Common use of Results of Operations Clause in Contracts

Results of Operations. Three Months Ended June 28, 1997 As Compared To Three Months Ended June 29, 1996 Net sales for the three months ended June 28, 1997, were $646,090 which was a 3.6% increase compared to net sales of $623,870 for the three months ended June 29, 1996. Sales increases from E▇▇▇▇ ▇▇▇▇▇'▇ retail and catalog divisions were significantly offset by sales decreases at Spiegel Catalog. E▇▇▇▇ ▇▇▇▇▇'▇ retail sales increased by 11.9% compared to the same period last year, with a comparable store sales increase of 2%. Total Company catalog sales were flat for the period as the growth of E▇▇▇▇ ▇▇▇▇▇'▇ catalog operations offset the lower Spiegel Catalog sales. Spiegel Catalog continues to be affected by lower productivity and response rates experienced in catalog mailings. Finance revenue for the second quarter of 1997 increased to $38,715 from $33,266 a year earlier. Revenues were favorably affected by a pretax gain of $19,672 on the sale of customer receivables recognized pursuant to SFAS No. 125. This gain was offset somewhat by lower finance revenues generated as a result of a lower average level of owned customer receivables. The gross profit margin on net sales decreased to 32.7% for the three months ended June 28, 1997, compared to 34.6% for the comparable 1996 period. This decrease was driven by lower gross profit margins at Spiegel Catalog reflecting a higher level of markdowns taken in an effort to promote sales and manage inventory risk. Selling, general and administrative expenses as a percentage of total revenues for the three months ended June 28, 1997 and June 29, 1996 were 38.0% and 36.9%, respectively. This increase was primarily due to approximately $10,000 in expenses associated with the restructuring activities of Spiegel Catalog, which included reserves for the closing of certain facilities and a work force reduction of approximately 125 Spiegel Catalog associates. Other factors contributing to the increase included less leverage of selling, general and administrative expenses, especially advertising expense, at Spiegel Catalog as a result of lower productivity from catalog offerings. Interest expense for the three months ended June 28, 1997 decreased 23.8% to $16,152 compared to $21,195 for the three months ended June 29, 1996. This decrease was due to reduced average debt levels resulting from a lower level of owned customer receivables and from the $69,972 net proceeds from the issuance of Class B voting stock in March 1997. Six Months Ended June 28, 1997 As Compared To Six Months Ended June 29, 1996 Net sales for the six months ended June 28, 1997 and June 29, 1996 were $1,215,875 and $1,213,331, respectively. E▇▇▇▇ ▇▇▇▇▇'▇ retail sales increased 11.3% over last year, with a comparable store sales increase of 3%. Total Company catalog sales were lower than last year by 4.7%. This decrease was driven by Spiegel Catalog as it continues to be affected by the lower productivity of catalog mailings as well as by the tightened credit policies on the Company's Preferred Credit Card. Finance revenue for the six month period ended June 28, 1997, was $61,243 compared to $61,607 for the same period in 1996. A pretax gain of $19,672 on the sale of customer receivables was recognized during the 1997 period under the provisions of SFAS No. 125. Offsetting this gain was a decrease in finance revenues resulting from a significantly lower level of average owned receivables compared to 1996 due to sales of customer receivables, as well as decreases in sales on the Company's proprietary credit card. Other revenue was $20,937 and $28,344 for the six month periods ended June 28, 1997 and June 29, 1996, respectively. This decrease was due primarily to the sale of the Company's technology consulting subsidiary at the end of the first quarter of 1996. The gross profit margin on net sales decreased to 31.3% for the six months ended June 28, 1997 from 33.1% for the comparable 1996 period. This decrease was driven by lower gross profit margins at Spiegel Catalog reflecting a higher level of markdowns taken in an effort to promote sales and manage inventory risk. Selling, general and administrative expenses as a percentage of total revenues for the six months ended June 28, 1997 and June 29, 1996 were 39.0% and 36.9%, respectively. This increase was primarily due to approximately $10,000 in expenses associated with the restructuring activities of Spiegel Catalog, which included reserves for the closing of certain facilities and a work force reduction of approximately 125 Spiegel Catalog associates. Other factors contributing to the increase included less leverage of selling, general and administrative expenses, especially advertising expense, at Spiegel Catalog as a result of lower productivity from catalog offerings. The 1996 ratio was favorably impacted by the gain of approximately $8,000 realized on the sale of the Company's information technology subsidiary, as well as the favorable impact of a $4 million reversal of the provision for doubtful accounts on customer receivables sold in the first quarter of 1996. Interest expense for the six months ended June 28, 1997 decreased 23.8% to $32,522 compared to $42,701 for the six months ended June 29, 1996. This decrease was due to reduced average debt levels resulting from a lower level of owned customer receivables and from the $69,972 net proceeds from the issuance of Class B voting stock in March 1997.

Results of Operations. Three Months Ended June September 28, 1997 1996 As Compared To Three Months Ended June 29September 30, 1996 1995 Net sales for the three months ended June September 28, 19971996, were decreased 5.7% to $646,090 which was a 3.6% increase 584,075 compared to net sales of $623,870 619,632 for the three months ended June 29September 30, 1996. Sales increases from E▇▇▇▇ ▇▇▇▇▇'▇ retail and catalog divisions were significantly offset by sales decreases at Spiegel Catalog1995. E▇▇▇▇ ▇▇▇▇▇'▇ retail sales increased by 11.92.6% compared to the same period last year, year with a comparable store sales increase decrease of 25.8%. Comparable store sales were negatively impacted by the reduction of footwear assortment in the stores which was done to provide more space for a new higher margin line of performance outerwear and activewear called EBTek. Total Company catalog sales were flat declined 9.5% for the period quarter as the growth a result of E▇▇▇▇ ▇▇▇▇▇'▇ catalog operations offset the lower Spiegel Catalog sales. Spiegel Catalog continues to be affected by lower productivity from Spiegel and response rates experienced in Newport News catalog mailingsdivisions. Finance revenue for the second third quarter of 1997 increased to 1996 was $38,715 from 26,826 or 45.7% below the $33,266 a year earlier. Revenues were favorably affected by a pretax gain of $19,672 on 49,390 reported for the sale of customer receivables recognized pursuant to SFAS No. 125same period in 1995. This gain decrease was offset somewhat by lower finance revenues generated as a the result of a significantly lower average level of average owned FCNB Preferred Card receivables in the third quarter of 1996 compared to the same period in 1995 due to sales of customer receivables. The gross profit margin on net sales decreased during the third quarter of 1996 increased to 32.731.0% for from 30.4% during the three months ended June 28, 1997, compared to 34.6% for the comparable 1996 periodthird quarter of 1995. This decrease improvement was driven mainly by higher margins in the E▇▇▇▇ B▇▇▇▇ division resulting from a lower level of promotional activity, less markdowns and reduced inventory levels. Slightly offsetting this improvement was declines in gross profit margins margin experienced at the Spiegel Catalog reflecting division as a result of higher level of markdowns taken in an effort to promote sales and manage inventory riskliquidation activity on overstock merchandise. Selling, general and administrative expenses as a percentage of total revenues for the three months ended June September 28, 1997 1996 and June 29September 30, 1996 1995 were 38.036.3% and 36.939.1%, respectively. This increase was primarily due to approximately $10,000 in expenses associated with The majority of the restructuring improvement is the result of activities of Spiegel Catalog, which included reserves for the closing of certain facilities and a work force reduction of approximately 125 Spiegel Catalog associates. Other factors contributing related to the increase included less leverage of Company's credit operations. In general, the Company's credit business has a higher selling, general and administrative expensesexpense ratio than other areas of the Company and has been experiencing higher charge-offs. However, especially advertising expense, at Spiegel Catalog as a result of lower productivity the receivable sales, the selling, general and administrative expense ratio for the credit business has improved. This has had a favorable impact on the overall Company's ratio. In addition, the net effect from catalog offeringsthe reversal of the provision for doubtful accounts related to the sale of customer receivables was approximately $6,300 which represented an improvement of 1.1% in the selling, general and administrative expense percentage in the current quarter compared to the prior year. The other operating units continue to see reductions in total selling, general and administrative expenses as a result of improvements from the Company's new fulfillment and distribution facilities as well as other ongoing cost reduction efforts. Interest expense was $21,006 for the three months ended June September 28, 1997 decreased 23.8% to $16,152 1996 compared to $21,195 26,358 for the three months ended June 29September 30, 19961995. This decrease was mainly due to reduced lower average debt levels resulting from a lower the higher level of owned customer receivables sold and from the $69,972 net proceeds from the issuance of Class B voting stock in March 1997Company's lower inventory levels. Six Nine Months Ended June September 28, 1997 1996 As Compared To Six Nine Months Ended June 29September 30, 1995 For the nine months ended September 28, 1996 Net and September 30, 1995, net sales for the six months ended June 28, 1997 and June 29, 1996 were $1,215,875 1,797,406 and $1,213,3311,837,252, respectively. E▇▇▇▇ ▇▇▇▇▇'▇ retail sales increased 11.3were 9.0% over higher than last yearyear for the period, with a and its comparable store sales increase of 3%were flat to last year. Total Company catalog sales were 5.7% lower than last year by 4.7%as a result of planned catalog circulation reductions made to reduce the impact of previous paper price increases. This decrease was driven by Additionally, lower productivity rates on certain catalog media at Spiegel Catalog as it continues contributed to be affected by the lower productivity of catalog mailings as well as by the tightened credit policies on the Company's Preferred Credit Carddecline. Finance revenue for the six nine month period ended June September 28, 1997, 1996 was $61,243 88,433 compared to $61,607 158,719 for the same period in 1996of 1995. A pretax This decline is mainly the result of significantly lower average owned FCNB Preferred Card receivables due to sales of customer receivables. Other revenue was $38,359 and $68,859 for the nine month periods ended September 28, 1996 and September 30, 1995, respectively. The decrease is mainly attributable to a gain of $19,672 18,637 recognized on the sale of customer receivables in the first quarter of 1995, because there was recognized during the 1997 period under the provisions of SFAS Nono comparable gain in 1996. 125. Offsetting this gain was a decrease in finance revenues resulting from a significantly lower level of average owned receivables compared to 1996 Also within other revenue, consulting revenue has declined due to sales of customer receivables, as well as decreases in sales on the Company's proprietary credit card. Other revenue was $20,937 and $28,344 for the six month periods ended June 28, 1997 and June 29, 1996, respectively. This decrease was due primarily to the sale of the Company's information technology consulting subsidiary at the end of in the first quarter of 1996. The gross profit margin on net sales decreased increased to 31.332.4% from 30.6% for the six first nine months ended June 28, 1997 from 33.1% for of 1996 compared to the comparable same period in 1995. Clearance and markdown activity at E▇▇▇▇ B▇▇▇▇ was substantially lower in the 1996 period. This decrease was driven by lower gross profit margins at Spiegel Catalog reflecting a higher level In the first half 1995, the Company took aggressive markdowns to liquidate overstock merchandise. Such markdowns were not required in the same period of markdowns taken in an effort to promote sales and manage inventory risk1996. Selling, general and administrative expenses as a percentage of to total revenues revenue were 36.7% and 38.6% for the six months nine month periods ended June September 28, 1997 1996 and June 29September 30, 1996 were 39.0% and 36.9%1995, respectively. This increase was primarily due The Company has continued to approximately $10,000 pursue cost saving measures in expenses associated with the restructuring activities all areas of Spiegel Catalog, which included reserves for the closing of certain facilities and a work force reduction of approximately 125 Spiegel Catalog associatesits businesses. Other factors contributing to the increase included less leverage of The lower selling, general and administrative expensesexpense ratio reflected reductions in several operating units' expenses as well as efficiencies being realized from the Company's new fulfillment and distribution facilities and more tightly controlled advertising expenditures, especially advertising expense, at Spiegel Catalog as a result of lower productivity from including catalog offeringsproduction costs. The 1996 ratio was also favorably impacted by the gain of approximately $8,000 realized on the sale of the Company's information technology subsidiary, as well as subsidiary in the favorable impact of a first quarter and by approximately $4 million 8,000 on the reversal of the provision for doubtful accounts on the customer receivables sold in 1996. Also favorably effecting the first quarter 1996 ratio, as discussed above, was the diminishing relative effect of 1996the Company's credit business due to receivable sales. By comparison, the 1995 ratio was favorably impacted by the effects of a sale of $350,000 of customer receivables in March 1995 including an $18,637 gain recognized and a reversal of approximately $15,000 of the provision for doubtful accounts on the receivables sold. Interest expense was $63,707 and $76,217 for the six nine months ended June September 28, 1997 decreased 23.8% to $32,522 compared to $42,701 for the six months ended June 291996 and September 30, 19961995, respectively. This decrease was mainly due to reduced lower average debt levels resulting from a lower higher level of owned customer receivables sold and the Company's lower inventory levels. Seasonality and Quarterly Fluctuations: The Company, like other retailers, experiences seasonal fluctuations in its merchandise sales and net earnings. Historically, a disproportionate amount of the Company's net sales and a majority of its net earnings have been realized during the fourth quarter. Accordingly, the results for the individual quarters are not necessarily indicative of the results to be expected for the entire year. Liquidity and Capital Resources: The Company has historically met its operating and cash requirements through funds generated from the $69,972 net proceeds from operations, the issuance of Class B voting stock in March 1997debt and the sale of customer accounts receivable. Total customer receivables sold were $1,318,730 at September 28, 1996, $1,180,000 at December 30, 1995 and $830,000 at September 30, 1995.

Results of Operations. Three Months Ended June 28September 27, 1997 As Compared To Three Months Ended June 29September 28, 1996 Net sales for the three months ended June 28September 27, 1997, were increased 1.3% to $646,090 which was a 3.6% increase 591,694 compared to net sales of $623,870 584,075 for the three months ended June 29September 28, 1996. Sales increases from E▇▇▇▇ ▇▇▇▇▇'▇ retail and catalog divisions were significantly offset by sales decreases at Spiegel Catalog. Retail sales at E▇▇▇▇ B▇▇▇▇▇'▇ retail sales increased by 11.99.1% compared to the same period over last year, with a comparable driven by an increase in the number of stores compared to last year. Comparable store sales increase of declined 2%% for the quarter. Total Company catalog sales were flat declined 2.6% for the period as the growth of E▇▇▇▇ ▇▇▇▇▇'▇ catalog operations and the favorable performance of the Company's Newport News division was more than offset the by lower Spiegel Catalog sales. Spiegel Catalog continues to be affected by lower productivity and response rates experienced in catalog mailingsmailings as well as a smaller active customer file. Finance revenue for the second third quarter of 1997 increased to $38,715 46,368 from $33,266 26,826 a year earlier. Revenues were favorably affected by a pretax gain of $19,672 22,686 on the sale of customer receivables recognized pursuant to SFAS No. 125. This gain was offset somewhat by lower finance revenues generated as a result of a significantly lower average level of owned customer receivables. The lower level of owned customer receivables was driven by decreases in sales on the Company's proprietary credit card, particularly at Spiegel Catalog. The gross profit margin on net sales decreased to 32.729.6% for the three months ended June 28September 27, 1997, compared to 34.61997 from 31.0% for the comparable 1996 period. This margin decrease was driven by lower gross profit margins at Spiegel Catalog reflecting is primarily due to a higher level of markdowns taken in an effort by Spiegel Catalog to promote sales and manage inventory riskrisk and liquidate merchandise that is not in line with the company's new targeted merchandise direction. Additionally, E▇▇▇▇ B▇▇▇▇ is experiencing some margin rate pressures due to somewhat higher levels of promotional activity. Selling, general and administrative expenses as a percentage of total revenues for the three months ended June 28September 27, 1997 and June 29September 28, 1996 were 38.037.2% and 36.936.3%, respectively. This increase was primarily due to approximately $10,000 in expenses associated with the restructuring activities of Spiegel Catalog, which included reserves for the closing of certain facilities and a work force reduction of approximately 125 Spiegel Catalog associates. Other factors Factors contributing to the increase included less leverage of selling, general and administrative fixed expenses, especially advertising expense, primarily at Spiegel Catalog Catalog, as a result of lower productivity from catalog offerings. In addition, the 1996 ratio was favorably impacted by the reversal of $6,300 of provision for doubtful accounts related to the sale of customer receivables. Interest expense for the three months ended June 28September 27, 1997 decreased 23.819.8% to $16,152 16,852 compared to $21,195 21,006 for the three months ended June 29, 1996. This decrease was due to reduced average debt levels resulting from a lower level of owned customer receivables and from the $69,972 net proceeds from the issuance of Class B voting stock in March 1997. Six Months Ended June September 28, 1997 As Compared To Six Months Ended June 29, 1996 Net sales for the six months ended June 28, 1997 and June 29, 1996 were $1,215,875 and $1,213,331, respectively. E▇▇▇▇ ▇▇▇▇▇'▇ retail sales increased 11.3% over last year, with a comparable store sales increase of 3%. Total Company catalog sales were lower than last year by 4.7%. This decrease was driven by Spiegel Catalog as it continues to be affected by the lower productivity of catalog mailings as well as by the tightened credit policies on the Company's Preferred Credit Card. Finance revenue for the six month period ended June 28, 1997, was $61,243 compared to $61,607 for the same period in 1996. A pretax gain of $19,672 on the sale of customer receivables was recognized during the 1997 period under the provisions of SFAS No. 125. Offsetting this gain was a decrease in finance revenues resulting from a significantly lower level of average owned receivables compared to 1996 due to sales of customer receivables, as well as decreases in sales on the Company's proprietary credit card. Other revenue was $20,937 and $28,344 for the six month periods ended June 28, 1997 and June 29, 1996, respectively. This decrease was due primarily to the sale of the Company's technology consulting subsidiary at the end of the first quarter of 1996. The gross profit margin on net sales decreased to 31.3% for the six months ended June 28, 1997 from 33.1% for the comparable 1996 period. This decrease was driven by lower gross profit margins at Spiegel Catalog reflecting a higher level of markdowns taken in an effort to promote sales and manage inventory risk. Selling, general and administrative expenses as a percentage of total revenues for the six months ended June 28, 1997 and June 29, 1996 were 39.0% and 36.9%, respectively. This increase was primarily due to approximately $10,000 in expenses associated with the restructuring activities of Spiegel Catalog, which included reserves for the closing of certain facilities and a work force reduction of approximately 125 Spiegel Catalog associates. Other factors contributing to the increase included less leverage of selling, general and administrative expenses, especially advertising expense, at Spiegel Catalog as a result of lower productivity from catalog offerings. The 1996 ratio was favorably impacted by the gain of approximately $8,000 realized on the sale of the Company's information technology subsidiary, as well as the favorable impact of a $4 million reversal of the provision for doubtful accounts on customer receivables sold in the first quarter of 1996. Interest expense for the six months ended June 28, 1997 decreased 23.8% to $32,522 compared to $42,701 for the six months ended June 29, 1996. This decrease was due to reduced average debt levels resulting from a lower level of owned customer receivables and from the $69,972 net proceeds from the issuance of Class B voting stock in March 1997.