-----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, KhqunAtnJGCw/qWIusalArSSB/qbxO9/8G/qITzs3Jk5kfM4kyyDFnTYeCaCfmne URXAkukR1ru6O791Yl7KmA== 0000893877-95-000060.txt : 19950615 0000893877-95-000060.hdr.sgml : 19950615 ACCESSION NUMBER: 0000893877-95-000060 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950520 FILED AS OF DATE: 19950614 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEYER FRED INC CENTRAL INDEX KEY: 0000701169 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 930798201 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15023 FILM NUMBER: 95547170 BUSINESS ADDRESS: STREET 1: 3800 SE 22ND AVE CITY: PORTLAND STATE: OR ZIP: 97202 BUSINESS PHONE: 5032328844 MAIL ADDRESS: STREET 1: PO BOX 42121 CITY: PORTLAND STATE: OR ZIP: 97242 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 20, 1995 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 No. 0-15023 FRED MEYER, INC. (Exact name of registrant as specified in its charter) Delaware 93-0798201 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3800 S.E. 22nd Avenue Portland, Oregon 97202 (Address of principal executive offices) (Zip Code) (503) 232-8844 (Registrant's telephone number, including area code) Not applicable. (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 XX No _______ ------- Shares of Common Stock Outstanding at May 20, 1995: 26,703,867 2 Part I - Financial Information FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
May 20, January 28, 1995 1995 ------ ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . $ 39,405 $ 34,868 Receivables-net . . . . . . . . . . . . . . 20,018 20,025 Inventories . . . . . . . . . . . . . . . . 515,016 514,473 Prepaid expenses and other. . . . . . . . . 36,221 42,092 Income taxes receivable . . . . . . . . . . 4,612 15,021 Current portion of deferred taxes . . . . . 15,586 15,116 ---------- ---------- Total current assets . . . . . . . . . . 630,858 641,595 ---------- ---------- PROPERTY AND EQUIPMENT-NET . . . . . . . . . . 946,237 896,439 ---------- ---------- OTHER ASSETS . . . . . . . . . . . . . . . . . 23,898 24,638 ----------- ---------- TOTAL . . . . . . . . . . . . . . . . $1,600,993 $1,562,672 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and outstanding checks . . $ 285,084 $ 312,044 Current portion of long-term debt and lease obligations. . . . . . . . . . 1,623 1,623 Accrued expenses and other. . . . . . . . . 83,600 78,414 ----------- ---------- Total current liabilities. . . . . . . . 370,307 392,081 ----------- ---------- LONG-TERM DEBT AND MORTGAGES . . . . . . . . . 599,153 540,166 ----------- ---------- CAPITAL LEASE OBLIGATIONS. . . . . . . . . . . 13,791 13,823 ----------- ---------- DEFERRED LEASE TRANSACTIONS. . . . . . . . . . 44,206 45,655 ----------- ---------- DEFERRED INCOME TAXES. . . . . . . . . . . . . 20,466 22,258 ----------- ---------- OTHER LONG-TERM LIABILITIES. . . . . . . . . . 9,230 10,069 ----------- ---------- STOCKHOLDERS' EQUITY Common stock. . . . . . . . . . . . . . . . 268 268 Additional paid-in capital. . . . . . . . . 199,208 197,087 Unearned compensation . . . . . . . . . . . (114) (130) Retained earnings . . . . . . . . . . . . . 348,374 345,291 Treasury stock. . . . . . . . . . . . . . . (3,896) (3,896) ---------- ---------- Total stockholders' equity . . . . . . . 543,840 538,620 ---------- ---------- TOTAL . . . . . . . . . . . . . . . . $1,600,993 $1,562,672 ========== ==========
See notes to consolidated financial statements. 3 FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
16 Weeks Ended ---------------------- May 20, May 21, 1995 1994 -------- -------- NET SALES. . . . . . . . . . . . . . . . . . . $936,679 $932,347 -------- -------- COST OF MERCHANDISE SOLD: General. . . . . . . . . . . . . . . . . . 668,926 658,971 Related party leases . . . . . . . . . . . 1,713 1,713 -------- -------- Total cost of merchandise sold . . . . . . 670,639 660,684 -------- -------- GROSS MARGIN . . . . . . . . . . . . . . . . . 266,040 271,663 -------- -------- OPERATING AND ADMINISTRATIVE EXPENSES: General. . . . . . . . . . . . . . . . . . 232,501 221,795 Related party leases . . . . . . . . . . . 17,414 17,676 -------- -------- Total operating and administrative expenses 249,915 239,471 -------- -------- INCOME FROM OPERATIONS . . . . . . . . . . . . 16,125 32,192 INTEREST EXPENSE-NET . . . . . . . . . . . . . 11,152 6,408 -------- -------- INCOME BEFORE INCOME TAXES . . . . . . . . . . 4,973 25,784 PROVISION FOR INCOME TAXES . . . . . . . . . . 1,890 9,798 -------- -------- NET INCOME . . . . . . . . . . . . . . . . . . $ 3,083 $ 15,986 ======== ======== EARNINGS PER COMMON SHARE. . . . . . . . . . . $.11 $.56 ==== ==== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING . . . . . . . . . 28,465 28,725 ====== =======
See notes to consolidated financial statements. 4 FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
16 Weeks Ended --------------------- May 20, May 21, 1995 1994 -------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income. . . . . . . . . . . . . . . . . $ 3,083 $15,986 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment. . . . . . . . 31,328 25,924 Deferred lease transactions. . . . . . . (1,449) (799) Other liabilities. . . . . . . . . . . . (839) 69 Income taxes . . . . . . . . . . . . . . 8,147 (13,331) Inventories. . . . . . . . . . . . . . . (543) (26,219) Other current assets . . . . . . . . . . 5,878 5,209 Accounts payable and accrued expenses. . 6,653 31,146 Other. . . . . . . . . . . . . . . . . . 1,344 1,509 -------- ------- Net cash provided by operating activities . 53,602 39,494 -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock-net . . . . . . . 2,121 1,471 Decrease in outstanding checks . . . . . . (27,993) (11,098) (Increase) decrease in notes receivable. . (44) 117 Long-term financing: Borrowings . . . . . . . . . . . . . . . 58,986 66,125 Repayments . . . . . . . . . . . . . . . (32) (256) -------- ------- Net cash provided by financing activities . 33,038 56,359 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Net purchases of investment securities. . . (935) (1,745) Purchases of property and equipment . . . . (83,187) (91,612) Net proceeds from sale of real property . . 2,019 1,476 -------- ------- Net cash used for investing activities. . . (82,103) (91,881) -------- ------- CASH AND CASH EQUIVALENTS: Net increase for the period . . . . . . . . 4,537 3,972 Beginning of period . . . . . . . . . . . . 34,868 34,054 -------- ------- End of period . . . . . . . . . . . . . . . $ 39,405 $38,026 ======== ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (refunded) during the period for: Interest . . . . . . . . . . . . . . . . $5,196 $ 7,212 Income taxes . . . . . . . . . . . . . . (6,388) 23,018
See notes to consolidated financial statements. 5 FRED MEYER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Interim Reporting Periods ------------------------- The Company's interim reporting periods for reports to stockholders are the 16th, 28th, and 40th weeks of its fiscal year. 2. Reclassifications ----------------- Certain prior year balances have been reclassified to conform to current year presentation. 3. Inventories ----------- Inventories consist mainly of merchandise held for sale. Substantially all the inventories are valued at the lower of last-in, first-out (LIFO) cost or market. Estimated gross margins have been used for determining the cost of merchandise sold for those operating departments not taking physical inventories at the end of the interim periods. 4. Income Taxes ------------ Income taxes have been provided for based upon the current estimate of the Company's annual effective tax rate. 5. Stockholders' Equity -------------------- Changes in stockholders' equity for the sixteen weeks ended May 20, 1995 were:
(In thousands) ----------- Stockholders' equity, January 28, 1995 $538,620 Stock options exercised 2,122 Amortization of unearned compensation 15 Net income 3,083 -------- Stockholders' equity, May 20, 1995 $543,840 ========
6. Earnings Per Common Share ------------------------- Fully diluted earnings per common share are computed by dividing net income by the weighted average number of common and common equivalent shares outstanding. Weighted average shares reflect the dilutive effect of outstanding stock options (ranging in exercise price from $3.24 to $41.25 per share) which was determined by using the "treasury stock" method. 7. Commitments and Contingencies ----------------------------- The Company and its subsidiaries are parties to various legal claims, actions, and complaints, certain of which involve material amounts. Although the Company is unable to predict with certainty whether or not it will ultimately be successful in these legal proceedings or, if not, what the impact might be, management presently believes that disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or consolidated results of operations. _______________ The financial information furnished in this Form 10-Q reflects all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair presentation of the results for the 16 weeks ended May 20, 1995 and May 21, 1994. The consolidated results of operations presented herein are not necessarily indicative of the results to be expected for the year due to the seasonality of the Company's business. These consolidated financial statements should be read in conjunction with the financial statements and related notes incorporated by reference in the Company's latest annual report filed on Form 10-K. 6 FRED MEYER, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION The Company funded its working capital and capital expenditure needs in 1995 and 1994 through internally generated cash flow, supplemented by borrowings under committed and uncommitted bank lines of credit and unrated commercial paper. On June 29, 1993 and August 2, 1993, the Company issued an aggregate of $70,000,000 of five-year floating rate notes to a group of five banks. At the Company's option, the notes will bear interest at a spread above LIBOR or certificate of deposit rates. On June 1, 1994, the Company issued an aggregate of $57,500,000 of senior notes to a group of life insurance companies. The notes mature on July 15 of 1999, 2001, 2004, and 2007 and bear interest rates of between 7.25 percent and 7.98 percent. On April 25, 1995, the Company issued $50,000,000 of seven year senior 7.77 percent notes to a major insurance company. On May 30, 1995, the Company borrowed $20,000,000 from a major international bank with a maturity of five years and bearing interest at 6.775 percent. The Company also put in place a lease line of credit for land and buildings for up to $100,000,000. The Company entered into a new credit facility in 1994 with several domestic and foreign banks for a committed line of credit which provides for borrowings of up to $400,000,000. This agreement was extended for one year in 1995 and continues through June 30, 2000, at which time the agreement terminates and any outstanding amounts must be paid in full. On March 6, 1995, the Company entered into a new 364-day credit facility with several domestic and foreign banks for an additional committed line of credit which provides for borrowings of up to $100,000,000. After 364 days, the agreement terminates, and any outstanding amounts must be paid in full unless extended. In addition to these committed credit facilities, the Company had $45,000,000 of uncommitted money market lines of credit with several foreign banks and had $95,000,000 of uncommitted money market lines of credit with banks who are in the committed credit facility. The bank lines of credit and unrated commercial paper are used primarily for seasonal inventory requirements, new store construction and financing, existing store remodeling, acquisition of land, and major projects such as MIS development. At May 20, 1995, the Company had unrated commercial paper outstanding in the amount of approximately $326,133,000, borrowings under committed borrowing facilities of $23,000,000, borrowings under uncommitted borrowing facilities of $20,000,000, and a total of approximately $150,867,000 available for borrowings that would be supported by its committed credit facilities. The Company has entered into interest rate swap and cap agreements to reduce the impact of changes in interest rates on its floating rate long-term debt. At May 20, 1995, the Company had outstanding six interest rate contracts with commercial banks, having a total notional principal amount of $100,000,000. Three of these agreements effectively fix the Company's interest rate on unrated commercial paper, floating rate facilities, and uncommitted lines of credit at rates between 4.625 percent and 7.595 percent on a notional principal amount of $50,000,000. These contracts expire in 1996, 1997, and 1998. The remaining three agreements effectively limit the maximum interest rate the Company will pay at rates between 5.00 percent and 9.00 percent on notional principal amounts totaling $50,000,000. These three agreements mature in 1996, 1998, and 1999. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counter-parties. RESULTS OF OPERATIONS COMPARISON OF THE 16 WEEKS ENDED MAY 20, 1995 WITH THE 16 WEEKS ENDED MAY 21, 1994. Net sales for the first quarter of 1995 increased $4,332,000 or .5 percent over the corresponding quarter in 1994. This increase reflects openings of new 7 stores, and inflation, offset by soft sales in seasonal nonfood categories resulting from poor weather comparisons with last year's first quarter, many competitive openings in 1994 and 1995 in the home improvement and home electronic categories, softer consumer demand, a slowdown in the Seattle economy reflected to some degree by layoffs in the aerospace industry, and Portland sales still reflecting some effects of an 88-day food industry strike in the last half of 1994. Comparable store sales decreased 4.9 percent for the first quarter of 1995. Comparable food store sales decreased 2.0 percent, and comparable nonfood store sales decreased 6.9 percent. The Company's food operations accounted for 42.0 percent of the overall sales in 1995 and 39.7 percent in 1994. Gross margin as a percent of net sales was 28.4 percent for the first quarter of 1995, compared with 29.1 percent in 1994's first quarter. Gross margins decreased due primarily to the negative impact of lower sales in higher margin seasonal categories, and higher markdowns. Operating and administrative expenses as a percent of net sales were 26.7 percent for the first quarter of 1995, compared with 25.7 percent in 1994's first quarter. Expenses as a percent of sales increased in 1995's first quarter, generally reflecting the impact of lower sales on fixed expenses and store labor costs. Net interest expense in the first quarter of 1995 was $11,152,000, an increase of 74.0 percent from the $6,408,000 reported for 1994. The increase primarily reflects higher rates, and higher borrowings due to an acceleration in new store construction and remodels and the impact of 1994's labor disputes. The reporting of interest expense was also modified in the first quarter of 1995 to report all interest expense as one item, versus the Company's prior treatment of charging a portion to cost of goods sold and selling, general, and administrative expenses in the form of occupancy costs. 1994's first quarter was adjusted for the same accounting presentation. The effective tax rate for the first quarters of 1995 and 1994 was 38.0 percent. Net income decreased 80.7 percent to $3,083,000 in the first quarter of 1995 from $15,986,000 in 1994. Earnings per share were $.11 for the first quarter of 1995 based on 28,465,000 shares outstanding, compared with $.56 for the prior year's period based on 28,725,000 shares outstanding. EFFECT OF LIFO The Company estimates annual LIFO expense based on estimates of three factors: inflation rates (calculated by reference to the Department Stores Inventory Price Index published by the Bureau of Labor Statistics for softgoods and jewelry, and to internally generated indices based on Company purchases during the year for all other departments), expected inventory levels, and expected markup levels (after reflecting permanent markdowns and cash discounts). The Company reviewed these year-to-date indices at the end of the first quarter and adjusted its LIFO reserve on a year-to-date basis to reflect the Company's overall product mix, anticipated year-end inventory levels, and the Company's expectations of the indices for the remainder of the year. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit ------- 11. Computation of earnings per Common Share (b) Reports on Form 8-K ------------------- No reports on Form 8-K have been filed during the period for which this report is filed. 8 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 thereunto duly authorized. FRED MEYER, INC. (Registrant) Dated: June 13, 1995 KENNETH THRASHER ------------- -------------------------------- Kenneth Thrasher Senior Vice President - Finance Chief Financial Officer 9 EXHIBIT INDEX Exhibit Sequential Number Document Description Page Number ------ -------------------- ----------- 11 Computation of Earnings per Common Share 27 Financial Data Schedule EX-11 2 EXHIBIT 11 EXHIBIT 11 FRED MEYER, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts) (Unaudited)
16 Weeks Ended --------------------- May 20, May 21, 1995 1994 ------- ------- Weighted average number of shares outstanding . . . . . . . . . . . . . . . . . . 26,633 26,450 Weighted average number of shares under option. . . . . . . . . . . . . . . . . . 2,988 3,680 Shares assumed to have been purchased under the treasury stock method . . . . . . . . (1,156) (1,405) ------ ------ Weighted average number of common and common equivalent shares outstanding. . . . . . 28,465 28,725 ====== ====== Net income . . . . . . . . . . . . . . . . . . . . $3,083 $15,986 ====== ======= Earnings per common share. . . . . . . . . . . . . $.11 $.56 ==== ====
EX-27 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 3-MOS FEB-03-1996 MAY-20-1995 39,405 0 20,849 0 515,016 631,689 1,419,066 472,829 631,689 370,307 599,153 268 0 0 543,572 1,600,993 936,679 936,679 670,639 249,915 0 0 11,152 4,973 1,890 3,083 0 0 0 3,083 .11 .11
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