-----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, HRGvjI5F75w4itX5h2rWUs1lnWeWUp3i2RQGszDJWuJYbfAKWJrW6jwmTERJ3R3G nPgVikUBDqNJWLZs6OrT6Q== 0000040493-97-000005.txt : 19970318 0000040493-97-000005.hdr.sgml : 19970318 ACCESSION NUMBER: 0000040493-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970317 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: 97557541 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 01/31/97 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, 1997 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 10, 1997, the number of outstanding shares of each of the issuer's classes of common stock was: Class Shares Outstanding Common Stock, $1.00 Par Value 50,717,022 Class B Stock, $1.00 Par Value 20,023,955 HARCOURT GENERAL, INC. I N D E X Part I. Financial Information Page Number Item 1. Condensed Consolidated Balance Sheets as of January 31, 1997 and October 31, l996 1 Condensed Consolidated Statements of Earnings for the Three Months Ended January 31, l997 and l996 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, l997 and l996 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 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands) January 31, October 31, 1997 l996 Assets Current assets: Cash and equivalents $ 543,336 $ 532,862 Short-term investments 299,355 242,054 Accounts receivable, net 378,717 409,110 Inventories 688,590 592,141 Deferred income taxes 77,491 77,491 Other current assets 80,204 79,607 Total current assets 2,067,693 1,933,265 Property and equipment, net 569,155 574,926 Other assets: Prepublication costs, net 206,151 209,519 Intangible assets, net 451,452 456,494 Other 160,477 152,034 Total other assets 818,080 818,047 Total assets $3,454,928 $3,326,238 Liabilities and Shareholders' Equity Current liabilities: Notes payable and current maturities of long-term liabilities $ 162,213 $ 163,717 Accounts payable 318,921 315,108 Accrued liabilities 332,021 333,205 Taxes payable 55,550 77,548 Other current liabilities 123,318 58,769 Total current liabilities 992,023 948,347 Long-term liabilities: Notes and debentures 812,312 714,282 Other long-term liabilities 230,339 224,792 Total long-term liabilities 1,042,651 939,074 Deferred income taxes 187,632 187,632 Minority interest 217,653 217,653 Shareholders' equity: Preferred stock 1,147 1,152 Common stock 70,731 71,119 Paid-in capital 744,174 743,947 Cumulative translation adjustments (5,191) (4,493) Retained earnings 204,108 221,807 Total shareholders' equity 1,014,969 1,033,532 Total liabilities and shareholders' equity $3,454,928 $3,326,238 See Notes to Condensed Consolidated Financial Statements.
1 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands except for per share amounts) For the three months ended January 31, 1997 1996 Revenues $768,698 $698,441 Costs applicable to revenues 454,836 418,240 Selling, general and administrative expenses 270,873 235,279 Corporate expenses 10,703 7,403 Operating earnings 32,286 37,519 Investment income 10,594 8,174 Interest expense (20,650) (20,455) Earnings before income taxes 22,230 25,238 Income taxes (7,558) (8,581) Net earnings $ 14,672 $ 16,657 Weighted average number of common and common equivalent shares outstanding 72,380 73,360 Earnings per common share: Net earnings $ .20 $ .23 Dividends per share: Common Stock $ .18 $ .17 Class B Stock $ .162 $ .153 Series A Stock $ .2055 $ .1945 See Notes to Condensed Consolidated Financial Statements.
2 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) For the three months ended January 31, 1997 1996 Cash flows from operating activities: Net earnings $ 14,672 $ 16,657 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 50,912 40,641 Other items 248 4,070 Changes in assets and liabilities: Accounts receivable 36,350 34,834 Inventories (95,079) (121,801) Other current assets (413) (22,325) Current liabilities 43,140 73,539 Net cash provided by operating activities 49,830 25,615 Cash flows from investing activities: Capital expenditures (33,893) (56,917) Purchase of short-term investments (154,547) (65,741) Maturities of short-term investments 97,246 22,604 Acquisitions (5,443) (15,560) Other investing activities (6,503) (25,589) Net cash used for investing activities (103,140) (141,203) Cash flows from financing activities: Proceeds from borrowings 148,506 124,400 Repayment of debt (52,000) (340) Cash dividends paid (12,629) (12,083) Repurchase of Common Stock (20,139) (66,806) Equity transactions 46 (133) Net cash provided by financing activities 63,784 45,038 Cash and equivalents Increase (decrease) during the period 10,474 (70,550) Beginning balance 532,862 363,750 Ending balance $543,336 $293,200 See Notes to Condensed Consolidated Financial Statements.
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, 1997 Condensed Consolidated Financial Statements include the November 2, l996 Condensed Consolidated Financial Statements of The Neiman Marcus Group, Inc. (NMG). NMG is a separate public company which is listed on the New York Stock Exchange and is subject to the reporting requirements of the Securities Exchange Act of 1934. The Company owns approximately 53% of the common stock 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. Stock purchase program The Company's Board of Directors has authorized the purchase of up to 3.5 million shares of the Company s Common Stock pursuant to its open market stock purchase program. During the quarter ended January 31, 1997, the Company repurchased approximately .4 million shares at an average price of $45.56 per share. 3. New accounting standard On January 1, 1997, the Company adopted Statement of Financial Accounting Standard No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 125). This statement provides consistent guidance for distinguishing transfers of financial assets (e.g. securitizations) that are sales from transfers that are secured borrowings. The effect of adopting SFAS 125 was not material to the Company's financial position or results of operations. 4 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended January 31, 1997 versus Three Months Ended January 31, 1996 The following table illustrates revenues and operating earnings (loss) by business segment for the three months ended January 31.
(In thousands) 1997 1996 Revenues: Publishing $198,382 $177,028 Specialty retailing 544,103 489,898 Professional services 26,213 31,515 Total revenues $768,698 $698,441 Operating earnings (loss): Publishing ($ 19,527) ($ 11,334) Specialty retailing 62,312 52,742 Professional services 204 3,514 Corporate expenses (10,703) (7,403) Total operating earnings $ 32,286 $ 37,519
Publishing Publishing revenues increased $21.4 million or 12.1% compared to the same period last year. The Company's international group, its scientific, technical, medical and professional (STMP) publishing group and its educational group each contributed to the increase in revenues. The international publishing group revenues increased primarily due to the acquisition during this quarter of both a Spanish language medical and health sciences publisher and international distribution rights to Mosby-Year Book health sciences publications. Higher journal revenues at Academic Press and incremental revenues at International Medical News Group (IMNG), acquired by W.B. Saunders at the end of the first quarter of fiscal 1996, were primarily responsible for the increased revenues at the STMP publishing group. Increased revenues at the educational publishing group were primarily due to higher testing program revenues. The publishing operating loss increased to $19.5 million compared to $11.3 million in the same period last year. The seasonal loss by the educational group reflects the higher levels of selling costs and plate amortization incurred for the elementary and secondary businesses in preparation for significant textbook adoptions expected later in the year. This loss was offset in part by the STMP publishing group's earnings, which rose in comparison to the prior year quarter primarily as a result of the higher sales volume by Academic Press. 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 November 2, 1996 therefore were consolidated with the operating results of the Company for the quarter ended January 31, 1997. 5 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Specialty Retailing (continued) Specialty retailing revenues in the thirteen weeks ended November 2, 1996 increased $54.2 million or 11.1% over revenues in the thirteen weeks ended October 28, 1995. The revenue growth was primarily attributable to a 6.8% increase in comparable sales and the opening of two new Neiman Marcus stores in King of Prussia, Pennsylvania in February 1996 and Paramus, New Jersey in August 1996. Comparable sales at Neiman Marcus Stores increased 7.7%, while NM Direct revenues increased 8.0% over the prior year and revenues at Bergdorf Goodman increased only slightly. The 18.1% increase in specialty retailing operating earnings was principally due to higher revenues at each of NMG s divisions. The increase also reflected, to a lesser extent, improved gross margins at both NM Direct and Bergdorf Goodman, and a reduction in selling, general and administrative expenses as a percentage of revenues. Professional Services Professional services revenues decreased 16.8% to $26.2 million in the fiscal 1997 first quarter from $31.5 million in fiscal 1996. The decrease is attributed to lower volume and lower prices due to competitive conditions, particularly in the group outplacement programs. Professional services operating earnings decreased $3.3 million to $.2 million compared to the same period in the prior year. The decrease resulted primarily from lower revenues. Corporate Expenses Corporate expenses increased $3.3 million to $10.7 million in the first quarter of 1997. The increase is primarily due to higher compensation expense recognized in connection with the resignation of the Company's former chief executive officer during the quarter. Investment Income Investment income increased 29.6% to $10.6 million from the previous year, primarily due to a higher average portfolio balance in fiscal 1997, which included $268.8 million in cash proceeds from NMG's issuance of its common stock to the public. Interest Expense Interest expense increased slightly to $20.7 million from $20.5 million in the same period last year. NMG average debt outstanding was higher in fiscal 1997; however, its effective interest rate decreased in comparison to the prior year period as fixed rate senior notes were repaid upon maturity with borrowings under NMG's revolving credit agreement. 6 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Income Tax Expense The Company's effective tax rate is expected to be 34% in fiscal 1997, unchanged from fiscal 1996. 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, l997 was $49.8 million. The publishing and professional services business segments provided $131.5 million of cash from operations while NMG's operations used $81.7 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 the repurchase of all of its redeemable preferred stocks from the Company. The most significant items affecting working capital were an increase in inventories of $95.1 million, which was partially offset by a $43.1 million increase in current liabilities and a $36.4 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 $103.1 million for the quarter ended January 31, 1997. The Company's investing activities included capital expenditures totaling $33.9 million. Publishing capital expenditures in the 1997 quarter totaled $20.0 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 1997. Specialty retailing capital expenditures in the 1997 quarter totaled $12.6 million and consisted principally of existing store renovations. NMG opened a new Neiman Marcus store in Paramus, New Jersey in August 1996. Capital expenditures for NMG in fiscal 1997 are expected to approximate $65.0 million. In October 1996, NMG sold 8.0 million shares of its common stock to the public at $35.00 per share. The net proceeds were used, together with an additional 3.9 million shares of NMG common stock and bank borrowings, to repurchase all of NMG's outstanding preferred stock from the Company. The Company will no longer receive the annual dividends of approximately $27.1 million from such preferred stock. Financing activities reflect additional borrowings by NMG of $148.5 million under its revolving credit agreement, which included borrowings made to repay $52.0 million of senior notes at maturity. Financing activities also include the repurchase of approximately .4 million shares of the Company's Common 7 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Stock in the open market at an average price of $45.56 per share and the payment of $12.6 million of dividends. At January 31, 1997, the Company had the entire $400.0 million available under its revolving credit agreement with thirteen banks. The agreement expires in December 1999. NMG had $190.0 million available at November 2, 1996 under its revolving credit facility, which expires in April 2000. 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. 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 filed a report on Form 8-K on November 25, 1996 describing in Item 2 (Acquisition or Disposition of Assets) the repurchase from the Company by NMG of all NMG's issued and outstanding preferred stocks, together with pro forma financial information. 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 17, 1997 /s/ John R. Cook John R. Cook Senior Vice President and Chief Financial Officer Date: March 17, 1997 /s/ Stephen C. Richards Stephen C. Richards Vice President and Controller Principal Accounting Officer 10 EX-11.1 2 COMPUTATION OF WEIGHTED AVERAGES 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, 1997 1996 PRIMARY 1. Weighted average number of common shares outstanding 71,000 71,827 2. Assumed conversion of Series A Cumulative Convertible Stock 1,263 1,317 3. Assumed exercise of certain stock options based on average market value 117 216 4. Weighted average number of shares used in primary per share computations 72,380 73,360 FULLY DILUTED (A) 1. Weighted average number of common shares outstanding 71,000 71,827 2. Assumed conversion of Series A Cumulative Convertible Stock 1,263 1,317 3. Assumed exercise of all dilutive options based on higher of average or closing market value 117 216 4. Weighted average number of shares used in fully diluted per share computations 72,380 73,360 (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%.
EX-27.1 3 ARTICLE 5/FINANCIAL DATA SCHEDULE
5 This schedule contains a summary of financial information extracted from the Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Earnings and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS OCT-31-1996 JAN-31-1997 543,336 299,355 399,670 20,953 688,590 2,067,693 942,974 373,819 3,454,928 992,023 812,312 0 1,147 70,731 943,091 3,454,928 768,698 768,698 454,836 736,412 0 28,063 20,650 22,230 7,558 14,672 0 0 0 14,672 0.20 0.20
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