-----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, SzFhzkf8H2MZc0gq3FKSwa0Ef35gN2ANTiaxbz91fDDerbsj3F4eY6mbOEFTWt3B WkBh84DiQWXakjLRp2QLZQ== 0000276641-96-000004.txt : 19960814 0000276641-96-000004.hdr.sgml : 19960814 ACCESSION NUMBER: 0000276641-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960813 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: 96611101 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-28-1996 JUN-29-1996 36,116 0 619,342 32,717 523,141 1,319,796 593,123 189,542 2,059,917 566,193 918,501 107,748 0 0 410,218 2,059,917 1,213,331 1,303,282 812,117 812,117 0 0 42,701 (32,632) (15,014) (17,618) 0 0 0 (17,618) (0.16) (0.16)
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 29, 1996 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 9,1996 are as follows: Class A non-voting common stock, $1.00 par value 14,611,424 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 30, 1995. PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheets, June 29, 1996 and December 30, 1995 Consolidated Statements of Earnings, Three and Six Months Ended June 29, 1996 and July 1, 1995 Consolidated Statements of Cash Flows, Six Months Ended June 29, 1996 and July 1, 1995 Notes to Consolidated Financial Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Item 5 - Other Information - ------------------------------------------------------ - ------------------------------------------------------ Consolidated Balance Sheets ($000s omitted, except per share amounts)
(unaudited) June 29, December 30, 1996 1995 ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 36,116 $ 42,302 Receivables, net 586,625 742,480 Inventories 523,141 572,377 Prepaid expenses 88,837 101,324 Refundable income taxes 42,944 29,560 Deferred income taxes 42,133 42,234 ------------ ------------ Total current assets 1,319,796 1,530,277 Property and equipment, net 403,581 412,934 Intangibles, net 172,738 173,088 Other assets 163,802 157,683 ------------ ------------ Total Assets $ 2,059,917 $ 2,273,982 ------------ ------------ ------------ ------------ LIABILITIES and STOCKHOLDERS' EQUITY Current liabilities: Current maturities of debt $ 134,328 $ 111,672 Accounts payable 176,162 256,527 Accrued liabilities: Salaries and wages 20,434 32,370 General taxes 114,685 125,504 Other accrued liabilities 120,584 140,375 ------------ ------------ Total current liabilities 566,193 666,448 Long-term debt, excluding current maturities 898,501 994,692 Indebtedness to related parties 20,000 20,000 Deferred income taxes 57,257 57,269 ------------ ------------ Total liabilities 1,541,951 1,738,409 Stockholders' equity: Class A non-voting common stock, $1.00 par value; authorized 16,000,000 shares; 14,606,324 shares issued and outstanding at June 29, 1996 and 14,604,844 at December 30, 1995 14,606 14,605 Class B voting common stock, $1.00 par value; authorized 94,000,000 shares; 93,141,654 shares issued and outstanding at June 29, 1996 and December 30, 1995 93,142 93,142 Additional paid-in capital 211,771 211,761 Minimum pension liability (8,650) (8,650) Retained earnings 207,097 224,715 ------------ ------------ Total stockholders' equity 517,966 535,573 ------------ ------------ $ 2,059,917 $ 2,273,982 ------------ ------------ ------------ -----------
[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 29, July 1, June 29, July 1, 1996 1995 1996 1995 ----------- ----------- ----------- ---------- Net sales and other revenues: Net sales $ 623,870 $636,759 $1,213,331 $1,217,620 Finance revenue 33,266 45,323 61,607 109,329 Other revenue 11,465 17,198 28,344 51,958 ----------- ----------- ----------- ----------- 668,601 699,280 1,303,282 1,378,907 Cost of sales and operating expenses: Cost of sales, including buying and occupancy expenses 408,225 429,573 812,117 843,202 Selling, general and administrative expenses 246,465 272,580 481,096 528,917 ----------- ----------- ----------- ----------- 654,690 702,153 1,293,213 1,372,119 ----------- ----------- ----------- ---------- Operating income (loss) 13,911 (2,873) 10,069 6,788 Interest expense 21,195 23,492 42,701 49,859 ----------- ----------- ----------- ----------- Earnings (loss) before income taxes (7,284) (26,365) (32,632) (43,071) Income tax benefit (3,987) (11,505) (15,014) (18,796) ----------- ----------- ----------- ----------- Net earnings (loss) $ (3,297) $ (14,860) $ (17,618) $ (24,275) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net earnings (loss) per common share $ (0.03) $ (0.14) $ (0.16) $ (0.22) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of common shares outstanding 107,746,760 107,716,627 107,746,629 107,934,394 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. - ----------------------------------------------------------- - ----------------------------------------------------------- Consolidated Statements of Cash Flows ($000s omitted) (unaudited)
Six Months Ended June 29, July 1, 1996 1995 ------------ ----------- Cash flows from operating activities Net earnings (loss) $ (17,618) $ (24,275) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 39,282 31,359 Gain on sale of receivables -- (18,637) Change in assets and liabilities: Sale of customer accounts receivable 30,000 350,000 (Increase) decrease in receivables, net 125,855 (32,471) Decrease in inventories 49,236 260 (Increase) decrease in prepaid expenses 12,487 (8,769) Decrease in accounts payable (80,365) (75,550) Decrease in accrued liabilities (42,546) (63,641) Decrease in income taxes (13,294) (8,143) ----------- ------------ Total adjustments 120,655 174,408 ----------- ----------- Net cash provided by operating activities 103,037 150,133 ------------ ------------ Cash flows from investing activities: Net additions to property and equipment (18,352) (73,169) Net additions to other assets (17,346) (11,211) ------------ ------------ Net cash used in investing activities (35,698) (84,380) ------------ ------------ Cash flows from financing activities: Issuance of debt 300,250 171,250 Payment of debt (373,786) (228,159) Dividends paid -- (10,805) Repurchase of common stock -- (4,742) Exercise of stock options 11 73 ------------ ------------ Net cash used in financing activities (73,525) (72,383) ------------ ------------ Net change in cash and cash equivalents (6,186) (6,630) Cash and cash equivalents at beginning of period 42,302 33,439 ------------ ----------- Cash and cash equivalents at end of period $ 36,116 $ 26,809 ------------ ------------ ------------ ------------ Supplemental cash flow information: Cash paid during the year for: Interest $ 43,360 $ 51,301 Income taxes $ 2,077 $ 4,387 ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements. - ----------------------------------------------------------------- - ----------------------------------------------------------------- Notes to Consolidated Financial Statements ($000s omitted) (unaudited) (1) Adjustments The financial statements reflect all adjustments, consisting only of normal accruals, 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) Long-term debt In March 1996, the Company replaced certain of its existing credit arrangements with new credit facilities and modified certain conditions of other senior and subordinated term indebtedness. These changes were made to strengthen the Company's liquidity and provide for future growth. The Company established a new $600 million revolving credit agreement with a group of 23 banks. The Company also increased its existing asset backed commercial paper program to $600 million from $400 million with a corresponding increase in the back-up credit line with the same group of 23 banks. The $400 million asset backed commercial paper program had been established in December 1995, as a prelude to these financing modifications. Simultaneously with the establishment of these new credit facilities, the Company canceled a $600 million commercial paper facility and a $300 million revolving credit facility. The Company also sold a net amount of $30,000 of customer receivables during the first six months of 1996. (4) Indebtedness to related parties In addition to the loan from the Company's majority shareholder, Spiegel Holdings, Inc., which existed as of December 30, 1995, in the first quarter of 1996, the Company received a term loan from 3 Suisses BVG (a wholly owned subsidiary of Otto Versand) for $25,000. This loan will be repaid $5,000 in 1996, $5,000 in 1997 and $15,000 in 1998 and bears interest at a rate of 5.92%. As of June 29, 1996, the total indebtedness to related parties outstanding was $55,000. The current portion is included in the Company's balance sheet under "Current maturities of debt". - ----------------------------------------------------------------- - ----------------------------------------------------------------- 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 29, 1996 As Compared To Three Months Ended July 1, 1995 - -------------------------------------- Net sales for the three months ended June 29, 1996, decreased 2.0% to $623,870 compared to $636,759 for the three months ended July 1, 1995. Eddie Bauer's retail sales increased by 10.0% compared to the same period last year with a comparable store sales increase of 1.1%. Total Company catalog sales declined 5.9% for the quarter as a result of the Company's planned reduction in catalog circulation as well as lower productivity from certain end-of-season sale books at Spiegel Catalog. Finance revenue of $33,266 for the second quarter of 1996 was 26.6% below the $45,323 reported for the same period in 1995. This decrease was mainly the result of a significantly lower level of average owned FCNB Preferred Card receivables in the second quarter of 1996 compared to the same period in 1995 due to sales of customer receivables. The gross profit margin on net sales was 34.6% and 32.5% for the three month periods ended June 29, 1996 and July 1, 1995, respectively. This improvement is driven by a lower level of promotional activity, resulting in less markdowns. Selling, general and administrative expenses as a percentage of total revenues for the three months ended June 29, 1996 and July 1, 1995 were 36.9% and 39.0%, respectively. This decrease reflected reductions achieved in several operating units' selling, general and administrative expenses. These reductions included improvements from the Company's new fulfillment and distribution facilities as well as other efficiencies gained from the Company's ongoing cost reduction efforts. In general, the Company's credit business has a higher selling, general and administrative expense ratio than other areas of the Company and has been experiencing higher charge-offs. However, as a result of the receivable sales, the relative size of the credit business has been reduced, and its selling, general and administrative expense ratio has improved slightly. This has had a favorable impact on the overall Company's ratio. Interest expense was $21,195 for the three months ended June 29, 1996 compared to $23,492 for the three months ended July 1, 1995. This decrease was mainly due to lower average debt levels resulting from the higher level of customer receivables sold. - ----------------------------------------------------------------- - ----------------------------------------------------------------- Six Months Ended June 29, 1996 As Compared To Six Months Ended July 1, 1995 - ----------------------------------- For the six months ended June 29, 1996 and July 1, 1995, net sales were $1,213,331 and $1,217,620, respectively. Eddie Bauer's retail sales were 12.9% higher than last year for the period, and its comparable store sales increased 2.9%. Total Company catalog sales were lower than last year as a result of planned catalog circulation reductions made to reduce the impact of paper price increases. Additionally, lower productivity rates on certain catalog media at Spiegel Catalog contributed to the decline. Finance revenue for the six month period ended June 29, 1996 was $61,607 compared to $109,329 for the same period of 1995. This decline is mainly the result of significantly lower average owned FCNB Preferred Card receivables due to sales of customer receivables. Other revenue was $28,344 and $51,958 for the six month periods ended June 29, 1996 and July 1, 1995, respectively. The decrease is mainly attributable to a gain of $18,637 recognized on the sale of customer receivables in the first quarter of 1995. There was no comparable gain in 1996. The gross profit margin on net sales increased to 33.1% from 30.7% for the first six months of 1996 compared to the same period in 1995. Clearance and markdown activity was much lower in the 1996 period. In the first half 1995, the Company took aggressive markdowns to liquidate overstock merchandise. Such markdowns were not required in the same period of 1996. Selling, general and administrative expenses as a percentage to total revenue were 36.9% and 38.4% for the six month periods ended June 29, 1996 and July 1,1995, respectively. The Company has continued to pursue cost saving measures in all areas of its businesses. The lower selling, general and administrative expense ratio reflected reductions in several operating units'expenses as well as efficiencies being realized from the Company's new fulfillment and distribution facilities and more tightly controlled advertising expenditures, including catalog production costs. The 1996 ratio was also favorably impacted by the gain of approximately $8,000 realized on the sale of the Company's information technology subsidiary in the first quarter. Also favorably effecting the 1996 ratio, as discussed above, was the diminishing relative effect of the Company's credit business due to receivable sales. By comparison, the 1995 ratio was favorably impacted by the effects of a sale of $350,000 of customer receivables in March 1995 including an $18,637 gain recognized and a reversal of approximately $15,000 of the provision for doubtful accounts on the receivables sold. Interest expense was $42,701 and $49,859 for the six months ended June 29, 1996 and July 1, 1995, respectively. This decrease was mainly due to lower average debt levels resulting from a higher level of customer receivables sold and the Company's lower inventory levels. The effective tax rate was 46.0% and 43.6% for the six months ended June 29, 1996 and July 1, 1995, respectively. This increase was due to the relative impact of the amortization of non-deductible goodwill as a percentage of earnings before taxes. - ----------------------------------------------------------------- - ----------------------------------------------------------------- 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 issuance of debt and the sale of customer accounts receivable. Total customer receivables sold were $1,210,000 at June 29, 1996, $1,180,000 at December 30, 1995 and $830,000 at July 1, 1995. In March 1996, the Company replaced certain of its existing credit arrangements with new credit facilities and modified certain conditions of other senior and subordinated term indebtedness. These changes were made to strengthen the Company's liquidity and provide for future growth. The Company established a new $600 million revolving credit agreement with a group of 23 banks. The Company also increased its existing asset backed commercial paper program to $600 million from $400 million with a corresponding increase in the back-up credit line with the same group of 23 banks. The $400 million asset backed commercial paper program had been established in December 1995 as a prelude to these financing modifications. Simultaneously with the establishment of these new credit facilities, the Company canceled a $600 million commercial paper facility and a $300 million revolving credit facility. The Company also sold a net amount of $30,000 of customer receivables during the first six months of 1996. Net cash provided by operating activities was $103,037 and $150,133 for the six month periods ended June 29, 1996 and July 1, 1995, respectively. The net cash proceeds from the sale of $30,000 and $350,000 of customer receivables were reported as operating cash flows in the six months ended June 29, 1996 and July 1, 1995, respectively. Without the effects of the sale of customer receivables, net cash provided by operating activities would have been $73,037 for the six month period ended June 29, 1996 and net cash used by operating activities would have been $199,867 for the six month period ended July 1, 1995. In 1996, significant sources of cash from operating activities were decreases in customer receivables and inventories. Decreases in accounts payable and other liabilities represented significant uses of cash. Net additions to property and equipment for the six months ended June 29, 1996 and July 1, 1995 were $18,352 and $73,169, respectively. The capital spending in 1996 was primarily related to the new addition to Eddie Bauer's headquarters, continued Eddie Bauer retail store expansion, and improvements to the retail distribution facility in Columbus, OH. During the six months ended June 29, 1996, the Company incurred approximately $2,290 of expenditures related to the 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 1996 were primarily for closing costs incurred relating to the warehouse buildings. The Company believes that its cash on hand, together with cash flows anticipated to be generated from operations, and borrowings under its existing credit facilities and other available sources of funds, will be adequate to fund the Company's capital and operating requirements for the foreseeable future. - ----------------------------------------------------------------- - ----------------------------------------------------------------- Item 5. Other Information During the second quarter of 1996, certain changes were made to the Company's board of directors. At the Company's board of directors meeting on April 25, 1996, Mr. Richard T. Fersch, President and Chief Operating Officer of Eddie Bauer, and Mr. John W. Irvin, President of the Spiegel Catalog Division, were elected to the board of directors. In June, Mr. Hans-Christoph Fischer announced his departure from the Company's board of directors. Mr. Martin Zaepfel of Otto Versand (GmbH Co) has been named to the board as Mr. Fischer's replacement. - ----------------------------------------------------------------- - ----------------------------------------------------------------- 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 13,1996 James W. Sievers (Chief Financial Officer)
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