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 May 2, 1998
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 (I.R.S. Employer Identification No.)
incorporation 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 June 1, 1998: 135,285,656
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WOOLWORTH CORPORATION
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets...................1
Condensed Consolidated Statements
of Operations......................................2
Condensed Consolidated Statements
of Comprehensive Income............................3
Condensed Consolidated Statements
of Retained Earnings...............................4
Condensed Consolidated Statements
of Cash Flows......................................5
Notes to Condensed Consolidated
Financial Statements.............................6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...8-12
Part II. Other Information
Item 1. Legal Proceedings......................................12
Item 6. Exhibits and Reports on Form 8-K.......................12
Signature..............................................13
Index to Exhibits...................................14-15
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
WOOLWORTH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
May 2, April 26, January 31,
1998 1997 1998
---- ---- ----
(Unaudited) (Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents.....................................$ 76 $ 75 $ 116
Merchandise inventories .......................................1,298 1,175 1,159
Net assets of discontinued operations ......................... 11 229 7
Other current assets .......................................... 224 169 177
----- ----- -----
1,609 1,648 1,459
Property and equipment, net .....................................1,115 940 1,053
Deferred charges and other assets ............................... 688 619 670
----- ----- -----
$3,412 $ 3,207 $ 3,182
===== ===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt...............................................$ 253 $ -- $ --
Accounts payable .............................................. 348 343 327
Accrued liabilities ........................................... 308 314 335
Current portion of reserve for discontinued operations ........ 52 -- 72
Current portion of long-term debt and obligations
under capital leases ........................................ 21 14 22
----- ----- -----
$ 982 671 756
Long-term debt and obligations
under capital leases .......................................... 537 570 535
Deferred taxes and other liabilities ............................ 592 675 602
Reserve for discontinued operations ............................. 18 -- 18
Shareholders' Equity
Common stock and paid-in capital .............................. 322 302 317
Retained earnings .............................................1,028 1,051 1,033
Foreign currency translation adjustment ....................... (22) (25) (34)
Minimum pension liability adjustment .......................... (45) (37) (45)
----- ----- -----
Total shareholders' equity ..................................1,283 1,291 1,271
Commitments ----- ----- -----
$3,412 $ 3,207 $ 3,182
===== ===== =====
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
--------------------
May 2, April 26,
1998 1997
---- ----
Sales ..........................................................$1,466 $ 1,539
Cost and expenses
Cost of sales ................................................ 1,046 1,074
Selling, general and administrative expenses ................. 391 388
Depreciation and amortization ................................ 44 41
Interest expense ............................................. 12 11
Other income ................................................. (19) (4)
----- -----
1,474 1,510
===== =====
Income (loss) from continuing operations
before income taxes ........................................ (8) 29
Income tax expense (benefit) ................................... (3) 12
----- -----
Income (loss) from continuing operations ....................... (5) 17
Loss from discontinued operations, net of income
taxes of $11 million ....................................... -- (16)
----- -----
Net income (loss) ..............................................$ (5) $ 1
===== =====
Basic earnings per share:
Income (loss) from continuing operations ...................$(0.04) $ 0.13
Loss from discontinued operations .......................... -- (0.12)
----- -----
Net income (loss) ..........................................$(0.04) $ 0.01
===== =====
Weighted-average common shares outstanding (in millions) ....... 135.1 134.1
Diluted earnings per share:
Income (loss) from continuing operations ...................$(0.04) $ 0.13
Loss from discontinued operations .......................... -- (0.12)
----- -----
Net income (loss) ..........................................$(0.04) $ 0.01
===== =====
Weighted-average common shares assuming dilution (in millions) 135.1 135.2
See Accompanying Notes to Condensed Consolidated Financial Statements.
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WOOLWORTH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in millions)
Thirteen weeks ended
--------------------
May 2, April 26,
1998 1997
---- ----
Net income (loss)...............................................$ (5) $ 1
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments,
pre-tax $19 and $(78) million, respectively............ 12 (47)
----- -----
Comprehensive income (loss).....................................$ 7 $ (46)
===== =====
See Accompanying Notes to Condensed Consolidated Financial Statements.
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WOOLWORTH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)
(in millions)
Thirteen weeks ended
--------------------
May 2, April 26,
1998 1997
---- ----
Retained earnings at beginning of year ........................$1,033 $1,050
Net income (loss)............................................... (5) 1
----- -----
Retained earnings at end of interim period .....................$1,028 $1,051
===== =====
See Accompanying Notes to Condensed Consolidated Financial Statements.
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WOOLWORTH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
Thirteen weeks ended
--------------------
May 2, April 26,
1998 1997
---- ----
From Operating Activities:
Net income (loss)............................................$ (5) $ 1
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization............................ 44 41
Net gain on sales of assets and investments.............. (19) (4)
Deferred income taxes.................................... (2) (2)
Change in assets and liabilities, net of acquisition:
Merchandise inventories.................................. (127) (95)
Other current assets..................................... (50) 31
Accounts payable and accrued expenses.................... (10) (36)
Discontinued operations.................................. (24) 7
Other, net............................................... (23) (32)
----- -----
Net cash used in operating activities........................ (216) (89)
----- -----
From Investing Activities:
Proceeds from sales of real estate .......................... 3 12
Capital expenditures......................................... (82) (25)
Payments for businesses acquired, net of cash acquired....... (29) (140)
Proceeds from sales of assets and investments................ 22 -
----- -----
Net cash used in investing activities...................... (86) (153)
----- -----
From Financing Activities:
Increase in short-term debt.................................. 253 -
Reduction in long-term debt and capital lease obligations.... (1) (1)
Issuance of common stock..................................... 5 3
----- -----
Net cash provided by financing activities.................. 257 2
----- -----
Effect of exchange rate fluctuations
on Cash and Cash Equivalents................................. 5 (13)
----- -----
Net change in Cash and Cash Equivalents......................... (40) (253)
Cash and Cash Equivalents at beginning of year.................. 116 328
----- -----
Cash and Cash Equivalents at end of interim period..............$ 76 $ 75
===== =====
Cash paid during the period:
Interest......................................................$ 2 $ 1
Income taxes..................................................$ 3 $ 33
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 Registrant's Form 10-K for the year ended January
31, 1998, as filed with the Securities and Exchange Commission (the "SEC") on
April 21, 1998. 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
weeks ended May 2, 1998 are not necessarily indicative of the results expected
for the year.
Discontinued Operations
On July 17, 1997, the Registrant announced that it was exiting its 400
store domestic Woolworth general merchandise business and recorded a charge to
earnings of $310 million before-tax or $195 million after-tax, for the loss on
disposal of discontinued operations. The loss from discontinued operations
recorded through July 17, 1997 was $47 million before-tax or $28 million
after-tax. The Registrant is in the process of converting approximately 130 of
the prime locations to Foot Locker, Champs Sports, and other athletic or
specialty formats. The Registrant has successfully converted and opened 56
stores through May 2, 1998. The remaining domestic Woolworth general merchandise
stores as well as the division's distribution center in Denver, Pennsylvania
were closed in November 1997.
The results of operations for all periods presented for the domestic
Woolworth general merchandise business have been classified as discontinued
operations in the Condensed Consolidated Statements of Operations. Sales from
discontinued operations for the period ended April 26, 1997 were $229 million.
The Condensed Consolidated Balance Sheets and Condensed Consolidated
Statements of Cash Flows have been restated for discontinued operations. The
following is a summary of the net assets of discontinued operations:
May 2, April 26, Jan. 31,
1998 1997 1998
---- ---- ----
Assets .............................. $ 21 $351 $ 28
Liabilities ......................... 10 122 21
--- --- ---
Net assets of discontinued operations $ 11 $229 $ 7
=== === ===
The assets as of May 2, 1998 and January 31, 1998 consisted primarily
of fixed assets. The assets as of April 26, 1997 consisted primarily of
inventory and fixed assets. Liabilities consisted primarily of amounts due to
vendors. During the period from July 17, 1997 through May 2, 1998, proceeds from
disposals related to the discontinued operations were $261 million which were
primarily from the sale of merchandise inventories.
Disposition activity related to the discontinued operations reserve for
the period ended May 2, 1998 was approximately $20 million and the remaining
reserve balance at May 2, 1998 was $70 million.
Comprehensive Income
The Registrant has adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income," ("SFAS No. 130") in the first quarter
of 1998. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in the financial statements.
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Comprehensive income is a more inclusive financial reporting methodology that
includes the disclosure of certain financial information that has not been
recognized in the calculation of net income or loss, such as foreign currency
translations and changes in minimum pension liability which are recorded
directly to shareholders' equity.
Earnings Per Share
The Registrant has adopted Statement of Financial Accounting Standards
No. 128, "Earnings per Share," ("SFAS No. 128"). SFAS No. 128 requires the
presentation of basic earnings per share and diluted earnings per share. Basic
earnings per share is computed as net earnings divided by the weighted-average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur from common shares issuable
through stock-based compensation including stock options, restricted stock
awards and other convertible securities.
A reconciliation of weighted-average common shares outstanding to
weighted-average common shares assuming dilution follows:
Thirteen weeks ended
--------------------
(in millions) May 2, April 26,
1998 1997
---- ----
Weighted-average common shares outstanding........... 135.1 134.1
Incremental commons shares issuable.................. - 1.1
----- -----
Weighted-average common shares assuming dilution..... 135.1 135.2
===== =====
Options with an exercise price greater than the average market price
were not included in the computation of diluted earnings per share and would not
have a material impact on diluted earnings per share. Incremental common shares
were not included in the quarter ended May 2, 1998 since to do so would be
antidilutive.
Reclassifications
Certain balances in prior periods have been reclassified to conform
with the presentation adopted in the current period. As discussed above, all
financial statements have been restated to reflect the discontinuance of the
domestic general merchandise business in July 1997.
Legal Proceedings
During 1994, the staff of the SEC initiated an inquiry relating to the
matters that were reviewed by the Special Committee established by the Board of
Directors in 1994 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. In the opinion of
management, the result of the inquiry will not have a material adverse effect on
the financial position or results of operation of the Registrant.
The information in this section on Legal Proceedings is current as of
June 9, 1998.
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Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective for
financial statements issued for fiscal years beginning after December 15, 1997
and therefore, effective for the Registrant in 1998. The Registrant will adopt
the provisions of this standard in the fourth quarter of 1998. SFAS No. 131
supersedes previously established standards for reporting operating segments in
the financial statements and requires disclosures regarding selected information
about operating segments in interim financial reports.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which is effective for fiscal
years beginning after December 15, 1997. This statement revises employers'
disclosures about pensions and other postretirement benefit plans. It does not
change the measurement or recognition of those plans.
Subsequent Event
On May 7, 1998, the Registrant announced that it had signed a
definitive merger agreement with The Sports Authority, Inc., whereby the
Registrant will acquire The Sports Authority, Inc. in a tax-free exchange of
shares valued at approximately $570 million, based upon the closing price of the
Registrant's common stock as of May 6, 1998, plus the assumption of
approximately $179 million of debt. The terms of the merger agreement provide
for the holders of The Sports Authority Inc.'s common stock to receive 0.8
shares of the Registrant's common stock in exchange for each of their shares.
The transaction, which is subject to approval by the shareholders of The Sports
Authority, Inc. and to customary regulatory approvals, is expected to be
completed in late summer 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
As discussed in the Notes to Condensed Consolidated Financial
Statements, in July 1997 the Registrant announced that it was exiting its
domestic Woolworth general merchandise business. Accordingly, the results of
operations for all periods presented for this business have been classified as
discontinued operations and all financial statements have been restated.
Total sales for the 1998 first quarter decreased 4.7 percent to $1,466
million as compared with $1,539 million for the first quarter of 1997,
reflecting foreign currency fluctuations and a comparable-store sales decrease
of 6.4 percent. Excluding the effect of foreign currency fluctuations and sales
from disposed operations, sales decreased 2.1 percent for the quarter. Total
Specialty segment sales decreased 0.5 percent in the first quarter and
comparable-store sales decreased 6.2 percent. International General Merchandise
segment sales decreased 17.3 percent for the first quarter of 1998 as compared
with the first quarter of 1997, while comparable-store sales decreased 7.1
percent during the period. Excluding the effect of foreign currency
fluctuations, International General Merchandise sales decreased by 11.2 percent,
as compared with the first quarter of 1997.
First quarter operating profit from continuing operations (before
corporate expense, interest expense and income taxes) declined to $28 million as
compared with $57 million in the first quarter of 1997. This decline is
primarily a result of lower sales and an increase in markdowns. Gross margin, as
a percentage of sales, decreased 160 basis points to 28.6 percent for the
quarter due to higher markdowns required to reduce inventory levels, reflecting
lower than anticipated sales. Selling, general and administrative expenses
("SG&A"), as a percentage of sales, increased 150 basis points to 26.7 percent
in the first quarter of 1998 as compared with 25.2 percent in the first quarter
of 1997. This increase is due to the overall decline in sales, as well as costs
of $7 million associated with the shutdown of the Registrant's 83-store Canadian
Kinney Shoe and 11-store U.S. Randy River specialty footwear operations.
Excluding this charge, SG&A remained relatively consistent with the
corresponding prior-year period.
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Included in other income is a $19 million gain recorded during the
first quarter of 1998 resulting from the sale of the Registrant's six-store
nursery chain as part of its continuing program to reduce its investment in
non-strategic businesses. The net gain on the sale of non-strategic real estate
in the first quarter ended April 26, 1997 totaled $4 million, which primarily
related to the sale of real estate located in Germany.
The Registrant reported a net loss for the thirteen weeks ended May 2,
1998 of $5 million, or $0.04 per share, as compared with net income of $1
million, or $0.01 per share for the first quarter of 1997 which includes a $16
million, or $0.12 per share, loss from discontinued operations.
The Registrant ended the first quarter with 7,247 stores consisting of
6,722 specialty stores and 525 international general merchandise stores. During
the first quarter, the Registrant opened 178 stores, closed or disposed of 168
stores and remodeled or relocated 63 stores. Of the 178 stores opened during the
quarter, 90 stores represented the first quarter acquisition of Athletic Fitters
stores.
SALES
The following table summarizes sales for continuing operations by segment and
geographic area:
Thirteen weeks ended
--------------------
(in millions) May 2, April 26,
1998 1997
---- ----
By segment:
Specialty:
Athletic Group..............................................$ 902 $ 905
Northern Group.............................................. 74 74
Specialty Footwear.......................................... 108 114
Other Specialty............................................. 78 75
----- -----
Specialty total................................................. 1,162 1,168
----- -----
International General Merchandise............................... 297 359
----- -----
Disposed operations............................................. 7 12
----- -----
$1,466 $1,539
===== =====
By geographic area:
Domestic...................................................$ 986 $ 987
International.............................................. 473 540
Disposed operations........................................ 7 12
----- -----
$1,466 $1,539
===== =====
Specialty
Athletic Group first quarter sales decreased 0.3 percent as compared with
the first quarter of 1997, which reflects a decrease in comparable-store sales
of 7.7 percent. The decrease in the 1998 first quarter Athletic Group
comparable-store sales was due to soft apparel sales, notably in the licensed
product category, as compared with the corresponding prior-year period.
Excluding the impact of foreign currency fluctuations, the Northern Group's
sales increased 2.3 percent for the first quarter, reflecting new store openings
and a comparable-store sales decrease of 6.3 percent as compared with the first
quarter of 1997.
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Specialty Footwear first quarter sales decreased 5.3 percent, and by 1.1
percent on a comparable-store basis, as compared with the corresponding prior-
year period. The decrease is primarily due to a sales decline from the U.S.
Kinney Shoe format, offset by favorable comparable-store increases achieved by
store formats in Australia.
Other Specialty first quarter sales increased 4.0 percent, and by 5.1
percent on a comparable-store basis, as compared with the corresponding prior-
year period. The increase is primarily due to favorable comparable-store sales
increases in the Afterthoughts format.
International General Merchandise
International General Merchandise sales decreased 17.3 percent for the
first quarter as compared with the corresponding prior-year period. Excluding
the impact of foreign currency fluctuations, sales decreased 11.2 percent for
the first quarter. Comparable-store sales decreased 7.1 percent for the first
quarter. Persistent high levels of unemployment and economic recession continue
to negatively impact sales.
OPERATING RESULTS
Operating results from continuing operations (before corporate expense, interest
expense, and income taxes) are as follows:
Thirteen weeks ended
--------------------
(in millions) May 2, April 26,
1998 1997
---- ----
By Segment:
Specialty..................................................$ 20 $ 62
International General Merchandise.......................... (1) (3)
Net gain on sales of real estate........................... - 4
Disposed operations........................................ 9 (6)
----- -----
$ 28 $ 57
===== =====
By geographic area:
Domestic...................................................$ 29 $ 67
International.............................................. (10) (8)
Net gain on sales of real estate........................... - 4
Disposed operations........................................ 9 (6)
----- -----
$ 28 $ 57
===== =====
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Specialty
The Specialty segment's operating profit decreased by $42 million, or
67.7 percent as compared with the 1997 first quarter. This decline is primarily
a result of lower sales and a decline in gross margins within the Athletic
Group. This decrease in gross margins reflect increased markdowns associated
with management strategy to keep inventories current, as sales did not meet
expectations. Additionally, to a lesser extent, higher occupancy costs
associated with the increase in the number of stores negatively impacted gross
margin and operating results.
The Specialty Footwear segment improved operating results by $1
million, or 7.7 percent as compared with the 1997 first quarter through
continuing expense reduction initiatives. The Northern Group operating results
decreased by $3 million, or 50.0 percent as compared with the 1997 first
quarter. Other Specialty operating results increased by $3 million, or 30.0
percent as compared with the 1997 first quarter.
Included in disposed operations for the first quarter of 1998 is a $19
million gain from the sale of the Registrant's six-store nursery chain. This
gain is offset by a $10 million loss for the shutdown of the Canadian Kinney
Shoe and U.S. Randy River specialty footwear operations, inclusive of $3 million
in operating losses. The prior year amount represents the operating results of
these operations.
International General Merchandise
Operating results in the International General Merchandise segment
improved by $2 million for the first quarter as compared with the 1997 first
quarter. The improvement in the International General Merchandise operating
profit compared with the prior year is attributable to expense reductions.
SEASONALITY
The Registrant's businesses are 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. As a result of these seasonal
sales patterns, inventory increases in the third quarter in anticipation of the
strong fourth quarter sales.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $216 million for the thirteen
weeks ended May 2, 1998, as compared with $89 million in the corresponding
prior-year period. This increase was due to lower-than-expected quarterly sales,
as well as additional inventory purchases related to the development of new
larger-size athletic formats. Inventories were $1,298 million as of May 2, 1998,
compared with $1,175 million as of April 26, 1997. The increase in inventory is
also attributable to the receipt of inventories for the recently acquired
Athletic Fitters stores and approximately 92 new store openings in May and June.
Also contributing to the decrease in cash is an outlay for occupancy costs on
May 1 not reflected in the prior year due to the timing of the end of the
quarter.
Net cash used in investing activities totaled $86 million for the
thirteen weeks ended May 2, 1998, as compared with $153 million used during the
corresponding prior-year period in 1997. Cash used in investing activities for
the thirteen weeks ended April 26, 1997 was predominately due to the first
quarter cash acquisition of Eastbay, Inc. for $140 million, in a transaction
accounted for as a purchase. Capital expenditures increased $57 million as
compared with the corresponding prior-year period, which represents the
Registrant's aggressive expansion and renovation program.
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Short-term debt at May 2, 1998 increased $253 million as compared with
the April 26, 1997 and the year-end levels. The increase in short-term debt was
due to increased investment in working capital and increased capital
expenditures for new stores and the Woolworth conversion stores, as well as the
purchase of Athletic Fitters stores in February 1998.
Shareholders' equity at May 2, 1998 increased by $12 million from
the level at January 31, 1998 primarily attributable to changes in foreign
currency exchange rates.
As mentioned in the Notes to the Condensed Consolidated Financial
Statements, the Registrant signed a definitive merger agreement with The Sports
Authority, Inc. whereby the Registrant will acquire The Sports Authority, Inc.
in a tax-free exchange of shares valued at approximately $570 million, based
upon the closing price of the Registrant's common stock as of May 6, 1998, plus
the assumption of approximately $179 million of debt.
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 page 7 of
Part I, Item 1.
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 14
through 15. The exhibits which are in this report immediately follow the index.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K dated March 11, 1988 (date of
earliest event reported) reporting that the Board of Directors adopted a
shareholder rights plan substantially similar to the Registrant's previous
rights plan.
Additionally, the Registrant filed a report on Form 8-K dated April 6,
1998 (date of earliest event reported) reporting that Allan Z. Loren had been
elected a director of the Registrant, effective April 8, 1998.
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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: June 9, 1998 /s/ Reid Johnson
-----------------
REID JOHNSON
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(i)(a) to the Quarterly
Report on Form 10-Q for the quarterly period ended
July 26, 1997, filed by the Registrant with the
SEC on September 4, 1997 (the "July 26, 1997 Form
10-Q")).
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 (b) July 24, 1990 and (c) July
9, 1997 (incorporated herein by reference to
Exhibit 3(i)(b) of the July 26, 1997 Form 10-Q).
3(ii) By-laws of the Registrant, as amended
(incorporated herein by reference to Exhibit 3(ii)
of the July 26, 1997 Form 10-Q).
4.1 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) Exhibits
3(i)(a) and 3(i)(b) to the July 26, 1997 Form
10-Q).
4.2 Rights Agreement dated as of March 11, 1998,
between Woolworth Corporation and First Chicago
Trust Registrant of New York, as Rights Agent
(incorporated herein by reference to Exhibit 4 to
the Form 8-K dated March 11, 1998).
4.3 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).
4.4 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).
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4.5 Form of 8 1/2% Debentures due 2022 (incorporated
herein by reference to Exhibit 4 to the
Registrant's Form 8-K dated January 16, 1992).
4.6 Purchase Agreement dated June 1, 1995 and Form of
7% Notes due 2000 (incorporated herein by
reference to Exhibits 1 and 4, respectively, to
the Registrant's Form 8-K dated June 7, 1995).
4.7 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 the Registrant's
Form 8-K dated July 13, 1995).
5 *
8 *
9 *
10 *
11 *
12 Computation of Ratio of Earnings to Fixed Charges.
13 *
15 Letter re: Unaudited Interim Financial Statements.
16 *
17 *
18 *
19 *
20 *
21 *
22 *
23 *
24 *
25 *
26 *
27.1 Financial Data Schedule, May 2, 1998 (which is
submitted electronically to the SEC for
information only and not filed.)
27.2 Restated Financial Data Schedule - April 26, 1997
(which is submitted electronically to the SEC for
information only and not filed.)
99 Independent Accountants' Review Report.
- -----------------
* Not applicable
15
18
Exhibits filed with this Form 10-Q:
Exhibit No. Description
- ----------- -----------
12 Computation of Ratio of Earnings to Fixed Charges.
15 Letter re: Unaudited Interim Financial Statements.
27.1 Financial Data Schedule - May 2, 1998.
27.2 Restated Financial Data Schedule - April 26, 1997.
99 Independent Accountants' Review Report.
1
EXHIBIT 12
WOOLWORTH CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
(dollars in millions)
Fiscal Fiscal Fiscal Fiscal Fiscal
13 weeks Year Year Year Year Year
ended ended ended ended ended ended
May 2, Jan. 31, Jan. 25, Jan. 27, Jan. 28, Jan. 29,
1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
NET EARNINGS
Net income (loss) from continuing
operations......................................$ (5) $ 213 $ 193 $ (98) $ 38 $(226)
Income tax expense (benefit)...................... (3) 125 127 (35) 42 (118)
Interest expense, excluding capitalized
interest........................................ 13 48 63 108 93 71
Portion of rents deemed representative
of the interest factor (1/3)..................... 51 204 211 207 194 192
---- ---- ---- ---- ---- ----
$ 56 $ 590 $ 594 $ 182 $ 367 $ (81)
==== ==== ==== ==== ==== ====
FIXED CHARGES
Gross interest expense............................$ 14 48 $ 63 $ 108 $ 93 $ 71
Portion of rents deemed representative
of the interest factor (1/3)..................... 51 204 211 207 194 192
---- ---- ---- ---- ---- ----
$ 65 $ 252 $ 274 $ 315 $ 287 $ 263
==== ==== ==== ==== ==== ====
RATIO OF EARNINGS TO FIXED
CHARGES 0.9 2.3 2.2 0.6 1.3 -
==== ==== ==== ==== ==== ====
Earnings were not adequate to cover fixed charges by $9 million, $133 million
and $344 million for the period ended May 2, 1998 and for the fiscal years ended
January 27, 1996 and January 29, 1994, respectively.
1
EXHIBIT 15
Accountants' Acknowledgment
Woolworth Corporation
New York, New York
Board of Directors:
Re: Registration Statements Numbers 33-10783, 33-91888, 33-91886, 33-97832,
333-07215 and 333-21131 on Form S-8 and Numbers 33-43334 and 33-86300 on
Form S-3
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated May 20, 1998 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.
/s/ KPMG Peat Marwick LLP
- -------------------------
New York, New York
June 9, 1998
5
1,000,000
3-MOS
JAN-30-1999
FEB-1-1998
MAY-2-1998
76
0
0
0
1,298
1,609
0
0
3,412
982
537
0
0
0
1,283
3,412
1,466
1,466
1,046
1,046
25
0
12
(8)
(3)
(5)
0
0
0
(5)
(0.04)
(0.04)
5
1,000,000
3-MOS
JAN-31-1998
JAN-26-1997
APR-06-1997
75
0
0
0
1,175
1,648
0
0
3,207
671
570
0
0
0
1,291
3,207
1,539
1,539
1,074
1,074
37
0
11
29
12
17
(16)
0
0
1
0.01
0.01
1
EXHIBIT 99
Independent Accountants' Review Report
The Board of Directors and Shareholders
Woolworth Corporation:
We have reviewed the accompanying condensed consolidated balance sheets of
Woolworth Corporation and subsidiaries as of May 2, 1998 and April 26, 1997, and
the related condensed consolidated statements of operations, comprehensive
income, retained earnings, and cash flows for the thirteen week periods ended
May 2, 1998 and April 26, 1997. These condensed consolidated financial
statements are the responsibility of 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 31, 1998, 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 11, 1998, 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 31, 1998, 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 20, 1998
