10-Q 1 ten-q.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 July 31, 2005 ------------------------------------------------- OR ( ) 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 0-12188 ---------------------------------------------------------- DEB SHOPS, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-1913593 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9401 Blue Grass Road, Philadelphia, Pennsylvania 19114 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (215) 676-6000 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 ________ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes __X__ No ________ Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Stock, Par Value $.01 14,319,308 ---------------------------- ---------------------------------- (Class) (Outstanding at September 6, 2005)

See notes to consolidated financial statements. -1-

See notes to consolidated financial statements. -2-

See notes to consolidated financial statements. -3- DEB SHOPS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JULY 31, 2005 - A - ORGANIZATION / BASIS OF PRESENTATION Deb Shops, Inc. operates 326 women's and men's specialty apparel retail stores in regional malls and strip shopping centers principally located in the East and Midwest regions of the United States. We operate 317 stores under the name "DEB" which offer moderately priced, fashionable, coordinated women's sportswear, dresses, coats, lingerie, accessories and shoes for junior and plus-sizes. DEB merchandise consists of clothing and accessories appealing primarily to fashion-conscious junior and plus-sized female consumers between the ages of 13 and 25. One hundred and fifty-four of the DEB stores contain plus-size departments. We also operate Tops `N Bottoms, a 19 location chain in 11 states. Two of the Tops `N Bottoms stores operate as combination stores with DEB, and we operate 13 Tops `N Bottoms departments within DEB stores. The Tops `N Bottoms stores sell moderately priced men's and women's apparel. In addition, we operate three outlet stores under the name "CSO." The outlet stores offer the same merchandise as DEB at reduced prices and serve as clearance stores for slow-moving inventory. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the first and third quarters, cost of goods sold and inventories are estimated based on the use of the gross profit method. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six-month periods ended July 31, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2006. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K/A for the fiscal year ended January 31, 2005. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain amounts in the January 31, 2005 consolidated balance sheet have been reclassified to conform to the current period presentation. -B- RESTATEMENT OF FINANCIAL STATEMENTS As a result of the publicity on the restaurant industry financial statement restatements related to leases, we commenced a review of certain of our accounting policies related to leases during January 2005. Subsequently, on February 7, 2005, the Office of the Chief Accountant of the Securities and Exchange Commission ("SEC") issued a letter to the American Institute of Certified Public Accountants expressing its views regarding certain operating-lease-related accounting issues and their application under GAAP. Based on our internal review, and after consultation with the Audit Committee of our Board of Directors and our predecessor independent registered public accounting firm on April 19, 2005, we restated our financial statements for periods prior to fiscal 2005 to correct our accounting for landlord allowances, calculation of straight-line rent expense, recognition of rent holiday periods, and depreciation of leasehold improvements for our retail stores. Where applicable, we have accounted for the effects of this restatement in the accompanying consolidated financial statements. In prior years, we classified our investments in auction rate certificates as cash and cash equivalents. During fiscal 2005, additional clarification was provided regarding the financial statement classification of this type of investment. Pursuant to this guidance, auction rate securities are not to be classified as cash and cash equivalents. As a result, we have classified our auction rate certificates as marketable securities and have restated the consolidated statements of cash flows for the six months ended July 31, 2004 to reflect the purchase and sale activity of these securities within the investing activities section of the consolidated statements of cash flows. This change had no effect on current or total assets or net income. -4- Following is a summary of the effects of these adjustments on our consolidated statements of operations for the three and six-months ended July 31, 2004 and on our consolidated statement of cash flows for the six months ended July 31, 2004:

-5- - C - NET INCOME PER SHARE The table below sets forth the reconciliation of the numerators and denominators of the basic and diluted net income per common share computations.

For the periods indicated, we issued the following number of common shares as a result of stock option exercises.

For each of the periods indicated, the effect of these exercises is included in the basic and diluted weighted average number of common shares outstanding. Options to purchase 135,500 shares of common stock, at a weighted average exercise price of $23.75 per share, were outstanding at July 31, 2005. At July 31, 2004, options to purchase 1,218,000 shares of common stock, at a weighted average exercise price of $23.77 were outstanding. The effect of these options on the diluted weighted average number of common shares outstanding at July 31, 2005 and 2004 is reflected in the above table that reconciles numerators and denominators of the basic and diluted net income per common share computations. -D - INCOME TAXES Our effective tax rate differs from the federal statutory rate due primarily to state income taxes, offset by tax-exempt interest earnings. - E - STOCK RELATED COMPENSATION We have a stock option plan whereby options may be granted to employees or non-employee directors on the basis of contributions to our operations. Details concerning the plan are described in Note G to the financial statements included in our Annual Report on Form 10-K/A for the fiscal year ended January 31, 2005. We continue to use the accounting method under Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees," and related interpretations for this plan. Under APB No. 25, generally, when the exercise price of our stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. -6- - E - STOCK RELATED COMPENSATION (CONTINUED) Had we recognized compensation cost for the stock option plan consistent with the provisions of Statement of Financial Accounting Standards No. 123 ("FAS No. 123"), "Accounting for Stock-Based Compensation," net income and basic and diluted net income per share would have been adjusted to the following pro forma amounts.

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123(R), "Share-Based Payment" ("FAS 123(R)"). FAS 123(R) revised FAS No. 123, and requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. Companies must adopt FAS 123(R) no later than the beginning of their next fiscal year that begins after June 15, 2005. Accordingly, we will be required to adopt FAS 123(R) in our first quarter of fiscal 2007. Previously, in complying with FAS 123, we disclosed the value of stock options granted and its pro forma impact on our net income in a footnote to our consolidated financial statements. We are currently considering which transition method we will select in adopting FAS 123(R), and whether this new accounting requirement will result in any changes in compensation strategies. Information contained in the footnotes provides the impact on pro forma net income for past financial statements. The impact of the adoption of FAS 123(R) is not expected to have a material impact on our future financial statements. -7- ITEM 2. ------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS We have made in this report, and from time to time may otherwise make, "forward-looking statements" (as that term is defined under federal securities laws) concerning our future operations, performance, profitability, revenues, expenses, earnings and financial condition. This report includes, in particular, forward-looking statements regarding expectations of future performance, store openings and closings and other matters. Such forward-looking statements are subject to various risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors. Such factors may include, but are not limited to, our ability to improve or maintain sales and margins, respond to changes in fashion, find suitable retail locations and our ability to attract and retain key management personnel. Such factors may also include other risks and uncertainties detailed in our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K/A for the fiscal year ended January 31, 2005 (the "2005 10-K/A"). We assume no obligation to update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. CRITICAL ACCOUNTING POLICIES Our critical accounting policies are discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations and notes accompanying the consolidated financial statements that appear in the 2005 10-K/A. There were no material changes subsequent to the filing of the 2005 10-K/A in our critical accounting policies or in the assumptions or estimates used to prepare the financial information appearing in this report. RESTATEMENT OF FINANCIAL STATEMENTS As a result of the publicity on the restaurant industry financial statement restatements related to leases, we commenced a review of certain of our accounting policies related to leases during January 2005. Subsequently, on February 7, 2005, the Office of the Chief Accountant of the Securities and Exchange Commission ("SEC") issued a letter to the American Institute of Certified Public Accountants expressing its views regarding certain operating-lease-related accounting issues and their application under GAAP. Based on our internal review, and after consultation with the Audit Committee of our Board of Directors and our predecessor independent registered public accounting firm on April 19, 2005, we restated our financial statements for periods prior to fiscal 2005 to correct our accounting for landlord allowances, calculation of straight-line rent expense, recognition of rent holiday periods, and depreciation of leasehold improvements for our retail stores. Where applicable, we have accounted for the effects of this restatement in the accompanying consolidated financial statements. The details of the restatement are more fully described in our 2005 10-K/A. The discussion contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" gives effect to the restatement. OVERVIEW This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and accompanying notes appearing elsewhere in this report. As used in this report, the term "fiscal 2006" refers to our fiscal year that will end on January 31, 2006. The term "fiscal 2005" refers to our fiscal year that ended on January 31, 2005. We operate 326 women's and men's specialty apparel retail stores in regional malls and strip shopping centers principally located in the East and Midwest regions of the United States. We operate 317 stores under the name "DEB" which offer moderately priced, fashionable, coordinated women's sportswear, dresses, coats, lingerie, accessories and shoes for junior and plus-sizes. One hundred and fifty-four of the DEB stores contain plus-size departments. We also operate Tops `N Bottoms, a 19 location chain in 11 states. Two of the Tops `N bottoms stores operate as combination stores with DEB, and we operate 13 Tops `N Bottoms departments within DEB stores. The Tops `N Bottoms stores sell moderately priced men's and women's apparel. In addition, we operate three outlet stores under the name "CSO." The outlet stores offer the same merchandise as DEB at reduced prices and serve as clearance stores for slow-moving inventory. -8- For the six months ended July 31, 2005 (the "Current Year-to-Date Period"), our merchandise assortment was well received, as evidenced by a 5.7% increase in comparable store sales versus the six months ended July 31, 2004 (the "Comparable Year-to-Date Period"). The increase in sales, combined with lower levels of promotional activity, allowed us to expand gross margins by 220 basis points and achieve a 280 basis point improvement in operating income. The increases we experienced in the Current Year-to-Date Period were relatively consistent in each of the first two quarters of the fiscal year. The following table sets forth certain store information.

The following table sets forth, for the periods indicated, selected statement of operations data expressed as a percentage of net sales:

RESULTS OF OPERATIONS THREE MONTHS ENDED JULY 31, 2005 COMPARED TO THREE MONTHS ENDED JULY 31, 2004 NET SALES Net sales increased 4.3% during the three months ended July 31, 2005 (the "Current Quarter") to $75,966,000 from $72,831,000 in the quarter ended July 31, 2004 (the "Comparable Quarter"). The $3,136,000 increase was the result of a 4.5% or $3,165,000 comparable store sales increase, offset by the effect of operating fewer stores during the Current Quarter as compared to the Comparable Quarter. We believe that the comparable store sales increase is attributable to improved customer acceptance of our merchandise offerings as evidenced by an increase in net sales per transaction versus the Comparable Quarter. ____________________________________ (1) Includes Tops `N Bottoms stores. (2) As restated. (3) Comparable stores sales include stores open for both periods. A store is added to the comparable store base in its 13th month of operation. -9- COST OF SALES, INCLUDING BUYING AND OCCUPANCY COSTS Cost of sales, including buying and occupancy costs, decreased $218,000 or 0.5% during the Current Quarter to $46,934,000 from $47,152,000 in the Comparable Quarter. As a percentage of sales, these costs decreased to 61.8% from 64.7% in the Comparable Quarter. The decrease between periods was due to an increase in merchandise margins arising from improved customer acceptance of our product offering and an increase in the leveraging of buying and occupancy costs as a result of our 4.5% comparable store sales increase. Buying and occupancy costs were 16.7% and 17.2% of net sales for the Current Quarter and Comparable Quarter, respectively. SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses increased $1,055,000 or 6.0% during the Current Quarter to $18,526,000 from $17,471,000 in the Comparable Quarter. As a percentage of net sales, these costs increased to 24.4% from 24.0% in the Comparable Quarter. The increase was due to increases in payroll expenses, insurance costs and merchant fees related to credit card sales. DEPRECIATION AND AMORTIZATION Depreciation expense decreased $9,000 or 0.7% to $1,283,000 in the Current Quarter from $1,292,000 in the Comparable Quarter. As a percentage of net sales, these expenses decreased to 1.7% from 1.8% in the Comparable Quarter. The percentage decrease was due to the leveraging of these expenses as a result of our 4.5% increase in comparable store sales. OTHER INCOME, PRINCIPALLY INTEREST Other income, principally interest, increased $866,000 or 188.5% to $1,325,000 in the Current Quarter from $459,000 in the Comparable Quarter. The increase was the result of more than a 100% increase in average interest rates and greater average invested balances during the Current Quarter versus the Comparable Quarter. INCOME TAX PROVISION The income tax provision for the Current Quarter was $3,958,000, resulting in a 37.5% effective tax rate, as compared to $2,732,000 and a 37.1% effective tax rate for the Comparable Quarter. The effective tax rate for the Current Quarter resulted from increasing the anticipated tax rate for fiscal 2006 to 37.4%. The effective tax rate for the Comparable Quarter represents the actual effective rate for fiscal 2005. SIX MONTHS ENDED JULY 31, 2005 COMPARED TO SIX MONTHS ENDED JULY 31, 2004 NET SALES Net sales increased 5.2% during the Current Year-to-Date Period to $153,451,000 from $145,911,000 in the Comparable Year-to-Date Period. The $7,540,000 increase was the result of a 5.7% or $8,020,000 comparable store sales increase, offset by the effect of operating fewer stores during the Current Year-to-Date Period as compared to the Comparable Year-to-Date Period. We believe that the comparable store sales increase is attributable to improved customer acceptance of our merchandise offerings as evidenced by an increase in net sales per transaction versus the Comparable Year-to-Date Period. COST OF SALES, INCLUDING BUYING AND OCCUPANCY COSTS Cost of sales, including buying and occupancy costs, increased $1,805,000 or 1.8% during the Current Year-to-Date Period to $102,617,000 from $100,812,000 in the Comparable Year-to-Date Period. As a percentage of sales, these costs decreased to 66.9% from 69.1% in the Comparable Year-to-Date Period. The nominal increase was due to the aforementioned $7,540,000 increase in sales. The decrease as a percentage of sales was due to an increase in merchandise margins arising from improved customer acceptance of our product offering and an increase in the leveraging of buying and occupancy costs as a result of our 5.7% comparable store sales increase. Buying and occupancy costs were 16.3% and 17.3% of net sales for the Current Year-to-Date Period and Comparable Year-to-Date Period, respectively. -10- SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses increased $1,017,000 or 2.9% during the Current Year-to-Date Period to $35,621,000 from $34,605,000 in the Comparable Year-to-Date Period. As a percentage of net sales, these costs decreased to 23.2% from 23.7% in the Comparable Year-to-Date Period. The nominal increase was due to increases in payroll expenses, insurance costs and merchant fees related to credit card sales, offset by the fact that the Comparable Year-to-Date Period included a payment made relating to an employee separation matter. DEPRECIATION AND AMORTIZATION Depreciation expense increased $41,000 or 1.6% to $2,649,000 in the Current Year-to-Date Period from $2,608,000 in the Comparable Year-to-Date Period. As a percentage of net sales, these expenses decreased to 1.7% from 1.8% in the Comparable Quarter. The percentage decrease was due to the leveraging of these expenses as a result of our 5.7% increase in comparable store sales. OTHER INCOME, PRINCIPALLY INTEREST Other income, principally interest, increased $1,509,000 or 174.5% to $2,373,000 in the Current Year-to-Date Period from $865,000 in the Comparable Year-to-Date Period. The increase was the result of more than a 100% increase in average interest rates and greater average invested balances during the Current Year-to-Date Period versus the Comparable Year-to-Date Period. INCOME TAX PROVISION The income tax provision for the Current Year-to-Date Period was $5,586,000, resulting in a 37.4% effective tax rate, as compared to $3,230,000 and a 37.0% effective tax rate for the Comparable Year-to-Date Period. The effective tax rate for the Current Year-to-Date Period is the rate anticipated for fiscal 2006. The actual effective tax rate for fiscal 2005 was 37.1%. LIQUIDITY AND CAPITAL RESOURCES As of July 31, 2005, we had cash and cash equivalents of $119,077,000 and marketable securities of $69,625,000 compared to cash and cash equivalents of $28,587,000 and marketable securities of $139,650,000 as of July 31, 2004. Of the $119,077,000 in cash and cash equivalents on hand at July 31, 2005, approximately $87,700,000 was used to fund the $6.125 per common share dividend that was paid on August 16, 2005. The cash and cash equivalents are invested principally in money market mutual funds while the marketable securities are invested principally in auction market securities, which trade on a par-in, par-out basis and provide interest-rate reset options on a revolving 35-day basis. Because we regularly liquidate our investments in these securities for reasons including, among others, changes in market interest rates and changes in the availability of and the yield on alternative investments, we have classified these securities as available for sale. We do not invest for trading purposes and therefore do not believe we have significant exposure to market risk with respect to our investments. During the Current Year-to-Date and Comparable Year-to-Date periods, we funded all of our operating needs internally, including capital expenditures for the opening of new stores and the remodeling of existing stores. For the Current Year-to-Date period, cash provided by operations was $7,874,000, resulting primarily from net income and the non-cash charge for depreciation and amortization and by the increase in trade accounts payable, offset by the related increase in merchandise inventories. Tax payments also offset operating cash flows. During the Comparable Year-to-Date Period, cash provided by operations was $5,429,000. These funds were provided by net income and the non-cash charges for depreciation and amortization, as well as from increases in trade accounts payable and accrued expenses. Offsetting these items were uses of cash relating to the seasonal increase in merchandise inventories, income tax payments and an increase in prepaid expenses. Using retail sales divided by average inventory at retail for the applicable periods, the inventory turnover rates were approximately 1.4 times during both the Current Year-to-Date and Comparable Year-to-Date Periods. During the Current Year-to-Date Period, net cash provided by investing activities was $74,631,000. These funds were generated from the net sales of marketable securities, primarily to fund the special $6.00 per common share dividend we paid on August 16, 2005. We also used $1,844,000 for capital additions relating to the opening of four new stores and the remodeling of 11 existing stores. During the Comparable Year-to-Date Period, cash used in investing activities was $8,975,000. These funds were used for the purchase of marketable securities and for the opening of two new stores and the remodeling of six existing stores. -11- During the Current Year-to-Date Period, net cash provided by financing activities was $6,274,000. These funds were provided by employee stock option exercises, offset by the payment of dividends on preferred and common stock. During the Comparable Year-to-Date Period, we used $1,932,000 in financing activities. These funds were used for the payment of dividends on preferred and common stock partially offset by proceeds from the exercise of employee stock options. On May 11, 2005, our Board of Directors approved a special dividend of $6.00 per share on our common stock. This special dividend was incorporated into our regularly scheduled dividend payment on August 16, 2005 for shareholders of record as of July 29, 2005. The total payout to shareholders relating to the special dividend was approximately $85,916,000. We believe that our existing cash and marketable securities, net of the payment of the aforementioned special dividend, and internally generated funds will be sufficient to meet our anticipated capital expenditures, none of which are material, and current operating needs. We have an unsecured line of credit in the amount of $20,000,000 as of July 31, 2005. Of this amount, $1,007,000 was outstanding as letters of credit for the purchase of inventory. We lease our retail apparel stores, warehouse and office building for original periods ranging from one to 20 years. Following is a summary of our contractual obligations for minimum rental payments on our non-cancelable operating leases and minimum payments on our other commitments as of July 31, 2005.

The above table excludes approximately $87,700,000 in dividends, which were accrued at July 31, 2005 and were paid on August 16, 2005, to shareholders of record on July 29, 2005. OTHER MATTERS Seasonality and Quarterly Results Our operating results are subject to seasonal fluctuations. Highest sales levels have historically occurred during the five-month period from August 1 to December 31 of each year (the back-to-school and holiday periods). Sales generated during these periods have traditionally had a significant impact on our results of operations. Any decreases in sales for these periods or in the availability of working capital needed in the months preceding these periods could have a material adverse effect on our results of operations. Results of operations in any one fiscal quarter are not necessarily indicative of the results of operations that can be expected for any other fiscal quarter or for the full fiscal year. Our results of operations may also fluctuate from quarter to quarter as a result of the amount and timing of expenses incurred in connection with, and sales contributed by, new stores, store remodels and the integration of new stores into our operations. -12- ITEM 3. ------- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of July 31, 2005, we had cash and cash equivalents of $119,077,000 and marketable securities of $69,625,000 compared to cash and cash equivalents of $28,587,000 and marketable securities of $139,650,000 as of July 31, 2004. Of the $119,077,000 in cash and cash equivalents on hand at July 31, 2005, approximately $87,700,000 was used to fund the $6.125 per common share dividend that was paid on August 16, 2005. The cash and cash equivalents are invested principally in money market mutual funds while the marketable securities are invested principally in auction market securities, which trade on a par-in, par-out basis and provide interest-rate reset options on a revolving 35-day basis. Because we regularly liquidate our investments in these securities for reasons including, among others, changes in market interest rates and changes in the availability of and the yield on alternative investments, we have classified these securities as available for sale. We do not invest for trading purposes and therefore do not believe we have significant exposure to market risk with respect to our investments. ITEM 4. ------- CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures Our chief executive officer and chief financial officer, with the participation of other members of management, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report (the "Evaluation Date") and, based on that evaluation, concluded that, as of the Evaluation Date, the disclosure controls and procedures were effective for recording, processing, summarizing and reporting information that is required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, within the time periods specified in the SEC's rules and forms. (b) Changes in Internal Control over Financial Reporting There has not been any change in our internal control over financial reporting during the quarter ended July 31, 2005 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------- --------------------------------------------------- Our annual meeting was held on Wednesday, May 11, 2005. Total votes present either in person or by proxy were 12,683,989. Votes were cast as follows for the election of directors: FOR WITHHELD ---------- -------- Marvin Rounick 12,554,578 129,411 Warren Weiner 12,554,578 129,411 Jack A. Rounick 12,554,144 129,845 Barry H. Feinberg 12,596,398 87,591 Barry H. Frank 12,536,811 147,178 Ivan Inerfeld 12,596,398 87,591 Ned J. Kaplin 12,657,301 26,688 There were no other matters voted on at the meeting. -13- ITEM 6. EXHIBITS ------- -------- Exhibit 31.1 Section 302 Certification by President and Chief Executive Officer Exhibit 31.2 Section 302 Certification by Chief Financial Officer Exhibit 32.1 Certification of Periodic Report by President and Chief Executive Officer Exhibit 32.2 Certification of Periodic Report by Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEB SHOPS, INC. DATE: September 7, 2005 By: Marvin Rounick -------------- Marvin Rounick President and Chief Executive Officer DATE: September 7, 2005 By: Barry J. Susson, CPA -------------------- Barry J. Susson, CPA Chief Financial Officer -14- EXHIBIT INDEX Exhibit 31.1 Section 302 Certification by President and Chief Executive Officer Exhibit 31.2 Section 302 Certification by Chief Financial Officer Exhibit 32.1 Certification of Periodic Report by President and Chief Executive Officer Exhibit 32.2 Certification of Periodic Report by Chief Financial Officer -15-

DEB SHOPS INC 10-Q