-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cHyx7D4svs07FzPjApkoTOEMc1VpVs+J0EYoWL/NwyNzjpCYSK+/W4vF6F+MC6IE NZNrYHjPek8g+F3nytLFug== 0000040493-94-000011.txt : 19940617 0000040493-94-000011.hdr.sgml : 19940617 ACCESSION NUMBER: 0000040493-94-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARCOURT GENERAL INC CENTRAL INDEX KEY: 0000040493 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94534012 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 HARCOURT GENERAL FORM 10Q - APRIL 30, 1994 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 April 30, 1994 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 June 6, 1994, the number of shares outstanding of each of the issuer's classes of common stock was: Class Shares Outstanding Common Stock, $1 Par Value 55,968,607 Class B Stock, $1 Par Value 21,902,773 HARCOURT GENERAL, INC. I N D E X Part I. Financial Information Page Number Item 1. Condensed Consolidated Balance Sheets as of April 30, 1994 and October 31, l993 1-2 Condensed Consolidated Statements of Operations for the Three and Six Months Ended April 30, l994 and l993 3 Condensed Consolidated Statements of Cash Flows for the Six Months Ended April 30, l994 and l993 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-10 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 Exhibit 11.1 13 1 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands) April 30, October 31, 1994 l993 Assets Current assets Cash and equivalents $ 423,388 $ 466,925 Accounts receivable - trade, net 512,147 493,384 Inventories 447,610 470,525 Deferred income taxes 75,022 20,016 Other current assets 54,483 53,095 Total current assets 1,512,650 1,503,945 Property and equipment, net 516,227 516,541 Other assets Prepublication costs, net 154,173 137,959 Intangible assets 394,465 400,028 Other 108,910 111,601 Total other assets 657,548 649,588 Net assets of discontinued theatre operations - 135,804 Insurance assets Fixed maturity securities, at amortized cost (market value $2,898,719 and $2,915,850) 2,913,791 2,665,378 Commercial paper 38,082 105,764 Other investments and cash 42,456 45,987 Premiums, accounts, and investment income receivable 68,894 70,965 Deferred policy acquisition costs 163,817 155,534 Other insurance assets 119,171 127,320 Total insurance assets 3,346,211 3,170,948 Total assets $6,032,636 $ 5,976,826
(Continued) See Notes to condensed consolidted financial statements. 2 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands) April 30, October 31, 1994 1993 Liabilities and Shareholders' Equity Current liabilities Notes payable and current maturities of long-term liabilities $ 58,800 $ 64,904 Accounts payable 224,588 283,693 Accrued liabilities 332,652 358,636 Taxes payable 61,435 35,322 Other current liabilities 104,901 49,331 Total current liabilities 782,376 791,886 Long-term liabilities Notes and debentures 953,692 923,618 Other long-term liabilities 170,671 167,031 Total long-term liabilities 1,124,363 1,090,649 Deferred income taxes 209,749 200,088 Insurance liabilities Policyholder reserves and deposits 2,624,478 2,450,023 Unearned premiums 158,419 175,937 Policy and contract claims 121,323 123,621 Other insurance liabilities 91,490 93,044 Total insurance liabilities 2,995,710 2,842,625 Shareholders' equity Preferred stock 1,473 1,996 Common stock 77,866 77,307 Paid-in capital 723,717 861,928 Cumulative translation adjustments (6,564) (5,524) Retained earnings 123,946 115,871 Total shareholders' equity 920,438 1,051,578 Total liabilities and shareholders' equity $ 6,032,636 $ 5,976,826
See Notes to condensed consolidated financial statements. 3 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands except for per share amounts)
For the Six Months For the Three Months Ended April 30, Ended April 30, 1994 1993 1994 1993 Revenues $1,798,199 $1,740,082 $965,962 $ 933,242 Costs applicable to revenues 1,169,601 1,133,048 643,904 618,845 Selling, general and administrative expenses 525,565 525,376 276,771 278,481 Corporate expenses 18,939 17,905 9,562 9,491 Operating earnings 84,094 63,753 35,725 26,425 Investment income 7,640 7,555 3,578 3,459 Interest expense (42,865) (41,704) (21,624) (21,042) Other income - 20,755 - - Earnings from continuing operations before income taxes 48,869 50,359 17,679 8,842 Income taxes (17,593) (17,877) (6,365) (3,176) Earnings from continuing operations 31,276 32,482 11,314 5,666 Earnings from discontinued theatre operations, net - 5,128 - 139 Net earnings $ 31,276 $ 37,610 $ 11,314 $ 5,805 Weighted average number of common and common equivalent shares outstanding 79,829 79,583 79,804 79,605 Earnings per common share: Earnings from continuing operations $ .39 $ .41 $ .14 $ .07 Earnings from discontinued theatre operations, net - .06 - - Net earnings $ .39 $ .47 $ .14 $ .07 Dividends per share: Common Stock $ .30 $ .28 $ .15 $ .14 Class B Stock $ .27 $ .252 $ .135 $ .126 Series A Stock $ .345 $ .295 $ .1725 $ .1475
See Notes to condensed financial statements. 4 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
For the Six Months Ended April 30, 1994 1993 Cash flows from operating activities Net earnings from continuing operations $ 31,276 $ 32,482 Adjustments to reconcile net earnings to net cash provided by operating activities: Other income - (20,755) Deferred income taxes (45,345) - Depreciation and amortization 79,997 78,548 Other items 3,026 3,340 Changes in assets and liabilities: Accounts receivable (18,262) (7,896) Inventories 23,152 (21,416) Other current assets (1,367) (9,120) Current liabilities (4,982) (8,753) 67,495 46,430 Insurance operating activities (18,189) 17,741 Discontinued theatre operating activities - 16,877 Net cash provided by operating activities 49,306 81,048 Cash flows from investing activities Discontinued theatre operation - (3,270) Capital expenditures (86,666) (71,498) Other items (645) (2,152) (87,311) (76,920) Insurance investing activities (171,173) (260,391) Net cash used by investing activities (258,484) (337,311) Cash flows from financing activities Proceeds from borrowing, net 43,500 40,117 Repayment of debt (19,499) (6,596) Cash dividends paid (23,209) (21,610) Equity transactions, net (2,335) 705 (1,543) 12,616 Insurance financing activities 167,184 223,593 Net cash provided by financing activities 165,641 236,209 Cash and equivalents Decrease during the period (43,537) (20,054) Beginning balance 466,925 430,728 Ending balance $423,388 $ 410,674
See Notes to condensed consolidated financial statements. 5 HARCOURT GENERAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. 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 April 30, l994 condensed consolidated financial statements include the January 29, l994 condensed consolidated financial statements of The Neiman Marcus Group, Inc. (NMG), which are filed with the Securities and Exchange Commission on Form 10-Q. The Company owns approximately 65% 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 operation On December 15, l993, the Company completed the spinoff of its theatre operations in a tax-free distribution to its shareholders. The newly created company is named GC Companies, Inc. (GCC). Under the plan of distribution, the Company transferred to GCC approximately $135.0 million of net theatre assets including approximately $64.0 million in cash. 3. Restructuring of Contempo Casuals NMG has commenced a restructuring of its Contempo Casuals division which includes Pastille stores, and recorded a charge of $48.4 million in NMG's third fiscal quarter. Because NMG's financial statements are consolidated with a lag of one quarter, this charge will be reflected in the Company's financial statements for the nine months ending July 31, l994. Because of the continuing weak operating performance of the Contempo Casuals division, NMG will close up to 50 Contempo Casuals Stores and discontinue all of the Pastille retail stores which Contempo Casuals had been testing as a new retail concept. The restructuring charge includes an estimate of lease termination costs ($20.7 million), the write-down of fixed assets ($12.8 million), inventory liquidation costs ($10.8 million), and other expenses ($4.1 million). NMG anticipates that the decision to close these Contempo Casuals and Pastille retail stores will reduce the operating losses experienced by the Contempo Casuals division. Substantially all of the cash payments for lease termination costs are expected to be made in NMG's fourth quarter and fiscal 1995. 4. Statement of Financial Accounting Standards No. 115 In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS No. 115). SFAS No. 115 revises the accounting and reporting for all investments in debt securities and for investments in equity securities that have determinable fair values. The Company is required to adopt SFAS No. 115 no later than fiscal 1995 and has not yet determined its impact on the Company's continuing operations or financial position. 6 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table illustrates revenues and operating earnings by business segment.
Six Months Ended April 30, Three Months Ended April 30, (In thousands) 1994 1993 1994 1993 Revenues: Publishing $ 305,818 $ 294,462 $144,825 $135,371 Specialty retailing 1,158,324 1,096,239 650,690 617,236 Insurance 261,770 279,252 133,284 141,223 Professional services 72,287 70,129 37,163 39,412 Total revenues $1,798,199 $1,740,082 $965,962 $933,242 Operating earnings (loss): Publishing ($ 29,997) ($ 40,728) ($ 22,594) ($ 28,766) Specialty retailing 85,190 75,405 48,149 40,261 Insurance 35,052 33,207 13,117 15,713 Professional services 12,788 13,774 6,615 8,708 Corporate expenses (18,939) (17,905) (9,562) (9,491) Total operating earnings $ 84,094 $ 63,753 $ 35,725 $ 26,425
Six Months Ended April 30, l994 Compared to Six Months Ended April 30, l993 Publishing Publishing revenues in the six months ended April 30, l994 increased 3.9% compared with revenues in the six months ended April 30, l993. Substantially all of the publishing businesses contributed to the increase in revenues with the educational division achieving the highest increase due to strong sales of science and health textbooks and testing products. The publishing operating loss decreased 26.3% compared with the same period last year. The operating loss was reduced by lower prepublication amortization costs and lower marketing expenses at the educational division, partially offset by an increase in prepublication amortization costs and higher operating expenses in the scientific, technical, medical businesses. Specialty Retailing Specialty retailing results are reported with a lag of one quarter so that operating results of The Neiman Marcus Group, Inc. (NMG) for the twenty-six weeks ended January 29, 1994 are consolidated with the operating results of the Company for the twenty-six weeks ended April 30, 1994. Revenues in the twenty-six weeks ended January 29, 1994 increased 5.7% over revenues in the twenty-six weeks ended January 30, l993. Higher revenues at the Neiman Marcus division and Bergdorf Goodman were partially offset by lower revenues at Contempo Casuals. The number of stores was substantially unchanged in the current period. Operating earnings increased 13.0%, reflecting higher revenues and finance charge income, partially offset by volume-related increases in cost of goods sold and selling costs. NMG recorded a restructuring charge of $48.4 million in its third quarter, which will be reflected in the Company's financial statements for its quarter ending July 31, 1994. 7 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Insurance Insurance revenues decreased 6.3% compared with the same period last year. The decrease was primarily related to lower capital gains and the absence of major medical premium revenue due to the sale of that block of business in April 1993. Insurance operating earnings increased 5.6% compared to the same period last year. Operating earnings increased due to favorable claims experience in the farm and rural accident and health lines of business. Also contributing to the increase were higher annuity profits stemming from a larger block of business and increased interest margins. These increases were partially offset by a $1.5 million decline in capital gains. Professional Services Professional services revenues increased $2.2 million compared with the same period last year. The increase reflects higher volume in executive outplacement programs. Professional services operating earnings decreased $986,000 compared to the same period last year. This decrease is attributable to higher payroll, benefit and other operating costs. Interest Expense Interest expense increased 2.8% from the same period last year. Higher interest expense at NMG was partially offset by lower interest expense at the Company. Other Income Other income in 1993 represents a gain from the reduction in the level of NMG's estimated liabilities due to the settlement of various disputes with Carter Hawley Hale Stores, Inc. Income Tax Expense The Company's effective tax rate is estimated to be 36.0% in fiscal l994 and was 36.9% in fiscal 1993. During the first quarter of 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 (SFAS No. 109) "Accounting for Income Taxes." SFAS No. 109 requires the asset and liability method of accounting for income taxes. The effect of adopting this standard was not material to the Company's financial position or results of operations. 8 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Quarter Ended April 30, 1994 Compared to Quarter Ended April 30, 1993 Publishing Publishing revenues increased 7.0% compared to the same period last year. This increase was primarily due to higher revenues in all of the publishing businesses with the educational division achieving the highest increase due to strong sales of health and science textbooks and testing products. The publishing operating loss decreased by $6.2 million compared to the same period last year. The operating loss was reduced because of higher revenues, lower prepublication amortization costs and higher marketing expenses at the educational division, partially offset by an increase in prepublication amortization costs and operating expenses in the scientific, technical, medical businesses. Specialty Retail Results of NMG are reported with a lag of one quarter, so that NMG's operating results for its quarter ended January 29, l994 are consolidated with the Company's operating results for the quarter ended April 30, l994. Revenues in the thirteen weeks ended January 29, l994 increased 5.4% over revenues in the thirteen weeks ended January 30, l993. Higher revenues at the Neiman Marcus division and Bergdorf Goodman were offset by lower revenues at the Contempo Casuals division. The number of stores was substantially unchanged from the thirteen weeks ended January 30, l993. Operating earnings increased 19.6%, reflecting higher revenues and finance charge income, partially offset by volume-related increases in cost of goods sold and selling costs. Insurance Insurance revenues decreased 5.6% compared to the same 1993 period due to lower capital gains and the absence of major medical premium revenue due to the sale of that block of business in April 1993. These decreases were partially offset by higher structured annuity revenues. Insurance operating earnings decreased $2.6 million compared to the same period last year. The decline in operating earnings was due to a $3.7 million decrease in capital gains, partially offset by favorable claims experience in the farm and rural accident and health lines of business and higher annuity profits resulting from a higher level of business. Professional Services Professional services revenues decreased $2.2 million to $37.2 million in the 1994 second quarter from $39.4 million in the 1993 second quarter. The decrease reflects lower volume in group outplacement programs. Professional services operating earnings decreased $2.1 million compared to the same period in the prior year. This decrease is attributable to lower revenues and higher payroll and benefit costs. 9 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest Expense Interest expense increased 3.2% compared to the same period last year primarily due to higher outstanding balances on bank borrowings during the period at NMG. Liquidity and Capital Resources General The following discussion analyzes liquidity and capital resources by operating, investing and financing activities as presented in the Company's consolidated statements of cash flows. The discussion of liquidity and capital resources for the insurance segment appears separately, because the assets, liabilities and cash flows of the insurance company are restricted by statute. Because NMG is a separate public company Harcourt General has no access to NMG's earnings or cash flow other than through the receipt of cash dividends paid by NMG. Similarly, NMG has no claim on the Company's assets. Cash provided by continuing operating activities for the six months ended April 30, l994 was $67.5 million excluding adjustments for the Company's insurance operations. The cash provided by the Company's operations was used to fund working capital, capital expenditures and dividend requirements. Since October 31, l993, working capital increased $18.2 million. The most significant items affecting working capital were increases in accounts receivable of $18.8 million and decreases in accounts payable of $59.1 million and in accrued liabilities of $26.0 million, which were partially offset by a $22.9 million decrease in inventories and a $26.1 million increase in taxes payable. Cash flows used by investing activities excluding insurance operations were $87.3 million. The Company's investing activities in the 1994 period included capital expenditures totaling $86.7 million. Publishing capital expenditures in the 1994 six month period totaled $59.4 million and were related principally to expenditures for prepublication costs. Capital expenditures in the publishing business are expected to approximate $140.0 million in fiscal 1994. Specialty retailing capital expenditures in the 1994 period totaled $26.1 million and were primarily related to store renovation and expansion of the mail order facility. Capital expenditures for NMG in fiscal 1994 are expected to approximate $65.0 million. Financing activities primarily reflect additional borrowings of $43.4 million under NMG's revolving credit agreements, the purchase of $18.9 million of the remaining Harcourt Brace debt and the payment of $23.2 million in dividends. At April 30, 1994, the Company's consolidated long-term liabilities totaled $1.1 billion. That amount includes $481.1 million of NMG long-term liabilities which are not guaranteed by the Company. The Company has uncommitted borrowing capacity with three banks totaling $75.0 million and committed borrowing capacity of $400.0 million. The Company had no committed or uncommitted borrowings outstanding at April 30, l994. NMG has committed borrowing capacity totaling $400.0 million of which $275.7 million was outstanding at January 29, l994 and uncommitted borrowing capacity totaling $70.0 million. 10 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Insurance Cash used by insurance operations totaled $18.2 million in the first six months of fiscal 1994. This amount reflects realized capital gains of $7.8 million and an increase in deferred policy acquisition costs of $8.3 million which were partially offset by net increases in policyholder reserves and unearned premiums. The insurance companies used $171.2 million in investing activities, primarily to purchase fixed maturity securities. Cash generated from insurance financing activities consisted of proceeds from policyholder deposits of $167.2 million. In the first quarter of 1994, the Company announced that it is exploring various options related to the potential sale of the insurance business, although no decision has been made. 11 HARCOURT GENERAL, INC. PART II Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders was held on March 11, 1994. The following matters were voted upon at the meeting: 1. Election of the following people as Class A Directors for a term of three years: Jack M. Greenberg Herbert W. Jarvis For 66,547,269 For 66,558,083 Withheld 176,519 Withheld 165,705 Richard A. Smith Robert J. Tarr, Jr. For 66,557,197 For 66,557,372 Withheld 166,591 Withheld 167,416 2. Ratification of the appointment of Deloitte & Touche as the Company's independent auditors for the 1994 fiscal year. For 66,014,309 Against 42,709 Abstain 666,771 Non-Voting 0 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 11.1 Computation of average number of shares outstanding used in determining primary and fully diluted earnings per share. (b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the quarter ended April 30, 1994. 12 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: June 10, 1994 s/John R. Cook John R. Cook Senior Vice President and Chief Financial Officer Date: June 10, 1994 s/Stephen C. Richards Stephen C. Richards Vice President and Controller Principal Accounting Officer EX-11.1 2 EXHIBIT 11.1 - HARCOURT GENERAL FORM 10-Q - APRIL 30, 1994 13 EXHIBIT 11.1 HARCOURT GENERAL, INC. Computation of average number of shares outstanding used in determining primary and fully diluted earnings per share:
(In thousands) For the six months For the three months 1994 1993 1994 1993 PRIMARY 1. Weighted average number of common shares outstanding 77,726 76,381 77,850 76,436 2. Assumed conversion of Series A Cumulative Convertible Stock 1,746 2,831 1,631 2,788 3. Assumed exercise of certain stock options based on average market value 357 371 323 381 4. Weighted average number of shares used in primary per share computations 79,829 79,583 79,804 79,605 FULLY DILUTED (A) 1. Weighted average number of common shares outstanding 77,726 76,381 77,850 76,436 2. Assumed conversion of Series A Cumulative Convertible Stock 1,746 2,831 1,631 2,788 3. Assumed exercise of all dilutive options based on higher of average or closing market value 361 399 324 381 4. Weighted average number of shares used in fully diluted per share computations 79,833 79,611 79,805 79,605
(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%. -----END PRIVACY-ENHANCED MESSAGE-----