SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
COMMISSION FILE NUMBER 1-1011
MELVILLE CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 04-1611460
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(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
ONE THEALL ROAD, RYE, NY 10580
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 925-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ----------------------
COMMON STOCK (PAR VALUE
$1 PER SHARE) NEW YORK STOCK EXCHANGE
4-7/8% CONVERTIBLE SUBORDINATED
DEBENTURES DUE JUNE 1, 1996 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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/_/
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN THE DEFINITIVE
PROXY STATEMENT INCORPORATED BY REFERENCE IN PART III OF THIS FORM
10-K, OR ANY AMENDMENT TO THIS FORM 10-K.
YES (NO DISCLOSURES ARE CONTAINED HEREIN) /X/ NO /_/
PAGE 1 OF 2 PAGE COVER PAGE
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AS OF MARCH 1, 1994, THE AGGREGATE MARKET VALUE OF THE VOTING STOCK*
HELD BY NON-AFFILIATES** WHICH WAS COMPUTED BY REFERENCE TO THE PRICE
AT WHICH THE STOCK WAS LAST TRADED WAS $3,996,104,076.
NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK (PAR VALUE
$1 PER SHARE) AT MARCH 1, 1994: 105,351,156.
DOCUMENTS INCORPORATED BY REFERENCE
1. ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31,
1993: PART I, ITEM 1; PART II, ITEMS 5, 6, 7 AND 8; AND PART IV, ITEM
14.
2. PROXY STATEMENT DATED MARCH 14, 1994 ISSUED IN CONNECTION WITH
THE ANNUAL MEETING OF SHAREHOLDERS: PART III, ITEMS 10, 11, 12 AND
13.
* DOES NOT INCLUDE 6,498,514 OUTSTANDING SHARES OF SERIES ONE ESOP
CONVERTIBLE PREFERENCE STOCK ("ESOP PREFERENCE STOCK"). AS OF
MARCH 1, 1994, EACH SHARE OF ESOP PREFERENCE STOCK IS ENTITLED
TO ONE VOTE PER SHARE ON ALL MATTERS SUBMITTED TO A VOTE OF THE
HOLDERS OF COMMON STOCK.
** ONLY STOCK HELD BY DIRECTORS AND OFFICERS IS EXCLUDED.
Page 2 of 2 page Cover Page
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Item 1. Business
Melville Corporation, a New York corporation (in this Item 1
called the "Company"), is one of the largest diversified specialty
retailers in the United States. On December 31, 1993, the Company,
through its subsidiaries (which together with the Company throughout
this Item 1 are collectively called the "Companies"), operated a total
of 7,282 retail stores and leased departments throughout the United
States, Puerto Rico, the U.S. Virgin Islands, Canada, the Czech
Republic and Slovakia. During 1993 the Companies also manufactured
men's and women's footwear in two factories and furniture in five
factories.
The Companies market products in chains of specialty retail
stores operating under various trade names. Prescription drugs,
health and beauty aids are sold in chains of stores operated under the
"CVS", "Peoples", "Standard Drug" and "Austin Drug" trade names.
Apparel and accessories are sold in chains of stores under the
"Marshalls", "Wilsons Suede & Leather", "Wilsons The Leather Experts",
"Bermans", "Bermans The Leather Experts", "Pelle Cuir", "Tannery
West", "Snyder Leather Outlets", "Georgetown Leather Design" and
"Bob's" trade names. Footwear is sold in chains of stores operated
under the "FootAction USA", "FootAction For Kids", "Fan Club", "Thom
McAn" and "B.O.Q." trade names and in leased departments in Kmart
discount department stores and Pay Less Drug Stores. Toy and hobby
products are sold in chains of stores operating under the "Kay-Bee
Toys", "Circus World", "K & K Toys", "Toy Works" and "Play Things"
trade names. Domestics are sold in a chain of stores operated under
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the "Linens 'n Things" trade name. Furniture is sold in a chain of
stores under the "This End Up" and "Wood's End" trade names.
In general, the retailing business is seasonal in nature with
each particular business of the Company affected, to varying degrees,
by certain peak selling periods. The peak selling periods are
characterized by inventory build-ups prior to such periods. The
build-ups are financed, in part, with the issuance of commercial paper
and bank loan participation notes, which are repaid from internally
generated funds. To maintain financial flexibility, the Company also
has on file with the Securities and Exchange Commission a shelf
registration statement for the issuance of up to $300 million in debt
securities, including medium term notes. No debt securities have been
issued to date, and the Company does not currently have any plans to
issue such debt securities under this shelf registration because its
capital resources are sufficient to sustain current operations and
provide for future growth.
The Christmas holiday is the most significant seasonal selling
period for the Company overall and the peak selling period for its toy
and leather apparel businesses. The peak selling periods, other than
the Christmas holiday, for the Company's non-leather apparel and
footwear businesses coincide with the Easter holiday and the opening
of school in the fall. Competition is based upon such
factors as price, style, quality and design of product and the layout
and location of stores.
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The Company's principal office is located in Rye, New York.
As of December 31, 1993, the Companies had approximately 111,000 full
and part-time associates.
BUSINESS SEGMENT INFORMATION
The Company is principally a specialty retailer conducting
business in four major segments:
- Prescription drugs, health and beauty aids retailing.
- Apparel retailing, which includes men's and women's specialty
and leather apparel, brand name and private label apparel for
men, women and children.
- Footwear, which includes retailing of both discount and
popular-priced shoes; retailing of brand name shoes and
athletic footwear for men, women and children; and footwear
manufacturing.
- Toys and household furnishings, which include retailing of
toys, domestics and furniture (as well as furniture
manufacturing).
The financial information concerning industry segments
required by Item 101(b) of Regulation S-K is set forth on page 47 of
the Company's Annual Report to Shareholders for the year ended
December 31, 1993, and is incorporated herein by reference.
PRESCRIPTION DRUGS, HEALTH AND BEAUTY AIDS RETAILING
On December 31, 1993, the Companies operated 1,284
prescription drugs, health and beauty aids stores in 15 states and the
District of Columbia under the names "CVS", "Peoples", "Standard Drug"
and "Austin Drug", 1,081 of which have pharmacies. Net sales for
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these stores for 1993 represented approximately 38% of the Companies'
consolidated net sales.
These stores are considered "destination" stores and are
located primarily in "strip" shopping centers and freestanding units.
In the prescription drugs, health and beauty aids retailing business,
the Company counts itself among the largest retailers in terms of
number of stores in its primary marketing territories, which is the
mid-Atlantic and Northeast United States. The monthly business
periodical entitled "Chain Drug Review" has ranked CVS fourth in
number of stores and fifth in dollar volume and among the top ten drug
store chains in the United States based upon dollar volume and store
count. These stores also compete with general merchandise stores,
supermarkets and mail order pharmacies.
APPAREL RETAILING
On December 31, 1993, the Companies operated 448 off-price
quality brand name family apparel stores in 40 states under the name
"Marshalls". These stores are located primarily in "strip" shopping
centers in which Marshalls is an "anchor" tenant. Marshalls' net
sales for 1993 represented approximately 25% of the Companies'
consolidated net sales.
On December 31, 1993, the Companies operated 631 men's and
women's leather and suede apparel and accessory stores, which are
located primarily in regional shopping malls, in 45 states and the
District of Columbia under the names "Wilsons Suede & Leather",
"Wilsons The Leather Experts", "Tannery West", "Bermans The Leather
Experts", "Bermans", "Snyder Leather Outlets", "Pelle Cuir" and
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"Georgetown Leather Design". Net sales for 1993 in these stores
represented approximately 5% of the Companies' consolidated net sales.
On December 31, 1993, the Companies operated 16 stores selling
casual clothing and footwear for the entire family under the name
"Bob's" principally in "strip" shopping centers located in
Connecticut, Massachusetts, New York and Rhode Island. Net sales at
Bob's stores for 1993 represented approximately 2% of the Companies'
consolidated net sales.
In the apparel retailing business, the Company believes it has
a significant presence in the markets for the products which it
carries; however, such products represent only a small portion of the
total apparel market.
FOOTWEAR
On December 31, 1993, the Companies operated 2,771 leased
footwear departments, 391 stores under the names "FootAction USA",
"FootAction For Kids" and "Fan Club" and 337 stores under the names
"Thom McAn" and "B.O.Q.". Collectively, these leased departments and
retail stores are located in all 50 states, Puerto Rico, the U.S.
Virgin Islands, the Czech Republic and Slovakia.
Each of the leased departments is operated by the Company's
Meldisco division which sells footwear for the entire family. All but
334 of the leased departments operated during the fiscal year ended
December 31, 1993 were located in Kmart discount department stores in
the United States, Puerto Rico, the Czech Republic and Slovakia. These
334 leased departments were located in Pay Less Drug Stores, which are
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owned by Pay Less Drug Stores Northwest, Inc. ("Pay Less").
Pursuant to an agreement between the Company and Kmart
Corporation ("Kmart" then known as S.S. Kresge Company) entered into
as of January 1, 1975, and an agreement between the Company and Pay
Less dated October 10, 1988, all license agreements relating to such
leased departments have terms of 25 years, subject to certain
performance standards. Rental payments under all such license
agreements are based on a percentage of sales, with additional
payments to be made under certain of the license agreements with Kmart
based on profits. The Company has a 51% equity interest, and Kmart
has a 49% equity interest, in all the subsidiaries which operate
leased departments in Kmart stores, with the exception of 42 such
subsidiaries in which the Company has a 100% equity interest. The
Company has a 100% equity interest in all the subsidiaries which
operate leased departments in Pay Less Drug Stores. Aggregate net
sales for 1993 of Meldisco leased departments represented
approximately 12% of the Companies' consolidated net sales.
FootAction stores (including Fan Club stores operated as part
of the FootAction division) are located primarily in regional
shopping malls. These stores specialize in brand name casual and
athletic footwear and related apparel for the entire family.
FootAction's net sales for 1993 represented approximately 3% of the
Companies' consolidated net sales.
A majority of the Thom McAn stores are also located in regional
shopping malls and substantially all of such stores sell footwear and
related items for men and women. Excluded from the operating results
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of the Thom McAn chain were stores designated to be closed or
redeployed under the Company's strategic realignment program announced
in 1992. Of the stores excluded, over 200 were closed or redeployed
in 1993. Thom McAn's net sales for 1993 represented approximately 2%
of the Companies' consolidated net sales.
The Companies' footwear retailing is primarily in the discount
and popular-price categories. However, with the growth of its
FootAction division, the Company continues to increase its presence in
brand name casual and athletic footwear. During 1993, substantially
all of the footwear, as well as all hosiery, handbags and accessories
sold in these stores, was purchased from unrelated third parties.
In the footwear retailing business the Companies, through
their retail stores and leased departments, compete with footwear
chain store operators and many other types of footwear retailers,
e.g., general merchandise stores, traditional department stores, mail
order businesses and apparel stores. According to research data
provided to the Company by Footwear Market Insights, a management
consulting and marketing research company specializing in footwear,
the seven largest footwear chain store and leased department operators
in the United States, ranked according to the number of pairs of
footwear sold and number of retail outlets, account for approximately
40.1% of total footwear pair sales, and the Companies are among such
seven largest operators.
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Manufacturing
As of December 31, 1993, the Company operated two factories in
the Southeast United States which produce shoes and contain facilities
for product development, product testing and quality control. During
1993, the manufactured footwear represented an insignificant
percentage of the total footwear sold by the Companies.
The two factories which produce footwear for the Companies' retail
stores will be closed in 1994. The costs associated with the shutdown
of the operations were provided for as a part of the strategic
realignment charge recorded in 1992.
TOYS AND HOUSEHOLD FURNISHINGS
On December 31, 1993, the Companies operated 1,026 toy and
hobby stores in all 50 states and Puerto Rico under the names
"Kay-Bee Toys", "Circus World", "K & K Toys", "Toy Works" and "Play
Things". The "Kay-Bee Toys", "Circus World", "Play Things" and
"K & K Toys" stores are located primarily in regional shopping malls.
The "Toy Works" stores are located primarily in "strip" shopping
centers and freestanding units. Excluded from operating results were
stores that the Company designated to close or not renew under its
strategic realignment program announced in 1992. Of the stores excluded,
over 70 were closed in 1993. Net sales in toy and hobby stores for
1993 represented approximately 9% of the Companies' consolidated net sales.
On December 31, 1993, the Companies operated 143 quality brand
name linens, towels, bath and other household items stores, which are
located primarily in "strip" shopping centers in 27 states
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under the name "Linens 'n Things". Linens 'n Things' net sales for
1993 represented approximately 3% of the Companies' consolidated net
sales.
On December 31, 1993, the Companies operated 235 stores
retailing a distinctive line of casual crate-designed furniture and
coordinated accessories for residential and commercial use, located
primarily in regional shopping malls in 33 states and Canada, under
the names "This End Up", and "Wood's End". Net sales of furniture for
1993 represented approximately 1% of the Companies' consolidated net
sales.
In the toy retailing business, the Company is among the
largest toy and hobby chain store operators in the United States in
terms of sales, as well as number of retail outlets. Based upon sales
volume, the business periodical "Discount Store News" has ranked
Kay-Bee among the top toy specialty chains in the United States.
In the household furnishings retailing business, the Company
believes itself to be a significant factor in the markets for the
products which it carries. Based on total revenues, This End Up has
been ranked by "Furniture Today", a weekly business periodical, among
the top 25 furniture retailers in the United States.
Manufacturing
During 1993, the Company, through This End Up Furniture
Company, manufactured a distinctive line of casual furniture in five
factories located in the Southeast United States. Approximately 99%
of the furniture manufactured is sold through the Company's This End
Up division. The Company believes that these factories have the
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capacity to supply all of the sales volume requirements of its "This
End Up" and "Wood's End" retail stores and currently these factories
supply substantially all of such requirements.
This End Up Furniture Company manufactures a large portion of
its furniture from southern yellow pine, which is in plentiful supply
in the Southeastern United States. Southern yellow pine is a
renewable resource and most producers have reforestation programs in
effect.
ACQUISITIONS
During 1993, the Company acquired 59 prescription drugs,
health and beauty aids stores, 31 leather apparel stores and 10 stores
selling branded athletic footwear and apparel.
DISPOSITIONS
Effective May 17, 1993, the Company completed the sale of all
487 of its Chess King stores; effective May 29, 1993, the Company
completed the sale of all of its 103 Prints Plus stores, and
effective October 16, 1993, the Company completed the sale of all of
its 114 Accessory Lady stores. Net sales for each of these chains in
1993 through their date of disposition represented less than 1% of the
Companies' consolidated net sales.
Item 2. Properties
The registrant and its subsidiaries lease various retail stores and
warehouse, plant and office facilities. Most of these leases contain
initial terms ranging from 5 to 25 years and many have options for
extension beyond the initial term ranging from 5 to 15 years. Retail
stores and office facilities are leased in nearly all cases.
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In the fiscal year ended December 31, 1993, the registrant and its
subsidiaries operated fifty-three distribution centers, located in 18
states, containing an aggregate of approximately 10,106,000 square
feet. All such distribution centers are leased with the exception of
sixteen distribution centers containing an aggregate of approximately
5,053,000 square feet which are owned by the registrant or one of its
subsidiaries. Sixteen distribution centers (comprising approximately
3,340,000 square feet) are used in the prescription drugs, health and
beauty aids business; ten distribution centers (comprising
approximately 3,356,000 square feet) are used in the apparel
businesses; ten distribution centers (comprising approximately
1,923,000 square feet) are used in the footwear businesses; and
seventeen distribution centers (comprising approximately 1,487,000
square feet) are used in the toys and household furnishings
businesses.
In the fiscal year ended December 31, 1993, the registrant and
its subsidiaries operated seven factories, all of which are
located in North Carolina. Two are footwear factories, one with the
capacity to produce over 1,500,000 pairs of shoes annually. (As
discussed above, these two factories will be closed in 1994). Five
are furniture factories with the total capacity to produce
approximately 780,000 pieces of furniture annually. The registrant or
one of its subsidiaries own all of such factories.
Item 3. Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to
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which the registrant or any of its subsidiaries is a party or of which
any of its or their property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders,
through solicitation of proxies or otherwise, during the fourth
quarter of the fiscal year ending December 31, 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is included as an unnumbered item in Part I of
this report since the registrant did not furnish such information in
its definitive proxy statement dated March 14, 1994.
Date Date First
Appointed Appointed an
to Present Officer of
Name/Office Age Office the Registrant
- ----------- --- ---------- --------------
James E. Alward 50 3/17/92 3/17/92
Vice President
Norman Axelrod 41 3/07/88 3/07/88
Vice President
(President of
Linens 'n Things)
Warren D. Feldberg 44 10/18/91 10/18/91
Vice President
(Chairman and Chief
Executive Officer
of Marshalls)
Michael A. Friedheim 50 1/01/94 7/14/82
Vice President
(Chairman and Chief
Executive Officer of
Bob's)
Philip C. Galbo 43 8/01/89 8/01/89
Treasurer
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Date Date First
Appointed Appointed an
to Present Officer of
Name/Office Age Office the Registrant
- ----------- --- ---------- --------------
Stanley P. Goldstein 59 1/01/87 4/13/71
Chairman of the
Board and Chief
Executive Officer
Thomas E. Harms 47 3/10/94 3/10/94
Vice President
Robert G. House 47 9/11/91 9/11/91
Vice President
Robert D. Huth 48 4/06/87 4/06/87
Executive Vice
President and Chief
Financial Officer
Daniel B. Katz 48 2/19/91 3/12/86
Senior Vice
President (President
of Melville Realty
Company, Inc.)
William C. Kingsford 47 3/12/86 7/13/79
Vice President
Jerald L. Maurer 51 1/01/94 1/01/94
Senior Vice
President
Larry A. McVey 52 3/14/84 3/14/84
Vice President
(President of
Thom McAn)
John I. Mitchell, Jr. 54 10/12/88 10/12/88
Vice President and
Chief Information
Officer
Ralph T. Parks 48 3/10/94 3/10/94
Vice President
(President of
FootAction)
Jerald S. Politzer 48 10/09/91 6/21/89
Executive Vice
President (Acting
President of Kay-Bee)
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Date Date First
Appointed Appointed an
to Present Officer of
Name/Office Age Office the Registrant
- ----------- --- ---------- --------------
Shahid Quraeshi 45 7/13/88 7/13/88
Vice President and
Controller (Principal
Accounting Officer)
Arthur V. Richards 55 9/13/89 4/12/77
Vice President
and Secretary
J. M. Robinson 47 7/13/88 7/13/88
Vice President
(President of Meldisco)
Harvey Rosenthal 51 1/01/94 10/17/84
President and
Chief Operating
Officer
Thomas M. Ryan 41 1/01/94 1/01/94
Vice President
(President and Chief
Executive Officer
of CVS)
Joel N. Waller 53 3/11/87 3/11/87
Vice President
(Chairman of Wilsons)
In each case the term of office extends to the date of the
board of directors meeting following the next annual meeting of
shareholders of the registrant. In addition to the office(s)
which they hold in the registrant as shown above, each of the
individuals listed (with the exception of Messrs. Harms,
Kingsford, Maurer and House) hold various offices in certain
subsidiaries of the registrant. Previous positions and
responsibilities held by each of the above officers with the
registrant and for each of the above officers who have not held
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the same office(s) with the same responsibilities for more than
the past five years, are indicated below:
James E. Alward - Director of Taxation (January, 1979 to
Present) of the registrant.
Warren D. Feldberg - President (January, 1991 to November, 1991)
of Target Stores, a division of Dayton Hudson
Corporation, Executive Vice President (December, 1988
to January, 1991) of Target Stores, Senior Vice
President (March, 1988 to December, 1988) of Target
Stores.
Michael A. Friedheim - Executive Vice President (February,
1986 to January, 1994) of the registrant.
Philip C. Galbo - Assistant Treasurer (October, 1988 to July,
1989) of the registrant.
Thomas E. Harms - Vice President Human Resources (July, 1993
to March, 1994) and Director Human Resources
(September, 1990 to July, 1993) of the CVS division
of the registrant; Director of Personnel of Marshall
Field's (August, 1988 to August, 1990).
Robert G. House - Consultant (January, 1988 to July, 1991) Temple,
Barker & Sloane, general management consultants.
Daniel B. Katz - Vice President (March, 1986 to February, 1991) of
the registrant; President (March, 1978 to Present) of
Melville Realty Company, Inc., a subsidiary
of the registrant.
Jerald L. Maurer - Corporate Vice President of Strategic Human
Resource Management of Aetna Life and Casualty
Company (January, 1992 to January, 1994); Vice
President of Human Resources (January, 1991 to
January 1992) of Medstat Systems, Inc.; Senior Vice
President of Human resources (1988 to January, 1990)
of John Wiley & Sons, Inc.
Ralph T. Parks - President of the FootAction division of the
registrant (November, 1991 to Present); Executive
Vice President and Chief Operating Officer of
FootAction, Inc. (March, 1987 to November, 1991).
Jerald S. Politzer - Group Vice President (June, 1989 to
October, 1991) of the registrant; President and Chief
Executive Officer (November, 1986 to June, 1989) of G.
Fox & Company, a division of The May Department Stores
Company.
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Arthur V. Richards - Secretary (April, 1977 to Present), General
Counsel (September, 1989 to October, 1990) and General
Attorney (April, 1977 to September, 1989) of the
registrant.
Harvey Rosenthal - President and Chief Executive Officer (October,
1984 to January, 1994) of the CVS division of the
registrant.
Thomas M. Ryan - Executive Vice President (January, 1990 to
January, 1994) and Senior Vice President-Pharmacy
(January, 1988 to January, 1990) of the CVS division
of the registrant.
Part II
Item 5. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters
The number of holders of the registrant's Common Stock, based upon
the number of record holders, was 7,600 as of December 31, 1993. All other
information required by this item is included in the registrant's Annual
Report to Shareholders for the year ended December 31, 1993 on pages 1 and
46 and is incorporated herein by reference.
Item 6. Selected Financial Data
The information required by this item is included in the
registrant's Annual Report to Shareholders for the year ended December 31,
1993 on page 48 and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The information required by this item is included in the
registrant's Annual Report to Shareholders for the year ended December 31,
1993 on pages 30 through 33 and is incorporated herein by reference.
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Item 8. Financial Statements and Supplementary Data
The information required by this item is included in the
registrant's Annual Report to Shareholders for the year ended December 31,
1993 on pages 35 through 47, and is incorporated herein by reference.
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure
During the registrant's two most recent fiscal years or any
subsequent interim period, no event occurred which would require disclosure
under this item.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the executive officers is furnished
under the heading "EXECUTIVE OFFICERS OF THE
REGISTRANT" in Part I of this report since the registrant did not
furnish such information in its definitive proxy statement dated
March 14, 1994.
The other information required by this item is included in
the registrant's definitive proxy statement dated March 14, 1994
on pages 1 through 3 and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item is included in the
registrant's definitive proxy statement dated March 14, 1994 on
pages 7 through 13 and is incorporated herein by reference.
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Item 12. Security Ownership of Certain
Beneficial Owners and Management
The information required by this item is included in the
registrant's definitive proxy statement dated March 14, 1994 on pages 1
through 5 and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
No information is required to be reported by this item.
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
(a) Documents filed as part of this report:
l. and 2. Financial Statements and Financial Statement
Schedules.
The consolidated financial statements of Melville
Corporation and its subsidiary companies incorporated herein by
reference to the Annual Report to Shareholders for the fiscal
year ended December 31, 1993 and the related consolidated
financial statement schedules are set forth in the index to
consolidated financial statements and consolidated schedules on
page 26 hereof.
3. Exhibits
(a) The Exhibits filed as part of this report are listed
below:
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Exhibit
Table
Number:
- -------
3 (a) Restated Certificate of Incorporation, as amended
as of April 18, 1990 (incorporated by reference
to Exhibit 3 filed with the registrant's
Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1990).
3 (b) By-Laws, as amended through December 8, 1993.
4 No instrument which defines the rights of holders of
long and intermediate debt of the registrant
and its subsidiaries is filed herewith pursuant
to Regulation S-K, Item 601(b)(4)(iii)(A) other
than the June 23, 1989 amendment to the
Restated Certificate of Incorporation defining
the rights of the holders of the Series One
ESOP Convertible Preference Stock (see above
exhibit table number 3(a)). The registrant
hereby agrees to furnish a copy of any such
instrument to the Securities and Exchange
Commission upon request.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10 (iii)(A) (i) 1973 Stock Option Plan (incorporated by
reference to Exhibit (10) (iii) (A) (i) to the
registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987).
21
<PAGE>
<PAGE>
Exhibit
Table
Number:
- ------- (ii) 1987 Stock Option Plan (incorporated by
reference to Exhibit (10) (iii) (A) (iii) to
the registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987).
(iii) 1989 Directors Stock Option Plan (incorporated
by reference to Exhibit B to the registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1988).
(iv) Melville Corporation Omnibus Stock Incentive
Plan (incorporated by reference to Exhibit B to
the registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989).
(v) Directors Retirement Plan (incorporated by
reference to Exhibit 10(iii)(A)(vi) to
registrant's Annual Report on Form 10-K
for year ended December 31, 1992).
(vi) Profit Incentive Plan of Melville Corporation
(incorporated by reference to Exhibit A to
registrant's definitive Proxy Statement dated
March 14, 1994).
11 Statement re: Computation of Per Share Earnings.
12 Statement re: Computation of Ratios.
22
<PAGE>
<PAGE>
Exhibit
Table
Number:
- -------
13 Annual Report to Shareholders for the year ended
December 31, 1993. (Except for the portions
incorporated herein by reference, such report
is furnished for the information of the SEC and
is not deemed "filed" as part of this Form 10-K
report.)
18 Letter re: Change in Accounting Principle.
22 Subsidiaries of the registrant.
(b) No reports on Form 8-K were filed in the last
fiscal quarter ending December 31, 1993.
23
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MELVILLE CORPORATION
By /S/ ARTHUR V. RICHARDS
-------------------------------
Arthur V. Richards
Vice President and Secretary
March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has also been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board and
Director (Chief Executive
/S/ STANLEY P. GOLDSTEIN Officer) March 28, 1994
- ----------------------------
(Stanley P. Goldstein)
Executive Vice
President and Director
/S/ ROBERT D. HUTH (Chief Financial Officer) March 28, 1994
- -----------------------------
(Robert D. Huth)
Vice President and
Corporate Controller
(Principal Accounting
/S/ SHAHID QURAESHI Officer) March 28, 1994
- -----------------------------
(Shahid Quraeshi)
/S/ HYMAN L. BATTLE, JR. Director March 28, 1994
- -----------------------------
(Hyman L. Battle, Jr.)
/S/ ALLAN J. BLOOSTEIN Director March 28, 1994
- -----------------------------
(Allan J. Bloostein)
/S/ JOHN J. CREEDON Director March 28, 1994
- -----------------------------
(John J. Creedon)
24
<PAGE>
<PAGE>
Signature Title Date
--------- ----- ----
Vice President
/S/ MICHAEL A. FRIEDHEIM and Director March 29, 1994
- -----------------------------
(Michael A. Friedheim)
/S/ MICHAEL H. JORDAN Director March 28, 1994
- -----------------------------
(Michael H. Jordan)
/S/ TERRY R. LAUTENBACH Director March 28, 1994
- -----------------------------
(Terry R. Lautenbach)
/S/ THEODORE LEVITT Director March 28, 1994
- -----------------------------
(Theodore Levitt)
/S/ DONALD F. MCCULLOUGH Director March 28, 1994
- -----------------------------
(Donald F. McCullough)
/S/ FRANK MELVILLE Director March 28, 1994
- -----------------------------
(Frank Melville)
Executive Vice
President and Director March __, 1994
- -----------------------------
(Jerald S. Politzer)
President, Chief
Operating Officer
/S/ HARVEY ROSENTHAL and Director March 28, 1994
- -----------------------------
(Harvey Rosenthal)
/S/ IVAN G. SEIDENBERG Director March 29, 1994
- -----------------------------
(Ivan G. Seidenberg)
/S/ PATRICIA CARRY STEWART Director March 27, 1994
- -----------------------------
(Patricia Carry Stewart)
/S/ M. CABELL WOODWARD, JR. Director March 28, 1994
- -----------------------------
(M. Cabell Woodward, Jr.)
25
<PAGE>
<PAGE>
MELVILLE CORPORATION AND SUBSIDIARY COMPANIES
Index to Consolidated Financial Statements and Schedules
The consolidated financial statements of Melville Corporation and
Subsidiary Companies together with the report on such consolidated
financial statements of KPMG Peat Marwick dated February 10, 1994,
except as to the subsequent event note, which is as of March 1, 1994,
which appear on the pages listed below of the 1993 Annual Report to
shareholders, are incorporated by reference in this Annual Report on
Form 10-K.
Page Number
in 1993
Annual Report
to Shareholders
---------------
Independent Auditors' Report .............................. 34
Consolidated Statements of Earnings for the years
ended December 31, 1993, 1992 and 1991 ................ 35
Consolidated Balance Sheets as of December 31,
1993 and 1992 ..........................................36-37
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1993,
1992 and 1991 ..........................................38
Consolidated Statements of Cash Flows for the
years ended December 31, 1993, 1992 and 1991 ...........39
Notes to Consolidated Financial Statements .................40-47
Included in Part IV of this report: Page
Consent of Independent Auditors ----
for Melville Corporation
and Subsidiary Companies ...............................F-1
Independent Auditors' Report on Consolidated
Financial Statement Schedules of Melville Corporation
and Subsidiary Companies ...............................F-2
Consolidated Financial Statement Schedules of Melville
Corporation and Subsidiary Companies for the
years ended December 31, 1993, 1992 and 1991:
V - Property, Plant and Equipment ...................S-1
VI - Accumulated Depreciation and Amortization
of Property, Plant and Equipment ..............S-2
VIII - Valuation and Qualifying Accounts ...............S-3
IX - Short-Term Borrowings ...........................S-4
X - Supplementary Consolidated Statements of
Earnings Information ..........................S-5
Schedules not included above have been omitted because they are
not applicable or the required information is shown in the
consolidated financial statements or related notes.
26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Schedule V
----------
MELVILLE CORPORATION AND SUBSIDIARY COMPANIES
Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
($ in Thousands)
Annual Balance at Balance at
Depreciation Beginning Additions Retirements Other Changes End
Classification Rates of Year at Cost (1) or Sales Add/(Deduct)(2) of Year
- -------------- ------------- ---------- ----------- ------------ -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Year ended December
31, 1993:
Land $ 20,016 $ 5,686 $ 0 $ (118) $ 25,584
Buildings and
improvements 2.5% to 10.0% 173,284 18,139 820 (4,578) 186,025
Fixture and
equipment 10.0% to 20.0% 980,604 247,807 90,952 (86,307) 1,051,152
Leasehold
improvements 6.7% to 20.0% 640,454 115,090 43,809 (88,332) 623,403
---------- -------- -------- ---------- -----------
Total assets
owned $1,814,358 $386,722 $135,581 $(179,335) $1,886,164
========== ======== ======== ========= ==========
Leased property
under capital
leases 3.3% to 12.5% $ 55,706 $ 2 $ 6,768 $ (1,075) $ 47,865
========== ======== ======== ========= ==========
Year ended December
31, 1992:
Land $ 16,296 $ 1,468 $ 34 $ 2,286 $ 20,016
Buildings and
improvements 2.5% to 10.0% 144,903 28,993 992 380 173,284
Fixture and
equipment 10.0% to 20.0% 902,644 175,243 100,504 3,221 980,604
Leasehold
improvements 6.7% to 20.0% 611,684 98,641 57,878 (11,993) 640,454
--------- -------- -------- ---------- -----------
Total assets
owned $ 1,675,527 $304,345 $159,408 $ (6,106) $1,814,358
========== ======== ======== ========= ==========
Leased property
under capital
leases 3.3% to 12.5% $ 60,755 $ -- $ 5,049 -- $ 55,706
========== ======== ======== ========= ==========
Year ended December
31, 1991:
Land $ 16,322 $ -- $ 81 $ 55 $ 16,296
Buildings and
improvements 2.5% to 10.0% 138,266 1,681 267 5,223 144,903
Fixture and
equipment 10.0% to 20.0% 819,832 167,115 108,102 23,799 902,644
Leasehold
improvements 6.7% to 20.0% 579,228 84,276 57,460 5,640 611,684
--------- -------- -------- ---------- -----------
Total assets
owned $ 1,553,648 $253,072 $165,910 $ 34,717 $1,675,527
========== ======== ======== ========= ==========
Leased property
under capital
leases 3.3% to 12.5% $ 67,350 $ -- $ 3,503 $ (3,092) $ 60,755
========== ======== ======== ========= ==========
<FN>
(1) Excludes assets obtained in connection with acquisitions.
(2) Amount primarily represents assets obtained in connection with acquisitions
and also reflects disposals of assets in connection with operations sold.
</FN>
</TABLE>
S-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Schedule VI
MELVILLE CORPORATION AND SUBSIDIARY COMPANIES
Accumulated Depreciation and Amortization
of Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
($ in Thousands)
Charged to Balance
Balance at Costs at
Beginning and Retirements Other Changes End
Classification of Year Expenses or Sales Add/(Deduct)(1) of Year
- -------------- ---------- --------- ----------- -------------- --------
<S> <C> <S> <S> <S> <S>
Year ended December 31, 1993:
Buildings and improvements $ 32,900 $ 5,918 $ 462 $ (245) $ 38,111
Fixtures and equipment 346,706 97,354 61,543 (38,467) 344,050
Leasehold improvements 226,881 51,056 27,155 (48,979) 201,803
-------- -------- -------- -------- --------
Total $606,487 $154,328 $ 89,160 $(87,691) $583,964
======== ======== ======== ======== ========
Leased property under capital leases $38,538 $ 2,578 $ 6,768 $ (1,160) $ 33,188
======== ======== ======== ======== ========
Year ended December 31, 1992:
Buildings and improvements $ 28,384 5,153 $ 623 $ (14) $ 32,900
Fixtures and equipment 324,198 98,520 71,987 (4,025) 346,706
Leasehold improvements 217,658 53,503 41,451 (2,829) 226,881
-------- -------- -------- -------- --------
Total $570,240 $157,176 $114,061 $ (6,868) $606,487
======== ======== ======== ======== ========
Leased property under capital
leases $ 39,920 $ 3,099 $ 4,481 $ -- $ 38,538
======== ======== ======== ======== ========
Year ended December 31, 1991
Buildings and improvements $ 23,596 $ 5,082 $ 294 $ -- $ 28,384
Fixtures and equipment 340,287 82,292 100,421 2,040 324,198
Leasehold improvements 224,680 47,787 53,951 (858) 217,658
-------- -------- -------- -------- --------
Total $588,563 $135,161 $154,666 $ 1,182 $570,240
======== ======== ======== ======== ========
Leased property under capital
leases $42,282 $ 3,323 $ 5,685 $ -- $ 39,920
======== ======== ======== ======== ========
<FN>
(1) Amounts represent reclassifications of assets and accumulated depreciation
of assets acquired and also reflects disposals in connection with
operations sold.
</FN>
</TABLE>
S-2
<PAGE>
<PAGE>
Schedule VIII
-------------
MELVILLE CORPORATION AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts
Years ended December 31, 1993, 1992 and 1991
($ in Thousands)
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Year Expenses Deductions(1) of Year
------------ ----------- ----------- ------------- ---------
Accounts Receivable:
Allowance for Doubtful Accounts:
Year Ended December 31, 1993 $ 25,131 $ 23,173 $ 15,770 $ 32,534
======== ======== ======== ========
Year Ended December 31, 1992 $ 21,717 $ 12,087 $ 8,673 $ 25,131
======== ======== ======== ========
Year Ended December 31, 1991 $ 15,170 $ 17,642 $ 11,095 $ 21,717
======== ======== ======== ========
(1) Write-offs, net of recoveries
S-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE IX
-----------
MELVILLE CORPORATION AND SUBSIDIARY COMPANIES
Short-Term Borrowings
Years ended December 31, 1993, 1992 and 1991
($ in Thousands)
Weighted
Maximum Average Average
Weighted Amount Amount Interest
Average Outstanding Outstaning Rate
Balance at Interest During the During the During the
End of Year Rate Year Year (A) Year (A)
----------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Commercial Paper $ 90,000 3.32% $ 875,000 $ 464,792 3.08%
========== ====== ============ ========== ======
Notes payable to banks $ -- -- $ -- $ -- --
========== ====== ============ ========== ======
Year Ended December 31, 1992
Commercial Paper $ -- -- $ 819,950 $ 542,171 3.46%
========== ====== ============ ========== ======
Notes payable to banks $ -- -- $ -- $ -- --
========== ====== ============ ========== ======
Year Ended December 31, 1991
Commercial Paper $ 50,000 4.98% $ 747,750 $ 453,398 5.61%
========== ====== ============ ========== ======
Notes payable to banks $ -- -- $ -- $ -- --
========== ====== ============ ========== ======
<FN>
(A) Calculated on a daily basis.
</FN>
</TABLE>
S-4
<PAGE>
<PAGE>
Schedule X
----------
MELVILLE CORPORATION AND SUBSIDIARY COMPANIES
Supplementary Consolidated Statement of Earnings Information
Years ended December 31, 1993, 1992 and 1991
($ in Thousands)
Amount Charged to Costs and Expenses
Item 1993 1992 1991
---- ---- ---- ----
Taxes, other than payroll and
income taxes $ 113,922 $ 108,536 $ 101,762
======= ======= =======
Advertising costs $ 174,297 $ 154,839 $ 131,092
======= ======= =======
Amounts for maintenance and repairs, depreciation and amortization of
intangible assets, pre-opening costs and similar deferrals and royalties
are not presented as such amounts are less than 1% of sales.
S-5
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Melville Corporation:
We consent to incorporation by reference in the Registration Statements
Numbers 33-40251, 33-17181 and 2-97913 on Form S-8 and Numbers 33-62664 and
33-34946 on Form S-3 of Melville Corporation and subsidiary companies of our
report dated February 10, 1994, except as to the Subsequent Event note, which
is as of March 1, 1994, related to the consoldiated balance sheets of Melville
Corporations and subsidiary companies as of December 31, 1993 and 1992,
and the related consolidated statements of earnings, shareholders' equity
and cash flows and related financial statement schedules for each of
the years in the three-year period ended December 31, 1993, which reports
appear (or are incorporated by reference) in the December 31, 1993 annual
report on Form 10-K of Melville Corporation and subsidiary companies.
Our reports refer to the adoption of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," in 1992 and to a
change in the method of determining retail price indices used in the valuation
of LIFO inventories in 1993.
Very truly yours,
/s/KPMG PEAT MARWICK
KPMG Peat Marwick
New York, New York
March 30, 1994
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Melville Corporation:
Under date of February 10, 1994, except as to the Subsequent Event note,
which is as of March 1, 1994, we reported on the consolidated balance
sheets of Melville Corporation and subsidiary companies as of December 31,
1993 and 1992, and related consolidated statements of earnings, shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1993, as contained in the 1993 annual report to shareholders.
These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year 1993.
In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedules
listed in the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
As discussed on page 44 of the Annual Report to Stockholders, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in 1992. Also, as discussed on
page 41, the Company changed its method of determining retail price indices
used in the valuation of LIFO inventories in 1993.
/s/KPMG PEAT MARWICK
KPMG Peat Marwick
New York, New York
February 10, 1994, except as to the Subsequent Event note, which is as of
March 1, 1994
F-2
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Table
Number:
- ---------
3 (a) Restated Certificate of Incorporation, as
amended as of April 18, 1990 (incorporated by
reference to Exhibit 3 filed with the registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1990).
* 3(b) By-Laws, as amended through December 8, 1993.
4 No instrument which defines the rights of holders of long
and intermediate debt of the registrant and its
subsidiaries is filed herewith pursuant to Regulation
S-K, Item 601(b)(4)(iii)(A) other than the June 23,
1989 amendment to the Restated Certificate of
Incorporation defining the rights of the holders of
the Series One ESOP Convertible Preference Stock (see
above exhibit table number 3 (a)). The registrant
hereby agrees to furnish a copy of any such
instrument to the Securities and Exchange Commission
upon request.
1
<PAGE>
<PAGE>
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Exhibit
Table
Number :
- ------------
10(iii)(A) (i) 1973 Stock Option Plan (incorporated by
reference to Exhibit (10) (iii) (A) (i) to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987).
(ii) 1987 Stock Option Plan (incorporated by reference to
Exhibit (10) (iii) (A) (iii) to the registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1987).
(iii) 1989 Directors Stock Option Plan (incorporated by
reference to Exhibit B to the registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1988).
(iv) Melville Corporation Omnibus Stock Incentive Plan
(incorporated by reference to Exhibit B to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989).
(v) Directors Retirement Plan (incorporated by reference to
Exhibit 10 (iii) (A) (vi) to registrant's Annual Report
on Form 10-K for year ended December 31, 1992).
(vi) Profit Incentive Plan of Melville Corporation
(incorporated by reference to Exhibit A to registrant's
definitive Proxy Statement dated March 14, 1994).
2
<PAGE>
<PAGE>
Exhibit
Table
Number:
- -----------
* 11 Statement re: Computation of Per Share Earnings.
* 12 Statement re: Computation of Ratios.
* 13 Annual Report to Shareholders for the year ended
December 31, 1993. (Except for the portions
incorporated herein by reference, such report is
furnished for the information of the SEC and is not
deemed "filed" as part of this Form 10-K report.)
* 18 Letter re: Change in Accounting Principle.
* 22 Subsidiaries of the registrant.
3
EXHIBIT 3(b)
MELVILLE CORPORATION
_____________
By-Laws
as amended to
December 8, 1993
1
<PAGE>
<PAGE>
BY-LAWS
OF
MELVILLE CORPORATION
_________________
ARTICLE I
Shareholders
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
the corporation, for the purpose of electing Directors and for the transaction
of such other business as may be brought before the meeting, shall be held at
the principal office of the corporation, or at such other place within or
without the State of New York stated in the notice of the meeting as the Board
of Directors may determine, on the second Tuesday of April of each year
(unless such day shall be a legal holiday, in which case the annual meeting
shall be held on the next succeeding day not a legal holiday), or on such
other day in the month of April as the Board of Directors may determine, at
10:00 o'clock in the forenoon, New York City time, or at such other hour
stated in the notice of the meeting as the Board of Directors may determine.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders
other than those regulated by statute may be held whenever called in writing by
the Chairman of the Board of Directors, the President or by vote of a majority
of the Board of Directors then holding office.
Special meetings shall be held at such place within or without the State
of New York as is specified in the call thereof.
SECTION 3. NOTICE OF MEETING; WAIVER. Unless otherwise required by
statute, the notice of every meeting of the shareholders shall be in writing
and signed by the Chairman of the Board of Directors, the President of a Vice-
President or the Secretary or an Assistant Secretary, and shall state the time
when and the place where it is to be held, and a copy thereof shall be served,
either personally or by mail, upon each shareholder of record entitled to vote
at such meeting, not less than ten nor more than fifty days before the
meeting. If the meeting to be held is other than the annual meeting of
shareholders, the notice shall also state the purpose or purposes for which
the meeting is called and shall indicate that it is being issued by or at the
direction of the person or persons calling the meeting. If, at any meeting,
action is proposed to be taken which would, if taken, entitle shareholders to
receive payment for their shares pursuant to Section 623 of the Business
Corporation Law, the notice of such meeting shall include a statement of that
purpose and to that effect. If the notice is mailed, it shall be directed to
a shareholder at his address as it appears on the record of shareholders
unless he shall have
2
<PAGE>
<PAGE>
filed with the Secretary of the corporation a written request that notices
intended for him be mailed to some other address, in which case it shall be
mailed to the address designated in such request.
Notice of meeting need not be given to any shareholder who submits a
signed waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of a shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack of notice
of such meeting, shall constitute a waiver of notice by him.
SECTION 4. QUORUM. At any meeting of the shareholders the holders of a
majority of the shares entitled to vote and being present in person or
represented by proxy shall constitute a quorum for all purposes, unless the
representation of a different number shall be required by law or by another
provision of these by-laws, and in that case the representation of the number
so required shall constitute a quorum.
If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy, the holders of a majority of the
shares present in person or represented by proxy at the meeting may adjourn
from time to time without further notice other than by an announcement made at
the meeting. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 5. ORGANIZATION. The Chairman of the Board of Directors or, in
his absence, the President or, in his absence, any Executive Vice President,
Senior Vice President or Vice President in the order of their seniority or in
such other order as may be designated by the Board of Directors, shall call
meetings of the shareholders to order and shall act as chairman of such
meetings. The Board of Directors or the Executive Committee may appoint any
shareholder to act as chairman of any meeting in the absence of any of such
officers and in the event of such absence and the failure of such board or
committee to appoint a chairman, the shareholders present at such meeting may
nominate and appoint any shareholder to act as chairman.
The Secretary of the corporation, or, in his absence, an Assistant
Secretary, shall act as secretary of all meetings of shareholders, but, in the
absence of said officers, the chairman of the meeting may appoint any person
to act as secretary of the meeting.
SECTION 6. VOTING. At each meeting of the shareholders every
shareholder of record having the right to vote shall be entitled to vote
either in person or by proxy.
3
<PAGE>
<PAGE>
SECTION 7. INSPECTORS OF ELECTION. The Board of Directors, in advance
of any shareholder's meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat, shall appoint one or more inspectors.
In case any person appointed fails to appear or act, the vacancy may be filled
by appointment made by the Board in advance of the meeting or at the meeting
by the person presiding thereat. Inspectors shall be sworn.
SECTION 8. CONDUCT OF ELECTION. At each meeting of the shareholders,
votes, proxies, consents and ballots shall be received, and all questions
touching the qualification of voters, the validity of proxies, and the
acceptance or rejection of votes, shall be decided by the Inspectors of
Election.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER OF DIRECTORS. The number of the directors of the
corporation shall be sixteen.
SECTION 2. TERM AND VACANCIES. Directors shall be elected at the
annual meeting of shareholders to hold office until the next annual meeting
and until their respective successors have been duly elected and have
qualified.
Vacancies in the Board of Directors occurring between annual meetings,
from any cause whatsoever including vacancies created by an increase in the
number of directors, shall be filled by the vote of a majority of the
remaining directors, though less than a quorum.
Directors need not be shareholders.
SECTION 3. GENERAL POWERS OF DIRECTORS. The business of the
corporation shall be managed under the direction of its Board of Directors
subject to the restrictions imposed by law, by the corporation's certificate
of incorporation and amendments thereto, or by these by-laws.
SECTION 4. MEETINGS OF DIRECTORS. The directors may hold their
meetings and may keep an office and maintain the books of the corporation,
except as otherwise provided by statute, in such place or places in the State
of New York or outside the State of New York as the Board may, from time to
time, determine.
Any action required or permitted to be taken by the Board of Directors
may be taken without a meeting if all of the directors consent in writing to
the adoption of a resolution authorizing the action, and in such event the
resolution and the written
4
<PAGE>
<PAGE>
consent of all directors thereto shall be filed with the minutes of the
proceedings of the Board of Directors.
Any one or more directors may participate in a meeting of the Board of
Directors by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time, and participation by such means shall constitute presence in
person at a meeting.
SECTION 5. REGULAR MEETINGS. Regular Meetings of the Board of
Directors shall be held at the principal office of the corporation in the
County of Westchester, Town of Harrison, State of New York, or at such other
place within or without the State of New York as shall be designated in the
notice of the meeting as follows: One meeting shall be held immediately
following the annual meeting of shareholders and further meetings shall be
held at such intervals or on such dates as may from time to time be fixed by
the directors, all of which meetings shall be held upon not less that four
days' notice served upon each director by mailing such notice to him at his
address as the same appears upon the records of the corporation, except the
meeting which shall be held immediately following the annual meeting of
shareholders which meeting shall be held without notice.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by the direction of the Chairman of
the Board of Directors, or of the President of the corporation, or of one-
third of the directors at the time in office. The Secretary shall give notice
of each special meeting by mailing such notice not less than four days, or by
telegraphing such notice not less than two days, before the date set for a
special meeting, to each director.
SECTION 7. WAIVER. Notice of a meeting need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at
its commencement, the lack of notice to him.
SECTION 8. QUORUM. One-third of the total number of directors shall
constitute a quorum for the transaction of business, but if at any meeting of
the Board there be less than a quorum present, the majority of those present
may adjourn the meeting from time to time.
SECTION 9. ORDER OF BUSINESS. At meetings of the Board of Directors
business shall be transacted in such order as the Board may fix and determine.
At all meetings of the Board of Directors, The Chairman of the Board of
Directors, or in his absence, the President, or in the absence of both, the
Executive Vice-President or any Vice-President (provided such person be a
member of the Board) shall
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preside.
SECTION 10. ELECTION OF CHAIRMAN, OFFICERS AND COMMITTEES. At the first
regular meeting of the Board of Directors in each year, at which a quorum
shall be present, held next after the annual meeting of the shareholders, the
Board of Directors shall proceed to the election of a Chairman of the Board,
of the executive officers of the corporation and of the Executive Committee,
if the Board of Directors shall provide for such committee under the
provisions of Article III hereof.
The Board of Directors from time to time may fill any vacancies among the
executive officers, members of the Executive Committee and members of other
committees, and may appoint additional executive officers and additional
members of such Executive Committee or other committees.
SECTION 11. COMPENSATION. Directors who are not officers or employees
of the corporation or any of its subsidiaries may receive such remuneration as
the Board may fix, in addition to a fixed sum for attendance at each regular
or special meeting of the Board or a Committee of the Board; provided,
however, that nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity or receiving
compensation therefor. In addition each director shall be entitled to
reimbursement for expenses incurred in attending any meeting of the Board or
Committee thereof.
ARTICLE III
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors by resolution
adopted by a majority of the entire Board, may designate from the Directors an
Executive Committee consisting of three or more, to serve at the pleasure of
the Board. At all times when the Board of Directors is not in session, the
Executive Committee so designated shall have and exercise the powers of the
Board of Directors, except that such committee shall have no authority as to
the matters set out in Section 3 hereof.
Meetings of the Executive Committee shall be called by any member of the
same, on three days' mailed notice, or one day's telegraphed notice to each of
the other members, stating therein the purpose for which such meeting is to be
held. Notice of meeting may be waived, in writing, by any member of the
Executive Committee.
All action by the Executive Committee shall be recorded in its minutes
and reported from time to time to the Board of Directors.
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The Executive Committee shall fix its own rules of procedure and shall
meet where and as provided by such rules or by resolution of the Board of
Directors.
Any action required or permitted to be taken by the Executive Committee
may be taken without a meeting if all of the members of the Executive
Committee consent in writing to the adoption of a resolution authorizing the
action, and in such event the resolution and the written consent of all
members of the Executive Committee thereto shall be filed with the minutes of
the proceedings of the Executive Committee.
Any one or more members of the Executive Committee may participate in a
meeting of the Executive Committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting.
SECTION 2. OTHER COMMITTEES. The Board of Directors may appoint such
other committees, of three or more, as the Board shall, from time to time, deem
advisable, which committees shall have and may exercise such powers as shall
be prescribed, from time to time, by resolution of the Board of Directors,
except that such committees shall have no authority as to the matters set out
in Section 3 hereof.
Actions and recommendations by each committee which shall be appointed
pursuant to this section shall be recorded and reported from time to time to
the Board of Directors.
Each such committee shall fix its own rules of procedure and shall meet
where and as provided by such rules or by resolution of the Board of
Directors.
Any action required or permitted to be taken by any such committee may be
taken without a meeting if all of the members of such committee consent in
writing to the adoption of a resolution authorizing the action, and in such
event the resolution and the written consent of all members of such committee
thereto shall be filed with the minutes of the proceedings of such committee.
Any one or more members of any such committee may participate in a
meeting of such committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time, and participation by such means shall
constitute presence in person at a meeting.
SECTION 3. LIMITATIONS. No committee shall have authority as to the
following matters:
(1) The submission to shareholders of any action that needs shareholders'
authorization.
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(2) The filling of vacancies in the Board of Directors or in any
committee.
(3) The fixing of compensation of the directors for serving on the Board
or on any committee.
(4) The amendment or repeal of the by-laws, or the adoption of new by-
laws.
(5) The amendment or repeal of any resolution of the Board which by its
terms shall not be so amendable or repealable.
SECTION 4. ALTERNATES. The Board may designate one or more directors
as alternate members of any such committees, who may replace any absent member
or members at any meeting of such committees.
SECTION 5. COMPENSATION. Members of special or standing committees may
receive such salary for their services as the Board of Directors may
determine; provided, however, that nothing herein contained shall be construed
to preclude any member of any such committee from serving the corporation in
any other capacity or receiving compensation therefor.
ARTICLE IV
OFFICERS
SECTION 1. TITLES AND TERMS OF OFFICE. The executive officers of the
corporation shall be the Chairman of the Board of Directors, a Vice Chairman,
a President, each of whom shall be a member of the Board of Directors, such
number of Executive Vice Presidents, Senior Vice Presidents and Vice
Presidents as the Board of Directors shall determine, a Controller, a
Treasurer and a Secretary, all of whom shall be chosen by the Board of
Directors.
The Board of Directors may also appoint one or more Assistant Secretaries
and one or more Assistant Treasurers, and such other junior officers as it
shall deem necessary, who shall have such authority and shall perform such
duties as from time to time may be prescribed by the Board of Directors.
One person may hold more than one of the above offices except the offices
of President and Secretary.
The officers of the Corporation shall each hold office for one year and
until their successors are chosen and qualified, and shall be subject to
removal at any time by the affirmative vote of the majority of the entire
Board of Directors.
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SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors shall be the chief executive officer of the corporation.
He shall have general management and control over the policy, business and
affairs of the corporation and shall have such other authority and perform
such other duties as usually appertain to a chief executive officer of a
business corporation. He shall preside at meetings of the Board of Directors
and of the shareholders.
SECTION 3. VICE CHAIRMAN. The Vice Chairman shall have such authority
and perform such duties as the Board of Directors, the Executive Committee, or
the Chairman of the Board of Directors may from time to time determine.
SECTION 4. PRESIDENT. The President shall have such authority and
shall perform such duties as the Board of Directors, the Executive Committee,
or the Chairman of the Board of Directors may from time to time determine. He
shall exercise the powers of the Chairman of the Board of Directors during his
absence or inability to act.
SECTION 5. EXECUTIVE VICE PRESIDENTS, GROUP VICE PRESIDENTS, SENIOR
VICE PRESIDENTS AND VICE PRESIDENTS. The Executive Vice Presidents, Group
Vice Presidents and Senior Vice Presidents, if any shall be designated, and the
Vice Presidents shall have such powers and perform such duties as may be
assigned to them by the Board of Directors, the Executive Committee, the
Chairman of the Board of Directors or the President. They shall, in order
of their seniority or in such other orders as may be designated by the Board
of Directors, the Executive Committee, the Chairman of the Board of Directors
and the President during the absence or inability to act of the Chairman of
the Board of Directors and the President.
SECTION 6. PRINCIPAL FINANCIAL OFFICER. An officer designated by the
Board of Directors shall be the principal financial officer of the
Corporation. He shall render to the Board of Directors, whenever the Board may
require, an account of the financial condition of the corporation, and shall
do and perform such other duties as from time to time may be assigned to him
by the Board of Directors, the Executive Committee, the Chairman of the Board
of Directors or the President.
SECTION 7. CONTROLLER AND PRINCIPAL ACCOUNTING OFFICER. The Controller
shall be the principal accounting officer and subject to the direction of the
principal financial officer, he shall have supervision over all the accounts
and account books of the corporation. He shall have such other powers and
perform such other duties as from time to time may be assigned to him by the
principal financial officer, and shall exercise the powers of the principal
financial officer during his absence or inability to act.
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SECTION 8. TREASURER. The Treasurer shall have custody of the funds
and securities of the corporation which come into his hands. When necessary
or proper, he may endorse on behalf of the corporation for collection, checks,
notes, and other instruments and obligations and shall deposit the same to the
credit of the corporation in such bank or banks or depositaries as the Board
of Directors or the Executive Committee shall designate; whenever required by
the Board of Directors or the Executive Committee, he shall render a statement
of his cash account; he shall keep, or cause to be kept, books of account, in
which shall be entered and kept full and accurate accounts of all monies
received and paid out on account of the corporation; he shall perform all acts
incident to the position of Treasurer, subject to the control of the Board of
Directors, the Executive Committee, the Chairman of the Board of Directors,
the President and the principal financial officer; he shall give bond for the
faithful discharge of his duties, if, as, and when the Board of Directors or
the Executive Committee may require. He shall perform such other duties as
from time to time may be assigned to him by the Board of Directors, the
Executive Committee, the Chairman of the Board of Directors, the President or
the principal financial officer.
SECTION 9. ASSISTANT TREASURERS. Each Assistant Treasurer shall have
such powers and perform such duties as may be delegated to him, and the
Assistant Treasurers shall, in the order of their seniority, or in such other
order as may be designated by the Board of Directors, the Executive Committee,
the Chairman of the Board of Directors, the President or the principal
financial officer, exercise the powers of the Treasurer during his absence
or inability to act.
SECTION 10. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors and the minutes of all meetings of the
shareholders and of the Executive Committee, in books provided for that
purpose; he shall attend to the giving and serving of all notices of the
corporation; and he shall have charge of the certificate books, transfer books
and records of shareholders and such other books and records as the Board of
Directors or Executive Committee may direct, all of which shall at all
reasonable time be open to the inspection of any director upon application
during the usual business hours.
He shall keep at the office of the corporation, or at the office of the
transfer agent or registrar of the corporation's capital stock, a record
containing the names, alphabetically arranged, of all persons who are
shareholders of the corporation, showing their places of residence, the number
of shares of stock held by them, respectively, the time when they respectively
became the owners thereof, and the amount paid thereon, and such record shall
be open for inspection as prescribed by Section 624 of the Business
Corporation Law. He shall in general perform all
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the duties incident to the office of Secretary, subject to the control of the
Board of Directors, the Executive Committee, the Chairman of the Board of
Directors and the President.
SECTION 11. ASSISTANT SECRETARIES. Each Assistant Secretary shall have
such powers and perform such duties as may be delegated to him, and the
Assistant Secretaries shall, in the order of their seniority, or in such other
order as may be designated by the Board of Directors, the Executive Committee,
the Chairman of the Board of Directors and the President, exercise the powers
of the Secretary during his absence or inability to act.
SECTION 12. VOTING UPON STOCKS. Unless otherwise ordered by the Board
of Directors or by the Executive Committee, the Chairman of the Board of
Directors of the corporation, or one designated in a proxy executed by him,
and in the absence of either, the President, or a person designated in a proxy
executed by him, and in the absence of all such, the Executive Vice Presidents
or the Vice Presidents of the corporation in the order of their seniority,
shall have full power and authority on behalf of the corporation to attend,
and to act, and to vote at meetings of stockholders of any corporation in
which this corporation may hold stock, and each such officer of the
corporation shall have power to sign a proxy deputizing others to vote the
same; and all such who shall be so authorized to vote shall possess and may
exercise any and all rights and powers incident to the ownership of such
stock and which, as the owner thereof, the corporation might have possessed
and exercised, if present.
The Board of Directors or the Executive Committee may, by resolution from
time to time, confer like powers on any other person or persons which shall
supersede the powers of those designated in the foregoing paragraph.
SECTION 13. All checks, notes, drafts or other instruments for the
payment of money shall be signed on behalf of this corporation by such person
or persons and in such manner as the Board of Directors or Executive Committee
may prescribe by resolution from time to time.
ARTICLE V
STOCK-RECORD DATE
SECTION 1. CERTIFICATES FOR STOCK. The certificates for shares of the
stock of the corporation shall be in such form, not inconsistent with the
certificate filed according to law, as shall be proper or approved by the
Board of Directors. Each certificate shall state (i) that the corporation is
formed under the laws of the State of New York, (ii) the name of the person or
persons to whom issued, (iii) the number and class of shares and the
designation of the series, if any, which such certificate represents and (iv)
the par value of each share represented by
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such certificate. Each certificate shall be signed by the Chairman of the
Board of Directors, the President, the Executive Vice President or a Vice-
President, and also by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary and sealed with the corporation's seal;
provided, however, that if such certificates are signed by a transfer agent or
transfer clerk and by a registrar the signature of the Chairman of the Board
of Directors, the President, the Executive Vice-President, Vice-President,
Treasurer, Assistant Treasurer, Secretary and Assistant Secretary and the seal
of the corporation upon such certificates may be facsimiles, engraved or
printed.
SECTION 2. TRANSFER OF SHARES. Shares of the stock of the corporation
may be transferred on the record of shareholders of the corporation by the
holder thereof in person or by his duly authorized attorney upon surrender of
a certificate therefor properly endorsed.
SECTION 3. The Board of Directors and the Executive Committee shall have
power and authority to make all such rules and regulations as respectively
they may deem expedient concerning the issue, transfer and registration of
such certificates for shares of the stock of the corporation as well as for
the issuance of new certificates in lieu of those which may be lost or
destroyed, and may require of any shareholder requesting replacement of lost
or destroyed certificates, bond in such amount and in such form as they may
deem expedient to indemnify the corporation, and/or the transfer agents,
and/or the registrars of its stock against any claims arising in connection
therewith.
SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors or
Executive Committee may appoint one or more transfer agents and one or more
registrars of transfer and may require all stock certificates to be
countersigned by such transfer agent and registered by such registrar of
transfers. One person or organization may serve as both transfer agent and
registrar.
SECTION 5. RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or to express consent to or dissent from any
proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment of any rights, or
for the purpose of any other action, the Board of Directors shall fix in
advance a date as the record date for any such determination of shareholders.
Such date shall not be more than fifty nor less than ten days before the date
of such meeting, nor more than fifty days prior to any other action.
SECTION 6. LIST OF SHAREHOLDERS. The Secretary of the corporation or
the transfer agent of its stock shall make and certify a list of the
shareholders as of the record date and the number of shares of each class of
stock of record in the name of
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each shareholder and such list shall be present at every meeting of
shareholders. If the right to vote at any meeting is challenged, the
inspectors of elections, or person presiding thereat, shall require such list
of shareholders to be produced as evidence of the right of the persons
challenged to vote at such meeting, and all persons who appear from such list
to be shareholders entitled to vote thereat, may vote at such meeting.
SECTION 7. Dividends may be declared and paid out of the surplus of the
corporation as often and at such times and to such extent as the Board of
Directors may determine, consistent with the provisions of the certificate of
incorporation of the corporation or other certificate of the corporation filed
pursuant to law.
ARTICLE VI
CORPORATE SEAL
The Board of Directors shall provide a suitable seal containing the name
of the corporation and of the state under the laws of which the corporation
was incorporated; and the Secretary shall have the custody thereof.
ARTICLE VII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The corporation shall indemnify any person to the fullest extent
permitted by applicable law against any and all expenses (including, without
limitation, investigation expenses and expert witnesses' and attorneys' fees
and expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person (net of any related insurance proceeds
received by or paid on behalf of such person) in connection with any present
or future threatened, pending or completed claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative, whether or not such
claim, action, suit or proceeding is by or in the right of the corporation
based upon, arising from, relating to, or by reason of the fact that such
person was, is, shall be or shall have been a director or an officer of the
corporation, or is or was serving, shall serve or shall have served at the
request of the corporation as director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust employee
benefit plan or other enterprise; provided that no indemnification may be made
to or on behalf of any person if a judgment or other final adjudication
adverse to such person establishes that his acts were committed in bad faith
or were the result of active and deliberate dishonesty and were material to
the cause of action so adjudicated, or that he personally gained in fact a
financial
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profit or other advantage to which he was not legally entitled.
For the purpose of this section, a corporation shall be deemed to have
requested a person to serve an employee benefit plan where the performance by
such person of his duties to the corporation also imposes duties on, or
otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to
an employee benefit plan pursuant to applicable law shall be considered fines;
and action taken or omitted by a person with respect to an employee benefit
plan in the performance of such person's duties for a purpose reasonable
believed, by such person to be in the interest of the participants and
beneificiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interest of the corporation.
A person entitled to indemnity under the first paragraph of this section
who has been successful, on the merits or otherwise, in the defense of a civil
or criminal action or proceeding of the character described in such paragraph
shall be entitled to indemnification as authorized in such paragraph. Any
other indemnification under such paragraph, unless awarded by a court, shall
be made by the corporation only if authorized in the specific case,
1. by the Board of Directors acting by a quorum of Directors who are not
parties to such action or proceeding upon a finding that the director or
officer has met the standard of conduct set forth in such paragraph, or
2. if such a quorum is not obtainable or, even if obtainable, a quorum
of disinterested directors so directs, (i) by the Board of Directors upon the
opinion in writing of independent legal counsel that indeminification is
proper in the circumstances because the applicable standard of conduct set
forth in such paragraph has been met by such person, or (ii) by the
shareholders upon a finding that such person has met the applicable standard
of conduct set forth in such paragraph.
Expenses incurred by a person in defending a civil or criminal action,
suit or proceeding shall be paid by the corporation promptly as incurred and in
advance of the final disposition of such action upon receipt of an undertaking
by or on behalf of such person to repay such amount to the extent the expenses
so advanced exceed the indemnification to which it is ultimately determined
that he is entitled.
The termination of any such civil, or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that a director's or
officer's acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action or that he
personally
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gained in fact a financial profit or other advantage to which he was not
legally entitled.
If under the foregoing provisions any expenses or other amounts are paid
by way of indemnification, otherwise than by court order or action by the
shareholders, the corporation shall, not later than the next annual meeting of
shareholders unless such meeting is held within three months from the date of
such payment, and in any event, within fifteen months from the date of such
payment, mail to its shareholders of record at the time entitled to vote for
the election of Directors a statement specifying the persons paid, the amounts
paid, and the nature and status at the time of such payment of the litigation
or threatened litigation.
The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or dis-interested
directors or otherwise, both as to his action in his official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
ARTICLE VIII
AMENDMENTS
SECTION 1. These by-laws may be amended, repealed or adopted by the
affirmative vote of the holders of a majority of all the shares outstanding
and entitled to vote at any regular or special meeting of the shareholders, if
notice of the proposed alteration or amendment be contained in the notice of
the meeting, provided, however, that no change in the time or place for the
election of directors shall be made within fifty days next preceding the date
on which such election is to be held and that in case of any change of such
time or place, notice thereof shall be given to each shareholder in person or
by letter mailed to his last known post office address, at least fifty days
before the election is held.
The Board of Directors shall have the power to amend or repeal these by-
laws, or any of them, or to adopt any new by-law, but any such action of the
Board may be amended or repealed by the shareholders, provided, however, that
any amendment which changes the number of directors shall require the vote of
a majority of the entire board.
If any by-law regulating an impending election of directors is adopted or
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of the shareholders for the election of directors
the by-law so adopted or amended or repealed, together with a concise
statement of the
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changes made.
ARTICLE IX
DIVISIONS
SECTION 1. ORGANIZATION. The Board of Directors may cause the business
and operations of this corporation to be divided into divisions based upon
character or type of operations, operating units, or upon such other basis of
division as the Board of Directors may from time to time determine to be
advisable, any may cause the business and operations of any such division to
be further divided into subdivisions or departments if deemed advisable by the
Board of Directors and upon such basis of subdivision as the Board of
Directors may determine.
SECTION 2. OFFICERS OF DIVISIONS. The Board of Directors of the
corporation may provide for the appointment of officers for each division into
which any of the activities of this corporation may be divided, with such
duties as the Board of Directors of the corporation may from time to time
determine. Officers of a division may be designated by such titles as
President, Executive Vice President, Senior Vice President, Vice President,
Secretary, Assistant Secretary, Treasurer, Assistant Treasurer, or Controller,
as the Board of Directors of the corporation may from time to time determine.
The authority of the officers of each division shall be subject to the control
of, and shall be limited to acts and transactions in conformity with the
policies of, the Board of Directors of the corporation, and may be further
limited to acts and transactions pertaining to the business of this
corporation which such division is authorized to transact and perform.
Individuals shall be appointed as divisional officers, and may be removed as
such, by the Chairman of the Board of Directors, who shall report all such
appointments and removals to the Board of Directors of the corporation. One
person may hold more than one of divisional or departmental offices. Any
general officer of the corporation shall be eligible for appointment to one or
more offices in one or more divisions or departments, but a divisional or
departmental officer, as such, shall not be an officer of the corporation.
SECTION 3. BY-LAWS OF DIVISIONS. The Board of Directors of the
corporation may establish and amend from time to time by-laws for each
division. Such by-laws may contain provisions setting forth the titles,
duties and responsibilities of the Board of Directors, Executive Committee and
officers of each division and such other rules relating to the operation of
the division as the Board of Directors shall provide.
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<TABLE>
<CAPTION>
EXHIBIT 11
MELVILLE CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE (1)
($ and shares in thousands, except per share data)
Twelve Months Ended Twelve Months Ended Twelve Months Ended
December 31, December 31, December 31,
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
Net earnings $331,790 $133,429 $346,681
Less: Preferred dividends, net 16,807 15,724 15,836
-------- -------- --------
Net earnings used to calculate
primary earnings per share $314,983 $117,705 $330,845
======== ======== ========
Weighted average number of shares
outstanding 105,069 104,418 103,376
Add: Weighted average number of
shares which could have been issued
upon exercise of outstanding options 281 510 456
-------- -------- --------
Weighted average number of shares used
to compute primary earnings per share 105,350 104,928 103,832
======== ======== ========
Primary earnings per share $2.99 $1.12 $3.19
======== ======== ========
FULLY DILUTED EARNINGS PER COMMON SHARE:
Net earnings $331,790 $133,429 $346,681
Less: Preferred dividends 53 54 58
-------- -------- --------
Net earnings used to calculate fully
diluted earnings per share, before
adjustments 331,737 133,375 346,623
Less: Adjustments resulting principally
from the assumed conversion of the
Series One ESOP Convertible Preference
Stock, net of tax benefit 510 452 1,397
-------- -------- --------
Net earnings used to calculate fully
diluted earnings per share $331,227 $132,923 $345,226
======== ======== ========
Weighted average number of shares used
to compute primary earnings per share 105,069 104,418 103,376
Add: Weighted average shares of Series
One Convertible Preference Stock
assuming conversion 6,830 6,602 6,779
Add: Weighted average number of shares
which could have been issued upon
exercise of outstanding options 293 652 501
Add: Weighted average number of shares
which could have been issued upon
conversion of 4 7/8% debentures 6 6 8
-------- -------- --------
Weighted average number of shares used
to compute fully diluted earnings per
share 112,198 111,678 110,664
======== ======== ========
Fully diluted earnings per share $2.95 $1.19 $3.12
======== ======== ========
</TABLE>
(1) The earnings per share calculation presented above differs from that
disclosed on the income statement as the above calculation includes shares
which could be issued upon conversion of outstanding stock options. As these
shares represent less than 3% dilution, they have been excluded from the
primary earnings per share presented on the income statement in accordance
with APB No. 15.
<TABLE>
<CAPTION>
Exhibit 12
----------
MELVILLE CORPORATION AND SUBSIDIARY COMPANIES
Computation of Ratio of Earnings to Fixed Charges
($ in thousands)
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Fixed Charges: (1)
Interest Expense $ 25,846 $ 26,519 $ 30,489 $ 23,822 $ 9,088
Interest Capitalized 583 124 748 1,930 1,854
Interest Portion of Operating
Leases 166,000 160,000 149,000 124,000 96,000
Interest Portion of Capital
Leases 3,390 4,030 4,507 4,983 5,452
Amortization of Debt Expense 127 127 127 127 63
---------- ----------- ----------- ---------- ---------
Total Fixed Charges $ 195,946 $ 190,800 $ 184,871 $ 154,862 $112,457
========== =========== =========== ========== ========
Adjusted Fixed Charges:
Total Fixed Charges $ 195,946 $ 190,800 $ 184,871 $ 154,862 $112,457
Interest Capitalized 583 124 748 1,930 1,854
---------- ----------- ----------- ---------- ---------
Adjusted Fixed Charges $ 195,363 $ 190,676 $ 184,123 $ 152,932 $110,603
========== =========== =========== ========== ========
Earnings:
Earnings before Income Taxes,
Minority Interests and Cumulative
Effect of Change in Accounting
Principle (2) $ 599,527 $ 335,496 $ 640,098 $ 687,338 $704,305
Adjusted Fixed Charges 195,363 190,676 184,123 152,932 110,603
---------- ----------- ----------- ---------- ---------
$ 794,890 $ 526,172 $ 824,221 $ 840,270 $814,908
========== =========== =========== ========== ========
Ratio of Earnings to Fixed Charges 4.06 2.76 4.46 5.43 7.25
========== =========== =========== ========== ========
<FN>
(1) The Company formed an Employee Stock Ownership Plan effective January 1,
1989. On June 23, 1989, the ESOP Trust borrowed $357.5 million from
qualified lenders, the proceeds of which were used to purchase a new
series of preference stock issued by the Company. The loan to the ESOP
Trust has been guaranteed by the Company. Annualized dividends on
preference stock totaled $25.2 million in 1993, $25.7 million in 1992,
$26.0 million in 1991, $26.1 million in 1990, and $24.3 million in 1989.
These amounts are not reflected in the calculation above.
(2) 1992 reflects the impact of the strategic realignment charge of $346,979.
</FN>
</TABLE>
<PAGE>
Exhibit 13
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------
($ and shares in thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------
Operating Results 1993(a) 1992(b) % Change
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 10,435,401 $ 10,432,843 --
Operating Profit 623,337 360,894 72.7
Earnings before Income Taxes, Minority Interests and
Cumulative Effect of Change in Accounting Principle 599,527 335,496 78.7
Earnings before Cumulative Effect of
Change in Accounting Principle 331,790 155,980 112.7
Net Earnings 331,790 133,429 148.7
Dividends on Common Stock 159,686 154,530 3.3
Dividends on Preferred and Preference Stock 25,248 25,794 (2.1)
- ------------------------------------------------------------------------------------------------------------------------
Per Share Data
- ------------------------------------------------------------------------------------------------------------------------
Earnings Per Share of Common Stock before Cumulative Effect
of Change in Accounting Principle $ 3.00 $ 1.34 123.9
Net Earnings Per Share of Common Stock 3.00 1.13 165.5
Dividends Per Share of Common Stock 1.52 1.48 2.7
- ------------------------------------------------------------------------------------------------------------------------
Financial Position at Year End
- ------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents $ 80,971 $ 145,138 (44.2)
Inventories 1,858,772 1,806,550 2.9
Working Capital 1,070,293 1,060,753 0.9
Shareholders' Equity 2,246,846 2,076,601 8.2
- ------------------------------------------------------------------------------------------------------------------------
Key Percentages
- ------------------------------------------------------------------------------------------------------------------------
Operating Profit as a Percent of Net Sales 6.0 3.5
Earnings before Income Taxes, Minority Interests and
Cumulative Effect of Change in Accounting Principle
as a Percent of Net Sales 5.7 3.2
Earnings before Cumulative Effect of Change in Accounting
Principle as a Percent of Net Sales 3.2 1.5
Net Earnings as a Percent of Net Sales 3.2 1.3
Return on Beginning Shareholders' Equity 16.0 6.4
- ------------------------------------------------------------------------------------------------------------------------
Statistics
- ------------------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares Outstanding 105,069 104,418 0.6
Number of Stores 7,282 8,213 (11.3)
Number of Associates 111,082 115,644 (3.9)
Number of Common Shareholders 7,600 8,000 (5.0)
========================================================================================================================
<FN>
(a)Excludes stores designated to be closed in connection with the 1992 strategic realignment program.
(b)Operating profit and earnings figures reflect the impact of the 1992 strategic realignment charge of $346,979
(see Notes to consolidated financial statements).
</FN>
</TABLE>
<PAGE>
<PAGE>
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Melville Corporation and Subsidiary Companies
Financial Condition
- ------------------------------------------------------------------------
($ in thousands) 1993 1992 1991
- ------------------------------------------------------------------------
Cash and cash
equivalents $ 80,971 $ 145,138 $ 78,674
Cash flows provided
by operating activities 419,654 559,411 369,813
Long-term obligations
to total capitalization 14.0% 15.3% 15.5%
Long-term obligations
to shareholders' equity 16.2% 18.1% 18.4%
Current ratio 1.8 1.8 1.8
========================================================================
The Company's primary source of liquidity continues to be cash provided by
operations. As over 70% of the Company's earnings occur in the fourth quarter,
however, it utilizes short-term borrowings, primarily through issuance of
commercial paper, to finance its seasonal inventory needs. During 1993,
short-term borrowings reached a maximum of $875.0 million as compared to
$820.0 million in 1992 and $747.8 million in 1991. The increase in 1993 over
1992 reflects lower earnings and additional capital expenditures related to
store openings and remodeling costs as well as system enhancements and new
technologies.
As of December 31, 1993, $90.0 million of short-term borrowings were
outstanding, with none outstanding at December 31, 1992, and $50.0 million
outstanding at December 31, 1991. The daily average of all short-term
borrowings was $464.8 million, $542.2 million and $453.4 million for 1993,
1992 and 1991, respectively.
Net interest expense is a function of interest rates and the level of
short-term borrowings resulting from the Company's cyclical cash requirements.
The Company had net interest expense of $23.8 million, $25.4 million and $29.5
million in 1993, 1992 and 1991, respectively. The decrease in net interest
expense in 1993 as compared to 1992 and 1991 is due to declining interest
rates as well as a significant decrease in the average level of short-term
borrowings from 1992.
Current assets decreased despite an increase in inventories of $52.2
million, primarily due to a lower cash position resulting from lower cash
flows from operations. The increase in inventories is due to acquisitions, new
store openings, the early receipt of spring merchandise, opportunistic
purchases and increased stock levels required for our larger store formats,
offset by dispositions. Prepaid expenses decreased as utilization of
realignment reserves resulted in decreased levels of deferred taxes.
Current liabilities decreased due to the timing of payments as well as a
decrease in costs relative to store closings and the sales of certain
divisions.
CAPITAL EXPENDITURES
Capital expenditures were $386.7 million in 1993, $304.3 million in 1992 and
$253.1 million in 1991. These expenditures were principally for improvements
to new and existing leased store locations, store equipment and information
systems. Capital expenditures for 1994 are estimated at $395.0 million and
are primarily for new store openings, continuing improvements to stores and
investments in new technologies.
Results of Operations
- ---------------------------------------------------------------------------
($ in millions, except
per share amounts) 1993 1992 1991
- ---------------------------------------------------------------------------
Net sales $10,435.4 $10,432.8 $9,886.2
Same store sales increase 0.1% 3.2% 0.4%
- ---------------------------------------------------------------------------
Operating profit before
realignment charge $ 623.3 $ 707.9 $ 669.6
Realignment charge -- 347.0 --
Operating profit 623.3 360.9 669.6
Net earnings before
realignment charge and
accounting change 331.8 381.4 346.7
- ---------------------------------------------------------------------------
Net earnings $ 331.8 $ 133.4 $ 346.7
- ---------------------------------------------------------------------------
Net earnings per share
before realignment
charge and accounting
change $ 3.00 $ 3.50 $ 3.20
Net earnings per share 3.00 1.13 3.20
- ---------------------------------------------------------------------------
Percent of net sales
- ---------------------------------------------------------------------------
Cost of goods sold,
buying and
warehousing costs 63.9 62.6 62.3
Store operating, selling,
general and
administrative expenses 28.3 28.7 29.1
===========================================================================
NET SALES
Consolidated net sales for the year as well as the fourth quarter ended
December 31, 1993 were flat with last year at $10.4 billion and $3.5 billion,
respectively. The consolidated operating results, however, exclude those of
Chess King, Prints Plus and Accessory Lady after their dispositions on May 17,
May 29 and October 16, 1993, respectively, as well as the results of stores
designated to be closed by Thom McAn and Kay-Bee under the 1992 strategic
realignment program. Adjusting for these factors in the 1993 and 1992 periods,
consolidated net sales would have increased 4.8% for the year and 7.1% for the
quarter. CVS,
<PAGE>
<PAGE>
Linens 'n Things and This End Up generated positive sales growth throughout
the year while disappointing performances at Marshalls, Kay-Bee, Wilsons and
Thom McAn offset these improvements.
The 1992 increase in consolidated net sales was due in part to the 1991
acquisitions of K&K toy stores and FootAction but also reflects the absence of
Freddy's, sold in 1991, and CVS stores in California, sold in February, 1992.
Adjusting for these factors, net sales increased 7.1%.
Increases in consolidated net sales differ from same store sales
increases mainly due to acquisitions and store openings and closings. The
lower same store sales increase in 1993 resulted primarily from weakness in
the apparel and footwear segments.
NET EARNINGS
Net earnings for 1993 were negatively impacted by disappointing sales,
heavier than expected markdowns in our apparel segment, a decline in gross
margin as CVS increases in proportion to the total operations of the Company,
and the partial write-off of the notes received in connection with the sales
of Freddy's and Chess King. Although the $5.8 million write-off related to
Freddy's was recovered in the fourth quarter, the proceeds were set aside to
cover anticipated lease settlement costs for the remaining Freddy's leases
which are guaranteed by the Melville Realty subsidiary of the Company. Also,
$4.0 million was charged to earnings to provide for less than full recovery of
the $29.4 million note related to the sale of Chess King as the note was sold
to a third party subsequent to year end for less than face value. Earnings
were impacted positively by a change in the Company's method of determining
retail price indices used in the valuation of its LIFO inventories, which
increased net earnings by $10.0 million.
Management formulated a strategic realignment program during the fourth
quarter of 1992 which resulted in an after-tax, non-cash charge of $222.0
million ($2.13 per share) and elected to record an after-tax, non-cash charge
of $22.6 million ($0.21 per share) retroactive to January 1, 1992, reflecting
the cumulative effect of a change in accounting for postretirement benefits.
Net earnings per share of common stock was $3.00 in 1993 compared with
$1.13 in 1992 and $3.20 in 1991. Net earnings per share in 1992, excluding the
impact of the two special charges, would have been $3.50.
STRATEGIC REALIGNMENT
In 1993 we accomplished the major objectives of the 1992 strategic
realignment program: three divisions, Chess King, Prints Plus and Accessory
Lady, were sold on May 17, May 29 and October 16, 1993, respectively, and
the Company closed over 200 Thom McAn stores and about 90 of the Kay-Bee and
Linens 'n Things stores designated to be closed or converted under the program.
To date, $279.0 million of the pre-tax amount recorded was utilized as follows:
the write-off of intangibles and the losses on sale, inclusive of operating
losses through the dates of disposition, amounted to $85.0 million; and asset
writedowns, operating losses and severance costs for store closings and the
acceleration of remodeling programs amounted to $194.0 million.
COSTS AND EXPENSES
Cost of goods sold, buying and warehousing costs continue to increase as
a percentage of consolidated net sales, reflecting the increased significance
of the prescription drugs, health and beauty aids segment to total operations,
compounded by continued pressure on third party providers to offer
prescriptions at lower prices, as well as lower initial markon in our other
segments. Increased markdowns in our apparel and footwear segments in 1993 as
compared to 1992 have also contributed to the erosion of gross margin.
Store operating, selling, general and administrative expenses continue to
decrease as a percentage of consolidated net sales due to the success of the
various cost containment programs currently underway which have enabled the
Company to make significant progress in reducing its variable cost structure.
ACCOUNTING CHANGES
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," effective January 1, 1993, but elected
to delay implementation of SFAS No. 112 "Employers' Accounting for
Postemployment Benefits," which is not required until fiscal 1994. The impact
of the adoption of SFAS No. 109 was immaterial, as would have been the impact
had SFAS No. 112 been adopted.
The Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," effective retroactively to
January 1, 1992. This statement requires that certain benefits be recorded on
the accrual basis, over an employee's service period, rather than on a cash
basis. The Company recorded a one-time, after-tax, non-cash charge of $22.6
million to recognize the accumulated obligation for retirees and active
employees as of January 1, 1992. The pre-tax annual retiree benefit
expense recorded in 1993 was $1.2 million as compared to $5.4 million in 1992.
The decrease in 1993 is due to a plan amendment which was effective December,
1992, and resulted in a prior service gain which is being amortized
prospectively.
<PAGE>
<PAGE>
PRESCRIPTION DRUGS,HEALTH AND BEAUTY AIDS
- ------------------------------------------------------------
($ in millions) 1993 1992 1991
- ------------------------------------------------------------
Net Sales $3,948.2 $3,632.1 $3,526.4
Operating profit before
realignment charge 195.7 208.6 206.1
Operating profit 195.7 149.2 206.1
- ------------------------------------------------------------
Pecent change from prior year
- ------------------------------------------------------------
Net Sales 8.7 3.0 31.6
Same stores sales 5.7 7.7 5.5
Operating profit before
realignment charge (6.2) 1.2 3.8
Operating profit 31.2 (27.6) 3.8
- ------------------------------------------------------------
Percent of consolidated total
- ------------------------------------------------------------
Net Sales 37.9 34.9 35.7
Operating profit* 30.8 40.3 30.2
============================================================
*Before corporate expenses.
CVS achieved very favorable increases in both net sales
and same store sales in 1993, with particularly strong increases in the fourth
quarter reflecting the success of the "Peoples Celebration Event" launched in
late May, 1993 to reintroduce these stores to the Washington, D.C. market.
Same store sales increased 7.0% in the fourth quarter of 1993 compared to 6.2%
in 1992.
Lower margined third party sales increased 24.1% in 1993 and 25.0% in
1992 due to an expansion of the division's managed care business and the
success of several key marketing strategies. Various micro-marketing
initiatives, and an expansion of private label merchandise lines, also helped
to increase front store sales in 1993 and 1992.
Net sales in 1992 exclude the Freddy's division sold in 1991 and the CVS
stores in California sold in February, 1992. Adjusting for these dispositions,
net sales would have increased 11.5% in 1992.
In 1991, net sales increased 31.6% due to the inclusion of Peoples Drug
Stores, acquired in 1990. After adjusting for this acquisition and the
disposition of the Freddy's division, net sales would have increased 14.4% in
1991.
Operating profit before the realignment charge decreased in 1993 due to
the impact of increasing lower margined prescription sales and incremental
costs of rolling out new point of sale and pharmacy systems which will not
yield any benefits until 1994.
The 1992 realignment charge related principally to the Peoples Drug
Stores remodeling program which was completed in 1993.
APPAREL
- -------------------------------------------------------------
($ in millions) 1993 1992 1991
- -------------------------------------------------------------
Net Sales $3,395.9 $3,486.1 $3,243.2
Operating profit before
realignment charge 181.9 230.3 223.0
Operating profit 181.9 125.9 223.0
- -------------------------------------------------------------
Pecent change from prior year
- -------------------------------------------------------------
Net Sales (2.6) 7.5 6.8
Same stores sales (3.6) 3.1 (0.6)
Operating profit before
realignment charge (21.0) 3.3 (7.1)
Operating profit 44.5 (43.5) (7.1)
- -------------------------------------------------------------
Percent of consolidated total
- -------------------------------------------------------------
Net Sales 32.5 33.4 32.8
Operating profit* 28.6 34.0 32.7
=============================================================
*Before corporate expenses.
The 1993 decrease in net sales was due to the sale of Chess King and
Accessory Lady, and a shift in consumer spending to more durable and home
related goods which resulted in lower net sales at Wilsons and decreased same
store sales at Marshalls. Net sales at Marshalls increased 2.3% over
1992, with its gifts and domestics department experiencing a 10.0% increase.
Adjusting for the divisions sold, net sales in the segment increased 2.3% in
1993.
In contrast, Marshalls and Wilsons experienced strong sales growth in
1992, which was overshadowed by a very weak performance at Chess King. The
protracted economic recession, especially in the Northeast and Southern
California, negatively impacted this segment's performance in 1991.
Operating profit before realignment charge decreased in 1993 because of
lower gross margin at Marshalls resulting from heightened promotional activity
throughout the apparel industry. This was partially offset by the exclusion of
the unprofitable Chess King division and strong expense control at both
Marshalls and Wilsons, achieved through investments in technology and the
reengineering of business processes.
Despite the negative impact of decreased sales and profits for a third
successive year at Chess King, operating profit in 1992 before the realignment
charge increased from 1991 due to strong sales at Marshalls, coupled with
strict expense control at Marshalls and Wilsons.
The realignment charge recorded in 1992 related to the writedown of
certain non-performing assets as well as an estimated loss on sale for the
Chess King and Accessory Lady divisions.
<PAGE>
<PAGE>
FOOTWEAR
- ----------------------------------------------------------------------------
($ in millions) 1993 1992 1991
- ----------------------------------------------------------------------------
Net sales $1,713.1 $1,840.0 $1,747.4
Operating profit before
realignment charge 169.0 180.0 161.9
Operating profit 169.0 92.0 161.9
- ----------------------------------------------------------------------------
Percent change from prior year
- ----------------------------------------------------------------------------
Net sales (6.9) 5.3 1.9
Same store sales (2.5) (1.8) (1.4)
Operating profit before
realignment charge (6.1) 11.2 3.8
Operating profit 83.7 (43.2) 3.8
- ----------------------------------------------------------------------------
Percent of consolidated total
- ----------------------------------------------------------------------------
Net sales 16.4 17.6 17.7
Operating profit* 26.6 24.9 23.7
============================================================================
*Before corporate expenses.
Net sales increases in 1993 at Meldisco and FootAction were offset by a
decline in net sales at Thom McAn, resulting from the exclusion from
operations of about 390 stores designated to be closed under the strategic
realignment program and the discontinuation of its men's athletic and
children's departments. Adjusting for stores excluded at Thom McAn, net
sales in the segment would have increased 2.2%.
Net sales in this segment increased 5.3% in 1992 due to the acquisition
of FootAction in November, 1991 coupled with a modest sales increase at
Meldisco. The continued lack of appeal of the traditional family footwear
business represented by Thom McAn, however, as well as the closing of 68 of
its stores, negatively impacted the sales results. Adjusting to exclude the
impact of FootAction, net sales would have decreased 0.1% in 1992.
Operating profit before the realignment charge decreased from 1992 due
to lower same store sales in the segment, particularly at Thom McAn, and a
higher level of mark-downs, which offset the increase in initial markon at
Meldisco as it continues to expand its direct purchasing program in the Far
East. Meldisco's overseas buying program and FootAction's success in
negotiating more favorable volume discounts, as well as strong expense
control, contributed to the increase in operating profit before the
realignment charge in 1992.
The realignment charge recorded in 1992 provided for the costs of
closing or redeploying about 390 Thom McAn stores. Of the remaining stores
designated to be closed, over 60 are planned for 1994.
TOYS AND HOUSEHOLD FURNISHINGS
- ----------------------------------------------------------------------------
($ in millions) 1993 1992 1991
- ----------------------------------------------------------------------------
Net sales $1,378.2 $1,474.7 $1,369.2
Operating profit before
realignment charge 89.1 98.1 91.4
Operating profit 89.1 2.9 91.4
- ----------------------------------------------------------------------------
Percent change from prior year
- ----------------------------------------------------------------------------
Net sales (6.5) 7.7 8.9
Same store sales (2.5) 1.6 (5.0)
Operating profit before
realignment charge (9.1) 7.3 (30.1)
Operating profit 2,946.4 (96.8) (30.1)
- ----------------------------------------------------------------------------
Percent of consolidated total
- ----------------------------------------------------------------------------
Net sales 13.2 14.1 13.8
Operating profit* 14.0 0.8 13.4
============================================================================
*Before corporate expenses.
Significant increases in net sales were reported at Linens 'n Things, due to
the successful rollout of its superstore format, and at This End Up, both of
which benefitted from the shift in spending to home furnishings and related
products. Despite these gains, the disposition of Prints Plus and a decrease
at Kay-Bee, due to the exclusion from operations of about 240 stores
designated to be closed under the strategic realignment program, declining
mall traffic and the lack of a "blockbuster" toy, led to an overall sales
decline in this segment as compared to last year. Adjusting for the stores
excluded and sold, net sales in 1993 increased 2.6% over 1992.
In both 1992 and 1991, net sales increased in all of the businesses in
this segment except for a slight decrease at This End Up. Adjusting for the
effect of K&K toy stores acquired in 1991, net sales would have increased
5.0% in 1992.
Operating profit declined in 1993 from the 1992 pre-realignment level
due to a same store sales decrease at Kay-Bee and a decrease in its initial
markon resulting from changing sales mix, offset partially by a pre-tax LIFO
adjustment in 1993 of about $14.0 million. Double digit sales increases at
This End Up, due to both its Wood's End product line and its larger store
format, positively impacted operating profit in 1993, as did aggressive
expense control at all divisions in this segment. Favorable economic trends
in the housing industry and an expansion of merchandise offerings at Linens
'n Things and This End Up also contributed to an increase in operating
profit before realignment in 1992.
The 1992 realignment charge provided primarily for costs of closing or
redeploying about 240 stores at Kay-Bee and coverting Linens 'n Things
stores to its superstore format. Of the remaining Kay-Bee stores designated
to be closed, 90 are planned for 1994.
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Melville Corporation:
We have audited the accompanying consolidated
balance sheets of Melville Corporation and
subsidiary companies as of December 31, 1993 and
1992 and the related consolidated statements of
earnings, shareholders' equity, and cash flows for
each of the years in the three-year period ended
December 31, 1993. These consolidated financial
statements are the responsibility of the Company's
management. Our responsibility is to express an
opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit
also includes assessing the accounting principles
used and significant estimates made by management,
as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in
all material respects, the financial position of
Melville Corporation and subsidiary companies at
December 31, 1993 and 1992 and the results of
their operations and their cash flows for each of
the years in the three-year period ended December
31, 1993 in conformity with generally accepted
accounting principles.
As discussed in notes to consolidated
financial statements, the Company has adopted
Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" effective January 1,
1992 and changed its method of determining retail
price indices used in the valuation of LIFO
inventories in 1993.
/s/KPMG Peat Marwick
New York, New York
February 10, 1994, except as to the Subsequent
Event note, which is as of March 1, 1994
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
Melville Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
($ in thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------
Years Ended December 31 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 10,435,401 $ 10,432,843 $ 9,886,183
Cost of goods sold, buying and warehousing costs 6,664,395 6,529,239 6,163,853
- ------------------------------------------------------------------------------------------------------------------------
3,771,006 3,903,604 3,722,330
- ------------------------------------------------------------------------------------------------------------------------
Store operating, selling, general and administrative expenses 2,956,081 2,994,723 2,875,610
Depreciation and amortization 191,588 201,008 177,110
Realignment charge -- 346,979 --
- ------------------------------------------------------------------------------------------------------------------------
3,147,669 3,542,710 3,052,720
- ------------------------------------------------------------------------------------------------------------------------
Operating profit 623,337 360,894 669,610
Interest expense, net 23,810 25,398 29,512
- ------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes, minority interests and
cumulative effect of change in accounting principle 599,527 335,496 640,098
Provision for income taxes 220,441 125,696 242,949
- ------------------------------------------------------------------------------------------------------------------------
Earnings before minority interests and cumulative effect
of change in accounting principle 379,086 209,800 397,149
Minority interests in net earnings 47,296 53,820 50,468
- ------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of
change in accounting principle 331,790 155,980 346,681
Cumulative effect of change in accounting principle, net -- 22,551 --
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 331,790 $ 133,429 $ 346,681
- ------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock
- ------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change in
accounting principle $ 3.00 $ 1.34 $ 3.20
Cumulative effect of change in accounting principle, net -- 0.21 --
- ------------------------------------------------------------------------------------------------------------------------
Net earnings per share of common stock $ 3.00 $ 1.13 $ 3.20
========================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
Melville Corporation and Subsidiary Companies
($ in thousands, except per share data)
- -----------------------------------------------------------------------------
As of December 31 1993 1992
- -----------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 80,971 $ 145,138
Accounts receivable, net 243,998 245,204
Inventories 1,858,772 1,806,550
Prepaid expenses 214,649 244,780
- -----------------------------------------------------------------------------
Total Current Assets 2,398,390 2,441,672
- -----------------------------------------------------------------------------
Property, plant, equipment and leasehold improvements, at cost:
Land 25,584 20,016
Buildings and improvements 186,025 173,284
Fixtures and equipment 1,051,152 980,604
Leasehold improvements 623,403 640,454
- -----------------------------------------------------------------------------
1,886,164 1,814,358
Less accumulated depreciation and amortization 583,964 606,487
- -----------------------------------------------------------------------------
Net property, plant, equipment and leasehold
improvements 1,302,200 1,207,871
Leased property under capital leases, net of
accumulated amortization 14,677 17,168
Deferred charges and other assets 113,455 117,433
Goodwill, net of accumulated amortization of
$81,531 in 1993 and $68,789 in 1992 443,678 429,918
- -----------------------------------------------------------------------------
Total Assets $ 4,272,400 $ 4,214,062
=============================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
($ in thousands, except per share data)
- -----------------------------------------------------------------------------
As of December 31 1993 1992
- -----------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 567,131 $ 676,519
Accrued expenses 585,997 609,166
Notes payable 90,000 --
Federal income taxes 74,376 87,073
Other current liabilities 10,593 8,161
- -----------------------------------------------------------------------------
Total Current Liabilities 1,328,097 1,380,919
- -----------------------------------------------------------------------------
Long-term debt 341,763 349,013
Deferred income taxes 83,333 22,125
Other long-term liabilities 177,173 283,834
Minority interests in subsidiaries 93,858 100,233
- -----------------------------------------------------------------------------
Redeemable Preferred Stock
- -----------------------------------------------------------------------------
Cumulative preferred stock, Series B, $4.00 dividend,
par value $100, redeemable at par plus accrued
dividends; authorized and issued 17,269 shares
in 1993 and 1992; 3,971 and 3,896 shares held in
treasury in 1993 and 1992, respectively 1,330 1,337
- -----------------------------------------------------------------------------
Shareholders' Equity
- -----------------------------------------------------------------------------
Preference stock, $1.00 par value, authorized
50,000,000 shares; Series One ESOP Convertible,
liquidation value $53.45; 6,498,514 issued and
outstanding in 1993 and 6,596,501 in 1992 347,346 352,583
Guaranteed ESOP Obligation (328,570) (335,877)
Common stock, par value $1.00, authorized
300,000,000 shares, issued 111,278,470 and
111,150,265, outstanding 105,346,356 and
104,733,054, net of treasury shares, in
1993 and 1992, respectively 111,278 111,150
Capital surplus 42,123 53,302
Retained earnings 2,364,322 2,208,875
Common stock in treasury, at cost; 5,932,114 and
6,417,211 shares in 1993 and 1992, respectively (289,653) (313,432)
- -----------------------------------------------------------------------------
Total Shareholders' Equity 2,246,846 2,076,601
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 4,272,400 $ 4,214,062
=============================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Melville Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
($ in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------------------------------
Years ended December 31, Preference Guaranteed Common Capital Retained Treasury
1993, 1992 and 1991 Stock ESOP Obligation Stock Surplus Earnings Stock
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1990 $ 356,928 $(347,200) $ 110,319 $ 29,245 $ 2,063,391 $(360,750)
- --------------------------------------------------------------------------------------------------------------------------------
Net earnings 346,681
Reissuance of common stock held in treasury
for business acquired (885,719 shares) (5,664) 43,418
Purchase of Series B preferred shares for
treasury (3,028 shares) 45
Conversion of Series One ESOP Preference
Stock through the reissuance of common
stock held in treasury (30,928 shares) (1,653) 137 1,516
Dividends:
Series One ESOP Convertible Preference
Stock ($3.90 per share,) net (15,778)
Series B preferred ($4.00 per share) (58)
Common ($1.44 per share) (148,536)
Exercise of stock options and restricted
shares issued under stock plans 356 12,783
Conversion of Subordinated Debentures 3 17
Reduction of Guaranteed ESOP Obligation 5,037
- --------------------------------------------------------------------------------------------------------------------------------
Balance as of December 31, 1991 355,275 (342,163) 110,678 36,563 2,245,700 (315,816)
- --------------------------------------------------------------------------------------------------------------------------------
Net earnings 133,429
Purchase of Series B preferred shares for
treasury (237 shares) 7
Conversion of Series One ESOP Preference
Stock through the reissuance of common
stock held in treasury (50,358 shares) (2,692) 223 2,469
Dividends:
Series One ESOP Convertible Preference
Stock ($3.90 per share,) net (15,670)
Series B preferred ($4.00 per share) (54)
Common ($1.48 per share) (154,530)
Exercise of stock options and restricted shares
issued under stock plans 469 16,491 (85)
Conversion of Subordinated Debentures 3 18
Reduction of Guaranteed ESOP Obligation 6,286
- --------------------------------------------------------------------------------------------------------------------------------
Balance as of December 31, 1992 352,583 (335,877) 111,150 53,302 2,208,875 (313,432)
- --------------------------------------------------------------------------------------------------------------------------------
Net earnings 331,790
Reissuance of common stock held in treasury
for business acquired (387,110 shares) (16,459) 149 18,976
Purchase of Series B preferred shares for
treasury (75 shares) 3
Conversion of Series One ESOP Preference
Stock through the reissuance of common
stock held in treasury (97,987 shares) (5,237) 434 4,803
Dividends:
Series One ESOP Convertible Preference
Stock ($3.90 per share,) net (16,753)
Series B preferred ($4.00 per share) (53)
Common ($1.52 per share) (159,686)
Exercise of stock options and restricted shares
issued under stock plans 128 4,843
Reduction of Guaranteed ESOP Obligation 7,307
- --------------------------------------------------------------------------------------------------------------------------------
Balance as of December 31, 1993 $347,346 $(328,570) $111,278 $ 42,123 $2,364,322 $(289,653)
================================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Melville Corporation and Subsidiary Companies
($ in thousands)
- ----------------------------------------------------------------------------
Years ended December 31 1993 1992 1991
- ----------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net earnings $ 331,790 $ 133,429 $ 346,681
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Realignment charge -- 346,979 --
Cumulative effect of change in
accounting principle -- 37,587 --
Depreciation and amortization 191,588 201,008 177,110
Minority interests in net earnings 47,296 53,820 50,468
Increase (decrease) in deferred income
taxes and other noncash items 15,595 (93,417) (10,130)
Change in assets and liabilities,
excluding acquisitions and dispositions:
Decrease (increase) in accounts
receivable, net 33,484 (31,728) (45,371)
Increase in inventories (86,344) (25,184) (216,380)
Increase in prepaid expenses, deferred
charges and other assets (16,854) (27,163) (15,198)
(Decrease) increase in accounts payable
and accrued expenses (120,182) (7,371) 76,434
Increase (decrease) in Federal income
taxes payable and other liabilities 23,281 (28,549) 6,199
- ----------------------------------------------------------------------------
Net Cash Provided by Operating Activities 419,654 559,411 369,813
- ----------------------------------------------------------------------------
Cash Flows From Investing Activities:
Additions to property, plant, equipment
and leasehold improvements (386,724) (304,345) (253,072)
Proceeds from the sale or disposal of
property, plant, equipment and leasehold
improvements, leased property under
capital leases, and operations sold 97,940 81,655 58,081
Acquisitions, net of cash acquired (41,534) (25,687) (42,206)
- ----------------------------------------------------------------------------
Net Cash Used in Investing Activities (330,318) (248,377) (237,197)
- ----------------------------------------------------------------------------
Cash Flows From Financing Activities:
Dividends paid (229,409) (239,467) (225,256)
Additions to (reductions of) notes payable 90,000 (50,000) 50,000
(Decrease) increase in book overdrafts (6,701) 39,050 20,902
Proceeds from the issuance of common stock 5,799 15,537 10,720
Reductions of long-term debt and
obligations under capital leases (13,190) (9,641) (22,384)
Other (2) (49) 983
- ----------------------------------------------------------------------------
Net Cash Used in Financing Activities (153,503) (244,570) (165,035)
- ----------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (64,167) 66,464 (32,419)
Cash and cash equivalents at beginning
of year 145,138 78,674 111,093
- ----------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 80,971 $ 145,138 $ 78,674
============================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Melville Corporation and Subsidiary Companies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of all subsidiary companies including foreign subsidiaries whose
results of operations are insignificant. The minority interests represent the
49% participation of Kmart Corporation in the ownership of all retail
subsidiaries formed or to be formed from July, 1967 through 1994 for the
purpose of operating leased shoe departments in Kmart stores. All intercompany
balances and transactions have been eliminated.
Cash and Cash Equivalents: Cash equivalents consist of highly liquid
instruments with maturities of three months or less and are stated at cost
which approximates market. The Company's cash management program utilizes zero
balance accounts. Accordingly, all book overdraft balances have been
reclassified to current liabilities.
Inventories: Inventories are stated at the lower of cost or market.
Inventories of the retail operations are determined primarily by the retail
method with 17.2% valued on a last-in, first-out (LIFO) basis. Inventories of
the manufacturing operations are determined primarily on a first-in, first-out
(FIFO) basis.
Fixed Assets: Depreciation and amortization of property, plant, equipment
and leasehold improvements have been provided in the consolidated financial
statements on a straight-line basis, generally over the estimated useful lives
of the assets or, when applicable, the life of the lease, whichever is
shorter. Amortization of leased property under capital leases is computed on a
straight-line basis over the life of the lease.
Deferred Charges: Deferred charges, principally beneficial leasehold
costs, are amortized on a straight-line basis
generally over the remaining life of the leasehold acquired.
Goodwill: The excess of acquisition cost over the fair value of net
assets acquired is amortized on a straight-line basis over periods not to
exceed forty years. Impairment is assessed based on profitability of the
related business relative to planned levels and changes in useful life if
disposition of a business is expected.
Maintenance and Repairs: Maintenance and repairs are charged directly to
expense as incurred. Major renewals or replacements are capitalized after
making necessary adjustments in the asset and accumulated depreciation
accounts for the items renewed or replaced.
Store Opening and Closing Costs: New store opening costs are charged to
expense as incurred. In the event a store is closed before its lease has
expired, the total lease obligation, less sublease rental income, is provided
for in the year of closing.
Federal Income Taxes: The Company and its wholly-owned subsidiaries file
a consolidated Federal income tax return. The tax benefit for dividends on
unallocated shares of Series One Convertible ESOP Preference Stock (the "ESOP
Preference Stock") is recorded as a credit to retained earnings.
Accounting Changes: Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"), the cumulative effect of which was not material to
the consolidated financial statements and is therefore not presented
separately. Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to the differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date; this effect was immaterial in 1993.
In 1993, the Company changed its method of determining retail price
indices used in the valuation of LIFO inventories.
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS No. 106").
Postretirement Benefits: The annual cost of postretirement benefits is
funded as they arise and the cost is recognized over an employee's term of
service with the Company.
Earnings Per Share: Primary earnings per share is computed by dividing
net earnings, after deducting net preferred dividends on redeemable preferred
stock and the ESOP Preference Stock, by the weighted average number of common
shares outstanding during the year. The tax benefit of dividends on the ESOP
Preference Stock included in the calculation was $10.1 million in 1993 and
1992, and $10.2 million in 1991.
Fully diluted earnings per share is computed based upon the assumed
conversion of the ESOP Preference Stock into common stock. Net earnings are
reduced by the difference between the current dividend on the ESOP Preference
Stock and the common stock, adjusted for certain nondiscretionary expenses
based on net earnings. Fully diluted earnings per share is not presented for
1992 since the effect is anti-dilutive.
Reclassifications: Certain reclassifications have been made to the
consolidated financial statements of prior years to conform to the 1993
presentation.
ACQUISITIONS AND DISPOSITIONS
During 1993, the Company acquired the assets of 50 prescription drugs, health
and beauty aids stores, 31 leather apparel stores and 10 stores selling
branded athletic footwear and apparel, for an aggregate of $38.8 million
in cash. These acquisitions have been accounted for using the purchase method
and resulted in goodwill of $26.1 million. Results of operations are included
in
<PAGE>
<PAGE>
the consolidated financial statements from their respective dates of
acquisition.
The Company also acquired all outstanding stock of a chain of nine
prescription drugs, health and beauty aids stores in exchange for 387,110
shares of the Company's common stock, which were reissued from treasury. This
acquisition was accounted for as a pooling of interests. Previously reported
financial statements have not been restated to include results of the acquired
company's operations as revenues and earnings prior to acquisition were not
material to the consolidated financial results of the Company. The difference
between the net book value of the acquired business and the cost of shares
reissued has been recorded in capital surplus.
The Company completed the sale of its Chess King, Prints Plus and
Accessory Lady divisions effective May 17, May 29 and October 16, 1993,
respectively, for aggregate proceeds of $77.1 million, including a note
receivable of $29.4 million. The aggregate loss on disposition of $85.0
million, inclusive of goodwill write-offs and losses from operations through
the dates of disposition, was provided for as part of the strategic
realignment charge recorded in 1992.
Pro forma financial results have not been presented for the effect of
these transactions since the operations are not material to the consolidated
financial results of the Company.
STRATEGIC REALIGNMENT CHARGE
In 1992, the Company recorded a pre-tax strategic realignment charge of $347.0
million to reflect the anticipated costs associated with a program to close or
convert to other formats duplicate or underperforming stores. The charge also
included the write-down of fixed assets and other underperforming assets,
losses from operations through the expected date of closure or lease
settlement, severance and inventory liquidation costs.
ACCOUNTS RECEIVABLE
Accounts receivable at December 31 consisted of the following:
- -------------------------------------------------------------------
($ in thousands) 1993 1992
- -------------------------------------------------------------------
Trade accounts $ 216,062 $ 195,820
Other 60,470 74,515
- -------------------------------------------------------------------
276,532 270,335
Less allowance for doubtful
accounts 32,534 25,131
- -------------------------------------------------------------------
$ 243,998 $ 245,204
===================================================================
INVENTORIES
Inventories at December 31 consisted of the following:
- ------------------------------------------------------------------
($ in thousands) 1993 1992
- -------------------------------------------------------------------
Finished goods $1,849,651 $1,790,780
Work-in-process 1,616 1,143
Raw materials and supplies 7,505 14,627
- ------------------------------------------------------------------
$1,858,772 $1,806,550
==================================================================
Prior to 1993, the Company used the U.S. Bureau of Labor Statistics
indices to measure inflation or deflation in the valuation of its LIFO
inventories. In 1993, internally developed indices were used to more
accurately measure price fluctuations. The net earnings impact of this change
on prior years, individually and cumulatively, is not determinable. The change
increased 1993 net earnings by $10.0 million.
Had the FIFO method been used, the carrying value of inventories valued
on a LIFO basis would have increased by $22.4 million and $33.7 million at
December 31, 1993 and 1992, respectively.
PREPAID EXPENSES
Prepaid expenses at December 31 consisted of the following:
- ----------------------------------------------------------
($ in thousands) 1993 1992
- ----------------------------------------------------------
Deferred income taxes $133,362 $167,834
Other 81,287 76,946
- ----------------------------------------------------------
$214,649 $244,780
==========================================================
ACCRUED EXPENSES
Accrued expenses at December 31 consisted of the following:
- ----------------------------------------------------------
($ in thousands) 1993 1992
- ----------------------------------------------------------
Taxes other than Federal
income taxes $114,627 $136,194
Rents 74,985 85,781
Strategic realignment reserve 3,570 100,905
Other 392,815 286,286
- ----------------------------------------------------------
$585,997 $609,166
==========================================================
SHORT-TERM BORROWING ARRANGEMENTS
At December 31, 1993, $90.0 million in commercial paper borrowings were
outstanding bearing interest at a rate of 3.3%. There were no short-term
borrowings outstanding at December 31, 1992.
The Company has available lines of credit with various banks which permit
borrowings at prime or other negotiated interest rates. There were no
short-term borrowings
<PAGE>
<PAGE>
outstanding under these lines of credit at December 31, 1993 and 1992. Lines
of credit available at December 31, 1993 and 1992, including lines available
for letters of credit, were $630.0 million and $600.4 million, respectively.
Letters of credit outstanding against these lines were approximately $323.4
million and $288.1 million as of December 31, 1993 and 1992, respectively.
The Company can also obtain short-term financing through the issuance of
commercial paper and bank loan participation notes, and is not obligated under
any formal or informal compensating balance agreements.
LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
- ----------------------------------------------------------
($ in thousands) 1993 1992
- ----------------------------------------------------------
Guaranteed ESOP note, 8.60%,
payable in various installments
through 2008* $340,100 $343,500
Other notes and mortgages payable 8,944 10,001
- ----------------------------------------------------------
349,044 353,501
Less current installments 7,281 4,488
- ----------------------------------------------------------
$341,763 $349,013
==========================================================
*See Employee Stock Ownership Plan footnote.
The aggregate long-term debt maturing during each of the next five years
is as follows: $7.3 million in 1994, $10.4 million in 1995, $13.8 million in
1996, $17.5 million in 1997 and $21.7 million in 1998.
Interest costs excluding the guaranteed ESOP note were $25.8 million in
1993, $26.7 million in 1992, and $31.2 million in 1991, which included
interest costs recognized in connection with the Company's contribution to the
ESOP. Interest income and capitalized interest totaled $2.0 million in 1993,
$1.3 million in 1992 and $1.7 million in 1991.
OTHER LONG-TERM LIABILITIES
Other long-term liabilities at December 31 consisted of the
following:
- ----------------------------------------------------------------
($ in thousands) 1993 1992
- ----------------------------------------------------------------
Strategic realignment reserve $ 6,996 $ 142,242
Other 170,177 141,592
- ----------------------------------------------------------------
$177,173 $ 283,834
================================================================
LEASES
The Company and its subsidiaries lease retail stores and warehouse, plant and
office facilities over periods generally ranging from 5 to 25 years with
options to renew such terms ranging from 5 to 15 years.
Leased property under capital leases at December 31 included:
- ----------------------------------------------------------------
($ in thousands) 1993 1992
- ----------------------------------------------------------------
Retail facilities $ 25,262 $ 33,198
Warehouse, plant and office
facilities 22,603 22,508
- ----------------------------------------------------------------
47,865 55,706
Less accumulated amortization 33,188 38,538
- ----------------------------------------------------------------
$ 14,677 $ 17,168
================================================================
At December 31, 1993, the future minimum lease payments under capital
leases, rental payments required under operating leases, and the future
minimum sublease rentals excluding lease obligations for closed stores were as
follows:
- ------------------------------------------------------------------
Capital Operating
($ in thousands) Leases Leases
- ------------------------------------------------------------------
1994 $ 6,176 $ 473,748
1995 5,790 444,389
1996 5,458 404,558
1997 4,990 371,487
1998 4,376 365,228
Thereafter 16,594 1,326,055
- ------------------------------------------------------------------
Total $ 43,384 $3,385,465
Less amount representing interest 17,228
- ------------------------------------------------------------------
Present value of minimum
lease payments $ 26,156
- ------------------------------------------------------------------
Total future minimum sublease
rentals $ 1,862 $ 25,865
==================================================================
Net rental expense for all operating leases for the years ended December
31 was as follows:
- ---------------------------------------------------------------------------
($ in thousands) 1993 1992 1991
- ---------------------------------------------------------------------------
Minimum rentals $ 496,555 $ 480,505 $ 447,779
Contingent rentals 192,905 207,106 198,584
- ---------------------------------------------------------------------------
689,460 687,611 646,363
Less sublease rentals 6,286 5,085 3,860
- ---------------------------------------------------------------------------
$ 683,174 $ 682,526 $ 642,503
===========================================================================
<PAGE>
<PAGE>
Contingent rentals are principally those for leased shoe departments
operated under license agreements with Kmart Corporation. These agreements are
for terms of 25 years, provide for rental payments based on sales and profits
and require certain performance standards. The remaining terms of license
agreements in existence at December 31, 1993 ranged from 6 to 25 years.
The balance of contingent rentals relate to other Company operations and
are based only on sales.
CONTINGENCIES
In connection with dispositions completed in 1991, 1992 and 1993, including
Chess King, Melville Realty Company, Inc. ("MRC"), a wholly owned subsidiary
of the Company, continues to guarantee rental and other lease-related charges
on 720 leases for retail stores and warehouse and office facilities. The
present value of these minimum rental payments at December 31, 1993 was
approximately $189.0 million. See subsequent event footnote regarding
guarantees of Chess King leases.
REDEEMABLE PREFERRED STOCK
The Company is required to provide $279,000 annually, on December 1, as a
sinking fund to repurchase shares of Series B preferred stock at prices not to
exceed $100 per share. Any balance not so applied within one year is returned
to the general funds of the Company. The difference between the cost of shares
repurchased and par value is reflected in capital surplus.
STOCK INCENTIVE PLANS
The Company's 1990 Omnibus Stock Incentive Plan (the "Plan") provides for the
granting of options, restricted stock and other stock-based awards for a
maximum of 5,000,000 shares of common stock to key employees. The Plan
replaced the Company's 1973 and 1987 Stock Option Plans and the 1980
Restricted Stock Plan ("Previous Plans").
Stock options under the Plan are awarded at the fair market value on the
date of grant. The right to exercise these options generally commences one
year from the date of grant and expires ten years after the grant date.
The 1989 Directors' Stock Option Plan ("Directors' Plan") for nonemployee
directors ("eligible directors") provides for the granting of options to
purchase a maximum of 150,000 shares of common stock. Any person who becomes
an eligible director receives an initial option grant to
purchase 2,000 shares of common stock, and, on each January 11 after such
initial grant through January 11, 1998, is automatically granted an additional
option to purchase 1,000 shares. All options are granted at the fair market
value on the date of grant.
The right to exercise options granted under the Directors' Plan generally
commences six months from the date of grant and expires ten years after the
grant date, provided the director has served continuously during the exercise
period.
Information with respect to stock option activity under the Plan, the
Previous Plans and the Directors' Plan is as follows:
- ------------------------------------------------------------------
Number Option Price
of Shares Range Per Share
- ------------------------------------------------------------------
Outstanding at
December 31, 1990 2,532,148 $ 12.41 / $ 54.75
Granted 667,250 39.75 / 49.31
Exercised 321,108 12.41 / 52.00
Cancelled 63,650 28.69 / 52.00
- ------------------------------------------------------------------
Outstanding at
December 31, 1991 2,814,640 $ 12.41 / $ 54.75
Granted 717,325 44.63 / 48.44
Exercised 460,090 12.41 / 52.00
Cancelled 44,650 36.00 / 52.00
- ------------------------------------------------------------------
Outstanding at
December 31, 1992 3,027,225 $ 18.19 / $ 54.75
Granted 709,650 41.13 / 53.50
Exercised 126,400 18.19 / 52.00
Cancelled 139,875 39.38 / 52.00
- ------------------------------------------------------------------
Outstanding at
December 31, 1993 3,470,600 $ 18.19 / $ 54.75
- ------------------------------------------------------------------
Exercisable at
December 31, 1993 2,787,150 $ 18.19 / $ 54.75
==================================================================
Restricted stock awards granted under the Plan are subject to certain
conditions, and restrictions are lifted generally three years after the grant
date.
Restricted stock grants under the Plan totaled 2,225 in 1993, 12,265 in
1992 and 39,060 in 1991. The fair market value as of the grant date was $0.1
million, $0.6 million and $1.8 million for 1993, 1992 and 1991, respectively.
Additionally, 420 shares, 2,030 shares and 1,520 shares were cancelled in
1993, 1992 and 1991, respectively.
The Plan also permits the granting of performance shares, representing
rights to receive cash and/or common stock of the Company based upon certain
performance criteria over a three-year performance period, and performance
based restricted shares, representing rights to receive common stock of the
Company based upon certain performance criteria over a one-year performance
period. Compensation expense related to grants under these provisions is based
on current market price of the Company's common stock and the extent to which
performance criteria are being met.
<PAGE>
<PAGE>
During 1993, 54,301 performance based restricted share units were
awarded at a fair market value of $2.6 million. During 1992 and 1991, 70,745
and 61,970 performance share units were awarded at a fair market value of $3.4
million and $3.1 million, respectively.
At December 31, 1993 2,181,629 shares were available for grant under the
Plan and 82,000 shares of stock were available for grant under the Directors'
Plan.
POSTRETIREMENT BENEFITS
The Company provides postretirement health benefits at several divisions for
retirees who meet certain eligibility requirements.
Effective January 1, 1992, the Company adopted SFAS No. 106, and recorded
an accumulated postretirement benefit obligation ("APBO") of $37.6 million for
active employees and retirees.
The weighted average discount rate used to determine the APBO was 6.9%
and 8.0% at December 31, 1993 and 1992, respectively. The following table
reflects the APBO as of December 31:
- ------------------------------------------------------------
($ in thousands) 1993 1992
- ------------------------------------------------------------
Retirees $19,400 $16,300
Fully eligible active
plan participants 2,800 2,900
Other active plan participants 12,000 10,000
- ------------------------------------------------------------
APBO 34,200 29,200
Unrecognized prior service gain 15,200 16,700
Unrecognized net loss (4,000) --
- ------------------------------------------------------------
Accrued APBO $45,400 $45,900
============================================================
Effective December, 1992, the Company amended these plans to terminate
certain benefits, resulting in a prior service gain of $16.7 million to be
amortized over 13 years. The net periodic cost recorded for the years ended
December 31 was as follows:
- -------------------------------------------------------
($ in thousands) 1993 1992
- -------------------------------------------------------
Interest expense $ 2,200 $ 3,300
Service cost (1,000)* 2,100
- -------------------------------------------------------
$ 1,200 $ 5,400
=======================================================
* Net of prior service gain amortization.
For measurement purposes, a 12.0% increase in the cost of covered
health-care benefits was assumed for 1993; the rate was assumed to decline
gradually to 6.0% in 2010, and remain at that level thereafter. A 1.0%
increase in the health-care cost trend rate would increase the APBO at January
1, 1993 by $4.5 million, and the 1993 annual expense by $0.5 million.
401(K) PROFIT SHARING PLAN
The Company has a qualified 401(k) Profit Sharing Plan available to full-time
employees who meet the plan's eligibility requirements. This plan, which is
also a defined contribution plan, contains a profit sharing component, with
tax-deferred contributions to each employee based on certain performance
criteria, and also permits employees to make contributions up to the maximum
limits allowed by Internal Revenue Code Section 401(k). Under the 401(k)
component, the Company matches a portion of the employee's contribution under
a predetermined formula based on the level of contribution and years of
vesting service. Company contributions to the plan for both profit sharing and
matching of employee contributions were $20.3 million, $17.9 million and $15.1
million in 1993, 1992 and 1991, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a defined contribution plan for all full-time employees
through its ESOP.
The ESOP Trust (the "Trust") borrowed $357.5 million at an interest rate
of 8.6% through a 20-year loan guaranteed by the Company and used the proceeds
to purchase 6,688,494 shares of ESOP Preference Stock from the Company. The
original liquidation value of the ESOP Preference Stock is guaranteed by the
Company. Dividends are cumulative at the stated rate or the common stock rate
if higher.
Contributions to the ESOP, plus the dividends paid on the ESOP Preference
Stock held by the Trust, are used to repay the loan principal and interest.
Dividends paid were $29.6 million, $25.8 million and $25.9 million in December
1993, October 1992 and October 1991, respectively. Cash contributions made by
the Company were $7.9 million, $7.4 million and $4.1 million, respectively, in
the same periods. Interest costs incurred by the Trust were approximately
$29.5 million in 1993, $29.8 million in 1992 and $29.9 million in 1991.
Compensation expense of $5.7 million, $5.5 million, and $5.3 million was
recognized in 1993, 1992 and 1991, respectively. The difference between the
cash contribution and the expense recognized is credited to the Guaranteed
ESOP Obligation.
INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109. The
cumulative effect of this accounting change was not material.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the
<PAGE>
<PAGE>
amounts used for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities as of December 31, were as follows:
- --------------------------------------------------------
($ in thousands) 1993
- --------------------------------------------------------
Deferred tax assets:
Inventories $ 30,852
Other assets 21,920
Employee benefits 53,915
- --------------------------------------------------------
Total deferred tax assets 106,687
- --------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment 56,658
- --------------------------------------------------------
Net deferred tax assets $ 50,029
========================================================
The provision for income taxes at December 31 consisted of the
following:
- --------------------------------------------------------
($ in millions) 1993 1992 1991
- --------------------------------------------------------
Federal $ 170.2 $ 99.1 $ 189.4
State 50.2 26.6 53.5
- --------------------------------------------------------
$ 220.4 $ 125.7 $ 242.9
========================================================
Reconciliations of the effective tax rates to the U.S. statutory income
tax rate are as follows:
- --------------------------------------------------------
Percent of pre-tax income 1993 1992 1991
- --------------------------------------------------------
Effective tax rate 36.8 37.5 38.0
State income taxes, net of
Federal tax benefit (5.4) (5.2) (5.5)
51% owned subsidiaries
excluded from the
consolidated Federal
income tax return 2.6 4.4 2.2
Goodwill (0.8) (3.9) (0.7)
Other 1.8 1.2 --
- --------------------------------------------------------
Statutory income tax rate 35.0 34.0 34.0
========================================================
The provision for income taxes includes a net deferred tax benefit of
$103.4 million in 1993, and net deferred tax charges of $97.6 million in 1992
and $1.2 million in 1991. For 1992 and 1991, deferred income taxes relate
principally to costs associated with the strategic realignment program, the
capitalization of inventory costs, depreciation, employee related benefits,
and leased property under capital leases.
SUPPLEMENTAL CASH FLOW INFORMATION
During the years ended December 31, the Company had the following non-cash
financing and investing activities:
- ---------------------------------------------------------------------
($ in thousands) 1993 1992 1991
- ---------------------------------------------------------------------
Fair value of
assets acquired $ 61,144 $ 26,417 $ 129,306
Fair value of common
stock reissued
from treasury -- -- 37,754
Cash paid 38,814 25,691 40,480
- ---------------------------------------------------------------------
Liabilities assumed $ 22,330 $ 726 $ 51,072
- ---------------------------------------------------------------------
Book value of common
stock issued in
pooling of interests $ 18,976 $ -- $ --
Notes received for
operations sold 29,413 -- 19,201
=====================================================================
Cash payments for income taxes and interest for the year ended December
31 were as follows:
- ---------------------------------------------------------------------
($ in thousands) 1993 1992 1991
- ---------------------------------------------------------------------
Income taxes $ 157,240 $ 236,975 $ 223,094
Interest (net of
amounts capitalized) 25,747 26,628 30,317
=====================================================================
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No.
112") which requires the recognition of an obligation for benefits provided to
former or inactive employees after employment but before retirement, must be
implemented in fiscal 1994. Had the Company adopted SFAS No. 112 in 1993, the
impact would have been immaterial to the consolidated financial statements.
SUBSEQUENT EVENT
Included in accounts receivable is a $29.4 million note received in connection
with the sale of the Chess King division (the "Note"). Subsequent to year end,
the issuer of the Note (the "Purchaser") filed for protection under Chapter 11
of the United States Bankruptcy Code. On March 1, 1994, the Company sold the
Note to a third party and realized a loss of approximately $4.0 million, which
was recorded in the 1993 consolidated financial statements.
MRC continues to guarantee rental and lease related charges for 423 of
the Chess King leases sold, the present value of which is approximately $91.0
million. Pursuant to the terms of sale of the Note, the Company will be
indemnified for 52.5% of any costs incurred under these guarantees for the
duration of the Purchaser's bankruptcy. As such, the Company's potential
liability under the guarantees is uncertain.
<PAGE>
<PAGE>
SUMMARY OF QUARTERLY RESULTS
- -----------------------------------------------------------------------------
(Unaudited; $ in thousands, except per share data)
- -----------------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Net Sales
1993 $ 2,033,011 $ 2,537,395 $ 2,355,376 $ 3,509,619
1992 2,059,351 2,495,073 2,390,584 3,487,835
- -----------------------------------------------------------------------------
Gross Profit
- -----------------------------------------------------------------------------
1993 $ 694,749 $ 926,835 $ 853,159 $ 1,296,263
1992 731,520 948,978 892,344 1,330,762
- -----------------------------------------------------------------------------
Earnings (Loss) before Cumulative Effect of Change in Accounting Principle
- -----------------------------------------------------------------------------
1993 $ (21,686) $ 74,525 $ 41,504 $ 237,447
1992 (13,609) 77,077 55,269 37,243
- -----------------------------------------------------------------------------
Net Earnings (Loss)
- -----------------------------------------------------------------------------
1993 $ (21,686) $ 74,525 $ 41,504 $ 237,447
1992 (36,160) 77,077 55,269 37,243
- -----------------------------------------------------------------------------
Earnings (Loss) Per Share before Cumulative Effect of Change in Accounting
Principle
- -----------------------------------------------------------------------------
1993 Primary $ (.24) $ .67 $ .35 $ 2.22
1993 Fully Diluted * (.24) .67 .35 2.12
1992 Primary (.17) .70 .49 .32
- -----------------------------------------------------------------------------
Net Earnings (Loss) Per Share
- -----------------------------------------------------------------------------
1993 Primary $ (.24) $ .67 $ .35 $ 2.22
1993 Fully Diluted * (.24) .67 .35 2.12
1992 Primary (.38) .70 .49 .32
=============================================================================
*Dilutive effect in the fourth quarter due to the assumed conversion of the
ESOP Preference Stock and the seasonality of earnings.
MARKET INFORMATION
Melville Corporation's common stock is listed on the New York Stock
Exchange. Its trading symbol is MES. Information with respect to quarterly
trading ranges (based on low/high stock prices) and dividends paid per share
is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
- ------------------------------------------------------------------------------------------------
Market Price Per Share
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 $46 3/4--54 3/4 $43 3/4--48 1/4 $42 1/4--47 1/8 $38 7/8--45 5/8 $38 7/8--54 3/4
1992 42 1/2--52 43 1/2--51 1/4 44 1/4--50 7/8 47 1/2--55 42 1/2--55
- ------------------------------------------------------------------------------------------------
Dividends Paid Per Share
- ------------------------------------------------------------------------------------------------
1993 $ .38 $ .38 $ .38 $ .38 $ 1.52
1992 .37 .37 .37 .37 1.48
================================================================================================
</TABLE>
<PAGE>
<PAGE>
SEGMENT INFORMATION
The Company is a specialty retailer conducting business through retail stores
in four business segments: prescription drugs,
health and beauty aids; apparel; footwear; and toys and household furnishings.
Information about operations for each of these
segments is summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
($ in thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prescription Drugs, Health and Beauty Aids
- -------------------------------------------------------------------------------------------------------------------------
Net sales $ 3,948,197 $ 3,632,066 $ 3,526,401
Operating profit (a) 195,670 149,182 206,106
Identifiable assets at December 31 1,592,964 1,492,471 1,525,541
Depreciation and amortization 56,883 60,233 55,985
Additions to property, plant, equipment and leasehold improvements 104,592 111,802 74,281
- -------------------------------------------------------------------------------------------------------------------------
Apparel
- -------------------------------------------------------------------------------------------------------------------------
Net sales 3,395,926 3,486,065 3,243,159
Operating profit (a) 181,922 125,893 222,968
Identifiable assets at December 31 1,348,385 1,378,091 1,308,957
Depreciation and amortization 75,963 78,566 69,898
Additions to property, plant, equipment and leasehold improvements 154,247 105,037 117,626
- -------------------------------------------------------------------------------------------------------------------------
Footwear
- -------------------------------------------------------------------------------------------------------------------------
Net sales 1,713,093 1,840,022 1,747,415
Operating profit (a) 168,979 91,984 161,876
Identifiable assets at December 31 568,015 572,344 582,858
Depreciation and amortization 20,937 22,293 19,198
Additions to property, plant, equipment and leasehold improvements 45,924 26,973 18,908
- -------------------------------------------------------------------------------------------------------------------------
Toys and Household Furnishings
- -------------------------------------------------------------------------------------------------------------------------
Net sales 1,378,185 1,474,690 1,369,208
Operating profit (a) 89,138 2,926 91,439
Identifiable assets at December 31 655,290 639,764 632,133
Depreciation and amortization 34,797 37,454 30,832
Additions to property, plant, equipment and leasehold improvements 70,948 47,191 41,031
- -------------------------------------------------------------------------------------------------------------------------
Consolidated
- -------------------------------------------------------------------------------------------------------------------------
Net sales $10,435,401 $10,432,843 $ 9,886,183
Operating profit before corporate expenses (a) 635,709 369,985 682,389
Corporate expenses excluding depreciation and amortization (b) 9,364 6,629 11,582
Corporate depreciation and amortization 3,008 2,462 1,197
Interest expense, net 23,810 25,398 29,512
- -------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and minority interests $ 599,527 $ 335,496 $ 640,098
- -------------------------------------------------------------------------------------------------------------------------
Identifiable assets at December 31 $ 4,164,654 $ 4,082,670 $ 4,049,489
Corporate assets 107,746 131,392 35,746
- -------------------------------------------------------------------------------------------------------------------------
Total assets at December 31 $ 4,272,400 $ 4,214,062 $ 4,085,235
- -------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 191,588 $ 201,008 $ 177,110
- -------------------------------------------------------------------------------------------------------------------------
Corporate additions to property, plant, equipment and
leasehold improvements 11,013 13,342 1,226
Total additions to property, plant, equipment and
leasehold improvements $ 386,724 $ 304,345 $ 253,072
=========================================================================================================================
<FN>
Operating profit is defined as total revenues less operating expenses. Identifiable assets include those assets directly
related to each segment's operations.
Capital additions exclude acquisitions.
(a) In 1992, includes the effect of the strategic realignment charge.
(b) Includes general corporate expenses as well as net expenses related to other corporate managed subsidiaries.
</FN>
</TABLE>
<PAGE>
<PAGE>
FIVE-YEAR FINANCIAL SUMMARY
Melville Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
($ in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------------------------------
Results for the Year 1993(a) 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $10,435,401 $10,432,843 $ 9,886,183 $ 8,686,765 $ 7,553,971
Wages and Compensation 1,338,881 1,315,564 1,257,756 1,053,440 969,309
Taxes 449,563 329,778 439,272 419,038 400,273
Earnings before Income Taxes, Minority
Interests and Cumulative Effect of
Change in Accounting Principle 599,527 335,496 640,098 687,338 704,305
Earnings before Cumulative Effect of Change in
Accounting Principle 331,790 155,980 346,681 385,261 398,076
Net Earnings 331,790 133,429 346,681 385,261 398,076
Dividends Declared 184,934 180,324 174,517 172,210 164,765
- --------------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock
- --------------------------------------------------------------------------------------------------------------------------------
Earnings before Cumulative Effect of
Change in Accounting Principle $ 3.00 $ 1.34 $ 3.20 $ 3.59 $ 3.56
Net Earnings 3.00 1.13 3.20 3.59 3.56
Dividends 1.52 1.48 1.44 1.42 1.30
Book Value 21.33 19.83 20.06 17.99 15.76
================================================================================================================================
End of Year Position
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets $ 2,398,390 $ 2,441,672 $ 2,369,993 $ 2,113,235 $ 1,874,530
Current Liabilities 1,328,097 1,380,919 1,330,227 1,147,717 808,863
Current Ratio 1.8 1.8 1.8 1.8 2.3
Total Assets $ 4,272,400 $ 4,214,062 $ 4,085,235 $ 3,662,157 $ 3,031,767
Total Long-Term Obligations and
Redeemable Preferred Stock 365,936 376,417 385,483 396,430 391,361
Percent of Long-Term Obligations to Total Capitalization 14.0 15.3 15.5 17.6 19.4
- --------------------------------------------------------------------------------------------------------------------------------
Property, Plant, Equipment and Leasehold Improvements
- --------------------------------------------------------------------------------------------------------------------------------
Net of Accumulated Depreciation and Amortization $ 1,302,200 $ 1,207,871 $ 1,105,287 $ 965,085 $ 766,560
Capital Additions 386,724 304,345 253,072 231,132 202,570
- --------------------------------------------------------------------------------------------------------------------------------
Percent of Net Sales
- --------------------------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes, Minority
Interests and Cumulative Effect of
Change in Accounting Principle 5.7 3.2 6.5 7.9 9.3
Earnings before Cumulative Effect of Change in
Accounting Principle 3.2 1.5 3.5 4.4 5.3
Net Earnings 3.2 1.3 3.5 4.4 5.3
- --------------------------------------------------------------------------------------------------------------------------------
Return on Beginning Shareholders' Equity 16.0% 6.4% 18.7% 23.8% 23.3%
- --------------------------------------------------------------------------------------------------------------------------------
Number of Stores 7,282 8,213 8,293 7,754 6,930
================================================================================================================================
<FN>
(a) Excludes stores designated to be closed in connection with the 1992 strategic realignment program.
</FN>
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 18
February 10, 1994
The Board of Directors
Melville Corporation, Inc.
Dear Members:
We have audited the consolidated balance sheets of Melville Corporation and
subsidiary companies as of December 31, 1993 and 1992 and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31,1993, and have
reported thereon under date of February 10, 1994 except as to the Subsequent
Event note, which is as of March 1, 1994. The aforementioned consolidated
financial statements and our audit report thereon are included in the
Company's 1993 Annual Report to Shareholders which is incorporated by
reference in the Company's annual report on Form 10-K for the year ended
December 31, 1993. As stated on page 41 of the 1993 Annual Report to
Shareholders, the Company changed its method of determining retail price
indices used in the valuation of LIFO inventories in 1993, and states that the
newly adopted method is preferable in the circumstances because the indices
used in 1993 more accurately measure inflation or deflation in the Company's
own retail prices. In accordance with your request, we have reviewed and
discussed with Company officials the circumstances and business judgment and
planning upon which the decision to make this change in the method of
accounting was based.
With regard to the aforementioned accounting change, authoritative criteria
have not been established for evaluating the preferability of one acceptable
method of accounting over another acceptable method. However, for purposes of
Melville Corporation's compliance with the requirements of the Securities and
Exchange Commission, we are furnishing this letter.
Based on our review and discussion, with reliance on management's business
judgment and planning, we concur that the newly adopted method of accounting
is preferable in the Company's circumstances.
Very truly yours,
/s/KPMG PEAT MARWICK
KPMG Peat Marwick
EXHIBIT 22
PARENTS AND SUBSIDIARIES AS OF DECEMBER 31, 1993
The registrant is the direct parent corporation (owning all of the
capital stock) of Footaction, Inc., a Texas corporation and the following
Minnesota corporations, all of which, except the first two, also operate
specialty retail chain stores; Smart Step H.C., Inc.; Meldisco H.C., Inc.; CVS
H.C., Inc.; Bob's H.C., Inc., Rosedale Wilsons, Inc.; Rosedale This End Up,
Inc.; Rosedale Open Country, Inc.; Bloomington, MN., L.T., Inc.;
Apache-Minnesota Thom McAn, Inc.; Southdale Kay-Bee Toy, Inc. and Marshalls of
Roseville, MINN., Inc.
Marshalls of Roseville, MINN., Inc. is the parent corporation (owning all
of the capital stock) of 490 subsidiaries, all of which were formed to operate
specialty retail stores, all located in the United States selling primarily
apparel for men, women and children.
Southdale Kay-Bee Toy, Inc. is the parent corporation (owning all of the
capital stock) of 670 subsidiaries, all of which were formed to operate
specialty retail stores, all located in the United States or Puerto Rico,
selling primarily toys, games and hobby products.
-1-
<PAGE>
<PAGE>
Rosedale Wilsons, Inc. is the parent corporation (owning directly or
indirectly all of the capital stock) of 436 subsidiaries, all of which were
formed to operate specialty retail stores, all located in the United States,
selling primarily leather and suede apparel and accessories for men and women.
Bloomington, MN., L.T., Inc. is the parent corporation (owning all of the
capital stock) of 256 subsidiaries, all of which were formed to operate
specialty retail stores, all located in the United States, selling quality
brand name linens, towels, bath and other household items.
Rosedale This End Up, Inc., is the parent corporation (owning all of the
capital stock) of 166 subsidiaries, 154 of which were formed to operate
specialty retail stores, located in the United States or Canada selling a
distinctive line of casual crate-designed furniture.
CVS H.C., Inc., is the parent corporation (owning all of the capital
stock) of 1,143 subsidiaries, all of which were formed to operate specialty
retail stores located in the United States, selling prescription drugs, health
and beauty aids.
Rosedale Open Country, Inc., is the parent corporation (owning all of the
capital stock) of 263 subsidiaries all of which were formed to operate
specialty retail stores located in the United States selling brand name
athletic footwear and related apparel for men, women and children.
-2-
<PAGE>
<PAGE>
Apache-Minnesota Thom McAn, Inc., is the parent corporation (owning all
of the capital stock) of 791 subsidiaries all of which were formed to operate
specialty retail stores located in the United States, Puerto Rico or the U.S.
Virgin Islands selling men's and women's footwear.
Meldisco H.C., Inc. is the parent corporation of 2,391 subsidiaries(owning
51% of the capital stock of 2,391 subsidiaries and 100% of the capital stock of
474 subsidiaries) all of which were formed to operate leased footwear
departments in Kmart or Pay Less Drug Stores all located in the United States
Puerto Rico or the Czech Republic and Slovakia.
Bob's H.C., Inc., is the parent corporation (owning all of the capital
stock) of twelve subsidiaries which were formed to operate specialty retail
stores located in the United States, selling casual clothing and footwear for
the entire family.
The registrant is also the direct parent corporation of Thom McAn
Manufacturing, Inc., a North Carolina corporation and the indirect parent
corporation of Marshall's, Inc., a Massachusetts corporation, Kay-Bee Toy &
Hobby Shops, Inc., a Massachusetts corporation, Wilsons House of Suede, Inc.,
a California corporation, Linens 'n Things, Inc., a New Jersey corporation,
T.E.U., Incorporated, a Virginia corporation, This End Up, Inc., a Virginia
corporation, This End Up Furniture
-3-
<PAGE>
<PAGE>
Company, a North Carolina corporation, T.E.U. Transportation, Inc. a Virginia
corporation, Bob's Inc., a Connecticut corporation, Peoples Drug Stores,
Incorporated, a Maryland corporation, CW Kay-Bee, Inc., a New York corporation
and K & K Kay-Bee, Inc., a Virginia corporation, all of which are included in
the consolidated financial statements of the registrant.
Several of the subsidiaries referred to in this Exhibit have not yet
opened their stores for business, and several no longer operate any stores.
All of the subsidiaries referred to herein are included in the consolidated
financial statements of the registrant.
The names of other subsidiaries are omitted as, considered in the
aggregate as a single subsidiary, they would not constitute a significant
subsidiary.
-4-
