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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number: 0-02788
THE ELDER-BEERMAN STORES CORP.
(Exact name of registrant as specified in its charter)
Ohio 31-0271980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3155 El-Bee Road, Dayton, Ohio 45439
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 296-2700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act:
Common Stock, no par value
(Title of class)
Share Purchase Rights
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of April 23, 1998, the aggregate market value of the voting stock held
by non-affiliates of the registrant (based on the closing sale price of such
stock on such date) was approximately $311,789,475.*
The number of shares of Common Stock outstanding on April 23, 1998, was
12,671,777 shares.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO
* Calculated by excluding all shares that may be deemed to be
beneficially owned by executive officers and directors of the
registrant, without conceding that all such persons are "affiliates" of
the registrant for purposes of the federal securities laws.
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TABLE OF CONTENTS
PAGE
PART I
ITEM 1. BUSINESS................................................................................................1
General Development of Business.........................................................................1
Background....................................................................................1
Chapter 11 Case...............................................................................2
Business ..............................................................................................2
Merchandising.................................................................................2
Pricing .....................................................................................3
Purchasing and Distribution...................................................................3
Information Systems...........................................................................3
Marketing.....................................................................................4
Credit Card Program...........................................................................4
Customer Service..............................................................................4
Expansion.....................................................................................4
Seasonality...................................................................................4
Competition...................................................................................4
Associates....................................................................................5
ITEM 2. PROPERTIES..............................................................................................5
ITEM 3. LEGAL PROCEEDINGS.......................................................................................8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................................8
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................................9
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA.....................................................................10
ITEM 7. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................11
Results of Operations..................................................................................11
Fiscal 1997 Compared to Fiscal 1996..........................................................11
Fiscal 1996 Compared to Fiscal 1995..........................................................12
Liquidity and Capital Resources........................................................................13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................................15
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......................16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.......................................................................16
Section 16(a) Beneficial Ownership Reporting Compliance................................................18
ITEM 11. EXECUTIVE COMPENSATION.................................................................................18
Cash Compensation Table................................................................................19
Fiscal 1997 Option Grants..............................................................................20
Fiscal 1997 Aggregated Option Exercises FY-End Option Values...........................................20
Employment and Severance Agreements With Certain Executives............................................21
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Compensation Committee Interlocks and Insider Participation............................................21
Director Compensation..................................................................................22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................................23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................................24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K........................................24
SIGNATURES.......................................................................................................28
EXHIBIT INDEX....................................................................................................29
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PART I
This Annual Report on Form 10-K contains certain forward-looking
statements that are based on management's current beliefs, estimates and
assumptions concerning the operations, future results and prospects of
Elder-Beerman and the retail industry in general. All statements that address
operating performance, events or developments that management anticipates will
occur in the future, including statements related to future sales, profits,
expenses, income and earnings per share, future finance and capital market
activity, or statements expressing general optimism about future results, are
forward-looking statements. In addition, words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates," variations of such words and
similar expressions are intended to identify forward-looking statements.
The statements described in the preceding paragraph constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 (the "Securities Act"). Because these statements are based on a
number of beliefs, estimates and assumptions that could cause actual results to
materially differ from those in the forward-looking statements, there is no
assurance that forward-looking statements will prove to be accurate.
Any number of factors could affect future operations and results,
including the following: increasing price and product competition; fluctuations
in consumer demand and confidence; the availability and mix of inventory;
fluctuations in costs and expenses; the effectiveness of advertising, marketing
and promotional programs; weather conditions that affect consumer traffic in
stores; the continued availability and terms of financing; the outcome of
pending and future litigation; and general economic conditions, such as the rate
of employment, inflation and interest rates and the condition of the capital
market. This list of factors is not exclusive.
Forward-looking statements are subject to the safe harbors created in
the Securities Act. Elder-Beerman undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 1. BUSINESS
The Elder-Beerman Stores Corp. ("Elder-Beerman" or the "Company";
except where the context otherwise requires, references to the "Company" refer
to Elder-Beerman and its subsidiaries, as described below) operates department
stores that sell a wide range of moderate to better brand merchandise, including
women's, men's, and children's apparel and accessories, cosmetics, home
furnishings, and other consumer goods. In addition, the Company owns a specialty
shoe store chain and a private label credit card program through its
wholly-owned subsidiaries, The Bee-Gee Shoe Corp. ("Bee-Gee") and The El-Bee
Chargit Corp. ("Chargit"), respectively. Elder-Beerman operates approximately 48
department stores and two furniture stores, principally in smaller Midwestern
markets in Ohio, Indiana, Illinois, Michigan, Wisconsin, Kentucky, and West
Virginia, and Bee-Gee operates 60 stores (48 shoe outlets and 12 Shoebilee!
stores), principally in smaller Midwestern markets in Ohio, Indiana, Illinois,
Michigan, Pennsylvania, Virginia and West Virginia. See "Properties." The
Company's operations are diversified by size of store, merchandising character,
and character of the community served. The Company seeks to satisfy the
merchandising needs of its geographic markets, serving customers of all ages
with varied tastes and incomes.
GENERAL DEVELOPMENT OF BUSINESS
BACKGROUND
Elder-Beerman and its predecessors have been operating department
stores since 1883. Historically, the Company's underlying strategy had been to
manage the bottom-line through an aggressive approach to (a) containing
operating costs, (b) enhancing gross profit percentages within its "moderate to
better" brand merchandise, and (c) expanding its presence as a regional
retailer. This strategy enabled the Company to experience steady sales growth
and consistent earnings results beginning in the mid-1960s and continuing into
the early 1990s. During 1992 and through 1994, the Company undertook a new and
high volume merchandising strategy. During 1995, it became apparent that this
strategy had a negative impact on the Company's financial position, and the
Company entered into negotiations with its lenders for a plan to provide
additional liquidity. These negotiations ultimately were unsuccessful. In
addition, as the need for working capital to fund increased inventory purchases
for the holiday season drew closer, Elder-Beerman's suppliers began to show
concerns about further extensions of trade credit to the Company in the wake of
other bankruptcies in the retail industry. The Company was faced with an absence
of working capital financing and the prospect of being unable to secure
inventory for the 1995 Christmas season.
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CHAPTER 11 CASE
On October 17, 1995 (the "Petition Date"), Elder-Beerman and its
subsidiaries, Chargit, Bee-Gee, Margo's LaMode, Inc. ("Margo's"), McCook
Wholesale Corp. ("McCook"), E-B Community Urban Redevelopment Corp. ("E-B"), and
EBA, Inc. ("EBA") (collectively, the "Old Elder-Beerman Companies"), filed
voluntary petitions for relief (the "Reorganization Cases") under chapter 11 of
the United States Bankruptcy Code, as amended (the "Bankruptcy Code"), with the
United States Bankruptcy Court for the Southern District of Ohio, Western
Division (the "Bankruptcy Court"). The Old Elder-Beerman Companies filed their
proposed joint plan of reorganization with the Bankruptcy Court on August 6,
1997, which was amended three times on October 16, 1997, November 7, 1997 and
November 18, 1997 (the "Plan"). The Plan was confirmed by an order of the
Bankruptcy Court entered on December 16, 1997 (the "Confirmation Date"). The
Plan became effective on December 30, 1997, (the "Effective Date").
BUSINESS
The Company sells a wide range of merchandise, including women's,
men's, and children's apparel and accessories, cosmetics, home furnishings, and
other consumer goods. In addition, as discussed above, the Company owns a shoe
store chain and a private label credit card program through its wholly-owned
subsidiaries, Bee-Gee and Chargit, respectively. The Company's historical
competitive advantage is its niche in medium and small size cities, and in many
cases, Elder-Beerman is the dominant supplier of moderate to better brands of
soft goods (e.g., Liz Claiborne, Estee Lauder, Tommy Hilfiger, Polo, Guess) in
such markets. In many of these cities, there is only one shopping mall, and the
Company is a main department store anchor along with J.C. Penney, Sears, or a
discount retailer such as Kmart. These other anchors generally supply moderate
private label goods, which typically complement the Company's more upscale and
largely branded merchandise. The Company's strong metropolitan rivals have
tended to bypass smaller Midwestern cities, leaving Elder-Beerman as the
dominant department store in these smaller markets.
The Company's business strategy is to improve profitability by
focusing on a more productive core department store business, primarily in
Dayton, Ohio and smaller communities in the Midwest, by seeking to be the
dominant destination retailer for fashion apparel, accessories, cosmetics,
shoes, and home accessories for the entire family, while continuing its
tradition of providing strong customer service in key product areas. In
addition, the Company aggressively uses technology and business process changes
to reduce operating costs and improve operating performance through productivity
gains.
The Company's long-term business plan is designed to accomplish its
strategy by (a) focusing on its traditional strengths as the major retailer in
its markets; (b) emphasizing major vendor partnerships to improve sales and
margins while improving supply chain integration and efficiencies; (c) competing
with traditional department store competitors through emphasis on customer
service, timely and broad product assortments, and competitive pricing and
promotions in appropriate markets and product areas; (d) competing with moderate
department stores and discounters through merchandise breadth and advantages in
branded and gift areas; (e) focusing price/product competition in key basic
merchandising areas; and (f) leveraging technology to create a selling culture
with "customer-focused" stores, to develop and execute customer and market
specific marketing programs, and to distribute, price, and promote goods by
market.
MERCHANDISING
The Company carries a broad assortment of goods to provide fashion,
selection, and variety found in leading department stores that feature better
merchandise brands. Although all stores stock identical core assortments,
specific types of goods are distributed to stores based on the particular
characteristic of the local market. The Company emphasizes "signature" areas
critical to its image in its niche market, as a primary destination for fashion
apparel and gifts. In addition, through continued efforts to develop a
partnership with its most significant vendors, the Company is (a) pursuing
automated replenishment of basic stock to increase sales and reduce basic
inventories and (b) using technology and focused merchandising and distribution
to reduce material handling costs and increase speed in moving stock from the
vendor to the selling floor.
Certain departments in Elder-Beerman's department stores are leased to
independent third parties. These leased departments, which include the fine
jewelry, beauty salon, watch repair and maternity departments, provide high
quality service and merchandise where specialization and expertise are critical
and the Company's direct participation in the business is not economically
justifiable. Leased department sales are included in Elder-Beerman's total
sales. Management regularly evaluates the performance of the leased departments
and requires compliance with established customer service guidelines.
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Bee-Gee operates two distinct discount footwear formats that are
differentiated by varying degrees of fashion, value, and convenience. The
Company's 48 El-Bee Shoe stores offer primarily close-out and special purchase
budget footwear styles for women, men and children in a self-service, open-box
rack format. The 12 Shoebilee! family footwear stores offer national brands in
an updated shopping environment where moderate assortments are merchandised by
lifestyle and classification rather than by size and gender. Merchandise is
presented in a self-select caseline format and is promoted under a value-priced
promotional umbrella. The Company is in the process of converting several El-Bee
Shoe stores to the newer Shoebilee! format. Many Bee-Gee stores are positioned
near existing Elder-Beerman stores to leverage credit marketing and
cross-shopping opportunities.
For the 52 weeks ending January 31, 1998 ("Fiscal 1997"), the 53 weeks
ending February 1, 1997 ("Fiscal 1996") and the 52 weeks ending February 3, 1996
("Fiscal 1995"), the Company's department store percentages of net sales by
major merchandise category were as follows:
THE ELDER-BEERMAN STORES CORP.
RETAIL SALES BY DEPARTMENT
1997 1996 1995
MERCHANDISE
CATEGORY % % %
- --------------------------------------- --------- --------- ---------
WOMEN'S READY TO WEAR 34.0% 33.2% 32.1%
ACCESSORIES, SHOES & COSMETICS 21.7% 21.6% 21.4%
MENS & CHILDRENS 24.3% 25.1% 24.9%
HOME STORE 20.0% 20.1% 21.6%
--------- --------- ---------
TOTAL RETAIL 100.0% 100.0% 100.0%
========= ========= =========
PRICING
All pricing decisions are made at the Company's corporate
headquarters. The Company's pricing strategy is designed to provide superior
quality/value appeal by offering competitive prices on fashion from premier
national brands. The Company has effectively been able to generate sales from
promotions with special pricing and of limited duration. The Company's
management information systems provide timely sales and gross margin reports
that identify sales and gross margins by stock keeping item and provide
management with the information and flexibility to adjust prices and inventory
levels as necessary.
PURCHASING AND DISTRIBUTION
During Fiscal 1997, the Company purchased merchandise from over 1,000
domestic and foreign manufacturers and suppliers. During that period, the top 25
vendors by dollar volume accounted for approximately 32% of net purchases. In
Fiscal 1997, the Company also purchased approximately 8% of its merchandise,
primarily private label merchandise, through Frederick Atkins, Inc. ("Atkins"),
a national association of major retailers that provides its members with group
purchase opportunities. Management believes it has good relationships with its
suppliers. No other vendor accounted for more than 5% of the Company's
purchases. The Company believes that alternative sources of supply are available
for each category of merchandise it purchases.
The Company owns a 20% limited partnership interest in Fairborn
Commerce Center II, a partnership that owns Elder-Beerman's 300,000 square foot
distribution center in Fairborn, Ohio. Merchandise is generally shipped from
vendors, through three consolidation points, to this distribution center.
Deliveries are made from the distribution center to each store two to seven
times per week depending on the store size and the time of year. Merchandise is
usually shipped ready for immediate placement on the selling floor.
INFORMATION SYSTEMS
The Company places great emphasis on its management information
systems. Currently, the Company's merchandising activities are controlled by a
series of on-line systems, including a point-of-sale and sales reporting system,
a purchase order management system, a receiving system and a merchandise
planning system. These integrated systems track merchandise from the order stage
through the selling stage and provide valuable "actual vs. plan" sales
information for management.
The Company is presently further enhancing its management information
systems, through capital investment and training programs, to (a) improve the
data integrity of financial and merchandise systems; (b) reduce administrative
costs through automation and elimination of paperwork and redundant controls;
(c) utilize Electronic Data Interchange and other industry standards to increase
"floor
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ready" merchandise receipts; (d) eliminate paperwork through automatic invoice
processing; and (e) improve merchandise analysis and decision making.
MARKETING
The Company's marketing and advertising functions are centralized at
its corporate headquarters and, for the department stores, are focused on
communicating a timely and broad offering of premier branded merchandise, a
strong quality/value relationship, and outstanding customer service. A
comprehensive, multi-media advertising program is utilized including print and
broadcast as well as creative in-store displays, signage and special promotions.
The Company distributes sale catalogs utilizing insertion in Sunday and weekday
newspapers as well as direct mail to preferred charge customers. Catalogs are
supplemented by additional newspaper advertising to support sale events as
scheduled. The Company also uses television and radio in markets where it is
productive and cost efficient. Marketing activities for the Bee-Gee subsidiary
are limited primarily to newspaper, radio, coupons, and in-store displays
emphasizing price, seasonal assortments, and special promotions.
CREDIT CARD PROGRAM
As discussed above, the Company operates a private label credit card
program through its wholly-owned subsidiary, Chargit. During Fiscal 1997, the
Company issued 158,000 Elder-Beerman credit cards for newly opened accounts and
had approximately 450,000 Elder-Beerman active credit card accounts during
Fiscal 1997. The Company has made a significant investment in its credit card
program since it believes that Elder-Beerman credit card holders generally
constitute the Company's most loyal and active customers. Elder-Beerman credit
card holders shop more frequently with the Company and generally purchase more
merchandise than customers who pay with cash or third-party credit cards. During
Fiscal 1997, approximately 44% of Elder-Beerman's total sales were private label
credit card sales whereas cash sales and third party credit cards accounted for
33% and 23% of sales, respectively. Frequent use of the Elder-Beerman credit
card by customers is an important element in the Company's marketing and growth
strategies. The Company also seeks to increase penetration of its private label
credit card program through a combination of efforts intended to increase the
use of cards by existing Elder-Beerman credit card customers, either through
incremental sales or shifting sales from other credit cards and other retailers,
and attracting new cardholders.
All phases of the credit card operation are handled by Chargit except
the processing of customer mail payments, which is performed pursuant to a
retail lockbox agreement with a bank. Decisions whether to issue a credit card
to an applicant are made on the basis of a credit scoring system.
CUSTOMER SERVICE
Elder-Beerman has a strong tradition of providing quality customer
service. The Company is presently enhancing its customer service image and
creating a customer-oriented store environment by (a) eliminating nonselling
activities from stores; (b) using training and recruiting practices to instill a
culture of customer helpfulness and responsiveness; (c) developing tools and
training to enhance selling skills and awareness; (d) implementing selling
productivity measurement and compensation systems directed at encouraging
selling activities and results; and (e) making increased use of technology and
improved controls.
EXPANSION
The Company is currently implementing a controlled expansion of new
stores with market characteristics consistent with current stores. The Company
believes that sufficient new locations are available in strategic markets within
the Company's current area of operations to support such an expansion. In
addition, the Company believes that opportunities exist to expand approximately
10 existing stores where current space constraints prevent adequate presentation
of certain core merchandise departments. The Company recently announced the
relocation of its Southtowne Shopping Center store in Dayton, Ohio from a
132,000 square foot standalone site to a 212,000 square foot anchor store in the
Dayton Mall, and the acquisition of a 120,000 square foot mall anchor store in
Erie, Pennsylvania. The Company expects that both new stores will open in
Summer 1998.
SEASONALITY
The department store business is seasonal, with a high proportion of
sales and operating income generated in November and December. Working capital
requirements fluctuate during the year, increasing somewhat in mid-summer in
anticipation of the fall merchandising season and increasing substantially prior
to the holiday season when the Company must carry significantly higher inventory
levels. Consumer spending in the peak retail season may be affected by many
factors outside the Company's control including competition, consumer demand and
confidence, weather that affects consumer traffic and general economic
conditions. A failure to generate substantial holiday season sales could have a
material adverse effect on the Company.
COMPETITION
The retail industry, in general, and the department store and shoe
store businesses, in particular, are intensely competitive. Generally, the
Elder-Beerman department stores and Bee-Gee shoe stores are in competition not
only with other department stores and
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family shoe stores, respectively, in the geographic areas in which they operate,
but also with numerous other types of retail outlets, including specialty
stores, general merchandise stores, off-price and discount stores, and
manufacturer outlets. Some of the retailers with which the Company competes have
substantially greater financial resources than the Company and may have other
competitive advantages over the Company. The Elder-Beerman department stores
compete on the basis of quality, depth and breadth of merchandise, prices for
comparable quality merchandise, customer service and store environment. The
Bee-Gee shoe stores compete primarily on the basis of price and convenience.
ASSOCIATES
On January 31, 1998, the Company had approximately 8,140 regular and
part-time employees, approximately 7,600 of which are employed by
Elder-Beerman's department stores. Because of the seasonal nature of the retail
business, the number of employees rises to a peak in the holiday season. None of
the Company's associates are represented by a labor union. The Company's
management considers its relationships with its associates to be satisfactory.
ITEM 2. PROPERTIES
Elder-Beerman currently operates 48 department stores and two
furniture stores, principally in smaller Midwestern markets in Ohio, Indiana,
Illinois, Michigan, Wisconsin, Kentucky, and West Virginia, and Bee-Gee operates
60 stores (48 shoe outlets and 12 Shoebilee! stores), principally in smaller
Midwestern markets in Ohio, Indiana, Illinois, Michigan, Pennsylvania, Virginia
and West Virginia. Substantially all of the Company's stores are leased
properties. The Company owns, subject to a mortgage, the 302,570 square foot
office/warehouse facility located in Dayton, Ohio, which serves as its principal
executive offices. The Company also has a 20% limited partnership interest in a
partnership that owns a 300,000 square foot distribution center located in
Fairborn, Ohio.
The following table sets forth certain information with respect to
Elder-Beerman's department store locations and Bee-Gee's shoe store locations,
operating as of January 31, 1998, the end of Elder-Beerman's and Bee-Gee's most
recently completed fiscal year:
THE ELDER-BEERMAN STORES CORP.
STORE SUMMARY BY REGION
TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
---------- -------- ---- ------ ---------
OHIO
Athens University Mall 42,829 09/88 Lease
Bowling Green Woodland Mall 40,700 04/87 Lease
Chillicothe Chillicothe Mall 55,940 05/81 Lease
Home Store 17,609 11/90 Lease
Cincinnati Forest Fair Mall 149,462 04/89 Lease
Dayton Centerville Place 191,400 08/66 Lease
Dayton Fairfield Commons 151,740 10/93 Lease
Dayton Southtowne Furniture 121,000 01/76 Lease
Dayton Northwest Plaza 217,060 02/66 Lease
Dayton Courthouse Plaza 125,390 11/75 Lease
Dayton Southtowne Center 131,637 11/72 Lease
Dayton Salem Furniture 124,987 11/72 Lease
Dayton Van Buren Shopping Center 101,604 08/63 Lease
Dayton Northpark Center 101,840 10/94 Lease
Defiance Northtowne Mall 48,000 04/86 Lease
Fairborn Distribution Center 300,000 12/90 Lease
Findlay Findlay Village Mall 74,825 07/90 Lease
Franklin Middletown (Towne Mall) 118,000 1977 Own
Hamilton Hamilton 167,925 04/74 Lease
Heath Indian Mound Mall 52,725 09/86 Lease
Lancaster River Valley Mall 52,725 09/87 Lease
Lima Lima Mall 103,350 11/65 Lease
Marion Southland Mall 74,621 11/84 Lease
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THE ELDER-BEERMAN STORES CORP.
STORE SUMMARY BY REGION
(CONT'D)
TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
---------- -------- ---- ------ ---------
Moraine Corporate Offices 302,570 06/70 Own
New Philadelphia New Towne Mall 52,648 10/88 Lease
Piqua Miami Valley Center 59,092 09/88 Lease
Sandusky Sandusky Mall 38,773 03/83 Lease
Springfield Upper Valley Mall 71,868 10/92 Lease
Toledo Woodville 100,000 08/85 Lease
Toledo Westgate 154,000 08/85 Lease
Wooster Wayne Towne Plaza 53,689 6/94 Lease
Zanesville Colony Square 70,346 09/85 Own
INDIANA
Anderson Mounds Mall 66,703 07/81 Lease
Columbus Columbus Mall 53,446 02/90 Lease
Elkhart Concord Mall 104,000 11/85 Lease
Evansville Washington Square Mall 134,536 10/93 Lease
Kokomo Kokomo Mall 75,704 10/87 Lease
Marion North Park Mall 55,526 11/78 Lease
Muncie Muncie Mall 80,000 10/97 Lease
Home Store 22,912 10/89 Lease
Richmond Downtown 100,000 08/74 Lease
Terre Haute Honey Creek Mall 70,380 08/73 Lease
MICHIGAN
Adrian Adrian Mall 54,197 08/87 Lease
Benton Harbor The Orchards Mall 70,428 10/92 Lease
Jackson Westwood Mall 70,425 09/93 Lease
Midland Midland Mall 64,141 10/91 Lease
Monroe Frenchtown Square 99,219 04/88 Lease
Muskegon Lakeshore Marketplace 87,185 10/95 Lease
ILLINOIS
Danville Village Mall 77,300 07/86 Lease
Mattoon Cross Country Mall 54,375 03/78 Lease
WISCONSIN
Beloit Beloit Mall 62,732 10/93 Lease
Green Bay Bay Park Square Mall 75,000 09/95 Lease
KENTUCKY
Paducah Kentucky Oaks Mall 60,092 08/82 Lease
WEST VIRGINIA
Morgantown Morgantown Mall 70,790 09/90 Lease
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THE BEE-GEE SHOE CORP.
STORE SUMMARY BY REGION
TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
---------- -------- ---- ------ ---------
OHIO
Akron West Market 4,000 12/76 Lease
Alliance Carnation Mall 3,052 04/85 Lease
Athens University Mall 3,600 11/88 Lease
Centerville Centerville 6,938 11/94 Lease
Chillicothe Chillicothe Mall 3,600 10/85 Lease
Cincinnati Western Hills Shopping Center 7,800 08/91 Lease
Cincinnati Colerain Hills 4,500 08/72 Lease
Dayton Van Buren Shopping Center 4,355 01/70 Lease
Dayton Sugar Creek Plaza 3,200 03/90 Lease
Dayton Southtowne Shopping Center 10,000 08/74 Own
Dayton Northwest Plaza 4,400 03/76 Lease
Defiance Northtowne Mall 6,650 03/91 Lease
East Liverpool Summit Square Shopping Center 3,600 08/91 Lease
Englewood Northmont Plaza 4,200 12/72 Lease
Fairfield Forest Fair Mall 5,172 02/89 Lease
Fairfield Fairfield Plaza 2,910 03/81 Lease
Findlay Flag City Station 5,900 08/91 Lease
Greenville Buckeye Square 3,000 11/83 Lease
Heath Indian Mound Mall 3,319 09/91 Lease
Huber Heights North Park Center 6,700 11/94 Lease
Lancaster River Valley Mall 3,106 08/91 Lease
Lima Clocktower Shopping Center 3,200 04/92 Lease
Mansfield Johnny Appleseed 5,365 11/72 Lease
Marion Southland Mall 4,392 11/97 Lease
Middletown Eastgate Shopping Center 3,500 10/85 Lease
Milford Milford Shopping Center 3,750 10/74 Lease
New Philadelphia New Towne Mall 3,621 08/91 Lease
Piqua Miami Valley Mall 3,075 09/88 Lease
Sandusky Park Place 3,705 05/91 Lease
Sidney Westown Square 4,120 05/89 Lease
Springfield Springfield Mall 3,000 04/93 Lease
St. Mary's St. Mary's Shopping Center 3,200 08/94 Lease
Streetsboro Streetsboro Market Shopping Center 6,890 09/95 Lease
Tiffin Tiffin Mall 6,576 07/84 Lease
Toledo Spring Meadows Shopping Center 6,000 05/87 Lease
Troy Troy Town Center 3,892 08/90 Lease
Westerville Westerville Shopping Center 3,750 11/71 Lease
Wooster Wayne Towne Plaza 3,150 07/92 Lease
Xenia Xenia Towne Square 3,500 08/85 Lease
Zanesville Colony Square 5,571 11/85 Lease
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THE BEE-GEE SHOE CORP.
STORE SUMMARY BY REGION
(CONT'D)
TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
---------- -------- ---- ------ ---------
INDIANA
Columbus Fair Oaks Mall 3,730 08/90 Lease
Elkhart Concord Mall 6,340 09/90 Lease
Kokomo Markland Mall 5,000 05/88 Lease
Logansport Logansport Mall 3,600 04/90 Lease
Muncie Northwest Shopping Center 3,500 12/71 Lease
Plymouth Pilgrim Place 3,367 05/90 Lease
Richmond Richmond Square Mall 5,450 10/97 Lease
South Bend Scottsdale Mall 4,770 05/83 Lease
Warsaw Marketplace 3,000 11/86 Lease
ILLINOIS
Huntley Huntley Outlet Center 5,000 11/95 Lease
Mattoon Cross County Mall 4,175 08/92 Lease
Peru Peru Mall 3,129 11/92 Lease
Springfield Capital City Shopping Center 4,050 05/88 Lease
Springfield White Oaks 3,075 03/87 Lease
PENNSYLVANIA
Grove City Grove City Outlet 4,520 11/94 Lease
Mars Cranberry Mall 3,600 10/88 Lease
Pittsburgh Robinson Towne Center 3,500 08/89 Lease
MICHIGAN
Kalamazoo Maple Hill Mall 2,850 03/87 Lease
Mt. Pleasant Indian Hills Plaza 3,200 08/90 Lease
WEST VIRGINIA
Vienna Vienna 3,750 04/76 Lease
VIRGINIA
Harrisonburg Valley Mall 3,078 09/84 Lease
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in several legal proceedings arising from its
normal business activities and reserves have been established where appropriate.
Management believes that none of these legal proceedings will have a material
adverse effect on the financial condition, results of operations or cash flows
of the Company.
In addition, as a result of the Reorganization Cases, the Company
remains subject to the jurisdiction of the Bankruptcy Court for matters relating
to the consummation of the Plan.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
12
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, without par value, (the "Common Stock") is
listed on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") and is designated a NASDAQ/National Market System Security
trading under the symbol EBSC. The Common Stock did not begin trading, however,
until February 17, 1998. As a result, no historical high and low bid information
is available for Fiscal 1997. Prior to February 17, 1998, there was no
established public trading market for the Common Stock.
The number of shareholders of record as of April 17, 1998 was 1,667.
No dividends have been paid on the Common Stock. The Company intends
to reinvest earnings in the Company's business to support its operations and
expansion. The Company has no present intention to pay cash dividends in the
foreseeable future, and will determine whether to declare dividends in the
future in light of the Company's earnings, financial condition and capital
requirements. In addition, the Company has certain credit agreements that limit
the payment of dividends.
The Company issued Common Stock and a Series A Warrant and a Series B
Warrant, each convertible into Common Stock, pursuant to the Plan in
satisfaction of certain allowed claims against, or interests in, the Company in
the Reorganization Cases. Based upon the exemptions provided by section 1145 of
the Bankruptcy Code, the Company believes that none of these securities are
required to be registered under the Securities Act in connection with their
issuance and distribution pursuant to the Plan. The Company has no recent sales
of unregistered securities other than such issuances pursuant to the Plan.
9
13
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth various selected financial information
for the Company as of and for the fiscal years ended January 31, 1998, February
1, 1997, February 3, 1996, January 28, 1995, and January 29, 1994. Such selected
consolidated financial information should be read in conjunction with the
consolidated financial statements of the Company, including the notes thereto,
set forth in Item 8 of this Form 10-K and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" set forth in Item 7 of this
Form 10-K.
FISCAL YEAR ENDED
------------------------------------------------------------------------------------------
JAN 31, 1998 FEB 1, 1997 FEB 3, 1996 (a) JAN 28, 1995 JAN 29, 1994
------------ ----------- --------------- ------------ ------------
DOLLARS IN THOUSANDS
(EXCEPT PER SHARE DATA)
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA
Total Revenues $ 607,946 $ 597,008 $ 608,931 $ 647,326 $ 633,936
Income / (Loss) Before
Reorganization Items and Income
Tax Expense (Benefit) 11,931 11,579 (33,631) (4,590) 23,194
Reorganization Items 27,542 23,648 19,711 -- --
Income / (Loss) Before
Extraordinary Items and
Discontinued Operations (b) (c) (8,199) (12,429) (51,010) (2,064) 15,244
Net Income / (Loss) $ (28,952) $ (12,429) $ (63,286) $ (13,355) $ 15,865
Basic and Diluted
Earnings/(Loss) Per Common
Share:
Continuing Operations $ (6.58) $ (100.20) $ (411.25) $ (16.64) $ 122.90
Preferred Stock Dividend -- -- -- (7.43) (7.43)
Discontinued Operations 5.92 -- (98.97) (91.03) 5.01
Extraordinary Items (22.58) -- -- -- --
--------- --------- --------- ----------- -----------
Net Earnings/(Loss) $ (23.24) $ (100.20) $ (510.22) $ (115.10) $ 120.48
========= ========= ========= =========== ===========
Cash Dividends Paid:
Common $ -- $ -- $ -- $ 11.55 $ 10.50
Preferred $ -- $ -- $ -- $ 1.39 $ 1.39
BALANCE SHEET DATA
Total Assets $ 371,365 $ 368,609 $ 367,069 $ 267,822 $ 285,996
Short Term Debt 1,105 57,931 50,100 6,221 --
Liabilities Subject to Compromise -- 231,675 229,409 -- --
Long-Term Obligations 142,024 5,669 3,100 109,487 108,010
OTHER DATA
Sales Increase/(Decrease) From
Prior Period 2.1% (3.5%) (6.5%) 1.8% 5.6%
Dept. Store Comp. Sales Inc./
(Dec.) From Prior Period (d) 3.7% (1.2%) (8.4%) (3.8%) 0.6%
10
14
NOTES TO SELECTED HISTORICAL FINANCIAL DATA:
(a) Fiscal Year ended February 3, 1996 included 53 weeks as
compared to 52 weeks for each of the other fiscal years shown.
(b) The financial information for Margo's is included in
discontinued operations for all period.
(c) The financial information for Bee-Gee is included as part of
continuing operations for all periods except for the initial
reserve for discontinued operations that was recorded in
Fiscal 1994 and the subsequent reversal recorded in Fiscal
1995.
(d) Comparable store sales include only those department stores
that operated during the applicable full fiscal year. And has
also been adjusted for elimination of any complete product
lines.
ITEM 7. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for Fiscal 1997, Fiscal 1996 and Fiscal 1995. The
Company's fiscal year ends on the Saturday closest to January 31. The discussion
and analysis that follows is based upon and should be read in conjunction with
the Company's Consolidated Financial Statements and the notes thereto included
in Item 8.
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for Fiscal 1997 increased by 2.1% to $581.4 million from
$569.6 million for Fiscal 1996. The increase is due to a 3.7% comparative store
sales (sales from stores open for at least one year) increase for the department
store division, offset partially by a 2.5% comparative stores sales decline for
the Bee-Gee Shoe outlet division. The Company closed the outlet section of the
Downtown Dayton, Ohio department store, the Fairborn, Ohio furniture store, and
the outlet section of the Hamilton, Ohio department store, which contributed a
combined total of approximately $5.5 million in Fiscal 1996 sales that were
absent in Fiscal 1997. In addition, the Company closed the Northtowne Mall
department store located in Toledo, Ohio and the department store in Carbondale,
Illinois in November 1997, and liquidated the unprofitable electronics product
line in December 1997. The Company's business is subject to seasonal
fluctuations. Approximately one-third of the Company's annual sales occur in the
fourth quarter (i.e., November - January), as well as a majority of the
Company's profits.
Financing revenue from the Company's private label credit card for
Fiscal 1997 decreased by 3.2% to $26.6 million from $27.5 million for Fiscal
1996. The decline is due to a 2.0% decrease in sales attributed to the Company's
private label credit card, and a resulting decline in the outstanding customer
accounts receivable. The decline in finance charges due to outstanding customer
accounts receivable has been partially offset by an increase in late fees
charged.
Cost of goods sold, occupancy, and buying expenses increased to 72.9%
of net sales for Fiscal 1997 from 72.0% of net sales for Fiscal 1996. This
increase is due to $8.6 million in excess markdowns in cost of goods due to
store closings in Fiscal 1997. This increase in costs is partially offset by an
increase in the initial rate of mark-up on goods sold coupled with a decrease in
the markdown rate. In Fiscal 1997, the LIFO inventory valuation adjustment
reduced cost of goods sold by $1.4 million compared to a decrease in cost of
goods sold of $1.9 million in Fiscal 1996.
Selling, general, administrative (including key employee performance
bonus plan expense) and hiring and recruiting expenses for new executives
decreased by $5.9 million to $157.4 million for Fiscal 1997 from $163.3 million
for Fiscal 1996. This improvement is primarily due to a reduction in payroll and
suspension of ongoing payments on certain computer leases resulting from
settlements with the lessors in which such lessors received claims in the
Reorganization Cases, offset partially by an increase in sales promotion
expense. The payroll expense reduction is primarily attributable to a reduction
in store payroll as the Company implemented several technology driven programs
to eliminate store non-selling workload, such as automating the price change,
transfer and return to vendor processes as well as re-engineering the store cash
office and gift wrap functions. In addition, $4 million was incurred under the
key employee retention bonus program for Fiscal 1997 compared to $5.0 million
for Fiscal 1996. The decline is due to an increase in the profit threshold
11
15
to which such bonus is tied. The expense savings above were partially offset by
an increase of $0.7 million in hiring and recruiting expenses for new
executives.
Provision for doubtful accounts increased to 1.5% of net sales for
Fiscal 1997 compared to 1.2% of net sales for Fiscal 1996. Consistent with
industry trends, net charge offs increased due to the rise in personal
bankruptcy filings and delinquent customer balances.
Interest Expense increased to $7.1 million for Fiscal 1997 from $6.5
million for Fiscal 1996. Interest expense increased due to the additional
borrowings to support working capital requirements and capital expenditures.
Other income fell from $1.1 million in Fiscal 1996 to $0.7 million in
Fiscal 1997. The Company had certain interest rate swap agreements (old swaps)
and was required to make adjustments to market value. For Fiscal 1997, the swap
adjustment to market resulted in an expense of $0.6 million compared to income
of $1.1 million in the prior period. Fiscal 1997's swap expense was offset by
$1.3 million in interest income generated by a federal income tax refund
received in 1997. With the emergence from bankruptcy protection, the old swaps
were bought out and no longer in force. Also, on December 30, 1997 the Company
entered into a new swap agreement with a notional amount of $115 million
(expiring September 28, 2001). This agreement has been matched to the Company's
securitization facility to reduce the impact of interest rate fluctuations.
Reorganization expense increased by $3.9 million to $27.5 million for
Fiscal 1997 from $23.6 million for Fiscal 1996. The Company expensed $6.9
million more in professional fees in Fiscal 1997 compared to Fiscal 1996. Also,
in Fiscal 1997 there was a $2.6 million expense recorded for an adjustment to
estimated allowed claims, and a $2.1 million expense recorded for reorganization
bonus that did not occur in Fiscal 1996. In Fiscal 1996 there was an expense
recorded of $7.4 million for equipment lease settlements which did not occur in
Fiscal 1997. There was also a reduction in financing cost expense of $2.4
million.
In Fiscal 1997 a state income tax expense provision was made for
approximately $0.5 million. Fiscal 1997 operating loss resulted in additional
federal net operating loss carryforwards ("NOLs"). The Company reviewed the
status of its deferred tax valuation allowance and determined that a deferred
tax asset of $7.9 million should be recognized. This results in a net income tax
benefit being recorded in Fiscal 1997. See the Company's Consolidated Financial
Statements and the accompanying notes set forth in Item 8.
The discontinued operations loss, net of tax, recorded in 1997 is for
the extinguishment of debt for Margo's. In December 1995 the Bankruptcy Court
approved the disposal of Margo's. The loss recorded represents the difference
between the amount of cash Margo's creditors received as part of the plan of
reorganization and the liabilities subject to settlement recorded by Margo's.
In Fiscal 1997 an extraordinary loss of $28.1 million was recorded in
connection with the extinguishment of the Company's prepetition liabilities. The
loss is based on the excess of the fair value of the stock and cash distributed
to the general unsecured creditors over the carrying amount of the liabilities
extinguished.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales for Fiscal 1996 decreased 3.5% to $569.6 million from $590.0
million for Fiscal 1995. Fiscal 1995 contains 53 weeks and contained
approximately $4.6 million in net sales for the extra week. The department store
division comparative store sales for Fiscal 1996 and the first 52-weeks of
Fiscal 1995 decreased approximately 0.4%. In Fiscal 1995 two department stores
were closed and two new department stores were opened. In addition, the Bee-Gee
Shoe division closed 11 El-Bee Shoe outlet stores in Fiscal 1996.
Financing revenue for Fiscal 1996 increased by $8.6 million to $27.5
million from $18.9 million in Fiscal 1995. In Fiscal 1995 prior to the Petition
Date, the Company maintained a financing facility through the sale
("securitization") of customer accounts receivable. With the filing of
bankruptcy the securitization facility was canceled. In Fiscal 1995 gross
financing revenue was reduced by $5.9 million of securitization expense.
Cost of goods sold, occupancy, and buying decreased from 77.5% of net
sales in Fiscal 1995 to 72.0% of net sales in Fiscal 1996. This improvement is
attributable to a significant increase in the initial rate of mark-up on goods
sold coupled with a significant decrease in the markdown rate for Fiscal 1996
compared to Fiscal 1995. In Fiscal 1995 increased
12
16
markdowns were taken to clear excess inventories. In Fiscal 1996, the LIFO
inventory valuation adjustment reduced cost of goods sold by $1.9 million
compared to an increase in cost of goods sold of $0.8 million in Fiscal 1995.
Selling, general, and administrative expenses (including key employee
performance bonus plan expense) and hiring and recruiting expenses for new
executives, decreased by $6.7 million to $163.3 million, or 28.7% of net sales,
in Fiscal 1996, compared to $170.0 million, or 28.8% of net sales, in Fiscal
1995. In Fiscal 1996 through expense reduction programs, the Company was able to
reduce expenses in a significant number of expense categories, particularly in
the areas of data processing and sales promotion, which was partially offset by
implementation in Fiscal 1996 of a key employee retention bonus program and
hiring and recruiting expenses.
Provision for doubtful accounts increased $0.8 million to $6.7 million,
or 1.2% of net sales, in Fiscal 1996, compared to $5.9 million, or 1.0% of net
sales, in Fiscal 1995. This increase is primarily the result of an increase in
customer personal bankruptcy filings.
Interest expense decreased $3.1 million to $6.5 million, or 1.1% of net
sales, in Fiscal 1996, compared to $9.6 million, or 1.6% of net sales, in Fiscal
1995. After the Petition Date, the primary method of financing was through a
Debtor-In-Possession ("DIP") financing agreement. The required borrowings under
the DIP after the Petition Date were significantly less than the total
indebtedness outstanding prior to the Petition Date, resulting in substantially
less interest expense for Fiscal 1996.
Other income for Fiscal 1996 relates to income recorded for a market
value adjustment in interest rate swaps.
Reorganization expense increased $3.9 million to $27.6 million in
Fiscal 1996 compared to $19.7 million in Fiscal 1995. Professional fees in
Fiscal 1996 were $5.0 million higher than Fiscal 1995 because the bankruptcy
filing occurred in October 1995. Other major differences include an expense of
$7.5 million for equipment lease settlements in Fiscal 1996 for which there were
no similar charges in Fiscal 1995, restructuring expenses that were $4.4 million
less in Fiscal 1996, and an expense in Fiscal 1995 of $5.0 million for the
market value adjustment of interest rate swaps.
Income tax expenses/(benefit) for Fiscal 1996 was an expense of $0.4
million, compared to a benefit of $2.3 million in Fiscal 1995. The tax provision
for Fiscal 1996 is for state and local taxes only, no federal tax benefit is
recorded due to a valuation allowance. Fiscal 1995's tax benefit includes the
carryback of net operating losses for a refund of prior tax paid net of state
and local taxes paid, and was also subject to a valuation allowance.
Loss/income from discontinued operations for Fiscal 1996 was zero
compared to $12.3 million for Fiscal 1995. Fiscal 1995's expense relates to an
additional reserve for disposal of Margo's and reversal of the reserve for
discontinued operations set up for Bee-Gee in the 1994 fiscal year, as the
Company had decided to retain Bee-Gee as a continuing operation in Fiscal 1995.
The Margo's disposal was completed in January 1996 (i.e., Fiscal 1995).
LIQUIDITY AND CAPITAL RESOURCES
Prior to the filing for bankruptcy protection in October 1995, the
Company's primary sources of funds were cash flow from operations and borrowings
under various debt agreements, and during the Reorganization Cases were cash
flow from operations and the DIP Credit Agreement.
Since the Effective Date, the Company's principal sources of funds are
cash flow from operations and borrowings under a three-year revolving credit
facility and receivable securitization facility ("New Credit Facilities"). The
Company's primary ongoing cash requirements are to fund debt service, make
capital expenditures, and finance working capital. The Company believes that it
will generate sufficient cash flow from operations, as supplemented by its
available borrowings under the New Credit Facilities, to meet anticipated
working capital and capital expenditure requirements, as well as debt service
requirements under the New Credit Facilities and other debt instruments.
The new revolving credit facility with Citicorp USA, Inc. as the Agent
and Citibank N.A. as the Issuer (the "New Revolving Credit Facility"), provides
for revolving credit loans of up to $125.0 million for seasonal working capital
purposes (including a $30.0 million letter of credit subfacility). The borrowing
base used in determining the aggregate availability for loans and other
extensions of credit under the New Revolving Credit Facility is equal to (a) up
to 95% of cash and (b) eligible finished-goods inventory as follows:
January-October, up to 60%; and November-December, up to 65%, less such reserves
as the Arranger deems appropriate. As of the end of Fiscal 1997, the Company's
outstanding balance under the New Revolving Credit Facility was $11.0 million.
13
17
The Company's new receivable securitization facility with Citicorp
North America, Inc., as agent (the "New Receivable Securitization Facility"), is
a three-year variable rate loan agreement, in which the Company's customer
accounts receivable serve as collateral. The New Receivable Securitization
Facility is a revolving arrangement whereby the Company can borrow up to $125.0
million. The borrowings under the New Receivable Securitization Facility are
subject to a borrowing base formula based primarily on outstanding customer
accounts receivable. Borrowings bear interest at approximately LIBOR plus 50
basis points. As of the end of Fiscal 1997, the Company's outstanding balance
under the New Receivable Securitization Facility was $123.0 million.
The Company's capital expenditures for Fiscal 1997 were $21.0 million,
of which $4.7 million related to data processing and the remaining $16.3 million
related to store maintenance, remodeling, and expansions.
The Company is in the process of reviewing its software inventory to
determine the effort necessary to ensure a smooth transition through the year
2000 event. The results indicate that the costs of this effort will not be
material. Third party software providers have either indicated that their
software is currently year 2000 compliant, or that it will be compliant well
before the year 2000. Third party providers are required to present their
certification statement or project plans to ensure compliance by mid-1998. The
Company is unable to ascertain any impact that the year 2000 event may have on
other principal suppliers of the Company, but it has no reason to believe that
any relationship with a principal supplier will be adversely affected.
14
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS AS OF JANUARY 31, 1998 AND
FEBRUARY 1, 1997 AND FOR EACH OF THE THREE FISCAL YEARS IN THE
PERIOD ENDED JANUARY 31, 1998:
Balance Sheets 2 - 3
Statements of Operations 4
Statements of Shareholders' Equity 5
Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 21
15
19
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
The Elder-Beerman Stores Corp.:
We have audited the accompanying consolidated balance sheets of The
Elder-Beerman Stores Corp. and subsidiaries (the "Company") as of January 31,
1998 and February 1, 1997 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended January 31, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of January 31, 1998
and February 1, 1997 and the results of their operations and their cash flows
for each of the three fiscal years in the period ended January 31, 1998, in
conformity with generally accepted accounting principles.
As discussed in Note A to the financial statements, on December 16, 1997, the
Bankruptcy Court entered an order confirming the plan of reorganization, which
became effective after the close of business on December 30, 1997.
DELOITTE & TOUCHE LLP
April 10, 1998
Dayton, Ohio
16
20
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
JANUARY 31, FEBRUARY 1,
1998 1997
ASSETS (DOLLARS IN THOUSANDS)
Current assets:
Cash and equivalents $ 6,497 $ 7,091
Customer accounts receivable (less allowance for doubtful
accounts: fiscal 1997 - $4,177; fiscal 1996 - $3,800) 136,705 147,814
Merchandise inventories 137,507 126,850
Refundable income taxes 10,336
Assets of discontinued operations 3
Deferred tax asset 2,595
Other current assets 10,051 10,822
--------- ---------
Total current assets 293,355 302,916
--------- ---------
Property:
Land and improvements 1,030 1,177
Buildings and leasehold improvements 62,074 54,361
Furniture, fixtures and equipment 87,132 76,047
--------- ---------
Total cost 150,236 131,585
Less accumulated depreciation and amortization (86,980) (77,782)
--------- ---------
Property, net 63,256 53,803
--------- ---------
Other assets 14,754 11,890
--------- ---------
$ 371,365 $ 368,609
========= =========
See notes to consolidated financial statements.
17
21
JANUARY 31, FEBRUARY 1,
1998 1997
(DOLLARS IN THOUSANDS,
LIABILITIES AND SHAREHOLDERS' EQUITY EXCEPT SHARE DATA)
Current liabilities:
Current portion of long-term obligations $ 1,105 $ 57,931
Accounts payable 49,005 22,345
Accrued liabilities:
Compensation and related items 8,562 8,696
Income and other taxes 6,581 6,421
Rent 2,079 2,009
Other 11,964 12,458
Liabilities of discontinued operations 10,216
--------- ---------
Total current liabilities 79,296 120,076
--------- ---------
Long-term obligations - less current portion 142,024 5,669
Deferred items 4,534 5,051
Liabilities subject to compromise 231,675
Commitments and contingencies
Shareholders' equity:
Series B convertible preferred stock, $.01 par value, 1,250,000 shares
authorized, 662,474 issued and outstanding at February 1, 1997 7
Common stock, no par, 12,583,789 shares in fiscal 1997
and 124,036, shares in fiscal 1996 issued and outstanding 199,351 6,511
Additional paid-in capital 23,283
Unearned compensation - restricted stock, net (1,225)
Deficit (52,615) (23,663)
--------- ---------
Total shareholders' equity 145,511 6,138
--------- ---------
$ 371,365 $ 368,609
========= =========
18
22
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED
---------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
Revenues:
Net sales $ 581,372 $ 569,557 $ 590,018
Financing 26,574 27,451 18,913
----------- --------- ---------
Total revenues 607,946 597,008 608,931
----------- --------- ---------
Costs and Expenses:
Cost of merchandise sold, occupancy and buying expenses 423,542 410,067 457,122
Selling, general and administrative expenses 151,293 156,892 169,919
Key employees retention bonus plan expense 4,000 4,994
Hiring and recruiting expenses for new executives 2,121 1,435 86
Provision for doubtful accounts 8,636 6,680 5,878
Interest expense 7,084 6,467 9,557
Other income (661) (1,106)
----------- --------- ---------
Total costs and expenses 596,015 585,429 642,562
----------- --------- ---------
Income (loss) before reorganization items and
income tax expense (benefit) 11,931 11,579 (33,631)
Reorganization items (27,542) (23,648) (19,711)
----------- --------- ---------
Loss before income tax expense (benefit),
discontinued operations and extraordinary item (15,611) (12,069) (53,342)
Income tax expense (benefit) (7,412) 360 (2,332)
----------- --------- ---------
Loss from continuing operations (8,199) (12,429) (51,010)
Discontinued operations 7,378 (12,276)
----------- --------- ---------
Loss before extraordinary item (821) (12,429) (63,286)
Extraordinary item (28,131)
----------- --------- ---------
Net loss $ (28,952) $ (12,429) $ (63,286)
=========== ========= =========
Basic and diluted earnings (loss) per common share:
Loss from continuing operations $ (6.58) $ (100.20) $ (411.25)
Discontinued operations 5.92 (98.97)
Extraordinary item (22.58)
----------- --------- ---------
Net loss $ (23.24) $ (100.20) $ (510.22)
=========== ========= =========
Weighted average number of common shares outstanding 1,245,760 124,036 124,036
=========== ========= =========
See notes to consolidated financial statements.
19
23
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
UNEARNED TOTAL
PREFERRED ADDITIONAL COMPENSATION - RETAINED SHARE-
STOCK COMMON PAID-IN RESTRICTED EARNINGS HOLDERS'
SERIES B STOCK CAPITAL STOCK (DEFICIT) EQUITY
Shareholders' equity at January 28, 1995
(124,036 common shares outstanding) $ 7 $ 6,511 $ 23,283 $ $ 52,052 $ 81,853
Net loss (63,286) (63,286)
--------- --------- --------- --------- --------- ---------
Shareholders' equity at February 3, 1996
(124,036 common shares outstanding) 7 6,511 23,283 (11,234) 18,567
Net loss (12,429) (12,429)
--------- --------- --------- --------- --------- ---------
Shareholders' equity at February 1, 1997
(124,036 common shares outstanding) 7 6,511 23,283 (23,663) 6,138
Net loss (28,952) (28,952)
Common stock issuance at bankruptcy
emergence (12,372,960 common shares) (7) 191,580 (23,283) 168,290
Restricted shares issued
(86,793 common shares) 1,260 (1,225) 35
--------- --------- --------- --------- --------- ---------
Shareholders' equity at January 31, 1998
(12,583,789 common shares
outstanding) $ $ 199,351 $ $ (1,225) $ (52,615) $ 145,511
========= ========= ========= ========= ========= =========
See notes to consolidated financial statements.
20
24
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
----------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
(DOLLARS IN THOUSANDS)
Cash flows from operating activities:
Net loss $ (28,952) $ (12,429) $ (63,286)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Provision for doubtful accounts 8,636 6,680 5,878
Deferred income taxes (7,877) 5,270
Provision for depreciation and amortization 11,849 13,139 15,768
Loss on disposal of assets 665 1,737 6,640
Loss on equipment settlements 74 7,458
Stock-based compensation expense 85
Payment to general unsecured creditors (82,215)
Discontinued operations (7,378)
Extraordinary item 28,131
Changes in noncash assets and liabilities:
Customer accounts receivable 2,473 (10,118) (9,621)
Merchandise inventories (10,657) (7,545) 23,980
Refundable income taxes 10,336
Other current assets 2,308 (5,331) (2,841)
Other long-term assets 1,566 916 (1,202)
Discontinued operations 583
Accounts payable 16,423 (2,710) 66,850
Accrued liabilities 1,113 (2,478) 8,063
Deferred items 365 1,048
--------- --------- ---------
Net cash provided by (used in) operating activities (53,420) (10,316) 57,130
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (20,994) (4,759) (11,401)
Proceeds from surrender of insurance policies 271 3,000
Proceeds from sale of property 1,200
Proceeds from sale of investment 300
Acquisition of securitized receivables (115,000)
--------- --------- ---------
Net cash used in investing activities (20,994) (2,988) (123,401)
--------- --------- ---------
Cash flows from financing activities:
Net borrowings under asset securization agreement 123,015
Net borrowings (payments) on bankers' acceptance and revolving lines of credit 10,960 29,500
Payments on long-term obligations (748) (991) (1,200)
Debt acquisition costs (1,634) (1,052) (3,875)
Net borrowings (payments) under DIP Facility (57,773) 7,773 50,000
--------- --------- ---------
Net cash provided by financing activities 73,820 5,730 74,425
--------- --------- ---------
Increase (decrease) in cash and equivalents (594) (7,574) 8,154
Cash and equivalents - beginning of year 7,091 14,665 6,511
--------- --------- ---------
Cash and equivalents - end of year $ 6,497 $ 7,091 $ 14,665
========= ========= =========
Supplemental cash flow information:
Interest paid $ 6,945 $ 6,929 $ 11,053
Income taxes paid 497 335 300
Supplemental non-cash investing and financing activities:
Property acquired from lease incentives $ 44 $ 366 $ 1,956
Property acquired from lease settlements 235 3,142
See notes to consolidated financial statements.
21
25
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
A. CHAPTER 11 CASE
On October 17, 1995 (the "Filing Date") , The Elder-Beerman Stores Corp.
and its Subsidiaries (collectively, the "Company") filed petitions for
relief under chapter 11 of the United States Bankruptcy Code ("Chapter
11"). From that time until December 30, 1997, the Company operated its
business as a debtor in possession subject to the jurisdiction of the
United States Bankruptcy Court for the Southern District of Ohio, Western
Division (the "Bankruptcy Court").
On December 30, 1997 (the "Effective Date"), the Company substantially
consummated its Third Amended Joint Plan of Reorganization dated November
17, 1997, as amended, (the "Joint Plan"), which was confirmed by an order
of the Bankruptcy Court entered on December 16, 1997.
The consolidated financial statements of the Company during its Chapter 11
case are presented in accordance with American Institute of Certified
Public Accountants Statement of Position 90-7, Financial Reporting by
Entities in Reorganization under the Bankruptcy Code ("SOP 90-7"). As of
the Effective Date, the reorganization value of assets of the Company
exceeded total liabilities. As such, in accordance with SOP 90-7,
fresh-start accounting and reporting was not adopted.
The Joint Plan establishes a reorganized Company, including a new Board of
Directors, new benefit and compensation programs and agreements, a
reorganization bonus paid to certain executives, authorization and
issuance of shares of new common and preferred stock and the issuance of
warrants. In addition, the Joint Plan provides for the settlement of
prepetition liabilities subject to compromise, in the Company's Chapter 11
case in exchange for cash, shares of new common stock or reinstatement as
liabilities of the reorganized Company.
The cash disbursements upon the effectiveness of the Joint Plan are as
follows:
Holders of general unsecured claims $ 79,698
Holders of unsecured claims against the Company's
discontinued Margo's operations 2,517
-----------
Total payments made to general unsecured creditors $ 82,215
===========
The new common shares issued upon the effectiveness of the Joint Plan are
as follows:
Holders of general unsecured claims 12,279,611
Holders of old common stock interests 124,036
Reorganization bonus to certain executives 93,349
-----------
12,496,996
===========
22
26
In addition to receiving new common shares, the holders of common stock
prior to the Company's emergence from bankruptcy received 249,809 Series A
Stock Warrants and 374,713 Series B Stock Warrants at the Effective Date.
The holders of preferred stock prior to the Company's emergence from
bankruptcy were awarded allowed claims as general unsecured claimants and,
accordingly, are included in the general unsecured distributions described
above (see Note I).
The value of cash and common stock required to be distributed under the
Joint Plan to the Company's general unsecured creditors exceeded the value
of the liabilities settled. Therefore, the Company recorded an
extraordinary loss related to the discharge of these prepetition
liabilities. The extraordinary loss recorded by the Company is determined
as follows:
Cash distribution to general unsecured creditors pursuant to the Joint Plan $ 79,698
Fair value of new common stock issued to general unsecured creditors 178,300
---------
257,998
Less: General unsecured claims (229,867)
---------
Extraordinary loss $ 28,131
=========
The February 1, 1997, consolidated balance sheet includes liabilities subject to
resolution in the Chapter 11 case. These liabilities are classified as
liabilities subject to compromise under reorganization proceedings, and are
comprised of the following:
FEBRUARY 1,
1997
Accounts payable and accrued liabilities $ 92,209
Unsecured debt 131,900
Secured debt 2,455
Capital lease obligations 2,834
Accrued interest 2,277
--------
$231,675
========
B. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - The Company operates principally in midwestern
states, through retail department stores and free-standing shoe stores.
The women's specialty stores (Margo's La Mode, Inc.) were liquidated in
1995 (see Note N).
ESTIMATES - The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of The Elder-Beerman Stores Corp. and subsidiaries
(including The El-Bee Chargit Corp., a finance subsidiary). All
significant intercompany balances and transactions have been eliminated in
consolidation.
23
27
FISCAL YEAR - The Company's fiscal year ends on the Saturday nearest
January 31. Fiscal years 1997 and 1996 consist of 52 weeks, and fiscal
year 1995 consists of 53 weeks ended January 31, 1998, February 1, 1997
and February 3, 1996, respectively.
CASH AND EQUIVALENTS - The Company considers all highly liquid investments
with original maturities of three months or less at the date of purchase
to be cash equivalents.
CUSTOMER ACCOUNTS RECEIVABLE - Customer accounts receivable are classified
as current assets since the average collection period is generally less
than one year.
MERCHANDISE INVENTORIES - Retail inventory is determined principally by
the retail method applied on a last-in, first-out (LIFO) basis and is
stated at the lower of cost or market. If the first-in, first-out (FIFO)
basis had been used, inventories would be higher by $6,657 at January 31,
1998 and $8,043 at February 1, 1997.
PROPERTY is stated at cost less accumulated depreciation determined by the
straight-line method over the expected useful lives of the assets. Assets
held under capital leases and related obligations are recorded initially
at the lower of fair market value or the present value of the minimum
lease payments. The straight-line method is used to amortize such
capitalized costs over the lesser of the expected useful life of the asset
or the life of the lease. The estimated useful lives by class of asset
are:
Buildings 25 to 50 years
Leasehold improvements 10 to 20 years
Furniture, fixtures and equipment 3 to 10 years
OTHER ASSETS include the value assigned to lease agreements acquired in an
acquisition that is being amortized over the lease terms. The Company
continually evaluates, based upon income and/or cash flow projections and
other factors as appropriate, whether events and circumstances have
occurred that indicate that the remaining estimated useful life of the
asset warrants revision or that the remaining balance of this asset may
not be recoverable.
During fiscal year 1995, the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. Upon the
adoption of SFAS No. 121, the Company recognized an impairment loss of
$551 related to the value assigned to lease agreements associated with
closed stores, which is included in cost of merchandise sold, occupancy
and buying expenses.
REVENUES are recognized on merchandise inventory sold upon receipt by the
customer. Finance revenue is generated by outstanding customer accounts
receivable and recognized as interest is accrued on these outstanding
balances.
PRE-OPENING COSTS associated with opening new stores are expensed as
incurred.
ADVERTISING EXPENSE - The cost of advertising is expensed as incurred.
24
28
NET EARNINGS (LOSS) PER COMMON SHARE are computed by dividing net earnings
(loss) by the weighted-average number of common shares outstanding during
the year. Stock options, restricted shares and warrants outstanding at
January 31, 1998, represent potential common shares and are not included
in computing diluted earnings per share as the effect on the current year
would be antidilutive. Share and per share amounts for all periods
presented have been restated to reflect the adoption of SFAS No. 128,
Earnings Per Share, and the effect of the issuance of new common stock
upon the Company's emergence from bankruptcy.
STOCK OPTIONS - The Company measures compensation cost for stock options
issued to employees using the intrinsic value based method of accounting
in accordance with Accounting Principles Board Opinion No. 25.
FINANCIAL INSTRUMENTS - The Company utilizes interest rate swap agreements
to manage its interest rate risks when receivables are sold under asset
securitization programs or other borrowings. The Company does not hold or
issue derivative financial instruments for trading purposes. The Company
does not have derivative financial instruments that are held or issued and
accounted for as hedges of anticipated transactions. Amounts currently due
to or from interest swap counterparties are recorded in interest expense
in the period in which they accrue. Gains or losses on terminated interest
rate swap agreements are included in long-term liabilities or assets and
amortized to interest expense over the shorter of the original term of the
agreements or the life of the financial instruments to which they are
matched. Gains or losses on the mark-to-market for interest rate swap
agreements that do not qualify for hedge accounting are recorded as income
or expense each period.
RECLASSIFICATIONS - Certain amounts in the fiscal 1996 and 1995 financial
statements have been reclassified to conform with the fiscal 1997
presentation.
C. CUSTOMER ACCOUNTS RECEIVABLE
Customer accounts receivable, which represent finance subsidiary
receivables (Note D), are classified as shown in the following table.
Interest is charged at an annual rate of 18% to 21%, depending on state
law.
JANUARY 31, FEBRUARY 1,
TYPE OF ACCOUNT 1998 1997
Optional and other $ 131,825 $ 140,623
Deferred payment 9,736 12,239
--------- ---------
Total 141,561 152,862
Less:
Allowance for doubtful accounts (4,177) (3,800)
Unearned interest on deferred contracts (679) (1,248)
--------- ---------
Customer accounts receivable, net $ 136,705 $ 147,814
========= =========
25
29
YEAR ENDED
-------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
------- ------- -------
Allowance for doubtful accounts:
Balance, beginning of year $ 3,800 $ 3,200 $ 1,700
Provision 8,636 6,680 5,878
Charge offs, net of recoveries (8,259) (6,080) (4,378)
------- ------- -------
Balance, end of year $ 4,177 $ 3,800 $ 3,200
======= ======= =======
Customer accounts receivable result from the Company's proprietary
credit card sales to customers residing principally in the midwestern
states. As such, the Company believes it is not dependent on a given
industry or business for its customer base and therefore has no
significant concentration of credit risk.
Deferred payment accounts include the remaining unearned interest
charge to be received. Unearned interest is amortized to finance income
using the effective interest method.
D. FINANCE SUBSIDIARY
The El-Bee Chargit Corp. ("Chargit") purchases substantially all
Elder-Beerman and subsidiaries' proprietary credit card receivables;
such receivables are purchased at a 2% discount (as of January 1998, 3%
discount). Customer accounts receivable held by the finance subsidiary
are included in Note C; purchase discounts are eliminated in
consolidation.
JANUARY 31, FEBRUARY 1,
BALANCE SHEETS 1998 1997
Assets:
Customer accounts receivable - net $ 136,705 $ 147,814
Unamortized purchase discount (2,923) (3,057)
Intercompany - prepetition 4,845
Other assets 3,658 2,295
--------- ---------
Total $ 137,440 $ 151,897
========= =========
Liabilities and shareholder's equity:
Liabilities $ 519 $ 2,286
Intercompany - postpetition 7,230 114,769
Liabilities subject to compromise 445
Long-term financing 123,015
Shareholder's equity 6,676 34,397
--------- ---------
Total $ 137,440 $ 151,897
========= =========
26
30
YEAR ENDED
----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
STATEMENTS OF OPERATIONS 1998 1997 1996
-------- -------- --------
Revenues:
Financing (net of securitization expense of $5,933,
for fiscal 1995) $ 26,574 $ 27,451 $ 18,913
Purchase discount 5,507 5,277 5,594
-------- -------- --------
Total revenues
32,081 32,728 24,507
-------- -------- --------
Expenses:
Occupancy costs 322 298 300
Selling, general and administrative 6,691 6,219 6,186
Provision for doubtful accounts 8,636 6,680 5,878
Other (income) expense 611 (1,106)
Interest expense 748
-------- -------- --------
Total expenses 17,008 12,091 12,364
-------- -------- --------
Income before reorganization items and income taxes 15,073 20,637 12,143
Reorganization items (31) (5,288)
-------- -------- --------
Income before income taxes and extraordinary item $ 15,042 $ 20,637 $ 6,855
======== ======== ========
On December 30, 1997, Chargit entered into a three-year variable-rate
securitization loan agreement ("Securitization Facility") with a
commercial bank, in which Chargit's customer accounts receivable are
pledged as collateral under the related Securitization Facility (see
Note F). The Securitization Facility is a revolving arrangement whereby
Chargit can borrow up to $125,000. As of January 31, 1998, borrowings
on Chargit's financial statements were $123,015.
On December 30, 1997, as a requirement of the Securitization Facility,
the Company entered into an interest rate swap agreement with a
notional amount of $115,000, expiring September 28, 2001, to reduce the
impact of interest rate changes on future interest expense. This
agreement has been matched to the Securitization Facility to reduce the
impact of interest rate changes on cash flows.
Prior to the Filing Date, the Company had a variable rate asset
securitization agreement with a commercial bank whereby it could sell
up to $115,000 of customer accounts receivable. The Company sold
approximately $115,000 of customer accounts receivable under this
agreement. These receivables were sold with a repurchase liability for
balances ultimately determined to be uncollectible. As a result of the
bankruptcy filing, the Company discontinued its accounts receivable
sale program and terminated its asset securitization agreement.
Upon termination of the accounts receivable sale program, the notional
amount of the effective interest rate swap agreements hedged against
receivables sold was $55,000. This notional amount was unmatched and a
$5,025 mark-to-market adjustment was recorded as reorganization expense
in fiscal 1995. For the period from the Filing Date to the Effective
Date, the estimated market value of the interest rate swaps were
recorded as liabilities subject to compromise. Mark-to-market
adjustments of $619 and ($1,106) are recorded as other expense (income)
in fiscal 1997 and 1996, respectively. The unmatched interest rate swap
agreement was paid off in December 1997.
27
31
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 involve the receipt of variable rate
amounts in exchange for fixed rate interest payments over the life of
the agreement. The differential between the fixed and variable rates to
be paid or received is accrued as interest rates change and is
recognized as an adjustment to interest expense. The Company has
outstanding swap agreements with notional amounts totaling $115,000 and
$55,000 for the fiscal years ended 1997 and 1996, respectively.
The Company is exposed to credit related losses in the event of
non-performance by the counterparties to the swap agreements. All
counterparties are rated A or higher by Moody's and Standard and Poor's
and the Company does not anticipate non-performance by any of its
counterparties.
E. OTHER ASSETS
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
Deferred tax asset $ 5,282 $
Value assigned to lease agreements 3,042 3,554
Receivables from developers 2,380
Unamortized debt issuance costs 909 454
Import deposits 2,555 2,555
Other 2,966 2,947
----------- -----------
$ 14,754 $ 11,890
=========== ===========
Receivables from developers represent receivables related to lease
incentives, in the form of construction reimbursements and advertising
allowances and are included in other long-term assets in fiscal 1996
because payment of certain construction reimbursements by the developer
to the Company are contingent on the Company's lease assumption and/or
payments for construction work performed. In fiscal 1997, these amounts
are classified as current because the Company expects to receive all
amounts in fiscal 1998.
F. LONG-TERM OBLIGATIONS
On December 30, 1997, the Company entered into a three-year $125,000
Revolving Credit Facility ("Credit Facility") and Securitization
Facility that effectively replaced the prior DIP Facility and paid
certain liabilities subject to compromise and administrative claims.
The Credit Facility provides for borrowings and letters of credit in an
aggregate amount up to $125,000, subject to a borrowing base formula
based primarily on merchandise inventories. There was a $30,000
sublimit for letters of credit, which was temporarily increased to
$60,000 in fiscal 1998. Borrowings bear interest at either prime plus
37.5 basis points or LIBOR plus 137.5 basis points through January
1999. Subsequent to January 1999, the interest rate on these borrowings
can fluctuate based on certain financial ratios of the Company. As of
January 31, 1998, the Company had $10,960 in outstanding borrowings,
$8,167 in outstanding letters of credit and approximately $51,000
available for additional borrowings under the Credit Facility.
The Securitization Facility provides for the Company to borrow up to
$125,000. The borrowings under this facility are subject to a borrowing
base formula based primarily on outstanding consumer accounts
receivable. Borrowings bear interest at approximately 1-month LIBOR,
plus 50 basis points.
28
32
Certain financial covenants related to debt, capital expenditures,
interest and fixed charge expenditures are included in these
agreements. Additionally, there are certain other restrictive covenants
including limitations on the incurrence of additional liens,
indebtedness, payment of dividends, distributions or other payments on
and repurchases of outstanding capital stock, investments, mergers,
stock transfers and sales of assets. Certain ratios related to the
performance of the accounts receivable portfolio are also included.
Long-term obligations consist of the following:
JANUARY 31, FEBRUARY 1,
1998 1997
-------- --------
DIP Facility $ $ 57,773
Revolving credit arrangement 3,600
Unsecured credit facility:
Eurodollar borrowings 40,000
Bankers' acceptances 13,300
Competitive bid advances 5,000
Unsecured senior notes payable, Series A-C 50,000
Unsecured senior notes payable 20,000
Mortgage note payable, 9.75% 2,669 2,727
Industrial development revenue bonds, variable rates based on published index of
tax-exempt bonds (5.15%) 4,260 5,555
Capital lease obligations (Note G) 2,225 2,834
Credit facility (8.0%) 10,960
Securitization facility (5.9%) 123,015
-------- --------
Total 143,129 200,789
Less:
Liabilities subject to compromise 137,189
DIP Facility 57,773
Current portion of long-term obligations, not subject
to compromise 1,105 158
-------- --------
Net long-term obligations $142,024 $ 5,669
======== ========
Maturities of borrowings are $1,105 in 1998, $951 in 1999, $134,942 in
2000, $870 in 2001, $362 in 2002, and $4,899 thereafter.
Collateral for the industrial development revenue bonds and the
mortgage note payable is land, buildings, furniture, fixtures and
equipment with a net book value of $5,675 at January 31, 1998.
Mechanics' liens have been filed in respect of improvements made to
certain properties.
29
33
G. LEASES
The Company leases retail store properties and certain equipment.
Generally, leases are net leases that require the payment of executory
expenses such as real estate taxes, insurance, maintenance and other
operating costs, in addition to minimum rentals. Leases for retail
stores generally contain renewal or purchase options, or both, and
generally provide for contingent rentals based on a percentage of
sales.
Minimum annual rentals, for leases having initial or remaining
noncancelable lease terms in excess of one year at January 31, 1998,
are as follows:
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
-------- --------
1998 $ 18,099 $ 824
1999 16,203 584
2000 13,676 525
2001 11,459 347
2002 10,358 174
Thereafter 77,872 121
-------- --------
Minimum lease payments $147,667 2,575
========
Less imputed interest 350
--------
Present value of net minimum lease payments $ 2,225
========
YEAR ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
RENT EXPENSE 1998 1997 1996
------- ------- -------
Operating leases:
Minimum $17,677 $20,489 $23,228
Contingent 2,108 2,136 2,766
------- ------- -------
Total rent expense $19,785 $22,625 $25,994
======= ======= =======
JANUARY 31, FEBRUARY 1,
ASSETS HELD UNDER CAPITAL LEASES 1998 1997
-------- --------
Buildings $ 11,033 $ 11,033
Equipment 235
Less accumulated depreciation and amortization
(9,997) (9,565)
-------- --------
Net $ 1,271 $ 1,468
======== ========
Assets acquired under capital leases are included in the consolidated
balance sheets as property, while the related obligations are included
in long-term obligations (see Note F).
30
34
H. INCOME TAXES
Income tax expense (benefit) consists of the following:
YEAR ENDED
----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
-------- -------- --------
Current:
Federal $ $ $(10,400)
State and local 465 360 504
-------- -------- --------
465 360 (9,896)
-------- -------- --------
Deferred:
Net operating losses and tax credit carryforwards (5,529) (13,560) (6,487)
Interest (6,119) 6,119
Deferred income 1,804 1,513 (270)
Discontinued operations 2,362 158 (274)
Other 3,364 (725) (4,200)
Valuation allowance (3,759) 6,495 20,787
-------- -------- --------
(7,877) 9,556
-------- -------- --------
Income tax expense (benefit) $ (7,412) $ 360 $ (340)
======== ======== ========
Income statement classification:
Continuing operations $ (7,412) $ 360 $ (2,332)
Discontinued operations 1,992
-------- -------- --------
Total $ (7,412) $ 360 $ (340)
======== ======== ========
The current tax benefit in fiscal 1995 includes the carryback of net
operating losses for a refund of prior taxes paid. During fiscal 1997,
this income tax refund was received by the Company.
The following table summarizes the major differences between the actual
income tax provision attributable to continuing operations and taxes
computed at the federal statutory rates:
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
-------- -------- --------
Federal statutory tax rate $ (5,464) $ (4,224) $(18,670)
State and local taxes 465 360 504
Valuation allowance (7,579) 3,767 15,824
Permanent items 5,166 457 10
-------- -------- --------
Income taxes $ (7,412) $ 360 $ (2,332)
======== ======== ========
Effective tax (benefit) rate (47.5)% --% (4.4)%
======== ======== ========
31
35
Deferred income taxes consist of the following:
JANUARY 31, FEBRUARY 1,
1998 1997
-------- --------
Deferred tax assets:
Net operating losses and tax credit carryforwards $ 25,576 $ 20,047
Discontinued operations 2,362
Deferred income 602 2,406
Bad debts 1,518 1,414
Other 4,280 7,517
-------- --------
31,976 33,746
Valuation allowance (23,523) (27,282)
Total deferred tax assets 8,453 6,464
-------- --------
Deferred tax liabilities:
Interest expense 6,119
Other 576 345
-------- --------
Total deferred tax liabilities
576 6,464
-------- --------
Net $ 7,877 $
======== ========
Included in the balance sheets:
Current assets - deferred tax asset $ 2,595 $
Other assets 5,282
-------- --------
Net deferred tax assets $ 7,877 $
======== ========
Permanent items consist primarily of bankruptcy related expenses that
are not deductible for tax purposes. The net operating loss
carryforwards, tax credit carryforwards, and other deferred tax assets
will result in future benefits only if the Company has taxable income
in future periods. In accordance with SFAS No. 109, Accounting for
Income Taxes, a valuation allowance has been recorded for the tax
effect of a portion of the future tax deductions and tax credit
carryforwards.
The federal net operating loss carryforward is approximately $64,000
and is available to reduce federal taxable income through 2012. The tax
credit carryforward is approximately $2,600; of which $600 will expire
in 2009 and 2010, and the balance is an indefinite carryforward.
I. EMPLOYEE BENEFIT PLANS
A defined-contribution employee benefit plan (the "401(k) Plan") covers
substantially all employees. The Company may contribute to the Plan
based on a percentage of compensation and on a percentage of income
before income taxes. No contributions were made in fiscal years 1997,
1996 and 1995. Eligible employees can make contributions to the Plan
through payroll withholdings of one to fifteen percent of their annual
compensation.
32
36
The Plan includes an employee stock ownership component. At February 1,
1997, the Plan held all of the outstanding preferred shares of the
Company. These preferred shares were included in the settlement of the
general unsecured claims on December 30, 1997 (See Note A). The
preferred shares were settled with a distribution of $4,184 in cash and
issuance of 644,680 common shares.
A Stock Purchase Plan was established under the Joint Plan. The Stock
Purchase Plan provides for the Company's employees to purchase
Elder-Beerman common stock at a 15% discount. Employees can make
contributions to the Plan through payroll withholdings of one percent
to ten percent of their annual compensation, up to a maximum of $25 per
year. A total of 625,000 shares of common stock are registered and
unissued under this plan.
J. BONUS PLANS
In 1995, the Company established a key employee retention program (the
"KERP"). The KERP provided for bonus payments to be made during the
Company's bankruptcy proceedings based on operating results and
continued employment. Expenses of $4,000 and $4,994 were recorded in
fiscal years 1997 and 1996, respectively.
K. TRANSACTIONS WITH RELATED PARTIES
The Company leased real estate under operating leases from certain
affiliated entities, and made payments to these related parties
totaling $3,247, $3,742 and $4,129 in fiscal years 1997, 1996 and 1995,
respectively. As a result of the issuance of new common shares of the
Company as of the Effective Date (see Note A), these entities' are no
longer related parties at January 31, 1998. Balances with related
parties at February 1, 1997 were as follows:
Customer accounts receivable $368
Other current assets 60
Other long-term assets 460
Accounts payable and other liabilities 536
Liabilities subject to compromise 951
L. SHAREHOLDERS' EQUITY
The Company authorized 25 million no par new common shares effective
with the Company's bankruptcy emergence. Under a Rights Agreement, each
outstanding common share presently has one right attached that trades
with the common share. Generally, the rights become exercisable and
trade separately after a third party acquires 20% or more of the common
shares or commences a tender offer for a specified percentage of the
common shares. Upon the occurrence of certain additional triggering
events specified in the Rights Agreement, each right would entitle its
holder (other than, in certain instances, the holder of 20% or more of
the common shares) to purchase common shares of the Company at an
exercise price of 50% of the then-current common share market value.
The rights expire on December 30, 1998, unless the Board of Directors
takes action prior to that date to extend the rights, and are presently
redeemable at $.01 per right.
At December 30, 1997, the Company issued shares of common stock to its
general unsecured claimants, which included 644,680 shares of common
stock issued in satisfaction of the claims of the old Series B
Preferred Shareholders. The Board of Directors has the authority to
issue five million shares of new preferred stock. At January 31, 1998,
these shares are unissued.
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37
M. STOCK-BASED COMPENSATION
During the fourth quarter of 1997, stock options and restricted shares
were granted to designated employees and nonemployee directors under
the new Equity and Performance Incentive Plan. This plan also
authorizes the Company's Board of Directors to grant appreciation
rights, deferred shares, performance shares and performance units.
Awards relating to 2,250,000 shares are authorized for issuance under
this plan and awards related to 1,310,000 shares have been issued as of
January 31, 1998.
On December 30, 1997, 773,000 stock options with an exercise price of
$10.89 per share were granted to directors, officers and key employees
under the Equity and Performance Incentive Plan. The options granted
have a maximum term of ten years and vest over a period of three to
five years. At January 31, 1998, none of the 773,000 stock options
outstanding are exercisable. The following table summarizes the fair
value of options granted using the Black-Scholes Option Pricing Model:
Fair value of options granted during the year $ 8.63
Weighted-average assumptions used for grants:
Expected dividend yield 0 %
Expected volatility 35 %
Risk-free interest rate 6.5 %
Expected life 7 years
The Restricted Stock Plan provides for the issuance of restricted
common shares to certain employees and nonemployee directors of the
Company. These shares have a vesting period of three years. There were
86,793 shares awarded under this plan in January 1998. The fair value
of the restricted shares awarded is $1,260 and is being amortized over
the three year vesting period.
Total compensation costs charged to loss from continuing operations
before income taxes for all stock-based compensation awards was
approximately $85 in fiscal 1997. Had compensation costs been
determined based on the fair value method of SFAS No. 123 for all
plans, the Company's net loss and loss per common share would have been
reduced to the following pro forma amounts:
YEAR ENDED
JANUARY 31,
1998
Net loss:
As reported $ (28,952)
Pro forma (29,018)
Loss per common share:
As reported (23.24)
Pro forma (23.29)
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38
N. DISCONTINUED OPERATIONS
In fiscal 1994, the Company adopted formal plans to dispose of its
subsidiaries, Margo's La Mode, Inc. ("Margo's") and The Bee-Gee Shoe
Corp. ("Bee Gee") and recorded reserves for loss on disposal of $9,834,
net of tax benefit of $5,066. During fiscal 1995, the Company was
unsuccessful in its attempt to sell Margo's and decided to liquidate
the subsidiary. During fiscal 1996, management determined the value of
Bee Gee would be more effectively realized by retaining Bee Gee as a
part of the Company's ongoing operations.
Based on management's estimates and the change in the disposition
strategy of Margo's in 1995, the Company provided an additional reserve
of $19,262 (including income tax expense of $1,992) for the
discontinued operations of Margo's. The discontinued operations expense
of $12,276 for fiscal 1995 includes the additional reserve for Margo's
net of the reversal of reserves for Bee Gee of $6,986 as a result of
management's decision in fiscal 1996, previously discussed. Margo's
operating losses of $322, $451 and $16,419 were charged against the
reserve for discontinued operations for fiscal years 1997, 1996 and
1995, respectively. Margo's net sales were $34,227 in 1995. Margo's did
not have any sales subsequent to fiscal 1995.
The settlement of Margo's liabilities subject to compromise and other
liabilities upon the Company's emergence from bankruptcy during fiscal
1997 resulted in a net gain from discontinued operations of $7,378. The
Company was able to utilize operating loss carryforwards that were
fully reserved in prior years to offset the income tax expense related
to the gain on discontinued operations. Therefore, there is no income
tax expense recorded in connection with this gain.
O. REORGANIZATION ITEMS
Reorganization costs consist of the following:
YEAR ENDED
-----------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
------- ------- -------
Professional fees $15,505 $ 8,612 $ 3,586
Equipment lease settlements 74 7,458
Restructuring 6,852 4,497 8,897
Adjustment to liabilities subject to compromise 2,326
Reorganization bonus 2,100
Financing costs 685 3,081 2,203
Market value adjustments of interest rate swaps 5,025
------- ------- -------
Total $27,542 $23,648 $19,711
======= ======= =======
Subsequent to the Chapter 11 filings, the Company began restructuring
its business and decided, among other things, to close two outlet
stores and certain Bee Gee locations and discontinue certain vendors in
fiscal 1995 and closed a furniture store in fiscal 1996. In fiscal 1997
the Company closed two department stores and discontinued certain
departments. Property impairment, severance and certain store closing
costs are included in restructuring costs. The Company negotiated
various equipment lease settlements primarily during fiscal 1996.
Equipment lease settlement costs primarily resulted from renegotiated
leases where cash payments and unsecured claims satisfied under the
Joint Plan were granted in exchange for ownership of the equipment and
relief from other claims previously filed in connection with the
underlying leases.
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39
In 1995, the market value adjustments of interest rate swaps represent
the recognition of losses on interest rate swaps previously hedged
against accounts receivable sold. Financing costs include the write-off
of the unamortized balance of previously deferred financing costs and
amortization of fees associated with the DIP facility.
P. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
CASH AND EQUIVALENTS - The carrying amount approximates fair
value because of the short maturity of those instruments.
ACCOUNTS RECEIVABLE AND DIP FACILITY - The net carrying amount
approximates fair value because of the relatively short
average maturity of the instruments.
LONG-TERM DEBT - The carrying amount approximates fair value
as a result of the variable-rate based borrowings.
INTEREST RATE SWAP AGREEMENTS - The fair value of interest
rate swaps is based on the quoted market prices that the
Company would pay to terminate the swap agreements at the
reporting date. The following table summarizes the carrying
amount and estimated fair value of the interest rate swap
agreements.
JANUARY 31, 1998 FEBRUARY 1, 1997
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
Financial instruments - interest rate
swaps $ -- $ -- $(1,415) $(1,415)
Unrecognized financial instruments -
interest rate swaps (1,548) (579) (844)
Q. COMMITMENTS AND CONTINGENCIES
LITIGATION - The Company is a party to various legal actions and
administrative proceedings and subject to various claims arising in the
ordinary course of business. In addition, as a result of the bankruptcy
case, the Company remains subject to the jurisdiction of the Bankruptcy
Court for matters relating to the consummation of the Joint Plan.
Management believes the outcome of any of the litigation matters that
will have a material effect on the Company's results of operations,
cash flows or financial position have been appropriately accrued.
INSURANCE - The Company is self-insured for employee medical and
workers' compensation subject to limitations for which insurance has
been purchased. Management believes that those claims reported and not
paid and claims incurred, but not yet reported, are appropriately
accrued.
* * * * * *
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ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding those persons
currently serving as the executive officers and directors of the Company.
Certain biographical information regarding each of the Company's current
directors and executive officers is described below the table.
Name Age Position
- ------------------------ ------ ------------------------------------------------------------------------
Frederick J. Mershad 55 Chairman of the Board and Chief Executive Officer
John A. Muskovich 51 President, Chief Operating Officer, Chief Financial Officer and Director
James M. Zamberlan 51 Executive Vice President, Stores
Steven D. Lipton 47 Senior Vice President, Controller
Perry J. Schiller 40 Senior Vice President and Treasurer
Scott J. Davido, Esq. 36 Senior Vice President, General Counsel, and Secretary
Stewart M. Kasen 58 Director
Steven C. Mason 62 Director
Thomas J. Noonan, Jr. 58 Director
Bernard Olsoff 69 Director
Laura H. Pomerantz 50 Director
Jack A. Staph 52 Director
John J. Wiesner 60 Director
Frederick J. Mershad has served as Chairman of the Board of
Elder-Beerman since December 1997, as Chief Executive Officer of Elder-Beerman
since January 1997 and as President of Elder-Beerman from January 1997 to
December 1997. Prior to this time, Mr. Mershad served as President and Chief
Executive Officer of the Proffitt's division of Proffitt's, Inc. ("Proffitt's")
from February 1995 to December 1996; Executive Vice President, Merchandising
Stores for Proffitt's from May 1994 to January 1995; Senior Vice President,
General Merchandise Manager, Home Store for Rich's Department Stores, Inc. from
August 1993 to May 1994; and Executive Vice President, Merchandising and
Marketing of the McRae's Department Stores division of Proffitt's from June 1990
to August 1993.
John A. Muskovich has served as President, Chief Operating Officer,
Chief Financial Officer and a Director of Elder-Beerman since December 1997 and
served as Executive Vice President of Administration of Elder-Beerman from
February 1996 to December 1997. Prior to this time, Mr. Muskovich served as
Director of Business Process for Kmart Corp. from September 1995 to February
1996; President of the Federated Claims Services Group with Federated Department
Stores, Inc. ("Federated") from February 1992 to August 1995; Vice President of
Benefits of Federated from 1994 to 1995; and Vice President, Corporate
Controller of Federated from 1988 to 1992.
James M. Zamberlan has served as Executive Vice President, Stores of
Elder-Beerman since July 1997. Prior to this time, Mr. Zamberlan served as
Executive Vice President of Stores for Bradlee's, Inc. from September 1995 to
January 1997 and also served as Senior Vice President of Stores for the Lazarus
Division of Federated Department Stores, Inc. from November 1989 to August 1995.
Steven D. Lipton has served as Senior Vice President, Controller of
Elder-Beerman since March 1996. Prior to this time, Mr. Lipton served as
Operating Vice President of Payroll for Federated Financial & Credit Services
from September 1994 to January 1996 and served as Vice President and Controller
of the Lazarus Division of Federated from February 1990 to August 1994.
Perry J. Schiller has served as Senior Vice President and Treasurer of
Elder-Beerman since November 1995. Prior to this time, Mr. Schiller served as
the Director of Internal Audit for Elder-Beerman from October 1993 to November
1995 and served as a Senior Manager of Financial Audit for Deloitte & Touche LLP
from May 1988 to October 1993.
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Scott J. Davido, Esq. has served as Senior Vice President, General
Counsel, and Secretary of Elder-Beerman since January 1998. Prior to this time,
Mr. Davido was a partner with Jones, Day, Reavis & Pogue, a law firm, since
December 1996, and was employed as an associate with the firm since September
1987.
Stewart M. Kasen has served as a Director of Elder-Beerman since
December 1997. Currently, Mr. Kasen is a private investor. Mr. Kasen served as
Chairman of the Board, President, and Chief Executive Officer of Best Products
Co., Inc. ("Best Products"), a Richmond, Virginia, retail catalogue showroom
company, from June 1994 through April 1996, President and Chief Executive
Officer from June 1991 to June 1994, and President and Chief Operating Officer
from 1989 to June 1991. Best Products filed for protection under Chapter 11 of
the United States Bankruptcy Code in January 1991. Best Products' plan of
reorganization was confirmed in June 1994, and it filed a petition for
bankruptcy under Chapter 11 again on September 24, 1996. Mr. Kasen also
currently serves as Chairman of the Board of Directors of Factory Card Outlet
Corp., and as a Director of Markel Corp., O'Sullivan Industries Holdings, Inc.,
Bibb Co., and K2 Inc.
Steven C. Mason has served as a Director of Elder-Beerman since
December 1997. Mr. Mason retired from Mead Corp., a forest products company, in
November 1997. Prior to retirement, Mr. Mason served as Chairman of the Board
and Chief Executive Officer of Mead Corp., from April 1992 to November 1997. Mr.
Mason is also currently a Director of PPG Industries, Inc. and Cincinnati Bell.
Thomas J. Noonan, Jr. has served as a Director of Elder-Beerman since
December 1997. Mr. Noonan serves as Managing Director of The Coppergate Group, a
financial investment and management company, and has served in this capacity
since April 1993. Mr. Noonan also serves as Executive Vice President and Chief
Financial Officer of Herman's Sporting Goods, Inc., a sporting goods retailer
that filed for protection under Chapter 11 of the United States Bankruptcy code
and is currently being liquidated, and has served in this capacity since August
1994. Prior to this time, Mr. Noonan served as Managing Director and Chief
Executive Officer of TFGII, a financial investment and management company, from
January 1993 to October 1994, and as Executive Vice President of Intrenet Inc.,
a trucking holding company, from September 1990 to March 1993. Mr. Noonan is
also currently a Director of Intrenet Inc. and Richman Gordman 1/2 Price Stores
Inc.
Bernard Olsoff has served as a Director of Elder-Beerman since December
1997. Mr. Olsoff retired from Frederick Atkins, Inc., a retail marketing and
consulting company, in 1997. Prior to this time, Mr. Olsoff served as President,
Chief Executive Officer and Chief Operating Officer of Frederick Atkins, from
1994 to April 1997, and President and Chief Operating Officer from 1983 to 1994.
Laura H. Pomerantz has served as a Director of Elder-Beerman since
December 1997. Mrs. Pomerantz currently serves as President of LHP Consulting &
Management, a real estate consulting firm, and has served in this capacity since
1995. Through LHP Consulting & Management, Mrs. Pomerantz is also associated
with Newmark Real Estate Co., Inc., a commercial real estate company, as Senior
Managing Director and has served in this capacity since August 1996. Prior
thereto, Mrs. Pomerantz served as Senior Managing Director of S.L. Green Real
Estate Company, a commercial real estate company, from August 1995 to July 1996,
and was affiliated with Koeppel Tenor Real Estate Services, Inc., a commercial
real estate company, from March 1995 through July 1995. Prior to this time, Mrs.
Pomerantz served as Executive Vice President and a Director of The Leslie Fay
Companies, Inc. ("Leslie Fay"), an apparel design and manufacturing company,
from January 1993 to November 1994, and as Senior Vice President and Vice
President of Leslie Fay from 1986 through 1992.
Jack A. Staph has served as a Director of Elder-Beerman since December
1997. Currently, Mr. Staph is a consultant and a private investor. Mr. Staph has
also served in an unrestricted advisory capacity to CVS Corp. since June 1997.
Prior to this time, Mr. Staph served as Senior Vice President, Secretary, and
General Counsel of Revco D.S., Inc., a retail pharmacy company, from October
1972 to August 1997.
John J. Wiesner has served as a Director of Elder-Beerman since
December 1997. Mr. Wiesner retired from C.R. Anthony, a regional apparel
retailer, in June 1997. Prior to retirement, Mr. Wiesner served as Chairman of
the Board of Directors, President and Chief Executive Officer of C.R. Anthony,
from April 1987 to June 1997. Mr. Wiesner is also currently a Director of Stage
Stores, Inc. and Lamonts Apparel, Inc.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and Executive Officers to file reports of ownership and
changes of ownership with the Securities and Exchange Commission and NASDAQ. The
Company assists its Directors and Executive Officers in completing and filing
those reports. The Company believes that during the last completed fiscal year
all filing requirements applicable to its Directors and Executive Officers were
complied with except that Mr. Schiller's Initial Statement of Beneficial
Ownership of Securities did not include the approximately 24 shares of Common
Stock allocated to Mr. Schiller under the Elder-Beerman Stores Corp. Profit
Sharing and Stock Ownership Plan.
ITEM 11. EXECUTIVE COMPENSATION
The compensation discussion that follows has been prepared based on the
actual plan and non-plan compensation awarded to, earned by or paid to the
Company's named executive officers during the periods presented. The Company's
compensation arrangements with its directors and employment contracts and
several arrangements with its named executive officers are also described below.
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43
CASH COMPENSATION TABLE
The following table sets forth the compensation paid or payable by the
Company during Fiscal 1995, Fiscal 1996 and Fiscal 1997, to those individuals
serving as the registrant's chief executive officer at any time during Fiscal
1997 and certain other highly compensated executive officers of the Company.
Annual Compensation Long-Term Compensation
------------------- ---------------------------
Awards Payouts
------------------- -------
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Name and Principal Salary Bonus Compen- Award(s) SARs Payouts Compen-
Position Year ($) ($) sation ($) ($) (#) ($) sation ($)
-------- ---- --- --- ---------- --- --- --- ----------
Frederick J. Mershad 1997 503,344 500,000 (1) 51,251(2) 47,087 194,000 -- --
Chairman of the Board and 1996 19,231 633,632 (3) -- -- -- -- --
Chief Executive Officer 1995 -- -- -- -- -- -- --
John A. Muskovich 1997 267,335 598,750 (4) -- 34,802 (5) 126,000 -- --
President, Chief Operating 1996 183,974 67,908 -- -- -- -- --
Officer and 1995 -- -- -- -- -- -- --
Chief Financial Officer
James M. Zamberlan 1997 164,944 41,313 -- 1,404 (6) 61,000 -- --
Executive Vice President, 1996 -- -- -- -- -- -- --
Stores 1995 -- -- -- -- -- -- --
Steve D. Lipton 1997 132,897 19,763 -- 1,701 (7) 21,000 -- --
Senior Vice President, 1996 103,143 45,820 -- -- -- -- --
Controller 1995 -- -- -- -- -- -- --
Perry J. Schiller 1997 118,489 27,600 -- 594 (8) 15,000 -- --
Senior Vice President 1996 113,846 34,500 -- -- -- -- --
and Treasurer 1995 93,365 5,750 -- -- -- -- --
Max Gutmann (9) 1997 667,071(10) 800,000 (11) -- -- -- -- --
Chairman of the Board 1996 388,846 160,000 -- -- -- -- --
1995 107,308 -- -- -- -- -- --
Herbert O. Glaser (12) 1997 517,159(13) 670,000 (14) -- -- -- -- --
Vice Chairman 1996 309,030 134,000 -- -- -- -- --
1995 135,000 -- -- -- -- -- --
- -------------------------
(1) Amount includes a $250,000 reorganization bonus granted to Mr.
Mershad by the Board of Directors on March 11, 1998, paid in
the same manner as the reorganization bonus previously paid to
Messrs. Muskovich, Gutmann and Glaser.
(2) Moving expense reimbursement.
(3) In accordance with his employment contract, Mr. Mershad
received a signing bonus of $633,632 as reimbursement for
forfeiting his performance bonus, restricted stock grants, and
stock options that he would have received from his prior
employer.
(4) Amount includes a $550,000 reorganization bonus awarded to Mr.
Muskovich pursuant to the Plan, paid 32.9% in cash and 62.1%
in stock (at $14.52 per share).
(5) Includes 3,357 deferred shares and 839 restricted shares
awarded Mr. Muskovich as the deferred portion of his 1997
bonus pursuant to the Equity and Performance Incentive Plan.
(6) Includes 1,123 deferred shares and 281 restricted shares
awarded Mr. Zamberlan as the deferred portion of his 1997
bonus pursuant to the Equity and Performance Incentive Plan.
(7) Includes 1,361 deferred shares and 340 restricted shares
awarded Mr. Lipton as the deferred portion of his 1997
bonus pursuant to the Equity and Performance Incentive Plan.
(8) Includes 475 deferred shares and 119 restricted shares awarded
to Mr. Schiller as the deferred portion of his 1997 bonus
pursuant to the Equity and Performance Incentive Plan.
(9) Effective December 30, 1997, Mr. Gutmann was replaced by Mr.
Mershad as Chairman of the Board of Directors.
(10) Includes severance payment of $400,000.
(11) Amount represents a reorganization bonus awarded to Mr.
Gutmann pursuant to the Plan, paid 32.9% in cash and 62.1% in
Stock (at $14.52 per share).
(12) Effective August 1997, Mr. Glaser is no longer employed by the
Company.
(13) Includes severance payment of $335,000.
(14) Amount represents a reorganization bonus awarded to Mr. Glaser
pursuant to the Plan, paid 32.9% in cash and 62.1% in stock
(at $14.52 per share).
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FISCAL 1997 OPTION GRANTS
The following table sets forth information concerning individual grants
of stock options to the Company's named executive officers during Fiscal 1997.
Individual Grants Potential Realizable Value
----------------------------------------------------- At Assumed Annual Rate
Of Stock Price
Appreciation For Option Term
----------------------------
Percent Of
Number Of Total
Securities Options
Underlying Granted To Exercise
Options Employees In Of Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date 0% ($) 5% ($) 10% ($)
---- ----------- ----------- ------------ ---- ------ ------ -------
Frederick J. Mershad 194,000 24.6 $10.89 12/30/07 704,220 2,475,440 5,193,380
John A. Muskovich 126,000 16.0 $10.89 12/30/07 457,380 1,607,760 3,373,020
James M. Zamberlan 61,000 7.7 $10.89 12/30/07 221,430 778,360 1,632,970
Steve D. Lipton 21,000 2.7 $10.89 12/30/07 76,230 267,960 562,170
Perry J. Schiller 15,000 1.9 $10.89 12/30/07 54,450 191,400 401,550
Max Gutmann 0 0.0 -- -- 0 0 0
Herbert O. Glaser 0 0.0 -- -- 0 0 0
- -------------------------
(1) One-fifth of the options vest on each of December 30, 1998,
1999, 2000, 2001, 2002.
(2) There was no established market price for the Company's stock
on the date of grant. The Company's stock did not begin
trading on NASDAQ until February 17, 1998, following
distribution shares of Common Stock to creditors under the
Plan.
FISCAL 1997 AGGREGATED OPTION EXERCISES FY-END OPTION VALUES
The following table sets forth information concerning the exercise of
stock options by each of the Company's named executive officers during Fiscal
1997 and fiscal year end value of unexercised options.
Number Of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Shares Value Options At Fiscal Year-End (#) Options At Fiscal Year-End ($)
Acquired On Realized ------------------------------ ------------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --- ----------- ------------- ----------- -------------
Frederick J. Mershad 0 0 194,000 0
John A. Muskovich 0 0 126,000 0
James M. Zamberlan 0 0 61,000 0
Steve D. Lipton 0 0 21,000 0
Perry J. Schiller 0 0 15,000 0
Max Gutmann 0 0 0 0
Herbert O. Glaser 0 0 0 0
- -------------------------
(1) One-fifth of the options vest on each of December 30, 1998,
1999, 2000, 2001, 2002.
(2) There was no established market price for the Company's stock
on the date of grant. The Company's stock did not begin
trading on NASDAQ until February 17, 1998, following
distribution shares of Common Stock to creditors under the
Plan.
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EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN EXECUTIVES
The Company has entered into employment agreements with Frederick J.
Mershad, Chairman and Chief Executive Officer, and John A. Muskovich, President,
Chief Operating Officer, and Chief Financial Officer and several of its other
executive officers as described below (the "Employment Agreements"). The
Employment Agreements with Messrs. Mershad and Muskovich were effective as of
the Effective Date and will end on the third anniversary of the Effective Date.
These Employment Agreements will be automatically renewed every year on the
anniversary date of the employment agreement for an additional one year period,
unless Mr. Mershad or Mr. Muskovich provides the Company or the Company provides
Mr. Mershad or Mr. Muskovich with 180 days prior notice terminating this yearly
renewal. These Employment Agreements set forth (a) the executive's compensation
and benefits, subject to review at the discretion of the Board of Directors, (b)
the Company's right to terminate the executive for cause or otherwise; (c) the
amounts to be paid by the Company in the event of the executive's termination,
death, or disability while rendering services; (d) the executive's duty of
strict confidence and to refrain from conflicts of interest; (e) the executive's
obligations not to compete for the term of the agreement plus one year unless
the executive terminated his employment for good reason or the employer
terminates the executive other than for cause; and (f) the executive's right to
receive severance payments. In general, these Employment Agreements provide that
if Mr. Mershad or Mr. Muskovich is terminated for any reason other than for
cause or following a change in control, he will receive payments equal to the
remaining base salary that would have been distributed to him by the Company
under the remaining term of his employment agreement and the incentive
compensation earned by the executive for the most recent fiscal year. If such
executive (a) is terminated within two years of a change in control without
cause, (b) voluntarily terminates within two years of a change in control, or
(c) is terminated in connection with but prior to a change in control and
termination occurs following the commencement of any discussions with any third
party that ultimately results in a change in control, he will receive a
severance payment equal to the greater of 2.99 times the Internal Revenue Code
"base amount" as described in Section 280G of the Internal Revenue Code or two
times his most recent base salary and bonus and the executive will continue to
be eligible for health benefits, perquisites, and fringe benefits generally made
available to senior executives following his termination, unless the executive
obtains new employment providing substantially similar benefits. A tax gross-up
on excise taxes also will be paid if the severance pay exceeds the limits
imposed by the Internal Revenue Code.
The Company has also entered into Employment Agreements that include
severance pay provisions with each of Messrs. Zamberlan, Davido, Lipton and
Schiller. These executives serve the Company under their respective agreements
for terms ending on the second anniversary, with respect to Mr. Schiller, or the
third anniversary, with respect to Messrs. Davido, Lipton and Zamberlan, of the
Effective Date with automatic yearly extensions thereafter, unless the Company
or the executive has given written notice of termination not less than 120 days
prior to the yearly renewal date. These Employment Agreements set forth (a) the
executive's compensation and benefits, subject to review at the discretion of
the Board of Directors, (b) the Company's right to terminate the executive for
cause or otherwise; (c) the amounts to be paid by the Company in the event of
the executive's termination, death, or disability while rendering services; (d)
the executive's duty of strict confidence and to refrain from conflicts of
interest; (e) the executive's obligations not to compete for the term of the
agreement plus one year unless the executive terminated his employment for good
reason or the employer terminates the executive other than for cause; and (f)
the executive's right to receive severance payments if he (i) is terminated
within two years of a change in control without cause, (ii) voluntarily
terminates for defined good reasons within two years of a change of control,
(iii) terminates his employment for any reason, or without reason, during the
thirty-day period immediately following the first anniversary of a change in
control, or (iv) is terminated in connection with but prior to a change in
control and termination occurs following the commencement of any discussions
with any third party that ultimately results in a change in control.
Specifically, under the employment agreements, the amount of any severance
payment by the Company will be the greater of 2.99 times the Internal Revenue
Code "base amount" as described in Section 280G of the Internal Revenue Code or
two times his most recent base salary and bonus. Severance payments made under
the employment agreements will reduce any amounts that would be payable under
any other severance plan or program, including the master severance plan for
certain key employees. A tax gross-up on excise taxes also will be paid if the
severance pay exceeds the limit imposed by the Internal Revenue Code. In
addition, the executive will continue to be eligible for health benefits,
perquisites, and fringe benefits generally made available to senior executives
for two years following his or her termination, unless the executive waives such
coverage, fails to pay any amount required to maintain such coverage, or obtains
new employment providing substantially similar benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Olsoff, Staph and
Wiesner. Prior to the Effective Date, the Company never had a Compensation
Committee or other committee of the Board of Directors performing similar
functions.
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Previously, decisions concerning compensation of executive officers of the
Company were made by the Company's Chief Executive Officer.
DIRECTOR COMPENSATION
Commencing on December 30, 1997, each director of Elder-Beerman who is
not an employee of Elder-Beerman or any of its subsidiaries will be paid an
annual base retainer fee of $15,000, with the choice to take such retainer as
cash, in the form of a discounted stock option or as a combination of the two.
Non-employee directors also will be paid $1,500 for each meeting of the Board of
Directors attended and $500 for any committee meeting of the Board of Directors
attended. Each such director also received an initial grant of (a) 1,300 shares
of restricted stock and (b) 7,000 options to purchase shares of Common Stock.
Members of the Board of Directors who are also employees of any of Elder-Beerman
or any of its subsidiaries will receive no additional compensation for service
on the Board of Directors.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's Common Stock is the only outstanding class of voting
securities. The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 27, 1998 by (a) each person
who owns beneficially more than 5% of Common Stock of the Company to the extent
known to management, (b) each executive officer and director of the Company, and
(c) all directors and executive officers, as a group. Unless otherwise
indicated, the named persons exercise sole voting and investment power over the
shares that are shown as beneficially owned by them.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
- --------------------------------------- ------------- --------
Perry Corp. (2) 772,943 6.10%
599 Lexington Avenue
New York, New York 10022
Beerman-Peal Holdings, Inc. (3) 748,558 5.63%
11 West Monument Building
8th Floor
Dayton, Ohio 45402
Bank of Montreal (4) 707,211 5.58%
115 South LaSalle Street
Chicago, Illinois 60603
The Elder-Beerman Stores Corp. 644,680 5.09%
Profit Sharing and Stock Ownership Plan
3155 El-Bee Road
Dayton, Ohio 45401-1448
Stewart M. Kasen 1,300 *
Steven C. Mason 1,300 *
Frederick J. Mershad 105,075 *
John A. Muskovich 76,023 *
Thomas J. Noonan, Jr. 1,300 *
Bernard Olsoff 1,300 *
Laura H. Pomerantz 1,300 *
Jack A. Staph 1,300 *
John J. Wiesner 1,300 *
James M. Zamberlan 10,000 *
Max Gutmann 91,308 (5) *
Herbert O. Glaser 45,443 (6) *
All directors and executive officers as a group 200,198 1.57%
(13 persons)
* less than 1%
- -------------------------
(1) Information with respect to beneficial ownership is based on
information furnished to the Company by each stockholder
included in this table. Each stockholder included in this
table has sole voting and investment power with respect to the
shares shown to be beneficially owned by him.
(2) According to Schedule 13G dated March 3, 1998 filed by Perry
Corp. and Richard C. Perry, President and sole stockholder of
Perry Corp.
(3) Includes a Series A Warrant and a Series B Warrant with
respect to 249,809 and 374,713 shares of Common Stock,
respectively, both of which were granted December 30, 1997.
Does not include approximately 34,161 shares owned by the
beneficial owners of Beerman-Peal Holdings, Inc. through other
entities.
(4) According to Schedule 13G dated February 27, 1998 filed by
Bank of Montreal.
(5) Includes 54,338 shares distributed to Mr. Gutmann pursuant to
the Plan in satisfaction of his claims in Class C-5, General
Unsecured Claims.
(6) Includes 14,381 shares distributed to Mr. Glaser pursuant to
the Plan in satisfaction of his claims in Class C-5, General
Unsecured Claims.
44
48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of the Company
and its subsidiaries are included in Item 8:
- Consolidated Balance Sheets-- As of January 31, 1998
and February 1, 1997
- Consolidated Statements of Operations -- For the
Years Ended January 31, 1998, February 1, 1997 and
February 3, 1996
- Consolidated Statements of Changes in Shareholders'
Equity -- For the Years Ended January 31, 1998,
February 1, 1997 and February 3, 1996
- Consolidated Statements of Cash Flows -- For the
Years Ended January 31, 1998, February 1, 1997 and
February 3, 1996
- Notes to Consolidated Financial Statements
- Report of Independent Auditors
(a)(2) The following consolidated financial statement schedule of the
Company and its subsidiaries is submitted herewith:
- Financial Statement Schedule II, Valuation and
Qualifying Accounts, for the years ended January 31,
1998, February 1, 1997 and February 3, 1996.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
(a)(3) Exhibits
The following Exhibits are included in this Annual Report on Form 10-K:
2 Third Amended Joint Plan of Reorganization of The
Elder-Beerman Stores Corp. and its Subsidiaries dated November
17, 1997 (previously filed as Exhibit 2 to the Company's Form
10 filed on November 26, 1997 (the "Form 10"), and
incorporated herein by reference) 3(a) Amended Articles of
Incorporation
3(b) Amended Code of Regulations (previously filed as Exhibit 3(b)
to the Form 10 and incorporated herein by reference)
4(a) Stock Certificate for Common Stock (previously filed as
Exhibit 4(a) to the Company's Form 10/A-1 filed on January 23,
1998 (the "Form 10/A-1") and incorporated herein by reference)
4(b) Form of Registration Rights Agreement (previously filed as
Exhibit 4(b) to the Form 10 and incorporated herein by
reference)
45
49
4(c) Rights Agreement By and Between The Elder-Beerman Stores Corp. and
Norwest Bank Minnesota, N.A., dated as of December 30, 1997
4(d) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the
Elder-Beerman Stores Corp. for 249,809 shares of Common Stock at a
strike price of $12.80 per share dated December 30, 1997
4(e) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the
Elder-Beerman Stores Corp. for 374,713 shares of Common Stock at a
strike price of $14.80 per share dated December 30, 1997
10(a)(i) Pooling and Servicing Agreement Among The El-Bee Receivables
Corporation, The El-Bee Chargit Corp. and Bankers Trust Company,
dated December 30, 1997 (previously filed as Exhibit 10(a)(i) to the
Form 10/A-1 and incorporated herein by reference)
10(a)(ii) Series 1997-1 Supplement Among The El-Bee Receivables Corporation,
The El-Bee Chargit Corp. and Bankers Trust Company, dated December
30, 1997 (previously filed as Exhibit 10(a)(ii) to the Form 10/A-1
and incorporated herein by reference)
10(a)(iii) Certificate Purchase Agreement Among The El-Bee Receivables
Corporation, Corporate Receivables Corporation, The Liquidity
Providers Named Herein, CitiCorp North American, Inc. and Bankers
Trust Company, dated December 30, 1997 (previously filed as Exhibit
10(a)(iii) to the Form 10/A-1 and incorporated herein by reference)
10(a)(iv) Loan Agreement Among The El-Bee Receivables Corporation, The El-Bee
Chargit Corp., Bankers Trust Company, The Collateral Investors
Parties Hereto and CitiCorp North America, Inc., dated as of
December 30, 1997 (previously filed as Exhibit 10(a)(iv) to the Form
10/A-1 and incorporated herein by reference)
10(a)(v) Intercreditor Agreement By and Among The El-Bee Chargit Corp., The
Elder-Beerman Stores Corp., Bankers Trust Company, CitiCorp USA,
Inc., CitiCorp North America, Inc., Corporate Receivables
Corporation and the Liquidity Providers Named Herein, dated as of
December 30, 1997 (previously filed as Exhibit 10(a)(v) to the Form
10/A-1 and incorporated herein by reference)
10(a)(vi) Parent Undertaking Agreement Among The Elder-Beerman Stores Corp.
and Bankers Trust Company, dated as of December 30, 1997 (previously
filed as Exhibit 10(a)(vi) to the Form 10/A-1 and incorporated
herein by reference)
10(a)(vii) Purchase Agreement (Chargit) Among The El-Bee Chargit Corp. and The
El-Bee Receivables Corporation, dated as of December 30, 1997
(previously filed as Exhibit 10(a)(vii) to the Form 10/A-1 and
incorporated herein by reference)
10(a)(viii) Purchase Agreement (Elder-Beerman) Among The Elder-Beerman Stores
Corp. and The El-Bee Chargit Corp., dated as of December 30, 1997
(previously filed as Exhibit 10(a)(viii) to the Form 10/A-1 and
incorporated herein by reference)
10(a)(ix) Subordinated Note Between The El-Bee Receivables Corporation and The
El-Bee Chargit Corp, dated December 30, 1997 (previously filed as
Exhibit 10(a)(ix) to the Form 10/A-1 and incorporated herein by
reference)
10(b)(i) Credit Agreement Among The Elder-Beerman Stores Corp., The Lenders
Party Hereto, Citibank, N.A. and CitiCorp USA, Inc., dated as of
December 30, 1997 (previously filed as Exhibit 10(b)(i) to the Form
10/A-1 and incorporated herein by reference)
10(b)(ii) Borrower Pledge Agreement Made by The Elder-Beerman Stores Corp. to
Citibank, N.A., dated December 30, 1997 (previously filed as Exhibit
10(b)(ii) to the Form 10/A-1 and incorporated herein by reference)
46
50
10(b)(iii) Chargit Pledge Agreement Made By The El-Bee Chargit Corp. to
Citibank, N.A., dated December 30, 1997 (previously filed as Exhibit
10(b)(iii) to the Form 10/A-1 and incorporated herein by reference)
10(b)(iv) Security Agreement Made By The Elder-Beerman stores Corp., The
El-Bee Chargit Corp., The Bee-Gee Shoe Corp. in Favor of CitiCorp
USA, Inc., dated December 30, 1997 (previously filed as Exhibit
10(b)(iv) to the Form 10/A-1 and incorporated herein by reference)
10(b)(v) Subsidiary Guaranty Made by The El-Bee Chargit Corp., dated December
30, 1997 (previously filed as Exhibit 10(b)(v) to the Form 10/A-1
and incorporated herein by reference)
10(b)(vi) Subsidiary Guaranty Made by The Bee-Gee Shoe Corp., dated December
30, 1997 (previously filed as Exhibit 10(b)(vi) to the Form 10/A-1
and incorporated herein by reference)
10(b)(vii) Form of Revolving Note (previously filed as Exhibit 10(b)(vii) to
the Form 10/A-1 and incorporated herein by reference)
10(b)(viii) Letter Agreement Re: Assignment of Account By and Between The
Elder-Beerman Stores Corp., CitiCorp USA, Inc., and Bankers Trust
Company, dated December 30, 1997 (previously filed as Exhibit
10(b)(viii) to the Form 10/A-1 and incorporated herein by reference)
10(c) Form of Employment Agreement for Senior Vice Presidents (previously
filed as Exhibit 10(c) to the Form 10 and incorporated herein by
reference)*
10(d) Form of Employment Agreement for Executive Vice Presidents
(previously filed as Exhibit 10(d) to the Form 10 and incorporated
herein by reference)*
10(f) Form of Director Indemnification Agreement (previously filed as
Exhibit 10(f) to the Form 10 and incorporated herein by reference)*
10(g) Form of Officer Indemnification Agreement (previously filed as
Exhibit 10(g) to the Form 10 and incorporated herein by reference)*
10(h) Form of Director and Officer Indemnification Agreement (previously
filed as Exhibit 10(h) to the Form 10 and incorporated herein by
reference)*
10(i) The Elder-Beerman Stores Corp. Equity and Performance Incentive
Plan, Effective December 30, 1997*
10(j) Form of Restricted Stock Agreement for Non-Employee Director
(previously filed as Exhibit 10(j) to the Form 10 and incorporated
herein by reference)*
10(k) Form of Restricted Stock Agreement (previously filed as Exhibit
10(k) to the Form 10 and incorporated herein by reference)*
10(l) Form of Deferred Shares Agreement (previously filed as Exhibit 10(l)
to the Form 10 and incorporated herein by reference)*
10(m) Form of Nonqualified Stock Option Agreement for Non-Employee
Director (previously filed as Exhibit 10(m) to the Form 10 and
incorporated herein by reference)*
10(n) Form of Nonqualified Stock Option Agreement (previously filed as
Exhibit 10(n) to the Form 10 and incorporated herein by reference)*
10(o) Employee Stock Purchase Plan (previously filed as Exhibit 10(o) to
the Form 10 and incorporated herein by reference)*
10(p) Comprehensive Settlement Agreement By and Among The Debtors, The
ESOP and the ESOP Committee and the Shareholders of The
Elder-Beerman Stores Corp., dated as of December 30, 1997
47
51
10(q) Tax Indemnification Agreement By and Among The
Elder-Beerman Stores Corp., the Direct and Indirect
Subsidiaries of Elder-Beerman, Beerman-Peal Holdings,
Inc., The Beerman-Peal Corporation, Beerman Investments,
Inc., The Beerman Corporation and The Individuals,
Partnerships and Trusts named Herein dated as of
December 15, 1997 (previously filed as Exhibit 10(q) to
the Form 10 and incorporated herein by reference)
10(r) Tax Sharing Agreement By and Among The Elder-Beerman
Stores Corp., The Bee-Gee Shoe Corp. and The El-Bee
Chargit Corp., dated as of December 30, 1997 (previously
filed as Exhibit 10(r) to the Form 10 and incorporated
herein by reference)
10(s) Employment Agreement Between The Elder-Beerman Stores
Corp. and John A. Muskovich, dated December 30, 1997*
10(t) Amended and Restated Employment Agreement Between The
Elder-Beerman Stores Corp. and Frederick J. Mershad,
dated December 30, 1997*
21 Subsidiaries of the Company
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the three months
ended January 31, 1998.
(c) The response to this portion of Item 14 is included as Exhibits to
this report.
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
48
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 30th day of
April, 1998.
THE ELDER-BEERMAN STORES CORP.
By: /s/ Scott J. Davido, Esq.
---------------------------------------------
Scott J. Davido, Esq.
Senior Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Company and in the capacities indicated and on April 30, 1998.
Signature Title
--------- -----
* Chairman of the Board of Directors and Chief Executive
______________________________ Officer
Frederick J. Mershad (Principal Executive Officer)
* President, Chief Operating Officer and Chief Financial
______________________________ Officer; Director
John A. Muskovich (Principal Financial Officer)
* Senior Vice President, Controller
______________________________ (Principal Accounting Officer)
Steven D. Lipton
* Director
______________________________
Stewart M. Kasen
* Director
______________________________
Steven C. Mason
* Director
______________________________
Thomas J. Noonan, Jr.
* Director
______________________________
Bernard Olsoff
* Director
______________________________
Laura H. Pomerantz
* Director
______________________________
Jack A. Staph
* Director
______________________________
John J. Wiesner
* The undersigned, pursuant to certain Powers of Attorney
executed by each of the directors and officers noted above and
previously filed or filed herewith contemporaneously with the
Securities and Exchange Commission, by signing his name
hereto, does hereby sign and execute this report on behalf of
each of the persons noted above, in the capacities indicated.
Dated: April 30, 1998 By: /s/ Scott J. Davido, Esq.
-------------------------------------
Scott J. Davido, Esq.
Attorney-in-Fact
49
53
EXHIBIT INDEX
2 Third Amended Joint Plan of Reorganization of The Elder-Beerman
Stores Corp. and its Subsidiaries dated November 17, 1997
(previously filed as Exhibit 2 to the Company's Form 10 filed on
November 26, 1997 (the "Form 10"), and incorporated herein by
reference)
3(a) Amended Articles of Incorporation
3(b) Amended Code of Regulations (previously filed as Exhibit 3(b) to the
Form 10 and incorporated herein by reference)
4(a) Stock Certificate for Common Stock (previously filed as Exhibit 4(a)
to the Company's Form 10/A-1 filed on January 23, 1998 (the "Form
10/A-1") and incorporated herein by reference)
4(b) Form of Registration Rights Agreement (previously filed as Exhibit
4(b) to the Form 10 and incorporated herein by reference)
4(c) Rights Agreement By and Between The Elder-Beerman Stores Corp. and
Norwest Bank Minnesota, N.A., dated as of December 30, 1997
4(d) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the
Elder-Beerman Stores Corp. for 249,809 shares of Common Stock at a
strike price of $12.80 per share dated December 30, 1997
4(e) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the
Elder-Beerman Stores Corp. for 374,713 shares of Common Stock at a
strike price of $14.80 per share dated December 30, 1997
10(a)(i) Pooling and Servicing Agreement Among The El-Bee Receivables
Corporation, The El-Bee Chargit Corp. and Bankers Trust Company,
dated December 30, 1997 (previously filed as Exhibit 10(a)(i) to the
Form 10/A-1 and incorporated herein by reference)
10(a)(ii) Series 1997-1 Supplement Among The El-Bee Receivables Corporation,
The El-Bee Chargit Corp. and Bankers Trust Company, dated December
30, 1997 (previously filed as Exhibit 10(a)(ii) to the Form 10/A-1
and incorporated herein by reference)
10(a)(iii) Certificate Purchase Agreement Among The El-Bee Receivables
Corporation, Corporate Receivables Corporation, The Liquidity
Providers Named Herein, CitiCorp North American, Inc. and Bankers
Trust Company, dated December 30, 1997 (previously filed as Exhibit
10(a)(iii) to the Form 10/A-1 and incorporated herein by reference)
10(a)(iv) Loan Agreement Among The El-Bee Receivables Corporation, The El-Bee
Chargit Corp., Bankers Trust Company, The Collateral Investors
Parties Hereto and CitiCorp North America, Inc., dated as of
December 30, 1997 (previously filed as Exhibit 10(a)(iv) to the Form
10/A-1 and incorporated herein by reference)
10(a)(v) Intercreditor Agreement By and Among The El-Bee Chargit Corp., The
Elder-Beerman Stores Corp., Bankers Trust Company, CitiCorp USA,
Inc., CitiCorp North America, Inc., Corporate Receivables
Corporation and the Liquidity Providers Named Herein, dated as of
December 30, 1997 (previously filed as Exhibit 10(a)(v) to the Form
10/A-1 and incorporated herein by reference)
10(a)(vi) Parent Undertaking Agreement Among The Elder-Beerman Stores Corp.
and Bankers Trust Company, dated as of December 30, 1997 (previously
filed as Exhibit 10(a)(vi) to the Form 10/A-1 and incorporated
herein by reference)
10(a)(vii) Purchase Agreement (Chargit) Among The El-Bee Chargit Corp. and The
El-Bee Receivables Corporation, dated as of December 30, 1997
(previously filed as Exhibit 10(a)(vii) to the Form 10/A-1 and
incorporated herein by reference)
10(a)(viii) Purchase Agreement (Elder-Beerman) Among The Elder-Beerman Stores
Corp. and The El-Bee Chargit Corp., dated as of December 30, 1997
(previously filed as Exhibit 10(a)(viii) to the Form 10/A-1 and
incorporated herein by reference)
50
54
10(a)(ix) Subordinated Note Between The El-Bee Receivables Corporation and The
El-Bee Chargit Corp, dated December 30, 1997 (previously filed as
Exhibit 10(a)(ix) to the Form 10/A-1 and incorporated herein by
reference)
10(b)(i) Credit Agreement Among The Elder-Beerman Stores Corp., The Lenders
Party Hereto, Citibank, N.A. and CitiCorp USA, Inc., dated as of
December 30, 1997 (previously filed as Exhibit 10(b)(i) to the Form
10/A-1 and incorporated herein by reference)
10(b)(ii) Borrower Pledge Agreement Made by The Elder-Beerman Stores Corp. to
Citibank, N.A., dated December 30, 1997 (previously filed as Exhibit
10(b)(ii) to the Form 10/A-1 and incorporated herein by reference)
10(b)(iii) Chargit Pledge Agreement Made By The El-Bee Chargit Corp. to
Citibank, N.A., dated December 30, 1997 (previously filed as Exhibit
10(b)(iii) to the Form 10/A-1 and incorporated herein by reference)
10(b)(iv) Security Agreement Made By The Elder-Beerman stores Corp., The
El-Bee Chargit Corp., The Bee-Gee Shoe Corp. in Favor of CitiCorp
USA, Inc., dated December 30, 1997 (previously filed as Exhibit
10(b)(iv) to the Form 10/A-1 and incorporated herein by reference)
10(b)(v) Subsidiary Guaranty Made by The El-Bee Chargit Corp., dated December
30, 1997 (previously filed as Exhibit 10(b)(v) to the Form 10/A-1
and incorporated herein by reference)
10(b)(vi) Subsidiary Guaranty Made by The Bee-Gee Shoe Corp., dated December
30, 1997 (previously filed as Exhibit 10(b)(vi) to the Form 10/A-1
and incorporated herein by reference)
10(b)(vii) Form of Revolving Note (previously filed as Exhibit 10(b)(vii) to
the Form 10/A-1 and incorporated herein by reference)
10(b)(viii) Letter Agreement Re: Assignment of Account By and Between The
Elder-Beerman Stores Corp., CitiCorp USA, Inc., and Bankers Trust
Company, dated December 30, 1997 (previously filed as Exhibit
10(b)(viii) to the Form 10/A-1 and incorporated herein by reference)
10(c) Form of Employment Agreement for Senior Vice Presidents (previously
filed as Exhibit 10(c) to the Form 10 and incorporated herein by
reference)*
10(d) Form of Employment Agreement for Executive Vice Presidents
(previously filed as Exhibit 10(d) to the Form 10 and incorporated
herein by reference)*
10(f) Form of Director Indemnification Agreement (previously filed as
Exhibit 10(f) to the Form 10 and incorporated herein by reference)*
10(g) Form of Officer Indemnification Agreement (previously filed as
Exhibit 10(g) to the Form 10 and incorporated herein by reference)*
10(h) Form of Director and Officer Indemnification Agreement (previously
filed as Exhibit 10(h) to the Form 10 and incorporated herein by
reference)*
10(i) The Elder-Beerman Stores Corp. Equity and Performance Incentive
Plan, Effective December 30, 1997*
10(j) Form of Restricted Stock Agreement for Non-Employee Director
(previously filed as Exhibit 10(j) to the Form 10 and incorporated
herein by reference)*
10(k) Form of Restricted Stock Agreement (previously filed as Exhibit
10(k) to the Form 10 and incorporated herein by reference)*
10(l) Form of Deferred Shares Agreement (previously filed as Exhibit 10(l)
to the Form 10 and incorporated herein by reference)*
10(m) Form of Nonqualified Stock Option Agreement for Non-Employee
Director (previously filed as Exhibit 10(m) to the Form 10 and
incorporated herein by reference)*
10(n) Form of Nonqualified Stock Option Agreement (previously filed as
Exhibit 10(n) to the Form 10 and incorporated herein by reference)*
10(o) Employee Stock Purchase Plan (previously filed as Exhibit 10(o) to
the Form 10 and incorporated herein by reference)*
51
55
10(p) Comprehensive Settlement Agreement By and Among The Debtors, The
ESOP and the ESOP Committee and the Shareholders of The
Elder-Beerman Stores Corp., dated as of December 30, 1997
10(q) Tax Indemnification Agreement By and Among The Elder-Beerman Stores
Corp., the Direct and Indirect Subsidiaries of Elder-Beerman,
Beerman-Peal Holdings, Inc., The Beerman-Peal Corporation, Beerman
Investments, Inc., The Beerman Corporation and The Individuals,
Partnerships and Trusts named Herein dated as of December 15, 1997
(previously filed as Exhibit 10(q) to the Form 10 and incorporated
herein by reference)
10(r) Tax Sharing Agreement By and Among The Elder-Beerman Stores Corp.,
The Bee-Gee Shoe Corp. and The El-Bee Chargit Corp., dated as of
December 30, 1997 (previously filed as Exhibit 10(r) to the Form 10
and incorporated herein by reference)
10(s) Employment Agreement Between The Elder-Beerman Stores Corp. and John
A. Muskovich, dated December 30, 1997*
10(t) Amended and Restated Employment Agreement Between The Elder-Beerman
Stores Corp. and Frederick J. Mershad, dated December 30, 1997*
21 Subsidiaries of the Company
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
52