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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 29, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to _______________
Commission file number 1-1066
GENERAL HOST CORPORATION
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(Exact name of registrant as specified in its charter)
New York State 13-0762080
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
One Station Place, P.O. Box 10045, Stamford, CT 06904
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(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (203) 357-9900
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ------------------------
Common Stock, $1.00 Par Value New York Stock Exchange
and Pacific Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
and Pacific Stock Exchange
8% Convertible Subordinated New York Stock Exchange
Notes due February 15, 2002
11 1/2% Senior Notes due New York Stock Exchange
February 15, 2002
[Cover page 1 of 2 pages]
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether General Host Corporation, 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of General Host Corporation's Common Stock, $1.00
par value, held by non-affiliates of General Host as of March 15, 1995:
$107,670,846*
Number of voting shares of General Host Corporation's Common Stock
outstanding as of March 15, 1995: 21,085,922.
DOCUMENTS INCORPORATED BY REFERENCE
General Host Corporation Proxy Part III, Items 10, 11, 12 and 13
Statement for Annual Meeting of
Shareholders to be held on
May 18, 1995 (hereinafter "the
Company's 1995 Proxy Statement")
* Does not include market value of Common Stock held by directors and officers
who may be deemed to be affiliates of General Host which aggregates
$18,844,686.
[Cover page 2 of 2 pages]
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PART I
ITEM 1. BUSINESS
General Host Corporation ("General Host", the "Company" or the
"Registrant") operates a chain of specialty retail stores devoted to the sale
of lawn and garden products, crafts, Christmas merchandise and pet food and
supplies. Measured by sales and number of stores, the Company believes it is
the largest chain in the United States concentrating on the sale of such
products. As of January 29, 1995, the Company operated 262 stores in 16 states
under the name Frank's Nursery & Crafts(R) and three stores under
the name Frank's SuperCrafts(R). Unless otherwise stated, all statistics in
this Item were compiled as of January 29, 1995.
The Company's executive offices are located at One Station Place,
Stamford, Connecticut. The Company's mailing address is Post Office Box 10045,
Stamford, Connecticut 06904, and its telephone number is (203) 357-9900.
General Host was incorporated under the laws of the State of New York in
1911 as General Baking Company. The Company has engaged in a number of
businesses since its organization.
With the acquisition of Frank's Nursery & Crafts, Inc. ("Frank's") in
1983, the Company began focusing its resources on developing the first national
chain of garden and crafts stores. At the time of its acquisition, Frank's had
95 stores principally located in the Midwest. In 1984, through the acquisition
of Flower Time, Inc., the Company obtained 17 stores in the New York
metropolitan area. In 1986, the Company further expanded into the eastern
United States when it acquired Scott's Seaboard Corporation, adding 14 stores
in the Washington, D.C. and Baltimore markets. In early 1989, the Company
increased its presence in the Philadelphia metropolitan area through the
acquisition of 12 store leases. Since 1983, the Company has built, leased or
acquired a net of 170 stores in existing and new markets.
In October 1994, the Company sold its interest in Sunbelt Nursery Group,
Inc. (See Note 3 on Page F-8 of this Annual Report on Form 10-K for a
discussion regarding Sunbelt).
During the fourth quarter of 1993 the Company approved a plan to exit 26
unprofitable Frank's stores primarily in the Nashville, South Florida and
Orlando markets and to dispose of certain other properties. All stores were
closed as of February 7, 1994, with the exception of one store which closed
March 7, 1994.
The national lawn and garden market is highly fragmented, consisting of
thousands of local garden centers plus mass merchandisers who sell lawn and
garden products as part of their
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overall product lines. In fiscal 1994, the Company's lawn and garden and
nursery sales averaged approximately $1.05 million per store in its 265 stores.
In addition to approximately $278 million in lawn and garden and nursery sales,
the Company generated approximately $265 million in revenues in the last fiscal
year from the sale of crafts and Christmas products and $25 million from the
sale of pet food and supplies.
Although no single company directly competes with the Company's overall
product lines, many retailers and mass merchandisers provide competition with
respect to certain of the Company's lines of business. The Company competes
with mass merchandisers, home center chains and many local and regional garden
centers in the lawn and garden and nursery business. The Company competes in
the crafts business with mass merchandisers, crafts store chains and local
craft stores. The Company competes with major department stores, mass
merchandisers, local garden centers and other retailers in the Christmas
business. The Company competes with mass merchandisers, supermarkets, pet
supply chains and local pet supply stores in the pet food and supply business.
The Company's business is highly seasonal and subject to the impact of
weather conditions, which may affect consumer purchasing patterns. In fiscal
1994, approximately 37% of the Company's sales occurred during the spring
season (late March to mid-June) and 26% occurred at Christmas time (November to
late December). Normally, spring is the most profitable season, and Christmas
is the next most profitable season. Losses usually are experienced during the
other periods of the year. The Company's slowest selling season is typically
the period from the beginning of the calendar year until the start of the
spring selling season, with the next slowest period being early July to Labor
Day.
Live nursery goods, which constitute a significant portion of the
Company's products, have limited shelf lives in some cases. If customer
purchases of live nursery goods are delayed because of adverse weather
conditions, such goods may remain unsold past their shelf life and require
markdowns or disposal.
Lawn and garden and nursery sales are highest in the spring with the
largest impact being in the first fiscal quarter and the early part of the
second fiscal quarter. There is an early fall season in these products that is
of less importance than the spring season, and sales during middle and late
summer are slow. In the winter months, sales of such products are minimal.
Crafts and pet food and supplies sell at a fairly even pace throughout the
year. Craft sales are stimulated by fall and late winter promotions. During
the winter months (other than the Christmas season) crafts constitute the
majority of the Company's sales.
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Christmas merchandise is sold almost entirely in November and December.
The Company's most significant capital requirements are for seasonal
buildup of Christmas and crafts inventories, technology improvements, new
stores and the modernization of existing stores.
Capital expenditures of the Company totalled $5.4 million in fiscal 1994.
Expenditures for fiscal 1994 included the addition of one new store. The
Company anticipates spending approximately $5 million for capital expenditures
in fiscal 1995.
The Company opened one new store in fiscal 1994 -- the third SuperCrafts
store in Philadelphia, Pennsylvania. The Company plans to open approximately
10-12 new stores in the next 24 months in existing markets. Expansion in
existing markets improves the Company's operating margins by decreasing
advertising costs on a per store basis, permitting more efficient distribution
of products to stores and increasing the utilization of existing supervisory
and managerial staff.
The aggregate cost of any future expansion is dependent upon the method of
financing new stores. Such methods include build-to-suit leases, conversion of
existing buildings, and land purchases with Company-funded construction. The
cost of these methods range from approximately $500,000 per store for
build-to-suit leases to $2.5 million per store for land purchases with
Company-funded construction.
The Company has begun to place greater strategic emphasis on the Christmas
products market by operating temporary Christmas shops for about eight weeks
during the holiday season. These smaller shops, typically 3,000 to 5,000
square feet, supplement the Christmas business of the Company's full-line
stores and offer substantially the same Christmas merchandise, except live
trees. In 1990, the Company experimented with three Christmas shops and,
encouraged by the results, opened 100 for the 1991 Christmas season and 137 for
the 1992 Christmas season. In fiscal 1993, the Company operated 104 Christmas
shops with an emphasis on mall locations which provided a higher concentration
of shoppers than strip shopping centers or stand-alone shops. In fiscal 1994,
the Company operated 115 Christmas shops almost exclusively in mall locations.
The success of the Company's Christmas shop business will depend upon the
Company's ability from year to year to obtain favorable short-term locations in
various malls that are in close proximity to existing stores.
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The principal products sold at the Company's retail garden and crafts
stores are as follows:
Percentage of
Sales In
Product Line Fiscal Year 1994 Description
------------ ---------------- -----------
Lawn and garden 24% Fertilizers, herbicides and pesticides, seeds
and bulbs, mulches, plant accessories, hoses
and garden tools and equipment
Live nursery 25 Trees, shrubs, roses, potted plants, annual
and perennial flowering plants and indoor
plants
Crafts 30 Yarns, macrame, art supplies, needlework and
children's crafts, wood crafts, ribbon, and
artificial and silk flowers and arrangements
Christmas 17 Artificial and live Christmas trees,
decorations and trimmings and Christmas
plants
Pet 4 Pet food and supplies, bird seed and accessories
---
100%
===
Substantially all of the plants and products the Company sells are
purchased from approximately 1,100 outside vendors. Alternative sources of
supply are generally available for all products sold by the Company.
As of January 29, 1995, 128 of the Company's stores were leased and 137
were owned. All store leases are long-term; 49 will terminate prior to
December 31, 2005.
Stores are generally located on three-acre sites. A prototype store in
which the overhang area leading to the yard has been enclosed includes 18,500
square feet of indoor space (16,000 square feet of sales area and 2,500 square
feet of storage area), 17,000 square feet of outdoor selling area and ample
offstreet parking.
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The stores are designed in a "supermarket" format familiar to customers, and
shopping is done with carts in wide aisles with attractive displays. Traffic
design is intended to enhance the opportunity for impulse purchases. Most
stores are free-standing and located adjacent to or near shopping centers; some
stores are part of strip centers.
The SuperCrafts stores are approximately 22,000 square feet in size,
offering an expanded line of craft merchandise and specialized, in-store
services such as customized framing and silk floral arrangements.
Typically, stores are open 80 hours per week. The average store has
approximately 20-25 employees, including a store manager and department
managers for (i) live goods and related products; (ii) crafts; (iii) office and
cashier supervision and at larger stores, (iv) customer service. The in-store
staff is supplemented at seasonal peak selling periods by temporary employees.
Overall, the Company had 8,031 employees at January 29, 1995, including
seasonal employees. Approximately 29 warehouse and distribution center
employees in Detroit are members of the Teamsters Union under a contract which
expires January 1, 1996.
The Company operates distribution centers in Detroit, Michigan; Chicago,
Illinois; and Harrisburg, Pennsylvania. The Company owns the Detroit center
which also contains Frank's headquarters, and leases the Chicago and Harrisburg
centers. These centers delivered approximately 44% of all merchandise to the
stores in 1994, primarily using contract carriers. The balance of the products
are delivered directly to stores by vendors.
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ITEM 2. PROPERTIES
Principal operating facilities owned or leased by the Company are
described in Item 1 of this Annual Report on Form 10-K. General Host leases
its executive offices. No material adverse effect is foreseen as a result of
the expiration of leases of the Company's facilities.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business the Company is subject to various claims.
In the opinion of management, any ultimate liability arising from or related to
these claims should not have a material adverse affect on future results of
operations or the consolidated financial position of the Company.
The Company has certain lease obligations which extend to the year 2001
for businesses sold. In the opinion of management, any ultimate liability
arising from or related to these obligations, to the extent not otherwise
provided for, should not have a material adverse effect on future operations or
the consolidated financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The New York Stock Exchange is the principal market on which the Company's
Common Stock is traded. The high and low sales prices per share of Common
Stock as traded on the New York Stock Exchange and cash dividends paid per
share of Common Stock during each quarter of the last two fiscal years are as
follows:
Cash Dividends
High Low Per Share
---- --- ---------
Fiscal 1994*
First Quarter $ 6-7/8 $ 5-1/4 $ .00
Second Quarter $ 6-1/4 $ 4-3/4 $ .00
Third Quarter $ 5-5/8 $ 3-3/4 $ .00
Fourth Quarter $ 5-3/8 $ 4 $ .00
Fiscal 1993
First Quarter $10-5/8 $ 8-7/8 $ .095
Second Quarter $ 9-1/4 $ 7-5/8 $ .095
Third Quarter $ 8-1/4 $ 6-7/8 $ .095
Fourth Quarter $ 7-3/4 $ 5-7/8 $ .095
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* Five percent stock dividends were paid on April 8, 1994 and April 7, 1995 and
all stock related data in the financial statements in this Report reflect the
aforementioned stock dividends for all periods presented.
A description of the most restrictive provisions in the Company's loan
agreements which may limit the payment of dividends is as follows:
Under the most restrictive provisions of any of the debt and bank
agreements, total shareholders' equity available to pay cash dividends or
purchase treasury stock was below the required minimum level by $3,690,000 at
January 29, 1995.
At March 15, 1995, there were approximately 3,645 holders of record of the
Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
Five Year Financial Data concerning the Company is listed on F-22 of this
Annual report on Form 10-K.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Sales were $568 million for the 1994 fiscal year compared to $568.6 million for
the 1993 fiscal year. The 1993 sales included sales of $34.9 million for the
26 stores closed in February 1994. Eliminating the sales for the closed stores
in 1993 would have resulted in a sales increase for 1994 of 6.4%. Same-store
sales (stores open for a full year in both years) for 1994 increased 5.2%.
Also contributing to the sales increase was improved in-store merchandising,
and the sales from the temporary Christmas boutiques of $12.9 million in 1994
compared to $11.2 million in 1993. Sales increased 1.9% to $568.6 million for
the 52-week 1993 fiscal year compared to $557.8 million for the 53-week 1992
fiscal year. The addition of seven new stores in 1993 and twelve new stores in
1992, and the sales from the temporary Christmas boutiques of $11.2 million in
1993 compared to $9.9 million in 1992 contributed to the sales increase.
Same-store sales for 1993 compared to 1992 on a comparative 52-week basis
decreased 1% due to extremely hot early summer weather and excessive winter
snows (in both the first and fourth quarters) in most of the Company's major
eastern markets, and excessive rain and flooding in the Midwest.
Other income increased $4.3 million to $5.6 million in 1994. The increase
was due to the gain from the sale of the Company's approximately 49.5% interest
in Sunbelt Nursery Group, Inc. ("Sunbelt") of $3.6 million and increased
interest income due to higher levels of short-term investments. Other income
decreased by $5.7 million to $1.3 million in 1993. The decrease was due to a
decline in interest earned on marketable securities resulting from lower levels
of short-term investments in 1993. Also in 1992 the Company had income from
non-competition agreements and dividends.
Cost of sales, including buying and occupancy, decreased $22.9 million to
$402.8 million or 70.9% of sales in 1994. This compares to $425.7 million or
74.9% of sales in 1993. The decrease of 4 percentage points was due to higher
merchandise margins resulting from improved inventory management, in addition
to the benefits from the operations improvement program in 1994 compared with
1993 when the Company underwent an inventory reduction program and closed 26
stores. Cost of sales, including buying and occupancy, increased $33.7 million
to $425.7 million in 1993 compared to $392 million in 1992. As a percentage of
sales, cost of sales increased 4.6 percentage points to 74.9% in 1993 compared
to 70.3% in 1992. The increase of 4.6 percentage points resulted from lower
merchandise margins due to the Company's inventory reduction program in January
1994, the liquidation sales related to the
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closing of 26 unprofitable stores and the adverse weather conditions which
affected sales throughout the entire year. In addition, increases in occupancy
costs related primarily to the 1993 and 1992 new store openings and
depreciation contributed to the cost of sales increase in 1993.
Selling, general and administrative expense in 1994 decreased $11.8
million to $140.2 million compared to $152 million in 1993. The decrease was
attributable to the operations improvement program initiated at the end of 1993
which resulted in lower administrative costs in 1994. As a percentage of
sales, selling, general and administrative expense decreased 2 percentage
points to 24.7% of sales in 1994 compared to 26.7% in 1993. Selling, general
and administrative expenses in 1993 increased by $3.4 million to $152 million
compared to $148.6 million in 1992. The increase was due mainly to increased
expenses for new stores opened in 1993 and 1992 and increased advertising
expenses in the 1993 fourth quarter. As a percentage of sales, selling,
general and administrative expenses increased .1 of a percentage point to 26.7%
of sales in 1993 compared to 26.6% in 1992.
During the fourth quarter of 1993 the Company approved a plan to exit 26
unprofitable Frank's stores primarily in the Nashville, South Florida and
Orlando markets and to dispose of certain other properties. The decision
resulted in the Company recording a reserve of $22.9 million ($15.1 million,
net of tax benefit) in the 1993 fourth quarter comprised primarily of $20
million for the closing of the 26 stores and $2.9 million primarily for
expected losses on the sale of the other properties. The $20 million store
closing reserve included a provision for termination of lease agreements,
brokers fees and legal costs of $12.9 million representing expected future cash
outflows; a provision of $3.5 million for expected losses from the sale of real
estate and the write-off of leasehold improvements and equipment of the closed
stores; and a provision of $3.6 million representing operating losses for
January 1994 through closure date and employee severance for the closed stores.
All stores were closed as of February 7, 1994, with the exception of one store
which closed March 7, 1994.
Interest and debt expense was $22.9 million in 1994 compared to $23.3
million in 1993. The decrease was primarily due to the redemption of the 7%
Subordinated Debentures on February 1, 1994. Interest and debt expense was
$23.3 million in 1993 compared to $23.2 million in 1992.
In 1994, the tax provision was favorably impacted by a reduction in the
valuation allowance which resulted from the current year utilization of loss
carryforwards. The valuation allowance was provided in 1993 against the net
deferred tax asset resulting from the Company's net operating loss and the loss
from an investment in an unconsolidated affiliate. Due to the Company's
historical operating results prior to 1994, a valuation allowance
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for the deferred tax asset balance remained at January 29, 1995. As a result
of the valuation allowance, approximately $14 million of these loss
carryforwards have not been benefitted and utilization will be recognized
against future income. Income taxes included the elimination of income tax
reserves of $1 million in 1994 and $1.9 million in 1992.
In April 1993 the Company acquired a 49.5% interest in Sunbelt by
exchanging 1.94 million shares of its common stock for 4.2 million shares of
common stock of Sunbelt held by Pier 1 Imports, Inc. At fiscal year end 1993
the Company reduced to zero the carrying value of its investment in Sunbelt due
to Sunbelt's lack of long-term financing. This resulted in a charge of $15.7
million which, when combined with the net equity losses recognized through the
1993 third quarter of $2 million, amounted to $17.7 million for fiscal 1993. In
October 1994 the Company sold its interest in Sunbelt and recognized a gain of
$3.6 million.
Income from continuing operations was $8.6 million in 1994 an improvement
of $63.8 million over 1993. The 1993 loss included a reserve of $22.9 million
for the closing of the 26 unprofitable stores and a loss of $17.7 million from
the net equity loss and write-down of the Company's investment in Sunbelt. The
loss from continuing operations in 1993 was $55.2 million, a decline of $58.1
million over 1992.
Discontinued operations and changes in accounting principles included (A)
a loss reserve of $.8 million in 1993 and $.4 million in 1992, net of taxes,
for lease obligations of businesses sold in prior years, and (B) income of $2.9
million representing the cumulative effect for the adoption of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," in 1992. These
items combined with the respective income or loss from continuing operations
resulted in net income of $8.6 million in 1994, a net loss of $56.1 million in
1993 and net income of $5.3 million in 1992.
Liquidity and Capital Resources
Continuing operations provided $42 million of net cash in 1994 compared to
$27.6 million in 1993. The increase of $14.4 million resulted primarily from
increased income from continuing operations of $63.8 million, offset by noncash
amounts in 1993 for the store closing provision and the Sunbelt net equity loss
and investment write-down. The changes in current assets and liabilities
caused a decrease to net cash provided in 1994 compared to 1993 of $25.6
million. This decrease was attributable to the reduction in inventory in 1993
resulting from reduced inventory purchases, an inventory reduction program in
January 1994 and the closing of 26 stores.
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During the fourth quarter of 1993 the Company recorded a noncash reserve
of $22.9 million for the closing of 26 stores. During 1994 the Company
terminated leases and was able to enter into sublease arrangements for all but
seven stores. The annual sublease income generated approximates the Company's
annual costs. The Company is contingently liable should a sublease tenant
default on the sublease obligation. At January 29, 1995 the remaining reserve
of $8.4 million primarily represents lease termination costs for the remaining
seven store locations and estimated losses associated with the sale and or
sublease of real estate. The Company utilized net cash of $8.6 million in 1994
to terminate lease arrangements, pay brokers fees, legal costs and severance.
Noncash charges of $2.2 million reduced the reserve primarily for asset
write-offs.
In April 1994 the Company issued restricted stock grants under the Stock
Incentive Plan to employees of the Company. At January 29, 1995, 68,300 shares
remain subject to restrictions which expire on January 28, 1996. The noncash
transaction was completed by issuing shares of treasury stock. The market
value of the shares granted amount to $.3 million and was charged to selling
expense in 1994.
In April 1993 the Company acquired a 49.5% interest in Sunbelt. The
noncash acquisition was completed by issuing 1.94 million shares of the
Company's common stock at the then market value of $17.7 million in exchange
for 4.2 million shares of Sunbelt.
Discontinued operations used net cash of $.3 million in 1994 and $1.3
million in 1993 related to payments for operations disposed of in prior years.
Net cash used for investing activities was $2.3 million in 1994. Net cash
used in 1993 was $2.8 million which included $29.9 million for property, plant
and equipment for the addition of new stores offset by the reduction of
marketable securities.
Net cash used for financing activities was $18.9 million in 1994 which
included the repayment of $13.2 million of 7% Subordinated Debentures on
February 1, 1994 and payments of long-term debt. Net cash used was $11.8
million in 1993 which represented payment of long-term debt and dividends.
The weighted average interest rate on debt outstanding at January 29, 1995
was 9.2%. The Company has a revolving credit agreement with a bank which
provides for $15 million of unsecured credit through July 1, 1995. The
agreement requires the Company, among other things, to maintain minimum levels
of earnings, tangible net worth and certain minimum financial ratios. The
Company was in compliance with all of its covenants under the agreement at
January 29, 1995. In January 1995 the Company
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completed an extension agreement for the Mortgage Notes which extended the
maturity date from December 31, 1995 to March 29, 1996.
Under the most restrictive provisions of any of the debt and bank
agreements, total shareholders' equity available to pay cash dividends or
purchase treasury stock was below the required minimum level by $3.7 million at
January 29, 1995. On March 1, 1995 the Company declared a 5% stock dividend
for shareholders of record on March 17, 1995. The stock dividend is payable on
April 7, 1995.
Total shareholders' equity in 1994 increased $8.9 million to $117.6
million from $108.7 million in 1993, due primarily to the 1994 net income.
Long-term debt as a percentage of total capitalization decreased from 70% in
1993 to 67% in 1994.
In December 1988 the Board of Directors authorized the repurchase, in open
market transactions, of up to 2,000,000 additional shares of the Company's
common stock. As of January 29, 1995 the total remaining authorization was for
628,750 shares. The Company did not repurchase any shares in fiscal 1994 or
1993.
Working Capital
Working capital amounted to $73 million at January 29, 1995 compared to $51
million at January 30, 1994. The ratio of current assets to current
liabilities was 1.7 in 1994 compared to 1.4 in 1993. Working capital included
$83 million of cash and cash equivalents at January 29, 1995 compared to $63
million of cash and cash equivalents at January 30, 1994.
The Company has sufficient cash and cash equivalents and plans to generate
sufficient cash flow from operations to meet its seasonal working capital
needs, pay approximately $24 million in fixed interest charges and to fund
capital expenditures of approximately $5 million for 1995. The Company
anticipates opening 10 to 12 new stores over the next 24 months.
Inflation
Inflation has been modest in recent years and has not had a significant effect
on the Company. If merchandise costs were to increase because of inflation,
management believes such increases could be recovered through higher selling
prices, since virtually all retailers would be similarly affected.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
The Company's consolidated financial statements and supplementary data are
listed in Item 14 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
Information on Nominee and Incumbent Directors, which appears on
pages 4, 5 and 6 of the Company's 1995 Proxy Statement, is
incorporated by reference in this Annual Report on Form 10-K.
(b) Executive Officers
POSITION AND OFFICE WITH
NAME AGE THE COMPANY
---- --- ------------------------
Harris J. Ashton 62 Chairman of the Board of Directors, President and
Chief Executive Officer
William C. Boyd 65 Executive Vice President - Frank's
Scott A. Hessler 46 President and Chief Operating Officer - Frank's
Robert M. Lovejoy, Jr. 51 Vice President and Treasurer
James R. Simpson 43 Vice President and Controller
Mr. Ashton has been Chairman of the Board of Directors and Chief Executive
Officer of the Company since 1970, and President of the Company since 1974.
Prior thereto he was President and Chief Executive Officer from October 1969 to
June 1970, President and Chief Administrative Officer from December 1967 to
October 1969, Secretary from May 1965 to December 1967 and a Director of the
Company since May 1965.
Mr. Boyd has been Executive Vice President of Frank's since June 1987 and
prior thereto was employed by Frank's in various capacities since 1949.
Mr. Hessler has been President and Chief Operating Officer of Frank's
since May 1994. He was Senior Vice President, Merchandising/Marketing of
Wherehouse Entertainment, Inc. from 1992 to 1994 and was employed by Broadway
Stores prior thereto from 1986 to 1992, most recently as Senior Vice President,
General Merchandise Manager. Prior thereto he was employed by May Department
Stores and R.H. Macy in senior merchandising positions since 1974.
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Mr. Lovejoy was named Vice President on February 22, 1991. He has been
Treasurer of the Company since September 1988 and previously he had been
employed by Bankers Trust Company since 1977, most recently as Vice President,
Corporate Finance and Global Markets.
Mr. Simpson was named Vice President on February 22, 1991. He has been
Controller of the Company since July 1989. He was Senior Vice President and
Chief Financial Officer of Consumers Distributing, Inc., from January 1988 to
July 1989 and was employed by Herman's Sporting Goods, Inc. since 1973, most
recently as Vice President and Controller.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation and Other Information which appears on pages 8 to
16 of the Company's 1995 Proxy Statement, is incorporated by reference in this
Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on the ownership of Company securities by certain beneficial
owners and management, which appears on pages 2 through 4 of the Company's 1995
Proxy Statement, is incorporated by reference in this Annual Report on Form
10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on transactions with management and others, which appears on
pages 6 and 7 and pages 15 and 16 of the Company's 1995 Proxy Statement, is
incorporated by reference in this Annual Report on Form 10-K.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. List of documents filed as part of this report:
1. Financial Statements
--------------------
Page No.
--------
- Report of Independent Accountants. F-1
- Consolidated Balance Sheets - for the years F-2
ended January 29, 1995 and January 30, 1994.
- Consolidated Statements of Income - for the F-3
years ended January 29, 1995, January 30, 1994
and January 31, 1993.
- Consolidated Statements of Changes in F-4
Shareholders' Equity - for the years ended
January 29, 1995, January 30, 1994 and
January 31, 1993.
- Consolidated Statements of Cash Flows - for the F-5
years ended January 29, 1995, January 30, 1994
and January 31, 1993.
- Notes to Consolidated Financial Statements. F-6
2. Financial Statement Schedules
-----------------------------
Schedules not included have been omitted
because they are not applicable or the
required information is shown in the
consolidated financial statements or
notes thereto.
VIII - Valuation and qualifying accounts - F-23
years ended January 29, 1995, January
30, 1994 and January 31, 1993.
16
19
3. Exhibits
(3) Articles of Incorporation and By-Laws:
(a) Restated Certificate of Incorporation of the Company,
filed November 13, 1968. Incorporated by reference
to the Company's Annual Report on Form 10-K for its
fiscal year ended January 31, 1993, Exhibit 3(a).
(b) Certificate of Amendment, filed January 24, 1969, of
the Company's Restated Certificate of Incorporation,
Exhibit 3(b). Incorporated by reference to the
Company's Annual Report on Form 10-K for its fiscal
year ended January 31, 1993, Exhibit 3(b).
(c) Certificate of Amendment, filed October 30, 1969, of
the Company's Restated Certificate of Incorporation.
Incorporated by reference to the Company's Annual
Report on Form 10-K for its fiscal year ended January
31, 1993, Exhibit 3(c).
(d) Certificate of Change, filed June 15, 1977, of the
Company's Restated Certificate of Incorporation.
Incorporated by reference to the Company's Annual
Report on Form 10-K for its fiscal year ended January
31, 1993, Exhibit 3(d).
(e) Composite Certificate of Incorporation of the
Company, as amended. Incorporated by reference to
the Company's Annual Report on Form 10-K for its
fiscal year ended January 31, 1993, Exhibit 3(e).
(f) Certificate of Amendment, filed June 27, 1985, of the
Company's Restated Certificate of Incorporation.
Incorporated by reference to the Company's Annual
Report on Form 10-K for its fiscal year ended January
26, 1992, Exhibit 3(f).
17
20
(g) By-Laws of the Company, amended as of November 6,
1986. Incorporated by reference to the Company's
Annual Report on Form 10-K for its fiscal year ended
January 31, 1993, Exhibit 3(g).
(4) Instruments Defining the Rights of Security Holders,
Including Indentures:
(a) Rights Agreement, dated as of March 7, 1990, by and
between the Company and Manufacturers Hanover Trust
Company. Incorporated by reference to the Company's
Form 8-A Registration Statement, dated March 23,
1995, Exhibits 1 and 2.
(b) Amendment No. 1 to the Rights Agreement dated as of
March 1, 1995 by and between the Company and Chemical
Bank, as successor to Manufacturers Hanover Trust
Company. Incorporated by reference to the Company's
Form 8-A Registration Statement, dated March 23,
1995, Exhibit 1a.
(c) Note and Indenture Extension Agreement dated as of
January 27, 1995 between Frank's Nursery and Crafts,
Inc. and The Bank of New York and W.T. Cunningham, as
Trustees.
(d) Form of Note Purchase Agreement between Frank's
Nursery & Crafts, Inc., Flower Time, Inc., and
various Purchasers, dated September 1, 1988.
Incorporated by reference to the Company's current
report on Form 8-K dated September 28, 1988, Exhibit
10(a). A copy of this Exhibit can be obtained from
the Public Reference Section of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549, File No. 1-1066.
(e) Indenture of Mortgage, Deed of Trust and Security
Agreement from Frank's Nursery & Crafts, Inc., to the
Connecticut Bank and Trust Company, N.A., Lese Amato
and Bank of New England Trust Company, N.A., as
trustees, dated as of September 1, 1988.
Incorporated by reference to the
18
21
Company's current report on Form 8-K dated September
28, 1988, Exhibit 10(b). A copy of this Exhibit can
be obtained from the Public Reference Section of the
Securities and Exchange Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549,
File No. 1-1066.
(f) Indenture of Mortgage, Deed of Trust and Security
Agreement from Flower Time, Inc., to the Connecticut
Bank and Trust Company, N.A., and Lese Amato, as
trustees, dated as of September 1, 1988.
Incorporated by reference to the Company's current
report on Form 8-K dated September 28, 1988, Exhibit
10(c). A copy of this Exhibit can be obtained from
the Public Reference Section of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549, File No. 1-1066.
(g) Guaranty from General Host Corporation to the
Connecticut Bank and Trust Company, N.A., and Lese
Amato, as trustees, dated as of September 1, 1988,
relating to Frank's Nursery & Crafts, Inc., notes.
Incorporated by reference to the Company's current
report on Form 8-K dated September 28, 1988, Exhibit
10(d). A copy of this Exhibit can be obtained from
the Public Reference Section of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549, File No. 1-1066.
(h) Guaranty from General Host Corporation to the
Connecticut Bank and Trust Company, N.A., and Lese
Amato, as trustees, dated as of September 1, 1988,
relating to Flower Time, Inc., notes. Incorporated
by reference to the Company's current report on Form
8-K dated September 28, 1988, Exhibit 10(e). A copy
of this Exhibit can be obtained from the Public
Reference Section of the Securities and Exchange
Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, File No. 1-1066.
19
22
(10) Material Contracts:
(a) Employment Agreement, dated as of January 1, 1992
between the Company and Harris J. Ashton.
Incorporated by reference to the Company's Annual
Report on Form 10-K for its fiscal year ended January
31, 1993, Exhibit 10(a).
(b) Agreement between the Company and a Trust established
for the benefit of Mr. and Mrs. Ashton's
beneficiaries dated November 1, 1989. Incorporated
by reference to the Company's Annual Report on Form
10-K for its fiscal year ended January 27, 1991,
Exhibit 10(b).
(c) 1995 Executive Compensation Program.
(d) Amended and Restated 1986 Stock Incentive Plan dated
April 8, 1992. Incorporated by reference to the
Company's Form S-8 Registration Statement dated July
24, 1992, Exhibit 28(a).
(e) Directors' Stock Option Plan dated March 20, 1986.
Incorporated by reference to the Company's Annual
Report on Form 10-K for its fiscal year ended January
26, 1992, Exhibit 10(e).
(11) Additional Earnings Per Share Information.
(21) Subsidiaries.
(23) Consent of Price Waterhouse.
(24) Powers of Attorney:
(a) C. Whitcomb Alden, Jr. Director
(b) Christopher A. Forster Director
(c) S. Joseph Fortunato Director
(d) Philip B. Harley Director
(e) Richard W. Haskel Director
(f) Edward H. Hoornstra Director
20
23
(g) Charles B. Johnson Director
(h) Kelly Ashton Sant Albano Director
Documents referred to in the list of Exhibits will be furnished
upon receipt by the Treasurer of the Company, at the Company's
principal executive offices referred to on the cover of this
Form 10-K, of written requests accompanied by a fee covering the
Company's reasonable expenses of $3.00 for handling and postage,
plus $.25 per page for photocopying.
B. Reports on Form 8-K
During the last quarter of the period covered by this report, the
Company did not file a report on Form 8-K.
21
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GENERAL HOST CORPORATION
Date: April 10, 1995 By /s/Harris J. Ashton
------------------------------------------
Harris J. Ashton
Chairman of the Board of
Directors, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: April 10, 1995 /s/Harris J. Ashton
------------------------------------------
Harris J. Ashton
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive and Financial Officer)
Date: April 10, 1995 /s/James R. Simpson
------------------------------------------
James R. Simpson
Controller
(Principal Accounting Officer)
Date: April 10, 1995 C. WHITCOMB ALDEN, JR.*
------------------------------------------
C. Whitcomb Alden, Jr.
Director
Date: April 10, 1995 CHRISTOPHER A. FORSTER*
------------------------------------------
Christopher A. Forster
Director
22
25
Date: April 10, 1995 S. JOSEPH FORTUNATO*
---------------------------------
S. Joseph Fortunato
Director
Date: April 10, 1995 PHILIP B. HARLEY*
---------------------------------
Philip B. Harley
Director
Date: April 10, 1995 RICHARD W. HASKEL*
---------------------------------
Richard W. Haskel
Director
Date: April 10, 1995 EDWARD H. HOORNSTRA*
---------------------------------
Edward H. Hoornstra
Director
Date: April 10, 1995 CHARLES B. JOHNSON*
---------------------------------
Charles B. Johnson
Director
Date: April 10, 1995 KELLY ASHTON SANT ALBANO*
---------------------------------
Kelly Ashton Sant Albano
Director
Date: April 10, 1995 *By /s/ROBERT M. LOVEJOY, JR.
---------------------------------
(Attorney-in-Fact)
23
26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
General Host Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(A)(1) and (2) on page 16 present fairly, in all
material respects, the financial position of General Host Corporation and its
subsidiaries at January 29, 1995 and January 30, 1994, and the results of their
operations and their cash flows for the three years in the period ended January
29, 1995 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 6 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in the year ended
January 31, 1993.
Price Waterhouse LLP
Detroit, Michigan
March 1, 1995, except as to the
stock dividend described in Note 1
which is as of March 17, 1995
F-1
27
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JANUARY 29, 1995 AND JANUARY 30, 1994
1994 1993
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 83,362 $ 62,855
Marketable securities 120
Accounts and notes receivable 3,682 7,109
Merchandise inventory 87,238 87,807
Prepaid expenses and other current assets 8,589 10,005
---------- ----------
Total current assets 182,871 167,896
---------- ----------
Property, plant and equipment, less accumulated
depreciation of $142,621 and $133,756 253,311 280,210
Intangibles, less accumulated amortization
of $8,818 and $7,881 17,101 18,038
Other assets and deferred charges 11,575 12,061
---------- ----------
$ 464,858 $ 478,205
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,726 $ 49,551
Accrued expenses 40,623 37,365
Provision for store closings
and other costs 6,379 11,575
Current portion of long-term debt 5,694 18,880
---------- ----------
Total current liabilities 109,422 117,371
---------- ----------
Long-term debt:
Senior debt 163,311 172,995
Subordinated debt 65,000 65,000
---------- ----------
Total long-term debt 228,311 237,995
---------- ----------
Other liabilities and deferred credits 9,475 14,125
Commitments and contingencies
Shareholders' equity:
Common stock $1.00 par value, 100,000,000
shares authorized, 31,752,450 shares issued 31,752 31,752
Capital in excess of par value 81,163 85,145
Retained earnings 97,802 95,543
---------- ----------
210,717 212,440
Cost of 9,611,497 and 10,735,904 shares of
common stock in treasury (91,106) (101,765)
Notes receivable from exercise of
stock options (1,961) (1,961)
---------- ----------
Total shareholders' equity 117,650 108,714
---------- ----------
$ 464,858 $ 478,205
========== ==========
See accompanying notes.
F-2
28
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEARS ENDED JANUARY 29, 1995, JANUARY 30, 1994 AND JANUARY 31, 1993
1994 1993 1992
---------- --------- ---------
Revenues:
Sales $ 567,987 $ 568,602 $ 557,818
Other income 5,619 1,338 6,970
---------- --------- ---------
573,606 569,940 564,788
---------- --------- ---------
Costs and expenses:
Cost of sales, including
buying and occupancy 402,839 425,724 391,955
Selling, general and
administrative 140,171 151,995 148,596
Provision for store closings
and other costs 22,876
Interest and debt expense 22,911 23,251 23,232
---------- --------- ---------
565,921 623,846 563,783
---------- --------- ---------
Income (loss) from continuing
operations before income taxes,
net equity loss and investment
write-down 7,685 (53,906) 1,005
Income tax benefit (900) (16,389) (1,848)
Net equity loss and write-down of
investment in an unconsolidated
affiliate (17,703)
---------- --------- ---------
Income (loss) from continuing
operations 8,585 (55,220) 2,853
Loss from discontinued operations (840) (381)
---------- --------- ---------
Income (loss) before cumulative
effect of change in
accounting principle 8,585 (56,060) 2,472
Cumulative effect of change in
accounting principle
for income taxes 2,850
---------- --------- ---------
Net income (loss) $ 8,585 $ (56,060) $ 5,322
========== ========= =========
Earnings (loss) per share:
Income (loss) from continuing
operations $ .39 $ (2.54) $ .14
Loss from discontinued operations (.04) (.02)
---------- --------- ---------
Income (loss) before cumulative
effect of change in
accounting principle .39 (2.58) .12
Cumulative effect of change
in accounting principle for
income taxes .15
---------- --------- ---------
Net income (loss) $ .39 $ (2.58) $ .27
========== ========= =========
Average shares outstanding 22,135 21,751 20,043
========== ========= =========
See accompanying notes.
F-3
29
GENERAL HOST CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FISCAL YEARS ENDED JANUARY 29, 1995, JANUARY 30, 1994
AND JANUARY 31, 1993
(DOLLARS IN THOUSANDS)
Notes
Receivable
Cost of from
Shares of Common Stock Common Capital in Common Exercise Total
----------------------- Stock Excess of Retained Stock in of Stock Shareholders'
Issued In Treasury Issued Par Value Earnings Treasury Options Equity
---------- ----------- -------- ---------- --------- --------- ---------- ------------
Balance at January 26, 1992 31,752,450 (13,777,692) $ 31,752 $ 89,057 $ 166,558 $(130,597) $ (1,381) $ 155,389
Net income 5,322 5,322
Cash dividends (6,475) (6,475)
Stock options exercised 101,000 (160) 957 (715) 82
Income tax benefit from stock
options exercised 40 40
---------- ----------- -------- ---------- --------- --------- --------- -----------
Balance at January 31, 1993 31,752,450 (13,676,692) 31,752 88,937 165,405 (129,640) (2,096) 154,358
Net loss (56,060) (56,060)
Cash dividends (7,422) (7,422)
Stock dividend 1,000,788 (3,106) (6,380) 9,486
Acquisition of equity interest
in Sunbelt Nursery Group, Inc. 1,940,000 (686) 18,389 17,703
Note repayments 135 135
---------- ----------- -------- ---------- --------- --------- --------- -----------
Balance at January 30, 1994 31,752,450 (10,735,904) 31,752 85,145 95,543 (101,765) (1,961) 108,714
Net income 8,585 8,585
Stock dividend declared on
March 1, 1995 1,054,307 (3,668) (6,326) 9,994
Restricted stock grants issued 68,300 (306) 648 342
Issuance of common stock 1,800 (8) 17 9
---------- ----------- -------- ---------- --------- --------- --------- -----------
Balance at January 29, 1995 31,752,450 (9,611,497) $ 31,752 $ 81,163 $ 97,802 $ (91,106) $ (1,961) $ 117,650
========== =========== ======== ========== ========= ========= ========= ===========
See accompanying notes.
F-4
30
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FISCAL YEARS ENDED JANUARY 29, 1995, JANUARY 30, 1994 AND JANUARY 31, 1993
1994 1993 1992
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ 8,585 $ (55,220) $ 2,853
Noncash adjustments:
Depreciation and amortization 23,836 24,610 21,179
Provision for store closings and other costs 22,876
Deferred income taxes (15,983) (635)
Net equity loss and write-down of investment
in an unconsolidated affiliate 17,703
Other 1,674 129 1,447
----------- --------- ---------
34,095 (5,885) 24,844
Changes in current assets and current liabilities:
(Increase) decrease in accounts and
notes receivable 2,751 4,658 (4,000)
(Increase) decrease in inventory 569 33,354 (37,183)
(Increase) decrease in prepaid expenses 1,333 (931) (47)
Increase (decrease) in accounts payable 7,175 (3,020) 4,087
Increase (decrease) in accrued expenses 4,662 3,034 (5,791)
Decrease in provision for store
closings and other costs (8,613) (3,655)
---------- --------- --------
Net cash provided by (used for)
continuing operations 41,972 27,555 (18,090)
Net cash used for discontinued operations (333) (1,286) (2,271)
---------- --------- --------
41,639 26,269 (20,361)
---------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (5,391) (29,946) (47,396)
Proceeds from sales of property, plant and equipment 3,016 430 38
Proceeds from the sales of marketable securities 120 26,690 94,407
Purchases of marketable securities (121,104)
---------- --------- ---------
Net cash used for investing activities (2,255) (2,826) (74,055)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt 137,714
Payment of long-term debt and capital lease
obligations (18,877) (4,486) (6,745)
Repurchase of long-term debt (40,545)
Cash dividends paid on common stock (7,422) (6,475)
Stock options exercised 135 82
---------- --------- ---------
Net cash provided by (used for) financing activities (18,877) (11,773) 84,031
---------- --------- ---------
Increase (decrease) in cash and cash equivalents 20,507 11,670 (10,385)
Cash and cash equivalents at beginning of year 62,855 51,185 61,570
---------- --------- ---------
Cash and cash equivalents at end of year $ 83,362 $ 62,855 $ 51,185
========== ========= =========
See accompanying notes.
F-5
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ACCOUNTING POLICIES
The fiscal year ends on the last Sunday in January. Fiscal year 1994 consisted
of 52 weeks and ended on January 29, 1995. Fiscal year 1993 consisted of 52
weeks and ended on January 30, 1994. Fiscal year 1992 consisted of 53 weeks
and ended on January 31, 1993.
The consolidated financial statements include the accounts of General Host
Corporation and its subsidiaries (the "Company"). Intercompany balances and
transactions are eliminated. Certain reclassifications have been made to prior
years' financial statements to conform to the 1994 presentation.
Cash equivalents are highly liquid investments, such as U.S. government
securities and bank certificates of deposit having original maturities of three
months or less, and are carried at cost plus accrued interest.
Marketable securities are carried at the lower of cost or market.
Merchandise inventories are stated at the lower of cost or market, with cost
being determined under the first-in, first-out method.
Pre-Opening costs are costs incurred in the opening of new stores (primarily
payroll costs) which are capitalized prior to the opening of a new store and
amortized over a one year period commencing with the first period after the new
store opens.
Store closing costs include provisions for estimated future net lease
obligations, nonrecoverable investments in fixed assets, and other expenses
directly related to discontinuance of operations and estimated operating losses
through expected closing dates. Provisions for store closings are charged to
operations in the period when the decision is made to close a retail unit.
Property, plant and equipment, including significant improvements thereto, are
recorded at cost. Expenditures for repairs and maintenance are charged to
expense as incurred. The cost of plant and equipment is depreciated over the
estimated useful lives using the straight-line method. Leasehold improvements
are depreciated over the terms of the respective leases or, if shorter, the
estimated useful lives. Upon sale or other disposition of assets, the cost and
related accumulated depreciation are removed from the accounts and the
resulting gain or loss, if any, is reflected in the statements of income.
F-6
32
Intangibles, including costs in excess of net assets of acquired businesses,
are amortized over the estimated periods of related benefit, ranging from 10 to
40 years, using the straight-line method. On an annual basis the Company
reviews the recoverability of intangibles, specifically goodwill. The
measurement of possible impairment is based primarily on the ability to recover
the balance of the goodwill from expected future operating cash flows on an
undiscounted basis.
Other postretirement benefits are recognized in the financial statements during
the period in which service is provided.
Leases which meet the accounting criteria for capital leases are recorded as
property, plant and equipment, and the related capital lease obligations (the
aggregate present value of minimum future lease payments, excluding executory
costs such as taxes, maintenance and insurance) are included in long-term debt.
Depreciation and interest are charged to expense, and rent payments are treated
as payments of long-term debt, accrued interest and executory costs. All other
leases are accounted for as operating leases, and rent payments are charged to
expense as incurred.
Deferred income tax assets and liabilities are determined based on the
difference between the financial carrying amounts and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
Primary earnings per share is based on the weighted average number of common
shares outstanding, which includes 1,054,307 shares representing the 5% stock.
Fully diluted earnings per share is based on the assumed conversion of all of
the 8% Convertible Subordinated Notes into common stock. Interest expense on
the 8% Convertible Subordinated Notes is added back to net earnings. Fully
diluted earnings per share impacted the first and fourth quarters of 1994 and
the first quarter of 1993 and 1992.
Subsequent to fiscal 1994 a 5% stock dividend was declared by the Board of
Directors for shareholders of record on March 17, 1995. The stock dividend is
payable on April 7, 1995 and all stock related data in the consolidated
financial statements reflect the stock dividend for all periods presented.
F-7
33
NOTE 2: PROVISION FOR STORE CLOSINGS
During the fourth quarter of 1993 the Company approved a plan to exit 26
unprofitable Frank's stores primarily in the Nashville, South Florida and
Orlando markets and to dispose of certain other properties. The decision
resulted in the Company recording a reserve of $22,876,000 ($15,098,000 net of
tax benefit) in the 1993 fourth quarter comprised primarily of $19,944,000 for
the closing of the 26 stores and $2,932,000 primarily for expected losses on
the sale of the other properties. The $19,944,000 store closing reserve
included a provision for termination of lease agreements, brokers fees and
legal costs of $12,862,000 representing expected future cash outflows; a
provision of $3,518,000 for expected losses from the sale of real estate and
the write-off of leasehold improvements and equipment of the closed stores; and
a provision of $3,564,000 representing operating losses for January 1994
through closure date and employee severance for the closed stores. All stores
were closed as of February 7, 1994, with the exception of one store which
closed March 7, 1994.
During 1994 the Company terminated leases and was able to enter into sublease
arrangements for all but seven stores. The annual sublease income generated
approximates the Company's annual costs. The Company is contingently liable
should a sublease tenant default on the sublease obligation.
At January 29, 1995 the remaining reserve of $8,379,000 primarily represents
lease termination costs for the remaining seven store locations and estimated
losses associated with the sale and or sublease of real estate.
The Company paid cash (net of proceeds) of $8,613,000 in 1994 to terminate
lease arrangements, pay brokers fees, legal costs and severance and charged
$2,229,000 against the reserve primarily for asset write-offs.
NOTE 3: EQUITY INTEREST IN SUNBELT NURSERY GROUP, INC.
In April 1993 the Company acquired a 49.5% interest in Sunbelt Nursery Group,
Inc. ("Sunbelt") by exchanging 1,940,000 shares of its common stock for
4,200,000 shares of common stock of Sunbelt held by Pier 1 Imports, Inc. The
Sunbelt investment was recorded on the General Host consolidated balance sheet
at the time of acquisition based upon fair value. At fiscal year end 1993 the
Company reduced to zero the carrying value of its investment in Sunbelt due to
Sunbelt's lack of long-term financing. This resulted in a charge of
$15,746,000 which, when combined with the
F-8
34
net equity losses recognized through the 1993 third quarter of $1,957,000,
amounted to $17,703,000 for fiscal 1993. In October 1994 the Company sold its
interest in Sunbelt for cash. The resulting gain of $3,612,000 was recorded in
other income for fiscal 1994.
NOTE 4: DISCONTINUED OPERATIONS
In prior years' the Company has sold businesses which have been treated as
discontinued operations for financial statement presentation.
As of January 29, 1995 and January 30, 1994 there were no remaining assets.
The liabilities for discontinued operations sold in prior years' were as
follows:
(In thousands) 1994 1993
- ------------------------------------------------------------
Accrued expenses $ 599 $ 1,059
Other liabilities 1,427 1,547
-------- --------
$ 2,026 $ 2,606
======== ========
The Company charged to discontinued operations losses of $840,000 or $.04 per
share in 1993 and $381,000 or $.02 per share after income tax benefit in 1992
for lease obligations which extend to the year 2001 for businesses sold in
prior years (Note 15).
NOTE 5: OTHER INCOME
(In thousands) 1994 1993 1992
- ------------------------------------------------------------
Interest on cash
equivalents and
marketable securities $ 1,365 $ 1,046 $ 3,777
Gain on the sale of Sunbelt
Nursery Group, Inc. 3,612
Non-competition agreement
income 1,615
Dividend income 2 10 1,211
Miscellaneous 640 282 367
-------- -------- --------
$ 5,619 $ 1,338 $ 6,970
======== ======== ========
F-9
35
NOTE 6: INCOME TAXES
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109
retroactively as of January 27, 1992, the beginning of the 1992 fiscal year.
The cumulative effect of adopting SFAS No. 109 increased net income for the
1992 fiscal year by $2,850,000.
The components of the income tax provisions are as follows:
(In thousands) 1994 1993 1992
- ------------------------------------------------------------------------
CONTINUING OPERATIONS:
Current federal income taxes $ (900) $ (1,730) $ (166)
Current state and other income taxes 1,324 (1,200)
Deferred federal income taxes (13,859) 1,218
Deferred state and other income taxes (2,124) (1,700)
-------- -------- --------
(900) (16,389) (1,848)
-------- -------- --------
DISCONTINUED OPERATIONS:
Current federal income taxes (144)
Deferred federal income taxes (52)
-------- -------- --------
(196)
-------- -------- --------
EXTRAORDINARY LOSSES:
Current federal income taxes (443)
Deferred federal income taxes 443
-------- -------- --------
--
-------- -------- --------
Total income tax benefit $ (900) $(16,389) $ (2,044)
======== ======== ========
Differences between income taxes of continuing operations and income taxes
based on statutory federal income tax rates applied to income before taxes are
as follows:
(In thousands) 1994 1993 1992
- ------------------------------------------------------------------------
Federal income taxes based on
statutory rates $ 2,613 $(18,867) $ 342
Increases (decreases) in rates
resulting from:
Limitation (utilization)
of tax loss carryforwards (2,207) 2,262
Dividends received deduction (286)
Elimination of reserves no
longer required (1,000) (528) (1,914)
Effect of graduated rates 539
Amortization of intangibles
and other acquisition costs 136 136 136
Other (442) 69 (126)
-------- -------- --------
$ (900) $(16,389) $ (1,848)
======== ======== ========
F-10
36
The tax effects of the principal temporary deferred tax assets and liabilities
are as follows:
(In thousands) 1994 1993
- ----------------------------------------------------------------------
LIABILITIES:
Property, plant & equipment $ (17,004) $ (19,647)
--------- ---------
Gross deferred tax liabilities (17,004) (19,647)
--------- ---------
ASSETS:
Inventory 1,134 875
Accrued expenses 2,962 2,943
Other 717 271
Loss on equity investment in an
unconsolidated affiliate 728 6,019
Store closing reserve 3,148 6,977
NOL carryforward 14,675 11,129
--------- ---------
Gross deferred tax assets 23,364 28,214
--------- ---------
Net deferred tax asset 6,360 8,567
Valuation allowance (6,360) (8,567)
--------- ---------
$ -- $ --
========= =========
In 1994, the tax provision was favorably impacted by a reduction in the
valuation allowance which resulted from the current year utilization of
loss carryforwards. The valuation allowance was provided in 1993 against
the net deferred tax asset resulting from the Company's net operating loss
and the loss from an investment in an unconsolidated affiliate. Due to the
Company's historical operating results prior to 1994, a valuation
allowance for the deferred tax asset balance remained at January 29, 1995.
At January 29, 1995 the federal tax NOL carryforwards approximated
$43,000,000. As a result of the valuation allowance, approximately
$14,000,000 of these carryforwards have not been benefitted and
utilization will be recognized against future income. The net operating
loss will expire as follows: in January 2008 -- $5,000,000 and January
2009 -- $38,000,000.
F-11
37
NOTE 7: PROPERTY, PLANT AND EQUIPMENT
(In thousands) 1994 1993
- -----------------------------------------------------------------
Land $ 46,623 $ 45,960
Buildings:
Owned 168,248 172,328
Capital leases (Note 11) 18,050 23,717
Equipment 111,792 115,550
Leasehold improvements 47,291 52,587
Construction in progress 3,928 3,824
-------- --------
395,932 413,966
Less accumulated depreciation,
including capital lease amounts
of $9,780 and $13,023 142,621 133,756
-------- --------
$253,311 $280,210
======== ========
Interest cost capitalized as property, plant and equipment amounted to $28,000
in 1994, $542,000 in 1993 and $1,000,000 in 1992.
NOTE 8: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable include amounts payable to brokers for purchases of cash
equivalents of $14,998,000 in 1994 and $24,998,000 in 1993.
Accrued expenses are as follows:
(In thousands) 1994 1993
- -----------------------------------------------------------------
Income taxes $ 1,007 $ 2,253
Taxes, other than income taxes 6,595 7,031
Payroll 4,063 4,087
Insurance 3,943 3,899
Interest 8,013 8,193
Other 17,002 11,902
------- -------
$40,623 $37,365
======= =======
F-12
38
NOTE 9: LONG-TERM DEBT
(In thousands) 1994 1993
- -----------------------------------------------------------------
SENIOR DEBT:
Adjustable Rate First Mortgage
Notes due March 29, 1996 $ 76,000 $ 80,750
11 1/2% Senior Notes due
February 15, 2002 78,000 78,000
Capital leases (Note 11) 14,172 19,934
Other 833
-------- --------
169,005 178,684
Less current portion 5,694 5,689
-------- --------
163,311 172,995
-------- --------
SUBORDINATED DEBT:
8% Convertible Subordinated Notes
due February 15, 2002 65,000 65,000
7% Subordinated Debentures due
February 1, 1994 13,191
-------- --------
65,000 78,191
Less current portion 13,191
-------- --------
65,000 65,000
-------- --------
Total long-term debt $228,311 $237,995
======== ========
The Senior Notes, issued at par, bear interest at 11 1/2%. The Convertible
Subordinated Notes, issued at par, bear interest at 8% and are convertible into
common stock of the Company at a conversion price of $9.41 per share, subject
to adjustments in certain events.
The Mortgage Notes bear interest at 1 1/2% above the three-month London
Interbank Offered Rate (LIBOR) and are repayable in $1,187,500 quarterly
installments. At January 29, 1995 the interest rate was 7.2%. The Mortgage
Notes are secured by first mortgages of 66 nursery and crafts retail stores
having a net book value of $88,031,000 including equipment at January 29, 1995.
At January 29, 1995 the Company had a $15,000,000 unsecured credit agreement
with a bank. The credit agreement is committed through July 1, 1995. There is
a commitment fee of 3/8 of 1% on the unused portion. At the Company's option,
interest under the agreement may be based on LIBOR or on the certificate of
deposit rate, as defined in the agreement, instead of on the prime rate.
F-13
39
The bank agreement requires the Company, among other things, to maintain
minimum levels of earnings, tangible net worth and certain minimum financial
ratios. The Company was in compliance with all of the bank agreement covenants
at January 29, 1995.
Under the most restrictive provisions of any of the debt and bank agreements,
total shareholders' equity available to pay cash dividends or purchase treasury
stock was below the required minimum level by $3,690,000 at January 29, 1995.
The 7% Debentures were redeemed on February 1, 1994. Amortization of the
original issue discount was based on an effective interest rate of 9% and
amounted to $282,000 in 1993 and $261,000 in 1992.
Aggregate maturities of long-term debt for the five years subsequent to 1994,
excluding capital lease obligations (Note 11), are $4,899,000 in 1995,
$71,416,000 in 1996, $184,000 in 1997, $205,000 in 1998 and $129,000 in 1999.
NOTE 10: SHAREHOLDERS' EQUITY
The Company's 1986 stock incentive plan, as amended in 1992, provides for the
granting of options to purchase up to 2,500,000 shares of common stock.
Options are granted to key employees and expire no later than ten years after
grant. In April 1994 the Company issued restricted stock grants under the plan
to employees of the Company. Restrictions on the grants will expire on January
28, 1996. At January 29, 1995, 68,300 shares remain subject to restriction.
The market value of the shares granted amounted to $341,500 for fiscal 1994 and
was charged to selling expense. The directors' stock option plan provides for
the issuance of options to members of the Board of Directors who are not
employees of the Company; options expire no later than five years after grant.
In October 1994 the Company granted each outside director options to purchase a
total of 25,000 shares of common stock under a newly created plan. The grants
and the plan are subject to shareholder approval at the next annual meeting of
shareholders in May 1995 and therefore have not been included in the following
option information for the year ended January 29, 1995. Under both plans,
options are granted at prices not less than fair market value on the date of
grant.
F-14
40
Changes in stock options during the three years ended January 29, 1995 are as
follows:
Shares Option Prices
--------- -------------
OUTSTANDING AT JANUARY 26, 1992 574,250 $ 5.50-14.38
Options granted 400,000 8.25- 9.00
Options exercised (101,000) 7.31- 8.50
Options cancelled (70,000) 7.31- 8.50
--------- ------------
OUTSTANDING AT JANUARY 31, 1993 803,250 5.50-14.38
Options granted 166,150 8.38-10.06
Options cancelled (26,000) 8.50-10.06
--------- ------------
OUTSTANDING AT JANUARY 30, 1994 943,400 5.50-14.38
Options granted 131,000 4.75- 5.75
Options cancelled (64,000) 5.50-14.38
--------- -----------
OUTSTANDING AT JANUARY 29, 1995 1,010,400 $ 4.75-14.38
========= ============
At January 29, 1995 outstanding options for 787,250 shares are exercisable and
1,348,300 shares are available for granting additional options.
The Company's certificate of incorporation authorizes the issuance of 1,000,000
shares of $1.00 par value preferred stock, none of which have been issued.
Each share of the Company's common stock carries with it one right to purchase
one additional share of common stock from the Company for $60 upon the
occurrence of certain events, at which time the rights become exercisable.
Separate rights certificates will then be issued and the rights can be traded
separately. In the event the rights become exercisable and thereafter the
Company is acquired in a merger or other business combination, each right will
entitle the holder, upon payment of the exercise price, to receive a number of
shares of the surviving corporation's common stock equal to the exercise price
divided by 50% of the market price. At the Company's option, the rights are
redeemable in their entirety at $.01 per right. The rights are subject to
adjustment to prevent dilution and expire March 7, 2000.
F-15
41
NOTE 11: LEASES
The Company's capital leases are principally for offices and retail stores, for
periods ranging up to 25 years. The Company's operating leases are principally
for retail store locations.
At January 29, 1995 lease obligations under capital leases, included in
long-term debt (Note 9), and operating leases with lease terms longer than one
year, are as follows:
Capital Operating
(In thousands) Leases Leases
- -----------------------------------------------------------------
Payable in 1995 $ 2,375 $ 13,653
1996 2,508 13,528
1997 2,499 12,502
1998 2,421 11,510
1999 2,363 10,845
Payable after 1999 14,955 85,651
-------- --------
Total minimum lease obligations 27,121 $147,689
========
Executory costs (58)
Amount representing future interest (12,891)
--------
Present value of net minimum lease
obligations $ 14,172
========
Future sublease rental income $ 4,551
========
Rent expense was $21,045,000 in 1994, $24,602,000 in 1993 and $22,976,000 in
1992. Rent expense includes additional rentals based on retail store sales (in
excess of the minimums specified in leases) of $760,000 in 1994, $804,000 in
1993 and $634,000 in 1992 and is reduced by sublease rental income of $873,000
in 1994, $824,000 in 1993 and $924,000 in 1992.
NOTE 12: PENSION PLAN
Retirement benefits for both salaried and hourly employees are provided
through a noncontributory, defined contribution plan. Contributions are
determined by the Board of Directors based upon assessment of the Company's
fiscal year's profitability as related to pre-established financial objectives.
The 1994 contribution approved by the Board of Directors subsequent to fiscal
year end was $500,000. There were no contributions made to the plan for 1993
and 1992. The plan also includes a 401(k) component, permitting employees to
invest from 1% to 10% of their salary in the employee's choice of an equity
fund, a balanced fund or a fixed income fund. The Company does not match
employee contributions.
F-16
42
The Company also sponsors a noncontributory, defined benefit pension plan which
covers former hourly employees of several discontinued operations and provides
pension benefits of stated amounts multiplied by years of service. The Company
contributes to this plan based on funding requirements determined by consulting
actuaries using the accrued benefit (unit credit) method.
Net periodic pension cost consisted of the following:
(In thousands) 1994 1993 1992
- ------------------------------------------------------------------------
Interest cost on projected benefit
obligations $ 2,065 $ 2,289 $ 2,381
Actual return on plan assets (2,684) (3,342) (4,042)
Net amortization and deferrals 610 1,369
-------- -------- --------
Net periodic pension income $ (619) $ (443) $ (292)
======== ======== ========
The following table summarizes the plan's funding status and the liability
recognized in the consolidated balance sheets as of January 29, 1995 and
January 30, 1994:
(In thousands) 1994 1993
- ------------------------------------------------------------
Actuarial present value of
pension benefit obligations,
all of which are vested $(26,892) $(30,787)
Plan assets at fair value 26,906 31,944
Unrecognized (gain) loss 358 (1,404)
-------- --------
Pension asset (liability) in the
consolidated balance sheets $ 372 $ (247)
======== ========
The above amounts were determined as of December 31 each year. The assumed
discount rate for projected benefit obligations was 8.5% for 1994 and 7.25% for
1993. The expected long-term return on plan assets was 9% for 1994 and 1993.
The assets of the plan consist primarily of U.S. government securities and
listed stocks and bonds, including common stock of the Company with a quoted
market value of $1,707,000 at December 31, 1994 and $2,461,000 at December 31,
1993.
F-17
43
NOTE 13: OTHER POSTRETIREMENT BENEFITS
The Company provides certain life insurance benefits to eligible retired
employees. The cost of this benefit is not significant to the Company. In
addition, the Company has provided for certain health care and life insurance
benefits which cover former hourly employees of several discontinued
operations.
The Company adopted SFAS No. 106 as of February 1, 1994. The Statement
requires that the cost of such benefits be recognized in the financial
statements during the period employees provide service to the Company. The
Company elected to immediately recognize the accumulated liability. At the
date of adoption, the unrecognized accumulated liability was not material to
the consolidated financial statements of the Company.
The accrued postretirement liability recognized in the consolidated balance
sheets was $1,598,000 at January 29, 1995 and $1,463,000 at January 30, 1994.
The net periodic postretirement benefit cost was $119,000 for 1994 and $99,000
for 1993. The amounts were determined as of December 31 each year. The
discount rate used in determining the accumulated postretirement benefit
obligation was 8.5% for 1994 and 7.25% for 1993. The assumed health care cost
trend rate used in measuring the accumulated postretirement benefit obligation
was 10.25% in 1994 grading down uniformly to 6.5% in 2005. If the health care
cost trend rate assumptions were increased by 1%, the accumulated
postretirement benefit obligation would be increased by 2.3% for 1994. The
effect of this change on the interest cost component of net periodic
postretirement benefit cost for 1994 would be an increase of 1.9%.
NOTE 14: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents
The carrying value amount approximates fair value because of the short maturity
of those investments.
Other investments
The Company's other investments represent investments in untraded companies.
Based upon the Company's review of the financial statements of these companies
the carrying amount approximates fair value.
F-18
44
Long-term debt
The fair value of the Company's long-term debt is estimated based upon the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
The estimated fair values of the Company's financial instruments at January 29,
1995 and January 30, 1994 are as follows:
(In thousands) 1994 1993
- -----------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- ----------------------------------------------------------------------------
Cash and cash equivalents $ 83,362 $ 83,362 $ 62,855 $ 62,855
Other investments 3,344 3,344 2,277 2,277
Long-term debt 234,005 216,065 256,875 256,290
NOTE 15: LITIGATION AND OTHER CONTINGENCIES
In the normal course of business the Company is subject to various claims. In
the opinion of management, any ultimate liability arising from or related to
these claims should not have a material adverse effect on future results of
operations or the consolidated financial position of the Company.
The Company has certain lease obligations which extend to the year 2001 for
businesses sold. In the opinion of management, any ultimate liability arising
from or related to these obligations, to the extent not otherwise provided for,
should not have a material adverse effect on future operations or the
consolidated financial position of the Company.
NOTE 16: SUPPLEMENTAL CASH FLOW INFORMATION
Income tax payments were $414,000 in 1994, $922,000 in 1993 and $6,490,000 in
1992. Interest payments were $21,431,000 in 1994, $20,912,000 in 1993, and
$17,935,000 in 1992. Noncash investing and financing activities for 1994
included the purchase of land for $891,000 in exchange for a mortgage payable
and the issuance of 68,300 shares of common stock representing restricted stock
grants. In 1993 noncash investing and financing activities included the
issuance of 1,940,000 shares of common stock at the then market value of
$17,703,000 in exchange for an equity investment in an unconsolidated
affiliate.
F-19
45
Net cash used for discontinued operations:
Net cash used for discontinued operations for fiscal 1994, 1993 and 1992 is
primarily for payments related to businesses sold in prior years which were
treated as discontinued operations and in 1992 included payments made to fund a
defined benefit pension plan which covers former hourly employees of several
discontinued operations.
F-20
46
QUARTERLY INFORMATION
Fourth Third Second First
Quarter Quarter Quarter Quarter
(12 wks) (12 wks) (12 wks) (16 wks)
- -------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
1994 3,6
Sales $169,870 $ 98,022 $114,905 $185,190
======== ======== ======== ========
Cost of sales, including buying and occupancy $115,448 $ 76,217 $ 84,595 $126,579
======== ======== ======== ========
Income (loss) from continuing operations
before income taxes $ 9,674 $ (8,916)1 $ (3,857) $ 10,784
======== ======== ======== ========
Net income (loss) $ 9,574 $ (7,047)2 $ (3,373) $ 9,431
======== ======== ======== ========
Primary earnings (loss) per share 7:
Net income (loss) $ .43 $ (.32) $ (.15) $ .43
======== ======== ======== ========
Fully diluted earnings (loss) per share 7:
Net income (loss) $ .37 $ (.32) $ (.15) $ .38
======== ======== ======== ========
1993 5,6
Sales $166,347 $105,370 $108,882 $188,003
======== ======== ======== ========
Cost of sales, including buying and occupancy $131,827 $ 81,240 $ 84,657 $128,000
======== ======== ======== ========
Income (loss) from continuing operations
before income taxes and net equity loss
and investment write-down $(35,796) $(13,918) $(12,234) $ 8,042
======== ======== ======== ========
Loss from discontinued operations $ (840)
======== ======== ======== ========
Net income (loss) $(42,678)4 $(11,406) $ (8,552) $ 6,576
======== ======== ======== ========
Primary earnings (loss) per share 7:
Income (loss) from continuing operations $ (1.90) $ (.52) $ (.39) $ .31
Loss from discontinued operations (.03)
-------- -------- -------- --------
Net income (loss) $ (1.93) $ (.52) $ (.39) $ .31
======== ======== ======== ========
Fully diluted earnings (loss) per share 7:
Income (loss) from continuing operations $ (1.90) $ (.52) $ (.39) $ .27
Loss from discontinued operations (.03)
-------- -------- -------- --------
Net income (loss) $ (1.93) $ (.52) $ (.39) $ .27
======== ======== ======== ========
1 Includes a gain of $3,612 from the sale of the Company's investment in
Sunbelt Nursery Group, Inc.
2 Includes $1,000 of income tax reserves no longer required.
3 Had the actual annual effective tax rate been applied to the quarterly
information, the first quarter net income would have increased by $1,353,
or $.06 per share, the second quarter net loss would have decreased by
$484, or $.02 per share, and the third quarter net loss would have
decreased by $869, or $.04 per share.
4 Includes $22,876 ($15,098 net of tax benefit) representing a reserve for
store closings and other costs and $15,746 representing the write-down of
the Sunbelt investment.
5 Had the actual annual effective tax rate been applied to the quarterly
information, the first quarter net income would have increased by $3,056,
or $.15 per share, and the fourth quarter net loss would have increased by
$3,056 or $.15 per share.
6 Share and per share data have been restated to reflect the 5% stock
dividend.
7 Due to changes in the number of shares outstanding during the year,
quarterly earnings per share do not necessarily add to the totals for the
year.
F-21
47
FIVE YEAR FINANCIAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts) 1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Sales of continuing operations $567,987 $568,602 $557,818 $520,072 $515,470
Income (loss) from continuing operations before
income taxes $ 7,685 1 $(53,906) $ 1,005 $ 14,601 6 $ 1,757
Income (loss) from continuing operations $ 8,585 2 $(55,220)3 $ 2,853 4 $ 8,703 $ 3,303 8
Net income (loss) $ 8,585 $(56,060) $ 5,322 5 $ 13,783 7 $ 3,303
Income (loss) per share from continuing operations 9 $ .39 1,2 $ (2.54)3 $ .14 4 $ .43 6 $ .16 8
Net income (loss) per share 9 $ .39 $ (2.58) $ .27 5 $ .69 7 $ .16
Cash dividends per share $ .00 $ .38 $ .36 $ .34 $ .32
Average shares outstanding 9 22,135 21,751 20,043 20,075 20,533
Working capital $ 73,499 $ 50,525 $130,542 $ 62,278 $ 60,240
Ratio of current assets to current liabilities 1.7-1 1.4-1 2.4-1 1.6-1 1.6-1
Total year-end assets $464,858 $478,205 $531,019 $435,304 $445,735
Long-term debt, including current portion $234,005 $256,875 $262,014 $166,043 $177,743
Shareholders' equity $117,650 $108,714 $154,358 $155,389 $148,632
Long-term debt as a percentage of total capitalization 67% 70% 63% 52% 54%
Number of common shares outstanding 9 22,141 22,071 20,131 20,030 19,941
Book value per share 9,10 $ 5.40 $ 5.01 $ 7.77 $ 7.83 $ 7.46
Price range per share as traded on the
New York Stock Exchange $6 7/8-3 3/4 $10 5/8-5 7/8 $10 1/2-7 3/4 $9 3/4-5 7/8 $7 1/2-3 7/8
- ----------------------------------------------------------------------------------------------------------------------------------
1 Includes a gain of $3,612 from the sale of the Company's investment in
Sunbelt Nursery Group, Inc.
2 Includes $1,000 of income tax reserves no longer required.
3 Includes $22,876 ($15,098 net of taxes) representing a reserve for store
closings and other costs and $17,703 representing the net equity loss and
write-down of the Sunbelt investment.
4 Includes $1,914 of income tax reserves no longer required.
5 Includes $2,850 representing the cumulative effect of the Company's
adoption of SFAS No. 109.
6 Includes gain from the sale of Calloway's Nursery, Inc. of approximately
$13,503 ($7,775 net of taxes).
7 Includes $5,940 of income tax reserves no longer required that were
related to discontinued operations.
8 Includes $2,651 of income tax reserves no longer required.
9 Share and per share data have been restated to reflect the 5% stock
dividend described in Note 1 of the Notes to Consolidated Financial
Statements.
10 Includes notes receivable from exercise of stock options.
F-22
48
Schedule VIII
GENERAL HOST CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED JANUARY 29, 1995
(In thousands)
Additions
-----------------------
Balance, Charged Charged Balance,
Beginning to Costs to Other End
of Year and Expenses Accounts Deductions of Year
--------- ------------ -------- ---------- ---------
Deducted from accounts receivable:
Allowance for doubtful accounts $ 200 $ 200
Non-current assets:
Accumulated amortization of
intangible assets 7,881 $ 937 8,818
Accumulated amortization of
deferred mortgage costs 3,258 680 3,938
Other liabilities and deferred credits:
Estimated liabilities in connection
with discontinued operations 1,547 278 398 (1) 1,427
Other liabilities 4,932 1,135 19 (1) 6,048
(1) Primarily reclassification to accrued expenses.
F-23
49
Schedule VIII
GENERAL HOST CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED JANUARY 30, 1994
(In thousands)
Additions
-----------------------
Balance, Charged Charged Balance,
Beginning to Costs to Other End
of Year and Expenses Accounts Deductions of Year
--------- ------------ -------- ---------- ---------
Deducted from marketable securities:
Valuation allowance for marketable
securities $ 10 $ 10 $ -0-
Deducted from accounts receivable:
Allowance for doubtful accounts 101 $ 100 1 200
Non-current assets:
Accumulated amortization of
intangible assets 6,941 940 7,881
Accumulated amortization of
deferred mortgage costs 2,603 655 3,258
Other liabilities and deferred credits:
Estimated liabilities in connection
with discontinued operations 1,961 189 603 (1) 1,547
Other liabilities 5,998 1,246 2,312 (2) 4,932
(1) Primarily reclassification to accrued expenses.
(2) Primarily related to the provision for store closings.
F-24
50
Schedule VIII
GENERAL HOST CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED JANUARY 31, 1993
(In thousands)
Additions
-----------------------
Balance, Charged Charged Balance,
Beginning to Costs to Other End
of Year and Expenses Accounts Deductions of Year
--------- ------------ -------- ---------- ---------
Deducted from marketable securities:
Valuation allowance for marketable
securities $ 10 $ 10
Deducted from accounts receivable:
Allowance for doubtful accounts $ 35 102 $ 36 101
Non-current assets:
Accumulated amortization of
intangible assets 6,000 941 6,941
Accumulated amortization of
deferred mortgage costs 1,971 632 2,603
Other liabilities and deferred credits:
Estimated liabilities in connection
with discontinued operations 2,094 201 (1) 334 (2) 1,961
Other liabilities 4,327 1,934 184 (1) 447 5,998
(1) Primarily reclassification from accrued expenses.
(2) Primarily charges related to discontinued operations.
F-25
51
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
(4) Instruments Defining the Rights of Security
Holders, Including Indentures:
(c) Note and Indenture Extension Agreement dated
as of January 27, 1995 between Frank's
Nursery and Crafts, Inc. and The Bank of
New York and W.T. Cunningham, as Trustees.
(10) Material Contracts:
(c) 1995 Executive Compensation Program.
(11) Additional Earnings Per Share Information.
(21) Subsidiaries.
(23) Consent of Price Waterhouse.
(24) Powers of Attorney:
(a) C. Whitcomb Alden, Jr. Director
(b) Christopher A. Forster Director
(c) S. Joseph Fortunato Director
(d) Philip B. Harley Director
(e) Richard W. Haskel Director
(f) Edward H. Hoornstra Director
(g) Charles B. Johnson Director
(h) Kelly Ashton Sant Albano Director
(27) Financial Data Schedule.