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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
   
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2004
 
OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from …………………… to ………………….
 
Commission file number 0-8550
 
 
Portrait Corporation of America, Inc.
(Exact name of registrant as specified in its charter)
  

 

Delaware 

 57-1208051

 (State or other jurisdiction of

 (IRS Employer

 incorporation or organization)

 Identification No.)


 
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
(Address of principal executive offices)
(Zip Code)
 
(704) 588-4351
(Registrant’s telephone number, including area code)
  
 
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x      No  o 
 
    Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the Exchange Act).     Yes  o      No  x 
 
    As of December 15, 2004, there were 2,294,352 shares of the registrant’s common stock outstanding.
 
  

 
     
 

                



       
Page No.
Part I.
    
1
Item 1.
    
1
     
1
     
3
     
4
     
5
Item 2.
    
17
Item 3.
    
23
Item 4.
    
23
Part II.
    
23
Item 5.
    
23
Item 6.
    
23
     
24
  

  

 
     
 

Table of Contents

Part I. Financial Information


Item 1. Financial Statements

PORTRAIT CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollar amounts in thousands)
 

   
October 31,
2004
  
February 1,
2004
  
ASSETS
              
CURRENT ASSETS:
              
Cash and cash equivalents
  
$
9,581
 
$
4,820
 
Accounts receivable
    
3,471
   
2,349
 
Inventories
    
13,274
   
12,236
 
Deferred income taxes
    
-
   
3,124
 
Prepaid expenses and other assets
    
4,130
   
4,018
 
               
Total current assets
    
30,456
   
26,547
 
               
PROPERTY AND EQUIPMENT:
              
Land and improvements
    
2,306
   
2,306
 
Buildings and improvements
    
13,672
   
13,117
 
Photographic, sales and finishing equipment
    
150,159
   
139,742
 
Studio improvements
    
26,653
   
23,566
 
Construction in progress
    
4,693
   
1,085
 
               
Total
    
197,483
   
179,816
 
Less accumulated depreciation and amortization
    
121,217
   
111,776
 
               
Property and equipment, net
    
76,266
   
68,040
 
               
GOODWILL
    
53,001
   
51,643
 
OTHER INTANGIBLE ASSETS
    
135
   
-
 
DEFERRED FINANCING COSTS, NET
    
7,267
   
8,466
 
DEFERRED INCOME TAXES, NONCURRENT
    
-
   
10,316
 
OTHER ASSETS
    
134
   
34
 
               
TOTAL ASSETS
  
$
167,259
 
$
165,046
 


See notes to condensed consolidated financial statements.

1
 
Table of Contents

PORTRAIT CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
(dollar amounts in thousands)
 

   
October 31,
2004
  
February 1,
2004
  
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
              
CURRENT LIABILITIES:
              
Short-term borrowings
  
$
37,000
 
$
10,000
 
Current portion of long-term debt
    
183
   
279
 
Accounts payable-trade
    
39,205
   
23,672
 
Accrued insurance
    
4,098
   
4,055
 
Accrued income taxes
    
615
   
858
 
Accrued compensation
    
5,482
   
5,270
 
Accrued interest
    
5,699
   
10,197
 
Other accrued liabilities
    
16,782
   
10,128
 
               
Total current liabilities
    
109,064
   
64,459
 
               
LONG-TERM DEBT
    
213,130
   
219,658
 
OTHER LIABILITIES
    
7,090
   
5,679
 
               
TOTAL LIABILITIES
    
329,284
   
289,796
 
               
COMMITMENTS AND CONTINGENCIES
              
               
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK, $0.01 par value
    
15,000
   
15,000
 
     at October 31, 2004 and $10.00 par value at February 1, 2004              
(authorized--200,000 shares; outstanding--15,000 shares)
              
               
SHAREHOLDERS' DEFICIENCY:
              
Common stock, $0.01 par value at October 31, 2004 and $0.20 par value at
   
23
   
459
 
February 1, 2004 (authorized--20,000,000 shares; issued and outstanding
              
--October 31, 2004 and February 1, 2004--2,294,352 shares
              
Warrants to purchase Series A redeemable convertible preferred stock (issued and
   
642
   
642
 
outstanding--287)
             
Warrants to purchase common stock (issued and oustanding--306,610)
    
2,947
   
2,947
 
Additional paid-in capital
   
24,104
   
23,668
 
Deferred compensation
   
(275
)
  
(333
)
Accumulated deficit
   
(204,454
)
  
(166,851
)
Accumulated other comprehensive loss
   
(12
)
  
(282