<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 26, 1997
----------------------------------------
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.)
5630 WEST BELMONT AVENUE CHICAGO, IL 60634
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(773) 481-5410
- --------------------------------------------------------------------------------
(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 26, 1997 - 1,060,672 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 26, 1997,
January 25, 1997, and April 27, 1996 and the results of its operations and its
cash flows for the quarters ended April 26, 1997 (first quarter of fiscal 1998)
and April 27, 1996 (first quarter of fiscal 1997) 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 26, January 25, April 27,
1997 1997 1996
---------- ------------ ----------
ASSETS
------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 565 $ 1,714 $ 3,628
Receivables, net 540 290 617
Merchandise inventories 7,481 6,305 10,122
Other current assets 342 224 551
------- ------- -------
Total current assets 8,928 8,533 14,918
------- ------- -------
Land, buildings and
equipment, at cost 15,081 14,908 23,736
Less accumulated depreciation
and amortization 9,636 9,395 14,684
------- ------- -------
5,445 5,513 9,052
------- ------- -------
Leasehold rights, net 31 32 67
Due from Jupiter 1,265
Other assets 1,619 1,597 1,478
------- ------- -------
$16,023 $15,675 $26,780
======= ======= =======
LIABILITIES, COMMON STOCK AND
- -----------------------------
OTHER SHAREHOLDERS' EQUITY
--------------------------
Current Liabilities:
Notes payable $ 1,800
Current portion of long-term debt $ 582 $ 582 227
Accounts payable 3,737 1,999 5,529
Accrued liabilities 1,867 2,505 2,831
Accrued dividends 5 5
------- ------- -------
Total current liabilities 6,191 5,091 10,387
------- ------- -------
Long-term debt, less current portion 1,164 1,164 1,791
Other long-term liabilities 857 867 940
Minority interest 1,285 1,262 1,196
Redeemable preferred stock, including accrued
dividends of $844 4,027
Common stock and other shareholders' equity:
Common shares; no par value;
authorized 10,000,000 shares;
issued 2,405,770 shares 11,246 11,246 11,246
Paid-in capital 5,939 5,939 4,775
Convertible preferred stock; no par
value; authorized and issued 1,500 shares 1,500 1,500
Accumulated deficit (8,546) (7,781) (6,297)
Treasury shares - 1,345,098, 1,345,062 and
51,807 shares at cost, respectively (3,613) (3,613) (1,285)
------- ------- -------
6,526 7,291 8,439
------- ------- -------
$16,023 $15,675 $26,780
======= ======= =======
</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 26, 1997 AND APRIL 27, 1996
--------------------------------------------------------
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
April 26, April 27,
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 11,754 $ 15,361
Cost of sales 7,858 10,355
---------- ----------
Gross profit 3,896 5,006
Selling, general and administrative
expenses 4,587 5,960
---------- ----------
Operating loss (691) (954)
Interest expense, net (7) (12)
Minority interest in net income
of subsidiary (23) (23)
---------- ----------
Loss before income tax provision (721) (989)
Income tax provision (10) (14)
---------- ----------
Net loss $ (731) $ (1,003)
========== ==========
Net loss applicable to common and
common equivalent shares $ (765) $ (1,093)
========== ==========
Net Loss per common share $ (.72) $ (.46)
========== ==========
Weighted average number of common and common
equivalent shares outstanding 1,060,688 2,353,973
========== ==========
</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 25, 1997,
and the quarter ended April 26, 1997
(in thousands, except share data)
(unaudited)
_____________
<TABLE>
<CAPTION>
Total
Common Paid-In Preferred Accumulated Treasury Shareholders'
Shares Capital Stock Deficit Stock Equity
-------- -------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 27, 1996 $11,246 $ 4,775 $(5,204) $(1,285) $ 9,532
Net loss, fiscal 1997 (2,150) (2,150)
Forgiveness of preferred
stock dividends by Jupiter 1,164 1,164
Issuance of 1,500 shares of
Series B Preferred Stock $ 1,500 1,500
Purchase of 1,293,258 common shares (2,328) (2,328)
Dividends accrued on
redeemable and convertible
preferred stock (427) (427)
------- ------- ------- ------- ------- -------
Balances, January 25, 1997 11,246 5,939 1,500 (7,781) (3,613) 7,291
Net loss, thirteen week
period ended April 26, 1997 (731) (731)
Dividends accrued on
convertible preferred stock (34) (34)
------- ------- ------- ------- ------- -------
Balances, April 26, 1997 $11,246 $ 5,939 $ 1,500 $(8,546) $(3,613) $ 6,526
======= ======= ======= ======= ======= =======
</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 26, 1997 AND APRIL 27, 1996
--------------------------------------------------------
(in thousands)
--------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
April 26, April 27,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (731) $(1,003)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 241 339
Minority interest 23 23
Changes in assets and liabilities:
Accounts receivables (250) (267)
Merchandise inventories (1,176) (1,388)
Other assets (current) (117) (216)
Other assets (noncurrent) (1) (11)
Accounts payable and accrued liabilities 1,100 1,290
Other liabilities (noncurrent) (10) 12
------- -------
Net cash used in operating activities (921) (1,221)
------- -------
Cash flows from investing activities:
Capital expenditures (173) (86)
Purchase of annuity contract (21)
------- -------
Net cash used in investing activities (194) (86)
------- -------
Cash flows from financing activities:
Borrowings under line of credit 3,100
Repayments under line of credit (1,500)
Principal payments of long-term debt (457)
Dividends paid on convertible preferred stock (34)
------- -------
Net cash (used in) provided by
financing activities (34) 1,143
------- -------
Net decrease in cash and cash equivalents (1,149) (164)
Cash and cash equivalents at beginning of year 1,714 3,792
------- -------
Cash and cash equivalents at end of quarter $ 565 $ 3,628
======= =======
</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 88%,
87% and 89% of the inventory as of April 26, 1997, January 25, 1997 and
April 27, 1996, respectively, 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 $445,000, $430,000, and $427,000 higher at April 26,
1997, January 25, 1997 and April 27, 1996, respectively.
2) Receivables are presented net of allowances for doubtful accounts of
approximately $42,000 at April 26, 1997, January 25, 1997 and April 27,
1996.
3) Leasehold rights are shown net of accumulated amortization of $19,000 at
April 26, 1997, $18,000 at January 25, 1997 and $33,000 at April 27, 1996.
4) Certain reclassifications have been made to the April 27, 1996 amounts in
order to conform to classifications at April 26, 1997 and January 25, 1997.
5) On December 13, 1996, the Company, pursuant to the terms of a certain Stock
Purchase Agreement, by and among Jupiter Industries, Inc. ("Jupiter") and
the Company, purchased from Jupiter, (i) 1,293,258 shares of the Company's
Common Stock, and (ii) 445 shares of the Company's Series A Preferred
Stock, for an aggregate purchase price of $5,510,864 of which $2,500,108
was paid in cash, $1,264,858 was paid by offset against liabilities of
Jupiter to the Company, and $1,745,898 was paid by delivery of a promissory
note payable in three annual installments ending December 13, 1999. In
connection with this acquisition, Jupiter also waived accrued dividends of
$1,164,000. The gain related to the waiver was recorded as an increase to
paid-in capital.
The Jupiter promissory note provides that under certain circumstances, at
the option of the holder, the outstanding principal amount plus all accrued
but unpaid interest may be converted into Common Stock of the Company. The
note is subordinated to any future Senior Debt of the Company and is
payable in full upon change of ownership or control. The payment of
dividends and the purchase of Common Stock is restricted by terms of the
Agreement.
6) As of January 27, 1996, Goldblatt's Department Stores, Inc. ("Goldblatt's",
a wholly-owned subsidiary of the Company) had a $3,500,000 revolving line
of credit and was, as of that date, in violation of a certain financial
covenant. Subsequent to year-end, the financial institution had granted
Goldblatt's a waiver of this covenant effective January 27, 1996.
Furthermore, the financial institution extended the line of credit through
May 1, 1997 and removed the financial covenants. Interest was payable at
the certificate of deposit rate plus 1%. The line was guaranteed by the
Company and was collateralized by a certificate of deposit and commercial
paper, totalling $3,500,000 as of April 27, 1996, and $1,500,000 as of
January 25, 1997. The amount of the collateral was restricted to the
extent of outstanding borrowings on the line, which was $1,800,000 at April
27, 1996, and $0 at January 25, 1997.
Effective April 23, 1997 a new Revolving Credit Agreement was executed. The
agreement provides a line of credit of up to $2,000,000 through May 1, 1998
based on availability of a borrowing base equal to 45% of merchandise
inventory. The line is collateralized by Goldblatt's inventory and cash
and cash equivalents. The line of credit agreement requires that
Goldblatt's maintain a tangible net worth of $5,500,000 and an inventory
level of $5,500,000. Interest is payable at the prime rate plus 1%. There
were no outstanding borrowings on the line as of April 26, 1997.
7
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
7) On December 13, 1996, the Company, pursuant to the terms of a certain
Series B Convertible Preferred Purchase Agreement (the "Series B Preferred
Stock Purchase Agreement"), by and among certain officers and a director of
the Company (collectively, the "Purchasers") and the Company, issued and
sold to the Purchasers, through a private placement, 1,500 shares of Series
B Convertible Preferred Stock of the Company, no par value per share (the
"Series B Preferred Shares"), for an aggregate purchase price of
$1,500,000. Holders of Series B Preferred Shares are entitled to vote with
the holders of Common Stock on all matters submitted to a vote of the
Company's shareholders as a single class. Currently, each share of Series B
Preferred Stock is entitled to 444.44 votes.
Dividends on Series B Preferred Stock accrue daily at a rate equal to 9%
per annum. Dividends accumulate until paid, and are paid when and as
declared by the Board of Directors. At any time prior to the fifth
anniversary of issuance (automatic conversion), holders of Series B
Preferred Stock may convert such shares into a number of shares of the
Company's Common Stock. The current conversion price is $2.25 per share.
8) On December 13, 1996, the Company also declared a one-for-three reverse
stock split, effective December 27, 1996. Accordingly, all references in
this report to number of shares, prices per share and per share amounts
have been retroactively restated to reflect the reduced number of common
shares outstanding, unless otherwise noted.
9) Loss per share applicable to common and common equivalent shares is
computed after recognition of the dividend requirements on the redeemable
and convertible preferred stock of $34,000 in fiscal 1998 and $90,000 in
fiscal 1997.
8
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash and cash equivalents decreased by $1,149,000 during the quarter ended April
26, 1997, which included approximately $921,000 of net cash used in operating
activities. Accounts receivable increased by $250,000 due to an increase in
layaway receivables during the first quarter. Inventories increased by
approximately $1,176,000 due to normal seasonal increases which accounted for
most of the $1,100,000 increase in current liabilities.
Goldblatt's Department Stores, Inc. ("Goldblatt's", a wholly-owned subsidiary of
the Company) spent approximately $173,000 on capital expenditures during the
first quarter of fiscal 1998 related to normal capital maintenance. Goldblatt's
capital expenditures for the balance of fiscal 1998 will be minimal as no new
store openings or major store renovations are planned.
Effective April 23, 1997 a new Revolving Credit Agreement was executed. The
agreement provides a line of credit of up to $2,000,000 through May 1, 1998
based on availability of a borrowing base equal to 45% of merchandise inventory.
The line is collateralized by Goldblatt's inventory and cash and cash
equivalents. The line of credit agreement requires that Goldblatt's maintain a
tangible net worth of $5,500,000 and an inventory level of $5,500,000. Interest
is payable at the prime rate plus 1%. There were no outstanding borrowings on
the line as of April 26, 1997. 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 1998.
9
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
---------------------
Quarter Ended April 26, 1997 (fiscal 1998) vs.
- ----------------------------------------------
Quarter Ended April 27, 1996 (fiscal 1997)
- ------------------------------------------
The loss from continuing operations decreased by approximately $272,000, or
27.1%, as compared to the first quarter of fiscal 1997.
Net sales decreased by $3,607,000 during the quarter as compared to the first
quarter of fiscal 1997 as the result of four store closings in fiscal 1997.
However, despite unseasonably cool spring weather, comparable store sales showed
a 2.5% increase during the quarter as compared to the prior year, due to a more
aggressive sales promotion program. Gross margin improved as a percentage of
sales to 33.1% as compared to 32.6% in the first quarter of fiscal 1997. This
improvement is due to a merchandise control program implemented in fiscal 1997
which resulted in more opportunistic purchases, lower inventory levels and less
markdowns.
Selling, general and administrative expenses ("SG&A") increased slightly to
39.0% of sales as compared to 38.8% in the prior year. Total SG&A expenses
decreased approximately $1,373,000, or 23.0%, as compared to the previous year
due primarily to cost savings associated with the four closed stores in fiscal
1997.
10
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
PART II - OTHER INFORMATION
- ---------------------------
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
11
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
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 fully authorized.
JG INDUSTRIES, INC.
-------------------
(Registrant)
Date: June 13, 1997 /s/ Clarence Farrar
------------- --------------------
CLARENCE FARRAR
President
/s/ Clifford Gutmann
---------------------
CLIFFORD GUTMANN
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
The JG Industries, Inc. Form 10-Q for the first quarter of fiscal year 1998
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-31-1998
<PERIOD-START> JAN-26-1997
<PERIOD-END> APR-26-1997
<CASH> 565
<SECURITIES> 0
<RECEIVABLES> 582
<ALLOWANCES> 42
<INVENTORY> 7,481
<CURRENT-ASSETS> 8,928
<PP&E> 15,081
<DEPRECIATION> 9,636
<TOTAL-ASSETS> 16,023
<CURRENT-LIABILITIES> 6,191
<BONDS> 1,164
0
1,500
<COMMON> 11,246
<OTHER-SE> (6,220)
<TOTAL-LIABILITY-AND-EQUITY> 16,023
<SALES> 11,754
<TOTAL-REVENUES> 11,754
<CGS> 7,858
<TOTAL-COSTS> 7,858
<OTHER-EXPENSES> 4,587
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (721)
<INCOME-TAX> 10
<INCOME-CONTINUING> (731)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (731)
<EPS-PRIMARY> (.72)
<EPS-DILUTED> 0<F1>
<FN>
<F1> In accordance with current financial statement presentation requirements,
this information is not included in the Company's consolidated financial
statements.
</FN>
</TABLE>
