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 AprilJuly 27, 1996


Commission file no. 1-10299


                              WOOLWORTH CORPORATION
             (Exact name of registrant as specified in its charter)


New York                                          13-3513936
(State or other jurisdiction of incorporation        (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 xX NO --- --- Number of shares of Common Stock outstanding at May 24,August 23, 1996: 133,091,871.133,483,992 2 WOOLWORTH CORPORATION INDEX
Page No. -------- Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated StatementStatements of Operations 4 Condensed Consolidated StatementStatements of Retained Earnings 5 Condensed Consolidated StatementStatements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 12 Part II. Other Information Item 1. Legal Proceedings 1213 Item 4. Submission of Matters to a Vote of Security Holders 13 - 14 Item 6. Exhibits and Reports on Form 8-K 1214 Signature 1315 Index toof Exhibits 1416 - 18
-2- 3 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTSFinancial Statements WOOLWORTH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in millions)
AprilJuly 27, AprilJuly 29, Jan. 27, 1996 1995 1996 -------- -------- -------- (Unaudited) (Unaudited) ----------- ----------- ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 4680 $ 76105 $ 13 Merchandise inventories 1,497 1,8641,491 1,804 1,364 Other current assets 232 392234 345 241 ------- ------- ------- 1,775 2,3321,805 2,254 1,618 PROPERTY AND EQUIPMENT, net 1,182 1,558NET 1,136 1,518 1,225 DEFERRED CHARGES AND OTHER ASSETS 650 682644 705 663 ------- ------- ------- $ 3,6073,585 $ 4,5724,477 $ 3,506 ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt $ 247137 $ 966860 $ 69 Accounts payable 372 447419 475 321 Accrued liabilities 356 367413 366 426 Current portion of long-term debt and obligations under capital leases 19 25 25 ------- ------- ------- 994 1,805988 1,726 841 LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES 616 571611 568 619 DEFERRED TAXES AND OTHER LIABILITIES 797 831781 826 817 SHAREHOLDERS' EQUITY Preferred stock -- -- -- Common stock and paid-in capital 291 282297 290 290 Retained earnings 869 975891 964 891 Foreign currency translation adjustment 75 11852 113 83 Minimum pension liability adjustment (35) (10) (35) ------- ------- ------- Total shareholders' equity 1,200 1,3651,205 1,357 1,229 CONTINGENCIES (Legal Proceedings) ------- ------- ------- $ 3,6073,585 $ 4,5724,477 $ 3,506 ======= ======= =======
Certain prior year amounts have been reclassified for comparative purposes. See accompanying Notes to Condensed Consolidated Financial Statements. -3- 4 WOOLWORTH CORPORATION CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts)
(Unaudited) Thirteen weeks ended ---------------------------- AprilTwenty-six weeks ended ----------------------- ----------------------- July 27, AprilJuly 29, July 27, July 29, 1996 1995 ---------- ----------1996 1995 -------- -------- -------- -------- SALES $ 1,8201,856 $ 1,7941,922 $ 3,676 $ 3,716 COSTS AND EXPENSES Costs of sales 1,295 1,3051,273 1,334 2,568 2,639 Selling, general and administrative expenses 492 546491 532 983 1,078 Depreciation and amortization 50 59 100 118 Interest expense 20 3219 33 39 65 Other income -- (15)(14) (17) (14) (32) ------- ------- 1,857 1,927 ------- ------- LOSS1,819 1,941 3,676 3,868 ------- ------- ------- ------- INCOME (LOSS) BEFORE INCOME TAXES (37) (133)37 (19) -- (152) Income tax benefit (15) (53)expense (benefit) 15 (8) -- (61) ------- ------- ------- ------- NET LOSSINCOME (LOSS) $ (22)22 $ (80)(11) $ -- $ (91) ======= ======= ======= ======= Net Loss Per Common Shareincome (loss) per share Primary $ (0.17)0.17 $ (0.60) Weighted-average Common Shares outstanding 133.1 132.5(0.09) $ -- $ (0.69) ======= ======= ======= ======= Fully diluted $ 0.17 $ * $ -- $ * ======= ======= Number of shares used to calculate earnings per share Primary 134.3 132.7 133.7 132.7 Fully diluted 134.9 * 134.5 *
* Fully diluted earnings per share is not presented as it produces an anti-dilutive result. See accompanying Notes to Condensed Consolidated Financial Statements. -4- 5 WOOLWORTH CORPORATION CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF RETAINED EARNINGS (Unaudited) (in millions)
(Unaudited) ThirteenTwenty-six weeks ended -------------------- April------------------------ July 27, AprilJuly 29, 1996 1995 --------- ----------------- -------- RETAINED EARNINGS AT BEGINNING OF YEAR $ 891 $ 1,055 Net Loss (22) (80)income (loss) - (91) Cash dividends declared: Preferred Stock - $0.55 per share -- -- ------ - ------- ------- RETAINED EARNINGS AT END OF INTERIM PERIOD $ 869891 $ 975 =====964 ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements. -5- 6 WOOLWORTH CORPORATION CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CASH FLOWS (Unaudited) (in millions)
(Unaudited) ThirteenTwenty-six weeks ended -------------------- April---------------------- July 27, AprilJuly 29, 1996 1995 ----------- ------------------ -------- FROM OPERATING ACTIVITIES Net Lossincome (loss) $-- $ (22) $ (80)(91) Adjustments to reconcile net loss to net cash used inprovided by (used in) operating activities: Depreciation and amortization 50 59100 118 Gain on sales of real estate -- (15)(13) (32) Deferred income taxes (16) (56) Change in assets and liabilities, net of acquisitions: Increase in merchandise inventories (137) (188)(143) (133) Increase in accounts payable 52 78103 105 Other, net (71) (143)(18) (107) ----- ----- Net cash used inprovided by (used in) operating activities (128) (289)13 (196) ----- ----- FROM INVESTING ACTIVITIES Capital expenditures (47) (68) Proceeds from sale of real estate -- 25 Capital expenditures (16) (30)21 86 Proceeds from sale of assets 19 33 Purchase of investments -- (74) Proceeds from sale of assets 7 24 ----- ----- Net cash used in investing activities (9) (55)(7) (23) ----- ----- FROM FINANCING ACTIVITIES Increase in short-term debt 179 10869 4 Increase in long-term debt -- 261263 Reduction in long-term debt and capital lease obligations (8) (9)(11) (12) Issuance of common stock 6 7 Dividends paid -- (20) ----- ----- Net cash provided by financing activities 171 34064 242 ----- ----- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1) 8(3) 10 ----- ----- NET CHANGE IN CASH AND CASH EQUIVALENTS 67 33 4 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13 72 ----- ----- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4680 $ 76105 ===== ===== Cash Paid During the Period: Interest $ 932 $ 2557 Income Taxes $ 49 $ 310
See accompanying Notes to Condensed Consolidated Financial Statements. -6- 7 WOOLWORTH CORPORATION 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 1995 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 27, 1996, as filed with the Securities and Exchange Commission (the "SEC"). 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 statementpresentation of the results for the interim period have been included,included. The results for the thirteen and all such adjustments weretwenty-six weeks ended are not necessarily indicative of a normal recurring nature.the results expected for the year. Merchandise Inventories Domestic merchandise inventories valued on the last-in, first-out basis at AprilJuly 27, 1996, AprilJuly 29, 1995 and January 27, 1996 are stated, respectively, at $102 million, $99$100 million and $102 million less than the amounts that would have been determined on the first-in, first-out basis. Reclassifications Certain balances in prior periods have been reclassified to conform with the presentation adopted in the current period. 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. Five separate state-court derivative actions filed in April 1994 were consolidated under the caption In re Woolworth Corporation Derivative Litigation in the Supreme Court of the State of New York, County of New York. -7- 8 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 have filed a notice of appeal from the dismissal -7- 8 to the Appellate Division, First Department. 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. These actions are all at a preliminary stage of proceedings. Accordingly, the outcomes cannot be predicted with any degree of certainty. As a result, the Registrant cannot determine if the results of the litigation will have a material adverse effect on the Registrant's results of operations, liquidity or financial position. During 1994, the staff of the SEC initiated an inquiry related to the matters that were reviewed by the Special Committee of the Board of Directors 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 by the SEC or its staff that any violations of law have occurred. There have been no material developments in the inquiry to date. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Total sales for the 1996 firstsecond quarter increased 1.4decreased 3.4 percent to $1,820$1,856 million compared to $1,794$1,922 million for the 1995 first quarter despitesecond quarter. Comparable-store sales decreased by 0.2 percent. Sales were negatively impacted by the unseasonably cooler weather in certainseveral markets and 156the operation of 290 fewer stores. Excluding the effect of foreign currency fluctuations and sales from disposed operations, sales increased $25 million, or 1.4decreased by 0.9 percent. Comparable-store sales increased 0.7 percent during the period. Total Specialty segment'ssegment sales for the second quarter increased 4.23.0 percent in the first quarter and comparable-store sales increased 3.52.9 percent. Total General Merchandise second quarter sales decreased 2.510.6 percent for the first quarter of 1996, compared to the first quartersame period of 1995.1995 while comparable-store sales decreased 5.0 percent. The decrease in the General Merchandise segment primarily relates to lower sales in the United States. Comparable-storeStates and Germany. Year-to-date 1996 sales indecreased 1.1 percent to $3,676 million compared to $3,716 million for 1995. Excluding the General Merchandise segment decreased 3.6effect of foreign currency fluctuations and sales from disposed operations, sales increased 0.3 percent, and comparable-store sales increased 0.3 percent during the year-to-date period. The improvement in theFiscal 1996 firstsecond quarter operating results of $69 million improved by $39 million over the comparable prior year operating result of $30 million. The improvement stems directly from the continuing implementation of the Registrant's strategic plan includingwhich includes reducing inventory levels, lowering expenses and eliminatingthe divestiture of non-strategic assets. Selling,For the thirteen weeks ended July 27, 1996, selling, general and administrative expenses declined by $41 million compared to the same prior year period. Year-to-date selling, general and administrative expenses were reduced by $54$95 million less than the first half of 1995. These decreases reflect the ongoing success of the Registrant's cost reduction initiatives. Included in the 1995 year-to-date results is a $38 million charge recorded in the first quarter of 1996 comparedrelated to first quarter 1995 which reflects the cost reduction initiatives undertaken. In the first quarter 1995, a $38 million charge was recorded as the inventory improvement program was implemented to lower inventory levels and clear stores of aged and discontinued merchandise for new product assortments. -8- 9 The Registrant reported a net lossincome of $22 million, or $0.17 per share, for the thirteen weeks ended AprilJuly 27, 1996, compared to a net loss of $80$11 million, or $0.60$0.09 per share, infor the corresponding year-earlierprior year period. DuringThe Registrant reported break-even results for the first quartertwenty-six weeks ended July 27, 1996, an improvement from the loss of $91 million or $0.69 per share for corresponding 1995 period. As of July 27, 1996, the Registrant operated a total of 7,951 stores consisting of 6,933 specialty stores and 1,018 general merchandise stores, compared to 8,241 stores consisting of 7,203 specialty stores and 1,038 general merchandise stores operated as of July 29,1995. The net gain on the divestiture of non-strategic real estate in the second quarter totaled $13 million. This included a distribution center in Greenville, SC whose closing was announced the closing of its 20-store Rx Place Drug Mart chain. The first quarter loss on disposed operations of $13 million relates primarily to the closure ofearlier this chain. On May 21, 1996, the Registrant announced the closing of the Accessory Lady chainyear and will redeploy a number of stores into other existing formats. The decision to close the Accessory Lady chain is inreal estate operated by Woolworth Germany, Woolworth U.S., and Woolworth Canada. In line with the Registrant's strategic plan to dispose of underperforming businesses. Thebusinesses, the Registrant announced the closing of the 109-store Accessory Lady chain is expected to beon May 2, 1996. All stores were closed by August 24, 1996. The Registrant took a charge of $8.3 million in the thirdsecond quarter to cover employee, wind-down and estimated lease costs. The Registrant intends to redeploy approximately one-half of 1996. Any loss incurred is not anticipatedthe stores to be materialformats principally in the Athletic Group and the Northern Group. The Registrant entered into an agreement on June 24, 1996 to sell the Registrant's annual results of operations. In the first quarter of 1995 the Registrant completed34-store Lady Plus chain in Germany. The charge for disposed operations includes $5 million related to the sale of The Rx Place deep-discount drug chainLady Plus and signed an agreement to sell the Little Folk/Kids Mart operations.its loss on operations through disposal. SALES - ----- The following table summarizes sales by segment and by geographic area:
Thirteen weeks ended -------------------------------Twenty-six weeks ended -------------------- ---------------------- (in millions) AprilJuly 27, AprilJuly 29, July 27, July 29, 1996 1995 ------------- -----------1996 1995 -------- -------- -------- -------- By segment: Specialty: Athletic Group $ 840 $ 784803 $1,680 $1,587 Specialty Footwear 153 161174 179 327 340 Other Specialty 94 10692 105 173 196 Northern Group 66 5579 64 145 119 ------ ------ ------ ------ Specialty total 1,153 1,1061,185 1,151 2,325 2,242 ------ ------ ------ ------ General Merchandise: Germany 370 361369 411 739 772 United States 244 264242 274 486 538 Other 46 5254 59 100 111 ------ ------ ------ ------ General Merchandise total 660 677665 744 1,325 1,421 ------ ------ ------ ------ Disposed operations 7 116 27 26 53 ------ ------ $1,820 $1,794------ ------ $1,856 $1,922 $3,676 $3,716 ====== ====== By geographic area: Domestic $1,182 $1,164 International 638 630 ------ ------ $1,820 $1,794 ====== ======
-9- 10 By geographic area: Domestic $1,152 $1,156 $2,316 $2,297 International 698 739 1,334 1,366 Disposed operations 6 27 26 53 ------ ------ ------ ------ $1,856 $1,922 $3,676 $3,716 ====== ====== ====== ======
Specialty Segment The Athletic Group and Northern Group turned in strong firstsecond quarter performances. Athletic footwear and apparelGroup sales increased for both the second quarter and the year-to-date periods, by 7.14.6 percent and 5.9 percent respectively, over the corresponding prior year period and comparable-store sales increased by 6.4 percent.periods. Northern Group sales increased by 2023.4 percent which was attributable to a combination of store openings and comparable-store growth of 2.0 percent.21.8 percent, for the second quarter and year-to-date periods, respectively. Specialty Footwear second quarter sales decreased by 5.02.8 percent compared to the prior year period and comparable-storewhile year-to-date sales decreased by 4.83.8 percent. These declines were mainly attributable to the closure of 88 stores,store closures, principally in the Kinney format. Other Specialty second quarter sales, adjusted for the disposal of the Rx Place Drug Mart chain,dispositions, decreased by 11.312.4 percent while comparable-storefrom $105 million to $92 million. For the year-to-date period, sales declined by 5.7 percent.11.7 percent to $173 million. This decline in Other Specialty sales was mainly due to the closure of 157153 underperforming stores offset by 47 store openings.related to ongoing formats coupled with second quarter and year-to-date comparable-store sale declines. General Merchandise German general merchandise second quarter sales increaseddecreased by 10.2 percent, while comparable-store sales declined by 3.1 percent. Year-to-date period sales have declined 4.3 percent while comparable-store sales declined 2.5 percent. This was principally due toExcluding the inclusionimpact of a full quarter's resultsforeign currency fluctuations, sales decreased by 3.9 percent and 1.0 percent for the Austrian department stores acquired February 1, 1995. However, German stores produced only marginally improved sales results due toquarter and year-to-date periods, respectively. Sales were impacted by the continued poorunseasonably cooler weather in Germany coupled with difficult economic conditions, including high unemployment and a poor retail environment.conditions. United States general merchandise sales decreased for both the second quarter and the year-to-date period by $20 million or 7.6 percent. This was caused by 11.7 percent and 9.7 percent, respectively. These declines are mainly due to the continued competitive pressures in the retail industry coupled with the closure of 15underperforming stores under the Registrant's store closing program and a decline in comparable-store sales of 5.0 percent.program. A slight decline in sales was experienced by both the Mexican and Canadian operations.operations for the second quarter as well as the year-to-date period. Sales in this group fell by $6$5 million, or 11.58.5 percent for the second quarter, and comparable-store$11 million, or 9.9 percent for the year-to-date period. Excluding the negative impact of foreign currency fluctuations, sales declined by 8.8 percent.4.1 percent for the second quarter and 6.7 percent year-to-date. Cooler weather conditions in Canada was the major factor causing this decline.and 16 fewer stores contributed to these declines. -10- 11 OPERATING RESULTS Operating results (before corporate expense, interest, and income taxes) are as follows:
Thirteen weeks ended ----------------------------Twenty-six weeks ended -------------------- ---------------------- (in millions) AprilJuly 27, AprilJuly 29, July 27, July 29, 1996 1995 By segment: ------------ -----------1996 1995 -------- -------- -------- -------- By Segment: Specialty $ 3496 $ (22)36 $ 131 $ 16 General Merchandise (21)(26) (16) (47) Disposed operations (13) (25)(62) Net gain on sales of real estate - 1513 17 13 32 Disposed operations (14) (7) (28) (35) ----- ----------- ----- ----- $ -69 $ (79)30 $ 69 $ (49) ===== =========== ===== ===== By geographic area: Domestic $ 4271 $ (30)41 $ 113 $ 14 International (1) (21) (29) (39) Disposed operations (13) (25)(60) Net gain on sales of real estate - 1513 17 13 32 Disposed operations (14) (7) (28) (35) ----- ----------- ----- ----- $ -69 $ (79) ====== ======30 $ 69 $ (49) ===== ===== ===== =====
-10- 11 Specialty Segment Specialty operating profits improved by $56$60 million and $115 million over the 1995 first quarter.second quarter and year-to-date periods, respectively. This was primarily due to higherthe specialty businesses' expense reduction combined with increased sales and cost reductionsachieved by the Athletic Group. All other specialty businesses reported lower operating expenses as a result of the strategic plan.Group . Specialty operating results for 1995 includeincluded a $16 million first quarter charge to reduce aged and discontinued merchandise, which wasas part of the Registrant's inventory improvement program. General Merchandise Each country'sTotal General Merchandise second quarter operating results decreased by $10 million compared to the second quarter of 1995, mainly attributable to declines in the United States. German operational results for the quarter were comparable with 1995 second quarter operating results, despite a second quarter 1996 $10 million charge for early retirement costs relating to workforce reduction programs being implemented. Year-to-date operating results show improvement compared to 1995. U.S. general merchandise businesses produced an improvement inoperations have reduced losses through expense control. Germany and other countries' operating results from the first quarter of 1995.reflect modest year-to-date loss reductions. General Merchandise operating results for 1995 include a first quarter $22 million charge to reduce aged and discontinued merchandise. In addition, the General Merchandise segment reported lower operating expenses in 1996 as a result of the strategic plan. 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. -11- 12 LIQUIDITY AND CAPITAL RESOURCES Net cash used inprovided by operating activities was $128$13 million for the thirteentwenty-six weeks ended AprilJuly 27, 1996, compared to $289$196 million used in the comparable prior-year period. The decrease in utilization ofincrease cash provided during 1996 compared to 1995 primarily reflects lower inventory levels and improved operating results.results, produced by the Registrant's inventory and cost reduction programs. Net cash used in investing activities amounted to $9$7 million for the thirteentwenty-six weeks ended AprilJuly 27, 1996, compared to cash used in investing activities of $55$23 million during the corresponding period in 1995. The reduced utilization of cash in 1996 reflects the overalla reduction in capital spending.expenditures and a reduction in proceeds from the sale of real estate and other assets. Capital expenditures of approximately $148$176 million are planned for the full year 1996.1996, an increase of $28 million over earlier plans. This relates principally to the acceleration of Athletic Group store growth and logistics improvements. Inventories decreased by $367declined $313 million compared to $1,491 million at July 27, 1996, from the level at AprilJuly 29, 1995, but rose $133increased $127 million from the level at January 27, 1996, to $1,497 million at the end of the first quarter 1996. The decrease from the firstsecond quarter of 1995 reflects the successRegistrant's successful inventory improvement program and the reduction of inventories as a result of the Registrant's inventory improvement efforts.divestiture of the Drug Mart and Accessory Lady chains. The increase from January 27, 1996 levels is a normal seasonal increase prior to peak selling periods, and is financed by short-term debt and accounts payable. Accounts payable of $419 million decreased by $75$56 million compared to the firstsecond quarter 1995 and increased by $51$98 million to $372 million at April 27, 1996, compared to the year-end level. The decrease from April 29, 1995 coincidesJanuary 27,1996. These changes are directly associated with the decrease in inventory. -11- 12inventory levels. Short-term debt decreased $719$723 million compared to the level at AprilJuly 29, 1995 levels and increased $178 million to $247by $68 million from the year-end level.level to $137 million. The decrease from July 29, 1995 primarily reflects the refinancing of short-term debt through the issuance of $90 million of long-term debt combined with lower levels necessary to finance inventories. Aggregate debt has declined $686 million from the prior year. The Registrant was also able to reduce short-term debt by lowering inventory levels by $367 million, reducing capital expenditures, selling non-strategic assets and continuing cost reduction programs. In addition, during the third quarter of 1995, short-term debt levels were reduced by refinancing $90 million to longer term notes. On April 7, 1995 theThe Registrant negotiated a revolving credit agreement to provide $1.5 billion of credit lines which includedhas a $1.0 billion three-year facility available through May 1998. Interest expense for the thirteen weeks ended April 27,second quarter of 1996, decreased $12$14 million or 42.4 percent over the comparable 1995 period. This wasInterest expense for the year-to-date period decreased $26 million, or 40.0 percent. The decrease from the second quarter is attributable to the reduction in total debt levels of $680$686 million compared to the prior year period as well as lower borrowing rates associated with such borrowings.period. Shareholders' equity at AprilJuly 27, 1996 decreased $165$152 million from the level at AprilJuly 29, 1995. The decrease reflectsincludes a non-cash pre-tax charge of $241 million ($165 million after-tax) for the adoption of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in the fourth quarter of 1995. On April 12, 1995,August 14, 1996, the Registrant announced that its Board of Directors called for the eliminationredemption of dividends onall of the outstanding shares of common stock and reduced capital expenditures as part of management's plans to improve the Registrant's cash flow.$2.20 Series A Convertible Preferred Stock ("Preferred Stock") on October 23, 1996 at the redemption price of $45 per shares. Shares of Preferred Stock may be converted into shares of the Registrant's Common Stock at the rate of 5.68 shares of Common Stock for each share of Preferred Stock. -12- 13 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 pages 7 through 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 13, 1996, in New York, New York. 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 1996 Annual Meeting and Proxy Statement, both dated May 6, 1996. (b) Each of J. Carter Bacot, Purdy Crawford, Philip H. Geier, Jr. and Dale W. Hilpert was elected as a director in Class II for a three-year term ending at the 1999 annual meeting of shareholders of the Registrant. All of such individuals previously served as directors of the Registrant. Roger N. Farah, Helen Galland, Jarobin Gilbert, Jr., Margaret P. MacKimm, John J. Mackowski, James E. Preston and Christopher A. Sinclair, having previously been elected directors of the Registrant for terms continuing beyond the 1996 annual meeting of shareholders, continue in office as directors. Seymour H. Knox III, whose term of office would have continued beyond the 1996 annual meeting, died on May 22, 1996. John W. Adams retired as a director at the 1996 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 - -------------------- ----------- -------------- ---------------- J. Carter Bacot 112,993,247 1,488,421 0 Purdy Crawford 113,015,187 1,466,481 0 Philip H. Geier, Jr. 112,994,002 1,487,666 0 Dale W. Hilpert 112,986,294 1,495,374 0
(2) Woolworth Corporation Directors' Stock Plan:
Votes For Votes Against Abstentions Broker Non-Votes - -------------------- ------------- -------------- ---------------- 109,591,653 3,765,064 1,124,951 0
(3) Amended and Restated Annual Incentive Compensation Plan:
Votes For Votes Against Abstentions Broker Non-Votes - -------------------- ------------- -------------- ---------------- 108,698,532 4,236,859 1,546,277 0
-13- 14 (4) Amended and Restated Long-Term Incentive Compensation Plan:
Votes For Votes Against Abstentions Broker Non-Votes - -------------------- ------------- -------------- ---------------- 108,664,715 4,201,205 1,615,748 0
(5) Ratification of the appointment of KPMG Peat Marwick LLP as independent accountants for the fiscal year beginning January 28, 1996:
Votes For Votes Against Abstentions Broker Non-Votes - -------------------- ------------- -------------- ---------------- 113,413,923 545,226 522,519 0
(6) Shareholder Proposal regarding the spinoff of the Athletic Division:
Votes For Votes Against Abstentions Broker Non-Votes - -------------------- ------------- -------------- ---------------- 13,353,247 86,230,256 1,447,810 13,450,355
At the close of business on the record date of May 1, 1996, there were issued and outstanding 133,083,673 shares of the Registrant's Common Stock, par value $.01 per share ("Common Stock"), and 97,240 shares of the Registrant's $2.20 Series A Convertible Preferred Stock, par value $1.00 per share ("Preferred Stock"). There were represented at the meeting, in person or by proxy, 114,421,973 shares of Common Stock and 59,695 shares of Preferred Stock. Such shares represented 85.95 percent of the total number of shares of such classes 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 1416 through 16.18. The exhibits which are in this report immediately follow the index. (b) Reports on Form 8-K The Registrant filed aThere were no reports on Form 8-K dated April 2, 1996 (date of earliest event reported), which reportedfiled for the Board of Directors' recommendation that shareholders vote against the proposal made by Greenway Partners, L.P. that the Registrant spin off its Athletic Footwear and Apparel Division. It also announced its 1995 operating results by segment. -12-three months ended July 27, 1996. -14- 1315 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 CORPORATION (Registrant) Date: June 11,September 6, 1996 /s/ Andrew P. Hines ------------- ------------------- ANDREW P. HINES Senior Vice President and Chief Financial Officer -13--15- 1416 WOOLWORTH CORPORATION 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 (incorporated herein by reference to Exhibit 3(a) to the Registration Statement on Form S-4 filed by the Registrant with the Securities and Exchange Commission ("SEC") on May 9, 1989 (Registration No. 33-28469)(the Registrant, as filed by the Department of State of the State of New York on April 7, 1989 (incorporated herein by reference to Exhibit 3(a) to the Registration Statement on Form S-4 filed by the Registrant with the Securities and Exchange Commission ("SEC") on May 9, 1989 (Registration No. 33-28469) (the "S-4 Registration Statement"). 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 (incorporated herein by reference to Exhibit 3(b) to the Registration Statement on Form 8-B filed by the Registrant with the SEC on August 7, 1989 (Registration No. 1-10299) (the "8-B Registration Statement")) and (b) July 24, 1990 (incorporated herein by reference to Exhibit 4(a) to the Quarterly Report on Form 10-Q for the quarterly period ended July 28, 1990, filed by the Registrant with the SEC on September 7, 1990 (incorporated herein by reference to Exhibit 4(a) to the Quarterly Report on Form 10-Q for the quarterly period ended July 28, 1990, filed by the Registrant with the SEC on September 7,1990 (the "Form 10-Q")). 3(ii) By-laws of the Registrant, as amended (incorporated herein by reference to Exhibit 3(ii) to the Registrant's Annual Report on Form 10-K for the year ended January 28, 1995, filed by the Registrant with the SEC on April 24, 1995 (the "1994 10-K")). 4(a) 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) Exhibit 3(a) to the S-4 Registration Statement, (b) Exhibit 3(b) to the 8-B Registration Statement and (c) Exhibit 4(a) to the Form 10-Q). 4(b) Rights Agreement dated as of April 4, 1988, as amended January 11, 1989, between F.W. Woolworth Co. ("FWW") and Morgan Shareholder Services Trust Company (now, First Chicago Trust Company of New York), as Rights Agent (incorporated herein by reference to (a) Exhibit 1 to the Registration Statement on Form 8-A filed by FWW with the SEC on April 12, 1988 (Registration No. 1-238) and (b) the Form 8 Amendment to such Form 8-A filed
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17 by FWW with the SEC on January 13, 1989). 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 S- 4 1989, by and between FWW and the Registrant (incorporated herein by reference to Exhibit 2 to the S-4 Registration Statement). 4(c) 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) previously filed with the SEC). 4(d) Forms of Medium-Term Notes (Fixed Rate and Floating Rate) (incorporated herein by reference to Exhibits 4.4 and 4.5 to the Registration Statement on Form S-3 (Registration No. 33-43334) previously filed with the SEC). 4(e) Form of 8-1/2% Debentures due 2022 (incorporated herein by reference to Exhibit 4 to Registrant's Form 8-K dated January 16, 1992). 4(f) Purchase Agreement dated June 1, 1995 and Form of 7% Notes due 2000 (incorporated herein by reference to Exhibits 1 and 4, respectively, to Registrant's Form 8-K dated June 7, 1995). 4(g) 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 Registrant's Form 8-K dated July 13, 1995). 5 * 6 * 7 * 8 * 9 * 10(a) $1 Billion Three-Year Credit Agreement dated as of May 26, 1995. 10(b) Amendment No. 1, dated as of March 21, 1996, to $1 Billion Three-Year Credit Agreement dated as of May 26, 1995. 11 Computation of Net Income (Loss) Per Common Share. 12 Computation of Ratio of Earnings to Fixed Charges. 13 * 14 *
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15 Letter re: Unaudited Interim Financial Statements. 16 * 17 * 18 * 19 * 20 * 21 * -17- 18 22 * 23 * 24 * 25 * 26 * 27 Financial Data Schedule, which is submitted electronically to the SEC for information only and not filed. 28 * 99 Independent Accountants' Review Report.
- ---------------------------------- * Not applicable -16--18- 17
Exhibits filed with this Form 10-Q: Exhibit No. 10(a) $1 Billion Three-Year Credit Agreement dated as of May 26, 1995. 10(b) Amendment No. 1, dated as of March 21, 1996, to $1 Billion Three-Year Credit Agreement dated as of May 26, 1995.19 Exhibits filed with this Form 10-Q: Exhibit No. - ----------- 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. 27 Financial Data Schedule. 99 Independent Accountants' Review Report.