<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 30, 1999
--------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ___________________
Commission File number 1-258
-------------------------------------------------
JG INDUSTRIES, INC.
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
ILLINOIS 36-1141010
- ----------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5630 WEST BELMONT AVENUE CHICAGO, IL 60634
- ------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(773) 481-5410
- ------------------------------------------------------------------------
(Registrant's telephone number, including area code)
________________________________________________________________________
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.
Yes X No__
---
Common Stock outstanding as of October 30, 1999 - 1,061,654 shares
- ------------------------------------------------------------------
1
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
Company or group of companies for which report is filed:
JG INDUSTRIES, INC. AND SUBSIDIARIES (Company)
----------------------------------------------
In the opinion of management, all adjustments necessary to fairly present the
condensed consolidated financial position of the Company as of October 30, 1999,
January 30, 1999, and October 31, 1998 and the results of its operations and its
cash flows for the thirteen and thirty-nine week periods ended October 30, 1999
(fiscal 2000) and October 31, 1998 (fiscal 1999) have been included. These
adjustments consist solely of normal recurring accruals. The results of
operations for such interim periods are not necessarily indicative of results
for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto in the
Company's latest Annual Report on Form 10-K.
2
<PAGE>
JG INDUSTRIES, INC AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
October 30 January 30, October 31
1999 1999 1998
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7 $ 212 $ 213
Receivables, net 538 198 697
Merchandise inventories 9,486 5,724 9,221
Other current assets - restricted $223,
$223 and $0, respectively 343 256 110
--------- --------- ---------
Total current assets 10,374 6,390 10,241
--------- --------- ---------
Land, buildings and
equipment, at cost 13,263 13,750 14,538
Less accumulated depreciation
and amortization 9,397 9,535 10,115
--------- --------- ---------
3,866 4,215 4,423
--------- --------- ---------
Leasehold rights, net 22 25 26
Other assets - restricted $1,214,
$1,299 and $1,549, respectively 1,421 1,504 1,739
--------- --------- ---------
$ 15,683 $ 12,134 $ 16,429
========= ========= =========
LIABILITIES, COMMON STOCK AND
OTHER SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 2,366 $ 5 $ 1,600
Current portion of long-term debt
and capitalized lease obligations 42 530 611
Accounts payable 6,831 3,084 5,323
Accrued liabilities 1,720 2,210 2,176
Accrued dividends 7 7 7
--------- --------- ---------
Total current liabilities 10,966 5,836 9,717
--------- --------- ---------
Long-term debt and capitalized lease
obligations, less current portion 732 745 1,914
Other long-term liabilities 539 605 693
Minority interest 1,523 1,457 1,432
Common stock and other shareholders' equity
Common shares; no par value; authorized
10,000,000 shares; issued 2,406,770,
2,405,770 and 2,405,770 shares, respectively 11,246 11,246 11,246
Paid-in Capital 5,939 5,939 5,939
Convertible preferred stock; no par
value; authorized and issued 1,500 shares 1,500 1,500 1,500
Accumulated deficit (13,149) (11,581) (12,399)
Treasury shares - 1,345,116, 1,345,100 and
1,345,100 shares at cost, respectively (3,613) (3,613) (3,613)
--------- --------- ---------
1,923 3,491 2,673
--------- --------- ---------
$ 15,683 $ 12,134 $ 16,429
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED OCTOBER 30, 1999 AND
OCTOBER 31, 1998
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
---------------------------- -----------------------------
October 30 October 31 October 30 October 31
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 12,402 $ 13,725 $ 36,042 $ 38,145
Cost of sales 7,985 8,919 23,731 25,372
---------- ---------- ---------- ----------
Gross profit 4,417 4,806 12,311 12,773
Selling, general and
administrative expenses 4,431 4,828 13,354 14,172
---------- ---------- ---------- ----------
Operating loss from continuing operations (14) (22) (1,043) (1,399)
Interest (expense) income, net (47) 25 (110) (52)
Gain on sale of assets 3
Provision for store closing (222) (380) (222) (380)
Minority interest in net income
of subsidiary (23) (27) (66) (74)
---------- ---------- ---------- ----------
Loss from operations before
income tax provision (306) (404) (1,438) (1,905)
Income tax provision (10) (9) (29) (29)
---------- ---------- ---------- ----------
Loss before extraordinary gain (316) (413) (1,467) (1,934)
Extraordinary item:
Gain on debt restructuring,
net of related expenses 124
---------- ---------- ---------- ----------
Net loss $ (316) $ (413) $ (1,467) $ (1,810)
========== ========== ========== ==========
Net loss applicable to common
shareholders $ (350) $ (447) $ (1,568) $ (1,911)
========== ========== ========== ==========
Basic and diluted earnings
per common share:
Loss before extraordinary gain $ (0.33) $ (0.42) $ (1.48) $ (1.92)
Extraordinary gain 0.12
---------- ---------- ---------- ----------
Net loss per common share $ (0.33) $ (0.42) $ (1.48) $ (1.80)
========== ========== ========== ==========
Weighted average number of common
shares outstanding 1,061,221 1,060,670 1,060,853 1,060,670
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY
for the fiscal year ended January 30, 1999
and the thirty-nine week period ended October 30, 1999
(in thousands)
(unaudited)
------------------------------
<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 31, 1998 $11,246 $ 5,939 $ 1,500 $ (10,488) $ (3,613) $ 4,584
Net loss, fiscal 1999 (958) (958)
Dividends accrued on
convertible preferred stock (135) (135)
-------- --------- --------- ----------- ---------- ----------
Balances, January 30, 1999 11,246 5,939 1,500 (11,581) (3,613) 3,491
Net loss, thirty-nine week
period ended October 30, 1999 (1,467) (1,467)
Dividends accrued on
convertible preferred stock (101) (101)
-------- --------- --------- ----------- ---------- ----------
Balances, October 30, 1999 $11,246 $ 5,939 $ 1,500 $ (13,149) $ (3,613) $ 1,923
======== ========= ========= =========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
5
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
FOR THE THIRTY-NINE WEEK PERIODS ENDED OCTOBER 30, 1999 AND OCTOBER 31, 1998
----------------------------------------------------------------------------
(in thousands)
--------------
(unaudited)
-----------
<TABLE>
<CAPTION>
39 Weeks Ended
---------------------------
October 30 October 31
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,467) $ (1,810)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 623 703
Minority interest 66 74
Gain on sale of assets, net (3)
Provision for store closing 222 380
Changes in assets and liabilities:
Accounts receivable (340) (416)
Merchandise inventories (3,860) (3,054)
Other assets (current) (87) 194
Other assets (noncurrent) 82 (3)
Accounts payable and accrued liabilities 3,196 2,512
Other liabilities (noncurrent) (66) (132)
---------- ----------
Net cash used in operating activities (1,634) (1,552)
---------- ----------
Cash flows from investing activities:
Capital expenditures (302) (343)
Proceeds from sale of assets 3
---------- ----------
Net cash used in investing activities (299) (343)
---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit 2,361 1,600
Redemption of promissory note to Jupiter (500)
Principal payments of long-term debt
and capital lease obligations (32) (21)
Dividends paid on convertible preferred stock (101) (101)
---------- ----------
Net cash provided by financing activities 1,728 1,478
---------- ----------
Net decrease in cash and cash equivalents (205) (417)
Cash and cash equivalents at beginning of year 212 630
---------- ----------
Cash and cash equivalents at end of thirty-nine week period $ 7 $ 213
========== ==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
1) Merchandise inventories are stated at the lower of cost or market. Cost is
determined on the last-in, first-out ("LIFO") basis for approximately 88%,
85% and 88% of the inventory as of October 30, 1999, January 30, 1999 and
October 31, 1998, respectively, using the retail method. The remaining
inventory is valued on the first-in, first-out ("FIFO") basis using the
retail method. If the FIFO method had been used to value all inventories,
cost would have been $524,000, $479,000 and $542,000 higher at October 30,
1999, January 30, 1999 and October 31, 1998, respectively.
2) Receivables are presented net of allowances for doubtful accounts of
approximately $16,000 at October 30, 1999 and January 30, 1999, and $17,000
at October 31, 1998.
3) Leasehold rights are shown net of accumulated amortization of $28,000 at
October 30, 1999, $25,000 at January 30, 1999 and $24,000 at October 31,
1998.
4) The Company entered into a capital lease for computer equipment during
fiscal year 2000. Future minimum lease payments at October 30, 1999 for the
following fiscal years are as follows:
Fiscal Year Amount
----------- ------
2000 $ 2,969
2001 11,874
2002 11,877
--------
Total minimum lease payments 26,720
Less amount representing interest 2,547
--------
24,173
Less current portion of capital lease
obligation 10,159
--------
Long-term capital lease obligations $ 14,014
--------
The accumulated depreciation on the capital lease was approximately $3,000
as of October 30, 1999.
5) On January 29, 1999, the Company and Jupiter Industries, Inc. ("Jupiter")
entered into a Cancellation Agreement whereby the $1,745,898 amended and
restated promissory note was canceled in return for a lump-sum payment of
$500,000 as full settlement of the outstanding debt obligation. During the
first quarter of fiscal 2000, the Company made the $500,000 lump-sum
payment to Jupiter. As a result of the negotiated settlement, the $500,000
obligation was reported as a current liability as of January 30, 1999.
7
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
-----------
6) Effective January 28, 1999, Goldblatt's entered into a new Loan and
Security Agreement with a national financial institution. The new agreement
provides a revolving line of credit of up to $3,000,000 through January,
2001 based on availability of a borrowing base equal to 50% of merchandise
inventory, computed on a FIFO basis. The line is collateralized by
Goldblatt's inventory and cash and cash equivalents. The line of credit
agreement requires that Goldblatt's maintain a FIFO inventory cost of at
least $5,500,000. Additionally, the Company is required to pay down the
outstanding line of credit with any available cash on a daily basis. The
line is guaranteed by the Company. As of October 30, 1999, there was
approximately $2,366,000 in outstanding borrowings on the line and, as of
that date, approximately $634,000 was available on the line of credit.
7) On July 13, 1999, the Company's shareholders approved the authorization for
issuance of 2,000 shares of Series C Preferred Stock, no par value per
share (the "Series C Preferred Stock"). The Liquidation Value of the Series
C Preferred Stock is initially set at $1,000 per share. Dividends upon each
Series C Preferred Share will accrue daily at a rate equal to 9% per annum.
Dividends will accumulate until paid, and will be paid when and as declared
by the Board of Directors.
The holders of Series C Preferred Stock will not be entitled to vote on any
matters submitted to the vote of the Company's shareholders. Shares of the
Company's Common Stock are subordinated to the Series C Preferred Stock.
The Series C Preferred Stock will rank equally with the Series B
Convertible Preferred Stock, no par value per share, with respect to
priority of payment of dividends and Liquidation Value.
As of October 30, 1999, no shares of the Series C Preferred Stock had been
issued.
8) On August 24, 1999, the Company canceled substantially all of the
outstanding stock options previously granted under prior stock option
plans, and then granted a comparable number of new stock options under the
1999 Amendment and Restatement of the 1988 Stock Option Plan. No
compensation expense was recognized at the date of grant by the Company as
all options were granted at the market price of the stock on the date of
the grant. However, these options will be subject to a variable plan
treatment once the FASB Interpretation of Opinion 25, "Accounting for
Certain Transactions Involving Stock Compensation" becomes effective. Under
this proposed interpretation, the Company will measure compensation expense
at each reporting date. The effects of applying this proposed
interpretation would be recognized on a prospective basis from the
effective date, and currently cannot be estimated.
8
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
9) On November 1, 1999, the Company closed one of its underperforming
Goldblatt's store locations in the Chicagoland area. All store merchandise
was purchased by a professional liquidator, who has been contracted to
liquidate the merchandise over a ten-week time frame in the present
location. As a result of this store closing, the Company has recorded store
closing costs of approximately $222,000, which are comprised of a write-
down of merchandise of approximately $98,000, a write-off of the furniture
and fixtures of approximately $62,000 and a store closing provision of
approximately $62,000. The store closing provision includes fixed operating
expenses for rent and insurance costs during the liquidation time period.
The lease for this store expires on January 31, 2000 and the store location
will be vacated by this time; thus, there will be no additional financial
obligations to the landlord beyond the current fiscal year-end.
10) For the third quarters of fiscal 2000 and 1999, basic and diluted per share
calculations are computed based on the weighted average number of common
shares outstanding of 1,061,221 and 1,060,670, respectively. For the first
39-week periods of fiscal 2000 and 1999, basic and diluted per share
calculations are computed based on the weighted average number of common
shares outstanding of 1,060,853 and 1,060,670, respectively. Incremental
shares from assumed conversions of preferred stock and stock options of
700,253 and 666,667 in the third quarters of fiscal 2000 and 1999,
respectively, and 677,862 and 666,667 for the first 39-week periods of
fiscal 2000 and 1999, respectively, are not included as they would be anti-
dilutive. Options to purchase 6,167 and 162,167 shares of common stock were
outstanding at October 30, 1999 and October 31, 1998, respectively, 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 would also be anti-dilutive.
Loss per share applicable to common shares is computed after recognition of
the dividend requirements on the convertible preferred stock of $101,000 in
fiscal 2000 and in fiscal 1999.
9
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash and cash equivalents decreased by $205,000 during the nine months ended
October 30, 1999, which included approximately $1,634,000 of net cash used in
operating activities. Accounts receivable increased by $340,000 due primarily to
a normal seasonal increase in layaway receivables during the fall shopping
season. In addition, merchandise inventory levels increased by approximately
$3,860,000 as the Company stocked up for the very busy holiday shopping season.
Accordingly, Goldblatt's trade accounts payable increased by $3,759,000 to
coincide with the increased inventory levels.
Goldblatt's spent approximately $302,000 on capital expenditures during the
first nine months of fiscal 2000. These expenditures were for normal capital
maintenance as well as certain upgrades to existing equipment related to Year
2000 compliance. Capital expenditures for the remainder of fiscal 2000 will
focus on a minimal amount of leasehold improvement renovations and additional
computer equipment pertaining to Year 2000 compliance.
Effective January 28, 1999, Goldblatt's executed a new Loan and Security
Agreement with a national financial institution. The new agreement provides a
revolving line of credit of up to $3,000,000 through January, 2001 based on
availability of a borrowing base equal to 50% of merchandise inventory, computed
on a FIFO basis. The line is collateralized by Goldblatt's inventory and cash
and cash equivalents. The line of credit agreement requires that Goldblatt's
maintain a FIFO inventory cost of at least $5,500,000. Additionally, the Company
is required to pay down the outstanding line of credit with any available cash
on a daily basis. The line is guaranteed by the Company. As of October 30, 1999,
there was approximately $2,366,000 in outstanding borrowings on the line and, as
of that date, $634,000 was available on the line of credit.
On January 29, 1999, the Company and Jupiter entered into a Cancellation
Agreement whereby the $1,745,898 amended and restated promissory note was
canceled in return for a lump-sum payment of $500,000 as full settlement of the
outstanding debt obligation. During the first quarter of fiscal 2000, the
Company made the $500,000 lump-sum payment to Jupiter.
On November 1, 1999, the Company closed one of its underperforming Goldblatt's
store locations in the Chicagoland area. All store merchandise was purchased by
a professional liquidator, who has been contracted to liquidate the remaining
inventory over a ten-week time frame in the present location. As a result of
this store closing, the Company has recorded store closing costs of
approximately $222,000. This includes a write-down of merchandise of
approximately $98,000, a write-off of the furniture and fixtures of
approximately $62,000 and fixed operating expenses of approximately $62,000. As
a result of this store closing, the Company anticipates generating cash proceeds
of approximately $503,000 from the sale of the inventory. Net cash proceeds of
approximately $441,000 are expected after consideration of the $62,000 in fixed
operating expenses. The lease for this store expires on January 31, 2000 and the
store location will be vacated by this time; thus, there will be no additional
financial obligations to the landlord beyond the current fiscal year-end.
The Company believes that Goldblatt's working capital and line of credit, in
addition to the cash infusion generated from the sale of the closed store's
inventory, will be adequate to fund current operations and service the Company's
debt through fiscal 2000.
10
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
YEAR 2000 ISSUE
---------------
The Year 2000 issue concerns the inability of information systems to properly
recognize and process date-sensitive information beyond January 1, 2000. Many of
our systems and related software are Year 2000 compliant. However, systems
critical to our business which have been identified as non-Year 2000 compliant
are either being replaced or corrected through programming modifications. The
Company is utilizing both internal personnel and outside vendors to identify the
Year 2000 noncompliance problems, modify code as necessary and test the
modifications.
The Company has focused its efforts on maintaining the data integrity of the
existing financial reporting programs and the current store-level operating
systems. The Company utilizes an IBM AS400 mainframe system operating with JDA
software. The Company has already finished testing on the financial reporting
applications of the AS400 system. Based upon a thorough review of the
programming code by an outside vendor, the AS400 program is undergoing minor
levels of modification to become Year 2000 compliant. An upgrade to the AS400
system has been completed and financed through working capital with minimal
cost.
Testing of the store-level operating and cash register systems has been
completed. It was determined that no Year 2000 compliance issues threaten the
stores' ability to process transactions. Credit card authorization software
upgrades have been performed by our credit card processing company. Although we
are confident about our ability to operate on January 1, 2000, we have developed
a set of contingency procedures to utilize in the event that forces outside our
control impact our normal operations. Some programming modifications and new
equipment upgrades have been completed and financed through working capital with
minimal cost.
The Company is monitoring the progress of its primary suppliers and vendors
regarding their Year 2000 compliance. In general, they have developed plans to
address the Year 2000 issues. The Company is also reviewing its own non-
information technology systems to determine the extent of any changes that may
be necessary, and believes that there will be minimal changes necessary for
compliance.
The Company anticipates total spending of approximately $150,000 through fiscal
year 2000 on the Year 2000 issue. The Company has already spent approximately
$100,000 through October 30, 1999. Maintenance or modification costs are being
expensed as incurred, while the replacement of certain systems are being
capitalized. The Company does not expect the costs relating to Year 2000
remediation to have a material effect on its results of operations or financial
condition.
The Company's financial condition or liquidity could be adversely effected by
business disruption and operational problems if needed modifications to the
financial reporting programs and store-level operating systems are not completed
on a timely basis. Although not anticipated, the worst-case scenario of failure
by the Company or its business partners to resolve the Year 2000 issue would be
a short-term slowdown in processing credit card transactions. Also, we
anticipate limited disruption in our purchasing function as our internal
purchasing procedures are manually intensive.
11
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
YEAR 2000 ISSUE - CONTINUED
---------------------------
While we continue to focus on solutions for the Year 2000 issues, and expect to
be Year 2000 compliant in a timely manner, we have developed a contingency plan.
As a contingency to ensure uninterrupted processing of accounts payable and
financial reporting applications, the Company has retained the older AS400
mainframe system to operate in tandem during the first fiscal period of
operation in the new calendar year.
RESULTS OF OPERATIONS
---------------------
Thirteen Weeks Ended October 30, 1999 (fiscal 2000) vs.
- -------------------------------------------------------
Thirteen Weeks Ended October 31, 1998 (fiscal 1999)
- ---------------------------------------------------
The loss from operations before extraordinary gain decreased by approximately
$97,000 as compared to the third quarter of fiscal 1999.
Net sales for the quarter were $12,402,000 as compared to last year's comparable
store sales of $12,743,000. Unseasonably mild weather experienced at the onset
of the fall put a temporary setback on the sales of fall and winter clothing
during the early fall shopping season. Since then, sales have rebounded well and
for the month of November, the Company's sales increased by approximately 3.2%
over last year on a comparable store basis.
Despite the reduced sales volume, the Company's gross profit percentage improved
to 35.6% of sales from 35.0% of sales in the third quarter of fiscal 1999. This
improvement is attributable to more opportunistic purchasing complemented by
tighter controls on markdowns.
Selling, general and administrative ("SG&A") expenses decreased by $397,000 for
the quarter as compared to the previous year. Savings in store-level operating
expenses were attained this quarter in part from operating one less store
location versus last year. Reductions in outside service-related expenses,
health insurance and corporate overhead expenditures were also experienced this
quarter as compared to the third quarter of fiscal 1999. SG&A expenses were
35.7% of sales versus 35.2% of sales during the same period last year.
On November 1, 1999, the Company closed one of its underperforming Goldblatt's
store locations in the Chicagoland area. All store merchandise was purchased by
a professional liquidator, who has been contracted to liquidate the merchandise
over a ten-week time frame in the present location. As a result of this store
closing, the Company has recorded store closing costs of approximately $222,000,
which are comprised of a write-down of merchandise of approximately $98,000, a
write-off of the furniture and fixtures of approximately $62,000 and a store
closing provision of approximately $62,000. The store closing provision includes
fixed operating expenses for rent and insurance costs during the liquidation
time period. The lease for this store expires on January 31, 2000 and the store
location will be vacated by this time; thus, there will be no additional
financial obligations to the landlord beyond the current fiscal year-end.
12
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
---------------------
Thirty-nine Weeks Ended October 30, 1999 (fiscal 2000) vs.
- ----------------------------------------------------------
Thirty-nine Weeks Ended October 31, 1998 (fiscal 1999)
- ------------------------------------------------------
The net loss for the first 39 weeks of fiscal 2000 decreased approximately
$343,000 as compared to the first 39 weeks of fiscal 1999. Last year's net loss
is inclusive of a $124,000 extraordinary gain on debt restructuring.
Consequently, the Company's loss from operations before extraordinary gain has
improved by $467,000 so far this year as compared to the first 39 weeks of last
year.
Net sales for the nine month period were $36,042,000 versus comparable store
sales of $35,287,000 for the same period last year. Additional promotional
efforts made during the Easter selling season spurred a positive sales trend
attained during the spring season. Unseasonably mild weather experienced during
the early fall season slightly tempered the sales increase, but through nine
months, year-to-date comparable store sales have increased by 2.1% over the
previous year.
The Company's gross profit percentage increased to 34.2% of sales from 33.5% of
sales for the same period last year. This improvement is attributable to more
opportunistic purchasing along with less markdowns and a reduced level of
inventory shrinkage.
SG&A expenses decreased by $818,000 for the nine month period as compared to
fiscal 1999. Savings in store-level operating expenses were achieved this year
from operating one less store location versus last year. Reductions in supplies,
utilities, outside service-related expenses, corporate overhead expenditures
and, particularly, health insurance have also been experienced so far this year.
As a result, SG&A expenses have improved to 37.1% of sales versus 37.2% of sales
for the comparable nine month period last year.
On November 1, 1999, the Company closed one of its underperforming Goldblatt's
store locations in the Chicagoland area. All store merchandise was purchased by
a professional liquidator, who has been contracted to liquidate the merchandise
over a ten-week time frame in the present location. As a result of this store
closing, the Company has recorded store closing costs of approximately $222,000,
which are comprised of a write-down of merchandise of approximately $98,000, a
write-off of the furniture and fixtures of approximately $62,000 and a store
closing provision of approximately $62,000. The store closing provision includes
fixed operating expenses for rent and insurance costs during the liquidation
time period. The lease for this store expires on January 31, 2000 and the store
location will be vacated by this time; thus, there will be no additional
financial obligations to the landlord beyond the current fiscal year-end.
13
<PAGE>
JG INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
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, computer system enhancements to enable Year 2000 compliance,
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.
PART II - OTHER INFORMATION
- ---------------------------
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the under-
signed thereunto fully authorized.
JG INDUSTRIES, INC.
-------------------
(Registrant)
Date: December 14, 1999 /s/ Clarence Farrar
----------------- -------------------
CLARENCE FARRAR
President
/s/ Clifford Gutmann
--------------------
CLIFFORD GUTMANN
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JG
INDUSTRIES, INC. FORM 10-Q FOR THE THIRD QUARTER OF FISCAL 2000 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JAN-29-2000 JAN-30-1999
<PERIOD-START> JAN-31-1999 FEB-01-1998
<PERIOD-END> OCT-30-1999 OCT-31-1998
<CASH> 7 213
<SECURITIES> 0 0
<RECEIVABLES> 554 714
<ALLOWANCES> 16 17
<INVENTORY> 9,486 9,221
<CURRENT-ASSETS> 10,374 10,241
<PP&E> 13,263 14,538
<DEPRECIATION> 9,397 10,115
<TOTAL-ASSETS> 15,683 16,429
<CURRENT-LIABILITIES> 10,966 9,717
<BONDS> 732 1,914
0 0
1,500 1,500
<COMMON> 11,246 11,246
<OTHER-SE> (10,823) (10,073)
<TOTAL-LIABILITY-AND-EQUITY> 15,683 16,429
<SALES> 36,042 38,145
<TOTAL-REVENUES> 36,042 38,145
<CGS> 23,731 25,372
<TOTAL-COSTS> 23,731 25,372
<OTHER-EXPENSES> 13,354 14,172
<LOSS-PROVISION> 222 380
<INTEREST-EXPENSE> 110 52
<INCOME-PRETAX> (1,438) (1,905)
<INCOME-TAX> 29 29
<INCOME-CONTINUING> (1,467) (1,934)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 124
<CHANGES> 0 0
<NET-INCOME> (1,467) (1,810)
<EPS-BASIC> (1.48) (1.80)
<EPS-DILUTED> (1.48) (1.80)
</TABLE>
