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Proc-Type: 2001,MIC-CLEAR
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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 August 22, 2002 (Date of Report, date of earliest event reported) Stage Stores, Inc
(Exact name of registrant as specified in its charter)
000-21011
(Commission File Number)
NEVADA
(State or other jurisdiction
of incorporation)
91-1826900
(I.R.S. Employer Identification No.)
10201 Main Street, Houston, Texas
(Address of principal executive offices)
77025
(Zip Code)
(713) 667-5601
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
ITEM 5. Other Events and Regulation FD Disclosure.
On August 22, 2002, the Company issued a news release announcing results for the second quarter ended August 3, 2002 and updated the Company's outlook for the full fiscal year ending February 1, 2003. A copy of the news release is attached to this Form 8-K as Exhibit 99.1.
ITEM 7. Financial Statements and Exhibits.
Not applicable.
Pro forma financial information.
Not applicable.
Exhibits.
99.1 News Release dated August 22, 2002 issued by the Company.
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, hereunto duly authorized.
STAGE STORES, INC.
August 22, 2002 /s/ Michael E. McCreery
(Date) Michael E. McCreery
Executive Vice President and Chief
Financial Officer
Exhibit 99.1
NEWS RELEASE
CONTACT:
Bob Aronson
Director of Investor Relations
(800) 579-2302
(baronson@stagestores.com)
FOR IMMEDIATE RELEASE
STAGE STORES ANNOUNCES SECOND QUARTER RESULTS; REAFFIRMS OUTLOOK FOR FISCAL 2002
-- Earnings Per Share Increase 6.8% Over Last Year's Proforma Results-HOUSTON, TX, August 22, 2002 -- Stage Stores, Inc. (Nasdaq: STGS) today announced results for the second quarter and first six months ended August 3, 2002 and reaffirmed the Company's outlook for the full fiscal year ending February 1, 2003.
Second Quarter Results
For the 13-week period ended August 3, 2002, net income was $10.4 million, or $0.47 per diluted share, compared to $2.3 million, or $0.08 per diluted share, in the prior year quarter. On a proforma basis, net income for last year's second quarter was $9.6 million, or $0.44 per share on an equivalent diluted share count basis. This year's diluted earnings per share represent a 6.8% increase over last year's proforma diluted earnings per share. Total sales increased 6.1% to $207.5 million from $195.5 million in the year-ago period. Comparable store sales increased 6.5% compared to the 2001 second quarter. Total sales grew at a lower rate than comparable store sales because the Company operated 342 stores during most of this year's second quarter while it operated 347 stores during the majority of last year's second quarter.
Proforma results for the fiscal 2001 second quarter exclude certain charges and expenses related to the Company's reorganization and emergence from Chapter 11 in August 2001. Details of the proforma financial presentation are described below.
Additional milestones achieved during the second quarter included:
Initiation of a $15.0 million stock repurchase program in July
--more--
Stage Stores Announces
Second Quarter Results;
Reaffirms Earnings Outlook
Page - 2
"We are very pleased with the sales and earnings levels achieved during the second quarter," said Jim Scarborough, Chairman, President and Chief Executive Officer. "The 6.5% increase in comparable store sales was produced on top of a strong 16.6% increase for the year-ago quarter on a calendar-adjusted basis. Additionally, diluted earnings per share of $0.47 were 6.8% higher than the prior year's proforma performance. Further, we continued to see solid performance in nearly every category of business. Our solid performance continues to speak to the strength of our concept and strategy and reflects the hard work and dedication of all of our Stage Stores associates."
Mr. Scarborough continued, "As we previously reported, on July 29, 2002, our Board of Directors approved a $15.0 million stock repurchase program. This action was taken because we believe that repurchasing our shares at current prices is in the best interest of our shareholders and will have an accretive impact on earnings per share. Under the program, we have repurchased 255,700 shares to date, for an aggregate value of $6.0 million".
Six Months Results
Net income for the six-month period ended August 3, 2002 was $28.1 million, or $1.29 per diluted share, compared to $8.7 million, or $0.31 per diluted share, in the prior year period. On a proforma basis, net income for last year was $21.9 million, or $1.00 per share on an equivalent diluted share count basis. This year's diluted earnings per share represent a 29.0% increase over last year's proforma diluted earnings per share. Total sales increased 5.9% to $414.2 million from $391.1 million in the year-ago period. Comparable store sales increased 6.8% compared to the same 26-week period last year. Total sales grew at a lower rate than comparable store sales because the Company operated 342 stores during most of this year's first six months while it operated 347 stores during most of last year's first six months.
Proforma results for the first six months of fiscal 2001 exclude certain charges and expenses related to the Company's reorganization and emergence from Chapter 11 in August 2001. Details of the proforma financial presentation are described below.
Fiscal 2002 Outlook
Commenting on the Company's fiscal 2002 outlook, Jim Scarborough stated, "Our Company achieved outstanding results in the first half of the fiscal year. While we are cautious in our outlook for the second half of the fiscal year, we remain comfortable with the upper end of our previously provided guidance for the full 2002 fiscal year. This equates to net income for the fiscal year of between $56.0 million and $57.0 million, or $2.58 to $2.62 per diluted share utilizing year-to-date weighted average diluted shares of 21.7 million. We currently anticipate that earnings in the third quarter will be flat to slightly below last year's proforma earnings of $11.6 million, due to a more competitive retail environment, coupled with higher new store opening costs in support of our seven planned store openings in October. We project earnings in the fourth quarter to be 7% to 10% higher than last year's earnings of $15.8 million".
--more--
Stage Stores Announces
Second Quarter Results;
Reaffirms Earnings Outlook
Page - 3
Mr. Scarborough continued, "Our fundamentals, strategies and operations remain strong. It is important to note that our range of estimated earnings per diluted share for the full fiscal year represents a strong 14.2% to 15.9% increase over last year's proforma earnings of $2.26 per equivalent diluted share".
Mr. Scarborough concluded, "Our focus over the last half of the fiscal year will be to continue to provide our customers with the most wanted merchandise coupled with excellent customer service in convenient, easy-to-shop locations. We look forward to the remaining six months of the fiscal year with cautious optimism and enthusiasm as we work to strengthen our position as one of America's leading specialty retailers of branded family apparel".
Presentation of Financial Results
Actual and proforma presentations of financial results for the second quarter and first six months of fiscal 2001 are attached to this release. Actual results for the second quarter and first six months of fiscal 2001 include certain charges and expenses related to the Company's Chapter 11 reorganization efforts. In order to illustrate what the Company's results during the second quarter and first six months of fiscal 2001 would look like after the elimination of these charges and expenses, proforma financials have been included. The proforma financials also remove the net operating results of stores closed during the reorganization period, back out the adjustment to accrete the yield on repurchased accounts receivable and adjust for the impact of the Company's debtor-in-possession financing. Footnotes to the proforma financials have been provided which reconcile the actual results to the proforma results. The proforma results reported in this news release are not intended to be indica tive of future period results. Future period results will be subject to certain risks and uncertainties as discussed in the safe harbor paragraph below.
Conference Call Information
The Company will host a conference call today at 11:00 a.m. Eastern Time to discuss the second quarter's results as well as its outlook for the 2002 fiscal year. All interested parties can listen to a live webcast of the Company's conference call by logging on to the Company's web site at stagestoresinc.com and then clicking on the webcast link under the Investor Relations tab. As an alternative, individual investors and other interested parties can listen to the conference call webcast by logging on to the companyboardroom website, while institutional investors, who are members, can access the call through the streetevents website. A replay of the conference call will be available online at each web site until midnight on August 29, 2002.
Stage Stores, Inc. brings nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family to small towns and communities throughout the south central United States. The company currently operates 347 stores in 13 states under the Stage, Bealls and Palais Royal names.
-more--
Stage Stores Announces
Second Quarter Results;
Reaffirms Earnings Outlook
Page - 4
On the effective date of the Company's Plan of Reorganization, August 24, 2001, Stage Stores, Inc., a Delaware corporation, merged into its wholly-owned subsidiary, Specialty Retailers, Inc. (NV), a Nevada corporation (the "Merger Date"). On the Merger Date, Specialty Retailers, Inc. (NV), the surviving corporation, changed its name to Stage Stores, Inc. For all periods referenced, Stage Stores, Inc. and its predecessor in interest are both referred to above as "Stage Stores" or the "Company".
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including comments regarding the Company's outlook and expectations for the third and fourth quarters of the 2002 fiscal year, the remaining six months of the 2002 fiscal year and for the full 2002 fiscal year. The Company intends forward looking terminology such as "believes", "expects", "may", "will", "should", "anticipates", "plans" or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause the Company's actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC") on April 12, 2002, and other factors as may periodically be described in other Company filings with the SEC.
(Tables to Follow)
Stage Stores, Inc. | |||||||||
Consolidated Statements of Operations | |||||||||
(in thousands, except earnings per share) | |||||||||
(unaudited) | |||||||||
Actual Quarter Ended (1) |
Proforma Quarter Ended |
||||||||
August 3, 2002 | August 4, 2001 |
August 4, 2001 |
|||||||
Amount | % to Sales | Amount | % to Sales | Amount | % to Sales | ||||
Net sales | $ 207,536 | 100.0% | $ 195,538 | 100.0% | $ 194,248 | 100.0% | (a) | ||
Cost of sales and related buying, occupancy and distribution expenses | 146,429 | 70.6% | 139,597 | 71.4% | 137,128 | 70.6% | (a) | ||
Gross profit | 61,107 | 29.4% | 55,941 | 28.6% | 57,120 | 29.4% | |||
Selling, general and administrative expenses | 43,737 | 21.1% | 44,295 | 22.7% | 40,899 | 21.1% | (a),(b) | ||
Store opening costs | 386 | 0.2% | - | 0.0% | - | 0.0% | |||
Reorganization items and store closure costs | - | 0.0% | 5,095 | 2.6% | - | 0.0% | (a) | ||
Interest | 550 | 0.3% | 4,205 | 2.2% | 441 | 0.2% | (c) | ||
Income before income tax | 16,434 | 7.9% | 2,346 | 1.2% | 15,780 | 8.1% | |||
Income tax expense | 6,080 | 2.9% | 5 | 0.0% | 6,156 | 3.2% | (d) | ||
Net income | $ 10,354 | 5.0% | $ 2,341 | 1.2% | $ 9,624 | 5.0% | (a) | ||
Basic & Diluted earnings per common share data: | |||||||||
Basic earnings per common share |
$ 0.52 |
$ 0.08 |
$ 0.48 |
||||||
Basic weighted average common shares outstanding |
19,955 |
(e) |
28,096 |
19,955 |
(e) | ||||
Diluted earnings per common share |
$ 0.47 |
$ 0.08 |
$ 0.44 |
||||||
Diluted weighted average common shares outstanding |
21,923 |
(e) |
28,096 |
21,923 |
(e) | ||||
EBITDA |
$ 21,314 |
10.3% |
$ 19,221 |
9.9% | |||||
(1) |
The Company emerged from bankruptcy on August 24, 2001 (the "Effective Date"). For financial reporting purposes, the Effective Date was assumed to be September 1, 2001, the last day of the Company's seventh fiscal period. The adjustments to reflect the consummation of the Company's Plan of Reorganization, including the gain on discharge of pre-petition liabilities and the adjustment to record assets and liabilities at their fair value, were recorded on the Effective Date. Accordingly, the Company's post-reorganization financial statements are not comparable to the pre-reorganization financial statements. |
(a) | Reported results have been adjusted to eliminate the net expense resulting from the Company's Chapter 11 Proceedings, subsequent reorganization efforts and store closures. This includes the reported sales of $1.3 million, cost of sales including occupancy costs of $1.0 million and direct operating expenses of $0.3 million of the stores included in the 1999 and 2000 Store Closure Programs and the six stores closed in 2001 prior to the Effective Date. Reported depreciation expense prior to the Effective Date is also adjusted for the impact of the basis reduction to recorded property, equipment and leasehold improvements due to fresh-start adjustments. The adjusted basis of depreciable assets owned as of the Effective Date was $100.3 million which would result in annual depreciation expense of approximately $12.0 million. Accordingly, proforma results for the thirteen weeks ended August 4, 2001 include depreciation expense of approximately $3.0 million. |
(b) | Securitization interest of $2.1 million included in proforma results is based on $175.0 million of borrowings (outstanding borrowing level as of September 1, 2001) at an interest rate of 3.95% plus unused facility fees and amortization of debt issue costs. The adjustment to accrete yield on repurchased receivables of $4.0 million in the thirteen weeks ended August 4, 2001 has been eliminated. |
(c) | Reported interest expense of $4.2 million on the debtor-in-possession financing and related debt issue costs has been eliminated. Proforma interest on the revolving facility and amortization of related debt issue costs is $0.4 million. Revolving interest is based on outstanding letters of credit of $14.1 million and no outstanding borrowings. |
(d) | Reported tax expense has been adjusted to a 39% effective tax rate. |
(e) | Weighted average shares outstanding represent the shares of new common stock issued under the Plan. In addition, the Company has 3,657,000 stock options with a weighted average exercise price of $15.12, 512,119 Series A Warrants with an exercise price of $15.00, and 1,078,146 Series B Warrants with an exercise price of $20.00 outstanding at August 3, 2002. The average market price during the second quarter of 2002 was $32.09. The basic and diluted shares outstanding for the second quarter of 2002 have been used in the proforma results for the second quarter of 2001, since the new common stock had not been issued at that time. |
Stage Stores, Inc. | |||||||||
Consolidated Statements of Operations | |||||||||
(in thousands, except earnings per share) | |||||||||
(unaudited) | |||||||||
Proforma Twenty-Six |
|||||||||
Actual Twenty-Six Weeks Ended (1) |
Weeks Ended |
||||||||
August 3, 2002 |
August 4, 2001 |
August 4, 2001 |
|||||||
Amount | % to Sales | Amount | % to Sales | Amount | % to Sales | ||||
Net sales | $ 414,204 | 100.0% | $ 391,087 | 100.0% | $ 387,783 | 100.0% | (a) | ||
Cost of sales and related buying, occupancy and distribution expenses | 281,759 | 68.0% | 272,893 | 69.8% | 267,496 | 69.0% | (a) | ||
Gross profit | 132,445 | 32.0% | 118,194 | 30.2% | 120,287 | 31.0% | |||
Selling, general and administrative expenses | 86,465 | 20.9% | 91,428 | 23.4% | 83,582 | 21.6% | (a),(b) | ||
Store opening costs | 408 | 0.1% | - | 0.0% | - | 0.0% | |||
Reorganization items and store closure costs | - | 0.0% | 8,431 | 2.2% | - | 0.0% | (a) | ||
Interest | 939 | 0.2% | 9,673 | 2.5% | 881 | 0.2% | (c) | ||
Income before income tax | 44,633 | 10.8% | 8,662 | 2.2% | 35,824 | 9.2% | |||
Income tax expense | 16,514 | 4.0% | 10 | 0.0% | 13,972 | 3.6% | (d) | ||
Net income | $ 28,119 | 6.8% | $ 8,652 | 2.2% | $ 21,852 | 5.6% | (a) | ||
Basic & Diluted earnings per common share data: | |||||||||
Basic earnings per common share |
$ 1.41 |
$ 0.31 |
$ 1.09 |
||||||
Basic weighted average common shares outstanding |
19,961 |
(e) |
28,096 |
19,961 |
(e) | ||||
Diluted earnings per common share |
$ 1.29 |
$ 0.31 |
$ 1.00 |
||||||
Diluted weighted average common shares outstanding |
21,746 |
(e) |
28,096 |
21,746 |
(e) | ||||
EBITDA |
$ 54,241 |
13.1% |
$ 42,705 |
11.0% | |||||
(1) |
The Company emerged from bankruptcy on August 24, 2001 (the "Effective Date"). For financial reporting purposes, the Effective Date was assumed to be September 1, 2001, the last day of the Company's seventh fiscal period. The adjustments to reflect the consummation of the Company's Plan of Reorganization, including the gain on discharge of pre-petition liabilities and the adjustment to record assets and liabilities at their fair value, were recorded on the Effective Date. Accordingly, the Company's post-reorganization financial statements are not comparable to the pre-reorganization financial statements. |
(a) | Reported results have been adjusted to eliminate the net expense resulting from the Company's Chapter 11 Proceedings, subsequent reorganization efforts and store closures. This includes the reported sales of $3.3 million, cost of sales including occupancy costs of $2.4 million and direct operating expenses of $0.6 million of the stores included in the 1999 and 2000 Store Closure Programs and the six stores closed in 2001 prior to the Effective Date. Reported depreciation expense prior to the Effective Date is also adjusted for the impact of the basis reduction to recorded property, equipment and leasehold improvements due to fresh-start adjustments. The adjusted basis of depreciable assets owned as of the Effective Date was $100.3 million which would result in annual depreciation expense of approximately $12.0 million. Accordingly, proforma results for the twenty-six weeks ended August 4, 2001 include depreciation expense of approximately $6.0 million. |
(b) | Securitization interest of $4.2 million included in proforma results is based on $175.0 million of borrowings (outstanding borrowing level as of September 1, 2001) at an interest rate of 3.95% plus unused facility fees and amortization of debt issue costs. The adjustment to accrete yield on repurchased receivables of $9.0 million in the twenty-six weeks ended August 4, 2001 has been eliminated. |
(c) | Reported interest expense of $9.7 million on the debtor-in-possession financing and related debt issue costs has been eliminated. Proforma interest on the revolving facility and amortization of related debt issue costs is $0.9 million. Revolving interest is based on outstanding letters of credit of $14.1 million and no outstanding borrowings. |
(d) | Reported tax expense has been adjusted to a 39% effective tax rate. |
(e) | Weighted average shares outstanding represent the shares of new common stock issued under the Plan. In addition, the Company has 3,657,000 stock options with a weighted average exercise price of $15.12, 512,119 Series A Warrants with an exercise price of $15.00, and 1,078,146 Series B Warrants with an exercise price of $20.00 outstanding at August 3, 2002. The average market price during the twenty-six weeks of 2002 was $30.41. The basic and diluted shares outstanding for the twenty-six weeks ended August 3, 2002 have been used in the proforma results for the twenty-six weeks ended August 4, 2001, since the new common stock had not been issued at that time. |
Stage Stores, Inc. | |||
Consolidated Balance Sheets | |||
(in thousands, except par values) | |||
August 3, 2002 |
February 2, 2002 |
||
(unaudited) | |||
ASSETS | |||
Cash and cash equivalents | $ 24,772 | $ 22,679 | |
Retained interest in receivables sold | 114,580 | 114,769 | |
Accounts receivable, net | 11,234 | 11,524 | |
Merchandise inventories, net | 199,028 | 178,818 | |
Prepaid expenses and other current assets |
19,507 |
17,688 |
|
Total current assets | 369,121 | 345,478 | |
Property, equipment and leasehold improvements, net | 124,157 | 109,612 | |
Other assets |
6,740 |
5,629 |
|
Total assets |
$ 500,018 |
$ 460,719 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Accounts payable | $ 57,770 | $ 60,417 | |
Accrued expenses and other current liabilities | 54,058 | 47,324 | |
Current portion of long-term debt |
210 |
197 |
|
Total current liabilities | 112,038 | 107,938 | |
Long-term debt | 672 | 873 | |
Other long-term liabilities |
13,923 |
11,684 |
|
Total liabilities |
126,633 |
120,495 |
|
Commitments and contingencies | |||
Common stock, par value $0.01, 50,000 shares | |||
authorized, 19,959 and 19,973 shares issued and outstanding, respectively | 200 | 200 | |
Additional paid-in capital | 326,090 | 318,090 | |
Retained earnings | 50,053 | 21,934 | |
Less 119 treasury shares - at cost |
(2,958) |
- |
|
Stockholders' equity |
373,385 |
340,224 |
|
Total liabilities and stockholders' equity |
$ 500,018 |
$ 460,719 |
|
Stage Stores, Inc. | |||||
Consolidated Statements of Cash Flows | |||||
(in thousands) | |||||
(unaudited) | |||||
Reorganized | Predecessor | ||||
Company |
Company |
||||
Twenty-Six | Twenty-Six | ||||
Weeks Ended | Weeks Ended | ||||
August 3, 2002 |
August 4, 2001 |
||||
Cash flows from operating activities: | |||||
Net income | $ 28,119 | $ 8,652 | |||
Adjustments to reconcile net income to net cash | |||||
provided by (used in) operating activities: | |||||
Depreciation and amortization | 8,669 | 11,296 | |||
Amortization of debt issue costs | 705 | 2,470 | |||
Provision for bad debts | 14,195 | 12,016 | |||
Deferred income taxes and utilization of pre-reorganization deferred tax assets | 6,665 | - | |||
Adjustment to accrete yield on repurchased accounts receivable | - | 9,000 | |||
Write-off of property, equipment and leasehold improvements | |||||
and other assets associated with closed stores | - | 1,175 | |||
Changes in operating assets and liabilities |
(4,800) |
37,065 |
|||
Total adjustments |
25,434 |
73,022 |
|||
Net cash provided by operating activities |
53,553 |
81,674 |
|||
Cash flows from investing activities: | |||||
Additions to property, equipment and leasehold improvements | (23,214) | (4,942) | |||
Proceeds from retirement of fixtures and equipment |
- |
355 |
|||
Net cash used in investing activities |
(23,214) |
(4,587) |
|||
Cash flows from financing activities: | |||||
Proceeds from (payments on): | |||||
Working capital facility | - | (76,208) | |||
Long-term debt and debt issue costs | (288) | (310) | |||
Repurchase of common stock | (2,958) | - | |||
Reduction in borrowings under account receivable securitization trust |
(25,000) |
- |
|||
Net cash used in financing activities |
(28,246) |
(76,518) |
|||
Net increase in cash and cash equivalents | 2,093 | 569 | |||
Cash and cash equivalents: | |||||
Beginning of period |
22,679 |
20,510 |
|||
End of period |
$ 24,772 |
$ 21,079 |
|||
Supplemental disclosures: | |||||
Interest paid |
$ 434 |
$ 10,103 |
|||
Income taxes paid |
$ 122 |
$ - |
|||
Supplemental non-cash transactions - The Company recognized $8.0 million of pre-reorganization deferred tax asset as a direct addition to additional paid-in capital.