FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 1, 1995
ROSE'S STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-631 56-0382475
(Commission File Number) (IRS Employer Identification No.)
218 S. Garnett Street
Henderson, North Carolina 27536
(Address of principal executive offices) (Zip Code)
(919) 430-2600
(Registrant's telephone number, including area code)
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Item 5. Other Events
On September 5, 1993, the Registrant filed a voluntary Petition for Relief
under Chapter 11, Title 11 of the United States Code (the "Bankruptcy Code")
with the United States Bankruptcy Court for the Eastern District of North
Carolina, Raleigh Division (the "Court"). On August 1, 1994, the Registrant
filed with the Court a proposed Joint Plan of Reorganization with the consent
of the official unsecured creditors committee, the pre-petition secured senior
noteholders, and the official equity committee. On October 5, 1994, the Court
approved a First Amended Disclosure Statement that described the proposed First
Amended Joint Plan of Reorganization (the "Plan") and approving the solicita-
tion of acceptances and rejections of the Plan from various classes of credit-
ors and equity holders prior to the Court's holding a confirmation hearing.
On December 14, 1994, the Court confirmed the Plan and entered an order ("Con-
firmation Order") to that effect.
On February 3, 1995, the Court approved an amendment to the Plan to set
a fixed price for certain subscription rights to be offered to the Company's
equity holders. On February 13, 1995, the Court approved an amendment to the
Plan to change the record date, for determining the equity holders entitled to
receive warrants to purchase the new common stock (the "Common Stock") to be
issued by the Company upon emergence from Chapter 11 and a possible distribution
of Common Stock, to the date that the Plan becomes effective (the "Effective
Date").
On April 24, 1995, the Court approved a Modified and Restated First Amended
Joint Plan of Reorganization (the "Modified Plan"), which (i) reflects the
payment, under the exit financing facility obtained by the Company, of certain
pre-petition lenders of the Company in cash instead of secured notes, (ii)
deletes all references to certain "Alternative Treatment" provisions under which
the Company would have been required to liquidate inasmuch as all requirements
for emergence from Chapter 11 were met as of the Effective Date and emergence
from Chapter 11 occurred as required under the Plan and Modified Plan, and (iii)
makes other confirming and technical modifications to the Plan. The Plan and
Modified Plan will be referred to hereinafter collectively as the "Plan."
The Effective Date occurred on April 28, 1995, simultaneously with the
funding of the Company's exit financing facility.
The Company's stock is currently quoted on the Nasdaq National Market
System. During the pendency of the Chapter 11 proceeding, the Company applied
for and was granted an exception to certain of the maintenance criteria imposed
by the Nasdaq Stock Market's National Market System and Small Cap Market for
continued inclusion in such markets. The exception was granted on September 14,
1994, by the Listing Qualifications Committee (the "Committee"), and affirmed
by the Nasdaq Hearing Review Committee on December 5, 1994.
As a condition to the granting of the exception, the Committee required
that the Company file with the Securities and Exchange Commission, upon its
emergence from Chapter 11, a Form 8-K which demonstrates compliance with all the
Nasdaq National Market System maintenance criteria for continued inclusion.
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The quantitative maintenance criteria for inclusion in the Nasdaq National
Market System, set forth in Part III, Section 5 of Schedule D to the NASD By-
laws, and the status of the Company's compliance with each of such criteria
are as follows:
(a) For an issuer such as the Company which has sustained losses
from continuing operations and/or net losses in three of its four most
recent fiscal years, the issuer's net tangible assets must equal at least
$4,000,000. As reflected in the Company's pro forma financial statement
attached hereto as Exhibit 99.1, as of the close of business on the
Effective Date, the Company has net tangible assets of approximately
$210,000,000. Thus, this criterion has been met.
(b) 200,000 shares of the issuer's stock must be publicly held.
Under the terms of the Plan, within [thirty (30)] days of the Effective
Date, (i) 9,850,000 shares of Common Stock will be allocated for issuance
and distribution to the Company's approximately $120,000,000 unsecured
creditors as designated in the Plan (the "Creditors") and for possible
issuance to the Company's former equity holders on a date ninety (90)
days after the Effective Date, and (ii) 150,000 shares of Common Stock
will be issued to certain members of the Company's management. Of the
Creditors entitled to receive Common Stock, none are or will become
insiders of the Company. On the Effective Date, the Company instructed
First Union National Bank of North Carolina to issue a certificate in
the amount of 9,850,000 shares of Common Stock in the name of First
Union National Bank of North Carolina as Escrow Agent for the Company
(the "Escrow Agent") for issuance and distribution to the unsecured
creditors in accordance with the Plan, and the Escrow Agent issued
such shares as instructed. As of the date hereof the Company expects
it will instruct the Escrow Agent to issue and distribute approximate-
ly 4,472,000 shares to certain of the Creditors who hold Allowed
Claims on or before June 12, 1995, in accordance with the distribution
requirements of the Plan. The remainder of the 9,850,000 shares will
be issued over the course of the three to four months following the
Effective Date, as mandated under the Plan. Thus, as of June 12, 1995,
the date of issuance of shares to the Creditors who have Allowed Claims,
this criterion will be met.
(c) The minimum bid price per share of the issuer's stock must
equal $1.00, or in the alternative, the market value of the public float
for the issuer's stock must be $3,000,000 and the issuer must have net
tangible assets of at least $4,000,000. Based on the financial health of
the Company after the Effective Date, as reflected in the proforma
financial statement attached as Exhibit 99.1 hereto, the Company believes
that it is reasonable to assume that the Common Stock will trade at a bid
price in excess of $1.00 per share. The estimated book value of the
Company as of April 29, 1995 is approximately $35,000,000. Thus, the per
share book value, assuming issuance of the Common Stock to the Creditors
and to management as discussed in paragraph (b) hereof, will be
approximately $35,000,000. The common stock of issuers in the retail
industry typically trades for a price well in excess of the issuer's per
share book value. Thus, given the Company's $3.50 per share book value,
<PAGE>
it is reasonable to believe that the Common Stock will trade well in
excess of the required $1.00 per share. Further, after eliminating
management shares and the shares of any 10% owners, of which there
will be none, and assuming the issuance of the shares as discussed
above the value of the public float will be well in excess of the
required $3,000,000.
(d) The market value of all publicly held shares of the issuer's
stock must be at least $1,000,000. This requirement is discussed in
paragraph (c) hereof.
(e) There must be at least 400 shareholders of record of the
issuer's stock. The Creditors of the Company entitled to receive Common
Stock, as discussed in paragraph (b) hereof, number over 3,500. Thus, as
of the issuance of Common Stock to such Creditors (as discussed in
paragraph (b) hereof), this criterion will be met.
Item 7. Financial Statements and Exhibits
The following exhibits are part of this report:
Exhibit 99.1 Pro Forma Financial Statement of Rose's Store, Inc.
as of April 29, 1995
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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 hereunto duly authorized.
ROSE'S STORES, INC.
Date: May 1, 1995 By: /s/Jeanette R. Peters
Jeanette R. Peters
Senior Vice President
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No Description Page No.
Exhibit 99.1 Pro Forma Financial Statement of Rose's
Stores, Inc. as of April 29, 1995
<PAGE>
FRESH START CONSOLIDATED BALANCE SHEET (Revised)
In 1990, the American Institute of Certified Public Accountants issued
Statement of Position 90-7 ("Reorganization SOP") "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" (Fresh-Start Reporting").
The application of Fresh-Start Reporting requires adjusting assets and
liabilities to their estimated fair value at the effective date of the
reorganization. The following are estimates of the adjustments that will be
applied to the April 29, 1995 balance sheet when the Company emerges.
The valuation information contained herein is not a prediction or guarantee
of the future trading price of the New Roses Common Stock to be issued under
the plan. The trading price of securities issued under a plan of reorganization
is subject to many unforeseeable circumstances and therefore cannot be accu-
rately predicted. The estimates of value were prepared through the applica-
tion of various valuation techniques and do not purport to reflect or consti-
tute appraisals of the actual market value that may be realized through the
sales of the New Roses Common Stock to be issued. The actual market price of
the New Roses Common Stock at the time of issuance will depend upon prevail-
ing interest rates, market conditions, the condition and prospects of the
Company, including the anticipated initial securities holding of pre-petition
creditors, some of which may prefer to liquidate their investment rather than
hold it on a long-term basis, and other factors that generally may influence
the prices of securities; therefore, the New Common Stock is likely to trade
at values that could differ materially from the amounts assumed herein.
<PAGE>
PROFORMA CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
<TABLE>
<CAPTION>
Projected "Fresh Start Proforma
April 29, Accounting" April 29,
1995 DR CR 1995
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 700 700
Accounts receivable 11,659 11,659
FIFO Inventory 182,600 182,600
LIFO Reserve (25,831) 25,831 (1) -
LIFO Inventory 156,769 182,600
Prepaid merchandise 6,000 6,000
Other current assets 9,100 3,600 (6) 5,500
Total current assets 184,228 206,459
Property and Equipment, at cost,
Less accumulated depreciation and amortization 33,501 33,501 (7) -
Deferred Tax Benefits 3,164 3,164
Other Assets 265 265 (7) -
$ 221,158 25,831 37,366 209,623
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts Payable $ 33,357 33,357
DIP facility 34,125 34,125 (3) -
Working capital facility - 61,041 (3) 61,041
Current maturities of capital lease obligations 530 530
Bank drafts outstanding 1,000 1,000
Closed store reserve 4,074 4,074
Deferred tax liabilities 3,164 3,164
Other current liabilities 14,815 224 (3) 10,200 (5) 24,791
Total current liabilities 91,065 127,957
Secured Pre-petition Debt 26,423 26,423 (3) -
Unsecured Pre-petition Claims 132,874 132,874 (4) -
Excess of Net Assets Over Reorganization Value - 39,307 (7) 39,307
Capital Lease Obligations 614 614
Deferred Income 1,792 1,792
Accumulated Postretirement Benefit Obligation 5,988 1,035 (2) 4,953
Stockholders' Equity (Deficit) (37,598) 72,598 (7) 35,000
$ 221,158 194,681 183,146 209,623
</TABLE>
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(1) Adjustment to write-up inventories by the current LIFO reserve.
(2) Adjustment to reverse unrecognized gain on transition obligation.
(3) Borrowings have been adjusted to reflect payments to be made in accordance
with the plan of reorganization as follows:
(a) $34,125 for pay off of the DIP facility
(b) $26,423 for pay off of pre-petition secured debt
(c) $224 to pay off DIP interest.
(d) $269 to pay off BOT facility and breakerage cost.
(4) Unsecured pre-petition claims will be settled as follows:
(a) $5,000 of priority claims, cure amounts and reclamation claims have
been moved to current liabilities.
(b) The remaining unsecured claims will be settled with stock.
(5) To recognize current liabilities for:
(a) $6,300 of priority claims, cure amounts and reclamation claims have
been moved to current liabilities.
(b) $2,100 in reorganization costs that will be incurred after the
effective date.
(c) $1,800 in additional accruals related to changes in accounting
methods.
(6) To write-off prepaid facility fees.
(7) The excess reorganization value will be allocated to non-current assets,
with any excess recorded as a deferred credit to be amortized over the
period of expected benefit but not more than 40 years.
