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Peapod says it has enough cash

With its shares plunging, Peapod Inc. (Nasdaq: PPOD) went on the defensive Monday with a statement assuring investors that it had enough operating cash to make it through the third quarter of 2000.

The company said it has $15 million in cash and marketable securities and has retained Wasserstein Perella to help the company attract additional financing to fund it past 2000. "The company is currently in discussions with a number of investors and strategic partners who have expressed interest in making a potential investment in Peapod," the company said.

Shares of online grocer Peapod fell 3 5/16, or 22 percent, to 11 11/16 during regular trading Friday and then plunged another 3 1/8 in after-hours trading after saying its "existing cash and marketable securities may be insufficient" to fund its operations for the next year.

The statement was buried in the company's 10-Q filing with the Securities and Exchange Commission. In the report, Peapod officials said it's evaluating financing opportunities but admits that there "can be no assurance that capital will be available to the company on favorable terms, or at all."

Investors went ballistic on rumors that Peapod was out of cash. For Peapod, the timing could not have been worse. Webvan Group (Nasdaq: WBVN) went public Friday and raised $375 million. Because of Webvan's IPO, Wall Street has been wondering if Peapod would have enough funding to compete.

This latest blow comes just days after Peapod missed analysts' estimates by 10 cents a share in its latest quarter, losing $6.5 million, or 38 cents a share, on sales of $16.5 million.

Operating expenses in the quarter rose 44 percent from the previous quarter, with general and administrative costs nearly tripling as Peapod recorded one-time costs related to hiring new management. Including $2.9 million, or 15 cents per share, in non-recurring revenue, Peapod lost $9.4 million, or 53 cents per share.

The third quarter sales of $16.5 million represent a 3.5 percent decline from $17.1 million in the second quarter.

Gross margins increased to 25.8 percent, from 24.4 percent in the second quarter and 21.6 percent in the third quarter of 1998. General and administrative expenses rose to $5 million from $1.9 million in the year-ago period, as Peapod announced the appointment of Malloy and other senior executives in the third quarter.

Fulfillment costs increased to $5.6 million, or 11 percent higher sequentially, because of higher volumes at distribution facilities where Peapod is scaling up, the company said. Peapod will strengthen its distribution and soon announce a strategic alliance, Malloy said during a conference call with analysts. The company has several options for financing, Malloy said.

Peapod shares moved up to a 52-week high of 15 11/16 ahead of the earnings report after falling to a low of 3 1/2 last November.

Three of the six analysts following the stock maintain a "hold" recommendation.