<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-6672
MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2745285
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
Mailing and
Street Address: 2430 East Del Amo Boulevard, Dominguez, California 90220-6306
- -------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 537-9220
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Former name, if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Shares Outstanding at August 31, 1997 24,455,771
- -------------------------------------------------------------------------------
<PAGE> 2
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value)
<TABLE>
<CAPTION>
August 3, February 2,
(Unaudited) (Audited)
1997 1997
--------- ---------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 10,170 $ 9,639
Merchandise inventories 209,966 182,275
Deferred income tax asset 8,800 8,800
Other current assets 10,536 9,284
--------- ---------
Total current assets 239,472 209,998
Property, Equipment and Improvements:
Land 35,224 35,224
Buildings and improvements 86,413 85,397
Automobiles and trucks 3,003 3,003
Furniture, fixtures and equipment 100,165 96,119
Leasehold improvements 87,687 85,533
Construction in progress 185 912
--------- ---------
312,677 306,188
Less: Accumulated depreciation
and amortization (141,431) (132,693)
--------- ---------
171,246 173,495
--------- ---------
Other Assets 2,638 1,503
--------- ---------
Total Assets $ 413,356 $ 384,996
========= =========
</TABLE>
<TABLE>
<CAPTION>
August 3, February 2,
(Unaudited) (Audited)
1997 1997
--------- ---------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Checks outstanding $ 12,482 $ 21,369
Current portion of long-term debt 3,122 3,172
Accounts payable 22,780 18,929
Accrued expenses 54,450 56,306
Income taxes payable - 13,408
Sales tax payable 5,283 3,793
--------- ---------
Total current liabilities 98,117 116,977
--------- ---------
Long-Term Debt 51,413 3,757
Deferred Income Taxes 12,233 12,233
Stockholders' Equity:
Preferred stock, $1 par value;
authorized, 500 shares; issued, none
Common stock, $.02778 par value;
authorized, 100,000 shares;
issued 25,067 shares (August 3, 1997)
and 26,262 shares (February 2, 1997) 696 729
Additional paid-in capital 26 9,606
Retained earnings 266,692 273,898
--------- ---------
267,414 284,233
Less: Treasury stock, at cost, 549 shares
(August 3, 1997) and 1,589 shares (February
2, 1997) (15,821) (32,204)
--------- ---------
Total Stockholders' Equity 251,593 252,029
--------- ---------
Total Liabilities and Stockholders' Equity $ 413,356 $ 384,996
========= =========
</TABLE>
- ------------
See Notes to Consolidated Financial Statements.
<PAGE> 3
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
-------------------------- -------------------------
August 3, July 28, August 3, July 28,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $176,980 $157,952 $360,444 $317,084
COST OF SALES 102,719 92,525 207,629 181,251
-------- -------- -------- --------
GROSS PROFIT 74,261 65,427 152,815 135,833
-------- -------- -------- --------
Store expenses 52,620 46,567 103,483 94,258
Warehouse and administrative
expenses 12,837 12,417 30,669 27,746
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 65,457 58,984 134,152 122,004
OPERATING INCOME 8,804 6,443 18,663 13,829
INTEREST EXPENSE, NET 447 1,583 645 3,305
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 8,357 4,860 18,018 10,524
INCOME TAX EXPENSE 3,356 1,847 7,027 3,999
-------- -------- -------- --------
NET EARNINGS $ 5,001 $ 3,013 $ 10,991 $ 6,525
======== ======== ======== ========
EARNINGS PER COMMON SHARE $ 0.20 $ 0.12 $ 0.43 $ 0.25
======== ======== ======== ========
AVERAGE SHARES OUTSTANDING 25,415 25,721 25,415 25,707
======== ======== ======== ========
</TABLE>
- ------------
See Notes to Consolidated Financial Statements.
<PAGE> 4
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
---------------------- Additional ----------------------------------------
Paid-in Retained
Shares Amount Capital Earnings Shares Amount Total
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, February 2, 1997 26,262 $ 729 $ 9,606 $ 273,898 1,589 ($ 32,204) $ 252,029
Exercise of stock options 481 13 6,556 6,569
Non-cash compensation
expense 24 24
Purchase of Treasury stock, at cost 636 (18,020) (18,020)
Treasury stock retired (1,676) (46) (16,160) (18,197) (1,676) 34,403 0
Net income for six months 10,991 10,991
--------- --------- --------- --------- --------- --------- ---------
Balance, August 3, 1997 25,067 $ 696 $ 26 $ 266,692 549 ($ 15,821) $ 251,593
========= ========= ========= ========= ========= ========= =========
</TABLE>
- ------------
See Notes to Consolidated Financial Statements.
<PAGE> 5
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
For the six months ended
-------------------------
August 3, July 28,
1997 1996
--------- ---------
<S> <C> <C>
INCREASE IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Cash received from customers $ 360,444 $ 317,084
Cash paid to suppliers and employees (366,577) (305,924)
Income taxes paid (22,781) (5,460)
Interest paid (net of amount capitalized) (528) (3,518)
Interest received 19 85
--------- ---------
Net cash (used in) provided by operating activities (29,423) 2,267
Cash flows from investing activities:
Capital expenditures (6,886) (5,859)
Fire related disposals (net) - 2,473
Proceeds from sale of fixed assets 685 1,525
--------- ---------
Net cash used in investing activities (6,201) (1,861)
Cash flows from financing activities:
Borrowings under line of credit agreements and long-term debt 169,200 417,800
Repayments under line of credit agreements and long-term debt (121,750) (413,634)
Repurchase of treasury stock (18,020) (4,704)
Proceeds from sale of stock options 6,569 3,145
Other (net) 156 570
--------- ---------
Net cash provided by financing activities 36,155 3,177
--------- ---------
Increase in cash and cash equivalents 531 3,583
Cash and cash equivalents, beginning of period 9,639 7,285
========= =========
Cash and cash equivalents, end of period $ 10,170 $ 10,868
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
MAC FRUGAL'S BARGAINS o CLOSE-OUTS-INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
(continued)
<TABLE>
<CAPTION>
For the six months ended
------------------------
August 3, July 28,
1997 1996
-------- --------
<S> <C> <C>
Reconciliation of Net Income to Net Cash (Used In)
Provided By Operating Activities:
Net income $ 10,991 $ 6,525
-------- --------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 8,900 9,320
Gain on sale of fixed assets (450) (802)
Non-cash compensation expense 24 43
Changes in assets and liabilities:
Increase in inventory (27,691) (14,379)
Increase in insurance receivable - (5,499)
Decrease (increase) in other assets (41) 1,059
(Decrease) increase in checks outstanding, accounts payable,
accrued expenses and sales tax payable (5,402) 7,461
Decrease in federal and state income taxes (15,754) (1,461)
-------- --------
Total adjustments (40,414) (4,258)
-------- --------
Net cash (used in) provided by operating activities ($29,423) $ 2,267
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 7
MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC. AND SUBSIDIARIES
PART I - ITEM I - FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
Note 1 The condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, by
Mac Frugal's Bargains - Close-outs Inc., without audit. Pursuant to
the rules and regulations of the Securities and Exchange Commission,
certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted or
condensed. It is management's belief that the disclosures made are
adequate to make the information presented not misleading and reflect
all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of financial position and results of
operations for the periods presented. The results of operations of the
periods presented should not be considered as necessarily indicative
of operations for the full year. It is recommended that these
condensed consolidated financial statements be read in conjunction
with the consolidated financial statements for the year ended February
2, 1997 and the notes thereto included in the Company's 10-K.
Note 2 Earnings per Common Share is based on the weighted average number of
Common Shares outstanding, adjusted for dilutive effects of stock
options, if applicable.
Note 3 The Company's effective tax rate for fiscal 1996 and the first half of
fiscal 1997 was 38.0% and 39.0%, respectively. For interim reporting
purposes the entire provision for income tax expense was classified as
current.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The Company had a net deferred tax liability of $3,433 at
August 3, 1997 and February 2, 1997.
The Company provided no valuation allowance against its deferred tax
assets recorded as of August 3, 1997 and February 2, 1997 because
management believes it is more likely than not that the deferred
income tax assets will be realized.
Note 4 At August 3, 1997, the Company classified that portion of its
revolving debt as long-term that is not required to be repaid at its
next annual clean-down date of February 28, 1998.
Note 5 In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share (SFAS 128). This statement is effective for financial statements
issued for periods ending after December 15, 1997, including interim
periods. The statement establishes standards for computing and
presenting earnings per share and will require additional earnings per
share disclosures within the financial statements issued after the
effective date. The adoption of SFAS 128 will be reflected in the
Company's 1997 consolidated financial statements. The adoption of SFAS
128 will not impact the Company's results of operations or financial
position.
<PAGE> 8
Note 6 In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, Disclosures about
segments of an Enterprise and Related Information (SFAS 131), which
will be effective for the Company beginning February 2, 1998. SFAS 131
redefines how operating segments are determined and requires
disclosure of certain financial and descriptive information about a
company's operating segments. The Company does not believe adoption of
this statement will have a material impact on current disclosures.
<PAGE> 9
PART I - ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND INTERIM RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
THIS QUARTERLY REPORT MAY CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES
AFFECTING THE COMPANY'S OPERATIONS AND FINANCIAL PERFORMANCE. ALTHOUGH THE
COMPANY BELIEVES THAT SUCH STATEMENTS REFLECT REASONABLE EXPECTATIONS OF FUTURE
EVENTS, NO ASSURANCES CAN BE GIVEN THAT SUCH STATEMENTS WILL PROVE TO HAVE BEEN
CORRECT. ACTUAL RESULTS MAY DIFFER MATERIALLY DUE TO GENERAL ECONOMIC
CONDITIONS; CHANGES IN CONSUMER DEMAND AND PREFERENCES; ADVERSE WEATHER
PATTERNS; COMPETITIVE FACTORS INCLUDING PRICING AND PROMOTIONAL ACTIVITIES OF
MAJOR COMPETITORS; THE AVAILABILITY OF MERCHANDISE ON FAVORABLE TERMS; IMPORT
RISKS INCLUDING POTENTIAL POLITICAL OR SOCIAL UNREST, DUTIES, TARIFFS AND
QUOTAS; AND OTHER FACTORS DESCRIBED IN THE COMPANY'S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION.
RESULTS OF OPERATIONS
THIRTEEN WEEK PERIOD ENDED AUGUST 3, 1997 ("SECOND QUARTER 1997") COMPARED WITH
THIRTEEN WEEK PERIOD ENDED JULY 28, 1996 ("SECOND QUARTER 1996").
Net sales increased 12.0% for the Second Quarter 1997 compared to the Second
Quarter 1996. The sales increase was the combined result of opening 6 net new
stores since July 28, 1996, and the positive impact of a 10.3% increase in
comparable store sales. At August 3, 1997, 321 stores were in operation compared
to 315 stores at July 28, 1996. The Company believes that the comparable sales
increase was primarily attributable to the Company's strategic objective to
increase sales and customer count by offering more branded products at more
competitive prices. The comparable store sales increase for the Second Quarter
1997 was driven primarily by increases in consumables, softlines and seasonal
merchandise, offset in part by a decrease in electronics.
Sales from the 168 California stores open at August 3, 1997, were approximately
58% of the Company's total sales for the Second Quarter 1997 as compared to 59%
for the Second Quarter 1996. California stores experienced a comparable store
sales increase for the Second Quarter 1997, similar to that of the Company-wide
experience.
The gross profit margin of 42.0% for the Second Quarter 1997, increased from
41.4% for the Second Quarter 1996. The increase in the gross profit margin was
primarily attributed to a higher initial markup on shipments to the stores in
the Second Quarter 1997 versus the Second Quarter 1996. This higher markup on
shipments was primarily attributed to a change in merchandise mix towards more
branded consumable products in the Second Quarter 1997 versus a concentration in
lower margin electronics during the Second Quarter 1996.
Operating expenses were 37.0% of sales for the Second Quarter of 1997 compared
to 37.3% for the Second Quarter 1996. The Company's sales increases in the
Second Quarter 1997 translated into lower total operating expenses as a percent
of sales.
<PAGE> 10
Store expenses were 29.7% and 29.5% of sales for the Second Quarter 1997 and the
Second Quarter 1996, respectively. General cost containment, leveraging of
expenses, and increased sales in the Second Quarter 1997, offset in part by the
minimum wage increase in California effective March 1997, resulted in fairly
consistent expenses as a percent of sales.
Warehouse and administrative expenses were 7.3% and 7.9% of sales for the Second
Quarter 1997 and the Second Quarter 1996, respectively. Operating efficiencies
in the warehouse in addition to leveraging a relatively fixed administrative
expense structure with increased sales resulted in a decrease in expenses as a
percent of sales. The Company continues to operate from one distribution center
as a result of the loss of the New Orleans distribution facility which was
destroyed by fire on March 21, 1996. Since then, all of the Company's stores
have been serviced by the Company's warehouse and distribution facility in
Rancho Cucamonga, California. The Company believes it can operate its warehouse
operations more efficiently in the immediate future through its West Coast
distribution facility. Through continued control over buying and inventory
receipt management, the Company believes it has adequate capacity to service the
Company's distribution needs in the immediate future.
The $1,136 decrease in interest expense for the Second Quarter 1997 compared to
the Second Quarter 1996 resulted from both a decrease in the average amount of
debt outstanding and lower interest rates. The decrease in the average amount of
debt outstanding is the combined result of a decrease in average inventories
encompassing the last four quarters ended August 3, 1997 compared to the same
time period in the prior year, earnings generated from operations during the
last twelve months and proceeds from the insurance settlement on the New Orleans
distribution center received in the second and fourth quarters of fiscal 1996,
partially offset by the repurchase of $43,947 in stock during the last four
quarters ended August 3, 1997.
The income tax rate for the Second Quarter 1997 was 40.2%, and for interim
purposes, the entire provision for income taxes is classified as current. Income
taxes were adjusted in the Second Quarter 1997 to reflect a 39.0% rate for the
first half of fiscal 1997. The income tax rate of 39.0% versus 38.0% for the
prior year reflects certain projected changes in permanent items relative to
pre-tax earnings.
The Company had a net deferred tax liability of $3,433 at August 3, 1997 and
February 2, 1997.
TWENTY-SIX WEEK PERIOD ENDED AUGUST 3, 1997 ("YEAR-TO-DATE 1997") COMPARED WITH
TWENTY-SIX WEEK PERIOD ENDED JULY 28, 1996 ("YEAR-TO-DATE 1996").
Net sales increased 13.7% for the Year-to-Date 1997 compared to the Year-to-Date
1996. The total sales increase was a result of opening 6 net new stores since
July 28, 1996 and the positive impact of a 11.9% increase in comparable store
sales. The Company believes that the comparable sales increase was primarily
attributable to the Company's strategic objective to increase sales and customer
count by offering more branded products at more competitive prices. The sales
increase for the Year-to-Date 1997 was driven primarily by increases in
consumables, softlines and seasonal merchandise, offset in part by a decrease in
electronics.
Sales from the 168 California stores open at August 3, 1997, were approximately
58% of the Company's total sales for the Year-to-Date 1997 as compared to 59%
for the Year-to-Date 1996. California stores experienced a comparable store
sales increase for the Year-to-Date 1997, similar to that of the Company-wide
trend.
<PAGE> 11
The gross profit margin of 42.4% for the Year-to-Date 1997, decreased from 42.8%
for the Year-to-Date 1996. The decrease in the gross profit margin for the
Year-to-Date 1997 versus the Year-to-Date 1996 was primarily attributed to an
increase in markdowns to clear old aged inventory which is consistent with the
Company's strategy to increase inventory turnover, offset in part by a higher
initial markup on shipments to the stores during the Year-to-Date 1997 versus
the Year-to-Date 1996. This higher initial markup on shipments was primarily
attributed to a change in merchandise mix towards more branded consumable
products during the Year-to-Date 1997 versus a concentration in lower margin
electronics during the Year-to-Date 1996.
Operating expenses were 37.2% of sales for the Year-to-Date 1997 compared to
38.5% for the Year-to-Date 1996. The Company's sales increases during the
Year-to-Date 1997 in conjunction with leveraging of expenses translated into
lower total operating expenses as a percent of sales.
Store expenses were 28.7% and 29.7% of sales for the Year-to-Date 1997 and the
Year-to-Date 1996, respectively. General cost containment, leveraging of
expenses, and increased sales for the Year-to-Date 1997, offset in part by the
minimum wage increase in California effective March 1997, resulted in a
reduction in expenses as a percent of sales in most expense categories.
Warehouse and administrative expenses were 8.5% and 8.8% of sales for the
Year-to-Date 1997 and the Year-to-Date 1996, respectively. Operating
efficiencies in the warehouse in addition to leveraging a relatively fixed
administrative expense structure resulted in a decrease in expenses as a percent
of sales. The Company continues to operate from one distribution center as a
result of the loss of the New Orleans distribution facility which was destroyed
by fire on March 21, 1996. Since then, all of the Company's stores have been
serviced by the Company's warehouse and distribution facility in Rancho
Cucamonga, California. The Company believes it can operate its warehouse
operations more efficiently in the immediate future through its West Coast
distribution facility. Through continued control over buying and inventory
receipt management, the Company believes it has adequate capacity to service the
Company's distribution needs in the immediate future.
The $2,660 decrease in interest expense for the Year-to-Date 1997 compared to
the Year-to-Date 1996 resulted from both a decrease in the average amount of
debt outstanding and lower interest rates. The decrease in the average amount of
debt outstanding is the combined result of a decrease in average inventories
encompassing the last four quarters ended August 3, 1997 compared to the same
time period in the prior year, earnings generated from operations during the
last twelve months and proceeds from the insurance settlement on the New Orleans
distribution center received in the second and fourth quarters of fiscal 1996,
partially offset by the repurchase of $43,947 in stock during the last four
quarters ended August 3, 1997.
The income tax rate for the Year-to-Date 1997 was 39.0% and for interim
purposes, the entire provision for income taxes is classified as current. The
income tax rate of 39.0% versus 38.0% for the prior year reflects certain
projected changes in permanent items relative to pre-tax earnings.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $531 for the Year-to-Date 1997 compared to
an increase of $3,583 for the Year-to-Date 1996. The decrease of cash and cash
equivalents for the Year-to-Date 1997 compared to the Year-to-Date 1996 related
primarily to the impact on inventory in the prior year related to the fire at
the New Orleans distribution center on March 21, 1996, coupled with an
associated increase in accounts payable for the Year-to-Date 1996. In contrast,
the Year-to-Date 1997 reflects
<PAGE> 12
income tax payments related to the increase in earnings for the Year-to-Date
1997 and the repurchase of treasury stock and associated debt, partially offset
by the proceeds from the sale of stock options.
As of August 3, 1997, the Company's long-term debt was 20.4% of equity and total
debt was 21.7% of equity. At July 28, 1996, long-term debt and total debt were
both 43.0% of equity. At February 2, 1997, long-term debt was 1.5% of equity and
total debt was 2.7% of equity. The improvement in both leverage ratios at August
3, 1997 compared to July 28, 1996 reflects the decrease in average inventories
encompassing the last four quarters ended August 3, 1997 and the borrowings
necessary to finance them. The improvement also reflects the cash infusion of
the insurance proceeds from the New Orleans distribution center settlement
received in the second and fourth quarters of fiscal 1996 and the Company's
earnings over the last four quarters, offset in part by the repurchase of stock
during the last four quarters ended August 3, 1997. The increase in the level of
long-term debt and total debt compared to February 2, 1997 reflects the building
of the Company's inventories to meet increased operational needs due to sales
demands and to meet seasonal needs.
The Company believes its present lines of credit are adequate to meet any
seasonal or temporary liquidity needs that cannot be met with cash flow from
operating activities. At August 3, 1997, the Company had $10,000 outstanding
revolving debt under the Company's $175,000 committed credit facility. There was
$37,500 outstanding under the Company's uncommitted credit lines at August 3,
1997.
The Company's current ratio as of August 3, 1997 was 2.44 versus 1.80 at fiscal
year end 1996 and 2.74 at July 28, 1996. The decrease in the Company's current
ratio at August 3, 1997 compared to July 28, 1996 is due primarily to an
insurance receivable recorded in current assets as of July 28, 1996 and accrued
liabilities recorded as of August 3, 1997, both related to the fire at the New
Orleans distribution center.
For the six months ended August 3, 1997, inventory turnover improved to 1.07
from .93 for the six months ended July 28, 1996. This improvement in inventory
turnover reflects the Company's improved sales performance and reduced inventory
levels for the first half of 1997 versus the first half of 1996.
<PAGE> 13
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders
The Company held its 1997 Annual Meeting of Stockholders on June 18,
1997 (the "Annual Meeting"). At the Annual Meeting, shareholders
elected all six directors nominated. The following table sets forth the
number of votes cast for and votes withheld from each nominee. There
were no broker non-votes for any nominee.
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
David H. Batchelder 21,994,525 1,060,243
Philip L. Carter 21,994,177 1,060,591
Peter C. Cooper 22,007,220 1,047,548
I. T. Corley 21,992,235 1,062,533
Mark J. Miller 21,991,155 1,063,613
James J. Zehentbauer 21,993,988 1,060,780
</TABLE>
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 27 -- Financial Data Schedule.
(b) Reports on Form 8-K - No reports on Form 8-K have
been filed during the quarter ended August 3, 1997.
<PAGE> 14
SIGNATURES
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.
MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC.
/s/ Philip L. Carter
--------------------------------------------------------
Philip L. Carter
Director, President and Chief Executive Officer
/s/ Neil T. Watanabe
--------------------------------------------------------
Neil T. Watanabe
Senior Vice President and Chief Financial Officer
DATE: September 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1998
<PERIOD-START> FEB-03-1997
<PERIOD-END> AUG-03-1997
<CASH> 10,170
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 209,966
<CURRENT-ASSETS> 239,472
<PP&E> 312,677
<DEPRECIATION> 141,431
<TOTAL-ASSETS> 413,356
<CURRENT-LIABILITIES> 98,117
<BONDS> 0
0
0
<COMMON> 696
<OTHER-SE> 250,897
<TOTAL-LIABILITY-AND-EQUITY> 413,356
<SALES> 360,444
<TOTAL-REVENUES> 360,444
<CGS> 207,629
<TOTAL-COSTS> 207,629
<OTHER-EXPENSES> 134,152
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 645
<INCOME-PRETAX> 18,018
<INCOME-TAX> 7,027
<INCOME-CONTINUING> 10,991
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,991
<EPS-PRIMARY> .43
<EPS-DILUTED> 0
</TABLE>
