<PAGE> 1
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 August 1, 1998
---------------------------
/ / 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
------------
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 Sections 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 close of the period covered by this report:
Common Stock, $.01 par value - 9,761,395
----------------------------------------
<PAGE> 2
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Condensed Consolidated Balance Sheets as of
August 1, 1998 and January 31, 1998 1
Condensed Consolidated Statements of Operations for
the 13 weeks and 26 weeks ended August 1, 1998,
and the 13 weeks and 26 weeks ended August 2, 1997 2
Condensed Consolidated Statements of Cash Flows for
the 26 weeks ended August 1, 1998 and August 2, 1997 3
Notes to Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of Operating Results
and Financial Condition 9
Part II. Other Information 12
Signatures 16
<PAGE> 3
PART I FINANCIAL INFORMATION
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS As Reorganized
---------------------------------------------
August 1, 1998 January 31, 1998
- ---------------------------------------------------------------------- ------------------------ --------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12.0 $ 58.2
Merchandise inventories 197.6 167.9
Other current assets 22.0 28.1
- ---------------------------------------------------------------------- ------------------------ --------------------
Total Current Assets 231.6 254.2
Property and equipment, net of accumulated depreciation and amortization
of $23.9 and $9.4. 117.5 121.1
Reorganization value in excess of identifiable assets, net of accumulated
amortization of $2.5 and $1.0. 26.9 28.4
Other assets 37.4 39.3
- ---------------------------------------------------------------------- ------------------------ --------------------
TOTAL ASSETS $ 413.4 $ 443.0
- ---------------------------------------------------------------------- ------------------------ --------------------
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 38.7 $ ----
Merchandise accounts payable 42.2 43.2
Expense accounts payable 23.9 29.3
Other current liabilities 48.4 72.8
- ---------------------------------------------------------------------- ------------------------ --------------------
Total Current Liabilities 153.2 145.3
Long-term debt 127.2 127.7
Post-retirement and other employee benefits 46.2 46.7
Other liabilities 2.4 1.6
- ---------------------------------------------------------------------- ------------------------ --------------------
TOTAL LIABILITIES 329.0 321.3
- ---------------------------------------------------------------------- ------------------------ --------------------
Common stockholders' equity:
Common stock 0.1 0.1
Capital in excess of par value 130.5 130.5
Common stock warrants 7.0 7.0
Accumulated deficit (52.8) (15.4)
Foreign currency translation adjustment (0.4) (0.5)
- ---------------------------------------------------------------------- ------------------------ --------------------
Total Common Stockholders' Equity 84.4 121.7
- ---------------------------------------------------------------------- ------------------------ --------------------
TOTAL LIABILITIES AND COMMON STOCKHOLDERS' EQUITY $ 413.4 $ 443.0
- ---------------------------------------------------------------------- ------------------------ --------------------
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
As Reorganized Pre-Confirmation As Reorganized Pre-Confirmation
------------------- ------------------- ---------------- ------------------
13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
August 1, 1998 August 2, 1997 August 1, 1998 August 2, 1997
- --------------------------------------------- ------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET RETAIL SALES $ 204.9 $ 236.6 $ 411.1 $ 460.6
- -------------------------------------------------------------------------------------------------------------------------
Cost of goods sold, occupancy, and buying
expenses 150.3 165.4 305.9 323.5
Store operating and administrative expenses 56.6 65.9 115.9 128.5
Depreciation and amortization 8.6 7.7 17.8 15.3
Interest expense, net 4.1 0.6 7.9 1.5
Restructuring and reorganization expenses ---- 10.1 ---- 18.2
Pension settlement gain ---- (15.8) ---- (15.8)
Other operating expenses 0.2 3.4 0.6 6.1
- --------------------------------------------- ------------------- ------------------- ---------------- ------------------
TOTAL EXPENSES 219.8 237.3 448.1 477.3
- --------------------------------------------- ------------------- ------------------- ---------------- ------------------
INCOME (LOSS) BEFORE INCOME TAXES (14.9) (0.7) (37.0) (16.7)
Income tax provision (benefit) ---- (0.9) 0.2 0.2
- --------------------------------------------- ------------------- ------------------- ---------------- ------------------
NET INCOME (LOSS) $ (14.9) $ 0.2 $ (37.2) $ (16.9)
- --------------------------------------------- ------------------- ------------------- ---------------- ------------------
NET INCOME (LOSS) PER BASIC AND DILUTED SHARE $ (1.46) $ 0.01 $ (3.64) $ (0.76)
- --------------------------------------------- ------------------- ------------------- ---------------- ------------------
BASIC AND DILUTED AVERAGE SHARES
OUTSTANDING (IN THOUSANDS) 10,253 22,202 10,233 22,202
- --------------------------------------------- ------------------- ------------------- ---------------- ------------------
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
As Reorganized Pre-Confirmation
----------------------- --------------------
26 Weeks Ended 26 Weeks Ended
August 1, 1998 August 2, 1997
- ----------------------------------------------------------------------- ----------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (37.2) $ (16.9)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 17.8 15.3
Pension settlement gain ---- (15.8)
Working capital changes (58.2) (0.7)
Other 1.7 4.0
- ----------------------------------------------------------------------- ----------------------- --------------------
TOTAL OPERATING ACTIVITIES (75.9) (14.1)
- ----------------------------------------------------------------------- ----------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13.2) (17.5)
Decrease in investments ---- 78.5
Other 0.3 ----
- ----------------------------------------------------------------------- ----------------------- --------------------
TOTAL INVESTING ACTIVITIES (12.9) 61.0
- ----------------------------------------------------------------------- ----------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 38.7 ----
Other 3.8 (2.3)
- ----------------------------------------------------------------------- ----------------------- --------------------
TOTAL FINANCING ACTIVITIES 42.5 (2.3)
- ----------------------------------------------------------------------- ----------------------- --------------------
Effect of exchange rates on cash 0.1 ----
CASH (USED) PROVIDED (46.2) 44.6
Beginning Cash and Cash Equivalents 58.2 125.6
- ----------------------------------------------------------------------- ----------------------- --------------------
ENDING CASH AND CASH EQUIVALENTS $ 12.0 $ 170.2
- ----------------------------------------------------------------------- ----------------------- --------------------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions)
NOTE 1: GENERAL
The financial statements as of August 1, 1998 and August 2, 1997, of Edison
Brothers Stores, Inc. (the "Company") are unaudited, and are presented pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, Notes to the Consolidated Financial Statements which are contained
in the Company's 1997 Annual Report should be read in conjunction with these
Financial Statements. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements reflect all adjustments (which are
of a normal recurring nature) necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented, but are not necessarily indicative of the results of operations for a
full fiscal year.
On November 3, 1995, the Company and 65 of its subsidiaries filed petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. An Amended Joint
Plan of Reorganization (the "Plan") was confirmed by the Bankruptcy Court on
September 9, 1997. The Company emerged from Chapter 11 on September 26, 1997.
During the period from November 3, 1995 through September 26, 1997, the Company
conducted business as debtor-in-possession.
Due to the Restructuring and implementation of Fresh Start Accounting, the
condensed consolidated financial statements for the new Reorganized Company
(period starting October 5, 1997) are not comparable to those of the Predecessor
Company (periods prior to October 5, 1997). For financial reporting purposes,
the effective date of the Company's emergence from bankruptcy is considered to
be the close of business on October 4, 1997.
NOTE 2: OTHER CURRENT ASSETS
Components of other current assets include:
<TABLE>
<CAPTION>
As Reorganized
----------------------------------------------------
August 1, 1998 January 31, 1998
-------------- ----------------
<S> <C> <C>
Prepaid expenses $ 13.9 $ 13.7
Senior note interest escrow 4.7 11.2
Other 3.4 3.2
- ------------------------------------------------------ -------------------------- -------------------------
TOTAL $ 22.0 $ 28.1
- ------------------------------------------------------ -------------------------- -------------------------
</TABLE>
4
<PAGE> 7
NOTE 3: OTHER ASSETS
Components of other assets include:
<TABLE>
<CAPTION>
As Reorganized
----------------------------------------------------
August 1, 1998 January 31, 1998
-------------- ----------------
<S> <C> <C>
Assets held for senior note interest escrow $ 10.3 $ 10.3
Intangible assets, net of accumulated
amortization of $2.1 and $1.0 3.0 4.3
Prepaid pension expense 18.4 19.3
Other 5.7 5.4
- ------------------------------------------------------ -------------------------- -------------------------
TOTAL $ 37.4 $ 39.3
- ------------------------------------------------------ -------------------------- -------------------------
</TABLE>
NOTE 4: OTHER CURRENT LIABILITIES
Components of other current liabilities include:
<TABLE>
<CAPTION>
As Reorganized
---------------------------------------------------
August 1, 1998 January 31, 1998
-------------- ----------------
<S> <C> <C>
Assumed prepetition reclamation $ 1.6 $ 3.0
Accrued payroll and vacations 10.4 10.2
Other taxes 13.4 28.2
Other 23.0 31.4
- ------------------------------------------------------ -------------------------- ------------------------
TOTAL $ 48.4 $ 72.8
- ------------------------------------------------------ -------------------------- ------------------------
</TABLE>
NOTE 5: FINANCING ARRANGEMENTS
SENIOR NOTES
Pursuant to the Plan, the Company issued senior notes in the aggregate principal
amount of $120 due on September 26, 2007 ("Senior Notes"). The Senior Notes bear
interest at a fixed rate of 11% per annum, payable semi-annually on January 31
and July 31 of each year. To secure the payment of approximately the first two
and one-half years of interest on the Senior Notes, the Company entered into a
Funding Escrow Agreement and transferred cash and assets held for sale into the
escrow account established pursuant to the Funding Escrow Agreement.
The Senior Notes may be redeemed, at the option of the Company, in increments of
not less than $5 at the following Redemption Prices (expressed as percentages of
the principal amount):
July 1, 1998 through June 30, 1999 104% of par
July 1, 1999 through June 30, 2000 103% of par
July 1, 2000 through June 30, 2001 102% of par
July 1, 2001 through June 30, 2002 101% of par
July 1, 2002 through September 26, 2007 100% of par
5
<PAGE> 8
In the event there occurs a change in control, as defined in the Trust Indenture
and First Supplemental Trust Indenture (together, the "Indenture") pursuant to
which the Senior Notes were issued, each holder of Senior Notes may, at the
option of the holder, require the Company to repurchase all or any of such
holder's Senior Notes at a price equal to 101% of par plus accrued interest. In
the event the Company makes extraordinary asset sales (as defined in the
Indenture) and if the net proceeds thereof not otherwise required to be paid to
other lenders exceeds $5, 50% of such net sale proceeds must be used to pay
principal under the Senior Notes.
The Indenture limits, without prior consent, the incurrence of new indebtedness
and liens, disposition of assets and the payment of dividends. As of August 1,
1998, the Company was in compliance with these covenants.
CREDIT FACILITY
At the Emergence Date, the Company entered into a loan agreement with Congress
Financial Corporation, as agent (the "Agent"), and the CIT Group/Business
Credit, Inc., as co-agent, for a $200 revolving credit facility secured by
inventory and other related assets, to fund ongoing working capital needs and to
provide letter of credit financing (the "Credit Facility"). The Credit Facility
has a sublimit of $150 for the issuance of letters of credit. The Credit
Facility is intended to provide the Company with cash and liquidity to conduct
its operations and expires on September 26, 2002.
At the Company's option, the Company may borrow under the Credit Facility at the
Prime Rate (as defined in the Credit Facility) plus .25%, or at the Eurodollar
Rate (as defined in the Credit Facility) plus 2.5%. The borrowing rate as of
August 1, 1998 was 8.5%.
The maximum borrowing, up to $200, is limited to 60% of the value of eligible
inventory (as defined in the Credit Facility) or 85% of the Net Recovery Cost
Percentage of the inventory (as defined in the Credit Facility) multiplied by
the cost of eligible inventory, plus 95% of the aggregate amount of cash held by
the Agent as collateral, less any availability reserves established by the
Agent. During the period commencing August 1 through and including December 15
of each year, the borrowing limit calculation uses 70% of eligible inventory and
100% of the Net Recovery Cost Percentage.
The Company is required to pay an unused line fee of .375% per annum.
The Credit Facility contains various covenants including a limitation on store
closings, limitations on the incurrence of additional liens and indebtedness,
limitations on sales of assets, required minimum adjusted net worth, as defined,
and a prohibition on paying dividends.
The Credit Facility was amended on August 12, 1998. This amendment principally
provided for a reduced minimum adjusted net worth covenant and increased letter
of credit and borrowing fees.
As of August 1, 1998, $38.7 was outstanding under the Credit Facility.
Outstanding letters of credit were $66.5 and available borrowings, before
availability reserves established by the Agent, if any, under the Credit
Facility, were $41.6.
6
<PAGE> 9
NOTE 6: RESTRUCTURING AND REORGANIZATION EXPENSES
In accordance with SOP 90-7, expenses resulting from the Chapter 11
reorganization are reported separately as restructuring and reorganization
expenses in the condensed consolidated statements of operations. These amounts
are summarized below.
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
August 2, 1997 August 2, 1997
-------------- --------------
<S> <C> <C>
Legal and consulting fees $ 8.4 $ 13.1
Estimated costs of store closings .9 3.3
Payroll and related expenses 2.4 4.6
Interest income (2.2) (4.5)
Other .6 1.7
------------------------------------------ --------------------------- -------------------------
TOTAL $ 10.1 $ 18.2
------------------------------------------ --------------------------- -------------------------
</TABLE>
NOTE 7: INCOME TAXES
The effective tax rates of 0.0% and 0.1% of the pre-tax losses for the 13 weeks
and 26 weeks ended August 1, 1998, respectively, differ from the Company's
customary relationship between the income tax benefit and pre-tax accounting
loss. No tax benefit relative to current operating results has been recorded,
since the Company has concluded that it likely will not be able to realize its
deferred tax assets. The provision for the 26 weeks ended August 1, 1998 of $0.2
in the 1998 condensed consolidated statements of operations relates to state
taxes and foreign operations of the Company.
The Company has net operating loss carryforwards for federal income tax purposes
of approximately $71.4 available (with certain annual limits) to offset future
taxable income of the reorganized company. These carryforwards will expire over
various periods through the year 2013.
The Company is currently undergoing an examination by the Internal Revenue
Service ("IRS") of its income tax returns for 1992 through 1996. Also, the IRS
has asserted deficiencies against the income tax returns of the Company for the
tax years 1986 through 1991, which the Company is contesting. The Company
believes that the ultimate resolution of these matters will not have a material
adverse impact on its financial condition.
NOTE 8: EARNINGS (LOSS) PER SHARE
Net income (loss) per basic and diluted share is based on the weighted average
common shares outstanding during each period. The Company reported a loss for
the 13 weeks and 26 weeks ended August 1, 1998, and the 26 weeks ended August 2,
1997 and, therefore, shares issuable under stock option plans are antidilutive
for those periods. For the 13 weeks ended August 2, 1997, shares issuable under
stock option plans had no dilutive effect on earnings per share.
7
<PAGE> 10
NOTE 9: COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB) adopted Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and disclosure of
comprehensive income and its components. Effective February 1, 1998, the Company
adopted SFAS No. 130. For the 13 weeks ended August 1, 1998, total comprehensive
loss was $14.8. For the 13 weeks ended August 2, 1997, total comprehensive
income was $0.2. Total comprehensive loss for the 26 weeks ended August 1, 1998
and August 2, 1997 was $37.1 and $16.9, respectively.
NOTE 10: NEW ACCOUNTING PRONOUNCEMENTS
In February 1998, the FASB adopted SFAS No. 132, "Employer's Disclosures about
Pensions and Other Postretirement Benefits," which establishes reporting
requirements related to a business' pensions and other postretirement benefits.
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997,
and does not apply to interim financial statements in the year of adoption. The
Company will adopt SFAS No. 132 for the fiscal year ended January 30, 1999.
In June 1997, the FASB adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes reporting requirements
related to a business' operating segments, products and services, geographic
areas of operations and major customers. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997, and does not apply to interim financial
statements in the year of adoption. The Company will adopt SFAS No. 131 for the
fiscal year ended January 30, 1999. The Company does not expect SFAS No. 131 to
have a significant impact on its Consolidated Financial Statements and the
related disclosures.
8
<PAGE> 11
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
On November 3, 1995, Edison Brothers Stores, Inc. (the Company) and 65 of its
subsidiaries filed petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. An Amended Joint Plan of Reorganization (the Plan) was
confirmed by the Bankruptcy Court on September 9, 1997. The Company emerged from
Chapter 11 on September 26, 1997. During the period from November 3, 1995
through September 26, 1997, the Company conducted business as
debtor-in-possession.
OPERATING RESULTS
Net sales for the 13 weeks and 26 weeks ended August 1, 1998 were $204.9 and
$411.1 million, respectively, a decrease of 13.4% and 10.7% from the comparable
periods of 1997. The decrease reflected an 8.2% decrease in the average number
of stores in operation between the first half of 1997 and first half of 1998.
Same-store sales declined 7.6% and 5.0% for the 13 week and 26 week periods,
respectively.
Cost of goods sold, including occupancy and buying expenses, was 73.4% and 74.4%
of sales for the 13 and 26 weeks ended August 1, 1998, respectively, compared to
69.9% and 70.2% for the comparable periods in 1997. The increase in cost of
goods sold, including occupancy and buying expenses, as a percentage of sales
was primarily due to increased markdowns as a percentage of sales. The Company
initiated an aggressive markdown program to clear older merchandise at the end
of the first quarter.
Store operating and administrative expenses were 27.6% and 28.2% of sales for
the 13 and 26 weeks ended August 1, 1998, respectively, compared to 27.9% for
both comparable periods in 1997. These expenses decreased $9.3 million and $12.6
million for the 13 and 26 weeks ended August 1, 1998, respectively, compared to
1997. The Company has realized savings from the reorganization of field
management as well as the centralization of the planning and allocation,
merchandising support and marketing functions.
Depreciation and amortization expense increased $0.9 and $2.5 million between
1998 and 1997, for the 13 and 26 week periods, respectively. The increase
resulted primarily from amortization of the reorganization value in excess of
identifiable assets and favorable lease rights recorded upon the Company's
adoption of Fresh Start Accounting and depreciation on the $41 million in
capital expenditures incurred in 1997.
Restructuring and reorganization expenses of $18.2 million were incurred in the
first half of 1997 for early lease termination costs, write-offs of fixtures and
equipment and discontinued operations, legal and consulting fees, severance
payroll and related fringe benefits, and other bankruptcy related expenses,
offset by interest income earned while the Company was in Chapter 11.
9
<PAGE> 12
FINANCIAL CONDITION
Liquidity and Capital Resources
The Company's principal short-term cash needs are for inventory expenditures
during both normal and peak-selling times. The Company experiences a significant
increase in sales during the Christmas selling season (Thanksgiving through
Christmas). This selling season generally accounts for approximately 14% of
annual sales. The Company funds short-term cash needs during normal and peak
periods through a combination of cash flows provided by operations, normal trade
credit arrangements and the Credit Facility.
The Company has a credit facility totaling $200 million subject to certain
limitations on the value of inventory (as defined in the Credit Facility) with a
sublimit of $150 million for the issuance of letters of credit. See Note 5 of
the Notes to Condensed Consolidated Financial Statements. At August 1, 1998, the
Company had outstanding borrowings of $38.7 million, outstanding letters of
credit of $66.5 million and available borrowings of $41.6 million.
Cash and cash equivalents were $158.2 million lower at the end of second quarter
1998 compared with second quarter 1997 primarily due to the cash payments made
pursuant to the Plan. Overall, cash and cash equivalents decreased $46.2 million
since the end of fiscal 1997 as the Company used cash to fund operations and
working capital needs during the first half of 1998 and certain
bankruptcy-related payments, including excise tax related to the termination of
the Company's pension plan. Cash flow from operations decreased $61.8 million
during the first half of 1998 compared to 1997. The decrease was mostly due to
the increase in the net loss, the payment of the excise tax related to the
termination of the Company's pension plan and the increase in merchandise
inventories for back-to-school selling. Although merchandise inventory levels
are higher than at the end of fiscal 1997, merchandise inventories are $22.9
million lower than second quarter 1997 due to the numerous store closings.
Capital Expenditures
Capital expenditures totaled $13.2 million for the first half of 1998 compared
to $17.5 million in the first half of 1997. These expenditures primarily related
to the remodeling of certain stores and costs incurred in connection with
implementing new information systems.
For 1998, the Company expects capital expenditures to total approximately $24
million depending primarily on the number of stores opened or remodeled. The
Company expects that capital expenditures will be funded principally by net cash
provided by operating activities and borrowings under the Credit Facility.
Other Investing Activities
Cash flows from other investing activities increased $78.5 million in 1997 when
the Company moved excess funds out of investments and into cash equivalent
securities. As noted above, the Company made cash payments pursuant to the Plan
subsequent to moving funds out of investments.
10
<PAGE> 13
Financing Activities
Cash flows from financing activities in the first half of 1998 consisted
primarily of borrowings under the credit facility less an interest payment on
the Senior Notes.
KNOWN TRENDS AND UNCERTAINTIES
The efficient operation of the Company's business is dependent in part on its
computer software programs and operating systems (collectively, "Programs and
Systems"). These Programs and Systems are used in several key areas of the
Company's business, including merchandise purchasing, inventory management,
pricing, sales, shipping and financial reporting, as well as in various
administrative functions. The Company has been evaluating its Programs and
Systems to identify potential "Year 2000" compliance problems. These actions are
necessary to ensure that the Programs and Systems will recognize and process the
year 2000 and beyond. It is anticipated that modification or replacement of most
of the Company's Programs and Systems will be necessary to make such Programs
and Systems "Year 2000" compliant. The Company is also communicating with
suppliers, financial institutions and others to coordinate year 2000 conversion.
Based on present information, the Company believes that it will be able to
achieve such "Year 2000" compliance through a combination of modification of
some existing Programs and Systems, and the replacement of other Programs and
Systems with new Programs and Systems that are already "Year 2000" compliant.
However, no assurance can be given that these efforts will be successful. The
Company estimates that the expenses associated with achieving "Year 2000"
compliance will be $7.0 million in 1998 and $2.9 million in 1999.
The Company experiences peak selling periods, such as Easter (early spring),
back-to-school (July to August), and Christmas (Thanksgiving to Christmas), with
the Christmas selling season accounting for a significant portion of the full
year sales (14% for fiscal year 1997). Sales for fiscal 1998 to date have fallen
below the Company's business plan. If this sales trend continues through the
remainder of 1998, it will have a material adverse effect on operating results.
This Report contains "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. The words "anticipate,"
"believe," "expect," "will," "could" and similar expressions are intended to
identify certain forward-looking statements. Such statements reflect the
Company's current views with respect to future events and financial performance
and involve risks and uncertainties, including, without limitation, the risks
described above under the caption "Known Trends and Uncertainties" and such
other risks as are described in the Company's other filings with the Securities
and Exchange Commission. Should one or more of these risks or uncertainties
occur, or should underlying assumptions prove incorrect, actual results may vary
materially and adversely from those anticipated, believed or otherwise
indicated. Consequently, all of the forward-looking statements made in this
Report are qualified by these cautionary statements.
11
<PAGE> 14
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 10, 1998. At the
meeting, the stockholders:
(a) voted to elect 6 directors of the company. Each nominee for director was
elected by a vote of the stockholders as follows:
Votes Cast for Votes Withheld
-------------- --------------
Jeffrey A. Cole 8,288,472 101,054
Jacob W. Doft 8,286,005 103,521
H. Michael Hecht 8,290,872 98,654
Lawrence E. Honig 8,290,872 98,654
Randolph I. Thornton, Jr. 8,290,872 98,654
Stephen E. Watson 8,290,872 98,654
(b) voted on a proposal to approve the Corporation's 1998 Equity Incentive
Plan. The proposal was approved by a vote of the stockholders as
follows:
Votes cast for 5,486,056
Votes cast against 212,446
Abstentions 83,976
Broker non-votes 2,607,048
(c) voted on a proposal to approve the Corporation's 1998 Deferred Stock
Compensation Plan for Non-Employee Directors. The proposal was approved
by a vote of the stockholders as follows:
Votes cast for 5,668,712
Votes cast against 29,629
Abstentions 84,137
Broker non-votes 2,607,048
(d) voted on a proposal to approve the Corporation's 1998 Restricted Stock
Plan for Non-Employee Directors. The proposal was approved by a vote of
the stockholders as follows:
Votes cast for 5,458,288
Votes cast against 239,848
Abstentions 84,342
Broker non-votes 2,607,048
Item 5 of part II is not applicable.
12
<PAGE> 15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No.
- -----------
2 Debtors' Amended Joint Plan of Reorganization under
Chapter 11 of the Bankruptcy Code, dated June 30, 1997, as
modified, was filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997 and is incorporated herein by reference.
3.1 Amended and Restated Certificate of Incorporation of the
Company was filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 1, 1997
and is incorporated herein by reference.
3.2 Amended and Restated Bylaws of the Company were filed as
an Exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended November 1, 1997 and are
incorporated herein by reference.
4.1 Loan and Security Agreement, dated as of September 26,
1997, by and among the Company, Edison Brothers Apparel
Stores, Inc. and Edison Puerto Rico Stores, Inc., as
Borrowers, the Guarantors named therein, the financial
institutions named therein as Lenders, Congress Financial
Corporation, as Agent, and The CITGroup/Business Credit,
Inc., as Co-Agent, was filed as an Exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended November 1, 1997 and is incorporated herein by
reference.
4.2 Amendment No. 1 to Loan and Security Agreement, dated as
of April 13, 1998, by and among the Company, Edison
Brothers Apparel Stores, Inc. and Edison Puerto Rico
Stores, Inc., as Borrowers, the Guarantors named therein,
the financial institutions named therein as Lenders,
Congress Financial Corporation, as Agent, and The
CITGroup/Business Credit, Inc., as Co-Agent, was filed as
an Exhibit to the Company's Annual Report on Form 10-K for
the year ended January 31, 1998 and is incorporated herein
by reference.
4.3 Amendment No. 2 to Loan and Security Agreement, dated as
of August 12, 1998, by and among the Company, Edison
Brothers Apparel Stores, Inc. and Edison Puerto Rico
Stores, Inc., as Borrowers, the Guarantors named therein,
the financial institutions named therein as Lenders,
Congress Financial Corporation, as Agent, and The
CITGroup/Business Credit, Inc., as Co-Agent.
4.4 Indenture, dated as of September 26, 1997, between the
Company and The Bank of New York, as Trustee, was filed as
an Exhibit to
13
<PAGE> 16
the Company's Quarterly Report on Form 10-Q for the
quarter ended November 1, 1997 and is incorporated herein
by reference.
4.5 First Supplemental Trust Indenture, dated as of September
26, 1997, between the Company and The Bank of New York, as
Trustee, was filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997 and is incorporated herein by reference.
4.6 Funding Escrow Agreement, dated as of September 26, 1997,
among the Company, Edison Brothers Apparel Stores, Inc.
and Mercantile Trust Company, N. A., as Escrow Agent, was
filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 1, 1997 and is
incorporated herein by reference.
4.7 Registration Rights Agreement, dated as of September 26,
1997, between the Company and Swiss Bank Corporation was
filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 1, 1997 and is
incorporated herein by reference.
4.8 Warrant Agreement, dated as of September 26, 1997, between
the Company and ChaseMellon Shareholder Services, L.L.C.,
as Warrant Agent, was filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997 and is incorporated herein by reference.
10.1 Form of Indemnification Agreement between the Company and
each of its Directors was filed as an Exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended November 1, 1997 and is incorporated herein by
reference.
10.2 Edison Brothers Stores, Inc. 1997 Stock Option Plan was
filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 1, 1997 and is
incorporated herein by reference.
10.3 Edison Brothers Stores, Inc. 1997 Directors Stock Option
Plan, as amended April 15, 1998, was filed as an Exhibit
to the Company's Annual Report on Form 10-K for the year
ended January 31, 1998 and is incorporated herein by
reference.
10.4 Edison Brothers Stores, Inc. 1998 Equity Incentive Plan
was filed as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 2, 1998 and is
incorporated herein by reference.
10.5 Edison Brothers Stores, Inc. 1998 Deferred Stock
Compensation Plan for Non-Employee Directors was filed as
an Exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 2, 1998 and is incorporated
herein by reference.
14
<PAGE> 17
10.6 Edison Brothers Stores, Inc. 1998 Restricted Stock Plan
for Non-Employee Directors was filed as an Exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended May 2, 1998 and is incorporated herein by reference.
10.7 Form of Restricted Stock Agreement, entered into by the
Company on June 4, 1997 with certain executive officers of
the Company, was filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997 and is incorporated herein by reference.
10.8 Employment Termination Agreement, dated September 4, 1997,
between the Company and Alan D. Miller, former Chairman of
the Board, President and Chief Executive Officer of the
Company, was filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997 and is incorporated herein by reference.
10.9 Form of Employment Agreements entered into by the Company
on September 4, 1997 with certain executive officers of
the Company, and schedule of material differences, were
filed as Exhibits to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 1, 1997 and are
incorporated herein by reference.
10.10 Form of Employment Agreements entered into by the Company
on September 4, 1997 with certain other executive officers
of the Company, and schedule of material differences, were
filed as Exhibits to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 1, 1997 and are
incorporated herein by reference.
10.11 Employment Agreement entered into by the Company on
January 12, 1998 with Lawrence E. Honig, Chairman,
President and Chief Executive Officer of the Company was
filed as an Exhibit to the Company's Annual Report on Form
10-K for the year ended January 31, 1998 and is
incorporated herein by reference.
10.12 Separation Agreement and General Release, dated June 9,
1998, between the Company and Michael J. Fine, former
President of the Company's Footwear Group.
27 Financial Data Schedule
(b) There were no reports filed on Form 8-K during the 13
weeks ended August 1, 1998.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 10, 1998
/s/ John F. Burtelow
------------------------------------------
By John F. Burtelow
Executive Vice President, Chief
Administrative Officer and Chief Financial Officer
16
<PAGE> 1
EXHIBIT 4.3
AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
August 12, 1998
Congress Financial Corporation, as Agent
and each of the financial institutions
from time to time parties to the Loan
Agreement referred to below
Ladies and Gentlemen:
Congress Financial Corporation in its capacity as agent pursuant to the
Loan Agreement (as hereinafter defined) acting for and on behalf of the
financial institutions which are parties thereto as lenders (in such capacity,
"Agent"), The CIT Group/Business Credit, Inc. in its capacity as co-agent
pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf
of the financial institutions which are parties thereto as lenders (in such
capacity, "Co-Agent"), and the financial institutions which are parties to the
Loan Agreement as lenders (collectively, "Lenders") have entered into financing
arrangements with Edison Brothers Stores, Inc. ("Edison"), Edison Brothers
Apparel Stores, Inc. ("Edison Apparel") and Edison Puerto Rico Stores, Inc.
("Edison Puerto Rico", and together with Edison and Edison Apparel,
individually, a "Borrower" and collectively, "Borrowers") and the other
signatories to the Loan Agreement as guarantors (individually, a "Guarantor" and
collectively, "Guarantors"), pursuant to which Agent and Lenders may make loans
and advances and provide other financial accommodations to Borrowers as set
forth in the Loan and Security Agreement, dated as of September 26, 1997, by
and among Agent, Co-Agent, Lenders, Guarantors and Borrowers, as amended by
Amendment No. 1 to Loan and Security Agreement, dated April 13, 1998 (as amended
hereby and as the same may hereafter be further amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement") and other
agreements, documents or instruments referred to therein or at any time executed
and/or delivered in connection therewith or related thereto (all of the
foregoing, including the Loan Agreement, as the same now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced,
being collectively referred to herein as the "Financing Agreements").
Borrowers and Guarantors have requested certain amendments to the Loan
Agreement and Agent, Co-Agent and Lenders are willing to agree to such
amendments, subject to the terms and conditions contained in this Amendment. By
this Amendment, Agent, Co-Agent, Lenders, Borrowers and Guarantors desire and
intend to evidence such amendments.
In consideration of the foregoing and the agreements and covenants
contained herein, the parties hereto agree as follows:
<PAGE> 2
1. Definitions.
(a) Amendments to Definitions:
(i) All references to the term "Interest Rate" in the Loan
Agreement and each such reference is hereby amended to mean, as to Prime Rate
Loans, a rate of one-quarter percent (1/4%) per annum in excess of the Prime
Rate and, as to Eurodollar Rate Loans, a rate of two and one-half percent (2
1/2%) per annum in excess of the Adjusted Eurodollar Rate (based on the
Eurodollar Rate applicable for the Interest Period selected by a Borrower as in
effect three (3) Business Days after the date of receipt by Agent of the request
of such Borrower for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate previously quoted to
such Borrower); provided that; the Interest Rate shall be increased to the rate
of two and one-quarter percent (2 1/4%) per annum in excess of the Prime Rate as
to Prime Rate Loans and the rate of four and one-half percent (4 1/2%) per annum
in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at
Agent's option, without notice, for the period on and after (a) the date of
termination hereof and until such time as all Obligations are indefeasibly paid
in full (notwithstanding entry of any judgment against such Borrower), or (b)
the date of the occurrence of any Event of Default, or act, condition or event
which with notice or passage of time or both would constitute an Event of
Default, and for so long as such Event of Default or other act, condition or
event is continuing.
(ii) All references to the term "Net Worth" in the Loan
Agreement and each such reference is hereby amended to exclude, as to Borrowers,
the effect of writeoffs with respect to fixed assets of Borrowers required
pursuant to FFAS 121, "Accounting for Long Lived Assets and for Long Lived
Assets to be Disposed of", of up to $3,000,000 for such writeoffs relating to
the fiscal year of Borrowers ending January 30, 1999, up to $2,000,000 of such
writeoffs relating to the fiscal year of Borrowers ending January 29, 2000 and
up to $1,000,000 for any such writeoffs in any fiscal year of Borrowers
thereafter.
(b) Interpretation. All capitalized terms used herein shall have the
meanings assigned thereto in the Loan Agreement, unless otherwise defined
herein.
2. Letter of Credit Accommodations.
(a) Section 2.2(b) of the Loan Agreement is hereby amended by
deleting the reference to "one and one-quarter percent (1 1/4%)" contained
therein and substituting the following therefor:
"one and one-half percent (1 1/2%)".
(b) Section 2.2(b) of the Loan Agreement is hereby amended by
deleting the reference to "three and one-quarter percent (3 1/4%)" contained
therein and substituting the following therefor:
"three and one-half percent (3 1/2%)".
3. Appraisals. Section 7.3(d) of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
"(d) upon Agent's request, such Borrower shall, at its expense, no
more than once in any three (3) month period, but at any time or times as
Agent may request at Agent's expense, or at any time or times as Agent
may request at such Borrower's expense on or after an Event of Default
exists or has occurred and so long as the same is continuing, deliver or
cause to be
<PAGE> 3
delivered to Agent written reports or appraisals as to the Inventory in
form, scope and methodology acceptable to Agent and by an appraiser
acceptable to Agent, addressed to Agent or upon which Agent is expressly
permitted to rely;"
4. Net Worth. Section 9.14 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"9.14 Net Worth. The consolidated Net Worth of Edison and its
Subsidiaries shall, on the last day of each fiscal quarter of Borrowers
and Guarantors, be equal to or exceed the amounts set forth below for the
quarter indicated:
<TABLE>
<CAPTION>
=================================================================
Quarter Amount
=================================================================
<S> <C>
2nd Quarter 1998 $70,000,000
=================================================================
3rd Quarter 1998 $58,000,000
=================================================================
4th Quarter 1998 $60,000,000
=================================================================
1st Quarter 1999 $46,000,000
=================================================================
2nd Quarter 1999 $32,000,000
=================================================================
3rd Quarter 1999 $25,000,000
=================================================================
4th Quarter 1999 $33,000,000
=================================================================
1st Quarter 2000 $26,000,000
=================================================================
2nd Quarter 2000 $24,000,000
=================================================================
3rd Quarter 2000 $24,000,000
=================================================================
4th Quarter 2000 $33,000,000
=================================================================
Each quarter thereafter $37,000,000
=================================================================
</TABLE>
5. Fees. In consideration of this Amendment, Borrowers shall (a) pay
Agent for the account of Lenders, a facility amendment fee in an amount equal to
$100,000 payable simultaneously with the execution hereof, which fee is fully
earned as of the date hereof and (b) pay Agent for the account of Agent, an
amendment administration fee in an amount equal to $25,000 payable
simultaneously with the execution hereof, which fee is fully earned as of the
date hereof. Such fees may, at the option of Agent, be charged directly to any
of Borrowers' revolving loan accounts maintained by Agent for the account of
Lenders under the Financing Agreements.
6. Effect of this Agreement. Except as modified pursuant hereto, no other
changes or modifications to the Financing Agreements are intended or implied and
in all other respects the Financing Agreements are hereby specifically ratified,
restated and confirmed by all parties hereto as of the effective date hereof. To
the extent of conflict between the terms of this Amendment and the Financing
Agreements, the terms of this Amendment shall control. The Loan Agreement and
this Amendment shall be read and construed as one agreement.
7. Governing Law. The validity, interpretation and enforcement of this
Amendment and any dispute arising out of the relationship between the parties
hereto in connection with this Amendment,
<PAGE> 4
whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of New York (without giving effect to principles of
conflicts of law).
8. Binding Effect; Successors and Assigns. This letter agreement shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
9. Counterparts. This agreement may be executed in any number of
counterparts and by each of the parties hereto in separate counterparts, each of
which shall be an original, but all of which shall together constitute one and
the same agreement.
The parties hereto have caused this letter agreement to be duly executed
and delivered by their authorized officers as of the day and year first above
written.
Very truly yours,
EDISON BROTHERS STORES, INC.
By: /s/ Thomas McCain
----------------------------------------
Title: Vice President - Controller
--------------------------------------
EDISON BROTHERS APPAREL STORES, INC.
By: /s/ Thomas McCain
----------------------------------------
Title: Vice President - Controller
--------------------------------------
EDISON PUERTO RICO STORES, INC.
By: /s/ Thomas McCain
----------------------------------------
Title: Vice President - Controller
---------------------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE> 5
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
ACKNOWLEDGED AND AGREED:
EDISON PAYMASTER, INC.
EDBRO MISSOURI REALTY COMPANY, INC.
EDISON BROTHERS STORES
INTERNATIONAL, INC.
TOFAC OF PUERTO RICO, INC.
By: /s/ Thomas McCain
-----------------------------------
Title: Vice President - Controller
---------------------------------
EDISON INDIANA, LLC
By: EDISON BROTHERS APPAREL
STORES, INC., its Manager
By: /s/ Thomas McCain
----------------------------------
Title: Vice President - Controller
-------------------------------
CONGRESS FINANCIAL CORPORATION,
as Agent and Lender
By: /s/ Lawrence S. Forte
----------------------------------
Title: First Vice President
-------------------------------
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Co-Agent and Lender
By: /s/ Edward Hirschfield
----------------------------------
Title: Assistant Secretary
-------------------------------
<PAGE> 1
EXHIBIT 10.12
SEPARATION AGREEMENT AND GENERAL RELEASE
Separation Agreement and General Release ("Agreement") by and between
Edison Brothers Stores, Inc., a Delaware corporation ("Edison") and Michael J.
Fine ("Fine").
Whereas, Edison and Fine have mutually agreed that Fine's employment by
Edison shall cease; and
Whereas, the parties wish to confirm the terms of Fine's separation from
employment with Edison and wish to fully and finally resolve all matters and
claims (actual or potential) between them arising out of Fine's employment by
Edison and /or his separation from such employment;
Now, therefore, in consideration of the foregoing and the promises
hereinafter set forth, Edison and Fine hereby agree as follows:
1. The parties acknowledge that Fine's employment with Edison will
terminate effective seven days from the date this Agreement is signed
by Fine (the "Separation Date").
2. On the Separation Date, Edison shall pay to Fine a lump sum cash amount
of $1,150,000.
3. On the Separation Date, Edison shall deliver to Fine the 25,000 shares
of Edison common stock (the "Restricted Stock") granted to Fine
pursuant to the letter agreement dated June 4, 1997 between Edison and
Fine (the "Restricted Stock Agreement"), free of any restrictions
contained therein. Edison advises and represents that the Restricted
Stock is presently covered by an effective registration statement on
Form S-8 under the Securities Act of 1933, as amended, and is saleable
pursuant to such registration statement.
4. Fine acknowledges and agrees that the cash amount set forth in
Paragraph 2 above shall be deemed to include all vacation pay to which
he may be entitled as of the Separation Date and that no additional sum
shall be owing to him in respect of any unused vacation.
5. Effective as of the Separation Date, Fine shall be eligible for medical
and dental coverage in accordance with the Consolidated Omnibus Budget
Reconciliation Act (COBRA).
6. Fine shall be entitled to receive as of the Separation Date all
benefits for which he is then eligible under the Edison Brothers Stores
Retirement Account Plan and /or the Edison Brothers Stores Pension
Restoration Plan, such benefits to be paid in such form as Fine may
elect in accordance with the terms of such plans.
7. Edison shall permit Fine to review in advance any proposed written
announcements by Edison regarding Fine's separation from employment and
to offer comments and suggestions regarding such announcements (without
any obligation on Edison's part to accept or implement such comments
and suggestions). In all events, it is agreed that no announcement by
Edison of Fine's separation from employment shall contain any
disparaging comments regarding Fine's capabilities or performance as an
executive of Edison or that otherwise would reasonably be construed as
negatively reflecting on his business or personal reputation.
<PAGE> 2
8. From and after the Separation Date, Fine shall be entitled to be
indemnified by Edison against all claims by third parties to the same
extent and subject to the same terms and conditions as any other former
officer of Edison pursuant to and in accordance with the provisions of
Edison's Amended and Restated Certificate of Incorporation and the
Delaware General Corporation Law.
9. In consideration of the foregoing, Edison hereby releases and forever
discharges Fine from any and all actions, causes of action, claims or
demands of any kind whatsoever which Edison ever had, now has or
hereafter may have arising out of or relating to Fine's employment by
Edison and/or his separation from such employment.
10. In consideration of the foregoing, Fine hereby releases and forever
discharges Edison, its subsidiaries, divisions and related entities,
and its and their respective officers, directors and employees, from
any and all actions, causes of action, claims or demands of any kind
whatsoever which Fine ever had, now has or hereafter may have arising
out of or relating to his employment by Edison and/or his separation
from such employment, including, without limitation (a) all rights and
claims under Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act of 1967, as amended, the Missouri
Human Rights Act, as amended, the Fair Labor Standards Act, as amended,
and any other federal, state or local statute or regulation, (b) all
rights and claims based upon or arising out of any employee policy or
handbook, (c) all rights and claims based upon or arising out of the
Restricted Stock Agreement, (d) all rights and claims based upon or
arising out of the Employment Agreement dated September 4, 1997 between
Edison and Fine, and (e) all claims alleging wrongful discharge or
based on any other theory of liability.
11. Fine understands that he has the right to consult with an attorney
concerning this Agreement and, by signing below, confirms that he has
done so. Fine further understands that he will have twenty-one days
from the date he receives this Agreement to decide whether or not to
sign it and that, if he does not sign and return this Agreement to
Edison within such twenty-one day period, this Agreement will be void.
Fine also understands that if he does sign this Agreement within such
twenty-one day period, he will then have seven days from the date it
was signed to revoke the Agreement. Any such revocation, to be
effective, must be in writing and delivered to Edison within such
seven-day period. If Fine revokes this Agreement as aforesaid, the
Agreement will thereupon become void.
12. Unless otherwise required by law, the parties agree to keep the terms
of this Agreement strictly confidential, except that disclosure may be
made by Fine to his immediate family and by each party to his or its
respective accountants, attorneys and financial consultants to the
extent necessary.
13. This Agreement constitutes the entire agreement between the parties.
The Agreement shall be governed by the laws of the State of Missouri,
without regard to the conflict of laws rules of such State. The
Agreement may not be amended or modified except in a writing signed by
Fine and by a duly authorized officer of Edison.
14. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective personal representatives,
executors, heirs, administrators, successors and assigns.
15. Fine acknowledges and confirms that he has read each of the provisions
of this Agreement carefully, understands them and freely and
voluntarily agrees to them.
<PAGE> 3
EDISON BROTHERS STORES, INC.
By: /s/ Alan A. Sachs
------------------------------
Alan A. Sachs
Senior Vice President
Dated: June 9, 1998
---------------------------
/s/ Michael J. Fine
--------------------------------
Michael J. Fine
Dated: June 9, 1998
---------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF AUGUST 1, 1998, AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS OF THE COMPANY FOR THE 26 WEEKS ENDED
AUGUST 1, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> AUG-01-1998
<CASH> 12,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 197,600
<CURRENT-ASSETS> 231,600
<PP&E> 141,400
<DEPRECIATION> 23,900
<TOTAL-ASSETS> 413,400
<CURRENT-LIABILITIES> 153,200
<BONDS> 127,200
0
0
<COMMON> 102
<OTHER-SE> 84,300
<TOTAL-LIABILITY-AND-EQUITY> 413,400
<SALES> 411,100
<TOTAL-REVENUES> 411,100
<CGS> 305,900
<TOTAL-COSTS> 133,700
<OTHER-EXPENSES> 600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,900
<INCOME-PRETAX> (37,000)
<INCOME-TAX> 200
<INCOME-CONTINUING> (37,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,200)
<EPS-PRIMARY> (3.64)
<EPS-DILUTED> (3.64)
</TABLE>
