FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 29, 1994
Commission file number 0-6319
JACOBSON STORES INC.
(Exact name of registrant as specified in its charter)
Michigan 38-0686330
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3333 Sargent Road, Jackson, Michigan 49201
(Address of principal executive offices)
(517) 764-6400
(Registrant's telephone number, including area code)
Not Applicable
(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 requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock ($1 Par Value):
5,779,021 Shares Outstanding, excluding
187,200 shares held in treasury, as of October 29, 1994
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For Quarter Ended October 29, 1994
INDEX
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
. Consolidated Balance Sheets -
October 29, 1994 and January 29, 1994 1
. Consolidated Statements of Earnings -
Thirteen and Thirty-Nine Week Periods Ended
October 29, 1994 and October 30, 1993 2
. Consolidated Statements of Cash Flows -
Thirty-Nine Week Periods Ended October 29,
1994 and October 30, 1993 3
. Notes to Consolidated Financial Statements 4
Review by Independent Public Accountants 12
Exhibit:
. Report of Independent Public Accountants 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
PART II: OTHER INFORMATION
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
All items except those set forth above are inapplicable and have been
omitted.
SIGNATURES 20
INDEX OF EXHIBITS
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
October 29, January 29,
ASSETS 1994 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,724 $ 5,899
Receivables from customers, net 37,438 45,668
Merchandise inventories 106,862 80,768
Prepaid expenses and other assets 2,796 1,920
Deferred taxes 2,969 2,969
Total current assets 153,789 137,224
PROPERTY AND EQUIPMENT, NET 100,089 96,526
OTHER ASSETS 18,436 15,068
$272,314 $248,818
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,750 $ 3,971
Accounts payable 38,895 25,247
Accrued expenses 13,979 13,734
Accrued income taxes (3,777) 924
Total current liabilities 52,847 43,876
LONG-TERM DEBT 129,611 108,203
DEFERRED TAXES 7,722 7,722
OTHER LIABILITIES 1,478 1,503
SHAREHOLDERS' EQUITY:
Common stock 5,966 5,966
Paid-in surplus 7,109 7,109
Retained earnings 67,980 74,838
Treasury stock (399) (399)
80,656 87,514
$272,314 $248,818
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share and dividend data)
(unaudited)
Thirteen Thirty-Nine
Weeks Ended Weeks Ended
Oct. 29, Oct. 30, Oct. 29, Oct. 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
NET SALES $ 86,501 $ 90,436 $273,912 $274,548
COSTS AND EXPENSES:
Cost of merchandise sold, buying
and occupancy expenses 55,509 56,351 182,012 181,394
Selling, general and administrative
expenses 31,843 31,355 93,923 92,357
Interest expense, net 1,942 1,885 5,699 5,705
Gain on sale of property - (979) (504) (979)
Total costs and expenses 89,294 88,612 281,130 278,477
EARNINGS (LOSS) BEFORE INCOME TAXES (2,793) 1,824 (7,218) (3,929)
PROVISION (CREDIT) FOR INCOME TAXES (977) 638 (2,526) (1,375)
NET EARNINGS (LOSS) $ (1,816) $ 1,186 $ (4,692) $ (2,554)
EARNINGS (LOSS) PER COMMON SHARE:
Primary $(0.31) $ 0.21 $(0.81) $(0.44)
Fully diluted (0.31) 0.21 (0.81) (0.44)
CASH DIVIDENDS PER SHARE $ 0.125 $ 0.125 $ 0.375 $ 0.375
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Thirty-Nine Weeks Ended
Oct. 29, Oct. 30,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (4,692) $ (2,554)
Gain on sale of property, net of income tax (333) (636)
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 7,455 7,159
Other liabilities (25) (42)
Change in:
Receivables from customers, net 8,230 9,463
Merchandise inventories (26,094) (11,550)
Prepaid expenses and other assets (876) 901
Accounts payable and accrued expenses 13,893 332
Accrued income taxes (4,701) (2,106)
Deferred taxes - (21)
Net cash provided by (used in)
operating activities (7,143) 946
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property,
net of income tax 612 2,096
Additions to property and equipment (11,297) (16,531)
Other non-current assets (3,368) (2,278)
Net cash used in investing
activities (14,053) (16,713)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 24,227 20,500
Reduction of long-term debt (3,039) (4,711)
Cash dividends paid (2,167) (2,167)
Net cash provided by
financing activities 19,021 13,622
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,175) (2,145)
Cash and cash equivalents, beginning
of period 5,899 8,301
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,724 $ 6,156
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 29, 1994
The condensed financial statements included herein have been
prepared by the Company without audit and reflect all
adjustments which are, in the opinion of management, necessary
to a fair statement of results for the interim periods.
Because of the nature of the specialty department store
business, the results for the thirty-nine week periods ended
October 29, 1994 and October 30, 1993 (which do not include the
Christmas holiday season) are not indicative of the results for
the year as a whole.
Certain information in footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles has been condensed or amended,
although the Company believes that the disclosures are adequate
to make the information presented not misleading. It is
suggested that these condensed financial statements be read in
conjunction with the financial statements and notes to
consolidated financial statements included in the Company's
latest annual report on Form 10-K.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF REPORTING
Jacobson Stores Inc. operates specialty department stores in
25 cities in Michigan, Florida, Indiana and Ohio. The
consolidated financial statements include the accounts of the
Company and two wholly-owned subsidiaries, Jacobson Stores
Realty Company and Jacobson Credit Corp. All significant
inter-company transactions and balances have been eliminated.
FISCAL YEAR
The Company's fiscal year ends on the last Saturday in January.
SALES
Sales are net of returns and include sales by owned merchandise
departments and styling salons. Restaurant and alteration
revenues are reflected as a reduction of cost of merchandise
sold. Finance charge revenues are recorded as income when
earned and are reflected as a reduction of selling, general and
administrative expenses.
- 4 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 29, 1994
RECEIVABLES FROM CUSTOMERS
An account is reviewed for write-off if payment of 20% (one
full monthly payment) has not been received during the previous
four-month period or if it is otherwise determined that the
account is uncollectible.
MERCHANDISE INVENTORIES
All merchandise inventories are valued at cost, which is lower
than market, as determined by the retail last-in, first-out
(LIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major
replacements and improvements are charged to the property and
equipment accounts. Maintenance, repairs and minor
replacements are charged to expense as incurred. When assets
are sold, retired or fully depreciated, their cost and related
accumulated depreciation and amortization are removed from the
property and equipment accounts, and any gain or loss is
reflected in the statements of earnings.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are provided on the straight-line
basis over the estimated useful lives of the property and
equipment, or over the respective lease terms, if such periods
are shorter.
CAPITALIZATION OF INTEREST
Interest expense incurred on properties under development is
capitalized to reflect properly the costs of properties up to
the time they produce revenues. The amounts capitalized are
then amortized over the respective lives of the depreciable
assets.
PRE-OPENING EXPENSES
Expenditures of a non-capital nature associated with opening
a new store are charged to expense using the straight-line
method in the 12 months immediately following the opening.
- 5 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 29, 1994
INCOME TAXES
Deferred income taxes result from temporary differences between
the tax basis of an asset or liability and its reported amount
in the financial statements and are adjusted for changes in tax
laws and rates.
EARNINGS PER SHARE
Primary earnings per share are computed by dividing net
earnings by the weighted average number of shares of common
stock and common stock equivalents outstanding during the
periods.
Fully diluted earnings per share are computed based on the
additional assumption that the Company's 6-3/4% Convertible
Subordinated Debentures due 2011 were converted to common stock
at the date of issuance with a corresponding increase in net
earnings to reflect a reduction in related interest expense,
net of income taxes.
(2) CUSTOMER CREDIT AND RECEIVABLES
Receivables from customers were as follows:
<TABLE>
<CAPTION>
October 29, January 29,
(in thousands) 1994 1994
<S> <C> <C>
Receivables from customers $38,520 $46,498
Less reserve for doubtful
accounts 1,082 830
$37,438 $45,668
</TABLE>
(3) MERCHANDISE INVENTORIES
Merchandise inventories were as follows:
<TABLE>
<CAPTION>
October 29, January 29,
(in thousands) 1994 1994
<S> <C> <C>
Inventories at first-in,
first-out (FIFO) cost $128,043 $100,607
Less LIFO reserves 21,181 19,839
$106,862 $ 80,768
</TABLE>
- 6 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 29, 1994
(4) PROPERTY AND EQUIPMENT
Property and equipment are set forth below:
<TABLE>
<CAPTION>
October 29, January 29,
(in thousands) 1994 1994
<S> <C> <C>
Land and improvements $ 9,459 $ 9,329
Buildings and improvements 90,926 89,608
Furniture, fixtures & equipment 40,022 38,870
Leasehold improvements 8,931 9,211
Construction in progress 7,201 1,089
Capital leases 10,403 10,403
166,942 158,510
Less accumulated depreciation
and amortization 66,853 61,984
$100,089 $ 96,526
</TABLE>
(5) LONG-TERM LEASES
The Company is obligated under non-cancellable long-term leases
for certain stores or portions of stores, and for certain
fixtures and equipment. Many of the leases contain renewal
options. Most require payment of taxes, insurance, and other
costs applicable to the property, and some require additional
rentals based on percentages of sales.
Capital leases provide the Company with the economic benefits
and risks of ownership. These leases are capitalized and
treated as installment purchases of depreciable property.
Capital leases are included in the balance sheets as property
and equipment while the related lease obligations are included
in current portion of long-term debt and long-term debt.
Interest based on these obligations and amortization based on
the lease terms are charged to current operations in lieu of
rental expense.
All other leases are considered operating leases. Operating
leases are accounted for by recording rental expense over the
terms of the leases. Additional rentals based on percentages
of sales are recorded as rental expense for both capital and
operating leases.
- 7 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 29, 1994
(6) FINANCING
Jacobson Credit Corp. has available an unsecured line of credit
of $35,000,000 under a three year Revolving Credit Agreement
with two banks. The Agreement provides for either or both of
two interest rate alternatives, at the Company's option, which
historically are below the prime rate of interest of the
lending banks. Borrowings under this Agreement mature on
June 30, 1997. On each June 30, this maturity date extends one
year unless terminated by written notice. The Agreement
requires a facility fee equal to 1/4 of 1% of the line per
annum. Compensating balances are not required. There was
$21,500,000 outstanding under the Agreement at October 29,
1994.
The 6-3/4% Convertible Subordinated Debentures are convertible
to shares of the Company's common stock at any time prior to
maturity, unless previously redeemed, at $32.67 per share,
subject to adjustment in certain events. The debentures are
redeemable, in whole or in part, at the option of the Company
at declining premiums to December 15, 1996, and thereafter at
par. Mandatory annual sinking fund payments of $1,725,000 are
required beginning December 15, 1996. At October 29, 1994,
1,056,000 shares of authorized common stock were reserved for
conversion.
The Company has a 10-year Term Loan Agreement with two banks
which provides for borrowings of up to $40,000,000 on an
unsecured basis at market rates in effect at the time of such
borrowings. The Term Loan Agreement provides for payments of
interest only through December 31, 1995, with quarterly
principal repayments commencing March 31, 1996. The Company
had $20,000,000 outstanding under this facility at October 29,
1994, at a fixed rate of 7.73%. Subsequent to the end of the
quarter covered by this report, on November 15, 1994, the
Company borrowed an additional $10,000,000 under this facility
at a variable rate which is less than prime.
Loan agreements include, among other things, covenants
requiring minimum working capital, minimum net worth and
minimum cash flow and restricting capital stock redemptions and
dividend payments.
- 8 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 29, 1994
Long-term debt, less current maturities, consisted of the
following:
<TABLE>
<CAPTION>
October 29, January 29,
(in thousands) 1994 1994
<S> <C> <C>
6-3/4% Convertible Subordinated
Debentures due 2011 $ 34,500 $ 34,500
Mortgage notes and collateral trust
bonds due through 2005, at rates
from 6.44% to 8.75% 41,682 40,482
7.73% unsecured term loan due 2002 20,000 20,000
Industrial development revenue bond
obligations, due through 2015, at
variable rates below prime 9,834 9,865
Note under Revolving Credit
Agreement at rates below prime 21,500 -
127,516 104,847
Capital lease obligations 2,095 3,356
$129,611 $108,203
</TABLE>
(7) ACCRUED EXPENSES
Accrued expenses were as follows:
<TABLE>
<CAPTION>
October 29, January 29,
(in thousands) 1994 1994
<S> <C> <C>
Wages and vacation pay $ 5,846 $ 6,272
Pension 1,237 1,100
Taxes, other than income taxes 2,282 2,310
Interest 1,383 801
Other 3,231 3,251
$13,979 $13,734
</TABLE>
- 9 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 29, 1994
(8) STOCK OPTIONS
At October 29, 1994, 146,190 shares of Jacobson Stores Inc.
common stock were reserved for issuance under a stock option
plan adopted in 1983. No more options may be granted under
this plan. At October 29, 1994, 36,750 shares of Jacobson
Stores Inc. common stock are reserved for issuance under a plan
adopted in 1994 and options for an additional 363,250 shares
of common stock are available for grant to directors and
employees.
(9) PREFERRED STOCK PURCHASE RIGHTS
The Company has a Preferred Stock Purchase Rights Plan, under
which a Right is attached to each share of the Company's Common
Stock. Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A
Preferred Stock at an exercise price of $100, subject to
adjustment. The Company has reserved 100,000 shares of Series
A Preferred Stock for issuance on exercise of the Rights. The
Rights trade with the Company's Common Stock and will become
exercisable 10 days after any person or group acquires 25% or
more of the Company's Common Stock or commences or announces
an offer for 30% or more of the Company's Common Stock. After
the Rights become exercisable, if the Company is acquired in
a merger or other business combination or if 50% or more of its
assets or earning power are sold, each Right will entitle the
holder to purchase, at the then current exercise price of the
Right, shares of common stock of the acquiring company having
a market value of twice the exercise price of the Right.
Alternatively, if a 25% shareholder acquires the Company by
means of a reverse merger in which the Company and its stock
survive, or if such shareholder engages in self-dealing
transactions with the Company or acquires beneficial ownership
of 40% or more of the Company's Common Stock other than by
means of a fair offer to buy all shares, each Right (except
those of the acquiring person or group) will entitle its holder
to purchase, on exercise, shares of the Company's Common Stock
having a market value of twice the current exercise price of
each Right. The Rights may be redeemed by the Company for one
cent per Right until 30 days after a person or group acquires
25% or more of the Company's Common Stock, and will expire on
October 25, 1998.
- 10 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 29, 1994
(10) RETIREMENT PLAN
The Company has a trusteed non-contributory defined benefit
pension plan covering substantially all of its employees.
Benefits under the plan are based on a career average pay
formula. Service cost and the projected benefit obligation
under the projected unit credit actuarial method reflect the
impact of estimated increases in compensation on future pension
benefits. Unrecognized pension costs and credits, including
actuarial gains and losses, are amortized over the average
remaining service period of those employees expected to receive
pension benefits. The Company has no unrecognized prior
service cost. The Company's funding policy satisfies the
minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code of 1986.
Pension plan assets are held and managed by an independent
trustee.
(11) SUPPLEMENTARY CASH FLOW INFORMATION
The Company considers all short-term investments with a
maturity at date of purchase of three months or less to be cash
equivalents.
Investing and financing activities not reported in the
Consolidated Statements of Cash Flows, because they do not
involve cash, include equipment acquired through capital lease
obligations. There were no new capital lease obligations in
the thirty-nine weeks ended October 29, 1994, and $1,085,000
for the thirty-nine weeks ended October 30, 1993.
Interest paid (net of interest capitalized) totalled $4,910,000
and $4,663,000 for the thirty-nine week periods ended October
29, 1994 and October 30, 1993, respectively. Income tax
payments totalled $2,178,000 and $753,000 for the thirty-nine
week periods ended October 29, 1994 and October 30, 1993,
respectively.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 29, 1994
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have
performed a limited review of the condensed consolidated
financial statements for the thirty-nine week period ended
October 29, 1994. Since they did not perform an audit, they
express no opinion on the financial statements referred to
above.
- 12 -
<PAGE>
Arthur Andersen LLP
EXHIBIT
Report of Independent Public Accountants
To Jacobson Stores Inc.:
We have reviewed the accompanying condensed consolidated balance sheet
of JACOBSON STORES INC. (a Michigan corporation) and subsidiaries as of
October 29, 1994 and the related condensed consolidated statements of
earnings and cash flows for the thirty-nine week period then ended.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Jacobson Stores
Inc. and subsidiaries as of January 29, 1994, and the related
consolidated statements of earnings, shareholders' equity and cash flows
for the year then ended (not presented herein), and, in our report dated
March 4, 1994, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of January 29,
1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan
November 11, 1994
- 13 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 29, 1994
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The registrant, Jacobson Stores Inc., a Michigan corporation, operates
specialty department stores catering to discerning customers with
preferences for fine merchandise. The Company emphasizes quality
merchandise, fully staffed stores, personalized customer service and
attractive, comfortable shopping surroundings. Each store features a
full line of fashion apparel and accessories for women, men and
children, and most offer accessories for the home.
The Company owns a substantial portion of the real property used in its
business, primarily through its consolidated, wholly-owned real estate
subsidiary, Jacobson Stores Realty Company ("Jacobson Realty"). The
Company finances customer receivables through Jacobson Credit Corp.
("Jacobson Credit"), its consolidated, wholly-owned finance subsidiary.
As used in this report, the terms "registrant", "Company" and
"Jacobson's" refer to Jacobson Stores Inc. and its subsidiaries unless
the context indicates otherwise.
Jacobson's operates in two regions, with stores in twenty-five cities in
Michigan, Florida, Indiana and Ohio. The Company maintains separate
staffs of buyers for each region in order to better respond to
customers' lifestyles and merchandise preferences. The principal
merchandising and distribution functions are performed through regional
distribution facilities. Functions common to all stores, such as
management coordination, sales promotion, data processing and accounting,
are centralized at the corporate headquarters in Jackson, Michigan.
a. OPERATING RESULTS: THIRTEEN WEEKS ENDED OCTOBER 29, 1994 TO
THIRTEEN WEEKS ENDED OCTOBER 30, 1993
Sales for the quarter ended October 29, 1994, totalled $86,501,000,
a decrease of 4.3% from 1993. Excluding furniture departments
discontinued in six stores in the Fall 1993, sales decreased 1.1%.
The cost of merchandise sold, buying and occupancy expenses,
expressed as a percentage of sales, increased to 64.2% for the
quarter from 62.3% one year ago, primarily due to higher markdowns
and lack of leverage on buying and occupancy expenses, partially
offset by higher maintained mark-up.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 29, 1994
Selling, general and administrative expenses, expressed as a
percentage of sales, increased to 36.8% in the quarter from 34.7% in
1993. The increase in rate was due primarily to the decrease in
sales and resulting lack of expense leverage. Selling, general and
administrative expense dollars increased 1.6%.
Interest expense, expressed as a percentage of sales, totalled 2.2%
for the quarter in 1994 and 2.1% in 1993, primarily due to higher
short-term borrowings.
The estimated effective annual income tax rate was 35% in both years
and includes estimated provisions for Federal, State and local
taxes.
Net loss for the thirteen weeks in 1994 totalled $1,816,000 or 31
cents per common share compared to net earnings of $1,186,000 or 21
cents per share in the same period last year. As a percentage of
sales, net loss in 1994 was 2.1% as compared to earnings of 1.3% in
1993. Results for the thirteen weeks in 1993 included an after-tax
gain of 11 cents per share on the sale of property.
b. OPERATING RESULTS: THIRTY-NINE WEEKS ENDED OCTOBER 29, 1994 TO
THIRTY-NINE WEEKS ENDED OCTOBER 30, 1993
Sales for the thirty-nine weeks ended October 29, 1994, totalled
$273,912,000, essentially flat compared to last year. Excluding
furniture departments discontinued in six stores in the Fall 1993,
sales increased 1.9%.
The cost of merchandise sold, buying and occupancy expenses,
expressed as a percentage of sales, increased to 66.4% for the
thirty-nine weeks from 66.0% for the same period one year ago,
primarily due to higher markdowns and a higher LIFO provision (as
discussed below) partially offset by higher maintained mark-up.
Selling, general and administrative expenses, expressed as a
percentage of sales, increased to 34.3% for the thirty-nine weeks in
1994 from 33.6% in 1993, reflecting flat sales and resulting lack of
expense leverage. Selling, general and administrative expense
dollars increased 1.7%.
Interest expense, expressed as a percentage of sales, totalled 2.1%
for the thirty-nine weeks, unchanged from one year ago, reflecting
lower interest on real estate debt offset by lower interest
capitalized on construction projects.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 29, 1994
The estimated effective annual tax rate was 35% in both years and
includes estimated provisions for Federal, State and local taxes.
Net loss for the thirty-nine weeks in 1994 totalled $4,692,000 or 81
cents per common share compared to $2,554,000 or 44 cents per share
in 1993. As a percentage of sales, net loss in 1994 was 1.7% as
compared to 0.9% in 1993.
Net loss for the thirty-nine weeks ended October 29, 1994, includes
an after-tax gain on sale of property of $333,000 or 5 cents per
share. Net loss for the thirty-nine weeks ended October 30, 1993,
included an after-tax gain on sale of property of $636,000 or 11
cents per share.
Financial results for the thirty-nine week period ended October 30,
1993, included a one-time charge, recorded in the second quarter, to
write-down furniture inventories to estimated net realizable value
in connection with the phase-out of furniture departments in six
stores. The LIFO provision was reduced by a comparable amount in
the second quarter to reflect liquidation of most furniture LIFO
reserves. The net impact on cost of merchandise sold and net
earnings for the thirty-nine week period was immaterial.
c. LIQUIDITY AND CAPITAL RESOURCES
At October 29, 1994, the Company's current ratio was 2.91 to 1 and
working capital totalled $100,942,000, including $3,724,000 of cash
and cash equivalents. At January 29, 1994, the current ratio was
3.13 to 1 and working capital totalled $93,348,000, including
$5,899,000 of cash and cash equivalents.
The Company utilizes cash flows from operations and short-term
borrowings to fund its seasonal working capital needs. To support
its seasonal requirements, the Company maintains a $35,000,000
unsecured revolving credit line through Jacobson Credit. This
facility provides for either or both of two interest rate
alternatives. At October 29, 1994, $21,500,000 was outstanding
under this facility. The Company also maintains a 10-year term loan
facility which provides for borrowings of up to $40,000,000 on an
unsecured basis at market rates in effect at the time of such
borrowings. At October 29, 1994, the Company had borrowed
$20,000,000 under this facility at a fixed rate of 7.73%.
Subsequent to the end of the quarter covered by this report, on
November 15, 1994, the Company borrowed an additional $10,000,000
under the term loan facility at a variable rate which is less than
prime. These two facilities provide sufficient capacity to fund
present and anticipated working capital requirements.
- 16 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 29, 1994
A part of the Company's financial strategy is to own, or obtain
long-term leases of its properties. Capital expenditures to
modernize and refixture existing stores and support facilities
generally are financed with internally-generated funds. New stores
and major expansion projects generally are financed by first
mortgages or comparable financing through Jacobson Realty, or
through long-term leases. Future expansion is expected to be
financed in a similar manner.
d. CASH FLOWS
Cash and cash equivalents decreased $2,175,000 in the thirty-nine
weeks ended October 29, 1994, compared to a decrease of $2,145,000
in the thirty-nine weeks ended October 30, 1993. Cash flows are
impacted by operating, investing and financing activities. In the
thirty-nine weeks this year, operating activities used $7,143,000 of
cash, compared to $946,000 provided in 1993, primarily due to start-up
working capital requirements of a new store opened in Louisville,
Kentucky, in November 1994 and the increase in net loss.
Investing activities used cash of $14,053,000 in the thirty-nine
weeks ended October 29, 1994, compared to $16,713,000 in the same
period in 1993. Investing activities included capital expenditures
for the acquisition and fixturing of new stores, and expansion,
modernization and refixturing of existing stores and support
facilities totalling $11,297,000 in the thirty-nine weeks in 1994
compared to $16,531,000 in the same period in 1993. In addition,
the Company incurs capital lease obligations (not included in cash
investing activities above) primarily for computer hardware and
related software. There were no new capital lease obligations to-date
in 1994 and $1,085,000 for the thirty-nine weeks in 1993.
Financing activities provided cash of $19,021,000 in the thirty-nine
weeks ended October 29, 1994, compared to $13,622,000 provided in
the same period in 1993. In the thirty-nine weeks this year, the
Company borrowed $21,500,000 under the revolving credit line through
Jacobson Credit, obtained $2,727,000 in mortgage financing and used
$3,039,000 to service current maturities of long-term debt. In the
same period in 1993, the Company obtained $20,500,000 under the
revolving credit line and used $4,711,000 of cash to service current
maturities of long-term debt and to retire the mortgage debt on its
former downtown store facility in Ann Arbor. The Company paid
common stock dividends of $2,167,000 in each thirty-nine week period
in 1994 and 1993.
- 17 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 29, 1994
The Company believes its cash flows from operations, along with its
borrowing capacity and access to financial markets are adequate to
fund its operations, debt maturities and strategies for future
growth.
e. CORPORATE DEVELOPMENT
The Company's strategy is to achieve consistent long-term growth
both by maintaining and improving market share in its existing
communities and by entering new markets.
In September 1993, the Company relocated its Ann Arbor, Michigan,
store operations to a 101,000 square foot store in the Briarwood
Mall. The Company obtained mortgage financing to fund the purchase
and renovation of the Briarwood store. The Company sold its
interest in its former downtown store facility.
In March 1994, the Company signed a lease for a 161,000 square foot
building and related parking in the Oxmoor Center, Louisville,
Kentucky. The Company renovated the building and opened the store
in November 1994.
In April 1994, the Company purchased the store building in the
Grande Boulevard Mall in Jacksonville, Florida, which it had leased
since opening in 1983. The Company obtained first mortgage
financing to fund the purchase.
In May 1994, the Company acquired ownership of its styling salon
operations, which were leased previously. The Company and the
former salon operator terminated their License Agreement and the
Company purchased the salon operating supplies, inventory and
property and equipment for cash. The cost of the assets acquired
was not material. Salon revenues, which were previously identified
as leased department sales, continue to be reported in Net Sales and
the costs to operate the salons continue to be reported in Cost of
Merchandise Sold, Buying and Occupancy Expenses.
- 18 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART II: OTHER INFORMATION
For Quarter Ended October 29, 1994
ITEM 5. OTHER INFORMATION
Subsequent to the end of the quarter covered by this report, on
October 31, 1994, the Company signed a lease for a 120,000 square foot
store in a shopping center to be constructed in Leawood, Kansas, a
suburb of Kansas City. The Company's commitment under the lease is
contingent on Landlord's ability to obtain financing for the shopping
center and to obtain title to the entire shopping center property. The
store is targeted to open in the Fall 1995.
On November 17, 1994, the Company opened a 161,000 square foot store in
leased premises in the Oxmoor Center in Louisville, Kentucky.
On November 30, 1994, the Company signed a letter of intent to lease an
80,000 square foot store to be constructed in Mizner Park, Boca Raton,
Florida. The store is targeted to open in the Fall 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of Earnings Per Share
15 Letter from Independent Public Accountants
27 Financial Data Schedule
All exhibits except as set forth above have been omitted as not
applicable or not required.
- 19 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
For Quarter Ended October 29, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JACOBSON STORES INC.
(Registrant)
Date: December 8, 1994 BY: /s/ Mark K. Rosenfeld
MARK K. ROSENFELD
Chairman of the Board and
Chief Executive Officer
Date: December 8, 1994 BY: /s/ Paul W. Gilbert
PAUL W. GILBERT
Vice Chairman of the Board
(Principal Financial Officer)
- 20 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
INDEX OF EXHIBITS
11 Computation of Earnings Per Share
15 Letter from Independent Public Accountants
27 Financial Data Schedule
All exhibits except as set forth above have been omitted as not
applicable or not required.
EXHIBIT 11
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands)
(unaudited)
Primary earnings per common share, as set forth in the consolidated
statements of earnings, are computed by dividing net earnings by the
weighted average number of shares of common stock and common stock
equivalents outstanding during the period. Fully diluted earnings per
share are computed based on the additional assumption that the Company's
6-3/4% Convertible Subordinated Debentures due 2011 were converted to
common stock at the date of issuance with a corresponding increase in net
earnings to reflect reduction in related interest expense, net of income
taxes, except if anti-dilutive.
These computations are set forth below (in thousands except per share
data):
<TABLE>
<CAPTION>
Thirteen Thirty-Nine
Weeks Ended Weeks Ended
Oct. 29, Oct. 30, Oct. 29, Oct. 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
EARNINGS (LOSS) PER COMMON SHARE AND
COMMON EQUIVALENT SHARE:
Weighted average number of shares
of common stock and common stock
equivalents outstanding -
Primary 5,779 5,779 5,779 5,779
Fully diluted 6,835 6,835 6,835 6,835
NET EARNINGS (LOSS) $(1,816) $ 1,186 $(4,692) $(2,554)
NET EARNINGS (LOSS), adjusted
to reflect reduction in
interest expense attributable
to convertible debentures,
net of income tax $(1,432) $ 1,570 $(3,540) $(1,401)
NET EARNINGS (LOSS) PER SHARE:
Primary $ (0.31) $ 0.21 $ (0.81) $ (0.44)
Fully diluted (0.31) 0.21 (0.81) (0.44)
</TABLE>
Arthur Andersen LLP
EXHIBIT 15
To Jacobson Stores Inc.:
We are aware that Jacobson Stores Inc. has incorporated by
reference in its Registration Statements No. 2-88295 and No. 033-53469
its Form 10-Q for the quarter ended October 29, 1994, which
includes our report dated November 11, 1994, covering the unaudited
interim condensed consolidated financial information contained
therein. Pursuant to Regulation C of the Securities Act of 1933,
that report is not considered a part of the registration statement
prepared or certified by our firm or a report prepared or certified
by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
Detroit, Michigan
December 8, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF JACOBSON STORES INC. AND CONSOLIDATED
SUBSIDIARIES FOR THE THIRTY-NINE WEEK PERIOD ENDED OCTOBER 29, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> OCT-29-1994
<CASH> 3,724
<SECURITIES> 0
<RECEIVABLES> 38,520
<ALLOWANCES> 1,082
<INVENTORY> 106,862
<CURRENT-ASSETS> 153,789
<PP&E> 166,942
<DEPRECIATION> 66,853
<TOTAL-ASSETS> 272,314
<CURRENT-LIABILITIES> 52,847
<BONDS> 129,611
<COMMON> 5,966
0
0
<OTHER-SE> 74,690
<TOTAL-LIABILITY-AND-EQUITY> 272,314
<SALES> 273,912
<TOTAL-REVENUES> 273,912
<CGS> 182,012
<TOTAL-COSTS> 182,012
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 660
<INTEREST-EXPENSE> 5,699
<INCOME-PRETAX> (7,218)
<INCOME-TAX> (2,526)
<INCOME-CONTINUING> (4,692)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,692)
<EPS-PRIMARY> (.81)
<EPS-DILUTED> (.81)
</TABLE>
