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 October 29, 1994.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
From the transition period from_____________ to ___________________
_________________________________________________________________
Commission file number __ 33-13622_________________________________
_________________________________________________________________
BRENDLE'S INCORPORATED
Elkin, North Carolina 56-049-7852
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1919 North Bridge Street, Elkin, North Carolina 28621
(910) 526 5600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant 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 registrant was required to file
such reports and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No________
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13,
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No________ Not Applicable________
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At October 29, 1994, there were 12,760,644 shares of the issuer's
Common Stock outstanding.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BRENDLE'S INCORPORATED
Consolidated Statements of Income
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
Oct.29, Oct. 30,
1994 1993
<S> <C> <C>
Net sales $ 32,671 $ 28,306
Other income 76 402
Total revenue 32,747 28,708
Cost and expenses:
Cost of merchandise sold 25,035 20,981
Selling, operating and
administrative expenses 10,817 9,678
Depreciation and amortization 908 1,127
Interest expense:
Capitalized leases 121 170
Other 619 136
Reorganization Costs 1,348 6,698
38,848 38,790
Net loss before income taxes
and extraordinary item (6,101) (10,082)
Provision for income taxes --- ---
Net loss before extraordinary item (6,101) (10,082)
Debt forgiveness 1,639 ---
Net income (loss) $ (4,462) $ (10,082)
Weighted average shares outstanding 12,761 8,293
Net income (loss) per share $ (0.35) $ (1.22)
</TABLE>
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BRENDLE'S INCORPORATED
Consolidated Statements of Income
(Unaudited)
(In thousands except per share data)
Nine Months Ended
Oct.29, Oct. 30,
1994 1993
Net sales $ 91,361 $ 97,812
Other income 138 539
Total revenue 91,499 98,351
Cost and expenses:
Cost of merchandise sold 68,981 71,639
Selling, operating and
administrative expenses 30,047 31,946
Depreciation and amortization 2,669 3,882
Interest expense:
Capitalized leases 343 585
Other 1,215 137
Reorganization Costs 2,194 10,357
105,449 118,546
Net loss before income taxes
and extraordinary item (13,950) (20,195)
Provision for income taxes --- ---
Net loss before extraordinary item (13,950) (20,195)
Debt forgiveness 31,889 ---
Net income (loss) $ 17,939 $ (20,195)
Weighted average shares outstanding 11,308 8,295
Net income (loss) per share $ 1.59 $ (2.43)
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BRENDLE'S INCORPORATED
Consolidated Balance Sheet
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Oct. 29, January 29, Oct. 30,
1994 1994 1993
<S> <C> <C> <S>
Assets
Current Assets:
Cash and temp. cash invest. $ 2,600 $ 34,774 $ 23,672
Accounts receivable 2,480 1,480 3,321
Merchandise inventories 74,020 54,133 74,147
Prepaid inventory 879 299 1,365
Prepaid expenses 1,494 671 1,004
Total current assets 81,473 91,357 103,509
Property and equipment, less accumulated
depreciation and amortization 9,325 15,767 25,180
Other assets 732 439 503
$ 91,530 $ 107,563 $ 129,192
Liabilities and Shareholders' Equity
Current liabilities:
Notes Payable $ 32,539 $ --- $ 1,900
Accounts Payable
Trade 16,729 3,002 13,699
Outstanding Checks (Note #5) 2,924 --- ---
Current portion of capitalized lease obligations 1,307 --- ---
Current portion of restructuring expenses 509 509 1,374
Accrued compensation 652 508 551
Other accrued liabilities 3,641 2,335 4,359
Total current liabilities 58,301 6,354 21,883
Reorganization notes 281 --- ---
Capitalized lease obligations, less current portion 760 --- ---
Other liabilities 390 --- ---
Other deferred credit 220 --- ---
Total long-term liabilities 1,651 0 0
Liabilities subject to compromise (Note #6) 931 95,749 102,727
Total Liabilities 60,883 102,103 124,610
Shareholders' equity:
Common stock, $1 par value, 20,000,000
shares authorized, 12,760,644, 8,299,454
and 8,301,644 shares issued 12,761 8,299 8,302
Capital in excess of par value 20,898 18,112 18,109
Retained earnings (deficit) (3,012) (20,951) (21,829)
Total shareholders' equity 30,647 5,460 4,582
$ 91,530 $ 107,563 $ 129,192
</TABLE>
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BRENDLE'S INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Oct. 29, Oct. 30,
1994 1993
<S> <C> <C>
Operations:
Net income (loss) $ 17,939 $ (20,195)
Items not requiring (providing) cash:
Depreciation and amortization 2,669 3,882
Reorganization reserve --- (1,670)
Other --- (2)
Debt forgiveness (31,889) ---
Changes in assets and liabilities:
Accounts receivable (1,000) 3,015
Merchandise inventories (19,887) (16,254)
Prepaid inventory (580) 3,402
Prepaid expenses (823) (137)
Accounts payable and accrued liabilities 18,380 8,657
Reorganization reserve (279) (3,559)
Cash provided (used) by operations (15,470) (22,861)
Investing Activities:
Net (additions) retirements of property and equip 3,773 11,302
(Addition) reduction in other assets (293) 163
Cash provided by investing activities 3,480 11,465
Financing Activities:
Decrease in liabilities subject
to compromise (51,010) ---
Increase in long-term liabilities 610 ---
Increase in reorganization notes 281 ---
Decrease in capitalized lease
obligations (2,591) (1,042)
Proceeds from borrowings on line of credit 32,539 (494)
Issuance (redemption) of common stock (8) 12
Decrease in paid-in-capital (7) (2)
Cash used by financing activities (20,186) (1,526)
Net decrease in cash and
temporary cash invest. $ (32,176) $ (12,922)
</TABLE>
Supplemental disclosure of non-cash financing activities:
During the quarter ended April 30, 1994 the company issued 4,469,191 shares
of common stock valued at $7,263,000 to creditors under the terms of its
Plan of Reorganization and resulted in an increase in capital in excess of
par value of $2,793,000
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BRENDLE'S INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements
reflect all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the
results of the interim period.
Note 2. In April 1986, four shareholders of the Company
agreed not to transfer or sell their Common Stock to
any unrelated party (as defined) without the written
consent of the other parties to the agreement. In
addition, in the event of the death of one of the four
shareholders, the Company can be required to purchase
their Common Stock at fair value up to the life
insurance proceeds, consisting of policies with a face
value of $5,250,000, $5,000,000, $3,070,000 and
$3,000,000, respectively. An amount equal to the cash
surrender value of these policies at October 29, 1994
and October 30, 1993 of $219,000 and $521,000,
respectively, has been shown as an other deferred
credit on the balance sheet with a corresponding
reduction in retained earnings. The Company has taken
out loans against the cash surrender value of these
policies in the sum of $1,840,000 to finance current
capital requirements.
Note 3. Tax refunds resulting from losses incurred are
calculated using tax payments of three prior years.
Any losses in excess of those allowed for carry-back
are carried forward for use as future earnings allow.
These loss carry-forwards at January 29, 1994 were
approximately $49 million. Tax loss carry-backs were
exhausted during the second quarter of Fiscal 1992.
Note 4. Effective for the first quarter of Fiscal 1994, the
Company implemented Statement of Financial Accounting
Standards 109, "Accounting for Income Taxes," (SFAS
109). SFAS 109 mandates the use of the liability
method to calculate deferred taxes. SFAS 109 permits
restatement of earlier years or presentation of the
cumulative effect of the change in the years adopted.
The Company has adopted the Statement prospectively and
the adoption does not impact the Company's financial
condition or results of operations due to the fact that
the Company has recorded a valuation allowance against
the deferred tax asset which primarily results from the
Company's net operating loss carry-forwards.
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Note 5. Outstanding checks totalling $2,924,000 on October 29,
1994 were classified under current liabilities (as
outstanding checks) and included in cash at October 29,
1994.
Note 6. Liabilities subject to compromise include disputed
claim obligations where claim objections have been
filed with the Bankruptcy Court.
Page 8 of 17
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Overview:
On November 22, 1992, the Company and its wholly-owned
principal operating subsidiary, Brendle's Stores, Inc. (BSI),
(collectively sometimes referred to as the "Company") filed for
protection under Chapter 11 of the Bankruptcy Code. Under
Chapter 11, the Company and BSI, Debtors In Possession, continued
to conduct business in the ordinary course under the protection
of the Bankruptcy Code while a Plan of Reorganization was
developed to restructure and reorganize the debt structure and
allow the debtor to strengthen its financial position.
At the time of the filing of the Petitions, the Company was
operating 51 retail stores in North Carolina, South Carolina,
Virginia, Tennessee and Georgia. The Company reviewed the
operations of each of its stores, and during the fiscal year
ended January 29, 1994, closed twenty-one stores whose
profitability was not considered by management to be adequate.
Eight store locations were closed in January 1993, and thirteen
store locations were closed in May 1993. The inventory,
fixtures, and real estate (at two of the company-owned stores)
that became available for sale as a result of these closings were
sold to generate cash to help fund the Plan of Reorganization.
The Company also sold its distribution center located in Elkin,
NC and leased back approximately 244,000 of the 388,000 square
feet facility. Proceeds from this sale were also used to help
fund the Plan of Reorganization.
On November 10, 1993, the Company filed a modified Plan of
Reorganization (the "Plan") with the United States Bankruptcy
Court for the Middle District of North Carolina. The Plan was
approved by the Company's creditors and shareholders in December,
1993, and was confirmed by the Bankruptcy Court by order entered
on December 20, 1993.
On April 20, 1994, the Company received Bankruptcy Court
approval for a five-year, $45 million revolving line of credit
with Foothill Capital Corporation ("the Revolving Credit
Facility") to be used to partially fund the Plan and to provide
working capital funds to the Company. See "Liquidity and Capital
Resources." On April 29, 1994, the Company substantially
consummated its Plan of Reorganization by making payments to
creditors in accordance with the Plan and distributing stock for
the benefit of certain unsecured and secured creditors.
Page 9 of 17
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Comparison of Operations
Third Quarter Fiscal 1995 Compared to Third Quarter Fiscal 1994
Net sales for the three months ended October 29, 1994 were
$32,671,000 compared to $28,306,000 for the same quarter ended
October 30, 1993. Comparable store sales increased 15.0%
compared to the same period last year. The sales increase
resulted from increased promotional activity including Senior
Citizen Days and additional pages of advertising circulars with
increased circulation.
Other income was $76,000 for the third quarter of Fiscal
1995 compared to $402,000 for the third quarter of Fiscal 1994.
Other income includes miscellaneous non-recurring items.
The cost of merchandise sold in the third quarter of Fiscal
1995 was $25,035,000 compared to $20,981,000 in the third quarter
of Fiscal 1994. The increase in cost of merchandise sold was
primarily the result of the increase in sales as discussed above.
Gross margin is calculated by subtracting the cost of
merchandise sold from net revenues. Gross margin as a percentage
of sales was 23.6% for the three months ended October 29, 1994
compared to 26.9% for the same period last year. The decrease in
the gross margin as a percentage of sales was the result of the
planned increase in promotional activity discussed above,
aggressive markdowns of items dropped from the Company's current
merchandise assortment and the continuing competitive retail
environment.
Selling, operating and administrative expenses ("SO & A")
for the third quarters of Fiscal 1995 and 1994 were $10,817,000
and $9,678,000, respectively. The increase in SO & A was
primarily the result of increased payroll costs and other
variable expenses related to the increased sales discussed above.
SO & A as a percentage of revenue decreased to 33.0% for the
third quarter of Fiscal 1995 versus 33.7% for the same period
last year.
Third quarter depreciation and amortization expense for
Fiscal 1995 and 1994 was $908,000 and $1,127,000, respectively.
Expense for fixed asset depreciation and amortization is less
because some assets have become fully depreciated since the third
quarter of Fiscal 1994.
Page 10 of 17
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Interest on capital leases for the third quarter of Fiscal
1995 and Fiscal 1994 was $121,000 and $170,000, respectively.
Interest expense on debt other than capital leases was $619,000
compared to $136,000 for the same quarter last year. This
increase in interest on debt is primarily for interest and fees
related to the Revolving Credit Facility from Foothill Capital
Corporation.
Reorganization costs of $1,348,000 for the third quarter of
Fiscal 1995 include professional fees associated with the Chapter
11 proceedings and expenses for stores closed in prior years.
Reorganization costs for Fiscal 1994 of $6,698,000 include
professional fees and store closing expenses reduced by interest
income. For the third quarter of Fiscal 1994 interest on short-
term investments was offset to reorganization costs as required
by AICPA Statement of Position 90-7 (Financial Reporting by
Entities Reorganizing Under the Bankruptcy Code).
Debt forgiveness recorded for the third quarter of Fiscal
1995 was $1,639,000. This amount represents the debt forgiveness
from the settlement of pre-petition debt claims resolved
subsequent to April 29, 1994.
Net loss for the third quarter of Fiscal 1995 was $4,462,000
compared to $10,082,000 for Fiscal 1994. Net loss before extra-
ordinary income (consisting of debt forgiveness) and
reorganization costs was $4,753,000 compared to $3,384,000 for
the same period last year. This increase in the net loss is the
result of the increased SO & A and interest expense as discussed
above.
The Company's tax loss carry-backs were exhausted in Fiscal
1992 resulting in the loss of any tax benefit for the third
quarter of Fiscal 1995. The loss carry-forwards will be used as
future earnings allow.
First Nine Months of Fiscal 1995 Compared to First Nine Months of
Fiscal 1994
Net sales for the nine months ended October 29, 1994 were
$91,361,000, a decrease from the $97,812,000 for the first nine
months ended October 30, 1993. The sales decrease from the prior
year was the result of operating fewer stores. For the first
nine months of Fiscal 1995 the Company operated thirty stores
compared to the first nine months of Fiscal 1994 when the Company
operated 43 stores for the first four months of the year and 30
stores for the remaining five months. Sales for the thirty
stores open the first nine months of both years increased by
7.7%. This increase in sales resulted primarily from a better
in-stock position and increased promotional activity compared to
the first nine months of Fiscal 1994.
Other income was $138,000 for the first nine months of
Fiscal 1995 compared to $539,000 for the comparable period last
year. Other income includes miscellaneous non-recurring items.
Page 11 of 17
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The cost of merchandise sold in the first nine months of
Fiscal 1995 was $2,658,000 less than the first nine months of
Fiscal 1994. The decrease was primarily the result of the
$6,451,000 decrease in sales which, as discussed above, was the
result of operating thirteen fewer stores for five months of the
nine month period.
Gross margin, the difference between net revenues and the
cost of merchandise sold, as a percentage of sales was 24.61%
compared to 27.16% for the first nine months of Fiscal 1995 and
1994, respectively. The reduction in the gross margin as a
percentage of sales was primarily the result of the planned
increase in promotional activity including Senior Citizen Days,
V.I.P. Nights and aggressive markdowns of items dropped from the
Company's current merchandise assortment.
Selling, operating and administrative expenses ("SO & A")
for the first nine months of Fiscal 1995 were $30,047,000
compared to $31,946,000 for the first nine months of Fiscal 1994.
The $1,899,000 decrease was the result of operating thirteen
fewer stores offset by the increase in payroll costs and other
variable expenses related to the sales increase in the third
quarter of Fiscal 1995. SO & A expenses, as a percentage of
revenues, was 32.8% for the first nine months of Fiscal 1995
compared to 32.5% for the same period last year.
Depreciation and amortization expense for the first nine
months of Fiscal 1995 and 1994 was $2,669,000 and $3,882,000
respectively. This decrease in depreciation and amortization
expense was primarily the result of operating fewer stores and
certain assets at the remaining stores that became fully
depreciated since October 30, 1993.
Interest on capital leases for the first nine months of
Fiscal 1995 and Fiscal 1994 was $343,000 and $585,000
respectively. Interest expense on debt other than capital leases
was $1,215,000 compared to $137,000 for the same period last
year. The increase in interest on debt is for the costs of the
debtor-in-possession credit facility which was terminated in
April 1994, and for the interest and costs of the Revolving
Credit Facility with Foothill Capital Corporation which was
established in April 1994.
Reorganization costs of $2,194,000 for the first nine months
of Fiscal 1995 include professional fees associated with the
Chapter 11 proceedings and expenses at certain closed stores
reduced by interest income earned on cash deposited in escrow
accounts for distribution to creditors per the plan of
reorganization. Reorganization costs for the first nine months
of Fiscal 1994 included professional fees associated with Chapter
11 proceedings and store closing expenses offset by interest
income earned on short-term investments. Interest on short term
investments was offset to reorganization costs as required by
AICPA Statement of Position 90-7 (Financial Reporting by
Entities Reorganizing Under the Bankruptcy Code).
Page 12 of 17
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Debt forgiveness recorded for the first nine months of
Fiscal 1995 was $31,889,000. This amount represents the pre-
petition debt of $39,152,000 that has been forgiven to date under
the Plan of Reorganization reduced by $7,263,000, the ascribed
value at the date of issuance of 4,469,191 shares of stock issued
to the unsecured creditors per the Plan of Reorganization.
Net income for the first nine months of Fiscal 1995 was
$17,939,000 which reflects the extraordinary item of debt
forgiveness of $31,889,000 and reorganization costs totaling
$2,194,000. Net loss before extraordinary income and
reorganization costs was $11,756,000 compared to $9,838,000 for
the same period last year.
Liquidity and Capital Resources
As a result of the Chapter 11 proceeding, the Company's
liquidity position was positively affected because the cash
requirements for the payment of scheduled principal payments,
accrued interest, accounts payable, and other liabilities that
were incurred prior to the filing of Chapter 11 Proceeding were,
in most cases, deferred and subsequently settled at a reduced
amount under the Plan.
On April 29, 1994, the Company achieved substantial
consummation of the Plan by making payments to creditors of
approximately $46.0 million. These payments were funded from
$30.0 million of cash on hand with the balance from borrowings
from the Company's $45 million five-year Revolving Credit
Facility with Foothill
Capital Corporation. Currently, the Company has $931,000 of
liabilities subject to compromise for pre-petition obligations
that the Company anticipates to be resolved in due course.
On April 20, 1994, the Company received Bankruptcy
Court Approval for its five-year, $45 million
Revolving Credit Facility. The Revolving Credit Facility
was used to fund the aforementioned negotiated Plan
payments to creditors, with the balance of the facility to
be used to fund working capital requirements, inventory
purchases, capital expenditures, and other general corporate
purposes as the need arises. The Revolving Credit
Facility includes restrictions on capital expenditures as well
as standard covenants found in similar agreements.
These include two financial ratio covenants: (1) current
ratio, and (2) total liabilities to tangible net worth
ratio. See below for a discussion of the Company's
compliance with these financial ratios.
Under the Revolving Credit Facility, the lender agrees to
make revolving loans and issue or guarantee letters of credit for
the Company in an amount not exceeding the lesser of the
Borrowing Base (as defined in the Loan Agreement) or $45.0
million. The Revolving Credit Facility includes a sublimit of
$10 million for
Page 13 of 17
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documentary and stand-by letters of credit. The Company had
borrowed $32,539,000 against the $45,000,000 Revolving Credit
Facility at October 29, 1994.
The Revolving Credit Facility provides that each loan shall
bear interest at a rate of prime plus one and forty-four one
hundredths (1.44) percentage points. Interest on these loans is
payable monthly in arrears on the first day of each month. Also
under the Revolving Credit Facility, the Company pays an unused
line fee for an amount equal to one-half of one percent (.50%)
per annum on the unused portion of the Revolving Credit Facility
and a letter of credit fee equal to 2.5% per annum on the average
daily balance of the aggregate undrawn letters of credit and
letter of credit guarantees outstanding during the immediately
preceding month and certain other fees. The Revolving Credit
Facility also requires an annual facility fee equal to one-half
of one percent(.50%) of the maximum amount of the facility
payable on each anniversary of the Revolving Credit Facility
closing date and a monthly servicing fee of $3,500 per month.
The Company also paid an initial, one-time fee of $450,000 in
order to establish the Revolving Credit Facility.
Under the terms of the Revolving Credit Facility, the
Company is required to maintain a Current Ratio of at least one
and forty-five one hundredths to one (1.45:1.0), measured on a
fiscal quarter-end basis. For the fiscal quarter ended October
29, 1994, the Company's Current Ratio was one and forty one
hundredths to one (1.40:1.0). The Current Ratio is defined as
the ratio of current assets to current liabilities. The Current
Ratio fluctuation resulted primarily from three
factors. The Company accelerated its receipts of inventory to
improve its in-stock position and to insure the availability of
certain "hard to get" merchandise. The additional inventory
resulted in corresponding increases in accounts payable which had
a negative impact on the Current Ratio. Had the Company not
accelerated its receipts of inventory and not incurred the
corresponding accounts payable, the Current Ratio would have been
1.43. In addition, the Company's year-to-date net earnings as of
October 29, 1994 were $2.3 million less than planned earnings
resulting in additional borrowings against the Revolving Credit
Facility. The reduced earnings reflect primarily the reduced
gross margin percentage experienced by the Company because of its
planned promotional activity to recapture the Company's share
of the market. Also, the business plan anticipated that certain
life insurance premiums would be paid out of the policies' cash
surrender values. Due to the Chapter 11 proceedings, however,
the insurance company did not allow the Company to use the cash
surrender value to pay these premiums. This resulted in
additional borrowings under the Revolving Credit Facility and an
increase in current liabilities totaling $630,000, with a
corresponding
Page 14 of 17
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increase in the cash surrender value of the life insurance
policies. The cash surrender value of the life insurance
policies is classified on the Balance Sheet as a noncurrent
asset.
The Company requested and has received a waiver from
Foothill Capital Corporation for the Current Ratio covenant
fluctuation for the fiscal quarter ended October 29, 1994. The
Company's management believes that the Current Ratio will be in
compliance with the terms of the Revolving Credit Facility at the
end of the fourth quarter ending January 29, 1995.
The Company's cash balance at October 29, 1994 was $2.6
million compared to $23.7 million at October 30, 1993. The
Company believes that the cash balances along with the Revolving
Credit Facility are adequate to fund its operations. Cash
balances have decreased since the third quarter of Fiscal 1994
primarily because of payments to creditors pursuant to the Plan
of Reorganization. Merchandise inventories were $74.0 million at
October 29, 1994 compared to $74.1 million at October 30, 1993.
The Company's inventory levels were $4.6 million more than plan
due to the planned acceleration of inventory receipts to improve
its in-stock position and insure the availability of certain
hard to get merchandise.
Current liabilities at October 29, 1994 were $58.3 million
compared with $21.9 million at October 30, 1993. This increase
in current liabilities is due to increased accounts payable
resulting from more favorable vendor credit terms, the
reclassification of the current portion of capitalized lease
obligations from liabilities subject to compromise to current
liabilities and the increase in notes payable due to borrowings
against the Revolving Credit Facility.
Since the filing of the Chapter 11 Proceeding, the
Company's vendor credit lines have continued to improve and
have reached the most favorable levels experienced by the Company
since November 1992. Management believes the Revolving Credit
Facility, together with the cash from operations and vendor
credit, should be adequate to cover working capital requirements
and permitted capital expenditures. The Company's ability to
continue as a going concern is dependent, in part, on
the Company's ability to obtain merchandise on a timely basis
from vendors on acceptable credit terms.
In addition to cash used for operations,
approximately $409,000 was also used for capital expenditures
during the first nine months of Fiscal 1995. The
Company anticipates capital expenditures for Fiscal 1995
primarily for normal facility maintenance and various
projects to improve management information systems.
Page 15 of 17
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On November 22, 1992, the Company and its wholly-owned
principal operating subsidiary, Brendle's Stores, Inc. (BSI),
(collectively sometimes referred to as the "Company") filed for
protection under Chapter 11 of the Bankruptcy Code. Under
Chapter 11, the Company and BSI, Debtors In Possession, continued
to conduct business in the ordinary course under the protection
of the Bankruptcy Code while a Plan of Reorganization was
developed to restructure and reorganize the debt structure and
allow the debtor to strengthen its financial position.
On November 10, 1993, the Company filed a modified Plan of
Reorganization (the "Plan") with the United States Bankruptcy
Court for the Middle District of North Carolina. The Plan was
approved by the Company's creditors and shareholders in December,
1993, and was confirmed by the Bankruptcy Court by order entered
on December 20, 1993. On April 29, 1994, the Company
substantially consummated its Plan of Reorganization by making
payments to creditors in accordance with the Plan and
distributing stock for the benefit of certain unsecured
creditors.
ITEM 2. CHANGES IN SECURITIES
On April 29, 1994, the date the Plan of Reorganization was
substantially consummated, the Company issued 4,469,191 shares of
Common Stock, or 35% of the outstanding stock, to Arnold Zahn of
Zahn and Associates, Inc., as escrow agent for the Unsecured
Creditors, pending the resolution of certain disputed claims.
These shares were valued at $7,263,000 and brought the total
shares outstanding to 12,769,145 at April 30, 1994.
ITEM 3. DEFAULT UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. None
B. None
Page 16 of 17
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BRENDLE'S INCORPORATED
(Registrant)
David R. Renegar
Vice President and
Chief Financial Officer
Date: December 15, 1994
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
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0
0
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</TABLE>
