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 October 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-13184
STUARTS DEPARTMENT STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2817110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16 Forge Parkway, Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 508-520-4540
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days:
Yes X No____
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15 (d) of the
Securities and Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes X No____
The number of shares outstanding of the issuer's common stock, as of
December 1, 1995 was 21,507,175 shares (excluding 901,899 shares held as
treasury shares).
<TABLE>
Part I - Financial Information
1. FINANCIAL STATEMENTS
STUARTS DEPARTMENT STORES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITIED)
<CAPTION>
ASSETS
<S> <C> <C>
Current Assets October 28, 1995 Jan. 29,1995
Cash and cash equivalents $2,489,552 $ 64,731
Merchandise inventory 0 12,376,497
Merchandise available for sale 0 3,282,000
Other 851,015 1,288,541
Total current assets 3,340,567 17,011,769
Equipment and Leasehold Improvement -
At Cost
Store Fixtures 0 8,527,424
Store Leasehold improvements 0 2,582,584
Office and warehouse equipment 0 3,183,232
0 14,293,240
Less allowance for depreciation
and amortization 0 9,313,761
0 4,979,479
Leaseholds (Less accumulated
amortization of 100 % and
$5,995,285, respectively) 0 1,010,209
Reorganization value in Excess of Amounts
Allocable to Identifiable Assets
(Less accumulated amortization of
100 % and $157,415, respectively) 0 543,585
Other Assets 227,120 511,692
Total Assets $3,340,567 $ 24,377,796
======== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable - trade post -petition $ ( 82,775) $ 0
Accounts payable - trade pre-petition 5,238,46 3,868,470
Accrued expenses:
Rent 1,321,909 693,644
Compensation and fringe benefits 111,675 251,951
Short term debt (note 4) 0
Other 6,383,432 5,026,372
Total current liabilities 12,972,709 9,840,437
Long Term Debt (Note 4) 6,394,185
Other Liabilities 186,395 318,567
Stockholders Equity
Common stock - authorized 25,000,000 shares
of $.01 par value; issued and outstanding
2,409,074 shares 224,091 224,091
Additional paid - in capital 29,725,274 29,725,274
Retained (deficit) (37,732,947) (20,316,923)
( 7,783,582) 9,632,442
Less treasury stock at cost
(901,899 shares) ( 1,807,835) (1,807,835)
Total stockholder's equity 9,591,417) 7,824,607
Total Liabilities and Stockholder's Equity $ 3,567,687 $24,377,796
========= ========
The accompanying notes are an integral part of these statements.
STUARTS DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)FOR THE
THIRTEEN WEEKS ENDED OCTOBER 28, 1995 AND OCTOBER 29, 1994
13 Weeks 13 Weeks
Ended Ended
October 28, 1995 October 29, 1994
Total store sales $ 0 $27,433,187
Less leased department sales 0 1,967,517
Net store sales 0 25,465,670
Leased department and other income 1,012,849 426,907
1,012,849 25,892,577
Costs and expenses
Cost of Sales, buying and distribution 0 17,821,135
Selling and administrative 956,405 8,444,384
Depreciation and amortization 0 538,366
Total costs and expenses 956,405 26,803,885
(Profit) before interest 47,444 (911,308)
Interest Income 873 314,705
Net (Profit) $ 46,571 $ 1,226,013
========== ===========
Net (loss) per share of common stock $(.06)
Weighted average number of common
shares outstanding 21,507,175 21,507,175
The accompanying notes are an integral part of these statements.
STUARTS DEPARTMENT STORES, INC.
Consolidated STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THIRTY NINE WEEKS ENDED OCTOBER 28, 1995 AND OCTOBER 29, 1994
39 Weeks 39 Weeks
Ended Ended
October 28, 1995 October 29, 1994
Total store sales $ 17,632,797 $ 77,317,493
Less leased department sales 1,029,454 5,645,772
Net store sales 16,603,343 71,671,771
1,316,849 1,197,628
Leased department and other income 17,920,192 72,869,399
Costs and expenses
Cost of sales, buying and
distribution 13,311,504 50,530,811
Selling and administrative 19,920,192 23,711,263
Depreciation and amortization 1,981,155 1,547,506
Total costs and expenses 34,954,113 75,789,580
(Loss) before interest (17,033,921) (2,920,181)
Interest expense 382,103 630,687
Net (loss) $ (17,416,024) $ (3,550,868)
Net (loss) per share of $ (.81) $ (.17)
common stock
Weighted average number of common
shares outstanding 21,507,175 21,507,175
The accompanying notes are an integral part of these statements.
STUARTS DEPARTMENTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE THIRTY NINE WEEKS ENDED OCTOBER 28,1995
Additional
Common Paid -in Retained Treasury
Stock Capital Earnings Stock
Balance at January 28,
1995 $224,091 $29,725,274 $(20,316,923) $(1,807,835)
Net (loss) (17,416,024)
Balance at October 28,
1995 $224,091 $29,725,274 $(37,732,947) $(1,807,835)
The accompanying notes are an integral part of these statements.
STUARTS DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THIRTY NINE WEEKS ENDED OCTOBER 28, 1995 AND OCTOBER 29,1994
26 Weeks 26 Weeks
Ended Ended
October 28,1995 October 29, 1994
Increase (decrease) in cash and cash
equivalents
Cash flows from operating activities:
Net (loss) (17,416,024) (3,550,868)
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization
(1995 asset write off ) 6,533,273 1,609,190
(Increase) in inventory
(1995 inventory write off) (15,158,497) (7,859,984)
Decrease (Increase)in other current assets 437,526 (741,779)
Increase in accounts payable
and accrued expenses 3,132,272 2,850,366
(Decrease) in other liabilities (132,172) (68,230)
Net cash used in operating
activities 8,213,372 (7,761,305)
Cash flows from investing activities:
Purchase of equipment and leasehold
improvements (1,990,891)
Decrease in leaseholds and other
assets 605,634 34,794
Net cash provided by (used in) investing
activities 605,634 (1,956,097)
Cash flows from financing activities:
Pay down of Long-Term Debt (6,394,185)
Proceeds from issuance of Long -Term Debt 0 9,465,897
Net cash (used in) provided by financing
activities (6,394,185) 9,465,897
Net Increase (decrease) in cash and cash
equivalents 2,424,821 ( 251,505)
Cash and cash equivalents at beginning
of period 64,371 344,075
Cash and cash equivalents at October 28,
1995 and October 29, 1994, respectively $2,489,552 92,570
Supplemental Disclosures of Cash Flows
Information;
Cash paid during the period for:
Interest 388,083 484,470
Income taxes 24,000 28,428
The accompanying notes are an integral part of these statements.
STUARTS DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - OPERATIONS IN CHAPTER 11
On May 16, 1995, Stuarts Department Stores, Inc. filed a voluntary petition
for reorganization under Chapter 11 ('Chapter 11'),Title 11 of the United
States Code (the 'Bankruptcy Code') in the United States Bankruptcy Court
(the 'Bankruptcy Court') for the District of Massachusetts, Western
Division. The Company is currently operating its business as a debtor-in-
possession, subject to the approval of the Bankruptcy Court for certain of
its proposed actions. In addition, an official committee of unsecured
creditors of the Company approved by the United States Trustee has the
right to, among other things, consult with the Company in connection with
the administration of its Chapter 11 case and participate in the
formulation of any plan of reorganization or liquidation. In June 1995,
the Company's Board of Directors authorized the Company's management to
sell or liquidate its stores, given its failure to achieve desired results
and the debtor's continuing losses. The Company is in the process of
liquidating under Chapter 11.
As of the petition date, actions to collect pre-petition indebtedness are
stayed and certain contractual obligations may not be enforced against the
Company. Under the Federal Bankruptcy Code, the rights of pre-petition
creditors and stockholders may be altered substantially. In addition, the
Company may reject executory contracts and lease obligations, and parties
affected by these rejections may file claims with the Court in accordance
with the process established by the Bankruptcy Court.
NOTE 2 - GENERAL
The accompanying unaudited condensed consolidated financial statements
include the accounts of Stuarts. Unless the context otherwise requires,
all references herein to 'Stuarts' or the 'Company' shall be to Stuarts
Department Stores, Inc.
In the opinion of the Company, the consolidated condensed financial
statements (unaudited) contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the consolidated
financial position of the Company as of October 28, 1995 and January 28,
1995, the consolidated results of operations for the 13 week period ended
October 28, 1995 and October 29, 1994 and the consolidated statements of
cash flows for the 13 week periods ended October 28, 1995 and October 29,
1994.
In July 1995, with proceeds received on the sale of inventory of its
remaining eight stores to a liquidation, the Company was able to pay its
debt owed to Foothill Capital Corporation in its entirety. Such debt had
been secured by liens on substantially all of the Company's assets.
STUARTS DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3 - RESTRUCTURING
In accordance with FASB EIFT 94-3 (liability recognition for certain costs
incurred in a restructuring), approximately $1,913,000 of expenses
incurred for the closing of stores located in Malden, Haverhill, Taunton,
Fall River and Springfield, Massachusetts and East Providence, Rhode Island
were charged to the first quarter of fiscal 1996.
On April 30, 1995, the Company's Board of Directors approved the closing of
four additional stores located in Athol, Chelsea and Fitchburg,
Massachusetts and Goffstown, New Hampshire. In accordance with FASB EIFT
94-3 (liability recognition for certain costs incurred in a restructuring),
approximately $2,875,000 in expense has been charged to the second quarter
of fiscal 1996 to cover the closing of these stores.
NOTE 4 - INCOME TAX
The Company operated at a loss for both financial reporting and income tax
reporting purposes in the 13 week periods ended July 29, 1995 and July
30,1994. No tax benefit was recorded for federal and state income taxes
for the second quarters of 1995 or 1994.
NOTE 5 - NET (LOSS) PER SHARE
</TABLE>
Net (loss) per common share has been calculated on the weighted average
number of shares outstanding for the respective fiscal periods.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CHAPTER 11 FILING AND LIQUIDATION - RESULTS OF OPERATIONS
On May 16, 1995, the Company filed for reorganization under Chapter 11 with
the Bankruptcy Court. The Company's voluntary filing was precipitated by
financial and liquidity difficulties, which caused the Company to fail to
make timely payments to its vendors and other suppliers as well as to
certain of its landlords under store leases. The Company's inability to
pay these obligations as they became due caused many of its vendors to
curtail inventory shipments to the Company, which further impacted
adversely the Company's performance. Prior to the Chapter 11 filing, the
Company unsuccessfully attempted to locate a buyer for the retail chain.
In June 1995, the Company's Board of Directors authorized the Company's
management to sell or liquidate the Company's stores, given the Company's
failure to achieve desired results and the Company's continuing losses.
The Company is in the process of liquidating under Chapter 11 and intends
to file a plan of liquidation with the Bankruptcy Court by the end of the
fourth fiscal quarter. The Company has prepared a draft of a liquidating
Chapter 11 plan, which has received the preliminary approval of the
Official Committee of Unsecured Creditors in the Chapter 11 case. Once a
liquidating Chapter 11 plan has been finalized and filed with the
Bankruptcy Court, the plan must be confirmed by the Bankruptcy Court and
submitted to a vote of the Company's creditors and stockholders for their
approval. There can be no assurance that a liquidating Chapter 11 plan
filed by the Company will receive the requisite confirmation and approvals.
During the 13 weeks ended October 28, 1995, due to the Company's
liquidation effort, the Company did not realize any store sales and
realized leased department and other income of $1,012,849. Similarly the
Company did not incur any cost of sales during this period and, as a result
of the write-off of assets which occurred during the 13 week period ended
July 29, 1995, did not incur any depreciation or amortization expense
during the 13 week period ended October 28, 1995. The Company incurred
selling and administrative expense of $956,405 during the 13 weeks ended
October 28, 1995 which related primarily to the Company's liquidation
effort.
LIQUIDITY AND CAPITAL RESOURCES
As noted earlier, the Company is in the process of liquidating its assets
and formulating a plan of liquidation which it expects to file with the
Bankruptcy Court by the fourth fiscal quarter. As a result of the pending
liquidation, the Company's planned expenditures have been significantly
curtailed and are presently confined to anticipated costs in the amount of
$850,000 associated with the completion of the liquidation process. The
Company does not anticipate that the liquidation process will result in
significant additional income. Proceeds from the sale of inventory to a
liquidator during July 1995 have been used by the Company to pay all
outstanding indebtedness under its facility with Foothill Capital
Corporation. Current payments on almost all pre-petition liabilities are
deferred except as may be required by Bankruptcy Court order. Until a plan
of liquidation has been confirmed and approved and the liquidation has
completed, which may take several months, the Company is not able to
determine or predict the amount, if any, that will be available to pay
these pre-petition creditors. The Company presently believes that the
liquidation will not result in any distribution of proceeds to the holders
of its equity securities.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 16, 1995, the Company filed voluntary petitions for relief under
Chapter 11, of the Bankruptcy Code with the Bankruptcy Court. Pursuant to
Section 362 of the Bankruptcy Code, during a Chapter 11 case, creditors and
other parties in interest may not, without Bankruptcy court approval; (i)
commence or continue a judicial, administrative or other proceeding against
a debtor which was or could have been commenced prior to commencement of
the Chapter 11 case, or to recover a claim that arose prior to commencement
of the case; (ii) enforce any pre-petition judgments against the debtor;
(iii) take any action to obtain possession of property of the debtor or to
exercise control over property of the debtor or the debtor's estate; (iv)
create, perfect or enforce any lien against the property of the debtor;
(v) collect, assess or recover claims against the debtor that arose before
the commencement of the case; or (vi) set off any debt owing to the debtor
that arose prior to the commencement of the case against a claim of such
creditor or party-in-interest against the debtor that arose before the
commencement of the case.
The Company is a party to certain other legal actions arising in the
ordinary course of its business. The continuance of certain of such
actions by the parties in interest is subject to Bankruptcy Court approval
as provided above. As a result of the Company's decision in June to
liquidate or sell all of its assets, the Company on July 5, 1995 entered
into an arrangement with a joint venture comprised of Garcel, Inc. and
Hilco Trading Co., Inc. to sell the Company's remaining inventory in
liquidation sales in the Company's eight stores . As a result of such
arrangement, the Company paid off its secured creditor in full. The
Company continues to liquidate its other assets for the benefit of its
unsecured creditors, and has filed several motions to sell furniture,
fixture, and equipment in its stores and home office to various parties.
The liquidation process is substantially completed. The Company has
prepared a draft of a liquidating Chapter 11 plan, which has received the
preliminary approval of the Official Committee of Unsecured Creditors in
the Chapter 11 case. Finally, the Company has exercised its right to reject
certain leases pursuant to Section 365 of the Bankruptcy Code, and has
obtained Bankruptcy Court approval to extend the time to assume or register
its other leases. The Company's current period for assuming or rejecting
its remaining leases expires on December 15, 1995. Finally, the Company is
unsecured creditors, and anticipates filing such plan by the end of the
fourth fiscal quarter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
(a) Exhibits - None
SIGNATURE
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.
STUARTS DEPARTMENT STORES, INC.
(Registrant)
Date: December 13, 1995 By: /s/ Antone F. Moreira
Antone F. Moreira
Executive Vice President and Chief
Financial Officer
1
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0
0
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