<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 36,116
<SECURITIES> 0
<RECEIVABLES> 619,342
<ALLOWANCES> 32,717
<INVENTORY> 523,141
<CURRENT-ASSETS> 1,319,796
<PP&E> 593,123
<DEPRECIATION> 189,542
<TOTAL-ASSETS> 2,059,917
<CURRENT-LIABILITIES> 566,193
<BONDS> 918,501
<COMMON> 107,748
0
0
<OTHER-SE> 410,218
<TOTAL-LIABILITY-AND-EQUITY> 2,059,917
<SALES> 1,213,331
<TOTAL-REVENUES> 1,303,282
<CGS> 812,117
<TOTAL-COSTS> 812,117
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,701
<INCOME-PRETAX> (32,632)
<INCOME-TAX> (15,014)
<INCOME-CONTINUING> (17,618)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,618)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
<PAGE>
- -----------------------------------------------------------
- ------------------------------------------------------------
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 June 29, 1996
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)
630-986-8800
(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 August 9,1996 are as follows:
Class A non-voting common stock, $1.00 par value
14,611,424 shares
Class B voting common stock, $1.00 par value
93,141,654 shares.
- ----------------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
SPIEGEL, INC. AND SUBSIDIARIES
Due to the seasonality of the registrant's business, the results
for the three and six 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 30, 1995.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets, June 29, 1996 and December 30, 1995
Consolidated Statements of Earnings,
Three and Six Months Ended June 29, 1996 and July 1, 1995
Consolidated Statements of Cash Flows,
Six Months Ended June 29, 1996 and July 1, 1995
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 5 - Other Information
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>
Consolidated Balance Sheets
($000s omitted, except per share amounts)
<TABLE>
<CAPTION>
(unaudited)
June 29, December 30,
1996 1995
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36,116 $ 42,302
Receivables, net 586,625 742,480
Inventories 523,141 572,377
Prepaid expenses 88,837 101,324
Refundable income taxes 42,944 29,560
Deferred income taxes 42,133 42,234
------------ ------------
Total current assets 1,319,796 1,530,277
Property and equipment, net 403,581 412,934
Intangibles, net 172,738 173,088
Other assets 163,802 157,683
------------ ------------
Total Assets $ 2,059,917 $ 2,273,982
------------ ------------
------------ ------------
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of debt $ 134,328 $ 111,672
Accounts payable 176,162 256,527
Accrued liabilities:
Salaries and wages 20,434 32,370
General taxes 114,685 125,504
Other accrued liabilities 120,584 140,375
------------ ------------
Total current liabilities 566,193 666,448
Long-term debt, excluding
current maturities 898,501 994,692
Indebtedness to related parties 20,000 20,000
Deferred income taxes 57,257 57,269
------------ ------------
Total liabilities 1,541,951 1,738,409
Stockholders' equity:
Class A non-voting common stock,
$1.00 par value; authorized
16,000,000 shares; 14,606,324
shares issued and outstanding
at June 29, 1996 and 14,604,844
at December 30, 1995 14,606 14,605
Class B voting common stock,
$1.00 par value; authorized
94,000,000 shares; 93,141,654
shares issued and outstanding
at June 29, 1996 and December 30,
1995 93,142 93,142
Additional paid-in capital 211,771 211,761
Minimum pension liability (8,650) (8,650)
Retained earnings 207,097 224,715
------------ ------------
Total stockholders' equity 517,966 535,573
------------ ------------
$ 2,059,917 $ 2,273,982
------------ ------------
------------ -----------
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
- -------------------------------------------------------------
- -------------------------------------------------------------
<PAGE>
Consolidated Statements of Earnings
($000s omitted, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales and other revenues:
Net sales $ 623,870 $636,759 $1,213,331 $1,217,620
Finance revenue 33,266 45,323 61,607 109,329
Other revenue 11,465 17,198 28,344 51,958
----------- ----------- ----------- -----------
668,601 699,280 1,303,282 1,378,907
Cost of sales and operating expenses:
Cost of sales, including
buying and occupancy
expenses 408,225 429,573 812,117 843,202
Selling, general
and administrative
expenses 246,465 272,580 481,096 528,917
----------- ----------- ----------- -----------
654,690 702,153 1,293,213 1,372,119
----------- ----------- ----------- ----------
Operating income (loss) 13,911 (2,873) 10,069 6,788
Interest expense 21,195 23,492 42,701 49,859
----------- ----------- ----------- -----------
Earnings (loss)
before income taxes (7,284) (26,365) (32,632) (43,071)
Income tax benefit (3,987) (11,505) (15,014) (18,796)
----------- ----------- ----------- -----------
Net earnings (loss) $ (3,297) $ (14,860) $ (17,618) $ (24,275)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings (loss)
per common share $ (0.03) $ (0.14) $ (0.16) $ (0.22)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average
number of common
shares outstanding 107,746,760 107,716,627 107,746,629 107,934,394
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
- -----------------------------------------------------------
- -----------------------------------------------------------
<PAGE>
Consolidated Statements of Cash Flows
($000s omitted)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 29, July 1,
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ (17,618) $ (24,275)
Adjustments to reconcile
net earnings (loss) to net
cash provided by operating
activities:
Depreciation and amortization 39,282 31,359
Gain on sale of
receivables -- (18,637)
Change in assets and liabilities:
Sale of customer
accounts receivable 30,000 350,000
(Increase) decrease in receivables, net 125,855 (32,471)
Decrease in inventories 49,236 260
(Increase) decrease in prepaid expenses 12,487 (8,769)
Decrease in accounts payable (80,365) (75,550)
Decrease in accrued liabilities (42,546) (63,641)
Decrease in income taxes (13,294) (8,143)
----------- ------------
Total adjustments 120,655 174,408
----------- -----------
Net cash provided by operating activities 103,037 150,133
------------ ------------
Cash flows from investing activities:
Net additions to property and equipment (18,352) (73,169)
Net additions to other assets (17,346) (11,211)
------------ ------------
Net cash used in investing activities (35,698) (84,380)
------------ ------------
Cash flows from financing activities:
Issuance of debt 300,250 171,250
Payment of debt (373,786) (228,159)
Dividends paid -- (10,805)
Repurchase of common stock -- (4,742)
Exercise of stock options 11 73
------------ ------------
Net cash used in financing activities (73,525) (72,383)
------------ ------------
Net change in cash and cash equivalents (6,186) (6,630)
Cash and cash equivalents at
beginning of period 42,302 33,439
------------ -----------
Cash and cash equivalents
at end of period $ 36,116 $ 26,809
------------ ------------
------------ ------------
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 43,360 $ 51,301
Income taxes $ 2,077 $ 4,387
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
Notes to Consolidated Financial Statements
($000s omitted)
(unaudited)
(1) Adjustments
The financial statements reflect all adjustments, consisting
only of normal accruals, 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) Long-term debt
In March 1996, the Company replaced certain of its existing
credit arrangements with new credit facilities and modified
certain conditions of other senior and subordinated term
indebtedness. These changes were made to strengthen the
Company's liquidity and provide for future growth. The
Company established a new $600 million revolving credit
agreement with a group of 23 banks. The Company also increased
its existing asset backed commercial paper program to $600
million from $400 million with a corresponding increase in the
back-up credit line with the same group of 23 banks. The $400
million asset backed commercial paper program had been
established in December 1995, as a prelude to these financing
modifications. Simultaneously with the establishment of these
new credit facilities, the Company canceled a $600 million
commercial paper facility and a $300 million revolving credit
facility. The Company also sold a net amount of $30,000 of
customer receivables during the first six months of 1996.
(4) Indebtedness to related parties
In addition to the loan from the Company's majority shareholder,
Spiegel Holdings, Inc., which existed as of December 30, 1995,
in the first quarter of 1996, the Company received a term loan
from 3 Suisses BVG (a wholly owned subsidiary of Otto Versand)
for $25,000. This loan will be repaid $5,000 in 1996, $5,000
in 1997 and $15,000 in 1998 and bears interest at a rate of
5.92%. As of June 29, 1996, the total indebtedness to related
parties outstanding was $55,000. The current portion is
included in the Company's balance sheet under "Current
maturities of debt".
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
(000's omitted except per share amounts)
Results of Operations
Three Months Ended June 29, 1996 As Compared To Three Months
Ended July 1, 1995
- --------------------------------------
Net sales for the three months ended June 29, 1996, decreased
2.0% to $623,870 compared to $636,759 for the three months ended
July 1, 1995. Eddie Bauer's retail sales increased by 10.0%
compared to the same period last year with a comparable store
sales increase of 1.1%. Total Company catalog sales declined
5.9% for the quarter as a result of the Company's planned
reduction in catalog circulation as well as lower productivity
from certain end-of-season sale books at Spiegel Catalog.
Finance revenue of $33,266 for the second quarter of 1996 was
26.6% below the $45,323 reported for the same period in 1995.
This decrease was mainly the result of a significantly lower
level of average owned FCNB Preferred Card receivables in the
second quarter of 1996 compared to the same period in 1995 due
to sales of customer receivables.
The gross profit margin on net sales was 34.6% and 32.5% for the
three month periods ended June 29, 1996 and July 1, 1995,
respectively. This improvement is driven by a lower level of
promotional activity, resulting in less markdowns.
Selling, general and administrative expenses as a percentage of
total revenues for the three months ended June 29, 1996 and July
1, 1995 were 36.9% and 39.0%, respectively. This decrease
reflected reductions achieved in several operating units'
selling, general and administrative expenses. These reductions
included improvements from the Company's new fulfillment and
distribution facilities as well as other efficiencies gained
from the Company's ongoing cost reduction efforts. In general,
the Company's credit business has a higher selling, general and
administrative expense ratio than other areas of the Company and
has been experiencing higher charge-offs. However, as a result
of the receivable sales, the relative size of the credit
business has been reduced, and its selling, general and
administrative expense ratio has improved slightly. This has
had a favorable impact on the overall Company's ratio.
Interest expense was $21,195 for the three months ended June 29,
1996 compared to $23,492 for the three months ended July 1,
1995. This decrease was mainly due to lower average debt
levels resulting from the higher level of customer receivables
sold.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
Six Months Ended June 29, 1996 As Compared To Six Months Ended
July 1, 1995
- -----------------------------------
For the six months ended June 29, 1996 and July 1, 1995, net
sales were $1,213,331 and $1,217,620, respectively. Eddie
Bauer's retail sales were 12.9% higher than last year for the
period, and its comparable store sales increased 2.9%. Total
Company catalog sales were lower than last year as a result of
planned catalog circulation reductions made to reduce the impact
of paper price increases. Additionally, lower productivity
rates on certain catalog media at Spiegel Catalog contributed to
the decline.
Finance revenue for the six month period ended June 29, 1996 was
$61,607 compared to $109,329 for the same period of 1995. This
decline is mainly the result of significantly lower average
owned FCNB Preferred Card receivables due to sales of customer
receivables. Other revenue was $28,344 and $51,958 for the six
month periods ended June 29, 1996 and July 1, 1995,
respectively. The decrease is mainly attributable to a gain of
$18,637 recognized on the sale of customer receivables in the
first quarter of 1995. There was no comparable gain in 1996.
The gross profit margin on net sales increased to 33.1% from
30.7% for the first six months of 1996 compared to the same
period in 1995. Clearance and markdown activity was much lower
in the 1996 period. In the first half 1995, the Company took
aggressive markdowns to liquidate overstock merchandise. Such
markdowns were not required in the same period of 1996.
Selling, general and administrative expenses as a percentage to
total revenue were 36.9% and 38.4% for the six month periods
ended June 29, 1996 and July 1,1995, respectively. The Company
has continued to pursue cost saving measures in all areas of its
businesses. The lower selling, general and administrative
expense ratio reflected reductions in several operating
units'expenses as well as efficiencies being realized from the
Company's new fulfillment and distribution facilities and more
tightly controlled advertising expenditures, including catalog
production costs. The 1996 ratio was also favorably impacted by
the gain of approximately $8,000 realized on the sale of the
Company's information technology subsidiary in the first
quarter. Also favorably effecting the 1996 ratio, as discussed
above, was the diminishing relative effect of the Company's
credit business due to receivable sales. By comparison, the 1995
ratio was favorably impacted by the effects of a sale of
$350,000 of customer receivables in March 1995 including an
$18,637 gain recognized and a reversal of approximately $15,000
of the provision for doubtful accounts on the receivables sold.
Interest expense was $42,701 and $49,859 for the six months
ended June 29, 1996 and July 1, 1995, respectively. This
decrease was mainly due to lower average debt levels resulting
from a higher level of customer receivables sold and the
Company's lower inventory levels.
The effective tax rate was 46.0% and 43.6% for the six months
ended June 29, 1996 and July 1, 1995, respectively. This
increase was due to the relative impact of the amortization of
non-deductible goodwill as a percentage of earnings before taxes.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
Seasonality and Quarterly Fluctuations:
- ---------------------------------------
The Company, like other retailers, experiences seasonal
fluctuations in its merchandise sales and net earnings.
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 $1,210,000 at June 29,
1996, $1,180,000 at December 30, 1995 and $830,000 at July 1,
1995.
In March 1996, the Company replaced certain of its existing
credit arrangements with new credit facilities and modified
certain conditions of other senior and subordinated term
indebtedness. These changes were made to strengthen the
Company's liquidity and provide for future growth. The Company
established a new $600 million revolving credit agreement with a
group of 23 banks. The Company also increased its existing
asset backed commercial paper program to $600 million from $400
million with a corresponding increase in the back-up credit
line with the same group of 23 banks. The $400 million asset
backed commercial paper program had been established in
December 1995 as a prelude to these financing modifications.
Simultaneously with the establishment of these new credit
facilities, the Company canceled a $600 million commercial paper
facility and a $300 million revolving credit facility. The
Company also sold a net amount of $30,000 of customer
receivables during the first six months of 1996.
Net cash provided by operating activities was $103,037 and
$150,133 for the six month periods ended June 29, 1996 and July
1, 1995, respectively. The net cash proceeds from the sale of
$30,000 and $350,000 of customer receivables were reported as
operating cash flows in the six months ended June 29, 1996 and
July 1, 1995, respectively. Without the effects of the sale of
customer receivables, net cash provided by operating activities
would have been $73,037 for the six month period ended June 29,
1996 and net cash used by operating activities would have been
$199,867 for the six month period ended July 1, 1995. In 1996,
significant sources of cash from operating activities were
decreases in customer receivables and inventories. Decreases in
accounts payable and other liabilities represented significant
uses of cash.
Net additions to property and equipment for the six months ended
June 29, 1996 and July 1, 1995 were $18,352 and $73,169,
respectively. The capital spending in 1996 was primarily related
to the new addition to Eddie Bauer's headquarters, continued
Eddie Bauer retail store expansion, and improvements to the
retail distribution facility in Columbus, OH.
During the six months ended June 29, 1996, the Company incurred
approximately $2,290 of expenditures related to the nonrecurring
charge taken in 1993. The charge provided for the estimated
impact of closing certain of the Company's existing catalog
distribution facilities. Expenditures incurred during 1996 were
primarily for closing costs incurred relating to the warehouse
buildings.
The Company believes that its cash on hand, together with cash
flows anticipated to be generated from operations, and
borrowings under its existing credit facilities and other
available sources of funds, will be adequate to fund the
Company's capital and operating requirements for the
foreseeable future.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
Item 5. Other Information
During the second quarter of 1996, certain changes were made to
the Company's board of directors. At the Company's board of
directors meeting on April 25, 1996, Mr. Richard T. Fersch,
President and Chief Operating Officer of Eddie Bauer, and Mr.
John W. Irvin, President of the Spiegel Catalog Division, were
elected to the board of directors. In June, Mr. Hans-Christoph
Fischer announced his departure from the Company's board of
directors. Mr. Martin Zaepfel of Otto Versand (GmbH Co) has
been named to the board as Mr. Fischer's replacement.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------- -------------------- ----------------
<C> <S> <C>
/s/ James W. Sievers Senior Vice President August 13,1996
James W. Sievers (Chief Financial Officer)
</TABLE>
