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 May 1, 1999 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 June 11, 1999, there were 18,476,830 shares of Weiner's Stores,
Inc. common stock, par value $.01 per share, outstanding.
3#v102.
<PAGE>
WEINER'S STORES, INC.
FORM 10-Q
QUARTER ENDED MAY 1, 1999
Table of Contents
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. Financial Statements 3
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-12
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities and Use of Proceeds 12
ITEM 3. Defaults Upon Senior Securities 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEINER'S STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks
Ended Ended
May 1, 1999 May 2, 1998
------------------- ------------------
<S> <C> <C>
Net sales $ 69,602,000 $ 61,579,000
Cost of goods sold 45,180,000 38,788,000
------------------- ------------------
Gross margin 24,422,000 22,791,000
Selling, administrative and other operating costs 22,179,000 22,010,000
------------------- ------------------
Operating income 2,243,000 781,000
Interest expense (210,000) (177,000)
Interest income - -
------------------- ------------------
Income before income taxes 2,033,000 604,000
Income taxes - -
------------------- ------------------
Net income $ 2,033,000 $ 604,000
=================== ==================
Net income per share of common stock $ 0.11 $ 0.03
=================== ==================
Weighted average number of shares of
common stock outstanding 18,477,000 19,000,000
=================== ==================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
WEINER'S STORES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 1, January 30,
1999 1999
------------------ -------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 4,255,000 $ 7,176,000
Receivables, net 1,492,000 1,252,000
Merchandise inventories, net 59,667,000 54,243,000
Prepaid expenses and other assets 5,085,000 2,380,000
------------------ -------------------
Total current assets 70,499,000 65,051,000
------------------ -------------------
Property and Equipment:
Land 258,000 258,000
Building - distribution center and office facility 1,996,000 1,996,000
Furniture, fixtures and leasehold improvements 22,142,000 20,728,000
------------------ -------------------
Total 24,396,000 22,982,000
Less accumulated depreciation and amortization (5,167,000) (4,296,000)
------------------ -------------------
Total property and equipment, net 19,229,000 18,686,000
------------------ -------------------
Excess Reorganization Value, less accumulated amortization of
$584,000 and $504,000, respectively 3,827,000 3,907,000
------------------ -------------------
$ 93,555,000 $ 87,644,000
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 17,144,000 $ 20,999,000
Accrued expenses and other current liabilities 9,004,000 9,271,000
------------------ -------------------
Total current liabilities 26,148,000 30,270,000
------------------ -------------------
Other Liabilities 397,000 397,000
Long-Term Debt 12,000,000 4,000,000
Commitments and Contingencies - -
Stockholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
19,000,000 shares issued 190,000 190,000
Additional paid-in capital 63,664,000 63,664,000
Accumulated deficit (8,844,000) (10,877,000)
Treasury stock, at cost, 523,170 shares - -
------------------ -------------------
Total stockholders' equity 55,010,000 52,977,000
------------------ -------------------
$ 93,555,000 $ 87,644,000
================== ===================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
WEINER'S STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks
Ended Ended
May 1, 1999 May 2, 1998
------------------- -------------------
<S> <C> <C>
Net cash (used in) provided by operating activities $ (9,506,000) $ 2,478,000
------------------- -------------------
Cash Flows from Investing Activities:
Capital expenditures (1,415,000) (1,639,000)
Proceeds on disposition of assets - 21,000
------------------- -------------------
Net cash used in investing activities (1,415,000) (1,618,000)
------------------- -------------------
Cash Flows from Financing Activities:
Net borrowings under bank line of credit 8,000,000 3,000,000
------------------- -------------------
Net cash provided by financing activities 8,000,000 3,000,000
------------------- -------------------
Net (Decrease) Increase in Cash (2,921,000) 3,860,000
Cash, beginning of period 7,176,000 3,574,000
------------------- -------------------
Cash, end of period $ 4,255,000 $ 7,434,000
=================== ===================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
WEINER'S STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
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 May 1, 1999,
and the results of its operations and its cash flows for each of the thirteen
week periods ended May 1, 1999 and May 2, 1998. The results of operations for
the thirteen week period may not be indicative of the results for the entire
year.
These consolidated financial statements should be read in conjunction
with the audited consolidated financial statements for the fiscal year ended
January 30, 1999 and related notes which are included in the Company's Annual
Report on Form 10-K. Accordingly, significant accounting policies and other
disclosures necessary for complete consolidated financial statements in
conformity with generally accepted accounting principles have been omitted since
such items are reflected in the Company's audited consolidated financial
statements and related notes thereto.
The preparation of consolidated 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 consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Certain prior year balances have been reclassified to conform to
current year presentation.
(2) Long-Term Debt
At May 1, 1999, the Company had approximately $17,286,000 of
availability under its $40,000,000 working capital facility, after considering
outstanding letters of credit of approximately $5,990,000 and borrowings of
$12,000,000. The Company may prepay amounts outstanding under the working
capital facility without penalty.
(3) Accrued Expenses
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
May 1, 1999 January 30, 1999
------------------- -------------------
<S> <C> <C>
Payroll and related benefits $ 1,426,000 $ 2,211,000
Taxes other than income taxes 2,485,000 1,563,000
Rent and other related costs 1,770,000 2,264,000
Other 3,323,000 3,233,000
------------------- -------------------
Total $ 9,004,000 $ 9,271,000
=================== ===================
</TABLE>
(4) Leases
During the thirteen weeks ended May 1, 1999, the Company entered into
new leases for five stores, including relocations, opened two stores, closed two
stores and executed renewal options on several locations. Future minimum rental
payments have increased approximately $6,020,000 since January 30, 1999,
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 $47,830,000.
6
<PAGE>
Total rent expense for all operating leases was as follows:
Thirteen Thirteen
Weeks Ended Weeks Ended
May 1, 1999 May 2, 1998
------------------ ------------------
Minimum rentals $ 2,674,000 $ 2,482,000
Contingent rentals 167,000 97,000
------------------ ------------------
Total $ 2,841,000 $ 2,579,000
================== ==================
(5) 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 thirteen weeks of 1999 or 1998. The recognition
of income tax benefits is affected by limitations on the Company's ability to
utilize net operating loss carryforwards.
(6) New Accounting Developments
The Accounting Standards Executive Committee has issued Statement of
Position 98-5, "Reporting the Costs of Start-up Activities" ("SOP 98-5"). Among
other things, SOP 98-5 requires that the costs of start-up activities be
expensed as incurred. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The Company has adopted SOP 98-5 beginning January 31, 1999
(fiscal year 1999). Prior to adoption of SOP 98-5, the Company expensed the
costs associated with the opening of new stores in the fiscal year in which the
store was opened. Had start-up costs been expensed as incurred in fiscal 1998,
net income would not have been materially different.
The Company recognizes revenue at the point of sale. The Company has a
layaway program that in the first quarter of 1999 accounted for approximately
7.5% of the Company's revenues. Layaways are recognized as revenue at the point
of sale and as a receivable on the balance sheet. (Net layaway receivables at
May 1, 1999 are $1,225,000.) The Company provides an allowance for layaway sales
receivable based on management's estimate of the amount by which uncollectible
receivables would exceed the cost of the items reverting back to inventory. This
estimate is based on the Company's historical calculation of layaway sales that
will never be completed. The Company generally requires a refundable deposit on
layaway sales. As customers pay on their layaways, the payment reduces the
receivable. The Staff of the U.S. Securities and Exchange Commission is
currently developing a Staff Accounting Bulletin that will address revenue
recognition matters. The issuance of this guidance could impact the Company's
accounting for layaway sales.
(7) 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>
May 1, 1999 May 2, 1998
---------------- ----------------
<S> <C> <C>
Weighted average number of shares of
common stock outstanding 18,476,830 19,000,000
Common stock equivalent - shares issuable
under the 1997 Stock Incentive Plan - -
---------------- ----------------
Weighted average number of shares of common
stock outstanding assuming full dilution 18,476,830 19,000,000
================ ================
</TABLE>
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).
7
<PAGE>
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, Year 2000 issues, 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
THIRTEEN WEEKS ENDED MAY 1, 1999 COMPARED TO THIRTEEN WEEKS ENDED MAY 2, 1998
Net sales in the first quarter of 1999 increased 13.0% to $69,602,000
from $61,579,000 in the first quarter of 1998. The increase is primarily
attributable to a 12.3% increase in comparable store sales for the first quarter
of 1999 compared to the same period last year.
Gross margin in the first quarter of 1999 decreased as a percentage of
sales to 35.1% from 37.0% in the first quarter of 1998. This decrease is
primarily attributable to lower planned initial markup and increased promotional
markdowns to support the Company's new marketing concept.
Selling, administrative and other operating costs increased slightly to
$22,179,000 in the first quarter of 1999 compared to $22,010,000 in the first
quarter of 1998. The increase is primarily attributable to an increase in rent
expense relating to new stores and utility expense, partially offset by a
decrease in promotional advertising and software rentals. As a percentage of
sales, selling, administrative and other operating costs in the first quarter of
1999 decreased to 31.9% from 35.7% in the first quarter of 1998. This decrease
is primarily attributable to the increase in sales during the first quarter of
1999 as discussed above and expense control.
Operating income increased to $2,243,000 in the first quarter of 1999
from $781,000 in the first quarter of 1998. The Company continues to focus on
its inventory mix and evaluating overall expense control initiatives to attempt
to further enhance operating results for the remainder of fiscal 1999.
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 quarter of 1999 or the first quarter of 1998.
The recognition of income tax benefits is affected by limitations on the
Company's ability to utilize net operating loss carryforwards.
The Company recorded interest expense of $210,000 in the first quarter
of 1999 compared to $177,000 in the first quarter of 1998. The increase is due
primarily to the increase in borrowings during the first quarter of 1999 as
compared to the first quarter of 1998.
8
<PAGE>
The Company's net income for the first quarter of 1999 was $2,033,000,
or $0.11 per share of common stock, compared to a net income of $604,000 or $.03
per share of common stock for the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash from Operations and Working Capital
The Company's cash used in operations was $9,506,000 during the first
quarter ended May 1, 1999, compared to cash provided by operations of $2,478,000
during the first quarter ended May 2, 1998. The increase in net cash used in
operations is primarily attributable to the increase in inventory and decrease
in accounts payable. The Company's working capital was $44,351,000 at May 1,
1999 compared to $34,781,000 at January 30, 1999 and $44,376,000 at May 2, 1998.
The Company's primary source of liquidity has been borrowings under the
revolving credit agreement (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.
Revolving Credit Agreement
The Company's Revolving Credit Agreement provides a $40,000,000 working
capital facility, including a $15,000,000 sub-facility for the issuance of
letters of credit. The Revolving Credit Agreement is secured by substantially
all of the Company's assets. 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 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 1999. 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
Revolving Credit Agreement expires on August 31, 2000. As of May 1, 1999, the
Company was in compliance with all of its covenants under the Revolving Credit
Agreement.
At May 1, 1999, the Company had approximately $17,286,000 of
availability under the working capital facility, after considering borrowings
and outstanding letters of credit. At May 1, 1999, the outstanding letters of
credit thereunder were approximately $5,990,000.
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 or
variances from anticipated performance could require the Company to seek
alternative sources of financing or to limit capital expenditures.
Capital Expenditures
The Company's capital expenditures are expected to be approximately
$5,000,000 in fiscal 1999, primarily for the opening of new stores, remodeling
of existing stores and management information system enhancements. The Company
expects to fund these capital expenditures from cash generated by operations and
borrowings under the Revolving Credit Agreement.
NEW ACCOUNTING DEVELOPMENTS
The Accounting Standards Executive Committee has issued Statement of
Position 98-5, "Reporting the Costs of Start-up Activities" ("SOP 98-5"). Among
other things, SOP 98-5 requires that the costs of start-up activities be
expensed as incurred. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The Company has adopted SOP 98-5 beginning January 31, 1999
(fiscal year 1999). Prior to adoption of SOP 98-5, the Company expensed the
costs associated with the opening of new stores in the fiscal year in which the
store was opened. Had start-up costs been expensed as incurred in fiscal 1998,
net income would not have been materially different.
9
<PAGE>
The Company recognizes revenue at the point of sale. The Company has a
layaway program that in the first quarter of 1999 accounted for approximately
7.5% of the Company's revenues. Layaways are recognized as revenue at the point
of sale and as a receivable on the balance sheet. (Net layaway receivables at
May 1, 1999 are $1,225,000.) The Company provides an allowance for layaway sales
receivable based on management's estimate of the amount by which uncollectible
receivables would exceed the cost of the items reverting back to inventory. This
estimate is based on the Company's historical calculation of layaway sales that
will never be completed. The Company generally requires a refundable deposit on
layaway sales. The Company generally requires a refundable deposit on layaway
sales. As customers pay on their layaways, the payment reduces the receivable.
The Staff of the U.S. Securities and Exchange Commission is currently developing
a Staff Accounting Bulletin that will address revenue recognition matters. The
issuance of this guidance could impact the Company's accounting for layaway
sales.
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 beginning in fiscal 1996 through
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 that is
free of any material 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, gas, water, banking facilities, merchandise purchases, deliveries,
federal, state and other governmental agencies, and other services. The Company
has identified and has initiated 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,
10
<PAGE>
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
believes that there are certain third party providers with respect to which
there is no reasonable method to mitigate such risks.
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 necessity to implement contingency plans. Costs through May 1,
1999 have been approximately $30,000. The remaining compliance costs are
expected to be incurred within the next nine 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, adverse 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, adverse
effect on the Company's operations. Similarly, there can be no assurance that
the Company can timely mitigate its risks related to suppliers' failure to
resolve their Year 2000 issues. If such mitigation is not achievable, Year 2000
problems could have a material, adverse effect 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
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
and to do so on a timely basis, 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 second 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
11
<PAGE>
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.
PART II. 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 Amendment No. 3 to Employment Agreement, dated effective
as of March 25, 1999, between the Company and Raymond J.
Miller (filed herewith)
27.1 Financial Data Schedule (filed herewith)
(b) The Company did not file any reports on Form 8-K during the first
quarter of 1999.
12
<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.
June 14, 1999 By: /s/ Raymond J. Miller
(Date) -----------------------------
Raymond J. Miller
Vice President, Chief Financial
Officer and Secretary
13
<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 Amendment No. 3 to Employment Agreement, dated effective as of March
25, 1999 , between the Company and Raymond J. Miller (filed
herewith)
27.1 Financial Data Schedule (filed herewith)
Exhibit 10.1
WEINER'S STORES, INC.
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
This Amendment No. 3 (this "Amendment") to the Employment Agreement (as
hereinafter defined), effective as of March 25, 1999, is by and between Weiner's
Stores, Inc., a Delaware corporation (the "Company"), and Raymond J. Miller (the
"Executive").
WHEREAS, the Company and the Executive are party to that certain
Employment Agreement dated as of February 24, 1995 (the "Original Employment
Agreement"); and
WHEREAS, the Company and the Executive are party to that certain
Amendment No. 1 to Employment Agreement dated as of April 7, 1995 ("Amendment
No. 1"), which amends the Original Employment Agreement; and
WHEREAS, the Company and the Executive are party to that certain
agreement dated as of May 1, 1997 ("Amendment No. 2"), which amends the Original
Employment Agreement, as theretofore amended; and
WHEREAS, the Company and the Executive desire to amend the Original
Employment Agreement, as amended by Amendment No. 1 and Amendment No. 2 (as so
amended, the "Employment Agreement"), as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
Section 1. Amendments.
(a) Section 4.4(d) of the Employment Agreement is hereby
deleted and replaced with the following:
"If during the Term and during the period that is more than
three (3) months but less than six (6) months following a
Change in Control (as defined below), the Executive, upon not
less than fourteen (14) days' written notice to the Company,
resigns, then, in lieu of any further payment of Base Salary
or any other compensation for which provision is made in
Section 3 herein, the Company shall pay the Executive the
greater of $220,000 or an amount equal to his then Base
Salary. For purposes of this Section 4.4(d), "Change in
Control" shall mean (a) the disposition, whether by sale,
merger, consolidation, etc. of all or substantially all of the
Company's assets, unless in advance of any such disposition
the Executive waives this provision in writing; (b) any
person, entity or group (as the term "group" is defined in the
rules and regulations relating to Section 13D of the
Securities Exchange Act of 1934, as amended), other than Chase
Bank of Texas, acquires 50% or more of the voting common stock
of the Company; or (c) a contested proxy solicitation of
Company stockholders that results in the contesting party
obtaining the ability to cast 25% or more of the votes
entitled to be cast in electing directors of the Company."
(b) Section 4.4 of the Employment Agreement is hereby further
amended to add the following new Section 4.4(e):
"(e) Letter of Credit: The payments provided in
Sections 4.4(a) or 4.4(d) and any other compensation which the
Executive has earned and which is due to the Executive and
unpaid as of the Termination Date shall be secured during the
Term and through the last date on which any payment earned
during the Term is payable by: (a) a clean, irrevocable letter
of credit in an amount sufficient to make the maximum payment
possible under Section 4 which the Company shall procure by
the later of May 15, 1999 or (b) within thirty (30) days prior
<PAGE>
to expiration of any letter of credit during the Term and
through the last date on which any payment earned during the
Term is payable, a replacement letter of credit; or, in the
alternative, cash collateral that gives the Executive
protection equivalent to the letter of credit described in
clause (a) of this Section 4.4(e)."
Section 2. General
(a) The Company and the Executive represent and warrant, each
to the other, that the execution, delivery and performance of this
Amendment by such party have been authorized by any and all requisite
action by or on behalf of such party and will not violate or cause a
default under any contract, agreement or instrument to which such party
is a party or by which such party is bound.
(b) All references to "this Agreement" or "the Agreement" in
the Employment Agreement shall be deemed to be references to the
Employment Agreement, as amended by this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above
written.
WEINER'S STORES, INC.
By: /s/ Herbert R. Douglas
-------------------------------
Herbert R. Douglas
President and
Chief Executive Officer
/s/ Raymond J. Miller
-------------------------------
Raymond J. Miller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements contained 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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> MAY-01-1999
<CASH> 4,255
<SECURITIES> 0
<RECEIVABLES> 1,492
<ALLOWANCES> 0
<INVENTORY> 59,667
<CURRENT-ASSETS> 70,449
<PP&E> 24,396
<DEPRECIATION> 5,167
<TOTAL-ASSETS> 93,555
<CURRENT-LIABILITIES> 26,148
<BONDS> 0
0
0
<COMMON> 190
<OTHER-SE> 54,820
<TOTAL-LIABILITY-AND-EQUITY> 93,555
<SALES> 69,602
<TOTAL-REVENUES> 69,602
<CGS> 45,180
<TOTAL-COSTS> 45,180
<OTHER-EXPENSES> 22,179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 210
<INCOME-PRETAX> 2,033
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,033
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,033
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>
