UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________________________
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): March 21, 2012
FRED'S,
INC.
(Exact
Name of Registrant as Specified in Charter)
Commission
File Number 001-14565
Tennessee |
|
62-0634010 |
(State or Other Jurisdiction of Incorporation) |
|
(I.R.S. Employer Identification No.) |
4300 New Getwell Road, Memphis, Tennessee 38118 |
(Address of principal executive offices) |
(901) 365-8880
Registrant’s
telephone number, including area code
Not
Applicable
(Former
Name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. | RESULTS OF OPERATIONS AND FINANCIAL CONDITION. |
On March 21, 2012, Fred's, Inc. issued a press release announcing its financial results for the fourth quarter and year ended January 28, 2012.
A copy of the press release announcing these events is furnished as Exhibit 99.1 to this report and is incorporated herein by reference. The information in this report, including the exhibit attached hereto, is furnished pursuant to Item 2.02 and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS. |
(d) | Exhibits. | |
99.1 | Press Release issued by Fred's, Inc., dated March 21, 2012. |
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.
FRED'S, INC. |
||||
(Registrant) | ||||
Date: |
March 21, 2012 |
By: |
/s/ |
Jerry A. Shore |
|
|
Jerry A. Shore |
||
|
Executive Vice President and |
|||
Chief Financial Officer |
EXHIBIT INDEX
Exhibit |
||
Number |
Description of Exhibit(s) |
|
99.1 |
Copy of press release issued by Fred's, Inc. on March 21, 2012. |
Exhibit 99.1
Fred's Reports 23% Increase in Fourth Quarter Earnings Per Diluted Share and 16% Increase in Full Year 2011 Earnings Per Diluted Share
MEMPHIS, Tenn.--(BUSINESS WIRE)--March 21, 2012--Fred's, Inc. (NASDAQ: FRED) today reported improved financial results for the fourth quarter and fiscal year ended January 28, 2012.
For the fourth quarter ended January 28, 2012, Fred's net income increased to $9.8 million compared with net income of $8.6 million in the year-earlier period, with earnings per diluted share rising 23% to $0.27 from $0.22 in the fourth quarter last year. In the quarter, a favorable adjustment to the Company's income tax rate added $0.02 to earnings per diluted share. Excluding the income tax rate effect, earnings per diluted share for the fourth quarter of 2011 increased 14% compared with fourth quarter 2010. For the fiscal year 2011, Fred's net income increased to $33.4 million compared with net income of $29.6 million for 2010, with earnings per diluted share rising 16% to $0.87 from $0.75 last year.
Fred's total sales for the fourth quarter of fiscal 2011 increased 2% to $497.6 million from $485.6 million for the same period last year. Comparable store sales for the quarter increased 0.1% on top of a 2.3% increase for the fourth quarter last year. Fred's total sales for fiscal 2011 increased 2% to $1.879 billion from $1.842 billion for the same period last year. Comparable store sales for fiscal 2011 increased 0.5% on top of an increase of 2.2% for the same period last year.
Commenting on the results, Bruce A. Efird, Chief Executive Officer, said, "We are pleased to report an improved performance and solid results for the fourth quarter, with earnings per diluted share 23% ahead of a strong prior-year quarter. Considering the ongoing challenges in the economy and an extremely competitive quarter, our marketing and operating strategies positioned us to manage gross margins and operating expenses, while maintaining the strength of our balance sheet.
"During 2011, we focused on our key strategic goals: building customer traffic, increasing market share, and accelerating growth. Both customer traffic and market share increased for the year, and new store openings were up 70% for 2011 with the opening of 26 new stores and 24 pharmacies. Also, we upgraded more than 200 existing stores with the elements of our Core 5 program – bringing the two-year total of upgrades to more than 400 stores."
Efird continued, "Our team is looking forward to continuing this momentum in 2012. Recognizing that the current economic backdrop may not improve significantly in our core markets, our team has developed enhanced merchandising plans and expanded product areas to reinforce the Super Dollar and Core 5 programs for 2012. We are planning to continue our accelerated pharmacy expansion program and leverage the benefits of our pharmacy customers into all areas of our store. Our team is excited about the opportunities for Fred's in 2012 and looks forward to delivering continued financial strength, improved operating margin and a double-digit earnings per share improvement for our shareholders."
Fred's gross profit for the fourth quarter of 2011 increased 2% to $137.7 million from $134.4 million in the prior-year period. Gross margin for the quarter remained flat at 27.7% in comparison to the same quarter last year. During the fourth quarter, control of promotional markdowns and improved pharmacy department margin offset a shift in the general merchandise mix toward more basic and consumable products. Gross profit for fiscal 2011 increased 2% to $538.5 million from $527.0 million in the prior-year period. Gross margin for fiscal 2011 was 28.7%, up 10 basis points from 28.6% in the prior-year period.
Selling, general and administrative expenses for the quarter, including depreciation and amortization, improved 10 basis points to 24.8% of sales from 24.9% of sales in the prior-year quarter. During the quarter, selling, general and administrative expenses reflected lower advertising, labor, and store occupancy costs, offsetting increases in depreciation and distribution expenses. For fiscal 2011, selling, general and administrative expenses improved 10 basis points to 26.0% of sales from 26.1% of sales in fiscal 2010.
Operating income for the fourth quarter of 2011 increased 4% to $14.2 million or 2.9% of sales compared with $13.6 million or 2.8% of sales in the prior-year period. For fiscal 2011, operating income increased 9% to $51.2 million or 2.7% of sales from $46.7 million or 2.5% of sales in fiscal 2010.
Income tax expense during the fourth quarter was favorably affected by increased work opportunity tax credits, favorable results of state tax audits, and lower overall state tax rates. The effective tax rate for the fourth quarter of 2011 was 30.4% compared with 36.7% in the year earlier quarter. The effective tax rate for 2011 was 34.1% compared with 36.4% for 2010.
During the fourth quarter, Fred's opened 16 new stores and seven express pharmacy stores as part of its 2011 operating plan. One franchise store closed in the quarter. For the year, Fred's opened 26 new stores (7 of which were express conversions) and 17 express stores and closed 8 and 2, respectively. We also opened 24 new pharmacies and closed 12, which are included within the new and express store counts. Three franchise stores closed in the year. The Company also remodeled and refreshed 205 stores with its new Core 5 elements in 2011, bringing the total stores upgraded to 413 during 2011 and 2010.
The Company provides the following guidance for the first quarter of 2012 and the upcoming full fiscal year, noting that there will be 53 weeks of operating results in the fiscal year.
Currently, Fred's, Inc. operates 700 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States. For more information about the Company, visit Fred's website at www.fredsinc.com.
A public, listen-only simulcast and replay of Fred's fourth quarter and year-end 2011 conference call may be accessed at the Company's web site or at www.earnings.com. The simulcast will begin at approximately 10:00 a.m. Eastern Time today; a replay of the call will be available beginning at approximately 1:00 p.m. Eastern Time and will run until April 21, 2012.
Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. These risks and uncertainties include, but are not limited to, those associated with the Company's announced strategic plan, lease buyouts and the underlying assumptions and projections upon which they are based, as well as risks that intended results may not be achieved or may not occur as quickly as expected; general economic trends; changes in consumer demand or purchase patterns; delays or interruptions in the flow of merchandise between the Company's distribution centers and its stores or between the Company's suppliers and same; a disruption in the Company's data processing services; costs and delays in acquiring or developing new store sites; and other contingencies discussed in the Company's Securities and Exchange Commission filings. Fred's undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.
FRED'S, INC. Unaudited Financial Highlights (In thousands, except per share amounts) |
|||||||||||
|
13 Weeks January 28, 2012 |
13 Weeks Ended January 29, 2011 |
Percent
Change |
||||||||
Net sales | $ | 497,592 | $ | 485,633 | 2.5 | % | |||||
Operating income | $ | 14,205 | $ | 13,643 | 4.1 | % | |||||
Net income | $ | 9,796 | $ | 8,620 | 13.6 | % | |||||
Net income per share: | |||||||||||
Basic | $ | 0.27 | $ | 0.22 | 22.7 | % | |||||
Diluted | $ | 0.27 | $ | 0.22 | 22.7 | % | |||||
Average shares outstanding: | |||||||||||
Basic | 36,831 | 39,119 | |||||||||
Diluted | 36,941 | 39,213 | |||||||||
|
52 Weeks Ended January 28, 2012 |
52 Weeks Ended January 29, 2011 |
Percent
Change |
||||||||
Net sales | $ | 1,879,059 | $ | 1,841,755 | 2.0 | % | |||||
Operating income | $ | 51,155 | $ | 46,718 | 9.5 | % | |||||
Net income | $ | 33,428 | $ | 29,587 | 13.0 | % | |||||
Net income per share: | |||||||||||
Basic | $ | 0.88 | $ | 0.76 | 15.8 | % | |||||
Diluted | $ | 0.87 | $ | 0.75 | 16.0 | % | |||||
Average shares outstanding: | |||||||||||
Basic | 38,176 | 39,133 | |||||||||
Diluted | 38,268 | 39,196 |
FRED'S, INC. Unaudited Fiscal 2011 Fourth Quarter Results (in thousands, except per share amounts) |
|||||||||||||
13 Weeks Ended January 28, 2012 |
% of Total |
13 Weeks Ended January 29, 2011 |
% of Total |
||||||||||
Net sales | $ | 497,592 | 100.0 | % | $ | 485,633 | 100.0 | % | |||||
Cost of goods sold | 359,891 | 72.3 | % | 351,247 | 72.3 | % | |||||||
Gross profit | 137,701 | 27.7 | % | 134,386 | 27.7 | % | |||||||
Depreciation & amortization | 9,878 | 2.0 | % | 7,544 | 1.6 | % | |||||||
Selling, general and administrative expenses | 113,618 | 22.8 | % | 113,199 | 23.3 | % | |||||||
Operating income | 14,205 | 2.9 | % | 13,643 | 2.8 | % | |||||||
Interest expense, net | 134 | 0.0 | % | 35 | 0.0 | % | |||||||
Income before income taxes | 14,071 | 2.9 | % | 13,608 | 2.8 | % | |||||||
Provision for income taxes | 4,275 | 0.9 | % | 4,988 | 1.0 | % | |||||||
Net income | $ | 9,796 | 2.0 | % | $ | 8,620 | 1.8 | % | |||||
Net income per share: | |||||||||||||
Basic | $ | 0.27 | $ | 0.22 | |||||||||
Diluted | $ | 0.27 | $ | 0.22 | |||||||||
Weighted average shares outstanding: | |||||||||||||
Basic | 36,831 | 39,119 | |||||||||||
Diluted | 36,941 | 39,213 |
Unaudited Fiscal 2011 Results (in thousands, except per share amounts) |
||||||||||||||
52 Weeks Ended January 28, 2012 |
% of Total |
52 Weeks Ended January 29, 2011 |
% of
Total |
|||||||||||
Net sales | $ | 1,879,059 | 100.0 | % | $ | 1,841,755 | 100.0 | % | ||||||
Cost of goods sold | 1,340,519 | 71.3 | % | 1,314,737 | 71.4 | % | ||||||||
Gross profit | 538,540 | 28.7 | % | 527,018 | 28.6 | % | ||||||||
Depreciation & amortization | 34,190 | 1.8 | % | 29,236 | 1.6 | % | ||||||||
Selling, general and administrative expenses | 453,195 | 24.2 | % | 451,064 | 24.5 | % | ||||||||
Operating income | 51,155 | 2.7 | % | 46,718 | 2.5 | % | ||||||||
Interest expense, net | 397 | 0.0 | % | 190 | 0.0 | % | ||||||||
Income before income taxes | 50,758 | 2.7 | % | 46,528 | 2.5 | % | ||||||||
Provision for income taxes | 17,330 | 0.9 | % | 16,941 | 0.9 | % | ||||||||
Net income | $ | 33,428 | 1.8 | % | $ | 29,587 | 1.6 | % | ||||||
Net income per share: | ||||||||||||||
Basic | $ | 0.88 | $ | 0.76 | ||||||||||
Diluted | $ | 0.87 | $ | 0.75 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||
Basic | 38,176 | 39,133 | ||||||||||||
Diluted | 38,268 | 39,196 |
FRED'S, INC. Unaudited Balance Sheet (in thousands) |
||||||||
|
January 28, 2012 |
January 29, 2011 |
||||||
ASSETS: | ||||||||
Cash and cash equivalents | $ | 27,130 | $ | 49,182 | ||||
Inventories | 331,882 | 313,384 | ||||||
Receivables | 31,883 | 28,146 | ||||||
Other non-trade receivables | 32,090 | 26,378 | ||||||
Prepaid expenses and other current assets | 12,321 | 12,723 | ||||||
Total current assets | 435,306 | 429,813 | ||||||
Property and equipment, net | 161,209 | 139,931 | ||||||
Intangibles | 32,191 | 22,193 | ||||||
Other non-current assets | 3,276 | 3,591 | ||||||
Total assets | $ | 631,982 | $ | 595,528 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
Accounts payable | $ | 106,886 | $ | 81,002 | ||||
Current portion of indebtedness | 658 | 201 | ||||||
Accrued expenses and other | 44,876 | 45,371 | ||||||
Deferred income taxes | 23,878 | 21,142 | ||||||
Total current liabilities | 176,298 | 147,716 | ||||||
Long-term portion of indebtedness | 6,640 | 3,969 | ||||||
Deferred income taxes | 5,633 | 2,069 | ||||||
Other non-current liabilities | 19,799 | 17,886 | ||||||
Total liabilities | 208,370 | 171,640 | ||||||
Shareholders' equity | 423,612 | 423,888 | ||||||
Total liabilities and shareholders' equity | $ | 631,982 | $ | 595,528 |
CONTACT:
Fred's, Inc.
Jerry A. Shore, 901-362-3733, Ext. 2217
Executive
Vice President and Chief Financial Officer