April 29, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached Form 10-K for the fiscal year ended
February 2, 1996. The filing fee of $250.00 was wire transferred to the
SEC account #910-8739 at the Mellon Bank, ABA number 043000261 on Monday,
April 15, 1996.
Sincerely,
KATHY GIES
Lands' End, Inc.
One Lands' End Lane
Dodgeville, WI 53595
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934. (FEE REQUIRED)
For the fiscal year ended February 2, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934. (NO FEE REQUIRED)
For the transition period from ...... to ......
Commission file number 1-9769
LANDS' END, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-2512786
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Lands' End Lane, Dodgeville, WI 53595
(Address of principal executive (Zip code)
offices)
Registrant's telephone number, including area code: 608-935-9341
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (__)
As of March 29, 1996, the aggregate market value of the Common Stock of the
registrant held by non-affiliates of the registrant was $247,551,133.
The number of shares of Common Stock ($0.01 par value) outstanding as of
March 29, 1996, was 33,615,790.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
Notice of 1996 Annual Meeting and Part III, Items 10,
Proxy Statement dated April 22,1996 11, 12 and 13
Lands' End, Inc. & Subsidiaries
Index To
Annual Report On Form 10-K
For Year Ended February 2, 1996
Part I. Page
----
Item 1. Business ............................................. 3-8
Executive Officers of the Registrant ................. 9
Item 2. Properties ........................................... 10
Item 3. Legal Proceedings .................................... 11
Item 4. Submission of Matters to a Vote of Security Holders .. 11
Part II.
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters ................................ 12
Item 6. Selected Consolidated Financial Data ................. 13
Item 7. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations ...... 14-19
Item 8. Consolidated Financial Statements and Supplementary
Data ............................................... 20-35
Item 9. Changes in and Disagreements on Accounting and
Consolidated Financial Disclosure................... 35
Part III.
Item 10. Directors and Executive Officers of the Registrant.... 36
Item 11. Executive Compensation ............................... 36
Item 12. Security Ownership of Certain Beneficial Owners and
Management ......................................... 36
Item 13. Certain Relationships and Related Transactions ....... 36
Part IV.
Item 14. Exhibits, Consolidated Financial Statement Schedules,
and Reports on Form 8-K ............................ 37
Signatures .......................................................... 38
2
PART I.
Item 1. Business
Lands' End, Inc., is a leading direct merchant of traditionally styled,
casual clothing for men, women and children, accessories, domestics,
shoes and soft luggage. The company strives to provide products of
exceptional quality at prices representing honest value, enhanced by a
commitment to excellence in customer service and an unconditional
guarantee. The company offers its products principally through regular
mailings of its monthly primary catalogs and its specialty catalogs.
The company's growth strategy has three key elements. First, the
company seeks to increase sales from its regular catalogs in the United
States both by expanding its customer base and by increasing sales to
its existing customers through improvements in its merchandise offerings
and creative presentations. Second, the company endeavors to generate
additional sales by making targeted mailings of its specialty catalogs
to existing and prospective customers. Third, the company is actively
pursuing opportunities to apply its merchandising, marketing and order
fulfillment skills abroad by continuing its efforts in the United
Kingdom, Japan and by entering a new market in Germany.
Catalogs and Marketing
Lands' End views each catalog issue as a unique opportunity to
communicate with its customers. Products are described in visual and
editorial detail in which the company shares its view of the benefits
and features of its merchandise. The catalogs use such techniques as
background stories, monthly publication and distinctive covers to
stimulate the reader's interest, combining a consistent theme with
varying monthly features.
During fiscal 1996, the company mailed 12 issues of its regular
monthly (primary) catalog with an average of 155 pages per issue from
its U.S. based operations. Worldwide, the company mailed approximately
200 million full-price catalogs, including specialty catalogs and
abridged issues.
Regular (Primary) and Prospector Catalogs (U.S. Based Operations)
Each issue of the regular catalog offers certain basic product lines for
men and women (including knit shirts, sweaters, dress and sport shirts,
casual pants, dresses, skirts, accessories, and soft luggage) that
customers have come to expect. The regular catalog also offers seasonal
merchandise, such as swimsuits, outerwear and holiday gifts. In
addition to the mailings of the regular catalog, each year Lands' End
generally mails two end-of-season clearance catalogs, interim catalogs
and a "Last Chance Before Christmas" catalog. The company mails an
abridged version of its regular catalog to prospective customers, who
are identified based on lists of magazine subscribers and customers of
other direct marketers and on lists compiled of households meeting
3
certain demographic criteria. In addition, the company identifies
prospective new customers through its national advertising campaign.
Specialty Catalogs (U.S. Based Operations)
In fiscal 1991, the company introduced three specialty catalogs
Kids, Coming Home, and Beyond Buttondowns. The Kids catalog offers
children's clothing. The Coming Home catalog offers domestic products,
primarily bedding and bath items. Beyond Buttondowns offers men's
tailored clothing and accessories. In fiscal 1994, the company
introduced the specialty catalog, Textures, featuring women's tailored
clothing and accessories. In fiscal 1996, the company mailed six, nine,
four, and two issues of its Kids, Coming Home, Beyond Buttondowns, and
Textures catalogs, respectively.
New Businesses (U.S. Based Operations)
The company continues to develop new businesses that play an important
role in its growth strategy. In fiscal 1994, the company purchased a
majority interest in The Territory Ahead, a California-based, upscale
casual clothing catalog for men and women. In fiscal 1996, The
Territory Ahead mailed 10 issues of its catalogs.
In fiscal 1994, Corporate Sales, the company's business-to-business
catalog, was introduced. Corporate Sales offers quality products to
teams and clubs or to companies that use Lands' End's merchandise for
corporate premiums or incentive programs. The company's embroidery
capabilities allow for the design and monogram of unique logos or
emblems for groups. In fiscal 1996, the company mailed four issues of
its Corporate Sales catalogs.
In fiscal 1995, the company purchased the trademark of Willis &
Geiger Company, a respected brand that offers apparel and related
products targeted to the outdoor enthusiast. The first Willis & Geiger
catalog was mailed in August 1995.
In fiscal 1995, the company formed a wholly owned subsidiary that
acquired the marketing rights and assets of MontBell America, Inc.,
which designs, develops and distributes premier outdoor clothing and
equipment through the wholesale channels to outdoor specialty stores,
primarily in the United States. During the fourth quarter of fiscal
1996, the company sold the marketing rights and assets of MontBell
America, Inc.
Pan International (U.S. Based Operations)
Through the company's Pan International business, regular mailings of
primary and prospecting catalogs are sent to customers in more than 175
countries throughout the world. The company will be discontinuing its
licensing agreement with Myer Direct in Australia and plans to develop
this counter-seasonal business through its Dodgeville operations instead.
4
International (Foreign Based Operations)
In September 1991, the company launched its first United Kingdom (U.K.)
catalog denominated in British pound sterling. In August 1993, the
company opened its own telephone order and distribution center in
Oakham, England, which allowed the company to fill orders locally and
greatly reduce delivery time to U.K. customers. Fourteen issues of the
pound-denominated U.K. catalog were mailed in fiscal 1996.
In the fall of 1994, the company launched operations in Japan, and in
fiscal 1996, the company mailed six issues of the Japanese-language,
yen-denominated catalog. The company's phone center and administrative
functions operate from its Yokohama offices. Packages are delivered
from a warehouse in Maebashi, which is operated by a third party. The
distribution center will move to a larger facility this year to allow
the company to manage additional growth.
In the fall of 1994, the company completed small mailings of native
language, native currency catalogs into France, Germany and the
Netherlands, using its Oakham, England, warehouse for fulfillment
services. After evaluating these mailings, the company has decided to
establish telephone operations in Germany for a launch there within the
next 12 months.
Alternative Media
The company believes that ways of reaching customers other than by
regular catalog mailings may become increasingly important in the
future. The company actively experiments with alternative technologies
and media for reaching customers, including on-line computer networks
such as the Internet's World Wide Web, Prodigy, CompuServe, America On-
line, and CD-ROMs. The company will continue to explore the development
of interactive shopping to meet its customer's expectations. However,
marketing the company's products through regular and specialty catalogs
is expected to remain the primary means of communicating with customers.
Customers
A principal factor in the company's success to date has been the
development of its own list of active customers, many of whom have been
identified through their response to the company's advertising. At the
end of fiscal 1996, the company's mailing list consisted of about 22.4
million persons, approximately 8.4 million of whom are viewed as
"customers" because they have made at least one purchase from the
company within the last 36 months. The company routinely updates and
refines this list prior to individual catalog mailings to monitor
customer interest as reflected in criteria such as the recency,
frequency, dollar amount, and product type of purchases.
5
The company believes that its customer list has desirable demographic
characteristics and is well-suited to the products offered in the
company's catalogs. A customer research survey conducted by the company
during 1995 indicated that approximately 49 percent of its customers
were in the 35-45 age group and 62 percent had household incomes of
$50,000 or more. This research indicated that approximately 86 percent
of customers attended or graduated from college. The results were not
significantly different from surveys conducted in prior years.
The company conducts a national advertising campaign intended to build
the company's reputation and to attract new customers. In fiscal 1996,
this advertising appeared in about 60 national magazines, as well as on
national television. In addition, the company advertises in
approximately 100 national, regional and local publications in Canada,
the U.K., Japan, the Middle East, and in Pacific Rim countries.
Product Development
Lands' End concentrates on traditional clothing and other products that
are classically inspired, simply styled and quality crafted to meet the
changing tastes of the company's customers rather than to mimic the
changing fads of the fashion world. At the same time, the company seeks
to maintain customer interest by developing new product offerings,
improving existing core products and reinforcing its value positioning.
The company continues to incorporate innovations in fabric, construction
and detail that add value and excitement and differentiate Lands' End
from the competition. In order to ensure that products are manufactured
to the company's quality standards at reasonable prices, product
managers, designers, quality assurance specialists, and inventory
managers develop the company's own product specifications. They also
specify the fibers, fabric construction and manufacturing source for
each item and are responsible for the styling and quality features of the
products.
As part of its "direct merchant" philosophy, Lands' End deals directly
with its suppliers and seeks to avoid intermediaries. All goods are
produced by independent manufacturers, except for most of our soft
luggage which is assembled at the company's own facilities. During
fiscal 1996, the company purchased merchandise from more than 500
domestic and foreign manufacturers, and no single manufacturer accounted
for more than 10 percent of company purchases in each of the last three
fiscal years. In fiscal 1996, approximately 30 percent of our
merchandise was imported, and 70 percent was purchased from
manufacturers headquartered in the United States. A portion of our
production with U.S. manufacturers is sourced through programs in the
Caribbean. The company will continue to take advantage of worldwide
sourcing without sacrificing customer service or quality standards. The
availability and cost of certain foreign products may be affected by
United States trade policies and the value of the United States dollar
relative to foreign currencies.
6
Order Entry and Fulfillment
The company attempts to simplify catalog shopping as much as possible and
believes that its fulfillment systems are among the best in the United
States. Lands' End utilizes toll-free telephone numbers which may be called
24 hours a day, seven days a week (except Christmas Day) to place orders or
to request a catalog. Approximately 80 - 90 percent of catalog orders are
placed by telephone. Telephone calls are answered by as many as 2,800 well-
trained sales representatives who utilize on-line computer terminals to
enter customer orders and to retrieve information about product
characteristics and availability. Additional services are provided through
the use of AT&T language lines to serve foreign customers and TDD (telephone
device for the deaf). The company's three U.S. telephone centers are
located in Dodgeville, Cross Plains and Reedsburg, Wisconsin. International
telephone centers are located in Oakham, England and Yokohama, Japan.
The company has achieved efficiencies in order entry and fulfillment
that permits the shipment of in-stock orders on the following day,
except orders requiring monogramming or inseaming, which typically
require one or two extra days. The company's sales representatives
enter orders into an on-line order entry and inventory control system.
Computer processing of orders is performed each night on a batch basis,
at which time picking tickets are printed with bar codes for optical
scanning. Inventory is picked based on the location of individual
products rather than orders, followed by computerized sorting and
transporting of goods to multiple packing stations and shipping zones.
The computerized inventory control system also handles the receipt of
shipments from manufacturers, permitting faster access to newly arrived
merchandise, as well as the handling of customer return items.
Orders are generally shipped by United Parcel Service at various tiered
rates dependent upon the total dollar value of each customer's order.
Other expedited delivery services are available at additional charges.
The company utilizes a two-day UPS service at standard rates, enhancing
its customer service.
Merchandise Liquidation
Liquidations, sales of overstocks and end-of-season merchandise at
reduced prices, were approximately 11 percent, 10 percent and 10 percent
of net sales in fiscal 1996, 1995 and 1994, respectively. A majority of
liquidation sales were made through catalogs and other print media.
The balance was sold principally through the company's outlet stores.
Competition
The company's principal competitors are retail stores, including
specialty shops, department stores, and other catalog companies. The
company may also face increased competition from other retailers as the
number of television shopping channels and the variety of merchandise
offered through electronic media increases. The apparel retail business
in general is intensely competitive. Lands' End competes principally on
7
the basis of merchandise value (quality and price), its established
customer list and customer service, including fast order fulfillment and
its unqualified guarantee.
The company believes that it is one of the leading catalog companies in
the U.S. The company attributes the growth in the catalog industry to
many factors including customer convenience, widespread use of credit
cards, the use of toll-free telephone lines, customers having less time
to shop in stores, and purchasing of product on-line through various
computer networks. At the same time, the catalog business is subject to
uncertainties in the economy, which result in fluctuating levels of
overall consumer spending. Due to the lead times required for catalog
production and distribution, catalog retailers may not be able to
respond as quickly as traditional retailers in an environment of rapidly
changing prices.
Trademarks
The company uses the trademark of "Lands' End" on product and catalogs.
Other trademarks, which are primarily used in the catalog, include
"Super-T" shirts, "Squall" jackets and "Drifter" sweaters. With the
exception of "Lands' End" and "Coming Home", the company believes that
loss or abandonment of any particular trademark would not significantly
affect its business.
Seasonality of Business
The company's business is highly seasonal. Historically, a
disproportionate amount of the company's net sales and a majority of its
profits have been realized during the fourth quarter. If the company's
sales were materially different from seasonal norms during the fourth
quarter, the company's annual operating results could be materially
affected. In addition, as the company continues to refine its marketing
efforts by experimenting with the timing of its catalog mailings,
quarterly results may fluctuate. Accordingly, results for the
individual quarters are not necessarily indicative of the results to be
expected for the entire year.
Employees
The company believes that its skilled and dedicated workforce is one of
its key resources. Employees are not covered by collective bargaining
agreements, and the company considers its employee relations to be
excellent. As a result of the highly seasonal nature of the company's
business, the size of the company's workforce varies, ranging from
approximately 5,800 to 7,600 individuals in fiscal 1996. During the
peak winter season of fiscal 1996, approximately 3,800 of the company's
approximately 7,600 employees were temporary employees.
8
Executive Officers of the Registrant
The following are the executive officers of the company:
Michael J. Smith, 35, is President and Chief Executive Officer of the
company. In 1983, Mr. Smith entered the employ of the company as a
Market Research Analyst, became Circulation Manager of Planning in 1985,
and was promoted to Manager of Merchandise Planning and Research in
1988. In 1990, he was named Managing Director of Coming Home and was
elected Vice President of that business in 1991. He assumed his present
position in December 1994.
Stephen A. (Chip) Orum, 50, is Executive Vice President and Chief
Operating Officer in addition to continuing his responsibilities as
Chief Financial Officer of the company. Mr. Orum joined the company as
Vice President and Chief Financial Officer in June 1991, and was
appointed Senior Vice President and Chief Financial Officer in February
1993. He was promoted to his present position in October 1994. Mr.
Orum was employed by Jos. A. Bank Clothiers, Inc. since 1982 in various
capacities, reaching the position of Executive Vice President and Chief
Financial Officer.
Mindy C. Meads, 44, resigned as Senior Vice President - Merchandising in
March 1996 to accept a position with another company in the retail
industry. Ms. Meads had joined Lands' End, Inc., in June 1991, as Vice
President-Merchandising of the women's apparel division. Ms. Meads was
promoted to Senior Vice President-Merchandising in January 1995. Ms.
Meads was employed by The Limited from 1990 through 1991 as Merchandise
Manager - Dresses. From 1978 until 1990, Ms. Meads was employed by
R. H. Macy & Company in various capacities reaching the position of
Senior Vice President - Merchandise.
Francis P. Schaecher, 48, is Senior Vice President - Operations of the
company. Mr. Schaecher joined the company in 1982 as Operations
Manager. He served as Vice President - Operations from 1983 until 1990,
at which time he assumed his present position.
All executive officers serve at the pleasure of the Board of Directors.
There is no family relationship between any of the executive officers of
the company. None of the company's directors or executive officers were
involved in any criminal proceeding (excluding traffic violations or
similar misdemeanors) nor was any such person a party to any civil
proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person was or is subject to a
judgment decree or final order enjoining future violations of or
prohibiting or mandating activities subject to federal or state
securities laws or finding any violation with respect to such laws.
9
Item 2. Properties
The following table sets forth certain information of the company and
its subsidiaries relating to their principal facilities as of February
2, 1996. None of these properties is subject to mortgage or collateral
assignment.
Type of
Location Interest
Domestic Properties:
Wisconsin:
Warehouses in Dodgeville and Reedsburg Owned
Phone centers and offices in Dodgeville,
Cross Plains, and Reedsburg Owned
Activity Center in Dodgeville Owned
Hangars in Madison and Mineral Point Owned
Outlet stores in Brookfield, Fox Point,
Madison, Oshkosh, and Dodgeville Leased
Offices in Madison Leased
Iowa:
Manufacturing plants in West Union and Elkader Owned
Outlet stores in Iowa City and West Des Moines Leased
Illinois:
Outlet stores in Chicago, Evanston, Gurnee,
Lombard, Niles, Schaumburg, Vernon Hills,
Champaign, Springfield, and Rockford Leased
California:
Warehouse, phone center, offices, and retail Leased(1)
store in Santa Barbara
Outlet store in Pismo Beach Leased(1)
International Properties:
United Kingdom:
Warehouse, phone center, outlet store, Leased
and offices in Oakham
Japan:
Warehouse in Maebashi Leased
Offices and phone center in Yokohama Leased
The company believes that its facilities are in good condition, well
maintained and suitable for their intended uses. The company will expand
its facilities in Japan and the United Kingdom to allow for future
growth. Within the next 12 months, telephone operations will be
established in Germany, and the company has plans to open additional
outlet stores.
(1) Leased by The Territory Ahead
10
Item 3. Legal Proceedings
There are no material legal proceedings presently pending, except for
routine litigation incidental to the business, to which the company
is a party or of which any of its property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended February 2, 1996.
11
PART II.
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters
Market Information
The common stock of the company is listed and traded on the New York
Stock Exchange. The stock tables in most daily newspapers list the
company as "LandsE". Ticker symbol: "LE". See Item 10 "Consolidated
Quarterly Analysis" for information on the high and low stock prices of
the company's common stock. The closing sales price of the company's
stock on the New York Stock Exchange on March 29, 1996, was $17 1/2 per
share.
Shareholders
As of March 29, 1996, the number of shareholders of record of common
stock of the company was 2,776. This number excludes shareholders whose
stock is held in nominee or street name by brokers.
Dividends
See Item 7 "Liquidity and capital resources" of Management's Discussion
and Analysis for the company's decision not to pay cash dividends during
fiscal years 1996 and 1995.
Stock Split
In May 1994, the company declared a two-for-one split in the company's
common stock that was effected as a stock dividend payable on June 15,
1994, to shareholders of record as of May 31, 1994.
12
Item 6. Selected Consolidated Financial Data
FIVE-YEAR CONSOLIDATED FINANCIAL SUMMARY (unaudited)
(In thousands, except per share data)
Fiscal Year
1996 1995 19942 1993 1992
Income statement data:
Net sales $1,031,548 $992,106 $869,975 $733,623 $683,427
Pretax income 50,925 59,663 69,870 54,033 47,492
Percent of net sales 4.9% 6.0% 8.0% 7.4% 7.0%
Net income before
cumulative effect of
accounting change 30,555 36,096 42,429 33,500 28,732
Cumulative effect of
change in accounting - - 1,300 - -
Net income 30,555 36,096 43,729 33,500 28,732
Per share of common stock: 1
Net income per share
before cumulative
effect of change in
accounting $0.89 $1.03 $1.18 $0.92 $0.77
Cumulative effect of
change in accounting - - .04 - -
Net income per share $0.89 $1.03 $1.22 $0.92 $0.77
Cash dividends per share - - $0.10 $0.10 $0.10
Common shares outstanding 33,659 34,826 35,912 36,056 36,944
Balance sheet data:
Current assets $222,089 $198,168 $192,276 $137,531 $131,273
Current liabilities 114,744 102,717 91,049 67,315 74,548
Property, plant,
equipment and
intangibles, net 101,408 99,444 81,554 74,272 74,527
Total assets 323,497 297,612 273,830 211,803 205,800
Noncurrent liabilities 7,561 5,767 5,496 5,100 4,620
Shareholders'
investment 201,192 189,128 177,285 139,388 126,632
Other data:
Net working capital $107,345 $ 95,451 $101,227 $ 70,216 $ 56,725
Capital expenditures 14,780 27,005 16,958 9,965 5,347
Depreciation and
amortization expense 12,456 10,311 8,286 7,900 7,428
Return on average
shareholders'
investment 16% 20% 28% 25% 23%
Return on average assets 10% 13% 18% 16% 15%
Debt/equity ratio - - - - 1%
1. Share data reflects the two-for-one stock split declared in May 1994.
2. Effective January 30, 1993, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes" which
was recorded as a change in accounting principle at the beginning of
fiscal 1994 with an increase to net income of $1.3 million or $0.04 per
share.
13
Item 7. Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
The following table sets forth certain items from the company's
consolidated statements of operations as a percentage of net sales.
For the period ended
February 2, January 27, January 28,
1996 1995 1994
Net sales 100.0% 100.0% 100.0%
Cost of sales 57.0 57.6 59.1
Gross profit 43.0 42.4 40.9
Selling, general and
administrative expenses 38.0 36.0 32.8
Charges from sale of subsidiary 0.2 0.4 -
Income from operations 4.8 6.0 8.1
Interest expense, net (0.3) (0.2) -
Other 0.4 0.2 (0.1)
Income before income taxes
and cumulative effect of
change in accounting 4.9 6.0 8.0
Income tax provision 1.9 2.4 3.1
Net income before cumulative
effect of change in accounting 3.0 3.6 4.9
Cumulative effect of change in
accounting for income taxes - - 0.1
Net income 3.0% 3.6% 5.0%
14
FISCAL 1996 COMPARED WITH FISCAL 1995
Net sales for the 53-week year just ended totaled $1.032 billion, compared
with $0.992 billion in the prior 52-week year, an increase of 4 percent. Net
sales for the first 52 weeks of fiscal 1996 rose 3 percent, compared to fiscal
1995. Sales in the United States from the company's core monthly and
prospecting catalogs, which accounted for about two-thirds of total net sales,
were lower than the prior year. Sales from the company's international and
new businesses accounted for more than the entire rise in sales for the year.
During the year, worldwide, catalog mailings were higher than in the prior
year, while overall pages mailed were slightly lower. The number of full-
price catalogs mailed increased 5 percent to 200 million in fiscal 1996 from
191 million in fiscal 1995.
The company ended the year with inventory of $165 million, down 2 percent from
fiscal 1995 ending inventory of $169 million. For the year, the company was
able to ship about 90 percent of items ordered by customers at the time the
order was placed, compared with 88 percent for fiscal 1995.
Gross profit increased
Gross profit increased 5 percent to $444 million in fiscal 1996, compared with
$421 million in fiscal 1995. As a percentage of net sales, gross profit rose
to 43.0 percent in fiscal 1996, compared with 42.4 percent in fiscal 1995.
The increase in gross profit margin was mainly due to lower merchandise costs,
primarily from improvements in sourcing, as well as from a greater proportion
of sales from higher margin businesses. Liquidation of out-of-season and
overstocked merchandise was about 11 percent of net sales in fiscal 1996,
compared to 10 percent in the prior year.
Costs of inventory purchases increased approximately 1.8 percent in fiscal
1996, compared to 0.1 percent in fiscal 1995.
Selling, general and administrative expenses
Selling, general and administrative (SG&A) expenses rose 10 percent in fiscal
1996 to $392 million, from $358 million in fiscal 1995. As a percentage of
sales, SG&A increased to 38.0 percent in fiscal 1996 from 36.0 percent in
fiscal 1995. The rise in the SG&A ratio was primarily due to higher paper
prices and postal rates and lower sales per catalog mailed in the United
States. Those expenses increased about $20 million. The costs of producing
and mailing catalogs represented about 43 percent of total SG&A in fiscal 1996
and 41 percent in fiscal 1995. Other operating expenses as a percentage of
sales were about the same as last year. While payroll costs were relatively
higher, this was mostly offset by lower bonuses and consulting fees.
15
Depreciation and amortization expense was up 21 percent from the prior year,
to $12.5 million, mainly for computer software and equipment. Rental expense
was up 34 percent to total $11.6 million, primarily due to increased computer-
related rentals and building rentals.
Utilization of credit lines remained stable
Borrowing under our short-term lines of credit was consistent with last year
due to stabilized inventory levels. These funds were mainly used to meet peak
inventory requirements. In addition, the company purchased approximately $20
million in treasury stock and spent $15 million in capital expenditures. The
company's lines of credit peaked at $104 million in October 1995, compared
with a peak of $106 million in the prior year. At February 2, 1996, the
company had only short-term debt outstanding for a foreign subsidiary of $9.3
million and no long-term debt outstanding.
Net income decreased
Net income was $30.6 million, down 15 percent from the $36.1 million the
company earned in fiscal 1995. Earnings per common share for the year just
ended were $0.89, compared with $1.03 per share in the prior year. Net income
for the year includes $2.4 million in foreign currency exchange gains,
recorded as other income.
As previously reported, during the fourth quarter of fiscal 1996, the company
took an after-tax charge to earnings of $1.1 million, or a reduction of $0.03
per share, in connection with the sale of its wholly owned subsidiary,
MontBell America, Inc. This is in addition to the after-tax charge of $2.1
million, or a reduction of $0.06 per share, taken as a reserve in the fourth
quarter of fiscal 1995 in anticipation of the sale of the subsidiary. Without
the effect of these after-tax charges, net income for fiscal 1996 was $31.7
million, or $0.92 per share, compared with $38.2 million, or $1.09 per share,
in fiscal 1995.
FISCAL 1995, COMPARED WITH FISCAL 1994
Net sales increased 14 percent to $992 million in fiscal 1995, compared with
$870 million in fiscal 1994. The increase was primarily due to improved
customer reaction to the catalogs and a 23 percent increase in the number of
regular and specialty catalogs mailed from 155 million to 191 million in
fiscal 1995. About half of the increase in net sales in fiscal 1995 came from
the company's regular monthly catalogs, prospector catalogs, and specialty
catalogs in the United States. Specialty catalogs include the Kids catalog,
featuring children's clothing; Coming Home, a catalog focusing on products for
bed and bath; Beyond Buttondowns, a men's tailored clothing and accessories
catalog; and the Textures catalog, featuring tailored clothing for women. In
addition, over 30 percent of the sales increase was attributed to the strong
sales growth from the company's international businesses as well as from two
new businesses, The Territory Ahead and Corporate Sales.
16
The company ended fiscal year 1995 with inventory of $169 million, up 13
percent from fiscal 1994 ending inventory of $150 million. Higher inventory
levels throughout the year resulted in higher interest expense, but enabled
the company to ship nearly 88 percent of items ordered by customers at the
time the order was placed, compared with 85 percent for fiscal 1994.
Gross profit increased
Gross profit increased 18 percent to $421 million in fiscal 1995, compared
with $356 million in fiscal 1994, primarily due to the 14 percent increase in
consolidated net sales, as well as to the increase in gross profit margin. As
a percentage of net sales, gross profit rose to 42.4 percent in fiscal 1995,
compared with 40.9 percent in fiscal 1994. The increase in gross profit
margin was mainly due to lower merchandise costs from improvements in domestic
and offshore sourcing, partially offset by steeper markdowns of liquidated
merchandise. Liquidation of out-of-season and overstocked merchandise was
about 10 percent of net sales in each of the last two years.
Costs on inventory purchases increased approximately 0.1 percent in fiscal
1995, compared with 0.8 percent in fiscal 1994. The impact of inflation
continued to be low for the merchandise purchased by the company.
Selling, general and administrative expenses
Selling, general and administrative (SG&A) expenses rose 25 percent in fiscal
1995 to $358 million, from $286 million in fiscal 1994, principally due to the
14 percent increase in net sales. Associated with higher sales were
advertising expenses (attributed to customer prospecting and increased catalog
mailings), fixed expenses (due to investment spending in international and new
businesses), and increased variable expenses (primarily due to higher payroll
and shipping and handling costs). The costs of producing and mailing catalogs
represented about 41 percent of total SG&A in fiscal 1995 and in fiscal 1994.
As a percentage of sales, SG&A increased to 36.0 percent in fiscal 1995 from
32.8 percent in fiscal 1994. The rise in the SG&A ratio was primarily due to
the company's investment spending to develop international and new businesses,
to expand customer acquisition programs in anticipation of the 1995 postal
rate and paper price increases, to enhance its customer service by offering
two-day UPS delivery service, and to upgrade its information systems.
Depreciation and amortization expense was up 24 percent from the prior year,
to $10.3 million. Rental expense was up 19 percent to total $8.6 million,
primarily due to increased computer hardware and building rentals.
Increased utilization of credit lines
Higher inventory levels for the majority of the year resulted in more
borrowing and higher interest expense throughout the year. In addition, the
company purchased approximately $28 million in treasury stock and spent $27
million in capital expenditures. The company's lines of credit peaked at $106
million in October 1994, compared with a peak of $54 million in the prior
year. At January 27, 1995, the company had short-term debt outstanding for a
subsidiary of $7.5 million and no long-term debt outstanding.
17
Net income decreased
Net income was $36.1 million, down 17 percent from the $43.7 million the
company earned in fiscal 1994. Earnings per common share for the year just
ended were $1.03, compared with $1.22 per share in the prior year.
During the fourth quarter of fiscal 1995, the company set up a reserve for the
anticipated sale of its subsidiary, MontBell America, Inc., that reduced net
income by $2.1 million, or $0.06 per share. During the first quarter of
fiscal 1994, the company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," which added $1.3 million of net
income, or $0.04 per share, to the results in fiscal 1994. Without the effect
of these two factors, net income for fiscal 1995 was $38.2 million, or $1.09
per share, compared with $42.4 million, or $1.18 per share, in fiscal 1994.
The Christmas season is our busiest
The company's business is highly seasonal. The fall/winter season, which the
company regards as a five-month period ending in December, includes the peak
selling season during the Thanksgiving and Christmas holidays in the company's
fourth quarter. In the longer spring/summer season, orders are fewer and the
merchandise offered generally has lower unit selling prices than products
offered in the fall/winter season. As a result, net sales are usually
substantially greater in the fall/winter season, and SG&A as a percentage of
net sales is usually higher in the spring/summer season. In addition, as the
company continues to refine its marketing efforts by experimenting with the
timing of its catalog mailings, quarterly results may fluctuate.
Nearly 40 percent of the company's annual sales came in the final three months
(November, December and January) of fiscal years 1996 and 1995. About 85
percent and 65 percent of before-tax profit was realized in the same three
months of fiscal 1996 and 1995, respectively.
Liquidity and capital resources
To date, the bulk of the company's working capital needs have been met through
funds generated from operations and from short-term bank loans. The company's
principal need for working capital has been to meet peak inventory
requirements associated with its seasonal sales pattern. In addition, the
company's resources have been used to purchase treasury stock and make asset
additions.
During fiscal 1995, the board of directors evaluated its dividend practice
whereby it had paid annual dividends. Given the company's intent to buy back
additional shares, the board determined that the current dividend practice was
no longer desirable, and payment of a cash dividend is not planned for the
foreseeable future.
The company continues to explore investment opportunities arising from the
expansion of its international businesses and the development of new
businesses. While this investment spending has had some negative impact on
earnings, it is not expected to have a material effect on liquidity.
18
At February 2, 1996, the company had unsecured domestic credit facilities
totaling $110 million, all of which was unused. The company also maintains
foreign credit lines for use in foreign operations totaling the equivalent of
approximately $19 million, of which $9.3 million was used at February 2, 1996.
The company has a separate $20 million bank facility available to fund
treasury stock purchases and capital expenditures. This facility runs through
December 31, 1996.
Since June 1989, the company's board of directors has authorized the company
from time to time to purchase a total of 8.2 million shares of treasury stock,
of which 1.3 million, 1.4 million, and 0.1 million shares have been purchased
in the fiscal years ended February 2, 1996, January 27, 1995, and January 28,
1994, respectively. The total cost of the purchases was $20.0 million, $28.0
million, and $2.9 million for fiscal 1996, 1995 and 1994, respectively. There
is a balance of 0.7 million shares available to the company to purchase as of
February 2, 1996.
Capital investment
Capital investment was about $15 million in fiscal 1996. Major projects
included new computer hardware and software, leasehold improvements for new
retail stores and material handling equipment.
In the coming year, the company plans to invest about $16 million in capital
improvements. Major projects will include new computer hardware and software,
material handling equipment and leasehold improvements for new retail stores.
The company believes that its cash flow from operations and borrowings under
its current credit facilities will provide adequate resources to meet its
capital requirements and operational needs for the foreseeable future.
Possible future changes
A 1992 Supreme Court decision confirmed that the Commerce Clause of the United
States Constitution prevents a state from requiring the collection of its use
tax by a mail order company unless the company has a physical presence in the
state. However, there continues to be uncertainty due to inconsistent
application of the Supreme Court decision by state and federal courts. The
company attempts to conduct its operations in compliance with its
interpretation of the applicable legal standard, but there can be no assurance
that such compliance will not be challenged.
In recent challenges, various states have sought to require companies to begin
collection of use taxes and/or pay taxes from previous sales. The company has
not received assessments from any state.
The Supreme Court decision also established that Congress has the power to
enact legislation which would permit states to require collection of use taxes
by mail order companies. Congress has from time to time considered proposals
for such legislation. The company anticipates that any legislative change, if
adopted, would be applied only on a prospective basis.
The possible future changes discussed above are forward looking, subject to
numerous uncertainties and accordingly, not necessarily indicative of actual
future results.
19
Item 8. Consolidated Financial Statements and Supplementary Data
Consolidated Statements of Operations
Lands' End, Inc. & Subsidiaries
(In thousands, except per share data)
For the period ended
February 2, January 27, January 28,
1996 1995 1994
Net sales $1,031,548 $992,106 $869,975
Cost of sales 588,017 571,265 514,052
Gross profit 443,531 420,841 355,923
Selling, general and
administrative expenses 392,484 357,516 285,513
Charges from sale of subsidiary 1,882 3,500 -
Income from operations 49,165 59,825 70,410
Other income (expense):
Interest expense (2,771) (1,769) (359)
Interest income 253 307 346
Other 4,278 1,300 (527)
Total other income (expense), net 1,760 (162) (540)
Income before income taxes
and cumulative effect of
change in accounting 50,925 59,663 69,870
Income tax provision 20,370 23,567 27,441
Net income before
cumulative effect of
change in accounting 30,555 36,096 42,429
Cumulative effect of
change in accounting
for income taxes - - 1,300
Net income $ 30,555 $ 36,096 $ 43,729
Net income per share
before cumulative effect
of change in accounting $ 0.89 $ 1.03 $ 1.18
Cumulative per share effect
of change in accounting - - 0.04
Net income per share $ 0.89 $ 1.03 $ 1.22
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
20
Consolidated Balance Sheets
Lands' End, Inc. & Subsidiaries
(In thousands) February 2, January 27,
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 17,176 $ 5,426
Receivables 8,064 4,459
Inventory 164,816 168,652
Prepaid advertising 15,824 7,506
Other prepaid expenses 5,295 3,713
Deferred income tax benefits 10,914 8,412
Total current assets 222,089 198,168
Property, plant and equipment, at cost:
Land and buildings 72,248 69,798
Fixtures and equipment 83,880 74,745
Leasehold improvements 2,912 1,862
Total property, plant and equipment 159,040 146,405
Less-accumulated depreciation and amortization 60,055 49,414
Property, plant and equipment, net 98,985 96,991
Intangibles, net 2,423 2,453
Total assets $323,497 $297,612
Liabilities and shareholders' investment
Current liabilities:
Lines of credit $ 9,319 $ 7,539
Accounts payable 62,380 52,762
Reserve for returns 4,555 5,011
Accrued liabilities 23,751 25,959
Accrued profit sharing 1,483 1,679
Income taxes payable 13,256 9,727
Current maturities of long-term debt - 40
Total current liabilities 114,744 102,717
Deferred income taxes 7,212 5,379
Long-term liabilities 349 388
Shareholders' investment:
Common stock, 40,221 shares issued 402 402
Donated capital 8,400 8,400
Additional paid-in capital 26,165 25,817
Deferred compensation (1,193) (1,421)
Currency translation adjustments 360 284
Retained earnings 260,109 229,554
Treasury stock, 6,561 and 5,395
shares at cost, respectively (93,051) (73,908)
Total shareholders' investment 201,192 189,128
Total liabilities and shareholders' investment $323,497 $297,612
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
21
Consolidated Statement of Shareholders' Investment
Lands' End, Inc. & Subsidiaries
(In thousands)
For the period ended
Feb. 2, 1996 Jan. 27, 1995 Jan. 28, 1994
Common Stock
Beginning balance $ 402 $ 201 $ 201
Two-for-one stock split - 201 -
Ending balance $ 402 $ 402 $ 201
Donated Capital Balance $ 8,400 $ 8,400 $ 8,400
Additional Paid-in Capital
Beginning balance $ 25,817 $ 24,888 $ 24,857
Tax benefit of stock
options exercised 348 1,130 31
Two-for-one stock split - (201) -
Ending balance $ 26,165 $ 25,817 $ 24,888
Deferred Compensation
Beginning balance $ (1,421) $ (2,001) $ (1,680)
Issuance of treasury stock - - (564)
Amortization of deferred
compensation 228 580 243
Ending balance $ (1,193) $ (1,421) $ (2,001)
Foreign Currency Translation
Beginning balance $ 284 $ 246 $ -
Adjustment for the year 76 38 246
Ending balance $ 360 $ 284 $ 246
Retained Earnings
Beginning balance $229,554 $193,460 $153,324
Net income 30,555 36,096 43,729
Cash dividends paid - - (3,592)
Issuance of treasury stock - (2) (1)
Ending balance $260,109 $229,554 $193,460
Treasury Stock
Beginning balance $(73,908) $(47,909) $(45,714)
Purchase of treasury stock (20,001) (27,979) (2,861)
Issuance of treasury stock 858 1,980 666
Ending balance $(93,051) $(73,908) $(47,909)
Total Shareholders' Investment $201,192 $189,128 $177,285
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
22
Consolidated Statements of Cash Flows
Lands' End, Inc. & Subsidiaries
(In thousands) Feb. 2, Jan. 27, Jan. 28,
1996 1995 1994
Cash flows from operating activities:
Net income before cumulative effect
of change in accounting $ 30,555 $ 36,096 $ 42,429
Adjustments to reconcile net income to net
cash flows from operating activities-
Depreciation and amortization 12,456 10,311 8,286
Deferred compensation expense 228 580 243
Deferred income taxes (669) (2,645) (1,684)
Loss on disposal of fixed assets 1,544 901 684
Changes in assets and liabilities excluding the
effects of acquisitions and divestitures:
Receivables (4,888) (264) (3,179)
Inventory 1,423 (16,544) (41,769)
Prepaid advertising (8,318) (580) (2,504)
Other prepaid expenses (1,611) 1,177 (3,211)
Accounts payable 9,618 (2,093) 16,765
Reserve for returns (456) 1,104 (98)
Accrued liabilities (2,208) 8,509 3,701
Accrued profit sharing (196) (597) 642
Income taxes payable 3,877 (1,671) 1,601
Other 37 177 502
Net cash flows from operating activities 41,392 34,461 22,408
Cash flows from investing activities:
Cash paid for capital additions and
businesses acquired (13,904) (32,102) (17,321)
Proceeds from divestiture 1,665 - -
Net cash flows used for investing activities (12,239) (32,102) (17,321)
Cash flows from financing activities:
Proceeds from short-term and long-term debt 1,780 7,539 80
Payment of long-term debt (40) (40) -
Purchases of treasury stock (20,001) (27,979) (2,861)
Issuance of treasury stock 858 1,978 101
Cash dividends paid - - (3,592)
Net cash flows used for financing activities (17,403) (18,502) (6,272)
Net increase (decrease) in cash
and cash equivalents 11,750 (16,143) (1,185)
Beginning cash and cash equivalents 5,426 21,569 22,754
Ending cash and cash equivalents $ 17,176 $ 5,426 $ 21,569
Supplemental cash flow disclosures:
Interest paid $ 2,833 $ 2,828 $ 364
Income taxes paid 16,896 27,595 27,475
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
23
Notes to Consolidated Financial Statements
Lands' End, Inc. & Subsidiaries
Note 1. Summary of significant accounting policies
Nature of business
Lands' End, Inc., (the company) is a direct marketer of traditionally
styled apparel, domestics (primarily bedding and bath items), soft
luggage, and other products. The company's primary market is the United
States, and other markets include the Pacific Basin area, Europe and
Canada.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
Principles of consolidation
The consolidated financial statements include the accounts of the company
and its subsidiaries after elimination of intercompany accounts and
transactions.
Year-end
The company's fiscal year is comprised of 52-53 weeks ending on the Friday
closest to January 31. Fiscal 1996 was a 53-week year that ended on
February 2, 1996. The additional week was added in the fourth quarter of
fiscal 1996. Fiscal 1995 ended on January 27, 1995, and fiscal 1994 ended
on January 28, 1994.
Fair values of financial instruments
The fair value of financial instruments does not materially differ from
their carrying values.
Inventory
Inventory, primarily merchandise held for sale, is stated at last-in,
first-out (LIFO) cost, which is lower than market. If the first-in,
first-out (FIFO) method of accounting for inventory had been used,
inventory would have been approximately $22.4 million and $18.9 million
higher than reported at February 2, 1996, and January 27, 1995,
respectively.
24
Notes to Consolidated Financial Statements
Lands' End, Inc. & Subsidiaries
Advertising
The company expenses the costs of advertising for magazines, television,
radio, and other media the first time the advertising takes place, except
for direct-response advertising, which is capitalized and amortized over
its expected period of future benefits.
Direct-response advertising consists primarily of catalog production and
mailing costs that have not yet been fully amortized over the expected
revenue stream, which is within three months from the date catalogs are
mailed.
Advertising costs reported as prepaid assets were $15.8 million and $7.5
million as of February 2, 1996, and January 27, 1995, respectively.
Advertising expense was $188.3 million, $162.0 million and $131.5 million
reported for fiscal years ended February 2, 1996, January 27, 1995, and
January 28, 1994, respectively.
Depreciation
Depreciation expense is calculated using the straight-line method over the
estimated useful lives of the assets, which are 20 to 30 years for
buildings and land improvements and five to 10 years for leasehold
improvements and furniture, fixtures, equipment, and software. The
company provides one-half year of depreciation in the year of addition
and retirement.
Intangibles
Intangible assets consist primarily of goodwill which is being amortized
over 40 years on a straight-line basis. Other intangibles are amortized
up to a period of five years. Total accumulated amortization of these
intangibles was $0.4 million and $0.3 million at February 2, 1996, and
January 27, 1995, respectively.
Net income per share
Net income per share is computed by dividing net income by the weighted
average number of common shares outstanding during each period. The
weighted average common shares outstanding were 34.2 million, 35.2 million
and 35.9 million for fiscal years 1996, 1995 and 1994, respectively.
Common stock equivalents include awards, grants and stock options which
have been issued by the company. The common stock equivalents do not
significantly dilute basic earnings per share.
Reserve for losses on customer returns
At the time of sale, the company provides a reserve equal to the gross
profit on projected merchandise returns, based on its prior returns
experience.
25
Notes to Consolidated Financial Statements
Lands' End, Inc. & Subsidiaries
Financial instruments with off-balance-sheet risk
The company is party to financial instruments with off-balance-sheet risk
in the normal course of business to reduce its exposure to fluctuations
in foreign currency exchange rates and to meet financing needs.
The company enters into forward exchange contracts to hedge anticipated
foreign currency transactions during the upcoming seasons. The purpose of
the company's foreign currency hedging activities is to protect the
company from the risk that the eventual dollar cash flows resulting from
these transactions will be adversely affected by changes in exchange
rates. At February 2, 1996, the company had forward exchange contracts,
maturing through January 1997, to sell approximately 1.8 billion Japanese
yen and 3.0 million British pounds and to purchase approximately 2.2
million Canadian dollars. The gains and losses on the outstanding forward
exchange contracts are reflected in the financial statements in the period
in which the currency fluctuation occurs.
The company also uses import letters of credit to purchase foreign-sourced
merchandise. The letters of credit are primarily U.S. dollar-denominated
and are issued through third-party financial institutions to guarantee
payment for such merchandise within agreed upon-time periods. At February
2, 1996, the company had outstanding letters of credit of approximately
$20.0 million, all of which had expiration dates of less than one year.
The counterparties to the financial instruments discussed above are
primarily two large financial institutions; management believes the risk
of counterparty nonperformance on these financial instruments is not
significant.
Foreign currency and transactions
Financial statements of the foreign subsidiaries are translated into U.S.
dollars in accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 52. Translation adjustments are
accumulated in a separate component of stockholder's equity. Foreign
currency transaction gains reflected on the Consolidated Statements of
Operations were $4.1 million and $0.8 million in fiscal 1996 and
1995, respectively. Foreign currency gains and losses for fiscal
1994 were not material.
Postretirement benefits
The company does not currently provide any postretirement benefits for
employees other than profit sharing and a 401(k) plan (see Note 7).
Reclassifications
Certain financial statement amounts have been reclassified to be
consistent with the fiscal 1996 presentation.
26
Notes to Consolidated Financial Statements
Lands' End, Inc. & Subsidiaries
Accounting standards
In 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," was issued. The company will adopt SFAS
No. 121 during the first quarter of 1997. The company does not
anticipate that adoption of this standard will have a material impact on
the consolidated financial statements.
Note 2. Shareholders' investment
Two-for-one stock split
In May 1994, the company declared a two-for-one split (effected as a stock
dividend) in the company's common stock. The stock split resulted in an
increase in the stated capital of the company from $201,103 to $402,206
with a corresponding reduction in paid-in capital. All share data
reflects the May 1994 two-for-one stock split.
Capital stock
The company currently has 160 million shares of $0.01 par value common
stock. The company is authorized to issue 5 million shares of preferred
stock, $0.01 par value. The company's board of directors has the
authority to issue shares and to fix dividend, voting and conversion
rights, redemption provisions, liquidation preferences, and other rights
and restrictions of the preferred stock.
Treasury stock
The company's board of directors has authorized the purchase of a total of
8.2 million shares of the company's common stock. A total of 7.5 million,
6.2 million and 4.8 million shares had been purchased as of February 2,
1996, January 27, 1995, and January 28, 1994, respectively.
Treasury stock summary: For the period ended
Feb. 2, 1996 Jan. 27, 1995 Jan. 28, 1994
Beginning balance 5,394,972 2,154,235 2,082,035
Two-for-one stock split - 2,154,235 -
Purchase of stock 1,282,326 1,380,502 89,800
Issuance of stock (116,000) (294,000) (17,600)
Ending Balance 6,561,298 5,394,972 2,154,235
27
Notes to Consolidated Financial Statements
Lands' End, Inc. & Subsidiaries
Stock awards and grants
The company has a restricted stock award plan. Under the provisions of
the plan, a committee of the company's board of directors may award shares
of the company's common stock to its officers and key employees. Such
shares vest over a 10-year period on a straight-line basis from the date
of the award.
In addition, the company granted shares of its common stock to individuals
as an inducement to enter the employ of the company.
The following table reflects the activity under the stock award and stock
grant plans:
Awards Grants
Balance at January 29, 1993 141,320 12,000
Granted 27,200 -
Forfeited (3,600) -
Vested (15,760) (2,000)
Balance at January 28, 1994 149,160 10,000
Granted - -
Forfeited (15,940) (10,000)
Vested (17,860) -
Balance at January 27, 1995 115,360 -
Granted - -
Forfeited (2,700) -
Vested (15,980) -
Balance at February 2, 1996 96,680 -
The granting of these awards and grants has been recorded as deferred
compensation based on the fair market value of the shares at the date of
grant. Compensation expense under these plans is recorded as shares
vest.
Stock options
The company has 2.5 million shares of common stock, either authorized
and unissued shares or treasury shares, that may be issued pursuant to the
exercise of options granted under the company's stock option plan.
Options are granted at the discretion of a committee of the company's
board of directors to officers and key employees of the company. No
option may have an exercise price less than the fair market value per
share of the common stock at the date of grant.
28
Notes to Consolidated Financial Statements
Lands' End, Inc. & Subsidiaries
Activity under the stock option plan is as follows:
Average
Exercise Exercisable
Options Price Options
Balance at January 29, 1993 1,060,000 $ 9.81 216,000
Granted 637,200 $19.12
Exercised (8,000) $12.69
Balance at January 28, 1994 1,689,200 $13.31 340,000
Granted - -
Exercised (294,000) $ 6.72
Forfeited (928,800) $15.27
Balance at January 27, 1995 466,400 $13.56 195,480
Granted 342,100 $16.50
Exercised (116,000) $ 7.40
Forfeited (70,800) $17.55
Balance at February 2, 1996 621,700 $15.87 150,240
The above options vest over a five year period from the date of grant.
The outstanding options expire as follows:
2001 - 72,000
2002 - 40,000
2003 - 181,600
2005 - 328,100
621,700
In 1995, the Financial Standards Board issued SFAS No. 123, "Accounting
for Stock-Based Compensation," which establishes financial accounting and
reporting standards for stock-based employee compensation. The company
plans to adopt the disclosure requirements of this statement, and to
continue to apply the accounting provisions of Accounting Principles Board
Opinion No. 25 to stock-based employee compensation arrangements, as is
allowed by the statement. The disclosure will be adopted effective with
the fiscal 1997 financial statements.
Note 3. Income taxes
Effective January 30, 1993, the company adopted SFAS No. 109, "Accounting
for Income Taxes". The cumulative effect of adopting the standard was
recorded as a change in accounting principle in the first quarter of
fiscal 1994 with an increase to net income of $1.3 million or $0.04 per
common share.
29
Notes to Consolidated Financial Statements
Lands' End, Inc. & Subsidiaries
The components of the provision for income taxes for each of the periods
presented is as follows (in thousands):
Period ended,
February 2, January 27, January 28,
1996 1995 1994
Current:
Federal $ 17,996 $ 22,154 $ 24,607
State 3,043 4,058 4,518
Deferred (669) (2,645) (1,684)
$ 20,370 $ 23,567 $ 27,441
The difference between income taxes at the statutory federal income tax
rate of 35 percent and income tax reported in the statements of
operations is as follows (in thousands):
Period ended,
February 2, January 27, January 28,
1996 1995 1994
Tax at statutory
federal tax rate $ 17,825 $ 20,882 $ 24,421
State income taxes,
net of federal benefit 2,018 2,156 2,818
Other 527 529 202
$ 20,370 $ 23,567 $ 27,441
Temporary differences which give rise to deferred tax assets and
liabilities as of February 2, 1996, and January 27, 1995, are as follows
(in thousands):
Feb. 2, 1996 Jan. 27, 1995
Deferred tax assets:
Catalog advertising $ (1,415) $ (1,539)
Inventory 8,602 7,052
Employee benefits 1,918 1,243
Reserve for returns 1,822 1,406
Other (13) 250
Total $ 10,914 $ 8,412
Deferred tax liabilities:
Depreciation 7,980 5,379
Foreign operating
loss carryforwards (527) (807)
Valuation allowance 527 807
Other (768) -
Total $ 7,212 $ 5,379
30
Notes to Consolidated Financial Statements
Lands' End, Inc., & Subsidiaries
The valuation allowance required under SFAS No. 109 has been established
for the deferred income tax benefits related to certain subsidiary loss
carryforwards, which management currently estimates may not be realized.
These carryforwards do not expire.
Note 4. Lines of credit
The company has unsecured domestic lines of credit with various U.S. banks
totaling $110 million. There were no amounts outstanding at February 2,
1996, and January 27, 1995.
In addition, the company has unsecured lines of credit with foreign banks
totaling the equivalent of $19 million for a wholly owned foreign
subsidiary. There was $9.3 million outstanding at February 2, 1996, at
interest rates averaging 1.6 percent.
Note 5. Long-term debt
There was no long-term debt as of February 2, 1996, and January 27, 1995.
The company has an agreement which expires December 31, 1996, with a bank
for a $20 million credit facility available to fund treasury stock
purchases and capital expenditures. As of February 2, 1996, the company
was in compliance with lending conditions and covenants related to this
debt facility.
Note 6. Leases
The company leases store and office space and equipment under various
leasing arrangements. The leases are accounted for as operating leases.
Total rental expense under these leases was $11.6 million, $8.6 million
and $7.3 million for the years ended February 2, 1996, January 27, 1995,
and January 28, 1994, respectively.
Total future fiscal year commitments under these leases as of February 2,
1996, are as follows (in thousands):
1997 $ 10,322
1998 7,905
1999 5,368
2000 3,940
2001 2,393
After 2001 5,136
$ 35,064
Note 7. Retirement plan
The company has a retirement plan which covers most regular employees and
provides for annual contributions at the discretion of the board of
directors. Also included in the plan is a 401(k) feature that allows
employees to make contributions, and the company matches a portion of
those contributions. Total expense provided under this plan was $3.2
million, $3.5 million and $3.7 million for the years ended February 2,
1996, January 27, 1995, and January 28, 1994, respectively.
31
Notes to Consolidated Financial Statements
Lands' End, Inc., & Subsidiaries
As of October 1, 1995, the "Lands' End, Inc. Retirement Plan" was amended
to allow certain participants to invest their elective contributions,
employer matching contributions and profit sharing contributions in a
"Lands' End, Inc. Stock Fund" established primarily for investing in
common stock of the company at the fair market value.
Note 8. Acquisitions and divestiture
In July 1994, the company formed a wholly owned subsidiary that acquired
the marketing rights and assets of MontBell America, Inc., which designs,
develops and distributes premier technical outdoor clothing and equipment
through the wholesale channel to outdoor specialty stores, primarily in
the United States.
During the fourth quarter of fiscal 1996, the company sold the marketing
rights and assets of MontBell America, Inc., to a wholly owned subsidiary
of Outdoor Industry Group, Inc., of San Francisco. In connection
with this sale, the company has taken an after-tax charge to earnings of
$1.1 million in fiscal year 1996. This is in addition to the after-tax
charge of $2.1 million taken as a reserve in January of fiscal 1995 in
anticipation of the sale.
In March 1993, the company purchased a majority interest in The Territory
Ahead, a catalog company that offers private label sportswear, accessories
and luggage. Beginning in 2003, the minority shareholders have the option
to require the company to purchase their shares, and the company will have
the option to require the minority shareholders to sell their shares in
The Territory Ahead. The price per share would be based on the fair
market value of The Territory Ahead.
Results of operations of MontBell America, Inc., and The Territory Ahead
were not material to the company, and as a result, no pro forma data is
presented. The transactions were accounted for using the purchase method.
The excess of the purchase price over the fair value of net assets was
recorded as goodwill. The operating results of MontBell America, Inc.,
and The Territory Ahead are included in the consolidated financial
statements of the company from their respective dates of acquisition.
Note 9. Sales and use tax
A 1992 Supreme Court decision confirmed that the Commerce Clause of the
United States Constitution prevents a state from requiring the collection
of its use tax by a mail order company unless the company has a physical
presence in the state. However, there continues to be uncertainty due to
inconsistent application of the Supreme Court decision by state and
federal courts. The company attempts to conduct its operations in
compliance with its interpretation of the applicable legal standard, but
there can be no assurance that such compliance will not be challenged.
In recent challenges various states have sought to require companies to
begin collection of use taxes and/or pay taxes from previous sales. The
company has not received assessment from any state. The amount of
potential assessments, if any, cannot be reasonably estimated.
32
Notes to Consolidated Financial Statements
Lands' End, Inc. & Subsidiaries
The Supreme Court decision also established that Congress has the power to
enact legislation which would permit states to require collection of use
taxes by mail order companies. Congress has from time to time considered
proposals for such legislation. The company anticipates that any
legislative change, if adopted, would be applied only on a prospective
basis.
Note 10. Consolidated Quarterly Analysis (unaudited)
(In thousands, except per share data)
Fiscal 1996
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Net Sales $207,122 $189,064 $235,887 $399,475
Gross profit 90,677 82,069 98,991 171,794
Pretax income 2,192 2,813 2,941 42,979
Net income $ 1,307 $ 1,695 $ 1,766 $ 25,787
Net income per share $ 0.04 $ 0.05 $ 0.05 $ 0.77
Common shares outstanding 34,686 34,536 33,784 33,659
Market price of shares
outstanding:
- market high 19 1/2 17 17 3/4 15 1/2
- market low 15 14 5/8 14 3/8 12 7/8
Fiscal 1995
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Net sales $187,012 $179,833 $246,209 $379,052
Gross profit 79,230 76,731 99,512 165,368
Pretax income 8,058 5,651 6,331 39,623
Net income 4,878 3,413 3,833 23,972
Net income per share $ 0.14 $ 0.10 $ 0.11 $ 0.69
Common shares outstanding 35,791 34,893 34,879 34,875
Market price of shares
outstanding:
- market high 27 3/4 24 1/16 20 1/2 19
- market low 22 5/8 17 3/8 16 7/8 13
The unaudited quarterly financial data above has been restated from the
company's previously filed Forms 10-K and 10-Q to reflect certain
reclassifications from selling, general and administrative expenses to cost of
sales.
33
RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS
The management of Lands' End, Inc. and its subsidiaries has the responsibility
for preparing the accompanying financial statements and for their integrity
and objectivity. The statements were prepared in accordance with generally
accepted accounting principles applied on a consistent basis. The
consolidated financial statements include amounts that are based on
management's best estimates and judgments. Management also prepared the other
information in the annual report and is responsible for its accuracy and
consistency with the consolidated financial statements.
The company's consolidated financial statements have been audited by Arthur
Andersen LLP, independent certified public accountants. Management has made
available to Arthur Andersen LLP all the company's financial records and
related data, as well as the minutes of shareholders' and directors' meetings.
Furthermore, management believes that all representations made to Arthur
Andersen LLP during its audit were valid and appropriate.
Management of the company has established and maintains a system of internal
control that provides for appropriate division of responsibility, reasonable
assurance as to the integrity and reliability of the consolidated financial
statements, the protection of assets from unauthorized use or disposition, and
the prevention and detection of fraudulent financial reporting, and the
maintenance of an active program of internal audits. Management believes
that, as of February 2, 1996, the company's system of internal control is
adequate to accomplish the objectives discussed herein.
Two directors of the company, not members of management, serve as the audit
committee of the board of directors and are the principal means through which
the board supervises the performance of the financial reporting duties of
management. The audit committee meets with management, the internal audit
staff and the company's independent auditors to review the results of the
audits of the company and to discuss plans for future audits. At these
meetings, the audit committee also meets privately with the internal audit
staff and the independent auditors to assure its free access to them.
/s/ MICHAEL J. SMITH /s/ STEPHEN A. ORUM
Michael J. Smith Stephen A. Orum
Chief Executive Officer Chief Financial Officer
34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Lands' End, Inc.:
We have audited the accompanying consolidated balance sheets of Lands' End,
Inc. (a Delaware corporation) and its subsidiaries as of February 2, 1996, and
January 27, 1995, and the related consolidated statements of operations,
shareholders' investment and cash flows for each of the three years in the
period ended February 2, 1996. These financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lands' End, Inc. and
subsidiaries as of February 2, 1996, and January 27, 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended February 2, 1996, in conformity with generally accepted
accounting principles.
As explained in Note 3 to the consolidated financial statements, effective
January 30, 1993, the company changed its method of accounting for income
taxes.
/s/ ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 8, 1996
Item 9. Changes in and Disagreements on Accounting and Consolidated Financial
Disclosure
The company has had no change in, or disagreements with, its independent
certified public accountants on accounting and financial disclosure.
35
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item with respect to directors of the
company is incorporated herein by reference to pages 2 through 5 of
the Lands' End, Inc. Notice of 1996 Annual Meeting and Proxy Statement
dated April 22, 1996 (the "Proxy Statement").
The information required by this item with respect to executive
officers of the company is included on page 9 in Part I of this
Form 10-K report.
Item 11. Executive Compensation
The information required by this item is incorporated herein by
reference to pages 5 through 10 of the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by
reference to page 12 of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by
reference to pages 4 and 5 of the Proxy Statement.
36
PART IV.
Item 14. Exhibits, Consolidated Financial Statement Schedules and Reports
on Form 8-K
(a) 1. Consolidated Financial Statements
See index on page 2.
2. Exhibits
Table Exhibit
Number Description Number
------ ----------- -------
(10) Sixth Amendment to Loan Agreement 1
between the company and the
American National Bank and Trust
Company of Chicago, dated
December 6, 1995
(11) Statement of recomputation of
earnings per share 2
(23) Consent of Arthur Andersen LLP 3
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the
three-month period ended February 2, 1996.
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on April 29, 1996.
LANDS' END, INC.
By /s/ STEPHEN A. ORUM
---------------------------
Stephen A. Orum
Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities shown, as of April 29, 1996.
/s/ GARY C. COMER Chairman of the Board and Director
- ---------------------------
Gary C. Comer
/s/ RICHARD C. ANDERSON Vice Chairman of the Board and Director
- ---------------------------
Richard C. Anderson
/s/ MICHAEL J. SMITH President and Chief Executive Officer
- ---------------------------
Michael J. Smith
/s/ JOHN N. LATTER Director
- ---------------------------
John N. Latter
/s/ DAVID B. HELLER Director
- ---------------------------
David B. Heller
/s/ HOWARD G. KRANE Director
- ---------------------------
Howard G. Krane
38
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTARY SCHEDULE
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in the Lands' End, Inc. annual
report to shareholders included in this Form 10-K, and have issued our report
thereon dated March 8, 1996. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule on page 40 of this
Form 10-K is the responsibility of the company's management and is presented
for purpose of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This schedule
has been subjected to the auditing procedures applied in the audit of the
basic consolidated financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 8, 1996
39
LANDS' END, INC. & SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Balance, Amounts Write-Offs Balance,
Beginning Charged to Against End of
of Period Net Income Reserve Period
--------- ---------- ------- ------
Reserve for Returns:
Year Ended February 2, 1996 $ 5,011 $145,626 $146,082 $ 4,555
======= ======== ========= ========
Year Ended January 27, 1995 $ 3,907 $148,643 $147,539 $ 5,011
======= ======== ======== ========
Year Ended January 28, 1994 $ 4,005 $117,449 $117,547 $ 3,907
======= ======== ======== ========
40
LIST OF DOCUMENTS INCORPORATED BY REFERENCE
In addition to the exhibits filed with this report, the exhibits listed
below have been heretofore filed with the Securities and Exchange
Commission as exhibits to the company's registration statement on Form S-8
(File No. 033-63461) and on Form S-1 (File No. 33-08217) or to other filings
with the Commission and are incorporated herein as exhibits by reference,
pursuant to Rule 24 of the SEC Rules of Practice. The exhibit number of the
document so filed is stated next to the description of such exhibit. The file
number for all other documents is 1-9769.
Table Description Exhibit Doc
Number of Item Number Desc
------ ----------- ------- ----
(3) Articles of Incorporation and By-laws:
Certificate of Incorporation of the company, 1 S-1
as amended through October 3, 1986.
Amendment to Certification of Incorporation of 3 10-Q
the company, dated August 10, 1987. Oct 1987
Amendment to Certificate of Incorporation of 4 10-Q
the company, dated May 20, 1994. July 1994
Amended and Restated By-laws of the company. 2 10-K
1993
(4) Equity Instrument and Agreements relating
to Debt Obligations:
Form of Stock Certificate to evidence the 1 10-Q
Common stock. Aug 1990
First Amendment to the Lands' End 2 S-8
Retirement Plan Oct 1995
(10) Material Contracts:
Form of letter from bank approving the 7 10-K
company's unsecured line of credit 1992
and corresponding note.
Term Loan Note and Loan Agreement between 11 10-Q
the company and the American National Aug 1990
Bank and Trust Company of Chicago.
Fifth Amendment to Loan Agreement between the 2 10-Q
company and the American National Bank Oct 1994
and Trust Company of Chicago, dated
November 22, 1994
41
Description Exhibit Doc
Number of Item Number Desc
------ ----------- ------- -----
(10) Buying Agreement between the company and 7 10-Q
the European Buying Agency, Ltd. Nov 1990
Salaried Incentive Bonus Plan 9 S-1
Second Amended and Restated 1989 12 10-Q
Restricted Stock Plan of the company Nov 1991
Stock Option Plan of the company 1 10-K
1995
Amended and Restated Retirement Plan, 3 10-K
dated February 1, 1992 1994
Form of Director Deferred Compensation 1 10-Q
Agreement July 1995
42
Exhibit 10.1
SIXTH AMENDMENT TO LOAN AGREEMENT
THIS SIXTH AMENDMENT ("Amendment") is entered into as of this 6th day
of December 1995, by and between Lands' End, Inc. ("Borrower"), and
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Bank").
WHEREAS, Borrower executed in favor of Bank a Loan Agreement dated
July 19, 1990, in exchange for Bank's agreement to lend monies to Borrower
(the "Loan Agreement"), which Loan Agreement has been amended by a First
Amendment to Loan Agreement dated as of June 1, 1991, a Second Amendment to
Loan Agreement dated as of January 27, 1992, a Third Amendment to Loan
Agreement dated as of December 11, 1992, a Fourth Amendment to Loan
Agreement dated as of December 1, 1993, a Fifth Amendment dated as of
November 22, 1994 (said Loan Agreement and Amendments herein referred to as
the "Loan Agreement"); and
WHEREAS, the Bank and Borrower wish to extend the time within which
disbursement of the Term Loan may be made; and
WHEREAS, the parties hereto desire and have agreed to enter into this
Amendment in order to amend certain terms of the Loan Agreement; and
NOW, THEREFORE, in consideration of the above recitals, the mutual
promises and agreements of the parties set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree to amend the Loan Agreement as
follows:
1. Extension of Final Disbursement Date. The Final Disbursement Date
under the Loan Agreement is hereby extended to December 31, 1996.
2. Amendment to Section 5.16. Section 5.16 of the Loan Agreement is
hereby amended to read in its entirety as follows:
On the last day of each of the Borrower's fiscal years, the
Borrower's ratio of Consolidated Liabilities (exclusive of
Subordinated Debt) to Consolidated Tangible Net Worth shall not
exceed 0.85 to 1.0.
3. This Amendment shall be incorporated into and made a part of the
Loan Agreement and all other related loan documents executed by
Borrower.
4. All terms and provisions of the Loan Agreement and all other
related loan documents between Borrower and Bank, except as
expressly modified herein, shall continue in full force and
effect, and Borrower hereby confirms each and every one of its
obligations under the Loan Agreement as amended herein.
5. This Amendment shall be governed by, and construed in accordance
with, the internal laws of the State of Illinois.
6. This Amendment shall inure to the benefit of Bank's successors and
assigns, and shall be binding upon Borrower's successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
LANDS' END, INC., a Delaware corporation
By: MICHAEL L. KRENTZ
Its: Treasurer
ACCEPTED BY:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: WILLIAM D. RYAN
Its: Second Vice President
Exhibit 11.2
COMPUTATION OF EARNINGS PER SHARE
LANDS' END, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
Feb. 2, Jan. 27, Feb. 2, Jan. 27,
1996 1995 1996 1995
Net income $25,787 $23,972 $30,555 $36,096
Average shares of common stock
outstanding during the period 33,676 34,872 34,230 35,156
Incremental shares from assumed
exercise of stock options
(primary) 10 96 28 154
33,686 34,968 34,258 35,310
Primary earnings per share $ 0.77 $ 0.69 $ 0.89 $ 1.03
Average shares of common stock
outstanding during the period 33,676 34,872 34,230 35,156
Incremental shares from assumed
exercise of stock options
(fully diluted) 18 102 28 154
33,694 34,974 34,258 35,310
Fully diluted earnings per share $ 0.77 $ 0.69 $ 0.89 $ 1.03
Average shares of common stock
outstanding during the period 33,676 34,872 34,230 35,156
Basic earnings per share $ 0.77 $ 0.69 $ 0.89 $ 1.03
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously
filed Registration Statement on Form S-8 (File No. 033-63461).
/s/ ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
April 29, 1996
5
1,000
YEAR
FEB-02-1996
FEB-02-1996
$17,176
0
8,064
0
164,816
222,089
159,040
60,055
323,497
114,744
0
0
0
402
200,790
323,497
1,031,548
1,031,548
588,017
588,017
0
0
2,771
50,925
20,370
30,555
0
0
0
$30,555
$0.89
$0.89
