1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 3, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-6672 MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 95-2745285 (State or other jurisdiction of (I.R.S. employer identification incorporation or organization) number) Mailing and Street Address: 2430 East Del Amo Boulevard, Dominguez, California 90220-6306 - ------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (310) 537-9220 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Former name, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Shares Outstanding at August 31, 1997 24,455,771 - ------------------------------------------------------------------------------- 2 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands except par value) August 3, February 2, (Unaudited) (Audited) 1997 1997 --------- --------- Assets Current Assets: Cash and cash equivalents $ 10,170 $ 9,639 Merchandise inventories 209,966 182,275 Deferred income tax asset 8,800 8,800 Other current assets 10,536 9,284 --------- --------- Total current assets 239,472 209,998 Property, Equipment and Improvements: Land 35,224 35,224 Buildings and improvements 86,413 85,397 Automobiles and trucks 3,003 3,003 Furniture, fixtures and equipment 100,165 96,119 Leasehold improvements 87,687 85,533 Construction in progress 185 912 --------- --------- 312,677 306,188 Less: Accumulated depreciation and amortization (141,431) (132,693) --------- --------- 171,246 173,495 --------- --------- Other Assets 2,638 1,503 --------- --------- Total Assets $ 413,356 $ 384,996 ========= ========= August 3, February 2, (Unaudited) (Audited) 1997 1997 --------- --------- Liabilities and Stockholders' Equity Current Liabilities: Checks outstanding $ 12,482 $ 21,369 Current portion of long-term debt 3,122 3,172 Accounts payable 22,780 18,929 Accrued expenses 54,450 56,306 Income taxes payable - 13,408 Sales tax payable 5,283 3,793 --------- --------- Total current liabilities 98,117 116,977 --------- --------- Long-Term Debt 51,413 3,757 Deferred Income Taxes 12,233 12,233 Stockholders' Equity: Preferred stock, $1 par value; authorized, 500 shares; issued, none Common stock, $.02778 par value; authorized, 100,000 shares; issued 25,067 shares (August 3, 1997) and 26,262 shares (February 2, 1997) 696 729 Additional paid-in capital 26 9,606 Retained earnings 266,692 273,898 --------- --------- 267,414 284,233 Less: Treasury stock, at cost, 549 shares (August 3, 1997) and 1,589 shares (February 2, 1997) (15,821) (32,204) --------- --------- Total Stockholders' Equity 251,593 252,029 --------- --------- Total Liabilities and Stockholders' Equity $ 413,356 $ 384,996 ========= ========= - ------------ See Notes to Consolidated Financial Statements. 3 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (Amounts in thousands except per share amounts) For the three months ended For the six months ended -------------------------- ------------------------- August 3, July 28, August 3, July 28, 1997 1996 1997 1996 -------- -------- -------- -------- NET SALES $176,980 $157,952 $360,444 $317,084 COST OF SALES 102,719 92,525 207,629 181,251 -------- -------- -------- -------- GROSS PROFIT 74,261 65,427 152,815 135,833 -------- -------- -------- -------- Store expenses 52,620 46,567 103,483 94,258 Warehouse and administrative expenses 12,837 12,417 30,669 27,746 -------- -------- -------- -------- TOTAL OPERATING EXPENSES 65,457 58,984 134,152 122,004 OPERATING INCOME 8,804 6,443 18,663 13,829 INTEREST EXPENSE, NET 447 1,583 645 3,305 -------- -------- -------- -------- EARNINGS BEFORE INCOME TAXES 8,357 4,860 18,018 10,524 INCOME TAX EXPENSE 3,356 1,847 7,027 3,999 -------- -------- -------- -------- NET EARNINGS $ 5,001 $ 3,013 $ 10,991 $ 6,525 ======== ======== ======== ======== EARNINGS PER COMMON SHARE $ 0.20 $ 0.12 $ 0.43 $ 0.25 ======== ======== ======== ======== AVERAGE SHARES OUTSTANDING 25,415 25,721 25,415 25,707 ======== ======== ======== ======== - ------------ See Notes to Consolidated Financial Statements. 4 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (Amounts in thousands) Common Stock Treasury Stock ---------------------- Additional ---------------------------------------- Paid-in Retained Shares Amount Capital Earnings Shares Amount Total --------- --------- --------- --------- --------- --------- --------- Balance, February 2, 1997 26,262 $ 729 $ 9,606 $ 273,898 1,589 ($ 32,204) $ 252,029 Exercise of stock options 481 13 6,556 6,569 Non-cash compensation expense 24 24 Purchase of Treasury stock, at cost 636 (18,020) (18,020) Treasury stock retired (1,676) (46) (16,160) (18,197) (1,676) 34,403 0 Net income for six months 10,991 10,991 --------- --------- --------- --------- --------- --------- --------- Balance, August 3, 1997 25,067 $ 696 $ 26 $ 266,692 549 ($ 15,821) $ 251,593 ========= ========= ========= ========= ========= ========= ========= - ------------ See Notes to Consolidated Financial Statements. 5 MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands) For the six months ended ------------------------- August 3, July 28, 1997 1996 --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS Cash flows from operating activities: Cash received from customers $ 360,444 $ 317,084 Cash paid to suppliers and employees (366,577) (305,924) Income taxes paid (22,781) (5,460) Interest paid (net of amount capitalized) (528) (3,518) Interest received 19 85 --------- --------- Net cash (used in) provided by operating activities (29,423) 2,267 Cash flows from investing activities: Capital expenditures (6,886) (5,859) Fire related disposals (net) - 2,473 Proceeds from sale of fixed assets 685 1,525 --------- --------- Net cash used in investing activities (6,201) (1,861) Cash flows from financing activities: Borrowings under line of credit agreements and long-term debt 169,200 417,800 Repayments under line of credit agreements and long-term debt (121,750) (413,634) Repurchase of treasury stock (18,020) (4,704) Proceeds from sale of stock options 6,569 3,145 Other (net) 156 570 --------- --------- Net cash provided by financing activities 36,155 3,177 --------- --------- Increase in cash and cash equivalents 531 3,583 Cash and cash equivalents, beginning of period 9,639 7,285 ========= ========= Cash and cash equivalents, end of period $ 10,170 $ 10,868 ========= ========= See Notes to Consolidated Financial Statements. 6 MAC FRUGAL'S BARGAINS o CLOSE-OUTS-INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands) (continued) For the six months ended ------------------------ August 3, July 28, 1997 1996 -------- -------- Reconciliation of Net Income to Net Cash (Used In) Provided By Operating Activities: Net income $ 10,991 $ 6,525 -------- -------- Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 8,900 9,320 Gain on sale of fixed assets (450) (802) Non-cash compensation expense 24 43 Changes in assets and liabilities: Increase in inventory (27,691) (14,379) Increase in insurance receivable - (5,499) Decrease (increase) in other assets (41) 1,059 (Decrease) increase in checks outstanding, accounts payable, accrued expenses and sales tax payable (5,402) 7,461 Decrease in federal and state income taxes (15,754) (1,461) -------- -------- Total adjustments (40,414) (4,258) -------- -------- Net cash (used in) provided by operating activities ($29,423) $ 2,267 ======== ======== See Notes to Consolidated Financial Statements. 7 MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC. AND SUBSIDIARIES PART I - ITEM I - FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands) Note 1 The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles, by Mac Frugal's Bargains - Close-outs Inc., without audit. Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted or condensed. It is management's belief that the disclosures made are adequate to make the information presented not misleading and reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position and results of operations for the periods presented. The results of operations of the periods presented should not be considered as necessarily indicative of operations for the full year. It is recommended that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements for the year ended February 2, 1997 and the notes thereto included in the Company's 10-K. Note 2 Earnings per Common Share is based on the weighted average number of Common Shares outstanding, adjusted for dilutive effects of stock options, if applicable. Note 3 The Company's effective tax rate for fiscal 1996 and the first half of fiscal 1997 was 38.0% and 39.0%, respectively. For interim reporting purposes the entire provision for income tax expense was classified as current. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company had a net deferred tax liability of $3,433 at August 3, 1997 and February 2, 1997. The Company provided no valuation allowance against its deferred tax assets recorded as of August 3, 1997 and February 2, 1997 because management believes it is more likely than not that the deferred income tax assets will be realized. Note 4 At August 3, 1997, the Company classified that portion of its revolving debt as long-term that is not required to be repaid at its next annual clean-down date of February 28, 1998. Note 5 In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128). This statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The statement establishes standards for computing and presenting earnings per share and will require additional earnings per share disclosures within the financial statements issued after the effective date. The adoption of SFAS 128 will be reflected in the Company's 1997 consolidated financial statements. The adoption of SFAS 128 will not impact the Company's results of operations or financial position. 8 Note 6 In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, Disclosures about segments of an Enterprise and Related Information (SFAS 131), which will be effective for the Company beginning February 2, 1998. SFAS 131 redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. The Company does not believe adoption of this statement will have a material impact on current disclosures. 9 PART I - ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND INTERIM RESULTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS) THIS QUARTERLY REPORT MAY CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AFFECTING THE COMPANY'S OPERATIONS AND FINANCIAL PERFORMANCE. ALTHOUGH THE COMPANY BELIEVES THAT SUCH STATEMENTS REFLECT REASONABLE EXPECTATIONS OF FUTURE EVENTS, NO ASSURANCES CAN BE GIVEN THAT SUCH STATEMENTS WILL PROVE TO HAVE BEEN CORRECT. ACTUAL RESULTS MAY DIFFER MATERIALLY DUE TO GENERAL ECONOMIC CONDITIONS; CHANGES IN CONSUMER DEMAND AND PREFERENCES; ADVERSE WEATHER PATTERNS; COMPETITIVE FACTORS INCLUDING PRICING AND PROMOTIONAL ACTIVITIES OF MAJOR COMPETITORS; THE AVAILABILITY OF MERCHANDISE ON FAVORABLE TERMS; IMPORT RISKS INCLUDING POTENTIAL POLITICAL OR SOCIAL UNREST, DUTIES, TARIFFS AND QUOTAS; AND OTHER FACTORS DESCRIBED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. RESULTS OF OPERATIONS THIRTEEN WEEK PERIOD ENDED AUGUST 3, 1997 ("SECOND QUARTER 1997") COMPARED WITH THIRTEEN WEEK PERIOD ENDED JULY 28, 1996 ("SECOND QUARTER 1996"). Net sales increased 12.0% for the Second Quarter 1997 compared to the Second Quarter 1996. The sales increase was the combined result of opening 6 net new stores since July 28, 1996, and the positive impact of a 10.3% increase in comparable store sales. At August 3, 1997, 321 stores were in operation compared to 315 stores at July 28, 1996. The Company believes that the comparable sales increase was primarily attributable to the Company's strategic objective to increase sales and customer count by offering more branded products at more competitive prices. The comparable store sales increase for the Second Quarter 1997 was driven primarily by increases in consumables, softlines and seasonal merchandise, offset in part by a decrease in electronics. Sales from the 168 California stores open at August 3, 1997, were approximately 58% of the Company's total sales for the Second Quarter 1997 as compared to 59% for the Second Quarter 1996. California stores experienced a comparable store sales increase for the Second Quarter 1997, similar to that of the Company-wide experience. The gross profit margin of 42.0% for the Second Quarter 1997, increased from 41.4% for the Second Quarter 1996. The increase in the gross profit margin was primarily attributed to a higher initial markup on shipments to the stores in the Second Quarter 1997 versus the Second Quarter 1996. This higher markup on shipments was primarily attributed to a change in merchandise mix towards more branded consumable products in the Second Quarter 1997 versus a concentration in lower margin electronics during the Second Quarter 1996. Operating expenses were 37.0% of sales for the Second Quarter of 1997 compared to 37.3% for the Second Quarter 1996. The Company's sales increases in the Second Quarter 1997 translated into lower total operating expenses as a percent of sales. 10 Store expenses were 29.7% and 29.5% of sales for the Second Quarter 1997 and the Second Quarter 1996, respectively. General cost containment, leveraging of expenses, and increased sales in the Second Quarter 1997, offset in part by the minimum wage increase in California effective March 1997, resulted in fairly consistent expenses as a percent of sales. Warehouse and administrative expenses were 7.3% and 7.9% of sales for the Second Quarter 1997 and the Second Quarter 1996, respectively. Operating efficiencies in the warehouse in addition to leveraging a relatively fixed administrative expense structure with increased sales resulted in a decrease in expenses as a percent of sales. The Company continues to operate from one distribution center as a result of the loss of the New Orleans distribution facility which was destroyed by fire on March 21, 1996. Since then, all of the Company's stores have been serviced by the Company's warehouse and distribution facility in Rancho Cucamonga, California. The Company believes it can operate its warehouse operations more efficiently in the immediate future through its West Coast distribution facility. Through continued control over buying and inventory receipt management, the Company believes it has adequate capacity to service the Company's distribution needs in the immediate future. The $1,136 decrease in interest expense for the Second Quarter 1997 compared to the Second Quarter 1996 resulted from both a decrease in the average amount of debt outstanding and lower interest rates. The decrease in the average amount of debt outstanding is the combined result of a decrease in average inventories encompassing the last four quarters ended August 3, 1997 compared to the same time period in the prior year, earnings generated from operations during the last twelve months and proceeds from the insurance settlement on the New Orleans distribution center received in the second and fourth quarters of fiscal 1996, partially offset by the repurchase of $43,947 in stock during the last four quarters ended August 3, 1997. The income tax rate for the Second Quarter 1997 was 40.2%, and for interim purposes, the entire provision for income taxes is classified as current. Income taxes were adjusted in the Second Quarter 1997 to reflect a 39.0% rate for the first half of fiscal 1997. The income tax rate of 39.0% versus 38.0% for the prior year reflects certain projected changes in permanent items relative to pre-tax earnings. The Company had a net deferred tax liability of $3,433 at August 3, 1997 and February 2, 1997. TWENTY-SIX WEEK PERIOD ENDED AUGUST 3, 1997 ("YEAR-TO-DATE 1997") COMPARED WITH TWENTY-SIX WEEK PERIOD ENDED JULY 28, 1996 ("YEAR-TO-DATE 1996"). Net sales increased 13.7% for the Year-to-Date 1997 compared to the Year-to-Date 1996. The total sales increase was a result of opening 6 net new stores since July 28, 1996 and the positive impact of a 11.9% increase in comparable store sales. The Company believes that the comparable sales increase was primarily attributable to the Company's strategic objective to increase sales and customer count by offering more branded products at more competitive prices. The sales increase for the Year-to-Date 1997 was driven primarily by increases in consumables, softlines and seasonal merchandise, offset in part by a decrease in electronics. Sales from the 168 California stores open at August 3, 1997, were approximately 58% of the Company's total sales for the Year-to-Date 1997 as compared to 59% for the Year-to-Date 1996. California stores experienced a comparable store sales increase for the Year-to-Date 1997, similar to that of the Company-wide trend. 11 The gross profit margin of 42.4% for the Year-to-Date 1997, decreased from 42.8% for the Year-to-Date 1996. The decrease in the gross profit margin for the Year-to-Date 1997 versus the Year-to-Date 1996 was primarily attributed to an increase in markdowns to clear old aged inventory which is consistent with the Company's strategy to increase inventory turnover, offset in part by a higher initial markup on shipments to the stores during the Year-to-Date 1997 versus the Year-to-Date 1996. This higher initial markup on shipments was primarily attributed to a change in merchandise mix towards more branded consumable products during the Year-to-Date 1997 versus a concentration in lower margin electronics during the Year-to-Date 1996. Operating expenses were 37.2% of sales for the Year-to-Date 1997 compared to 38.5% for the Year-to-Date 1996. The Company's sales increases during the Year-to-Date 1997 in conjunction with leveraging of expenses translated into lower total operating expenses as a percent of sales. Store expenses were 28.7% and 29.7% of sales for the Year-to-Date 1997 and the Year-to-Date 1996, respectively. General cost containment, leveraging of expenses, and increased sales for the Year-to-Date 1997, offset in part by the minimum wage increase in California effective March 1997, resulted in a reduction in expenses as a percent of sales in most expense categories. Warehouse and administrative expenses were 8.5% and 8.8% of sales for the Year-to-Date 1997 and the Year-to-Date 1996, respectively. Operating efficiencies in the warehouse in addition to leveraging a relatively fixed administrative expense structure resulted in a decrease in expenses as a percent of sales. The Company continues to operate from one distribution center as a result of the loss of the New Orleans distribution facility which was destroyed by fire on March 21, 1996. Since then, all of the Company's stores have been serviced by the Company's warehouse and distribution facility in Rancho Cucamonga, California. The Company believes it can operate its warehouse operations more efficiently in the immediate future through its West Coast distribution facility. Through continued control over buying and inventory receipt management, the Company believes it has adequate capacity to service the Company's distribution needs in the immediate future. The $2,660 decrease in interest expense for the Year-to-Date 1997 compared to the Year-to-Date 1996 resulted from both a decrease in the average amount of debt outstanding and lower interest rates. The decrease in the average amount of debt outstanding is the combined result of a decrease in average inventories encompassing the last four quarters ended August 3, 1997 compared to the same time period in the prior year, earnings generated from operations during the last twelve months and proceeds from the insurance settlement on the New Orleans distribution center received in the second and fourth quarters of fiscal 1996, partially offset by the repurchase of $43,947 in stock during the last four quarters ended August 3, 1997. The income tax rate for the Year-to-Date 1997 was 39.0% and for interim purposes, the entire provision for income taxes is classified as current. The income tax rate of 39.0% versus 38.0% for the prior year reflects certain projected changes in permanent items relative to pre-tax earnings. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased $531 for the Year-to-Date 1997 compared to an increase of $3,583 for the Year-to-Date 1996. The decrease of cash and cash equivalents for the Year-to-Date 1997 compared to the Year-to-Date 1996 related primarily to the impact on inventory in the prior year related to the fire at the New Orleans distribution center on March 21, 1996, coupled with an associated increase in accounts payable for the Year-to-Date 1996. In contrast, the Year-to-Date 1997 reflects 12 income tax payments related to the increase in earnings for the Year-to-Date 1997 and the repurchase of treasury stock and associated debt, partially offset by the proceeds from the sale of stock options. As of August 3, 1997, the Company's long-term debt was 20.4% of equity and total debt was 21.7% of equity. At July 28, 1996, long-term debt and total debt were both 43.0% of equity. At February 2, 1997, long-term debt was 1.5% of equity and total debt was 2.7% of equity. The improvement in both leverage ratios at August 3, 1997 compared to July 28, 1996 reflects the decrease in average inventories encompassing the last four quarters ended August 3, 1997 and the borrowings necessary to finance them. The improvement also reflects the cash infusion of the insurance proceeds from the New Orleans distribution center settlement received in the second and fourth quarters of fiscal 1996 and the Company's earnings over the last four quarters, offset in part by the repurchase of stock during the last four quarters ended August 3, 1997. The increase in the level of long-term debt and total debt compared to February 2, 1997 reflects the building of the Company's inventories to meet increased operational needs due to sales demands and to meet seasonal needs. The Company believes its present lines of credit are adequate to meet any seasonal or temporary liquidity needs that cannot be met with cash flow from operating activities. At August 3, 1997, the Company had $10,000 outstanding revolving debt under the Company's $175,000 committed credit facility. There was $37,500 outstanding under the Company's uncommitted credit lines at August 3, 1997. The Company's current ratio as of August 3, 1997 was 2.44 versus 1.80 at fiscal year end 1996 and 2.74 at July 28, 1996. The decrease in the Company's current ratio at August 3, 1997 compared to July 28, 1996 is due primarily to an insurance receivable recorded in current assets as of July 28, 1996 and accrued liabilities recorded as of August 3, 1997, both related to the fire at the New Orleans distribution center. For the six months ended August 3, 1997, inventory turnover improved to 1.07 from .93 for the six months ended July 28, 1996. This improvement in inventory turnover reflects the Company's improved sales performance and reduced inventory levels for the first half of 1997 versus the first half of 1996. 13 PART II - OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders The Company held its 1997 Annual Meeting of Stockholders on June 18, 1997 (the "Annual Meeting"). At the Annual Meeting, shareholders elected all six directors nominated. The following table sets forth the number of votes cast for and votes withheld from each nominee. There were no broker non-votes for any nominee. Nominee For Withheld ------- --- -------- David H. Batchelder 21,994,525 1,060,243 Philip L. Carter 21,994,177 1,060,591 Peter C. Cooper 22,007,220 1,047,548 I. T. Corley 21,992,235 1,062,533 Mark J. Miller 21,991,155 1,063,613 James J. Zehentbauer 21,993,988 1,060,780 Item 6 Exhibits and Reports on Form 8-K (a) Exhibit 27 -- Financial Data Schedule. (b) Reports on Form 8-K - No reports on Form 8-K have been filed during the quarter ended August 3, 1997. 14 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. MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC. /s/ Philip L. Carter -------------------------------------------------------- Philip L. Carter Director, President and Chief Executive Officer /s/ Neil T. Watanabe -------------------------------------------------------- Neil T. Watanabe Senior Vice President and Chief Financial Officer DATE: September 10, 1997