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UNITED STATES
SECURITIES AND EXCHANGE COMMMISSION
Washington, D.C. 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 quarter ended March 31, 1994
or
/ / 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 0-16126
SPIEGEL, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2593917
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3500 Lacey Road, Downers Grove, Illinois 60515-5432
(Address of principal executive offices) (Zip Code)
708-986-8800
(Registrant's telephone number, including area code)
(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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of each of the issuer's classes of common
stock, as of May 6, 1994 are as follows:
Class A non-voting common stock, $1.00 par value
15,049,644 shares
Class B voting common stock, $1.00 par value
93,141,654 shares.
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SPIEGEL, INC. AND SUBSIDIARIES
Due to the seasonality of the registrant's business, the results for the three
month periods are not necessarily indicative of the results for the year.
The financial statements have been prepared from the books and records of
the registrant. They reflect all adjustments which are, in the opinion of
management, necessary to a fair presentation of the results for the interim
periods. These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
registrant's Annual Report on Form 10-K, which includes financial statements
for the year ended December 31, 1993.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets, March 31, 1994 and December 31, 1993
Consolidated Statements of Earnings,
Three Months Ended March 31, 1994 and 1993
Consolidated Statements of Cash Flows,
Three Months Ended March 31, 1994 and 1993
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
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Spiegel, Inc. and Subsidiaries
Consolidated Balance Sheets
($000s omitted, except per share amounts)
March 31, 1994 and December 31, 1993
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
1994 1993
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 53,582 $ 47,389
Receivables, net 950,466 998,525
Inventories, net 446,284 438,869
Prepaid expenses:
Catalog advertising 50,657 45,509
Other 22,228 14,336
Deferred income tax benefit 48,010 48,037
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Total current assets 1,571,227 1,592,665
Property and equipment, net 295,218 288,551
Intangibles, net 188,605 189,454
Other assets 150,525 139,921
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$ 2,205,575 $ 2,210,591
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LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt,including current maturities $ 119,153 $ 89,152
Accounts payable 158,267 226,311
Accrued liabilities:
Salaries and wages 21,739 32,255
General taxes 90,429 97,764
Other accrued liabilities 122,302 142,204
Income taxes 2,845 39,561
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Total current liabilities 514,735 627,247
Long-term debt, excluding current maturities 1,076,266 971,683
Deferred income taxes 44,222 44,176
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Total liabilities 1,635,223 1,643,106
Stockholders' equity:
Class A non-voting common stock,
$1.00 par value; authorized 16,000,000
shares; issued 15,048,444 shares
at March 31, 1994 and 14,599,824 at
December 31, 1993 15,048 14,600
Class B voting common stock,
$1.00 par value; authorized 94,000,000
shares; issued 93,141,654 shares
at March 31, 1994 and December 31, 1993 93,142 93,142
Additional paid-in capital 215,722 209,029
Retained earnings 246,440 250,714
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Total stockholders' equity 570,352 567,485
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$ 2,205,575 $ 2,210,591
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[FN]
See accompanying notes to consolidated financial statements.
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Spiegel, Inc. and Subsidiaries
Consolidated Statements of Earnings
($000s omitted, except per share amounts)
Three Months Ended March 31, 1994 and 1993
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
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Net sales and other revenues:
Net sales $ 548,723 $ 439,007
Finance revenue 58,232 47,701
Other revenue 15,179 13,575
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622,134 500,283
Cost of sales and operating expenses:
Cost of sales, including buying and
occupancy expenses 368,613 306,179
Selling, general and administrative
expenses 224,171 171,320
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592,784 477,499
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Operating income 29,350 22,784
Interest expense 17,706 17,687
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Earnings before income taxes 11,644 5,097
Income taxes 5,100 2,197
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Net earnings $ 6,544 $ 2,900
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Net earnings per common share $ 0.06 $ 0.03
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Weighted average number of common
shares outstanding 108,152,215 104,018,576
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</TABLE>
See accompanying notes to consolidated financial statements.
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Spiegel, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
($000s omitted)
Three Months Ended March 31, 1994 and 1993
(unaudited)
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<CAPTION>
Three Months Ended
March 31,
1994 1993
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Net cash provided by (used in) operating activities $ (98,724) $ (62,996)
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Cash flows from investing activities:
Net additions to property and equipment (15,386) (15,591)
Net additions to other assets (10,604) (6,943)
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Net cash used in investing activities (25,990) (22,534)
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Cash flows from financing activities:
Borrowings of debt 158,500 96,750
Payments of debt (23,916) (1,416)
Dividends paid (10,818) (11,443)
Issuance of common stock 6,894 0
Exercise of stock options 247 175
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Net cash provided by financing activities 130,907 84,066
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Net change in cash and cash equivalents 6,193 (1,464)
Cash and cash equivalents at beginning of period 47,389 3,604
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Cash and cash equivalents at end of period $ 53,582 $ 2,140
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Supplemental cash flow information:
Cash paid during the year for:
Interest $ 14,802 $ 13,382
Income taxes $ 41,843 $ 21,406
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</TABLE>
See accompanying notes to consolidated financial statements.
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Spiegel, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
($000s omitted, except share amounts)
(unaudited)
(1) Adjustments
The financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair presentation of
the results for the periods presented.
(2) Reclassifications
Certain prior year amounts have been reclassified to conform to
the current presentation.
(3) Stockholders' Equity
In January, the underwriters exercised their option to purchase an
additional 400,000 shares of Class A non-voting common stock as part of the
secondary offering of common stock completed in December 1993. Accordingly,
common stock was increased $400 representing the par value of the shares and
additional paid-in capital was increased by $6,494 for the difference between
the proceeds from the issuance and the par value.
(4)
Investments in Debt and Equity Securities
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities, which requires the classification of debt and equity
securities into one of three categories; held-to-maturity, trading securities
or available-for-sale. The Company's debt and equity securities are recorded
in the consolidated balance sheet as cash equivalents and other assets. These
securities are being held-to-maturity and thus, there is no financial
statement impact to adopting SFAS No. 115.
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Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Three Months Ended March 31, 1994 Compared With Three Months Ended
March 31, 1993
Net sales for the three months ended March 31, 1994 increased 25% to
$548,723 compared to $439,007 for the three months ended March 31, 1993.
This increase was the result of the continued positive response to
merchandise offerings at Spiegel and Eddie Bauer and to the acquisition
of New Hampton, which was completed in August 1993. Additionally, strong
retail sales increases were experienced at Eddie Bauer with their comparable
store sales increasing 12%. The acquisition of New Hampton also contributed
to the sales increase.
Finance revenues increased 22% during the quarter due primarily to
a $172 million or 17% increase in Preferred Card receivables over the
March 31, 1993 levels. The overall strength of the net sales helped drive
this increase. In February, the Company successfully introduced Preferred
Credit to New Hampton customers.
The gross profit margin on net sales increased to 32.8% for the three
months ended March 31, 1994 compared to 30.3% for the comparable 1993 period.
The continued strong response to the Company's value pricing strategy and
increased contribution from Spiegel Catalog's private-label merchandise
programs helped drive this improvement. Additionally, lower levels of
promotional activity in the Eddie Bauer retail stores added to the improved
margins.
Selling, general and administrative expenses as a percent of total
revenues for the three months ended March 31, 1994 and 1993 were 36.0%
and 34.2%, respectively. This increase was primarily driven by the
Company's continued strategy of increasing market share through aggressive
new catalog customer acquisition programs.
Interest expense for the three months ended March 31, 1994 remained
relatively flat as increases in average borrowing levels were offset by
lower overall effective interest rates. The Company's consolidated tax rate
was 43.8% compared to the 1993 rate of 43.1%. This increase reflects the
change in the federal statutory corporate tax rate from 34% to 35% enacted
during the third quarter of 1993.
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Seasonality and Quarterly Fluctuations
The Company, like other retailers, has experienced and expects to
continue to experience seasonal fluctuations in its merchandise sales and
net income. Historically, a disproportionate amount of the Company's net
sales and a majority of its net earnings have been realized during the
fourth quarter. Accordingly, the results for the individual quarters are
not necessarily indicative of the results to be expected for the entire year.
Liquidity and Capital Resources
The Company has historically met its operating and cash requirements
through funds generated from operations, the issuance of debt and the sale
of customer accounts receivable. Total customer receivables sold were $330
million at March 31, 1994 and December 31, 1993.
Cash used in operating activities was $99 million for the three months
ended March 31, 1994 compared to $63 million for the comparable period last
year. This increase in cash requirements is primarily the result of the
higher customer receivable levels. Additionally, timing differences in
inventory receipts between Fall 1993 and the first quarter of 1994 resulted
in increased expenditures during the quarter compared to last year. Capital
expenditures for the new catalog distribution facility being constructed in
Groveport, OH have continued during first quarter 1994. This new distribution
facility will consolidate the majority of the catalog distribution functions
of Spiegel and Eddie Bauer. Through March 31, 1994, total project-to-date
expenditures related to the new distribution facility were $112 million.
Estimates for the total costs of this facility continue to be approximately
$135 million, with equipment financing provided through an operating lease.
Distribution activities are scheduled to commence for Eddie Bauer during the
third quarter of 1994 with Spiegel operations being transferred in early 1995.
At the present time, the Company has no plans to consolidate the distribution
functions of its recently acquired New Hampton subsidiary. In addition to
the catalog distribution facility, capital spending continues in the Eddie
Bauer retail division with ongoing store additions and remodels in process.
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During the third quarter of 1993, the Company recorded a $39 million
nonrecurring charge to effect the estimated costs for closure of certain of
the Company's existing catalog distribution facilities. This charge consisted
of termination benefits, disposal of certain fixed assets and other related
costs. The Company expects a portion of these costs will be paid in 1994
with the remaining costs paid out in 1995, with the exception of the write-off
of property and equipment of $6.5 million, which is a noncash item. As of
March 31, 1994, no material expenditures have been made relating to this
charge.
The Company believes that its cash on hand, together with cash flows
anticipated to be generated from operations, borrowings under its existing
credit facilities and other available sources of credit, will be adequate to
fund the Company's capital and operating requirements for the foreseeable
future, including expenditures related to distribution facilities and new
store openings.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPIEGEL, INC.
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Signature Title Date
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<C> <S> <C>
/s/ James W. Sievers Vice President May 13, 1994
James W. Sievers (Chief Financial Officer)
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