ITEM 1. BUSINESS
General Host Corporation ("General Host", the "Company" or the "Registrant") operates a chain of specialty retail stores devoted to the sale of lawn and garden products, crafts, Christmas merchandise and pet food and supplies. Measured by sales and number of stores, the Company believes it is the largest chain in the United States concentrating on the sale of such products. As of January 28, 1996, the Company operated 261 stores in 16 states under the name Frank's Nursery & Crafts(R) and three stores under the name Frank's SuperCrafts(R). Unless otherwise stated, all statistics in this Item were compiled as of January 28, 1996.
The Company's executive offices are located at One Station Place, Stamford, Connecticut. The Company's mailing address is Post Office Box 10045, Stamford, Connecticut 06904, and its telephone number is (203) 357-9900.
General Host was incorporated under the laws of the State of New York in 1911 as General Baking Company. The Company has engaged in a number of businesses since its organization.
With the acquisition of Frank's Nursery & Crafts, Inc. ("Frank's") in 1983, the Company began focusing its resources on developing the first national chain of garden and crafts stores. At the time of its acquisition, Frank's had 95 stores principally located in the Midwest. In 1984, through the acquisition of Flower Time, Inc., the Company obtained 17 stores in the New York metropolitan area. In 1986, the Company further expanded into the eastern United States when it acquired Scott's Seaboard Corporation, adding 14 stores in the Washington, D.C. and Baltimore markets. In early 1989, the Company increased its presence in the Philadelphia metropolitan area through the acquisition of 12 store leases. Since 1983, the Company has built, leased or acquired a net of 169 stores in existing and new markets.
In October 1994, the Company sold its interest in Sunbelt Nursery Group, Inc. (See Note 3 on Page of this Annual Report on Form 10- K for a discussion regarding Sunbelt.)
During the fourth quarter of 1993 the Company approved a plan to exit 26 unprofitable Frank's stores primarily in the Nashville, South Florida and Orlando markets and to dispose of certain other properties. All stores were closed as of February 7, 1994, with the exception of one store which closed March 7, 1994.
The national lawn and garden market is highly fragmented, consisting of thousands of local garden centers plus mass merchandisers who sell lawn and garden products as part of their overall product lines. In fiscal 1995, the Company's lawn and garden and nursery sales averaged approximately $1.1 million per store. In addition to approximately $295 million in lawn and garden and nursery sales, the Company generated approximately $266
million in revenues in the last fiscal year from the sale of crafts and Christmas products and $32 million from the sale of pet food and supplies.
Although no single company directly competes with the Company's overall product lines, many retailers and mass merchandisers provide competition with respect to certain of the Company's lines of business. The Company competes with mass merchandisers, home center chains and many local and regional garden centers in the lawn and garden and nursery business. The Company competes in the crafts business with mass merchandisers, crafts store chains and local craft stores. The Company competes with major department stores, mass merchandisers, local garden centers and other retailers in the Christmas business. The Company competes with mass merchandisers, supermarkets, pet supply chains and local pet supply stores in the pet food and supply business.
The Company's business is highly seasonal and subject to the impact of weather conditions, which may affect consumer purchasing patterns. In fiscal 1995, 38% of the Company's sales occurred during the spring season (late March to mid-June) and 25% occurred at Christmas time (November to late December). Normally, spring is the most profitable season, and Christmas is the next most profitable season. Losses usually are experienced during the other periods of the year. The Company's slowest selling seasons are typically the period from the beginning of the calendar year until the start of the spring selling season, and from mid-July to Labor Day.
Live nursery goods, which constitute a significant portion of the Company's products, have limited shelf lives in some cases. If customer purchases of live nursery goods are delayed because of adverse weather conditions, such goods may remain unsold past their shelf life and require markdowns or disposal.
Lawn and garden and nursery sales are highest in the spring with the largest impact being in the first fiscal quarter and the early part of the second fiscal quarter. There is an early fall season in these products that is of less importance than the spring season, and sales during middle and late summer are slow. In the winter months, sales of such products are minimal.
Crafts and pet food and supplies sell at a fairly even pace throughout the year. Craft sales are stimulated by fall and late winter promotions. During the winter months (other than the Christmas season) crafts constitute the majority of the Company's sales.
Christmas merchandise is sold almost entirely in November and December.
The Company's most significant capital requirements are for seasonal buildup of Christmas and crafts inventories, new stores and the modernization of existing stores.
Capital expenditures of the Company totalled $5.5 million in fiscal 1995. Expenditures for fiscal 1995 included the purchase of land and building for one new store to be opened in fiscal 1996 and expenditures for facility improvements at existing stores. The Company anticipates spending approximately $6 million for capital expenditures in fiscal 1996.
The Company closed one store in fiscal 1995. In 1996 the Company plans to open two to three new stores in existing markets, relocate three to four stores and remodel three to four existing stores. Expansion in existing markets improves the Company's operating margins by decreasing advertising costs on a per store basis, permitting more efficient distribution of products to stores and increasing the utilization of existing supervisory and managerial staff.
The aggregate cost of any future expansion is dependent upon the method of financing new stores. Such methods include build-to-suit leases, conversion of existing buildings, and land purchases with Company-funded construction. The cost of these methods ranges from approximately $500,000 per store for build-to-suit leases to $2.5 million per store for land purchases with Company-funded construction.
In 1990, looking to capitalize on its expertise in the Christmas decoration business, the Company entered the temporary retail marketplace with the introduction of "Christmas by Frank's". The "Christmas by Frank's" boutiques are temporary sites, typically located in high traffic regional malls and open only during the Christmas shopping season. These boutiques carry a broad selection of seasonal merchandise and capitalize on the increased mall traffic during the holidays. During 1995 the Company operated 119 temporary Christmas boutiques. In addition the Company tested two other temporary concepts: "Frank's Kids Corner", featuring educational toys for children, and "In the Garden by Frank's", offering gifts for the gardener. A total of eleven "Frank's Kids Corner" and four "In the Garden by Frank's" were open in 1995.
The success of the Company's temporary business will depend upon the Company's ability from year to year to obtain favorable short-term locations in various malls that are in close proximity to existing stores.
The principal products sold at the Company's retail garden and crafts stores are as follows:
Substantially all of the plants and products the Company sells are purchased from approximately 1,200 outside vendors. Alternative sources of supply are generally available for all products sold by the Company.
As of January 28, 1996, 127 of the Company's stores were leased and 137 were owned (36 of which are subject to ground leases). All store leases are long-term. If no options are exercised, 108 leases will terminate prior to December 31, 2006.
Stores are generally located on three-acre sites. A prototype store in which the overhang area leading to the yard has been
enclosed includes 18,500 square feet of indoor space (16,000 square feet of sales area and 2,500 square feet of storage area), 17,000 square feet of outdoor selling area and ample offstreet parking. The stores are designed in a "supermarket" format familiar to customers, and shopping is done with carts in wide aisles with attractive displays. Traffic design is intended to enhance the opportunity for impulse purchases. Most stores are free-standing and located adjacent to or near shopping centers; some stores are part of strip centers.
Typically, stores are open 80 hours per week. The average store has approximately 20-25 employees, including a store manager, assistant manager and up to seven department managers responsible for the various product lines of the business. The in-store staff is supplemented at seasonal peak selling periods by temporary employees. Overall, the Company had 7,150 employees at January 28, 1996, including seasonal employees. Approximately 24 warehouse and distribution center employees in Detroit are members of the Teamsters Union under a contract which expires January 1, 1997.
The Company operates distribution centers in Detroit, Michigan; Chicago, Illinois; and Harrisburg, Pennsylvania. The Company owns the Detroit center which also contains Frank's headquarters, and leases the Chicago and Harrisburg centers. These centers delivered approximately 49% of all merchandise to the stores in 1995, primarily using contract carriers. The balance of the products are delivered directly to stores by vendors.
ITEM 2.
ITEM 2. PROPERTIES
Principal operating facilities owned or leased by the Company are described in Item 1 of this Annual Report on Form 10-K. General Host leases its executive offices. No material adverse effect is foreseen as a result of the expiration of leases of the Company's facilities.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business the Company is subject to various claims. In the opinion of management, any ultimate liability arising from or related to these claims should not have a material adverse affect on future results of operations or the consolidated financial position of the Company.
In 1995 the Company charged to discontinued operations a loss of $3 million, or $.13 per share, as a result of a judgment against the Company in a 1991 saltwater pollution lawsuit. The Company has appealed. The lawsuit involves claims by farmers in Rice County, Kansas who alleged that saltwater pollution of the ground water by the American Salt Company, a former subsidiary of the Company, rendered it unfit for irrigation. In August 1995, a jury verdict awarded the plaintiffs $.5 million in compensatory damages for the period 1989 to 1995 and in October 1995 the plaintiffs were awarded $.5 million in punitive damages and the judgment was entered. The judgment, together with approximately $1.1 million in legal defense costs, $.5 million in related costs, principally for technical consulting and expert witnesses, and $.4 million for future legal and related costs, totalled $3 million.
The Company has certain lease obligations which extend to the year 2001 for businesses sold. In the opinion of management, any ultimate liability arising from or related to these obligations, to the extent not otherwise provided for, should not have a material adverse effect on future operations or the consolidated financial position of the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The New York Stock Exchange is the principal market on which the Company's Common Stock is traded. The high and low sales prices per share of Common Stock as traded on the New York Stock Exchange and cash dividends paid per share of Common Stock during each quarter of the last two fiscal years are as follows:
*Five percent stock dividends were paid on April 7, 1995 and April 5, 1996 and all stock-related data in the financial statements in this Report reflect the aforementioned stock dividends for all periods presented.
Under the most restrictive provisions of any of the debt and bank agreements, total shareholders' equity available to pay cash dividends or purchase treasury stock was below the required minimum level by $10.8 million at January 28, 1996.
At April 1, 1996, there were approximately 3,845 holders of record of the Company's Common Stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Five Year Financial Data concerning the Company is listed on of this Annual Report on Form 10-K.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales were $593 million for the 1995 fiscal year compared to $568 million for the 1994 fiscal year. Same-store sales (stores open for a full year in both years) for 1995 increased 4.5% led by a 25% sales gain in the pet food and supplies business as well as a strong first half performance in the lawn and garden business. Also contributing to the sales increase was improved in-store merchandising, and the sales from the temporary Christmas boutiques of $14.4 million in 1995 compared to $12.9 million in 1994. Sales were $568 million for the 1994 fiscal year compared to $568.6 million for the 1993 fiscal year. The 1993 sales included sales of $34.9 million for the 26 stores closed in February 1994. Eliminating the sales for the closed stores in 1993 would have resulted in a sales increase for 1994 of 6.4%. Same-store sales for 1994 increased 5.2%. Also contributing to the sales increase was improved in-store merchandising, and the sales from the temporary Christmas boutiques of $12.9 million in 1994 compared to $11.2 million in 1993.
Other income increased $1.3 million to $3.3 million in 1995. The increase was due to increased interest income resulting from higher rates of return in 1995. Other income increased $.7 million to $2 million in 1994. The increase was due to increased interest income resulting from higher levels of cash equivalents.
Cost of sales, including buying and occupancy, increased $28.7 million to $431.5 million or 72.7% of sales. This compares with $402.8 million or 70.9% of sales in 1994. The increase of 1.8 percentage points was due to lower merchandise margins resulting from increased promotional activity and extremely hot, dry weather in the second quarter of 1995, the mix of goods sold during 1995 and increased occupancy costs related to the temporary Christmas business. Cost of sales, including buying and occupancy, decreased $22.9 million to $402.8 million or 70.9% of sales in 1994. This compares to $425.7 million or 74.9% of sales in 1993. The decrease of 4 percentage points was due to higher merchandise margins resulting from improved inventory management, in addition to the benefits from the operations improvement program in 1994 compared with 1993 when the Company underwent an inventory reduction program and closed 26 stores.
Selling, general and administrative expense increased $6 million to $146.2 million compared to $140.2 million in 1994. The increase was attributable to the increases in store payroll, advertising and administrative costs that occurred in the first half of 1995 and increased costs associated with the temporary Christmas business. As a percentage of sales, selling, general and
administrative expense was 24.6% of sales in 1995 and 24.7% of sales in 1994. Selling, general and administrative expense in 1994 decreased $11.8 million to $140.2 million compared to $152 million in 1993. The decrease was attributable to the operations improvement program initiated at the end of 1993, which resulted in lower administrative costs in 1994. As a percentage of sales, selling, general and administrative expense decreased 2 percentage points to 24.7% of sales in 1994 compared to 26.7% in 1993.
During the fourth quarter of 1993 the Company approved a plan to exit 26 unprofitable Frank's stores primarily in the Nashville, South Florida and Orlando markets and to dispose of certain other properties. The decision resulted in the Company recording a reserve of $22.9 million ($15.1 million, net of tax benefit) in the 1993 fourth quarter comprised primarily of $20 million for the closing of the 26 stores and $2.9 million primarily for expected losses on the sale of the other properties. The $20 million store closing reserve included a provision for termination of lease agreements, brokers fees and legal costs of $12.9 million representing expected future cash outflows; a provision of $3.5 million for expected losses from the sale of real estate and the write-off of leasehold improvements and equipment of the closed stores; and a provision of $3.6 million representing operating losses for January 1994 through closure date and employee severance for the closed stores. All stores were closed as of February 7, 1994, with the exception of one store which closed March 7, 1994.
Interest and debt expense was $23.8 million in 1995 compared to $22.9 million in 1994. The increase was primarily due to increased interest rates for the Adjustable Rate First Mortgage Notes (the "mortgage notes") due March 29, 1996 that were repaid as of January 28, 1996. Interest and debt expense was $22.9 million in 1994 compared to $23.3 million in 1993. The decrease was primarily due to the redemption of the 7% Subordinated Debentures on February 1, 1994.
The income tax benefit for 1995 included the elimination of income tax reserves no longer required of $.6 million. In 1995, the tax provision was unfavorably impacted by an increase in the valuation allowance as a result of the current year loss not being benefitted. A valuation allowance was provided in 1993 against the net deferred tax asset resulting from the Company's net operating loss and the loss from an investment in an unconsolidated affiliate. Due to the Company's historical operating results prior to 1995, a valuation allowance for the deferred tax asset balance remained at January 28, 1996. As a result of the valuation allowance, approximately $21 million of these loss carryforwards have not been benefitted and utilization will be recognized against future income. Income taxes included the elimination of income tax reserves no longer required of $1 million in 1994.
In April 1993 the Company acquired a 49.5% interest in Sunbelt Nursery Group, Inc. ("Sunbelt") by exchanging 1.94 million shares of its common stock for 4.2 million shares of common stock of Sunbelt held by Pier 1 Imports, Inc. The 4.2 million shares of Sunbelt were subsequently pledged as security for payment of a $12 million revolving credit facility between Sunbelt and Pier 1 Imports, Inc. which was scheduled to mature in April 1994. The Company received no assurances that the maturity of this facility would be extended or that Sunbelt had the ability to repay this facility [which resulted in a going concern qualification in the audit opinion to Sunbelt's financial statements for the year ended January 31, 1994]. As a result there existed the possibility that Pier 1 Imports, Inc. would foreclose on the Sunbelt shares pledged as security. Consequently, the Company decided to reduce to zero the carrying value of its investment in Sunbelt as of fiscal year end 1993. This resulted in a charge of $15.7 million which, when combined with the net equity losses recognized through the 1993 third quarter of $2 million, amounted to $17.7 million for fiscal 1993. In October 1994 the Company sold its interest in Sunbelt and recognized a net gain of $3.6 million.
The loss from continuing operations was $4.3 million, a decline of $12.9 million compared with 1994. Income for 1994 included $3.6 million from the sale of the Company's investment in Sunbelt. Income from continuing operations was $8.6 million in 1994, an improvement of $63.8 million over 1993. The 1993 loss included a reserve of $22.9 million for the closing of the 26 unprofitable stores and a loss of $17.7 million from the net equity loss and write-down of the Company's investment in Sunbelt.
The loss from discontinued operations for 1995 of $3 million resulted from an October 1995 judgment of $1 million against the Company in a 1991 saltwater pollution lawsuit. The judgment, together with approximately $1.1 million in legal defense costs, $.5 million in related costs, principally for technical consulting and expert witnesses, and $.4 million for future legal and related costs, totalled $3 million. The Company has appealed the case. Discontinued operations in 1993 represented a loss reserve of $.8 million for lease obligations of businesses sold in prior years. These items combined with the respective income or loss from continuing operations resulted in a net loss of $7.3 million in 1995, net income of $8.6 million in 1994 and a net loss of $56.1 million in 1993.
Liquidity and Capital Resources
Continuing operations used $2.6 million of net cash in 1995 compared to net cash provided of $38.4 million in 1994. In 1995 the early receipt of Christmas season merchandise in the 1995 fourth quarter and reduced purchases for the 1996 spring season in the fourth quarter of 1995 resulted in a decrease in accounts payable for 1995 compared to 1994. The change in accrued expenses for 1995 compared to 1994 is due to the timing of payments. The 1995 loss also contributed to the utilization of net cash in 1995.
During the fourth quarter of 1993 the Company recorded a noncash reserve of $22.9 million for the closing of 26 stores. As of January 28, 1996 the Company had terminated leases and entered into sublease arrangements for all but five stores. The annual sublease income generated approximates the Company's annual costs. The Company retains its primary obligation under the prime lease should a sublease tenant default on its sublease obligation. At January 28, 1996 the remaining reserve of $4.3 million primarily represents lease termination costs for the remaining five store locations and estimated losses associated with the sale and or sublease of real estate. In 1995 the Company utilized net cash of $3.6 million to pay lease termination costs for leases terminated at the end of 1994 and in 1995 and to pay brokers fees and legal costs. Net cash of $8.6 million was used in 1994 to terminate lease arrangements, pay brokers fees, legal costs and severance. Noncash charges of $2.2 million in 1994 reduced the reserve primarily for asset write-offs.
Discontinued operations used net cash of $1.9 million in 1995 primarily for legal expenditures incurred to defend the Company in a 1991 saltwater pollution lawsuit. Net cash of $.3 million in 1994 related to payments for operations disposed of in prior years.
In 1994 the Company issued restricted stock grants under the 1986 stock incentive plan, as amended in 1992, to employees of the Company. The noncash transaction was completed by issuing shares of treasury stock. The market value of the shares granted amounted to $.3 million and was charged to selling expense in 1994. On January 28, 1996 the restrictions expired and in February 1996, 59,301 shares were issued.
In April 1993 the Company acquired a 49.5% interest in Sunbelt. The noncash acquisition was completed by issuing 1.94 million shares of the Company's common stock at the then market value of $17.7 million in exchange for 4.2 million shares of Sunbelt. At fiscal year end 1993 the Company reduced to zero the carrying value of its investment in Sunbelt due to Sunbelt's lack of long-term financing. In 1994 the Company sold its interest in Sunbelt for cash, which resulted in a net gain of $3.6 million.
Net cash used for investing activities was $5.2 million in 1995. Net cash provided in 1994 was $1.4 million, which included the net proceeds from the sale of the Company's interest in Sunbelt.
Net cash used for financing activities was $43.8 million in 1995, which included the payment of long-term debt and capital lease obligations of $77.1 million (principally the mortgage notes of $76 million). Offsetting, in part, the mortgage note repayment was $35 million of new mortgage financings, which the Company entered into during the third and fourth quarters of 1995. Interest rates on the new mortgage notes vary from 7.8% to 8.7%, and the notes mature with balloon payments on varying dates from February 1, 2001 to February 1, 2006. Net cash used for financing activities was $18.9 million in 1994, which included the repayment of $13.2 million of 7% Subordinated Debentures on February 1, 1994 and payments of long-term debt.
The weighted average interest rate on debt outstanding at January 28, 1996 was 10%. The Company has a $25 million unsecured credit agreement with a bank which expires May 31, 1996. The agreement requires the Company, among other things, to maintain minimum levels of earnings, tangible net worth and certain minimum financial ratios. The Company was in compliance with all of its covenants under the agreement at January 28, 1996.
As of February 28, 1996 the Company had $25 million outstanding under the unsecured credit agreement. The Company plans either to extend the maturity of the existing credit facility or negotiate a new credit facility prior to May 31, 1996. If the Company is unable to secure a replacement credit facility, the Company believes that its cash flow from operations will be sufficient to meet its working capital requirements. The Company, if necessary, could raise capital through a) additional mortgage financings (currently there are 64 properties having a net book value of approximately $95 million available for such financing), b) expense reductions or c) new debt offerings. The Company is required to maintain a minimum credit facility of $15 million at all times prior to May 31, 1997 under $5 million of the new mortgage financings.
Under the most restrictive provisions of any of the Company's debt agreements, total shareholders' equity available to pay cash dividends or purchase treasury stock was below the required minimum level by $10.8 million at January 28, 1996, thus prohibiting the Company from paying cash dividends or purchasing treasury stock. None of the Company's debt agreements affect its ability to declare and pay a stock dividend. On February 28, 1996 a 5% stock dividend for shareholders of record on March 15, 1996 was declared. The stock dividend is payable on April 5, 1996. The Company was in compliance with all other covenants.
Total shareholders' equity in 1995 decreased $7.5 million to $110.2 million from $117.7 million in 1994, due primarily to the 1995 net loss. Long-term debt as a percentage of total capitalization decreased from 67% in 1994 to 64% in 1995.
In December 1988 the Board of Directors authorized the repurchase, in open market transactions, of up to 2,000,000 additional shares of the Company's common stock. As of January 28, 1996 the total remaining authorization was for 628,750 shares. The Company did not repurchase any shares in fiscal 1995 or 1994.
Working Capital
Working capital amounted to $45 million at January 28, 1996 compared to $73 million at January 29, 1995. The ratio of current assets to current liabilities was 1.5 in 1995 compared to 1.7 in 1994. Working capital included $30 million of cash and cash equivalents at January 28, 1996 compared to $83 million of cash and cash equivalents at January 29, 1995.
The Company has sufficient cash and cash equivalents and plans to generate sufficient cash flow from operations to meet its seasonal working capital needs, pay approximately $20 million in fixed interest charges and to fund capital expenditures of approximately $6 million for 1996. In 1996 the Company plans to open two to three new stores, relocate three to four stores and to remodel three to four existing stores.
Inflation
Inflation has been modest in recent years and has not had a significant effect on the Company. If merchandise costs were to increase because of inflation, management believes such increases could be recovered through higher selling prices, since virtually all retailers would be similarly affected.
Recent Accounting Pronouncements
In March 1995 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets" (SFAS 121). The effect of implementing SFAS 121 is not expected to be material to the Company's financial position or results of operations. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) issued in October 1995 sets forth standards for accounting for stock-based compensation or allows companies to continue to account for stock-based compensation under the requirements of Accounting Principles Board (APB) Opinion No. 25 and make additional disclosure in the notes to the financial
statements. It is the Company's intention to continue to account for stock-based compensation in accordance with APB Opinion No. 25 and provide the additional disclosure in the notes to the financial statements beginning in 1996.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
The Company's consolidated financial statements and supplementary data are listed in Item 14 of this Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors Information on Nominee and Incumbent Directors, which appears on pages 5 and 6 of the Company's 1996 Proxy Statement, is incorporated by reference in this Annual Report on Form 10-K.
(b) Executive Officers
Mr. Ashton has been Chairman of the Board of Directors and Chief Executive Officer of the Company since 1970, and President of the Company since 1974. Prior thereto he was President and Chief Executive Officer from October 1969 to June 1970, President and Chief Administrative Officer from December 1967 to October 1969, Secretary from May 1965 to December 1967 and a Director of the Company since May 1965.
Mr. Boyd has been Executive Vice President of Frank's since June 1987 and prior thereto was employed by Frank's in various capacities since 1949.
Mr. Hessler has been President and Chief Operating Officer of Frank's since May 1994. He was Senior Vice President, Merchandising/Marketing of Wherehouse Entertainment, Inc. from 1992 to 1994 and was employed by Broadway Stores prior thereto from 1986 to 1992, most recently as Senior Vice President, General Merchandise Manager. Prior thereto he was employed by May
Department Stores and R.H. Macy in senior merchandising positions since 1974.
Mr. Lovejoy was named Vice President on February 22, 1991. He has been Treasurer of the Company since September 1988 and previously he had been employed by Bankers Trust Company since 1977, most recently as Vice President, Corporate Finance and Global Markets.
Mr. Simpson was named Vice President on February 22, 1991. He has been Controller of the Company since July 1989. He was Senior Vice President and Chief Financial Officer of Consumers Distributing, Inc., from January 1988 to July 1989 and was employed by Herman's Sporting Goods, Inc. from 1973 to 1988, most recently as Vice President and Controller.
Mr. Everingham was named Vice President, General Counsel and Secretary on July 12, 1995. He was self-employed in the private practice of law from January 1995 to July 1995 and was a partner of the law firm of Dykema Gossett PLLC for more than five years prior thereto.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation and Other Information which appears on pages 8 to 15 of the Company's 1996 Proxy Statement is incorporated by reference in this Annual Report on Form 10-K.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on the ownership of Company securities by certain beneficial owners and management which appears on pages 2 through 4 of the Company's 1996 Proxy Statement is incorporated by reference in this Annual Report on Form 10-K.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on transactions with management and others which appears on pages 6 and 7 and pages 15 and 18-19 of the Company's 1996 Proxy Statement, is incorporated by reference in this Annual Report on Form 10-K.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. List of documents filed as part of this report:
1. Financial Statements
- --------------- * See Schedule of Substantially Identical Documents filed herewith.
- --------------- * See Schedule of Substantially Identical Documents filed herewith.
B. Reports on Form 8-K
During the last quarter of the period covered by this report, the Company did not file a report on Form 8-K.
SCHEDULE OF SUBSTANTIALLY IDENTICAL DOCUMENTS
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.
GENERAL HOST CORPORATION
Date: April 24, 1996 By /s/ James R. Simpson ----------------------------- James R. Simpson Vice President and Controller
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of General Host Corporation
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(A)(1) and (2) on page 18 present fairly, in all material respects, the financial position of General Host Corporation and its subsidiaries at January 28, 1996 and January 29, 1995, and the results of their operations and their cash flows for the three years in the period ended January 28, 1996 in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP Detroit, Michigan February 28, 1996, except as to the stock dividend described in Note 1 which is as of March 15, 1996
CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) JANUARY 28, 1996 AND JANUARY 29, 1995
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FISCAL YEARS ENDED JANUARY 28, 1996, JANUARY 29, 1995 AND JANUARY 30, 1994
See accompanying notes.
GENERAL HOST CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FISCAL YEARS ENDED JANUARY 28, 1996, JANUARY 29, 1995 AND JANUARY 30, 1994 (DOLLARS IN THOUSANDS)
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) FISCAL YEARS ENDED JANUARY 28, 1996, JANUARY 29, 1995 AND JANUARY 30, 1994
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ACCOUNTING POLICIES
General Host is the nation's leading specialty retailer of lawn and garden products, crafts and Christmas merchandise. Below are those accounting policies considered to be significant.
The fiscal year is comprised of 52 or 53 weeks, ending on the last Sunday in January. The 1995, 1994 and 1993 fiscal years each reflect a 52-week period.
The consolidated financial statements include the accounts of General Host Corporation and its subsidiaries (the "Company"). Intercompany balances and transactions are eliminated. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and, as such, include amounts based on management's best estimates. Actual results could differ from those estimates. Certain reclassifications have been made to prior years' financial statements to conform to the 1995 presentation.
Cash equivalents are highly liquid investments, such as U.S. government securities and bank certificates of deposit having original maturities of three months or less, and are carried at cost plus accrued interest.
Merchandise inventories are stated at the lower of cost or market, with cost being determined under the first-in, first-out method.
Pre-Opening costs are costs incurred in the opening of new stores (primarily payroll costs) that are capitalized prior to the opening of a new store and amortized over a one year period commencing with the first period after the new store opens.
Advertising costs are expensed when the advertising first takes place. Advertising expenditures were $22,073,000 for 1995, $21,721,000 for 1994 and $22,802,000 for 1993.
Store closing costs include provisions for estimated future net lease obligations, nonrecoverable investments in fixed assets, and other expenses directly related to discontinuance of operations and in 1993 included estimated operating losses through expected closing dates. Provisions for store closings are charged to operations in the period when the decision is made to close a retail unit.
Property, plant and equipment, including significant improvements thereto, are recorded at cost. Expenditures for repairs and maintenance are charged to expense as incurred. The cost of plant and equipment is depreciated over the estimated useful lives using the straight-line method. Estimated useful lives, including capital leases, are buildings, 10-40 years or, if shorter, the terms of the lease; equipment, 3-20 years. Leasehold improvements are depreciated over the terms of the respective leases or, if shorter, the estimated useful lives. Upon sale or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected in the statements of income.
Intangibles, including costs in excess of net assets of acquired businesses, are amortized over the estimated periods of related benefit, ranging from 10 to 40 years, using the straight-line method. On an annual basis the Company reviews the recoverability of intangibles, specifically goodwill. The measurement of possible impairment is based primarily on the ability to recover the balance of the goodwill from expected future operating cash flows on an undiscounted basis.
Other postretirement benefits are recognized in the financial statements during the period in which service is provided.
Leases that meet the accounting criteria for capital leases are recorded as property, plant and equipment, and the related capital lease obligations (the aggregate present value of minimum future lease payments, excluding executory costs such as taxes, maintenance and insurance) are included in long-term debt. Depreciation and interest are charged to expense, and rent payments are treated as payments of long-term debt, accrued interest and executory costs. All other leases are accounted for as operating leases, and rent payments are charged to expense as incurred.
Deferred income tax assets and liabilities are determined based on the difference between the financial carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
Primary earnings per share is based on the weighted average number of common shares outstanding, which includes 1,108,751 shares representing the 5% stock dividend described below.
Fully diluted earnings per share is based on the assumed conversion of all of the 8% Convertible Subordinated Notes into common stock. Interest expense on the 8% Convertible Subordinated Notes is added back to net earnings. Fully diluted earnings per share impacted the first quarters of 1995 and 1994, the fourth quarter of 1994 and the first quarter of 1993.
Subsequent to fiscal 1995 a 5% stock dividend was declared on February 28, 1996 by the Board of Directors for shareholders of record on March 15, 1996. The stock dividend is payable on April 5, 1996 and all stock related data in the consolidated financial statements reflect the stock dividend for all periods presented.
NOTE 2: PROVISION FOR STORE CLOSINGS
During the fourth quarter of 1993 the Company approved a plan to exit 26 unprofitable Frank's stores primarily in the Nashville, South Florida and Orlando markets and to dispose of certain other properties. The decision resulted in the Company recording a reserve of $22,876,000 ($15,098,000 net of tax benefit) in the 1993 fourth quarter comprised primarily of $19,944,000 for the closing of the 26 stores and $2,932,000 primarily for expected losses on the sale of the other properties. The $19,944,000 store closing reserve included a provision for termination of lease agreements, brokers fees and legal costs of $12,862,000 representing expected future cash outflows; a provision of $3,518,000 for expected losses from the sale of real estate and the write-off of leasehold improvements and equipment of the closed stores; and a provision of $3,564,000 representing operating losses for January 1994 through closure date and employee severance for the closed stores. All stores were closed as of February 7, 1994, with the exception of one store which closed March 7, 1994.
As of January 28, 1996 the Company had terminated leases and entered into sublease arrangements for all but five stores. The annual sublease income generated approximates the Company's annual costs. The Company retains its primary obligation under the prime lease should a sublease tenant default on its sublease obligation.
At January 28, 1996 the remaining reserve of $4,347,000 primarily represents lease termination costs for the remaining five store locations and estimated losses associated with the sale and or sublease of real estate.
During 1995 the Company utilized net cash of $3,621,000 to pay lease termination costs for leases terminated at the end of fiscal 1994 and in 1995 and to pay brokers fees and legal costs.
NOTE 3: EQUITY INTEREST IN SUNBELT NURSERY GROUP, INC.
In April 1993 the Company acquired a 49.5% interest in Sunbelt Nursery Group, Inc. ("Sunbelt") by exchanging 1,940,000 shares of its common stock for 4,200,000 shares of common stock of Sunbelt held by Pier 1 Imports, Inc. The Sunbelt investment was recorded on the General Host consolidated balance sheet at the time of acquisition based upon fair value. The 4,200,000 shares of Sunbelt were subsequently pledged as security for payment of a $12,000,000 revolving credit facility between Sunbelt and Pier 1, Imports, Inc. which was scheduled to mature in April 1994. The Company received no assurances that the maturity of this facility would be extended or that Sunbelt had the ability to repay this facility [which resulted in a going concern qualification in the audit opinion to Sunbelt's financial statements for the year ended January 31, 1994]. As a result there existed the possibility that Pier 1 Imports, Inc. would foreclose on the Sunbelt shares that were pledged as security. Consequently, the Company decided to reduce to zero the carrying value of its investment in Sunbelt as of fiscal year end 1993. This resulted in a charge of $15,746,000 which, when combined with the net equity losses recognized through the 1993 third quarter of $1,957,000, amounted to $17,703,000 for fiscal 1993. In October 1994 the Company sold its interest in Sunbelt for cash, which resulted in a net gain of $3,612,000.
NOTE 4: DISCONTINUED OPERATIONS
In prior years' the Company has sold businesses that have been treated as discontinued operations for financial statement presentation.
The assets and liabilities for discontinued operations sold in prior years' were as follows:
In 1995 the Company charged to discontinued operations a loss of $3,000,000, or $.13 per share, as a result of a judgment against the Company in a 1991 saltwater pollution lawsuit (Note 15). In 1993 the Company charged to discontinued operations a loss of $840,000, or $.03 per share, for lease obligations that extend to the year 2001 for businesses sold in prior years (Note 15).
NOTE 5: OTHER INCOME
NOTE 6: INCOME TAXES
The components of the income tax provisions are as follows:
Differences between income taxes of continuing operations and income taxes based on statutory federal income tax rates applied to income before taxes are as follows:
The tax effects of the principal temporary deferred tax assets and liabilities are as follows:
In 1995, the tax provision was unfavorably impacted by an increase in the valuation allowance as a result of the current year loss not being benefitted. A valuation allowance was provided in 1993 against the net deferred tax asset resulting from the Company's net operating loss and the loss from an investment in an unconsolidated affiliate. Due to the Company's historical operating results prior to 1995, a valuation allowance for the deferred tax asset balance remained at January 28, 1996.
At January 28, 1996 the federal tax NOL carryforwards approximated $53,000,000. As a result of the valuation allowance, approximately $20,700,000 of these carryforwards have not been benefitted and utilization will be recognized against future income. The net operating loss will expire as follows: in January 2008 -- $5,000,000, January 2009 -- $39,000,000, January 2010 -- $3,000,000 and January 2011 -- $6,000,000.
NOTE 7: PROPERTY, PLANT AND EQUIPMENT
NOTE 8: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable include amounts payable to brokers for purchases of cash equivalents of $19,997,000 in 1995 and $14,998,000 in 1994.
Accrued expenses are as follows:
NOTE 9: LONG-TERM DEBT
The Senior Notes, issued at par, bear interest at 11 1/2%. The Convertible Subordinated Notes, issued at par, bear interest at 8% and are convertible into common stock of the Company at a conversion price of $8.96 per share, subject to adjustments in certain events.
The Company repaid the remaining balance of the Adjustable Rate First Mortgage Notes due March 29, 1996 during the last half of 1995. As part of the plan to repay the mortgage notes, the Company entered into new mortgage financings totalling $34,984,000 during the third and fourth quarters of 1995. Interest rates on the new mortgage notes vary from 7.8% to 8.7%, and the notes mature with balloon payments on varying dates from February 1, 2001 to February 1, 2006. The new mortgage notes are secured by 37 nursery and crafts retail stores having a net book value of $47,260,000 at January 28, 1996.
The Company has a $25,000,000 unsecured credit agreement with a bank. The credit agreement is committed through May 31, 1996. There is a commitment fee of 1/2 of 1% on the unused portion. At the Company's option, interest under the agreement may be based on the London Interbank Offering Rate (LIBOR) or on
the bank's prime rate. On November 6, 1995 the Company borrowed $10,000,000 under the agreement, which was repaid on December 6, 1995. As of February 28, 1996, $25,000,000 was outstanding under the agreement.
The bank agreement requires the Company, among other things, to maintain minimum levels of earnings, tangible net worth and certain minimum financial ratios. In addition, the Company is required to maintain a minimum credit facility of $15,000,000 at all times prior to May 31, 1997 under $4,950,000 of the new mortgage financings. The Company was in compliance with all of the bank agreement covenants and other restrictions under all other debt agreements at January 28, 1996.
Under the most restrictive provisions of any of the Company's debt agreements, total shareholders' equity available to pay cash dividends or purchase treasury stock was below the required minimum level by $10,799,000 at January 28, 1996.
Aggregate maturities of long-term debt for the five years subsequent to 1995, excluding capital lease obligations (Note 11), are $1,054,000 in 1996, $1,171,000 in 1997, $1,306,000 in 1998, $1,327,000 in 1999 and $1,304,000 in 2000.
NOTE 10: SHAREHOLDERS' EQUITY
The Company's 1986 stock incentive plan, as amended in 1992, provides for the granting of options to purchase up to 2,500,000 shares of common stock and expires by its terms on March 19, 1996. Options are granted to key employees and expire no later than ten years after grant. Effective April 7, 1995 the exercise prices of all outstanding options under the plan were adjusted to reflect the 5% stock dividends paid on April 7, 1995 and April 8, 1994. The 1996 stock incentive plan is subject to shareholder approval at the annual meeting of shareholders in May 1996. In April 1994 the Company issued restricted stock grants under the plan to employees of the Company. The market value of the shares granted amounted to $341,500 for fiscal 1994 and was charged to selling expense. Restrictions on the grants expired on January 28, 1996 and in February 1996, 59,301 shares were issued. The directors' stock option plan provides for the issuance of options to members of the Board of Directors who are not employees of the Company; options expire no later than five years after grant. In October 1994 the Company granted each outside director options to purchase a total of 25,000 shares of common stock under a newly created plan that was approved by the shareholders in May 1995 and therefore have been included in the following option information for fiscal 1994. Effective April 7, 1995 all
outstanding options under the plan were adjusted to reflect the 5% stock dividend paid on April 7, 1995 and the resulting additional options of 11,250 were included in options granted for fiscal 1995. Under both plans, options are granted at prices not less than fair market value on the date of grant.
Changes in stock options during the three years ended January 28, 1996 are as follows:
At January 28, 1996 outstanding options for 786,988 shares are exercisable and 1,440,099 shares are available for granting additional options. During 1995 the Company cancelled 540,000 options (300,000 at $7.73 and 240,000 at $7.45). These options were reissued at $3.75.
The Company's certificate of incorporation authorizes the issuance of 1,000,000 shares of $1.00 par value preferred stock, none of which have been issued.
Each share of the Company's common stock carries with it one right to purchase one additional share of common stock from the Company for $60 upon the occurrence of certain events, at which time the rights become exercisable. Separate rights certificates will then be issued and the rights can be traded separately. In the event the rights become exercisable and thereafter the Company is acquired in a merger or other business combination, each right will entitle the holder, upon payment of the exercise price, to receive a number of shares of the surviving corporation's common stock equal to the exercise price divided by 50% of the market price. At the Company's option, the rights are redeemable in their entirety at $.01 per right. The rights are subject to adjustment to prevent dilution and expire March 7, 2000.
NOTE 11: LEASES
The Company's capital leases are principally for offices and retail stores, for periods ranging up to 25 years. The Company's operating leases are principally for retail store locations.
At January 28, 1996 lease obligations under capital leases, included in long-term debt (Note 9), and operating leases with lease terms longer than one year, are as follows:
Rent expense was $22,473,000 in 1995, $21,045,000 in 1994 and $24,602,000 in 1993. Rent expense includes additional rentals based on retail store sales (in excess of the minimums specified in leases) of $815,000 in 1995, $760,000 in 1994 and $804,000 in 1993 and is reduced by sublease rental income of $832,000 in 1995, $873,000 in 1994 and $824,000 in 1993.
NOTE 12: PENSION PLAN
Retirement benefits for both salaried and hourly employees are provided through a noncontributory, defined contribution plan. Contributions are determined by the Board of Directors based upon assessment of the Company's fiscal year's profitability as related to pre-established financial objectives. There were no contributions made to the plan for 1995 and 1993. The 1994 contribution approved by the Board of Directors was $500,000. The plan also includes a 401(k)component, permitting employees to
invest from 1% to 10% of their salary in the employee's choice of an equity fund, a balanced fund or a fixed income fund. The Company does not match employee contributions.
The Company also sponsors a noncontributory, defined benefit pension plan, which covers former hourly employees of several discontinued operations and provides pension benefits of stated amounts multiplied by years of service. The Company contributes to this plan based on funding requirements determined by consulting actuaries using the accrued benefit (unit credit) method.
Net periodic pension cost consisted of the following:
The following table summarizes the plan's funding status and the asset recognized in the consolidated balance sheets as of January 28, 1996 and January 29, 1995:
The above amounts were determined as of December 31 each year. The assumed discount rate for projected benefit obligations was 7.25% for 1995 and 8.5% for 1994. The expected long-term return on plan assets was 9% for 1995 and 1994.
The assets of the plan consist primarily of U.S. government securities and listed stocks and bonds, including common stock of the Company with a quoted market value of $1,550,000 at December 31, 1995 and $1,707,000 at December 31, 1994.
NOTE 13: OTHER POSTRETIREMENT BENEFITS
The Company provides certain life insurance benefits to eligible retired employees. The cost of this benefit is not significant to the Company. In addition, the Company has provided for certain health care and life insurance benefits which cover former hourly employees of several discontinued operations.
The Company adopted SFAS No. 106 as of February 1, 1994. The Statement requires that the cost of such benefits be recognized in the financial statements during the period employees provide service to the Company. The Company elected to immediately recognize the accumulated liability. At the date of adoption, the unrecognized accumulated liability was not material to the consolidated financial statements of the Company.
The accrued postretirement liability recognized in the consolidated balance sheets was $1,577,000 at January 28, 1996 and $1,598,000 at January 29, 1995. The net periodic postretirement benefit cost was $105,000 for 1995 and $119,000 for 1994. The amounts were determined as of December 31 each year. The discount rate used in determining the accumulated postretirement benefit obligation was 7.25% for 1995 and 8.5% for 1994. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 9.9% in 1995 grading down uniformly to 5.25% in 2005. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefit obligation would be increased by 7.2% for 1995. The effect of this change on the interest cost component of net periodic postretirement benefit cost for 1995 would be an increase of 6.6%.
NOTE 14: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents The carrying value amount approximates fair value because of the short maturity of those investments.
Other investments The Company's other investments represent investments in untraded companies. Based upon the Company's review of the financial statements of these companies the carrying amount approximates fair value.
Long-term debt The fair value of the Company's long-term debt is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities.
The estimated fair values of the Company's financial instruments at January 28, 1996 and January 29, 1995 are as follows:
NOTE 15: LITIGATION AND OTHER CONTINGENCIES
In the normal course of business the Company is subject to various claims. In the opinion of management, any ultimate liability arising from or related to these claims should not have a material adverse effect on future results of operations or the consolidated financial position of the Company.
In 1995 the Company charged to discontinued operations a loss of $3,000,000, or $.13 per share, as a result of a judgment against the Company in a 1991 saltwater pollution lawsuit. The Company has appealed. The lawsuit involves claims by farmers in Rice County, Kansas who alleged that saltwater pollution of the ground water by the American Salt Company, a former subsidiary of the Company, rendered it unfit for irrigation. In August 1995, a jury verdict awarded the plaintiffs $480,000 in compensatory damages for the period 1989 to 1995 and in October 1995 the plaintiffs were awarded $550,000 in punitive damages and the judgment was entered. The judgment, together with approximately $1,130,000 in legal defense costs, $470,000 in related costs, principally for technical consulting and expert witnesses, and $370,000 for future legal and related costs, totalled $3,000,000.
The Company has certain lease obligations which extend to the year 2001 for businesses sold. In the opinion of management, any ultimate liability arising from or related to these obligations, to the extent not otherwise provided for, should not have a material adverse effect on future operations or the consolidated financial position of the Company.
NOTE 16: SUPPLEMENTAL CASH FLOW INFORMATION
Income tax payments were $449,000 in 1995, $414,000 in 1994 and $922,000 in 1993. Interest payments were $23,286,000 in 1995, $21,431,000 in 1994, and $20,912,000 in 1993. Noncash investing and financing activities for 1994 included the purchase of land for $891,000 in exchange for a mortgage payable and the issuance of 68,300 shares of common stock representing restricted stock grants. In 1993 noncash investing and financing activities included the issuance of 1,940,000 shares of common stock at the then market value of $17,703,000 in exchange for an equity investment in an unconsolidated affiliate.
Net cash used for discontinued operations:
Net cash used for discontinued operations for fiscal 1995, 1994 and 1993 is primarily for payments related to businesses sold in prior years, which were treated as discontinued operations.
1 Had the actual annual effective tax rate been applied to the quarterly information, the first quarter net income would have increased by $817, or $.04 per share, the second quarter net loss would have increased by $40, with no per share effect, the third quarter net loss would have increased by $1,090, or $.05 per share, and the fourth quarter net loss would have decreased by $313, or $.01 per share.
2 Includes $600 of income tax reserves no longer required.
3 Had the actual annual effective tax rate been applied to the quarterly information, the first quarter net income would have increased by $1,353, or $.06 per share, the second quarter net loss would have increased by $484, or $.02 per share, and the third quarter net loss would have increased by $869, or $.04 per share.
4 Includes a net gain of $3,612 from the sale of the Company's investment in Sunbelt Nursery Group, Inc.
5 Includes $1,000 of income tax reserves no longer required.
6 Share and per share data have been restated to reflect the 5% stock dividend declared on February 28, 1996.
7 Due to changes in the number of shares outstanding during the year, quarterly earnings per share do not necessarily add to the totals for the year.
1 Includes $600 of income tax reserves no longer required.
2 Includes a net gain of $3,612 from the sale of the Company's investment in Sunbelt Nursery Group, Inc.
3 Includes $1,000 of income tax reserves no longer required.
4 Includes $22,876 ($15,098 net of taxes) representing a reserve for store closings and other costs and $17,703 representing the net equity loss and write-down of the Sunbelt investment.
5 Pre-tax earnings from continuing operations were inadequate to cover fixed charges to the extent of $54,266.
6 Includes $1,914 of income tax reserves no longer required.
7 Includes $2,850 representing the cumulative effect of the Company's adoption of SFAS No. 109, "Accounting for Income Taxes".
8 Includes gain from the sale of Calloway's Nursery, Inc. of approximately $13,503 ($7,775 net of taxes).
9 Includes $5,940 of income tax reserves no longer required that were related to discontinued operations.
10 Share and per share data have been restated to reflect the 5% stock dividend described in Note 1 of the Notes to Consolidated Financial Statements.
11 Includes notes receivable from exercise of stock options.
12 In lieu of a cash dividend, a 5% stock dividend was distributed.
Schedule VIII
GENERAL HOST CORPORATION VALUATION AND QUALIFYING ACCOUNTS FISCAL YEAR ENDED JANUARY 28, 1996 (In thousands)
(1) Represents payments of liabilities.
Schedule VIII
GENERAL HOST CORPORATION VALUATION AND QUALIFYING ACCOUNTS FISCAL YEAR ENDED JANUARY 29, 1995 (In thousands)
(1) Primarily represents reclassification to current assets.
Schedule VIII
GENERAL HOST CORPORATION VALUATION AND QUALIFYING ACCOUNTS FISCAL YEAR ENDED JANUARY 30, 1994 (In thousands)
(1) Primarily reclassification to accrued expenses.
(2) Primarily related to the provision for store closings.
INDEX OF EXHIBITS FILED HEREWITH