-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U8GYcIFi3ZEBl313qUn6nTHbprlXQLVG7uka78qcBoiRlrZUtWIpXWqNqBwsVPug 9gXSI/LUKYV76asViqVcDA== 0000276641-97-000006.txt : 19970813 0000276641-97-000006.hdr.sgml : 19970813 ACCESSION NUMBER: 0000276641-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPIEGEL INC CENTRAL INDEX KEY: 0000276641 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 362593917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16126 FILM NUMBER: 97657263 BUSINESS ADDRESS: STREET 1: 3500 LACEY RD CITY: DOWNERS GROVE STATE: IL ZIP: 60515-5432 BUSINESS PHONE: 7089868800 MAIL ADDRESS: STREET 1: 3500 LACEY ROAD CITY: DOWNERS GROVE STATE: IL ZIP: 60515-5432 EX-27 1 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 1,000 6-MOS JAN-03-1998 JUN-28-1997 44,398 0 390,761 9,960 514,207 1,108,319 578,911 189,947 1,851,916 476,874 776,150 118,107 0 0 428,748 1,851,916 1,215,875 1,298,055 835,699 835,699 0 0 32,522 (75,750) (31,058) (44,692) 0 0 0 (44,692) (0.39) (0.39)
10-Q 2 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended June 28, 1997 or / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ............. to ............... Commission file number 0-16126 SPIEGEL, INC. (Exact name of registrant as specified in its charter) Delaware 36-2593917 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3500 Lacey Road, Downers Grove, Illinois 60515-5432 (Address of principal executive offices) (Zip Code) 630-986-8800 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS The number of shares outstanding of each of the issuer's classes of common stock, as of August 8,1997 are as follows: Class A non-voting common stock, $1.00 par value 14,627,104 shares Class B voting common stock, $1.00 par value 103,483,298 shares. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SPIEGEL, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheets, June 28, 1997 and December 28, 1996 Consolidated Statements of Earnings, Three and Six Months Ended June 28, 1997 and June 29, 1996 Consolidated Statements of Cash Flows, Six Months Ended June 28, 1997 and June 29, 1996 Notes to Consolidated Financial Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Consolidated Balance Sheets ($000s omitted, except per share amounts)
(unaudited) June 28, December 28, 1997 1996 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 44,398 $ 86,917 Receivables, net 380,801 485,242 Inventories 514,207 502,209 Prepaid expenses 84,106 84,634 Refundable income taxes 49,275 16,991 Deferred income taxes 35,532 35,542 ------------ ------------ Total current assets 1,108,319 1,211,535 Property and equipment, net 388,964 399,910 Intangibles, net 165,098 166,275 Other assets 189,535 167,905 ------------ ------------ Total Assets $ 1,851,916 $ 1,945,625 ------------ ------------ ------------ ------------ LIABILITIES and STOCKHOLDERS' EQUITY Current liabilities: Current maturities of debt $ 52,850 $ 89,292 Indebtedness to related parties -- 20,000 Accounts payable 172,553 270,973 Accrued liabilities: Salaries and wages 22,414 36,636 General taxes 107,360 127,170 Allowance for returns 24,474 41,691 Other accrued liabilities 97,224 109,634 ------------ ------------ Total current liabilities 476,875 695,396 ------------ ------------ Long-term debt, excluding current maturities 771,150 676,656 Indebtedness to related parties 5,000 -- Deferred income taxes 52,036 52,024 ------------ ------------ Total liabilities 1,301,061 1,424,076 Stockholders' equity: Class A non-voting common stock, $1.00 par value; authorized 16,000,000 shares; 14,624,104 shares issued and outstanding at June 28, 1997 and 14,618,404 at December 28, 1996 14,624 14,618 Class B voting common stock, $1.00 par value; authorized 104,000,000 shares; 103,483,298 shares issued and outstanding at June 28, 1997 and 93,141,654 at December 28, 1996 103,483 93,142 Additional paid-in capital 271,480 211,828 Minimum pension liability (9,365) (9,365) Retained earnings 166,633 211,326 ------------ ------------ Total stockholders' equity 546,855 521,549 ------------ ------------ $ 1,851,916 $ 1,945,625 ------------ ------------ ------------ ------------
[FN] See accompanying notes to consolidated financial statements. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Consolidated Statements of Earnings ($000s omitted, except per share amounts) (unaudited)
Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Net sales and other revenues: Net sales $ 646,090 $ 623,870 $1,215,875 $1,213,331 Finance revenue 38,715 33,266 61,243 61,607 Other revenue 11,438 11,465 20,937 28,344 ----------- ----------- ----------- ----------- 696,243 668,601 1,298,055 1,303,282 Cost of sales and operating expenses: Cost of sales, including buying and occupancy expenses 434,764 408,225 835,699 812,117 Selling, general and administrative expenses 264,844 246,465 505,584 481,096 ----------- ----------- ----------- ----------- 699,608 654,690 1,341,283 1,293,213 ----------- ----------- ----------- ----------- Operating income (loss) (3,365) 13,911 (43,228) 10,069 Interest expense 16,152 21,195 35,522 42,701 ----------- ----------- ----------- ----------- Earnings (loss) before income taxes (19,517) (7,284) (75,750) (32,632) Income benefit (6,034) (3,987) (31,058) (15,014) ----------- ----------- ----------- ----------- Net earnings (loss) $ (13,483) $ (3,297) $ (44,692) $ (17,618) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net earnings (loss) per common share $ (0.11) $ (0.03) $ (0.39) $ (0.16) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of common shares outstanding 118,106,457 107,746,760 114,184,116 107,746,629 ------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
[FN] See accompanying notes to consolidated financial statements. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Consolidated Statements of Cash Flows ($000s omitted) (unaudited)
Six Months Ended June 28, June 29, 1997 1996 ------------ ------------ Cash flows from operating activities Net earnings (loss) $ (44,692) $ (17,618) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 41,583 41,248 Gain on sale of receivables (19,672) -- Change in assets and liabilities: Increase (decrease) in sold customer receivables (149,734) 30,000 Decrease in receivables, net 254,175 125,855 (Increase) decrease in inventories (11,998) 49,236 Decrease in prepaid expenses 527 12,487 Decrease in accounts payable (98,419) (80,365) Decrease in accrued liabilities (63,660) (42,546) Decrease in income taxes (32,262) (13,294) ----------- ------------ Total adjustments (79,460) 122,621 ----------- ------------ Net cash provided by (used in) operating activities (124,152) 105,003 ------------ ------------ Cash flows from investing activities: Net additions to property and equipment (18,899) (18,352) Net additions to other assets (12,519) (19,312) ------------ ------------ Net cash used in investing activities (31,418) (37,664) ------------ ------------ Cash flows from financing activities: Issuance of debt 124,500 300,250 Payment of debt (81,448) (373,786) Issuance of Class B common stock 69,972 -- Exercise of stock options 27 11 ------------ ------------ Net cash provided by (used in) financing activities 113,051 (73,525) ------------ ------------ Net change in cash and cash equivalents (42,519) (6,186) Cash and cash equivalents at beginning of period 86,917 42,302 ------------ ------------ Cash and cash equivalents at end of period $ 44,398 $ 36,116 ------------ ------------ ------------ ------------ Supplemental cash flow information: Cash paid during the year for: Interest $ 32,856 $ 43,360 Income taxes $ 4,533 $ 2,077 ------------ ------------ ------------ ------------
[FN] See accompanying notes to consolidated financial statements. - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- Spiegel, Inc. and Subsidiaries Notes to Consolidated Financial Statements ($000s omitted, except per share amounts) (unaudited) (1) Basis of Presentation The consolidated financial statements at June 28, 1997 are unaudited and have been prepared from the books and records of the registrant in accordance with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission. All adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of financial position and operating results for the interim periods are reflected. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the registrant's most recent Annual Report on Form 10-K, which includes financial statements for the year ended December 28, 1996. Due to the seasonality of the registrant's business, the results for interim periods are not necessarily indicative of the results for the year. (2) Reclassifications Certain prior period amounts have been reclassified to conform to the current presentation. (3) Indebtedness to related parties In the second quarter of 1997, the Company made the final $20,000 principal payment on the loan from the Company's majority shareholder, Spiegel Holdings, Inc., which existed as of December 28, 1996. In addition, the Company replaced $20,000 of the $25,000 loan from 3 Suisses BVG (a wholly owned subsidiary of Otto Versand) received in the first quarter of 1997 with a term loan from an unrelated party. As of June 28, 1997, the total indebtedness to related parties outstanding was $5,000, bearing interest at a variable rate based on LIBOR plus a margin, due in its entirety in August, 1999. (4) Issuance of Class B common stock On March 7, 1997, the Company issued 10,341,644 shares of Class B voting common stock to its majority shareholder, Spiegel Holdings, Inc. The net proceeds of $69,972 are being used primarily to fund capital needs, including the continued expansion of Eddie Bauer. (5) Gains on sale of customer receivables In 1997, the Company implemented Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". Due to the revolving nature of sales of customer receivables held by trusts, a pretax gain of $19,672 was recognized under the provisions of this new accounting standard in the second quarter. This gain is recorded as Finance Revenue in the Consolidated Statements of Earnings. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (000's omitted except per share amounts) Results of Operations: Three Months Ended June 28, 1997 As Compared To Three Months Ended June 29, 1996 Net sales for the three months ended June 28, 1997, were $646,090 which was a 3.6% increase compared to net sales of $623,870 for the three months ended June 29, 1996. Sales increases from Eddie Bauer's retail and catalog divisions were significantly offset by sales decreases at Spiegel Catalog. Eddie Bauer's retail sales increased by 11.9% compared to the same period last year, with a comparable store sales increase of 2%. Total Company catalog sales were flat for the period as the growth of Eddie Bauer's catalog operations offset the lower Spiegel Catalog sales. Spiegel Catalog continues to be affected by lower productivity and response rates experienced in catalog mailings. Finance revenue for the second quarter of 1997 increased to $38,715 from $33,266 a year earlier. Revenues were favorably affected by a pretax gain of $19,672 on the sale of customer receivables recognized pursuant to SFAS No. 125. This gain was offset somewhat by lower finance revenues generated as a result of a lower average level of owned customer receivables. The gross profit margin on net sales decreased to 32.7% for the three months ended June 28, 1997, compared to 34.6% for the comparable 1996 period. This decrease was driven by lower gross profit margins at Spiegel Catalog reflecting a higher level of markdowns taken in an effort to promote sales and manage inventory risk. Selling, general and administrative expenses as a percentage of total revenues for the three months ended June 28, 1997 and June 29, 1996 were 38.0% and 36.9%, respectively. This increase was primarily due to approximately $10,000 in expenses associated with the restructuring activities of Spiegel Catalog, which included reserves for the closing of certain facilities and a work force reduction of approximately 125 Spiegel Catalog associates. Other factors contributing to the increase included less leverage of selling, general and administrative expenses, especially advertising expense, at Spiegel Catalog as a result of lower productivity from catalog offerings. Interest expense for the three months ended June 28, 1997 decreased 23.8% to $16,152 compared to $21,195 for the three months ended June 29, 1996. This decrease was due to reduced average debt levels resulting from a lower level of owned customer receivables and from the $69,972 net proceeds from the issuance of Class B voting stock in March 1997. Six Months Ended June 28, 1997 As Compared To Six Months Ended June 29, 1996 Net sales for the six months ended June 28, 1997 and June 29, 1996 were $1,215,875 and $1,213,331, respectively. Eddie Bauer's retail sales increased 11.3% over last year, with a comparable store sales increase of 3%. Total Company catalog sales were lower than last year by 4.7%. This decrease was driven by Spiegel Catalog as it continues to be affected by the lower productivity of catalog mailings as well as by the tightened credit policies on the Company's Preferred Credit Card. Finance revenue for the six month period ended June 28, 1997, was $61,243 compared to $61,607 for the same period in 1996. A pretax gain of $19,672 on the sale of customer receivables was recognized during the 1997 period under the provisions of SFAS No. 125. Offsetting this gain was a decrease in finance revenues resulting from a significantly lower level of average owned receivables compared to 1996 due to sales of customer receivables, as well as decreases in sales on the Company's proprietary credit card. Other revenue was $20,937 and $28,344 for the six month periods ended June 28, 1997 and June 29, 1996, respectively. This decrease was due primarily to the sale of the Company's technology consulting subsidiary at the end of the first quarter of 1996. The gross profit margin on net sales decreased to 31.3% for the six months ended June 28, 1997 from 33.1% for the comparable 1996 period. This decrease was driven by lower gross profit margins at Spiegel Catalog reflecting a higher level of markdowns taken in an effort to promote sales and manage inventory risk. Selling, general and administrative expenses as a percentage of total revenues for the six months ended June 28, 1997 and June 29, 1996 were 39.0% and 36.9%, respectively. This increase was primarily due to approximately $10,000 in expenses associated with the restructuring activities of Spiegel Catalog, which included reserves for the closing of certain facilities and a work force reduction of approximately 125 Spiegel Catalog associates. Other factors contributing to the increase included less leverage of selling, general and administrative expenses, especially advertising expense, at Spiegel Catalog as a result of lower productivity from catalog offerings. The 1996 ratio was favorably impacted by the gain of approximately $8,000 realized on the sale of the Company's information technology subsidiary, as well as the favorable impact of a $4 million reversal of the provision for doubtful accounts on customer receivables sold in the first quarter of 1996. Interest expense for the six months ended June 28, 1997 decreased 23.8% to $32,522 compared to $42,701 for the six months ended June 29, 1996. This decrease was due to reduced average debt levels resulting from a lower level of owned customer receivables and from the $69,972 net proceeds from the issuance of Class B voting stock in March 1997. Seasonality and Quarterly Fluctuations: The Company, like other retailers, experiences seasonal fluctuations in its merchandise sales and net earnings. Historically, a disproportionate amount of the Company's net sales and a majority of its net earnings have been realized during the fourth quarter. Accordingly, the results for the individual quarters are not necessarily indicative of the results to be expected for the entire year. Liquidity and Capital Resources: The Company has historically met its operating and cash requirements through funds generated from operations, the sale of customer accounts receivable, and the issuance of debt and common stock. Total customer receivables sold were $1,313,996 at June 28, 1997, $1,463,730 at December 28, 1996 and $1,210,000 at June 29, 1996. Net cash used by operating activities was $124,152 for the six month period ended June 28, 1997 compared to net cash provided by operations of $105,003 for the six month period ended June 29, 1996. This net $229,155 increase in cash used for operations over the comparable period last year is attributable to several factors. Net cash provided by receivables was lower by $51,414 in the 1997 period due primarily to a decrease in sold customer receivables. The net $61,234 increase in inventories in the 1997 period compared to 1996 represents an increase in inventories at Eddie Bauer to support its growth. Other significant uses of cash in the 1997 period include an additional decrease in accounts payable and accrued liabilities of $58,136 compared to last year and the funding of the $44,692 net loss. Net additions to property and equipment for the six months ended June 28, 1997 and June 29, 1996 were $18,899 and $18,352, respectively. The capital spending in 1997 was primarily related to continued Eddie Bauer retail store expansion. On March 7, 1997, the Company issued 10,341,644 shares of Class B voting common stock its majority shareholder, Spiegel Holdings, Inc. The net proceeds of $69,972 are being used primarily to fund capital needs, including continued expansion of Eddie Bauer. In February 1997, the FASB issued SFAS No. 128, "Earnings per Share," effective for both interim and annual periods ending after December 15, 1997. The Company will adopt the new standard, as required, in the fourth quarter of 1997. For the three and six months ended June 28, 1997, SFAS No. 128 would not have had a material impact on the Company's loss per share calculation. SFAS No. 130, "Reporting Comprehensive Income", effective for fiscal years beginning after December 15, 1997, establishes standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company is evaluating the Statement's provisions to conclude how it will present comprehensive income in its financial statements, and has not yet determined the amounts to be disclosed. The Company will adopt the new standard, as required, in fiscal year 1998. SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", effective for fiscal years beginning after December 15, 1997, establishes standards for the way public business enterprises report financial and descriptive information about reportable operating segments in annual financial statements and interim financial reports issued to stockholders. The Company is evaluating the new Statement's provisions to determine the additional disclosures required in its financial statements, if any. The Company will adopt SFAS No. 131 in fiscal year 1998. The Company believes that its cash on hand, together with cash flows anticipated to be generated from operations, borrowings under its existing credit facilities, sales of customer receivables and other available sources of funds, will be adequate to fund the Company's capital and operating requirements for the foreseeable future. Forward Looking Statements: This report contains statements which are forward looking statements within the meaning of applicable federal securities laws and are based upon the Company's current expectations and assumptions. Such forward looking statements are subject to a number of risks and uncertainties which could cause actual results to materially differ from those anticipated including but not limited to, financial strength and performance of the retail and direct marketing industry, changes in consumer spending patterns, dependence on the securitization of accounts receivable to fund operations, the impact of competitive activities, inventory risks due to shifts in the market demand, risks associated with collections on the Company's credit card portfolios, interest rate fluctuations, and postal rate, paper or printing cost increases, as well as other risks indicated in other filings with the Securities and Exchange Commission such as the Company's most recent Form 10-K. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b). Reports on Form 8-K On June 26, 1997, the Company filed a report on Form 8-K announcing the early retirement of John J. Shea, Vice Chairman, President, and CEO, from the Company and the Board of Directors effective July 3, 1997. It further announced the formation of the Office of the President consisting of Harold S. Dahlstrand, Senior Vice President, Human Resources; Michael R. Moran, Senior Vice President and General Counsel; and James W. Sievers, Senior Vice President and Chief Financial Officer. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SIGNATURE Pursuant to the requirements 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. SPIEGEL, INC.
Signature Title Date - ------------------------- ------------------------ ---------------- /s/ James W. Sievers Senior Vice President August 12, 1997 James W. Sievers (Chief Financial Officer) /s/ D. L. Skip Behm Vice President - Controller August 12, 1997 D. L. Skip Behm (Chief Accounting Officer)
-----END PRIVACY-ENHANCED MESSAGE-----