SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended October 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. 0-23671
-------
WEINER'S STORES, INC.
---------------------
(exact name of registrant as specified in its charter)
Delaware 76-0355003
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6005 Westview Drive, Houston, TX 77055
-----------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (713) 688-1331
--------------
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 has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
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.
As of December 14, 1998, there were 18,480,080 shares of Weiner's
Stores, Inc. common stock, par value $.01 per share, outstanding.
HO1:\131108\02\2T5W02!.DOC\80289.0001
<PAGE>
WEINER'S STORES, INC.
FORM 10-Q
QUARTER ENDED OCTOBER 31, 1998
Table of Contents
Page No.
--------
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
Consolidated Statements of Operations 3-4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Financial Statements 7-9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk 14
PART 2. OTHER INFORMATION
ITEM 1. Legal Proceedings 15
ITEM 2. Changes in Securities and Use of Proceeds 15
ITEM 3. Defaults Upon Senior Securities 15
ITEM 4. Submission of Matters to a Vote of Security Holders 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
WEINER'S STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
-------------------------------------- -------------------
Thirteen Weeks Nine Weeks Four Weeks
Ended Ended Ended
October 31, 1998 October 25, 1997 August 25, 1997
------------------- ------------------ -------------------
<S> <C> <C> <C>
Net sales $ 60,585,000 $ 35,800,000 $ 33,232,000
Cost of goods sold 39,984,000 24,933,000 22,733,000
------------------- ------------------ -------------------
Gross margin 20,601,000 10,867,000 10,499,000
Selling, administrative and other operating costs 23,001,000 13,763,000 7,946,000
Reorganization expense - - 1,006,000
------------------- ------------------ -------------------
Operating (loss) income (2,400,000) (2,896,000) 1,547,000
Interest expense (309,000) (32,000) (14,000)
Interest income - - -
"Fresh start" adjustments - - (1,519,000)
------------------- ------------------ -------------------
Loss before extraordinary gain (2,709,000) (2,928,000) 14,000
Extraordinary gain - - 18,683,000
------------------- ------------------ -------------------
Net (loss) income $ (2,709,000) $ (2,928,000) $ 18,697,000
=================== ================== ===================
Net (loss) income per share of common stock $ (0.14) $ (0.15) $ 186.97
=================== ================== ===================
Weighted average number of shares of
common stock outstanding 19,000,000 19,000,000 100,000
=================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WEINER'S STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
--------------------------------------- -------------------
Thirty-Nine Weeks Nine Weeks Thirty Weeks
Ended Ended Ended
October 31, 1998 October 25, 1997 August 25, 1997
-------------------- ------------------ -------------------
<S> <C> <C> <C>
Net sales $ 190,712,000 $ 35,800,000 $ 160,315,000
Cost of goods sold 124,835,000 24,933,000 106,350,000
-------------------- ------------------ -------------------
Gross margin 65,877,000 10,867,000 53,965,000
Selling, administrative and other operating costs 67,827,000 13,763,000 50,309,000
Reorganization expense - - 2,406,000
-------------------- ------------------ -------------------
Operating (loss) income (1,950,000) (2,896,000) 1,250,000
Interest expense (751,000) (32,000) (40,000)
Interest income - - 167,000
"Fresh start" adjustments - - (1,519,000)
-------------------- ------------------ -------------------
Loss before extraordinary gain (2,701,000) (2,928,000) (142,000)
Extraordinary gain - - 18,683,000
-------------------- ------------------ -------------------
Net (loss) income $ (2,701,000) $ (2,928,000) $ 18,541,000
==================== ================== ===================
Net (loss) income per share of common stock $ (0.14) $ (0.15) $ 185.41
==================== ================== ===================
Weighted average number of shares of
common stock outstanding 19,000,000 19,000,000 100,000
==================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WEINER'S STORES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, January 31,
1998 1998
------------------- --------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,232,000 $ 3,574,000
Receivables 3,326,000 1,592,000
Merchandise inventories, net 60,352,000 49,881,000
Prepaid expenses and other assets 3,797,000 3,138,000
------------------- --------------------
Total current assets 70,707,000 58,185,000
------------------- --------------------
Property and Equipment:
Land 258,000 258,000
Building - distribution center and office facility 1,996,000 1,967,000
Furniture, fixtures and leasehold improvements 19,688,000 16,262,000
------------------- --------------------
Total 21,942,000 18,487,000
Less accumulated depreciation and amortization (4,263,000) (1,674,000)
------------------- --------------------
Total property and equipment, net 17,679,000 16,813,000
------------------- --------------------
Excess Reorganization Value, less accumulated amortization of
$360,000 and $164,000, respectively 5,446,000 5,741,000
------------------- --------------------
$ 93,832,000 $ 80,739,000
=================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 14,372,000 $ 9,303,000
Accrued expenses and other current liabilities 10,397,000 7,633,000
------------------- --------------------
Total current liabilities 24,769,000 16,936,000
------------------- --------------------
Other Liabilities 796,000 834,000
Long-Term Debt 13,000,000 5,000,000
------------------- --------------------
Commitments and Contingencies - -
Stockholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
19,000,000 shares issued and outstanding 190,000 190,000
Additional paid-in capital 63,664,000 63,664,000
Accumulated deficit (8,587,000) (5,885,000)
------------------- --------------------
Total stockholders' equity 55,267,000 57,969,000
------------------- --------------------
$ 93,832,000 $ 80,739,000
=================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
WEINER'S STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
----------------------------------------- --------------------
Thirty-Nine Weeks Nine Weeks Thirty Weeks
Ended Ended Ended
October 31, 1998 October 25, 1997 August 25, 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Net cash used in operating activities $ (4,573,000) $ (8,669,000) $ 706,000
-------------------- -------------------- --------------------
Cash Flows from Investing Activities:
Capital expenditures (3,834,000) (1,555,000) (3,813,000)
Proceeds on disposition of assets 65,000 - 61,000
-------------------- -------------------- --------------------
Net cash used in investing activities (3,769,000) (1,555,000) (3,752,000)
-------------------- -------------------- --------------------
Cash Flows from Financing Activities:
Net borrowings under bank line of credit 8,000,000 - -
-------------------- -------------------- --------------------
Net cash provided by financing activities 8,000,000 - -
-------------------- -------------------- --------------------
Net Decrease in Cash (342,000) (10,224,000) (3,046,000)
Cash and Cash Equivalents, beginning of period 3,574,000 15,673,000 18,719,000
-------------------- -------------------- --------------------
Cash and Cash Equivalents, end of period $ 3,232,000 $ 5,449,000 $ 15,673,000
==================== ==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
WEINER'S STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Basis of Presentation
On April 12, 1995, the Company filed a petition for reorganization
under Chapter 11 of the Federal Bankruptcy Code. The Company's Plan of
Reorganization was confirmed on August 13, 1997 and became effective on August
26, 1997. On that date, the Company adopted "fresh start" reporting in
accordance with the American Institute of Certified Public Accountants Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," which resulted in adjustments to the Company's stockholders'
equity and the carrying value of assets and liabilities. Accordingly, the
Company's post-reorganization financial statements are not comparable to the
pre-reorganization financial statements. A vertical black line is shown in the
accompanying financial statements to separate the post-reorganization periods
from the pre-reorganization periods.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring adjustments)
which management considers necessary to present fairly the financial position of
Weiner's Stores, Inc. (the "Company") as of October 31, 1998, and the results of
its operations and its cash flows for each of the thirteen and thirty-nine week
periods ended October 31, 1998 and October 25, 1997. The results of operations
for the thirteen and thirty-nine week periods may not be indicative of the
results for the entire year.
These financial statements should be read in conjunction with the
audited financial statements for the fiscal year ended January 31, 1998 and
related notes which are included in the Company's Annual Report to stockholders
and the Company's Registration Statement on Form 10, as amended. Accordingly,
significant accounting policies and other disclosures necessary for complete
financial statements in conformity with generally accepted accounting principles
have been omitted since such items are reflected in the Company's audited
financial statements and related notes thereto.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain 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.
(2) Accrued Expenses
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
October 31, 1998 January 31, 1998
------------------- -------------------
<S> <C> <C>
Payroll and related benefits $ 1,575,000 $ 1,661,000
Taxes other than income taxes 3,033,000 1,613,000
Rent and other related costs 2,548,000 2,123,000
Other 3,241,000 2,236,000
------------------- -------------------
Total $ 10,397,000 $ 7,633,000
=================== ===================
</TABLE>
(3) Long-Term Debt
At October 31, 1998, the Company had approximately $18,128,000 of
availability under its $40,000,000 working capital facility, after considering
outstanding letters of credit of approximately $4,199,000. The Company may
prepay amounts outstanding under the working capital facility without penalty.
Effective August 29, 1998, the Company and the Agent for the working
capital facility entered into a Second Amendment to the revolving credit
agreement. The Second Amendment, among other things, provided for a slight
upward adjustment in applicable interest rates to the reference rate thereunder
plus 0.5% or, at the option of the Company, the Eurodollar Rate thereunder plus
7
<PAGE>
2.5%, and adjusted the financial covenant relating to earnings before interest,
taxes, depreciation and amortization ("EBITDA") as defined in the revolving
credit agreement. As of October 31, 1998, the Company was in compliance with all
covenants of the revolving credit agreement.
(4) Leases
During the thirty-nine weeks ended October 31, 1998, the Company entered
into new leases for three stores, including relocations, closed one store and
executed renewal options on several locations. Future minimum rental payments
have increased approximately $8,440,000 since January 31, 1998, bringing the
total future minimum rental payments under all noncancelable operating leases
with initial or remaining lease terms of one year or more to approximately
$45,518,000.
Total rent expense for all operating leases was as follows:
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
----------------------------------------- --------------------
Thirty-Nine Nine Thirty
Weeks Ended Weeks Ended Weeks Ended
October 31, 1998 October 25, 1997 August 25, 1997
------------------ ------------------ --------------------
<S> <C> <C> <C>
Minimum rentals $ 7,559,000 $ 1,594,000 $ 5,426,000
Contingent rentals 337,000 39,000 419,000
------------------ ------------------ --------------------
Total $ 7,896,000 $ 1,633,000 $ 5,845,000
================== ================== ====================
</TABLE>
(5) Stock Based Awards
On March 26, 1998, under the 1997 Stock Incentive Plan, options to
purchase 51,500 shares of common stock were granted to certain key employees at
an exercise price of $1.00 per share, the fair market value on that date. At
October 31, 1998, there were vested options outstanding to purchase 295,166
shares of common stock at a per share exercise price of $1.15.
(6) Income Taxes
The Company provides United States federal income taxes based on its
estimated annual effective tax rate for the fiscal year. No income tax provision
was recorded in either the first nine months of 1998 or 1997. The recognition of
income tax benefits is affected by limitations on the Company's ability to
utilize NOL carryforwards.
(7) New Accounting Pronouncements
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting the Costs of Start-up
Activities." SOP 98-5 is effective beginning on January 1, 1999, and requires
that start-up costs capitalized prior to January 1, 1999 be written off and any
future start-up costs be expensed as incurred. If the Company had expensed these
items as incurred during the first nine months of 1998, the Company would have
had a loss per share of common stock of $0.15.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999. The Company does not participate in the use of derivatives and
does not believe this pronouncement will impact its financial presentation.
8
<PAGE>
(8) Earnings Per Share
Net income per share of common stock is computed based on the weighted
average number of shares of common stock and equivalent shares of common stock
outstanding during the period. The computation of weighted average shares of
common stock outstanding is as follows:
<TABLE>
<CAPTION>
Successor
Company
-----------------------------------------
October 31, 1998 October 25,
1997
------------------ ---------------
<S> <C> <C>
Weighted average number of shares of
common stock outstanding 19,000,000 19,000,000
Common stock equivalent - shares issuable
under the 1997 Stock Incentive Plan
- -
------------------ ---------------
Weighted average shares of common stock
outstanding assuming full dilution 19,000,000 19,000,000
================== ===============
</TABLE>
As of October 31, 1998, the Company's common stock was not actively
traded. The Company has determined that none of its common stock had appreciated
beyond the underlying exercise price of the option based on the most recent
trading activity (i.e., no dilution for the earnings per share computations).
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements.
The words "anticipate," "believe," "expect," "plan," "intend," "seek,"
"estimate," "project," "will," "could," "may," and similar expressions are
intended to identify forward-looking statements. These statements include, among
others, information regarding future operations, future capital expenditures and
future cash flow. Such statements reflect the Company's current views with
respect to future events and financial performance and involve risks and
uncertainties, including, without limitation, general economic and business
conditions, changes in foreign, political, social and economic conditions,
regulatory initiatives and compliance with governmental regulations, the ability
of the Company and its competitors to predict fashion trends and customer
preferences and achieve further market penetration and additional customers,
consumer apparel buying patterns, adverse weather conditions, inventory risks
due to shifts in market demand, and various other matters, many of which are
beyond the Company's control. Should one or more of these risks or uncertainties
occur, or should underlying assumptions prove to be incorrect, actual results
may vary materially and adversely from those anticipated, believed, estimated or
otherwise indicated. Consequently, all of the forward-looking statements made in
this Report are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequences to or effect on the Company or its business or operations.
The Company does not undertake and expressly disclaims any obligation to
publicly update or revise any such forward-looking statements even if experience
or future changes make it clear that the projected results expressed or implied
therein will not be realized.
Results of Operations
On April 12, 1995, the Company filed a petition for reorganization
under Chapter 11 of the Federal Bankruptcy Code. The Company's Plan of
Reorganization was confirmed on August 13, 1997 and became effective on August
26, 1997. On that date, the Company adopted "fresh start" reporting in
accordance with the American Institute of Certified Public Accountants Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," which resulted in adjustments to the Company's stockholders'
equity and the carrying value of assets and liabilities. Accordingly, the
Company's post-reorganization financial statements are not comparable to the
pre-reorganization financial statements. A vertical black line is shown in the
accompanying financial statements to separate the post-reorganization periods
from the pre-reorganization periods.
9
<PAGE>
Thirteen Weeks Ended October 31, 1998 Compared to Thirteen Weeks Ended October
25, 1997
Net sales in the third quarter of 1998 decreased 12.2% to $60,585,000
from $69,032,000 in the third quarter of 1997. The decrease is primarily
attributable to a 13.3% decrease in comparable store sales. Sales were
negatively impacted by warm weather, excessive rains and a decrease in sales of
Levi's jeans and branded athletic shoes.
Gross margin in the third quarter of 1998 increased as a percentage of
sales to 34.0% from 31.0% in the third quarter of 1997. This increase is
primarily attributable to higher initial markup and lower promotional markdowns.
Selling, administrative and other operating costs increased to
$23,001,000 in the third quarter of 1998 compared to $21,709,000 in the third
quarter of 1997. The increase is primarily attributable to increased payroll
costs, promotional advertising and rent expense relating to new stores. As a
percentage of sales, selling, administrative and other operating costs in the
third quarter of 1998 increased to 38.0% from 31.4% in the third quarter of
1997. This increase is primarily attributable to the decrease in sales discussed
above.
The third quarter of 1997 included $1,006,000 of reorganization
expense. There has been no reorganization expense since August 26, 1997 when the
Company emerged from Chapter 11 reorganization.
Operating loss increased to $2,400,000 in the third quarter of 1998
from $1,349,000 in the third quarter of 1997. Had the Company not incurred the
reorganization expense referred to above, third quarter 1997 operating loss
would have been $343,000. The Company is focusing on its inventory mix and
evaluating overall expense control initiatives to attempt to enhance operating
results for fiscal 1998.
The Company provides United States federal income taxes based on its
estimated annual effective tax rate for the fiscal year. No income tax provision
was recorded in either the third quarter of 1998 or the third quarter of 1997.
The recognition of income tax benefits is affected by limitations on the
Company's ability to utilize NOL carryforwards.
The Company recorded interest expense of $309,000 in the third quarter
of 1998 compared to $46,000 in the third quarter of 1997. During its bankruptcy
proceedings, the Company discontinued accruing interest on substantially all of
its prepetition debt. Interest expense has increased due to the increase in
borrowings under the Revolving Credit Agreement since the Company's emergence
from Chapter 11 reorganization on August 26, 1997. In the third quarter of 1997,
the Company was not utilizing its working capital facility.
The Company recorded $1,519,000 in "fresh-start" expense in relation to
its emergence from Chapter 11 reorganization in August 1997.
Extraordinary gain of $18,683,000 related to debt discharge in the
Company's emergence from Chapter 11 reorganization was recognized in August
1997.
The Company's net loss for the third quarter of 1998 was $2,709,000, or
$0.14 per share of common stock, compared to a net income of $15,769,000 or
$157.69 per share of common stock for the third quarter of 1997. The Company
adopted "fresh start" accounting upon its emergence from Chapter 11
reorganization. Earnings per share for prior periods is based on the Predecessor
Company shares then outstanding; such information is not comparable due to the
Company's reorganization.
Thirty-Nine Weeks Ended October 31, 1998 Compared to Thirty-Nine Weeks Ended
October 25, 1997
Net sales in the first nine months of 1998 decreased 2.8% to
$190,712,000 from $196,115,000 in the first nine months of 1997. The decrease is
primarily attributable to a 4.7% decrease in comparable store sales and the
closing of seven stores in the fourth quarter of 1997, offset by sales from new
stores (seven stores in 1998 and one store in 1997). Sales were negatively
impacted by warm weather, excessive rains and a decrease in sales of Levi's
jeans and branded athletic shoes.
10
<PAGE>
Gross margin in the first nine months of 1998 increased as a percentage
of sales to 34.5% from 33.1% in the first nine months of 1997. This increase is
primarily attributable to increased initial markup and lower promotional
markdowns. These results are not indicative of performance during more
competitive seasons.
Selling, administrative and other operating costs increased to
$67,827,000 in the first nine months of 1998 compared to $64,072,000 in the
first nine months of 1997. The increase is primarily attributable to increased
payroll costs due to federally mandated minimum wage increases, promotional
advertising and rent expense. As a percentage of sales, selling, administrative
and other operating costs in the first nine months of 1998 increased to 35.6%
from 32.7% in the first nine months of 1997. This increase is primarily
attributable to the decrease in sales discussed above.
The first nine months of 1997 included $2,406,000 of reorganization
expense. There has been no reorganization expense since August 26, 1997 when the
Company emerged from Chapter 11 reorganization.
Operating loss increased to $1,950,000 in the first nine months of 1998
from an operating loss of $1,646,000 in the first nine months of 1997. Had the
Company not incurred the reorganization expense referred to above, in the first
nine months of 1997 operating income would have been $760,000. The Company is
focusing on its inventory mix and evaluating overall expense control initiatives
to attempt to enhance operating results for fiscal 1998.
The Company provides United States federal income taxes based on its
estimated annual effective tax rate for the fiscal year. No income tax provision
was recorded in either the first nine months of 1998 or the first nine months of
1997. The recognition of income tax benefits is affected by limitations on the
Company's ability to utilize NOL carryforwards.
The Company recorded interest expense of $751,000 in the first nine
months of 1998 compared to $72,000 in the first nine months of 1997. During its
bankruptcy proceedings, the Company discontinued accruing interest on
substantially all of its prepetition debt. Interest expense has increased due to
the increase in borrowings under the Revolving Credit Agreement since the
Company's emergence from Chapter 11 reorganization on August 26, 1997. In the
third quarter of 1997, the Company was not utilizing its working capital
facility.
Interest income during the first nine months of 1998 was approximately
zero compared to $167,000 during the first nine months of 1997. This decline in
interest income is primarily due to the reduction in cash available for
investment in the first nine months of 1998 as compared to the first nine months
of 1997.
The Company recorded $1,519,000 in "fresh-start" expense in relation to
its emergence from Chapter 11 reorganization in August 1997.
Extraordinary gain of $18,683,000 related to debt discharge in the
Company's emergence from Chapter 11 reorganization was recognized in August
1997.
The Company's net loss for the first nine months of 1998 was
$2,701,000, or $0.14 per share of common stock, compared to a net income of
$15,613,000 or $156.13 per share of common stock for the first nine months of
1997. The Company adopted "fresh start" accounting upon its emergence from
Chapter 11 reorganization. Earnings per share for prior periods is based on the
Predecessor Company shares then outstanding; such information is not comparable
due to the Company's reorganization.
Liquidity and Capital Resources
The Company's cash used in operations was $4,573,000 during the
thirty-nine weeks ended October 31, 1998, compared to cash used in operations of
$7,963,000 during the thirty-nine weeks ended October 25, 1997. The decrease in
cash used in operations is primarily attributable to the elimination of the
incurrence of reorganization expense since the Company's emergence from Chapter
11 reorganization on August 26, 1997. The Company's working capital was
$45,938,000 at October 31, 1998 compared to $41,249,000 at January 31, 1998 and
$39,722,000 at October 25, 1997. The Company's primary source of liquidity has
11
<PAGE>
been borrowings under the Revolving Credit Agreement, dated August 26, 1997, as
amended, between the Company and The CIT Group/Business Credit, Inc., as agent
(the "Agent") and the lenders thereunder (the "Revolving Credit Agreement").
At October 31, 1998, the Company had approximately $18,128,000 of
availability under the Revolving Credit Agreement, after considering borrowings
and outstanding letters of credit. At October 31, 1998, the aggregate amount of
outstanding letters of credit thereunder was approximately $4,199,000. The
Company may prepay amounts outstanding under the Revolving Credit Agreement
without penalty.
The Company's capital expenditures are expected to be approximately
$5,000,000 in fiscal 1998, primarily for the opening of new stores, remodeling
of existing stores and enhancements of the management information systems. The
Company will fund these capital expenditures from cash flows from operations and
borrowings under the Revolving Credit Agreement.
The Company's Revolving Credit Agreement provides a $40,000,000 working
capital facility, including a $15,000,000 subfacility for the issuance of
letters of credit. The Revolving Credit Agreement is secured by substantially
all of the Company's assets. Effective August 29, 1998, the Company and the
Agent entered into a Second Amendment to the Revolving Credit Agreement. The
Second Amendment, among other things, provided for a slight upward adjustment in
applicable interest rates, and adjusted the financial covenant relating to
earnings before interest, taxes, depreciation and amortization ("EBITDA") as
defined in the Revolving Credit Agreement. The Revolving Credit Agreement
provides that proceeds may be used solely to fund working capital in the
ordinary course of business and for other general corporate purposes. Borrowings
under the Revolving Credit Agreement, as so amended by such Second Amendment,
bear interest at the reference rate thereunder plus 0.5% or, at the option of
the Company, the Eurodollar Rate thereunder plus 2.5%. Under the terms of the
Revolving Credit Agreement, capital expenditures are limited to $7,000,000 in
fiscal 1998. The Revolving Credit Agreement further stipulates certain borrowing
limitations based on the Company's inventory levels and requires that the
Company comply with certain financial covenants. The expiration date of the
Revolving Credit Agreement is August 31, 2000. As of October 31, 1998, the
Company was in compliance with all covenants of the Revolving Credit Agreement.
The Company believes that its internally generated cash flow, together
with borrowings under the Revolving Credit Agreement, will be adequate to
finance the Company's operating requirements, debt repayments and capital needs
during the foreseeable future. Any material shortfalls in operating cash flow
could require the Company to seek alternative sources of financing or to reduce
capital expenditures.
Year 2000 Readiness Disclosure
The Year 2000 issue is primarily the result of computer programs being
written using two digits rather than four to define the applicable year. Certain
information technology systems and their associated software and certain
equipment that utilizes embedded logic chips to control aspects of its operation
may recognize "00" as a year other than the Year 2000. Some systems and embedded
chip equipment owned or used by the Company and third parties that do business
with the Company may contain two-digit programming to define a year. The Year
2000 issue could result, at the Company and elsewhere, in system failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or to engage in other
normal business activities.
The Company's State of Readiness
In the ordinary course of business, the Company initiated plans to
replace or enhance its core business systems in fiscal 1996-1999 with systems
which would be Year 2000 compliant. During fiscal 1997, the Company established
an oversight committee (the "Committee"), consisting of individuals from each of
its functional areas, to review all of the Company's computer systems and
programs, as well as to make inquiries with respect to the computer systems of
the third parties upon whose data or functionality the Company relies in any
material respect, and to assess their ability to process transactions in the
year 2000. The Committee meets regularly to review the progress of the Company's
Year 2000 compliance initiative. The goal of the Committee is to achieve a
transition for the Company into the Year 2000 which is free of any material
12
<PAGE>
interruptions. The Company has divided its Year 2000 efforts into five phases:
(i) identification and inventorying of systems, including embedded chip
equipment with potential Year 2000 problems; (ii) assessment of the scope of
Year 2000 issues for, and assigning priorities to, each item based on its
importance to the Company's operations; (iii) remediation of Year 2000 issues in
accordance with assigned priorities, by correction, upgrade, replacement, or
retirement; (iv) testing for a validation of Year 2000 compliance; and (v)
developing contingency plans to address the most reasonably likely worst case
scenario for the Company's Year 2000 issues. Because the Company uses a variety
of systems, internally developed and third party provided software and embedded
chip equipment, depending upon business function and location, various aspects
of the Company's Year 2000 efforts are in different phases and are proceeding in
parallel.
The Company's operations are also dependent upon the Year 2000
readiness of third parties who do business with the Company. In particular, the
Company's systems interact with commercial electronic transaction processing
systems to handle customer credit card purchases and other point of sale
transactions, and the Company is dependent on third-party suppliers of such
infrastructure elements as, but not limited to, telephone service, electric
power, water, banking facilities, merchandise purchases, deliveries and other
services. The Company has begun to identify and initiate formal communications
with key third parties and suppliers and with significant merchandise vendors to
determine the extent to which such parties have resolved their own Year 2000
issues. Although the Company is continuing to make such inquiries of third party
providers and to seek responses thereto, and the Company has not been put on
notice that any known third party problem will not be resolved, the Company has
limited information and no assurance of additional information concerning the
Year 2000 readiness of third parties. Consequently, the resulting risks to the
Company's business are very difficult to assess. Where commercially reasonable
to do so, the Company intends to assess its risks with respect to failure by
third parties to be Year 2000 compliant and to seek to mitigate those risks. The
Company is presently at an early stage in those efforts.
Costs
The total cost associated with becoming Year 2000 compliant is not
expected to be material to the Company's financial position. The Company expects
such costs in the aggregate to be approximately $50,000 exclusive of system
additions, upgrades or replacements incurred in the ordinary course of business
and assuming no implementation of contingency plans will be necessary. Costs
through October 31, 1998 have been approximately $10,000. The remaining
compliance costs are expected to be incurred within the next 12 months.
Risks
The Company intends and expects to implement the changes that it
determines to be necessary to address the Year 2000 issue for systems and
embedded chip equipment used within the Company. The Company presently believes
that, with modifications to its existing software, conversions to new software,
and appropriate remediation of embedded chip equipment, the Year 2000 issue is
not reasonably likely to pose significant operational problems for the Company's
systems and embedded chip equipment as so modified and converted. However, if
unforeseen difficulties arise or such modifications, conversions and
replacements are not completed on a timely basis, or if the Company's vendors'
or suppliers' systems are not Year 2000 compliant, the Year 2000 issue may have
a material impact on the results of operations and financial condition of the
Company.
The Company is presently unable to accurately assess the likelihood
that the Company will experience significant operational problems due to
unresolved Year 2000 problems of third parties who do business with the Company.
There can be no assurance that such other entities will achieve timely Year 2000
compliance; if they do not, Year 2000 problems could have a material impact on
the Company's operations. Similarly, there can be no assurance that the Company
can timely mitigate its risks related to a supplier's failure to resolve its
Year 2000 issues. If such mitigation is not achievable, Year 2000 problems could
have a material impact on the Company's operations.
The Company estimates that it will achieve Year 2000 compliance by the
end of August 1999. The Company's estimates of such date and the costs of
achieving Year 2000 compliance are based on management's best estimates, which
13
<PAGE>
were derived using numerous assumptions about future events including the
continued availability of certain resources, third party modification plans and
other factors. However, there can be no assurance that these estimates will be
achieved, and actual results could differ materially from these estimates.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in Year 2000
remediation work, the ability to locate and correct all relevant computer codes,
the success achieved by the Company's suppliers in reaching Year 2000 readiness,
the timely availability of necessary replacement items and similar
uncertainties, many of which are beyond the Company's control.
Contingency Plans
The Company is in the process of developing Year 2000 contingency plans
to address its most critical operational areas at the Company level. By the
close of the first quarter of fiscal 1999, the Company expects to more
completely define these issues, quantify their potential impact and complete the
development of such contingency plans. However, the necessity, timing and cost
of any contingency plans must be evaluated on a case-by-case basis and may vary
considerably, and testing results and external business partner responses may
require changes in or additions to such plans. Furthermore, there may be no
practical alternative course of action available to the Company for some issues.
The Company's statements of its expectations regarding the Year 2000
problem, including as to the current status, date of completion and costs of its
Year 2000 compliance programs, are forward-looking statements. These statements
are management's best estimates based on information currently available.
Therefore, they are inherently subject to risks and uncertainties, including
those described above, which could cause actual results to differ and which may
have a material adverse effect on the Company's business, financial position,
results of operations or capital or liquidity needs.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
14
<PAGE>
PART 2. OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is party to ordinary routine litigation,
arbitration and proceedings incidental to its business, the disposition
of which is not expected to have a material adverse effect on the
Company's business or financial condition.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit
No. Description
--- -----------
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
registration statement on Form 10 filed April 14, 1998)
3.2 Restated Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's registration statement on Form
10 filed April 14, 1998)
10.1 Second Amendment, dated as of August 29, 1998, to the
Revolving Credit Agreement (filed herewith)
27.1 Financial Data Schedule (filed herewith)
(b) The Company did not file any reports on Form 8-K during the third
quarter of 1998.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
WEINER'S STORES, INC.
December 14, 1998 /s/ Raymond J. Miller
----------------- --------------------------------
(Date) By: Raymond J. Miller
Vice President and Chief
Financial Officer
16
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
registration statement on Form 10 filed April 14, 1998)
3.2 Restated Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's registration statement on Form 10
filed April 14, 1998)
10.1 Second Amendment, dated as of August 29, 1998, to the Revolving
Credit Agreement (filed herewith)
27.1 Financial Data Schedule (filed herewith)
17
Exhibit 10.1
SECOND AMENDMENT
TO
REVOLVING CREDIT AGREEMENT
SECOND AMENDMENT, dated as of August 29, 1998 (this "Second
Amendment"), to the Revolving Credit Agreement, dated as of August 26, 1997 (as
amended by that certain First Amendment to Revolving Credit Agreement, dated
September 30, 1997, and as may be hereafter amended, supplemented or modified
from time to time in accordance with its terms, the "Credit Agreement"), by and
among WEINER'S STORES, INC., a Delaware corporation (the "Borrower"), the
financial institutions from time to time party hereto (collectively, the
"Lenders") and THE CIT GROUP/BUSINESS CREDIT, INC., as a Lender and as agent for
the Lenders (in such capacity, the "Agent").
WHEREAS, the Borrower was required, on or before September 25,
1997, to furnish the Agent with (i) pursuant to Section 7.13(a)(v) of the Credit
Agreement, Depository Account Agreements, substantially in the form of Exhibit G
to the Credit Agreement, with respect to each Depository Bank listed on Schedule
6.26 of the Credit Agreement and (ii) pursuant to Section 7.13(a)(vi) of the
Credit Agreement, a Restricted Account Agreement substantially in the form of
Exhibit H to the Credit Agreement (collectively, the "Required Agreements"); and
WHEREAS, pursuant to certain letter agreements with the Agent,
the Borrower's deadline to furnish the Required Agreements was extended to
August 29, 1998; and
WHEREAS, the Borrower has advised the Agent that the Borrower
will not be able to furnish the Agent with the Required Agreements by August 29,
1998, and the Borrower has requested that the Agent extend the deadline by which
it is required to furnish the Agent with the Required Agreements; and
WHEREAS, the Borrower has revised its financial projections
for the remainder of fiscal year 1998; and
WHEREAS, in connection with such revised projections, the
Borrower has requested certain amendments to the Credit Agreement; and
WHEREAS, the Agent and the Lenders are willing to make such
amendments to the Credit Agreement upon the terms and subject to the conditions
set forth in this Second Amendment.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and subject to the fulfillment of
the conditions set forth below, the parties hereto agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Definitions. All capitalized terms used herein and not otherwise
defined herein are used herein as defined in the Credit Agreement.
1.2 Amendment to Definition of Regular Rate. The definition of the term
"Regular Rate" in Section 1.01 of the Credit Agreement is hereby amended in its
entirety as follows:
"'Regular Rate' shall mean, for any day, the Reference Rate for
such day plus .5%."
1.3 Amendment to Definition of Cumulative FIFO EBITDA. The definition of
the term "Cumulative FIFO EBITDA" in Section 1.01 of the Credit Agreement is
hereby amended in its entirety as follows:
<PAGE>
"'Cumulative FIFO EBITDA' shall mean (a) with respect to any
fiscal month ending prior to August 29, 1998, the aggregate FIFO EBITDA
for the period beginning on August 26, 1997 and ending at the end of
such fiscal month and (b) with respect to any month ending thereafter,
the aggregate FIFO EBITDA for such fiscal month and the preceding
eleven (11) fiscal months."
1.4 Amendment to Section 2.05(b). Section 2.05(b) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"(b) Each Eurodollar Loan shall bear interest at a rate per
annum equal to the Eurodollar Rate plus 2.5% for the Interest Period in
effect for such Eurodollar Loan, together with any additional interest
owning pursuant to Section 2.14 hereof."
Amendment to Section 7.13(a). Section 7.13(a) of the Credit Agreement
is amended in its entirety as follows:
"(a) The Borrower agrees and covenants to (i) cause all cash
and all proceeds from accounts receivable and the sale of Inventory to
be deposited into the Depository Accounts in the ordinary course of
business of the Borrower consistent with past practice, (ii) cause all
remittances on credit card sales to be transferred into the Cash
Concentration Account or a Depositary Account on a daily basis, (iii)
cause all funds in the Depository Accounts to be transferred into the
Cash Concentration Account at least three (3) times per week, (iv) take
all such actions as the Agent deems necessary or advisable to send all
cash, all proceeds from the sale of Inventory, all remittances or other
proceeds of Collateral to the Cash Concentration Account, (v) as soon
as possible and in no event later than December 31, 1998, the Borrower
shall enter into a Depositary Account Agreement substantially in the
form of Exhibit G hereto with respect to each Depositary Bank listed on
Schedule 6.26, and (vi) take such actions as the Agent deems necessary
or advisable to grant to the Agent dominion and control over the funds
in the Cash Concentration Account. With respect to the Cash
Concentration Account, as soon as possible and in no event later than
December 31, 1998, the Borrower shall deliver to the Agent an
agreement, duly executed by the Borrower and the Cash Concentration
Account Bank substantially in the form of Exhibit H hereto (the
"Restricted Account Agreement"), authorizing and directing the Cash
Concentration Account Bank to remit all amounts deposited in the Cash
Concentration Account to the Agent or as the Agent may direct, subject
to this Section 7.13. After the occurrence and during the continuance
of an Event of Default, the Agent may instruct the Cash Concentration
Account Bank to send by wire transfer all amounts deposited in the Cash
Concentration Account to the Agent Account or as the Agent shall
direct. In the absence of an Event of Default, the Agent shall direct
the Cash Concentration Account Bank to make all cash in the Cash
Concentration Account available to the Borrower for general corporate
purposes in accordance with Section 2.09. The Borrower shall promptly,
and in any event not later than five (5) days after the opening of any
such new account, notify the Agent in writing of the creation of any
new Depository Account and shall at the time of such notice cause each
Depository Bank maintaining a Depository Account to promptly, and in
any event within thirty (30) days after the date of such notice, enter
into a Depository Account Agreement. If the Borrower is unable to
obtain a Depository Account Agreement from any financial institution
that receives remittances or other proceeds of sales of Inventory
within such thirty (30) day period, the Borrower shall promptly
thereafter terminate such accounts and establish new accounts at a
financial institution that will enter into a Depository Account
Agreement."
Amendment to Section 8.12. Section 8.12 of the Credit Agreement is
amended in its entirety as follows:
2
<PAGE>
"Cumulative FIFO EBITDA. (i) Permit Cumulative FIFO EBITDA
for any fiscal month of the Borrower set forth below to be less than
the amount specified opposite each such fiscal month.
Month Amount
----- ------
August, 1998 ($4,133,000)
September, 1998 ($3,273,000)
October, 1998 ($3,528,000)
November, 1998 ($3,990,000)
December, 1998 ($3,996,000)
January, 1999 ($2,714,000)
February, 1999 ($2,167,000)
March, 1999 ($2,363,000)
April, 1999 ($2,114,000)
May, 1999 ($1,646,000)
June, 1999 ($1,367,000)
July, 1999 ($1,804,000)
August, 1999 ($1,178,000)
September 1999 ($962,000)
October, 1999 ($836,000)
November, 1999 ($195,000)
December, 1999 $364,000
January, 2000 $375,000
(ii) Permit Cumulative FIFO EBITDA for any fiscal month of the
Borrower from and after February, 2000 through and including August,
2000 to be less than the amounts agreed to in writing between the Agent
and Borrower based upon a detailed budget for the Borrower for the
fiscal year ending January 29, 2001, in form and substance satisfactory
to the Agent, provided by the Borrower to the Agent as soon as possible
and in any event no later than December 15, 1999."
2. CONDITIONS TO EFFECTIVENESS
This Second Amendment shall become effective only upon satisfaction in
full of the following conditions precedent (the first date upon which all such
conditions have been satisfied being herein called the "Effective Date"):
2.1 The Agent shall have received a counterpart of this Second Amendment
which bears the signature of the Borrower.
2.2 All legal matters incident to this Second Amendment shall be
satisfactory to the Agent and its counsel.
2.3 The Borrower shall have paid the Amendment Fee (as defined below)
and all other fees, costs, expenses and taxes payable by the Borrower under the
Credit Agreement.
2.4 The Borrower shall have paid all accrued and unpaid fees and
expenses of Fried, Frank, Harris, Shriver & Jacobson, counsel to the Agent,
including, without limitation, the fees and expenses of counsel to the Agent
incurred in connection with this Second Amendment.
3. FEES AND EXPENSES
3.1 In consideration of the amendments to the Credit Agreement made
hereby at the request of the Borrower, the Borrower shall pay the Lenders an
amendment fee in the amount of $50,000 (the "Amendment Fee"), which Amendment
3
<PAGE>
Fee shall be fully earned and non-refundable as of the Effective Date. The
Amendment Fee may be charged, at the Agent's sole option, to any account of the
Borrower maintained by the Agent.
3.2 Without in any way limiting Section 10.06 of the Credit Agreement,
the Borrower will pay on demand all fees, costs and expenses, if any, incurred
by Agent in connection with the preparation, execution and delivery of this
Second Amendment, including, without limitation, the fees and expenses of Fried,
Frank, Harris, Shriver & Jacobson, counsel to Agent.
4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders as follows:
4.1 The execution, delivery and performance by the Borrower of this
Second Amendment and the performance by the Borrower of the Credit Agreement as
amended hereby (i) have been duly authorized by all necessary corporate action
and (ii) do not and will not contravene its organizational documents or any
applicable law.
4.2 This Second Amendment and the Credit Agreement, as amended hereby,
constitute the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their terms.
4.3 The representations and warranties contained in the Credit Agreement
are correct on and as of the Effective Date as though made on and as of the
Effective Date (except to the extent such representations and warranties
expressly relate to an earlier date), and no Event of Default or Potential
Default has occurred and is continuing on and as of the Effective Date.
5. CONTINUED EFFECTIVENESS OF CREDIT AGREEMENT
The Borrower hereby (i) confirms and agrees that each Related Document
to which it is a party is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects except that on and after
the Effective Date of this Second Amendment all references in any such Related
Documents to "the Credit Agreement", "thereto", "thereof", "thereunder" or words
of like import referring to the Credit Agreement shall mean the Credit Agreement
as amended by this Second Amendment; and (ii) confirms and agrees that to the
extent that any such Related Document purports to grant to the Lenders or the
Agent a security interest in or lien on, any collateral as security for the
Obligations of the Borrower from time to time existing in respect of the Credit
Agreement and the Related Documents, such security interest or lien is hereby
ratified and confirmed in all respects.
6. MISCELLANEOUS
6.1 This Second Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.
6.2 Section and paragraph headings herein are included for convenience
of reference only and shall not constitute a part of this Second Amendment for
any other purposes.
6.3 This Second Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to choice of
law principles.
6.4 Except as herein expressly amended, the Credit Agreement and the
other documents executed and delivered in connection therewith are each ratified
and confirmed in all respects and shall remain in full force and effect in
accordance with their respective terms.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
BORROWER:
---------
WEINER'S STORES, INC.
By: /s/ Raymond J. Miller
--------------------------------
Raymond J. Miller
Vice President and
Chief Financial Officer
AGENT AND LENDER:
-----------------
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Frank A. Grimaldi
--------------------------------
Frank A. Grimaldi
Vice President
LENDER:
-------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Martin Greenberg
--------------------------------
Martin Greenberg
Duly Authorized Signator
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THE ACCOMPANYING QUARTERLY REPORT ON
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JAN-30-1999 JAN-30-1999
<PERIOD-END> OCT-31-1998 OCT-31-1998
<CASH> 0 3,232
<SECURITIES> 0 0
<RECEIVABLES> 0 3,326
<ALLOWANCES> 0 0
<INVENTORY> 0 60,352
<CURRENT-ASSETS> 0 70,707
<PP&E> 0 21,942
<DEPRECIATION> 0 (4,263)
<TOTAL-ASSETS> 0 93,832
<CURRENT-LIABILITIES> 0 24,769
<BONDS> 0 0
0 0
0 0
<COMMON> 0 190
<OTHER-SE> 0 55,267
<TOTAL-LIABILITY-AND-EQUITY> 0 93,832
<SALES> 60,585 190,712
<TOTAL-REVENUES> 60,585 190,712
<CGS> 39,984 124,835
<TOTAL-COSTS> 39,984 124,835
<OTHER-EXPENSES> 23,001 67,827
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 309 751
<INCOME-PRETAX> (2,709) (2,701)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,709) (2,701)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,709) (2,701)
<EPS-PRIMARY> (0.14) (0.14)
<EPS-DILUTED> (0.14) (0.14)
</TABLE>
