UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 30, 1999
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 No. 001-14035
Stage Stores, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0407711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identifications No.)
10201 Main Street, Houston, 77025
Texas (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (800)
579-2302
Securities registered pursuant to Section 12(b) of the
Act: NONE
Securities registered pursuant
to Section 12(g) of the Act:
Name of each exchange on which
Title of each class registered
Common Stock ($0.01 par value) New York Stock Exchange
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting common stock held
by non-affiliates as of April 5, 1999 was $179,704,170.
At April 5, 1999, there were 26,743,461 shares of Common
Stock and 1,250,584 shares of Class B Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of
Stockholders to be held May 13, 1999 (the "Proxy
Statement") are incorporated by reference into Part III.
PART I
References to a particular year are to the Company's fiscal
year which is the 52 or 53 week period ending on the Saturday
closest to January 31 of the following calendar year (e.g., a
reference to "1998" is a reference to the fiscal year ended
January 30, 1999).
ITEM 1. BUSINESS
General
Stage Stores, Inc. (the "Company" or "Stage Stores")
operates the store of choice for well-known, nationally
recognized brand name apparel, accessories, cosmetics and
footwear in over 500 small towns and communities throughout the
United States. Stage Stores was formed in 1988 when the
management of Palais Royal, together with several venture capital firms,
acquired the family owned Bealls and Palais Royal chains which
were originally founded in the 1920's. The Company has developed
a unique franchise focused on 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.
As a result of its small market focus, Stage Stores
generally faces less competition for brand name apparel because
consumers in small markets generally have only been able to shop
for branded merchandise in regional malls. In those small
markets where the Company does compete for brand name apparel
sales, such competition generally comes from local retailers,
small regional chains and, to a lesser extent, national
department stores. The Company believes it has a competitive
advantage over local retailers and smaller regional chains due to
its: (i) economies of scale; (ii) strong vendor relationships;
and (iii) proprietary credit card program. The Company believes
it has a competitive advantage in small markets over national
department stores due to its: (i) experience with smaller
markets; (ii) ability to effectively manage merchandise
assortments in a small store format; and (iii) established
operating systems designed for efficient operations within small
markets. In addition, due to minimal merchandise overlap, Stage
Stores generally does not directly compete for branded apparel
sales with national discounters such as Wal-Mart.
At January 30, 1999, the Company, through its wholly-owned
subsidiary, Specialty Retailers, Inc. ("SRI"), operated 679
stores in thirty-four states throughout the United States.
Although the Company's stores may be operated under
its "Stage", "Bealls" and "Palais Royal"
trade names depending on the geographic market, the Company operates
the vast majority of the stores under one concept and strategy.
Approximately 75% of these stores are located in small markets
and communities with populations below 30,000. The Company's
store format (averaging approximately 16,000 total selling square
feet) and merchandising capabilities enable the Company to
operate profitably in small markets. The remainder of the
Company's stores operate in metropolitan areas, primarily in
suburban Houston.
The Company's merchandising strategy focuses on the
traditionally higher margin categories of women's, men's and
children's branded apparel, accessories, cosmetics and footwear.
Merchandise mix may vary from store to store to accommodate
differing demographic factors. The Company purchases merchandise
from a vendor base of over two thousand vendors. Over 85% of
1998 sales consisted of branded merchandise, including nationally
recognized brands such as Levi Strauss, Liz Claiborne,
Chaps/Ralph Lauren, Calvin Klein, Guess, Hanes, Nike, Reebok and
Haggar Apparel. Levi accounted for approximately 9% of the
Company's 1998 retail purchases. No other vendor accounted for
more than 5%. In addition, the Company, through its membership
in Associated Merchandising Corporation ("AMC", a cooperative
buying service), purchases imported merchandise for its private
label program. The membership provides the Company with
synergistic purchasing opportunities allowing it to augment its
branded merchandise assortments. Private label merchandise
purchased through AMC accounted for approximately 6% of the
Company's total retail purchases for 1998.
The Company offers a carefully edited but broad selection of
moderately priced, branded merchandise which is divided into
distinct departments as follows (percentages represent each
department's contribution to Company sales):
Department 1998 1997
Men's/Young Men 20% 20%
Misses Sportswear 15 15
Shoes 11 11
Juniors 10 9
Children 9 9
Accessories & Gifts 8 9
Special Sizes 6 5
Cosmetics 5 5
Intimate 4 5
Dresses & Suits 3 3
Boys 3 2
Misses Dresses 2 3
Coats 2 2
Activewear 2 2
100% 100%
Employees
During 1998, the Company employed an average of 14,680 full
and part-time employees at all of its locations, of which 1,947
were salaried and 12,733 were hourly. The Company's central
office (which includes corporate, credit and distribution center
offices) employed an average of 490 salaried and 1,083 hourly
employees during 1998. In its stores during 1998, the Company
employed an average of 1,457 salaried and 11,650 hourly
employees. Such averages will vary during the year as the
Company traditionally hires additional employees and increases
the hours of part-time employees during peak seasonal selling
periods. There are no collective bargaining agreements in effect
with respect to any of the Company's employees. The Company
believes that relationships with its employees are good.
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in a one
hundred thirty thousand square foot building in Houston, Texas.
The Company leases the building and most of the land at its
Houston facility. The Company owns its approximately 450,000
square foot distribution center and its credit department
facility, both located in Jacksonville, Texas. The Jacksonville
distribution center collateralizes the Company's Credit Facility
(as defined herein). See Note 5 to the Consolidated Financial
Statements.
At January 30, 1999, the Company operated 679 stores located in
thirty-four states as follows:
Number
of
State Stores
Alabama 4
Arizona 4
Arkansas 27
Colorado 7
Florida 1
Georgia 1
Illinois 14
Indiana 16
Iowa 16
Kansas 27
Louisiana 49
Maryland 1
Michigan 7
Minnesota 12
Mississippi 17
Missouri 21
Montana 11
Nebraska 7
Nevada 3
New Mexico 27
New York 2
North Dakota 2
Ohio 26
Oklahoma 70
Oregon 7
Pennsylvania 2
South Carolina 1
South Dakota 9
Texas 269
Virginia 1
Washington 4
West Virginia 1
Wisconsin 3
Wyoming 10
Total 679
Stores generally range in size from 4,200 to 55,000 square feet,
with the average being 16,000 square feet. The Company's stores
are primarily located in strip shopping centers. All store
locations are leased except for three Bealls stores and one Stage
store which are owned. The majority of leases provide for a base
rent plus contingent rentals, generally based upon a percentage
of net sales.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company and its subsidiaries are
involved in various litigation matters arising in the ordinary
course of its business. In addition, on March 30, 1999, a class
action lawsuit was filed against the Company and certain of its
officers, directors and stockholders in the United States
District Court for the Southern District of Texas by John C.
Weld, Jr., a stockholder who purchased 125 shares of the
Company's common stock on August 3, 1998, alleging violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder (the "Weld Suit"). The
Company believes that the allegations of the Weld suit are
without merit and intends to defend the case vigorously.
Management believes that none of the matters in which the
Company or its subsidiaries are currently involved, either
individually or in the aggregate, is material to the financial
position, results of operations, or cash flows of the Company or
its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of security holders
during the quarter ended January 30, 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's authorized common equity securities consist of
par value $0.01 per share common stock ("Common Stock") and par
value $0.01 per share Class B common stock ("Class B Common
Stock"). Prior to April 16, 1998, the Common Stock was quoted on
the NASDAQ National Market System under the symbol "STGE".
Beginning April 16, 1998, the Company's Common Stock is quoted on
the New York Stock Exchange under the symbol "SGE". As of April
5, 1999, (the date of record for Proxy Statement matters) there
was one holder of Class B Common Stock and 293 holders of record
of Common Stock. The following table sets forth, for the periods
indicated, the high and low closing bid prices for the Common
Stock as reported by the NASDAQ National Market System and the
NYSE New York Stock Exchange.
Common Stock Prices
High Low Close
Quarter ended May 3, 1997 $24.50 $17.25 $20.50
Quarter ended August 2, 1997 29.19 19.25 29.00
Quarter ended November 1, 1997 43.38 28.88 36.50
Quarter ended January 31, 1998 43.13 32.25 38.78
Quarter ended May 2, 1998 53.00 35.75 51.13
Quarter ended August 1, 1998 53.75 25.00 25.44
Quarter ended October 31, 1998 26.13 8.75 13.25
Quarter ended January 30, 1999 15.00 6.75 8.00
The Company has not declared or paid any cash dividends on
its Common Stock during its two most recent fiscal years and does
not expect to pay cash dividends for the foreseeable future. The
Company anticipates that for the foreseeable future, earnings
will be reinvested in the business and used to service
indebtedness. The Company's existing indebtedness limits its
ability to pay dividends. The declaration and payment of
dividends by the Company are subject to the discretion of the
Board. Any future determination to pay dividends will depend on
the Company's results of operations, financial condition, capital
requirements, contractual restrictions under its current
indebtedness and other factors deemed relevant by the Board.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth selected consolidated financial
data for the periods indicated. The selected consolidated
financial data were derived from, and should be read in
conjunction with, the Company's Consolidated Financial
Statements. All dollar amounts are stated in thousands, except
for per share data.
Fiscal Year
1998 1997 1996 1995(1) 1994
Statement of operations data:
Net sales $1,173,547 $1,073,316 $776,550 $682,624 $581,463
Cost of sales and related
buying, occupancy and
distribution expenses 839,238 730,179 532,563 468,347 398,659
Gross profit 334,309 343,137 243,987 214,277 182,804
Selling, general and
administrative expenses 271,477 240,011 172,579 149,102 126,200
Store opening and
closure costs 10,192 8,686 2,838 3,689 5,647
Operating income 52,640 94,440 68,570 61,486 50,957
Interest, net 46,471 38,277 45,954 43,989 40,010
Income before income tax
and extraordinary items 6,169 56,163 22,616 17,497 10,947
Income tax expense 2,455 21,623 8,594 6,767 4,317
Income before extraordinary
items 3,714 34,540 14,022 10,730 6,630
Extraordinary items, net
of tax -- (18,295) (16,081) -- (308)
Net income (loss) $3,714 $16,245 $(2,059) $10,730 $6,322
Basic earnings (loss)
per common share $0.13 $0.63 $(0.13) $0.88 $0.52
Basic weighted average
common shares outstanding 27,885 25,808 15,394 12,255 12,224
Diluted earnings (loss)
per common share $0.13 $0.61 $(0.13) $0.86 $0.52
Diluted weighted average
common shares outstanding 28,428 26,483 15,927 12,483 12,146
Margin and other data:
Gross profit margin 28.5% 32.0% 31.4% 31.4% 31.4%
Selling, general and
administrative expense rate 23.1% 22.4% 22.2% 21.8% 21.7%
Operating income margin 4.5% 8.8% 8.8% 9.0% 8.8%
Store data: (1)
Comparable store sales growth (3.0%) 4.1% 3.3% 0.8% 4.1%
Store openings 86 301(2) 69 68 10
Number of stores open at
end of period 679 607 315 256 188
Total selling area
square footage (thousands) 10,548 9,557 5,670 4,886 3,777
Balance sheet data (at
end of period):
Working capital $368,138 $318,064 $235,219 $170,108 $148,229
Total assets 857,680 759,396 509,283 408,254 366,243
Long-term debt 487,968 395,248 298,453 380,039 349,775
Stockholders' equity
(deficit) 204,392 205,078 92,266 (72,314) (81,193)
___________________________________
(1) 1995 includes 53 weeks. Comparable store sales growth for
1995 has been determined based on a comparable 52 week
period.
(2) Includes 104 stores acquired from C. R. Anthony Company in
1997 which were not converted to the Company's format and
trade names until 1998.
ITEM 7. 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 and the failure to
achieve the expected results of merchandising and marketing plans
or store opening and closing plans. The occurrence of any of the
above could have a material adverse impact on the Company's
operating results. See "Risk Factors" below. Certain
information herein contains estimates which represent
management's best judgment as of the date hereof based on
information currently available; however, the Company does not
intend to update this information to reflect developments or
information obtained after the date hereof and disclaims any
legal obligation to the contrary.
General
Overview. The Company operates the store of choice for
nationally recognized brand name family apparel, accessories,
cosmetics and footwear in over 500 small towns and communities
throughout the 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.
At January 30, 1999, the Company, through Specialty
Retailers, Inc. ("SRI"), operated 679 stores in thirty-four
states throughout the United States. Although the Company's
stores may be operated primarily under its "Stage", "Bealls" and
"Palais Royal" trade names depending on the geographical market,
the Company operates the vast majority of the stores under one
concept and strategy. Approximately 75% of these stores are
located in small markets and communities with populations below
30,000. The Company's store format (averaging approximately
16,000 total selling square feet) and merchandising capabilities
enable the Company to operate profitably in small markets. The
remainder of the Company's stores operate in metropolitan areas.
Significant Events. During the second quarter of 1997,
the Company, through SRI, completed an offering of $300.0 million
of long-term indebtedness consisting of $200.0 million in
aggregate principal amount of 8.5% Senior Notes due 2005 and
$100.0 million in aggregate principal amount of 9% Senior
Subordinated Notes due 2007 (collectively, the "Note Offering").
The gross proceeds from the Note Offering of approximately $299.7
million were used to: (i) retire the Company's existing 10%
Senior Notes due 2000 and 11% Senior Subordinated Notes due 2003;
(ii) to pay related fees and expenses; and (iii) to pay a portion
of the costs associated with the acquisition of C. R. Anthony
Company ("CR Anthony"). Concurrently with this transaction, the
Company entered into a new credit facility with a group of
lenders (the "Credit Facility"). The Credit Facility provides
for a $100.0 million working capital and letter of credit
facility and a $100.0 million expansion facility. The Credit
Facility replaced the Company's previous $75.0 million credit
facility (the "Old Credit Facility"). See Note 5 to the
Company's Consolidated Financial Statements.
During the second quarter of 1997, the Company acquired CR
Anthony which operated 246 family apparel stores in small markets
throughout the central and midwestern United States. The Company
converted 130 of the acquired locations to the Company's format
primarily under its "Stage" and "Bealls" trade names during the
fall of 1997 and an additional 104 stores during the Spring of
1998 while closing 12 of the acquired stores.
During the third quarter of 1997, the Company completed an
offering of approximately 7.1 million shares of common stock of
which 6.4 million shares were secondary shares representing the
shares owned by two venture capital firms. The remaining 650,000
shares were issued as primary shares, a result of an over-
allotment provision. The shares sold by the Company resulted in
net proceeds to the Company of approximately $20.7 million, which
were used to reduce borrowings outstanding under the Company's
Credit Facility.
During the fourth quarter of 1997, the Company replaced the
$40.0 million revolving certificate in its Accounts
Receivable Trust (the "Old Revolving Certificate") with a new and
more efficient asset backed commercial paper facility (the
"Revolving Certificate"). The Revolving Certificate has an
increased capacity at terms and rates more favorable than the Old
Revolving Certificate. The Company amended the Revolving
Certificate in the third quarter of 1998 to increase the limit
that may be outstanding from $82.5 million to $165.0 million
through March 31, 1999 to reflect the growth in the Company's
accounts receivable portfolio. The maximum outstanding under the
revolving certificate will be reduced to $144.4 million from
April 1, 1999 to September 30, 1999 and $82.5 million thereafter.
The larger facility will allow the Company to take advantage of
the increase in accounts receivable in the Trust as a result of
the acquisition of CR Anthony as well as to accommodate planned
future growth. See Note 3 to the Company's Consolidated
Financial Statements.
The financial information, discussion and analysis that
follow should be read in conjunction with the Company's
Consolidated Financial Statements included elsewhere herein.
Results of Operations
The following sets forth the results of operations as a
percentage of sales for the periods indicated.
Fiscal Year
1998 1997 1996
Net sales 100.0% 100.0% 100.0%
Cost of sales and related buying,
occupancy and distribution expense 71.5 68.0 68.6
Gross profit margin 28.5 32.0 31.4
Selling, general and
administrative expenses 23.1 22.4 22.2
Store opening and closure costs 0.9 0.8 0.4
Operating income margin 4.5 8.8 8.8
Net interest expense 4.0 3.6 5.9
Income before income tax
and extraordinary item 0.5% 5.2% 2.9%
1998 Compared to 1997
Sales for 1998 increased 9.3% to $1,173.5 million from
$1,073.3 million in 1997. The increase in sales was primarily due
to an approximately $132.8 million increase in sales from stores
opened or acquired during 1998 and 1997 which are not included in
comparable store sales, partly offset by a 3.0% decline in
comparable store sales. Management believes the majority of the
decline in comparable store sales was attributable to (i) the
extreme hot weather and drought conditions during the second
quarter of 1998 in a substantial portion of the Company's market
area, (ii) the unseasonably warm weather which existed throughout
the majority of the 1998 Christmas selling period, (iii) the
implementation of a "value pricing" program on selected private
label merchandise and (iv) the aggressive but prudent management
of the Company's inventory levels throughout the fall selling
season.
The extreme weather conditions which impacted the majority
of the Company's markets during late June and July 1998 resulted
in reduced customer traffic and changed customers' spending
patterns during this period. As a result, comparable store sales
for the second quarter decreased 5.0%. Unseasonably warm weather
conditions in most markets in the third and fourth quarters of
1998 negatively impacted the sales of the traditional cold
weather categories of merchandise. In response, the Company
accelerated its promotional activities during this period by
increasing the level of permanent and promotional markdowns on
its seasonal merchandise. This strategy lowered the average
retail unit price of merchandise sold during the fall selling
season which negatively impacted net sales. As a result of these
factors and those discussed below, comparable store sales for the
fall selling season decreased 4.3%.
In order to mitigate any potential economic impact that the
record summer heat and drought conditions had on the small market
communities in which the Company operates, the Company
implemented a value pricing strategy on a small portion of its
private label merchandise. Under the value pricing strategy, the
Company reduced the price point on certain key private label
basic items for the fall season. The program was designed to
generate sufficient additional unit sales to offset the reduction
in the average unit selling price. Due to the increased
promotional activities discussed above during the fourth quarter,
the program did not accomplish its goals. For 1999, based upon
the results of this program, the Company eliminated the value
pricing strategy from its merchandise mix.
Finally, the Company aggressively managed its inventory
levels throughout the fall selling season due to the softness in
overall sales. Actions taken to control inventory levels
included a significant reduction in the aggregate amount of
merchandise receipts for the fall selling season as well as the
acceleration of the Company's promotional activities discussed
above. The significant reduction in the receipt flow for the
fall selling season negatively impacted the freshness and content
of certain of the Company's merchandise offerings thereby further
depressing sales levels. However, as a result of its aggressive
promotional activities and prudent management of its inventory
levels, retail inventory per square foot on a comparable store
basis at year-end 1998 was approximately 8% lower than the
corresponding 1997 level. Management believes it has identified
the content issues within its merchandise offerings created
during 1998 and has put plans in place to address these issues in
1999.
Gross profit decreased 2.6% to $334.3 million in 1998 from
$343.1 million in 1997. Gross profit as a rate of sales
decreased to 28.5% in 1998 from 32.0% in 1997. Contributing to
the decline in gross profit were the higher levels of markdowns
designed to stimulate traffic during the adverse weather
conditions in the second quarter and the aggressive discounting
and promotional activity during the second half of the year
designed to drive unit sales and liquidate seasonal merchandise.
In addition, the lower gross margin percentage reflects the
impact of fixed buying, occupancy, and distribution expense
components included in cost of goods sold in relation to lower
sales levels as well as slightly higher shrinkage expense.
Selling, general and administrative expenses increased 13.1%
to $271.5 million in 1998 from $240.0 million in 1997. Selling,
general and administrative expenses as a percentage of sales for
1998 increased to 23.1% from 22.4% in 1997. Factors contributing
to the increase in selling, general and administrative expenses
as a percent of sales were the negative leverage resulting from
the reduced sales level and the increased promotional expense
associated with the aggressive management of the Company's
inventory level discussed above. Advertising expenses as a
percentage of sales were 4.3% in 1998 as compared to 3.7% in
1997. Offsetting these increases were approximately $5.6 million
of certain duplicative and one-time costs associated with the CR
Anthony acquisition which were incurred in 1997 as well as the
positive impact of the Company's newly formed credit card bank
which has allowed the Company to charge its customers a service
charge and late fee rate structure consistent with other national
apparel retailers.
Store opening and closure costs for 1998 increased to $10.2
million from $8.7 million for the same period in 1997 due to an
increase in the number of stores opened during 1998 as compared
to 1997.
Operating income for 1998 decreased to $52.6 million from $94.4
million in 1997 due to the factors discussed above. Operating
income as a percent of sales for 1998 was 4.5% as compared to
8.8% in 1997.
Net interest expense for 1998 increased 21.4% to $46.5
million from $38.3 million in 1997 due to higher levels of
borrowings under the Credit Facilities resulting from the
Company's expansion program.
The Company's net income before extraordinary items for 1998
decreased to $3.7 million as compared to $34.5 million in 1997
due to the impact of the factors discussed above.
1997 Compared to 1996
Sales for 1997 increased 38.2% to $1,073.3 million from
$776.5 million in 1996. The increase in sales was due primarily
to a $61.5 million increase in sales from stores opened during
1997 and 1996 which are not included in comparable store sales,
$204.8 million of sales from the CR Anthony stores, as well as a
4.1% increase in comparable store sales. These increases were
partially offset by the impact of closing nine stores during
1997. The increase in comparable store sales was due primarily
to the strength in the Company's small market stores where
comparable store sales increased 6.1%.
Gross profit increased 40.6% to $343.1 million in 1997 from
$244.0 million in 1996. Gross profit as a percentage of sales
increased to 32.0% in 1997 from 31.4% in 1996. Gross profit for
1997 was favorably impacted by an increase in markup on
merchandise sold relating to an improved mix of inventories and a
lower markdown rate, the result of a continued focus and tight
control over inventories as well as reduced shrinkage expense as
a rate of sales.
Selling, general and administrative expenses for 1997
increased 39.1% to $240.0 million from $172.6 million in 1996.
As a percentage of sales, these expenses increased to 22.4% in
1997 from 22.2% in 1996 due to $5.6 million in duplicative costs
associated with the acquisition of CR Anthony and a decrease in
the service charge income associated with the Company's private
label credit card program as a percentage of sales resulting from
a planned increase in the liquidation rate in the portfolio as
the Company focused on improving its collection efforts. This
decrease in service charge income as a percentage of sales was
partially offset by a reduction in bad debt expense as a
percentage of sales from 2.8% in 1996 to 2.0% in 1997.
Advertising expenses as a percentage of sales for 1997 and 1996
were 3.7% and 3.8%, respectively.
Operating income for 1997 increased 37.6% to $94.4 million
from $68.6 million for 1996 due to the factors discussed above.
Operating income as a percentage of sales was 8.8% in 1997 and
1996.
Net interest expense decreased 16.7% to $38.3 million in
1997 from $46.0 million in 1996. Net interest expense decreased
due to the retirement of the Senior Discount Debentures in
October 1996 in connection with the Company's initial public
offering partially offset by additional interest associated with
the issuance of the $30.0 million in aggregate principal amount
of 12.5% Trust Certificate-Backed Notes during May 1996 and
additional borrowings under the Company's Credit Facility as a
result of the CR Anthony acquisition and new store growth.
During the second quarter of 1997, the Company completed the Note
Offering. As a result of the Note Offering, the Company's
weighted average interest rate on its senior long-term debt
decreased from 10.5% to 8.7%. This decrease in the weighted
average interest rate was offset by the increased borrowing
levels incurred in connection with the Note Offering.
In connection with the Note Offering, the replacement of the
Old Credit Facility, and the replacement of the Old Revolving
Certificate, the Company recorded an extraordinary charge of
$18.3 million, net of applicable income taxes of $11.5 million.
Seasonality and Inflation
The Company's business is seasonal and sales traditionally
are lower during the first nine months of the year (February
through October) and higher during the last three months of the
year (November through January). Working capital requirements
fluctuate during the year and generally reach their highest
levels during the third and fourth quarters.
Fiscal Year 1998 Fiscal Year 1997
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Net
sales $272,788 $271,805 $271,605 $357,349 $191,512 $238,137 $274,269 $369,398
Gross
profit 87,225 82,239 75,252 89,593 61,925 73,902 86,822 120,488
Operating
income 25,278 12,678 7,226 7,458 20,524 19,736 15,789 38,391
Quarter's
operating
income as
a percent
of annual 48% 24% 14% 14% 22% 21% 17% 40%
Income (loss)
before ex-
traordinary
items $9,035 $765 $(3,152) $(2,934) $7,094 $6,246 $3,673 $17,527
Net income
(loss) $9,035 $765 $(3,152) $(2,934) $7,094 $(11,134) $3,523 $16,762
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
Total working capital increased $50.0 million to $368.1
million at January 30, 1999 from $318.1 million at January 31,
1998. The most significant change in working capital was the
increase in inventories associated with the 104 CR Anthony stores
which the Company converted to its format and trade names during
the first half of 1998 and the 86 new stores opened during the
current year.
The Company's primary capital requirements are for working
capital, debt service and capital expenditures. Cash interest
payments were $43.0 million in 1998 and based upon the current
capital structure, management anticipates cash interest payments
will be approximately $44.0 million during 1999. Capital
expenditures are generally for new store openings, remodeling of
existing stores and facilities and customary store maintenance.
Capital expenditures were $88.7 million during 1998 as compared
to $64.9 million in 1997. Capital expenditures during 1998 were
primarily related to 86 new store openings, remodeling of
existing stores, the conversion of 104 CR Anthony stores to the
Company's format and the implementation of a new merchandising
system. Management estimates that capital expenditures will be
approximately $23.0 million for 1999. Required aggregate
principal payments on existing debt, excluding the Credit
Facility, total $4.8 million and $34.8 million for 1999 and 2000,
respectively.
The Company's current short-term liquidity needs are
provided by (i) existing cash balances, (ii) operating cash
flows, (iii) the Accounts Receivable Program and (iv) the Credit
Facility. 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. Outstanding borrowings under the Credit
Facility were $142.0 million at January 30, 1999 as compared to
$45.7 million at January 31, 1998. The Company had $45.6 million
of availability under the Credit Facility at January 30, 1999.
The outstanding balances under the revolving certificates
associated with the Accounts Receivable Program were $115.6
million and $77.0 million at January 30, 1999 and January 31,
1998, respectively, while outstanding balances under term
certificates were $165.0 million at both January 30, 1999 and
January 31, 1998. Principal repayments under the term
certificates commence on December 31, 1999. However, the Company
currently expects to refinance these certificates prior to that
date. Therefore, the Company does not believe this will have an
impact on its liquidity or cash flow for 1999 although there can
be no assurances that the Company will successfully refinance the
Accounts Receivable Program or as to the terms of any such
refinancing. See Note 3 to the Company's Consolidated Financial
Statements.
The Company continually monitors its liquidity position and
compliance with its various debt agreements. During the third
and fourth quarters of 1998, the Company's Credit Facility was
amended to lessen certain covenant requirements and clarify
certain defined terms contained in the Credit Facility. In
addition, the Credit Facility was modified to allow a maximum of
$170.0 million of borrowings to be outstanding for thirty days
during the period from January 27, 1999 through July 31, 1999.
As of February 25, 1999, this requirement had been satisfied. The
Company believes the current covenant levels provide sufficient
flexibility to allow the Company to execute its business plan.
Management believes that funds provided by operations,
together with funds available under the Credit Facility 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.
Recent Accounting Pronouncements
In April 1998, the Accounting Standards Executive Committee
issued Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") effective for fiscal years
beginning after December 15, 1998. SOP 98-5 provides guidance on
the financial reporting of start-up costs and organization costs.
It requires costs of start-up activities and organization costs
to be expensed as incurred. Initial adoption of SOP 98-5 is to
be reported as the cumulative effect of a change in accounting
principle. The Company will adopt SOP 98-5 in the first quarter
of 1999 and estimates adoption will result in an after tax charge
of approximately $2.4 million.
Risk Factors
Leverage and Restrictive Covenants: Due to the level of the
Company's indebtedness, any material adverse development
affecting the business of the Company could significantly limit
its ability to withstand competitive pressures and adverse
economic conditions, to take advantage of expansion opportunities
or other significant business opportunities that may arise, or to
meet its obligations as they become due. The Company's debt
imposes operating and financial restrictions on the Company and
certain of its subsidiaries. Such restrictions limit the
Company's ability to incur additional indebtedness, to make
dividend payments and to make capital expenditures. See
"Liquidity and Capital Resources."
Future Growth and Recent Acquisitions; Liquidity: Key
components of the Company's growth strategy are to (i) continue
to identify and acquire new store locations where the Company
believes it can operate profitably and (ii) identify and
consummate strategic acquisitions. Such expansions and
acquisitions could be material in size and cost. The Company's
ability to achieve its expansion plans is dependent upon many
factors, including the availability and permissibility under
restrictive covenants of financing, general and market specific
economic conditions, the identification of suitable markets, the
leasing of suitable sites on acceptable terms, the hiring,
training and retention of qualified management and other store
personnel and the integration of new stores into the Company's
information systems and operations. As a result, there can be no
assurance that the Company will be able to achieve its targets
for opening new stores (including acquisitions) or that such new
stores will operate profitably when opened or acquired.
The Company's growth strategy may significantly expand the
Company's capital expenditure and working capital requirements,
and the Company's ability to meet such requirements may be
adversely affected by the Company's level of indebtedness and the
restrictive covenants contained therein, especially in periods of
economic downturn.
Economic and Market Conditions; Seasonality and Weather: A
substantial portion of the Company's operations are located in
the central United States. In addition, many of the Company's
stores are situated in small towns and rural environments that
are substantially dependent upon the local economy. The retail
apparel business is dependent upon the level of consumer
spending, which may be adversely affected by an economic downturn
or a decline in consumer confidence. An economic downturn,
particularly in the central United States and any state (such as
Texas) from which the Company derives a significant portion of
its net sales, could have a material adverse effect on the
Company's business and financial condition.
The Company's success depends in part upon its ability to
anticipate and respond to changing consumer preferences and
fashion trends in a timely manner. Although the Company attempts
to stay abreast of emerging lifestyle and consumer preferences
affecting its merchandise, any sustained failure by the Company
to identify and respond to such trends could have a material
adverse effect on the Company's business and financial condition.
The Company's business is seasonal and its quarterly sales
and profits traditionally have been lower during the first three
fiscal quarters of the year (February through October) and higher
during the fourth fiscal quarter (November through January). In
addition, working capital requirements fluctuate throughout the
year, increasing substantially in October and November in
anticipation of the holiday season due to requirements for
significantly higher inventory levels. Any substantial decrease
in sales for the last three months of the year could have a
material adverse effect on the Company's business and financial
condition.
The Company's business depends in part on normal weather
patterns across its markets. Any unusual weather patterns in the
Company's markets, such as what occurred in 1998, can have a
material impact on the Company's business and financial
condition.
Competition: The retail apparel business is highly
competitive. Although competition varies widely from market to
market, the Company faces substantial competition, particularly
in its Houston area markets, from national, regional and local
department and specialty stores. Some of the Company's
competitors are considerably larger than the Company and have
substantially greater financial and other resources. Although
the Company currently offers branded merchandise not available at
certain other retailers (including large national discounters) in
its small market stores, there can be no assurance that existing
or new competitors will not carry similar branded merchandise in
the future, which could have a material adverse effect on the
Company's business and financial condition.
Dependence on Key Personnel: The success of the Company
depends to a large extent on its executive management team,
including the Company's Chairman and Chief Executive Officer,
Carl Tooker. Although the Company has entered into employment
agreements with each of the Company's executive officers, it is
possible that members of executive management may leave the
Company, and such departures could have a material adverse effect
on the Company's business and financial condition. The Company
does not maintain key-man life insurance on any of its executive
officers.
Consumer Credit Risks - Private Label Credit Card Portfolio:
Sales under the Company's private label credit card program
represent a significant portion of the Company's business. In
recent years, some retailers have experienced substantial
increases in the rate of charge-offs in their credit card
portfolios. Although the Company did not experience this trend
in 1998, any significant deterioration in the quality of the
Company's accounts receivable portfolio or any adverse changes in
laws regulating the granting or servicing of credit (including
late fees and the finance charge applied to outstanding balances)
could have a material adverse effect on the Company's business
and financial condition.
Accounts Receivable Program: The Company currently
securitizes substantially all of the receivables derived from its
proprietary credit card accounts through the Accounts Receivable
Program. Under this program, the Company causes such receivables
to be transferred to the Trust, which from time to time issues
certificates to investors backed by such receivables. The
Accounts Receivable Program has substantially increased the
Company's liquidity (through the issuance and sale of such
certificates). There can be no assurance that the Company will
be able to continue to securitize its receivables in this manner.
Furthermore, there can be no assurance that receivables will
continue to be generated by credit card holders, or that new
credit card accounts will continue to be established at the rate
historically experienced by the Company. Any decline in the
generation of receivables or in the rate or pattern of cardholder
payments on accounts could have a material adverse effect on the
Company's business and financial condition. In addition,
significant increases in the floating rates paid on investor
certificates and/or significant deterioration in the performance
of the Company's receivables portfolio could trigger an early
repayment requirement, which could materially adversely affect
liquidity. Principal repayments under the term certificates
commence on December 31, 1999. However, the Company currently
expects to refinance these certificates prior to that date.
Therefore, the Company does not believe this will have an impact
on its liquidity or cash flow for 1999 although there can be no
assurances that the Company will successfully refinance the
Accounts Receivable Program or as to the terms of any such
refinancing. See Note 3 to the Company's Consolidated Financial
Statements. See "Liquidity and Capital Resources."
Interest Rate Risk: Although the Company is protected to a
certain extent by interest rate caps, investors in the
receivables-backed certificates of the Trust receive interest
payments on such certificates based on a floating rate. In
addition, borrowings under the Credit Facility bear a floating
rate of interest. If market rates of interest increase, the
Company's financial results could be materially adversely
affected. See "Liquidity and Capital Resources."
Centralized Operations: The Company's buying, credit,
distribution and other corporate operations are highly
centralized in three main locations. The Company's operations
could be materially affected if a catastrophic event (such as but
not limited to fire, hurricanes or floods) impacts use of these
facilities. There can be no assurances that the Company would be
successful in obtaining alternative servicing facilities in a
timely manner if such a catastrophic event should occur.
Year 2000 Infrastructure: The Year 2000 issue relates to the
way computer systems and programs define calendar dates. They
could fail or make miscalculations due to interpreting a date
including "00" to mean 1900, not 2000. Also, other systems and
equipment may contain imbedded hardware or software that may have
a time element and affect their operation. The Company began
working on the Year 2000 compliance issue in 1996 and heightened
its focus and resource commitment in 1997 with the establishment
of a formalized project plan and management oversight function.
The Company has divided its Year 2000 risk assessment and
remediation efforts into the following three categories:
information systems, peripheral systems and hardware, and third
party vendors.
The Company has completed the evaluation of its critical
information systems infrastructure for Year 2000 compliance and
has developed detailed work plans to achieve compliance prior to
possible system failures. The systems have been segregated into
the following five logical, manageable groups: (1) human
resource, time keeping, and payroll systems (2) point-of-sale and
sales audit systems (3) credit systems (4) financial reporting
and accounts payable systems and (5) merchandising systems. Year
2000 remediation is being addressed through a combination of
modifications or upgrades to existing applications or
replacement. The Company has dedicated in-house resources and
has contracted with third party vendors to complete the necessary
coding changes, testing and installation. The five groups of
systems are in various stages of completion. The Company
estimates Year 2000 readiness related to information systems is
65% complete and anticipates will be substantially complete by
the end of the second quarter of fiscal year 1999.
The Company has substantially completed an inventory of its
major peripheral systems and hardware and is in the process of
assessing and remediating Year 2000 non-compliance issues. These
include, but are not limited to, mainframe computer hardware and
operating systems, communications networks, personal computers
and network systems, printers, store register systems and
processors, scanners, and emergency power systems. The Company
estimates Year 2000 readiness related to peripheral systems and
hardware is 75% complete and anticipates will be substantially
complete by the end of the second quarter of fiscal year 1999.
The Company is installing a new merchandising system which
is anticipated to be completed during the first half of 1999. If
installation is not complete, the Company has made arrangements
with the third party presently working on the Company's Year 2000
compliance issues to remediate the legacy system. To the extent
there are unforeseen issues associated with the implementation of
the new system, the Company's business could be adversely impacted.
The Company's plan is to have addressed its significant
Year 2000 issues prior to being affected by them. However, if the
Company identifies additional risks related to Year 2000
compliance or its progress in planned remediation efforts
deviates from the anticipated timeline, the Company will develop
contingency plans as deemed necessary at that time. It is
currently estimated that the aggregate cost of the Company's Year
2000 efforts paid to third parties to assist in remediation will
be approximately $2.3 million, of which approximately $1.6
million has been spent. These costs are being expensed as
incurred. These amounts do not include any costs associated with
the implementation of contingency plans or the cost associated
with the replacement of information systems, hardware or
equipment, substantially all of which would be capitalized. The
failure to correct a material Year 2000 problem could result in
an interruption in certain normal business activities or
operations. Presently, the Company does not anticipate any
material disruption in its operations as a result of any failure
by the Company to be in compliance.
The Company has limited information concerning Year
2000 compliance status of its suppliers. The Company has,
however, identified its major suppliers and has sent a survey
letter which is being used to evaluate the potential risk to the
Company if these vendors fail to remedy their Year 2000 issues.
In the event that the Company or any of its significant suppliers
does not successfully and timely achieve Year 2000 compliance,
the Company's business or operations could be adversely affected.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements and Schedules" included
on page 21 for information required under this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, ages and all positions
held by the directors and executive officers of Stage Stores as
of April 1, 1999:
Name Age Position
Carl Tooker 51 Chairman, Chief Executive Officer an President
James Marcum 39 Director, Vice Chairman and Chief Financial Officer
Stephen Lovell 43 Vice Chairman and Chief Field Operations Officer
Gregg Kennedy 51 Executive Vice President and Chief Merchandising Officer
Jim Bodemuller 53 Executive Vice President and Chief Information Officer
Ron Lucas 51 Executive Vice President, Human Resources
Harold Compton 51 Director
Robert Huth 53 Director
Richard Jolosky 64 Director
Jack Bush 64 Director
David Thomas 49 Director
John Wiesner 61 Director
Mr. Tooker joined the Company as Director, President and
Chief Operating Officer on July 1, 1993. On July 1, 1994, Mr.
Tooker was appointed Chief Executive Officer and on January 27,
1997, Mr. Tooker was elected Chairman of the Board. Mr. Tooker
has 26 years of experience in the retail industry, 18 of which
were spent in the May Co. where he served as Chairman and Chief
Operating Officer of Filene's of Boston from 1988 to 1990. In
1990, Mr. Tooker joined Rich's, a division of Federated
Department Stores, Inc., as President and Chief Operating
Officer, and in 1991 Mr. Tooker was promoted to Chief Executive
Officer of Rich's where he served until joining the Company in
1993.
Mr. Marcum joined the Company in June 1995 as Executive Vice
President and Chief Financial Officer, was elected to the Board
on August 20, 1997 and was promoted to Vice Chairman and Chief
Financial Officer on March 5, 1998. Prior to joining the
Company, Mr. Marcum held various positions at the Melville
Corporation where he was employed since 1983. Mr. Marcum served
as Treasurer of Melville Corporation from 1986 to 1989, Vice
President and Controller of Marshalls, Inc., a division of the
Melville Corporation, from 1989 to 1990 and as Senior Vice
President and Chief Financial Officer of Marshalls, Inc. from
1990 to 1995. Mr. Marcum has been nominated as a director
candidate for The Bombay Company, Inc. to be voted on by
shareholders at their annual meeting on May 20, 1999.
Mr. Lovell joined the Company in June 1995 as Executive Vice
President and Director of Stores and was promoted to Vice
Chairman and Chief Field Operations Officer on March 5, 1998.
Before joining the Company, Mr. Lovell served in various
positions at Hit or Miss, a division of TJX Companies, where he
was employed since 1980 and where he served since January 1987 as
Senior Vice President and Director of Stores.
Mr. Kennedy joined the Company in August 1998 as Vice
President, Divisional Merchandising Manager, was promoted to
Senior Vice President, General Merchandise Manager in November
1998 and was promoted to Executive Vice President and Chief
Merchandising Officer in February 1999. Between 1993 and 1998,
Mr. Kennedy was Vice President, General Merchandising Manager at
Belk Department Stores. In 1991 he joined H.L. Reeds Department
Stores as President. From 1989 to 1991 he held a variety of
merchandising and store management positions at Federated
Department Stores and from 1976 to 1989 he was Vice President,
Divisional Merchandise Manager for women's sportswear at
Kaufmann's, a division of May Company.
Mr. Bodemuller joined the Company in July 1997 as Senior
Vice President, Planning and Allocation, was promoted to
Executive Vice President, Planning and Allocation in March 1998
and was promoted to Executive Vice President and Chief
Information Officer in March 1999. From 1995 to 1997 Mr.
Bodemuller was Senior Vice President, Planning Allocation and
Information Systems at Woolworths. Between 1993 and 1995 he was
Senior Vice President and Chief Information Officer at Marshalls,
Inc., a division of the Mellville Corporation and from 1982 to
1993 he was Corporate Vice President, MIS at May Company.
Mr. Lucas joined the Company in July 1995 as Senior
Vice President, Human Resources and was promoted to Executive
Vice President, Human Resources on March 5, 1998. Between 1987
and 1995, Mr. Lucas served as Vice President, Human Resources at
two different divisions of Limited, Inc., the Limited Stores
Division and Lane Bryant. Previously, he spent seventeen years at
the Venture Stores Division of May Co. where from 1985 to 1987 he
was Vice President, Organization Development.
Mr. Compton has been a Director since March 1997. Mr.
Compton is also Executive Vice President and Chief Operating
Officer of CompUSA, Inc. where he has served since January 1995.
Mr. Compton is also President of CompUSA Stores. Previously, he
served as Executive Vice President-Operations of CompUSA Stores
from August 1994 to January 1995. Prior to joining CompUSA,
Inc., Mr. Compton served as President and Chief Operating Officer
of Central Electric Inc. from December 1993 to August 1994 and as
Executive Vice President-Operations & Human Resources of
HomeBase, Inc. from 1989 to 1993. Mr. Compton is a director of
Linens `N Things, Inc. and Jumbo Sports.
Mr. Huth has been a Director since March 1997. Mr. Huth is
also Director, President and Chief Operating Officer of David's
Bridal where he has served since 1995. Prior to joining David's
Bridal, Mr. Huth served as Director, Executive Vice President and
Chief Financial Officer of Melville Corporation from 1987 to
1995.
Mr. Jolosky has been a Director since March 1997. Mr.
Jolosky is also Director and Vice Chairman of Payless ShoeSource,
Inc. where he has served since 1996. Prior to joining Payless
Shoe Source, Inc., Mr. Jolosky previously served as President and
Chief Executive Officer of Silverman Jewelry Company from 1995 to
1996 and as Chief Executive Officer of the Richard Allen Company
from 1992 to 1995.
Mr. Bush has been a Director since December 1997. Mr.
Bush is also President of Raintree Partners, Inc., a management
consulting firm where he has served since 1995, as well as
Chairman, Director and Chief Executive Officer of Jumbo Sports,
Director of TeleQuip Company and Chairman of the Strategic Board
of Directors of the College of Business and Public Administration
at the University of Missouri. From 1991 to August 1995, Mr.
Bush was President and Director of Michaels Stores, Inc.
Mr. Thomas has been a Director since September 1997. Mr.
Thomas has been a Managing Director of Citicorp Venture Capital,
Ltd. and a Vice President of Court Square Capital Limited for
more than five years. Mr. Thomas is a director of Lifestyle
Furnishings International Ltd., Galey & Lord, Inc., Anvil
Knitwear, Inc., Neenah Corporation, Plainwell, Inc., Sleepmaster
Corporation and American Commercial Lines, LLC.
Mr. Wiesner has been a Director since July 1997. Prior to
joining the Company, Mr. Wiesner held varying positions at CR
Anthony, including Chairman of the Board, Chief Executive Officer
from 1987 to 1997, and President from 1987 to 1990 and 1992 to
1995. Mr. Wiesner is also a director of Lamont Apparel, Inc. and
Elder Beerman, Inc.
Certain other information regarding directors and officers
is incorporated herein by reference to the information under the
heading "Director and Officer and Ten Percent Stockholder
Security Reports" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors
Information regarding compensation of directors is
incorporated herein by reference to the information under the
heading "Compensation of Directors" in the Proxy Statement.
Compensation of Executive Officers
Information regarding compensation of executive officers is
incorporated herein by reference to the information under the
heading "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding security ownership of certain
beneficial owners and management is incorporated herein by
reference to the information under the heading "Security
Ownership of Certain Beneficial Owners and Management" in the
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related
transactions is incorporated herein by reference to the
information under the heading "Certain Relationships and Related
Transactions" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) and (d) Financial Statements
See "Index to Financial Statements and
Schedules" on Page 21.
(b) Reports on Form 8-K
The Company filed a News Release on Form 8-K dated
November 5, 1998 related to Stage Stores, Inc.'s Board
adopting a rights plan and third quarter 1998 sales
results.
The Company filed a News Release on Form 8-K dated
November 12, 1998 related to Stage Stores, Inc.
announcing the resignation of the Chief Merchandising
Officer.
The Company filed a Form 8-K on November 12, 1998
related to the adoption of the stockholder rights plan.
Filed as an exhibit was the Rights Agreement dated as
of November 11, 1998 between Stage Stores, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights
Agent.
The Company filed a News Release on Form 8-K dated
November 19, 1998 related to Stage Stores, Inc. third
quarter and nine months 1998 results.
The Company filed a News Release on Form 8-K dated
January 7, 1999 related to Stage Stores, Inc. 1998
holiday period sales results.
The Company filed a News Release on Form 8-K dated
January 27, 1999 related to the Fourth Amendment
Agreement dated as of January 27, 1999 by and among
Specialty Retailers, Inc., Stage Stores, Inc., the
banks named therein and Credit Suisse First Boston to
the Credit Agreement dated as of June 17, 1997.
The Company filed a News Release on Form 8-K dated
February 4, 1999 related to Stage Stores, Inc.
announcing fourth quarter 1998 sales.
The Company filed a News Release on Form 8-K dated
February 19, 1999 related to Stage Stores, Inc. naming
of a new executive vice president, chief merchandising
officer.
The Company filed a News Release on Form 8-K dated
March 11, 1999 related to Stage Stores, Inc. announcing
fourth quarter and full year 1998 results.
The Company filed a News Release on Form 8-K dated
April 2, 1999 related to Stage Stores, Inc. denial of
allegations of securities laws violations.
(c) Exhibits - See "Exhibit Index" at X-1.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
/s/ Carl Tooker April 13, 1999
Carl Tooker
Chairman, Chief Executive Officer and President
(principal executive officer)
STAGE STORES, INC.
/s/ James Marcum April 13, 1999
James Marcum
Vice Chairman and Chief Financial Officer
(principal financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
/s/ Carl Tooker Chairman of the Board of Directors April 13, 1999
Carl Tooker
/s/ James Marcum Director April 13, 1999
James Marcum
/s/ Jack Bush Director April 13, 1999
Jack Bush
/s/ Robert Huth Director April 13, 1999
Robert Huth
/s/ John Wiesner Director April 13, 1999
John Wiesner
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
Number
Financial Statements
Report of Independent Accountants F-1
Consolidated Balance Sheet at January 30, 1999 and January 31, 1998 F-2
Consolidated Statement of Operations for 1998, 1997 and 1996 F-3
Consolidated Statement of Cash Flows for 1998, 1997 and 1996 F-4
Consolidated Statement of Stockholders' Equity for 1998, 1997 and 1996 F-5
Notes to Consolidated Financial Statements F-6
Schedules
All schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
Report of Independent Accountants
To the Board of Directors and Stockholders of
Stage Stores, Inc.
In our opinion, the consolidated financial statements listed
in the accompanying index present fairly, in all material
respects, the financial position of Stage Stores, Inc. and its
subsidiaries (the "Company") at January 30, 1999 and January 31,
1998, and the results of their operations and their cash flows
for each of the three years in the period ended January 30, 1999,
in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Houston, Texas
March 10, 1999
Stage Stores, Inc.
Consolidated Balance Sheet
(in thousands, except par values)
January 30, 1999 January 31, 1998
ASSETS
Cash and cash equivalents $ 12,832 $23,315
Undivided interest in accounts
receivable trust 69,816 61,211
Merchandise inventories, net 341,316 303,115
Prepaid expenses 24,981 20,417
Other current assets 59,492 57,788
Total current assets 508,437 465,846
Property, equipment and leasehold
improvements, net 233,263 171,654
Goodwill, net 92,551 95,486
Other assets 23,429 26,410
Total assets $857,680 $759,396
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 82,779 $91,799
Accrued expenses and other current
liabilities 52,706 53,291
Current portion of long-term debt 4,814 2,692
Total current liabilities 140,299 147,782
Long-term debt including credit
facilities 487,968 395,248
Other long-term liabilities 25,021 11,288
Total liabilities 653,288 554,318
Preferred stock, par value $1.00, non-
voting,
3 shares authorized, no shares
issued or outstanding -- --
Common stock, par value $0.01, 75,000
shares
authorized, 26,718 and 26,500 shares
issued and outstanding, respectively 267 265
Class B common stock, par value $0.01,
non-voting,
3,000 shares authorized, 1,250 shares
issued and outstanding 13 13
Additional paid-in capital 265,716 264,679
Accumulated deficit (55,610) (59,324)
Accumulated other comprehensive income (5,994) (555)
Stockholders' equity 204,392 205,078
Commitments and contingencies -- --
Total liabilities and
stockholder's equity $857,680 $759,396
Stage Stores, Inc.
Consolidated Statement of Operations
(in thousands, except earnings per share)
Fiscal Year
1998 1997 1996
Net sales $1,173,547 $1,073,316 $ 776,550
Cost of sales and related
buying,
occupancy and
distribution expenses 839,238 730,179 532,563
Gross profit 334,309 343,137 243,987
Selling, general and
administrative expenses 271,477 240,011 172,579
Store opening and closure
costs 10,192 8,686 2,838
Operating income 52,640 94,440 68,570
Interest, net 46,471 38,277 45,954
Income before income tax
and extraordinary items 6,169 56,163 22,616
Income tax expense 2,455 21,623 8,594
Income before extraordinary items 3,714 34,540 14,022
Extraordinary items --
early retirement
of debt, net of tax -- (18,295) (16,081)
Net income (loss) $ 3,714 $ 16,245 $ (2,059)
Basic earnings (loss) per
common share data:
Basic earnings per common
share before
extraordinary items $ 0.13 $ 1.34 $ 0.91
Extraordinary items --
early retirement
of debt -- (0.71) (1.04)
Basic earnings (loss) per $ 0.13 $ 0.63 $ (0.13)
common share
Basic weighted average
common shares outstanding 27,885 25,808 15,394
Diluted earnings (loss) per
common share data:
Diluted earnings per common
share before
extraordinary items $ 0.13 $ 1.30 $ 0.88
Extraordinary items --
early retirement
of debt -- (0.69) (1.01)
Diluted earnings (loss) per $ 0.13 $ 0.61 $ (0.13)
common share
Diluted weighted average
common shares outstanding 28,428 26,483 15,927
Stage Stores, Inc.
Consolidated Statement of Cash Flows
(in thousands)
Fiscal Year
1998 1997 1996
Cash flows from operating
activities:
Net income (loss) $3,714 $16,245 $(2,059)
Adjustments to reconcile net
income (loss) to net cash provided by
operating activities:
Depreciation and amortization 33,474 19,828 14,181
Deferred income taxes 2,371 27,438 15,650
Accretion of discount 1,138 1,231 11,097
Amortization of debt issue costs 2,577 2,274 2,104
Loss on early retirement of debt -- 18,295 16,081
Changes in operating assets
and liabilities:
Decrease (increase) in
undivided interest in accounts
receivable trust (8,605) 22,777 (18,815)
Increase in merchandise
inventories (38,201) (76,451) (28,199)
Increase in other assets (2,637) (26,970) (3,339)
Increase (decrease) in
accounts payable and accrued
liabilities (9,341) 14,167 (6,614)
Total adjustments (19,224) 2,589 2,146
Net cash provided by (used
in) opeating activities (15,510) 18,834 87
Cash flows from investing
activities:
Acquisitions, net of cash acquired -- (4,946) (27,346)
Additions to property, equipment
and leasehold improvements (88,719) (64,859) (26,096)
Net cash used in investing
activities (88,719) (69,805) (53,442)
Cash flows from financing
activities:
Proceeds from:
Credit facilities 96,300 45,700 --
Long-term debt -- 299,718 30,000
Common stock 955 22,522 165,969
Payments on:
Long-term debt (2,596) (299,533) (140,677)
Redemption of common stock -- -- (46)
Additions to debt issue costs (913) (12,407) (3,878)
Net cash provided by
financing activities 93,746 56,000 51,368
Net increase (decrease) in cash
and cash equivalents (10,483) 5,029 (1,987)
Cash and cash equivalents:
Beginning of year 23,315 18,286 20,273
End of year $12,832 $23,315 $18,286
Supplemental disclosures:
Cash flow information:
Interest paid $43,015 $45,988 $32,094
Income taxes paid (refunded) $(2,872) $(14,436) $6,988
Non-cash investing and financing
activities:
In connection with various
acquisitions, liabilities were
assumed as follows:
Fair value allocated to
assets aquired $ -- $120,665 $35,001
Cash paid for assets aquired,
including acquisition expenses -- (4,946) (27,346)
Value of Common Stock exchanged -- (72,284) --
Purchase price payable at closing -- -- --
Liabilities assumed $ -- $43,435 $7,655
Stage Stores, Inc.
Consolidated Statement of Stockholders' Equity
(in thousands)
Fiscal Year
1998 1997 1996
Shares Outstanding
Shares of common stock issued:
Beginning balance 26,500 22,033 10,866
Issuance of stock 218 4,467 11,032
Conversion of Class B common stock -- -- 141
Retirement of stock -- -- (6)
Ending balance 26,718 26,500 22,033
Shares of Class B stock issued:
Beginning balance 1,250 1,250 1,391
Conversion of Class B common stock -- -- (141)
Ending balance 1,250 1,250 1,250
Stockholders' Equity
Common stock issued:
Beginning balance $265 $220 $109
Issuance of stock 2 45 110
Conversion of Class B common stock -- -- 1
Ending balance 267 265 220
Class B stock issued:
Beginning balance 13 13 14
Conversion of Class B common stock -- -- (1)
Ending balance 13 13 13
Additional Paid-in Capital:
Beginning balance 264,679 169,811 3,800
Issuance of stock 953 94,761 165,859
Vested compensatory stock options 84 107 198
Retirement of stock -- -- (46)
Ending balance 265,716 264,679 169,811
Accumulated deficit and accumulated
other comprehensive income:
Beginning balance (59,879) (77,778) (76,237)
Comprehensive income (loss):
Net income (loss) 3,714 16,245 (2,059)
Other comprehensive
income (loss) (5,439) 1,654 518
Total comprehensive
income (loss) (1,725) 17,899 (1,541)
Ending balance (61,604) (59,879) (77,778)
Total Stockholders' Equity $204,392 $205,078 $92,266
Accumulated other
comprehensive income:
Beginning balance $ (555) $ (2,209) $(2,727)
Comprehensive income (loss) -
Minimum pension liability
adjustment net of tax (5,439) 1,654 518
Ending balance $ (5,994) $ (555) $(2,209)
Stage Stores, Inc.
Notes to Consolidated Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES
Description of Business: Stage Stores, Inc. ("Stage Stores"
or the "Company"), through its wholly-owned subsidiary, Specialty
Retailers, Inc. ("SRI"), operates family apparel stores primarily
under the names "Bealls", "Palais Royal" and "Stage" offering
nationally recognized brand name family apparel, accessories,
cosmetics and footwear. As of January 30, 1999, the Company
operated 679 stores in thirty-four states located throughout the
United States.
Principles of Consolidation: The consolidated financial
statements include the accounts of Stage Stores and its wholly-
owned subsidiaries. All significant intercompany transactions
have been eliminated in consolidation.
Fiscal Year: References to a particular year are to the
Company's fiscal year which is the 52 or 53 week period ending on
the Saturday closest to January 31 of the following calendar year
(e.g., a reference to "1998" is a reference to the fiscal year
ended January 30, 1999).
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make certain estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Accounts Receivable Securitization: The Company securitizes
substantially all of its trade accounts receivable through a
wholly-owned special purpose entity, SRI Receivables Purchase
Co., Inc. ("SRPC"). SRPC holds a retained interest in the
securitization vehicle, a special purpose trust (the "Trust"),
which is represented by two certificates of beneficial ownership
in the Trust (the "Retained Certificates"). The Company accounts
for the Retained Certificates in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). Under
SFAS 115, the Retained Certificates are accounted for as
investments in debt securities and classified as trading
securities. Accordingly, the Retained Certificates are recorded
at fair value in the accompanying balance sheet with any change
in fair value reflected currently in income. The gain recorded to
income in 1998, 1997 and 1996 was $3.2 million, $0.7 million and
$1.3 million, respectively.
Merchandise Inventories: The Company states its merchandise
inventories at the lower of cost or market based upon the retail
method of accounting, cost being determined using the last-in,
first-out ("LIFO") method. Market is estimated on a pool-by-pool
basis. The Company believes that the LIFO method, which charges
the most recent merchandise costs to the results of current
operations, provides a better matching of current costs with
current revenues in the determination of operating results.
Property, Equipment and Leasehold Improvements: Property,
equipment and leasehold improvements are stated at cost and
depreciated over their estimated useful lives using the straight-
line method. The estimated useful lives of leasehold
improvements do not exceed the term of the related lease,
including renewal options. The estimated useful lives in years
are as follows:
Buildings 20-25
Store and office fixtures and equipment 5-12
Warehouse equipment 5-15
Leasehold improvements 5-50
Income Taxes: The provision for income taxes is computed
based on the pretax income included in the Consolidated Statement
of Operations. The asset and liability approach is used to
recognize deferred tax liabilities and
assets for the expected future tax consequences of temporary
differences between the carrying amounts for financial reporting
purposes and the tax basis of assets and liabilities.
Debt Issue Costs: Debt issue costs are accounted for as a
deferred charge and amortized on a straight-line basis over the
term of the related issue. Amortization of debt issue costs were
$2.6 million, $2.3 million and $2.1 million for 1998, 1997 and
1996, respectively.
Goodwill and Other Intangibles: The Company amortizes
goodwill and intangible assets on a straight-line basis over the
estimated future periods benefited, not to exceed forty years.
Amortization periods for goodwill and other intangibles
associated with acquisitions are currently five to forty years.
Each year, the Company evaluates the remaining useful life
associated with goodwill based upon, among other things,
historical and expected long-term results of operations.
Accumulated amortization of goodwill was $10.3 million and $7.4
million at January 30, 1999 and January 31, 1998, respectively.
Store Pre-Opening Expenses: Pre-opening expenses of new
stores are charged to operations in the year the store opens.
Advertising Expenses: Advertising costs are charged to
operations when the related advertising first takes place.
Advertising costs were $50.4 million, $39.5 million and $29.7
million for 1998, 1997 and 1996, respectively. Prepaid
advertising costs were $2.7 million and $3.6 million at January
30, 1999 and January 31, 1998, respectively.
Cash and Cash Equivalents: The Company considers highly
liquid investments with initial maturities of less than three
months to be cash equivalents in its statement of cash flows.
Financial Instruments: Except for the Retained Certificates,
the Company records all financial instruments at cost. The cost
of all financial instruments, except long-term debt and the
Retained Certificates, approximates fair value.
Impairment of Assets: The Company reviews for the impairment
of long-lived assets and certain identifiable intangibles
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An
impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its
eventual disposition are less than its carrying amount. The
Company has not identified any such impairment losses.
Earnings per Share: Basic earnings per share is computed
using the weighted average number of common shares outstanding
during the periods. Diluted earnings per share is computed using
the weighted average number of common shares as well as all
potentially dilutive common share equivalents outstanding. Stock
options and restricted stock are the only potentially dilutive
share equivalents the Company has outstanding for the periods
presented. Incremental shares of 543 thousand, 675 thousand and
533 thousand in 1998, 1997 and 1996, respectively, were used in
the calculation of diluted earnings per common share. Common
share equivalents of 408 thousand, 245 thousand and 256 thousand
in 1998, 1997 and 1996, respectively, were not included in the
computation of diluted earnings per share as they were anti-
dilutive.
Stock Split: Share and per share amounts for all periods
presented reflect the impact of a .94727 for 1 reverse stock
split of the Company's common stock consummated concurrently with
the Company's initial public offering in October 1996.
Comprehensive income: During the first quarter of 1998, the
Company adopted Statement of Financial Accounting Standards No.
130 "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose
financial statements. Other comprehensive income refers to
revenues, expenses, gains and losses that under generally
accepted accounting principles are recorded directly as an
adjustment to stockholders' equity. Minimum pension liability
adjustment is the Company's only component of comprehensive
income. The minimum pension liability adjustments recorded in
the accompanying statement of stockholders' equity are net of tax
expense (benefit) of $3.5 million, ($1.1) million and ($0.3)
million in 1998, 1997 and 1996, respectively. Prior year
statements have been restated in accordance with the provisions
of SFAS 130.
Start-up Costs: In April 1998, the Accounting Standards
Executive Committee issued Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" ("SOP 98-5"),
effective for fiscal years beginning after December 15, 1998.
SOP 98-5 provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred.
Initial adoption of SOP 98-5 is to be reported as the cumulative
effect of a change in accounting principle. The Company will
adopt SOP 98-5 in the first quarter of 1999.
Reclassifications: The accompanying Consolidated Financial
Statements include reclassifications from financial statements
issued in previous years.
NOTE 2 - C. R. ANTHONY COMPANY ACQUISITION
During June 1997, the Company acquired C.R. Anthony Company
("CR Anthony") which operated 246 family apparel stores in small
markets throughout the central and midwestern United States. The
Company issued 3,607,044 shares in exchange for the outstanding
common stock of CR Anthony. The purchase price for CR Anthony
(including the common stock issued by the Company) was
approximately $77.2 million, including acquisition costs and net
of cash acquired. The acquisition of CR Anthony was accounted
for under the purchase method of accounting. Accordingly, the
total acquisition cost was allocated to the assets acquired and
liabilities assumed at their estimated fair values. The excess
of the purchase price over the estimated fair value of such
assets and liabilities was recognized as goodwill and is being
amortized on a straight-line basis over forty years.
NOTE 3 - ACCOUNTS RECEIVABLE SECURITIZATION
Pursuant to the accounts receivable securitization (the
"Accounts Receivable Program"), the Company sells substantially
all of the accounts receivable generated by the holders of the
Company's private label credit card accounts to SRPC on a daily
basis in exchange for cash or an increase in the Retained
Certificates. SRPC is a separate limited-purpose subsidiary that
is operated in a fashion intended to ensure that its assets and
liabilities are distinct from those of the Company and its other
affiliates as SRPC's creditors have a claim on its assets prior
to becoming available to any creditor of the Company. The Trust
currently has $165.0 million of term certificates as well as a
revolving certificate facility (the "Revolving Certificate")
outstanding which represent undivided interests in the Trust.
During September 1998, the Company amended the Revolving
Certificate to increase the limit that may be outstanding from
$82.5 million to $165.0 million through March 31, 1999. The
maximum outstanding under the Revolving Certificate will be
reduced to $144.4 million from April 1, 1999 to September 30,
1999 and $82.5 million thereafter. Amounts outstanding under the
Revolving Certificate are funded by the issuance of commercial
paper in the open market through a facility agent at various
rates and maturities. If the commercial paper market is
unavailable, amounts outstanding under the Revolving Certificate
will be funded by a liquidity provider. If accounts 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 receivable balances exceed the certificates then
outstanding and the required Retained Certificates. The Trust
may issue additional series of certificates from time to time.
Terms of any future series will be determined at the time of
issuance. The outstanding balances of the term certificates
totaled $165.0 million at January 30, 1999 and January 31, 1998.
There was $115.6 million and $77.0 million outstanding under the
Revolving Certificate at January 30, 1999 and January 31, 1998
respectively.
Total accounts receivable transferred to the Trust during
1998, 1997 and 1996 were $585.3 million, $508.9 million and
$441.4 million, respectively. The cash flows generated from the
accounts receivable in the Trust are dedicated to: (i) the
purchase of new accounts receivable generated by the Company;
(ii) payment of a return on the certificates; and (iii) the
payment of a servicing fee to SRI. Any remaining cash flows are
remitted to SRPC. The term certificates entitle the holders to
receive a return, based upon the London Interbank Offered Rate
("LIBOR"), plus a specified margin. Principal payments commence
on December 31, 1999 but can be accelerated upon occurrence of
certain events. The Company is currently protected against
increases above 12% with respect to the term certificates under
an agreement entered into with a bank. The Company is exposed to
a loss in the event of non-performance by the bank, however, such
event is not anticipated. The Revolving Certificate entitles the
holder to receive a return based upon a commercial paper rate, or
a base rate plus a specified margin depending on the type of
funding outstanding for the Revolving Certificate. The purchase
commitment for the Revolving Certificate which was entered into
December 1997 is three years, subject to renewal at the option of
the parties. At January 30, 1999, the average rate of return on
the term certificates and the Revolving Certificate were 6.2% and
5.1%, respectively.
The following table reflects the total consolidated
operating performance of the Company's Accounts Receivable
Program, the results of which are included in selling, general
and administrative expenses in the Company's Consolidated
Financial Statements (in thousands):
Fiscal Year
1998 1997 1996
Finance charge income billed to cardholders $ 64,627 $51,141 $48,555
Return paid to certificateholders (15,879) (12,612) (11,428)
Servicing and bad debt expenses (44,588) (38,399) (37,626)
Other trust expenses (1,192) (788) (987)
$2,968 $(658) $(1,486)
NOTE 4 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements were as
follows (in thousands):
January 30, 1999 January 31, 1998
Land $3,074 $3,074
Buildings 16,980 16,911
Fixtures and equipment 198,588 146,260
Leasehold improvements 130,870 96,798
349,512 263,043
Accumulated depreciation 116,249 91,389
$233,263 $171,654
Depreciation expense was $25.9 million, $16.8 million and
$12.3 million for 1998, 1997 and 1996, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
January 30, 1999 January 31, 1998
Senior Notes $ 200,000 $ 200,000
Senior Subordinated Notes, net
of discount 99,696 99,673
Credit Facility 142,000 45,700
SRPC Notes 30,000 30,000
Other long-term debt 21,086 22,567
492,782 397,940
Less current maturities 4,814 2,692
$ 487,968 $ 395,248
The Senior Notes were issued during June 1997 by SRI with a
principal amount of $200.0 million, bear interest at 8.5% payable
semi-annually on January 15 and July 15, and mature July 15,
2005. The Senior Notes are general unsecured obligations and
rank senior to all subordinated debt of SRI including the Senior
Subordinated Notes.
The Senior Subordinated Notes were issued during June 1997
by SRI with a principal amount of $100.0 million and at a
discount which results in a combined effective interest rate of
9.03%. The Senior Subordinated Notes bear interest at 9% payable
semi-annually on January 15 and July 15 and mature July 15, 2007.
The Senior Subordinated Notes are subordinated to the obligations
under the Senior Notes.
The Senior Notes and Senior Subordinated Notes are
guaranteed by Stage Stores and contain restrictive covenants
which, among other things, limit: (i) SRI's ability to sell
certain assets, pay dividends, retire its common stock or retire
certain debt; (ii) its ability to incur additional debt or issue
stock; and (iii) certain related party transactions. The gross
proceeds from the issuance of these notes (approximately $299.7
million) were used to: (i) retire the Company's existing 10%
Senior Notes due 2000 and 11% Senior Subordinated Notes due 2003;
(ii) pay related fees and expenses; and (iii) pay costs
associated with the acquisition of CR Anthony.
Concurrently with the issuance of the Senior Notes and
Senior Subordinated Notes, SRI entered into a new credit facility
with a group of lenders (the "Credit Facility") which replaced
the Company's existing $75.0 million credit facility. The Credit
Facility provides for: (i) a $100.0 million working capital and
letter of credit facility (the "Working Capital Facility")
pursuant to which SRI shall have the right at any time prior to
June 17, 2000 to solicit one or more lenders and/or new financial
institutions to provide up to $25 million in additional
commitments to increase the Working Capital Facility to an amount
not to exceed $125 million in the aggregate, subject to certain
conditions, of which up to $50 million may be used for letters of
credit; and (ii) a $100.0 million expansion facility (the
"Expansion Facility"). The Credit Facility matures on June 14,
2002 provided that in addition to certain mandatory reductions in
commitments, the commitments under the Expansion Facility will be
reduced on the fourth anniversary of the signing of the Credit
Facility by the amount, if any, necessary so that total
reductions in the amount of the commitments under the Expansion
Facility (taking into account all mandatory reductions) will have
been at least $25 million. SRI will pay a commitment fee on the
unused commitments of each of the Working Capital Facility and
Expansion Facility payable quarterly in arrears. The amount of
the commitment fee will be determined based on the Adjusted
Leverage Ratio (as defined in the Credit Facility), and will
range from 0.25% to 0.50% per annum. Advances under the Working
Capital Facility and Expansion Facility will bear interest at the
Company's option, at the Base Rate plus the applicable Margin
Percentage or at the Eurodollar Rate plus the applicable Margin
Percentage (each as defined in the Credit Facility). The Margin
Percentage will be determined from time to time based on the
Adjusted Leverage Ratio and was 1.75% for the Base Rate and 2.75%
for the Eurodollar Rate at January 30, 1999. The effective
interest rate for borrowings outstanding under the Credit
Facility was 7.6% at January 30, 1999.
The Credit Facility contains covenants which, among other
things, restrict the: (i) incurrence of additional debt; (ii)
incurrence of capitalized lease obligations; (iii) payment of
dividends; (iv) formation of certain business combinations; (v)
acquisition of subordinated debt; (vi) use of proceeds received
under the agreement; (vii) aggregate amount of capital
expenditures; (viii) transactions with related parties; and (ix)
changes in lines of business. In addition, the Credit Facility
requires the Company to maintain compliance with certain
specified financial covenants, including covenants relating to
minimum interest coverage, minimum fixed charge coverage and
maximum leverage ratios. The Credit Facility also limits the
amount which can be outstanding for a specified length of time
each year. A portion of the Credit Facility is secured by SRI's
distribution center located in Jacksonville, Texas, including
equipment located therein and a pledge of SRPC stock. The net
book value of the distribution center was approximately $6.0
million at January 30, 1999.
During 1996, the Company issued $30.0 million in aggregate
principal amount of 12.5% Trust Certificate-Backed Notes (the
"SRPC Notes"). The SRPC Notes are collateralized by the Retained
Certificates. Interest and principal payments are made from
amounts otherwise received by SRPC from funds associated with the
Retained Certificates and are non-recourse to the Company to the
extent these funds are insufficient to make scheduled interest
and principal payments. Interest is payable semi-annually on
June 15 and December 15 of each year commencing December 15,
1996. Principal repayments are scheduled to begin during
December 2000.
In connection with various acquisitions, the Company has
indebtedness which bear interest between 7% and 12% and maturity
dates between 1998 through 2003.
Aggregate maturities of long-term debt excluding the Credit
Facility for the next five years are: 1999 - $4.8 million; 2000 -
$34.8 million; 2001 - $2.6 million; 2002 - $2.7 million and 2003
- - $14.2 million.
Management estimates the fair value of its long-term debt to
be $482.4 million and $414.0 million at January 30, 1999 and
January 31, 1998, respectively. In developing its estimates,
management considered quoted market prices for each instrument,
if available, current market interest rates in relation to the
coupon interest rates of each instrument, the relative
subordination of each instrument and the relative liquidity of
the instrument as indicated by the presence or lack of an active
market.
NOTE 6 - STOCKHOLDERS' EQUITY
The Company's authorized common equity securities consist of
par value $0.01 per share common stock ("Common Stock") and par
value $0.01 per share Class B common stock ("Class B Common
Stock"). Except as otherwise described herein, all shares of
Common Stock and Class B Common Stock are identical and entitle
the holders thereof to the same rights and privileges (except
with respect to voting privileges). Holders of Class B Common
Stock may elect at any time to convert any or all of such shares
into Common Stock, on a share-for-share basis, to the extent the
holder thereof is not prohibited from owning additional voting
securities by virtue of regulatory restrictions. The holders of
Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Except as required by law,
holders of Class B Common Stock do not have the right to vote on
any matters to be voted upon by the stockholders.
During October 1996, the Company completed an initial public
offering whereby the Company sold 10,750,000 shares of its common
stock to the public. The net proceeds of $165.7 million were
used primarily to retire the 12 3/4% Senior Discount Debentures
due 2000 at 112.7% of the accreted value ($120.0 million).
During September 1997, the Company completed an offering of
approximately 7.1 million shares of common stock, 6.4 million
shares of which were secondary shares representing the shares
owned by two venture capital firms. The remaining 650,000 shares
were issued as primary shares, a result of an over-allotment
provision. The shares sold by the Company resulted in net
proceeds to the Company of approximately $20.7 million, which
were used to reduce borrowings outstanding under the Company's
Credit Facility.
In November 1998, the Company adopted a Stockholder Rights
Plan designed to protect Company stockholders in the event of
takeover activity that would deny them the full value of their
investment. Terms of this plan provide for a dividend
distribution of one right for each share of Common Stock of the
Company to holders of record at the close of business on November
13, 1998. The rights will become exercisable only in the event,
with certain exceptions, a person or group of affiliated or
associated persons accumulates 15% or more of the Company's
voting stock, or if a person or group announces an offer to
acquire 15% or more. The rights will expire on November 10,
2008. Each right will entitle the holder to buy one one-hundred
thousandth of a share of a new series of preferred stock at a
price of $60. In addition, upon the occurrence of certain
events, holders of the rights would be entitled to purchase
either Company stock or shares in an "acquiring entity" at half
of market value. Further, at any time after a person or group
acquires 15% or more (but less than 50%) of the Company's
outstanding voting stock, the Board of Directors may, at its
option, exchange part or all of the Rights (other than Rights
held by the acquiring person or group, which would become void)
for shares of the Company's common stock on a one-for-one basis.
The Company generally will be entitled to redeem the rights at
$0.01 per right at any time until the tenth day following the
acquisition of a 15% position in its voting stock.
NOTE 7 - STOCK OPTION PLANS
In 1993, the Company adopted the Third Amended and Restated
Stock Option Plan (the "1993 Stock Option Plan") designed to
provide incentives to present and future executive, managerial
and other key employees and advisors to the Company (the
"Participants") as selected by the Board of Directors or the
compensation committee of the Board of Directors (the "Board").
All options granted under the 1993 Stock Option Plan were non-
qualified within the meaning of Section 422A of the Internal
Revenue Code. The number of shares of common stock which could
be granted under the 1993 Stock Option Plan was 1,894,540 shares.
As of January 30, 1999, there were 924,394 options outstanding
under the 1993 Stock Option Plan.
During 1996, the Company adopted the1996 Equity Incentive
Plan (the "Incentive Plan"). The Incentive Plan provides for the
granting of the following types of awards: stock options, stock
appreciation rights ("SARs"), restricted stock, performance
units, performance grants and other types of awards that the
Board deems to be consistent with the purposes of the Incentive
Plan. An aggregate of 1,500,000 shares of common stock have been
reserved for issuance under the Incentive Plan. No Participant
shall be entitled to receive grants of common stock, stock
options or SARs with respect to common stock, in any calendar
year in excess of 400,000 shares in the aggregate. As of January
30, 1999, there were 930,496 options and 290,800 shares of
restricted stock outstanding under the Incentive Plan.
The Board will have exclusive discretion to select the
Participants and to determine the type, size and terms of each
award, to modify the terms of awards, to determine when awards
will be granted and paid, and to make all other determinations
which it deems necessary or desirable in the interpretation and
administration of the Incentive Plan. The Incentive Plan is
scheduled to terminate ten years from the date that the Incentive
Plan was initially approved and adopted by the stockholders of
the Company, unless extended for up to an additional five years
by action of the Board. With limited exceptions, including
termination of employment as a result of death, disability or
retirement, or except as otherwise determined by the Board,
rights to these forms of contingent compensation are forfeited if
a recipient's employment or performance of services terminates
within a specified period following the award. Generally, a
Participant's rights and interest under the Incentive Plan will
not be transferable except by will or by the laws of descent and
distribution.
Options are rights to purchase a specified number of shares
of common stock at a price fixed by the Board. The option price
may be equal to or greater than the fair market value of the
underlying shares of common stock, but in no event less than the
fair market value on the date of grant. Options granted under
the 1993 Stock Option Plan generally become exercisable in
installments of 20% per year on each of the first through the
fifth anniversaries of the grant date and have a maximum term of
ten years. Options granted under the Incentive Plan generally
become exercisable in installments of 25% per year on each of the
first through fourth anniversaries of the grant date and have a
maximum term of ten years.
A summary of the option activity under the various plans
follows:
Number of Weighted
Outstanding Average
Options Option
Price
Options outstanding at February 3, 1996 1,005,534 $ 1.80
Granted 783,819 10.72
Surrendered (31,550) 4.48
Exercised (282,222) 1.10
Options outstanding at February 1, 1997 1,475,581 6.61
Granted 570,550 23.84
Surrendered (124,015) 13.31
Exercised (208,023) 2.22
Options outstanding at January 31, 1998 1,714,093 12.39
Granted 505,200 38.08
Surrendered (147,185) 26.35
Exercised (217,218) 4.57
Options outstanding at January 30, 1999 1,854,890 19.15
Exercisable options under the various plans at January 31, 1998
and February 1, 1997
were 333,159 and 181,358 with a weighted average exercise price
of $2.87 and $1.55, respectively. A summary of outstanding and
exercisable options as of January 30, 1999 follows:
Weighted
Weighted Average Weighted
Number of Average Remaining Number of Average
Option Outstanding Exercise Contractual Remaining Exercise
Price Options Price Life Options Price
$0.00 - $0.12 84,308 $0.11 4.4 84,308 $0.11
2.24 - 3.05 271,835 2.77 5.9 197,021 2.80
5.00 - 8.00 343,961 5.28 7.1 116,328 5.28
9.00 - 13.88 181,735 10.57 9.6 6,829 10.56
17.00 - 21.15 245,400 20.90 7.5 8,250 19.95
22.00 - 30.00 391,401 22.85 8.0 107,766 23.25
33.75 - 42.13 28,000 37.35 8.8 6,250 37.14
49.75 - 51.88 308,250 51.61 9.1 -- --
1,854,890 19.15 526,752 7.88
During 1998, 73,300 shares of restricted stock with a
weighted average grant-date fair value of $41.48 were granted
under the Incentive Plan and vest 25% per year on each of the
first through fourth anniversaries of the grant date. During
1997, 220,000 shares of restricted stock with a weighted average
grant date fair value of $32.04 were granted under the Incentive
Plan and vest at the end of a three year period and contain
certain accelerated vesting provisions. No shares were vested at
January 30, 1999. Compensation expense is being amortized over
the vesting period on a straight-line basis.
The Company applies Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" in accounting for
its plans. Compensation expense was $3.2 million, $0.5 million
and $0.3 million in 1998, 1997 and 1996, respectively. The
following unaudited pro forma data is calculated as if
compensation cost for the Company's stock option plans were
determined based upon the fair value at the grant date for awards
under these plans consistent with the methodology prescribed
under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation":
Fiscal Year
1998 1997 1996
Pro forma net income (loss) (in thousands) $1,106 $15,407 $(2,653)
Pro forma basic earnings (loss) per common share 0.04 0.60 (0.17)
Pro forma diluted earnings (loss) per common share 0.04 0.58 (0.17)
Weighted average grant-date value of options granted 22.30 13.96 8.33
The fair value of the options granted is estimated using the
Black-Scholes option-pricing model with the following assumptions
for 1998: no dividend yield; volatility of 47.32%; risk-free
interest rate of 4.9%; assumed forfeiture rate at 71.27% and an
expected life of 7.8 years. For 1997, the following assumptions
were used: no dividend yield; volatility of 47.32%; risk-free
interest rate of 5.5%; assumed forfeiture rate of 76.92% and an
expected life of 7.42 years. For 1996, the following assumptions
were used: no dividend yield; volatility of 34.35%; risk-free
interest rate of 6.25%; assumed forfeiture rate of 68.26% and an
expected life of eight years. The pro forma amounts above are
not likely to be representative of future years because options
vest over several years and additional awards generally are made
each year.
NOTE 8 - EMPLOYEE BENEFIT PLANS
During 1998, the Company adopted Statement of Financial
Accounting Standards No. 132 "Employers' Disclosures about
Pensions and other Postretirement Benefits - an amendment of FASB
Statements No. 87, 88, and 106" ("SFAS 132"). SFAS 132
standardizes the disclosure requirements for pensions and other
postretirement benefits. Prior year disclosures have been
restated in accordance with the provisions of SFAS 132.
Pension benefits for employees are provided under the SRI
Restated Retirement Plan (the "Retirement Plan"), a qualified
defined benefit plan. Benefits are administered through a trust
arrangement which provides monthly payments or lump sum
distributions. The Retirement Plan covers substantially all
employees who have completed one year of service with 1,000 hours
of service as of June 30, 1998. Benefits under the plan are
based upon a percentage of the participant's earnings during each
year of credited service. Supplemental pension benefits for
certain key executives are provided under the SRI Supplemental
Executive Retirement Plan (the "Supplemental Retirement Plan"), a
non-qualified defined benefit plan.
Information regarding the Retirement Plan and the
Supplemental Retirement Plan is as follows (in thousands):
January 30, 1999 January 31, 1998
Change in benefit obligation:
Benefit obligation at beginning of year $ 34,716 $ 31,641
Service cost 917 1,738
Interest cost 2,191 2,328
Actuarial (gain) loss 3,056 970
Benefits paid (3,913) (1,961)
Plan curtailment (5,991) --
Plan settlement 663 --
Projected benefit obligation
at end of year 31,639 34,716
Change in plan assets:
Fair value of plan assets at
beginning of year 26,624 20,942
Actual return on plan assets (1,550) 5,369
Employer contributions 550 2,574
Benefits paid (3,913) (1,961)
Fair value of plan assets at end
of year 21,711 26,924
Funded status (9,928) (7,792)
Unrecognized prior service cost 326 (15)
Unrecognized net actuarial (gain) loss 9,890 6,405
Net amount recognized $ 288 $ (1,402)
Amounts recognized in the consolidated
balance sheet consist of:
Accrued benefit liability $ (9,538) $ (2,310)
Accumulated other comprehensive income 9,826 908
Net amount recognized $ 288 $ (1,402)
January 30, 1999 January 31, 1998
Weighted-average assumptions as of
year end:
Discount rate 6.5% 7.75%
Expected long-term rate of return
on plan assets 9.0% 9.0%
Rate of annual compensation increase N/A 4.0%
Rate of increase in maximum benefit
and compensation limits 3.5% 3.5%
Assumed rate of increase in taxable
wage base N/A N/A
The components of pension cost for the Retirement Plan and the
Supplemental Retirement Plan were as follows (in thousands):
Fiscal Year
1998 1997 1996
Net periodic pension cost for
the fiscal year ended:
Service cost $ 917 $ 1,738 $ 1,269
Interest cost 2,191 2,328 2,085
Expected return on plan assets (2,367) (2,521) (2,047)
Amortization of prior service cost 18 (6) (6)
Recognized actuarial loss 127 507 795
Net periodic pension cost $ 886 $ 2,046 $ 2,096
The Company's funding policy for the Retirement Plan is to
contribute the minimum amount required by applicable regulations.
Retirement Plan assets include 100,000 shares of Stage Stores
common stock purchased during the Company's initial public
offering.
Effective June 30, 1998, the Retirement Plan was frozen.
There will be no future benefit accruals after that date. Any
service after that date will continue to count toward vesting and
eligibility for normal and early retirement. The Company
recorded a gain of $2.0 million associated with the plan
curtailment.
The Company has a contributory 401(k) savings plan covering
substantially all qualifying employees. Under the 401(k),
participants may contribute up to 15% of their qualifying
earnings, subject to certain restrictions. The Company currently
matches 50% of each participant's contributions, limited to 6% of
each participant's salary. The Company's matching contributions
were approximately $0.8 million for 1998 and $0.4 million for
1997 and 1996.
NOTE 9 - OPERATING LEASES
The Company leases stores, service center facilities, the
corporate headquarters and equipment under operating leases. A
number of store leases provide for escalating minimum rent.
Rental expense is recognized on a straight-line basis over the
life of such leases. The majority of the Company's store leases
provide for contingent rentals, generally based upon a percentage
of net sales. The Company has renewal options for most of its
store leases; such leases generally require that the Company pay
for utilities, taxes and maintenance expense. A summary of
rental expense associated with operating leases follows (in
thousands):
Fiscal Year
1998 1997 1996
Minimum rentals $48,022 $37,601 $30,397
Contingent rentals 3,993 4,545 3,318
Equipment rentals 3,854 1,240 829
$55,869 $43,386 $34,544
Minimum rental commitments on long-term operating leases at
January 30, 1999, net of sub-leases, are as follows (in
thousands):
Fiscal Year:
1999 $52,380
2000 45,261
2001 39,375
2002 34,022
2003 28,482
Thereafter 117,565
$317,085
NOTE 10 - INCOME TAXES
All Company operations are domestic. Income tax expense
charged to continuing operations consisted of the following (in
thousands):
Fiscal Year
1998 1997 1996
Federal income tax expense (benefit):
Current $ (66) $11,012 $(7,443)
Deferred 3,246 8,413 15,399
3,180 19,425 7,956
State income tax expense (benefit):
Current 150 193 764
Deferred (875) 2,005 (126)
(725) 2,198 638
$ 2,455 $21,623 $8,594
A reconciliation between the federal income tax expense
charged to continuing operations computed at statutory tax rates
and the actual income tax expense recorded follows (in
thousands):
Fiscal Year
1998 1997 1996
Federal income tax expense
at the statutory rate $ 2,159 $19,657 $7,915
State income taxes, net (471) 1,428 414
Permanent differences, net 767 538 265
$ 2,455 $21,623 $8,594
In connection with the early retirement of various
indebtedness, the Company recorded extraordinary charges of $18.3
million and $16.1 million in 1997 and 1996, respectively. These
charges were net of applicable income taxes of $11.5 million and
$9.8 million in 1997 and 1996, respectively.
The 1997 income tax benefit relating to the extraordinary
items is comprised of a $9.9 million deferred federal tax benefit
and a $1.6 million deferred state tax benefit. The 1996 income
tax benefit relating to the extraordinary item is comprised of a
$7.7 million current federal tax benefit, a $0.9 million deferred
federal tax benefit and a $1.2 million state tax benefit.
Deferred tax liabilities (assets) consist of the following
(in thousands):
January 30, 1999 January 31, 1998
Gross deferred tax liabilities:
Depreciation and amortization $14,790 $11,811
Inventory reserves -- 2,841
State income taxes 1,838 1,497
Other 7,786 6,554
24,414 22,703
Gross deferred tax assets:
Retained Certificates (2,460) (3,070)
Net operating loss carryforwards (25,160) (24,604)
AMT tax credit carryforward (3,040) (3,094)
Accrued expenses (4,558) (4,380)
Pensions (4,231) (1,378)
Escalating leases (1,802) (2,242)
Accrued payroll costs (1,445) (2,557)
Inventory reserves (2,546) --
Other (382) (1,481)
(45,624) (42,806)
Net deferred tax assets $(21,210) $(20,103)
The Company has net operating loss carryforwards for
federal income tax purposes of approximately $55.5 million, which
if not utilized will expire in varying amounts between 2007 and
2020. Included in this amount is approximately $8.3 million
which is subject to an annual limitation of approximately $2.7
million. The Company has net operating loss carryforwards for
state income tax purposes of approximately $109.4 million, which
if not utilized, will expire in varying amounts between 2003 and
2020.
NOTE 11 - QUARTERLY FINANCIAL INFORMATION
Unaudited quarterly financial data is summarized as follows
(in thousands):
Fiscal Year 1998
Q1 Q2 Q3 Q4
Net sales $272,788 $271,805 $271,605 $357,349
Gross profit 87,225 82,239 75,252 89,593
Operating income 25,278 12,678 7,226 7,458
Net income (loss) 9,035 765 (3,152) (2,934)
Basic earnings (loss)
per common share 0.33 0.03 (0.11) (0.10)
Diluted earnings (loss)
per common share 0.32 0.03 (0.11) (0.10)
Fiscal Year 1997
Q1 Q2 Q3 Q4
Net sales $191,512 $238,137 $274,269 $369,398
Gross profit 61,925 73,902 86,822 120,488
Operating income 20,524 19,736 15,789 38,391
Income before
extraordinary items 7,094 6,246 3,673 17,527
Net income (loss) 7,094 (11,134) 3,523 16,762
Basic earnings (loss)
per common share data:
Basic earnings per
common share before
extraordinary items 0.30 0.27 0.13 0.63
Extraordinary items -
early retirement
of debt -- (0.74) -- (0.03)
Basic earnings (loss)
per common share 0.30 (0.48) 0.13 0.60
Diluted earnings (loss)
per common share data:
Diluted earnings per
common share before
extraordinary items 0.30 0.25 0.13 0.62
Extraordinary items -
early retirement
of debt -- (0.68) -- (0.03)
Diluted earnings (loss)
per common share 0.30 (0.44 ) 0.13 0.59
NOTE 12 - RELATED PARTY TRANSACTIONS
Pursuant to a professional service agreement with an
affiliate of a principal stockholder, the Company paid fees for
professional services rendered and expense reimbursements in the
amount of $2.7 million for 1996. Upon consummation of the
Company's initial public offering, this agreement was terminated.
As a result, there were no such fees in 1998 and 1997.
The Company has made loans, in an aggregate principal amount
of $2.1 million and $1.2 million at January 30, 1999 and January
31, 1998, respectively, to certain executive officers of the
Company. These loans are full recourse loans and are secured by
a pledge of the shares of common stock owned by such executive
officers. The loans provide for interest from 5.7% to 7.25% and
mature no later than June 1, 2000.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Litigation: The Company is subject to claims and litigation
arising in the normal course of its business. The Company does
not believe that any of these proceedings will have a material
adverse effect on its financial position or its results of
operations.
Letters of Credit: The Company issues letters of credit to
support certain merchandise purchases which are required to be
collateralized. The Company had outstanding letters of credit
totaling approximately $12.4 million at January 30, 1999, all of
which were collateralized by the Credit Facility (see Note 5).
These letters of credit expire within twelve months of issuance.
Concentration of Credit Risk: Financial instruments which
potentially subject the Company to concentrations of credit risk
are primarily cash, short-term investments and the accounts
receivable transferred to the Trust (see Note 3). The Company's
cash management and investment policies restrict investments to
low-risk, highly-liquid securities and the Company performs
periodic evaluations of the relative credit standing of the
financial institutions with which it deals. The credit risk
associated with the accounts receivable transferred to the Trust
is limited by the large number of customers in the Company's
customer base. The Company's customers primarily reside in the
central United States.
NOTE 14 - CONSOLIDATING FINANCIAL STATEMENTS
SRI is the primary obligor under the long-term indebtedness
issued in connection with the Note Offering (see Note 5). Stage
Stores and Specialty Retailers, Inc. (NV), a wholly-owned
subsidiary of Stage Stores (which was incorporated during June,
1997), are guarantors under such indebtedness. The consolidating
condensed financial information for Stage Stores and its wholly-
owned subsidiaries are presented below. The financial data for
SRI Receivables Purchase Co. does not reflect the total
consolidated operating performance of the Company's Accounts
Receivable Program. For a summary of the total consolidated
operating performance of the Company's Accounts Receivable
Program, see Note 3.
Consolidating Condensed Balance Sheet
January 30, 1999
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Receivables Eliminations Consolidated
Inc. Purchase
Co.
ASSETS
Cash and cash equivalents $10,882 $ -- $ -- $10,882
Undivided interest in
accounts receivable trust (13,228) 83,044 -- 69,816
Merchandise inventories, net 341,316 -- -- 341,316
Prepaid expenses 24,082 899 -- 24,981
Other current assets 53,566 5,926 -- 59,492
Total current assets 416,618 89,869 -- 506,487
Property, equipment and
leasehold improvements, net 231,499 -- -- 231,499
Goodwill, net 92,551 -- -- 92,551
Other assets 18,967 4,402 -- 23,369
Investment in subsidiaries 37,886 -- (37,886) --
Total assets $797,521 $94,271 $(37,886) $853,906
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Accounts payable $82,779 $ -- $ -- $82,779
Accrued expenses and other
current liabilities 49,726 2,888 -- 52,614
Current portion of
long-term debt 4,814 -- -- 4,814
Total current liabilities 137,319 2,888 -- 140,207
Long-term debt 457,968 30,000 -- 487,968
Intercompany notes/advances 151,273 23,497 -- 174,770
Other long-term liabilities 25,021 -- -- 25,021
Total liabilities 771,581 56,385 -- 827,966
Preferred stock -- -- -- --
Common stock -- -- -- --
Class B common stock -- -- -- --
Additional paid-in capital 3,317 32,130 (32,130) 3,317
Accumulated earnings (deficit) 28,617 5,756 (5,756) 28,617
Accumulated other
comprehensive income (5,994) -- -- (5,994)
Stockholders' equity 25,940 37,886 (37,886) 25,940
Total liabilities and
stockholders' equity $797,521 $94,271 $(37,886) $853,906
Consolidating Condensed Balance Sheet
January 30, 1999
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Retailers, Eliminations Consolidated
Inc. Inc. (NV)
ASSETS
Cash and cash equivalents $ 2 $ 1,948 $ -- $12,832
Undivided interest in
accounts receivable trust -- -- -- 69,816
Merchandise inventories, net -- -- -- 341,316
Prepaid expenses -- -- -- 24,981
Other current assets -- -- -- 59,492
Total current assets 2 1,948 -- 508,437
Property, equipment and
leasehold improvements, net -- 1,764 -- 233,263
Goodwill, net -- -- -- 92,551
Other assets -- 60 -- 23,429
Investment in subsidiaries 204,349 -- (204,349) --
Total assets $204,351 $ 3,772 $(204,349) $857,680
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Accounts payable $ -- $ -- $ -- $82,779
Accrued expenses and other
current liabilities 92 -- -- 52,706
Current portion of
long-term debt -- -- -- 4,814
Total current liabilities 92 -- -- 140,299
Long-term debt -- -- -- 487,968
Intercompany notes/advances (133) (174,637) -- --
Other long-term liabilities -- -- -- 25,021
Total liabilities (41) (174,637) -- 653,288
Preferred stock -- -- -- --
Common stock 267 -- -- 267
Class B common stock 13 -- -- 13
Additional paid-in capital 265,716 160,040 (163,357) 265,716
Accumulated earnings (deficit) (55,610) 18,369 (46,986) (55,610)
Accumulated other
comprehensive income (5,994) -- 5,994 (5,994)
Stockholders' equity 204,392 178,409 (204,349) 204,392
Total liabilities and
stockholders' equity $204,351 $ 3,772 $(204,349) $857,680
Consolidating Condensed Balance Sheet
January 31, 1998
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Receivables Eliminations Consolidated
Inc. Purchase
Co.
ASSETS
Cash and cash equivalents $23,299 $ -- $ -- $23,299
Undivided interest in
accounts receivable trust (11,234) 72,445 -- 61,211
Merchandise inventories, net 303,115 -- -- 303,115
Prepaid expenses 19,944 473 -- 20,417
Other current assets 49,980 7,808 -- 57,788
Total current assets 385,104 80,726 -- 465,830
Property, equipment and
leasehold improvements, net 170,401 -- -- 170,401
Goodwill, net 95,486 -- -- 95,486
Other assets 20,653 5,757 -- 26,410
Investment in subsidiaries 40,312 -- (40,312) --
Total assets $711,956 $86,483 $(40,312) $758,127
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Accounts payable $91,799 $ -- $ -- $91,799
Accrued expenses and other
current liabilities 52,409 630 -- 53,039
Current portion of
long-term debt 2,692 -- -- 2,692
Total current liabilities 146,900 630 -- 147,530
Long-term debt 365,248 30,000 -- 395,248
Intercompany notes/advances 149,258 14,324 -- 163,582
Other long-term liabilities 9,874 1,217 -- 11,091
Total liabilities 671,280 46,171 -- 717,451
Preferred stock -- -- -- --
Common stock -- -- -- --
Class B common stock -- -- -- --
Additional paid-in capital 3,317 34,556 (34,556) 3,317
Accumulated earnings (deficit) 37,914 5,756 (5,756) 37,914
Accumulated other
comprehensive income (555) -- -- (555)
Stockholders' equity 40,676 40,312 (40,312) 40,676
Total liabilities and
stockholders' equity $711,956 $86,483 $(40,312) $758,127
Consolidating Condensed Balance Sheet
January 31, 1998
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Retailers, Eliminations Consolidated
Inc. Inc. (NV)
ASSETS
Cash and cash equivalents $ 16 $ -- $ -- $23,315
Undivided interest in
accounts receivable trust -- -- -- 61,211
Merchandise inventories, net -- -- -- 303,115
Prepaid expenses -- -- -- 20,417
Other current assets -- -- -- 57,788
Total current assets 16 -- -- 465,846
Property, equipment and
leasehold improvements, net -- 1,253 -- 171,654
Goodwill, net -- -- -- 95,486
Other assets -- -- -- 26,410
Investment in subsidiaries 205,075 -- (205,075) --
Total assets $205,091 $ 1,253 $(205,075) $759,396
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Accounts payable $ -- $ -- $ -- $91,799
Accrued expenses and other
current liabilities 252 -- -- 53,291
Current portion of
long-term debt -- -- -- 2,692
Total current liabilities 252 -- -- 147,782
Long-term debt -- -- -- 395,248
Intercompany notes/advances (436) (163,146) -- --
Other long-term liabilities 197 -- -- 11,288
Total liabilities 13 (163,146) -- 554,318
Preferred stock -- -- -- --
Common stock 265 -- -- 265
Class B common stock 13 -- -- 13
Additional paid-in capital 264,679 159,002 (162,319) 264,679
Accumulated earnings (deficit) (59,324) 5,397 (43,311) (59,324)
Accumulated other
comprehensive income (555) -- 555 (555)
Stockholders' equity 205,078 164,399 (205,075) 205,078
Total liabilities and
stockholders' equity $205,091 $1,253 $(205,075) $759,396
Consolidating Condensed Statement of Operations
Fiscal Year ended January 30, 1999
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Receivables Eliminations Consolidated
Inc. Purchase
Co.
Net sales $1,173,547 $ -- $ -- $1,173,547
Cost of sales related buying,
occupancy and distribution
expenses 839,238 -- -- 839,238
Gross profit 334,309 -- -- 334,309
Selling, general and
administrative expenses 277,523 (1,467) -- 276,056
Store opening and closure costs 10,192 -- -- 10,192
Operating income 46,594 1,467 -- 48,061
Interest expense, net 65,345 (3,435) -- 61,910
Income (loss) before
income taxes (18,751) 4,902 -- (13,849)
Income tax expense (benefit) (6,377) 1,826 -- (4,551)
Income (loss) before equity in
net earnings of subsidiaries (12,374) 3,076 -- (9,298)
Equity in net earnings
of subsidiaries 3,076 -- (3,076) --
Net income (loss) $(9,298) $3,076 $(3,076) $(9,298)
Consolidating Condensed Statement of Operations
Fiscal Year ended January 30, 1999
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Retailers, Eliminations Consolidated
Inc. Inc. (NV)
Net sales $ -- $ -- $ -- $1,173,547
Cost of sales and related
buying, occupancy and
distribution expenses -- -- -- 839,238
Gross profit -- -- -- 334,309
Selling, general and
administrative expenses 93 (4,672) -- 271,477
Store opening and closure costs -- -- -- 10,192
Operating income (93) 4,672 -- 52,640
Interest expense, net -- (15,439) -- 46,471
Income (loss) before
income taxes (93) 20,111 -- 6,169
Income tax expense (benefit) (33) 7,039 -- 2,455
Income (loss) before equity in
net earnings of subsidiaries (60) 13,072 -- 3,714
Equity in net earnings
of subsidiaries 3,774 -- (3,774) --
Net income (loss) $3,714 $13,072 $(3,774) $3,714
Consolidating Condensed Statement of Operations
Fiscal Year ended January 31, 1998
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Receivables Eliminations Consolidated
Inc. Purchase
Co.
Net sales $1,073,316 $ -- $ -- $1,073,316
Cost of sales and related
buying, occupancy and
distribution expenses 730,179 -- -- 730,179
Gross profit 343,137 -- -- 343,137
Selling, general and
administrative expenses 242,843 (2,865) -- 239,978
Store opening and closure costs 8,686 -- -- 8,686
Operating income 91,608 2,865 -- 94,473
Interest expense, net 47,746 (1,164) -- 46,582
Income (loss) before
income taxes 43,862 4,029 -- 47,891
Income tax expense (benefit) 17,234 1,483 -- 18,717
Income (loss) before equity in
net earnings of subsidiaries
and extraordinary item 26,628 2,546 -- 29,174
Equity in net earnings
of subsidiaries 1,904 -- (1,904) --
Income (loss) before
extraordinary item 28,532 2,546 (1,904) 29,174
Extraordinary item - early
retirement of debt (17,653) (642) -- (18,295)
Net income (loss) $10,879 $1,904 $(1,904) $10,879
Consolidating Condensed Statement of Operations
Fiscal Year ended January 31, 1998
(in thousands, unaudited)
Stage Specialty Eliminations Stage Stores
Stores, Retailers, Consolidated
Inc. Inc. (NV)
Net sales $ -- $ -- $ -- $1,073,316
Cost of sales and related
buying, occupancy and
distribution expenses -- -- -- 730,179
Gross profit -- -- -- 343,137
Selling, general and
administrative expenses 30 3 -- 240,011
Store opening and closure costs -- -- -- 8,686
Operating income (30) (3) -- 94,440
Interest expense, net -- (8,305) -- 38,277
Income (loss) before
income taxes (30) 8,302 -- 56,163
Income tax expense (benefit) -- 2,906 -- 21,623
Income (loss) before equity in
net earnings of subsidiaries
and extraordinary item (30) 5,396 -- 34,540
Equity in net earnings
of subsidiaries 16,275 -- (16,275) --
Income (loss) before
extraordinary item 16,245 5,396 (16,275) 34,540
Extraordinary item - early
retirement of debt -- -- -- (18,295)
Net income (loss) $16,245 $5,396 $(16,275) $16,245
Consolidating Condensed Statement of Operations
Fiscal Year ended February 1, 1997
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Receivables Eliminations Consolidated
Inc. Purchase
Co.
Net sales $776,550 $ -- $ -- $776,550
Cost of sales and related
buying, occupancy and
distribution expenses 532,563 -- -- 532,563
Gross profit 243,987 -- -- 243,987
Selling, general and
administrative expenses 178,497 (5,935) -- 172,562
Store opening and closure costs 2,838 -- -- 2,838
Operating income 62,652 5,935 -- 68,587
Interest expense, net 34,671 344 -- 35,015
Income (loss) before
income taxes 27,981 5,591 -- 33,572
Income tax expense (benefit) 10,261 2,023 -- 12,284
Income (loss) before equity in
net earnings of subsidiaries
and extraordinary item 17,720 3,568 -- 21,288
Equity in net earnings
of subsidiaries 3,568 -- (3,568) --
Income (loss) before
extraordinary item 21,288 3,568 (3,568) 21,288
Extraordinary item - early
retirement of debt (16,081) -- -- (16,081)
Net income (loss) $5,207 $3,568 $(3,568) $5,207
Consolidating Condensed Statement of Operations
Fiscal Year ended February 1, 1997
(in thousands, unaudited)
Stage Stage Stores
Stores, Eliminations Consolidated
Inc.
Net sales $ -- $ -- $776,550
Cost of sales and related
buying, occupancy and
distribution expenses -- -- 532,563
Gross profit -- -- 243,987
Selling, general and
administrative expenses 17 -- 172,579
Store opening and closure costs -- -- 2,838
Operating income (17) -- 68,570
Interest expense, net 10,939 -- 45,954
Income (loss) before
income taxes (10,956) -- 22,616
Income tax expense (benefit) (3,690) -- 8,594
Income (loss) before equity in
net earnings of subsidiaries
and extraordinary item (7,266) -- 14,022
Equity in net earnings
of subsidiaries 5,207 (5,207) --
Income (loss) before
extraordinary item (2,059) (5,207) 14,022
Extraordinary item - early
retirement of debt -- -- (16,081)
Net income (loss) $(2,059) $(5,207) $(2,059)
Consolidating Condensed Statement of Cash Flows
Fiscal Year ended January 30, 1999
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Receivables Eliminations Consolidated
Inc. Purchase
Co.
Cash flows from operating
activities:
Net cash provided by (used
in) operating activities $(28,747) $11,586 $ -- $(17,161)
Cash flows from investing
activities:
Investment in subsidiaries -- -- -- --
Additions to property
equipment and
leasehold improvments (88,047) -- -- (88,047)
Proceeds from the sales of
accounts receivable, net 2,504 (2,504) -- --
Dividend from subsidiary 9,082 -- (9,082) --
Net cash used in
investing activities (76,461) (2,504) (9,082) (88,047)
Cash flows from financing
activities:
Proceeds from working
capital facility 96,300 -- -- 96,300
Proceeds from issuance
of common stock -- -- -- --
Proceeds from capital
contribution -- -- -- --
Payments on long-term debt (2,596) -- -- (2,596)
Additions to debt issue costs (913) -- -- (913)
Dividend paid -- (9,082) 9,082 --
Net cash provided by (used
in) financing activities 92,791 (9,082) 9,082 92,791
Net increase (decrease) cash
and cash equivalents (12,417) -- -- (12,417)
Cash and cash equivalents:
Beginning of period 23,299 -- -- 23,299
End of period $10,882 $ -- $ -- $10,882
Consolidating Condensed Statement of Cash Flows
Fiscal Year ended January 30, 1999
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Retailers, Eliminations Consolidated
Inc. Inc. (NV)
Cash flows from operating
activities:
Net cash provided by (used
in) operating activities $(31) $1,682 $ -- $(15,510)
Cash flows from investing
activities:
Investment in subsidiaries (1,038) -- 1,038 --
Additions to property,
equipment and
leasehold improvements -- (672) -- (88,719)
Proceeds from the sales of
accounts receivable, net -- -- -- --
Dividend from subsidiary 100 -- (100) --
Net cash used in
investing activites (938) (672) 938 (88,719)
Cash flows from financing
activities:
Proceeds from working
capital facility -- -- -- 96,300
Proceeds from issuance
of common stock 955 -- -- 955
Proceeds from capital
contribution -- 1,038 (1,038) --
Payments on long-terrm debt -- -- -- (2,596)
Additions to debt issue costs -- -- -- (913)
Dividend paid -- (100) 100 --
Net cash provided by (used
in) financing activities 955 938 (938) 93,746
Net increase (decrease) in
cash and cash equivalents (14) 1,948 -- (10,483)
Cash and cash equivalents:
Beginning of period 16 -- -- 23,315
End of period $ 2 $1,948 $ -- $12,832
Consolidating Condensed Statement of Cash Flows
Fiscal Year ended January 31, 1998
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Receivables Eliminations Consolidated
Inc. Purchase
Co.
Cash flows from
operating activities:
Net cash provided by (used
in) operating activities $36,822 $(17,988) $ -- $18,834
Cash flows from
investing activities:
Acquisitions, net of
cash aquired (4,946) -- -- (4,946)
Investment in subsidiaries 21,243 -- -- 21,243
Intercompany notes/advances 22,522 -- -- 22,522
Additions to property,
equipment and
leasehold improvements (64,859) -- -- (64,859)
Proceeds from the sale of
accounts receivable, net (19,962) 19,962 -- --
Dividend from subsidiary 1,904 -- (1,904) --
Net cash used in
investing activities (44,098) 19,962 (1,904) (26,040)
Cash flows from
financing activities:
Proceeds from working
capital facility 45,700 -- -- 45,700
Proceeds from issuance
of long-term debt 299,718 -- -- 299,718
Proceeds from issuance
of common stock -- -- -- --
Proceeds from capital
contributions (21,243) -- -- (21,243)
Payments on long-term debt (299,533) -- -- (299,533)
Additions to debt issue costs (12,337) (70) -- (12,407)
Dividend paid -- (1,904) 1,904 --
Net cash provided by (used
in) financing activities 12,305 (1,974) 1,904 12,235
Net increase in cash and
cash equivalents 5,029 -- -- 5,029
Cash and cash equivalents:
Beginning of period 18,270 -- -- 18,270
End of period $23,299 $ -- $ -- $23,299
Consolidating Condensed Statement of Cash Flows
Fiscal Year ended January 31, 1998
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Retailers, Eliminations Consolidated
Inc. Inc. (NV)
Cash flows from operating
activities:
Net cash provided by (used
in) operating activities $ -- $ -- $ -- $18,834
Cash flows from investing
activities:
Acquisitions, net of
cash aquired -- -- -- (4,946)
Investment in subsidiaries (21,243) -- -- --
Intercompany notes/advances (1,279) (21,243) -- --
Additions to property,
equipment and
leasehold improvements -- -- -- (64,859)
Proceeds from the sales of
accounts receivable, net -- -- -- --
Dividend from subsidiary -- -- -- --
Net cash used in
investing activities (22,522) (21,243) -- (69,805)
Cash flows from financing
activities:
Proceeds from working
capital facility -- -- -- 45,700
Proceeds from issuance
of long-term debt -- -- -- 299,718
Proceeds from issuance
of common stock 22,522 -- -- 22,522
Proceeds from capital
contributions -- 21,243 -- --
Payments on long-term debt -- -- -- (299,533)
Additions to debt issue costs -- -- -- (12,407)
Dividend paid -- -- -- --
Net cash provided by (used
in) financing activities 22,522 21,243 -- 56,000
Net increase in cash
and cash equivalents -- -- -- 5,029
Cash and cash equivalents:
Beginning of period 16 -- -- 18,286
End of period $ 16 $ -- $ -- $23,315
Consolidating Condensed Statement of Cash Flows
Fiscal Year ended February 1, 1997
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Receivables Eliminations Consolidated
Inc. Purchase
Co.
Cash flows from
operating activities:
Net cash provided by (used
in) operating activities $(20,479) $20,583 $ -- $ 104
Cash flows from
investing activities:
Acquisitions, net of cash
aquired (27,346) -- -- (27,346)
Intercompany notes/advances -- -- -- --
Additions to property,
equipment and
leasehold improvements (26,096) -- -- (26,096)
Proceeds from the sales of
accounts receivable, net 18,284 (18,284) -- --
Net cash used in
investing activities (35,158) (18,284) -- (53,442)
Cash flows from
financing activities:
Proceeds from issuance of
long-term debt -- 30,000 -- 30,000
Proceeds from issuance
of common stock -- -- -- --
Payments on long-term debt (140,677) -- -- (140,677)
Intercompany notes/advances 165,899 -- -- 165,899
Redemption of common stock -- -- -- --
Additions to debt issue costs (1,056) (2,822) -- (3,878)
Dividends paid to SRI 29,477 (29,477) -- --
Net cash provided by (used
in) financing activities 53,643 (2,299) -- 51,344
Net increase (decrease) in
cash and cash equivalents (1,994) -- -- (1,994)
Cash and cash equivalents:
Beginning of period 20,264 -- -- 20,264
End of period $18,270 $ -- $ -- $18,270
Consolidating Condensed Statement of Cash Flows
Fiscal Year ended February 1, 1997
(in thousands, unaudited)
Stage Stage Stores
Stores, Eliminations Consolidated
Inc.
Cash flows from operating
activities:
Net cash provided by (used
in) operating activities $(17) $ -- $ 87
Cash flows from investing
activities:
Acquisitions, net of cash
aquired -- -- (27,346)
Intercompany notes/advances (165,899) 165,899 --
Additions to property,
equipment and
leasehold improvements -- -- (26,096)
Proceeds from the sales of
accounts receivable, net -- -- --
Net cash used in
investing activities (165,899) 165,899 (53,442)
Cash flows from financing
activities:
Proceeds from issuance
of long-term debt -- -- 30,000
Proceeds from issuance
of common stock 165,969 -- 165,969
Payments on long-term debt -- -- (140,677)
Intercompany notes/advances -- (165,899) --
Redemption of common stock (46) -- (46)
Additions to debt issue costs -- -- (3,878)
Dividends paid to SRI -- -- --
Net cash provided by (used
in) financing activities 165,923 (165,899) 51,368
Net increase (decrease) in
cash and cash equivalents 7 -- (1,987)
Cash and cash equivalents:
Beginning of period 9 -- 20,273
End of period $ 16 $ -- $18,286
EXHIBIT INDEX
The following documents are the exhibits to the Form 10-K.
For convenient reference, each exhibit is listed according to the
Exhibit Table of Regulation S-K.
Exhibit
Number Exhibit
*2.1 Agreement and Plan of Merger, dated as of March 5,
1997, between Stage Stores, Inc. and C.R. Anthony
Company (Incorporated by Reference to Exhibit 2.1 of
Registration No. 333-27809 on Form S-4).
*2.2 First Amendment to Agreement and Plan of Merger,
dated as of May 20, 1997, between Stage Stores, Inc.
and C. R. Anthony Company (Incorporated by Reference to
Exhibit 2.2 of Registration No. 333-27809 on Form S-4).
*3.1 Amended and Restated Certificate of Incorporation
of Stage Stores, Inc. (Incorporated by Reference to
Exhibit 3.3 of Registration No. 333-5855 on Form S-1).
*3.2 Amended and Restated By-Laws of Stage Stores, Inc.
(Incorporated by Reference to Exhibit 3.4 of
Registration No. 333-5855 on Form S-1).
*3.3 Restated Articles Certificate of Incorporation of
Specialty Retailers, Inc. (Incorporated by Reference to
Exhibit 3.3 of Registration No. 333-32695 on Form S-4).
*3.4 Amended and Restated Bylaws of Specialty
Retailers, Inc. (Incorporated by Reference to Exhibit
3.4 of Registration No. 333-32695 on Form S-4).
*3.5 Certificate of Incorporation of
Specialty Retailers, Inc. (NV) (Incorporated by
Reference to Exhibit 3.5 of Registration No. 333-32695
on Form S-4).
*3.6 Bylaws of Specialty Retailers, Inc. (NV)
(Incorporated by Reference to Exhibit 3.6 of
Registration No. 333-32695 on Form S-4).
*3.7 Rights Agreement dated as of November
11, 1998 between Stage Stores, Inc. and ChaseMellon
Shareholder Services, L.L.C. as Rights Agent
(Incorporated by Reference to Exhibit 1 of Form 8-K of
Stage Stores, Inc., dated November 12, 1998).
*4.1 Credit Agreement dated as of June 17,
1997 by and among Specialty Retailers, Inc., Stage
Stores, Inc., the banks named therein and Credit Suisse
First Boston (Incorporated by Reference to Exhibit 4.1
of Registration No. 333-32695 on Form S-4).
**4.2 Amendment Agreement dated as of June 26, 1997
by and among Specialty Retailers, Inc., Stage Stores,
Inc., the banks named therein and Credit Suisse First
Boston to the Credit Agreement dated as of June 17,
1997.
**4.3 Second Amendment Agreement dated as of October 1,
1997 by and among Specialty Retailers, Inc., Stage
Stores, Inc., the banks named therein and Credit
Suisse First Boston to the Credit Agreement dated as
of June 17, 1997.
*4.4 Third Amendment Agreement dated as of October
6, 1998 by and among Specialty Retailers, Inc., Stage
Stores, Inc., the banks named therein and Credit Suisse
First Boston to the Credit Agreement dated as of June
17, 1997. (Incorporated by Reference to Exhibit 4.1 on
Form 10-Q of Stage Stores, Inc., dated October 31,
1998).
EXHIBIT INDEX
(Continued)
Exhibit
Number Exhibit
*4.5 Fourth Amendment Agreement dated as
of January 27, 1999 by and among Specialty Retailers,
Inc., Stage Stores, Inc., the banks named therein and
Credit Suisse First Boston to the Credit Agreement
dated as of June 17, 1997. (Incorporated by Reference
to Form 8-K of Stage Stores, Inc., dated January 28,
1999).
*4.6 Indenture dated as of June 17, 1997
relating to the $200,000,000 aggregate principal amount
of 8.5% Senior Notes due 2005 among Specialty Retailers,
Inc., Stage Stores, Inc. and State Street Bank and
Trust Company, and First Supplemental Indenture dated
as of July 2, 1997 (Incorporated by Reference to
Exhibit 4.2 of Registration No. 333-32695 on Form S-4).
*4.7 Indenture dated as of June 17, 1997 relating to
the $100,000,000 aggregate principal amount of 9%
Senior Subordinated Notes due 2007 among Specialty
Retailers, Inc., Stage Stores, Inc. and State Street
Bank and Trust Company, and First Supplemental
Indenture dated as of July 2, 1997 (Incorporated by
Reference to Exhibit 4.3 of Registration No. 333-32695
on Form S-4).
*4.8 Indenture between 3 Bealls Holding Corporation and
Bankers Trust Company, as Trustee, relating to 3 Bealls
Holding Corporation's 9% Subordinated Debentures due
2002 (Incorporated by Reference to Exhibit 4.2 of
Registration No. 33-24571 on Form S-4) and First
Supplemental Indenture dated August 2, 1993
(Incorporated by Reference to Exhibit 4.4 of
Registration No. 33-68258 on Form S-4).
*4.9 Indenture between 3 Bealls Holding Corporation and
IBJ Schroder Bank and Trust Company, as Trustee,
relating to 3 Bealls Holding Corporation's 7% Junior
Subordinated Debentures due 2002 (Incorporated by
Reference to Exhibit 4.3 of Registration No. 33-24571
on Form S-4) and First Supplemental Indenture dated
August 2, 1993 (Incorporated by Reference to Exhibit
4.5 of Registration No. 33-68258 on Form S-4).
*4.10 Indenture among SRI Receivables Purchase Co.,
Inc., Specialty Retailers, Inc., as Administrative
Agent, and Bankers Trust Company, as Trustee and
Collateral Agent, relating to the 12.5% Trust
Certificate-Backed Notes of SRI Receivables Purchase
Co., Inc. (including form of note). (Incorporated by
Reference to Exhibit 4.1 on Form 10-Q of Apparel
Retailers Inc., dated May 4, 1996).
*4.11 Amended and Restated Pooling and Servicing
Agreement by and among SRI Receivables Purchase Co.,
Inc., Specialty Retailers, Inc., and Bankers Trust
(Delaware) dated August 11, 1995 (Incorporated by
Reference to Exhibit 4.6 on Form 10-Q of Apparel
Retailers, Inc., dated October 28, 1995).
*4.12 First Amendment to Amended and Restated Pooling
and Servicing Agreement by and among SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc., and
Bankers Trust (Delaware) dated May 30, 1996
(Incorporated by Reference to Exhibit 4.2 on Form 10-Q
of Apparel Retailers, Inc., dated May 4, 1996).
*4.13 Amended and Restated Series 1997-1
Supplement dated as of October 16, 1998 to Amended and
Restated Pooling and Servicing Agreement dated as of
August 11, 1995 and Amended on May 30, 1996 and August
1, 1998 by and among SRI Receivables Purchase Co.,
Inc., Specialty Retailers, Inc., and Bankers Trust
(Delaware) on behalf of the Series 1997-1
Certificateholders. (Incorporated by Reference to
Exhibit 4.2 on Form 10-Q of Stage Stores, Inc., dated
October 31, 1998).
EXHIBIT INDEX
(Continued)
Exhibit
Number Exhibit
*4.14 Class A Certificate Purchase Agreement amount SRI
Receivables Purchase Co., Inc., Specialty Retailers,
Inc., the Class A Purchasers party thereto and Credit
Suisse First Boston dated as of December 3, 1997.
(Incorporated by Reference to Exhibit 4.8 on Form 10-K
of Stage Stores, Inc., dated January 31, 1998).
*4.15 Class B Certificate Purchase Agreement amount SRI
Receivables Purchase Co., Inc., Specialty Retailers,
Inc., the Class B Purchasers party thereto and Credit
Suisse First Boston dated as of December 3, 1997.
(Incorporated by Reference to Exhibit 4.9 on Form 10-K
of Stage Stores, Inc., dated January 31, 1998).
*4.16 Class B-2 Certificate Purchase Agreement dated
as of October 16, 1998 by and among SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc., the
Class B-2 Purchasers parties thereto, and Credit Suisse
First Boston. (Incorporated by Reference to Exhibit 4.3
on Form 10-Q of Stage Stores, Inc., dated October 31,
1998).
*4.17 Amendment No. 1 to Class A Certificate
Purchase Agreement dated as of October 16, 1998 by and
among SRI Receivables Purchase Co., Inc., Specialty
Retailers, Inc., the Class A Purchasers parties thereto
and Credit Suisse First Boston. (Incorporated by
Reference to Exhibit 4.4 on Form 10-Q of Stage Stores,
Inc., dated October 31, 1998).
*4.18 Amendment No. 1 to Class B Certificate
Purchase Agreement dated as of October 16, 1998 by
and among SRI Receivables Purchase Co., Inc., Specialty
Retailers, Inc., the Class B Purchasers parties thereto
and Credit Suisse First Boston. (Incorporated by
Reference to Exhibit 4.5 on Form 10-Q of Stage Stores,
Inc., dated October 31, 1998).
*4.19 Amended and Restated Series 1993-1 Supplement
among SRI Receivables Purchase Co., Inc., Specialty
Retailers, Inc. and Bankers Trust (Delaware) dated May
30, 1996 (Incorporated by Reference to Exhibit 4.3 on
Form 10-Q of Apparel Retailers, Inc., dated May 4,
1996).
*4.20 Amended and Restated Series 1995-1 Supplement
by and among SRI Receivables Purchase Co., Inc.,
Specialty Retailers, Inc. and Bankers Trust (Delaware)
on behalf of the Series 1995-1 Certificateholders dated
May 30, 1996 (Incorporated by Reference to Exhibit 4.6
on Form 10-Q of Apparel Retailers, Inc., dated May 4,
1996).
*4.21 Amended and Restated Receivables Purchase
Agreement among SRI Receivables Purchase Co., Inc. and
Originators dated May 30, 1996 (Incorporated by
Reference to Exhibit 4.7 on Form 10-Q of Apparel
Retailers, Inc., dated May 4, 1996).
*4.22 Certificate Purchase Agreements between SRI
Receivables Purchase Co., Inc. and the Purchasers of
the Series 1993-1 Offered Certificates (Incorporated by
Reference to Exhibit 4.10 of Registration No. 33-68258
on Form S-4).
*4.23 Certificate Purchase Agreement among SRI
Receivables Purchase Co., Inc., Specialty Retailers,
Inc. and the Certificate Purchaser dated August 11,
1995 (Incorporated by Reference to Exhibit 4.9 on Form
10-Q of Apparel Retailers, Inc., dated October 28,
1995).
*10.1 Registration Agreement by and among Specialty
Retailers, Inc., Tyler Capital Fund, L.P. Tyler
Massachusetts, L.P., Tyler International, L.P.-I, Tyler
International, L.P.-II, Bain Venture Capital, Citicorp
Capital Investors, Ltd., Acadia Partners, L.P., Drexel
Burnham Lambert Incorporated, and certain other
Purchasers, dated December 29, 1988 (Incorporated by
Reference to Exhibit 10.10 of
EXHIBIT INDEX
(Continued)
Exhibit
Number Exhibit
Registration No. 33-27714 on Form S-
1) and Amendment to Registration Agreement dated August
2, 1993 (Incorporated by Reference to Exhibit 10.5 of
Registration No. 33-68258 on Form S-4).
*10.2 Apparel Retailers, Inc. Stock Option Plan
(Incorporated by Reference to Exhibit 10.13 of
Registration No. 33-68258 on Form S-4).
*10.3 Employment Agreement between Stage Stores, Inc.
and Carl E. Tooker dated April 1, 1998.
(Incorporated by Reference to Exhibit 10.3 on Form 10-K
of Stage Stores, Inc., dated January 31, 1998).
*10.4 Stock Option Agreement between Specialty
Retailers, Inc. and Carl E. Tooker dated June 9, 1993
(Incorporated by Reference to Exhibit 10.18 of
Registration No. 33-68258 on Form S-4).
*10.5 Employment Agreement between Harry Brown and Stage
Stores, Inc. dated April 1,1998.
(Incorporated by Reference to Exhibit 10.5 on Form 10-K
of Stage Stores, Inc., dated January 31, 1998).
*10.6 Employment Agreement between James Marcum and
Stage Stores, Inc. dated April 1, 1998.
(Incorporated by Reference to Exhibit 10.6 on Form 10-K
of Stage Stores, Inc., dated January 31, 1998).
*10.7 Employment between Stephen Lovell and Stage
Stores, Inc. dated April 1, 1998.
(Incorporated by Reference to Exhibit 10.7 on Form 10-K
of Stage Stores, Inc., dated January 31, 1998).
*10.8 Employment Agreement between Ron Lucas and Stage
Stores, Inc. dated April 1, 1998.
(Incorporated by Reference to Exhibit 10.8 on Form 10-K
of Stage Stores, Inc., dated January 31, 1998).
*10.9 Employment Agreement between Jim Bodemuller and
Stage Stores, Inc. dated April 1, 1998.
(Incorporated by Reference to Exhibit 10.9 on Form 10-K
of Stage Stores, Inc., dated January 31, 1998).
*10.10 Securities Purchase Agreement among Palais Royal,
Inc. and certain selling stockholders of Uhlmans, dated
May 9, 1996 (Incorporated by Reference to Exhibit 10.1
on Form 10-Q of Stage Stores, Inc., dated June 12,
1996).
*10.11 Stage Stores, Inc. Equity Incentive Plan
(Incorporated by Reference to Exhibit 10.29 of
Registration No. 333-5855 of Form S-1).
**21.1 List of Registrant's Subsidiares.
**23.1 Consent of PricewaterhouseCoopers LLP.
**27.1 Financial Data Schedule.
________
* Previously Filed
** Filed Herewith
Exhibit 4.2
AMENDMENT AGREEMENT
This AMENDMENT AGREEMENT, dated as of June 26, 1997 (the
"Agreement"), is among Specialty Retailers, Inc. (the "Borrower"), Stage
Stores, Inc. (the "Parent"), the banks named therein (the "Banks") and
Credit Suisse First Boston, as Administrative Agent, Collateral Agent,
Swingline Bank and L/C Bank (the "Administrative Agent").
PRELIMINARY STATEMENT
WHEREAS, the Borrower, the Parent, the Banks and the
Administrative Agent are parties to the Credit Agreement, dated as of
June 17, 1997 (the "Credit Agreement");
WHEREAS, the Company has requested the amendment of certain
provisions set forth in the Credit Agreement;
WHEREAS, the Banks have agreed to amend the specific
provisions set forth herein under the terms and conditions set forth
herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Capitalized terms used and not
defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
SECTION 2. Amendments. The Banks hereby agree to amend
the Credit Agreement as follows:
(a) The definition of "Receivables Program Documents" in Section
1.1 of the Credit Agreement is hereby amended by adding the following
after the words "created in the future" in the third line thereof:
"(including, without limitation, any such program of a Person
in existence at the time such Person is acquired pursuant to a Permitted
Acquisition)"; and
(b) Section 6.2(f) of the Credit Agreement is hereby amended by
deleting the words "incurred in the ordinary course of business" in the
first line thereof.
Except as otherwise specified above, there is no amendment of
any other term, condition or provision of the Credit Agreement all of
which are hereby ratified and confirmed by the Borrower and the Parent.
SECTION 3. Representations and Warranties; No Defaults.
Each Loan Party hereby represents and warrants that after giving effect
to the amendments set forth in Section 2 of this Agreement, (a) the
representations and warranties contained in the Credit Agreement and
Loan Documents are correct on the effective date of this Agreement, and
(b) no Default or Event of Default has occurred or is continuing on the
date hereof and on the effective date of this Agreement.
SECTION 4. Counterparts. This Agreement (a) may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the
same instrument, (b) shall be effective only in this specific instance
for the specific purpose set forth herein, and (c) does not allow any
other or further departure from the terms of the Credit Agreement or the
Loan Documents, which terms shall continue in full force and effect.
SECTION 5. Conditions to Effectiveness. This Agreement
shall become effective as of the date hereof when copies hereof, when
taken together, bearing the signatures of each of the parties hereto
have been received by the Agent.
SECTION 6. Applicable Law. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed by their duly
authorized officers, all as of the date and year first
written above.
SPECIALTY RETAILERS, INC.
By: /s/ Mark A. Hess
Name: Mark A. Hess
Title: Vice President
STAGE STORES, INC.
By: /s/ Mark A. Hess
Name: Mark A. Hess
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent, Collateral
Agent,
Swingline Bank and L/C Bank
By: /s/ Chris T. Horgan
Name: Chris T. Horgan
Title: Vice President
By: /s/ Kristin Lepri
Name: Kristin Lepri
Title: Associate
BANQUE PARIBAS
By: /s/ Scott Clingan
Name: Scott Clingan
Title: Vice President
By: /s/ Larry Robinson
Name: Larry Robinson
Title: Vice President
CREDITANSTALT BANKVEREIN
By: /s/ Carl G. Drake
Name: Carl G. Drake
Title: Senior Associate
By: /s/ Robert Biringer
Name: Robert Biringer
Title: SVP
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Susan O'Connor
Name: Susan O'Connor
Title: Director
By: /s/ Joel D. Makowsky
Name: Joel D. Makowsky
Title: Assistant Vice President
HIBERNIA NATIONAL BANK
By: /s/ Troy J. Villafarra
Name: Troy J. Villafarra
Title: Vice President
IMPERIAL BANK, A CALIFORNIA BANKING
CORPORATION
By: /s/ Ray Vadalma
Name: Ray Vadalma
Title: Senior Vice President
ROYAL BANK OF SCOTLAND
By: /s/ Derek Bonnar
Name: Derek Bonnar
Title: Vice President
THE FUJI BANK, LIMITED
By: /s/ Philip C. Lauinger III
Name: Philip C. Lauinger III
Title: Vice President & Manager
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard P. DeGrey
Name: Richard P. DeGrey
Title: Vice President
BANK UNITED
By: /s/ Mario Chiodetti
Name: Mario Chiodetti
Title: Director
Exhibit 4.3
SECOND AMENDMENT AGREEMENT
This SECOND AMENDMENT AGREEMENT, dated as of October 1,
1997 (the "Agreement"), is among Specialty Retailers, Inc. (the
"Borrower"), Stage Stores, Inc. (the "Parent"), the banks named
therein (the "Banks") and Credit Suisse First Boston, as Adminis
trative Agent, Collateral Agent and Swingline Bank (the "Ad
ministrative Agent").
PRELIMINARY STATEMENT
WHEREAS, the Borrower, the Parent, the Banks and the
Administrative Agent are parties to the Credit Agreement, dated
as of June 17, 1997, as amended (the "Credit Agreement");
WHEREAS, the Borrower has requested the amendment of
certain provisions set forth in the Credit Agreement;
WHEREAS, the Banks have agreed to amend the specific
provisions set forth herein under the terms and conditions set
forth herein;
NOW, THEREFORE, the parties hereto hereby agree as
follows:
SECTION 1. Defined Terms. Capitalized terms used
and not defined herein shall have the meanings assigned to such
terms in the Credit Agreement.
SECTION 2. Amendments. The Banks hereby agree to
amend the Credit Agreement as follows:
(a) The definition of "Excess Cash Flow" in Section 1.1 of
the Credit Agreement is hereby amended by inserting at the end of
clause (ix) thereof the following:
"minus (x) all payments made in respect of the
outstanding principal of the Bealls Subordinated Notes to the
extent permitted pursuant to Section 6.10(a)(iii)"
(b) Section 1.1 of the Credit Agreement is hereby amended
by adding the following definition in the correct alphabetical
order:
""Bealls Subordinated Notes" shall mean (i) the
$14,982,914 12% Bealls Holding Subordinated Notes due 2002, (ii)
the $14,312,959 7% Bealls Junior Subordinated Debentures due 2003
and (iii) the $4,381,185 7% FB Holdings Subordinated Notes due
2000."; and
(c) Section 6.10 of the Credit Agreement is hereby amended
by deleting the word "and" between clause (i) and clause (ii)
thereof and inserting a comma in its place and by inserting at
the end of clause (ii) the following:
"and (iii) so long as no Default or Event of Default
has occurred and is continuing, any Indebtedness
outstanding under the Bealls Subordinated Notes so long
as the aggregate amount paid in respect of such
Indebtedness shall not exceed $5,000,000,"
Except as otherwise specified above and in the Amend
ment Agreement, dated as of June 26, 1997, among the Borrower,
the Parent, the Banks and the Administrative Agent, there is no
amendment of any other term, condition or provision of the Credit
Agreement all of which are hereby ratified and confirmed by the
Borrower and the Parent.
SECTION 3. Representations and Warranties; No De
faults. Each Loan Party hereby represents and warrants that
after giving effect to the amendments set forth in Section 2 of
this Agreement, (a) the representations and warranties contained
in the Credit Agreement and Loan Documents are correct on the
effective date of this Agreement, and (b) no Default or Event of
Default has occurred or is continuing on the date hereof and on
the effective date of this Agreement.
SECTION 4. Counterparts. This Agreement (a) may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which taken together shall
constitute one and the same instrument, (b) shall be effective
only in this specific instance for the specific purpose set forth
herein, and (c) does not allow any other or further departure
from the terms of the Credit Agreement or the Loan Documents,
which terms shall continue in full force and effect.
SECTION 5. Conditions to Effectiveness. This Agree
ment shall become effective as of the date hereof when copies
hereof, when taken together, bearing the signatures of each of
the parties hereto have been received by the Administrative
Agent.
SECTION 6. Applicable Law. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers,
all as of the date and year first written above.
SPECIALTY RETAILERS, INC.
By: /s/ Mark A. Hess
Name: Mark A. Hess
Title: Vice President, Financial
Planning
STAGE STORES, INC.
By: /s/ Mark A. Hess
Name: Mark A. Hess
Title: Vice President, Financial
Planning
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent, Collateral
Agent and
Swingline Bank
By: /s/ Chris T. Horgan
Name: Chris T. Horgan
Title: Vice President
By: /s/ Heather Suggitt
Name: Heather Suggitt
Title: Vice President
BANQUE PARIBAS
By: /s/ Scott Clingan
Name: Scott Clingan
Title: Vice President
By: /s/ Timothy A. Donnon
Name: Timothy A. Donnon
Title: Managing Director
CREDITANSTALT BANKVEREIN
By: /s/ Carl G. Drake
Name: Carl G. Drake
Title: Sr. Associate
By: /s/ Craig Stamm
Name: Craig Stamm
Title: Vice President
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Susan M. O'Connor
Name: Susan M. O'Connor
Title: Director
By: /s/ Joel D. Makowsky
Name: Joel D. Makowsky
Title: Assistant Vice President
HIBERNIA NATIONAL BANK
By: /s/ Troy J. Villafarra
Name: Troy J. Villafarra
Title: Vice President
IMPERIAL BANK, A CALIFORNIA BANKING
CORPORATION
By: /s/ Ray Vadalma
Name: Ray Vadalma
Title: Senior Vice President
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ Derek Bonnar
Name: Derek Bonnar
Title: Vice President
THE FUJI BANK, LIMITED
By: /s/ Philip C. Lauinger III
Name: Philip C. Lauinger III
Title: Vice President & Manager
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard P. DeGrey
Name: Richard P. DeGrey
Title: Vice President
BANK UNITED
By: /s/ Mario Chiodetti
Name: Mario Chiodetti
Title: Director
BEAR STEARNS INVESTMENT PRODUCTS
INC.
By: /s/ Gregory Hanley
Name: Gregory Hanley
Title: Vice President
Exhibit 21.1
List Of Subsidiaries
Specialty Retailers, Inc.
Jurisdiction of Incorporation: Texas
Stockholder: Stage Stores, Inc. 100%
Specialty Retailers, Inc. (NV)
Jurisdiction of Incorporation: Nevada
Stockholder: Stage Stores, Inc. 100%
SRI Receivables Purchase Co., Inc.
Jurisdiction of Incorporation: Delaware
Stockholder: Specialty Retailers,Inc. 100%
Granite National Bank, N. A.
Jurisdiction of Incorporation: Ohio
Stockholder: Specialty Retailers,Inc. (NV) 100%
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 333-15981) of Stage
Stores, Inc. of our report dated March 10, 1999 appearing on page
F-1 of this Form 10-K.
PricewaterhouseCoopers LLP
Houston, Texas
April 13, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 1000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> 1/30/1999
<PERIOD-END> 1/30/1999
<CASH> 12,832
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 341,316
<CURRENT-ASSETS> 508,437
<PP&E> 349,512
<DEPRECIATION> 116,249
<TOTAL-ASSETS> 857,680
<CURRENT-LIABILITIES> 140,299
<BONDS> 487,968
<COMMON> 280
0
0
<OTHER-SE> 204,112
<TOTAL-LIABILITY-AND-EQUITY> 857,680
<SALES> 1,173,547
<TOTAL-REVENUES> 1,173,547
<CGS> 839,238
<TOTAL-COSTS> 839,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,471
<INCOME-PRETAX> 6,169
<INCOME-TAX> 2,455
<INCOME-CONTINUING> 3,714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,714
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
