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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 FEBRUARY 03, 2001
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 19, 2001, 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 $32,723,817.*
The number of shares of Common Stock outstanding on April 19, 2001, was
11,416,515.
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 [ ]
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* 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
Merchandising............................................. 2
Pricing................................................... 2
Purchasing and Distribution............................... 2
Information Systems....................................... 3
Marketing................................................. 3
Credit Card Program....................................... 3
Customer Service.......................................... 3
Expansion................................................. 3
Business Plan............................................. 4
Seasonality............................................... 4
Competition............................................... 4
Associates................................................ 5
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9
PART II
Item 5. Market for Common Equity and Related Shareholder Matters.... 9
Item 6. Selected Historical Financial Data.......................... 9
Item 7. Management's Discussions and Analysis of Financial Condition
and Results
of Operations............................................. 12
Item 7a. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 14
Item 8. Financial Statements and Supplementary Data................. 15
Table of Contents......................................... 15
Independent Auditors' Report.............................. 16
Consolidated Statement of Operations...................... 17
Consolidated Balance Sheets............................... 18
Consolidated Statements of Shareholders' Equity........... 19
Consolidated Statements of Cash Flows..................... 20
Notes to Consolidated Financial Statements................ 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure...................................... 35
PART III
Item 10. Directors and Executive Officers............................ 35
Directors and Executive Officers.......................... 35
Item 11. Executive Compensation...................................... 38
Summary Compensation Table................................ 38
Stock Option/SAR Grants................................... 39
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PAGE
Stock Option Exercises and Fiscal Year-End Values......... 39
Employment and Severance Agreements With Certain
Officers.................................................. 39
Compensation Committee Report on Executive Compensation... 41
Overview and Philosophy................................ 41
Components of Compensation............................. 42
Base Salary............................................ 42
Annual Bonus........................................... 42
Long-Term Incentive Awards............................. 43
Executive Plan......................................... 43
Compensation of Chief Executive Officer................ 43
2000 Base Salary and Annual Bonus...................... 43
Executive Plan......................................... 44
Tax Deductibility of Executive Compensation............ 44
Compensation of Elder-Beerman's Directors................. 44
Compensation Committee Interlocks and Insider
Participation............................................. 44
Stock Price Performance................................... 45
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 46
Item 13. Certain Relationships and Related Transactions.............. 47
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 48
SIGNATURES............................................................ 53
EXHIBIT INDEX......................................................... 55
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PART I
This Annual Report on Form 10-K contains "forward-looking statements,"
including predictions of future operating performance, events or developments
such as our future sales, gross margins, profits, expenses, income and earnings
per share. In addition, words such as "expects," "anticipates," "intends,"
"plans," "believes," "hopes," and "estimates," and variations of such words and
similar expressions, are intended to identify forward-looking statements.
Because forward-looking statements are based on a number of beliefs, estimates
and assumptions by management that could ultimately prove inaccurate, there is
no assurance that forward-looking statements will prove to be accurate. Many
factors could materially affect our actual future operations and results,
including the following: the ability to open new stores on schedule, including
our new stores announced for Fall 2001 in Kohler, Wisconsin and DuBois,
Pennsylvania; increasing price and product competition; fluctuations in consumer
demand and confidence, especially during the Christmas shopping season and in
light of current general economic conditions, interest rates and the capital
markets; the availability and mix of inventory; fluctuations in costs and
expenses; consumer response to the company's new merchandising strategies,
advertising, marketing and promotional programs; the ability of the company to
achieve its expense cutting initiatives as it implements its strategic plan; the
timing and effectiveness of new store openings, particularly its new concept
stores opened in the Fall season of 2000 (Howell, Michigan; West Bend,
Wisconsin; and Jasper, Indiana), Spring season of 2001 (Plover, Wisconsin), and
the new concept stores to be opened in 2001; the growing impact of electronic
commerce; weather conditions that affect consumer traffic in stores, especially
during the Christmas season; the continued availability and terms of financing;
the outcome of pending and future litigation; consumer debt levels; the impact
of any new consumer bankruptcy laws; inflation and interest rates and the
condition of the capital markets.
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) has been operating
department stores since 1847. Elder-Beerman operates department stores that sell
a wide range of moderate to better branded merchandise, including women's, men's
and children's apparel and accessories, cosmetics, home furnishings, and other
consumer goods. In addition, the Company operates its private label credit card
program through its wholly-owned subsidiary, The El-Bee Chargit Corp.
("Chargit"). As of fiscal year end 2000, Elder-Beerman operated 62 department
stores and two furniture stores, principally in smaller Midwestern markets in
Ohio, West Virginia, Indiana, Illinois, Michigan, Wisconsin, Kentucky and
Pennsylvania. See "Properties."
The Company's historical competitive advantage is its niche in smaller size
cities. In many of these cities, there is only one shopping mall or major
shopping center, and the Company is a main department store anchor along with
J.C. Penney, Sears, or a discount retailer such as Kohl's, Target or Wal-Mart.
The Company seeks to differentiate itself from its competitors through superior
service and a fashion-oriented merchandise offering with name brand vendors
unavailable to the competition (e.g., cosmetics lines such as Estee Lauder,
Clinique, Lancome and Elizabeth Arden; and clothing lines such as Liz Claiborne,
Tommy Hilfiger, Sag Harbor, Alfred Dunner, Leslie Fay, Chaps by Ralph Lauren and
Izod; and home store lines such as T-Fal, Wamsutta, Pfaltzgraf and Atlantic.)
The larger metropolitan department stores have tended to bypass smaller
midwestern cities, leaving Elder-Beerman as the dominant department store in
many of its smaller markets.
The Company's long-term business plan is designed to accomplish its
strategy by (a) focusing on its strengths as the major retailer in its smaller
markets; (b) competing with traditional department store competitors through
emphasis on timely product assortments offering fashion and value, competitive
pricing and promotions, and customer service; (c) competing with moderate
department stores and discounters through merchandise advantages in branded
areas and competitive pricing and promotions in appropriate markets and product
areas; (d) focusing price/product competition in key basic merchandising areas;
(e) emphasizing major vendor partnerships to improve sales and margins; (f)
improving supply chain
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integration and efficiencies; and (g) leveraging technology to enhance customer
service and to develop and execute customer marketing programs.
Merchandising
The Company carries a broad assortment of goods to provide fashion,
selection and value found in leading department stores that feature branded
merchandise. Although all stores stock identical core assortments, specific
types of better goods are distributed to stores based on the particular
characteristic of the local market. In addition, through continued efforts to
develop better processes and stronger partnerships with its most significant
vendors, the Company is using technology and focused merchandising and
distribution to reduce logistics 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, 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.
Management regularly evaluates the performance of the leased departments and
requires compliance with established customer service guidelines.
For the 53 weeks ending February 3, 2001 ("Fiscal 2000"), the 52 weeks
ending January 29, 2000 ("Fiscal 1999"), and the 52 weeks ending January 30,
1999 ("Fiscal 1998"), the Company's percentages of net sales by major
merchandise category were as follows:
THE ELDER-BEERMAN STORES CORP.
RETAIL SALES BY DEPARTMENT
2000 1999 1998
MERCHANDISE CATEGORY % % %
- -------------------- ----- ----- -----
Women's Ready to Wear....................................... 32.5% 33.0% 33.1%
Accessories, Shoes & Cosmetics.............................. 23.6% 23.2% 22.6%
Men's & Children's.......................................... 23.1% 23.3% 24.0%
Home Store.................................................. 20.8% 20.5% 20.3%
----- ----- -----
TOTAL RETAIL................................................ 100.0% 100.0% 100.0%
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Pricing
All pricing decisions are made at the Company's corporate headquarters. The
Company's pricing strategy is designed to provide superior quality and value
appeal by offering competitive prices in all of its businesses. The Company's
management information systems provide timely sales and gross margin reports
that identify sales and gross margins by item and by store and provide
management with the information and flexibility to adjust prices and inventory
levels as necessary.
Purchasing and Distribution
During Fiscal 2000, 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 38% of net purchases. In
Fiscal 2000, the Company also purchased approximately 3% of its merchandise,
primarily private label merchandise, through Frederick Atkins, Inc. ("Atkins"),
a national cooperative association of major retailers that provided its members
with group purchase opportunities. The Atkins group disbanded during fall 2000.
Management believes it has good relationships with its suppliers. No 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, including private label products.
Merchandise is generally shipped from vendors, through three consolidation
points, to the Company's distribution center in Dayton, Ohio. Deliveries are
made from the distribution center to each store two to
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seven times per week depending on the store size and the time of year. A
majority of the merchandise is shipped ready for immediate placement on the
selling floor.
Information Systems
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 supply chain, inventory and sales
performance information for management.
The Company has developed and is currently deploying a new point of sale
system ("POS System") to enhance its customer service by speeding up the
transaction at point of service and by taking advantage of technology to add
more marketing and sales support functions at point of service.
Marketing
The company's marketing and advertising functions are centralized at its
corporate headquarters. Advertising messages are focused on communicating the
Company's merchandise offering and the strong quality/value relationship in that
offering, as well as outstanding customer service. The company employs
advertising programs that include print and broadcast as well as creative
in-store displays, signage and special promotions. The company uses a database
targeting system that allows focused direct mail to our preferred charge
customers -- those most likely to respond to a merchandise offering. Sunday and
weekday newspaper inserts (as opposed to ROP ads) are used each week to reach
customers on a repetitive basis that has become a customer expectation. This is
an economical method of advertising that has reduced advertising expense. The
company also uses television and radio in markets where it is productive and
cost efficient.
Credit Card Program
The Company operates a private label credit card program through its
wholly-owned subsidiary, Chargit. During Fiscal 2000, the Company issued 280,000
Elder-Beerman credit cards for newly opened accounts and had approximately
894,000 Elder-Beerman active credit card accounts during Fiscal 2000.
Approximately 43% of Elder-Beerman's total sales were private label credit card
sales. Cash sales and third party credit cards accounted for 30% and 27% 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 seeks to increase the use of its private label credit card through
incremental sales or shifting sales from other credit cards and other retailers,
and by 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 friendly customer
service. The Company is presently enhancing its customer service image and
creating a customer-oriented store environment by (a) centralizing customer
service register stations at highly visible points in the store and assuring
that they are always staffed; (b) reducing nonselling activities in the stores;
(c) using training and recruiting practices to instill a culture of customer
helpfulness, friendliness and responsiveness; and (d) deploying a new POS System
to expedite the sales completion process and provide additional marketing and
sales support functions at point of service.
Expansion
The Company is currently implementing a controlled expansion of new concept
stores in markets having characteristics consistent with the Company's smaller
markets. The Company believes that sufficient new locations are available in
markets within or contiguous to the Company's current area of operations to
support such an expansion.
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Business Plan
The Company revised its business plan during Fiscal 2000 to improve
profitability through the following key strategies:
A Shift in the Company's Merchandising Strategy. In response to customer
research, the Company plans to focus on the businesses where the Company
believes it has the greatest opportunities, namely ladies' and men's moderate
sportswear, ladies' shoes, denim in all businesses, textiles and cosmetics. Also
in response to customer research, the Company is offering more moderate/value
priced merchandise in many of its businesses than it offered in the past.
New Store Growth in the Concept Store Format. To capitalize on the
Company's strengths, the Company is building new stores in the Company's
"concept store" format. The Company developed and tested this format in 1999 in
two new locations in Warsaw, Indiana and Frankfort, Kentucky. At an average of
approximately 55,000 square feet, the concept stores are generally 20% smaller
than the Company's typical smaller market department store and maximize selling
space through a floor plan that features movable interior walls, a neutral color
palate, high capacity fixtures and extensive use of wallscaping.
Concept stores also feature:
- Centralized customer service centers that are always staffed for
efficient and convenient transactions and quality customer service.
- Self-select cosmetics and shoes on open fixtures for ease and convenience
of selection.
- The Zone, a combined juniors' and young men's area that creates a
specialty store within a store for the next generation of customers.
A Streamlined Organization. For 2001, the Company has embarked upon
expense initiatives to improve operational efficiencies in its corporate offices
and in its stores. The expense initiatives touch upon all aspects of the
organization and began in Fall 2000 with a headcount reduction primarily at the
corporate office. Many of the initiatives involve technology and business
process changes to reduce operating costs and improve operating performance
through productivity gains.
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 Christmas 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 business in
particular is intensely competitive. Generally, the Elder-Beerman department
stores compete not only with other department stores in the same geographic
markets, but also with numerous other types of retail outlets, including
specialty stores; general merchandise stores; off-price and discount stores;
manufacturer outlets; and direct to consumer retailers such as catalog and
internet retailers. 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.
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Associates
On February 3, 2001, the Company had approximately 7,547 regular and
part-time associates. Because of the seasonal nature of the retail business, the
number of associates 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
As of February 3, 2001, Elder-Beerman operated 62 department stores and two
furniture stores, principally in smaller midwestern markets in Ohio, West
Virginia, Indiana, Illinois, Michigan, Wisconsin, Kentucky and Pennsylvania.
Substantially all of the Company's stores are leased properties. The Company
owns, subject to a mortgage, a 302,570 square foot office/warehouse facility
located in Dayton, Ohio, which serves as its principal executive offices. The
Company also leases an approximately 300,000 square foot distribution center in
Fairborn, Ohio.
The following table sets forth certain information with respect to
Elder-Beerman's department store locations operating as of February 3, 2001, the
end of Elder-Beerman's most recently completed fiscal year:
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THE ELDER-BEERMAN STORES CORP.
STORE SUMMARY BY REGION
TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
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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 Dayton Mall 212,000 07/98 Lease
Dayton Salem Furniture 124,987 11/72 Own
Dayton Kettering Town Center 82,078 10/98 Lease
Dayton Northpark Center 101,840 10/94 Lease
Defiance Northtowne Mall 51,333 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 73,695 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
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 80,398 03/83 Lease
Springfield Upper Valley Mall 71,868 10/92 Lease
St. Clairsville Ohio Valley Mall 66,545 07/98 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
WEST VIRGINIA
Beckley Raleigh Mall 50,210 07/98 Lease
Bridgeport Meadowbrook Mall 70,789 07/98 Lease
Home Store 74,723 07/98 Lease
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TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
- ---------- --------------------------------- ------- ------ ---------
Huntington Huntington Mall 75,640 07/98 Lease
Kanawha City Kanawha Mall 41,270 07/98 Lease
Morgantown Morgantown Mall 70,790 09/90 Lease
Morgantown Mountaineer Mall 70,470 07/98 Lease
Vienna Grand Central Mall 106,000 07/98 Lease
Winfield Liberty Square Center 67,728 07/98 Lease
INDIANA
Anderson Mounds Mall 66,703 07/81 Lease
Columbus Columbus Mall 73,446 02/90 Lease
Elkhart Concord Mall 104,000 11/85 Lease
Jasper* Germantown Shopping Center 55,000 11/00 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
Richmond Downtown 100,000 08/74 Lease
Terre Haute Honey Creek Mall 70,380 08/73 Lease
Warsaw* Market Place Center 56,120 10/99 Lease
MICHIGAN
Adrian Adrian Mall 54,197 08/87 Lease
Benton Harbor The Orchards Mall 70,428 10/92 Lease
Howell* Grand River Plaza 74,873 09/00 Lease
Jackson Westwood Mall 70,425 09/93 Lease
Midland Midland Mall 64,141 10/91 Lease
Monroe Frenchtown Square 98,887 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
West Bend* West Bend Corporate Center 61,011 10/00 Lease
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TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
- ---------- --------------------------------- ------- ------ ---------
KENTUCKY
Ashland Cedar Knolls Galleria 70,000 07/98 Lease
Paducah Kentucky Oaks Mall 60,092 08/82 Lease
Frankfort* Frankfort 53,954 11/99 Lease
PENNSYLVANIA
Erie Millcreek Mall 119,800 9/98 Lease
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* CONCEPT STORE
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in several legal proceedings arising from its
normal business activities and has established reserves 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock, without par value, (the "Common Stock") is
listed on the Nasdaq Stock Market ("NASDAQ") and is designated a NASDAQ/National
Market System Security trading under the symbol EBSC.
The number of shareholders of record as of April 19, 2001 was 1,933.
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.
Pursuant to the Third Amended Joint Plan of Reorganization, as amended (the
"Plan of Reorganization") of the Company, confirmed by an order entered by the
United States Bankruptcy Court for the Southern District of Ohio, Western
Division (the "Bankruptcy Court") on December 16, 1997, the Company issued
Common Stock and a Series A Warrant and a Series B Warrant, each convertible
into Common Stock, in satisfaction of certain allowed claims against, or
interests in, the Company or its subsidiaries. Based upon the exemptions
provided by section 1145 under chapter 11 of the United States Bankruptcy Code,
as amended, the Company believes that none of these securities are required to
be registered under the Securities Act of 1933 (the "Securities Act") in
connection with their issuance and distribution pursuant to the Plan of
Reorganization. The Company has no recent sales of unregistered securities other
than such issuances pursuant to the Plan of Reorganization.
The Company's high and low stock prices by quarter for Fiscal 2000 are set
forth below:
HIGH LOW
------ ------
First Quarter
1/30/00 to 4/29/00........................................ 6.50 4.188
Second Quarter
4/30/00 to 7/29/00........................................ 5.25 3.969
Third Quarter
7/30/00 to 10/28/00....................................... 5.25 3.094
Fourth Quarter
10/29/00 to 2/3/01........................................ 4.188 2.469
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 February 3, 2001, January 29,
2000, January 30, 1999, January 31, 1998, and February 1, 1997. 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.
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FISCAL YEAR ENDED
-----------------------------------------------------------------------------
FEB 3, 2001(a) JAN 29, 2000 JAN 30, 1999 JAN 31, 1998 FEB 1, 1997
-------------- ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA
Total Revenues.................. $687,630 $667,374 $610,969 $560,509 $546,844
Earnings (Loss) Before
Discontinued Operations and
Extraordinary Items(b)........ (6,824) 18,015 25,864 (7,530) (12,818)
Net Earnings (Loss)............. $ (6,735) $ 15,228 $ 25,461 $(28,952) $(12,429)
Diluted Earnings (Loss) Per
Common Share:
Continuing Operations......... $ (.51) $ 1.17 $ 1.79 $ (6.04) $(103.34)
Discontinued Operations....... 0.01 (0.18) (0.03) 5.38 3.14
Extraordinary Items........... (22.58)
-------- -------- -------- -------- --------
Net Earnings (Loss).... $ (0.50) $ 0.99 $ 1.76 $ (23.24) $(100.20)
======== ======== ======== ======== ========
Cash Dividends Paid:
Common........................ $ -- $ -- $ -- $ -- $ --
Preferred..................... $ -- $ -- $ -- $ -- $ --
BALANCE SHEET DATA
Total Assets.................... $455,317 $454,168 $453,268 $369,068 $367,501
Short-Term Debt................. 1,509 131,086 951 1,105 57,931
Liabilities Subject to
Compromise.................... -- -- -- -- 223,641
Long-Term Obligations........... 165,632 6,130 121,507 142,024 5,669
OTHER DATA
Sales Increase (Decrease) From
Prior Period.................. 2.9% 9.6% 9.7% 2.8% (0.8%)
Comparable Sales Increase
(Decrease) From Prior
Period........................ (0.8%) 2.0% 4.1% 3.7% (1.2%)
- ---------------
Notes to Selected Historical Financial Data:
(a) Fiscal Year ended February 3, 2001 includes 53 weeks as compared to 52 weeks
for each of the other fiscal years shown.
(b) The financial information for The Bee-Gee Shoe Corp. ("Bee-Gee") and Margo's
LaMode, Inc. ("Margo's") is included as discontinued operations for all
periods.
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SELECTED QUARTERLY FINANCIAL DATA
FISCAL 2000
------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS
DATA
Total Revenues........................ $149,105 $138,730 $162,109 $237,686
Net Earnings (Loss)................... $ (3,071) $ (3,973) $ (8,194) $ 8,503
Diluted Earnings (Loss) Per Common
Share:.............................. $ (0.21) $ (0.27) $ (0.58) $ 0.75
FISCAL 1999
------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS
DATA
Total Revenues(a)..................... $147,107 $136,153 $156,066 $228,048
Net Earnings (Loss)................... $ (188) $ (1,266) $ (738) $ 17,420
Diluted Earnings (Loss) Per Common
Share:.............................. $ (0.01) $ (0.08) $ (0.05) $ 1.18
- ---------------
(a) The financial information for Bee-Gee is included in discontinued operations
for all periods.
11
15
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 2000, Fiscal 1999 and Fiscal 1998. 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 2000 Compared to Fiscal 1999
Net sales for Fiscal 2000, which includes 53 weeks, increased by 2.9% to
$656.2 million from $637.8 million for Fiscal 1999. Comparable store sales,
sales for stores opened for 13 months and excluding the 53rd week of sales,
decreased 0.8%. Women's moderate sportswear, intimate apparel, cosmetics, and
furniture had the strongest sales increases.
Financing revenue from the Company's private label credit card for Fiscal
2000 increased by 7.8% to $28.2 million from $26.1 million for Fiscal 1999,
primarily due to an increase in late fees charged.
Other revenue, which is primarily from leased departments, for Fiscal 2000
decreased by $0.2 million to $3.3 million from $3.5 million for Fiscal 1999.
Cost of merchandise sold, occupancy, and buying expenses increased to 72.6%
of net sales for Fiscal 2000 from 69.8% of net sales for Fiscal 1999. This
increase is primarily due to a charge of $12.1 million related to inventory
costs to implement the Company's new strategic plan and $2.8 million in charges
to record excess markdowns related to the closing of three stores. Additionally,
merchandise gross margins were reduced 0.3% due to additional markdowns to clear
excess inventory as a result of the comparable sales decrease.
Selling, general, administrative, and other expenses increased to 29.3% of
net sales for Fiscal 2000 from 28.7% for Fiscal 1999. Fiscal 2000 costs include
charges of $3.8 million, primarily severance, to implement the Company's new
strategic plan and $3.3 million related to the closing of three stores. Fiscal
1999 costs include a charge of $4.6 million to reflect a write down of amounts
related to an investment made several years ago in a cooperative buying group.
Depreciation and amortization expense for Fiscal 2000 increased $1.0
million to $16.2 million from $15.2 million for Fiscal 1999 due to increased
capital expenditures related to the opening of three concept stores.
Interest expense increased to $13.0 million for Fiscal 2000 from $10.9
million for Fiscal 1999. The increase is primarily due to higher average
borrowing because of the Company's stock repurchase program, which was completed
in October 2000, and higher average interest rates in Fiscal 2000 versus Fiscal
1999.
The Company's effective income tax benefit rate is 31.6% in Fiscal 2000
compared to an income tax rate of 41.5% in Fiscal 1999 before adjustments to the
Company's deferred tax asset valuation allowance. In Fiscal 1999 the Company
reviewed the status of its deferred tax asset valuation allowance at the end of
the fiscal year and determined that the valuation allowance should be reduced to
reflect the likely utilization of net operating loss carryforwards to offset
taxable income generated in future years. This resulted in a net income tax
benefit being recorded in Fiscal 1999. See Note F to the Consolidated Financial
Statements set forth in Item 8.
During the third quarter of 1999 the Company adopted a plan to dispose of
Bee-Gee and consummated the sale in the fourth quarter. During the fourth
quarter of 2000 the Company recorded a gain of $0.1 million, net of tax,
resulting from the final settlement of the sale. In Fiscal 1999 the Company
recorded a loss on disposal of $2.3 million, net of tax. The Company also
recorded a loss from operations in Fiscal 1999 of $0.4 million, net of tax. See
Note K to the Consolidated Financial Statements set forth in Item 8.
Fiscal 1999 Compared to Fiscal 1998
Net sales for Fiscal 1999 increased by 9.6% to $637.8 million from $582.1
million for Fiscal 1998. The increase includes a 2.0% comparable store sales
increase. Fiscal 1999 includes $31.8 million in sales during the first 26 weeks
of 1999 from the stores acquired from Stone & Thomas that were not owned during
the first
12
16
26 weeks of 1998. Women's better sportswear, intimate apparel, cosmetics, and
domestics led the sales increase.
Financing revenue from the Company's private label credit card for Fiscal
1999 increased by 2.2% to $26.1 million from $25.6 million for Fiscal 1998. The
increase in finance charges is due to an increase in late fees charged of $0.5
million.
Other revenue, which is primarily from leased departments, for Fiscal 1999
increased by $0.2 million to $3.5 million from $3.3 million for Fiscal 1998.
Cost of merchandise sold, occupancy, and buying expenses increased to 69.8%
of net sales for Fiscal 1999 from 68.3% of net sales for Fiscal 1998. This
increase is primarily due to real estate expenses related to the new Dayton
Mall, Erie, and West Virginia stores, for which sales have not yet matured to
Company average productivity levels. In Fiscal 1998, the LIFO inventory
valuation adjustment reduced cost of goods sold by $5.8 million (1% of net
sales) compared to no adjustment in Fiscal 1999.
Selling, general, administrative, and other expenses increased to 28.7% of
net sales for Fiscal 1999 from 28.5% for Fiscal 1998. In Fiscal 1999 a charge of
$4.6 million to reflect a write down of amounts related to an investment made
several years ago in a cooperative buying group. In addition, the Company
implemented tracking systems and undertook studies of merchandise credits and
gift certificates, which resulted in a reduction of the liability for future
redemptions. In Fiscal 1998 the Company incurred nonrecurring acquisition and
integration expenses related to interim financing for the acquisition of Stone &
Thomas as well as other integration expenses. In addition, gains were realized
from the sale of the company's 20% limited partnership interest in a
partnership, which owned the Company's 300,000 square foot distribution center,
and the sale of the Southtown department store building and a favorable
settlement of bankruptcy related claims that were accrued at the end of 1997.
Interest expense remained unchanged at $10.9 million for Fiscal 1999 and
Fiscal 1998.
The Company's effective income tax rate was 41.5% in Fiscal 1999 and 40.5%
in Fiscal 1998 before adjustments to the Company's deferred tax asset valuation
allowance. The Company reviewed the status of its deferred tax asset valuation
allowance at the end of each fiscal year and determined that the valuation
allowance should be reduced to reflect the likely utilization of net operating
loss carryforwards to offset taxable income generated in future years. This
resulted in a net income tax benefit being recorded in Fiscal 1999 and Fiscal
1998. See Note F to the Consolidated Financial Statements set forth in Item 8.
During the third quarter of 1999 the Company adopted a plan to dispose of
Bee-Gee and consummated the sale in the fourth quarter. In Fiscal 1999 the
Company recorded a loss on disposal of $2.3 million, net of tax. The Company
also recorded a loss from operations in Fiscal 1999 of $0.4 million, net of tax.
In Fiscal 1998 a loss from operations was recorded of $0.4 million, net of tax.
See Note K to the Consolidated Financial Statements set forth in Item 8.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are cash flow from operations and
borrowings under the Revolving Credit Facility and Receivable Securitization
Facility (collectively, the "Credit Facilities"). The Company's primary ongoing
cash requirements are to fund debt service, make capital expenditures, and
finance working capital.
Net cash provided by operating activities was $17.0 million for Fiscal
2000, compared to $6.6 million in Fiscal 1999. A net loss was recorded in Fiscal
2000 of $6.7 million, including pre-tax charges of $15.9 million related to the
Company's new strategic plan implementation and $6.1 million for the closing of
three stores, compared to net income of $15.2 million in Fiscal 1999. Trade
payables decreased $2.7 million in Fiscal 2000 compared to a decrease of $18.5
million in Fiscal 1999. Inventory decreased in Fiscal 2000 by $11.3 million
compared to an increase of $1.6 million in Fiscal 1999.
Net cash used in investing activities was $23.5 million for Fiscal 2000,
compared to $13.5 million for Fiscal 1999. Capital expenditures for new stores,
store maintenance, remodeling, and data processing totaled
13
17
$23.5 million for Fiscal 2000 compared to $17.0 million for Fiscal 1999. The
cash proceeds from the sale of Bee-Gee in Fiscal 1999 were $3.0 million.
For Fiscal 2000, net cash provided by financing activities was $6.1 million
compared to $7.0 million for Fiscal 1999. In October 2000 the Company completed
the tender offer previously announced on August 29, 2000. The Company purchased
3,462,363 shares of its common stock for $17.7 million, which includes expenses
of approximately $0.4 million. In Fiscal 1999 the Company purchased 1,133,200
shares of its common stock for $7.4 million. Both purchases were financed though
additional borrowings.
On May 19, 2000 the Company completed the replacement of its existing
Credit Facilities, which were set to expire in December 2000, with agreements
similar in scope and with 36 month terms. The new Revolving Credit Facility
provides for borrowings and letters of credit in an aggregate amount up to
$150,000,000, subject to a borrowing base formula based on seasonal merchandise
inventories. There is a $40,000,000 sublimit for letters of credit.
The Company's replacement Receivable Securitization Facility provides for
borrowings up to $150,000,000 based on qualified, pledged accounts receivable
balances. The terms and borrowing rates are substantially similar to the
predecessor Receivable Securitization Facility.
The Company believes that it will generate sufficient cash flow from
operations, as supplemented by its available borrowings under the Credit
Facilities, to meet anticipated working capital and capital expenditure
requirements, as well as debt service requirements under the Credit Facilities.
The Company may from time to time consider acquisitions of department store
assets and companies. Acquisition transactions, if any, are expected to be
financed through a combination of cash on hand from operations, available
borrowings under the Credit Facilities, and the possible issuance from time to
time of long-term debt or other securities. Depending upon the conditions in the
capital markets and other factors, the Company will from time to time consider
the issuance of debt or other securities, or other possible capital market
transactions, the proceeds of which could be used to refinance current
indebtedness or for other corporate purposes.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to the risk of fluctuating interest rates in the
normal course of business, primarily as a result of its variable rate borrowing.
The Company has entered into a variable to fixed rate interest-rate swap
agreement to effectively reduce its exposure to interest rate fluctuations. A
hypothetical 100 basis point change in interest rates would not materially
affect the Company's financial position, liquidity or results of operations.
The Company does not maintain a trading account for any class of financial
instrument and is not directly subject to any foreign currency exchange or
commodity price risk. As a result, the Company believes that its market risk
exposure is not material to the Company's financial position, liquidity or
results of operations.
14
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
PAGE
-----
Independent Auditors' Report................................ 16
Consolidated Financial Statements as of February 3, 2001 and
January 29, 2000 and for each of the three fiscal years in
the period ended February 3, 2001:
Statements of Operations.................................. 17
Balance Sheets............................................ 18
Statements of Shareholders' Equity........................ 19
Statements of Cash Flows.................................. 20
Notes to Consolidated Financial Statements................ 21-34
15
19
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders 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 February 3,
2001 and January 29, 2000, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three fiscal
years in the period ended February 3, 2001. 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 auditing standards generally
accepted in the United States of America. 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 February 3,
2001 and January 29, 2000 and the results of its operations and its cash flows
for each of the three fiscal years in the period ended February 3, 2001, in
conformity with accounting principles generally accepted in the United States of
America.
April 9, 2001
Dayton, Ohio
16
20
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED
-----------------------------------------
FEBRUARY 3, JANUARY 29, JANUARY 30,
2001 2000 1999
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Revenues:
Net sales............................................... $656,164 $637,797 $582,091
Financing............................................... 28,162 26,124 25,573
Other................................................... 3,304 3,453 3,305
-------- -------- --------
Total revenues.................................. 687,630 667,374 610,969
-------- -------- --------
Costs and expenses:
Cost of merchandise sold, occupancy and buying
expenses............................................. 476,313 445,365 397,831
Selling, general, administrative and other expenses..... 192,078 183,237 166,040
Depreciation and amortization........................... 16,200 15,229 13,418
Interest expense........................................ 13,014 10,927 10,940
-------- -------- --------
Total costs and expenses........................ 697,605 654,758 588,229
-------- -------- --------
Earnings (loss) before income tax benefit and
discontinued operations....................... (9,975) 12,616 22,740
Income tax benefit........................................ (3,151) (5,399) (3,124)
-------- -------- --------
Earnings (loss) from continuing operations.............. (6,824) 18,015 25,864
Discontinued operations................................... 89 (2,787) (403)
-------- -------- --------
Net earnings (loss)..................................... $ (6,735) $ 15,228 $ 25,461
======== ======== ========
Earnings (loss) per common share -- basic:
Continuing operations................................... $ (0.51) $ 1.17 $ 1.84
Discontinued operations................................. 0.01 (0.18) (0.03)
-------- -------- --------
Net earnings (loss)............................. $ (0.50) $ 0.99 $ 1.81
======== ======== ========
Earnings (loss) per common share -- diluted:
Continuing operations................................... $ (0.51) $ 1.17 $ 1.79
Discontinued operations................................. 0.01 (0.18) (0.03)
-------- -------- --------
Net earnings (loss)............................. $ (0.50) $ 0.99 $ 1.76
======== ======== ========
See notes to the consolidated financial statements.
17
21
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
YEARS ENDED
------------------------------------
FEBRUARY 3, 2001 JANUARY 29, 2000
---------------- ----------------
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
Cash and equivalents...................................... $ 7,878 $ 8,276
Customer accounts receivable, net......................... 135,794 141,266
Merchandise inventories................................... 154,153 165,451
Other current assets...................................... 23,170 20,250
--------- --------
Total current assets.............................. 320,995 335,243
--------- --------
Property:
Land and improvements..................................... 1,030 1,278
Buildings and leasehold improvements...................... 71,832 63,538
Furniture, fixtures, and equipment........................ 114,644 105,022
Construction in progress.................................. 1,177 2,069
--------- --------
Total cost................................................ 188,683 171,907
Less accumulated depreciation and amortization............ (102,233) (96,975)
--------- --------
Property, net..................................... 86,450 74,932
--------- --------
Other assets................................................ 47,872 43,993
--------- --------
$ 455,317 $454,168
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term obligations.................. $ 1,509 $131,086
Accounts payable.......................................... 33,236 37,466
Accrued liabilities:
Compensation and related items......................... 5,076 3,822
Income and other taxes................................. 7,213 7,909
Rent................................................... 3,669 3,176
Other.................................................. 9,128 9,348
--------- --------
Total current liabilities......................... 59,831 192,807
--------- --------
Long-term obligations -- less current portion............... 165,632 6,130
Deferred items.............................................. 7,873 9,054
Commitments and contingencies (Note N)
Shareholders' equity:
Common stock, no par, 11,451,953 shares at February 3, 2001
and 14,923,846 shares at January 29, 2000 issued and
outstanding............................................... 242,049 260,171
Unearned compensation -- restricted stock................... (455) (1,779)
Deficit..................................................... (18,950) (12,215)
Other comprehensive loss.................................... (663)
--------- --------
Total shareholders' equity........................ 221,981 246,177
--------- --------
$ 455,317 $454,168
========= ========
See notes to the consolidated financial statements.
18
22
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNEARNED
COMMON STOCK COMPENSATION- OTHER COMPREHENSIVE
--------------------- RESTRICTED COMPREHENSIVE EARNINGS/
SHARES AMOUNT STOCK, NET DEFICIT LOSS (LOSS)
---------- -------- ------------- -------- ------------- -------------
Shareholders' equity -- January 31,
1998............................... 12,583,789 $199,351 $(1,225) $(52,904) $
Net earnings....................... 25,461 $25,461
Common stock issued................ 3,228,943 65,563
Restricted shares issued........... 86,371 1,773 (1,773)
Restricted shares forfeited........ (239) (4) 4
Amortization of unearned
compensation..................... 966
---------- -------- ------- -------- ----- -------
Shareholders' equity -- January 30,
1999............................... 15,898,864 266,683 (2,028) (27,443) $25,461
=======
Net earnings....................... 15,228 $15,228
Common stock issued................ 8,309 107
Restricted shares issued........... 151,814 853 (853)
Restricted shares forfeited........ (1,941) (22) 22
Shares purchased................... (1,133,200) (7,450)
Amortization of unearned
compensation..................... 1,080
---------- -------- ------- -------- ----- -------
Shareholders' equity -- January 29,
2000............................... 14,923,846 260,171 (1,779) (12,215) $15,228
=======
Net loss........................... (6,735) $(6,735)
Common stock issued................ 32,021 399
Restricted shares issued........... 42,625 225 (225)
Restricted shares forfeited........ (84,176) (1,018) 1,018
Shares purchased................... (3,462,363) (17,728)
Amortization of unearned
compensation..................... 531
Minimum pension liability (net of
income taxes of $373)............ (663) (663)
---------- -------- ------- -------- ----- -------
Shareholders' equity -- February 3,
2001............................... 11,451,953 $242,049 $ (455) $(18,950) $(663) $(7,398)
========== ======== ======= ======== ===== =======
See notes to the consolidated financial statements.
19
23
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED
---------------------------------------
FEBRUARY 3, JANUARY 29, JANUARY 30,
2001 2000 1999
----------- ----------- -----------
Cash flows from operating activities:
Net earnings (loss)....................................... $ (6,735) $ 15,228 $ 25,461
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Provision for doubtful accounts........................ 6,178 3,906 5,046
Deferred income taxes.................................. (1,901) (7,748) (4,672)
Depreciation and amortization.......................... 16,200 15,229 13,418
Loss (gain) on disposal of assets...................... 276 28 (2,521)
Stock-based compensation expense....................... 676 1,640 1,564
Loss on discontinued operations........................ 2,787 403
Asset impairment....................................... 281 4,639
Changes in noncash assets and liabilities:
(net of amounts acquired)
Customer accounts receivable......................... (716) (3,057) 1,742
Merchandise inventories.............................. 11,298 (1,572) (12,658)
Other current assets................................. (1,891) (837) 1,995
Other long-term assets............................... (2,549) (164) (1,229)
Net assets of discontinued operations................ 1,740 (1,255)
Accounts payable..................................... (2,707) (18,549) (4,620)
Accrued liabilities.................................. (1,422) (6,685) (7,842)
-------- -------- --------
Net cash provided by operating activities......... 16,988 6,585 14,832
-------- -------- --------
Cash flows from investing activities:
Capital expenditures...................................... (23,471) (17,041) (16,215)
Proceeds from sale of property............................ 10 587 11,782
Proceeds from sale of discontinued operations............. 3,000
Acquisition of customer accounts receivable............... (13,046)
Real estate acquired...................................... (2,814)
Payment for acquired business, net of cash purchased...... (19,405)
-------- -------- --------
Net cash used in investing activities............. (23,461) (13,454) (39,698)
-------- -------- --------
Cash flows from financing activities:
Net borrowings (payments) under asset securitization
agreement.............................................. (19,855) 12,430 (8,606)
Net borrowings (payments) on bankers' acceptance and
revolving lines of credit.............................. 47,561 3,279 (10,960)
Payments on long-term obligations......................... (1,805) (951) (1,105)
Debt acquisition payments................................. (2,098) (309) (613)
Common shares purchased................................... (17,728) (7,450)
Proceeds from common stock issuance, net of expense....... 65,381
Payments on debt assumed at acquisition................... (17,582)
-------- -------- --------
Net cash provided by financing activities......... 6,075 6,999 26,515
-------- -------- --------
Increase (decrease) in cash and equivalents................. (398) 130 1,649
Cash and equivalents:
Beginning of year......................................... 8,276 8,146 6,497
-------- -------- --------
End of year............................................... $ 7,878 $ 8,276 $ 8,146
======== ======== ========
Supplemental cash flow information:
Interest paid............................................. $ 12,954 $ 11,189 $ 11,299
Income taxes paid......................................... 903 778 569
Supplemental non-cash investing and financing activities:
Capital leases............................................ 4,024
Issuance of common shares to satisfy deferred
compensation........................................... 399 25
Receivables acquired in the sale of The Bee-Gee Shoe
Corp. ................................................. 3,600
See notes to consolidated financial statements.
20
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
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 (collectively the
"Company"). All significant intercompany balances and transactions have been
eliminated in consolidation.
FISCAL YEAR -- The Company's fiscal year ends on the Saturday nearest
January 31. Fiscal year 2000 consists of 53 weeks, and fiscal years 1999 and
1998 consist of 52 weeks ended January 29, 2000 and January 30, 1999,
respectively.
ESTIMATES -- The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America 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.
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 are classified as current assets because the
average collection period is generally less than one year.
MERCHANDISE INVENTORIES are valued by the retail method applied on a
last-in, first-out (LIFO) basis and are stated at the lower of cost or market.
Current cost, which approximates replacement cost under the first-in, first-out
(FIFO) method, is equal to the LIFO value of inventories at February 3, 2001 and
January 29, 2000.
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 -- Included in other assets is goodwill, which is amortized
using the straight-line method over estimated useful lives of 10 to 25 years.
The Company periodically evaluates the carrying value of long-lived assets to be
held and used, including goodwill, when events and circumstances warrant such a
review. The carrying value of a long-lived asset is considered impaired when the
anticipated undiscounted cash flow from such asset is separately identified and
is less than its carrying value.
REVENUE RECOGNITION -- Sales 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. Other revenue consists primarily of leased
department revenue. Leased department revenue is recognized as the Company earns
commission from the sale of merchandise within leased departments.
PRE-OPENING COSTS associated with opening new stores are expensed as
incurred.
ADVERTISING EXPENSE -- The cost of advertising is expensed as incurred.
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.
21
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 counter parties 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.
COMPREHENSIVE INCOME is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners. The
difference between net earnings and comprehensive earnings for fiscal year 2000
relates to the change in minimum pension liability for fiscal year 2000.
Comprehensive income equals net income for fiscal years 1999 and 1998.
RECLASSIFICATIONS -- Certain prior year amounts have been reclassified to
conform to current year presentation. The Company changed the presentation of
its selling, general, administrative and other expenses headings in its
statements of operations to more closely compare to that of other companies in
its industry. Additionally, in compliance with EITF 00-10, Accounting for
Shipping and Handling Fees and Costs, the Company reclassified to other revenue
certain shipping and handling costs billed to customers that were previously
recorded as an offset to shipping and handling costs included in selling,
general, administrative and other expenses.
ACCOUNTING PRONOUNCEMENTS -- Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended, requires derivatives to be recorded on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
fair value of the derivatives are recorded depending upon whether the
instruments meet the criteria for hedge accounting. Effective February 4, 2001,
the beginning of the first quarter of fiscal 2001, this Statement will be
adopted and will result in a cumulative after-tax other comprehensive loss of
$1.8 million.
B. ACQUISITION
In 1998, the Company acquired Stone & Thomas for a purchase price of
approximately $20.2 million in cash. Stone & Thomas operated 20 department
stores located in West Virginia, Ohio, Kentucky, and Virginia under the name
Stone & Thomas. This transaction has been accounted for as a purchase. The
excess of acquisition costs over fair value of the net assets acquired of $16.8
million is recorded as goodwill. As part of the Company's acquisition of Stone &
Thomas, it planned to exit certain activities, which resulted in the sale of
seven of the store locations, the closing of two and the recording of related
liabilities for store closings, employee severance, lease buyouts, and other
expenses. The Company recorded an accrual to exit certain activities of Stone &
Thomas in accordance with this plan in the amount of $6.8 million, which was
paid in fiscal 1999 and 1998.
22
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C. CUSTOMER ACCOUNTS RECEIVABLE
Customer accounts receivable represent finance subsidiary receivables.
Interest is charged at an annual rate of 18% to 21%, depending on state law. A
reconciliation of the Company's allowance for doubtful accounts is as follows:
YEAR ENDED
--------------------------------------------------------
FEBRUARY 3, 2001 JANUARY 29, 2000 JANUARY 30, 1999
---------------- ---------------- ----------------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Balance, beginning of year............. $ 2,048 $ 4,377 $ 4,177
Provision.............................. 6,178 3,906 5,046
Other.................................. 1,463
Charge offs, net of recoveries......... (5,748) (6,235) (6,309)
------- ------- -------
Balance, end of year................... $ 2,478 $ 2,048 $ 4,377
======= ======= =======
In the fourth quarter of fiscal 1998, the Company acquired Stone & Thomas'
customer accounts receivable portfolio, which was previously owned and serviced
by a third-party servicer. The portfolio totaled approximately $11.3 million,
net of an initial allowance for doubtful accounts of approximately $1.5 million.
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.
The El-Bee Chargit Corp. ("Chargit" or financing subsidiary) purchases
substantially all Elder-Beerman and subsidiaries' proprietary credit card
receivables; such receivables are purchased at a 3% discount. Purchase discounts
are eliminated in consolidation.
D. DEBT
Through a commercial bank lending group, the Company has a three-year
Revolving Credit Facility ("Credit Facility"), and through its financing
subsidiary, a three-year variable rate securitization loan agreement
("Securitization Facility"), both of which expire May 18, 2003. Outstanding
borrowings of $157.8 million on the Credit and Securitization Facilities due May
2003 are classified as long-term liabilities.
The Credit Facility provides for borrowing and letters of credit in an
aggregate amount up to $150 million subject to a borrowing base formula based
primarily on merchandise inventories. There is a $40 million sublimit for
letters of credit. The Company has the option to finance borrowings at either
prime, plus 25 basis points or LIBOR, plus 175 basis points.
The Securitization Facility is a revolving agreement whereby the Company
can borrow up to $150 million. The Company's customer accounts receivables are
pledged as collateral under the Securitization Facility. The borrowings under
this facility are subject to a borrowing-based formula based primarily on
outstanding customer accounts receivable. Borrowings bear interest at commercial
paper rates, plus 5 basis points.
Certain financial covenants related to debt are included in the Credit and
Securitization Facility 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 repurchase of outstanding capital stock, investments, mergers, stock
transfer and sale of assets. Certain ratios related to the performance of the
accounts receivable portfolio are also included.
At January 29, 2000, borrowings of $130.1 million on prior Credit and
Securitization Facilities that expired in December 2000 were classified as
current liabilities. The Company entered into new three-year Credit and
Securitization Facilities in May 2000.
23
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Debt consists of the following:
FEBRUARY 3, 2001 JANUARY 29, 2000
---------------- ----------------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Mortgage note payable (9.75%)............................... $ 2,459 $ 2,536
Industrial development revenue bonds, variable rates based
on published index of tax-exempt bonds (4.92%)............ 3,055 3,480
Capital lease obligations (7.13% -- 15.95%)................. 3,802 1,081
Credit facility (7.59%)..................................... 50,840 3,279
Securitization facility (6.18%)............................. 106,985 126,840
-------- ---------
Total............................................. 167,141 137,216
Current portion of long-term obligations.................... (1,509) (131,086)
-------- ---------
Long-term obligations....................................... $165,632 $ 6,130
======== =========
Maturities of borrowings are $1,509,000 in 2001, $1,083,000 in 2002,
$158,794,000 in 2003, $778,000 in 2004, $2,877,000 in 2005, and $2,100,000
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 $3.9 million at February 3, 2001.
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 had
outstanding swap agreements with notional amounts totaling $100 million, $115
million and $115 million for the fiscal years ended 2000, 1999 and 1998,
respectively. The Company's current swap agreement expires April 2004. This
agreement has been matched to the Securitization Facility to reduce the impact
of interest rate changes on cash flows.
The Company is exposed to credit related losses in the event of
non-performance by the counter parties to the swap agreements. All counter
parties 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 counter parties.
E. 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.
24
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Minimum annual rentals, for leases having initial or remaining
noncancelable lease terms in excess of one year at February 3, 2001, are as
follows:
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
- ----------- --------- ----------
(ALL DOLLAR AMOUNTS IN
THOUSANDS)
2001...................................................... $ 24,038 $1,397
2002...................................................... 22,777 1,225
2003...................................................... 21,618 1,006
2004...................................................... 20,886 716
2005...................................................... 20,362 674
Thereafter................................................ 160,073
-------- ------
Minimum lease payments...................................... $269,754 5,018
========
Imputed interest............................................ (1,216)
------
Present value of net minimum lease payments................. $3,802
======
YEAR ENDED
-----------------------------------------
FEBRUARY 3, JANUARY 29, JANUARY 30,
2001 2000 1999
----------- ----------- -----------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
RENT EXPENSE
Operating leases:
Minimum................................................. $25,474 $24,895 $19,848
Contingent.............................................. 1,763 1,907 1,818
------- ------- -------
Total rent expense........................................ $27,237 $26,802 $21,666
======= ======= =======
Assets acquired under capital leases are included in the consolidated
balance sheets as property, while the related obligations are included in
long-term obligations.
FEBRUARY 3, JANUARY 29,
2001 2000
----------- -----------
(ALL DOLLAR AMOUNTS IN
THOUSANDS)
ASSETS HELD UNDER CAPITAL LEASES
Buildings................................................. $ 3,442 $ 5,538
Equipment................................................. 4,259 235
Accumulated depreciation and amortization................. (3,574) (5,130)
------- -------
$ 4,127 $ 643
======= =======
25
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
F. INCOME TAXES
Income tax benefit consists of the following:
YEAR ENDED
-----------------------------------------
FEBRUARY 3, JANUARY 29, JANUARY 30,
2001 2000 1999
----------- ----------- -----------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Current:
Federal................................................. $ $ 272 $ 813
State and local......................................... 65 471 503
------- -------- --------
65 743 1,316
------- -------- --------
Deferred:
Net operating losses and tax credit carryforwards....... (4,316) (1,178) 8,955
Interest................................................ (266)
Deferred income......................................... 1,024 (268)
Valuation allowance..................................... (10,635) (12,337)
Other................................................... 127 4,333 (1,024)
------- -------- --------
(3,165) (7,748) (4,672)
------- -------- --------
Income tax benefit........................................ $(3,100) $ (7,005) $ (3,356)
======= ======== ========
Income statement classifications:
YEAR ENDED
-----------------------------------------
FEBRUARY 3, JANUARY 29, JANUARY 30,
2001 2000 1999
----------- ----------- -----------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Current:
Continuing operations................................... $(3,151) $(5,399) $(3,124)
Discontinued operations................................. 51 (1,606) (232)
------- ------- -------
Total........................................... $(3,100) $(7,005) $(3,356)
======= ======= =======
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:
FEBRUARY 3, JANUARY 29, JANUARY 30,
2001 2000 1999
----------- ----------- -----------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Federal taxes computed at the statutory rate.............. $(3,442) $ 4,416 $ 7,959
State and local taxes..................................... 65 539 523
Valuation allowance....................................... (10,635) (12,337)
Permanent items........................................... 226 281 731
------- -------- --------
Income tax benefit from continuing operations............. $(3,151) $ (5,399) $ (3,124)
======= ======== ========
26
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes consist of the following:
FEBRUARY 3, JANUARY 29,
2001 2000
----------- -----------
(ALL DOLLAR AMOUNTS IN
THOUSANDS)
Deferred tax assets:
Net operating losses and tax credit carryforwards......... $27,166 $22,850
Deferred income........................................... 112 1,136
Deferred compensation..................................... 1,593 1,666
Bad debts................................................. 867 758
Other..................................................... 7,001 7,258
------- -------
36,739 33,668
Valuation allowance......................................... (3,829) (3,829)
------- -------
Total deferred tax assets......................... 32,910 29,839
------- -------
Deferred tax liabilities.................................... (8,938) (9,405)
------- -------
Net deferred tax asset............................ $23,972 $20,434
======= =======
Included in the balance sheets:
Other current assets...................................... $10,645 $ 8,090
Other assets.............................................. 13,327 12,344
------- -------
Net deferred tax assets........................... $23,972 $20,434
======= =======
Permanent items consist primarily of nondeductible goodwill. Permanent
items in fiscal 1998 also include certain bankruptcy related expenses. 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. In the fourth quarter of
fiscal 1999 and 1998, the Company reduced the valuation allowance to reflect the
likely future utilization of its deferred tax assets.
The federal net operating loss carryforward is approximately $69.5 million
and is available to reduce federal taxable income through 2020. The tax credit
carryforward is approximately $3.0 million, of which $632,000 will expire in
2009 and 2010, and the balance of which is an indefinite carryforward.
G. EMPLOYEE BENEFIT PLANS
A defined-contribution employee benefit plan (the "Benefit Plan") covers
substantially all employees. The Company may contribute to the Benefit Plan
based on a percentage of compensation and on a percentage of earnings before
income taxes. Contributions of $1.1 million, $1.9 million and $1.3 million were
recorded in fiscal 2000, 1999 and 1998, respectively, for the Company's match to
the Benefit Plan. Eligible employees can make contributions to the Benefit Plan
through payroll withholdings of one to fifteen percent of their annual
compensation. The Benefit Plan includes an employee stock ownership component.
The Company has a Stock Purchase Plan, which provides for its employees to
purchase Elder-Beerman common stock at a 15% discount. Employees can make
contributions to the Stock Purchase Plan through payroll withholdings of one
percent to ten percent of their annual compensation, up to a maximum of $25,000
per year. A total of 625,000 shares of common stock are registered and unissued
under the Stock Purchase Plan.
With the acquisition of Stone & Thomas, the Company assumed a
defined-benefit pension plan, which covered all full-time employees of Stone &
Thomas upon completion of one year of service and the attainment
27
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of age 21. The benefits were based upon years of service and the earnings.
Accrued benefits were frozen as of September 30, 1998, as part of the Company's
plan of acquisition. The Company's funding policy is to contribute an amount
annually that satisfies the minimum funding requirements of ERISA and that is
tax deductible under the Internal Revenue Code.
Summary information for the Company's defined-benefit plan is as follows:
FEBRUARY 3, JANUARY 29,
2001 2000
----------- -----------
(ALL DOLLAR AMOUNTS IN
THOUSANDS)
Change in the projected benefit obligation:
Projected benefit obligation at beginning of year......... $(5,119) $(6,092)
Interest cost............................................. (372) (385)
Actuarial gain (loss)..................................... (206) 608
Benefits paid............................................. 689 750
------- -------
Projected benefit obligation at end of year................. (5,008) (5,119)
------- -------
Change in the plan assets:
Fair value of plan assets at beginning of year............ 5,126 6,123
Actual return (loss) on plan assets....................... 237 (247)
Benefits paid............................................. (689) (750)
------- -------
Fair value of plan assets at end of year.................... 4,674 5,126
------- -------
Plan assets in excess of projected benefit obligation....... (334) 7
Reconciliation of financial status of plan to amounts
recorded in the Company's balance sheet -- unrecorded
effect of net loss arising from differences between
actuarial assumptions used to determine periodic pension
expense and actual experience............................. 1,036 666
------- -------
Net pension asset........................................... $ 702 $ 673
======= =======
Amounts recognized in the Company's balance sheets consist
of:
Other assets -- pension asset............................. $ 702 $ 673
Other current liabilities................................. (1,036)
Other assets -- deferred tax asset........................ 373
Other comprehensive loss.................................. 663
Benefit obligation discount rate............................ 7.25% 7.5%
The components of net pension income are as follows:
2000 1999 1998
----- ----- -----
(ALL DOLLAR AMOUNTS IN
THOUSANDS)
Service cost................................................ $ $ $ 12
Interest cost on projected benefit obligation............... 372 385 199
Expected return on plan assets.............................. (422) (507) (249)
Amortization of unrecorded net loss......................... 22
----- ----- -----
Net pension income.......................................... $ (28) $(122) $ (38)
===== ===== =====
Plan assets are held in a trust and are invested primarily in equities and
fixed income obligations. The expected long-term rate of return on plan assets
used in determining net pension income was 8.0% in 2000 and 8.5% in 1999 and
1998.
28
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. EARNINGS PER SHARE
Net earnings (loss) per common share is computed by dividing net earnings
(loss) by the weighted-average number of common shares outstanding during the
year. Stock options, restricted shares, deferred shares and warrants outstanding
represent potential common shares and are included in computing diluted earnings
per share when the effect is dilutive. There was no dilutive effect of potential
common shares in fiscal 2000. A reconciliation of the weighted average shares
used in the basic and diluted earnings per share calculation is as follows:
2000 1999 1998
---------- ---------- ----------
Weighted average common shares outstanding --
basic........................................ 13,598,485 15,371,183 14,078,441
Dilutive potential common shares:
Warrants..................................... 150,049
Stock options................................ 2,953 185,161
Restricted shares............................ 4,552 33,917
Deferred shares.............................. 63,970 25,388
---------- ---------- ----------
Adjusted weighted average shares -- diluted.... 13,598,485 15,442,658 14,472,956
========== ========== ==========
I. SHAREHOLDERS' EQUITY
The Company has authorized 25 million no par common shares. In August 2000,
the Company's Board of Directors authorized the repurchase of a targeted 3.3
million common shares at an aggregate repurchase price of $20 million through a
self-tender. During fiscal 2000 pursuant to the self-tender, a total of 3.5
million common shares were repurchased for $17.7 million. In August 1999, the
Company's Board of Directors authorized a share repurchase program to repurchase
up to $24 million in common shares over a two-year period. During fiscal 1999
pursuant to the share repurchase program, a total of 1.1 million common shares
were repurchased for $7.4 million. There were 1.0 million shares held in
treasury at February 3, 2001.
The Board of Directors has the authority to issue five million shares of
preferred stock. At February 3, 2001, these shares are unissued.
Warrants of 624,522 are attached to shares outstanding of 624,522.
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, 2007,
unless the Board of Directors takes action prior to that date to extend the
rights, and are presently redeemable at $0.01 per right.
J. STOCK-BASED COMPENSATION
The Equity and Performance Incentive Plan (the "Incentive Plan") authorizes
the Company's Board of Directors to grant restricted shares, stock options,
appreciation rights, deferred shares, performance shares and performance units.
Awards relating to 2,750,000 shares are authorized for issuance under this plan
and awards related to 2,218,826 shares have been issued as of February 3, 2001.
Officers and key employees have been granted stock options under the
Incentive Plan. The options granted have a maximum term of ten years and vest
over a period ranging from three to five years. In fiscal
29
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2000, 1999 and 1998, the Company has granted certain discounted stock options,
in lieu of directors fees, to outside directors with an exercise price less than
the market price of the stock on the grant date.
The following table summarizes the Company's stock option activity:
2000 1999 1998
--------------------- --------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- --------- ------- ---------
Outstanding at beginning of year...... 1,666,150 $10.81 938,096 $12.53 773,000 $10.89
Granted:
Discounted.......................... 78,763 3.31 30,554 5.39 29,096 12.07
Undiscounted........................ 592,500 3.48 343,000 8.18 165,000 20.51
Premium............................. 460,000 9.71
Canceled.............................. (487,150) 10.97 (105,500) 11.10 (29,000) 13.86
--------- --------- -------
Outstanding at end of year............ 1,850,263 $ 8.10 1,666,150 $10.81 938,096 $12.53
========= ========= =======
Exercisable at year end............... 556,082 $10.86 346,965 $11.84 161,133 $10.89
========= ========= =======
Weighted-average fair value of stock
options granted during the year
using the Black-Scholes
options -- pricing model:
Discounted.......................... $ 3.50 $ 5.24 $10.47
Undiscounted........................ $ 2.63 $ 5.55 $11.96
Premium............................. $ 4.94
2000 1999 1998
------- ------- -------
Weighted-average assumptions used for grants:
Expected dividend yield................................... 0% 0% 0%
Expected volatility....................................... 79% 63% 50%
Risk-free interest rate................................... 5.5% 6.3% 5.3%
Expected life............................................. 7 years 7 years 7 years
The following table shows various information about stock options
outstanding at February 3, 2001:
OPTIONS OUTSTANDING
--------------------------------------- OPTIONS EXERCISABLE
WEIGHTED- ----------------------------
AVERAGE WEIGHTED- NUMBER WEIGHTED-
REMAINING AVERAGE EXERCISABLE AT AVERAGE
CONTRACTUAL EXERCISE FEBRUARY 3, EXERCISE
RANGE OF EXERCISE PRICES SHARES LIFE (IN YEARS) PRICE 2001 PRICE
- ------------------------ --------- --------------- --------- --------------- ----------
2.719 - 5.750 691,653 9.6 $ 3.51 22,071 $ 4.85
6.125 - 9.125 339,570 8.2 8.12 94,270 8.04
9.600 - 14.125 722,312 7.2 10.79 398,513 10.84
16.735 - 21.000 96,728 7.1 20.82 41,228 20.68
--------- -------
1,850,263 8.3 $ 8.10 556,082 $10.86
========= =======
The Incentive 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. As of February 3, 2001, 281,247 restricted common
shares are issued and outstanding under the plan. There were 42,625 and 151,814
shares awarded under this plan in fiscal 2000 and 1999, respectively. The fair
value of the restricted shares awarded was $0.2 million and $0.9 million in
fiscal 2000 and 1999, respectively, which is recorded as compensation expense
over the three-year vesting period.
30
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Incentive Plan also provides for certain employees to elect to defer a
portion of their compensation through the purchase of deferred shares. Each
deferred share represents an employee's right to a share of the Company's common
stock. As of February 3, 2001, 46,025 deferred shares are outstanding.
Total compensation costs charged to earnings from continuing operations
before income taxes for all stock-based compensation awards was approximately $
0.7 million, $1.6 million and $1.6 million in fiscal 2000, 1999 and 1998,
respectively. Had compensation costs been determined based on the fair value
method of SFAS No. 123 for all plans, the Company's net earnings (loss) and
diluted earnings (loss) per common share would have been the following pro forma
amounts:
2000 1999 1998
--------- --------- ---------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Net earnings (loss):
As reported............................................... $(6,735) $15,228 $25,461
Pro forma................................................. (8,523) 13,103 24,211
Net earnings (loss) per common share -- diluted:
As reported............................................... (0.50) 0.99 1.76
Pro forma................................................. (0.63) 0.85 1.67
K. DISCONTINUED OPERATIONS
During fiscal 1999, the Company sold its wholly-owned subsidiary, The
Bee-Gee Shoe Corp. for $3 million cash, $1.5 million cash payable from
subsequent earnings of the purchaser (the "Earnout"), and a $4.8 million note
receivable. The sale was completed January 25, 2000. The Company obtained an
independent appraisal of the fair value of the Earnout and note receivable in
order to determine the consideration received from sale. Payments on the note
will commence March 31, 2002. In the interim, interest accrues at a rate of 8.5%
per annum. Payments from subsequent earnings of the purchaser will commence no
later than March 31, 2003. Revenues of the shoe division were $26.7 million and
$31.2 million in 1999 and 1998, respectively.
The following are the components of discontinued operations:
2000 1999 1998
---- ------- -----
(ALL DOLLAR AMOUNTS
IN THOUSANDS)
Loss from operations of shoe division (net of income tax
benefit of $257 and $232 in fiscal years 1999 and 1998,
respectively)............................................. $ $ (447) $(403)
Gain (loss) on sale of shoe division, including loss on
operations during phase-out period of $564 in fiscal 1999
(net of income tax expense (benefit) of $51 and ($1,349)
in fiscal years 2000 and 1999, respectively).............. 89 (2,340)
--- ------- -----
$89 $(2,787) $(403)
=== ======= =====
L. ASSET IMPAIRMENT AND OTHER EXPENSES
During fiscal 2000, the Company recorded a pre-tax charge of $15.9 million
associated with the Company's new strategic plan announced in August 2000. The
charges included $12.1 million for inventory costs included in cost of goods
sold, occupancy and buying expenses and $3.8 million for severance costs and
outside professional fees and expenses included in selling, general,
administrative and other expenses. The severance costs related to the
termination of 137 salaried and hourly employees, all of who left the Company
before February 3, 2001. A remaining amount of $1.0 million is payable at
February 3, 2001 for payments to be made in 2001 and 2002 under a severance
contract.
In fiscal 1999, the Company recorded an asset impairment of $4.6 million in
selling, general, administrative and other expenses as the result of adverse
changes in the operations of a cooperative buying group in which the Company
held an investment. The Company determined the fair value of its investment
31
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
based on an analysis of the expected future cash flows. The asset impairment
recorded reflects the write-down of the carrying amount of the investment in the
cooperative buying group to its estimated fair value. During 2000, income of
$0.7 million was recorded in selling, general, administrative and other expenses
related to proceeds received upon the disbanding of the cooperative buying group
in which the Company held an investment.
M. 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.
CUSTOMER ACCOUNTS RECEIVABLE -- The net carrying amount approximates
fair value because of the relatively short average maturity of the
instruments and no significant change in interest rates.
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 estimated fair
value of the interest rate swap agreement is a $(2.8) million loss and a
$1.1 million gain at February 3, 2001 and January 29, 2000, respectively.
There is no carrying amount in the consolidated balance sheets.
N. 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. Management believes the outcome of any of the litigation
matters will not have a material effect on the Company's results of operations,
cash flows or financial position.
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.
LEASE GUARANTEES -- The Company has a guarantee lease obligation of sixteen
stores of Shoebilee, Inc. The leases have remaining noncancelable terms expiring
no later than 2008. The minimum annual rentals related to these leases are
$711,000 in 2001; $547,000 in 2002; $372,000 in 2003; $359,000 in 2004; $295,000
in 2005; and $732,000 thereafter.
O. SEGMENT REPORTING
Management assesses performance and makes operating decisions based on two
reportable segments, Department Store and Finance Operations.
The Department Store segment is identified by the merchandise sold and
customer base served. The Department Store segment sells a wide range of
moderate to better brand merchandise, including women's ready to wear,
accessories, cosmetics, men's, children's and home. The Company's retail stores
are principally engaged in smaller Midwestern markets in Ohio, Indiana,
Illinois, Michigan, Pennsylvania, Wisconsin,
32
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Kentucky, and West Virginia. Net sales by major merchandising category in the
Department Store segment are as follows:
MERCHANDISE CATEGORY
2000 1999 1998
--------- --------- ---------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Women's Ready to Wear.............................. $212,169 $209,821 $191,953
Accessories, Shoes and Cosmetics................... 156,854 149,337 133,551
Men's and Childrens................................ 150,933 148,175 138,478
Home Store......................................... 136,208 130,464 118,109
-------- -------- --------
Total Department Store............................. $656,164 $637,797 $582,091
======== ======== ========
The Finance Operations segment is a private label credit card program
operated by the Company through its wholly owned subsidiary, Chargit. Finance
Operations segment revenues consist primarily of finance charges earned through
issuance of Elder-Beerman proprietary credit cards. All phases of the credit
card operation are handled by Chargit except the processing of customer mail
payments.
The following table sets forth information for each of the Company's
segments:
2000 1999 1998
--------- --------- ---------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
DEPARTMENT STORE
Revenues........................................... $659,468 $641,250 $585,396
Depreciation and amortization...................... 15,677 14,724 13,045
Operating profit(1)................................ 2,229 2,557 15,826
Capital expenditures............................... 23,459 16,615 15,933
Total assets....................................... 339,446 318,242 327,252
2000 1999 1998
--------- --------- ---------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
FINANCE OPERATIONS
Revenues(2)........................................ $ 37,560 $ 34,802 $ 32,783
Depreciation and amortization...................... 523 505 373
Operating profit(1)................................ 23,892 24,064 21,461
Capital expenditures............................... 12 426 282
Total assets....................................... 115,871 135,926 126,016
- ---------------
(1) Total segment operating profit is reconciled to earnings (loss) before
income tax benefit and discontinued operations as follows:
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37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2000 1999 1998
--------- --------- ---------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Segment operating profit........................... $ 26,121 $ 26,621 $ 37,287
New strategic plan costs........................... (15,903)
Store closing costs................................ (6,059) (1,302)
Acquisition and integration........................ (4,154)
Interest expense................................... (13,014) (10,927) (10,940)
Reorganization and other........................... (1,120) (3,078) 1,849
-------- -------- --------
$ (9,975) $ 12,616 $ 22,740
======== ======== ========
- ---------------
(2) Finance Operations segment revenues is reconciled to reported financing
revenues as follows:
2000 1999 1998
--------- --------- ---------
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Segment revenues...................................... $37,560 $34,802 $32,783
Intersegment operating charge eliminated.............. (9,398) (8,678) (7,210)
------- ------- -------
$28,162 $26,124 $25,573
======= ======= =======
* * * * * *
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
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........ 58 Chairman of the Board, President and Chief Executive Officer
Scott J. Davido............. 39 Executive Vice President, Chief Financial Officer, Treasurer
and Secretary
James M. Zamberlan.......... 54 Executive Vice President, Stores
Steven D. Lipton............ 50 Senior Vice President, Controller
Mark F.C. Berner............ 47 Director
Dennis Bookshester.......... 62 Director
Eugene I. Davis............. 46 Director
Charles Macaluso............ 57 Director
Steven C. Mason............. 65 Director
Thomas J. Noonan, Jr. ...... 60 Director
Bernard Olsoff.............. 72 Director
Laura H. Pomerantz.......... 53 Director
Jack A. Staph............... 55 Director
Charles H. Turner........... 44 Director
Frederick J. Mershad has served as Chairman of the Board of Elder-Beerman
since December 1997, as Chief Executive Officer and a Director of Elder-Beerman
since January 1997 and as Chairman of the Board, Chief Executive Officer,
President and a Director since July 2000. Prior to this time, Mr. Mershad served
as President and Chief Executive Officer of the Proffitt's division of Saks,
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 the Rich's
Department Stores division of Federated Department Stores, Inc. ("Federated")
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.
Scott J. Davido was appointed to the position of Executive Vice President,
Chief Financial Officer, Treasurer and Secretary in March 1999 and served as
Senior Vice President, General Counsel and Secretary of Elder-Beerman from
January 1998 through March 1999. 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.
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 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
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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.
Mark F.C. Berner has served as a Director of Elder-Beerman since September
2000. Mr. Berner is Managing Partner of SDG Resources, L.P., an oil and gas
investment fund. From 1996 to 1998, he was a private investment consultant in
New York. In 1995, Mr. Berner served as Senior Vice President and Counsel for
Turnberry Capital Management, L.P., a private equity fund. His prior position
was as a Director of the First Boston Special Situations Fund, a private
investment partnership. Mr. Berner also currently serves as a Director of
ThinkSheet, Inc., and served as a Director of Renaissance Technologies from 1997
through March 2000. Mr. Berner is also a member of the bar of the State of New
York.
Dennis Bookshester has served as a Director of Elder-Beerman since December
1999. Mr. Bookshester serves as the Chief Executive Officer of Fruit of the
Loom, a garment manufacturer that filed for protection under chapter 11 of the
United States Bankruptcy Code in December 1999. He also currently serves as a
Director of Fruit of the Loom and Playboy Enterprises and as Chairman of Cutanix
Corp.
Eugene I. Davis has served as a Director of Elder-Beerman since September
2000. Mr. Davis is Chairman and Chief Executive Officer of Pirinate Consulting
Group, L.L.C., a corporate strategy consulting firm, and of Murdock
Communications Corp., a telecommunications enterprise. He also serves as Chief
Executive Officer of SmarTalk Teleservices Corp., an independent provider of
prepaid calling cards, that filed for protection under chapter 11 of the United
States Bankruptcy Code in January 1999, and is currently being liquidated.
During 1998 and 1999, Mr. Davis was Chief Operating Officer of Total-Tel
Communications, Inc., a long distance telecommunications provider. From 1996 to
1997, Mr. Davis was the Chief Executive Officer of Sport Supply Group, Inc., a
sporting goods and athletic equipment distributor. From 1992 to 1997, he served
as President of Emerson Radio Corp., a consumer electronics distributor. Mr.
Davis also currently serves as a Director of Coho Energy, Inc., Murdock
Communications Corp., Tipperary Corporation and Eagle Geophysical Corp.
Charles Macaluso has served as a Director of Elder-Beerman since December
1999. Mr. Macaluso is a Principal in East Ridge Consulting, Inc., a management
advisory and investment firm he founded in 1999. Prior to this, Mr. Macaluso
served as a Principal from 1996 through 1999 in Miller Associates, Inc., a
management consulting firm. Prior to this, Mr. Macaluso was a partner with the
Airlie Group, L.P. and an analyst for Investment Limited Partners, L.P., both
private investment partnerships, from 1986 through 1996.
Steven C. Mason has served as a Director of Elder-Beerman since 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 also
currently serves as a Director of PPG Industries, Inc. and Convergys.
Thomas J. Noonan, Jr. has served as a Director of Elder-Beerman since 1997.
Mr. Noonan is the Chief Executive Officer of the Coppergate Group
("Coppergate"), a financial investment and management company, and has served in
this capacity since May 1996. Prior to that, he served as a Managing Director of
Coppergate from April 1993 through May 1996. He also serves as the Chairman,
President and Chief Executive Officer of Intrenet, Inc. ("Intrenet"), a
truckload carrier service provider that filed for protection under chapter 11 in
January 2001, and is currently being liquidated. Mr. Noonan has served in his
current position at Intrenet since January 2001. He has been a Director of
Intrenet since 1991 and was named Chairman in December 2000. Mr. Noonan also
serves as the Chief Executive of R&S Liquidating Company, Inc., which was
formerly known as WSR, Inc. ("WSR") an automotive aftermarket retailer, and has
served in this capacity since April 2000. Prior to that Mr. Noonan was WSR's
Chief Restructuring Officer from August 1998 through December 1999. Mr. Noonan
served as Executive Vice President and Chief Financial Officer of Herman's
Sporting Goods, Inc. from August 1994 through 1999, a sporting goods retailer
that filed for protection under chapter 11 of the United States Bankruptcy Code
and is currently being liquidated.
Bernard J. Olsoff has served as a Director of Elder-Beerman since 1997. Mr.
Olsoff retired from Frederick Atkins, 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,
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40
and President and Chief Operating Officer from 1983 to 1994. Mr. Olsoff also
currently serves as a Director of The Leslie Fay Companies, Inc., an apparel
design and manufacturing company ("Leslie Fay").
Laura H. Pomerantz has served as a Director of Elder-Beerman since 1998.
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 Leslie Fay, 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 1997. Mr.
Staph is currently a consultant, lawyer and private investor. He also serves as
Vice President and Treasurer of Bernadette Travel, Inc. 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.
Charles H. Turner has served as a Director of Elder-Beerman since September
2000. Mr. Turner is Senior Vice President of Finance, Chief Financial Officer
and Treasurer of Pier 1 Imports, Inc., ("Pier 1"), and has served in this
capacity since August 1999. Mr. Turner served as Pier 1's Senior Vice President
of Stores from July 1994 through August 1999 and served as Controller and
Principal Accounting Officer of Pier 1 from January 1992 through August 1994.
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 and persons who own more than 10 percent of a
registered class of our equity securities to file reports of ownership on Forms
3, 4 and 5 with the Securities and Exchange Commission. The Securities and
Exchange Commission requires this group to furnish us with copies of all such
filings. The Company periodically reminds this group of its reporting obligation
and assists in making the required disclosure once the Company is notified that
a reportable event has occurred. The Company is required to disclose any failure
by any of the above mentioned persons to make timely Section 16 reports.
Based upon its review of such forms received by Elder-Beerman and written
representations from the directors and executive officers that no other reports
were required, Elder-Beerman is unaware of any instances of noncompliance, or
late compliance, with such filings during fiscal year 2000 by its directors,
executive officers or 10 percent shareholders.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The table below shows the before-tax compensation for the years shown for
Elder-Beerman's Chief Executive Officer and the four next highest paid executive
officers (the "Named Executive Officers") at the end of fiscal year 2000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ----------------------------------------------
AWARDS PAYOUTS
----------------------- --------------------
SECURITIES ALL
OTHER RESTRICTED UNDERLYING OTHER
ANNUAL STOCK OPTIONS/ LTIP COMPEN-
SALARY BONUS COMPEN- AWARD(S) SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) SATION($)(5) ($) (#) ($) ($)(9)(10)
- --------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ----------
Frederick J. Mershad --
Chairman and Chief 2000 671,539 100,000 9,705
Executive Officer 1999 600,000 581,250 300,000 7,665
1998 559,263 120,000 29,403 1,050,000 75,000 9,970
John A. Muskovich(1) --
President, Chief 2000 196,971 37,602 270,837(11)
Operating Officer 1999 425,000 310,000(6) 160,000(8) 6,000
through June 29, 2000 1998 412,207 85,000 473,127(7) 30,000(8) 9,950
Scott J. Davido --
Executive Vice President -- 2000 261,923 37,295(3) 29,690 30,000 4,236
Chief Financial Officer, 1999 217,596 36,000 60,550 45,625 25,000 382
Treasurer and Secretary 1998 174,076 21,280 26,626 26,599 4,585
Charles P. Shaffer(2)
Vice President -- General 2000 297,692 7,613 10,000 8,792
Merchandise Manager 1999 243,654 44,303 95,190 40,000 7,159
1998 220,769 60,000 37,495 5,483
James M. Zamberlan --
Executive Vice President -- 2000 351,346 9,703 29,690 30,000 4,359
Stores 1999 309,808 53,156 20,000 2,712
1998 278,803 79,650 234,892 15,000 8,050
Steven D. Lipton --
Sr. Vice President -- 2000 203,538 43,315(4) 11,876 15,000 6,660
Controller 1999 180,115 35,830 10,000 5,801
1998 154,976 21,132 26,412 0 7,985
Fiscal year 2000 includes 53 weeks.
- ---------------
(1) Mr. Muskovich was terminated by the Company on June 29, 2000.
(2) Mr. Shaffer served as Executive Vice President -- Merchandising and
Marketing until August 11, 2000. He currently serves and Senior Vice
President, General Merchandise Manager.
(3) Includes 2,711 deferred shares and 678 restricted shares awarded to Mr.
Davido as the deferred portion of his 2000 bonus pursuant to the Company's
Equity and Performance Incentive Plan.
(4) Includes 5,935 deferred shares and 1,484 restricted shares awarded to Mr.
Lipton as the deferred portion of his 2000 bonus pursuant to the Company's
Equity and Performance Incentive Plan.
(5) Moving expense reimbursement.
(6) This restricted share grant was cancelled on June 30, 2000 pursuant to the
terms of the restricted share agreement.
(7) Mr. Muskovich received $322,493 of his 1998 restricted shares grants. The
remaining shares were cancelled on June 30, 2000, pursuant to the
termination of his position as President and Chief Operating Officer.
(8) All of Mr. Muskovich's option grants were cancelled on September 30, 2000,
pursuant to the terms of the option agreements.
(9) Includes life insurance premium payments paid by the Company in 2000 in the
following amounts: Mr. Mershad $4,865, Mr. Muskovich $1,430, Mr. Zamberlan
$2,759, Mr. Davido $2,636, Mr. Shaffer $2,332 and Mr. Lipton $1,820.
(10) Includes matching contributions paid by the Company in 2000 under the
Company's Retirement Savings Plan in the following amounts: Mr. Mershad
$4,840, Mr. Muskovich $4,840, Mr. Shaffer $6,460, Mr. Davido $1,600, Mr.
Zamberlan $1,600 and Mr. Lipton $4,840.
(11) Includes severance payments pursuant to Mr. Muskovich's employment
agreement.
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STOCK OPTION/SAR GRANTS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers during fiscal year 2000 pursuant to the
Company's Equity and Performance Incentive Plan (the "Plan").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------- AT ASSUMED ANNUAL
PERCENT OF RATE
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN OF BASE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- ---- ------------- ------------ ----------- ---------- --------- ---------
Frederick J. Mershad.......... 100,000 17.42 3.13 12/5/10 196,530 498,044
John A. Muskovich............. 0 0
Scott J. Davido............... 30,000 5.23 3.44 11/13/10 64,864 164,379
James M. Zamberlan............ 30,000 5.23 3.44 11/13/10 64,864 164,379
Steven D. Lipton.............. 15,000 2.61 3.44 11/13/10 32,432 82,189
Charles P. Shaffer............ 10,000 1.74 3.44 11/13/10 21,621 54,793
- ---------------
(1) Options vest annually in one-fifth increments beginning one year from date
of grant.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options exercised
during fiscal year 2000 by the Named Executive Officers and the fiscal year-end
value of unexercised options held by the Named Executive Officers. All of such
options were granted under the Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS HELD AT OPTIONS/SARS HELD AT
SHARES VALUE FEBRUARY 03, 2001(#) FEBRUARY 3, 2001($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
Frederick J. Mershad.......... 0 $0.00 246,401 422,599 $0.00 $0.00
John A. Muskovich............. 0 $0.00 0 0 $0.00 $0.00
Scott J. Davido............... 0 $0.00 17,600 58,400 $0.00 $0.00
James M. Zamberlan............ 0 $0.00 46,600 79,400 $0.00 $0.00
Steven D. Lipton.............. 0 $0.00 14,600 31,400 $0.00 $0.00
Charles P. Shaffer............ 0 $0.00 23,000 52,000 $0.00 $0.00
- ---------------
(1) Based on the closing price on NASDAQ of the Company's Common Stock on
February 2, 2001 (the last trading day in fiscal year 2000) of $3.00.
EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN OFFICERS
The Company has entered into employment agreements with Frederick J.
Mershad, Chairman, President and Chief Executive Officer, John A. Muskovich, who
departed as President and Chief Operating Officer, and the other executive
officers as described below (the "Employment Agreements"). This Employment
Agreement sets forth (a) Mr. Mershad's compensation and benefits, subject to
increases at the discretion of the Board of Directors, (b) the Company's right
to terminate Mr. Mershad for cause or otherwise; (c) the
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43
amounts to be paid by the Company in the event of Mr. Mershad's termination,
death or disability while rendering services; (d) Mr. Mershad's duty of strict
confidence and to refrain from conflicts of interest; (e) Mr. Mershad's
obligations not to compete for the term of the agreement plus one year unless
Mr. Mershad terminated his employment for good reason or the employer terminates
Mr. Mershad other than for cause; and (f) Mr. Mershad's right to receive
severance payments. In general, these Employment Agreements provide that if Mr.
Mershad is terminated for any reason, other than for cause or following a
"change in control," (as defined in the Employment Agreements), 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 Mr. Mershad (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.
Mr. Muskovich, the former President and Chief Operating Officer of the
Company, was terminated by the Company on June 29, 2000. Pursuant to the terms
of Mr. Muskovich's Employment Agreement, the Company was required to give Mr.
Muskovich notice six months prior to December 30, 2000 if the Company elected
not to renew his Employment Agreement. The Company gave Mr. Muskovich notice on
June 29, 2000 that the Company would terminate his Employment Agreement and his
employment. Pursuant to the terms of his Employment Agreement, Mr. Muskovich
will receive payments equal to the remaining base salary that would have been
paid to him by the Company under the remaining term of his Employment Agreement,
which expires on December 30, 2002.
The Company has also entered into Employment Agreements that include
severance pay provisions with each of Messrs. Zamberlan, Davido and Shaffer.
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 Company"s severance pay plan. 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 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.
The Company has also entered into an Employment Agreement that includes
severance pay provisions with Mr. Lipton. Mr. Lipton's Employment Agreement sets
forth (a) his compensation and benefits, subject
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44
to review at the discretion of the Board of Directors, (b) the Company's right
to terminate him for cause or otherwise; (c) the amounts to be paid by the
Company in the event of his termination, death or disability while rendering
services; (d) his duty of strict confidence and to refrain from conflicts of
interest; (e) his obligations not to compete for the term of the agreement plus
one year unless he terminated his employment for good reason or the employer
terminates him other than for cause; and (f) his right to receive severance pay
and other benefits (pursuant to general the severance policy of the Company in
place at the time) if he is terminated or terminates his employment for certain
reasons. The current severance policy of the Company provides that the amount of
the severance payment by the Company to Mr. Lipton in the event of his
termination because of a change of control is equal to 78 weeks of his base
salary, plus life and health benefit continuation for 78 weeks. If there is no
change of control and Mr. Lipton's employment is terminated for any reason other
than cause, his severance will be the greater of (i) four weeks of his base
salary for every year of service or (ii) the base salary due under the remaining
term of his Employment Agreement.
The Company has also entered into Indemnification Agreements with each
current member of the Board of Directors as well as each of the Company's
executive officers. These agreements provide that, to the extent permitted by
Ohio law, the Company will indemnify the director or officer against all
expenses, costs, liabilities and losses (including attorneys' fees, judgments,
fines or settlements) incurred or suffered by the director or officer in
connection with any suit in which the director or officer is a party or is
otherwise involved as a result of the individual's service as a member of the
Board of Directors or as an officer so long as the individual's conduct that
gave rise to such liability meets certain prescribed standards.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors (the "Committee") has
responsibility for setting and administering the policies that govern executive
compensation. The Committee has authority, among other things, to review,
analyze and recommend compensation programs to the Board and to administer and
grant awards under the Plan. The Committee is composed entirely of outside
directors. Reports of the Committee's actions and decisions are recommended to
the full Board. The purpose of this report is to summarize the philosophical
principles, specific program objectives and other factors considered by the
Committee in reaching its determination regarding the executive compensation of
the Chief Executive Officer and the Company's executive officers.
The Committee's goal is to ensure the establishment and administration of
executive compensation policies and practices that will enable Elder-Beerman to
attract, retain and motivate the management talent necessary to achieve the
Company's goals and objectives. The Committee's philosophy is that executive
compensation should include the following:
- A competitive mix of short-term (base salary and annual incentive bonus)
and long-term (stock options and restricted and deferred shares)
compensation that helps the Company attract and retain executive talent.
- Cash compensation that generally reflects competitive industry levels,
with annual incentive bonus opportunities that may produce total
compensation at or above competitive levels if performance against
predetermined objectives exceeds expectations.
- Opportunities for ownership of Elder-Beerman's Common Stock that align
the interests of Company executives with the long-term interests of
shareholders.
The Company's executive compensation is comprised primarily of (i)
salaries, (ii) annual cash incentive bonuses and (iii) long-term incentive
compensation in the form of stock options, deferred shares and restricted shares
granted under the Plan. Each year the Committee reviews market data and assesses
the Company's competitive position for each of these three components. To assist
in benchmarking the competitiveness of its compensation programs, the Committee
retains a third-party consultant to compile an executive compensation survey for
comparably sized retail companies. Because the Committee believes that
compensation in the retail industry is more directly tied to the size of
enterprise than the type of retail
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business, these surveys also include comparably sized retailers outside of the
department store business. Each of the components of executive compensation is
discussed below.
COMPONENTS OF COMPENSATION
Base Salary
Base salaries for Company executives were initially established in each of
the executive's employment agreements, which were approved pursuant to the Plan
of Reorganization. The Committee reviews base salaries annually and makes
adjustments on the basis of the performance of both the individual executive and
the Company, the executive's level of responsibility in the Company, the
executive's importance to the Company and the general level of executive
compensation in the retail industry. The base salaries and increases in the base
salaries of the Company's executive officers (other than the Chief Executive
Officer) are reviewed and approved by the Committee after considering
recommendations made by the Chief Executive Officer in light of the criteria
discussed above.
Annual Bonus
- General Parameters
Annual bonus awards are designed to promote the achievement of the
Company's business objectives. In setting the bonus award targets each year that
the Company must meet before it can make any bonus payments, the Committee
considers the Company's prior year's performance and objectives, as well as its
expectations for the upcoming year. Additionally, individual performance goals
that are objective and measurable are established for each participant other
than the President and Chief Executive Officer. Bonus program participants
receive no payments unless minimum thresholds of Company financial performance
or individual performance are achieved.
Bonus targets are fixed as a percentage of annual base salary based on
comparable incentives paid by other retail companies. Target bonus percentages
for the executive officers ranged from 35% to 50%. The target percentage
increases with the level of responsibility of the executive. Bonus payments may
range from 0% to 150% of the target annual bonus, with payments increasing as
performance improves.
- Deferred Shares and Restricted Shares
An executive may elect to defer up to 50% of his annual bonus in the form
of deferred shares. Deferred shares are subject to a deferral period of at least
three years, which is accelerated in the event of death, permanent disability,
termination of employment or change in control of Elder-Beerman. Holders of
deferred shares do not have voting rights for their deferred shares, but the
terms of the deferred shares may provide for dividend equivalents. The Company
matches 25% of the deferred shares in restricted shares.
Restricted shares vest in three years from the date of grant, which is
accelerated in the event of death, permanent disability or a change in control
of Elder-Beerman. Prior to vesting, restricted shares are forfeitable upon
termination of employment. The restricted shares provide for dividend
equivalents and voting rights.
The deferred shares and restricted shares are granted to executives in
accordance with the Plan.
- 2000 Bonus Objectives
Annual bonuses for 2000 were based on meeting weighted objectives for the
following measurements:
- Corporate operating profit;
- Financial goals in the applicable executive's area of responsibility; and
- Individual performance goals for the applicable executive
For 2000, the Company did not achieve the target award level established
for operating profit and therefore, the Company did not pay any amounts for this
component of bonuses. Many executives also failed to achieve any of their
respective area of responsibility or individual performance goals, which
resulted in these
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executives earning no bonus. Many executives were able to achieve some or all of
their respective area of responsibility and individual performance goals, which
resulted in these executives earning in total between approximately 5% and 74%
of each executive's respective target bonus amounts.
Long-Term Incentive Awards
- Stock Options, Deferred Shares and Restricted Shares
The Committee administers the Plan, which provides for long-term incentives
to executive officers in the form of stock options, deferred shares and
restricted shares. The awards of stock options, deferred shares and restricted
shares provide compensation to executives only if shareholder value increases.
To determine the number of stock options, deferred shares and restricted shares
awarded, the Committee reviews a survey prepared by a third-party consultant of
awards made to individuals in comparable positions at other retail companies and
the executive's past performance, as well as the number of long-term incentive
awards previously granted to the executive. The deferred shares and restricted
shares are subject to the terms and conditions described above.
Executive Plan
At the beginning of Fiscal 1999, the Committee adopted a long-term
incentive award plan (the "Executive Plan") for Mr. Mershad, its Chief Executive
Officer and Mr. Muskovich, its former President and Chief Operating Officer.
Since Mr. Muskovich is no longer with the Company, the Executive Plan now
applies only to Mr. Mershad. This Executive Plan consists of performance-based
restricted shares and premium priced stock options. This Executive Plan was
developed to achieve two key objectives:
- Create strong incentives that will drive shareholder value; and
- Create a retention mechanism for the top two officers of the Company.
To establish benchmarks for a competitive long-term incentive plan for Mr.
Mershad, the Committee engaged a third party consultant to conduct an analysis
of executive compensation at 12 peer retail companies. The Committee reviewed
the current compensation package of Mr. Mershad and evaluated the Company's
performance and future performance objectives. Bearing in mind these factors and
the two key objectives for the Executive Plan, the Committee formulated the
amounts of restricted shares and stock options to be granted under the Executive
Plan to Mr. Mershad and the earnings per share and stock price targets that must
be met for Mr. Mershad to earn his respective award. Pursuant to the terms of
the Executive Plan, any restricted shares granted to Mr. Mershad will vest at
the end of three years only if the Company meets target earnings per share
levels. The premium price stock options will vest over a period of three years
and the vesting is not contingent on performance goals.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The base salary and increases in the base salary of the Chief Executive
Officer are reviewed annually and approved by the Committee and the nonemployee
members of the Board of Directors after review of the Chief Executive Officer's
performance against predetermined performance criteria set by the nonemployee
Directors.
2000 Base Salary and Annual Bonus
Effective April 16, 2000, Mr. Mershad's annual base salary was $660,000,
which was an increase of 10% over his 1999 and 1998 base salary of $600,000. Mr.
Mershad is also eligible for an annual bonus of up to 50% of his base salary.
Mr. Mershad's bonus is determined in the same manner described above for the
executive officers. For fiscal year 2000, Mr. Mershad received no bonus because
the Company failed to meet its bonus threshold corporate operating profit.
On December 5, 2000, pursuant to the Plan, the Committee granted Mr.
Mershad options to purchase 100,000 shares of Common Stock. The exercise price
of the options is equal to the closing price of the
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Common Stock on the date of grant. The options will vest in 20,000 share
increments on each of the first through fifth anniversaries of the date of
grant.
Executive Plan
On February 25, 1999 pursuant to the Executive Plan, the Committee granted
Mr. Mershad 75,000 restricted shares and options to purchase 300,000 shares of
Common Stock. The restricted shares granted to Mr. Mershad will vest at the end
of three years only if the Company meets target earnings per share levels. The
premium price stock options will vest at the end of three years and the vesting
is not contingent on performance goals. At the date of the grant approximately
one-third of the options had an exercise price equal to the then-current stock
price. The remaining two-thirds of the options were set with exercise prices of
20% to 40% above current market price.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Under Section 162(m) of the Internal Revenue Code, the Company is precluded
from deducting compensation in excess of $1 million per year paid to each of the
Named Executive Officers. Qualified performance-based compensation is excluded
from this deduction limitation if certain requirements are met. The Plan is
designed to permit (but not require) the Committee to grant awards that will
qualify as performance-based compensation that is excluded from the limitation
in Section 162(m). The Committee believes that Section 162(m) should not cause
the Company to be denied a deduction for Fiscal 2000 compensation paid to the
Named Executive Officers. The Committee will work to structure components of its
executive compensation package to achieve maximum deductibility under Section
162(m) while at the same time considering the goals of its executive
compensation policies.
The foregoing is the report of the Compensation Committee of the Board of
Directors.
Bernard Olsoff
Charles Macaluso
Steven C. Mason
Jack A. Staph
COMPENSATION OF ELDER-BEERMAN'S DIRECTORS
Directors who are employees of Elder-Beerman do not receive any separate
fees or other remuneration for serving as a director or a member of any
Committee of the Board. For fiscal year 2000, nonemployee directors were paid an
annual retainer of $20,000 for their service on the Board of Directors.
Nonemployee directors may elect to take their annual retainer as cash or in the
form of discounted stock options. At the beginning of each fiscal year,
nonemployee directors also receive an annual grant of restricted shares with a
market value of $10,000 on the date of grant. When first joining the board, a
nonemployee director also receives an initial grant of 1,300 restricted shares
and options to purchase 7,000 shares of Common Stock. Nonemployee committee
chairpersons are paid an additional $5,000 fee for their services on their
respective committees. Nonemployee directors are also each paid a meeting fee of
$1,500 for each board meeting attended, plus $500 for each committee meeting
attended.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee was or ever has been an
officer or employee of Elder-Beerman or engaged in transactions with
Elder-Beerman (other than in his capacity as a director). None of
Elder-Beerman's executive officers serves as a director or member of the
compensation committee of another entity, one of whose executive officers serves
as a member of the Compensation Committee or a director of Elder-Beerman.
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STOCK PRICE PERFORMANCE
The following graph depicts the value of $100 invested in Elder-Beerman
stock beginning February 17, 1998, through February 3, 2001, fiscal year end.
Comparisons are made to:
1. The Standard & Poor's SmallCap 600 Index, a market-value weighted index
of 600 domestic companies with an average equity market value of
approximately $400 million.
2. A Regional Department Store Peer Group, consisting of The Bon-Ton
Stores, Inc., Goody's Family Clothing, Inc., Gottschalks Inc., and
Jacobson Stores Inc. The return for this group was calculated assuming
an equal dollar amount was invested in each retailer's stock based on
closing prices as of February 17, 1998. The peer group index is
different than the index used by the Company in Fiscal 1999. The Company
substituted Goody's Family Clothing, Inc. for Stage Stores, Inc. The
change was made because Stage Stores filed for protection under chapter
11 of the United States Bankruptcy Code and its shares are no longer
traded on NASDAQ. No other changes in the peer group index were made.
[ELDER-BEERMAN LINE GRAPH]
- ----------------------------------------------------------------------------------------------------------------------------------
Company/Index Name Feb 98 May 98 Aug 98 Oct 98 Jan 99 May 99 Jul 99 Oct 99 Jan 00 Apr 00 Jul 00
- ----------------------------------------------------------------------------------------------------------------------------------
S&P SmallCap 600
Index $100 $107 $ 93 $84 $93 $91 $97 $93 $103 $109 $106
Regional Dept Store
Peer Group Index 100 118 112 64 70 61 68 64 46 44 42
EBSC 100 165 140 71 54 51 37 41 30 28 26
- -------------------- -----------------
Company/Index Name Oct 00 Feb 01
- -------------------- -----------------
S&P SmallCap 600
Index $110 $120
Regional Dept Store
Peer Group Index 32 36
EBSC 24 18
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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 ownership of
the Company's Common Stock as of April 14, 2000 (except as otherwise noted) 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. Except as noted, all information with respect to beneficial ownership has
been furnished by each director or officer or is based on filings with the
Securities and Exchange Commission.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- ---------------- ----------------- --------
Snyder Capital Management, Inc.............................. 3,042,650(2) 26.66%
350 California Street, Suite 1460
San Francisco, CA 94104
PPM America, Inc. .......................................... 1,966,868(3) 17.23%
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
The D3 Family Fund.......................................... 900,000(4) 7.89%
19605 N.E. Eighth Street
Camas, WA 98607
Dimensional Fund Advisors Inc............................... 622,700(5) 5.46%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Mark F.C. Berner............................................ 5,366 *
Dennis S. Bookshester....................................... 27,367(6) *
Eugene I. Davis............................................. 5,366 *
Charles Macaluso............................................ 29,584(6) *
Steven C. Mason............................................. 47,506(6) *
Frederick J. Mershad........................................ 488,062(6) 4.28%
Thomas J. Noonan, Jr. ...................................... 16,575(6) *
Bernard Olsoff.............................................. 31,120(6) *
Laura H. Pomerantz.......................................... 25,155(6) *
Jack A. Staph............................................... 31,520(6) *
Charles H. Turner........................................... 10,970(6) *
James M. Zamberlan.......................................... 73,666(6) *
Scott J. Davido............................................. 34,104(6) *
Steven D. Lipton............................................ 21,957(6) *
- -------------------------------------------------------------------------------------------
All directors and executive officers as a group:............ 860,455 7.54%
- ---------------
* less than 1%
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(1) Information with respect to beneficial ownership is based on information
furnished to the Company by each shareholder included in this table.
"Beneficial ownership" is a technical term broadly defined by the Securities
and Exchange Commission to mean more than ownership in the usual sense. So,
for example, you not only "beneficially" own the Elder-Beerman Common Stock
that you hold directly, but also the Elder-Beerman Common Stock that you
indirectly (through a relationship, a position as a director or trustee, or
a contract or understanding), have (or share) the power to vote or sell or
that you have the right to acquire within 60 days.
(2) Snyder Capital Management, Inc. ("SCMI") is the general partner of Snyder
Capital Management, L.P. ("SCMLP"), a registered investment advisor. SCMI
and SCMLP reported the beneficial ownership (as of December 31, 2000) of
such shares in a Form 13f dated February 12, 2001.
(3) PPM America, Inc. ("PPM"), a registered investment advisor, reported the
beneficial ownership (as of December 31, 2000) of such shares in a Form 13f
dated February 14, 2001. All such shares are held in portfolios of PPM
America Special Investments Fund, L.P. ("SIF I") and PPM America Special
Investments CBO II, L.P. ("CBO II"). PPM serves as investment advisor to
both SIF I and CBO II. PPM, PPM America CBO II Management Company (general
partner of CBO II) and PPM American Fund Management GP, Inc. (general
partner of SIF I) disclaim beneficial ownership of all such shares.
(4) The D3 Family Fund ("D3") reported the beneficial ownership (as of August 4,
2000) of such shares in a Schedule 13D filed August 4, 2000. D3 has sole
voting and dispositive power over such shares. Such shares include shares
held by Haredale Ltd. (20,000), James Henry Hildebrandt (6,500), Toxford
Corporation (3,000) and The Nierenberg Family Trust (50,000).
(5) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, reported the beneficial ownership of such shares in a Schedule 13G
filed on February 2, 2001. All such shares are owned by investment
companies, trusts or separate accounts (the "Funds"). Dimensional is an
investment advisor or manager to all of the Funds and possesses voting
and/or investment power over the shares. Dimensional disclaims beneficial
ownership of all shares.
(6) These amounts include shares of Common Stock that the following persons had
a right to acquire within 60 days after February 3, 2001.
STOCK OPTIONS
EXERCISABLE
NAME BY APRIL 4, 2001
- ---- ----------------
Mr. Mershad................................................. 361,401
Mr. Davido.................................................. 22,600
Mr. Zamberlan............................................... 30,400
Mr. Lipton.................................................. 16,600
Mr. Bookshester............................................. 20,457
Mr. Macaluso................................................ 22,674
Mr. Mason................................................... 39,770
Mr. Noonan.................................................. 8,839
Mr. Olsoff.................................................. 23,384
Ms. Pomerantz............................................... 13,419
Mr. Staph................................................... 23,384
Mr. Turner.................................................. 3,604
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 8, 2000 the Compensation Committee recommended that the Board
approve a loan to John A. Muskovich (the Company's President and Chief Operating
Officer until June 30, 2000 and a director of the Company until September 21,
2000) for the purpose of financing the purchase of his new home in Dayton, Ohio.
Following approval by the Board of this recommendation, on February 8, 2000, the
Company made an unsecured loan to Mr. Muskovich in the amount of $230,000. The
interest on the Company's loan to Mr. Muskovich was the same rate charged to the
Company under the Company's Credit Facilities. The principal and interest were
due on the earlier of (i) three days after the closing of the purchase of Mr.
Muskovich's old residence or (ii) August 8, 2000. Mr. Muskovich repaid the loan
in full on August 18, 2000, with interest.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are included in the
consolidated financial statements, 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(a) 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)
2(b) Agreement and Plan of Merger by and Among The Elder-Beerman
Stores Corp., The Elder-Beerman Acquisition Corp. and Stone
& Thomas dated June 18, 1998 (previously filed as Exhibit
2(b) to the Company's Registration Statement on Form S-1
(File No. 333-57447) (the "Form S-1") and incorporated
herein by reference)
2(c) First Amendment to Agreement and Plan of Merger By and Among
The Elder-Beerman Stores Corp., The Elder-Beerman
Acquisition Corp. and Stone & Thomas dated July 27, 1998
(previously filed as Exhibit 2(c) to the Company's Form S-1
and incorporated herein by reference)
3(a) Amended Articles of Incorporation (previously filed as
Exhibit 3(a) to the form 10-K filed on April 30, 1998 (the
"1997 Form 10-K"), and incorporated herein by reference)
3(b) Certificate of Amendment to the Amended Articles of
Incorporation (previously filed as Exhibit 3(b) to the
Company's Form 10-Q for the quarterly period ended October
28, 2000 ("2000 3rd Quarter 10-Q") and incorporated herein
by reference)
3(c) Amended Code of Regulations (previously filed as Exhibit
3(c) to the 2000 3rd Quarter 10-Q 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 (the "Rights Agreement") (previously filed as
Exhibit 4.1 to the Company's Registration Statement on Form
8-A filed on November 17, 1998 (the "Form 8-A") and
incorporated herein by reference)
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 (previously filed as Exhibit 4(d) to the
1997 Form 10-K and incorporated herein by reference)
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 (previously filed as Exhibit 4(e) to the
1997 Form 10-K and incorporated herein by reference)
4(f) Amendment No. 1 to the Rights Agreement, dated as of
November 11, 1998 (previously filed as Exhibit 4.2 to the
Form 8-A and incorporated herein by reference)
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52
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) 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)(ii) 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)(iii) 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)(iv) 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)(v) 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)*
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53
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 (previously
filed as Exhibit 10(i) to the 1997 Form 10-K and
incorporated herein by reference)*
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
(previously filed as Exhibit 10(p) to the 1997 Form 10-K and
incorporated herein by reference)
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 (previously
filed as Exhibit 10(s) to the 1997 Form 10-K and
incorporated herein by reference)*
10(t) Amended and Restated Employment Agreement Between The
Elder-Beerman Stores Corp. and Frederick J. Mershad, dated
December 30, 1997 (previously filed as Exhibit 10(t) to the
1997 Form 10-K and incorporated herein by reference) *
10(u) Employment Agreement Between The Elder-Beerman Stores Corp.
and James M. Zamberlan, dated December 30, 1997 (previously
filed as Exhibit 10(u) to the Company's Form 10-K for the
year ended January 30, 1999 (the "1998 Form 10-K") and
incorporated herein by reference)*
10(v) Employment Agreement Between The Elder-Beerman Stores Corp.
and Scott J. Davido, dated December 30, 1997 (previously
filed as Exhibit 10(v) to the 1998 Form 10-K and
incorporated herein by reference)*
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54
10(w) Amended and Restated Employment Agreement Between The Elder-Beerman Stores Corp. and Scott J.
Davido, dated March 15, 1999 (previously filed as Exhibit 10(w) to the 1998 Form 10-K and
incorporated herein by reference)*
10(x) Employment Agreement Between The Elder-Beerman Stores Corp. and Steven D. Lipton, dated
December 30, 1997 (previously filed as Exhibit 10(x) to the 1998 Form 10-K and incorporated
herein by reference)*
10(y) Amended and Restated 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 July 27, 1998
(previously filed as Exhibit 10(b)(iv) to the Company's Form S-1 and incorporated herein by
reference)
10(z) Subsidiary Guaranty Made by Elder-Beerman West Virginia, Inc., dated July 27, 1998 (previously
filed as Exhibit 10(b)(vii) to the Company's Form S-1 and incorporated herein by reference)
10(aa) Amended and Restated Employment Agreement Between The Elder-Beerman Stores Corp. and Charles P.
Shaffer, dated August 22, 1999 (previously filed as Exhibit 10(bb) to the Company's Form 10-K
for the year ended January 29, 2000 (the "1999 Form 10-K") and incorporated herein by
reference)
10(bb) Amendment No. 1 to Series 1997-1 Supplement Among The El-Bee Receivables Corporation, The
El-Bee Chargit Corp. and Bankers Trust Company, dated November 25, 1998 (previously filed as
Exhibit 10(ee) to the 1999 Form 10-K and incorporated herein by reference)
10(cc) Amendment No. 2 to Series 1997-1 Supplement Among The El-Bee Receivables Corporation, The
El-Bee Chargit Corp. and Bankers Trust Company, dated November 24, 1999 (previously filed as
Exhibit 10(ff) to the 1999 Form 10-K and incorporated herein by reference)
10(dd) Amendment No. 1 to Certificate Purchase Agreement Among The El-Bee Receivables Corporation,
Corporate Receivables Corporation. The Liquidity Providers Named Therein, Citicorp North
America Inc. and Bankers Trust Company dated November 25, 1998 (previously filed as Exhibit
10(ii) to the 1999 Form 10-K and incorporated herein by reference)
10(ee) Subsidiary Guaranty Made by Elder-Beerman Holdings, Inc., Elder-Beerman Operations, LLC and
Elder-Beerman Indiana, L.P., dated December 30, 1999 (previously filed as Exhibit 10(jj) to the
1999 Form 10-K and incorporated herein by reference)
10(ff) Amendment No. 1 to The Elder-Beerman Master Trust Pooling and Servicing Agreement, dated as of
May 19, 2000, among The El-Bee Receivables Corporation, The El-Bee Chargit Corp. and Bankers
Trust Company (previously filed as Exhibit 10(a) to the Company's Form 10-Q for the quarterly
period ended April 29, 2000 (the "2000 1st Quarter 10-Q") and incorporated hereby by reference)
10(gg) Elder-Beerman Master Trust Series 2000-1 Supplement, dated as of May 19, 2000, among the El-Bee
Receivables Corporation, as Transferor, The El-Bee Chargit Corp., as Servicer and Bankers Trust
Company, as Trustee (previously filed as Exhibit 10(b) to the 2000 1st Quarter 10-Q and
incorporated herein by reference)
10(hh) Series 2000-1 Certificate Purchase Agreement, dated May 19, 2000, among the El-Bee Receivables
Corporation, as Seller, the Conduit Purchasers Named Therein, the Committed Purchasers Named
Therein, the Managing Agents Named Therein, Citicorp North America, Inc., as Program Agent for
the Purchasers and Bankers Trust Company, as Trustee (previously filed as Exhibit 10(c) to the
2000 1st Quarter 10-Q and incorporated herein by reference)
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55
10(ii) Intercreditor Agreement, dated May 19, 2000, among Citicorp
North America, Inc., as Program Agent, The El-Bee
Receivables Corporation, as Transferor, The El-Bee Chargit
Corp., as Originator and Servicer, The Elder-Beerman Stores
Corp., as Borrower and Originator, Bankers Trust Company, as
Trustee and Citicorp USA, Inc., as Bank Agent (previously
filed as Exhibit 10(d) to the 2000 1st Quarter 10-Q and
incorporated herein by reference)
10(jj) Amended and Restated Credit Agreement, dated as of May 19,
2000, among The Elder-Beerman Stores Corp., as Borrower and
the Lenders Party Thereto, Citibank, N.A., as Issuer and
Citicorp USA, Inc., as Agent and Swing Loan Bank (previously
filed as Exhibit 10(e) to the 2000 1st Quarter 10-Q and
incorporated herein by reference)
10(kk) Form of Amended and Restated Revolving Credit Note
(previously filed as Exhibit 10(f) to the 2000 1st Quarter
10-Q and incorporated herein by reference)
21 Subsidiaries of the Company
23 Independent Auditors' Consent
24 Powers of Attorney
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three-months ended February
3, 2001.
(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.
(d) Financial Statement Schedules
All financial statement schedules are included in the consolidated financial
statements herein.
52
56
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 26th day of
April, 2001.
THE ELDER-BEERMAN STORES CORP.
By: /s/ SCOTT J. DAVIDO
------------------------------------
Scott J. Davido
Executive Vice President, Chief
Financial Officer,
Treasurer 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 26, 2001.
SIGNATURE TITLE
--------- -----
* Chairman of the Board of Directors and Chief
- -------------------------------------------------------- Executive Officer (Principal Executive
Frederick J. Mershad Officer)
* Executive Vice President, Chief Financial
- -------------------------------------------------------- Officer, Treasurer and Secretary
Scott J. Davido (Principal Financial Officer)
* Senior Vice President, Controller (Principal
- -------------------------------------------------------- Accounting Officer)
Steven D. Lipton
* Director
- --------------------------------------------------------
Mark F.C. Berner
* Director
- --------------------------------------------------------
Dennis S. Bookshester
* Director
- --------------------------------------------------------
Eugene I. Davis
* Director
- --------------------------------------------------------
Charles Macaluso
* Director
- --------------------------------------------------------
Steven C. Mason
53
57
SIGNATURE TITLE
--------- -----
* Director
- --------------------------------------------------------
Thomas J. Noonan, Jr.
* Director
- --------------------------------------------------------
Bernard Olsoff
* Director
- --------------------------------------------------------
Laura H. Pomerantz
* Director
- --------------------------------------------------------
Jack A. Staph
* Director
- --------------------------------------------------------
Charles H. Turner
- - 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 26, 2001 By: /s/ SCOTT J. DAVIDO
------------------------------------
Scott J. Davido
Attorney-in-Fact
54
58
EXHIBIT INDEX
2(a) 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)
2(b) Agreement and Plan of Merger by and Among The Elder-Beerman
Stores Corp., The Elder-Beerman Acquisition Corp. and Stone
& Thomas dated June 18, 1998 (previously filed as Exhibit
2(b) to the Company's Registration Statement on Form S-1
(File No. 333-57447) (the "Form S-1") and incorporated
herein by reference)
2(c) First Amendment to Agreement and Plan of Merger By and Among
The Elder-Beerman Stores Corp., The Elder-Beerman
Acquisition Corp. and Stone & Thomas dated July 27, 1998
(previously filed as Exhibit 2(c) to the Company's Form S-1
and incorporated herein by reference)
3(a) Amended Articles of Incorporation (previously filed as
Exhibit 3(a) to the form 10-K filed on April 30, 1998 (the
"1997 Form 10-K"), and incorporated herein by reference)
3(b) Certificate of Amendment to the Amended Articles of
Incorporation (previously filed as Exhibit 3(b) to the
Company's Form 10-Q for the quarterly period ended October
28, 2000 ("2000 3rd Quarter 10-Q") and incorporated herein
by reference)
3(c) Amended Code of Regulations (previously filed as Exhibit
3(c) to the 2000 3rd Quarter 10-Q 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 4(b)
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 (previously filed as Exhibit 4.1 to the Company's
Registration Statement on Form 8-A filed on November 17,
1998 (the "Rights Agreement") and incorporated herein by
reference)
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 (previously filed as Exhibit 4(d) to the
1997 Form 10-K and incorporated herein by reference)
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 (previously filed as Exhibit 4(e) to the
1997 Form 10-K and incorporated herein by reference)
4(f) Amendment No. 1 to the Rights Agreement, dated as of
November 11, 1998 (previously filed as Exhibit 4.2 to the
Form 8-A and incorporated herein by reference)
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)
55
59
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) 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)(ii) 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)(iii) 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)(iv) 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)(v) 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 (previously
filed as Exhibit 10(i) to the 1997 Form 10-K and
incorporated herein by reference)*
56
60
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(i) Form of Deferred Shares Agreement (previously filed as
Exhibit 10(l) 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
(previously filed as Exhibit 10(p) to the 1997 Form 10-K and
incorporated herein by reference)
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 (previously
filed as Exhibit 10(s) to the 1997 Form 10-K and
incorporated herein by reference)*
10(t) Amended and Restated Employment Agreement Between The
Elder-Beerman Stores Corp. and Frederick J. Mershad, dated
December 30, 1997 (previously filed as Exhibit 10(t) to the
1997 Form 10-K and incorporated herein by reference)*
10(u) Employment Agreement Between The Elder-Beerman Stores Corp.
and James M. Zamberlan, dated December 30, 1997 (previously
filed as Exhibit 10(u) to the Company's Form 10-K for the
year ended January 30, 1999 (the "1998 Form 10-K") and
incorporated herein by reference)*
10(v) Employment Agreement Between The Elder-Beerman Stores Corp.
and Scott J. Davido, dated December 30, 1997 (previously
filed as Exhibit 10(v) to the 1998 Form 10-K and
incorporated herein by reference)*
10(w) Amended and Restated Employment Agreement Between The
Elder-Beerman Stores Corp. and Scott J. Davido, dated March
15, 1999 (previously filed as Exhibit 10(w) to the 1998 Form
10-K and incorporated herein by reference)*
10(x) Employment Agreement Between The Elder-Beerman Stores Corp.
and Steven D. Lipton, dated December 30, 1997 (previously
filed as Exhibit 10(x) to the 1998 Form 10-K and
incorporated herein by reference)*
10(y) Amended and Restated 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
July 27, 1998 (previously filed as exhibit 10(b)(iv) to the
Company's Form S-1 and incorporated herein by reference)
57
61
10(z) Subsidiary Guaranty Made by Elder-Beerman West Virginia, Inc., dated July 27, 1998 (previously filed
as Exhibit 10(b)(vii) to the Company's Form S-1 and incorporated herein by reference)
10(aa) Amended and Restated Employment Agreement Between The Elder-Beerman Stores Corp. and Charles P.
Shaffer, dated August 22, 1999 (previously filed as Exhibit 10(bb) to the Company's Form 10-K for
the year ended January 29, 2000 (the "1999 Form 10-K") and incorporated herein by reference)
10(bb) Amendment No. 1 to Series 1997-1 Supplement Among The El-Bee Receivables Corporation, The El-Bee
Chargit Corp. and Bankers Trust Company, dated November 25, 1998 (previously filed as Exhibit 10(ee)
to the 1999 Form 10-K and incorporated herein by reference)
10(cc) Amendment No. 2 to Series 1997-1 Supplement Among The El-Bee Receivables Corporation, The El-Bee
Chargit Corp. and Bankers Trust Company, dated November 24, 1999 (previously filed as Exhibit 10(ff)
to the 1999 Form 10-K and incorporated herein by reference)
10(dd) Amendment No. 1 to Certificate Purchase Agreement Among The El-Bee Receivables Corporation,
Corporate Receivables Corporation, The Liquidity Providers Named Therein, Citicorp North America
Inc. and Bankers Trust Company dated November 25, 1998 (previously filed as Exhibit 10(ii) to the
1999 Form 10-K and incorporated herein by reference)
10(ee) Subsidiary Guaranty Made by Elder-Beerman Holdings, Inc., Elder-Beerman Operations, LLC and
Elder-Beerman Indiana, L.P., dated December 30, 1999 (previously filed as Exhibit 10(jj) to the 1999
Form 10-K and incorporated herein by reference)
10(ff) Amendment No. 1 to The Elder-Beerman Master Trust Pooling and Servicing Agreement, dated as of May
19, 2000, among The El-Bee Receivables Corporation, The El-Bee Chargit Corp. and Bankers Trust
Company (previously filed as Exhibit 10(a) to the Company's Form 10-Q for the quarterly period ended
April 29, 2000 (the "2000 1st Quarter 10-Q") and incorporated hereby by reference)
10(gg) Elder-Beerman Master Trust Series 2000-1 Supplement, dated as of May 19, 2000, among the El-Bee
Receivables Corporation, as Transferor, The El-Bee Chargit Corp., as Servicer and Bankers Trust
Company, as Trustee (previously filed as Exhibit 10(b) to the 2000 1st Quarter 10-Q and incorporated
herein by reference)
10(hh) Series 2000-1 Certificate Purchase Agreement, dated May 19, 2000, among the El-Bee Receivables
Corporation, as Seller, the Conduit Purchasers Named Therein, the Committed Purchasers Named
Therein, the Managing Agents Named Therein, Citicorp North America, Inc., as Program Agent for the
Purchasers and Bankers Trust Company, as Trustee (previously filed as Exhibit 10(c) to the 2000 1st
Quarter 10-Q and incorporated herein by reference)
10(ii) Intercreditor Agreement, dated May 19, 2000, among Citicorp North America, Inc., as Program Agent,
The El-Bee Receivables Corporation, as Transferor, The El-Bee Chargit Corp., as Originator and
Servicer, The Elder-Beerman Stores Corp., as Borrower and Originator, Bankers Trust Company, as
Trustee and Citicorp USA, Inc., as Bank Agent (previously filed as Exhibit 10(d) to the 2000 1st
Quarter 10-Q and incorporated herein by reference)
10(jj) Amended and Restated Credit Agreement, dated as of May 19, 2000, among The Elder-Beerman Stores
Corp., as Borrower and the Lenders Party Thereto, Citibank, N.A., as Issuer and Citicorp USA, Inc.,
as Agent and Swing Loan Bank (previously filed as Exhibit 10(e) to the 2000 1st Quarter 10-Q and
incorporated herein by reference)
10(kk) Form of Amended and Restated Revolving Credit Note (previously filed as Exhibit 10(f) to the 2000
1st Quarter 10-Q and incorporated herein by reference)
21 Subsidiary of the Company
23 Independent Auditors' Consent
24 Powers of Attorney
58