TO: SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED July 31, 1995
COMMISSION FILE NUMBER 0-1391
ZIONS COOPERATIVE MERCANTILE INSTITUTION
A UTAH CORPORATION
SALT LAKE CITY, UTAH 84137
TELEPHONE NUMBER 801:579-6404
IRS EMPLOYEE IDENTIFICATION NUMBER 87-0196220
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 of such charter 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
Number of Shares outstanding: Common Stock 2,168,942 shares
Other shares, none
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
INDEX
TITLE PAGE NO.
Balance Sheet 1
July 29, 1995 & January 28, 1995
Statement of Operations 3
Three Months Ended July 29, 1995 & 1994
Statement of Operations 4
Six Months Ended July 29, 1995 & 1994
Condensed Statement of Cash Flows 5
Three Months Ended July 29,1995 and July 30,1994
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis of the 7
Condensed Income Statement
Other Information 10
Signatures 11
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
BALANCE SHEET - JULY 29, 1995 & JANUARY 28, 1995
In Thousands (000 omitted)
<TABLE>
ASSETS AND OTHER DEBITS
<S> <C> <C>
Current Assets: JULY JANUARY
1995 1995
Cash and short term investments $ 551 $ 2,699
Net Accounts and Notes Receivable 42,142 54,679
Inventories:
Finished goods 44,685 44,767
Supplies 2,629 1,645
Deferred income taxes 1,290 1,290
Prepaid Expenses 831 761
Total Current Assets $92,128 105,840
Property:
Property, plant and equipment $34,499 $34,429
Less accumulated depreciation (12,820) (11,595)
Capital Leases, Net Accumulated Amortization 14,302 15,358
Total Property - Net $35,981 $38,192
Other Assets 598 598
TOTAL ASSETS AND OTHER DEBITS $128,707 $144,630
</TABLE>
See Notes to condensed financial statements
-1-
Form 10-Q
<TABLE>
ZIONS COOPERATIVE MERCANTILE INSTITUTION
BALANCE SHEET - JULY 29, 1995 & JANUARY 28, 1995
In Thousands (000 omitted)
LIABILITIES, RESERVES AND STOCKHOLDERS EQUITY
<S> <C> <C>
JULY JANUARY
1995 1995
Current Liabilities:
Accounts payable - trade $ 3,497 $ 6,648
Short term borrowings - banks 8,039 11,500
Current portion of long-term debt 448 146
Current portion of obligations under capital
leases 1,934 1,790
Accrued liabilities
Outstanding gift certificates 1,440 1,566
Reserve for store closings 759 768
Other accrued liabilities 6,397 12,008
Deferred gain on sale and leaseback 1,221 1,221
Total Current Liabilities $23,735 $35,647
Long-Term Debt:
Bonds, mortgages and similar debt 31,601 30,222
Capital Lease - Long Term Portion (Note 1) 19,636 20,752
Other Liabilities and Deferred Credits:
Deferred Fed Income Taxes 1.302 1,302
Deferred Gross Profit 2,524 3,136
Stockholders Equity:
Capital shares $14,622 $14,621
Retained Earnings 35,287 38,950
Total Stockholders Equity $49,909 $53,571
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $128,707 $144,630
</TABLE>
See notes to condensed financial statements
-2-
Form 10-Q
<TABLE>
ZIONS COOPERATIVE MERCANTILE INSTITUTION
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 29, 1995 & 1994
In Thousands (000 omitted)
<S> <C> <C>
1995 1994
Net Sales $52,108 $48,340
Other revenues 1,354 1,319
Cost of goods sold, direct merchandising and
buying costs (36,072) (33,330)
Selling, general and administrative expenses (17,120) (15,848)
Other Income:
Income Deductions:
Interest and amortization of debt discount and
expenses (740) (376)
Interest Expense on Capital Leases (Note 1) (655) (638)
Miscellaneous income deductions (285) (479)
Net profit (loss) before income tax expense $(1,410) $ (878)
Income tax expense 0 0
Net profit (loss) $(1,410) $ (878)
Weighted average number of common shares outstanding 2,148,202 2,168,942
Earnings per common share $ (0.65) $ (0.40)
Cash dividends per common share $ 0.15 $ 0.15
</TABLE>
See notes to condensed financial statements
-3-
Form 10-Q
<TABLE>
ZIONS COOPERATIVE MERCANTILE INSTITUTION
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 29, 1995 & 1994
In Thousands (000 omitted)
<S> <C> <C>
1995 1994
Net Sales $102,555 $98,447
Other revenues 2,878 2,808
Cost of goods sold, direct merchandising and
buying costs (70,625) (67,794)
Selling, general and administrative expenses (34,574) (32,479)
Other Income:
Income Deductions:
Interest and amortization of debt discount
and expenses (1,433) (751)
Interest Expense on Capital Leases (Note 1) (1,306) (1,276)
Miscellaneous income deductions (519) (502)
Net profit (loss) before income tax expense (3,024) (1,547)
Income tax expense 0 0
Net profit (loss) (3,024) (1,547)
Weighted average number of common shares outstanding 2,148,202 2,168,942
Earnings per common share $( 1.39) $ (0.71)
Cash dividends per common share $ 0.15 $ 0.15
</TABLE>
See notes to condensed financial statements
-4-
Form 10-Q
<TABLE>
ZIONS COOPERATIVE MERCANTILE INSTITUTION
CONDENSED STATEMENT OF CASH FLOWS
THREE MONTHS ENDING JULY 29, 1995 & JULY 30, 1994
In Thousands (000 omitted)
<S> <C> <C>
July July
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $(3,024) $(1,547)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,306 2,046
Deferred gross profit (613) (597)
Deferred income taxes 0 0
Provision for losses on accounts receivable 478 701
Decrease (increase) in assets:
Accounts receivable 12,059 10,740
Inventories (902) (4,561)
Prepaid expenses (71) (124)
Other Assets 0 22
Increase (decrease) in liabilities:
Accounts payable -- trade (2,111) 2
Accrued liabilities (5,903) (4,722)
Net cash provided by operating activities 2,219 1,960
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,901) (2,877)
Proceeds from sale of property, plant and equipment 1,805 414
Net cash used in investing activities ( 96) (2,463)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings (4,500) (9,500)
Additions to long-term debt 1,380 6,564
Principal payments on long-term debt & obligations
under capital leases (514) (835)
Stock options exercised and sales of capital stock
Purchase of treasury stock 8 146
Sale of treasury stock
Cash dividends (645) (644)
Net cash provided by (used in) financing activities (4,271) (4,269)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,148) (4,772)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,699 5,315
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 551 $ 543
</TABLE>
-5-
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
Notes to Condensed Financial Statements
1. The Company has non-cancellable leases covering store space which expire
on various dates through 2016. Some of the leases contain provisions for
additional annual lease payments based on a percentage of sales at the
leased store. The leases have renewal options for additional periods
ranging from 50 to 69 years.
2. In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
July 29, 1995 and January 28, 1995 and the results of operations for the
three months ended July 29, 1995 and 1994, for six months ended
July 29, 1995, and 1994 and changes in financial position for three months
ended July 29, 1995 and 1994.
3. The results of operations for the three months period ended July 29, 1995
and 1994 and the six months period ended July 29, 1995 and 1994 are not
necessarily indicative of the results to be expected for the full year.
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Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONDENSED INCOME STATEMENTS
1. Prospective Information:
During the year ended January 28, 1995, ZCMI closed the Superstition Springs
store in Mesa, Arizona. This store had been converted to an outlet store
format during fiscal 1992, as were stores in the now-closed Village Fair
Mall in Phoenix, Arizona, the Tri-City Mall in Mesa, Arizona and the East
Bay Mall in Provo, Utah. ZCMI did not open any stores during the fiscal
year ended January 28, 1995. No new stores are planned during the current
fiscal year.
The Company is also in the final phases of converting from a mainframe
computer to a more efficient computer system. This conversion from the
present IBM 4381 mainframe to an IBM AS/400 computer system is estimated to
cost approximately $1,500,000 from inception to completion of the project.
It is anticipated that these capital expenditures will be financed by
internally generated funds, the leasing of fixtures, and by short-term and
long-term debt.
ZCMI has completed the remodeling projects at the Cottonwood Mall, Valley
Fair Mall, and Layton Hills Mall stores. There are no further renovation
projects scheduled for 1995. The Ogden store was sold during October 1994.
The Ogden store is now located in the Ogden City Mall, across the street
from its previous location. Fixed asset expenditures for the current year
are intended for the purchase of new assets and the maintenance of
currently owned assets and should be approximately $1,000,000.
2. Liquidity and Capital Resources:
The quick and current ratios are 1.9 and 4.0, respectively for the
second quarter 1995 as compared to 1.7 and 3.5 for the same time period in
1994. This indicates that the Company's liquidity is more than adequate.
These ratios will fluctuate from quarter to quarter due to the seasonality
of inventory requirements. The liquidity is considered adequate to finance
current operations, pay dividends, and provide for capital expenditures.
The lines of credit that the Company has ($53,500,000) are more than
adequate to handle the borrowing requirements for the above mentioned items.
3. Material Changes:
Accounts Receivable balances normally decline from prior year end balances
due to customer payments on Christmas merchandise as well as
(Continued on page 8)
-7-
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONDENSED INCOME STATEMENT
(Continued from page 7)
the customer using a third party charge card instead of a ZCMI charge card.
Funding for the increased levels of inventory has increased long-term
debt while short term borrowing has greatly decreased. Inventories
increased because of the seasonal trend in inventory levels.
4. Interim Period Reporting:
Comparisons between the second quarter of our fiscal year and the fourth
quarter of the prior year in the department store industry are not only
meaningless, but if made, could be misleading. The Company and the
industry typically records about 33% of its annual sales in the fourth
quarter versus about 20% in the second quarter, due to the variation in
seasonal buying patterns of consumers. Variations in net income is even
greater due to the relatively fixed expenses that accrue rather evenly
throughout the year. As a result, many retailers have net losses in the
second quarter.
Sales increased by 7.8% in the second quarter of 1995 over the second
quarter of 1994.
Cost of goods sold have increased slightly to 69.22% for the three month
period ended July 29, 1995 as compared to 68.94% for the same period for
1994. Markdowns have remained the same at 18.3% of sales as of
July 29, 1995 as compared to the same period ending on July 30, 1994.
Selling, general, and administrative expenses have increased slightly
as a percent of sales. As of July 29, 1995, they were 32.85% of sales
while they were 32.78% of sales as of July 30, 1994.
For the first six months of 1995, cost of goods sold remained steady
as a percent of sales at 68.9%, which is unchanged from the same time
period in 1994. Selling, general, and administrative expenses increased
slightly to 33.71% as a percent of sales.
Selling, general and administrative expenses increased in the second
quarter as a result of increased depreciation, leases, and rental of
furniture, fixture and equipment due to remodeling and expansion. Also,
pension and health insurance expense have continued to increase as the cost
of providing fringe benefits to associates have increased. Interest
expense has continued to rise as the interest rates have increased over
this time last year. Interest income from proprietary credit cards has
decreased during the first six months of the year contributing to the net
loss for the year and the second quarter.
(Continued on page 9)
-8-
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONDENSED INCOME STATEMENT
(Continued from page 8)
5. Store Closing Expenditures:
ZCMI made a decisive move to close stores in Charleston Commons Mall in
Las Vegas, Nevada and Pavilions Mall in Scottsdale, Arizona during the
fiscal year ended January 31, 1992. Closing expenses during that year
were $298,800. As previously mentioned, the Village Fair Mall store was
closed during the fiscal year ended January 29, 1994. As part of the
continuing effort to close these unprofitable stores, $650,000 was reserved
from profits in fiscal 1991 for closing stores, while $4,600,000 was
reserved from current year profits during fiscal 1992, and $1,900,000
reserved from current year profits in fiscal 1993. These amounts are
considered sufficient to close all unprofitable stores without any
further costs.
-9-
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a party to routine legal proceedings incident to its
business none of which, in the opinion of management, will have a
material adverse effect on The Company's business or financial
condition.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
1. The Company was not required to report material or unusual charges
or credits to income pursuant to item 10 (a) or a change in
independent accountants pursuant to item 12 of Form 8-K for any of
the three months ended July 29, 1995.
2. There were no securities of the Company sold by the Company during
the three months ended July 29, 1995 which were not registered under
the Securities Act of 1933 in reliance upon an exemption from
registration provided by section 4 (2) of the Act.
Item 6. Exhibits and Reports on Form 8-K.
None.
-10-
Form 10-Q
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
ZIONS COOPERATIVE MERCANTILE INSTITUTION
Date September 13, 1995 ____Keith C. Saunders____________________
Keith C. Saunders
Executive Vice President-CFO
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> JUL-29-1995
<CASH> 551
<SECURITIES> 0
<RECEIVABLES> 44,477
<ALLOWANCES> 2,335
<INVENTORY> 47,314
<CURRENT-ASSETS> 92,128
<PP&E> 34,499
<DEPRECIATION> 12,820
<TOTAL-ASSETS> 128,707
<CURRENT-LIABILITIES> 23,735
<BONDS> 0
<COMMON> 14,622
0
0
<OTHER-SE> 35,287
<TOTAL-LIABILITY-AND-EQUITY> 128,707
<SALES> 102,555
<TOTAL-REVENUES> 105,433
<CGS> 70,625
<TOTAL-COSTS> 104,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 322
<INTEREST-EXPENSE> 2,739
<INCOME-PRETAX> (3,024)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,024)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,024)
<EPS-PRIMARY> (1.39)
<EPS-DILUTED> (1.39)
</TABLE>
