UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED].
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED].
For the transition period from ________ to _______
Commission File Number: 1-10767
A. Full title of plan and the address of the plan, if different from
that of the issuer named below:
THE PROFIT SHARING AND 401(k) PLAN
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
VALUE CITY DEPARTMENT STORES, INC.
3241 Westerville Road
Columbus, Ohio 43224
THE PROFIT SHARING AND 401(K) PLAN
Financial Statements as of December 31, 2002
and 2001 and Supplemental Schedule for
the Year Ended December 31, 2002
and Independent Auditors' Report
THE PROFIT SHARING AND 401(K) PLAN
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2002 AND 2001:
Statements of Net Assets Available for Plan Benefits 2
Statement of Changes in Net Assets Available for Plan Benefits 3
Notes to Financial Statements 4-6
SUPPLEMENTAL SCHEDULE FOR THE YEAR ENDED DECEMBER 31, 2002:
Form 5500 Schedule H, Line 4i, Schedule of Assets 8
SIGNATURE 9
The following exhibits are being filed herewith:
Exhibit No. Description: Page Number
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23 Independent Auditors' Consent 11
99 Section 906 Certification 12
INDEPENDENT AUDITORS' REPORT
To the Plan Committee
of The Profit Sharing and 401(k) Plan
We have audited the accompanying financial statements of The Profit Sharing and
401(k) Plan (the "Plan") as of December 31, 2002 and 2001, and for the year
ended December 31, 2002, listed in the Table of Contents. These financial
statements and the supplemental schedule referred to below are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these supplemental financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 net assets available for plan benefits of the Plan as
of December 31, 2002 and 2001, and the changes in net assets available for plan
benefits for the year ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
Such supplemental schedule has been subjected to the auditing procedures applied
in our audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
June 16, 2003
THE PROFIT SHARING AND 401(K) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 2002 AND 2001
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2002 2001
INVESTMENTS--At fair value:
Mutual funds $ 79,082,321 $ 84,128,222
Common collective fund 65,742,160 63,430,467
Common stock 5,352,539 8,176,247
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Total investments--at fair value 150,177,020 155,734,936
PARTICIPANT LOANS 9,059,471 8,564,691
RECEIVABLES:
Employee contributions 515,634 509,143
Employer matching contributions 327,885 307,178
Employer profit sharing contributions 1,147,505 1,281,754
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Total receivables 1,991,024 2,098,075
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $161,227,515 $166,397,702
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See notes to financial statements.
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THE PROFIT SHARING AND 401(K) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 2002
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ADDITIONS TO NET ASSETS:
Investment income:
Dividends and interest $ 163,514
Net realized and unrealized depreciation in fair value of investments (20,131,033)
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Total investment loss--net (19,967,519)
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Contributions:
Employee 18,481,751
Employer matching 10,805,933
Employer profit sharing 1,309,866
Rollovers 1,458,713
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Total contributions 32,056,263
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Total additions 12,088,744
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DEDUCTIONS FROM NET ASSETS:
Distributions to participants 17,163,434
Fees 95,497
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Total deductions 17,258,931
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NET DECREASE (5,170,187)
NET ASSETS AVAILABLE FOR PLAN BENEFITS--Beginning of year 166,397,702
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NET ASSETS AVAILABLE FOR PLAN BENEFITS--End of year $ 161,227,515
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See notes to financial statements.
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THE PROFIT SHARING AND 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2002 AND 2001
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1. DESCRIPTION OF THE PLAN
GENERAL--The following description of The Profit Sharing and 401(k) Plan
(the "Plan") is provided for general information only. Interested parties
should refer to the Plan document for more complete information.
The Plan was adopted by Schottenstein Stores Corporation and affiliated
companies (the "Company") effective August 1, 1989 for the profit sharing
provisions of the Plan and effective October 1, 1989 for the 401(k)
provisions of the Plan. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974.
The Plan is administered by the Company, and all Plan expenses, with the
exception of loan fees, are paid by the Company. Heritage Trust Company is
the trustee and asset custodian of the Plan; Lifestyle and Company stock
fund assets are in the custody of Reliance Trust Company.
CONTRIBUTIONS TO THE PLAN--The Plan is a defined contribution plan.
Pursuant to the 401(k) feature of the Plan, an eligible employee may
contribute up to 30% of his or her cash compensation on a pretax basis,
not to exceed $11,000 per participant for the year ended December 31, 2002
($12,000 for participants over the age of 50). Effective January 1, 2001
the match formula is as follows:
EMPLOYEE CONTRIBUTION EMPLOYER MATCH
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1% 1%
2% 2%
3% 3%
4% 3.5%
5% 4%
6% 4.5%
The Company may also elect to make a discretionary profit sharing
contribution. Such contributions are allocated to eligible participants,
as defined by the Plan, based on the ratio of each participant's
compensation to the total of all eligible participants' compensation.
Total discretionary contributions for 2002 was approximately $1,147,000.
INVESTMENT OPTIONS--Participants have the option to direct the investment
of their accounts among alternative investment funds selected by the Plan
committee. A participant chooses from a number of different mutual fund
options. In addition, participants who are employees of Schottenstein
Stores Corporation and Value City Department Stores, Inc. are able to
invest in the stock of Value City Department Stores, Inc. and employees of
American Eagle Outfitters, Inc. are able to invest in the stock of
American Eagle Outfitters, Inc.
ELIGIBILITY AND VESTING--Full-time employees are eligible for
participation in the Plan on the first of the month following the
completion of 60 days of service, and having attained the age of
twenty-one. Part-time employees are eligible after completion of 1,000
hours of service within a year.
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Amounts contributed by the participants and earnings thereon are fully
vested and nonforfeitable at all times. Amounts contributed by the Company
(matching and profit sharing contributions) to a participant's account and
earnings thereon vest at the rate of 25% per year, beginning with the
second full year of service. Participants are fully vested at the end of
the fifth year of service.
ALLOCATION OF INVESTMENT INCOME AND FORFEITURES--Investment income for
each fund is allocated to the applicable participants' accounts based on
the ratio of each participant's account balance to the total of all
participants' account balances in that fund, as defined. Forfeitures have
historically been used to offset employer contributions after five
consecutive one year service breaks, as defined by the Plan, based on the
ratio of each eligible participant's compensation to the total of all
eligible participants' compensation. The Plan's forfeitures are
immediately available to offset employer contributions.
BENEFIT PAYMENTS--Benefits are generally payable upon the participating
employee's retirement, death, disability or termination of employment and
are paid as a lump-sum amount.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING--The financial statements are prepared using the
accrual basis of accounting.
USE OF ESTIMATES--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America 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
period. Actual results could differ from those estimates.
The Plan utilizes various investment instruments. Investment securities,
in general, are exposed to various risks, such as interest rate, credit
and overall market volatility. Due to the level of risk associated with
certain investment securities, it is reasonably possible that changes in
the values of investment securities will occur in the near term and that
such changes could materially affect the amounts reported in the
statements of net assets available for benefits.
VALUATION OF INVESTMENTS--Investments are stated at fair value.
Unrealized appreciation (depreciation) of assets is based on fair values
at year end and fair values at the beginning of the Plan year or cost at
the time of purchase during the year. Realized appreciation (depreciation)
on sale or redemption of assets is based on the proceeds and the fair
value of the assets at the beginning of the Plan year or cost at the time
of purchase during the year.
Purchases and sales of securities are recorded on a trade date basis.
Dividends are recorded on the ex-dividend date.
PARTICIPANT LOANS--Subject to certain provisions, a participant may borrow
from their account balances. The participant executes a promissory note
with an interest rate based upon prevailing commercial lending rates. Loan
principal and interest are paid over a period in excess of one year as
determined by the Plan Committee. Principal and interest are paid ratably
through payroll deductions. Participant loans are valued at cost which
approximates fair value.
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3. TAX STATUS
The Internal Revenue Service has determined and informed the Company, by a
letter dated September 26, 1996, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC). The Plan has been amended since the latest determination
letter. However, the Plan Administrator believes the Plan, as currently
designed, is in compliance and is being operated within the applicable
requirements of the IRC. The Company has applied for a Determination
Letter in connection with the GUST and EGTTRA amendments made during the
plan years since the 1996 Determination Letter.
4. INVESTMENTS
The fair value of investments, which represent 5% or more of net assets
available for Plan benefits, as of December 31, 2002 and 2001, is as
follows:
2002 2001
MFS Institutional Fixed Fund $65,742,160 $63,430,467
Massachusetts Investors Trust Fund 9,717,069
Massachusetts Investors Growth Stock Fund 13,476,284 19,139,224
MFS Capital Opportunities Fund 9,910,279
Reliance Trust Conservative Portfolio 12,166,014
Reliance Trust Moderate Portfolio 8,385,493 8,402,232
During 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value by $20,131,033 as follows:
Mutual funds $(15,456,745)
Common stock (4,674,288)
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Total depreciation $(20,131,033)
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5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan at any time subject to the
provisions of ERISA. In the event of Plan termination, participants will
become 100% vested in their accounts.
6. RELATED PARTY TRANSACTIONS
Certain Plan investments are funds managed by MFS. MFS is the asset
custodian of the Plan, and therefore, these transactions qualify as a
party in interest. Additionally, as Value City Department Stores (VCDS)
and American Eagle Corporation are affiliated companies, the transactions
in the VCDS Stock Fund and American Eagle Stock Fund qualify as a party in
interest. Participant loans also qualify as a party in interest.
******
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SUPPLEMENTAL SCHEDULE
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THE PROFIT SHARING AND 401(K) PLAN
FORM 5500 SCHEDULE H, LINE 4I, SCHEDULE OF ASSETS (HELD
AT DECEMBER 31, 2002)
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IDENTITY OF ISSUE, BORROWERS, NUMBER OF
LESSOR, OR SIMILAR PARTY DESCRIPTION OF ASSET SHARES FAIR VALUE
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MUTUAL FUNDS:
Reliance Trust Company Conservative Option Fund $ 12,166,014
Reliance Trust Company Moderate Option Fund 1,013,769 8,385,493
Reliance Trust Company Aggressive Option Fund 901,262 6,849,004
PIMCO Total Return Fund 535,243 5,711,050
*MFS Total Return Fund 415,209 5,509,823
Vanguard 500 Index Fund 43,853 4,679,570
*MFS Massachusetts Investors Trust 581,790 7,487,636
*MFS Massachusetts Investors
Growth Stock Fund 1,460,051 13,476,284
*MFS Capital Opportunities Fund 766,758 7,161,524
*MFS Emerging Growth Fund 112,129 2,405,169
Lord Abbett Developing Growth Fund 92,572 1,058,091
American Funds New Perspectives Fund 173,795 3,135,250
American Funds Europacific Growth Fund 46,035 1,057,413
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Total mutual funds 79,082,321
COMMON COLLECTIVE FUND--
*MFS Institutional Fixed Fund 65,742,160 65,742,160
COMMON STOCK:
Value City Department Stores, Inc. Common Stock 1,882,181 2,087,151
American Eagle Outfitters, Inc. Common Stock 266,949 3,265,388
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Total common stock 5,352,539
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TOTAL INVESTMENTS,
AT FAIR VALUE 150,177,020
PARTICIPANT LOANS--
*Various Participants Outstanding Participants Loans
(with interest rates ranging from
5% to 10%, with maturities
through 2021) 9,059,471
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TOTAL $ 159,236,491
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*Denotes party-in-interest
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed by the undersigned hereunto duly
authorized.
The Profit Sharing and 401(k) Plan
Dated: June 27, 2003 /s/ George Dailey
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By: George Dailey
Title: Plan Administrator
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THE PROFIT SHARING AND 401(K) PLAN
ANNUAL REPORT ON FORM 11-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2002
INDEX TO EXHIBITS
Exhibit No. Description Page Number
23 Independent Auditors' Consent 11
99 Section 906 Certification 12