FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 4, 1996
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
For Quarter Ended: May 4, 1996
Commission File Number: 0-15907
Exact name of registrant as specified in its charter:
PROFFITT'S, INC.
State of Incorporation: Tennessee
I.R.S. Employer Identification Number: 62-0331040
Address of Principal Executive Offices (including zip code):
P.O. Box 9388, Alcoa, Tennessee 37701
Registrant's telephone number, including area code:
(423) 983-7000
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes (X) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.10 Par Value 19,188,194 shares as of May 4, 1996
Commission File No. 0-15907
PROFFITT'S, INC.
Index
PART I. FINANCIAL INFORMATION Page No.
Item l. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
May 4, 1996, February 3, 1996, and April 29, 1995 2
Condensed Consolidated Statements of Income
Three Months Ended May 4, 1996 and April 29, 1995 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended May 4, 1996 and April 29, 1995 4
Notes to Condensed Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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Commission File No. 0-15907
<TABLE>
<CAPTION>
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
May 4, February 3, April 29,
1996 1996 1995
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $2,014 $26,157 $12,359
Net trade accounts receivable,
less receivables sold
to third party 32,038 44,878 116,625
Merchandise inventories 317,004 286,474 311,534
Other current assets 20,263 21,243 22,269
------- ------- -------
Total current assets 371,319 378,752 462,787
Property and equipment, net 380,836 381,839 386,318
Goodwill 52,450 52,838 50,816
Other assets 21,288 22,237 23,256
------- ------- -------
$825,893 $835,666 $923,177
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable
and accrued liabilities $150,959 $149,361 $137,079
Current portion of long-
term debt and capital
lease obligations 16,900 17,269 15,617
------- ------- -------
Total current liabilities 167,859 166,630 152,696
Senior debt 113,965 134,255 217,498
Capital lease obligations 10,715 10,846 11,200
Deferred income taxes 53,957 52,250 61,476
Other long-term liabilities 15,008 14,328 11,722
Subordinated debentures 100,568 100,505 100,326
Shareholders' equity 363,821 356,852 368,259
------- ------- -------
$825,893 $835,666 $923,177
======== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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Commission File No. 0-15907
<TABLE>
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended
------------------
May 4, April 29,
1996 1995
------------------
<S> <C> <C>
Net sales $296,561 $287,125
Costs and expenses:
Cost of sales 192,892 187,008
Selling, general and
administrative expenses 71,537 70,891
Other operating expenses 24,398 24,840
Expenses related to hostile
takeover defense 438
Merger, restructuring and
integration costs 2,763
Gain on sale of assets (2,260)
-------- -------
Operating income 7,231 3,948
Other income (expense):
Finance charge income 10,634 9,954
Finance charge income allocated
to purchaser of
accounts receivable (3,474) (2,161)
Interest expense (4,105) (6,269)
Other income (expense), net 370 656
-------- -------
Income before provision
for income taxes 10,656 6,128
Provision for income taxes 4,402 2,480
-------- -------
NET INCOME 6,254 3,648
Preferred stock dividends 488 488
-------- -------
Net income available to
common shareholders $5,766 $3,160
======== =======
Earnings per common share $0.29 $0.16
======== =======
Weighted average common shares 19,744 19,182
======== =======
Note/ Earnings per common share amounts are based on the weighted
average number of shares of common stock and dilutive common
stock equivalents (employee stock options) outstanding during each
period, after recognition of preferred stock dividends.
See notes to condensed consolidated financial statements.
</TABLE>
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Commission File No. 0-15907
<TABLE>
<CAPTION>
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
------------------
May 4, April 29,
1996 1995
------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $6,254 $3,648
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 8,501 8,555
Gain on sale of assets (2,260)
Changes in operating assets
and liabilities, net (11,727) (16,194)
Net cash provided by
(used in) operating activities 768 (3,991)
INVESTING ACTIVITIES
Purchases of property and
equipment, net (9,348) (9,668)
Proceeds from sale of assets 5,000
Acquisition of Parks-Belk Company (10,422)
Other, net 35
-------- -------
Net cash used in investing activities (4,348) (20,055)
FINANCING ACTIVITIES
Payments on long-term debt
and capital
lease obligations (20,790) (3,052)
Proceeds from long-term borrowings 25,141
Proceeds from issuance of stock 1,202 110
Dividends paid to preferred
shareholders (975) (975)
-------- -------
Net cash (used in) provided
by financing activities (20,563) 21,224
Decrease in cash and
cash equivalents (24,143) (2,822)
Cash and cash equivalents
at beginning of period 26,157 15,181
-------- -------
Cash and cash equivalents
at end of period $2,014 $12,359
======== ========
Cash paid during the three months ended May 4, 1996 for interest
and income taxes totaled $5,633 and $1,457, respectively.
Cash paid during the three months ended April 29, 1995 for interest
and income taxes totaled $3,996 and $8,145, respectively.
See notes to condensed consolidated financial statements.
</TABLE>
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Commission File No. 0-15907
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE A BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of the Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three month period ended May 4, 1996 are not
necessarily indicative of the results that may be expected for the
year ending February 1, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year
ended February 3, 1996.
The balance sheet at February 3, 1996 has been derived from the
audited financial statements at that date.
NOTE B BUSINESS COMBINATIONS
Proffitt's, Inc. combined its business with Younkers, Inc., a
publicly-owned retail department store chain with 51 stores in the
midwest, effective February 3, 1996, immediately before the
Company's fiscal year end. Each outstanding share of Younkers,
Inc. Common Stock was converted into ninety eight one hundredths
(.98) shares of Proffitt's, Inc. Common Stock, with approximately
8.8 million shares issued in the transaction. This combination was
accounted for as a pooling of interests, and accordingly, the
consolidated financial statements have been restated for all
periods to include the results of operations and financial position
of Younkers.
Younkers' financial statements have been restated to conform to
Proffitt's accounting methods and also reflect certain
reclassifications without any material impact on previously
reported income or shareholders' equity.
In conjunction with the business combination with Younkers, the
Company incurred certain fourth quarter 1995 charges to effect the
merger and other costs to restructure and integrate the combined
operating companies. In the quarter ended May 4, 1996, the Company
incurred certain additional integration costs totaling $2.8
million (pre-tax) related to such items as the termination of a
Younkers pension plan, the conversion of Younkers' computer
systems, and expenses of consolidating administrative functions.
On April 12, 1995, the Company completed the acquisition of the
Parks-Belk Company, a family-owned department store company with
four stores. Three stores were renovated and opened as
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Commission File No. 0-15907
Proffitt's Division stores during 1995; one store was permanently
closed. The operations of Parks-Belk have been included in the
results of operations of the Company subsequent to the purchase
date.
NOTE C -- GAIN ON SALE OF ASSETS
During the quarter ended May 4, 1996, the Company sold two Younkers
stores to a third party, realizing a pre-tax gain on the
transaction of $2.3 million.
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Commission File No. 0-15907
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources
Accounts receivable, inventory, accounts payable, and senior debt
balances fluctuate throughout the year due to the seasonal nature
of the retail industry.
The May 4, 1996 net trade accounts receivable balance declined from
the April 29, 1995 balance due to the sale of additional
receivables to third parties.
May 4, 1996 senior debt declined from the February 3, 1996 and
April 29, 1995 balances due to the sale of additional accounts
receivables to third parties and utilization of excess cash
balances to reduce the balance of the Company's revolving credit
facility.
During the quarter ended May 4, 1996, the Company announced the
planned conversion of its 600,000 shares of Series A Preferred
Stock, held by Apollo Specialty Retail Partners, L.P. ("Apollo"),
into 1,421,801 shares of Proffitt's, Inc. Common Stock. The
conversion is expected to be completed by June 30, 1996 and will
eliminate $1.95 million in annual dividend payments by the Company
to Apollo.
<PAGE>
Commission File No. 0-15907
Results of Operations
Income statement information for the quarter ended April 29, 1995
has been restated to reflect the February 3, 1996 Younkers merger,
which was accounted for as a pooling of interests. The operations
of Parks-Belk have been included in the income statements
subsequent to the April 12, 1995 purchase date.
The following table shows, for the periods indicated, certain items
from the Company's Condensed Consolidated Statements of Income
expressed as percentages of net sales.
Three Months Ended
5/4/96 4/29/95
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 65.0 65.1
Selling, gen. & admin. exp. 24.1 24.7
Other operating expenses 8.2 8.6
Expenses related to
hostile takeover defense 0.0 0.2
Merger, restructuring and
integrations costs 0.9 0.0
Gain on sale of assets (0.7) 0.0
---- ----
Operating income 2.5 1.4
Other income (expense):
Finance charge income 3.6 3.5
Finance charge income
allocated to purchaser
of accounts receivable (1.2) (0.8)
Interest expense (1.4) (2.2)
Other income (expense), net 0.1 0.2
---- ----
Income before provision
for income taxes 3.6 2.1
Provision for income taxes 1.5 0.8
---- ----
NET INCOME 2.1% 1.3%
==== ====
For the quarter, total Company sales were $296.6 million, a 3%
increase over $287.1 million in the prior year. On a comparable
stores basis, total Company sales increased 5% for the quarter.
Revenues for the Younkers Division were $126.6 million, flat with
$126.7 million last year; revenues for the McRae's Division totaled
$109.5 million, a 6% increase over $103.8 million in the prior
year; and revenues for the Proffitt's Division were $60.6 million
compared to $56.7 million last year, an increase of 7%. For the
quarter, comparable store sales increased 1%, 4%, and 17% at the
Younkers, McRae's, and Proffitt's Divisions, respectively. The
total Company sales increase was lower than the comparable stores
sales increase primarily due to the recent closing of two Younkers
stores and one Proffitt's store and the sale of two Younkers
stores.
Selling, general, and administrative expenses totaled 24.1% of net
sales, a 60 basis point reduction over 24.7% last year. The
initial stages of previously targeted cost reductions (such as
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Commission File No. 0-15907
the elimination of duplicate corporate expenses and consolidation
of certain back office functions) led to this increased leverage on
expenses.
Other operating expenses, which consist of rents, depreciation, and
taxes other than income taxes, declined in dollars and as a
percentage of sales primarily due to reduced expenses related to
stores recently sold and closed and lower depreciation due to the
reduced carrying value of certain property as a result of a 1995
impairment write-down.
Financing costs, which include finance charge income allocated to
the third party purchaser of accounts receivable and interest
expense, dropped from $8.4 million, or 3.0% of net sales, last year
to $7.6 million, or 2.6% of net sales, in the current year. The
reduction was due to lower borrowing levels in the current year.
Prior to the non-recurring items outlined below, first quarter net
income totaled $6.6 million, or $.31 per share, a 68% increase over
$3.9 million, or $.18 per share last year. In conjunction with the
Younkers merger, certain non-recurring merger, restructuring, and
integration charges were incurred in the first quarter of 1996.
These charges totaled $2.8 million before tax, or 0.9% of net sales
($1.7 million after tax, or $.09 per share). Of the after tax
total, $1.1 million was related to the termination of a Younkers
pension plan, and the remainder was related to items such as the
conversion of Younkers' computer systems and expenses of
consolidating administrative functions. Also during the first
quarter of 1996, the Company sold two Younkers stores to a third
party, realizing a pre-tax gain of $2.3 million ($1.4 million after
tax, or $.07 per share). After these non-recurring items, net
income for the quarter ended May 4, 1996 totaled $6.3 million, or
$.29 per share. For the quarter ended April 29, 1995, the Company
incurred pre-tax hostile defense takeover expenses of approximately
$.4 million, or 0.2% of net sales ($.3 million after tax, or $.02
per share). After this item, net income for the first quarter of
1995 totaled $3.6 million, or $.16 per share. The increase in
earnings over the prior year primarily was due to enhanced sales
and gross margin performance and expense leverage.
<PAGE>
Commission File No. 0-15907
PROFFITT'S, INC.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Form of Employment Agreement by and between
Proffitt's, Inc. and Brian W. Bender dated May 24, 1996
10.2 Agreement and Notice of Conversion by and
between Proffitt's, Inc. and Apollo Specialty Retail Partners, L.P.
dated May 13, 1996
11.1 Statement re: Computation of Earnings per
Common Share
27.1 Financial Data Schedule
(b) Form 8-K Reports.
A report on Form 8-K was filed with the Commission on
April 1, 1996 reporting consolidated net sales and net income for
Proffitt's, Inc. for the 4 weeks ended March 2, 1996.
<PAGE>
Commission File No. 0-15907
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.
PROFFITT'S, INC.
----------------------------------
Registrant
6-12-96
----------------------------------
Date
/s/ Brian W. Bender
----------------------------------
Brian W. Bender
Executive Vice President and
Chief Financial Officer
(effective 5/24/96)
/s/ James E. Glasscock
----------------------------------
James E. Glasscock
Executive Vice President of
Financial Strategies
(Executive Vice President and Chief
Financial Officer through 5/23/96)
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 24th day of May 1996, by and between Proffitt's, Inc.
("Company"), and Brian W. Bender ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as Executive
Vice President and Chief Financial Officer of Company or in such
other capacity with Company and its subsidiaries as Company's Board
of Directors shall designate.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best
efforts to follow the policies and directions of Company's Board of
Directors.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive a base
salary ("Base Salary") at a rate of no less than $275,000 per year.
In addition, the Board of Directors of Company shall, in good
faith, consider granting increases in such Base Salary based upon
such factors as Executive's performance and the growth and/or
profitability of Company. Executive's Base Salary shall be paid in
installments in accordance with Company's normal payment schedule
for its senior management. All payments shall be subject to the
deduction of payroll taxes and similar assessments as required by
law.
(b) Bonus. In addition to the Base Salary, Executive
shall be eligible, as long as he holds the position stated in
paragraph 1, for a yearly cash bonus of up to 30% of Base Salary
based upon his performance in accordance with specific annual
objectives, set in advance, all as approved by the Board of
Directors.
(c) Incentive Compensation. Executive shall be and
hereby is granted a non-qualified option as of May 24, 1996,
("Option") to purchase thirty-five thousand (35,000) shares of
Company common stock at an option price equal to the closing price
of the stock on May 24, 1996, as reported in the Wall Street
Journal. The Option is granted pursuant to Company's 1994 Long-
Term Incentive Plan ("1994 LTIP"), and shall be subject to the
terms and conditions thereof. The Option shall be exercisable on
or after May 24, 1996, (the "Grant Date") to the extent of 20% of
the shares covered thereby; exercisable to the extent of an
additional 20% of the shares covered thereby on and after the first
anniversary of the Grant Date; exercisable to the extent of an
additional 20% of the shares covered thereby on and after the
second anniversary of the Grant Date; exercisable to the extent of
an additional 20% of the shares covered thereby on and after the
third anniversary of the Grant Date; and exercisable to the extent
of any remaining shares on and after the fourth anniversary of the
Grant Date; provided, however, that no portion of the Option shall
be exercisable any earlier than six months from the Grant Date. As
long as Executive remains employed by Company, the Option may be
exercised (as provided in the 1994 LTIP) up to ten (10) years from
the Grant Date. Any portion of the Option not exercised within
said ten (10) year period shall expire.
Notwithstanding the preceding paragraph, the Option granted
under this Agreement shall not be exercisable if Executive has been
demoted from the position stated in paragraph 1 or otherwise been
reassigned duties at a lower level in the Company. In the case of
such a demotion or reassignment of duties at a lower position,
Company retains the right to reduce the number of option shares
granted under this Agreement and, in such a case, vesting will
occur as if the reduced number of option shares had been granted on
the Grant Date.
(d) Effect of Change of Control on Options. In the
event of a Change of Control (as defined in the 1994 LTIP) any
Options granted to Executive prior to such Change of Control shall
immediately vest.
4. Insurance and Benefits. Company shall allow Executive to
participate in each employee benefit plan and to receive each
executive benefit that Company provides for senior executives at
the level of Executive's position.
5. Term. The term of this Agreement shall be for two (2)
years, beginning May 24, 1996, provided, however, that Company may
terminate this Agreement at any time upon thirty (30) days' prior
written notice (at which time this Agreement shall terminate except
for Section 9, which shall continue in effect as set forth in
Section 9). In the event of such termination by Company, Executive
shall be entitled to receive his Base Salary (at the rate in effect
at the time of termination) through the end of the term of this
Agreement. Such Base Salary shall be paid thereafter in regular
payroll installments.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise
any unexercised stock options pursuant to Company's stock option
plan then in effect, (b) other entitlements under this contract
that expressly survive death, and (c) any rights which Executive's
estate or dependents may have under COBRA or any other federal or
state law or which are derived independent of this Agreement by
reason of his participation in any plan maintained by Company.
6. Termination by Company for Cause. (a) Company shall have
the right to terminate Executive's employment under this Agreement
for cause, in which event no salary or bonus shall be paid after
termination for cause. Termination for cause shall be effective
immediately upon notice sent or given to Executive. For purposes
of this Agreement, the term "cause" shall mean and be strictly
limited to: (i) conviction of Executive, after all applicable
rights of appeal have been exhausted or waived, for any crime that
materially discredits Company or is materially detrimental to the
reputation or goodwill of Company; (ii) commission of any material
act of fraud or dishonesty by Executive against Company or
commission of an immoral or unethical act that materially reflects
negatively on Company, provided that Executive shall first be
provided with written notice of the claim and with an opportunity
to contest said claim before the Board of Directors; or (iii)
Executive's material breach of his obligations under paragraph 2 of
the Agreement, as so determined by the Board of Directors.
(b) In the event that Executive's employment is
terminated, Executive agrees to resign as an officer and/or
director of Company (or any of its subsidiaries or affiliates),
effective as of the date of such termination, and Executive agrees
to return to Company upon such termination any of the following
which contain confidential information: all documents, instruments,
papers, facsimiles, and computerized information which are the
property of Company or such subsidiary or affiliate.
7. Change in Control. If Executive's employment is terminated
primarily as a result of a Change in Control of Company or a
Potential Change in Control of Company, as defined below, Executive
shall receive his Base Salary (at the rate in effect at the time of
termination) for a period of two years or through the end of the
term of this Agreement, whichever is longer.
As used herein, the term "Change in Control" means the
happening of any of the following:
(a) Any person or entity, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, other than Company, a subsidiary of Company, or any
employee benefit plan of Company or its subsidiaries, becomes the
beneficial owner of Company's securities having 25 percent or more
of the combined voting power of the then outstanding securities of
Company that may be cast for the election for directors of Company
(other than as a result of an issuance of securities initiated by
Company in the ordinary course of business); or
(b) As the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the
foregoing transactions, less than a majority of the combined voting
power of the then outstanding securities of Company or any
successor corporation or entity entitled to vote generally in the
election of directors of Company or such other corporation or
entity after such transaction, are held in the aggregate by holders
of Company's securities entitled to vote generally in the election
of directors of Company immediately prior to such transactions; or
(c) During any period of two consecutive years,
individuals who at the beginning of any such period constitute the
Board of Directors of Company cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination
for election by Company's stockholders, of each director of Company
first elected during such period was approved by a vote of at least
two-thirds of the directors of Company then still in office who
were directors of Company at the beginning of any such period.
As used herein, the term "Potential Change in Control" means
the happening of any of the following:
(a) The approval by stockholders of an agreement by
Company, the consummation of which would result in a Change of
Control of Company; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Company, a
wholly-owned subsidiary thereof or any employee benefit plan of
Company or its subsidiaries (including any trustee of such plan
acting as trustee)) of securities of Company representing 5 percent
or more of the combined voting power of Company's outstanding
securities and the adoption by the Board of Directors of Company of
a resolution to the effect that a Potential Change in Control of
Company has occurred for purposes of this Agreement.
8. Disability. If Executive becomes disabled at any time
during the term of this Agreement, he shall after he becomes
disabled continue to receive all payments and benefits provided
under the terms of this Agreement for a period of twelve
consecutive months, or for the remaining term of this Agreement,
whichever period is shorter. In the event that Executive is
disabled for more than twelve consecutive months during the term of
this Agreement, Executive shall, at the expiration of the initial
twelve consecutive month period, be entitled to receive under this
Agreement 50% of his Base Salary plus the insurance and benefits
described in Section 4 of this Agreement for the remaining term of
this Agreement. For purposes of this Agreement, the term
"disabled" shall mean the inability of Executive (as the result of
a physical or mental condition) to perform the duties of his
position under this Agreement with reasonable accommodation and
which inability is reasonably expected to last at least one (1)
full year.
9. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of one year
thereafter, Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder
of less than 5% of the stock of a corporation the securities of
which are traded on a national securities exchange or in the over-
the-counter market), director, officer, employee or otherwise, in
competition with (i) the businesses conducted at the date hereof by
Company or any subsidiary or affiliate, or (ii) any business in
which Company or any subsidiary or affiliate is substantially
engaged at any time during the employment period;
(ii) shall not solicit, in competition with Company,
any person who is a customer of the businesses conducted by Company
at the date hereof or of any business in which Company is
substantially engaged at any time during the term of this
Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate his or her employment relationship
in order to enter into competitive employment.
(b) Unauthorized Disclosure. During the period Executive
is employed under this Agreement, and for a further period of two
years thereafter, Executive shall not, except as required by any
court or administrative agency, without the written consent of the
Board of Directors, or a person authorized thereby, disclose to any
person, other than an employee of Company or a person to whom
disclosure is reasonably necessary or appropriate in connection
with the performance by Executive of his duties as an executive for
Company, any confidential information obtained by him while in the
employ of Company; provided, however, that confidential information
shall not include any information now known or which becomes known
generally to the public (other than as a result of unauthorized
disclosure by Executive).
(c) Scope of Covenants; Remedies. The following
provisions shall apply to the covenants of Executive contained in
this Section 9:
(i) the covenants contained in paragraph (i) and
(ii) of Section 9(a) shall apply within all the territories in
which Company is actively engaged in the conduct of business while
Executive is employed under this Agreement, including, without
limitation, the territories in which customers are then being
solicited;
(ii) without limiting the right of Company to pursue
all other legal and equitable remedies available for violation by
Executive of the covenants contained in this Section 9, it is
expressly agreed by Executive and Company that such other remedies
cannot fully compensate Company for any such violation and that
Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof;
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 9, any term, restriction,
covenant or promise contained therein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(iv) the covenants contained in this Section 9 shall
survive the conclusion of Executive's employment by Company.
10. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected by personal delivery, in writing
or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the
parties at the addresses set forth below, but each party may change
his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Brian W. Bender
c/o McRae's
Post Office 20080
Jackson, MS 39289
If to Company: Proffitt's, Inc.
Post Office Box 9388
Alcoa, TN 37701
(b) Partial Invalidity. If any provision in this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions shall,
nevertheless, continue in full force and without being impaired or
invalidated in any way.
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Tennessee.
(d) Entire Agreement. Except for any prior grants of
options or other forms of incentive compensation evidenced by a
written instrument, this Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto
with respect to employment of Executive by Company and contains all
of the covenants and agreements between the parties with respect to
such employment. Each party to this Agreement acknowledges that no
representations, inducements or agreements, oral or otherwise, that
have not been embodied herein, and no other agreement, statement or
promise not contained in this Agreement, shall be valid or binding.
Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this
Agreement, Executive warrants that he is not a party to any
restrictive covenant, agreement or contract which limits the
performance of his duties and responsibilities under this Agreement
or under which such performance would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define
or limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
PROFFITT'S, INC.
BY: _____________________
James A. Coggin
President
_____________________
Brian W. Bender
Executive
Exhibit 10.2
AGREEMENT AND NOTICE OF CONVERSION
This inducement and notification agreement, dated as of May
13, 1996 (the "Agreement"), is being entered into between
Proffitt's, Inc., a Tennessee corporation (the "Company"), and
Apollo Specialty Retail Partners, L.P., a Delaware limited
partnership ("Holder").
WHEREAS, the Company and Holder entered into a Securities
Purchase Agreement dated as of March 3, 1994, as amended by
Amendment No. 1 thereto dated March 31, 1994 (collectively the
"Securities Purchase Agreement"), pursuant to which Holder
purchased 600,000 shares of the Company's Series A Cumulative
Convertible Exchangeable Preferred Stock (the "Holder's Series A
Preferred Stock");
WHEREAS, the terms of the Series A Preferred Stock
contained in the amendment to the Charter of the Company
establishing such Series (the "Series A Amendment") allow their
conversion into Common Stock of the Company at a "Conversion Price"
set forth in such Series A Amendment; and
WHEREAS, the Company, to induce Holder to convert the
Series A Preferred Stock into Common Stock of the Company, is
willing to pay certain consideration to Holder,
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Section 1. Inducement. To induce Holder to convert its
shares of Series A Preferred Stock into Common Stock of the
Company, the Company agrees to pay Holder in cash at the Closing
(as hereafter defined) the present value of dividends that would
have been paid on September 1, 1996, March 1, 1997, September 1,
1997 and March 1, 1998 on Holder's Series A Preferred Stock, using
a discount rate of 7.0% (the "Inducement Payment").
Section 2. Conversion Agreement and Notice; Closing.
Subject to the terms and conditions herein set forth, Holder agrees
that it will convert all of its Series A Preferred Stock for Common
Stock, and the Company agrees that it will issue to Holder on
conversion of its Series A Preferred Stock in accordance with the
terms thereof, 1,421,801 whole shares of Common Stock of the
Company (subject to adjustment prior to the Closing in accordance
with the terms of the Series A Amendment).
(i) The conversion and issuance will take place at a
closing (the "Closing") at the Company's principal executive
offices or at such other location as shall be agreed to by the
Company and Holder.
(ii) Delivery of the shares of Common Stock, payment of
the Inducement Payment and delivery of the notice of conversion, in
a form reasonably acceptable to the Holder, shall all occur
simultaneously at the Closing. Certificates for the shares of
Common Stock shall be registered in the names designated by Holder
in writing to the Company prior to the Closing. Holder
acknowledges and agrees that each certificate shall bear a legend
to reflect the applicability of Federal and states securities laws
limitations on the transfer of such shares of Common Stock as
follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAW OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
(iii) The Closing shall occur no later than June 30,
1996, unless the Company and the Holder agree to a different later
date in writing; provided, however, that in the event of one or
more requests for additional information in connection with any
filing under the Hart-Scott-Rodino Antitrust Improvements Act, the
Closing shall occur no later than July 31, 1996. If the Closing
shall not have occurred by June 30, 1996 or such later date
permitted by this subsection (iii), then this Agreement shall be
null and void, and of no further force and effect, except that this
provision shall not limit the rights of any party in respect of a
breach of Section 5 hereof.
Section 3. Representations and Warranties of the Holder. As
a condition to the agreement of the Company to convert the Holder's
Series A Preferred Stock, Holder hereby represents and warrants
both as of the date hereof and as of the Closing, and covenants, as
follows:
(i) The Holder is a limited partnership duly organized,
validly existing and in good standing under the laws of Delaware.
The Holder has all necessary partnership power and authority to
execute and deliver this Agreement, and to elect to convert
Holder's Series A Preferred Stock into Common Stock of the Company,
and to consummate the transactions contemplated hereby. The
execution and delivery by the Holder of this Agreement have been
duly authorized by all necessary partnership actions and no further
authorization on the part of the Holder is necessary to authorize
such execution, delivery and performance. This Agreement
constitutes the legal valid and binding agreement of the Holder
enforceable against the Holder in accordance with its terms except
as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally other than laws relating to
fraudulent conveyances.
(ii) The Holder has all necessary title to Holder's
Series A Preferred Stock to perform its obligations under this
Agreement, and there are no liens or encumbrances of any nature
whatsoever that will impair its ability to complete the
transactions contemplated by this Agreement. No consent, approval
or authorization of, or declaration, filing or registration with,
any governmental or regulatory authority is required in connection
with the execution and delivery by the Holder of this Agreement,
the consummation of the transactions contemplated hereby, and the
performance by the Holder of its obligations hereunder other than
pursuant to the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations thereunder and
the expiration of any applicable waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act prior to the Closing. The
execution and delivery by the Holder of this Agreement, the
consummation of the transactions contemplated hereby and the
performance by the Holder of its obligations hereunder do not and
will not (with the giving of notice or the passage of time or both)
conflict with or violate the constitutive documents of the Holder,
any agreements to which the Holder is a party or any applicable
law, regulation, judgment, injunction, order or decree binding upon
the Holder or to which any of its properties is subject.
(iii) At the Closing, the Holder will deliver
certificates for all of the Holder's Series A Preferred Stock, duly
endorsed in blank, to the Company and a notice of conversion.
(iv) The shares of Common Stock of the Company to be
acquired by the Holder pursuant to this Agreement are being
acquired for its own account with no intention of distributing or
reselling such Common Stock in any transaction which would be in
violation of the applicable securities laws of the United States or
any state thereof, without prejudice, however, to the Holder's
rights at all times to sell or otherwise dispose of all or any part
of such shares of Common Stock pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities
Act"), or under an exemption from such registration available under
the Securities Act.
(v) The Holder has been afforded access to information
about the Company, its financial condition, results of operations,
business, property, management and prospects sufficient to enable
the Holder to evaluate its election to convert.
(vi) If the Holder should decide to dispose of the shares
of Common Stock received on conversion other than pursuant to an
effective registration statement under the Securities Act, the
Holder may in connection with such disposition, at the Holder's
expense, appoint counsel of recognized standing in securities law
(including in-house or special counsel) in connection with such
disposition and the Company will accept, and will recommend the
that its transfer agent accept, the opinion of such counsel to the
effect that the proposed disposition would not be in violation of
the Securities Act, provided that such counsel and opinion are
reasonably acceptable to the Company and its counsel.
Section 4. Representations and Warranties of the
Company. As a condition of the Holder's agreement to convert the
Holder's Series A Preferred Stock into Common Stock of the Company,
the Company hereby represents and warrants, both as of the date
hereof and as of the Closing, and covenants, as follows:
(i) The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has
all necessary corporate power and authority to conduct its business
as currently conducted and to own or lease the properties and
assets it now owns or holds under lease; and is duly qualified to
do business and is in good standing as a foreign corporation in
every jurisdiction in the which the conduct of its business or the
ownership or leasing of its properties requires it to be so
qualified or licensed except where the failure to be so qualified
or licensed or in good standing would not individually, or in the
aggregate, have a material adverse effect on the Company. The
Company has heretofore delivered to the Holder true, complete and
correct copies of the Charter and By-laws of the Company as
currently in effect, and no action has been taken or authorized to
amend or in contemplation of the amendment of such documents or to
liquidate or dissolve the Company.
(ii) The execution, delivery and performance by the
Company of this Agreement have been duly authorized by all
necessary corporate actions and no further authorization on the
part of the Company is necessary to authorize such execution,
delivery and performance. This Agreement constitutes the legal,
valid and binding agreement of the Company enforceable against the
Company in accordance with its terms except as enforceability may
be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors'
rights generally other than laws relating to fraudulent
conveyances. The shares of Common Stock to be issued on conversion
of the Holder's Series A Preferred Stock have been duly authorized
and, upon issuance on conversion in accordance with the terms of
this Agreement, will be validly issued, fully paid and non-
assessable, and free and clear of any liens, and the issuance of
such shares will not be subject to any preemptive or similar right
of any other stockholder of the Company.
(iii) Except for the expiration of any applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act
prior to the Closing, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or
regulatory authority is required in connection with the execution
and delivery by the Company of this Agreement, the consummation of
the transactions contemplated hereby, and the performance by the
Company of its obligations hereunder. The execution and delivery
by the Company of this Agreement, the consummation of the
transactions contemplated hereby and the performance by the Company
of its obligations hereunder do not and will not (with the giving
of notice or the passage of time or both) conflict with or violate
the constitutive documents of the Company, any agreements to which
the Company is a party or any applicable law, regulation, judgment,
injunction, order or decree binding upon the Company or to which
any of its properties is subject.
(iv) Since January 1, 1992, the Company has filed all
reports, forms and other documents required to be filed by it with
the Securities and Exchange Commission (the "Commission") pursuant
to the Exchange Act and the Securities Act. Each such report, form
and document (a) was prepared in accordance with the requirements
of the Securities Act or the Exchange Act, as the case may be, and
the respective rules and regulations thereunder, and (b) did not as
of its date contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances
in which made, not misleading.
(v) Since February 3, 1996, there has not been any change
or occurrence in or affecting the business, results of operations
or financial condition of the Company that has had or could
reasonably be expected to have a material adverse effect on the
business, assets, condition (financial or otherwise), or the
results of operations of the Company and its subsidiaries taken as
a whole.
(vi) The Conversion Price (as defined in the Series A
Amendment) is $21.10. Since the issuance of the Series A Preferred
Stock, no event or circumstance has occurred which requires
adjustment of the Conversion Price pursuant to Section 4 of the
Series A Amendment.
Section 5. Covenants. The Company and the Holder each
agree to use their reasonable best efforts promptly to make such
filings and requests for consent, seek such authorizations and
respond to such requests for information, and to take any other
actions as may be necessary to consummate the transactions
contemplated by this Agreement.
Section 6. Closing. The Closing shall occur on a date
to be agreed to by the parties hereto as soon as practicable after
the execution of this Agreement and the satisfaction of the
following conditions:
(i) Each of the representations and warranties shall be
true and correct in all respects as of the date of this Agreement
and as of the Closing, as though made on and as of the Closing;
(ii) All registrations, filings, applications, notices,
transfers, consents, approvals, orders, qualifications, waivers and
other actions of any kind required with or from any governmental
agencies or bodies, including, but not limited to the FTC and the
Antitrust Division, shall have been filed, made or obtained and all
applicable waiting periods shall have expired or been terminated,
including, but not limited to, any applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act;
(iii) The Company shall have received any necessary
consents from lending institutions without the imposition of
material conditions;
(iv) As of the Closing, no injunction, restraining order
or decree of any nature of any governmental agency or body shall be
in effect which restrains or prohibits the Closing, and no Federal
or state agency or governmental body shall be threatening action to
restrain or prohibit or attach material conditions to the
consummation of this Agreement;
(v) As a condition to the obligation of the Company to
close the transactions contemplated by this Agreement, except for
a bona fide pledge or hypothecation, Holder shall not have
transferred any of its Series A Preferred Stock, other than to an
Apollo Related Account as such term is defined in Article I of the
Securities Purchase Agreement, to any person without the Company's
prior written consent; and
(vi) As a condition to the obligation of the Holder to
close the transactions contemplated by this Agreement, as of the
Closing no Change of Control, as that term is defined in Section 1
of the Series A Amendment, or event which would require an
adjustment of the Conversion Price pursuant to Section 4 of the
Series A Amendment shall have occurred.
Section 7. Entire Agreement; Survival of Provisions.
All provisions of the Securities Purchase Agreement will continue
in full force and effect in accordance with the terms thereof.
This Agreement, the Securities Purchase Agreement and any other
documents expressly referred to herein and therein constitute the
entire agreement of the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and
understandings with respect thereto. The representations,
warranties and covenants contained in this Agreement shall survive
the Closing.
Section 8. Communications. All notices and other
communications provided for hereunder shall be in writing and shall
only be effective upon receipt addressed to the Company as follows:
Proffitt's, Inc.
115 North Calderwood
Alcoa, Tennessee 37701
Attention: Mr. R. Brad Martin
Telecopy: (423) 981-6336
with a copy to:
Brian J. Martin, Esquire
Senior Vice President and General Counsel
3455 Highway 80 West
Jackson, MS 39209
Telecopy: (601) 968-5216
and
James A. Strain, Esquire
Sommer & Barnard
4000 Bank One Tower
Indianapolis, Indiana 46204-5140
Telecopy: (317) 236-9802
and to Holder as follows:
Apollo Specialty Retail Partners, L.P.
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, N.Y. 10577
Attention: Mr. Michael Gross
Telecopy: (914) 694-8032
with a copy to:
Lion Advisors, L.P.
1301 Avenue of the Americas
New York, N.Y. 10019
Attention: Mr. Josh Harris
Telecopy: (212) 459-3300
and
Thomas E. Molner, Esquire
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, N.Y. 10022-3852
Telecopy: (212) 715-8000.
Section 9. Miscellaneous. (i) This Agreement shall be
governed by the internal laws of the State of Tennessee. Each of
the parties hereto agrees to submit to the jurisdiction of the
federal or state courts located in the County of New York, State of
New York in any action or proceeding arising out of or relating to
this Agreement.
(ii) Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
(iii) Without the express written consent of the Company,
neither Holder's Series A Preferred Stock, nor the rights of Holder
hereunder may be assigned or transferred (except for a bona fide
pledge or hypothecation) to any other person prior to Closing other
than to one or more Apollo Related Accounts, as such term is
defined in Article I of the Securities Purchase Agreement, which
Account or Accounts shall agree to the extent required hereunder to
convert all such Series A Preferred Stock and otherwise to be bound
hereunder as Holder and to provide the Company with
representations, warranties and covenants substantially equivalent
to those provided by Holder hereunder.
[next page is signature page]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers, as of the
date first above written.
PROFFITT'S, INC.
By:/s/ Brian J. Martin
Brian J. Martin
Senior Vice President
APOLLO SPECIALTY RETAIL PARTNERS, L.P.
By: AIF II, L.P., its General Partner
By: Apollo Advisors, L.P., its
Managing Partner
By: Apollo Capital Management, Inc.,
its General Partner
By:/s/ Michael Gross
Michael Gross
Vice President:
Exhibit 11.1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF HISTORICAL EARNINGS PER COMMON SHARE
PROFFITT'S, INC. AND SUBSIDIARIES
(in thousands, except per share amounts)
Three Months Ended
-------------------
May 4, April 29,
1996 1995
-------- ---------
PRIMARY:
Average shares outstanding 19,156 18,870
Net effect of dilutive stock
options -- based on the
treasury stock method using
average market price 588 312
------ ------
Total 19,744 19,182
====== ======
Net income $6,254 $3,648
Less Preferred Stock dividends (488) (488)
------ ------
Net income available to
common shareholders $5,766 $3,160
====== ======
Primary earnings per common share $0.29 $0.16
====== ======
<PAGE>
EXHIBIT 11.1 (continued)
STATEMENT RE: COMPUTATION OF HISTORICAL EARNINGS
PER COMMON SHARE
PROFFITT'S, INC. AND SUBSIDIARIES
(in thousands, except per share amounts)
Three Months Ended
-------------------
May 4, April 29,
1996 1995
-------- ---------
FULLY DILUTED:
Average shares outstanding 19,156 18,870
Net effect of dilutive stock
options -- based on
the treasury stock method
using period-end
market price if higher
than average price 777 317
------ ------
Total 19,933 19,187
====== ======
Net income $6,254 $3,648
Less Preferred Stock dividends (488) (488)
------ ------
Net income available to
common shareholders $5,766 $3,160
====== ======
Fully diluted earnings
per common share $0.29 $0.16
====== ======
Note/For each period shown, the fully diluted earnings per common
share calculation is anti-dilutive, and therefore, no fully diluted
presentation is needed.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Condensed Consolidated Balance Sheet as of May 4, 1996 and the
Condensed Consolidated Statement of Income for the three months
ended May 4, 1996 (unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 2,014,000
<SECURITIES> 0
<RECEIVABLES> 32,038,000
<ALLOWANCES> 0
<INVENTORY> 317,004,000
<CURRENT-ASSETS> 371,319,000
<PP&E> 380,836,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 825,893,000
<CURRENT-LIABILITIES> 167,859,000
<BONDS> 294,213,000
0
0
<COMMON> 0
<OTHER-SE> 363,821,000
<TOTAL-LIABILITY-AND-EQUITY> 825,893,000
<SALES> 296,561,000
<TOTAL-REVENUES> 306,351,000
<CGS> 192,892,000
<TOTAL-COSTS> 192,892,000
<OTHER-EXPENSES> 27,161,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,105,000
<INCOME-PRETAX> 10,656,000
<INCOME-TAX> 4,402,000
<INCOME-CONTINUING> 6,254,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,254,000
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
