1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 27, 1996
Commission file no. 1-10299
WOOLWORTH CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-3513936
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
233 Broadway, New York, New York 10279-0003
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 553-2000
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.
YES X NO
--- ---
Number of shares of Common Stock outstanding at August 23, 1996: 133,483,992
2
WOOLWORTH CORPORATION
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements
of Operations 4
Condensed Consolidated Statements
of Retained Earnings 5
Condensed Consolidated Statements
of Cash Flows 6
Notes to Condensed Consolidated
Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13 - 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
Index of Exhibits 16 - 18
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WOOLWORTH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
July 27, July 29, Jan. 27,
1996 1995 1996
-------- -------- --------
(Unaudited) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 80 $ 105 $ 13
Merchandise inventories 1,491 1,804 1,364
Other current assets 234 345 241
------- ------- -------
1,805 2,254 1,618
PROPERTY AND EQUIPMENT, NET 1,136 1,518 1,225
DEFERRED CHARGES AND OTHER ASSETS 644 705 663
------- ------- -------
$ 3,585 $ 4,477 $ 3,506
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 137 $ 860 $ 69
Accounts payable 419 475 321
Accrued liabilities 413 366 426
Current portion of long-term debt and obligations
under capital leases 19 25 25
------- ------- -------
988 1,726 841
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASES 611 568 619
DEFERRED TAXES AND OTHER LIABILITIES 781 826 817
SHAREHOLDERS' EQUITY
Preferred stock -- -- --
Common stock and paid-in capital 297 290 290
Retained earnings 891 964 891
Foreign currency translation adjustment 52 113 83
Minimum pension liability adjustment (35) (10) (35)
------- ------- -------
Total shareholders' equity 1,205 1,357 1,229
CONTINGENCIES (Legal Proceedings)
------- ------- -------
$ 3,585 $ 4,477 $ 3,506
======= ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
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WOOLWORTH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
Thirteen weeks ended Twenty-six weeks ended
----------------------- -----------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
-------- -------- -------- --------
SALES $ 1,856 $ 1,922 $ 3,676 $ 3,716
COSTS AND EXPENSES
Costs of sales 1,273 1,334 2,568 2,639
Selling, general and administrative expenses 491 532 983 1,078
Depreciation and amortization 50 59 100 118
Interest expense 19 33 39 65
Other income (14) (17) (14) (32)
------- ------- ------- -------
1,819 1,941 3,676 3,868
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES 37 (19) -- (152)
Income tax expense (benefit) 15 (8) -- (61)
------- ------- ------- -------
NET INCOME (LOSS) $ 22 $ (11) $ -- $ (91)
======= ======= ======= =======
Net income (loss) per share
Primary $ 0.17 $ (0.09) $ -- $ (0.69)
======= ======= ======= =======
Fully diluted $ 0.17 $ * $ -- $ *
======= =======
Number of shares used to
calculate earnings per share
Primary 134.3 132.7 133.7 132.7
Fully diluted 134.9 * 134.5 *
* Fully diluted earnings per share is not presented as it produces an
anti-dilutive result.
See accompanying Notes to Condensed Consolidated Financial Statements.
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WOOLWORTH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)
(in millions)
Twenty-six weeks ended
------------------------
July 27, July 29,
1996 1995
-------- --------
RETAINED EARNINGS AT BEGINNING OF YEAR $ 891 $ 1,055
Net income (loss) - (91)
Cash dividends declared:
Preferred Stock - $0.55 per share - -
------- -------
RETAINED EARNINGS AT END OF PERIOD $ 891 $ 964
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
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WOOLWORTH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
Twenty-six weeks ended
----------------------
July 27, July 29,
1996 1995
-------- --------
FROM OPERATING ACTIVITIES
Net income (loss) $-- $ (91)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 100 118
Gain on sales of real estate (13) (32)
Deferred income taxes (16) (56)
Change in assets and liabilities, net of acquisitions:
Increase in merchandise inventories (143) (133)
Increase in accounts payable 103 105
Other, net (18) (107)
----- -----
Net cash provided by (used in) operating activities 13 (196)
----- -----
FROM INVESTING ACTIVITIES
Capital expenditures (47) (68)
Proceeds from sale of real estate 21 86
Proceeds from sale of assets 19 33
Purchase of investments -- (74)
----- -----
Net cash used in investing activities (7) (23)
----- -----
FROM FINANCING ACTIVITIES
Increase in short-term debt 69 4
Increase in long-term debt -- 263
Reduction in long-term debt and capital lease obligations (11) (12)
Issuance of common stock 6 7
Dividends paid -- (20)
----- -----
Net cash provided by financing activities 64 242
----- -----
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (3) 10
----- -----
NET CHANGE IN CASH AND CASH EQUIVALENTS 67 33
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13 72
----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 80 $ 105
===== =====
Cash Paid During the Period:
Interest $ 32 $ 57
Income Taxes $ 9 $ 10
See accompanying Notes to Condensed Consolidated Financial Statements.
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WOOLWORTH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Notes to Consolidated Financial
Statements contained in the 1995 Annual Report to Shareholders of Woolworth
Corporation (the "Registrant"), portions of which Annual Report are incorporated
by reference in the Registrant's Annual Report on Form 10-K for the year ended
January 27, 1996, as filed with the Securities and Exchange Commission (the
"SEC"). Certain items included in these statements are based on management's
estimates. In the opinion of management, all material adjustments, which are of
a normal recurring nature, necessary for a fair presentation of the results for
the interim period have been included. The results for the thirteen and
twenty-six weeks ended are not necessarily indicative of the results expected
for the year.
Merchandise Inventories
Domestic merchandise inventories valued on the last-in, first-out basis
at July 27, 1996, July 29, 1995 and January 27, 1996 are stated, respectively,
at $102 million, $100 million and $102 million less than the amounts that would
have been determined on the first-in, first-out basis.
Reclassifications
Certain balances in prior periods have been reclassified to conform
with the presentation adopted in the current period.
Legal Proceedings
Between March 30, 1994 and April 18, 1994, the Registrant and certain
of its present and former directors and officers were named as defendants in
lawsuits brought by certain shareholders claiming to represent classes of
shareholders that purchased shares of the Registrant's Common Stock during
different periods between January 1992 and March 1994.
These class action complaints purport to present claims under the
federal securities and other laws and seek unspecified damages based on alleged
misleading disclosures during the class periods.
On April 29, 1994, United States Senior District Judge Richard Owen
entered an order consolidating 25 actions, purportedly brought as class actions,
commenced against the Registrant and certain officers and directors of the
Registrant in the United States District Court for the Southern District of New
York, under the caption In re Woolworth Corporation Securities Class Action
Litigation. Plaintiffs served an Amended and Consolidated Class Action
Complaint, to which the defendants responded. On February 17, 1995, Judge Owen
entered an order for certification of the action as a class action on behalf of
all persons who purchased the Registrant's Common Stock or options on the
Registrant's Common Stock from May 12, 1993 to March 29, 1994 inclusive,
pursuant to a stipulation among the parties.
Five separate state-court derivative actions filed in April 1994 were
consolidated under the caption In re Woolworth Corporation Derivative Litigation
in the Supreme Court of the State of New York, County of New York.
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Plaintiffs served a Consolidated Complaint on behalf of the plaintiffs in these
five actions together with the plaintiff in the former federal derivative action
Sternberg v. Woolworth Corp., which has been dismissed. Defendants moved to
dismiss the Consolidated Complaint, and on April 27, 1995, the court granted
defendants' motion, with leave to the plaintiffs to replead. On June 7, 1995,
plaintiffs served a Consolidated Amended Derivative Complaint. On June 27, 1995,
defendants moved to dismiss the Consolidated Amended Derivative Complaint with
prejudice. On April 10, 1996, the court granted defendants' motion with
prejudice. Plaintiffs have filed a notice of appeal from the dismissal to the
Appellate Division, First Department.
There is one federal derivative action pending in the United States
District Court for the Southern District of New York under the caption Rosenbaum
v. Sells et al. There have been no material developments in this action.
These actions are all at a preliminary stage of proceedings.
Accordingly, the outcomes cannot be predicted with any degree of certainty. As a
result, the Registrant cannot determine if the results of the litigation will
have a material adverse effect on the Registrant's results of operations,
liquidity or financial position.
During 1994, the staff of the SEC initiated an inquiry related to the
matters that were reviewed by the Special Committee of the Board of Directors as
well as in connection with trading in the Registrant's securities by certain
directors and officers of the Registrant. The SEC staff has advised that its
inquiry should not be construed as an indication by the SEC or its staff that
any violations of law have occurred. There have been no material developments in
the inquiry to date.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Total sales for the 1996 second quarter decreased 3.4 percent to $1,856
million compared to $1,922 million for the 1995 second quarter. Comparable-store
sales decreased by 0.2 percent. Sales were negatively impacted by the
unseasonably cooler weather in several markets and the operation of 290 fewer
stores. Excluding the effect of foreign currency fluctuations and sales from
disposed operations, sales decreased by 0.9 percent. Total Specialty segment
sales for the second quarter increased 3.0 percent and comparable-store sales
increased 2.9 percent. Total General Merchandise second quarter sales decreased
10.6 percent compared to the same period of 1995 while comparable-store sales
decreased 5.0 percent. The decrease in the General Merchandise segment primarily
relates to lower sales in the United States and Germany.
Year-to-date 1996 sales decreased 1.1 percent to $3,676 million
compared to $3,716 million for 1995. Excluding the effect of foreign currency
fluctuations and sales from disposed operations, sales increased 0.3 percent,
and comparable-store sales increased 0.3 percent during the year-to-date period.
Fiscal 1996 second quarter operating results of $69 million improved by
$39 million over the comparable prior year operating result of $30 million. The
improvement stems directly from the continuing implementation of the
Registrant's strategic plan which includes reducing inventory levels, lowering
expenses and the divestiture of non-strategic assets. For the thirteen weeks
ended July 27, 1996, selling, general and administrative expenses declined by
$41 million compared to the same prior year period. Year-to-date selling,
general and administrative expenses were $95 million less than the first half
of 1995. These decreases reflect the ongoing success of the Registrant's cost
reduction initiatives. Included in the 1995 year-to-date results is a $38
million charge recorded in the first quarter related to the inventory
improvement program implemented to lower inventory levels and clear stores of
aged and discontinued merchandise for new product assortments.
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The Registrant reported net income of $22 million, or $0.17 per share,
for the thirteen weeks ended July 27, 1996, compared to a net loss of $11
million, or $0.09 per share, for the corresponding prior year period. The
Registrant reported break-even results for the twenty-six weeks ended July 27,
1996, an improvement from the loss of $91 million or $0.69 per share for
corresponding 1995 period.
As of July 27, 1996, the Registrant operated a total of 7,951 stores
consisting of 6,933 specialty stores and 1,018 general merchandise stores,
compared to 8,241 stores consisting of 7,203 specialty stores and 1,038 general
merchandise stores operated as of July 29,1995.
The net gain on the divestiture of non-strategic real estate in the
second quarter totaled $13 million. This included a distribution center in
Greenville, SC whose closing was announced earlier this year and other real
estate operated by Woolworth Germany, Woolworth U.S., and Woolworth Canada.
In line with the Registrant's strategic plan to dispose of
underperforming businesses, the Registrant announced the closing of the
109-store Accessory Lady chain on May 2, 1996. All stores were closed by August
24, 1996. The Registrant took a charge of $8.3 million in the second quarter to
cover employee, wind-down and estimated lease costs. The Registrant intends to
redeploy approximately one-half of the stores to formats principally in the
Athletic Group and the Northern Group.
The Registrant entered into an agreement on June 24, 1996 to sell the
34-store Lady Plus chain in Germany. The charge for disposed operations includes
$5 million related to the sale of Lady Plus and its loss on operations through
disposal.
SALES
The following table summarizes sales by segment and by geographic area:
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
(in millions) July 27, July 29, July 27, July 29,
1996 1995 1996 1995
-------- -------- -------- --------
By segment:
Specialty:
Athletic Group $ 840 $ 803 $1,680 $1,587
Specialty Footwear 174 179 327 340
Other Specialty 92 105 173 196
Northern Group 79 64 145 119
------ ------ ------ ------
Specialty total 1,185 1,151 2,325 2,242
------ ------ ------ ------
General Merchandise:
Germany 369 411 739 772
United States 242 274 486 538
Other 54 59 100 111
------ ------ ------ ------
General Merchandise total 665 744 1,325 1,421
------ ------ ------ ------
Disposed operations 6 27 26 53
------ ------ ------ ------
$1,856 $1,922 $3,676 $3,716
====== ====== ====== ======
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By geographic area:
Domestic $1,152 $1,156 $2,316 $2,297
International 698 739 1,334 1,366
Disposed operations 6 27 26 53
------ ------ ------ ------
$1,856 $1,922 $3,676 $3,716
====== ====== ====== ======
Specialty Segment
The Athletic Group and Northern Group turned in strong second quarter
performances. Athletic Group sales increased for both the second quarter and the
year-to-date periods, by 4.6 percent and 5.9 percent respectively, over the
corresponding prior year periods. Northern Group sales increased by 23.4 percent
and 21.8 percent, for the second quarter and year-to-date periods, respectively.
Specialty Footwear second quarter sales decreased by 2.8 percent
compared to the prior year period while year-to-date sales decreased by 3.8
percent. These declines were attributable to store closures, principally in the
Kinney format.
Other Specialty second quarter sales, adjusted for dispositions,
decreased by 12.4 percent from $105 million to $92 million. For the year-to-date
period, sales declined 11.7 percent to $173 million. This decline in sales was
mainly due to the closure of 153 underperforming stores related to ongoing
formats coupled with second quarter and year-to-date comparable-store sale
declines.
General Merchandise
German general merchandise second quarter sales decreased by 10.2
percent, while comparable-store sales declined by 3.1 percent. Year-to-date
period sales have declined 4.3 percent while comparable-store sales declined 2.5
percent. Excluding the impact of foreign currency fluctuations, sales decreased
by 3.9 percent and 1.0 percent for the quarter and year-to-date periods,
respectively. Sales were impacted by the unseasonably cooler weather in Germany
coupled with difficult economic conditions.
United States general merchandise sales decreased for both the second
quarter and the year-to-date period by by 11.7 percent and 9.7 percent,
respectively. These declines are mainly due to the continued competitive
pressures in the retail industry coupled with the closure of underperforming
stores under the Registrant's store closing program.
A decline in sales was experienced by both the Mexican and Canadian
operations for the second quarter as well as the year-to-date period. Sales in
this group fell by $5 million, or 8.5 percent for the second quarter, and $11
million, or 9.9 percent for the year-to-date period. Excluding the negative
impact of foreign currency fluctuations, sales declined 4.1 percent for the
second quarter and 6.7 percent year-to-date. Cooler weather conditions and 16
fewer stores contributed to these declines.
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OPERATING RESULTS
Operating results (before corporate expense, interest, and income taxes) are as
follows:
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
(in millions) July 27, July 29, July 27, July 29,
1996 1995 1996 1995
-------- -------- -------- --------
By Segment:
Specialty $ 96 $ 36 $ 131 $ 16
General Merchandise (26) (16) (47) (62)
Net gain on sales of real estate 13 17 13 32
Disposed operations (14) (7) (28) (35)
----- ----- ----- -----
$ 69 $ 30 $ 69 $ (49)
===== ===== ===== =====
By geographic area:
Domestic $ 71 $ 41 $ 113 $ 14
International (1) (21) (29) (60)
Net gain on sales of real estate 13 17 13 32
Disposed operations (14) (7) (28) (35)
----- ----- ----- -----
$ 69 $ 30 $ 69 $ (49)
===== ===== ===== =====
Specialty Segment
Specialty operating profits improved by $60 million and $115 million
over the 1995 second quarter and year-to-date periods, respectively. This was
primarily due to the specialty businesses' expense reduction combined with
increased sales achieved by the Athletic Group . Specialty operating results for
1995 included a $16 million first quarter charge to reduce aged and discontinued
merchandise, as part of the Registrant's inventory improvement program.
General Merchandise
Total General Merchandise second quarter operating results decreased
by $10 million compared to the second quarter of 1995, mainly attributable to
declines in the United States. German operational results for the quarter were
comparable with 1995 second quarter operating results, despite a second quarter
1996 $10 million charge for early retirement costs relating to workforce
reduction programs being implemented. Year-to-date operating results show
improvement compared to 1995. U.S. general merchandise operations have reduced
losses through expense control. Germany and other countries' operating results
reflect modest year-to-date loss reductions. General Merchandise operating
results for 1995 include a first quarter $22 million charge to reduce aged and
discontinued merchandise.
SEASONALITY
The Registrant's businesses are highly seasonal in nature.
Historically, the greatest proportion of sales and net income is generated in
the fourth quarter and the lowest proportion of sales and net income is
generated in the first quarter, reflecting seasonal buying patterns.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $13 million for the
twenty-six weeks ended July 27, 1996, compared to $196 million used in the
comparable prior-year period. The increase cash provided during 1996 compared to
1995 primarily reflects improved operating results, produced by the Registrant's
inventory and cost reduction programs.
Net cash used in investing activities amounted to $7 million for the
twenty-six weeks ended July 27, 1996, compared to $23 million during the
corresponding period in 1995. The reduced utilization of cash in 1996 reflects
a reduction in capital expenditures and a reduction in proceeds from the sale
of real estate and other assets. Capital expenditures of approximately $176
million are planned for the full year 1996, an increase of $28 million over
earlier plans. This relates principally to the acceleration of Athletic Group
store growth and logistics improvements.
Inventories declined $313 million to $1,491 million at July 27, 1996,
from the level at July 29, 1995, but increased $127 million from the level at
January 27, 1996. The decrease from the second quarter of 1995 reflects the
Registrant's successful inventory improvement program and the reduction of
inventories as a result of the divestiture of the Drug Mart and Accessory Lady
chains. The increase from January 27, 1996 levels is a normal seasonal increase
prior to peak selling periods, and is financed by short-term debt and accounts
payable.
Accounts payable of $419 million decreased by $56 million compared to
the second quarter 1995 and increased $98 million compared to January 27,1996.
These changes are directly associated with inventory levels.
Short-term debt decreased $723 million compared to July 29, 1995 levels
and increased by $68 million from the year-end level to $137 million. The
decrease from July 29, 1995 primarily reflects the refinancing of short-term
debt through the issuance of $90 million of long-term debt combined with lower
levels necessary to finance inventories. Aggregate debt has declined $686
million from the prior year. The Registrant was also able to reduce debt levels
by selling non-strategic assets and continuing cost reduction programs.
The Registrant has a $1.0 billion three-year facility available
through May 1998.
Interest expense for the second quarter of 1996, decreased $14 million
or 42.4 percent over the comparable 1995 period. Interest expense for the
year-to-date period decreased $26 million, or 40.0 percent. The decrease from
the second quarter is attributable to the reduction in total debt levels of $686
million compared to the prior year period.
Shareholders' equity at July 27, 1996 decreased $152 million from the
level at July 29, 1995. The decrease includes a non-cash pre-tax charge of $241
million ($165 million after-tax) for the adoption of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" in the fourth quarter of
1995.
On August 14, 1996, the Registrant announced that its Board of
Directors called for the redemption of all of the outstanding shares of the
Registrant's $2.20 Series A Convertible Preferred Stock ("Preferred Stock") on
October 23, 1996 at the redemption price of $45 per shares. Shares of Preferred
Stock may be converted into shares of the Registrant's Common Stock at the rate
of 5.68 shares of Common Stock for each share of Preferred Stock.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
This information is incorporated by reference to the Legal Proceedings
section of the Notes to Condensed Consolidated Financial Statements on pages 7
through 8 of Part I, Item 1.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant's annual meeting of shareholders was held on June
13, 1996, in New York, New York. Proxies were solicited by management of the
Registrant pursuant to Regulation 14A under the Securities Exchange Act of 1934;
there was no solicitation in opposition to management's nominees as listed in
the Notice of 1996 Annual Meeting and Proxy Statement, both dated May 6, 1996.
(b) Each of J. Carter Bacot, Purdy Crawford, Philip H. Geier, Jr. and
Dale W. Hilpert was elected as a director in Class II for a three-year term
ending at the 1999 annual meeting of shareholders of the Registrant. All of such
individuals previously served as directors of the Registrant. Roger N. Farah,
Helen Galland, Jarobin Gilbert, Jr., Margaret P. MacKimm, John J. Mackowski,
James E. Preston and Christopher A. Sinclair, having previously been elected
directors of the Registrant for terms continuing beyond the 1996 annual meeting
of shareholders, continue in office as directors. Seymour H. Knox III, whose
term of office would have continued beyond the 1996 annual meeting, died on May
22, 1996. John W. Adams retired as a director at the 1996 annual meeting of
shareholders, having reached the mandatory retirement age for directors.
(c) The matters voted upon and the results of the voting were as
follows:
(1) Election of Directors:
Abstentions and
Name Votes For Votes Withheld Broker Non-Votes
- -------------------- ----------- -------------- ----------------
J. Carter Bacot 112,993,247 1,488,421 0
Purdy Crawford 113,015,187 1,466,481 0
Philip H. Geier, Jr. 112,994,002 1,487,666 0
Dale W. Hilpert 112,986,294 1,495,374 0
(2) Woolworth Corporation Directors' Stock Plan:
Votes For Votes Against Abstentions Broker Non-Votes
- -------------------- ------------- -------------- ----------------
109,591,653 3,765,064 1,124,951 0
(3) Amended and Restated Annual Incentive Compensation Plan:
Votes For Votes Against Abstentions Broker Non-Votes
- -------------------- ------------- -------------- ----------------
108,698,532 4,236,859 1,546,277 0
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(4) Amended and Restated Long-Term Incentive Compensation Plan:
Votes For Votes Against Abstentions Broker Non-Votes
- -------------------- ------------- -------------- ----------------
108,664,715 4,201,205 1,615,748 0
(5) Ratification of the appointment of KPMG Peat Marwick LLP as independent
accountants for the fiscal year beginning January 28, 1996:
Votes For Votes Against Abstentions Broker Non-Votes
- -------------------- ------------- -------------- ----------------
113,413,923 545,226 522,519 0
(6) Shareholder Proposal regarding the spinoff of the Athletic Division:
Votes For Votes Against Abstentions Broker Non-Votes
- -------------------- ------------- -------------- ----------------
13,353,247 86,230,256 1,447,810 13,450,355
At the close of business on the record date of May 1, 1996, there were
issued and outstanding 133,083,673 shares of the Registrant's Common Stock, par
value $.01 per share ("Common Stock"), and 97,240 shares of the Registrant's
$2.20 Series A Convertible Preferred Stock, par value $1.00 per share
("Preferred Stock"). There were represented at the meeting, in person or by
proxy, 114,421,973 shares of Common Stock and 59,695 shares of Preferred Stock.
Such shares represented 85.95 percent of the total number of shares of such
classes of stock issued and outstanding on the record date.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
An index of the exhibits that are required by this item, and which are
furnished in accordance with Item 601 of Regulation S-K, appears on pages 16
through 18. The exhibits which are in this report immediately follow the index.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended July
27, 1996.
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SIGNATURE
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.
WOOLWORTH CORPORATION
(Registrant)
Date: September 6, 1996 /s/ Andrew P. Hines
-------------------
ANDREW P. HINES
Senior Vice President
and Chief Financial Officer
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WOOLWORTH CORPORATION
INDEX OF EXHIBITS REQUIRED BY ITEM 6(a) OF FORM 10-Q
AND FURNISHED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K
Exhibit No. in Item 601
of Regulation S-K Description
----------------- -----------
1 *
2 *
3(i)(a) Certificate of Incorporation of the Registrant, as
filed by the Department of State of the State of
New York on April 7, 1989 (incorporated herein by
reference to Exhibit 3(a) to the Registration
Statement on Form S-4 filed by the Registrant with
the Securities and Exchange Commission ("SEC") on
May 9, 1989 (Registration No. 33-28469) (the "S-4
Registration Statement").
3(i)(b) Certificates of Amendment of the Certificate of
Incorporation of the Registrant, as filed by the
Department of State of the State of New York on (a)
July 20, 1989 (incorporated herein by reference to
Exhibit 3(b) to the Registration Statement on Form
8-B filed by the Registrant with the SEC on August
7, 1989 (Registration No. 1-10299) (the "8-B
Registration Statement")) and (b) July 24, 1990
(incorporated herein by reference to Exhibit 4(a)
to the Quarterly Report on Form 10-Q for the
quarterly period ended July 28, 1990, filed by the
Registrant with the SEC on September 7, 1990 (the
"Form 10-Q")).
3(ii) By-laws of the Registrant, as amended (incorporated
herein by reference to Exhibit 3(ii) to the
Registrant's Annual Report on Form 10-K for the
year ended January 28, 1995, filed by the
Registrant with the SEC on April 24, 1995 (the
"1994 10-K")).
4(a) The rights of holders of the Registrant's equity
securities are defined in the Registrant's
Certificate of Incorporation, as amended
(incorporated herein by reference to: (a) Exhibit
3(a) to the S-4 Registration Statement, (b) Exhibit
3(b) to the 8-B Registration Statement and (c)
Exhibit 4(a) to the Form 10-Q).
4(b) Rights Agreement dated as of April 4, 1988, as
amended January 11, 1989, between F.W. Woolworth
Co. ("FWW") and Morgan Shareholder Services Trust
Company (now, First Chicago Trust Company of New
York), as Rights Agent (incorporated herein by
reference to (a) Exhibit 1 to the Registration
Statement on Form 8-A filed by FWW with the SEC on
April 12, 1988 (Registration No. 1-238) and (b) the
Form 8 Amendment to such Form 8-A filed
-16-
17
by FWW with the SEC on January 13, 1989). The
rights and obligations of FWW under said Rights
Agreement were assumed by the Registrant pursuant
to an Agreement and Plan of Share Exchange dated as
of May 4, 1989, by and between FWW and the
Registrant (incorporated herein by reference to
Exhibit 2 to the S- 4 Registration Statement).
4(c) Indenture dated as of October 10, 1991
(incorporated herein by reference to Exhibit 4.1 to
the Registration Statement on Form S-3
(Registration No. 33-43334) previously filed with
the SEC).
4(d) Forms of Medium-Term Notes (Fixed Rate and Floating
Rate) (incorporated herein by reference to Exhibits
4.4 and 4.5 to the Registration Statement on Form
S-3 (Registration No. 33-43334) previously filed
with the SEC).
4(e) Form of 8-1/2% Debentures due 2022 (incorporated
herein by reference to Exhibit 4 to Registrant's
Form 8-K dated January 16, 1992).
4(f) Purchase Agreement dated June 1, 1995 and Form of
7% Notes due 2000 (incorporated herein by reference
to Exhibits 1 and 4, respectively, to Registrant's
Form 8-K dated June 7, 1995).
4(g) Distribution Agreement dated July 13, 1995 and
Forms of Fixed Rate and Floating Rate Notes
(incorporated herein by reference to Exhibits 1,
4.1 and 4.2, respectively, to Registrant's Form 8-K
dated July 13, 1995).
5 *
8 *
9 *
11 Computation of Net Income (Loss) Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 *
15 Letter re: Unaudited Interim Financial Statements.
16 *
17 *
18 *
19 *
20 *
21 *
-17-
18
22 *
23 *
24 *
25 *
26 *
27 Financial Data Schedule, which is submitted
electronically to the SEC for information only and
not filed.
99 Independent Accountants' Review Report.
- ----------
* Not applicable
-18-
19
Exhibits filed with this Form 10-Q:
Exhibit No.
- -----------
11 Computation of Net Income (Loss) Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
15 Letter re: Unaudited Interim Financial Statements.
27 Financial Data Schedule.
99 Independent Accountants' Review Report.
1
EXHIBIT 11
WOOLWORTH CORPORATION
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
(Unaudited)
(in millions, except per share amounts)
Thirteen weeks ended Twenty-six weeks ended
---------------------- ----------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
-------- -------- -------- ---------
PRIMARY
Weighted-average number of common shares
outstanding and common share equivalents 134.3 132.7 133.7 132.7
======= ======= ======= =======
Net income (loss) applicable to common shares $ 22.4 $ (11.5) $ -- $ (91.3)
======= ======= ======= =======
Primary net income (loss) per share of common stock $ 0.17 $ (0.09) $ -- $ (0.69)
======= ======= ======= =======
FULLY DILUTED (1)
Weighted-average number of common shares outstanding
and fully diluted common share equivalents 134.3 132.8 133.9 132.8
Assumed conversion of preferred stock 0.6 0.6 0.6 0.6
------- ------- ------- -------
Adjusted weighted-average number of common
shares and common share equivalents 134.9 133.4 134.5 133.4
======= ======= ======= =======
Net income (loss) applicable to common shares $ 22.4 $ (11.5) $ -- $ (91.2)
======= ======= ======= =======
Fully diluted net income (loss) per share of common stock $ 0.17 $ (0.08) $ -- $ (0.68)
======= ======= ======= =======
(1) This calculation is submitted for the 1995 loss in accordance with
Regulation S-K, Item 601(b)(11) although it is contrary to paragraph 40
of APB Opinion No. 15 because it produces an anti-dilutive result.
1
EXHIBIT 12
WOOLWORTH CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in millions)
26 weeks Fiscal Years Ended
ended -------------------------------------------------------
July 27, Jan. 27, Jan. 28, Jan. 29, Jan. 30, Jan. 25,
1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
EARNINGS
Net income (loss) $-- $(164) $ 47 $(495) $ 280 $ (53)
Income tax expense (benefit) -- (69) 49 (303) 157 (30)
Gross interest expense, excluding
capitalized interest 40 124 110 86 94 99
Portion of rents deemed representative
of the interest factor (1/3) 56 224 211 210 199 192
----- ----- ----- ----- ----- -----
$ 96 $ 115 $ 417 $(502) $ 730 $ 208
===== ===== ===== ===== ===== =====
FIXED CHARGES
Gross interest expense $ 40 $ 124 $ 111 $ 86 $ 94 $ 99
Portion of rents deemed representative
of the interest factor (1/3) 56 224 211 210 199 192
----- ----- ----- ----- ----- -----
$ 96 $ 348 $ 322 $ 296 $ 293 $ 291
===== ===== ===== ===== ===== =====
RATIO OF EARNINGS TO FIXED
CHARGES 1.0 .3 1.3 -- 2.5 .7
===== ===== ===== ===== ===== =====
Earnings were not adequate to cover fixed charges by $233 million, $798 million
and $83 million for the fiscal years ended January 27, 1996, January 29, 1994
and January 25, 1992, respectively.
1
EXHIBIT 15
Accountants' Acknowledgment
Woolworth Corporation
New York, New York
Board of Directors:
Re: Registration Statement Numbers 33-43334 and 33-86300 on Form S-3 and Numbers
2-98142 and 33-10783 on Form S-8.
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated September 6, 1996 related to
our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
New York, New York
September 6, 1996
5
1,000,000
3-MOS
JAN-25-1997
JAN-28-1996
JUL-27-1996
80
0
0
0
1,491
1,805
1,136
0
3,585
988
0
0
0
0
1,205
3,585
1,856
1,856
1,273
1,273
50
0
19
37
15
22
0
0
0
22
.17
.17
1
EXHIBIT 99
Independent Auditors' Review Report
The Board of Directors and Shareholders
Woolworth Corporation:
We have reviewed the condensed consolidated balance sheets of Woolworth
Corporation and subsidiaries as of April 27, 1996 and April 29, 1995, and the
related condensed consolidated statements of operations, retained earnings, and
cash flows for the thirteen-week periods ended April 27, 1996 and April 29,
1995. These condensed consolidated financial statements are the responsibility
of the Woolworth Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Woolworth Corporation and
subsidiaries as of January 27, 1996, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated March 12, 1996, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of January 27, 1996, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/KPMG Peat Marwick LLP
New York, New York
May 14, 1996
