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 May 2, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-631
ROSE'S HOLDINGS, INC.
Incorporated Under the Laws of Delaware
I.R.S. Employer Identification No. 56-2043000
150 East 52nd Street, 21st Floor
New York, New York
10022
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: 212-813-1500
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
As of May 2, 1998 of the 10,007,730 shares of common stock delivered to
First Union National Bank of North Carolina, as Escrow Agent ("FUNB"),
pursuant to the Modified and Restated First Amended Joint Plan of
Reorganization, 8,655,391 of such shares of common stock are outstanding.
The remaining 19,680 shares held in escrow will be distributed by FUNB in
satisfaction of disputed Class 3 claims as and when such claims are resolved.
If all pending claims are resolved adversely to the Company, approximately
8,644,644 shares of common stock will be outstanding. If all pending claims
are resolved in accordance with the Company's records, approximately
8,675,071 shares of common stock will be outstanding. To the extent that
escrowed shares of common stock are not used to satisfy claims, they will
revert to the Company and will be retired or held in the treasury of the
Company.
<PAGE>
ROSE'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
(Amounts in thousands except per share amounts)
The following summary of financial information of Rose's Holdings, Inc.
(the "Company"), which is unaudited, reflects all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of
management, necessary to reflect a fair statement of the information
presented.
ROSE'S HOLDINGS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
May 2, 1998 April 26, 1997
<S> <C> <C>
Selling, general and administrative $ 248 -
Total costs and expenses 248 -
Other Income
Interest income 208 -
Loss from operation of
Discontinued business - (1,308)
Net Loss $ (40) (1,308)
Net Loss Per Share-Basic $ - (.15)
Weighted Average Shares 8,632 8,632
See notes to financial statements
</TABLE>
<PAGE>
ROSE'S HOLDINGS, INC.
CONDENSED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
May 2, January 31, April 26,
1998 1998 1997
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 13,393 13,465 584
Cash restricted in escrow 1,961 1,920 -
Accounts receivable - - 7,473
Inventories - - 155,485
Other current assets - - 3,355
Total current assets 15,354 15,385 166,897
Property and Equipment, at cost,
less accumulated depreciation and amortization - 7,554
Other Assets 16 23 282
$ 15,370 15,408 174,733
Liabilities and Stockholders' Equity
Current Liabilities
Short-term debt - - 44,243
Bank drafts outstanding - - 2,041
Accounts payable 8 6 36,539
Accrued salaries and wages - - 4,400
Pre-petition liabilities - - 1,908
Other current liabilities - - 11,123
Total current liabilities 8 6 100,254
Excess of Net Assets Over Reorganization Value,
Net of Amortization - - 20,997
Reserve for Income Taxes - - 13,033
Deferred Income - - 128
Other Liabilities - - 689
Stockholders' Equity
Preferred stock, Authorized 10,000 shares;
none issued - - -
Common stock, Authorized 50,000 shares;
issued 8,632 at 4/25/98, 1/31/98 and 4/26/97
(Note 1) 35,000 35,000 35,000
Paid-in capital 1,159 1,159 1,159
Retained (deficit) earnings (20,797) (20,757) 3,473
Total stockholders' equity 15,362 15,402 39,632
$ 15,370 15,408 174,733
</TABLE>
See notes to financial statements
<PAGE>
ROSE'S HOLDINGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
May 2, 1998 April 26, 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (40) (1,308)
Expenses not requiring the outlay of cash:
Depreciation and amortization - (529)
Amortization of deferred financing costs - 206
Settlement of pre-petition liabilities - (754)
Provision for closed store - 189
Cash provided by (used in) assets and liabilities:
Increase in accounts receivable - (2,372)
Increase in inventories - (14,198)
Decrease (increase) in other assets (34) 1,150
Increase in accounts payable 2 17,309
Decrease in other liabilities - (1,439)
Increase in income tax reserves - 37
Increase in reserve for store closings - (530)
Decrease in deferred income - (211)
Net cash used in operating activities (72) (2,450)
Cash flows from investing activities:
Purchases of property and equipment - (204)
Net cash used in investing activities - (204)
Cash flows from financing activities:
Net activity on line of credit - 105
Payments of unsecured priority
and administrative claims - (75)
Principal payments on capital leases - (64)
Increase in bank drafts outstanding - 2,041
Payments of deferred financing costs - (10)
Net cash provided by (used in) financing activities - 1,997
Net decrease in cash (72) (15)
Cash and cash equivalents at beginning of period 13,465 593
Cash and cash equivalents at end of period $ 13,393 578
Supplemental disclosure of additional non-cash
investing and financing activities:
Retirement of net book value of assets in reserve
for store closings $ - 14
</TABLE>
See notes to financial statements
<PAGE>
ROSE'S HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS:
Thirteen Weeks Ended May 2, 1998; 53 Weeks Ended January 31, 1998 and
Thirteen Weeks Ended April 26, 1997
(Amounts in thousands except per share amounts)
1. DISCONTINUED OPERATIONS
On August 7, 1997, pursuant to an agreement and plan of merger among
Rose's Stores, Inc. ("Stores") and two newly created, wholly-owned
subsidiaries of Stores, Stores became a wholly-owned subsidiary of the
Company. As a result of such merger, each share of common stock, no par
value ("Stores Common Stock"), of Stores was converted into common stock,
no par value ("Common Stock"), of the Company and each warrant, option or
other right entitling the holder thereof to purchase or receive shares of
Stores Common Stock was converted into a warrant, option or other right
(as the case may be) entitling the holder thereof to purchase or receive
shares of Common Stock on identical terms. The powers, rights and other
provisions of the Common Stock was identical to the powers, rights and other
provisions of the Stores Common Stock.
On December 2, 1997, Rose's Holdings, Inc. consummated the sale to
Variety Wholesalers, Inc. of all of the outstanding capital stock of Rose's
Stores, Inc., a wholly owned subsidiary of the Company pursuant to a Stock
Purchase Agreement, dated as of October 24, 1997, between the Company and
Variety. The Sale constituted the disposition by the Company of
substantially all of its assets and was approved by the holders of a majority
of the outstanding shares of Common Stock of the Company at a special
stockholders meeting of the Company on December 2, 1997. The total purchase
price for the Sale was $19,200, including $1,920 which was placed in escrow.
The proceeds of the Sale, net of certain transaction, closing, and other
costs, were $15,331 (including the $1,920 in escrow). The loss resulting
from the Sale was $22,446.
2. REORGANIZATION AND EMERGENCE FROM CHAPTER 11
The Company filed a petition for reorganization under Chapter 11 of the
United States Bankruptcy Code ("Chapter 11") on September 5, 1993
(the "Filing Date"). The Company's Modified and Restated First Amended Joint
Plan of Reorganization (the "Plan") was consummated on April 28, 1995
(the "Effective Date").
The Plan provided for, among other things, the cash payment of $26,423
to the Company's pre-petition secured lenders and amounts owing under the
debtor-in-possession revolving credit agreement and various administrative
and tax claims due at the Effective Date, and the distribution of common
stock of reorganized Rose's to be issued pursuant to the Plan to creditors
Additionally, stockholders of record as of the Effective Date received their
pro-rata share of warrants and the shares of stock, stock options, and stock
warrants of the Company's Predecessor were canceled. In addition, RSI
Trading, Inc., a wholly owned subsidiary of the Company, was merged into the
Company under the provisions of the Plan. Also, a new board of directors was
elected for the Successor. Upon consummation of the Plan, the Company
obtained $125 million of post-emergence financing.
Under Chapter 11, the Company elected to assume or reject real estate
leases, employment contracts, and unexpired executory pre-petition contracts
subject to Bankruptcy Court approval. The Company established and recorded
its estimated liabilities for such items and settled or carried forward
portions of the liabilities (for assumed leases) at the Effective Date.
3. FRESH-START REPORTING
In 1990, the American Institute of Certified Public Accountants issued
Statement of Position 90-7 ("SOP 90-7") "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (sometimes called "Fresh-Start
Reporting"). The application of Fresh-Start Reporting changed the Company's
basis of accounting for financial reporting purposes. Specifically, SOP 90-7
required the adjustment of the Company's assets and liabilities to reflect
their estimated fair market value at the Effective Date. At the same time, the
Company made certain reclassifications between gross margin and expenses and
changed the method of accruing certain expenses between periods.
<PAGE>
ROSE'S HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued):
3. FRESH-START REPORTING (continued)
Accordingly, the statements of operations and changes in cash flows
commencing May 1995, and the balance sheets beginning with April 1995, are
not comparable to the financial information for prior periods.
In accordance with SOP 90-7, the reorganization value of the Company was
determined as of the Effective Date. The reorganization value of $35,000
was derived by an outside company using various valuation methods, including
discounted cash flow analyses (utilizing the Company's projections), analyses
of the market values of other publicly traded companies whose businesses are
reasonably comparable, and analyses of the present value of the Company's
equity.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Nature of Operations The Company currently has no business operations and
its principal asset is cash. The Company is actively seeking acquisitions
and/or merger transactions in which to employ its cash but there can be no
assurance that suitable acquisitions will be located.
Fiscal Year Fiscal year 1997 ended on January 31, 1998. Fiscal year 1996
ended on January 25, 1997. Due to the emergence from Chapter 11, fiscal year
1995 is comprised of the thirty-nine weeks ended January 27, 1996
(Successor), and the thirteen weeks ended April 29, 1995 (Predecessor).
Fiscal year 1997 contained 53 weeks. Fiscal years 1996 and 1995 contained 52
weeks.
Cash Equivalents The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Cash equivalents are stated at cost, which approximates market. Bank drafts
outstanding have been reported as a current liability.
Earnings (Loss) Per Share For the year ended January 31, 1998, the
Company adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). In
accordance with this statement, primary net loss per common share is replaced
with basic loss per common share which is calculated by dividing net loss by
the weighted-average number of common shares outstanding for the period. Fully
diluted net income per common share is replaced with diluted net income per
common share reflecting the maximum dilutive effect of common stock issuable
upon exercise of stock options and stock warrants. Diluted net earnings (loss)
per common share is not shown, as common equivalent shares from stock options
and stock warrants would have an anti-dilutive effect. Prior period per share
data has been restated to reflect the adoption of SFAS No. 128.
Stock-Based Compensation Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," encourages, but does not
require companies to record compensation cost for stock-based employee
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. Accordingly, compensation cost for stock options
is measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock.
Discontinued Operations Discontinued operations are excluded from the
income from continuing operations and included in net income before
extraordinary items. Prior years have been restated to conform with
generally accepted accounting principles.
5. CONTINGENCIES
As a result of the Sale on December 2, 1997 to Variety of all of the
outstanding capital stock of the Registrant's wholly owned subsidiary and
sole operating entity, Stores, the Registrant was relieved of liability for
claims against Stores except to the extent of its indemnification, obligation
of certain claims, as set forth in the Stock Purchase Agreement. Pursuant to
the Stock Purchase Agreement, ten percent ($1,920,000) of the purchase price
for the sale of stock to Variety was placed in escrow for payment of
indemnified losses to Variety. The Stock Purchase Agreement further provides
that if the aggregate cumulative indemnifiable losses as of December 2, 1998
are less than such amount, the balance of the escrowed amount will be
disbursed to the Registrant at such time and any further claims for
indemnification by Variety shall be satisfied directly by the Registrant.
<PAGE>
ROSE'S HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
5. CONTINGENCIES (continued)
As of the date hereof, the only material claim arising under the
indemnification obligation of the Registrant to Variety relates to the
assertion by a third party, of a right to a fee in the amount of $1.3 million.
The Company disputes its obligation to pay any such fee. Certain claims, suits
and complaints arrising in the ordinary course of business have been filed or
are pending against the Company. In the opinion of management and counsel, all
contingencies are either adequately covered by insurance or are without merit.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Revenue The Company reported no sales revenue for the first quarter of
1998. Excluding the results of discontinued operations (Stores), the Company
had no revenue for 1997.
Costs and Expenses There were no cost of sales or related expenses for
the first quarter of 1998. Selling, general and administrative expenses (SG&A)
for the first quarter of 1998 which includes audit fees and legal fees of
$80 and $26, respectively, for Variety Wholesalers post closing matters.
Other Income $208 for the first quarter of 1998 included money market
interest and escrow account interest of $167 and $41, respectively.
Liquidity and Capital Resources The Company currently has no business
operations and its principal asset is the net proceeds from the Sale. The
Company is actively seeking acquisitions and/or merger transactions in which to
employ its cash so that the Company's stockholders may benefit by owning an
interest in a viable enterprise. There can be no assurance that the Company
will be able to locate or purchase a business, or that such business, if
located and purchased, will be profitable. In order to finance an
acquisition, the Company may be required to incur or assume indebtedness or
issue securities. Pending the use of the net proceeds of the Sale, the
Company has invested, and plans to continue to invest, such net proceeds in
liquid, high quality investments. The Company's management believes that the
Company's current cash flows are adequate to meet its liquidity needs.
<PAGE>
PART II. OTHER INFORMATION
Item 6. None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROSE'S HOLDINGS, INC.
By: Warren G. Lichtenstein
Warren G. Lichtenstein
President, Chief Executive Officer,
and Chief Accounting Officer
By: Jack L. Howard
Jack L. Howard
Vice President, Secretary, Treasurer,
and Chief Financial Officer
Date: June 16, 1998
450
0145
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Rose's
Holdings, Inc., Form 10-Q for the quarter ended May 2, 1998, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> MAY-2-1998
<CASH> 15,354<F1>
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,354
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,370
<CURRENT-LIABILITIES> 8
<BONDS> 0
0
0
<COMMON> 35,000
<OTHER-SE> 1,159
<TOTAL-LIABILITY-AND-EQUITY> 15,370
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (208)
<INCOME-PRETAX> (40)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Cash includes cash restricted in escrow of 1,961.
</FN>
</TABLE>
