UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE THIRTEEN WEEKS ENDED AUGUST 3, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number: 1-8057
L. LURIA & SON, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-0620505
(State of incorporation) (I.R.S. Employee Identification No.)
5770 MIAMI LAKES DRIVE, MIAMI LAKES, FLORIDA 33014
(Address of principal executive offices) (Zip Code)
(305) 557-9000
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Common stock, par value $.01 per share: 5,446,485 shares
outstanding as of August 9, 1996
Class B stock, par value $.01 per share: 423 shares
outstanding as of August 9, 1996
This filing consists of 11 pages
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L. LURIA & SON, INC.
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION PAGE
----
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ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets - August 3, 1996 (Unaudited),
July 29, 1995 (Unaudited), and February 3, 1996.......................................3
Condensed Statements of Operations (Unaudited), for
the thirteen and twenty-six weeks ended August 3, 1996 and July 29, 1995..............4
Condensed Statements of Cash Flows (Unaudited), for
the twenty-six weeks ended August 3, 1996 and July 29, 1995...........................5
Notes to Condensed Financial Statements...............................................6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................................7
PART II - OTHER INFORMATION
ITEM 4. Submission to Matters of a Vote of Security Holders...................................9
ITEM 6. Exhibits and Reports on Form 8-K......................................................10
Signatures...........................................................................................11
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2
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Item 1. Financial Statements
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L. LURIA & SON, INC.
CONDENSED BALANCE SHEETS
(in thousands)
AUGUST 3, JULY 29, FEBRUARY 3,
ASSETS 1996 1995 1996
----------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,468 $ 894 $ 4,941
Accounts receivable 2,187 982 1,129
Income tax receivable 3,392 0 3,392
Inventories 60,598 77,150 60,087
Prepaid expenses 2,483 3,414 1,037
Deferred taxes 756 0 756
-------- -------- --------
Total current assets 70,884 82,440 71,342
Property, net 25,428 40,070 38,303
Deferred taxes 8,412 0 4,466
Other assets 1,798 214 238
-------- -------- --------
Total assets $106,522 $122,724 $114,349
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term bank borrowing $ 17,191 $ 19,950 $ 0
Accounts payable and accrued liabilities 25,811 18,790 44,262
Deferred taxes 1,839 0 1,839
Current portion of long-term debt 206 206 206
-------- -------- --------
Total current liabilities 45,047 38,946 46,307
-------- -------- --------
Long-term debt 655 939 791
Deferred taxes and other liabilities 2,578 1,995 2,454
Shareholders' Equity:
Preferred stock: $1 par value, 5,000,000 shares authorized;
no shares issued -- -- --
Common stock:
Common: $.01 par value, 14,000,000 shares authorized;
4,126,380 shares issued and outstanding at August 3, 1996,
4,025,250 shares issued and outstanding at July 29, 1995;
and 4,100,274 issued and outstanding at February 3, 1996.
Class B: $.01 par value, 6,000,000 shares authorized; 41 40 41
1,320,528 shares issued and outstanding at August 3, 1996;
1,398,134 shares issued and outstanding at July 29, 1995
and 1,346,634 shares issued and outstanding at February 3,
1996. 13 14 13
Additional paid-in capital 18,220 18,230 18,220
Retained earnings 39,968 62,560 46,523
-------- -------- --------
Total shareholders' equity 58,242 80,844 64,797
-------- -------- --------
Total liabilities and shareholders' equity $106,522 $122,724 $114,349
======== ======== ========
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See accompanying notes to condensed financial statements
3
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<TABLE>
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L. LURIA & SON, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THIRTEEN WEEKS THIRTEEN WEEKS TWENTY-SIX WEEKS TWENTY-SIX WEEKS
(in thousands, except loss ENDED ENDED ENDED ENDED
per common share) AUGUST 3, 1996 JULY 29, 1995 AUGUST 3, 1996 JULY 29, 1995
---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net Sales $ 27,552 $ 33,840 $ 56,921 $ 71,742
Cost of goods sold, buying and
warehousing costs 20,862 24,512 41,923 51,365
-------- -------- -------- --------
Gross margin 6,690 9,328 14,998 20,377
Operating expenses 12,525 12,139 24,830 24,573
-------- -------- -------- --------
Loss from operations (5,835) (2,811) (9,832) (4,196)
Interest income (expense) - net (400) (313) (670) (499)
-------- -------- -------- --------
Loss before income tax benefit (6,235) (3,124) (10,502) (4,695)
Income tax benefit (2,342) (1,170) (3,947) (1,760)
-------- -------- -------- --------
Net loss $ (3,893) $ (1,954) $ (6,555) $ (2,935)
======== ======== ======== ========
Weighted average number of
common shares outstanding 5,447 5,417 5,447 5,412
======== ======== ======== ========
Loss per common share $ (.71) $ (.36) $ (1.20) $ (.54)
======== ======== ======== ========
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See accompanying notes to condensed financial statements.
4
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<TABLE>
<CAPTION>
L. LURIA & SON, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
TWENTY-SIX WEEKS TWENTY-SIX WEEKS
ENDED ENDED
AUGUST 3, 1996 JULY 29, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,555) $ (2,935)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 1,935 1,967
Deferred tax benefit 0 99
Deferred loss on sale leaseback 1,672 0
Gain on sale of property (87) 0
(Increase) Decrease in accounts receivable (1,058) 652
(Increase) Decrease in inventories (511) 5,781
Increase in prepaid expenses (1,446) (698)
Increase in other assets (5,506) --
Decrease in accounts payable and accrued liabilities (18,327) (33,378)
------- -------
Net cash used in operating activities (29,883) (28,512)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property (687) (1,608)
Proceeds from sale of property 372 0
------- -------
Net cash applied to investing activities (315) (1,608)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under line of credit agreements 17,191 19,950
Repayments of long-term debt (136) (37)
Proceeds from sale leaseback 9,670 0
------- --------
Net cash provided by financing activities 26,725 19,913
------- --------
Net decrease in cash and cash equivalents (3,473) (10,207)
Cash and cash equivalents, beginning of period 4,941 11,100
------- --------
Cash and cash equivalents, end of period $ 1,468 $ 893
======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 684 $ 519
Income taxes $ 0 $ (212)
</TABLE>
See accompanying notes to condensed financial statements.
5
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L. LURIA & SON, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEKS ENDED AUGUST 3, 1996 AND JULY 29, 1995
GENERAL
The accompanying condensed financial statements have been prepared in accordance
with the instructions to Form 10-Q of the Securities and Exchange Commission and
in accordance with generally accepted accounting principles applicable to
interim financial statements and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management of L. Luria & Son, Inc. (the
"Company"), the accompanying condensed financial statements reflect all
adjustments necessary to present fairly the financial position of the Company as
of August 3, 1996 and July 29, 1995, and the results of its operations and cash
flows for the periods ended August 3, 1996 and July 29, 1995. Furthermore, all
adjustments were of a normal or recurring nature.
SEASONALITY
The results of operations for the thirteen weeks ended August 3, 1996 are not
indicative of the results to be expected for the entire year because the
Company's operations are seasonal.
ACCOUNTING POLICIES
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements in the 1996 L. Luria & Son, Inc. Annual Report,
which is incorporated by reference in Form 10-K.
COMMITMENTS AND CONTINGENCIES
On November 30, 1995 the Company announced that a Florida Circuit Court jury had
returned a verdict of $13.8 million in favor of the Company in a case in which
the Company alleged that its competitor, Service Merchandise Company, had
tortiuously interfered with the Company's business relationship and business
rights at the Sawgrass Mills Shopping Center in Broward County, Florida. The
Company had executed a letter of intent with the shopping center's landlord, had
successfully negotiated a formal lease, but was unable to obtain execution of
the formal lease by the landlord. The jury decided in favor of the Company in
both of its theories: that the letter of intent was a binding contract with
which Service Merchandise had intentionally interfered and that, at the very
least, the letter of intent created a business relationship with which Service
Merchandise had intentionally and wrongfully interfered. The trial judge has
denied various post-trial motions and entered final judgment in favor of the
Company. Service Merchandise has indicated that it will appeal from the final
judgment. No award amount has been reflected in the financial statements.
WORKING CAPITAL
The Company entered into a secured revolving credit arrangement providing up to
$40.0 million. The line available to the Company is based on the value of
inventory. Management believes this line of credit is adequate for its working
capital needs during the fiscal year.
6
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L. LURIA & SON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
The following table sets forth for the periods indicated percentages which
certain items reflected in the financial data bear to net sales of the Company:
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RELATIONSHIPS TO NET SALES
PERIOD ENDED
THIRTEEN WEEKS THIRTEEN WEEKS TWENTY-SIX WEEKS TWENTY-SIX WEEKS
ENDED ENDED ENDED ENDED
AUGUST 3, 1996 JULY 29, 1995 AUGUST 3, 1996 JULY 29, 1995
-------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold, buying and
warehousing costs 75.7 72.4 73.7 71.6
------ ------ ------ ------
Gross margin 24.3 27.6 26.3 28.4
Operating expenses 45.5 35.9 43.6 34.2
------ ------ ------ ------
Loss from operations (21.2) (8.3) (17.3) (5.8)
Interest income (expense) net (1.4) (.9) (1.1) (.7)
------ ------ ------ ------
Loss before income tax (22.6) (9.2) (18.4) (6.5)
Income tax benefit (8.5) (3.5) (6.9) (2.4)
------ ------ ------ ------
Net loss (14.1)% (5.7)% (11.5)% (4.1)%
====== ====== ====== ======
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NET SALES
For the thirteen weeks ended August 3, 1996, net sales were $27,552,000, a 18.6%
decrease compared to the same period last year. Comparable store sales decreased
20.9%. This year's second quarter sales were impacted by reduced advertising
expenditures, and reduced inventory levels. Sales for the twenty-six weeks ended
August 3, 1996 decreased $14,821,000 or 20.7%, while comparable store sales
decreased 23%.
GROSS MARGINS
Gross margins as a percent of net sales for the thirteen weeks ended August 3,
1996 were 24.3% as compared to 27.6% for the prior year. For the twenty-six
weeks ended August 3, 1996, gross margins as a percent of net sales were 26.3%
compared to 28.4% for the prior year. The decrease is due to greater discounts
and promoted products as the Company reduces its inventory in some significant
categories in preparation for new product lines planned for the Fall of Fiscal
1997.
OPERATING EXPENSES
Operating expenses for the current quarter increased as a percent of net sales
to 45.5% this year from 35.9% last year, due primarily to lower sales than last
year. For the twenty-six week period, operating expenses as a percent of net
sales increased to 43.6% from 34.2% last year. Operating expenses for the
quarter were 3.2% above last year's operating expenses. Approximately $300,000
of carrying costs associated with previously closed stores has been charged
against reserve set up in fiscal year 1996, primarily for closed store leases.
The Company currently operates eleven superstores, 31 catalog showrooms and one
jewelry mall store.
7
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L. LURIA & SON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
INCOME TAX BENEFIT
The company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities are
recognized for future taxable amounts and deferred tax assets are recognized for
future deductions, as well as net operating loss carryforwards, tax credits and
other tax benefits. Income tax benefit for the thirteen-week period ended August
3, 1996 is estimated at 37.6% which is comparable to last year's rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $1.5 million at August 3, 1996
compared to $4.9 million at February 3,1995. Working capital at August 3, 1996
was $25.8 million compared to $43.5 million at July 29, 1995 and $25.0 million
at February 3, 1996. Net cash used by operations at August 3, 1996 was $29.9
million primarily due to the net operating loss of $6.5 million, a decrease in
accounts payable of $18.3 million and an increase in assets and prepaid expenses
of $8.0 million.
On June 28, 1996 the Company sold three pieces of property for approximately
$10,000,000. As part of the transaction, the Company entered into a lease
agreement for the same properties for a term of approximately 20 years.
In February, 1996 the Company entered into a revolving credit agreement secured
by substantially all assets of the Company and providing up to $40.0 million.
The amount of credit available under the line is based on the value of
inventory. There were borrowings outstanding of approximately $17.2 million at
August 3, 1996.
The Company believes that available lines of credit and access to the capital
markets at competitive rates will be adequate to meet its working capital and
capital expenditure requirements for fiscal year 1997.
8
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The Company's Annual Meeting of Shareholders was held on
June 6, 1996.
(b) Not required
(c) The matters voted on at the Annual Meeting of
Shareholders and the tabulation of votes on such matters
are as follows:
1. Election of Directors
AGAINST OR BROKER
NAME STOCK TYPE FOR WITHHELD ABSTAINED NON-VOTE
---- ---------- --- -------- --------- --------
Leonard Luria Class B 1,282,466 0 58,062 0
Edwin D. Marks Class B 1,282,466 0 58,062 0
2. Proposal to ratify the Company's 1996 Stock Option Plan.
AGAINST OR BROKER
STOCK TYPE FOR WITHHELD ABSTAINED NON-VOTE
---------- --- -------- --------- --------
Common 1,080,269 778,653 640,227 1,583,837
Class B 1,282,466 0 58,062 0
3. Proposal to approve the appointment of Deloitte &
Touche, LLP as independent auditors of the Company for
the current fiscal year.
AGAINST OR BROKER
STOCK TYPE FOR WITHHELD ABSTAINED NON-VOTE
---------- --- -------- --------- --------
Common 3,410,216 47,165 625,605 0
Class B 1,282,466 0 58,062 0
(d) Not applicable.
9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) 27.1 Financial Data Schedule
b) There were two reports on Form 8-K filed with the SEC since the
last filing. One was filed on July 11, 1996 in regard to the Sale
Leaseback of three retail stores located in Miami, Tampa and Coral
Gables, Florida; and one was filed on August 20, 1996 in regard to
the Change in Control of the Registrant
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
L. LURIA & SON, INC.
Date: SEPTEMBER 17, 1996 /S/ RACHMIL LEKACH
---------------------- ---------------------------
Rachmil Lekach
Chief Executive Officer
and Director
Date: SEPTEMBER 17, 1996 /S/ THOMAS A. FLOERCHINGER
---------------------- ----------------------------
Thomas A. Floerchinger
Senior Vice President, Chief Financial Officer
and Principal Accounting Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF L. LURIA & SON, INC. FOR THE QUARTER ENDED AUGUST 3,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> AUG-03-1996
<CASH> 1,468
<SECURITIES> 0
<RECEIVABLES> 5,579
<ALLOWANCES> 0
<INVENTORY> 60,598
<CURRENT-ASSETS> 70,884
<PP&E> 63,024
<DEPRECIATION> (37,596)
<TOTAL-ASSETS> 106,522
<CURRENT-LIABILITIES> 45,047
<BONDS> 655
0
0
<COMMON> 54
<OTHER-SE> 58,188
<TOTAL-LIABILITY-AND-EQUITY> 106,522
<SALES> 56,921
<TOTAL-REVENUES> 56,921
<CGS> 41,923
<TOTAL-COSTS> 24,830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 670
<INCOME-PRETAX> (10,502)
<INCOME-TAX> (3,947)
<INCOME-CONTINUING> (6,555)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,555)
<EPS-PRIMARY> (1.20)
<EPS-DILUTED> 0
</TABLE>
