<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 1, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO.0-13076
50-OFF STORES, INC.
DELAWARE 74-2640559
- ------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION IDENTIFICATION NO.)
8750 TESORO DRIVE, SAN ANTONIO, TEXAS 78217
- ---------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
TELEPHONE: (210) 805-9300
----------------------------------------------------
(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:
--- ---
--------------------
12,200,915 SHARES OF THE REGISTRANT'S COMMON STOCK WERE OUTSTANDING AT NOVEMBER
1, 1996.
--------------------
THERE ARE 23 PAGES IN THE SEQUENTIALLY NUMBERED, MANUALLY SIGNED ORIGINAL. THE
EXHIBIT INDEX IS LOCATED ON PAGE 22.
<PAGE> 2
FORM 10-Q INDEX
<TABLE>
<CAPTION>
PAGE
PART I
<S> <C> <C>
ITEM 1 FINANCIAL STATEMENTS ............................................... 3
CONDENSED CONSOLIDATED BALANCE SHEETS,NOVEMBER 1, 1996 (UNAUDITED),
FEBRUARY 2, 1996 AND NOVEMBER 3, 1995 (UNAUDITED) ................. 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS, THIRTEEN AND
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1996 (UNAUDITED), AND
THIRTEEN AND THIRTY-NINE
WEEKS ENDED NOVEMBER 3, 1995 (UNAUDITED) .......................... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS,
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1996 (UNAUDITED), AND
THIRTY-NINE WEEKS ENDED NOVEMBER 3, 1995 (UNAUDITED) .............. 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED) ......................................................... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ................................ 13
</TABLE>
PART II
<TABLE>
<S> <C> <C>
ITEM 1 LEGAL PROCEEDINGS ........................................... 20
ITEM 2. CHANGES IN SECURITIES ....................................... 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ............................. 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......... 20
ITEM 5. OTHER INFORMATION ........................................... 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................ 20
SIGNATURES .................................................. 21
EXHIBIT INDEX ............................................... 22
</TABLE>
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
50-OFF STORES, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
November 1, 1996 February 2, 1996 November 3, 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash and cash equivalents $ 2,034,429 $ 341,334 $ 2,148,896
Accounts receivable 1,266,219 1,129,604 2,307,626
Merchandise inventories 13,542,362 27,753,965 40,080,323
Prepaid and other current assets 498,237 437,226 2,019,990
----------- ----------- -----------
TOTAL CURRENT ASSETS 17,341,247 29,662,129 46,556,835
PROPERTY AND
EQUIPMENT-NET 12,758,143 24,888,222 25,602,865
OTHER ASSETS 1,061,843 899,126 976,772
----------- ----------- -----------
TOTAL ASSETS $31,161,233 $55,449,477 $73,136,472
=========== =========== ===========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
-3-
<PAGE> 4
50-OFF STORES, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
November 1, 1996 February 2, 1996 November 3, 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
LIABILITIES NOT SUBJECT TO
COMPROMISE:
CURRENT LIABILITIES:
Credit Facility $ 7,335,364 $ -- $ --
Accounts payable-trade 250,365 8,595,246 15,702,086
Accounts payable-other 1,097,693 4,238,123 4,291,876
Accrued expenses and
other current liabilities 462,451 3,280,093 3,094,264
Current portion of closed store
costs -- 1,168,213 693,306
Current portion of long-term
debt 266,667 1,286,372 2,027,127
------------ ------------ ------------
TOTAL CURRENT
LIABILITIES 9,412,540 18,568,047 25,808,659
CREDIT FACILITY, refinanced -- 11,218,051 15,804,076
LONG-TERM DEBT, less
current portion -- 3,884,515 4,162,876
CLOSED STORE COSTS -- -- 1,187,000
LIABILITIES SUBJECT TO
COMPROMISE 25,546,755 -- --
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 122,009 122,009 121,884
Additional paid-in capital 36,022,264 36,022,264 36,022,389
Subscription receivable (3,991,050) (3,991,050) (3,991,050)
Accumulated deficit (35,951,285) (10,374,359) (5,979,362)
------------ ------------ ------------
TOTAL STOCKHOLDERS'
EQUITY (3,798,062) 21,778,864 26,173,861
------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 31,161,233 $ 55,449,477 $ 73,136,472
============ ============ ============
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
-4-
<PAGE> 5
50-OFF STORES, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
--------------------------------------- ---------------------------------------
November 1, November 3, 1995 November 1, November 3,
1996 1995 1996 1995
------------------- ------------------- --------------------- ----------------
<S> <C> <C> <C> <C>
NET SALES $ 27,111,033 $ 37,643,782 $ 91,234,461 $ 124,919,599
COST OF SALES 20,926,072 25,013,817 66,509,128 82,721,285
------------ ------------ ------------ -------------
GROSS PROFIT 6,184,961 12,629,965 24,725,333 42,198,314
------------ ------------ ------------ -------------
OPERATING EXPENSES:
Selling, advertising, general
and administrative 9,037,828 12,905,798 34,619,623 41,454,699
Depreciation and amortization 875,132 978,555 2,812,206 2,941,882
Closed stores (1,370,299) -- (1,403,151)
------------ ------------ -------------
TOTAL OPERATING EXPENSES 8,542,661 13,884,353 36,028,678 44,396,581
------------ ------------ ------------ -------------
OTHER EXPENSE (INCOME):
Interest income (19,087) (24,013) (59,326) (78,759)
Interest expense 467,688 538,243 1,461,923 1,524,923
------------ ------------ ------------ -------------
TOTAL OTHER EXPENSE
(INCOME) 448,601 514,230 1,402,597 1,446,164
------------ ------------ ------------ -------------
LOSS BEFORE
REORGANIZATION ITEMS
AND INCOME TAXES (2,806,301) (1,768,618) (12,705,942) (3,644,431)
REORGANIZATION ITEMS:
Severance payroll 135,725 -- 135,725 --
Professional fees 466,692 -- 466,692 --
Loss on write-off of loan
origination fees 369,806 -- 369,806 --
Loss on disposal of stores 9,945,889 -- 9,945,889 --
Loss on write-down of inventories 1,800,000 -- 1,800,000 --
------------ ------------ ------------ -------------
12,718,112 -- 12,718,112 --
------------ ------------ ------------ -------------
LOSS BEFORE INCOME TAXES (15,524,413) (1,768,618) (25,424,054) (3,644,431)
(PROVISION FOR) BENEFIT
FROM INCOME TAXES (152,873) 623,000 (152,873) 1,261,000
------------ ------------ ------------ -------------
NET LOSS $(15,677,286) $ (1,145,618) $(25,576,927) $ (2,383,431)
------------ ------------ ------------ -------------
PRIMARY AND FULLY DILUTED
LOSS PER COMMON SHARE $ (1.28) (.09) (2.10) (.20)
============ ============ ============ =============
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
-5-
<PAGE> 6
50-OFF STORES, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
--------------------------------------
November 1, 1996 November 3, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(25,576,927) $(2,383,431)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,812,206 2,941,882
Deferred income tax -- (1,261,000)
Non-cash interest expense on long-term debt 117,981 --
Changes in assets and liabilities:
Accounts receivable (245,299) (662,323)
Merchandise inventories 12,411,603 (8,400,585)
Prepaid and other current assets (430,817) (41,429)
Other assets (173,043) 262,948
Accounts payable-trade 7,534,134 5,690,274
Accounts payable-other (653,487) (604,157)
Accrued expenses and other
current liabilities (214,851) (53,415)
Closed store costs (1,168,213) (854,888)
------------ -----------
Net cash (provided by) used in operating
activities before reorganization items (5,586,713) (5,366,124)
------------ -----------
Operating cash flows from reorganization items:
Professional fees 466,692 --
Loss of write-off of loan origination fees 369,806 --
Loss on disposal of stores 9,791,012 --
Loss on write-down of inventories 1,800,000 --
------------ -----------
Net cash provided by (used in)operating activities 6,840,797 (5,366,124)
------------ -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (565,664) (3,213,818)
------------ -----------
Net cash used in investing activities (565,664) (3,213,818)
------------ -----------
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
-6-
<PAGE> 7
50-OFF STORES, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
-------------------------------------
November 1, 1996 November 3, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from credit facility $ 64,844,472 $ 41,092,224
Payments on credit facility (68,727,159) (31,539,770)
Payments on long-term debt (699,351) (885,292)
------------ ------------
Net cash (used) provided by financing
activities (4,582,038) 8,666,162
------------ ------------
Increase (decrease) in cash and cash
equivalents 1,693,095 86,220
Cash and cash equivalents at
beginning of period 341,334 2,062,676
------------ ------------
Cash and cash equivalents at end of period $ 2,034,429 $ 2,148,896
============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid/received during the period for:
Interest paid $ 1,343,942 $ 1,525,000
Income taxes paid -- --
Income taxes received -- 408,000
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
-7-
<PAGE> 8
50-OFF STORES, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: The condensed consolidated balance sheet at February 2, 1996
has been condensed from the audited consolidated balance
sheet at February 2, 1996.
The condensed consolidated balance sheets at November 1, 1996
and November 3, 1995 and the condensed consolidated
statements of operations and cash flows for the thirteen and
thirty-nine weeks ended November 1, 1996 and the thirteen and
thirty-nine weeks ended November 3, 1995 have been prepared
by the Company without audit. In the opinion of management,
all adjustments necessary to present fairly the condensed
consolidated financial position, results of operations and
cash flows have been made. The results of operations for the
thirteen and thirty-nine week periods ended November 1, 1996
are not necessarily indicative of the operating results for a
full year or of future operations.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Registrant's
annual report on Forms10-K and 10-KA for the year ended
February 2, 1996.
Certain reclassifications have been made to the fiscal 1996
condensed consolidated financial statements to conform to the
fiscal 1997 condensed consolidated financial statements.
As discussed below, the Company and its significant
subsidiaries filed petitions under Chapter 11 of the
Bankruptcy Code (Chapter 11) in the United States Bankruptcy
Court for the Western District of Texas (the Bankruptcy
Court) on October 9, 1996. The financial statements do not
purport to show assets at their realizable values,
pre-petition liabilities at amounts that may be allowed or
the effect of any changes that may ultimately be made in the
capitalization of the Company or its operations.
NOTE 2: On October 9, 1996, the Company and its significant
subsidiaries filed petitions under Chapter 11 in the
Bankruptcy Court. Faced with deteriorating results and the
apparent consumer rejection of the 50-OFF retailing concept
in almost all its markets, the Board of Directors supported a
change of leadership in mid-May. In September 1996, the Board
of Directors approved a plan which provided for the continued
conversion of existing 50-OFF stores to LOT$OFF stores, a
geographic consolidation of the chain (exiting Alabama,
Georgia, North Carolina, South Carolina and Arkansas and
parts of Florida and Tennessee) and the liquidation or
closing of at least 37 under-performing stores or stores
located outside of the reduced market area with appropriate
reductions in field and corporate overhead and staffing. On
October 8, 1996, the Board of Directors approved the filing
of the petitions under Chapter 11 of the Bankruptcy Code.
The Company had been pursuing an infusion of capital and an
external affiliation with a supplier of product and credit
and additional concessions from lenders and landlords to
secure the resources necessary to implement its business plan
and to effect the changes believed necessary by management to
achieve profitability. Although management believed it had
developed an appropriate plan for the Company in its current
environment, the Company was unable to secure
-8-
<PAGE> 9
the necessary concessions and resources to improve operations
and reverse operating trends and was forced to seek the
protections afforded under Chapter 11 of the Bankruptcy Code.
The Company will continue to manage its affairs and operate
its business under Chapter 11 as debtor in possession while a
plan of reorganization is formulated. Through a
reorganization under Chapter 11, management intends to
restructure the operations and capitalization of the Company
in order to implement its plan and strengthen the Company's
financial position and operating performance. The Company's
ability to successfully reorganize and continue as a going
concern will be affected by a number of factors, including,
but not limited to, uncertainty regarding the eventual
outcome of the bankruptcy case, the degree of success in
reversing the Company's recent business trends, the ability
to alleviate trade credit concerns and restore merchandise
flow to adequate levels and success in securing required
financial resources. Management believes that the recent and
planned closing of stores and the implementation of expense
cuts commensurate with the down-sizing of the total stores in
operation facilitates its efforts to improve the Company's
financial performance. No assurance can be given, however,
that the Company will be successful in its continuing efforts
to secure required financial resources, reverse recent
business trends and return to profitability. Management is
also considering, among other alternatives, strategic or
financial alliances with third parties and/or the merger or
sale of all or a part of the Company.
Because of uncertainty regarding the outcome of the
bankruptcy case and the effect of any bankruptcy
reorganization plan on the interest of the Company's
creditors and stockholders, the ultimate impact of the
bankruptcy case on the Company's results of operations and
financial position cannot be determined. The Company is also
unable to predict the value, if any, to be realized by
stockholders in the bankruptcy case whether or not a
successful reorganization is achieved. For this reason, any
investment in the Company's Common Stock should be considered
speculative.
NOTE 3: The principal categories of claims reclassified in the
condensed consolidated balance sheet as of November 1, 1996
and included in liabilities subject to compromise are as
follows:
<TABLE>
<CAPTION>
Long-term debt
<S> <C>
Secured debt, 8.5%, secured by furniture,
fixtures and equipment ........................... $ 4,234,352
Secured debt, capital leases, secured by signs ... 88,498
Trade and other miscellaneous claims ............. 21,223,905
-----------
$25,546,755
===========
</TABLE>
These amounts may be subject to future adjustments depending
on: filings of additional claims against the Company; actions
of the Bankruptcy Court; further developments with respect to
disputed claims - whether or not such claims are secured and
the value of any security interest securing any such claims;
and other events. The Company has estimated that certain
pre-petition debt exceeds the related collateral and
therefore, in accordance with Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," the Company has discontinued accruing
interest on these obligations. The above amounts represent
the Company's best estimate of claims which will ultimately
be allowed by the Court.
NOTE 4: In February 1996 and with the support of its vendors,
50-OFF implemented a payment plan with respect to its
$8,447,000 of unsecured trade payables as of February 26,
1996. Under the plan, such payables were to be paid in full
within a two year period. Approximately $4,678,000 of such
payables remained outstanding at November 1, 1996 and are
included in liabilities subject to compromise.
-9-
<PAGE> 10
In April 1996, the Company restructured its $4,000,000 and
$2,775,000 long term borrowings with an affiliate of an
insurance company into one promissory note for approximately
$4,645,000. The promissory note provides for monthly
installments (including principal and interest) of $94,638
until March 2000. Interest is charged at a rate of 8.50%. The
note is secured by the Company's furniture and fixtures.
Approximately $4,234,000 of such note remained outstanding at
November 1, 1996 and is included in liabilities subject to
compromise.
On May 13, 1996, the Company entered into a credit facility
with two financial corporations providing the Company with a
line of credit through May 1998 of up to $22,500,000,
including letters of credit. Borrowings under the line were
limited to a borrowing base equal to the lessor of, (i)
eligible inventory at cost: December 16 to February 28,
55.75%, March 1 to September 15, 60.75% and September 16 to
December 15, 63.75% or (ii) eligible inventory at retail:
December 16 to February 28, 33.45%, March 1 to September 15,
37.25% and September 16 to December 15, 39.0%. Interest under
the line was charged on funds borrowed at the First National
Bank of Boston's base rate (currently 8.25%) plus 1.75% and
there was a monthly administrative fee of $12,000 and an
annual facility fee of 1.5% ($337,500). The line of credit
was secured by inventory, accounts receivable and other
assets. In addition, the Company issued the lenders a three
year warrant to purchase 400,000 shares of Common Stock at
$2.50 per share. The agreement contained various restrictive
covenants, including minimum gross margin, minimum EBITDA,
minimum and maximum inventory levels, minimum working capital
and minimum trade support financial covenants. On August 8,
1996, the Company was notified that it was in violation of
the minimum gross margin and the minimum working capital
financial covenants and that such breaches constituted Events
of Default under the loan documents. The lenders subsequently
established additional availability reserves, imposed certain
increased fees and other charges and accelerated fees deemed
earned at the initial closing. This facility was paid off in
November 1996.
Prior to entering into such credit facility on May 13, 1996,
the Company had a credit facility with a financial
institution providing the Company a line of credit through
January 1998, as amended, of up to $20,000,000, including
letters of credit of up to $4,000,000. Borrowings under the
facility were limited to a borrowing base equal to the lesser
of, (i) 45% of eligible inventory, or (ii) 80% of liquidation
value of inventory, both minus a permanent block of
$1,500,000. Interest under the line was charged on funds
borrowed at the lender's prime rate plus 1.75%. The agreement
contained various restrictive covenants, including
restrictions on the payment of cash dividends. This credit
facility was secured by inventory, certain accounts
receivable and other assets.
On November 18, 1996, the Company, with the approval of the
Bankruptcy Court, entered into a credit agreement with
General Electric Capital Corporation providing the Company
with a line of credit through November 1997 of up to
$15,000,000, including letters of credit. Borrowings under
the line are limited to a borrowing base equal to a
percentage of eligible inventory at cost: August 15 through
December 15, 65%; and December 16 through August 14, 60%.
Interest under the line is charged on funds borrowed at the
annualized yield on 30-day commercial paper (currently 5.95
%) plus 3%. The line of credit is secured by inventory,
accounts receivable and other assets. The credit agreement
contains various restrictive covenants. The agreement also
contains minimum gross margin, minimum EBITDA, minimum
inventory, minimum sales, minimum trade support and maximum
capital expenditure financial covenants. At January 1, 1997,
the Company had approximately $2,947,000 outstanding under
the credit facility and had approximately $2,483,000
available for use.
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<PAGE> 11
The Company's bankruptcy filing resulted in events of default
for all pre-petition loan agreements, and, accordingly, all
of the Company's mortgage obligation has been classified as
current in the condensed consolidated balance sheet at
November 1, 1996.
NOTE 5: In November 1994, the Company received subscriptions for
approximately 1,810,000 shares of Common Stock in a
Regulation S offering to qualified investors. The Company
received net proceeds of approximately $861,000 from the
purchase of 310,000 shares and has purchase agreements for
1,500,000 shares for which proceeds have not been received.
On February 21, 1995, the Company filed a lawsuit [50-Off
Stores, Inc. v. Banque Paribas (Suisse) S.A. Betafid, S.A.,
Yanni Koutsoubos, Andalucian Villas (Forty Eight) Limited,
Arnass Limited, Brocimast Enterprises Ltd., Dennis Morris,
Howard White, and Morris & Associates, Case No.
SA-95-CA-0159] in United States District Court in San
Antonio, Texas against Banque Paribas (Suisse) S.A., Betafid
S.A., three purchaser entities allegedly controlled by them
and certain affiliated individuals in connection with the
breach by certain of the defendants of their contractual
obligation to purchase an aggregate of 1,500,000 shares of
the Company's common stock at $3.65 per share. The lawsuit
also includes securities fraud, promissory estoppel,
conspiracy and conversion claims. The conversion claim
relates to actions of the defendants in removing the shares
from an escrow account into which they had been issued for
authentication purposes, even though the defendants have
never paid anything for such shares. The Company seeks
recovery of actual and punitive damages, an injunction
against the defendant's transfer of such stock in violation
of the Securities Act, pre- and post-judgment interest,
attorneys' fees and such other remedies to which the Company
may show itself entitled.
Dennis Morris and Howard White have answered the complaint
with White raising the affirmative defense of contributory
negligence. White recently served a third party complaint on
Chase Manhattan Bank, N.A. 50-OFF has moved for leave to join
Chase and Aries Peak, Inc. as additional defendants. Defaults
have been sought and/or entered against Andalucian Villas,
Brocimast, Betafid and Koutsoubos for failure to appear or
answer. Banque Paribas moved to dismiss the action for lack
of jurisdiction, failure to state a claim and for forum non
conveniens. The Court referred all pre-trial matters to U.S.
Magistrate Judge John W. Primono, who denied or dismissed
each of Paribas' motions to dismiss. Paribas is seeking
reconsideration of its motion to dismiss for lack of
jurisdiction before the District Court.
Written discovery has been served on all defendants who have
appeared, and depositions have been taken of Dennis Morris,
Howard White and two non-party witnesses. In a reversal of an
earlier decision, Judge Primono has required that all
discovery of Paribas take place pursuant to the provisions of
the Hague Evidence Convention. The Swiss Government recently
approved 50-OFF's interrogatories and requests for
production, which Paribas will respond to shortly.
On January 9, 1996, the Company filed a lawsuit [50-OFF
Stores, Inc. v. Jefferies & Company, Inc. and Jefferies
International, Ltd., Cause No. 96-CI-00349] in Bexar County
District Court in San Antonio, Texas against the Company's
placement agents in the securities offering referenced in the
lawsuit discussed above. The suit alleges that the defendants
breached their contracts with the Company, breached their
fiduciary duties to the Company and were reckless or grossly
negligent in failing to investigate properly the
qualifications of the purchasers they introduced to the
Company. The Company seeks to recover actual and exemplary
damages in excess of $10,000,000, pre- and post-judgment
interest, costs and attorneys' fees. Both defendants have
answered the petition and raised the affirmative defense of
contributory negligence. Additionally, Jefferies & Company
filed a cross-claim against Howard White. Discovery is
proceeding. Soon
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<PAGE> 12
after the Company filed for protection under Chapter 11,
Jefferies and White removed this case to the Bankruptcy
Court. The defendants then moved to consolidate the case with
the suit against Paribas, Betafid, et al. 50-OFF has
responded by asking the Court to abstain from hearing the
case and by requesting the Court to remand the case back to
the Bexar County District Court.
The Company, based upon advice of counsel, believes that it
will obtain a favorable judgment against one or more of the
defendants referenced in the preceding two lawsuits, however,
the ability to collect on any such judgment is uncertain at
this time. Until the matters have been resolved, the Company
will treat the 1,500,000 shares of Common Stock as
outstanding with no proceeds recognized from their sale. The
related subscription receivable recorded in the accompanying
consolidated balance sheet is based upon a share price of
$2.94, the closing price of the Company's Common Stock on
January 12, 1995 and the date the stock was removed from
escrow. If the Company is unable to collect amounts due and
the shares are not ultimately returned, an extraordinary
non-cash charge to earnings for the uncollected amount of the
subscription receivable will be recorded in the consolidated
financial statements. Damages awarded to the Company or
settlement amounts paid to the Company, if any, in excess of
the subscriptions receivable would be credited to earnings.
The Company will continue to prosecute these cases
vigorously.
-12-
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
50-OFF Stores' operating results in recent years have been disappointing,
reflecting weaknesses in retailing generally and in apparel retailing
specifically: the casualization of apparel has hurt many apparel retailers; and
regional, off-price retailers have faced increased competition for the
"value-conscious" consumers' purchases. In addition, 50-OFF was especially hard
hit by the last devaluation and continued deterioration of the Mexican peso and
the continuing economic turmoil along the Texas-Mexico border where it operated
thirteen 50-OFF stores, historically its best performing locations.
For the thirty-nine week period ended November 1, 1996, the Company had net
sales of $91.2 million, down 27.0% from the comparable prior year period's $
124.9 million, and the Company's loss before income taxes rose to $25.3 million
(including write downs of inventories, write-offs of leasehold improvements in
stores closed or scheduled for liquidation and closing and reorganization
expenses totaling approximately $16.7 million) from $3.6 million. The Company
operated a weighted average of 94.0 stores in the most recent period as
compared to 105.1 in the comparable prior year period.
Faced with deteriorating results and the apparent consumer rejection of the
50-OFF retailing concept in almost all its markets, the Board of Directors
supported a change of leadership in mid-May and, more recently, the continued
conversion of existing 50-OFF stores to LOT$OFF stores, a geographic
consolidation of the chain and the liquidation or closing of at least 37
under-performing stores or stores located outside of the reduced market area
(since mid-May, the Company has closed or scheduled for closing 58 stores),
appropriate reductions in field and corporate overhead and staffing and the
Company's and its significant subsidiaries' filing of petitions for relief
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the Western District of Texas on October 9, 1996. Although management
believes it has developed an appropriate business plan for the Company in its
current environment, the Company was unable to secure the resources required to
implement its plan and to effect the changes believed necessary to improve
operations and reverse the Company's disappointing operating results without
the protections afforded under Chapter 11. The Company will continue to manage
its affairs and operate its business under Chapter 11 as a debtor in possession
while a plan of reorganization is formulated. Through a reorganization under
Chapter 11, management intends to restructure the operations and capitalization
of the Company in order to implement its plan and strengthen the Company's
financial position and operating performance.
The Company's ability to successfully reorganize and continue as a going
concern will be affected by a number of factors, including, but not limited to,
uncertainty regarding the eventual outcome of the bankruptcy case, the degree
of success in reversing the Company's recent business trends, the ability to
alleviate trade credit concerns and restore merchandise flow to adequate levels
and success in securing required financial resources. Management believes that
the recent and planned closing of stores and the implementation of expense cuts
commensurate with the down-sizing of the total stores in operation (to 43
stores) facilitates its efforts to improve the Company's financial performance.
However, no assurance can be given that the Company will be successful in its
continuing efforts to secure required financial resources, reverse recent
business trends and return to profitability. Management is also considering,
among other alternatives, strategic or financial alliances with third parties
and/or the merger or sale of all or a part of the Company.
Because of uncertainty regarding the outcome of the bankruptcy case and the
effect of any bankruptcy reorganization plan on the interest of the Company's
creditors and stockholders, the ultimate impact of the bankruptcy case on the
Company's results of operations and financial position cannot be determined.
The Company is also unable to predict the value, if any, to be realized by
stockholders in the bankruptcy case whether
-13-
<PAGE> 14
or not a successful reorganization is achieved. For this reason, any
investment in the Company's Common Stock should be considered speculative, and
investors should be prepared to lose their entire investment.
On May 7, 1996, the Company's Board of Directors accepted the resignation of
Charles Siegel from his positions as President and Chief Executive Officer of
the Company, as well as his position on the Board, and appointed Charles J.
Fuhrmann II to the positions of President, Chief Executive Officer and Chief
Financial Officer. Mr. Fuhrmann, a Director of the Company since October 1994,
has served in various consulting capacities for 50-OFF, including Acting Chief
Administrative and Financial Officer until his new appointment. Mr. Fuhrmann,
most recently a private investor and strategic and financial consultant, was
formerly Managing Director-Investment Banking with Merrill Lynch & Co. in New
York. Other significant management changes included the promotions of Allen
Fields to Senior Vice President - Operations, Joe Goldstein to Senior Vice
President - Merchandise and James Scogin to Vice President - Controller, Chief
Accounting Officer and Assistant Secretary.
Management is in the process of redirecting 50-OFF's retail activities from
off-price retailing to a close-out retailing concept. Coincident and consistent
with this change is a change in the mix of products, historically a majority in
family apparel, to a majority in non-apparel merchandise, principally through
the addition of new product categories to the Company's historical non-apparel
offerings which include cosmetics, housewares and giftware, home furnishings,
shelf-stable food products, toys, luggage, footwear, stationery and health and
beauty aids. New categories include sporting goods, automotive, greeting cards,
fine jewelry, books, party goods, seasonal, pet supplies and hardware, among
others. The Company will continue to maintain a healthy showing of basic family
apparel products in the new LOT$OFF stores. The actual merchandise mix will
fluctuate by category, by season and by store based on customer needs and
buying trends, demographics and the availability of products at close-out
prices. This merchandising concept is designed to appeal to value-conscious
shoppers and other "bargain hunters," and management is hopeful its
implementation will lead to higher initial mark-ups, less promotional pricing,
fewer mark-downs, less inventory shrink, increased store traffic and improved
operating results.
On September 27, the Company opened six LOT$OFF stores in San Antonio at
50-OFF's existing San Antonio locations, bringing to 14 the number of LOT$OFF
stores still operated by the Company, 8 of such stores having opened in
Oklahoma (4) and the Dallas Metroplex (4) July 26 and August 1, 1996,
respectively. Early operating results for the LOT$OFF stores have been
encouraging, in spite of difficulties in maintaining inventories due to serious
cash shortages, far surpassing the results of the remaining 50-OFF stores. As
of January 1, 1997, the Company was continuing to operate 45 50-OFF and LOT$OFF
stores in New Mexico (3), Texas (30), Oklahoma (4), Louisiana (6), Memphis,
Tennessee (1) and Pensacola, Florida (1), two of which in Texas were being
liquidated by the Company for eventual closings. Under Chapter 11 protection,
the Company hopes to proceed with the conversion of those 50-OFF stores it
elects to continue to operate to LOT$OFF stores.
Liquidity and Capital Resources
The Company began fiscal 1997 with cash of $341,334. During the thirty-nine
weeks ended November 1, 1996, the Company decreased borrowings by a net of
$4,582,038, generated $6,840,797 from operating activities, used $565,664 for
capital expenditures in refurbishing existing stores, opening one store and
converting 50-OFF stores to LOT$OFF stores and ended the period with cash on
hand of $2,034,429.
On May 13, 1996, the Company entered into a $22.5 million revolving credit
facility with Foothill Capital Corporation and GBFC, Inc. which provided for a
60.75% advance rate on eligible inventory (63.75%, September 16 - December 15;
55.75%, December 16 - February 28) with interest set at prime plus 1.75%
through May 31, 1998. The line of credit was secured by inventory, accounts
receivable and other assets. The agreement contained various restrictive
covenants, including restrictions on the payment of cash dividends. The
-14-
<PAGE> 15
agreement also contained minimum gross margin, minimum EBITDA, minimum and
maximum inventory levels, minimum working capital and minimum trade support
financial covenants. On August 8, 1996, the Company was notified that it was in
violation of the minimum gross margin (disputed) and the minimum working
capital financial covenants and that such breaches constituted Events of
Default under the loan documents. The lenders subsequently established
additional availability reserves, imposed certain increased fees and other
charges and accelerated fees deemed earned at the initial closing, which,
individually and together, substantially impacted the Company's financial
liquidity and. therefore, its ability to acquire and maintain much needed
inventory for its stores. The Company was unable to secure the resources
required to cure the defaults under the loan documents and to implement its
business plan and effect the changes believed necessary to improve operations
and reverse the Company's disappointing operating results without the
protections afforded under Chapter 11. The Company and its significant
subsidiaries filed petitions for relief under Chapter 11 in the Bankruptcy
Court on October 9, 1996. As of November 1, 1996, the Company had approximately
$7,335,000 outstanding under the credit facility and, with the support and by
order of the Bankruptcy Court, was using cash collateral for working capital
needs. This facility was paid off in November 1996.
On November 18, 1996, the Company, with the approval of the Bankruptcy Court,
entered into a credit agreement with General Electric Capital Corporation
providing the Company with a line of credit through November 1997 of up to
$15,000,000, including letters of credit. Borrowings under the line are limited
to a borrowing base equal to a percentage of eligible inventory at cost: August
15 through December 15, 65%; and December 16 through August 14, 60%. Interest
under the line is charged on funds borrowed at the annualized yield on 30-day
commercial paper (currently 5.95 %) plus 3%. The line of credit is secured by
inventory, accounts receivable and other assets. The credit agreement contains
various restrictive covenants. The agreement also contains minimum gross
margin, minimum EBITDA, minimum inventory, minimum sales, minimum trade support
and maximum capital expenditure financial covenants. At January 1, 1997, the
Company had approximately $2,947,000 outstanding under the credit facility and
had approximately $2,483,000 available for use.
The Company will continue to manage its affairs and operate its business under
Chapter 11 as a debtor in possession while a plan of reorganization is
formulated. Through the reorganization under Chapter 11, management intends to
restructure the operations and capitalization of the Company in order to
implement its plan and strengthen the Company's financial position and
operating performance. The Company's ability to successfully reorganize and
continue as a going concern will be affected by a number of factors, including,
but not limited to, uncertainty regarding the eventual outcome of the
bankruptcy case, the degree of success in reversing the Company's recent
business trends, the ability to alleviate trade credit concerns and restore
merchandise flow to adequate levels in light of the Company's reduced scale of
operations and success in securing required financial resources. Management
believes that the recent and planned closings of stores and the implementation
of expense cuts commensurate with the down-sizing of the total stores in
operation facilitates its efforts to improve the Company's financial
performance. However, no assurance can be given that the Company will be
successful in its continuing efforts to secure required financial resources,
reverse recent business trends and return to profitability.
Significant Litigation
The Company has filed a lawsuit seeking in excess of $5 million related to
certain parties' breach of contractual obligations to purchase 1,500,000 shares
of the Company's Common Stock and actions in misappropriating and removing
these shares from an escrow account prior to payment for such shares. The
Company intends to vigorously prosecute this matter and to pursue all available
avenues to effect either the receipt of payment for such shares or the return
of the shares themselves, plus actual and punitive damages. The Company, based
upon advice of counsel, believes that it will obtain a favorable judgment or
result in this court action, however, the ability to collect on any such
judgment is uncertain at this time. Until the matter has been resolved, the
Company
-15-
<PAGE> 16
will treat the 1,500,000 shares of Common Stock as outstanding with no proceeds
recognized from their sale. If the Company is unable to collect amounts due or
the shares are not ultimately returned, an extraordinary non-cash charge to
earnings for the uncollected amount of the subscription receivable ($3,991,050)
will be recorded in the consolidated financial statements. Damages awarded to
the Company or settlement amounts paid to the Company, if any, in excess of the
subscriptions receivable would be credited to earnings. See Note 5 to the
Condensed Consolidated Financial Statements for further discussion of this
matter and information pertaining to a related lawsuit filed by the Company
against the placement agents.
Impact of Mexican Economic Conditions
Although the Company has in recent years significantly reduced its dependence
upon border store operations by expansion to other markets, the Company's
activities were historically dependent to a significant degree upon its stores
located in Texas cities along the Mexican border. During the first thirty-nine
weeks of fiscal 1997, approximately 12.1% of the Company's net sales were
attributable to the Company's border stores.
Mexican peso devaluations and duty-free import restrictions, and the
enforcement thereof, have from time to time significantly reduced purchases by
Mexican nationals, who constitute a significant portion of the Company's
customers in certain of its border locations, and have resulted in decreases in
sales during such periods. The Mexican Government devalued the peso and
subsequently released it for free exchange just prior to Christmas 1994, and
the Company's border stores experienced a significant drop in sales for the
last seven weeks of fiscal 1995. The continuing economic weakness along the
border and further erosion of the peso continued to negatively affect sales and
operating results in the Company's border stores throughout fiscal 1996; the
Company's border stores experienced an approximately $10.2 million (32.0%) drop
in sales to $21.8 million for fiscal 1996. With the continued erosion of the
value of the peso well into fiscal 1996 and with the current peso value still
below its comparable level a year ago, sales in the Company's border stores
have continued to suffer through the first thirty-nine weeks of fiscal 1997 (an
approximately $4.2 million, or 28.0%, drop to $10.8 million). While the Company
cannot predict the ultimate effect on fiscal 1997 results, continuing weakness
in the border economy and negative comparable peso values would have a
continuing negative effect on the operating results of its border stores. In
October 1996, the Company closed one of its border stores and began the
liquidation of three others in anticipation of their eventual closings in
November 1996. Another border store was closed in December 1996. The Company
continues to operate eight border stores.
-16-
<PAGE> 17
Results of Operations
The following tables set forth (i) certain items in the condensed consolidated
statements of operations as a percentage of net sales for the periods
indicated, and (ii) the percentage change in such items from the comparable
period of the prior year.
<TABLE>
<CAPTION>
Percentage of Sales
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------------- --------------------------
November 1, November 3, November 1, November 3,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ............................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ........................... 77.2 66.4 72.9 66.2
Selling, advertising, general and
administrative ........................ 33.4 34.3 37.9 33.2
Depreciation and amortization ........... 3.2 2.6 3.1 2.3
Closed stores ........................... (5.1) -- (1.5) --
----- ----- ----- -----
Total ................................ 108.7 103.3 112.4 101.7
Other expense, net ..................... 1.7 1.4 1.5 1.2
----- ----- ----- -----
Total expenses .......................... 110.4 104.7 113.9 102.9
----- ----- ----- -----
Loss before reorganization items
and income taxes ........................ (10.4) (4.7) (13.9) (2.9)
Reorganization items .................... 46.9 -- 13.9 --
(Provision for) benefit from income
taxes ................................... (.5) 1.7 (.2) 1.0
Net loss ................................ (57.8)% (3.0)% (28.0)% (1.9)%
====== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Percentage Change
Thirteen Weeks Ended Thirty-Nine Weeks Ended
November 1, 1996 compared to November 1, 1996 compared to
Thirteen Weeks Ended Thirty-Nine Weeks Ended
November 3, 1995 November 3, 1995
<S> <C> <C>
Net sales ............................... (28.0)% (27.0)%
Cost of sales ........................... (16.3) (19.6)
Selling, advertising, general
and administrative ................... (30.0) (16.5)
Depreciation and amortization ........... (10.6) (4.4)
Loss before reorganization items
and income taxes ........................ 58.7 248.6
(Provision for) benefit from income
taxes ................................... (124.5) (112.1)
Net loss ................................ 1,268.5% 973.1%
</TABLE>
-17-
<PAGE> 18
THIRTEEN WEEKS ENDED NOVEMBER 1, 1996 COMPARED TO THIRTEEN WEEKS ENDED NOVEMBER
3, 1995:
The net sales decrease of 28.0% for the thirteen weeks ended November 1, 1996
compared to the thirteen weeks ended November 3, 1995 is attributable to a
20.6% decrease in the weighted average number of stores in operation (from
102.1stores to 81.1) and a 32.8% decrease in comparable store sales (due
primarily to the Company's inability to acquire and maintain adequate
inventories for its stores). These decreases were partially offset by increased
sales pertaining to partial liquidations of inventories at the six 50-OFF
stores converted to LOT$OFF stores during the fiscal 1997 period (such stores
were closed, however, on average, five days during the period for remodeling
and re-merchandising), the sale to a third party of inventories at 37 stores
closed during the period and the beginning of store liquidations at all other
stores scheduled to be closed.
Cost of sales as a percentage of net sales increased from 66.4% for the
thirteen weeks ended November 3, 1995 to 77.2% for the thirteen weeks ended
November 1, 1996, due primarily to the sale of inventories at 37 stores closed
during the period to a third party and other store liquidations which began in
September. Excluding the sale to a third party of inventories at 37 stores
closed during the period but making no adjustment for the other store
liquidations, cost of sales as a percentage of net sales would have been 71.8%
for the thirteen weeks ended November 1, 1996.
Selling, advertising, general and administrative expenses decreased from 34.3%
of net sales for the thirteen weeks ended November 3, 1995 to 33.3% of net
sales for the thirteen weeks ended November 1, 1996. The percentage decrease
was due primarily to cost reductions implemented by management, offset in part
by lower sales.
Depreciation and amortization decreased by 10.6% in the thirteen weeks ended
November 1, 1996 compared to the comparable period of the prior year, due
primarily to the decreased number of stores in operation.
Other expense, net, decreased to approximately $449,000 in the thirteen weeks
ended November 1, 1996 compared to approximately $514,000 in the comparable
period of the prior year, due primarily to decreased interest expense
attributable to decreased borrowings under the Company's line of credit and the
Company's discontinuing to accrue interest on certain of its obligations.
The increase in the Company's loss before income taxes and reorganization items
for the thirteen weeks ended November 1, 1996 compared to the thirteen weeks
ended November 3, 1995 is primarily due to the Company's lower net sales and
the sale of inventories and liquidations of stores discussed above.
Income tax benefit related to the loss for the thirteen weeks ended November 1,
1996 was not recognized because the utilization of such benefit is not assured.
Such benefit, if any remaining after the Company's planned reorganization, is
available for recognition in future years.
-18-
<PAGE> 19
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1996 COMPARED TO THIRTY-NINE WEEKS ENDED
NOVEMBER 3, 1995:
The net sales decrease of 27.0% for the thirty-nine weeks ended November 1,
1996 compared to the thirty-nine weeks ended November 3, 1995 is attributable
to a 10.6% decrease in the weighted average number of stores in operation (from
105.1 stores to 94.0) and a 23.1% decrease in comparable store sales. These
decreases were partially offset by increased net sales pertaining to
liquidations of inventories at the 50-OFF stores converted to LOT$OFF stores
during the fiscal 1997 period (such stores were closed, however, on average, 13
days during the period for remodeling and re-merchandising), the sale to a
third party of inventories at 37 stores closed during the period and the
beginning of store liquidations at all other stores scheduled to be closed.
Cost of sales as a percentage of net sales increased from 66.2% for the
thirty-nine weeks ended November 3, 1995 to 72.9% for the thirty-nine weeks
ended November 1, 1996, due primarily to approximately $4,271,000 in write
downs of inventories at stores liquidated (including the inventories sold to a
third party at 37 stores closed during the period) and to the store
liquidations which began in September. Excluding the write downs of inventory
and the sale to a third party of inventories at 37 closed stores, cost of sales
as a percentage of net sales would have been 66.3% for the thirty-nine weeks
ended November 1, 1996.
Selling, advertising, general and administrative expenses increased from 33.2%
of net sales for the thirty-nine weeks ended November 3, 1995 to 37.9% of net
sales for the thirty-nine weeks ended November 1, 1996. The percentage increase
was due to lower sales, offset in part by the cost reductions implemented by
management late in the period.
Depreciation and amortization decreased by 3.4% in the thirty-nine weeks ended
November 1, 1996 compared to the comparable period of the prior year, due to
the decreased number of stores in operation.
Other expense, net, decreased to approximately $1,403,000 in the thirty-nine
weeks ended November 1, 1996 compared to approximately $1,446,000 in the
comparable period of the prior year, due primarily to decreased interest
expense attributable to decreased borrowings under the Company's line of credit
and the Company's discontinuing to accrue interest on certain of its
obligations.
The increase in the Company's loss before income taxes and reorganization items
for the thirty-nine weeks ended November 1, 1996 compared to the thirty-nine
weeks ended November 3, 1995 is primarily due to the Company's lower sales and
the write downs, sales and liquidations of inventories discussed above.
Income tax benefit related to the loss for the thirty-nine weeks ended November
1, 1996 was not recognized because the utilization of such benefit is not
assured. Such benefit, if any remaining after the Company's planned
reorganization, is available for recognition in future years.
-19-
<PAGE> 20
PART II
ITEM 1. LEGAL PROCEEDINGS
See Note 5 to the Condensed Consolidated Financial Statements regarding
lawsuits filed in February 1995 and January 1996. Such lawsuits were also
reported in the Company's annual reports on Form 10-K for the fiscal years
ended February 3, 1995 and February 2, 1996 and Form 10-Q for the fiscal
quarter ended August 2, 1996.
The Company is a party to certain other legal proceedings arising in the
ordinary course of business, none of which are believed to be material.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On August 8, 1996, the Company received notice from its then principal lender,
GBFC, Inc., as agent for itself and Foothill Capital Corporation, that it was
in violation of two financial covenants and that such violations constituted
events of default under the loan documents. The Company's bankruptcy filing on
October 9, 1996 resulted in events of default under all pre-petition loan
agreements (see Note 3 to Notes to Condensed Consolidated Financial Statements
herein).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On October 9, 1996, the Company and its significant subsidiaries filed
petitions under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Western District of Texas.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: To be filed by amendment.
Exhibit 10 - General Electric Capital Corporation Loan Documents
Exhibit 99 - Bankruptcy Petitions
No other exhibits are required to be filed by the Registrant under Item 601 of
Regulation S-K with this report on Form 10-Q.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended November 1,
1996.
-20-
<PAGE> 21
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:
50-OFF STORES, INC.
By: /s/ Charles J. Fuhrmann II
----------------------------------------
Charles J. Fuhrmann II, President, Chief
Executive and Financial Officer
By: /s/ James G. Scogin
----------------------------------------
James G. Scogin, Vice-President,
Controller Chief Accounting Officer,
and Assistant Secretary
-21-
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
EXHIBIT 27........................................................ 23
</TABLE>
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 50-OFF
STORES, INC.'S FINANCIAL STAEMENTS AS OF AND FOR THE THIRTEEN WEEKS ENDED
NOVEMBER 1, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-01-1996
<PERIOD-END> NOV-01-1996
<CASH> 2,034
<SECURITIES> 0
<RECEIVABLES> 1,266
<ALLOWANCES> 0
<INVENTORY> 13,542
<CURRENT-ASSETS> 17,341
<PP&E> 24,469
<DEPRECIATION> 11,711
<TOTAL-ASSETS> 31,161
<CURRENT-LIABILITIES> 9,413
<BONDS> 0
0
0
<COMMON> 122
<OTHER-SE> (3,920)
<TOTAL-LIABILITY-AND-EQUITY> 31,161
<SALES> 27,111
<TOTAL-REVENUES> 27,111
<CGS> 20,926
<TOTAL-COSTS> 20,926
<OTHER-EXPENSES> 8,543
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 449
<INCOME-PRETAX> (15,524)
<INCOME-TAX> 153
<INCOME-CONTINUING> (15,677)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,677)
<EPS-PRIMARY> (1.28)
<EPS-DILUTED> (1.28)
</TABLE>
