UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1997
----------------
or
[ ] 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 0-1308
------------
STRAWBRIDGE & CLOTHIER
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1131660
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 Market Street
Philadelphia, Pennsylvania 19107-3199
---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 629-6460
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
----------------------------- ----------------------------
Securities registered pursuant to Section 12(g) of the Act:
Series A Common Stock, par value $1 per share
-------------------------------------------------
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. YES / X / NO / /
The aggregate market value of the Series A Common Stock and the Series B
Common Stock, par value $1 per share, of the registrant held by
nonaffiliates of the registrant as of April 30, 1997 was
$154,158,584.
The number of shares of Series A Common Stock, par value $1 per share,
of the registrant outstanding at April 30, 1997 was 10,602,196. The
number of shares of Series B Common Stock, par value $1 per share, of
the registrant outstanding at April 30, 1997 was 33,988.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the 1996 Annual Report to shareholders are incorporated by
reference in Part II.
<PAGE>
PART I
------
Item 1. Business.
---------
Strawbridge & Clothier (the "Company") is a Pennsylvania
corporation. Prior to July 18, 1996, the Company operated 13 department
stores under the Strawbridge & Clothier name, 26 discount stores under
the Clover name in Pennsylvania, New Jersey and Delaware, and one Home
Furnishings store in northern Delaware. The Company is the successor to
a business begun in 1868.
On April 4, 1996, the Board of Directors of the Company adopted
a resolution providing for the voluntary dissolution of the Company in
accordance with a Plan of Reorganization and Liquidation (the "Plan of
Liquidation") to be effected pursuant to the asset disposition
transactions described below. The shareholders of the Company approved
the voluntary dissolution of the Company in accordance with the Plan of
Liquidation on July 15, 1996.
On July 18, 1996, the Company completed the closing pursuant to
an asset purchase agreement with The May Department Stores Company
("May") for the sale of substantially all of the assets of the Company's
Department Store Division in exchange for May stock and the assumption
by May of certain Department Store Division liabilities. The Company
received a total of 4,454,229 shares of May common stock in accordance
with the agreement.
On August 28, 1996, the Company completed the sale of 23 of the
Company's 26 Clover stores to Kimco Realty Corporation ("Kimco"), Kohl's
Department Stores, Inc. ("Kohl's"), VC Retailers, Inc., and National
Wholesale Liquidators of Philadelphia, Inc. for approximately $35.5
million. At closing, approximately $12.0 million of the Company's
applicable mortgage notes, accrued interest, and closing costs were
paid, and the Company received approximately $19.0 million in cash. An
additional approximately $4.5 million was placed into a claims
administration trust account.
On July 10, 1996, the Company entered into agreements with
Gordon Brothers Partners, Inc. ("Gordon Brothers") for the sale of the
inventory of all, and the operation of certain, Clover stores. In
connection with the inventory sale, the Company received approximately
$63.4 million in proceeds. The agreements also authorized Gordon
Brothers to liquidate the Clover fixtures. Proceeds from such fixture
sales occurring thus far have been remitted to the Company, net of
deduction of compensation payable to Gordon Brothers.
From August 4, 1996 through February 1, 1997, the Company,
through an operating agreement with Gordon Brothers, operated three
Clover stores located in Penrose Plaza, Mercerville and Shore Mall,
which were not sold as part of the Kimco and Kohl's transaction referred
to above. On January 2, 1997, the Company repurchased the remaining
inventory and resumed responsibility for ongoing operations. The
Company completed sale of the Penrose Plaza store in February 1997, and
closed the store on May 1, 1997 after a liquidation sale. The Company
is continuing to operate the Clover stores at Mercerville and Shore Mall
and is trying to line up substitute tenants or make other arrangements
for these two remaining stores. Gordon Brothers is continuing the
operating management of these stores under its agreement with the
Company. The Company has commenced a going out of business sale at
Mercerville.
As of May 1, 1997, the Company had 118 full time employees.
The Company is in the process of completing the voluntary
dissolution of the Company pursuant to the Plan of Reorganization and
Liquidation. The Company is disposing of certain of its remaining
assets and satisfying remaining liabilities and is continuing to operate
its Clover stores at Mercerville and Shore Mall. As a final step in the
liquidation, the Company will transfer any remaining assets, including
a portion of its May shares, to a liquidating
1
<PAGE>
trust. Such transfer to the liquidating trust will occur by July
18, 1997. The liquidating trust will succeed to all of the then
remaining assets of the Company including a portion of its May shares as
a contingency reserve, and any liabilities of the Company. The sole
purpose of the liquidating trust will be to liquidate on terms
satisfactory to the liquidating trustees and to distribute any assets in
the trust after paying any remaining liabilities. The shareholders of
the Company at the time of the establishment of the liquidating trust
will be the beneficiaries of any distributions from the liquidating
trust. The liquidating trust will terminate upon the complete
distribution of the liquidating trust's assets.
The Company intends to make a substantial initial partial
distribution of May shares to its shareholders on or before the time of
the transfer of any remaining assets to a liquidating trust, which will
occur by July 18, 1997. A final distribution of remaining May shares,
if any, will be made at the termination of the liquidating trust, which
is estimated to occur by July 1999.
Item 2. Properties.
-----------
As of May 1, 1997, the Company continues to lease two Clover
store properties at Mercerville in Mercer County, New Jersey and at
Shore Mall in Atlantic County, New Jersey, each of which is
approximately 86,000 square feet. The Company also owns 85.5 acres of
undeveloped land in Hopewell Township, New Jersey.
Item 3. Legal Proceedings.
------------------
In connection with its voluntary dissolution, the Company, as
required by Pennsylvania Business Corporation Law ("PBCL"), notified all
known entities having claims against the Company and also served public
notice of its planned dissolution. These notices requested entities to
provide sufficient detail to enable the Company to evaluate the
substance of any claims against the Company. To the extent the Company
rejected any claims in accordance with PBCL, such claim is permanently
barred unless the claimant whose claim was rejected had commenced an
action within 90 days of the Company's mailing of the rejection notice.
The Company has been named as a defendant in several actions
related to its dissolution. In one of those actions, the Company's
Directors were also named as defendants. In another action, the
plaintiffs seek to enjoin the distribution of May shares to the Company
s shareholders. While management believes that these actions are
without merit and that adequate accruals have been established in the
accompanying consolidated financial statements to provide for any costs
that may be incurred with respect to these contingencies, there can be
no assurance as to the time of payment or that the ultimate settlement
of these claims will not be higher or lower than the amounts recorded.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
This item is not applicable because there were no matters
submitted to a vote of security holders during the fourth quarter of
fiscal year 1996.
Executive Officers of the Registrant.
- -------------------------------------
Office
Held
Name Age Office(1) Since(2)
- ---- --- --------- --------
Francis R. Strawbridge, III(3) 59 Chairman of the Board 1984
Peter S. Strawbridge(3) 58 President 1979
Warren W. White 65 Executive Vice President 1979
2
<PAGE>
Office
Held
Name Age Office(1) Since(2)
- ---- --- --------- --------
Steven L. Strawbridge(3) 53 Vice President, Treasurer and
Secretary 1982
Ronald B. Avellino 58 Vice President 1987
Alexander B. Jervis 53 Vice President 1992
Thomas S. Rittenhouse 55 Vice President 1978
David W. Strawbridge(3) 57 Vice President 1978
__________
(1) Each executive officer has been employed by the Company as
an executive officer for at least the past five years.
(2) The executive officers of the Company are elected annually
to hold office until the annual organization meeting of the Board of
Directors and until their respective successors shall have been duly
elected and qualified.
(3) Peter S. Strawbridge and Steven L. Strawbridge are brothers
and are first cousins of Francis R. Strawbridge, III and David W.
Strawbridge, who also are brothers.
3
<PAGE>
PART II
-------
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
-----------------------------------------------------
The Company's Series A Common Stock is traded on the Nasdaq
National Market. There is no trading market for Series B Common Stock
but it is readily convertible at any time into Series A Common Stock on
a share-for-share basis. The following table indicates the range of
high and low price quotations for the Series A Common Stock by quarter
during the last two fiscal years, as obtained through Nasdaq and the
quarterly cash dividends per common share.
Cash Dividends Per Share
-----------------------------
Range of High and Low
Price Quotations Series A Series B
------------------------------ -------------- ------------
Fiscal
Quarter 1996 1995 1996 1995 1996 1995
- --------
First. . $17.75 $28.25 $19.00 $22.75 $0.275 $0.275 $0.25 $0.25
Second . 15.25 18.75 18.50 21.50 0.275 0.275 0.25 0.25
Third. . 16.75 20.88 14.13 19.75 0.275 0.275 0.25 0.25
Fourth . 14.50 17.75 18.00 25.25 - 0.275 - 0.25
Item 6. Selected Financial Data.
------------------------
The following table sets forth, for the periods and dates
indicated, selected financial data derived from the financial statements
of the Company. This data should be read in conjunction with the
financial statements of the Company and related notes thereto and
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
4
<PAGE>
<TABLE>
<CAPTION>
FIVE-YEAR FINANCIAL SUMMARY
(amounts in thousands, except per share data)
1996(1) 1995(2) 1994 1993 1992
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net Sales ..............$392,714 $980,598 $1,003,524 $984,615 $967,794
Cost of Sales .......... 316,813 746,473 745,251 733,901 718,582
Interest Expense ....... 7,917 18,964 19,551 20,909 21,446
Earnings (Loss) Before
Income Taxes and
Cumulative
Effect of Accounting
Changes................ (67,684) (13,285) 30,090 26,829 27,189
Income Taxes (Benefit).. (19,210) (4,498) 10,058 9,102 9,169
Earnings (Loss) Before
Cumulative Effect of
Accounting Changes..... (48,474) (8,787) 20,032 17,727 18,020
Net Earnings (Loss)..... (48,474) (8,787) 20,032 17,727 1,170(4)
OTHER OPERATING DATA
Depreciation............$ 14,798 $ 31,300 $ 29,587 $ 28,829 $ 28,322
DIVIDENDS
Cash Dividends on
Common Stock...........$ 8,655 $ 11,295 $ 11,147 $ 10,963 $ 10,502
Stock Dividends on
Common Stock........... -- -- -- 3% 3%
PER SHARE OF COMMON STOCK(3)
Earnings (Loss) Before
Cumulative Effect of
of Accounting Changes..$ (4.56) $ (.83) $ 1.92 $ 1.71 $ 1.76
Net Earnings (Loss)..... (4.56) (.83) 1.92 1.71 .11(4)
Cash Dividends on
Series A Common Stock.. .83 1.10 1.10 1.09 1.07
Cash Dividends on
Series B Common Stock.. .75 1.00 1.00 .99 .96
Book Value.............. 16.51 23.09 25.08 24.28 23.68
</TABLE>
- ------------
(1) Operating results, other operating data and earnings per share
reflect amounts for the 26 week period through August 3, 1996, the
close of the Company's second fiscal quarter, the date on which the
Company began reporting on the liquidation basis of accounting. Cash
dividends, cash dividends per share, book value and financial data are
as of or for the year ended February 1, 1997.
(2) 53-week fiscal year.
(3) Weighted average shares outstanding were: 1996--10,619; 1995--10,531;
1994--10,426; 1993--10,324; 1992--10,216.
(4) Includes cumulative effect adjustments relating to accounting changes
for income taxes ($9,750 benefit; $.95 per share) and retiree health
care benefits ($26,600 charge; $2.60 per share) and reduced cost of
sales of $3,948 as a result of a change in LIFO accounting method,
resulting in an after-tax benefit of $2,606 or $.26 per share.
5
<PAGE>
FINANCIAL DATA
Working Capital.........$ N/A $119,532 $ 201,464 $209,581 $212,514
Property, Fixtures and
Equipment--Net......... 5,075 329,392 308,161 300,368 307,158
Total Assets............ 239,091 575,814 639,792 663,052 653,939
Long-Term Debt.......... N/A 129,358 161,442 162,254 171,617
Capital Lease
Obligations............ 1,931 35,739 40,848 43,554 52,030
Redeemable Preferred
Stock.................. -- -- 116 296 474
Shareholders' Equity.... N/A 245,059 262,352 252,202 242,839
Net Assets in
Liquidation............ 175,639 -- -- -- --
Number of Common
Shares Outstanding..... 10,636 10,614 10,462 10,386 9,957
Square Feet of
Store Space............ 255 6,007 5,744 5,744 5,744
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
---------------------------------------------------------------
The information appearing in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" from the portions of the Company's 1996 Annual Report to
Shareholders filed as Exhibit 13 to this Form 10-K is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
--------------------------------------------
The information appearing in the sections captioned "Report of
Ernst & Young LLP, Independent Auditors", "Consolidated Statement of Net
Assets in Liquidation," "Consolidated Statement of Changes in Net Assets
in Liquidation," "Consolidated Balance Sheet," "Consolidated Statements
of Shareholders' Equity," "Consolidated Statements of Operations,"
"Consolidated Statements of Cash Flows" and "Notes to Consolidated
Financial Statements," from the portions of the Company's 1996 Annual
Report to shareholders filed as Exhibit 13 to this Form 10-K is
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------------------------------------------------
This item is not applicable.
6
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
Directors of the Registrant
- ---------------------------
DIRECTOR
NAME PRINCIPAL OCCUPATION AGE SINCE
- ----------------------------- -------------------------------- --- --------
Jennifer S. Braxton ......... Retired ........................ 34 1994
Isaac H. Clothier, IV ....... Attorney ....................... 64 1975
Thomas B. Harvey, Jr. ....... Attorney ....................... 61 1988
Paul E. Shipley ............. Retired ........................ 67 1988
David W. Strawbridge ........ Vice President.................. 57 1971
Francis R. Strawbridge, III.. Chairman of the Board .......... 59 1968
Peter S. Strawbridge ........ President ...................... 58 1968
Steven L. Strawbridge ....... Vice President, Treasurer and
Secretary ................... 53 1975
Natalie B. Weintraub ........ Retired ........................ 68 1994
Warren W. White ............. Executive Vice President ....... 65 1981
Each of the directors indicated above as being employed by the
Company has been so employed during the past five years. Ms. Braxton
was an Assistant Advertising Director for more than five years before
July 1996. Mr. Harvey is an attorney and has been in practice since
1963. Until her retirement from the Company in 1994, Mrs. Weintraub was
Vice President and General Merchandise Manager, Department Stores since
1976. Mr. Clothier has been a partner of Dechert, Price & Rhoads since
1966. Mr. Shipley retired in 1993 as a Vice President of Wilmington
Trust Company, where he was employed since 1972, and he continues to be
active in civic and community affairs.
Peter S. Strawbridge and Steven L. Strawbridge are brothers and
are first cousins of Francis R. Strawbridge, III and David W.
Strawbridge who also are brothers. Each is a first cousin of Mr. Harvey
and Mr. Shipley who also are first cousins. Jennifer S. Braxton is the
daughter of Peter S. Strawbridge and the niece of Steven L. Strawbridge.
Francis R. Strawbridge, III is a director of Mellon PSFS.
Peter S. Strawbridge is a director of CoreStates Financial Corp.
The required information as to executive officers is set forth
in Part I hereof and incorporated herein by reference.
7
<PAGE>
Item 11. Executive Compensation.
-----------------------
The following table sets forth certain information concerning
compensation paid for the Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-
TERM
COMPEN-
ANNUAL COMPENSATION SATION
----------------------------- -------
SECUR-
OTHER ITIES ALL
ANNUAL UNDER- OTHER
NAME AND COMPEN- LYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION OPTIONS SATION(1)
- ---------------------------- ---- -------- ----- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Peter S. Strawbridge........ 1996 $340,000 $0 $0 0 $21,500
President and Co-Chief 1995 $340,000 $0 $0 0 $ 1,219
Executive Officer 1994 $310,000 $0 $0 0 $ 1,780
Francis R. Strawbridge, III. 1996 $340,000 $0 $0 0 $52,000
Chairman of the Board 1995 $340,000 $0 $0 0 $ 1,108
and Co-Chief Executive 1994 $300,000 $0 $0 0 $ 1,892
Officer
Thomas S. Rittenhouse....... 1996 $190,000 $134,000(2) $0 0 $33,049
Vice President 1995 $180,000 $0 $0 0 $ N/A
1994 $170,000 $0 $0 0 $ N/A
Warren W. White............. 1996 $300,000 $0 $0 0 $18,075
Executive Vice President 1995 $300,000 $0 $0 0 $ 921
1994 $275,000 $0 $0 0 $ 2,079
Robert G. Muskas(3)......... 1996 $205,000 $0 $0 0 $ 1,281
Executive Vice President 1995 $192,500 $0 $0 0 $ 1,000
1994 $180,000 $0 $0 0 $ 2,000
</TABLE>
- ------------
(1) Amounts contributed or accrued by the Company under the
Company's 401(k) Retirement Savings Plan, which was terminated in June
1996, except for 1996 amounts paid for accrued vacation to P.S.
Strawbridge ($19,800), F.R. Strawbridge ($50,300), T.S. Rittenhouse
($31,400) and W.W. White ($16,200).
(2) Amount paid as wind down bonus for services during
dissolution of the Company.
(3) Ceased being an executive officer in July 1996.
EMPLOYMENT AGREEMENTS AND CONSULTING ARRANGEMENT
Each of the eight remaining executive officers of the Company
has an employment contract with the Company terminable by either party
triannually, which establishes the employee's basic annual rate of
compensation, subject to periodic increases and bonuses.
8
<PAGE>
STOCK OPTIONS
There were no stock options granted in fiscal year 1996 to the
executive officers named in the Summary Compensation Table.
Set forth in the table below is information concerning stock
options exercised during the fiscal year ended February 1, 1997 and the
value of stock options held at the end of the fiscal year ended February
1, 1997 by executive officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END
-------------------- --------------------
SHARES
ACQUIRED ON VALUE EXERCIS- UNEXERCIS- EXERCIS- UNEXERCIS-
NAME EXERCISE REALIZED ABLE ABLE ABLE ABLE
- ---- ----------- -------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Peter S. Strawbridge 0 $0 21,218 0 $0 N/A
Francis R. Strawbridge, III 0 0 21,218 0 0 N/A
Thomas S. Rittenhouse 0 0 5,304 0 0 N/A
Warren W. White 0 0 10,609 0 0 N/A
Robert G. Muskas 0 0 8,401 0 0 N/A
</TABLE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
The following table sets forth the shareholdings as of April
30, 1997 of persons owning beneficially more than 5% of the outstanding
shares of Series A Common Stock of the Company, the directors, certain
executive officers and all executive officers and directors as a group.
9
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OWNED BENEFICIALLY
----------------------------------------------
SERIES A
COMMON STOCK
----------------------------------------------
SOLE SHARED PERCENT
VOTING VOTING OF
AND OR SERIES A
INVESTMENT INVESTMENT COMMON
NAME OF BENEFICIAL OWNER POWER POWER TOTAL STOCK(1)
- ------------------------ ---------- ---------- ------- ---------
<S> <C> <C> <C> <C>
MORE THAN 5% HOLDERS
(3)(4)
Estate of G. Stockton Strawbridge... 64,648 655,638 720,286 6.8%
c/o Francis J. Mirabello
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
(3)(6)
PNC Bank, National.................. 56,448 862,941 919,389 8.7
Association(5)
Broad and Chestnut Streets
Philadelphia, PA 19101
Farallon Partners, L.L.C.(7)........ 2,327,700 2,327,700 22.0
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(3)
Peter S. Strawbridge................ 18,233 659,453 677,686 6.4
8060 Goshen Road
Newtown Square, PA 19073
DIRECTORS
Jennifer S. Braxton................. 102 102
(6)
Isaac H. Clothier, IV...............116,180 109,076 225,256 7.1
(8)
Thomas B. Harvey, Jr. .............. 30,292 136,000 166,292 1.6
(2)
Paul E. Shipley..................... 79,307 211,557 290,864 2.11
David W. Strawbridge................ 29,908 29,908
(8)
Francis R. Strawbridge, III......... 33,946 219,701 253,647 2.4
(3)
Peter S. Strawbridge ............... 18,233 659,453 677,686 6.4
(2)
Steven L. Strawbridge .............. 22,860 211,001 233,861
Natalie B. Weintraub................ 1,896 1,896
Warren W. White..................... 7,288 7,288
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTAIN EXECUTIVE OFFICERS
Robert G. Muskas.................... 1,497 1,497
Thomas S. Rittenhouse............... 2,521 2,521
All executive officers and
directors as a group
(13 persons).....................365,784 1,209,787 1,575,571 14.9
</TABLE>
(1) Percentages of less than 1% are not shown. There were 10,602,196
shares of Series A Common Stock outstanding on April 30, 1997.
(2) Includes 211,001 shares as to which P.E. Shipley and S.L.
Strawbridge share voting and investment power.
(3) Includes 655,441 shares as to which the estate of G.S. Strawbridge,
P.S. Strawbridge and PNC Bank, National Association share voting
and investment power.
(5) The information relating to this person is presented in reliance
upon information set forth in a Schedule 13G filed with the
Securities and Exchange Commission reporting as of December 31,
1996. Does not include any shares held by the bank in purely
custodial accounts.
(6) Includes 94,302 shares as to which I.H. Clothier, IV and PNC Bank,
National Association share voting and investment power.
(7) The information relating to this person is presented in reliance
upon information set forth in a Schedule 13D filed with the
Securities and Exchange Commission reporting as of April 29, 1997.
Includes shares owned beneficially by the following: Farallon
Capital Partners, L.P., Farallon Capital Institutional Partners,
L.P., Farallon Capital Institutional Partners II, L.P., Farallon
Capital Institutional Partners III, L.P., Tinicum Partners, L.P.,
Farallon Capital Management, L.L.C., Farallon Capital Partners,
L.L.C., Enrique H. Boilini, David I. Cohen, Joseph F. Downes, Fleur
E. Fairman, Jason M. Fish, Andrew B. Fremder, William F. Mellin,
Stephen L. Millham, Meridee A. Moore and Thomas F. Steyer.
(8) Includes 136,000 shares as to which F.R. Strawbridge, III and T.B.
Harvey, Jr. share voting and investment power with another
co-trustee.
The numbers shown exclude shares of Series A Common Stock which the
individual or members of the group have the right to acquire within 60
days upon the exercise of stock options, as follows: F.R. Strawbridge,
III, 21,218 shares; S.L. Strawbridge, 10,609 shares; D.W. Strawbridge,
10,609 shares; P.S. Strawbridge, 21,218 shares; W.W. White, 10,609
shares; R.G. Muskas, 8,401 shares; T.S. Rittenhouse, 5,304 shares; and
all executive officers and directors as a group (13 persons) a total of
95,527 shares. In computing the percent of each series owned by an
individual or the group, the number of shares subject to options held by
the individual or the group are deemed outstanding.
11
<PAGE>
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
----------------------------------------------------------------
(a) All financial statements and schedules.
---------------------------------------
A list of the financial statements and supporting schedule
included in this Report appears on page F-1 hereof.
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed during the last
fiscal quarter of the fiscal year covered by this Report.
(c) Exhibits.
---------
(2.1) Asset Purchase Agreement, dated April 4, 1996, between the
Company and The May Department Stores Company, as filed
as Exhibit 2.1 to Form 10-K for the fiscal year ended
February 3, 1996, is incorporated herein by reference.
(2.2) Plan of Reorganization and Liquidation of Strawbridge &
Clothier, as filed as Exhibit 2.1 to Form S-4 No.
333-05527 of The May Department Stores Company, is
incorporated herein by reference.
(2.3) Asset Purchase Agreement, dated May 3, 1996, between the
Company and Kimco Realty Corporation, as filed as Exhibit
2.3 to Form S-4 No. 333-05527 of The May Department
Stores Company, is incorporated herein by reference.
(3)(i) Restated Articles of the Company filed on July 28, 1995
with the Department of State of the Commonwealth of
Pennsylvania, as filed as Exhibit 3(i) to Form 10-K for
the fiscal year ended February 3, 1996, are incorporated
herein by reference.
(ii) By-Laws, effective October 1, 1989, as filed as Exhibit 3(b)
to Form 10-K for the fiscal year ended February 3, 1990,
are incorporated herein by reference.
(10.1) 1991 Stock Option Plan of Strawbridge & Clothier, as filed
as Exhibit 10(c) to Form 10-K for the fiscal year ended
February 1, 1992, is incorporated herein by
reference.(**)
(10.2) Form of Employment Agreement for executive officers of the
Company as filed as Exhibit 10.4.1 to Form 10-K for the
fiscal year ended January 30, 1993, is incorporated
herein by reference.(**)
(10.3) Form of Supplemental Agreement for the executive officers
of the Company, as filed as Exhibit 10.4.3 to Form 10-K
for the fiscal year ended February 3, 1996, is
incorporated herein by reference.(**)
12
<PAGE>
(10.4) Form of Supplemental Employment Agreement to Employment
Agreement for the executive officers of the Company, as
filed as Exhibit 10.4.4 to Form 10-K for the fiscal year
ended February 3, 1996, is incorporated herein by
reference.(**)
(10.5) Strawbridge & Clothier Separation Pay Plan dated as of
February 26, 1996, as filed as Exhibit 10.4.5 to Form
10-K for the fiscal year ended February 3, 1996, is
incorporated herein by reference.(**)
(13) Portions of the 1996 Annual Report to Shareholders, included
as part of this Report.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
- ------------
(**) Management contract or compensatory plan or arrangement required to be
filed or incorporated by reference as an exhibit.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
STRAWBRIDGE & CLOTHIER
(Registrant)
By /s/Francis R. Strawbridge, III
------------------------------
Francis R. Strawbridge, III
Chairman of the Board
Dated: May 19, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
/s/Francis R. Strawbridge, III May 19, 1997
- ---------------------------------------------
Francis R. Strawbridge, III
Director and Chairman of the Board (co-
principal executive officer)
/s/Peter S. Strawbridge May 19, 1997
- ---------------------------------------------
Peter S. Strawbridge
Director and President
(co-principal executive officer)
/s/Warren W. White May 19, 1997
- ---------------------------------------------
Warren W. White
Director
/s/Steven L. Strawbridge May 19, 1997
- ---------------------------------------------
Steven L. Strawbridge
Director
/s/David W. Strawbridge May 19, 1997
- ---------------------------------------------
David W. Strawbridge
Director
/s/Thomas S. Rittenhouse May 19, 1997
- ---------------------------------------------
Thomas S. Rittenhouse
Vice President
(principal financial and
accounting officer)
S-1
<PAGE>
/s/Jennifer S. Braxton May 19, 1997
- ---------------------------------------------
Jennifer S. Braxton
Director
/s/Isaac H. Clothier, IV May 19, 1997
- ---------------------------------------------
Isaac H. Clothier, IV
Director
/s/Thomas B. Harvey, Jr. May 19, 1997
- ---------------------------------------------
Thomas B. Harvey, Jr.
Director
/s/Paul E. Shipley May 19, 1997
- ---------------------------------------------
Paul E. Shipley
Director
/s/Natalie B. Weintraub May 19, 1997
- ---------------------------------------------
Natalie B. Weintraub
Director
S-2
<PAGE>
FORM 10-K -- ITEM 14(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
STRAWBRIDGE & CLOTHIER
The following consolidated financial statements of Strawbridge &
Clothier and subsidiaries and the report of independent auditors
thereon, included in the 1996 Annual Report to Shareholders, are
incorporated by reference in Item 8:
Consolidated Statement of Net Assets in Liquidation - February 1,
1997.
Consolidated Statement of Changes in Net Assets in Liquidation
- August 4, 1996 through February 1, 1997.
Consolidated Balance Sheet - February 3, 1996.
Consolidated Statements of Shareholders' Equity - February 4,
1996 through August 3, 1996 and Fiscal years ended February 3,
1996, and January 28, 1995.
Consolidated Statements of Operations - February 4, 1996
through August 3, 1996 and Fiscal years ended February 3, 1996,
and January 28, 1995.
Consolidated Statements of Cash Flows - February 4, 1996
through August 3, 1996 and Fiscal years ended February 3, 1996,
and January 28, 1995.
Notes to Consolidated Financial Statements
The following consolidated financial statement schedule of Strawbridge &
Clothier and subsidiaries is included herein:
Schedule II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
F-1
<PAGE>
Exhibit Index
-------------
Exhibit No. Page No.
- ----------- --------
(13) Portions of the 1996 Annual Report to Shareholders,
included as part of this Report.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
<PAGE>
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
- ------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------
| | ADDITIONS | |
| |------------------------| |
| |(1) Charged |(2) Charged| |
| Balance at |to Costs |to Other | |Balance
| Beginning |and |Accounts - | Deductions |at End of
DESCRIPTION | of Period |Expenses |Describe | - Describe |Period
- ------------------------------------------------------------------------------
February 4, 1996
to August 3, 1996:
- ------------------
Reserves and
allowances
deducted from
asset accounts:
Allowance for
doubtful accounts $1,940 $ 4,865 $ -0- $ 6,805(1)(4) $ -0-
====== ======= ====== ======== ======
Fiscal year ended
February 3, 1996:
- -----------------
Reserves and
allowances de-
ducted from asset
accounts:
Allowance for
doubtful accounts $5,544 $14,177 $ -0- $17,781(1)(2) $1,940
====== ======= ====== ======== ======
Fiscal year ended
January 28, 1995:
- -----------------
Reserves and
allowances de-
ducted from asset
accounts:
Allowance for
doubtful accounts $5,000 $10,281 $ -0- $ 9,737(1)(3) $5,544
====== ======= ====== ======== ======
(1) Accounts written off during year, net of recoveries.
(2) Includes $7,560 reclassified to accrued expenses to provide for
estimated recourse obligations on accounts receivable sold.
(3) Includes $1,756 reclassified to accrued expenses to provide for
estimated recourse obligations on accounts receivable sold.
(4) Elimination of reserve in connection with Plan of Reorganization and
Liquidation and related sale of accounts receivable to the May
Department Stores Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
On April 4, 1996, the Board of Directors of the Company adopted a
resolution providing for the voluntary dissolution of the Company in
accordance with a Plan of Reorganization and Liquidation (the "Plan of
Liquidation") to be effected pursuant to the asset disposition involving
certain transactions with The May Department Stores Company ("May") and
Kimco Realty Corporation ("KIMCO") . The shareholders of the Company
approved the voluntary dissolution of the Company in accordance with the
Plan of Liquidation on July 15, 1996.
RESULTS OF OPERATIONS
- ---------------------
As a result of the May and KIMCO agreements (See Notes 1 and 2 to the
accompanying consolidated financial statements) and the related planned
dissolution of the Company, the Company's going concern operations
ceased on July 15, 1996, and the Company began reporting on the
liquidation basis of accounting as of the close of its second fiscal
quarter. Accordingly, the financial statements for the fiscal year
ended February 1, 1997 reflect operating activity only through August 3,
1996.
Sales for the 26 week operating period in fiscal 1996 were $392,714,000,
a decrease of 60.0% from sales of $980,598,000 in fiscal 1995, a 53 week
year. Fiscal 1995 sales had decreased 2.3% from sales of $1,003,524,000
in fiscal 1994, a 52 week year. The vast majority of the decrease
between fiscal 1996 and 1995 is the result of the July 15, 1996
termination of the Company's going concern operations. Comparable
period net sales for the department stores through July 15, 1996 and for
the Clover stores through July 10, 1996 declined 5.9%, while comparable
store sales declined 7.0% during the same period.
The net loss for the 26 week operating period in fiscal 1996 was
$48,474,000 compared to a net loss for fiscal 1995 of $8,787,000 and net
earnings for fiscal 1994 of $20,032,000. The 1996 result can be
attributed to a $34,686,000 net adjustment to the liquidation basis of
accounting, as well as the decrease in sales and significantly greater
markdowns as a result of the May and KIMCO transactions. Fiscal 1995
earnings decreased from fiscal 1994 as a result of the decreased sales
and increased markdowns taken to clear seasonal inventory.
Other income and deductions was $2,915,000 for the 26 week operating
period in fiscal 1996 compared to $6,238,000 in fiscal 1995 and
$3,265,000 in fiscal 1994. Fiscal 1995 included a $6,556,000 gain on
the curtailment of the Company's pension plan and a $2,920,000 expense
incurred in connection with the attempt to acquire six John Wanamaker
stores.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
- ---------------------------------------------------------
Costs and expenses as a percentage of sales and the effective tax rates
were as follows:
FISCAL PERIODS ENDED
--------------------------------------
8/3/96 2/3/96 1/28/95
(26 weeks) (53 weeks) (52 weeks)
---------- ---------- ----------
Cost of sales, including occupancy
and buying costs .................. 80.7 76.1 74.3
Selling and administrative expenses,
net of finance charges .............. 21.4 19.3 17.1
Depreciation ........................ 3.8 3.2 2.9
Interest ............................ 2.0 1.9 1.9
Provision for doubtful accounts...... 1.2 1.4 1.0
Effective tax rate (benefit) ........ (28.4) (33.9) 33.4
Cost of sales, including occupancy and buying costs, for the fiscal 1996
operating period reflect significantly greater markdowns as a result of
the May and KIMCO transactions. Selling and administrative expenses,
net of finance charge income reflect an increase due to new stores
opened in fiscal 1995 and a reduction in finance charge income due to
the sale of customer accounts receivable. Depreciation expense
increased due to new stores opened in fiscal 1995. The effective tax
rate for fiscal 1996 decreased since only benefits available through the
utilization of net operating loss carrybacks were recognized.
In connection with the Company's change to the liquidation basis of
accounting as of August 3, 1996, assets have been valued at estimated
net realizable values and liabilities have been reflected at their
estimated settlement amounts, including estimated costs to be incurred
during the period of liquidation. The Company has recorded an
adjustment to liquidation basis of $34,686,000 which consists of (i)
gain on the sale of certain of the Company's department store division
net assets to May of $75,732,000, (ii) gain on the termination of the
Company's retiree health care plan of $48,223,000, (iii) unrealized gain
on the Company's investment in common stock of The May Department Stores
Company of $12,075,000, (iv) loss on accrual of estimated costs
associated with carrying out the plan of liquidation of $78,270,000, (v)
loss of $60,416,000 on adjustment of remaining assets and liabilities to
net realizable values, (vi) loss on the sale of certain of the Company's
Clover division net assets to KIMCO of $30,730,000, and (vii) loss on
the sale of the Company's Clover division inventory to Gordon Brothers
Partners, Inc. of $1,300,000. The valuations of the assets and
liabilities are based on management's estimates and assumptions as of
the date of the financial statements; actual realization of the assets
and settlement of liabilities could be higher or lower than the amounts
indicated. Estimates used in the liquidation basis of accounting are
forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, and there are a number of important
factors that could cause actual results to differ from the estimates,
including the period during which the remaining Clover stores will
continue to operate, the ability to obtain substitute tenants,
settlement amounts of claims and other liabilities to be paid in the
liquidation, the amounts to be received for assets which have not yet
been sold, and the time period necessary to complete the Plan of
Reorganization and Liquidation.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
- ---------------------------------------------------------
Estimated costs during the period of liquidation increased $8,400,000
from August 4, 1996 through February 1, 1997. Of this amount,
$6,000,000 provides for the anticipated operating losses of the three
remaining Clover locations operating after January 1, 1997, the date the
Company resumed responsibility for the continuing operating requirements
(See Note 2 to the accompanying consolidated financial statements). The
remaining $2,400,000 increase represents the net change in other
estimated assets and liabilities in liquidation. On February 26, 1997,
the Company sold the Penrose Plaza Clover location and settled its
related lease obligation. This store closed on May 1, 1997 after
completion of a liquidation sale. The Company continues to negotiate
the sale of property and assumption of the leases for the two remaining
Clover locations.
CASH PAYMENTS AND RECEIPTS DURING LIQUIDATION
- ---------------------------------------------
Payments made during the six months ended February 1, 1997 consisted
primarily of the payoff of certain Clover mortgages in connection with
the KIMCO settlement, negotiated settlements on the early termination of
operating contracts, payment to May of the $9,200,000 condemnation award
received in settlement of the Island Avenue distribution center,
repurchase of the Clover stores' merchandise inventory on hand at
December 31, 1996 from Gordon Brothers Partners, Inc., wages and
benefits for the Company's severance plans, liquidation and winddown
expenses, and the dividend paid to shareholders in November, 1996.
Cash received during the six months ended February 1, 1997 consisted
primarily of the proceeds of the KIMCO transaction, after deduction at
closing of the Company's applicable mortgage notes outstanding,
including interest and closing costs as well as certain escrow trust
requirements, $5,000,000 of income tax recoverable, and $2,400,000 in
cash dividends on the shares of May.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
Cash provided by operating activities for the 26 week operating period
in fiscal 1996 was $22,800,000 compared to $121,800,000 in 1995 and
$93,000,000 in 1994. Results for fiscal 1995 and 1994 include
$95,000,000 and $50,000,000, respectively, from the Company's sale of
its private label credit card accounts receivable (See Note 4 to the
accompanying consolidated financial statements). The principal
components of the fiscal 1996 amount are cash received from the sale of
merchandise inventories to Gordon Brothers Partners, Inc. and customers,
offset by payments of account payable and accrued expenses.
The Company's capital expenditures were $5,700,000, $48,700,000 and
$38,000,000 in fiscal years 1996, 1995 and 1994, respectively. Capital
expenditures for 1996 represent amounts paid for projects started in
fiscal 1995. Capital expenditures in 1995 included two new Clover
stores, the new Concord home furnishings store, and renovations of the
Concord department store and Center Square and Rising Sun Clover stores.
In 1994, capital expenditures were for various renovations projects.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
- ---------------------------------------------------------
Cash used for financing activities were $20,000,000, $56,700,000 and
$50,400,000 for the 26 week operating period in 1996, and fiscal years
1995 and 1994, respectively. Amounts used in each period were for the
payment of debt obligations and dividends on the Company's common stock.
At the closing of the May transaction on July 18, 1996, outstanding
amounts under the Company's credit facilities, including all mortgage
notes payable on department store assets, were assumed by May. The
aggregate amount, including accrued interest, was $147,300,000. At the
KIMCO closing on August 26, 1996, the aggregate amount of all mortgage
notes paid on the applicable Clover sites, including accrued interest
and closing costs, was $12,000,000.
In connection with the Liquidation, in August, 1996 the Company entered
into a $25,000,000 revolving credit facility with First Union National
Bank (See Note 5 to the accompanying consolidated financial statements).
The outstanding balance of $12,200,000 under this facility was paid on
March 6, 1997 from the proceeds of a $22,500,000 federal tax refund.
Management believes that this credit facility, together with amounts
received from the sale of remaining assets, including certain shares of
May common stock, will be sufficient to provide the liquidity necessary
to complete the Company's dissolution.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders
of Strawbridge & Clothier
We have audited the accompanying consolidated statement of net assets in
liquidation of Strawbridge & Clothier (the "Company") as of February 1,
1997, the related consolidated statement of changes in net assets in
liquidation for the period from August 4, 1996 through February 1, 1997,
and the consolidated statements of operations, shareholders' equity, and
cash flows for the period February 4, 1996 through August 3, 1996. In
addition, we have audited the consolidated balance sheet as of February
3, 1996 and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the two years in the
period ended February 3, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the consolidated financial statements, the
Company's shareholders approved a plan of Reorganization and Liquidation
on July 15, 1996, and the Company commenced liquidation shortly
thereafter. As a result, the Company changed its basis of accounting
from the going concern basis to the liquidation basis and began
reporting on the liquidation basis as of August 3, 1996.
1
<PAGE>
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated net assets in
liquidation of Strawbridge & Clothier at February 1, 1997, the changes
in its consolidated net assets in liquidation from August 4, 1996
through February 1, 1997, the results of its operations and its cash
flows for the period February 4, 1996 through August 3, 1996, the
financial position of Strawbridge & Clothier at February 3, 1996, and
the results of its operations and its cash flows for each of the two
fiscal years in the period ended February 3, 1996, in conformity with
generally accepted accounting principles applied on the bases described
in the preceding paragraph.
/s/ Ernst & Young, LLP
Philadelphia, Pennsylvania
May 15, 1997
2
<PAGE>
Strawbridge & Clothier
Consolidated Statement of Net Assets in Liquidation
February 1, 1997
(in thousands)
ASSETS
Restricted cash $ 5,078
Investment in The May Department Stores Company common stock 198,350
Merchandise inventories 5,505
Income taxes recoverable 22,996
Property, fixtures, and equipment 5,075
Other assets 2,087
--------
239,091
LIABILITIES
Outstanding checks in excess of bank balances 238
Accounts payable 874
Accrued expenses 16,462
Debt and capital lease obligations 14,131
Estimated costs during period of liquidation 8,047
Other liabilities 23,700
--------
63,452
--------
Net assets in liquidation as of February 1, 1997 $175,639
========
See accompanying notes.
3
<PAGE>
Strawbridge & Clothier
Consolidated Statement of Changes in
Net Assets in Liquidation
August 4, 1996 through February 1, 1997
(in thousands)
Net assets in liquidation as of August 4, 1996 $191,173
Unrealized loss on investment in The May Department
Stores Company common stock (4,454)
Decrease in estimated number of The May Department
Stores Company common shares to be received (2,191)
Dividends received on The May Department Stores
Company common stock 2,438
Dividends paid on common stock (per share: $.275 Series A;
$.25 Series B) (2,922)
Net change in estimated assets and liabilities (8,405)
--------
(15,534)
--------
Net assets in liquidation as of February 1, 1997 $175,639
========
See accompanying notes.
4
<PAGE>
Strawbridge & Clothier
Consolidated Balance Sheet
(Going Concern Basis)
February 3, 1996
(in thousands)
ASSETS
Current assets:
Cash and equivalents $14,253
Accounts receivable 45,058
Allowance for doubtful accounts (1,940)
-------
43,118
Merchandise inventories 154,009
Deferred income taxes 3,365
Income taxes recoverable 5,653
Prepaid expenses and other 9,534
Total current assets 229,932
Property, fixtures, and equipment--on the
basis of cost:
Land 20,311
Buildings and improvements 388,740
Store fixtures, furniture, and equipment 258,093
Allowance for depreciation (deduction) (342,052)
--------
325,092
Construction in progress 4,300
--------
329,392
Other assets 16,490
--------
$575,814
========
5
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 63,494
Accrued expenses 30,153
Federal, state, and local taxes 3,116
Long-term debt and capital lease
obligations due within one year 13,637
--------
Total current liabilities 110,400
Long-term debt--due after one year 129,358
Capital lease obligations--due after one year 35,739
Accrued retirement costs 48,518
Other liabilities 6,740
Series Preferred Stock--no par value:
authorized--2,000,000 shares; none issued --
Shareholders' equity:
Series A Common Stock--par value $1 a share:
authorized 20,000,000 shares; issued and
outstanding 7,473,841 shares 7,474
Series B Common Stock--par value $1 a
share, convertible: authorized--20,000,000 shares;
issued and outstanding--3,139,699 shares 3,140
Capital in addition to par value of shares 170,859
Retained earnings 63,586
--------
Total shareholders' equity 245,059
--------
$575,814
========
See accompanying notes.
6
<PAGE>
Strawbridge & Clothier
Consolidated Statements of Shareholders' Equity
(Going Concern Basis)
(in thousands, except per share data)
<TABLE>
<CAPTION>
CAPITAL IN
SERIES A SERIES B ADDITION TO NET ASSETS
COMMON COMMON PAR VALUE RETAINED IN
STOCK STOCK OF SHARES EARNINGS LIQUIDATION TOTAL
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 29, 1994 $ 7,151 $ 3,235 $ 167,024 $ 74,792 $ -- $252,202
Net earnings 20,032 20,032
Cash dividends--common
(per share:
$1.10 Series A;
$1.00 Series B) (11,147) (11,147)
Cash dividends--
preferred (8) (8)
Employee stock
purchases 75 1,198 1,273
Conversions 65 (65) --
--------------------------------------------------------------------
Balance, January 28, 1995 7,291 3,170 168,222 83,669 -- 262,352
Net loss (8,787) (8,787)
Cash dividends--common
(per share:
$1.10 Series A;
$1.00 Series B) (11,295) (11,295)
Cash dividends--
preferred (1) (1)
Exercise of stock options,
employee stock
purchases, and
contribution to
Retirement Savings Plan 153 2,637 2,790
Conversions 30 (30) --
--------------------------------------------------------------------
Balance, February 3, 1996 7,474 3,140 170,859 63,586 -- 245,059
Net loss (48,474) (48,474)
Cash dividends--common
(per share:
$.55 Series A;
$.50 Series B) (5,733) (5,733)
Exercise of stock options
and employee stock
purchases 22 299 321
Change from going concern
to liquidation basis
of accounting (7,496) (3,140) (171,158) (9,379) 191,173 --
--------------------------------------------------------------------
Balance, August 3, 1996 $ -- $ -- $ -- $ -- $191,173 $191,173
====================================================================
</TABLE>
7
See accompanying notes.
<PAGE>
Strawbridge & Clothier
Consolidated Statements of Operations
(Going Concern Basis)
(in thousands, except share and per share data)
FEBRUARY 4,
1996 YEAR ENDED
TO --------------------------
AUGUST 3, FEBRUARY 3, JANUARY 28,
1996 1996 1995
-----------------------------------------
(26 weeks) (53 weeks) (52 weeks)
Net sales $ 392,714 $ 980,598 $ 1,003,524
Other income, net of
other deductions 2,915 6,238 3,265
-----------------------------------------
395,629 986,836 1,006,789
Deduct:
Cost of sales, including
occupancy and buying costs 316,813 746,473 745,251
Selling and administrative
expenses, net of finance
charges 84,234 189,207 172,029
Depreciation 14,798 31,300 29,587
Interest 7,917 18,964 19,551
Provision for doubtful accounts 4,865 14,177 10,281
Net adjustment to liquidation
basis of accounting 34,686 -- --
-----------------------------------------
463,313 1,000,121 976,699
-----------------------------------------
(Loss) earnings before income taxes
(benefit) (67,684) (13,285) 30,090
Income taxes (benefit) (19,210) (4,498) 10,058
-----------------------------------------
Net (loss) earnings $ (48,474) $ (8,787) $ 20,032
=========================================
(Loss) earnings per share $ (4.56) $ (.83) $ 1.92
=========================================
Average shares outstanding 10,618,659 10,531,149 10,426,277
See accompanying notes.
8
<PAGE>
Strawbridge & Clothier
Consolidated Statements of Cash Flows
(Going Concern Basis)
(in thousands)
FEBRUARY 4,
1996 YEAR ENDED
TO --------------------------
AUGUST 3, FEBRUARY 3, JANUARY 28,
1996 1996 1995
-----------------------------------------
(26 weeks) (53 weeks) (52 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) earnings $ (48,474) $ (8,787) $ 20,032
Adjustments to reconcile net (loss)
earnings to cash flows from
operating activities:
Net adjustment to liquidation
basis of accounting 34,686 -- --
Depreciation 14,798 31,300 29,587
Deferred income taxes (benefit) 4,827 (407) (5,377)
Pension curtailment gain -- (6,556) --
Sale of accounts receivable -- 95,000 50,000
Changes in operating assets and
liabilities, exclusive of
adjustments to liquidation
basis:
Accounts receivable 5,407 23,825 (11,510)
Merchandise inventories 117,072 (10,219) (658)
Accounts payable and accrued
expenses (82,323) 9,482 3,303
Federal, state, and
local taxes (14,154) (17,895) 4,154
Other (9,045) 6,090 3,481
-----------------------------------------
Total 22,794 121,833 93,012
-----------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES
Acquisition of property, fixtures,
and equipment (5,731) (48,692) (37,970)
Changes in other assets (403) (3,764) (5,917)
-----------------------------------------
Total (6,134) (52,456) (43,887)
-----------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES
Long-term borrowings -- -- 5,000
Payment of long-term debt and capital
lease obligations (14,624) (37,320) (11,147)
Decrease in short-term notes payable -- (6,500) (37,000)
Net proceeds from stock transactions 321 1,213 1,094
Cash dividends (5,733) (14,092) (8,357)
-----------------------------------------
Total (20,036) (56,699) (50,410)
-----------------------------------------
Change in cash and equivalents (3,376) 12,678 (1,285)
Cash and equivalents at beginning
of period 14,253 1,575 2,860
-----------------------------------------
Cash and equivalents at end
of period $ 10,877 $ 14,253 $ 1,575
=========================================
See accompanying notes.
9
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements
Years ended February 1, 1997,
February 3, 1996, and January 28, 1995
Prior to the adoption of a Plan of Reorganization and Liquidation as
discussed in Note 1, the Company operated 40 retail stores, including
department and self-service stores, which sold general merchandise in
Philadelphia and the surrounding Delaware Valley area of Southeastern
Pennsylvania, Southern New Jersey, and Northern Delaware. The Company
granted credit to customers, substantially all of whom are residents of
its trading area.
Subsequent to July 15, 1996, the Company's activities have involved the
sale of its remaining assets and the settlement of its remaining
obligations. At February 1, 1997, three Clover stores remained in
operation pending resolution of lease obligations. The Company
completed the sale of the Penrose Plaza store in February 1997, and
closed the store on May 1, 1997 after a liquidation sale.
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On July 15, 1996, the Company's shareholders approved a Plan of
Reorganization and Liquidation involving certain transactions with The
May Department Stores Company ("May") and Kimco Realty Corporation
("KIMCO"), and the dissolution of the Company following the sale,
liquidation or disposal of all assets not purchased by May or KIMCO and
the payment of all liabilities not assumed by May or KIMCO. As a
result, the Company changed its basis of accounting from a going concern
basis to the liquidation basis of accounting. Under this basis of
accounting, assets and liabilities are stated at their net realizable
value and estimated costs through the liquidation date are provided to
the extent reasonably determinable. The Company began reporting on the
liquidation basis of accounting as of the close of its second fiscal
quarter, August 3, 1996.
In connection with the aforementioned approval, the Company will be
liquidated and dissolved and May shares will be distributed to its
shareholders, to the extent that such shares are not needed to fund
payment of remaining obligations. Any remaining assets and liabilities
will be placed into a liquidating trust established to provide for the
Company's remaining obligations during liquidation. Based on the
Consolidated Statement of Net Assets at February 1, 1997 and the May
stock price of $44.50 per share at that date, management estimates that
.37 shares of May stock would be received for each S&C share. The
actual amount will be higher or lower as estimates reflected in the
Consolidated Statement of Net Assets or the price per share of the May
stock change.
10
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
As a result of the change in the Company's basis of accounting from the
going concern basis to the liquidation basis in accordance with
generally accepted accounting principles, for all financial statements
dated after August 2, 1996, assets have been valued at estimated net
realizable value and liabilities have been reflected at their estimated
settlement amounts, including estimated costs to be incurred during the
period of liquidation. The valuations of the assets and liabilities are
based on management's estimates and assumptions as of the date of the
financial statements; actual realization of the assets and settlement of
liabilities could be higher or lower than the amounts indicated.
Estimates used in the liquidation basis of accounting are
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934 and there are a number of important
factors that could cause actual results to differ from the estimates
including the period during which the remaining Clover stores will
continue to be operated, the ability to obtain substitute tenants,
settlement amounts of claims and other liabilities to be paid in the
liquidation, the amounts to be received for assets which have not yet
been sold, and the time period necessary to complete the Plan of
Reorganization and Liquidation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All intercompany
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
11
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT IN THE MAY DEPARTMENT STORES COMPANY COMMON STOCK
The Company's 4,457,309 May shares (including 3,080 shares received in
December 1996 in lieu of cash dividends) are being carried at market
value ($44.50 per share at February 1, 1997). The market value at
August 3, 1996 was $45.50 per share. Realized and unrealized gains and
losses are included in the Consolidated Statement of Changes in Net
Assets in Liquidation. Dividends on May common stock are recognized on
the record date. The per share value of May shares as of May 14, 1997
was $46.75.
MERCHANDISE INVENTORIES
Merchandise inventories at February 1, 1997 represent goods at the three
remaining Clover stores which the Company plans to close. The inventory
is stated at its estimated liquidation value, which is in excess of
cost. Merchandise inventories at February 3, 1996 were priced at cost
on the last-in, first-out method using internally developed price
indices for most inventories. If the first-in, first-out method of
determining inventory cost had been used, inventories would have been
$33,235,000 higher than reported at February 3, 1996.
STORE PREOPENING COSTS
Store preopening costs were charged to expense in the year incurred and
totalled $0, $1,417,000, and $28,000 in 1996, 1995, and 1994,
respectively.
PROPERTY, FIXTURES, AND EQUIPMENT
Property, fixtures, and equipment at February 1, 1997 are recorded at
net realizable value. Property, fixtures, and equipment at February 3,
1996 are recorded at cost, which was depreciated by the straight-line
method over the estimated useful lives of the assets. Amortization of
capital lease assets was included in depreciation expense.
ADVERTISING COSTS
Advertising costs were expensed as incurred and totalled $12,369,000,
$29,292,000, and $28,477,000 in 1996, 1995, and 1994, respectively.
12
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with maturities of three months or less when
purchased to be cash equivalents.
PER SHARE DATA
Earnings per share amounts are based on the weighted average number of
shares of common stock and dilutive common stock equivalents (employee
stock options) outstanding during each fiscal year. Common share
equivalents have not been considered in loss periods as their effect
would be anti-dilutive.
2. SIGNIFICANT TRANSACTIONS
MAY AGREEMENT
On April 4, 1996, the Company entered into an asset purchase agreement
with May for the sale of substantially all of the assets of the
Company's Department Store Division in exchange for May stock and the
assumption by May of certain Department Store Division liabilities. The
Company received 4,454,229 shares in accordance with the agreement.
KIMCO AGREEMENT
On August 28, 1996, the Company closed the sale of 23 of the Company's
26 Clover stores to Kimco Realty Corporation ("KIMCO"), Kohl's
Department Stores, Inc., VC Retailers, Inc., and National Wholesale
Liquidators of Philadelphia, Inc. for $35,500,000. At closing,
$11,989,000 of the Company's applicable mortgage notes, accrued
interest, and closing costs were paid, and the Company received
$18,991,000 in cash. An additional $4,520,000 was placed into a claims
administration trust account. This amount is included in Restricted
cash in the accompanying Consolidated Statement of Net Assets in
Liquidation.
13
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT TRANSACTIONS (CONTINUED)
GORDON BROTHERS AGREEMENTS
On July 10, 1996, the Company entered into agreements with Gordon
Brothers Partners, Inc. ("Gordon Brothers") for the sale of the
inventory at all, and the operation of certain, Clover stores. In
connection with the inventory sale, the Company received $63.4 million
in proceeds. The agreements also authorized Gordon Brothers to
liquidate the Clover fixtures. Proceeds from such fixture sales were
remitted to the Company, net of deduction of compensation payable to
Gordon Brothers.
Pursuant to the Gordon Brothers Agreement, on January 2, 1997, the
Company repurchased any remaining inventory and resumed responsibility
for ongoing operations of the Clover stores located in Mercerville,
Penrose Plaza and Shore Mall, which were not sold as part of the KIMCO
Agreement referred to above. The Company completed the sale of the
Penrose Plaza location in February 1997 and closed the store on May 1,
1997 after a liquidation sale. The Company is continuing to negotiate
the assumption of the leases for the two remaining locations. Gordon
Brothers is continuing the operating management of these stores under
its agreement with the Company.
TERMINATION OF RETIREE HEALTH CARE PLAN
In conjunction with the plan of liquidation, the Company terminated its
retiree health care plan effective July 18, 1996. As a result, the
Company recorded a one-time, noncash gain of $48.2 million in the
quarter ended August 3, 1996. See Note 3.
14
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
3. NET ADJUSTMENT TO THE LIQUIDATION BASIS OF ACCOUNTING
The net adjustment at August 3, 1996 to convert from the going concern
basis to the liquidation basis of accounting consisted of the following
(in thousands):
(INCOME)
EXPENSE
--------
Gain on sale to May $(75,732)
Loss on sale to KIMCO 30,730
Loss on sale to Gordon Brothers 1,300
Gain on termination of retiree health care plan (48,223)
Adjustment of remaining assets and liabilities
to net realizable value 60,416
Estimated costs associated with carrying
out plan of liquidation 78,270
Unrealized gain on investment in May
common stock--7/18/96 -- 8/3/96 (12,075)
--------
$ 34,686
========
4. ACCOUNTS RECEIVABLE
The Company entered into an agreement in January 1995 under which it
could sell, on a revolving basis, up to $50,000,000 of the Company's
private label credit card accounts receivable. In November 1995, the
Company entered into an agreement that increased the amount of
receivables the Company can sell to $150,000,000. The amount of
receivables sold was $145,000,000 at February 3, 1996. The Company
accounted for these sales under the provisions of FASB Statement No. 77,
"Receivables Sold With Recourse." Under the recourse provisions of the
agreement, the Company was obligated to cover uncollectible receivables
within specified limits. The Company remained contingently liable for
approximately $31,990,000 of the sold receivables at February 3, 1996
and established an accrual of $7,560,000 to reserve for any such
uncollectible receivables.
In July 1996, the Company's private label credit card receivables were
sold to May as part of the May Agreement described in Note 2.
15
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
5. DEBT AND REVOLVING CREDIT FACILITY
In connection with the Liquidation, the Company entered into a $25
million revolving credit facility, which is available through the
Company's dissolution. Advances under the facility are to be used
solely as a liquidity facility to assist in the settlement of
liquidation claims and for working capital purposes. The facility is
secured by the Company's pledge of 630,000 shares of common stock of The
May Department Stores Company as well as other property and assets of
the Company. The aggregate liability may not exceed seventy-two percent
(72%) of the market value of the shares comprising the collateral. At
February 1, 1997, $12,200,000 was outstanding under this facility. The
interest rate is 5.67% at February 1, 1997. All outstanding amounts
were repaid in March, 1997 with a portion of the proceeds of the
Company's income tax refunds.
At February 1, 1997, debt and capital lease obligations also included
$1,931,000 representing a capital lease obligation for the Company's
Mercerville Clover store. Principal and interest payments of $26,503
are payable monthly.
At February 3, 1996, long-term debt due after one year consisted of the
following (in thousands):
6.625% notes due October 15, 2003 $ 49,645
Series A Senior Notes, maturing equally from
1996 to 2004 with interest at 9.2% 21,819
Series B Senior Notes, due September 30, 1999,
with interest at 9.0% 20,000
Mortgage notes payable, at rates ranging from
8.5% to 10%, due in installments, maturing
from 2 to 12 years 12,894
Senior Note, due October 15, 1997, with
interest at 7.04% 25,000
--------
$129,358
========
16
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
5. DEBT AND REVOLVING CREDIT FACILITY (CONTINUED)
During 1996, all of the above debt was transferred or satisfied in
connection with the transactions described in Note 2.
There were no compensating balance arrangements in connection with debt
or credit lines.
Interest paid, net of amounts capitalized, was: 1996--$11,768,000;
1995--$19,428,000; and 1994--$19,833,000.
6. RETIREMENT BENEFITS
DEFINED BENEFIT PLANS
The Company provided pension benefits under the Strawbridge & Clothier
Employee Retirement Plan (the "Plan"). Effective January 31, 1996, the
benefits that were earned by all present participants in the Plan were
frozen. Employees who did not meet plan eligibility requirements prior
to January 31, 1996 are not eligible to participate in the Plan. For
participants with at least fifteen years of eligibility service and
whose age and service add up to seventy, earnings over the next three
years will be used in determining their final benefit. The benefits for
all other participants have been determined as of January 31, 1996,
based on current years of service and salary levels. As a result of
these changes, the Company recorded a one-time, noncash curtailment gain
in fiscal 1995 of $6,556,000, which is included in other income.
Net pension cost was $0, $3,269,000, and $3,233,000 in 1996, 1995, and
1994, respectively.
During December 1996, May assumed from Strawbridge & Clothier and became
the sole sponsor of the Plan.
The Company sponsored an unfunded, nonqualified Deferred Compensation
Plan, which provided retirement benefits for certain key executive
officers. The accrued liability for this plan is included in accrued
retirement costs in the accompanying consolidated balance sheet at
February 3, 1996. At December 31, 1995, the accumulated benefit
obligation for this plan was $10,355,000 and the projected benefit
obligation was $10,769,000. Obligations under this plan were assumed by
May.
17
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
6. RETIREMENT BENEFITS (CONTINUED)
401(K) PLAN
The Company had a 401(k) Retirement Savings Plan, under which employees
were able to defer a portion of their compensation. In connection with
the Company's ongoing liquidation, the 401(k) Retirement Savings Plan
was terminated in June 1996. All amounts were distributed to Plan
participants by the end of September 1996. Prior to its termination,
the Company contributed an amount equal to 1.5% of each participant's
compensation for each Plan year. Matching expense was $716,900,
$630,000, and $882,000 for 1996, 1995, and 1994, respectively.
7. COMMON STOCK
Series A and Series B shares are entitled to one and ten votes per
share, respectively. Series B shares are convertible on a
share-for-share basis into Series A shares. Series A shares are freely
transferable while Series B shares were only transferable to certain
permitted transferees. Series A Common Stock is entitled to cash
dividends at least 10% higher than any cash dividend declared on Series
B Common Stock.
The Company offered Series A Common Stock to employees for purchase
through payroll deductions under its 1991 Employee Stock Purchase Plan.
The purchase price was 85% of the closing market price on the offering
date or the purchase date, whichever is lower. During fiscal 1996,
21,336 shares were issued at an average price of $14.00. In 1995,
76,870 shares were issued at an average price of $17.00.
The Company also has stock option plans which provide for granting to
key employees qualified and nonqualified options to purchase common
stock of the Company. Generally, options are granted for a term of ten
years and become exercisable immediately. During fiscal 1996, 1,038
shares were issued upon exercise of options at an average price of
$21.03. During fiscal 1995, 2,044 shares were issued upon exercise of
options at an average price of $19.14. No options were exercised during
fiscal 1994. Options to purchase 147,343 shares of Series A Common
Stock at an average price of $26.39 were outstanding at February 1, 1997.
18
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
7. COMMON STOCK (CONTINUED)
At February 1, 1997, there were 20,000,000 shares of Series A common
stock and 20,000,000 shares of Series B common stock authorized and
10,602,196 shares of Series A common stock and 33,988 shares of Series B
common stock outstanding.
8. INCOME TAXES
Income taxes recoverable at February 1, 1997 consists primarily of
federal income taxes recoverable through carryback of net operating
losses. In March 1997, the Company received $22.5 million of federal
tax refunds.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. As a result of the Plan of Reorganization and Liquidation,
there are no deferred income taxes at February 1, 1997. The components
of deferred tax liabilities and assets as of February 3, 1996 were as
follows (in thousands):
Deferred tax liabilities:
Depreciation $18,078
Other--net 3,812
-------
21,890
-------
Deferred tax assets:
Retiree health care obligation 14,854
Accruals and reserves 11,863
-------
26,717
-------
Net deferred tax assets $ 4,827
=======
19
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
The components of income tax expense (benefit) are as follows (in
thousands):
1996 1995 1994
-----------------------------------
Current:
Federal $(24,037) $(4,111) $13,886
State -- 20 1,549
-----------------------------------
(24,037) (4,091) 15,435
Deferred:
Federal 4,827 (116) (3,927)
State -- (291) (1,450)
-----------------------------------
4,827 (407) (5,377)
-----------------------------------
$(19,210) $(4,498) $10,058
===================================
The $19,210,000 net income tax benefit reflects the current benefit of
recoverable income taxes created by the carryback of the tax net
operating loss, offset by the reduction of the prior-year deferred tax
asset to zero. Due to the Plan of Reorganization and Liquidation, there
are no additional loss carryforwards, and no additional taxes available
for refund.
A reconciliation of the effective income tax rate with the statutory
federal income tax rate is as follows:
1996 1995 1994
-----------------------------------
Federal tax rate (34.0)% (34.0)% 35.0%
Losses not benefited 5.6 0.0 0.0
State taxes (benefit),
net of federal taxes 0.0 (1.6) 0.2
Jobs tax credit 0.0 (0.8) (1.9)
Effect of state statutory
tax rate change 0.0 1.1 0.0
Other 0.0 1.4 0.1
-----------------------------------
(28.4)% (33.9)% 33.4%
===================================
Income taxes (refunded) paid were as follows: 1996--$(5,000,000);
1995--$13,309,000; 1994--$11,735,000.
20
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES
LEASES
Future minimum rental commitments as of February 1, 1997, for the Shore
Mall Clover store, which is the only remaining significant operating
lease obligation are as follows: 1997--$684,000; 1998--$684,000;
1999--$701,000; 2000--$787,000; 2001--$787,000; 2002--$787,000;
2003--$787,000; 2004--$656,000. These amounts do not consider
reductions which may occur as the Company continues to negotiate the
assumption of this lease.
Total net rental expense amounted to:
Fiscal Year
1996 1995 1994
----------------------------------
Minimum rentals $ 3,684 $ 7,318 $ 5,661
Contingent rentals,
based on sales 535 1,222 1,310
Sublease rentals (256) (973) (1,022)
----------------------------------
$ 3,963 $ 7,567 $ 5,949
==================================
CONTINGENCIES
In connection with its dissolution, the Company, as required by
Pennsylvania Business Corporation Law ("PBCL"), notified all known
entities having claims against the Company and also served public notice
of its planned dissolution. These notices requested entities to provide
sufficient detail to enable the Company to evaluate the substance of any
claims against the Company. To the extent the Company rejected any
claims in accordance with PBCL, such claim is permanently barred unless
the claimant whose claim was rejected had commenced an action within 90
days of the Company's mailing of the rejection notice.
The Company has been named as a defendant in several actions related to
its dissolution. In one of those actions, the Company's Directors were
also named as defendants. In another action, the plaintiffs seek to
enjoin the distribution of May shares to the
21
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONTINGENCIES (CONTINUED)
Company's shareholders. While management believes these actions are
without merit and that adequate accruals have been established in the
accompanying consolidated financial statements to provide for any costs
that may be incurred with respect to these contingencies, there can be
no assurance as to the time of payment or that the ultimate settlement
of these claims will not be higher or lower than the amounts recorded.
OTHER
In fiscal 1995, the City of Philadelphia advised the Company that it
planned to exercise its eminent domain power to acquire the Company's
Department Store Distribution Center. The Distribution Center was
acquired by the City of Philadelphia during 1996, with the Company
receiving $9.2 million in proceeds. As part of the May Agreement, these
funds were remitted to May. The Company will also receive an amount from
the City of Philadelphia for the value of the in-place fixtures at the
Distribution Center.
Outstanding letters of credit at February 1, 1997 amounted to
approximately $509,000. In February 1997, the Company placed an
additional letter of credit in the amount of $3,000,000, which was
required under the terms of its operating agreement with Gordon Brothers
(see Note 2). This amount was subsequently reduced to $1,000,000 as a
result of the closing of the Penrose location and the commencement of a
going-out-of-business sale at the Mercerville location.
22
<PAGE>
Strawbridge & Clothier
Notes to Consolidated Financial Statements (continued)
10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data are as follows (in thousands):
Fiscal Quarter Ended
--------------------------------------------------
May 4, August 3, November 2, February 1,
1996 1996 1996 1997
--------------------------------------------------
Net sales $208,127 $184,587 $ -- $ --
Gross profit 46,407 29,494 -- --
Adjustment to the
liquidation basis of
accounting -- (34,686)(1) -- --
Increase (decrease) in net
assets in liquidation -- -- (1,014) (14,520)(3)
Net loss (6,932) (41,542)(1) -- --
Net loss per common share (0.65) (3.91)(1) -- --
Fiscal Quarter Ended
--------------------------------------------------
April 29, July 29, October 28, February 3,
1995 1995 1995 1996
--------------------------------------------------
Net sales $198,625 $218,551 $225,504 $ 337,918
Gross profit 45,465 47,081 52,271 89,308
Net earnings (loss) (6,064) (9,079) (7,232) 13,588(2)
Net earnings (loss) per
common share (0.58) (0.86) (0.68) 1.28(2)
(1) Restated from previously reported amount.
(2) Includes gain on curtailment of pension plan of $4,320, or $.41 per share.
(3) Results primarily from the decrease in market value of The May
Department Stores Company Common Stock from $47.75 at November 2, 1996
to $44.50 at February 1, 1997.
23
EXHIBIT 23
----------
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Strawbridge & Clothier of our report dated May 15, 1997
included in the 1996 Annual Report to Shareholders of Strawbridge &
Clothier.
Our audits also included the financial statement schedule of Strawbridge
& Clothier listed in Item 14(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion
on this schedule based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-40928) and the related Prospectus of
Strawbridge & Clothier of our report dated May 15, 1997, with respect to
the consolidated financial statements and schedule included in the
Annual Report (Form 10-K) for the year ended February 1, 1997.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
May 15, 1997
F-3
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<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> FEB-01-1997
<CASH> 5,078
<SECURITIES> 198,350
<RECEIVABLES> 22,996
<ALLOWANCES> 0
<INVENTORY> 5,505
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<TOTAL-LIABILITY-AND-EQUITY> 239,091
<SALES> 392,714
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