VALUE MERCHANTS, INC. SEEKS TO AMEND 11 PERCENT SUBORDINATED NOTES AND OFFERS EXCHANGE FOR 9 PERCENT CONVERTIBLE SUBORDINATED NOTES; FIRST QUARTER RESULTS ANNOUNCED FOR PERIOD ENDED MAY 1, 1993
MILWAUKEE, July 13 /PRNewswire/ -- Value Merchants, Inc. (NYSE: VMI), a national retailer of close-out merchandise and the nation's largest wholesaler of close-out toys, today announced that in connection with the company's attempt to obtain a $60 to $65 million line of credit to finance its current and Christmas season merchandise needs and provide the company with the working capital needed to continue its business, it is seeking the consent of the holders of the company's 11 percent Subordinated Notes due Aug. 1, 1999, to amend the indenture to reduce the minimum consolidated net worth that the company is required to maintain at the end of each quarter from $55.0 to $35.0 million. The company also is offering to exchange up to a majority in principal amount of the Subordinated Notes for its newly issued 9 percent Convertible Subordinated Notes due Aug. 1, 1999. These new notes are convertible into shares of the company's common stock at a conversion price of $4.25.
EXCHANGE OFFER AND CONSENT SOLICITATION
In order to improve the company's current financial position, the company has developed a Refinancing Plan which, if implemented, provides for a $60 to $65 million working capital facility, the participation of the company's current bank group and others in the facility on terms which must be acceptable to all parties, substantial modifications of agreements with other lenders and the deferred payment of a substantial portion of trade payables, rents and other obligations until Dec. 31, 1993, reduction of operating expenses and consents to amend the minimum consolidated net worth requirement through the exchange offer. Noteholder consent is required by July 30, 1993. The Exchange offer expires at 5 p.m. Milwaukee, Wis., time on Aug. 9, 1993, unless extended. If the proposed amendment to the Subordinated Note Indenture is not approved, the company could be in violation of the net worth covenant as of the end of the second fiscal quarter of 1993. This could prevent the company from being able to refinance or extend the maturity of the existing senior indebtedness or consummate the new working capital credit facility. The company's new lenders may not agree to a Refinancing Plan if the Subordinated Notes are in default. Approval of the amendment to the indenture does not necessarily mean that the company's Refinancing Plan will be implemented or if implemented that it will be successful. Since fiscal 1992, the company has experienced significant liquidity constraints and increasing operating losses. In the absence of the consummation of the Refinancing Plan, the company may be forced to seek protection from creditors under federal bankruptcy laws. "We have determined that completion of the various elements of the Refinancing Plan is in the best interest of the company, its shareholders, noteholders and other creditors," according to Steven J. Appel, president and chief executive officer. "The Refinancing Plan is specifically designed to increase the company's cash position, replace capital absorbed by operating losses and enable the company to grow and compete effectively in its markets," he stated. "It would enable the company to restore the confidence of the company's suppliers and should permit management and employees to focus without distraction on the company's ongoing business and operations." The company previously reported that the Refinancing Plan has "already received extraordinarily gratifying initial support from a significant majority of our creditors," Appel said. "There can be no assurance, however, that all of the support we need to implement the new credit facility will be obtained or that the other conditions to the facility will be satisfied." The consent of a majority in principal amount of the outstanding Subordinated Notes is required to approve the proposed amendment to the indenture.
FIRST QUARTER RESULTS
Value Merchants, Inc. also announced that for the first quarter ended May 1, 1993, the company had a loss of $9,944,000, or $1.34 per share on 7,396,000 weighted average common shares outstanding, compared with a loss of $3,654,000 or $0.49 per share on 7,411,000 weighted average common shares outstanding for the first quarter a year ago ended May 23, 1992. Sales for the period this year totaled $73,324,000, a gain of 9.8 percent from sales of $66,759,000 for the first quarter of fiscal 1992. The company has changed its reporting period to reflect the predominant retail reporting calendar. Accordingly, its first quarter of fiscal 1993 was 13 weeks long. The first quarter of fiscal 1992 was 16 weeks long. "The increase in the first quarter loss is attributable largely to an imbalance in the merchandise assortment of Everything's $1.00 stores resulting from working capital constraints," Appel stated. "Additionally, financial results reflect cautious consumer spending attitudes during the quarter," he said. Everything's $1.00 comparable store sales for the period declined 19.7 percent from a year ago and Toy Liquidators comparable store sales for the period were down 8.9 percent from a year ago. Following is a summary of results for the first quarters of fiscal 1993 and fiscal 1992: First Quarter Ended First Quarter Ended May 1, 1993 May 23, 1992 Net sales: EAD variety $56,779,000 $46,440,000 Toy operations 16,545,000 20,319,000 Total net sales 73,324,000 66,759,000 Net income (loss) ($9,944,000) ($3,654,000) Loss per share ($1.34) ($0.49) Weighted average shares 7,396,000 7,411,000 Retail stores operating: EAD 420 275 Toy 120 116 Total Stores 540 391 The company anticipates that it will incur substantial losses in the second and third fiscal quarters of 1993, and if the Refinancing Plan is consummated, earn a modest profit in the fourth quarter. VALUE MERCHANTS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE 13 WEEKS ENDED MAY 1, 1993 AND THE 16 WEEKS ENDED MAY 23, 1992 May 1, 1993 May 23, 1992 NET SALES $73,324,000 $66,759,000 COST OF SALES, INCLUDING WAREHOUSE EXPENSES 46,059,000 39,361,000 Gross profit 27,265,000 27,398,000 OPERATING EXPENSES: Selling and store expenses 31,648,000 24,130,000 General and administrative expenses 5,842,000 6,650,000 Structuring and store opening expenses 1,499,000 1,208,000 Total operating expenses 38,989,000 31,988,000 Loss from operations (11,724,000) (4,590,000) INTEREST EXPENSE, NET 2,482,000 1,485,000 Loss before income tax benefit (14,206,000) (6,075,000) INCOME TAX BENEFIT (4,262,000) (2,421,000) Net loss ($9,944,000) ($3,654,000) Loss per common share ($1.34) ($0.49) Weighted average common shares outstanding 7,396,000 7,411,000 VALUE MERCHANTS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF MAY 1, 1993; JAN. 30, 1993; AND MAY 23, 1992 May 1, 1993 Jan. 30, 1993 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,222,000 $ 4,934,000 Accounts receivable, less allowance for doubtful accounts of $567,000, and $662,000, respectively 6,670,000 6,379,000 Inventories 106,919,000 109,718,000 Prepaid expenses and other current assets 12,187,000 7,125,000 Refundable income taxes 6,771,000 4,313,000 Total current assets 137,769,000 132,469,000 LEASEHOLD IMPROVEMENTS, FURNITURE AND EQUIPMENT: Leasehold improvements 36,141,000 33,783,000 Furniture and equipment 51,138,000 50,077,000 Costs for stores under construction 430,000 142,000 Total 87,709,000 84,002,000 Less: Accumulated depreciation and amortization 17,379,000 14,705,000 Net leasehold improvements, furniture and equipment 70,330,000 69,297,000 GOODWILL, net of accumulated amortization of $347,000, and $331,000 2,758,000 2,774,000 OTHER ASSETS 3,812,000 2,006,000 Total $214,669,000 $206,546,000 LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Short-term borrowings $ 33,022,000 $ 14,893,000 Accounts payable 46,062,000 43,687,000 Accrued salaries and wages 2,428,000 2,809,000 Accrued liabilities - other 5,887,000 7,316,000 Short term deferred tax liability 631,000 --- Current maturities of long-term debt 38,329,000 39,328,000 Total current liabilities 126,359,000 108,033,000 LONG-TERM DEBT 19,386,000 19,631,000 DEFERRED CREDITS 6,065,000 5,752,000 DEFERRED INCOME TAXES --- 570,000 SHAREHOLDERS' INVESTMENT: Cumulative preferred stock, par value $.10 per share, 2,000,000 shares authorized, none issued --- --- Common stock, par value, $.01 per share, 15,000,000 shares authorized, 7,418,149, and 7,378,202 shares issued and outstanding, respectively 74,000 74,000 Additional paid-in-capital 51,158,000 50,946,000 Retained earnings 12,131,000 22,075,000 Unamortized value of restricted stock (504,000) (535,000) Total shareholders' investment 62,859,000 72,560,000 Total $214,669,000 $206,546,000 May 23, 1992 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,649,000 Accounts receivable, less allowance for doubtful accounts $321,000 7,214,000 Inventories 96,988,000 Prepaid expenses and other current assets 7,016,000 Refundable income taxes 3,705,000 Total current assets 118,572,000 LEASEHOLD IMPROVEMENTS, FURNITURE AND EQUIPMENT: Leasehold improvements 19,479,000 Furniture and equipment 33,963,000 Costs for stores under construction 1,506,000 Total 54,948,000 Less: Accumulated depreciation and amortization 8,943,000 Net leasehold improvements, furniture and equipment 46,005,000 GOODWILL, net of accumulated amortization of $244,000 2,861,000 OTHER ASSETS 1,432,000 Total $168,870,000 LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Short-term borrowings $ 29,848,000 Accounts payable 25,093,000 Accrued salaries and wages 1,748,000 Accrued liabilities - other 3,367,000 Short term deferred tax liability --- Current maturities of long-term debt 4,218,000 Total current liabilities 64,274,000 LONG-TERM DEBT 27,059,000 DEFERRED CREDITS --- DEFERRED INCOME TAXES 1,098,000 SHAREHOLDERS' INVESTMENT: Cumulative preferred stock, par value $.10 per share, 2,000,000 shares authorized, none issued --- Common stock, par value, $.01 per share, 15,000,000 shares authorized, 7,291,729 shares issued and outstanding 73,000 Additional paid-in-capital 49,988,000 Retained earnings 26,378,000 Unamortized value of restricted stock --- Total shareholders' investment 76,439,000 Total $168,870,000 -0- 7/13/93 /CONTACT: Gary I. Kastel, director of communications for Value Merchants, Inc., 414-274-2976/ (VMI)
CO: Value Merchants, Inc. ST: Wisconsin IN: REA SU: ERN RCN
KL -- CL021 -- 1102 07/13/93 17:49 EDT
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|Date:||Jul 13, 1993|
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