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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 August 1, 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
(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
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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 September 14, 1998, 15,898,148 shares of the issuer's common
stock, without par value, were outstanding.
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THE ELDER-BEERMAN STORES CORP.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of January 31, 1998
and as of August 1, 1998 (Unaudited).........................................................1
Condensed Consolidated Statements of Operations for the 13 weeks
ended August 2, 1997 and August 1, 1998 (Unaudited)..........................................2
Condensed Consolidated Statements of Operations for the 26 weeks
ended August 2, 1997 and August 1, 1998 (Unaudited)..........................................3
Condensed Consolidated Statements of Cash Flows for the 13 weeks
ended August 2, 1997 and August 1, 1998 (Unaudited)..........................................4
Notes to Condensed Consolidated Financial Statements (Unaudited).............................5
ITEM 2. Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations....................................................................7
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk...................................9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................................................9
ITEM 2. Changes in Securities and Use of Proceeds...................................................10
ITEM 3. Defaults Upon Senior Securities.............................................................10
ITEM 4. Submission of Matters to a Vote of Security Holders.........................................10
ITEM 5. Other Information...........................................................................10
ITEM 6. Exhibits and Reports on Form 8-K............................................................10
SIGNATURES...............................................................................................12
EXHIBIT INDEX............................................................................................13
</TABLE>
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
August 1, 1998 Jan. 31, 1998
-------------- -------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents $ 7,123 $ 6,497
Customer accounts receivable (less allowance for doubtful
accounts: August 1, 1998 - $3,447; January 31, 1998 -
$4,177) 119,675 136,705
Merchandise inventories 192,534 137,507
Other current assets 18,356 12,646
-------- --------
Total current assets 337,688 293,355
Property, fixtures and equipment, less accumulated depreciation
and amortization 80,446 63,256
Other assets 21,970 14,754
-------- --------
Total assets $440,104 $371,365
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term obligations: $ 1,105 $ 1,105
Accounts payable 58,875 49,005
Other accrued liabilities 32,100 29,186
-------- --------
Total current liabilities 92,080 79,296
Long-term obligations, less current portion 191,726 142,024
Deferred items 10,416 4,534
-------- --------
Total liabilities 294,222 225,854
======== ========
Shareholders' equity:
Common stock, no par, 12,678,148 shares on August 1, 1998 and 12,583,789 on
January 31, 1998 issued and
outstanding 201,234 199,351
Unearned compensation - restricted stock, net (2,539) (1,225)
Retained earnings (52,813) (52,615)
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Total shareholders' equity 145,882 145,511
-------- --------
Total liabilities and shareholders' equity $440,104 $371,365
======== ========
</TABLE>
See notes to condensed consolidated 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
August 1, 1998 August 2, 1997
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<S> <C> <C>
Revenues:
Net sales $ 125,464 $ 122,112
Financing 6,177 6,493
----------- ---------
Total revenues 131,641 128,605
Costs & expenses:
Cost of goods sold, occupancy, and buying expenses 91,002 88,887
Selling, general, administrative, and other expenses 35,585 35,634
Provision for doubtful accounts 1,112 1,133
Interest expense 2,980 1,587
Other expense - 853
Acquisition & integration expense 570 -
----------- ---------
Total costs & expenses 131,249 128,094
Income before reorganization items and income tax expense 392 511
Reorganization items - 2,846
----------- ---------
Income (loss) before income tax expense 392 (2,335)
Income tax expense 153 -
----------- ---------
Net income(loss) $ 239 $ (2,335)
=========== =========
Basic net income (loss) per common share $ 0.02 $ (18.83)
Basic weighted average number of shares outstanding 12,504,857 124,036
Diluted net income (loss) per common share $ 0.02 $ (18.83)
Diluted weighted average number of shares outstanding 13,451,388 124,036
</TABLE>
See notes to condensed consolidated 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>
26 weeks ended 26 weeks ended
August 1, 1998 August 2, 1997
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<S> <C> <C>
Revenues:
Net sales $ 252,188 $241,933
Financing 12,675 13,227
----------- --------
Total revenues 264,863 255,160
Costs & expenses:
Cost of goods sold, occupancy, and buying expenses 182,829 175,564
Selling, general, administrative, and other expenses 73,309 73,114
Provision for doubtful accounts 2,689 2,213
Interest expense 5,784 3,055
Other expense - 609
Acquisition & integration expense 570 -
----------- --------
Total costs & expenses 265,181 254,555
Income (loss) before reorganization items and income tax
benefit (318) 605
Reorganization items - 6,209
----------- --------
Loss before income tax benefit (318) (5,604)
Income tax benefit (121) -
----------- --------
Net loss $ (197) $ (5,604)
=========== ========
Basic and diluted net loss per common share $ (0.02) $ (45.18)
Basic weighted average number of shares outstanding 12,500,927 124,036
</TABLE>
See notes to condensed consolidated financial statements.
3
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THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 weeks ended 26 weeks ended
August 1, 1998 August 2, 1997
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (197) $(5,604)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 6,426 5,998
Changes in operating assets and liabilities, net (10,420) 343
-------- -------
Net cash provided by (used in) operating activities (4,191) 737
Cash flows from investing activities:
Capital expenditures, net (3,885) (6,032)
Business acquisition, net of cash purchased (20,179) -
Real estate acquired (2,814) -
Proceeds from the sale of fixed assets 114 -
-------- -------
Net cash used in investing activities (26,764) (6,032)
Cash flows from financing activities:
Net borrowings (payments) under debtor-in-possession
agreement - 5,346
Net borrowings (payments) under asset securitization
agreement (15,977) -
Net borrowings (payments) under revolving lines of credit 66,420 -
Payments on long-term obligations (741) (136)
Retirement of assumed debt (17,582) -
Other (539) (125)
-------- -------
Net cash provided by financing activities 31,581 5,085
-------- -------
Increase (decrease) in cash and equivalents 626 (210)
Cash and equivalents - beginning of period 6,497 7,091
-------- -------
Cash and equivalents - end of period $ 7,123 $ 6,881
======== =======
Supplemental cash flow information:
Interest paid 5,527 3,104
Income taxes paid 192 183
</TABLE>
See notes to condensed consolidated financial statements.
4
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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 August 2, 1997 and the 26 weeks ended August 2, 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 August 2, 1997 and the 26 weeks ended August 2, 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
Basic income (loss) per common share is computed by dividing net income
(loss) by the weighted-average number of common shares outstanding. Stock
options, restricted shares, deferred shares, and warrants outstanding
represent potential common shares and are included in computing diluted
income per share when the effect would be dilutive.
3. Stock-Based Compensation
During the second quarter of 1998, a total of 7,500 stock options with an
exercise price of $24.375 per share were granted to designated employees
under the Company's Equity and Performance Incentive Plan. These options
granted have a maximum term of ten years and vest over a period of five
years.
Also during the second quarter of 1998, 6,371 shares of restricted stock
were awarded under the Annual Incentive Plan. These shares have a vesting
date of January 31, 2001. The fair value of the restricted shares awarded
is $93 and is being amortized over the vesting period. In addition, 25,488
deferred shares were awarded under the same program and have a vesting date
of January 31, 2001.
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 second
quarter of 1998, a total of 2,055 stock options, with an exercise price of
$21.00, were granted under this plan. These options vest on January 31,
1999.
4. Subsequent Events
In August 1998 the Company issued 3,220,000 shares of additional common
stock. A net amount of $66.2 million, before expenses, was raised from the
offering.
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5. Acquisition
On July 27, 1998, the Company acquired Stone & Thomas for a purchase price
of approximately $20.2 million in cash, subject to post-closing
adjustments. Stone & Thomas operated 20 department stores located in West
Virginia, Ohio, Kentucky, and Virginia under the name Stone & Thomas. This
transaction will be accounted for as a purchase.
Pro forma summary of operations data (unaudited)
The unaudited pro forma summary of operations data for each of the
13-week periods and 26-week periods ending August 1, 1998 and August 2,
1997, have been prepared by combining the condensed consolidated
statement of operations of The Elder-Beerman Stores Corp. with the
consolidated statement of operations of Stone & Thomas for the same
periods. To comply with disclosures required by generally accepted
accounting principles related to acquisitions, the following unaudited
pro forma financial information is presented as though the acquisition
occurred at the beginning of 1997. The expected synergy of this
acquisition after integration with existing businesses, including the
disposition of stores, is not permitted to be reflected in the pro
forma results. Therefore, pro forma results are not indicative of
results of operations in the future or in the periods presented below.
Included in the pro forma is the estimated purchase price allocation
and the issuance of additional common shares. The net proceeds of the
additional common shares were used in part to purchase Stone & Thomas.
13 weeks ended
August 1, 1998 August 2, 1997
-------------- --------------
Net sales $147,475 $149,851
Net loss $ (4,598) $ (5,036)
Basic and diluted net loss
per common share $ (0.29) $ (1.51)
26 weeks ended
August 1, 1998 August 2, 1997
-------------- --------------
Net sales $295,622 $296,862
Net loss $ (8,256) $(11,302)
Basic and diluted net loss
per common share $ (0.53) $ (3.38)
The above pro forma reflects the operation of all 20 Stone & Thomas
stores. The Company has closed two stores and is currently in the
process of selling eight locations. The pro forma net sales using
only the 10 continuing Stone & Thomas stores are as follows:
August 1, 1998 August 2, 1997
-------------- --------------
13 weeks ended $140,612 $141,730
26 weeks ended $282,567 $281,100
6. 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.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This Quarterly Report on Form 10-Q contains certain forward-looking
statements that are based on management's current beliefs, estimates and
assumption concerning the operations, future results and prospects of
Elder-Beerman and the retail industry in general. All statements that address
operating performance, events or developments that management anticipates will
occur in the future, including statements related to future sales, profits,
expenses, income and earnings per share, future finance and capital market
activity, or statements expressing general optimism about future results, are
foward-looking statements. In addition, words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates," variations of such words and
similar expressions are intended to identify forward-looking statements.
The statements described in the preceding paragraph constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 (the "Securities Act"). Because these statements are based on a
number of beliefs, estimates and assumptions that could cause actual results to
materially differ from those in the forward-looking statements, there is no
assurance that forward-looking statements will prove to be accurate.
Any number of factors could affect future operations and results, including
the following: increasing price and product competition; fluctuations in
consumer demand and confidence; the availability and mix of inventory;
fluctuations in costs and expenses; the effectiveness of advertising, marketing
and promotional programs; weather conditions that affect consumer traffic in
stores; the continued availability and terms of financing; the outcome of
pending and future litigation; and general economic conditions, such as the rate
of employment, inflation and interest rates and the condition of the capital
market. This list of factors is not exclusive.
Forward-looking statements are subject to the safe harbors created in the
Securities Act. Elder-Beerman undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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 August 1, 1998 ("Second
Quarter 1998") and August 2, 1997 ("Second Quarter 1997"), and the 26-week
periods ended August 1, 1998 ("First Half 1998") and August 2, 1997 ("First Half
1997"). The Company's fiscal year ends on the Saturday closest to January 31st.
The discussion and analysis that follow 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
Second Quarter 1998 Compared to Second Quarter 1997
Net sales for the Second Quarter 1998 increased by 2.8% to $125.5 million
from $122.1 million for the Second Quarter 1997. The increase is due to a 6.0%
comparable store sales increase for the department store division, and a 6.4%
comparable store sales increase for the Bee-Gee Shoe division. The department
store comparable sales results include the Dayton flagship store relocated from
the Southtown shopping center to the Dayton Mall in July 1998. Men's and ladies
sportswear, intimate apparel, furniture, and domestics led the sales increase
for the department stores.
Financing revenue from the Company's private label credit card for the
Second Quarter 1998 decreased to $6.2 million from $6.5 million for the
Second Quarter 1997. The decline in finance charges is due to a reduction in
outstanding customer accounts receivable and has been partially offset by an
increase in late fees charged.
Cost of goods sold, occupancy, and buying expenses decreased to 72.5% of
net sales for the Second Quarter 1998 from 72.8% of net sales for the Second
Quarter 1997. This decrease is primarily due to improved gross margin
performance, which was partially offset by 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 expenses decreased to 28.4% of net
sales for the Second Quarter 1998 from 29.2% for the Second Quarter 1997. This
was due to an improvement in store selling and customer service expenditures,
modifications to fringe benefit plans, and the leveraging of several semi-fixed
costs, most notably service and operations, utilities, and advertising.
Additionally, last year's expense reflected a reduction due to an Internal
Revenue Service settlement.
Provision for doubtful accounts was 0.9% of net sales for the Second
Quarter 1998, unchanged from the Second Quarter 1997.
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Interest expense increased to $3.0 million for the Second Quarter 1998 from
$1.6 million for the Second Quarter 1997. The increase is due to the financing
required to support the payment of bankruptcy obligations in connection with the
consummation of the Company's chapter 11 plan of reorganization.
There was no other expense for the Second Quarter 1998 compared to an
expense of $0.9 for the Second Quarter 1997. The expense last year was realized
from a swap mark-to-market adjustment on the unhedged portion of swap agreements
in place at that time.
On July 27, 1998 the Company acquired Stone & Thomas, a West Virginia
corporation ("Stone & Thomas"), a department store retailer based in Wheeling,
West Virginia. The acquisition and integration expense of $0.6 million are
non-recurring expenses incurred at the end of the Second Quarter 1998, and
relate to interim financing for the purchase transaction.
Reorganization costs were zero for the Second Quarter 1998 versus $2.8
million for the Second Quarter 1997 because of the Company's emergence from
bankruptcy protection in December 1997.
An income tax expense was recorded in the Second Quarter 1998 at the rate
of 39.0%. An income tax benefit was not recorded in the Second Quarter 1997
because the Company remained under bankruptcy protection.
FIRST HALF 1998 COMPARED TO FIRST HALF 1997
Net sales for the First Half 1998 increased by 4.2% to $252.2 million from
$241.9 million for the First Half 1997. The increase is due to an 8.3%
comparable store sales increase for the department store division, and a 4.6%
comparable store sales increase for the Bee-Gee Shoe division. The department
store comparable sales results include the relocated Dayton flagship store.
Women's sportswear, men's clothing and men's sportswear, furniture, and intimate
apparel led the sales increase for the department stores.
Financing revenue from the Company's private label credit card for the
First Half 1998 decreased to $12.7 million from $13.2 million for the First
Half 1997. The decline in finance charges is due to a reduction in outstanding
customer accounts receivable and has been partially offset by an increase in
late fees charged.
Cost of goods sold, occupancy, and buying expenses decreased to 72.5% of
net sales for the First Half 1998 from 72.6% of net sales for the First Half
1997. This decrease is primarily due to improved gross margin performance in the
second quarter, which was partially offset by 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 expenses decreased to 29.1% of net
sales for the First Half 1998 from 30.2% for the First Half 1997. This was due
to an improvement in store selling and customer service expenditures,
modifications to fringe benefit plans, and the leveraging of several semi-fixed
costs, most notably service and operations, utilities, and advertising.
Additionally, last year's expense reflected a reduction due to an Internal
Revenue Service settlement.
Provision for doubtful accounts increased to 1.1% of net sales for the
First Half 1998 from 0.9% for the First Half 1997. The increase is primarily due
to the level of delinquent accounts and receivable charge-offs in previous
months.
Interest expense increased to $5.8 million for the First Half 1998 from
$3.1 million for the First Half 1997. The increase is due to the financing
required to support the payment of bankruptcy obligations in connection with the
consummation of the Company's chapter 11 plan of reorganization.
There was no other expense for the First Half 1998 compared to an expense
of $0.6 for the First Half 1997. The expense last year 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 Half 1998 versus $6.2 million
for the First Half 1997 because of the Company's emergence from bankruptcy
protection in December of 1997.
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An income tax benefit was recorded in the First Half 1998 at the rate of
38.0%. An income tax benefit was not recorded in the First Half 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 $4.2 million for the First Half
1998, compared to $0.7 million being provided in the First Half 1997. During the
First Half 1998 approximately $10.6 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 $5.4
million reduction in pre-tax loss.
Net cash used in investing activities was $26.8 million for the First Half
1998, compared to $6.0 million for the First Half 1997. The Stone & Thomas
acquisition on July 27, 1998 required an investment of $20.2 million, net of
cash purchased. The Company also purchased for $2.8 million the department store
building that housed the Southtown shopping center store. This location was
relocated to the Dayton Mall, and the Southtown location has been placed for
sale, with an anticipated sale closing occurring in Fiscal 1998. Capital
expenditures for store maintenance, remodeling, and data processing totaled $3.9
million for the First Half 1998 compared to $6.0 million for the First Half
1997.
For the First Half 1998, net cash provided by financing activities was
$31.6 million compared to $5.1 for the First Half 1997. This increase is
primarily due to the acquisition of Stone & Thomas.
In August 1998 the Company issued 3,220,000 shares of additional common
stock. A net amount of $66.2 million, before expenses, was raised from the
offering.
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.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) In connection with the Company's public offering of its
Common Stock, without par value (the "Offering"), the Company
filed a Registration Statement on Form S-1 (File No. 333-57447)
whereby the Company registered shares of its common stock. The
Registration Statement was declared effective by the Securities
and Exchange Commission on July 30, 1998 (the "Effective
Date"). The Offering commenced on July 31, 1998 and was
terminated on August 12, 1998. All of the shares registered in
connection with the Offering have been sold. The managing
underwriters for the Offering were McDonald & Company
Securities, Inc., Warburg Dillon Read LLC and Johnson Rice &
Company L.L.C.
In connection with the Offering the Company issued 3,220,000
shares (including the exercise of the underwriters
over-allotment option) of its common stock to the public at a
price of $22.00 per share. The Company received net proceeds
from the Offering of $65,235,400 after deducting estimated
expenses of $1,000,000. Since the Effective Date, the Company
has repaid approximately $65,235,400 of indebtedness incurred
under the Credit Facilities. Approximately $21.0 million of
the indebtedness incurred under the Credit Facilities was in
connection with the acquisition of Stone & Thomas and the
remainder was incurred to fund the Company's obligations under
the Plan and for general corporate purposes.
The Credit Facilities contain a number of covenants, including,
among others, covenants restricting the Company with respect to
the incurrence of additional indebtedness, capital expenditures,
the ability to declare, pay or make dividends, distributions or
other restricted payments, the creation of liens, the making of
certain investments and loans, the consummation of certain
transactions such as sales of substantial assets, mergers or
consolidations and other transactions. The Company is also
required to comply with certain financial tests and maintain
certain financial ratios. Management believes that the Company
will be able to comply with the covenants contained in the
Credit Facilities and does not believe that compliance with
these covenants will interfere with its business or the
implementation of its growth strategy.
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(a) 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)
2(b) Agreement and Plan of Merger by and Among The Elder-Beerman
Stores Corp., The Elder-Beerman Acquisition Corp. and Stone &
Thomas dated June 18, 1998 (previously filed as Exhibit 2(b)
to the Company's Registration Statement on Form S-1 (File
No. 333-57447) (the "Form S-1") and incorporated herein by
reference)
2(c) First Amendment to Agreement and Plan of Merger By and Among
The Elder-Beerman Stores Corp., The Elder-Beerman
Acquisition Corp. and Stone & Thomas dated July 27, 1998
(previously filed as Exhibit 2(c) to the Company's Form S-1
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)
10
<PAGE> 13
10(a) Amended and Restated Credit Agreement Among The Elder-Beerman
Stores Corp., The Lenders Party Thereto, Citibank, N.A. and
CitiCorp USA, Inc., dated as of July 27, 1998 (previously
filed as exhibit 10(b)(i) to the Company's Form S-1 and
incorporated herein by reference)
10(b) Amended and Restated Security Agreement Made By The
Elder-Beerman Stores Corp., The El-Bee Chargit Corp., The
Bee-Gee Shoe Corp. in Favor of CitiCorp USA, Inc., dated July
27, 1998 (previously filed as exhibit 10(b)(iv) to the
Company's Form S-1 and incorporated herein by reference)
10(c) Subsidiary Guaranty Made by Elder-Beerman West Virginia,
Inc., dated July 27, 1998 (previously filed as exhibit
10(b)(vii) to the Company's Form S-1 and incorporated herein
by reference)
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the period.
11
<PAGE> 14
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.
THE ELDER-BEERMAN STORES CORP.,
an Ohio corporation
Dated: September 15, 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)
12
<PAGE> 15
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
2(a) 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)
2(b) Agreement and Plan of Merger by and Among The Elder-Beerman
Stores Corp., The Elder-Beerman Acquisition Corp. and Stone &
Thomas dated June 18, 1998 (previously filed as Exhibit 2(b) to
the Company's Registration Statement on Form S-1 (File No.
333-57447) (the "Form S-1") and incorporated herein by
reference)
2(c) First Amendment to Agreement and Plan of Merger By and Among The
Elder-Beerman Stores Corp., The Elder-Beerman Acquisition Corp.
and Stone & Thomas dated July 27, 1998 (previously filed as
Exhibit 2(c) to the Company's Form S-1 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)
10(a) Amended and Restated Credit Agreement Among The Elder-Beerman
Stores Corp., The Lenders Party Thereto, Citibank, N.A. and
CitiCorp USA, Inc., dated as of July 27, 1998 (previously filed
as exhibit 10(b)(i) to the Company's Form S-1 and incorporated
herein by reference)
10(b) Amended and Restated Security Agreement Made By The
Elder-Beerman Stores Corp., The El-Bee Chargit Corp., The
Bee-Gee Shoe Corp. in Favor of CitiCorp USA, Inc., dated July
27, 1998 (previously filed as exhibit 10(b)(iv) to the Company's
Form S-1 and incorporated herein by reference)
10(c) Subsidiary Guaranty Made by Elder-Beerman West Virginia, Inc.,
dated July 27, 1998 (previously filed as exhibit 10(b)(vii) to
the Company's Form S-1 and incorporated herein by reference)
27 Financial Data Schedule
13
<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 PERIOD
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-31-1998
<PERIOD-START> JAN-31-1998
<PERIOD-END> AUG-01-1998
<CASH> 7,123
<SECURITIES> 0
<RECEIVABLES> 119,675
<ALLOWANCES> 3,447
<INVENTORY> 192,534
<CURRENT-ASSETS> 337,688
<PP&E> 80,446
<DEPRECIATION> 0
<TOTAL-ASSETS> 440,104
<CURRENT-LIABILITIES> 92,080
<BONDS> 191,726
0
0
<COMMON> 201,234
<OTHER-SE> (55,352)
<TOTAL-LIABILITY-AND-EQUITY> 440,104
<SALES> 252,188
<TOTAL-REVENUES> 264,863
<CGS> 182,829
<TOTAL-COSTS> 182,829
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,689
<INTEREST-EXPENSE> 5,784
<INCOME-PRETAX> (328)
<INCOME-TAX> (121)
<INCOME-CONTINUING> (197)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (197)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
<FN>
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.
</TABLE>
