FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 27, 1996
Commission file number 0-6319
JACOBSON STORES INC.
--------------------
(Exact name of registrant as specified in its charter)
Michigan 38-0686330
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3333 Sargent Road, Jackson, Michigan 49201
------------------------------------------
(Address of principal executive offices, including zip code)
(517) 764-6400
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock ($1 Par Value):
5,779,021-2/3 Shares outstanding as of July 27, 1996
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For Quarter Ended July 27, 1996
INDEX
Page
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
. Consolidated Balance Sheets - July 27, 1996 and
January 27, 1996 1
. Consolidated Statements of Earnings -
Thirteen and Twenty- Six Week Periods Ended
July 27, 1996 and July 29, 1995 2
. Consolidated Statements of Cash Flows -
Twenty-Six Week Periods Ended July 27, 1996
and July 29, 1995 3
. Notes to Consolidated Financial Statements 4
Review by Independent Public Accountants 7
Exhibit:
. Report of Independent Public Accountants 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
All items except those set forth above are inapplicable and
have been omitted.
SIGNATURES 15
INDEX OF EXHIBITS
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
July 27, January 27,
ASSETS 1996 1996
--------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............. $ 4,797 $ 3,068
Receivables from customers, net ....... 35,248 43,134
Merchandise inventories ............... 81,798 89,249
Prepaid expenses and other assets ..... 2,101 3,928
Refundable income taxes ............... 5,634 3,029
Deferred taxes ........................ 2,363 2,363
--------- ---------
Total current assets ........ 131,941 144,771
--------- ---------
PROPERTY AND EQUIPMENT, NET .............. 95,510 96,597
--------- ---------
OTHER ASSETS ............................. 22,652 21,146
--------- ---------
$ 250,103 $ 262,514
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ..... $ 4,229 $ 4,531
Accounts payable ...................... 24,604 30,537
Accrued expenses ...................... 13,875 14,612
--------- ---------
Total current liabilities ... 42,708 49,680
--------- ---------
LONG-TERM DEBT ........................... 120,403 119,727
--------- ---------
DEFERRED TAXES ........................... 9,115 9,115
--------- ---------
OTHER LIABILITIES ........................ 2,624 2,376
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock .......................... 5,966 5,966
Paid-in surplus ....................... 7,109 7,109
Retained earnings ..................... 62,577 68,940
Treasury stock ........................ (399) (399)
--------- ---------
75,253 81,616
--------- ---------
$ 250,103 $ 262,514
========= =========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
- 1 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share and dividend data)
(unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------- ----------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES, including leased departments ........... $ 93,990 $ 93,099 $ 200,515 $ 193,397
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses ......................... 69,258 67,438 137,518 132,264
Selling, general and administrative expenses ... 31,586 31,665 66,022 64,665
Interest expense, net .......................... 2,272 2,182 4,544 4,390
--------- --------- --------- ---------
Total costs and expenses ............. 103,116 101,285 208,084 201,319
--------- --------- --------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES ............... (9,126) (8,186) (7,569) (7,922)
PROVISION (CREDIT) FOR INCOME TAXES ............... (3,195) (2,865) (2,650) (2,773)
--------- --------- --------- ---------
NET EARNINGS (LOSS) ............................... $ (5,931) $ (5,321) $ (4,919) $ (5,149)
========= ========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE:
Primary and fully diluted ...................... $ (1.02) $ (0.92) $ (0.85) $ (0.89)
========= ========= ========= ========
CASH DIVIDENDS PER SHARE .......................... $0.12 1/2 $0.12 1/2 $ 0.25 $ 0.25
========= ========= ========= ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-2-
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Twenty-Six Weeks Ended
----------------------
July 27, July 29,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................. $(4,919) $ (5,149)
Adjustments to reconcile net loss to cash provided
by operating activities:
Depreciation and amortization .......................... 5,139 5,098
Other liabilities ...................................... 248 433
Change in:
Receivables from customers, net ..................... 7,886 7,471
Merchandise inventories ............................. 7,451 11,006
Prepaid expenses and other assets ................... 1,827 1,397
Accounts payable and accrued expenses ............... (6,670) (2,880)
Refundable income taxes ............................. (2,605) (3,077)
------- --------
Net cash provided by operating activities .. 8,357 14,299
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ....................... (4,052) (3,678)
Other non-current assets .................................. (1,506) (473)
------- --------
Net cash used in investing activities ...... (5,558) (4,151)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt ............................... 2,800 --
Reduction of long-term debt ............................... (2,426) (5,238)
Cash dividends paid ....................................... (1,444) (1,444)
------- --------
Net cash used in financing activities ...... (1,070) (6,682)
------- --------
INCREASE IN CASH AND CASH EQUIVALENTS ........................ 1,729 3,466
Cash and cash equivalents, beginning of period ............ 3,068 3,558
------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ..................... $ 4,797 $ 7,024
======= ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
- 3 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended July 27, 1996
The condensed financial statements included herein have been prepared
by the Company without audit and reflect all adjustments which are, in
the opinion of management, necessary to achieve a fair statement of
results for the interim periods. All adjustments are of a normal and
recurring nature.
Because of the nature of the specialty department store business, the
results for the twenty-six week periods ended July 27, 1996 and July
29, 1995 (which do not include the Christmas holiday season) are not
indicative of the results for the year as a whole.
Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles has been condensed or amended, although the
Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the
financial statements and notes to consolidated financial statements
included in the Company's latest annual report on Form 10-K.
(1) EARNINGS PER SHARE
Primary earnings per share are computed by dividing net earnings by
the weighted average number of shares of common stock and common stock
equivalents outstanding during the periods. Weighted average shares
outstanding were 5,808,000 and 5,783,000 for the quarters ended July
27, 1996 and July 29, 1995, respectively, and 5,791,000 and 5,783,000
for the twenty-six week periods ended July 27, 1996 and July 29, 1995,
respectively.
Fully diluted earnings per share are computed based on the additional
assumption that the Company's 6-3/4% Convertible Subordinated
Debentures due 2011 were converted to common stock at the date of
issuance with a corresponding increase in net earnings to reflect a
reduction in related interest expense, net of income taxes. Weighted
average shares outstanding used in the computation of fully diluted
earnings per share were 6,864,000 and 6,840,000 for the quarters ended
July 27, 1996 and July 29, 1995, respectively, and 6,862,000 and
6,839,000 for the twenty-six week periods ended July 27, 1996 and July
29, 1995, respectively.
- 4 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended July 27, 1996
<TABLE>
<CAPTION>
(2) CUSTOMER CREDIT AND RECEIVABLES Receivables from customers were as
follows:
July 27, January 27,
(in thousands) 1996 1996
-----------------------------------------------------------------
<S> <C> <C>
Receivables from customers $ 36,028 $ 43,907
Less reserve for doubtful accounts 780 773
--------- ---------
$ 35,248 $ 43,134
========= =========
</TABLE>
<TABLE>
<CAPTION>
(3) MERCHANDISE INVENTORIES
Merchandise inventories were as follows:
July 27, January 27,
(in thousands) 1996 1996
-----------------------------------------------------------------
<S> <C> <C>
Inventories at first-in, first out
(FIFO) cost $ 99,213 $ 106,061
Less LIFO reserves 17,415 16,812
--------- ---------
$ 81,798 $ 89,249
========= =========
</TABLE>
<TABLE>
<CAPTION>
(4) PROPERTY AND EQUIPMENT
Property and equipment are set forth below:
July 27, January 27,
(in thousands) 1996 1996
-----------------------------------------------------------------
<S> <C> <C>
Property and equipment $ 171,902 $ 172,525
Less accumulated depreciation
and amortization 76,392 75,928
--------- ---------
$ 95,510 $ 96,597
========= =========
</TABLE>
- 5 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended July 27, 1996
(5) CREDIT AGREEMENT
The Company has a Revolving Credit and Term Loan facility under a
Credit Agreement with two banks. The Revolving Credit portion of the
Agreement provides for borrowings of up to $45,000,000, subject to a
borrowing base limitation. Borrowings under the Revolving Credit line
mature on June 30, 1998, with one year renewals subject to approval by
both banks each year. The Company has requested renewal of the line
for an additional year through June 30, 1999. For 1996 only, the
Company and the banks have agreed to extend to November 30, 1996, the
due date for the banks' decision whether to renew the Revolving Credit
line for this additional year.
(6) SUPPLEMENTARY CASH FLOW INFORMATION
The Company considers all short-term investments with a maturity at
date of purchase of three months or less to be cash equivalents.
Interest paid (net of interest capitalized) totalled $4,583,000 and
$4,367,000 in the twenty-six week periods ended July 27, 1996 and July
29, 1995, respectively. The Company received income tax refunds of
$44,000 for the twenty-six week period ended July 27, 1996 and paid
$64,000 in income taxes for the twenty-six week period ended July 29,
1995.
- 6 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended July 27, 1996
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have performed a
limited review of the condensed consolidated financial statements for
the twenty-six week period ended July 27, 1996. Since they did not
perform an audit, they express no opinion on the financial statements
referred to above.
- 7 -
<PAGE>
EXHIBIT
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To Jacobson Stores Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
JACOBSON STORES INC. (a Michigan corporation) and subsidiaries as of July 27,
1996 and the related condensed consolidated statements of earnings and cash
flows for the twenty-six week period then ended. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Jacobson Stores Inc. and
subsidiaries as of January 27, 1996, and the related consolidated statements
of earnings, shareholders' equity and cash flows for the year then ended (not
presented herein), and, in our report dated March 4, 1996, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of January 27, 1996, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ ARTHUR ANDERSEN LLP
-------------------------
Detroit, Michigan
August 12, 1996
- 8 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended July 27, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The registrant, Jacobson Stores Inc., a Michigan corporation and successor to
a business founded in 1868, operates specialty department stores catering to
discerning customers with preferences for quality merchandise. The Company
emphasizes quality merchandise, fully staffed stores, personalized customer
service and attractive, comfortable shopping surroundings. Each store features
fashion apparel and accessories for the family, and most offer decorative
accents 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"). 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.
a. OPERATING RESULTS: THIRTEEN WEEKS ENDED JULY 27, 1996 COMPARED TO
THIRTEEN WEEKS ENDED JULY 29, 1995
Sales for the quarter ended July 27, 1996, totalled $93,990,000, an
increase of 1.0% from 1995. The thirteen weeks this year include sales in
a new store in Leawood, Kansas, which opened in March 1996. Comparable
store sales decreased 3.7% (5.0% increase in Florida; 6.4% decrease in
Midwest). Midwest sales for the thirteen weeks were adversely affected by
a change in the timing of the Company's Fall Pre-Season Sale, which was
moved to early August in 1996. Sales in the Metropolitan Detroit stores
are expected to be pressured as a result of increased competition,
including the entry of Nordstrom's into the market in August 1996.
The Company's gross profit percentage decreased to 26.3% for the thirteen
weeks this year from 27.6% in 1995, reflecting incentive discounts
offered to new charge customers and a shift of summer clearance third
markdowns into the second quarter this year, partially offset by a lower
LIFO provision.
- 9 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended July 27, 1996
Selling, general and administrative expenses, expressed as a percentage
of sales, decreased to 33.6% in the quarter from 34.0% one year ago. The
decrease is due primarily to lower health care, advertising and store
pre-opening expenses, as well as to a reduction in comparable store
payroll expense.
Interest expense, expressed as a percentage of sales, increased to 2.4%
for the quarter from 2.3% one year ago due to higher revolving credit and
term loan borrowings.
1996 net loss for the thirteen weeks totalled $5,931,000, or $1.02 per
common share, compared to $5,321,000, or 92 cents per share, last year.
As a percentage of sales, net loss was 6.3% in 1996 compared to 5.7% one
year ago.
b. OPERATING RESULTS: TWENTY-SIX WEEKS ENDED JULY 27, 1996 COMPARED TO
TWENTY-SIX WEEKS ENDED JULY 29, 1995
Sales for the twenty-six weeks ended July 27, 1996, totalled
$200,515,000, an increase of 3.7% from 1995. The twenty-six weeks this
year include sales in a new store in Leawood, Kansas, which opened in
March 1996. Comparable store sales decreased 0.5% (6.7% increase in
Florida; 3.6% decrease in Midwest). Midwest sales for the twenty-six
weeks were adversely affected by a change in the timing of the Company's
Fall Pre-Season Sale, which was moved to early August in 1996. Sales in
the Metropolitan Detroit stores are expected to be pressured as a result
of increased competition, including the entry of Nordstrom's into the
market in August 1996.
The Company's gross profit percentage decreased to 31.4% from 31.6% in
1995, reflecting incentive discounts offered to new charge customers,
partially offset by lower markdowns and a lower LIFO provision.
Selling, general and administrative expenses, expressed as a percentage
of sales, decreased to 32.9% year-to-date from 33.4% one year ago. The
decrease is due primarily to lower health care, advertising and store
pre-opening.
Interest expense, expressed as a percentage of sales, totalled 2.3% in
both years. Higher revolving credit and term loan borrowings were offset
by leverage provided by sales growth.
1996 net loss for the twenty-six weeks totalled $4,919,000, or 85 cents
per common share, compared to $5,149,000, or 89 cents per share, in 1995.
As a percentage of sales, net loss was 2.5% in 1996 compared to 2.7% one
year ago.
- 10 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended July 27, 1996
c. LIQUIDITY AND CAPITAL RESOURCES
At July 27, 1996, the Company's current ratio was 3.09 to 1 and working
capital totalled $89,233,000, including $4,797,000 of cash and cash
equivalents. At January 27, 1996, the current ratio was 2.91 to 1 and
working capital totalled $95,091,000, including $3,068,000 of cash and
cash equivalents.
The Company utilizes cash flows from operations and revolving credit line
borrowings to fund its seasonal working capital needs. To support its
present and planned working capital requirements, including working
capital requirements for the two stores opening in 1996, the Company has
a $65,000,000 Revolving Credit and Term Loan facility under a Credit
Agreement with two banks. At July 27, 1996, there was $20,000,000
outstanding under the Revolving Credit line and $20,000,000 outstanding
under the Term Loan portion of the Credit Agreement.
d. CASH FLOWS
Cash and cash equivalents increased $1,729,000 in the twenty-six weeks
ended July 27, 1996 compared to an increase of $3,466,000 in the
twenty-six weeks ended July 29, 1995. Cash flows are impacted by
operating, investing and financing activities. In the twenty-six weeks
this year, operating activities provided $8,357,000 of cash, compared to
$14,299,000 of cash provided in 1995. The decrease in 1996 versus 1995
reflects primarily inventory of the new Leawood, Kansas store and a
decrease in estimated required health care reserves.
Investing activities used cash of $5,558,000 in the twenty-six weeks this
year compared to $4,151,000 in 1995. Investing activities included
capital expenditures for the acquisition and fixturing of new stores, and
modernization and refixturing of existing stores and support facilities
totalling $4,052,000 in the first twenty-six weeks of 1996 compared to
$3,678,000 last year.
Financing activities used cash of $1,070,000 in the twenty-six weeks this
year compared to $6,682,000 last year. In the first twenty-six weeks this
year, the Company borrowed $2,800,000 under the Revolving Credit portion
of its Credit Agreement compared to $3,500,000 re-paid under its former
revolving credit facility in the first twenty-six weeks of 1995. In the
first twenty-six weeks this year, the Company used $2,426,000 to service
current maturities of long-term debt compared to $1,738,000 in 1995. The
Company paid common stock dividends of $1,444,000 in each twenty-six week
period in 1996 and 1995.
- 11 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended July 27, 1996
The Company believes its cash flows from operations, along with its
borrowing capacity and access to financial markets are adequate to fund
its operations, debt maturities and commitments for another store opening
in 1996.
e. CORPORATE DEVELOPMENT
The Company opened a 120,000 square foot leased store in the Town Center
Plaza, a shopping center in Leawood, Kansas, a suburb of Kansas City, in
March 1996.
In May 1995, the Company signed a lease for an 80,000 square foot store
under construction in Mizner Park, a mixed-use retail, residential and
office development in Boca Raton, Florida. The store is targeted to open
in the Fall 1996.
The Company evaluates potential new store locations and would open new
stores as desirable opportunities arise and resources permit. The Company
has developed a concept store for additional new stores based on a
standard 65,000-70,000 square foot footprint on one level. Implementing a
growth strategy would likely require additional capital, including
additional debt or equity financing. The Company is currently exploring
its strategic alternatives, including its financing alternatives for its
corporate development plans. The Company reviews the performance of its
less profitable existing stores from time to time to determine whether it
would be in the Company's best interest to close any of these stores.
Store openings and closings could have a significant impact on the
Company's sales, expenses and capital requirements. In addition, store
closings would likely entail significant one-time charges to effect the
closing and to recognize any impairment of assets resulting from the
closing decision.
- 12 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART II: OTHER INFORMATION
For Quarter Ended July 27, 1996
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on May 23,
1996. At the Annual Meeting, Herbert S. Amster, James B. Fowler, Herman
S. Kohlmeyer, Jr. and Mark K. Rosenfeld were elected as directors of the
Company to serve until the 1999 Annual Meeting of Shareholders or until
their successors are elected and qualified. The following votes were
cast for or were withheld from voting with respect to the election of
each of the following persons:
<TABLE>
<CAPTION>
Votes
---------------------
Authority
Name For Withheld
----------------- --------- ---------
<S> <C> <C>
Herbert S. Amster 5,398,859 37,471
James B. Fowler 5,270,762 165,568
Herman S. Kohlmeyer, Jr. 5,402,569 33,761
Mark K. Rosenfeld 5,403,916 32,414
</TABLE>
There were no abstentions or broker non-votes in connection with the
election of the directors at the Annual Meeting.
In addition, at the Annual Meeting, the shareholders voted to appoint
Arthur Andersen LLP, independent certified public accountants, as
auditors for the fiscal year ending January 25, 1997. The following
table shows the number of votes for and against the proposal and the
number of votes abstaining with respect to the proposal:
<TABLE>
<CAPTION>
For Against Abstain
--------- ------ -----
<S> <C> <C>
5,417,339 13,607 5,384
</TABLE>
There were no broker non-votes in connection with the appointment of the
Company's auditors at the Annual Meeting.
- 13 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART II: OTHER INFORMATION
For Quarter Ended July 27, 1996
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10(a) Amendment, as of August 1, 1996, to Employment Agreement
dated February 1, 1996, between Jacobson Stores Inc. and
Paul W. Gilbert
10(b) Amendment, as of August 1, 1996, to Employment Agreement
dated February 1, 1996, between Jacobson Stores Inc. and
James B. Fowler
10(c) Employment Agreement dated August 1, 1996, between
Jacobson Stores
Inc. and Robert L. Moles
11 Computation of Earnings Per Share
15 Letter from Independent Public Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during its fiscal
quarter ended July 27, 1996.
All exhibits except as set forth above have been omitted as not applicable or
not required.
- 14 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
For Quarter Ended July 27, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JACOBSON STORES INC.
-------------------------------
(Registrant)
Date: September 5 , 1996 BY: /s/ Mark K. Rosenfeld
--------------------- -------------------------------
MARK K. ROSENFELD
Chairman of the Board and Chief
Executive Officer
Date: September 5 , 1996 BY: /s/ Paul W. Gilbert
--------------------- -------------------------------
PAUL W. GILBERT
Vice Chairman of the Board
(Principal Financial Officer)
- 15 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
INDEX OF EXHIBITS
10(a) Amendment, as of August 1, 1996, to Employment Agreement
dated February 1, 1996, between Jacobson Stores Inc. and
Paul W. Gilbert
10(b) Amendment, as of August 1, 1996, to Employment Agreement
dated February 1, 1996, between Jacobson Stores Inc. and
James B. Fowler
10(c) Employment Agreement dated August 1, 1996, between Jacobson
Stores Inc. and Robert L. Moles
11 Computation of Earnings Per Share
15 Letter from Independent Public Accountants
27 Financial Data Schedule
All exhibits except as set forth above have been omitted as not applicable
or not required.
EXHIBIT 10(a)
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of August 1,
1996, between JACOBSON STORES INC., a Michigan corporation, of Jackson,
Michigan (the "Company"), and PAUL W. GILBERT, of Jackson, Michigan
("Gilbert").
THE PARTIES HEREBY AGREE that paragraph 2 of the Employment Agreement
between them, dated as of February 1, 1996 (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 Seventy-Five Thousand Dollars
($275,000.00) per year. Gilbert shall also participate in such plans
and additional benefits as may generally be available from time to
time to other executive officers of the Company."
Except as expressly amended hereby, the Employment Agreement shall
continue in full force and effect.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Susan T. Clingerman By: /s/ Mark K. Rosenfeld
- ----------------------- ---------------------
Mark K. Rosenfeld,
Chairman of the Board and
Chief Executive Officer
/s/ Meredith A. Szostek By: /s/ Richard Z. Rosenfeld
- ----------------------- ------------------------
Richard Z. Rosenfeld,
Secretary
/s/ Susan T. Clingerman /s/ Paul W. Gilbert
- ----------------------- -------------------
Paul W. Gilbert
EXHIBIT 10(b)
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of August 1,
1996, between JACOBSON STORES INC., a Michigan corporation, of Jackson,
Michigan (the "Company"), and JAMES B. FOWLER, of Jackson, Michigan
("Fowler").
THE PARTIES HEREBY AGREE that paragraph 2 of the Employment Agreement
between them, dated as of February 1, 1996 (the "Employment Agreement") is
amended to read as follows:
"2. Compensation. Subject to the provisions of paragraph 5,
Fowler's salary shall be Two Hundred Sixty-Five Thousand Dollars
($265,000.00) per year. Fowler shall also participate in such plans
and additional benefits as may generally be available from time to
time to other executive officers of the Company."
Except as expressly amended hereby, the Employment Agreement shall
continue in full force and effect.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Susan T. Clingerman By: /s/ Mark K. Rosenfeld
- ----------------------- ---------------------
Mark K. Rosenfeld,
Chairman of the Board and
Chief Executive Officer
/s/ Meredith A. Szostek By: /s/ Richard Z. Rosenfeld
- ----------------------- ------------------------
Richard Z. Rosenfeld,
Secretary
/s/ Susan T. Clingerman /s/ James B. Fowler
- ----------------------- -------------------
James B. Fowler
EXHIBIT 10(c)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into August 1, 1996, between JACOBSON STORES
INC., a Michigan corporation, of Jackson, Michigan (the "Company"), and Robert
L. Moles (the "Employee").
RECITALS
A. The Company is currently considering whether to consolidate various
functions into its Orlando, Florida office, including the functions performed
by Employee, but has not yet determined whether to do so. The potential
consolidation of functions has created uncertainty among some of the Company's
employees.
B. The Company is dependent on Employee's services during this
critical stage of its development, and the loss of Employee's services could
have a material adverse effect on the Company.
C. In light of the foregoing and to allow Employee to focus less on
his employment status with the Company and more on the Company's business, the
Company and Employee desire to provide for the extension of the term of
Employee's employment with the Company and to provide for a bonus if Employee
continues employment with the Company for a minimum period and moves to the
Orlando, Florida area if and when requested to do so by the Company after it
determines whether to consolidate Employee's functions in that office.
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Term. The Company employs Employee as Senior Vice
President-Stores, and Employee agrees to serve in that capacity and/or in such
other capacity or capacities as the Chief Executive Officer of the Company or
his designee deems advisable for the compensation and on the terms set forth
in this Agreement. The term of Employee's employment under this Agreement
shall begin on the date of this Agreement and shall continue through July 31,
1997 (the "Expiration Date"), unless terminated sooner pursuant to the
provisions of paragraph 5.
2. Compensation. Subject to the provisions of paragraph 5, the Company
agrees (i) to pay Employee salary at an annual rate of $135,000, in bi-weekly
or other regular periodic installments no less frequent than monthly, and (ii)
to provide Employee with such insurance and other employee benefit plans that
are generally applicable to all employees of the Company and that are
maintained by the Company from time to time.
3. Bonus. Subject to the provisions of paragraph 5, the Company agrees
to pay employee a bonus if (i) either (A) Employee's employment under this
Agreement continues at least through the Expiration Date, in which case such
bonus will be equal to 50% of Employee's base salary on the Expiration Date
and such bonus will be paid on the Expiration Date, or (B)
<PAGE>
the "Entity" (as defined in paragraph 5.(d)(vi)) terminates Employee's
employment without "Cause" (as defined in paragraph 5.(d)(v)) before the
Expiration Date, in which case such bonus will be equal to 50% of Employee's
base salary on the date of such termination and will be paid on or before
the regular payroll date with respect to the period that includes the date of
termination, and (ii) Employee relocates to the Orlando, Florida area if and
when requested to do so by the Company's Chairman of the Board, Vice Chairman
of the Board or President before the termination of Employee's employment
under this Agreement.
4. 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.
5. Termination. Employee's employment under this Agreement shall
terminate on the earliest to occur of the following: (1) immediately upon
Employee's death, (2) at the Company's option, immediately when notice to
Employee of such termination is given after Employee's permanent incapacity
(established to the reasonable satisfaction of the Chief Executive Officer of
the Company), (3) at the Company's option, immediately when notice to Employee
of such termination is given (for any reason or for no reason and regardless
of whether there is good cause for such termination), (4) 30 days after notice
of such termination is given to the Company by Employee, and (5) the
Expiration Date. Notice will be deemed to be given on the earliest of (1) when
delivered, or (2) three business days after mailed by certified or registered
mail, postage prepaid, return receipt requested, or (3) one business day after
sent by recognized overnight courier, if to Employee, to Employee's address on
the Company's corporate records, and if to the Company, to the address of its
principal executive offices, attention Chief Financial Officer. The following
events during the term of this Agreement shall have the following respective
effects on the obligations of the Company pursuant hereto:
(a) If employment is terminated due to Employee's death or
permanent incapacity, the Company shall have no obligation to pay any salary
or other amounts or benefits under this Agreement or otherwise for any period
after the date of termination of employment, but benefits may continue to the
extent provided in any wage continuation program, insurance, or other employee
benefit plans that are generally applicable to all employees of the Company
and that are maintained by the Company at that time.
(b) Except as otherwise provided in paragraph 5.(c) or
paragraph 5.(d), if employment is terminated by the Company, or if Employee
resigns or retires before the Expiration Date, the Company shall have no
obligation to pay any salary or other amounts or benefits under this Agreement
or otherwise for any period after the date of termination of employment.
(c) If Employee terminates Employee's employment with the
"Entity" (as defined in paragraph 5.(d)(vi)) for "Good Reason" (as defined in
paragraph 5.(d)(iv)) or the "Entity" terminates Employee's employment without
"Cause" (as defined in paragraph 5.(d)(v)),
-2-
<PAGE>
both before the Expiration Date, Employee will receive the bonus described
in paragraph 3 if Employee has satisfied the condition described in
paragraph 3(ii), and, for the period from the date of such termination
through the Expiration Date, (i) Employee's salary at the rate set forth in
paragraph 2, and (ii) any benefits to the extent provided in any wage
continuation program, insurance, or other employee benefit plans that are
generally applicable to all employees of the Company and that are
maintained by the Company at that time. Any of the foregoing that are cash
payments shall be made in a lump sum on or before the regular payroll date
with respect to the period that includes the termination date. The Company
may withhold from such payments all federal, state, city and other taxes to
the extent such taxes are required to be withheld by applicable law.
(d) If (1) a "Change in Control" (as defined below) occurs
during the term of Employee's employment under this Agreement, and (2)
either Employee terminates Employee's employment with the "Entity" (as
defined below) for "Good Reason" (as defined below) or the "Entity"
terminates Employee's employment without "Cause" (as defined below), both
within one year after the Change in Control, Employee will receive the
bonus described in paragraph 3, if Employee has satisfied the condition
described in paragraph 3(ii) and if not already paid, and Employee's salary
at the rate set forth in paragraph 2 for the period from the date of such
termination through the date that is 12 months after the date such Change
in Control occurs. Any of the foregoing that are cash payments shall be
made in a lump sum on or before the regular payroll date with respect to
the period that includes the termination date. The Company may withhold
from such payments all federal, state, city and other taxes to the extent
such taxes are required to be withheld by applicable law. The Company's
obligation to pay the payments based on Employee's salary and provided in
this paragraph 5.(d) shall survive the expiration of the term.
(i) For purposes of this Agreement, a "Change in
Control" occurs on the first day any one or more of the following
occurs:
(A) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), together with all
affiliates and associates of such person (as such terms are
defined in Rule 12b-2 under the Exchange Act) but excluding
all "Excluded Persons" (as defined in paragraph 5.(d)(ii)),
becomes the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of securities
of the Company representing (A) 40% or more of the combined
voting power of all of the Company's outstanding securities
entitled to vote generally in the election of the Company's
directors, or (B) 40% or more of the combined shares of the
Company's capital stock then outstanding, all except in
connection with any merger, consolidation, reorganization or
share exchange involving the Company;
(B) the consummation of any merger,
consolidation, reorganization or share exchange involving the
Company, unless the holders of the Company's capital stock
outstanding immediately before such transaction own more than
50%
-3-
<PAGE>
of the combined outstanding shares of capital stock and have
more than 50% of the combined voting power in the surviving
entity after such transaction and they own such securities in
substantially the same proportions (relative to each other) as
they owned the Company's capital stock immediately before such
transaction;
(C) the consummation of any sale or other
disposition (in one transaction or a series of related
transactions) of all, or substantially all, of the Company's
assets to a person whose acquisition of 40% or more of the
combined shares of the Company's capital stock then outstanding
would have caused a Change in Control under paragraph
5.(d)(i)(A)); or
(D) the "Continuing Directors" (as defined in
paragraph 5.(d)(iii)) cease to be a majority of the Company's
directors.
A determination by the Company's Continuing Directors (by resolution
of at least a majority of the Continuing Directors) as to whether a
Change in Control has occurred for purposes of this Agreement, the
date on which it has occurred or both shall be conclusive for purposes
of this Agreement.
(ii) For purposes of this Agreement, the "Excluded
Persons" are (1) Employee, (2) any "group" (as that term is used in
Section 13(d) of the Exchange Act and the rules thereunder) that
includes Employee or in which Employee is, or has agreed to become, an
equity participant, (3) any entity in which Employee is, or has agreed
to become, an equity participant, (4) the Company, (5) any subsidiary
of the Company, (6) any employee benefit plan of the Company or any
subsidiary of the Company or the related trust, (7) any entity to the
extent it is holding capital stock of the Company for or pursuant to
the terms of any employee benefit plan of the Company or any
subsidiary of the Company, and (8) any director, officer or beneficial
owner of at least 10% of the Company's outstanding Common Stock as of
the date of this Agreement. For purposes of this Agreement, Employee
shall not be deemed an "equity participant" in any group or entity (1)
in which Employee owns for investment purposes only no more than 5% of
the stock of a publicly-traded entity whose stock is either listed on
a national stock exchange or quoted in The Nasdaq National Market, if
Employee is not otherwise affiliated with such group or entity, or (2)
if Employee's participation is fully-disclosed to, and approved by,
the Company's Chief Executive Officer before the Change in Control
occurs.
(iii) For purposes of this Agreement, the "Continuing
Directors" are the directors of the Company as of the date of this
Agreement, and any person who subsequently becomes a director if such
person is appointed to be a director by a majority of the Continuing
Directors or if such person's initial nomination for election or
initial election as a director is recommended or approved by a
majority of the Continuing Directors.
-4-
<PAGE>
(iv) Termination of Employee's employment for "Good
Reason" means Employee's voluntary termination of employment with the
Entity after a Change in Control as a result of (1) any decrease by
the Entity (without Employee's consent) in Employee's salary from
Employee's salary immediately before such Change in Control; provided,
that no such decrease shall constitute "Good Reason" if such decrease
is applied in the same manner to all officers or employees at the same
employment level as Employee (such as all officers or all store
managers, as the case may be), (2) a substantial change by the Entity
(without Employee's consent) in Employee's duties or responsibilities
from Employee's duties and responsibilities immediately before such
Change in Control, or (3) any requirement by the Entity (to which
Employee does not consent) that Employee change Employee's primary
place of business. "Good Reason" will not include Employee's death,
permanent incapacity or Retirement (as defined below), or Employee's
resignation other than as provided in the preceding sentence. For
purposes of this Agreement, "Retirement" means Employee's retirement
from the Entity in accordance with the Entity's normal policies.
(v) The Entity's termination of Employee's employment
without "Cause" means a termination other than for (1) Employee's
continued failure either to (A) devote substantially full time to
Employee's employment duties (except because of Employee's illness or
disability) or (B) make a good faith effort to perform Employee's
employment duties; (2) any other willful act or omission which
Employee knew, or had reason to know, would materially injure the
Entity; or (3) Employee's conviction of a felony involving dishonesty
or fraud.
(vi) For purposes of this Agreement, the "Entity" shall
mean both (1) the Company and, (2) in connection with a Change in
Control defined in paragraph 5.(d)(i)(B) or paragraph 5.d(i)(C), the
survivor of the merger, consolidation, reorganization or share
exchange involving the Company and the buyer of all, or substantially
all, of the Company's assets, if such additional entity described in
this clause (2) (if other than the Company) has offered to employ
Employee on such terms that would not constitute "Good Reason" for
termination of Employee's employment if imposed by the Company.
Therefore, for purposes of this paragraph 5.(d), Employee shall not
be deemed to have terminated Employee's employment with the "Entity"
for "Good Reason" and the "Entity" shall not be deemed to have
terminated Employee's employment without "Cause" unless such actions
are taken by all entities included within the definition of "Entity".
In addition, for purposes of this paragraph 5.(d), Employee shall not
be deemed to have terminated Employee's employment with the "Entity"
for "Good Reason" and the "Entity" shall not be deemed to have
terminated Employee's employment without "Cause" if (1) the survivor
of the merger, consolidation, reorganization or share exchange
involving the Company and the buyer of all, or substantially all, of
the Company's assets has offered to employ Employee on such terms
that would not constitute "Good Reason" for termination of Employee's
employment if imposed by the Company, (2) Employee refuses such
employment, and (3) the Company terminates Employee's employment for
any reason or for no reason.
-5-
<PAGE>
(e) The severance benefits provided in this paragraph 5 are in
addition to any other severance benefits to which Employee may be entitled.
(f) There is not, nor will there be, unless in writing signed
by both Employee and the Company, any express or implied agreement as to
Employee's continued employment by the Company during or after the end of the
term of Employee's employment under this Agreement. Employee's employment with
the Company will be employment "at will", and the provisions of this Agreement
will not apply to any such employment after the end of the term of Employee's
employment under this Agreement.
6. Previous Agreements Superseded. This Agreement supersedes all
previous employment agreements between the parties.
7. 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/ Prudie DeWaters By: /s/ Mark K. Rosenfeld
- ------------------- ----------------------
Its: Chairman & CEO
---------------
COMPANY
/s/ Prudie DeWaters /s/ Robert L. Moles
- ------------------- --------------------
Robert L. Moles
EMPLOYEE
-6-
EXHIBIT 11
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands)
(unaudited)
Primary earnings per common share, as set forth in the consolidated statements
of earnings, are computed by dividing net earnings by the weighted average
number of shares of common stock and common stock equivalents outstanding
during the period. Fully diluted earnings per share are computed based on the
additional assumption that the Company's 6-3/4% Convertible Subordinated
Debentures due 2011 were converted to common stock at the date of issuance
with a corresponding increase in net earnings to reflect reduction in related
interest expense, net of income taxes, except if anti-dilutive.
These computations are set forth below (in thousands except per share data):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
EARNINGS (LOSS) PER COMMON SHARE AND
COMMON EQUIVALENT SHARE:
Weighted average number of shares of common
stock and common stock equivalents outstanding -
Primary ..................................... 5,808 5,783 5,791 5,783
Fully diluted ............................... 6,864 6,840 6,862 6,839
======= ======= ======= =======
NET LOSS .......................................... $(5,931) $(5,321) $(4,919) $(5,149)
======= ======= ======= =======
NET LOSS, adjusted to reflect reduction in
interest expense attributable to convertible
debentures, net of income tax .................. $(5,547) $(4,937) $(4,151) $(4,381)
======= ======= ======= =======
NET LOSS PER SHARE:
Primary and Fully diluted ...................... $ (1.02) $ (0.92) $ (0.85) $ (0.89)
======= ======= ======= =======
</TABLE>
EXHIBIT 15
ARTHUR ANDERSEN LLP
To Jacobson Stores Inc.:
We are aware that Jacobson Stores Inc. has incorporated by reference in its
Form S-8 Registration Statements File No. 2-88295 and File No. 033-53469 and
Form S-2 File No. 33-10532 its Form 10-Q for the quarter ended July 27, 1996,
which includes our report dated August 12, 1996, covering the unaudited
interim condensed consolidated financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
------------------------
Detroit, Michigan
September 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES AS
OF, AND FOR THE TWENTY-SIX WEEK PERIOD ENDED, JULY 27, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND ACCOMPANYING
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> JUL-27-1996
<PERIOD-TYPE> 6-MOS
<CASH> 4,797
<SECURITIES> 0
<RECEIVABLES> 36,028
<ALLOWANCES> 780
<INVENTORY> 81,798
<CURRENT-ASSETS> 131,941
<PP&E> 171,902
<DEPRECIATION> 76,392
<TOTAL-ASSETS> 250,103
<CURRENT-LIABILITIES> 42,708
<BONDS> 120,403
<COMMON> 5,966
0
0
<OTHER-SE> 69,287
<TOTAL-LIABILITY-AND-EQUITY> 250,103
<SALES> 200,515
<TOTAL-REVENUES> 200,515
<CGS> 137,518
<TOTAL-COSTS> 137,518
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,544
<INCOME-PRETAX> (7,569)
<INCOME-TAX> (2,650)
<INCOME-CONTINUING> (4,919)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,919)
<EPS-PRIMARY> (.85)
<EPS-DILUTED> (.85)
</TABLE>
