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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 ACT OF 1934
For quarterly period ended May 2, 1998
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: 0-02788
THE ELDER-BEERMAN STORES CORP.
(Exact name of registrant as specified in its charter)
OHIO 31-0271980
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3155 EL-BEE ROAD, DAYTON, OHIO 45439 45439
(Address of principal executive offices) (Zip Code)
(937) 296-2700
(Registrant's telephone number, including area code)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date.
As of June 1, 1998, 12,671,649 shares of the issuer's common stock,
without par value, were outstanding.
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THE ELDER-BEERMAN STORES CORP.
INDEX
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PART I. FINANCIAL INFORMATION PAGE
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ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of January 31, 1998 and as of May 2, 1998 (unaudited).... 1
Condensed Consolidated Statements of Operations for the 13 weeks ended May 3, 1997 and
May 2, 1998 (unaudited) .......................................................................... 2
Condensed Consolidated Statements of Cash Flows for the 13 weeks ended May 3, 1997
and May 2, 1998 (unaudited) ...................................................................... 3
Notes to Condensed Consolidated Financial Statements (unaudited) ................................. 4
ITEM 2. Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations ........................................................................ 6
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk ....................................... 7
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings ................................................................................ 7
ITEM 2 Changes in Securities and Use of Proceeds ........................................................ 8
ITEM 3 Defaults Upon Senior Securities .................................................................. 8
ITEM 4 Submission of Matters to a Vote of Security Holders .............................................. 8
ITEM 5 Other Information ................................................................................ 8
ITEM 6 Exhibits and Reports on Form 8-K ................................................................. 8
SIGNATURES................................................................................................. 9
EXHIBIT INDEX..............................................................................................10
</TABLE>
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
May 2, 1998 Jan. 31, 1998
---------------- ----------------
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash and equivalents $ 6,413 $ 6,497
Customer accounts receivable (less allowance for doubtful
accounts: May 2, 1998 - $3,883; January 31, 1998 -
$4,177) 126,762 136,705
Merchandise inventories 154,772 137,507
Other current assets 11,524 12,646
---------------- ----------------
Total current assets 299,471 293,355
Property, fixtures and equipment, less accumulated depreciation
and amortization 62,589 63,256
Other assets 15,105 14,754
---------------- ----------------
Total Assets $ 377,165 $ 371,365
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current portion of long-term obligations: $ 1,105 $ 1,105
Accounts payable 42,658 49,005
Other accrued liabilities 26,069 29,186
---------------- ----------------
Total current liabilities 69,832 79,296
Long-term obligations, less current portion 153,059 142,024
Deferred items 9,002 4,534
---------------- ----------------
Total Liabilities 231,893 225,854
================ ================
Shareholders' equity:
Common stock, no par, 12,671,777 shares on May 2, 1998 and
12,583,789 on January 31, 1998 issued and outstanding 201,031 199,351
Unearned compensation - restricted stock, net (2,708) (1,225)
Retained earnings (53,051) (52,615)
---------------- ----------------
Total shareholders' equity 145,272 145,511
---------------- ----------------
Total liabilities and shareholders' equity $ 377,165 $ 371,365
================ ================
</TABLE>
See notes to condensed financial statements.
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THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 weeks ended 13 weeks ended
May 2, 1998 May 3, 1997
---------------- ----------------
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Revenues: $ $
Net Sales 126,724 119,821
Financing 6,498 6,734
---------------- ----------------
Total Revenues 133,222 126,555
Costs & Expenses:
Cost of goods sold, occupancy, and buying expenses 91,827 86,677
Selling, general, administrative, and other expenses 37,724 37,480
Provision for doubtful accounts 1,577 1,080
Interest expense 2,804 1,468
Other (income) expense - (244)
---------------- ----------------
Total Costs & Expenses 133,932 126,461
Loss Before Reorganization Items and Income Tax Benefit (710) 94
Reorganization Items - 3,363
---------------- ----------------
Loss Before Income Tax Benefit (710) (3,269)
Income Tax Benefit (274) -
---------------- ----------------
Net Loss $ (436) $ (3,269)
================ ================
Basic and Diluted Net Loss Per Common Share $ (0.03) $ (26.36)
Weighted Average Number of Shares Outstanding 12,496,996 124,036
</TABLE>
See notes to condensed financial statements.
2
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THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
13 weeks ended 13 weeks ended
May 2, 1998 May 3, 1997
---------------- ----------------
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Cash flows from operating activities:
Net loss $ (436) $ (3,269)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 3,227 2,997
Changes in operating assets and liabilities, net (11,383) (6,521)
---------------- ----------------
Net cash used in operating activities (8,592) (6,793)
Cash flows from investing activities:
Capital expenditures, net (2,492) (2,248)
---------------- ----------------
Net cash used in investing activities (2,492) (2,248)
Cash flows from financing activities:
Net borrowings (payments) under debtor-in-possession
agreement 11,097
Net borrowings (payments) under asset securitization agreement (10,937)
Net borrowings (payments) under revolving lines of credit 22,253
Payments on long-term obligations (281) (114)
Other (35)
---------------- ----------------
Net cash provided by financing activities 11,000 10,983
---------------- ----------------
Increase (decrease) in cash and equivalents (84) 1,942
Cash and equivalents - beginning of period 6,497 7,091
---------------- ----------------
Cash and equivalents - end of period $ 6,413 $ 9,033
================ ================
Supplemental cash flow information:
Interest paid 2,568 1,736
</TABLE>
See notes to condensed financial statements.
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THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include accounts of The Elder-Beerman Stores Corp. and its wholly-owned
subsidiaries (the "Company"). All intercompany transactions and balances
have been eliminated in consolidation. In the opinion of management, all
adjustments (primarily consisting of normal recurring accruals) considered
necessary for a fair presentation for all periods presented have been
made.
On December 30, 1997, the Company substantially consummated its Third
Amended Joint Plan of Reorganization, dated November 17, 1997, as amended
(the "Plan"), which was confirmed by an order of the United States
Bankruptcy Court for the Southern District of Ohio, Western Division (the
"Bankruptcy Court") entered on December 16, 1997. Accordingly, the
condensed consolidated financial statements as of and for the 13 weeks
ended May 3, 1997, are presented in accordance with American Institute of
Certified Public Accountants Statement of Position 90-7, Financial
Reporting by Entities in Reorganization under the Bankruptcy Code. The
reorganization expense for the 13 weeks ended May 3, 1997 consists of
professional fees and other bankruptcy related expenses.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company's
business is seasonal in nature and the results of operations for the
interim periods are not necessarily indicative of the results for the full
fiscal year. It is suggested these condensed consolidated financial
statements be read in conjunction with the financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the
year ended January 31, 1998.
2. Per Share Amounts
Net loss per common share is computed by dividing net loss by the
weighted-average number of common shares outstanding. Stock options,
restricted shares, and warrants outstanding represent potential common
shares and are not included in computing diluted earnings per share as the
effect would by antidilutive.
3. Stock-Based Compensation
During the first quarter of 1998, stock options and restricted shares were
granted to designated employees under the Company's Equity and Performance
Incentive Plan. A total of 15,000 stock options with an exercise price of
$10.89 per share and 135,000 stock options with an exercise price of
$21.00 per share were granted. These options granted have a maximum term
of ten years and vest over a period of five years.
Also, during the first quarter of 1998, 80,000 shares of restricted stock
were awarded under the Company's Equity and Performance Incentive Plan.
These shares have a vesting period of three years. The fair value of the
restricted shares awarded is $1,680 and is being amortized over the
three-year period.
Non-employee directors may take all or a portion of their annual base
retainer fee in the form of a discounted stock option. During the first
quarter of 1998, a total of 4,722 stock options, with an exercise price of
$12.375, were granted under this plan. These options become vested on
January 31, 1999.
4. Leases
During the first quarter of 1998 the Company entered into two operating
lease commitments for retail department store property and leasehold
improvements. These lease agreements have minimum lease payments in fiscal
1998 of $2,791 and $3,513 each year from fiscal 1999 through fiscal 2002.
4
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5. Comprehensive Income
Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income. Adoption of
this standard had no impact on the Company's financial statements.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Except for historical information, certain statements in this
Management's Discussion and Analysis of Consolidated Financial Condition and
Results of Operations are forward looking. These forward looking statements are
based on current expectations that are subject to a number of uncertainties and
risks, and actual results may differ materially. The uncertainties and risks
include, but are not limited to, competitive and other market factors, customer
purchasing behavior, general economic conditions and other facets of the
Company's business operations. The Company undertakes no obligation and does not
intend to update, revise or otherwise publicly release the result of any
revisions to these forward looking statements that may be made to reflect future
events or circumstances.
The following information should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes included in Part I, Item
1. The following information should also be read in conjunction with the Audited
Consolidated Financial Statements and Notes, and Management's Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
January 31, 1998 as contained in the Company's Annual Report on Form 10-K.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the 13 week periods ended May 2, 1998 ("First
Quarter 1998") and May 3, 1997 ("First Quarter 1997"). The Company's fiscal year
ends on the Saturday closest to January 31st. The discussion and analysis that
follows are based upon and should be read in conjunction with the Condensed
Consolidated Financial Statements and the Notes thereto included in Part I, Item
1.
RESULTS OF OPERATIONS
First Quarter 1998 Compared to First Quarter 1997
Net sales for the First Quarter 1998 increased by 5.8% to $126.7
million from $119.8 million for the First Quarter 1997. The increase is due to a
10.6% comparable store sales increase for the Elder-Beerman department stores,
and a 2.5% comparable store sales increase for the Bee-Gee shoe stores. Better
and moderate women's sportswear, men's clothing and men's sportswear, furniture,
and domestics led the sales increase for the department stores.
Financing revenue from the Company's private label credit card for the
First Quarter 1998 decreased by 3.5% to $6.5 million from $6.7 million for the
First Quarter 1997. The decline in finance charges due to the reduction in
outstanding customer accounts receivable has been partially offset by an
increase in late fees charged.
Cost of goods sold, occupancy, and buying expenses increased to 72.5%
of net sales for the First Quarter 1998 from 72.3% of net sales for the First
Quarter 1997. This increase is primarily due to an increase in the buying staff
payroll as a result of being more fully staffed, and an increase in depreciation
due to capital expenditures in 1997.
Selling, general, and administrative (including key employee
performance bonus plan expense), and hiring and recruiting expenses for new
executives decreased to 29.8% of net sales for the First Quarter 1998 from 31.3%
for the First Quarter 1997. This was due to the leverage of several semi-fixed
costs, most notably service and operations, utilities, and advertising costs.
Provisions for doubtful accounts increased to 1.2% of net sales for the
First Quarter 1998 from 0.9% for the First Quarter 1997. The increase is
primarily due to the level of delinquent accounts and receivable charge-offs in
previous months.
Interest expense increased to $2.8 million for the First Quarter 1998
from $1.5 million for the First Quarter 1997. The increase is due to the
required financing to support the payment of the bankruptcy obligations.
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There was no other income for the First Quarter 1998 compared to an
income of $0.2 million for the First Quarter 1997. The income for First Quarter
1997 was realized from a swap mark-to-market adjustment on the unhedged portion
of swap agreements in place at that time.
Reorganization costs were zero for the First Quarter 1998 versus $3.4
million for the First Quarter 1997 because of the Company's emergence from
bankruptcy protection in December 1997.
An income tax benefit was recorded in the First Quarter 1998 at the
estimated statutory rate for federal and state income taxes of 38.5%. An income
tax benefit was not recorded in the First Quarter 1997 because the Company
remained under bankruptcy protection.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are cash flow from operations
and borrowings under its Revolving Credit Facility and Receivable Securitization
Facility (collectively, the "Credit Facilities"). The Company's primary ongoing
cash requirements are to fund debt service, make capital expenditures, and
finance working capital.
Net cash used in operating activities was $8.6 million for the First
Quarter 1998, compared to $6.8 million for the First Quarter 1997. During the
First Quarter 1998, approximately $6.7 million in payments were made for
professional fees, administration payments, lease cure payments, and other items
that were related to the bankruptcy, which was partially offset by a $2.6
million reduction in pre-tax loss.
Net cash used in investing activities was $2.5 million for the First
Quarter 1998, compared to $2.2 million for the First Quarter 1997. The entire
amount for both periods is for capital expenditures for store maintenance and
remodeling, and data processing.
For the First Quarter 1998, net cash provided by financing activities
was $11.0 million, the same as for the First Quarter 1997.
The Company believes that it will generate sufficient cash flow from
operations, as supplemented by its available borrowings under the Credit
Facilities, to meet anticipated working capital and capital expenditure
requirements, as well as debt service requirements under the Credit Facilities.
The Company may from time to time consider acquisitions of department
store assets and companies. Acquisition transactions, if any, are expected to be
financed through a combination of cash on hand from operations and the possible
issuance from time to time of long-term debt or other securities. Depending upon
the conditions in the capital markets and other factors, the Company will from
time to time consider the issuance of debt or other securities, or other
possible capital market transactions, the proceeds of which could be used to
refinance current indebtedness or for other corporate purposes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
NOT APPLICABLE.
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is currently involved in several legal proceedings
arising from its normal business activities and reserves have been established
where appropriate. However, no legal proceedings have arisen or become
reportable events during this quarter, and management believes that none of the
remaining legal proceedings will have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.
In addition, as a result of the bankruptcy, the Company remains
subject to the jurisdiction of the Bankruptcy Court for matters relating to the
consummation of the Plan.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are included in this Quarterly Report on Form
10-Q:
2 Third Amended Joint Plan of Reorganization of The
Elder-Beerman Stores Corp. and its Subsidiaries dated November
17, 1997 (previously filed as Exhibit 2 to the Company's Form
10 filed on November 26, 1997 (the "Form 10"), and
incorporated herein by reference)
3(a) Amended Articles of Incorporation (previously filed as Exhibit
3(a) to the Form 10-K filed on April 30, 1998 (the "Form
10-K") and incorporated herein by reference)
3(b) Amended Code of Regulations (previously filed as Exhibit 3(b)
to the Form 10 and incorporated herein by reference)
4(a) Stock Certificate for Common Stock (previously filed as
Exhibit 4(a) to the Company's Form 10/A-1 filed on January 23,
1998 (the "Form 10/A-1") and incorporated herein by reference)
4(b) Rights Agreement By and Between The Elder-Beerman Stores Corp.
and Norwest Bank Minnesota, N.A., dated as of December 30,
1997 (previously filed as Exhibit 4(c) to the Form 10-K and
incorporated herein by reference)
4(c) Warrant Agreement by and Between Beerman-Peal Holdings, Inc.
and the Elder-Beerman Stores Corp. for 249,809 shares of
Common Stock at a strike price of $12.80 per share dated
December 30, 1997 (previously filed as Exhibit 4(d) to the
Form 10-K and incorporated herein by reference)
4(d) Warrant Agreement by and Between Beerman-Peal Holdings, Inc.
and the Elder-Beerman Stores Corp. for 374,713 shares of
Common Stock at a strike price of $14.80 per share dated
December 30, 1997 (previously filed as Exhibit 4(e) to the
Form 10-K and incorporated herein by reference)
27 Financial Data Schedule
(b) The Company filed a Current Report on Form 8-K on February 2, 1998
disclosing that on January 29, 1998, the Company's Board of Directors (the
"Board") authorized an increase in the size of the Board to nine members and
elected Laura H. Pomerantz to fill the resulting vacancy. In addition, the Board
approved a purchase price of $60.00 per one one-hundredth of a new series of
Class A Preferred Stock, subject to adjustment for the Rights issued pursuant to
the Rights Agreement, dated December 30, 1997, between the Company and Norwest
Bank Minnesota, N.A., as Rights Agent.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
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THE ELDER-BEERMAN STORES CORP.,
an Ohio corporation
Dated: June 12, 1998 By: /s/ John A. Muskovich
--------------------------- ------------------------
John A. Muskovich
President, Chief Operating Officer and
Chief Financial Officer
(on behalf of the Registrant and as Principal
Financial Officer)
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C> <C>
2 Third Amended Joint Plan of Reorganization of The Elder-Beerman Stores Corp. and its
Subsidiaries dated November 17, 1997 (previously filed as Exhibit 2 to the Company's Form 10
filed on November 26, 1997 (the "Form 10"), and incorporated herein by reference)
3(a) Amended Articles of Incorporation (previously filed as Exhibit 3(a) to the Form 10-K filed on
April 30, 1998 (the "Form 10-K"), and incorporated herein by reference)
3(b) Amended Code of Regulations (previously filed as Exhibit 3(b) to the Form 10 and incorporated
herein by reference)
4(a) Stock Certificate for Common Stock (previously filed as Exhibit 4(a) to the Company's Form
10/A-1 filed on January 23, 1998 (the "Form 10/A-1") and incorporated herein by reference)
4(b) Rights Agreement By and Between The Elder-Beerman Stores Corp. and Norwest Bank Minnesota,
N.A., dated as of December 30, 1997 (previously filed as Exhibit 4(c) to the Form 10-K and
incorporated herein by reference)
4(c) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the Elder-Beerman Stores
Corp. for 249,809 shares of Common Stock at a strike price of $12.80 per share dated December
30, 1997 (previously filed as Exhibit 4(e) to the Form 10-K and incorporated herein by
reference)
4(d) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the Elder-Beerman Stores
Corp. for 374,713 shares of Common Stock at a strike price of $14.80 per share dated December
30, 1997 (previously filed as Exhibit 4(e) to the Form 10-K and incorporated herein by
reference)
27 Financial Data Schedule
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q OF THE ELDER-BEERMAN STORES CORP. FOR THE
THIRTEEN WEEKS ENDED MAY 2, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE
SECURITIES ACT OF 1933, SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE
LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION
STATEMENT TO WHICH IT RELATES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> JAN-31-1998
<PERIOD-END> MAY-02-1998
<CASH> 6,413
<SECURITIES> 0
<RECEIVABLES> 130,645
<ALLOWANCES> 3,883
<INVENTORY> 154,772
<CURRENT-ASSETS> 299,471
<PP&E> 62,589
<DEPRECIATION> 0
<TOTAL-ASSETS> 377,165
<CURRENT-LIABILITIES> 69,832
<BONDS> 153,059
0
0
<COMMON> 201,031
<OTHER-SE> (55,759)
<TOTAL-LIABILITY-AND-EQUITY> 377,165
<SALES> 126,724
<TOTAL-REVENUES> 133,222
<CGS> 91,827
<TOTAL-COSTS> 91,827
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,577
<INTEREST-EXPENSE> 2,804
<INCOME-PRETAX> (710)
<INCOME-TAX> (274)
<INCOME-CONTINUING> (436)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (436)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
