-----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, OCBDnX2/oDGufVVOS95aretoXZNd5pD7ihhfyjYFJyiseunoOw7gIhOW+PTbiPiE KzHw1jY+kuU8Dz0kgV+Beg== 0000040493-96-000005.txt : 19960315 0000040493-96-000005.hdr.sgml : 19960315 ACCESSION NUMBER: 0000040493-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960131 FILED AS OF DATE: 19960314 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARCOURT GENERAL INC CENTRAL INDEX KEY: 0000040493 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 041619609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04925 FILM NUMBER: 96534583 BUSINESS ADDRESS: STREET 1: 27 BOYLSTON ST / BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02167 BUSINESS PHONE: 6172328200 MAIL ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02167 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CINEMA CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MID WEST DRIVE IN THEATRES INC DATE OF NAME CHANGE: 19660907 10-Q 1 HGI 10Q FOR QTR ENDED 01/31/96 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended January 31, 1996 Commission File Number 1-4925 HARCOURT GENERAL, INC. (Exact name of registrant as specified in its charter) Delaware 04-1619609 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 27 Boylston Street, Chestnut Hill, MA 02167 (Address of principal executive offices) (Zip Code) (617)232-8200 (Registrant's telephone number, including area code) 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 As of March 8, 1996, the number of shares outstanding of each of the issuer's classes of common stock was: Class Shares Outstanding Common Stock, $1.00 Par Value 50,243,321 Class B Stock, $1.00 Par Value 20,801,956 [Page] HARCOURT GENERAL, INC. I N D E X Part I. Financial Information Page Number Item 1. Condensed Consolidated Balance Sheets as of January 31, 1996 and October 31, 1995 1 Condensed Consolidated Statements of Earnings for the Three Months Ended January 31, 1996 and 1995 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 1996 and 1995 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-8 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10 Exhibit 11.1 11 Exhibit 27.1 12 [Page] HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands) January 31, October 31, 1996 l995 Assets Current assets: Cash and equivalents $ 293,200 $ 363,750 Short-term investments 300,823 243,073 Accounts receivable, net 337,133 372,700 Inventories 616,042 495,222 Deferred income taxes 79,083 79,083 Other current assets 63,632 55,970 Total current assets 1,689,913 1,609,798 Property and equipment, net 552,301 540,347 Other assets: Prepublication costs, net 171,284 164,449 Intangible assets, net 466,520 442,566 Other 141,107 127,176 Total other assets 778,911 734,191 Total assets $3,021,125 $2,884,336 Liabilities and Shareholders' Equity Current liabilities: Notes payable and current maturities of long-term liabilities $ 109,428 $ 55,484 Accounts payable 314,136 284,481 Accrued liabilities 322,340 334,479 Taxes payable 41,754 58,104 Other current liabilities 123,073 52,423 Total current liabilities 910,731 784,971 Long-term liabilities: Notes and debentures 822,061 749,008 Other long-term liabilities 212,143 210,846 Total long-term liabilities 1,034,204 959,854 Deferred income taxes 198,398 198,398 Shareholders' equity: Preferred stock 1,181 1,210 Common stock 71,045 72,699 Paid-in capital 728,010 727,285 Cumulative translation adjustments (7,002) (5,166) Retained earnings 84,558 145,085 Total shareholders' equity 877,792 941,113 Total liabilities and shareholders' equity $3,021,125 $2,884,336 See Notes to Condensed Consolidated Financial Statements
[Page] 1 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands except for per share amounts) For the three months ended January 31, 1996 1995 Revenues $698,441 $663,309 Costs applicable to revenues 418,240 398,697 Selling, general and administrative expenses 235,279 222,933 Corporate expenses 7,403 9,018 Operating earnings 37,519 32,661 Investment income 8,174 11,124 Interest expense (20,455) (22,802) Earnings from continuing operations before income taxes 25,238 20,983 Income taxes (8,581) (7,383) Earnings from continuing operations 16,657 13,600 Loss from discontinued operations, net - (1,804) Net earnings $ 16,657 $ 11,796 Weighted average number of common and common equivalent shares outstanding 73,360 79,802 Earnings per common share: Earnings from continuing operations $ .23 $ .17 Loss from discontinued operations - (.02) Net earnings $ .23 $ .15 Dividends per share: Common Stock $ .17 $ .16 Class B Stock $ .153 $ .144 Series A Stock $ .1945 $ .1835 See Notes to Condensed Consolidated Financial Statements
[Page] 2 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) For the three months ended January 31, 1996 1995 Cash flows from operating activities: Net earnings from continuing operations $ 16,657 $ 13,600 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 40,641 41,991 Other items 4,070 (83) Changes in assets and liabilities: Accounts receivable 34,834 20,161 Inventories (121,801) (92,124) Other current assets (7,712) 4,540 Current liabilities 73,539 28,020 40,228 16,105 Discontinued operating activities - 527 Net cash provided by operating activities 40,228 16,632 Cash flows from investing activities: Capital expenditures (56,917) (43,726) Purchase of short-term investments (57,750) (266,984) Acquisitions (15,560) - Other investing activities (25,589) - Net cash used by investing activities (155,816) (310,710) Cash flows from financing activities: Proceeds from borrowings, net 124,400 81,500 Repayment of debt (340) (300) Cash dividends paid (12,083) (12,392) Repurchase of Common Stock (66,806) - Other financing activities (133) (1,447) Net cash provided by financing activities 45,038 67,361 Cash and equivalents Decrease during the period (70,550) (226,717) Beginning balance 363,750 819,659 Ending balance $293,200 $592,942 See Notes to Condensed Consolidated Financial Statements
[Page] 3 HARCOURT GENERAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of presentation The condensed consolidated financial statements of Harcourt General, Inc. (the Company) are submitted in response to the requirements of Form 10-Q and should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K. In the opinion of management, these statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for the interim periods presented. The January 31, 1996 condensed consolidated financial statements include the October 28, l995 condensed consolidated financial statements of The Neiman Marcus Group, Inc. (NMG), which were filed with the Securities and Exchange Commission on Form 10-Q. The Company owns approximately 67% of the fully-converted equity of NMG. The Company's businesses are seasonal in nature, and historically the results of operations for these periods have not been indicative of the results for the full year. 2. Discontinued operations On June 30, 1995, NMG sold its Contempo Casuals subsidiary to The Wet Seal, Inc. (Wet Seal) for approximately 250,000 shares of Wet Seal Class A common stock and $100,000 in cash. The loss from discontinued operations recorded in the quarter ended October 29, 1994 is net of applicable income tax benefits of $1.3 million. Revenues related to discontinued Contempo Casuals operations for the thirteen week period ended October 29, 1994 were $57.3 million. 3. Stock purchase programs In April 1995, the Company completed a Dutch Auction tender offer and purchased approximately 5.4 million shares of the Company s Common Stock at $40.50 per share. In May 1995, the Company's Board of Directors authorized the purchase of up to 2.5 million shares of the Company's Common Stock on the open market. During the quarter ended January 31, 1996, the Company purchased approximately 1.7 million shares at an average price of $39.18 per share under this buyback program. In March 1996, the Company's Board of Directors authorized an increase in the existing open market stock purchase program from 2.5 million to 3.5 million shares of the Company's Common Stock. [Page] 4 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended January 31, 1996 versus Three Months Ended January 31, 1995 The following table illustrates revenues and operating earnings (loss) by business segment for the three months ended January 31. (In thousands) 1996 1995 Revenues: Publishing $177,028 $168,490 Specialty retailing 489,898 462,322 Professional services 31,515 32,497 Total revenues $698,441 $663,309 Operating earnings (loss): Publishing ($ 11,334) ($ 11,901) Specialty retailing 52,742 49,442 Professional services 3,514 4,138 Corporate expenses (7,403) (9,018) Total operating earnings $ 37,519 $ 32,661 Publishing Publishing revenues increased $8.5 million or 5.1% compared to the same period last year. The increase was primarily due to higher college and testing program sales at the educational publishing group. College sales increased across substantially all of its disciplines, while testing program revenues were higher because of the Assessment Systems, Inc. acquisition, which was completed in the third quarter of fiscal 1995. The publishing operating loss decreased slightly to $11.3 million compared to $11.9 million in the same period last year. The operating loss was less than anticipated in the quarter due to improved earnings in the college business and a smaller than expected loss in the elementary business. The scientific, technical, medical and professional (STMP) publishing group reported operating earnings that were slightly lower than the 1995 quarter. Specialty Retailing Specialty retailing results are reported with a lag of one quarter. The operating results of The Neiman Marcus Group, Inc. (NMG) for the quarter ended October 28, 1995 were consolidated with the operating results of the Company for the quarter ended January 31, 1996. In June 1995, NMG sold its Contempo Casuals subsidiary to The Wet Seal, Inc. NMG's fiscal 1995 results have been restated to reflect Contempo Casuals as a discontinued operation. Specialty retailing revenues in the thirteen weeks ended October 28, 1995 increased $27.6 million or 6.0% over revenues in the thirteen weeks ended October 29, 1994. Higher revenues at Neiman Marcus Stores more than offset slightly lower revenues at Bergdorf Goodman and NM Direct. The increase in revenues at Neiman Marcus Stores was due to both comparable store sales increases of 6.1% and the opening of a new store in Short Hills, New Jersey in August 1995. [Page] 5 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Specialty Retailing Continued The 6.7% increase in specialty retailing operating earnings was principally due to higher revenues and lower sales promotion costs, partially offset by lower finance charge income. The reduction in finance charge income during the quarter resulted from the securitization of the Company's credit card receivables, which was completed in March 1995. The securitization had the effect of reducing finance charge income by approximately $4.8 million during the quarter ended October 28, 1995. Professional Services Professional services revenues decreased 3.0% to $31.5 million in the 1996 first quarter from $32.5 million in 1995. The decrease was principally due to lower pricing as a result of increased competition. Professional services operating earnings decreased $0.6 million compared to the same period in the prior year. The decrease was primarily attributable to lower revenues and slightly higher general and administrative expenses. Investment Income Investment income decreased $3.0 million to $8.2 million from the previous year. The decrease was primarily due to a reduction in the portfolio balance as a result of the Company's common stock purchase program which commenced in April 1995 and, to a lesser extent, a lower rate of return on portfolio assets compared to the first quarter of 1995. Interest Expense Interest expense decreased $2.3 million to $20.5 million compared to the same period last year. The decrease was mainly due to the use of the NMG securitization proceeds to pay down outstanding NMG bank debt. Income Tax Expense The Company's effective tax rate is expected to be 34% in fiscal 1996, unchanged from fiscal 1995. [Page] 6 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The following discussion analyzes liquidity and capital resources by operating, investing and financing activities as presented in the Company's condensed consolidated statement of cash flows. Cash provided by operating activities for the quarter ended January 31, 1996 was $40.2 million. The publishing and professional services business segments provided $133.8 million of cash from operations while NMG's operations used $93.6 million of cash. The cash provided by the publishing and professional services business segments was sufficient to fund their working capital, capital expenditures and the Company's dividend requirements. NMG increased its borrowings in order to fund working capital for the holiday season, capital expenditures and its preferred dividend requirements. The most significant items affecting working capital were an increase in inventories of $121.8 million, which was partially offset by a $73.5 million increase in other current liabilities and a $34.8 million decrease in accounts receivable. The increase in inventory was primarily attributable to NMG's holiday season. Other current liabilities were higher due to the seasonal increase in unearned subscriptions at the STMP group. A decrease in publishing accounts receivable was partially offset by an increase at NMG. Cash flows used by investing activities were $155.8 million for the quarter ended January 31, 1996. The Company's investing activities included capital expenditures totaling $56.9 million. Publishing capital expenditures in the 1996 quarter totaled $31.2 million and were principally related to expenditures for prepublication costs. Capital expenditures in the publishing business are expected to approximate $150.0 million in fiscal 1996. Specialty retailing capital expenditures in the 1996 quarter totaled $24.8 million and were principally related to the construction of new stores in King of Prussia, Pennsylvania and Paramus, New Jersey and a new national distribution center. Capital expenditures for NMG in fiscal 1996 are expected to approximate $100.0 million. During the quarter, the Company purchased $57.8 million of short-term investments. These securities are highly liquid and consist of commercial paper, certificates of deposit, corporate securities and U.S. Government securities. In November 1995, the Company also acquired an additional 831,400 shares of NMG common stock in a privately negotiated transaction at $18.75 per share. Financing activities reflect additional borrowings of $124.4 million under NMG's revolving credit agreements, the repurchase of approximately 1.7 million shares of the Company s Common Stock on the open market at an average price of $39.18 per share and the payment of $12.1 million of dividends. At January 31, 1996, the Company had available the entire $400.0 million under its revolving credit agreement with thirteen banks. This agreement expires in December 1999. NMG had $305.0 million available at October 28, 1995 under its revolving credit facility, which expires in April 2000. [Page] 7 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources, continued The Company believes its cash on hand, cash generated from operations and its current and future debt capacity will be sufficient to fund its planned capital growth as well as its operating and dividend requirements. [Page] 8 PART II Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 11.1 Computation of weighted average number of shares outstanding used in determining primary and fully diluted earnings per share. 27.1 Financial data schedule (b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the quarter ended January 31, 1996 [Page] 9 SIGNATURES 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 hereunto duly authorized. HARCOURT GENERAL, INC. Date: March 13, 1996 s/ John R. Cook John R. Cook Senior Vice President and Chief Financial Officer Date: March 13, 1996 s/ Stephen C. Richards Stephen C. Richards Vice President and Controller Principal Accounting Officer [Page] 10 EX-11.1 2 COMPUTATION OF WEIGHTED AVG. NUMBER OF SHARES EXHIBIT 11.1 HARCOURT GENERAL, INC.
Computation of weighted average number of shares outstanding used in determining primary and fully diluted earnings per share: (In thousands) For the three months ended January 31, 1996 1995 PRIMARY 1. Weighted average number of common shares outstanding 71,827 77,911 2. Assumed conversion of Series A Cumulative Convertible Stock 1,317 1,596 3. Assumed exercise of certain stock options based on average market value 216 295 4. Weighted average number of shares used in primary per share computations 73,360 79,802 FULLY DILUTED (A) 1. Weighted average number of common shares outstanding 71,827 77,911 2. Assumed conversion of Series A Cumulative Convertible Stock 1,317 1,596 3. Assumed exercise of all dilutive options based on higher of average or closing market value 216 295 4. Weighted average number of shares used in fully diluted per share computations 73,360 79,802 (A)This calculation is submitted in accordance with Securities Exchange Act of 1934 Release No. 9083 although not required by Footnote 2 to Paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. [Page]
EX-27.1 3 FINANCIAL DATA SCHEDULE
5 This schedule contains a summary of financial information extracted from the Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Operations and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS OCT-31-1996 JAN-31-1996 293200 300823 361017 23884 616042 1689913 853244 300943 3021125 910731 822061 0 1181 71045 805566 3021125 698441 698441 418240 660922 0 29853 20455 25238 8581 16657 0 0 0 16657 0.23 0.23
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