-----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, ZUh5rt/bBn6dDjzwF3LHmYEfv7cKlEIfHSlDf+PbBtC16n2orQqXPTYk6i3L/vTf 3IyKlbvSt58BJEz6LrETng== 0000794367-95-000013.txt : 19950614 0000794367-95-000013.hdr.sgml : 19950614 ACCESSION NUMBER: 0000794367-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950429 FILED AS OF DATE: 19950613 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: 1934 Act SEC FILE NUMBER: 001-13536 FILM NUMBER: 95546686 BUSINESS ADDRESS: STREET 1: 7 W SEVENTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 513-579-70 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 April 29, 1995. FEDERATED DEPARTMENT STORES, INC. 151 West 34th Street New York, New York 10001 (212) 695-4400 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. 182,777,694 shares of the Registrant's Common Stock, $.01 par value, were outstanding as of May 27, 1995. PART I -- FINANCIAL INFORMATION FEDERATED DEPARTMENT STORES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (THOUSANDS, EXCEPT PER SHARE FIGURES)
13 Weeks Ended 13 Weeks Ended April 29, April 30, 1995 1994 Net Sales, including leased department sales $2,988,006 $1,653,631 Cost of sales 1,823,921 1,008,136 Selling, general and administrative expenses 1,069,959 542,088 Business integration and consolidation expenses 83,322 - Operating Income 10,804 103,407 Interest expense (109,501) (56,363) Interest income 11,949 11,024 Income (Loss) Before Income Taxes (86,748) 58,068 Federal, state and local income tax benefit (expense) 29,749 (25,846) Net Income (Loss) $ (56,999) $ 32,222 Earnings (Loss) per Share $ (.31) $ .25 Average Number of Shares Outstanding 182,682 126,464 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (THOUSANDS)
April 29, January 28, April 30, 1995 1995 1994 ASSETS: Current Assets: Cash $ 150,242 $ 206,490 $ 102,907 Accounts receivable 2,237,598 2,265,651 1,781,938 Merchandise inventories 2,553,193 2,380,621 1,267,958 Supplies and prepaid expenses 114,191 99,559 47,374 Deferred income tax assets 232,889 238,127 86,278 Total Current Assets 5,288,113 5,190,448 3,286,455 Property and Equipment - net 5,245,346 5,349,912 2,544,481 Intangible Assets - net 1,037,861 1,006,547 333,029 Notes Receivable 407,293 408,134 407,757 Other Assets 386,818 424,671 799,647 Total Assets $12,365,431 $12,379,712 $7,371,369 LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Short-term debt $ 671,741 $ 463,042 $ 125,847 Accounts payable and accrued liabilities 2,085,154 2,183,711 1,146,702 Income taxes 9,621 65,319 78,280 Total Current Liabilities 2,766,516 2,712,072 1,350,829 Long-Term Debt 4,526,191 4,529,220 2,683,233 Deferred Income Taxes 989,228 993,451 803,159 Other Liabilities 498,627 505,359 220,455 Shareholders' Equity 3,584,869 3,639,610 2,313,693 Total Liabilities and Shareholders' Equity $12,365,431 $12,379,712 $7,371,369 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (THOUSANDS)
13 Weeks Ended 13 Weeks Ended April 29, 1995 April 30, 1994 Cash flows from operating activities: Net income (loss) $ (56,999) $ 32,222 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 103,309 54,716 Amortization of intangible assets 10,828 4,691 Amortization of financing costs 4,968 2,542 Amortization of original issue discount 904 4,411 Amortization of unearned restricted stock 1,122 486 Changes in assets and liabilities: (Increase) decrease in accounts receivable 28,053 (23,003) Increase in merchandise inventories (172,572) (87,114) Increase in supplies and prepaid expenses (14,632) (714) Decrease in other assets not separately identified 7,392 3,318 Decrease in accounts payable and accrued liabilities not separately identified (70,260) (53,940) Decrease in current income taxes (46,292) (31,929) Increase in deferred income taxes 1,015 1,454 Increase (decrease) in other liabilities not separately identified (6,208) 229 Net cash used by operating activities (209,372) (92,631) Cash flows from investing activities: Purchase of property and equipment (45,995) (27,822) Disposition of property and equipment 23,804 587 Net cash used by investing activities (22,191) (27,235) Cash flows from financing activities: Debt issued 311,918 14,995 Financing costs (290) (1,140) Debt repaid (107,152) (7,149) Decrease in outstanding checks (30,297) (9,102) Acquisition of treasury stock (347) (273) Issuance of common stock 1,483 3,014 Net cash provided by financing activities 175,315 345
(Continued) FEDERATED DEPARTMENT STORES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (THOUSANDS)
13 Weeks Ended 13 Weeks Ended April 29, 1995 April 30, 1994 Net decrease in cash (56,248) (119,521) Cash at beginning of period 206,490 222,428 Cash at end of period $ 150,242 $ 102,907 Supplemental cash flow information: Interest paid $ 72,386 $ 45,734 Interest received 12,380 11,673 Income taxes paid (net of refunds received) 15,282 55,691 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 28, 1995 (the "1994 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 1994 10-K. Because of the seasonal nature of the general merchandising business, the results of operations for the 13 weeks ended April 29, 1995 and April 30, 1994 (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 April 29, 1995 and April 30, 1994, 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. 2. ACQUISITION OF COMPANIES On December 31, 1993, Federated Noteholding Corporation ("FNC"), a wholly owned subsidiary of the Company, paid $109.3 million in cash and issued a promissory note (the "Promissory Note") in the principal amount of $340.0 million to The Prudential Insurance Company of America ("Prudential"), in exchange for 50% of a claim (the "Prudential Claim") held by Prudential in the Chapter 11 reorganization of R. H. Macy & Co., Inc. ("Macy's") and an option to acquire the remaining 50% of the Prudential Claim (the Prudential Option"). This investment was included in other assets in the Company's Consolidated Balance Sheet at April 30, 1994. On December 19, 1994, the Company completed its acquisition of Macy's pursuant to a Plan of Reorganization (the "Macy's POR") of Macy's and substantially all of its subsidiaries (collectively, the "Macy's Debtors"). Pursuant to the Macy's POR, Macy's merged with the Company, which became responsible for making distributions of cash and debt and equity securities to the holders of allowed claims against the Macy's Debtors pursuant to the Macy's POR. In connection with the acquisition, FNC exercised the Prudential Option, whereby it acquired the remainder of the Prudential Claim in exchange for $469.6 million in cash, and repaid the full amount of indebtedness under the Promissory Note. The total purchase price of the acquisition, net of amounts issued or paid to wholly owned subsidiaries of the Company (including FNC), was approximately $3,815.9 million and consisted of the following:
(millions) Cash payments, including exercise of the Prudential Option and transaction costs $ 830.4 Assumption of merger-related liabilities 192.5 Issuance, reinstatement or assumption of debt 1,182.4 Issuance of 55.6 million shares of common stock 1,047.6 Issuance of warrants to purchase 18.0 million shares of common stock 118.4 Cost of the initial investment in the Prudential Claim, net of a $4.7 million cash distribution 444.6 $3,815.9 /TABLE FEDERATED DEPARTMENT STORES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) The Macy's acquisition was accounted for under the purchase method and, accordingly, the results of operations of Macy's have been included in the Company's results of operations since the date of acquisition and the purchase price has been allocated to Macy's assets and liabilities based on their estimated fair values at the date of acquisition. Including certain adjustments recorded in the 13 weeks ended April 29, 1995 to the assets and liabilities acquired, the excess of cost over net assets acquired is approximately $350.6 million. The following unaudited pro forma condensed statement of operations gives effect to the Macy's acquisition and related financing transactions as if such transactions had occurred at the beginning of the period presented.
13 Weeks Ended April 30, 1994 (millions) Net sales $ 2,997.0 Net loss (39.6) Loss per share $ (.22)
The foregoing unaudited pro forma condensed statement of operations gives effect to, among other pro forma adjustments, the following: (i) Interest expense on debt incurred to finance the acquisition, the reversal of Macy's historical interest expense and the reversal of the Company's historical interest expense on certain indebtedness redeemed in connection with the acquisition; (ii) Amortization of deferred debt expense related to debt incurred to finance the acquisition; (iii) Amortization, over 20 years, of the excess of cost over net assets acquired, and amortization, over 40 years, of tradenames acquired; (iv) Depreciation and amortization adjustments related to fair market value of assets acquired; and (v) Adjustments to income tax expense related to the above. The foregoing unaudited pro forma information is provided for illustrative purposes only and does not purport to be indicative of results that actually would have been achieved had the Macy's acquisition been consummated on the first day of the period presented or of future results. On May 26, 1994, the Company purchased Joseph Horne Co., Inc. ("Horne's"), a department store retailer operating ten stores in Pittsburgh and Erie, Pennsylvania for approximately $116.0 million including the assumption of $40.0 million of mortgage debt and transaction costs. The acquisition was accounted for under the purchase method of accounting and the purchase price approximates the estimated fair value of the assets and liabilities acquired. Results of operations for the stores acquired are included in the Consolidated Financial Statements from the date of acquisition. Pro forma financial results have not been presented for this acquisition since it did not significantly affect results of operations of the Company. FEDERATED DEPARTMENT STORES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 3. BUSINESS INTEGRATION AND CONSOLIDATION EXPENSES During the 13 weeks ended April 29, 1995, the Company recorded $83.3 million of business integration and consolidation expenses associated with the integration of Macy's into the Company ($73.5 million) and the consolidation of the Company's Rich's/Goldsmith's and Lazarus divisions ($9.8 million). The primary components of the Macy's integration expenses were $40.0 million of inventory valuation adjustments to merchandise in lines of business which the Company, subsequent to the acquisition, eliminated or replaced, $8.6 million of severance costs and $24.9 million of other costs and expenses associated with integrating Macy's into the Company, including costs to close and sell certain stores and to convert a number of stores to other nameplates. Of the $9.8 million of expenses associated with the divisional consolidation referred to above, $7.9 million relates to inventory valuation adjustments to merchandise of the affected divisions in lines of business which were eliminated or replaced as a result of the consolidation. The Company's accrued severance liability related to business integration and consolidation expenses was reduced from $26.1 million at January 28, 1995 to $12.0 million at April 29, 1995. As of April 29, 1995, this accrued severance liability covered approximately 200 employees. FEDERATED DEPARTMENT STORES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company acquired Macy's on December 19, 1994, and effected other acquisitions (and dispositions) during its 1994 fiscal year. Under the purchase method of accounting, the assets, liabilities and results of operations associated with such acquisitions have been included in the Company's financial position and results of operations since the respective dates thereof. Accordingly, the financial position and results of operations of the Company presented and discussed herein are generally not directly comparable between years. For purposes of the following discussion, all references to "first quarter of 1995" and "first quarter of 1994" are to the Company's 13-week fiscal periods ended April 29, 1995 and April 30, 1994, respectively. RESULTS OF OPERATIONS COMPARISON OF THE 13 WEEKS ENDED APRIL 29, 1995 AND APRIL 30, 1994 Net sales for the first quarter of 1995 totaled $2,988.0 million, compared to net sales of $1,653.6 million for the first quarter of 1994, an increase of 80.7%. Since April 30, 1994, the company added 142 department stores (121 through the Macy's acquisition) and more than 135 specialty and clearance stores and closed eight department stores. All of the specialty and clearance stores were added through the Macy's acquisition. Comparable store sales for the first quarter of 1995 increased 1.2% over the first quarter of 1994, including sales of the Macy's stores that were open throughout both such quarters. Cost of sales was 61.0% as a percent of net sales for the first quarter of 1995, compared to 60.9% for the first quarter of 1994. Cost of sales includes a charge of $1.8 million for the first quarter of 1995 compared to a charge of $5.2 million in the first quarter of 1994 resulting from the valuation of merchandise inventory on the last-in, firstout basis. Additionally, because the Macy's divisions have historically experienced higher inventory shortages than the Company prior to the Macy's acquisition, cost of sales for the first quarter of 1995 reflects higher anticipated inventory shortage adjustments. Selling, general and administrative expenses were 35.8% as a percent of net sales for the first quarter of 1995 compared to 32.8% for the first quarter of 1994. Since the credit card programs relating to the acquired Macy's divisions are owned by a third party, revenue from credit operations decreased as a percentage of sales. Because selling, general and administrative expenses are reported net of revenue from credit operations, such decrease was the major factor contributing to the increase in the selling, general and administrative expense rate. Business integration and consolidation expenses for the first quarter of 1995 consist of $73.5 million associated with the integration of Macy's into the Company and $9.8 million related to the consolidation of the Company's Rich's/Goldsmith's and Lazarus divisions. During the remainder of fiscal 1995, the Company presently expects to incur approximately $170.0 million of additional business integration and consolidation expenses as a result of the Macy's acquisition, the divisional consolidation referred to above and the discontinuation of the Company's clearance store operations. FEDERATED DEPARTMENT STORES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Net interest expense was $97.6 million for the first quarter of 1995, compared to $45.3 million for the first quarter of 1994. The higher interest expense for the first quarter of 1995 is principally due to the higher levels of borrowings incurred in connection with the acquisition of Macy's. Income tax benefit was $29.7 million for the first quarter of 1995. This amount differs from the amount computed by applying the federal income tax statutory rate of 35.0% to income before income taxes principally because of permanent differences arising from the amortization of intangible assets and state and local income taxes. LIQUIDITY AND CAPITAL RESOURCES The Company's principal sources of liquidity are cash from operations, cash on hand and available credit facilities. Net cash used by operating activities in the first quarter of 1995 was $209.4 million, an increase of $116.8 million from the net cash used by operating activities in the first quarter of 1994 of $92.6 million. Higher payments of non-merchandise payables and accrued liabilities (including merger - related liabilities) were the most significant factors contributing to this increased use of cash. Net cash provided by the Company for all financing activities was $175.3 million for the first quarter of 1995, and net cash used in investing activities was $22.2 million. During the first quarter of 1995, the Company issued $311.9 million of short-term debt under the Company's bank credit facility and receivables backed commercial paper program and repaid $107.2 million of debt, consisting primarily of the Company's subsidiary trade obligations. The Company opened two new department stores and closed three department stores in the first quarter of 1995. Management believes the department store industry will continue to consolidate. Accordingly, the Company intends from time to time to consider additional acquisitions of department store assets and companies. 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 other possible capital markets transactions to reduce its cost of capital, including the refinancing of indebtedness. PART II - - OTHER INFORMATION FEDERATED DEPARTMENT STORES, INC. ITEM 1. LEGAL PROCEEDINGS The information regarding legal proceedings in the 1994 10K covers events known to the Company and occurring prior to March 30, 1995. The following is a general description of certain developments in the legal proceedings known to the Company that arose subsequent to that date and prior to June 6, 1995. CASH PAYMENT CLAIMS AGAINST MACY'S DEBTORS. As reported in the 1994 10-K, certain claims or portions thereof (collectively the "Cash Payment Claims") against the Macy's Debtors which, to the extent allowed by the United States Bankruptcy Court for the Southern District of New York, will be paid in cash pursuant to the Macy's POR, are currently disputed by the Company. As of June 6, 1995, the aggregate face amount of disputed Cash Payment Claims was approximately $838.3 million, while the estimated allowed amount thereof was approximately $336.7 million. Although there can be no assurance with respect thereto, the Company believes that the actual allowed amount of disputed Cash Payment Claims will not be materially greater than the estimated allowed amount thereof. OTHER PROCEEDINGS. The Company and its subsidiaries are also involved in various legal proceedings incidental to the normal course of their business. Management does not expect that any of such proceedings will have a material adverse effect on the Company's consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of the Company's stockholders was held on May 19, 1995. 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 1998 Annual Meeting of the Company's stockholders. The votes for such elections were as follows: Joseph Neubauer - 144,004,187 votes in favor and 94,405 votes withheld; Allen I. Questrom - 144,013,692 votes in favor and 84,900 votes withheld; Paul W. Van Orden - 143,999,036 votes in favor and 99,556 votes withheld; and Karl M. von der Heyden 144,008,395 votes in favor and 90,197 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 February 3, 1996. The votes for the ratification were 141,763,652, the votes against the ratification were 2,157,938 the votes abstained were 177,002, and there were no broker non-votes. (iii) The stockholders voted against a resolution by a stockholder to change the date of the Company's Annual Meeting to the second Friday in June. The votes against the resolution were 90,212,168, the votes for the resolution were 1,335,557, the votes abstained were 5,856,961, and there were 46,693,906 broker non-votes. PART II - - OTHER INFORMATION (Continued) FEDERATED DEPARTMENT STORES, INC. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11 Statement re computation of per share earnings. 27 Financial Data Schedule (b) Reports on Form 8-K No reports were filed on Form 8-K during this quarter. 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 its behalf by the undersigned thereunder duly authorized. FEDERATED DEPARTMENT STORES, INC. Date June 13, 1995 /s/ Dennis J. Broderick Dennis J. Broderick Senior Vice President, General Counsel and Secretary /s/ John E. Brown John E. Brown Senior Vice President and Controller (Principal Accounting Officer) EX-11 2 EXHIBIT 11 - PER SHARE EARNINGS EXHIBIT 11 FEDERATED DEPARTMENT STORES, INC. EXHIBIT OF PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER SHARE (THOUSANDS, EXCEPT PER SHARE FIGURES)
13 Weeks Ended April 29, 1995 April 30, 1994 Shares (Loss) Shares Income Net income (loss) and average numberof shares outstanding 182,682 $(56,999) 126,464 $32,222 Earnings (loss) per share $(.31) $.25 PRIMARY COMPUTATION: Average number of common share equivalents: Shares to be issued to the U.S. Treasury 81 122 Deferred compensation plan 143 40 Stock options 377 - 337 - Adjusted number of common and common equivalent shares outstanding and adjusted net income (loss) 183,283 (56,999) 126 ,963 32,222 Primary earnings (loss) per share $(.31) $.25 FULLY DILUTED COMPUTATION: Additional adjustments to a fully diluted basis: Stock options 1 - 1 Adjusted number of shares outstanding and net income (loss) on a fully diluted basis 183,284 $(56,999) 126,964 $32,222 Fully diluted earnings (loss) per share $(.31) $.25
EX-27 3 EXHIBIT 27 - ARTICLE 5 FDS
5 1,000 3-MOS FEB-03-1996 JAN-29-1995 APR-29-1995 150,242 0 2,237,598 0 2,553,193 5,288,113 5,245,346 0 12,365,431 2,766,516 4,526,191 0 0 0 0 12,365,431 2,988,006 0 0 1,823,921 1,153,281 0 109,501 (86,748) (29,749) 0 0 0 0 (56,999) (.31) (.31) Includes the following: Supplies and prepaid expenses 114,191 Deferred income tax assets 232,889 Includes the following: Intangible assets - net 1,037,861 Notes receivable 407,293 Other assets 386,818 Includes the following: Deferred income taxes 989,228 Other liabilities 498,627 Shareholders' equity 3,584,869 Includes the following: Interest income 11,949
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