Exhibit 99.9
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
AUG. 2, 2003 AUG. 3, 2002 FEB. 1, 2003
------------ ------------ ------------
ASSETS
Current assets:
Cash and equivalents $ 7,325 $ 6,881 $ 9,735
Customer accounts receivable (less allowance for doubtful accounts:
August 2, 2003 - $2,438; August 3, 2002 - $2,250; February 1, 2003 - $3,298) 113,577 117,138 127,786
Merchandise inventories 144,286 146,799 138,748
Other current assets 17,082 20,073 17,162
--------- --------- ---------
Total current assets 282,270 290,891 293,431
--------- --------- ---------
Property, fixtures and equipment, less accumulated depreciation
and amortization 88,027 96,237 90,181
Other Assets 25,834 27,309 27,436
--------- --------- ---------
Total assets $ 396,131 $ 414,437 $ 411,048
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 3,896 $ 7,311 $ 5,456
Accounts payable 51,280 39,627 40,607
Other accrued liabilities 25,700 22,693 31,918
--------- --------- ---------
Total current liabilities 80,876 69,631 77,981
--------- --------- ---------
Long-term obligations, less current portion 102,978 132,120 115,127
Deferred items 8,568 13,502 11,214
Shareholders' equity:
Common stock, no par, 11,585,457 shares at August 2, 2003, 11,528,587 shares at
August 3, 2002, and 11,536,460 shares at February 1, 2003 issued and outstanding 243,444 243,382 243,419
Unearned compensation - restricted stock (92) (258) (197)
Deficit (38,654) (40,208) (34,043)
Other comprehensive loss (989) (3,732) (2,453)
--------- --------- ---------
Total shareholders' equity 203,709 199,184 206,726
--------- --------- ---------
Total liabilities and shareholders' equity $ 396,131 $ 414,437 $ 411,048
========= ========= =========
See notes to condensed consolidated financial statements
1
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
13-WEEKS ENDED 13-WEEKS ENDED
AUG. 2, 2003 AUG. 3, 2002
-------------- --------------
Revenues:
Net sales $ 132,558 $ 133,578
Financing 6,587 6,629
Other 624 697
------------ ------------
Total revenues 139,769 140,904
------------ ------------
Costs and expenses:
Cost of merchandise sold, occupancy, and buying expenses 97,385 95,938
Selling, general, administrative, and other expenses 38,590 39,909
Depreciation and amortization 4,935 5,006
Interest expense 2,197 2,768
------------ ------------
Total costs and expenses 143,107 143,621
------------ ------------
Loss before income tax benefit (3,338) (2,717)
Income tax benefit (1,202) (978)
------------ ------------
Net loss $ (2,136) $ (1,739)
============ ============
Net loss per common share - basic and diluted $ (0.19) $ (0.15)
Weighted average number of shares outstanding 11,415,401 11,378,922
See notes to condensed consolidated financial statements
2
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
26-WEEKS ENDED 26-WEEKS ENDED
AUG. 2, 2003 AUG. 3, 2002
-------------- --------------
Revenues:
Net sales $ 263,610 $ 274,744
Financing 13,449 13,787
Other 1,323 1,385
------------ ------------
Total revenues 278,382 289,916
------------ ------------
Costs and expenses:
Cost of merchandise sold, occupancy, and buying expenses 194,525 201,083
Selling, general, administrative, and other expenses 76,550 81,404
Depreciation and amortization 9,852 9,977
Interest expense 4,660 5,608
------------ ------------
Total costs and expenses 285,587 298,072
------------ ------------
Loss before income tax benefit (7,205) (8,156)
Income tax benefit (2,594) (2,936)
------------ ------------
Loss before cumulative effect of changes in accounting principles (4,611) (5,220)
Cumulative effect of changes in accounting principles -- (15,118)
------------ ------------
Net loss $ (4,611) $ (20,338)
============ ============
Net loss per common share - basic and diluted
Loss before cumulative effect of changes in accounting principles $ (0.40) $ (0.46)
Cumulative effect of changes in accounting principles -- (1.33)
------------ ------------
Net loss $ (0.40) $ (1.79)
Weighted average number of shares outstanding 11,411,101 11,374,378
See notes to condensed consolidated financial statements
3
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements Of Cash Flows
(Dollars in thousands)
26-WEEKS ENDED 26-WEEKS ENDED
AUGUST 2, 2003 AUG. 3, 2002
-------------- --------------
Cash flows from operating activities: $ 18,773 $ 21,098
Cash flows from investing activities:
Capital expenditures, net (7,481) (4,604)
Proceeds from the disposal of investments -- 326
-------- --------
Net cash used in investing activities (7,481) (4,278)
Cash flows from financing activities:
Net payments under asset securitization agreement (20,433) (8,133)
Net borrowings (payments) under revolving lines of credit 9,531 (6,465)
Payments on long-term obligations (2,807) (3,792)
Issuance of an installment note -- 3,464
Debt acquisition payments -- (2,098)
Other 7 (57)
-------- --------
Net cash used in financing activities (13,702) (17,081)
-------- --------
Decrease in cash and equivalents (2,410) (261)
Cash and equivalents - beginning of period 9,735 7,142
-------- --------
Cash and equivalents - end of period $ 7,325 $ 6,881
======== ========
Supplemental cash flow information:
Interest paid $ 4,703 $ 6,019
Supplemental non-cash investing and financing activities:
Capital leases 337
See notes to condensed consolidated financial statements.
4
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include accounts of The Elder-Beerman Stores Corp. and its wholly-owned
subsidiaries (the "Company"). All intercompany transactions and balances have
been eliminated in consolidation. In the opinion of management, the Company has
made all adjustments (primarily consisting of normal recurring accruals)
considered necessary for a fair presentation for all periods presented.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. The
Company's business is seasonal in nature and the results of operations for the
interim periods are not necessarily indicative of the results for the full
fiscal year. It is suggested these condensed consolidated financial statements
be read in conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended February
1, 2003. Certain reclassifications have been made to the second quarter of 2002
financial statements to conform to the second quarter of 2003 financial
statement presentation.
2. PER SHARE AMOUNTS
Net earnings (loss) per common share is computed by dividing net earnings
(loss) by the weighted-average number of common shares outstanding during the
period presented. Stock options, restricted shares, and deferred shares
represent potential common shares and are included in computing diluted earnings
per share when the effect would be dilutive. Dilutive potential common shares
for the 13 weeks ended August 2, 2003 and August 3, 2002 were 776,447 and
117,129, respectively. Dilutive potential common shares for the 26 weeks ended
August 2, 2003 and August 3, 2002 were 483,113 and 86,692, respectively. There
was no dilutive effect of potential common shares for the periods presented.
3. STOCK-BASED COMPENSATION
In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
requires expanded and more prominent disclosure in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method on reported results. This statement
was effective for interim financial statements beginning after December 15,
2002. The Company continues to measure compensation cost for stock options
issued to employees and directors using the intrinsic value based method of
accounting in accordance with Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees.
Total compensation costs charged to loss before income tax benefit for all
stock-based compensation awards was approximately $0.1 million for the first
half of 2003 and the first half of 2002. The following table illustrates the
effect on net loss and loss per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation,
to stock-based employee compensation (dollars in thousands, except per share
data):
5
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - Continued
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
AUGUST 2, 2003 AUGUST 3, 2002 AUGUST 2, 2003 AUGUST 3, 2002
-------------- -------------- -------------- --------------
Net loss as reported $(2,136) $(1,739) $(4,611) $(20,338)
Deduct: Additional stock-based
compensation under fair value
based method, net of tax (107) (137) (237) (274)
------- ------- ------- --------
Pro forma net loss $(2,243) $(1,876) $(4,848) $(20,612)
======= ======= ======= ========
Loss per common share - diluted:
As reported $ (0.19) $ (0.15) $ (0.40) $ (1.79)
Pro forma $ (0.20) $ (0.16) $ (0.42) $ (1.81)
4. SHAREHOLDERS' EQUITY
The comprehensive loss for the 13 weeks ended August 2, 2003 and August 3,
2002, was $1.4 million and $2.0 million, respectively. The comprehensive loss
for the 26 weeks ended August 2, 2003 and August 3, 2002, was $3.1 million and
$20.2 million, respectively. Following is a reconciliation between net loss and
comprehensive loss (dollars in thousands):
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
AUGUST 2, 2003 AUGUST 3, 2002 AUGUST 2, 2003 AUGUST 3, 2002
-------------- -------------- -------------- --------------
Net loss $(2,136) $(1,739) $(4,611) $(20,338)
Net unrealized gain (loss) on cash
flow hedges, net of tax 695 (286) 1,464 179
------- ------- ------- --------
Comprehensive loss $(1,441) $(2,025) $(3,147) $(20,159)
======= ======= ======= ========
5. DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes interest rate swap agreements to effectively
establish long-term fixed rates on borrowings under the Securitization Facility,
thus reducing the impact of interest rate changes on future income. These swap
agreements, which are designated as cash flow hedges, involve the receipt of
variable rate amounts in exchange for fixed rate interest payments over the life
of the agreements. The fair value of the Company's swap agreements was a $1.5
million liability at August 2, 2003, a $5.7 million liability at August 3, 2002,
and a $3.8 million liability at February 1, 2003. This liability is included in
deferred items on the condensed consolidated balance sheet. The adjustment to
record the net change in fair value was recorded, net of income taxes, in other
comprehensive loss. There was no ineffectiveness during the 26 week period ended
August 2, 2003. In fiscal 2003, the Company expects the amounts to be
reclassified out of other comprehensive loss to earnings to be immaterial to the
financial statements.
6. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS
In April 2002, SFAS No. 145, Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections, was issued.
SFAS No. 145 primarily rescinds SFAS No. 4 which allowed gains or losses from
the extinguishment of debt to be classified as an extraordinary item. As a
result, the criteria set forth by APB Opinion No. 30 will now be used to
classify those gains or losses. SFAS No. 145 becomes effective for fiscal years
beginning after May 15, 2002. The Company adopted SFAS No. 145 as of February 2,
2003, the beginning of our new fiscal year. The adoption of SFAS No. 145 did not
have a material impact on the financial statements.
6
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - Continued
7. NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In April 2003, SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, was issued. This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and
hedging activities accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. Primarily the changes in this statement
improve financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. This statement is effective for all
contracts entered into or modified after June 30, 2003, and all hedging
relationships entered into after June 30, 2003. Management does not believe the
adoption of this statement will have a material impact on the Company's
financial statements.
In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity, was issued. This statement
requires that certain financial instruments that under previous guidance could
be accounted for as equity, should now be classified as a liability in the
statement of financial position. This statement is effective May 31, 2003 for
new or modified financial instruments, otherwise it is effective at the
beginning of the first interim period beginning after June 15, 2003. Management
does not believe the adoption of this statement will have a material impact on
the Company's financial statements.
8. ASSET IMPAIRMENT AND OTHER EXPENSES
On January 7, 2003 the Company announced its plan to close its Forest Fair
Mall department store located in Cincinnati, OH. During the 13 weeks ended May
3, 2003 the Company recorded pre-tax costs of $0.9 million for excess inventory
markdowns and $0.1 million for severance and other costs. The closing was
completed April 29, 2003.
The following is a summary related to the severance and other costs for
the 26 weeks ended August 2, 2003 (dollars in thousands):
Severance and other costs:
Balance as of February 1, 2003 ... $ 179
Charge recorded .................. 154
Used for intended purpose ........ (333)
-------
Balance as of August 2, 2003 ..... $ 0
=======
Executive retirement and other costs:
Balance as of February 1, 2003 ... $ 1,431
Used for intended purpose ........ (372)
-------
Balance as of August 2, 2003 ..... $ 1,059
=======
9. RECENT EVENTS
On September 15, 2003, the Company entered into an Agreement and Plan of
Merger with The Bon-Ton Stores, Inc. ("Bon-Ton") and its wholly owned subsidiary
Elder Acquisition Corp. ("B-T Sub"). The merger agreement provides for the sale
of the Company to Bon-Ton and that shareholders of the Company will receive
$8.00 per share in cash for their common shares.
Pursuant to the terms of the merger agreement with Bon-Ton, Bon-Ton will,
on or before September 23, 2003, commence a tender offer to purchase all of the
outstanding Company shares, followed by a second step merger of Elder-Beerman
with B-T Sub. Elder-Beerman will be the surviving corporation in the merger.
Completion of the tender offer is conditioned, among other things, upon: (i) at
least two-thirds of Elder-Beerman's outstanding common shares, on a fully
diluted basis, being tendered and not withdrawn prior to the expiration date of
the offer, (ii) the proceeds of the financings under Bon-Ton's commitment
letters being available to Bon-Ton and (iii) satisfaction of applicable
regulatory requirements.
On June 25, 2003, Elder-Beerman entered into a merger agreement with
Wright Holdings, Inc. In connection Elder-Beerman's execution of its merger
agreement with Bon-Ton, the Company terminated its merger agreement with Wright
Holdings, Inc.
7
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - Continued
10. SEGMENT REPORTING
The following table sets forth financial information by segment, (dollars
in thousands):
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
AUGUST 2, 2003 AUGUST 3, 2002 AUGUST 2, 2003 AUGUST 3, 2002
-------------- -------------- -------------- --------------
Department Store
Revenues .................. $ 133,182 $ 134,275 $ 264,933 $ 276,129
Operating loss ............ (4,091) (3,923) (8,273) (8,143)
Finance Operations
Revenues .................. $ 6,587 $ 6,629 $ 13,449 $ 13,787
Operating profit .......... 4,040 4,054 8,336 8,611
Segment Subtotal
Revenues .................. $ 139,769 $ 140,904 $ 278,382 $ 289,916
Operating profit (loss) (1) (51) 131 63 468
(1) Segment operating profit (loss) is reconciled to loss before income
tax benefit as follows:
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
AUGUST 2, 2003 AUGUST 3, 2002 AUGUST 2, 2003 AUGUST 3, 2002
-------------- -------------- -------------- --------------
Segment operating profit (loss) ...... $ (51) $ 131 $ 63 $ 468
Store closing costs & other costs (5) (116) (1,063) (2,152)
Asset impairment ................ -- -- -- (1,037)
Interest expense ................ (2,197) (2,768) (4,660) (5,608)
Merger costs .................... (686) -- (686) --
Other ........................... (399) 36 (859) 173
------- ------- ------- -------
$(3,338) $(2,717) $(7,205) $(8,156)
======= ======= ======= =======
8