-----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, J4PwjNe7kQWqrmvbRkziIwpqTgqYyZNMwGsP5XkjhL/a9whI32qd0xe+IH9GQ9au 1whg0NB0EAuLGQ7MsunNUA== 0000276641-97-000010.txt : 19971114 0000276641-97-000010.hdr.sgml : 19971114 ACCESSION NUMBER: 0000276641-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-16126 FILM NUMBER: 97714141 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 3RD QUARTER 10-Q
5 1,000 9-MOS JAN-03-1998 SEP-27-1997 29,854 0 368,900 11,187 610,141 1,177,893 573,208 192,229 1,933,418 520,272 834,250 118,142 0 0 408,714 1,933,418 1,807,569 1,945,018 1,252,449 1,252,449 0 0 49,374 (102,996) (38,109) (64,887) 0 0 0 (64,887) (0.56) (0.56)
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 September 27, 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 November 7, 1997 are as follows: Class A non-voting common stock, $1.00 par value 14,660,464 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, September 27, 1997 and December 28, 1996 Consolidated Statements of Earnings, Three and Nine Months Ended September 27, 1997 and September 28, 1996 Consolidated Statements of Cash Flows, Nine Months Ended September 27, 1997 and September 28, 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) September, 27 December 28, 1997 1996 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 29,854 $ 86,917 Receivables, net 357,713 485,242 Inventories 610,141 502,209 Prepaid expenses 103,403 84,634 Refundable income taxes 41,254 16,991 Deferred income taxes 35,528 35,542 ------------ ------------ Total current assets 1,177,893 1,211,535 Property and equipment, net 380,979 399,910 Intangibles, net 164,610 166,275 Other assets 209,936 167,905 ------------ ------------ Total assets $ 1,933,418 $ 1,945,625 ------------ ------------ ------------ ------------ LIABILITIES and STOCKHOLDERS' EQUITY Current liabilities: Current maturities of debt $ 87,900 $ 89,292 Indebtedness to related parties -- 20,000 Accounts payable 194,547 270,973 Accrued liabilities: Salaries and wages 21,373 36,636 General taxes 103,752 127,170 Allowance for returns 22,975 41,691 Other accrued liabilities 89,725 109,634 ------------ ------------ Total current liabilities 520,272 695,396 Long-term debt, excluding current maturities 829,250 676,656 Indebtedness to related parties 5,000 -- Deferred income taxes 52,040 52,024 ------------ ------------ Total liabilities 1,406,562 1,424,076 Stockholders' equity: Class A non-voting common stock, $1.00 par value; authorized 16,000,000 shares; 14,659,264 shares issued and outstanding at September 27, 1997 and 14,618,404 at December 28, 1996 14,659 14,618 Class B voting common stock, $1.00 par value; authorized 104,000,000 shares; 103,483,298 shares issued and outstanding at September 27, 1997 and 93,141,654 at December 28, 1996 103,483 93,142 Additional paid-in capital 271,641 211,828 Minimum pension liability (9,365) (9,365) Retained earnings 146,438 211,326 ------------ ------------ Total stockholders' equity 526,856 521,549 ------------ ------------ Total liabilities and stockholders' equity $ 1,933,418 $ 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 Nine Months Ended September 27, September 28, September 27, September 28, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Net sales and other revenues: Net sales $ 591,694 $ 584,075 $1,807,569 $1,797,406 Finance revenue 46,368 26,826 107,611 88,433 Other revenue 8,901 10,015 29,838 38,359 ---------- ----------- ----------- ----------- 646,963 620,916 1,945,018 1,924,198 Cost of sales and operating expenses: Cost of sales, including buying and occupancy expenses 416,750 403,038 1,252,449 1,215,155 Selling, general and administrative expenses 240,607 225,678 746,191 706,774 ---------- ----------- ----------- ----------- 657,357 628,716 1,998,640 1,921,929 ---------- ----------- ----------- ----------- Operating income (loss) (10,394) (7,800) (53,622) 2,269 Interest expense 16,852 21,006 49,374 63,707 ---------- ----------- ----------- ----------- Earnings (loss) before income taxes (27,246) (28,806) (102,996) (61,438) Income tax benefit (7,051) (13,248) (38,109) (28,262) ---------- ----------- ----------- ----------- Net earnings (loss) $ (20,195) $ (15,558) $ (64,887) $ (33,176) ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Net earnings (loss) per common share $ (0.17) $ (0.14) $ (0.56) $ (0.31) ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Weighted average number of common shares outstanding 118,112,697 107,752,989 115,493,643 107,748,749 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
[FN] See accompanying notes to consolidated financial statements. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Consolidated Statements of Cash Flows ($000s omitted) (unaudited)
Nine Months Ended September 27, September 28, 1997 1996 ------------ ------------ Cash flows from operating activities: Net earnings (loss) $ (64,887) $ (33,176) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 62,178 65,135 Gain on sale of receivables (42,358) -- Change in assets and liabilities: Increase (decrease) in sold customer receivables (209,957) 138,730 Decrease in receivables, net 337,487 169,733 Increase in inventories (107,932) (61,245) (Increase) decrease in prepaid expenses (18,770) 6,477 Decrease in accounts payable (76,425) (62,091) Decrease in accrued liabilities (77,308) (57,071) Decrease in income taxes (24,232) (3,258) ----------- ------------ Total adjustments (157,317) 196,410 ----------- ------------ Net cash provided by (used in) operating activities (222,204) 163,234 ----------- ------------ Cash flows from investing activities: Net additions to property and equipment (25,911) (26,140) Net additions to other assets (15,343) (23,741) ------------ ----------- Net cash used in investing activities (41,254) (49,881) ------------ ----------- Cash flows from financing activities: Issuance of debt 225,500 306,250 Payment of debt (89,298) (431,654) Issuance of Class B common stock 69,972 -- Exercise of stock options 222 61 ------------ ------------ Net cash provided by (used in) financing activities 206,396 (125,343) ------------ ------------ Net change in cash and cash equivalents (57,063) (11,990) Cash and cash equivalents at beginning of year 86,917 42,302 ------------ ------------ Cash and cash equivalents at end of period $ 29,854 $ 30,312 ------------ ------------ ------------ ------------ Supplemental cash flow information: Cash paid during the period for: Interest $ 46,550 $ 60,982 Income taxes $ 9,062 $ 2,960 ------------ ------------ ------------ ------------
[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 September 27, 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. As of September 27, 1997, the total indebtedness to related parties was $5,000, representing the remaining balance on a loan received in the first quarter of 1997 from 3 Suisses BVG (a wholly owned subsidiary of Otto Versand). This loan bears interest at a variable rate based on LIBOR plus a margin and is 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 working capital and investing 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 $22,686 was recognized under the provisions of this new accounting standard in the third quarter. Pretax gains of $42,358 pursuant to SFAS No. 125 have been recognized to date in 1997. These gains are 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 September 27, 1997 As Compared To Three Months Ended September 28, 1996 Net sales for the three months ended September 27, 1997, increased 1.3% to $591,694 compared to $584,075 for the three months ended September 28, 1996. Sales increases from Eddie Bauer's retail and catalog divisions were significantly offset by sales decreases at Spiegel Catalog. Retail sales at Eddie Bauer increased 9.1% over last year, driven by an increase in the number of stores compared to last year. Comparable store sales declined 2% for the quarter. Total Company catalog sales declined 2.6% for the period as the growth of Eddie Bauer's catalog operations and the favorable performance of the Company's Newport News division was more than offset by lower Spiegel Catalog sales. Spiegel Catalog continues to be affected by lower productivity and response rates experienced in catalog mailings as well as a smaller active customer file. Finance revenue for the third quarter of 1997 increased to $46,368 from $26,826 a year earlier. Revenues were favorably affected by a pretax gain of $22,686 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 significantly lower average level of owned customer receivables. The lower level of owned customer receivables was driven by decreases in sales on the Company's proprietary credit card, particularly at Spiegel Catalog. The gross profit margin on net sales decreased to 29.6% for the three months ended September 27, 1997 from 31.0% for the comparable 1996 period. This margin decrease is primarily due to a higher level of markdowns taken by Spiegel Catalog to manage inventory risk and liquidate merchandise that is not in line with the company's new targeted merchandise direction. Additionally, Eddie Bauer is experiencing some margin rate pressures due to somewhat higher levels of promotional activity. Selling, general and administrative expenses as a percentage of total revenues for the three months ended September 27, 1997 and September 28, 1996 were 37.2% and 36.3%, respectively. Factors contributing to the increase included less leverage of fixed expenses, primarily at Spiegel Catalog, as a result of lower productivity from catalog offerings. In addition, the 1996 ratio was favorably impacted by the reversal of $6,300 of provision for doubtful accounts related to the sale of customer receivables. Interest expense for the three months ended September 27, 1997 decreased 19.8% to $16,852 compared to $21,006 for the three months ended September 28, 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. During the third quarter of 1997, the Company revised its estimated annual effective income tax rate from 41% to 37%. Accordingly, third quarter results reflect the effect of this change in the estimated income tax benefit, resulting in a quarterly effective income tax benefit rate of 25.9%. This compares unfavorably to the 46% income tax benefit rate utilized during the same period last year. Nine Months Ended September 27, 1997 As Compared To Nine Months Ended September 28, 1996 Net sales for the nine months ended September 27, 1997 and September 28, 1996 were $1,807,569 and $1,797,406, respectively. Eddie Bauer's retail sales increased 10.5% over last year, with a comparable store sales increase of 1%. Total Company catalog sales were lower than last year by 4.0%. 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 proprietary credit card. Spiegel Catalog continues its effort to strengthen its performance through its restructuring, which will create more focused, targeted catalog offerings designed to improve sales. Somewhat offsetting the catalog sales decline experienced by Spiegel Catalog were catalog sales improvements at Eddie Bauer and Newport News. Finance revenue for the nine month period ended September 27, 1997 was $107,611 compared to $88,433 for the same period in 1996. A pretax gain of $42,358 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 $29,838 and $38,359 for the nine month periods ended September 27, 1997 and September 28, 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. Also contributing to the variance were declines in sales- volume driven other revenue categories at Spiegel Catalog as a result of lower catalog productivity. The gross profit margin on net sales decreased to 30.7% for the nine months ended September 27, 1997 from 32.4% for the comparable 1996 period. This margin decrease is primarily due to a higher level of markdowns taken by Spiegel Catalog to manage inventory risk and liquidate merchandise that is not in line with the company's new targeted merchandise direction. Selling, general and administrative expenses as a percentage of total revenues for the nine months ended September 27, 1997 and September 28, 1996 were 38.4% and 36.7%, respectively. This increase reflects 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 an $8,000 reversal of the provision for doubtful accounts on customer receivables sold in 1996. Spiegel Catalog continues to pursue cost saving measures. In October 1997, subsequent to the end of the third quarter, the Company announced its intention to close two sales centers in late December 1997 to reduce fixed costs by eliminating excess sales center capacity. Charges for this action will be included in fourth quarter results and are currently estimated to be between $6,000 and $8,000. Interest expense for the nine months ended September 27, 1997 decreased 22.5% to $49,374 compared to $63,707 for the nine months ended September 28, 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. The annual effective income tax rate is currently estimated at 37% compared to 46% recorded for the nine months ended September 28, 1996. The Company assesses its effective tax rate on a continual basis. Different earnings levels in the Company's individual business units can have a profound impact on the consolidated rate. 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 $1,253,773 at September 27, 1997, $1,463,730 at December 28, 1996 and $1,318,730 at September 28, 1996. Net cash used by operating activities was $222,204 for the nine month period ended September 27, 1997 compared to net cash provided by operations of $163,234 for the nine month period ended September 28, 1996. All categories contributed to the net $385,438 increase in cash used for operations over the comparable period last year, most notably accounts receivable and inventories. Net cash provided by receivables was lower by $180,933 in the 1997 period, as cash flow provided by decreases in accounts receivable was more than offset by decreases in sold customer receivables. The net $46,687 increase in cash used for inventories over last year represents the increase in inventories at Eddie Bauer to support its growth. Eddie Bauer has opened 38 additional retail stores since December 28, 1996 compared to 17 stores opened in the comparable period last year. Net additions to property and equipment for the nine months ended September 27, 1997 and September 28, 1996 were $25,912 and $26,140, respectively. The capital spending in 1997 and 1996 is 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 to its majority shareholder, Spiegel Holdings, Inc. The net proceeds of $69,972 are being used primarily to fund working capital and investing needs, including continued expansion of Eddie Bauer. 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. 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 nine months ended September 27, 1997, SFAS No. 128 would not have had an 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. The Company plans to 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 plans to adopt SFAS No. 131 in fiscal year 1998. 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 Executive Vice President November 12, 1997 James W. Sievers (Chief Financial Officer) /s/ D. L. Skip Behm Vice President - Controller November 12, 1997 D. L. Skip Behm (Chief Accounting Officer)
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