0000276641-95-000004.txt : 19950816 0000276641-95-000004.hdr.sgml : 19950816 ACCESSION NUMBER: 0000276641-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950815 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: 95564419 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 DEC-31-1995 JUL-01-1995 26,809 0 843,650 35,451 597,521 1,600,870 547,385 161,902 2,324,414 609,005 1,123,605 107,718 0 0 431,750 2,324,414 1,217,620 1,378,907 843,202 843,202 0 (15,190) 49,859 (43,071) (18,796) (24,275) 0 0 0 (24,275) (0.22) (0.22)
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 July 1, 1995 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) 708-986-8800 (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, 1995 are as follows: Class A non-voting common stock, $1.00 par value 14,604,244 shares Class B voting common stock, $1.00 par value 93,141,654 shares. ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ SPIEGEL, INC. AND SUBSIDIARIES Due to the seasonality of the registrant's business, the results for the three and six month periods are not necessarily indicative of the results for the year. The financial statements have been prepared from the books and records of the registrant. They reflect all adjustments which are, in the opinion of management, necessary to a fair presentation of the results for the interim periods. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the registrant's Annual Report on Form 10-K, which includes financial statements for the year ended December 31, 1994. PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheets, July 1, 1995 and December 31, 1994 Consolidated Statements of Earnings, Three and Six Months Ended July 1, 1995 and July 2, 1994 Consolidated Statements of Cash Flows, Three and Six Months Ended July 1, 1995 and July 2, 1994 Notes to Consolidated Financial Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ Spiegel, Inc. and Subsidiaries Consolidated Balance Sheets ($000s omitted, except per share amounts) July 1, 1995 and December 31, 1994
(unaudited) July 1, December 31, 1995 1994 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 26,809 $ 33,439 Receivables, net 808,199 1,125,728 Inventories 597,521 597,781 Prepaid expenses: Catalog advertising 58,842 51,524 Other 30,897 29,446 Refundable income taxes 33,011 24,904 Deferred income tax benefit 45,591 45,580 ------------ ------------ Total current assets 1,600,870 1,908,402 Property and equipment, net 385,483 335,103 Intangibles, net 178,320 180,446 Other assets 159,741 136,336 ------------ ------------ $ 2,324,414 $ 2,560,287 ------------ ------------ ------------ ------------ LIABILITIES and STOCKHOLDERS' EQUITY Current liabilities: Short-term debt,including current maturities $ 200,171 $ 80,320 Accounts payable 190,201 265,752 Accrued liabilities: Salaries and wages 19,745 31,114 General taxes 106,384 118,266 Other accrued liabilities 92,504 132,894 ------------ ------------ Total current liabilities 609,005 628,346 Long-term debt, excluding current maturities 1,123,605 1,300,364 Deferred income taxes 52,336 52,360 ------------ ------------ Total liabilities 1,784,946 1,981,070 Stockholders' equity: Class A non-voting common stock, $1.00 par value; authorized 16,000,000 shares; issued 14,575,544 shares at July 1, 1995 and 15,065,244 at December 31, 1994 14,576 15,065 Class B voting common stock, $1.00 par value; authorized 94,000,000 shares; issued 93,141,654 shares at July 1, 1995 and December 31, 1994 93,142 93,142 Additional paid-in capital 211,621 215,800 Retained earnings 220,129 255,210 ------------ ------------ Total stockholders' equity 539,468 579,217 ------------ ------------ $ 2,324,414 $ 2,560,287 ------------ ------------ ------------ ------------
[FN] See accompanying notes to consolidated financial statements. ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ Spiegel, Inc. and Subsidiaries Consolidated Statements of Earnings ($000s omitted, except per share amounts) Fiscal Periods Ended July 1, 1995 and July 2, 1994 (unaudited)
Three Months Ended Six Months Ended July 1, July 2, July 1, July 2, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Net sales and other revenues: Net sales $ 636,759 $ 600,650 $1,217,620 $1,149,373 Finance revenue 45,323 56,975 109,329 115,207 Other revenue 17,198 17,452 51,958 32,631 ----------- ----------- ----------- ----------- 699,280 675,077 1,378,907 1,297,211 Cost of sales and operating expenses: Cost of sales, including buying and occupancy expenses 429,573 392,971 843,202 761,584 Selling, general and administrative expenses 272,580 250,741 528,917 474,912 ----------- ----------- ----------- ----------- 702,153 643,712 1,372,119 1,236,496 ----------- ----------- ----------- ----------- Operating income (loss) (2,873) 31,365 6,788 60,715 Interest expense 23,492 19,792 49,859 37,498 ----------- ----------- ----------- ----------- Earnings (loss) before income taxes (23,365) 11,573 (43,071) 23,217 Income tax provision (benefit) (11,505) 5,069 (18,796) 10,169 ----------- ----------- ----------- ----------- Net earnings (loss) $ (14,860) $ 6,504 $ (24,275) $ 13,048 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net earnings (loss) per common share $ (0.14) $ 0.06 $ (0.22) $ 0.12 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of common shares outstanding 107,716,627 108,191,064 107,934,394 108,171,958 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Spiegel, Inc. and Subsidiaries Consolidated Statements of Cash Flows ($000s omitted) Six Months Ended July 1, 1995 and July 2, 1994 (unaudited)
Six Months Ended July 1, July 2, 1995 1994 ------------ ------------ Net cash provided by (used in) operating activities $ 149,764 $ (159,943) ------------ ------------ Cash flows from investing activities: Net additions to property and equipment (73,169) (34,488) Net additions to other assets (10,842) (22,401) ------------ ------------ Net cash used in investing activities (84,011) (56,889) ------------ ------------ Cash flows from financing activities: Borrowings of debt 171,250 273,599 Payments of debt (228,159) (61,850) Dividends paid (10,805) (10,818) Issuance of common stock 0 (6,894) Repurchase of common stock (4,742) 0 Exercise of stock options 73 272 ------------ ------------ Net cash provided by financing activities (72,383) 208,097 ------------ ------------ Net change in cash and cash equivalents (6,630) (8,735) Cash and cash equivalents at beginning of period 33,439 47,389 ------------ ------------ Cash and cash equivalents at end of period $ 26,809 $ 38,654 ------------ ------------ ------------ ------------ Supplemental cash flow information: Cash paid during the year for: Interest $ 51,301 $ 37,808 Income taxes $ 4,387 $ 57,387 ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements. ------------------------------------------------------------------------- ------------------------------------------------------------------------- Spiegel, Inc. and Subsidiaries Notes to Consolidated Financial Statements ($000s omitted, except share amounts) (unaudited) (1) Adjustments The financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair presentation of the results for the periods presented. (2) Reclassifications Certain prior year amounts have been reclassified to conform to the current presentation. (3) Receivables During the first quarter of 1995, the Company transferred portions of its customer receivables to a trust which, in turn, sold certificates representing undivided interests in the trust to investors. Certificates sold were $350,000. This transaction increased other revenue by $18,637 in the first quarter. The Company owns the remaining undivided interest in the trust not represented by the certificates and will continue to service all receivables for the trust. (4) Treasury Stock During the first six months of 1995, the Company purchased and retird 500,000 shares of Class A Non-Voting Common Stock at market value for a total cost of $4,742. As discussed in the 1994 Annual Report on Form 10-K, the Executive Committee of the Board of Directors approved the purchase and retirement of up to 500,000 shares. ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- 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 July 1, 1995 As Compared To Three Months Ended July 2, 1994 ------------------------------------------- Net sales for the three months ended July 1, 1995, increased 6% to $636,759 compared to $600,650 for the three months ended July 2, 1994. This increase in the quarter was driven by retail sales which were approximately 22% above the second quarter 1994 levels. Eddie Bauer had 374 stores at the end of the second quarter of 1995 as compared to 306 at the same time in 1994. Eddie Bauer comparable store sales increased 3%. Finance revenues decreased 20% during the quarter due primarily to a net decrease in the receivables owned by the Company. There were $830,000 and $330,000 of receivables sold at July 1, 1995 and July 2, 1994, respectively. The gross profit margin on net sales declined to 32.5% for the three months ended July 1, 1995 compared to 34.6% for the comparable 1994 period. The decline is the result of a higher level of retail sales generated from the outlet divisions. In addition, catalog margins declined due to a shift in the mix of catalog sales towards home products as a result of weaker apparel sales. Home products generally carry a lower gross profit margin than apparel. Selling, general and administrative expenses as a percentage of total revenues for the three months ended July 1, 1995 and July 2, 1994 were 39.0% and 37.1%, respectively. This increase reflects the incremental expenses incurred as a result of the transition of the Company's catalog operations to the new distribution facility in Groveport, Ohio. The Company is anticipating an increased level of operating productivity from this facility, especially going into the higher volume holiday season. Also effecting selling, general and administrative expense are the increasing costs of producing and mailing catalogs driven by significantly higher paper costs and the postal rate increase effected in January, 1995. Interest expense for the three months ended July 1, 1995 increased 19% to $23,492 compared to $19,792 for the three months ended July 2, 1994. This increase is due to higher average debt levels as well as higher overall effective interest rates. Six Months Ended July 1, 1995 Compared With Six Months Ended July 2, 1994 ------------------------------------------ Net sales for the six months ended July 1, 1995 increased 6% to $1,217,620 compared to $1,149,373 for the six months ended July 1, 1994. While total catalog sales remained relatively flat for the first six months of 1995 as compared to the same period of 1994, total retail sales increased approximately 19%. This increase in retail sales was fueled primarily by an increase in the number of total Eddie Bauer retail stores to 374 at July 2, 1994 from 306 at July 1, 1994. Eddie Bauer comparable store sales decreased 1% for the first half of 1995 as compared to 1994 as the comparable store decrease from the first quarter of 1995 was only partially offset by the second quarter increase. ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Finance revenues decreased 5% during the six month period ended July 1,1995 as compared to the same period of 1994 due to the decrease of receivables owned by the Company as noted above. Other revenue for the first six months of this year includes a gain of $18,637 recognized on the sale of $350,000 of Preferred Card receivables in March, 1995. The gross profit margin on net sales declined to 30.7% for the six months ended July 1, 1995 compared to 33.7% for the comparable 1994 period. This decline is the result of a number of factors including a higher level of retail sales generated from the outlet divisions, aggressive markdowns taken in the first quarter to liquidate excess inventories remaining from 1994, and a shift in the mix of catalog sales towards lower gross profit margin home products as a result of weaker apparel sales. Selling, general and administrative expenses as a percentage of total revenues were 38.4% for the six months ended July 1, 1995 and 36.6% for the comparable period in 1994. As discussed previously, the Company experienced higher warehouse related costs during the first half of 1995 due to the transition of Spiegel catalog operations to the new facility. Also, the increased postal and paper costs in 1995 continue to be factors in the higher selling, general and administrative expenses. The 33% increase in interest expense for the six months ended July 1, 1995 as compared to the six months ended July 2, 1994 is driven by higher debt levels throughout the year as well as higher interest rates. Seasonality and Quarterly Fluctuations: --------------------------------------- The Company, like other retailers, experiences seasonal fluctuations in its merchandise sales and net income. 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 issuance of debt and the sale of customer accounts receivable. Total customer receivables sold were $830,000 at July 1, 1995 and $480,000 at December 31, 1994. Net cash provided by operating activities was $149,764 for the six month period ended July 1,1995 as compared to net cash used of $159,943 for the six month period ended July 2,1995. The net cash proceeds from the sale of $350,000 of accounts receivable were reported as operating cash flows in the six months ended July 1, 1995. During the first six months of 1995, funding of the Company's net loss as well as decreases in accounts payable and other accrued liabilities represented significant uses of cash . --------------------------------------------------------------------------- --------------------------------------------------------------------------- Net additions to property and equipment for the six months ended July 1, 1995 were $73,169 consisting primarily of capital spending related to the new retail distribution facility in Columbus, OH, continued Eddie Bauer retail store expansion, and the construction of a corporate headquarters addition at Eddie Bauer. The Company purchased and retired 500,000 shares of Class A Non-Voting Common Stock at a total cost of $4,742 during the first six months of 1995. The shares were purchased at market value, and they represent less than one percent of the Company's total shares outstanding. No additional shares are currently approved for repurchase. During the six months ended July 1, 1995, the Company incurred approximately $7,700 of expenditures related to the $39,000 nonrecurring charge taken in 1993. The charge provided for the estimated impact of closing certain of the Company's existing catalog distribution facilities. Expenditures incurred during the first six months of 1995 were primarily for certain employee termination benefits as well as inventory transfers from Spiegel warehouse operations in Chicago to the new facility in Groveport, Ohio. The remaining balance of the reserve at July 1, 1995, was $8,200. The Company believes that its cash on hand, together with cash flows anticipated to be generated from operations, borrowings under its existing credit facilities and other available sources of credit, will be adequate to fund the Company's capital and operating requirements for the foreseeable future, including expenditures related to distribution facilities and new store openings. In March, 1995, SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, was issued. This statement establishes accounting standards for the recognition of losses resulting from impairment of long-lived assets to be held and used or to be disposed of. The Company has not yet adopted this policy and is not required to adopt it until the 1996 fiscal year. However, management currently estimates that the effects of adoption of this statement will be immaterial. ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- 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 15, 1995 James W. Sievers (Chief Financial Officer)