<PAGE>
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
----------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
COMMISSION FILE NO. 1-258
----------------
JG INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
ILLINOIS 36-1141010
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5630 WEST BELMONT AVENUE, 60634
CHICAGO, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (773) 481-5410
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, No Par Value NASD Automated
Quotation System
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
----------------
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [_]
The aggregate market value of Common Stock held by nonaffiliates of the
Registrant on April 24, 1998 was approximately $644,498. On that date there
were 1,060,670 shares of Common Stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and III incorporate by reference certain information to be included
in Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders currently scheduled for July 28, 1998.
Index to Exhibits on Pages 26 through 30.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL INFORMATION
JG Industries, Inc. ("JG") is an Illinois corporation organized on February
27, 1928. Effective July 23, 1985 the name of the Company was changed from
Goldblatt Bros., Inc. to JG Industries, Inc. JG and its subsidiaries are
hereinafter collectively referred to as the "Company." The Company's
continuing operations are comprised of nine discount department stores located
in the Chicago, Illinois vicinity and one in Indiana.
ACQUISITIONS, PUBLIC OFFERING AND DISPOSITIONS
At the Company's Annual Meeting of Shareholders on July 20, 1993, the
shareholders approved a 3,000,000 share increase to the Company's authorized
capital stock and an Agreement and Plan of Merger (the "Agreement") between
the Company and SGH, Inc. ("SGH") which was owned 80% by JG and 20% by Jupiter
Industries, Inc. ("Jupiter") (a shareholder of the Company). Under the terms
of the Agreement, SGH was merged with and into the Company, with the Company
being the surviving corporation. The shares of SGH owned by the Company were
canceled and the shares of SGH owned by Jupiter were converted into the right
to receive 375,667 shares of the Company's common stock.
The merger was completed on July 27, 1993 and the 375,667 shares of the
Company's common stock were issued to Jupiter on August 4, 1993. As a result
of this stock issuance, Jupiter's ownership interest in JG was increased from
approximately 46.4% to 55.2%.
Effective as of October 29, 1993, the Company, Sussex Group Ltd. ("Sussex")
(an indirect majority owned subsidiary of JG) and Jupiter entered into a Stock
Purchase and Loan Agreement. Under the terms of the agreement, the Company,
through Sussex, borrowed $5,075,000 from Jupiter on October 29, 1993. The note
was repaid per the terms of the agreement on February 4, 1994 by the transfer
of 700,000 shares of Huffman Koos Inc. ("H-K") (a majority owned subsidiary of
Sussex) common stock from Sussex to Jupiter, along with interest at the prime
rate.
Effective November 30, 1994, Sussex and Jupiter entered into a Stock
Purchase Agreement whereby Sussex sold an additional 100,000 shares of H-K
common stock to Jupiter 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 represented 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, Sussex and Jupiter entered into a Stock Purchase
Agreement whereby 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 represented 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 to make payments on JG's $7,125,000 term loan.
The Stock Purchase and Loan Agreement and Stock Purchase Agreement (the
"Agreements") contained a provision which allowed Sussex 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. The Company and Jupiter collectively owned
of record 2,200,000 of 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
2
<PAGE>
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 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. This loss was recorded as a decrease to paid-in
capital and represented the difference between the total cash due to Jupiter
and the proportionate portion of H-K equity represented by these shares. The
Company also recorded a receivable from Jupiter of approximately $1,265,000.
This receivable represented the difference between proceeds from the sale of
$8,906,000 and $7,641,000 owed to Jupiter by Sussex. The $6,295,000 gain on
sale of discontinued operations for the quarter ending October 28, 1995 is net
of applicable income tax of $349,000 and includes $42,000 of net income from
discontinued operations during the phase-out period from the measurement date
of September 25, 1995, net of reversal of income taxes provided in earlier
quarters.
On July 11, 1996, Goldblatt's Department Stores, Inc. and Goldblatt
Subsidiary, Inc., wholly-owned subsidiaries of the Company (the
"Subsidiaries"), closed the transactions contemplated by an Agreement of
Purchase and Sale by and between the Subsidiaries and Delray Farms, Inc. (the
"Purchaser"). Pursuant to the terms of the agreement, the Subsidiaries sold to
the Purchaser a parking lot located at 91st Street and Exchange Avenue,
Chicago, Illinois and the three properties located at 1615 West Chicago
Avenue, Chicago, Illinois; 3311 West 26th Street, Chicago, Illinois; and 9100
South Commercial Avenue, Chicago, Illinois for an aggregate consideration of
$5,000,000 (exclusive of proceeds from inventory liquidation and layaway
receivables, net of closing costs). The stores located on the three properties
were closed within 90 days of July 11, 1996.
On December 12, 1996 the shareholders, by majority vote, amended the
Company's Articles of Incorporation to effect a one-for-three reverse stock
split (the "Reverse Stock Split") of the Company's issued and outstanding
shares of Common Stock. The Reverse Stock Split was effective December 27,
1996.
On December 13, 1996, JG Industries, Inc., pursuant to the terms of a
certain Stock Purchase Agreement, by and among 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. In connection with
this transaction, Jupiter waived accrued dividends of $1,164,000. The gain
resulting from the waiver was recorded as an increase to paid-in capital.
Prior to the consummation of this transaction, Jupiter was the Company's
largest shareholder, holding 1,293,258 of the Company's Common Stock
(approximately 55.2% of the issued and outstanding Common Stock) and all of
the Company's issued and outstanding Series A Preferred Stock.
Effective May 15,1998, the original $1,745,898 promissory note payable by JG
to Jupiter has been amended and restated ("Restated Note"). The Restated Note
will not bear interest unless an event of default occurs, as defined in the
agreement, and is payable in three annual installments of $581,966 each
commencing May 15, 1999, with the last installment due and payable on May 15,
2001.
Effective December 13, 1996 the Company, pursuant to terms of a certain
Series B Convertible Preferred Stock Purchase Agreement (the "Series B
Preferred Stock Purchase Agreement"), by and among certain officers and a
director (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.
The 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, with each Series B Preferred Share having the
number of votes equal to the number of shares of Common Stock into which one
share of Series B Preferred Stock may be converted. Currently, each share of
Series B Preferred Stock is entitled to 444.44 votes. After giving effect to
the repurchase from Jupiter and the issuance to the Purchasers, the Purchasers
control approximately 47.9% of the Company's voting rights.
3
<PAGE>
The holders of Series B Preferred Shares may convert all or any portion of
such shares into the number of shares of the Company's Common Stock computed
by dividing (i) the product of (a) the number of Series B Preferred Shares to
be converted, times 1,000 by (ii) the conversion price. The current conversion
price is $2.25. Accordingly, each Series B Share is presently convertible into
444.44 shares of Common Stock.
Dividends upon each Series B Preferred Share accrue daily at a rate equal to
9% per annum. Additional information regarding the terms and financing
relative to acquisitions/dispositions is included in the notes to consolidated
financial statements.
The Company operates in one industry segment of the retail market that is
defined as Discount Department Stores. Goldblatt's Department Stores, Inc.
("Goldblatt's"), a wholly-owned subsidiary of the Company, offers customers a
diverse assortment of both nationally branded and private label merchandise,
emphasizing a full range of both soft and hard line goods. The stores
frequently feature special promotions of merchandise purchased on advantageous
terms. Soft line merchandise includes men's, women's, children's and infant's
wearing apparel and accessories. Hard line merchandise includes textiles and
domestics, televisions and electronics, small appliances and housewares,
cosmetics and notions, hardware, toys and sporting goods. Over the past five
years, soft line departments have provided between 52% and 54% of owned sales.
Goldblatt's also licenses jewelry, shoe, millinery and optical departments for
operation at certain of its stores.
The department stores maintain a centralized purchasing function, buying
goods direct from domestic and international manufacturers and through
wholesalers. No single vendor accounted for more than 4% of total department
store purchases during fiscal 1998. Supplier relationships are considered
strong and Goldblatt's continues to obtain favorable pricing and payment terms
on many purchases.
The department store business is seasonal with approximately 30% of total
sales occurring in the fourth quarter.
<TABLE>
<CAPTION>
BALANCE AT OPENED/PURCHASED CLOSED/SOLD BALANCE AT
DESCRIPTION BEGINNING OF YEAR STORES STORES END OF YEAR
----------- ----------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C>
Discount department
stores
Fiscal year 1996........ 14 14
Fiscal year 1997........ 14 4 10
Fiscal year 1998........ 10 10
</TABLE>
Competition
The Company's discount department stores are highly competitive. The Company
competes with national and local retail establishments, both large and small,
for the patronage of its customers. Some of the largest retail merchandise
companies with substantially greater resources than the Company have outlets
located in the same areas in which the Company's subsidiaries operate. The
Company's overall promotional strategy is to emphasize quality merchandise at
competitive prices.
Employees
The Company employs 688 people, comprised of 4 employees of JG and 684
employees of Goldblatt's. The Company believes that its relationship with its
employees is good.
ITEM 2. PROPERTIES
The Company owns and leases the retail merchandise stores, office and
warehouse locations described below. In the opinion of management, the
properties are suitable and adequate for the conduct of its business.
At April 30, 1998, Goldblatt's owns in fee one retail location in Chicago,
Illinois. This one property has gross square footage of 135,000. This property
is subject to a mortgage in favor of a regional financial instition.
4
<PAGE>
Goldblatt's leases its other nine retail locations, aggregating 720,100 gross
square feet, with expirations, excluding renewal options, ranging from 1999 to
2008. Five stores have renewal options of up to 25 years. Aggregate minimum
rentals with respect to the foregoing leasehold properties are approximately
$1,930,000 annually.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings are currently pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to vote of the company's shareholders during the
last quarter of the fiscal year ended January 31, 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Although the Company's Common Stock is listed on the NASD Automated
Quotation System, (trading symbol: JGIN), the volume of shares traded was
limited during the years ended January 31, 1998 (fiscal 1998) and January 25,
1997 (fiscal 1997). The following table lists the reported high and low bid
quotations as quoted on the NASD Automated Quotation System for each quarterly
period during fiscal 1998 and 1997. Such over-the-counter market quotations
reflect interdealer prices, without retail markup, markdown or commission and
may not necessarily represent actual transactions. The Company has not paid
dividends in any of the last five years. There were approximately 2,458
holders of record of Common Stock on April 24, 1998.
<TABLE>
<CAPTION>
PRICE RANGE
------------
HIGH LOW
----- -----
<S> <C> <C>
Fiscal 1998
First Quarter............................................. $2.00 $1.38
Second Quarter............................................ 2.00 1.50
Third Quarter............................................. 1.38 1.13
Fourth Quarter............................................ 1.44 .50
Fiscal 1997
First Quarter............................................. $1.31 $ .94
Second Quarter............................................ 1.63 1.00
Third Quarter............................................. 1.23 .63
Fourth Quarter............................................ 2.63* 1.25*
</TABLE>
- --------
* On December 12, 1996 the shareholders approved a proposal to amend the
Company's Articles of Incorporation to effect a one-for-three reverse stock
split of the Company's issued and outstanding Common Stock. The price range
shown above for the fourth quarter of fiscal 1997 reflects the per share
effect of this split.
5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Following is selected financial data for the Company for each of the last
five fiscal years.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales from
continuing operations.. $ 53,483 $ 60,198 $ 72,964 $ 77,106 $ 76,900
Operating loss.......... (2,423) (2,195) (2,871) (68) (2,501)
Loss from continuing
operations............. (2,569) (2,101) (4,103) (1,121) (3,621)
Income (loss) from
discontinued
operations............. (49) 6,856 1,608 2,276
Income (loss) before
extraordinary items.... (2,569) (2,150) 2,753 487 (1,346)
Net income (loss)....... (2,569) (2,150) 2,753 487 (1,346)
Net income (loss)
available to common
shareholders........... (2,707) (2,577) 2,472 267 (1,527)
Per share data:
Loss from continuing
operations--basic and
diluted.............. (2.55) (1.15) (1.86) (.57) (1.75)
Net income (loss)--
basic................ (2.55) (1.17) 1.05 .11 (.70)
Net income (loss)--
diluted.............. (2.55) (1.17) 1.04 .11 (.70)
Total assets............ 14,213 15,675 25,315 76,007 73,004
Long-term obligations... 3,343 2,031 2,776 11,269 21,466
Redeemable preferred
stock.................. 3,937 3,657 3,183
Convertible preferred
stock.................. 1,500 1,500
Weighted average number
of common shares
outstanding............ 1,060,674 2,194,085 2,353,445 2,351,702 2,168,413
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Approximately $1,235,000 of net cash was used in operating activities during
the year ended January 31, 1998 compared to approximately $3,963,000 of net
cash used in the prior year. Merchandise inventory levels decreased by $63,000
due in part to a 4.2% increase in comparable store sales during fiscal 1998.
Goldblatt's Department Stores, Inc. spent $499,786 on capital expenditures
during fiscal 1998 related to normal capital maintenance. In addition,
approximately $56,000 of furniture, fixtures and computer equipment previously
put into storage as a result of the four store closings during fiscal 1997
were transferred out to existing Goldblatt's stores for replacement needs. No
new store openings are planned for Goldblatt's during fiscal 1999.
An internal examination of processes and procedures indicates the Company
will spend approximately $150,000 through fiscal year 2000 to take the steps
necessary to enable the proper computer processing of transactions related to
the year 2000 and beyond. The Company continues to utilize both internal and
external resources to evaluate the proper courses of corrective action.
Maintenance or modification costs will be expensed as incurred, while the
replacement of certain systems will be recorded as assets and amortized. The
Company does not expect the amounts required to be expensed over the next two
years to have a material effect on its financial position or results of
operations.
Effective April 23, 1997, Goldblatt's executed a new line of credit
Agreement with a maturity date of May 1, 1998. The Agreement provides a line
of credit of up to $2,000,000 based on availability of a borrowing base equal
to 45% of merchandise inventory. The line of credit is collateralized by
Goldblatt's inventory and cash and cash equivalents. The Agreement requires
that Goldblatt's maintain an inventory level of at least $5,500,000, a
tangible net worth of $5,500,000 and net loss restrictions for fiscal years
1998 and 1999. As of January 31, 1998, Goldblatt's was in violation of the net
loss covenant. Subsequent to year-end, the financial institution granted
Goldblatt's a waiver of this covenant effective January 31, 1998 and, in
addition, amended the line of credit maturity date to April 15, 1999. As of
January 31, 1998, $2,000,000 is available on the line of credit.
6
<PAGE>
Effective January 30, 1998, Goldblatt's entered into a mortgage loan
agreement for $800,000 with an 8.5% fixed rate of interest from a regional
financial institution. The mortgage is secured by a parcel of owned real
estate housing a Goldblatt's store. The loan agreement stipulates monthly
principal and interest payments of $7,878 and a final principal payment of
approximately $547,000 due on January 31, 2005. The loan agreement requires
that no default exists under the line of credit agreement.
Pursuant to a stock purchase agreement dated December 13, 1996, the Company
purchased from Jupiter 445 shares of Series A Preferred Stock and 1,293,258
shares of the Company's Common Stock for an aggregate 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.
Effective May 15, 1998, the original $1,745,898 promissory note was amended
and restated. The amended and restated promissory note is non-interest bearing
unless an event of default occurs, as defined in the agreement, and is payable
in three annual installments of $581,966 each commencing May 15, 1999, with
the last installment due and payable on May 15, 2001. In addition, the accrued
and unpaid interest on the original promissory note of approximately $119,000
at January 31, 1998 was forgiven.
The Company believes that Goldblatt's working capital and line of credit
will be adequate to fund current operations and service the Company's debt
through fiscal 1999.
FORWARD-LOOKING STATEMENTS
Except for historical information, the matters discussed or incorporated by
reference in this report are forward-looking statements that involve risks and
uncertainties that may affect the Company's actual results and cause results
to differ materially from such forward-looking statements. Such risks and
uncertainties include, but are not limited to, economic conditions,
seasonality of the Company's business, relationships with suppliers and
financial institutions, ability to attract and retain key personnel,
competition, regulation and other factors indicated from time to time in the
Company's filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
Year Ended January 31, 1998 (fiscal 1998, 53 weeks) vs. Year Ended January
25, 1997 (fiscal 1997, 52 weeks)
The comparison of fiscal years 1998 and 1997 is materially distorted due to
the sale of three stores in July, 1996 and the closing of a fourth store in
November, 1996. In addition, fiscal 1998 includes the results of operations
for 53 weeks as compared to 52 weeks in fiscal 1997.
Net sales from continuing operations decreased from $60,198,000 to
$53,483,000. The closed stores represented a decrease in sales of
approximately $8,850,000, which was partially offset by a comparable store
sales increase of approximately $2,135,000.
While our aggressive promotional and merchandising programs resulted in
comparable store sales increases during fiscal 1998, losses from continuing
operations increased to $2,569,000 as compared to $2,101,000 in the previous
year. The Company's gross profit percentage decreased to 32.0% of sales from
32.7% in the previous year. Selling, general and administrative expenses
("SG&A") increased from 36.3% in fiscal 1997 to 36.5% in fiscal 1998.
There were three significant factors which negatively impacted our profit
performance during fiscal 1998.
a. The two federal minimum wage increases effective October 1, 1996 and
September 1, 1997 resulted in additional payroll expense of approximately
$400,000.
b. Insurance costs rose by approximately $360,000 driven primarily by
catastrophic illnesses of several of our employees.
c. Inventory shrinkage increased over the preceding year in excess of
$400,000.
7
<PAGE>
As a result of remedial action programs, described briefly below, we
anticipate that we will experience improvement during fiscal 1999.
a. We have just completed and implemented an expense reduction initiative
which will reduce expenses by $725,000 on an annualized basis and is
projected to favorably impact the current fiscal year by $510,000.
b. For the last four months, health care costs have improved significantly
and this expense is currently trending at a level consistent with
previous years' experience before the fiscal 1998 aberration. In
addition, we have renegotiated the premiums on our property, casualty and
general liability insurance resulting in a premium reduction in excess of
$55,000 per year.
c. We have reviewed each of our loss prevention systems and programs and
tightened up the supervisory responsibilities to assure compliance with
procedures and standards.
Year Ended January 25, 1997 (fiscal 1997) vs. Year Ended January 27, 1996
(fiscal 1996)
The comparison of fiscal years 1997 and 1996 is materially distorted due to
the sale of three stores in July, 1996 and the closing of a fourth store in
November, 1996. Of the $12,700,000 loss in sales, $10,300,000 is directly
attributable to the store closings and $2,400,000 is attributable to net sales
decrease on a comparable store basis. This loss in sales from continuing
operations is attributable to a number of factors including but not limited
to:
a. The store closing sales conducted by the liquidator which reduced the
sales of continuing stores, and
b. Adverse weather conditions which negatively impacted sales promotion
efforts.
Sales late in the fiscal year indicate a reversal of this trend. In
addition, Goldblatt's has experienced sales increases for four consecutive
months commencing in December, 1996 and continuing through March, 1997. The
company experienced a sizable sales increase in March (10.1%) but this was
partially attributable to Easter falling in March as compared to April last
year. It is anticipated that, due to this calendar change, April, 1997 sales
will fall short of April, 1996 sales, but that sales for the first quarter of
fiscal 1998 will be above last year.
As a result of improved inventory controls and supervision, the gross profit
improved to 32.7% of sales as compared to 31.4% last year.
Expenses decreased by approximately $5,260,000 to $21,760,000 as compared to
$27,020,000 last year. This lower expense is attributable to the closing of
four Goldblatt's stores and a reduction in interest expense as a result of the
retirement of short-term and long-term debt.
The combined impact of the gross profit improvement and the expense
reductions noted above produced a 49% improvement in the loss from continuing
operations to $2,101,000 as compared to $4,103,000 in fiscal 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are listed in Part IV, Item
14, of this Report and begin on page 10.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item will be set forth in the Proxy
Statement and such information is incorporated herein by reference.
8
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth in the Proxy
Statement and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth in the Proxy
Statement and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth in the Proxy
Statement and such information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
(1)Consolidated Financial Statements:
Report of Independent Accountants............................. 10
Consolidated Balance Sheets, January 31, 1998 and January 25,
1997......................................................... 11
Consolidated Statements of Operations for the fiscal years
ended January 31, 1998, January 25, 1997, and January 27,
1996......................................................... 12
Consolidated Statements of Common Stock and Other
Shareholders' Equity for the fiscal years ended January 31,
1998, January 25, 1997 and January 27, 1996.................. 13
Consolidated Statements of Cash Flows for the fiscal years
ended January 31, 1998, January 25, 1997 and January 27,
1996......................................................... 14
Notes to Consolidated Financial Statements.................... 15-24
(2)The Index to Exhibits is on pages 26 through 30.
</TABLE>
(b) Reports on Form 8-K.
None
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of JG Industries, Inc.
We have audited the consolidated financial statements of JG Industries, Inc.
and Subsidiaries as listed in the index on page 9 of this Form 10-K. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial position of JG
Industries, Inc. and Subsidiaries as of January 31, 1998 and January 25, 1997,
and the consolidated results of their operations and their cash flows for each
of the three fiscal years in the period ended January 31, 1998 in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Chicago, Illinois
April 24, 1998, except as to
information presented in
Notes 4 and 14 for which the
date is May 15, 1998
10
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1998 AND JANUARY 25, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 25,
ASSETS 1998 1997
------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 630 $ 1,714
Receivables, net..................................... 281 290
Merchandise inventories.............................. 6,242 6,305
Other assets......................................... 304 224
-------- -------
Total current assets............................... 7,457 8,533
-------- -------
Land, buildings and equipment, at cost:
Land................................................. 478 478
Buildings............................................ 998 998
Leasehold improvements............................... 6,085 5,621
Furniture and fixtures............................... 7,346 7,811
-------- -------
14,907 14,908
Less accumulated depreciation and amortization......... 9,916 9,385
-------- -------
4,991 5,513
-------- -------
Leasehold rights, net.................................. 28 32
Other assets--restricted $1,538 and $1,420,
respectively.......................................... 1,737 1,597
-------- -------
$ 14,213 $15,675
======== =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt.................... $ 28 $ 582
Accounts payable..................................... 2,574 1,999
Accrued liabilities.................................. 2,319 2,505
Accrued dividends.................................... 7 5
-------- -------
Total current liabilities.......................... 4,928 5,091
-------- -------
Long-term debt, less current portion................... 2,518 1,164
Other long-term liabilities............................ 825 867
Minority interest...................................... 1,358 1,262
Commitments and contingencies
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
Paid-in capital...................................... 5,939 5,939
Convertible preferred stock; no par value; authorized
and issued 1,500 shares............................. 1,500 1,500
Accumulated deficit.................................. (10,488) (7,781)
Treasury shares--1,345,100 and 1,345,065 shares at
cost, respectively.................................. (3,613) (3,613)
-------- -------
Total common stock and other shareholders' equity...... 4,584 7,291
-------- -------
$ 14,213 $15,675
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
11
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JANUARY 31, 1998,
JANUARY 25, 1997 AND JANUARY 27, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net sales from continuing operations................ $53,483 $60,198 $72,964
Cost of sales....................................... 36,371 40,526 50,029
------- ------- -------
Gross profit........................................ 17,112 19,672 22,935
Selling, general and administrative expenses........ 19,535 21,867 25,806
------- ------- -------
Operating loss from continuing operations........... (2,423) (2,195) (2,871)
------- ------- -------
Other income (expenses):
Interest income................................... 114 313 169
Interest expense.................................. (151) (161) (897)
Gain/(loss) on sale of asset, net................. 44 (3)
Loss on subsidiary stock transactions, net........ (23)
Minority interest in net income of subsidiaries... (96) (89) (460)
------- ------- -------
(133) 107 (1,214)
------- ------- -------
Loss before income tax provision and discontinued
operations......................................... (2,556) (2,088) (4,085)
Income tax provision................................ 13 13 18
------- ------- -------
Loss before discontinued operations................. (2,569) (2,101) (4,103)
Discontinued operations:
Income from operations, net of applicable income
taxes............................................ 561
Gain/(loss) on sale of discontinued operations,
including income during phase-out period, less
applicable income taxes.......................... (49) 6,295
------- ------- -------
Income (loss) from discontinued operations.......... (49) 6,856
------- ------- -------
Net income (loss)................................... $(2,569) $(2,150) $ 2,753
======= ======= =======
Net income (loss) available to common shareholders.. $(2,707) $(2,577) $ 2,472
======= ======= =======
Per share data--basic:
Loss before discontinued operations............... $ (2.55) $ (1.15) $ (1.86)
Discontinued operations........................... (0.02) 2.91
------- ------- -------
Net income (loss)................................. $ (2.55) $ (1.17) $ 1.05
======= ======= =======
Per share data--diluted:
Loss before discontinued operations............... $ (2.55) $ (1.15) $ (1.86)
Discontinued operations........................... (0.02) 2.90
------- ------- -------
Net income (loss)................................. $ (2.55) $ (1.17) $ 1.04
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED JANUARY 31, 1998, JANUARY 25, 1997 AND JANUARY 27,
1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TOTAL COMMON
STOCK AND
OTHER
COMMON PAID-IN PREFERRED ACCUMULATED TREASURY SHAREHOLDERS'
SHARES CAPITAL STOCK DEFICIT SHARES EQUITY
------- ------- --------- ----------- -------- -------------
<S> <C> <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 2,667
common shares.......... 4 4
Purchase of 295 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, 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, fiscal 1998... (2,569) (2,569)
Dividends accrued on
convertible preferred
stock.................. (138) (138)
------- ------ ------ -------- ------- -------
Balances, January 31,
1998................... $11,246 $5,939 $1,500 $(10,488) $(3,613) $ 4,584
======= ====== ====== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
13
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JANUARY 31, 1998, JANUARY 25, 1997 AND JANUARY 27,
1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $(2,569) $(2,150) $ 2,753
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................. 1,007 1,229 2,557
Deferred income taxes.......................... 23
Loss on subsidiary stock transactions, net..... 23
Minority interest in net income of
subsidiaries.................................. 96 89 526
Gain on discontinued operations................ (6,619)
Net gain on sale of assets and store closings.. (44)
Changes in assets and liabilities:
Accounts receivable............................ 9 17 4,238
Merchandise inventories........................ 63 (458) 351
Other assets (current)......................... (80) 111 177
Other assets (noncurrent)...................... (107) (130) (123)
Accounts payable and accrued liabilities....... 388 (2,566) (4,098)
Other liabilities (noncurrent)................. (42) (61)
------- -------- -------
Net cash used in operating activities........ (1,235) (3,963) (192)
Cash flows from investing activities:
Net proceeds from sale of assets and discontinued
operations...................................... 21 6,633 11,827
Capital expenditures............................. (502) (1,061) (1,533)
Purchase of annuity contracts.................... (32) (32)
------- -------- -------
Net cash (used in) provided by investing
activities.................................. (513) 5,572 10,262
------- -------- -------
Cash flows from financing activities:
Borrowings under line of credit.................. 2,275 8,950 9,094
Repayments under line of credit.................. (2,275) (9,150) (8,894)
Proceeds from mortgage borrowing................. 800
Principal payments of long-term debt............. (2,475) (8,537)
Redemption of preferred stock from Jupiter....... (3,183)
Proceeds from Due from Jupiter................... 1,265
Proceeds from issuance of convertible preferred
stock........................................... 1,500
Proceeds from exercise of stock options.......... 4
Proceeds from exercise of stock options at
subsidiary...................................... 13
Dividends paid on convertible preferred stock.... (136) (12)
Purchase of treasury shares...................... (582) (6)
------- -------- -------
Net cash provided by (used in) financing
activities.................................. 664 (3,792) (8,326)
------- -------- -------
Net (decrease) increase in cash and cash
equivalents....................................... (1,084) (2,078) 1,744
Cash and cash equivalents at beginning of year..... 1,714 3,792 2,048
------- -------- -------
Cash and cash equivalents at end of year........... $ 630 $ 1,714 $ 3,792
======= ======== =======
Cash paid during the fiscal year for:
Interest......................................... $ 45 $ 147 $ 1,073
Income taxes..................................... 17 407 143
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
14
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Principles of Consolidation--The consolidated financial statements
include the accounts of JG Industries, Inc. (the "Company" or "JG") and
subsidiary companies that are majority owned or effectively controlled. The
Company's majority owned subsidiaries include Goldblatt's Department Stores,
Inc. ("Goldblatt's") (the Company's discount department store division) and
Sussex Group Holding Company which formerly through Sussex Group, Ltd.
("Sussex") (a majority owned subsidiary) controlled 56.0% of the outstanding
common stock of Huffman Koos Inc. ("H-K") (the Company's discontinued
furniture division).
H-K has been accounted for as a discontinued operation in the accompanying
consolidated financial statements through October 28, 1995 when an unrelated
third party acquired all of the issued and outstanding H-K shares. The Company
is now engaged in retail merchandising operations in one continuing business
segment consisting of ten discount department stores primarily located in the
Chicago, Illinois vicinity. Significant intercompany accounts and transactions
have been eliminated.
Prior to December 13, 1996, Jupiter Industries, Inc. ("Jupiter") was the
Company's largest shareholder. Jupiter held 1,293,258 shares of the Company's
Common Stock (approximately 55.2% of issued and outstanding Common Stock) and
all of the Company's issued and outstanding Series A Preferred Stock.
Accordingly, the consolidated financial statements of Jupiter included
operations of the Company. Subsequent to December 13, 1996, Jupiter does not
hold any shares of the Company's Common Stock.
B) Statement of Cash Flows--For purposes of the consolidated statement of
cash flows the Company considers all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents. As of
January 31, 1998 and January 25, 1997, cash and cash equivalents are
concentrated with banks located in the Midwest region of the United States.
C) Merchandise Inventories--Merchandise inventories are stated at the lower
of cost or market. Cost is determined on the last-in, first-out (LIFO) basis
for approximately 86% and 87% of the inventory using the retail method as of
January 31, 1998 and January 25, 1997, respectively. 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
$497,000 and $430,000 higher at January 31, 1998 and January 25, 1997,
respectively. During fiscal 1997 certain LIFO inventory levels were reduced
which increased net income by approximately $176,000 due to the matching of
older historical inventory cost with current sales dollars.
D) Land, Buildings and Equipment--Depreciation is computed using the
straight-line method over the following estimated useful lives of the assets:
buildings--25 to 30 years; leasehold improvements--up to 25 years, depending
on the applicable lease term; furniture, fixtures and equipment--3 to 12 1/2
years. Asset costs and related accumulated depreciation are eliminated from
the accounts when the asset is disposed of or at the end of its estimated
useful life. Expenditures for renewals and betterments are capitalized, while
costs of maintenance and repairs are charged to operations when incurred.
E) Leasehold Rights--Leasehold rights represent the value or cost of leases
acquired and improvements. Amortization of the rights is computed using the
straight-line method over the terms of the related leases. Leasehold rights
are shown net of accumulated amortization of $22,000 at January 31, 1998 and
$18,000 at January 25, 1997.
F) Store Pre-Opening Costs--Noncapital expenditures incurred prior to the
opening of a new store are charged to expense in the year the store is opened.
G) Per Share Data--During fiscal 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS
No. 128 requires the presentation of basic earnings
15
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
per share and, for companies with potential dilutive securities, such as stock
options and warrants, diluted earnings per share. SFAS No. 128 is effective
for annual and interim periods ending after December 15, 1997 and requires
restatement of earnings per share for prior periods.
For fiscal 1998, 1997 and 1996, basic and diluted per share calculations are
computed based on the weighted average number of common shares outstanding
(after giving effect to the one-for-three reverse stock split in fiscal 1997)
of 1,060,674, 2,194,085, and 2,353,445, respectively. Incremental shares from
assumed conversions of preferred stock and stock options of 666,667 and
681,941 in fiscal 1998 and 1997, respectively, are not included as they would
be anti-dilutive. Options to purchase 171,167 shares of common stock were
outstanding at January 31, 1998, but were not included in the computation of
diluted earnings per share since the options' exercise prices were greater
than the average market price of the common shares, and they also would be
anti-dilutive. In fiscal 1996, incremental shares from assumed conversions of
stock options of 20,778 have been incorporated into the diluted per share
computations.
Income (loss) per share applicable to common shares for fiscal 1998, 1997
and 1996 is computed after recognition of the dividend requirements of
$138,000, $427,000 and $281,000, respectively, on the redeemable and
convertible preferred stock.
H) Income Taxes--The Company files a consolidated federal income tax return
with subsidiaries in which its ownership interest is 80% or greater.
The Company provides for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the use of the liability
method of accounting for taxes, under which deferred tax assets and
liabilities are recorded based on the differences between the financial
statement and tax bases of assets and liabilities and the tax rates in effect
when these differences are expected to reverse. The principal assets and
liabilities giving rise to such differences are the different methods of
accounting for inventory, depreciation and certain accrued liabilities for tax
and financial statement purposes and net operating loss carryforwards.
Deferred tax assets are reduced where appropriate by a valuation allowance
which reflects expectations of the extent to which such assets will be
realized.
I) Financial Instruments--The fair value of cash and cash equivalents is
assumed to approximate the carrying value of these assets due to the short
maturity of these instruments. The fair value of the Company's long-term debt
is estimated to approximate the carrying value based upon borrowing rates
currently available to the Company for borrowings with similar terms. The fair
value of the note payable to Jupiter cannot be determined since it was a
transaction with a related party.
J) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at January 31,
1998 and January 25, 1997 and the reported amounts of revenues and expenses
during the three years ended January 31, 1998. Actual results could differ
from those estimates.
K) New Pronouncements--In June 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income", which
will be effective for financial statements for both interim and annual periods
for fiscal years beginning after December 15, 1997. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. The Company is in the process of evaluating the
specific reporting requirements of SFAS No. 130; however, it believes the
adoption of SFAS No. 130 will not have a material effect on the Company.
2. STOCK TRANSACTIONS
During fiscal 1995, Sussex transferred or sold a total of 800,000 shares of
H-K common stock to Jupiter. The transfer of 700,000 shares of this stock on
February 3, 1996 was used to repay a $5,075,000 note payable to
16
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 had 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 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 represented 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 represented the
difference between proceeds from the sale of $8,906,000 and $7,641,000 owed to
Jupiter by Sussex. The $6,295,000 gain on sale of discontinued operations for
the year ended January 27, 1996 is net of applicable income tax of $349,000
and includes $42,000 of net income from discontinued operations during the
phase-out period from the measurement date of September 25, 1995, net of
reversal of income taxes provided in earlier quarters.
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.
During fiscal 1996, options to purchase 13,400 shares of common stock of H-K
were exercised. A loss of $23,000 on the issuance of these shares was recorded
by the Company with an increase to minority interest as H-K's net book value
per share exceeded the option price. During fiscal 1995, options to purchase
4,400 shares of common stock of H-K were exercised. A loss of $6,000 was
recorded by the Company.
On December 13, 1996, the Company, pursuant to the terms of a certain Stock
Purchase Agreement, by and among 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.
17
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On December 13, 1996, the Company also declared a one-for-three reverse
stock split. 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.
3. RECEIVABLES
Receivables in the consolidated balance sheets are shown net of the
allowances for doubtful accounts and consist of the following at January 31,
1998 and January 25, 1997:
<TABLE>
<CAPTION>
1998 1997
----- -----
(IN
THOUSANDS)
<S> <C> <C>
Accounts receivable--trade................................... $ 70 $ 87
Accounts receivable--other................................... 232 245
----- -----
302 332
Less allowance for doubtful accounts....................... 21 42
----- -----
$281 $ 290
===== =====
</TABLE>
An analysis of the allowance for doubtful accounts and the net provision
charged to operations for fiscal 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Allowance for doubtful accounts, beginning of year..... $ 42 $42 $ 384
Accounts receivable written off........................ (21) (45)
Reduction from sale of H-K............................. (297)
---- --- -----
Allowance for doubtful accounts, end of year........... $ 21 $42 $ 42
==== === =====
</TABLE>
4. NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt at January 31, 1998 and January 25, 1997 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
BALANCE
---------------
INTEREST
DESCRIPTION 1/31/98 1/25/97 RATE
----------- ------- ------- --------
<S> <C> <C> <C>
JG:
Jupiter promissory note........................ $1,746 $1,746 6.0%
Goldblatt's:
Mortgage loan.................................. 800 8.5%
------ ------
2,546 1,746
Less current maturities.......................... 28 582
------ ------
$2,518 $1,164
====== ======
</TABLE>
Long-term debt maturing within each of the five fiscal years subsequent to
January 31, 1998 is as follows (in thousands):
<TABLE>
<S> <C>
1999................................ $ 28
2000................................ 612
2001................................ 615
2002................................ 617
2003................................ 39
</TABLE>
18
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Jupiter promissory note provides upon an event of default, as defined in
the agreement, at the option of the holder, the outstanding principal amount
plus any accrued but unpaid interest may be converted into Common Stock of the
Company. The note is subordinated to any 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 are restricted by terms of the agreement.
Additionally, other distributions of cash, securities or property are also
restricted.
The Jupiter promissory note was payable in three installments commencing
December 13, 1997. The Company did not make the first installment payment of
$581,966 due to pending debt restructuring negotiations. As discussed in Note
14, effective May 15, 1998, the original $1,745,898 promissory note obligation
was amended and restated. The amended and restated promissory note is non-
interest bearing unless an event of default occurs, as defined in the
agreement, at which time interest will be accrued at 9% per annum from the
date of default. The note is payable in three annual installments of $581,966
each commencing May 15, 1999, with the last installment due and payable on May
15, 2001. As a result of the amendment and restatement, the obligation is
reported as a non-current liability as of January 31, 1998.
Effective January 30, 1998, Goldblatt's entered into a mortgage loan
agreement for $800,000 with an 8.5% fixed rate of interest from a regional
financial institution. The mortgage is secured by a parcel of owned real
estate housing a Goldblatt's store, and is guaranteed by JG. The loan
agreement stipulates monthly principal and interest payments of $7,878 and a
final principal payment of approximately $547,000 due on January 31, 2005. The
loan agreement requires that no default exists under the line of credit
agreement.
As of January 25, 1997, Goldblatt's had a $3,500,000 revolving line of
credit in effect through May 1, 1997. Interest was payable at the certificate
of deposit rate plus 1%. The line was guaranteed and collateralized by JG.
There were no outstanding borrowings on the line on January 25, 1997.
During fiscal 1998, 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 an inventory level of at least $5,500,000, a tangible net worth of
$5,500,000 and net loss restrictions for fiscal years 1998 and 1999. Interest
is payable at the prime rate plus 1%. As of January 31, 1998, Goldblatt's was
in violation of the net loss covenant. Subsequent to year-end, the financial
institution has granted Goldblatt's a waiver of this covenant effective
January 31, 1998 and, in addition, amended the line of credit maturity date to
April 15, 1999. There were no outstanding borrowings on the line on January
31, 1998.
The weighted average interest rate on short-term borrowings for fiscal 1998,
1997 and 1996 was 9.50%, 6.44% and 9.30%, respectively.
5. PREFERRED STOCK
The Redeemable Preferred Stock consisting of 445 shares of Series "A" 9%
Cumulative Preferred Stock with a face and liquidation value of $3,183,000
were acquired by the Company and canceled on December 13, 1996. 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.
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 a aggregate purchase price of $1,500,000.
Holders of Series B
19
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
After giving effect to the purchase of the Jupiter shares previously
described, the Purchasers control approximately 47.9% of the Company's voting
rights.
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.
6. INCOME TAXES
The income tax provision before minority interest is comprised of current
state taxes of $13,000 for fiscal 1998 and 1997, and $18,000 for fiscal 1996.
Following is a reconciliation of the difference between the statutory
federal income tax rate and the effective income tax rate on income from
continuing operations before minority interest as reflected in the
accompanying consolidated statements of operations:
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Provision at the
statutory tax rate..... (34.0%) (34.0%) (34.0%)
State income taxes, net. .5 .6 .5
Change in valuation
allowance.............. 34.0 34.0 34.0
----- ----- -----
.5% .6% .5%
===== ===== =====
</TABLE>
At January 31, 1998, the Company has net operating loss carryforwards of
approximately $22,151,000 available to offset future taxable income for
federal income tax purposes. These carryforwards expire principally in fiscal
1999 through 2013. The amount of carryforwards which expired in fiscal 1998
was $4,487,309.
The components of the net deferred tax assets and liabilities as of January
31, 1998 and January 25, 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Inventory............................................. $ 163 $ 214
Accruals and other liabilities........................ 271 287
Alternative Minimum Tax credit........................ 398 398
Net operating loss carryforwards...................... 8,639 9,172
------- -------
9,471 10,071
Valuation allowance................................... (8,604) (9,275)
------- -------
867 796
------- -------
Deferred tax liabilities:
Property, plant and equipment......................... 867 796
------- -------
867 796
------- -------
Net deferred tax liabilities........................ $ -- $ --
======= =======
</TABLE>
20
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASE COMMITMENTS
The following table presents the future minimum lease commitments for all
operating leases that have initial or remaining noncancelable terms in excess
of one year. The leases expire in fiscal 1999 to 2008 and have various renewal
options.
<TABLE>
<CAPTION>
FISCAL OPERATING
YEAR LEASES
------ --------------
(IN THOUSANDS)
<S> <C>
1999..................... $ 1,930
2000..................... 1,840
2001..................... 1,806
2002..................... 1,725
2003..................... 1,741
Thereafter............... 3,608
-------
Total minimum lease
payments................ $12,650
=======
</TABLE>
Certain store leases contain contingent rental provisions based on retail
sales. Rent expense, net of insignificant sublease income, for fiscal years
1998, 1997 and 1996 was $1,873,000, $1,962,000, and $2,368,000, respectively,
including contingent rentals of $228,000, $209,000, and $174,000,
respectively.
8. DISCONTINUED OPERATIONS, SALE OF ASSETS AND STORE CLOSINGS
As a result of the sale of H-K, as described in Note 2, previously issued
consolidated statements of operations were restated to reflect H-K as a
discontinued operation.
Summarized results of the H-K business prior to the sale were as follows
(excluding the impact of minority interest and management fees allocated to H-
K on the Company's financial statements) for the first nine months of fiscal
year 1996:
<TABLE>
<CAPTION>
FISCAL YEAR
1996
--------------
(IN THOUSANDS)
<S> <C>
Net sales................. $84,807
Cost and expenses......... 84,675
-------
Income before income
taxes.................... 132
Income taxes.............. 53
-------
Net income................ $ 79
=======
</TABLE>
Net assets of the discontinued business were as follows:
<TABLE>
<CAPTION>
OCTOBER 28,
1995
--------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................. $ 1,017
Receivables, net.......................................... 19,395
Merchandise, inventories.................................. 19,906
Land, buildings and equipment net of accumulated
depreciation............................................. 5,634
Other assets.............................................. 2,355
Current liabilities....................................... (21,101)
Long-term debt, net of current portion.................... (2,271)
--------
Net assets of the discontinued business................... $ 24,935
========
</TABLE>
21
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During fiscal 1997, the Company sold three stores and recorded a gain of
$908,000. The gain was offset by a loss of $864,000 resulting from a store
closing. The furniture, fixtures and computer equipment from the four closed
stores (with net book values of approximately $382,000 and $548,000 as of
January 31, 1998 and January 25, 1997, respectively) were retained and placed
into storage. During fiscal 1998, furniture, fixtures and computer equipment
with a net book value of approximately $56,000 were transferred to existing
Goldblatt's stores for replacement needs. It is anticipated that the remaining
fixtures and equipment will be used in the opening of new stores in future
years and as replacement fixtures for store remodeling projects.
9. PENSION, PROFIT-SHARING AND EMPLOYEE BENEFIT PLANS
The Company and its subsidiary have defined contribution plans which
substantially all non-union employees may join after completing one year and
1,000 hours of service. Annually, the companies contribute a discretionary
amount determined by their respective Boards of Directors and participants may
voluntarily contribute varying percentages of their compensation.
Approximately $117,000, $134,000 and $137,000 of expenses relating to these
plans are included in the consolidated statements of operations in fiscal
1998, 1997 and 1996, respectively. All plans are qualified under provisions of
the Internal Revenue Code.
10. STOCK OPTION PLAN
Effective fiscal 1997, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation". As provided by SFAS No. 123, the Company has
elected to continue to account for its stock-based compensation programs
according to the provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees".
Information for the fiscal years ended January 27, 1996, January 25, 1997
and January 31, 1998 with respect to options under the Company's Plans is as
follows:
<TABLE>
<CAPTION>
EXERCISE WEIGHTED-AVERAGE
NUMBER OF PRICE PER EXERCISE
SHARES SHARE PRICE PER SHARE
--------- -------------- ----------------
<S> <C> <C> <C>
Shares under Option:
January 28, 1995.............. 54,500 $1.50 to $4.88 $2.68
Exercised................... (2,667) 1.50 1.50
Expired/Canceled............ (2,333) 1.50 to 3.94 2.54
-------
January 27, 1996.............. 49,500 1.50 to 4.88 2.75
Granted..................... 58,000 1.38 1.38
Expired/Canceled............ (18,333) 4.88 4.88
-------
January 25, 1997.............. 89,167 1.38 to 1.50 1.42
Granted..................... 85,000 1.50 1.50
Expired/Canceled............ (3,000) 1.50 1.50
-------
January 31, 1998.............. 171,167 1.38 to 1.50 1.46
=======
</TABLE>
All options are exercisable for a 10-year period beginning on the date of
the grant. The weighted-average remaining contractual life of options
outstanding at January 31, 1998 is approximately 8 years.
No compensation expense has been recognized by the Company as all options
were granted at the market price of the stock on the day of the grants. Had
compensation expense for the Company's stock based
22
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
compensation plans been determined based on the fair market value at the grant
dates consistent with the method of SFAS 123, the Company's pro forma net loss
and net loss per basic and diluted share would have been approximately
$2,644,000 and $2.62, and $2,200,000 and $1.20 for fiscal 1998 and 1997,
respectively.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions for fiscal 1998 and 1997. Adjustments for forfeitures are made as
they occur.
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Risk free interest rate..................................... 6.26% 6.16%
Expected dividend yield..................................... 0.0% 0.0%
Expected volatility factor.................................. 86.32 94.24
Expected option term (years)................................ 3 3
</TABLE>
The weighted-average fair value per option at the date of grant for options
granted in fiscal 1998 and 1997 was $.88 and $.86, respectively.
11. FOURTH QUARTER ADJUSTMENTS
Results of continuing operations in the fourth quarter of fiscal 1998, 1997
and 1996 were increased by year-end adjustments of approximately $66,000,
$170,000 and $666,000, respectively, which related primarily to adjustments to
inventory and certain miscellaneous accruals.
12. SUPPLEMENTARY INFORMATION
Charges to selling, general and administrative expenses for fiscal 1998,
1997 and 1996 include the following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Advertising costs................................... $1,091 $1,252 $1,571
Real estate and personal property taxes............. 811 1,106 1,282
</TABLE>
Advertising costs are expensed when incurred.
13. RELATED PARTY TRANSACTIONS
The Company purchased a certain annuity contract from a former affiliate to
secure the future consulting payments to the chief executive officer
("Executive"), as required by the Employment Agreement and Consulting
Agreement. The total account value of the contract as of January 31, 1998 and
January 25, 1997 is $1,538,000 and $1,420,000, respectively, and is included
in other assets. Pursuant to the Consulting Agreement, the Executive has
agreed to provide certain services to the Company following the termination of
his employment, and he (or his estate) will be paid $223,000 per year for ten
years. The obligations of the Company, pursuant to the Consulting Agreement,
are secured by the annuity contract, pursuant to a Pledge and Security
Agreement dated as of January 25, 1991.
The Company earned interest of $86,000, $118,000 and $90,000 on this annuity
contract during fiscal 1998, 1997 and 1996, respectively.
23
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
14. SUBSEQUENT EVENTS
Effective May 15, 1998, the Company and Jupiter amended and restated the
Jupiter 6% promissory note (see also note 4). The original $1,745,898
promissory note was amended and restated to a non-interest bearing promissory
note payable in three annual installments of $581,966 each commencing May 15,
1999, with the last installment due and payable on May 15, 2001. In addition,
the accrued and unpaid interest of approximately $119,000 and $149,000 as of
January 31, 1998 and May 15, 1998, respectively, was forgiven. As a result of
this transaction, the Company will recognize an extraordinary gain on debt
restructuring of approximately $129,000, net of related expenses, in the
second quarter of fiscal 1999.
24
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
JG Industries, Inc.
/s/ William Hellman
Dated: June 8, 1998 By __________________________________
William Hellman
Chairman and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
Chief Executive Officer:
<TABLE>
<S> <C> <C>
/s/ William Hellman Chairman and Chief Date: June 8, 1998
____________________________________ Executive Officer
William Hellman
</TABLE>
Directors:
<TABLE>
<S> <C> <C>
/s/ Sheldon Collen Director Date: June 8, 1998
____________________________________
Sheldon Collen
/s/ Clarence Farrar Director Date: June 8, 1998
____________________________________
Clarence Farrar
/s/ Lionel Goldblatt Director Date: June 8, 1998
____________________________________
Lionel Goldblatt
/s/ Sheldon Harris Director Date: June 8, 1998
____________________________________
Sheldon Harris
/s/ William Hellman Director Date: June 8, 1998
____________________________________
William Hellman
/s/ Philip Rootberg Director Date: June 8, 1998
____________________________________
Philip Rootberg
/s/ Wallace W. Schroeder Director Date: June 8, 1998
____________________________________
Wallace W. Schroeder
</TABLE>
25
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
2.1 Disclosure Statement of the Company, dated July 6, 1983,
filed by the Company with the Bankruptcy Court and delivered
to the Company's creditors and shareholders, which describes
the Plan of Reorganization as an Exhibit. (Previously filed
as Exhibit 2.1 to the Current Report on Form 8-K dated
October 14, 1983 and is incorporated herein by reference.)
2.2 Stock Purchase Agreement, dated as of October 1, 1984, among
Goldblatt Bros., Inc., The Jupiter Corporation and JGM
Holdings, Inc., and Marvin Kagan, Robert D. Berk, Dennis R.
McGarvy, Theodore Lazaraton and Paul Homer, as Trustee of
the Marvin Kagan Irrevocable Trust Agreement U/T/A, dated
May 20, 1983, relating to the stock purchase of all of the
outstanding stock of Milgram-Kagan Corporation by the
Company. (Previously filed as Exhibit 2.1 to the Current
Report on Form 8-K dated November 7, 1984, and is
incorporated herein by reference.)
2.3 First Amendment to Stock Purchase Agreement, dated as of
February 28, 1985. (Previously filed as Exhibit 2.3 to the
1986 10-K and is incorporated herein by reference.)
2.4 Purchase and Sale Agreement, dated as of September 29, 1984
(the "Purchase and Sale Agreement"), by and between Jay
Sixteen Corporation (now known as Sussex Group, Ltd. after
name change) and Household Merchandising, Inc. and Huffman
Koos Company. (Previously filed as Exhibit 2.1 to the
Current Report on Form 8-K, dated January 10, 1985 (the
"1985 8-K"), and is incorporated herein by reference.)
2.5 First Amendment to Purchase and Sale Agreement, dated as of
January 4, 1985. (Previously filed as Exhibit 2.2 to the
1985 8-K and is incorporated herein by reference.)
2.6 Second Amendment to Purchase and Sale Agreement, dated as of
January 9, 1985. (Previously filed as Exhibit 2.3 to the
1985 8-K and is incorporated herein by reference.)
2.7 Purchase and Sale Agreement, dated as of March 8, 1985, by
and between Sussex Group, Ltd. and McMahan's Valley Stores.
(Previously filed as Exhibit 2.6 to the 1986 10-K and is
incorporated herein by reference.)
2.8 First Amendment to Purchase and Sale Agreement, dated April
1, 1985. (Previously filed as Exhibit 2.7 to the 1986 10-K
and is incorporated herein by reference.)
2.9 Agreement for the Purchase and Sale of Assets, dated April
15, 1987, by and between Sussex Group, Ltd. and RBK
Furniture, Inc. (Previously filed as Exhibit 2.9 to the 1987
10-K and is incorporated herein by reference.)
2.10 Stock Purchase Agreement, dated September 30, 1985, by and
among Milgram-Kagan Corporation, a Delaware Corporation, and
William A. Wiss individually, and as Trustee under Living
Trust of William A. Wiss, and Alvin Steinman and Marvin
Talan. (Previously filed as Exhibit 2.8 to the 1986 10-K and
is incorporated herein by reference.)
2.11 Agreement and Plan of Reorganization, dated October 10,
1986, by and between JG Industries, Inc. and Goldblatt's
Department Stores, Inc. (Previously filed as Exhibit 2.11 to
the 1987 10-K and is incorporated herein by reference.)
2.12 Agreement and Plan of Reorganization, dated September 25,
1987 by and among the following: JG Industries, Inc., an
Illinois corporation; JGM Holdings, Inc., a Delaware
corporation; The Jupiter Corporation, a Delaware
corporation; Milgram-Kagan Corporation, a Delaware
corporation; and the following individuals: Marvin Kagan,
Dennis R. McGarvy, Theodore Lazaraton, Paul Homer, as
Trustee of the Marvin Kagan Irrevocable Trust Agreement
U/T/A dated May 20, 1983 and Marvin Kagan, as Trustee.
(Previously filed as Exhibit 2.12 to the 1988 10-K and is
incorporated herein by reference.)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
2.13 Stock Purchase Agreement, dated February 15, 1988, by and
among Sussex Group Holding Company and Michael L. Silverman
and Sydney Selati. (Previously filed as Exhibit 2.13 to the
1988 10-K and is incorporated herein by reference.)
2.14 Purchase Agreement, dated as of March 16, 1988 by and
between Ward White U.S.A. Holdings, Inc., a Delaware
corporation, Charles Kushins, Inc., a Delaware corporation,
Milgram-Kagan Corporation, a Delaware corporation and
Kushins Acquisition, Inc., a Delaware corporation.
(Previously filed as Exhibit 2.14 to the April 30, 1988 10-Q
and is incorporated herein by reference.)
2.15 Purchase and Sale Agreement, dated as of June 29, 1989 by
and between BBD Acquisition Corporation, a Delaware
corporation, Sussex Group, Ltd., a Delaware corporation and
JG Industries, Inc., an Illinois corporation. (Previously
filed as Exhibit 2.1 to the August 10, 1989 8-K and is
incorporated herein by reference.)
2.16 First Amendment to Purchase and Sale Agreement, dated as of
August 1, 1989. (Previously filed as Exhibit 2.2 to the
August 10, 1989 8-K and is incorporated herein by
reference.)
2.17 Termination Agreement, dated September 7, 1990 by and among
Marvin Kagan, Milgram-Kagan Corporation, a Delaware
corporation, The Jupiter Corporation, an Illinois
corporation, JG Industries, Inc., an Illinois corporation,
J. Kagan Corporation, an Illinois corporation, JJJ Shoe
Corp., an Illinois corporation, Gold Shoes, Inc., an
Illinois corporation, and JGM Holdings, Inc., a Delaware
corporation. (Previously filed as Exhibit 2.17 to the 1991
10-K and is incorporated herein by reference.)
2.18 Purchase and Sale Agreement, dated as of October 13, 1992 by
and among JG Industries, Inc., Westinghouse Credit
Corporation and The Jupiter Corporation. (Previously filed
as Exhibit 10.1 to the October 13, 1992 8-K and is
incorporated herein by reference.)
2.19 Settlement Agreement, dated as of January 30, 1993 by and
among JG Industries, Inc., The Jupiter Corporation, JGM
Holdings, Inc., Theodore Lazaraton and Dennis McGarvy.
(Previously filed as Exhibit 2.19 to the 1993 10-K and is
incorporated herein by reference.)
2.20 Memorandum of Settlement, dated as of January 30, 1993 by
and among JG Industries, Inc., The Jupiter Corporation, JGM
Holdings, Inc., Marvin Kagan and Paul Homer, Trustee of The
Marvin Kagan Irrevocable Trust. (Previously filed as Exhibit
2.20 to the 1993 10-K and is incorporated herein by
reference.)
2.21 Agreement and Plan of Merger, dated July 20, 1993, between
SGH, Inc. and JG Industries, Inc. (Previously filed in
preliminary form as Exhibit A to the June 22, 1993 Notice of
Annual Meeting of Shareholders and Proxy Statement).
2.22 Stock Purchase and Loan Agreement, dated as of November 3,
1993 (but effective October 29, 1993), among The Jupiter
Corporation, Sussex Group Ltd., and JG Industries, Inc.
(Previously filed as Exhibit 2.22 to the November 30, 1993
Form 10-Q and is incorporated herein by reference.)
2.23 First Amendment to Stock Purchase and Loan Agreement, dated
as of November 29, 1994, among Sussex Group, Ltd., Jupiter
Industries, Inc., and JG Industries, Inc. (Previously filed
as Exhibit 2.23 to the October 29, 1994 10-Q and is
incorporated herein by reference.)
2.24 Stock Purchase Agreement, dated as of November 29, 1994,
between Jupiter Industries, Inc. and Sussex Group, Ltd.
(Previously filed as Exhibit 2.24 to the October 29, 1994
10-Q and is incorporated herein by reference).
2.25 Agreement and Plan of Merger, dated as of September 18,
1995, among Huffman Koos, Inc., HK Acquisition Company, Inc.
and Breuner's Home Furnishings Corporation. (Previously
filed as Exhibit 2.1 to the September 18, 1995 8-K and is
incorporated herein by reference.)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
2.26 Stockholders' Agreement, dated September 18, 1995, among HK
Acquisition Company, Inc., Breuner's Home Furnishings
Corporation, Jupiter Industries, Inc. and Sussex Group, Ltd.
(Previously filed as Exhibit 2.2 to the September 18, 1995
8-K and is incorporated herein by reference.)
3.1 Articles of Amendment and Restated Articles to the Articles
of Incorporation of the Company. (Previously filed as
Exhibit 3.1 to the July 28, 1990 10-Q and is incorporated
herein by reference.)
3.2 By-Laws of the Company, as amended on April 29, 1992.
(Previously filed as Exhibit 3.3 to the April 25, 1992 10-Q
and is incorporated herein by reference.)
4.1 Certificate of the Voting Powers, Designations, Preferences
and Relative, Participating, Optional or Other Rights, and
the Qualifications, Limitations or Restrictions thereof, of
the Series A 9% Cumulative Preferred Stock of the Company.
(Previously filed as Exhibit 4.1 to the July 28, 1990 10-Q
and is incorporated herein by reference.)
4.2 First Amendment to Certificate of the Voting Powers,
Designations, Preferences and Relative, Participating,
Optional or Other Rights, and the Qualifications,
Limitations or Restrictions thereof, of the Series A 9%
Cumulative Preferred Stock of the Company. (Previously filed
as Exhibit 4.2 to the 1991 10-K and is incorporated herein
by reference.)
4.3 Second Amendment to Certificate of the Voting Powers,
Designations, Preferences and Relative, Participating,
Optional or Other Rights, and the Qualifications,
Limitations or Restrictions thereof, of the Series A 9%
Cumulative Preferred Stock of the Company. (Previously filed
as Exhibit 4.3 to the July 25, 1992 10-Q and is incorporated
herein by reference.)
4.4 Third Amendment to Certificate of the Voting Powers,
Designations, preferences and Relative, Participating,
Optional or Other Rights, and the Qualifications,
Limitations or Restrictions thereof, of the Series A 9%
Cumulative Preferred Stock of the Company. (Previously filed
as Exhibit 4.1 to the October 13, 1992 8-K and is
incorporated herein by reference.)
4.5 Statement of Resolution Establishing Series Relating To The
Series B Convertible Preferred Stock, With No Par Value Per
Share, of JG Industries, Inc., filed with the office of the
Secretary of State of the State of Illinois on December 13,
1996. (Incorporated by reference from the Registrant's
definitive proxy statement filed with the Securities and
Exchange Commission on November 22, 1996.)
10.1 Amended and Restated Employment Agreement dated, June 1,
1983, between the Company and William Hellman. (Previously
filed as Exhibit 10.1 to the 1984 10-K and is incorporated
herein by reference.)
10.2 First Amendment to Amended and Restated Employment
Agreement, dated August 8, 1985, between the Company and
William Hellman. (Previously filed as Exhibit 10.2 to the
1986 10-K and is incorporated herein by reference.)
10.3 Guaranty of The Jupiter Corporation, dated as of June 1,
1983 relative to the Amended and Restated Employment
Agreement, dated as of June 1, 1983, by and between the
Company and William Hellman. (Previously filed as Exhibit
10.2 to the 1985 10-K and is incorporated herein by
reference.)
10.4 Second Amendment to Amended and Restated Employment
Agreement, including a Stock Purchase and Sale Agreement,
dated July 23, 1986, between the Company and William
Hellman. (Previously filed as Exhibit 10.4 to the Company's
July 26, 1986 10-Q and is incorporated herein by reference.)
10.5 Employment Agreement, dated June 1, 1983, between the
Company and Lionel H. Goldblatt. (Previously filed as
Exhibit 10.2 to the 1984 10-K and is incorporated herein by
reference.)
10.6 Amendment to Employment Agreement, dated July 22, 1987
between and among the Company, Goldblatt's Department
Stores, Inc. and Lionel H. Goldblatt. (Previously filed as
Exhibit 10.6 to the 1988 10-K and is incorporated herein by
reference.)
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
10.7 Incentive Stock Option and Non-Statutory Stock Option
Agreement. (Previously filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-8, dated September 29,
1984, and is incorporated herein by reference.)
10.8 1983 Stock Option and Stock Appreciation Rights Plan.
(Previously filed as Exhibit 10.4 to the 1984 10-K and is
incorporated herein by reference.)
10.9 1988 Stock Option Plan (Previously filed as Exhibit 10.9 to
the 1989 10-K and is incorporated herein by reference.)
10.10 Third Amendment to Amended and Restated Employment
Agreement, dated October 3, 1988, between the Company and
William Hellman.(Previously filed as Exhibit 10.10 to the
1989 10-K and is incorporated herein by reference.)
10.11 Fourth Amendment to Amended and Restated Employment
Agreement, dated March 28, 1989, between the Company and
William Hellman. (Previously filed as Exhibit 10.11 to the
1989 10-K and is incorporated herein by reference.)
10.12 Fourth Amendment to Employment Agreement, dated April 6,
1988 between and among the Company, Goldblatt's Department
Stores, Inc. and Lionel H. Goldblatt. (Previously filed as
Exhibit 10.12 to the 1989 10-K and is incorporated herein by
reference.)
10.13 Fifth Amendment to Employment Agreement, dated March 28,
1989 between and among the Company, Goldblatt's Department
Stores, Inc. and Lionel H. Goldblatt. (Previously filed as
Exhibit 10.13 to the 1989 10-K and is incorporated herein by
reference.)
10.14 Fifth Amendment to Amended and Restated Employment
Agreement, dated January 25, 1991 between the Company and
William Hellman. (Previously filed as Exhibit 10.14 to the
1991 10-K and is incorporated herein by reference.)
10.15 Sixth Amendment to Employment Agreement, dated January 28,
1991 between and among the Company, Goldblatt's Department
Stores, Inc. and Lionel H. Goldblatt. (Previously filed as
Exhibit 10.15 to the 1991 10-K and is incorporated herein by
reference.)
10.16 Seventh Amendment to Employment Agreement, dated February
18, 1992 between and among the Company, Goldblatt's
Department Stores, Inc. and Lionel H. Goldblatt. (Previously
filed as Exhibit 10.16 to the 1992 10-K and is incorporated
herein by reference.)
10.17 Sixth Amendment to Amended and Restated Employment
Agreement, dated April 27, 1992, between the Company and
William Hellman. (Previously filed as Exhibit 10.17 to the
April 25, 1992 10-Q and is incorporated herein by
reference.)
10.18 Eighth Amendment to Employment Agreement, dated February 23,
1994 between and among the Company, Goldblatt's Department
Stores, Inc. and Lionel H. Goldblatt. (Previously filed as
Exhibit 10.18 to the January 29, 1994 Form 10-K and is
incorporated herein by reference.)
10.19 Eighth Amendment to Amended and Restated Employment
Agreement, dated May 26, 1994, between the Company and
William Hellman. (Previously filed as Exhibit 10.19 to the
April 30, 1994 10-Q and is incorporated herein by
reference.)
10.20 Ninth Amendment to Employment Agreement, dated April 19,
1995, between and among the Company, Goldblatt's Department
Stores, Inc. and Lionel H. Goldblatt. (Previously filed as
Exhibit 10.20 to the January 28, 1995 10-K and is
incorporated herein by reference.)
10.21 Ninth Amendment to Amended and Restated Employment
Agreement, dated June 12, 1995, between the Company,
Goldblatt's Department Stores, Inc. and William Hellman.
(Previously filed as Exhibit 10.21 to the July 28, 1995 Form
10-Q and is incorporated herein by reference.)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
10.22 Stock Purchase Agreement, dated December 13, 1996, by and
among Jupiter Industries, Inc. and the Registrant.
(Incorporated by reference from the Registrant's definitive
proxy statement filed with the Securities and Exchange
Commission on November 22, 1996.)
10.23 Series B Convertible Preferred Stock Purchase Agreement,
dated December 13, 1996, by and among William Hellman,
Philip Rootberg and Sheldon Harris and the Registrant.
(Incorporated by reference from the Registrant's definitive
proxy statement filed with the Securities and Exchange
Commission on November 22, 1996.)
10.24 Thirteenth Amendment to Amended and Restated Employment
Agreement, dated February 1, 1997, between the Company,
Goldblatt's Department Stores, Inc. and William Hellman.
(Previously filed as Exhibit 10.24 to the January 25, 1997
Form 10-K and is incorporated herein by reference.)
10.25 Employment Agreement, dated February 1, 1997, between the
Company and Clarence Farrar. (Previously filed as Exhibit
10.25 to the January 25, 1997 Form 10-K and is incorporated
herein by reference.)
10.26 Employment Agreement, dated February 1, 1997, between
Goldblatt's Department Stores, Inc. and Lionel Goldblatt.
(Previously filed as Exhibit 10.26 to the January 25, 1997
Form 10-K and is incorporated herein by reference.)
10.27 Fourteenth Amendment to Amended and Restated Employment
Agreement, dated August 31, 1997, between the Company,
Goldblatt's Department Stores, Inc. and William Hellman.
21 List of Subsidiaries.
23 Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
27 Financial Data Schedule.
28.1 Supplemental Agreement, dated as of June 17, 1983, between
the Company, Goldblatt Subsidiary, Inc. ("GS"), Jupiter
Subsidiary A. Inc. ("JSA"), J.G. Investments ("JG") and J.
Gold Corporation, together with a modification dated
September 30, 1983. (Previously filed as Exhibit 28.1 to the
1983 8-K and is incorporated herein by reference.)
28.2 Agreement and Plan of Merger, dated September 30, 1983,
between JSA and GS. (Previously filed as Exhibit 28.2 to the
1983 8-K and is incorporated herein by reference.)
</TABLE>
30
<PAGE>
EXHIBIT 10.27
FOURTEENTH AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
THIS AGREEMENT, entered into as of the 31st day of August, 1997, between JG
INDUSTRIES, INC.("JG"), an Illinois corporation, GOLDBLATT'S DEPARTMENT STORES,
INC. ("Goldblatt's"), an Illinois corporation (collectively, the "Employer"),
and WILLIAM HELLMAN (the "Employee").
WHEREAS, Employee has been employed by Employer in an executive capacity
pursuant to an Amended and Restated Employment Agreement dated as of the first
day of June, 1983, as amended (the "Employment Agreement"); and
WHEREAS, Employer and Employee desire to further amend the Employment
Agreement in certain respects as hereinafter stated;
ACCORDINGLY, the Employment Agreement is hereby amended and restated in the
following respect;
1. New Termination Date. The Employment Period shall terminate on August
31, 1998.
2. Base Compensation. Paragraph 3(a) is deleted in its entirety and the
following is substituted in its place and stead:
"(a) Base Compensation. He shall receive a salary for the Employment Period
based upon an annual salary of $250,000 ("Base Compensation") payable in
monthly or more frequent installments in accordance with Employer's
remuneration policy respecting executives."
<PAGE>
3. Annuity Contracts. The provisions respecting Annuity Contracts set
forth in paragraph 3 of the Thirteenth Amendment to the Employment Agreement
shall be modified to provide that the monthly annuity payment shall be increased
to $18,583.
4. Effect of Amendment. All other paragraphs of the Employment Agreement,
as heretofore amended, shall remain unchanged and shall continue in full force
and effect.
IN WITNESS WHEREOF, the Employee and the Employer have executed this
Fourteenth Amendment to Amended and Restated Employment Agreement as of the date
first above written.
/s/ William Hellman
-------------------
William Hellman
JG INDUSTRIES, INC.
By: /s/ Clarence Farrar
-------------------
Its: President
GOLDBLATT'S DEPARTMENT STORES, INC.
By: /s/ Lionel Goldblatt
--------------------
Its: Chairman
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
____________
Goldblatt's Department Stores, Inc.
Capital & Vermont Realty Corporation
Goldblatt Subsidiary, Inc.
GBI Belmont Central, Inc.
Sussex Group Holding Company
Sussex Group, Ltd.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of JG
Industries, Inc. and Subsidiaries on Form S-8 of our report dated April 24,
1998, except as to information presented in Notes 4 and 14 for which the date is
May 15, 1998, on our audits of the consolidated financial statements of JG
Industries, Inc. and Subsidiaries as of January 31, 1998 and January 25, 1997,
and for each of the three fiscal years in the period ended January 31, 1998,
which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
June 8, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of JG Industries, Inc. and subsidiaries for
the fiscal years ended January 31, 1998 and January 25, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JAN-31-1998 JAN-25-1997
<PERIOD-START> JAN-26-1997 JAN-28-1996
<PERIOD-END> JAN-31-1998 JAN-25-1997
<CASH> 630 1,714
<SECURITIES> 0 0
<RECEIVABLES> 302 332
<ALLOWANCES> 21 42
<INVENTORY> 6,242 6,305
<CURRENT-ASSETS> 7,457 8,533
<PP&E> 14,907 14,908
<DEPRECIATION> 9,916 9,395
<TOTAL-ASSETS> 14,213 15,675
<CURRENT-LIABILITIES> 4,928 5,091
<BONDS> 2,518 1,164
0 0
1,500 1,500
<COMMON> 11,246 11,246
<OTHER-SE> (6,662) (3,955)
<TOTAL-LIABILITY-AND-EQUITY> 14,213 15,675
<SALES> 53,483 60,198
<TOTAL-REVENUES> 53,483 60,198
<CGS> 36,371 40,526
<TOTAL-COSTS> 55,906 62,393
<OTHER-EXPENSES> 247<F1> 250<F1>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 151 161
<INCOME-PRETAX> (2,556) (2,088)
<INCOME-TAX> 13 13
<INCOME-CONTINUING> (2,569) (2,101)
<DISCONTINUED> 0 (49)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,569) (2,150)
<EPS-PRIMARY> $(2.55) $(1.17)
<EPS-DILUTED> $(2.55) $(1.17)
<FN>
<F1>Includes interest expense.
</FN>
</TABLE>
