<PAGE> 1
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 April 30, 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 April 30, 1994
<PAGE> 2
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For Quarter Ended April 30, 1994
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
. Consolidated Balance Sheets -
April 30, 1994 and January 29, 1994 1
. Consolidated Statements of Earnings -
Thirteen Week Periods Ended April 30, 1994
and May 1, 1993 2
. Consolidated Statements of Cash Flows -
Thirteen Week Periods Ended April 30, 1994
and May 1, 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 6. Exhibits and Reports on Form 8-K 18
All items except those set forth above are inapplicable and have been omitted.
SIGNATURES 19
INDEX OF EXHIBITS
</TABLE>
<PAGE> 3
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
April 30, January 29,
ASSETS 1994 1994
--------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,498 $ 5,899
Receivables from customers, net 40,499 45,668
Merchandise inventories 83,728 80,768
Prepaid expenses and other assets 1,791 1,920
Deferred taxes 2,969 2,969
-------- --------
Total current assets 136,485 137,224
-------- --------
PROPERTY AND EQUIPMENT, NET 96,814 96,526
-------- --------
OTHER ASSETS 17,550 15,068
-------- --------
$250,849 $248,818
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 4,117 $ 3,971
Accounts payable 26,332 25,247
Accrued expenses 13,704 13,734
Accrued income taxes 610 924
-------- --------
Total current liabilities 44,763 43,876
-------- --------
LONG-TERM DEBT 108,955 108,203
-------- --------
DEFERRED TAXES 7,722 7,722
-------- --------
OTHER LIABILITIES 1,500 1,503
-------- --------
SHAREHOLDERS' EQUITY:
Common stock 5,966 5,966
Paid-in surplus 7,109 7,109
Retained earnings 75,233 74,838
Treasury stock (399) (399)
-------- --------
87,909 87,514
-------- --------
$250,849 $248,818
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
- 1 -
<PAGE> 4
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share and dividend data)
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------
April 30, May 1,
1994 1993
-------- --------
<S> <C> <C>
NET SALES, including leased departments $ 97,494 $ 96,063
-------- --------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses 62,974 62,187
Selling, general and administrative
expenses 31,448 31,276
Interest expense, net 1,858 1,945
Gain on sale of property (504) -
-------- --------
Total costs and expenses 95,776 95,408
-------- --------
EARNINGS BEFORE INCOME TAXES 1,718 655
PROVISION FOR INCOME TAXES 601 229
-------- --------
NET EARNINGS $ 1,117 $ 426
-------- --------
-------- --------
EARNINGS PER COMMON SHARE:
Primary $ 0.19 $ 0.07
Fully diluted 0.19 0.07
------ ------
CASH DIVIDENDS PER SHARE $ 0.12-1/2 $ 0.12-1/2
------ ------
------ ------
</TABLE>
The accompanying notes are an integral part of these statements.
- 2 -
<PAGE> 5
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------
April 30, May 1,
1994 1993
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,117 $ 426
Gain on sale of property, net of income tax (333) -
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 2,473 2,372
Other liabilities (3) (13)
Change in:
Receivables from customers, net 5,169 7,041
Merchandise inventories (2,960) (2,936)
Prepaid expenses and other assets 129 965
Accounts payable and accrued expenses 1,055 (6,012)
Accrued income taxes (314) (38)
Deferred taxes - (21)
------- -------
Net cash provided by operating
activities 6,333 1,784
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property,
net of income tax 612 -
Additions to property and equipment (3,040) (2,968)
Other non-current assets (2,482) (496)
------- -------
Net cash used in investing
activities (4,910) (3,464)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 1,700 -
Reduction of long-term debt (802) (800)
Cash dividends paid (722) (722)
------- -------
Net cash provided by (used in)
financing activities 176 (1,522)
------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,599 (3,202)
Cash and cash equivalents, beginning
of period 5,899 8,301
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,498 $ 5,099
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE> 6
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 30, 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 thirteen week periods ended April 30, 1994 and May 1,
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, Ohio, Indiana and Florida. 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 leased departments.
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> 7
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 30, 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> 8
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 30, 1994
INCOME TAXES
Deferred income taxes result from differences between the tax basis of
an asset or liability and its reported amount in the financial
statements (temporary differences) 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>
April 30, January 29,
(in thousands) 1994 1994
--------------------------------------------------------
<S> <C> <C>
Receivables from customers $41,392 $46,498
Less reserve for doubtful
accounts 893 830
------- -------
$40,499 $45,668
------- -------
------- -------
</TABLE>
(3) MERCHANDISE INVENTORIES
Merchandise inventories were as follows:
<TABLE>
<CAPTION>
April 30, January 29,
(in thousands) 1994 1994
--------------------------------------------------------
<S> <C> <C>
Inventories at first-in,
first-out (FIFO) cost $104,236 $100,607
Less LIFO reserves 20,508 19,839
-------- --------
$ 83,728 $ 80,768
-------- --------
-------- --------
</TABLE>
- 6 -
<PAGE> 9
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 30, 1994
(4) PROPERTY AND EQUIPMENT
Property and equipment are set forth below:
<TABLE>
<CAPTION>
April 30, January 29,
(in thousands) 1994 1994
----------------------------------------------------------
<S> <C> <C>
Land and improvements $ 9,419 $ 9,329
Buildings and improvements 90,302 89,608
Furniture, fixtures & equipment 38,334 38,870
Leasehold improvements 8,863 9,211
Construction in progress 1,364 1,089
Capital leases 10,403 10,403
-------- --------
158,685 158,510
Less accumulated depreciation
and amortization 61,871 61,984
-------- --------
$ 96,814 $ 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> 10
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 30, 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, 1996. 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. No borrowings
were outstanding under the Agreement at April 30, 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
April 30, 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 has $20,000,000 outstanding under this facility at April
30, 1994, at a fixed rate of 7.73%.
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> 11
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 30, 1994
Long-term debt, less current maturities, consisted of the following:
<TABLE>
<CAPTION>
April 30, 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 9.5% 41,616 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 9,855 9,865
-------- --------
105,971 104,847
Capital lease obligations 2,984 3,356
-------- --------
$108,955 $108,203
-------- --------
-------- --------
</TABLE>
(7) ACCRUED EXPENSES
Accrued expenses were as follows:
<TABLE>
<CAPTION>
April 30, January 29,
(in thousands) 1994 1994
---------------------------------------------------------------
<S> <C> <C>
Wages and vacation pay $ 5,874 $ 6,272
Pension 905 1,100
Taxes, other than income taxes 2,185 2,310
Interest 1,354 801
Other 3,386 3,251
------- -------
$13,704 $13,734
------- -------
------- -------
</TABLE>
- 9 -
<PAGE> 12
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 30, 1994
(8) STOCK OPTIONS
At April 30, 1994, 153,160 shares of Jacobson Stores Inc. common stock
were reserved for issuance under a stock option plan adopted in 1983.
The option price is not less than the fair market value at the date of
grant. No more options may be granted under this plan. Subsequent to
the close of the quarter covered by this report, at the 1994 Annual
Meeting, the Company's shareholders approved a new stock option plan.
Under the 1994 plan, options to purchase up to 400,000 shares of
Jacobson Stores Inc. common stock may be granted.
(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> 13
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 30, 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 thirteen weeks this year and
$303,000 for the quarter ended May 1, 1993.
Interest paid (net of interest capitalized) totalled $1,246,000 and
$1,377,000 for the thirteen week periods ended April 30, 1994 and May
1, 1993, respectively. Income tax payments totalled $918,000 and
$289,000 for the thirteen week periods ended April 30, 1994 and May 1,
1993, respectively.
- 11 -
<PAGE> 14
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 30, 1994
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co., independent public accountants, have performed
a limited review of the condensed consolidated financial statements
for the thirteen week period ended April 30, 1994. Since they did
not perform an audit, they express no opinion on the financial
statements referred to above.
- 12 -
<PAGE> 15
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 April 30,
1994 and the related condensed consolidated statements of earnings and cash
flows for the thirteen 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.
ARTHUR ANDERSEN & CO.
Detroit, Michigan
May 13, 1994
- 13 -
<PAGE> 16
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 30, 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, Ohio, Indiana and Florida. 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 APRIL 30, 1994 TO THIRTEEN
WEEKS ENDED MAY 1, 1993
Sales for the quarter ended April 30, 1994, totalled $97,494,000, an
increase of 1.5% from 1993. Excluding furniture departments
discontinued in six stores in the Fall 1993, sales increased 3.1%.
The cost of merchandise sold, buying and occupancy expenses, expressed
as a percentage of sales, decreased to 64.6% for the quarter from 64.7%
one year ago, primarily due to a higher markup percentage substantially
offset by increased markdowns.
- 14 -
<PAGE> 17
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 30, 1994
Selling, general and administrative expenses, expressed as a percentage
of sales, decreased to 32.3% in the quarter from 32.6% in 1993. The
decrease in rate is due primarily to a reduction in health care expenses
partially offset by an increase in sales promotion expenses.
Interest expense, expressed as a percentage of sales, decreased to 1.9%
for the quarter from 2.0% one year ago, reflecting lower interest on
real estate debt.
The estimated effective annual income tax rate was 35% in both years and
includes estimated provisions for Federal, Florida and local taxes.
1994 net earnings for the thirteen weeks totalled $1,117,000 or 19 cents
per common share compared to $426,000 or 7 cents per share in the same
period last year. As a percentage of sales, net earnings were 1.1% in
1994 as compared to 0.4% in 1993.
Net earnings for the thirteen weeks in 1994 include an after-tax gain on
sale of property of $333,000 or 5 cents per share.
b. LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1994, the Company's current ratio was 3.05 to 1 and working
capital totalled $91,722,000, including $7,498,000 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 April 30,
1994, no borrowings were 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 April 30, 1994, the Company
had borrowed $20,000,000 under this facility. These facilities provide
sufficient capacity to fund present and anticipated working capital
requirements.
- 15 -
<PAGE> 18
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 30, 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.
c. CASH FLOWS
Cash and cash equivalents increased $1,599,000 in the thirteen weeks
ended April 30, 1994, compared to a decrease of $3,202,000 in the
thirteen weeks ended May 1, 1993. Cash flows are impacted by operating,
investing and financing activities. In the thirteen weeks this year,
operating activities provided $6,333,000 of cash, up from $1,784,000 in
1993.
Investing activities used cash of $4,910,000 in the thirteen weeks this
year compared to $3,464,000 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 $3,040,000 in the quarter in 1994 compared
to $2,968,000 last year. 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 this year and $303,000 last year.
Financing activities provided cash of $176,000 in the thirteen weeks
this year and used cash of $1,522,000 last year. In the quarter this
year, the Company obtained $1,700,000 in first mortgage financing and
used $802,000 of cash to service current maturities of long-term debt.
In the same period last year, the Company used $800,000 of cash to
service current maturities of long-term debt. The Company paid common
stock dividends of $722,000 in each thirteen week period in 1994 and
1993.
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.
- 16 -
<PAGE> 19
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 30, 1994
d. 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 is currently renovating the building and plans to open 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.
Subsequent to the close of the quarter covered by this report, in May
1994, the Company acquired ownership of its beauty 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 is not material. Salon revenues, which were
previously identified as leased department sales, will continue to be
reported in Net Sales and the costs to operate the salons will continue
to be reported in Cost of Merchandise Sold, Buying and Occupancy
Expenses.
- 17 -
<PAGE> 20
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART II: OTHER INFORMATION
For Quarter Ended April 30, 1994
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10(a) 1994 Management Incentive Plan (Corrected)
11 Computation of Earnings Per Share
15 Letter from Independent Public Accountants
All exhibits except as set forth above have been omitted as not applicable or
not required.
- 18 -
<PAGE> 21
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
For Quarter Ended April 30, 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: June 10, 1994 BY: /s/ Mark K. Rosenfeld
MARK K. ROSENFELD
Chairman of the Board and
Chief Executive Officer
Date: June 10, 1994 BY: /s/ Paul W. Gilbert
PAUL W. GILBERT
Vice Chairman of the Board
(Principal Financial Officer)
- 19 -
<PAGE> 22
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
INDEX OF EXHIBITS
10(a) 1994 Management Incentive Plan (Corrected)
11 Computation of Earnings Per Share
15 Letter from Independent Public Accountants
All exhibits except as set forth above have been omitted as not applicable or
not required.
<PAGE> 1
EXHIBIT 10(a)
JACOBSON STORES INC.
1994 Management Incentive Plan
(Corrected)
Senior management incentives are based on accomplishing the key goals of our
business plan. Incentives are structured to strive for excellence.
The management incentive plan is designed to:
. foster an awareness of the Company's objective of consistent,
profitable operation.
. motivate managers to meet the shorter term needs of shareholders
without sacrificing long-term profitability.
. encourage managers to "stretch" for higher levels of performance
in the future.
. establish target incentives for each participant so that each
person is aware of what payout percentages can be expected with
various levels of accomplishment.
. encourage long-term retention of key employees.
The principal features of the plan include:
. participation in the plan is limited to salaried officers of the
Company.
. the potential payout as a percent of the base salary of each
participant is as follows:
<TABLE>
<CAPTION>
Threshold Target Maximum
--------- ------ -------
% of target 80% 100% 125%
% of target award 0% 100% 150%
----------------------------------------------------------
<S> <C> <C> <C>
Chairman and CEO 0% 35% 50%
Vice Chairman 0 30 45
President 0 30 45
SVP - Stores 0 25 37.5
SVP - GMM 0 25 37.5
VP - Store Group Manager 0 20 30
VP - DMM 0 20 30
VP - Staff Positions 0 20 30
----------------------------------------------------------
</TABLE>
. specific performance criteria and weights are established at the
beginning of the year for each participant. At the most senior
level, primary emphasis is placed on corporate goal achievement
(to emphasize the importance of cooperation and the team
approach); at the VP-Staff level, primary emphasis is placed on
individual goal achievement.
<PAGE> 1
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 Weeks Ended
---------------------------
April 30, May 1,
1994 1993
-------- --------
<S> <C> <C>
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE:
Weighted average number of shares
of common stock and common stock
equivalents outstanding -
Primary 5,779 5,787
Fully diluted 6,840 6,843
------- -------
NET EARNINGS $ 1,117 $ 426
------- -------
------- -------
NET EARNINGS, adjusted
to reflect reduction in
interest expense attributable
to convertible debentures,
net of income tax $ 1,501 $ 810
------- -------
------- -------
NET EARNINGS PER SHARE:
Primary $ 0.19 $ 0.07
Fully diluted 0.19 0.07
------- -------
------- -------
</TABLE>
<PAGE> 1
CONFORMED
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 April 30, 1994, which includes our report dated May 13, 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 & Co.
Detroit, Michigan
June 2, 1994
