UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):Nov. 24, 1997
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(Nov. 24, 1997)
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Bradlees, Inc.
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(Exact Name of Registrant As Specified In Its Charter)
Massachusetts
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(State Or Other Jurisdiction of Incorporation)
1-11134 04-3156108
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(Commission File Number) (IRS Employer Identification No.)
One Bradlees Circle; Braintree, Massachusetts 02184
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(Address Of Principal Executive Offices) (Zip Code)
(781) 380-3000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
Exhibit Index on Page 4
Page 1 of 11 (Including Exhibits)
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Item 5: OTHER EVENTS
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Beginning on November 24, 1997, Bradlees, Inc. (the
"Company") will distribute to its banks and other credit
providers summaries of its unaudited financial results for the
third quarter (thirteen weeks) and year-to-date (thirty-nine
weeks) ended November 1, 1997, including a comparison to the
Company's summary revised financial plan (the "Plan") for the
fiscal year ending January 31, 1998 ("Fiscal 1997") filed on
Form 8-K dated August 13, 1997. The Fiscal 1997 third-quarter
and year-to-date results compared to the Plan are attached
hereto as Exhibit 20. Also attached hereto, as Exhibit 10, is
the First Amendment to the Amended and Restated Revolving Credit
and Guaranty Agreement ("DIP") dated October 16, 1997 that
increased the borrowing base formula for the period from October
29, 1997 (the "Effective Date") through January 31, 1998.
Total sales for the third quarter ended November 1, 1997
were $20.0 million below Plan. EBITDA before restructuring (as
defined in the exhibit) was $8.2 million or $1.2 million below
Plan, primarily due to the unfavorable sales variance, partially
offset by an above-Plan gross margin rate (29.5% vs. 29.4%) and
favorable selling, store operating, administrative and
distribution (SG&A) expenses ($3.0 million). The unfavorable
sales variance in the third quarter was due, in part, to weak
denim sales and the unseasonably warm weather in October that
hurt outerwear sales, and to toy sales that were below planned
levels. In addition, the third quarter sales impact of weaning
the Company off of its aggressive promotional strategies of
prior years was underestimated in the development of the
Company's financial plan. Deemphasis of the multiple discount
programs that ran concurrently in many of the 1996 promotional
events resulted in sales projections for 1997 that were
impractical to estimate with precision. SG&A expenses were
below Plan due to a reduction ($3.6 million) in self-insurance
reserves and below-Plan home office expenses ($1.5 million),
partially offset by above-Plan store payroll ($0.7 million),
store operating expenses ($0.8 million) and advertising expenses
($0.6 million). The reduction in the Company's self-insurance
reserves was based on an actuarial analysis, and is the result
of aggressive clams management and continued safety initiatives.
The Company reported net income of $0.4 million for this
year's third quarter, the first quarterly net income since the
fourth quarter of fiscal 1994, compared to a planned net loss of
$6.6 million. The credit in reorganization items included the
reversal of a rejected lease provision for a closed store lease
that was sold and a favorable severance settlement.
Year-to-date total sales were $20.0 million below Plan.
The year-to-date EBITDA loss before restructuring was $10.4
million or $1.0 million below Plan as an above-Plan gross margin
rate (30.3% vs. 30.2%) and below-Plan SG&A expenses ($3.4
million) partially offset the impact from the lower sales. The
below-Plan sales and SG&A expenses were due to the factors
discussed above for the third quarter. The year-to-date net
loss was $48.5 million compared to a planned net loss of $55.8
million.
Unrestricted cash was $1.3 million above Plan at November
1, 1997. Inventories were $4.7 million above Plan, primarily
in toys because of advance purchase programs and below-Plan
sales. Accounts payable was $12.0 million below Plan and
outstanding borrowings under the Company's DIP facility were
$27.4 million
2
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above Plan. The below-Plan accounts payable level and
associated above-Plan DIP borrowings were primarily the result
of the reduction in seasonal and extended vendor dating (for
suppliers whose payment terms generally exceeded thirty days)
that followed the Montgomery Ward bankruptcy filing and the
Company's own tightened liquidity position in July and August.
In addition, this contraction in terms resulted from
higher-than-anticipated commodity sales (commodity vendors
generally have shorter terms) and a change in the vendor mix as
a consequence of the reintroduction of certain other merchandise
categories generally sold by discount stores. The attached DIP
amendment has restored liquidity closer to the levels projected
in the Plan.
The Company is distributing the quarterly performance
against its Plan (the "Plan Performance Information") to its
banks and other credit providers to facilitate their credit
analyses. THE PLAN PERFORMANCE INFORMATION SHOULD NOT BE RELIED
UPON FOR ANY OTHER PURPOSE and should be read in conjunction
with the Company's Form 8-K dated August 13, 1997, Form 10-Q for
the first quarter ended May 3, 1997 and second quarter ended
August 2, 1997, and Form 10-K for the fiscal year ended February
1, 1997 (fiscal 1996). The Plan Performance Information is
being reported publicly solely because it is being distributed
to a large number of the Company's vendors for purposes of their
credit analyses. Although the Company is publicly disclosing
the Plan Performance Information, the Company does not believe
it is obligated to provide such information indefinitely, and
the Company may cease making such disclosures and updates at any
time. The Plan Performance Information was not examined,
reviewed or compiled by the Company's independent public
accountants. The Company is not obligated to update the Plan
Performance Information to reflect subsequent events or
developments. The Plan Performance Information is subject to
future adjustments, if any, that could materially affect such
information.
Item 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
Exhibit: 10 First Amendment to Amended and Restated
Revolving Credit and Guaranty Agreement.
20 Summary Financial Results for the 13 and
39 Weeks Ended November 1, 1997.
3
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INDEX TO EXHIBITS
Exhibit No. Exhibit Page No.
- ---------- ------- --------
10 First Amendment to Amended and Restated
Revolving Credit and Guaranty Agreement. 6
20 Summary Financial Results for the
13 and 39 Weeks Ended November 1, 1997. 10
4
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BRADLEES, INC.
AND SUBSIDIARIES
SIGNATURES
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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.
BRADLEES, INC.
Date: November 24, 1997 By /s/ PETER THORNER
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Peter Thorner
Chairman and
Chief Executive Officer
Date: November 24, 1997 By /s/ CORNELIUS F. MOSES III
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Cornelius F. Moses III
Senior Vice President,
Chief Financial Officer
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EXHIBIT 10
FIRST AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AND GUARANTY AGREEMENT
FIRST AMENDMENT, dated as of October 16, 1997 (the
"AMENDMENT") to the AMENDED AND RESTATED REVOLVING CREDIT AND
GUARANTY AGREEMENT, dated as of June 23, 1995 and Amended and
Restated as of April 10, 1997, among BRADLEES STORES, INC., a
Massachusetts corporation (the "BORROWER"), as a debtor and
debtor-in-possession under Chapter 11 of the Bankruptcy Code,
the Guarantors named therein (the "GUARANTORS"), as debtors and
debtors-in-possession under Chapter 11 of the Bankruptcy Code,
THE CHASE MANHATTAN BANK a New York banking corporation
("CHASE"), each of the other financial institutions party
thereto (together with Chase, the "BANKS") and THE CHASE
MANHATTAN BANK, as Agent for the Banks (in such capacity, the
"AGENT");
WITNESSETH:
WHEREAS, the Borrower, the Guarantors, the Banks and the
Agent are parties to that certain Amended and Restated Revolving
Credit and Guaranty Agreement, dated as of June 23, 1995 and
Amended and Restated as of April 10, 1997 (as the same may be
amended, modified or supplemented from time to time, the "CREDIT
AGREEMENT"); and
WHEREAS, the Borrower and the Guarantors have requested
that from and after the Effective Date (as hereinafter defined)
of this Amendment, the Credit Agreement be amended subject to
and upon the terms and conditions set forth herein.
Accordingly, the parties hereto hereby agree as follows:
1. As used herein all terms which are defined in the
Credit Agreement shall have the same meanings herein.
2. The definition of the term "BORROWING BASE" set forth
in Section 1.01 of the Credit Agreement is hereby amended by
inserting the following proviso at the end thereof:
"provided that during the period from October 16, 1997
through and including January 31, 1998, such percentage shall be
65%."
3. This Amendment shall not become effective until the
date (the "EFFECTIVE DATE") on which (i) this Amendment shall
have been executed by the Borrower, the Guarantors, Banks
representing the Required Banks and the Agent, and the Agent
shall have received evidence satisfactory to it of such
execution, (ii) the Borrower shall have paid to the Agent, for
the respective accounts of the Banks, an amendment fee in an
aggregate amount equal to $250,000 and (iii) the Bankruptcy
Court shall have entered an order (in form and substance
satisfactory to the Agent) approving the terms hereof,
including, without limitation, the payment of the amendment fee
provided for in clause (ii) above.
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4. The Borrower agrees that its obligations set forth in
Section 10.05 of the Credit Agreement shall extend to the
preparation, execution and delivery of this Amendment.
5. This Amendment shall be limited precisely as written
and shall not be deemed (a) to be a consent granted pursuant to,
or a waiver or modification of, any other term or condition of
the Credit Agreement or any of the instruments or agreements
referred to therein or (b) to prejudice any right or rights
which the Agent or the Banks may now have or have in the future
under or in connection with the Credit Agreement or any of the
instruments or agreements referred to herein. Whenever the
Credit Agreement is referred to in the Credit Agreement or any
of the instruments, agreements or other documents or papers
executed or delivered in connection therewith, such reference
shall be deemed to mean the Credit Agreement as modified by this
Amendment.
6. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which taken together
shall constitute but one and the same instrument.
7. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and the year first
above written.
BRADLEES STORES, INC.
By: /s/ David L. Schmitt
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Title: Senior Vice President,
Secretary & Clerk
GUARANTORS:
BRADLEES, INC.
BRADLEES ADMINISTRATIVE CO., INC.
DOSTRA REALTY CO., INC.
MAXIMEDIA SERVICES, INC.
NEW HORIZONS OF BRUCKNER, INC.
NEW HORIZONS OF WESTBURY, INC.
NEW HORIZONS OF YONKERS, INC.
By: /s/ David L. Schmitt
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Title: Vice President, Secretary & Clerk
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THE CHASE MANHATTAN BANK,
Individually and as Agent
By: /s/ Neil R. Boylan
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Title: Vice President
FLEET NATIONAL BANK
By: /s/ John C. McDonough
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Title: Vice President
HELLER FINANCIAL, INC.
By: /s/ Stephen Metivier
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Title: Assistant Vice President
JACKSON NATIONAL LIFE INSURANCE
COMPANY
By: PPM AMERICA, INC., as
Attorney-in-Fact for
Jackson National Life Insurance
Company
By: /s/ Stuart Lissner
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Title: Managing Director
BHF-BANK AKTIENGESELLSCHAFT
GRAND CAYMAN BRANCH
By: /s/ John Sykes
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Title: Assistant Vice President
By: /s/ Thomas J. Scifo
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Title: Assistant Vice President
MANUFACTURERS & TRADERS TRUST COMPANY
By: /s/ Gino Martocci
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Title: Assistant Vice President
SIGNET BANK
By: /s/ Mara L. Sierocinski
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Title: Asst. Vice President
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CREDIT AGRICOLE
By: /s/ David Bouhl
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Title: First Vice President
THE TRAVELERS COMPANIES
By: /s/ John F. Gilsenan
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Title: Second Vice President
BANKBOSTON RETAIL FINANCE INC.
By: /s/ Francis D. O'Connor
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Title: Vice President
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Exhibit 20
Page 1 of 2
BRADLEES, INC.
THIRD QUARTER RESULTS VS. PLAN
(Unaudited)
(In Millions)
Third Quarter 1997 Year-to-Date 1997
------------------ -----------------
Actual Plan* Last Yr. Actual Plan* Last Yr.
------ ---- ------- ------ ---- -------
INCOME SUMMARY:
Owned Sales $328.7 $347.5 $402.4 $890.3 $909.1 $1,105.3
Food Service Sales 1.7 1.7 2.0 4.9 4.9 6.4
Leased Dept. Sales 11.9 13.1 15.9 35.5 36.6 44.7
------ ------ ------ ------ ------ ---------
Total Sales 342.3 362.3 420.3 930.7 950.6 1,156.4
Gross Margin $ 97.1 102.2 113.1 269.7 274.8 322.8
Non-Recurring
GOB Reserve - - - - - (5.9)
------ ------ ------ ------ ------ --------
Adjusted Gross
Margin $ 97.1 102.2 113.1 269.7 274.8 316.9
G/M %(based on
owned sales) 29.5% 29.4% 28.1% 30.3% 30.2% 28.7%
SG&A Expenses (93.0) (96.0) (120.0) (289.8)(293.2) (392.4)
Other Income 3.3 3.2 3.7 8.7 8.7 10.6
Gain on Dispos.
of Property 0.8 - 1.7 1.0 0.2 1.7
Add back
Non-Recurring
GOB Reserve - - - - - 5.9
------ ------ ------ ------ ------ --------
EBITDA before
Restructuring 8.2 9.4 (1.5) (10.4) (9.5) (57.3)
------ ------ ------ ------ ------ --------
Cash Impact from
Restructuring (2.3) (4.3) (4.4) (5.6) (7.4) (9.0)
------ ------ ------ ------ ------ --------
EBITDA after
Restructuring 5.9 5.1 (5.9) (16.0) (16.9) (66.3)
------ ------ ------ ------ ------ --------
Cash Impact from
Restructuring 2.3 4.3 4.4 5.6 7.4 9.0
Gain on Disposition
of Property (in
Reorg. Items) (0.8) - - (1.0) (0.2) -
Less Non-Recurring
GOB Reserve - - - - - (5.9)
Deprec. & Amort.
Expense (9.3) (9.5) (10.6) (27.5) (27.9) (32.1)
Interest & Debt
Expense (4.7) (4.4) (2.9) (11.7) (11.3) (7.8)
Reorg. Items 7.0 (2.1) (8.1) 2.1 (6.9) (56.5)
------ ------ ------ ------ ------ --------
Net Earnings(Loss) $0.4 ($6.6) ($23.1) ($48.5) ($55.8)($159.6)
===== ======= ====== ======= ====== ======
BALANCE SHEET SUMMARY:
Balance at End of Period
Unrestricted Cash & Cash Equivalents $11.3 $10.0 $20.2
Restricted Cash & Cash Equivalents 9.4 9.4 9.0
Inventories 335.4 330.7 339.2
Other Current Assets 33.0 28.8 37.0
------- ------ ------
Total Current Assets 389.1 378.9 405.4
Net Fixed Assets 156.6 155.8 176.2
Long Term Assets 154.3 154.0 194.0
------- ------ ------
Total Assets $700.0 $688.7 $775.6
======= ======= =======
Accounts Payable $196.3 $208.3 $238.7
DIP Borrowings 131.5 104.1 24.0
Other Current Liabilities 41.8 46.3 52.8
------- ------ ------
Total Current Liabilities 369.6 358.7 315.5
Long-Term Liabilities 82.0 83.5 94.8
Liabilities Subject to Settlement 560.1 565.5 569.6
Paid-in-Capital 137.3 137.3 137.1
Accumulated Deficit (449.0) (456.3) (341.4)
------- ------ ------
Total Stockholders' Equity (Deficiency) (311.7) (319.0) (204.3)
------- ------ ------
Total Liabilities & Stockholders' Equity $700.0 $688.7 $775.6
======= ======= =======
* As filed on Form 8-K dated August 13, 1997 and adjusted for
bank service charges reclassified from SG&A expenses to interest
and debt expense.
NOTE: EBITDA before restructuring is earnings (loss) before
interest and debt expense, income taxes, restructuring and
non-recurring items, asset impairment charge, reorganization and
extraordinary items, and depreciation and amortization expense.
At the time cash is received or expended for restructuring and
non-recurring items, the cash amount is included in the
calculation of EBITDA after restructuring.
10
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Exhibit 20
Page 2 of 2
BRADLEES, INC.
THIRD QUARTER RESULTS VS. PLAN
(Unaudited)
(In Millions)
Third Quarter 1997 Year-to-Date
------------------- ------------
Actual Plan* Actual Plan*
--------------------------------------
CASH FLOW SUMMARY:
- -----------------
Beginning Unrestricted Cash
& Cash Equivalents $10.9 $10.0 $10.0 $10.0
Cash Used in Operations:
Net Income (Loss) 0.4 (6.6) (48.5) (55.8)
Depreciation &
Amortization Expense 9.3 9.5 27.5 27.9
Amortization of Deferred
Financing Costs 0.5 0.4 2.1 2.0
Inventory Increase (81.4) (75.2) (98.4) (93.8)
Accounts Payable Incr. 56.9 63.3 81.0 93.0
All Other, Including
Reorganization Items (21.3) (1.0) (27.7) (11.2)
------ ----- ------ ------
Net Cash Used
in Operations (35.6) (9.6) (64.0) (37.9)
Capital Spending (3.8) (5.0) (14.7) (15.0)
Increase in Restricted Cash
and Cash Equivalents (0.1) (0.1) (0.3) (0.3)
Other:
Payments of Capital Leases &
Deferred Financing Costs (0.7) (0.4) (3.3) (3.0)
Payments of Liabilities
Subject to Settlement (1.9) (1.9) (5.4) (5.4)
Net Borrowings Under
the DIP Facility 42.5 17.0 89.0 61.6
------ ------ ------ ------
Total Other 39.9 14.7 80.3 53.2
------ ------ ------ ------
Increase (Decrease) in
Unrestricted Cash
and Cash Equivalents 0.4 - 1.3 -
------ ------ ------ ------
Ending Unrestricted Cash
and Cash Equivalents $11.3 $10.0 $11.3 $10.0
====== ====== ====== ======
* As filed on Form 8-K dated August 13, 1997.
11
