<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 29, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________________ TO ______________________
COMMISSION FILE NUMBER 1-8765
BROADWAY STORES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-0457907
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3880 NORTH MISSION ROAD
LOS ANGELES, CALIFORNIA 90031
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(213) 227-2000
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 .
--- ---
Indicated by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed
by a court. Yes X . No .
--- ---
As of May 31, 1995, approximately 45,978,350 shares of the registrant's common
stock were outstanding.
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BROADWAY STORES, INC.
FORM 10-Q INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Management's Discussion and Analysis of Financial Condition and Results of Operations... 1
Consolidated Statement of Earnings...................................................... 4
Consolidated Balance Sheet.............................................................. 5
Consolidated Statement of Cash Flows.................................................... 6
Notes to Consolidated Financial Statements.............................................. 7
PART II. OTHER INFORMATION................................................................ 8
SIGNATURES................................................................................. 9
</TABLE>
<PAGE>
BROADWAY STORES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The discussion of results of operations that follows is based upon the
Company's consolidated financial statements set forth on pages 4 to 7. The
discussion of liquidity and capital resources is based upon the Company's
current financial position.
RECENT DEVELOPMENTS
On April 20, 1995, the Company announced that in response to several
unsolicited offers and inquiries the Board of Directors approved a plan to
explore the sale of certain stores in peripheral, non-California markets.
Approximately 88% of revenues are currently derived from California store
locations and it may be in the shareholders' best interest for the Company to
focus exclusively on California areas in which it has a dominant presence.
The Company is systematically exploring this matter.
RESULTS OF OPERATIONS
For the thirteen week period ended April 29, 1995, total sales were
$423.9 million, a decrease of 1.7% compared to sales of $431.1 million for the
thirteen week period ended April 30, 1994. Disappointing sales results
continue to reflect difficulties in the California economy and weak demand in
the women's apparel business. Excluding sales of four stores which were
temporarily closed in 1994 as a result of the Northridge earthquake, sales, on
a same store basis, decreased 6.8%.
For the quarter, the Company posted a $12.2 million loss, before interest
and taxes, and a net loss of $43.3 million, or $0.92 per share. In the first
quarter of 1994, the Company reported earnings before interest and taxes of
$4.6 million and a net loss of $18.0 million, or $0.38 per share. The
decrease in the current quarter reflects the impact of lower sales and a
continuing promotional environment.
Cost of goods sold including occupancy and buying costs was $324.8
million, 76.6% of sales in the current year first quarter compared to $319.4
million, 74.1% in the comparable prior year period. The deterioration
reflects an increase in the level of markdowns taken and the impact of higher
depreciation and other occupancy costs on a lower sales base.
Selling, general and administrative expenses were $135.9 million, 32.1%
of sales in the current quarter compared to $129.7 million, 30.1% of sales in
the comparable prior year period. The expense increase relates largely to
higher sales promotion and selling and support services costs incurred in the
current period.
Finance charge revenue totaling $24.6 million in the current quarter and
$22.5 million in the comparable prior year period, continues to reflect the
positive impact of the fall 1993 payment terms changes which reduced the
minimum monthly payment requirements on the company's short term
1
<PAGE>
revolving charge accounts. The improvements in credit revenue significantly
outweigh the related increases in bad debt costs experienced on higher
receivables balances outstanding.
Interest expense increased $8.6 million to $31.1 million this year
compared to $22.5 million in the first quarter of 1994. The increase was due
to both higher average borrowings and rising interest rates.
Limitations on the Company's ability to record income tax benefits for
net operating loss carry forwards for financial statement purposes resulted in
no income tax benefit being recognized in the current and prior year first
quarter periods.
Due to the seasonal nature of the retail business wherein a significant
portion of sales for the year are generated in the fourth quarter, the Company
follows the practice of allocating certain fixed buying and occupancy costs
among quarters within the fiscal year to match these costs with the associated
seasonal sales revenue. Operating results, on a pre-tax basis, reflect the
reallocation of such buying and occupancy costs, resulting in benefits of
$5.0 million and $6.9 million being reflected in the operating results for
the current and prior year first quarter periods.
The seasonal nature of the retail business also results in a significant
portion of the earnings from operations for the year being generated in the
fourth quarter. Interim operating results are thus not necessarily indicative
of earnings from operations that will be realized for the full fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Borrowing Facilities. The Company's working capital financing
requirements are provided by a Credit Facility and Receivables Facility which
mature in October, 1996. Subject to collateral limitations, the facilities
provide for up to $225.0 million in credit financing and up to $575.0 million
to finance the Company's proprietary credit card receivables portfolio. As of
April 29, 1995, $88.8 million in advances and $52.9 million in letters of
credit were outstanding under the Credit Facility and $451.4 million of
borrowings, the maximum available, were outstanding under the Receivables
Facility. An additional $64.0 million of receivables were financed through
subordinated asset backed notes which mature in 1999.
The Credit Facility contains a number of operating and financial
covenants, as well as significant negative covenants. The Credit Facility
includes covenants for material adverse changes, minimum aggregate net cash
flow and earnings before interest, taxes, depreciation and amortization
("EBITDA"). In addition, the Credit Facility prohibits the Company from
paying dividends on its stock and places limitations on the Company's capital
expenditures. The Company is currently in compliance with all covenants under
the Credit Facility. The credit agreement and the Company's agreements with
its other principal secured creditors also contain other covenants and
requirements. On March 7, 1995, the Company, in conjunction with revising its
capital program, amended the Credit Facility to provide greater flexibility
with respect to earnings.
A substantial portion of the Company's debt is at variable interest
rates. Assuming that the average borrowings and all other variables would
have remained constant, an increase (or decrease) of one percent in the
interest rates applicable to the variable rate portion of the Company's debt
would have increased (or decreased) the Company's interest expense for the
first quarter by approximately $1.6 million.
Capital Expenditures. In 1994 the Company remodeled more than 3.5
million square feet in 27 stores at a cost of approximately $110 million.
Current year capital expenditures are expected to approximate $40 million and
will be focused on interior improvements. During the first quarter, $8.4
million was spent on such projects.
2
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The Company's ability to fund its capital expenditure program and to
implement its business strategy will depend on cash flow from operations and
the continued availability of borrowings under the Credit Facility. Operating
cash flow will be affected by, among other things, the timing of results from
the Company's business strategy, sales during the holiday season, and general
competitive and economic conditions. The Company believes that the operating
cash flow and amounts available under the Credit Facility will be sufficient
to fund the major elements of its business strategy. Although the Company is
currently in compliance with all covenants in the Credit Facility, there can
be no assurance that the Company will remain in compliance in the future,
which could effect borrowing availability under the Credit Facility. The
Company is currently negotiating to modify its covenants under the Credit
Facility in order to provide greater financial and operating flexibility.
Additionally, the Company continuously evaluates increasing or decreasing the
number of stores, the terms of its Credit Facility and Receivables Facility
and other operating and financing alternatives.
3
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BROADWAY STORES, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------
April 29, April 30,
1995 1994
-------- --------
<S> <C> <C>
Sales $423,911 $431,077
Finance charge revenue 24,594 22,537
Cost of goods sold, including
occupancy and buying costs 324,753 319,366
Selling, general, and
administrative expenses 135,915 129,695
-------- --------
Earnings (loss) from operations
before interest expense and
income taxes (12,163) 4,553
Interest expense, net 31,135 22,513
-------- --------
Pretax loss (43,298) (17,960)
Income taxes 0 0
-------- --------
Net loss $(43,298) $(17,960)
======== ========
Loss per common share $ (0.92) $ (0.38)
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
BROADWAY STORES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
April 29, January 28, April 30,
1995 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Assets
Current assets
Cash $ 17,440 $ 18,318 $ 18,414
Accounts receivable, net 595,937 664,825 572,014
Merchandise inventories 435,443 504,522 405,508
Other current assets 18,637 11,613 21,215
---------- ---------- ----------
1,067,457 1,199,278 1,017,151
Property and equipment, net 887,353 888,258 810,353
Other assets 37,183 39,540 37,957
---------- ---------- ----------
$1,991,993 2,127,076 1,865,461
========== ========== ==========
Liabilities and Shareholders' Equity
Current liabilities
Notes payable $ 88,752 $ 11,740 $
Current installments 6,750 6,750 3,460
Accounts payable 98,656 175,622 129,690
Accrued expenses 109,114 141,027 150,422
Current income taxes 914 1,002 1,116
---------- ---------- ----------
304,186 336,141 284,688
Receivables based financing 515,443 573,138 339,561
Other secured long-term debt 522,118 522,517 520,366
Convertible subordinated notes 143,750 143,750 143,750
Capital lease obligations 40,727 41,524 43,933
Other liabilities 108,565 109,504 122,341
Deferred income taxes 14,850 14,850 14,850
Shareholders' equity
Preferred stock, $.01 par value 8 9 9
Common stock, $.01 par value 469 469 467
Other paid-in capital 502,039 502,038 501,001
Accumulated deficit (160,162) (116,864) (105,505)
---------- ---------- ----------
342,354 385,652 395,972
---------- ---------- ----------
$1,991,993 $2,127,076 $1,865,461
========== ========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
BROADWAY STORES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
April 29, April 30,
1995 1994
-------- --------
<S> <C> <C>
Operating activities
Loss from operations $ (43,298) $(17,960)
Adjustments to reconcile
loss from operations
to net operating cash flows
Depreciation and amortization 12,636 10,009
Changes in operating assets and liabilities
Customer receivables, net 56,190 34,610
Merchandise inventories 69,079 22,123
Accounts payable and accrued expenses (108,879) (45,027)
Other, net 3,705 (2,966)
--------- --------
Net cash provided (used)
by operating activities (10,567) 789
--------- --------
Investing activities
Purchases of property and equipment (8,432) (7,354)
--------- --------
Financing activities
Net change in financing under
receivables based facility (57,695) 7,379
Net change in financing under
working capital facility 77,012
Retirements of long-term debt and
capital lease obligations (1,196) (807)
Issuances of common stock 215
--------- --------
Net cash provided
by financing activities 18,121 6,787
--------- --------
Net increase (decrease) in cash (878) 222
Cash at the beginning of the period 18,318 18,192
--------- --------
Cash at the end of the period $ 17,440 $ 18,414
========= ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
<PAGE>
BROADWAY STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF REPORTING
The consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q of the Securities and Exchange Commission
and should be read in the context of the Summary of Significant Accounting
Policies and Financial Review contained in the Company's Annual Report on Form
10-K for the fifty-two week period ended January 28, 1995. In the opinion of
the Company's management, these statements contain all adjustments, all of
which are of a normal recurring nature, necessary for the amounts shown to be
fairly stated as of April 29, 1995 and April 30, 1994 and for the thirteen
week periods then ended. The Balance Sheet as of January 28, 1995 is as
included in the Company's Form 10-K report for the year ended January 28,
1995.
EARNINGS PER SHARE OF COMMON STOCK
Earnings per share are computed on the basis of the weighted average
number of shares outstanding during the period, including dilutive stock
options and all 35.0 million shares of Common Stock expected to be issued in
accordance with the plan of reorganization (the "POR") approved in connection
with the Company's emergence from bankruptcy on October 8, 1992 (the
"Emergence Date"). As of April 29, 1995, 1.0 million shares of common stock
remain to be issued in accordance with the POR.
INVENTORIES
The last-in, first-out ("LIFO") method of accounting resulted in charges
to cost of goods sold of $1.0 million and $0.5 million for the thirteen week
periods ended April 29, 1995 and April 30, 1994. If all inventories had been
valued on a first-in, first-out basis, they would have been lower by $13.3
million, $14.3 million and $10.3 million at April 29, 1995, January 28, 1995
and April 30, 1994 respectively.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material change has occurred in the litigation described in "Item 3:
Legal Proceedings" on pages 16 and 17 of the Company's Form 10-K for the year
ended January 28, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1/*/ Computation of Earnings Per Share.
27.1/*/ Financial Data Schedule.
/*/ Exhibit filed with this Form 10-Q.
(b) Reports on Form 8-K:
March 6, 1995...... Filing of Eighth Amendment to Credit Agreement,
dated as of March 3, 1995 among Broadway Stores,
Inc., a Delaware Corporation previously known as
Carter Hawley Hale Stores, Inc., the financial
institutions parties thereto and General
Electric Capital Corporation, a New York
Corporation, as agent for the Lenders.
8
<PAGE>
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.
BROADWAY STORES, INC.
Date June 12, 1995 /s/ J.C. HAECKEL
------------- -----------------------------------------
J.C. Haeckel, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date June 12, 1995 /s/ J.D. DAVIES
------------- -----------------------------------------
J.D. Davies, Vice President, Accounting
(Principal Accounting Officer)
9
<PAGE>
EXHIBIT 11.1
BROADWAY STORES, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------
April 29, April 30,
1995 1994
-------- --------
<S> <C> <C>
Net loss used to compute earnings
per common share......................... $(43,298) $(17,960)
======== ========
Weighted average number of common shares
outstanding during this period /(1)/..... 46,941 46,826
======== ========
Loss per common share...................... $ (.92) $ (.38)
======== ========
</TABLE>
(1) The weighted average number of shares outstanding reflects all shares of
Common Stock expected to be issued in accordance with the POR as if they had
been issued on the Emergence Date.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> APR-29-1995
<CASH> 17,440
<SECURITIES> 0
<RECEIVABLES> 595,937
<ALLOWANCES> 0
<INVENTORY> 435,443
<CURRENT-ASSETS> 1,067,457
<PP&E> 887,353
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,991,993
<CURRENT-LIABILITIES> 304,186
<BONDS> 1,222,038
<COMMON> 469
8
0
<OTHER-SE> 341,877
<TOTAL-LIABILITY-AND-EQUITY> 1,991,993
<SALES> 423,911
<TOTAL-REVENUES> 448,505
<CGS> 324,753
<TOTAL-COSTS> 324,753
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,135
<INCOME-PRETAX> (43,298)
<INCOME-TAX> 0
<INCOME-CONTINUING> (43,298)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,298)
<EPS-PRIMARY> (0.92)
<EPS-DILUTED> (0.92)
</TABLE>
