<PAGE>
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 quarterly period ended April 27, 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 1-258
________________________________________________________
JG INDUSTRIES, INC.
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
ILLINOIS 36-1141010
______________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1615 WEST CHICAGO AVENUE CHICAGO, IL 60622
______________________________________________________________________________
(Address of principal executive offices)
(Zip Code)
(312) 850-8000
______________________________________________________________________________
(Registrant's telephone number, including area code)
______________________________________________________________________________
(Former name, former address and former fiscal
year, if changed since last report)
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 requirement for the past 90 days.
Yes X No
___ ___
Common Stock outstanding as of April 27, 1996 - 7,061,890 shares
----------------------------------------------------------------
1
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
Company or group of companies for which report is filed:
JG INDUSTRIES, INC. AND SUBSIDIARIES (Company)
----------------------------------------------
In the opinion of management, all adjustments necessary to fairly present the
condensed consolidated financial position of the Company as of April 27, 1996,
January 27, 1996, and April 29, 1995 and the results of its operations and its
cash flows for the quarters ended April 27, 1996 (first quarter of fiscal 1997)
and April 29, 1995 (first quarter of fiscal 1996) have been included. These
adjustments consist solely of normal recurring accruals. The results of
operations for such interim periods are not necessarily indicative of results
for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto in the
Company's latest Annual Report on Form 10-K.
2
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
April 27, January 27, April 29,
1996 1996 1995
---------- ------------ ----------
<S> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $ 3,628 $ 3,792 $ 4
Receivables, net 617 350 16,138
Merchandise inventories 10,122 8,734 32,629
Other current assets 551 335 1,264
------- ------- -------
Total current assets 14,918 13,211 50,035
------- ------- -------
Land, buildings and
equipment, at cost 23,736 23,650 35,503
Less accumulated depreciation
and amortization 14,684 14,347 19,220
------- ------- -------
9,052 9,303 16,283
------- ------- -------
Deferred income taxes 626
Leasehold rights, net 67 69 760
Due from Jupiter 1,265 1,265
Other assets 1,478 1,467 2,003
------- ------- -------
$26,780 $25,315 $69,707
======= ======= =======
LIABILITIES, COMMON STOCK AND
- -----------------------------
OTHER SHAREHOLDERS' EQUITY
--------------------------
Current Liabilities:
Notes payable $ 1,800 $ 200 $ 1,230
Current portion of long-term debt 227 627 1,915
Accounts payable 5,529 3,875 12,780
Accrued liabilities 2,831 3,195 8,099
Undelivered sales liability 4,890
Deferred income taxes 927
------- ------- -------
Total current liabilities 10,387 7,897 29,841
------- ------- -------
Long-term debt, less current portion 1,791 1,848 11,110
Other long-term liabilities 940 928 890
Minority interest 1,196 1,173 17,097
Redeemable preferred stock, including accrued
dividends of $844, $754 and $540, respectively 4,027 3,937 3,723
Common stock and other shareholders' equity:
Common shares; no par value;
authorized 10,000,000 shares;
issued 7,217,311 shares 11,246 11,246 11,242
Paid-in capital 4,775 4,775 6,129
Accumulated deficit (6,297) (5,204) (9,046)
Treasury shares - 155,421, 155,322 and
154,682 shares at cost, respectively (1,285) (1,285) (1,279)
------- ------- -------
8,439 9,532 7,046
------- ------- -------
$26,780 $25,315 $69,707
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
FOR THE QUARTERS ENDED APRIL 27, 1996 AND APRIL 29, 1995
--------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
April 27, April 29,
1996 1995
----------- -----------
<S> <C> <C>
Net sales from continuing operations $ 15,361 $ 16,541
Cost of sales 10,355 11,421
---------- ----------
Gross profit 5,006 5,120
Selling, general and administrative
expenses 5,960 6,239
---------- ----------
Operating loss from continuing
operations (954) (1,119)
Interest expense, net (12) (255)
Loss on issuance of stock by subsidiary (3)
Minority interest in net income
of subsidiary (23) (13)
---------- ----------
Loss before income tax provision
and discontinued operations (989) (1,390)
Income tax provision (14) (11)
---------- ----------
Loss before discontinued
operations (1,003) (1,401)
Income from discontinued operations 98
---------- ----------
Net loss $ (1,003) $ (1,303)
========== ==========
Net loss applicable to common and
common equivalent shares $ (1,093) $ (1,370)
========== ==========
Loss per common share from
continuing operations $(.15) $(.21)
========== ==========
Loss per common share $(.15) $(.19)
========== ==========
Average number of common and common
equivalent shares outstanding 7,061,918 7,054,694
========== ==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY
for the fiscal year ended January 27, 1996,
and the quarter ended April 27, 1996
(in thousands, except share data)
(unaudited)
------------
<TABLE>
<CAPTION>
Common Paid-In Accumulated Treasury
Shares Capital Deficit Stock Total
------- ------- ----------- -------- -----
<S> <C> <C> <C> <C> <C>
Balances, January 28, 1995 $11,242 $ 6,129 $(7,676) $(1,279) $ 8,416
Net income, fiscal 1996 2,753 2,753
Gain on sale of H-K stock
to Jupiter 176 176
Loss on purchase of H-K stock
from Jupiter (1,530) (1,530)
Exercise of stock options for
8,000 common shares 4 4
Purchase of 884 common shares (6) (6)
Dividends accrued on
redeemable preferred stock (281) (281)
------- ------- --------- ------- -------
Balances, January 27, 1996 11,246 4,775 (5,204) (1,285) 9,532
Net loss, thirteen week
period ended April 27, 1996 (1,003) (1,003)
Dividends accrued on
redeemable preferred stock (90) (90)
------- ------- --------- ------- -------
Balances, April 27, 1996 $11,246 $ 4,775 $(6,297) $(1,285) $ 8,439
======= ======= ========= ======= =======
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
5
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
FOR THE QUARTERS ENDED APRIL 27, 1996 AND APRIL 29, 1995
--------------------------------------------------------
(in thousands)
--------------
(unaudited)
-----------
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
April 27, April 29,
1996 1995
-------------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,003) $(1,303)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 339 680
Deferred income taxes (193)
Minority interest 23 (173)
Loss on issuance of stock
by subsidiary 3
Changes in assets and liabilities:
Receivables (267) 7,845
Merchandise inventories (1,388) (3,638)
Other assets (current) (216) (71)
Other assets (noncurrent) (11) (7)
Accounts payable and accrued liabilities 1,302 (6,095)
------- -------
Net cash used in operating activities (1,221) (2,952)
------- -------
Cash flows from investing activities:
Capital expenditures (86) (553)
------- -------
Net cash used in investing activities (86) (553)
------- -------
Cash flows from financing activities:
Net short-term borrowings 1,600 1,230
Net borrowings under revolving credit loan 1,036
Principal payments of long-term debt (457) (805)
------- -------
Net cash provided by
financing activities 1,143 1,461
------- -------
Net decrease in cash and cash equivalents (164) (2,044)
Cash and cash equivalents at beginning of year 3,792 2,048
------- -------
Cash and cash equivalents at end of quarter $ 3,628 $ 4
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
1) Merchandise inventories are stated at the lower of cost or market. Cost is
determined on the last-in, first-out (LIFO) basis for approximately 89% of
the inventory as of April 27, 1996, January 27, 1996 and April 29, 1995,
using the retail method. The remaining inventory is valued on the first-in,
first-out (FIFO) basis using the retail method. If the FIFO method had been
used to value all inventories, cost would have been $427,000, $406,000, and
$1,894,000 higher at April 27, 1996, January 27, 1996 and April 29, 1995,
respectively.
2) Receivables are presented net of allowances for cancellation reserves and
doubtful accounts of approximately $42,000 at April 27, 1996, $42,000 at
January 27, 1996 and $234,000 at April 29, 1995.
3) Leasehold rights are shown net of accumulated amortization of $33,000 at
April 27, 1996, $31,000 at January 27, 1996 and $2,462,000 at April 29,
1995.
4) Certain reclassifications have been made to the April 29, 1995 amounts in
order to conform to classifications at April 27, 1996 and January 27, 1996.
5) During fiscal 1995, Sussex Group, Ltd. ("Sussex", an indirect majority
owned subsidiary of the Company), transferred or sold a total of 800,000
shares of Huffman Koos Inc. ("H-K") common stock to Jupiter Industries,
Inc. ("Jupiter"). The transfer of 700,000 shares of this stock on February
3, 1994 was used to repay a $5,075,000 note payable to Jupiter. The
remaining 100,000 shares of H-K common stock was sold to Jupiter on
November 30, 1994 for $800,000. As a result of the transfer and sale of the
800,000 shares, the Company recognized a gain of $1,540,000 in fiscal 1995.
This gain was recorded as an increase to paid-in capital and represents the
difference between the amount of the note retired and cash received and the
amount of H-K net equity represented by these shares.
Effective May 23, 1995, the Company through Sussex sold an additional
150,000 shares of H-K common stock to Jupiter for $1,125,000. As a result
of the sale of these shares, the Company recognized a gain of $176,000.
This gain was recorded as an increase to paid-in capital and represents the
difference between cash received and the amount of H-K net equity
represented by these shares. The Company used $625,000 of the proceeds from
the May 23, 1995 stock sale to make payments on JG's $7,125,000 term loan.
Pursuant to the terms of the various stock purchase agreements (the
"Agreements"), Sussex has been granted an option to repurchase any or all
of the 950,000 H-K shares for a purchase price ranging from $7.25 to $8.00
per share plus interest on such amount. The Agreements also contained a
provision which required Jupiter to vote the 950,000 H-K shares for the
election of a majority of the Board of Directors of H-K as Sussex shall
direct. As a result of this voting provision, the Company through Sussex,
retained effective control of H-K. Jupiter and Sussex collectively owned of
record 2,200,000 H-K shares, representing approximately 55.9% of the total
issued and outstanding H-K shares at October 27, 1995.
Pursuant to an Agreement and Plan of Merger dated September 18, 1995,
stockholders of H-K stock received a tender offer from an unrelated third
party on September 25, 1995 to acquire all of the issued and outstanding H-
K shares at a per share purchase price of $9.375 in cash. Upon consumption
of the tender offer on October 27, 1995, Sussex sold the 1,250,000 H-K
shares held directly by it for an aggregate cash consideration of
approximately $11,719,000. On October 27, 1995, pursuant to an agreement
dated September 18, 1995 between Jupiter and Sussex, Sussex also exercised
its option to repurchase the 950,000 H-K shares for
7
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
the total purchase price of $7,000,000 plus interest of approximately
$641,000, and instructed Jupiter to tender the 950,000 H-K shares. As a
result of the repurchase, the Company recorded a $1,530,000 loss as a
decrease to paid-in capital. This loss represents the difference between
the total cash due to Jupiter and the amount of H-K equity represented by
these shares. The Company also recorded a receivable from Jupiter of
approximately $1,265,000. This receivable represents the difference between
proceeds from the sale of $8,906,000 and $7,641,000 owed to Jupiter by
Sussex.
On October 30, 1995, the Company used proceeds received by Sussex from the
transaction to repay all debt outstanding under the Company's term loan of
approximately $6,250,000 plus interest, and to deposit $3,500,000 as
collateral on the Goldblatt's line of credit.
As a result of the transactions described above, previously issued
consolidated statements of operations have been restated to reflect H-K as
a discontinued operation.
Summarized results of H-K business for the thirteen weeks ended April 29,
1995 are as follows (excluding the impact of minority interest and
management fees allocated to H-K on the Company's financial statements):
<TABLE>
<CAPTION>
<S> <C>
Net sales $ 23,035
Cost and expenses 23,316
--------
Loss before income taxes (281)
Income tax benefit 193
--------
Net loss (88)
========
</TABLE>
Net assets of the discontinued business as of April 29, 1995 were as
follows:
<TABLE>
<CAPTION>
<S> <C>
Receivables, net $ 15,495
Merchandise inventories 21,361
Land, building and equipment net
of accumulated depreciation 5,638
Other assets 2,805
Current liabilities (18,179)
Long-term debt, net of current
portion (2,567)
--------
Net assets of discontinued
business $ 24,553
========
</TABLE>
The sale of H-K gave rise to an obligation of the Company under the Series
A 9% Cumulative Preferred Stock Designations to redeem all of the issued
and outstanding shares of that class of stock. The redemption price for all
of the Series A Preferred Stock is $3,183,000 plus unpaid accrued and
additional dividends of $844,000 at April 27, 1996. A mandatory obligation
to redeem shares of Series A Preferred Stock having a liquidation value of
at least $1,500,000 was scheduled on May 1, 1996. The Directors not
affiliated with Jupiter, on recommendation of management of the Company,
have determined to defer any redemption of the Series A Preferred Stock
until such time as it may do so without materially adversely affecting the
financial condition of the Company, as contemplated by applicable state
law. Pending satisfaction of any such redemption obligation, in accordance
with the Preferred Stock Designations, the dividend rate on the Series A
Preferred Stock increased from 9% to 12% per annum, compounded quarterly.
Jupiter is seeking redemption of the Series A Preferred Stock.
8
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
6) Effective January 27, 1996, Goldblatt's Department Store, Inc.
("Goldblatt's", a wholly-owned subsidiary of the Company) mortgage loan was
amended changing the maturity date to August 1, 1997 and modifying the
financial covenants. With the execution and delivery of the amendment, a
principal payment of $400,000 was required. At April 27, 1996, Goldblatt's
was in violation of certain financial covenants. Effective April 27, 1996,
Goldblatt's received waivers on these violations from the lending
institution.
Effective February 22, 1996, Goldblatt's line of credit was amended. The
line is guaranteed by the Company, and is collateralized by a Certificate
of Deposit ("CD") in the amount of $3,500,000 held by the financial
institution. Interest is payable monthly at the CD rate plus 1%.
7) During the first quarter of fiscal 1996, options to purchase 400 shares of
common stock of H-K were exercised. Losses of $3,000 on the issuance of
these shares were recorded by the Company with an increase to minority
interest as H-K's net book value per share exceeded the option prices.
8) Loss per share applicable to common and common equivalent shares is
computed after recognition of the dividend requirements on redeemable
preferred stock of $90,000 in fiscal 1997, and $67,000 in fiscal 1996.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash and cash equivalents decreased by $164,000 during the quarter ended April
27, 1996 which included approximately $1,221,000 of net cash used in operating
activities. Accounts receivable increased by $267,000 due to an increase in
layaway receivables during the first quarter. Inventories increased by
approximately $1,388,000 due to normal seasonal increases which caused accounts
payable to increase by approximately $1,368,000.
Goldblatt's Department Stores, Inc. ("Goldblatt's", a wholly-owned subsidiary of
the Company) spent approximately $86,000 on capital expenditures during the
first quarter of fiscal 1997 related to normal capital maintenance. Goldblatt's
capital expenditures for the balance of fiscal 1997 will be minimal as no new
store openings or major store renovations are planned. Goldblatt's had remaining
availability of $1,700,000 under its line of credit as of April 27, 1996. The
Company believes that Goldblatt's working capital and line of credit will be
adequate to fund current operations and service the Company's indebtedness
through fiscal 1997.
The Company used proceeds received by Sussex from the sale of the Huffman Koos,
Inc. ("H-K") common stock to repay all debt outstanding under the Company's term
loan of approximately $6,250,000 plus interest, and to deposit $3,500,000 as
collateral on the Goldblatt's line of credit.
The sale of H-K gave rise to an obligation of the Company under the Series A 9%
Cumulative Preferred Stock Designations to redeem all of the issued and
outstanding shares of that class of stock. The redemption price for all of the
Series A Preferred Stock is $3,183,000 plus unpaid accrued and additional
dividends of $844,000 as of April 27, 1996. A mandatory obligation to redeem
shares of Series A Preferred Stock having a liquidation value of at least
$1,500,000 was scheduled on May 1, 1996. The Directors not affiliated with
Jupiter, on recommendation of management of the Company, have determined to
defer any redemption of the Series A Preferred Stock until such time as it may
do so without materially adversely affecting the financial condition of the
Company, as contemplated by applicable state law. Pending satisfaction of any
such redemption obligation, in accordance with the Preferred Stock Designations,
the dividend rate on the Series A Preferred Stock increased from 9% to 12% per
annum, compounded quarterly. Jupiter is seeking redemption of the Series A
Preferred Stock.
Effective January 27, 1996, Goldblatt's mortgage loan was amended changing the
maturity date to August 1, 1997 and modifying the financial covenants. With the
execution and delivery of the amendment, a principal payment of $400,000 was
required. At April 27, 1996, Goldblatt's was in violation of certain financial
covenants. Effective April 27, 1996, Goldblatt's received waivers on these
violations from the lending institution.
Effective February 22, 1996, Goldblatt's line of credit was amended. The line is
guaranteed by the Company, and is collateralized by a Certificate of Deposit
("CD") in the amount of $3,500,000 held by the financial institution. Interest
is payable monthly at the CD rate plus 1%.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
---------------------
QUARTER ENDED APRIL 27, 1996 (FISCAL 1997) VS.
- ----------------------------------------------
QUARTER ENDED APRIL 29, 1995 (FISCAL 1996)
- ------------------------------------------
The loss from continuing operations decreased by approximately $398,000 or 28.4%
as compared to the first quarter of fiscal 1996.
While sales decreased approximately 7.1% during the quarter primarily due to
adverse weather conditions and a sluggish retail environment, gross margin
improved as a percentage of sales to 32.5% as compared to 30.9% in the prior
year. This improvement is due to a merchandise control program implemented
during the fourth quarter of fiscal 1996 which resulted in more opportunistic
purchases, lower inventory levels and less markdowns. Management intends to
maintain inventory levels at approximately $1,000,000 below fiscal 1996
inventory levels.
Selling, general and administrative expenses ("SG&A") increased to 38.8% of
sales from 37.7% in the prior year. The increase in SG&A expenses as a
percentage of sales was due to the sales decline. Actual SG&A expense was down
approximately $279,000 due to an expense reduction program implemented in
February 1996.
Interest expenses decreased due to the repayment of the Company's term loan
after the sale of H-K in fiscal 1996.
11
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
12
<PAGE>
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
under-signed thereunto fully authorized.
JG INDUSTRIES, INC.
-------------------
(Registrant)
Date: June 7, 1996 /s/ Clarence Farrar
------------ -----------------------
CLARENCE FARRAR
President and acting
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the JG Industries, Inc. First Quarter 10-Q for fiscal 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-START> JAN-28-1996
<PERIOD-END> APR-27-1996
<CASH> 3,628
<SECURITIES> 0
<RECEIVABLES> 617
<ALLOWANCES> 0
<INVENTORY> 10,122
<CURRENT-ASSETS> 14,918
<PP&E> 23,736
<DEPRECIATION> 14,684
<TOTAL-ASSETS> 26,780
<CURRENT-LIABILITIES> 10,387
<BONDS> 0
<COMMON> 11,246
4,027
0
<OTHER-SE> (2,807)
<TOTAL-LIABILITY-AND-EQUITY> 26,780
<SALES> 15,361
<TOTAL-REVENUES> 15,361
<CGS> 10,355
<TOTAL-COSTS> 10,355
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> (989)
<INCOME-TAX> 14
<INCOME-CONTINUING> (1,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,003)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
