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 May 4, 1996
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.
Condensed Balance Sheet 1
Condensed Income Statement 3
Three Months Ended May 4, 1996 & April 29,1995
Condensed Statement of Cash Flows 4
May 4, 1996 & April 29,1995
Notes to Condensed Financial Statements 5
Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
Other Information 9
Signatures 10
Form 10-Q
<TABLE>
ZIONS COOPERATIVE MERCANTILE INSTITUTION
CONDENSED BALANCE SHEET - May 4, 1996 & February 4, 1995
In Thousands (000 omitted)
ASSETS AND OTHER DEBITS
Current Assets: APRIL JANUARY
1996 1996
<S> <C> <C>
Cash and cash items $ 612 $ 2,698
Accounts and Notes Receivable 44,897 52,028
Less allowance for doubtful accounts 1,553 1,307
Net Accounts Receivable and Notes Receivable 43,344 50,721
Inventories:
Finished goods - LIFO cost, retail method 47,711 44,766
Supplies - FIFO cost 1,730 1,111
Prepaid Expenses 1,760 1,321
Deferred Income Taxes 2,016 2,016
Total Current Assets $97,173 102,633
Property:
Property, plant and equipment $30,244 $29,683
Less accumulated depreciation, depletion
and amortization of property, plant and
equipment 10,191 9,660
Capital Leases, Net Accumulated Amortization
(Note 1) 12,726 13,251
Total Property $32,779 $33,274
Other Assets and Deferred Charges:
Other Assets 294 294
Investment in Subsidiary 304 304
TOTAL ASSETS AND OTHER DEBITS $130,550 $136,505
</TABLE>
See notes to condensed financial statements
-1-
Form 10-Q
<TABLE>
ZIONS COOPERATIVE MERCANTILE INSTITUTION
CONDENSED BALANCE SHEET - May 4, 1996 & February 4, 1996
In Thousands (000 omitted)
LIABILITIES, RESERVES AND STOCKHOLDERS EQUITY
APRIL JANUARY
1996 1996
Current Liabilities:
<S> <C> <C>
Accounts payable - trade $ 5,175 $ 7,370
Short term borrowings - banks 4,329 2,500
Current portion of long-term debt 318 311
Current portion of obligations under capital
leases 2,272 2,291
Accrued liabilities
Outstanding gift certificates 1,584 1,611
Reserve for store closings 205 205
Other accrued liabilities 8,302 8,960
Deferred gain on sale and leaseback 1,608 1,608
Total Current Liabilities $ 23,793 $ 24,856
Long-Term Debt:
Bonds, mortgages and similar debt 34,767 37,886
Capital Lease - Long Term Portion (Note 1) 17,980 18,520
Other Liabilities and Deferred Credits:
Deferred Fed Income Taxes 683 683
Deferred Gross Profit 3,089 3,498
Stockholders Equity:
Capital shares $ 14,746 $ 14,731
Pension Liability Adjustment (1,909) (1,909)
Other stockholders equity 37,401 38,240
Total Stockholders Equity $ 50,238 $ 51,062
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $130,550 $136,505
</TABLE>
See notes to condensed financial statements
-2-
Form 10-Q
<TABLE>
ZIONS COOPERATIVE MERCANTILE INSTITUTION
CONDENSED INCOME STATEMENT THREE MONTHS ENDED May 4, 1996 & April 29, 1995
In Thousands (000 omitted)
1996 1995
<S> <C> <C>
Net Sales $54,083 $50,447
Cost of goods sold, direct merchandising and
buying costs 37,118 34,553
Other revenues 1,582 1,524
Other costs and expenses applicable to other revenue 0 0
Selling, general and administrative expenses 17,542 17,298
Provision for doubtful accounts and notes 185 156
Other Income:
Miscellaneous other income 86 164
Income Deductions:
Interest and amortization of debt discount and
expenses 595 693
Interest Expense on Capital Leases (Note 1) 461 651
Miscellaneous income deductions 394 398
Net loss before income tax expense and
extraordinary items $ (544) $(1,614)
Income tax expense 0 0
Net loss before extraordinary items $ (544) $(1,614)
Extraordinary items less applicable tax 0 0
Net Loss $ (544) $(1,614)
Weighted average number of common shares outstanding 2,168,942 2,168,942
Earnings per common share $ (0.25) $ (0.74)
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
CONDENSED STATEMENT OF CASH FLOWS May 4, 1996 & APRIL 29, 1995
In Thousands (000 omitted)
April April
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income (loss) $ (544) $(1,614)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,090 1,168
Deferred gross profit (1,291) (307)
Deferred income taxes (726) 0
Provision for losses on accounts receivable 185 156
Decrease (increase) in assets:
Accounts receivable 7,193 8,329
Inventories (3,564) (2,810)
Prepaid expenses (440) (297)
Other Assets 0 0
Increase (decrease) in liabilities
Accounts payable -- trade (865) (419)
Accrued liabilities 923 (6,655)
Net cash provided by operating activities (1,961) (2,448)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property, plant and equipment (595) (1,162)
Proceeds from sale of property, plant and equipment 0 1,805
Net cash used in investing activities (595) 643
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings 500 3,500
Additions (Reductions) to long-term debt (3,120) (3,339)
Principal payments on long-term debt obligations (552) (111)
under capital leases
Stock options exercised and sales of capital stock 0 0
(Purchase) Sale of treasury stock 45 (13)
Cash dividends (324) (322)
Net cash provided by (used in) financing activities (3,451) (286)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,086) (2,090)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,698 2,699
CASH AND CASH EQUIVALENTS AT END OF PERIOD 612 608
</TABLE>
-4-
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 2053. 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 up to 67
years.
2. In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments (con-
sisting of only normal recurring accruals) necessary to
present fairly the financial position as of May 4, 1996 and
the results of operations for three months ended May 4, 1996,
and April 29, 1995 and changes in financial position for three
months ended May 4, 1996 and April 29, 1995.
3. The results of operations for the three months period ended
May 4, 1996 are not necessarily indicative of the results to
be expected for the full year.
-5-
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. Prospective Information:
During the year ended February 3, 1996, ZCMI closed the Tri-City
Mall 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 now closed
Superstition Springs Mall store in Mesa, Arizona and the East Bay
Mall store in Provo, Utah. ZCMI did not open any stores during the
fiscal year ended February 3, 1996. No new stores are planned for
closing or opening 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.
Future estimated capital expenditures include normal equipment
replacement estimated at $500,000 and the completion of the
conversion from the IBM 4381 mainframe to an IBM AS/400 computer
system. In addition, the South Towne store will be extensively
remodeled at a cost of approximately $700,000.
It is anticipated that these capital expenditures will be financed
by continuing operations, internally generated funds, the leasing
of fixtures and buildings, and by short-term and long-term debt.
With continued favorable short-term loan rates to the Company and
the expected dollar level of debt financing required, Management
still considers short-term borrowing to be the best strategy to
meet its working capital needs.
2. Liquidity and Capital Resources:
The quick and current ratios are 1.8 and 4.1, respectively for the
first quarter of 1996 as compared with 1.5 and 3.1 during 1995.
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.
(Continued on page 7)
-6-
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued from page 6)
3. Material Changes:
Accounts Receivable balances normally decline from prior year end
balances due to customer payments on Christmas merchandise as well
as 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 decreased. Inventories
increased as a result of the seasonal trend in inventory levels.
4. Interim Period Reporting:
Comparisons between the first 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 first 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 first quarter.
Sales increased by 7.2% in the first quarter of 1996 over the first
quarter of 1995.
Costs of goods sold have remained steady at 68.6% for the three
month period ended May 4, 1996 as compared to 68.75% for the same
period for 1995. Markdowns have been reduced to 17.4% of sales as
of May 4, 1996 as compared to 17.9% of sales on April 29, 1995.
Selling, general, and administrative expenses have decreased
slightly as a percent of sales. As of May 4, 1996, they were 32.4%
of sales while they were 34.3% of sales as of April 29, 1995.
Operating expenses decreased in the first quarter of 1996. Pension
and health insurance expenses have decreased in the first quarter,
as well as decreases in electrical costs. Interest income has
increased over last year while at the same time, interest expense
has decreased. However, payroll has increased dramatically during
the year due to pressures as competitive payrolls continue to rise
in the prime market areas of ZCMI.
(Continued on page 8)
-7-
Form 10-Q
ZIONS COOPERATIVE MERCANTILE INSTITUTION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued from page 7)
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 costs, while $4,600,000 was reserved from current
year profits during fiscal 1992 and $1,900,000 was reserved from
current year profits in fiscal 1993. As mentioned earlier, ZCMI
closed the Tri-City Mall store on December 23, 1995. The amounts
that have been reserved are considered sufficient to cover all
expenditures associated with store closings without any further
costs to the Company.
-8-
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 May 4, 1996.
2. There were no securities of the Company sold by the
Company during the three months ended May 4, 1996
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
-9-
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 CO-OPERATIVE MERCANTILE INSTITUTION
Date June 13, 1996 __________________________________
Keith C. Saunders, Secretary
Executive Vice President
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 612,000
<SECURITIES> 0
<RECEIVABLES> 44,897,000
<ALLOWANCES> 1,553,000
<INVENTORY> 49,441,000
<CURRENT-ASSETS> 97,173,000
<PP&E> 61,609,000
<DEPRECIATION> 28,830,000
<TOTAL-ASSETS> 130,550,000
<CURRENT-LIABILITIES> 23,793,000
<BONDS> 0
0
0
<COMMON> 2,160
<OTHER-SE> 50,235,840
<TOTAL-LIABILITY-AND-EQUITY> 130,550,000
<SALES> 54,083,000
<TOTAL-REVENUES> 55,751,000
<CGS> 37,118,000
<TOTAL-COSTS> 54,660,000
<OTHER-EXPENSES> 394,000
<LOSS-PROVISION> 185,000
<INTEREST-EXPENSE> 1,056,000
<INCOME-PRETAX> (544,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (544,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (544,000)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
