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FORM 10-Q
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 November 2, 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 000-21011
STAGE STORES, 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 December 9, 1996 was
21,927,261 shares of Common Stock and 1,351,967 shares of Class B Common Stock.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STAGE STORES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands, except par value and number of shares)
<TABLE>
<CAPTION>
2-Nov-96 3-Feb-96
--------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents .................................... $ 16,443 $ 20,273
Accounts receivable .......................................... 59,802 65,740
Merchandise inventories ...................................... 214,965 150,032
Prepaid expenses and other current assets .................... 26,119 24,457
--------- ---------
Total current assets ................................... 317,329 260,502
Property, equipment and leasehold improvements, net .......... 111,088 93,118
Goodwill, net ................................................ 47,141 30,876
Other assets ................................................. 26,128 27,837
--------- ---------
$ 501,686 $ 412,333
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ............................................. $ 72,186 $ 41,494
Accrued interest ............................................. 8,231 12,327
Accrued expenses and other current liabilities ............... 14,181 33,197
Accrued taxes, other than income taxes ....................... 6,631 3,376
--------- ---------
Total current liabilities .............................. 101,229 90,394
Long-term debt ............................................... 300,824 380,039
Other long-term liabilities .................................. 18,238 14,214
--------- ---------
Total liabilities ...................................... 420,291 484,647
========= =========
Preferred stock, par value $1.00, non-voting,
2,500 shares authorized, no shares
issued or outstanding ...................................... -- --
Common stock, par value $0.01, 75,000,000 shares
authorized, 21,920,346 and 10,866,041 shares
issued and outstanding, respectively ...................... 219 109
Class B common stock, par value $0.01, non-voting,
3,000,000 shares authorized, 1,351,967 and 1,391,303 shares
issued and outstanding, respectively ...................... 14 14
Additional paid-in capital ................................... 169,950 3,800
Accumulated deficit .......................................... (88,788) (76,237)
--------- ---------
Stockholders' equity (deficit) ............................ 81,395 (72,314)
--------- ---------
Commitments and contingencies ................................ -- --
--------- ---------
$ 501,686 $ 412,333
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
1
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(in thousands, except earnings per share)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ----------------------
2-Nov-96 28-Oct-95 2-Nov-96 28-Oct-95
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ............................... $ 182,562 $ 159,161 $ 528,489 $ 456,092
Cost of sales and related buying,
occupancy and distribution expenses ... 126,354 110,502 363,577 314,595
--------- --------- --------- ---------
Gross profit ............................ 56,208 48,659 164,912 141,497
Selling, general and
administrative expenses ............... 43,071 37,759 121,504 103,512
Store opening and closure costs ......... 795 1,176 1,096 2,352
--------- --------- --------- ---------
Operating income ........................ 12,342 9,724 42,312 35,633
Interest, net ........................... 12,795 11,215 36,849 32,580
--------- --------- --------- ---------
Income (loss) before income tax and
extraordinary item ................... (453) (1,491) 5,463 3,053
Income tax expense (benefit) ............ (188) (592) 2,208 1,293
--------- --------- --------- ---------
Income (loss) before extraordinary item . (265) (899) 3,255 1,760
Extraordinary item - early retirement
of debt .............................. (15,806) -- (15,806) --
--------- --------- --------- ---------
Net income (loss) ....................... $ (16,071) $ (899) $ (12,551) $ 1,760
========= ========= ========= =========
Earnings (loss) per common share data:
Earnings (loss) per common share before
extraordinary item ................... $ (0.02) $ (0.07) $ 0.24 $ 0.14
Extraordinary item - early retirement
of debt .............................. $ (1.12) $ -- $ (1.19) $ --
--------- --------- --------- ---------
Earnings (loss) per common share after
extraordinary item ................... $ (1.14) $ (0.07) $ (0.95) $ 0.14
========= ========= ========= =========
Weighted average common shares
outstanding ........................... 14,091 12,715 13,231 12,712
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
2-Nov-96 28-Oct-95
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .......................................... $ (12,551) $ 1,760
--------- ---------
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization ............................ 10,029 8,982
Deferred income taxes .................................... (2,141) (2,860)
Accretion of discount .................................... 10,971 10,275
Amortization of debt issue costs ......................... 1,639 1,395
Issuance of long-term debt in lieu of interest payment ... -- 147
Loss on early retirement of debt ......................... 15,806 --
Changes in operating assets and liabilities: ............. -- --
Decrease in accounts receivable ........................ 2,481 2,779
Increase in merchandise inventories .................... (55,401) (62,624)
Increase in other assets ............................... (1,530) (3,568)
Increase in accounts receivable sold ................... 8,800 20,858
Increase in accounts payable and accrued liabilities ... 16,223 11,991
--------- ---------
Total adjustments .................................... 6,877 (12,625)
--------- ---------
Net cash used in operating activities .................. (5,674) (10,865)
--------- ---------
Cash flows from investing activities:
Increase in restricted investments ......................... -- (100)
Acquisitions, net of cash acquired ........................ (28,151) --
Additions to property, equipment and leasehold improvements (22,899) (22,819)
--------- ---------
Net cash used in investing activities .................. (51,050) (22,919)
--------- ---------
Cash flows from financing activities:
Proceeds from:
Long-term debt ........................................... 30,000 16,458
Common stock ............................................. 166,202 65
Payments on:
Long-term debt ........................................... (140,526) (115)
Redemption of common stock ............................... (32) (26)
Additions to debt issue costs ............................ (2,750) (794)
--------- ---------
Net cash provided by financing activities .............. 52,894 15,588
--------- ---------
Net decrease in cash and cash equivalents .............. (3,830) (18,196)
Cash and cash equivalents:
Beginning of period ...................................... 20,273 28,593
--------- ---------
End of period ............................................ $ 16,443 $ 10,397
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
2-Nov-96 28-Oct-95
-------- ---------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid .................................................... $ 28,224 $ 26,150
======== ========
Income taxes paid ................................................ $ 9,144 $ 5,917
======== ========
Supplemental schedule of noncash investing and financing activities:
The Company purchased Uhlmans, Inc. for $28,151 in cash on June 3, 1996. In
conjunction with this acquisition, liabilities were assumed as follows:
Fair value allocated to assets acquired .......................... $ 35,250
Cash paid for assets acquired, including acquisition expenses ... (28,151)
--------
Liabilities assumed .............................................. $ 7,099
========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(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 ........ 10,866,041 $ 109 1,391,303 $ 14 3,800 $ (76,237) $ (72,314)
Net income ....................... -- -- -- -- -- (12,551) (12,551)
Proceeds from stock offering ..... 10,750,000 107 -- -- 165,799 -- 165,906
Vested compensatory stock options -- -- -- -- 90 -- 90
Exercise of stock options ........ 269,431 3 -- -- 293 -- 296
Conversion of Class B common stock 39,336 -- (39,336) -- -- -- --
Retirement of stock .............. (4,462) -- -- -- (32) -- (32)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, November 2, 1996 ........ 21,920,346 $ 219 1,351,967 $ 14 $ 169,950 ($ 88,788) $ 81,395
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
STAGE STORES, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated condensed financial
statements of Stage Stores, 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"). As of November 2, 1996, SRI
operated 319 family apparel stores in the central United States. 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. During October 1996, the Company completed an initial public
offering of its common stock. The Company sold 10,750,000 shares at an initial
offering price of $16.50 per share. The net proceeds from the offering were
approximately $165.9 million after deducting underwriting discounts and expenses
related to the transaction. The net proceeds were used primarily to retire the
12 3/4% Senior Discount Debentures due 2000 (the "Senior Discount Debentures").
The remaining proceeds of approximately $22 million are being used for general
corporate purposes. As a result of the early retirement of the Senior Discount
Debentures, the Company recorded an extraordinary charge of $15.8 million, net
of applicable income taxes of $9.7 million.
Immediately prior to the offering, the Board of Directors approved a
.94727 for 1 reverse stock split, the effect of which is reflected in the
accompanying financial statements for all periods presented.
3. 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.
4. On June 3, 1996, the Company completed its acquisition of Uhlmans
Inc. ("Uhlmans") for $28.2 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 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.
5. 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
6
<PAGE>
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.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
Certain items discussed or incorporated by reference herein contain
forward-looking statements that involve risks and uncertainties including, but
not limited to, the seasonality of demand for apparel which can be affected by
weather patterns, levels of competition, competitors' marketing strategies,
changes in fashion trends and availability of product, the failure to achieve
the expected results of merchandising and marketing plans or store opening or
closing plans and other such risks as discussed in the Company's filings with
the Securities and Exchange Commission (including, without limitation, the
specific factors discussed in the Company's Prospectus dated October 23, 1996).
The occurrence of any of the above could have a material adverse impact on the
Company's operating results.
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 $28.2 million including acquisition expenses and net of cash acquired. For
the year ended February 3, 1996, Uhlmans had net sales of $59.7 million. The
Company has 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.
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
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
8
<PAGE>
favorably in the first and second quarters and adversely affected the third
quarter. This calendar shift will also negatively affect comparable store sales
comparisons in the fourth quarter.
Sales for the third quarter of 1996 increased 14.7% to $182.6 million
from $159.2 million in the comparable period of 1995. The increase in third
quarter sales was primarily due to a 15.3% increase in sales from stores opened
during 1996 and 1995 combined with a 0.1% increase in comparable store sales. On
a comparable reporting calendar, comparable store sales increased 2.7% for the
quarter ended November 2, 1996. Sales for the first nine months of 1996
increased 15.9% to $528.5 million from $456.1 million in the comparable period
of 1995. The increase in sales for the nine month period was primarily due to a
12.5% increase in sales from stores opened during 1996 and 1995 combined with a
4.4% increase in comparable store sales. On a comparable reporting calendar,
comparable store sales increased 3.7% for the nine months ended November 2,
1996.
Gross profit increased 15.4% to $56.2 million for the third quarter of
1996, from $48.7 million in the comparable period of 1995. Gross profit margin
for the third quarter of 1996 increased to 30.8% compared to 30.6% for the
comparable period in 1995 due primarily to favorable seasonal merchandise
purchases made during the third quarter of 1996. Gross profit for the first nine
months of 1996 increased 16.5% to $164.9 million from $141.5 million in the
comparable period of 1995. Gross profit margin for the first nine months of 1996
increased to 31.2% from 31.0% for the comparable period in 1995 due primarily to
the application of fixed buying, occupancy and distribution costs to a larger
sales volume.
Selling, general and administrative expenses as a percentage of sales
decreased to 23.6% during the third quarter of 1996 from 23.7% in the comparable
period of 1995. Selling, general and administrative expenses as a percentage of
sales for the first nine months of 1996 increased to 23.0% from 22.7% 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 acquisition of Uhlmans. Bad debt expense as a percent
of sales for the nine months ended November 2, 1996 increased to 2.3% from 1.8%
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 more than offset the associated
increase in bad debt expense. Advertising expenses as a percentage of sales
remained unchanged at approximately 4.6% for the third quarters of 1996 and 1995
and 4.1% for the first nine months of 1996 and 1995.
Operating income increased 26.9% and 18.7% for the third quarter and
first nine months of 1996, respectively, as compared to comparable periods in
1995 due to the factors described above.
Net interest expense for the third quarter of 1996 increased 14.3% to
$12.8 million from $11.2 million for the comparable period in 1995. Net interest
expense for the first nine months of 1996 increased 12.9% to $36.8 million from
$32.6 million for the comparable period in 1995. Net 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 11% Series D Senior Subordinated Notes Due 2003 during August 1995 combined
with an increase in the accretion of discount on the Senior Discount Debentures.
Accretion on the Senior Discount Debentures was $10.6 million and $9.6 million
for the first nine months of 1996 and 1995, respectively, which the Company will
no longer incur given the retirement of the Senior Discount Debentures in
connection with the initial public offering of the Company's common stock.
In connection with the early retirement of the Senior Discount
Debentures, the Company recorded an extraordinary charge of $15.8 million, net
of applicable income taxes of $9.7 million.
9
<PAGE>
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 shows certain unaudited financial information for
the Company by quarter (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------------- ----------------------------------------------
Q1 Q2 Q3 Q1 Q2 Q3 Q4
-------- -------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ............ $163,177 $182,750 $ 182,562 $142,353 $154,578 $ 159,161 $226,532
Gross profit ......... 52,081 56,623 56,208 46,283 46,555 48,659 72,780
Operating income ..... 16,045 13,925 12,342 14,835 11,074 9,724 25,853
Quarter's operating
income as a percent
of annual ......... -- -- -- 24% 18% 16% 42%
Income (loss) before
extraordinary item $ 2,652 $ 868 $ (265) $ 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
During October 1996, the Company completed an initial public offering
of its common stock. The net proceeds from the offering were approximately
$165.9 million after deducting underwriting discounts and expenses related to
the offering. The net proceeds were primarily used to retire the Senior Discount
Debentures. The remaining proceeds of approximately $22 million are being used
for general corporate purposes. The Company's consolidated long-term debt at
November 2, 1996 included $130.0 million of Senior Notes, $116.6 million of
Senior Subordinated Notes, $30.0 million of SRPC Notes, and certain other debt.
On June 3, 1996, the Company purchased Uhlmans for approximately $28.2
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 $46.0 million to $216.1 million at
November 2, 1996 from $170.1 million at February 3, 1996, due primarily to the
acquisition of Uhlmans through the issuance of the SRPC Notes and the initial
public offering of common stock.
The Company's primary capital requirements are for working capital,
debt service and capital expenditures. Based upon the current capital structure,
management anticipates cash interest payments to be approximately $5.5
10
<PAGE>
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
nine months of 1996 were $22.9 million as compared to $22.8 million for the
comparable period of 1995. Management expects capital expenditures to be
approximately $28.5 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
November 2, 1996, no borrowings were outstanding under the Revolving Credit
Agreement. As of November 2, 1996, $6.0 million of the total commitment 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"). As of November 2, 1996, no
borrowings were outstanding under the Seasonal Credit Agreement. 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 $204.1 million at
November 2, 1996), up to a maximum of $40.0 million. As of November 2, 1996, the
outstanding balance under the revolving certificate was $8.8 million. The
Company's Retained Interest at November 2, 1996 was $54.2 million, which
represented 23.8% 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 Revolving 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.
11
<PAGE>
STAGE STORES, 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.
On September 26, 1996, in connection with the 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
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"). All holders constituting 100% of the Series B Senior
Discount Debentures tendered and consented. The indenture governing the
Series B Senior Discount Debentures was terminated on November 8, 1996.
In addition, on September 30, 1996, in connection with the 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 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 initial public
offering. All holders constituting 100% of the Series B Senior Notes,
Series B Senior Subordinated Notes and Series D Senior Subordinated
Notes consented to the changes to the respective indentures governing
such notes. Supplemental indentures governing such notes were executed
on October 25, 1996 and became operative on October 30, 1996, the date
of the closing of the initial public offering.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
None.
REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K dated September 27, 1996
related to the Company's (i) Offer to Purchase and (ii) Consent
Solicitation.
12
<PAGE>
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.
December 16, 1996 /s/ Carl E. Tooker
(Date) Carl E. Tooker
President and
Chief Executive Officer
December 16, 1996 /s/ James A. Marcum
(Date) James A. Marcum
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE STAGE STORES, INC. CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> NOV-02-1996
<CASH> 16,443
<SECURITIES> 0
<RECEIVABLES> 59,802
<ALLOWANCES> 0
<INVENTORY> 214,965
<CURRENT-ASSETS> 317,329
<PP&E> 111,088
<DEPRECIATION> 0
<TOTAL-ASSETS> 501,686
<CURRENT-LIABILITIES> 101,229
<BONDS> 300,824
0
0
<COMMON> 233
<OTHER-SE> (88,788)
<TOTAL-LIABILITY-AND-EQUITY> 501,686
<SALES> 528,489
<TOTAL-REVENUES> 528,489
<CGS> 363,577
<TOTAL-COSTS> 122,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,849
<INCOME-PRETAX> 5,463
<INCOME-TAX> 2,208
<INCOME-CONTINUING> 3,255
<DISCONTINUED> 0
<EXTRAORDINARY> 15,806
<CHANGES> 0
<NET-INCOME> (12,551)
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0
</TABLE>
