<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 39,195
<SECURITIES> 0
<RECEIVABLES> 437,208
<ALLOWANCES> 8,186
<INVENTORY> 520,934
<CURRENT-ASSETS> 1,154,062
<PP&E> 569,924
<DEPRECIATION> 177,493
<TOTAL-ASSETS> 1,881,835
<CURRENT-LIABILITIES> 534,786
<BONDS> 734,650
<COMMON> 118,106
0
0
<OTHER-SE> 442,256
<TOTAL-LIABILITY-AND-EQUITY> 1,881,835
<SALES> 569,785
<TOTAL-REVENUES> 601,812
<CGS> 400,935
<TOTAL-COSTS> 400,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,370
<INCOME-PRETAX> (56,233)
<INCOME-TAX> (25,024)
<INCOME-CONTINUING> (31,209)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,209)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</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 March 29, 1997
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 May 9,1997 are as follows:
Class A non-voting common stock, $1.00 par value
14,623,104 shares
Class B voting common stock, $1.00 par value
103,483,298 shares.
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<PAGE>
SPIEGEL,INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets, March 29, 1997 and December 28, 1996
Consolidated Statements of Earnings,
Three Months Ended March 29, 1997 and March 30, 1996
Consolidated Statements of Cash Flows,
Three Months Ended March 29, 1997 and March 30, 1996
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
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<PAGE>
Consolidated Balance Sheets
($000s omitted, except per share amounts)
March 29, 1997 and December 28, 1996
<TABLE>
<CAPTION>
(unaudited)
March 29, December 28,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,195 $ 86,917
Receivables, net 429,022 485,242
Inventories 520,934 502,209
Prepaid expenses 86,338 84,634
Refundable income taxes 43,042 16,991
Deferred income tax benefit 35,531 35,542
------------ ------------
Total current assets 1,154,062 1,211,535
Property and equipment, net 392,431 399,910
Intangible assets, net 165,952 166,275
Other assets 169,390 167,905
------------ ------------
Total Assets $ 1,881,835 $ 1,945,625
------------ ------------
------------ ------------
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of debt $ 94,274 $ 89,292
Indebtedness to related parties 20,000 20,000
Accounts payable 165,286 270,973
Accrued liabilities:
Salaries and wages 20,189 36,636
General taxes 113,082 127,170
Allowance for returns 25,791 41,691
Other accrued liabilities 96,164 109,634
------------ ------------
Total current liabilities 534,786 695,396
Long-term debt, excluding current maturities 709,650 676,656
Indebtedness to related parties 25,000 --
Deferred income taxes 52,037 52,024
------------ ------------
Total liabilities 1,321,473 1,424,076
Stockholders' equity:
Class A non-voting common stock,
$1.00 par value; authorized 16,000,000
shares; issued 14,623,104 shares
at March 29, 1997 and 14,618,404 at
December 28, 1996 14,623 14,618
Class B voting common stock,
$1.00 par value; authorized 104,000,000
shares; issued 103,483,298 shares at
March 29, 1997 and 93,141,654 at
December 28, 1996 103,483 93,142
Additional paid-in capital 271,504 211,828
Minimum pension liability (9,365) (9,365)
Retained earnings 180,117 211,326
------------ ------------
Total stockholders' equity 560,362 521,549
------------ ------------
$ 1,881,835 $ 1,945,625
------------ ------------
------------ ------------
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
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<PAGE>
Consolidated Statements of Earnings
($000s omitted, except per share amounts)
Fiscal Periods Ended March 29, 1997 and March 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 30,
1997 1996
----------- -----------
<S> <C> <C>
Net sales and other revenues:
Net sales $ 569,785 $ 589,461
Finance revenue 22,528 28,341
Other revenue 9,499 16,879
---------- ------------
601,812 634,681
Cost of sales and operating expenses:
Cost of sales, including buying and
occupancy expenses 400,935 403,892
Selling, general and administrative
expenses 240,740 234,631
--------- -----------
641,675 638,523
---------- ------------
Operating income (loss) (39,863) (3,842)
Interest expense 16,370 21,506
----------- ------------
Earnings (loss) before income taxes (56,233) (25,348)
Income tax benefit (25,024) (11,027)
----------- -----------
Net earnings (loss) $ (31,209) $ (14,321)
----------- -----------
----------- -----------
Net earnings (loss) per common share $ (0.28) $ (0.13)
----------- -----------
----------- -----------
Weighted average number of common
shares outstanding 110,261,774 107,746,498
----------- -----------
----------- -----------
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
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<PAGE>
Consolidated Statements of Cash Flows
($000s omitted)
Three months ended March 29, 1997 and March 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 30,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (31,209) $ (14,321)
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 20,467 19,815
Change in assets and liabilities:
Increase (decrease) in sold customer receivables (113,572) 70,000
Decrease in receivables, net 169,792 88,337
(Increase) decrease in inventories (18,725) 17,315
(Increase) decrease in prepaid expenses (1,704) 18,573
Decrease in accounts payable (105,687) (99,726)
Decrease in accrued liabilities (59,904) (44,385)
Decrease in income taxes (26,027) (11,223)
------------ ------------
Total adjustments (135,360) 58,706
------------ ------------
Net cash provided by (used in) operating activities $ (166,569) $ 44,385
------------ ------------
Cash flows from investing activities:
Net additions to property and equipment (7,356) (9,052)
Net additions to other assets (6,795) (15,958)
------------ ------------
Net cash used in investing activities (14,151) (25,010)
------------ ------------
Cash flows from financing activities:
Issuance of debt 108,000 310,000
Payment of debt (45,024) (312,518)
Issuance of Class B common stock 70,000 --
Exercise of stock options 22 --
------------ ------------
Net cash provided by (used in) financing activities 132,998 (2,518)
------------ ------------
Net change in cash and cash equivalents (47,722) 16,857
Cash and cash equivalents at beginning of year 86,917 42,302
------------ ------------
Cash and cash equivalents at end of period $ 39,195 $ 59,159
------------ ------------
------------ ------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 12,926 $ 23,596
Income taxes $ 3,170 $ 1,070
------------ ------------
------------ ------------
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
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<PAGE>
Spiegel, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
($000s omitted, except per share amounts)
(unaudited)
(1) Basis of Presentation
The consolidated financial statements at March 29, 1997 are unaudited
and have been prepared from the books and records of the registrant in
accordance with generally accepted accounting principles and the rules
and regulations of the Securities and Exchange Commission.
All adjustments (consisting only of normal recurring accruals) which
are, in the opinion of management, necessary for a fair presentation
of financial position and operating results for the interim periods are
reflected. These financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included in
the registrant's most recent Annual Report on Form 10-K, which includes
financial statements for the year ended December 28, 1996. Due to the
seasonality of the registrant's business, the results for interim periods
are not necessarily indicative of the results for the year.
(2) Reclassifications
Certain prior period amounts have been reclassified to conform to the
current presentation.
(3) Indebtedness to related parties
In addition to the $20,000 loan from the Company's majority shareholder,
Spiegel Holdings, Inc., which existed as of December 28, 1996, the Company
received a term loan in the first quarter from 3 Suisses BVG (a wholly owned
subsidiary of Otto Versand) for $25,000. The loan bears interest at a
variable rate based on LIBOR plus a margin. This loan is due in its
entirety in August, 1999.
(4) Issuance of Class B common stock
On March 7, 1997, the Company issued 10,341,644 shares of Class B voting
common stock for $70,000 to its majority shareholder, Spiegel Holdings,
Inc. The proceeds from this issuance will be used primarily to fund
capital needs, including the continued expansion of Eddie Bauer.
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<PAGE>
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(000s omitted, except per share amounts)
Results of Operations
Three Months Ended March 29, 1997 As Compared To Three Months
Ended March 30, 1996
- ----------------------------------------------------------------------------
Net sales for the three months ended March 29, 1997, were $569,785 which
was a 3.3% decrease compared to net sales of $589,461 for the three months
ended March 30, 1996. This decrease was driven by lower Spiegel Catalog net
sales due to the decreased productivity of catalog mailings. In addition,
sales were also impacted by the tightened credit policies on the Company's
Preferred Credit card as a significant portion of Spiegel Catalog sales are
generated on this propriety credit card. These declines were offset somewhat
by increases in net sales at Eddie Bauer. Comparable store sales for Eddie
Bauer retail stores increased 4% in the first quarter of 1997 compared to the
first quarter of 1996.
Finance revenue for the first quarter of 1997 was $22,528 compared to $28,341
for the same period in 1996. This decrease was primarily the result of a
significantly lower level of average owned customer receivables in the first
quarter of 1997 compared to 1996 due to sales of customer receivables
completed in 1996 and to decreases in sales on the Company's proprietary
credit card. Other revenue for the first quarter of 1997 decreased $7,380
as compared to the first quarter of 1996 due to the sale of the Company's
technology consulting subsidiary at the end of the first quarter of 1996.
The gross profit margin on net sales decreased to 29.6% for the three months
ended March 29, 1997 compared to 31.5% for the comparable 1996 period. This
decrease was primarily driven by lower gross profit margin at Spiegel Catalog
resulting from a higher percentage of clearance catalog sales compared to
sales from in-season, regular priced catalogs. Somewhat offsetting this
was an increase in the gross profit margin at Eddie Bauer.
Selling, general and administrative expenses as a percentage of total
revenues for the three months ended March 29, 1997 and March 30, 1996
were 40.0% and 37.0%, respectively. This increase is due to several factors
including less leverage of selling, general and administrative expenses,
especially advertising expense, at Spiegel Catalog as a result of lower
productivity from catalog offerings. In addition, the 1996 ratio was
favorably impacted by the gain of approximately $8,000 realized on the
sale of the Company's information technology subsidiary. Finally, the
1996 ratio was favorably impacted by a $4 million reversal of the
provision for doubtful accounts on customer receivables sold in the
first quarter of 1996.
Interest expense for the three months ended March 29, 1997 decreased
23.9% to $16,370 compared to $21,506 for the three months ended
March 30, 1996. This decrease was due to lower average debt levels
offset slightly by higher effective interest rates. Debt levels
have declined as a result of a higher lever of customer receivables sold
and the Company's lower inventory levels.
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<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 sale of customer accounts
receivable, and the issuance of debt and common stock. Total customer
receivables sold were $1,350,158 at March 29, 1997, $1,463,730 at
December 28, 1996 and $1,250,000 at March 30, 1996.
Net cash used by operating activities was $166,569 for the three
month period ended March 29, 1997. Significant uses of cash for
the 1997 quarter were seasonal decreases in accounts payable and
accrued liabilities of approximately $192,000 and funding of the
$31,209 net loss. These were offset somewhat by a $56,220 net
decrease in owned receivables during the 1997 quarter. For the three
month period ended March 30, 1996, there was net cash provided by
operations of $44,385. Significant sources of cash for the first
quarter of 1996 included a net decrease in owned receivables of
$158,337 and decreases in inventories and prepaids totaling
approximately $36,000. These sources were somewhat offset by decreases
in accounts payable and accrued liabilities of approximately $155,000
during the first quarter of 1996.
Net additions to property and equipment for the three months ended
March 29, 1997 were $7,356 compared to $9,052 for the first quarter
of 1996. The capital spending in 1997 was primarily related to
continued Eddie Bauer retail store expansion.
On March 7, 1997, the Company issued 10,341,644 shares of Class B
voting common stock for $70,000 to its majority shareholder, Spiegel
Holdings, Inc. The proceeds from this issuance will be primarily used
to fund capital needs, including continued expansion of Eddie Bauer.
During the three months ended March 29, 1997, the Company incurred
approximately $2,500 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 the first quarter of 1997 were primarily
for closing costs relating to the warehouse buildings. All buildings
associated with the reserve have now been sold or transferred to third
parties. There is no reserve balance remaining.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share",
effective for both interim and annual periods ending after
December 15, 1997. The Company will adopt the new standard, as required,
in the fourth quarter of 1997. For the quarter ended March 29, 1997,
SFAS No. 128 would not have had a material impact on the Company's
loss per share calculation.
The Company believes that its cash on hand, together with cash flows
anticipated to be generated from operations, borrowings under its
existing credit facilities, sales of customer receivables and other
available sources of funds, will be adequate to fund the Company's
capital and operating requirements for the foreseeable future.
Forward Looking Statements:
This report contains statements which are forward looking statements
within the meaning of applicable federal securities laws and are
based upon the Company's current expectations and assumptions. Such
forward looking statements are subject to a number of risks and
uncertainties which could cause actual results to materially differ
from those anticipated including but not limited to, financial strength
and performance of the retail and direct marketing industry, changes
in consumer spending patterns, dependence on the securitization of
accounts receivable to fund operations, the impact of competitive
activities, inventory risks due to shifts in the market demand, risks
associated with collections on the Company's credit card portfolios,
interest rate fluctuations, and postal rate, paper or printing cost
increases, as well as other risks indicated in other filings with
the Securities and Exchange Commission such as the Company's most
recent Form 10-K.
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<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 May 13, 1997
James W. Sievers (Chief Financial Officer)
</TABLE>
