<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended APRIL 29, 2000
---------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from ________________ to _____________________
Commission file number 000-26207
------------------
BELK, INC.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified In Its Charter)
Delaware 56-2058574
--------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2801 West Tyvola Road, Charlotte, NC 28217-4500
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (704) 357-1000
-----------------------------
--------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
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 June 2, 2000, the registrant had issued and outstanding 55,196,065 shares of
class A common stock and 30,718 shares of class B common stock.
<PAGE> 2
BELK, INC.
INDEX TO FORM 10-Q
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited, except where
otherwise noted)
Condensed Consolidated Statements of Income for the
Three Months Ended April 29, 2000 and May 1, 1999 4
Consolidated Balance Sheets as of April 29, 2000 and January 29, 2000 5
Consolidated Statement of Changes in Stockholders' Equity for
the Three Months Ended April 29, 2000 6
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended April 29, 2000 and May 1, 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
2
<PAGE> 3
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS
Certain statements made in this report, and other written or oral
statements made by or on behalf of Belk, Inc. (the "Company"), may constitute
"forward-looking statements" within the meaning of the federal securities laws.
Statements regarding future events and developments and the Company's future
performance, as well as our expectations, beliefs, plans, estimates or
projections relating to the future, are forward-looking statements within the
meaning of these laws. You can identify these forward-looking statements through
our use of words such as "may," "will," "intend," "project," "expect,"
"anticipate," "believe," "estimate," "continue," or other similar words. These
forward-looking statements are subject to certain risks and uncertainties, which
may cause our actual results to differ significantly from the results we discuss
in such forward-looking statements. These forward-looking statements are
reasonable; however, you should not place undue reliance on such statements.
For a more detailed explanation of the risks and uncertainties that
might cause our results to differ from those we project in our forward-looking
statements, we refer you to the section captioned "This Information Contains
Forward-Looking Statements" in our Annual Report on Form 10-K for the fiscal
year ended January 29, 2000 that we filed with the Securities and Exchange
Commission on April 28, 2000. Our other filings with the Securities and Exchange
Commission may contain additional information concerning the risks and
uncertainties listed above, and other factors you may wish to consider. Upon
request, we will provide copies of these filings to you free of charge.
Our forward-looking statements are based on current expectations and
speak only as of the date of such statements. We undertake no obligation to
publicly update or revise any forward-looking statement, even if future events
or new information may impact the validity of such statements.
3
<PAGE> 4
BELK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
Three Months Ended
-------------------------
April 29, May 1,
2000 1999
---------- ----------
Revenues $ 501,533 $ 496,316
Cost of goods sold (including occupancy and buying
expenses) 350,293 334,550
Selling, general and administrative expenses 131,403 130,129
Restructuring charge -- 7,068
---------- ----------
Income from operations 19,837 24,569
Interest expense, net (8,517) (8,716)
Gain on sale of property, equipment and investments 3,771 439
Other income, net 507 195
---------- ----------
Income from operations before income taxes 15,598 16,487
Income taxes 5,710 6,270
---------- ----------
Net income $ 9,888 $ 10,217
========== ==========
Basic and diluted net income per share $ 0.18 $ 0.18
========== ==========
Dividends per share $ 0.250 $ 0.235
========== ==========
Weighted average shares outstanding 54,851,909 56,126,608
========== ==========
See accompanying notes to financial statements.
4
<PAGE> 5
BELK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
April 29, January 29,
2000 2000
----------- -----------
(audited)
Assets
Current assets:
Cash and cash equivalents $ 27,778 $ 23,009
Accounts receivable, net 322,704 340,061
Merchandise inventory 590,316 499,285
Prepaid income taxes 3,121 5,972
Deferred income taxes 1,684 1,610
Prepaid expenses and other current assets 16,934 11,795
----------- -----------
Total current assets 962,537 881,732
Investment securities 21,844 21,809
Property and equipment, net 603,987 598,945
Prepaid pension costs 99,542 99,542
Other assets 30,621 27,473
----------- -----------
Total assets $ 1,718,531 $ 1,629,501
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 207,932 $ 163,083
Accrued expenses 89,365 85,296
Accrued income taxes 4,493 24,296
Lines of credit and notes payable 273,983 7,854
Current installments of long-term debt
and capital lease obligations 9,736 9,474
----------- -----------
Total current liabilities 585,509 290,003
Deferred income taxes 49,929 47,734
Long-term debt and capital lease obligations,
excluding current installments 190,873 395,883
Deferred compensation and other noncurrent
liabilities 76,005 73,113
----------- -----------
Total liabilities 902,316 806,733
----------- -----------
Stockholders' equity:
Preferred stock -- --
Common stock, 54.7 million and 54.9 million
shares issued and outstanding at
April 29, 2000 and January 29, 2000,
respectively 547 549
Paid-in capital 562,265 565,031
Retained earnings 254,603 258,388
Accumulated other comprehensive loss (1,200) (1,200)
----------- -----------
Total stockholders' equity 816,215 822,768
----------- -----------
Total liabilities and stockholders' equity $ 1,718,531 $ 1,629,501
=========== ===========
See accompanying notes to financial statements.
5
<PAGE> 6
BELK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Loss Total
------ -------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 29, 2000 $ 549 $565,031 $258,388 $ (1,200) $822,768
Net income -- -- 9,888 -- 9,888
Cash dividends -- -- (13,673) -- (13,673)
Repurchase and retirement of stock (2) (2,766) -- -- (2,768)
----- -------- -------- -------- --------
Balance at April 29, 2000 $ 547 $562,265 $254,603 $ (1,200) $816,215
===== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
BELK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
April 29, May 1,
2000 1999
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,888 $ 10,217
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization 19,741 15,650
Restructuring charge -- 7,068
Gain on sale of property and equipment and investments (3,771) (439)
(Increase) decrease in:
Accounts receivable, net 17,357 23,062
Merchandise inventory (91,031) (52,499)
Prepaid expenses and other assets (4,479) 8,923
Increase (decrease) in:
Accounts payable and accrued expenses 29,115 (1,082)
Deferred compensation and other liabilities 5,013 (6,706)
-------- --------
Net cash provided (used) by operating activities (18,167) 4,194
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (32,875) (18,510)
Proceeds from the sale of property and equipment 14,287 1,598
Other 3 (626)
-------- --------
Net cash used by investing activities (18,585) (17,538)
-------- --------
Cash flows from financing activities:
Proceeds from notes payable -- 2,004
Payments on notes payable -- (15)
Proceeds from issuance of long-term debt 24,005 42,000
Principal payments on long-term debt and capital lease obligations (8,115) (22,114)
Net proceeds from lines of credit 42,072 26,764
Dividends paid (13,673) (12,968)
Repurchase of common stock (2,768) (17,310)
-------- --------
Net cash provided by financing activities 41,521 18,361
-------- --------
Net increase in cash and cash equivalents 4,769 5,017
Cash and cash equivalents at beginning of period 23,009 18,313
-------- --------
Cash and cash equivalents at end of period $ 27,778 $ 23,330
======== ========
Supplemental schedule of noncash investing and financing activities:
Increase in property and equipment through assumption of capital leases $ 3,419 $ 2,498
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
BELK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Belk, Inc. and subsidiaries (the "Company") have been prepared in accordance
with the instructions to Form 10-Q promulgated by The Securities and Exchange
Commission and should be read in conjunction with the Notes to Consolidated
Financial Statements (pages 17-29) in our Annual Report on form 10-K for the
fiscal year ended January 29, 2000. In the opinion of management, this
information is fairly presented and all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the results for the
interim periods have been included; however, certain items are included in these
statements based on estimates for the entire year. Also, operating results on
periods which exclude the Christmas season may not be indicative of the
operating results that may be expected for the full fiscal year.
Certain prior period amounts have been reclassified to conform with the
current presentation.
(2) COMPREHENSIVE INCOME
The following table sets forth the computation of comprehensive income. For
the three months ended April 29, 2000 other comprehensive income was $0. For the
three months ended May 1, 1999 other comprehensive income was comprised of $292
unrealized gains on investments (net of income tax of $179).
Three Months Ended
-----------------------------
April 29, May 1,
2000 1999
--------- ---------
Net Income $9,888 $10,217
Other Comprehensive Income -- 292
--------- ---------
Total Comprehensive Income $9,888 $10,509
========= =========
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage relationship to revenues of certain items in the Company's statements
of income.
Three Months Ended
------------------------------
April 29, May 1,
2000 1999
--------------- -------------
Revenues 100.0% 100.0%
Cost of goods sold 69.8 67.4
Selling, general and adminstrative expenses 26.2 26.2
Restructuring Charge -- 1.4
Income from operations 4.0 5.0
Interest expense, net 1.7 1.8
Net income 2.0 2.1
Comparable store net revenue increase 0.0 5.6
COMPARISON OF THE 13 WEEKS ENDED APRIL 29, 2000 AND MAY 1, 1999
Revenues. The Company's revenues for the first quarter of fiscal year
2001 increased 1.1%, or $5.2 million, to $501.5 million from $496.3 million over
the same period in fiscal year 2000. The increase is attributed to revenues from
new stores and store expansions as comparable store revenues remained constant
for the period.
Cost of goods sold. As a percentage of revenues, cost of goods sold for
the first quarter of fiscal year 2001 increased to 69.8% compared to 67.4% for
the first quarter of fiscal year 2000. This increase was primarily the result of
increased markdowns to generate sales and reduce inventory levels in response to
the soft department store sales environment.
Selling, general and administrative expenses. SG&A expenses were $131.4
million for the first quarter of fiscal year 2001, compared to $130.1 million in
fiscal year 2000. As a percentage of revenues, SG&A expenses remained consistent
at 26.2% for the first quarter of fiscal years 2001 and 2000. The increases in
expenses resulted from additional payroll and depreciation expense related to
new stores and store expansions partially offset by increases in finance charge
income from the Company's proprietary credit card.
Restructuring charge. During the first quarter of fiscal year 2000, the
Company recorded a $7.1 million charge in connection with the consolidation of
its thirteen operating divisions into four expanded regional divisions. The
charge consisted of $3.4 million of employee severance costs and $3.7 million
related to the disposal of excess assets in the closing division offices.
Net Income. Net income for the first quarter of fiscal year 2001
decreased $.3 million to $9.9 million from $10.2 million for the first quarter
of fiscal year 2000. Net income per share remained constant at $0.18 cents per
share. The first quarter of fiscal year 2001 includes $2.3 million of gains from
the sale of property, net of income taxes of $1.4 million and the first quarter
of fiscal year 2000 includes a $4.4 million restructuring charge, net of income
taxes of $2.7 million. Excluding these items, net income for the first quarter
of fiscal year 2001 decreased $7.0 million from the first quarter of fiscal year
2000.
9
<PAGE> 10
SEASONALITY AND QUARTERLY FLUCTUATIONS
The retail business is highly seasonal with approximately one-third of
annual revenues being generated in the fourth quarter, which includes the
Christmas selling season. As a result, a disproportionate amount of the
Company's operating and net income is realized during the fourth quarter and
significant variations can occur when comparing the Company's financial
condition between quarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash on hand, cash flow
from operations, and borrowings under debt facilities.
Expenditures for property and equipment were $32.9 million in the first
quarter of fiscal year 2001, compared to $18.5 million in the first quarter of
fiscal year 2000. In the first quarter of fiscal year 2001, the Company opened a
new store in Snellville, Georgia; relocated and expanded two stores in existing
markets to new facilities in Charleston, South Carolina and Fayetteville,
Georgia; and expanded its store in Hilton Head, South Carolina.
Net cash provided by financing activities was $41.5 million for the
first quarter of fiscal year 2001, a result of increased short-term borrowings,
compared to $18.4 million of cash provided by financing activities in the first
quarter of fiscal year 2000.
The Company's note payable agreement expires on April 28, 2001 and,
accordingly, the outstanding balance as of April 29, 2000 of $224.1 million has
been included in current liabilities. However, the agreement may be renewed by
mutual consent of the parties and it is the Company's intent to renew the
facility and utilize it as long-term financing.
Management of the Company believes that cash flows from operations and
the existing credit facilities will be sufficient to cover working capital
needs, capital expenditures and debt service requirements.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which establishes standards for accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. In June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral
of the Effective Date of FASB Statement No. 133", which deferred the effective
date of SFAS No. 133. The standard is effective for the Company starting in
fiscal year 2002. The impact of SFAS No. 133 on the Company's financial
statements has not been determined.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's quantitative and
qualitative market risk disclosures during the three months ended April 29,
2000.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
In March 2000, the Company issued 19,043 shares of its Class B common
stock pursuant to compensation arrangements. The stock was issued in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act of 1933.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on May 24, 2000. In
accordance with the Company's Amended and Restated Certificate of Incorporation,
Mr. H. W. McKay Belk, Mr. Karl G. Hudson, Jr. and Mr. B. Frank Matthews, II were
re-elected to the office of Class II director, to hold office until the annual
meeting of stockholders in 2003. A total 518,406,288 votes were cast in favor of
the election of each of the nominees, and 39,930 were withheld. Mr. Thomas M.
Belk, Jr., Mr. J. Kirk Glenn and Mrs. Sarah Belk Gambrell continue to serve as
Class I directors, and Mr. John M. Belk, Mr. John R. Belk and Mr. John A. Kuhne
continue to serve as Class III directors. Mr. John M. Belk continues to serve as
Chairman of the Board of Directors.
At the annual meeting, the stockholders also approved the Belk, Inc.
2000 Incentive Stock Plan. A total of 514,313,188 votes were cast in favor of
the plan, 2,424,510 were cast against the plan and 1,708,520 were recorded as
abstentions.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Form of Amended and Restated Certificate of Incorporation of
the Company (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-4, File No.
333-42935).
3.2 Form of Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.3 to the Company's
Registration Statement on Form S-4, File No. 333-42935).
10.1 Letter Agreement extending the Commitment Termination Date of
the Note Purchase Agreement, dated as of May 3, 1999, by and
among Belk, Inc., as Debtor, The Belk Center, Inc., as
Servicer, Enterprise Funding Corporation, and NationsBank,
N.A., as agent for Enterprise Funding Corporation and the Bank
Investors and as a Bank Investor.
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BELK, INC.
Dated: June 13, 2000 By: /s/ Ralph A. Pitts
----------------------------------------
Ralph A. Pitts
Executive Vice President, General Counsel
and Corporate Secretary
(Authorized Officer of the Registrant)
By: /s/ Bill R. Walton
----------------------------------------
Bill R. Walton
Senior Vice President and Treasurer
(Principal Accounting Officer)
12
