-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, TK9NRNhHVuHrYyS8Zp7vnZ4ho1OegTKHakhB8vv2tHSffAUSJjaL3QxPgGwxHtfj AbVpka/2vPY+eE5BN2GMkQ== 0000912057-94-002046.txt : 19940617 0000912057-94-002046.hdr.sgml : 19940617 ACCESSION NUMBER: 0000912057-94-002046 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARTER HAWLEY HALE STORES INC /DE/ CENTRAL INDEX KEY: 0000750217 STANDARD INDUSTRIAL CLASSIFICATION: 5311 IRS NUMBER: 940457907 STATE OF INCORPORATION: DE FISCAL YEAR END: 0202 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08765 FILM NUMBER: 94534159 BUSINESS ADDRESS: STREET 1: 3880 N MISSION RD CITY: LOS ANGELES STATE: CA ZIP: 90031 BUSINESS PHONE: 2132272000 FORMER COMPANY: FORMER CONFORMED NAME: EMPORIUM CAPEWELL CO DATE OF NAME CHANGE: 19910827 FORMER COMPANY: FORMER CONFORMED NAME: BROADWAY HALE STORES INC DATE OF NAME CHANGE: 19910827 10-Q 1 FORM 10Q - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1994 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 1-8765 CARTER HAWLEY HALE STORES, INC. (Exact name of registrant as specified in its charter) Delaware 94-0457907 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3880 North Mission Road Los Angeles, California 90031 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (213) 227-2000 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 . --- --- Indicated by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X . No . --- --- As of May 28, 1994, approximately 45,622,122 shares of the registrant's common stock were outstanding. - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- CARTER HAWLEY HALE STORES, INC. Form 10-Q Index PAGE ---- PART I. FINANCIAL INFORMATION: Management's Discussion and Analysis of Financial Condition and Results of Operations. . 1 Consolidated Statement of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7 PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
CARTER HAWLEY HALE STORES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The discussion of results of operations that follows is based upon the Company's consolidated financial statements set forth on pages 4 to 7. The discussion of liquidity and capital resources is based upon the Company's current financial position. RECENT DEVELOPMENTS A significant number of the Company's Southern California stores suffered damage as a result of the major earthquake which affected that area on January 17, 1994. While most of the area stores were reopened within two weeks, four stores suffered substantial damage. Of these stores, one was reopened in the later part of May, two stores are scheduled to reopen during June and the remaining store is scheduled to reopen in the fall season. The Company maintains earthquake and business interruption insurance with standard deductible provisions that require the Company to incur an initial level of costs at each location subject to damage or interruption of business. In January 1994, the Company established both a reserve of $65.4 million to cover costs of building and fixture repairs, inventory and business interruption losses, and other costs related to the earthquake and a receivable of $50.4 million for estimated insurance recoveries. As of April 30, 1994, $27.3 million of the reserve had been utilized, largely to cover repairs and damaged inventories, and $21.2 million had been received in insurance recoveries. The $15.0 million non-recurring charge recognized in January 1994, in management's opinion, continues to be adequate to cover earthquake related losses in excess of estimated insurance proceeds. RESULTS OF OPERATIONS For the thirteen weeks ended April 30, 1994, total sales were $431.1 million, a decrease of 2.6% compared with the $442.5 million in sales for the thirteen weeks ended May 1, 1993. Current year results were impacted by the January 17, 1994 Northridge earthquake and the loss of sales from the four stores which remained closed during the period. On a comparable store basis, sales increased 4.7% for the quarter. Earnings before interest and taxes ("EBIT") of $4.6 million, 1.1% of sales in the current year period compares to $5.0 million, 1.1% of sales in the prior year period. The decrease in the current quarter reflects the impact of lower sales and a continuing promotional environment. Cost of goods sold improved to $319.4 million, 74.1% of sales from $329.5 million, 74.5% in the prior year period. The .4% improvement reflects savings in buying costs. Selling, general, and administrative expenses were $129.7 million, 31.1% of sales, compared to $129.2 million, 29.2% of sales last year. Savings from cost reduction programs put in place during fiscal 1993 were largely offset by higher promotion and store operating expense levels during the current year period. Finance charge revenue increased to $22.5 million, 5.2% of sales, in the current year period, from $21.2 million, 4.8% of sales, in the comparable prior year period. The improvement reflects increasing customer receivable balances resulting from an October 1993 change in 1 payment terms, reducing the minimum monthly payment requirement on the Company's short term revolving charge accounts. Limitations on the Company's ability to record income tax benefits for net operating loss carryforwards for financial statement purposes resulted in no income tax benefit being recognized in the current year. The income tax benefit recognized in the first quarter of the prior year was eliminated in the fourth quarter of that year for similar reasons. Interest expense increased by $.2 million to $22.5 million in the current year first quarter from $22.3 million in the comparable prior year period. The effect of increased interest rates and borrowing fees was partially offset by lower borrowing levels. Due to the seasonal nature of the retail business wherein a significant portion of sales for the year are generated in the fourth quarter, the Company follows the practice of allocating certain fixed buying and occupancy costs among quarters within the fiscal year to match these costs with the associated seasonal sales revenue. Operating results, on a pre-tax basis, reflect the reallocation of such buying and occupancy costs, resulting in benefits of $6.9 million and $6.6 million being reflected in the operating results for the current and prior year first quarter periods. The seasonal nature of the retail business also results in a significant portion of the earnings from operations for the year being generated in the fourth quarter. Interim operating results are thus not necessarily indicative of earnings from operations that will be realized for the full fiscal year. LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY. The Company has adequate funding available to meet its operating requirements under separate credit and receivables facilities. Subject to collateral limitations, the facilities provide for up to $225.0 million in credit financing and up to $575.0 million in financing for the Company's proprietary credit card receivables portfolio. As of April 30, 1994, no advances and $56.0 million in letters of credit were outstanding under the credit facility and $340.2 million of borrowings, $104.5 million less than the maximum available based on the level of customer receivables, were outstanding under the receivables facility. The facilities expire in October 1995. The credit facility contains a number of operating and financial covenants, as well as significant negative covenants. The credit facility includes covenants for material adverse changes, minimum aggregate net cash flow and earnings before interest, taxes, depreciation and amortization ("EBITDA"). In addition, the credit facility prohibits the Company from paying dividends on its stock and places limitations on inventory levels and capital expenditure amounts. During the first quarter of the current year, the financial covenants were relaxed by an amendment to the credit facility which took into account the enhanced liquidity provided by proceeds of $137.9 million from the December 1993 issuance of 6.25% Convertible Senior Subordinated Notes. The Company is currently in compliance with all covenants under the credit facility. As of April 30, 1994, cash flow and EBITDA levels exceeded covenant requirements by $30.9 million and $28.4 million, respectively. In addition, the Company's net inventory ratio at April 30, 1994 was 73.7% or 13.5% less than the maximum permitted under the credit facility and year-to-date capital expenditures amounted to $7.4 million compared to the $110.0 million maximum allowable for fiscal 1994. The credit agreement and the Company's agreements with its other principal secured creditors contain additional covenants and requirements, all of which the Company is in compliance with. 2 A substantial portion of the Company's debt is variable rate debt. Assuming that the average borrowings and all other variables would have remained constant, an increase (or decrease) in the interest rates applicable to the variable rate portion of the Company's debt throughout the thirteen week period ended April 30, 1994 of one percent would have increased (or decreased) the Company's interest expense for such period by approximately $1.0 million. CAPITAL EXPENDITURES. The Company's business strategy includes a store remodeling program designed to increase selling space within existing stores and to make more productive use of existing selling space. Capital expenditures for the current year, excluding costs for earthquake repairs, are projected at approximately $100.0 million and will be largely concentrated on the remodel program. The capital expenditure program may be modified over time to accommodate market factors and the Company's then existing financial condition. In addition, from time to time the Company may consider proposals to close existing stores or open new stores. The Company's ability to fund its capital expenditure program and to implement its business strategy will depend on cash flow from operations and the continued availability of borrowings under the credit facility. Operating cash flow will be affected by, among other things, the timing of results from the Company's business strategy, sales during the holiday season, and general competitive and economic conditions. The Company believes that the operating cash flow and amounts available under the credit facility, together with proceeds from the 1993 Convertible Senior Subordinated Notes and equity offerings, will be sufficient to fund the major elements of its business strategy. However, the Company continuously evaluates increasing or decreasing the number of stores, the terms of its credit and receivables facilities and other operating and financing alternatives. 3 CARTER HAWLEY HALE STORES, INC. Consolidated Statement of Earnings (In thousands) (Unaudited)
Thirteen Weeks Ended -------------------------------- April 30, May 1, 1994 1993 ------------- ------------ Sales $ 431,077 $ 442,480 Finance charge revenue 22,537 21,228 Cost of goods sold, including occupancy and buying costs 319,366 329,454 Selling, general, and administrative expenses 129,695 129,213 ------------- ------------ Earnings from operations before interest expense and income taxes 4,553 5,041 Interest expense, net 22,513 22,300 ------------- ------------ Pretax loss (17,960) (17,259) Income tax benefit 0 6,900 ------------- ------------ Net loss $ (17,960) $ (10,359) ------------- ------------ ------------- ------------ Loss per common share $ (0.38) $ (0.29) ------------- ------------ ------------- ------------
See Accompanying Notes to Consolidated Financial Statements. 4 CARTER HAWLEY HALE STORES, INC. Consolidated Balance Sheet (In thousands) (Unaudited)
April 30, January 29, May 1, 1994 1994 1993 -------------- ------------- ------------ ASSETS Current assets Cash $ 18,414 $ 18,192 $ 18,213 Accounts receivable, net 572,014 627,374 518,884 Merchandise inventories 405,508 427,631 419,623 Other current assets 21,215 9,799 18,837 ----------- ------------- ------------ 1,017,151 1,082,996 975,557 Property and equipment, net 810,353 810,608 786,730 Other assets 37,957 40,543 43,276 ----------- ------------- ------------ $ 1,865,461 $ 1,934,147 $ 1,805,563 ----------- ------------- ------------ ----------- ------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable $ $ $ 112,200 Current installments 3,460 3,459 7,070 Accounts payable 129,690 151,687 114,892 Accrued expenses 150,422 186,837 106,948 Current income taxes 1,116 1,203 2,984 ----------- ------------- ------------ 284,688 343,186 344,094 Receivables based financing 339,561 332,182 411,531 Other secured long-term debt 520,366 517,287 517,492 Convertible subordinated notes 143,750 143,750 Capital lease obligations 43,933 44,667 46,818 Other liabilities 122,341 124,508 115,676 Deferred income taxes 14,850 14,850 5,550 Shareholders' equity Preferred stock, $.01 par value 9 9 11 Common stock, $.01 par value 467 468 352 Other paid-in capital 501,001 500,785 351,678 Accumulated earnings (deficit) (105,505) (87,545) 12,361 ----------- ------------- ------------ 395,972 413,717 364,402 ----------- ------------- ------------ $ 1,865,461 $ 1,934,147 $ 1,805,563 ----------- ------------- ------------ ----------- ------------- ------------
See Accompanying Notes to Consolidated Financial Statements. 5 CARTER HAWLEY HALE STORES, INC. Consolidated Statement of Cash Flows (In thousands) (Unaudited)
Thirteen Weeks Ended -------------------------------- April 30, May 1, 1994 1993 ------------- ------------ Operating activities Loss from operations $ (17,960) $ (10,359) Adjustments to reconcile loss from operations to net operating cash flows Depreciation and amortization 10,009 8,335 Deferred income taxes (6,900) Changes in operating assets and liabilities Customer receivables, net 34,610 59,110 Merchandise inventories 22,123 48,086 Accounts payable and accrued expenses (45,027) (85,267) Other, net (2,966) (5,405) ------------ ------------ Net cash provided by operating activities 789 7,600 ------------ ------------ Investing activities Purchases of property and equipment (7,354) (9,998) ------------ ------------ Financing activities Net change in financing under receivables based facility 7,379 (56,046) Net change in financing under working capital facility 59,885 Retirements of long-term debt and capital lease obligations (807) (1,845) Issuances of common stock 215 ------------- ------------ Net cash provided by financing activities 6,787 1,994 ------------- ------------ Net increase (decrease) in cash 222 (404) Cash at the beginning of the period 18,192 18,617 ------------- ------------ Cash at the end of the period $ 18,414 $ 18,213 ------------- ------------ ------------- ------------
See Accompanying Notes to Consolidated Financial Statements. 6 CARTER HAWLEY HALE STORES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) BASIS OF REPORTING The consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission and should be read in the context of the Summary of Significant Accounting Policies and Financial Review contained in the Company's Annual Report on Form 10-K for the fifty-two week period ended January 29, 1994. In the opinion of the Company's management, these statements contain all adjustments, all of which are of a normal recurring nature, necessary for the amounts shown to be fairly stated as of April 30, 1994 and May 1, 1993 and for the thirteen week periods then ended. The Balance Sheet as of January 29, 1994 is as included in the Company's Form 10-K report for the year ended January 29, 1994. EARNINGS PER SHARE OF COMMON STOCK Earnings per share are computed on the basis of the weighted average number of shares outstanding during the period, including dilutive stock options and all 35.0 million shares of Common Stock expected to be issued in accordance with the plan of reorganization (the "POR") approved in connection with the Company's emergence from bankruptcy on October 8, 1992 (the "Emergence Date"). As of April 30, 1994, 1.2 million shares of common stock remain to be issued in accordance with the POR. INVENTORIES The last-in, first-out ("LIFO") method of accounting resulted in charges to cost of goods sold of $.5 million in the first quarters of both the current and prior year. If all inventories had been valued on a first-in, first-out basis, they would have been lower by $10.3 million and $1.4 million at April 30, 1994 and May 1, 1993. 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings No material change has occurred in the litigation described in "Item 3: Legal Proceedings" on pages 17 and 18 of the Company's Form 10-K for the year ended January 29, 1994. Item 6. Exhibits and reports on Form 8-K (a) Exhibits: 11.1* Computation of Earnings Per Share. - - -------------- * Exhibit filed with this Form 10-Q. (b) Reports on Form 8-K: March 9, 1994 Filing of Sixth Amendment to Credit Agreement, dated as of February 26, 1994, among Carter Hawley Hale Stores, Inc., various financial institutions and General Electric Capital Corporation, as agent for the lenders. March 14, 1994 Filing of Carter Hawley Hale Stores, Inc.'s financial results reported for the fiscal year and fourth quarter ended January 29, 1994. 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARTER HAWLEY HALE STORES, INC. Date June 8, 1994 /s/J.C. HAECKEL ------------ -------------------------------------- J.C. Haeckel, Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date June 8, 1994 /s/J.D. DAVIES ------------ ---------------------------------------- J.D. Davies, Vice President, Accounting (Principal Accounting Officer) 9 EX-11.1 2 EXHIBIT 11.1 EXHIBIT 11.1 CARTER HAWLEY HALE STORES, INC. COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share data)
Thirteen Thirteen Weeks Ended Weeks Ended April 30, 1994 May 1, 1993 -------------- ----------- Net loss used to compute earnings per common share . . . . . . . . . . . . . . . . . . . . $(17,960) $(10,359) --------- --------- --------- --------- Weighted average number of common shares outstanding during this period (1) . . . . . . . . . . . 46,826 35,200 --------- --------- --------- --------- Loss per common share. . . . . . . . . . . . . . . . . . . $ (.38) $ (.29) --------- --------- --------- --------- - - ----------- (1) The weighted average number of shares outstanding reflects all shares of Common Stock expected to be issued in accordance with the POR as if they had been issued on the Emergence Date.
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