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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934 For the quarterly period ended August 1, 1998, or
Transition report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 For the transition period from to .
Commission file number 1-12814
COLE NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 34-1453189
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
5915 Landerbrook Drive
Mayfield Heights, Ohio 44124
(Address of principal executive offices) (Zip code)
(440) 449-4100
(Registrant's telephone number, including area code)
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. X YES NO
--- ---
As of August 26, 1998, 14,838,428 shares of the registrant's common stock
were outstanding.
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COLE NATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED AUGUST 1, 1998
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of August 1, 1998 and January 31,
1998...................................................................... 1
Consolidated Statements of Operations for the 13 and 26 weeks ended August
1, 1998 and August 2, 1997................................................ 2
Consolidated Statements of Cash Flows for the 26 weeks ended August
1, 1998 and August 2, 1997................................................ 3
Notes to Consolidated Financial Statements................................ 4 - 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 6 - 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders....................... 10
Item 6. Exhibits and Reports on Form 8-K.......................................... 11
</TABLE>
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<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
August 1, January 31,
1998 1998
------------- --------------
Assets
- ------
<S> <C> <C>
Current assets:
Cash and temporary cash investments $ 34,152 $ 68,053
Accounts receivable, less allowance for
doubtful accounts of $6,357 in 1998 and
$4,334 in 1997 56,833 52,030
Current portion of notes receivable 3,402 4,177
Refundable income taxes 8,911 9,520
Inventories 126,485 119,970
Prepaid expenses and other 11,459 9,195
Deferred income tax benefits 21,534 21,534
------------ ------------
Total current assets 262,776 284,479
Property and equipment, at cost 263,289 242,966
Less-accumulated depreciation and amortization (125,279) (115,162)
------------ ------------
Total property and equipment, net 138,010 127,804
Other assets:
Notes receivable, excluding current portion 33,689 25,783
Deferred income taxes and other 65,036 54,241
Intangible assets, net 158,612 159,077
------------ ------------
Total assets $ 658,123 $ 651,384
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 16,071 $ 16,027
Accounts payable 53,905 71,867
Accrued interest 6,822 6,615
Accrued liabilities 113,391 115,838
Accrued income taxes 10,438 957
------------ ------------
Total current liabilities 200,627 211,304
Long-term debt, net of discount and current portion 276,773 277,401
Other long-term liabilities 30,664 30,664
Stockholders' equity 150,059 132,015
------------ ------------
Total liabilities and stockholders' equity $ 658,123 $ 651,384
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
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<PAGE> 4
COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
------------------------ ------------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue $ 267,611 $ 242,163 $ 539,439 $ 481,849
Costs and expenses:
Cost of goods sold 89,132 81,162 179,421 163,574
Operating expenses 147,721 133,505 304,039 269,546
Depreciation and amortization 8,091 7,026 16,489 14,486
---------- ---------- ---------- ----------
Total costs and expenses 244,944 221,693 499,949 447,606
Operating income 22,667 20,470 39,490 34,243
Other (income) expense:
Interest expense 6,868 8,528 13,785 16,924
Interest income and other (635) (634) (1,265) (1,247)
---------- ---------- ---------- ----------
Total other (income) expense 6,233 7,894 12,520 15,677
Income from continuing operations before income taxes 16,434 12,576 26,970 18,566
Income tax provision 6,634 5,348 11,058 7,984
---------- ---------- ---------- ----------
Income from continuing operations 9,800 7,228 15,912 10,582
Operating income (loss) from
discontinued operations, net of
income taxes -- 130 -- (776)
---------- ---------- ---------- ----------
Net income $ 9,800 $ 7,358 $ 15,912 $ 9,806
========== ========== ========== ==========
Earnings (loss) per common share:
Basic-
Income from continuing operations $ 0.66 $ 0.58 $ 1.07 $ 0.87
Income (loss) from discontinued
operations -- 0.01 -- (0.07)
---------- ---------- ---------- ----------
Net income $ 0.66 $ 0.59 $ 1.07 $ 0.80
========== ========== ========== ==========
Diluted-
Income from continuing operations $ 0.64 $ 0.56 $ 1.04 $ 0.83
Income (loss) from discontinued
operations -- 0.01 -- (0.06)
---------- ---------- ---------- ----------
Net income $ 0.64 $ 0.57 $ 1.04 $ 0.77
========== ========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
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COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
26 Weeks Ended
----------------------------
August 1, August 2,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,912 $ 9,806
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 16,489 14,486
Non-cash interest (473) 113
Change in assets and liabilities:
Increase in accounts and notes receivable,
prepaid expenses and other assets (5,580) (18,044)
Increase in inventories (5,950) (10,806)
Decrease in accounts payable, accrued liabilities
and other liabilities (23,220) (14,068)
Increase (decrease) in accrued interest 207 (1,826)
Increase (decrease) in accrued income taxes 10,090 (11,268)
------------ ------------
Net cash provided (used) by operating activities 7,475 (31,607)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment, net (22,563) (19,818)
Systems development costs (10,150) (6,020)
Investment in Pearle Europe, net (7,152) --
Acquisitions of businesses, net (2,923) --
Other, net 402 (460)
------------ ------------
Net cash used by investing activities (42,386) (26,298)
------------ ------------
Cash flows from financing activities:
Repayment of long-term debt (682) (564)
Proceeds from public offering, net -- 115,909
Proceeds from exercise of stock options and warrants 1,857 2,668
Other, net (165) (107)
------------ ------------
Net cash provided by financing activities 1,010 117,906
------------ ------------
Cash and temporary cash investments:
Net increase (decrease) during the period (33,901) 60,001
Balance, beginning of the period 68,053 73,141
------------ ------------
Balance, end of the period $ 34,152 $ 133,142
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
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COLE NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Cole
National Corporation (CNC), its wholly owned subsidiaries, including Cole
National Group, Inc. (CNG), and CNG's wholly owned subsidiaries
(collectively, the "Company"). All significant intercompany transactions
have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared
without audit and certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted, although the
Company believes that the disclosures herein are adequate to make the
information not misleading. Prior year financial statements have been
restated to reflect the discontinued operations of Cole Gift Centers, Inc.
(CGC) chain of personalized gift and greeting card departments located in
host stores. At March 15, 1998, all CGC locations have been closed.
Results for interim periods are not necessarily indicative of the
results to be expected for the full year. These statements should be read in
conjunction with the Company's consolidated financial statements for the
fiscal year ended January 31, 1998.
In the opinion of management, the accompanying financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the Company's financial position as of August 1,
1998 and the results of operations for the 13 and 26 weeks ended August 1,
1998 and August 2, 1997, and cashflows for the 26 weeks ended August 1, 1998
and August 2, 1997.
Inventories
The accompanying interim consolidated financial statements have been
prepared without physical inventories.
Cash Flows
Net cash flows from operating activities reflect cash payments for
income taxes and interest of $912,000 and $13,471,000, respectively, for the
26 weeks ended August 1, 1998, and $18,661,000 and $19,044,000,
respectively, for the 26 weeks ended August 2, 1997.
Earnings Per Share
Earnings per share for the 13 and 26 weeks ended August 1, 1998 and
August 2, 1997 have been calculated based on the following weighted average
number of common shares and equivalents outstanding:
<TABLE>
<CAPTION>
13 Weeks 26 Weeks
----------------------------- -------------------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Basic 14,881,801 12,436,850 14,818,344 12,228,169
Diluted 15,344,539 12,963,978 15,310,805 12,722,546
</TABLE>
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<PAGE> 7
(2) INVESTMENT IN PEARLE EUROPE B.V.
In February 1998, the Company repaid a $3.2 million note payable to a
subsidiary of Pearle Europe and invested an additional $7.2 million in the
form of 8% shareholder loans to Pearle Europe in connection with Pearle
Europe's acquisition of optical operations in Germany and Austria.
In June 1998, Pearle Europe repaid to the Company a shareholder loan,
including interest thereon, in the amount of $3.7 million.
(3) NEW ACCOUNTING PRONOUNCEMENT
Effective February 1, 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." This statement requires that the Company report the change in its
equity during a period from non-owner sources. For the 13 and 26 weeks
ended August 1, 1998 and August 2, 1997, components of other comprehensive
income (loss) relate to foreign currency translation adjustments related
to the Company's Canadian operations and investment in Pearle Europe.
Total comprehensive income is as follows (000's omitted):
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
---------------------------- ----------------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 9,800 $ 7,358 $ 15,912 $ 9,806
Other comprehensive income (loss) (268) (449) (3) (909)
------------ ------------ ------------ ------------
Total comprehensive income $ 9,532 $ 6,909 $ 15,909 $ 8,897
============ ============ ============ ============
</TABLE>
(4) RECLASSIFICATIONS
Certain 1997 amounts have been reclassified to conform with the 1998
presentation.
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of certain factors affecting the
Company's results of continuing operations for the 13 and 26 week periods
ended August 1, 1998 and August 2, 1997 (the Company's second quarter and
first six months, respectively) and its liquidity and capital resources.
This discussion should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this filing
and the Company's audited financial statements for the fiscal year ended
January 31, 1998 included in its annual report on Form 10-K.
The Company's fiscal year ends on the Saturday closest to January 31.
Fiscal years are identified according to the calendar year in which they
begin. For example, the fiscal year ended January 31, 1998 is referred to as
"fiscal 1997."
RESULTS OF OPERATIONS
Net revenue for the second quarter of fiscal 1998 increased 10.5% to
$267.6 million from $242.2 million for the same period in fiscal 1997. Net
revenue for the first six months of fiscal 1998 increased 12.0% to $539.4
million from $481.8 million for the same period in fiscal 1997. The
increases in revenue were primarily attributable to the inclusion in fiscal
1998 of additional Cole Optical units, including the American Vision
Centers, Inc. ("AVC") stores acquired in August 1997, consolidated
comparable store sales increases of 3.6% for both the second quarter and the
first six months of fiscal 1998, and the growth of managed vision care fees.
At Cole Optical, second quarter comparable store sales increased 3.8% at
Cole Vision and decreased 0.9% at Pearle. For the first six months,
comparable store sales increased 4.2% and 0.4% at Cole Vision and Pearle,
respectively. The Pearle comparable store sales were impacted by weaker
than expected reception to both a new promotional offer in the first
quarter and subsequent marketing efforts. At Things Remembered, the
comparable store sales increases of 7.8% and 6.5% for the second quarter
and first six months, respectively, reflected increased sales of additional
personalization and clearance merchandise. At August 1, 1998, the Company
had 2,848 specialty service retail locations, including 403 franchised
locations, compared to 2,675 at August 2, 1997.
Gross profit increased 10.9% to $178.5 million in the second quarter
of fiscal 1998 from $161.0 million in the same period last year. For the
first six months of fiscal 1998, gross profit increased 13.1% to $360.0
million from $318.3 million in the same period a year ago. The gross profit
increases were primarily attributable to the increased revenue at Cole
Optical and Things Remembered. Gross margins for the second quarter of
fiscal 1998 and fiscal 1997 were 66.7% and 66.5%, respectively. For the
first six months of fiscal 1998 and fiscal 1997, gross margins were 66.7%
and 66.1%, respectively. Gross margins were favorably impacted by the growth
in managed vision care fees and the sales mix of higher margin products at
Cole Optical.
Operating expenses increased 10.6% to $147.7 million in the second
quarter of fiscal 1998 from $133.5 million in fiscal 1997, and as a
percentage of revenue, operating expenses were nearly flat at 55.2% in
fiscal 1998 versus 55.1% in fiscal 1997. For the first six months of fiscal
1998, operating
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<PAGE> 9
expenses increased 12.8% to $304.0 million from $269.5 million in fiscal
1997, and as a percentage of revenue, operating expenses increased to 56.4%
in fiscal 1998 from 55.9% in fiscal 1997. The leverage loss for the first
six months was primarily a result of increased advertising expenditures at
Pearle during the first quarter and increased expenses related to managed
vision care fee growth, partially offset by leverage gains on payroll and
store occupancy costs. Fiscal 1998 depreciation and amortization expense of
$8.1 million in the second quarter and $16.5 million in the first six
months was $1.1 million and $2.0 million more, respectively, than the same
periods in fiscal 1997 reflecting the acquisition of AVC and an increase in
capital expenditures.
Operating income increased 10.7% to $22.7 million for the second
quarter of fiscal 1998 from $20.5 million for the same period a year ago,
and for the first six months of fiscal 1998, operating income increased
15.3% to $39.5 million from $34.2 million for the same period last year,
primarily the result of the increase in net revenue.
Interest expense decreased $1.7 million from the second quarter of
fiscal 1997 to $6.9 million and decreased $3.1 million in the six months of
fiscal 1998 to $13.8 million. The decreases were primarily attributable to
the purchase and retirement of $150.9 million of 11-1/4% Senior Notes in
connection with a tender offer in September 1997, partially offset by
additional interest on $125.0 million of 8-5/8% Senior Subordinated Notes
issued in August 1997.
An income tax provision was recorded in the first six months of
fiscal 1998 and fiscal 1997 using the Company's estimated annual effective
tax rates of 41% and 43%, respectively. The reduction in the rate primarily
reflects the estimated impact of non-deductible amortization of goodwill in
both years.
Net income increased to $9.8 million for the second quarter of fiscal
1998 from $7.4 million for the same period in fiscal 1997. For the first six
months of fiscal 1998, net income increased to $15.9 million from $9.8
million for the same period last year. The increases were due to
improvements in income from operations, the reduction of net interest
expense, the lower effective tax rate and a $0.8 million loss from
discontinued operations in the first six months of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is funds provided from
operations of its operating subsidiaries. In addition, the Company's
operating subsidiaries have available to them working capital commitments of
$75.0 million under their Credit Facility, reduced by commitments under
letters of credit.
There were no working capital borrowings outstanding during the first
six months of fiscal 1998 and fiscal 1997.
Operations for the first six months provided $7.5 million of cash in
fiscal 1998 and used $31.6 million of cash in fiscal 1997. The increase in
cash provided by operations was primarily attributable to the payment in
fiscal 1997 of
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<PAGE> 10
$15.0 million of taxes due on the sale of Pearle's European operation in
fiscal 1996, less cash used in the first six months of fiscal 1998 for
increases in accounts receivable, prepaid expenses and inventories and the
increase in net income.
Cash used by investing activities included capital additions of $22.6
million and $19.8 million for the first six months of fiscal 1998 and fiscal
1997, respectively. The majority of capital expenditures were for store
fixtures, equipment and leasehold improvements for new stores and the
remodeling of existing stores. In fiscal 1997, capital expenditures of $6.9
million were incurred in connection with the construction of Things
Remembered's new warehouse and distribution facility. In May 1998, the
Company purchased an office building in Twinsburg, Ohio for $9.5 million. It
is anticipated that a portion of Cole Optical's business will move there
during 1998. The Company is currently evaluating financing alternatives for
both facilities. In addition, $2.9 million of cash was used to acquire
optical retail locations. During the first six months of fiscal 1998, the
Company repaid a $3.2 million note payable to a subsidiary of Pearle Europe
B.V. (Pearle Europe), invested an additional $7.2 million in the form of 8%
shareholder loans to Pearle Europe in connection with Pearle Europe's
acquisition of two optical operations in Germany and Austria, and was repaid
$3.7 million by Pearle Europe representing a shareholder loan and accrued
interest. Investments in systems development costs totaled $10.2 million
and $6.0 million in the first six months of fiscal 1998 and fiscal 1997,
respectively.
During the current fiscal year through August 31, 1998, the Company
has repurchased 65,000 shares of common stock for an aggregate purchase
price of approximately $1.8 million and has remaining authority to purchase
up to 415,000 shares of common stock in the open market and block purchases.
The Company believes that funds provided from operations along with
funds available under the Credit Facility will provide adequate sources of
liquidity to allow the Company's operating subsidiaries to continue to
expand the number of stores and to fund capital expenditures and systems
development costs.
YEAR 2000
The Company currently is working with a consultant to assess and
resolve the potential impact of the Year 2000 on the ability of the
Company's computerized information systems to accurately process information
that may be date-sensitive. Any of the Company's programs that recognize a
date using "00" as the year 1900 rather than the Year 2000 could result in
errors or system failures.
Included in the Company's assessment is the identification of all
critical and non-critical computer programs and hardware, including
non-information technology systems such as HVAC, telephone and others
containing embedded microcontrollers, and an evaluation of their Year 2000
readiness. Concurrent with this internal assessment, the Company is
identifying critical third parties, with whom the Company does business,
regarding their Year 2000 readiness.
Approximately 90% of the Company's hardware devices and software
applications have been identified and evaluated, and critical vendors, host
stores and managed health care partners have been contacted with respect to
the Year 2000. The Company expects to complete this assessment during the
third quarter of fiscal 1998. At that time a comprehensive plan will be
completed which will include (a) an estimate of the total Year 2000 costs,
(b) a timeline for modifying or replacing critical programs and hardware,
and (c) a contingency plan to address the risks of failure to be Year 2000
ready and identify actions to mitigate those risks. The Company utilizes
over 500 separate computer
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<PAGE> 11
information systems across its operations, many of which were recently
installed and were Year 2000 ready. In addition, modification to many of the
Company's other critical programs has been started. The Company currently
believes that all critical programs and hardware will be Year 2000 ready,
including testing, by the end of the second quarter of fiscal 1999.
The Company cannot currently estimate the costs of assessing and
resolving its Year 2000 issues, which include both internal staff costs as
well as outside consulting and other expenditures related to this effort.
Notwithstanding that the Company is proceeding diligently with the
implementation of its own readiness program, including ascertaining Year
2000 readiness of critical third parties, the inability of the Company or
critical third parties to effectuate timely and cost effective solutions to
Year 2000 issues could have a material adverse effect on the Company.
For the 26 weeks ended August 1, 1998, in addition to internal costs,
the Company has incurred approximately $300,000 of external Year 2000
costs, all of which have been expensed.
FORWARD-LOOKING INFORMATION
Certain sections of this Form 10-Q contain forward-looking
statements. Forward-looking statements are made based upon management's
expectations and beliefs concerning future events impacting the Company. All
forward-looking statements involve risk and uncertainty.
The Company operates in a highly competitive environment, and its
future liquidity, financial condition and operating results may be
materially affected by a variety of factors, some of which may be beyond the
control of the Company, including risks associated with the integration of
acquired operations, the Company's ability to select and stock merchandise
attractive to customers, the implementation of its store acquisition
program, economic and weather factors affecting consumer spending,
operating factors, including manufacturing quality of optical and engraved
goods, affecting customer satisfaction, the Company's relationships with
host stores and franchisees, the mix of goods sold, pricing and other
competitive factors, the ability of the Company and its suppliers, host
stores, and managed care organization partners to achieve Year 2000
readiness, and the seasonality of the Company's business.
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<PAGE> 12
PART II -- OTHER INFORMATION
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 11, 1998, the Company held its annual meeting of
stockholders. At that meeting, the stockholders elected seven directors to
serve until the next annual meeting of stockholders, approved the 1998
Equity and Performance Incentive Plan ("Omnibus Plan"), and confirmed the
appointment of Arthur Andersen LLP as independent auditors of the Company
for the fiscal year ending January 30, 1999.
Of the total eligible votes of 14,812,467, stockholders cast votes of
13,023,347 or 87.92% of the total eligible votes. The votes cast for the
aforementioned matters were as follows:
1) Election of Directors
<TABLE>
<CAPTION>
Abstentions
and/or Broker
For Withheld non-votes
---------- -------- ---------
<S> <C> <C> <C>
Jeffrey A. Cole 12,969,815 53,532 0
Timothy F. Finley 12,983,863 39,484 0
Irwin W. Gold 12,983,608 39,739 0
Peter V. Handel 12,983,763 39,584 0
Charles A. Ratner 12,969,863 53,484 0
Walter J. Salmon 12,969,189 54,158 0
Brian B. Smith 12,969,819 53,528 0
</TABLE>
2) 1998 Equity and Performance Incentive Plan ("Omnibus Plan")
<TABLE>
<CAPTION>
Abstentions
and/or Broker
For Withheld non-votes
---------- -------- ---------
<S> <C> <C> <C>
Approval of Plan 11,273,512 518,219 1,231,616
</TABLE>
3) Confirmation of Independent Auditors
<TABLE>
<CAPTION>
Abstentions
and/or Broker
For Withheld non-votes
---------- -------- ---------
<S> <C> <C> <C>
Arthur Andersen LLP 13,012,449 7,100 3,798
</TABLE>
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<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following Exhibits are filed herewith and made a part
hereof:
27 Financial Data Schedule
10.1 Form of Cole National Corporation's 1998 Equity and
Performance Incentive Plan, incorporated by reference to
Exhibit A to Cole National Corporation's definitive Proxy
Statement dated May 1, 1998 (File No. 1-12814).
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K for the quarterly
period ended August 1, 1998.
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<PAGE> 14
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLE NATIONAL CORPORATION
By: /s/ Wayne L. Mosley
---------------------------------------
Wayne L. Mosley
Vice President and Controller
(Duly Authorized Officer and Principal
Accounting Officer)
Date: September 1, 1998
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<PAGE> 15
COLE NATIONAL CORPORATION
FORM 10-Q
QUARTER ENDED AUGUST 1, 1998
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
10.1 Form of Cole National Corporation's 1998 Equity and
Performance Incentive Plan, incorporated by reference to
Exhibit A to Cole National Corporation's definitive Proxy
Statement dated May 1, 1998 (File No. 1-12814).
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> AUG-01-1998
<CASH> 34,152
<SECURITIES> 0
<RECEIVABLES> 60,235
<ALLOWANCES> 6,357
<INVENTORY> 126,485
<CURRENT-ASSETS> 262,776
<PP&E> 263,289
<DEPRECIATION> 125,279
<TOTAL-ASSETS> 658,123
<CURRENT-LIABILITIES> 200,627
<BONDS> 276,773
0
0
<COMMON> 15
<OTHER-SE> 150,044
<TOTAL-LIABILITY-AND-EQUITY> 658,123
<SALES> 539,439
<TOTAL-REVENUES> 539,439
<CGS> 179,421
<TOTAL-COSTS> 499,949
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,520
<INCOME-PRETAX> 26,970
<INCOME-TAX> 11,058
<INCOME-CONTINUING> 15,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,912
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.04
</TABLE>
