UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-1394
Edison Brothers Stores, Inc.
(Exact name of registrant as specified in its charter)
Delaware 43-0254900
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 N. Broadway, St. Louis, Missouri 63102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 331-6000
Not applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes /X/ No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report:
Common Stock, $1 par value - 21,993,384
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EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
INDEX
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Condensed Consolidated Balance Sheets as of
April 30, 1994; January 29, 1994; and
May 1, 1993 1
Condensed Consolidated Statements of Income for
the 13 weeks ended April 30, 1994 and
for the 13 weeks ended May 1, 1993 2
Condensed Consolidated Statements of Cash Flows
for the 13 weeks ended April 30, 1994 and for the
13 weeks ended May 1, 1993 3
Notes to Condensed Consolidated
Financial Statements 4
Management's Discussion and Analysis 6
Part II. Other Information 8
Signatures 8
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<TABLE>
PART I FINANCIAL INFORMATION
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
April 30, January 29, May 1,
1994 1994 1993
(In Millions)
<S> <C> <C> <C>
Current Assets:
Cash and short-term investments $ 35.6 $ 32.6 $ 81.1
Merchandise inventories 333.8 295.0 353.3
Prepaid expenses 11.7 9.4 9.8
Deferred income taxes 19.4 17.4 13.4
Other current assets 11.9 12.5 6.8
Total Current Assets 412.4 366.9 464.4
Property and Equipment, net 351.7 353.8 340.2
Intangible Assets, net 99.9 102.4 77.2
Prepaid Pension Expense 36.7 36.2 34.7
Other Assets 14.4 13.8 8.8
Total Assets $915.1 $873.1 $925.3
LIABILITIES AND COMMON
STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and commercial paper $ 91.3 $ 44.8 $ 39.0
Current portion of long-term debt 35.1 35.1 75.1
Accounts payable, trade 74.7 72.2 59.0
Income taxes 1.1
Other current liabilities 67.2 69.3 61.3
Total Current Liabilities 268.3 221.4 235.5
Long-Term Debt 158.7 159.2 194.3
Postretirement Benefits 39.0 38.8 38.1
Other Liabilities 32.7 31.9 30.3
Deferred Income Taxes 9.8 10.0 7.1
Common Stockholders' Equity:
Common stock, par value $1 22.0 22.0 22.0
Capital in excess of par value 76.0 75.6 78.3
Retained earnings 310.0 314.5 319.7
Foreign currency translation
adjustment and other (1.4) (.3)
Total Common Stockholders' Equity 406.6 411.8 420.0
Total Liabilities and Equity $915.1 $873.1 $925.3
<FN>
See notes to condensed consolidated financial statements.
</FN>
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EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
13 Weeks Ended 13 Weeks Ended
April 30, May 1,
1994 1993
(In millions, except per share data)
<S> <C> <C>
Net Sales $ 326.7 $ 329.2
Cost of goods sold, occupancy
and buying expenses 212.9 212.7
Store operating and
administrative expenses 87.8 84.9
Depreciation and amortization 17.6 16.5
Interest expense, net 4.9 4.2
Total Costs and Expenses 323.2 318.3
Income before income taxes 3.5 10.9
Provision for income taxes 1.3 4.0
Net Income $ 2.2 $ 6.9
Per Common Share:
Net Income $ .10 $ .31
Cash dividends declared $ .31 $ .31
Weighted average common shares
outstanding (in thousands) 21,987 22,016
<FN>
See notes to condensed consolidated financial statements.
</FN>
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EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
13 Weeks Ended
April 30, May 1,
1994 1993
(In Millions)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 2.2 $ 6.9
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 17.6 16.5
Deferred income taxes .1 (.2)
Change in assets and liabilities
net of effects from acquisitions:
Merchandise inventories (38.4) (11.7)
Other assets (2.0) (1.4)
Accounts payable, accrued
expenses and other liabilities (1.7) (22.4)
Other 1.4 1.5
Total Operating Activities (20.8) (10.8)
Cash Flows from Investing Activities:
Net payments for businesses and assets
net of cash acquired (1.4)
Capital expenditures (13.6) (21.6)
Other .2 (.8)
Total Investing Activities (14.8) (22.4)
Cash Flows from Financing Activities:
Principal payments of long-term debt (.5) (.1)
Short-term borrowings 46.5 (53.8)
Common stock dividends (6.8) (6.8)
Proceeds from long-term debt issuance 150.0
Other (.6) 1.6
Total Financing Activities 38.6 90.9
Cash Provided 3.0 57.7
Beginning cash and short-term investments 32.6 23.4
Ending cash and short-term investments $ 35.6 $ 81.1
<FN>
See notes to condensed consolidated financial statements.
</FN>
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EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements and notes have been
condensed and, therefore, do not contain all disclosures required by
generally accepted accounting principles. Reference should be made to
the annual financial statements, including the notes thereto, included
in the company's Annual Report to Stockholders for the year ended
January 29, 1994. In the opinion of the company, all adjustments have
been made to present fairly the financial position and the results of
operations for the unaudited interim periods. Unless otherwise
indicated, all such adjustments are of a normal recurring nature.
Certain prior year items have been reclassified to conform to the
current year presentation.
2. Interim operating results are not necessarily indicative of those for a
full fiscal year because of the seasonal nature of the business.
3. Net income per common share is based on the weighted average common
shares outstanding during the period. Shares issuable under the stock
option plans would have no material dilutive effect on earnings per
common share.
4. Common stock shares authorized total 100,000,000; 27,554,116 shares are
issued of which 5,560,732 shares are being held in the company's
treasury and 21,993,384 shares are outstanding.
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5. Property and equipment, net is composed of the following:
<CAPTION>
April 30, January 29, May 1,
1994 1994 1993
(In millions)
<S> <C> <C> <C>
Cost $620.1 $612.5 $570.9
Accumulated depreciation and
amortization (268.4) (258.7) (230.7)
Net book value $351.7 $353.8 $340.2
</TABLE>
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6. Intangible assets, net is composed of the following:
<CAPTION>
April 30, January 29, May 1,
1994 1994 1993
(In millions)
<S> <C> <C> <C>
Cost $145.6 $145.2 $115.3
Accumulated amortization (45.7) (42.8) (38.1)
Net book value $ 99.9 $102.4 $ 77.2
</TABLE>
7. The company's financing agreements contain certain restrictions
including limitations on dividend payments and the company's
acquisition of its capital stock. At April 30, 1994 retained earnings
of $101.2 million were free of the most restrictive of these
limitations.
8. In accordance with Financial Accounting Standards Board Technical
Bulletin 85-3, the company accrues noncash rent expense for leases with
scheduled increases in minimum lease payments such that minimum rent
expense is recognized on a straight-line basis over the lease term.
Minimum rent expense accrued in excess of cash rent payments was $.4
million and $.9 million for the 13 weeks ended April 30, 1994 and May
1, 1993, respectively.
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Condition
Cash and short-term investments decreased between first quarter and year-end
1993 as proceeds from a March 1993 sale of senior notes were applied to other
maturing debt during the last quarter of 1993. The company reduced its
merchandise inventories over the same period as it responded to an anticipated
weak retail environment during the fall 1993 season. During the first quarter
of 1994 the reduced inventories were increased in selected chains for the
spring season. The restocking program was still in progress as the quarter
ended, with the resumption of greater buying activity accounting for most of
the increase in trade payables in first quarter 1994 compared to first quarter
1993. The company continued to tightly control discretionary capital
expenditures in the first quarter, as had been done during the fall of 1993.
First quarter expenditures decreased by 37.0% in 1994 compared to the same
period of 1993. The acquisitions of 1993 accounted for the increase in
intangible assets between first quarter and year-end.
The fluctuations in current debt (notes payable and commercial paper) and long-
term debt (current and noncurrent portions) were caused by seasonal variances
and normal balance sheet reclassifications to recognize pending maturities of
long-term debt. The first quarter 1993 notes payable and commercial paper
levels were atypical, as a portion of the funds from the March 1993, $150.0
million senior note sale were applied to reduce this liability. Fluctuations
in the capital structure have remained reasonably consistent over the past few
years, including at year-end, when the company benefits from the larger
positive cash flow from Christmas sales. At year-end 1993 and 1992 the total-
debt to total-debt-plus-equity ratio decreased to 36.7% and 33.7%,
respectively. At the end of first quarter 1994 the ratio was 41.2% and at the
end of first quarter 1993 was 42.3%. With the application of the then-
available investment funds to existing debt, the 1993 measure would drop to
37.4%. The increased proportion of debt in the company's capital structure at
the end of 1993 and the first quarter of 1994, when measured against twelve-
month-earlier ratios, was the result of the less favorable earnings results in
1993 as compared with 1992. Assuming 1993 income had been at the 1992 level
(before the accounting-change charge), the year-end 1993 and first quarter 1994
ratios would have been 34.2% and 38.5%, respectively.
The company has used, and if needed will use, short-term financing to provide
additional working capital when appropriate. The company has available a
$125.0 million credit facility and, at the end of first quarter 1994, other
unused credit arrangements of $102.8 million. Management believes that funds
from operations and the short-term facilities provide adequate working capital.
Operating Results
On April 30, 1994, the company had 2,855 stores in operation, a net decrease of
11 stores from January 29, 1994. Four stores were added via a business
acquisition during the quarter.
Sales for the first quarter of 1994 decreased by .8% from the comparable period
of 1993. Sales in comparable stores experienced a moderate decrease. The
company believes sales were held down in part by the lower inventory levels
discussed earlier. Thus the winter-clearance sales event was not as strong as
would normally be expected. Further, the delivery of some spring merchandise
was scheduled later than usual so as to arrive closer to its primary selling
season. Not having these goods available produced a somewhat negative effect
on first quarter sales. The apparel segment dominated sales with 63.9% of the
total. Footwear and entertainment reported 28.4% and 7.7%, respectively, of
the total.
First quarter cost of goods sold, including occupancy and buying expenses, as a
percentage of sales was 65.2% and 64.6% in first quarter 1994 and 1993,
respectively. The lower inventory levels resulted in significantly reduced
markdown activity in certain chains, more than offsetting the increase reported
in other chains. Consequently, merchandise related costs in first quarter 1994
decreased by 32 basis points compared to 1993. Occupancy and buying costs,
however, increased by 86 basis points. The increase was attributed primarily
to the increase in the number of stores between the end of first quarter 1993
and 1994. Excluding the entertainment division, which is not a major portion
of the company as a whole but which contains larger stores that tend to distort
averages, occupancy and buying costs on a per-store basis increased by less
than 1% while total dollars of cost for the merchandising units increased
by 3.6%.
Store operating and administrative expenses, expressed as a percentage of
sales, were 26.9% in first quarter 1994 and 25.8% in first quarter 1993. More
than three quarters of the increase occurred in the store operating expenses
category. This increase was attributed primarily to the increase in the number
of stores. As was the case with occupancy and buying, average store expense
performance was distorted by the disproportionately large units, particularly
Dave & Buster's, of the entertainment division. Exclusive of Dave & Buster's,
store operating expenses, on a per-store basis, actually declined by 1.5%. The
modest increase in depreciation and amortization was consistent with the modest
increase in the underlying asset base. Fixed asset depreciation, which
accounted for over 80% of the line item in both first quarters as well as 75%
of the increase, was incurred at a rate of 2.3% and 2.4% of average fixed asset
cost during the 1994 and 1993 periods, respectively. The increase in net
interest expense primarily reflects having the March 1993 senior note offering
outstanding for the full period of first quarter 1994 compared with only a
portion of first quarter 1993.
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Items 1 through 5 of Part II are not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 4, Amendment Agreement, dated April 28, 1994, amending the Loan
Agreement and Senior Promissory Notes dated November 15, 1990, between
Edison Brothers Stores, Inc. and Metropolitan Life Insurance Company
relating to $105 million of unsecured debt, is on page 9 of this form
10-Q.
(b) Exhibit 11, computation of per share earnings, is on page 11 of this
Form 10-Q.
(c) There were no reports on Form 8-K filed during the quarter ended
April 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EDISON BROTHERS STORES, INC.
Date: June 10, 1994 By/s/ Lee G. Weeks
Executive Vice President
and Chief Financial Officer
April 26, 1994
Metropolitan Life Insurance Co.
One Lincoln Center, Suite 800
Oakbrook Terrace, IL 60181
ATTN: Mr. Michael J. Kroeger
Dear Mr. Kroeger
Reference is made to the Loan Agreement dated as of November 15, 1990, and the
amendment thereto dated as of January 25, 1994, between Edison Brothers Stores,
Inc. (the "Company") and Metropolitan Life Insurance Company (the "Purchaser")
relating to, among other things, the issuance and sale by the Company to the
Purchaser of $15,000,000 aggregate principal amount of 9.19% Senior Promissory
Notes due November 15, 1994 (the "Notes"). Capitalized terms used herein, not
otherwise defined, are used as defined in the Notes.
The amendment referred to above effected a change in Section 4.04 of the Notes,
which section is entitled "Maintenance of Fixed Charges." Concurrent with that
amendment, the Company obtained a similar amendment under its other debt
agreements. The Company was subsequently asked by the creditors under certain
of those other agreements to further amend the fixed charges coverage
provisions of those agreements. The Company agreed to those requests. As a
result of those subsequent amendments, the fixed charges coverage calculation
under those other agreements has become somewhat more restrictive. In order to
maintain a parity in protection for the Purchaser, we are requesting that the
Purchaser consent, pursuant to Section 5 of the Notes, to the further amendment
of Section 4.04 to read in its entirety as follows:
"Section 4.04. Maintenance of Fixed Charges Coverage. The Company will
cause the ratio of (i) Consolidated Net Income Available for Interest
Charges, Income Taxes, and Rentals to (ii) the aggregate amount of Interest
Charges and Rentals (after eliminating intercompany items) of the Company
and its Subsidiaries for:
(a) each period of four (4) consecutive fiscal quarters up to and
including the quarter ending October 30, 1993, to be not less than 1.25 to
1.00;
(b) the fiscal quarter ending January 29, 1994, to be not less than 1.25 to
1.00;
(c) each period of four (4) consecutive fiscal quarters beginning with the
period that ends with the first fiscal quarter of fiscal year 1994 to and
including the period that ends with the third fiscal quarter of fiscal year
1994, to be not less than 1.10 to 1.00.
If Consolidated Net Income for each of any two consecutive quarters during
the first three quarters of fiscal year 1994 is a net loss and the loss
reported for the second such consecutive quarter is greater than the loss
reported for the first such quarter, such event shall constitute a breach of
this Section 4.04."
No Default or Event of Default exists after giving effect to the Amendment set
forth herein. Except as expressly provided in this Amendment, the Loan
Agreement and all documents and instruments executed in connection with, or
contemplated by, the Loan Agreement shall remain in full force and effect.
This Amendment shall be binding upon, and shall inure to the benefit of, the
successors and assigns of the parties hereto and the holders from time to time
of the Notes.
Your consent and prompt response would be greatly appreciated.
Very truly yours
By /s/Lee G. Weeks
Executive Vice President and Chief Financial Officer
Consented and Agreed to
Metropolitan Life Insurance Co.
By /s/ Michael J. Kroeger
Name: Michael J. Kroeger
Title: Vice-President
Date: April 28, 1994
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EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
EDISON BROTHERS STORES, INC.
AND SUBSIDIARIES
<CAPTION>
13 Weeks Ended
April 30, May 1,
1994 1993
(In thousands, except per share data)
<S> <C> <C>
Income from continuing operations $ 2,205 $ 6,859
Preferred stock dividends (7) (7)
Net Income applicable to
common stock $ 2,198 $ 6,852
SIMPLE AND PRIMARY
Weighted average shares outstanding 21,987 22,016
Net effect of dilutive stock
options - based on the treasury
method 129 279
TOTAL 22,116 22,295
Per common share amounts: Simple
Net Income applicable to
common stock $ .10 $ .31
Per common share amounts: Primary
Net Income applicable to
common stock $ .10 $ .31
FULLY DILUTED
Weighted average shares outstanding 21,987 22,016
Net effect of dilutive stock
options - based on the treasury
method 140 302
TOTAL 22,127 22,318
Per common share amounts: Fully
diluted
Net Income applicable
to common stock $ .10 $ .31
</TABLE>
