FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 30, 1999
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 incorporation (IRS Employer
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):
5,788,209-2/3 Shares outstanding as of October 30, 1999
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For Quarter Ended October 30, 1999
INDEX
<TABLE>
<S> <C>
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
. Consolidated Balance Sheets - October 30, 1999 and
January 30, 1999 1
. Consolidated Statements of Earnings - Thirteen and
Thirty-Nine Week Periods Ended October 30, 1999 and
October 31, 1998 2
. Consolidated Statements of Cash Flows - Thirty-Nine
Week Periods Ended October 30, 1999 and October 31, 1998 3
. Notes to Consolidated Financial Statements 4
Review by Independent Public Accountants 6
Exhibit:
. Report of Independent Public Accountants 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
All items except those set forth above are inapplicable and
have been omitted.
SIGNATURES 16
INDEX OF EXHIBITS
</TABLE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
October 30, January 30,
ASSETS 1999 1999
----------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 622 $ 2,929
Receivables from customers, net 27,589 32,151
Merchandise inventories 104,479 90,454
Prepaid expenses and other assets 1,369 1,370
Deferred taxes 4,894 4,894
--------- ---------
Total current assets 138,953 131,798
--------- ---------
PROPERTY AND EQUIPMENT, NET 82,962 84,989
--------- ---------
OTHER ASSETS 20,072 20,088
--------- ---------
$ 241,987 $ 236,875
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,476 $ 3,719
Accounts payable 40,024 34,769
Accrued expenses 15,800 16,774
Accrued income taxes -- 442
--------- ---------
Total current liabilities 58,300 55,704
--------- ---------
LONG-TERM DEBT 108,805 99,803
--------- ---------
DEFERRED TAXES 3,622 6,386
--------- ---------
OTHER LIABILITIES 3,763 4,045
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock 5,975 5,975
Paid-in surplus 7,201 7,201
Retained earnings 54,720 58,160
Treasury stock (399) (399)
--------- ---------
67,497 70,937
--------- ---------
$ 241,987 $ 236,875
========= =========
The accompanying notes are an integral part of these statements.
- 1 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty Nine Weeks Ended
------------------------ ------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 94,380 $ 95,636 $ 302,525 $ 305,717
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses 60,684 63,099 202,990 206,045
Selling, general and administrative
expenses 34,554 35,165 100,077 102,759
Interest expense, net 1,697 1,881 5,274 5,807
Gain on sale of property -- (659) (523) (659)
--------- --------- --------- ---------
Total costs and expenses 96,935 99,486 307,818 313,952
--------- --------- --------- ---------
EARNINGS (LOSS) BEFORE INCOME
TAXES (2,555) (3,850) (5,293) (8,235)
PROVISION (CREDIT) FOR INCOME
TAXES (894) (1,347) (1,853) (2,882)
--------- --------- --------- ---------
NET EARNINGS (LOSS) $ (1,661) $ (2,503) $ (3,440) $ (5,353)
========= ========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE:
Basic and diluted $ (0.29) $ (0.43) $ (0.59) $ (0.93)
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
- 2 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Thirty Nine Weeks Ended
------------------------
October 30, October 31,
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,440) $ (5,353)
Gain on sale of property (523) (659)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation and amortization 6,312 6,336
Deferred taxes (2,764) (3,108)
Other liabilities (282) (210)
Change in:
Receivables from customers, net 4,562 5,171
Merchandise inventories (14,025) (18,969)
Prepaid expenses and other assets 1 157
Accounts payable and accrued expenses 4,281 10,812
Current income taxes (442) (360)
-------- --------
Net cash used in operating activities (6,320) (6,183)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 2,315 1,163
Additions to property and equipment (6,077) (7,218)
Other non-current assets 16 (34)
-------- --------
Net cash used in investing activities (3,746) (6,089)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 10,702 15,559
Reduction of long-term debt (2,943) (3,291)
Proceeds of exercise of stock options -- 101
-------- --------
Net cash provided by financing activities 7,759 12,369
-------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,307) 97
Cash and cash equivalents, beginning of period 2,929 3,883
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 622 $ 3,980
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
- 3 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 30, 1999
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 thirty-nine week periods ended October 30, 1999
and October 31, 1998 (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 (LOSS) PER SHARE
Basic earnings per share are computed by dividing reported earnings
available to common shareholders by weighted average common shares
outstanding. Diluted earnings per share give effect to potential
common shares represented by stock options and the Company's 6 3/4%
Convertible Subordinated Debentures due 2011, except if
anti-dilutive. Earnings (loss) per common share are calculated as
follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------- -------------------------
October 30, October 31, October 30, October 31,
(in thousands except per share data) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss $(1,661) $(2,503) $(3,440) $(5,353)
======= ======= ======= =======
Weighted average common
shares outstanding 5,788 5,788 5,788 5,783
Dilutive stock options -- 45 -- 166
------- ------- ------- -------
Shares used to calculate diluted
loss per common share 5,788 5,833 5,788 5,949
======= ======= ======= =======
Loss per common share:
Basic and Diluted $ (.29) $ (.43) $ (.59) $ (.93)
======= ======= ======= =======
</TABLE>
- 4 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 30, 1999
(2) CUSTOMER CREDIT AND RECEIVABLES
Receivables from customers were as follows:
October 30, January 30,
(in thousands) 1999 1999
-------------------------------------------------------------
Receivables from customers $28,035 $32,749
Less reserve for doubtful accounts 446 598
------- -------
$27,589 $32,151
======= =======
(3) MERCHANDISE INVENTORIES
Merchandise inventories were as follows:
October 30, January 30,
(in thousands) 1999 1999
-------------------------------------------------------------
Inventories at first-in, first out
(FIFO) cost $123,176 $108,263
Less LIFO reserves 18,697 17,809
-------- --------
$104,479 $ 90,454
======== ========
(4) PROPERTY AND EQUIPMENT
Property and equipment are set forth below:
October 30, January 30,
(in thousands) 1999 1999
---------------------------------------------------------
Property and equipment $179,769 $177,864
Less accumulated depreciation
and amortization 96,807 92,875
-------- --------
$ 82,962 $ 84,989
======== ========
- 5 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended October 30, 1999
(5) 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) totaled $4,879,000 and
$5,328,000 in the thirty-nine week periods ended October 30, 1999
and October 31, 1998, respectively. The Company paid income taxes
totalling $1,359,000 and $652,000 in the thirty-nine week periods
ended October 30, 1999 and October 31, 1998, respectively.
(6) FINANCING
In May 1999, the Company and the lenders under its Revolving Credit
Agreement extended the maturity date by one year to March 24, 2002.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have performed
a limited review of the condensed consolidated financial statements
for the thirty-nine week period ended October 30, 1999. Since they
did not perform an audit, they express no opinion on the financial
statements referred to above.
- 6 -
EXHIBIT
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To Jacobson Stores Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
JACOBSON STORES INC. (a Michigan corporation) and subsidiaries as of October
30, 1999, and the related condensed consolidated statements of earnings and
cash flows for the thirty-nine week period then ended. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed 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 30, 1999, 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 5, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of January 30, 1999, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan
November 12, 1999
- 7 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 30, 1999
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, offers customers
distinctive apparel and accessories for women, men and
children, as well as decorative accents for the home. The
Company operates 24 specialty stores in Michigan, Indiana,
Kansas, Kentucky, Ohio and Florida, catering to discerning
customers with preferences for high quality merchandise and
individualized service provided by knowledgeable sales
associates.
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 also has a
consolidated wholly-owned finance subsidiary, Jacobson Credit
Corp. ("Jacobson Credit"). 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.
The principal distribution functions are performed at service
centers in Jackson, Michigan and Winter Park, Florida.
Functions common to all stores, such as management
coordination, merchandising, sales promotion, data processing
and accounting, are centralized at the corporate headquarters
in Jackson, Michigan.
a. OPERATING RESULTS: THIRTEEN WEEKS ENDED OCTOBER 30, 1999
COMPARED TO THIRTEEN WEEKS ENDED OCTOBER 31, 1998
Sales for the quarter ended October 30, 1999, totaled
$94,380,000, a decrease of 1.3% from 1998. The Company
operated the same number of stores in 1999 and 1998. The sales
decrease in the quarter this year is primarily due to a
phase-out of the Company's bridal salons, which began in
mid-1998, and disruptions caused by the extensive remodeling
of the Sarasota store and expansion of the Naples store this
year. These projects were completed in mid-November.
The Company's gross profit percentage increased to 35.7 % for
the thirteen weeks this year from 34.0% in 1998, reflecting
principally lower markdowns.
Selling, general and administrative expenses totaled 36.6% of
sales for the quarter, essentially unchanged from 36.8% one
year ago. Expense dollars decreased $611,000 in the quarter
this year, reflecting in part savings from integration of the
Company's Florida and Midwest buying offices.
- 8 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 30, 1999
Interest expense, expressed as a percentage of sales,
decreased to 1.8% for the quarter from 2.0% one year ago,
primarily due to lower revolving credit interest rates and
borrowings and lower secured debt and 6 3/4% Convertible
Subordinated Debenture borrowing levels.
1999 net loss for the thirteen weeks totaled $1,661,000, or 29
cents per common share, compared to $2,503,000, or 43 cents
per common share, last year. As a percent of sales, net loss
totaled 1.8% in 1999 compared to 2.6% in 1998. 1998 results
included an after-tax gain on sale of property totaling
$428,000, or 7 cents per share.
b. OPERATING RESULTS: THIRTY-NINE WEEKS ENDED OCTOBER 30, 1999
COMPARED TO THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998
Sales for the thirty-nine weeks ended October 30, 1999,
totaled $302,525,000, a decrease of 1.0% from 1998. The
Company operated the same number of stores in 1999 and 1998.
The sales decrease in the thirty-nine weeks this year is
primarily due to a phase-out of the Company's bridal salons,
which began in mid-1998, and disruptions caused by the
extensive remodeling of the Sarasota store and expansion of
the Naples store this year. These projects were completed in
mid-November.
The Company's gross profit percentage increased to 32.9% for
the thirty-nine weeks this year from 32.6% in 1998, reflecting
principally higher markup.
Selling, general and administrative expenses, expressed as a
percentage of sales, decreased to 33.1% for the thirty-nine
weeks from 33.6% one year ago. The decrease is due primarily
to reduced sales promotion expense this year and savings from
integration of the Company's Florida and Midwest buying
offices.
Interest expense, expressed as a percentage of sales,
decreased to 1.7% from 1.9% in 1998, primarily due to lower
revolving credit interest rates and borrowings and lower
secured debt and 6 3/4% Convertible Subordinated Debenture
borrowing levels.
1999 net loss for the thirty-nine weeks totaled $3,440,000, or
59 cents per common share, compared to $5,353,000, or 93 cents
per common share, last year. As a percent of sales, net loss
was 1.1% in 1999 compared to 1.8% in 1998. 1999 and 1998
results included after-tax gains on sale of property totaling
$340,000, or 6 cents per share, and $428,000, or 7 cents per
share, respectively.
c. LIQUIDITY AND CAPITAL RESOURCES
At October 30, 1999, the Company's current ratio was 2.38 to 1
and working capital totaled $80,653,000, including $622,000 of
cash and cash equivalents. At January 30, 1999, the current
ratio was 2.37 to 1 and working capital totaled $76,094,000,
including $2,929,000 of cash and cash equivalents.
- 9 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 30,1999
The Company utilizes cash flows from operations and revolving
credit line borrowings to fund its seasonal working capital
needs, debt service and expenditures to modernize and
refixture existing stores. To support its present and planned
working capital requirements, the Company has a $100,000,000
revolving credit facility under a Revolving Credit Agreement
with a commercial lender. The revolving credit facility
currently provides for borrowings of up to $80,000,000,
subject to a borrowing base limitation and lender reserves.
The Company may, at its option, increase the maximum available
borrowings under the revolving credit facility to up to
$100,000,000 in the aggregate, subject to the borrowing base
limitation and lender reserves. As of October 30, 1999, the
Company had borrowings and outstanding letters of credit under
this facility totaling $47,832,000 and had $32,168,000 of
borrowing availability. For the thirty-nine weeks ended
October 30, 1999, the daily weighted average interest rate on
borrowings under the Revolving Credit Agreement was 7.4%.
The Company's debt obligations that are sensitive to changes
in interest rates, scheduled principal maturities, weighted
average interest rates associated with those maturities and
market value of debt have not changed materially from fiscal
year-end, except that in May 1999 the Company received a
one-year extension of the revolving credit facility maturity
date to March 24, 2002. In the Form 10-K for the year ended
January 30, 1999, revolving credit borrowings of $34,875,000
were included in 2001 principal maturities.
d. CASH FLOWS
Cash and cash equivalents decreased $2,307,000 in the
thirty-nine weeks ended October 30, 1999, compared to an
increase of $97,000 in the thirty-nine weeks ended October 31,
1998. Cash flows are impacted by operating, investing and
financing activities. In the thirty-nine weeks this year, cash
used in operating activities totaled $6,320,000, compared to
$6,183,000 in 1998.
Net operating cash outflows in both the 1999 and 1998
thirty-nine week periods resulted primarily from seasonal
inventory increases and the net loss adjusted for non-cash
items, partially offset by collection of receivables from
customers and an increase in accounts payable.
Investing activities used cash of $3,746,000 in the
thirty-nine weeks this year compared to $6,089,000 used in
1998. Capital expenditures totaled $6,077,000 in the first
thirty-nine weeks of 1999 compared to $7,218,000 in the
comparable 1998 period. Proceeds from the sale of property in
1999 and 1998 totaled $2,315,000 and $1,163,000, respectively.
- 10 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 30, 1999
Financing activities provided cash of $7,759,000 in the
thirty-nine weeks this year compared to $12,369,000 provided
last year. In the thirty-nine weeks in 1999, the Company
borrowed $10,702,000 under its revolving credit facility, used
$1,260,000 to purchase 6 3/4% Convertible Subordinated
Debentures, satisfying the December 1999 sinking fund
requirement, and used $1,683,000 to service current maturities
of long-term debt. In 1998, the Company borrowed $15,559,000
under the Revolving Credit Agreement, purchased $1,695,000 in
principal amount of 6 3/4% Convertible Subordinated Debentures
to satisfy the $1,725,000 annual sinking fund requirement and
used $1,596,000 to service current maturities of long-term
debt.
The Company believes its cash flows from operations, along
with its borrowing capacity and access to financial markets
are adequate to fund its operations and debt maturities.
e. CORPORATE DEVELOPMENT
The Company reviews the performance of its less profitable
stores from time to time to determine whether it would be in
the Company's best interest to close any of these stores.
Store closings could have a significant impact on the
Company's sales, expenses and capital requirements and would
likely entail additional significant one-time charges to
effect the closing and to recognize any impairment of assets
resulting from the closing decision. In 1998, the Company sold
closed facilities in Jackson and Kalamazoo, Michigan. In the
second quarter of 1999, the Company sold a closed facility in
Dearborn, Michigan.
In 1999, the Company constructed a 17,000 square foot
expansion of its leased store in Naples, Florida and remodeled
its Sarasota, Florida store. Both projects were completed in
November 1999.
In August 1999, the Company signed a non-binding letter of
intent for an 80,000 square foot leased store to be
constructed at Meridian Mall in Okemos, Michigan, a suburb of
Lansing. The Company is scheduled to relocate its present East
Lansing store operations to that location in November 2000.
The Company is actively addressing the issues related to the
year 2000. In 1997, the Company assessed its critical
information systems, communications networks, equipment and
facilities, and established a plan of action to remediate or
replace all non-compliant software and hardware that could
pose a significant risk to the Company's operations.
Remediation or replacement, testing and implementation of all
key systems is complete.
- 11 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 30, 1999
In addition, the Company has contacted third-party providers
of computer hardware and software to secure appropriate
representations that such hardware or software is or will be
year 2000 compliant. The Company has received year 2000
compliant versions of most third-party software. Testing and
implementation of those third-party software programs that
have been identified as critical to the Company's operation is
complete.
The Company believes its information systems are ready for the
year 2000. Under the most reasonably likely worst case
scenario, it may experience isolated incidents of
non-compliance. The Company expects that its technically
trained personnel, working in cooperation with key vendors and
service providers, should be able to address any year 2000
issues that may arise. As part of its contingency planning
effort, the Company has made inquiries as to the year 2000
readiness of select key merchandise vendors. The Company
continues to evaluate the responses to identify any
significant exposure that may exist and to establish alternate
sources or strategies where necessary. The Company believes it
generally will have alternative sources of comparable products
and services and does not expect to experience any material
business interruption.
Many risks, however, such as the failure to perform by public
utilities, telecommunications providers and financial
institutions, and the impact of the year 2000 issue on the
economy as a whole, are outside the Company's control and
could adversely affect the Company and its ability to conduct
business. While the Company believes its remediation and
contingency planning efforts adequately identify and address
the year 2000 issues that are within the Company's reasonable
control, there can be no assurance that the year 2000 issue
will not have a material adverse impact on the Company's
financial condition, operating results or business.
The substantial majority of the costs to replace non-compliant
software and hardware would have been incurred regardless of
the year 2000 issue to meet current business needs and to take
advantage of new lower cost technology platforms. In addition,
the Company spent approximately $800,000 in internal
development costs related to year 2000 readiness, principally
for payroll costs of its internal information systems staff in
1998 and 1999. These system replacement and internal costs
were funded primarily through cash flows from operations.
- 12 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 30, 1999
Each of the above statements regarding future revenues,
expenses or business plans (including statements regarding the
sufficiency of the Company's capital resources to fund future
operations) may be a "forward looking statement" within the
meaning of the Securities Exchange Act of 1934. Such
statements are subject to important factors and uncertainties
that could cause actual results to differ materially from
those in the forward-looking statement, including the
continued support of the Company's trade creditors and
factors, the risks inherent in the level of the Company's
long-term debt compared to its equity, the risks inherent in
the Year 2000 computer issue, the risk of unanticipated
operating expenses, general trends in retail clothing apparel
purchasing, especially during the Christmas season, and the
factors set forth in this Management's Discussion and Analysis
of Financial Condition and Results of Operations.
- 13 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended October 30, 1999
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's debt obligations that are sensitive to changes
in interest rates, scheduled principal maturities, weighted
average interest rates associated with those maturities and
market value of debt have not changed materially from fiscal
year-end, except that in May 1999 the Company received a
one-year extension of the revolving credit facility maturity
date to March 24, 2002. In the Form 10-K for the year ended
January 30, 1999, revolving credit borrowings of $34,875,000
were included in 2001 principal maturities.
- 14 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART II: OTHER INFORMATION
For Quarter Ended October 30, 1999
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
15 Letter from Independent Public Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during its
fiscal quarter ended October 30, 1999.
All exhibits except as set forth above have been omitted as not applicable or
not required.
- 15 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
For Quarter Ended October 30, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JACOBSON STORES INC.
------------------------------------
(Registrant)
Date: December 10 , 1999 BY: /s/ P. Gerald Mills
------------------ ------------------------------------
P. GERALD MILLS
Chairman of the Board, President and
Chief Executive Officer
Date: December 10 , 1999 BY: /s/ Paul W. Gilbert
------------------ ------------------------------------
PAUL W. GILBERT
Vice Chairman of the Board
(Principal Financial Officer)
- 16 -
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
INDEX OF EXHIBITS
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 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 Nos. 033-53469, 333-31989 and 333-59031
and Form S-2 File No. 33-10532 its Form 10-Q for the quarter ended October
30, 1999, which includes our report dated November 12, 1999, 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
------------------------
ARTHUR ANDERSEN LLP
Detroit, Michigan
December 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES AS
OF, AND FOR THE THIRTY-NINE WEEK PERIOD ENDED, OCTOBER 30, 1999 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-29-2000
<PERIOD-END> OCT-30-1999
<PERIOD-TYPE> 9-MOS
<CASH> 622
<SECURITIES> 0
<RECEIVABLES> 28,035
<ALLOWANCES> 446
<INVENTORY> 104,479
<CURRENT-ASSETS> 138,953
<PP&E> 179,769
<DEPRECIATION> 96,807
<TOTAL-ASSETS> 241,987
<CURRENT-LIABILITIES> 58,300
<BONDS> 108,805
<COMMON> 5,975
0
0
<OTHER-SE> 61,522
<TOTAL-LIABILITY-AND-EQUITY> 241,987
<SALES> 302,525
<TOTAL-REVENUES> 302,525
<CGS> 202,990
<TOTAL-COSTS> 202,990
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,274
<INCOME-PRETAX> (5,293)
<INCOME-TAX> (1,853)
<INCOME-CONTINUING> (3,440)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,440)
<EPS-BASIC> (0.59)
<EPS-DILUTED> (0.59)
</TABLE>
