-----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, AJ9ZumeuVYgYQ0gVS51yhgRv6zYZhSH9BfFdD8V1q2kUQdk9SPC15a8snMXeCbQH YHRObxK4q2nDeI8Ic1+f7g== 0000836974-95-000012.txt : 19950517 0000836974-95-000012.hdr.sgml : 19950517 ACCESSION NUMBER: 0000836974-95-000012 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950516 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONTGOMERY WARD HOLDING CORP CENTRAL INDEX KEY: 0000836974 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 363571585 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-17540 FILM NUMBER: 95539980 BUSINESS ADDRESS: STREET 1: ONE MONTGOMERY WARD PLZ CITY: CHICAGO STATE: IL ZIP: 60671 BUSINESS PHONE: 3124672000 10-Q/A 1 - ------------------------------------------------------------------ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-Q/A Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended Commission File April 1, 1995 No. 0-17540 MONTGOMERY WARD HOLDING CORP. (Exact name of registrant as specified in its charter) DELAWARE 36-3571585 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Montgomery Ward Plaza Chicago, Illinois 60671 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number Including Area Code: (312) 467-2000 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 X No . At April 29, 1995, there were 19,216,522 shares of Class A Common Stock and 25,000,000 shares of Class B Common Stock of the Registrant outstanding. - ------------------------------------------------------------------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. INDEX Page Montgomery Ward Holding Corp. Consolidated Statement of Income . . . . . . . . .2 Consolidated Condensed Balance Sheet . . . . . . .3 Consolidated Statement of Cash Flows . . . . . . .4 Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . .6 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENT OF INCOME (Millions of dollars, except per share amounts) For the 13-Week Period Ended April 1, April 2, 1995 1994 Revenues Net sales, including leased and licensed department sales . . . . . . . . . . . . . . $1,359 $1,216 Direct response marketing revenues, including insurance. . . . . . . . . . . . . 130 107 Total Revenues . . . . . . . . . . . . . . 1,489 1,323 Costs and Expenses Cost of goods sold, including net occupancy and buying expense . . . . . . . . . . . . . 1,076 930 Operating, selling, general and administrative expenses, including benefits and losses of direct response operations. . . . . . . . . . . . . 401 366 Interest expense, net of investment income . . . . . . . . . . . . . . . . . . . 19 11 Total Costs and Expenses . . . . . . . . . 1,496 1,307 Income (Loss) Before Income Taxes. . . . . . . (7) 16 Income Tax (Benefit) Expense . . . . . . . . . (3) 6 Net Income (Loss). . . . . . . . . . . . . . . (4) 10 Preferred Stock Dividend Requirements. . . . . 1 - Net Income (Loss) Applicable to Common Shareholders . . . . . . . . . . . . . $ (5) $ 10 Net Income per Class A Common Share. . . . . . $ (.12) $ .23 Net Income per Class B Common Share. . . . . . $ (.10) $ .20 See notes to consolidated condensed financial statements. MONTGOMERY WARD HOLDING CORP. CONSOLIDATED CONDENSED BALANCE SHEET (Millions of dollars) ASSETS April 1, December 31, 1995 1994 Cash and cash equivalents. . . . . . . . . . $ 48 $ 33 Short-term investments . . . . . . . . . . . 6 3 Investments of insurance operations. . . . . 316 314 Total Cash and Investments . . . . . . . 370 350 Trade and other accounts receivable. . . . . 104 112 Accounts and notes receivable from affiliates . . . . . . . . . . . . . . 18 6 Total Receivables. . . . . . . . . . . . 122 118 Merchandise inventories. . . . . . . . . . . 1,628 1,625 Prepaid pension contribution . . . . . . . . 326 324 Federal income taxes receivable. . . . . . . 3 - Properties, plants and equipment, net of accumulated depreciation and amortization. . . . . . . . . . . . . . 1,378 1,396 Direct response and insurance acquisition costs . . . . . . . . . . . . . 338 322 Other assets . . . . . . . . . . . . . . . . 410 402 Total Assets . . . . . . . . . . . . . . . . $4,575 $4,537 LIABILITIES AND SHAREHOLDERS' EQUITY Short-term borrowings. . . . . . . . . . . . $ 777 $ 144 Trade accounts payable . . . . . . . . . . . 1,245 1,719 Federal income taxes payable . . . . . . . . - 14 Accrued liabilities and other obligations . . . . . . . . . . . . . . . . 1,127 1,231 Insurance policy claim reserves. . . . . . . 238 236 Long-term debt . . . . . . . . . . . . . . . 225 228 Obligations under capital leases . . . . . . 80 81 Deferred federal income taxes. . . . . . . . 126 122 Total Liabilities. . . . . . . . . . . . 3,818 3,775 Redeemable Preferred Stock . . . . . . . . . 75 75 Shareholders' Equity Common stock. . . . . . . . . . . . . . . . - - Capital in excess of par value. . . . . . . 23 23 Retained earnings . . . . . . . . . . . . . 746 751 Unrealized gain on marketable equity securities . . . . . . . . . . . . . . . . 5 2 Less: Treasury stock, at cost. . . . . . . (92) (89) Total Shareholders' Equity . . . . . . . 682 687 Total Liabilities and Shareholders' Equity. . . . . . . . . . . . $4,575 $4,537 See notes to consolidated condensed financial statements. MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENT OF CASH FLOWS (Millions of dollars) For the 13-Week Period Ended April 1, April 2, 1995 1994 Cash flows from operating activities: Net income (loss) . . . . . . . . . . . . . . $ (4) $ 10 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. . . . . . . 31 25 Deferred income taxes . . . . . . . . . . 2 (6) Changes in operating assets and liabilities: (Increase) decrease in: Trade and other accounts receivable. . . . 8 2 Accounts and notes receivable from affiliates. . . . . . . . . . . . . . . . (12) (22) Merchandise inventories. . . . . . . . . . (3) (6) Prepaid pension contribution . . . . . . . (2) (3) Other assets . . . . . . . . . . . . . . . (25) (11) Increase (decrease) in: Trade accounts payable . . . . . . . . . . (474) (286) Federal income taxes payable, net. . . . . (17) (2) Accrued liabilities and other obligations . . . . . . . . . . . . . . . (104) (65) Insurance policy claim reserves. . . . . . 2 - Net cash used in operations . . . . . . . (598) (364) Cash flows from investing activities: Acquisition of Lechmere, net of cash acquired . . . . . . . . . . . . . . - (109) Purchase of short-term investments. . . . . . (28) (25) Purchase of investments of insurance operations . . . . . . . . . . . . . . . . . (91) (116) Sale of short-term investments. . . . . . . . 25 37 Sale of investments of insurance operations . . . . . . . . . . . . . . . . . 94 103 Capital expenditures. . . . . . . . . . . . . (18) (12) Disposition of properties, plants and equipment, net . . . . . . . . . . . . . . . 6 - Net cash used for investing activities . . . . . . . . . . $(12) $(122) See notes to consolidated condensed financial statements. MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENT OF CASH FLOWS (Millions of dollars) For the 13-Week Period Ended April 1, April 2, 1995 1994 Cash flows from financing activities: Proceeds from issuance of short-term borrowings. . . . . . . . . . . . $3,369 $1,727 Payments on short-term borrowings . . . . . .(2,736) (1,360) Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . - 165 Payments of Montgomery Ward long-term debt . . . . . . . . . . . . . . . (3) (2) Payments of Lechmere long-term debt . . . . . . . . . . . . . . . - (88) Payments of obligations under capital leases . . . . . . . . . . . . . . . (1) (2) Cash dividends paid . . . . . . . . . . . . . (1) - Purchase of treasury stock, at cost . . . . . (3) (2) Net cash provided by financing activities. . . . . . . . . . . 625 438 Increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . 15 (48) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 33 98 Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 48 $ 50 Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes . . . . . . . . . . . . . . . $ 20 $ 15 Interest . . . . . . . . . . . . . . . . . $ 16 $ 13 Non-cash investing activity: Change in unrealized gain on marketable securities . . . . . . . . . . $ 3 $ - See notes to consolidated condensed financial statements. MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 1. Condensed Financial Statements Montgomery Ward Holding Corp. (the Company or MW Holding) conducts its operations through its only direct subsidiary, Montgomery Ward & Co., Incorporated (Montgomery Ward). In the opinion of management, the unaudited financial statements of the Company include all adjustments necessary for a fair presentation. All such adjustments are of a normal recurring nature. The condensed financial statements should be read in the context of the financial statements and notes thereto filed with the Securities and Exchange Commission in MW Holding's 1994 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to be comparable with the current period presentation. 2. Net Income Per Common Share Net income (loss) per common share is computed as follows: 13-Week Period Ended April 1, 1995 Class A Class B Earnings (loss) available for Common Shareholders . . . . . . . $(2) $(3) Weighted average number of common and common equivalent shares (stock options) outstanding. . . . 20,882,543 25,000,000 Earnings (loss) per share . . . . . $(.12) $(.10) 13-Week Period Ended April 2, 1994 Class A Class B Earnings available for Common Shareholders. . . . . . . . $ 5 $ 5 Weighted average number of common and common equivalent shares (stock options) outstanding. . . . 21,632,062 25,000,000 Earnings per share. . . . . . . . . $ .23 $ .20 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Millions of dollars) 3. Acquisition of Lechmere, Inc. Montgomery Ward acquired in a merger transaction all the stock of LMR Acquisition Corporation (LMR) which owns 100% of the stock of Lechmere, Inc. (Lechmere) on March 30, 1994. The aggregate purchase price was $113. The closing price included a $10 promissory note (the Note) of Montgomery Ward, which bears interest at a rate of 4.87% per annum. Seventy-five percent of the accrued interest on and principal of the Note are payable 540 days after the date of the Note and the balance is payable three years after the date of the Note. The Note, which is secured by a standby letter of credit, is to be reduced upon the occurrence of certain specified circumstances. As part of the closing, Montgomery Ward advanced approximately $88 and assumed $3 in obligations to enable Lechmere to retire its outstanding bank debt and subordinated debt. The acquisition was accounted for as a purchase. The purchase price has been allocated to Lechmere's net assets based upon results of asset valuations and liability and contingency assessments. The allocation is summarized as follows: Inventory . . . . . . . . . . . . . . . . . . . . .$140 Properties, Plants and Equipment. . . . . . . . . . 54 Goodwill. . . . . . . . . . . . . . . . . . . . . . 124 Other Assets. . . . . . . . . . . . . . . . . . . . 50 Due to Montgomery Ward. . . . . . . . . . . . . . . (88) Other Liabilities . . . . . . . . . . . . . . . . .(167) $113 4. Benefits and Losses Operating, selling, general and administrative expenses include benefits and losses related to direct response marketing operations of $28 and $27 for the 13-week periods ended April 1, 1995 and April 2, 1994, respectively. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of results of operations for MW Holding compares the first quarter of 1995 to the first quarter of 1994. All dollar amounts referred to in this discussion are in millions, and all income and expense items are shown before income taxes, unless specifically stated otherwise. MW Holding's business is seasonal, with one-third of the sales traditionally occurring in the fourth quarter; accordingly, the results of operations for the quarter are not necessarily indicative of the results for the entire year. Results of Operations First Quarter 1995 Compared with First Quarter 1994 Consolidated net loss for the first quarter of 1995 was $4, as compared to net income of $10 for the first quarter of 1994. Lechmere was acquired on March 30, 1994. Consequently, Lechmere's loss from operations and the interest cost on the financing of the acquisition are not reflected in the first quarter 1994 results. Had these results been reflected in 1994, overall net income would have been $6 million lower. Consolidated total revenues (net sales and direct response marketing revenues, including insurance) were $1,489 compared with $1,323 in 1994. The net sales increase is due to the inclusion of Lechmere sales in the first quarter of 1995, partially offset by the impact of the shift in the Easter selling season from the first quarter of 1994 to the second quarter of 1995. Sales on a comparable store basis, which reflects only the stores in operation for both the first quarter of 1995 and 1994, decreased 5%. Direct response marketing revenues increased $23, or 21%, to $130. The increase was primarily due to increased clubs membership levels as well as increased revenues generated from the April 1994 acquisition of SmileSaver, Inc. and the October 1994 acquisition of Credit Card Sentinel. Gross margin (net sales less cost of goods sold) dollars were $283, a decrease of $3, or 1%, from the first quarter of last year. This decrease was due to the gross margin impact of the decrease in the margin rate on sales ($30) and increased occupancy costs primarily related to new stores ($15), partially offset by the gross margin impact of the increased sales ($42). The decrease in the margin rate was impacted by a heavier emphasis in appliances and electronics and the lower margin rate that accompany these businesses (which includes Lechmere) and continued competitive pressures. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) First Quarter 1995 Compared with First Quarter 1994 (continued) Operating, selling, general and administrative expenses increased $35 from the prior year. Excluding Lechmere's expenses, operating, selling, general and administrative expenses increased by $1. This increase was attributable to the impact of new store openings of $7 and increased other operating and administrative costs of $2, partially offset by increased income generated from the sale of product service contracts of $8. Net interest expense increased $8, or 73%. The increase is due to increased borrowings, primarily due to the acquisition of Lechmere, as well as increased interest rates. Preferred stock dividend requirements were $1 for the first quarter of 1995 due to the issuance of Senior Preferred Stock on April 27, 1994. Discussion of Financial Condition Montgomery Ward is the only direct subsidiary of MW Holding and therefore Montgomery Ward and its subsidiaries are MW Holding's sole source of funds. Montgomery Ward has entered into a Long Term Credit Agreement (Long Term Agreement) dated as of September 15, 1994 with various lenders. The Long Term Agreement, which expires September 15, 1999, provides for a revolving facility in the principal amount of $603. As of April 1, 1995, $492 was outstanding under the Long Term Agreement. Concurrently, Montgomery Ward also entered into a Short Term Credit Agreement (Short Term Agreement) dated as of September 15, 1994 with various lenders. The Short Term Agreement, which expires September 14, 1995, provides for a revolving facility in the principal amount of $297. As of April 1, 1995, $210 was outstanding under the Short Term Agreement. In addition, $75 was outstanding under short-term uncommitted bank lines of credit as of April 1, 1995, which the Company uses periodically at seasonal working capital peaks to diversify its borrowings. Under the Long Term Agreement and the Short Term Agreement (collectively, the Agreements), Montgomery Ward may select among several interest rate options, including a rate negotiated with one or more of the various lenders. The interest rates for the aforementioned bank borrowings are based on market rates and significant increases in market interest rates will increase Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) interest payments required. A commitment fee is payable based upon the unused amount of each facility, although under certain circumstances, an additional fee may be payable to lenders not participating in a negotiated rate loan. During the fourth quarter of 1994, Montgomery Ward entered into interest rate exchange and cap agreements with various banks to offset the market risk associated with an increase in interest rates under both the Long Term Agreement and Short Term Agreement. The aggregate notional principal amounts under the interest rate exchange agreements is $175 in 1995. Under the terms of the interest rate exchange agreements, Montgomery Ward pays the banks a weighted average fixed rate of 7.4% in 1995 and will receive the one-month daily average London Interbank Offered (LIBO) rate multiplied by the notional principal amount. The average aggregate notional principal amounts under the various cap agreements is $154 in 1995. Under the terms of the cap agreements, Montgomery Ward receives payments from the banks when the one-month daily average LIBO rate exceeds the 5.5% cap strike rate in 1995. Such payments will equal the amount determined by multiplying the notional principal amount by the excess of the percentage rate, if any, of the one-month daily average LIBO rate over the cap strike rate. Montgomery Ward is exposed to credit risk in the event of nonperformance by the other parties to the interest rate exchange and cap agreements; however, Montgomery Ward anticipates full performance by the counterparties. The Agreements and the Note Purchase Agreements impose various restrictions on Montgomery Ward, including the satisfaction of certain financial tests which include restrictions on payments of dividends. Under the terms of the Agreements, which are currently the most restrictive of the financing agreements as to dividends, distributions and redemptions, Montgomery Ward may not pay dividends or make any other distributions to the Company or redeem any Common Stock in excess of (1) $63 on a cumulative basis, plus (2) 50% of Consolidated Net Income of Montgomery Ward (as defined in the Agreements) after January 1, 1994, plus (3) any repayment by the Company of any loan or advance made by Montgomery Ward to the Company which was received after January 1, 1994, plus (4) capital contributions received by Montgomery Ward after January 1, 1994, plus (5) net proceeds received by Montgomery Ward from (a) the issuance of capital stock including treasury stock but excluding Debt-Like Preferred Stock (as defined in the Agreements) or (b) any indebtedness which is converted into shares of capital stock other than Debt-Like Preferred Stock of Montgomery Ward or the Company, after January 1, 1994, plus (6) an adjustment of $45 for 1994 through 1996, $30 in 1997 and $15 in 1998. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) On April 27, 1994, the Company issued 750 shares of a new series of Senior Preferred Stock (Senior Preferred Stock) to General Electric Capital Corporation (GE Capital) in exchange for $75 in cash. The Company used the proceeds to acquire 750 shares of a new issue of Senior Preferred Stock of Montgomery Ward (Montgomery Ward Preferred) for $75 and Montgomery Ward used the proceeds to reduce short-term borrowings. The Montgomery Ward Preferred constitutes Debt-Like Preferred Stock for purposes of the dividend restrictions under the Agreements. Future cash needs are expected to be provided by ongoing operations, the sale of customer receivables to Montgomery Ward Credit Corporation (Montgomery Ward Credit), a subsidiary of GE Capital, borrowings under the Agreements and the disposition of capital assets related to facility closings. Capital expenditures during the first three months of 1995 of $18 were primarily related to expenditures for various merchandise fixture and presentation programs. Capital expenditures for the comparable 1994 period were $12. PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K. None. SIGNATURE 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. REGISTRANT MONTGOMERY WARD HOLDING CORP. BY JOHN L. WORKMAN NAME AND TITLE John L. Workman, Executive Vice President, Chief Financial Officer and Assistant Secretary DATE May 15, 1995 EX-27 2
5 1,000,000 3-MOS DEC-30-1995 APR-01-1995 48 322 122 0 1628 0 1999 621 4575 0 0 0 75 0 682 4575 1359 1489 1076 1104 373 0 19 (7) (3) (4) 0 0 0 (4) (.12) (.12)
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