FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 4, 1996
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
For Quarter Ended: May 4, 1996
Commission File Number: 0-15907
Exact name of registrant as specified in its charter:
PROFFITT'S, INC.
State of Incorporation: Tennessee
I.R.S. Employer Identification Number: 62-0331040
Address of Principal Executive Offices (including zip code):
P.O. Box 9388, Alcoa, Tennessee 37701
Registrant's telephone number, including area code:
(423) 983-7000
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes (X) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.10 Par Value 19,188,194 shares as of May 4, 1996
Commission File No. 0-15907
PROFFITT'S, INC.
Index
PART I. FINANCIAL INFORMATION Page No.
Item l. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
May 4, 1996, February 3, 1996, and April 29, 1995 2
Condensed Consolidated Statements of Income
Three Months Ended May 4, 1996 and April 29, 1995 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended May 4, 1996 and April 29, 1995 4
Notes to Condensed Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Commission File No. 0-15907
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
May 4, February 3, April 29,
1996 1996 1995
(Unaudited) (Audited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $2,014 $26,157 $12,359
Net trade accounts receivable,
less receivables sold
to third party 32,038 44,878 116,625
Merchandise inventories 317,004 286,474 311,534
Other current assets 20,263 21,243 22,269
------- ------- -------
Total current assets 371,319 378,752 462,787
Property and equipment, net 380,836 381,839 386,318
Goodwill 52,450 52,838 50,816
Other assets 21,288 22,237 23,256
------- ------- -------
$825,893 $835,666 $923,177
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable
and accrued liabilities $150,959 $149,361 $137,079
Current portion of long-
term debt and capital
lease obligations 16,900 17,269 15,617
------- ------- -------
Total current liabilities 167,859 166,630 152,696
Senior debt 113,965 134,255 217,498
Capital lease obligations 10,715 10,846 11,200
Deferred income taxes 53,957 52,250 61,476
Other long-term liabilities 15,008 14,328 11,722
Subordinated debentures 100,568 100,505 100,326
Shareholders' equity 363,821 356,852 368,259
------- ------- -------
$825,893 $835,666 $923,177
======== ======== ========
See notes to condensed consolidated financial statements.
Commission File No. 0-15907
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended
------------------
May 4, April 29,
1996 1995
------------------
Net sales $296,561 $287,125
Costs and expenses:
Cost of sales 192,892 187,008
Selling, general and
administrative expenses 71,537 70,891
Other operating expenses 24,398 24,840
Expenses related to hostile
takeover defense 438
Merger, restructuring and
integration costs 2,763
Gain on sale of assets (2,260)
-------- -------
Operating income 7,231 3,948
Other income (expense):
Finance charge income 10,634 9,954
Finance charge income allocated
to purchaser of
accounts receivable (3,474) (2,161)
Interest expense (4,105) (6,269)
Other income (expense), net 370 656
-------- -------
Income before provision
for income taxes 10,656 6,128
Provision for income taxes 4,402 2,480
-------- -------
NET INCOME 6,254 3,648
Preferred stock dividends 488 488
-------- -------
Net income available to
common shareholders $5,766 $3,160
======== =======
Earnings per common share $0.29 $0.16
======== =======
Weighted average common shares 19,744 19,182
======== =======
Note/ Earnings per common share amounts are based on the weighted
average number of shares of common stock and dilutive common
stock equivalents (employee stock options) outstanding during each
period, after recognition of preferred stock dividends.
See notes to condensed consolidated financial statements.
Commission File No. 0-15907
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
------------------
May 4, April 29,
1996 1995
------------------
OPERATING ACTIVITIES
Net income $6,254 $3,648
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 8,501 8,555
Gain on sale of assets (2,260)
Changes in operating assets
and liabilities, net (11,727) (16,194)
Net cash provided by
(used in) operating activities 768 (3,991)
INVESTING ACTIVITIES
Purchases of property and
equipment, net (9,348) (9,668)
Proceeds from sale of assets 5,000
Acquisition of Parks-Belk Company (10,422)
Other, net 35
-------- -------
Net cash used in investing activities (4,348) (20,055)
FINANCING ACTIVITIES
Payments on long-term debt
and capital
lease obligations (20,790) (3,052)
Proceeds from long-term borrowings 25,141
Proceeds from issuance of stock 1,202 110
Dividends paid to preferred
shareholders (975) (975)
-------- -------
Net cash (used in) provided
by financing activities (20,563) 21,224
Decrease in cash and
cash equivalents (24,143) (2,822)
Cash and cash equivalents
at beginning of period 26,157 15,181
-------- -------
Cash and cash equivalents
at end of period $2,014 $12,359
======== ========
Cash paid during the three months ended May 4, 1996 for interest
and income taxes totaled $5,633 and $1,457, respectively.
Cash paid during the three months ended April 29, 1995 for interest
and income taxes totaled $3,996 and $8,145, respectively.
See notes to condensed consolidated financial statements.
Commission File No. 0-15907
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE A BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of the Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three month period ended May 4, 1996 are not
necessarily indicative of the results that may be expected for the
year ending February 1, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year
ended February 3, 1996.
The balance sheet at February 3, 1996 has been derived from the
audited financial statements at that date.
NOTE B BUSINESS COMBINATIONS
Proffitt's, Inc. combined its business with Younkers, Inc., a
publicly-owned retail department store chain with 51 stores in the
midwest, effective February 3, 1996, immediately before the
Company's fiscal year end. Each outstanding share of Younkers,
Inc. Common Stock was converted into ninety eight one hundredths
(.98) shares of Proffitt's, Inc. Common Stock, with approximately
8.8 million shares issued in the transaction. This combination was
accounted for as a pooling of interests, and accordingly, the
consolidated financial statements have been restated for all
periods to include the results of operations and financial position
of Younkers.
Younkers' financial statements have been restated to conform to
Proffitt's accounting methods and also reflect certain
reclassifications without any material impact on previously
reported income or shareholders' equity.
In conjunction with the business combination with Younkers, the
Company incurred certain fourth quarter 1995 charges to effect the
merger and other costs to restructure and integrate the combined
operating companies. In the quarter ended May 4, 1996, the Company
incurred certain additional integration costs totaling $2.8
million (pre-tax) related to such items as the termination of a
Younkers pension plan, the conversion of Younkers' computer
systems, and expenses of consolidating administrative functions.
On April 12, 1995, the Company completed the acquisition of the
Parks-Belk Company, a family-owned department store company with
four stores. Three stores were renovated and opened as
Commission File No. 0-15907
Proffitt's Division stores during 1995; one store was permanently
closed. The operations of Parks-Belk have been included in the
results of operations of the Company subsequent to the purchase
date.
NOTE C -- GAIN ON SALE OF ASSETS
During the quarter ended May 4, 1996, the Company sold two Younkers
stores to a third party, realizing a pre-tax gain on the
transaction of $2.3 million.
Commission File No. 0-15907
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources
Accounts receivable, inventory, accounts payable, and senior debt
balances fluctuate throughout the year due to the seasonal nature
of the retail industry.
The May 4, 1996 net trade accounts receivable balance declined from
the April 29, 1995 balance due to the sale of additional
receivables to third parties.
May 4, 1996 senior debt declined from the February 3, 1996 and
April 29, 1995 balances due to the sale of additional accounts
receivables to third parties and utilization of excess cash
balances to reduce the balance of the Company's revolving credit
facility.
During the quarter ended May 4, 1996, the Company announced the
planned conversion of its 600,000 shares of Series A Preferred
Stock, held by Apollo Specialty Retail Partners, L.P. ("Apollo"),
into 1,421,801 shares of Proffitt's, Inc. Common Stock. The
conversion is expected to be completed by June 30, 1996 and will
eliminate $1.95 million in annual dividend payments by the Company
to Apollo.
Commission File No. 0-15907
Results of Operations
Income statement information for the quarter ended April 29, 1995
has been restated to reflect the February 3, 1996 Younkers merger,
which was accounted for as a pooling of interests. The operations
of Parks-Belk have been included in the income statements
subsequent to the April 12, 1995 purchase date.
The following table shows, for the periods indicated, certain items
from the Company's Condensed Consolidated Statements of Income
expressed as percentages of net sales.
Three Months Ended
5/4/96 4/29/95
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 65.0 65.1
Selling, gen. & admin. exp. 24.1 24.7
Other operating expenses 8.2 8.6
Expenses related to
hostile takeover defense 0.0 0.2
Merger, restructuring and
integrations costs 0.9 0.0
Gain on sale of assets (0.7) 0.0
---- ----
Operating income 2.5 1.4
Other income (expense):
Finance charge income 3.6 3.5
Finance charge income
allocated to purchaser
of accounts receivable (1.2) (0.8)
Interest expense (1.4) (2.2)
Other income (expense), net 0.1 0.2
---- ----
Income before provision
for income taxes 3.6 2.1
Provision for income taxes 1.5 0.8
---- ----
NET INCOME 2.1% 1.3%
==== ====
For the quarter, total Company sales were $296.6 million, a 3%
increase over $287.1 million in the prior year. On a comparable
stores basis, total Company sales increased 5% for the quarter.
Revenues for the Younkers Division were $126.6 million, flat with
$126.7 million last year; revenues for the McRae's Division totaled
$109.5 million, a 6% increase over $103.8 million in the prior
year; and revenues for the Proffitt's Division were $60.6 million
compared to $56.7 million last year, an increase of 7%. For the
quarter, comparable store sales increased 1%, 4%, and 17% at the
Younkers, McRae's, and Proffitt's Divisions, respectively. The
total Company sales increase was lower than the comparable stores
sales increase primarily due to the recent closing of two Younkers
stores and one Proffitt's store and the sale of two Younkers
stores.
Selling, general, and administrative expenses totaled 24.1% of net
sales, a 60 basis point reduction over 24.7% last year. The
initial stages of previously targeted cost reductions (such as
Commission File No. 0-15907
the elimination of duplicate corporate expenses and consolidation
of certain back office functions) led to this increased leverage on
expenses.
Other operating expenses, which consist of rents, depreciation, and
taxes other than income taxes, declined in dollars and as a
percentage of sales primarily due to reduced expenses related to
stores recently sold and closed and lower depreciation due to the
reduced carrying value of certain property as a result of a 1995
impairment write-down.
Financing costs, which include finance charge income allocated to
the third party purchaser of accounts receivable and interest
expense, dropped from $8.4 million, or 3.0% of net sales, last year
to $7.6 million, or 2.6% of net sales, in the current year. The
reduction was due to lower borrowing levels in the current year.
Prior to the non-recurring items outlined below, first quarter net
income totaled $6.6 million, or $.31 per share, a 68% increase over
$3.9 million, or $.18 per share last year. In conjunction with the
Younkers merger, certain non-recurring merger, restructuring, and
integration charges were incurred in the first quarter of 1996.
These charges totaled $2.8 million before tax, or 0.9% of net sales
($1.7 million after tax, or $.09 per share). Of the after tax
total, $1.1 million was related to the termination of a Younkers
pension plan, and the remainder was related to items such as the
conversion of Younkers' computer systems and expenses of
consolidating administrative functions. Also during the first
quarter of 1996, the Company sold two Younkers stores to a third
party, realizing a pre-tax gain of $2.3 million ($1.4 million after
tax, or $.07 per share). After these non-recurring items, net
income for the quarter ended May 4, 1996 totaled $6.3 million, or
$.29 per share. For the quarter ended April 29, 1995, the Company
incurred pre-tax hostile defense takeover expenses of approximately
$.4 million, or 0.2% of net sales ($.3 million after tax, or $.02
per share). After this item, net income for the first quarter of
1995 totaled $3.6 million, or $.16 per share. The increase in
earnings over the prior year primarily was due to enhanced sales
and gross margin performance and expense leverage.
Commission File No. 0-15907
PROFFITT'S, INC.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Form of Employment Agreement by and between
Proffitt's, Inc. and Brian W. Bender dated May 24, 1996
10.2 Agreement and Notice of Conversion by and
between Proffitt's, Inc. and Apollo Specialty Retail Partners, L.P.
dated May 13, 1996
11.1 Statement re: Computation of Earnings per
Common Share
27.1 Financial Data Schedule
(b) Form 8-K Reports.
A report on Form 8-K was filed with the Commission on
April 1, 1996 reporting consolidated net sales and net income for
Proffitt's, Inc. for the 4 weeks ended March 2, 1996.
Commission File No. 0-15907
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PROFFITT'S, INC.
----------------------------------
Registrant
6-12-96
----------------------------------
Date
/s/ Brian W. Bender
----------------------------------
Brian W. Bender
Executive Vice President and
Chief Financial Officer
(effective 5/24/96)
/s/ James E. Glasscock
----------------------------------
James E. Glasscock
Executive Vice President of
Financial Strategies
(Executive Vice President and Chief
Financial Officer through 5/23/96)