ITEM 1. BUSINESS
INTRODUCTION
The Caldor Corporation (the "Registrant"), a Delaware corporation, and its subsidiaries (collectively, the "Company") operate a leading upscale discount retail chain offering a diverse line of branded and private-label merchandise, including hardline products such as housewares, electronics, furniture and toys and softline products such as apparel, shoes, jewelry, cosmetics and domestics. As of April 15, 1998, the Company operated 145 stores in nine East Coast and Mid-Atlantic states, including the key markets of Connecticut, New York City, Long Island, Westchester County, the Hudson River Valley of New York State, northern New Jersey and the greater Boston, Philadelphia and Baltimore areas. The Company's stores are located primarily in urban/suburban areas with high population densities. For further information, see "Item 2.
ITEM 2. PROPERTIES
As of April 15, 1998, the Company and its subsidiaries operated 145 stores in a corridor comprised of nine East Coast and Mid-Atlantic states. The Company's stores are located in well-established, high-traffic retail corridors, strip shopping centers and enclosed shopping malls, or operate as free-standing units, primarily in or near densely populated urban and suburban locations. The Company's stores average approximately 100,400 square feet. Approximately 75% of the square footage is used as selling space and the remainder is used for merchandise processing, temporary storage and store administration.
As of April 15, 1998, the Company operated stores in the following states: Connecticut (30), Delaware (3), Maryland (8), Massachusetts (22), New Hampshire (1), New Jersey (26), New York (43), Pennsylvania (10), and Rhode Island (2).
The Company owns nine stores (five of which include land and building, and four, the building only) and its MIS facility in Trumbull, Connecticut and has construction loans on two store locations (including the owned Silver Spring, Maryland store to be closed in 1998), with the remainder of its facilities operated under predominantly long-term leases. The typical store lease has an initial term of 20 years, with renewal options between 10 and 30 years, exercisable at the Company's option. The Company leases a 649,521 square foot distribution center in Westfield, Massachusetts with an option to add up to 350,500 square feet to the facility. The Company leases a 616,000 square foot distribution center and a 235,000 square foot warehouse located in North Bergen, New Jersey. For further information, see "Item 1. Business--Purchasing, Distribution and Inventory Management." The Company also leases its corporate headquarters located in Norwalk, Connecticut and an administrative facility located in North Ridgeville, Ohio. All of these facilities have leases with terms subject to renewal by the Company. The Company sublets its excess land parcels and retail space to generate additional revenue. All of the properties and assets of the Company currently are subject to security interests and liens under the Company's various credit facilities. In addition, one of the Company's store locations is subject to a mortgage and another store location is subject to an industrial revenue bond. For further information, see "Item 1. Business--Reorganization Case."
On March 25, 1998, the Company obtained Bankruptcy Court approval to close the twelve Under-Performing Stores, consisting of all of the Company's seven stores in the Washington, D.C. market, two stores in the Baltimore market, two stores in the Albany, New York market and one store in the Long Island, New York market. One of the Under-Performing Stores has been closed and store closing sales are being conducted currently at the other Under-Performing Stores by a liquidator retained by the Company. The four 1997 Closed Stores consisted of two stores in the New York City market; one store in Massachusetts; and one store in Rhode Island. In 1996, the Company closed the twelve 1996 Closed Stores. The Company did not open any stores in 1997. In 1996, the Company opened seven new stores.
As of April 15, 1998, the Debtors had rejected leases for 32 locations, assumed 17 real estate leases (two of which were for warehouses and the balance were for stores) and reached agreements with landlords to terminate an additional seven leases without liability. Subsequent to assuming these leases, the Company announced its plans to close the Under-Performing Stores, including three Previously Assumed Stores. The claims of the landlords of the Previously Assumed Stores are treated as administrative expenses under Chapter 11 subject to both the landlords' obligation to mitigate damages and limitations on damages agreed upon by the Company and each landlord. For further information regarding "assumption" and "rejection," see "Item 3.
ITEM 3. LEGAL PROCEEDINGS - --------------------------
COMMENCEMENT OF CHAPTER 11 CASE
While the following discussion provides general background information regarding the Debtors' Chapter 11 case, it is not intended to be an exhaustive summary.
General. On September 18, 1995, the Debtors filed petitions for relief under Chapter 11 of the Bankruptcy Code. The individual Chapter 11 cases were consolidated for procedural purposes only and are being jointly administered by the Bankruptcy Court. See "Item 1. Business -- Reorganization Case".
Chapter 11 Reorganization Under the Bankruptcy Code. Pursuant to Section 362 of the Bankruptcy Code, during a Chapter 11 case, creditors and other parties in interest may not, without Bankruptcy Court approval: (i) commence or continue judicial, administrative or other proceedings against the Debtors which were or could have been commenced prior to commencement of the Chapter 11 case, or recover a claim that arose prior to commencement of the case; (ii) enforce any pre-petition judgments against the Debtors; (iii) take any action to obtain possession of or exercise control over property of the Debtors or their estates; (iv) create, perfect or enforce any lien against the property of the Debtors; (v) collect, assess or recover claims against the Debtors that arose before the commencement of the case; or (vi) set off any debt owing to the Debtors that arose prior to the commencement of the case against a claim of such creditor or party in interest against the Debtors that arose before the commencement of the case.
Although the Debtors are authorized to operate their businesses and manage their properties as debtors-in-possession, they may not engage in transactions outside of the ordinary course of business without complying with the notice and hearing provisions of the Bankruptcy Code and obtaining Bankruptcy Court approval.
An Official Unsecured Creditors' Committee and an Official Committee of Equity Security Holders have been appointed by the United States Trustee and are acting in the Chapter 11 case of the Debtors. The Debtors are required to pay certain expenses of these committees and those of the Steering Committee of the banks participating in the Extended DIP Facility, including counsel, accountants' and financial advisors' fees to the extent allowed by the Bankruptcy Court.
As debtors-in-possession, the Debtors have the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject executory, pre-petition contracts and unexpired leases. In this context, "assumption" requires the Debtors to perform their obligations and cure all existing defaults under the assumed contract or lease and "rejection" means that the Debtors are relieved from their obligations to perform further under the rejected contract or lease, but are subject to a claim for damages for the breach thereof subject to certain limitations contained in the Bankruptcy Code. Any damages resulting from rejection are treated as general unsecured claims in the reorganization.
Under the Bankruptcy Code, a creditor's claim is treated as secured only to the extent of the value of such creditor's collateral, and the balance of such creditor's claim is treated as unsecured. Generally, unsecured and undersecured debt does not accrue interest after the Filing.
Pre-petition claims which were contingent or unliquidated at the commencement of the Chapter 11 cases are generally allowable against the Debtors in amounts to be fixed by the Bankruptcy Court or otherwise agreed upon. These claims, including, without limitation, those which arise in connection with the rejection of executory contracts, including leases, are expected to be substantial. The Company has established a reserve approximating what the Company believes will be its liability under these claims. The Bankruptcy Court fixed August 12, 1996 as the last date by which creditors of the Debtors could file proofs of claim for claims that arose prior to the Filing.
Plan of Reorganization - Procedures. For 120 days after the date of the filing of a voluntary Chapter 11 petition, a debtor has the exclusive right to propose and file a plan of reorganization with the Bankruptcy Court and an additional 60 days within which to solicit acceptances to any plan so filed (the "Exclusive Period"). The Bankruptcy Court may increase or decrease the Exclusive Period for cause shown, and as long as the Exclusive Period continues, no other party may file a plan of reorganization.
Given the magnitude of the Debtors' operations and the number of interested parties asserting claims that must be resolved in the Chapter 11 case, the plan formulation process is complex. The Debtors currently retain the exclusive right to propose and solicit acceptances of a plan or plans of reorganization until September 1, 1998 and October 30, 1998, respectively.
If a Chapter 11 debtor fails to file its plan during the Exclusive Period or after such plan has been filed fails to obtain acceptance of such plan from impaired classes of creditors and equity security holders during the exclusive solicitation period, any party in interest, including a creditor, an equity security holder or a committee of creditors or equity security holders, may file a plan of reorganization for such Chapter 11 debtor.
Inherent in a successful plan of reorganization is a capital structure which permits the Company to generate sufficient cash flow after reorganization to meet its restructured obligations and fund the current obligations of the Company. Under the Bankruptcy Code, the rights and treatment of pre-petition creditors and stockholders may be substantially altered. At this time it is not possible to predict the outcome of the Chapter 11 case, in general, or the effects of the Chapter 11 case on the business of the Company or on the interests of creditors. At this time, it is not expected that such a plan would provide for recovery by equity security holders.
Generally, after a plan has been filed with the Bankruptcy Court, it will be sent, with a disclosure statement approved by the Bankruptcy Court following a hearing, to members of all classes of impaired creditors and equity security holders for acceptance or rejection. Following acceptance or rejection of any such plan by impaired classes of creditors and equity security holders, the Bankruptcy Court, after notice and a hearing, would consider whether to confirm the plan. Among other things, to confirm a plan the Bankruptcy Court is required to find that (i) each impaired class of creditors and equity security holders will, pursuant to the plan, receive at least as much as the class would have received in a liquidation of the debtor and (ii) confirmation of the plan is not likely to be followed by the liquidation or need for further financial reorganization of the debtor or any successor to the debtor, unless the plan proposes such liquidation or reorganization.
To confirm a plan, the Bankruptcy Court generally is also required to find that each impaired class of creditors and equity security holders has accepted the plan by the requisite vote. If any impaired class of creditors or equity security holders does not accept a plan but all of the other requirements of the Bankruptcy Code are met, the proponent of the plan may invoke the so-called "cram down" provisions of the Bankruptcy Code. Under these provisions, the Bankruptcy Court may confirm a plan notwithstanding the non-acceptance of the plan by an impaired class of creditors or equity security holders if certain requirements of the Bankruptcy Code are met, including that (i) at least one impaired class of claims has accepted the plan, (ii) the plan "does not discriminate unfairly" and (iii) the plan "is fair and equitable with respect to each class of claims or interests that is impaired under, and has not accepted, the plan." As used by the Bankruptcy Code, the phrases "discriminate unfairly" and "fair and equitable" have narrow and specific meanings unique to bankruptcy law.
OTHER PENDING LEGAL PROCEEDINGS: CLASS ACTIONS
On or about September 13, 1995, a class action complaint was filed in the United States District Court for the District of Connecticut (the "Connecticut District Court") by Joel A. Gerber (the "Gerber Action") against the Company and certain of its former officers and directors alleging violations of the provisions of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). A second class action complaint was filed on or about September 21, 1995 in the Connecticut District Court against certain of the Company's former officers and directors (but not the Company) by Lawrence Cowit and others (the "Cowit Action"). A third class action complaint was filed by Dominic Pignetti (the "Pignetti Action") on or about October 27, 1995 in the Connecticut District Court against certain of the Company's former officers and directors (but not the Company). A fourth class action complaint was filed on or about November 30, 1995 in the Connecticut District Court by Ann V. Nelms and others (the "Nelms Action") against certain of the Company's former officers and directors (but not the Company).
A consolidated amended complaint was served in the Gerber, Cowit and Nelms Actions on December 18, 1995 (the "Consolidated Action"). On the same date, a separate amended complaint was served in the Pignetti Action, which was not consolidated. The amended complaints in both actions assert claims only against certain of the Company's former officers and directors.
The Consolidated Action seeks to recover damages on behalf of all persons who purchased the Company's common stock between February 6, 1995 and September 15, 1995. The amended complaint in the Consolidated Action alleges that the defendants made false statements in the Company's annual report and in the press regarding the Company's continued growth, alleged problems in its relationships with its factors and lenders, and the sufficiency of available financing to fund normal business operations and the Company's expansion plan, all in violation of the provisions of the Exchange Act.
The Pignetti Action seeks to recover damages on behalf of all persons who purchased the Company's common stock between January 5, 1995 and September 15, 1995. The amended complaint in the Pignetti Action alleges that the defendants disseminated false and misleading information by misrepresenting the Company's financial condition and performance and its ability to finance its normal business operations and expansion plans, all in violation of the provisions of the Exchange Act. The amended complaint in the Pignetti Action also asserts claims for negligent misrepresentation and common law fraud, based upon the same allegations.
Although the Company is not a named defendant in either the Consolidated Action or the Pignetti Action, a proof of claim was filed in the Chapter 11 case by the plaintiffs in the Consolidated Action. The amount of liability, if any, related to these actions is not presently determinable.
On December 18, 1995, the Company commenced an adversary proceeding in the Bankruptcy Court and brought on, by order to show cause, a motion for a preliminary injunction to stay proceedings in the Consolidated Action and the Pignetti Action. The Bankruptcy Court entered an order, dated February 7, 1997, granting the Company's motion for a preliminary injunction enjoining prosecution of the class actions until further order of the Bankruptcy Court. On or about February 24, 1998, the plaintiffs in the Consolidated Action filed a motion with the Bankruptcy Court seeking to vacate or modify the order granting the preliminary injunction. A hearing on the motion is presently scheduled to be held on May 12, 1998.
Although the Company is required to indemnify the defendants to the extent provided by Delaware law, the Company has directors and officers liability coverage. As a result of the preliminary injunction, none of the former officers or directors named as a defendant in any of the actions has been required to answer any of the foregoing complaints, which actions are believed by the Company to be without merit and will be vigorously defended.
OTHER ACTIONS
The Company and certain of its subsidiaries are defendants in various other actions commenced by vendors, customers, former employees and others that are incidental to the normal course of its business. Similarly situated persons have asserted claims against the Company but have not made those claims the subject of litigation. However, cases that relate to a claim that arose before the Filing generally were stayed pursuant to Section 362 of the Bankruptcy Code and are to be dealt with as part of the claims resolution process.
The Company believes that the ultimate outcome of the foregoing actions and claims pending will not have a material adverse effect on its consolidated financial position, results of operations or liquidity.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER - ------------------------------------------------------------------------- MATTERS -------
The Company's Common Stock was listed on the New York Stock Exchange ("NYSE") under the symbol "CLD" until September 18, 1997, at which time it was suspended. On November 25, 1997, the SEC delisted the Company's Common Stock. Subsequent to September 18, 1997, the Company's stock has been traded on the "OTC Bulletin Board" under the symbol "CLDRQ." The high and low sales prices for the Company's Common Stock on the NYSE (until September 18, 1997) and the high and low bid prices on the OTC Bulletin Board thereafter for each of the quarters during 1997 and 1996 were as follows:
COMMON STOCK PRICE
As of April 15, 1998, the closing bid price on the OTC Bulletin Board was 5/8 and the approximate number of holders of the Company's Common Stock was 16,500. The Company has not paid, and has no current plans to pay in the foreseeable future, dividends on its Common Stock. As detailed in "Item 3. Legal Proceedings," the Debtors have filed for protection under Chapter 11 of the Bankruptcy Code and the Company is precluded from paying dividends until such cases have been concluded. The Extended DIP Facility and the New Facilities prohibit the declaration of cash dividends on the Company's Common Stock.
The Debtors have distributed a term sheet and drafts of its proposed plan of reorganization and disclosure statement to the professionals representing the Debtors' Creditor, Bank and Equity Committees. The Debtors are negotiating the terms and timing of its emergence from Chapter 11 with these Committees. At this time it is not expected that such a plan would provide for recovery by equity security holders.
ITEM 6.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA - ---------------------------------------------
THE CALDOR CORPORATION AND SUBSIDIARIES (in thousands, except per share data)
(1) In 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share" and all prior year per share information has been restated.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS -------------
OVERVIEW
The notes to consolidated financial statements are an integral part of Management's Discussion and Analysis of Financial Condition and Results of Operations and should be read in conjunction herewith.
On September 18, 1995, the Debtors filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code and are presently operating their business as debtors-in-possession subject to the jurisdiction of the United States Bankruptcy Court for the Southern District of New York. For further discussion of Chapter 11 proceedings, see "Item 1. Business--Reorganization Case" and note 1 to consolidated financial statements.
The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities and commitments in the normal course of business. The Filing, related circumstances and the losses from operations, raise substantial doubt about the Company's ability to continue as a going concern. The appropriateness of using the going concern basis is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations, and the ability to generate sufficient cash from operations and financing sources to meet obligations. As a result of the Filing and related circumstances, however, such realization of assets and liquidation of liabilities is subject to significant uncertainty. While under the protection of Chapter 11, the Debtors may sell or otherwise dispose of assets, and liquidate or settle liabilities, for amounts other than those reflected in the accompanying consolidated financial statements. Further, a plan of reorganization could materially change the amounts reported in the accompanying consolidated financial statements. The consolidated financial statements do not include any adjustments relating to a recoverability of the value of recorded asset amounts or the amounts and classification of liabilities that might be necessary as a consequence of a plan of reorganization.
RESULTS OF OPERATIONS
The Company's fiscal year ends on the Saturday closest to January 31. References to 1997, 1996, and 1995 relate to the fiscal years ended January 31, 1998, February 1, 1997 and February 3, 1996, respectively. Each of these fiscal years included 52 weeks except for 1995 which included 53 weeks. References to years relate to fiscal years rather than calendar years. The following table summarizes the Company's operating results for the years 1997, 1996 and 1995:
1997 VS. 1996
Net sales during 1997 decreased by 4.1% from 1996 due to the closing of 16 stores since the first quarter of 1996 (a $102.8 million reduction in sales) and a 2.1% decrease in comparable store sales, partly offset by sales from the opening of 7 new stores since mid-April 1996 (incremental sales of $48 million in 1997). The decrease in comparable store sales was primarily attributable to the intensely competitive retail environment, unseasonable weather in the Northeast that negatively impacted the Company's sales of seasonal merchandise and changes in the Company's marketing strategy including the discontinuance of one-day sales events, mid-week circulars in May 1996, and coupon sales. The Company made the determination that the discontinued marketing programs were neither profitable nor compatible with its long-term marketing strategy. Hardline sales, exclusive of the stores closed in 1997 and 1996, increased in 1997 primarily due to increased sales of consumables, electronics, housewares and toys. Sales of these items at regular prices have increased as a result of the Price Cut Program. Softline sales, exclusive of the stores closed in 1997 and 1996, decreased in 1997 mainly as a result of decreased sales of men's and boy's, children's and ready-to-wear merchandise.
Gross margin as a percentage of sales increased to 26.8% for 1997 compared to 25.5% in 1996. The increase was primarily due to reduced markdowns, partially offset by lower overall initial markups as compared to 1996 due to the change in the Company's marketing strategy and the Price Cut Program. In the third quarter of 1996, to better balance its promotional and regular-priced business and to provide fair prices everyday, the Company introduced the Price Cut Program which lowered everyday prices on selected items in electronics, health and beauty aids, diapers, household chemicals, furniture, hardware and housewares. In the second quarter of 1997, the Company extended the Price Cut Program to certain other product categories such as basic apparel commodities, paper products, film and cosmetics. The Company plans to extend the Price Cut Program to other product categories.
Selling, general and administrative expenses ("SG&A") as a percentage of sales decreased to 26.9% in 1997 from 27.7% in 1996, primarily attributable to store closings and initiatives to control and reduce SG&A. These initiatives, adopted by the Company in the second quarter of 1996, include changes in marketing strategy, which have reduced advertising expenses, and a reduction of corporate overhead. The Company continues to evaluate its operating
procedures and is pursuing additional reductions in SG&A through increased operating efficiencies at both the corporate and store level.
Interest expense, net, increased in 1997 primarily due to an increase in average revolving credit borrowings and an increase in the related weighted average interest rates as compared to 1996. Average revolving credit borrowings were $210.5 million at a weighted average interest rate of 7.1% in 1997 compared to $151.8 million at 6.6% in 1996. The weighted average interest rate on the Term Loan was 6.5% in 1997 compared to 6.3% in 1996.
The Company recorded reorganization charges of $84.9 million and $87.5 million in 1997 and 1996, respectively. The costs primarily include provisions of $70.5 million and $51.6 million in 1997 and 1996, respectively, related to the lease rejections and closings of locations, as well as the reduction to net realizable value of fixed assets in the closed stores. For further information, see "Item 2. Properties" and note 8 to consolidated financial statements.
On March 25, 1998, the Company obtained Bankruptcy Court approval to close the Under-Performing Stores. The net proceeds of these liquidation sales will be placed in a segregated interest-bearing account with Chase, in its capacity as agent under the DIP Facility, pending agreement between the Company and the bank group concerning distribution of the proceeds. The Company closed four stores in 1997. The lease obligations and related reserves for closings include rejected real property leases and amounts for other executory contracts that have been identified for rejection pursuant to Bankruptcy Code and are reflected at estimated settlement amounts. The costs relating to these facilities closings are based on management's best estimates, however actual costs could differ from those presently recorded in the consolidated financial statements. Also included in reorganization costs are $1.7 million and $15.0 million related to employee retention plans and $5.3 million and $13.7 million in professional fees for 1997 and 1996, respectively. For further information, see note 8 to consolidated financial statements.
The Company's effective income tax rate was 0.6% and 0.3% in 1997 and 1996, respectively. A provision of $0.8 million and $0.5 million for certain state franchise and capital taxes was recorded in 1997 and 1996, respectively. The Company did not record a tax benefit in 1997 or 1996 since the utilization of the Company's loss carryforwards is dependent upon sufficient future taxable income and the Company has established a full valuation allowance against these carryforward benefits.
1996 VS. 1995
Net sales during 1996 decreased by 5.9% from 1995 due to the closing of 12 stores in 1996 (a $115.5 million reduction in sales), a decrease in same store sales and one less week of sales, partly offset by sales from the opening of 10 new stores since July 1995 (incremental sales of $116.9 million in 1996). For 1996, same store sales decreased 5.3% on a comparable 52 week basis from 1995. The decrease in same store sales was primarily attributable to changes in the Company's marketing strategy, including the discontinuance of one-day sale events, mid-week circulars in May 1996 and coupon sales, as well as the intensely competitive retail environment. In addition, same store sales for the fiscal month of December were lower primarily due to five fewer Christmas shopping days and unseasonably warm weather in the Northeast. Hardline sales, exclusive of the 12 stores closed in 1996, decreased in 1996 primarily due to decreased sales of electronics, cameras, housewares and small electrical appliances. Softline sales, exclusive of the 12 stores closed in 1996, increased in 1996 mainly as a result of increased sales of ready-to-wear merchandise. Additionally, the Price Cut Program lowered everyday prices in the third and fourth quarters of 1996 on items in electronics, health and beauty aids, diapers, household chemicals, furniture, hardware and housewares.
Gross margin as a percentage of sales increased to 25.5% for 1996 compared to 22.9% in 1995. The increase was mainly attributable to reduced promotional markdowns due to the change in the Company's marketing strategy, partly offset by an increase in the reserve for shrinkage. In addition, gross margin in 1995 included a provision for vendor claims estimated to result upon reconciliation of differences between pre-petition liabilities shown by the
Company and claims filed by creditors in connection with the Filing, and provision to cover anticipated losses on the liquidation of inventory. For further information, see note 7 to consolidated financial statements.
Selling, general and administrative expenses ("SG&A") as a percentage of sales decreased to 27.7% in 1996 from 28.0% in 1995, primarily attributable to store closings and initiatives to control and reduce SG&A adopted by the Company in the second quarter of 1996, including changes in marketing strategy, which have reduced advertising expenses, a reduction of corporate overhead and the discontinuance of additional accruals related to the pension plan.
Interest expense, net, decreased in 1996 primarily due to a decrease in average revolving credit borrowings as well as a decrease in the related weighted average interest rates as compared to 1995. Average revolving credit borrowings were $151.8 million at a weighted average interest rate of 6.6% in 1996 compared to $160.0 million at 7.2% in 1995. The weighted average interest rate on the Term Loan was 6.3% in 1996 compared to 6.7% in 1995.
The Company recorded reorganization charges of $87.5 million and $170.7 million in 1996 and 1995, respectively. The costs primarily include provisions of $51.6 million and $143.7 million in 1996 and 1995, respectively, related to the lease rejections and closings of locations, as well as the reduction to net realizable value of fixed assets in the closed stores. For further information, see "Item 2. Properties" and note 8 to consolidated financial statements.
The Company closed four stores in 1997 and 12 stores in 1996. The lease obligations and related reserves for closings include numerous real property leases rejected and amounts for other executory contracts that have been identified for rejection pursuant to the Bankruptcy Code and are reflected at estimated settlement amounts. The costs relating to these facilities closings are based on management's best estimates, however actual costs could differ from those presently recorded in the consolidated financial statements. Also included in reorganization costs are $15.0 million and $12.5 million related to employee retention plans and $13.7 million and $8.8 million in professional fees for 1996 and 1995, respectively. For further information, see note 8 to consolidated financial statements.
The Company's effective income tax rate in 1996 was 0.3% primarily due to the non-recognition by the Company of deferred tax assets related to net operating loss carryforwards, other credit carryforwards and certain deductible temporary differences. A provision of $0.5 million for certain state franchise and capital taxes was recorded in 1996. The Company realized an income tax benefit of $59.8 million in 1995 as a result of the net losses incurred and the recognition by the Company of the reduction of previously recorded deferred income tax liabilities as well as the receipt by the Company of refunds of previously paid income taxes. The effective income tax rate in 1995 was (17.0)% primarily due to the non-recognition of operating loss carryforwards in 1995.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company's working capital as of January 31, 1998 decreased by $57.1 million from February 1, 1997. This decrease was primarily due to increased borrowings under the Extended DIP Facility of $35.7 million, which resulted from a net loss of $132.6 million in 1997, capital expenditures of $29.5 million and reorganization item payments of $16.9 million. In addition, inventories decreased by $30.8 million, partly related to the Company's program to reduce inventories and due to the closure of certain stores. Refundable income taxes decreased by $13 million due to receipt of federal income tax refunds in 1997 and current maturities of long-term debt increased by $9.4 million due to the reclassification of the long-term portion of a construction loan related to the Silver Spring, Maryland store to be closed in 1998. These decreases were partially offset by a net increase in assets held for disposal of $21.9 million relating to assets of the Under-Performing Stores partly offset by liquidation sales of the assets of 1997 Closed Stores.
The Company's working capital as of February 1, 1997 decreased by $169.2 million from February 3, 1996. This decrease was primarily due to increased borrowings under the DIP Facility of $112.0 million, which resulted from a net loss of $185.3 million in 1996, capital expenditures of $36.6 million, and reorganization item payments of $29.9 million. In addition, inventories decreased by $49.4 million, partly related to the Company's program to reduce inventories and due to the closure of certain stores. Assets held for disposal at year-end 1995 were liquidated through 1996 Closing Sales and the proceeds were applied to the Term Loan, contributing to a decrease in working capital. Refundable income taxes and deferred income taxes decreased by $9.0 million primarily due to the receipt of federal income tax refunds in 1996.
Net cash used in operating activities for 1997 was $15.8 million. This use of cash for operating activities was primarily due to the Company's net loss of $132.6, a reduction in liabilities subject to compromise of $29 million and reorganization item payments of $16.9 million. The reduction in liabilities subject to compromise included application of the 1996 Closing Sales proceeds to the Term Loan, reclamation payments made to vendors, a reduction in the liability for vendor claims, payments for rent, real estate taxes and common area maintenance charges relating to assumed leases and normal amortization of capital lease obligations.
Net cash used in operating activities for 1996 was $73.0 million as compared to net cash provided by operating activities of $93.2 million in 1995. This use of cash for operating activities in 1996 was primarily due to the Company's net loss of $185.3 million, a reduction in liabilities subject to compromise of $78.2 million and reorganization items of $29.9 million. The reduction of liabilities subject to compromise included application of the 1996 Closing Sales proceeds to the Term Loan, reclamation payments made to vendors, a reduction in the liability for vendor claims, payments for sales and use tax, the refinancing of the loan related to the Silver Spring, Maryland store, and normal amortization of capital lease obligations.
Capital expenditures of $29.5 million in 1997 were primarily for management information systems (mostly related to the implementation of warehouse management systems at the distribution centers and for merchandising systems) and store remodels. Capital expenditures of $36.6 million in 1996 were primarily for conversion to a regionalized distribution network (which included opening a new facility in Westfield, Massachusetts and updating the facility in North Bergen, New Jersey to accommodate regionalization) and for costs associated with opening new stores. Capital expenditures of $81.1 million in 1995 primarily represented costs associated with opening new stores. The Company opened three new stores in 1995 and seven new stores in 1996. The decrease in capital expenditures in 1996 as compared to 1995 was due to a substantial portion of the expenditures related to the stores that opened in 1996 being incurred in 1995. In 1995, the Company utilized construction loans to build two of its new store locations. The Company's capital expenditures for 1998 are projected to be approximately $34 million to be used primarily for
management information systems (approximately $15.0 million), store remodeling (approximately $10.0 million) and distribution center and store upgrades and improvements (approximately $9.0 million).
The Company and its key vendors utilize software and related technologies that will be affected by the ability of these technologies to distinguish and properly process date-sensitive information when the year changes to 2000. Many existing applications, as was common in the market place, were designed to only accommodate a two-digit date position which represents the year. The Company's program to address the Year 2000 issue (the "Year 2000 Program") is currently underway and the Company has identified significant systems requiring modification or replacement to ensure Year 2000 compliance. In addition, the Company is initiating communication with its key external suppliers of goods and services in order to assess their assurance efforts and the Company's exposure to them.
The Company currently estimates expenditures for the Year 2000 Program to be approximately $7 million for modification and remediation of existing software, being expensed as incurred. The costs of the Year 2000 Program are based on management's current best estimates, including the continued availability of resources and third party modification plans. However, there can be no assurance that the Company's systems or the systems of other companies on which the Company's operations rely will be timely converted and that the lack of such timely conversion would not have an adverse effect on the Company's operations.
On October 17, 1995, the Bankruptcy Court entered a final order approving the DIP Facility as provided under the Amended and Restated Revolving Credit and Guaranty Agreement dated as of October 17, 1995, among the Registrant, as the borrower thereunder, the subsidiaries of the Registrant named therein, as the guarantors thereunder, and a bank group led by Chase. The DIP Facility amended and restated, in its entirety, the Registrant's Debtor-In-Possession Revolving Credit and Guaranty Agreement dated as of September 18, 1995 with Chase as agent. On June 4, 1997, the Bankruptcy Court entered a final order approving the Fourth Amendment which extended the DIP Facility to June 15, 1998. Pursuant to the terms of the Extended DIP Facility, the bank group has made available to the Registrant an aggregate principal amount of up to $450 million consisting of (i) up to $250 million under the Tranche A Facility and (ii) $200 million under the Tranche B Facility which principal amount may be borrowed, paid and reborrowed. The Company's maximum borrowing under the Tranche A Facility, up to $250 million, may not exceed the lesser of 60% of Eligible Cost Value of Inventory or 50% of Eligible Retail Value of Inventory (the "Borrowing Base"). At January 31, 1998, the Borrowing Base was $217.4 million. The Extended DIP Facility has a sublimit of $175 million for the issuance of letters of credit. The Tranche B Facility must be fully utilized before the Company can borrow under the Tranche A Facility. Borrowings under the Extended DIP Facility may be used to fund working capital and inventory purchases and for other general corporate purposes. The Extended DIP Facility provides for, among other things, capital expenditures not to exceed $16 million from January 31, 1998 through the maturity date and revised EBITDAR thresholds for the fiscal quarter ending May 2, 1998. The Extended DIP Facility also contains restrictive covenants, including, among other things, limitations on the creation of additional liens and indebtedness, capital leases and annual rents, the sale of assets, and the maintenance of minimum earnings before interest, taxes, depreciation, amortization and reorganization items, the maintenance of inventory levels, and a prohibition on the payment of dividends. The Company was in compliance with the financial covenants contained in the Extended DIP Facility at January 31, 1998.
The Extended DIP Facility provides that advances made (i) under the Tranche A Facility will bear interest at a rate of 0.75% per annum in excess of Chase's Alternative Base Rate ("ABR"), or, at the Registrant's option, a rate of 1.75% per annum in excess of LIBOR for the interest periods of one, three or six months or (ii) under the Tranche B Facility will bear interest at 0.25% per annum in excess of ABR, or, at the Registrant's option, at a rate of 1.0% per
annum in excess of LIBOR. The Registrant incurred approximately $3 million in bank fees associated with the extension of the DIP Facility, which were paid in 1997.
Under the Tranche A Facility, the Company pays a commitment fee of 0.5% per annum on the unused portion thereof, a letter of credit fee equal to 1.5% per annum of average outstanding letters of credit and certain other fees. Under the Tranche B Facility, the Company pays a commitment fee of 0.3125% per annum on the unused portion thereof, a letter of credit fee equal to 0.75% per annum of average outstanding letters of credit and certain other fees. Commitment fees were approximately $0.9 million and $1.2 million in 1997 and 1996, respectively. Letter of credit fees were approximately $0.7 million, $0.5 million and $0.4 million in 1997, 1996 and 1995, respectively. The Tranche B Facility must be fully utilized before the Company can borrow under the Tranche A Facility.
The Tranche A Banks and the Tranche B Banks were granted a lien on all of the assets of the Debtors and a superpriority claim over all obligations of the Debtors arising under the Tranche A Facility and the Tranche B Facility, respectively. However, the claim of the Tranche B Banks is subordinate in priority to the claim of the Tranche A Banks. In addition, Chase, as agent, was granted a security interest in all of the shares of capital stock now or hereafter issued to the Registrant by certain of its subsidiaries. The pre-petition banks have been granted a security interest in all assets of the Debtors, subordinate to the security interests and liens thereon granted to the Tranche A Banks and the Tranche B Banks, subject to the conditions of the financing order of the Bankruptcy Court, dated October 17, 1995.
As of January 31, 1998, the outstanding borrowings under the Extended DIP Facility were $187.7 million and open letters of credit were $61.8 million. In addition, the Company had outstanding borrowings of $187.5 million and $191.1 million on its Term Loan as of January 31, 1998 and February 1, 1997, respectively. The Term Loan was reduced by application of the net proceeds of the Closing Sales of $2.2 million and $22.5 million in 1997 and 1996, respectively. The Term Loan was also reduced by $1.4 million per year in payments related to the reclamation program in 1997 and 1996. The borrowings outstanding under the Term Loan have been classified as liabilities subject to compromise in the consolidated balance sheets (see note 6 to consolidated financial statements).
In February 1995, the Company increased the Term Loan borrowings by $50 million to $215 million. Using the additional $50 million in Term Loan borrowings and $16 million in revolving credit borrowings, the Company executed an in-substance defeasance of the outstanding 15% Senior Subordinated Notes (the "Notes") by depositing $66 million of U.S. Government Securities into an irrevocable trust to cover the redemption value (including principal, call premium and interest) of the Notes on June 1, 1995, at which time the Notes were called.
The Company borrowed $10.9 million in 1996 under a construction loan relating to the Silver Spring, Maryland store. The proceeds of this loan were used to refinance an existing construction loan and for capital expenditures for such store. As of January 31, 1998, the outstanding borrowings under this loan were $9.9 million and bore interest at a rate of 1.75% per annum in excess of LIBOR. On March 25, 1998, the Company obtained Bankruptcy Court approval to close this store.
The Registrant has received the Commitment from BBNA to provide the Company with the separate fully underwritten and committed senior secured $450 million New Facilities. The New DIP Facility will be used for the working capital and general business needs of the Company as well as to repay in full the Company's Extended DIP Facility. The Exit Facility will be used to provide for the working capital and general business needs of the reorganized Company beyond the effective date of a plan of reorganization (the "Effective Date") as well as to repay in full the New DIP Facility. BBNA intends, with the Company's consent, to syndicate part of the New Facilities to other Lenders.
BBNA's commitment to provide the New DIP Facility is subject to certain conditions precedent including approval by the Bankruptcy Court of the New DIP Facility. The New DIP Facility will be replaced by the Exit Facility on the Effective Date provided that the plan is not inconsistent with certain terms of the Commitment and is otherwise reasonably satisfactory to BBNA and that all conditions precedent to confirmation of the plan have been met. Among other things, the plan must provide for repayment in full of the New DIP Facility, the Company must have had a 12-month rolling EBITDAR on the closing date of the Exit Facility no less than $60 million (EBITDAR for the 1997 fiscal year was $53.7 million), and the Company's borrowing availability under the Exit Facility on the closing date thereof must exceed certain specified minimum levels.
The New DIP Facility will terminate on the earlier of (i) the Effective Date or (ii) 18 months after the closing date for the New DIP Facility. The Exit Facility will terminate four years after the closing date of the New DIP Facility.
The Company's maximum borrowing under the New DIP Facility may not exceed the lesser of (a) the sum of (i) 72% (77% for the fiscal months of March through December of each year (the "Overadvance Rate") provided that the Overadvance Rate shall not increase the borrowing base by more than $30 million) of the cost value of the Company's Eligible Inventory and, without duplication, Eligible Letter of Credit Inventory, Eligible In Transit Inventory and Eligible FOB Inventory minus applicable Reserves, (ii) 80% of the Company's Eligible Accounts Receivable minus applicable Reserves (as such terms are defined in the New DIP Facility) and (iii) the lesser of (A) $45 million and (B) under certain circumstances, 70% of the agreed upon value of the Company's leasehold interests in real estate and (b) $450 million (the "New DIP Facility Borrowing Base"). The Company's maximum borrowing under the Exit Facility may not exceed the lesser of (a) the sum of (i) 75% (73% for the fiscal months of January and February of each year) of the cost value of the Company's Eligible Inventory and, without duplication, Eligible Letter of Credit Inventory, Eligible In Transit Inventory and Eligible FOB Inventory minus applicable Reserves, (ii) 80% of the Company's Eligible Accounts Receivable minus applicable Reserves (as such terms are defined in the New DIP Facility) and (iii) the lesser of (A) $40 million and (B) under certain circumstances, 60% of the agreed upon value of the Company's leasehold interests in real estate and (b) $450 million (the "Exit Facility Borrowing Base").
The New Facilities have a sublimit of $150 million for the issuance of letters of credit. The New Facilities also contain restrictive covenants, including, among other things, limitations on the creation of additional liens and indebtedness, capital leases and annual rents, the sale of assets, and the maintenance of minimum earnings before interest, taxes, depreciation, amortization and reorganization items, the maintenance of ratio of accounts payable to inventory levels, and a prohibition on the payment of dividends.
Advances under the New Facilities will bear interest, at the Company's option, at BBNA's Alternate Base Rate per annum or the Eurodollar Applicable Margin (i.e., the fully reserved adjusted Eurodollar Rate plus 2.25% or 2.75% during any period that the Company is utilizing the Overadvance Rate) for periods of one, two and three months. The Eurodollar Applicable Margin is subject to reduction by up to 0.50% if the Company achieves certain specified EBITDAR levels.
Under the New Facilities, the Company will pay an unused line fee of 0.25% per annum on the unused portion thereof, a letter of credit fee equal to 1.625% per annum of average outstanding letters of credit and certain other fees. In connection with the receipt of the Commitment and the closing of the New DIP Facility, the Company will pay fees to BBNA of approximately $5.6 million. The Company will also pay BBNA an annual agency fee of $150,000.
Obligations of the Company under the New DIP Facility will be granted (i) superpriority administrative claim status pursuant to section 364 (c) (1) of the Bankruptcy Code, subject only to an exclusion for certain administrative and professional fees and (ii) secured perfected first priority security interests in and liens upon all assets of the Company. Obligations of the Company under the Exit Facility will be granted secured perfected first priority security interests in and liens upon all assets of the Company.
The Company believes that cash on hand, amounts available under the New DIP Facility and funds from operations will enable the Company to meet its current liquidity and capital expenditure requirements through emergence from Chapter 11. Until a plan of reorganization is approved, the Company's long-term liquidity and the adequacy of its capital resources cannot be determined.
In August 1995, the Company entered into the Real Estate Loan with Chase consisting of a $37.1 million non-amortizing term loan. The borrowing is secured by mortgages on certain real estate. The outstanding borrowings of $37.1 million for 1997, 1996 and 1995 have been classified as liabilities subject to compromise in the consolidated balance sheets (see note 6 to consolidated financial statements).
Inherent in a successful plan of reorganization is a capital structure which permits the Company to generate sufficient cash flow after reorganization to meet its restructured obligations and fund the current obligations of the
Company. Under the Bankruptcy Code, the rights and treatment of pre-petition creditors and stockholders may be substantially altered. At this time it is not possible to predict the outcome of the Chapter 11 case, in general, or the effects of such case on the business of the Company or on the interests of creditors and stockholders. The Debtors have distributed a term sheet and drafts of its proposed plan of reorganization and disclosure statement to the Debtors' Creditor, Bank and Equity Committees. The Debtors are negotiating the terms and timing of its emergence from Chapter 11 with these Committees. While no plan of reorganization has been proposed, it is not expected that such a plan would provide for recovery by equity security holders.
As a result of the Filing, the prosecution of litigation against the Debtors involving matters arising prior to the Filing for bankruptcy generally was stayed. Such stay may be modified by the Bankruptcy Court for cause shown in appropriate circumstances.
Certain former officers and directors of the Company are defendants in class actions brought on behalf of all persons who purchased the Company's stock during specified periods of time. These actions are discussed in "Item 3. Legal Proceedings." Although the Company is not a named defendant in these actions, a proof of claim was filed in the Chapter 11 case by the plaintiffs in the Consolidated Action. The amount of liability, if any, related to these actions is not presently determinable. The Company is required to indemnify the defendants to the extent provided by Delaware law and the Company has directors' and officers' liability coverage. Accordingly, no amounts have been provided for such liability in the consolidated financial statements.
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
From time to time, information provided by the Company, statements made by its employees or information included in its filings with the SEC (including the Annual Report on Form 10-K) may contain statements that are not historical facts, so-called "forward-looking statements", which involve risks and uncertainties. In particular, statements in "Item 1. Business" related to the Company's business strategies and the Company's ability to compete, and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" relating to the sufficiency of capital to meet working capital and capital expenditures requirements may be forward-looking statements. The Company's actual future results may differ significantly from those stated in any forward-looking statements. Factors that may cause such differences include, but are not limited to, the factors discussed below. Each of these factors, and others, are discussed from time-to-time in the Company's filings with the SEC. The Company assumes no obligation to update or revise any such forward-looking statements, even if experience or future events or changes make it clear that any projected financial or operating results implied by such forward-looking statements will not be realized.
The Company's future results are subject to substantial risks and uncertainties. The Company is operating as a debtor-in-possession under the Bankruptcy Code and its future results are subject to the development and confirmation of a plan of reorganization. The Company's business is seasonal; a substantial portion of its sales and income from operations are generated during the fourth quarter of the fiscal year which includes the Christmas selling season. Any substantial decrease in sales during such period would have a material adverse effect on the financial condition, results of operations and liquidity of the Company. The Company may be adversely affected as competitors open additional stores in the Company's market areas. The Company has working capital needs which are expected to be funded largely through borrowings under the Extended DIP Facility and the New DIP Facility. The Extended DIP Facility and the New Facilities contain restrictive covenants, including, among other things, limitations on the creation of additional liens and indebtedness, limitations on capital expenditures, capital leases and annual rents, the sale of assets and the maintenance of minimum earnings before interest, taxes, depreciation, amortization, and reorganization items, the maintenance of inventory levels, and a prohibition on the payment of dividends. Such restrictions may limit the Company's operating and financial flexibility. For further information, see "Item 1. Business--Reorganization Case."
SEASONALITY
The Company's business is highly seasonal with a major portion of its annual sales occurring in the fourth quarter of the year due to increased customer buying during the Christmas selling season. As a result, the Company's operating earnings have historically been concentrated in the fourth quarter. In 1997 and 1996, approximately 32% of the Company's total sales were recorded in the fourth quarter of each year.
INFLATION
The Company believes that the impact of inflation and changing prices has not significantly affected the Company's sales or results of operations. The Company uses the LIFO inventory accounting method for financial reporting purposes, because it is believed to provide a better matching of current costs with revenue than does the FIFO method. Therefore, the cost of merchandise sold included in the results of operations are already adjusted for inflation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which is effective for the Company's fiscal year ending January 30, 1999 ("Fiscal Year 1998"). SFAS No. 130 establishes standards for reporting and display of comprehensive income (the change in equity from transactions and other events except those resulting from investment by owners). The Company is currently evaluating the impact of this statement on its financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," which is effective beginning with Fiscal Year 1998. SFAS No. 131 will require that segment financial information be publicly reported on the basis that is used internally for evaluating segment performance. The Company is currently evaluating the effects of this change on its financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which is effective beginning with Fiscal Year 1998. SFAS No. 132 standardizes the disclosure requirements for pension and other postretirement benefits, but does not change the existing measurement or recognition provisions of previous standards. The Company is currently evaluating the effects of this change on its financial statement disclosures.
SELECTED QUARTERLY DATA (UNAUDITED)
The following quarterly results are determined in accordance with the same accounting policies used for the annual information, including certain items based upon estimates for the entire year:
(1) The 1997 fourth quarter reorganization items included $38.0 million for lease rejection obligations, $32.5 million of provisions for closed stores, and a $5.6 million reduction to the Employee Retention Plan accrual.
(2) The 1996 third quarter gross margin includes a $15 million reduction in the provision for vendor claims that was recorded during 1995. In addition, the Company has refined its practice of capitalizing certain costs in inventory, resulting in additional cost of merchandise sold, of approximately $13 million upon liquidation of such inventory.
(3) The 1996 fourth quarter reorganization items included $30.8 million of provisions for closed stores, $20.8 million for lease rejection obligations, $7.2 million for the Employee Retention Plan and $2.4 million for professional fees.
(4) In the fourth quarter of 1997, the Company adopted SFAS No. 128. All previously reported share and per share information has been restated. The sum of the quarterly per share data may not equal the annual amounts due to changes in the weighted average shares and share equivalents outstanding.
ITEM 8.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA - ---------------------------------------------------
See the consolidated financial statements of The Caldor Corporation and Subsidiaries attached hereto and listed on the index to consolidated financial statements set forth in Item 14 of this Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------------------------------------------------------------------------ FINANCIAL DISCLOSURES --------------------- None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------
Directors as of April 29, 1998:
(1) Member of the Executive Committee of the Board of Directors. (2) Member of the Compensation Committee of the Board of Directors (the "Compensation Committee"). (3) Chairman of the Audit Committee of the Board of Directors (the "Audit Committee"). (4) Member of the Audit Committee. (5) Chairman of the Compensation Committee.
Executive officers as of April 29, 1998:
Certain information concerning the directors and executive officers of the Registrant:
WARREN D. FELDBERG has been Chairman of the Board of Directors and Chief Executive Officer of the Registrant since January 1997. He was President and Chief Operating Officer of the Registrant and a director of the Registrant from April 1996 to January 1997. From 1991 to 1995, Mr. Feldberg was Chairman and Chief Executive Officer of Marshall's, a division of Melville Corporation ("Marshalls"). From December 1990 to October 1991, he served as President of Target Stores ("Target"), a division of Dayton Hudson Corporation ("Dayton Hudson"). From October 1988 to November 1990, he served as Executive Vice President, Merchandising of Target. From March 1988 to November 1988, he was Senior Vice President, General Merchandise Manager, Softlines of Target. From 1984 to 1988, Mr. Feldberg was Executive Vice President, Marketing of Lechmere, Inc., a division of Dayton Hudson. From 1976 to 1984, Mr. Feldberg held a variety of management positions with Bloomingdales, a division of Federated Department Stores ("Federated"). He is also a director of CompUSA, Inc.
JOHN G. REEN has been Executive Vice President and Chief Financial Officer of the Registrant and a director of the Registrant since January 1996. From 1991 to 1995, Mr. Reen was Executive Vice President and Chief Financial Officer of Hills Department Stores ("Hills"). From 1979 to 1991, he held various positions including Vice President-Controller of Hills. Mr. Reen was also a director and Chairman of the Finance Committee of Hills from 1993 to 1995. In October 1993, Hills emerged from reorganization proceedings under Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). Hills had voluntarily filed a petition for reorganization under Chapter 11 in February 1991.
BRUCE CARSWELL has been a consultant to GTE Corporation ("GTE") since April 1995. He was Senior Vice President of Human Resources and Administration of GTE from 1986 to March 1995, when he retired. He is a director of the Electronic Industries Association, the Electronic Industries Foundation ("EIF") and Cornell Center for Advanced Human Resources Studies (and its first Visiting CAHRS Executive). Mr. Carswell was appointed to the National Skill Standards Board by the Congress of the United States and currently is Vice Chairman.
STEVEN M. FRIEDMAN was Chairman of the Board and Vice President of the Registrant from 1989 to 1991 and, prior thereto, in 1989, he was President of the Registrant. He was a director of Caldor, Inc. ("Caldor") from 1989 to 1993. Since January 1, 1994, Mr. Friedman has been a General Partner of Eos Partners, L.P. From 1988 to 1993, he was a General Partner of Odyssey Partners, L.P. ("Odyssey"). From 1983 to 1988, he was a principal of Odyssey. He is also a director of Eagle Food Centers, Inc.
VERNA K. GIBSON has been a consultant since 1994 to Retail Options, a business advisory firm founded in June 1993, and has been a retail industry consultant and President of Outlook Consulting, Inc. since 1991. From 1994 to 1997 she served as Chairman of the Board of Petrie Retail, Inc. ("Petrie"). Petrie filed a voluntary petition for reorganization under Chapter 11 in October 1995. From 1985 to 1991, she was President of The Limited Stores, Inc. and was a director of the Federal Reserve Board, Cleveland, Ohio, for six years ending December 31, 1993. Ms. Gibson is currently a director of Today's Man, Inc., Chico's FAS Inc. and Mother's Work, Inc.
WILLIAM F. GLAVIN has been President Emeritus of Babson College (Wellesley, Mass.) since June 1997. From 1989 to May 1997, he was President of Babson College. From 1985 to 1989, he was Vice Chairman of Xerox Corporation. He is also a director of Reebok International Ltd., INCO Limited and John Hancock Mutual Funds, Inc.
ELLIOTT J. KERBIS has been Executive Vice President-General Merchandise Manager-Hardlines of the Registrant since January 1996. He was Senior Vice President-General Merchandise Manager-Hardlines for the Registrant and its predecessors from March 1987 to January 1996. From 1985 to 1987, he was Group Vice President with Macy's New York, Inc.
DENNIS M. LEE has been Executive Vice President-Human Resources and Merchandise Logistics of the Registrant since January 1997. He was Executive Vice President-Human Resources and Merchandise Distribution and Replenishment of the Registrant from January 1996 to January 1997. He was Senior Vice President-Human Resources
and Merchandise Distribution and Replenishment of the Registrant from May 1994 to January 1996. He was Senior Vice President-Human Resources of the Registrant and its predecessors since 1987. From 1985 to 1987, he was Vice President, Executive Development for May Company.
JAMES E. FOTHERGILL has been Senior Vice President-Human Resources of the Registrant since January 1997. He was Vice President-Human Resources of the Registrant from May 1994 to January 1997. From February 1986 to May 1994, he held various positions with the Registrant, including Vice President-Organizational Planning, Field Personnel and Special Businesses.
BENNETT S. GROSS has been Senior Vice President-General Counsel of the Registrant since January 1997 and Secretary of the Registrant since February 1996. He was Vice President-General Counsel of the Registrant and its predecessors from May 1993 to January 1997. He held various positions, including Vice President-General Attorney, with R.H. Macy & Co., Inc. from 1985 to May 1993, prior to which he was an Associate with the law firm of Weil, Gotshal & Manges.
GARY A. MAXWELL has been Senior Vice President-Merchandise Distribution and Replenishment of the Registrant since January 1997. Previously, he was Vice President-Merchandise Distribution and Replenishment of the Registrant from January 1994 to January 1997. From June 1993 to January 1994, he was Vice President-Merchandise Planning and Control of the Registrant. From May 1990 to June 1993, he was a Consultant for Webb and Shirley, a department of KPMG Peat Marwick LLP.
MARK E. MINSKY has been Senior Vice President-General Merchandise Manager-Softlines of the Registrant and its predecessors since July 1992. Previously, he was Operating Vice President, Divisional Merchandise Manager-Ready to Wear of Caldor from 1991 to July 1992. From 1985 to 1991, he was Operating Vice President, Divisional Merchandise Manager-Jewelry, Accessories and Intimate Apparel of Caldor.
DANIEL C. O'HARRA has been Senior Vice President-Operations of the Registrant and its predecessors since 1987. From 1985 to 1987, he was Senior Vice President-Facilities Management of Caldor.
JOHN A. POLIZZI has been Senior Vice President-Management Information Systems of the Registrant since April 1997. He was Senior Vice President of Horace Small Apparel Company from April 1996 to April 1997. From October 1994 to April 1996, he was Operating Vice President-Management Information Systems of the Registrant. From November 1993 to October 1994, he was Senior Director-Management Information Systems of Finast Supermarkets Inc. From July 1993 to November 1993, he was Project Executive of International Business Machines Corporation's ISSC Division. From August 1990 to July 1993, he was Director-Management Information Systems Applications of Rite Aid Corporation.
EDWARD F. SADLER has been Senior Vice President-Stores of the Registrant since May 1997. Previously, he was Regional Vice President-Stores of the Registrant from June 1995 until May 1997. From 1976 to February 1995, he held various positions with Target, including Vice President-Store Operations, Regional Merchandise Manager and District Manager.
SUSAN V. SPRUNK has been Senior Vice President-Marketing of the Registrant since August 1996. Previously, she was Vice President-Marketing of Hills from November 1993 to August 1996. From 1983 to 1993, she held a number of positions with Mervyn's, a division of Dayton Hudson, including Vice President-Sales Promotion.
JOHN TEMPESTA has been Senior Vice President-Distribution and Logistics of the Registrant since November 1993. From 1988 to 1993, he was Senior Vice President-Operations of Chadwicks of Boston, and from 1983 to 1988 he was Senior Vice President-Operations of Filene's Basement.
BRIAN WOOLF has been Senior Vice President-General Merchandise Manager-Homelines of the Registrant since May 1996. From March 1995 to February 1996, he was Vice President-General Merchandise Manager-Women's Ready-to-Wear of Marshall's. From 1988 to 1995, he was Senior Vice President-General Merchandise Manager of Lazarus, a department store division of Federated.
DANIEL L. ANDERTON has been Vice President-Treasurer of the Registrant since June 1997. From May 1996 to June 1997, he was Vice President-Treasurer of Petrie. From July 1995 to May 1996, he was principal of RM Outsourcing Company. He held various positions, including Assistant Treasurer, with Crystal Brands, Inc., from 1985 to July 1995.
BRUCE A. CALDWELL has been Vice President-Controller of the Registrant since February 1997 and was Vice President-Treasurer of the Registrant from February 1996 to February 1997. He held various positions, including Vice President-Treasurer, with Hills from 1987 to February 1996.
Pursuant to Section 16 of the Exchange Act, officers, directors and holders of more that 10% of the outstanding shares of the Registrant's Common Stock are required to file periodic reports of their ownership of, and transactions involving, the Registrant's Common Stock with the SEC. Based solely on its review of copies of such reports received by the Registrant or written representations from certain reporting persons that no Annual Statement of Changes in Beneficial Ownership on Form 5 was required for those persons, the Registrant believes that its reporting persons have complied with all Section 16 filing requirements applicable to them with respect to the Registrant's fiscal year ended January 31, 1997, except the failure by Mr. Glavin to file a Statement of Changes in Beneficial Ownership on Form 4 (which transaction was reported in his Form 5 for 1997).
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION - --------------------------------
SUMMARY OF CASH AND CERTAIN OTHER INFORMATION. The following table shows, for the fiscal years ended 1997, 1996 and 1995, the compensation paid or accrued by the Registrant and its subsidiaries to those persons who were at January 31, 1998 (i) the persons who served as Chief Executive Officer and (ii) the other four most highly compensated executive officers of the Registrant (the "Named Officers"):
SUMMARY COMPENSATION TABLE
- ---------------------
1. Perquisites and other personal benefits did not exceed the lesser of $50,000 or 10% of reported annual salary and bonus for any of the Named Officers. 2. The table reflects salary paid or deferred during the respective fiscal years shown. 3. Consists of matching contribution credited to the 401(k) plan.
4. Consists of 30,634, 13,309 and 12,934 shares of restricted stock for Messrs. Feldberg, Kerbis and Lee, respectively. These restricted stock awards vest the later of 3 years from the date of grant or 6 months following the date of reorganization. The value of the restricted stock awards at fiscal year end for Messrs. Feldberg, Kerbis and Lee was $16,274, $7,070 and $6,871, respectively. Amounts in the Restricted Stock Awards column reflect the value of the restricted stock awards at the date of grant. 5. Consists of $750,000 signing bonus and $46,731 relocation allowance paid to Mr. Feldberg. 6. Mr. Feldberg served as President and Chief Operating Officer of the Company from April 1996 to January 1997. Mr. Feldberg has been Chairman of the Board of Directors and Chief Executive Officer of the Company since January 31, 1997. 7. Consists of $2,000 matching contribution credited to the 401(k) plan, with the balance representing reimbursement of miscellaneous relocation expenses. 8. Consists of $200,000 relocation bonus and $19,108 relocation allowance paid to Mr. Reen. 9. Since January 1996 Mr. Reen has been Executive Vice President, Chief Financial Officer and Director of the Company. 10. Consists of $2,000 matching contribution credited to the 401(k) plan with the balance representing an increase in the executive's share of the cash value of the split dollar plan. 11. Consists of 21,530 and 22,293 shares of restricted stock for Messrs. Kerbis and Lee, respectively. These restricted stock awards vest one-third on each of the 3rd, 4th and 5th anniversaries of the grant date. The value of the restricted stock awards at fiscal year-end for Messrs. Kerbis and Lee was $11,438 and $11,843, respectively. Amounts in the Restricted Stock Awards column reflect the value of the restricted stock awards at the date of grant. 12. Since January 1997 Mr. Lee has been Executive Vice President-Human Resources and Merchandise Logistics. From January 1996 to January 1997 Mr. Lee was Executive Vice President-Human Resources and Merchandise Distribution and Replenishment. From May 1994 to January 1996 Mr. Lee was Senior Vice President-Human Resources and Merchandise Distribution and Replenishment. 13. Consists of $1,875 matching contribution credited to the 401(k) plan, with the balance representing an increase in the executive's share of the cash value of the split dollar plan. 14. Prior to January 1996 Mr. Kerbis was Senior Vice President-General Merchandise Manager-Hardlines. 15. Consists of $854 matching contribution credited to the 401(k) plan, with the balance representing a one-time payment to Ms. Sprunk. 16. Consists of an upfront bonus of $75,000 and reimbursement of relocation expenses of $17,849 paid to Ms. Sprunk. 17. Since August 1996 Ms. Sprunk has been Senior Vice President-Marketing.
STOCK OPTIONS. During the 1997 fiscal year, there were no grants to Named Officers of stock options or of performance-based Stock Appreciation Rights ("SARs"). No stock option or SAR was exercised by a Named Officer during the 1997 fiscal year and no Named Officer held an unexercised stock option or SAR at the end of the 1997 fiscal year.
RETIREMENT AND CERTAIN OTHER BENEFIT PLANS
The following table shows the estimated pension benefits payable to a covered participant at normal retirement age under the Company's qualified defined benefit pension plan ("Caldor, Inc. Retirement Plan") as well as the Company's non-qualified supplemental pension plan ("Supplemental Executive Retirement Plan") based on covered compensation and years of service with the Company. All future benefits accruals for the Caldor, Inc. Retirement Plan and the Supplemental Executive Retirement Plan have been frozen as of July 31, 1996.
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(1) A participant's covered compensation (base salary plus bonus) is his or her highest average annual compensation for 36 consecutive months prior to August 1, 1996. Benefits shown on the table include benefits from the qualified plan plus 100% of the estimated Social Security benefits.
(2) The target benefit has been 25% to 35% (depending upon Company performance and prorated for less than 25 years of credited service since January 1, 1990 and prior to August 1, 1996) of the highest average annual compensation for 36 consecutive months prior to August 1, 1996. Benefits are reduced if they begin prior to age 60. Annual benefits, for participants in the Supplemental Executive Retirement Plan as of January 1, 1993 are 125% of the above amounts. Messrs. Lee and Kerbis have each been credited with six years of service. None of the other Named Officers has been credited with years of service.
DIRECTOR COMPENSATION
Directors who are members of management receive no compensation or fees for service as directors. All other directors receive annual retainers of $25,000 and meeting fees of $1,000 for each Board of Directors meeting attended. The Chairmen of the Compensation and Audit Committees each receive an additional annual retainer of $5,000.
EMPLOYMENT CONTRACTS, TERMINATION, SEVERANCE AND CHANGE-OF-CONTROL ARRANGEMENTS
Each of the Named Officers was during fiscal 1997 and is currently a party to an employment agreement with the Company.
On June 7, 1996, the Bankruptcy Court approved the employment agreement dated as of April 15, 1996, as amended on June 7, 1996, between the Company and Warren D. Feldberg, pursuant to which Mr. Feldberg was appointed President and Chief Operating Officer of the Company and was designated a director of the Company, subject to continued election by its stockholders. The agreement provides for an initial three year term of employment and continues for successive periods of one year each, unless terminated by the Company or Mr. Feldberg upon not less than 180 days written notice prior to the expiration of the then applicable term of employment. Since January 1997, Mr. Feldberg has served as Chairman of the Board of Directors and Chief Executive Officer of the Company.
The agreement provides for an annual base salary of $900,000 per annum with increases at the discretion of the Board of Directors. Mr. Feldberg received a lump sum cash bonus of $750,000. In addition, on the date the Company's plan of reorganization (the "Plan of Reorganization") becomes effective in accordance with its terms (the "Effective Date"), Mr. Feldberg will be paid an amount equal to (i) 35% of his annual base salary then in effect plus (ii) up to 52.5% of his annual base salary depending upon the level of the Company's achievement as determined under the Company's Performance Retention Program approved by the Bankruptcy Court by order dated March 27, 1996; and six months following the Effective Date, Mr. Feldberg will be paid an additional amount equal to the amount paid on the Effective Date (the "Feldberg Retention Payments"). The Feldberg Retention Payments will be made only if, at the time that they are payable, Mr. Feldberg is employed by the Company, or, if not then employed, Mr. Feldberg's employment was terminated (i) by the Company without cause (as defined in the agreement) or (ii) by Mr. Feldberg for Good Reason for Resignation (as defined in the agreement). Mr. Feldberg will be entitled to participate in any cash bonus arrangements, including the Performance Incentive Plan ("PIP"), applicable to his position during the term of his employment. However, notwithstanding any limitations contained in the PIP, Mr. Feldberg will receive a minimum annual amount each year, from the date on which he commenced employment with the Company through the Effective Date, equal to 50% of the maximum amount payable to him under the PIP for any fiscal year irrespective of the financial performance of the Company, and will have the opportunity to be paid up to the additional 50% depending upon the attainment of certain financial performance goals by the Company under the PIP.
If the Company elects not to renew the agreement, Mr. Feldberg will be entitled to receive, within 30 days after termination, a lump sum severance payment equal to twelve (12) multiplied by the sum of (i) 1/12 of his annual base salary in effect at the time of such expiration plus (ii) 1/12 of 100% of his Target Bonus Opportunity (as defined in the agreement) for the fiscal year of the Company in which such expiration occurs (the sum of (i) plus (ii), as measured as of the time of the applicable expiration or termination under the agreement, the "Monthly Severance Amount"). Upon termination by the Company without cause (as defined in the agreement) or by Mr. Feldberg for Good Reason for Resignation (as defined in the agreement), the severance payment would be equal to (i) the Monthly Severance Amount as of the date of such termination, multiplied by (ii) the greater of (a) the number of full calendar months remaining in his then current term of employment and (b) twelve (12); provided that if he terminates his employment by virtue of a Good Reason for Resignation relating to failure of the Company to maintain officer and director insurance, the severance payment will be reduced by one-half. If Mr. Feldberg terminates his employment (or, in certain circumstances, is dismissed) following the occurrence of certain "change
in control" events specified in the agreement, then he will be entitled to receive, within 30 days after termination, in cash, as severance, a lump sum payment equal to the excess of 2.99 times (or in certain circumstances 1.50 times) his "base amount" over the "present value" of any other "parachute payments" that he has received or to which he is entitled ("base amount," "present value," and "parachute payments" have the meanings set forth in Section 280G of the Code except that "parachute payments" is determined without regard to whether or not they equal or exceed three times Mr. Feldberg's "base amount"). The obligations of the Company under the agreement are secured by a $3.9 million standby letter of credit.
On March 6, 1996, the Bankruptcy Court approved the employment agreement dated as of January 29, 1996, as amended on March 5, 1996, between the Company and John G. Reen, pursuant to which Mr. Reen serves as an Executive Vice President and Chief Financial Officer of the Company and was designated a director of the Company, subject to continued election by its stockholders. The agreement provides for an initial term of employment expiring on March 6, 1999 and continuing for successive periods of one year each unless terminated by the Company or the employee upon not less than 120 days written notice prior to the expiration of the then applicable term of employment.
The agreement provides for an annual base salary of $460,000 per annum with increases at the discretion of the Board of Directors. In addition Mr. Reen received a lump sum cash bonus of $200,000 upon his relocation. On the Effective Date of the Company's Plan of Reorganization, Mr. Reen will be paid an amount equal to 60% of his annual base salary then in effect; and, six months following the Effective Date, Mr. Reen will be paid an additional amount equal to the greater of (i) $600,000 minus the amount paid at the Effective Date or (ii) 60% of his base salary in effect on such subsequent date (the "Reen Retention Payments"). The Reen Retention Payments will be made only if, at the time that they are payable, Mr. Reen is employed by the Company, or, if not then employed, Mr. Reen's employment was terminated (i) by reason of Mr. Reen's death, (ii) by the Company other than for cause (as defined in the Agreement), (iii) by Mr. Reen for Good Reason for Resignation (as defined in the Agreement) or (iv) as a result of non-renewal of the agreement by the Company. Mr. Reen will be entitled to participate in any cash bonus arrangements, including the PIP, applicable to his position during the term of his employment. However, notwithstanding any limitations contained in the PIP, Mr. Reen will receive a minimum annual bonus each year, from the date on which he commenced employment with the Company through the date the Court enters an order confirming the Company's Plan of Reorganization ("Confirmation"), equal to 30% of his annual base salary (as in effect on May 1 of the fiscal year for which the bonus is to be paid) and will have the opportunity to be paid up to an additional 30% of his annual base salary depending upon the attainment of achievable financial objectives determined by the Company and applicable to all senior executives who participate in the PIP. Mr. Reen will also be entitled to participate on a level immediately below that of "Principal" in any equity or cash bonus program included or contemplated by any Plan of Reorganization confirmed by the Bankruptcy Court.
If the Company elects not to renew the agreement, then he will be entitled to receive, within 30 days after termination, a lump sum severance payment equal to the sum of (i) 100% of his annual base salary in effect at the time of such termination plus (ii) 100% of his target bonus opportunity (the bonus payable upon the Company achieving, but not exceeding, its business plan) for the fiscal year in which such termination occurs. Upon termination of the agreement by the Company without cause (as defined in the agreement) or by Mr. Reen for Good Reason for Resignation (as defined in the agreement), the severance payment would be equal to the sum of (i) 1/12 of the annual base salary plus 1/12 of the target bonus opportunity for the fiscal year of the Company in which such termination occurs multiplied by the greater of (a) the number of full calendar months remaining in his then current term of employment and (b) twelve (12). If Mr. Reen terminates his employment (or, in certain circumstances, is dismissed) pursuant to certain "change in control" provisions (as described in the agreement), then he will be entitled to receive, within 30 days after termination, in cash, as severance, a lump sum payment equal to the excess of 2.99 times his "base amount" over the "present value" of any other "parachute payments" that he has received or to which he is entitled ("base amount," "present value," and "parachute payments" have the meanings set forth in Section 280G of the Code, except that "parachute payments" is determined without regard to whether or not they equal or exceed three times Mr. Reen's "base amount").
The employment agreements of each of Mr. Kerbis, Mr. Lee and Ms. Sprunk are substantially identical and expire on October 31, 1998, October 31, 1998 and September 3, 1998, respectively. Each such agreement continues for successive periods of one year unless terminated by either party upon not less than two months' written notice prior to the expiration of the then applicable term of employment. Such agreements provide for an annual salary during their respective terms (the base salary for the fiscal year ended January 31, 1998 is the amount set forth for 1997 in the above Summary Compensation Table), with increases subject to the discretion of the Board of Directors. On October 3, 1997, the Company and Ms. Sprunk entered into an agreement providing for a one-time payment of $250,000 to her by the Company.
If the Company elects not to renew the employment agreement of Mr. Kerbis, Mr. Lee or Ms. Sprunk, then such employee would receive, within 30 days after termination, a lump sum payment equal to the sum of (i) 1/12 of the employee's annual base salary in effect at the time of such termination plus (ii) 1/12 of 100% of the employee's target bonus opportunity for the fiscal year in which such termination occurs, which sum is multiplied by nine. Such agreements also provide for the continuation of health and insurance benefits for a period of nine months following termination. If, during the term of any such employment agreement, the Company terminates the employment of the employee other than for "cause" (as defined below), or the employee terminates his or her employment because the Company, upon 30 days' prior written notice by the employee specifying a material breach of any of its obligations to the employee under such agreement, has failed to cure such material breach (within such 30-day notice period), then such employee is entitled to receive, within 30 days after termination, a lump sum payment equal to (X) the sum of (i) 1/12 of his or her annual base salary in effect at the time of such termination plus (ii) 1/12 of 100% of the employee's target bonus opportunity for the fiscal year in which such termination occurs, multiplied by (Y) the greater of (a) the number of calendar months remaining in the employee's term of employment and (b) nine. Such agreements also provide for the continuation of health and insurance benefits for the number of months determined under clause (Y) above. ("Cause" is defined as (i) the willful failure to perform any material obligations under the employment agreement, (ii) an act of fraud, theft or dishonesty likely to result in financial harm to the Company, (iii) the conviction of any felony or (iv) the conviction of any misdemeanor involving moral turpitude which might cause embarrassment to the Company.)
In addition, Mr. Kerbis, Mr. Lee and Ms. Sprunk each has the right to terminate his or her employment within 12 months after (i) the employee has obtained actual knowledge that a "change in control" (as defined) of the Company has occurred and (ii) an assignment to the employee of any duties inconsistent with the status of his or her office and/or position with the Company as constituted immediately prior to the change in control or a significant adverse change in the nature or scope of his or her authorities, powers, functions or duties as constituted immediately prior to the change in control. The employment agreements of each of Mr. Kerbis, Mr. Lee and Ms. Sprunk provide that if the employee terminates his or her employment following a change in control, then the employee is entitled to receive, within 30 days after termination, in cash, as severance, a lump sum payment equal to the salary and bonus amounts paid by the Company to the employee during the 24 month period immediately preceding the termination (the "Payment Period"), but not to exceed 2.99 times the employee's "base amount" (as defined below).
In each of the foregoing employment agreements, a "change in control" is deemed to have occurred (i) if there has occurred a change in control as provided under certain rules or regulations under the federal securities laws, (ii) when any person or entity becomes a beneficial owner of 20% or more of the Company's securities, (iii) if the stockholders of the Company approve a plan of complete liquidation; or (iv) if there occurs a change in ownership or effective control of the Company or a substantial portion of its assets. The term "base amount" as used in each of the foregoing employment agreements has the meaning ascribed to such term in Section 280G of the Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
During fiscal 1997, the Compensation Committee consisted of Steven M. Friedman, Bruce Carswell and William F. Glavin. Steven M. Friedman was an officer of the Registrant from 1989 to 1991.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -----------------------------------------------------------------------------
(a) To the best of the Registrant's knowledge, there were no beneficial owners of more than 5% of the issued and outstanding shares of Common Stock as of March 15, 1998.
(b) The following table sets forth information regarding the beneficial ownership at March 15, 1998 of the issued and outstanding shares of Common Stock of (a) each of the current directors of the Registrant, (b) each of the Named Officers and (c) all 19 current directors and executive officers of the Registrant as a group:
* Ownership does not exceed 1% of the outstanding shares.
(1) Unless otherwise noted, each beneficial owner has sole voting and investment power with respect to the shares attributable to such owner. The percent of total stock owned is based on 16,902,839 shares issued and outstanding at the close of business on March 15, 1998.
(2) Consists of shares of restricted stock subject to cancellation if the employee leaves the employ of the Company prior to vesting.
(3) Includes an aggregate of 183,718 shares of restricted stock held by officers subject to cancellation if such executive officers leave the employ of the Company prior to vesting.
(4) Includes an aggregate of 25,875 shares which may be acquired within 60 days of March 15, 1998 upon exercise of options or SARs.
(c) The Registrant is not aware of any arrangements, including any pledge by any person of securities of the Registrant, the operation of which may at a subsequent date result in a change of control of the Registrant.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- None
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------
(a) Documents filed as part of this annual report:
(1) Financial Statements:
The Consolidated Financial Statements are set forth in the Index to Consolidated Financial Statements on page hereof.
(2) Financial Statement Schedules:
None.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
(1) Exhibits are set forth in the "Exhibits to Form 10-K" on page E-1.
Signatures
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 undersigned, thereunto duly authorized.
THE CALDOR CORPORATION
By: /s/ Warren D. Feldberg ------------------------------------ Warren D. Feldberg Dated April 29, 1998 Chairman and Chief Executive Officer
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 date indicated.
THE CALDOR CORPORATION
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of The Caldor Corporation Norwalk, Connecticut
We have audited the accompanying consolidated balance sheets of The Caldor Corporation (Debtor-in-Possession) and subsidiaries (the "Company") as of January 31, 1998 and February 1, 1997, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended January 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The Caldor Corporation (Debtor-in-Possession) and subsidiaries as of January 31, 1998 and February 1, 1997, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 1998 in conformity with generally accepted accounting principles.
As discussed in Note 1, the Company and certain of its subsidiaries filed for reorganization under Chapter 11 of the United States Bankruptcy Code in September 1995. The accompanying consolidated financial statements do not purport to reflect or provide for the consequences of the bankruptcy proceedings. In particular, such financial statements do not purport to show (a) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities; (b) as to pre-petition liabilities, the amounts that may be allowed for claims or contingencies, or the status and priority thereof; (c) as to stockholder accounts, the effect of any changes that may be made in the capitalization of the Company; (d) as to operations, the effect of any changes that may be made in its business; or (e) as to the litigation, claims and contingencies discussed in Note 16, the amounts that may be allowed for such matters. The eventual outcome of these matters is not presently determinable.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the bankruptcy filings and related circumstances and the recurring losses from operations raise substantial doubt about its ability to continue as a going concern. The continuation of its business as a going concern is contingent upon, among other things, future profitable operations, the ability to generate sufficient cash from operations and financing sources to meet its obligations, and the development and confirmation of a plan of reorganization. Management's plans concerning these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainties referred to herein and in the preceding paragraph.
DELOITTE & TOUCHE LLP New York, New York April 24, 1998
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
See notes to consolidated financial statements.
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
See notes to consolidated financial statements.
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
See notes to consolidated financial statements.
THE CALDOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
See notes to consolidated financial statements.
THE CALDOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) - -----------------------------------------------
NOTE 1 - CHAPTER 11 PROCEEDINGS AND BASIS OF FINANCIAL STATEMENTS PRESENTATION
On September 18, 1995, The Caldor Corporation (the "Registrant") and certain of its subsidiaries (collectively, the "Debtors", "Caldor" or the "Company") filed voluntary petitions (the "Filing") for relief under Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). The Debtors are presently operating their business as debtors-in-possession subject to the jurisdiction of the U.S. Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court").
In the Chapter 11 case, substantially all liabilities as of the date of the Filing are subject to resolution under a plan of reorganization to be voted upon by the Debtors' creditors and stockholders and confirmed by the Bankruptcy Court. Amended and restated schedules were filed by the Debtors with the Bankruptcy Court setting forth the assets and liabilities of the Debtors as of the date of the Filing as shown by the Debtors' accounting records. The Bankruptcy Court fixed August 12, 1996 as the last date by which creditors of the Debtors could file proofs of claim for claims that arose prior to the Filing. The Debtors are in the process of reconciling differences between amounts shown by the Debtors and claims filed by creditors. The amount and settlement terms for such disputed liabilities are subject to allowance by the Bankruptcy Court. Ultimately, the adjustment of the total liabilities of the Debtors remains subject to a Bankruptcy Court approved plan of reorganization and, accordingly, the amount of such liabilities is not presently determinable. The Bankruptcy Court has extended the period in which the Debtors possess the exclusive right to file a plan of reorganization through September 1, 1998 and the period in which the Debtors can solicit acceptances for the plan of reorganization through October 30, 1998. The Debtors have distributed a term sheet and drafts of their proposed plan of reorganization and disclosure statement to the professionals representing the Debtors' Creditor, Bank and Equity Committees. The Debtors are negotiating the terms and timing of their emergence from Chapter 11 with these Committees. At this time it is not expected that such plan would provide for recovery by equity security holders.
On September 18, 1997, the New York Stock Exchange suspended trading in the Company's Common Stock and on November 25, 1997, the Securities and Exchange Commission delisted the Company's Common Stock. Subsequent to September 18, 1997, the Company's Common Stock has been traded on the "OTC Bulletin Board."
The United States Trustee for the Southern District of New York has appointed Official Committees ("Committees") of Unsecured Creditors and Equity Security Holders for the Chapter 11 case. The role of the Committees includes, among other things: (a) consultation with the Debtors concerning the administration of the Chapter 11 case; (b) investigation of the acts, conduct, assets, liabilities, financial condition and operations of the Debtors, and the desirability of the continuation of their business and other relevant matters; and (c) participation in the formulation of a plan of reorganization. In discharging these responsibilities, the Committees have standing to raise issues with the Bankruptcy Court relating to the business of the Debtors and the conduct and course of the Chapter 11 case. The Debtors are required to pay certain expenses of the Committees and those of the Steering Committee of the banks participating in the Extended DIP Facility (as hereinafter defined), including professional fees, to the extent allowed by the Bankruptcy Court.
On December 6, 1996 the Company presented its Five-Year Business Plan (the "Business Plan") to the Company's Creditor, Bank and Equity Committees setting forth its strategy to restore the Company to long-term profitability by raising customer satisfaction levels, revamping advertising programs, lowering everyday prices and focusing its promotional activity, narrowing and refocusing merchandise assortments, and implementing improved operating efficiencies and cost reductions. The Company believes that the Business Plan sets forth a strategic direction to take advantage of its strengths and to improve key areas of its business. The Company will continue to review and refine the Business Plan.
On June 7, 1996, the Bankruptcy Court approved the Debtors' reclamation program, which authorizes the Debtors to settle the claims of 425 vendors that submitted reclamation demands at the time of Filing. The program provides for each reclamation vendor that extends mutually acceptable credit support to receive both a cash payment of up to 50% of its eligible reclamation claim and, subject to certain conditions, priority treatment for the remainder of its claim. Reclamation cash payments of $1.5 million and $11.6 million were made in 1997 and 1996, respectively. To the extent these payments exceed $10 million, the Debtors are required to apply such excess to pay down the term portion of the pre-petition credit facility (the "Term Loan") in an equivalent amount (up to $8.5 million). In 1997 and 1996, the Debtors had paid down $1.4 million per year of the Term Loan related to the reclamation program.
Under Chapter 11, the Debtors may elect to assume or reject real estate leases, employment contracts, personal property leases, service contracts and other executory pre-petition contracts, subject to Bankruptcy Court approval. Under Section 502 of the Bankruptcy Code, a lessor's claim for damages resulting from the rejection of a real property lease is limited to the rent provided under such lease, without acceleration, for the greater of one year, or 15%, not to exceed three years, of the remaining term of the lease following the earlier of the date of the Filing or the date on which the property is returned to the landlord. Forty-five of the Company's store leases, including three which were rejected in 1996, are guaranteed by the Company's former parent, The May Department Stores Company ("May Company"). In 1989 as part of its leveraged buyout from May Company, the Company agreed to indemnify May Company for any damages incurred by May Company under its guaranties. The Company's liability to May Company for amounts paid by May Company under its guaranties of these leases, if rejected, may not be limited under Section 502 of the Bankruptcy Code. As a pre-petition claim, however, this liability is subject to compromise and discharge. A landlord may also have a claim for unpaid pre-petition rent. As of April 15, 1998, the Debtors had rejected leases for 32 locations, assumed 17 real estate leases (two of which were for warehouses and the balance were for stores) and had
reached agreement with landlords to terminate, without liability, seven additional leases. Subsequent to assuming these leases, the Company announced its plans to close the Under-Performing Stores (as hereinafter defined), including three locations for which leases had been assumed (the "Previously Assumed Stores"). The claims of the landlords of the Previously Assumed Stores are treated as administrative expenses under Chapter 11 subject to both the landlords' obligation to mitigate damages and limitations on damages agreed upon by the Company and each landlord. The Company is required by an order of the Bankruptcy Court, subject to the right of both the Company and the applicable landlord to move to accelerate for due cause shown, to make a decision to assume or reject 39 leases by August 31, 1998 and the balance of the real property leases on confirmation of its plan of reorganization. As part of the ongoing review of its operations, the Company is currently negotiating with landlords regarding rent reductions and lease restructurings (See note 8).
On April 2, 1996, the Bankruptcy Court approved the closing of 12 under-performing stores (the "1996 Closed Stores") and the Debtors' retention of a liquidator to conduct store closing sales (the "1996 Closing Sales"). The 1996 Closing Sales were completed and the stores were closed by the end of June 1996. On July 16, 1996, the Bankruptcy Court directed the application of the net proceeds of the 1996 Closing Sales to the payment of the Term Loan. The Company paid $2.2 million and $22.5 million to The Chase Manhattan Bank ("Chase"), as agent for the Term Loan banks in 1997 and 1996, respectively.
On March 12, 1997 the Bankruptcy Court approved the closing of 4 under-performing stores (the "1997 Closed Stores") and the Debtor's retention of a liquidator to conduct store closing sales (the "1997 Closing Sales"). These sales were completed and the stores were closed by the end of May 1997. Concurrently, the Registrant, as the borrower thereunder, the subsidiaries of the Registrant named therein, as the guarantors thereunder, and the bank group led by Chase entered into an amendment (the "Third Amendment") to the Amended and Restated Revolving Credit and Guaranty Agreement dated as of October 17, 1995 among the Registrant, as the borrower thereunder, the subsidiaries of the Registrant named therein, as the guarantors, thereunder, and a bank group led by Chase ("the DIP Facility"). Pursuant to the Third Amendment, all of the proceeds of the 1997 Closing Sales were applied to a prepayment of the Tranche B (as hereinafter defined) loans and the Tranche B facility commitment was reduced by such amount.
As part of the Company's ongoing review process, the Company identified, and on March 25, 1998 obtained Bankruptcy Court approval to close, 12 under-performing stores in 1998 (the "Under-Performing Stores"). The Company completed a liquidation sale at one of the locations and has retained a liquidator who is currently conducting store closing sales at the other locations. The net proceeds of these sales will be placed in a segregated interest bearing account with Chase, in its capacity as agent under the DIP Facility, pending agreement between the Company and the bank group concerning distribution of the proceeds.
The Debtors continue to review leases and contracts, as well as other operational and merchandising changes, and cannot presently determine or reasonably estimate the ultimate outcome of, or liability resulting from this review.
The consolidated financial statements of the Company have been presented in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7: "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7") and have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates continuity of operations, realization of assets and the liquidation of liabilities and commitments in the normal course of business. The Filing, related circumstances and the losses from operations, raise substantial doubt about the Company's ability to continue as a going concern. The appropriateness of using the going concern basis is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations, and the ability to generate sufficient cash from operations and financing sources to meet obligations. As a result of the Filing and related circumstances, however, such realization of assets and liquidation of liabilities is subject to significant uncertainty. While under the protection of Chapter 11, the Debtors may sell or otherwise dispose of assets, and liquidate or settle liabilities, for amounts other than those reflected in the
consolidated financial statements. Further, a plan of reorganization could materially change the amounts reported in the consolidated financial statements. The consolidated financial statements do not include any adjustments relating to a recoverability of the value of recorded asset amounts or the amounts and classification of liabilities that might be necessary as a consequence of a plan of reorganization.
NOTE 2 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of Business - The Company operates a regional chain of upscale discount retail stores located in nine East Coast and Mid-Atlantic states. The Company's fiscal year ends on the Saturday closest to January 31. References to 1997, 1996 and, 1995 relate to the fiscal years ended January 31, 1998, February 1, 1997 and February 3, 1996, respectively. Each of these fiscal years included 52 weeks except for 1995 which included 53 weeks. References to years relate to fiscal years rather than calendar years.
b. Principles of Consolidation and Basis of Presentation - The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All material intercompany accounts and transactions between the entities have been eliminated.
c. Cash Equivalents - The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value.
d. Restricted Cash - As of January 31, 1998, the restricted cash balance of $1 million was being held in a segregated account, pursuant to stipulation, pending resolution of a motion filed in Bankruptcy Court by a vendor of the Company. As of February 1, 1997, the restricted cash balance of $5.3 million was being held in an escrow account pending final resolution of issues concerning the closing sales agreement between the Company and the liquidator who conducted the 1996 Closing Sales.
e. Merchandise Inventories -The value of merchandise inventories is determined by the lower of LIFO (last-in, first-out) cost, using the retail inventory method, or market. The LIFO cost of merchandise inventories exceeded current cost at January 31, 1998 and February 1, 1997. Therefore, the reported amounts of merchandise inventory approximate market at January 31, 1998 and February 1, 1997.
f. Assets Held for Disposal - Assets held for disposal represent the net realizable value of inventories located at the stores to be closed and the net realizable value of land and building for the Silver Spring, Maryland store to be closed.
g. Property and Equipment - Property and equipment are stated at cost (or purchase cost) less accumulated depreciation and amortization. Provisions for depreciation and amortization are computed using the straight-line method based upon the estimated useful lives of the assets, which are 40 to 50 years for buildings and 3 to 15 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of their economic lives or the terms of the leases. Leasehold interests and investments in property under capital leases are amortized over the related lease term.
h. Debt Issuance Costs - Debt issuance costs are amortized over the term of the related debt agreements (See note 14).
i. Selling, General and Administrative Expenses - Buying and store occupancy costs are included in selling, general and administrative expenses.
j. Store Pre-Opening Expenses - Costs associated with the opening of new stores are expensed in the year the stores are opened. The Company did not incur any pre-opening expenses in 1997. The Company incurred pre-opening expenses of $3.1 million and $1.6 million in 1996 and 1995, respectively.
k. Advertising Costs - Advertising costs, net are expensed as incurred and were $60.4 million, $70.8 million and $70.4 million in 1997, 1996 and 1995, respectively.
l. Income Taxes - The Company provides for deferred income taxes under the asset and liability method in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," whereby deferred income taxes result from the tax effect of temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements (see Note 11).
m. Earnings (Loss) Per Share - In 1997, the Company adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 establishes standards for computing and presenting earnings per share. Basic and diluted earnings (loss) per share were computed by dividing net income by the weighted average number of common shares outstanding during each period. Stock options to purchase 190,525, 279,299 and 1,083,037 shares of common stock were outstanding at January 31, 1998, February 1, 1997 and February 3, 1996 respectively, but were not included in the computation of diluted earnings per share since they would have resulted in an antidilutive effect.
n. Self Insurance Programs - The Company is self insured for workers compensation and general liability claims, and recognizes the projected costs of such programs on a discounted basis using a risk-free rate. Use of a risk-free rate to discount future cash payments produces a reserve that approximates the amount at which such claims could be settled in an arm's length transaction with a third party.
o. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The consolidated financial statements include estimates of restructuring charges for certain facilities closings (see note 8) and do not purport to reflect or provide for the consequences of the bankruptcy proceedings and other uncertainties. Actual results could differ from reported results.
p. Reclassifications - Certain balances in prior fiscal years have been reclassified to conform with the current year's classifications.
q. Stock-Based Compensation - The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. In 1996, the Company adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation Plans." (See note 9).
r. Recent Accounting Pronouncements - In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which is effective for the Company's fiscal year ending January 30, 1999 ("Fiscal Year 1998"). SFAS No. 130 establishes standards for reporting and display of comprehensive income (the change in equity from transactions and other events except those resulting from investment by owners). The Company is currently evaluating the effects of this change on its financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related information," which is effective beginning with Fiscal Year 1998. SFAS No. 131 will require that segment
financial information be publicly reported on the basis that is used internally for evaluating segment performance. The Company is currently evaluating the effects of this change on its financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" which is effective beginning with Fiscal Year 1998. SFAS No. 132 standardizes the disclosure requirements for pension and other postretirement benefits, but does not change the existing measurement or recognition provisions of previous standards. The Company is currently evaluating the effects of this change on its financial statement disclosures.
s. Fair Value of Financial Instruments - SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" requires disclosures of estimated fair values of financial instruments both reflected and not reflected in the accompanying consolidated financial statements. The estimated fair values of the Company's cash and cash equivalents, accounts receivable, borrowings under credit agreements and accounts payable (post-petition) approximate the carrying amounts at January 31, 1998 and February 1, 1997 due to their short maturities or variable-rate nature of the borrowings. As judgment is involved, the estimates are not necessarily indicative of the amounts the Company could realize in a current market exchange. The fair value of the Company's liabilities subject to compromise is not presently determinable as a result of the Chapter 11 proceedings.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost, less accumulated depreciation and amortization, as follows:
NOTE 4 - OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
Note 5 - Debt
Debt consisted of the following:
On October 17, 1995, the Bankruptcy Court entered a final order (the "Final Order") approving the DIP Facility. The DIP Facility amended and restated, in its entirety, the Registrant's Debtor-In-Possession Revolving Credit and Guaranty Agreement dated as of September 18, 1995 with Chase as agent. On June 4, 1997, the Bankruptcy Court entered a final order approving the Fourth Amendment to the DIP Facility (the "Fourth Amendment") which extended the DIP Facility to June 15, 1998 (the "Extended DIP Facility"). The Extended DIP Facility provides for a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $450 million, divided into two (2) separate tranches consisting of (i) a post petition revolving credit and letter of credit facility in an aggregate principal amount not to exceed $250 million made available by the Tranche A Banks (the "Tranche A Facility") and (ii) the continued use of the revolving credit and letter of credit portion of the pre-petition credit facility made available by the Tranche B Banks (the "Tranche B Facility") in an aggregate principal amount of $200 million which principal amount may be borrowed, paid and reborrowed. The Company's maximum borrowing under the Tranche A Facility, up to $250 million, may not exceed the lesser of 60% of Eligible Cost Value of Inventory or 50% of Eligible Retail Value of Inventory (the "Borrowing Base"). At January 31, 1998, the Borrowing Base was $217.4 million. The Extended DIP Facility has a sublimit of $175 million for the issuance of letters of credit. The Tranche B Facility must be fully utilized before the Company can borrow under the Tranche A Facility. In addition, the Extended DIP Facility provides for, among other things, capital expenditures not to exceed $16 million from January 31, 1998 through the maturity date, revised earnings before interest, taxes, depreciation, amortization and reorganization items ("EBITDAR") thresholds for the fiscal quarter ending May 2, 1998 and revised monthly inventory amounts through June 15, 1998. The Extended DIP Facility also contains restrictive covenants, including, among other things, limitations on the creation of additional liens and indebtedness, capital leases and annual rents, the sale of assets and a prohibition on the payment of dividends. The Company was in compliance with the financial covenants contained in the Extended DIP Facility at January 31, 1998.
The Extended DIP Facility provides that advances made (i) under the Tranche A Facility will bear interest at a rate of 0.75% per annum in excess of Chase's Alternative Base Rate ("ABR"), or at the Registrant's option, a rate of 1.75% per annum in excess of LIBOR for the interest periods of one, three or six months or (ii) under the Tranche B Facility will bear interest at 0.25% per annum in excess of ABR, or, at the Registrant's option, a rate of
1.0% per annum in excess of LIBOR. The Registrant incurred approximately $3 million in bank fees associated with the extension of the DIP Facility, which were paid in 1997. In all other material respects, the DIP Facility remains unchanged.
The Final Order provides that (i) the Company pay monthly interest payments on the outstanding principal amount of pre-petition indebtedness under the Term Loan and the real estate based loan agreement (the "Real Estate Loan") between the Company and Chase at an annual rate equal to LIBOR plus 3/4 of 1% and (ii) the lenders under such pre-petition facilities be granted a replacement security interest in and lien upon all of the properties and assets of the Company. The outstanding principal amounts on the Term Loan and the Real Estate Loan have been classified as liabilities subject to compromise on the consolidated balance sheets (see note 6).
Under the Tranche A Facility, the Company pays a commitment fee of 0.5% per annum on the unused portion thereof, a letter of credit fee equal to 1.5% per annum of average outstanding letters of credit and certain other fees. Under the Tranche B Facility, the Company pays a commitment fee of 0.3125% per annum on the unused portion thereof, a letter of credit fee equal to 0.75% per annum of average outstanding letters of credit and certain other fees. Commitment fees were approximately $0.9 million and $1.2 million in 1997 and 1996, respectively. Letter of credit fees were approximately $0.7 million and $0.5 million in 1997 and 1996, respectively.
The Tranche A Banks and the Tranche B Banks were granted a lien on all of the assets of the Debtors and a superpriority claim for all obligations of the Debtors arising under the Tranche A Facility and the Tranche B Facility, respectively. However, the claim of the Tranche B Banks is subordinate in priority to the claim of the Tranche A Banks. In addition, Chase, as agent, was granted a security interest in all of the shares of capital stock now or hereafter issued to the Registrant by certain of its subsidiaries.
At January 31, 1998 and February 1, 1997, the respective principal amounts outstanding were $187.7 million and $152 million in revolving credit borrowings and $61.8 million and $52.6 million in letters of credit, which were issued primarily to import merchandise in the normal course of the Company's business. The effective interest rate at January 31, 1998 and February 1, 1997 was 7.0% and 6.3%, respectively, on revolving credit borrowings.
The maximum amounts of revolving credit borrowings at any month-end were $300.2 million in 1997, $267 million in 1996 and $222.1 million in 1995. Average revolving credit borrowings outstanding were $210.5 million at a weighted average interest rate of 7.1% in 1997, $151.8 million at a weighted average interest rate of 6.6% in 1996 and $160.0 million at a weighted average interest rate of 7.2% in 1995.
The Company borrowed $10.9 million in 1996 under a construction loan relating to the Silver Spring, Maryland store. As of January 31, 1998 and February 1, 1997, the outstanding borrowings under this loan were $9.9 million and $10.5 million, respectively and bear interest at a rate of 1.75% per annum in excess of LIBOR. On March 25, 1998, the Company obtained Bankruptcy Court approval to close the Silver Spring, Maryland store in 1998, and accordingly, the outstanding balance of the loan as of January 31, 1998 has been classified as current maturities of long-term debt on the consolidated balance sheet.
The Registrant has received a commitment (the "Commitment") from BankBoston, N. A. ("BBNA") to provide the Company with separate fully underwritten and committed senior secured $450 million guaranteed revolving credit facilities for debtor-in-possession financing (the "New DIP Facility") and exit financing (the "Exit Facility", and together with the New DIP Facility, the "New Facilities"). The New DIP Facility will be used for the working capital and general business needs of the Company as well as to repay in full the Company's Extended DIP Facility. The Exit Facility will be used to provide for the working capital and general business needs of the reorganized Company beyond the Effective Date as well as to repay in full the New DIP Facility. BBNA intends, with the Company's consent, to syndicate part of the New Facilities to other financial institutions (collectively, including BBNA, the "Lenders").
BBNA's commitment to provide the New DIP Facility is subject to certain conditions precedent including approval by the Bankruptcy Court of the New DIP Facility. The New DIP Facility will be replaced by the Exit Facility on the effective date of a plan of reorganization (the "Effective Date") provided that the plan is not inconsistent with certain terms of the Commitment and is otherwise reasonably satisfactory to BBNA and that all conditions precedent to confirmation of the plan have been met. Among other things, the plan must provide for repayment in full of the New DIP Facility, the Company must have had a 12-month rolling EBITDAR on the closing date of the Exit Facility no less than $60 million (EBITDAR for the 1997 fiscal year was $53.7 million), and the Company's borrowing availability under the Exit Facility on the closing date thereof must exceed certain specified minimum levels.
The New DIP Facility will terminate on the earlier of (i) Effective Date or (ii) 18 months after the closing date for the New DIP Facility. The Exit Facility will terminate four years after the closing date of the New DIP Facility.
The Company's maximum borrowing under the New DIP Facility may not exceed the lesser of (a) the sum of (i) 72% (77% for the fiscal months of March through December of each year (the "Overadvance Rate") provided that the Overadvance Rate shall not increase the borrowing base by more than $30 million) of the cost value of the Company's Eligible Inventory and, without duplication, Eligible Letter of Credit Inventory, Eligible In Transit Inventory and Eligible FOB Inventory minus applicable Reserves, (ii) 80% of the Company's Eligible Accounts Receivable minus applicable Reserves (as such terms are defined in the New DIP Facility) and (iii) the lesser of (A) $45 million and (B) under certain circumstances, 70% of the agreed upon value of the Company's leasehold interests in real estate and (b) $450 million (the "New DIP Facility Borrowing Base"). The Company's maximum borrowing under the Exit Facility may not exceed the lesser of (a) the sum of (i) 75% (73% for the fiscal months of January and February of each year) of the cost value of the Company's Eligible Inventory and, without duplication, Eligible Letter of Credit Inventory, Eligible In Transit Inventory and Eligible FOB Inventory minus applicable Reserves, (ii) 80% of the Company's Eligible Accounts Receivable minus applicable Reserves (as such terms are defined in the New DIP Facility) and (iii) the lesser of (A) $40 million and (B) under certain circumstances, 60% of the agreed upon value of the Company's leasehold interests in real estate and (b) $450 million (the "Exit Facility Borrowing Base").
The New Facilities have a sublimit of $150 million for the issuance of letters of credit. The New Facilities also contain restrictive covenants, including, among other things, limitations on the creation of additional liens and indebtedness, capital leases and annual rents, the sale of assets, and the maintenance of minimum earnings before interest, taxes, depreciation, amortization and reorganization items, the maintenance of ratio of accounts payable to inventory levels, and a prohibition on the payment of dividends.
Advances under the New Facilities will bear interest, at the Company's option, at BBNA's Alternate Base Rate per annum or the Eurodollar Applicable Margin (i.e., the fully reserved adjusted Eurodollar Rate plus 2.25% or 2.75% during any period that the Company is utilizing the Overadvance Rate) for periods of one, two and three months. The Eurodollar Applicable Margin is subject to reduction by up to 0.50% if the Company achieves certain specified EBITDAR levels.
Under the New Facilities, the Company will pay an unused line fee of 0.25% per annum on the unused portion thereof, a letter of credit fee equal to 1.625% per annum of average outstanding letters of credit and certain other fees. In connection with the receipt of the Commitment and the closing of the New DIP Facility, the Company will pay fees to BBNA of approximately $5.6 million. The Company will also pay BBNA an annual agency fee of $150,000.
Obligations of the Company under the New DIP Facility will be granted (i) superpriority administrative claim status pursuant to section 364 (c) (1) of the Bankruptcy Code, subject only to an exclusion for certain administrative and professional fees and (ii) secured perfected first priority security interests in and liens upon all assets of the Company. Obligations of the Company under the Exit Facility will be granted secured perfected first priority security interests in and liens upon all assets of the Company.
NOTE 6 - LIABILITIES SUBJECT TO COMPROMISE
Liabilities subject to compromise are subject to future adjustments depending on Bankruptcy Court actions and further developments with respect to disputed claims. Liabilities subject to compromise were as follows:
Liabilities subject to compromise under reorganization proceedings include substantially all current and long-term unsecured debt as of the date of the Filing. Pursuant to the provisions of the Bankruptcy Code, payment of those liabilities may not be made except pursuant to a plan of reorganization or Bankruptcy Court order while the Debtors continue to operate as debtors-in-possession. The Company has recorded an estimated liability for certain leases that have either been rejected or the Company anticipates rejecting.
Accounts payable subject to compromise was reduced by reclamation payments of $1.5 million and a reduction to the liability for vendor claims of $2 million (see note 7). The outstanding principal amount of the Term Loan was reduced by application of the closing sale proceeds of $2.2 million for the 1996 Closed Stores and $1.4 million in payments related to the reclamation program. Rejected leases and other miscellaneous claims increased to reflect lease rejection claims for the Under-Performing Stores. Accrued expenses were reduced principally by payments for rent, real estate taxes and common area maintenance charges relating to assumed leases, pursuant to Section 365 of the Bankruptcy Code. Capital lease obligations were reduced by normal amortization and the reclassification of leases assumed in 1997 to long-term debt.
NOTE 7 - COST OF MERCHANDISE SOLD
During 1995, the Company recorded reserves for additional vendor claims of approximately $29 million estimated to result upon the reconciliation of pre-petition liabilities and for anticipated losses on the liquidation of inventories in 1996 of approximately $39 million. Based upon actual claims reconciliation experience, the Company reduced its provision and liability for vendor claims by approximately $2 million and $15 million in 1997 and 1996, respectively. In addition, the Company refined its practice of capitalizing certain costs in inventory, which resulted in additional cost of merchandise sold in 1996 of approximately $13 million upon liquidation of such inventories. The impact of these items, which was included in cost of merchandise sold in 1997 and 1996, was not material to the Company's consolidated financial position or results of operations.
NOTE 8 - REORGANIZATION ITEMS
The components of reorganization items and accrual activity that were directly associated with the Company's Chapter 11 reorganization proceedings and the resulting restructuring of its operations were as follows:
Cash payments made in 1997 included $8.1 million for professional fees, $5.1 million for severance payments, $2.0 million for bankruptcy expenses and $1.7 million for store closing expenses. Cash payments made in 1996 included $15.9 million for professional fees, $3.8 million for severance payments, $7.2 million for bankruptcy expenses and $3.0 million for store closing expenses. Cash payments in 1995 were $1.5 million for bankruptcy expenses and $1.6 million for professional fees.
As discussed in note 1, the Company closed 12 under-performing stores in 1996 and four under-performing stores in 1997. The Company identified, and on March 25, 1998, the Bankruptcy Court approved, the closing of the Under-Performing Stores. The Company completed a liquidation sale at one of the locations and has retained a liquidator who is currently conducting store closing sales at the other locations. The provision for closed stores covers costs associated
with the closing of the stores and primarily relates to fixed asset and inventory write-offs. The lease obligations and related reserves for the facilities closings include numerous real property leases rejected and to be rejected (including three previously assumed leases) and amounts for other executory contracts that have been identified for rejection pursuant to Section 365 of the Bankruptcy Code and are reflected at the estimated amount of the eventually allowed claims of the lessors in the Chapter 11 case as prescribed by Section 502 of the Bankruptcy Code for the rejection of leases. Forty-five of the Company's store leases, including three which were rejected in 1996, are guaranteed by the Company's former parent, The May Company. In 1989 as part of its leveraged buyout from May Company, the Company agreed to indemnify May Company for any damages incurred by May Company under its guaranties. The Company's liability to May Company for amounts paid by May Company under its guaranties of these leases, if rejected, may not be limited under Section 502 of the Bankruptcy Code. As a pre-petition claim, however, this liability is subject to compromise and discharge. The costs relating to these facilities closings are based on management's best estimates, however actual costs could differ from those presently recorded in the consolidated financial statements. Net sales of the Under-Performing Stores were approximately $156.9 million, $157.1 million and $132.9 million in 1997, 1996 and 1995, respectively. Net sales of the 1997 Closed Stores were approximately $8.0 million, $92.6 million and $88.2 million during 1997, 1996 and 1995, respectively. Net sales of the 1996 Closed Stores were approximately $18.1 million and $133.6 million during 1996 and 1995, respectively.
NOTE 9 - STOCK COMPENSATION PLANS
At January 31, 1998, the Company had four stock-based compensation plans which are described below. The Company applies Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its stock-based compensation plans other than for its restricted stock awards. The Company determined that had compensation cost for the Company's stock-based compensation plans been determined consistent with the methodology prescribed under SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"), the impact on the Company's net loss and loss per share would not be material. The effects of applying SFAS No. 123 are not indicative of future results as SFAS No. 123 does not take into consideration compensation expense related to awards granted prior to 1995.
a. Stock Option Plans - The Company's 1995 Stock Option Plan for Key Employees, 1991 Stock Option Plan for Key Employees and 1991 Stock Option Plan for Directors provide for the granting of options to purchase 1,500,000 shares of the Company's common stock to key employees and directors. The option price under the plans is the fair market value of the shares on the grant date. Exercise terms are determined at each grant date. Stock options granted during 1995 and 1994 become exercisable in installments of 25% per year on each of the first through fourth anniversaries of the grant date and have a maximum term of ten years.
A summary of the status of the Company's three stock option plans and changes during the years ended January 31, 1998, February 1, 1997 and February 3, 1996 is presented below:
b. Stock Appreciation Rights and Restricted Stock Plan - The Company's 1994 Performance Stock Appreciation Rights ("SARs") and Restricted Stock Plan provides for the granting of 1,300,000 shares of the Company's common stock to key employees in the form of SARs or as restricted stock. No more than 546,000 shares will be granted as restricted stock.
During fiscal 1995, 225,000 SARs were granted at a weighted average fair market value of $18.63. No SARs were granted during 1997 or 1996. At January 31, 1998, SARs which had been awarded and were outstanding amounted to 5,000 shares at a price of $31.88, 7,500 shares at a price of $18.75 and 5,000 shares at a price of $13.50. No compensation expense was recognized in connection with the granting of SARs.
During fiscal 1996 and 1995, 191,169 and 216,188 restricted stock awards at a weighted average fair market value of $4.00 and $21.44, respectively, were granted to certain key employees at no cost to these employees. There were no restricted stock awards granted during 1997. The outstanding restricted stock awards vest on the later of three years subsequent to the 1996 award date or six months following the date of a plan of reorganization. The cost of restricted stock awards, based on the stock's fair market value at the award date is charged to stockholders' equity and subsequently amortized against earnings over the vesting period. In 1997, the Company amortized $0.5 million and for 1996 and 1995 $0.9 million per year of unamortized compensation related to restricted stock awards. At January 31, 1998, 183,718 shares were outstanding under restricted stock awards.
NOTE 10 - SHAREHOLDER RIGHTS PLAN
On August 2, 1995, the Company adopted a Shareholder Rights Plan and declared a distribution of one Right for each outstanding share of Common Stock, par value $.01 per share (the "Company Common Stock"). Such Rights only become exercisable ten business days after a person or group (an "Acquiring Person") acquires beneficial ownership of, or commences a tender or exchange offer for, 15% or more of the Company's Common Stock (the "Stock Acquisition Date").
Each Right entitles the holder to purchase from the Company one one-hundredth of a share of Series A Preferred Stock, par value $.01 per share, at a purchase price of $64 for each one one-hundredth of a share, subject to adjustment. Thereafter, upon the occurrence of certain events (for example, if the Company is the surviving corporation of a merger with an Acquiring Person), each holder of a Right will have the right to receive, upon exercise, shares of Preferred Stock (or, in certain circumstances, Common Stock, cash, property or other securities of the Company) having a value of twice the exercise price of the Rights. Alternatively, upon the occurrence of certain other events (for example, if the Company is acquired in a merger or other business combination in which the Company is not the surviving corporation), each holder (other than the Acquiring Person) of a Right will have the right to receive, upon exercise, shares of Common Stock of the surviving corporation having a value of twice the exercise price of the Rights.
At any time until 10 business days following the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (subject to adjustment in certain events) payable at the option of the Company. The Rights will expire on August 2, 2005.
NOTE 11 - INCOME TAXES
The provision (benefit) for income taxes included the following:
A reconciliation between income taxes computed using the effective income tax rate and the statutory income tax rate is as follows:
The tax effect of temporary differences and carry forwards which give rise to deferred tax assets and liabilities were as follows:
The Company and its subsidiaries file a consolidated federal income tax return. For tax reporting purposes, the Company has adopted the year ending on the Thursday occurring nearest to the last day of the calendar month of October.
The Company has certain federal and state net operating loss carryforwards at October 1997 which will expire in the years 1998 through 2012. The Company has an alternative minimum tax credit carryforward of approximately $6.0 million available to offset future regular income taxes payable to the extent such regular taxes exceed alternative minimum taxes payable. The Company has approximately $6.1 million of targeted jobs tax credit carryforwards, which expire in the years 2005 through 2010. The valuation allowance relates to the uncertainty associated with future realization of net operating loss carryforwards, credit carryforwards and certain deductible temporary differences.
NOTE 12 - EXTRAORDINARY ITEM
During February 1995, the Company amended its credit agreement to increase the amortizing Term Loan to $215 million. Using $50 million in Term Loan borrowings and $16 million of non-amortizing revolver borrowings, the Company executed, on February 7, 1995, an in-substance defeasance of the outstanding 15% Senior Subordinated Notes (the "Notes") by depositing $66 million of U.S. government securities into an irrevocable trust to cover the redemption value (including principal, call premium and interest) of the Notes on June 1, 1995, at which time the Notes were called. For financial reporting purposes, the Notes were considered extinguished during the first quarter of fiscal 1995, and the defeasance transaction resulted in an extraordinary loss of $8.4 million. During the fourth quarter of fiscal 1995, the previously recorded tax benefit from this extraordinary loss was reversed and allocated to continuing operations.
NOTE 13 - LEASE OBLIGATIONS AND COMMITMENTS
The Company leases the majority of its stores and certain equipment under noncancelable leases. Certain of the store leases provide for contingent rentals based on sales. Substantially all of the store leases require the Company to pay taxes, insurance and other occupancy costs and contain renewal options which range from 5 to 60 years.
Rental expense for operating leases consisted of:
Excluding leases rejected or identified to be rejected, future minimum lease payments at January 31, 1998 for each of the next five years were as follows:
NOTE 14 - INTEREST EXPENSE, NET
Interest expense, net, included the following:
NOTE 15 - BENEFIT PLANS
a. Pension Plans - The Company has three defined benefit plans, which cover employees ("Associates") who meet certain requirements including age, length of service, and hours worked per year. The benefits provided are based upon years of service and compensation during employment. The Caldor Corporation Retirement Plan and the Supplemental Executive Retirement Plan were amended effective August 1, 1996 to discontinue additional accruals for participants. The Caldor Pension Plan and Trust was amended on October 1, 1997 to discontinue additional accruals for participants. Under both the Caldor Corporation Retirement Plan and the Caldor Pension Plan and Trust, benefits accrued prior to the effective dates of the future accrual discontinuations, are not affected by these changes and current participants not yet fully vested are eligible to vest with additional years of service after such dates.
Contributions to the pension plans, which are made solely by the Company, are determined by an outside actuarial firm. To compute net pension costs, the actuarial firm estimates the total benefits which will ultimately be paid to eligible Associates and then allocates these costs to service periods. Each of the actuarial assumptions used to calculate pension costs is reviewed annually. The following tables summarize the funded status of the pension plans, components of pension expense and actuarial assumptions.
At December 31, 1997, the Company recorded a minimum pension liability of $2.1 million in accordance with SFAS No. 87, "Employers' Accounting for Pensions."
B. Profit Sharing Plan - The Company has a profit sharing plan pursuant to Section 401 of the Internal Revenue Code, whereby eligible participants (all nonunion Associates who meet certain hour requirements) may contribute a percentage of compensation, but not in excess of the maximum allowed. The plan provides for matching contributions and additional contributions depending upon achievement of specific earnings levels. Charges to earnings for the Company's contributions during 1997, 1996 and 1995 were approximately $0.7 million, $0.9 million and $1.0 million, respectively.
C. Employee Retention Plan - Included in reorganization costs for 1997, 1996 and 1995 are charges of $1.7 million, $15.0 million and $12.5 million, respectively for the employee retention program. The Company has implemented an employee retention program, which provides for retention payments and enhanced severance payments to key employees who continue their employment with the Company during the Chapter 11 proceedings. The retention plan provides, among other things, a payment to be made to employees upon confirmation of a plan of reorganization and a second payment 6 months thereafter. The severance plan provides for enhanced severance payments and change in control severance payments to be made to certain employees upon involuntary termination.
NOTE 16 - CONTINGENCIES
As a result of the Filing, the prosecution of litigation against the Debtors involving matters arising prior to the Filing is stayed. Such stay may be lifted by the Bankruptcy Court handling the bankruptcy proceedings in appropriate circumstances.
Four class actions against certain former officers of the Company were brought on behalf of all persons who purchased the Company's stock during specified periods of time. The Company is not a defendant in these actions (three of which have been consolidated). A proof of claim was filed in the Chapter 11 case by the plaintiffs in the consolidated action. Although it is required to indemnify the defendants to the extent required by Delaware law, the Company has directors' and officers' liability coverage. The amount of liability, if any, related to these actions is not presently determinable. As a pre-petition claim, any liability to the Company would be subject to compromise. These actions are believed by the Company to be without merit and will be vigorously defended.
The Company and certain of its subsidiaries are defendants in various other actions commenced by vendors, customers, former employees and others. Other persons have asserted similar claims against the Company but have not made those claims the subject of litigation. However, cases that relate to a claim that arose before the Filing generally were stayed pursuant to Section 362 of the Bankruptcy Code and are to be dealt with as part of the claims reconciliation process. The Company believes that the ultimate outcome of the foregoing actions and claims pending against the Company and its subsidiaries will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company.
EXHIBIT INDEX -------------
EXHIBIT NUMBER DESCRIPTION - -------------- -----------
3.1 Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8, filed September 28, 1994, File No. 33-84526 (the "1994 Form S-8")).
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1, filed September 10, 1990, File No. 33-35157 (the "1990 Registration Statement")).
4.1 Rights Agreement dated as of August 2, 1995 between the Company and Chemical Bank, as Rights Agent (incorporated by reference to Exhibit 1.1 to the Company's Registration Statement on Form 8-A, filed on August 11, 1995).
10.1 Credit Agreement dated as of October 21, 1993 (the "Credit Agreement") among the Company, Caldor, Inc. - NY, Caldor, Inc. - CT, certain lenders named therein and Chemical Bank as Administrative Agent and Fronting Bank (incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K, reporting an event occurring on October 21, 1993, File No. 1-10745 (the "October 1993 Form 8-K")).
10.1(i) First Amendment dated as of August 16, 1994, to the Credit Agreement among the Company, Caldor, Inc.-NY, Caldor, Inc.-CT, the lenders listed on the signature pages thereto, Chemical Bank as Administrative Agent, the Fronting Banks named therein and the Swingline Lender named therein (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K reporting an event occurring on August 16, 1994, File No. 1-10745).
10.1(ii) Second Amendment dated as of February 6, 1995, to the Credit Agreement among the Company, Caldor, Inc.-NY, Caldor, Inc.-CT, the lenders listed on the signature pages thereto, Chemical Bank as Administrative Agent, the Fronting Banks named therein and the Swingline Lender named therein (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K reporting an event occurring on February 6, 1995, File No. 1-10745 (the "February 1995 Form 8-K")).
10.1(iii) Third Amendment dated as of April 18, 1995, to the Credit Agreement among the Company, Caldor, Inc.-NY, Caldor, Inc.-CT, the lenders listed on the signature pages thereto, Chemical Bank as Administrative Agent, the Fronting Banks named therein and the Swingline Lender named therein (incorporated by reference to Exhibit 99.8 to the February 1995 Form 8-K).
10.1(iv) Fifth Amendment dated as of August 7, 1995 to the Credit Agreement among the Company, Caldor, Inc.-NY, Caldor, Inc.-CT, Chemical Bank as Administrative Agent, and the lenders listed on the signature pages thereto (incorporated by reference to Exhibit 99.7 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 29, 1995, File No. 1-10745 (the "July 1995 Form 10-Q")).
10.1(v) Amended and Restated Revolving Credit and Guaranty Agreement dated as of October 17, 1995 (the "DIP Agreement") among the Company as borrower, Caldor, Inc.-CT and Caldor, Inc.-NY as retail guarantors, the other subsidiaries of the borrower named therein as guarantors, the banks party thereto and Chemical Bank as agent (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K reporting an event occurring on October 17, 1995, File No. 1-10745 (the "October 1995 Form 8-K")).
10.1(vi) Amendment Letter Agreement dated April 24, 1996 to the DIP Agreement among the Company as borrower, certain of its subsidiaries as guarantors, the banks party thereto and Chemical Bank (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K reporting an event occurring on May 7, 1996, File No. 1-10745).
10.1(vii) Second Amendment dated as of June 28, 1996 to the DIP Agreement among the Company as borrower, certain of its subsidiaries as guarantors, the banks party thereto and Chemical Bank (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K reporting an event occurring on July 16, 1996, File No. 1-10745).
10.1(viii) Four Store Amendment Letter Agreement dated as of March 12, 1997 to the DIP Agreement among the Company as borrower, certain of its subsidiaries as guarantors, the banks party thereto and The Chase Manhattan Bank, N.A. (formerly, Chemical Bank) ("Chase") (incorporated by reference to Exhibit 10.1 (viii) to the Company's Annual Report on Form 10-K for the year ended February 1, 1997, File No. 1-10745 (the "1996 Form 10-K").
10.1(ix) Fourth Amendment dated as of April 30, 1997 to the DIP Agreement among the Company as borrower, certain of its subsidiaries as guarantors, the banks party thereto and Chase (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended May 3, 1997, File No. 1-10745).
10.2 Form of Term Note (contained in Exhibit 10.1 as Exhibit A-3).
10.3 Guarantee Agreement dated as of October 21, 1993 among Lacdor Realty Corp., Premier Service Programs, Inc. and Chemical Bank as Collateral Agent (incorporated by reference to Exhibit 99.7 to the October 1993 Form 8-K).
10.4 Guarantee, dated as of April 13, 1995 (the "Guarantee") from the Company, Caldor, Inc.-NY and Caldor, Inc.-CT to Chemical Bank as agent (incorporated by reference to Exhibit 99.4 to the February 1995 Form 8-K) .
10.4(i) Second Amendment dated as of August 7, 1995 to the Guarantee from the Company, Caldor, Inc.-NY and Caldor, Inc.-CT in favor of Chemical Bank as agent and the lenders party thereto (incorporated by reference to Exhibit 99.8 to the July 1995 Form 10-Q).
10.5 Amended and Restated Pledge Agreement dated as of April 13, 1995 between the Company and Chemical Bank as Collateral Agent (incorporated by reference to Exhibit 99.5 to the February 1995 Form 8-K).
10.5(i) Amended and Restated Pledge Agreement dated as of October 17, 1995 between the Company and Chemical Bank as agent for the banks party to the DIP Agreement (incorporated by reference to Exhibit 99.2 to the October 1995 Form 8-K). 10.6 Amended and Restated Security Agreement dated as of April 13, 1995 among the Company, Caldor, Inc.-NY, Caldor, Inc.-CT and Chemical Bank as Collateral Agent (incorporated by reference to Exhibit 99.6 to the February 1995 Form 8-K).
10.6(i) Amended and Restated Security Agreement dated as of October 17, 1995 between the Company and Chemical Bank as agent for the banks party to the DIP Agreement (incorporated by reference to Exhibit 99.3 to the October 1995 Form 8-K).
10.7 Collateral Agent Agreement dated as of April 13, 1995 among the Company, Caldor, Inc.-CT, Caldor Lease Financing Trust and Chemical Bank as Collateral Agent and agent for the lenders party thereto (incorporated by reference to Exhibit 99.7 to the February 1995 Form 8-K).
10.8 Credit Agreement dated as of August 8, 1995 among the Company, Caldor, Inc.-NY, Caldor, Inc.-CT and Chemical Bank as Administrative Assistant and as Collateral Agent (incorporated by reference to Exhibit 99.6 to the July 1995 Form 10-Q).
10.9 Amended and Restated Stockholders' and Warrant Holders' Agreement dated as of May 24, 1990 among the Company, Odyssey Partners, L.P., May Funding, Inc., certain institutional investors named therein, certain management stockholders named therein and certain members of the Investor Group (as defined therein) named therein (the "Amended and Restated Stockholders' and Warrant Holders' Agreement") (incorporated by reference to Exhibit 10.7 to the 1990 Registration Statement).
10.9(i) Amendment No. 1, dated as of August 24, 1990 to the Amended and Restated Stockholders' and Warrant Holders' Agreement (incorporated by reference to Exhibit 10.6(i) to the Company's Annual Report on Form 10-K for the year ended February 1, 1992, File No. 1-10745 (the "1991 Form 10-K")).
10.9(ii) Amendment No. 2 dated as of March 14, 1991 to the Amended and Restated Stockholders' and Warrant Holders' Agreement (incorporated by reference to Exhibit 10.6(ii) to the 1991 Form 10-K).
10.9(iii) Amendment No. 3 dated as of March 14, 1991 to the Amended and Restated Stockholders' and Warrant Holders' Agreement (incorporated by reference to Exhibit 10.6(iii) to the 1991 Form 10-K).
10.9(iv) Amendment No. 4 dated as of January 26, 1993 to the Amended and Restated Stockholders' and Warrant Holders' Agreement (incorporated by reference to Exhibit 4.11(iv) to the Company's Registration Statement on Form S-3, filed on January 27, 1993, File No. 33-57476 (the "1993 Registration Statement")).
10.9(v) Amendment No. 5 dated as of January 26, 1993 to the Amended and Restated Stockholders' and Warrant Holders' Agreement (incorporated by reference to Exhibit 4.11(v) to the 1993 Registration Statement).
10.9(vi) Amendment No. 6 dated as of September 28, 1994 to the Amended and Restated Stockholders' and Warrant Holders' Agreement (incorporated by reference to Exhibit 4.8(vi) to the Company's Registration Statement on Form S-3, filed on September 29, 1994, File No. 33-84488). 10.10+ Employment Agreement dated as of April 15, 1996 between the Company and Warren D. Feldberg (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K, reporting an event occurring on June 7, 1996, File No. 1-10745 (the "June 1996 Form 8-K")).
10.10(i)+ Amendment dated as of June 7, 1996 to the Employment Agreement between the Company and Warren D. Feldberg (incorporated by reference to Exhibit 99.2 to the June 1996 Form 8-K).
10.11+ Employment Agreement dated April 24, 1991 between the Company and Elliot J. Kerbis (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended February 3, 1996, File No. 1-10745 (the "1995 Form 10-K")).
10.11(i)+ Amendment dated June 20, 1995 to the Employment Agreement between the Company and Elliott J. Kerbis (incorporated by reference to Exhibit 10.13 (i) to the 1995 Form 10-K).
10.12+ Employment Agreement dated April 24, 1991 between the Company and Dennis M. Lee (incorporated by reference to Exhibit 10.14 to the 1995 Form 10-K).
10.12(i)+ Amendment dated June 20, 1995 to the Employment Agreement between the Company and Dennis M. Lee (incorporated by reference to Exhibit 10.14 (i) to the 1995 Form 10-K).
10.13+ Employment Agreement dated as of January 29, 1996 between the Company and John G. Reen (incorporated by reference to Exhibit 99.1 to the Company's current Report on Form 8-K, reporting an event occurring on March 6, 1996, File No. 1-10745) (the "March 1996 Form 8-K").
10.13(i)+ Amendment dated March 5, 1996 to the Employment Agreement between the Company and John G. Reen (incorporated by reference to Exhibit 99.2 to the March 1996 Form 8-K).
10.14+ Employment Agreement dated as of August 16, 1996 between the Company and Susan Sprunk.*
10.14(i)+ Agreement dated October 3, 1997 between the Company and Susan Sprunk.*
10.15+ Caldor, Inc. Retirement Plan, effective January 1, 1990 (incorporated by reference to Exhibit 10.25 to the 1990 Registration Statement).
10.16+ Caldor, Inc. Supplemental Non-Qualified Retirement Plan, effective February 1, 1990 (incorporated by reference to Exhibit 10.32 to the Company's Registration Statement on Form S-1, filed on March 18, 1991, File No. 33-39475).
10.17+ Caldor, Inc. Profit Sharing Plan, amended and restated effective January 1, 1991 (incorporated by reference to Exhibit 28.01(b) to the Company's Registration Statement on Form S-8, filed on January 9, 1992, File No. 33-44996). 10.18+ The Caldor Performance Incentive Plan (incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended January 28, 1995, File No. 1-10745).
10.18(i)+ Summary of Amendment to The Caldor Performance Incentive Plan (incorporated by reference to Exhibit 10.19 (i) to the 1995 Form 10-K).
10.19+ 1991 Stock Option Plan for Directors, as amended through May 25, 1994 (incorporated by reference to Exhibit 99.1 of the 1994 Form S-8).
10.19(i)+ 1991 Stock Option Plan for Directors, as amended through October 31, 1996 (incorporated by reference to Exhibit 10.19(i) to the 1996 Form 10-K).
10.20+ 1991 Stock Option Plan for Key Employees, as amended through May 25, 1994 (incorporated by reference to Exhibit 99.2 of the 1994 Form S-8).
10.20(i)+ 1991 Stock Option Plan for Key Employees, as amended through October 31, 1996 (incorporated by reference to Exhibit 10.20 (i) to the 1996 Form 10-K).
10.21+ 1993 Retainer Stock Plan for Non-Employee Directors (incorporated by reference to Exhibit 99.3 of the 1994 Form S-8).
10.22+ 1994 Performance SAR and Restricted Stock Plan (incorporated by reference to Exhibit 10.23 to the 1995 Form 10-K).
10.22(i)+ 1994 Performance SAR and Restricted Stock Plan as amended through October 31, 1996 (incorporated by reference to Exhibit 10.22(i) to the 1996 Form 10-K).
10.23+ 1995 Stock Option Plan for Key Employees (incorporated by reference to Exhibit 10.24 to the 1996 Form 10-K).
10.23(i)+ 1995 Stock Option Plan for Key Employees as amended through October 31, 1996 (incorporated by reference to Exhibit 10.23 (i) to the 1996 Form 10-K) .
10.24+ Summary of Severance Program (incorporated by reference to Exhibit 10.25 to the 1995 Form 10-K).
10.25+ Summary of Performance Retention Program (incorporated by reference to Exhibit 10.26 to the 1995 Form 10-K).
10.26 Commitment Letter dated April 24, 1998 between BankBoston N.A. and the Registrant.*
11 Statement regarding the computation of per share earnings.*
21 List of Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the 1995 Form 10-K).
23 Consent of Deloitte & Touche LLP*
27 Financial Data Schedule *
* Filed herewith
+ Management contract or compensation plan or arrangement required to be noted as provided in Item 14(a)(3).