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 July 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 - 22,010,931
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Condensed Consolidated Balance Sheets as of
July 30, 1994; January 29, 1994; and
July 31, 1993
Condensed Consolidated Statements of Income for
the 13 and 26 weeks ended July 30, 1994 and
for the 13 and 26 weeks ended July 31, 1993
Condensed Consolidated Statements of Cash Flows
for the 26 weeks ended July 30, 1994 and for the
26 weeks ended July 31, 1993
Notes to Condensed Consolidated
Financial Statements
Management's Discussion and Analysis
Part II. Other Information
Signatures
<TABLE>
PART I FINANCIAL INFORMATION
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 30, January 29, July 31,
1994 1994 1993
(In Millions)
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and short-term investments $ 34.0 $ 32.6 $ 101.8
Merchandise inventories 343.1 295.0 375.3
Prepaid expenses 10.5 9.4 8.9
Deferred income taxes 20.3 17.4 12.5
Other current assets 13.5 12.5 16.4
Total Current Assets 421.4 366.9 514.9
Property and Equipment, net 352.1 353.8 344.1
Intangible Assets, net 102.1 102.4 103.7
Prepaid Pension Expense 37.5 36.2 35.2
Other Assets 16.6 13.8 9.6
Total Assets $929.7 $873.1 $1,007.5
<CAPTION>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Notes payable and commercial paper $130.6 $ 44.8 $ 106.9
Current portion of long-term debt 15.1 35.1 95.1
Accounts payable, trade 77.2 72.2 73.9
Other current liabilities 66.1 69.3 69.6
Total Current Liabilities 289.0 221.4 345.5
Long-Term Debt 158.6 159.2 174.2
Postretirement Benefits 39.2 38.8 38.4
Other Liabilities 32.9 31.9 32.1
Deferred Income Taxes 9.6 10.0 .5
Common Stockholders' Equity:
Common stock, par value $1 22.0 22.0 22.1
Capital in excess of par value 76.3 75.6 78.8
Retained earnings 304.1 314.5 316.2
Foreign currency translation
adjustment and other (2.0) (.3) (.3)
Total Common Stockholders' Equity 400.4 411.8 416.8
Total Liabilities and Equity $929.7 $873.1 $1,007.5
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
(In millions, except per share data)
<S> <C> <C> <C> <C>
Net Sales $351.0 $338.0 $677.7 $667.2
Cost of goods sold, occupancy
and buying expenses 241.6 228.1 454.5 440.8
Store operating and
administrative expenses 86.1 83.0 173.9 167.9
Depreciation and amortization 17.6 16.3 35.2 32.8
Interest expense, net 4.1 5.4 9.0 9.6
Total Costs and Expenses 349.4 332.8 672.6 651.1
Income before income taxes 1.6 5.2 5.1 16.1
Provision for income taxes .6 2.0 1.9 6.0
Net Income $ 1.0 $ 3.2 $ 3.2 $ 10.1
Per Common Share:
Net Income $ .05 $ .15 $ .15 $ .46
Cash dividends declared $ .31 $ .31 $ .62 $ .62
Weighted average common shares
outstanding (in thousands) 21,998 22,060 21,993 22,038
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
26 Weeks Ended
July 30, July 31,
1994 1993
(In Millions)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 3.2 $ 10.1
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 35.2 32.8
Deferred income taxes (1.4) .4
Change in assets and liabilities
net of effects from acquisitions:
Merchandise inventories (52.0) (27.7)
Other assets (6.2) (10.8)
Accounts payable, accrued
expenses and other liabilities 3.8 (6.8)
Other 3.5 3.6
Total Operating Activities (13.9) 1.6
Cash Flows from Investing Activities:
Net payments for businesses and assets
net of cash acquired (4.2) (34.2)
Capital expenditures (31.2) (39.7)
Other .2 (1.9)
Total Investing Activities (35.2) (75.8)
Cash Flows from Financing Activities:
Principal payments of long-term debt (20.6) (.2)
Short-term borrowings 85.7 14.1
Common stock dividends (13.6) (13.6)
Proceeds from long-term debt issuance 150.0
Other (1.0) 2.3
Total Financing Activities 50.5 152.6
Cash Provided (Used) 1.4 78.4
Beginning cash and short-term investments 32.6 23.4
Ending cash and short-term investments $ 34.0 $ 101.8
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
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; 27,554,160 shares
are issued of which 5,543,229 shares are being held in the company's
treasury and 22,010,931 shares are outstanding.
<TABLE>
5. Property and equipment, net is composed of the following:
<CAPTION>
July 30, January 29, July 31,
1994 1994 1993
(In millions)
<S> <C> <C> <C>
Cost $627.8 $612.5 $583.3
Accumulated depreciation and
amortization (275.7) (258.7) (239.2)
Net book value $352.1 $353.8 $344.1
</TABLE>
<TABLE>
6. Intangible assets, net is composed of the following:
<CAPTION>
July 30, January 29, July 31,
1994 1994 1993
(In millions)
<S> <C> <C> <C>
Cost $146.9 $145.2 $143.7
Accumulated amortization (44.8) (42.8) (40.0)
Net book value $102.1 $102.4 $103.7
</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 July 30, 1994 retained earnings
of $94.6 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 $.5 million and $.9 million for the 13 and 26 weeks ended July 30,
1994 and $.9 million and $1.8 million for the 13 and 26 weeks ended
July 31, 1993.
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Condition
Cash and short-term investments decreased between second 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. The
increase in inventory between year-end 1993 and second quarter 1994 was a
normal build-up of stock in anticipation of the back-to-school and fall
selling seasons. Spring 1994 inventory levels were not as high as in
recent years as the company continued to be cautious in a lackluster retail
environment. This caution was reflected in average inventory per store
which, when compared with second quarter 1993, decreased in every specialty
fashion chain except one. The company also continued to limit
discretionary capital expenditures in the second quarter of 1994, although
not as tightly as during the first quarter and fall of 1993. Second
quarter expenditures were down 2.8% in 1994 after a 37.0% drop in the first
quarter.
The fluctuations in current debt (notes payable and commercial paper) and
long-term debt (current and noncurrrent portions) were caused by normal
seasonal variances and balance sheet reclassifications to recognize pending
maturities of long-term debt and the payment of such maturities. The sell-
down of inventory in the fall of 1993 provided the funds necessary to
reduce short-term borrowings during the period. Current debt increased
between year-end 1993 and July 1994, in large part because of the seasonal
build-up of fall 1994 inventories, a $20.0 million senior debt payment in
June of 1994, and spring capital expenditures.
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 second quarter 1994 the ratio was
43.2% and at the end of second quarter 1993 was 47.4%. With the
application of the then-available investment funds to existing debt, the
1993 measure would have dropped to 42.0%. The increased proportion of debt
in the company's capital structure at the end of 1993 and the second
quarter of 1994, when measured against twelve-month-earlier ratios (second
quarter 1993 as remeasured), 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
second quarter 1994 ratios would have been 34.2% and 40.4%, 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 second
quarter 1994, other unused credit arrangements of $87.0 million.
Management believes that funds from operations and the short-term
facilities provide adequate working capital.
Operating Results
On July 30, 1994, the company had 2,822 stores in operation, a net decrease
of 44 stores from January 29, 1994. Nine stores were added via business
acquisitions during the period.
Sales for the second quarter and 26 weeks ended July 1994 increased by 3.8%
and 1.6%, respectively, from the comparable periods of 1993. Sales in
comparable stores decreased moderately. The company believes sales were
held down because spring and summer fashion trends stimulated little
demand, and consumers continued to seek bargains. As a result, many of the
company's chains took significant markdowns during the period.
During spring 1994, the apparel segment dominated sales with
64.1% of the total. Footwear and entertainment reported 28.4% and 7.5%,
respectively, of the total.
Cost of goods sold, including occupancy and buying expenses, as a
percentage of sales was 68.8% and 67.1% for the second quarter and 26 weeks
of 1994, respectively, as compared with 67.5% and 66.1 % for the 1993
periods. Over one-half of the second quarter's increased cost percentage
resulted from the heightened markdown activity discussed earlier. The
balance of the increase was split about equally between higher merchandise
costs and the occupancy and buying component. For the 26 weeks, the
increase was split somewhat equally, with occupancy and buying increasing
by 55 basis points and merchandise costs rising by 45 basis points. In
general, the footwear segment, and particularly the Bakers/Leeds chain, was
more successful than the apparel segment at achieving regular-price sales and
avoiding promotional markdowns and at maintaining or lowering occupancy and
buying costs.
Store operating and administrative expenses, expressed as a percentage of
sales, were 24.5% and 25.7% for the second quarter and 26 weeks of 1994 as
compared with 24.6% and 25.2% for the comparable 1993 periods. After a
more substantial increase in store costs during the first quarter of 1994,
tighter expense control and more positive sales leverage lowered the rate
of increase in the second quarter. Reductions in second quarter
administrative costs offset the store expense increase during the second
quarter and lowered the overall growth rate in this cost category for the
26 weeks as compared with the first quarter. Over 40% of the second
quarter store expense increase was attributable to Dave & Buster's units.
The large Dave & Buster's units are more labor intensive than the company's
other retail units and tend to distort expense performance as measured
against sales.
The modest increase in depreciation and amortization was consistent with
the cost of the underlying asset bases. Fixed asset depreciation as a
percentage of average fixed asset cost was incurred at rates of 2.3% and
2.3% for the second quarters and 4.6% and 4.7% for the 26 week periods
during 1994 and 1993, respectively. Amortization of intangible assets as a
percentage of average cost was incurred at rates of 2.2% and 2.3% for the
second quarters and 4.5% and 4.8% for the 26 week periods during 1994 and
1993, respectively. The reduction in interest expense in 1994 was
attributable to the discontinuance and partial reversal of an accrual
and to the greater interest income earnings.
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Items 1 through 3 of Part II are not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The company's annual meeting of stockholders was held June 8, 1994. At the
meeting, the stockholders:
(i) voted to elect 12 directors of the company. Each nominee for director
was elected by a vote of the stockholders as follows:
<TABLE>
<CAPTION>
Votes Cast for Votes Withheld
<S> <C> <C>
Julian I. Edison 18,762,812 67,274
Peter A. Edison 18,779,058 51,028
Jane Evans 18,756,395 73,691
Michael H. Freund 18,778,880 51,206
Karl W. Michner 18,779,028 51,058
Alan D. Miller 18,779,398 50,688
Andrew E. Newman 18,775,336 54,750
Eric P. Newman 18,770,098 59,988
Alan A. Sachs 18,779,134 50,952
Craig D. Schnuck 18,774,076 56,010
Martin Sneider 18,775,774 54,312
Robert W. Staley 18,778,746 51,340
</TABLE>
(ii) voted on a proposal to approve the Corporation's Executive Performance
- Based Bonus Plan. The proposal was approved by a vote of the
stockholders as follows:
<TABLE>
<CAPTION>
<S> <C>
Votes cast for 17,759,879
Votes cast against 784,380
Abstentions 285,827
</TABLE>
Item 5 of part II is not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11, computation of per share earnings, is on page 10 of this
Form 10-Q.
(b) Exhibit 27, Financial Data Schedule, is on page 11 of this Form 10-Q.
(c) There were no reports on Form 8-K filed during the quarter ended
July 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: September 9, 1994 By/s/ Norman Gold
Norman Gold
Vice President and Controller
<TABLE>
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
EDISON BROTHERS STORES, INC.
AND SUBSIDIARIES
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Income from continuing operations $ 999 $ 3,270 $ 3,204 $10,129
Preferred stock dividends (1) (7) (8) (13)
Net Income applicable to common stock $ 998 $ 3,263 $ 3,196 $10,116
SIMPLE AND PRIMARY
Weighted average shares outstanding 21,998 22,060 21,993 22,038
Net effect of dilutive stock
options - based on the treasury
method 33 222 81 250
TOTAL 22,031 22,282 22,074 22,288
Per common share amounts: Simple
Net Income applicable to common
stock $ .05 $ .15 $ .15 $ .46
Per common share amounts: Primary
Net income applicable to common
stock $ .05 $ .15 $ .14 $ .45
FULLY DILUTED
Weighted average shares outstanding 21,998 22,060 21,993 22,038
Net effect of dilutive stock
options - based on the treasury
method 45 243 91 272
TOTAL 22,043 22,303 22,084 22,310
Per common share amounts: Fully
diluted
Net Income applicable to common
stock $ .05 $ .15 $ .14 $ .45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JULY 30, 1994 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE 26 WEEKS ENDED JULY 30, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000031575
<NAME> EDISON BROTHERS STORES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1994
<PERIOD-END> JUL-30-1994
<CASH> 34,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 343,100
<CURRENT-ASSETS> 421,400
<PP&E> 627,800
<DEPRECIATION> (275,700)
<TOTAL-ASSETS> 929,700
<CURRENT-LIABILITIES> 289,000
<BONDS> 158,600
<COMMON> 22,000
0
0
<OTHER-SE> 378,400
<TOTAL-LIABILITY-AND-EQUITY> 929,700
<SALES> 677,700
<TOTAL-REVENUES> 677,700
<CGS> 454,500
<TOTAL-COSTS> 209,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,000
<INCOME-PRETAX> 5,100
<INCOME-TAX> 1,900
<INCOME-CONTINUING> 3,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,200
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
