-----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, MPpYcFBtYSdFBKTVbDu9eyy0nuxzfwmRq3/Aazrgm97QKQ9FY5V1pFZoQ8vy5Dn9 Eom8jPBloHV3erJxS1b3Pg== 0000794367-98-000010.txt : 19980617 0000794367-98-000010.hdr.sgml : 19980617 ACCESSION NUMBER: 0000794367-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980502 FILED AS OF DATE: 19980616 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED DEPARTMENT STORES INC /DE/ CENTRAL INDEX KEY: 0000794367 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 133324058 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13536 FILM NUMBER: 98648949 BUSINESS ADDRESS: STREET 1: 7 W SEVENTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 2126954400 MAIL ADDRESS: STREET 1: 7 W SEVENTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 FORMER COMPANY: FORMER CONFORMED NAME: R H MACY & CO INC DATE OF NAME CHANGE: 19950307 10-Q 1 FIRST QUARTER 10-Q 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 fiscal quarter ended May 2, 1998. FEDERATED DEPARTMENT STORES, INC. 151 West 34th Street New York, New York 10001 (212) 494-1602 and 7 West Seventh St. Cincinnati, Ohio 45202 (513) 579-7000 Delaware 1-13536 13-3324058 (State of (Commission File No.) (I.R.S. Employer Incorporation) Identification Number) The Registrant has filed all reports required to be filed by Section 12, 13 or 15 (d) of the Act during the preceding 12 months and has been subject to such filing requirements for the past 90 days. 210,864,697 shares of the Registrant's Common Stock, $.01 par value, were outstanding as of May 30, 1998. PART I -- FINANCIAL INFORMATION FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Income (Unaudited) (millions, except per share figures) 13 Weeks Ended 13 Weeks Ended May 2, 1998 May 3, 1997 Net Sales $ 3,456 $ 3,409 Cost of sales 2,106 2,087 Selling, general and administrative expenses 1,169 1,174 Operating Income 181 148 Interest expense (83) (115) Interest income 6 11 Income Before Income Taxes 104 44 Federal, state and local income tax expense (44) (20) Net Income $ 60 $ 24 Basic earnings per share $ .29 $ .12 Diluted earnings per share $ .27 $ .11 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements. FEDERATED DEPARTMENT STORES, INC. Consolidated Balance Sheets (Unaudited) (millions) May 2, January 31, May 3, 1998 1998 1997 ASSETS: Current Assets: Cash $ 179 $ 142 $ 153 Accounts receivable 2,446 2,640 2,661 Merchandise inventories 3,336 3,239 3,385 Supplies and prepaid expenses 105 115 98 Deferred income tax assets 62 58 88 Total Current Assets 6,128 6,194 6,385 Property and Equipment - net 6,422 6,520 6,420 Intangible Assets - net 684 690 711 Other Assets 319 334 584 Total Assets $13,553 $13,738 $14,100 LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Short-term debt $ 357 $ 556 $ 1,060 Accounts payable and accrued liabilities 2,375 2,416 2,414 Income taxes 24 88 16 Total Current Liabilities 2,756 3,060 3,490 Long-Term Debt 3,920 3,919 4,514 Deferred Income Taxes 975 939 831 Other Liabilities 557 564 562 Shareholders' Equity 5,345 5,256 4,703 Total Liabilities and Shareholders' Equity $13,553 $13,738 $14,100 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements. FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Cash Flows (Unaudited) (millions) 13 Weeks Ended 13 Weeks Ended May 2, 1998 May 3, 1997 Cash flows from operating activities: Net income $ 60 $ 24 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 149 139 Amortization of intangible assets 6 7 Amortization of financing costs 2 7 Changes in assets and liabilities: Decrease in accounts receivable 194 173 Increase in merchandise inventories (97) (139) Decrease in supplies and prepaid expenses 10 11 (Increase) decrease in other assets not separately identified 4 (8) Decrease in accounts payable and accrued liabilities not separately identified (116) (120) Increase (decrease) in current income taxes (64) 7 Increase in deferred income taxes 32 - Decrease in other liabilities not separately identified (6) - Net cash provided by operating activities 174 101 Cash flows from investing activities: Purchase of property and equipment (51) (50) Disposition of property and equipment 16 28 Net cash used by investing activities (35) (22) Cash flows from financing activities: Debt issued 300 - Financing costs (7) - Debt repaid (499) (127) Increase in outstanding checks 75 43 Acquisition of treasury stock - (2) Issuance of common stock 29 11 Net cash used by financing activities (102) (75) (Continued) FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Cash Flows (Unaudited) (millions) 13 Weeks Ended 13 Weeks Ended May 2, 1998 May 3, 1997 Net increase in cash 37 4 Cash at beginning of period 142 149 Cash at end of period $ 179 $ 153 Supplemental cash flow information: Interest paid $ 80 $ 113 Interest received 6 11 Income taxes paid (net of refunds received) 68 9 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements. FEDERATED DEPARTMENT STORES, INC. Notes to Consolidated Financial Statements (Unaudited) 1. Summary of Significant Accounting Policies A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998 (the "1997 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 1997 10-K. Because of the seasonal nature of the general merchandising business, the results of operations for the 13 weeks ended May 2, 1998 and May 3, 1997 (which do not include the Christmas season) are not indicative of such results for the fiscal year. The Consolidated Financial Statements for the 13 weeks ended May 2, 1998 and May 3, 1997, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company and its subsidiaries. During the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," which establishes standards for the reporting and display of comprehensive income and its components. For all periods presented, comprehensive income is equivalent to net income. FEDERATED DEPARTMENT STORES, INC. Notes to Consolidated Financial Statements (Unaudited) 2. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share:
13 Weeks Ended May 2, 1998 May 3, 1997 (millions, except per share data) Shares Income Shares Income Net income and average number of shares outstanding 210.4 $ 60 208.2 $ 24 Shares to be issued under deferred compensation plan .3 - .3 - 210.7 $ 60 208.5 $ 24 Basic earnings per share $ .29 $ .12 Effect of dilutive securities: Warrants 8.1 3.5 Stock options 2.6 1.6 Convertible notes 10.2 3 - - 231.6 $ 63 213.6 $ 24 Diluted earnings per share $ .27 $ .11
In addition to the warrants and stock options reflected in the foregoing table, warrants and stock options to purchase 4.5 million and .6 million shares of common stock at prices ranging from $34.63 to $79.44 per share were outstanding at May 2, 1998 and May 3, 1997, respectively, but were not included in the computation of diluted earnings per share because the exercise price thereof exceeded the average market price and would have been antidilutive. Additionally, at May 31, 1997, the assumed conversion of the convertible notes would have an antidilutive effect on diluted earnings per share and was therefore excluded from the computation. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations For purposes of the following discussion, all references to "first quarter of 1998" and "first quarter of 1997" are to the Company's 13-week fiscal periods ended May 2, 1998 and May 3, 1997, respectively. Results of Operations Comparison of the 13 Weeks Ended May 2, 1998 and May 3, 1997 Net sales for the first quarter of 1998 totaled $3,456 million, compared to net sales of $3,409 million for the first quarter of 1997, an increase of 1.4%. Since January 31, 1997, the Company has opened six new department stores and two new furniture galleries, closed nineteen stores, and eliminated certain consumer electronics lines of business. On a comparable store basis, sales for the first quarter of 1998 increased 2.4% over the first quarter of 1997. Cost of sales was 61.0% of net sales for the first quarter of 1998, compared to 61.2% for the first quarter of 1997. The improvement in cost of sales as a percent of net sales is due to the elimination, in fiscal 1997, of certain lower-margin consumer electronics lines of business. Selling, general and administrative ("SG&A") expenses were 33.8% of net sales for the first quarter of 1998 compared to 34.5% for the first quarter of 1997. The major factor contributing to the improvement in the SG&A expense rate for the first quarter of 1998 was lower distribution-related expenses resulting from restructuring and technological enhancements within the merchandise distribution process. Net interest expense was $77 million for the first quarter of 1998, compared to $104 million for the first quarter of 1997. The lower interest expense for the first quarter of 1998 is due to lower levels of borrowings and lower interest rates resulting from refinancings completed in July 1997. The Company's effective income tax rate of 42.2% for the first quarter of 1998 differs from the federal income tax statutory rate of 35.0% principally because of the effect of state and local income taxes and permanent differences arising from the amortization of intangible assets. Liquidity and Capital Resources The Company's principal sources of liquidity are cash from operations, cash on hand and certain available credit facilities. Net cash provided by operating activities in the first quarter of 1998 was $174 million, an increase of $73 million from the net cash provided by operating activities in the first quarter of 1997. The major factors contributing to this improvement were improved operating results and greater reductions in customer accounts receivable. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Net cash used by investing activities was $35 million for the first quarter of 1998, with purchases of property and equipment totaling $51 million and dispositions of property and equipment totaling $16 million. On May 13, 1998, the Company announced that it had signed a letter of intent for the sale of its specialty store division to the division's management group. The sale, if consummated, will not have a material impact on the Company's financial position or results of operations. Net cash used by the Company for all financing activities was $102 million for the first quarter of 1998. During the first quarter of 1998, the Company issued $300 million of 7.0% Senior Debentures due 2028. The proceeds were used to refinance short-term borrowings. On May 4, 1998, the final $200 million installment of a note receivable was received and the remaining $176 million of borrowings under a note monetization facility were repaid. Such amounts were included in accounts receivable and short- term debt, respectively, as of May 2, 1998. Management believes the department store business will continue to consolidate. Accordingly, the Company intends from time to time to consider additional acquisitions of department store assets and companies. On May 19, 1998, the Company announced its intention to repurchase as much as $500 million of its common stock. The company may repurchase shares from time to time in the open market or through privately negotiated transactions, depending on prevailing market conditions, alternative uses of capital and other factors. Any such purchases may be discontinued or resumed at any time. Management of the Company believes that, with respect to its current operations, cash on hand and funds from operations, together with its credit facilities, will be sufficient to cover its reasonably foreseeable working capital, capital expenditure and debt service requirements. Acquisition transactions, if any, are expected to be financed through a combination of cash on hand and from operations and the possible issuance from time to time of long-term debt or other securities. Depending upon conditions in the capital markets and other factors, the Company will from time to time consider the issuance of debt or other securities, or other possible capital markets transactions, the proceeds of which could be used to refinance current indebtedness or for other corporate purposes. PART II -- OTHER INFORMATION FEDERATED DEPARTMENT STORES, INC. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of the Company's stockholders was held on May 15, 1998. The Company's stockholders voted on the following items at such meeting: i. The stockholders approved the election of four Directors for a three-year term expiring at the 2001 Annual Meeting of the Company's stockholders. The votes for such elections were as follows: Sara Levinson - 170,724,942 votes in favor and 39,880,219 votes withheld; Joseph Neubauer - 170,724,509 votes in favor and 39,880,652 votes withheld; Joseph A. Pichler - 170,723,466 votes in favor and 39,881,695 votes withheld; and Karl M. von der Heyden - 170,726,641 votes in favor and 39,878,520 votes withheld. There were no broker non-votes on this item. ii. The stockholders ratified the employment of KPMG Peat Marwick LLP as the Company's independent accountants for the fiscal year ending January 30, 1999. The votes for the ratification were 172,303,425, the votes against the ratification were 250,276, the votes abstained were 128,028, and there were no broker non-votes. iii.The stockholders approved a shareholder proposal recommending that the Board of Directors of the Company take the necessary steps to instate the election of directors annually, instead of the stagger system. The votes for such proposal were 124,042,892, the votes against the proposal were 22,544,497, the votes abstained were 13,780,956, and there were 12,313,384 broker non-votes. Item 5. Other Information This report and other reports, statements and information previously or subsequently filed by the Company with the Securities and Exchange Commission (the "SEC") contain or may contain forward-looking statements. Such statements are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the time such statements are made. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words "may," "will," "could," "should," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "estimate," or "continue" or the negative or other variations thereof and (ii) statements regarding matters that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties, including (i) risks and uncertainties relating to the possible invalidity of the underlying beliefs and assumptions, (ii) possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions, and (iii) actions PART II -- OTHER INFORMATION FEDERATED DEPARTMENT STORES, INC. (continued) taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials. In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking statements, the statements in the immediately preceding sentence and the statements under captions such as "Risk Factors" and "Special Considerations" in reports, statements and information filed by the Company with the SEC from time to time constitute cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to differ materially from those reflected in such forward-looking statements. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule 27.2 Restated Financial Data Schedules 27.3 Restated Financial Data Schedules (b) Reports on Form 8-K No reports were filed on Form 8-K during the quarter ended May 2, 1998. FEDERATED DEPARTMENT STORES, INC. 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 thereunder duly authorized. FEDERATED DEPARTMENT STORES, INC. Date June 16, 1998 /s/ Dennis J. Broderick Dennis J. Broderick Senior Vice President, General Counsel and Secretary /s/ Joel A. Belsky Joel A. Belsky Vice President and Controller (Principal Accounting Officer) EX-27.1 2
5 1,000,000 3-MOS JAN-30-1999 FEB-01-1998 MAY-02-1998 179 0 2,446 0 3,336 6,128 6,422 0 13,553 2,756 3,920 0 0 0 0 13,553 3,456 0 0 2,106 1,169 0 83 104 44 0 0 0 0 60 0.29 0.27 Includes the following: Supplies and prepaid expenses 105 Deferred income tax assets 62 Includes the following: Intangible assets - net 684 Other assets 319 Includes the following: Deferred income taxes 975 Other liabilities 557 Shareholders' Equity 5,345 Includes the following: Interest Income 6
EX-27.2 3
5 1,000 3-MOS 3-MOS 3-MOS YEAR JAN-31-1998 JAN-31-1998 JAN-31-1998 FEB-01-1997 FEB-02-1997 MAY-04-1997 AUG-03-1997 FEB-04-1996 MAY-03-1997 AUG-02-1997 NOV-01-1997 FEB-01-1997 152,582 317,352 431,156 148,794 0 0 0 0 2,661,052 2,498,148 2,513,143 2,834,321 0 0 0 0 3,384,883 3,371,584 4,287,328 3,245,996 6,385,377 6,422,054 7,467,419 6,427,302 6,419,547 6,371,055 6,423,168 6,524,757 0 0 0 0 14,100,050 13,874,132 14,931,541 14,264,143 3,489,364 3,991,260 4,975,422 3,595,699 4,514,247 3,732,269 3,682,499 4,605,916 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14,100,050 13,874,132 14,931,541 14,264,143 3,409,091 3,452,829 3,746,276 15,228,999 0 0 0 0 0 0 0 0 2,086,865 2,098,671 2,286,919 9,354,367 1,174,166 1,142,298 1,191,396 4,981,433 0 0 0 0 114,725 106,358 100,957 498,616 43,683 112,597 176,083 441,435 19,624 46,227 70,969 175,571 0 0 0 0 0 0 0 0 0 38,673 0 0 0 0 0 0 24,059 27,697 105,114 265,864 0.12 0.13 0.50 1.28 0.11 0.13 0.47 1.24 Includes the following: Supplies and prepaid expenses 98,193 Deferred income tax assets 88,667 Includes the following: Intangible assets - net 710,583 Notes receivable 204,248 Other assets 380,295 Includes the following: Deferred income taxes 831,207 Other liabilities 561,907 Shareholders' Equity 4,703,325 Includes the following: Interest income 10,348 Restated to reflect the Company's adoption of Statement of Financial Accounting Standards No. 128, "Earnings Per Share." Includes the following: Supplies and prepaid expenses 128,981 Deferred income tax assets 105,989 Includes the following: Intangible assets - net 703,761 Notes receivable 3,976 Other assets 373,286 Includes the following: Deferred income taxes 835,725 Other liabilities 559,001 Shareholders' Equity 4,755,877 Includes the following: Interest income 7,095 Includes the following: Supplies and prepaid expenses 119,685 Deferred income tax assets 116,107 Includes the following: Intangible assets - net 696,940 Notes receivable 6,923 Other assets 337,091 Includes the following: Deferred income taxes 842,048 Other liabilities 560,247 Shareholders' Equity 4,871,325 Includes the following: Interest income 9,079 Includes the following: Supplies and prepaid expenses 109,678 Deferred income tax assets 88,513 Includes the following: Intangible assets - net 717,404 Notes receivable 204,400 Other assets 390,280 Includes the following: Deferred income taxes 830,943 Other liabilities 562,431 Shareholders' Equity 4,669,154 Includes the following: Interest income 46,852
EX-27.3 4
5 1,000 3-MOS 3-MOS 3-MOS YEAR FEB-01-1997 FEB-01-1997 FEB-01-1997 FEB-03-1996 FEB-04-1996 MAY-05-1996 AUG-04-1996 JAN-29-1995 MAY-04-1996 AUG-03-1996 NOV-02-1996 FEB-03-1996 195,473 134,133 152,596 172,518 0 0 0 0 2,944,595 2,768,417 2,821,833 2,842,077 0 0 0 0 3,204,023 3,234,271 4,170,860 3,094,848 6,592,448 6,429,091 7,405,704 6,360,365 6,231,782 6,270,870 6,384,812 6,305,167 0 0 0 0 14,150,735 14,032,369 15,096,694 14,295,050 2,742,415 2,765,143 3,803,994 3,098,069 5,768,933 5,644,524 5,624,065 5,632,232 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14,150,735 14,032,369 15,096,694 14,295,050 3,300,665 3,284,228 3,609,148 15,048,513 0 0 0 0 0 0 0 0 2,014,648 1,995,573 2,189,903 9,317,784 1,230,753 1,212,901 1,231,933 5,067,842 0 0 0 0 123,345 126,996 124,510 508,132 (57,017) (39,860) 73,951 201,859 (19,071) (12,667) 32,150 127,306 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (37,946) (27,193) 41,801 74,553 (0.18) (0.13) 0.20 0.39 (0.18) (0.13) 0.20 0.39 Inclues the following: Supplies and prepaid expenses 150,566 Deferred income tax assets 97,791 Includes the following: Intangible assets - net 737,868 Notes receivable 210,758 Other assets 377,879 Includes the following: Deferred income taxes 731,200 Other liabilities 556,671 Shareholders' Equity 4,351,516 Includes the following: Interest income 11,064 Restated to reflect the Company's adoption of Statement of Financial Accounting Standards No. 128, "Earnings Per Share." Includes the following: Supplies and prepaid expenses 176,729 Deferred income tax assets 115,541 Includes the following: Intangible assets - net 731,047 Notes receivable 204,035 Other assets 397,326 Includes the following: Deferred income taxes 730,725 Other liabilities 561,847 Shareholders' Equity 4,330,130 Includes the following: Interest income 11,382 Includes the following: Supplies and prepaid expenses 169,532 Deferred income tax assets 90,883 Includes the following: Intangible assets - net 724,225 Notes receivable 204,997 Other assets 376,956 Includes the following: Deferred income taxes 727,772 Other liabilities 564,606 Shareholders' Equity 4,376,257 Includes the following: Interest income 11,150 Includes the following: Supplies and prepaid expenses 176,411 Deferred income tax assets 74,511 Includes the following: Intangible assets - net 744,869 Notes receivable 415,066 Other assets 469,763 Includes the following: Deferred income taxes 732,936 Other liabilities 558,127 Shareholders' Equity 4,273,686 Includes the following: Interest income 47,104
-----END PRIVACY-ENHANCED MESSAGE-----