Restructuring Initiatives Beginning to Have Positive Impact
on Store Performance
ST. LOUIS, Missouri -- Sept. 16, 1996 -- href="chap11.edison.html">Edison Brothers Stores
Inc. (NYSE: EBS) today reported a net loss of $5.8 million, or 26
cents per share, before special charges, for the second quarter of
l996, ended Aug. 3. This represents a $6.5 million or 53 percent
improvement over last year, when the retailer reported a 1995 second
quarter net loss of $12.3 million, or 56 cents per share, before
special after-tax charges of $13.4 million.
For the second quarter of l996, Edison experienced special
charges of $7.0 million relating to the company's current
restructuring and Chapter 11 reorganization, as well as charges of
$6.1 million for a special markdown accrual to substantially reduce
inventory in the clothing category (suits, sportcoats and related
items) at Repp Ltd Big & Tall menswear stores and $6.3 million for
inventory liquidation at the Zeidler & Zeidler menswear chain.
Including these charges, the net loss for the second quarter was
$25.2 million, or $1.14 per share.
As previously reported, same-store sales for the second quarter
of l996 declined 2.9 percent to $257.7 million from $265.5 million
the previous year. Total second quarter sales declined 19.7 percent
to $268.8 million from $334.7 million in l995.
Excluding special charges, the company's net loss for the first
half of l996 was $11.9 million, or 54 cents per share, compared with
a net loss of $18.7 million, or 85 cents per share, in the first
half of l995. Special charges brought the l996 first half net loss
to $42.9 million, or $1.93 per share. Sales for the period were
$526.9 million, a decrease of 19.3 percent.
Commenting on the second quarter, Alan Miller, Edison president
and chief executive officer, said the company's performance is "on
plan" in terms of the retailer's strategy for emerging from Chapter
"We are encouraged by the initial results of the company-wide
initiatives, which are beginning to have a positive impact in
several chains," Miller said. "However, we're still in the middle of
our restructuring phase, and the full impact of these initiatives
will take time to be felt."
Miller said Edison's restructuring involves three phases. The
first, following last November's bankruptcy filing, involved the
closing of unprofitable stores coupled with other expense
reductions. Phase two, restructuring, is currently under way and
includes better targeting of customers, upgraded and refocused
merchandise assortments, and adoption of "best practices" throughout
the company. The third and final phase, anticipated to occur in
spring l997, will be to emerge from Chapter 11.
Current company-wide initiatives are designed to simplify and
streamline every facet of operations in order to improve efficiency,
reduce expenses, enhance customer service and re-energize Edison's
business. Specific changes have included new operating standards
for every store, which reduce the amount of time store employees
spend in the backroom working on inventory so they can devote more
time to customers; better leveraging of corporate resources, such as
collective purchasing and information sharing among chains; improved
training and more store-level input in decision-making. Strong, new
management teams also have been put in place in several chains.
Other turnaround initiatives include:
Edison Brothers Stores Inc. operates JW/Jeans West, Coda,
Oaktree, J. Riggings and Repp Ltd Big & Tall menswear stores and
Phoenix mens big and tall catalog; 5-7-9 Shops junior apparel
stores; and Bakers, Leeds, Precis and Wild Pair footwear stores.
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements Of Income
13 Weeks Ended 26 Weeks Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
(In millions except per share data)
Net Sales $268.8 $334.7 $526.9 $652.8
Cost of goods sold, occupancy,
and buying expenses 207.3 244.2 391.0 463.1
Store operating and
administrative expenses 69.1 86.3 138.4 173.5
Depreciation and amortization 10.1 16.7 20.5 33.7
Interest expense, net .5 6.3 .9 11.8
reorganization expenses 7.0 20.9 18.6 20.9
Total Costs and Expenses 294.0 374.4 569.4 703.0
Loss before Income Taxes (25.2) (39.7) (42.5) (50.2)
Income tax provision (benefit) (14.0) .4 (18.1)
Net Loss $(25.2) $(25.7) $(42.9) $(32.1)
Per Common Share:
Net Loss $(1.14) $(1.17) $(1.93) $(1.46)
Cash dividends declared -- $ .11 -- $ .42
Weighted average common shares
outstanding (in thousands) 22,202 22,074 22,168 22,051
BOSTON, Mass. -- Sept. 16, 1996 -- United States
Attorney Donald K.
Stern announced that attorney JEROME ROSEN, 77, of 36 Bullard Road,
Weston, Massachusetts, was found guilty late Friday by a federal
jury of having engaged in four counts of a mail fraud scheme to
defraud a bankruptcy trustee of $500,000.
ROSEN previously had a law office at 60 State Street in Boston.
Judge Keeton scheduled sentencing for December 4, 1996.
The evidence presented during the three day trial before United
States District Judge Robert J. Keeton showed that ROSEN engaged in
a scheme to defraud the bankruptcy trustee of bankruptcy debtor N.E.
Tri-State Development Corp., a company which ROSEN represented.
ROSEN negotiated the sale of N.E. Tri-State's land in Maine for
$500,000 to be paid to the bankruptcy trustee, but with an
undisclosed side agreement involving the payment of $25,000 to
ROSEN, and payments over several years totalling nearly $500,000 to
the company's former owners, who were ROSEN's clients.
The evidence showed that ROSEN made material misrepresentations
to the bankruptcy trustee and failed to disclose the side agreement.
When the trustee later learned about the side agreement from another
source, he had the sale cancelled and re-negotiated the price with
the buyer, ultimately receiving an additional $230,000.
ROSEN faces five years in prison, a $250,000 fine, a $100
special assessment and three years of supervised release on each
This case is the last of four bankruptcy fraud related cases
charged in Massachusetts in February as part of a national
Bankruptcy Fraud Initiative, known as Operation Full Disclosure.
The defendants in the other cases pled guilty.
The case was investigated by the Federal Bureau of
Investigation, referred by the U.S. Trustee's Office in Boston, and
is being prosecuted by Assistant U.S. Attorney Mark J. Balthazard of
Stern's Economic Crimes Unit.
/CONTACT: Joy Fallon or Amy Rindskopf of U.S. Attorney's Office,
SHERMAN OAKS, Calif. -- Sept. 16, 1996 -- href="chap11.hf.html">House of Fabrics,
Inc. (Nasdaq: HFAB), which recently emerged from Chapter 11,
reported a sharp reduction in net loss for the second fiscal quarter
and six months ended July 31, 1996.
For the three-month period, which was the last quarter of
Chapter 11 prior to emergence, the company reported a net loss of
$5.0 million, equal to $.37 per share, compared with a net loss of
$11.0 million, or $.81 per share, for the second quarter last year.
Sales amounted to $54.8 million, compared with $71.9 million a year
ago, reflecting 86 fewer stores in operation.
The net loss for the first half of the current fiscal year was
reduced to $11.0 million, equal to $.80 per share, from a net loss
of $19.0 million, or $1.39 per share, a year ago. Also reflecting
the closure of 86 stores, sales totaled $111.4 million versus $145.7
Gary L. Larkins, president and chief executive officer, said the
improved performance reflected the closure of unprofitable and under
performing stores, along with cost savings that were effected during
the company's reorganization period. He said same-store sales were
essentially flat as compared with the prior year. Larkins noted
that results for the second quarter still included reorganization
costs and non-cash lease cancellation charges which will be
eliminated going forward, along with higher interest expenses than
will be incurred in future periods. The quarter also included a
$3.4 million gain from the sale of the company's office building.
"We are pleased with the progress that has been made getting
House of Fabrics back on track and look forward to a much brighter
future," said Larkins. "Management will now be able to concentrate
its full energies on operations and meeting our ultimate objective
of enhancing shareholder value.
"In connection with the emergence from Chapter 11, the company
has secured a new $65 million credit facility with the CIT Group,
which allowed us to reduce our bank debt to $47.3 million from $126
million at the time of the filing," Larkins added. "Moreover, we
are receiving excellent cooperation from our vendors, and I am happy
to report that goods have arrived for our critical Fall season."
House of Fabrics currently operates 269 company-owned House of
Fabrics, Sofro Fabrics, Fabricland and Fabric King retail fabric and
craft stores in 34 states and employs approximately 7,000 people.
HOUSE OF FABRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
July 31, July 31, July 31, July 31,
1996 1995 1996 1995
Sales $54,840,000 $71,909,000 $111,355,000
Income Taxes (5,001,000) (10,989,000) (10,948,000)
Income Taxes 24,000 50,000 48,000
Net Loss $(5,025,000) $(11,039,000) $(10,996,000)
Loss Per Share $(0.37) $(0.81) $(0.80)
Number of Shares
Outstanding.. 13,697,107 13,697,107 13,697,107
.. Reflects the weighted average number of shares outstanding
prior to emergence from Chapter 11. Subsequent to emergence, the
number of shares outstanding will be reduced to approximately
SELECTED BALANCE SHEET DATA....
July 31, 1996 January 31, 1996
Inventories $94,853,000 $107,140,000
Accounts Payable $12,370,000 $9,754,000
Bank Debt $47,300,000 $102,823,000
.... Pro Forma equity at August 1, 1996, after settlement of
claims and application of fresh start accounting amounted to
DALLAS, Texas -- Sept. 16, 1996 -- href="chap11.neostar.html">NeoStar Retail Group,
Inc. (NASDAQ: NEOS), parent company of Babbage's and Software
announced today that it has filed a voluntary petition to reorganize
under Chapter 11 of the U.S. Bankruptcy Code in Federal Bankruptcy
Court in Dallas. The company said that it, along with its
subsidiaries, elected to seek court protection in order to
strengthen vendor confidence to ensure adequate inventory for the
upcoming holiday selling season.
The company said that it will continue to operate in the normal
course of business during the proceeding and that it has received a
commitment for $70 million in debtor-in-possession ("DIP") financing
from Foothill Capital Corporation and a group of lenders.
NeoStar also announced that outside director Thomas G. Plaskett
has been named chairman of the board of the company and will lead
its efforts to develop and implement a plan of reorganization.
James B. McCurry will continue as NeoStar's president and chief
Plaskett said that the board of directors, with the assistance
of its financial advisors, had reviewed available strategic options
and had determined that a restructuring of the company in the
context of a Chapter 11 reorganization afforded the company the best
opportunity to return it to profitability and provide maximum value
for NeoStar's stockholders and creditors.
"Our near-term plans are to do everything possible to ensure
that our stores receive the necessary shipments of new inventory to
fully stock our stores in advance of the holiday selling season,"
McCurry said. "Reorganizing under Chapter 11 allows NeoStar to
build upon its dominant position in the market for leading-edge
video game products just as that market is about to take off on a
new cycle of rapid growth."
In connection with the filing, the company expects to establish
a valuation allowance pursuant to SFAS No. 109 against all of the
deferred income taxes carried as an asset on the company's balance
Plaskett is an executive with 25 years of general management and
senior policy level experience in both service and manufacturing
businesses. Since 1991, Plaskett has served as managing director of
Fox Run Capital Associates, a private financial consulting concern.
Previously, he held the position of chairman, president and chief
executive officer of Pan Am Corporation from 1988 to 1991; and as
president and chief executive officer of Continental Airlines from
1986 to 1987.
He also served as senior vice president of marketing and senior
vice president of finance at American Airlines, Inc. Plaskett was
elected to the board of directors of Greyhound Lines, Inc., and
served as interim president and chief executive officer of the
company during the later part of 1994. He was elected chairman of
the board of Greyhound in February 1995. Plaskett is also a member
of the board of directors of Tandy Corporation, Fort Worth, Texas,
and Smart & Final, Inc., Los Angeles, Calif., and is a trustee of
the GMI Engineering and Management Institute in Flint, Mich.
NeoStar Retail Group is the nation's leading chain of consumer
software specialty stores. The company employs over 5,000 people
and operates 707 stores in 49 states, the District of Columbia,
Puerto Rico, and Canada primarily under the names of Software Etc.
and Babbage's. Virtually all of the company's stores are located in
major regional shopping malls.
"THE SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION ACT OF 1995. This press release contains forward-looking
statements that involve risks and uncertainties, including but not
limited to, projections of future operating results, the financial
condition of the company, bankruptcy court approval of those actions
requiring such approval, and other risks detailed from time to time
in the company's Securities and Exchange Commission filings.
CONTACT: NeoStar Retail Group, Inc.,
Paul Streiber, 817/424-2186