UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
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 NO. 333-10843
SRI RECEIVABLES PURCHASE CO., INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 51-349276
incorporation or organization) (I.R.S. Employer Identification No.)
10201 MAIN STREET, HOUSTON, TEXAS 77025
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (713) 667-5601
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 at least the past 90 days. Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting common stock held by non-affiliates as
of April 30, 1998 was zero. The number of shares of common stock outstanding as
of April 30, 1998 was 1,000 shares which were held by Specialty Retailers, Inc.,
a wholly-owned subsidiary of Stage Stores, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (I)(1)(A)
AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM UNDER THE REDUCED
DISCLOSURE FORMAT.
<PAGE>
PART I
SRI RECEIVABLES PURCHASE CO., INC.'S ("SRPC") FISCAL YEAR ENDS ON THE
SATURDAY NEAREST TO JANUARY 31 IN THE FOLLOWING CALENDAR YEAR. REFERENCES TO
YEARS MEANS SRPC'S FISCAL YEAR. FOR EXAMPLE, REFERENCES TO "1997" MEAN THE
FISCAL YEAR ENDED JANUARY 31, 1998.
ITEM 1. BUSINESS
GENERAL
SRPC is an indirect, wholly owned, limited-purpose subsidiary of
Specialty Retailers, Inc. ("SRI"). SRI is a wholly-owned subsidiary of Stage
Stores, Inc. ("Stage Stores"). SRPC was formed in 1993 to implement SRI's
private label credit card accounts receivable securitization program (the
"Accounts Receivable Program"). SRPC is operated in a fashion that is intended
to ensure that its assets and liabilities are distinct from those of SRI and its
other affiliates so that SRPC's creditors would be entitled to satisfy their
claims from SRPC's assets prior to any distribution to SRI or its affiliates.
SRPC purchases, on a daily basis in transactions intended to be true sales for
creditors' rights purposes, substantially all of the accounts receivables
generated by holders of the SRI proprietary credit cards. In the event of a
breach of representation or warranty by SRI with respect to a receivable sold by
SRI or in the event that a receivable sold by SRI is not an eligible receivable,
SRI may be obligated to make certain payments to SRPC or to repurchase such
receivable. SRPC in turn transfers, on a daily basis, all of the accounts
receivable so purchased to the SRI Receivables Master Trust (the "Trust"), which
was also formed in connection with the Accounts Receivable Program. The Trust
has contracted with SRI to service the receivables.
Stage Stores, through SRI, operates the store of choice for well-known,
national brand name family apparel in over 500 small towns and communities
across the central United States. At January 31, 1998, SRI operated 607 stores
primarily through its "Stage", "Bealls" and "Palais Royal" trade names in
twenty-four states throughout the central United States. Stage Stores offers its
customers a private label credit card which can be used to make purchases at its
stores. At January 31, 1998, Stage Stores had approximately two million of
active credit card accounts.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This Item is omitted pursuant to general instruction I of Form 10-K.
1
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
None.
ITEM 6. SELECTED FINANCIAL DATA
This Item is omitted pursuant to general instruction I of Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
Certain items discussed or incorporated by reference herein contain
forward-looking statements that involve risks and uncertainties including, but
not limited to, the seasonality of demand for apparel which can be affected by
weather patterns, levels of competition, competitors' marketing strategies,
changes in fashion trends and availability of product, the failure of SRI to
achieve the expected results of merchandising and marketing plans or store
opening or closing plans. The occurrence of any of the above could have a
material adverse impact on the amount or quality of accounts receivable
transferred to SRPC, which in turn could affect the operating results of SRPC.
Additionally, changes in economic conditions (including interest rates and
payment patterns of the holders of SRI private label credit cards) could
negatively impact SRPC's results of operations. Certain information herein
contains estimates which represent management's best judgment as of the date
hereof based on information currently available; however, SRPC does not intend
to update this information to reflect developments or information obtained after
the date hereof and disclaims any legal obligation to the contrary.
1997 COMPARED TO 1996
Management's Discussion and Analysis of Financial Condition and Results
of Operations is limited to an analysis of results of operations between 1997
and 1996 pursuant to general instruction I of Form 10-K.
The gain associated with the Retained Certificates for 1997 decreased
43.5% to $4.1 million from $7.2 million in 1996 due to an increase in premium
payments to SRI for the purchase of accounts receivable partially offset by an
increase in the amount of service charge income and a decrease in bad debt
expense. SRPC paid $27.2 million in premiums on accounts receivable purchased
during 1997 and $19.8 million for the same period in 1996.
Interest income on balances with SRI increased 127.9% to $4.7 million in
1997 from $2.0 million in 1996 due primarily to an increase in the net cash
advances to SRI. Interest expense increased 47.4% to $3.7 million in 1997 from
$2.5 million in 1996. Additionally, amortization of debt issue costs increased
66.8% to $0.6 million in 1997 from $0.4 million in 1996. These increases were
due primarily to the issuance of $30.0 million in aggregate principal amount of
12.5% Trust Certificate-Backed Notes in June 1996. General and administrative
expenses decreased 35.9% to $0.6 million in 1997 from $0.9 million in 1996 due
primarily to a reduction in the amortization of trust organization costs which
resulted from the write-off of $1.0 million associated with the revolving
certificate which was replaced during the fourth quarter of 1997 (see Note 4 to
the Financial Statements).
2
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements and Schedules" included on page 5 for
information required under this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This Item is omitted pursuant to general instruction I of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
This Item is omitted pursuant to general instruction I of Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This Item is omitted pursuant to general instruction I of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This Item is omitted pursuant to general instruction I of Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) and (d) Financial Statements
See "Index to Financial Statements and Schedules" on Page 5.
(b) Reports on Form 8-K
None.
(c) Exhibits - See "Exhibit Index" at X-1.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
SRI Receivables Purchase Co., Inc.
/s/ CARL TOOKER April 30, 1998
Carl Tooker
Chairman, Chief Executive Officer and President
(principal executive officer)
SRI Receivables Purchase Co., Inc.
/s/ JAMES MARCUM April 30, 1998
James Marcum
Vice Chairman and Chief Financial Officer
(principal financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ CARL TOOKER Chairman of the Board of Directors April 30, 1998
Carl Tooker
/s/ JAMES MARCUM Director April 30, 1998
James Marcum
4
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
FINANCIAL STATEMENTS NUMBER
Report of Independent Accountants.......................................... F-1
Balance Sheet at January 31, 1998 and February 1, 1997..................... F-2
Statement of Income for the fiscal years 1997, 1996 and 1995............... F-3
Statement of Cash Flows for the fiscal years 1997, 1996 and 1995........... F-4
Statement of Stockholder's Equity for the fiscal years 1997, 1996 and 1995. F-5
Notes to Financial Statements.............................................. F-6
SCHEDULES
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
SRI Receivables Purchase Co., Inc.
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of SRI
Receivables Purchase Co., Inc. at January 31, 1998 and February 1, 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended January 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Houston, Texas
April 21, 1998
F-1
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
BALANCE SHEET
(in thousands, except par value)
January 31, February 1,
1998 1997
---------- ----------
ASSETS
------
Retained Certificates in Trust .......................... $72,918 $ 90,102
Restricted cash ......................................... 7,808 5,632
Debt issue costs ........................................ 1,874 2,440
Trust organization costs ................................ 3,883 5,011
------- --------
Total assets ......................................... $86,483 $103,185
======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses and other accrued liabilities .......... $ 630 $ 1,219
Payable to SRI, net ..................................... 14,324 35,041
Deferred income taxes ................................... 1,217 1,443
Long-term debt .......................................... 30,000 30,000
------- --------
Total liabilities ................................. 46,171 67,703
Common stock, par value $0.01, 1 share
authorized, issued and outstanding .................. -- --
Additional paid-in capital .............................. 34,556 29,726
Retained earnings ....................................... 5,756 5,756
------- --------
Stockholder's equity .............................. 40,312 35,482
------- --------
Commitments and contingencies ........................... -- --
------- --------
Total liabilities and stockholder's equity ........... $86,483 $103,185
======= ========
F-2
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
STATEMENT OF INCOME
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Gain associated with Retained Certificates ........... $ 4,099 $ 7,249 $ 23,397
Interest income on balances with SRI ................. 4,659 2,044 825
Interest income ...................................... 245 150 228
Interest expense ..................................... 3,740 2,538 --
Amortization of debt issue costs ..................... 637 382 --
General and administrative expenses .................. 597 932 1,152
------------- ------------- -------------
Operating income ..................................... 4,029 5,591 23,298
Income tax expense ................................... 1,483 2,023 8,651
------------- ------------- -------------
Income before extraordinary item ..................... 2,546 3,568 14,647
Extraordinary item - write-off of trust organization
costs ................................................. (642) -- --
------------- ------------- -------------
Net income ........................................... $ 1,904 $ 3,568 $ 14,647
============= ============= =============
</TABLE>
F-3
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................ $ 1,904 $ 3,568 $ 14,647
--------- --------- ---------
Adjustments to reconcile net income to net cash
used in operating activities:
Amortization of trust organization and debt issue
costs ................................................ 1,254 1,385 1,101
Extraordinary item .............................. 642 -- --
Deferred income taxes ........................... (58) 380 (295)
Change in operating assets and liabilities:
Increase (decrease) in payable to SRI ........ (20,717) 16,519 9,594
Increase in Trust organization costs ......... -- -- (632)
Increase (decrease) in accrued expenses and
other liabilities .................................... (589) (7) 665
Unrealized gainassociated with the Retained
Certificates ......................................... (424) (1,262) (1,017)
--------- --------- ---------
Total adjustments ............................... (19,892) 17,015 9,416
--------- --------- ---------
Net cash provided by (used in) operating activities (17,988) 20,583 24,063
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash ..................... (2,176) (1,221) (957)
Purchases of accounts receivable from SRI ....... (486,774) (458,408) (408,278)
Transfer of accounts receivable to Trust ........ 508,912 441,345 411,626
--------- --------- ---------
Net cash provided by (used in) investing
activities ........................................... 19,962 (18,284) 2,391
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ........ -- 30,000 --
Additions to debt issue costs ................... (70) (2,822) --
Dividends paid to SRI ........................... (1,904) (29,477) (26,454)
--------- --------- ---------
Net cash used in investing activities ......... (1,974) (2,299) (26,454)
--------- --------- ---------
Net change in cash and cash equivalents ....... -- -- --
Cash and cash equivalents:
Beginning of year ............................... -- -- --
========= ========= =========
End of year ..................................... $ -- $ -- $ --
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ................................... $ 3,750 $ 2,039 $ --
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Contribution of ineligible accounts receivable .. $ 4,530 $ 4,944 $ 4,471
========= ========= =========
Contribution of trust organization costs ........ $ 300 $ 87 $ --
========= ========= =========
</TABLE>
F-4
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
STATEMENT OF STOCKHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock
---------------------
Additional
Shares Paid-In Retained
Outstanding Amount Capital Earnings Total
----------- --------- ---------- ---------- ----------
<S> <C> <C>
Balance, January 28, 1995 .................................. 1 $ -- $ 47,724 $ 15,972 $ 63,696
Net income ................................................. - -- -- 14,647 14,647
Dividends .................................................. - -- -- (26,454) (26,454)
Contribution of ineligible accounts
receivable .................................................. - -- 4,471 -- 4,471
-------- -------- -------- -------- --------
Balance, February 3, 1996 .................................. 1 -- 52,195 4,165 56,360
Net income ................................................. - -- -- 3,568 3,568
Dividends .................................................. - -- (27,500) (1,977) (29,477)
Contribution of ineligible accounts
receivable .................................................. - -- 4,944 -- 4,944
Contribution of trust organization costs ................... - -- 87 -- 87
-------- -------- -------- -------- --------
Balance, February 1, 1997 .................................. 1 -- 29,726 5,756 35,482
Net income ................................................. - -- -- 1,904 1,904
Dividends .................................................. - -- -- (1,904) (1,904)
Contribution of ineligible accounts
receivable .................................................. - -- 4,530 -- 4,530
Contribution of trust organization costs ................... - -- 300 -- 300
-------- -------- -------- -------- --------
Balance, January 31, 1998 .................................. 1 -- $ 34,556 $ 5,756 $ 40,312
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS:
SRI Receivables Purchase Co., Inc. ("SRPC" or the "Company") is a wholly
owned, special-purpose subsidiary of Specialty Retailers, Inc. ("SRI"). The
Company's ultimate parent is Stage Stores, Inc. ("Stage Stores"). The Company
was incorporated in 1993 and was established to acquire substantially all of the
trade accounts receivable generated by holders of SRI's private label credit
card accounts and transfer such accounts receivable to SRI Receivables Master
Trust (the "Trust") under the terms of a pooling and servicing agreement.
The Company is a separate and distinct entity from Stage Stores and its
other affiliates. The Company was established with the intent that in the event
of a liquidation, its creditors would be entitled to satisfy their claims from
the Company's assets prior to any distribution to Stage Stores or any of its
subsidiaries.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR: The fiscal years discussed herein end on the Saturday
nearest to January 31 in the following calendar year. For example, references to
"1997" mean the fiscal year ended January 31, 1998. All fiscal years consist of
fifty-two weeks except for 1995 which consisted of fifty-three weeks.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
RETAINED CERTIFICATES IN TRUST: Retained certificates in Trust
represents the Class D term certificates, the Class B revolving certificate and
the transferor certificate (the "Transferor Certificate" and along with the
Class D term certificates and the Class B revolving certificate, the "Retained
Certificates") which are held by SRPC. SRPC accounts for the Retained
Certificates under Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
Under SFAS 115, the Retained Certificates are accounted for as debt securities
and classified as trading securities. Accordingly, the Retained Certificates are
recorded at fair value in the accompanying balance sheet with any change in fair
value reflected currently in income.
Fair value is determined based upon the purchase price of the
receivables as well as actual and estimated finance charge income, servicing
cost and bad debt expense associated with the underlying accounts receivable
portfolio, return paid to the holders of the Class A, B and C term certificates
(the "Term Certificates") and the Class A and B revolving certificates. The
realized gain associated with the Retained Certificate represents: (i) actual
finance charge income billed to the holders of the underlying accounts
receivable; less (ii) actual servicing costs incurred by SRPC under an agreement
with SRI, actual return paid to the holders of the Term Certificates and
revolving certificate, actual premium payments made to SRI and actual bad debt
write-offs net of any recoveries of such write-offs (see Note 3). The change in
the unrealized gain (loss) associated with the Retained Certificates represents:
(i) estimated future finance charge income to be billed to the holders of the
underlying accounts receivable as the underlying accounts receivable portfolio
liquidates; less (ii) the estimated servicing cost to be incurred by SRPC over
the liquidation period, estimated return to be paid to the holders of the Term
Certificates and revolving certificate over the liquidation period and estimated
future bad debt expense associated with the underlying accounts receivable
portfolio.
RESTRICTED CASH: The Company records its undivided interest in the cash
balances of the Trust as restricted cash.
F-6
<PAGE>
TRUST ORGANIZATION COSTS: Trust organization costs are amortized on a
straight-line basis over the expected life of the underlying certificates to
their legal maturities of three to nine years. Trust organization costs are net
of accumulated amortization of $3.7 million and $3.1 million at January 31, 1998
and February 1, 1997, respectively.
STATEMENT OF CASH FLOWS: The Company considers highly liquid investments
with initial maturities of less than three months to be cash equivalents in its
statement of cash flows.
FINANCIAL INSTRUMENTS AND DERIVATIVES: The Company records all financial
instruments, other than the Retained Certificates, at cost. The fair values of
these financial instruments approximate cost. The Company has entered into two
interest rate cap agreements in order to hedge its interest rate risk. The cost
of entering into the agreements was not material and there are no future costs
related to the exercise of these agreements. If future interest rates increase
above specified amounts, reimbursements to the Company under the agreements will
reduce interest expense.
INCOME TAXES: Although SRPC is included in the consolidated federal tax
return of Stage Stores, the provisions for federal income taxes has been
computed as if SRPC had filed a separate federal income tax return. The asset
and liability approach is used to recognize deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
carrying amounts and the tax basis of assets and liabilities.
RECLASSIFICATION: The accompanying financial statements include
reclassifications from financial statements issued in previous years.
NOTE 3 - RECEIVABLES PURCHASE AGREEMENT:
The Company has entered into a Receivables Purchase Agreement (the
"Purchase Agreement") with SRI. The Purchase Agreement requires SRPC to purchase
eligible accounts receivable at a price which may be greater or less than the
face amount of such receivables.
The purchase price is based on: (i) the expected yield on the
receivables, reduced by certain costs to SRPC; (ii) the expected losses on the
receivables, net of certain expected benefits to SRPC from SRI; and (iii) a
reasonable rate of return on SRPC's capital. In 1997, 1996 and 1995, all
accounts receivable were purchased at face value plus premiums of $27.9 million,
$19.8 million and $12.0 million, respectively, to compensate SRI for the cost of
servicing the accounts receivable not offset by the fee SRI charged the Trust
described in Note 4. The Purchase Agreement terminates upon the occurrence of
certain events specified therein.
The Purchase Agreement and the Pooling and Servicing Agreement (see Note
4) allow SRPC to sell defaulted accounts receivable to SRI, subject to certain
limitations. The Purchase Agreement does not allow for the repurchase of any
other receivables by SRI. Sales of defaulted accounts receivable are limited to
95% of the immediately preceding fiscal year's default ratio, as defined in the
various agreements, applied to eligible accounts receivable transferred from SRI
during any fiscal period.
NOTE 4 - POOLING AND SERVICING AGREEMENT:
The Company has entered into a Pooling and Servicing Agreement (the
"Agreement"), with the Trust, SRI and Bankers Trust (Delaware), as the trustee.
Under the terms of the Agreement, as well as various supplements, the Trust
issued to third parties $165.0 million of long-term Class A, B and C Term
Certificates for cash and a revolving certificate. The Trust used the proceeds
from the Term Certificates to purchase substantially all of the credit card
accounts receivable of the Company. The Trust has also issued $35.1 million in
Class D Term
F-7
<PAGE>
Certificates to the Company, which do not receive a return. The Trust did not
receive any cash for the revolving certificate upon its issuance but rather the
holder of the revolving certificate agreed to purchase interests in the Trust
equal to the amount of accounts receivable in the Trust above the level required
to support the Term Certificates and the transferor's retained interest up to a
maximum amount. The maximum amount of the original revolving certificate (the
"Old Revolving Certificate") was $40.0 million. During the fourth quarter of
1997, the Company replaced the Old Revolving Certificate with a new revolving
certificate (the "Revolving Certificate"). Amounts outstanding under the
Revolving Certificate, which are currently limited to $82.5 million, are funded
by issuance of commercial paper in the open market through a facility agent at
various rates and maturities. If the commercial paper market is unavailable,
amounts outstanding under the Revolving Certificate will be funded by a
liquidity provider. If accounts receivable balances in the Trust fall below the
level required to support the certificates, certain principal collections may be
retained in the Trust until such time as the receivable balances exceed the
certificate balances. The Trust may issue additional series of certificates from
time to time. Terms of any future series will be determined at the time of
issuance.
The Company owns an undivided interest in the accounts receivable in the
Trust not represented by the Term Certificates or Revolving Certificate and SRI
continues to service all of the accounts receivable in the Trust. The
outstanding balances of the Term Certificates totaled $165.0 million at January
31, 1998 and February 1, 1997. There was $77.0 million outstanding under the
Revolving Certificate at January 31, 1998. No amounts were outstanding under the
Old Revolving Certificate at February 1, 1997.
The repayment of the Class B term and revolving certificates is
contingent upon full repayment of the Class A term and revolving certificates.
The repayment of the Class C term and revolving certificates is contingent upon
full repayment of the Class B term and revolving certificates. The repayment of
the Class D term certificates is contingent upon full repayment of the Class C
term certificates.
Total accounts receivable transferred to the Trust during 1997, 1996 and
1995 were $508.9 million, $441.4 million and $411.6 million, respectively. The
cash flows generated from the accounts receivable in the Trust are dedicated to:
(i) the purchase of new accounts receivable generated by the Company; (ii)
payment of a return on the certificates; and (iii) the payment of a servicing
fee to SRI. Any remaining cash flows are remitted to SRPC. The Term Certificates
entitle the holders to receive a return, based upon the London Interbank Offered
Rate ("LIBOR"), plus a specified margin. Principal payments commence on December
31, 1999 but can be accelerated upon occurrence of certain events. The Company
is currently protected against increases above a 12% return with respect to the
Term Certificates under an agreement entered into with a bank. The Company is
exposed to a loss in the event of non-performance by the bank. However, the
Company does not anticipate non-performance by the bank. The Revolving
Certificate entitles the holder to receive a return based upon a commercial
paper rate, or a base rate plus a specified margin depending on the type of
funding outstanding for the Revolving Certificate. The purchase commitment for
the Revolving Certificate is three years, subject to renewal at the option of
the parties. At January 31, 1998, the average rate of return on the Term
Certificates and the Revolving Certificate were 6.9% and 5.8%, respectively.
SRI acts as agent to service the accounts receivable but this
appointment may be revoked under certain circumstances. Under the Agreement, SRI
receives a servicing fee equal to 2% of all Term and Revolving Certificates
outstanding. SRI received $4.6 million, $4.1 million and $3.8 million during
1997, 1996 and 1995, respectively, as compensation for servicing the accounts
receivable under the Agreement.
F-8
<PAGE>
NOTE 5 - LONG-TERM DEBT:
During 1996, the Company issued $30.0 million in aggregate principal
amount of 12.5% Trust Certificate-Backed Notes (the "SRPC Notes"). The SRPC
Notes are collateralized by the Retained Certificates. Interest and principal
payments are made from amounts otherwise received by SRPC from funds associated
with the Retained Certificates. Interest is payable semi-annually on June 15 and
December 15 of each year commencing December 15, 1996. Principal matures
December 2000.
NOTE 6 - INCOME TAXES:
All Company operations are domestic. Income tax expense charged to
continuing operations consisted of the following (in thousands):
Fiscal Year
------------------------------
1997 1996 1995
------- ------ -------
Federal income tax expense (benefit):
Current .................................. $ 1,596 $1,582 $ 8,309
Deferred ................................. (202) 339 (420)
------- ------ -------
1,394 1,921 7,889
------- ------ -------
State income tax expense (benefit):
Current .................................. 113 61 637
Deferred ................................. (24) 41 125
------- ------ -------
89 102 762
------- ------ -------
$ 1,483 $2,023 $ 8,651
======= ====== =======
A reconciliation between the federal income tax expense charged to
continuing operations computed at statutory tax rates and the actual income tax
expense recorded follows (in thousands):
Fiscal Year
------------------------
1997 1996 1995
------ ------ ------
Federal income tax expense at the statutory
rate ................................................ $1,410 $1,957 $8,154
State income taxes, net ............................. 73 66 497
====== ====== ======
$1,483 $2,023 $8,651
====== ====== ======
F-9
<PAGE>
Deferred tax liabilities (assets) consist of the following (in thousands):
January 31, February 1,
1998 1997
------- -------
Gross deferred tax liabilities:
Unrealized gain associated with the
Retained Certificates ...................... $ 1,309 $ 1,501
Gross deferred tax assets:
Other .......................................... (92) (58)
Deferred tax assets valuation allowance ............ -- --
------- -------
$ 1,217 $ 1,443
======= =======
In connection with the write-off of trust organization costs during
1997, the Company recorded an extraordinary charge of $1.0 million, net of
applicable income taxes of $0.4 million.
NOTE 7 - COMMITMENTS AND CONTINGENCIES:
LITIGATION: Although no litigation is currently pending, the Company is
subject to claims and litigation arising in the normal course of its business.
CONCENTRATION OF CREDIT RISK: Financial instruments which potentially
subject the Company to concentrations of credit risk are primarily cash and
accounts receivable. The credit risk associated with the Company's accounts
receivable is limited by the large number of customers in SRI's customer base.
Substantially all of SRI's customers reside in the central United States.
NOTE 8 - RELATED PARTY TRANSACTIONS:
In connection with the transactions discussed in Note 3 and Note 4, the
Company will record a payable to or a receivable from SRI. Intercompany interest
was charged on receivable balances from SRI at LIBOR plus 1.0% (6.8% at January
31, 1998).
F-10
<PAGE>
EXHIBIT INDEX
The following documents are the exhibits to the Form 10-K. For convenient
reference, each exhibit is listed according to the Exhibit Table of Regulation
S-K.
EXHIBIT
NUMBER EXHIBIT
------ -------
*3.1 Certificate of Incorporation of SRI Receivables Purchase Co., Inc.
*3.2 By-Laws of SRI Receivables Purchase Co., Inc.
*4.1 Indenture among SRI Receivables Purchase Co., Inc., Specialty
Retailers, Inc., as Administrative Agent, and Bankers Trust
Company, as Trustee and Collateral Agent, relating to the 12.5%
Trust Certificate-Backed Notes of SRI Receivables Purchase Co.,
Inc. (including form of Note). (Incorporated by Reference to
Exhibit 4.1 on Form 10-Q of Apparel Retailers, Inc., dated
May 4, 1996
*4.2 Series 1997-1 Supplement dated December 3, 1997 to Amended and
Restated Pooling and Servicing Agreement dated as of August 11,
1995 and Amended on May 30, 1996 by and among SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc. and Bankers Trust
(Delaware) on behalf of the Series 1997-1 Certificateholders
(Incorporated by Reference to Exhibit 10.1 on Form 10-Q
of Stage Stores, Inc., dated November 1, 1997).
*4.3 Class A Certificate Purchase Agreement amount SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc., the Class A
Purchasers party thereto and Credit Suisse First Boston dated
as of December 3, 1997. (Incorporated by Reference to Exhibit
4.8 on Form 10-K of Stage Stores, Inc., for the fiscal
year ended January 31, 1998).
*4.4 Class B Certificate Purchase Agreement amount SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc., the Class B
Purchasers party thereto and Credit Suisse First Boston dated
as of December 3, 1997. (Incorporated by Reference to Exhibit
4.9 on Form 10-K of Stage Stores, Inc., for the fiscal
year ended January 31, 1998).
*4.5 Amended and Restated Series 1993-1 Supplement among SRI
Receivables Purchase Co., Inc., Specialty Retailers, Inc. and
Bankers Trust (Delaware) dated May 30, 1996 (Incorporated by
Reference to Exhibit 4.3 on Form 10-Q of Apparel
Retailers, Inc., dated May 4, 1996).
*4.6 Amended and Restated Series 1995-1 Supplement by and among SRI
Receivables Purchase Co., Inc., Specialty Retailers, Inc. and
Bankers Trust (Delaware) on behalf of the Series 1995-1
Certificateholders dated May 30, 1996 (Incorporated by
Reference to Exhibit 4.6 on Form 10-Q of Apparel Retailers,
Inc., dated May 4, 1996).
*4.7 Amended and Restated Receivables Purchase Agreement among SRI
Receivables Purchase Co., Inc. and the Originators dated as of
May 30, 1996 (Incorporated by Reference to Exhibit 4.7 on Form
10-Q of Apparel Retailers, Inc., dated May 4, 1996).
*4.8 Certificate Purchase Agreements between SRI Receivables Purchase
Co., Inc. and the Purchasers of the Series 1993-1 Offered
Certificates (Incorporated by Reference to Exhibit 4.10 of
Registration No. 33-68258 on Form S-4 of
Specialty Retailers, Inc.).
X-1
<PAGE>
*4.9 Revolving Certificate Purchase Agreement between SRI Receivables
Purchase Co., Inc., the Facility Agent and the Revolving
Purchasers with respect to the Class A-R Certificates
(Incorporated by Reference to Exhibit 4.11 of
Registration No. 33-68258 on Form S-4 of Specialty Retailers,
Inc.).
*4.10 Certificate Purchase Agreement among SRI Receivables Purchase
Co., Inc., Specialty Retailers, Inc. and the Certificate
Purchaser dated as of August 11, 1995 (Incorporated by
Reference to Exhibit 4.9 on Form 10-Q of Apparel Retailers,
Inc., dated October 28, 1995).
*4.11 Series 1997-1 Supplement dated as of December 3, 1997 to Amended
and Restated Pooling and Servicing Agreement dated as of August
11, 1995 and Amended on May 30, 1996 by and among SRI
Receivables Purchase Co., Inc., Specialty Retailers, Inc. and
Bankers Trust (Delaware) on behalf of the Series 1997-1
Certificateholders (Incorporated by Reference to Exhibit 10.1
on Form 10-Q of Stage Stores, Inc., dated November 1, 1997).
*10.1 Registration Rights Agreement dated as of May 30, 1996 by and
among SRI Receivables Purchase Co., Inc. and BT Securities
Corporation relating to the sale of SRI Receivables Purchase
Co., Inc. 12.5% Trust Certificate-Backed Notes (Incorporated by
Reference to Exhibit 10.1 of Registration No.
333-10843 on Form S-4 of SRI Receivables Purchase Co., Inc.).
*10.2 Employment Agreement between Stage Stores, Inc. and Carl E.
Tooker dated April 1, 1998. (Incorporated by Reference to
Exhibit 10.3 on Form 10-K of Stage Stores, Inc., for the
fiscal year ended January 31, 1998).
*10.3 Stock Option Agreement between Specialty Retailers, Inc. and
Carl E. Tooker dated June 9, 1993 (Incorporated by Reference
to Exhibit 10.18 of Registration No. 33-68258 on Form S-4 of
Specialty Retailers, Inc.).
*10.4 Employment Agreement between James Marcum and Stage Stores,
Inc. dated April 1, 1998. (Incorporated by Reference to
Exhibit 10.6 on Form 10-K of Stage Stores, Inc., for the
fiscal year ended January 31, 1998).
**27.1 Financial Data Schedule.
- ----------
* Previously Filed
** Filed Herewith
X-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE SRI RECEIVABLES PURCHASE CO., INC. FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 80,726
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 86,483
<CURRENT-LIABILITIES> 630
<BONDS> 30,000
<COMMON> 0
0
0
<OTHER-SE> 40,312
<TOTAL-LIABILITY-AND-EQUITY> 86,483
<SALES> 0
<TOTAL-REVENUES> 9,003
<CGS> 0
<TOTAL-COSTS> 1,234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,740
<INCOME-PRETAX> 4,029
<INCOME-TAX> 1,483
<INCOME-CONTINUING> 2,546
<DISCONTINUED> 0
<EXTRAORDINARY> 642
<CHANGES> 0
<NET-INCOME> 1,904
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
