1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 29, 1994 Commission file number 1-8897
CONSOLIDATED STORES CORPORATION
A Delaware Corporation
IRS No. 06-1119097
1105 North Market Street, Suite 1300
P.O. Box 8985
Wilmington, Delaware 19899
(302) 478-4896
Indicate 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, and (2) has been subject to such filling requirements for
the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock $.01 par value per share, outstanding as
of November 29, 1994, was 46,823,933 and there were no shares of Non-Voting
Common Stock, $.01 par value per share outstanding at that date.
2
CONSOLIDATED STORES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
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Page
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PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - Other Information 9
Signatures 10
Exhibit 27 11
FORM 10-Q Page 2 of 11
3
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
October 29, January 29,
1994 1994*
===========================================================================================================
ASSETS
Current Assets:
Cash and cash equivalents $ 16,258 $ 24,873
Accounts receivable 6,997 4,865
Inventories 385,634 252,880
Prepaid expenses and deferred income taxes 34,728 28,211
- - -----------------------------------------------------------------------------------------------------------
Total current assets 443,617 310,829
- - -----------------------------------------------------------------------------------------------------------
Property and equipment - net 162,664 147,848
Other assets 6,351 9,543
- - -----------------------------------------------------------------------------------------------------------
$612,632 $468,220
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities
of long-term obligations $ 34,600 $ --
Accounts payable 119,147 81,545
Accrued liabilities and income taxes 36,777 54,755
- - -----------------------------------------------------------------------------------------------------------
Total current liabilities 190,524 136,300
- - -----------------------------------------------------------------------------------------------------------
Long-term obligations, less current maturities 120,000 50,000
Deferred income taxes and other liabilities 25,150 23,385
Stockholders' equity:
Preferred stock - authorized 2,000,000 shares,
$.01 par value; none issued -- --
Common stock - authorized 90,000,000 shares,
$.01 par value; shares issued 46,807,273 and
46,485,428, respectively 468 465
Non-voting common stock - authorized 8,000,000
shares, $.01 par value; none issued -- --
Additional paid-in capital 93,212 89,817
Retained earnings 182,647 165,479
Other adjustments 631 2,774
- - -----------------------------------------------------------------------------------------------------------
Total stockholders' equity 276,958 258,535
- - -----------------------------------------------------------------------------------------------------------
$612,632 $468,220
===========================================================================================================
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed financial statements.
FORM 10-Q Page 3 of 11
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CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except earnings per share data)
Thirteen weeks ended Thirty-nine weeks ended
------------------------- -----------------------
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
===============================================================================================================
Sales $310,108 $261,058 $825,200 $705,678
Costs and expenses:
Cost of sales 174,484 145,999 470,239 398,007
Selling and administrative expenses 119,188 102,117 321,297 279,593
Interest expense 2,600 1,713 5,382 4,575
Other - net 149 (106) (817) (1,039)
---------------------------------------------------------------------------------------------------------------
296,421 249,723 796,101 681,136
---------------------------------------------------------------------------------------------------------------
Income before income taxes 13,687 11,335 29,099 24,542
Income taxes 5,612 4,533 11,931 9,819
---------------------------------------------------------------------------------------------------------------
Net income $ 8,075 $ 6,802 $ 17,168 $ 14,723
===============================================================================================================
Income per common and common
equivalent share $ .17 $ .14 $ .36 $ .31
===============================================================================================================
Weighted average number of
common and common equivalent
shares outstanding 48,076 48,026 48,037 47,913
===============================================================================================================
The accompanying notes are an integral part of these condensed financial statements.
FORM 10-Q Page 4 of 11
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CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Thirty-nine weeks ended
---------------------------------
October 29, October 30,
1994 1993
=================================================================================================================
Cash provided by (used for) operations:
Net income $ 17,168 $ 14,723
Items not effecting cash:
Depreciation and amortization 18,793 17,051
Deferred income taxes (3,442) 1,491
Other 591 7,419
Changes in assets and liabilities (115,283) (93,134)
- - -----------------------------------------------------------------------------------------------------------------
Net cash used for operations (82,173) (52,450)
- - -----------------------------------------------------------------------------------------------------------------
Cash provided by (used for) investment activities:
Capital expenditures (34,860) (35,738)
Other (15) 308
- - -----------------------------------------------------------------------------------------------------------------
Net cash used for investment activities (34,875) (35,430)
- - -----------------------------------------------------------------------------------------------------------------
Cash provided by financing activities:
Net proceeds from credit agreements 104,600 63,500
Exercise of stock options 726 811
Increase in deferred credits 3,107 --
- - -----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 108,433 64,311
- - -----------------------------------------------------------------------------------------------------------------
Decrease in cash $ (8,615) $(23,569)
=================================================================================================================
Supplemental Data
-----------------
Income taxes paid $ 24,752 $ 14,642
Interest paid $ 7,595 $ 6,053
The accompanying notes are an integral part of these condensed financial statements.
FORM 10-Q Page 5 of 11
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CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The condensed consolidated balance sheet at October 29, 1994, and the condensed
consolidated statements of income and statements of cash flows for the thirteen
and thirty-nine week periods ended October 29, 1994, have been prepared by the
Company without audit. In the opinion of management, all adjustments necessary
to present fairly the financial position, results of operations, and cash flows
at October 29, 1994, and for all periods presented have been made. Such
adjustments consisted only of normal recurring items.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or condensed. It is suggested that the condensed consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report for the year ended
January 29, 1994. The results of operations for the period ended October 29,
1994, may not necessarily be indicative of the operating results for the full
year.
Note 2 - Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share are based on the weighted
average number of shares outstanding during each period which includes the
additional number of shares which would have been issued upon exercise of stock
options assuming that the Company used the proceeds received to purchase
additional shares at market value.
FORM 10Q Page 6 of 11
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CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
TRENDS. The Company is a leading retailer and wholesaler of closeout
merchandise. At October 29, 1994, retail operations were conducted through 483
ODD LOTS/BIG LOTS and 22 iTZADEAL! specialty retail stores, 158 ALL FOR ONE
single price point retail stores and 82 TOY LIQUIDATORS/TOYS UNLIMITED STORES
(TOYS) discount toy stores. In comparison, there were 428 ODD LOTS/BIG LOTS and
173 ALL FOR ONE stores in operation at the end of the 1993 third quarter.
Wholesale operations are conducted under the name of CONSOLIDATED INTERNATIONAL
and WISCONSIN TOY. It is anticipated 55 net new ODD LOTS/BIG LOTS and 20 to 30
iTZADEAL! stores will be opened in fiscal 1994. A summary of change in the
number of stores in operation is presented below.
Beginning Format End of
of Year Opened Closed Conversion* Quarter
- - ---------------------------------------------------------------------------------------------------------------
1994
ODD LOTS/BIG LOTS 432 65 (14) -- 483
ALL FOR ONE 177 -- (8) (11) 158
iTZADEAL! -- 11 -- 11 22
TOYS** -- 82 -- -- 82
- - ---------------------------------------------------------------------------------------------------------------
609 158 (22) -- 745
- - ---------------------------------------------------------------------------------------------------------------
1993
ODD LOTS/BIG LOTS 381 61 (14) -- 428
ALL FOR ONE 160 16 (3) -- 173
iTZADEAL! -- -- -- -- --
TOYS -- -- -- -- --
- - ---------------------------------------------------------------------------------------------------------------
541 77 (17) -- 601
- - ---------------------------------------------------------------------------------------------------------------
* Converted from ALL FOR ONE single price point format to iTZADEAL! merchandising concept.
** Acquired certain assets on May 18, 1994.
The Company's retail business is somewhat seasonal. Due to
the holiday season, the fourth quarter generally reflects higher net sales and
net income than the other quarters. The first quarter is usually the least
profitable reflecting the traditional slow retail sales period following the
holiday season. Quarterly fluctuations in inventory balances are normal
reflecting the opportunistic purchases available at any given time and the
expansion of the Company's store base. Historically, on a per store basis,
inventory levels are lower at the end of the fiscal year and build through the
remaining three quarters of the year to a peak level in the third quarter.
Accounts payable generally follow a trend similar to inventories.
SALES. Net sales in the third quarter of 1994 increased 18.8% to $310.1
million from $261.1 million. For the thirty-nine weeks ended October 29, 1994,
net sales increased 16.9% to $825.2 million. Reflected in the quarterly and
year-to-date sales gains are increases in net retail sales of 18.5% and 16.6%,
respectively. The year to date sales volume reflects the negative impact in
each first
FORM 10Q Page 7 of 11
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CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - (Continued)
- - -----------------------------------
quarter of severe winter storms in many of the Company's market areas in
addition to the expansion of the Company's retail store base. For 1994
comparable store sales for stores open two full years at the beginning of
fiscal 1994 increased 2.0% in the third quarter and were even for the
thirty-nine week period. In the prior year comparable store sales increased
4.0% in the third quarter and were a positive 2.2% for the year to date period.
GROSS PROFIT. Gross profit, as a percentage of net sales, was 43.7% for the
third quarter of 1994 and 43.0% for the year-to-date period. In contrast gross
profit percentages in the preceding year were 44.1% and 43.6%, respectively.
Retail gross profit in the third quarter of 1994 and 1993 were 44.2% and 44.6%,
respectively. For the first nine months of 1994 retail gross profit was 43.4%
compared to 44.0% in the prior year. The decline in gross profit percentage is
primarily attributable to markdowns associated with softlines offset slightly
by benefits realized from inventory control programs.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses as a
percent of net sales were 38.4% and 39.1% in the third quarters of 1994 and
1993, respectively. For the thirty-nine week periods of 1994 and 1993 selling
and administrative expenses were 38.9% and 39.6% of net sales. The improvement
reflects the reduction of previously recognized operating expenses, leverage
from store growth on corporate fixed expenses, the benefits of implemented cost
controls, and general operating efficiencies.
INTEREST EXPENSE. Interest expense increased $0.9 million in the third
quarter of 1994 compared to the same 1993 period. This rise reflects an
increase in the weighted average seasonal borrowings and higher effective
interest rates on seasonal borrowings offset to some extent by the benefit of
capitalized interest associated with the construction of a addition to the
Company's warehouse facility.
INCOME TAXES. The Company's effective income tax rate has increased from
40.0% in fiscal 1993 to 41.0% in 1994. The increase represents higher tax rates
in certain states which the Company operates, the utilization of state
operating loss carryforwards and a reduction in the benefits from Targeted Jobs
Tax Credits.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Financing for store expansion, capital expenditure programs, and seasonal
operating requirements are financed by internally generated funds and
available credit facilities. The Company has a $90 million revolving credit
facility through June 1, 1996, and a $50 million letter of credit facility
through June 1, 1995. Seasonal increases in the revolving credit and letter
of credit facility to $110 million and $75 million, respectively are available.
Additional uncommitted credit facilities totaling $55 million are utilized as
needed. Availability under all credit agreements, including seasonal
increases, at October 29, 1994, totaled $100.3 million. The Company believes
that sufficient amounts of capital resources are available, or readily
obtainable, to achieve both short-term plans and long-term goals.
FORM 10Q Page 8 of 11
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the third quarter of
the fiscal year covered by this report to a vote of
security holders.
Item 5. Other Information. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Document
----------- ------------------------------------------------
27 Financial Data Schedule
(b) Reports on Form 8-K. None
FORM 10Q Page 9 of 11
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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.
CONSOLIDATED STORES CORPORATION
-------------------------------
(Registrant)
Dated: November 29, 1994 By: /s/ Michael J. Potter
-----------------------------
Senior Vice President, Chief
Financial Officer and Chief
Accounting Officer
FORM 10Q Page 10 of 11
5
9-MOS
JAN-28-1995
OCT-29-1994
16,258
0
6,997
0
385,634
443,617
274,908
112,244
612,632
190,524
120,000
468
0
0
276,490
612,632
825,200
825,200
470,239
470,239
(817)
0
5,382
29,099
11,931
17,168
0
0
0
17,168
.36
.36
