-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S78nE706XIY8xYwwysIK1CYiCaA7WFMvaOKr1SGDxZYW9OvTN+eY7MPyzZUpuqGS XAAtWV71G2v2iJEFe7kTLg== 0000813775-97-000005.txt : 19970618 0000813775-97-000005.hdr.sgml : 19970618 ACCESSION NUMBER: 0000813775-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970503 FILED AS OF DATE: 19970617 SROS: CSX SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAMILY BARGAIN CORP CENTRAL INDEX KEY: 0000813775 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 510299573 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10089 FILM NUMBER: 97625014 BUSINESS ADDRESS: STREET 1: 315 EAST 62ND ST STREET 2: 6TH FLR CITY: NEW YORK STATE: NY ZIP: 10021 BUSINESS PHONE: 2129809670 MAIL ADDRESS: STREET 1: 315 EAST 62ND ST CITY: NEW YORK STATE: NY ZIP: 10021 FORMER COMPANY: FORMER CONFORMED NAME: DRS INDUSTRIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: LONGWOOD GROUP LTD DATE OF NAME CHANGE: 19920527 10-Q 1 QUARTERLY REPORT ON FORM 10-Q MAY 3, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 1O-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 3, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-10089 FAMILY BARGAIN CORPORATION (Exact name of registrant as specified in its charter) Delaware 51-0299573 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4000 Ruffin Road, San Diego, CA 92123 (Address of principal executive office) (Zip Code) (619) 627-1800 (Registrant's telephone number, including area code) 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. [X] YES [ ] NO The number of shares outstanding of the registrant's of common stock, as of June 10, 1997, was 4,929,822 shares. 2 FAMILY BARGAIN CORPORATION FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MAY 3, 1997 INDEX
PART I. FINANCIAL INFORMATION - ------ --------------------- Page No. ---- Item 1. Financial Statements Family Bargain Corporation and Subsidiaries Consolidated Balance Sheets as of February 1, 1997 and May 3, 1997 (Unaudited) F-1 Family Bargain Corporation and Subsidiaries Consolidated Statements of Operations (Unaudited) for the three months ended April 27, 1996 and May 3, 1997 F-3 Family Bargain Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) for the three months ended April 27, 1996 and May 3, 1997 F-4 Family Bargain Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) F-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 3 PART II. OTHER INFORMATION - ------- ----------------- Item 6. Exhibits and Reports on Form 8-K 7
- 2- 3 PART I ITEM 1 FAMILY BARGAIN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 1, 1997 AND MAY 3, 1997
February 1, May 3, 1997 1997 (Unaudited) Assets - ------ Current assets: Cash $ 3,261,000 4,716,000 Accounts receivable - non-trade 77,000 684,000 Merchandise inventories 29,118,000 38,513,000 Prepaid expenses 862,000 2,746,000 ---------- ---------- Total current assets 33,318,000 46,659,000 Leasehold improvements and equipment, net 10,714,000 11,944,000 Other assets 2,323,000 2,088,000 Excess of cost over net assets acquired (goodwill), less accumulated amortization of $5,332,000 and $5,734,000 at February 1, 1997 and May 3, 1997, respectively 34,314,000 33,912,000 ---------- ---------- Total assets $ 80,669,000 94,603,000 ========== ==========
(continued) F-1 4 FAMILY BARGAIN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 1, 1997 AND MAY 3, 1997 (Continued)
February 1, May 3, 1997 1997 (Unaudited) Liabilities and Stockholders' Equity - ------------------------------------ Current liabilities: Current maturities of long-term debt and capital leases $ 5,748,000 4,840,000 Accounts payable 17,491,000 22,721,000 Accrued salaries, wages and bonuses 2,924,000 1,899,000 Other accrued expenses 6,907,000 4,949,000 ---------- ---------- Total current liabilities 33,070,000 34,409,000 Revolving credit notes 17,887,000 23,715,000 Long-term debt, less current maturities 14,422,000 13,329,000 Deferred rent 2,098,000 2,230,000 Capital lease and other long-term obligations 1,984,000 2,335,000 ---------- ---------- Total liabilities 69,461,000 76,018,000 ---------- ---------- Commitments and contingencies Stockholders' equity: Series A convertible preferred stock; $.01 par value; 4,500,000 shares authorized; 3,727,415 and 3,638,690 shares issued and outstanding (aggregate liquidation preference of $37,274,000 and $36,387,000) at February 1, 1997 and May 3, 1997, respectively 37,000 37,000 Series B junior convertible, exchangeable preferred stock, $.01 par value, 40,000 shares authorized, 22,000 and 33,465 shares issued and outstanding (aggregate liquidation preference of $22,000,000 and $33,465,000) at February 1, 1997 and May 3, 1997, respectively - - Common stock, $.01 par value, 80,000,000 shares authorized, 4,693,337 and 4,929,822 shares issued and outstanding at February 1, 1997 and May 3, 1997, respectively 14,000 17,000 Additional paid-in capital 71,090,000 82,553,000 Stock subscription notes receivable - (1,865,000) Accumulated deficit (59,933,000) (62,157,000) ---------- ---------- Total stockholders' equity 11,208,000 18,585,000 ---------- ---------- Total liabilities and stockholders' equity $ 80,669,000 94,603,000 ========== ==========
See accompanying notes to consolidated financial statements. F-2 5 FAMILY BARGAIN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 27, 1996 AND MAY 3, 1997 (Unaudited)
For the For the Three Months Ended Three Months Ended April 27, 1996 May 3, 1997 Net sales $ 49,825,000 60,436,000 Cost of sales 32,342,000 39,313,000 ---------- ---------- Gross profit 17,483,000 21,123,000 Selling, general and administrative expenses 17,540,000 20,805,000 Amortization of goodwill 462,000 401,000 ---------- ---------- Operating loss (519,000) (83,000) Interest expense and financing fees (1,039,000) (1,277,000) ---------- ---------- Net loss (1,558,000) (1,360,000) Preferred stock dividends (854,000) (864,000) ---------- ---------- Net loss applicable to common stock $ (2,412,000) (2,224,000) ========== ========== Net loss applicable to common stock per common and common share equivalent $ (0.60) (0.46) Weighted average shares outstanding 4,040,034 4,818,076
See accompanying notes to consolidated financial statements. F-3 6 FAMILY BARGAIN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED APRIL 27, 1996 AND MAY 3, 1997 (Unaudited)
For the For the Three Months Ended Three Months Ended April 27, 1996 May 3, 1997 Cash flows from operating activities: Net loss $ (1,558,000) (1,360,000) Adjustments to reconcile loss to net cash used in operating activities: Depreciation and amortization 1,009,000 1,207,000 Amortization of debt discount 263,000 459,000 Excess of straight-line rent over cash payments 4,000 132,000 Increase in merchandise inventories (8,693,000) (9,395,000) Decrease (increase) in accounts receivable-non trade, prepaid expenses and other assets 255,000 (2,277,000) Increase in layaway receivables (513,000) - Increase in accounts payable 1,281,000 5,230,000 Increase (decrease)in accrued salaries, wages and bonuses 503,000 (1,025,000) Decrease in other accrued expenses and other current liabilities (3,713,000) (2,031,000) ----------- ----------- Net cash used in operations (11,162,000) (9,060,000) ----------- ----------- Cash flows used in investing activities- Purchase of leasehold improvements and equipment (1,485,000) (1,370,000) ----------- ----------- Cash flows from financing activities: Borrowings on revolving credit note 73,912,000 80,893,000 Payments on revolving credit note (65,318,000) (75,065,000) Proceed from the issuance of notes payable 815,000 - Payments on notes payable and capital lease obligations (482,000) (2,622,000) Payment of deferred debt issuance costs - (57,000) Net proceeds from issuance of preferred stock 2,856,000 9,600,000 Payment of dividends on preferred stock (854,000) (864,000) ----------- ----------- Net cash provided by financing activities 10,929,000 11,885,000 ----------- -----------
(continued) F-4 7 FAMILY BARGAIN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED APRIL 27, 1996 AND MAY 3, 1997 (Continued) Net increase (decrease) in cash (1,718,000) 1,455,000 Cash at the beginning of the period 1,958,000 3,261,000 ----------- ----------- Cash at the end of the period $ 240,000 4,716,000 =========== =========== Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 601,000 835,000
See accompanying notes to consolidated financial statements. F-5 8 FAMILY BARGAIN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Unaudited Interim Financial Statements The accompanying unaudited consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the financial statements for the fiscal year ended February 1, 1997 included in the Family Bargain Corporation and Subsidiaries' (the Company) Form 10-K as filed with the Securities and Exchange Commission. The unaudited consolidated financial statements include the accounts of Family Bargain Corporation and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation. In the opinion of management, the unaudited consolidated financial statements as of and for the three months ended May 3, 1997 reflect all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Due to the seasonal nature of the Company's business, the results of operations for the interim period may not necessarily be indicative of the results of operations for a full year. (2) Financing Transactions In February and March 1997, the Company placed 9,600 shares of Series B Junior Convertible, Exchangeable Preferred Stock (Series B Preferred Stock) with private investors for net cash proceeds of $9,600,000. In addition, in March 1997, the Company issued 1,865 shares of Series B Preferred Stock to certain key employees and executives of the Company for $1,865,000 in full recourse notes which are reflected as an offset to stockholders' equity under the caption "Stock Subscription Notes Receivable" in the accompanying consolidated balance sheet as of May 3, 1997. (3) Long-term Debt and Revolving Credit Notes At May 3, 1997 the Company's estimation of cash flows which determine the timing and amounts of payments of certain subordinated debt of General Textiles were the same as estimated for February 1, 1997. Consequently, there were no adjustments to the carrying value of such debt during the three months ended May 3, 1997 except for recurring amortization of debt discount. In June 1997, the Company amended its agreement with its working capital lender to increase its revolving credit facilities to $50.0 million, with advances limited to 65% of eligible inventory (as defined), an interest rate of prime plus 3/4% per annum and an expiration date (subject to annual one year extensions) of November 1999. F-6 9 (4) Earnings per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128, Earnings per Share (SFAS No. 128). SFAS No. 128 becomes effective for interim and annual periods ending after December 15, 1997 and will change the way the Company computes earnings per share. However, had the Company applied SFAS No. 128, there would have been no difference between the loss per share reported under SFAS No. 128 and the loss per share reported on the accompanying consolidated statement of operations for the three months ended May 3, 1997. (5) Provision for Income Taxes No provision for income taxes has been reflected in the accompanying consolidated statements of operations for the three months ended April 27, 1996 and May 3, 1997 since the Company generated tax losses during these periods. While losses would increase the Company's net operating loss carry forwards (NOLs), realization of such losses is not assured due to limitations on utilization of NOLs and the Company's history of losses. As a result, a full valuation allowance has been recognized against the net deferred tax assets arising from the increased NOLs and no benefit for income taxes is reflected in the accompanying statements of operations. F-7 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Management's discussion of the results of operations provides analyses of the Company's operations during the three months ended April 27, 1996 and May 3, 1997. RESULTS OF OPERATIONS THREE MONTHS ENDED MAY 3, 1997 COMPARED TO THE THREE MONTHS ENDED APRIL 27, 1996 Net sales (gross sales less sales tax and sales returns) were $60.4 million for the three months ended May 3, 1997 compared to $49.8 million for the three months ended April 27, 1996, an increase of $10.6 million. Of the total increase,$700,000 was attributable to a 1.3% increase in comparable store sales (sales at stores open throughout both periods) and the remaining $9.9 million increase in sales was attributable to the opening of new and, therefore, non-comparable stores. As of May 3, 1997 there were 158 stores in operation compared to 135 stores as of April 27, 1996. Gross profit was $21.1 million for the three months ended May 3, 1997 compared to $17.5 million for the three months ended April 27, 1996, an increase of $3.6 million. As a percentage of sales, gross profit was 35.0% for the three months ended May 3, 1997 compared to 35.1% for the three months ended April 27, 1996. Selling, general and administrative expenses were $20.8 million for the three months ended May 3, 1997 compared to $17.5 million for the three months ended April 27, 1996, an increase of $3.3 million. As a percentage of sales, selling, general and administrative expenses decreased to 34.4% for the three months ended May 3, 1997 from 35.2% for the three months ended April 27, 1996. The decrease in selling, general and administrative expenses as a percentage of sales was attributable to reduced compensation and other expenses related to the closed New York office, partially offset by increases in store wages (due to to increases in the minimum wage) and increased store opening expenses. Amortization of goodwill was $401,000 for the three months ended May 3, 1997 compared to $462,000 for the three months ended April 27, 1996. The decrease arose from the reduction in goodwill arising from the write-off goodwill disclosed in the consolidated financial statements for the fiscal year ended February 1, 1997. Interest expense and financing fees were $1.3 million for the three months ended May 3, 1997 compared to $1.0 million for the three months ended April 27, 1996. The increase of $300,000 was attributable primarily to increased debt discount amortization arising from changes in the projected timing and payment of the reorganization securities of General Textiles. - 3 - 11 The net loss applicable to common stock was $2.2 million for the three months ended May 3, 1997 compared to $2.4 million for the three months ended April 27, 1996. LIQUIDITY AND CAPITAL RESOURCES THE COMPANY OBLIGATIONS OF THE COMPANY. As of May 3, 1997, the Company, exclusive of General Textiles and Factory 2-U, Inc. ("Factory 2-U" and, with General Textiles, the "Operating Subsidiaries"), had outstanding indebtedness in the principal amount of $2.7 million, no material change from its debt obligations at February 1, 1997. Of that $2.7 million outstanding principal, $1.9 million is due during the next twelve months. Distributions of cash from the Operating Subsidiaries to the parent company to pay parent company debt service obligations, Series A 9 1/2% Convertible Preferred Stock (the "Series A Preferred Stock") dividends (if declared) and certain administrative expenses are limited under a plan of reorganization and certain debt agreements of the Operating Subsidiaries. Permitted cash payments from General Textiles include payments pursuant to a tax sharing agreement, certain subordinated debt of General Textiles (which the Parent holds), and a management agreement. Permitted cash payments by Factory 2-U to the Parent are limited to payments pursuant to a management agreement and a guaranty fee agreement. In February and March 1997, the Company placed 9,600 shares of Series B Junior Convertible, Exchangeable Preferred Stock (Series B Preferred Stock) with private investors for cash net proceeds of $9.6 million. The net proceeds of the private placement were provided to the Operating Subsidiaries for working capital purposes. Management believes that permitted cash flows to the parent company will be adequate to finance its administrative expenses and meet the obligations under its existing indebtedness as they become due for at least the next twelve months. The ability of the Company to make dividend payments on its Series A Preferred Stock as they become due will be dependent on the results of operations of the Company. GENERAL TEXTILES GENERAL. General Textiles finances its operations through credit provided by suppliers, amounts borrowed under its $25.0 million revolving credit facility, $3.0 million in installment notes and internally generated cash flow. At May 3, 1997, General Textiles was obligated to non-affiliate holders of its subordinated notes and reorganization securities in the face amount of $23.1 million and a carrying value of $11.6 million, of which management estimates principal payments in the amount of approximately $1.3 million will be paid the next twelve months. - 4 - 12 REVOLVING CREDIT FACILITY. As of May 3, 1997, General Textiles had $16.5 million outstanding and $4.6 million available to borrow under its revolving credit facility. As of June 10, 1997, General Textiles had $16.4 million outstanding and $4.9 million available to borrow under its revolving credit facility. Effective June 2, 1997, General Textiles amended its agreement with its working capital lender to increase its revolving credit facility to $35.0 million, with advances limited to 65% of eligible inventory (as defined), an interest rate of prime plus 3/4% per annum and an expiration date (subject to annual one year extensions) of November 1999. FACTORY 2-U GENERAL. Factory 2-U finances its operations through credit provided by suppliers, amounts borrowed under its $10.0 million revolving credit facility and internally generated cash flow. REVOLVING CREDIT FACILITY. As of May 3, 1997, Factory 2-U had $7.2 million outstanding and $1.0 million available to borrow under its revolving credit facility. As of June 10, 1997, Factory 2-U had $6.6 million outstanding and $1.7 million available to borrow under its revolving credit facility. Effective June 2, 1997, Factory 2-U, amended its agreement with its working capital lender to increase its revolving credit facility to $15.0 million, with advances limited to 65% of eligible inventory (as defined), an interest rate of prime plus 3/4% per annum and an expiration date (subject to annual one year extensions) of November 1999. CAPITAL EXPENDITURES The Company's planned future capital expenditures include costs to open new Family Bargain Center and Factory 2-U stores, to renovate and/or relocate existing stores, and to expand it central administrative and distribution facilities. Management believes that future expenditures will be financed from internal cash flow, a $5.0 million installment note commitment from its working capital lender (unused as of June 10, 1997) and the General Textiles and Factory 2-U revolving credit facilities. INFLATION In general, the Company believes that it will be able to offset the effects of inflation by increasing operating efficiency, by monitoring and controlling expenses and by increasing prices to the extent permitted by competitive factors. - 5 - 13 SEASONALITY AND QUARTERLY FLUCTUATIONS The Company historically has realized its highest level of sales and income during the third and fourth quarters of the fiscal year (the quarters ending in fiscal October and January) as a result of the "Back to School" (August and September) and Christmas (November and December) seasons. If the Company's sales were substantially below seasonal expectations during the third and fourth quarters, the Company's annual operating results would be adversely affected. The Company historically has realized lower sales in its first two quarters (the quarters ending in fiscal April and July), which often has resulted in the Company incurring losses during those quarters. The Company incurred a net loss in the quarter ended May 3, 1997. - 6 - 14 PART II ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None. 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. FAMILY BARGAIN CORPORATION Date: June 11, 1997 By: /s/ James. M. Baker ---------------------------- Name: James M. Baker Title: Treasurer (duly authorized officer and principal financial officer) - 7 - EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR THE THREE MONTHS ENDED MAY 3, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AS INCLUDED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q. 1000 3-MOS JAN-31-1998 MAY-03-1997 4,716 0 0 0 38,513 46,659 11,944 5,481 94,603 34,409 0 17 0 37 18,531 94,603 60,436 60,436 39,313 39,313 0 0 1,277 (1,360) 0 (1,360) 0 0 0 (1,360) (0.46) (0.46)
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