<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 JULY 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 July 26, 1997 - 1,060,670 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 July 26, 1997,
January 25, 1997, and July 27, 1996 and the results of its operations and its
cash flows for the thirteen and twenty-six week periods ended July 26, 1997
(fiscal 1998) and July 27, 1996 (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>
<TABLE>
<CAPTION>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(in thousands, except share data)
(unaudited)
July 26, January 25, July 27,
1997 1997 1996
-------- ----------- --------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3 $ 1,714 $ 3,869
Receivables, net 392 290 485
Merchandise inventories 7,483 6,305 7,481
Other current assets 335 224 546
-------- ----------- --------
Total current assets 8,213 8,533 12,381
-------- ----------- --------
Land, buildings and
equipment, at cost 15,193 14,908 14,116
Less accumulated depreciation
and amortization 9,880 9,395 8,844
-------- ----------- --------
5,313 5,513 5,272
-------- ----------- --------
Leasehold rights, net 30 32 35
Due from Jupiter 1,265
Other assets 1,621 1,597 1,475
-------- ----------- --------
$ 15,177 $ 15,675 $ 20,428
======== =========== ========
LIABILITIES, COMMON STOCK AND
OTHER SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 800
Current portion of long-term debt 582 $ 582
Accounts payable 2,962 1,999 $ 3,321
Accrued liabilities 2,064 2,505 2,879
Accrued dividends 5 5
-------- ----------- --------
Total current liabilities 6,413 5,091 6,200
-------- ----------- --------
Long-term debt, less current portion 1,164 1,164 131
Other long-term liabilities 846 867 821
Minority interest 1,308 1,262 1,219
Redeemable preferred stock, including accrued
dividends of $980 4,163
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 (9,626) (7,781) (6,842)
Treasury shares - 1,345,100, 1,345,062 and
51,807 shares at cost, respectively (3,613) (3,613) (1,285)
-------- ----------- --------
5,446 7,291 7,894
-------- ----------- --------
$ 15,177 $ 15,675 $ 20,428
======== =========== ========
</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 THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED JULY 26, 1997 AND JULY 27,
1996
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
----------------------- ------------------------
July 26, July 27, July 26, July 27,
1997 1996 1997 1996
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 12,689 $ 15,715 $ 24,443 $ 31,076
Cost of sales 8,806 10,734 16,664 21,089
---------- ---------- ---------- ----------
Gross profit 3,883 4,981 7,779 9,987
Selling, general and
administrative expenses 4,869 5,941 9,456 11,901
Provision for store closing 407 407
---------- ---------- ---------- ----------
Operating loss (986) (1,367) (1,677) (2,321)
Interest expense, net (28) (19) (35) (31)
Gain on sale of asset 1,012 1,012
Minority interest in net income
of subsidiary (23) (23) (46) (46)
---------- ---------- ---------- ----------
Loss before income tax
provision (1,037) (397) (1,758) (1,386)
Income tax provision (10) (12) (20) (26)
---------- ---------- ---------- ----------
Net loss $ (1,047) $ (409) $ (1,778) $ (1,412)
========== ========== ========== ==========
Net loss applicable to common
and common equivalent shares $ (1,080) $ (585) $ (1,845) $ (1,638)
========== ========== ========== ==========
Net loss per common share $ (1.02) $ (.25) $ (1.74) $ (.70)
========== ========== ========== ==========
Weighted average number of common
and common equivalent shares
outstanding. 1,060,671 2,353,963 1,060,680 2,353,968
========== ========== ========== ==========
</TABLE>
The accompanying notes are an intergral 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 twenty-six week period ended July 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)
Foregiveness 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, twenty-six week
period ended July 26, 1997 (1,778) (1,778)
Dividends accrued on
convertible preferred stock (67) (67)
-------- ---------- --------- ---------- ------------ ------------
Balances, July 26, 1997 $ 11,246 $ 5,959 $ 1,500 $ (9,626) $ (3,613) $ 5,446
======== ========== ========= ========== ============ ============
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
JG INDUSTRIES, INC. AND SUBSIDIARIES
-------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------
FOR THE TWENTY-SIX WEEK PERIODS ENDED JULY 26, 1997 AND JULY 27, 1996
----------------------------------------------------------------------
(in thousands)
--------------
(Unaudited)
-----------
26 Weeks Ended
---------------------
<S> <C> <C>
July 26, July 27,
1997 1996
-------- --------
Cash flows from operating activities:
Net loss $ (1,778) $ (1,412)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 487 662
Minority interest 46 46
Gain on sale of asset (1,012)
Provision for store closing 407
Changes in assets and liabilities:
Accounts receivables (102) (200)
Merchandise inventories (1,178) (960)
Other assets (current) (111) 75
Other assets (noncurrent) (3) (8)
Accounts payable and accrued liabilities 522 (1,174)
Other liabilities (noncurrent) (21) 24
-------- --------
Net cash used in operating activities (2,138) (3,552)
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets 6,544
Capital expenditures (285) (240)
Purchase of annuity contract (21)
-------- --------
Net cash (used in) provided by investing activities (306) 6,304
-------- --------
Cash flows from financing activities:
Borrowings under line of credit 800 5,100
Repayments under line of credit (5,300)
Principal payments of long-term debt (2,475)
Dividends paid on convertible preferred stock (67)
-------- --------
Net cash provided by (used in)
financing activities 733 (2,675)
--------- --------
Net (decrease) increase in cash and cash equivalents (1,711) 77
Cash and cash equivalents at beginning of year 1,714 3,792
-------- --------
Cash and cash equivalents at end of twenty-six week period $ 3 $ 3,869
======== ========
</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%,
87% and 88% of the inventory as of July 26, 1997, January 25, 1997 and July
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 $460,000, $430,000, and $448,000 higher at July 26, 1997, January 25,
1997 and July 27, 1996, respectively.
2) Receivables are presented net of allowances for doubtful accounts of
approximately $42,000 at July 26, 1997, January 25, 1997 and July 27, 1996.
3) Leasehold rights are shown net of accumulated amortization of $20,000 at
July 26, 1997, $18,000 at January 25, 1997 and $37,000 at July 27, 1996.
4) Certain reclassifications have been made to the July 27, 1996 amounts in
order to conform to classifications at July 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 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, totaling $3,500,000 as of July 27, 1996, and $1,500,000 as of
January 25, 1997. There were no outstanding borrowings on the line as of
July 27, 1996, and 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%. The
amount of the collateral was restricted to the extent of outstanding
borrowing on the line, which was $800,000 as of July 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 $67,000 in fiscal 1998 and $226,000 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 $1,711,000 during the six months ended
July 26, 1997, which included approximately $2,138,000 of net cash used in
operating activities. Accounts receivable increased by $102,000 due primarily
to an increase in layaway receivables. Inventories increased by approximately
$1,178,000, which is attributable to normal seasonal increases in the
merchandise product lines. Accordingly, trade accounts payable increased by
$932,000 to coincide with the heightened inventory levels.
Goldblatt's spent approximately $283,000 on capital expenditures during the
twenty-six weeks ended July 26, 1997 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%. The amount of the collateral was
restricted to the extent of outstanding borrowing on the line, which was
$800,000 as of July 26, 1997.
As of July 26, 1997, the Company has working capital of $1,800,000 and line of
credit availability of $1,200,000. No new store openings or acquisitions are
planned for the remainder of fiscal 1998, and capital expenditure spending will
be minimal. The Company plans to focus its efforts on strengthening the core
Goldblatt's operation over the rest of the year. Particular emphasis will be
given to programs enhancing sales development and inventory control. 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
---------------------
Thirteen Weeks Ended July 26, 1997 (fiscal 1998) vs.
- ----------------------------------------------------
Thirteen Weeks Ended July 27, 1996 (fiscal 1997)
- ------------------------------------------------
Net sales decreased by $3,026,000 during the quarter as compared to the second
quarter of fiscal 1997 as the result of four store closings in fiscal 1997.
Comparable store sales posted a 6.7% sales increase for the second quarter as
compared to the prior year due to a more aggressive sales promotion program.
This continues to build on the upward sales trend established in the first
quarter.
Gross profit percentage declined to 30.6% of sales from 31.7% of sales in the
second quarter of fiscal 1997. This decrease is attributable to a higher level
of inventory shrinkage experienced this year. Tightened inventory control
measures have since been formulated in response to the shrinkage.
Selling, general and administrative expenses ("SG&A") decreased by approximately
$1,072,000, or 18.0%, as compared to the second quarter of fiscal 1997 due
primarily to cost savings associated with the closed stores. SG&A expenses
increased to 38.4% of sales as compared to 37.8% in the prior year.
Twenty-six Weeks Ended July 26, 1997 (fiscal 1998) vs.
- ------------------------------------------------------
Twenty-six Weeks Ended July 27, 1996 (fiscal 1997)
- --------------------------------------------------
Net sales decreased by $6,633,000 versus the same period last year due to the
four store closings in fiscal 1997. Comparable store sales, however, have shown
a 4.6% increase during this period as compared to the prior year. These
increased sales are the result of a more aggressive sales promotion program, and
particularly strong sales gains during the second quarter of fiscal 1998.
Gross profit percentage dropped slightly to 31.8% of sales from 32.1% of sales
in the preceding year. This decrease is attributable to a higher level of
inventory shrinkage experienced for the first six months of fiscal 1998.
Tightened inventory control measures have since been formulated in response to
the shrinkage.
SG&A expenses decreased by approximately $2,445,000 as compared to fiscal 1997
due primarily to cost savings associated with the closed stores and corporate
overhead expense reductions. Overall, SG&A expenses increased slightly to 38.7%
of sales as compared to 38.3% of sales in the prior year.
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 under-
signed thereunto fully authorized.
JG INDUSTRIES, INC.
-------------------
(Registrant)
Date: September 9, 1997 /s/ Clarence Farrar
----------------- --------------------
CLARENCE FARRAR
President
/s/ Clifford Gutmann
---------------------
CLIFFORD GUTMANN
Chief Financial Officer
Goldblatt's Department Stores, Inc.
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 second 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> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> JAN-26-1997
<PERIOD-END> JUL-26-1997
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 434
<ALLOWANCES> 42
<INVENTORY> 7,483
<CURRENT-ASSETS> 8,213
<PP&E> 15,193
<DEPRECIATION> 9,880
<TOTAL-ASSETS> 15,177
<CURRENT-LIABILITIES> 6,413
<BONDS> 1,164
0
1,500
<COMMON> 11,246
<OTHER-SE> (7,300)
<TOTAL-LIABILITY-AND-EQUITY> 15,177
<SALES> 24,443
<TOTAL-REVENUES> 24,443
<CGS> 16,664
<TOTAL-COSTS> 16,664
<OTHER-EXPENSES> 9,456
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> (1,758)
<INCOME-TAX> 20
<INCOME-CONTINUING> (1,778)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,778)
<EPS-PRIMARY> (1.74)
<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>
