Form 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 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 number 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)
(713) 667-5601
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of common stock of Stage Stores, Inc.
outstanding as of December 7, 1999 was 26,833,828 shares of
Common Stock and 1,250,584 shares of Class B Common Stock.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Stage Stores, Inc.
Consolidated Condensed Balance Sheet
(in thousands, except par values)
(unaudited)
October 30, 1999 January 30, 1999
ASSETS
Cash and cash equivalents $ 7,533 $ 12,832
Undivided interest in accounts
receivable trust 69,069 69,816
Merchandise inventories, net 389,926 341,316
Prepaid expenses and other
current assets 61,444 84,473
Total current assets 527,972 508,437
Property, equipment and leasehold
improvements, net 218,087 233,263
Goodwill, net 87,500 92,551
Other assets 18,364 23,429
Total assets $ 851,923 $ 857,680
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 78,773 $ 82,779
Accrued expenses and other current
liabilities 52,660 52,706
Current portion of long-term debt 65,980 4,814
Total current liabilities 197,413 140,299
Long-term debt 444,512 487,968
Other long-term liabilities 24,882 25,021
Total liabilities 666,807 653,288
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, 26,834
and 26,718 shares issued and
outstanding, respectively 268 267
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 265,977 265,716
Accumulated deficit (75,148) (55,610)
Accumulated other comprehensive income (5,994) (5,994)
Stockholders' equity 185,116 204,392
Commitments and contingencies -- --
Total liabilities and
stockholders' equity $ 851,923 $ 857,680
The accompanying notes are an integral part of this statement.
Stage Stores, Inc.
Consolidated Condensed Statement of Operations
(in thousands, except per share amounts)
(unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 31, October 30, October 31, October 30,
1999 1998 1999 1998
Net sales $ 264,327 $ 271,605 $ 796,766 $ 816,198
Cost of sales and related
buying, occupancy and
distribution expenses 187,124 196,353 575,183 571,482
Gross profit 77,203 75,252 221,583 244,716
Selling, general and
administrative expenses 63,715 65,140 191,822 194,623
Store opening and closure
program costs 928 2,886 17,142 4,911
Operating income 12,560 7,226 12,619 45,182
Interest, net 12,192 12,394 36,949 34,284
Income (loss) before income
tax and cumulative effect
of a change in
accounting principle 368 (5,168) (24,330) 10,898
Income tax expense (benefit) 144 (2,016) (7,194) 4,250
Income (loss) before
cumulative effect of a change
in accounting principle 224 (3,152) (17,136) 6,648
Cumulative effect of a
change in accounting
principle, net of tax -
reporting costs of start-up
activities -- -- (2,402) --
Net income (loss) $ 224 $ (3,152) $ (19,538) $ 6,648
Basic earnings (loss) per
common share data:
Basic earnings (loss) per
common share before
cumulative effect of a
change in accounting
principle $ 0.01 $ (0.11) $ (0.61) $ 0.24
Cumulative effect of a
change in accounting
principle, net of tax -
reporting costs of
start-up activities -- -- (0.09) --
Basic earnings (loss) per
common share $ 0.01 $ (0.11) $ (0.70) $ 0.24
Basic weighted average
common shares outstanding 28,083 27,926 28,015 27,864
Diluted earnings (loss) per
common share data:
Diluted earnings (loss) per
common share before
cumulative effect of a
change in accounting
principle $ 0.01 $ (0.11) $ (0.61) $ 0.23
Cumulative effect of a
change in accounting
principle, net of tax -
reporting costs of
start-up activities -- -- (0.09) --
Diluted earnings (loss) per
common share $ 0.01 $ (0.11) $ (0.70) $ 0.23
Diluted weighted average
common shares outstanding 28,231 27,926 28,015 28,474
The accompanying notes are an integral part of this statement.
Stage Stores, Inc.
Consolidated Condensed Statement of Cash Flows
(in thousands)
(unaudited)
Thirty-nine Weeks Ended
October 30, 1999 October 31, 1998
Cash flows from operating activities:
Net income (loss) $ (19,538) $ 6,648
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 36,329 21,046
Deferred income taxes (2,015) 192
Accretion of discount 920 820
Amortization of debt issue costs 2,234 1,808
Cumulative effect of a change in
accounting principle 2,402 --
Change in working capital (29,517) (106,691)
Total adjustments 10,353 (82,825)
Net cash used in operating activities (9,185) (76,177)
Cash flows from investing activities:
Additions to property, equipment and
leasehold improvements (13,166) (71,202)
Net cash used in investing activities (13,166) (71,202)
Cash flows from financing activities:
Proceeds from working capital facility 19,150 134,650
Proceeds from issuance of common stock 262 839
Payments on long-term debt (2,360) (199)
Net cash provided by financing
activities 17,052 135,290
Net decrease in cash and cash equivalents (5,299) (12,089)
Cash and cash equivalents:
Beginning of period 12,832 23,315
End of period $ 7,533 $ 11,226
Supplemental disclosure of cash flow
information:
Interest paid $ 26,185 $ 22,433
Income taxes paid (refunded) $ 188 $ (2,805)
The accompanying notes are an integral part of this statement.
Stage Stores, Inc.
Consolidated Statement of Stockholders' Equity
For the Thirty-nine Weeks Ended October 30, 1999
(in thousands)
Shares Outstanding
Shares of common stock
issued:
Beginning balance 26,718
Issuance of stock 116
Ending balance 26,834
Shares of Class B stock
issued:
Beginning balance 1,250
Ending balance 1,250
Stockholders' Equity
Common stock issued:
Beginning balance $ 267
Issuance of stock 1
Ending balance 268
Class B stock issued:
Beginning balance 13
Ending balance 13
Additional Paid-in Capital:
Beginning balance 265,716
Issuance of stock 261
Ending balance 265,977
Accumulated deficit and
accumulated other
comprehensive income:
Beginning balance (61,604)
Comprehensive income (loss):
Net income (loss) (19,538)
Other comprehensive
income (loss) --
Total comprehensive
income (loss) (19,538)
Ending balance (81,142)
Total Stockholders' Equity $ 185,116
Accumulated other
comprehensive income:
Beginning balance $ (5,994)
Ending balance $ (5,994)
The accompanying notes are an integral part of this statement.
Stage Stores, Inc.
Notes to Unaudited Consolidated Condensed Financial Statements
1. The accompanying Unaudited Consolidated Condensed
Financial Statements of Stage Stores, Inc. ("Stage Stores") have
been prepared in accordance with Rule 10-01 of Regulation S-X and
do not include all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. Those adjustments, which include only normal
recurring adjustments that are, in the opinion of management,
necessary for a fair presentation of the results of the interim
periods, have been made. The results of operations for such
interim periods are not necessarily indicative of the results of
operations for a full year. The Unaudited Consolidated Condensed
Financial Statements should be read in conjunction with the
Audited Consolidated Financial Statements and notes thereto for
the year ended January 30, 1999 filed with Stage Stores' Annual
Report on Form 10-K. The fiscal years discussed herein end on the
Saturday nearest to January 31 in the following calendar year.
For example, references to "1999" mean the fiscal year ending
January 29, 2000.
Stage Stores conducts its business primarily through its
wholly-owned subsidiary Specialty Retailers, Inc. ("SRI") which,
as of October 30, 1999, operated 654 family apparel stores in 33
states located throughout the United States. Stage Stores and
SRI are collectively referred to herein as the "Company".
2. Pursuant to the accounts receivable securitization
program (the "Accounts Receivable Program"), an indirect wholly-
owned subsidiary of the Company, SRI Receivables Purchase Co.,
Inc. ("SRPC") purchases the accounts receivable generated by the
Company's private label credit card program. Such accounts
receivable are transferred to a master trust (the "Trust") which
has issued certain certificates to third parties representing
undivided interests in the Trust. SRPC owns an undivided interest
in the accounts receivable not supporting the certificates issued
to third parties by the Trust as set forth in the accompanying
Consolidated Condensed Balance Sheet. SRPC is a separate
corporate entity from the Company and SRPC's creditors have a
claim on its assets prior to those assets becoming available to
any creditor of the Company.
3. During the first quarter of 1999, the Company adopted
the Accounting Standards Executive Committee's Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5") which requires costs of start-up activities and
organization costs be expensed as incurred. The initial adoption
of SOP 98-5 during the quarter, reported as the cumulative effect
of a change in accounting principle, resulted in an after tax
charge of $2.4 million.
4. During the second quarter of 1999, the Company announced
a store closure program under which the Company will close
approximately 35 underperforming stores. Thirty-three of these
stores were closed as of the end of the third quarter of 1999 and
the remaining stores are expected to be closed during the fourth
quarter of 1999. In connection with the store closure program,
the Company has recorded $23.7 million of pretax costs, of which
$7.3 million is included in cost of sales while the remaining
$16.4 million is included in store opening and closure program
costs. Of the total $23.7 million of costs, approximately $2.5
million represents severance and lease termination costs,
approximately $2.5 million represents operating costs for the
stores in the closure program during the second and third
quarters of 1999, approximately $7.3 million represents a lower
of cost or market reserve related to the inventory to be
liquidated in the stores in the closure program while the balance
relates primarily to the write-off of fixed assets and
intangibles associated with the stores in the closure program.
5. On November 9, 1999, the Company completed a refinancing
of the existing term and revolving certificates outstanding under
its Accounts Receivable Program. In connection with the
refinancing, the previously existing term and revolving
certificates were replaced with new term and revolving
certificates (the "New Certificates"). The New Certificates
provide the Company with a maximum availability of $329.9
million, subject to the amount of receivables held in the Trust.
Based upon the amount of receivables in the Trust at the time of
closing, the Company received approximately $290.0 million of
proceeds. Of this amount, approximately $260.0 million was used
to retire the outstanding balances under the previously existing
Trust certificates, which were scheduled to begin amortizing in
December of 1999. The remainder of the proceeds were used to
redeem the previously existing $30.0 million aggregate principle
amount of SRPC 12.5% Trust certificate-backed notes. In
connection with the refinancing, the Company expects to record an
after-tax extraordinary charge of approximately $1.3 million in
the fourth quarter of 1999, the majority of which is non-cash.
6. The Consolidating Condensed Financial Statements for
Stage Stores and its wholly-owned subsidiaries is presented to
satisfy disclosure requirements pursuant to Sections 13 and 15(d)
of the Securities Exchange Act of 1934 with respect to wholly-
owned subsidiaries of Stage Stores. Stage Stores does not prepare
separate financial statements and related disclosures for its
wholly-owned subsidiaries SRI and Specialty Retailers, Inc. (NV)
because management has determined that such information is not
material to investors. SRI is the primary obligor under the 8.5%
Senior Notes due 2005 and the 9% Senior Subordinated Notes due
2007 (see Note 5 to the Company's Consolidated Financial
Statements filed with Stage Stores' Annual Report on Form 10-K
for the year ended January 30, 1999). Stage Stores and Specialty
Retailers, Inc. (NV), a wholly-owned subsidiary of Stage Stores
which was incorporated during June 1997, are guarantors of such
indebtedness.
SRPC securitizes the accounts receivable generated by the
Company's private label credit card program. The results of
operations of SRPC are not indicative of the total 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 to the
Company's Consolidated Financial Statements filed with Stage
Stores' Annual Report on Form 10-K for the year ended January
30, 1999.
The following consolidating condensed financial information
for Stage Stores and its wholly-owned subsidiaries, including all
significant intercompany transactions eliminated in
consolidation, are presented below.
Consolidating Condensed Balance Sheet
October 30, 1999
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Inc. Receivables Eliminations Consolidated
Purchase Co.
ASSETS
Cash and cash equivalents $ 5,584 $ -- $ -- $ 5,584
Undivided interest in
accounts receivable trust (11,061) 80,130 -- 69,069
Merchandise
inventories, net 389,926 -- -- 389,926
Prepaid expenses and other
current assets 57,890 3,554 -- 61,444
Total current assets 442,339 83,684 -- 526,023
Property, equipment
and leasehold
improvements, net 216,830 -- -- 216,830
Goodwill, net 87,500 -- -- 87,500
Other assets 16,444 1,860 -- 18,304
Investment in subsidiaries 39,234 -- (39,234) --
Total assets $ 802,347 $ 85,544 $ (39,234) $ 848,657
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Accounts payable $ 78,773 $ -- $ -- $ 78,773
Accrued expenses and
other current liabilities 48,930 3,703 -- 52,633
Current portion of
long-term debt 65,980 -- -- 65,980
Total current liabilities 193,683 3,703 -- 197,386
Long-term debt 414,512 30,000 -- 444,512
Intercompany
notes/advances 171,037 12,607 -- 183,644
Other long-term
liabilities 24,882 -- -- 24,882
Total liabilities 804,114 46,310 -- 850,424
Preferred stock -- -- -- --
Common stock -- -- -- --
Class B common stock -- -- -- --
Additional paid-in capital 3,317 33,550 (33,550) 3,317
Accumulated
earnings (deficit) 910 5,684 (5,684) 910
Accumulated other
comprehensive income (5,994) -- -- (5,994)
Stockholders' equity (1,767) 39,234 (39,234) (1,767)
Total liabilities
and stockholders'
equity $ 802,347 $ 85,544 $ (39,234) $ 848,657
(Table Continued)
Consolidating Condensed Balance Sheet
October 30, 1999
(in thousands, unaudited)
Stage Specialty Eliminations Stage Stores
Stores, Inc. Retailers, Consolidated
Inc. (NV)
ASSETS
Cash and cash equivalents $ 2 $ 1,947 $ -- $ 7,533
Undivided interest in
accounts receivable trust -- -- -- 69,069
Merchandise inventories, net -- -- -- 389,926
Prepaid expenses and
other current assets -- -- -- 61,444
Total current assets 2 1,947 -- 527,972
Property, equipment and
leasehold improvements, net -- 1,257 -- 218,087
Goodwill, net -- -- -- 87,500
Other assets -- 60 -- 18,364
Investment in subsidiaries 185,180 -- (185,180) --
Total assets $ 185,182 $ 3,264 $(185,180) $ 851,923
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Accounts payable $ -- $ -- $ -- $ 78,773
Accrued expenses and
other current liabilities 27 -- -- 52,660
Current portion of
long-term debt -- -- -- 65,980
Total current liabilities 27 -- -- 197,413
Long-term debt -- -- -- 444,512
Intercompany notes/advances 39 (183,683) -- --
Other long-term liabilities -- -- -- 24,882
Total liabilities 66 (183,683) -- 666,807
Preferred stock -- -- -- --
Common stock 268 -- -- 268
Class B common stock 13 -- -- 13
Additional paid-in capital 265,977 160,302 (163,619) 265,977
Accumulated
earnings (deficit) (75,148) 26,645 (27,555) (75,148)
Accumulated other
comprehensive income (5,994) -- 5,994 (5,994)
Stockholders' equity 185,116 186,947 (185,180) 185,116
Total liabilities and
stockholders' equity $ 185,182 $ 3,264 $(185,180) $ 851,923
Consolidating Condensed Balance Sheet
January 30, 1999
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Inc. Receivables Eliminations Consolidated
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 and
other current assets 77,648 6,825 -- 84,473
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
(Table Continued)
Consolidating Condensed Balance Sheet
January 30, 1999
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Inc. Retailers, Eliminations Consolidated
Inc. (NV)
ASSETS
Cash and cash equivalents $ 2 $ 1,948 $ -- $ 12,832
Undivided interest in
accounts receivable trust -- -- -- 69,816
Merchandise invemtories, net -- -- -- 341,316
Prepaid expenses and
other current assets -- -- -- 84,473
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 Statement of Operations
Thirty-nine Weeks Ended October 30, 1999
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Inc, Receivables Eliminations Consolidated
Inc. Purchase Co.
Net sales $ 796,766 $ -- $ -- $ 796,766
Cost of sales and related
buying, occupancy and
distribution expenses 575,183 -- -- 575,183
Gross profit 221,583 -- -- 221,583
Selling, general and
administrative expenses 197,017 (4,951) -- 192,066
Store opening and closure
program costs 17,142 -- -- 17,142
Operating income (loss) 7,424 4,951 -- 12,375
Interest expense, net 46,180 3,151 -- 49,331
Income (loss) before
income taxes (38,756) 1,800 -- (36,956)
Income tax expense (benefit) (12,317) 666 -- (11,651)
Income (loss) before equity
in net earnings of
subsidiaries and cumulative
effect of a change in
accounting principle (26,439) 1,134 -- (25,305)
Equity in net earnings
of subsidiaries (72) -- 72 --
Income (loss) before
cumulative effect of a
change in accounting
principle (26,511) 1,134 72 (25,305)
Cumulative effect of a
change in accounting
principle, net of tax -
reporting costs of
start-up activities (1,196) (1,206) -- (2,402)
Net income (loss) $ (27,707) $ (72) $ 72 $ (27,707)
(Table Continued)
Consolidating Condensed Statement of Operations
Thirty-nine Weeks Ended October 30, 1999
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Inc. Retailers, Eliminations Consolidated
Inc. (NV)
Net sales $ -- $ -- $ -- $ 796,766
Cost of sales and related
buying, occupancy and
distribution expenses -- -- -- 575,183
Gross profit -- -- -- 221,583
Selling, general and
administrative expenses 107 (351) -- 191,822
Store opening and closure
program costs -- -- -- 17,142
Operating income (loss) (107) 351 -- 12,619
Interest expense, net -- (12,382) -- 36,949
Income (loss) before
income taxes (107) 12,733 -- (24,330)
Income tax expense (benefit) -- 4,457 -- (7,194)
Income (loss) before equity
in net earnings of subsidiaries
and cumulative effect of a
change in accounting principle (107) 8,276 -- (17,136)
Equity in net earnings
of subsidiaries (19,431) -- 19,431 --
Income (loss) before cumulatve
effect of a change in
accounting principle (19,538) 8,276 19,431 (17,136)
Cumulative effect of a change
in accounting principle, net
of tax - reporting costs of
start-up activities -- -- -- (2,402)
Net income (loss) $ (19,538) $ 8,276 $ 19,431 $ (19,538)
Consolidating Condensed Statement of Operations
Thirty-nine Weeks Ended October 31, 1998
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Inc. Receivables Eliminations Consolidated
Purchase Co.
Net sales $ 816,198 $ -- $ -- $ 816,198
Cost of sales and related
buying, occupancy and
distribution expenses 571,482 -- -- 571,482
Gross profit 244,716 -- -- 244,716
Selling, general and
administartive expenses 196,583 204 -- 196,787
Store opening and closure
program costs 4,911 -- -- 4,911
Operating income (loss) 43,222 (204) -- 43,018
Interest expense, net 48,221 (2,507) -- 45,714
Income (loss) before
income taxes (4,999) 2,303 -- (2,696)
Income tax expense (1,384) 852 -- (532)
Income (loss) before equity
in net earnings of
subsidiaries (3,615) 1,451 -- (2,164)
Equity in net earnings
of subsidiaries 1,451 -- (1,451) --
Net income (loss) $ (2,164) $ 1,451 $ (1,451) $ (2,164)
(Table Continued)
Consolidating Condensed Statement of Operations
Thirty-nine Weeks Ended October 31, 1998
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Inc. Retailers, Eliminations Consolidated
Inc. (NV)
Net sales $ -- $ -- $ -- $ 816,198
Cost of sales and related
buying, occupancy and
distribution expenses -- -- -- 571,482
Gross profit -- -- -- 244,716
Selling, general and
administrative expenses 66 (2,230) -- 194,623
Store opening and closure
program costs -- -- -- 4,911
Operating income (loss) (66) 2,230 -- 45,182
Interest expense, net -- (11,430) -- 34,284
Income (loss) before
income taxes (66) 13,660 -- 10,898
Income tax expense -- 4,782 -- 4,250
Income (loss) before equity
in net earnings of
subsidiaries (66) 8,878 -- 6,648
Equity in net earnings
of subsidiaries 6,714 -- (6,714) --
Net income (loss) $ 6,648 $ 8,878 $ (6,714) $ 6,648
Consolidating Condensed Statement of Cash Flows
Thirty-nine Weeks Ended October 30, 1999
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Inc. Receivables Eliminations Consolidated
Purchase Co.
Cash flows from operating
activities:
Net cash used in
operating activities $ (1,485) $ (7,437) $ -- $ (8,922)
Cash flows from investing
activities:
Investment in subsidiary -- -- -- --
Additions to property,
equipment and leasehold
improvements (13,166) -- -- (13,166)
Proceeds from the sales
of accounts receivable, net (7,437) 7,437 -- --
Net cash provided by (used in)
investing activities (20,603) 7,437 -- (13,166)
Cash flows from financing
activities:
Proceeds from working
capital facility 19,150 -- -- 19,150
Proceeds from issuance
of common stock -- -- -- --
Proceeds from capital
contribution -- -- -- --
Payments on long-term debt (2,360) -- -- (2,360)
Net cash provided by (used
in) financing activities 16,790 -- -- 16,790
Net decrease in cash and
cash equivalents (5,298) -- -- (5,298)
Cash and cash equivalents:
Beginning of period 10,882 -- -- 10,882
End of period $ 5,584 $ -- $ -- $ 5,584
(Table Continued)
Consolidating Condensed Statement of Cash Flows
Thirty-nine Weeks Ended October 30, 1999
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Inc. Retailers, Eliminations Consolidated
Inc. (NV)
Cash flows from operating
activities:
Net cash used in operating
activities $ -- $ (263) $ -- $ (9,185)
Cash flows from
investing activities:
Investment in subsidiary (262) -- 262 --
Additions to property,
equipment and leasehold
improvements -- -- -- (13,166)
Proceeds from the sales of
accounts receivable, net -- -- -- --
Net cash provided by (used
in) investing activities (262) -- 262 (13,166)
Cash flows from financing
activities:
Proceeds from working
capital facility -- -- -- 19,150
Proceeds from issuance
of common stock 262 -- -- 262
Proceeds from capital
contribution -- 262 (262) --
Payments on long-term debt -- -- -- (2,360)
Net cash provided by (used
in) financing activities 262 262 (262) 17,052
Net decrease in cash and --
cash equivalents -- (1) -- (5,299)
Cash and cash equivalents:
Beginning of period 2 1,948 -- 12,832
End of period $ 2 $ 1,947 $ -- $ 7,533
Consolidating Condensed Statement of Cash Flows
Thirty-nine Weeks Ended October 31, 1998
(in thousands, unaudited)
Specialty SRI SRI SRI
Retailers, Inc. Receivables Eliminations Consolidated
Purchase Co.
Cash flows from operating
activities:
Net cash used in operating
activities $ (70,740) $ (6,413) $ -- $ (77,153)
Cash flows from investing
activities:
Intercompany notes/advances (119) -- -- (119)
Additions to property,
equipment and leasehold
improvements (71,202) -- -- (71,202)
Proceeds from sales of
accounts receivable, net (7,420) 7,420 -- --
Dividend from subsidiary 1,007 -- (1,007) --
Net cash provided by (used
in) investing activities (77,734) 7,420 (1,007) (71,321)
Cash flows from financing
activities:
Proceeds from working capital
facility 134,650 -- -- 134,650
Proceeds from issuance of
common stock -- -- -- --
Payments on long-term debt (199) -- -- (199)
Dividend paid -- (1,007) 1,007 --
Net cash provided by (used
in) financing activities 134,451 (1,007) 1,007 134,451
Net increase (decrease) in
cash and cash equivalents (14,023) -- -- (14,023)
Cash and cash equivalents:
Beginning of period 23,299 -- -- 23,299
End of period $ 9,276 $ -- $ -- $ 9,276
(Table Continued)
Consolidating Condensed Statement of Cash Flows
Thirty-nine Weeks Ended October 31, 1998
(in thousands, unaudited)
Stage Specialty Stage Stores
Stores, Inc. Retailers, Eliminations Consolidated
Inc. (NV)
Cash flows from operating
activities:
Net cash used in operating
activities $ (14) $ 990 $ -- $ (76,177)
Cash flows from investing
activities:
Intercompany notes/advances (839) 958 -- --
Additions to property,
equipment and leasehold
improvements -- -- -- (71,202)
Proceeds from the sales of
accounts receivable, net -- -- -- --
Dividend from subsidiary -- -- -- --
Net cash provided by (used
in) investing activities (839) 958 -- (71,202)
Cash flows from financing
activities:
Proceeds from working capital
facility -- -- -- 134,650
Proceeds from issuance of
common stock 839 -- -- 839
Payments on long-term debt -- -- -- (199)
Dividend paid -- -- -- --
Net cash provided by (used
in) financing activities 839 -- -- 135,290
Net increase (decrease) in
cash and cash equivalents (14) 1,948 -- (12,089)
Cash and cash equivalents:
Beginning of period 16 -- -- 23,315
End of period $ 2 $ 1,948 $ -- $ 11,226
Item 2. 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 ability to
obtain financing on terms reasonably satisfactory to the Company,
the ability of the Company to comply with the various covenant
requirements contained in the Company's debt agreements and the
demand for apparel. The demand for apparel can be affected by
weather patterns, levels of competition, competitors' marketing
strategies, changes in fashion trends, availability of product on
normal payment terms and the failure to achieve the expected
results of the Company's merchandising and marketing plans as
well as its store opening and closing plans. The occurrence of
any of the above could have a material and adverse impact on the
Company's operating results. See additional risk factors
discussed in the Company's Annual Report on Form 10-K. Certain
information herein contains estimates which represent
management's best judgement 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 under served 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.
The financial information, discussion and analysis that
follow should be read in conjunction with the Company's
Consolidated Financial Statements included in the Company's
Annual Report on Form 10-K for the year ended January 30, 1999.
Results of Operations
Thirteen Weeks Ended October 30, 1999 Compared to the Thirteen
Weeks Ended October 31, 1998
Sales for the thirteen weeks ended October 30, 1999
("current year third quarter") decreased 2.7% to $264.3 million
from $271.6 for the thirteen weeks ended October 31, 1998 ("prior
year third quarter"). The decrease in total sales reflects the
impact of closing 33 stores which were included in the Company's
store closure program as well as a 3.8% decline in comparable
store sales. The decline in comparable store sales reflects a
reduction in the level of clearance activities during the early
part of the current year third quarter as compared to the prior
year third quarter. The Company began the prior year third
quarter with a higher level of spring and summer clearance
inventory as a result of softness in sales over the latter half
the prior year second quarter. In response, this excess
clearance inventory was aggressively liquidated over the early
part of the prior year third quarter generating higher sales
volume at lower margins.
Gross profit increased 2.6% to $77.2 million for the
thirteen weeks ended October 30, 1999 from $75.3 million in the
prior year third quarter despite the decline in total sales.
Gross profit as a percent of sales increased to 29.2% in the
current year third quarter from 27.7% in the prior year third
quarter. The increase in gross profit reflects the reduced level
of clearance volume as discussed above, a more conservative
promotional cadence throughout the current year third quarter as
well as a reduction in freight expense, partially offset by the
negative leverage associated with the Company's fixed buying,
occupancy and distribution expenses which are included in cost of
goods sold.
Selling, general and administrative ("SG&A") expenses for
the thirteen weeks ended October 30, 1999 decreased 2.2% to $63.7
million from $65.1 million in the prior year third quarter. As a
percent of sales, SG&A expenses were 24.1% in the current year
third quarter as compared to 24.0% in the prior year third
quarter. SG&A expenses benefited from the closure of the
underperforming stores included in the store closure program as
well as from the Company's continuing effort and focus on
controlling selling and central overhead costs.
Store opening and closure program costs were $0.9 million
for the thirteen weeks ended October 30, 1999 as compared to $2.9
million in the prior year third quarter. The expense during the
current year third quarter reflects the operating costs for the
remaining 31 stores in the store closure program, 29 of which
were closed during the quarter. There were no new store opening
costs incurred during the current year third quarter as the
current year store opening program was completed during the first
quarter, and in accordance with the adoption of SOP 98-5 in the
current year first quarter, the opening costs associated with
these stores were expensed at the time of opening. Store opening
and closure program costs during the prior year were related to
new store opening costs which were expensed over the year in
which the store opened.
Operating income for the thirteen weeks ended October 30,
1999 increased 75.0% to $12.6 million from $7.2 million in the
prior year third quarter. Operating income as a percent of sales
was 4.8% in the current year third quarter as compared to 2.7% in
the prior year third quarter.
Net interest expense for the thirteen weeks ended October
30, 1999 decreased $0.2 million from the prior year third quarter
as a result of a lower level of average borrowings outstanding,
partially offset by an increase in overall borrowing rates.
As a result of the factors discussed above, the Company had
net income of $0.2 million for the thirteen weeks ended October
30, 1999 as compared to a net loss in the prior year third
quarter of $3.2 million.
Thirty-nine Weeks Ended October 30, 1999 Compared to the Thirty-
nine Weeks Ended October 31, 1998
Sales for the thirty-nine weeks ended October 30, 1999
("current year") decreased 2.4% to $796.8 million from $816.2
million for the thirty-nine weeks ended October 31, 1998 ("prior
year"). Comparable store sales decreased 6.7% for the current
year. Sales results for the current year reflect, among other
things, the impact of transitioning the Company's inventory to a
more fashionable, in-demand merchandise mix as well as a more
conservative promotional cadence. Sales results for the current
year also reflect the impact on the first quarter of the heavy
promotional and inventory management activities which were put
into place during the fall of 1998. These initiatives have had,
and to some extent, continue to have a negative impact on the
Company's merchandise mix and customer base. As a result of this
activity, the Company's sales results for the current year
reflect a higher sell-through of fully priced units and a
significantly lower number of lower priced clearance units which
has resulted in a net reduction of total sales at higher
merchandise margins.
For the thirty-nine weeks ended October 30, 1999, gross
profit decreased 9.4% to $221.6 million from $244.7 million in
the comparable period of 1998. Gross profit as a percent of
sales decreased to 27.8% for the current year from 30.0% in the
prior year. Gross margin for 1999 includes a $7.3 million
provision associated with the store closure program implemented
during the second quarter of the current year as well as the
negative sales leverage associated with the Company's fixed
buying, occupancy and distribution expenses which are included in
cost of goods sold. The decline in gross margin as a percent of
sales also reflects lower vendor discounts on new store inventory
purchases and reduced levels of store grand opening sales which
typically carry a higher level of gross margin as a result of the
reduction in the number of new stores opened during 1999. These
declines were partially offset by higher merchandise margins
during the second and third quarters of the current year
resulting from a reduction in the level of clearance sales and a
more conservative promotional cadence.
SG&A expenses for the thirty-nine weeks ended October 30,
1999 decreased 1.4% to $191.8 million from $194.6 million in the
comparable period of 1998 and, as a percentage of sales,
increased to 24.1% from 23.8% in the comparable period of 1998.
SG&A expenses for the current year benefited from improved
results in the Company's credit card operations during the first
and second quarters of 1999. In addition, SG&A expenses for 1999
benefited from approximately $4.7 million of reduced payroll and
payroll related costs as well as the Company's continuing efforts
in controlling SG&A expenses. The reduction in payroll related
costs was primarily associated with reduced vacation expense
resulting from a change in the Company's employee benefit program
during the first quarter of this year. The current year SG&A
expenses also benefited from a reduction in operating costs
associated with the stores included in the store closure program
which was implemented during the second quarter of 1999.
Store opening and closure program costs for the thirty-nine
weeks ended October 30, 1999 reflect the costs associated with
the 10 new stores opened during the current year first quarter as
well as the store closure program that was implemented during the
second quarter. The store closure program will result in the
closure of approximately 35 underperforming stores, of which 33
were closed as of the end of the third quarter of 1999. The
remaining stores are expected to be closed during the fourth
quarter of 1999. In connection with the store closure program,
the Company has recorded $23.7 million of pretax costs, of which
$7.3 million is included in cost of sales while the remaining
$16.4 million is included in store opening and closure program
costs. Of the total $23.7 million of costs, approximately $2.5
million represents severance and lease termination costs,
approximately $2.5 million represents operating costs for the
stores in the closure program during the second and third
quarters of 1999, approximately $7.3 million represents a lower
of cost or market reserve related to the inventory to be
liquidated in the stores in the closure program while the balance
relates primarily to the write-off of fixed assets and
intangibles associated with the stores in the closure program.
Store opening and closure program costs during the prior year
were related to new store opening costs which were expensed over
the year in which the store was opened.
As a result of the factors discussed above, the Company had
operating income of $12.6 million for the thirty-nine weeks ended
October 30, 1999 as compared to operating income of $45.2 million
in the comparable period in 1998.
Net interest expense for the thirty-nine weeks ended October
30, 1999 increased 7.6% to $36.9 million from $34.3 million for
the comparable period in 1998 due to a higher level of average
borrowings outstanding and an increase in overall borrowing
rates.
As a result of the foregoing, the Company's net loss before
the cumulative effect of a change in accounting principle for the
thirty-nine weeks ended October 30, 1999 was $17.1 million as
compared to net income of $6.6 million for the comparable period
in 1998.
In connection with the adoption of SOP 98-5, the Company
recorded a cumulative effect of a change in accounting principle,
net of tax charge, of $2.4 million during the first quarter of
1999. The charge reflects the write-off of the unamortized
organizational costs associated with the Company's accounts
receivable trust and credit card bank.
Seasonality and Inflation
The Company's business is seasonal and annual results of
operations are highly dependent upon the fourth quarter as
quarterly sales and profits are traditionally lower during the
first three quarters (February through October) and higher during
the fourth quarter (November through January). In addition,
working capital requirements fluctuate throughout the year,
increasing substantially in October and November due to
requirements for significantly higher inventory levels in
anticipation of the holiday season. During 1998, the Company
experienced poor sales and results of operations beginning in the
second quarter which impacted these traditional trends during
those periods.
The following table shows certain unaudited financial
information for the Company by quarter (dollars in thousands):
1999
Q1 Q2 Q3
Net sales $ 262,591 $ 269,848 $ 264,327
Gross profit 70,359 74,021 77,203
Operating income (loss) 8,391 (8,332) 12,560
Quarters' operating
income as a percent
of total -- -- --
Income (loss) before
cumulative effect of a
change in accounting
principle $ (2,269) $ (15,091) $ 224
Net income (loss) $ (4,671) $ (15,091) $ 224
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 (loss) 25,278 12,678 7,226 7,458
Quarters' operating
income as a percent
of total 48% 24% 14% 14%
Income (loss) before
cumulative effect of
a change in
accounting principle $ 9,035 $ 765 $ (3,152) $ (2,934)
Net income (loss) $ 9,035 $ 765 $ (3,152) $ (2,934)
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 decreased $37.5 million to
$330.6 million at October 30, 1999 from $368.1 million at January
30, 1999. The most significant changes in working capital were:
(i) an increase in inventories associated with the seasonal build
of inventories offset by (ii) the inclusion of $61.2 million of
the outstanding balance under the Company's $100.0 million
working capital and letter of credit facility and the $100.0
million expansion revolving credit facility (collectively the
"Credit Facility") in current portion of long-term debt. This
amount reflects the requirement contained in the Credit Facility
agreement to reduce the aggregate balance outstanding under the
facility to $100.0 million for a period of 45 days prior to July
2000. Outstanding borrowings under the Credit facility were
$161.2 million at October 30, 1999 as compared to $180.4 million
at October 31, 1998 and $142.0 million at January 30, 1999. The
entire balance outstanding at January 30, 1999 was included in
long-term debt as the Credit Facility agreement was modified to
allow a maximum of $170.0 million to be outstanding for thirty
days during the period of January 27, 1999 through July 31, 1999.
The Company's primary capital requirements are for working
capital, debt service and capital expenditures. Based upon the
current capital structure, management anticipates cash interest
payments to be approximately $44.0 million during each of 1999
and 2000. Capital expenditures are generally for new store
openings, remodeling of existing stores and customary store
maintenance. Capital expenditures for the first thirty-nine weeks
of 1999 were $13.2 million as compared to $71.2 million for the
comparable period of 1998. The reduction was a result of a
decrease in the number of new stores opened as well as the
completion of the conversion of the remaining CR Anthony stores
to the Company's format and trade names, which occurred during
the first and second quarters of 1998. Management expects
capital expenditures to be approximately $23.0 million during
1999, consisting primarily of 10 new store openings, remodeling
of existing stores and the implementation of a new merchandising
system. Required aggregate principal payments on existing debt,
excluding the Credit Facility, total $4.8 million and $34.8
million for 1999 and 2000, respectively. Included in the $34.8
million of principal repayments in 2000 are the $30.0 million
aggregate principle amount of SRPC 12.5% Trust certificate-backed
notes ("SRPC Notes") which were defeased on November 9, 1999 in
connection with the restructuring of the Accounts Receivable
Program as discussed below.
The Company's current short-term liquidity needs are
provided by (i) existing cash balances, (ii) operating cash
flows, (iii) the Accounts Receivable Program, (iv) the Credit
Facility (v) and normal trade credit terms from the vendor and
factor community. The Company expects to fund its long-term
liquidity needs from (i) its operating cash flows, (ii) the
issuance of debt and/or equity securities, (iii) the Accounts
Receivable Program and (iv) the Credit Facility. Outstanding
borrowings under the Credit Facility were $161.2 million at
October 30, 1999 as compared to $180.4 million at October 31,
1998, a decrease of $19.2 million. The Company had $24.6 million
of availability under the Credit Facility at October 30, 1999 and
$7.1 million at October 31, 1998.
On November 9, 1999, the Company completed a refinancing of
the existing term and revolving certificates outstanding under
its Accounts Receivable Program. In connection with the
refinancing, the previously existing term and revolving
certificates were replaced with new term and revolving
certificates (the "New Certificates"). The New Certificates
provide the Company with a maximum availability of $329.9
million, subject to the amount of receivables held in the Trust.
Based upon the amount of receivables in the Trust at the time of
closing, the Company received approximately $290.0 million of
proceeds. Of this amount, approximately $260.0 million was used
to retire the outstanding balances under the previously existing
Trust certificates, which were scheduled to begin amortizing in
December of 1999. The remainder of the proceeds were used to
redeem the SRPC Notes. In connection with the refinancing, the
Company expects to record an after-tax extraordinary charge of
approximately $1.3 million in the fourth quarter of 1999, the
majority of which is non-cash.
The Company continually monitors its liquidity position and
compliance with its various credit agreements. During the third
and fourth quarters of 1998, the Company's Credit Facility
agreement was amended to lessen certain covenant requirements
through the third quarter of 1999 and to clarify certain defined
terms contained in the Credit Facility agreement. The covenant
requirements for the fourth quarter of 1999 are significantly
more restrictive than those for the first three quarters of 1999.
As discussed in "Seasonality and Inflation" above, the Company's
profits are historically lower in the first three quarters of the
year and higher in the fourth quarter. Accordingly, the Company
is dependent on a significantly improved financial performance
for the entire year, and in particular the fourth quarter as
compared to last year, in order to be in compliance with the
financial covenants as well as meeting the clean down requirement
contained in its Credit Facility agreement. There can be no
assurance that the Company's financial results for the fourth
quarter will be sufficient to allow the Company to continue to be
in compliance with its financial covenants. To the extent the
Company fails to achieve compliance with its financial covenants
or the Company is unable to obtain certain amendments if
necessary from its lenders to lessen the covenant requirements,
the financial position of the Company could be adversely
affected.
Year 2000
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 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. In August of 1999, the
Company completed the installation of a new merchandising system
which is year 2000 compliant. The Company is currently addressing
various post-implementation issues; however, the Company does not
anticipate that these issues will have a material impact on the
financial position or results of operations of the Company. The
Company believes Year 2000 readiness related to critical
information systems infrastructure is substantially complete.
In addition, 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, communications
networks, personal computers and network systems, printers, store
register systems and processors, scanners and emergency power
systems. The Company believes Year 2000 readiness related to
peripheral systems and hardware is substantially complete.
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. The aggregate
cost of the Company's Year 2000 efforts paid to third parties to
assist in remediation has been approximately $2.3 million. 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.
PART II - OTHER INFORMATION
Item 1. 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. On July
23, 1999, the Company filed a motion to dismiss the Weld Suit.
The United States District Court for the Southern District of
Texas is not expected to render a final opinion on the motion to
dismiss before the spring of 2000.
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 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a News Release on Form 8-K dated August 5,
1999 related to Stage Stores, Inc. second quarter 1999 sales
results.
The Company filed a News Release on Form 8-K dated August
19, 1999 related to Stage Stores, Inc. second quarter 1999
results of operations.
The Company filed a News Release on Form 8-K dated November
4, 1999 related to Stage Stores, Inc. third quarter 1999
sales results.
The Company filed a News Release on Form 8-K dated November
11, 1999 related to Stage Stores, refinancing the accounts
receivable credit facility.
The Company filed a News Release on Form 8-K dated November
18, 1999 related to Stage Stores, Inc. third quarter 1999
results of operations.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
STAGE STORES, INC.
December 7, 1999 /s/ Carl E. Tooker
(Date) Carl E. Tooker
Chairman, Chief Executive Officer
and President
(principal executive officer)
December 7, 1999 /s/ James A. Marcum
(Date) James A. Marcum
Vice Chairman and
Chief Financial Officer
(principal financial and
accounting officer)
<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.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> OCT-30-1999
<CASH> 7,533
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 389,926
<CURRENT-ASSETS> 527,972
<PP&E> 218,087
<DEPRECIATION> 0
<TOTAL-ASSETS> 851,923
<CURRENT-LIABILITIES> 197,413
<BONDS> 444,512
<COMMON> 281
0
0
<OTHER-SE> 184,835
<TOTAL-LIABILITY-AND-EQUITY> 851,923
<SALES> 796,766
<TOTAL-REVENUES> 796,766
<CGS> 575,183
<TOTAL-COSTS> 575,183
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,949
<INCOME-PRETAX> (24,330)
<INCOME-TAX> (7,194)
<INCOME-CONTINUING> (17,136)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (2,402)
<NET-INCOME> (19,538)
<EPS-BASIC> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
