<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
<TABLE>
<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NUMBER 333-42935
BELK, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 56-2058574
(State of incorporation) (IRS Employer Identification No.)
2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH 28217-4500
CAROLINA
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code:
(704) 357-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
---------------------
Pursuant to Rule 15d-2 of the Act, this annual report contains only
financial statements for the fiscal year ended January 31, 1998.
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 [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the common equity held by non-affiliates of
the Registrant (assuming for these purposes, but without conceding, that all
executive officers and directors are "affiliates" of the Registrant) as of May
2, 1998 (based on the pro forma book value per share of Class A Common Stock of
the Registrant, as shown in the Registrant's Registration Statement on Form S-4,
File No. 3333-42935) was $262,552,989. 56,005,817 shares of common stock were
outstanding as of May 2, 1998, comprised of 56,005,817 shares of the
registrant's Class A Common Stock, par value $0.01, and zero shares of the
registrant's Class B Common Stock, par value $0.01.
DOCUMENTS INCORPORATED BY REFERENCE
Not applicable.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
THIS FORM 10-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
BELK, INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD LOOKING STATEMENTS" UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR
CURRENT EXPECTATIONS OF BELK, INC. AND MEMBERS OF ITS MANAGEMENT TEAM, AS WELL
AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE INVESTORS ARE
CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES AND THAT ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.
THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING
STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED
EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME.
i
<PAGE> 3
PART II
ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES
The following combined financial statements of the Belk Companies, as
predecessor to Belk, Inc. are included in Item 8:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors Report................................. 2
Combined Statements of Income............................... 3
Combined Balance Sheets..................................... 4
Combined Statements of Shareholders' Equity................. 5
Combined Statements of Cash Flows........................... 6
Notes to Combined Financial Statements...................... 7
</TABLE>
1
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Boards of Directors of
The Belk Companies:
We have audited the accompanying combined balance sheets of the Belk
Companies (the "Companies") as of January 31, 1998 and February 1, 1997, and the
related combined statements of income, shareholders' equity and cash flows for
each of the years in the three-year period ended January 31, 1998. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Belk Companies
as of January 31, 1998 and February 1, 1997, and the results of their operations
and their cash flows for each of the years in the three-year period ended
January 31, 1998, in conformity with generally accepted accounting principles.
As discussed in note 4 to the combined financial statements, the Company
adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," during fiscal year 1997.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
April 17, 1998
2
<PAGE> 5
THE BELK COMPANIES
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues................................................... $1,974,102 $1,772,613 $1,685,470
Cost of goods sold (including occupancy and buying
expenses)................................................ 1,317,278 1,205,687 1,149,270
Selling, general and administrative expenses............... 543,245 466,841 465,375
Impairment of long-lived assets............................ 6,260 3,177 --
---------- ---------- ----------
Income from operations..................................... 107,319 96,908 70,825
Interest expense........................................... (39,950) (27,554) (20,864)
Interest income............................................ 5,288 4,873 4,191
Gain (loss) on sale of property and equipment.............. (1,058) 21,328 5,242
Other income, net.......................................... 1,320 3,698 3,327
---------- ---------- ----------
Income from continuing operations before income taxes and
equity in earnings of unconsolidated entities............ 72,919 99,253 62,721
Income taxes............................................... 29,900 38,802 22,387
---------- ---------- ----------
Income from continuing operations before equity in earnings
of unconsolidated entities............................... 43,019 60,451 40,334
Equity in earnings of unconsolidated entities, net of
income taxes............................................. 16,653 4,046 2,184
---------- ---------- ----------
Income from continuing operations.......................... 59,672 64,497 42,518
Discontinued operations:
Income (loss) from discontinued operations, net of income
tax expense (benefit) of $(814), $(2,937) and $834 for
fiscal years 1998, 1997 and 1996, respectively........ (1,273) (4,593) 1,298
Gain (loss) on disposal of discontinued operations, net
of income tax expense (benefit) of $(2,411) and
$29,897 for fiscal years 1998 and 1997,
respectively.......................................... (3,999) 41,466 --
---------- ---------- ----------
Net income....................................... $ 54,400 $ 101,370 $ 43,816
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
3
<PAGE> 6
THE BELK COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 16,263 $ 56,115
Accounts receivable, net.................................. 353,509 335,914
Merchandise inventory..................................... 431,169 425,415
Prepaid income taxes...................................... 5,226 2,682
Deferred income taxes..................................... 7,438 6,990
Prepaid expenses and other current assets................. 26,453 26,646
---------- ----------
Total current assets.............................. 840,058 853,762
Investments in unconsolidated entities...................... 38,846 33,750
Investment securities....................................... 37,223 32,781
Property and equipment, net................................. 395,771 377,770
Intangible assets, net...................................... 17,620 26,047
Other assets................................................ 18,984 34,790
---------- ----------
Total assets...................................... $1,348,502 $1,358,900
========== ==========
LIABILITIES, DEFERRED INCOME AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 123,573 $ 126,710
Accrued expenses.......................................... 67,520 59,709
Accrued income taxes...................................... 3,363 5,680
Lines of credit and notes payable......................... 59,323 187,272
Current installments of long-term debt and capital lease
obligations............................................ 89,133 31,638
---------- ----------
Total current liabilities......................... 342,912 411,009
Deferred income taxes....................................... 28,866 31,481
Long-term debt and capital lease obligations, excluding
current installments...................................... 210,449 184,372
Deferred compensation and other noncurrent liabilities...... 50,508 48,121
---------- ----------
Total liabilities................................. 632,735 674,983
---------- ----------
Deferred income............................................. 11,982 11,901
---------- ----------
Shareholders' equity:
Common stock.............................................. 70,629 70,885
Paid-in capital........................................... 470 470
Retained earnings......................................... 618,834 578,525
Net unrealized gains on investments....................... 13,852 22,136
---------- ----------
Total shareholders' equity........................ $ 703,785 $ 672,016
---------- ----------
Total liabilities, deferred income and
shareholders' equity............................ $1,348,502 $1,358,900
========== ==========
</TABLE>
See accompanying notes to combined financial statements.
4
<PAGE> 7
THE BELK COMPANIES
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
COMMON PAID-IN RETAINED GAINS ON
STOCK CAPITAL EARNINGS INVESTMENTS TOTAL
------- ------- -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at January 31, 1995............ $90,105 $478 $612,091 $14,609 $717,283
Unrealized gains on investments, net of
income taxes......................... -- -- -- 1,574 1,574
Equity in net unrealized gains on
investments held by unconsolidated
entity............................... -- -- -- 2,868 2,868
Cash dividends......................... -- -- (11,673) -- (11,673)
Net income............................. -- -- 43,816 -- 43,816
Repurchase of stock.................... (1,156) (8) (3,998) -- (5,162)
------- ---- -------- ------- --------
Balance at February 3, 1996............ 88,949 470 640,236 19,051 748,706
Unrealized gains on investments, net of
income taxes......................... -- -- -- 733 733
Equity in net unrealized gains on
investments held by unconsolidated
entity............................... -- -- -- 2,352 2,352
Cash dividends......................... -- -- (11,847) -- (11,847)
Net income............................. -- -- 101,370 -- 101,370
Repurchase of stock.................... (18,064) -- (151,234) -- (169,298)
------- ---- -------- ------- --------
Balance at February 1, 1997............ 70,885 470 578,525 22,136 672,016
Unrealized gains on investments, net of
income taxes......................... -- -- -- 3,137 3,137
Net realized gains on investments held
by unconsolidated entity............. -- -- -- (11,421) (11,421)
Cash dividends......................... -- -- (8,936) -- (8,936)
Net income............................. -- -- 54,400 -- 54,400
Repurchase of stock.................... (256) -- (5,155) -- (5,411)
------- ---- -------- ------- --------
Balance at January 31, 1998............ $70,629 $470 $618,834 $13,852 $703,785
======= ==== ======== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
5
<PAGE> 8
THE BELK COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 54,400 $101,370 $ 43,816
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income taxes..................................... (4,326) 175 (1,338)
Deferred income........................................... 81 759 910
Depreciation and amortization............................. 54,081 51,021 50,832
Impairment of long-lived assets........................... 6,260 3,177 --
(Gain) loss on disposal of discontinued operations, net... 3,999 (41,466) --
(Gain) loss on sale of property and equipment............. 1,058 (21,328) (5,242)
Gain on sale of investments............................... (461) (1,882) (3,370)
Equity in earnings of unconsolidated entities, net of
income taxes............................................ (16,653) (4,046) (2,184)
(Increase) decrease in:
Accounts receivable, net................................ (17,595) (32,729) (23)
Merchandise inventory................................... (5,754) 17,462 (16,292)
Prepaid income taxes.................................... (2,544) (606) (1,824)
Prepaid expenses and other assets....................... 18,732 6,706 (2,127)
Increase (decrease) in:
Accounts payable and accrued expenses................... 553 (8,070) (8,151)
Accrued income taxes.................................... (2,317) 2,357 (5,495)
Deferred compensation and other liabilities............. 2,387 (5,607) 10,875
-------- -------- --------
Net cash provided by operating activities................... 91,901 67,293 60,387
-------- -------- --------
Cash flows from investing activities:
Distributions received from real estate partnership....... -- 3,375 --
Purchases of investments.................................. (4,403) (16,338) (6,545)
Proceeds from sales of investments........................ 5,673 16,583 16,752
Purchases of property and equipment....................... (77,295) (62,408) (50,329)
Proceeds from sales of property and equipment............. 2,996 27,275 9,589
Acquisition of businesses, net of cash acquired........... -- (36,145) (82,954)
-------- -------- --------
Net cash used by investing activities....................... (73,029) (67,658) (113,487)
-------- -------- --------
Cash flows from financing activities:
Proceeds from notes payable............................... 24,541 158,018 104,840
Payments on notes payable................................. (122,796) (91,023) --
Proceeds from issuance of long-term debt.................. 175,351 220,157 11,177
Principal payments on long-term debt and capital lease
obligations............................................. (91,779) (160,168) (64,126)
Net proceeds from (payments on) lines of credit........... (29,694) 36,233 487
Dividends paid............................................ (8,936) (11,847) (11,673)
Repurchase of common stock................................ (5,411) (169,298) (5,162)
-------- -------- --------
Net cash provided (used) by financing activities............ (58,724) (17,928) 35,543
-------- -------- --------
Net decrease in cash and cash equivalents................... (39,852) (18,293) (17,557)
Cash and cash equivalents at beginning of year.............. 56,115 74,408 91,965
-------- -------- --------
Cash and cash equivalents at end of year........... $ 16,263 $ 56,115 $ 74,408
======== ======== ========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 40,489 $ 31,129 $ 18,700
Income taxes paid......................................... 38,965 33,062 31,323
Supplemental schedule of noncash investing and financing
activities:
Decrease in assets and liabilities due to sale of rental
operations.............................................. -- 167,318 --
Purchase of net assets of retail company through
assumption of notes..................................... -- 51,923 --
</TABLE>
See accompanying notes to combined financial statements.
6
<PAGE> 9
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The Belk Companies (also referred to herein as the "Company") operate
retail department stores in the southeastern United States. The Company's outlet
store subsidiary is presented as a discontinued operation. The Belk Companies
are listed in note 18.
As of January 31, 1998, ownership of the entities included in the Belk
Companies was collectively held by approximately 585 individuals (referred to
herein as the "Shareholders"). Subsequent to year end, the Shareholders approved
and adopted an Agreement and Plan of Reorganization dated November 25, 1998, as
amended, by and among the Belk Companies, Belk, Inc. and Belk Acquisition Co.
(the "Reorganization Agreement") that provided for the reorganization (the
"Reorganization") of the Belk Companies into a single operating entity ("Belk,
Inc."). The Reorganization became effective on May 2, 1998. Pursuant to the
Reorganization, all of the Belk Companies merged with and into Belk, Inc., with
Belk, Inc. as the surviving corporation, and Belk Acquisition Co. merged with
and into Belk-Simpson Company, Greenville, South Carolina ("Belk-Simpson"), with
Belk-Simpson surviving as a wholly-owned subsidiary of Belk, Inc. The
accompanying combined financial statements have been prepared for purposes of
depicting the combined financial position and results of operations of the Belk
Companies, on a historical cost basis, that participated in the Reorganization.
Subsequent to year end, a majority of the shareholders redeemed their
shares in Belk-Simpson (the "Belk-Simpson Reorganization," see note 2). The
prorata equity interest in Belk-Simpson held by shareholders who became
shareholders of Belk, Inc. in the Reorganization is included in the combined
financial statements based on the equity method of accounting.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
All significant intercompany transactions, balances and profits have been
eliminated in combination.
(2) PRO FORMA CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
As discussed in note 1 above, on April 15 and 16, 1998, the shareholders
voted to approve the Reorganization. The following unaudited pro forma condensed
statements of operations are based upon the combined financial statements of the
Belk Companies, adjusted to give effect to the Reorganization and the
acquisition of Leggett (see note 3) and Belk-Simpson as if they had occurred at
the beginning of each period presented. The unaudited pro forma condensed
statements of operations reflect the preliminary allocation of the purchase
price as the purchase price allocation has not been finalized.
In accordance with the Belk-Simpson Reorganization, Belk-Simpson sold
substantially all of its investment assets and used the proceeds to purchase
common stock of Belk-Simpson. Of the 99,008 shares of common stock of
Belk-Simpson that were outstanding at the time of the offer, 63,077 shares were
tendered and purchased by Belk-Simpson for an aggregate purchase price of
approximately $68 million. Belk-Simpson is included in the historical financial
statements of the Belk Companies as a 37% equity investment. The unaudited pro
forma condensed statements of operations reflect 100% of the Belk-Simpson retail
operations and exclude the sold investment assets.
7
<PAGE> 10
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Reorganization is reflected in the following unaudited pro forma
condensed statements of operations as a purchase business combination in
accordance with the provisions of Accounting Principles Board Opinion Number 16,
and the Security Exchange Commission's Staff Accounting Bulletin Number 97. Belk
Enterprises, Inc. is deemed to be the acquiring corporation in the
Reorganization because its shareholders will receive a larger portion of the
voting rights in Belk, Inc. than any other Belk Company.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------
JANUARY 31, 1998 FEBRUARY 1, 1997
----------------------- -----------------------
REPORTED PRO FORMA REPORTED PRO FORMA
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues........................................ $1,974,102 $2,042,266 $1,772,613 $2,060,236
Net income...................................... 54,400 42,389 101,370 123,880
Net income per share............................ n/a 0.76 n/a 2.21
</TABLE>
(3) ACQUISITIONS AND DISCONTINUED OPERATIONS
On November 1, 1996, the Company acquired substantially all of the
outstanding shares of the common stock of Leggett of Virginia, Inc. ("Leggett").
Leggett operated retail department stores generally in the southeastern United
States. The acquisition was accounted for using the purchase method of
accounting and, accordingly, Leggett's operating results subsequent to the date
of acquisition have been included in the Company's combined financial
statements.
The aggregate purchase price was approximately $92 million, which includes
acquisition expenses. The aggregate purchase price, which was financed through
available cash resources, proceeds from a credit facility and notes held by
previous Leggett shareholders, has been allocated to the assets and liabilities
of Leggett based upon their respective fair market values. The excess of
purchase price over net assets acquired of approximately $12.5 million is being
amortized over 15 years on a straight-line basis.
In November 1995, BAC, Inc., ("BAC"), a wholly-owned subsidiary of the
Company, purchased all of the stock of Ivey Properties, Inc., ("Ivey"), a real
estate investment trust. The largest holding of Ivey was an interest in JV
Properties ("JV"), a retail mall joint venture. The acquisition was accounted
for as a purchase.
Prior to the purchase, the Company's ownership of JV was accounted for
using the equity method of accounting. Subsequent to the purchase, the Company
consolidated the assets, liabilities and operations of JV, which was comprised
of the operations of a shopping mall facility located in Charlotte, North
Carolina.
In November 1996, JV's interest in the retail mall, along with debt, was
distributed to BAC in redemption of BAC's partnership interest in JV.
Subsequently, the Company sold the stock of BAC to an unrelated third party and
recognized a gain on the disposal of $41,466, net of income tax expense of
$29,897. The accompanying combined financial statements present the results of
operations of JV as discontinued operations. JV recorded revenues of $4,111 for
the three months ended February 3, 1996 (after purchasing the net assets from
Ivey) and $11,897 for the year ended February 1, 1997.
In September 1997, the managers and the advisory board of TAGS Stores, LLC,
("TAGS"), the Company's discount outlet store subsidiary, adopted a formal plan
to liquidate its operations during the 1997 Christmas retailing season.
Accordingly, the results of operations of TAGS are presented as discontinued
operations. During the year ended January 31, 1998, the Company provided for
losses on liquidation of the discontinued operations of $4.0 million, net of
income tax benefit of $2.4 million. TAGS, which was formed in February 1996,
recorded revenues of $25.9 and $18.5 million for fiscal years 1998 and 1997,
respectively.
8
<PAGE> 11
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(4) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
Starting in fiscal year 1996, the Company's fiscal year ends on the
Saturday closest to each January 31. Fiscal years 1998 and 1997 ended on January
31, 1998 and February 1, 1997, respectively, and included 364 days. Fiscal year
1996 ended on February 3, 1996 and included 368 days.
REVENUES
Revenues include sales from retail operations and leased departments, net
of returns. Customer returns are recognized as incurred.
COST OF GOODS SOLD
Cost of goods sold includes occupancy and buying expenses. Occupancy
expenses include rent, utilities and real estate taxes. Buying expenses include
payroll and travel expenses associated with the buying function.
MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market as
determined by the retail inventory method.
FINANCE CHARGES
Selling, general and administrative expenses in the combined statements of
income are reduced by finance charge revenue arising from customer accounts
receivable. Finance charge revenues were $43,788, $37,562 and $33,014 in fiscal
years 1998, 1997 and 1996, respectively.
PROPERTY AND EQUIPMENT, NET
Property and equipment owned by the Company is stated at cost less
accumulated depreciation. Property and equipment leased by the Company under
capital leases is stated at an amount equal to the present value of the minimum
lease payments less accumulated amortization. Depreciation and amortization are
provided utilizing straight-line and various accelerated methods over the
shorter of estimated asset lives or related lease terms.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement bases
and the respective tax bases of the assets and liabilities and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
PRE-OPENING COSTS
Store pre-opening costs are expensed as incurred.
9
<PAGE> 12
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CASH EQUIVALENTS
Cash equivalents include liquid investments with an original maturity of 90
days or less.
ADVERTISING
Advertising costs are expensed as incurred and amounted to $61,326, $54,977
and $55,118 in fiscal years 1998, 1997 and 1996, respectively, net of
reimbursements by suppliers.
INTANGIBLE ASSETS, NET
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 15 years. Leasehold intangibles, which
represent the excess of fair value over the carrying value of leaseholds, are
amortized on a straight-line basis over the remaining terms of the lease
agreements. The carrying value of intangible assets is periodically reviewed by
the Company's management to assess the recoverability of the assets. Accumulated
amortization was $4,017, $838 and $169 at January 31, 1998, February 1, 1997 and
February 3, 1996, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes various derivative financial instruments (interest
rate swap agreements) to manage the interest rate risk associated with its
borrowings. The counterparties to these instruments are major financial
institutions. These agreements are used to reduce the potential impact of
increases in interest rates on variable rate long-term debt. The differential to
be paid or received is accrued as interest rates change and is recognized as an
adjustment to interest expense. The fair value of the swap agreements is not
recognized in the combined financial statements.
IMPAIRMENT CHARGE
During fiscal 1997, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which addresses the identification and measurement of asset impairments and
requires the recognition of impairment losses on long-lived assets when carrying
values exceed expected future cash flows. The Company evaluated its investment
in long-lived assets on an individual store basis. Based upon an assessment of
historical and projected operating results, it was determined that the carrying
value of certain operating stores was impaired under the criteria defined in
SFAS No. 121. As a result, the Company recorded pre-tax impairment charges of
$6,260 and $3,177 for fiscal years 1998 and 1997, respectively to reduce the
carrying value of these assets to their estimated fair value.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' financial
statements to conform with the classification used in the financial statements
for the fiscal year ended January 31, 1998.
(5) ACCOUNTS RECEIVABLE, NET
Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels and finance charge rates. Installments of deferred payment
accounts receivable maturing after one year are included in current assets in
accordance with industry practice.
10
<PAGE> 13
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company provides an allowance for doubtful accounts which is determined
based on a number of factors, including the risk characteristics of the
portfolio, historical charge-off patterns and management judgment.
Accounts receivable, net consists of:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Customer receivables........................................ $349,641 $326,907
Other....................................................... 12,274 15,820
Less allowance for doubtful accounts........................ (8,406) (6,813)
-------- --------
Accounts receivable, net.......................... $353,509 $335,914
======== ========
</TABLE>
Changes in the allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year............................ $ 6,813 $ 4,883 $ 4,770
Charged to expense.................................... 13,181 10,829 5,403
Acquired.............................................. -- 801 --
Net uncollectible balances written off................ (11,588) (9,700) (5,290)
-------- ------- -------
Balance, end of year........................ $ 8,406 $ 6,813 $ 4,883
======== ======= =======
</TABLE>
(6) INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company's 25% ownership in Carolina Place Associates Partnership
("CPA") is recorded on the equity method. Equity in earnings of CPA for the year
ended February 1, 1997 includes $3,072, net of income tax expense of $1,973, for
the Company's portion of the gain recognized by CPA for the sale of its
investment in a retail mall joint venture.
The Company's 37% investment in Belk-Simpson is recorded on the equity
method (see note 1). Equity in earnings of Belk-Simpson in fiscal years 1998,
1997 and 1996 were $16,653, $974 and $2,184, respectively.
Condensed combined financial information of the unconsolidated entities is
as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current assets........................................ $122,697 $ 31,034 $31,551
Noncurrent assets..................................... 36,408 110,074 91,603
Current liabilities................................... 17,720 22,885 20,337
Noncurrent liabilities................................ 31,638 22,219 18,299
Shareholders' equity.................................. 109,387 96,004 84,518
Revenues.............................................. 68,163 69,621 72,482
Net income.................................. $ 45,624 $ 3,445 $ 7,537
</TABLE>
Included in retained earnings of the combined financial statements at
January 31, 1998 is undistributed earnings of approximately $23,940 from the
unconsolidated entities.
11
<PAGE> 14
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
The Company classifies as held-to-maturity securities all debt securities
that the Company has the ability and intent to hold to maturity. All equity
securities and all other debt securities with a readily determinable market
value are classified as available-for-sale securities with unrealized gains and
losses, net of income taxes, reported as a component of shareholders' equity.
Held-to-maturity securities consist of federal, state and local debt
securities, and are reported at amortized cost. Available-for-sale securities
are reported at fair values.
Details of investments in held-to-maturity securities are as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Amortized cost.............................................. $10,480 $12,130
Gross unrealized gains...................................... 626 494
Gross unrealized losses..................................... -- (8)
------- -------
Fair value........................................ $11,106 $12,616
======= =======
</TABLE>
At January 31, 1998, scheduled maturities of held-to-maturity securities
are as follows:
<TABLE>
<CAPTION>
AMORTIZED
FAIR VALUE COST
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
One to five years........................................... $ 4,978 $ 4,799
Six to ten years............................................ 3,616 3,329
After ten years............................................. 2,512 2,352
------- -------
$11,106 $10,480
======= =======
</TABLE>
Details of investments in available-for-sale securities are as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cost........................................................ $ 4,660 $ 3,506
Gross unrealized gains...................................... 22,141 17,165
Gross unrealized losses..................................... (58) (20)
------- -------
Fair value of securities.......................... $26,743 $20,651
======= =======
</TABLE>
Realized gains and losses on sales of securities are recognized on a
specific identification basis. Gross realized gains included in income in fiscal
years 1998, 1997 and 1996 were $546, $1,966 and $3,486, respectively, and gross
realized losses included in income in fiscal years 1998, 1997 and 1996 were $85,
$84 and $116, respectively.
12
<PAGE> 15
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) PROPERTY AND EQUIPMENT, NET
Details of property and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED JANUARY 31, FEBRUARY 1,
LIVES 1998 1997
--------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land.................................................. N/A $ 20,337 $ 20,340
Buildings............................................. 30-50 423,962 395,443
Furniture, fixtures and equipment..................... 5-7 432,425 410,588
Construction in progress.............................. N/A 8,282 12,146
----------- -----------
885,006 838,517
Less accumulated depreciation and amortization........ (489,235) (460,747)
----------- -----------
Property and equipment, net................. $ 395,771 $ 377,770
=========== ===========
</TABLE>
(9) ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Salaries, wages and employee benefits....................... $33,141 $28,913
Interest.................................................... 4,773 5,277
Rent........................................................ 4,505 4,524
Taxes, other than income.................................... 3,721 3,781
Other....................................................... 21,380 17,214
------- -------
$67,520 $59,709
======= =======
</TABLE>
(10) BORROWINGS
Long-term debt, principally due to banks, and capital lease obligations
consist of the following:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1998
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage notes payable...................................... $ 39,898 $ 41,831
Unsecured notes payable..................................... 248,128 163,053
Secured note payable........................................ -- 2,612
Capital lease agreements through July 2017.................. 11,556 8,514
-------- --------
299,582 216,010
Less current installments................................... (89,133) (31,638)
-------- --------
Long-term debt and capital lease obligations, excluding
current installments...................................... $210,449 $184,372
======== ========
</TABLE>
The mortgage notes are payable in installments and are due through June
2003, at fixed rates ranging from 6.7% to 9.625% and at variable rates based on
the secondary 90 day CD rate plus 50 basis points and LIBOR plus 50 and 80 basis
points. The unsecured notes are payable in installments and are due through
January 2007, at fixed rates ranging from 6.75% to 8% and variable rates based
on such bank's 90 day CD rate (as defined by the Bank) plus 50 basis points and
LIBOR plus from 80 to 125 basis points. On January 31, 1998, the prime and LIBOR
rates were 8.5% and 5.598%, respectively.
13
<PAGE> 16
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Carrying values of land, buildings and personal property pledged as
collateral for the mortgage notes were approximately $48,533 at January 31,
1998.
The annual maturities of long-term debt and capital lease obligations over
the next five years as of January 31, 1998 are $89,133, $37,473, $45,181,
$30,234 and $32,314, respectively.
The Company's loan agreements place restrictions on mergers,
consolidations, acquisitions, sales of assets, transactions with affiliates,
leases, liens, dividend payments, debt and investments. They also contain
certain financial requirements including current ratio, debt to equity, tangible
net worth, cash flow coverage and fixed charge coverage ratios. The Company has
obtained waivers for any out-of-compliance conditions.
The Company has entered into interest rate swap agreements with various
financial institutions to manage the exposure to changes in interest rates on
its LIBOR based indebtedness. The amount of indebtedness covered by the interest
rate swaps is $175 million at January 31, 1998, $150 million for 1999, $75
million for 2000 and 2001, and $50 million through 2007.
At January 31, 1998, the Company has short-term loan agreements outstanding
totaling $41,297 at variable interest rates based on LIBOR plus from 80 to 175
basis points, prime less 50 basis points and at the fixed rate of 6%.
Approximately $30 million of the short-term loan agreements outstanding are
secured by customer accounts receivable. The amount outstanding under short-term
loan agreements at February 1, 1997 was $139,552 and was at variable interest
rates based on LIBOR plus from 50 to 180 basis points and at the fixed rate of
5.6%.
At January 31, 1998 and February 1, 1997, the Company has unsecured line of
credit agreements totaling $163,500 and $213,870, respectively, with banks at
varying interest rates based on LIBOR plus from 50 to 175 basis points and at
such bank's cost of funds rate (as defined by the Bank) less 50 basis points.
The agreements expire through September 30, 1998 and may be renewed upon mutual
agreement between the parties. The amounts outstanding under these agreements at
January 31, 1998 and February 1, 1997 were $18,026 and $47,720, respectively.
(11) LEASES
The Company leases certain of its stores, warehouse facilities and
equipment. The majority of these leases will expire over the next 10 years. The
leases usually contain renewal options and provide for payment by the lessee of
real estate taxes and other expenses and, in certain instances, increased
rentals based on percentages of sales.
Future minimum lease payments under noncancelable leases as of January 31,
1998 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR CAPITAL OPERATING
- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1999........................................................ $ 1,466 $ 34,674
2000........................................................ 1,466 32,294
2001........................................................ 1,382 28,993
2002........................................................ 1,322 27,503
2003........................................................ 1,325 26,692
After 2003.................................................. 9,952 145,318
------- --------
Total............................................. 16,913 $295,474
========
Less imputed interest....................................... (5,357)
-------
Present value of minimum lease payments..................... 11,556
Less current portion........................................ (808)
-------
$10,748
=======
</TABLE>
14
<PAGE> 17
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Rental expense for all operating leases consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Buildings:
Minimum rentals..................................... $32,941 $29,982 $26,091
Contingent rentals.................................. 5,037 4,562 4,316
Equipment............................................. 10,385 10,484 10,630
------- ------- -------
Total rental expense........................ $48,363 $45,028 $41,037
======= ======= =======
</TABLE>
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities.
(12) INCOME TAXES
Federal and state income tax expense (benefit) from continuing operations
was as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................. $28,212 $31,427 $19,160
State............................................... 6,014 7,200 4,565
------- ------- -------
34,226 38,627 23,725
Deferred:
Federal............................................. (3,280) 91 (578)
State............................................... (1,046) 84 (760)
------- ------- -------
(4,326) 175 (1,338)
------- ------- -------
Income taxes.......................................... $29,900 $38,802 $22,387
======= ======= =======
</TABLE>
A reconciliation between income taxes from continuing operations computed
using the effective income tax rate and the federal statutory income tax rate of
35% is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income tax at the statutory federal rate.............. $25,522 $34,739 $21,952
State income taxes, net of federal income tax
benefit............................................. 3,229 4,735 2,473
Other................................................. 1,149 (672) (2,038)
------- ------- -------
Income taxes.......................................... $29,900 $38,802 $22,387
======= ======= =======
</TABLE>
15
<PAGE> 18
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consist of:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Benefit plan costs........................................ $ 15,512 $ 14,520
Tax carryovers............................................ 10,362 6,963
Inventory capitalization.................................. 4,512 4,469
Allowance for doubtful accounts........................... 3,183 2,521
Capitalized leases........................................ 843 970
Other..................................................... 9,599 6,626
-------- -----------
Gross deferred tax assets................................... 44,011 36,069
Less valuation allowance.................................... (2,705) (3,488)
-------- -----------
Net deferred tax assets..................................... 41,306 32,581
Deferred tax liabilities:
Investment securities..................................... 8,102 5,930
Property and equipment.................................... 17,161 16,104
Prepaid pension costs..................................... 846 1,529
Provision for gain on disposal of discontinued
operations............................................. 29,897 29,897
Other..................................................... 6,728 3,612
-------- -----------
Gross deferred tax liabilities.............................. $ 62,734 $ 57,072
-------- -----------
Net deferred tax assets (liabilities)............. $(21,428) $ (24,491)
======== ===========
</TABLE>
The change in the valuation allowance was a decrease of $783 and $2,191 for
January 31, 1998 and February 1, 1997, respectively. In assessing the
realization of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
temporary differences becoming deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment.
As of January 31, 1998, the Company has net operating loss and contribution
carryforwards for federal and state income tax purposes of approximately $20,819
and $44,389, respectively, which are available to offset future taxable income,
if any. These carryforwards expire at various intervals through 2013. In
addition, the Company has alternative minimum tax credit carryforwards of
approximately $969 which are available to reduce future federal regular income
taxes, if any, over an indefinite period.
(13) PENSION BENEFITS
The Company has a defined benefit pension plan covering substantially all
of its employees. The benefits are based on years of service and the employee's
compensation during the five years before retirement. The cost of pension
benefits has been determined by the projected unit credit actuarial method in
accordance with SFAS No. 87 "Employers' Accounting for Pensions."
16
<PAGE> 19
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plan's funded status and amounts
recognized in the Company's combined balance sheets at January 31, 1998 and
February 1, 1997:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
Actuarial present value of benefit obligations: ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Vested benefit obligation................................... $185,868 $156,651
======== ========
Accumulated benefit obligation.............................. $189,673 $159,054
======== ========
Projected benefit obligation................................ $209,469 $183,083
Plan assets at fair value................................... 332,775 289,482
-------- --------
Plan assets in excess of projected benefit obligation....... 123,306 106,399
Unrecognized net gain....................................... (120,154) (94,136)
Unrecognized prior service cost............................. 4,797 --
Unrecognized net asset at January 1, 1986 being recognized
over 15 years............................................. (5,699) (7,664)
-------- --------
Prepaid pension cost........................................ $ 2,250 $ 4,599
======== ========
</TABLE>
Net pension cost for fiscal years 1998, 1997 and 1996 includes the
following components:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................... $10,688 $10,657 $11,118
Interest cost on projected benefit obligation......... 14,924 13,202 13,196
Actual return on plan assets.......................... (20,064) (19,146) (18,021)
Net amortization and deferral......................... (3,199) (2,998) (3,724)
------- ------- -------
Net pension cost...................................... $ 2,349 $ 1,715 $ 2,569
======= ======= =======
</TABLE>
Assumptions used in accounting for the pension plan as of January 31, 1998
and February 1, 1997 were:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Discount rates........................................ 7.25% 7.75% 7.25%
Rates of increase in compensation levels.............. 4.00 4.00 4.00
Expected long-term rate of return on assets........... 8.50 8.50 8.50
</TABLE>
(14) OTHER POSTRETIREMENT BENEFIT PLANS
The Company has a defined benefit health care plan that provides
postretirement medical and life insurance benefits to certain retired full-time
employees. The Company accounts for postretirement benefits by recognizing the
cost of these benefits over an employee's estimated term of service with the
Company.
17
<PAGE> 20
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's combined balance sheets at January 31, 1998
and February 1, 1997:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................... $ 20,297 $ 16,295
Active plan participants.................................... 12,035 11,448
-------- --------
Accumulated postretirement benefit obligation............... 32,332 27,743
Unrecognized net obligation at February 1, 1993 being
recognized over 20 years.................................. (14,022) (14,957)
Unrecognized net loss....................................... (10,667) (6,884)
-------- --------
Accrued postretirement benefit cost......................... $ 7,643 $ 5,902
======== ========
</TABLE>
Net postretirement benefit cost for fiscal years 1998, 1997 and 1996
includes the following components:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................... $ 454 $ 455 $ 343
Interest cost......................................... 2,287 2,044 1,968
Net amortization and deferral......................... 1,329 1,298 1,104
------ ------ ------
Net postretirement benefit cost....................... $4,070 $3,797 $3,415
====== ====== ======
</TABLE>
For measurement purposes, a 9.0% annual rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) was assumed for
fiscal year 1998; the rate was assumed to decrease gradually to 5.5% by fiscal
year 2003 and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
January 31, 1998 by $2,207 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year ended
January 31, 1998 by $285.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25%, 7.75% and 7.25% at January 31,
1998, February 1, 1997, and February 3, 1996, respectively.
(15) OTHER EMPLOYEE BENEFITS
The Belk Employees' Group Medical Plan provides medical benefits to
substantially all full-time employees of the Belk Companies. This Plan is
"self-funded" for medical benefits through a 501(c)(9) Trust. The Group Life
Insurance Plan, The Belk Employees Group Dental Insurance Plan and The Belk
Employees Short Term Disability Insurance Plan provide insurance to
substantially all full-time employees of the Belk Companies and are fully
insured through contracts issued by insurance companies. Contributions by the
Company under these plans amounted to approximately $11,584, $12,311 and $12,268
in fiscal years 1998, 1997 and 1996, respectively.
The Belk 401(K) Savings Plan, a contributory, defined contribution
multi-employer plan, provides benefits for substantially all employees of the
Belk Companies. The costs of the plan generally represent 10% of profits, as
defined, and amounted to approximately $16,292, $14,003 and $10,848 in fiscal
years 1998, 1997 and 1996, respectively.
18
<PAGE> 21
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Beginning on January 1, 1998, the contributions to the 401(K) Savings Plan
are comprised of a matching contribution, generally 50% of the employees'
contribution up to 6% of eligible compensation, and a basic contribution,
generally 2% of eligible compensation, regardless of the employees'
contributions
The Supplemental Executive Retirement Plan ("SERP") is a non-qualified
defined benefit retirement plan which provides retirement and death benefits to
certain qualified executives of the Company. Total SERP costs charged to
operations were approximately $1,336, $1,002 and $1,987 in fiscal years 1998,
1997 and 1996, respectively. The effective discount rate used in determining the
net periodic SERP cost is 7.25%, 7.75% and 7.25% for fiscal years 1998, 1997 and
1996, respectively. Actuarial gains and losses are amortized over the average
remaining service lives of the participants.
Certain eligible employees participate in a non-qualified Deferred
Compensation Plan ("DCP"). Participants in the plan have elected to defer a
portion of their regular compensation subject to certain limitations prescribed
by the DCP. The Company is required to pay interest on the employees' deferred
compensation at various rates between 9% and 15%. Total interest expense related
to this plan and charged to operations was approximately $3,028, $2,768 and
$2,598 in fiscal years 1998, 1997 and 1996, respectively.
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying values approximate fair values for financial instruments that are
short-term in nature, such as cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses and lines of credit. The fair value of other
financial instruments are as follows:
<TABLE>
<CAPTION>
JANUARY 31, 1998 FEBRUARY 1, 1997
--------------------------- ---------------------------
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
-------------- ---------- -------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Notes payable........................... $ 41,297 $ 41,297 $139,552 $138,993
Long-term debt (excluding capitalized
leases)............................... 288,026 290,574 207,496 209,487
Interest rate swap agreements........... -- (4,605) -- --
Investment securities................... 37,223 37,849 32,781 33,267
</TABLE>
The fair value of the Company's fixed rate long-term debt and notes payable
is estimated based on the current rates offered to the Company for debt of the
same remaining maturities. The carrying values of the Company's variable rate
long-term debt and notes payable are reasonable estimates of fair value.
The fair value of interest rate swap agreements is the estimated amount
that the Company would pay to terminate the swap agreement, taking into account
current credit worthiness of the swap counterparties.
(17) RELATED PARTY TRANSACTIONS
The Company owns a 37% interest in Belk-Simpson, an affiliated retail
company. The Company has outstanding receivable balances from Belk-Simpson of
$12,038 and $10,541 at January 31, 1998 and February 1, 1997, respectively,
which are included in prepaid expenses and other current assets in the combined
balance sheets. The Company also has a loan payable to Belk-Simpson which is
included in deferred compensation and other non-current liabilities in the
combined balance sheets. The outstanding balances on this loan are $7,204 and
$7,851 at January 31, 1998 and February 1, 1997, respectively.
Various officers and directors of the Company have outstanding loans with
the Company at a fixed rate of 7.5%. The balances of these loans are $981 and
$2,226 as of January 31, 1998 and February 1, 1997, respectively.
Various officers, directors and employees of the Company have demand
deposits with the Company. The deposits are invested in highly liquid securities
and other investments and earn interest at the 30 day secondary
19
<PAGE> 22
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CD rate less 50 basis points. The aggregate amount of demand deposits are $4,087
and $4,065 at January 31, 1998 and February 1, 1997, respectively.
On November 21, 1996, several directors, executive officers, and their
families sold 6,601.33 shares of common stock of the corporations that owned and
operated the 42 Leggett stores acquired in the Leggett acquisition to Belk of
Virginia, Inc. for $6,019.
On August 1, 1997, Belk Finance Company guaranteed a $5,000 bank loan made
to Brothers Investment Company. This loan bears interest at the prime rate as
established by the Federal Reserve Bank, less 0.5% per annum, payable monthly,
and is due on July 31, 1998. At January 31, 1998, this loan had an outstanding
balance of $5,000. John M. Belk, the current Chairman of the Board of all of the
Belk Companies, owns 50% of Brothers Investment Company and is a director of
Brothers Investment Company. The estate of Thomas M. Belk, of which John M. Belk
is a co-executor, owns the remaining 50% of Brothers Investment Company.
(18) THE BELK COMPANIES
The following list represents the related entities (referred to in note 1),
included in the Belk Companies:
Belk-Simpson Company of Paragould, Arkansas, Inc.
Belk Department Store of Stuttgart, Ark., Inc.
Belk-Lindsey Stores, Inc.
Belk's Department Store of Albany, Georgia
Belk of Americus, Ga., Inc.
Belk of Athens, Ga., Inc.
Belk-Simpson Co., of Bainbridge, Ga., Inc.
Belk of Canton, Ga., Inc.
Belk-Rhodes Company, of Carrollton, Ga.
Belk's Department Store of Cartersville, Georgia, Incorporated
Belk of Cornelia, Ga., Inc.
Belk of Covington, Ga., Inc.
Belk of Dalton, Ga., Inc.
Belk-Matthews Company of Dublin, Georgia
Belk of Hartwell, Ga., Inc.
Belk of LaGrange, Ga., Inc.
Belk of Lawrenceville, Ga., Inc.
Belk-Matthews Company of Macon, Georgia
Belk-Matthews Company of Milledgeville, Ga., Inc.
Belk of Monroe, Ga., Inc.
Belk of Newnan, Ga., Inc.
Belk-Rhodes Company, (Rome, Georgia)
Belk of Statesboro, Ga., Inc.
Belk of Thomaston, Ga., Inc.
Belk of Toccoa, Ga., Inc.
Belk-Matthews Company, Vidalia, Georgia, Inc.
Belk of Washington, Ga., Inc.
Belk of Waycross, Ga., Inc.
Belk-Simpson Company of Corbin, Kentucky, Incorporated
Belk-Simpson Company of Harlan, Kentucky, Incorporated
Belk of Miss., Inc.
Belk Department Store of Ahoskie, N.C., Inc.
20
<PAGE> 23
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Belk's Department Store of Albemarle, North Carolina, Incorporated
Belk of Asheboro, N.C., Inc.
Belk's Department Store of Asheville, North Carolina, Incorporated
Belk-Matthews Company
Belk's Department Store of Boone, North Carolina, Incorporated
Belk's Department Store of Brevard, N.C. Incorporated
Belk-Beck Company of Burlington, North Carolina, Inc.
Belk Brothers Company
Belk Enterprises, Inc.
Belk-Matthews Company of Cherryville, N.C., Incorporated
Belk Department Store of Clinton, N.C., Inc.
Belk's Department Store of Dunn, North Carolina, Incorporated
Belk Department Store of Eden, N.C., Inc.
Belk Department Store of Elkin, N.C., Inc.
Belk Department Store of Forest City, N.C., Inc.
Hudson-Belk Co. of Fuquay-Varina, N.C., Inc.
Matthews-Belk Company
Belk Department Store of Greenville, N.C., Inc.
Belk-Simpson Company of Hendersonville, N.C., Incorporated
Belk Department Store of Hickory, N.C., Inc.
Belk-Beck Co. of High Point, N.C., Inc.
Belk's Department Store of Jacksonville, N.C., Inc.
Belk's Department Store of Lenoir, North Carolina, Incorporated
Belk Department Store of Lincolnton, N.C., Inc.
Belk Brothers of Monroe, North Carolina, Incorporated
Belk's Department Store of Morehead City, N.C., Inc.
Belk's Department Store of Mount Airy, North Carolina, Incorporated
Belk's Department Store of New Bern, N.C., Incorporated
Hudson-Belk Company
Belk Department Store of Reidsville, N.C., Inc.
Belk's Department Store of Rockingham, N.C., Incorporated
Belk-Harry Company -- Salisbury, N.C.
Belk Department Store of Shelby, N.C., Inc.
Belk of Siler City, N.C., Inc.
Belk Department Store of Waynesville, N.C., Inc.
Belk Department Store of Wilkesboro, N.C., Inc.
Belk's Department Store, Incorporated of Aiken, South Carolina
Gallant-Belk Company
Belk's Department Store of Batesburg, S.C., Inc.
Belk-Simpson Company, Incorporated of Beaufort, South Carolina
Belk's Department Store of Camden, S.C., Incorporated
Belk Department Store of Charleston, S.C., Inc.
Belk's Department Store of Conway, S.C., Incorporated
Belk's Department Store of Florence, S.C., Incorporated
Belk's Department Store of Gaffney, South Carolina, Incorporated
Belk of Georgetown, S.C., Inc.
Belk Department Store of Greenwood, S.C., Inc.
Belk's Department Store of Hartsville, S.C., Incorporated
Belk's Department Store, Incorporated, of Lake City, South Carolina
21
<PAGE> 24
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Belk's Department Store of Lancaster, S.C., Inc.
Belk's Department Store of Laurens, South Carolina, Incorporated
Belk of Orangeburg, S.C., Inc.
Belk of Seneca, S.C., Inc.
Belk of Spartanburg, S.C., Inc.
Belk of Union, S.C., Inc.
Belk of Walterboro, S.C., Inc.
Belk's Department Store of Winnsboro, S.C., Incorporated
Parks-Belk Company of Clarksville, Tennessee
Belk Department Store of Greenville, Texas, Inc.
Belk's Department Store of Paris, Texas, Inc.
Parks-Belk Company, Incorporated
Belk of Danville, Va., Inc.
Belk of Lynchburg, Va., Inc.
Belk Stores of Virginia, Inc.
Belk of Roanoke, Va., Inc.
Belk of South Boston, Va., Inc.
Belk of Dawson, Ga., Inc.
Belk of Elberton, Ga., Inc.
Belk of Thomson, Ga., Inc.
Belk Department Store of Edenton, N.C., Inc.
Belk of Thomasville, N.C., Inc.
Belk's Department Store of Chesterfield, S.C., Incorporated
Belk's Department Store of Columbia, South Carolina, Incorporated
Belk Finance Company
Belk-Simpson Realty Company
Belk of Lawrenceville, Va., Inc.
Belk Realty of Radford, Va., Inc.
Belk Realty of Staunton, Va., Inc.
Belk Outlet Center, Inc.
Belk of St. Augustine, Fla., Inc.
Belk-Simpson Company of Somerset, Kentucky, Incorporated
Belk Stores of Maryland, Inc.
Belk Charlotte, Inc.
Belk Department Store of Greensboro, N.C., Inc.
Belk of Roanoke Rapids, N.C., Inc.
Belk Department Store of North Augusta, S.C., Inc.
Belk's Department Store of Rock Hill, S.C., Incorporated
Belk Department Store of Chattanooga, Tennessee, Incorporated
Parks-Belk Company of Wise, Virginia, Incorporated
Belk of West Virginia, Inc.
Belk Brothers Properties, Inc.
Belk Investment Company
Belk of Virginia, Inc.
Belk of Delaware, Inc.
Archdale Advertising Agency, Inc.
Belk Leasing Company
Belk Stores Services, Inc.
United Electronic Services, Inc.
22
<PAGE> 25
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Belk Stores Mutual Insurance Company
The Belk Center, Inc.
Belk International, Inc.
TAGS Stores, LLC
Belk, Inc.
Belk Funding, LLC
23
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
1. Financial Statements
A. Historical Combined Financial Statements of Belk, Inc. (See page 1)
Report of Independent Certified Public Accountants.
Combined Statements of Income for the years ended January 31, 1998,
February 1, 1997 and February 3, 1996.
Combined Balance Sheets as of January 31, 1998 and February 1, 1997.
Combined Statements of Shareholders' Equity for the years ended
January 31, 1998, February 1, 1997 and February 3, 1996.
Combined Statements of Cash Flows for the years ended January 31,
1998, February 1, 1997 and February 3, 1996.
Notes to Combined Financial Statements.
B. Pro Forma Combined Financial Statements (See page 25)
Unaudited Pro Forma Condensed Statement of Income for the year ended
January 31, 1998
Unaudited Pro Forma Condensed Balance Sheet as of the year ended
January 31, 1998
24
<PAGE> 27
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements are based
upon the financial statements of the Belk Companies, combined and adjusted to
give effect to the Reorganization (see Notes to Combined Financial Statements,
page 7). The unaudited pro forma condensed statement of income for the year
ended January 31, 1998 gives effect to the Reorganization as if it had occurred
at the beginning of the first period presented. The unaudited pro forma
condensed balance sheet at January 31, 1998 gives effect to the Reorganization
as if it had occurred on such date. These unaudited pro forma condensed
financial statements should be read in conjunction with the audited historical
combined financial statements including the notes thereto, included elsewhere
herein.
The unaudited pro forma condensed financial statements are not necessarily
indicative of the results of operations or financial position of Belk, Inc. that
would have occurred had the Reorganization occurred at the beginning of the
first period presented or on the date indicated, nor are they necessarily
indicative of the future operating results or financial position of Belk, Inc.
The pro forma condensed financial statements reflect the preliminary allocation
of the purchase price as the purchase price allocation has not been finalized.
The unaudited pro forma adjustments are based upon certain assumptions
included in the notes to the unaudited pro forma financial statements.
Management believes that these assumptions are reasonable under the
circumstances.
The unaudited pro forma financial statements presented do not reflect
future events that may occur after the Reorganization has been consummated.
Management believes that operating expense synergies of the combined operations
will be realized post-Reorganization. However, for the purposes of the unaudited
pro forma financial statements presented herein, these synergies have not been
reflected because their realization cannot be assured.
The Reorganization is reflected in the unaudited pro forma condensed
financial statements as a purchase business combination in accordance with the
provisions of Accounting Principles Board Opinion Number 16, and the
Commission's Staff Accounting Bulletin Number 97. Belk Enterprises, Inc., one of
the combined Belk Companies, is deemed to be the acquiring corporation because
its shareholders will receive a larger portion of the voting rights in the
combined corporation than any other Belk company.
The unaudited pro forma condensed financial statements include adjustments
to reflect the acquisition of the Belk-Simpson retail operations (see Notes to
Combined Financial Statements, page 7). Belk-Simpson is included in the
historical financial statements of the Belk Companies as a 37% equity
investment. The unaudited pro forma condensed financial statements reflect 100%
of the Belk-Simpson retail operations and exclude the sold investment assets.
25
<PAGE> 28
THE BELK COMPANIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
YEAR ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
THE BELK
(1) COMPANIES
HISTORICAL BELK-SIMPSON PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS ADJUSTMENTS BELK, INC.
---------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues............................... $1,974,102 $ 68,164 $ -- $ 2,042,266
Cost of goods sold (including occupancy
and buying expenses)................. 1,317,278 45,920 -- 1,363,198
Selling, general and administrative
expenses............................. 543,245 19,483 (4,660)(2) 558,068
Impairment of long-lived assets........ 6,260 -- (2,912)(3) 3,348
---------- -------- ------- -----------
Income from operations................. 107,319 2,761 7,572 117,652
Interest expense....................... (39,950) (563) (2,741)(4) (43,254)
Interest income........................ 5,288 -- -- 5,288
Loss on sale of property and
equipment............................ (1,058) (593) -- (1,651)
Other income, net...................... 1,320 80 -- 1,400
---------- -------- ------- -----------
Income from continuing operations
before income taxes and equity in
earnings of unconsolidated
entities............................. 72,919 1,685 4,831 79,435
Income taxes........................... 29,900 512 1,362(5) 31,774
---------- -------- ------- -----------
Income from continuing operations
before equity in earnings of
unconsolidated entities.............. 43,019 1,173 3,469 47,661
Equity in earnings of unconsolidated
entities, net of income taxes........ 16,653 (16,653) -- --
---------- -------- ------- -----------
Income from continuing operations...... $ 59,672 $(15,480) $ 3,469 $ 47,661
========== ======== ======= ===========
Income from continuing operations per
share................................ $ 0.85
===========
Pro forma weighted average shares
outstanding.......................... 56,005,817
===========
</TABLE>
26
<PAGE> 29
THE BELK COMPANIES
NOTES TO PRO FORMA CONDENSED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-----------
<S> <C>
(1) Adjustments to reflect Belk-Simpson as if the retail
operations of Belk-Simpson had been acquired by the Belk
Companies on February 2, 1997.
(2) Adjustments to selling, general and administrative
expenses consist of the following:
To record the pro forma increase in depreciation
related to the allocation of fair market values to
property and equipment, net, based on the estimated fair
market value of the combined Belk Companies. The
increase of $73,443 will be depreciated over the average
remaining life of property and equipment, net, of 23
years................................................... $ 3,193
To record the pro forma decrease in amortization
related to the allocation of fair market value to
leasehold improvements based on the estimated fair
market value of the combined Belk Companies. The
decrease of $21,488 will be amortized over the average
remaining life for leasehold improvements of 10
years................................................... (2,148)
To record the pro forma net decrease in expense for the
Company's defined benefit pension plan, defined benefit
health care plan and Supplemental Executive Retirement
Plan (the "Retirement Plans") related to adjusting the
Retirement Plans to their estimated fair market
values.................................................. (2,966)
To record the decrease in amortization expense related
to the elimination of intangible assets which were
recorded in a previous purchase business
combination. ........................................... (3,276)
To record the amortization of Reorganization costs. ... 537
-------
($4,660)
=======
(3) To reverse impairment losses attributed to intangible
assets which were recorded in a previous business
combination. ........................................... ($2,912)
=======
(4) Adjustments to interest expense consist of the
following:
To record the increase in interest expense related to
the debt acquired to redeem shares from dissenting
shareholders. The debt is estimated to be $51 million
with an interest rate of 6.9%. ......................... ($3,519)
To record amortization related to the allocation of
fair market values to interest rate swap agreements. The
interest rate swap agreements of $3,114 will be
amortized over the average remaining life of 4
years. ................................................. 778
-------
($2,741)
=======
(5) Adjustment to reflect income taxes based upon the pro
forma pre-tax income as if the Belk Companies had been
subject to federal and state income taxes at an
effective tax rate of 40%. ............................. $ 1,362
=======
</TABLE>
27
<PAGE> 30
THE BELK COMPANIES
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF JANUARY 31, 1998
<TABLE>
<CAPTION>
THE BELK
(1) COMPANIES
HISTORICAL BELK-SIMPSON PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS ADJUSTMENTS BELK, INC.
---------- ------------ ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents............. $ 16,263 $ 91 $ -- $ 16,354
Accounts receivable, net.............. 353,509 12,835 -- 366,344
Merchandise inventory................. 431,169 14,935 -- 446,104
Other current assets.................. 39,117 (11,521) -- 27,596
---------- -------- --------- ----------
Total current assets.......... 840,058 16,340 -- 856,398
Investments............................. 76,069 (38,846) -- 37,223
Property and equipment, net............. 395,771 21,684 50,841(2) 468,296
Other noncurrent assets................. 36,604 630 74,810(3) 112,044
---------- -------- --------- ----------
Total assets.................. $1,348,502 $ (192) $ 125,651 $1,473,961
========== ======== ========= ==========
Current Liabilities:
Accounts payable...................... $ 123,573 $ 3,248 $ 2,155(4) $ 128,976
Accrued expenses...................... 67,520 1,526 -- 69,046
Accrued income taxes.................. 3,363 (801) -- 2,562
Lines of credit and notes payable..... 59,323 892 -- 60,215
Current installments of long-term debt
and capital lease obligations...... 89,133 400 -- 89,533
---------- -------- --------- ----------
Total current liabilities..... 342,912 5,265 2,155 350,332
Deferred income taxes................... 28,866 -- 11,272(5) 40,138
Long-term debt and capital lease
obligations, excluding current
installments.......................... 210,449 1,500 51,000(6) 262,949
Deferred compensation and other
non-current liabilities............... 50,508 (4,466) 23,350(7) 69,392
---------- -------- --------- ----------
Total liabilities............. 632,735 2,299 87,777 722,811
Deferred income......................... 11,982 -- -- 11,982
Shareholders' Equity:
Common stock.......................... 70,629 8,087 (78,156)(8) 560
Paid in capital....................... 470 -- 585,980(9) 586,450
Net unrealized gain (loss) on
investments........................ 13,852 (147) (13,047)(10) 658
Retained earnings..................... 618,834 (10,431) (456,903)(11) 151,500
---------- -------- --------- ----------
Total shareholders' equity.... $ 703,785 $ (2,491) $ 37,874 $ 739,168
---------- -------- --------- ----------
$1,348,502 $ (192) $ 125,651 $1,473,961
========== ======== ========= ==========
</TABLE>
28
<PAGE> 31
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENT
----------
<C> <S> <C>
(1) Adjustments to reflect Belk-Simpson as if the retail
operations of Belk-Simpson had been acquired by the Belk
Companies on January 31, 1998.
(2) Amount represents the purchase price allocated to property
and equipment, net, in excess of historical cost............ $ 50,841
=========
(3) Adjustments to other assets consist of the following:
To eliminate intangible assets which were recorded in a
previous purchase business combination...................... $ (16,926)
Amount represents the estimated fair market value of the
defined benefit pension plan net assets in excess of
historical cost amounts..................................... 89,581
To record the anticipated costs incurred in connection with
the Reorganization. The costs are estimated to be $5,373 of
which $3,218 was paid and capitalized at January 31, 1998... 2,155
---------
$ 74,810
=========
(4) To record the anticipated costs incurred in connection with
the Reorganization. The costs are estimated to be $5,373 of
which $3,218 was paid and capitalized at January 31, 1998... $ 2,155
=========
(5) To adjust existing deferred taxes to the amounts that they
are expected to be settled for or realized.................. $ (36,002)
To record the deferred taxes related to the pro forma
adjustments................................................. 47,274
---------
$ 11,272
=========
(6) To record the debt assumed to be incurred to redeem shares
from dissenting shareholders................................ $ 51,000
=========
(7) Amount represents the estimated fair market value of the
Retirement Plans liabilities in excess of historical
amounts..................................................... $ 20,236
Amount represents the estimated fair market value of the
interest rate swap agreement liabilities in excess of
historical amounts.......................................... 3,114
---------
$ 23,350
=========
(8) Adjustments to record the pro forma shares outstanding...... $ (78,156)
=========
(9) Net effect of purchase accounting adjustments............... $ 585,980
=========
(10) Adjustment to reduce the net unrealized gain or loss to the
amount on the acquirer's records............................ $ (13,047)
=========
(11) Adjustment to reduce the combined retained earnings to the
amount on the acquirer's records............................ $(456,903)
=========
</TABLE>
29
<PAGE> 32
2. Financial Statement Schedules
Not applicable.
3. Exhibits
(27.1) Financial Data Schedule is filed herein as an Exhibit.
30
<PAGE> 33
SIGNATURES
Pursuant to requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 8th day of
June, 1998.
BELK, INC.
(Registrant)
By: /s/ JOHN M. BELK
------------------------------------
John M. Belk
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant and
in the capacities indicated on June 8, 1998.
/s/ JOHN M. BELK
------------------------------------------------------
John M. Belk
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ THOMAS M. BELK, JR.
------------------------------------------------------
Thomas M. Belk, Jr.
President and Director
/s/ H. W. MCKAY BELK
------------------------------------------------------
H. W. McKay Belk
President and Director
/s/ JOHN R. BELK
------------------------------------------------------
John R. Belk
President and Director
/s/ BILL R. WALTON
------------------------------------------------------
Bill R. Walton
Senior Vice President, Controller and Treasurer
(Principal Accounting Officer)
/s/ J. KIRK GLENN, JR.
------------------------------------------------------
J. Kirk Glenn, Jr.
Director
/s/ KARL G. HUDSON, JR.
------------------------------------------------------
Karl G. Hudson, Jr.
Director
/s/ JOHN A. KUHNE
------------------------------------------------------
John A. Kuhne
Director
/s/ B. FRANK MATTHEWS, II
------------------------------------------------------
B. Frank Matthews, II
Director
31
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> JAN-31-1998
<CASH> 16,263
<SECURITIES> 37,223
<RECEIVABLES> 361,915
<ALLOWANCES> 8,406
<INVENTORY> 431,169
<CURRENT-ASSETS> 840,058
<PP&E> 885,006
<DEPRECIATION> 489,235
<TOTAL-ASSETS> 1,348,502
<CURRENT-LIABILITIES> 342,912
<BONDS> 299,582
0
0
<COMMON> 70,629
<OTHER-SE> 633,156
<TOTAL-LIABILITY-AND-EQUITY> 1,348,502
<SALES> 1,974,102
<TOTAL-REVENUES> 1,974,102
<CGS> 1,317,278
<TOTAL-COSTS> 1,317,278
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,181
<INTEREST-EXPENSE> 39,950
<INCOME-PRETAX> 72,919
<INCOME-TAX> 29,900
<INCOME-CONTINUING> 59,672
<DISCONTINUED> (5,272)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,400
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>EPS IS NOT APPLICABLE AS THE 10-K IS FOR COMBINED COMPANIES UNDER COMMON
CONTROL THAT WERE MERGED SUBSEQUENT TO YEAR END AS FURTHER EXPLAINED IN
FOOTNOTE 1 OF THE NOTES TO THE COMBINED FINANCIAL STATEMENTS.
</FN>
</TABLE>
