<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT to SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 28, 1998. Commission File Number 0-15017
SAMUELS JEWELERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3746316
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2914 Montopolis Dr., Suite 200, Austin, Texas 78741
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (512) 369-1400
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common Stock
Warrants
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. [ ]
As of January 15, 1999, the issuer had a total of 5,001,800 shares of common
stock outstanding.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution under a plan confirmed by a
court. [X] Yes. [ ] No.
<PAGE> 2
SAMUELS JEWELERS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGES
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets 1
Statements of Operations 2
Statements of Cash Flows 4
Notes to Financial Statements 5
</TABLE>
<PAGE> 3
Item 1.
Part I
SAMUELS JEWELERS, INC.
(FORMERLY KNOWN AS BARRY'S JEWELERS, INC., DEBTOR-IN-POSSESSION)
BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(As Restated,
See note 5)
Successor Co. Predecessor Co.
November 28, May 30,
1998 1998
------------ ------------
(unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,493 $ 19,301
Customer receivables, net of allowance for doubtful accounts of
$5,218 at November 28, 1998, and $7,099 at May 30, 1998 43,215 48,076
Merchandise inventories 34,807 26,993
Prepaid expenses and other current assets 1,957 1,569
------------ ------------
Total current assets 85,472 95,939
Property and equipment:
Leasehold improvements, furniture and fixtures 11,864 17,824
Computers and equipment 3,900 5,724
------------ ------------
15,764 23,548
Less: accumulated depreciation 597 10,250
------------ ------------
Net property and equipment 15,167 13,298
Other assets 637 1,495
Reorganization value in excess of amounts allocated to
identifiable assets, net 17,393 --
------------ ------------
Total assets $ 118,669 $ 110,732
============ ============
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Accounts payable - trade $ 16,851 $ 9,086
Other accrued liabilities 17,147 9,698
------------ ------------
Total current liabilities 33,998 18,784
Liabilities subject to compromise under reorganization proceedings -- 126,812
Long-term debt 41,524 --
Shareholders' equity (deficiency):
Common stock; no par value; authorized 8,000,000 shares; issued
and outstanding, 4,029,372 shares at May 30, 1998 -- 33,247
Common stock; $.001 par value; authorized 20,000,000 shares;
issued and outstanding, 5,001,800 shares at November 28, 1998 5 --
Additional paid in capital 47,095 --
Notes receivable (936) --
Accumulated deficit (3,017) (68,111)
------------ ------------
Total shareholders' equity (deficiency) 43,147 (34,864)
Total liabilities and shareholders' equity (deficiency) $ 118,669 $ 110,732
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE> 4
SAMUELS JEWELERS, INC.,
(FORMERLY KNOWN AS BARRY'S JEWELERS, INC., DEBTOR-IN-POSSESSION)
STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
(As Restated,
See note 5)
Successor Co. Predecessor Co. Predecessor Co.
Two Months One Month Three Months
Ended Ended Ended
November 28, October 2, November 30,
1998 1998 1997
-------------- -------------- --------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Net sales $ 13,595 $ 7,546 $ 23,585
Finance and credit insurance fees 1,565 813 2,622
-------------- -------------- --------------
15,160 8,359 26,207
Costs and expenses:
Cost of goods sold, buying and occupancy 9,726 5,135 16,681
Selling, general and administrative expenses 7,051 3,735 11,609
Provision for doubtful accounts 850 356 1,425
-------------- -------------- --------------
17,627 9,226 29,715
Operating loss (2,467) (867) (3,508)
Interest expense, net 550 643 2,979
-------------- -------------- --------------
Loss before reorganization items, income
taxes and extraordinary item (3,017) (1,510) (6,487)
Reorganization items:
Fresh-Start adjustments -- (66,042) --
Reorganization costs -- 2,628 447
-------------- -------------- --------------
Income (loss) before income taxes and
extraordinary item (3,017) 61,904 (6,934)
Income taxes -- -- --
-------------- -------------- --------------
Net income (loss) before extraordinary item (3,017) 61,904 (6,934)
Gain on forgiveness of debt -- (11,545) --
Net income (loss) $ (3,017) $ 73,449 $ (6,934)
============== ============== ==============
Basic and diluted loss per share(a) $ (.60) n/a n/a
============== ============== ==============
Weighted-average number of common shares
Outstanding(a) 5,001,800 n/a n/a
============== ============== ==============
</TABLE>
(a) The basic and diluted loss per share and weighted average number of common
shares outstanding for the Predecessor Company have not been presented because,
due to the reorganization and implementation of Fresh-Start Reporting, they are
not comparable to subsequent periods.
See Notes to Financial Statements.
<PAGE> 5
SAMUELS JEWELERS, INC.
(FORMERLY KNOWN AS BARRY'S JEWELERS, INC., DEBTOR-IN-POSSESSION)
STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
(As Restated,
See note 5)
Successor Co. Predecessor Co. Predecessor Co.
Two Months Four Months Six Months
Ended Ended Ended
November 28, October 2, November 30,
1998 1998 1997
------------ ------------ ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Net sales $ 13,595 $ 27,494 $ 45,873
Finance and credit insurance fees 1,565 3,397 5,569
------------ ------------ ------------
15,160 30,891 51,442
Costs and expenses:
Cost of goods sold, buying and occupancy 9,726 19,091 32,541
Selling, general and administrative expenses 7,051 12,980 22,103
Provision for doubtful accounts 850 1,492 2,918
------------ ------------ ------------
17,627 33,563 57,562
Operating loss (2,467) (2,672) (6,120)
Interest expense, net 550 2,367 6,097
------------ ------------ ------------
Loss before reorganization items, income
taxes and extraordinary item (3,017) (5,039) (12,217)
Reorganization items:
Fresh-Start adjustments -- (66,042) --
Reorganization costs -- 4,437 1,457
------------ ------------ ------------
Income (loss) before income taxes and
extraordinary item (3,017) 56,566 (13,674)
Income taxes -- -- --
------------ ------------ ------------
Net income (loss) before extraordinary item (3,017) 56,566 (13,674)
Gain on forgiveness of debt -- (11,545) --
------------ ------------ ------------
Net income (loss) $ (3,017) $ 68,111 $ (13,674)
============ ============ ============
Basic and diluted loss per share (a) $ (.60) n/a n/a
============ ============ ============
Weighted-average number of common shares
Outstanding (a) 5,001,800 n/a n/a
============ ============ ============
</TABLE>
(a) The basic and diluted loss per share and weighted average number of common
shares outstanding for the Predecessor Company have not been presented because,
due to the reorganization and implementation of Fresh-Start Reporting, they are
not comparable to subsequent periods.
See Notes to Financial Statements.
<PAGE> 6
SAMUELS JEWELERS, INC.
(FORMERLY KNOWN AS BARRY'S JEWELERS, INC., DEBTOR-IN-POSSESSION)
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(As Restated,
See note 5)
Successor Co. Predecessor Co. Predecessor Co.
Two Months Four Months Six Months
Ended Ended Ended
November 28, October 2, November 30,
1998 1998 1997
------------ -------------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ (3,017) $ 68,111 $ (13,674)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Fresh-Start adjustments -- (66,042) --
Extraordinary item - gain on forgiveness of debt -- (11,545) --
Depreciation and amortization 899 1,341 2,118
Provision for doubtful accounts 850 1,492 2,918
Loss on disposal of assets 315 -- --
Management stock grant -- 417 --
Change in operating assets and liabilities:
Customer receivables (133) 2,652 2,949
Merchandise inventories (8,278) (4,592) 7,923
Prepaid expenses and other current assets (940) 552 851
Other assets (154) (21) (22)
Accounts payable - trade 4,149 3,616 5,880
Accrued liabilities 1,907 1,921 3,715
------------ ------------ ------------
Net cash provided by (used in) operating activities (4,402) (2,098) 12,658
Investing activities:
Purchase of property and equipment (2,512) (2,641) (351)
Proceeds from sale of assets 100 -- --
------------ ------------ ------------
Net cash used in investing activities (2,412) (2,641) (351)
Financing activities:
Net borrowings (repayments) under revolving credit facility (4,934) (11,397) --
Notes receivable (936) -- --
Issuance of common stock 15,012 -- --
------------ ------------ ------------
Net cash provided by (used in) financing activities 9,142 (11,397)
Increase (decrease) in cash 2,328 (16,136) 12,307
Cash at beginning of period 3,165 19,301 7,322
============ ============ ============
Cash at end of period $ 5,493 $ 3,165 $ 19,629
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 306 $ 2,060 $ 2,805
Income taxes -- -- 6
</TABLE>
See Notes to Financial Statements.
<PAGE> 7
SAMUELS JEWELERS, INC.
(FORMERLY KNOWN AS BARRY'S JEWELERS, INC., DEBTOR-IN-POSSESSION)
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Samuels Jewelers, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. The plan of reorganization, which became
effective October 2, 1998, has materially changed the amounts reported in the
accompanying financial statements, which give effect to adjustments to the
carrying values of assets and liabilities as a consequence of the plan of
reorganization. The results of operations and cash flows have been split into
two periods. The first four months ended October 2, 1998 reflect operations
prior to the emergence from Chapter 11 proceedings. The latest two months ended
November 28, 1998 reflect operations after the emergence from Chapter 11
proceedings and reflect the effects of Fresh-Start Reporting (see note 2). As a
result, the net income for the two months ended November 28, 1998 is not
comparable with prior periods and is not combined with prior period net income
for year-to-date totals due to non-comparability. The balance sheet at November
28, 1998 is also not comparable to prior periods.
The financial statements included herein do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation for
the interim periods have been included. Operating results for the interim
periods presented are not necessarily indicative of the results that may be
expected for the year ending May 29, 1999. For further information, refer to the
financial statements and footnotes thereto included in the Barry's Jewelers,
Inc. Annual Report on Form 10-K for the year ended May 30, 1998.
The Company changed its fiscal year end during 1998 from May 31 to the Saturday
closest to May 31. The Company's fiscal month of September 1998 ended on October
3, 1998. This five-week period is referred to as the one month ended October 2,
1998 to conform with the effective date of the Company's plan of reorganization
as any differences are deemed to be not significant. The two months ended
November 28, 1998 consists of the eight weeks then ended, while the quarter
ended November 30, 1997 consists of the three months then ended. The four months
ended October 2, 1998 consist of the 18 weeks then ended.
Samuels Jewelers, Inc. is a chain of specialty retail jewelry stores generally
located in regional shopping malls. The Company's stores offer fine jewelry
items in a wide range of styles and prices, with a principal emphasis on diamond
and gemstone jewelry. It operated 114 stores on November 28, 1998, and 128
stores on November 30, 1997.
The accompanying financial statements have been presented in accordance with
Statement of Position 90-7 "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" (Fresh Start Reporting).
<PAGE> 8
2. REORGANIZATION
On May 11, 1997, (the "Petition Date"), the Company filed a voluntary petition
for reorganization under Chapter 11 in the United States Bankruptcy Court for
the Central District of California, Los Angeles Division (the "Bankruptcy
Court"). After the Petition Date, the Company continued in possession of its
properties and, as Debtor-in-Possession, was authorized to operate and manage
its businesses and enter into all transactions (including obtaining services,
inventories, and supplies) that it could have entered into in the ordinary
course of business without approval of the Bankruptcy Court.
On September 16, 1998, the Bankruptcy court entered an order (the "Confirmation
Order") confirming the Company's Original Disclosure Statement and Plan of
Reorganization, dated April 30, 1998, as Modified (as so modified and confirmed,
the "Plan"). A copy of the Plan and the Confirmation Order are attached as
Exhibits to the Company's Current Report on Form 8-K dated September 16, 1998.
Please refer to such documents for more information.
The Plan was confirmed and became effective on October 2, 1998 (the "Effective
Date"). The Company adopted the fresh start reporting requirements of Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" during the second quarter of fiscal 1999. In accordance with
the fresh start reporting requirements, the reorganization value of the Company
has been allocated to the Company's assets in conformity with the procedures
specified by APB Opinion 16, Business Combinations. In addition the accumulated
deficit of the Company was eliminated and its capital structure was revalued in
accordance with the Plan. The Company has recorded the effects of the Plan and
Fresh-Start Reporting as of October 2, 1998. The adjustment to eliminate the
Company's accumulated deficit totaled $77.6 million of which $11.6 million was
forgiveness of debt and the remaining $66.0 million was Fresh-Start adjustments.
The results of operations and cash flows for the four months ended October 2,
1998 include operations prior to the Company's emergence from Chapter 11
proceedings (referred to as "Predecessor Company") and the effects of
Fresh-Start Reporting. The results of operations and cash flows for the two
months ended November 28, 1998 include operations subsequent to the Company's
emergence from Chapter 11 proceedings and reflect the effects of Fresh-Start
Reporting. As a result, the net income for the two months ended November 28,
1998 is not comparable with prior periods and the net income for the
year-to-date period ended November 28, 1998 is divided into Successor Company
and Predecessor Company and is also not comparable with prior periods. In
addition, the balance sheet as of November 28, 1998 is not comparable to prior
periods for the reasons discussed above.
Under the plan, the Company issued 5,001,800 shares of the reorganized company
stock. Of those shares 2,500,000 shares were issued to holders of Allowed Class
2 and Class 5 claims (secured and unsecured Claims of Bondholders), an
additional 2,251,800 were sold to holders of Allowed Class 2 and Class 5 claims,
and 250,000 shares were granted to executive officers of the reorganized
company. Under the plan, the Company issued 263,158 Reorganized Company Warrants
to the holders of Allowed Class 9 claims (claims of former holders of common
stock of Barry's Jewelers, Inc.).
The Company's stock is traded on the Nasdaq OTC Bulletin Board under the symbol
"SMJW".
The reorganized value of the Company's common equity of $47.1 million, was
determined by the Company, with the assistance of financial advisors, by
reliance on the Discounted Cash Flow method using the weighted average cost of
capital. The reorganized value of the Company has been allocated to specific
assets categories pursuant to Fresh-Start Reporting. Reorganization Value in
Excess of Amounts Allocated to Identifiable Assets reflects the difference in
the Company's stock valuation and the Company's net assets. The Company is
amortizing the Reorganization Value in Excess of Amounts Allocated to
Identifiable Assets over ten years.
3. LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS
Liabilities subject to compromise under reorganization proceedings consisted
of the following at May 30, 1998:
<TABLE>
<CAPTION>
Secured liabilities: May 30, 1998
-------------
<S> <C>
Borrowings outstanding under
Amended Revolving Credit Agreement $ 57,855
Senior Secured Notes (includes interest payable
of $3,073 accrued through the Petition Date) 53,073
Other notes payable and capital lease obligations 88
-------------
111,016
Unsecured liabilities:
Accounts payable trade 4,870
Other accrued expenses 10,926
-------------
15,796
-------------
$ 126,812
=============
</TABLE>
<PAGE> 9
In accordance with the Plan, these liabilities subject to compromise were
resolved on the Effective Date.
4. LONG-TERM DEBT
On October 2, 1998, the Company entered into a three year, $50,000,000 financing
agreement with Foothill Capital Corporation as a lender and as agent for a
lender group (the "Lenders"). The lenders will make revolving advances to the
Company in amounts determined based on percentages of eligible accounts
receivable and inventory. The annual rate of interest will be, at the Company's
option, (i) 2.25% per annum over the Eurodollar rate or (ii) 0.5% per annum over
the bank's prime rate, provided, however, that in no event will the applicable
interest rate on any advance be less than 7% per annum. Upon the occurrence and
during the continuation of any event of default under the financing agreement,
all obligations will bear interest at a per annum rate equal to three percentage
points above the otherwise applicable interest rate. As collateral for any and
all obligations to the lenders under the financing agreement, the Company
granted a first priority perfected security interest in and to substantially all
of its owned or thereafter acquired assets, both tangible and intangible. The
financing agreement contains quarterly covenants which include a minimum level
of tangible net worth and a ratio of in-house credit sales to total merchandise
sales. The financing agreement also gives the Company an option to reduce the
maximum credit line to no less than $25,000,000 upon the sale of the Company's
entire accounts receivable portfolio, provided, however, that such option will
expire eighteen months from the date of closing of the financing agreement.
As of November 28, 1998, the Company had direct borrowings of $41,524,000
outstanding with additional credit available of approximately $8,476,000.
As of November 28, 1998, the Company was in compliance with all terms of the
financing agreement.
5. RESTATEMENT
Subsequent to the issuance of the Company's Report on Form 10-Q for the period
ended November 28, 1998, the Company's management determined that compensation
expenses related to restricted stock grants and tax note bonuses, issued upon
confirmation of the Plan of Reorganization, recorded in the one and four month
periods ended October 2, 1998 should be adjusted and expensed over their vesting
term (in accordance with Accounting Principles Board Opinion No. 25).
Approximately $1.8 million of expense relating to this grant was reversed from
reorganization expense and fresh-start entries were appropriately adjusted. In
addition, notes receivable associated with the grants were reclassified from
other current assets to notes receivable (contra-equity) as reflected in the
balance sheet as of November 28, 1998.
A summary of the changes to account balances is outlined in the table below.
<TABLE>
<CAPTION>
As Originally As Restated
Stated
----------------- --------------
<S> <C> <C>
Balance Sheet as of November 28, 1998
Prepaid expenses and other current assets 2,893 1,957
Reorganization value in excess of amounts allocated to
Identifiable assets, net 18,329 17,393
Other accrued liabilities 18,083 17,147
Notes receivable -- (936)
Statement of Operations for the One Month Ended
October 2, 1998
Fresh -Start adjustments (67,853) (66,042)
Reorganization costs 4,439 2,628
Statement of Operations for the Four Months Ended
October 2, 1998
Fresh -Start adjustments (67,853) (66,042)
Reorganization costs 6,248 4,437
As Originally As Restated
Stated
----------------- --------------
Statement of Cash Flow for the Four Months Ended
October 2, 1998
Fresh-Start adjustments (67,853) (66,042)
Management stock grant 2,228 417
Statement of Cash Flow for the Two Months Ended
November 28, 1998
Prepaid expenses and other current assets (1,876) (940)
Notes receivable -- (936)
</TABLE>
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SAMUELS JEWELERS, INC.
April 13, 1999 By: /s/ Randy N. McCullough
------------------------------------
Randy N. McCullough
President and Chief Executive Officer
(Principal Executive Officer)
April 13, 1999 By: /s/ E. Peter Healey
------------------------------------
E. Peter Healey
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
April 13, 1999 By: /s/ Robert J. Herman
------------------------------------
Robert J. Herman
Vice President and Controller
(Principal Accounting Officer)
