FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 28, 1995
Commission File No. 0-6319
JACOBSON STORES INC.
Michigan 38-0686330
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
3333 Sargent Road, Jackson, Michigan 49201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: 517-764-6400
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 par value
Series A Preferred Stock Purchase Rights
6-3/4% Convertible Subordinated Debentures due 2011
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE
TO THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES
OF SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF
FILING.
$41,290,000 as of March 1, 1995
<PAGE>
(THE PERSONS CONSIDERED AFFILIATES FOR THE PURPOSE OF THE FOREGOING
COMPUTATION ARE IDENTIFIED ON PAGE 19 OF THIS REPORT.)
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'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 March 1, 1995
DOCUMENTS INCORPORATED BY REFERENCE
LIST HEREUNDER THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE
PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED:
SPECIFIED PORTIONS OF PROXY STATEMENT FOR 1995 ANNUAL MEETING OF
SHAREHOLDERS, TO BE HELD MAY 25, 1995: PART III
<PAGE>
JACOBSON STORES INC.
FORM 10-K
FISCAL YEAR ENDED JANUARY 28, 1995
INDEX
PAGE
PART I.
Item 1. Business. 1
Item 2. Properties. 7
Item 3. Legal Proceedings. 9
Item 4. Submission of Matters to a Vote of
Security Holders. 9
Executive Officers of the Registrant. 9
PART II.
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters. 10
Item 6. Selected Financial Data. 12
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 12
Item 8. Financial Statements and Supplementary
Data. 18
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. 18
PART III.
Item 10. Directors and Executive Officers of
the Registrant. 19
Item 11. Executive Compensation. 19
Item 12. Security Ownership of Certain Beneficial
Owners and Management. 19
Item 13. Certain Relationships and Related
Transactions. 19
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 20
<PAGE>
PAGE
SIGNATURES 24
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1/F-17
INDEX OF EXHIBITS E-1/E-3
ii
<PAGE>
PART I
ITEM 1. BUSINESS.
INTRODUCTION
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-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 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.
MERCHANDISE AND MARKETING
MERCHANDISE. Jacobson's directs its primary merchandising and marketing
efforts to discerning customers with preferences for fine merchandise. Stores
are merchandised with a full line of fashion apparel and accessories for
women, men and children, and most offer accessories for the home.
1
<PAGE>
The percentage contribution to sales by major class of merchandise for
the last three fiscal years was as follows:
<TABLE>
<CAPTION>
Year Ended
- - - - - - - - - - - - - - - - - - - -
January January January
1995 1994 1993
- - - - - - - - - - - -
<S> <C> <C> <C>
Women's apparel and accessories............................. 66.2% 64.6% 64.3%
Men's apparel and accessories............................... 12.8 12.5 12.6
Accessories for the home.................................... 8.0 9.5 9.3
Children's apparel and
accessories............................................... 8.8 9.1 9.3
Miscellaneous............................................... 4.2 4.3 4.5
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
PERSONAL SERVICE. Jacobson's stores are fully staffed with
knowledgeable salespeople to ensure that customers receive prompt personal
attention. Jacobson's salespeople are experienced and well-trained through
video presentations, seminars and close working relationships with buyers and
merchandise managers. Salespeople maintain personal trade lists of their
customers' sizes, colors, fashion preferences, and important dates, and
contact customers by telephone or personal note to alert them to the arrival
of new merchandise or to remind them of birthdays or anniversaries. Management
believes that personal relationships between salespeople and their clientele
promote customer loyalty and contribute to the Company's growth. Other special
services include free gift wrapping and free parking. All regularly scheduled
Jacobson's salespeople are compensated on some form of commission program.
SALES PROMOTION. The Company uses newspaper, radio, television and
direct mail advertising, as well as in-store events and billing statement
enclosures, to stimulate sales. Advertising generally is institutional and
focuses on current fashions and merchandise classifications. The Company's
policy is to price merchandise fairly and competitively and to avoid sale
events other than special pre-season promotions and end-of-season clearances.
Although advertisements usually mention price, Jacobson's refrains from
comparative pricing (comparing the advertised price to a higher original
price) in its advertising. Management believes that this practice enhances
credibility and customer loyalty. Jacobson's in-store events include fashion
shows and wardrobing seminars to communicate fashion trends to customers.
STORE DESIGN. Jacobson's stores are designed to project an attractive,
comfortable atmosphere similar to the style customers find in their own homes.
All aspects of the store interiors and fixturing are coordinated by the
Company's store planning personnel, using quality fixtures, carpeting,
lighting and displays.
2
<PAGE>
CREDIT POLICY
Jacobson's issues its own credit card as a customer service. The
Company offers three credit plans to its cardholders: an Option plan requiring
a minimum monthly payment of 20% of the outstanding balance; an Extended
Payment plan available primarily for furs, fine jewelry, and furniture
purchases in the Company's two stores which carry furniture; and a Tabletop
plan granting extended payment terms without finance charge for qualifying
purchases of china, crystal, silver, and table linens.
Sales under Jacobson's credit plans averaged 48.1% of sales for the
last three fiscal years and accounted for 44.8% of the Company's sales in
fiscal 1994. In addition, sales under third party credit cards (VISA,
MasterCard and American Express) averaged 31.9% of sales for the last three
fiscal years and accounted for 35.9% of the Company's sales in fiscal 1994.
Credit losses relating to the Company's credit card have averaged .42% of
credit sales over the last three years (ranging from .32% to .53%).
The Company maintains purchasing and payment history on its 286,000
active account holders, which permits targeting of direct mail advertising and
automatic increases of credit limits.
OPERATIONS
The Company operates in two regions, the Midwest and Florida. The
principal merchandising and distribution functions for the Midwest stores are
performed at the Company's central distribution facility in Jackson, Michigan.
The principal merchandising and distribution functions for the Florida stores
are performed in Winter Park, Florida. Functions common to all stores, such as
management coordination, sales promotion, data processing and accounting, are
centralized at the corporate headquarters in Jackson, Michigan.
Jacobson's stores in Michigan are located in Birmingham, Dearborn,
Grosse Pointe, Livonia and Rochester (all suburbs of Detroit), Ann Arbor, East
Grand Rapids, East Lansing, Jackson, Kalamazoo and Saginaw; in Indiana, in
Indianapolis; in Kentucky, in Louisville; in Ohio, in Columbus and Toledo; and
in Florida, in Clearwater, Fort Myers, Jacksonville, Longwood, Naples, North
Palm Beach, Osprey, Sarasota, Tampa and Winter Park. In addition, the Company
has a clearance center in Troy, Michigan, a suburb of Detroit. Stores in the
Midwest range from 101,000 to 199,000 square feet, except for the clearance
center, which is 34,000 square feet. The Florida stores range from 23,000 to
90,000 square feet.
Jacobson's maintains evening hours consistent with customer shopping
patterns in each community. Stores generally are open a maximum of 59 hours
each week, except during the holiday season, when evening hours may be
extended.
3
<PAGE>
Annual sales, percentage increase in sales, average gross square
footage of stores in operation during the fiscal year, and approximate sales
per average gross square foot were as follows:
<TABLE>
<CAPTION>
Year Ended
- - - - - - - - - - - - - - - - - - - -
January January January
1995 1994 1993
- - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Net sales, including leased
departments (in thousands).......................... $409,154 $403,816 $411,631
Percentage increase in sales:
All stores.......................................... 1.3% (1.9)% 4.0%
Same stores......................................... (0.2)% (4.1)% 2.9%
Average gross square footage
(in thousands)...................................... 2,439 2,454 2,433
Approximate sales per average
gross square foot................................... 168 165 169
</TABLE>
PURCHASING, CONTROL AND DISTRIBUTION OF INVENTORY
Jacobson's purchases merchandise from several thousand suppliers, no
one of which accounted for as much as 3% of the Company's net purchases during
fiscal 1994. The Company maintains separate staffs of buyers for its Midwest
and Florida stores to better respond to customer lifestyles and merchandise
preferences. Merchandising decisions are directed by 3 general merchandise
managers, 13 divisional merchandise managers, 81 buyers and 12 assistant
buyers. In addition, the Company is a member of the Frederick Atkins Buying
Office, a domestic and foreign buying office serving approximately 30
retailers, which provides merchandising counsel, product information, direct
store import capability, and other services.
An on-line computerized merchandise information system provides the
Company's buyers with detailed reports of current sales and inventory levels
for each store, by department, class, vendor, style, color and size. This
system permits the Company's merchandising staff to analyze trends on a daily
basis, to identify fast-selling and slow-selling merchandise and to respond to
customer buying preferences when making reorder and markdown decisions.
Merchandise is generally shipped directly from vendors to the Company's
regional distribution centers in Jackson, Michigan and in Winter Park,
Florida, where it is inspected for quality by the Company's buyers, priced and
shipped to the stores by Jacobson's fleet of trucks.
Jacobson's adopted the LIFO method of inventory valuation in 1968. At
the end of fiscal 1994, LIFO reserves totalled $15,488,000, or approximately
13.9% of pre-LIFO inventory values. Physical inventories are taken at least
once each year. Inventory shrinkage at retail over the past three fiscal years
has averaged 2.5% to owned retail sales.
4
<PAGE>
EXPANSION
Jacobson's current strategy is to open one new store each year, to the
extent feasible, and to renovate one store each year.
In April 1994, the Company purchased the store building and related
parking area in the Grande Boulevard Mall in Jacksonville, Florida, which it
had leased since 1983.
In May 1994, the Company acquired ownership of its styling salon
operations, which were previously leased.
In October 1994, the Company signed a lease of a 120,000 square foot
store in a shopping center to be constructed in Leawood, Kansas, a suburb of
Kansas City. The store is targeted to open in 1996.
In November 1994, the Company opened a 161,000 square foot store in
Oxmoor Center, Louisville, Kentucky.
In November 1994, the Company signed a letter of intent to lease an
80,000 square foot store to be constructed at Mizner Park, in Boca Raton,
Florida. The store is targeted to open in 1996.
The Company intends to continue expanding its operations in its Midwest
and Florida regions as desirable opportunities arise and resources permit.
REAL ESTATE POLICY
Jacobson's strategy is to own or obtain long-term leases of the real
estate used in the operation of its business. Through Jacobson Realty, the
Company owns approximately 70% of the total square footage used in its
business. The Company uses cash flow equal to depreciation to maintain a
continuing program of property improvements and renewal of existing stores and
support facilities. New stores and major expansion projects generally are
financed by mortgage loans or comparable financing, or through long-term
leases. At January 28, 1995, mortgage loans and related secured financings
comprised approximately 43% of consolidated debt.
COMPETITION
The specialty department store business is highly competitive. The
Company's stores are in active competition with other department and specialty
stores and with regional and national department store chains, some of which
are considerably larger than the Company and have substantially greater
financial and other resources. Jacobson's competes principally on the basis of
availability of fashion merchandise, quality, personalized service and
attractive store surroundings, as well as fair pricing and advertising. The
Company believes it is a respected retail merchandiser in the communities it
serves, and that its merchandising policies and reputation enable it to
maintain its competitive position.
5
<PAGE>
EMPLOYEES
Jacobson's believes that its employees are among its key resources.
Management stresses development programs for employees and promotion from
within. The Company employs approximately 5,000 employees, 3,850 full-time and
1,150 part-time. During the holiday season, the number of employees increases
to approximately 6,100.
- - - - -
(a) GENERAL DEVELOPMENT OF BUSINESS.
Some of the principal developments in Jacobson's business during
fiscal 1994 and the current year to date are summarized on page 5 of this
report under the caption "Expansion." To finance this expansion, the Company
obtains mortgage loans or comparable financing or obtains long-term leases. In
addition, to fund present and anticipated working capital requirements, the
Company has a 10-year term loan agreement which provides for borrow-ings of up
to $40 million on an unsecured basis. At January 28, 1995, the Company had
borrowed $30 million under this facility. Also, the Company's wholly-owned
finance subsidiary has an unsecured line of credit of $35 million under a
3-year revolving credit agreement.
During fiscal 1994, the Company sold the site of its former Store
for the Home in East Lansing, Michigan, and consolidated its Birmingham,
Michigan operations from three facilities into two. It is currently
consolidating its Kalamazoo, Michigan operations into one building.
(b) INDUSTRY SEGMENTS AND LINES OF BUSINESS.
Jacobson's operates in a single industry, the specialty
department store industry.
The percentage contribution to sales by major class of
merchandise for each of the last three fiscal years is set forth on page 2 of
this report.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
The nature of Jacobson's business, the categories of merchandise
it sells, and the percentage contribution to sales by merchandise category
during the past three fiscal years, are set forth on pages 1-2 of this report.
The specialty department store business is seasonal. The holiday
season (from the day after Thanksgiving to January 1) generally accounts for
15-20% of Jacobson's net sales.
6
<PAGE>
By reason of the seasonal nature of the business, Jacobson's and
others in the industry experience significant build-up of inventory and
accounts receivable at certain times of the year. To support the seasonal
requirements, Jacobson Credit has an unsecured line of credit of $35,000,000
under a revolving credit agreement. Further information on this line of credit
is set forth in the Notes to the Company's Consolidated Financial Statements
for the three fiscal years ended January 1995, filed as part of this report
(see "Financing" on page F-9).
Competitive conditions in the specialty department store business
are discussed on pages 5-6 of this report.
Information with respect to the Company's employees is provided
on page 6 of this report.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES.
The registrant has no foreign operations and no material export
sales.
ITEM 2. PROPERTIES.
(a) The following table shows the location and approximate size of
Jacobson's stores and its offices and principal warehouse and distribution
facilities; whether owned by the registrant or leased; and the expiration
dates (including renewal options) of principal real estate leases. Most such
owned properties are subject to mortgage. In several cities, the store
consists of two buildings.
Jacobson's management considers that these properties, as well as
its furniture, fixtures, machinery and equipment, are well maintained,
suitable and adequate for their intended purposes, and in general fully
utilized.
<TABLE>
<CAPTION>
Approximate Expiration
Total Square Dates of
Feet of Principal
Locations Building(s) Ownership Leases
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
MICHIGAN
Jackson........................ 105,000 Partly owned (1) 2006, 2016
Ann Arbor...................... 101,000 Owned ----
East Lansing................... 117,000 Partly owned (2) 2028
Saginaw........................ 199,000 Partly owned (3) 1995
Grosse Pointe.................. 151,000 Owned ----
Birmingham..................... 179,000 Partly owned (4) 2008
Kalamazoo...................... 131,000 Partly owned (5) 2010
Dearborn....................... 145,000 Owned ----
East Grand Rapids.............. 148,000 Owned ----
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Approximate Expiration
Total Square Dates of
Feet of Principal
Locations Building(s) Ownership Leases
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
MICHIGAN
Rochester....................... 106,000 Partly owned (6) 2046
Livonia......................... 150,000 Owned ----
Troy Clearance Center........... 34,000 Leased 2002
Central Office and
Distribution Center
(Jackson)...................... 238,000 Owned ----
INDIANA
Indianapolis.................... 120,000 Leased 2048
KENTUCKY
Louisville...................... 161,000 Leased 2036
OHIO
Toledo.......................... 120,000 Owned ----
Columbus........................ 119,000 Partly owned (7) 2079
FLORIDA
Sarasota........................ 25,000 Partly owned (7) 2014
Winter Park..................... 23,000 Leased 2013
Longwood........................ 49,000 Leased 2020
North Palm Beach................ 90,000 Leased 2022
Osprey.......................... 32,000 Leased 2025
Clearwater...................... 52,000 Leased 2039
Fort Myers...................... 51,000 Partly owned (8) 2085
Jacksonville.................... 57,000 Owned ----
Tampa........................... 48,000 Leased 2030
Naples.......................... 46,000 Leased 2042
Regional Distribution
Center (Winter Park)........... 84,000 Owned ----
<FN>
(1) Approximately 28,000 square feet owned; balance leased.
(2) Building is owned; approximately half of land is owned and
half leased.
(3) Approximately 29,000 square feet leased from month to month;
balance owned.
(4) Birmingham Fashion Apparel Store (98,000 square feet) is owned.
The Men's Store and Children's Store (81,000 square feet) include
approximately 64,000 square feet owned; the balance is leased.
(5) Kalamazoo Apparel Store (83,000 square feet) is owned. The Store
for the Home (48,000 square feet) is leased, except for 2,000
square feet owned.
(6) Approximately 71,000 square feet and related parking area are
owned. The balance of the shopping center is leased, of which
35,000 square feet are operated as part of Jacobson's store.
(7) Building is owned on leased land.
(8) Building is owned; land and parking area are leased.
(b) Not applicable.
</TABLE>
8
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
No material legal proceedings are pending to which Jacobson Stores Inc.
or any of its subsidiaries is a party or to which any of their property is
subject, other than ordinary routine litigation incidental to the registrant's
business, and no such proceeding is known by the registrant to be
contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The table below sets forth the name and age of each executive officer
of the registrant, all positions and offices with Jacobson Stores Inc. and its
wholly-owned subsidiaries held by each such person, and the period during
which the officer has served in such positions. Each has been elected to hold
office until the 1995 Annual Meeting or until a successor is elected and
qualified.
<TABLE>
<CAPTION>
Held
Office
Name Age Positions and Offices Since
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Mark K. Rosenfeld 49 Chairman of the Board and 1993
Chief Executive Officer,
and Director, Jacobson
Stores Inc. and wholly-
owned subsidiaries
Paul W. Gilbert 50 Vice Chairman of the Board, 1993
and Director, Jacobson
Stores Inc. and wholly-
owned subsidiaries
James B. Fowler 47 President and Director, 1993
Jacobson Stores Inc. and
wholly-owned subsidiaries
Joseph H. Fisher 59 Senior Vice President- 1991
General Merchandise Manager,
Jacobson Stores Inc.
George P. Kelly 58 Senior Vice President- 1994
General Merchandise Manager,
Jacobson Stores Inc.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Held
Office
Name Age Positions and Offices Since
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Theodore R. Kolman 54 Senior Vice President- 1991
General Merchandise Manager,
Jacobson Stores Inc.
Robert L. Moles 53 Senior Vice President- 1986
Stores, Jacobson Stores Inc.
Timothy J. Spalding 39 Vice President & Controller, 1991
Jacobson Stores Inc. and
wholly-owned subsidiaries
</TABLE>
There is no arrangement or understanding between any of the officers
and any other person pursuant to which the officer was selected as an officer.
Each executive officer except Mr. Kelly and Mr. Kolman has held
managerial or executive positions with Jacobson's for more than five
years.
Before joining Jacobson's as Senior Vice President-General Merchandise
Manager in February 1994, Mr. Kelly was Chairman and Chief Executive Officer,
Marshall Field & Co., 1978-83, President and Treasurer, Mallards Enterprises
Inc. (which filed a voluntary petition for liquidation under the Bankruptcy
Code), 1984-1992, and Chief Operating Officer, Brands of Indiana, 1993-1994.
Before joining Jacobson's in 1990, Mr. Kolman was Senior Vice President
and General Merchandise Manager, Robinson's of Florida, Inc., 1982-1987, and
Assistant to the Chief Executive Officer, Cohoes Specialty Stores, 1987-1990.
He was General Merchandise Manager, Home Furnishings Division, Jacobson Stores
Inc., from 1990 to 1991, and has been Senior Vice President-General
Merchandise Manager since May 1991.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded on the NASDAQ National Market,
under the symbol "JCBS."
The quarterly range of high and low price quotations of Jacobson's
Common Stock and dividends paid per share are shown in the following schedule:
10
<PAGE>
<TABLE>
<CAPTION>
Dividends
Per
Year Quarter High Low Share
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C> <C>
1994 4th $13 $10 $.12-1/2
3rd 13-3/4 12-1/2 .12-1/2
2nd 14-3/4 12-1/4 .12-1/2
1st 15 11-3/4 .12-1/2
1993 4th $14 $11-3/4 $.12-1/2
3rd 13 11 .12-1/2
2nd 14 11-3/4 .12-1/2
1st 16-1/2 11-3/4 .12-1/2
1992 4th $17-1/4 $13-3/4 $.12-1/2
3rd 17-3/4 14-1/2 .12-1/2
2nd 18 14-1/2 .12-1/2
1st 19 15-1/4 .12-1/2
</TABLE>
The approximate number of shareholders of record of Jacobson's Common
Stock as of March 1, 1995 was 1,375.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for fiscal 1990 through 1994 is as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(in thousands except
per share data) 1994 1993 1992 1991 1990
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C> <C> <C>
Net sales, including
leased departments.................. $409,154 $403,816 $411,631 $395,677 $394,009
Earnings before income taxes.......... 6,388 4,610 5,894 6,494 2,862
Net earnings.......................... 4,088 3,014 3,910 4,218 2,365
Total assets.......................... 268,589 248,818 250,395 239,460 240,764
Long-term debt, less current
portion............................. 120,424 108,203 105,270 97,514 103,597
Per common share:
Net earnings -
. Primary........................... $ 0.71 $ 0.52 $ 0.68 $ 0.73 $ 0.41
. Fully diluted..................... 0.71 0.52 0.68 0.73 0.41
Cash dividends...................... 0.50 0.50 0.50 0.50 0.50
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table shows the percentage relationship to sales of the
items presented for the periods indicated.
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Net sales.................................................... 100.0% 100.0% 100.0%
Gross profit................................................. 35.2 33.9 33.7
Selling, general and administrative
expenses................................................... 31.7 31.1 30.4
Interest expense, net........................................ 2.0 1.9 1.9
Gain on sale of property..................................... 0.1 0.2 -
Earnings before income taxes................................. 1.6 1.1 1.4
Net earnings................................................. 1.0 0.7 0.9
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
12
<PAGE>
1994 VERSUS 1993
Sales in 1994 totalled $409,154,000, an increase of 1.3% from 1993. Excluding
sales of furniture departments which were discontinued in six stores in the
Fall of 1993, comparable store sales also increased 1.3% in 1994.
Women's apparel and accessories represented 66.2% of the Company's total
business in 1994. Other major components were men's 12.8%, children's 8.8%,
home accessories 8.0%, and miscellaneous 4.2%.
The Company's gross profit percentage increased to 35.2% in 1994 from 33.9% in
1993, reflecting a higher markup percentage and a significant LIFO credit
which reduced cost of merchandise sold by $4,351,000, partially offset by
higher markdowns. In 1993, a LIFO credit (including liquidation of most
furniture LIFO reserves, as discussed below) reduced cost of merchandise sold
by $181,000.
Selling, general and administrative expenses, as a percentage of sales, were
31.7% compared to 31.1% in 1993. This increase was due primarily to increased
sales promotion expense, higher usage of third party credit cards and
resulting increased merchant fees and reduced finance charge income, as well
as to modest sales growth and a resulting lack of expense leverage.
Interest expense increased in 1994 from 1993, reflecting primarily an increase
in short-term rates and borrowings and lower interest capitalized on
construction projects.
1994 net earnings totalled $4,088,000 or 71 cents per common share, compared
to 1993 net earnings of $3,014,000 or 52 cents per share. As a percentage of
sales, net earnings were 1.0% in 1994 as compared to 0.7% in 1993.
Net earnings include after-tax gains on sales of property totalling $333,000
or 5 cents per share in 1994 and $636,000 or 11 cents per share in 1993.
In the Fall of 1993, the Company phased out furniture departments in six
stores to provide increased space for fashion apparel, accessories and home
decorative departments. Furniture comprised less than 2 percent of
Company-wide annual sales. Operating results for 1993 include a $1,400,000
reduction in the LIFO provision to reflect liquidation of most furniture LIFO
reserves, largely offset by a charge to write down furniture inventories to
net realizable value. The impact on net earnings was not material.
13
<PAGE>
1993 VERSUS 1992
Sales in 1993 totalled $403,816,000, a decrease of 1.9% from 1992. The 1992
fiscal year included 53 weeks. On an equivalent 52 week basis, 1993 sales
increased 0.1% and comparable store sales decreased 2.0%.
Women's apparel and accessories represented 64.6% of the Company's total
business in 1993. Other major components were men's 12.5%, home accessories
9.5%, children's 9.1% and miscellaneous 2.4%. Leased department sales amounted
to 1.9% of net sales in 1993.
The Company's gross profit percentage increased to 33.9% in 1993 from 33.7% in
1992, reflecting a higher markup percentage and lower markdowns. These
improvements were partially offset by occupancy costs associated with a new
store opened in November 1992 and higher inventory shortage. In 1993, a LIFO
credit (including liquidation of most furniture LIFO reserves, as discussed
above) reduced cost of merchandise sold by $181,000. In 1992, the LIFO credit
totalled $201,000.
Selling, general and administrative expenses, as a percentage of sales, were
31.1% compared to 30.4% in 1992. This increase is due primarily to the
decrease in sales and resulting lack of expense leverage. Selling, general and
administrative expense dollars were essentially unchanged from 1992,
principally reflecting the impact of one less week in 1993 and a reduction in
health care expenses.
Interest expense in 1993 was substantially unchanged from 1992. The first full
year impact of interest on $20,000,000 borrowed in November 1992 under the
Company's term loan facility was offset by lower interest on real estate debt
and interest capitalized on construction projects.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", as of the beginning of
the 1993 fiscal year. Adoption had an immaterial impact on net
earnings.
1993 net earnings totalled $3,014,000 or 52 cents per common share, compared
to 1992 net earnings of $3,910,000 or 68 cents per share. As a percentage of
sales, net earnings were 0.7% in 1993 as compared to 0.9% in 1992.
Net earnings in 1993 include an after-tax gain on sale of property of $636,000
or 11 cents per share.
14
<PAGE>
INFLATION
The Company cannot determine the precise effects of inflation on its business.
Because of inflation, historically the Company has experienced increases in
the cost of merchandise and in certain operating expenses. The Company
generally has been able to offset the effects of these increased expenses by
adjusting prices, by using the LIFO method for valuing all merchandise
inventories and by controlling expenses. The Company's ability to adjust
prices is limited by competitive pressures in its market areas. The Department
Store Inventory Price Indexes, published by the Bureau of Labor Statistics,
are used to measure inflation's impact on inventories in the LIFO valuation.
The BLS Index decreased 0.5% overall in 1994. The BLS Index increased 1.3% in
1993 and 0.6% in 1992.
LIQUIDITY AND CAPITAL RESOURCES
At January 28, 1995, the Company's current ratio was 3.01 to 1 and working
capital totalled $99,636,000, including $3,558,000 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. At January 30, 1993, the current ratio was 3.07 to 1 and working
capital totalled $100,779,000, including $8,301,000 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 three year revolving credit line
through its consolidated, wholly-owned finance subsidiary, Jacobson Credit
Corp. This facility provides for either or both of two interest rate
alternatives. At January 28, 1995, borrowings under this facility totalled
$3,500,000. 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 January 28, 1995, the
Company had borrowed $30,000,000 under this facility. These facilities provide
sufficient capacity to fund present and anticipated working capital
requirements.
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 the Company's
consolidated, wholly-owned real estate subsidiary, Jacobson Stores Realty
Company, or through long-term leases. Future expansion is expected to be
financed in a similar manner.
15
<PAGE>
CASH FLOWS
Cash and cash equivalents decreased $2,341,000 in 1994, $2,402,000 in 1993 and
increased $3,190,000 in 1992. Cash flows are impacted by operating, investing
and financing activities. In 1994, operating activities provided $5,997,000 of
cash, compared to $16,303,000 in 1993 and $7,684,000 in 1992. The decrease in
1994 versus 1993 reflects primarily increases in inventory levels, including
start-up working capital requirements for a new store opened in late 1994 and
a $4,351,000 reduction of LIFO reserves. The increase in 1993 versus 1992
reflects principally reductions in inventory levels, including discontinuance
of most furniture operations.
Investing activities used cash of $17,563,000, $18,263,000 and $8,381,000 in
1994, 1993 and 1992, respectively. 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 $14,131,000, $17,519,000 and $6,034,000 in 1994, 1993 and 1992,
respectively. In addition, the Company incurred capital lease obligations (not
included in cash investing activities above) primarily for computer hardware
and related software totalling $1,085,000 and $1,257,000 in 1993 and 1992,
respectively. There were no new capital lease obligations in 1994.
Financing activities provided cash of $9,225,000 in 1994, used cash of
$442,000 in 1993, and provided cash of $3,887,000 in 1992. In 1994, the
Company borrowed $10,000,000 at a below-prime variable rate under its term
loan facility, obtained $2,727,000 first mortgage financing and used
$4,112,000 of cash to service current maturities of long-term debt. In
addition, the Company had borrowings of $3,500,000 under its revolving credit
line at January 28, 1995. In 1993, the Company obtained $8,000,000 first
mortgage financing, and used $5,552,000 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 borrowed $20,000,000 in 1992 at a fixed
rate of 7.73% under its term loan facility and used $13,224,000 of cash to
redeem its $10,000,000 10% Subordinated Debentures due April 1993 and to
service current maturities of long-term debt. The Company paid common stock
dividends of $2,890,000 in each of 1994, 1993 and 1992.
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>
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 1992, the Company completed a 37,000 square foot expansion of its Florida
regional distribution center using internally-generated funds and opened a
46,000 square foot leased store in a new shopping center, Waterside Shops at
Pelican Bay, Naples, Florida.
In January 1993, the Company purchased a 101,000 square foot building and
related parking in Briarwood Mall, Ann Arbor, Michigan, and relocated its
store operations to that location in September 1993. The Company obtained
mortgage financing to fund the purchase and renovation of the Briarwood store
and 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 previously were operated as a leased department. The Company and the
former salon operator terminated their License Agreement and the Company
purchased the salon assets for cash.
In October 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 store is targeted to open in 1996.
In November 1994, the Company signed a letter of intent to lease 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 1996.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements and supplementary financial
information are filed as part of this report on pages F-1 through F-17:
Consolidated Statements of Earnings, Three Fiscal Years Ended
January 28, 1995.
Consolidated Statements of Cash Flows, Three Fiscal Years Ended
January 28, 1995.
Consolidated Balance Sheets, January 28, 1995, January 29, 1994, and
January 30, 1993.
Consolidated Statements of Shareholders' Equity, Three Fiscal
years Ended January 28, 1995.
Notes to Consolidated Financial Statements.
Summary of Significant Accounting Policies.
Report of Independent Public Accountants.
Quarterly Information (Unaudited).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
18
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Part III is incorporated by reference
from those portions of the registrant's definitive proxy statement for its
1995 Annual Meeting of Shareholders to be held May 25, 1995, filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days
after the end of the fiscal year covered by this Form 10-K, appearing under
the following captions:
"Voting Securities and Principal Holders Thereof" (pages 1-3, inclusive,
of the proxy statement).
"Election of Directors" (pages 3-7, inclusive, thereof).
"Executive Compensation" (pages 8-10, inclusive, thereof); but excluding
from this incorporation by reference everything appearing under
the captions "Organization and Compensation Committee Report on
Executive Compensation" and "Performance Graph" (pages 11-13,
inclusive, thereof).
For the purpose of stating the aggregate market value of voting stock
held by non-affiliates on the cover of this report, the registrant considers
that the directors of the registrant, the executive officers listed on pages
9-10 of this report, Marjorie L. Rosenfeld, David A. Rosenfeld, the Jacobson's
Retirement Savings and Profit Sharing Plan, the Jacobson Pension Plan, and The
Jacobson Stores Foundation are affiliates, and that all other shareholders are
non-affiliates. This statement is without prejudice to the classification of
any shareholder at other times or for other purposes.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following financial statements, financial statement schedules,
and exhibits are filed as part of this report:
PAGE
(1) FINANCIAL STATEMENTS:
Consolidated Statements of Earnings, Three F-1
Fiscal Years Ended January 28, 1995.
Consolidated Statements of Cash Flows, Three F-2
Fiscal Years Ended January 28, 1995.
Consolidated Balance Sheets, January 28, 1995, F-3
January 29, 1994, and January 30, 1993.
Consolidated Statements of Shareholders' Equity, F-4
Three Fiscal Years Ended January 28, 1995.
Notes to Consolidated Financial Statements. F-5/
F-13
Summary of Significant Accounting Policies. F-14
Report of Independent Public Accountants. F-15
Quarterly Information (Unaudited). F-16/
F-17
(2) All schedules have been omitted since the information required to be
submitted has been included in the consolidated financial statements or
notes thereto or has been omitted as not applicable or not required.
20
<PAGE>
(3) EXHIBITS:
Each management contract or compensatory plan required to be
filed as an exhibit pursuant to Item 14(c) of this report is indicated
by an asterisk (*).
10(a)* Amendment to Employment Agreement dated March 23,
1994, effective February 1, 1995, between Jacobson
Stores Inc. and Paul W. Gilbert
10(b)* Executive Employment Agreement dated March 22, 1995
between Jacobson Stores Inc. and George P. Kelly
10(c)* Executive Employment Agreement dated March 24, 1995
between Jacobson Stores Inc. and Robert L. Moles
10(d)* 1995 Management Incentive Plan
11 Computation of Earnings per Share
21 Schedule of Subsidiaries
23 Consent of Arthur Andersen LLP
27 Financial Data Schedules
In addition, the previously-filed exhibits listed below are incorporated
herein by reference. (All references are to Securities and Exchange Commission
File #0-6319 unless otherwise noted.)
Current Identification of
Exhibit Description of Exhibit Prior Filing
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
3(a) Restated Articles of Incorpora- Exhibit 19(a) to Form
tion, Jacobson Stores Inc., as 10-Q, Quarter Ended
amended and restated May 25, April 29, 1989
1989
3(b) Certificate of Designation, Exhibit 3(a) to Form
Preferences and Rights of 10-Q, Quarter Ended
Preferred Stock of Jacobson October 29, 1988
Stores Inc.
3(c) By-laws, Jacobson Stores Inc., Exhibit 3(a) to Form
as amended March 17, 1994 10-K, Year Ended
January 29, 1994
4(a) Election under Section 780, Exhibit 28 to Form
Michigan Business Corporation 10-Q, Quarter Ended
Act October 27, 1984
21
<PAGE>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4(b) Indenture dated as of December File #33-10532:
15, 1986 between Jacobson Exhibit 4(a) to Form
Stores Inc. and National Bank S-2 (Amendment No. 1),
of Detroit, as Trustee filed December 12,
1986
4(c) Rights Agreement dated as of Exhibit I to Form 8-A
October 4, 1988 between and Exhibit 4 to Form
Jacobson Stores Inc. and 8-K, October 7, 1988;
Manufacturers National Bank Exhibit 1 to Amendment
of Detroit, as Rights Agent; No. 1 to Form 8-A, May
Change of Rights Agent, 16, 1989; Exhibit 1 to
Effective June 1, 1989; Amendment No. 2 to
Change of Rights Agent, Form 8-A, June 9, 1994
effective May 31, 1994
4(d) Jacobson Credit Corp. Exhibit 4(a) to Form
$35,000,000 Amended and 10-Q, Quarter Ended
Restated Revolving Credit October 24, 1992
Agreement, dated as of
November 20, 1992
4(e) Jacobson Stores Inc. Exhibit 4(b) to Form
$40,000,000 Term Loan 10-Q, Quarter Ended
Agreement, dated as of October 24, 1992
November 20, 1992
9 Voting and Transfer Exhibit 9 to Form
Restriction Agreement, 10-K, Year Ended
effective December 31, 1990 January 26, 1991
10(e)* Employment Agreement dated Exhibit 10(a) to Form
March 23, 1994, between 10-K, Year Ended
Jacobson Stores Inc. and January 29, 1994
Mark K. Rosenfeld
10(f)* Employment Agreement dated Exhibit 10(b) to Form
March 23, 1994, between 10-K, Year Ended
Jacobson Stores Inc. and January 29, 1994
Paul W. Gilbert
10(g)* Employment Agreement dated Exhibit 10(c) to Form
March 23, 1994, between 10-K, Year Ended
Jacobson Stores Inc. and January 29, 1994
James B. Fowler
10(h)* Jacobson Stores Inc. Deferred Exhibit 10(c) to Form
Compensation Plan 10-K, Year Ended
January 26, 1991
22
<PAGE>
With the exception of Exhibits 4(b), 4(d) and 4(e), instruments defining
the rights of holders of long-term debt of the registrant and its subsidiaries
have been omitted. The amount of debt authorized under each such instrument is
less than 10% of the total assets of the registrant and its subsidiaries on a
consolidated basis. The registrant agrees to furnish a copy of any such
instrument to the Securities and Exchange Commission upon request.
In addition to Exhibits 10(a) to 10(c), inclusive, and 10(e) to 10(g),
inclusive, the registrant has employment agreements with three other executive
officers, which are not considered material in amount or significance.
(b) The registrant did not file any report on Form 8-K during the last
quarter of the period covered by this report.
(c) See Item 14(a)(3).
(d) See Item 14(a)(2).
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DATE: April 11, 1995 JACOBSON STORES INC.
By: /s/ Mark K. Rosenfeld
------------------------------
Mark K. Rosenfeld, Chairman
of the Board and Chief
Executive Officer
By: /s/ Paul W. Gilbert
------------------------------
Paul W. Gilbert, Vice Chairman
of the Board (Principal
Financial Officer)
By: /s/ Timothy J. Spalding
------------------------------
Timothy J. Spalding, Vice
President and Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
JACOBSON STORES INC. Date
By: /s/ Mark K. Rosenfeld April 11, 1995
--------------------------------
Mark K. Rosenfeld, Chairman
of the Board and Chief
Executive Officer, and
Director
By: /s/ Paul W. Gilbert April 11, 1995
--------------------------------
Paul W. Gilbert, Vice Chairman
of the Board, and Director
By: /s/ James B. Fowler April 11, 1995
--------------------------------
James B. Fowler, President and
Director
24
<PAGE>
JACOBSON STORES INC. Date
By: /s/ Herbert S. Amster April 11, 1995
---------------------------------
Herbert S. Amster, Director
By: /s/ Frank Couzens, Jr. April 11, 1995
---------------------------------
Frank Couzens, Jr., Director
By: /s/ Herman S. Kohlmeyer, Jr. April 11, 1995
---------------------------------
Herman S. Kohlmeyer, Jr.,
Director
By: /s/ Kathleen McCree Lewis April 11, 1995
---------------------------------
Kathleen McCree Lewis, Director
By: /s/ Patricia Shontz Longe April 11, 1995
---------------------------------
Patricia Shontz Longe, Director
By: /s/ Michael T. Monahan April 11, 1995
---------------------------------
Michael T. Monahan, Director
By: /s/ Philip H. Power April 11, 1995
---------------------------------
Philip H. Power, Director
By: /s/ Richard Z. Rosenfeld April 11, 1995
---------------------------------
Richard Z. Rosenfeld, Director
By: /s/ Robert L. Rosenfeld April 11, 1995
---------------------------------
Robert L. Rosenfeld, Director
By: /s/ James L. Wolohan April 11, 1995
---------------------------------
James L. Wolohan, Director
25
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended
- - - - - - - - - - - - - - - - - - - - - - -
January 28, January 29, January 30,
(in thousands except per share data) 1995 1994 1993 (1)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
NET SALES............................................. $409,154 $403,816 $411,631
-------- -------- --------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses................................ 265,204 266,882 272,962
Selling, general and administrative
expenses.......................................... 130,039 125,759 125,218
Interest expense, net............................... 8,027 7,544 7,557
Gain on sale of property............................ (504) (979) --
-------- -------- --------
Total costs and expenses....................... 402,766 399,206 405,737
-------- -------- --------
EARNINGS BEFORE INCOME TAXES.......................... 6,388 4,610 5,894
PROVISION FOR INCOME TAXES............................ 2,300 1,596 1,984
-------- -------- --------
NET EARNINGS.......................................... $ 4,088 $ 3,014 $ 3,910
======== ======== ========
EARNINGS PER COMMON SHARE:
Primary and Fully Diluted........................... $0.71 $0.52 $0.68
===== ===== =====
<FN>
(1) 53 week year.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The accompanying notes (pages F-5 through F-13) and summary of significant
accounting policies (page F-14) are an integral part of these statements.
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
- - - - - - - - - - - - - - - - - - - - - - - -
January 28, January 29, January 30,
(in thousands) 1995 1994 1993 (1)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................................ $ 4,088 $ 3,014 $ 3,910
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.................... 10,120 9,404 8,865
Deferred taxes .................................. 1,462 164 1,047
Other liabilities................................ (38) (14) 53
Change in:
Receivables from customers, net ............... 1,684 3,791 2,325
Merchandise inventories........................ (15,080) 4,854 (8,537)
Prepaid expenses and other assets.............. (1,719) 1,052 (1,300)
Accounts payable and accrued expenses.......... 6,737 (6,021) 2,038
Accrued income taxes........................... (924) 695 (717)
-------- -------- --------
Net cash provided by
operating activities.................... 5,997 16,303 7,684
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property,
net of income tax................................. 612 2,096 --
Additions to property and equipment................. (14,131) (17,519) (6,034)
Other non-current assets............................ (4,044) (2,840) (2,347)
-------- -------- --------
Net cash used in investing
activities.............................. (17,563) (18,263) (8,381)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt......................... 16,227 8,000 20,000
Reduction of long-term debt......................... (4,112) (5,552) (13,224)
Cash dividends paid................................. (2,890) (2,890) (2,890)
Proceeds from exercise of stock options............. -- -- 1
-------- -------- --------
Net cash provided by (used in)
financing activities.................... 9,225 (442) 3,887
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................................... (2,341) (2,402) 3,190
Cash and cash equivalents, beginning
of year........................................... 5,899 8,301 5,111
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR................ $ 3,558 $ 5,899 $ 8,301
======== ======== ========
<FN>
(1) 53 week year.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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 of $1,085,000 in 1993 and $1,257,000 in
1992. There were no new capital lease obligations in 1994. Interest paid (net
of interest capitalized) was $7,580,000 in 1994, $7,165,000 in 1993 and
$7,218,000 in 1992. Income tax payments were $1,977,000 in 1994, $753,000 in
1993 and $1,670,000 in 1992.
The accompanying notes (pages F-5 through F-13) and summary of significant
accounting policies (page F-14) are an integral part of these statements.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Year Ended
- - - - - - - - - - - - - - - - - - - - - - - -
January 28, January 29, January 30,
(in thousands) 1995 1994 1993 (1)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 3,558 $ 5,899 $ 8,301
Receivables from customers, net..................... 43,984 45,668 49,459
Merchandise inventories............................. 95,848 80,768 85,622
Prepaid expenses and other assets................... 3,639 1,920 2,972
Deferred taxes...................................... 2,190 2,969 3,027
-------- -------- --------
Total current assets.......................... 149,219 137,224 149,381
-------- -------- --------
PROPERTY AND EQUIPMENT, NET........................... 100,258 96,526 88,786
-------- -------- --------
OTHER ASSETS.......................................... 19,112 15,068 12,228
-------- -------- --------
$268,589 $248,818 $250,395
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt................... $ 3,865 $ 3,971 $ 3,371
Accounts payable.................................... 30,606 25,247 30,255
Accrued expenses.................................... 15,112 13,734 14,747
Accrued income taxes................................ -- 924 229
-------- -------- --------
Total current liabilities..................... 49,583 43,876 48,602
-------- -------- --------
LONG-TERM DEBT........................................ 120,424 108,203 105,270
-------- -------- --------
DEFERRED TAXES........................................ 8,405 7,722 7,616
-------- -------- --------
OTHER LIABILITIES..................................... 1,465 1,503 1,517
-------- -------- --------
SHAREHOLDERS' EQUITY:
Common stock........................................ 5,966 5,966 5,966
Paid-in surplus..................................... 7,109 7,109 7,109
Retained earnings................................... 76,036 74,838 74,714
Treasury stock...................................... (399) (399) (399)
-------- -------- --------
88,712 87,514 87,390
-------- -------- --------
$268,589 $248,818 $250,395
======== ======== ========
<FN>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The accompanying notes (pages F-5 through F-13) and summary of significant
accounting policies (page F-14) are an integral part of these statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Paid-in Retained Treasury
(in thousands except number of shares) Stock Surplus Earnings Stock
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C> <C>
BALANCE, January 25, 1992............................. $5,966 $7,108 $73,694 $(399)
FIFTY-THREE WEEKS ENDED January 30, 1993:
Net earnings........................................ 3,910
Dividends paid, 50 cents per share.................. (2,890)
Exercise of stock options........................... 1
------ ------ ------- ------
BALANCE, January 30, 1993............................. 5,966 7,109 74,714 (399)
FIFTY-TWO WEEKS ENDED January 29, 1994:
Net earnings........................................ 3,014
Dividends paid, 50 cents per share.................. (2,890)
------ ------ ------- ------
BALANCE, January 29, 1994............................. 5,966 7,109 74,838 (399)
FIFTY-TWO WEEKS ENDED January 28, 1995:
Net earnings........................................ 4,088
Dividends paid, 50 cents per share.................. (2,890)
------ ------ ------- ------
BALANCE, January 28, 1995............................. $5,966 $7,109 $76,036 $(399)
====== ====== ======= ======
<FN>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PREFERRED STOCK
Authorized 1,000,000 shares, $1 par value; no shares outstanding at January
30, 1993, January 29, 1994 and January 28, 1995.
COMMON STOCK
Authorized 15,000,000 shares, $1 par value; 5,966,221 shares issued at January
30, 1993, January 29, 1994 and January 28, 1995. Shares issued include 187,200
shares in treasury at January 30, 1993, January 29, 1994 and January 28, 1995.
The accompanying notes (pages F-5 through F-13) and summary of significant
accounting policies (page F-14) are an integral part of these statements.
</TABLE>
F-4
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TAXES
<TABLE>
<CAPTION>
The provisions for income taxes consisted of:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(in thousands) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Currently payable................................................. $ 838 $1,432 $ 937
Current deferred:
Alternative minimum tax......................................... 619 314 120
Expenses deductible for tax purposes only
at time of payment............................................ 160 (256) 420
Non-current deferred:
Accelerated depreciation........................................ (40) (574) (247)
Additional pension cost deductible for tax purposes............. 734 692 835
Other timing differences, net................................... (11) (12) (81)
------ ------ ------
$2,300 $1,596 $1,984
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Income taxes as a percent of earnings before income taxes differed from the
statutory Federal income tax rate as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(percent of earnings before income taxes) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Statutory Federal income tax rate................................. 34.0% 34.0% 34.0%
State income tax.................................................. 0.2 0.1 (0.6)
Other............................................................. 1.8 0.5 0.3
---- ---- ----
36.0% 34.6% 33.7%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Deferred income taxes represent temporary differences in the recognition of certain items
for income tax and financial reporting purposes and are classified as current or non-
current in the Consolidated Balance Sheets based on the classification of the assets and
liabilities which gave rise to the temporary differences. The components of the net
deferred income tax liability at January 28, 1995, January 29, 1994 and
January 31, 1993 were as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
January January January
(in thousands) 1995 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Deferred Tax Liabilities:
Accelerated depreciation........................................ $4,429 $4,475 $4,472
Additional pension cost deductible for tax purposes............. 4,664 3,930 3,248
Other........................................................... 88 455 923
------ ------ ------
9,181 8,860 8,643
------ ------ ------
Deferred Tax Assets:
Accrued vacation pay............................................ 1,181 1,144 1,106
Additional inventory capitalized for tax purposes............... 1,086 1,044 930
Alternative minimum tax credit carry forward.................... -- 277 590
Other........................................................... 699 1,642 1,449
------ ------ ------
2,966 4,107 4,075
------ ------ ------
$6,215 $4,753 $4,568
====== ====== ======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
Taxes, other than income taxes, were as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(in thousands) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Payroll taxes..................................................... $ 7,965 $ 7,167 $ 7,454
Real estate and personal property taxes........................... 4,316 4,134 4,389
Other taxes....................................................... 1,245 1,116 1,349
------- ------- -------
$13,526 $12,417 $13,192
======= ======= =======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
INTEREST EXPENSE
<TABLE>
<CAPTION>
Components of net interest expense are summarized below:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(in thousands) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Short-term borrowings............................................. $ 365 $ 167 $ 291
Real estate obligations........................................... 3,490 3,380 3,986
Long-term debt.................................................... 4,054 3,908 2,751
Capital lease obligations......................................... 369 487 587
------ ------ ------
8,278 7,942 7,615
Less interest earned on short-term investments.................... 95 66 58
Less interest capitalized on properties under
development..................................................... 156 332 --
------ ------ ------
$8,027 $7,544 $7,557
====== ====== ======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
CUSTOMER CREDIT AND RECEIVABLES
Credit sales under Jacobson credit plans were 44.8% of total sales in 1994,
48.4% in 1993 and 50.7% n 1992. Credit plans consist of option and extended
payment accounts.
Revenues and direct costs associated with the Company's credit program are
summarized below:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(in thousands) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Finance charge revenues........................................... $5,376 $5,660 $5,968
------ ------ ------
Cost of credit operations:
Credit and collection administration............................ 1,394 1,389 1,646
Allocated interest expense...................................... 2,680 1,813 2,015
Provision for doubtful accounts, net of recoveries.............. 544 720 1,116
Provision (credit) for income taxes............................. 258 591 405
------ ------ ------
4,876 4,513 5,182
------ ------ ------
Net income from credit program.................................... $ 500 $1,147 $ 786
====== ====== ======
As a percent of credit sales................................... 0.3% 0.6% 0.4%
==== ==== ====
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The finance charge rate assessed under the Company's credit plans has remained
unchanged for 1994, 1993 and 1992. Allocated interest expense is computed at
the average rate of interest incurred by Jacobson Credit Corp. (the Company's
consolidated, wholly-owned finance subsidiary) applied to the average total
receivables from customers. The average rate was 6.0% in 1994, 3.8% in 1993
and 4.0% in 1992.
F-6
<PAGE>
Receivables from customers at year-end were as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
January January January
(in thousands) 1995 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Receivables from customers........................................ $44,777 $46,498 $50,360
Less reserve for doubtful accounts................................ 793 830 901
------- ------- -------
$43,984 $45,668 $49,459
======= ======= =======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
Accounts written off, net of recoveries, were $581,000 in 1994, $791,000 in
1993 and $1,115,000 in 1992 (0.32%, 0.40% and 0.53%, respectively, of credit
sales).
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. At year-end,
merchandise inventories were as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
January January January
(in thousands) 1995 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Inventories at first-in, first-out (FIFO) cost.................... $111,336 $100,607 $105,642
Less LIFO reserves................................................ 15,488 19,839 20,020
-------- -------- --------
$ 95,848 $ 80,768 $ 85,622
======== ======== ========
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The change in LIFO reserves from January 1993 to January 1994 includes a
$1,400,000 liquidation of most furniture LIFO reserves as a result of the
Company's phaseout of furniture departments in six stores in 1993.
PROPERTY AND EQUIPMENT
Property and equipment year-end are set forth below:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
January January January
(in thousands) 1995 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Land and improvements............................................. $ 9,472 $ 9,329 $ 9,299
Buildings and improvements........................................ 92,663 89,608 82,398
Furniture, fixtures and equipment................................. 44,299 38,870 31,621
Leasehold improvements............................................ 10,824 9,211 9,627
Construction in progress.......................................... 2,116 1,089 2,405
Capital leases.................................................... 9,610 10,403 11,321
-------- -------- --------
168,984 158,510 146,671
Less accumulated depreciation and amortization.................... 68,726 61,984 57,885
-------- -------- --------
$100,258 $ 96,526 $ 88,786
======== ======== ========
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
Depreciation and amortization amounted to $10,120,000 in 1994, $9,404,000 in
1993 and $8,865,000 in 1992.
F-7
<PAGE>
CAPITAL AND MAINTENANCE EXPENDITURES
Capital expenditures, including amounts under capital leases, for the past
three years are summarized below:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Stores and Store Support Facilities
(in thousands) Modernization and Equipment Total
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
1994.............................................. $12,359 $1,772 $14,131
1993.............................................. 15,503 3,101 18,604
1992.............................................. 4,350 2,941 7,291
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
Stores and store modernization expenditures include those made for the
acquisition of land, buildings and improvements, and related fixtures and
equipment for new stores and expansion and re-fixturing of existing stores.
Support facilities and equipment expenditures relate to corporate office and
distribution centers and other non-store expenditures. Repairs and maintenance
expense totalled $1,846,000 in 1994, $1,737,000 in 1993 and $1,630,000 in
1992.
LONG-TERM LEASES
At January 28, 1995, the Company was 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.
Future minimum rental commitments (net of rental income) as of January 28,
1995, for all non-cancellable leases which had a remaining term of more than
one year were as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Operating Capital
(in thousands) Leases Leases
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
1995..................................................................... $ 4,611 $1,889
1996..................................................................... 4.699 893
1997..................................................................... 4,878 560
1998..................................................................... 5,245 225
1999..................................................................... 5,393 136
Thereafter............................................................... 76,508 136
-------- ------
Total minimum lease payments $101,334 3,839
========
Less imputed interest.................................................... 483
------
Capital lease obligations, including current
maturities of $1,684................................................... $3,356
======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
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
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.
F-8
<PAGE>
Rental expense (net of rental income) was as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(in thousands) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Buildings and improvements:
Operating leases:
Minimum rent.................................................. $3,831 $3,914 $3,496
Percentage rent............................................... 993 1,013 1,418
Capital leases:
Percentage rent............................................... 290 356 295
------ ------ ------
$5,114 $5,283 $5,209
====== ====== ======
Fixtures and equipment:
Operating leases................................................ $ 888 $ 947 $ 922
====== ====== ======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
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 $3,500,000
outstanding under the Agreement at January 28, 1995.
Revolving Credit Agreement borrowings and interest rates for the past three
years were as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(in thousands) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Maximum amount outstanding........................................ $25,500 $16,500 $30,700
Daily weighted average amount outstanding......................... 6,051 4,393 7,215
Daily weighted average interest rate.............................. 6.0% 3.8% 4.0%
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
At year end, long-term debt, less current maturities, consisted of the
following:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
January January January
(in thousands) 1995 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
6-3/4% Convertible Subordinated Debentures due 2011............... $ 34,500 $ 34,500 $ 34,500
Mortgage notes and collateral trust bonds due
through 2013, at rates from 6.44% to 9.5%....................... 41,124 40,482 36,039
Unsecured term loan due 2002, at a fixed rate of 7.73%............ 20,000 20,000 20,000
Unsecured term loan due 2002, at a variable rate
below prime..................................................... 10,000 -- --
Industrial development revenue bond obligations,
due through 2015, at variable rates below prime................. 9,628 9,865 10,509
Notes under revolving credit agreement due 1997, at
a variable rate below prime..................................... 3,500 -- --
-------- -------- --------
118,752 104,847 101,048
Capital lease obligations......................................... 1,672 3,356 4,222
-------- -------- --------
$120,424 $108,203 $105,270
======== ======== ========
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
F-9
<PAGE>
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 January 28, 1995, 1,056,000 shares of authorized common stock were
reserved for conversion.
The Company has a ten-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 January 28, 1995 at a fixed rate of 7.73% and
$10,000,000 outstanding at a variable rate below 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. Under the most restrictive
net worth covenant, at January 28, 1995, $8,205,000 was available for capital
stock redemptions and dividend payments.
Aggregate maturities of long-term debt for the next five years are as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Capital
Long-Term Lease
(in thousands) Debt Obligations (1) Total
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
1995..................................................... $ 2,181 $1,684 $ 3,865
1996..................................................... 8,253 790 9,043
1997..................................................... 10,788 509 11,297
1998..................................................... 7,683 203 7,886
1999..................................................... 8,204 126 8,330
<FN>
(1) Excluding imputed interest.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
Based on the quoted market price of the 6-3/4% Convertible Subordinated
Debentures due 2011 and on the current rates offered to the Company for other
long-term debt of similar remaining maturities, the estimated fair value of
total long-term debt, excluding capital lease obligations, was less than the
carrying value by approximately $14,400,000 at January 28, 1995, $5,700,000 at
January 29, 1994 and $3,300,000 at January 30, 1993.
ACCRUED EXPENSES
Accrued expenses at year-end were as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
January January January
(in thousands) 1995 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Wages and vacation pay............................................ $ 6,720 $ 6,272 $ 6,541
Pension........................................................... 1,293 1,100 1,621
Taxes other than income taxes..................................... 2,247 2,310 2,583
Interest.......................................................... 927 801 867
Other............................................................. 3,925 3,251 3,135
------- ------- -------
$15,112 $13,734 $14,747
======= ======= =======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
F-10
<PAGE>
GAIN ON SALE OF PROPERTY
In 1994, the Company sold its Store for the Home in East Lansing, Michigan, at
an after-tax gain of $333,000 in connection with its phase out of furniture
operations in six stores the previous year. In 1993, the Company relocated its
Ann Arbor, Michigan, store operations to the Briarwood Mall and sold its
interest in its downtown store facility at an after-tax gain of $636,000.
STOCK OPTIONS
At January 28, 1995, 103,350 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 January 28, 1995, 37,250 shares of
Jacobson Stores Inc. common stock were reserved for issuance under a plan
adopted in 1994 and options for an additional 362,750 shares were available
for grant to directors and employees.
Option activity for the past three years was as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Number Option Price
of Shares Per Share
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
Options outstanding at January 25, 1992........................... 139,425 $14.00 - 25.03
Activity during 1992:
Granted......................................................... 95,000 13.75 - 16.00
Exercised....................................................... 80 14.00
Expired......................................................... 38,020 14.00 - 25.03
------- --------------
Options outstanding at January 30, 1993........................... 196,325 13.75 - 21.75
Activity during 1993:
Granted......................................................... 7,000 12.25 - 14.00
Expired......................................................... 50,165 13.75 - 21.75
------- --------------
Options outstanding at January 29, 1994........................... 153,160 12.25 - 21.75
Activity during 1994:
Granted......................................................... 37,250 14.38
Expired......................................................... 49,810 12.88 - 19.80
------- --------------
Options outstanding at January 28, 1995........................... 140,600 $12.25 - 21.75
======= ==============
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
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.
F-11
<PAGE>
RETIREMENT PLANS
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. Pension expense was $1,354,000 in 1994, $1,160,000 in
1993 and $1,083,000 in 1992. 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 managed by
independent investment managers.
Net periodic pension expense, the funded status of the plan, and the related
actuarial assumptions for the past three years are as follows:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Components of Net Pension Expense (in thousands) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Service cost for benefits earned during the year.................. $2,060 $1,799 $1,639
Interest cost on projected benefit obligation..................... 2,803 2,602 2,394
Actual (return) loss on assets.................................... 2,329 (1,365) (2,337)
Net amortization and deferral..................................... (5,838) (1,876) (613)
------ ------ ------
Net pension expense............................................... $1,354 $1,160 $1,083
====== ====== ======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
December 31,
- - - - - - - - - - - - - - - - - - -
Funded Status (in thousands) 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested.......................................................... $34,242 $33,697 $29,083
Non-vested...................................................... 1,234 1,626 1,569
------- ------- -------
Accumulated benefit obligation.................................... $35,476 $35,323 $30,652
======= ======= =======
Projected benefit obligation...................................... $40,021 $40,957 $35,098
Fair market value of assets....................................... 38,551 39,872 36,970
------- ------- -------
Plan assets in excess of (less than) projected
benefit obligation.............................................. (1,470) (1,085) 1,872
Unrecognized net assets at transition............................. (803) (1,129) (1,454)
Unrecognized net loss............................................. 13,247 11,330 6,284
------- ------- -------
Net prepaid pension cost.......................................... $10,974 $ 9,116 $ 6,702
======= ======= =======
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Actuarial Assumptions 1994 1993 1992
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
Discount rate:
Beginning of year............................................... 7.0% 7.5% 8.0%
End of year..................................................... 8.5 7.0 7.5
Expected return on plan assets.................................... 9.0 9.0 9.0
Rate of increase in compensation.................................. 5.0 5.0 5.0
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The Company contributed and charged to expense $293,000 in 1994, $339,000 in
1993 and $171,000 in 1992 for multi-employer pension plans. These contributions
were determined in accordance with the provisions of negotiated labor contracts
and generally are based on the number of hours worked. Under the provisions of
the Multi-Employer Pension Plan Amendments Act of 1980, if the Company should
substantially or totally withdraw from a multi-employer pension fund, it would
be required to continue contributions to such plan to the extent of its portion
of the plan's unfunded vested liability. Management has no plans to terminate
operations that would subject the Company to such liability.
F-12<PAGE>
CONDENSED BALANCE SHEETS
Condensed balance sheets of Jacobson Stores Realty Company, Jacobson Credit
Corp. and merchandising operations are shown below:
<TABLE>
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
January January January
(in thousands) 1995 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C>
JACOBSON STORES REALTY COMPANY
Current assets................................................ $ 284 $ 159 $ 338
Advances to Jacobson Stores Inc............................... 19,902 17,764 19,323
Property and equipment, net................................... 59,057 63,186 56,498
Investments and other assets.................................. 3,055 1,146 793
-------- -------- --------
Assets................................................... $ 82,298 $ 82,255 $ 76,952
======== ======== ========
Current liabilities........................................... $ 3,210 $ 3,655 $ 3,187
Long-term debt................................................ 49,241 50,089 46,324
Other liabilities............................................. 2,821 2,841 3,445
Equity of Jacobson Stores Inc................................. 27,026 25,670 23,996
-------- -------- --------
Liabilities and Equity................................... $ 82,298 $ 82,255 $ 76,952
======== ======== ========
JACOBSON CREDIT CORP.
Cash.......................................................... $ 3,580 $ 245 $ 212
Advances to Jacobson Stores Inc............................... 8,392 7,993 7,962
-------- -------- --------
Assets................................................... $ 11,972 $ 8,238 $ 8,174
======== ======== ========
Current liabilities........................................... $ 127 $ 53 $ 85
Long-term debt................................................ 3,500 -- --
Equity of Jacobson Stores Inc................................. 8,345 8,185 8,089
-------- -------- --------
Liabilities and Equity................................... $ 11,972 $ 8,238 $ 8,174
======== ======== ========
JACOBSON STORES INC. (merchandising operations)
Current assets................................................ $146,276 $136,887 $148,908
Property and equipment, net................................... 41,201 33,340 32,288
Investments and other assets.................................. 19,517 17,442 15,022
-------- -------- --------
Assets................................................... $206,994 $187,669 $196,218
======== ======== ========
Current liabilities........................................... $ 47,165 $ 40,235 $ 45,407
Long-term debt................................................ 67,683 58,114 58,946
Other liabilities............................................. 8,409 7,801 7,175
Advances from subsidiaries.................................... 28,294 25,757 27,285
Shareholders' equity.......................................... 55,443 55,762 57,405
-------- -------- --------
Liabilities and Equity................................... $206,994 $187,669 $196,218
======== ======== ========
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
F-13
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGE IN ACCOUNTING POLICY. Effective January 31, 1993 (the first day of the
1993 fiscal year), the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Adoption had an immaterial impact on net earnings.
BASIS OF REPORTING. Jacobson Stores Inc. operates specialty department stores
in 26 cities in Michigan, Florida, Indiana, Kentucky 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.
Fiscal years 1994 and 1993 consisted of 52 weeks and ended January 28, 1995
and January 29, 1994, respectively. Fiscal 1992 consisted of 53 weeks and
ended January 30, 1993.
SALES. Sales are net of returns. 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.
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 twelve months immediately following the opening.
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 shares of common stock and common stock
equivalents outstanding during the year. Weighted average shares outstanding,
excluding treasury shares, were 5,779,123 in 1994, 5,779,117 in 1993 and
5,785,187 in 1992. 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. Weighted average shares outstanding
used in the computation of fully diluted earnings per share were 6,835,138 in
1994, 6,835,132 in 1993 and 6,841,188 in 1992.
FINANCIAL INSTRUMENTS. With the exception of long-term debt and shareholders'
equity, the Company records all financial instruments, including cash
equivalents, receivables from customers and accounts payable, at or in amounts
approximating market value.
F-14
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jacobson Stores Inc.:
We have audited the accompanying consolidated balance sheets of JACOBSON
STORES INC. (a Michigan corporation) and subsidiaries as of January 28, 1995,
January 29, 1994 and January 30, 1993 and the related consolidated statements
of earnings, shareholders' equity and cash flows for each of the three fiscal
years in the period ended January 28, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jacobson Stores Inc. and
subsidiaries as of January 28, 1995, January 29, 1994 and January 30, 1993 and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended January 28, 1995, in conformity with
generally accepted accounting principles.
As explained in the Notes to Consolidated Financial Statements, effective
January 31, 1993, the Company changed its method of accounting for income
taxes in accordance with SFAS No. 109, "Accounting For Income Taxes."
/s/ ARTHUR ANDERSEN LLP
-----------------------
Detroit, Michigan
March 3, 1995
F-15
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
QUARTERLY INFORMATION (unaudited)
OPERATING RESULTS
The unaudited quarterly operating results shown below were prepared using the
same accounting policies that are applied to the annual data.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Quarter
-----------------------------------------
(in thousands, except per share data) First Second Third Fourth
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Net sales............................................. $97,494 $89,917 $86,501 $135,242
Cost of merchandise sold, buying and occupancy
expenses............................................ 62,974 63,529 55,509 83,192
Selling, general and administrative expenses.......... 31,448 30,632 31,843 36,116
Interest expense, net................................. 1,858 1,899 1,942 2,328
Gain on sale of property.............................. (504) -- -- --
Earnings (loss) before income taxes................... 1,718 (6,143) (2,793) 13,606
Net earnings (loss)................................... 1,117 (3,993) (1,816) 8,780
Earnings (loss) per share:
Primary............................................. $.19 $(.69) $(.31) $1.52
Fully diluted....................................... .19 (.69) (.31) 1.34
1993
Net sales............................................. $96,063 $88,049 $90,436 $129,268
Cost of merchandise sold, buying and occupancy
expenses............................................ 62,187 62,856 56,351 85,488
Selling, general and administrative expenses.......... 31,276 29,726 31,355 33,402
Interest expense, net................................. 1,945 1,875 1,885 1,839
Gain on sale of property.............................. -- -- (979) --
Earnings (loss) before income taxes................... 655 (6,408) 1,824 8,539
Net earnings (loss)................................... 426 (4,166) 1,186 5,568
Earnings (loss) per share:
Primary............................................. $.07 $(.72) $.21 $.96
Fully diluted....................................... .07 (.72) .21 .87
1992 (1)
Net sales............................................. $91,574 $89,643 $88,012 $142,402
Cost of merchandise sold, buying and occupancy
expenses............................................ 58,635 64,724 55,540 94,063
Selling, general and administrative expenses.......... 29,048 28,165 30,478 37,527
Interest expense, net................................. 1,869 1,746 1,763 2,179
Earnings (loss) before income taxes................... 2,022 (4,992) 231 8,633
Net earnings (loss)................................... 1,314 (3,244) 150 5,690
Earnings (loss) per share:
Primary............................................. $.23 $(.56) $.03 $.98
Fully diluted....................................... .23 (.56) .03 .89
<FN>
(1) 53 week year
- --------------------------------------------------------------------------------------------------
</TABLE>
F-16
<PAGE>
The Company's business is seasonal in nature. Traditionally, a higher
proportion of sales and net earnings is generated in the fourth quarter (which
includes the Christmas season). The anticipated effective annual tax rate is
used to compute income taxes on a quarterly basis. The gross margins used in
calculating cost of goods sold for interim periods include an allocation of
the estimated annual LIFO provision, which cannot be determined precisely
until the year-end inventory value is known and the Bureau of Labor Statistics
Department Store Index is published in late February.
The impact of LIFO on earnings per share as it was reported and as it would
have been had the actual charge (credit) been known when the quarterly
allocations were made is shown below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
As Reported As Reallocated
--------------------------- ------------------------------
Quarter 1994 1993 1992 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $.07 $ .08 $ .07 $(.12) $ .03 $(.01)
2nd .03 (.09) .07 (.11) (.12) -
3rd .05 .07 .07 (.11) .03 -
4th (.65) (.08) (.23) (.16) .04 (.01)
----- ----- ----- ----- ----- -----
$(.50) $(.02) $(.02) $(.50) $(.02) $(.02)
===== ===== ===== ===== ===== =====
<CAPTION>
- -----------------------------------------------------------------------------
</TABLE>
F-17
<PAGE>
INDEX OF EXHIBITS
Exhibit
Each management contract or compensatory plan required to be filed as an
exhibit pursuant to Item 14(c) of this report is indicated by an asterisk (*).
10(a)* Amendment to Employment Agreement dated March 23, 1994,
effective February 1, 1995, between Jacobson Stores Inc.
and Paul W. Gilbert
10(b)* Executive Employment Agreement dated March 22, 1995
between Jacobson Stores Inc. and George P. Kelly
10(c)* Executive Employment Agreement dated March 24, 1995
between Jacobson Stores Inc. and Robert L. Moles
10(d)* 1995 Management Incentive Plan
11 Computation of Earnings per Share
21 Schedule of Subsidiaries
23 Consent of Arthur Andersen LLP
27 Financial Data Schedules
In addition, the previously-filed exhibits listed below are incorporated
herein by reference. (All references are to Securities and Exchange Commission
File #0-6319 unless otherwise noted.)
Current Identification of
Exhibit Description of Exhibit Prior Filing
3(a) Restated Articles of Incorpora- Exhibit 19(a) to Form
tion, Jacobson Stores Inc., as 10-Q, Quarter Ended
amended and restated May 25, April 29, 1989
1989
3(b) Certificate of Designation, Exhibit 3(a) to Form
Preferences and Rights of 10-Q, Quarter Ended
Preferred Stock of Jacobson October 29, 1988
Stores Inc.
3(c) By-laws, Jacobson Stores Inc., Exhibit 3(a) to Form
as amended March 17, 1994 10-K, Year Ended
January 29, 1994
4(a) Election under Section 780, Exhibit 28 to Form
Michigan Business Corporation 10-Q, Quarter Ended
Act October 27, 1984
E-1
<PAGE>
Current Identification of
Exhibit Description of Exhibit Prior Filing
4(b) Indenture dated as of File #33-10532:
December 15, 1986 between Exhibit 4(a) to Form
Jacobson Stores Inc. and S-2 (Amendment No. 1),
National Bank of Detroit, filed December 12,
as Trustee 1986
4(c) Rights Agreement dated as Exhibit I to Form 8-A
of October 4, 1988 between and Exhibit 4 to Form
Jacobson Stores Inc. and 8-K, October 7, 1988;
Manufacturers National Bank Exhibit 1 to Amendment
of Detroit, as Rights Agent; No. 1 to Form 8-A, May
Change of Rights Agent, 16, 1989; Exhibit 1 to
effective June 1, 1989; Amendment No. 2 to
Change of Rights Agent, Form 8-A, June 9, 1994
effective May 31, 1994
4(d) Jacobson Credit Corp. Exhibit 4(a) to Form
$35,000,000 Amended and 10-Q, Quarter Ended
Restated Revolving Credit October 24, 1992
Agreement, dated as of
November 20, 1992
4(e) Jacobson Stores Inc. Exhibit 4(b) to Form
$40,000,000 Term Loan 10-Q, Quarter Ended
Agreement, dated as of October 24, 1992
November 20, 1992
9 Voting and Transfer Exhibit 9 to Form
Restriction Agreement, 10-K, Year Ended
effective December 31, 1990 January 26, 1991
10(e)* Employment Agreement dated Exhibit 10(a) to Form
March 23, 1994, between 10-K, Year Ended
Jacobson Stores Inc. and January 29, 1994
Mark K. Rosenfeld
10(f)* Employment Agreement dated Exhibit 10(b) to Form
March 23, 1994, between 10-K, Year Ended
Jacobson Stores Inc. and January 29, 1994
Paul W. Gilbert
10(g)* Employment Agreement dated Exhibit 10(c) to Form
March 23, 1994, between 10-K, Year Ended
Jacobson Stores Inc. and January 29, 1994
James B. Fowler
10(h)* Jacobson Stores Inc. Deferred Exhibit 10(c) to Form
Compensation Plan 10-K, Year Ended
January 26, 1991
E-2
<PAGE>
With the exception of Exhibits 4(b), 4(d) and 4(e), instruments defining
the rights of holders of long-term debt of the registrant and its subsidiaries
have been omitted. The amount of debt authorized under each such instrument is
less than 10% of the total assets of the registrant and its subsidiaries on a
consolidated basis. The registrant agrees to furnish a copy of any such
instrument to the Securities and Exchange Commission upon request.
In addition to Exhibits 10(a) to 10(c), inclusive, and 10(e) to 10(g),
inclusive, the registrant has employment agreements with three other executive
officers, which are not considered material in amount or significance.
E-3
EXHIBIT 10(a)
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT dated March 23, 1994 (the
"Employment Agreement"), between JACOBSON STORES INC., a Michigan
corporation, and PAUL W. GILBERT, each of Jackson, Michigan, is
entered into effective February 1, 1995.
THE PARTIES AGREE that paragraph 2 of the Employment Agreement is
amended to read as follows:
2. Compensation. Subject to the provisions of paragraph 5,
Gilbert's salary shall be Two Hundred Twenty Thousand Dollars
($220,000.00) per year, effective February 1, 1995.
Except as expressly amended hereby, the Employment Agreement shall
continue in full force and effect.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Frank W. Hones By: /s/ Mark K. Rosenfeld
- ---------------------------- ---------------------------
Mark K. Rosenfeld,
Chairman of the Board and
Chief Executive Officer
/s/ Timothy J. Spalding /s/ Paul W. Gilbert
- ---------------------------- ------------------------------
Paul W. Gilbert
EXHIBIT 10(b)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into March 22, 1995 between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the
"Company"), and George P. Kelly (the "Employee").
THE PARTIES AGREE AS FOLLOWS:
1. EMPLOYMENT AND TERMS. The Company employs Employee as
Senior Vice President-General Merchandise Manager, and Employee agrees
to serve in that capacity commencing January 29, 1995, and continuing
through January 27, 1996, for the salary and on the terms set forth
herein.
2. COMPENSATION. The Company agrees to pay Employee salary at
an annual rate of $200,000.00, in bi-weekly or other regular
intervals.
3. DUTIES. Employee agrees, as long as employment by the
Company continues, to devote Employee's entire time and best efforts
to furthering the interests of the Company; to comply with all
regulations and policies of the Company; and to perform the duties
requested by any officers and executives of the Company to whom the
Employee is directed to report.
4. TERMINATION.
(a) If employment is terminated due to Employee's death,
permanent incapacity or retirement, the Company shall have no
obligation to pay any salary for the period after the date of
termination of employment; but benefits may continue to the extent
provided in any generally-applicable wage continuation program,
insurance, or other employee benefit plans maintained by the Company.
(b) If employment is terminated by the Company, or if Employee
resigns before or at the expiration of the term, the Company shall
have no obligation to pay any salary or other employment benefits for
any period after the date of termination of employment.
(c) If there is a change in the ownership or effective control of
the Company or in the ownership of substantially all of the assets of
the Company during the term and the Company terminates Employee's
employment within two years after such change, the Company shall
continue to pay salary (but no other employment benefits) at a
bi-weekly rate equal to the amount paid bi-weekly pursuant to
paragraph 2, for a period of six months. This paragraph 4(c) shall
survive the expiration of the term.
(d) Unless this Agreement is terminated by either party or
superseded by another, it shall remain in effect from month-to-month
after the expiration of the term.
<PAGE>
5. PREVIOUS AGREEMENTS SUPERSEDED. This Agreement supersedes
all previous employment agreements between the parties.
6. MISCELLANEOUS PROVISIONS. This Agreement may be amended
only by written agreement signed by either the Chairman, Vice Chairman
or the President of the Company. It shall be construed according to
the laws of Michigan, and shall be binding on and enforceable by the
parties and their successors in interest.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Susan T. Clingerman By: /s/ Mark K. Rosenfeld
- ---------------------------- ---------------------------
Its: Chairman
COMPANY
/s/ Susan T. Clingerman /s/ George P. Kelly
- ---------------------------- ------------------------------
EMPLOYEE
EXHIBIT 10(c)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into March 24, 1995 between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the
"Company"), and Robert L. Moles (the "Employee").
THE PARTIES AGREE AS FOLLOWS:
1. EMPLOYMENT AND TERMS. The Company employs Employee as
Senior Vice President-Store, and Employee agrees to serve in that
capacity commencing January 29, 1995, and continuing through January
27, 1996, for the salary and on the terms set forth herein.
2. COMPENSATION. The Company agrees to pay Employee salary at
an annual rate of $130,000.00, in bi-weekly or other regular
intervals.
3. DUTIES. Employee agrees, as long as employment by the
Company continues, to devote Employee's entire time and best efforts
to furthering the interests of the Company; to comply with all
regulations and policies of the Company; and to perform the duties
requested by any officers and executives of the Company to whom the
Employee is directed to report.
4. TERMINATION.
(a) If employment is terminated due to Employee's death,
permanent incapacity or retirement, the Company shall have no
obligation to pay any salary for the period after the date of
termination of employment; but benefits may continue to the extent
provided in any generally-applicable wage continuation program,
insurance, or other employee benefit plans maintained by the Company.
(b) If employment is terminated by the Company, or if Employee
resigns before or at the expiration of the term, the Company shall
have no obligation to pay any salary or other employment benefits for
any period after the date of termination of employment.
(c) If there is a change in the ownership or effective control of
the Company or in the ownership of substantially all of the assets of
the Company during the term and the Company terminates Employee's
employment within two years after such change, the Company shall
continue to pay salary (but no other employment benefits) at a
bi-weekly rate equal to the amount paid bi-weekly pursuant to
paragraph 2, for a period of 24 months. This paragraph 4(c) shall
survive the expiration of the term.
(d) Unless this Agreement is terminated by either party or
superseded by another, it shall remain in effect from month-to-month
after the expiration of the term.
<PAGE>
5. PREVIOUS AGREEMENTS SUPERSEDED. This Agreement supersedes
all previous employment agreements between the parties.
6. MISCELLANEOUS PROVISIONS. This Agreement may be amended
only by written agreement signed by either the Chairman, Vice Chairman
or the President of the Company. It shall be construed according to
the laws of Michigan, and shall be binding on and enforceable by the
parties and their successors in interest.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Paul W. Gilbert By: /s/ Mark K. Rosenfeld
- ---------------------------- ---------------------------
Its: Chairman & CEO
COMPANY
/s/ Madeleine V. Haines /s/ Robert L. Moles
- ---------------------------- ------------------------------
EMPLOYEE
EXHIBIT 10(d)
JACOBSON STORES INC.
1995 Management Incentive Plan
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% 52.5%
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 - Operations 0 20 30
VP - Staff Positions 0 15 22.5
----------------------------- --------- ---------- -----
</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.
(Rev. 3/15/95)
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
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>
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended
January 28, January 29, January 30,
1995 1994 1993
-------------- -------------- ---------------
<S> <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 5,785
Fully diluted 6,835 6,835 6,841
====== ====== ======
NET EARNINGS $4,088 $3,014 $3,910
====== ====== ======
NET EARNINGS, adjusted to reflect
reduction in interest expense
attributable to convertible
debentures, net of income tax $5,625 $4,551 $5,447
====== ====== ======
NET EARNINGS PER SHARE:
Primary $ 0.71 $ 0.52 $ 0.68
Fully diluted 0.71 0.52 0.68
====== ====== ======
</TABLE>
EXHIBIT 21
SCHEDULE OF SUBSIDIARIES
<TABLE>
<CAPTION>
State of Percent of Voting
Name Incorporation Securities Owned
<S> <C> <C>
Jacobson Stores Realty Michigan 100%
Company
Jacobson Credit Corp. Michigan 100%
275 North Woodward Corp. (1) Michigan 80%
<FN>
(1) 80% of the voting securities of 275 North Woodward Corp.
are owned by Jacobson Stores Realty Company. The
remaining 20% are owned by parties who are not affiliates
of Jacobson's. 275 North Woodward Corp. is not a
significant subsidiary.
</TABLE>
Each subsidiary does business under its own corporate name.
EXHIBIT 23
ARTHUR ANDERSEN LLP
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Form S-2 (File No. 33-10532) and Form S-8 Registration Statements (File No.
2-88295 and File No. 033-53469).
/s/ ARTHUR ANDERSEN LLP
------------------------
Detroit, Michigan
April 10, 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 FOR THE YEAR ENDED JANUARY 28, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> JAN-30-1994
<PERIOD-END> JAN-28-1995
<PERIOD-TYPE> YEAR
<CASH> 3,558
<SECURITIES> 0
<RECEIVABLES> 44,777
<ALLOWANCES> 793
<INVENTORY> 95,848
<CURRENT-ASSETS> 149,219
<PP&E> 168,984
<DEPRECIATION> 68,726
<TOTAL-ASSETS> 268,589
<CURRENT-LIABILITIES> 49,583
<BONDS> 120,424
<COMMON> 5,966
0
0
<OTHER-SE> 82,746
<TOTAL-LIABILITY-AND-EQUITY> 268,589
<SALES> 409,154
<TOTAL-REVENUES> 409,154
<CGS> 265,204
<TOTAL-COSTS> 265,204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 544
<INTEREST-EXPENSE> 8,027
<INCOME-PRETAX> 6,388
<INCOME-TAX> 2,300
<INCOME-CONTINUING> 4,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,088
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
