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FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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 3, 1996
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 33-68258
STAGE STORES, INC.
(FORMERLY APPAREL RETAILERS, INC.)
(Exact name of registrant as specified in its charter)
DELAWARE 76-0407711
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10201 MAIN STREET, HOUSTON, TEXAS 77025
(Address of principal executive offices) (Zip Code)
(713) 667-5601
Registrant's telephone number, including area code
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 [ ]
The number of shares of common stock outstanding as of September 12, 1996 was
11,749,121 shares of Common Stock and 1,468,750 shares of Class B Common Stock.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Stage Stores, Inc.
(formerly Apparel Retailers, Inc.)
Consolidated Condensed Balance Sheet
(in thousands, except par value and number of shares)
<TABLE>
<CAPTION>
August 3, February 3,
1996 1996
--------- ---------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents ........................................................ $ 18,940 $ 20,273
Accounts receivable .............................................................. 64,684 65,740
Merchandise inventories .......................................................... 167,769 150,032
Prepaid expenses and other current assets ........................................ 29,826 24,457
--------- ---------
Total current assets ....................................................... 281,219 260,502
Property, equipment and leasehold improvements, net .............................. 106,464 93,118
Goodwill, net .................................................................... 46,577 30,876
Other assets ..................................................................... 28,980 27,837
--------- ---------
$ 463,240 $ 412,333
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable ................................................................. $ 44,336 $ 41,494
Accrued interest ................................................................. 13,009 12,327
Accrued expenses and other current liabilities ................................... 37,067 33,197
Accrued taxes, other than income taxes ........................................... 5,689 3,376
--------- ---------
Total current liabilities .................................................. 100,101 90,394
Long-term debt ................................................................... 373,362 335,839
Related party debt ............................................................... 44,200 44,200
Other long-term liabilities ...................................................... 14,005 14,214
--------- ---------
Total liabilities .......................................................... 531,668 484,647
Preferred stock, par value $1.00, non-voting,
2,500 shares authorized, no shares
issued or outstanding .......................................................... -- --
Common stock, par value $0.01, 15,000,000 shares
authorized, 11,748,686 and 11,470,902 shares
issued and outstanding, respectively ........................................... 117 115
Class B common stock, par value $0.01, non-voting,
1,500,000 shares authorized, 1,468,750 shares
issued and outstanding ......................................................... 15 15
Additional paid-in capital ....................................................... 4,157 3,793
Accumulated deficit .............................................................. (72,717) (76,237)
--------- ---------
Stockholders' deficit ......................................................... (68,428) (72,314)
--------- ---------
Commitments and contingencies .................................................... -- --
--------- ---------
$ 463,240 $ 412,333
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
1
Stage Stores, Inc.
(formerly Apparel Retailers, Inc.)
Consolidated Condensed Statement of Income
(in thousands, except earnings per share)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------------- -----------------------------
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ............................................. $182,750 $154,578 $345,927 $296,931
Cost of sales and related buying,
occupancy and distribution expenses ................. 126,127 108,023 237,223 204,093
-------- -------- -------- --------
Gross profit .......................................... 56,623 46,555 108,704 92,838
Selling, general and
administrative expenses ............................. 45,457 37,061 84,335 70,877
Service charge income ................................. 2,989 2,441 5,902 5,124
Store opening and closure costs ....................... 230 861 301 1,176
-------- -------- -------- --------
Operating income ...................................... 13,925 11,074 29,970 25,909
-------- -------- -------- --------
Interest income ....................................... 116 111 242 271
-------- -------- -------- --------
Interest expense:
Related party ....................................... 1,118 1,117 2,235 2,154
Other ............................................... 10,902 9,315 21,030 18,550
Amortization of debt issue costs .................... 562 480 1,031 932
-------- -------- -------- --------
12,582 10,912 24,296 21,636
-------- -------- -------- --------
Income before income tax .............................. 1,459 273 5,916 4,544
Income tax expense .................................... 591 52 2,396 1,885
-------- -------- -------- --------
Net income ............................................ $ 868 $ 221 $ 3,520 $ 2,659
======== ======== ======== ========
EARNINGS PER COMMON SHARE DATA:
Earnings per common share ............................. $ 0.06 $ 0.02 $ 0.26 $ 0.20
======== ======== ======== ========
Weighted average common shares
outstanding ......................................... 13,631 13,419 13,500 13,409
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
2
Stage Stores, Inc.
(formerly Apparel Retailers, Inc.)
Consolidated Condensed Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
August 3, July 29,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................................................. $ 3,520 $ 2,659
-------- --------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization ......................................................... 6,844 5,721
Deferred income taxes ................................................................. (833) (490)
Accretion of discount ................................................................. 7,663 6,722
Amortization of debt issue costs ...................................................... 1,031 932
Issuance of long-term debt in lieu of interest payment ................................ -- 147
Changes in operating assets and liabilities:
Decrease in accounts receivable ..................................................... 5,299 10,809
Increase in merchandise inventories ................................................. (8,205) (28,696)
Increase in other assets ............................................................ (5,366) (8,169)
Increase in accounts receivable sold ................................................ 1,100 1,200
Decrease in accounts payable and accrued liabilities ................................ (4,946) (1,349)
-------- --------
Total adjustments ................................................................. 2,587 (13,173)
-------- --------
Net cash provided by (used in) operating activities ................................. 6,107 (10,514)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired ...................................................... (27,276) --
Additions to property, equipment and leasehold improvements ............................. (15,183) (16,786)
-------- --------
Net cash used in investing activities ............................................... (42,459) (16,786)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Revolving credit agreement ............................................................ 7,500 --
Long-term debt ........................................................................ 30,000 16,458
Common stock .......................................................................... 292 64
Payments on:
Long-term debt ........................................................................ (125) (115)
Redemption of common stock ............................................................ (16) --
Additions to debt issue costs ......................................................... (2,632) (734)
-------- --------
Net cash provided by financing activities ........................................... 35,019 15,673
-------- --------
Net decrease in cash and cash equivalents ........................................... (1,333) (11,627)
-------- --------
Cash and cash equivalents:
Beginning of period ................................................................... 20,273 28,593
-------- --------
End of period ......................................................................... $ 18,940 $ 16,966
======== ========
The accompanying notes are an integral part of this statement
3
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ........................................................................... $ 14,885 $ 13,894
======== ========
Income taxes paid ....................................................................... $ 8,617 $ 5,862
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased Uhlmans, Inc. for $27,276 in cash, including
acquisition expenses and net of cash acquired, on June 3, 1996. In
conjunction with this acquisition, liabilities were assumed as follows:
Fair value allocated to assets acquired ................................................. $ 34,295 $ --
Cash paid for assets acquired, including acquisition expenses ........................... (27,276) --
-------- --------
Liabilities assumed ..................................................................... $ 7,019 $ --
======== ========
</TABLE>
The accompanying notes are an integral part of this statement
4
Stage Stores, Inc.
(formerly Apparel Retailers, Inc.)
Consolidated Condensed Statement of Stockholders' Deficit
(in thousands, except numbers of shares)
(unaudited)
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------------
Class B
------------------------- Additional
Shares Shares Paid-in Accumulated
Outstanding Amount Outstanding Amount Capital Deficit Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 3, 1996 ... 11,470,902 $ 115 1,468,750 $ 15 $ 3,793 $ (76,237) $ (72,314)
Net income .................. -- -- -- -- -- 3,520 3,520
Vested compensatory stock
options ................... -- -- -- -- 90 -- 90
Issuance of stock ........... 280,994 2 -- -- 290 -- 292
Retirement of stock ......... (3,210) -- -- -- (16) -- (16)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, August 3, 1996 ..... 11,748,686 $ 117 1,468,750 $ 15 $ 4,157 $ (72,717) $ (68,428)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement
5
STAGE STORES, INC.
(FORMERLY APPAREL RETAILERS, INC.)
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated condensed financial
statements of Stage Stores, Inc. (formerly Apparel Retailers, Inc.) ("Stage
Stores"), have been prepared in accordance with Rule 10-01 of Regulation S-X and
do not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. Those adjustments,
which include only normal recurring adjustments, that are, in the opinion of
management, necessary for a fair presentation of the results of the interim
periods have been made. The results of operations for such interim periods are
not necessarily indicative of results of operations for a full year. The
unaudited consolidated condensed financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended February 3, 1996 filed with Stage Stores, Inc.'s Annual
Report on Form 10-K. Certain reclassifications have been made to prior year
amounts to conform with the current year presentation. The fiscal years
discussed herein end on the Saturday nearest to January 31, in the following
calendar year. For example, references to "1996" mean the fiscal year ended
February 1, 1997.
Stage Stores conducts its business exclusively through it's wholly owned
subsidiary Specialty Retailers, Inc. ("SRI"), which operated 308 family apparel
stores in the central United States as of August 3, 1996. Stage Stores has no
operations of its own and its primary asset is the common stock of SRI. Stage
Stores and SRI are collectively referred to herein as the "Company".
2. Pursuant to the accounts receivable securitization program
implemented in 1993 (the "Accounts Receivable Program"), an indirect wholly
owned subsidiary of the Company, SRI Receivables Purchase Co., Inc. ("SRPC")
purchases the accounts receivable generated by the Company's private label
credit card program. Such accounts receivable are transferred to a master trust
(the "Trust") which has issued certain certificates to third parties
representing undivided interests in the Trust. SRPC owns an undivided interest
in the accounts receivable not supporting the certificates issued to third
parties by the Trust (the "Retained Interest"). SRPC is a separate corporate
entity from the Company and SRPC's creditors have a claim on its assets prior to
those assets becoming available to any creditor of the Company.
3. On June 3, 1996, the Company completed its acquisition of Uhlmans
Inc. ("Uhlmans") for $27.3 million, including acquisition expenses and net of
cash acquired. Uhlmans, which operated 34 family apparel stores located in Ohio,
Michigan and Indiana, had sales of $59.7 million and net income of $0.6 million
for the year ended February 3, 1996.
The Company financed the acquisition of Uhlmans through the issuance of
$30.0 million in aggregate principal amount of 12.5% Trust Certificate-Backed
Notes Due 2000 (the "SRPC Notes"). Interest on the SRPC Notes is payable
semi-annually on June 15 and December 15 of each year, commencing December 15,
1996 from amounts otherwise received by SRPC from its Retained Interest.
Principal repayments are scheduled to begin on December 1, 1999.
4. During the first quarter of 1996, the Company adopted Statement of
Financial Accounting Standard No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"), and
Statement of Financial Accounting Standard No. 123, Accounting for Stock Based
Compensation ("SFAS 123"). Neither the adoption of SFAS 121 or SFAS 123 had a
material effect on the Company's financial position or its results of
operations. With the adoption of SFAS 123, the Company continues to measure
compensation plans using the intrinsic value method prescribed by APB Opinion
No. 25, Accounting for Stock Issued to Employees, and will provide pro forma
disclosures of net income and earnings per share as if the market value based
method prescribed by SFAS 123 had been applied in measuring compensation expense
in its annual financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
OVERVIEW. The Company operates the store of choice for well known
national brand name family apparel in over 200 small towns and communities
across the central United States. The Company has recognized the high level of
brand awareness and demand for fashionable, quality apparel by consumers in
small markets and has identified these markets as a profitable and underserved
niche. The Company has developed a unique franchise focused on these small
markets, differentiating itself from the competition by offering a broad range
of brand name merchandise with a high level of customer service in convenient
locations.
ACQUISITIONS. The Company acquired forty-five stores from Beall-Ladymon
in 1994 and subsequently reopened the stores in the first quarter of 1995 under
the Stage name. On June 3, 1996 the Company completed the acquisition of Uhlmans
for $27.3 million including acquisition expenses and net of cash acquired. For
the year ended February 3, 1996, Uhlmans had net sales of $59.7 million and net
income of $0.6 million. The Company has substantially completed the
consolidation of the Uhlmans general office functions, including accounting,
data processing, merchandising, personnel, sales promotion, credit and
distribution into similar functions provided by the Company. As a result of this
consolidation, the Company has eliminated approximately $4.0 million of
annualized Uhlmans historical overhead costs.
ACCOUNTS RECEIVABLE PROGRAM. Pursuant to the Accounts Receivable
Program, the Company sells, on a daily basis, substantially all of the accounts
receivable generated from purchases by the holders of the Company's proprietary
credit card to SRPC. SRPC is a separate limited-purpose subsidiary that is
operated in a manner intended to ensure that its assets and liabilities are
distinct from those of the Company and its other affiliates so that SRPC's
creditors have a claim on its assets prior to such assets becoming available to
any creditor of the Company. SRPC sells, on a daily basis, the accounts
receivable purchased from the Company to the Trust in exchange for cash or a
certificate representing an undivided interest in the Trust.
Service charge income includes the amount of service charge income
attributable to the Company's Retained Interest in the Trust. Additionally, the
Company's selling, general and administrative expenses are decreased or
increased by a gain or loss, respectively, on the sale of receivables to the
Trust. This gain or loss is calculated based upon actual and projected: (i) cash
receipts from the receivables sold to the Trust (primarily service charge
income) less (ii)(a) payments of returns to the holders of the Trust
Certificates (as defined below), and (b) credit expenses. Selling, general and
administrative expenses are also affected by adjustments to previously recorded
gains and losses.
The financial information, discussion and analysis that follow should be
read in conjunction with the Company's Consolidated Financial Statements
included in the Company's 1995 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Sales for the second quarter of 1996 increased 18.2% to $182.8 million
from $154.6 million in the comparable period of 1995. The increase in second
quarter sales was primarily due to an 11.7% increase in sales from stores opened
during 1996 and 1995 combined with a 7.2% increase in comparable store sales.
Sales for the first six months of 1996 increased 16.5% to $345.9 million from
$296.9 million in the comparable period of 1995. The increase in sales for the
six month period was primarily due to an 11.1% increase in sales from stores
opened during 1996 and 1995 combined with a 6.8% increase in comparable store
sales. The significant increase in comparable store sales was primarily
attributable to the strong performance of the Company's Bealls stores combined
with a one-week shift in the comparable calendar period due to the 53-week year
in 1995.
Fiscal 1995 was a 53 week year. As a result, the Company's quarterly
accounting periods for 1996 occur one week later than their 1995 counterparts.
Other factors being equal, this calendar shift, combined with the timing of the
Company's promotional events and holidays, has affected year-to-year comparable
store performance for 1996 favorably in the first and second quarters. Adjusting
for this shift in the fiscal calendar, comparable store sales for the three and
six months ended August 3, 1996 would have been 5.7% and 4.2%, respectively.
This calendar shift will negatively affect comparable store sales comparisons
for the third and the fourth quarters.
Gross profit increased 21.5% to $56.6 million for the second quarter of
1996, from $46.6 million in the comparable period of 1995. Gross profit margin
for the second quarter of 1996 increased to 31.0% compared to 30.1% for the
comparable period in 1995 due primarily to the application of fixed buying,
occupancy and distribution costs to a larger sales volume. Gross profit for the
first six months of 1996 increased 17.1% to $108.7 million from $92.8 million in
the comparable period of 1995. Gross profit margin for the first six months of
1996 increased to 31.4% from 31.3% for the comparable period in 1995.
Selling, general and administrative expenses as a percentage of sales
increased to 24.9% during the second quarter of 1996 from 24.0% in the
comparable period of 1995 due to an increase in bad debt expense associated with
the Company's proprietary credit card program as well as certain non-recurring
costs associated with the Company's expansion program. Bad debt expense as a
percent of sales increased to 2.1% for the second quarter of 1996 from 1.5% for
the comparable period in 1995. The increase in bad debt was the result of a
general rise in the level of personal bankruptcies in the Company's accounts
receivable portfolio as well as the Company's adoption of higher late fees
assessed on delinquent accounts intended to partially compensate for higher
collection costs on these accounts. Management believes that the incremental
revenues generated by the increased late fees, which are reported in service
charge income, more than offset the associated increase in bad debt expense. As
a result of the acquisition of Uhlmans, the Company incurred $0.4 million (0.2%
of sales) of duplicative costs during the three months ended August 3, 1996
related to the Uhlmans central office which has been eliminated as of August 31,
1996. Selling, general and administrative expenses as a percentage of sales for
the first six months of 1996 increased to 24.4% from 23.9% in the comparable
period of 1995 due to the above factors. Advertising expenses as a percentage of
sales remained unchanged at approximately 3.8% for the second quarter and first
six months of 1996 and 1995.
Service charge income for the second quarter of 1996 increased 25.0% to
$3.0 million from $2.4 million for the comparable period in 1995. Service charge
income for the first six months of 1996 increased 15.7% to $5.9 million from
$5.1 million for the comparable period in 1995. Service charge income increased
due to an increase in the average level of accounts receivable balances combined
with an increased yield on the accounts receivable portfolio. This increase
results primarily from an increase in late fees applied to delinquent accounts.
Operating income increased 25.7% and 15.7% for the second quarter and
first six months of 1996, respectively, as compared to comparable periods in
1995 due to the factors described above.
Interest expense for the second quarter of 1996 increased 15.6% to $12.6
million from $10.9 million for the comparable period in 1995. Interest expense
for the first six months of 1996 increased 12.5% to $24.3 million from $21.6
million for the comparable period in 1995. Interest expense increased due to the
issuance of (i) $30.0 million in aggregate principal amount of 12.5% SRPC Notes
during May 1996 and (ii) $18.3 million in aggregate principal amount of Senior
Subordinated Notes during August 1995 combined with an increase in the accretion
of discount on the Senior Discount Debentures.
As a result of the foregoing, the Company's net income for the second
quarter of 1996 increased to $0.9 million from $0.2 million for the comparable
period in 1995. The Company's net income for the first six months of 1996
increased by 29.6% to $3.5 million from $2.7 million for the comparable period
in 1995.
SEASONALITY AND INFLATION
The Company's business is seasonal and its quarterly sales and profits
are traditionally lower during the first three quarters (February through
October) and higher during the fourth quarter (November through January). In
addition, working capital requirements fluctuate throughout the year, increasing
substantially in October and November due to requirements for significantly
higher inventory levels in anticipation of the holiday season.
The following table show certain unaudited financial information for the
Company by quarter (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------------------------------
Q1 Q2 Q1 Q2 Q3 Q4
--------- -------- -------- -------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales............ $163,177 $182,750 $142,353 $154,578 $159,161 $226,532
Gross profit......... 52,081 56,623 46,283 46,555 48,659 72,780
Operating income..... 16,045 13,925 14,835 11,074 9,724 25,853
Quarters' operating
income as a
percent of total.... -- -- 24% 18% 16% 42%
Net income (loss).... $ 2,652 $ 868 $ 2,438 $ 221 $ (899) $ 8,970
</TABLE>
The Company does not believe that inflation had a material effect on its
results of operations during the past two years. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future.
LIQUIDITY AND CAPITAL RESOURCES
At August 3, 1996, the Company's consolidated long-term debt included
$130.0 million of Senior Notes, $116.6 million of Senior Subordinated Notes,
Senior Discount Debentures with an accreted value of $117.0 million, $30.0
million of SRPC Notes and certain other debt.
On June 3, 1996, the Company purchased Uhlmans for approximately $27.3
million, including acquisition costs and net of cash acquired. The Company,
through SRPC, issued $30.0 million in aggregate principal amount of SRPC Notes
during May 1996, the proceeds of which were used to fund the Uhlmans'
acquisition. The SRPC Notes are secured by the Company's Retained Interest.
Interest on the SRPC Notes is payable semi-annually on June 15 and December 15
of each year, commencing December 15, 1996. Amounts received by SRPC from its
Retained Interest are expected to provide a source of cash flows to pay the
interest on the SRPC Notes. The scheduled amortization of principal will
commence in December 1999 and is subject to the collection experience of the
receivables underlying the Trust Certificates at that time. The issuance of the
SRPC Notes does not impact the ability of the Company to issue additional
certificates under the Accounts Receivable Program to third-party investors.
Total working capital increased $11.0 million to $181.1 million at
August 3, 1996 from $170.1 million at February 3, 1996, due primarily to the
issuance of the SRPC Notes and the acquisition of Uhlmans.
The Company's primary capital requirements are for working capital, debt
service and capital expenditures. Based upon the current capital structure,
management anticipates interest payments to be approximately $5.5 million higher
than the 1995 level during 1996 and 1997 due to the issuance of the Series D
Senior Subordinated Notes and the SRPC Notes. Capital expenditures are generally
for new store openings, remodeling of existing stores and facilities and
customary store maintenance. Capital expenditures for the first six months of
1996 were $15.2 million as compared to $16.8 million for the comparable period
of 1995 as a result of fewer stores opened or acquired. Management expects
capital expenditures to be approximately $28.0 million during 1996 consisting
primarily of the opening of 35 stores, the conversion of most of the Uhlmans
stores to Stage stores, routine store maintenance, store remodels and
renovations at the corporate headquarters. Required aggregate principal payments
on debt total $2.4 million during 1996 and 1997.
The Company's short-term liquidity needs are provided by (i) existing
cash balances, (ii) operating cash flows, (iii) the Accounts Receivable Program
and (iv) the Revolving Credit Agreements (as defined below). The Company expects
to fund its long-term liquidity needs from its operating cash flows, the
issuance of debt and/or equity securities, the securitization of its accounts
receivable and bank borrowings.
The Company has a revolving credit agreement with a bank (the "Revolving
Credit Agreement") under which it may draw up to $25.0 million. Of this amount,
$15.0 million may be used to support letters of credit. As of August 3, 1996,
$14.5 million of the capacity under the Revolving Credit Agreement was utilized
of which $7.0 million of this amount was used to collateralize letters of
credit. The Company also has a separate agreement with the bank under which it
may borrow an additional $10.0 million for seasonal working capital needs (the
"Seasonal Credit Agreement" and together with the Revolving Credit Agreement,
the "Revolving Credit Agreements"). Funds are available under the Seasonal
Credit Agreement from August 15 through January 15 of each calendar year (the
"Seasonal Period"). The Revolving Credit Agreements are available through
February 3, 1998.
Since its inception, the Trust has issued $165.0 million of term
certificates and a $40.0 million revolving certificate (collectively, the "Trust
Certificates") to third parties representing undivided interests in the Trust.
The holder of the revolving certificate agreed to purchase interests in the
Trust equal to the amount of accounts receivable in the Trust above the level
required to support the term certificates (aggregating $200.1 million at August
3, 1996), up to a maximum of $40.0 million. As of August 3, 1996, the
outstanding balance under the revolving certificate was $1.1 million. The
Company's Retained Interest at August 3, 1996 was $55.8 million, which
represented 25.2% of total receivables outstanding in the Trust. The remaining
interest in the Trust is held by third-party investors. The Retained Interest is
effectively subordinated to the interests of such third-party investors, and is
pledged to secure the SRPC Notes. If receivable balances in the Trust fall below
the level required to support the term certificates and revolving certificates,
certain principal collections may be retained in the Trust until such time as
the accounts receivable balances exceed the amount of accounts receivable
required to support the Trust Certificates and any required transferor's
interest. SRPC receives distributions from the Trust of cash in excess of
amounts required to satisfy the Trust's obligations to third-party investors on
the Trust Certificates. Cash so received by SRPC may be used to purchase
additional accounts receivable from, or make distributions to, the Company after
SRPC has satisfied its obligations on the SRPC Notes. The Trust may issue
additional series of certificates from time to time on various terms. Terms of
any future series will be determined at the time of issuance.
Management believes that funds provided by operations, together with
funds available under the Credit Agreement, the Seasonal Credit Agreement and
the Accounts Receivable Program will be adequate to meet the Company's
anticipated requirements for working capital, interest payments, planned capital
expenditures and principal payments on debt. Estimates as to working capital
needs and other expenditures may be materially affected if the foregoing sources
are not available or do not otherwise provide sufficient funds to meet the
Company's obligations.
STAGE STORES, INC.
(FORMERLY APPAREL RETAILERS, INC.)
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
1. On June 5, 1996, a Consent in Lieu of Special Meeting of Stockholders
was mailed to certain of Stage Stores' stockholders requesting that they
approve a change in the name from Apparel Retailers, Inc. to Stage
Stores, Inc. On June 6, 1996, 7,543,706 shares of common stock were
voted in favor of the name change and no shares were voted against the
name change and no shares abstained. On June 7, 1996, a Notice of
Corporate Action by Written Consent was mailed to all other
stockholders, and on such date the name change by Written Consent in
Lieu of Special Meeting of Stockholders took effect in accordance with
Delaware General Corporation Law.
2. On June 27, 1996, in connection with the then proposed initial public
offering of common stock of Stage Stores, Stage Stores distributed to
holders of the Series B Senior Discount Debentures for their tender and
consents an Offer to Purchase and Consent Solicitation Statement
relating to the then proposed offer to purchase for cash all the
outstanding Series B Senior Discount Debentures and solicitation of
consents for the amendment of the indenture governing the Series B
Senior Discount Debentures (the "Offer to Purchase").
In addition, on June 27, 1996, in connection with the then proposed
initial public offering of Stage Stores, SRI distributed to holders of
the Series B Senior Notes, Series B Senior Subordinated Notes and Series
D Senior Subordinated Notes for their consent a Consent Solicitation
Statement relating to the then proposed consent solicitation to amend
the indentures governing each of the Series B Senior Notes, Series B
Senior Subordinated Notes and Series D Senior Subordinated Notes (the
"Consent Solicitation"). Each of the Offer to Purchase and the Consent
Solicitation were conditioned upon the completion of the then proposed
initial public offering.
On July 26, 1996, the Company decided to postpone the proposed initial
public offering of common stock of Stage Stores, and accordingly,
terminated the Offer to Purchase and Consent Solicitation.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
3.1 Certificate of Amendment to Certificate of Incorporation of
Apparel Retailers, Inc., as filed with the Delaware Secretary of
State on June 7, 1996.
REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K dated May 9, 1996 related
to the acquisition of Uhlmans Inc.
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.
STAGE STORES, INC.
(FORMERLY APPAREL RETAILERS, INC.)
SEPTEMBER 16, 1996 /s/ CARL E. TOOKER
(Date) Carl E. Tooker
President and
Chief Executive Officer
SEPTEMBER 16, 1996 /s/ JAMES A. MARCUM
(Date) James A. Marcum
Executive Vice President and
Chief Financial Officer
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
APPAREL RETAILERS, INC.
UNDER SECTIONS 228 AND 242 OF THE DELAWARE GENERAL CORPORATION LAW
The undersigned, being the Secretary and Treasurer of Apparel
Retailers, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
1. The name of the Corporation is Apparel Retailers, Inc.
2. The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of Delaware on June 17, 1993.
3. The Certificate of Incorporation of the Corporation is hereby
amended to effect a change in Article One thereof, relating to the name of the
Corporation. Accordingly, Article One thereof shall be amended in its entirety
by striking out Article One thereof and by substituting in lieu of said Article
the following new Article One:
"ARTICLE ONE
The name of the corporation is Stage Stores, Inc (the
"Corporation")."
4. The Board of Directors of the Corporation, pursuant to
Sections 141 and 242 of the General Corporation Law of the State of Delaware,
adopted resolutions authorizing the foregoing amendment.
5. The holders of a majority of the Corporation's issued and
outstanding common stock approved and adopted the Certificate of Amendment in
accordance with Sections 228 and 242 of the General Corporation Law of the State
of Delaware. Written notice of the adoption of the amendment of the Certificate
herein certified has been given to those stockholders who have not consented in
writing thereto, as provided in Section 228 of the General Corporation Law of
the State of Delaware.
* * * *
1
IN WITNESS WHEREOF, the undersigned, under penalties of perjury
does hereby declare and certify that this is the act and deed of the Corporation
and the facts stated herein are true, and accordingly has hereunto signed this
Certificate of Amendment to Certificate of Incorporation this 7th day of June,
1996.
By: /s/ JERRY IVIE
Jerry Ivie,
Secretary and Treasurer
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE STAGE STORES, INC. (FORMERLY APPAREL RETAILERS, INC.) CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> AUG-03-1996
<CASH> 18,940
<SECURITIES> 0
<RECEIVABLES> 64,684
<ALLOWANCES> 0
<INVENTORY> 167,769
<CURRENT-ASSETS> 281,219
<PP&E> 106,464
<DEPRECIATION> 0
<TOTAL-ASSETS> 463,240
<CURRENT-LIABILITIES> 100,101
<BONDS> 417,562
0
0
<COMMON> 132
<OTHER-SE> (72,717)
<TOTAL-LIABILITY-AND-EQUITY> 463,240
<SALES> 345,927
<TOTAL-REVENUES> 345,927
<CGS> 237,223
<TOTAL-COSTS> 84,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,296
<INCOME-PRETAX> 5,916
<INCOME-TAX> 2,396
<INCOME-CONTINUING> 3,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,520
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0
</TABLE>
