Commission File No. 1-13113
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 2, 1998
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 2, 1998
Commission File Number: 1-13113
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):
750 Lakeshore Parkway, Birmingham, Alabama 35211
Registrant's telephone number, including area code:
(205) 940-4000
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 -- 89,734,571 shares as of May 2, 1998
PROFFITT'S, INC.
Index
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -- May 2,
1998, January 31, 1998, and May 3, 1997 3
Condensed Consolidated Statements of Income --
Three Months Ended May 2, 1998 and May 3, 1997 4
Condensed Consolidated Statements of Cash Flows
-- Three Months Ended May 2, 1998 and May 3, 1997 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
<TABLE>
<CAPTION>
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
May 2, January 31, May 3,
1998 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $27,808 $39,396 $38,081
Trade accounts receivable 111,206 342,513 332,539
Merchandise inventories 803,927 715,147 709,867
Other current assets 30,911 30,835 55,102
Deferred income taxes 23,970 23,970 23,313
-------- --------- ---------
Total current assets 997,822 1,151,861 1,158,902
Property and equipment, net 792,924 765,881 686,301
Goodwill and tradenames, net 281,832 273,857 275,658
Other assets 39,155 33,280 31,592
-------- --------- ---------
TOTAL ASSETS $2,111,733 $2,224,879 $2,152,453
========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $215,120 $150,154 $209,537
Accrued expenses and other current liabilities 290,037 295,216 235,899
Current portion of long-term debt 8,750 8,600 14,737
-------- -------- ---------
Total current liabilities 513,907 453,970 460,173
Senior debt 342,915 541,661 432,531
Deferred income taxes 18,016 18,002 23,625
Other long-term liabilities 105,245 105,717 98,086
Subordinated debt 10,964 10,964 225,840
Shareholders' equity 1,120,686 1,094,565 912,198
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,111,733 $2,224,879 $2,152,453
========= ========= =========
</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
-------------------------
May 2, 1998 May 3, 1997
----------- -----------
<S> <C> <C>
Net sales $833,149 $784,504
Costs and expenses:
Cost of sales 537,439 509,426
Selling, general and administrative expenses 206,111 195,574
Other operating expenses 65,443 62,196
Store pre-opening costs 587 824
Merger, restructuring and integration costs 1,956 1,468
(Gains) losses from long-lived assets (3) 27
Year 2000 expense 1,525 617
ESOP expenses 726
--------- ---------
Operating income 20,091 13,646
Other income (expense):
Finance charge income 32,176 28,070
Finance charge income allocated to purchaser of
accounts receivable (9,446) (4,359)
Interest expense (7,942) (14,955)
Other income, net 128 136
--------- ---------
Income before provision for income taxes 35,007 22,538
Provision for income taxes 14,144 9,325
--------- ---------
NET INCOME $20,863 $13,213
========= =========
Earnings per share:
Basic $0.23 $0.16
========= =========
Diluted $0.22 $0.15
========= =========
Weighted average common shares:
Basic 89,506 83,310
========= =========
Diluted 93,411 85,793
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
-------------------------
May 2, 1998 May 3, 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $20,863 $13,213
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 18,016 16,402
Deferred income taxes 14 (4,319)
(Gains) losses from long-lived assets (3) 27
ESOP expenses 316
Changes in operating assets and liabilities, net 200,373 11,147
--------- ---------
Net cash provided by operating activities 239,263 36,786
INVESTING ACTIVITIES
Purchases of property and equipment, net (37,561) (38,375)
Proceeds from sale of assets 21,347
Acquisition of other assets (17,042)
Other, net (776)
--------- ---------
Net cash used in investing activities (54,603) (17,804)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 8,663
Payments on long-term debt and capital lease obligations (76,426) (7,574)
Net repayments under receivables facility (125,000) (4,742)
Proceeds from issuance of stock 5,178 4,392
Purchase of treasury stock (4,516)
Payments to preferred and common shareholders (1,124)
--------- ---------
Net cash used in financing activities (196,248) (4,901)
(Decrease) increase in cash and cash equivalents (11,588) 14,081
Cash and cash equivalents at beginning of period 39,396 24,000
--------- ---------
Cash and cash equivalents at end of period $27,808 $38,081
========= =========
</TABLE>
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 month period ended May 2, 1998 are not
necessarily indicative of the results that may be expected for the
year ending January 30, 1999. The financial statements include the
accounts of Proffitt's, Inc. and its subsidiaries, including its
special purpose receivables financing subsidiaries. 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 January 31, 1998.
The accompanying balance sheet at January 31, 1998 has been derived
from the audited financial statements at that date.
NOTE B -- BUSINESS COMBINATIONS
Effective January 31, 1998, immediately before the Company's prior
fiscal year end, Proffitt's combined its business with Carson Pirie
Scott & Co. ("Carson's"), a retail department store chain currently
operating 55 stores in the midwest. The merger has been accounted
for as a pooling of interests, and accordingly, the consolidated
financial statements have been restated for the prior year to
include the results of operations, financial position, and cash
flows of Carson's. Prior to the merger with Proffitt's, Carson's
financed its trade accounts receivables with a $200 million
receivables facility. In connection with the merger, the Carson's
receivables facility was terminated and the $125 million
outstanding balance was repaid in February 1998 with the proceeds
from the sale of Carson's receivables under the Company's existing
receivables securitization agreements.
On March 6, 1998, the Company acquired Brody Brothers Dry Goods
Company, Inc. ("Brody's"), which operated six department stores in
North Carolina. Consideration was paid in cash and was immaterial
to Proffitt's, Inc. Four of the Brody's locations were converted
into Proffitt's stores, and two stores were permanently closed.
For the quarters ended May 2, 1998 and May 3, 1997, the Company
incurred certain integration costs related to its business
combinations with Younkers (completed February 3, 1996), Parisian
(completed October 11, 1996), Herberger's (completed February 1,
1997), Carson's, and Brody's. These charges totaled $2.0 million
and $1.5 million, respectively, for the quarters ended May 2, 1998
and May 3, 1997, respectively.
A reconciliation of the aforementioned charges to the amounts of
merger, restructuring, and integration costs remaining unpaid at
May 2, 1998 is as follows (in thousands):
Amounts unpaid at January 31, 1998 $ 25,094
Adjustments to amounts unpaid at
January 31, 1998 0
Amounts related to continuing integration
efforts for the three months ended
May 2, 1998 1,956
Amounts paid during the three months ended
May 2, 1998 (12,339)
---------
Amounts unpaid at May 2, 1998 $ 14,711
NOTE C -- INCOME TAXES
The difference between the actual income tax expense and the amount
expected by applying the statutory federal income tax rate is due
to the inclusion of state income taxes, as well as certain items
that are not deductible for income tax purposes, such as the
amortization of goodwill and tradenames, and certain ESOP charges.
The deferred income tax asset and liability amounts reflect the
impact of temporary differences between values recorded for assets
and liabilities for financial reporting purposes and values
utilized for measurement in accordance with tax laws. The major
components of these amounts result from the allocation of the
purchase price to the assets and liabilities related to the McRae's
acquisition in March 1994 and the Parisian acquisition in October
1996.
NOTE D -- EARNINGS PER COMMON SHARE
Calculations of earnings per common share ("EPS") for the quarters
ended May 2, 1998 and May 3, 1997 are as follows (net income and
shares in thousands):
<TABLE>
<CAPTION>
For the Quarter Ended For the Quarter Ended
May 2, 1998 May 3, 1997
---------------------- -----------------------
Weighted Weighted
Net Average Per Share Net Average Per Share
Income Shares Amount Income Shares Amount
------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $20,863 89,506 $0.23 $13,213 83,310 $0.16
Effect of dilutive
stock options (based
on the treasury
stock method using
the average price) 3,905 2,483
------- -------- -------- -------- -------- --------
Diluted EPS $20,863 93,411 $0.22 $13,213 85,793 $0.15
</TABLE>
Note E -- CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following tables present condensed consolidating financial information
for (i) Proffitt's, Inc.; (ii) on a combined basis, the guarantors
of Proffitt's, Inc.'s Senior Notes (which are all of the wholly-owned
subsidiaries of Proffitt's, Inc., except for Proffitt's Credit Corporation
("PCC"), Younkers Credit Corporation ("YCC"), and the National Bank of
the Great Lakes ("NBGL")); and (iii) on a combined basis, PCC YCC, and NBGL,
the only non-guarantor subsidiaries of the Senior Notes. Separate
financial statements of the guarantor subsidiaries are not presented because
the guarantors are jointly, severally, and unconditionaly liable under the
guarantees, and the Company believes the condensed consolidating financial
statements are more meaningful in understanding the financial position
of the guarantor subsidiaries. Proffitt's, Inc. is comprised of substantially
all of the Proffitt's and Younkers store operating divisions and certain
corporate management financial functions. Borrowings and the related
interest expense under Proffitt's, Inc. revolving credit facility
are allocated to Proffitt's, Inc. and the guaranty subsidiaries
under an informal lending arrangement. There are also management and
royalty fee arrangements among Proffitt's, Inc. and the subsidiaries.
<TABLE>
<CAPTION>
PROFFITT'S, INC.
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MAY 2, 1998
(In Thousands)
Non-
Guarantor Guarantor
Proffitt's, Subsidi- Subsidi- Elimin- Consoli-
Inc. aries aries ations dated
--------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales $174,308 $658,841 $833,149
Costs and Expenses
Cost of sales 114,806 422,633 537,439
Selling, general and admin-
istrative expenses 36,354 160,511 $9,246 206,111
Other operating expenses 13,838 51,605 65,443
Store pre-opening costs 462 125 587
Merger, restructuring and
integration costs 1,419 537 1,956
(Gains) losses from long-
lived assets (3) (3)
Year 2000 expenses 331 1,194 1,525
-------- -------- --------- --------- ----------
Operating income (loss) 7,101 22,236 (9,246) 20,091
Other Income (Expense)
Finance charge income, net 22,730 22,730
Gain (loss) on sale of
receivables (1,534) (6,990) 8,524
Servicer fees 6,239 (6,239)
Equity in earnings of
subsidiaries 17,908 3,854 ($21,762)
Interest expense, net (1,223) (4,888) (1,831) (7,942)
Other income (expense), net 106 22 128
-------- -------- --------- --------- ----------
Income before provision for
income taxes 22,358 20,473 13,938 (21,762) 35,007
Provision for income taxes 1,495 7,602 5,047 14,144
-------- -------- --------- --------- ----------
Net income $20,863 $12,871 $8,891 ($21,762) $20,863
========= ========= ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
PROFFITT'S, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS AT MAY 2, 1998
(In Thousands)
Non-
Guarantor Guarantor
Proffitt's, Subsidi- Subsidi- Elimin- Consoli-
Inc. aries aries ations dated
--------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $5,077 ($7,171) $29,902 $27,808
Trade accounts receivable 2,352 288 108,566 111,206
Merchandise inventories 200,273 603,654 803,927
Deferred income taxes 6,797 12,871 4,302 23,970
Notes receivable from sale
of receivables and inter-
company borrowings 72,132 ($72,132)
Other current assets 14,410 15,661 840 30,911
-------- -------- --------- --------- ----------
Total Current Assets 301,041 625,303 143,610 (72,132) 997,822
Property and Equipment, net 192,857 600,067 792,924
Goodwill and Tradenames, net 18,926 262,906 281,832
Other Assets 3,450 29,060 6,645 39,155
Investment in and Advances
to Subsidiaries 990,292 24,783 (1,015,075)
-------- -------- --------- --------- ----------
Total Assets $1,506,566 $1,542,119 $150,255 ($1,087,207) $2,111,733
=========== ========== ========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $61,850 $153,270 $215,120
Accrued expenses and other
current liabilities 38,218 237,494 $14,325 290,037
Notes payable from purchase
of receivables 72,132 ($72,132)
Current portion of long-term
debt 452 8,298 8,750
-------- -------- --------- --------- ----------
Total Current Liabilities 100,520 399,062 86,457 (72,132) 513,907
Senior Debt 265,298 77,617 342,915
Deferred Income Taxes 8,683 9,333 18,016
Other Long-Term Liabilities 11,379 93,866 105,245
Subordinated Debt 10,964 10,964
Investment by and Advances
from Parent 951,277 63,798 (1,015,075)
Shareholders' Equity 1,120,686 1,120,686
-------- -------- --------- --------- ----------
Total Liabilities and Share-
holders' Equity $1,506,566 $1,542,119 $150,255 ($1,087,207) $2,111,733
========== =========== ========= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PROFFITT'S, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 2, 1998
(In Thousands)
Non-
Guarantor Guarantor
Proffitt's, Subsidi- Subsidi- Elimin- Consoli-
Inc. aries aries ations dated
--------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $20,863 $12,871 $8,891 ($21,762) $20,863
Adjustments to reconcile
net income to net cash
provided by
(used) in operating activ-
ities:
Equity in earnings of
subsidiaries (17,908) (3,854) 21,762
Depreciation and
amortization 3,814 14,202 18,016
Deferred income taxes 14 14
(Gains) losses from long
lived assets (3) (3)
Changes in operating assets
and liabilities, net (20,196) (11,420) 231,989 200,373
-------- -------- --------- --------- ----------
Net cash provided by
(used in) operating
activities (13,430) 11,813 240,880 239,263
INVESTING ACTIVITIES
Purchases of property and
equipment, net (6,587) (30,974) (37,561)
Acquisition of other assets (17,042) (17,042)
-------- -------- --------- --------- ----------
Net cash used in invest-
ing activities (23,629) (30,974) (54,603)
FINANCING ACTIVITIES
Inter-company borrowings 96,294 19,930 (116,224)
Payments on long-term debt (74,741) (1,685) (76,426)
Repayments under rec-
eivables facility (125,000) (125,000)
Proceeds from issuance of
stock 5,178 5,178
-------- -------- --------- --------- ----------
Net cash provided by
(used in) financing
activities 26,731 18,245 (241,224) (196,248)
Increase (decrease) in cash
and cash equivalents (10,328) (916) (344) (11,588)
Cash and cash equivalents at
beginning of period 15,405 (6,255) 30,246 39,396
-------- -------- --------- --------- ----------
Cash and cash equivalents at
end of period $5,077 ($7,171) $29,902 $27,808
======== ======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
PROFFITT'S, INC.
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MAY 3, 1997
(In Thousands)
Non-
Guarantor Guarantor
Proffitt's, Subsidi- Subsidi- Elimin- Consoli-
Inc. aries aries ations dated
--------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales $155,404 $629,100 $784,504
Costs and Expenses
Cost of sales 101,172 408,254 509,426
Selling, general and admin-
istrative expenses 38,823 151,923 $4,828 195,574
Other operating expenses 12,434 49,762 62,196
Store pre-opening costs 824 824
Merger, restructuring and
integration costs 98 1,370 1,468
(Gains) losses from long-
lived assets (2) 29 27
Year 2000 expenses 617 617
ESOP expenses 726 726
-------- -------- --------- --------- ----------
Operating income (loss) 2,879 15,595 (4,828) 13,646
Other Income (Expense)
Finance charge income, net 23,711 23,711
Gain (loss) on sale of
receivables (885) (2,933) 4,053 (235)
Servicer fees 2,750 (2,750)
Equity in earnings of
subsidiaries 14,100 6,047 ($20,147)
Interest expense, net (2,797) (8,458) (3,700) (14,955)
Other income (expense), net (41) 177 136
-------- -------- --------- --------- ----------
Income before provision
for income taxes 13,256 13,178 16,486 (20,382) 22,538
Provision for income taxes 43 3,339 6,178 (235) 9,325
-------- -------- --------- --------- ----------
Net income $13,213 $9,839 $10,308 ($20,147) $13,213
======== ======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
PROFFITT'S, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 3, 1997
(In Thousands)
Non-
Guarantor Guarantor
Proffitt's, Subsidi- Subsidi- Elimin- Consoli-
Inc. aries aries ations dated
--------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $13,213 $9,839 $10,308 ($20,147) $13,213
Adjustments to reconcile net
income to net cash provided by
(used) in operating activities:
Equity in earnings of
subsidiaries (14,100) (6,047) 20,147
Depreciation and amort-
ization 3,378 13,024 16,402
Deferred income taxes (123) (4,021) (175) (4,319)
(Gains) losses from long
lived assets 27 27
ESOP expense 316 316
Changes in operating assets
and liabilities, net (7,181) (3,509) 21,837 11,147
-------- -------- --------- --------- ----------
Net cash provided by
operating activities (4,813) 9,629 31,970 36,786
INVESTING ACTIVITIES
Purchases of property and
equipment, net (2,409) (35,966) (38,375)
Proceeds from sale of assets 21,347 21,347
Other, net (776) (776)
-------- -------- --------- --------- ----------
Net cash provided by
(used in) investing
activities 18,938 (36,742) 0 0 (17,804)
FINANCING ACTIVITIES
Inter-company borrowings (18,831) 54,364 (35,533)
Proceeds from long-term
borrowings 8,663 8,663
Payments on long-term debt (1,987) (5,587) (7,574)
Net repayments under
receivables facility (4,742) (4,742)
Proceeds from issuance
of stock 4,392 4,392
Purchase of treasury stock (4,516) (4,516)
Payments to preferred and
common shareholders (1,124) (1,124)
-------- -------- --------- --------- ----------
Net cash provided by
(used in) financing
activities (12,279) 47,653 (40,275) (4,901)
Increase (decrease) in cash
and cash equivalents 1,846 20,540 (8,305) 14,081
Cash and cash equivalents at
beginning of period 11,878 (1,725) 13,847 24,000
-------- -------- --------- --------- ----------
Cash and cash equivalents at
end of period $13,724 $18,815 $5,542 $38,081
======== ========= ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
PROFFITT'S, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS AT JANUARY 31, 1998
(In Thousands)
Non-
Guarantor Guarantor
Proffitt's, Subsidi- Subsidi- Elimin- Consoli-
Inc. aries aries ations dated
--------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $15,405 ($6,255) $30,246 $39,396
Trade accounts receivable 113 273 342,127 342,513
Merchandise inventories 171,212 543,935 715,147
Deferred income taxes 6,797 12,871 4,302 23,970
Notes receivable from
sale of receivables and
intercompany borrowings 30,715 90,293 ($121,008)
Other current assets 6,777 24,051 7 30,835
-------- -------- --------- --------- ----------
Total Current Assets 231,019 665,168 376,682 (121,008) 1,151,861
Property and Equipment, net 186,266 579,615 765,881
Goodwill and Tradenames, net 7,340 266,517 273,857
Other Assets 2,297 24,312 6,671 33,280
Investment in and Advances
to Subsidiaries 1,109,362 18,346 (1,127,708)
-------- -------- --------- --------- ----------
Total Assets $1,536,284 $1,553,958 $383,353 ($1,248,716) $2,224,879
========== ========== ========= ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $39,713 $110,441 $150,154
Accrued expenses and other
current liabilities 45,563 234,582 $15,071 295,216
Notes payable from purchase
of receivables 121,008 (121,008)
Current portion of long-term
debt 452 8,148 8,600
-------- -------- --------- --------- ----------
Total Current Liabilities 85,728 353,171 136,079 (121,008) 453,970
Senior Debt 336,545 80,116 125,000 541,661
Deferred Income Taxes 8,683 9,319 18,002
Other Long-Term Liabilities 10,763 94,954 105,717
Subordinated Debt 10,964 10,964
Investment by and Advances
from Parent 1,005,434 122,274 (1,127,708)
Shareholders' Equity 1,094,565 1,094,565
-------- -------- --------- --------- ----------
Total Liabilities and
Shareholders' Equity $1,536,284 $1,553,958 $383,353 ($1,248,716) $2,224,879
========== ========== ========= ========== ==========
</TABLE>
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 2, 1998 trade accounts receivable balance decreased from
the January 31, 1998 and May 3, 1997 balances due to selling a
higher percentage of the Company's receivables through its
securitization programs (primarily related to Carson's receivables
which were not previously securitized). The proceeds of these
additional securitizations were used to reduce senior debt
balances.
May 2, 1998 merchandise inventory and property and equipment
balances increased over January 31, 1998 and May 3, 1997 balances
primarily due to four new store locations opened (net of closings)
during 1997, one new store opened in March 1998, the acquisition of
the Brody's stores in March 1998, and the intensification of
inventories at certain stores, particularly at certain Parisian and
Herberger's stores.
May 2, 1998 subordinated debt decreased from the balance at May 3,
1997 due to the conversion of approximately $86 million of
subordinated debentures into Common Stock and the retirement of
approximately $128 million of additional debentures.
May 2, 1998 equity increased over the balances at January 31, 1998
and May 3, 1997 primarily due to net earnings and the previously
mentioned conversion of subordinated debentures into common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Prior year income statement information below has been restated to
reflect the January 31, 1998 merger with Carson's, which was
accounted for as a pooling of interests.
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
------------------------
5/2/98 5/3/97
---------- ----------
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 64.5 64.9
Selling, general & administrative
expenses 24.7 24.9
Other operating expenses 7.9 7.9
Store pre-opening costs 0.1 0.1
Merger, restructuring and integration
costs 0.2 0.2
Year 2000 expenses 0.2 0.1
ESOP expenses 0.0 0.1
Operating income 2.4 1.8
---------- ----------
Other income (expense):
Finance charge income 3.9 3.6
Finance charge income allocated
to purchasers of accounts
receivable (1.1) (0.6)
Interest expense (1.0) (1.9)
---------- ----------
Income before provision for
income taxes 4.2 2.9
Provision for income taxes 1.7 1.2
---------- ----------
NET INCOME 2.5% 1.7%
========== ==========
For the first quarter ended May 2, 1998, total Company sales were
$833.1 million, a 6% increase over $784.5 million in the prior
year. The sales increase was primarily attributable to comparable
store sales growth of 5% and new store openings since last year.
For the first quarter, gross margin percentage increased 40 basis
points over the prior year. This improvement was achieved through
proper execution and the realization of benefits related to
increased purchasing scale, and shifts in the merchandise mix of
select stores.
Selling, general, and administrative expenses declined as a
percentage of net sales for the quarter by 20 basis points. This
expense leverage primarily resulted from targeted cost reductions
related to each of the Company's completed business combinations
and certain productivity efficiencies.
In conjunction with the Company's business combinations with
Younkers, Parisian, Herberger's, Carson's, and Brody's, the
Company incurred certain integration charges in each period
presented. For the quarter ended May 2, 1998, these charges
totaled $2.0 million, or 0.2% of net sales, and for the quarter
ended May 3, 1997, these charges totaled $1.5 million, or 0.2% of
net sales.
The Company has completed its assessment of the Year 2000 effect on
the Company's systems. Necessary systems modifications are
currently underway and are scheduled for completion by the end of
1998. For the quarters ended May 2, 1998 and May 3, 1997, Year
2000 expenses totaled $1.5 million, or 0.2% of net sales, and $.6
million, or 0.1% of net sales, respectively.
For the quarter ended May 3, 1997, the Company incurred expenses of
$.7 million, or 0.1% of net sales, related to the Company's
Employee Stock Ownership Plan (ESOP) maintained at Herberger's.
The ESOP was terminated in December 1997.
For the quarter ended May 2, 1998, finance charge income, as a
percent of net sales, increased 30 basis points over the prior year
first quarter. This increase was primarily due to the successful
introduction of a proprietary charge card program to the Company's
Herberger's customers in May 1997 as well as certain proprietary
charge card term changes for most of the Company's credit card
programs effected in late 1997.
Total financing costs, which include interest expense and finance
charge income allocated to the third party purchasers of accounts
receivable, decreased as a percentage of net sales for the first
quarter by 40 basis points due to lower average borrowings during
the period as well as more favorable financing terms.
Net income for the quarter ended May 2, 1998 totaled $20.9 million,
or $.22 per diluted share, compared to $13.2 million, or $.15 per
diluted share, for the quarter ended May 3, 1997. The increase in
earnings over the prior year primarily was due to improved gross
margin performance, leverage on operating expenses, increased
finance charge income, and lower financing costs.
PROFFITT'S, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27.1 Financial Data Schedule
(b) Form 8-K Reports.
A report on Form 8-K was filed with the Commission
on February 11, 1998 regarding financial
information related to the Carson Pirie Scott & Co.
merger.
A report on Form 8-K was filed with the Commission
on April 10, 1998, regarding February 1998 combined
sales and earnings information for Proffitt's, Inc.
and Carson Pirie Scott & Co.
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
5/29/98
---------------------
Date
/s/ Douglas E. Coltharp
----------------------
Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheets as of May 2, 1998 and May 3, 1997 and the
Condensed Consolidated Statements of Income for the three months ended May 2,
1998 and May 3, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-30-1999 JAN-31-1998
<PERIOD-END> MAY-02-1998 MAY-03-1997
<CASH> 27,808,000 38,081,000
<SECURITIES> 0 0
<RECEIVABLES> 111,206,000 332,359,000
<ALLOWANCES> 0 0
<INVENTORY> 803,927,000 709,867,000
<CURRENT-ASSETS> 997,822,000 1,158,902,000
<PP&E> 792,924,000 686,301,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 2,111,733,000 2,152,453,000
<CURRENT-LIABILITIES> 513,907,000 460,173,000
<BONDS> 353,879,000 658,371,000
0 0
0 0
<COMMON> 8,970,000 5,603,000
<OTHER-SE> 1,111,716,000 906,595,000
<TOTAL-LIABILITY-AND-EQUITY> 2,111,733,000 2,152,453,000
<SALES> 833,149,000 784,504,000
<TOTAL-REVENUES> 833,149,000 784,504,000
<CGS> 537,439,000 509,426,000
<TOTAL-COSTS> 537,439,000 509,426,000
<OTHER-EXPENSES> 69,508,000 65,858,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,942,000 14,955,000
<INCOME-PRETAX> 35,008,000 22,538,000
<INCOME-TAX> 14,145,000 9,325,000
<INCOME-CONTINUING> 20,863,000 13,213,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 20,863,000 13,213,000
<EPS-PRIMARY> 0.23 0.16
<EPS-DILUTED> 0.22 0.15
</TABLE>
