-----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, NqSoAqS5hNgtzDs0qlwT91dgjsSlYDkylETqzgUFCWJAxLD+OCecs58uyAm8TYO2 KNLwMiOciKjgML+CK4L9mQ== 0000893877-96-000176.txt : 19960627 0000893877-96-000176.hdr.sgml : 19960627 ACCESSION NUMBER: 0000893877-96-000176 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960525 FILED AS OF DATE: 19960626 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: 001-11274 FILM NUMBER: 96585891 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 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 25, 1996 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 25, 1996: 26,704,855 Part I - Financial Information FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
May 25, February 3, 1996 1996 ---- ---- ASSETS CURRENT ASSETS: Cash and cash equivalents....................... $ 38,800 $ 41,849 Receivables-net................................. 23,024 24,683 Inventories..................................... 559,009 520,555 Prepaid expenses and other...................... 21,558 23,680 Current portion of deferred taxes............... 22,046 22,046 ---------- ---------- Total current assets......................... 664,437 632,813 ---------- ---------- PROPERTY AND EQUIPMENT-NET......................... 1,009,116 1,014,148 ---------- ---------- OTHER ASSETS....................................... 31,006 24,631 ---------- ---------- TOTAL.................................... $1,704,559 $1,671,592 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and outstanding checks......... $ 319,734 $ 257,073 Current portion of long-term debt and lease obligations........................ 1,468 1,468 Income taxes payable............................ 4,588 4,857 Accrued expenses and other...................... 88,220 86,333 ---------- ---------- Total current liabilities.................... 414,010 349,731 ---------- ---------- LONG-TERM DEBT AND MORTGAGES....................... 616,655 656,260 ---------- ---------- CAPITAL LEASE OBLIGATIONS.......................... 13,271 13,298 ---------- ---------- DEFERRED LEASE TRANSACTIONS........................ 41,411 42,271 ---------- ---------- DEFERRED INCOME TAXES.............................. 30,814 30,814 ---------- ---------- OTHER LONG-TERM LIABILITIES........................ 7,554 7,984 ---------- ---------- STOCKHOLDERS' EQUITY Common stock.................................... 270 270 Additional paid-in capital...................... 199,514 199,363 Retained earnings............................... 385,021 375,577 Treasury stock and other........................ (3,961) (3,976) ---------- ---------- Total stockholders' equity................... 580,844 571,234 ---------- ---------- TOTAL..................................... $1,704,559 $1,671,592 ========== ==========
See notes to consolidated financial statements. 2 FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
16 Weeks Ended -------------- May 25, May 20, 1996 1995 ---- ---- NET SALES.......................................... $1,040,028 $935,351 ---------- -------- COST OF MERCHANDISE SOLD: General......................................... 736,243 668,926 Related party lease............................. 1,713 1,713 ---------- -------- Total cost of merchandise sold.................. 737,956 670,639 ---------- -------- GROSS MARGIN....................................... 302,072 264,712 ---------- -------- OPERATING AND ADMINISTRATIVE EXPENSES: General......................................... 257,089 231,173 Related party leases............................ 16,647 17,414 ---------- -------- Total operating and administrative expenses..... 273,736 248,587 ---------- -------- INCOME FROM OPERATIONS............................. 28,336 16,125 INTEREST EXPENSE-NET............................... 13,104 11,152 ---------- -------- INCOME BEFORE INCOME TAXES......................... 15,232 4,973 PROVISION FOR INCOME TAXES......................... 5,788 1,890 ---------- -------- NET INCOME......................................... $ 9,444 $ 3,083 ========== ======== EARNINGS PER COMMON SHARE.......................... $.33 $.11 ==== ==== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING....................... 28,539 28,465 ====== ======
See notes to consolidated financial statements. 3 FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
16 Weeks Ended -------------- May 25, May 20, 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income...................................... $ 9,444 $ 3,083 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment.................... 35,322 31,328 Amortization of goodwill..................... 95 95 Deferred lease transactions.................. (860) (1,449) Other liabilities............................ (430) (839) Income taxes................................. (269) 8,147 Inventories.................................. (38,454) (543) Other current assets......................... 3,781 5,878 Accounts payable and accrued expenses........ 65,719 6,653 Other........................................ (6,203) 314 ------- ------- Net cash provided by operating activities....... 68,145 52,667 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock-net.................... 151 2,121 Decrease in outstanding checks.................. (1,136) (27,993) Increase in notes receivable.................... (273) (44) Long-term financing: Borrowings................................... --- 58,986 Repayments................................... (39,632) (32) ------- ------- Net cash (used for) provided by financing activities......................... (40,890) 33,038 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment............. (36,131) (83,187) Net proceeds from sale of real property......... 5,827 2,019 ------- ------- Net cash used for investing activities.......... (30,304) (81,168) ------- ------- CASH AND CASH EQUIVALENTS: Net (decrease) increase for the period.......... (3,049) 4,537 Beginning of period............................. 41,849 34,868 ------- ------- End of period................................... $38,800 $39,405 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (refunded) during the period for: Interest..................................... $12,510 $5,196 Income taxes................................. 6,038 (6,388)
See notes to consolidated financial statements. 4 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 25, 1996 were: (In thousands) -------------- Stockholders' equity, February 3, 1996 $571,234 Issuance of common stock - net 151 Amortization of unearned compensation 15 Net income 9,444 -------- Stockholders' equity, May 25, 1996 $580,844 ======== 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 25, 1996 and May 20, 1995. 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. 5 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 1996 and 1995 through internally generated cash flow, supplemented by borrowings under committed and uncommitted bank lines of credit and unrated commercial paper. On April 25, 1995, the Company issued $50,000,000 of unsecured seven-year senior 7.77 percent notes to a major insurance company. On May 17, 1995, the Company borrowed $20,000,000 from a major international bank, with a maturity of May 17, 2000 and bearing interest at 6.775 percent. In May 1995 and December 1995 the Company also put into place two lease lines of credit for land and buildings for up to $100,000,000 and $60,000,000, respectively. The Company entered into a new credit facility in 1995 with several domestic and foreign banks for a committed line of credit which provides for borrowings of up to $500,000,000. This agreement continues through June 30, 2000, at which time the agreement terminates; and any outstanding amounts must be paid in full. In addition to this committed credit facility, the Company has $100,000,000 of uncommitted money market lines of credit with several foreign banks and $120,000,000 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 25, 1996, the Company had unrated commercial paper outstanding in the amount of approximately $313,065,000, borrowings under money market lines with committed line banks of $43,500,000, borrowings under uncommitted borrowing facilities of $10,000,000, and a total of approximately $133,435,000 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 25, 1996, 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 counterparties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counterparties. The Company believes that a combination of cash flow from operations and borrowings under its credit facilities will permit it to finance its capital expenditure requirements for 1996, currently budgeted to be approximately $121,000,000, net of estimated real estate sales and stores financed on leases. If the Company determines that it is preferable, it may fund its capital expenditure requirements by mortgaging facilities, entering into sale and leaseback transactions, or by issuing additional debt or equity. RESULTS OF OPERATIONS COMPARISON OF THE 16 WEEKS ENDED MAY 25, 1996 WITH THE 16 WEEKS ENDED MAY 20, 1995. Net sales for the first quarter of 1996 increased $104,677,000 or 11.2 percent over the corresponding quarter in 1995. This increase reflects sales growth at existing stores, openings of new stores, and, to a lesser extent, inflation. Sales increases were highlighted by strong sales in food and pharmacy and 6 improved sales in garden and apparel. Comparable store sales increased 5.1 percent for the first quarter of 1996. Comparable food store sales increased 6.4 percent, and comparable nonfood store sales increased 4.2 percent. The Company's food operations accounted for 42.8 percent of the overall sales in 1996 and 42.0 percent in 1995. Gross margin as a percent of net sales was 29.0 percent for the first quarter of 1996, compared with 28.3 percent in 1995's first quarter. Gross margins increased due primarily to the improved mix of nonfood sales, stronger food margins, and lower distribution and delivery costs as a percent of sales. Operating and administrative expenses as a percent of net sales were 26.3 percent for the first quarter of 1996, compared with 26.6 percent in 1995's first quarter. Expenses as a percent of sales decreased in 1996's first quarter, generally reflecting the impact of lower store labor costs, corporate overhead expenses, and advertising costs as a percent of sales. Net interest expense in the first quarter of 1996 was $13,104,000, an increase of 17.5 percent from the $11,152,000 reported for 1995. The increase primarily reflects higher rates, and higher borrowings due to new store construction and remodels and last year's completion of distribution center projects. The effective tax rate for the first quarters of 1996 and 1995 was 38.0 percent. Net income increased 206.3 percent to $9,444,000 in the first quarter of 1996 from $3,083,000 in 1995. Earnings per share were $.33 for the first quarter of 1996 based on 28,539,000 shares outstanding, compared with $.11 for the prior year's period based on 28,465,000 shares outstanding. In the first quarter of 1996, the Company acquired 22 mall jewelry stores, located primarily in California, which operated under various names, but are now operating under the Fred Meyer Jewelers name. The Company anticipates that in 1996 it will acquire 49 mall Merksamer Jewelers operating in 11 states, which will continue to operate under the Merksamer name. These two acquisitions will result in Fred Meyer operating approximately 200 jewelry stores at the end of 1996, including those inside its multidepartment stores. EFFECT OF LIFO During each year, the Company estimates the LIFO adjustment for the year 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. 7 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 26, 1996 KENNETH THRASHER ------------- ---------------------------------- Kenneth Thrasher Senior Vice President - Finance Chief Financial Officer 8 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 25, May 20, 1996 1995 ------- ------- Weighted average number of shares outstanding..................................... 26,706 26,633 Weighted average number of shares under option.................................... 3,722 2,988 Shares assumed to have been purchased under the treasury stock method................. (1,889) (1,156) ------- ------ Weighted average number of common and common equivalent shares outstanding............ 28,539 28,465 ====== ====== Net income......................................... $9,444 $3,083 ====== ====== Earnings per common share.......................... $.33 $.11 ==== ====
EX-27 3 EXHIBIT 27
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-1-1997 MAY-25-1996 38,800 0 23,024 0 559,009 664,437 1,578,088 (568,972) 1,704,559 414,010 616,655 0 0 270 580,574 1,704,559 1,040,028 1,040,028 737,956 273,736 0 0 13,104 15,232 5,788 9,444 0 0 0 9,444 .33 .33 Long term debt and mortgages
-----END PRIVACY-ENHANCED MESSAGE-----