0000950131-95-002489.txt : 19950914 0000950131-95-002489.hdr.sgml : 19950914 ACCESSION NUMBER: 0000950131-95-002489 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950729 FILED AS OF DATE: 19950908 SROS: NYSE 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: 95571921 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 ================================================================================ 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 JULY 29, 1995 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 September 5, 1995, approximately 46,052,274 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............................................................................... 11
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 As discussed in Item 5 of this report, the Company has entered into agreements providing for the acquisition of the Company by Federated Department Stores, Inc. ("Federated") in exchange for approximately 12.7 million shares of Federated's common stock, certain amendments to the Company's working capital facility, and certain other matters. RESULTS OF OPERATIONS Sales for the current quarter and year-to-date period ended July 29, 1995 were $460.6 million and $884.6 million compared to $457.0 million and $888.1 million in the comparable prior year periods. Disappointing sales results continue to reflect difficulties in the California economy and weak demand in the women's apparel business. Excluding sales of stores which were temporarily closed in 1994 as a result of the Northridge earthquake, sales, on a same store basis, decreased 1.2% and 4.0% for the current quarter and year-to-date periods. The Company reported losses before interest and taxes of $6.1 million and $18.2 million in the current quarter and year-to-date periods compared to earnings before interest and taxes of $10.6 million and $15.1 million in the comparable prior year periods. Net losses increased to $37.4 million and $80.7 million, or losses of $0.80 and $1.72 per share, in the current quarter and year-to-date periods compared to losses of $12.9 million and $30.9 million, or losses of $0.28 and $0.66 per share, in the comparable prior year periods. The current year results reflect the impact of the continuing promotional environment on gross margin and selling expenses together with increases in interest costs. Cost of goods sold including occupancy and buying costs was $351.8 million, 76.4% of sales and $676.6 million, 76.5% of sales in the current quarter and year-to-date periods compared to $338.3 million, 74.0% of sales, and $657.7 million, 74.1% of sales in the comparable prior year periods. The deterioration reflects an increase in the level of markdowns taken and the impact of higher depreciation and increased other occupancy costs. Selling, general and administrative expenses were $138.6 million, 30.1% of sales and $274.5 million, 31.0% of sales in the current quarter and year- to-date periods compared to $130.5 million, 28.6% of sales and $260.2 million, 29.3% of sales in the comparable prior year periods. The expense increase relates largely to higher sales promotion costs incurred in the current year. Finance charge revenue increased to $23.7 million, 5.1% of sales and $48.3 million, 5.5% of sales in the current quarter and year-to-date periods, from $22.4 million, 4.9% of sales, and $44.9 1 million, 5.1% of sales in the comparable prior year periods. The current year improvements continue to reflect the positive impact of the fall 1993 payment terms changes which reduced the minimum monthly payment requirements on the Company's short term revolving charge accounts. The improvements in credit revenue significantly outweighed the related increases in bad debt costs experienced on higher customer receivables balances outstanding. Interest expense increased $7.9 million and $16.5 million to $31.4 million and $62.5 million in the current quarter and year-to-date periods compared to interest expense of $23.5 million and $46.0 million in the comparable prior year periods. The increase was due to both higher average borrowings and increased average interest rates. Limitations on the Company's ability to record income tax benefits for net operating loss carry forwards for financial statement purposes resulted in no income tax benefit being recognized in the current and prior year periods. 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 $6.5 million and $11.5 million being reflected in the operating results for the current quarter and year-to-date periods compared to $5.9 million and $12.8 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 As discussed in Item 5 of this report, the Company has entered into agreements providing for the acquisition of the Company by Federated, certain amendments to the Company's working capital facility and certain other matters, all of which will potentially impact the Company's liquidity and capital resources. The decision by the Company's Board of Directors to approve the merger considered a number of material factors including the Company's historic and prospective liquidity and financial condition. Among other factors, the Company's Board of Directors considered the significant risk that, in light of limitations on the Company's working capital financing and the general weakness in its operating results, significant vendors might refuse to ship merchandise for the Fall and Christmas seasons and that the Company might have no recourse to obtain additional working capital financing other than in the context of reorganization proceedings under the United States Bankruptcy Code ("Chapter 11 Proceedings"). In addition, the Company's Board of Directors considered the significant additional amounts of capital that will be required to upgrade and remodel the Company stores so as to maintain their position in an increasingly competitive retail environment and the significant constraints that the Company's high leverage imposes on its ability to raise such funds as an independent concern or in Chapter 11 Proceedings. Alternatives to the Merger, considered by the Company's Board of Directors, included, among others, the Company remaining an independent entity and seeking to reduce its high leverage through Chapter 11 Proceedings or through selected asset sales and the risks associated with such alternatives and the likelihood that no other alternative would provide greater value for Company stockholders than the Merger, and that Chapter 11 Proceedings, in particular, might result in considerably less value for Company stockholders. 2 The Company's current working capital financing requirements are provided by a Working Capital Facility and Receivables Facility which mature in October, 1996, except that the Working Capital Facility commitment will mature February 29, 1996, if the Merger with Federated shall not have become effective on or prior to such date. Subject to collateral limitations, the facilities, as currently amended, provide for up to $250.0 million in working capital financing and up to $575.0 million to finance the Company's proprietary credit card receivables portfolio. In conjunction with the August 17, 1995 amendments to the Working Capital Facility, the minimum inventory balance requirements were relaxed and all other financial covenants, except for the limitation on capital expenditures, were eliminated. As of July 29, 1995, $51.7 million in advances and $60.0 million in letters of credit were outstanding under the Working Capital Facility and $503.6 million of borrowings, the maximum available, were outstanding under the Receivables Facility. An additional $64.0 million of receivables were financed through subordinated asset backed notes which mature in 1999. 3 BROADWAY STORES, INC. Consolidated Statement of Earnings (In thousands, except per share data) (Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended ----------------------- ----------------------- July 29, July 30, July 29, July 30, 1995 1994 1995 1994 --------- --------- --------- --------- Sales $460,639 $457,030 $884,550 $888,107 Finance charge revenue 23,691 22,388 48,285 44,925 Cost of goods sold, including occupancy and buying costs 351,797 338,288 676,550 657,654 Selling, general, and administrative expenses 138,617 130,549 274,532 260,244 -------- -------- -------- -------- Earnings (loss) from operations before interest expense and income taxes (6,084) 10,581 (18,247) 15,134 Interest expense, net 31,364 23,516 62,499 46,029 -------- -------- -------- -------- Pretax loss (37,448) (12,935) (80,746) (30,895) Income taxes 0 0 0 0 -------- -------- -------- -------- Net loss $(37,448) $(12,935) $(80,746) $(30,895) ======== ======== ======== ======== Loss per common share $ (0.80) $ (0.28) $ (1.72) $ (0.66) ======== ======== ======== ========
See Accompanying Notes to Consolidated Financial Statements. 4 BROADWAY STORES, INC. Consolidated Balance Sheet (In thousands) (Unaudited)
July 29, January 28, July 30, 1995 1995 1994 ---------- ---------- ---------- ASSETS Current assets Cash $ 15,901 $ 18,318 $ 15,575 Accounts receivable, net 559,939 664,825 569,931 Merchandise inventories 390,825 504,522 415,443 Other current assets 25,418 11,613 27,640 ---------- ---------- ---------- 992,083 1,199,278 1,028,589 Property and equipment, net 885,002 888,258 816,947 Other assets 34,521 39,540 35,572 ---------- ---------- ---------- $1,911,606 $2,127,076 $1,881,108 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable $ 51,676 $ 11,740 $ Current installments 6,750 6,750 3,460 Accounts payable 107,295 175,622 128,997 Accrued expenses 113,029 141,027 125,525 Current income taxes 824 1,002 977 ---------- ---------- ---------- 279,574 336,141 258,959 Receivables based financing 503,584 573,138 392,143 Other secured long-term debt 521,384 522,517 523,517 Convertible subordinated notes 143,750 143,750 143,750 Capital lease obligations 39,930 41,524 43,199 Other liabilities 103,121 109,504 121,227 Deferred income taxes 14,850 14,850 14,850 Shareholders' equity Preferred stock, $.01 par value 8 9 9 Common stock, $.01 par value 470 469 469 Other paid-in capital 502,545 502,038 501,425 Accumulated deficit (197,610) (116,864) (118,440) ---------- ---------- ---------- 305,413 385,652 383,463 ---------- ---------- ---------- $1,911,606 $2,127,076 $1,881,108 ========== ========== ==========
See Accompanying Notes to Consolidated Financial Statements. 5 BROADWAY STORES, INC. Consolidated Statement of Cash Flows (In thousands) (Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended -------------------------- -------------------------- July 29, July 30, July 29, July 30, 1995 1994 1995 1994 --------- --------- --------- --------- Operating activities Loss from operations $(37,448) $(12,935) $(80,746) $(30,895) Adjustments to reconcile loss from operations to net operating cash flows Depreciation and amortization 12,703 10,192 25,339 20,201 Changes in operating assets and liabilities Customer receivables, net 15,528 4,438 71,718 39,048 Merchandise inventories 44,618 (9,935) 113,697 12,188 Accounts payable and accrued expenses 12,554 (4,139) (96,325) (49,166) Other, net 7,453 (28,273) 11,158 (31,239) -------- -------- -------- -------- Net cash provided (used) by operating activities 55,408 (40,652) 44,841 (39,863) -------- -------- -------- -------- Investing activities Purchases of property and equipment (6,988) (14,387) (15,420) (21,741) -------- -------- -------- -------- Financing activities Net change in financing under receivables based facility (11,859) 52,582 (69,554) 59,961 Net change in financing under working capital facility (37,076) 39,936 Retirements of long-term debt and capital lease obligations (1,531) (808) (2,727) (1,615) Issuances of common stock 507 426 507 641 -------- -------- -------- -------- Net cash provided (used) by financing activities (49,959) 52,200 (31,838) 58,987 -------- -------- -------- -------- Net decrease in cash (1,539) (2,839) (2,417) (2,617) Cash at the beginning of the period 17,440 18,414 18,318 18,192 -------- -------- -------- -------- Cash at the end of the period $ 15,901 $ 15,575 $ 15,901 $ 15,575 ======== ======== ======== ========
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 28, 1995. 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 July 29, 1995 and July 30, 1994 and for the thirteen and twenty-six week periods then ended. The Balance Sheet as of January 28, 1995 is as included in the Company's Form 10-K report for the year ended January 28, 1995. 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 July 29, 1995, 1.0 million shares of common stock remained reserved for issuance in accordance with the POR. INVENTORIES The last-in, first-out ("LIFO") method of accounting resulted in charges to cost of goods sold of $1.0 million and $2.0 million for the thirteen and twenty-six week periods ended July 29, 1995, and $.5 million and $1.0 million 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 $12.3 million, $14.3 million and $9.8 million at July 29, 1995, January 28, 1995 and July 30, 1994 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 16 and 17 of the Company's Form 10-K for the year ended January 28, 1995. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting of Stockholders held on June 16, 1995, the following proposals, detailed in the May 10, 1995 Notice of Annual Meeting and Proxy Statement, were voted on and approved as follows: 1. The election of directors to serve for a term of one year until the next Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified.
Name For Withheld ---- --- -------- Walter T. Dec 40,050,344 168,825 David L. Dworkin 40,040,707 178,462 Dr. L.F. Estrada 40,051,250 167,919 Sidney R. Petersen 40,050,586 168,583 Terry Savage 40,051,330 167,839 David M. Schulte 40,049,551 169,618 Sanford Shkolnik 40,048,436 170,733 Dr. R.M. Solow 40,051,385 167,784 James D. Woods 39,949,912 269,257 Samuel Zell 40,047,135 172,034
2. The ratification of the appointment of Price Waterhouse LLP as the Company's independent accountants for the Company's 1995 fiscal year.
For Against Abstain --- ------- ------- 40,093,050 86,264 39,855
ITEM 5. OTHER INFORMATION On August 14, 1995, the Company, Federated Department Stores, Inc. ("Federated"), and a wholly owned subsidiary of Federated ("Newco"), entered into an agreement (the "Merger Agreement") pursuant to which, on the terms and subject to the conditions set forth therein, Newco will be merged with and into the Company (the "Merger"), and the Company will thereby become a subsidiary of Federated. At the effective time of the Merger, among other things, each outstanding share of Company common stock will be converted into 0.27 shares of Federated's common stock. In connection with the Merger Agreement, Federated and Zell/Chilmark Fund, L.P. ("Zell/Chilmark") entered into an agreement (the "Stock Agreement"), pursuant to which, among other things, Zell/Chilmark agreed to vote the approximately 54% of the outstanding shares of Company common stock owned by it in favor of the adoption of the Merger Agreement and granted to Federated an option to purchase such shares for consideration consisting of 0.27 shares of Federated's common stock for each such share of Company common stock. In addition, the Company and General Electric Capital Corporation ("GE Capital") entered into an amendment (the "Working Capital Amendment") to the Company's working capital credit facility (the "Working Capital Facility") pursuant to which the size of the Working Capital Facility was increased to $250.0 million from $225.0 million, and the percentage of the value of "Eligible Inventory" that constitutes the "Borrowing Base" under the Working Capital Facility was increased to 55% from 8 50%. In addition, the minimum inventory balance requirements under the Working Capital Facility were relaxed and various financial covenants previously contained therein were eliminated. In connection with the Working Capital Amendment, the Company paid fees aggregating $1.125 million to GE Capital and will reimburse GE Capital for its expenses incurred in connection therewith, and GE Capital consented to the transactions contemplated by the Merger Agreement and the Stock Agreement. In addition, the Company, Federated, and Bank of America National Trust and Savings Association ("Bank of America") entered into a letter agreement (the "Bank of America Agreement") relating to certain mortgage indebtedness of the Company (the "Bank of America Loan") pursuant to which Bank of America, on behalf of itself and certain lenders under the Bank of America Loan, consented to the consummation of the Merger. Such consent is conditioned upon the Company entering into an amendment to the Bank of America Loan providing for recourse against the Company for repayment of its obligations thereunder, with the effectiveness of such amendment to be conditioned upon the consummation of the Merger. The consummation of the foregoing transactions is subject to the satisfaction or waiver of various conditions, as to which there can be no assurance. The Merger Agreement, the Stock Agreement, the Working Capital Amendment and the Bank of America Agreement are filed herewith as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein by this reference. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.1 Agreement and Plan of Merger, dated as of August 14, 1995, among Broadway Stores, Inc., Federated Department Stores, Inc., and Newco (incorporated by reference to Exhibit 2.1 to the Federated Department Stores, Inc. Registration Statement on Form S-4, Registration No. 33-62077). 10.2 Stock Agreement, dated as of August 14, 1995, between Federated Department Stores, Inc. and Zell/Chilmark (incorporated by reference to the Federated Department Stores, Inc. Schedule 13D, dated August 14, 1995, relating to the common stock of Broadway Stores, Inc.). 10.3 Tenth Amendment to Credit Agreement, dated as of August 17, 1995, among Broadway Stores, Inc., a Delaware Corporation previously known as Carter Hawley Hale Stores, Inc., the financial institutions parties thereto and General Electric Capital Corporation, a New York Corporation, as agent for the Lenders (incorporated by reference to Exhibit 4.1 to the Broadway Stores, Inc. current report on Form 8-K dated August 14, 1995, as amended on Form 8-K/A dated August 14, 1995). 10.4* Letter agreement, dated August 13, 1995, among Broadway Department Stores, Inc., Federated Department Stores, Inc. and Bank of America National Trust and Savings Association. 11.1* Computation of Earnings Per Share. 27.1* Financial Data Schedule. *Exhibit filed with this Form 10-Q. 9 (b) Reports on Form 8-K: June 29, 1995 Filing of Ninth Amendment to Credit Agreement, dated as of June 28, 1995, among Broadway Stores, Inc., a Delaware Corporation previously known as Carter Hawley Hale Stores, Inc., the financial institutions parties thereto and General Electric Capital Corporation, a New York Corporation, as agent for the Lenders. 10 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 September 8, 1995 /s/ J.C. HAECKEL ----------------- ----------------------------------------- J.C. Haeckel, Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date September 8, 1995 /s/ J.D. DAVIES ----------------- ----------------------------------------- J.D. Davies, Vice President, Accounting (Principal Accounting Officer) 11 EX-10.4 2 LETTER AGREEMENT 8/13/95 EXHIBIT 10.4 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Security Pacific Plaza 333 South Hope Street Los Angeles, California 90071 August 13, 1995 Broadway Stores, Inc. 444 South Flower Street Los Angeles, California 90071 Federated Department Stores, Inc. 7 West Seventh Street Cincinnati, Ohio 45202 Re: Consent and Waiver Under Term Loan Agreement -------------------------------------------- Ladies/Gentlemen: Please refer to the Amended and Restated Term Loan Agreement dated as of October 8, 1992 (as heretofore amended, waived or otherwise modified, the "Agreement") by and among Broadway Stores, Inc. ("Broadway"), the banks parties thereto (collectively, the "Banks") and Bank of America National Trust and Savings Association, as agent (in such capacity, the "Agent"). Capitalized terms used herein and not otherwise defined have the meaning assigned such terms in the Agreement. Background ---------- You have informed us that, pursuant to an Agreement and Plan of Merger dated as of August 14, 1995 (the "Merger Agreement") among Broadway, Federated Department Stores, Inc. ("Federated") and Nomo Company, Inc. ("Merger Sub"), Merger Sub intends to merge with and into Broadway with Broadway being the surviving corporation of such merger (such transaction hereinafter called the "Merger"),/(1)/ with the common stockholders of Broadway receiving shares of the common stock of Federated in exchange for their shares of Broadway common stock. In addition, ---------- /(1)/ Merger Sub is a wholly owned subsidiary of Federated formed for the sole purpose of effecting the Merger. August 13, 1995 Page 2 pursuant to a Stock Agreement dated as of August 14, 1995 between Federated and Zell/Chilmark Fund, L.P. ("Z/C"), Federated is acquiring an option (the "Option") to purchase all of the outstanding Broadway common stock held by Z/C for the same Federated common stock consideration that would otherwise be provided to the holders of Broadway common stock in connection with the Merger. You have requested our consent to and our waiver of any Default or Event of Default that might arise under the Agreement solely as a result of Broadway's entering into the Merger Agreement, the consummation of the Merger and/or any exercise of the Option by Federated (such transactions, together with each and every transaction, agreement and other arrangement relating thereto, collectively called the "Subject Transactions") on behalf of ourselves and the Majority Banks. Consent and Waiver ------------------ Subject to the terms and conditions contained in this letter, the Agent, on behalf of itself and the Majority Banks, hereby consents to the change of ownership of the stock of Broadway resulting from Broadway, Merger Sub and Federated entering into and consummating each of the Subject Transactions and permanently and irrevocably waives any Default or Event of Default under the Agreement or any other of the Restructured Loan Documents that arises or could arise solely as a result of a violation of Section 8.03 of the Agreement and analogous provisions of the other Restructured Loan Documents as a result of Broadway, Merger Sub and Federated entering into and consummating each of the Subject Transactions. Conditions and Agreements Relating to Consent and Waiver -------------------------------------------------------- The foregoing consent and waiver is subject to Broadway's entering into an appropriate amendment to the Restructured Loan Documents (including, without limitation, Section 11.22 of the Agreement) promptly after the date hereof providing for recourse against Broadway for repayment of the Obligations and permitting, in connection with such recourse, the Agent and the Banks to seek a personal or deficiency judgment against Broadway for payment of the Obligations in accordance with and subject to the terms of the Restructured Loan Documents. Such amendment will also effect such technical modifications of the Restructured Loan Documents as may be necessary as a result of the consummation of the Subject Transactions. This amendment will be subject to, and the effectiveness thereof will be expressly conditioned upon, the consummation of the Merger. In addition, Federated hereby agrees that (i) any funds it contributes to Merger Sub to enable Merger Sub to effect any repurchase of Broadway's 6-1/4% Convertible Senior Subordinated Notes due 2000 required as a result of the consummation of the August 13, 1995 Page 3 Subject Transactions will be contributed by an infusion of equity into Merger Sub, and (ii) it will discuss with the Agent the terms on which the consent of GE Capital and Prudential to the consummation of the Subject Transactions is being obtained and will ensure that the Agent and the Banks receive treatment under the Agreement and the other Restructured Loan Documents in connection with the waiver and consent to the consummation of the Subject Transactions set forth herein that is no less favorable, viewed as a whole and in the totality of the circumstances, than the treatment GE Capital and Prudential receive under the Working Capital Facility and the Prudential Loan Documents, respectively, in connection with their respective waivers and consents. Federated and Broadway confirm that the consent and waiver set forth herein applies and is effective only with respect to any Default or Event of Default that arises or could arise solely as a result of a violation of Section 8.03 of the Agreement and analogous provisions of the other Restructured Loan Documents as a result of Broadway, Merger Sub and Federated entering into and consummating each of the Subject Transactions. The Agent on behalf of the Banks hereby reserves all rights provided under the Restructured Loan Documents with respect to any other or future transactions. Except for the modifications to the Restructured Loan Documents contemplated by the amendment described in the preceding paragraph, the terms and provisions of the Restructured Loan Documents will be unaffected by the consummation of the Merger. The waiver and consent set forth herein will expire if the Merger is not consummated by January 31, 1996. August 13, 1995 Page 4 Please execute a copy of this letter in the space provided below to evidence your agreement with the terms set forth in the two preceding paragraphs. Very truly yours, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent and on behalf of the Majority Banks By: /s/ CLARA Y. STRAND ------------------------- Title: Vice President ---------------------- Agreed: ------ BROADWAY STORES, INC. By: /s/ JOHN C. HAECKEL -------------------------------- Title: Executive Vice President and Chief Financial Officer ---------------------------- FEDERATED DEPARTMENT STORES, INC. By: /s/ RONALD W. TYSOE -------------------------------- Title: Vice Chairman ---------------------------- EX-11.1 3 COMPUTATION OF EARNINGS EXHIBIT 11.1 BROADWAY STORES, INC. COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share data)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED ---------------------- ------------------------ July 29, July 30, July 29, July 30, 1995 1994 1995 1994 ---------- --------- ----------- ---------- Net loss used to compute earnings per common share......................... $(37,448) $(12,935) $(80,746) $(30,895) ======== ======== ======== ======== Weighted average number of common shares outstanding during this period /(1)/..... 46,969 46,865 46,955 46,846 ======== ======== ======== ======== Loss per common share...................... $ (.80) $ (.28) $ (1.72) $ (0.66) ======== ======== ======== ========
/(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. EX-27 4 ARTICLE 5 FDS
5 1,000 6-MOS FEB-03-1996 JUL-29-1995 15,901 0 559,939 0 390,825 992,083 885,002 0 1,911,606 279,574 1,208,648 470 8 0 304,935 1,911,606 884,550 932,835 676,550 676,550 0 0 62,499 (80,746) 0 (80,746) 0 0 0 (80,746) (1.72) (1.72)