Item 1 - Business
(a) General Development of Business.
The Valley Fair Corporation ("Valley Fair") was incorporated under the laws of the state of Delaware on June 13, 1955. The Valley Fair Corporation together with its subsidiary, L. F. Widmann, Inc. (collectively called the "Registrant" or the "Corporation") is engaged in the business of operating retail discount stores and variety stores.
During its fiscal year ended January 28, 1996, ("1996 fiscal year") the Corporation continued to operate two discount department stores in New Jersey. In addition, the Corporation presently operates, through its wholly owned subsidiary, L.F. Widmann, Inc., 127 retail locations, including 67 departments in stores controlled by its "Parent", Schottenstein Stores Corporation.
(b) Financial Information About Industry Segments.
The Corporation's operations consist of a single line of business.
(c) Narrative Description of Business.
The Corporation currently operates through a combination of owned and licensed departments, two "full line" discount department stores, under the name "Valley Fair", in the State of New Jersey. The stores sell soft goods such as men's and women's clothing, hard goods such as hardware, stationery and health and beauty aids, as well as grocery items in a full line supermarket situated at one of the store locations. Each store is free-standing and offers an in-depth selection of nationally advertised brand products.
Through its wholly owned subsidiary, L. F. Widmann, Inc., the Corporation currently operates 127 retail health and beauty aid variety stores, including 67 licensed departments in Value City Department Stores controlled by its parent Schottenstein Stores Corporation. The stores sell non-prescription proprietary drugs, tobacco and other sundries (including greeting cards, stationery, electronics, toys and small appliances), cosmetics and hair goods and other products.
The merchandise consists mostly of nationally advertised brand products, as well as private label merchandise.
During the last three years no single class of similar products has accounted for ten percent of the Corporation's revenues.
The Corporation does not own any patents, trademarks, licenses, franchises or concessions, other than licenses to operate departments in two stores owned by others. Those licenses are not material to the Corporation's operations.
The Corporation purchases from its suppliers on normal trade credit terms. The Corporation sells at retail for cash and accepts certain charge cards.
Because of the retail nature of the Corporation's business, the Company is not dependent upon a single customer or a few customers and no single customer accounts for 10 percent or more of the Corporation's sales. Likewise, the Corporation does not have a significant backlog of orders.
The Corporation is not materially affected by federal, state or local regulations relating to the discharge of materials into the environment or otherwise relating to the protection of the environment. During the last few fiscal years adequate heating and cooling was available at all of the Corporation's locations. The Corporation is not engaged in any manufacturing operations, so processing fuels are not required.
The Corporation's operations are not generally seasonal except for an increase in sales during the Christmas season.
The Corporation operates in geographical areas in which retail operations are highly competitive. Competition is based upon price, quality, selection and service.
The Corporation competes directly with several types of retailers, including full line department stores, discount department stores, specialty shops, discount houses, supermarkets, pharmacies, and variety stores. Many of the Corporation's direct competitors are national or regional chains and have greater financial resources than the Corporation. Due to the number and variety of competitors, the Corporation is unable to determine its competitive position.
The Corporation's discount department store operations employ approximately 250 persons, of whom approximately 150 are employed full time. Substantially all of such employees are unionized except for supervisory personnel. The Corporation considers its labor relations to be satisfactory. Widmann has approximately 440 employees of whom approximately 330 are employed full time. Except for approximately 90 warehouse personnel, Widmann's employees are not unionized. Widmann considers its labor relations to be satisfactory.
The Corporation does not have sales to customers in foreign countries.
Item 2
Item 2 - Properties
Registrant's two discount department stores are operated at free standing facilities. These units are one story buildings and information concerning each facility is summarized as follows:
APPROXIMATE LEASE LOCATION SQUARE FEET EXPIRATION -------- ----------- ----------
Chancellor Ave. 140,000 Owned Irvington, N.J.
Bergen Turnpike 135,000 February 1, 2004 Little Ferry, N.J. (With 2 Ten Year Options)
Widmann leases space at 124 locations at which it operates health and beauty aid variety stores, in similar cities and towns in central and western Pennsylvania, Ohio, New Jersey, Tennessee, Michigan, Kentucky, Indiana, Virginia, West Virginia, Maryland, Delaware, and New York. The size of the leased properties generally range from 800 to 8,000 square feet, with the average size being approximately 3,000 square feet. These leases, including renewal option periods, expire on dates ranging from April 1996 through January 31, 2025.
In 1980, Widmann purchased 5.54 acres of land in the Clinton County Industrial Park, located in McElhattan, Pennsylvania. Originally, a building containing 43,000 square feet was constructed, and subsequently it was expanded by an additional 30,000 square feet. It is currently in use as headquarters and distribution center.
In addition, L. F. Widmann, Inc. owns the following store locations:
426 Bellefonte Avenue, Lock Haven, Pa. Seventh Street and Huron Ave., Renovo, Pa. 849-851 Diamond Street, Williamsport, Pa.
Item 3
Item 3 - Legal Proceedings
The Corporation is not a party to any material litigation other than routine litigation arising in the ordinary course of business.
Item 4
Item 4 - Submission of Matters to a Vote ofSecurity Holders
None.
PART II
Item 5
Item 5 - Market for the Registrant's Common Stock and Related Security Holder Matters
The Corporation's Common Stock is traded principally in the over-the-counter market.
Effective May 7, 1984 the Board of Directors approved that the Corporation reduce the number of authorized shares of common stock from 20,000,000 to 666,666 and increase the par value per share of its common stock from $.01 per share to $.30 per share. In connection therewith, the Corporation converted each outstanding share of common stock of $.01 par value per share into one-thirtieth (1/30th) of a share of common stock of $.30 par value per share. Fractional shares were not issued. Instead the Corporation paid cash for fractional shares, based on market value of $.625 per share for the former share.
The table below represents the high and low bid price for the Corporation's Common Stock during the quarters of fiscal 1996 and 1995. These prices represent quotations between dealers in securities, and do not include commissions and do not necessarily represent actual transactions.
1996 High Bid Low Bid ---- -------- ------- First Quarter 26.00 26.00 Second Quarter 26.00 26.00 Third Quarter 26.00 26.00 Fourth Quarter 26.00 26.00
---- First Quarter 26.00 26.00 Second Quarter 26.00 26.00 Third Quarter 26.00 26.00 Fourth Quarter 26.00 26.00
No dividends were paid in the reporting period. Long term debt agreements that expire May 8, 1996, include certain restrictive covenants which, among other things, prohibit the Corporation from declaring any dividends (except stock dividends).
The number of holders of record of the Corporation's Common Stock as of January 28, 1996 was 1,164.
Item 6
Item 6 - Selected Financial Data
Item 7
Item 7 - Management's Discussion and Analysis of Financial Conditions and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
FISCAL 1996 VS. 1995
The consolidated statements of income for fiscal 1996 and 1995 are comprised of 52 week periods. Net sales decreased $2,624,000, or 3.7% to $68,035,000 in fiscal 1996. The decrease in net sales was primarily attributable to increased competition, while adverse economic uncertainties continued to affect consumer buying patterns. Competitive factors continue to affect sales growth and are being evaluated and addressed through emphasis on customer service and promotional activities. Management continues to monitor individual store locations for their contributions to the overall company profit plan (See Liquidity and Capital Resources). Tenant license revenue was approximately $59,000 (1.2%) more than the prior fiscal year.
Gross profit as a percentage of sales was 31.4% in fiscal 1996 as compared to 30.4% for fiscal 1995, resulting from an increase of promotional merchandise purchased at favorable and liquidated values and an improvement in the estimates used to allocate overhead to warehouse inventory.
Selling, general and administrative expenses decreased by 1.3% in fiscal 1996 as compared to a 4% increase in fiscal 1995. The $330,000 decrease in fiscal 1996 was primarily the result of decreased depreciation and payroll tax expense. The decrease in depreciation expense was a result of assets becoming fully depreciated. The decrease in payroll tax expense was a result of a reduction in the unemployment compensation rate. Selling, general and administrative expenses as a percentage of net sales increased 1% in fiscal 1996 compared to fiscal 1995 (i.e. 37.1% in fiscal 1996 versus 36.1% in fiscal 1995).
Interest expense in fiscal 1996 increased approximately $168,000 compared to fiscal 1995, a 20% increase. The increase in expense is attributable to an increase in the borrowings outstanding during 1996, along with higher rates during 1996.
The effective tax rate for fiscal 1996 was 98% compared to (160%) in fiscal 1995. A further analysis of these changes can be found in the notes to the consolidated financial statements.
FISCAL 1995 VS. 1994
The consolidated statements of income for fiscal 1995 and 1994 are comprised of 52 week periods. Net sales increased $782,000, or 1% to $70,659,000 in fiscal 1995. The increase in net sales was partially attributable to the addition of 1 new store. Sales of new store openings (net of closings) were approximately $326,000. Same store sales increased a modest $456,000 in fiscal 1995, as new stores opened in the prior year matured, with competition and economic uncertainties continuing to effect consumer buying patterns. The Company expects same store sales to increase modestly as the economy improves. Competitive factors continue to affect sales growth and are being evaluated and addressed through emphasis on customer service and promotional activities. Management continues to monitor individual store locations for their contributions to the overall company profit plan. Tenant license revenue was approximately $250,000 (5.4%) more than the prior fiscal year, which was the result of the expansion and addition of tenant departments.
Gross profit as a percentage of sales was 30.4% in fiscal 1995 as compared to 31.4% for fiscal 1994, resulting from a significant decrease of promotional merchandise purchased at favorable and liquidated values.
Selling, general and administrative expenses increased by 4.0% and 9.1% in fiscal 1995 and 1994, respectively. The $973,000 increase in fiscal 1995 was primarily the result of increased salaries and employee benefits. Several factors contributed to the increase in salaries and benefits including salaries associated with new store openings, additional supervisory positions as well as annual pay increases. Selling, general and administrative expenses as a percentage of net sales increased .9% in fiscal 1995 compared to fiscal 1994 (i.e. 36.1% for fiscal 1995 versus 35.2% in fiscal 1994).
Interest expense in fiscal 1995 increased approximately $135,000 compared to fiscal 1994, a 19% increase. The increase in expense is principally attributable to higher rates during 1995.
The effective tax rate for fiscal 1995 was (160%) compared to 44% in fiscal 1994. A further analysis of these changes can be found in the notes to the consolidated financial statements.
LIQUIDITY AND FINANCIAL RESOURCES
As of January 28, 1996, the Company's cash and cash equivalent balance was $3,609,000. The Company's principal sources of liquidity are cash available from operations and available borrowings from bank agreements. During 1995, the Company entered into a revolving credit agreement with a new bank. Working capital amounted to $14,710,000 at January 28, 1996 compared to $14,845,000 at January 29, 1995, a decrease of $135,000. The current ratio at January 28, 1996 and January 29, 1995 was 2 to 1.
In March 1996, the Company decided to close 16 of its unprofitable L.F. Widmann, Inc. stores. As a result of these closings, the Company anticipates a $835,000 charge to operations in the first quarter of fiscal 1997. Approximately 76% of the charges represents the expected loss on the liquidation of the inventories at these locations.
The Company believes that its fiscal 1996 working capital needs, capital expenditures and debt repayments can be funded from operations and available credit lines.
NEW ACCOUNTING STANDARDS
The Company adopted a new accounting standard for disclosures about fair value of financial instruments (FAS 107) in fiscal 1996. This new standard did not affect the financial position of the Company.
As discussed more fully in Note 1 to the consolidated financial statements, the Company adopted a new accounting standard for income taxes (SFAS 109) in the first quarter of fiscal 1994. This new standard did not significantly impact the financial statements of the Company.
The Financial Accounting Standards Board (FASB) has established a new accounting standard relating to the accounting for the impairment of long-lived assets (FAS 121). FAS 121 is effective for fiscal years beginning after December 15, 1995. It is anticipated that this new standard will not affect the financial position of the Company.
INFLATION
Although not significant, inflation continues to cause increases in product and occupancy costs. The effects of these cost increases are minimized by increased selling prices and operating efficiencies.
Item 8
Item 8 - Financial Statements
Consolidated financial statements
Independent Auditors' Reports Alpern, Rosenthal & Company KPMG Peat Marwick LLP
Consolidated Balance Sheets - January 28, 1996 and January 29, 1995
Consolidated Statements of Income for the Years Ended January 28, 1996, January 29, 1995 and January 30, 1994
Consolidated Statements of Stockholders' Equity for the Years Ended January 28, 1996, January 29, 1995 and January 30, 1994
Consolidated Statements of Cash Flows for the Years Ended January 28, 1996, January 29, 1995 and January 30, 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report
Board of Directors and Stockholders The Valley Fair Corporation Little Ferry, New Jersey
We have audited the accompanying consolidated balance sheets of The Valley Fair Corporation (a subsidiary of Schottenstein Stores Corporation) and subsidiary as of January 28, 1996 and January 29, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1996 and 1995 financial statements referred to above present fairly, in all material respects, the financial position of The Valley Fair Corporation and subsidiary as of January 28, 1996 and January 29, 1995, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ Alpern, Rosenthal & Company Pittsburgh, Pennsylvania
March 22, 1996
[GRAPHIC -- COMPANY LOGO] KPMG Peat Marwick LLP
225 Market Street Suite 300 P.O. Box 1190 Harrisburg, PA 17108-1190
Independent Auditor's Report
Board of Directors and Shareholders The Valley Fair Corporation:
We have audited the accompanying consolidated statements of income, stockholders' equity, and cash flows for the year ended January 30, 1994 of The Valley Fair Corporation (a subsidiary of Schottenstein Stores Corporation) and subsidiary. In connection with our audit of the consolidated financial statement, we have also audited the financial statement schedule listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of their operations and their cash flows for the year ended January 30, 1994 of The Valley Fair Corporation and subsidiary in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/KPMG Peat Marwick LLP
April 8, 1994
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
- -------------------------------------------------------------------------------- For the Years Ended January 28, 1996, January 29, 1995, and January 30, 1994 - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
- -------------------------------------------------------------------------------- For the Years Ended January 28, 1996, January 29, 1995, and January 30, 1994 - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------- For the Years Ended January 28, 1996, January 29, 1995, and January 30, 1994 - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
- -------------------------------------------------------------------------------- For the Years Ended January 28, 1996, January 29, 1995, and January 30, 1994 - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
A. Reporting Entity and Nature of Business
The consolidated financial statements include the accounts of The Valley Fair Corporation (Valley Fair) and its wholly-owned subsidiary, L.F. Widmann, Inc. (Widmann), collectively referred to as "The Company". All material intercompany transactions have been eliminated in consolidation. The majority of the Company's stock (93%) is controlled by Schottenstein Stores Corporation and affiliated companies (the Parent).
Valley Fair currently operates, through a combination of owned and licensed departments, two discount stores in the state of New Jersey. The stores sell apparel, shoes, hard goods, e.g., hardware, stationery, health and beauty aids, as well as food items in a full-line supermarket at one location.
Widmann currently operates and licenses 127 retail health and beauty aid stores primarily in Pennsylvania and also in 11 other Mid-Atlantic and Mid-Western States. The stores sell non-prescription proprietary drugs, tobacco, greeting cards, stationery, electronics, toys, small appliances, cosmetics, hair care products and other household items.
The Company, excluding licensed departments, is in one segment of business - retail sales to the general public.
The Company's fiscal year ends on the Sunday closest to January 31. The fiscal years ended January 28, 1996, January 29, 1995 and January 30, 1994 contained 52 weeks.
B. Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
C. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Approximately 49% and 37% of cash and cash equivalents as of January 28, 1996 and January 29, 1995, respectively, were held in bankers acceptances. Substantially all of the remaining cash and cash equivalents were maintained in accounts with two banks.
Note 1 - Summary of Significant Accounting Policies (Continued)
D. Merchandise Inventories
Merchandise inventories are valued at the lower of cost (first-in, first-out basis) or market determined by the retail inventory method for store inventories and an average cost method for the warehouse inventory.
During 1996, the Company improved the estimates used to allocate overhead to warehouse inventory. As a result of this change, overhead cost allocated to inventory was approximately $340,000 greater than if the old estimates had been used.
E. Property and Equipment
Depreciation is provided by the straight-line method over the estimated useful lives of assets.
Maintenance and repairs which are not considered to extend the useful lives of assets are charged to operations as incurred. Additions and improvements are capitalized. Upon sale or retirement, the cost of assets and related allowances are removed from the accounts and any resulting gains or losses are included in other income (expense).
F. Store Opening and Closing Costs
Expenditures of a non-capital nature incurred prior to the opening of a new store are charged to operations as incurred. Costs of closing a store are expensed in the year in which the store is closed.
G. Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes relating to temporary differences. The primary differences are in the basis of property and equipment and deferred compensation between financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses and tax credits that are available to offset future Federal and state taxable income. (See also Note 8.)
H. Reclassifications
Certain reclassifications have been made to the 1995 and 1994 financial statements in order to conform to 1996 presentations.
Note 1 - Summary of Significant Accounting Policies (Continued)
I. Net Income Per Common Share
Net income per common share has been computed based on the weighted average number of shares of common stock outstanding during the periods.
Note 2 - Transactions with Affiliates
Valley Fair has entered into license agreements for tenant departments with an affiliated company of its Parent. The consolidated statements of income include rental income earned from these licenses with affiliated companies of approximately $2,347,000 in 1996, $2,312,000 in 1995 and $2,243,000 in 1994.
Widmann's has entered into agreements to lease tenant retail space from an affiliated company of Schottenstein Stores Corporation. Rents are based on a percentage of sales. The related rental expense (Note 7) incurred was approximately $2,195,000 in 1996, $2,329,000 in 1995, and $2,498,000 in 1994. In addition, Widmann is charged approximately 2.9% of sales in those stores as reimbursement for certain store operating expenses.
The accounts receivable and payable - affiliate are a result of the above transactions.
The Company was charged $125,000 per year in 1996, 1995, and 1994 by the Parent for certain administrative services provided.
Note 3 - Property and Equipment
Property and equipment consisted of the following:
Note 4 - Accrued Liabilities
Accrued liabilities consist of:
Note 5 - Note Payable - Bank
During 1996, the Company entered into a $14,000,000 unsecured revolving credit agreement with a new bank. Borrowings under this arrangement bear interest at either a Euro-rate or prime at the Company's option. Substantially all the line was subject to a Euro-rate, which was 7.31% at January 28, 1996. The weighted average interest rate at January 28, 1996 and January 29, 1995 was 7.43% and 8.38%, respectively.
The agreement also contains several financial covenants including minimum net worth, minimum working capital, and minimum pre-tax interest coverage.
Note 6 - Long-term Debt
Long-term debt consists of the following:
Note 6 - Long-term Debt (Continued)
Approximate maturities of debt are as follows:
1997 $ 65,000 1998 41,000 1999 33,000 2000 33,000 2001 34,000 Thereafter 93,000 ----------- $ 299,000 ===========
Note 7 - Leases
The Company leases retail store locations and delivery vehicles under operating leases. Store leases provide for base rentals and the payment of additional rentals based on sales levels, at certain locations (see also Note 2). In addition, the Company is typically responsible under its leases for real estate taxes, insurance, maintenance and advertising.
Rent expense charged to operations under these types of arrangements were as follows:
Note 7 - Leases (Continued)
Valley Fair also leases certain retail facilities to various tenants under operating and sublet lease arrangements. The amounts received under tenant sub-lease agreements, included below, were approximately $1,861,000 in 1996, $2,133,000 in 1995 and $1,982,000 in 1994. The rental income under tenant lease and sub-lease arrangements, included in tenant revenue, were as follows:
At January 28, 1996, the approximate minimum rental commitments and tenant income from sub-lease agreements and other operating leases is as follows:
Note 8 - Income Taxes
In 1994, the Company adopted the provisions of FASB 109, Accounting for Income Taxes, effective February 1, 1993. The cumulative effect of the change in accounting principle had no significant effect on the 1994 financial statements.
Note 8 - Income Taxes (Continued)
The provision for (recovery of) income taxes for the years ended January 28, 1996, January 29, 1995 and January 30, 1994 consisted of the following:
The Company has net operating losses totalling approximately $453,000 available to offset future state taxes. These losses expire in various years, depending on state tax laws.
The reconciliation of income tax expense (benefit) at the statutory Federal rate to the reported income tax expense is as follows:
Note 8 - Income Taxes (Continued)
The significant components of deferred income tax expense (benefit) for the years ended January 28, 1996 and January 29, 1995 and January 30, 1994 are as follows:
The deferred income tax liabilities (assets) were as follows at January 28, 1996 and January 29, 1995:
Note 9 - Retirement and Savings Plan
The Company has a defined contribution retirement plan which covers substantially all of its employees. The Plan is a cash deferred arrangement described in Internal Revenue Code Section 401(k). The Company's contribution to the Plan was $100,000 each in 1996, 1995, and 1994.
The Plan provides that employees of the Company may elect to defer a certain portion of their compensation and contribute to the Plan. The Corporation makes discretionary contributions as prescribed by the Plan.
Note 10 - Contingencies
The Company is a defendant in various legal actions and claims arising in the ordinary course of business. After taking into consideration legal counsel's evaluation of such actions, management is of the opinion that such litigation and claims will be resolved without material effect on the Company's financial condition or will be covered by the Company's liability insurance.
Note 11 - Financial Instruments
The Company has several financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at December 31, 1995, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The fair value amounts have been estimated by the Company using available market information and appropriate valuation methodologies. Considerable judgement is required in interpreting market data to develop the estimates of fair value and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
Note 12 - Subsequent Event
In March 1996, the Company decided to close 16 unprofitable Widmann stores. As a result of these closings, the Company expects to have a charge to operations of approximately $835,000 in the first quarter of fiscal 1997. This charge includes approximately $635,000 of anticipated writedowns in inventories to liquidation value.
Item 9
Item 9 - Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
In December 1994, the Corporation terminated KPMG Peat Marwick LLP as independent auditors for the Corporation for the fiscal year ended January 29, 1995 and engaged Alpern, Rosenthal & Company.
The independent auditor's report on the financial statements of the Corporation for fiscal 1994 did not contain an adverse opinion or disclaimer as to uncertainty, audit scope or accounting principles. The decision to change accountants was approved by the Board of Directors.
In connection with the fiscal year ended January 30, 1994 and the subsequent interim period through December 15, 1994, there was no disagreement with KPMG Peat Marwick LLP on any matter of accounting principles or practices, financial statement disclosure, or audit scope or procedures which, if not resolved to the satisfaction of KPMG Peat Marwick LLP, would have caused KPMG Peat Marwick LLP to make reference to the subject matter of the disagreement in its report.
PART III
Item 10
Item 10 - Directors and Executive Officers of the Registrant
The information required by this Item relating to directors and nominees for election as directors at the Company's Annual Meeting of Shareholders to be held on June 19, 1996 is incorporated herein by reference to the information under the caption "Election of Directors" on pages 2 and 3 of the Corporation's definitive Proxy Statement (the 1996 Proxy Statement) filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934. The information required by this Item relating to executive officers is incorporated herein by reference to the 1996 Proxy Statement on page 2 and page 3.
Item 11
Item 11 - Executive Compensation
The information required by this Item is incorporated herein by reference to the information under the caption "Management Compensation" on page 4 of the 1996 Proxy Statement.
Item 12
Item 12 - Security Ownership of Certain Beneficial Financial Owners and Management
The information required by this Item is incorporated herein by reference to the information under the caption "Voting Securities and Principal Holders Thereof" on pages 1, 2 and 3 of the 1996 Proxy Statement.
Item 13
Item 13 - Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the information under the caption "Transactions with Management" on page 4 of the 1996 Proxy Statement.
Part IV
Item 14
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(A) (1) The following financial statements are included in Part II, Item 8:
Reports of Independent Certified Public Accountants
Consolidated Financial Statements:
Consolidated Balance Sheets - January 28, 1996 and January 29, 1995
Consolidated Statements of Income for Years Ended January 28, 1996, January 29, 1995 and January 30, 1994
Consolidated Statements of Stockholders' Equity for Years Ended January 28, 1996, January 29, 1995 and January 30, 1994
Consolidated Statements of Cash Flows for Years Ended January 28, 1996, January 29, 1995 and January 30, 1994
Notes to Consolidated Financial Statements
(2) The following financial schedule for the periods 1996, 1995 and 1994 is submitted herewith:
Schedule II - Valuation and Qualifying Accounts IV-2
All other schedules are omitted because they are not required, inapplicable, or the information is otherwise shown in the financial statements or notes thereto.
(B) Reports on Form 8-K (No Reports filed)
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(1) Uncollectible accounts written off, net of recoveries.
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the under-signed, thereunto duly authorized.
By: /S/ ROSS N. ALFIERI -------------------------- Ross N. Alfieri Treasurer and Assistant Secretary
DATE: April 24, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/S/ JAY L. SCHOTTENSTEIN - -------------------------------------------- April 24, 1996 Jay L. Schottenstein, Chairman of the Board
/S/ ERWIN LEHR - -------------------------------------------- April 24, 1996 Erwin Lehr, President and Director
/S/ THOMAS R. KETTELER - -------------------------------------------- April 24, 1996 Thomas R. Ketteler, Secretary and Director
/S/ ROSS N. ALFIERI - -------------------------------------------- April 24, 1996 Ross N. Alfieri, Treasurer and Director