THE PURPOSE OF THIS AMENDMENT IS TO INCLUDE THE FINANCIAL DATA SCHEDULE.
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 July 29, 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 September 1, 1995 was 21,507,175 shares (excluding 901,899
shares held as treasury shares).
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STUARTS DEPARTMENT STORES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS
Current Assets July 29, 1995 Jan. 29, 1995
Cash and cash equivalents $ 2,432,552 $ 64,731
Merchandise inventory 0 12,376,497
Merchandise available for sale 0 3,282,000
Other 729,684 1,288,541
Total current assets 3,162,236 17,011,769
Equipment and Leasehold Improvements -
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 413,397 511,692
Total Assets $ 3,575,633 $ 24,377,796
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable - trade post-petition $ (103,243) $ 0
Accounts payable - trade pre-petition 5,219,620 3,868,470
Accrued expenses:
Rent 1,204,644 693,644
Compensation and fringe benefits 170,713 251,951
Short term debt (Note 4) 0
Other 6,542,531 5,026,372
Total current liabilities 13,034,265 9,840,437
Long Term Debt (Note 4) 6,394,185
Other Liabilities 179,356 318,567
Stockholders' Equity
Common stock - authorized 25,000,000 shares
of $.01 par value; issued and outstanding
22,409,074 shares 224,091 224,091
Additional paid-in capital 29,725,274 29,725,274
Retained (deficit) (37,779,518) (20,316,923)
(7,830,153) 9,632,442
Less treasury stock at cost
(901,899 shares) (1,807,835) (1,807,835)
Total stockholders' equity (9,637,988) 7,824,607
Total Liabilities and Stockholders' Equity $ 3,575,633 $ 24,377,796
========== ==========
The accompanying notes are an integral part of these statements.
2
<PAGE>
STUARTS DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THIRTEEN WEEKS ENDED JULY 29, 1995 AND JULY 30, 1994
13 Weeks 13 Weeks
Ended Ended
July 29, 1995 July 30, 1994
Total store sales $ 5,815,194 $26,122,653
Less leased department sales 342,297 1,986,870
Net store sales 5,472,897 24,135,783
Leased department and other income 105,783 411,829
5,578,680 24,547,612
Costs and expenses
Cost of sales, buying and
distribution 4,952,585 17,222,310
Selling and administrative 10,777,580 7,920,679
Depreciation and amortization 1,518,511 506,434
Total costs and expenses 17,248,676 25,649,423
(Loss) before interest (11,669,996) (1,101,811)
Interest expense (income) 126,693 205 556
Net (loss) $(11,796,689) $(1,307,367)
========== ==========
Net (loss) per share of
common stock $(.55) $(.06)
Weighted average number of common
shares outstanding 21,507,175 21,507,175
The accompanying notes are an integral part of these statements.
3
<PAGE>
STUARTS DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE TWENTY-SIX WEEKS ENDED JULY 29, 1995 AND JULY 30, 1994
26 Weeks 26 Weeks
Ended Ended
July 29, 1995 July 30, 1994
Total store sales $ 17,632,797 $49,884,306
Less leased department sales 1,029,454 3,678,205
Net store sales 16,603,343 46,206,101
Leased department and other income 304,000 770,721
16,907,343 46,976,822
Costs and expenses
Cost of sales, buying and
distribution 13,311,504 32,709,676
Selling and administrative 18,696,049 15,266,879
Depreciation and amortization 1,981,155 1,009,140
Total costs and expenses 33,988,708 48,985,695
(Loss) before interest (17,081,365) (2,008,873)
Interest expense (income) 381,230 315,982
Net (loss) $(17,462,595) $(2,324,855)
========== ==========
Net (loss) per share of
common stock $(.81) $(.11)
Weighted average number of common
shares outstanding 21,507,175 21,507,175
The accompanying notes are an integral part of these statements.
4
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STUARTS DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE TWENTY-SIX WEEKS ENDED JULY 29, 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) (17,462,595)
Balance at July 29,
1995 $224,091 $29,725,274 $(37,779,518) $(1,807,835)
======= ========== ========== =========
The accompanying notes are an integral part of these statements.
5
<PAGE>
STUARTS DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE TWENTY-SIX WEEKS ENDED JULY 29, 1995 AND JULY 30, 1994
26 Weeks 26 Weeks
Ended Ended
July 29, 1995 July 30, 1994
Increase (decrease) in cash and cash
equivalents
Cash flows from operating activities:
Net (loss) $ (7,047,756) $ (2,324,855)
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization
(1995 asset write off) 5,978,696 1,080,733
(Increase) in inventory
(1995 inventory write off) 6,235,329 (4,652,521)
(Increase) in other current assets 225,686 (616,264)
Increase in accounts payable
and accrued expenses (1,699,681) 2,500,858
(Decrease) in other liabilities (116,840) (45,435)
Net cash used in operating
activities 3,575,433 (4,057,484)
Cash flows from investing activities:
Purchase of equipment and leasehold
improvements 0 (1,171,865)
Decrease in leaseholds and other
assets 223,284 13,637
Net cash used in investing activities 223,284 (1,158,228)
Cash flows from financing activities:
Pay down of Long-Term Debt (1,843,566)
Proceeds from issuance of Long-Term Debt 0 4,972,559
Net cash provided by financing
activities (1,843,566) 4,972,559
Net (decrease) in cash and cash
equivalents 1,955,151 (243,153)
Cash and cash equivalents at beginning
of period 477,401 344,075
Cash and cash equivalents at July 29,
1995 and July 30, 1994, respectively $2,432,552 $ 100,922
========= =========
Supplemental Disclosures of Cash Flows
Information:
Cash paid during the period for:
Interest 383,850 211,352
Income taxes 24,200 28,428
The accompanying notes are an integral part of these statements.
6
<PAGE>
STUARTS DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
July 29, 1995
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 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 July 29, 1995 and January 28, 1995, the
consolidated results of operations for the 13 week periods ended
July 29, 1995 and July 30, 1994 and the consolidated statements
of cash flows for the 13 week periods ended July 29, 1995 and
July 30, 1994.
In July 1995, with proceeds received on the sale of inventory of
its remaining eight stores to a liquidator, 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.
7
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STUARTS DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
July 29, 1995
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 TAXES
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
Net (loss) per common share has been calculated on the weighted
average number of shares outstanding for the respective fiscal
periods.
NOTE 6 - CLOSING WRITE-OFFS
The second quarter results reflect the write-offs of
approximately $6,900,000 resulting from the liquidation of the
Company.
8
<PAGE>
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 third
fiscal quarter. Once a liquidation 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 liquidation plan filed by the Company will
receive the requisite confirmation and approvals. Pending final
confirmation and approval of a liquidation plan, which is
expected to require several months, the Company will continue to
analyze which of its executory contracts and unexpired leases it
intends to reject or assume for purposes of assignment.
As a result of the decision to liquidate the Company, the
Company closed its remaining eight stores effective July 7,
1995. These closings, in connection with the closing of an
aggregate of 12 stores since the beginning of fiscal 1996,
caused the Company to have significantly fewer stores in
operation and accounted for a significant decline in sales
during the 13 and 26 week period ended July 29, 1995. In
addition, the Company's Cost of sales, buying and distribution
expense was significantly impacted by the loss on the sale of
the Company's remaining inventory to a liquidator. Selling and
administrative expenses were largely impacted by write-offs
resulting from the liquidation. Write-offs charged to the
second quarter period ending July 29, 1995 are listed below.
Fixtures and leasehold $ 3,137,000
Inventory write-off 1,105,850
Leasehold amortization 683,774
Reorganization value 514,360
Investment in Barre 402,740
Pre-paid loan fees 306,161
Deferred freight 235,682
Supply inventory 98,098
Total $ 6,887,413
9
<PAGE>
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 end of the
third 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 $2,200,000 associated with the closing of the
Company's remaining stores and completion of the liquidation
process. The Company does not anticipate that the liquidation
process will result in significant 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 been completed, which is expected to 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
10
<PAGE>
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
remaining 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. 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 reject its other leases. The
Company's current period for assuming or rejecting its remaining
leases expires on October 16, 1995. Finally, the Company is
currently negotiating a plan of liquidation with its committee
of unsecured creditors, and anticipates filing such plan by the
end of the third fiscal quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) As a result of the filing of a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code with the
Bankruptcy Court, there occurred an event of default under the
Company's pre-petition financing arrangements with Foothill
Capital Corporation. As of May 16, 1995, the outstanding
principal amount of the Company's indebtedness under the
pre-petition financing arrangements was $2,027,951 and accrued
and unpaid interest thereon was $20,513. Such indebtedness has
been paid in full.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
During the 13 weeks ended July 29, 1995, the
following reports were filed on Form 8-K:
On May 3, 1995, the Company filed a current report on Form
8-K dated May 3, 1995 with the Securities and Exchange
Commission, which reported the closing of its stores located in
Athol, Chelsea, and Fitchburg, Massachusetts and Goffstown, New
Hampshire.
On May 16, 1995, the Company filed a current report on Form
8-K dated May 16, 1995 with the Securities and Exchange
Commission, which stated that Stuarts had filed a voluntary
petition for reorganization under Chapter 11, Title 11 of the
United States Code.
On June 21, 1995, the Company filed a current report on Form
8-K dated June 21, 1995 with the Securities and Exchange
Commission, which stated that Stuarts Board of Directors
approved the orderly liquidation or sale in Chapter 11 of the
department store chain.
11
<PAGE>
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: September 18, 1995 By: /s/ David S. Ferguson
David S. Ferguson
President and Chief Operating
Officer
Date: September 18, 1995 By: /s/ Antone F. Moreira
Antone F. Moreira
Executive Vice President and Chief
Financial Officer
12
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