<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 44,398
<SECURITIES> 0
<RECEIVABLES> 390,761
<ALLOWANCES> 9,960
<INVENTORY> 514,207
<CURRENT-ASSETS> 1,108,319
<PP&E> 578,911
<DEPRECIATION> 189,947
<TOTAL-ASSETS> 1,851,916
<CURRENT-LIABILITIES> 476,874
<BONDS> 776,150
<COMMON> 118,107
0
0
<OTHER-SE> 428,748
<TOTAL-LIABILITY-AND-EQUITY> 1,851,916
<SALES> 1,215,875
<TOTAL-REVENUES> 1,298,055
<CGS> 835,699
<TOTAL-COSTS> 835,699
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,522
<INCOME-PRETAX> (75,750)
<INCOME-TAX> (31,058)
<INCOME-CONTINUING> (44,692)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,692)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> (0.39)
</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 28, 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 August 8,1997 are as follows:
Class A non-voting common stock, $1.00 par value
14,627,104 shares
Class B voting common stock, $1.00 par value
103,483,298 shares.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
SPIEGEL, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets, June 28, 1997 and December 28, 1996
Consolidated Statements of Earnings,
Three and Six Months Ended June 28, 1997 and June 29, 1996
Consolidated Statements of Cash Flows,
Six Months Ended June 28, 1997 and June 29, 1996
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
Consolidated Balance Sheets
($000s omitted, except per share amounts)
<TABLE>
<CAPTION>
(unaudited)
June 28, December 28,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 44,398 $ 86,917
Receivables, net 380,801 485,242
Inventories 514,207 502,209
Prepaid expenses 84,106 84,634
Refundable income taxes 49,275 16,991
Deferred income taxes 35,532 35,542
------------ ------------
Total current assets 1,108,319 1,211,535
Property and equipment, net 388,964 399,910
Intangibles, net 165,098 166,275
Other assets 189,535 167,905
------------ ------------
Total Assets $ 1,851,916 $ 1,945,625
------------ ------------
------------ ------------
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of debt $ 52,850 $ 89,292
Indebtedness to related parties -- 20,000
Accounts payable 172,553 270,973
Accrued liabilities:
Salaries and wages 22,414 36,636
General taxes 107,360 127,170
Allowance for returns 24,474 41,691
Other accrued liabilities 97,224 109,634
------------ ------------
Total current liabilities 476,875 695,396
------------ ------------
Long-term debt, excluding current maturities 771,150 676,656
Indebtedness to related parties 5,000 --
Deferred income taxes 52,036 52,024
------------ ------------
Total liabilities 1,301,061 1,424,076
Stockholders' equity:
Class A non-voting common stock,
$1.00 par value; authorized 16,000,000
shares; 14,624,104 shares issued and
outstanding at June 28, 1997 and 14,618,404
at December 28, 1996 14,624 14,618
Class B voting common stock,
$1.00 par value; authorized 104,000,000
shares; 103,483,298 shares issued and
outstanding at June 28, 1997 and
93,141,654 at December 28, 1996 103,483 93,142
Additional paid-in capital 271,480 211,828
Minimum pension liability (9,365) (9,365)
Retained earnings 166,633 211,326
------------ ------------
Total stockholders' equity 546,855 521,549
------------ ------------
$ 1,851,916 $ 1,945,625
------------ ------------
------------ ------------
</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 28, June 29, June 28, June 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales and other revenues:
Net sales $ 646,090 $ 623,870 $1,215,875 $1,213,331
Finance revenue 38,715 33,266 61,243 61,607
Other revenue 11,438 11,465 20,937 28,344
----------- ----------- ----------- -----------
696,243 668,601 1,298,055 1,303,282
Cost of sales and operating expenses:
Cost of sales, including buying and
occupancy expenses 434,764 408,225 835,699 812,117
Selling, general and administrative
expenses 264,844 246,465 505,584 481,096
----------- ----------- ----------- -----------
699,608 654,690 1,341,283 1,293,213
----------- ----------- ----------- -----------
Operating income (loss) (3,365) 13,911 (43,228) 10,069
Interest expense 16,152 21,195 35,522 42,701
----------- ----------- ----------- -----------
Earnings (loss) before income taxes (19,517) (7,284) (75,750) (32,632)
Income benefit (6,034) (3,987) (31,058) (15,014)
----------- ----------- ----------- -----------
Net earnings (loss) $ (13,483) $ (3,297) $ (44,692) $ (17,618)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings (loss) per common share $ (0.11) $ (0.03) $ (0.39) $ (0.16)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding 118,106,457 107,746,760 114,184,116 107,746,629
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Consolidated Statements of Cash Flows
($000s omitted)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 28, June 29,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ (44,692) $ (17,618)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 41,583 41,248
Gain on sale of receivables (19,672) --
Change in assets and liabilities:
Increase (decrease) in sold customer
receivables (149,734) 30,000
Decrease in receivables, net 254,175 125,855
(Increase) decrease in inventories (11,998) 49,236
Decrease in prepaid expenses 527 12,487
Decrease in accounts payable (98,419) (80,365)
Decrease in accrued liabilities (63,660) (42,546)
Decrease in income taxes (32,262) (13,294)
----------- ------------
Total adjustments (79,460) 122,621
----------- ------------
Net cash provided by (used in) operating activities (124,152) 105,003
------------ ------------
Cash flows from investing activities:
Net additions to property and equipment (18,899) (18,352)
Net additions to other assets (12,519) (19,312)
------------ ------------
Net cash used in investing activities (31,418) (37,664)
------------ ------------
Cash flows from financing activities:
Issuance of debt 124,500 300,250
Payment of debt (81,448) (373,786)
Issuance of Class B common stock 69,972 --
Exercise of stock options 27 11
------------ ------------
Net cash provided by (used in)
financing activities 113,051 (73,525)
------------ ------------
Net change in cash and cash equivalents (42,519) (6,186)
Cash and cash equivalents at beginning of period 86,917 42,302
------------ ------------
Cash and cash equivalents at end of period $ 44,398 $ 36,116
------------ ------------
------------ ------------
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 32,856 $ 43,360
Income taxes $ 4,533 $ 2,077
------------ ------------
------------ ------------
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
<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 June 28, 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 the second quarter of 1997, the Company made the final $20,000 principal
payment on the loan from the Company's majority shareholder, Spiegel
Holdings, Inc., which existed as of December 28, 1996. In addition,
the Company replaced $20,000 of the $25,000 loan from 3 Suisses BVG (a
wholly owned subsidiary of Otto Versand) received in the first quarter of
1997 with a term loan from an unrelated party. As of June 28, 1997, the
total indebtedness to related parties outstanding was $5,000, bearing
interest at a variable rate based on LIBOR plus a margin, 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 to its majority shareholder, Spiegel Holdings, Inc. The net
proceeds of $69,972 are being used primarily to fund capital needs,
including the continued expansion of Eddie Bauer.
(5) Gains on sale of customer receivables
In 1997, the Company implemented Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities". Due to the revolving
nature of sales of customer receivables held by trusts, a pretax gain of
$19,672 was recognized under the provisions of this new accounting
standard in the second quarter. This gain is recorded as Finance
Revenue in the Consolidated Statements of Earnings.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<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 28, 1997 As Compared To Three Months Ended June 29, 1996
Net sales for the three months ended June 28, 1997, were $646,090 which was
a 3.6% increase compared to net sales of $623,870 for the three months ended
June 29, 1996. Sales increases from Eddie Bauer's retail and catalog divisions
were significantly offset by sales decreases at Spiegel Catalog. Eddie Bauer's
retail sales increased by 11.9% compared to the same period last year, with a
comparable store sales increase of 2%. Total Company catalog sales were flat
for the period as the growth of Eddie Bauer's catalog operations offset the
lower Spiegel Catalog sales. Spiegel Catalog continues to be affected by lower
productivity and response rates experienced in catalog mailings.
Finance revenue for the second quarter of 1997 increased to $38,715 from
$33,266 a year earlier. Revenues were favorably affected by a pretax gain of
$19,672 on the sale of customer receivables recognized pursuant to SFAS
No. 125. This gain was offset somewhat by lower finance revenues generated
as a result of a lower average level of owned customer receivables.
The gross profit margin on net sales decreased to 32.7% for the three months
ended June 28, 1997, compared to 34.6% for the comparable 1996 period. This
decrease was driven by lower gross profit margins at Spiegel Catalog reflecting
a higher level of markdowns taken in an effort to promote sales and manage
inventory risk.
Selling, general and administrative expenses as a percentage of total revenues
for the three months ended June 28, 1997 and June 29, 1996 were 38.0% and
36.9%, respectively. This increase was primarily due to approximately
$10,000 in expenses associated with the restructuring activities of Spiegel
Catalog, which included reserves for the closing of certain facilities and
a work force reduction of approximately 125 Spiegel Catalog associates.
Other factors contributing to the increase included less leverage of selling,
general and administrative expenses, especially advertising expense, at
Spiegel Catalog as a result of lower productivity from catalog offerings.
Interest expense for the three months ended June 28, 1997 decreased 23.8% to
$16,152 compared to $21,195 for the three months ended June 29, 1996. This
decrease was due to reduced average debt levels resulting from a lower level
of owned customer receivables and from the $69,972 net proceeds from the
issuance of Class B voting stock in March 1997.
Six Months Ended June 28, 1997 As Compared To Six Months Ended June 29, 1996
Net sales for the six months ended June 28, 1997 and June 29, 1996 were
$1,215,875 and $1,213,331, respectively. Eddie Bauer's retail sales increased
11.3% over last year, with a comparable store sales increase of 3%. Total
Company catalog sales were lower than last year by 4.7%. This decrease was
driven by Spiegel Catalog as it continues to be affected by the lower
productivity of catalog mailings as well as by the tightened credit policies
on the Company's Preferred Credit Card.
Finance revenue for the six month period ended June 28, 1997, was $61,243
compared to $61,607 for the same period in 1996. A pretax gain of $19,672
on the sale of customer receivables was recognized during the 1997 period under
the provisions of SFAS No. 125. Offsetting this gain was a decrease in finance
revenues resulting from a significantly lower level of average owned
receivables compared to 1996 due to sales of customer receivables, as well
as decreases in sales on the Company's proprietary credit card. Other
revenue was $20,937 and $28,344 for the six month periods ended June 28, 1997
and June 29, 1996, respectively. This decrease was due primarily 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 31.3% for the six months
ended June 28, 1997 from 33.1% for the comparable 1996 period. This decrease
was driven by lower gross profit margins at Spiegel Catalog reflecting a
higher level of markdowns taken in an effort to promote sales and manage
inventory risk.
Selling, general and administrative expenses as a percentage of total revenues
for the six months ended June 28, 1997 and June 29, 1996 were 39.0% and 36.9%,
respectively. This increase was primarily due to approximately $10,000 in
expenses associated with the restructuring activities of Spiegel Catalog, which
included reserves for the closing of certain facilities and a work force
reduction of approximately 125 Spiegel Catalog associates. Other factors
contributing to the increase included less leverage of selling, general and
administrative expenses, especially advertising expense, at Spiegel Catalog
as a result of lower productivity from catalog offerings. The 1996 ratio was
favorably impacted by the gain of approximately $8,000 realized on the sale of
the Company's information technology subsidiary, as well as the favorable
impact of a $4 million reversal of the provision for doubtful accounts on
customer receivables sold in the first quarter of 1996.
Interest expense for the six months ended June 28, 1997 decreased 23.8% to
$32,522 compared to $42,701 for the six months ended June 29, 1996. This
decrease was due to reduced average debt levels resulting from a lower level
of owned customer receivables and from the $69,972 net proceeds from the
issuance of Class B voting stock in March 1997.
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
$1,313,996 at June 28, 1997, $1,463,730 at December 28, 1996 and $1,210,000 at
June 29, 1996.
Net cash used by operating activities was $124,152 for the six month period
ended June 28, 1997 compared to net cash provided by operations of $105,003
for the six month period ended June 29, 1996. This net $229,155 increase in
cash used for operations over the comparable period last year is attributable
to several factors. Net cash provided by receivables was lower by $51,414 in
the 1997 period due primarily to a decrease in sold customer receivables. The
net $61,234 increase in inventories in the 1997 period compared to 1996
represents an increase in inventories at Eddie Bauer to support its growth.
Other significant uses of cash in the 1997 period include an additional
decrease in accounts payable and accrued liabilities of $58,136 compared to
last year and the funding of the $44,692 net loss.
Net additions to property and equipment for the six months ended June 28, 1997
and June 29, 1996 were $18,899 and $18,352, respectively. 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 its majority shareholder, Spiegel Holdings, Inc. The net proceeds of
$69,972 are being used primarily to fund capital needs, including continued
expansion of Eddie Bauer.
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 three and six months ended June 28, 1997, SFAS No. 128
would not have had a material impact on the Company's loss per share
calculation.
SFAS No. 130, "Reporting Comprehensive Income", effective for fiscal years
beginning after December 15, 1997, establishes standards for the reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. The Company is evaluating the
Statement's provisions to conclude how it will present comprehensive income
in its financial statements, and has not yet determined the amounts to be
disclosed. The Company will adopt the new standard, as required, in fiscal
year 1998.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", effective for fiscal years beginning after December 15, 1997,
establishes standards for the way public business enterprises report financial
and descriptive information about reportable operating segments in annual
financial statements and interim financial reports issued to stockholders.
The Company is evaluating the new Statement's provisions to determine the
additional disclosures required in its financial statements, if any. The
Company will adopt SFAS No. 131 in fiscal year 1998.
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.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b). Reports on Form 8-K
On June 26, 1997, the Company filed a report on Form 8-K announcing
the early retirement of John J. Shea, Vice Chairman, President, and
CEO, from the Company and the Board of Directors effective
July 3, 1997. It further announced the formation of the Office of
the President consisting of Harold S. Dahlstrand, Senior Vice President,
Human Resources; Michael R. Moran, Senior Vice President and General
Counsel; and James W. Sievers, Senior Vice President and Chief Financial
Officer.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<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 12, 1997
James W. Sievers (Chief Financial Officer)
/s/ D. L. Skip Behm Vice President - Controller August 12, 1997
D. L. Skip Behm (Chief Accounting Officer)
</TABLE>
