-----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, hfOTIBiEWlZs7ljulngnSVWZcp2fHovGG6Tj55Kx2QLD6JZxLEbtkRxGxi5zuvyp 19JlRUnqFYRuwkGjJ+6LyQ== 0000912057-94-004183.txt : 19941214 0000912057-94-004183.hdr.sgml : 19941214 ACCESSION NUMBER: 0000912057-94-004183 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941029 FILED AS OF DATE: 19941213 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROADWAY STORES INC CENTRAL INDEX KEY: 0000750217 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [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: 94564564 BUSINESS ADDRESS: STREET 1: 3880 N MISSION RD CITY: LOS ANGELES STATE: CA ZIP: 90031 BUSINESS PHONE: 2132272000 FORMER COMPANY: FORMER CONFORMED NAME: CARTER HAWLEY HALE STORES INC /DE/ DATE OF NAME CHANGE: 19920703 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 10-Q COVER, TOC, PG 1 THRU 9 - -------------------------------------------------------------------------------- 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 OCTOBER 29, 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 BROADWAY 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 Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X . No . --- --- As of December 5, 1994, approximately 45,852,291 shares of the registrant's common stock were outstanding. - -------------------------------------------------------------------------------- BROADWAY 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 BROADWAY 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 On June 17, 1994, at the Company's annual meeting, shareholders approved the change of the Company's name from Carter Hawley Hale Stores, Inc. to Broadway Stores, Inc. in order to more closely identify the Company with its operations. Accordingly, on June 20, 1994, Company common stock began trading on the New York Stock Exchange under the symbol "BWY". On November 4, 1994, the Company reopened the last of the four stores which suffered substantial damage in the January 17, 1994 Northridge earthquake. 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 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. In addition, the Company established a receivable of $50.4 million for estimated insurance recoveries. The reserve has been fully utilized to cover repairs and damaged inventories, and as of October 29, 1994, $33.8 million has 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 Sales for the current quarter and year-to-date periods ended October 29, 1994 were $474.9 million and $1,363.0 million compared to $469.7 million and $1,387.1 million in the comparable prior year periods. Current year results were impacted by the January 17, 1994 Northridge earthquake and the loss of sales from the four most severely damaged stores. On a comparative store basis sales for the current quarter and year-to-date periods increased 3.9% and 3.2% over the comparable prior year periods. The net losses of $18.4 million and $49.3 million in the current quarter and year-to-date periods improved from losses of $25.1 million and $77.9 million in the comparable prior year periods. Prior year results include a $25.0 million charge in the second quarter for non-recurring costs for the implementation of expense reduction programs. Earnings before interest and taxes ("EBIT") of $7.1 million and $22.2 million in the current quarter and year-to-date periods compare to losses of $5.3 million and $21.0 million in the comparable prior year periods. Cost of goods sold including buying and occupancy costs improved to $355.3 million, 74.8% of sales and $1,012.9 million, 74.3% of sales in the current quarter and year-to-date periods as compared to $360.0 million, 76.7% of sales and $1,049.8 million, 75.7% of sales in the comparable prior year periods. The improvement reflects improving margins. 1 Selling, general, and administrative expenses were $134.7 million, 28.4% of sales and $395.0 million, 29.0% of sales in the current quarter and year-to- date periods compared to $133.8 million, 28.5% of sales and $393.3 million, 28.4% of sales last year. Savings from cost reduction programs put in place during fiscal 1993 were largely offset by higher store operating expenses and promotional costs during the current year period. Finance charge revenue increased to $22.2 million, 4.7% of sales, and $67.1 million, 4.9% of sales in the current quarter and year-to-date periods, from $18.9 million, 4.0% of sales, and $60.0 million, 4.3% of sales in the comparable prior year periods. The improvement reflects earnings on higher customer receivable balances resulting from an October 1993 change in payment terms which reduced the minimum monthly payment requirement on the Company's short term revolving charge accounts. Interest expense increased by $5.7 million to $25.5 million in the third quarter and increased by $7.7 million to $71.5 million for the current year-to- date period. The increase was largely due to rising interest rates in 1994 and in part due to rising borrowing levels during the third quarter. 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. 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 $6.4 million and $19.2 million being reflected in the operating results for the current quarter and year-to-date periods as compared to $7.5 million and $18.8 million in the comparable prior year 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. On September 13, 1994 the Company finalized a private placement of subordinated asset backed notes (the "Asset Backed Notes") totalling $64.0 million. The Asset Backed Notes were issued in two classes: $38.0 million of 7.55% Class A notes due 1999 (rated BBB by Standard and Poors and Fitch Investors Service) and $26.0 million of 11.00% Class B notes due 1999 (rated BB by Standard and Poors and Fitch Investors Service). Proceeds of the notes are being used to increase the Company's liquidity. Concurrently, the Company finalized changes to its $800.0 million credit and receivables facilities. The amendments extended the maturity date of the agreements from October 1995 to October 1996 and enhanced certain credit facility provisions. Subject to collateral limitations, the facilities, as currently stated, 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 October 29, 1994, there were $41.9 million in advances and $50.6 million in letters of credit outstanding under the credit facility, $425.0 million of borrowings under the receivables facility and $64.0 million of Asset Backed Notes outstanding. Under these notes and facilities, $132.5 million remained available for borrowing. 2 The credit facility contains a number of operating and financial covenants, as well as significant negative covenants including 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. Further covenant changes to enhance flexibility were finalized concurrent with the issuance of $64.0 million in Asset Backed Notes. The Company is currently in compliance with all covenants under the credit facility. As of October 29, 1994, cash flow and EBITDA levels both exceeded covenant requirements by $34.2 million. In addition, the Company's net inventory ratio at October 29, 1994 was 72.1% or 5.0% less than the maximum permitted under the credit facility and year-to-date capital expenditures amounted to $75.8 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. A substantial portion of the Company's debt is at variable interest rates. Assuming that the average borrowings and all other variables would have remained constant, an increase (or decrease) of one percent in the interest rates applicable to the variable rate portion of the Company's debt would have increased (or decreased) the Company's interest expense by approximately $1.3 million and $3.4 million for the current quarter and year-to-date periods respectively. 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 $110 million and have been largely concentrated on the remodel program. Substantially all major projects were completed prior to the start of the holiday selling season. 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 future capital expenditure programs and implement new business strategies 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 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 BROADWAY STORES, INC. Consolidated Statement of Earnings (In thousands, except per share data) (Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended --------------------------------- --------------------------------- October 29, October 30, October 29, October 30, 1994 1993 1994 1993 ------------ ------------- ------------- ------------- Sales $ 474,910 $ 469,688 $ 1,363,017 $ 1,387,103 Finance charge revenue 22,171 18,895 67,096 59,988 Cost of goods sold, including occupancy and buying costs 355,260 360,036 1,012,914 1,049,833 Selling, general, and administrative expenses 134,724 133,821 394,968 393,271 Charge for non-recurring costs 25,000 ------------ ------------- ------------- ------------- Earnings (loss) from operations before interest expense and income taxes 7,097 (5,274) 22,231 (21,013) Interest expense, net 25,507 19,811 71,536 63,801 ------------- ------------- ------------- ------------- Pretax loss (18,410) (25,085) (49,305) (84,814) Income tax benefit 6,900 ------------- -------------- ------------- ------------- Net loss $ (18,410) $ (25,085) $ (49,305) $ (77,914) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Loss per common share $ (0.39) $ (0.54) $ (1.05) $ (1.95) ------------- ------------- -------------- ------------- ------------- ------------- -------------- -------------
See Accompanying Notes to Consolidated Financial Statements. 4 BROADWAY STORES, INC. Consolidated Balance Sheet (In thousands) (Unaudited)
October 29, January 29, October 30, 1994 1994 1993 ------------- ------------ ------------ Assets Current assets Cash $ 16,917 $ 18,192 $ 15,408 Accounts receivable, net 569,912 627,374 482,651 Merchandise inventories 547,890 427,631 504,438 Other current assets 37,108 9,799 28,222 ------------ ------------ ------------ 1,171,827 1,082,996 1,030,719 Property and equipment, net 863,149 810,608 799,552 Other assets 39,968 40,543 39,080 ------------ ------------ ------------ $ 2,074,944 $ 1,934,147 $ 1,869,351 ------------ ------------ ------------ ------------ ------------ ------------ Liabilities and Shareholders' Equity Current liabilities Notes payable $ 43,167 $ $ 44,280 Current installments 3,460 3,459 3,195 Accounts payable 191,163 151,687 185,651 Accrued expenses 134,285 186,837 120,470 Current income taxes 930 1,203 2,863 ------------ ------------ ------------ 373,005 343,186 356,459 Receivables based financing 488,950 332,182 388,681 Other secured long-term debt 525,904 517,287 514,471 Convertible subordinated notes 143,750 143,750 Capital lease obligations 42,465 44,667 45,338 Other liabilities 120,503 124,508 113,577 Deferred income taxes 14,850 14,850 5,550 Shareholders' equity Preferred stock, $.01 par value 9 9 11 Common stock, $.01 par value 469 468 467 Other paid-in capital 501,889 500,785 499,991 Accumulated deficit (136,850) (87,545) (55,194) ------------ ------------ ------------ 365,517 413,717 445,275 ------------ ------------ ------------ $ 2,074,944 $ 1,934,147 $ 1,869,351 ------------ ------------ ------------ ------------ ------------ ------------
See Accompanying Notes to Consolidated Financial Statements. 5 BROADWAY STORES, INC. Consolidated Statement of Cash Flows (In thousands) (Unaudited)
Thirty-Nine Weeks Ended -------------------------------- October 29, October 30, 1994 1993 ------------ ------------ Operating activities Loss from operations $ (49,305) $ (77,914) Adjustments to reconcile loss from operations to net operating cash flows Depreciation and amortization 30,842 25,033 Deferred income taxes (6,900) Changes in operating assets and liabilities Customer receivables, net 25,774 99,413 Merchandise inventories (120,259) (36,729) Accounts payable and accrued expenses 44,046 3,588 Other, net (55,222) (20,941) ------------ ------------ Net cash used by operating activities (124,124) (14,450) ------------ ------------ Investing activities Proceeds from asset sales 5,600 Purchases of property and equipment (75,766) (39,674) ------------ ------------ Net cash used by investing activities (75,766) (34,074) ------------ ------------ Financing activities Net change in financing under receivables based facility 156,768 (78,896) Net change in financing under working capital facility 43,167 (8,035) Retirements of long-term debt and capital lease obligations (2,425) (16,182) Issuances of common stock 1,105 148,428 ------------ ------------ Net cash provided by financing activities 198,615 45,315 ------------ ------------ Net decrease in cash (1,275) (3,209) Cash at the beginning of the period 18,192 18,617 ------------ ------------ Cash at the end of the period $ 16,917 $ 15,408 ------------ ------------ ------------ ------------
See Accompanying Notes to Consolidated Financial Statements. 6 BROADWAY 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 October 29, 1994 and October 30, 1993 and for the thirteen and thirty-nine 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 October 29, 1994, 1.1 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 and $1.5 million for the thirteen and thirty-nine week periods ended October 29, 1994 and in the comparative prior year periods. If all inventories had been valued on a first-in, first-out basis, they would have been lower by $9.3 million, $10.8 million and $.4 million at October 29, 1994, January 29, 1994 and October 30, 1993 respectively. 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. 27.1* Financial Data Schedules. * Exhibit filed with this Form 10-Q. (b) Reports on Form 8-K: September 13, 1994 Summary information relating to the completion of both the private placement of $64.0 million of Subordinated Credit Card Notes Due 1999 and the Seventh Amendment to the Credit Agreement, dated as of September 13, 1994, among Broadway Stores, Inc., various financial institutions and General Electric Capital Corporation as agent for the lenders. 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. BROADWAY STORES, INC. Date December 9, 1994 /s/ J.C. HAECKEL ---------------- ---------------------------------------- J.C. Haeckel, Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date December 9, 1994 /s/ J.D. DAVIES ---------------- ---------------------------------------- J.D. Davies, Vice President, Accounting (Principal Accounting Officer) 9 EX-11.1 2 EXHIBIT 11.1, 1 PAGE EXHIBIT 11.1 BROADWAY STORES, INC. COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share data)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED ------------------------------ ----------------------------- October 29, October 30, October 29, October 30, 1994 1993 1994 1993 ---------- ---------- ---------- ---------- Net loss used to compute earnings per common share......................... $ (18,410) $ (25,085) $ (49,305) $ (77,914) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted average number of common shares outstanding during this period (1) 46,896 46,676 46,862 39,964 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Loss per common share........................ $ (.39) $ (.54) $ (1.05) $ (1.95) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (1) The weighted average number of shares outstanding reflects all shares of Common Stock expected to be issued in accor- dance with the POR as if they had been issued on the Emergence Date.
EX-27.1 3 EXHIBIT 27.1
5 1,000 9-MOS JAN-28-1995 OCT-29-1994 16,917 0 569,912 0 547,890 1,171,827 863,149 0 2,074,944 373,005 1,201,069 469 9 0 365,039 2,074,944 1,363,017 1,430,113 1,012,914 1,012,914 0 0 71,536 (49,305) 0 (49,305) 0 0 0 (49,305) (1.05) (1.05)
-----END PRIVACY-ENHANCED MESSAGE-----