<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 30, 1995
FAY'S INCORPORATED
(Exact name of registrant as specified in its charter)
0-5179
(Commission File Number)
State of New York 16-0919350
(State of Incorporation) (I.R.S. Employer
Identification No.)
7245 HENRY CLAY BOULEVARD, LIVERPOOL, NEW YORK 13088
(Address of principal executive offices)
Registrant's telephone number, including area code: (315) 451-8000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 20, 1995, the Registrant and its wholly owned subsidiary, Wheels
Discount Auto Supply, Inc., entered into a definitive agreement ("Asset Purchase
Agreement" or the "Agreement") to sell the inventory and store assets used in
the operation of its Wheels Discount Auto Supply Division ("Wheels" or "Wheels
Division") to Western Auto Supply Company ("Western Auto"), a wholly owned
subsidiary of Sears Roebuck and Co.. The Wheels Division consisted of 81
discount automotive parts and supply stores operating in New York and in
Pennsylvania. The transfer of assets of the Wheels Division to Western Auto was
completed on November 30, 1995 (the "Closing Date").
The purchase price for Wheels' inventory and stores assets is an amount equal
to the book value of such inventory and store assets on the Closing Date plus
$4,500,000. Except as specifically provided for in the Asset Purchase
Agreement, Registrant will retain the liabilities of Wheels arising from the
operations, activities and transactions through the Closing Date. On the
Closing Date, Western Auto remitted to Registrant an estimated purchase price of
$36,965,165 less $2,000,000 placed in escrow pending final determination of the
closing purchase price. In addition, on the Closing Date Western Auto retained
$700,000 pending delivery of landlord consents to the assignment of 14 leases
($50,000 per consent) not delivered as of the Closing Date.
The closing purchase price will be determined after completion of an audit of
Wheels' Closing Date balance sheet. Calculation of the closing purchase price
based on the audited closing balance sheet is subject to binding arbitration in
the event Western Auto disagrees with such calculation in an amount exceeding
$150,000.
Under the terms of the Agreement, Registrant made various representations and
warranties and has agreed to indemnify Western Auto for any breaches thereof.
No indemnification shall be made in favor of Western Auto unless all claims for
such indemnification exceed in the aggregate $350,000. Registrant's maximum
indemnification obligation for such losses is $17,500,000.
On the Closing Date, Registrant also entered into various agreements with
Western Auto pursuant to the Asset Purchase Agreement including: (a) subleases
for two (2) leases under which Registrant continues to conduct retail
operations; (b) assignment of four (4) leases for stores not being operated by
Wheels; and, (c) an agreement whereby Registrant will provide certain
transitional distribution and office services to Western Auto.
There are no material relationships between the Registrant or any of its
affliates, officers, directors or any associate of such director or officer and
Western Auto or any of its affiliates, directors or offficers or any associates
of such directors or officers.
2
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Not applicable
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial statements
are filed with this report.
Pro Forma Condensed Consolidated Balance
Sheet at October 28, 1995 ........................................ Page F-1
Pro Forma Condensed Consolidated Statements of Net Earnings:
Year Ended January 28, 1995 .................................... Page F-2
Thirty-Nine Weeks Ended October 28, 1995 ....................... Page F-3
The Pro Forma Condensed Consolidated Balance Sheet of Registrant at October
28, 1995 reflects the financial position of Registrant after giving effect to
the disposition of the assets and assumption of liabilities discussed in Item 2
and assumes that the disposition took place on October 28, 1995. The Pro Forma
Condensed Consolidated Statements of Net Earnings for the fiscal year ended
January 28, 1995 and the thirty-nine weeks ended October 28, 1995 assume that
the disposition occurred on January 30, 1994, and are based on the operations of
Registrant for the year ended January 28, 1995 and the thirty-nine weeks ended
October 28, 1995. These statements are based on preliminary analyses and
estimates, and are subject to further adjustment including adjustments in the
assumed purchase price as detailed in Item 2.
The unaudited pro forma condensed consolidated financial statements have been
prepared by Registrant based upon assumptions deemed proper by it. The unaudited
pro forma condensed consolidated financial statements presented herein are shown
for illustrative purposes only and are not necessarily indicative of the future
financial position or future results of operations of Registrant, or of the
financial position or results of operations of Registrant that would have
actually occurred had the transaction been in effect as of the date or for the
periods presented.
The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the historical financial statements and related notes
of Registrant.
(c) Exhibits
2. Asset Purchase Agreement by and among Wheels Discount Auto Supply, Inc.,
Fay's Incorporated and Western Auto Supply Company dated October 20, 1995.
3
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FAY'S INCORPORATED
------------------
(Registrant)
/s/ James F. Poole, Jr.
-----------------------
James F. Poole, Jr.
Senior Vice President-Finance
and Chief Financial Officer
Dated: December 15, 1995
4
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FAY'S INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
Historical WDA (a) Other Pro Forma
---------- ------- ------ ---------
<S> <C> <C> <C> <C>
Current Assets:
Cash $ 1,625 $ 81 $ 39,568 (b) $ 41,112
Accounts receivable 34,267 383 133 (c) 34,017
Merchandise inventories 184,973 22,750 162,223
Prepaid expenses 6,928 871 245 (c) 6,302
Refundable income taxes 1,424 - - 1,424
------- ------ ------ -------
Total Current Assets 229,217 24,085 39,946 245,078
Deferred Income Taxes 1,572 1,572
Property and Equipment, net 72,179 11,510 2,200 (d) 62,869
Intangible and Other Assets, net 31,130 4,211 - 26,919
------- ------ ------ -------
Total Assets $ 334,098 $ 39,806 $ 42,146 $ 336,438
======= ====== ====== =======
Current Liabilities:
Notes payable, bank $ 14,855 $ $ $ 14,855
Accounts payable, trade 86,811 9,210 9,210 (e) 86,811
Accrued payroll and related taxes 7,729 321 896 (e) 8,304
Other current liabilities 21,282 2,717 2,200 (e) 20,765
Federal and state income taxes payable - 119 (e) 119
Current portion of long-term debt and
obligation under leases 10,147 - - 10,147
------- ------ ------ -------
Total Current Liabilities 140,824 12,248 12,425 141,001
Long-Term Debt 74,127 74,127
Obligation Under Leases 1,282 1,282
Deferred Gain and Other Liabilities 3,236 2,000 (e) 5,236
Accrued Postretirement Benefit
Obligation 7,394 7,394
Total Stockholders' Equity 107,235 27,558 27,721 107,398
------- ------ ------ -------
$ 334,098 $ 39,806 $ 42,146 $ 336,438
======= ====== ====== =======
</TABLE>
- --------------------
(a) To eliminate the assets and liabilities included in the balance sheet of
the Company's Wheels Discount Auto Supply Division ("WDA") as of October
28, 1995.
(b) To reflect the proceeds from the sale of WDA based on the net book value of
assets as of October 28, 1995. The actual purchase price will be based on
the net book value of assets at November 30, 1995 and accordingly amounts
presented here may not be indicative of the actual proceeds to be realized.
(c) To reflect accounts receivable and prepaid expenses retained by the
Company.
(d) To reflect fixed assets retained by the Company for sale net of adjustments
to reduce carrying value of such assets to estimated net realizable value.
(e) To reflect liabilities retained by the Company, transaction costs, and the
accrual of costs associated with a lease commitment on a vacant
distribution facility retained by the Company.
F-1
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FAY'S INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
FOR THE YEAR ENDED JANUARY 28, 1995
(Unaudited)
(in thousands of dollars except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
Historical WDA (a) Other Pro Forma
---------- ------- ------- ---------
<S> <C> <C> <C> <C>
Net sales $ 1,038,110 $ 64,142 $ $ 973,968
Costs and Expenses:
- -------------------
Cost of merchandise sold 735,324 36,924 698,400
Selling, general and administrative 255,976 23,538 175 (b) 232,613
Depreciation and amortization 16,264 1,633 14,631
Interest expense, net 8,493 1,064 (1,125) (c) 6,304
--------- ------ ------ -------
Total cost and expenses 1,016,057 63,159 (950) 951,948
--------- ------ ------ -------
Earnings before income taxes 22,053 983 950 22,020
Provision for income taxes 9,417 414 406 9,409
--------- ------ ------ -------
Net earnings $ 12,636 $ 569 $ 544 $ 12,611
========= ====== ====== =======
Average shares outstanding including
common stock equivalents 20,357 20,357
Earnings per share $ .62 $ .62
========= =======
</TABLE>
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(a) To eliminate the profit of WDA for the entire period.
(b) To reflect costs that would not have been eliminated due to the sale of
WDA.
(c) To reflect estimated reduction in interest cost.
F-2
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FAY'S INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 28, 1995
(Unaudited)
(in thousands of dollars except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
Historical WDA (a) Other Pro Forma
---------- ------- ------ ---------
<S> <C> <C> <C> <C>
Net sales $ 808,927 $ 64,111 $ $ 744,816
Costs and Expenses:
- -------------------
Cost of merchandise sold 580,726 37,904 542,822
Selling, general and administrative 203,524 23,943 130 (b) 179,711
Depreciation and amortization 12,884 1,392 11,492
Interest expense, net 6,676 1,009 (927) (c) 4,740
------- ------ ---- -------
Total cost and expenses 803,810 64,248 (797) 738,765
------- ------ ---- -------
Earnings before income taxes 5,117 (137) 797 6,051
Provision for income taxes 2,152 (53) 335 2,540
------- ------ ---- -------
Net earnings $ 2,965 $ (84) $ 462 $ 3,511
======= ====== ==== =======
Average shares outstanding including
common stock equivalents 20,830 20,830
Earnings per share $ .14 $ .17
======= =======
</TABLE>
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(a) To eliminate the profit of WDA for the entire period.
(b) To reflect costs that would not have been eliminated due to the sale of
WDA.
(c) To reflect estimated reduction in interest cost.
F-3
