UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - --- EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1994
--------------
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 1-10491
-------
MERRY-GO-ROUND ENTERPRISES, INC.
- - -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-0913402
- - ---------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3300 Fashion Way, Joppa, Maryland 21085
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
410-538-1000
- - ---------------------------------------------------
(Registrant's telephone number, including area code)
Neither name, address nor fiscal year has been changed since the last
report.
- - ---------------------------------------------------------------------------
(Former name, former address and formal fiscal year, if changed since last
report.)
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
--- ---
Number of shares of Common Stock outstanding as of June 10, 1994:
53,948,283
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MERRY-GO-ROUND ENTERPRISES, INC.
INDEX
Part I - Financial Information
Consolidated Statements of Operations (Unaudited)
for the Three Months Ended
April 30, 1994 and May 1, 1993 3
Consolidated Balance Sheets as of April 30, 1994
(Unaudited) and January 29, 1994 4
Consolidated Statements of Cash Flows
(Unaudited) for the Three Months Ended
April 30, 1994 and May 1, 1993 5
Notes to Consolidated Financial Statements (Unaudited) 6
Management's Discussion and Analysis of Results of
Operations and Financial Condition 10
Part II- Other Information
Item 6 Exhibits and Reports on Form 8-K 13
Signatures 14
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PART I: FINANCIAL INFORMATION
- - ------------------------------
<TABLE>
MERRY-GO-ROUND ENTERPRISES, INC.
DEBTOR-IN-POSSESSION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
-------------------------------
April 30, 1994 May 1, 1993
-------------- -----------
<S> <C> <C>
Net sales $169,016,000 $185,927,000
------------ ------------
Costs and expenses:
Costs of sales, buying
and occupancy 139,026,000 140,367,000
Selling and administrative 49,952,000 41,929,000
Interest expense, net 68,000 520,000
------------ ------------
Total 189,046,000 182,816,000
------------ ------------
Earnings (loss) before reorganization costs and
income tax (benefit) expense (20,030,000) 3,111,000
Reorganization costs, net (note 3) 7,009,000 -
------------ ------------
Earnings (loss) before income tax (benefit) expense (27,039,000) 3,111,000
Income tax (benefit) expense (note 4) (2,974,000) 1,136,000
------------ ------------
Net earnings (loss) $(24,065,000) $ 1,975,000
============ ============
Earnings (loss) per share of common stock $ (.45) $ .04
============ ============
Weighted average number of
shares outstanding 53,932,335 53,880,930
============ ============
<FN>
Accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
MERRY-GO-ROUND ENTERPRISES, INC.
DEBTOR-IN-POSSESSION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 30, 1994 January 29, 1994
--------------- ---------------
(Unaudited) (Note)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 79,550,000 $113,119,000
Receivables 4,273,000 3,916,000
Merchandise inventories 101,512,000 71,528,000
Prepaid expenses and other, including deferred
income taxes of $3,435,000 and $2,323,000 6,750,000 4,279,000
Refundable income taxes (note 4) 22,418,000 18,026,000
------------ ------------
Total current assets 214,503,000 210,868,000
------------ ------------
Property and equipment, at cost:
Land and land improvements 5,421,000 5,421,000
Buildings 37,572,000 37,428,000
Leasehold improvements 141,796,000 140,301,000
Furniture, fixtures and equipment 182,658,000 183,681,000
------------ ------------
367,447,000 366,831,000
Less accumulated depreciation and amortization 127,322,000 119,691,000
------------ ------------
Net property and equipment 240,125,000 247,140,000
------------ ------------
Other 4,261,000 3,871,000
------------ ------------
$458,889,000 $461,879,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable, trade $ 24,476,000 $ 5,406,000
Other payables and accrued expenses 30,411,000 30,997,000
Total current liabilities ------------ ------------
54,887,000 36,403,000
------------ ------------
Noncurrent liabilities:
Long-term debt 10,000,000 10,000,000
Other, including deferred income taxes
of $3,250,000 and $648,000 13,961,000 11,113,000
------------ ------------
Total noncurrent liabilities 23,961,000 21,113,000
------------ ------------
Liabilities subject to compromise under
reorganization proceedings (note 2) 212,746,000 213,142,000
------------ ------------
Stockholders' equity:
Common stock of $.01 par value per share:
Authorized 100,000,000 shares; issued and
outstanding 53,932,335 shares at
April 30, 1994 and January 29, 1994 539,000 539,000
Additional paid-in capital 70,783,000 70,644,000
Retained earnings 95,973,000 120,038,000
------------ ------------
Total stockholders' equity 167,295,000 191,221,000
------------ ------------
$458,889,000 $461,879,000
============ ============
<FN>
Note - The consolidated balance sheet at January 29, 1994 has been derived from the audited
consolidated financial statements at that date.
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
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MERRY-GO-ROUND ENTERPRISES, INC.
DEBTOR-IN-POSSESSION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
-------------------------------
April 30, 1994 May 1, 1993
-------------- -----------
<S> <C> <C>
Operating activities:
Net earnings (loss) $(24,065,000) $ 1,975,000
Adjustments to reconcile net earnings (loss) to
net cash (used in ) provided by operating activities:
Noncash reorganization items 7,341,000 -
Depreciation and amortization 9,080,000 7,808,000
Provision for deferred income taxes 1,490,000 1,407,000
Loss on disposal of property and equipment 196,000 -
Amortization of restricted common stock 139,000 327,000
Change in operating assets and liabilities:
(Increase) decrease in:
Receivables (536,000) 388,000
Merchandise inventories (29,984,000) (39,334,000)
Prepaid expenses and other (1,359,000) (52,000)
Refundable income taxes (4,392,000) -
Other assets (390,000) (405,000)
Increase (decrease) in:
Accounts payable, trade 19,070,000 31,096,000
Other payables and accrued expenses (7,015,000) (10,376,000)
Federal and state income taxes payable - (9,065,000)
Other noncurrent liabilities 246,000 1,098,000
Operating payables subject to compromise under
reorganization proceedings (396,000) -
------------ -------------
Net cash used in operating activities (30,575,000) (15,133,000)
------------ -------------
Investing activities:
Property and equipment expenditures (3,214,000) (16,637,000)
Proceeds from sales of property and equipment 220,000 -
------------ ------------
Net cash used in investing activities (2,994,000) (16,637,000)
------------ ------------
Financing activities:
Principal payments on long-term debt - (210,000)
Proceeds from issuance of common stock - 350,000
Dividends paid - (717,000)
------------ ------------
Net cash used in financing activities - (577,000)
------------ ------------
Net decrease in cash and cash equivalents (33,569,000) (32,347,000)
Cash and cash equivalents at beginning of period 113,119,000 40,115,000
------------ ------------
Cash and cash equivalents at end of period $ 79,550,000 $ 7,768,000
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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MERRY-GO-ROUND ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
1. REORGANIZATION AND BASIS OF REPORTING
-------------------------------------
Merry-Go-Round Enterprises, Inc. (the "Company"), a national specialty
retailer of contemporary fashions for young men and women, operated 1,388
stores in 44 states and Washington, D.C. at April 30, 1994.
Almost all of the Company's stores are located in enclosed regional
shopping malls and are leased. The geographic distribution of the retail
stores by regions of the United States was as follows: East North
Central, 306 stores; East South Central, 66 stores; Mid-Atlantic, 238
stores; Mountain, 45 stores; New England, 90 stores; Pacific, 136 stores;
South Atlantic, 285 stores; West North Central, 59 stores; and West South
Central, 163 stores.
During the first quarter of fiscal 1995, the numbers of stores
opened, closed and converted to other concepts, were as follows:
<TABLE>
<CAPTION>
Open at Open at
January 29, Stores Stores Stores April 30,
1994 Opened Closed Converted 1994
------- ------ ------ --------- --------
Concept
- - -------
<S> <C> <C> <C> <C> <C>
Merry-Go-Round 517 - (9) (11) 497
Dejaiz/Attivo 395 - (7) (9) 379
Chess King 417 - (23) (83) 311
Cignal 80 - (1) 2 81
Club International 20 - - - 20
Boogies Diner 5 - (1) - 4
Fashion Outlets - - (5) 101 96
----- --- --- ---- -----
1,434 - (46) - 1,388
----- --- --- ---- -----
</TABLE>
During the first quarter of fiscal 1995, the Company converted the
merchandising strategy for 96 store locations to offer prior season clearance
and "off-price" branded merchandise.
In May 1994, the Company closed 22 store locations. The Company
anticipates that it will close additional stores in connection with its
Chapter 11 proceedings.
As a result of certain events in the third and fourth quarters of fiscal
1994, on January 11, 1994, the Company and certain of its subsidiaries, filed
voluntary petitions for relief under Chapter 11 ("Chapter 11") of Title 11 of
the United States Code in the United States Bankruptcy Court for the District
of Maryland, Baltimore Division (the "Bankruptcy Court"). The Company and its
subsidiaries are presently operating their businesses as debtors-in-possession
under the jurisdiction of the Bankruptcy Court and intend to propose a plan of
reorganization pursuant to Chapter 11. As debtors-in-possession, the Company
and its subsidiaries may not engage in transactions outside of the ordinary
course of business without approval of the Bankruptcy Court.
Liabilities subject to compromise (see note 2) in the accompanying
consolidated balance sheets represent the Company's estimate of liabilities as
of April 30, 1994, subject to adjustment in the reorganization process. Under
Chapter 11, actions to enforce certain claims against the Company are stayed
if the claims arose, or are
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based on events that occurred, on or before the petition date of January 11,
1994. The ultimate terms of settlement of these claims will be determined in
accordance with a plan of reorganization confirmed by the Bankruptcy Court.
Other liabilities may arise or be subject to compromise as a result of
rejection of executory contracts, including leases, or the Bankruptcy Court's
resolution of contingent and disputed claims. The ultimate resolution of such
liabilities will be addressed as part of a plan of reorganization.
The accompanying consolidated financial statements have been presented on
the basis that the Company is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. As a result of the Chapter 11 filing and circumstances relating
to this event, realization of assets and satisfaction of liabilities is
subject to uncertainty. A plan of reorganization could materially change the
amounts reported in the accompanying consolidated financial statements, which
do not reflect adjustments to the carrying values of assets and liabilities
which may be necessary as a consequence of a plan of reorganization. The
ability of the Company to continue as a going concern is dependent on, among
other things, confirmation of an acceptable plan of reorganization, future
profitable operations, compliance with the debtor-in-possession financing
agreement, and the ability to generate sufficient cash from operations and
financing sources to meet future obligations.
The consolidated financial statements included herein do not include all
the information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles. For further information, such as the significant accounting
policies followed by the Company, refer to the notes to consolidated financial
statements contained in the 1994 Annual Report.
In the opinion of management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation for the
interim periods have been included in the consolidated financial statements.
The results of operations for the period ended April 30, 1994, are not
necessarily indicative of the operating results to be expected for the full
year.
2. LIABILITIES SUBJECT TO COMPROMISE
---------------------------------
Liabilities subject to compromise as of April 30, 1994 and January 29,
1994 consisted of:
<TABLE>
<CAPTION>
April 30, 1994 January 29, 1994
-------------- ----------------
<S> <C> <C>
Secured note payable $ 4,997,000 $ 4,997,000
Unsecured liabilities:
Accounts payable, trade 40,656,000 40,881,000
Other payables and accrued expenses 28,160,000 28,331,000
Revolving credit debt 44,520,000 44,520,000
Chess King acquisition debt 29,413,000 29,413,000
Institutional investor notes 65,000,000 65,000,000
------------ ------------
$212,746,000 $213,142,000
============ ============
</TABLE>
A plan of reorganization ultimately confirmed by the Bankruptcy Court may
materially change the amounts and terms of these prepetition liabilities.
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MERRY-GO-ROUND ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
(Unaudited)
During the first quarter of fiscal 1995, the Company received
authorization to pay and did pay approximately $4.5 million of prepetition
sales taxes.
The Company anticipates that it will negotiate with creditors to
reconcile claims filed with the Bankruptcy Court to the Company's financial
records. The additional liability arising from this reconciliation process,
if any, is not subject to reasonable estimation. As a result, no provision
has been recorded for these possible claims. The Company will recognize the
additional liability, if any, as the amounts become subject to reasonable
estimation.
Additional bankruptcy claims and prepetition liabilities may arise from
the termination of other contractual obligations and the settlement of
contingent and disputed claims. Consequently, the amounts included in the
consolidated balance sheet as liabilities subject to compromise may be subject
to further adjustment.
Included in other payables and accrued expenses above are claims by
landlords of approximately $3.9 million arising from the rejection of
approximately 43 store leases as permitted under the Bankruptcy Code. Of
these stores, 15 were leases acquired in the 1993 acquisition of Chess King
and were guaranteed by a subsidiary of Melville. Therefore, the lessors of
these leases may have a claim against Melville for unpaid lease obligations
and breach of contract claims beyond the amounts permitted by the Bankruptcy
Code. As part of the purchase agreement, the Company has agreed to indemnify
Melville against any loss under its lease guarantees. As a result, Melville
may assert claims against the Company for amounts, if any, it is required to
pay under the lease guarantees.
If Melville is required to perform under its lease guarantees relating to
these rejected leases, the amount of any claim that would be allowed against
the Company in Bankruptcy Court under the indemnification clause of the
purchase agreement is uncertain. As a result, the Company has recorded a
liability subject to compromise in the amount of the maximum claim permitted
by the landlord under the Bankruptcy Code and has not recorded any amount
relating to the potential claims by Melville which may arise under the
indemnification clause of the purchase agreement. In addition, since
landlords are generally required to mitigate losses under the rejected leases,
the amount of their losses including the portion of their losses which may
represent a claim against Melville, cannot be estimated at this time. The
total lease commitments on the rejected Chess King stores in excess of the
recorded claims are approximately $2.6 million.
Additional amounts relating to these stores may be recorded, if
necessary, in the period in which, based on the legal status of Melville's
claim, it is probable that the Company will be required to reimburse Melville
for any amounts paid under the lease guarantees and those amounts can be
reasonably estimated. In the event claims arising from the Melville lease
guarantees are permitted in Bankruptcy Court, these claims will be prepetition
claims and will be subject to the payment terms dictated by a confirmed plan
of reorganization.
3. REORGANIZATION COSTS, NET
-------------------------
Reorganization costs recorded in the first quarter of fiscal 1995
consisted of:
Write-off of leasehold improvements and
fixtures associated with closed stores $2,722,000
Estimated lease rejection claims 2,224,000
Professional fees 2,200,000
Other 244,000
Interest income (381,000)
----------
$7,009,000
==========
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4. INCOME TAX BENEFIT
------------------
The income tax benefit for the first quarter of fiscal 1995 reflects
limitations applicable to net operating loss carrybacks resulting from
alternative minimum tax rules and the reduced realizability of deferred tax
assets.
In June 1994, the Company received approximately $15.8 million of its
refundable income receivable.
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MERRY-GO-ROUND ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company is a national specialty retailer of contemporary fashions for
young men and women. At April 30, 1994, the Company operated 1,388 stores in
44 states and Washington, D.C. The following discussion explains material
changes in the results of operations for the first quarter of fiscal years
1995 and 1994 and significant developments affecting financial condition since
the end of fiscal 1994.
CHAPTER 11 REORGANIZATION
- - -------------------------
On January 11, 1994, the Company and two of its subsidiaries, MGR
Distribution Corp. and MGRR, Inc., filed voluntary petitions for relief under
Chapter 11 of Title 11 of the United States Code in the United States
Bankruptcy Court for the District of Maryland, Baltimore Division.
The consolidated financial statements have been presented on the basis
that the Company is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
As a result of the Chapter 11 filing and circumstances relating to this event,
realization of assets and satisfaction of liabilities is subject to
uncertainty. A plan of reorganization could materially change the amounts
reported in the accompanying consolidated financial statements, which do not
reflect all adjustments to the carrying values of assets and liabilities which
may be necessary as a consequence of a plan of reorganization. The ability of
the Company to continue as a going concern is dependent on, among other
things, confirmation of an acceptable plan of reorganization, future
profitable operations, compliance with the debtor-in-possession financing
agreement and the ability to generate sufficient cash from operations and
financing sources to meet future obligations.
RESULTS OF OPERATIONS
- - ---------------------
Net sales for the first quarter of fiscal 1995 decreased approximately
$16.9 million or 9.1% compared to the first quarter of fiscal 1994.
Comparable store sales decreased 26% and 6.6% in the first quarters of fiscal
1995 and 1994, respectively. The decrease in fiscal 1995 is primarily due to
inventory levels being well below desired levels as a result of delays by
vendors in accepting and/or beginning production of spring merchandise orders,
decreased customer traffic, and the continued impact of a highly promotional
retail environment and shift by customers away from higher-priced branded
merchandise to lower-priced private label merchandise. The Company believes
that these low inventory levels will continue and will have an adverse impact
on sales until the fall back-to-school selling season and that it will be
necessary to rebuild customer loyalty. The Company expects to continue to
experience decreases in comparable store sales at least through the third
quarter and that it will report losses for this period. The decrease in
fiscal 1994 in comparable store sales was due to a number of factors,
including the effects of continuing weakness in consumer confidence and
spending patterns, the absence of a clear fashion trend and a shift by the
Company's traditional customer base toward lower priced basic fashion
merchandise.
Net sales for May 1994 and 1993 were $52.6 million and $64.2 million,
respectively. Comparable store sales for May 1994 decreased 25%.
Costs of sales, buying and occupancy expenses decreased approximately
$1.3 million or 1.0% in the first quarter of fiscal 1995 compared to the
first quarter of fiscal 1994. As a percentage of net sales, these costs
increased to 82.3% in the first quarter of fiscal 1995 from 75.5% in the first
quarter of fiscal 1994. This increase is due primarily to decreased leverage
on fixed occupancy costs resulting from the decrease in sales per square foot
to $43 in fiscal 1995 from $67 in fiscal 1994.
Selling and administrative expenses decreased approximately $8.0 million
or 19.1% in the first quarter of fiscal 1995 compared to the first quarter of
fiscal 1994. As a percentage of net sales, these costs increased to 29.6% in
the first quarter of fiscal 1995 from 22.5% in the first quarter of fiscal
1994. These increases for the first quarter of fiscal 1995 as compared to the
first quarter of
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Page 11
fiscal 1994 are attributed principally to the increase in the number of stores
and decreased leverage on fixed operating expenses resulting from lower
average sales.
Interest expense was $322,000 and $697,000 and interest income was
$254,000 and $177,000 for the first quarter of fiscal 1995 and 1994,
respectively. Under the Bankruptcy Code, prepetition liabilities do not
continue to accrue interest unless the debt is clearly collateralized by
assets having current fair market values in excess of the amount of the debt.
Therefore, interest has not been accrued on any of the Company's prepetition
obligations except for a $10 million note payable secured by the headquarters
and distribution center facility. As a result, interest expense for the first
quarter of fiscal 1995 has decreased. In addition, interest income in the
amount of approximately $381,000 has been classified as a reduction in
reorganization costs in accordance with AICPA Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code".
In May 1994, the Company closed 22 store locations. The Company
anticipates that it will close additional stores in connection with its
Chapter 11 proceedings. Since the beginning of the proceedings, the Company
also has rejected an aggregate of 43 leases of stores, as permitted under the
Bankruptcy Code.
Reorganization costs which were approximately $7.0 million in the first
quarter of fiscal 1995 includes all costs associated with the reorganization
under Chapter 11 such as, the write-off of leasehold improvements and fixtures
associated with closed stores and estimated lease rejection claims (including
costs associated with the store closings and lease rejections noted above),
professional fees and certain other expenses. See notes 2 and 3 to the
consolidated financial statements for the detail components of reorganization
costs and the amounts of payables and accrued expenses subject to compromise
associated with the lease rejections.
Income tax benefit in the first quarter of fiscal 1995 was approximately
$3.0 million representing an effective tax rate of 11% compared to income tax
expense of approximately $1.1 million representing an effective tax rate of
36.5% in the first quarter of fiscal 1994. The income tax benefit reflects
limitations on net operating loss carrybacks resulting from alternative
minimum tax rules and reduced realizability of deferred tax assets.
The net loss for the quarter was approximately $24.1 million compared to
net earnings of approximately $2.0 million in the first quarter of fiscal
1994. Earnings before interest, income taxes, depreciation, amortization and
reorganization costs (EBITDA), an alternative measure of operating performance
generally reported by debtors-in-possession, were approximately negative $10.8
million for the first quarter of fiscal 1995 compared to a positive $11.4
million for the first quarter of fiscal 1994. The decrease in net earnings
and EBITDA were the result of the decreases in both total and same store
sales. The net loss was also adversely impacted by the costs associated with
the Chapter 11 process and the limitations on the tax benefit.
The results of operations for the period ended April 30, 1993 are not
necessarily indicative of the operating results to be expected for the full
year.
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LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
At April 30, 1994, the Company's working capital was approximately $159.6
million and its current ratio was 3.9. Net cash used in operating activities
was approximately $30.6 million for the first quarter of fiscal 1995, compared
to approximately $15.1 million for the first quarter of fiscal 1994 The
increase in net cash used in operating activities is due primarily to an
increase in merchandise inventories and decrease in net earnings.
Property and equipment expenditures for the first quarters of fiscal 1995
and 1994 were approximately $3.2 million and $16.6 million, respectively.
Property and equipment expenditures include approximately $900,000 and $5.5
million in the first quarter of fiscal 1995 and 1994, respectively, expended
in connection with expanding and equipping the Company's headquarters and
distribution center. The other property and equipment expenditures were
principally for store openings and remodelings.
The Company currently expects to open 6 new stores and expand and remodel
25 stores during the remainder of fiscal 1995 at a cost of approximately
$10.6 million.
In connection with the Chapter 11 filing, the Company entered into and
the Bankruptcy Court approved an agreement with certain lenders and The CIT
Group/Business Credit, Inc., as agent, to provide unsecured
debtor-in-possession financing in the form of a $125 million line-of-credit.
The agreement provides for cash borrowings and the issuance of up to $90
million in letters of credit which, in the aggregate, cannot exceed the lower
of a "borrowing base", as defined, or $125 million. Cash borrowings bear
interest at either a banks prime rate plus 1% or LIBOR plus 2-1/2%, at the
option of the Company. The Company is required to meet minimum levels of
earnings before interest, income taxes, depreciation, amortization and
reorganization costs, maintain specified inventory levels, and limit its
capital expenditures and may not pay dividends on its common stock over the
term of the agreement. The agreement will terminate on the earlier of April
21, 1996 or the date of consummation of a plan of reorganization.
The Company believes that working capital at April 30, 1994, anticipated
net cash provided by operating activities, the refund of income taxes
previously paid and its debtor-in-possession financing should enable the
Company to meet its liquidity requirements during fiscal 1995. However, in
view of the Chapter 11 reorganization, there is uncertainty with respect to
the Company's liquidity.
The foregoing discussion is designed to comply with the quarterly
reporting standards and should be read in conjunction with the more detailed
discussion in the 1994 Annual Report.
Item 6. Exhibits and Reports on Form 8-K
- - --------------------------------------------
(a) Exhibits - none
(b) Reports on Form 8-K - none
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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.
MERRY-GO-ROUND ENTERPRISES, INC.
DATE June 14, 1994 /s/ Isaac Kaufman
------------------- -----------------------------------
Isaac Kaufman
Executive Vice President, Secretary and
Treasurer (Principal Financial Officer)
DATE June 14, 1994 /s/ Frank C. Peters
------------------- -----------------------------------
Frank C. Peters
Vice President and Controller
(Principal Accounting Officer)
