<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended November 2, 1996
Commission File Number 000-24328
RICHMAN GORDMAN 1/2 PRICE STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0771211
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
12100 WEST CENTER ROAD, OMAHA, NEBRASKA 68144
(Address of principal executive offices) (zip code)
(402) 691-4000
(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
--- ---
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, or 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Class of Common Stock Outstanding at November 2, 1996
--------------------- -------------------------------
<S> <C>
Common Stock:
Series A 16,695,000 shares
Series B Option 10,200,000 shares
</TABLE>
Page 1 of 19
Exhibit Index Appears At Page 17
<PAGE> 2
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
-----------------------------------------------------
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets as of
November 2, 1996 and February 3, 1996 3
Consolidated Statements of Operations -
Three Months Ended November 2, 1996
and October 28, 1995
Nine Months Ended November 2, 1996
and October 28, 1995 4
Consolidated Statements of Cash Flows -
Nine Months Ended November 2, 1996
and October 28, 1995 5 - 6
Notes to Consolidated Financial Statements 7 - 8
Item 2 - Management's Discussion and Analysis of 9 - 13
Financial Condition and Results of
Operations
PART II - OTHER INFORMATION
Items 1-4 - None 14
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
Page 2 of 19
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
November 2, 1996 February 3, 1996
---------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 314,906 $ 488,012
Accounts receivable, less allowance for doubtful
accounts of $467,789 and $349,422 1,720,125 928,792
Merchandise inventories 37,846,645 30,786,359
Prepaid expenses and other current assets 1,866,927 2,145,237
----------- -----------
Total current assets 41,748,603 34,348,400
PROPERTY, BUILDINGS AND EQUIPMENT, net 15,082,324 16,681,855
OTHER ASSETS 296,292 978,691
----------- -----------
$57,127,219 $52,008,946
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit borrowings $18,646,693 $ 7,690,923
Accounts payable 10,820,428 7,953,024
Accrued expenses 4,789,486 5,118,000
Taxes accrued and withheld 3,000,821 2,252,451
Income taxes payable 206,104 206,104
Current portion of long-term debt 2,637,534 2,779,207
Current maturites of capital lease obligations 1,226,991 1,229,819
----------- -----------
Total current liabilities 41,328,057 27,229,528
LONG-TERM DEBT, net of current portion 3,774,588 4,201,143
CAPITAL LEASE OBLIGATIONS, net of current portion 9,676,145 10,594,328
OTHER LONG-TERM LIABILITIES 594,267 585,765
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock
Series A common stock, $.01 par value; 19,800,000
shares authorized; 19,260,000 and 17,640,000 shares issued 192,600 176,400
Series B option common stock, $.01 par value; 10,200,000
shares authorized, issued and outstanding 102,000 102,000
Paid-in capital 4,562,886 4,436,526
Retained earnings (deficit) (2,877,604) 4,683,256
Less: Treasury Stock, at cost, 2,565,000 shares (225,720) -
----------- -----------
Total stockholders' equity 1,754,162 9,398,182
----------- -----------
$57,127,219 $52,008,946
=========== ===========
</TABLE>
See notes to consolidated financial statements.
Page 3 of 19
<PAGE> 4
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 2, 1996 October 28, 1995 November 2, 1996 October 28, 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
NET SALES $ 50,484,778 $ 52,730,784 $137,950,813 $138,812,673
COST OF SALES 32,367,912 35,227,702 89,650,635 91,656,407
------------ ------------ ------------ ------------
Gross Profit 18,116,866 17,503,082 48,300,178 47,156,266
OPERATING AND
ADMINISTRATIVE EXPENSES 18,119,210 18,167,944 53,004,416 50,168,723
------------ ------------ ------------ ------------
Loss from operations (2,344) (664,862) (4,704,238) (3,012,457)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (1,070,545) (1,042,161) (2,857,716) (3,050,347)
Interest income 200 7,040 1,094 27,080
------------ ------------ ------------ ------------
(1,070,345) (1,035,121) (2,856,622) (3,023,267)
------------ ------------ ------------ ------------
LOSS BEFORE PROVISION FOR
INCOME TAX (1,072,689) (1,699,983) (7,560,860) (6,035,724)
PROVISION FOR INCOME TAXES - - - -
------------ ------------ ------------ ------------
NET LOSS $ (1,072,689) $ (1,699,983) $ (7,560,860) $ (6,035,724)
============ ============ ============ ============
LOSS PER COMMON SHARE $ (0.04) $ (0.06) $ (0.26) $ (0.20)
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING 27,435,000 30,000,000 28,575,000 30,000,000
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
Page 4 of 19
<PAGE> 5
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
NOVEMBER 2, 1996 OCTOBER 28, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $137,322,164 $ 138,003,574
Merchandise purchases (93,837,085) (102,731,814)
Cash paid for operating and administrative expenses (49,804,615) (50,482,441)
Interest paid on capital leases (1,053,461) (1,165,583)
Interest paid on other debt obligations (1,176,180) (945,263)
------------ -------------
Net cash used by operating activities (8,549,177) (17,321,527)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment (609,267) (2,565,156)
Decrease in cash surrender value life
insurance policies - 5,546
------------ -------------
Net cash used in investing activities (609,267) (2,559,610)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving credit line 10,955,770 17,324,678
Payments on obligations under capitalized leases (921,011) (895,909)
Payments to prepetition secured creditors (603,000) (603,000)
Purchase of Treasury Stock (225,720) -
Payments made under plan of reorganization (220,701) (2,223,351)
------------ -------------
Net cash provided by financing activities 8,985,338 13,602,418
------------ -------------
NET DECREASE IN CASH (173,106) (6,278,719)
CASH, Beginning of period 488,012 6,607,476
------------ -------------
CASH, End of period $ 314,906 $ 328,757
============ =============
</TABLE>
See notes to consolidated financial statements.
Page 5 of 19
<PAGE> 6
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
November 2, 1996 October 28, 1995
---------------- ----------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
USED BY OPERATING ACTIVITIES:
Net loss $(7,560,860) $ (6,035,724)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 2,346,929 2,310,324
Net changes in assets and liabilities:
Accounts receivable (791,333) (1,176,636)
Merchandise inventory (7,060,286) (8,835,553)
Prepaid expenses 278,310 (4,864,080)
Accounts payable 2,867,404 (272,450)
Other assets 544,266 (381,212)
Other accrued expenses 826,393 1,933,804
----------- ------------
Net cash used by operating activities $(8,549,177) $(17,321,527)
=========== ============
</TABLE>
Page 6 of 19
<PAGE> 7
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. MANAGEMENT REPRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all
adjustments necessary for a fair presentation of the results of operations
for the interim periods have been included. All such adjustments are of a
normal recurring nature. Because of the seasonal nature of the business,
results for interim periods are not necessarily indicative of a full year's
operations. The accounting policies followed by Richman Gordman 1/2 Price
Stores, Inc. and subsidiary (the "Company") and additional footnotes are
reflected in the audited consolidated financial statements contained in the
Annual Report on Form 10-K of the Company for the fiscal year ended February
3, 1996.
2. DESCRIPTION OF BUSINESS
On October 20, 1993, the Company emerged from Chapter 11 of the United
States Bankruptcy Code pursuant to a confirmed Plan of Reorganization (the
"Plan"). The Company operated 32 1/2 Price Stores as of November 2, 1996,
and 31 1/2 Price Stores as of October 28, 1995. The 1/2 Price primary
concept is to offer first quality, name brand merchandise at half of the
conventional department store regular prices or at half of manufacturers'
suggested retail prices.
3. MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost (on a last-in,
first-out, or LIFO basis) or market. Total inventories would have been
higher at November 2, 1996, and February 3, 1996, by approximately
$9,084,977 and $8,615,977, respectively, had the FIFO (first-in, first-out)
method been used to determine the cost of all inventories. Quarterly LIFO
inventory determinations reflect assumptions regarding fiscal year-end
inventory levels and the estimated impact of annual inflation.
4. INCOME TAXES
As of February 3, 1996 (the Company's most recent tax year-end), the Company
had net operating loss carryforwards of approximately $15,053,000, which
expire through 2010. A valuation allowance has been provided against this
net operating loss benefit until realization of these benefits becomes more
likely than not. No income tax benefit was recorded for the first nine
months of fiscal 1996 and 1995 because of the uncertainty of the realization
of such benefits in the future resulting from recent losses.
Page 7 of 20
<PAGE> 8
5. STOCKHOLDERS' EQUITY
Should the Company fulfill its minimum obligation to the unsecured creditors
under the Plan, the Company and the former preferred shareholder's designee
have the option to purchase all or a portion of the 10,200,000 shares of
Series B Option Common Stock issued to the unsecured creditors at a price
equal to the fair value of the stock on February 2, 1998, less the amount of
any Excess Cash Balance paid to the unsecured creditors during the term of
the Plan. As of November 2, 1996 there is no excess cash paid to the
unsecured creditors. During fiscal 1995, previous Excess Cash Balance
payments totaling $3,277,224 were used to fulfill the Company's minimum
obligation to the unsecured creditors.
6. EARNINGS PER SHARE
Earnings per common share were calculated using weighted average common
shares outstanding for all periods presented. For purposes of the weighted
average shares outstanding, all shares to be issued to certain members of
management or to the unsecured creditors during the term of the Plan are
considered outstanding.
7. EXECUTIVE SEVERANCE PAYMENTS
On May 15, 1996, the Company's chief executive officer resigned. In
connection with this resignation, the executive received severance related
payments totaling approximately $373,000, which were expensed in the second
quarter of fiscal 1996. The severance benefits included the vesting of
1,080,000 shares of the Company's Series A Common Stock which were to be
issued in 1997 and 1998 if certain cash flow goals were achieved. In
addition, approximately $806,000 of prepaid compensation to the executive
paid during fiscal 1995 will not have to be repaid to the Company and was
also expensed in the second quarter of fiscal 1996.
8. TREASURY STOCK TRANSACTION
In connection with the resignation of the Company's chief executive officer,
the Company purchased the 2,565,000 shares of the executive's stock at a
fair market value of $225,720.
Page 8 of 19
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth an analysis of various components of the
Consolidated Statements of Operations as a percentage of sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 64.1 66.8 65.0 66.0
----- ----- ----- -----
Gross Profit 35.9 33.2 35.0 34.0
Operating and
Administrative Expenses 35.9 34.4 38.4 36.1
----- ----- ----- -----
Loss From Operations 0.0 (1.2) (3.4) (2.1)
Interest Expense - Net (2.1) (2.0) (2.1) (2.2)
----- ----- ----- -----
Loss Before Provision For Taxes (2.1) (3.2) (5.5) (4.3)
Provision For Income Taxes - - - -
----- ----- ----- -----
Net Loss (2.1)% (3.2)% (5.5)% (4.3)%
===== ===== ===== =====
</TABLE>
Page 9 of 19
<PAGE> 10
Net Sales for the third quarter of fiscal 1996 decreased approximately
$2,246,000, or 4.3%, compared to net sales for the third quarter of fiscal 1995
due primarily to sales decreases in comparable stores during the period.
Comparable store sales in the third quarter of fiscal 1996 were approximately
$42,350,000 this year compared to $46,257,000 last year, a decrease of
$3,907,000, or 8.4%. However, this decline represents an improvement from the
first and second quarters of fiscal 1996 where comparable store sales were down
9.8% and 13.5%.
Net sales for the first nine months of fiscal 1996 decreased by approximately
$862,000, or 0.6%, over the first nine months of fiscal 1995 due primarily to
sales decreases in comparable stores during the period which more than offset
the increase in sales due to the opening of one new store since October 28,
1995 and the increase in sales at four non-comparable stores. Comparable store
sales for the first nine months of fiscal 1996 were approximately $114,954,000
this year compared to $128,535,000 last year, a decrease of approximately
$13,581,000, or 10.6%. Although comparable store sales continue to decline,
there is improvement as evidenced by the fact that the third quarter comparable
store sales decrease of 8.4% compares favorably with the 11.8% decrease in the
first half.
During the third quarter management implemented certain strategic initiatives
in response to the negative comparable store sales trend in the first half of
the year. The initiatives involve intensifying the Company's overall offering
of department store and specialty store branded merchandise. In conjunction
with this brand intensification focus, a new market positioning and advertising
strategy was developed to specifically address the need to increase market
share. The new advertising strategy, which was implemented in August of fiscal
1996, shifts advertising dollars from a 100% preprint (8-12 page color folio
newspaper insert) effort to a more diversified format including TV, radio and
ROP (ads printed on newspaper page). The marketing initiative seeks to
position the Company as the alternative to department stores. This is conveyed
to the consumer in virtually all its advertising vehicles through the use of
slogans such as: "Department Store Brands At 1/2 Price Every Day", "Brands You
Know (1/2 Price Stores logo) Values You Expect", and "The Biggest Selection of
Name Brands at (1/2 Price Stores logo). Management believes that these
merchandising, marketing and advertising strategies contributed to the
improvement in the negative comparable store sales during the third quarter of
fiscal 1996 compared to the first two quarters of 1996.
Gross Profit dollars increased by approximately $614,000, or 3.5%, for the
third quarter of fiscal 1996 compared to the third quarter of fiscal 1995. The
gross margin dollar increase was a result of an increase in the gross margin
rate which increased from 33.2% of sales in the third quarter of fiscal 1995 to
35.9% of sales in the third quarter of fiscal 1996. Gross profit dollars
increased approximately $1,144,000, or 2.4%, for the first nine months of
fiscal 1996 over the first nine months of fiscal 1995. As a percentage of
sales, gross profits increased 1.0% in the first nine months of fiscal 1996
compared to the first nine months of fiscal 1995. The Company was able to
realize this improvement in gross margin by selling more goods at normal
selling price due to its new marketing strategy, as well as by maintaining a
higher initial markup due to better negotiating,
Page 10 of 19
<PAGE> 11
and pricing some goods to sell at less than a 50% discount. The Company
intends to continue implementation of these strategies with the goal of further
improvements in gross profit in future periods.
Operating and Administrative Expenses decreased approximately $49,000, or 0.3%,
for the third quarter of fiscal 1996 compared to the third quarter of fiscal
1995. As a percentage of net sales, operating and administrative expenses
increased by 1.5%. These dollar savings have been achieved because the Company
is operating at a reduced level of corporate overhead, achieved through a
combination of attrition, restructuring of job responsibilities, and layoffs.
During the third quarter of fiscal 1996 corporate level payrolls decreased by
approximately $378,000 compared to the third quarter of fiscal 1995, offsetting
increases in sales promotion costs.
Operating and administrative expenses increased approximately $2,836,000, or
5.7%, for the first nine months of fiscal 1996 over the first nine months of
fiscal 1995. As a percentage of net sales, operating and administrative
expenses increased by 2.3%. The increase in expense of approximately
$2,836,000 was the net result of a $2,591,000 increase in non-comparable store
operating expense, severance-related costs of approximately $1,179,000 related
to the Company's former president, increased sales promotion costs of
approximately $1,196,000, decreases in distribution center costs of
approximately $189,000, decreases in costs in comparable stores of
approximately $415,000, and decreases in various corporate departments totaling
approximately $1,526,000.
Interest Expense (Net) increased by approximately $35,000 for the third quarter
of fiscal 1996 compared to the third quarter of fiscal 1995 and was
approximately $167,000 less for the first nine months of fiscal 1996 compared
to the first nine months of fiscal 1995. The change in interest expense for
the nine-month period was the net result of increases in interest expense on
the Company's revolving line of credit, decreased interest expense in the
pre-petition debt to the Company's unsecured creditors due to principal
payments, and decreased interest expense on capitalized leases.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing cash requirements are for operating expenses,
inventory and the minimum payments to the Company's creditors (pursuant to the
Plan). The Company's primary sources of funds for its business activities are
cash from operations and borrowings under its revolving credit facility with
Congress Financial Corporation (Central). In addition, short term trade credit
(normally for 30-day periods) represents a significant source of interim
financing for merchandise inventories. Trade creditors representing
approximately two thirds of all merchandise purchases are extending normal
credit terms. During the first nine months of fiscal 1996 approximately one
third of the Company's purchases, primarily from those vendors that factor
their invoices, had to be prepaid because the factor would not extend normal
credit terms to the Company. Management believes the percentage of prepayments
will not increase over the next few months.
Page 11 of 19
<PAGE> 12
The Company has a financing agreement with a financial institution which
provides for revolving credit borrowings and letters of credit of up to $27.5
million (subject to a borrowing base limitation) with a maturity date in
October 1999. The rate of interest on borrowings is prime plus 1.5% payable
monthly in arrears. A non-use fee of .5% per annum is payable monthly in
arrears on the unused portion of the facility. The agreement contains certain
restrictions and a covenant limiting annual cumulative capital expenditures.
At the end of the first nine months of fiscal 1996, the Company was in
compliance with all such restrictions and the covenant.
As of November 2, 1996, the Company had approximately $18,647,000 outstanding
under the credit facility, as compared with approximately $7,691,000 at
February 3, 1996. Amounts available under the credit facility at November 2,
1996, totaled approximately $6,580,000.
During the first nine months of fiscal 1996 and 1995, capital expenditures were
approximately $609,000 and $2,565,000, respectively. The following table sets
forth the major categories of capital expenditures for both periods.
<TABLE>
<CAPTION>
TOTAL CAPITAL EXPENDITURES
(IN THOUSANDS)
FIRST NINE MONTHS
--------------------------
1996 1995
---- ------
<S> <C> <C>
Stores $409 $2,309
Distribution Center 63 102
Computer Operations 112 82
All Other 25 72
---- ------
TOTAL $609 $2,565
==== ======
</TABLE>
The Company plans to spend approximately $1.0 million for capital expenditures
in fiscal year 1996, an amount within the Company's cumulative capital
expenditure covenant under the Company's financing agreement. Of this amount,
$0.5 million has been allocated for one new store (opened during March, 1996)
with the balance relating to existing stores, the Distribution Center and the
computer operations. The Company's policy is to negotiate leases wherein the
landlord makes the leasehold improvements. Accordingly, the Company's capital
expenditures to open a store are composed primarily of fixturing at a cost of
approximately $350,000. In addition, new stores typically require an inventory
investment of approximately $1,400,000 which is largely financed by accounts
payable.
The Company had long-term debt and obligations under capital leases of
approximately $13,451,000 at November 2, 1996, and $14,795,000 at February 3,
1996. The Company's ability to satisfy scheduled principal and interest
payments under such obligations is dependent on its cash flow and existing
credit facility.
Page 12 of 19
<PAGE> 13
The Company recognizes that it has a high level of indebtedness,
primarily in the form of line of credit borrowings, creditor debt and capital
lease obligations. Management is closely monitoring liquidity in light of the
decrease in comparable store sales and higher outstanding borrowings on its
line of credit. The following are among the liquidity initiatives being
undertaken. Sales, inventory purchases, expenses and other items impacting
liquidity are being closely managed to assure that adequate liquidity for
operations is maintained. In the prior quarter, the Company negotiated an
expansion of its credit facility which increased available credit by
approximately $3,000,000. The Company continues to evaluate other operating
line options which would further expand its available credit. The Company is
also pursuing the sale of owned real properties to provide additional
liquidity. The Company has also had favorable conversations with its
Creditors' Committee and anticipates that shortly it will finalize agreements
with that Committee regarding deferral of the creditor payment due at the end of
Fiscal Year 1996. Management believes that with its present operating plan
and continued focus on liquidity, cash flow from operations and the expanded
credit facility will be sufficient to fund capital expenditures, working
capital requirements (including prepayments to vendors not extending terms),
deferred creditor payments and long-term debt payments.
Management does not believe that its agreement to keep its property free of
certain liens and not to make certain prohibited investments will adversely
affect its liquidity or capital resources.
SEASONALITY AND INFLATION
The company's business is seasonal, with the back-to-school season (July and
August) historically contributing approximately 17% of annual sales and the
Christmas season (November and December) accounting for approximately 28% of
annual sales. Sales and income are also affected by the timing of new store
openings. Although the Company's operations are influenced by general economic
conditions and inflationary pressures, the Company does not believe that
inflation has had a material effect on operations during the past 3 - 5 years.
Page 13 of 19
<PAGE> 14
PART II - OTHER INFORMATION
Items 1 - 4.
- ------------
There are no items to report.
Item 5. - Other Information
- ---------------------------
The Series B Option Common Stock is subject to an option to purchase
exercisable by the Company or the Trustee of the R.G. Stock Trust in 1998
(the "Option"). The Option is noted upon the face of the Series B Option
Common Stock certificates. If the Option is exercised, the holder or
holders of shares must sell them for a price equal to the fair value of
the shares, as determined by an independent appraisal on February 2,
1998, less any payments of Excess Cash Balance (as defined in the Plan)
that have been made to creditors entitled to payment under the Plan
("Creditors"). Holders of the Series B Option Common Stock will not
have any rights of appraisal similar to dissenters' rights if they
dispute the market value as determined by the independent appraisal.
Payments of Excess Cash Balance would result in shareholders having to
sell their shares for less than fair market value. Holders of Series B
Option Common Stock should note that the Excess Cash Balance paid to the
Creditors, if any, shall be credited against, and shall reduce the
exercise price for, the option whether or not the holder of any shares of
Series B Option Common Stock with respect to which the option is
exercised received such Excess Cash Balance.
Although with respect to the Company's Fiscal Years ended January 29,
1994, and January 28, 1995, the Company made Excess Cash Balance payments
of $1,444,613 and $1,832,611, respectively, to Creditors, the Company's
cash position during Fiscal Year 1995 was such that all of the prior
Excess Cash Balance payments were utilized to make a portion of the $5.5
million minimum payment to creditors required for the Fiscal Year ended
February 3, 1996. Therefore, if the Option were exercised at this date,
the Excess Cash Balance payments would result in no reduction from fair
market value in the Option exercise price. Additional payments of Excess
Cash Balance may be created in the next two Fiscal Years which may reduce
the Option exercise price. For any given Fiscal Year, the Excess Cash
Balance is the excess of the Company's actual year-end cash balance over
the Cumulative Plan Cash Balance for that year. The cumulative total of
the Excess Cash Balance will be reported in the Company's annual and
quarterly financial reports.
Page 14 of 19
<PAGE> 15
PART II - OTHER INFORMATION (CONTINUED)
-----------------------------------------------
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
There are no items to report.
Page 15 of 19
<PAGE> 16
PART II - OTHER INFORMATION
-----------------------------------
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.
RICHMAN GORDMAN 1/2 PRICE
STORES, INC.
Date: 12/17/96 By: /s/ Jeffrey J. Gordman
------------------------- -----------------------------------------
Jeffrey J. Gordman, President and
Chief Executive Officer
Date: 12/17/96 By: /s/ Roger R. Faust
------------------------- -----------------------------------------
Roger R. Faust, Senior Vice President,
Chief Financial Officer, Secretary and
Treasurer
Page 16 of 19
<PAGE> 17
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
(27) Financial Data Schedule 19 - 20
Page 17 of 19
<TABLE> <S> <C>
<ARTICLE> 5
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