AMENDMENT NO. 2 TO
FORM 10Q/A
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 August 3, 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: August 3, 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 - 20,662,671 shares as of August 3, 1996
PROFFITT'S, INC.
Index
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets -- August 3,
1996, February 3, 1996, and July 29, 1995 2
Condensed Consolidated Statements of Income --
Three and Six Months Ended August 3, 1996 and July
29, 1995 3
Condensed Consolidated Statements of Cash Flows --
Six Months Ended August 3, 1996 and July 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 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<TABLE>
<CAPTION>
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
August 3, February 3, July 29,
1996 1996 1995
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $2,022 $26,157 $34,276
Net trade accounts receivable,
less receivables sold to
third parties 25,817 44,878 112,105
Merchandise inventories 307,806 286,474 291,074
other current assets 30,440 21,243 21,848
Total current assets 366,085 378,752 459,303
Property and equipment, net 387,774 381,839 391,862
Goodwill 52,063 52,838 52,266
Other assets 21,264 22,237 26,234
$827,186 $835,666 $929,665
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $79,628 $75,377 $93,878
Other accrued liabilities 65,041 73,984 52,510
Current portion of long-term debt
and capital lease obligations 16,949 17,269 15,268
Total current liabilities 161,618 166,630 161,656
Senior debt 120,822 134,255 213,157
Capital lease obligations 10,584 10,846 11,083
Deferred income taxes 53,657 52,250 61,040
Other long-term liabilities 14,751 14,328 11,570
Subordinated debentures 100,634 100,505 100,384
Shareholders' equity 365,120 356,852 370,775
$827,186 $835,666 $929,665
</TABLE>
See notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $271,716 $278,798 $568,277 $565,923
Costs and expenses:
Cost of sales 173,732 178,484 366,624 365,492
Selling, general and
administrative expenses 69,948 71,994 141,485 142,885
Other operating expenses 23,683 24,575 48,081 49,415
Expenses related to hostile
takeover defense 1,474 1,912
Merger, restructuring and
integration costs 1,507 4,270
Gain on sale of assets (2,260)
Operating income 2,846 2,271 10,077 6,219
Other income (expense):
Finance charge income 11,123 9,678 21,757 19,632
Finance charge income allocated
to purchaser of accounts
receivable (3,404) (2,129) (6,878) (4,290)
Interest expense (4,503) (6,307) (8,608) (12,576)
Other income (expense), net 70 716 440 1,372
Income before provision for
income taxes 6,132 4,229 16,788 10,357
Provision for income taxes 2,593 1,750 6,995 4,230
NET INCOME 3,539 2,479 9,793 6,127
Preferred stock dividends 308 487 796 975
Payment for early conversion of
Preferred Stock 3,032 3,032
Net income available to common
shareholders $199 $1,992 $5,965 $5,152
Earnings per share:
Primary $0.01 $0.10 $0.30 $0.27
Fully diluted $0.16 $0.10 $0.46 $0.27
Weighted average common shares:
Primary 20,628 19,450 20,186 19,316
Fully diluted 21,472 19,484 21,414 19,336
</TABLE>
Note: On June 28, 1996, the Company converted 600 shares of Series A
Preferred Stock ("Preferred Stock") into 1,422 shares of Proffitt's,
Inc. Common Stock. In order to complete this early conversion of the
Preferred Stock, the Company paid $3,032 to the holder of the
Preferred Stock.
Primary earnings per share are based on earnings available to common
shareholders (net income reduced by preferred stock dividends and
payment for early conversion) and the weighted average number of
common shares and equivalents (stock options) outstanding. Common
Stock issued on June 28, 1996 for the conversion of the Preferred
Stock has been included in the weighted average number of shares
outstanding subsequent to that date.
As a result of the June 28, 1996 Preferred Stock conversion and as
required by generally accepted accounting principles, fully diluted
earnings per share has been presented for the periods shown based upon
an "as if the 1,422 shares issued in the conversion were outstanding
from the beginning of the period" basis.
See notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six Months Ended
August 3, July 29,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net income $9,793 $6,127
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 16,860 16,927
Gain on sale of assets (2,260)
Changes in operating assets and liabilities, net (13,067) 13,041
Net cash provided by operating activities 11,326 36,095
INVESTING ACTIVITIES
Purchases of property and equipment, net (23,898) (23,188)
Proceeds from sale of assets 5,000
Acquisition of Parks-Belk Company (10,422)
Other, net 70
Net cash used in investing activities (18,898) (33,540)
FINANCING ACTIVITIES
Payments on long-term debt and capital
lease obligations (14,015) (7,161)
Proceeds from long-term borrowings 24,500
Proceeds from issuance of stock 2,092 176
Payments to preferred shareholders (4,640) (975)
Net cash (used in) provided by financing activities (16,563) 16,540
(Decrease) increase in cash and cash equivalents (24,135) 19,095
Cash and cash equivalents at beginning of period 26,157 15,181
Cash and cash equivalents at end of period $2,022 $34,276
</TABLE>
Cash paid during the six months ended August 3, 1996 for interest and
income taxes totaled $8,106 and $11,852, respectively.
Cash paid during the six months ended July 29, 1995 for interest and
income taxes totaled $11,790 and $11,872, respectively.
See notes to condensed consolidated financial statements.
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 and
six month periods ended August 3, 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 currently operating 48
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. Total accrued unpaid restructuring liabilities at
February 3, 1996 consisted of merger transaction costs of
approximately $7.1 million, severance and related benefits of
approximately $3.2 million and other costs approximately $2.1 million.
During the six months ended August 3, 1996, the Company paid approximately
$2.4 million in merger transaction costs, approximately $2.8 million in
severance benefits and approximately $1.2 million in other expenses,
respectively, against restructuring liabilities established for such expenses
at February 3, 1996.
During the quarter the Company incurred and paid certain additional
restructuring charges including approximately $0.9 million related to
the conversion and consolidation of management information systems and
other consolidation related travel expenses and approximately $0.6
million in professional fees, employee training expenses and other
less significant consolidation related expenses.
For the six month period ended August 3, 1996, aggregate additional
restructuring charges included approximately $1.8 million to terminate
the Younkers pension plan, approximately $1.5 million related to the
conversion and consolidation of management information systems and
other consolidation related travel expenses and approximately $1.0
million in professional fees, employee training expenses and other
less significant consolidation related expenses. The Company has not
changes its estimates for remaining accrued but unpaid restructuring
charges.
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 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
In March 1996, the Company sold two Younkers stores to a third party,
realizing a pre-tax gain on the transaction of $2.3 million.
NOTE D -- PENDING BUSINESS COMBINATION
On July 8, 1996, the Company announced its planned merger with
Parisian, Inc. ("Parisian"), a 38 unit specialty department store
chain headquartered in Birmingham, Alabama. Parisian will operate as
a separate division of Proffitt's, Inc.
Under the terms of the transaction, the Company will pay Parisian's
shareholders approximately $110 million in cash and issue
approximately 2.9 million shares of Proffitt's, Inc. Common Stock.
Outstanding options to purchase shares of Parisian Common Stock will
be converted into options to purchase approximately 406,000 shares of
Proffitt's, Inc. Common Stock. In addition, the Company will assume
approximately $243 million of Parisian indebtedness (which included
$84 million of off-balance sheet receivables financing as of the July
2, 1996 pre-announcement date).
The merger is expected to close in October 1996. The transaction will
be accounted for as a purchase.
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 August 3, 1996 net trade accounts receivable balance declined from
the July 29, 1995 balance due to the sale of additional receivables to
third parties.
August 3, 1996 senior debt declined from the February 3, 1996 and July
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.
On June 28, 1996, the Company completed the early 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 eliminates $1.95 million in future
annual dividend payments by the Company to Apollo.
On July 8, 1996, the company announced its planned merger with
Parisian, which is expected to close in October 1996.
Under the terms of the transaction, the Company will pay Parisian's
shareholders approximately $110 million in cash and issue
approximately 2.9 million shares of Proffitt's, Inc. Common Stock.
Outstanding options to purchase shares of Parisian common Stock will
be converted into options to purchase approximately 406,000 shares of
Proffitt's, Inc. Common Stock. In addition, the Company will assume
approximately $243 million of Parisian indebtedness (which included
$84 million of off-balance sheet receivables financing as of the July
2, 1996 pre-announcement date).
In conjunction with the pending transaction with Parisian, the Company
is in the process of revising its existing revolving credit facility
with banks. Management expects availability under the line will be
extended from $125 million to $275 million in order to fund the cash
portion of the purchase price and provide for future working capital
requirements.
Results of operations
Income statement information for the quarter and six months ended July
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.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
8/3/96 7/29/95 8/3/96 7/29/95
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 63.9 64.0 64.5 64.6
Selling, gen. & admin. exp. 25.7 25.8 24.9 25.2
Other operating expenses 8.8 8.8 8.4 8.8
Expenses related to hostile
takeover defense 0.0 0.6 0.0 0.3
Merger, restructuring and
integrations costs 0.6 0.0 0.8 0.0
Gain on sale of assets 0.0 0.0 (0.4) 0.0
Operating income 1.0 0.8 1.8 1.1
Other income (expense):
Finance charge income 4.1 3.5 3.8 3.5
Finance charge income allocated
to purchaser of accounts
receivable (1.2) (0.8) (1.2) (0.8)
Interest expense (1.6) (2.3) (1.5) (2.2)
Other income (expense), net 0.0 0.3 0.1 0.2
Income before provision for
income taxes 2.3 1.5 3.0 1.8
Provision for income taxes 1.0 0.6 1.3 0.7
NET INCOME 1.3% 0.9% 1.7% 1.1%
</TABLE>
For the quarter, total Company sales were $271.7 million, a 3%
decrease over $278.8 million in the prior year. On a comparable stores
basis, total company sales increased 1% for the quarter. Revenues for
the Younkers Division were $123.8 million, down 5% from $130.1 million
last year; revenues for the McRae's Division totaled $92.8 million, a
3% increase over $90.6 million in the prior year; and revenues for the
Proffitt's Division were $55.1 million compared to $58.1 million last
year, a 5% decrease. For the quarter, comparable store sales were
flat with last year for the Younkers Division, up 1% for the McRae's
Division, and up 4% for the Proffitt's Division.
For the six months ended August 3, 1996, total Company sales were
$568.3 million compared to $565.9 million last year. On a comparable
stores basis, total Company sales increased 4% for the six months.
Revenues for the Younkers Division were $250.4 million, down 3% from
$256.8 million in the prior year; revenues for the McRae's Division
totaled $202.3 million, a 4% increase over $194.4 million last year;
and revenues for the Proffitt's Division were $115.7 million, a 1%
increase over $114.8 million last year. For the six months,
comparable store sales increased 2%, 3%, and 10% for the Younkers,
McRae's, and Proffitt's Divisions, respectively.
The total store sales performance for the periods indicated was lower
than the comparable stores sales increase primarily due to the closing
of two Younkers stores and one Proffitt's store in January 1996 and
the sale of two Younkers stores in March 1996.
The conversion of the Younkers shoe operation from leased to owned was
completed on August 3, 1996. Sales performance was negatively
affected during the transition period for the first six months of
1996. Excluding Younkers' leased shoe sales, comparable store sales
for the Younkers Division increased 2% and 3% for the quarter and six
months, respectively. For the total Company, comparable store sales
increased 2% and 4% for the quarter and six months, respectively,
excluding Younkers' leased shoe sales.
Selling, general, and administrative expenses declined in both dollars
and as a percentage of net sales for the quarter and six months. As a
percentage of net sales, these expenses totaled 25.7% for the quarter
compared to 25.8% last year and 24.9% for the six months compared to
25.2% in the prior year. The initial stages of previously targeted
cost reductions (such as 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 for the quarter and
in both dollars and as a percentage of net sales for the six months.
This reduction was 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.
Finance charge income increased in dollars and as a percentage of net
sales for both the quarter and six months primarily due to increased
finance charge rates assessed in certain states and implementation of
certain late fee penalties on past due balances.
Total financing costs, which include interest expense and finance
charge income allocated to the third party purchasers of accounts
receivable, dropped in dollars and as a percentage of net sales for
the quarter and six months ended August 3, 1996. The reduction was
due to lower financing levels in the current year.
Prior to the non-recurring items outlined below, second quarter net
income totaled $4.4 million, or $.21 per share, a 32% increase over
$3.4 million, or $.15 per share last year, and net income for the six
months totaled $11.0 million, or $.51 per share, compared to $7.3
million, or $.33 per share last year.
In conjunction with the Younkers merger, certain non-recurring merger,
restructuring, and integration charges were incurred for the quarter
and six months ended August 3, 1996. For the quarter, these charges
totaled $1.5 million before tax, or 0.6% of net sales ($.9 million
after tax, or $.04 per share). For the six months, these charges
totaled $4.3 million before tax, or 0.8% of net sales ($2.6 million
after tax, or $.12 per share). These charges were primarily related
to items such as the termination of a Younkers pension plan, the
conversion of Younkers' computer systems, and expenses of
consolidating administrative functions. In March 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 $.06 per share, for the six
months). For the quarter and six months ended July 29, 1995, the
Company incurred pre-tax expenses of $1.5 million, or 0.6% of net
sales, and $1.9 million, or 0.3% of net sales, respectively, related
to the defense of the attempted hostile takeover of Younkers by Carson
Pirie Scott & Co. On an after-tax basis, these charges totaled $.9
million, or $.04 per share, and $1.1 million, or $.06 per share, for
the quarter and six months, respectively.
After these non-recurring items, net income for the quarter and six
months ended August 3, 1996 totaled $3.5 million, or $.16 per share,
and $9.8 million, or $.46 per share, respectively. The increase in
earnings over the prior year primarily was due to solid gross margin
performance, expense control, and increased finance charge income.
Earnings per share figures above assume full dilution.
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. Total accrued unpaid restructuring liabilities at
February 3, 1996 consisted of merger transaction costs of
approximately $7.1 million, severance and related benefits of
approximately $3.2 million and other costs approximately $2.1 milion.
During the six months ended August 3, 1996, the Company paid
approximately $2.4 million in merger transaction costs, approximately
$2.8 million in severance benefits and approximately $1.2 million
in other expenses, respectively, against restructuring liabilities
established for such expenses at February 3, 1996.
During the quarter the Company incurred and paid certain additional
restructuring charges including approximately $0.9 million related to
the conversion and consolidation of management information systems and
other consolidated related travel expenses and approximately $0.6
million in professional fees, employee training expenses and other
less significant consolidation related expenses.
For the six month period ended August 3, 1996, aggregate additional
restructuring charges included approximately $1.8 million to terminate
the Younkers pension plan, approximately $1.5 million related to the
conversion and consolidation of management information systems and
other consolidation related travel expenses and approximately $1.0
million in professional fees, employee training expenses and other
less significant consolidation related expenses. The Company has not
changed its estimates for remaining accrued but unpaid restructuring
charges.
PROFFITT'S, INC.
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Shareholders of the Company was held on June
19, 1996. 17,641,292 shares of the 19,210,024 shares of Common Stock
entitled to vote, or 91.8%, were represented at the meeting in person
or by proxy. The matters submitted to a vote of the shareholders and
the vote on these matters were as follows:
1) All nominees for Directors listed in the proxy statement were
elected to hold office until the next Annual Meeting of the
Shareholders.
Shareholders holding at least 17,457,894 shares voted for,
shareholders holding no more than 180,704 shares voted against,
and shareholders holding no more than 2,694 shares abstained from
the vote.
2) The vote for the Ratification of Appointment of Independent
Accountants (Coopers & Lybrand L.L.P.) for the fiscal year ending
February 1, 1997 was as follows: shareholders holding 17,614,715
shares voted for, shareholders holding 22,672 shares voted
against, and shareholders holding 3,905 shares abstained from the
vote.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11.1* Statement re: Computation of Earnings per Common Share
27.1* Financial Data Schedule
- ------------------
* Previously filed
(b) Form S-K Reports.
A report on Form 8-K was filed with the Commission on July 17,
1996 regarding the proposed merger of Proffitt's, Inc. and
Parisian, Inc.
A report on Form 8-K was filed with the Commission on August 9,
1996 regarding sales and expected earnings for the quarter ended
August 3, 1996
A report on Form 8-K was filed with the Commission on August
30, 1996 regarding sales and earnings for the quarter and six
months ended August 3, 1996 and the consent solicitation of
the holders of the 9 7/8% Senior Subordinated Notes due 2003 of
Parisian, Inc.
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
____________________________
Registrant
12-31-96
_____________________________
Date
/s/ Douglas Coltharp
______________________________
Douglas Coltharp
Executive Vice President and Chief
Financial Officer
