-----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, BJ7PUmgl57RzCRNV4PJC8mmKgKlkBTpnBnXb8R/j9lzOQPV62VklZrzkbnOKUXpC GWkyA7pwWDHHvR7iECUmPw== 0000040493-96-000007.txt : 19960613 0000040493-96-000007.hdr.sgml : 19960613 ACCESSION NUMBER: 0000040493-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960612 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: 96579944 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, INC. 2ND QUARTER 1996 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, 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 June 5, 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 52,893,966 Class B Stock, $1.00 Par Value 20,051,210 HARCOURT GENERAL, INC. I N D E X Part I. Financial Information Page Number Item 1. Condensed Consolidated Balance Sheets as of April 30, 1996 and October 31, l995 1 Condensed Consolidated Statements of Earnings for the Three and Six Months Ended April 30, l996 and l995 2 Condensed Consolidated Statements of Cash Flows for the Six Months Ended April 30, l996 and l995 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-10 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 Exhibit 27.1 14 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands) April 30, October 31, 1996 l995 Assets Current assets: Cash and equivalents $ 363,612 $ 363,750 Short-term investments 166,324 243,073 Accounts receivable, net 342,453 372,700 Inventories 509,823 495,222 Deferred income taxes 79,083 79,083 Other current assets 78,682 55,970 Total current assets 1,539,977 1,609,798 Property and equipment, net 569,312 540,347 Other assets: Prepublication costs, net 191,990 164,449 Intangible assets, net 463,244 442,566 Other 144,478 127,176 Total other assets 799,712 734,191 Total assets $2,909,001 $2,884,336 Liabilities and Shareholders' Equity Current liabilities: Notes payable and current maturities of long-term liabilities $ 196,776 $ 55,484 Accounts payable 239,334 284,481 Accrued liabilities 323,494 334,479 Taxes payable 19,135 58,104 Other current liabilities 121,598 52,423 Total current liabilities 900,337 784,971 Long-term liabilities: Notes and debentures 717,114 749,008 Other long-term liabilities 215,795 210,846 Total long-term liabilities 932,909 959,854 Deferred income taxes 198,398 198,398 Shareholders' equity: Preferred stock 1,171 1,210 Common stock 71,092 72,699 Paid-in capital 728,681 727,285 Cumulative translation adjustments (6,282) (5,166) Retained earnings 82,695 145,085 Total shareholders' equity 877,357 941,113 Total liabilities and shareholders' equity $2,909,001 $2,884,336 See Notes to Condensed Consolidated Financial Statements.
1 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands except for per share amounts) Six Months Three Months Ended April 30, Ended April 30, 1996 1995 1996 1995 Revenues $1,542,784 $1,437,786 $844,343 $774,477 Costs applicable to revenues 961,367 900,488 543,127 501,791 Selling, general and administrative expenses 498,514 456,937 263,235 234,004 Corporate expenses 15,840 17,420 8,437 8,402 Operating earnings 67,063 62,941 29,544 30,280 Investment income 15,423 23,757 7,249 12,634 Interest expense (41,445) (46,795) (20,990) (23,994) Earnings from continuing operations before income taxes 41,041 39,903 15,803 18,920 Income taxes (13,954) (13,567) (5,373) (6,184) Earnings from continuing operations 27,087 26,336 10,430 12,736 Earnings (loss) from discontinued operations, net - (306) - 1,498 Net earnings $ 27,087 $ 26,030 $ 10,430 $ 14,234 Weighted average number of common and common equivalent shares outstanding 73,155 79,141 72,949 78,479 Earnings per common share: Earnings from continuing operations $ .37 $ .33 $ .14 $ .16 Earnings from discontinued operations, net - - - .02 Net earnings $ .37 $ .33 $ .14 $ .18 Dividends per share: Common Stock $ .34 $ .32 $ .17 $ .16 Class B Stock $ .306 $ .288 $ .153 $ .144 Series A Stock $ .389 $ .367 $ .1945 $ .1835 See Notes to Condensed Consolidated Financial Statements.
2 HARCOURT GENERAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) Six Months Ended April 30, 1996 1995 Cash flows from operating activities: Net earnings from continuing operations $ 27,087 $ 26,336 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 84,429 82,371 Other items 1,188 (3,966) Changes in current assets and liabilities: Accounts receivable 29,668 9,914 Inventories (14,742) (3,661) Other current assets (8,911) 3,440 Current liabilities (24,932) (46,644) 93,787 67,790 Discontinued operating activities - 4,110 Net cash provided by operating activities 93,787 71,900 Cash flows from investing activities: Capital expenditures (131,498) (90,583) Purchase of short-term investments (126,196) (273,221) Maturities of short-term investments 188,332 - Acquisitions (17,467) - Other investing activities (25,589) - Net cash used by investing activities (112,418) (363,804) Cash flows from financing activities: Proceeds from borrowings 108,550 43,000 Repayment of debt (764) (10,701) Repurchase of Common Stock (67,150) (220,039) Dividends paid (24,042) (23,927) Other financing activities 1,899 2,092 Net cash provided (used) by financing activities 18,493 (209,575) Cash and equivalents Decrease during the period (138) (501,479) Beginning balance 363,750 819,659 Ending balance $363,612 $318,180 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 April 30, l996 condensed consolidated financial statements include the January 27, 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 59% of the common stock and 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 operations to The Wet Seal, Inc. The condensed consolidated financial statements have been restated to present Contempo Casuals as a discontinued operation. Revenues applicable to discontinued Contempo operations were $69.1 million and $126.4 million for the thirteen and twenty-six week periods ended January 28, 1995. 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. In March 1996, the Company's Board of Directors authorized an increase in the open market stock purchase program to 3.5 million shares of the Company's Common Stock. During the six months ended April 30, 1996, the Company purchased approximately 1.7 million shares at an average price of $39.18 per share under this buyback program. 4 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 (loss) from continuing operations by business segment.
Six Months Ended April 30, Three Months Ended April 30, (In thousands) 1996 1995 1996 1995 Publishing $ 362,632 $ 321,986 $ 185,604 $ 153,496 Specialty retailing 1,115,322 1,051,858 625,424 589,536 Professional services 64,830 63,942 33,315 31,445 Total revenues $1,542,784 $1,437,786 $ 844,343 $774,477 Operating earnings (loss): Publishing ($ 26,283) ($ 32,189) ($ 14,949) ($ 20,288) Specialty retailing 101,325 105,491 48,583 56,049 Professional services 7,861 7,059 4,347 2,921 Corporate expenses (15,840) (17,420) (8,437) (8,402) Total operating earnings $ 67,063 $ 62,941 $ 29,544 $ 30,280
Six Months Ended April 30, l996 Compared to Six Months Ended April 30, l995 Publishing Publishing revenues for the six months ended April 30, l996 increased 12.6% to $362.6 million from $322.0 million in the six months ended April 30, l995. The increase was primarily attributable to higher testing program revenues and sales of elementary reading, science and math programs at the Company's educational publishing group, and higher revenues at the scientific, technical, medical and professional (STMP) publishing group. The testing program revenue growth was primarily a result of the Assessment Systems, Inc. (ASI) acquisition completed in the third quarter of fiscal 1995, while the STMP revenue growth reflects both increased book and journal sales at W.B. Saunders as well as revenue increases due to the acquisition of International Medical News Group (IMNG) in the first quarter of fiscal 1996. The publishing operating loss decreased $5.9 million or 18.3% compared with the same period last year. The decrease was primarily due to improved earnings at the STMP publishing group, which resulted from higher sales volume and reduced plate amortization costs. The operating loss at the educational publishing group was reduced slightly, as sales volume increases were largely offset by higher administrative and editorial expenses, related in part to the operations of ASI. Specialty Retailing Specialty retailing results are reported with a lag of one quarter. Accordingly, the operating results of The Neiman Marcus Group, Inc. (NMG) for the twenty-six weeks ended January 27, 1996 are consolidated with the operating results of the Company for the six months ended April 30, 1996. In June 1995, NMG sold its Contempo Casuals subsidiary to The Wet Seal, Inc. NMG's fiscal 1995 results have been restated to present Contempo Casuals as a discontinued operation. 5 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Specialty Retailing (Continued) Revenues in the twenty-six weeks ended January 27, 1996 increased $63.5 million or 6.0% over revenues in the twenty-six weeks ended January 28, l995. The increase in revenues was primarily due both to a 3.8% comparative sales increase and the opening of a new Neiman Marcus store in Short Hills, New Jersey in August 1995. Operating earnings decreased 3.9% to $101.3 million as a result of a $9.6 million reduction in finance charge income related to the securitization of NMG's credit card receivables in March 1995 and higher markdowns during the holiday selling season, partially offset by higher sales volume. Professional Services Professional services revenues increased 1.4% to $64.8 million compared to the same period last year. The increase was primarily due to higher volume in executive outplacement programs. Professional services operating earnings increased 11.4% in 1996 compared to the same six month period last year, primarily due to higher revenues and essentially unchanged operating expenses. Investment Income Investment income decreased $8.3 million to $15.4 million compared to the same six month period in 1995. The decrease was 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. Interest Expense Interest expense decreased $5.4 million to $41.4 million from the same period last year. The decrease was primarily due to the use of NMG securitization proceeds to pay down outstanding NMG bank debt. Income Tax Expense The Company's effective tax rate is estimated to be 34.0% in fiscal l996, unchanged from fiscal 1995. 6 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended April 30, 1996 Compared to Three Months Ended April 30, 1995 Publishing Publishing revenues increased 20.9% to $185.6 million compared to the same period last year. The increase was primarily due to higher sales volume at both the educational and STMP publishing groups. The educational publishing group increase was primarily a result of higher testing program revenues primarily due to the acquisition of ASI and early sales of elementary reading, science and math programs. STMP revenues increased primarily as a result of the IMNG acquisition and higher sales volume of books and journals at W. B. Saunders. The publishing operating loss decreased by $5.3 million or 26.3% compared to the same period last year. The operating loss was reduced primarily because of significantly improved earnings at the STMP publishing group, resulting from higher sales volume, reduced plate amortization costs, and reduced operating expenses as a percentage of revenues. Specialty Retailing Specialty retailing results are reported with a lag of one quarter. The operating results of NMG for the thirteen weeks ended January 27, 1996 are consolidated with the operating results of the Company for the three months ended April 30, 1996. Revenues in the thirteen weeks ended January 27, l996 increased 6.1% over revenues in the thirteen weeks ended January 28, l995. A 3.8% comparable sales increase and the opening of a new Neiman Marcus store in Short Hills, New Jersey in August 1995 contributed to the improvement. Operating earnings decreased 13.3%, resulting principally from a reduction in finance charge income and higher markdowns. The reduction in finance charge income resulted from the securitization of the credit card receivables of NMG in March 1995. Professional Services Professional services revenues increased $1.9 million to $33.3 million in the 1996 second quarter from $31.4 million in 1995. The increase resulted primarily from higher volume in executive outplacement programs. Professional services operating earnings increased $1.4 million or 48.8% compared to the same period in the prior year, principally due to higher revenues and proportionately lower operating expenses. Investment Income Investment income decreased $5.4 million to $7.2 million in 1996 compared to the same 1995 quarter. The decrease was due to a reduction in the portfolio balance as a result of the Company s common stock purchase program and a lower rate of return on portfolio assets. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended April 30, 1996 Compared to Three Months Ended April 30,1995 Interest Expense Interest expense decreased $3.0 million compared to the same period last year primarily due to lower NMG debt balances as a result of the securitization of NMG's credit card receivables in March 1995. 8 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. During the period the Company had sufficient cash flows to fund its working capital, capital expenditures and dividend requirements. Cash provided by operating activities for the six months ended April 30, l996 was $93.8 million. The publishing and professional services business segments provided $109.9 million of cash from operations while NMG's operations used $16.1 million. Net earnings from continuing operations before depreciation and amortization provided cash of $111.5 million while changes in working capital and other items used cash of $17.7 million. The primary items affecting working capital were decreases in accounts receivable ($29.7 million) and current liabilities ($24.9 million) and an increase in inventories ($14.7 million). Cash flows used by investing activities were $112.4 million. The Company's investing activities included capital expenditures totaling $131.5 million. Publishing capital expenditures in the six month period ended April 30, 1996 totaled $76.3 million and were related principally to expenditures for prepublication costs. Capital expenditures in the publishing business are expected to approximate $170.0 million in fiscal 1996. Specialty retailing capital expenditures in the 1996 period totaled $53.0 million and were primarily related to existing store renovations and the construction of new stores in King of Prussia, Pennsylvania and Paramus, New Jersey and a new national distribution center for Neiman Marcus Stores in Longview, Texas. Capital expenditures for NMG in fiscal 1996 are expected to approximate $100.0 million. During the six months ended April 30, 1996, $188.3 million of short-term investments matured, and the Company purchased $126.2 million of short-term investments. These investments are highly liquid and consist primarily of high quality commercial paper, certificates of deposit, corporate debt securities and U.S. Government securities. In November 1995, the Company acquired 831,400 shares of NMG common stock in a privately negotiated transaction at $18.75 per share. In May 1996, the Company acquired an additional 300,000 shares of NMG common stock in a privately negotiated transaction at $24.13 per share. Financing activities primarily reflect the payment of $24.0 million in dividends and the purchase of approximately 1.7 million shares of the Company's common stock for $67.2 million on the open market at an average price of $39.18 per share. NMG's financing activities primarily reflect additional borrowings of $107.9 million under its revolving credit agreements. NMG eliminated its quarterly cash dividend on common stock beginning with its third quarter of fiscal 1995. Elimination of this dividend conserves approximately $7.6 million of NMG's cash annually. At April 30, 1996, the Company's consolidated long-term liabilities totaled $932.9 million. That amount includes approximately $238.0 million of NMG long-term liabilities, which are not guaranteed by the Company. 9 HARCOURT GENERAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Continued) At April 30, 1996, the Company had the entire $400 million available under its revolving credit agreement with thirteen banks. The Company's revolving credit agreement expires in December 1999. At January 27, 1996, NMG had $330 million available under its revolving credit facility, which expires in April 2000. The Company believes its cash on hand, cash generated from operations and its debt capacity will be sufficient to fund its planned capital growth as well as its operating working capital and dividend requirements. 10 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 8, 1996. The following matters were voted upon at the meeting: 1. Election of the following individuals as Class C Directors for a term of three years: Brian J. Knez Jeffrey R. Lurie For 63,033,235 For 63,037,435 Withheld 464,805 Withheld 460,605 Lynn Morley Martin Paula Stern For 63,121,249 For 63,119,339 Withheld 376,791 Withheld 378,701 Clifton R. Wharton, Jr. For 63,094,379 Withheld 403,661 2. Election of the following individual as a Class A Director for a term of one year to coincide with the terms of the other Class A directors. Gary L. Countryman For 63,121,774 Withheld 376,266 3. Ratification of the appointment of Deloitte & Touche LLP as the Company's independent auditors for the 1996 fiscal year. For 63,364,748 Against 52,609 Abstain 80,683 Non-Voting 0 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 April 30, 1996. 11 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 12, 1996 s/John R. Cook John R. Cook Senior Vice President and Chief Financial Officer Date: June 12, 1996 s/Stephen C. Richards Stephen C. Richards Vice President and Controller Principal Accounting Officer 12 EX-11.1 2 COMPUTATION OF WEIGHTED AVERAGES EXHIBIT 11.1 HARCOURT GENERAL, INC. Computation of the weighted average number of shares outstanding used in determining primary and fully diluted earnings per share:
(In thousands) Six Months Three Months Ended April 30, Ended April 30, 1996 1995 1996 1995 PRIMARY 1. Weighted average number of common shares outstanding 71,636 77,255 71,445 76,598 2. Assumed conversion of Series A Cumulative Convertible Stock 1,312 1,580 1,307 1,565 3. Assumed exercise of certain stock options based on average market value 207 306 197 316 4. Weighted average number of shares used in primary per share computations 73,155 79,141 72,949 78,479 FULLY DILUTED (A) 1. Weighted average number of common shares outstanding 71,636 77,255 71,445 76,598 2. Assumed conversion of Series A Cumulative Convertible Stock 1,312 1,580 1,307 1,565 3. Assumed exercise of all dilutive options based on higher of average or closing market value 208 322 200 350 4. Weighted average number of shares used in fully diluted per share computations 73,156 79,157 72,952 78,513 (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%.
13 EX-27.1 3 ARTICLE 5
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 6-MOS OCT-31-1996 APR-30-1996 363,612 166,324 366,512 24,059 509,823 1,539,977 886,611 317,299 2,909,001 900,337 717,114 0 1,171 71,092 805,094 2,909,001 1,542,784 1,542,784 961,367 1,475,721 0 46,711 41,445 41,041 13,954 27,087 0 0 0 27,087 .37 .37
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