<PAGE>
FORM 10-Q EXHIBIT INDEX ON
PAGE 13
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission file number 0-22682
CARSON PIRIE SCOTT & CO.
(Exact name of registrant as specified in its charter)
ILLINOIS 37-0175980
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
331 West Wisconsin Avenue, Milwaukee, Wisconsin
53203
(Address of principal executive offices)
(Zip Code)
414-347-4141
(Registrant's telephone number, including area code)
____________________________________________
(Former name, former address and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports),and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
contribution of securities under a plan confirmed by a court.
Yes X No
Number of shares outstanding of each of the issuer's classes
of common stock, as of August 3, 1996:
Common Stock, $.01 par value 16,099,700 shares, exclusive of
21,555,068 shares held by
subsidiaries of the registrant
Page 1
Carson Pirie Scott & Co. and Subsidiaries
Consolidated Balance Sheets
As of August 3, 1996
(Unaudited)
(dollars in thousands)
August 3, February 3,
Assets 1996 1996
- -------------------- -------- -----------
Current Assets:
Cash and cash equivalents $ 25,946 44,384
Accounts receivable, net 214,433 232,257
Merchandise inventories 186,587 178,632
Marketable securities - 25,140
Other current assets 19,701 17,575
---------- ----------
Total current assets 446,667 497,988
Property, fixtures and
equipment, net 155,915 140,851
Net deferred tax assets 38,562 37,789
Other assets 22,840 15,474
--------- ---------
$ 663,984 692,102
========= ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current maturities of
long-term debt $ 2,766 3,081
Accounts payable 62,129 47,492
Accrued expenses 88,769 86,105
------- -------
Total current liabilities 153,664 136,678
Long-term debt,
less current maturities 146,431 192,705
Other liabilities 43,451 42,903
------- -------
Total liabilities 343,546 372,286
------- -------
Shareholders' equity:
Common stock 161 164
Paid-in capital 165,554 172,183
Unamortized stock compensation (306) (453)
Unrealized gain on investments 597 5,957
Retained earnings 154,432 141,965
------- -------
Total shareholders' equity 320,438 319,816
------- -------
$ 663,984 692,102
======= =======
See accompanying notes to consolidated financial statements.
Page 2
Carson Pirie Scott & Co. and Subsidiaries
Consolidated Statements of Operations
Three months ended August 3, 1996 and July 29, 1995
(Unaudited)
(dollars in thousands, except per share amounts)
Three months ended
----------------------
August 3, July 29,
1996 1995
--------- ---------
Net sales $ 224,986 220,751
Cost of sales (141,464) (140,522)
Selling, general and
administrative expenses (71,470) (67,823)
Depreciation, amortization
and other (4,073) (3,067)
------- --------
Income from operations 7,979 9,339
Interest expense, net (3,391) (4,915)
-------- --------
Income before income taxes 4,588 4,424
Income tax expense (1,808) (1,767)
-------- --------
Net income $ 2,780 2,657
======== ========
Primary net income
per share $ 0.17 0.16
======== ========
Weighted average number
of common and common
equivalent shares 16,782,011 16,708,404
=========== ===========
See accompanying notes to consolidated financial statements.
Page 3
Carson Pirie Scott & Co. and Subsidiaries
Consolidated Statements of Operations
Six months ended August 3, 1996 and July 29, 1995
(Unaudited)
(dollars in thousands, except per share amounts)
Six months ended
----------------------
August 3, July 29,
1996 1995
------ ---------
Net sales $ 461,755 470,107
Cost of sales (295,206) (310,207)
Selling, general and
administrative expenses (142,710) (138,329)
Depreciation, amortization
and other (8,198) (6,128)
Minnesota disposition gain - 55,000
------- --------
Income from operations 15,641 70,443
Interest expense, net (7,135) (8,719)
Gain on sale of
marketable securities 14,892 -
Other expense (2,827) -
-------- --------
Income before income taxes 20,571 61,724
Income tax expense (8,105) (24,687)
-------- --------
Net income $ 12,466 37,037
======== ========
Primary net income
per share $ 0.74 2.09
======== ========
Weighted average number
of common and common
equivalent shares 16,791,250 17,702,491
=========== ===========
See accompanying notes to consolidated financial statements.
Page 4
Carson Pirie Scott & Co. and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended August 3, 1996 and July 29, 1995
(Unaudited)
(dollars in thousands)
Six months ended
-----------------------
August 3, July 29,
1996 1995
------ ---------
Net cash provided by
operating activities $ 35,619 70,349
------ ------
Cash flows from investing activities:
Proceeds from sale of
marketable securities 31,094 5,000
Purchases of property
and equipment (22,874) (18,613)
Purchase of leasehold interests (4,369) -
Proceeds from disposition
of assets 603 70,801
------- -------
Net cash provided by
investing activities 4,454 57,188
------- -------
Cash flows from financing activities:
Stock options exercised 481 108
Repurchase of common stock (7,366) (1,831)
Repayments of long-term
debt and other obligations (1,713) (1,400)
Net repayments under
receivables facility (45,000) (21,121)
Deferred financing costs (763) -
Termination of interest rate
floor agreements (4,150) -
------- -------
Net cash used by
financing activities (58,511) (24,244)
Cash flow effect of
reorganization activities:
Change in reorganization payables - (311)
------- -------
Net cash used by
reorganization activities - (311)
-------- -------
Net increase (decrease) in
cash and cash equivalents (18,438) 102,982
Cash and cash equivalents at
beginning of the period 44,384 30,244
------- -------
Cash and cash equivalents
at end of the period $ 25,946 133,226
======= =======
See accompanying notes to consolidated financial statements.
Page 5
Carson Pirie Scott & Co. and Subsidiaries
Notes to Consolidated Financial Statements
August 3, 1996
(Unaudited)
(1) The Company
Carson Pirie Scott & Co.(CPS) and its subsidiaries (together, the
Company) operate 52 traditional department stores and three
furniture stores which are located in Illinois, Wisconsin,
Indiana and Minnesota.
(2) Opinion of Management
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments,
consisting of normal recurring accruals, considered necessary to
present fairly the Company's consolidated financial statements.
All intercompany balances and transactions have been
eliminated in consolidation. The accompanying consolidated
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto filed in
CPS's annual report on Form 10-K for the year ended
February 3, 1996.
The results of operations for the six months ended August 3, 1996
are not necessarily indicative of the results to be expected for
the full year due to the seasonal nature of the retail industry.
(3) Marketable Securities
During the first quarter of 1996, the Company sold
1,026,550 shares of Proffitt's, Inc. (Proffitt's) common stock
for $31.1 million and realized a gain of $14.9 million.
(4) New Store Acquisitions
In February 1996, the Company purchased a department store
located in Aurora, Illinois from The May Department Stores
Company. In March 1996, the Company purchased the leasehold
interests for two department stores located in Rockford, Illinois
from Younkers, Inc.
(5) Other Expense
During the first quarter of 1996, the Company made a $2.5 million
cash contribution to the Carson Pirie Scott Foundation.
(6) Share Repurchases
During the six months ended August 3, 1996, the Company repurchased
316,100 shares of its common stock for $7.4 million under its $20.0
million buyback program.
Page 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The financial information, discussion, and analysis which follow
are based upon and should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto.
Results of Operations
Comparison of the three months ended August 3, 1996 and July 29, 1995
Net sales. Net sales were $225.0 million for the three months
ended August 3, 1996 as compared to $220.8 million for the three
months ended July 29, 1995, an increase of $4.2 million or 1.9%.
The net sales increase was due to new store openings. The Company
opened a department store location at the Cherryvale Mall located
in Rockford, Illinois in June 1996 and a freestanding furniture
store located in Schaumburg, Illinois in January 1996. On a
comparable store basis, net sales for the period decreased by 0.4%.
The comparable sales decline was caused by unseasonably cool weather
that slowed customer spending.
Gross margin. Gross margin was $83.5 million for the 1996 three-
month period versus $80.2 million for the 1995 three-month period,
an increase of $3.3 million or 4.1%. Gross margin as a percentage of
net sales was 37.1% for the 1996 three-month period compared to 36.3%
for the comparable prior period. The margin rate increase was due to
a combination of fewer clearance events at the Company's downtown
locations, improved shortage results and early selling of Fall apparel.
Selling, general and administrative expenses. Selling, general
and administrative expenses were $71.5 million for the 1996
three-month period versus $67.8 million for the 1995 three-month
period, an increase of $3.7 million or 5.4%. Selling, general and
administrative expenses as a percentage of sales were 31.8% and
30.7% for the quarters ended August 3, 1996 and July 29, 1995,
respectively. The increase was primarily due to preopening expenses
associated with new stores, lower finance charge income, and higher
payroll costs.
Depreciation, amortization and other. Depreciation, amortization
and other expense increased to $4.1 million for the three months
ended August 3, 1996 from $3.1 million for the three months ended
July 29, 1995. Depreciation expense rose $0.9 million for the
1996 period reflecting the increased carrying value of property,
fixtures and equipment due to the Company's capital expenditure
program.
Interest expense, net. Interest expense, net decreased to $3.4 million
for the three-month period ended August 3, 1996 as compared to $4.9
million for the three-month period ended July 29, 1995. The improvement
occurred because, during the third and fourth quarters of fiscal 1995,
the Company redeemed its 13% ten year subordinated notes. The notes
were issued in March 1995 in the total principal amount of $57 million.
Page 7
Income tax expense. Income tax expense for the three months
ended August 3, 1996 and July 29, 1995 was $1.8 million in each period
resulting in effective income tax rates of 39.4% and 40.0%,
respectively.
Comparison of the six months ended August 3, 1996 and July 29, 1995
Net sales. Net sales were $461.8 million for the six months
ended August 3, 1996 as compared to $470.1 million for the six
months ended July 29, 1995, a decrease of $8.3 million or 1.8%.
The decrease was due to the Company's sale of eight of its nine
Minnesota stores (the Minnesota Closed Stores) in March 1995. The
Minnesota Closed Stores contributed $25.0 million in sales during
the first half of 1995 that were absent in 1996. On a comparable
store basis, net sales for the period increased by 2.1%. The increase
was comprised of a 4.6% increase for the first quarter of 1996, offset
by a 0.4% decline in the second quarter of 1996. The first quarter
increase was caused by increases in Feminine Apparel and Men's Apparel
sales, while the second quarter decrease was caused by unseasonably cool
weather.
Gross margin. Gross margin was $166.5 million for the 1996 six-
month period versus $159.9 million for the 1995 six-month
period, an increase of $6.6 million or 4.1%. Gross margin as a
percentage of net sales was 36.1% for the 1996 six-month period
compared to 34.0% for the comparable prior period. Excluding the
Minnesota Closed Stores clearance sales which did not contribute to
gross margin in the 1995 period, the 1995 rate was 35.9%. The gross
margin rate improvement in the 1996 period resulted from a combination
of fewer clearance events at the Company's downtown locations, improved
shortage results and early selling of Fall apparel in the second quarter
of 1996.
Selling, general and administrative expenses. Selling, general
and administrative expenses were $142.7 million for the 1996
six-month period versus $138.3 million for the 1995 six-month
period, an increase of $4.4 million or 3.2%. Selling, general and
administrative expenses as a percentage of sales were 30.9% and
31.1% (excluding the Minnesota Closed Stores clearance sales) for the
six months ended August 3, 1996 and July 29, 1995, respectively. The
increase in dollars was primarily due to preopening expenses associated
with new stores, lower finance charge income, and higher payroll costs.
Depreciation, amortization and other. Depreciation, amortization
and other expense increased to $8.2 million for the six months
ended August 3, 1996 from $6.1 million for the six months ended
July 29, 1995. Depreciation expense rose $1.9 million for the
1996 period reflecting the increased carrying value of property,
fixtures and equipment due to the Company's capital
expenditure program.
Gain on sale of marketable securities. During the six months
ended August 3, 1996, the Company sold 1,026,550 shares of
Proffitt's common stock for $31.1 million and realized a gain of
$14.9 million.
Page 8
Other expense. The Company made a $2.5 million cash contribution
to the Carson Pirie Scott Foundation during the six months ended
August 3, 1996.
Interest expense, net. Interest expense, net decreased to $7.1 million
for the six-month period ended August 3, 1996 as compared to $8.7
million for the six-month period ended July 29, 1995. The improvement
occurred because, during the third and fourth quarters of fiscal 1995,
the Company redeemed its 13% ten year subordinated notes. The notes
were issued in March 1995 in the total principal amount of $57 million.
Income tax expense. Income tax expense for the six months
ended August 3, 1996 and July 29, 1995 was $8.1 million and $24.7
million, respectively, resulting in effective income tax rates of
39.4% and 40.0%, respectively.
Liquidity and Capital Resources
The Company's cash and cash equivalents position on August 3, 1996
totaled $25.9 million and outstanding debt totaled $149.2
million, resulting in a net debt position (Net Debt) of $123.3
million. Net Debt is outstanding debt less cash and cash
equivalents. The Company believes Net Debt is a useful
measure of its liquidity position given the Company's ability to
apply cash to its outstanding debt. For the six months ended
August 3, 1996, Net Debt declined $28.1 million, which is
primarily due to the receipt of $31.1 million from the
sale of the Company's 1,026,550 shares of Proffitt's common stock.
Net cash provided by operations declined $34.7 million from $70.3
million in 1995, to $35.6 million in 1996. This was primarily due
to the liquidation of working capital related to the Minnesota
Closed Stores during the 1995 period.
A subsidiary of the Company has the right to borrow, subject to
certain limitations, including compliance with certain
restrictive covenants, up to $216.0 million under a receivables
facility. As of August 3, 1996, borrowings under the receivables
facility totaled $99.0 million. The receivables facility
expires July 1998. In addition, the Company has the right to
borrow, subject to certain limitations, up to $150.0 million
under a working capital facility. The working capital facility
had outstanding letters of credit for $18.6 million as of August 3,
1996, which reduce availability. No cash borrowings were
outstanding under the working capital facility during the
six months ended August 3, 1996. In May 1996, the working capital
facility was replaced with a similar facility that expires
May 1999.
During the six months ended August 3, 1996, the Company repurchased
316,100 shares of its common stock for $7.4 million under its $20.0
million buyback program.
Page 9
In fiscal 1996, the Company anticipates spending $60 million for
capital expenditures which will be allocated as follows: store
programs of $26 million, new store acquisitions and renovations
of $25 million, technology programs of $4 million and other
programs of $5 million. Store programs include the completion of
five store renovations. New store acquisitions and renovations
include the three stores acquired in the first quarter of fiscal
1996 and a freestanding furniture store.
As of February 3, 1996, the Company had federal and state net
operating loss (NOL) carryforwards of approximately $138 million.
Although subject to limitation, the future utilization of the NOL
carryforwards and other tax benefits will enable the Company to
reduce its cash requirements for income tax payments in the next
several fiscal years from that which would otherwise be payable.
The Company believes that it will have sufficient funds available
from cash on hand, cash from operations, the receivables facility
and the working capital facility to satisfy the Company's needs
for working capital, planned capital expenditures, debt service
and operations during the next several fiscal years. However,
the Company can give no assurance that the Company's future
operating performance, net sales and cash flows, all of which are
subject to financial, general and regional economic, competitive
and other factors affecting the Company, many of which are beyond
its control, will be adequate to generate sufficient funds to
meet the Company's needs during the next several fiscal years.
Seasonality and Inflation
The Company's business is seasonal in nature with a high
proportion of sales and net income generated in November and
December. Over the last several years, the Company's customers
have demonstrated an inclination to buy closer to the time of
need. In response, the Company has been adjusting the flow of
merchandise to better anticipate customer buying patterns.
Working capital requirements fluctuate during the year,
increasing somewhat in mid-summer in anticipation of the fall
merchandising season and increasing substantially prior to the
Christmas season when the Company must carry significantly higher
inventory levels. Inflationary pressures on the cost of
merchandise inventory and operating expenses have been low, and
historically, have been offset by a combination of
comparable-store sales increases and improved productivity.
Page 10
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held an annual meeting of shareholders on May 30,
1996 for the following purposes:
Item 1: To elect seven directors;
Item 2: To approve the 1996 Directors' Stock Compensation
Plan; and
Item 3: To ratify the appointment of KPMG Peat Marwick LLP
as the Company's independent accountants for the fiscal year ending
February 1, 1997.
The number of votes cast for and withheld for each nominee for
the Company's Board of Directors were as follows:
FOR WITHHELD
Stanton J. Bluestone 14,364,010 10,549
John W. Burden III 14,364,010 10,549
Mark Dickstein 14,364,010 10,549
Chaim Y. Edelstein 14,364,010 10,549
Mark L. Kaufman 14,364,010 10,549
Michael R. MacDonald 14,364,010 10,549
Robert Tammero 14,364,010 10,549
The number of votes cast for, against, abstain, and non vote
for Items 2 and 3 were as follows:
FOR AGAINST ABSTAIN NON VOTE
Item 2 11,552,152 2,789,347 19,453 13,607
Item 3 14,368,412 5,501 646
Page 11
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
----------
See Exhibit Index on page 13 of this Quarterly
Report on Form 10-Q.
(b) Reports on Form 8-K
--------------------------
The following reports on Forms 8-K were filed on the dates
indicated below during the quarter ended August 3, 1996:
May 13, 1996 Reported CPS's sales for the first quarter under
Item 5.
June 3, 1996 Reported CPS's earnings for the first quarter under
Item 5.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunder duly authorized.
Date: September 11, 1996
Carson Pirie Scott & Co.
/s/ David J. Biese
----------------------------
David J. Biese
Controller (chief accounting officer
and authorized officer)
Page 12
EXHIBIT INDEX
Copies of documents listed below which are identified with an
asterisk (*)have previously been filed with the Securities and
Exchange Commission (the Commission) as exhibits to registration
statements or reports filed with the Commission and are
incorporated into this Quarterly Report on Form 10-Q by
reference and made a part hereof. The exhibit number and the
file number of each document previously filed and incorporated
into this Quarterly Report on Form 10-Q by reference are set
forth below. Exhibits not identified with an asterisk are filed
with this Quarterly Report on Form 10-Q.
Exhibit Sequential Page
Number Description Numbers
- --------- --------------- --------------
11.1 Computation of
Per Share Earnings. 14
27 Financial Data Schedule. 16
Page 13
<PAGE>
EXHIBIT 11.1
Carson Pirie Scott & Co. and Subsidiaries
Computation of Per Share Earnings
(dollars in thousands, except per share amounts)
Three months ended
------------------------------
August 3, 1996 July 29, 1995
------------------------------
Net income $2,780 $2,657
========= =========
Primary:
Weighted average number of
common shares outstanding 16,223,009 16,427,484
Weighted average number of
common share equivalents--
stock options 559,002 280,920
----------- ---------
Total common and
common share equivalents 16,782,011 16,708,404
----------- -----------
Primary net income per share $0.17 $0.16
========== ==========
Fully Diluted:
Weighted average number of
common shares outstanding 16,223,009 16,427,484
Weighted average number of
common share equivalents--
stock options 559,002 280,920
---------- ---------
Total common and common
share equivalents 16,782,011 16,708,404
----------- -----------
Fully diluted net
income per share $0.17 $0.16
=========== ===========
Primary net income per share was computed using the treasury
stock method, assuming common share purchases at the average
market price of the common shares for the period.
Fully diluted net income per share was computed using the
treasury stock method, assuming common share purchases at the
greater of the average market price of the common shares for the
period or the ending price of the common shares.
Page 14
Carson Pirie Scott & Co. and Subsidiaries
Computation of Per Share Earnings
(dollars in thousands, except per share amounts)
Six months ended
------------------------------
August 3, 1996 July 29, 1995
------------------------------
Net income $12,466 $37,037
========= =========
Primary:
Weighted average number of
common shares outstanding 16,274,457 17,410,607
Weighted average number of
common share equivalents--
stock options 516,793 291,884
----------- ---------
Total common and
common share equivalents 16,791,250 17,702,491
----------- -----------
Primary net income per share $0.74 $2.09
========== ==========
Fully Diluted:
Weighted average number of
common shares outstanding 16,274,457 17,410,607
Weighted average number of
common share equivalents--
stock options 545,485 291,884
---------- ---------
Total common and common
share equivalents 16,819,942 17,702,491
----------- -----------
Fully diluted net
income per share $0.74 $2.09
=========== ===========
Primary net income per share was computed using the treasury
stock method, assuming common share purchases at the average
market price of the common shares for the period.
Fully diluted net income per share was computed using the
treasury stock method, assuming common share purchases at the
greater of the average market price of the common shares for the
period or the ending price of the common shares.
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF
AUGUST 3, 1996 AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED AUGUST 3, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> AUG-03-1996
<CASH> 25,946
<SECURITIES> 0
<RECEIVABLES> 214,433
<ALLOWANCES> 0
<INVENTORY> 186,587
<CURRENT-ASSETS> 446,667
<PP&E> 155,915
<DEPRECIATION> 0
<TOTAL-ASSETS> 663,984
<CURRENT-LIABILITIES> 153,664
<BONDS> 0
0
0
<COMMON> 161
<OTHER-SE> 320,277
<TOTAL-LIABILITY-AND-EQUITY> 663,984
<SALES> 461,755
<TOTAL-REVENUES> 461,755
<CGS> 295,206
<TOTAL-COSTS> 295,206
<OTHER-EXPENSES> 150,908
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,135
<INCOME-PRETAX> 20,571
<INCOME-TAX> 8,105
<INCOME-CONTINUING> 12,466
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,466
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
</TABLE>
