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 29, 1995
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 - 22,037,490
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Condensed Consolidated Balance Sheets as of
April 29, 1995; January 28, 1995; and
April 30, 1994
Condensed Consolidated Statements of Income for
the 13 weeks ended April 29, 1995 and
for the 13 weeks ended April 30, 1994
Condensed Consolidated Statements of Cash Flows
for the 13 weeks ended April 29, 1995 and for the
13 weeks ended April 30, 1994
Notes to Condensed Consolidated
Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operation
Part II. Other Information
Signatures
<TABLE>
PART I FINANCIAL INFORMATION
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 30
April 29, January 28, 1994
1995 1995 (restated)
(In Millions)
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and short-term investments $ 53.4 $ 27.0 $ 35.6
Merchandise inventories 351.3 318.4 333.8
Prepaid expenses 9.0 8.2 11.7
Deferred income taxes 8.0 9.6 19.4
Other current assets 19.8 33.9 11.9
Total Current Assets 441.5 397.1 412.4
Property and Equipment, net 344.5 347.0 351.7
Intangible Assets, net 92.0 96.2 99.9
Prepaid Pension Expense 39.6 38.7 36.7
Other Assets 17.0 14.8 14.4
Total Assets $934.6 $893.8 $915.1
<CAPTION>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Notes payable and commercial paper $113.4 $115.9 $ 91.3
Current portion of long-term debt 9.0 35.1
Accounts payable, trade 73.8 75.4 74.7
Other current liabilities 62.8 64.9 67.2
Total Current Liabilities 259.0 256.2 268.3
Long-Term Debt 224.4 173.5 158.7
Postretirement Benefits 40.3 40.0 39.0
Other Liabilities 32.3 33.2 39.7
Deferred Income Taxes 4.9 3.7 6.9
Common Stockholders' Equity:
Common stock, par value $1 per share 22.0 22.0 22.0
Capital in excess of par value 76.7 76.5 76.0
Retained earnings 290.6 303.8 305.9
Foreign currency translation
adjustment and other (15.6) (15.1) (1.4)
Total Common Stockholders' Equity 373.7 387.2 402.5
Total Liabilities and Equity $934.6 $893.8 $915.1
<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 13 Weeks Ended
April 30,
April 29, 1994
1995 (restated)
(In millions, except per share data)
<S> <C> <C>
Net Sales $ 318.1 $ 326.7
Cost of goods sold, occupancy
and buying expenses 218.9 212.9
Store operating and
administrative expenses 87.2 88.2
Depreciation and amortization 17.0 17.6
Interest expense, net 5.5 4.9
Total Costs and Expenses 328.6 323.6
Income (Loss) before income taxes (10.5) 3.1
Provision for income taxes (4.1) 1.2
Net Income (Loss) $ (6.4) $ 1.9
Per Common Share:
Net Income (Loss) $ (.29) $ .09
Cash dividends declared $ .31 $ .31
Weighted average common shares
outstanding (in thousands) 22,028 21,987
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
13 Weeks Ended
April 30,
April 29, 1994
1995 (restated)
(In Millions)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (6.4) $ 1.9
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 17.0 17.6
Deferred income taxes 2.1
Change in assets and liabilities
net of effects from acquisitions:
Merchandise inventories (31.7) (38.4)
Other assets 10.0 (2.0)
Accounts payable, accrued
expenses and other liabilities (3.2) (1.3)
Other 1.7 1.4
Total Operating Activities (10.5) (20.8)
Cash Flows from Investing Activities:
Capital expenditures (13.8) (13.6)
Other .1 (1.2)
Total Investing Activities (13.7) (14.8)
Cash Flows from Financing Activities:
Principal payments of long-term debt (.1) (.5)
Short-term debt (payments) borrowings (2.5) 46.5
Common stock dividends (6.8) (6.8)
Proceeds from long-term debt issuance 60.0
Other .2 (.6)
Total Financing Activities 50.8 38.6
Effect of exchange rate changes on cash (.2)
Cash Provided 26.4 3.0
Beginning cash and short-term investments 27.0 32.6
Ending cash and short-term investments $ 53.4 $ 35.6
<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 28, 1995. 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; at April 29, 1995,
27,554,232 shares were issued of which 5,516,742 shares were being
held in the company's treasury and 22,037,490 shares were outstanding.
<TABLE>
5. Property and equipment, net is composed of the following:
<CAPTION>
April 29, January 28, April 30,
1995 1995 1994
(In millions)
<S> <C> <C> <C>
Cost $638.5 $633.1 $620.1
Accumulated depreciation and
amortization (294.0) (286.1) (268.4)
Net book value $344.5 $347.0 $351.7
</TABLE>
<TABLE>
6. Intangible assets, net is composed of the following:
<CAPTION>
April 29, January 28, April 30,
1995 1995 1994
(In millions)
<S> <C> <C> <C>
Cost $139.7 $142.5 $145.6
Accumulated amortization (47.7) (46.3) (45.7)
Net book value $ 92.0 $ 96.2 $ 99.9
</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 29, 1995 retained earnings
of $35.3 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 $(.3) million and $.4 million for the 13 weeks ended April 29,
1995 and April 30, 1994, respectively.
9. Income for the first quarter of 1994 has been restated and reduced by
$.4 million ($.3 million after tax or 1 cent per share) to reflect as
annual compensation expense certain amounts payable under a contingent
earn-out related to a 1989 business acquisition; such amounts were
previously considered as additional purchase price to be reflected
upon payment in 1995. In addition, 1994 beginning retained earnings
have been reduced by $3.9 million to reflect the effect of restatement
for years prior to 1994.
10. During the first quarter of 1995, the company increased long-term debt
by $60.0 million through borrowings under its credit agreement. The
additional borrowings mature in June of 1997. All of the $113.4
million of short-term debt at the end of the first quarter of 1995 was
composed of notes payable to banks. Of that amount, $84.8 million was
borrowed under informal credit arrangements.
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
During the first quarter of 1995 the Company retained excess cash from
operations. The result was a $26.4 million increase in cash and short-term
investments during the quarter. Merchandise inventory increased during the
first quarter of 1995 by $32.9 million compared with year-end 1994 and by
$17.5 million compared with the end of the first quarter of 1994. The
quarter-to-quarter increase was caused by increasing stock in chains
experiencing greater customer demand (e.g. Bakers and Jeans West) and
acquisitions for the Repp Ltd. chain. Partially offsetting the increases
were decreases achieved through reductions in merchandise purchases and
through sales encouraged by promotional markdowns in chains experiencing
weakened customer acceptance of their merchandise, such as 5-7-9 Shops, J.
Riggings and Zeidler & Zeidler/Webster. In addition to the factors noted
above, during the first quarter of 1995 inventories were increased from
year-end 1994 as part of a normal seasonal restocking following the higher
sales of Christmas and the January clearance sales. Store opening/closing
activity during the first quarter of 1995 was a net reduction of 19 stores
and, therefore, did not have a significant effect on inventory levels for
the period. The decrease in other assets was caused by collection of
amounts due the Company related to recovery of certain countervailing
duties.
During the first quarter of 1995, long-term debt increased by $50.9
million which represented borrowing under a bank lending agreement net of
$9.0 million reclassified as current portion of long-term debt. The funds
were used principally during the early weeks of the quarter to increase
inventory in anticipation of Easter-holiday sales. The decrease in Common
Stockholders' Equity since year-end 1994 reflects the first quarter of 1995
net loss and dividend payment. Shortly after the end of the first quarter
of 1995, the Company announced, effective with the second quarter of 1995,
a reduction in its quarterly dividend from 31 to 11 cents per share.
Cash flow from operations improved by $10.3 million during the first
quarter of 1995 compared with the first quarter of 1994. The improvement
resulted primarily from the collection of amounts owing to the Company in
the other assets category discussed earlier and a smaller first quarter
increase in inventory in 1995 than 1994. These positive factors were
partially offset by the decline in income.
The Company has available a $125.0 million credit facility, of which
$21.5 million was unused at the end of the first quarter of 1995. During
the first quarter of 1995 the Company amended its principal loan
agreements, including this credit facility, to provide for greater
operating flexibility and to ensure convenant compliance during the first
quarter of 1995.
In addition to the $125.0 million credit facility, the Company uses
short-term financing from several banks on an uncommitted as-needed basis
throughout the year for working capital and other requirements. At the end
of the first quarter of 1995, the outstanding balance of such short-term
bank financing was $84.8 million.
As noted in the Management's Discussion and Analysis contained in the
Company's annual report on Form 10-K for the year ended January 28, 1995,
as amended, the Company is pursuing a refinancing plan which is expected to
involve the sale of up to $300.0 million of debt securities to the public.
The Company has filed a shelf registration statement for such offering with
the Securities and Exchange Commission which became effective on June 8,
1995. It is the Company's present intention to use the proceeds of this
offering to refinance all of its outstanding uncommitted bank lines, a
portion of the debt outstanding under its credit facility and all of its
existing senior notes. Based on discussions with the banks providing its
short-term uncommitted financing, the Company expects these lenders to
continue to extend credit to the Company until the refinancing plan is
completed.
As part of the refinancing plan, the Company has also entered into a
commitment letter with a major money center bank to arrange a new $300.0
million committed facility that would replace all of the Company's existing
bank facilities. This proposed new facility would provide for a $125.0
million, three-year revolving credit facility and a $175.0 million letter
of credit facility. The Company believes that this new $300.0 million
facility would provide it with adequate capital resources to meet its
working capital and general corporate needs.
As previously announced, the Company expects to spin off its Dave &
Buster's operations via a distribution to the Company's shareholders during
the second quarter of 1995. For the first quarter of 1995, Dave & Buster's
reported net income of $.9 million and as of April 29, 1995 has total
assets of $51.3 million and a net book value of $27.9 million. For fiscal
years 1994 and 1993 Dave & Buster's reported net income of $2.4 million and
$1.2 million, respectively. At the end of 1994 and 1993 Dave & Buster's
had total assets of $49.0 million and $43.4 million, respectively, and a
net book value of $27.7 million and $25.0 million, respectively.
OPERATING RESULTS
Net sales for the first quarter of 1995 decreased by 2.6% from the
comparable period of 1994. Same-store sales decreased by 2.0% for the
Company as a whole with the apparel segment reporting a 2.8% decline and
footwear a 1.4% increase. The Company attributed much of the same-store
decrease to the highly promotional and competitive apparel business. A
contributing factor to the total sales decline was the net reduction of 111
under-performing retail stores between the end of first quarter 1994 and
the end of first quarter 1995. The Company is continuing to study the
possibility of closing a significant additional number of under-performing
stores, the majority of which are in the Oaktree chain. Although no
decision has been made as to the number and timing of closings, the Company
is evaluating the operating results, long-term potential and other criteria
of the group of stores under consideration for closing and, if appropriate,
will establish a reserve to cover the cost of closing those units. The
amount of such a reserve is difficult to estimate because of several
unknown factors including the exact number of stores to be closed and the
amount of payments to landlords which might be required to terminate
certain leases. Because of the significant number of stores being
considered, the Company believes that if a closing plan is initiated, the
one-time charge to income to reserve for costs to be incurred for closing
the stores would be material. However, the Company would not expect that
charge to exceed $20.0 million.
First quarter costs of goods sold, including occupancy and buying expenses,
as a percentage of sales were 68.8% and 65.2% for 1995 and 1994,
respectively. The decline in gross margin resulting from markdowns taken
in the competitive promotional environment caused over 70% of the increase.
Promotional markdowns were particularly heavy in the suit and sports coat
product lines of the Company's menswear chains. Assuming markdowns during
the 1995 period had been incurred as a percentage of sales at the 1994
level, the 1995 gross margin would have been nearly $9.0 million higher.
The Company attributes the highly promotional retail environment to a lack
of fashion excitement and cautious consumer spending on soft goods.
Increased direct cost of merchandise and shrinkage, approximately 1.0% of
sales in the aggregate, accounted for the remainder of the increased 1995
costs of goods sold. As a percentage of sales, occupancy and buying costs
were about equal for the two periods, halting a negative trend that had
occurred throughout 1994.
Store operating and administrative expenses as a percentage of sales were
27.4% and 27.0% during the first quarters of 1995 and 1994, respectively.
The store expense component as a percentage of sales increased by less than
ten basis points in 1995 as compared with the 1994 first quarter, evidence
of the Company's ongoing efforts to tightly control such costs. Higher
administrative expenses as a percentage of sales accounted for the balance
of the increase. The cause of the administrative expense increase was
split evenly between the loss of positive sales leverage and an increase in
expense of less than $.6 million. The decrease in depreciation and
amortization is attributed in part to the curtailment of capital
expenditures over the past few years and in part to maturation of the
intangible assets in shorter-lived categories such as lease rights. The
increase in net interest expense is primarily attributable to increased
short and long-term bank debt. The average daily balance of such debt was
$170.4 million during first quarter 1995 compared with $81.4 million for
the same period of 1994. The increase reflected the Company's greater
reliance on such debt for working capital, capital expenditures and long-
term debt repayment normally funded to a greater extent by funds from
operations. The higher short and long-term bank interest expense was
partially offset by higher interest income and lower long-term interest
expense, the latter due to the retirement of $35.0 million of senior notes
during 1994.
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) Bylaws of the Company, as amended February 21, 1995 were filed as an
Exhibit to the Company's annual report on Form 10-K for the year ended
January 28, 1995, and are incorporated herein by reference.
(b) The Company's Certificate of Incorporation, as amended June 28, 1990,
was filed as an Exhibit to the Company's annual report on Form 10-K
for the year ended February 2, 1991, and is incorporated herein by
reference.
(c) Exhibit 4(a), Credit Agreement dated as of June 4, 1993 between Edison
Brothers Stores, Inc. and a number of financial institutions relating
to a $150 million revolving credit facility, is incorporated by
reference from the Company's Registration Statement on Form S-3 (No.
33-58609) filed with the Commission.
(d) Exhibit 4(b), First Amendment to Credit Agreement dated as of January
24, 1994 amending the Credit Agreement dated June 4, 1993, is
incorporated by reference from the Company's Registration Statement on
Form S-3 (No. 33-58609) filed with the Commission.
(e) Exhibit 4(c), Second Amendment to Credit Agreement dated as of
February 17, 1994 amending the Credit Agreement dated June 4, 1993, is
incorporated by reference from the Company's Registration Statement on
Form S-3 (No. 33-58609) filed with the Commission.
(f) Exhibit 4(d), Third Amendment to Credit Agreement dated as of March
29, 1995 amending the Credit Agreement dated June 4, 1993, is
incorporated by reference from the Company's Registration Statement on
Form S-3 (No. 33-58609) filed with the Commission.
(g) Exhibit 10, description of a restricted stock grant by Edison Brothers
Stores, Inc. to Alan D. Miller, Chairman, President and Chief
Executive Officer of the company, is incorporated by reference from
the Company's Registration Statement on Form S-3 (No. 33-58609), as
amended, filed with the Commission.
(h) Exhibit 11, computation of per share earnings, is on page 11 of this
Form 10-Q.
(i) Exhibit 27, Financial Data Schedule, is on page 12 of this Form 10-Q.
(j) There were no reports on Form 8-K filed during the quarter ended
April 29, 1995.
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 13, 1995 By/s/ David B. Cooper, Jr.
Executive Vice President and
Chief Financial Officer
<TABLE>
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
EDISON BROTHERS STORES, INC.
AND SUBSIDIARIES
<CAPTION>
13 Weeks Ended 13 Weeks Ended
April 30,
April 29, 1994
1995 (restated)
(In thousands, except per share data)
<S> <C> <C>
Income (Loss) from continuing
operations $(6,388) $ 1,946
Preferred stock dividends (1) (7)
Net Income (Loss) applicable to
common stock $(6,389) $ 1,939
SIMPLE AND PRIMARY
Weighted average shares outstanding 22,028 21,987
Net effect of dilutive stock
options - based on the treasury
method 129
TOTAL 22,028 22,116
Per common share amounts: Simple
Net Income (Loss) applicable to
common stock $ (.29) $ .09
Per common share amounts: Primary
Net Income (Loss) applicable to
common stock $ (.29) $ .09
FULLY DILUTED
Weighted average shares outstanding 22,028 21,987
Net effect of dilutive stock
options - based on the treasury
method 4 140
TOTAL 22,032 22,127
Per common share amounts: Fully
diluted
Net Income (Loss) applicable to
common stock $ (.29) $ .09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet as of April 29, 1995 and the condensed
consolidated statement of income for the 13 weeks ended April 29, 1995 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> 3-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> APR-29-1995
<CASH> 53,400
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 351,300
<CURRENT-ASSETS> 441,500
<PP&E> 638,500
<DEPRECIATION> 294,000
<TOTAL-ASSETS> 934,600
<CURRENT-LIABILITIES> 259,000
<BONDS> 224,400
<COMMON> 22,000
0
0
<OTHER-SE> 351,700
<TOTAL-LIABILITY-AND-EQUITY> 934,600
<SALES> 318,100
<TOTAL-REVENUES> 318,100
<CGS> 218,900
<TOTAL-COSTS> 104,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,500
<INCOME-PRETAX> (10,500)
<INCOME-TAX> (4,100)
<INCOME-CONTINUING> (6,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,400)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
