Fays Inc – ‘8-K’ for 11/30/95

As of:  Friday, 12/15/95   ·   For:  11/30/95   ·   Accession #:  950130-95-2701   ·   File #:  1-07527

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Current Report   —   Form 8-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         7     27K 

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.   20549

FORM 8-K

CURRENT REPORT

Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): 
November 30, 1995 

FAY'S INCORPORATED
(Exact name of registrant as specified in its charter)

0-5179
(Commission File Number)

State of New York                     16-0919350                      
(State of Incorporation)              (I.R.S. Employer                
                           Identification No.)

7245 HENRY CLAY BOULEVARD, LIVERPOOL, NEW YORK   13088
(Address of principal executive offices)

Registrant's telephone number, including area code:  (315) 451-8000 

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ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS                                   

On October 20, 1995, the Registrant  and its wholly owned subsidiary, Wheels
Discount Auto Supply, Inc., entered into a definitive agreement ("Asset Purchase
Agreement" or the "Agreement") to sell the inventory and store assets used in   
the operation of its Wheels Discount Auto Supply Division ("Wheels" or "Wheels  
Division") to Western Auto Supply Company ("Western Auto"), a wholly owned      
subsidiary of Sears Roebuck and Co..  The Wheels Division consisted of 81       
discount automotive parts and supply stores operating in New York and in        
Pennsylvania.  The transfer of assets of the Wheels Division to Western Auto was
completed on November 30, 1995 (the "Closing Date").                            

 The purchase price for Wheels' inventory and stores assets is an amount equal
to the book value of such inventory and store assets on the Closing Date plus   
$4,500,000.  Except as specifically provided for in the Asset Purchase          
Agreement, Registrant will retain the liabilities of Wheels arising from the    
operations, activities and transactions through the Closing Date.  On the       
Closing Date, Western Auto remitted to Registrant an estimated purchase price of
$36,965,165 less $2,000,000 placed in escrow pending final determination of the 
closing purchase price.  In addition, on the Closing Date Western Auto retained 
$700,000 pending delivery of landlord consents to the assignment of 14 leases   
($50,000 per consent) not delivered as of the Closing Date.                     

 The closing purchase price will be determined after completion of an audit of
Wheels' Closing Date balance sheet.  Calculation of the closing purchase price  
based on the audited closing balance sheet is subject to binding arbitration in 
the event Western Auto disagrees with such calculation in an amount exceeding   
$150,000.                                                                       

 Under the terms of the Agreement, Registrant made various representations and
warranties and has agreed to indemnify Western Auto for any breaches thereof.   
No indemnification shall be made in favor of Western Auto unless all claims for 
such indemnification exceed in the aggregate $350,000.  Registrant's maximum    
indemnification obligation for such losses is $17,500,000.                      

On the Closing Date, Registrant also entered into various agreements with   
Western Auto pursuant to the Asset Purchase Agreement including: (a) subleases  
for two (2) leases under which Registrant continues to conduct retail           
operations;  (b) assignment of four (4) leases for stores not being operated by 
Wheels; and, (c) an agreement whereby Registrant will provide certain           
transitional distribution and office services to Western Auto.                  

There are no material relationships between the Registrant or any of its    
affliates, officers, directors or any associate of such director or officer and 
Western Auto or any of its affiliates, directors or offficers or any associates 
of such directors or officers.                                                  

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ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS                                      

(a)  Financial Statements of Business Acquired                                  

Not applicable                                                              

(b)  Pro Forma Financial Information                                            

 The following unaudited pro forma condensed consolidated financial statements
are filed with this report.                                                     

Pro Forma Condensed Consolidated Balance                                    
 Sheet at October 28, 1995 ........................................ Page F-1
Pro Forma Condensed Consolidated Statements of Net Earnings:                
   Year Ended January 28, 1995 .................................... Page F-2
   Thirty-Nine Weeks Ended October 28, 1995 ....................... Page F-3

The Pro Forma Condensed Consolidated Balance Sheet of Registrant at October 
28, 1995 reflects the financial position of Registrant after giving effect to   
the disposition of the assets and assumption of liabilities discussed in Item 2 
and assumes that the disposition took place on October 28, 1995.  The Pro Forma 
Condensed Consolidated Statements of Net Earnings for the fiscal year ended     
January 28, 1995 and the thirty-nine weeks ended October 28, 1995 assume that   
the disposition occurred on January 30, 1994, and are based on the operations of
Registrant for the year ended January 28, 1995 and the thirty-nine weeks ended  
October 28, 1995.  These statements are based on preliminary analyses and       
estimates, and are subject to further adjustment including adjustments in the   
assumed purchase price as detailed in Item 2.                                   

 The unaudited pro forma condensed consolidated financial statements have been
prepared by Registrant based upon assumptions deemed proper by it. The unaudited
pro forma condensed consolidated financial statements presented herein are shown
for illustrative purposes only and are not necessarily indicative of the future 
financial position or future results of operations of Registrant, or of the     
financial position or results of operations of Registrant that would have       
actually occurred had the transaction been in effect as of the date or for the  
periods presented.                                                              

 The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the historical financial statements and related notes  
of Registrant.                                                                  

(c)  Exhibits                                                                   

2.  Asset Purchase Agreement by and among Wheels Discount Auto Supply, Inc.,    
  Fay's Incorporated and Western Auto Supply Company dated October 20, 1995.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the    
registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

                                        FAY'S INCORPORATED
                                        ------------------
                                          (Registrant)

                                             /s/ James F. Poole, Jr.
                                             -----------------------
                                         James F. Poole, Jr.
                                                   Senior Vice President-Finance
                                                 and Chief Financial Officer

                                               Dated:  December 15, 1995

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FAY'S INCORPORATED AND SUBSIDIARIES 
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands of dollars) 

                                                        [Enlarge/Download Table]


                                                           Pro Forma Adjustments                 
                                                           ---------------------                 

                                             Historical     WDA (a)     Other           Pro Forma
                                             ----------     -------     ------          ---------
                                                                                                 
Current Assets:                                                                                  
  Cash                                    $       1,625  $      81   $  39,568  (b)  $     41,112
  Accounts receivable                            34,267        383         133  (c)        34,017
  Merchandise inventories                       184,973     22,750                        162,223
  Prepaid expenses                                6,928        871         245  (c)         6,302
  Refundable income taxes                         1,424          -           -              1,424
                                                -------     ------      ------            -------
    Total Current Assets                        229,217     24,085      39,946            245,078

Deferred Income Taxes                             1,572                                     1,572
Property and Equipment, net                      72,179     11,510       2,200  (d)        62,869
Intangible and Other Assets, net                 31,130      4,211           -             26,919
                                                -------     ------      ------            -------
Total Assets                              $     334,098  $  39,806   $  42,146       $    336,438
                                                =======     ======      ======            =======

Current Liabilities:                                                                             
  Notes payable, bank                     $      14,855  $           $               $     14,855
  Accounts payable, trade                        86,811      9,210       9,210  (e)        86,811
  Accrued payroll and related taxes               7,729        321         896  (e)         8,304
  Other current liabilities                      21,282      2,717       2,200  (e)        20,765
  Federal and state income taxes payable              -                    119  (e)           119
  Current portion of long-term debt and                                                          
    obligation under leases                      10,147          -           -             10,147
                                                -------     ------      ------            -------
    Total Current Liabilities                   140,824     12,248      12,425            141,001

Long-Term Debt                                   74,127                                    74,127
Obligation Under Leases                           1,282                                     1,282
Deferred Gain and Other Liabilities               3,236                  2,000  (e)         5,236
Accrued Postretirement Benefit                                                                   
 Obligation                                       7,394                                     7,394
Total Stockholders' Equity                      107,235     27,558      27,721            107,398
                                                -------     ------      ------            -------
                                          $     334,098  $  39,806   $  42,146       $    336,438
                                                =======     ======      ======            =======


--------------------                                                            
(a)  To eliminate the assets and liabilities included in the balance sheet of   
  the Company's Wheels Discount Auto Supply Division ("WDA") as of October
28, 1995.                                                             
(b)  To reflect the proceeds from the sale of WDA based on the net book value of
   assets as of October 28, 1995. The actual purchase price will be based on
   the net book value of assets at November 30, 1995 and accordingly amounts
     presented here may not be indicative of the actual proceeds to be realized.
(c)  To reflect accounts receivable and prepaid expenses retained by the        
Company.                                                              
(d)  To reflect fixed assets retained by the Company for sale net of adjustments
    to reduce carrying value of such assets to estimated net realizable value.
(e)  To reflect liabilities retained by the Company, transaction costs, and the 
accrual of costs associated with a lease commitment on a vacant       
distribution facility retained by the Company.                        

F-1 

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FAY'S INCORPORATED AND SUBSIDIARIES 
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS 
FOR THE YEAR ENDED JANUARY 28, 1995 
(Unaudited) 
(in thousands of dollars except per share data) 

                                                        [Enlarge/Download Table]


                                                       Pro Forma Adjustments                  
                                                       ---------------------                  

                                         Historical     WDA (a)      Other           Pro Forma
                                         ----------     -------     -------          ---------

                                                                                              
Net sales                             $   1,038,110  $  64,142   $                $    973,968

Costs and Expenses:                                                                           
-------------------                                                                           
Cost of merchandise sold                    735,324     36,924                         698,400
Selling, general and administrative         255,976     23,538         175   (b)       232,613
Depreciation and amortization                16,264      1,633                          14,631
Interest expense, net                         8,493      1,064      (1,125)  (c)         6,304
                                          ---------     ------      ------             -------
  Total cost and expenses                 1,016,057     63,159        (950)            951,948
                                          ---------     ------      ------             -------

Earnings before income taxes                 22,053        983         950              22,020
Provision for income taxes                    9,417        414         406               9,409
                                          ---------     ------      ------             -------
Net earnings                          $      12,636  $     569   $     544        $     12,611
                                          =========     ======      ======             =======

Average shares outstanding including                                                          
  common stock equivalents                   20,357                                     20,357

Earnings per share                    $         .62                               $        .62
                                          =========                                    =======


---------------------------                                                     
(a)  To eliminate the profit of WDA for the entire period.                      
(b)  To reflect costs that would not have been eliminated due to the sale of    
WDA.                                                                  
(c)  To reflect estimated reduction in interest cost.                           

F-2 

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FAY'S INCORPORATED AND SUBSIDIARIES 
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS 
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 28, 1995
(Unaudited) 
(in thousands of dollars except per share data) 

                                                        [Enlarge/Download Table]


                                                       Pro Forma Adjustments                 
                                                       ---------------------                 

                                         Historical     WDA (a)     Other           Pro Forma
                                         ----------     -------     ------          ---------
                                                                                             
Net sales                             $     808,927  $  64,111   $               $    744,816

Costs and Expenses:                                                                          
-------------------                                                                          
Cost of merchandise sold                    580,726     37,904                        542,822
Selling, general and administrative         203,524     23,943        130   (b)       179,711
Depreciation and amortization                12,884      1,392                         11,492
Interest expense, net                         6,676      1,009       (927)  (c)         4,740
                                            -------     ------       ----             -------
  Total cost and expenses                   803,810     64,248       (797)            738,765
                                            -------     ------       ----             -------

Earnings before income taxes                  5,117       (137)       797               6,051
Provision for income taxes                    2,152        (53)       335               2,540
                                            -------     ------       ----             -------
Net earnings                          $       2,965  $     (84)  $    462        $      3,511
                                            =======     ======       ====             =======

Average shares outstanding including                                                         
  common stock equivalents                   20,830                                    20,830

Earnings per share                    $         .14                              $        .17
                                            =======                                   =======


----------------------------                                                    
(a)  To eliminate the profit of WDA for the entire period.                      
(b)  To reflect costs that would not have been eliminated due to the sale of    
WDA.                                                                  
(c)  To reflect estimated reduction in interest cost.                           

F-3 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-K’ Filing		Date		First		Last			Other Filings
Filed on:		12/15/95		4					8-K/A
For Period End:		11/30/95		1		5
		10/28/95		3		7			10-Q
		10/20/95		2		3
		1/28/95		3		6			10-K405
		1/30/94		3
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