FORM 10-Q
UNITED STATES
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 28, 1995
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, including zip code)
(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):
5,779,021-2/3 Shares Outstanding, excluding
187,200 shares held in treasury, as of October 28, 1995
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For Quarter Ended October 28, 1995
INDEX
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
. Consolidated Balance Sheets - October 28, 1995 and
January 28, 1995 1
. Consolidated Statements of Earnings - Thirteen and
Thirty-Nine Week Periods Ended October 28, 1995 and
October 29, 1994 2
. Consolidated Statements of Cash Flows - Thirty-Nine Week
Periods Ended October 28, 1995 and October 29, 1994 3
. Notes to Consolidated Financial Statements 4
Review by Independent Public Accountants 8
Exhibit:
. Report of Independent Public Accountants 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
All items except those set forth above are inapplicable and have
been omitted.
SIGNATURES 17
INDEX OF EXHIBITS
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
October 28, January 28,
ASSETS 1995 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,795 $ 3,558
Receivables from customers, net 35,456 43,984
Merchandise inventories 108,728 95,848
Prepaid expenses and other assets 6,916 3,639
Deferred taxes 2,190 2,190
--------- ---------
Total current assets 157,085 149,219
--------- ---------
PROPERTY AND EQUIPMENT, NET 98,421 100,258
--------- ---------
OTHER ASSETS 21,453 19,112
--------- ---------
$ 276,959 $ 268,589
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,925 $ 3,865
Accounts payable 40,069 30,606
Accrued expenses 14,606 15,112
--------- ---------
Total current liabilities 58,600 49,583
--------- ---------
LONG-TERM DEBT 128,701 120,424
--------- ---------
DEFERRED TAXES 8,405 8,405
--------- ---------
OTHER LIABILITIES 2,112 1,465
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock 5,966 5,966
Paid-in surplus 7,109 7,109
Retained earnings 66,465 76,036
Treasury stock (399) (399)
--------- ---------
79,141 88,712
--------- ---------
$ 276,959 $ 268,589
========= =========
<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 EARNINGS
(in thousands except per share and dividend data)
(unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------ ------------------------
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES, including leased departments $ 87,802 $ 86,501 $281,199 $273,912
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses 57,316 55,509 189,580 182,012
Selling, general and administrative
expenses 32,884 31,843 97,549 93,923
Interest expense, net 2,136 1,942 6,526 5,699
Gain on sale of property (1,065) - (1,065) (504)
-------- -------- -------- --------
Total costs and expenses 91,271 89,294 292,590 281,130
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (3,469) (2,793) (11,391) (7,218)
CREDIT FOR INCOME TAXES (1,214) (977) (3,987) (2,526)
-------- -------- -------- --------
NET LOSS $ (2,255) $ (1,816) $ (7,404) $ (4,692)
======== ======== ======== ========
LOSS PER COMMON SHARE:
Primary and fully diluted $ (0.39) $ (0.31) $ (1.28) $ (0.81)
======== ======== ======== ========
CASH DIVIDENDS PER SHARE $ 0.12-1/2 $ 0.12-1/2 $ 0.37-1/2 $ 0.37-1/2
======== ======== ======== ========
<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
-------------------------
October 28, October 29,
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,404) $ (4,692)
Gain on sale of property, net of income tax (693) (333)
Adjustments to reconcile net loss to cash provided
by (used in) operating activities:
Depreciation and amortization 7,646 7,455
Other liabilities 647 (25)
Change in:
Receivables from customers, net 8,528 8,230
Merchandise inventories (12,880) (26,094)
Prepaid expenses and other assets (3,277) (5,577)
Accounts payable and accrued expenses 8,957 13,893
--------- ----------
Net cash provided by (used in) operating activities 1,524 (7,143)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, net of income tax 827 612
Additions to property and equipment (5,809) (11,297)
Other non-current assets (2,475) (3,368)
--------- ----------
Net cash used in investing activities (7,457) (14,053)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 11,100 24,227
Reduction of long-term debt (2,763) (3,039)
Cash dividends paid (2,167) (2,167)
--------- ----------
Net cash provided by financing activities 6,170 19,021
--------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 237 (2,175)
Cash and cash equivalents, beginning of period 3,558 5,899
--------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,795 $ 3,724
========= ==========
<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 28, 1995
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. All adjustments are of a normal and recurring
nature.
Because of the nature of the specialty department store business, the
results for the thirty-nine week periods ended October 28, 1995 and
October 29, 1994 (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) 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. Weighted average shares
outstanding were 5,779,000 for the thirteen week periods ended October
28, 1995 and October 29, 1994, and were 5,781,000 and 5,779,000 for the
thirty-nine week periods ended October 28, 1995 and October 29, 1994,
respectively.
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. Weighted
average shares outstanding used in the computation of fully-diluted
earnings per share were 6,835,000 for the thirteen week periods ended
October 28, 1995 and October 29, 1994, and were 6,837,000 and 6,835,000
for the thirty-nine week periods ended October 28, 1995 and October 29,
1994, respectively.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 28, 1995
(2) CUSTOMER CREDIT AND RECEIVABLES
Receivables from customers were as follows:
<TABLE>
<CAPTION>
October 28, January 28,
(in thousands) 1995 1995
-------------------------------------------------------------------
<S> <C> <C>
Receivables from customers $ 36,148 $ 44,777
Less reserve for doubtful accounts 692 793
-------- --------
$ 35,456 $ 43,984
======== ========
</TABLE>
(3) MERCHANDISE INVENTORIES
Merchandise inventories were as follows:
<TABLE>
<CAPTION>
October 28, January 28,
(in thousands) 1995 1995
-------------------------------------------------------------------
<S> <C> <C>
Inventories at first-in, first-out
(FIFO) cost $ 125,592 $ 111,336
Less LIFO reserves 16,864 15,488
--------- ----------
$ 108,728 $ 95,848
========= ==========
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment are set forth below:
<TABLE>
<CAPTION>
October 28, January 28,
(in thousands) 1995 1995
-------------------------------------------------------------------
<S> <C> <C>
Property and equipment $ 172,186 $ 168,984
Less accumulated depreciation
and amortization 73,765 68,726
--------- ----------
$ 98,421 $ 100,258
========= ==========
</TABLE>
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 28, 1995
(5) FINANCING
Jacobson Credit Corp. has available an unsecured line of credit of
$35,000,000 under a Revolving Credit Agreement with two banks. At
October 28, 1995, there was $14,600,000 outstanding under the Revolving
Credit Agreement. The Company has a 10 year Term Loan Agreement
providing for borrowings of up to $40,000,000 on an unsecured basis. At
October 28, 1995, there was $30,000,000 outstanding under the Term Loan
Agreement.
Subsequent to the close of the quarter ended October 28, 1995, the
Company obtained a commitment from two banks for a $65,000,000 line of
credit under a Credit Agreement, which will replace the existing
$35,000,000 line of credit under the Revolving Credit Agreement and
$30,000,000 outstanding under the Term Loan Agreement with the same two
banks.
The Revolving Credit portion of the Credit Agreement will provide for
borrowings of up to $45,000,000, subject to a borrowing base limitation,
at either or both of two interest rate alternatives, at the Company's
option. Based on current rates, one of these options will be below the
prime interest rate of the lending banks, but will be higher than the
current facility. Borrowings under the Revolving Credit line will mature
on June 30, 1998, with one year renewals subject to approval of both
banks by June 30 of each subsequent year. The Revolving Credit line will
carry a commitment fee equal to two- tenths of 1% per annum on the
unused portion of the line and a facility fee of one-tenth of 1% per
annum on the total line. No compensating balances are required.
The Term Loan portion of the Credit Agreement will total $20,000,000 at
a fixed rate which, based on current rates, will be below the prime
interest rate of the lending banks, but higher than the current term
loans. The Term Loan portion of the Credit Agreement provides for
payments of interest only through December 31, 1997, with quarterly
principal payments of $1,000,000 commencing on March 31, 1998, through
the maturity date of December 31, 2002.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 28, 1995
Borrowings under the Credit Agreement will be guaranteed by the
Company's subsidiaries and secured by receivables under Jacobson credit
plans and first mortgages on selected properties. The new facility will
include, among other things, covenants requiring minimum net worth, a
minimum cash flow ratio and a maximum funded debt to net worth ratio.
(6) 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.
Interest paid (net of interest capitalized) totalled $5,881,000 and
$4,910,000 for the thirty-nine week periods ended October 28, 1995 and
October 29, 1994, respectively. Income tax payments totalled $64,000 and
$2,178,000 for the thirty-nine week periods ended October 28, 1995 and
October 29, 1994, respectively.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 28, 1995
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 28, 1995. Since they did not
perform an audit, they express no opinion on the financial statements
referred to above.
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<PAGE>
EXHIBIT
ARTHUR ANDERSEN LLP
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
28, 1995 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 28, 1995, 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 3, 1995, 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 28, 1995, 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 8, 1995
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 28, 1995
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, although under
the proposed new credit facility, the Company will finance such receivables
with its own loan replacing Jacobson Credit's revolving credit facility. See
Note 5 of the Notes to Consolidated Financial Statements, included in Item 1,
which note is incorporated by reference in this Item 2. 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-six cities in
Michigan, Indiana, Kentucky, Ohio 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 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 28, 1995 TO THIRTEEN
WEEKS ENDED OCTOBER 29, 1994
Sales for the quarter ended October 28, 1995, totalled $87,802,000, an
increase of 1.5% from 1994. Comparable store sales decreased 2.3%,
reflecting a difficult apparel retail climate. The comparable store sales
decrease included a 0.2% decrease in sales in the Company's Florida
stores and a 2.9% decrease in sales in the Company's other stores.
Generally, the increase in sales resulting from the opening of the
Company's Louisville, Kentucky store in
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 28, 1995
November 1994 was partially offset by the decrease in comparable store
sales in the Company's other stores. Sales in the Company's Metropolitan
Detroit stores are expected to be further pressured as a result of
increased competition, including the proposed entry of Nordstrom's into
the market in the Fall of 1996. The Company expects the difficult retail
environment to continue into the fourth quarter. In addition, planned and
potential store openings and closings described below under "Corporate
Development" are expected to affect future sales.
The cost of merchandise sold, buying and occupancy expenses, expressed as
a percentage of sales, increased to 65.3% for the quarter from 64.2% one
year ago, primarily due to higher markdowns to clear remaining
Spring/Summer merchandise and occupancy costs associated with a new store
opened in November 1994, partially offset by higher markups.
Selling, general and administrative expenses, expressed as a percentage
of sales, increased to 37.5% in the quarter from 36.8% in 1994. The
increase is due primarily to the decrease in comparable store sales and
resulting lack of expense leverage and to first-year costs associated
with a new store opened in November 1994, partially offset by lower
payroll and health care costs in comparable stores. The Company expects
advertising costs to increase in the fourth quarter as a result of an
aggressive direct mail and television promotional campaign.
Interest expense, expressed as a percentage of sales, increased to 2.4%
for the quarter from 2.2% one year ago, reflecting primarily increased
borrowings on the term loan facility.
The estimated effective annual income tax rate was 35% in both years and
includes estimated provisions for Federal, State and local income taxes.
1995 net loss for the thirteen weeks totalled $2,255,000, or 39 cents per
common share, compared to $1,816,000, or 31 cents per share, in the same
period last year. As a percentage of sales, net loss was 2.6% in 1995
compared to 2.1% in 1994.
Net loss for the thirteen weeks this year included an after-tax gain on
sale of property of $693,000, or 12 cents per share.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 28, 1995
b. OPERATING RESULTS: THIRTY-NINE WEEKS ENDED OCTOBER 28, 1995 TO
THIRTY-NINE WEEKS ENDED OCTOBER 29, 1994
Sales for the thirty-nine weeks ended October 28, 1995, increased 2.7% to
$281,199,000 from $273,912,000 in 1994. Comparable store sales decreased
1.2%, reflecting a difficult apparel retail climate. The comparable store
sales decrease included a 4.7% increase in sales in the Company's Florida
stores and a 3.5% decrease in sales in the Company's other stores.
Generally, the increase in sales resulting from the opening of the
Company's Louisville, Kentucky store in November 1994 and the increase in
comparable store sales in the Company's Florida stores, was partially
offset by the decrease in comparable store sales in the Company's other
stores. Sales in the Company's Metropolitan Detroit stores are expected
to be further pressured as a result of increased competition, including
the proposed entry of Nordstrom's into the market in the Fall of 1996.
The Company expects the difficult retail environment to continue into the
fourth quarter. In addition, planned and potential store openings and
closings described below under "Corporate Development" are expected to
affect future sales.
The cost of merchandise sold, buying and occupancy expenses, expressed as
a percentage of sales, increased to 67.4% for the thirty-nine weeks from
66.4% for the same period one year ago, principally due to higher
markdowns and occupancy costs associated with a new store opened in
November 1994, partially offset by higher mark-ups.
Selling, general and administrative expenses, expressed as a percentage
of sales, increased to 34.7% from 34.3% one year ago, reflecting the
decrease in comparable store sales and resulting lack of expense leverage
and first-year costs associated with a new store opened in November 1994,
partially offset by lower payroll and health care costs in comparable
stores. The Company expects advertising costs to increase in the fourth
quarter as a result of an aggressive direct mail and television
promotional campaign.
Interest expense, expressed as a percentage of sales, totalled 2.3% for
the thirty-nine weeks versus 2.1% one year ago, reflecting primarily
increased borrowings on term loan and revolving credit facilities.
The estimated effective annual income tax rate was 35% in both years and
includes estimated provisions for Federal, State and local income taxes.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 28, 1995
1995 net loss for the thirty-nine weeks totalled $7,404,000, or $1.28 per
common share, compared to $4,692,000, or 81 cents per share, in 1994. As
a percentage of sales, net loss was 2.6% in 1995 compared to 1.7% in
1994.
Net loss includes after-tax gains on sales of property of $693,000, or 12
cents per share, and $333,000, or 5 cents per share, for the thirty-nine
week periods ended October 28, 1995 and October 29, 1994, respectively.
c. LIQUIDITY AND CAPITAL RESOURCES
At October 28, 1995, the Company's current ratio was 2.68 to 1 and
working capital totalled $98,485,000, including $3,795,000 of cash and
cash equivalents. At January 28, 1995, the current ratio was 3.01 to 1
and working capital totalled $99,636,000, including $3,558,000 of cash
and cash equivalents.
The Company utilizes cash flows from operations and revolving credit line
borrowings to fund its seasonal working capital needs. Jacobson Credit
Corp. has available an unsecured line of credit of $35,000,000 under a
Revolving Credit Agreement with two banks. At October 28, 1995, there was
$14,600,000 outstanding under the Revolving Credit Agreement. The Company
has a 10 year Term Loan Agreement providing for borrowings of up to
$40,000,000 on an unsecured basis. At October 28, 1995, there was
$30,000,000 outstanding under the Term Loan Agreement.
Subsequent to the close of the quarter ended October 28, 1995, the
Company obtained a commitment from two banks for a $65,000,000 Revolving
Credit and Term Loan facility, which will replace the existing
$35,000,000 line of credit under Jacobson Credit Corp.'s Revolving Credit
Agreement and $30,000,000 in term loans with the same two banks. This
facility is expected to provide sufficient capacity to fund present and
planned working capital requirements. Further information on the new
facility is set forth in Note 5, Financing, on page 6 of this report.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 28, 1995
d. CASH FLOWS
Cash and cash equivalents increased $237,000 in the thirty-nine weeks
ended October 28, 1995 compared to a decrease of $2,175,000 in the
thirty-nine weeks ended October 29, 1994. Cash flows are impacted by
operating, investing and financing activities. In the thirty-nine weeks
this year, operating activities provided $1,524,000 of cash, compared
with $7,143,000 of cash used in 1994, primarily due to planned inventory
reductions in 1995 and start-up inventory requirements of a new store in
1994, partially offset by a larger net loss in 1995 and a smaller
increase in accounts payable.
Investing activities used cash of $7,457,000 in the thirty-nine weeks
this year compared to $14,053,000 in 1994. 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 $5,809,000 in the first nine months of 1995 compared
to $11,297,000 last year.
Financing activities provided cash of $6,170,000 in the thirty-nine weeks
this year compared to $19,021,000 last year. Year-to-date this year, the
Company borrowed $11,100,000 under its revolving credit line and used
$2,763,000 to service current maturities of long-term debt. In the same
period last year, the Company borrowed $21,500,000 under its revolving
credit line and obtained $2,727,000 in first mortgage financing and used
$3,039,000 to service current maturities of long-term debt. The Company
paid common stock dividends of $2,167,000 in each thirty-nine week period
in 1995 and 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 commitments for stores planned to
open in 1996.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 28, 1995
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. The Company evaluates potential new locations and
expects to open new stores as desirable opportunities arise and resources
permit. The Company has signed leases for two new stores to open in 1996
and has a goal to open three to five new stores in 1997 and in 1998. The
Company has developed a concept store for these proposed new stores based
on a standard 67,000 square foot footprint on one level. Implementing
this strategy would likely require additional capital, including
additional debt or equity financing. The Company is currently exploring
its strategic alternatives, including its financing alternatives for its
corporate development plans. The Company reviews the performance of its
less profitable existing stores from time to time to determine whether it
would be in the Company's best interest to close any of these stores.
Store openings and closings could have a significant impact on the
Company's sales, expenses and capital requirements. In addition, store
closings would likely entail significant one-time charges to effect the
closing and to recognize any impairment of assets.
The Company has a 120,000 square foot leased store under construction as
part of the Town Center Plaza, a shopping center in Leawood, Kansas, a
suburb of Kansas City, targeted to open in the Spring 1996.
In May 1995, the Company signed a lease for an 80,000 square foot store
to be constructed in Mizner Park, a mixed-use retail, residential and
office development in Boca Raton, Florida. The store is targeted to open
in the Fall 1996.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART II: OTHER INFORMATION
For Quarter Ended October 28, 1995
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4(b) Second Amendment to Term Loan Agreement
4(c) First Amendment to Amended and Restated Revolving Credit
Agreement
11 Computation of Earnings Per Share
15 Letter from Independent Public Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during its fiscal
quarter ended October 28, 1995.
All exhibits except as set forth above have been omitted as not applicable or
not required.
- 16 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
For Quarter Ended October 28, 1995
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, 1995 BY: /s/ Mark K. Rosenfeld
-------------------------
MARK K. ROSENFELD
Chairman of the Board and Chief
Executive Officer
Date: December 8, 1995 BY: /s/ Paul W. Gilbert
-----------------------
PAUL W. GILBERT
Vice Chairman of the Board
(Principal Financial Officer)
- 17 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
INDEX OF EXHIBITS
4(b) Second Amendment to Term Loan Agreement
4(c) First Amendment to Amended and Restated Revolving Credit
Agreement
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 4(b)
SECOND AMENDMENT TO
TERM LOAN AGREEMENT
This Second Amendment to Term Loan Agreement (the "Second Amendment")
made as of the 28th day of October, 1995 ("Amendment Effective Date"), among
Comerica Bank and NBD Bank (formerly known as NBD Bank, N.A.) (individually,
"Bank" and collectively, "Banks"), Comerica Bank, as Agent for the Banks (in
such capacity "Agent") and Jacobson Stores Inc., a Michigan corporation
("Company").
WITNESSETH:
WHEREAS, the Banks, the Agent and the Company have executed and
delivered that certain Term Loan Agreement dated as of November 20, 1992,
which was amended by a First Amendment to Term Loan Agreement dated as of May
25, 1995 (as amended, the "Original Agreement");
WHEREAS, the Company, the Agent and the Banks desire further to amend
the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises, the Banks, the Agent
and the Company hereby agree as follows:
1. Section 8.11 of the Original Agreement is amended to read in its
entirety as follows:
"8.11 Consolidated Tangible Net Worth. Maintain Consolidated
Tangible Net Worth of not less than the Minimum Amount; provided,
however, for the period beginning July 30, 1995 and ending January 26,
1996, Consolidated Tangible Net Worth shall be not less than
$76,000,000."
2. Company hereby represents and warrants that, after giving effect
to the amendments contained herein, (a) execution, delivery and performance of
the Original Agreement, as amended by this Second Amendment, are within
Company's corporate powers, have been duly authorized, are not in
contravention of law or the terms of Company's Articles of Incorporation or
Bylaws, and do not require the consent or approval of any governmental body,
agency, or authority; and the Original Agreement, as amended by this Second
Amendment, will be valid and binding obligations of Company in accordance with
its terms; (b) the continuing representations and warranties of Company set
forth in Sections 7.1 through 7.12 and 7.14 of the Original Agreement are true
and correct on and as of the date hereof with the same force and effect as
made on and as of the date hereof; (c) the continuing representations and
warranties of Company set forth in Section 7.13 of the Original Agreement are
true and correct as of the date hereof with respect to the most recent
financial statements furnished to the Bank by Company in accordance with
Section 8.3 of the Original Agreement and with respect to material adverse
changes since July 29, 1995; and (d) no Event of Default, or condition or
event which, with the giving of notice or the running of time, or both, would
constitute an Event of Default under the Original Agreement, has occurred and
is continuing as of the date hereof.
<PAGE>
3. This Second Amendment shall be effective as of October 28, 1995.
4. All references to the term "Agreement" and to the terms "hereof",
"hereunder" and similar referential terms in the Original Agreement shall be
deemed to mean or refer to the Original Agreement as amended by this Second
Amendment.
5. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Original Agreement.
6. This Second Amendment may be executed in counterparts, in
accordance with Section 12.10 of the Original Agreement.
IN WITNESS WHEREOF, the Banks, the Agent and the Company have caused
this Second Amendment to be executed by their respective, duly authorized
officers, all as of the date set forth above.
COMPANY:
JACOBSON STORES INC.
By: /s/ Kevin C. Binkley
-----------------------------
Title: Vice President-Treasurer
-------------------------
AGENT:
COMERICA BANK:
By: /s/ Charles F. Weddell
-----------------------------
Title: Vice President
-------------------------
- 2 -
<PAGE>
BANKS:
COMERICA BANK:
By: /s/ Charles F. Weddell
-----------------------------
Title: Vice President
-------------------------
NBD BANK (formerly known as NBD Bank, N.A.)
By: /s/ Thomas A. Gamm
-----------------------------
Title: Second Vice President
-------------------------
- 3 -
EXHIBIT 4(c)
FIRST AMENDMENT TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This First Amendment to Amended and Restated Revolving Credit
Agreement (the "First Amendment") made as of the 28th day of October, 1995
("Amendment Effective Date"), among Comerica Bank and NBD Bank (formerly known
as NBD Bank, N.A.) (individually, "Bank" and collectively, "Banks"), Comerica
Bank, as Agent for the Banks (in such capacity "Agent") and Jacobson Credit
Corp., a Michigan corporation ("Company").
WITNESSETH:
WHEREAS, the Banks, the Agent and the Company have executed and
delivered that certain Amended and Restated Revolving Credit Agreement dated
as of November 20, 1992 (the "Original Agreement");
WHEREAS, the Company, the Agent and the Banks desire to amend the
Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises, the Banks, the Agent
and the Company hereby agree as follows:
1. Section 11.1(h)(i) of the Original Agreement is amended to read
in its entirety as follows:
"(i) Fail to maintain Consolidated Tangible Net Worth in an
amount equal to or greater than the Minimum Amount, except for the
period beginning July 30, 1995 and ending January 26, 1996, when it
shall be an Event of Default if Consolidated Tangible Net Worth shall
be less than $76,000,000."
2. Company hereby represents and warrants that, after giving effect to
the amendments contained herein, (a) execution, delivery and performance of
the Original Agreement, as amended by this First Amendment, are within
Company's corporate powers, have been duly authorized, are not in
contravention of law or the terms of Company's Articles of Incorporation or
Bylaws, and do not require the consent or approval of any governmental body,
agency, or authority; and the Original Agreement, as amended by this First
Amendment, will be valid and binding obligations of Company in accordance with
its terms; (b) the continuing representations and warranties of Company set
forth in Sections 7.1 through 7.7 and 7.9 of the Original Agreement are true
and correct on and as of the date hereof with the same force and effect as
made on and as of the date hereof; (c) the continuing representations and
warranties of Company set forth in Section 7.8 of the Original Agreement are
true and correct as of the date hereof with respect to the most recent
financial statements furnished to the Bank by Company in accordance with
Section 9.2 of the Original Agreement and with respect to material adverse
changes since July 29, 1995; and (d) no Event of Default, or condition or
event which, with the giving of notice or the running of time, or both, would
constitute an Event of Default under the Original Agreement, has occurred and
is continuing as of the date hereof.
<PAGE>
3. This First Amendment shall be effective as of October 28, 1995.
4. All references to the term "Agreement" and to the terms "hereof",
"hereunder" and similar referential terms in the Original Agreement shall be
deemed to mean or refer to the Original Agreement as amended by this First
Amendment.
5. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Original Agreement.
6. This First Amendment may be executed in counterparts, in accordance
with Section 13.10 of the Original Agreement.
IN WITNESS WHEREOF, the Banks, the Agent and the Company have caused
this First Amendment to be executed by their respective, duly authorized
officers, all as of the date set forth above.
COMPANY:
JACOBSON CREDIT CORP.
By: /s/ Kevin C. Binkley
-----------------------------
Title: Vice President-Treasurer
-------------------------
AGENT:
COMERICA BANK:
By: /s/ Charles F. Weddell
-----------------------------
Title: Vice President
-------------------------
- 2 -
<PAGE>
BANKS:
COMERICA BANK:
By: /s/ Charles F. Weddell
-----------------------------
Title: Vice President
-------------------------
NBD BANK (formerly known as NBD Bank, N.A.)
By: /s/ Thomas A. Gamm
-----------------------------
Title: Second Vice President
-------------------------
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. 28, Oct. 29, Oct. 28, Oct. 29,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <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 5,779 5,781 5,779
Fully diluted 6,835 6,835 6,837 6,835
======== ======== ========= ========
NET LOSS $ (2,255) $ (1,816) $ (7,404) $ (4,692)
======== ======== ========= ========
NET LOSS, adjusted to reflect reduction in
interest expense attributable to convertible
debentures, net of income tax $ (1,871) $ (1,432) $ (6,252) $ (3,540)
======== ======== ========= ========
NET LOSS PER SHARE:
Primary and Fully diluted $ (0.39) $ (0.31) $ (1.28) $ (0.81)
======== ======== ========= ========
</TABLE>
EXHIBIT 15
ARTHUR ANDERSEN LLP
To Jacobson Stores Inc.:
We are aware that Jacobson Stores Inc. has incorporated by reference in its
Form S-8 Registration Statements No. 2-88295 and No. 033-53469 and Form S-2
Registration Statement No. 33-10532 its Form 10-Q for the quarter ended
October 28, 1995, which includes our report dated November 8, 1995, 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, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES AS
OF, AND FOR THE THIRTY-NINE WEEK PERIOD ENDED, OCTOBER 28, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-END> OCT-28-1995
<PERIOD-TYPE> 9-MOS
<CASH> 3,795
<SECURITIES> 0
<RECEIVABLES> 36,148
<ALLOWANCES> 692
<INVENTORY> 108,728
<CURRENT-ASSETS> 157,085
<PP&E> 172,186
<DEPRECIATION> 73,765
<TOTAL-ASSETS> 276,959
<CURRENT-LIABILITIES> 58,600
<BONDS> 128,701
<COMMON> 5,966
0
0
<OTHER-SE> 73,175
<TOTAL-LIABILITY-AND-EQUITY> 276,959
<SALES> 281,199
<TOTAL-REVENUES> 281,199
<CGS> 189,580
<TOTAL-COSTS> 189,580
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,526
<INCOME-PRETAX> (11,391)
<INCOME-TAX> (3,987)
<INCOME-CONTINUING> (7,404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,404)
<EPS-PRIMARY> (1.28)
<EPS-DILUTED> (1.28)
</TABLE>
