<PAGE> 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 February 26, 2000. 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 April 6, 2000, the Registrant had 5,153,900 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> 2
SAMUELS JEWELERS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGES
PART I FINANCIAL INFORMATION
<S> <C> <C>
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 17
</TABLE>
<PAGE> 3
PART I
ITEM 1
SAMUELS JEWELERS, INC.
BALANCE SHEETS
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
February 26, May 29,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,307 $ 1,456
Customer receivables, net of allowance for doubtful accounts of
$3,184 at February 26, 2000, and $5,120 at May 29, 1999 6,881 45,098
Merchandise inventories 56,036 32,684
Prepaid expenses and other current assets 4,166 1,207
------------ ------------
Total current assets 69,390 80,445
Property and equipment:
Leasehold improvements, furniture and fixtures 26,268 15,396
Computers and equipment 5,943 4,334
------------ ------------
32,211 19,730
Less: accumulated depreciation (5,003) (2,109)
------------ ------------
Net property and equipment 27,208 17,621
Other assets 676 631
Goodwill, net 4,960 --
Reorganization value in excess of amounts allocated to
Identifiable assets, net 15,189 16,512
------------ ------------
Total assets $ 117,423 $ 115,209
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 27,136 $ 45,893
Accounts payable - trade 26,330 12,157
Other accrued liabilities 15,874 13,304
------------ ------------
Total current liabilities 69,340 71,354
Notes payable 2,000 --
Shareholders' equity:
Common stock; $.001 par value; authorized 20,000,000 shares;
Issued and outstanding, 5,118,900 shares at February 26, 2000,
5,001,800 at May 29, 1999 5 5
Additional paid-in capital 49,082 48,346
Deferred compensation (834) (1,251)
Notes receivable (524) (771)
Accumulated deficit (1,646) (2,474)
------------ ------------
Total shareholders' equity 46,083 43,855
------------ ------------
Total liabilities and shareholders' equity $ 117,423 $ 115,209
============ ============
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 4
SAMUELS JEWELERS, INC.
STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
February 26, February 27,
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 73,302 $ 44,429
Finance and credit insurance fees -- 2,531
------------ ------------
73,302 46,960
Costs and expenses:
Cost of goods sold, buying and occupancy 43,625 26,607
Selling, general and administrative expenses 20,504 13,697
Provision for doubtful accounts -- 1,981
------------ ------------
64,129 42,285
------------ ------------
Operating income 9,173 4,675
Interest expense, net 522 830
------------ ------------
Income before income taxes 8,651 3,845
Income taxes -- --
------------ ------------
Net income $ 8,651 $ 3,845
============ ============
Earnings per share:
Basic:
Net income $ 1.70 $ .77
============ ============
Weighted average shares outstanding 5,080 5,002
============ ============
Diluted:
Net income $ 1.68 $ .77
============ ============
Weighted average shares outstanding 5,155 5,002
============ ============
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
SAMUELS JEWELERS, INC.
STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Predecessor
Nine Months Five Months Four Months
Ended Ended Ended
February 26, February 27, October 2,
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 120,903 $ 58,024 $ 27,494
Finance and credit insurance fees 2,331 4,096 3,397
----------- ----------- -----------
123,234 62,120 30,891
Costs and expenses:
Cost of goods sold, buying and occupancy 77,755 36,333 19,091
Selling, general and administrative expenses 41,866 20,748 12,980
Provision for doubtful accounts 839 2,831 1,492
----------- ----------- -----------
120,460 59,912 33,563
----------- ----------- -----------
Operating income (loss) 2,774 2,208 (2,672)
Interest expense, net 1,946 1,380 2,367
----------- ----------- -----------
Income (loss) before reorganization items, income
taxes and extraordinary item 828 828 (5,039)
Reorganization items:
Fresh-Start adjustments -- -- (66,042)
Reorganization costs -- -- 4,437
----------- ----------- -----------
Income before income taxes and
extraordinary item 828 828 56,566
Income taxes -- -- --
----------- ----------- -----------
Net income before extraordinary item 828 828 56,566
Gain on forgiveness of debt -- -- (11,545)
----------- ----------- -----------
Net income $ 828 $ 828 $ 68,111
=========== =========== ===========
Earnings per share (a):
Basic:
Net income $ .16 $ .17 n/a
=========== ===========
Weighted average shares outstanding 5,057 5,002 n/a
=========== ===========
Diluted:
Net income $ .16 $ .17 n/a
=========== ===========
Weighted average shares outstanding 5,119 5,002 n/a
=========== ===========
</TABLE>
(a) The basic and diluted earnings 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> 6
SAMUELS JEWELERS, INC.
STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Predecessor
Nine Months Five Months Four Months
Ended Ended Ended
February 26, February 27, October 2,
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 828 $ 828 $ 68,111
Adjustments to reconcile net earnings 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 4,347 2,206 1,341
Provision for doubtful accounts 839 2,831 1,492
Loss on disposal of assets -- 315 --
Management stock grant -- -- 417
Change in operating assets and liabilities:
Customer receivables 37,718 (6,853) 2,652
Merchandise inventories (12,599) (7,960) (4,592)
Prepaid expenses and other current assets (1,131) 400 552
Other assets 32 (157) (21)
Accounts payable - trade 8,943 3,403 3,616
Accrued liabilities 1,289 (2,188) 1,921
----------- ----------- -----------
Net cash provided by (used in) operating activities 40,266 (7,175) (2,098)
Investing activities:
Purchase of property and equipment (10,736) (4,458) (2,641)
Proceeds from sale of assets -- 100 --
Acquisition of stores (Note 2) (3,274) -- --
----------- ----------- -----------
Net cash used in investing activities (14,010) (4,358) (2,641)
Financing activities:
Net borrowings under revolving credit facility (26,069) (4,372) (11,397)
Issuance of common stock -- 15,012 --
Deferred compensation 417 -- --
Notes receivable 247 (856) --
----------- ----------- -----------
Net cash provided by (used in) financing activities (25,405) 9,784 (11,397)
----------- ----------- -----------
Increase (decrease) in cash 851 (1,749) (16,136)
Cash at beginning of period 1,456 3,165 19,301
----------- ----------- -----------
Cash at end of period $ 2,307 $ 1,416 $ 3,165
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,012 $ 1,134 $ 2,060
Income taxes 9 -- --
Notes payable issued for acquisition of stores 4,000 -- --
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 7
SAMUELS JEWELERS, INC.
NOTES TO FINANCIAL STATEMENTS
(amounts in thousands, except share data)
1. REORGANIZATION AND BASIS OF PRESENTATION
REORGANIZATION
Samuels Jewelers, Inc. ("Samuels") 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 company's name, "Samuels Jewelers," comes from a chain of stores operated by
the Predecessor in the San Francisco Bay area. That chain, founded in 1891,
blends a rich tradition of providing an excellent selection of fine jewelry with
outstanding customer service.
Samuels operates a chain of specialty retail jewelry stores located in regional
shopping malls, power centers, strip 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 April 6, 2000, Samuels operated
196 retail jewelry stores in twenty-six 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 nine months ended
February 27, 1999 have been split into two reporting periods. The four months
ended October 2, 1998 reflect operations prior to the Reorganization. The five
months ended February 27, 1999 reflect operations after the Reorganization and
reflect the effects of Fresh-Start Reporting. The quarter and nine months ended
February 26, 2000 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 nine months ended February 26, 2000
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
7
<PAGE> 8
Samuels includes the financial statements only as required by Securities and
Exchange Act regulations to describe the general development of the business.
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
nine months ended February 26, 2000 consist of the thirteen and thirty-nine
weeks then ended, respectively. The five months ended February 27, 1999 consist
of the twenty-one 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 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, then
valued at approximately $0.3 million, 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 April 6, 2000, Samuels was operating thirteen stores under
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
November 15, 1999. Samuels is currently negotiating the one remaining lease
assignment covered by the purchase agreement. Nevertheless, Samuels is currently
operating in this store 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
re-opened by Samuels.
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 net purchase price of this acquisition,
including liabilities assumed, was approximately $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 Rauch home office was
closed at the end of January 2000, the lease on its home office has been
cancelled and the functions performed in Lexington, Kentucky have been absorbed
by Samuels' home office in Austin, Texas.
8
<PAGE> 9
The net purchase price was allocated as follows (in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents $ 726
Accounts receivable 339
Merchandise inventories 10,078
Prepaid expenses and other current assets 2,621
Leasehold improvements, furniture and fixtures 1,010
Goodwill 5,086
----------
Total purchase price $ 19,860
==========
</TABLE>
On December 15, 1999, Samuels entered into an assets purchase agreement with
Wilkerson & Associates to acquire substantially all of its interests in and
rights to fourteen Musselman Jewelers stores ("Musselman"), including trade
names, customer lists, fixtures and the lease rights related to such stores.
Samuels' purchase price for these assets was 60,000 shares of its common stock,
then valued at approximately $0.3 million, the delivery of which was contingent
upon the delivery of the Musselman assets to Samuels. Samuels did not assume any
of Musselman's liabilities and did not acquire any of Musselman's other assets
as part of the purchase agreement. The 60,000 shares were registered under
Samuels' shelf registration on Form S-1, as amended by Post-Effective Amendment
No. 1 on Form S-4 to Form S-1 Registration Statement, which was declared
effective by the SEC on January 28, 2000. As of January 25, 2000, Samuels had
begun operating fourteen stores under Musselman's lease agreements.
Samuels has accounted for the former Musselman 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
re-opened by Samuels.
In addition to the above acquisitions, Samuels opened 15 stores during the nine
months ended February 26, 2000. Samuels is in various stages of lease
negotiations for several other 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 based on a percentage of
eligible 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
Lenders' 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 Samuels to
meet a minimum level of tangible net worth and prohibits its payment of
dividends. Samuels has entered into four 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 February 26, 2000, Samuels had direct borrowings of $25.1 million
outstanding, with additional credit available of approximately $5.9 million
based upon existing collateral. As of February 26, 2000, 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 first promissory note, due January 2000, has
been paid. The two remaining notes have a stated interest rate of 7% per annum
9
<PAGE> 10
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 not disclosed 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 holdback 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).
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).
5. SUBSEQUENT EVENTS
On March 8, 2000, Samuels entered into a Web Site Purchase Agreement with
JewelryLine.com, Inc. ("JewelryLine.com") to purchase all of the assets,
including the registered domain names, related to JewelryLine.com's operation of
an online Internet site for the sale of jewelry and related items. Samuels'
purchase price for these assets was 35,000 shares of common stock, then valued
at approximately $0.3 million, registered pursuant to Samuels' shelf
registration on Form S-1 Registration Statement, which the SEC declared
effective on January 28, 2000. Samuels did not assume any of JewelryLine.com's
liabilities as part of the transaction.
Samuels has accounted for the acquisition from JewelryLine.com using the
purchase method of accounting and, accordingly, the purchase price has been
allocated to the assets acquired based upon their preliminary fair values at the
date of acquisition.
This purchase is one of Samuels' initial steps into providing online Internet
sales and services. Samuels has also obtained registration of additional domain
names for the purpose of providing such sales and services. Samuels expects to
devote significant time and resources to further developing such sales and
services in the future in conjunction with continuing to operate its business as
presently conducted.
10
<PAGE> 11
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 nine months ended February 26, 2000 and February
27, 1999. 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 FEBRUARY 26, 2000 COMPARED TO THE THREE MONTHS ENDED FEBRUARY
27, 1999
The following table sets forth selected store data with respect to the quarters
ended February 26, 2000 and February 27, 1999:
<TABLE>
<CAPTION>
February February
2000 1999
------------ ------------
<S> <C> <C>
Number of stores at beginning of quarter ......... 181 114
Acquired during the quarter .................... 14 --
Opened during the quarter ...................... 3 --
Closed during the quarter ...................... -- (3)
------------ ------------
Total at quarter end ................... 198 111
============ ============
Percentage increase in sales of
Comparable stores .............................. 14.3%
Quarterly average sales per comparable store
(in thousands) ................................. $ 405 $ 354
Equivalent store weeks ........................... 2,436 1,463
Equivalent weekly store sales (in thousands) ..... $ 30.1 $ 30.4
</TABLE>
Net sales for the quarter ended February 26, 2000, were $73.3 million, an
increase of 65.1% or $28.9 million, as compared to net sales of $44.4 million
for the quarter ended February 27, 1999. Equivalent store weeks were 2,436 for
the third quarter this year as compared to 1,463 for the third quarter last
year, as Samuels opened three new stores and acquired fourteen Musselman stores
during the third quarter this year. Equivalent weekly sales were $30.1 thousand
for the third quarter ended February 26, 2000 as compared to $30.4 thousand for
the third quarter ended February 27, 1999. The decrease in equivalent weekly
sales is due to the acquisition of the Rauch and Musselman stores (see Note 2)
that operate in smaller markets and have a lower average sales volume.
Comparable store sales (for those stores open for the same period in both the
current and preceding year) increased 14.3% during the quarter ended February
26, 2000. Samuels attributes the overall increase in sales to several key
factors, mainly the remodeling of stores, a continued 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 a reduced percentage of credit sales
(representing 29.6% of sales during the quarter ended February 26, 2000 as
compared to 45.2% in the quarter ended February 27, 1999) resulting from
continued changes to the credit underwriting criteria in order to maintain a
portfolio consisting of more creditworthy customers and marketing targeted to a
less credit dependent customer. Additionally, the recently acquired Rauch and
former Musselman stores, which are not accustomed to a private label credit card
program, have experienced a significantly lower credit sales penetration
compared to the other Samuels stores.
Finance and credit insurance fees are no longer generated by Samuels, due to the
sale of the existing credit card accounts to a third party as of August 30, 1999
(see Note 4). Revenue from these fees totalled $2.5 million during the quarter
ended February 27, 1999.
11
<PAGE> 12
Cost of goods sold, buying and occupancy expenses were $43.6 million for the
quarter ended February 26, 2000, as compared to $26.6 million for the same
quarter last year. 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. Cost of goods sold, buying and occupancy expenses
were 59.5% of net sales for the quarter ended February 26, 2000 and 59.9% 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 third quarter this year and $0.4 million for the third
quarter last year, cost of goods sold, buying and occupancy expenses were 58.9%
and 59.0% of sales, respectively. The 0.1% decrease in cost of goods sold,
buying and occupancy expenses as a percentage of sales resulted primarily from
sales growing at a faster rate than costs offset by discounting focused on an
increased effort to reduce slower moving and dated merchandise, particularly the
merchandise acquired in the Rauch acquisition, much of which was sold at a
substantial discount prior to re-merchandising those stores, a shift in the mix
of products being sold to higher ticket lower margin items, and pre-opening
startup costs and grand opening promotions which targeted former customers in
the new and acquired stores.
Selling, general and administrative expenses were $20.5 million for the quarter
ended February 26, 2000, as compared to $13.7 million in the same quarter last
year. The increase was primarily due to the overall increase in the number of
stores in operation, including the continued operation of the Rauch home office
through January 31, 2000. Selling, general and administrative expenses as a
percentage of net sales were 28.0% for the quarter ended February 26, 2000 and
30.8% for the quarter ended February 27, 1999. The improvement as a percentage
of net sales resulted primarily from the general and administrative expenses
being spread over the larger sales volume offset by a seasonal increase in
credit costs associated with the WFN contract (see Note 4).
The provision for doubtful accounts is no longer being recorded as Samuels'
credit card accounts have been sold (see Note 4).
Net interest expense was $0.5 million for the quarter ended February 26, 2000, a
decrease of $0.3 million, or 37.1% from $0.8 million for the quarter ended
February 27, 1999. Proceeds from the sale of Samuels' existing credit card
accounts on August 30, 1999 (see Note 4) were used to reduce the amounts
outstanding under Samuels' revolving line of credit.
NINE MONTHS ENDED FEBRUARY 26, 2000 COMPARED TO THE NINE MONTHS ENDED FEBRUARY
27, 1999 (COMBINING SAMUELS AND THE PREDECESSOR)
The following table sets forth selected store data with respect to the nine
months ended February 26, 2000 and February 27, 1999:
<TABLE>
<CAPTION>
February February
2000 1999
---------- ----------
<S> <C> <C>
Number of stores at beginning of period .......... 116 117
Acquired during the period ..................... 68 --
Opened during the period ....................... 15 2
Closed during the period ....................... (1) (8)
---------- ----------
Total at period end .................... 198 111
========== ==========
Percentage increase in sales of
Comparable stores .............................. 5.25%
Period average sales per comparable store
(in thousands) ................................. $ 803 $ 763
Equivalent store weeks ........................... 5,833 4,460
Equivalent weekly store sales (in thousands) ..... $ 20.7 $ 19.2
</TABLE>
Net sales for the nine months ended February 26, 2000, were $120.9 million, an
increase of 41.4% or $35.4 million, as compared to net sales of $85.5 million
for the nine months ended February 27, 1999. Equivalent store weeks were 5,833
for the nine months this year as compared to 4,460 for the nine months last
year, as Samuels opened fifteen new stores, acquired fourteen Musselman stores,
acquired fourteen Silverman's stores and acquired forty C&H Rauch stores during
the first nine months of this year. Equivalent weekly
12
<PAGE> 13
sales were $20.7 thousand for the nine months ended February 26, 2000 as
compared to $19.2 thousand for the nine months ended February 27, 1999.
Comparable store sales (for those stores open for the same period in both the
current and preceding year) increased 5.25%. Samuels attributes the overall
increase in sales to several key factors, mainly the remodeling of stores, a
continued 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 35.6% of sales during the nine months ended February
26, 2000 as compared to 49.5% in the nine months ended February 27, 1999)
resulting from continued changes to the credit underwriting criteria in order to
maintain a portfolio consisting of more creditworthy customers and marketing
targeted to a less credit dependent customer. Additionally, the recently
acquired Rauch and former Musselman stores, which are not accustomed to a
private label credit card program, have experienced a significantly lower credit
sales penetration compared to the other Samuels stores.
Finance and credit insurance fees decreased to $2.3 million during the nine
months ended February 26, 2000, from $7.5 million during the nine months ended
February 27, 1999. This decrease was primarily due to the sale of the existing
credit card accounts to WFN as of August 30, 1999.
Cost of goods sold, buying and occupancy expenses were $77.8 million for the
nine months ended February 26, 2000, as compared to $55.4 million for the same
nine months last year. 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. Cost of goods sold, buying and occupancy expenses
were 64.3% of net sales for the nine months ended February 26, 2000 and 64.8% of
net sales for the same nine months last year. Excluding amortization of Samuels'
reorganization value in excess of amounts allocated to identifiable assets of
$1.4 million for the nine months this year and $0.7 million for the nine months
last year, cost of goods sold, buying and occupancy expenses were 63.1% and
64.0% of sales, respectively. The 0.9% decrease in cost of goods sold, buying
and occupancy expenses as a percentage of sales resulted primarily from sales
growing at a faster rate than costs offset by discounting focused on an
increased effort to reduce slower moving and dated merchandise, particularly the
merchandise acquired in the Rauch acquisition, much of which was sold at a
substantial discount prior to re-merchandising those stores, a shift in the mix
of products being sold to higher ticket lower margin items, and pre-opening
startup costs and grand opening promotions which targeted former customers in
the new and acquired stores.
Selling, general and administrative expenses were $41.9 million for the nine
months ended February 26, 2000, as compared to $33.7 million in the same nine
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 the existing credit card accounts to WFN as of August 30,
1999 (see Note 4). Selling, general and administrative expenses as a percentage
of net sales were 34.6% for the nine months ended February 26, 2000 and 39.4%
for the nine months ended February 27, 1999. 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 nine months ended
February 26, 2000. This was a decrease of $3.5 million, or 80.6% from $4.3
million for the nine months ended February 27, 1999. The decrease in the
provision was primarily due the fact that the provision for doubtful accounts is
no longer being recorded because Samuels' credit card accounts were sold on
August 30, 1999 (see Note 4).
Net interest expense was $1.9 million for the nine months ended February 26,
2000, a decrease of $1.8 million, or 48.1% from $3.7 million for the nine months
ended February 27, 1999. Samuels entered into its revolving line of credit under
a new financing agreement on October 2, 1998 (see Note 3), which resulted in
more favorable borrowing rates. The decrease in interest expense is primarily
due to using the proceeds from the sale of the existing credit card accounts on
August 30, 1999 (see Note 4) to reduce the amounts outstanding under the line of
credit, offset somewhat by increases in the base rate during the current period.
13
<PAGE> 14
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 holdback 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 4).
INVENTORY. As of February 26, 2000, Samuels' inventories (net of reserves and
not including consignment inventory) were approximately $56.0 million, an
increase of approximately $23.3 million from $32.7 million at May 29, 1999. This
increase is primarily due to merchandise purchased for the opening of new and
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. As part of its acquisitions of Rauch and Musselman
stores (see Note 2), Samuels had to expend a significant amount of working
capital to re-merchandise the stores and make the necessary capital
improvements. Samuels is currently considering ways in which it might increase
its working capital, including doing so as to address future expenditures that
may be necessary for Samuels to take advantage of business opportunities
presented to it.
Samuels reported cash flow provided by operating activities of approximately
$40.3 million for the nine months ended February 26, 2000, as compared to cash
flow used in operating activities of approximately $9.3 million for the
comparable period in the prior year. The change in cash flow from operating
activities is primarily due to the sale of the existing credit card accounts
(see Note 4). Samuels acquired $10.7 million in new property and equipment
during the nine months, primarily consisting of leasehold improvements
associated with the remodeling of existing stores and the acquisition of new
stores. Additionally, Samuels recorded cash payments of $3.3 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 of which $2.0 million has
been paid (see Note 3).
As of February 26, 2000, Samuels had $2.3 million of cash and cash equivalents
as compared to $1.5 million as of May 29, 1999.
FINANCING TRANSACTIONS
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 a percentage of eligible 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 Lenders' 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 it's obligations to the Lenders under the
financing agreement, Samuels granted a first priority perfected security
interest in and to substantially all of its owned or
14
<PAGE> 15
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 four 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 February 26, 2000, Samuels had direct borrowings of $25.1 million
outstanding with additional credit available of approximately $5.9 million based
upon existing collateral. As of February 26, 2000, 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 first of which has been paid. The two remaining
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%.
INTERNET SALES STRATEGY. The purchase of JewelryLine.com on March 8, 2000, is
one of Samuels' initial steps into providing online Internet sales and services.
Samuels has also obtained registration of additional domain names for the
purpose of providing such sales and services. Samuels expects to devote
significant time and resources to further developing such sales and services in
the future in conjunction with continuing to operate its business as presently
conducted.
YEAR 2000 COMPLIANCE. 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.
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.
15
<PAGE> 16
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Samuels is exposed to market risk in the form of interest rate risk. As of
February 26, 2000, Samuels had $25.2 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> 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Samuels is involved from time to time in legal proceedings 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 B. 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 B. 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 December 15, 1999, Samuels entered into an assets purchase agreement
with Wilkerson & Associates (see Note 2).
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 Four 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.
17
<PAGE> 18
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 10, 2000 By: /s/ RANDY N. MCCULLOUGH
----------------------------------------
Randy N. McCullough
President and Chief Executive Officer
April 10, 2000 By: /s/ E. PETER HEALEY
----------------------------------------
E. Peter Healey
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
April 10, 2000 By: /s/ J. DOUGLAS BULLOCK
----------------------------------------
J. Douglas Bullock
Vice President-Finance
(Principal Accounting Officer)
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Certificate of Incorporation of Samuels Jewelers, Inc. (1)
3.2 Bylaws of Samuels Jewelers, Inc. (1)
10.1 Amendment Number Four to Loan and Security Agreement
27.1 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to the Company's Current Report on Form 8-K filed
October 6, 1998.
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NUMBER FOUR TO LOAN AND SECURITY AGREEMENT
This Amendment Number Four to Loan and Security Agreement ("Amendment")
is entered into as of January 25, 2000, among SAMUELS JEWELERS, INC., a Delaware
corporation (the "Borrower"), on the one hand, and the financial institutions
listed on the signature pages hereof (such financial institutions, together with
their respective successors and assigns, are referred to hereinafter each
individually as a "Lender" and collectively as the "Lenders"), and FOOTHILL
CAPITAL CORPORATION, as Agent ("Agent"), on the other hand.
RECITALS
A. Borrower, Lenders and Agent have previously entered into that
certain Loan and Security Agreement, dated as of October 2, 1998, as amended as
of April 15, 1999, August 30, 1999, and November 24, 1999 (the "Agreement").
B. Borrower has entered into that certain Assets Purchase Agreement,
dated December 15, 1999 (the "Musselman Purchase Agreement") , with Wilkerson &
Associates (the "Seller") pursuant to which Borrower is acquiring certain of the
real and personal property assets of Seller used in connection with Seller's
Musselman Jewelers stores (the "Musselman Assets").
C. Borrower, Lenders and Agent desire to consent to Borrower's purchase
of the Musselman Assets and to further amend the Agreement as provided for and
on the conditions herein.
NOW, THEREFORE, Borrower, Lenders and Agent hereby amend certain
provisions of the Agreement as follows:
1. DEFINITIONS. All initially capitalized terms used in this Amendment
shall have the meanings given to them in the Agreement unless specifically
defined herein.
2. AMENDMENTS.
2.1 Section 1.1 of the Agreement is hereby amended by adding the
following new definitions thereto:
"Musselman Purchase Agreement" means that certain Assets
Purchase Agreement dated as of December 15, 1999, between Wilkerson
& Associates and Borrower.
"Musselman Put" means that certain obligation of Borrower to
make a payment to Wilkerson & Associates ("Wilkerson") or any
successor or assign in consideration of the "put" rights of
Wilkerson set forth in Section 2.3 (a) of the Musselman Purchase
Agreement.
1
<PAGE> 2
"Permitted Put Payment" means a payment by Borrower on account
of the Musselman Put in accordance with the terms set forth in the
Musselman Purchase Agreement, so long as at the time of such payment
(a) no Event of Default is currently in existence, and (b) after
taking such payment into account Borrower would have (and would have
had at all times during the 30 days preceding such payment) Excess
Availability of not less than $5,000,000.
2.2 Section 7.20 (b) of the Agreement is amended to read as follows:
"(b) Tangible Net Worth. A Tangible Net Worth of at least the
following amounts as of the last day of the fiscal quarters of
Borrower ending on or about the last day of the following months:
<TABLE>
<CAPTION>
Month Minimum Tangible Net Worth
----- --------------------------
<S> <C>
November 1999 $14,500,000
February 2000 $24,500,000
May 2000 $23,900,000
August 2000 $21,500,000
November 2000 $20,300,000
February 2001 $32,900,000
May 2001 $33,300,000
August 2001 $31,300,000
</TABLE>
2.3 Section 8.11 of the Agreement is hereby amended to read as
follows:
"If Borrower makes any payment on the Rauch Notes other than a
Permitted Rauch Notes Payment, if Borrower makes any payment in
respect of the Musselman Put other than a Permitted Put Payment, or
if Borrower makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment
of the Obligations, except to the extent such payment is permitted
by the terms of the subordination provisions applicable to such
Indebtedness;"
2.4 Schedule E-1 of the Agreement is amended in its entirety as set
forth on Schedule E-1 to this Amendment.
2.5 Agent and Lenders hereby consent to Borrower's purchase of the
Musselman Assets in accordance with the terms of the Musselman Purchase
Agreement.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Lenders
and Agent that all of Borrower's representations and warranties set forth in the
Agreement
2
<PAGE> 3
are true, complete and accurate in all respects as of the date hereof (except to
the extent such representations and warranties relate solely to an earlier
date).
4. DEFAULTS; WAIVER. Borrower hereby affirms to Lenders and Agent that
no Default or Event of Default exists as of the date hereof.
5. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
expressly conditioned upon the following:
(a) Receipt by Agent of fully executed copies of this Amendment;
(b) Receipt by Agent of UCC-1 financing statements respecting any
new locations acquired in connection with the Musselman Purchase Agreement; and
(c) Payment of a fee to Agent, for the pro rata account of Lenders,
in the amount of $15,000.
6. COSTS AND EXPENSES. Borrower shall pay to Agent all of Agent's
out-of-pocket costs and expenses (including, without limitation, the reasonable
fees and expenses of its counsel, which counsel may include any local counsel
reasonably deemed necessary, search fees, filing and recording fees,
documentation fees, appraisal fees, travel expenses, and other fees) arising in
connection with the preparation, execution, and delivery of this Amendment and
any related documents.
7. LIMITED EFFECT. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Agreement, the
terms and provisions of this Amendment shall govern. In all other respects, the
Agreement, as amended, modified, and supplemented hereby, shall remain in full
force and effect.
3
<PAGE> 4
8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which when so executed and delivered shall be deemed to be an original. All
such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the execution of a
counterpart of this Amendment by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first set forth above.
SAMUELS JEWELERS, INC.,
a Delaware corporation
By /s/ DOUG BULLOCK
-------------------------------------------------
Title: Vice President
---------------------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and as a Lender
By /s/ ROBERT CASTINE
-------------------------------------------------
Title: Vice President
---------------------------------------------
LASALLE BUSINESS CREDIT, INC.,
a Delaware corporation
By /s/
-------------------------------------------------
Title: Senior Vice President
---------------------------------------------
SUNROCK CAPITAL CORP.,
a Delaware corporation
By /s/
-------------------------------------------------
Title: Senior Vice President
---------------------------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-03-2000
<PERIOD-START> MAY-30-1999
<PERIOD-END> FEB-26-2000
<CASH> 2,307
<SECURITIES> 0
<RECEIVABLES> 6,881
<ALLOWANCES> 0
<INVENTORY> 56,036
<CURRENT-ASSETS> 69,390
<PP&E> 32,211
<DEPRECIATION> 5,003
<TOTAL-ASSETS> 117,423
<CURRENT-LIABILITIES> 69,340
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 46,078
<TOTAL-LIABILITY-AND-EQUITY> 117,423
<SALES> 120,903
<TOTAL-REVENUES> 123,234
<CGS> 77,755
<TOTAL-COSTS> 41,866
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 839
<INTEREST-EXPENSE> 1,946
<INCOME-PRETAX> 828
<INCOME-TAX> 0
<INCOME-CONTINUING> 828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 828
<EPS-BASIC> .16
<EPS-DILUTED> .16
</TABLE>
