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 30, 1994 Commission file number 1-8897
CONSOLIDATED STORES CORPORATION
A Delaware Corporation
IRS No. 06-1119097
1105 North Market Street
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 June 6, 1994, was 46,616,953 and there were no
shares of Non-voting Common Stock, $.01 par value per share
outstanding at that date.
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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
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CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
April 30, January 29,
1994 1994*
========================================================================== ================
ASSETS
Current Assets:
Cash and cash equivalents $ 4,021 $ 24,873
Accounts receivable 5,696 4,865
Inventories 298,808 252,880
Prepaid expenses and deferred income taxes 31,716 28,211
- - -------------------------------------------------------------------------- ----------------
Total current assets 340,241 310,829
- - -------------------------------------------------------------------------- ----------------
Property and equipment 154,382 147,848
Other assets 7,220 9,543
- - -------------------------------------------------------------------------- ----------------
$ 501,843 $ 468,220
========================================================================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 12,500 $ --
Accounts payable 112,249 81,545
Accrued liabilities 22,505 31,632
Income taxes 8,837 23,123
- - -------------------------------------------------------------------------- ----------------
Total current liabilities 156,091 136,300
- - -------------------------------------------------------------------------- ----------------
Long-term obligations 62,400 50,000
Deferred income taxes and other liabilities 22,367 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 46,605,953
and 46,485,428, respectively 466 465
Non-voting common stock - authorized 8,000,000
shares, $.01 par value; none issued -- --
Additional paid-in capital 91,725 89,817
Retained earnings 167,863 165,479
Other adjustments 931 2,774
- - -------------------------------------------------------------------------- ----------------
Total stockholders' equity 260,985 258,535
- - -------------------------------------------------------------------------- ----------------
$ 501,843 $ 468,220
========================================================================== ================
* Condensed from audited financial statements.
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Thirteen weeks ended
----------------------------
April 30, May 1,
1994 1993
========================================================================================================== ============
Net sales $ 242,278 $ 210,190
Cost and expenses:
Cost of sales 140,596 120,837
Selling and administrative expenses 97,468 86,635
Interest expense 970 1,353
Other - net (796) (845)
- - ---------------------------------------------------------------------------------------------------------- ------------
238,238 207,980
- - ---------------------------------------------------------------------------------------------------------- ------------
Income before income taxes 4,040 2,210
Income taxes 1,656 884
- - ---------------------------------------------------------------------------------------------------------- ------------
Net income $ 2,384 $ 1,326
========================================================================================================== ============
Income per common and common equivalent share $ .05 $ .03
========================================================================================================== ============
Weighted average number of common and common
equivalent shares outstanding 48,141 47,867
========================================================================================================== ============
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Thirteen weeks ended
----------------------------
April 30, May 1,
1994 1993
========================================================================================================== ============
Cash provided by (used for) operations:
Net income $ 2,384 $ 1,326
Items not effecting cash:
Depreciation and amortization 6,114 5,163
Deferred income taxes (4,036) 398
Other 613 78
Change in assets and liabilities (37,742) (33,166)
- - ---------------------------------------------------------------------------------------------------------- ------------
Net cash used by operations (32,667) (2,123)
- - ---------------------------------------------------------------------------------------------------------- ------------
Cash provided by (used for) investment activities:
Capital expenditures (13,171) (12,177)
Other (150) 57
- - ---------------------------------------------------------------------------------------------------------- ------------
Net cash used for investment activities (13,321) (12,120)
- - ---------------------------------------------------------------------------------------------------------- ------------
Cash provided by financing activities:
Net proceeds from credit agreements 24,900 12,450
Proceeds from exercise of stock options 236 222
- - ---------------------------------------------------------------------------------------------------------- ------------
Net cash provided by financing activities 27,537 12,672
- - ---------------------------------------------------------------------------------------------------------- ------------
Decrease in cash $ (20,852) $ (25,649)
========================================================================================================== ============
Supplemental Data
- - -----------------
Income taxes paid $ 17,339 $ 5,399
Interest paid $ 2,748 $ 2,641
The accompanying notes are an integral part of these financial statements.
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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 April 30, 1994, and the
condensed consolidated statements of income and statements of cash flows for
the thirteen week period ended April 30, 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 April 30, 1994, 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 29, 1994. The results of operations for the period ended
April 30, 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.
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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. At April 30, 1994, the Company operated 453 ODD LOTS and BIG LOTS
specialty retail stores selling close-out merchandise at substantial discounts
and 173 ALL FOR ONE (AFO) single price point retail stores. In comparison,
there were 388 ODD LOTS and BIG LOTS and 167 AFO stores in operation at the end
of the 1993 quarter. Subsequent to April 30, 1994, the Company introduced a new
retail concept under the name of ITZADEAL! offering close-out merchandise in
a format similar to AFO with various price points. Additionally, floor
space in certain AFO stores will be dedicated to offering close-out merchandise
at more than a single price point.
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 30, 1994, increased
15.3% to $242.3 million compared to first quarter 1993 net sales of $210.2
million. Retail sales increased 15.2% in the 1994 quarter to $236.6 million
reflecting the greater number of stores in operation during the period and a
0.5% decline in comparable store sales for stores open two full years at the
beginning of fiscal 1994. Comparable store sales in the prior year first
quarter declined 2.1%. Each first quarter net sales were negatively affected
by unusually severe winter storms in many of the Company's market areas.
GROSS PROFIT. Gross profit as a percent of net sales was 42.0% in the first
quarter of fiscal 1994 compared to 42.5% in the prior year quarter. Retail
gross profit was 42.4% and 42.9% in the respective quarters.
SELLING AND ADMINISTRATIVE EXPENSES. As a percent to net sales selling and
administrative expenses were 40.2% and 41.2% in the first quarters of fiscal
1994 and 1993, respectively. The improvement reflects the reduction of
previously recognized operating expenses, the benefits of implemented cost
controls, and operating efficiencies. Continued reductions in selling and
administrative expenses are not anticipated to be as significant, compared as a
percent to net sales, in future periods.
INTEREST EXPENSE. Interest expense was $1.0 (net of $.4 million in
capitalized interest) for the thirteen weeks ended April 30, 1994, compared to
$1.4 million in the same 1993 period.
OTHER. For the quarter ended April 30, 1994, the Company recognized a $.5
million gain on the sales of corporate transportation equipment. During the
first quarter of 1993 a $.7 million benefit was recognized from an insurance
claim related to an accident which destroyed a store. Each of the nonrecurring
items is recognized in the respective consolidated statement of income under
the caption of other-net.
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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 has increased from 40% in
fiscal 1993 to 41% in the first quarter of 1994. This increase reflects the
effect of higher tax rates in certain states and localities in which the
Company operates, the utilization of state operating loss carryforwards, and a
reduction in the anticipated benefit of Targeted Jobs Tax Credits.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
The Company opened 25 ODD LOTS and BIG LOTS stores in the first quarter and
closed 4. In the same period 4 AFO stores were closed. It is anticipated 50
net new ODD LOTS and BIG LOTS stores and 20 to 40 new ITZADEAL! stores will
be opened in fiscal 1994.
Financing for future store growth, capital expenditure programs and seasonal
operating requirements are financed by internally generated funds and available
credit facilities. At April 30, 1994, the Company had a $80 million revolving
credit facility through June 1, 1995, a $50 million letter of credit facility
through June 1, 1994, and $50 million in uncommitted credit facilities.
Available for future use at April 30, 1994, under all credit facilities totaled
$94.6 million. Management believes adequate amounts of capital resources are
available, or readily obtainable, to achieve both short-term plans and
long-term goals.
SUBSEQUENT EVENTS
- - -----------------
On May 18, 1994, the Company acquired certain assets of the TOY LIQUIDATORS
and WISCONSIN TOY operations. The purchase added 82 new store locations
offering close-out toys to the Company's existing retail store base. Virtually
all locations acquired are located in manufacturers outlet malls.
Subsequent to April 30, 1994, the Company expanded and extended its
revolving credit agreement and letter of credit facility under substantially
the same terms.
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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 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. None.
(b) Reports on Form 8-K. None.
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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
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(Registrant)
Dated: June 10, 1994 By: /s/ Michael J. Potter
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Michael J. Potter, Sr. Vice President,
Chief Financial Officer, and Principal
Accounting Officer
