1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 26, 1997August 1, 1998
--------------
Commission file no. 1-10299
WOOLWORTH CORPORATION-------
VENATOR GROUP, INC.
--------------------
(Exact name of registrant as specified in its charter)
New York 13-3513936
- -------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S.I.R.S. Employer Identification No.)
incorporation or organization)
233 Broadway, New York, New York 10279-0003
- --------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 553-2000
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
--- ---
Number of shares of Common Stock outstanding at August 29, 1997:134,914,08228, 1998: 135,524,566
-----------
2
WOOLWORTH CORPORATION
INDEXVENATOR GROUP, INC.
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3Sheets...................1
Condensed Consolidated Statements
of Operations 4Operations......................................2
Condensed Consolidated Statements
of Comprehensive Loss..............................3
Condensed Consolidated Statements
of Retained Earnings 5Earnings...............................4
Condensed Consolidated Statements
of Cash Flows 6Flows......................................5
Notes to Condensed Consolidated
Financial Statements 7-9Statements.............................6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-13Operations...8-14
Part II. Other Information
Item 1. Legal Proceedings 13Proceedings......................................14
Item 4. Submission of Matters to a Vote of Security Holders 13-14Holders...14-15
Item 6. Exhibits and Reports on Form 8-K 14
Signature 158-K.......................15
Signature..............................................16
Index to Exhibits 16-18
-2-Exhibits...................................17-18
i
3
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. FINANCIAL STATEMENTS
WOOLWORTH CORPORATION- -----------------------------
VENATOR GROUP, INC.
------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(in millions)
August 1, July 26, July 27, January 25,31,
1998 1997 1996 1997
---- ---- ----1998
-------- -------- ----------
(Unaudited) (Unaudited) (Audited)(1)
ASSETS
------
Current Assets:assets
Cash and cash equivalentsequivalents..................$ 77 $ 69 $ 97 $ 328116
Merchandise inventoriesinventories.....................1,406 1,216 1,259 1,0661,159
Net assets of discontinued operationsoperations....... 10 209 268 2367
Other current assetsassets........................ 228 174 205 202
------- ------- -------177
----- ------ ------
1,721 1,668 1,829 1,8321,459
Property and equipment, netnet....................1,214 903 1,032 9831,053
Deferred charges and other assetsassets.............. 716 737 592 524
------- ------- -------670
----- ------ ------
$3,651 $ 3,308 $ 3,453 $ 3,339
======= ======= =======3,182
===== ===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:liabilities
Short-term debtdebt............................$ 451 $ 38 $ 137 $ ---
Accounts payable 352 360 286
Accrued liabilities 526 350 427and accrued liabilities.... 747 646 662
Current portion of reserve for
discontinued operations................... 27 232 72
Current portion of long-term debt and
obligations under capital leasesleases.......... 23 14 17 15
------- ------- -------22
----- ------ ------
$1,248 930 864 728756
Long-term debt and obligations
under capital leasesleases........................ 536 568 605 575535
Deferred taxes and other liabilities 721 779 702liabilities........... 586 654 602
Reserve for discontinued operations............ 18 67 18
Shareholders' Equity:
Preferred stock -- -- --Equity
Common stock and paid-in capitalcapital............ 327 311 297 299317
Retained earningsearnings...........................1,015 870 891 1,050
Foreign currency translation adjustment (55) 52 22
Minimum pension liability adjustment (37) (35) (37)
------- ------- -------1,033
Accumulated other comprehensive loss........ (79) (92) (79)
----- ------ ------
Total shareholders' equityequity.....................1,263 1,089 1,205 1,334
Commitments
------- ------- -------1,271
Commitments....................................----- ------ ------
$3,651 $ 3,308 $ 3,453 $ 3,339
======= ======= =======3,182
===== ===== =====
See accompanying notesAccompanying Notes to Condensed Consolidated Financial Statements.
-3-(1) The Condensed Consolidated Balance Sheet as of January 31, 1998 has been
summarized from the Registrant's audited Consolidated Balance Sheet as of that
date.
1
4
WOOLWORTH CORPORATIONVENATOR GROUP, INC.
--------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
(in millions, except per share amounts)
Thirteen weeks ended Twenty-six weeks ended
---------------------------- ------------------------------------------------ ----------------------
August 1, July 26, July 27,August 1, July 26,
July 27,1998 1997 19961998 1997
1996
---- ---- ---- ----------- ------- ------- -------
Sales $ 1,465 $ 1,500 $ 1,6072,931 $ 3,039
$ 3,177
Cost and Expenses:expenses
Cost of sales ................. 1,052 1,037 1,0952,098 2,111 2,214
Selling, general and
administrative expenses .... 380 370 416771 758 831
Depreciation and amortization . 47 43 4491 84 89
Interest expense, net ......... 9 11 1521 22 32
Other income .................. (3) (2) (22) (6) (6) (7)
------- ------- ------- -------
1,485 1,459 1,5642,959 2,969 3,159
------- ------- ------- -------
Income (loss) from continuing
operations before income taxes (20) 41 43(28) 70 18
Income tax expense (benefit) .... (7) 15 17(10) 27 7
------- ------- ------- -------
Income (loss)
from continuing operations . (13) 26 26(18) 43 11
Loss from discontinued operations,
net of income taxestax benefits
of $8 $2,and $19 and $7,million,
respectively ............... -- (12) (4)-- (28) (11)
Loss on disposal of discontinued
operations, net of income taxestax
benefit of $115 million .... -- (195) -- (195)
--------- ------- -------- -------
Net income (loss)loss ........................$ (13) $ (181) $ 22(18) $ (180) $ --
======= ======= ======= =======
Per commonBasic earnings per share:
Income (loss) from continuing
operations .................$ (0.09) $ 0.19 $ 0.19(0.13) $ 0.32 $ 0.08
Loss from discontinued
operations $................. -- (1.54) $ (0.02) $-- (1.66) $ (0.08)
------- ------- ------- -------
Net income (loss)loss ...................$ (0.09) $ (1.35) $ 0.17(0.13) $ (1.34) $ --
======= ======= ======= =======
Weighted-average common shares
outstanding ................ 135.4 134.5 133.3135.3 134.3
133.2Diluted earnings per share:
Income (loss) from continuing
operations ................$ (0.09) $ 0.19 $ (0.13) $ 0.32
Loss from discontinued
operations ................ -- (1.52) -- (1.64)
------- ------- ------- -------
Net loss ................... (0.09) $ (1.33) $ (0.13) $ (1.32)
======= ======= ======= =======
Weighted-average common
shares assuming dilution ... 135.4 136.0 135.3 135.6
See accompanying notesAccompanying Notes to Condensed Consolidated Financial Statements.
-4-2
5
WOOLWORTH CORPORATIONVENATOR GROUP, INC.
---------------------
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
-------------------------------------------------------
(Unaudited)
(in millions)
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
August 1, July 26, August 1, July 26,
1998 1997 1998 1997
-------- ------- -------- --------
Net loss ........................ $ (13) $(181) $ (18) $ (180)
Other comprehensive loss, net of
tax: Foreign currency
translation adjustments
(pre-tax $(19), $(46), $0,
and $(124), respectively) .. (12) (30) -- (77)
----- ----- ----- ------
Comprehensive loss .............. $ (25) $(211) $ (18) $ (257)
===== ===== ===== =====
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
6
VENATOR GROUP, INC.
-------------------
CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
------------------------------------------------------
(Unaudited)
(in millions)
Twenty-six weeks ended
----------------------
August 1, July 26,
July 27,1998 1997
1996
---- ----------- -------
Retained earnings at beginning of yearyear.....$ 1,033 $ 1,050
$ 891
Net income (loss)loss ................................... (18) (180)
--
Cash dividends declared:
Preferred stock (1996 - $1.10 per share) -- --
------- ------------- ------
Retained earnings at end of interim periodperiod.$ 1,015 $ 870
$ 891
======= ============= ======
See accompanying notesAccompanying Notes to Condensed Consolidated Financial Statements.
-5-4
6
WOOLWORTH CORPORATION7
VENATOR GROUP, INC.
--------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
(in millions)
Twenty-six weeks ended
--------------------------------------------------
August 1, July 26,
July 27,1998 1997
1996
---- ------------ -------
From Operating Activities:
Net income (loss)loss ............................................$ (18) $ (180) $ --
Adjustments to reconcile net income (loss)loss to net cash
provided by
(used in)used in operating activities:
Non-cash charge for discontinued operations,
310net of tax .................................... -- 195
Discontinued operations activitiesactivity ................ (45) (11) --
Depreciation and amortization ................... 91 84 92
Net gain on sales of real estate ................ (1) (4)
(13)Net gain on sales of assets and investments ..... (19) --
Deferred income taxes (138) (16)........................... (4) (23)
Change in assets and liabilities, net of acquisition:
Merchandise inventories ......................... (243) (153) (91)
Accounts payable and other liabilities .......... 91 63
121
Change in netNet assets of discontinued operations ........... (3) 27 44
Other, net ...................................... (123) (111)
(121)
------- ------------ -----
Net cash provided by (used in)used in operating activities ............. (274) (113)
16
------- ------------ -----
From Investing Activities:
Proceeds from sales of real estate .................. 7 19 21
Capital expenditures ................................ (233) (56) (36)
Payments for businessbusinesses acquired, net of cash acquired (29) (140) --
Proceeds from sales of assets and investments ....... 22 --
19
------- ------------ -----
Net cash provided by (used in)used in investing activities ............. (233) (177)
4
------- ------------ -----
From Financing Activities:
Increase in short-term debt ......................... 451 38 69
Reduction in long-term debt and capital lease
obligations ....................................... (3) (1) (9)
Issuance of common stock ............................ 10 11
6
Dividends paid -- --
------- ------------ -----
Net cash provided by financing activities ......... 458 48
66
------- ------------ -----
Effect of exchange rate fluctuations
on Cash and Cash Equivalents ........................ 10 (17)
(3)
------- ------------ -----
Net change in Cash and Cash Equivalents ................ (39) (259) 83
Cash and Cash Equivalents at beginning of year ......... 116 328
14
------- ------------ -----
Cash and Cash Equivalents at end of interim period .....$ 77 $ 69
$ 97
======= ============ =====
Cash paid during the period:
InterestInterest.............................................$ 25 $ 22
Income taxes.........................................$ 32
Income taxes10 $ 46 $ 9
See accompanying notesAccompanying Notes to Condensed Consolidated Financial Statements.
-6-5
7
WOOLWORTH CORPORATION8
VENATOR GROUP, INC.
-------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Basis of Presentation
- ---------------------
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Notes to Consolidated Financial
Statements contained in the 1996 Annual Report to Shareholders of Woolworth
Corporation (the "Registrant"), portions of which Annual Report are incorporated
by reference in the Registrant's Annual Report on Form 10-K for the year ended January
25, 1997,31, 1998, as filed with the Securities and Exchange Commission (the "SEC"). on
April 21, 1998. The Condensed Consolidated Statement of Comprehensive Loss was
prepared in conformity with the accounting principles and was not required for
the year ended January 31, 1998. Certain items included in these statements are
based on management's estimates. In the opinion of management, all material
adjustments, which are of a normal recurring nature, necessary for a fair
presentation of the results for the interim period have been included. The
results for the twenty-six weeks ended July 26, 1997August 1, 1998 are not necessarily
indicative of the results expected for the year.
Name Change
- -----------
The Registrant (formerly Woolworth Corporation) changed its name to
Venator Group, Inc. effective June 11, 1998.
Discontinued Operations
- -----------------------
On July 17, 1997, the Registrant announced that it iswas exiting its 400
store domestic Woolworth general merchandise business.business and recorded a charge to
earnings of $310 million before-tax or $195 million after-tax, for the loss on
disposal of discontinued operations. The loss from discontinued operations
recorded through July 17, 1997 was $47 million before-tax or $28 million
after-tax. The remaining domestic Woolworth general merchandise stores as well
as the division's distribution center in Denver, Pennsylvania were closed in
November 1997. The Registrant expects to
convertis in the process of converting approximately 100150
of itsthe prime locations to Foot Locker, Champs Sports, and other athletic or
specialty formats. The Registrant expects to close its
remaininghas successfully converted and opened 88
stores as well as the division's distribution center in Denver,
Pennsylvania by November 1997.through August 1, 1998.
The results of operations for all periods presented for thisthe domestic
Woolworth general merchandise business have been classified as discontinued
operations in the Condensed Consolidated Statements of Operations. Sales from
discontinued operations for the 1997 second quarters of 1997quarter and 1996year-to-date periods
were $198 million and $249$427 million, respectively.
Sales from discontinued operations for the year-to-date periods ended July 26,
1997 and July 27, 1996 were $427 million and $499 million, respectively.
The Condensed Consolidated Balance Sheets and Condensed Consolidated
Statements of Cash Flows have been restated for discontinued operations.
The following is a summary of the net assets of discontinued
operations:
July 26, July 27, Jan. 25,
1997 1996 1997
---- ---- ----
Assets $358 $400 $373
Liabilities 149 132 137
August 1, July 26, Jan. 31,
1998 1997 1998
------ ------- -------
Assets............................... $ 17 $ 358 $ 28
Liabilities.......................... 7 149 21
---- ---- ----
Net assets of discontinued operations $ 10 $ 209 $ 7
==== ==== ====
The net assets of discontinued operations $209 $268 $236
==== ==== ====
Theas of August 1, 1998 and
January 31, 1998 consisted primarily of fixed assets. As of July 26, 1997, the
net assets consistconsisted primarily of inventory and fixed assets. Liabilities consistfor
all periods presented consisted primarily of amounts due to vendors.
6
9
Disposition activity related to the discontinued operations reserve for
the periodquarter and year-to-date periods ended August 1, 1998 was approximately $25
million and $45 million, respectively. The remaining reserve balance at August
1, 1998 was $45 million.
Earnings Per Share
- ------------------
Statement of July 17, 1997Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share" requires the presentation of basic earnings per share and diluted
earnings per share. Basic earnings per share is computed as net earnings divided
by the weighted-average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur from
common shares issuable through stock-based compensation including stock options,
restricted stock awards and other convertible securities.
A reconciliation of weighted-average common shares outstanding to
weighted-average common shares assuming dilution follows:
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
August 1, July 26, August 1, July 26,
(in millions) 1998 1997 1998 1997
-------- ------- -------- -------
Weighted-average common shares
outstanding.................... 135.4 134.5 135.3 134.3
Incremental common shares issuable -- 1.5 -- 1.3
Weighted-average common shares ----- ----- ----- -----
assuming dilution.............. 135.4 136.0 135.3 135.6
===== ===== ===== =====
Incremental common shares were not included in the computation for the
quarter and year-to-date periods ended August 1, 1998 since their inclusion in
periods when the Registrant reported a net loss would be antidilutive. For the
thirteen and the twenty-six weeks ended July 26, 1997, options with an exercise
price greater than the average market price are not included in the computation
of diluted earnings per share and would not have a material impact on diluted
earnings per share.
Comprehensive Income
- --------------------
The Registrant adopted SFAS No. 130, "Reporting Comprehensive Income,"
in the first quarter of 1998. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in the financial
statements. Comprehensive income is a more inclusive financial reporting
methodology that includes the disclosure of certain financial information that
has not been recognized in the calculation of net income or loss, such as
foreign currency translations and changes in minimum pension liability which are
recorded directly to shareholders' equity. Accumulated other comprehensive loss
was a reductioncomprised of the reserveforeign currency translation adjustments of approximately $11 million.$34 million and
minimum pension liability adjustments of $45 million at August 1, 1998 and
January 31, 1998.
Reclassifications
- -----------------
Certain balances in prior periods have been reclassified to conform
with the presentation adopted in the current period.
-7-7
810
Legal Proceedings
Between March 30, 1994 and April 18, 1994, the Registrant and certain
of its present and former directors and officers were named as defendants in
lawsuits brought by certain shareholders claiming to represent classes of
shareholders that purchased shares of the Registrant's common stock during
different periods between January 1992 and March 1994.
These class action complaints purport to present claims under the
federal securities and other laws and seek unspecified damages based on alleged
misleading disclosures during the class periods.
On April 29, 1994, United States Senior District Judge Richard Owen
entered an order consolidating 25 actions, purportedly brought as class actions,
commenced against the Registrant and certain officers and directors of the
Registrant in the United States District Court for the Southern District of New
York, under the caption In re Woolworth Corporation Securities Class Action
Litigation. Plaintiffs served an Amended and Consolidated Class Action
Complaint, to which the defendants responded. On February 17, 1995, Judge Owen
entered an order for certification of the action as a class action on behalf of
all persons who purchased the Registrant's common stock or options on the
Registrant's common stock from May 12, 1993 to March 29, 1994 inclusive,
pursuant to a stipulation among the parties. On March 13, 1997, the parties'
representatives engaged in a mediation proceeding with a view toward settling
the issues in dispute. On June 23, 1997, a proposed settlement of the class
action was reached by the parties that provides for the payment to the class of
$20 million. The settlement is subject to final approval of the court which has
scheduled a settlement hearing for September 29, 1997. The amount of the
settlement, net of amounts to be paid by insurance carriers under relevant
insurance policies, has been reserved by the Registrant. In the opinion of
management, the settlement, if approved by the court, would not have a material
adverse effect on the financial position or results of operations of the
Registrant.
Five separate state-court derivative actions filed in April 1994 were
consolidated under the caption In re Woolworth Corporation Derivative Litigation
and are now pending in the Supreme Court of the State of New York, County of New
York. Plaintiffs served a Consolidated Complaint on behalf of the plaintiffs in
these five actions together with the plaintiff in the former federal derivative
action Sternberg v. Woolworth Corp., which has been dismissed. Defendants moved
to dismiss the Consolidated Complaint, and on April 27, 1995, the court granted
defendants' motion, with leave to the plaintiffs to replead. On June 7, 1995,
plaintiffs served a Consolidated Amended Derivative Complaint. On June 27, 1995,
defendants moved to dismiss the Consolidated Amended Derivative Complaint with
prejudice. On April 10, 1996, the court granted defendants' motion with
prejudice. Plaintiffs filed a notice of appeal from the dismissal to the
Appellate Division, First Department. On June 5, 1997, the court affirmed the
dismissal of this action. Plantiffs' time to appeal the dismissal has expired
and there have been no further proceedings. There is one federal derivative
action pending in the United States District Court for the Southern District of
New York under the caption Rosenbaum v. Sells et al. There have been no material
developments in this action. In the opinion of management, the results of this
action would not have a material adverse effect on the financial position or
results of operations of the Registrant.- -----------------
During 1994, the staff of the SEC initiated an inquiry relating to the
matters that were reviewed by the Special Committee ofestablished by the Board of
Directors in 1994 as well as in connection with trading in the Registrant's
securities by certain directors and officers of the Registrant.
The SEC staff has advised that its
inquiry should not be construed as an indication byOn June 29, 1998, the SEC or its staffannounced that any violationsit had accepted the
Registrant's Offer of law have occurred.Settlement in resolution of an administrative proceeding
arising from the inquiry. In the opinionOffer of management,Settlement, the resultRegistrant admitted
that during its 1993 fiscal year it violated Sections 13(a) and 13(b) (2) (A)
and (B) of the inquiry will not have a material adverse effect onSecurities Exchange Act of 1934, 15 U.S.C. Sections 78m(a) and
78m(b) (2) (A) - (B), and SEC rules 13a-13 and 12b-20 promulgated thereunder,
and the financial positionSEC found that the Registrant had committed those violations and ordered
that the Registrant cease and desist from any violation of those provisions.
Apart from this direction to cease and desist, no monetary or results of operations ofother relief
against the Registrant.
The information in this section on Legal Proceedings is current as of September
4, 1997.
-8-
9Registrant was awarded.
Recent Accounting Pronouncements
- --------------------------------
In FebruaryJune 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting StandardStandards ("SFAS") No. 128, "Earnings
per Share", which is effective for financial statements issued for periods
ending after December 15, 1997131, "Disclosures about
Segments of an Enterprise and therefore, effective for the Registrant for
the fiscal year ending January 31, 1998. SFAS No. 128 simplifies the standards
for computing earnings per share previously found in Accounting Principles Board
Opinion No. 15 and establishes new standards for computing and presenting
earnings per share. Application of SFAS No. 128 is not expected to have a
significant impact on the Registrant's earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income",Related Information," which is effective for
financial statements issued for fiscal years beginning after December 15, 1997
and therefore, effective for the Registrant forin 1998. The Registrant will adopt
the fiscal year beginning February 1, 1998. SFAS No. 130 establishes
standards for reporting and displayprovisions of comprehensive income and its componentsthis standard in the financial statements. A revised presentationfourth quarter of information on the income
statement is required for comparative purposes.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", which is effective for financial
statements issued for fiscal years beginning after December 15, 1997 and
therefore, effective for the Registrant for the fiscal year beginning February
1, 1998. SFAS No. 131
supersedes previously established standards for reporting operating segments in
the financial statements and requires disclosures regarding selected information
about operating segments in interim and annual financial reports.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which is effective for fiscal
years beginning after December 15, 1997. This statement revises employers'
disclosures about pensions and other postretirement benefit plans. It does not
change the measurement or recognition of those plans.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal quarters of
fiscal years beginning after June 15, 1999 and therefore, effective for the
Registrant in 2000. SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Registrant is in the
process of evaluating SFAS No. 133 to determine its impact on the consolidated
financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
As discussed more fully in the footnotes to the Condensed Consolidated
Financial Statements, the Registrant announced that it is exiting its domestic
Woolworth general merchandise business. Accordingly, the results of operations
for all periods presented for this business have been classified as discontinued
operations and all financial statements have been restated.---------------------
Total sales for the 19971998 second quarter decreased 6.72.3 percent to $1,500$1,465
million as compared with $1,607$1,500 million for the 1996 second quarter principally due
to 423 fewer stores.of 1997,
reflecting foreign currency fluctuations and a comparable-store sales decrease
of 6.0 percent. Excluding the effect of foreign currency fluctuations and sales
from disposed operations, sales remained level for the quarter.
Comparable-store sales decreased 2.5 percent.1998 second quarter were essentially
flat as compared with the corresponding prior-year period. Total Specialty
segment sales increased 1.8 percent infor the 1998 second quarter andremained unchanged while
comparable-store sales decreased 1.5 percent.6.1 percent, as compared with the corresponding
prior-year period. International General Merchandise segment sales decreased 17.4
percent for the 1998
second quarter of 1997 as compared with the second quarter of
1996. Comparable-store sales in the International General Merchandise segment
decreased 5.38.8 percent during the period. Excluding the impact of foreign
currency fluctuations,and comparable-store sales decreased by 6.65.8
percent, as compared with the second quarter of 1996.
Year-to-date 1997 salescorresponding prior-year period.
8
11
Sales for the 1998 twenty-six weeks ended August 1, 1998 decreased 4.33.6
percent to $3,039$2,931 million as compared with $3,177$3,039 million for 1996.the same period a
year earlier. Excluding the effect of foreign currency fluctuations and sales
from disposed operations, sales increased 2.5decreased 1.1 percent as compared with 1996.1997.
Comparable-store sales decreased 1.46.4 percent as compared with the corresponding
year-earlierprior-year period.
Selling, general and administrative expenses ("SG&A") increased $10
million and $13 million for the thirteen and twenty-six weeks ended August 1,
1998 as compared with the corresponding prior-year periods. The increases
primarily reflect costs of $7 million associated with the shutdown of the
Registrant's 83-store Canadian Kinney Shoe and 11-store U.S. Randy River
specialty footwear operations in the first quarter of 1998, and a $9 million
charge primarily related to the shutdown of the Registrant's Eagle Rock footwear
operations, consisting of four manufacturing facilities and an administrative
office in the second quarter of 1998. These increases were partially offset by
decreases in net pension and net postretirement benefit expense of $9 million.
The decrease primarily reflects the amortization of the plans' unrecognized
gains and losses over the average remaining life expectancy of inactive
participants, who now comprise the majority of the plans' participants.
Previously, the unrecognized gains and losses were amortized over the average
remaining service period of active participants.
Second quarter operating profitresults from continuing operations (before
corporate expense, interest expense and income taxes) of $74include a $3 million improvedloss
for 1998 as compared with $72a profit of $74 million in the second quarter of 1996. This improvement
relates to1997.
For the disposition of unprofitable formats and reduced selling, general
and administrative expenses, ("SG&A") partially offset by an increase in cost of
sales. The improvement in SG&A of $46 million and $73 million for the thirteen
-9-
10
and twenty-six weeks ended July 26, 1997, respectively,August 1, 1998, operating profit declined to $25
million from $131 million in the corresponding prior-year period. Gross margin,
as a percentage of sales, decreased approximately 270 basis points to 28.2
percent for the 1998 second quarter and decreased approximately 210 basis points
to 28.4 percent for the 1998 year-to date period, as compared with the
corresponding priorperiods a year periods reflects management'searlier. These declines primarily reflect a
continuing effort to
implement cost reduction initiatives. Cost ofdecline in sales as a percentage of sales
increasedand an increase in markdowns as a result of inventory markdowns taken to keep inventory current.
The Registrant reportedthe
aggressive promotional selling environment currently prevailing in the athletic
footwear and apparel industry.
Interest expense, net of interest income, from continuing operationsdecreased $2 million for the
thirteen weeks ended July 26, 19971998 second quarter and $1 million for the year-to-date period as compared with
the corresponding prior-year periods. Interest income of $26approximately $7
million or $0.19 per share, unchanged
fromrelated to a franchise tax settlement in the restated year-earlier period. For the twenty-six weeks ended July 26,
1997 income from continuing operations was $43 million, an increasesecond quarter of $32
million from the restated prior year period.1998 more
than offset higher interest expense as a result of increased short-term
borrowing levels.
The Registrant reported a net loss for the quarterthirteen weeks ended August
1, 1998 of $13 million, or $0.09 per share, as compared with a net loss of $181
million or $1.35$1.33 per share for the corresponding prior-year period, which
includesincluded an after-tax chargeloss of $207 million or $1.54$1.52 per share for discontinued
operations. This
compares toFor the twenty-six weeks ended August 1, 1998 the Registrant
reported a net incomeloss of $22$18 million, or $0.17$0.13 per share, for the corresponding
year-earlier period. The Registrant reportedas compared with a net
loss of $180 million or $1.34$1.32 per share for the corresponding prior-year period,
which included an after-tax loss of $223 million or $1.64 per share for
discontinued operations.
The Registrant ended the second quarter with 7,262 stores consisting of
6,749 specialty stores and 513 international general merchandise stores. This
compares with 6,929 stores, adjusted for dispositions, at the end of the
corresponding prior-year period. During the twenty-six weeks ended July 26, 1997 compared with
break-even results for the corresponding year-earlier period.
As of July 26, 1997,August 1,
1998, the Registrant operated a totalopened 347 stores, closed or disposed of 7,117 stores
consisting of 6,555 Specialty322 stores and
562 International General Merchandiseremodeled or relocated 194 stores. This compares to 7,540Of the 347 stores excluding discontinued operations,
consistingopened, 90 stores
represented the first quarter acquisition of 6,933 Specialty stores and 607 International General Merchandise
stores operated at July 27, 1996.Athletic Fitters stores.
9
12
SALES
The following table summarizes sales for continuing operations by segment and
by
geographic area:
Thirteen weeks ended Twenty-six weeks ended
---------------------------- ------------------------------------------------ ----------------------
(in millions) August 1, July 26, July 27,August 1, July 26,
July 27,By Segment: 1998 1997 19961998 1997
1996
---- ---- ---- ------------ ------- -------- --------
By segment:
Specialty:
Athletic Group Group...............$ 859871 $ 838858 $ 1,7661,773 $ 1,6761,763
Northern GroupGroup................ 85 86 79159 160
145
Specialty Footwear 129 132 250 254Footwear............ 107 119 214 232
Other Specialty............... 83 83 158 155
------ ------ ------ ------
Specialty 85 89 161 168
------- ------- ------- -------
Specialty total 1,159 1,138 2,337 2,243
------- ------- ------- -------
International General Merchandise:
Germany 305 369 631 739
Other 36 44 69 81
------- ------- ------- -------total.................. 1,146 1,146 2,304 2,310
------ ------ ------ ------
International General Merchandise total311 341 413608 700
820
------- ------- ------- ------------- ------ ------ ------
Disposed operations -- 56 2 114
------- ------- ------- -------operations.............. 8 13 19 29
------ ------ ------ ------
$ 1,465 $ 1,500 $ 1,6072,931 $ 3,039
$ 3,177
======= ======= ======= ============= ====== ====== ======
By geographic area:
Domestic Domestic.....................$ 940935 $ 912937 $ 1,9281,919 $ 1,835
International 560 639 1,109 1,2281,923
International................. 522 550 993 1,087
Disposed operations -- 56 2 114
------- ------- ------- -------operations........... 8 13 19 29
------ ------ ------ ------
$ 1,465 $ 1,500 $ 1,6072,931 $ 3,039
$ 3,177
======= ======= ======= ============= ====== ====== ======
-10-
11
Specialty
- ---------
Athletic Group sales increased by 2.51.5 percent and by 0.6 percent for
the 1998 second quarter and year-to-date periods, as compared with the
corresponding periods a year earlier. These increases were primarily due to 343
additional stores and the positive impact from store remodelings. On a
comparable-store basis sales declined by 7.7 percent for both the 1998 second
quarter and the year-to-date periods primarily due to over-supplied athletic
footwear in the marketplace, as well as decreased sales in the licensed product
categories.
Excluding the impact of foreign currency fluctuations, Northern Group
sales increased by 0.9 percent and by 1.8 percent for the second quarter and
year-to-date periods, respectively. The increase reflects new store openings,
particularly in the United States, offset by comparable-store sales decreases of
4.7 percent and 5.4 percent for the second quarter and year-to-date periods,
respectively.
These increases were
primarily due to 145 store openingsSpecialty Footwear 1998 second quarter and year-to-date sales decreased
10.1 percent and 7.8 percent as well ascompared with the corresponding prior-year
periods. Excluding the impact of foreign currency fluctuations in the Australian
operations, sales fromdeclined by 4.9 percent and by 2.3 percent for the first1998 second
quarter acquisition of Eastbay, Inc. ("Eastbay"). Comparable-storeand year-to-date periods, respectively. On a comparable-store basis,
sales decreased by 2.63.6 percent for the second quarter and remained levelby 2.4 percent for the
year-to-date period. Northern Group sales increasedThese decreases were primarily due to the closure of 43
under-performing stores in the U.S. Kinney Shoe format since the second quarter
1997, offset in part by 8.9 percent and 10.3comparable-store increases in the Australian operations
of 1.8 percent for the second quarter and 3.2 percent for the year-to-date
periods, respectively. Comparable-storeperiod.
Other Specialty 1998 second quarter and year-to-date comparable-store
sales increased for bothby 7.2 percent and by 6.3 percent, as compared with the
quartercorresponding prior-year periods. The increase primarily relates to the
Afterthoughts format, reflecting positive customer responses to increased
private-label product and the year-to-date periods by 4.6 percent and
5.1 percent, respectively. Store openings in Northern Reflections, a women's
casual sportswear store, and Northern Getaway, a children's apparel store also
contributed tosuccess of the sales increase.
The 2.3 percent decline in Specialty Footwear's second quarter sales,
which resulted from closing 115 stores, was offset by a comparable-store sales
increase of 2.0 percent. Sales declines in the Kinney format, particularly in
Canada, were mitigated by favorable comparable-store sales increases achieved by
store formats in Australia. For the year-to-date period, Specialty Footwearformat's larger-store design.
10
13
International General Merchandise
- ---------------------------------
International General Merchandise sales decreased by 1.6 percent, while comparable-store sales increased 1.9
percent. Other Specialty sales, adjusted for dispositions, decreased by 4.58.8 percent and 4.2 percent for the quarter and year-to-date periods, respectively.
Comparable-store sales declined by
0.9 percent and 1.7 percent, respectively.
The decline in Other Specialty sales were mainly due to the closure of 98
under-performing stores related to ongoing formats.
International General Merchandise
German general merchandise sales decreased by 17.3 percent and 14.613.1 percent for the second quarter and year-to-date periods, respectively.
Excluding the impact of foreign currency fluctuations, sales decreased 5.2by 4.0
percent and 2.2by 8.5 percent for the second quarter and year-to-date periods,
respectively. Comparable-store sales decreased by 4.5 percent and 4.85.8 percent for the second
quarter and by 7.2 percent for the year-to-date periods, respectively.period. These decreases reflect
the overall difficulties of the German retail industry in the current recession
and the negative impact of the increase in VAT rates in Germany as of April
1998.
OPERATING RESULTS
- -----------------
Operating results from continuing operations (before corporate expense, interest
expense, and income taxes) are as follows:
Thirteen weeks ended Twenty-six weeks ended
---------------------------- ------------------------------------------------ ----------------------
(in millions) August 1, July 26, July 27,August 1, July 26,
July 27,By Segment: 1998 1997 19961998 1997
1996
---- ---- ---- ------------ ------- -------- --------
By Segment:
Specialty Specialty.....................$ 8318 $ 9685 $ 14140 $ 135148
International General
MerchandiseMerchandise.................. (13) (9) (18)(14) (12)
(30)Net gain on sales of
real estate.................. 1 -- 1 4
Disposed operations............ (9) (2) (2) (9)
----- ----- ----- -----
$ (3) $ 74 $ 25 $ 131
===== ===== ===== =====
By geographic area:
Domestic......................$ 14 $ 74 $ 45 $ 142
International.................. (9) 2 (19) (6)
Net gain on sales of real estate 1 -- 61 4
6
Disposed operations -- (12)operations............ (9) (2) (31)
------- ------- ------- -------(2) (9)
----- ----- ----- -----
$ (3) $ 74 $ 7225 $ 131
$ 80
======= ======= ======= =======
By geographic area:
Domestic $ 74 $ 81 $ 141 $ 132
International -- (3) (12) (27)
Net gain on sales of real estate -- 6 4 6
Disposed operations -- (12) (2) (31)
------- ------- ------- -------
$ 74 $ 72 $ 131 $ 80
======= ======= ======= ============ ===== ===== =====
-11-
12
Specialty
- ---------
The Specialty segment's operating profit decreased by $13 million, or 13.578.8 percent as compared with the 1996 second quarter. The decrease was primarily due
to changes in merchandise mix and
increased markdowns within the Athletic Group.
A shift in consumer preferences has contributed to the decisions to take those
markdowns and to reposition the Registrant's merchandise assortmentby 73.0 percent for the fourth quarter. Year-to-date operating profits increased $6 million or 4.4
percentthirteen and twenty-six weeks ended August 1, 1998 as
compared with the corresponding period of 1996, which is primarilyprior-year periods. The declines in Athletic
Group sales contributed to higher than anticipated inventory levels and
increased promotional markdowns to keep the product assortment current.
Operating results for Specialty Footwear and the Northern Group for the 1998
second quarter and year-to-date periods also decreased due to sales declines and
gross margin increases achieved by the Athletic Group in the
first quarter of 1997.
Theincreased markdowns. Other Specialty Footwear segment improved operating results throughimproved by 40.0 percent
and by 33.3 percent for the 1998 second quarter and year-to-date periods,
respectively, as compared with the corresponding prior-year periods
predominantly related to the Afterthoughts format.
Included in disposed operations for the twenty-six weeks ended August
1, 1998 is a $19 million gain from the sale of the Registrant's six-store
nursery chain. This gain is offset by a $21 million loss for the shutdown of the
Canadian Kinney Shoe, U.S. Randy River and Eagle Rock specialty footwear
operations, including $8 million in operating losses. This is part of the
Registrant's continuing expense reduction initiatives.program to reduce its investment in non-strategic
businesses. The Northern Group improvedprior-year amount represents the operating results predominately through increased sales and higher margins.of these
operations.
11
14
International General Merchandise
- ---------------------------------
The International General Merchandise segment's operating loss
improvedincreased by $9$4 million and $18by $2 million for the quarter and year-to-date periods as
compared with the1998 second quarter and
year-to-date periods, of 1996, respectively.respectively, as compared with the corresponding
prior-year periods. The Registrant's German operations have significantly lowered itsincreased operating loss through reduced expenses by operatingis primarily attributable to
severance costs in Germany in connection with a more flexible, smaller workforce.the ongoing improvement of its
personnel structure.
SEASONALITY
- -----------
The Registrant's businesses are highly seasonal in nature. Historically, the
greatest proportion of sales and net income is generated in the fourth quarter
and the lowest proportion of sales and net income is generated in the first
quarter, reflecting seasonal buying patterns. As a result of these seasonal
sales patterns, inventory increases in the third quarter in anticipation of the
strong fourth quarter sales.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash used in operating activities was $274 million for the
twenty-six weeks ended August 1, 1998, as compared with $113 million in the
corresponding prior-year period, which principally reflects an additional $90
million used to purchase inventories. These additional inventory purchases
contributed to a $28 million increase in accounts payable and other liabilities.
Increased inventory reflects lower than anticipated sales and seasonal increases
associated with the back to school season. Additionally, under the Registrant's
new store and remodeling program, inventory was received for approximately 375
new and remodeled stores which are scheduled for completion in August and
September.
Net cash used in investing activities totaled $233 million for the
twenty-six weeks ended August 1, 1998, as compared with $177 million used during
the corresponding prior-year period. Cash used in investing activities for the
twenty-six weeks ended July 26, 1997 as compared with cash provided of $16
million in the comparable prior-year period. The increase in cash used resulted
from the timing of inventory purchases. The Condensed Consolidated Statements of
Cash Flows have been restated for discontinued operations for the prior period.
Net cash used in investing activities amounted to $177 million for the
twenty-six weeks ended July 26, 1997, as compared with cash provided of $4
million during the corresponding period in 1996. The increase in cash used for
investing was predominantly due to the January 30, 1997first quarter
cash acquisition of Eastbay, and
increased new store development spendingInc. for existing formats.$140 million, in a transaction accounted
for as a purchase. Capital expenditures increased by $20$177 million of which $25
million relates to the Woolworth conversion stores, as compared towith the
corresponding prior-year second
quarter;period; approximately $285$545 million of capital
expenditures are planned for the 1997 fiscal year as compared with $134$284 million in 1996.
Inventories decreased $43 million1997.
Increased inventory levels contributed to $1,216 million as of July 26,
1997, from a restated $1,259 million as of July 27, 1996. The decrease from the
second quarter of 1996 reflects the Registrant's merchandise improvement efforts
as well as the sale of Silk & Satin, Lady Plus, Rubin and Moderna chains. The
$150 million increase in inventory levels from January 25, 1997 is a seasonal
increase, as inventory levels are at their lowest in the fourth quarter.
-12-
13
Accountsaccounts
payable at July 26, 1997 decreasedAugust 1, 1998 by $8 million as compared
with the 1996 second quarter and increased by $66 million to $352 million as
compared with the year-end level. The increase from January 25, 1997 coincides
with the seasonal increase in inventory.
Short-term debt decreased $99$114 million as compared with July 27, 1996
due to repayment using cash generated from operations. Short-term debt increased
by $38 million from the year-end level attributable to the financing of seasonal
working capital needs.
Interest expense for the thirteen weeks ended July 26, 1997 decreased
$4 million over the comparable 1996 period. Interest expense for the
year-to-date period decreased $10 million. These declines were attributable to
the reduction in total debt levels ofand by
$139 million as compared with January 31, 1998.
Short-term debt at August 1, 1998 increased by $451 million and by $413
million as compared with January 31, 1998 and July 26, 1997. The increases in
short-term debt were principally due to the significant capital expenditures
required for the Registrant's aggressive new store and remodeling program and
the acquisition of the Athletic Fitters stores for $29 million in February 1998.
Lower than expected sales and higher than anticipated inventory levels also
contributed to the increases in short-term borrowing levels.
On June 22, 1998, the Registrant entered into an agreement to sell its
Corporate Headquarters building in New York, the Woolworth Building. The
transaction is expected to be completed in October 1998.
As previously announced, the Registrant and The Sports Authority, Inc.
have signed a definitive merger agreement pursuant to which The Sports Authority
would become a wholly-owned subsidiary of the Registrant through a pooling of
interests. There is a provision in the merger agreement that provides that for
the transaction to be put to a vote of the shareholders of The Sports Authority,
the Registrant's average stock price is at least $20.50 per share during one or
more specified measuring periods prior to December 31, 1998. The transaction is
subject to approval by The Sports Authority shareholders.
12
15
IMPACT OF YEAR 2000
- -------------------
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits, rather than four, to define the applicable year.
Mistaking "00" for the year 1900 could result in miscalculations and errors and
cause significant business interruptions for the Registrant, as well as lower financingfor the
government and most other companies. The Registrant has instituted a plan to
assess its state of readiness for Y2K, to remediate those systems that are non-
compliant and to assure that material third parties will be Y2K compliant.
State of Readiness
- ------------------
The Registrant has assessed all mainframe, operating and application
systems (including point of sale) for Y2K readiness, giving the highest priority
to those information technology applications (IT) systems that are considered
critical to its business operations. At present, approximately 60 percent of the
IT systems have been remediated. The Registrant anticipates the completion of
all remediation of the IT systems by the end of 1998. Extensive testing of the
remediated systems will be performed throughout 1999 for implementation during
that year.
Apart from the Y2K issue, the Registrant had developed and installed
throughout its business units beginning in 1997 a comprehensive information
computer system ("ECLIPSE"), encompassing merchandising, logistics, finance and
human resources. The ECLIPSE project was undertaken for business reasons
unrelated to Y2K. However, the installation of ECLIPSE eliminates the need to
reprogram or replace certain existing software for Y2K compliance.
The Registrant is presently compiling an inventory of its non-IT
systems, which include those systems containing embedded chip technology
commonly found in buildings and equipment connected with a buildings'
infrastructure. Once the inventory is complete, the systems will be prioritized
and assessed for compliance. Preliminary investigations of the embedded chip
systems indicate that Y2K will not affect systems such as heating, ventilation
and security in most store locations. Ongoing testing and implementation of any
remediation required for the non- IT systems will be performed throughout 1999.
Material Third Parties
- ----------------------
Key vendors and service providers have been identified, and management
intends to meet with these third parties to discuss the status of their
compliance and to distribute a comprehensive compliance questionnaire.
Approximately 20 vendors are considered key vendors of the Registrant.
Y2K Costs
- ---------
The Registrant is utilizing both internal and external resources to
address the Y2K issue. Internal resources reflect the reallocation of IT
personnel to the Y2K project from other IT projects. In the opinion of
management, the deferral of such other projects will not have a significant
adverse affect continuing operations. The total estimated direct cost, excluding
ECLIPSE, to remediate the Y2K issue is not expected to be material to the
Registrant's results of operations or financial condition. All costs, resulting from renegotiationexcluding
ECLIPSE, are being expensed as incurred.
Contingency Plan/Risks
- ----------------------
The Registrant is in the process of developing contingency plans for
those areas which might be affected by Y2K. Although the full consequences are
unknown, the failure of either the Registrant's critical systems or those of its
material third parties to be Y2K compliant would result in the interruption of
its business, which could have a material adverse affect on the results of
operations or financial condition of the Registrant.
13
16
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements within the meaning of the
federal securities laws. All statements, other than statements of historical
facts, which address activities, events or developments that the Registrant
expects or anticipates will or may occur in the future, including such things as
future capital expenditures, expansion, strategic plans, growth of the
Registrant's credit agreement.
Shareholders' equity at July 26, 1997 decreased $245 million frombusiness and operations, Y2K related actions, and other such
matters are forward-looking statements. These forward-looking statements are
based on many assumptions and factors including effects of currency
fluctuations, consumer preferences and economic conditions worldwide, and the
level at January 25, 1997. This decrease was primarily attributableability of the Registrant to implement, in a timely manner, the programs and
actions related to the after-tax charge for discontinued operations of $195 million andY2K issue. Any changes in foreign currency exchange rates.such assumptions or factors
could produce significantly different results.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- -------------------------
This information is incorporated by reference to the Legal Proceedings
section of the Notes to Condensed Consolidated Financial Statements on page 8 of
Part I, Item 1.
Item 4. Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------------
(a) The Registrant's annual meeting of shareholders was held on June 12, 1997,11,
1998, in New York, New York.Watertown, Massachusetts. Proxies were solicited by management
of the Registrant pursuant to Regulation 14A under the Securities
Exchange Act of 1934; there was no solicitation in opposition to
management's nominees as listed in the Notice of 19971998 Annual Meeting
and Proxy Statement, both dated May 5, 1997.April 28, 1998.
(b) Each of Jarobin Gilbert Jr., Margaret P. MacKimm and John J.
Mackowski wereAllan Z. Loren was elected as a director in Class III for a three-yeartwo-year
term ending at the annual meeting of shareholders of the Registrant in
2000. Each of Roger N. Farah, James E. Preston and Christopher A.
Sinclair was elected as a director in Class I for a three-year term
ending at the annual meeting in 2001. All of such individuals
previously served as directors of the Registrant. J. Carter Bacot,
Purdy Crawford, Roger N. Farah, Philip H. Geier Jr., Jarobin Gilbert Jr., Dale W.
Hilpert, James E.
PrestonMargaret P. MacKimm and Christopher A. Sinclair,John J. Mackowski, having previously
been elected directors of the Registrant for terms continuing beyond
the 19971998 annual meeting of shareholders, continue in office as directors. Helen Galland retired as a
director at the 1997 annual meeting of shareholders, having reached the
mandatory retirement age for
directors.
(c) The matters voted upon and the results of the voting were as follows:
(1) Election of Directors:
Abstentions and
Name Votes For Votes Withheld Broker Non-Votes
- --------------------- ------------- ------------------------------------- ----------- ----------- ----------------
Jarobin Gilbert Jr. 109,756,782 2,357,330 0
Margaret P. MacKimm 109,788,879 2,325,233 0
John J. Mackowski 109,759,371 2,354,741 0
-13-
14Roger N. Farah 114,158,903 5,841,327 --
Allan Z. Loren 114,229,354 5,770,876 --
James E. Preston 114,184,187 5,816,043 --
Christopher A. Sinclair 101,191,554 18,808,676 --
(2) Amendments toAmendment of the Certificate of Incorporation and By-laws:to change the name
the Registrant's name:
Votes For Votes Against Abstentions Broker Non-Votes
- ------------------------------ ------------- -------------- ----------------
110,678,945 880,980 554,187 0----------- ---------------
94,158,905 24,356,846 1,484,479 --
14
17
(3) Ratification of the appointment of KPMG Peat Marwick LLP as
independent accountants for the fiscal year beginning January 26, 1997:February 1,
1998:
Votes For Votes Against Abstentions Broker Non-Votes
- ------------------------------ ------------- ------------------------- ----------------
111,585,116 209,116 319,880 0118,472,061 207,227 1,320,942 --
(4) Shareholder Proposal on reinstatementApproval of the dividend:1998 Stock Option and Award Plan:
Votes For Votes Against Abstentions Broker Non-Votes
- ----------------------------- ------------- ------------------------- ----------------
13,000,515 85,662,822 975,725 12,475,050100,453,155 17,881,428 1,665,647 --
(5) Shareholder Proposal on German Operations:
Votes For Votes Against Abstentions Broker Non-Votes
-------- ------------ ----------- ----------------
35,647,893 78,432,131 1,062,983 4,857,223
(6) Shareholder Proposal on Rights Plan:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------ ----------- ----------------
90,785,519 21,700,412 2,657,076 4,857,223
At the close of business on the record date of April 30, 1997,23, 1998, there
were issued and outstanding 134,209,670135,251,929 shares of the Registrant's Common Stock,
par value $.01 per share ("Common Stock"). There were represented at the
meeting, in person or by proxy, 112,114,112120,000,230 shares of Common Stock. Such shares
represented 83.5488.72 percent of the total number of shares of such class of stock
issued and outstanding on the record date.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
An index of the exhibits that are required by this item, and which are
furnished in accordance with Item 601 of Regulation S-K, appears on
pages 1617 through 18. The exhibits which are in this report immediately
follow the index.
(b) Reports on Form 8-K
-------------------
The Registrant filed a report on Form 8-K dated July 17, 1997May 7, 1998 (date of
earliest event reported) reporting that it had signed a definitive
merger agreement with The Sports Authority, Inc., whereby the
Registrant will acquire The Sports Authority in a tax-free exchange of
shares. The transaction is subject to approval by the shareholders of
The Sports Authority, Inc. and to customary regulatory approvals.
Additionally, the Registrant filed a report on Form 8-K dated June 11,
1998 (date of earliest event reported) reporting that the Board of
Directors and the shareholders approved the proposal to change the name
of the Registrant was exiting its domesticfrom Woolworth general merchandise business.
-14-Corporation to Venator Group, Inc.
effective as of June 11, 1998.
15
1518
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 thereunto duly authorized.
WOOLWORTH CORPORATIONVENATOR GROUP, INC.
--------------------
(Registrant)
Date: September 4, 19971998 /s/ Bruce L. Hartman
--------------------
BRUCE L. HARTMANReid Johnson
----------------
REID JOHNSON
Senior Vice President
and Controller
(Principal Accounting Officer)
-15-Chief Financial Officer
16
16
WOOLWORTH CORPORATION19
VENATOR GROUP, INC.
-------------------
INDEX OF EXHIBITS REQUIRED BY ITEM 6(a) OF FORM 10-Q
AND FURNISHED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K
-------------------------------------------------------------
Exhibit No. in Item 601
of Regulation S-K Description
------------------ ------------------------ -----------
1 *
2 *
3(i)(a) Certificate of Incorporation of the
Registrant, as filed by the
Department of State of the State of
New York on April 7, 1989.1989
(incorporated herein by reference to
Exhibit 3(i)(a) to the Quarterly
Report on Form 10-Q for the
quarterly period ended July 26,
1997, filed by the Registrant with
the SEC on September 4, 1997
(the "July 26, 1997 Form 10-Q")).
3(i)(b) Certificates of Amendment of the
Certificate of Incorporation of the
Registrant, as filed by the
Department of State of the State of
New York on (a) July 20, 1989 (b)
July 24, 1990 and (c) July 9, 1997.1997
(incorporated herein by reference to
Exhibit 3(i)(b) to the July 26, 1997
Form 10-Q) and (d) June 11, 1998
(incorporated herein by reference to
Exhibit 4.2(a) of the Registration
Statement on Form S-8 (Registration
No.333-62425) previously filed with
the SEC).
3(ii) By-laws of the Registrant, as amended.
4(a)amended
(incorporated herein by reference to
Exhibit 4.2 of the Registration
Statement on Form S-8 (Registration
No. 333-62425) previously filed with
the SEC).
4.1 The rights of holders of the
Registrant's equity securities are
defined in the Registrant's
Certificate of Incorporation, as
amended (incorporated herein by
reference to:
(a)to Exhibits 3 (i) 3(i)(a) and
3 (i) 3(i)(b) to thisthe July 26, 1997 Form
10-Q.
4(b)10-Q and Exhibit 4.2(a) to the
Registration Statement on Form S-8
(Registration No. 333-62425)
previously filed with the SEC).
4.2 Rights Agreement dated as of April 4, 1988,
as amended JanuaryMarch 11,
1989,1998, between F.W.
Woolworth Co. ("FWW")Venator Group, Inc. and Morgan Shareholder
Services Trust Company (now,
First Chicago Trust Company of
New York),York, as Rights Agent
(incorporated herein by reference to
(a)
Exhibit 14 to the Registration Statement on
Form 8-A filed by FWW with the Securities and
Exchange Commission ("SEC") on April 12, 1988
(Registration No. 1-238) and (b) the Form 8
Amendment to such Form 8-A filed by FWW with
the SEC on January 13, 1989)8-K dated March
11, 1998).
The rights and
obligations of FWW under said Rights
Agreement were assumed by the Registrant
pursuant to an Agreement and Plan of Share
Exchange dated as of May 4, 1989, by and
between FWW and the Registrant (incorporated
herein by reference to Exhibit 2 to the
Registration Statement on Form S-4 filed by
the Registrant with the SEC on May 9, 1989
(Registration No. 33-28469)).
4(c)4.3 Indenture dated as of October 10,
1991 (incorporated herein by
reference to Exhibit 4.1 to the
Registration Statement on Form S-3
(Registration No. 33-43334)No.33-43334) previously
filed with the SEC).
4(d)4.4 Forms of Medium-Term Notes (Fixed
Rate and Floating Rate).
-16-
17 (incorporated
herein by reference to Exhibits 4.4
and 4.5 to the Registration Statement
on Form S-3 (Registration No. 33-43334)No.33-43334)
previously filed with the SEC).
4(e)17
20
4.5 Form of 8-1/81/2% Debentures due 2022
(incorporated herein by reference to
Exhibit 4 to the Registrant's Form
8-K dated January 16, 1992).
4(f)4.6 Purchase Agreement dated June 1, 1995
and Form of 7% Notes due 2000
(incorporated herein by reference to
Exhibits 1 and 4,respectively, to the
Registrant's Form 8-K dated June 7,
1995).
4(g)4.7 Distribution Agreement dated July 13,
1995 and Forms of Fixed Rate and
Floating Rate Notes (incorporated
herein by reference to Exhibits 1, 4.1
and 4.2, respectively, to the
Registrant's Form 8-K dated July 13,
1995).
5 *
8 *
9 *
10 Amendment No. 1 dated as of July 16, 1997 to
the Credit Agreement dated April 9, 1997.*
11 Computation of Net Income (Loss) Per Common
Share.*
12 Computation of Ratio of Earnings to
Fixed Charges.
13 *
15 Letter re: Unaudited Interim
Financial Statements.
16 *
17 *
18 *
19 *
20 *
21 *
22 *
23 *
24 *
25 *
26 *
2727.1 Financial Data Schedule, whichAugust 1,
1998 (which is submitted
electronically to the SEC for
information only and not filed.
-17-
18filed).
27.2 Restated Financial Data Schedule -
July 26, 1997 (which is submitted
electronically to the SEC for
information only and not filed).
99 Independent Accountants' Review
Report.
--------------------______________
* Not applicable
-18-18
1921
Exhibits filed with this Form 10-Q:
Exhibit No. Description
- ---------- ----------- -----------
3 (i)(a) Certificate of Incorporation of the Registrant,
as filed by the Department of State of State of
New York on April 7, 1989.
3 (i)(b) Certificates of Amendment of the Certificate of
Incorporation of the Registrant.
3 (ii) By-laws of the Registrant, as amended.
10 Amendment No. 1 dated as of July 16, 1997 to the
Credit Agreement, dated April 9, 1997.
11 Computation of Net Income (Loss) Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
15 Letter re: Unaudited Interim Financial Statements.
2727.1 Financial Data Schedule.Schedule - August 1, 1998.
27.2 Restated Financial Data Schedule - July 26, 1997.
99 Independent Accountants' Review Report.