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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 2000
REGISTRATION NO. 333-78923
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-4
TO FORM S-1 REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
SAMUELS JEWELERS, INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 5944 95-3746316
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
2914 MONTOPOLIS DRIVE E. PETER HEALEY PLEASE SEND COPIES OF ALL
SUITE 200 EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, COMMUNICATIONS TO:
AUSTIN, TEXAS 78741 SECRETARY AND TREASURER JEFFREY D. HOPKINS, ESQ.
(512) 369-1400 2914 MONTOPOLIS DRIVE, SUITE 200 WEIL, GOTSHAL & MANGES LLP
(Address, Including Zip Code, and AUSTIN, TEXAS 78741 700 LOUISIANA, SUITE 1600
Telephone Number, Including Area Code, (512) 369-1400 HOUSTON, TEXAS 77002
of Registrant's (Name, Address, Including Zip Code, and Telephone (713) 546-5000
Principal Executive Offices) Number, Including Area Code,
of Agent For Service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
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NOTE: THIS POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-4 TO THE REGISTRANT'S
REGISTRATION STATEMENT ON FORM S-1 (REG. NO. 333-78923) RELATES TO 5,000,000
SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE $.001 PER SHARE, REGISTERED
FOR ISSUANCE IN CONNECTION WITH ACQUISITIONS OF ASSETS OR BUSINESSES, WHETHER BY
PURCHASE, MERGER OR ANY OTHER FORM OF BUSINESS COMBINATION.
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21901.0001
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THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING ANY OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
[Samuels Logo]
A 100 Year Diamond Tradition
2914 Montopolis Drive, Suite 200
Austin, Texas 78741
(512) 369-1400
5,000,000 SHARES OF COMMON STOCK
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This prospectus relates to 5,000,000 shares of common stock, par
value $.001 per share, of Samuels Jewelers, Inc. ("Samuels") that Samuels
intends to issue from time to time in connection with future acquisitions of
assets or businesses, whether by purchase, merger or any other form of business
combination.
Samuels operates a chain of specialty retail jewelry stores, which
offer fine jewelry items in a wide range of styles and prices with a principal
emphasis on diamond and gemstone jewelry. Samuels operates 182 stores with
locations in twenty-five states. Samuels was incorporated in August 1998 for the
purpose of acquiring the assets of Barry's Jewelers, Inc. ("Predecessor").
Samuels expects the terms of acquisitions involving the issuance of
the shares will be determined by direct negotiations with the owners or
controlling persons of the assets or businesses to be acquired, and that Samuels
will issue the shares at prices reasonably related to the market price of its
common stock either at the time we enter into an agreement concerning the terms
of the acquisition or at or about the time we deliver the shares.
Samuels does not expect to pay underwriting discounts or commissions,
although we may pay finder's fees, which may be in the form of shares registered
under this prospectus, from time to time in connection with specific
acquisitions. Any person receiving any such fees may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, as amended.
Samuels common stock trades on Nasdaq's OTC Bulletin Board(R) under
the symbol "SMJW". The closing sales price of our stock was $7 per share on
January 13, 2000.
SEE "RISK FACTORS" BEGINNING ON PAGE 1 FOR A DISCUSSION OF FACTORS
THAT PROSPECTIVE PURCHASERS SHOULD CONSIDER.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense.
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Prospectus dated January 14, 2000
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THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT SAMUELS THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS
PROSPECTUS. SAMUELS WILL PROVIDE, WITHOUT CHARGE, A COPY OF ANY OR ALL OF THE
DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS UPON ORAL OR WRITTEN
REQUEST TO SAMUELS JEWELERS, INC., 2914 MONTOPOLIS DRIVE, SUITE 200, AUSTIN,
TEXAS 78741, ATTENTION: CORPORATE SECRETARY (TELEPHONE (512) 369-1400). TO
OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO LATER THAN FIVE
BUSINESS DAYS BEFORE THE DATE THAT YOU MUST MAKE YOUR INVESTMENT DECISION.
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Samuels has not authorized any person to provide information or make
any representation about this offering that is not in this prospectus.
Prospective investors should rely only on the information contained in this
prospectus. This prospectus is not an offer to sell nor is it seeking an offer
to buy these securities in any jurisdiction where the offer or sale is
prohibited. Information in his prospectus is correct only as of its date,
regardless of when any later offer or sale occurs.
TABLE OF CONTENTS
Page
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Risk Factors 1
Disclosure Regarding Forward-Looking Statements 5
Plan of Distribution 5
Incorporation of Certain Documents by Reference 7
Where You Can Find More Information 7
Legal Matters 7
Experts 7
RISK FACTORS
In addition to the other information contained in this documents and
the documents incorporated by reference, you should carefully consider the
following risk factors before you decide how to vote on the proposed
transactions. Additional risks and uncertainties not presently known to us, or
that we currently deem immaterial, may also impair our business operations. If
any of the following risks actually occur, our business, financial condition or
results of operations could be materially and adversely affected. In that case,
the trading price of our common stock could decline, and you may lose all or
part of your investment.
INTEGRATION OF COMPLETED o We cannot assure that the assets or
ACQUISITIONS businesses we acquire will be
successfully integrated. Samuels
management team may not have
experience with the acquired assets
or businesses and may not be able to
integrate the operations of those
assets or businesses without a loss
of key officers, employees,
customers or suppliers, a loss of
revenues, an increase in
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operating or other costs or other
difficulties. Samuels may not
successfully realize any operating
efficiencies and other benefits that
it may expect from acquisitions. Any
difficulties Samuels may incur in
the integration of assets or
business it acquires could have an
adverse effect on its business,
results of operations or financial
condition.
RECENT EMERGENCE FROM CHAPTER o Our Predecessor emerged on October
11/HISTORY OF OPERATING LOSSES 2, 1998 from bankruptcy proceedings
that it had instituted on May 11,
1997. Our Predecessor also had
emerged from bankruptcy proceedings
just over six years ago in 1992. We
believe that our Predecessor's lack
of success may be attributed to the
following:
o failed merchandising
programs;
o poor credit underwriting
practices;
o cash flow constraints;
o excessive collection
costs;
o poor inventory controls
and below average
percentage of consignment
inventory;
o executive attrition;
o restrictive financing
arrangements; and
o ineffective investments
in technology and
resulting excessive
administrative costs.
INDEBTEDNESS OF SAMUELS o On October 2, 1998, Samuels entered
into a three year, $50 million
financing agreement with Foothill
Capital Corporation. Samuels
subsequently reduced, at its option,
the line of credit under the
financing agreement to $40 million
in August 1999. As of November 27,
1999, Samuels had approximately
$29.2 million of long-term debt and
$7.4 million available for borrowing
under the financing agreement based
upon existing collateral. Samuels
heavily relies on this source of
funding and would likely suffer
significant financial difficulty if
restrictions were imposed on its
ability to receive further amounts
under the financing agreement or
were it to suffer an event of
default under the financing
agreement.
RESTRICTIONS IMPOSED BY TERMS o Our revolving loan agreement
OF INDEBTEDNESS contains certain covenants that
limit our activities with regard to
the following:
o incurrence of additional
indebtedness;
o the payment of dividends;
o the redemption of capital
stock;
o the making of certain
investments;
o the issuance of
guarantees;
o transactions with
affiliates;
o asset sales; and
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o certain mergers and
consolidations.
In addition, the revolving loan
agreement contains other restrictive
covenants which require us to
satisfy certain financial tests. Our
ability to comply with such
covenants and to satisfy such
financial tests may be affected by
events beyond our control.
o A breach of any of the covenants
under our revolving loan agreement
could result in an event of default.
In the event of a default under the
revolving loan agreement, the
lenders could elect to declare all
amounts borrowed, together with
accrued interest, to be immediately
due and payable and could terminate
all commitments thereunder.
COMPETITION o We operate in a highly competitive
retail jewelry market. Numerous
other companies, including publicly
and privately held independent
stores and small retail chains,
department stores, catalog
showrooms, direct mail suppliers and
television home shopping networks,
compete against us on both national
and regional levels. Certain of our
competitors are much larger than us
and have greater financial
resources.
o The malls and shopping centers in
which we operate generally contain
several other national chain or
independent jewelry stores, as well
as one or more jewelry departments
located in the "anchor" department
stores.
SEASONALITY o We greatly depend on the success of
our "Christmas selling season" for
our success. The success of our
Christmas season depends on many
factors beyond our control,
including general economic
conditions and industry competition.
Sales during the Christmas selling
season typically account for
approximately 25% of net sales and
almost all of annual earnings.
SUPPLY AND PRICE FLUCTUATIONS o The marketing arm of DeBeers
Consolidated Mines, Ltd., the
Central Selling Organization,
possesses considerable influence
over the world supply and price of
diamonds, supplying approximately
80% of the world's demand for rough
diamonds over the past several
years.
o The continued availability of
diamonds to our suppliers is
materially dependent on the
political and economic situation in
South Africa. While several other
countries also supply diamonds, we
cannot predict with certainty the
effect on the overall supply
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or price of diamonds in the event of
an interruption of diamond supply
from South Africa or the Central
Selling Organization.
o Samuels is subject to other supply
risks, including fluctuations in the
prices of precious gems and metals.
Presently, we do not engage in any
activities to hedge against possible
fluctuations in the prices of
precious gems and metals. If
fluctuations in these prices are
unusually large or rapid and result
in prolonged higher or lower prices,
we cannot assure that the necessary
retail price adjustments can be made
quickly enough to prevent us from
being adversely affected.
DEPENDENCE ON KEY PERSONNEL o Randy N. McCullough, our President
and Chief Executive Officer, was
hired in 1997 and we have retained
or recruited all other senior
executives and other key employees
since that time. We are dependent on
these personnel, who have been
instrumental in designing and
implementing our recent initiatives
and are involved in the strategies,
for our future growth and
profitability. The loss of services
of Mr. McCullough could have a
material adverse effect on our
results of operations and financial
condition. We do not maintain
key-man life insurance on our senior
executives or other key employees.
REGULATION o Our operations, and the retail
jewelry business in general, are
subject to significant review and
regulation by federal and state
authorities. There can be no
assurance that such regulation, or a
failure on our part to comply with
regulatory provisions, will not have
a material adverse effect on us.
MARKET FOR THE SHARES o Our common stock may lack a healthy
market because our Predecessor
underwent two separate Chapter 11
reorganizations in a six-year time
span. These two bankruptcy
proceedings may create a lack of
confidence in our future performance
and, correspondingly, in the market
for our shares.
o Nasdaq National Market suspended
trading in our Predecessor's common
stock on July 11, 1997. Neither our
Predecessor's nor Samuels' common
stock has traded on a national
exchange or on Nasdaq's National
Market or Small Cap markets since
that time. Our Predecessor traded on
the "pink sheets" following its
delisting until it was merged into
Samuels. While our common stock now
trades on Nasdaq's OTC Bulletin
Board(R), we cannot ensure that the
market for our common stock will be
as liquid
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as if it traded on a national
exchange or on Nasdaq's National
Market or Small Cap markets.
YEAR 2000 COMPLIANCE o Many existing computer systems and
applications use only two digits to
identify a year in the date field.
As a result of the change to the
year 2000, such systems and
applications could fail or create
erroneous results unless corrected
so that they can process data
related to that year and beyond.
Although Samuels has not experienced
significant disruptions due to the
change to year 2000, we cannot
assure that all year 2000 problems
have been identified within our
computer systems or those of our
significant suppliers or that we
will be able to successfully remedy
any problems that are discovered.
TAX LOSS CARRYFORWARDS o In the event of an ownership change
of a corporation, the Internal
Revenue Code places potential
limitations on the new owner's use
of the net operating losses that the
corporation incurred prior to the
ownership change. This may limit
Samuels's use of net operating
losses previously recorded by our
Predecessor.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference in this
prospectus contain both historical and forward-looking statements. All
statements other than statements of historical fact are, or may be deemed to be,
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include the information concerning possible or
assumed future results or operations of Samuels set forth under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in those documents incorporated by reference in this prospectus.
Samuels claims the protection of the disclosure liability safe harbor for
forward-looking statement contained in the Private Securities Litigation Reform
Act of 1995. Such statements are subject to risks and uncertainties, including
particularly those important factors set forth below under the heading "Risk
Factors."
PLAN OF DISTRIBUTION
The 5,000,000 shares of Samuels' common stock may be offered and
issued by Samuels from time to time in connection with acquisitions of other
businesses or properties. Samuels anticipates that future acquisitions, like
those described below, will consist principally of additional retail jewelry and
related businesses. The consideration for such acquisitions may include cash
(including installment payments), shares of common stock, guarantees,
assumptions of liabilities or any two or more of the foregoing, as determined
from time to time by negotiations between Samuels and the owners or controlling
persons of the businesses or properties subject to acquisition. In addition,
Samuels may enter into employment and independent consultant contracts and
non-competition agreements with former owners and key executive personnel of
these acquired businesses.
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Samuels has previously issued 54,600 shares of common stock under
this registration statement for the acquisition of numerous assets, including
leasehold interests, leasehold improvements, store fixtures, furniture, safes,
display elements and the attendant property interests for fourteen stores of
Henry Silverman Jewelers, Inc. Samuels accounted for the acquisition as a
purchase. The fourteen stores, of which Samuels' purchased the leaseholds, are
located in Texas (6 stores), Michigan (2 stores), South Carolina (2 stores),
Arizona (1 store), Colorado (1 store), Kansas (1 store) and New Mexico (1
store). The definitive purchase agreement with respect to the acquired assets
was entered into as of July 20, 1999, with the original purchase price for
Samuels to be 60,000 shares of common stock for the property related to
seventeen Henry Silverman Jewelers, Inc. stores. Samuels issued the 60,000
shares and placed them in escrow with release contingent upon the delivery of
the leasehold interests for the stores. We obtained the return of 5,400 shares
related to three stores, that we were unable to take possession of, on or about
November 15, 1999. As part of the acquisition, Samuels also issued issued 2,500
shares of its common stock, registered under this registration statement, as a
finder's fee.
Samuels is engaged at this time in preliminary discussions with other
candidates for possible future acquisitions. Samuels reasonably expects to offer
and sell the remaining 4,942,900 shares within two years from the initial
effective date of this registration.
Samuels will determine the terms of future acquisitions by
negotiations between Samuels' representatives and the owners or controlling
persons of the businesses or properties to be acquired. Samuels may consider the
following factors, among others, in a proposed acquisition:
o the established quality and reputation of the business and
its management;
o gross revenues;
o earning power;
o cash flow;
o growth potential;
o location of business; and
o properties to be acquired and geographical diversification
resulting from the acquisition.
Samuels anticipates that the shares it will offer in connection with future
acquisitions will be valued at a price reasonably related to the current market
value of its common stock either at the time the terms of the acquisition are
tentatively agreed upon or at or about the time or times of delivery of the
Samuels' shares. Samuels does not expect to receive any cash proceeds (other
than cash balances of acquired companies) in connection with any such issuances.
Samuels does not expect to pay any underwriting discounts or
commissions except that finder's fees, which may be in the form of shares
registered under this registration statement for the purpose of offering and
issuance in connection with future acquisitions. Any person receiving any such
fees may be deemed to be an underwriter within the meaning of the Securities
Act.
A material acquisition or series of acquisitions (constituting in the
aggregate a material transaction) requires Samuels to file an amendment to the
registration statement, of which this
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prospectus forms a part, discussing or disclosing the acquisition or
acquisitions and the effects on Samuels. That amendment must become effective
under the Securities Act before any additional shares, registered under this
registration statement, may be sold.
Samuels may sell pursuant to Rule 144 under the Securities Act,
rather than pursuant to this prospectus, any shares covered by this prospectus
that qualify for sale pursuant to Rule 144.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Securities and Exchange Commission ("SEC") rules and regulations
permit Samuels to "incorporate by reference" information Samuels has previously
filed with the SEC. This means that Samuels may disclose important information
to you by referring to those filed documents rather than by repeating their
content in full in this prospectus. Samuels incorporates by reference the
following documents:
o its Annual Report on Form 10-K for the year ended May 29,
1999;
o its Quarterly Report on Form 10-Q for the period ended
August 28, 1999; and
o its Quarterly Report on Form 10-Q for the period ended
November 27, 1999.
A copy of our Annual Report on Form 10-K for the year ended May 29, 1999 and our
Quarterly Report on Form 10-Q for the period ended November 27, 1999 must
accompany this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
Samuels files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any document Samuels
files with SEC at the SEC's public reference rooms located at 450 Fifth Street,
N.W., in Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Samuels' SEC filings are also
available to the public on the SEC's web site at "http://www.sec.gov."
LEGAL MATTERS
Weil, Gotshal & Manges LLP, Houston, Texas, will pass on the validity
of the shares of Samuels common stock offered by this prospectus.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from the Samuels Jewelers, Inc.
Annual Report on Form 10-K for the year ended May 29, 1999 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may limit the liability of and indemnify its directors and officers
against liability in a variety of circumstances. In accordance with Section 145,
Samuels' Certificate of Incorporation contains provisions eliminating the
personal liability of the directors except for liability for (i) a breach of his
or her duty of loyalty to Samuels or to its stockholders, (ii) acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law, (iii) dividends or stock repurchases or redemptions that are unlawful
under Delaware law and (iv) any transaction from which he or she receives an
improper personal benefit.
Samuels also maintains directors' and officers' liability insurance,
which insures Samuels' directors and officers against certain liabilities that
may arise from the performance of their respective duties, including liabilities
associated with certain violations of securities laws.
ITEM 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Exhibit
Number Description
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2.1 Order Confirming Original Disclosure Statement and Plan of
Reorganization, dated April 30, 1998, Proposed by Barry's
Jewelers, Inc., as modified, dated September 16, 1998
(with Plan attached.(1)
2.2 Certificate of Ownership and Merger of Barry's Jewelers,
Inc. with and into Samuels Jewelers, Inc. dated October 2,
1998.(1)
3.1 Certificate of Incorporation of Samuels Jewelers, Inc.(1)
3.2 Bylaws of Samuels Jewelers, Inc.(1)
4.1 Warrant Agreement dated as of October 2, 1998 between
Samuels Jewelers Inc. and Norwest Bank Minnesota, N.A., as
Warrant Agent.(1)
4.2 Registration Rights Agreement dated as of October 2, 1998
among Samuels Jewelers, Inc., The Galileo Fund, L.P., B
III Capital Partners, L.P., DDJ Overseas Corporation,
Paine Webber High Income Fund, Managed Yield Fund Inc.,
All-American Term Trust Inc. and Paine Webber Offshore
Funds PLC, the The High Income Fund(1)
5.1 Opinion of Weil, Gotshal & Manges LLP(2)
10.1(a) Loan and Security Agreement dated October 2, 1998, between
Samuels Jewelers, Inc. and Foothill Capital Corporation,
as agent for certain lenders party thereto.(1)
10.1(b) Amendment Number One to Loan and Security Agreement
entered into as of April 15, 1999, among Samuels Jewelers,
Inc., Foothill Capital Corporation and the financial
institutions listed on the signature pages thereto.(3)
10.1(c) Amendment Number Two to Loan and Security Agreement
entered into as of August 30, 1999, among Samuels
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Exhibit
Number Description
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Jewelers, Inc., Foothill Capital Corporation and the
financial institutions listed on the signature pages
thereto.(3)
10.1(d) Amendment Number Three to Loan and Security Agreement
entered into as of November 24, 1999, among Samuels
Jewelers, Inc., Foothill Capital Corporation and the
financial institutions listed on the signature pages
thereto.(4)
10.2 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and Randy N. McCullough.(1)
10.3 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and E. Peter Healey.(1)
10.4 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and Chad C. Haggar.(1)
10.5 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and Bill R. Edgel.(1)
10.6 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and Paul Hart.(1)
10.7 Private Label Credit Card Agreement between World
Financial Network National Bank and Samuels Jewelers, Inc.
dated as of July 27, 1999.(3)
10.8 Purchase and Sale Agreement between World Financial
Network National Bank and Samuels Jewelers, Inc. dated as
of July 27, 1999.(3)
13.1 Samuels Jewelers, Inc. Quarterly Report on Form 10-Q filed
on January 11, 2000.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Weil, Gotshal & Manges LLP (contained in
Exhibit 5.1)(2)
24.1 Powers of Attorney
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(1) Incorporated by reference to Samuels' Current Report on Form 8-K filed
October 6, 1998.
(2) Previously filed.
(3) Incorporated by reference to Samuels' Annual Report on Form 10-K for the
year ended May 29, 1999.
(4) Incorporated by reference to Samuels' Quarterly Report on Form 10-Q for the
period ended November 27, 1999.
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(b) Financial Statement Schedules.
VALUATION & QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGE TO COSTS AND DEDUCTIONS/OTHER BALANCE AT END
BEGINNING OF PERIOD EXPENSES OF PERIOD
<S> <C> <C> <C> <C> <C>
YEAR END 1999:
Allowance for doubtful accounts $ 7,099 $ 5,509 $ (7,488) $ 5,120
Inventory valuation allowance (1) $ 2,218 $ 5,056 $ (1,938) $ 5,336
YEAR END 1998:
Allowance for doubtful accounts $ 10,300 $ 6,586 $ (9,787) $ 7,099
Inventory valuation allowance $ 3,033 $ $ (815) $ 2,218
YEAR END 1997:
Allowance for doubtful accounts $ 10,930 $ 18,766 $ (19,396) $ 10,300
Inventory valuation allowance $ -- $ 3,033 $ -- $ 3,033
YEAR END 1996:
Allowance for doubtful accounts $ 11,662 $ 11,839 $ (12,571) $ 10,930
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(1) The inventory valuation allowance was adjusted by $5,056 as of
October 2, 1998, as a part of the Company's adoption of the
fresh-start reporting requirements of Statement of Position 90-7. See
"Note 1 Reorganization and Basis of Presentation."
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ITEM 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933,
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each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(6) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Austin,
State of Texas, on January 14, 2000.
SAMUELS JEWELERS, INC.
By: /s/ Randy N. McCullough
--------------------------------------
Randy N. McCullough
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed on January 14, 2000 by the following persons in the
capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Randy N. McCullough President, Chief Executive Officer (Principal Executive Officer)
- -------------------------------------- and Director
Randy N. McCullough
/s/ E. Peter Healey Chief Financial Officer (Principal Financial Officer) and Director
- --------------------------------------
E. Peter Healey
/s/ Robert J. Herman Controller (Principal Accounting Officer)
- --------------------------------------
Robert J. Herman
* Chairman of the Board
- --------------------------------------
David H. Eisenberg
* Director
- --------------------------------------
David B. Barr
* Director
- --------------------------------------
David J. Breazzano
* Director
- --------------------------------------
Wendy T. Landon
* Director
- --------------------------------------
Jerry Winston
*By: /s/ E. Peter Healey
- ----------------------------------------
(Attorney-in-Fact)
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
2.1 Order Confirming Original Disclosure Statement and Plan of
Reorganization, dated April 30, 1998, Proposed by Barry's
Jewelers, Inc., as modified, dated September 16, 1998
(with Plan attached.(1)
2.2 Certificate of Ownership and Merger of Barry's Jewelers,
Inc. with and into Samuels Jewelers, Inc. dated October 2,
1998.(1)
3.1 Certificate of Incorporation of Samuels Jewelers, Inc.(1)
3.2 Bylaws of Samuels Jewelers, Inc.(1)
4.1 Warrant Agreement dated as of October 2, 1998 between
Samuels Jewelers Inc. and Norwest Bank Minnesota, N.A., as
Warrant Agent.(1)
4.2 Registration Rights Agreement dated as of October 2, 1998
among Samuels Jewelers, Inc., The Galileo Fund, L.P., B
III Capital Partners, L.P., DDJ Overseas Corporation,
Paine Webber High Income Fund, Managed Yield Fund Inc.,
All-American Term Trust Inc. and Paine Webber Offshore
Funds PLC, the The High Income Fund(1)
5.1 Opinion of Weil, Gotshal & Manges LLP(2)
10.1(a) Loan and Security Agreement dated October 2, 1998, between
Samuels Jewelers, Inc. and Foothill Capital Corporation,
as agent for certain lenders party thereto.(1)
10.1(b) Amendment Number One to Loan and Security Agreement
entered into as of April 15, 1999, among Samuels Jewelers,
Inc., Foothill Capital Corporation and the financial
institutions listed on the signature pages thereto.(3)
10.1(c) Amendment Number Two to Loan and Security Agreement
entered into as of August 30, 1999, among Samuels
Jewelers, Inc., Foothill Capital Corporation and the
financial institutions listed on the signature pages
thereto.(3)
10.1(d) Amendment Number Three to Loan and Security Agreement
entered into as of November __, 1999, among Samuels
Jewelers, Inc., Foothill Capital Corporation and the
financial institutions listed on the signature pages
thereto.(4)
10.2 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and Randy N. McCullough.(1)
10.3 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and E. Peter Healey.(1)
10.4 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and Chad C. Haggar.(1)
10.5 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and Bill R. Edgel.(1)
10.6 Employment Agreement, dated as of October 2, 1998, between
Samuels Jewelers, Inc. and Paul Hart.(1)
10.7 Private Label Credit Card Agreement between World
Financial Network National Bank and Samuels Jewelers, Inc.
dated as of July 27, 1999.(3)
10.8 Purchase and Sale Agreement between World Financial
Network National Bank and Samuels Jewelers, Inc. dated as
of July 27, 1999.(3)
13.1 Samuels Jewelers, Inc. Quarterly Report on Form 10-Q filed
on January 11,2000.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Weil, Gotshal & Manges LLP (contained in
Exhibit 5.1)(2)
24.1 Powers of Attorney
- -----------------------
(1) Incorporated by reference to Samuels' Current Report on Form 8-K filed
October 6, 1998.
II-6
<PAGE>
(2) Previously filed.
(3) Incorporated by reference to Samuels' Annual Report on Form 10-K for the
year ended May 29, 1999.
(4) Incorporated by reference to Samuels' Quarterly Report on Form 10-Q for the
period ended November 27, 1999.
II-7
Exhibit 13.1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT to SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 27, 1999.
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
(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 7, 2000, the Registrant had 5,058,900 shares of common stock, par
value $.001 per share, 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>
SAMUELS JEWELERS, INC.
FORM 10-Q
INDEX
<TABLE>
<S> <C>
PAGES
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 6
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk 16
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings 17
ITEM 2. Changes in Securities and Use of Proceeds 17
ITEM 3. Defaults Upon Senior Securities 17
ITEM 4. Submission of Matters to a Vote of Security Holders 17
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE>
PART I
Item 1
SAMUELS JEWELERS, INC.
BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Successor Successor
November 27, May 29,
1999 1999
----------- ---------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,706 $ 1,456
Customer receivables, net of allowance for doubtful accounts of
$3,737 at November 27, 1999, and $5,120 at May 29, 1999 5,732 45,098
Merchandise inventories 58,651 32,684
Prepaid expenses and other current assets 3,448 1,207
--------- ---------
Total current assets 71,537 80,445
Property and equipment:
Leasehold improvements, furniture and fixtures 22,023 15,396
Computers and equipment 4,916 4,334
--------- ---------
26,939 19,730
Less: accumulated depreciation (3,961) (2,109)
--------- ---------
Net property and equipment 22,978 17,621
Other assets 694 631
Goodwill, net 5,090 --
Reorganization value in excess of amounts allocated to
identifiable assets, net 15,630 16,512
--------- ---------
Total assets $ 115,929 $ 115,209
========= =========
Liabilities and Shareholders' Equity Current liabilities:
Notes payable $ 31,175 $ 45,893
Accounts payable - trade 26,698 12,157
Other accrued liabilities 17,175 13,304
--------- ---------
Total current liabilities 75,048 71,354
Notes payable 4,000 --
Shareholders' equity:
Common stock; $.001 par value; authorized 20,000,000 shares; issued and
outstanding, 5,058,900 shares at November 27, 1999,
5,001,800 at May 29, 1999 5 5
Additional paid-in capital 48,616 48,346
Deferred compensation (834) (1,251)
Notes receivable (609) (771)
Accumulated deficit (10,297) (2,474)
--------- ---------
Total shareholders' equity 36,881 43,855
--------- ---------
Total liabilities and shareholders' equity $ 115,929 $ 115,209
========= =========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
SAMUELS JEWELERS, INC.
STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(unaudited)
<TABLE>
<CAPTION>
Successor Successor Predecessor
Three Months Two Months One Month
Ended Ended Ended
November 27, November 28, October 2,
1999 1998 1998
----------- ----------- ----------
<S> <C> <C> <C>
Net sales $ 26,470 $ 13,595 $ 7,546
Finance and credit insurance fees 75 1,565 813
-------- -------- --------
26,545 15,160 8,359
Costs and expenses:
Cost of goods sold, buying and occupancy 18,717 9,726 5,135
Selling, general and administrative expenses 11,892 7,051 3,735
Provision for doubtful accounts -- 850 356
-------- -------- --------
30,609 17,627 9,226
Operating loss (4,064) (2,467) (867)
Interest expense, net 455 550 643
-------- -------- --------
Loss before reorganization items, income
taxes and extraordinary item (4,519) (3,017) (1,510)
Reorganization items:
Fresh-Start adjustments -- -- (67,853)
Reorganization costs -- -- 4,439
-------- -------- --------
Income (loss) before income taxes and
extraordinary item (4,519) (3,017) 61,904
Income taxes -- -- --
-------- -------- --------
Net income (loss) before extraordinary item (4,519) (3,017) 61,904
Gain on forgiveness of debt -- -- (11,545)
-------- -------- --------
Net loss $ (4,519) $ (3,017) $ 73,449
======== ======== ========
Basic and diluted loss per share (a) $ (.89) $ (.60) n/a
======== ======== ========
Weighted-average number of common shares
outstanding, in thousands (a) 5,062 5,002 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.
4
<PAGE>
SAMUELS JEWELERS, INC.
STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(unaudited)
<TABLE>
<CAPTION>
Successor Successor Predecessor
Six Months Two Months Four Months
Ended Ended Ended
November 27, November 28, October 2,
1999 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 47,601 $ 13,595 $ 27,494
Finance and credit insurance fees 2,331 1,565 3,397
-------- -------- --------
49,932 15,160 30,891
Costs and expenses:
Cost of goods sold, buying and occupancy 34,130 9,726 19,091
Selling, general and administrative expenses 21,362 7,051 12,980
Provision for doubtful accounts 839 850 1,492
-------- -------- --------
56,331 17,627 33,563
Operating loss (6,399) (2,467) (2,672)
Interest expense, net 1,424 550 2,367
-------- -------- --------
Loss before reorganization items, income
taxes and extraordinary item (7,823) (3,017) (5,039)
Reorganization items:
Fresh-Start adjustments -- -- (67,853)
Reorganization costs -- -- 6,248
-------- -------- --------
Income (loss) before income taxes and
extraordinary item (7,823) (3,017) 56,566
Income taxes -- -- --
-------- -------- --------
Net income (loss) before extraordinary item (7,823) (3,017) 56,566
Gain on forgiveness of debt -- -- (11,545)
-------- -------- --------
Net loss $ (7,823) $ (3,017) $ 68,111
======== ======== ========
Basic and diluted loss per share (a) $ (1.55) $ (.60) n/a
======== ======== ========
Weighted-average number of common shares
outstanding, in thousands (a) 5,045 5,002 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.
5
<PAGE>
Samuels Jewelers, Inc.
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
Successor Successor Predecessor
Six Months Two Months Four Months
Ended Ended Ended
November 27, November 28, October 2,
1999 1998 1998
----------- ----------- ------------
<S> <C> <C> <C>
Operating activities:
Net earnings (loss) $ (7,823) $ (3,017) $ 68,111
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Fresh-Start adjustments -- -- (67,853)
Extraordinary item - gain on forgiveness of debt -- -- (11,545)
Depreciation and amortization 2,734 899 1,341
Provision for doubtful accounts 839 850 1,492
Loss on disposal of assets -- 315 --
Management stock grant -- -- 2,228
Change in operating assets and liabilities:
Customer receivables 38,867 (133) 2,652
Merchandise inventories (15,214) (8,278) (4,592)
Prepaid expenses and other current assets (413) (1,876) 552
Other assets 14 (154) (21)
Accounts payable - trade 9,311 4,149 3,616
Accrued liabilities 2,590 1,907 1,921
-------- -------- --------
Net cash provided by (used in) operating activities 30,905 (5,338) (2,098)
Investing activities:
Purchase of property and equipment (5,930) (2,512) (2,641)
Proceeds from sale of assets -- 100 --
Acquisition of stores (Note 2) (1,274) -- --
-------- -------- --------
Net cash used in investing activities (7,204) (2,412) (2,641)
Financing activities:
Net borrowings under revolving credit facility (22,030) (4,934) (11,397)
Issuance of common stock -- 15,012 --
Deferred compensation 417 -- --
Notes receivable 162 -- --
-------- -------- --------
Net cash provided by (used in) financing activities (21,451) 10,078 (11,397)
-------- -------- --------
Increase (decrease) in cash 2,250 2,328 (16,136)
Cash at beginning of period 1,456 3,165 19,301
-------- -------- --------
Cash at end of period $ 3,706 $ 5,493 $ 3,165
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,517 $ 306 $ 2,060
Income taxes -- -- --
Notes payable issued for acquired stores 6,000 -- --
</TABLE>
6
<PAGE>
SAMUELS JEWELERS, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. REORGANIZATION AND BASIS OF PRESENTATION
REORGANIZATION
Samuels Jewelers, Inc. ("Samuels" or "Successor") was created in August 1998 for
acquiring the assets of Barry's Jewelers, Inc. ("Barry's" or "Predecessor") as
part of Barry's plan of reorganization (the "Plan"), which was confirmed by the
U.S. Bankruptcy Court on September 16, 1998 and consummated on October 2, 1998
(the "Reorganization"). Samuels is incorporated in Delaware and was initially
funded by $15 million of new equity provided by the former bondholders of
Barry's, who also consented to the conversion of their $50 million of Barry's
bonds into equity of Samuels.
On October 2, 1998, the Predecessor was merged into Samuels under the Plan as
part of the Reorganization.
The new company's name, "Samuels Jewelers," comes from a chain of stores
operated by the Predecessor in the San Francisco Bay area. The chain was founded
in 1891 and it lends a rich tradition of outstanding customer service and of
providing an excellent selection of fine jewelry.
Samuels operates a chain of specialty retail jewelry stores located in regional
shopping malls, power centers and stand alone stores. Its stores offer fine
jewelry items in a wide range of styles and prices, with a principal emphasis on
diamond and gemstone jewelry. As of January 7, 2000, Samuels operated 182 retail
jewelry stores, in twenty-five states, principally California, Texas, Kentucky,
Colorado, Ohio, Indiana, Utah, Arizona, Idaho, Montana and New Mexico. As
measured by the number of retail locations, Samuels is one of the larger
specialty retailers of fine jewelry in the country. Samuels' corporate office is
located at 2914 Montopolis Drive, Suite 200, Austin, Texas 78741, and its
telephone number is (512) 369-1400.
BASIS OF PRESENTATION
The accompanying unaudited financial statements of Samuels 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, 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. The results of operations and cash flows for the quarter and six
months ended November 28, 1998 have been split into two reporting periods. The
first four months ended October 2, 1998 reflect operations prior to the
Reorganization. The latest two months ended November 28, 1998 reflect operations
after the Reorganization and reflect the effects of Fresh-Start Reporting. The
quarter and six months ended November 27, 1999 reflect the results of operations
and cash flows after the Reorganization and reflect the effects of Fresh-Start
Reporting. Therefore, the results of operations and cash flows for the quarter
and six months ended November 27, 1999 are not comparable with results and cash
flows for the same periods of the prior year. As used herein, Samuels refers to
results for periods after October 2, 1998 and to results for the Predecessor for
those periods through October 2, 1998.
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, Samuels has included all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation for the interim periods. However, and as stated above, the
periods are not comparable and Samuels includes the financial statements only as
required by Securities and Exchange Act regulations to describe the general
development of the business.
7
<PAGE>
Operating results for the interim periods presented are not necessarily
indicative of the results that may be expected for the year ending June 3, 2000.
For further information, you should refer to the financial statements and
footnotes thereto that are included in Samuels' Annual Report on Form 10-K for
the year ended May 29, 1999.
Samuels' fiscal year ends on the Saturday closest to May 31. The quarter and six
months ended November 27, 1999 consisted of the thirteen and twenty-six weeks
then ended, respectively. The one month ended October 2, 1998 consists of the
five weeks then ended for the 1999 fiscal year, the two months ended November
28, 1998 consist of the eight weeks then ended for the 1999 fiscal year and the
four months ended October 2, 1998 consist of the eighteen weeks then ended for
the 1999 fiscal year.
Certain previously reported amounts were reclassified to conform to current year
presentations.
2. ACQUISITIONS AND NEW STORES
On July 27, 1999, Samuels entered into a purchase agreement with Henry Silverman
Jewelers, Inc. ("Silverman's") to acquire all its trade names, customer lists,
fixtures and the lease rights for up to seventeen Silverman's stores. Samuels'
purchase price for these assets was 60,000 shares of its common stock, the
delivery of which was contingent upon the delivery of the Silverman's assets to
Samuels. Samuels did not assume any of Silverman's liabilities and did not
acquire any of Silverman's other assets as part of the purchase agreement. The
60,000 shares were issued and registered under Samuels' shelf registration on
Form S-1, declared effective by the SEC on June 9, 1999. As of January 7, 2000,
Samuels consummated the takeover of twelve of Silverman's lease agreements.
Samuels has abandoned lease assignments on three Silverman's stores, to which
the purchase agreement had allocated 5,400 shares. Samuels completed the return
of the 5,400 shares related to these stores on or about November 15, 1999.
Samuels is currently negotiating the remaining two lease assignments covered by
the purchase agreement. Nevertheless, Samuels is currently operating in these
two stores and expects the lease rights to be assigned. As part of the
acquisition, Samuels also issued 2,500 shares of its common stock as a finder's
fee.
Samuels has accounted for the former Silverman's stores using the purchase
method of accounting and, accordingly, the purchase price has been allocated to
the assets acquired and the liabilities assumed based upon their preliminary
fair values at the date of acquisition. Samuels has included the results of
operations for these stores in its Statement of Operations as each store was
opened.
In November 1999, Samuels acquired substantially all of the assets of C & H
Rauch, Inc. ("Rauch"), a Kentucky corporation, through the purchase of all of
the outstanding stock of Rauch. The total cost of the acquisition, including
liabilities assumed, was $19.9 million. The acquisition of Rauch added
operations in 40 new stores for Samuels, including new operations in the states
of Kentucky, Ohio, Indiana, West Virginia, and Virginia. Prior to the
acquisition, Rauch had operated as a privately owned corporation. Upon
completion of the acquisition, Rauch was merged with and into Samuels.
Samuels has accounted for the Rauch acquisition using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based upon their preliminary fair values at
the date of acquisition. The excess of the purchase price over the fair value of
the net assets acquired was approximately $5.1 million, which Samuels has
recorded as goodwill and is amortizing on a straight line basis over ten years.
Samuels has included the results of operations for the Rauch acquisition in its
Statement of Operations beginning November 1999. The current Rauch home office
will be closed at the end of January 2000, the lease on the home office has been
cancelled and the functions performed in Lexington have been or soon will be
absorbed by Samuels' home office in Austin.
8
<PAGE>
The net purchase price was allocated as follows (in thousands):
Cash and cash equivalents $ 726
Accounts receivables
339
Merchandise inventories 10,753
Prepaid expenses and other current assets
2,501
Leasehold improvements, furniture and fixtures
455
Goodwill 5,090
-------
Total purchase price $19,864
=======
In addition to the above acquisitions, Samuels opened twelve stores during the
six months ended November 27, 1999. Samuels also opened one new store during
December 1999 and is in various stages of negotiation for several other new
locations.
3. NOTES PAYABLE
On October 2, 1998, Samuels entered into a three-year, $50.0 million financing
agreement with Foothill Capital Corporation as a lender and as agent for the
lender group (the "Lenders"). Under the terms of the financing agreement, the
lenders make revolving advances to Samuels in amounts that are based on
percentages of eligible accounts receivable and inventory. The annual rate of
interest is, at Samuels' 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. Interest charges are payable monthly. 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, Samuels 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 also
contains quarterly covenants which include its meeting a minimum level of
tangible net worth and prohibits the payment of dividends. Samuels has entered
into three amendments to the Loan and Security Agreement with the Lenders. As
part of the amendments, Samuels and the Lenders adjusted some of the covenants
required of Samuels under this financing agreement, allowed for the sale to
World Financial Network National Bank ("WFN") of Samuels' existing credit card
accounts (see Note 4) and reduced the total commitment under the financing
agreement from $50.0 million to $40.0 million.
As of November 27, 1999, Samuels had direct borrowings of $29.2 million
outstanding, with additional credit available of approximately $7.4 million
based upon existing collateral. As of November 27, 1999, Samuels was in
compliance with its obligations under the financing agreement.
In conjunction with Samuels' acquisition of Rauch (see Note 2), Samuels issued
three promissory notes due and payable for $2.0 million each in January 2000,
2001 and 2002, respectively. The notes have a stated interest rate of 7% per
annum with interest due and payable beginning January 15, 2000 and on each
successive six-month anniversary thereafter. Samuels may offset its payment
obligations under these notes, in part or in full, to the extent and in the
event any liabilities arise that were not accounted for and undisclosed in the
unaudited balance sheet of Rauch as of October 31, 1999, which Samuels required
to be delivered as part of its completing the transaction. Upon the occurrence
and during the continuation of any event of default under the notes, Samuels'
payment obligations may bear interest at a per annum rate of 15%.
4. ACCOUNTS RECEIVABLE
On July 27, 1999, Samuels entered into agreements with WFN to sell its existing
credit card accounts to WFN and to have WFN provide a third-party credit card
program for the benefit of Samuels' customers. Samuels and WFN effected the
transactions set out in the agreements on August 30, 1999. Upon closing the
sale, Samuels sold its approximately $46.8 million outstanding accounts
receivable to WFN at face value, less a hold back reserve of approximately $9.4
million. Samuels used the net proceeds of
9
<PAGE>
approximately $37.4 million to reduce the balances outstanding under Samuels'
financing agreement with the Lenders (see Note 3).
The sale of Samuels' existing credit card accounts has affected the presentation
of Samuels' financial statements. Samuels is no longer recording finance revenue
or credit insurance fees. The discount fee paid to WFN is included in selling,
general and administrative expenses. Samuels previously included expenses from
the operation of its credit operations in selling, general and administrative
expenses. Additionally, Samuels is no longer recording a provision for bad debt.
Similarly, Samuels' interest expense has been reduced as a result of the
reduction of the balances outstanding under its financing agreement with its
Lenders (see Note 3).
10
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PRIVATE SECURITIES LITIGATION REFORM ACT. This Quarterly Report on Form 10-Q
contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 and Samuels intends that such forward-looking statements be subject to the
safe harbors created thereby.
OVERVIEW. The following discussion presents information about the financial
condition, liquidity and capital resources, and results of operations of Samuels
as of and for the quarters and six months ended November 27, 1999 and November
28, 1998. This information should be read in conjunction with the audited
consolidated financial statements of Samuels and the notes thereto as reported
on Samuels' Annual Report on Form 10-K for the fiscal year ended May 29, 1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 27, 1999 COMPARED TO THE THREE MONTHS ENDED
NOVEMBER
28, 1998 (COMBINING BOTH THE PREDECESSOR AND SUCCESSOR COMPANIES)
The following table sets forth selected store data with respect to the quarters
ended November 27, 1999 and November 28, 1998:
November November
1999 1998
-------- --------
Number of stores at beginning of ....... 123 116
quarter
Acquired during the quarter ........ 48 --
Opened during the quarter .......... 10 2
Closed during the quarter .......... -- (4)
------- -------
Total at quarter end ......... 181 114
======= =======
Percentage increase (decrease) in
sales of comparable stores............ 4.0%
Quarterly average sales per comparable
store (in thousands).................. $ 195 $ 187
Equivalent store weeks ................. 1,874 1,489
Net sales for the quarter ended November 27, 1999, were $26.5 million, an
increase of 25.6% or $5.4 million, as compared to net sales of $21.1 million for
the quarter ended November 28, 1998. Equivalent store weeks were 1,874 for the
second quarter this year as compared to 1,489 for the second quarter last year,
as Samuels opened ten new stores, acquired an additional eight Silverman's
stores and acquired forty C&H Rauch stores during the second quarter this year.
Equivalent weekly sales were $14.1 thousand for the second quarter ended
November 27, 1999 as compared to $14.2 thousand for the second quarter ended
November 28, 1998. The decrease in equivalent weekly sales is due to the
acquisition of the Rauch stores that operate in smaller markets and have a lower
average sales volume. Comparable store sales increased 4.0% during the quarter
ended November 27, 1999. The increase in comparable store sales for the second
quarter this year as compared to the second quarter last year was due to the
factors described below as well as the change in the comparable store base
resulting from the closure of eight stores during the preceding twelve months.
Samuels attributes the overall increase in sales to several key factors, mainly
the remodeling of stores, a continuation of the upgrading of the quality of its
merchandise to offer an expanded assortment of higher ticket price merchandise
and continued efforts to refine its marketing by targeting a more mature,
financially sound customer, with a more discretionary spending ability. These
factors were offset somewhat by reduced credit sales (representing 44.6% of
sales during the quarter ended November 27, 1999 as compared to 54.2% in the
quarter ended November 28, 1998) resulting from changes to the credit
underwriting criteria in order to maintain a portfolio consisting of more
creditworthy customers and marketing which targeted a less credit dependant
customer.
Finance and credit insurance fees decreased to $0.1 million during the quarter
ended November 27, 1999, from $2.4 million during the quarter ended November 28,
1998. This decrease was primarily due to the sale of our existing credit card
accounts to a third party as of August 30, 1999 (see Note 4. Accounts
Receivable).
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<PAGE>
Cost of goods sold, buying and occupancy expenses were $18.7 million for the
quarter ended November 27, 1999, as compared to $14.8 million for the same
quarter last year. Cost of goods sold, buying and occupancy expenses were 70.6%
of net sales for the quarter ended November 27, 1999 and 70.1% of net sales for
the same quarter last year. Excluding amortization of Samuels' reorganization
value in excess of amounts allocated to identifiable assets of $0.4 million for
the second quarter this year and $0.3 million for the second quarter last year,
cost of goods sold, buying and occupancy expenses were 69.1% and 68.7% of sales,
respectively. The increase in cost of goods sold, buying and occupancy expenses
resulted primarily from the overall increase in the number of stores in
operation and increased sales. The increase in cost of goods sold, buying and
occupancy expenses as a percentage of sales resulted primarily from moderate
discounting focused on reducing slow moving merchandise, a shift in the mix of
products being sold to higher ticket lower margin items, grand opening
promotions which targeted former customers and pre-opening startup costs in the
newly acquired stores.
Selling, general and administrative expenses were $11.9 million for the quarter
ended November 27, 1999, as compared to $10.8 million in the same quarter last
year. The increase was primarily due to the overall increase in the number of
stores in operation offset by a net reduction in credit expenses related to the
sale of the our existing credit card accounts to WFN as of August 30, 1999 (see
Note 4. Accounts Receivable). Selling, general and administrative expenses as a
percentage of net sales were 44.9% for the quarter ended November 27, 1999 and
51.2% for the quarter ended November 28, 1998. The improvement as a percentage
of net sales resulted primarily from the general and administrative expenses
being spread over the larger sales volume as well as the reduction in credit
operations costs.
The provision for doubtful accounts is no longer being recorded as Samuels'
existing credit card accounts have been sold (see Note 4. Accounts Receivable).
Net interest expense was $0.5 million for the quarter ended November 27, 1999, a
decrease of $0.7 million, or 58.3% from $1.2 million for the quarter ended
November 28, 1998. Proceeds from the sale of Samuels' existing credit card
accounts on August 30, 1999 (see Note 4. Accounts Receivable) were used to
reduce the amounts outstanding under Samuels' revolving line of credit.
Additionally, upon completion of the Reorganization, Samuels entered into a
revolving line of credit under a new financing agreement, which resulted in
reduced amounts outstanding as well as a lower rate of interest on amounts
outstanding after October 2, 1998. (See Note 3. Notes Payable).
Reorganization costs incurred by the Predecessor consisted primarily of
professional fees directly related to the Chapter 11 proceedings, offset by
interest earned on accumulated cash during the pendency of the Chapter 11
proceedings.
SIX MONTHS ENDED NOVEMBER 27, 1999 COMPARED TO THE SIX MONTHS ENDED
NOVEMBER 28, 1998 (COMBINING BOTH THE PREDECESSOR AND SUCCESSOR COMPANIES)
The following table sets forth selected store data with respect to the six
months ended November 27, 1999 and November 28, 1998:
November November
1999 1998
-------- --------
Number of stores at beginning of period...... 116 117
Acquired during the period ................ 54 --
Opened during the period .................. 12 2
Closed during the period .................. (1) (5)
------- -------
Total at period end ............... 181 114
======= =======
Percentage increase (decrease) in
sales of comparable stores ................ 3.5%
Period average sales per comparable
store (in thousands) ...................... $ 381 $ 364
Equivalent store weeks ...................... 3,397 2,997
Net sales for the six months ended November 27, 1999, were $47.6 million, an
increase of 15.8% or $6.5 million, as compared to net sales of $41.1 million for
the six months ended November 28, 1998. Equivalent
12
<PAGE>
store weeks were 3,397 for the six months this year as compared to 2,997 for the
six months last year, as Samuels opened twelve new stores, acquired fourteen
Silverman's stores and acquired forty C&H Rauch stores during the first six
months of this year. Equivalent weekly sales were $14.0 thousand for the six
months ended November 27, 1999 as compared to $13.7 thousand for the six months
ended November 28, 1998. Comparable store sales increased 4.8%. Samuels
attributes the overall increase in sales to several key factors, mainly the
remodeling of stores, a continuation of the upgrading of the quality of its
merchandise to offer an expanded assortment of higher ticket price merchandise
and continued efforts to refine its marketing by targeting a more mature,
financially sound customer, with more discretionary spending ability. These
factors were offset somewhat by reduced credit sales (representing 46.7% of
sales during the six months ended November 27, 1999 as compared to 54.2% in the
six months ended November 28, 1998) resulting from changes to the credit
underwriting criteria in order to maintain a portfolio consisting of more
creditworthy customers and marketing which targeted a less credit dependant
customer.
Finance and credit insurance fees decreased to $2.3 million during the six
months ended November 27, 1999, from $5.0 million during the six months ended
November 28, 1998. This decrease was primarily due to the sale of our existing
credit card accounts to WFN as of August 30, 1999.
Cost of goods sold, buying and occupancy expenses were $34.1 million for the six
months ended November 27, 1999, as compared to $28.8 million for the same six
months last year. Cost of goods sold, buying and occupancy expenses were 71.6%
of net sales for the six months ended November 27, 1999 and 70.1% of net sales
for the same six months last year. Excluding amortization of Samuels'
reorganization value in excess of amounts allocated to identifiable assets of
$0.9 million for the six months this year and $0.3 million for the six months
last year, cost of goods sold, buying and occupancy expenses were 69.7% and
69.3% of sales, respectively. The increase in cost of goods sold, buying and
occupancy expenses resulted primarily from the overall increase in the number of
stores in operation, increased sales, understaffing in Samuels' buying and
distribution departments while it was in the process of relocating its home
office during the first six months of fiscal 1998, and depreciation associated
with our expenditures on new computer systems during the first six months of
fiscal 1999. The increase in cost of goods sold, buying and occupancy expenses
as a percentage of sales resulted primarily from moderate discounting focused on
reducing slow moving merchandise, a shift in the mix of products being sold to
higher ticket lower margin items, grand opening promotions which targeted former
customers and pre-opening startup costs in the newly acquired stores.
Selling, general and administrative expenses were $21.4 million for the six
months ended November 27, 1999, as compared to $20.0 million in the same six
months last year. The increase was primarily due to the overall increase in the
number of stores in operation offset by a net reduction in credit expenses
related to the sale of our existing credit card accounts to WFN as of August 30,
1999 (see Note 4. Accounts Receivable). Selling, general and administrative
expenses as a percentage of net sales were 45.0% for the six months ended
November 27, 1999 and 48.7% for the six months ended November 28, 1998. The
improvement as a percentage of net sales resulted primarily from the general and
administrative expenses being spread over the larger sales volume as well as the
reduction in credit operations costs.
The provision for doubtful accounts was $0.8 million for the six months ended
November 27, 1999. This was a decrease of $1.5 million, or 65.2% from $2.3
million for the six months ended November 28, 1998. The decrease in the
provision was primarily due the fact that the provision for doubtful accounts is
now no longer being recorded because Samuels' existing credit card accounts were
sold on August 30, 1999 (see Note 4. Accounts Receivable).
Net interest expense was $1.4 million for the six months ended November 27,
1999, a decrease of $1.5 million, or 51.7% from $2.9 million for the six months
ended November 28, 1998. Proceeds from the sale of our existing credit card
accounts on August 30, 1999 (see Note 4. Accounts Receivable) were used to
reduce the amounts outstanding under our revolving line of credit. Additionally,
upon completion of the Reorganization, Samuels entered into that revolving line
of credit under a new financing agreement, which resulted in reduced amounts
outstanding as well as a lower rate of interest on amounts outstanding after
October 2, 1998. (See Note 3. Notes Payable).
13
<PAGE>
Reorganization costs incurred by the Predecessor consisted primarily of
professional fees directly related to the Chapter 11 proceedings, offset by
interest earned on accumulated cash during the pendency of the Chapter 11
proceedings.
FINANCIAL CONDITION
CREDIT PROGRAM. On July 27, 1999, Samuels agreed with WFN to sell its existing
credit card accounts to WFN and to have WFN provide a third-party credit card
program for the benefit of Samuels' customers. Samuels and WFN effected the
transactions set out in the agreements on August 30, 1999. Upon closing the
sale, Samuels sold its approximately $46.8 million outstanding accounts
receivable to WFN at face value, less a hold back reserve of approximately $9.4
million. Samuels used the net proceeds of approximately $37.4 million to reduce
the balances outstanding under Samuels' financing agreement with the Lenders
(see Note 3).
INVENTORY. At November 27, 1999, Samuels' inventories (net of reserves and not
including consignment inventory) were approximately $58.7 million, an increase
of approximately $26.0 million from $32.7 million at May 29, 1999. This increase
is primarily due to merchandise purchased in preparation for the Christmas
selling season and for the opening of newly acquired stores.
Liquidity and Capital Resources
General. Samuels' operations require working capital to fund the purchase of
inventory and to meet normal operating expenses. The seasonality of Samuels'
business requires a significant build-up of inventory for the Christmas holiday
selling period. Samuels generally must fund these seasonal inventory needs
during the late summer and fall months because of the necessary lead-time to
obtain additional inventory. Management currently believes that cash flow from
operating activities and funds available under its existing financing agreement
should be sufficient to support its working capital needs as well as its current
store expansion program.
Samuels reported cash flow provided by operating activities of approximately
$30.9 million for the six months ended November 27, 1999, as compared to cash
flow used in operating activities of approximately $7.4 million for the
comparable period last year. The change in cash flow from operating activities
is primarily due to the sale of our existing credit card accounts (see Note 4.
Accounts Receivable). Samuels acquired $5.9 million in new property and
equipment during the six months consisting mostly of leasehold improvements
associated with the remodeling of existing stores and the acquisition of new
stores. Additionally, Samuels recorded cash payments of $1.3 million for the
acquisition of C&H Rauch, Inc. Samuels financed the acquisition in part through
the issuance of notes payable totaling $6.0 million (see Note 3. Notes Payable).
As of November 27, 1999, Samuels had $3.7 million of cash and cash equivalents
as compared to $1.5 million as of May 29, 1999. Cash levels traditionally
increase during the last week of November as Samuels enters its Christmas
selling season.
FINANCING TRANSACTIONS
To replace the DIP Financing agreement and to provide for longer term financing
on October 2, 1998, Samuels entered into a three year, $50.0 million financing
agreement with Foothill Capital Corporation as a lender and as agent for the
Lenders. Under the terms of the financing agreement, the Lenders make revolving
advances to Samuels in amounts based on percentages of eligible accounts
receivable and inventory. The annual rate of interest is, at Samuels' 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. Interest charges are
payable monthly. Upon the occurrence and during the continuation of any event of
default under the financing agreement, Samuels' 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 of Samuels' obligations
to the Lenders under the financing agreement, it granted a first priority
perfected security interest in and to substantially all of its
14
<PAGE>
owned or thereafter acquired assets, both tangible and intangible. The financing
agreement also contains quarterly covenants that include requiring Samuels to
meet a minimum level of tangible net worth and prohibiting its payment of
dividends. Samuels has entered into three amendments to the Loan and Security
Agreement with the Lenders. As part of the amendments, Samuels and the Lenders
adjusted some of the covenants required of Samuels under this financing
agreement, allowed for the sale to World Financial Network National Bank ("WFN")
of Samuels' existing credit card accounts (see Note 4) and reduced the total
commitment under the financing agreement from $50.0 million to $40.0 million.
As of November 27, 1999, Samuels had direct borrowings of $29.2 million
outstanding with additional credit available of approximately $7.4 million based
upon existing collateral. As of November 27, 1999, Samuels was in compliance
with its obligations under the financing agreement.
In conjunction with Samuels' acquisition of Rauch (see Note 2), Samuels issued
three promissory notes due and payable for $2.0 million each in January 2000,
2001 and 2002, respectively. The notes have a stated interest rate of 7% per
annum with interest due and payable beginning January 15, 2000 and on each
successive six-month anniversary thereafter. Upon the occurrence and during the
continuation of any event of default under the notes, Samuels' payment
obligations may bear interest at a per annum rate of 15%.
YEAR 2000 COMPLIANCE. Many existing computer systems and applications, and other
control devices, use only two digits to identify a year in the date field. As a
result of the change to the year 2000, such systems and applications could fail
or create erroneous results unless corrected so that they can process data
related to that year and beyond.
Samuels relies on its computer system, applications and devices in operating and
monitoring all major aspects of its business, including financial systems (such
as general ledger, accounts payable and payroll modules), customer services,
infrastructure, embedded computer chips, networks, telecommunications equipment
and end products.
Samuels obtained a new integrated management information system that included a
system processor and operating system, applications software, point of sale
hardware and additional microcomputers. Samuels addressed the year 2000 issue
during the planning process, and all new system technology was believed to be
year 2000 compliant.
Through December 31, 1999, Samuels spent approximately $3.5 million, with $1.2
million of this amount for new hardware and $2.3 million for new software on all
projects to insure that Samuels met all requirements to be year 2000 compliant.
Samuels believes that all of the internal operating systems it currently uses
are, and have been shown to be, year 2000 compliant.
Samuels also relies, directly and indirectly, on external systems of business
enterprises such as suppliers, creditors and financial organizations, and of
government entities, for accurate exchange of data.
Samuels received assurances from most of the parties with which it interacts
that their systems are currently year 2000 compliant. We have no assurances that
their representations are correct, and although the year 2000 issue may not
materially affect Samuels' internal systems, it possibly could be affected
through disruptions in the operations of the parties with which it interacts.
To date, Samuels has experienced no significant disruptions due to the change to
year 2000.
15
<PAGE>
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Samuels is exposed to market risk in the form of interest rate risk. As of
November 27, 1999, Samuels had $29.2 million outstanding under its revolving
line of credit under its financing agreement with the Lenders. This revolving
line of credit is priced with a variable rate based on LIBOR or a base rate,
plus, in each case an applicable margin. An increase or decrease in interest
rates would affect the interest costs relating this revolving line of credit.
Samuels has no interest rate swaps or other hedging facilities relating to its
revolving line of credit.
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Samuels is involved from time to time in legal proceedings of a
character normally incident to its business. Samuels believes that its
potential liability in any such pending or threatened proceedings,
either individually or in the aggregate, will not have a material
effect on the financial condition or results of operations of Samuels.
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Samuels held its annual meeting of shareholders on November 3, 1999.
Proxies were solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended. At the meeting, Samuels' shareholders
voted on the election of directors and the ratification of its
appointment of certified public accountants.
David Barr, David J. Breazzano, David H. Eisenberg, E. Peter Healey,
Wendy T. Landon, Randy N. McCullough and Jerry Winston were elected to
serve until the 2000 annual meeting of shareholders. Voting by proxy or
in person, Samuels' shareholders elected the above seven directors with
4,479,270 votes cast for, and 3,800 votes abstaining for David Barr,
David J. Breazzano, David H. Eisenberg, Wendy T. Landon, Randy N.
McCullough and 4,478,270 votes cast for, and 4,800 votes abstaining for
E. Peter Healey and Jerry Winston.
The shareholders voted on and approved the ratification of appointment
of certified public accountants with 4,480,370 votes cast for
ratification, no votes against ratification and 2,700 votes abstaining.
Item 5. Other Information
On July 27, 1999, Samuels entered into a purchase agreement with Henry
Silverman Jewelers, Inc. ("Silverman's") to acquire all its trade
names, customer lists, fixtures and the lease rights for up to
seventeen Silverman's stores. Samuels' purchase price for these assets
was 60,000 shares of its common stock, the delivery of which was
contingent upon the delivery of the Silverman's assets to Samuels.
Samuels did not assume any of Silverman's liabilities and acquired none
of Silverman's other assets as part of the purchase agreement. The
60,000 shares were issued and registered under Samuels' shelf
registration on Form S-1, declared effective by the SEC on June 9,
1999. As of January 7, 2000, Samuels has consummated the takeover on
twelve of the Silverman's lease agreements. Samuels has abandoned lease
assignments on three Silverman's stores, to which the purchase
agreement had allocated 5,400 shares. Samuels completed the return of
the 5,400 shares related to these stores on or about November 15, 1999.
Samuels has the remaining two lease assignments covered by the purchase
agreement under negotiation. Nevertheless, Samuels is currently
operating in these two stores and expects the lease rights to be
assigned. As part of the acquisition, Samuels also issued 2,500 shares
of its common stock as a finder's fee.
Samuels has accounted for the former Silverman's stores using the
purchase method of accounting and, accordingly, the purchase price has
been allocated to the assets acquired and the liabilities
17
<PAGE>
assumed based upon their preliminary fair values at the date of
acquisition. Samuels has included the results of operations for these
stores in its Statement of Operations as each store was opened.
In November 1999, Samuels acquired substantially all of the assets of C
& H Rauch, Inc., a Kentucky corporation ("Rauch"), through a purchase
of all of the outstanding stock of Rauch. The total cost of the
acquisition, including liabilities assumed, was $19.9 million. The
acquisition of Rauch added operations in 40 new stores for Samuels,
including new operations in the states of Kentucky, Ohio, Indiana, West
Virginia, and Virginia. Prior to the acquisition, Rauch had operated as
a privately owned corporation. Upon completion of the acquisition,
Rauch was merged with and into Samuels.
Samuels has accounted for the Rauch acquisition using the purchase
method of accounting and, accordingly, the purchase price has been
allocated to the assets purchased and the liabilities assumed based
upon their preliminary fair values at the date of acquisition. The
excess of the purchase price over the fair value of the net assets
acquired was approximately $5.1 million, which Samuels has recorded as
goodwill and is amortizing on a straight line basis over ten years.
Samuels has included the results of operations for the acquisition in
its Statement of Operations beginning November 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Description
------- -----------
3.1 Certificate of Incorporation of Samuels Jewelers, Inc. (1)
3.2 Bylaws of Samuels Jewelers, Inc. (1)
10.1 Amendment Number Three to Loan and Security Agreement
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable
(1) Incorporated by reference to the Company's Current Report on Form 8-K filed
October 6, 1998.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SAMUELS JEWELERS, INC.
January 10, 1999 By: /s/ RANDY N. MCCULLOUGH
---------------------------------
Randy N. McCullough
President and Chief Executive Officer
January 10, 1999 By: /s/ E. PETER HEALEY
---------------------------------
E. Peter Healey
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
January 10, 1999 By: /s/ ROBERT J. HERMAN
---------------------------------
Robert J. Herman
Vice President and Controller
(Principal Accounting Officer)
19
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EXHIBIT INDEX
Exhibit Description
------- -----------
3.1 Certificate of Incorporation of Samuels Jewelers, Inc. (1)
3.2 Bylaws of Samuels Jewelers, Inc. (1)
10.1 Amendment Number Three to Loan and Security Agreement
27.1 Financial Data Schedule
(1) Incorporated by reference to the Company's Current Report on Form 8-K filed
October 6, 1998.
20
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to Registration Statement No. 333-78923 of Samuels Jewelers, Inc. on Form
S-4 of our report dated September 10, 1999, appearing in the Annual Report on
Form 10-K of Samuels Jewelers, Inc. for the year ended May 29, 1999 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
such Registration Statement.
DELOITTE & TOUCHE LLP
Dallas, Texas
January 14, 2000
EXHIBIT 24.1
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
designates and appoints Randy N. McCullough and E. Peter Healey and each of them
(with full power of substitution and resubstitution (the "Attorneys-in-Fact"),
for it or him and in its or his name, place and stead, in any and all
capacities, to execute one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as the Attorney-in-Fact deems
appropriate, and to file each such amendment to this Registration Statement
together with all exhibits thereto and any and all documents in connection
therewith.
Pursuant to the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Randy N. McCullough President, Chief Executive Officer (Principal April 30, 1999
- -------------------------------------- Executive Officer and Director
Randy N. McCullough
/s/ E. Peter Healey Chief Financial Officer (Principal Financial April 30, 1999
- -------------------------------------- Officer) and Director
E. Peter Healey
/s/ Robert J. Herman Controller (Principal Accounting Officer) April 30, 1999
- --------------------------------------
Robert J. Herman
/s/ David H. Eisenberg Chairman of the Board April 30, 1999
- --------------------------------------
David H. Eisenberg
/s/ David B. Barr Director April 30, 1999
- --------------------------------------
David B. Barr
/s/ David J. Breazzano Director April 30, 1999
- --------------------------------------
David J. Breazzano
/s/ Jerry Winston Director April 30, 1999
- --------------------------------------
Jerry Winston
</TABLE>
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby designates and
appoints Randy N. McCullough and E. Peter Healey and each of them (with full
power of substitution and resubstitution (the "Attorneys-in-Fact"), for it or
him and in its or his name, place and stead, in any and all capacities, to
execute one or more amendments (including post-effective amendments) to this
Registration Statement, which amendments may make such changes in this
Registration Statement as the Attorney-in-Fact deems appropriate, and to file
each such amendment to this Registration Statement together with all exhibits
thereto and any and all documents in connection therewith.
Pursuant to the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Wendy T. Landon Director January 11, 2000
- --------------------------------------
Wendy T. Landon
