-----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, J5gidywQReFfQS/4bDb32u28Lc1SVZUNvRS8AO9dQKlCa5kMUYlgfkOgQ8/+HXlp HtkrgpLNlq7L3N22BU8dFQ== 0000085149-94-000016.txt : 19941212 0000085149-94-000016.hdr.sgml : 19941212 ACCESSION NUMBER: 0000085149-94-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941029 FILED AS OF DATE: 19941209 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSES STORES INC CENTRAL INDEX KEY: 0000085149 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 560382475 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00631 FILM NUMBER: 94564004 BUSINESS ADDRESS: STREET 1: PO DRAWER 947 STREET 2: 218 S GARNETT ST CITY: HENDERSON STATE: NC ZIP: 27536 BUSINESS PHONE: 9194302600 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) (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 Commission File Number 0-631 ROSE'S STORES, INC. Incorporated Under the Laws of Delaware I.R.S. Employer Identification No. 56-0382475 P. H. Rose Building 218 South Garnett Street Henderson, North Carolina 27536 Telephone No. 919/430-2600 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 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class Shares Outstanding Voting common stock, no par value 8,262,420 Non-voting Class B stock, no par value 10,495,586 ROSE'S STORES, INC. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (Amounts in thousands except per share amounts) The following summary of financial information, which is unaudited, reflects all adjustments (none of which were other than normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the information presented below for the thirty-nine weeks ended October 29, 1994 and October 30, 1993. Notes: (1) The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. The Company continues to operate as a debtor-in-possession pursuant to the provisions of Sections 1107 and 1108 of the Bankruptcy Code. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. On August 1, 1994, the Company and the major constituencies in its Chapter 11 proceeding filed a joint plan of reorganization in the United States Bankruptcy Court for the Eastern District of North Carolina. The Plan was co-sponsored by the Company's significant secured creditors and its unsecured creditors' and equity committees, and was consented to by GE Capital, Rose's debtor-in-possession lender. On October 5, 1994 the Company filed its Amended Joint Plan of Reorganization (the "Amended Plan") and an Amended Disclosure Statement. The Bankruptcy Court approved the Amended Disclosure Statement and soon thereafter the Amended Plan was submitted to the Company's creditors and stockholders for acceptance. The Company anticipates seeking Court approval of the Amended Plan in mid December, but there can be no assurance as to the timing of approval, the terms of the Amended Plan upon approval or whether the Amended Plan will be approved. The following summary of the Plan is not intended as a solicitation of acceptances. The Plan provides secured creditors, primarily senior secured noteholders, with payments reducing their debt from $108,000 at the time of filing Chapter 11 to less than $30,000. The Plan contemplates a four year amortizing note on the remaining debt balance at an 11% annual interest rate. The unsecured creditors will receive 100% of the shares of common stock of the reorganized company, or such portion of the stock which will provide total realization of the group's approved claims. The existing stockholders will receive warrants for the purchase of up to 30% of the reorganized company's stock on a fully diluted basis. In addition, existing stockholders will be entitled to purchase rights to receive all or a portion of the new common stock which would otherwise be distributed to the unsecured creditors. All currently outstanding shares of stock, warrants and options will be canceled. In order for the Plan to be effective, certain conditions must be met, including, but not limited to, the following: (a) the Company must have made all required adequate protection payments to the secured lenders, and (b) the Company must have an operating cash flow of at least $25,000 as of December 31, 1994. The Company has received a post confirmation exit financing commitment. The commitment is for a three year revolving credit agreement which would, subject to the satisfaction of the terms and conditions contained there- in, allow the Company to borrow up to $80,000. (2) The operating results presented herein are not necessarily indicative of the operating results for a full year due to seasonal factors. (3) Included in the reorganization costs for 1994 is a $43,000 provision for the costs of closing 59 stores in 1994 and to realign corporate and administrative costs accordingly. (4) Certain reclassifications were made to 1993 balances to conform to the 1994 presentation. These reclassifications have no effect on stockholders' equity. (5) LIFO expense (credit) is included as an adjustment to reconcile net loss to net cash used in operating activities in the statements of cash flows because LIFO expense (credit) is a noncash item included in cost of sales to adjust inventories stated on a FIFO basis to a LIFO basis. ROSE'S STORES, INC. DEBTOR-IN-POSSESSION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in Thousands Except Per Share Amounts)
Thirteen Weeks Ended Thirty-Nine Weeks Ended October 29, October 30, October 29, October 30, 1994 1993 1994 1993 Revenue: Gross sales $ 178,531 276,301 $ 528,345 866,178 Leased department sales 6,088 10,192 17,970 31,341 Net sales 172,443 266,109 510,375 834,837 Leased department income 1,248 1,927 3,698 6,051 Total revenue 173,691 268,036 514,073 840,888 Costs and Expenses: Cost of sales 129,178 206,152 383,409 640,198 Selling, general and administrative 39,313 72,950 118,900 209,516 Depreciation and amortization 2,246 3,291 7,108 9,767 Interest 1,520 3,091 4,925 9,297 Total costs and expenses 172,257 285,484 514,342 868,778 Earnings (Loss) Before Reorganization Expense 1,434 (17,448) (269) (27,890) Reorganization Costs (Note 1) (3,936) (40,416) (54,746) (40,416) Net Loss $ (2,502) (57,864) $ (55,015) (68,306) Loss Per Share $ (0.13) (3.08) $ (2.93) (3.65) Weighted Average Shares 18,758 18,758 18,758 18,734 Note 1 Write-off of Bank Facility Costs $ - (4,528) $ - (4,528) Closed Store lease rejections - 13,026 - 13,026 Closed store provision - (44,500) (43,000) (44,500) DIP financing fees, amortization & expenses (844) (798) (1,778) (798) Estimated professional fees (2,817) (3,276) (9,331) (3,276) Other reorganization costs and expenses (275) (340) (637) (340) TOTAL REORGANIZATION COSTS $ (3,936) (40,416) $ (54,746) (40,416)
See notes to consolidated financial statements ROSE'S STORES, INC. DEBTOR-IN-POSSESSION CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands)
October 29, January 29, October 30, 1994 1994 1993 Assets Current Assets Cash and cash equivalents $ 620 11,955 5,128 Accounts receivable 23,109 15,057 23,494 Inventories 164,841 203,150 271,999 Prepaid merchandise 6,390 10,757 33,949 Other current assets 7,455 7,457 9,521 Total current assets 202,415 248,376 344,091 Property and Equipment, at cost Less accumulated depreciation and amortization 36,297 50,234 56,026 Deferred Income Tax Benefits 6,447 6,447 5,760 Other Assets 272 3,048 1,681 $ 245,431 308,105 407,558 Liabilities and Stockholders' Equity (Deficit) Current Liabilities Reclamation claims $ 266 4,000 20,353 Current maturities of capital lease obligations 1,010 2,374 2,372 Bank drafts outstanding 445 - - Accounts payable 33,505 35,507 52,442 Federal and state income taxes - - 1,307 DIP financing 34,975 - 27,219 Accrued salaries and wages 6,892 12,295 10,105 Reserve for store closings and remerchandising 5,720 - 31,346 Deferred income tax liability 6,447 6,447 5,760 Other current liabilities 12,725 14,113 22,534 Total current liabilities 101,985 74,736 173,438 Liabilities Subject to Settlement Under Reorganization Proceedings 173,248 207,456 208,640 Capital Lease Obligations 892 1,907 2,490 Deferred Income 2,229 2,296 2,671 Accumulated Postretirement Benefit Obligation 5,996 5,614 6,323 Stockholders' Equity (Deficit) Voting common stock Authorized 30,000 shares; issued 10,800 shares 2,250 2,250 2,250 Non-voting Class B stock Authorized 30,000 shares; issued 12,659 shares 18,795 18,795 18,795 Paid-in Capital-Stock Warrants 2,700 2,700 2,700 Retained earnings (Accumulated deficit) (44,046) 10,969 8,869 (20,301) 34,714 32,614 Treasury stock, at cost (4,701 shares at 10/29/94, 1/29/94 and 10/30/93) (18,618) (18,618) (18,618) Total stockholders' equity (deficit) (38,919) 16,096 13,996 $ 245,431 308,105 407,558
See notes to consolidated financial statements ROSE'S STORES, INC. DEBTOR-IN-POSSESSION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
For the Thirty-Nine Weeks Ended October 29, October 30, 1994 1993 Cash flows from operating activities: Net earnings (loss) $ (55,015) (68,306) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 7,108 9,767 (Gain) loss on disposal of property and equipment (278) 69 LIFO expense (2,079) 282 Provision for closed stores 43,000 31,474 Write-off of old bank fees - 4,528 Cash provided by (used in) assets and liabilities: (Increase) decrease in accounts receivable (8,052) (10,210) (Increase) decrease in prepaid merchandise 4,367 (33,949) (Increase) decrease in inventories 40,388 (40,018) (Increase) decrease in other current and non-current assets 229 (1,677) Increase (decrease) in pre and post-petition accounts payable (6,257) 62,190 Increase (decrease) in accrued expenses and other liabilities (6,709) (1,107) Increase (decrease) in federal and state income taxes payable - 7,865 Increase (decrease) in reserves for closed stores $ 21,130 25,957 Non cash activities in closed store reserve: Provision for closed stores (43,000) (31,474) Retirement of net book value of assets 7,018 255 Write-off of leases (114) - Write-off of inventory 2,549 779 Net cash increase (decrease) in provisions for closed stores (12,417) (4,483) Increase (decrease) in deferred income (67) (875) Increase (decrease) in accumulated postretirement benefit obligation 382 317 Net cash provided by (used in) operating activities 4,600 (44,133) Cash flows from investing activities: Purchases of property and equipment (1,275) (7,856) Proceeds from disposal of property and equipment 733 8 Net cash provided by (used in) investing activities (542) (7,848) Cash flows from financing activities: Proceeds (payments) of debt (49,179) 15,500 Proceeds (payments) of DIP Facility 34,975 27,219 Principal payments on capital lease obligations (1,634) (1,777) Increase (decrease) in bank drafts outstanding 445 (3,128) Other - 194 Net cash provided by (used in) financing activities (15,393) 38,008 Net decrease in cash (11,335) (13,973) Cash and cash equivalents at beginning of period 11,955 19,101 Cash and cash equivalents at end of period $ 620 5,128
See notes to consolidated financial statements ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollar amounts in thousands) Chapter 11 Proceedings The Company continues to operate as a debtor-in-possession pursuant to the provisions of Sections 1107 and 1108 of the Bankruptcy Code. On August 1, 1994, the Company and the major constituencies in its Chapter 11 proceeding filed a joint plan of reorganization in the United States Bankruptcy Court for the Eastern District of North Carolina. The Plan was co-sponsored by the Company's significant secured creditors and its unsecured creditors' and equity committees, and was consented to by GE Capital, Rose's debtor-in-possession lender. On October 5, 1994 the Company filed its Amended Joint Plan of Reorganization (the "Amended Plan") and an Amended Disclosure Statement. The Bankruptcy Court approved the Amended Disclosure Statement and soon thereafter the Amended Plan was submitted to the Company's creditors and stockholders for acceptance. The Company anticipates seeking Court approval of the Amended Plan in mid December, but there can be no assurance as to the timing of approval, the terms of the Amended Plan upon approval or whether the Amended Plan will be approved. The following summary of the Plan is not intended as a solicitation of acceptances. The Plan provides secured creditors, primarily senior secured noteholders, with payments reducing their debt from $108,000 at the time of filing Chapter 11 to less than $30,000. As of the end of the third quarter, this debt has been reduced to $42,681. The Plan also contemplates a four year amortizing note on the remaining debt balance at an 11% annual interest rate. The unsecured creditors will receive 100% of the shares of common stock of the reorganized company, or such portion of the stock which will provide total realization of the group's approved claims. The existing stockholders will receive warrants for the purchase of up to 30% of the reorganized company's stock on a fully diluted basis. In addition, existing stockholders will be entitled to purchase rights to receive all or a portion of the new common stock which would otherwise be distributed to the unsecured creditors. All currently outstanding shares of stock, warrants and options will be canceled. In order for the Plan to be effective, certain conditions must be met, including, but not limited to, the following: (a) the Company must have made all required adequate protection payments to the secured lenders, and (b) the Company must have an operating cash flow of at least $25,000 as of December 31, 1994. Following acceptance or rejection of the plan by impaired classes and equity security holders, the Bankruptcy Court after notice and a hearing would consider whether to confirm the plan. Among other things, to confirm a plan the Bankruptcy Court is required to find (i) with respect to each impaired class of creditors and equity security holders, that each holder of a claim or interest of such class either (a) will, pursuant to the plan, receive or retain property of a value, as of the effective date of the plan, that is at least as much as such holder would have received in a liquidation on such date of the Company, or (b) has accepted the plan, (ii) with respect to each class of claims or equity security holders, that such class has accepted the plan or such class is not impaired under the plan and (iii) confirmation of the plan is not likely to be followed by the liquidation or need for further financial reorganization of the Company or any successors unless such liquidation or reorganization is proposed in the plan. The Company has received a post confirmation exit financing commitment. The commitment is for a three year revolving credit agreement which would, subject to the satisfaction of the terms and conditions contained therein, allow the Company to borrow up to $80,000. Under the Bankruptcy Code, the rights of stockholders and pre-petition creditors may be substantially altered by the plan of reorganization, either voluntarily or by order of the Bankruptcy Court. The Company's plan of reorganization permits the Company to fund its current operations and meet its obligations to creditors (as they are restructured under the plan) out of the projected cash flow generated by the Company after approval and confirmation of the plan. The Company's objective is subject to a number of factors, some of which are within the ability of the Company to control and others of which are not. At this time it is not possible to predict whether the Company will achieve its objective or the effect of the plan of reorganization on the rights of creditors and stockholders of the Company. On confirmation of a plan of reorganization, the Company expects to utilize "Fresh Start Accounting" in accordance with the guidelines for accounting for emergence from bankruptcy. Fresh Start Accounting is expected to result in a restatement of Company assets and liabilities to reflect current values. Revenue The Company reported sales for the third quarter of 1994 of $178,531, a decrease of $97,770 or 35.4% from the third quarter of 1993, and year- to-date sales were $528,345, a decrease of $337,833 or 39.0% from last year. Sales on a comparable store basis increased 8.6% for the third quarter and 2.6% year-to-date. Sales for the third quarter last year were negatively affected by out-of-stocks relating to the Chapter 11 filing in September, 1993. Costs and Expenses Year-to-date cost of sales as a percent to net sales was 75.1% for 1994 and 76.7% for 1993. Increases in markdowns as a percent of sales were more than offset by increases in markon, decreases in the shrink percent to sales, and increases in the LIFO credit. For the third quarter, cost of sales as a percent to net sales was 74.9% compared to 77.5% last year. This decrease was due primarily to a decrease in the shrink rate and the effect of a LIFO credit versus LIFO expense last year. Selling, general and administrative expenses (SG&A) as a percent of net sales for the third quarter were 22.8% in 1994 and 27.4% in 1993. Year- to-date SG&A expenses as a percentage of sales were 23.3% in 1994 and 25.1% in 1993. The SG&A rates for the year and the quarter were positively affected by the closing of 102 unprofitable stores. The same store sales increase also had a positive impact on the SG&A rate for the quarter. Included in the reorganization costs are closed store provisions of $43,000 in 1994 for 59 closings, and $44,500 in 1993 for 43 closings. Current year operating results exclude the results of these 102 stores. Also included in reorganization costs for year-to-date 1994 is $11,746 for professional fees, DIP fees and expense amortizations, and other expenditures related directly to the Chapter 11 filing. Liquidity and Capital Resources At the end of the third quarter of 1994, the Company had $34,975 outstanding under its DIP facility. The Company invested $491 in cash for property and equipment in the third quarter of 1994 compared to $2,991 invested in the third quarter of 1993. Year-to-date cash investment in property and equipment was $1,275 in 1994 compared to $7,856 in 1993. Cash used by operating activities was $28,235 in the third quarter of 1994. Cash provided by operating activities was $4,600 year-to-date. Cash used in operating activities during 1993 were $16,105 in the third quarter and $44,133 year-to-date. Rose's management expects the Company to realize positive cash flow from its 1994 operations. The filing under Chapter 11 will protect the Company from its pre-petition creditors while the plan of reorganization is being confirmed. The adequacy of the Company's capital resources and long-term liquidity cannot be determined until the plan is confirmed by the Bankruptcy Court. PART II. OTHER INFORMATION ITEM 1: Legal Proceedings (Dollar amounts in thousands) The Company's business ordinarily results in a number of negligence and tort actions, most of which arise from injuries on store premises, injuries from a product, or false arrest and detainer arising from apprehending suspected shoplifters. The Company's liability for uninsured general damages and punitive damages is not considered material. No legal proceedings presently pending by or against the Company are described because the Company believes that the outcome of such litigation should not have a material adverse effect on the financial position of the Company. On September 5, 1993, the Company filed a voluntary Petition for Relief under Chapter 11, Title 11 of the United States Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the Eastern District of North Carolina (the "Bankruptcy Court") Case No. 93-01365-5-ATS (the "Chapter 11 Case"). The Chapter 11 Case is described in the Form 10-K of the Company for the year ended January 30, 1994 and subsequent Form 10-Qs and Form 8-Ks. The following discussion sets forth certain developments in the Chapter 11 Case during the third quarter of 1994 and through the date hereof, but it is not intended to be an exhaustive summary. For additional information regarding the effect of the Chapter 11 Case on the Company, reference should be made to the Bankruptcy Code. On August 1, 1994 the Company filed with the Court a proposed Joint Plan of Reorganization (the "Plan") with the consent of the official unsecured creditors committee, the pre-petition secured senior noteholders, and the official equity committee. A copy of the Plan is attached as Exhibit 10.1 to the Form 8-K dated August 1, 1994. Various ancillary agreements required to effectuate the Plan are expected to be negotiated with the official unsecured creditors committee, the Pre- Petition Lenders, the official equity committee and any Plan/exit funder, and filed at a later date. On October 5, 1994 the Company filed its Amended Joint Plan of Reorganization (the "Amended Plan") and an Amended Disclosure Statement. The Bankruptcy Court approved the Amended Disclosure Statement and soon thereafter the Amended Plan was submitted to the Company's creditors and stockholders for acceptance. The Company anticipates seeking Court approval of the Amended Plan in mid December, but there can be no assurance as to the timing of approval, the terms of the Amended Plan upon approval or whether the Amended Plan will be approved. ITEM 6: Exhibits and Reports on Form 8-K (a) All exhibits included in the Company's 1993 Form 10K are included herein by reference. Exhibit 10.1, Proposed Joint Plan of Reorganization dated August 1, 1994 is incorporated by reference from the Report on Form 8-K dated August 1, 1994. Exhibit 10.1, Order of United States Bankruptcy Court Eastern District of North Carolina Raleigh Division dated October 5, 1994 is incorporated by reference from the Report on Form 8-K dated August 1, 1994. Exhibit 10.2, First Amended Disclosure Statement Related to First Amended Joint Plan of Reorganization dated October 4, 1994 is incorporated by reference from the Report on Form 8-K dated October 5, 1994. Exhibit 10.3, Proposed First Amended Joint Plan of Reorganization dated October 4, 1994 is incorporated by reference from the Report on Form 8-K dated October 5, 1994. (b) Report on Form 8-K dated October 5, 1994, reporting under Item 5 that the Court issued an order approving as containing "adequate information" under Section 1125 of the Bankruptcy Code a First Amended Disclosure Statement that describes the proposed First Amended Joint Plan of Reorganization and approving the solicitation of acceptances and rejections of the Plan from various classes of creditors and equity holders prior to the Court holding a confirmation hearing. 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. ROSE'S STORES, INC. Date December 9, 1994 By /s/ R. Edward Anderson R. Edward Anderson President, Chief Executive Officer Date December 9, 1994 By /s/ Jeanette R. Peters Jeanette R. Peters Senior Vice President, Chief Financial Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROSE'S STORES, INC. FORM 10-Q FOR THE QUARTER ENDED OCTOBER 29, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000085149 ROSE'S STORES, INC. 1,000 QTR-3 JAN-28-1995 OCT-29-1994 620 0 23,109 0 164,841 202,415 125,166 (88,869) 245,431 101,985 0 21,045 0 0 (59,964) 245,431 510,375 514,073 383,409 383,409 126,008 0 4,925 (55,015) 0 (55,015) 0 0 0 (55,015) (2.93) (2.93) INCLUDES REORGANIZATION EXPENSE OF $54,746.
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