<PAGE> 1
FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 3, 1996
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 1-10745
THE CALDOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1282044
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
20 GLOVER AVENUE, NORWALK, CT 06856-5620
(Address of principal executive offices) (Zip Code)
(203) 846-1641
(Registrant's telephone number, including area code)
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 [ ]
The number of shares of common stock outstanding as of August 28, 1996 was
17,061,962.
<PAGE> 2
THE CALDOR CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
FINANCIAL STATEMENTS
Consolidated Statements of Operations for the Thirteen and Twenty-Six
Weeks Ended August 3, 1996 and July 29, 1995 3
Consolidated Balance Sheets as of August 3, 1996 and February 3, 1996 4
Consolidated Statement of Changes in Stockholders' Equity (Deficit) 5
Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended
August 3, 1996 and July 29, 1995 6
Notes to Consolidated Financial Statements 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 12
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 17
</TABLE>
-2-
<PAGE> 3
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED: TWENTY-SIX WEEKS ENDED:
------------------------------ ------------------------------
AUGUST 3, JULY 29, AUGUST 3, JULY 29,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 622,212 $ 670,830 $ 1,190,772 $ 1,235,080
Cost of goods sold 455,016 487,495 881,176 895,198
Selling, general and administrative expenses 175,792 167,874 344,316 329,362
Interest expense, net 9,045 9,963 17,441 20,050
----------- ----------- ----------- -----------
Earnings (Loss) before reorganization items,
income taxes and extraordinary item (17,641) 5,498 (52,161) (9,530)
Reorganization items (Note 5) 10,779 19,540
----------- ----------- ----------- -----------
Earnings (Loss) before income taxes
and extraordinary item (28,420) 5,498 (71,701) (9,530)
Income tax provision (benefit) (Note 6) 2,155 (3,631)
----------- ----------- ----------- -----------
Earnings (Loss) before extraordinary item (28,420) 3,343 (71,701) (5,899)
Extraordinary loss (net of income tax
benefit of $3,232) (5,164)
----------- ----------- ----------- -----------
Net earnings (loss) $ (28,420) $ 3,343 $ (71,701) $ (11,063)
=========== =========== =========== ===========
Per share amounts:
Earnings (Loss) before extraordinary item $ (1.67) $ 0.20 $ (4.23) $ (0.35)
=========== =========== =========== ===========
Net earnings (loss) $ (1.67) $ 0.20 $ (4.23) $ (0.66)
=========== =========== =========== ===========
Weighted average common and common
equivalent shares used in computing per
share amounts 17,012 16,933 16,935 16,889
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE> 4
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
AUGUST 3, 1996 FEBRUARY 3, 1996
-------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 32,016 $ 25,577
Restricted cash (Note 3) 1,516
Accounts receivable 19,879 18,059
Merchandise inventories 551,699 499,948
Assets held for disposal, net 25,265
Refundable income taxes 3,290 5,380
Prepaid expenses and other current assets 21,619 17,047
----------- -----------
Total current assets 630,019 591,276
----------- -----------
Property and equipment, net 448,542 457,638
Property under capital leases, net 92,082 94,339
Debt issuance costs 3,963 4,674
Deferred income taxes 16,626 16,626
Other assets 9,512 9,466
----------- -----------
$ 1,200,744 $ 1,174,019
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 174,716 $ 156,240
Accrued expenses 63,894 70,835
Other accrued liabilities 55,492 52,836
Borrowings under revolving credit agreement (Note 2) 155,000 40,000
----------- -----------
Total current liabilities 449,102 319,911
----------- -----------
Long-term debt 239,187 252,145
Obligations under capital leases 8,611 8,640
Other long-term liabilities 27,643 25,158
Liabilities subject to compromise (Note 4) 510,650 530,957
Stockholders' equity (deficit):
Preferred stock, par value $.01-
authorized, 10,000,000 shares;
issued and outstanding, none
Common stock, par value $.01-
authorized, 50,000,000 shares;
issued and outstanding, 17,061,962
and 16,921,433 shares, respectively 171 170
Additional paid-in capital 203,553 205,047
Deficit (235,186) (163,485)
Unearned compensation (2,987) (4,524)
----------- -----------
Total stockholders' equity (deficit) (34,449) 37,208
----------- -----------
$ 1,200,744 $ 1,174,019
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE> 5
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
OUTSTANDING
COMMON STOCK ADDITIONAL
--------------------------- PAID-IN UNEARNED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION EQUITY (DEFICIT)
----------- ----------- ----------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 3, 1996 16,921,433 $ 170 $ 205,047 $ (163,485) $ (4,524) $ 37,208
Cancellation of restricted stock (64,516) (1) (2,299) 1,918 (382)
Shares issued under director
stock plan 13,876 42 42
Shares issued under restricted
stock plan 191,169 2 763 (765)
Amortization of unearned
compensation 384 384
Net loss (71,701) (71,701)
----------- ----------- ----------- ----------- ----------- -----------
Balance, August 3, 1996 17,061,962 $ 171 $ 203,553 $ (235,186) $ (2,987) $ (34,449)
=========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE> 6
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE 26 WEEKS ENDED:
-----------------------
AUGUST 3, 1996 JULY 29, 1995
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (71,701) $ (11,063)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of debt issuance costs 800 450
Depreciation and other amortization 25,668 24,755
Extraordinary loss on early retirement of debt 3,471
Amortization of unearned compensation 384 340
Reorganization items 19,540
Working capital and other (12,889) (98,324)
--------- ---------
Net cash used in operating activities
before reorganization items (38,198) (80,371)
Reduction of liabilities subject to compromise (14,554)
Reorganization items (21,622)
--------- ---------
Net cash used in operating activities (74,374) (80,371)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,973) (21,253)
Acquisition of leasehold interests (5,103)
--------- ---------
Net cash used in investing activities (13,973) (26,356)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of Senior Secured Notes (59,500)
Proceeds from borrowing under Term Loan 50,000
Proceeds from issuance of common stock
and exercise of stock options 42 160
Repayment of construction loan previously subject to compromise (5,753)
Proceeds from borrowings under construction loans 9,678
Proceeds from borrowings under revolving credit agreement 115,000 123,052
Increase in restricted cash (1,516)
Repayment of long-term debt (22,665) (2,600)
--------- ---------
Net cash provided by financing activities 94,786 111,112
--------- ---------
Increase in cash and cash equivalents 6,439 4,385
Cash and cash equivalents, beginning of period 25,577 21,100
--------- ---------
Cash and cash equivalents, end of period $ 32,016 $ 25,485
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
-6-
<PAGE> 7
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE 26 WEEKS ENDED:
---------------------------------
AUGUST 3, 1996 JULY 29, 1995
-------------- -------------
<S> <C> <C>
WORKING CAPITAL AND OTHER COMPRISED OF:
Accounts receivable $ (1,820) $ (1,447)
Merchandise inventories (51,751) (59,785)
Prepaid expenses and other current assets (4,572) (7,550)
Assets held for disposal, net 25,265
Refundable income taxes 2,090
Accounts payable 18,476 (8,508)
Accrued expenses (6,941) (6,722)
Federal and state income taxes payable (14,969)
Other accrued liabilities 5,336 879
Other assets and long-term liabilities 1,028 (222)
-------- --------
$(12,889) $(98,324)
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-7-
<PAGE> 8
THE CALDOR CORPORATION AND
SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands except per share data)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of The
Caldor Corporation (the "Registrant") and subsidiaries (collectively,
the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions for Form 10-Q applicable to a going concern, which
principles, except as otherwise disclosed, assume that assets will be
realized and liabilities will be discharged in the normal course of
business. The Registrant and certain of its subsidiaries (collectively,
the "Debtors") filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code ("Chapter 11") on September 18, 1995 (the
"Filing"). The Debtors are presently operating their business as
debtors-in-possession subject to the jurisdiction of the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court").
The Company's consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations. The
appropriateness of using the going concern basis is dependent upon,
among other things, confirmation of a plan of reorganization, future
profitable operations, and the ability to generate sufficient cash from
operations and financing sources to meet obligations. As a result of
the Filing and related circumstances, however, such realization of
assets and liquidation of liabilities is subject to significant
uncertainty. While under the protection of Chapter 11, the Debtors may
sell or otherwise dispose of assets, and liquidate or settle
liabilities, for amounts other than those reflected in the accompanying
consolidated financial statements. Further, a plan of reorganization
could materially change the amounts reported in the accompanying
consolidated statements. The consolidated financial statements do not
include any adjustments relating to a recoverability of the value of
recorded asset amounts or the amounts and classification of liabilities
that might be necessary as a consequence of a plan of reorganization.
With respect to the unaudited consolidated financial statements for the
thirteen and twenty-six weeks ended August 3, 1996, it is the
Registrant's opinion that all necessary adjustments (consisting of
normal and recurring adjustments) have been included to present a fair
statement of results for the interim periods.
These statements should be read in conjunction with the Company's
financial statements included in the Registrant's Annual Report on Form
10-K for the fiscal year ended February 3, 1996. Due to the seasonal
nature of the Company's sales and the Filing, operating results for the
interim period are not necessarily indicative of results that may be
expected for the fiscal year ending February 1, 1997. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations promulgated by the Securities and Exchange Commission.
-8-
<PAGE> 9
Certain reclassifications have been made to prior periods' financial
statements to conform with classifications used in the current period.
2. REORGANIZATION CASE
In the Chapter 11 case, substantially all liabilities as of the date of
the Filing are subject to resolution under a plan of reorganization to
be voted upon by the Debtors' creditors and stockholders and confirmed
by the Bankruptcy Court. Amended and Restated Schedules have been filed
by the Debtors with the Bankruptcy Court setting forth the assets and
liabilities of the Debtors as of the date of the Filing as shown by the
Debtors' accounting records. The Bankruptcy Court fixed August 12, 1996
as the last date by which creditors of the Debtors could file proofs of
claim. Differences between amounts shown by the Debtors and claims
filed by creditors will be investigated and reconciled. The amount and
settlement terms for such disputed liabilities are subject to allowance
by the Bankruptcy Court. Ultimately the adjustment of the total
liabilities of the Debtors remains subject to a Bankruptcy Court
approved plan of reorganization, and, accordingly, the amount of such
liabilities is not presently determinable. The Bankruptcy Court has
extended the period in which the Debtors possess the exclusive right to
file a plan of reorganization through February 28, 1997 and the period
in which the Debtors can solicit acceptances for the plan of
reorganization through April 30, 1997. The Debtors agreed to provide a
five year business plan to the Official Committee of Unsecured
Creditors, the Official Equity Committee and The Chase Manhattan Bank,
as agent for the Bank Group, no later than November 28, 1996;
otherwise, the exclusive period and the solicitation period will expire
on December 31, 1996 and February 28, 1997, respectively.
On April 2, 1996, the Bankruptcy Court approved the closing of 12
under-performing stores (the "Closed Stores") and the Debtors'
retention of a liquidator to conduct store closing sales (the "Closing
Sales"). The liquidation sales were completed and the stores were
closed by the end of June 1996.
On June 7, 1996, the Bankruptcy Court approved the Debtors' reclamation
program, which authorizes the Debtors to settle the claims of 425
vendors that submitted reclamation demands at the time of the Filing.
The program provides for each reclamation vendor that extends credit
support comparable to pre-petition terms to receive both a cash payment
of up to 50% of its eligible reclamation claim and priority treatment
for the remainder of its claim. Reclamation cash payments of $2.5
million were made in the second quarter 1996. To the extent these
payments exceed $10 million, the Debtors are required to pay the Term
Debt (as defined in the Debtor-in-Possession financing arrangement (the
"DIP Facility")) in an equivalent amount (up to $8.5 million).
On July 16, 1996, the Bankruptcy Court approved the Second Amendment
(the "Second Amendment") to the DIP Facility which, among other things,
rescinded the reduction of the Tranche A Facility commitment that
occurred on May 4, 1996 and eliminated the $50 million reduction of the
Tranche A Facility commitment that was scheduled for October 5, 1996.
Instead, the Second Amendment provided for an automatic $50 million
reduction of the Tranche A Facility commitment on May 3, 1997.
Concurrently, the Bankruptcy Court authorized and directed the
application by the Company of the net proceeds of the Closing Sales, to
the payment of the Term Debt. The Company has paid $22.5 million to
Chase, as agent, for application to the Term Debt.
Under the Bankruptcy Code, the Debtors may elect to assume or reject
real estate leases, employment contracts, personal property leases,
service contracts and other executory pre-petition contracts, subject
to Bankruptcy Court approval. As of August 3,
-9-
<PAGE> 10
1996, the Debtors had rejected the leases for the 12 Closed Stores and
for 12 additional real estate leases, assumed 13 real estate leases
and had reached agreement with landlords to terminate an additional 7
leases without liability. The Debtors continue to review leases and
contracts, as well as other operational and merchandising changes,
and cannot presently determine or reasonably estimate the ultimate
outcome of, or liability resulting from, this review. Additional
information with respect to the Debtors' Chapter 11 case is set forth
in the Registrant's Annual Report on Form 10-K for the fiscal year
ended February 3, 1996.
3. RESTRICTED CASH
As of August 3, 1996, the restricted cash balance held in an escrow
account relating to the Closing Sales was $1.5 million.
4. LIABILITIES SUBJECT TO COMPROMISE
Liabilities subject to compromise are subject to future adjustments
depending on Bankruptcy Court actions and further developments with
respect to disputed claims.
Liabilities subject to compromise are as follows:
<TABLE>
<CAPTION>
August 3, 1996 February 3, 1996
-------------- ----------------
<S> <C> <C>
Accounts payable $263,858 $265,249
Rejected leases and other
miscellaneous claims 109,087 109,087
Accrued expenses 79,865 90,343
Capital lease obligations 42,592 45,234
Construction loans 11,511 17,264
Industrial revenue bonds
and mortgage notes 3,737 3,780
-------- --------
Total $510,650 $530,957
</TABLE>
Accounts payable subject to compromise was reduced by reclamation
payments and the ongoing reconciliation of differences between amounts
shown by Debtors and creditors. Accrued expenses were reduced by
Bankruptcy Court approved payments for sales and use tax and
reclamation claims. Capital lease obligations were reduced by normal
amortization. Construction loans were reduced by the refinancing
transaction, approved by the Bankruptcy Court, for the Silver Spring,
MD store.
5. REORGANIZATION ITEMS
Reorganization items consisted of the following:
<TABLE>
<S> <C>
Retention costs $ 5,261
Professional fees 9,078
Severance costs 2,409
Other 2,792
-------
Total provision for reorganization $19,540
</TABLE>
-10-
<PAGE> 11
6. INCOME TAXES
Income taxes are provided based on the asset and liability method of
accounting pursuant to Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Utilization of the Company's loss
carryforwards is dependent upon sufficient future taxable income. The
Company has established a full valuation allowance against these
carryforward benefits and, therefore, has not recorded any tax benefits
related to first and second quarter 1996 losses.
7. RECENT ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS No.121") during the First
Quarter 1996. The adoption of this statement did not have an impact on
the Company's results of operations. As part of the ongoing review of
its operations, the Company is currently negotiating with landlords
regarding rent reductions and lease restructurings. In the event the
Company does not achieve certain expected rent reductions, the Company
could incur an impairment charge for certain of its properties.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
which is effective for the Company beginning February 4, 1996. SFAS No.
123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require)
compensation expense to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to
continue to apply Accounting Principles Board Opinion No. 25 ("APB No.
25"), which recognizes compensation costs based on the intrinsic value
of the equity instrument awarded. The Company will continue to apply
APB No. 25 to its stock-based compensation awards to employees and will
disclose the required pro-forma effects on net income and earnings per
share.
8. RETIREMENT PLAN
The Caldor Retirement Plan, a noncontributory defined benefit pension
plan covering eligible employees, was amended on August 1, 1996 to
discontinue additional accruals for Plan participants. Retirement Plan
benefits accrued prior to August 1, 1996 are not affected by the change
and current participants in the Plan are eligible to vest with
additional years of service after August 1, 1996.
9. RESTRICTED STOCK PLAN
During the Second Quarter 1996, 191,169 restricted stock awards were
granted to certain key employees at no cost to these employees. The
outstanding restricted stock award shares vest on the later of three
years subsequent to their award or six months following the date the
Debtors emerge from Chapter 11. The cost of restricted stock awards,
based on the stock's fair market value at the award date, is charged to
stockholders' equity and subsequently amortized against earnings over
the vesting period.
-11-
<PAGE> 12
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Debtors filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") on September 18, 1995 and are presently operating
their business as debtors-in-possession subject to the jurisdiction of the
Bankruptcy Court. As a result of the Filing, the cash requirements for the
payments of accounts payable and certain other liabilities that arose prior to
the Filing are in most cases deferred until a plan of reorganization is approved
by the Bankruptcy Court.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED AUGUST 3, 1996 ("SECOND QUARTER 1996") AS COMPARED TO
THIRTEEN WEEKS ENDED JULY 29, 1995 ("SECOND QUARTER 1995"):
Total sales for Second Quarter 1996 were $622.2 million compared to $670.8
million for the Second Quarter 1995, a decrease of $48.6 million, or 7.2%. This
decrease was primarily due to a 7.5% decrease in comparable store sales and 12
stores that were closed since the first quarter 1996, partially offset by the
sales from 9 new stores opened since July 1995. The decrease in comparable store
sales was primarily attributable to changes in the Company's marketing strategy,
including the discontinuance of mid-week circulars, coupon sales and one-day
sales events. The Company made the determination that these programs are not
profitable or compatible with the Company's long-term marketing strategy. Sales
for the quarter were also adversely affected by extremely mild summer weather in
the Northeast region as compared to last year which negatively impacted certain
apparel and seasonal merchandise categories.
Gross margin as a percentage of sales for Second Quarter 1996 decreased by 0.4%
to 26.9% from 27.3% in Second Quarter 1995. This decrease was attributable to
the Company aggressively taking markdowns on seasonal merchandise and increased
competitive pricing. The impact to gross margin was partially offset by reducing
the markdowns associated with promotional events.
Selling, general and administrative expenses ("SG&A expenses") as a percentage
of sales for Second Quarter 1996 increased by 3.3% to 28.3% compared to 25.0% in
Second Quarter 1995. This increase was attributable primarily to decreased sales
levels, higher rents and related costs for new stores and reduced handling
charge income due to revised chargeback policies related to vendor shipments.
These higher costs were partially offset by reduced advertising expenses. The
Company has adopted a number of expense reduction initiatives, including changes
in marketing strategy and the regionalization of its distribution operations
which are expected to achieve cost savings, and plans to implement additional
cost savings programs to achieve further reductions in SG&A expenses.
Interest expense, net, for Second Quarter 1996 decreased by $0.9 million
primarily due to a decrease in average short-term borrowings and a decrease in
average short term interest rates in Second Quarter 1996. As a percentage of
sales, interest expense, net, for Second Quarter 1996 was unchanged from Second
Quarter 1995 at 1.5%.
-12-
<PAGE> 13
Average monthly revolving credit borrowings were $139.2 million at a weighted
average interest rate of 6.5% in Second Quarter 1996 compared to $198.5 at 7.0%
for Second Quarter 1995. The weighted average interest rate of the Term Debt was
6.3% in Second Quarter 1996 compared to 6.9% in Second Quarter 1995.
The Company did not record any tax benefit in Second Quarter 1996 since the
utilization of the Company's loss carryforwards is dependent upon sufficient
future taxable income and the Company has established a full valuation allowance
against these carryforward benefits.
Reorganization costs relating to the Chapter 11 proceedings were $10.8 million
in Second Quarter 1996 for professional fees and retention and severance costs.
TWENTY-SIX WEEKS ENDED AUGUST 3, 1996 ("YEAR-TO-DATE 1996") AS COMPARED TO
TWENTY-SIX WEEKS ENDED JULY 29, 1995 ("YEAR-TO-DATE 1995"):
Total sales for Year-To-Date 1996 were $1,190.8 million compared to $1,235.1
million for Year-To-Date 1995, a decrease of $44.3 million, or 3.6%. This
decrease was primarily due to a 4.4% decrease in comparable store sales and 12
stores that were closed since the first quarter 1996, partially offset by the
sales from 9 new stores opened since July 1995. The decrease in comparable store
sales was primarily attributable to changes in the Company's marketing strategy,
including the discontinuance of mid-week circulars, coupon sales and one-day
sales events. The Company made the determination that these programs are not
profitable or compatible with the Company's long-term marketing strategy. Sales
were also adversely affected by extremely mild summer weather in the Northeast
region as compared to last year which negatively impacted certain apparel and
seasonal merchandise categories.
Gross margin as a percentage of sales for Year-To-Date 1996 decreased by 1.5% to
26.0% from 27.5% for Year-To-Date 1995. The decrease was mainly attributable to
the Company aggressively taking markdowns on seasonal merchandise, increased
competitive pricing and an increase in the reserve for shrinkage.
SG&A expenses as a percentage of sales for Year-To-Date 1996 increased by 2.2%
to 28.9% compared to 26.7% for Year-To-Date 1995. This increase was attributable
primarily to decreased sales levels, higher rents and related costs for new
stores and reduced handling charge income due to revised chargeback policies
related to vendor shipments. Higher advertising costs in the first quarter of
1996 were partially offset by expense reductions resulting from changes in
marketing strategy in Second Quarter 1996. The Company has adopted a number of
expense reduction initiatives, including changes in marketing strategy and the
regionalization of its distribution operations which are expected to achieve
cost savings, and plans to implement additional cost savings programs to achieve
further reductions in SG&A expenses.
Interest expense, net, for Year-To-Date 1996 decreased by $2.6 million due to a
decrease in average short-term borrowings and a decrease in average short term
interest rates. As a percentage of sales, interest expense, net, for
Year-To-Date 1996 was 1.5% compared to 1.6% for Year-To-Date 1995.
Average monthly revolving credit borrowings were $121.9 million at a weighted
average interest rate of 6.5% for Year-To-Date 1996 compared to $192.7 at 7.1%
for Year-To-Date 1995. The weighted average interest rate of the Term Debt was
6.3% for Year-To-Date 1996 compared to 6.9% for Year-To-Date 1995.
Reorganization costs relating to the Chapter 11 proceedings were $19.5 million
for Year-To-Date 1996 for professional fees and retention and severance costs.
-13-
<PAGE> 14
FINANCIAL CONDITION
The Company's working capital as of August 3, 1996 decreased by $90.4 million
from February 3, 1996. Due to normal seasonal increases, as well as the six new
stores opened between April and July 1996, inventories increased by $51.8
million. The Company generated a net loss of $71.7 million for Year-To-Date
1996, compared to a net loss of $11.1 million in the same period last year.
These factors contributed to the increase in borrowings under the DIP Facility
of $115.0 million. Assets held for disposal were liquidated through the Closing
Sales and the proceeds were applied to the Term Debt. In addition, the Company
initiated the liquidation of aged inventories that were on hand at February 3,
1996.
Net cash used in operating activities for Year-To-Date 1996 was $74.4 million as
compared to $80.4 million for Year-To-Date 1995. This use of cash for operating
activities was primarily due to the Company's net loss, reorganization items and
the reduction in liabilities subject to compromise. The reduction in liabilities
subject to compromise, approved by the Bankruptcy Court, included reclamation
payments made to vendors, payments for sales and use tax, the refinancing of the
construction loan relating to the Silver Spring, MD store, as well as the normal
amortization of capital lease obligations.
For Year-To-Date 1996, $14.0 million was spent for capital expenditures compared
to $21.3 million for Year-To-Date 1995. The Company's capital expenditures for
1996 are projected to be approximately $45 million and will be used for a
regional distribution center, new stores, management information systems and
normal store upgrades and improvements.
On October 17, 1995, the Bankruptcy Court entered a final order approving the
DIP Facility as provided under the Amended and Restated Revolving Credit and
Guaranty Agreement dated as of October 17, 1995, among the Registrant, as the
borrower thereunder, the subsidiaries of the Registrant named therein, as the
guarantors thereunder, and a bank group led by Chemical Bank (now merged with,
and known as The Chase Manhattan Bank) ("Chase"). The DIP Facility amends and
restates the Registrant's Debtor-In-Possession Revolving Credit and Guaranty
Agreement dated as of September 18, 1995 with Chase as agent in its entirety.
Pursuant to the terms of the DIP Facility, as amended, the Banks have made
available to the Registrant a revolving credit and letter of credit facility in
an aggregate principal amount, at August 3, 1996, not to exceed a total of
$492.4 million, divided into two (2) separate tranches consisting of (i) a
post-petition revolving credit and letter of credit facility in an aggregate
principal amount not to exceed $250 million (reflecting the Second Amendment
(as hereinafter defined)) to be made available by the Tranche A Banks (the
"Tranche A Facility") and (ii) the continued use of the revolving credit and
letter of credit portion of the pre-petition credit facility made available by
the Tranche B Banks (the "Tranche B Facility") in an aggregate principal amount
of $242.4 million which principal amount may be borrowed, paid and reborrowed.
The Company's maximum borrowing under the Tranche A Facility, up to $250
million, may not exceed the lesser of 60% of Eligible Cost Value of Inventory
or 50% of Eligible Retail Value of Inventory. The DIP Facility has a sublimit
of $175 million for the issuance of letters of credit. On July 16, 1996, the
Bankruptcy Court approved the Second Amendment which, among other things,
provided for rescinding a $50 million line reduction that took effect on May 4,
1996 and eliminating the $50 million reduction of the Tranche A Facility
commitment that was scheduled for October 5, 1996. Instead, the Second
Amendment provided for an automatic $50 million reduction of the Tranche A
Facility commitment on May 3, 1997. Concurrently, the Bankruptcy Court
authorized and directed the application by the Company of the net proceeds of
the Closing Sales, previously authorized by the Bankruptcy Court, to the
payment of the Term Debt. The Company has paid $22.5 million to Chase, as
agent, for application to the Term Debt. The Tranche B Facility must be fully
utilized before the Company can borrow under the Tranche A Facility. The DIP
Facility expires on September 18, 1997.
-14-
<PAGE> 15
Borrowings under the DIP Facility may be used to fund working capital, inventory
purchases and for other general corporate purposes. The DIP Facility contains
restrictive covenants, including, among other things, limitations on the
creation of additional liens and indebtedness, limitations on capital
expenditures, capital leases and annual rents, the sale of assets and the
maintenance of minimum earnings before interest, taxes, depreciation,
amortization, and reorganization items, the maintenance of inventory levels, and
a prohibition on the payment of dividends.
The DIP Facility provides that advances made (i) under the Tranche A Facility
will bear interest at a rate of 0.5% per annum in excess of ABR, or, at the
Registrant's option, a rate of 1.5% per annum in excess of the reserve adjusted
LIBOR for the interest periods of one, three or six months or (ii) under the
Tranche B Facility will bear interest at ABR or at a rate of 0.75% per annum in
excess of LIBOR.
The Tranche A Facility and the Tranche B Facility expire on the earlier of
September 18, 1997 or the date of entry of an order by the Bankruptcy Court
confirming a plan of reorganization.
The Tranche A Banks and the Tranche B Banks were granted a lien on all of the
assets of the Debtors and a superpriority claim for all obligations of the
Debtors arising under the Tranche A Facility and the Tranche B Facility,
respectively. However, the claim of the Tranche B Banks is subordinate in
priority to the claim of the Tranche A Banks. In addition, Chase, as agent, was
granted a security interest in all of the shares of capital stock now or
hereafter issued to the Registrant by certain of its subsidiaries. A replacement
security interest in all collateral, subordinate to the security interests and
liens granted to the Tranche A Banks and the Tranche B Banks on all of the
assets of the Debtors and subject to the conditions of the financing order of
the Bankruptcy Court, dated October 17, 1995, has been granted to the
pre-petition banks in an amount limited to the aggregate decline in the value of
collateral securing the Term Debt and the real estate loan referenced in the DIP
Facility.
As of August 3, 1996, the outstanding borrowings under the DIP Facility were
$155.0 million and open letters of credit were $81.5 million.
The Company believes that cash on hand, refundable income taxes, amounts
available under the DIP Facility, utilization of capital leases and funds from
operations will enable the Company to meet its current liquidity and capital
expenditure requirements. Until a plan of reorganization is approved, the
Company's long-term liquidity and the adequacy of its capital resources cannot
be determined.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission (the "SEC") (including the Quarterly Report on Form 10-Q)
may contain statements which are not historical facts, so-called
"forward-looking statements", which involve risks and uncertainties. In
particular, statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" may be forward-looking statements. The
Company's actual future results may differ significantly from those stated in
any forward-looking statements. Factors that may cause such differences include,
but are not limited to, the factors discussed below. Each of these factors, and
others, are discussed from time to time in the Company's filings with the SEC.
The Company's future results are subject to substantial risks and uncertainties.
The Company is operating as a debtor-in-possession under the Bankruptcy Code and
its future results are subject to the development and confirmation of a plan of
reorganization. The Company's business is seasonal; a substantial portion of its
sales and income from operations are generated
-15-
<PAGE> 16
during the fourth quarter of the fiscal year which includes the Christmas
selling season. Any substantial decrease in sales during such period would have
a material adverse effect on the financial condition and results of operations
of the Company. The Company has working capital needs which are expected to be
funded largely through borrowings under the DIP Facility. The DIP Facility
contains financial and other covenants that restrict, among other things, the
ability of the Company and its subsidiaries to incur additional indebtedness,
create liens, pay dividends on or repurchase shares of capital stock, and make
certain loans, investments or guarantees. Such restrictions may limit the
Company's operating and financial flexibility. For further information, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition".
-16-
<PAGE> 17
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
None
b) Reports on Form 8-K
During the fiscal quarter covered by this report, the
Registrant filed Current Reports on Form 8-K for events that
occurred on May 7, 1996, June 7, 1996 and July 16, 1996,
respectively. All filings reported only on Item 5, and no
financial statements were included in such filings.
-17-
<PAGE> 18
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.
The Caldor Corporation
(Registrant)
Date: September 13, 1996 By: /s/ Don R. Clarke
-------------------------- ------------------------------------
Don R. Clarke
Chairman and Chief Executive Officer
Date: September 13, 1996 By: /s/ John G. Reen
-------------------------- ------------------------------------
John G. Reen
Executive Vice President and
Chief Financial Officer
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> AUG-03-1996
<CASH> 33,532
<SECURITIES> 0
<RECEIVABLES> 19,879
<ALLOWANCES> 0
<INVENTORY> 551,699
<CURRENT-ASSETS> 630,019
<PP&E> 591,395
<DEPRECIATION> 142,853
<TOTAL-ASSETS> 1,200,744
<CURRENT-LIABILITIES> 449,102
<BONDS> 247,798
0
0
<COMMON> 171
<OTHER-SE> (34,620)
<TOTAL-LIABILITY-AND-EQUITY> 1,200,744
<SALES> 1,190,772
<TOTAL-REVENUES> 1,190,772
<CGS> 881,176
<TOTAL-COSTS> 881,176
<OTHER-EXPENSES> 363,856
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,441
<INCOME-PRETAX> (71,071)
<INCOME-TAX> 0
<INCOME-CONTINUING> (71,701)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,701)
<EPS-PRIMARY> (4.23)
<EPS-DILUTED> (4.23)
</TABLE>
