<PAGE> 1
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 April 29, 2000
Commission file number 0-6319
JACOBSON STORES INC.
(Exact name of registrant as specified in its charter)
Michigan 38-0686330
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3333 Sargent Road, Jackson, Michigan 49201
(Address of principal executive offices, including zip code)
(517) 764-6400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock ($1 Par Value):
5,788,209-2/3 Shares outstanding as of April 29, 2000
<PAGE> 2
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For Quarter Ended April 29, 2000
INDEX
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
. Consolidated Balance Sheets -April 29, 2000 and
January 29, 2000 1
. Consolidated Statements of Earnings - Thirteen Week Periods
Ended April 29, 2000 and May 1, 1999 2
. Consolidated Statements of Cash Flows - Thirteen Week Periods
Ended April 29, 2000 and May 1, 1999 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 12
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
All items except those set forth above are inapplicable and have been
omitted.
SIGNATURES 14
INDEX OF EXHIBITS
<PAGE> 3
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
April 29, January 29,
ASSETS 2000 2000
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,537 $ 722
Receivables from customers, net 30,066 32,142
Merchandise inventories 93,355 91,905
Prepaid expenses and other assets 1,069 1,472
Deferred taxes 5,494 5,494
--------- ---------
Total current assets 131,521 131,735
--------- ---------
PROPERTY AND EQUIPMENT, NET 81,485 83,163
--------- ---------
OTHER ASSETS 18,966 18,766
--------- ---------
$ 231,972 $ 233,664
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,846 $ 3,392
Accounts payable 28,240 39,968
Accrued expenses 18,356 18,712
Accrued income taxes 1,262 1,670
--------- ---------
Total current liabilities 50,704 63,742
--------- ---------
LONG-TERM DEBT 94,363 85,772
--------- ---------
DEFERRED TAXES 6,039 6,039
--------- ---------
OTHER LIABILITIES 3,637 3,668
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock 5,975 5,975
Paid-in surplus 7,201 7,201
Retained earnings 64,452 61,666
Treasury stock (399) (399)
--------- ---------
77,229 74,443
--------- ---------
$ 231,972 $ 233,664
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 29, May 1,
2000 1999
--------- --------
<S> <C> <C>
NET SALES $115,179 $113,959
-------- --------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses 72,790 73,697
Selling, general and administrative expenses 36,286 34,391
Interest expense, net 1,817 1,804
-------- --------
Total costs and expenses 110,893 109,892
-------- --------
EARNINGS BEFORE INCOME TAXES 4,286 4,067
PROVISION FOR INCOME TAXES 1,500 1,423
-------- --------
NET EARNINGS $ 2,786 $ 2,644
======== ========
EARNINGS PER COMMON SHARE:
Basic $ 0.48 $ 0.46
======== ========
Diluted $ 0.48 $ 0.46
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 5
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 29, May 1,
2000 1999
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,786 $ 2,644
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 2,144 2,104
Other liabilities (31) (94)
Change in:
Receivables from customers, net 2,076 1,630
Merchandise inventories (1,450) (1,471)
Prepaid expenses and other assets 403 246
Accounts payable and accrued expenses (12,084) (4,336)
Current income taxes (408) 925
-------- --------
Net cash provided by (used in) operating activities (6,564) 1,648
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (466) (1,234)
Other non-current assets (200) (36)
-------- --------
Net cash used in investing activities (666) (1,270)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 9,083 1,038
Reduction of long-term debt (1,038) (1,701)
-------- --------
Net cash provided by (used in) financing activities 8,045 (662)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 815 (284)
-------- --------
Cash and cash equivalents, beginning of period 722 2,929
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,537 $ 2,645
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 6
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 29, 2000
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 thirteen week periods ended April 29, 2000 and May 1,
1999 (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
Basic earnings per common share are computed by dividing reported
earnings available to common shareholders by weighted average common
shares outstanding. Diluted earnings per common share give effect to
dilutive potential common shares. Earnings per common share are
calculated as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
(in thousands, except per share data) April 29, 2000 May 1,1999
------------------------------------- ---------------------------
<S> <C> <C>
Earnings available to common shareholders $2,786 $2,644
====== ======
Weighted average common shares outstanding 5,788 5,788
Dilutive stock options 7 --
------ ------
Shares used to calculate diluted
earnings per common share 5,795 5,788
====== ======
Earnings per common share:
Basic $ 0.48 $ 0.46
====== ======
Diluted $ 0.48 $ 0.46
====== ======
</TABLE>
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JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 29, 2000
<TABLE>
<CAPTION>
(2) CUSTOMER CREDIT AND RECEIVABLES
Receivables from customers were as follows:
April 29, January 29,
(in thousands) 2000 2000
-------------- --------- -----------
<S> <C> <C>
Receivables from customers $30,627 $32,701
Less reserve for doubtful accounts 561 559
------- -------
$30,066 $32,142
======= =======
(3) MERCHANDISE INVENTORIES
Merchandise inventories were as follows:
April 29, January 29,
(in thousands) 2000 2000
-------------- --------- -----------
Inventories at first-in, first out
(FIFO) cost $110,592 $108,803
Less LIFO reserves 17,237 16,898
-------- --------
$ 93,355 $ 91,905
======== ========
(4) PROPERTY AND EQUIPMENT
Property and equipment are set forth below:
April 29, January 29,
(in thousands) 2000 2000
-------------- --------- -----------
Property and equipment $180,666 $180,199
Less accumulated depreciation
and amortization 99,181 97,036
-------- --------
$ 81,485 $ 83,163
======== ========
</TABLE>
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JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended April 29, 2000
(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) totalled $1,263,000 and
$1,439,000 in the thirteen week periods ended April 29, 2000 and May 1,
1999, respectively. The Company paid income taxes totalling $1,918,000
and $502,000 in the thirteen week periods ended April 29, 2000 and May
1, 1999, respectively.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have performed a
limited review of the condensed consolidated financial statements for
the thirteen week period ended April 29, 2000. Since they did not
perform an audit, they express no opinion on the financial statements
referred to above.
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<PAGE> 9
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 April 29,
2000 and the related condensed consolidated statements of earnings and cash
flows for the thirteen week period then ended. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Jacobson Stores Inc. and
subsidiaries as of January 29, 2000 and the related consolidated statements of
earnings, shareholders' equity and cash flows for the year then ended (not
presented herein), and, in our report dated March 3, 2000, 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 29, 2000, 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
May 12, 2000
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JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 29, 2000
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 stores catering to discerning
customers with preferences for distinctive, quality merchandise. The Company is
committed to highly responsive service, distinctive merchandise of high quality
at a fair price, and a visually appealing and immaculate setting. Each store
features distinctive apparel and accessories for women, men and children, as
well as 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"). 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 Company has stores in twenty-four cities in Michigan, Indiana,
Kansas, Kentucky, Ohio and Florida. 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 APRIL 29, 2000 COMPARED TO
THIRTEEN WEEKS ENDED MAY 1, 1999
Sales for the quarter ended April 29, 2000, totalled $115,179,000, an
increase of 1.1% from 1999, attributable to increases in three stores
renovated in 1999. Comparable store sales also increased 1.1%.
The Company's gross profit percentage increased to 36.8% for the thirteen
weeks this year from 35.3% in 1999, reflecting principally lower markdowns
and higher markup.
Selling, general and administrative expenses, expressed as a percentage of
net sales, increased to 31.5 % in the quarter from 30.2% one year ago. The
increase is due primarily to planned increases in sales promotion expense
and direct selling payroll, partially offset by one-time expense
(primarily severance) last year to integrate the Company's Florida and
Midwest buying offices.
Interest expense, expressed as a percentage of net sales, totalled 1.6%
for the quarter in both years.
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JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 29, 2000
2000 net earnings for the thirteen weeks totalled $2,786,000, or 48 cents
per common share, compared to $2,644,000, or 46 cents per common share,
last year. As a percent of sales, net earnings were 2.4% in 2000 compared
to 2.3% in 1999.
b. LIQUIDITY AND CAPITAL RESOURCES
At April 29, 2000, the Company's current ratio was 2.59 to 1 and working
capital totalled $80,817,000, including $1,537,000 of cash and cash
equivalents. At January 29, 2000, the current ratio was 2.07 to 1 and
working capital totalled $67,993,000, including $722,000 of cash and cash
equivalents.
The Company utilizes cash flows from operations and revolving credit line
borrowings to fund its seasonal working capital needs, 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 April 29, 2000, the Company had outstanding
borrowings and letters of credit under this facility totalling $35,725,000
and had $44,275,000 of borrowing availability. For the quarter ended April
29, 2000, the daily weighted average interest rate on borrowings under the
Revolving Credit Agreement was 8.5%.
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.
c. CASH FLOWS
Cash and cash equivalents increased $815,000 in the thirteen weeks ended
April 29, 2000, compared to a decrease of $284,000 in the thirteen weeks
ended May 1, 1999. Cash flows are impacted by operating, investing and
financing activities. In the thirteen weeks this year, cash used in
operating activities totalled $6,564,000, compared to $1,648,000 provided
in 1999.
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<PAGE> 12
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 29, 2000
Net operating cash outflows in the 2000 quarter resulted primarily from
seasonal inventory increases and paydown of accounts payable, partially
offset by earnings before non-cash charges and collection of receivables
from customers.. Net cash inflows in the 1999 quarter resulted primarily
from earnings before non-cash charges and collection of receivables from
customers, partially offset by seasonal inventory increases and paydown of
accounts payable.
Investing activities used cash of $666,000 in the thirteen weeks this year
compared to $1,270,000 used in 1999. Capital expenditures totalled
$466,000 in the first thirteen weeks of 2000 compared to $1,234,000 in the
comparable 1999 period.
Financing activities provided cash of $8,045,000 in the thirteen weeks
this year compared to $662,000 used last year. In the thirteen weeks in
2000, the Company borrowed $9,083,000 under its revolving credit facility,
used $589,000 to purchase 6 3/4% Convertible Subordinated Debentures and
used $449,000 to service current maturities of long-term debt. In 1999,
the Company borrowed $1,038,000 under its revolving credit facility, used
$1,230,000 to purchase 6 3/4% Convertible Debentures and used $471,000 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.
d. 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 January, 2000, the Company signed a lease for an 80,000 square foot
store under construction in Meridian Mall, Okemos, Michigan. This store is
targeted to open in October 2000 and will replace the Company's nearby
freestanding downtown East Lansing location. The Company sold its East
Lansing location in January 2000, but will continue to operate the present
store under a short-term lease until the Meridian Mall store opens.
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<PAGE> 13
In March 2000, the Company signed a lease for an 80,000 square foot store
that will anchor a new development, The Cascades at Isleworth, an upscale
specialty center to be constructed in southwest Orlando, Florida. The
store is targeted to open in the fall of 2001.
In March 2000, the Company changed its fiscal year end to the Saturday
nearest January 31st from the last Saturday in January.
In April, 2000, the Company signed a lease for an 80,000 square foot store
that will anchor the Village Crossing at West Chester, a new specialty
center to be constructed in north Cincinnati, Ohio. The store is targeted
to open in the fall of 2001.
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 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.
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JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended April 29, 2000
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.
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JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART II: OTHER INFORMATION
For Quarter Ended April 29, 2000
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Amendment to Employment Agreement, dated as of May 26, 2000,
between Jacobson Stores Inc. and Theodore R. Kolman.
15 Letter from Independent Public Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
On April 3, 2000, the Company filed a Current Report on Form 8-K,
reporting in Item 8 that, effective March 23, 2000, the Company changed
its fiscal year to end on the Saturday that is nearest to January 31
each year. Previously, the fiscal year ended on the last Saturday in
January. No financial statements were filed with the report.
All exhibits except as set forth above have been omitted as not applicable or
not required.
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JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
For Quarter Ended April 29, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JACOBSON STORES INC.
------------------------------------
(Registrant)
Date: June 12, 2000 BY: /s/ P. Gerald Mills
------------------------------------
P. GERALD MILLS
Chairman of the Board, President and
Chief Executive Officer
Date: June 12, 2000 BY: /s/ Paul W. Gilbert
------------------------------------
PAUL W. GILBERT
Vice Chairman of the Board
(Principal Financial Officer)
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<PAGE> 17
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
INDEX OF EXHIBITS
10 Amendment to Employment Agreement, dated as of May 26,
2000, between Jacobson Stores Inc. and Theodore R.
Kolman.
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.
