FORM 8-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
February 22, 2000
(Date of Report, date of earliest event reported)
Stage Stores, Inc.
(Exact name of registrant as specified in its charter)
Commission file number 001-14035
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)
Not Applicable
(Former name or address, if changed since last report)
ITEM 5. Other Events.
On February 22, 2000, Carl Tooker left employment with the
Company, effective that date. Mr. Tooker was Chairman, Chief
Executive Officer and President of the Company. Also effective
that date, Steve Lovell, ceased serving as Chief of Field
Operations Officer, and will leave the Company by March 31, 2000.
With Mr. Tooker's departure, the Company's Board will
oversee operations and coordinate the search for a new Chief
Executive Officer. The Board appointed Director John J. (Jack)
Wiesner interim Chairman, Chief Executive Officer and President.
Prior to becoming a Director of the Company, Mr. Wiesner served
as Chairman of the Board of Directors and Chief Executive Officer
of C.R. Anthony Company, a national retail apparel chain which
the Company acquired in 1997. The other members of the Board of
Directors have agreed to assist Mr. Wiesner as necessary.
The Company is actively conducting a search for a new Chief
Executive Officer.
Mr. Tooker's departure follows an inquiry conducted by a
Special Committee consisting of all of the non-management members
of the Board of Directors, which reviewed certain transactions
between the Company and Mr. Tooker. The effects of the
transactions reviewed have been reflected in the Company's
results for prior periods, and the Committee believes they are
not material to the financial condition or operations of the
Company. However, these transactions had not been properly
reported to the Company's Board of Directors.
Specifically, the Special Committee determined that the
Company purchased Mr. Tooker's personal residence in 1997 at a
price specified by him, and assumed all liability for the
property, including upkeep and existing debt payments, until it
was sold in 1999. The Company sustained a loss of $806,556 as a
result of this transaction. Although the payment of these funds
has been reflected in the Company's books and records, this
transaction has not been previously disclosed in prior filings
with the SEC, nor was it discussed with or approved by the Board
of Directors.
In another transaction, it was determined that in May, 1997
the Company entered into a severance agreement and a separate
consulting contract in connection with the separation of an
employee who shortly thereafter became Mr. Tooker's spouse. The
Company recorded in its books and records payments to or for the
benefit of his spouse beginning in May, 1997, and ending in
August 1998, totaling $608,317.48, without the knowledge or
approval of the Board of Directors. The Special Committee also
determined that while employed by the Company in 1996 and 1997,
this employee entered into transactions with a company with whom
her sister was believed to be affiliated, in which the Company
paid a total of $313,260 for purchases of clothing inventory.
The Special Committee did not find any overcharges with respect
to the inventory purchases.
Demand has been made upon Mr. Tooker to reimburse the
Company for the unauthorized payments regarding his personal
residence and the severance paid to his spouse. In addition, the
Company has demanded repayment by Mr. Tooker of outstanding loans
he obtained from the Company, with interest thereon, totaling
approximately $1.1 million. Some of these loans are secured by
collateral which includes securities of the Company. Mr. Tooker
has not responded to the Company's demands.
The Special Committee further determined that during the
years 1997 through 1999, the Company maintained a contractual
relationship with Stage Planning and Design, Inc. ("SPAD"),
believed to be a wholly owned subsidiary of U.S. Builders, Inc.,
to manage the construction of store remodeling. Under the terms
of this agreement, the Company was required to and did reimburse
or pay direct all of SPAD's costs, including all payroll
expenses. In 1997, the Company paid SPAD in excess of $2.4
million, and in 1998 in excess of $9.9 million. Until late 1999,
Mr. Tooker's son-in-law was an officer and project manager for
SPAD, whose compensation was included as a reimbursable expense
billed to the Company during this time. Although the
expenditures were recorded on the Company's books and records for
the years in which they were accrued, the relationship involving
Mr. Tooker's son-in-law was not previously discussed with and
approved by the Board of Directors.
A Press Release regarding Mr. Tooker's departure and certain
other matters was issued by the Company on February 22, 2000 and
was filed as Exhibit 99.1 to Form 8-K dated February 23, 2000.
A press release regarding the Company announcing fourth
quarter and full year 1999 results of operations and completion
of $35.0 million senior revolving credit facility and certain
other matters was issued by the Company on March 9, 2000 and is
attached hereto as Exhibit 99.1.
ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
99.1 Press release dated March 9, 2000 issued by the Company.
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.
March 9, 2000 /s/ James A. Marcum
(Date) James A. Marcum
Vice Chairman and,
Chief Financial Officer
Exhibit 99.1
NEWS RELEASE
CONTACT: Bob Aronson
Director of Investor Relations
(800) 579-2302
FOR IMMEDIATE RELEASE
STAGE STORES, INC. ANNOUNCES FOURTH QUARTER
AND FULL YEAR 1999 RESULTS AND COMPLETION OF $35.0 MILLION
SENIOR REVOLVING CREDIT FACILITY
-- Net Loss of $3.90 Per Share Includes Special Charges --
_______________________________________________________________
HOUSTON, TX, March 9, 2000 -- Stage Stores, Inc. (NYSE: SGE)
today announced results for the fourth quarter and full year
ended January 29, 2000.
Net sales for the fourth quarter ended January 29, 2000 were
$324.8 million as compared to $357.3 million for the same period
last year. The decrease in sales primarily reflects the net
reduction of 31 stores for the year and a 7.8% decline in
comparable store sales during the quarter resulting from a
weakness in the Company's sales during the holiday selling
period. Net sales for the year ended January 29, 2000 were
$1,121.6 million as compared to $1,173.5 million last year.
Comparable store sales for the year decreased 7.0%
The Company reported a net loss for the fourth quarter before
extraordinary items of $109.1 million, or $3.88 per share, as
compared to a net loss of $2.9 million, or $0.10 per share, for
the same period last year. The results include certain one-time
pretax charges aggregating $131.1 million. During the fourth
quarter, the Company recorded an extraordinary item of $0.5
million in connection with the early retirement in November 1999
of the $30.0 million aggregate principal amount of SRI
Receivables Purchase Co., Inc. 12.5% Notes. The net loss for the
quarter after extraordinary items was $109.6 million, or $3.90
per share.
The net loss for the year ended January 29, 2000 before
extraordinary items and the cumulative effect of a change in
accounting principle was $126.3 million, or $4.50 per share, as
compared to net income of $3.7 million, or $0.13 per share on a
diluted basis, for the comparable period last year. This year's
results include certain one-time pretax charges aggregating
$154.8 million. The net loss for the year after extraordinary
items of $0.5 million and the cumulative effect of a change in
accounting principle of $2.4 million was $129.1 million, or $4.61
per share.
In commenting on the results, Jack Wiesner, the new interim Chief
Executive Officer, stated, "Clearly, the fourth quarter concluded
an extremely difficult and challenging year for the Company.
Improving our execution and the profitability of the business is
our top priority and the Board of Directors and the management
team are committed to accomplishing this objective. We must make
significant strides during the year in getting the key drivers of
our business back on track, namely sales, merchandise margins and
store level execution."
James A. Marcum, Vice Chairman and Chief Financial Officer,
commented, "In reviewing the components of our profit and loss
statement for the fourth quarter, it is important to note the
impact of the significant amount of pretax charges that were
recorded during the quarter. Gross margin for the fourth quarter
reflects a $54.0 million charge related to a lower cost or market
reserve for inventory to be liquidated in connection with our
store closure program and excess fall clearance inventory as well
as an $8.0 million LIFO charge resulting from an overall decrease
in the level of inventory. Selling, general and administrative
("SG&A") expenses for the fourth quarter reflect a $36.0 million
write down of long-lived assets in accordance with Statement of
Financial Accounting Standards No. 121; of this amount, $13.7
million relates to goodwill and other intangibles and the
remaining amount relates to other long-lived assets. SG&A
expenses for the fourth quarter also reflect a $2.8 million
provision against certain miscellaneous receivables, $0.6 million
associated with severance for the previously announced work force
reduction program and $1.9 million associated with certain costs
related to the refinancing of the Company's accounts receivable
program completed in November 1999.
"In addition to the special charges, gross margin for the quarter
was negatively impacted by an increased level of promotional
activity which increased our level of markdowns without
generating enough incremental unit sales to offset the decline in
the average price of units sold. SG&A expenses were also
negatively impacted by an increase in costs associated with the
Company's frozen pension plan of $0.9 million and increased
advertising costs of $2.0 million."
Mr. Marcum concluded, "The store opening and closure costs of
$27.8 million for the fourth quarter reflect the costs associated
with our previously announced store closure program for 2000."
The Company also announced that it completed its new $35.0
million senior revolving credit facility. The new facility
increases the current borrowing capacity of the Company to $235.0
million when combined with its existing $200.0 million revolving
credit facilities. In addition, as previously announced, the
Company's bank lending group amended certain financial covenants
under its existing credit facilities for the fourth quarter of
1999 and the first three quarters of fiscal 2000. As a result of
these amendments, the Company is in full compliance with the
provisions of the credit agreement. In the process of obtaining
these amendments and the increase in working capital
availability, the Company experienced a disruption of its spring
merchandise receipt flows during the early part of the first
quarter which may have an impact on the Company's first quarter
performance. With the increase in liquidity and the
modifications to the Company's financial covenants, the Company
is currently receiving significant trade support.
Mr. Wiesner concluded, "I want to reiterate that the Board of
Directors and the management of Stage are all firmly committed to
the Company's concept. We strongly believe that our difficulties
lie in execution issues. We will take those tough, but
necessary, actions that are needed to improve the future
performance of the Company."
The Company is actively conducting a search for a new CEO and has
retained an executive recruiting firm to assist in the search
effort.
Stage Stores, Inc. brings nationally recognized brand name
apparel, accessories, cosmetics and footwear for the entire
family to small towns and communities throughout the United
States. The company operated 648 stores in 33 states at the end
of the fourth quarter, primarily under the Stage, Bealls and
Palais Royal trade names.
Any statements in this press release that may be considered
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially. These
risks and uncertainties are discussed in periodic reports filed
by the Company with the Securities and Exchange Commission that
the Company urges investors to consider.
(Tables to Follow)
Stage Stores, Inc.
Consolidated Condensed Statement of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
1/29/00 1/30/99 1/29/00 1/30/99
Net sales $324,801 $357,349 $1,121,567 $1,173,547
Cost of sales and related
buying, occupancy and
distribution expenses 321,934 267,756 897,117 839,238
Gross profit 2,867 89,593 224,450 334,309
Selling, general and
administrative expenses 121,390 76,854 313,212 271,477
Store opening and closure
program costs 27,844 5,281 44,986 10,192
Operating income (loss) (146,367) 7,458 (133,748) 52,640
Interest, net 11,685 12,187 48,634 46,471
Income (loss) before income
tax, extraordinary item and
cumulative effect of change
in accounting principle (158,052) (4,729) (182,382) 6,169
Income tax expense (benefit) (48,935) (1,795) (56,129) 2,455
Income (loss) before
extraordinary item and
cumulative effect of a
change in accounting
principle (109,117) (2,934) (126,253) 3,714
Extraordinary item - early
retirement of debt,
net of tax (457) -- (457) --
Cumulative effect of change
in accounting principle -
reporting costs of start-up
activities, net of tax -- -- (2,402) --
Net income (loss) $(109,574) $(2,934) $(129,112) $3,714
Basic earnings (loss) per
common share data:
Basic earnings (loss) per
common share before
extraordinary item and
cumulative effect of change
in accounting principle $(3.88) $(0.10) $(4.50) $0.13
Extraordinary item - early
retirement of debt,
net of tax (0.02) -- (0.02) --
Cumulative effect of change
in accounting principle -
reporting costs of start-up
activities, net of tax -- -- (0.09) --
Basic earnings (loss) per
common share $(3.90) $(0.10) $(4.61) $0.13
Basic weighted average common
shares outstanding 28,084 27,954 28,028 27,885
Diluted earnings (loss) per
common share data:
Diluted earnings (loss) per
common share before
extraordinary item and
cumulative effect of change
in accounting principle $(3.88) $(0.10) $(4.50) $0.13
Extraordinary item - early
retirement of debt,
net of tax (0.02) -- (0.02) --
Cumulative effect of change
in accounting principle -
reporting costs of start-up
activities, net of tax -- -- (0.09) --
Diluted earnings (loss) per
common share $(3.90) $(0.10) $(4.61) $0.13
Diluted weighted average
common shares outstanding 28,084 27,954 28,028 28,428
Comparable store sales data (7.8%) (5.7%) (7.0%) (3.0%)
Stage Stores, Inc.,
Consolidated Condensed Balance Sheet
(in thousands)
(unaudited)
1/29/00 1/30/99
ASSETS
Cash and cash equivalents $20,179 $12,832
Undivided interest in accounts
receivable trust 41,600 69,816
Merchandise inventories, net 261,104 341,316
Other current assets 34,707 84,473
Total current assets 357,590 508,437
Fixed assets, net 182,782 233,263
Goodwill, net 69,856 92,551
Other assets 94,437 23,429
$704,665 $857,680
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $40,955 $82,779
Other current liabilities 63,950 52,706
Current portion of long-term debt
including credit facilities 9,830 4,814
Total current liabilities 114,735 140,299
Long-term debt including credit
facilities 492,393 487,968
Other long-term liabilities 19,726 25,021
Total liabilities 626,854 653,288
Stockholders' equity 77,811 204,392
$704,665 $857,680
Stage Stores, Inc.
Consolidated Condensed Statement of Cash Flows
(in thousands)
(unaudited)
Twelve Months Ended
1/29/00 1/30/99
Cash flows from operating activities:
Net income (loss) $(129,112) $3,714
Adjustments to net income:
Depreciation and amortization 99,027 33,474
Other (53,337) 2,371
Amortization of debt issue costs and
accretion of discount 4,184 3,715
Changes in working capital 100,339 (58,784)
Net cash provided by (used in)
operating activities 21,101 (15,510)
Cash flows from investing activities:
Additions to fixed assets (19,237) (88,719)
Net cash used in investing activities (19,237) (88,719)
Cash flows from financing activities:
Proceeds from working capital facility 43,000 96,300
Proceeds from issuance of common stock 128 955
Payments on long-term debt (34,813) (2,596)
Additions to debt issue costs (2,832) (913)
Net cash provided by financing
activities 5,483 93,746
Net increase (decrease) in cash and
cash equivalents 7,347 (10,483)
Cash and cash equivalents:
Beginning of period 12,832 23,315
End of period $ 20,179 $ 12,832
