-----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, K9iR4LXelcd2rmJ/hJgsexWCY96PsxN0b0PTI1+eA68JQUzCn6y/VOMxRwQDzVhW XZKj2KGOjzvn7VA5wTfJ7Q== 0000950148-94-000400.txt : 19940915 0000950148-94-000400.hdr.sgml : 19940915 ACCESSION NUMBER: 0000950148-94-000400 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940731 FILED AS OF DATE: 19940913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAC FRUGALS BARGAINS CLOSE OUTS INC CENTRAL INDEX KEY: 0000078384 STANDARD INDUSTRIAL CLASSIFICATION: 5331 IRS NUMBER: 952745285 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11164 FILM NUMBER: 94548906 BUSINESS ADDRESS: STREET 1: 2430 E DEL AMO BLVD CITY: DOMINGUEZ STATE: CA ZIP: 90220-6306 BUSINESS PHONE: 3105379220 MAIL ADDRESS: ZIP: ***** FORMER COMPANY: FORMER CONFORMED NAME: PIC N SAVE CORP DATE OF NAME CHANGE: 19920610 10-Q 1 10-Q FOR PERIOD ENDED JULY 31, 1994 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 July 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-6672 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. (Exact name of registrant as specified in its charter) Delaware 95-2745285 - - ------------------------------------ -------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2430 East Del Amo Boulevard Dominguez, California 90220-6306 - - ------------------------------------ --------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 537-9220 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. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Shares Outstanding at August 28, 1994 28,437,867 2 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (Amounts in thousands except per share amounts)
For the three months ended For the six months ended ---------------------------- ------------------------------ July 31, August 1, July 31, August 1, 1994 1993 1994 1993 -------- -------- -------- -------- NET SALES $133,693 $116,081 $275,788 $242,778 Cost of sales 71,295 61,977 146,620 130,110 -------- -------- -------- -------- GROSS PROFIT 62,398 54,104 129,168 112,668 Store expenses 42,128 36,204 83,485 71,229 Warehouse and administrative expenses 14,613 13,261 29,218 25,674 -------- -------- -------- -------- TOTAL OPERATING EXPENSES 56,741 49,465 112,703 96,903 OPERATING INCOME 5,657 4,639 16,465 15,765 Interest expense, net 1,433 1,217 2,391 2,531 -------- -------- -------- -------- EARNINGS BEFORE INCOME TAXES 4,224 3,422 14,074 13,234 INCOME TAX EXPENSE 1,690 1,369 5,630 5,294 -------- -------- -------- -------- NET EARNINGS $ 2,534 $ 2,053 $ 8,444 $ 7,940 ======== ======== ======== ======== EARNINGS PER COMMON SHARE $0.09 $0.07 $0.29 $0.27 AVERAGE SHARES OUTSTANDING 29,245 29,932 29,485 29,919 ======== ======== ======== ========
_____________ See Notes to Consolidated Financial Statements. 1 3 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in thousands except par value)
July 31, January 30, 1994 1994 -------- ---------- Assets Current Assets : Cash and cash equivalents $ 2,888 $ 1,015 Merchandise inventories 229,448 181,755 Other current assets 16,858 15,114 -------- -------- Total current assets 249,194 197,884 Property, Equipment and Improvements: Land 29,350 27,109 Buildings and improvements 75,252 71,784 Automobiles and trucks 2,778 2,778 Furniture, fixtures and equipment 80,640 75,797 Leasehold improvements 69,832 64,843 Construction in progress 1,434 1,137 -------- -------- 259,286 243,448 Less: Accumulated depreciation and amortization (97,085) (89,628) 162,201 153,820 Deferred Federal and State Income Tax Asset 1,352 1,252 Deferred Financing Costs and Other assets 4,474 5,177 Total Assets $417,221 $358,133 ======== ======== July 31, January 30, 1994 1994 -------- ---------- Liabilities and Stockholders' Equity Current Liabilities: Loan payable to bank $110,500 $34,900 Current portion of long-term debt 59 97 Accounts payable 15,038 13,444 Accrued expenses 31,207 31,726 Income taxes payable -- Sales tax payable 4,218 9,394 --------- -------- Total current liabilities 161,022 89,561 Long-Term Debt 4,077 3,869 Deferred Federal and State Income Taxes 7,353 7,353 Stockholders' Equity Preferred stock, $1 par value; authorized, 500 shares; issued, none Common stock, $.02778 par value; authorized, 100,000 shares; issued 29,755 shares (July 31, 1994) and 29,727 shares (January 30, 1994 827 825 Additional paid-in capital 1,644 1,319 Retained earnings 264,477 256,033 --------- -------- 266,948 258,177 Less: Treasury stock, at cost, 1,336 shares (July 31,1994) and 55 shares (January 30,1994) (22,179) (827) -------- -------- Total Stockholders' Equity 244,769 257,350 Total Liabilities and Stockholders' Equity $417,221 $358,133 ======== ========
See Notes to Consolidated Financial Statements. 2 4 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (Amounts in thousands)
Common Stock Treasury Stock -------------------- Additional ------------------- Paid-in Retained Shares Amount Capital Earnings Shares Amount Total ------ ------ ---------- -------- ------ ------ ----- Balance, January 30, 1994 29,727 $825 $1,319 $256,033 55 $(827) $257,350 Exercise of stock options 28 2 287 289 Non-cash compensation expense 38 38 Purchase of Treasury stock, at cost 1,281 (21,352) (21,352) Net earnings for six months 8,444 8,444 ------ ---- ------ -------- ----- ------- -------- Balance, July 31, 1994 29,755 $827 $1,644 $264,477 1,336 $(22,179) $244,769 ====== ==== ====== ======== ===== ======= ========
See Notes to Consolidated Financial Statements. 3 5 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
For the six months ended --------------------------------- July 31, August 1, 1994 1993 ------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities: Cash received from customers $ 275,788 $ 242,778 Cash paid to suppliers and employees (302,807) (251,450) Income taxes paid (8,243) (21,182) Interest paid (1,796) (3,173) Interest received 37 574 --------- --------- Net cash used in operating activities (37,021) (32,453) Cash flows from investing activities: Capital expenditures (16,284) (11,521) Proceeds from sale of fixed assets 471 2,101 --------- --------- Net cash used in investing activities (15,813) (9,420) Cash flows from financing activities: Net borrowings under line of credit agreements 75,600 37,000 Repurchase of treasury stock (21,352) -- Payment of long-term debt (68) (12,938) Proceeds from sale of stock options 289 434 Other (net) 238 253 --------- --------- Net cash provided by financing activities 54,707 24,749 --------- --------- Increase (decrease) in cash and cash equivalents 1,873 (17,124) Cash and cash equivalents, beginning of period 1,015 21,820 --------- --------- Cash and cash equivalents, end of period $ 2,888 $ 4,696 ========= =========
See Notes to Consolidated Financial Statements. 4 6 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousand) (continued)
For the six months ended ------------------------ July 31, August 1, 1994 1993 -------- --------- Reconciliation of Net Income to Net Cash Used In Operating Activities: Net income $ 8,444 $ 7,940 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 7,651 7,840 Gain on sale of fixed assets (219) (1,560) Non-cash compensation expense 38 38 Changes in assets and liabilities: Increase in inventory (47,693) (36,230) Increase in other assets (1,041) (2,321) Increase in deferred income tax asset (100) -- (Decrease) increase in accounts payable, accrued expenses and sales tax payable (4,101) 5,182 Decrease in federal and state income taxes -- (14,717) Increase in deferred federal and state income taxes -- 1,375 -------- -------- Total adjustments (45,465) (40,393) -------- -------- Net cash used in operating activities $(37,021) $(32,453) ======== ========
- - ------------- See Notes to Consolidated Financial Statements. 5 7 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES PART I - ITEM I - FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 The information furnished was prepared internally by the Company and has not been independently verified. However, it reflects all adjustments which are, in the opinion of Management, necessary to present a fair statement of results for the interim period. All adjustments are of a normal, recurring nature. Note 2 Earnings per Common Share is based on the weighted average number of Common Shares outstanding, adjusted for dilutive effects of stock options, if applicable. Note 3 The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", effective February 1, 1993 with no significant income statement impact. This statement supersedes APB Opinion No. 11. The Company's effective tax rate during the second quarter and first half of fiscal 1994 was 40.0%. The provision for income tax expense was $1,690,000 and $5,630,000 for the second quarter and first half of fiscal 1994, respectively. For interim reporting purposes the entire provision for income tax expense was classified as current. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company had a net deferred tax liability of $815,000 at July 31, 1994 and $915,000 at January 30, 1994. This change in net deferred tax liability is due to a reclassification from deferred income taxes to current income taxes payable. Other current assets on the balance sheet includes $5,231,000 and $5,186,000 of current deferred assets at July 31, 1994 and January 30, 1994, respectively. Other current assets also includes $927,000 of current refundable taxes at January 30, 1994. The Company provided no valuation allowance against its deferred tax assets recorded as of July 31, 1994 and January 30, 1994. 6 8 PART I -- ITEM II MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND INTERIM RESULTS OF OPERATIONS SALES Total sales and comparable store sales increased 15.2% and 4.7%, respectively, for the three months ended July 31, 1994 as compared to the same period a year ago. The total sales increase was a result of the combination of opening 35 net new stores since August 1, 1993, of which 16 were opened in the second half of fiscal 1993 and thirteen during the current quarter, and the comparable store sales increase noted above. At July 31, 1994, 256 stores were in operation compared to 221 stores at August 1, 1993. Total sales and comparable store sales increased 13.6% and 2.3%, respectively, for the six months ended July 31, 1994 as compared to the same period a year ago. The total sales increase was a result of the combination of opening 51 net new stores since February 1, 1993, of which 18 were opened during the first half of this year, and the comparable increase noted above. Sales from the 144 California stores open at July 31, 1994 were approximately 63% of total sales for both the second quarter and first half of the current year. In addition, California stores produced comparable store sales increases during the second quarter. GROSS PROFIT RATE The gross profit rate of 46.7% and 46.8% for the current year second quarter and first half increased 0.1 and 0.4 percentage points, respectively, over similar periods in the prior year. Both increases are primarily due to higher markups on goods acquired and shipped to stores in the current year compared to a year ago but were partially offset by increased markdowns as a percent of sales in the current year. In addition, the reserve rate for inventory shrinkage was the same for the six month periods of both years but was lower in the prior year second quarter than in the current year second quarter. OPERATING EXPENSE RATES Operating expenses were 42.4% and 40.9% of sales for the current year second quarter and first half, respectively. Prior year second quarter and first half operating expenses were 42.6% and 39.9% of sales, respectively. The reasons for those changes are explained in the following two paragraphs. Store expenses totaled 31.5% and 30.3% of sales for the second quarter and first half of fiscal 1994, respectively. The percentages are higher than the 31.2% and 29.3% of sales incurred during the same periods last year. The increase in store expenses as a percentage of sales is mainly due to higher rent and payroll as a percentage of sales but was partially offset by lower advertising dollars in the current year second quarter than in the prior year second quarter and lower advertising as a percentage of sales for the first half of fiscal 1994. The increases noted are to be expected during a phase of expansion. 7 9 Administrative and warehouse expense as a percentage of sales was slightly lower for the second quarter, and unchanged for the first half of fiscal 1994 as compared to the same periods last year. General cost containment helped to offset the effect of recognizing a $1,557,000 gain on the sale of land in the prior year first half. INTEREST EXPENSE Net interest expense was $1,433,000 and $2,391,000 for the second quarter and first half of fiscal 1994, respectively. This compares to the $1,217,000 and $2,531,000 incurred during the same periods last year. Interest amounts are higher than last year due to higher average debt levels resulting from increased borrowings, the proceeds of which were applied to both repurchase 1,335,500 shares of stock for $22,180,000 (compared to no share repurchases in the first half of fiscal 1993) and to fund higher inventory levels for new stores and in anticipation of the fall and holiday seasons. INCOME TAX RATE The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", effective February 1, 1993 with no significant income statement impact. This Statement supersedes APB Opinion No. 11 under which the Company provided for its income taxes prior to the adoption of SFAS No. 109. The income tax rate for the second quarter and first half of fiscal 1994 was 40.0%, and for interim reporting purposes, the entire provision for income tax is classified as current. The current rate of 40.0% reflects an increase from the fiscal 1993 rate of 39.6% for projected changes in permanent items. Income taxes were provided at a rate of 40.0% in the prior year second quarter and first half. The Company had a net deferred tax liability of $815,000 at July 31, 1994 and $915,000 at January 30, 1994. This change in net deferred tax liability is due to a reclassification from deferred income taxes to current income taxes payable. Other current assets on the balance sheet includes $5,231,000 and $5,186,000 of current deferred assets at July 31, 1994 and January 30, 1994, respectively. Other current assets also includes $927,000 of current refundable taxes at January 30, 1994. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased $1,873,000 in the first half of fiscal 1994 compared to a decrease of $17,124,000 in the first half of fiscal 1993. The major factors influencing the increase of cash and cash equivalents in the current year first half were lower income tax payments and higher net borrowings, partially offset by increased capital expenditures and continued repurchases of the Company's Common Stock. During the first half, the Company repurchased 1,280,400 shares of its Common Stock in the open market at a weighted average price of $16.68 per share. The Company's long-term debt was 1.7% of equity and its total debt was 46.8% of equity at the end of the first half of fiscal 1994 compared to 1.5% and 15.1%, respectively, at fiscal year end 1993. These changes reflect the Company's ongoing stock repurchase program, as well as the financing of higher merchandise inventory levels for new stores. 8 10 Subsequent to the end of the second quarter the Company amended its credit agreement. Among other things, the Company increased the size of its committed revolver to $200 million from $150 million, extended the maturity of the agreement by approximately one year, and increased the amount of shares that it may repurchase. The Company believes its present lines of credit are adequate to meet any seasonal or temporary liquidity needs that cannot be met with cash flow from operating activities. At July 31, 1994, the Company had $110,500,000 of outstanding revolving debt. The Company's current ratio at the end of the first half was 1.55 versus 2.21 at fiscal year-end 1993. The change is primarily due to the growth in short-term borrowings to fund share repurchases. For the six months ended July 31, 1994, inventory turnover decreased to .72 compared to .79 for the six months ended August 1, 1993. The decrease in inventory turnover is primarily due to the buildup of inventory in preparation for the opening of new stores, most of which opened at or near the end of the period. 9 11 PART II -- OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders The Company held its 1994 Annual Meeting of Stockholders on June 22, 1994 (the "Annual Meeting"). At the Annual Meeting, shareholders elected all eight directors nominated. The following table sets forth the number of votes for and against each nominee. The number of votes cast against each nominee includes votes withheld. There were no broker non-votes or abstentions.
AGAINST OR NOMINEE FOR WITHHELD ------- --- -------- Peter S. Willmott 26,944,028 99,430 Leonard S. Williams 26,944,123 99,335 David H. Batchelder 26,361,819 681,639 Bruce E. Karatz 26,345,786 697,672 Anthony Luiso 26,930,443 113,015 Ronald P. Spogli 26,929,698 113,760 Bill M. Thomas 26,943,573 99,885 James J. Zehentbauer 26,690,833 352,625
Item 6 Exhibits and Reports on Form 8-K (a) Exhibits -- Exhibit 27 -- Financial Data Schedule. (b) Reports on Form 8-K -- No reports on Form 8-K have been filed during the quarter ended July 31, 1994. 10 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 thereunto duly authorized. MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. /s/ Leonard S. Williams -------------------------------------- Leonard S. Williams President and Chief Executive Officer (Principal Executive Officer) /s/ Philip L. Carter -------------------------------------- Philip L. Carter Executive Vice President and Chief Financial Officer (Principal Accounting Officer) DATE: September 13, 1994 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JAN-29-1995 JAN-31-1994 JUL-31-1994 2,888 0 0 0 229,448 249,194 259,286 97,085 417,221 161,022 0 827 0 0 243,942 417,221 275,788 275,788 146,620 146,620 112,703 0 2,391 14,074 5,630 8,444 0 0 0 8,444 0.29 0
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