1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 1995 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 filing requirements for
the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock $.01 par value per share, outstanding as
of May 26, 1995, was 47,425,848 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
Page
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
Signature 10
3
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
APRIL 29, January 28,
1995 1995*
- ------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 12,863 $ 40,356
Accounts receivable 6,810 5,524
Inventories 356,413 302,132
Prepaid expenses and deferred income taxes 36,079 33,261
- ------------------------------------------------------------------------------------------------
Total current assets 412,165 381,273
- ------------------------------------------------------------------------------------------------
Property and equipment - net 160,750 161,500
Other assets 8,554 8,847
- ------------------------------------------------------------------------------------------------
$581,469 $551,620
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $114,406 $103,401
Accrued liabilities 33,300 38,289
Income taxes 7,354 18,982
Notes payable and current maturities of
long-term obligations 19,895 10,000
- ------------------------------------------------------------------------------------------------
Total current liabilities 174,955 170,672
- ------------------------------------------------------------------------------------------------
Long-term obligations 57,800 40,000
Deferred income taxes and other noncurrent liabilities 24,905 25,714
Stockholders' equity:
Preferred stock - authorized 2,000,000 shares,
$.01 par value; none issued -- --
Common stock - authorized 90,000,000 shares, $.01
par value; issued 47,274,648 and 46,866,303,
shares respectively 473 469
Common stock - authorized 8,000,000 shares, $.01
par value; none issued -- --
Additional paid-in-capital 98,620 93,872
Retained earnings 223,695 220,699
Other adjustments 1,021 194
- ------------------------------------------------------------------------------------------------
Total stockholders' equity 323,809 315,234
- ------------------------------------------------------------------------------------------------
$581,469 $551,620
================================================================================================
* Condensed from audited financial statements
The accompanying notes are an integral part of these financial statements.
4
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Thirteen weeks ended
--------------------------
April 29, April 30,
1995 1994
- -------------------------------------------------------------------------------------------------
Net sales $291,797 $242,278
Cost and expenses:
Cost of sales 168,897 140,596
Selling and administrative expenses 116,923 97,468
Interest expense 1,308 970
Other - net (163) (796)
- -------------------------------------------------------------------------------------------------
286,965 238,238
- -------------------------------------------------------------------------------------------------
Income before income taxes 4,832 4,040
Income taxes 1,836 1,656
- -------------------------------------------------------------------------------------------------
Net income $ 2,996 $ 2,384
=================================================================================================
Income per common and common equivalent share $ .06 $ .05
=================================================================================================
Weighted average common and common
equivalent shares outstanding 48,482 48,141
=================================================================================================
The accompanying notes are an integral part of these condensed financial statements.
5
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Thirteen weeks ended
--------------------------
April 29, April 30,
1995 1994
- ------------------------------------------------------------------------------------------------
Cash provided by (used for) operations:
Net income $ 2,996 $ 2,384
Items not effecting cash:
Depreciation and amortization 6,792 6,114
Deferred income taxes 1,204 (4,036)
Other 1,836 613
Change in assets and liabilities (63,641) (37,742)
- ------------------------------------------------------------------------------------------------
Net cash used by operations (50,813) (32,667)
- ------------------------------------------------------------------------------------------------
Cash provided by (used for) investment activities:
Capital expenditures (6,398) (13,171)
Other 596 (150)
- ------------------------------------------------------------------------------------------------
Net cash used for investment activities (5,802) (13,321)
- ------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities:
Proceeds from credit agreements 32,695 24,900
Proceeds from exercise of stock options 1,427 236
Payment of long-term obligations (5,000) --
- ------------------------------------------------------------------------------------------------
Net cash provided by financing activities 29,122 25,136
- ------------------------------------------------------------------------------------------------
Decrease in cash $(27,493) $(20,852)
================================================================================================
The accompanying notes are an integral part of these condensed financial statements.
6
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The condensed consolidated balance sheet at April 29, 1995, and the
condensed consolidated statements of income and statements of cash flows for
the thirteen week period ended April 29, 1995, 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 April 29, 1995, and for the thirteen week 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
principals 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 28, 1995. The results of operations for the period ended
April 29, 1995, 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.
7
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
TRENDS. At April 29, 1995, the Company operated 498 ODD LOTS/BIG LOTS and 29
ITZADEAL! specialty retail stores selling close-out merchandise at substantial
discounts, 153 ALL FOR ONE (AFO) and 15 IT'S REALLY $1.00 single price point
retail stores, and 85 TOY LIQUIDATORS/TOYS UNLIMITED (TOY) close-out toy
stores. In comparison, there were 453 ODD LOTS/ BIG LOTS and 173 AFO stores in
operation at the end of the 1994 quarter. Wholesale operations are conducted
under the names CONSOLIDATED INTERNATIONAL and WISCONSIN TOY. The Company
introduced the ITZADEAL! retail concept in the second quarter of 1994. This
concept offers close-out merchandise in a format similar to AFO with differing
price points. The Company acquired certain assets of the TOY operations in May
of 1994.
The Company opened 10 ODD LOTS/BIG LOTS, 2 ITZADEAL! and 3 TOY stores in the
first quarter of 1995. In the same period 2 AFO stores were closed and certain
assets of the 15 IT'S REALLY $1 stores were acquired. It is anticipated
approximately 50 to 55 net new ODD LOTS/BIG LOTS stores, 35 net new ITZADEAL!
stores, and 35 net new TOY stores will be opened in fiscal 1995.
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 Company's 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 for the thirteen weeks ended April 29, 1995, increased 20.4%
to $291.8 million compared to first quarter 1994 net sales of $242.3 million.
Retail sales increased 19.8% in the 1995 quarter to $283.4 million reflecting
the greater number of stores in operation during the period and a 4.3% increase
in comparable store sales for stores open two full years at the beginning of
fiscal 1995. Comparable store sales in the prior year first quarter declined
0.5% primarily as a result of unusually severe winter storms in many of the
Company's market areas.
GROSS PROFIT. Gross profit as a percent of net sales was 42.1% in the first
quarter of fiscal 1995 compared to 42.0% in the prior year quarter. Retail
gross profit was 42.6% and 42.4% in the respective quarters.
SELLING AND ADMINISTRATIVE EXPENSES. As a percent to net sales selling and
administrative expenses were 40.1% and 40.2% in the first quarters of fiscal
1995 and 1994, respectively. The improvement reflects the effect of fixed
store operating expenses on a increased sales volume.
INTEREST EXPENSE. Interest expense was $1.3 million for the thirteen weeks
ended April 29, 1995, compared to $1.0 million (net of $.4 million in
capitalized interest) in the same 1994 period.
OTHER. Reflected under the caption of other-net in the condensed consolidated
statements of income for the thirteen weeks April 30, 1994, is a nonrecurring
$.5 million gain on the sale of corporate transportation equipment.
8
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - continued
- ---------------------------------
INCOME TAXES. The Company's effective tax rate decreased from 41% in the first
quarter of 1994 to 38% in the 1995 period. This decrease reflects the
expiration of the Targeted Jobs Tax Credits in the fourth quarter of 1994
offset by tax benefits of the Company's investment in corporate owned life
insurance.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Financing for future store growth, capital expenditure programs and seasonal
operating requirements are financed by internally generated funds and available
credits facilities. At April 29, 1995, the Company had a $90 million revolving
credit facility through June 1, 1996, a $50 million letter of credit facility
through June 1, 1995, and $55 million of uncommitted credit facilities. The
revolving credit facility is seasonally adjusted to $110 million from August
through November and the letter of credit facility is seasonally adjusted to
$75 million from May through July. Availability for future use at April 29,
1995, under all credit facilities totaled $105 million. Subsequent to April 29,
1995, the Company extended its revolving credit agreement and letter of credit
facility under substantially the same terms. Management believes adequate
amounts of capital resources are available, or readily obtainable, to achieve
both short-term plans and long-term goals.
PROSPECTIVE INFORMATION
- -----------------------
Management is not aware of any current trends, events, demands, commitments, or
uncertainties which reasonably can be expected to have a material impact on the
liquidity, capital resources, financial position or results of operations of
the Company.
9
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 Vote of Security Holders.
No matter was submitted during the first 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.
10
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: May 26, 1995 By: /s/ Michael J. Potter
-------------- -------------------------------------
Michael J. Potter, Sr. Vice President,
Chief Financial Officer, and Principal
Accounting Officer
5
3-MOS
FEB-03-1996
JAN-29-1995
APR-29-1995
12,863
0
6,810
0
356,413
412,165
285,469
124,719
581,469
174,955
57,800
473
0
0
323,336
581,469
291,797
291,797
168,897
285,820
1,145
0
0
4,832
1,836
2,996
0
0
0
2,996
.06
.06
