<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 QUARTER ENDED MAY 31, 1999
COMMISSION FILE NUMBER 0-15247
REEDS JEWELERS, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1441702
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2525 South Seventeenth Street
Wilmington, North Carolina 28401
(Address of principal executive offices)
(910) 350-3100
(Registrant's telephone number, including area code)
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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
The number of outstanding shares of Common Stock, par value $0.10 per
share, as of July 12, 1999 was 8,476,372.
<PAGE> 2
Part I
Item 1. FINANCIAL STATEMENTS
The consolidated financial statements included herein have been
prepared by Reeds Jewelers, Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations; however, the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form 10-K for the
fiscal year ended February 28, 1999.
2
<PAGE> 3
REEDS JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, May 31, May 31,
1999 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 1,080,000 $ 1,376,000 $ 1,091,000
Accounts receivable:
Customers, less allowance for doubtful accounts
of $3,782,000, $3,658,000, and $3,210,000 45,655,000 44,164,000 38,747,000
Other 853,000 746,000 646,000
Merchandise inventories 40,798,000 46,674,000 40,920,000
Deferred income taxes 2,312,000 2,205,000 2,285,000
Other 523,000 545,000 754,000
------------ ------------ ------------
Total current assets 91,221,000 95,710,000 84,443,000
Property and equipment 30,656,000 31,592,000 29,065,000
Less: accumulated depreciation and amortization 17,895,000 18,596,000 17,045,000
------------ ------------ ------------
Net property and equipment 12,761,000 12,996,000 12,020,000
Goodwill, net of accumulated amortization of
$2,101,000, $2,212,000, and $1,766,000 6,295,000 6,184,000 6,630,000
Deferred income taxes, net of valuation allowance of
$157,000, $150,000 and $149,000 127,000 75,000 317,000
Other 561,000 661,000 609,000
------------ ------------ ------------
Total other assets 6,983,000 6,920,000 7,556,000
------------ ------------ ------------
TOTAL ASSETS $110,965,000 $115,626,000 $104,019,000
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 15,638,000 $ 12,593,000 $ 10,646,000
Accrued expenses 6,408,000 4,517,000 4,655,000
Deferred revenue (Note D) 908,000 754,000 1,391,000
Income taxes 1,879,000 53,000 170,000
Current portion of long-term debt 0 0 2,862,000
------------ ------------ ------------
Total current liabilities 24,833,000 17,917,000 19,724,000
Revolving credit note 43,348,000 54,769,000 45,000,000
Subordinated notes payable to shareholders 845,000 845,000 879,000
Deferred income taxes 1,440,000 1,281,000 1,387,000
Deferred revenue (Note D) 314,000 182,000 936,000
Other long-term liabilities 17,000 133,000 145,000
------------ ------------ ------------
Total long-term liabilities 45,964,000 57,210,000 48,347,000
Common stock, par value $0.10 per share;
25,000,000 shares authorized; 8,476,372 shares
issued and outstanding at February 28, 1999 and
May 31, 1999; 8,449,752 shares issued and
outstanding at May 31, 1998 (Note B) 847,000 847,000 844,000
Additional paid-in capital (Note B) 10,560,000 10,560,000 10,503,000
Retained earnings 28,761,000 29,092,000 24,601,000
------------ ------------ ------------
Total shareholders' equity 40,168,000 40,499,000 35,948,000
------------ ------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $110,965,000 $115,626,000 $104,019,000
============ ============ ============
</TABLE>
3
<PAGE> 4
REEDS JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three months ended May 31,
1999 1998
----------- -----------
<S> <C> <C>
Net sales $23,419,000 $20,431,000
Cost of sales 11,510,000 10,053,000
----------- -----------
Gross profit 11,909,000 10,378,000
Selling, general, and administrative expenses 9,766,000 8,644,000
Depreciation and amortization 852,000 816,000
----------- -----------
Operating earnings 1,291,000 918,000
Interest expense 797,000 851,000
----------- -----------
Income before income taxes 494,000 67,000
Income taxes 163,000 22,000
----------- -----------
Net earnings $ 331,000 $ 45,000
=========== ===========
Basic and diluted earnings per share (Note B) $ 0.04 $ 0.01
=========== ===========
Weighted average shares outstanding (Note B) 8,476,372 8,449,752
=========== ===========
</TABLE>
4
<PAGE> 5
REEDS JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended May 31,
1999 1998
------------ -----------
<S> <C> <C>
Operating activities
Net income $ 331,000 $ 45,000
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and Amortization 852,000 816,000
Loss (gain) on sale of property, furniture and equipment 2,000 (1,000)
Changes in operating assets and liabilities:
Accounts receivable 1,598,000 1,525,000
Merchandise inventories (5,876,000) (4,454,000)
Other current assets and other assets (133,000) (193,000)
Accounts payable (3,045,000) 1,279,000
Accrued expenses (1,892,000) (566,000)
Deferred revenue (286,000) (443,000)
Income taxes (1,826,000) (1,828,000)
Other long-term liabilities 116,000 (19,000)
------------ -----------
Net cash used in operating activities (10,159,000) (3,839,000)
Investing activities
Purchases of property, furniture and equipment (966,000) (1,014,000)
------------ -----------
Net cash used in investing activities (966,000) (1,014,000)
Financing activities
Net proceeds from revolving credit note 11,421,000 4,948,000
------------ -----------
Net cash provided by financing activities 11,421,000 4,948,000
------------ -----------
Net increase in cash and cash equivalents 296,000 95,000
Cash, beginning of period 1,080,000 996,000
------------ -----------
Cash, end of period $ 1,376,000 $ 1,091,000
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 738,000 $ 851,000
============ ===========
Income taxes $ 1,878,000 $ 2,207,000
============ ===========
</TABLE>
5
<PAGE> 6
REEDS JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. MANAGEMENT'S OPINION
These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto for the
fiscal year ended February 28, 1999.
Management of Reeds Jewelers, Inc. believes that the consolidated financial
statements contained herein contain all adjustments necessary to present
fairly the financial position, consolidated results of operations, and cash
flows for the interim period. Management also believes that all adjustments
so made are of a normal and recurring nature.
B. STOCK SPLIT
All share and per share amounts have been adjusted for the two-for-one stock
split effective in the form of a 100% stock dividend on February 20, 1998.
C. RECLASSIFICATIONS
Certain reclassifications were made to the 1998 financial statements to
conform to the classifications used in 1999. The reclassifications had no
effect on net income or shareholders' equity as previously reported.
D. DEFERRED REVENUE
For the fiscal years ended February 28, 1998 and 1997 and February 29, 1996,
in accordance with FASB Technical Bulletin 90-1, "Accounting for Separately
Priced Extended Warranty and Product Maintenance Contracts," revenue from
these contracts was deferred and recognized in income on a straight-line
basis over the contract period. This deferred revenue has been separated
into its current and long-term portions on the balance sheet. Commission
costs that were directly related to the acquisition of these contracts were
deferred and charged to expense in proportion to the revenue recognized. All
other costs, such as costs of services performed under the contracts,
general and administrative expenses, and advertising expenses, were charged
to expense as incurred. Previously deferred extended service contract
revenue recognized for the quarters ended May 31, 1999 and 1998 of $264,000
and $408,000, respectively, has been reflected as a reduction of selling,
general, and administrative expenses.
During the first quarter of the fiscal year ended February 28, 1999, the
Company stopped selling its own extended service contracts and began selling
such contracts on behalf of unrelated third parties only. These contracts
provide for warranty periods of 24 to 36 months. As a result of this change,
the Company will continue to recognize existing deferred revenues from
previously sold contracts through January 31, 2001 and now recognizes
commission revenue for the unrelated third-party extended warranty plans at
the time of sale.
6
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Sales
Net sales for the three months ended May 31, 1999 were $23,419,000, 14.6% higher
than the same period a year earlier. The Company operated eight more stores
during the first quarter of 1999 ending the period with 107 stores. Comparable
store sales of 15.7% in March, 9.7% in April, and 8.1% in May resulted in an
11.2% same-store increase for the quarter. During the first quarter ended May
31, 1999, the Company opened four new stores and sold one under-performing
store. Management expects to open at least four more new stores during the rest
of the current year.
The Company averaged 96.1% in-stock on its key and core items during the first
quarter of the current year compared to 92.1% a year ago. The Company averaged
83.6% in-stock on its entire basic merchandise mix compared to 81.8% during the
same quarter last year. During the quarter ended May 31, 1999, key and core
merchandise accounted for 49.9% of net sales, 52.3% of the items in the
Company's basic merchandise mix, and 37.4% of its inventory investment. In the
first quarter of last year, key & core merchandise represented 49.9% of net
sales, 52.3% of the items offered, and 40.5% of inventory.
Sales on the Company's proprietary credit card were up 16.7% while cash sales
rose 12.7%. Credit sales accounted for 49.6% of total net sales, compared to
48.7% during the first quarter of last year. The average credit transaction
during the first quarter of 1999 was 2.5% higher than the same quarter in 1998.
The average credit sale was also 4.4 times the size of the average cash sale,
compared to 4.8 times in 1998. The primary reason for the difference in the
average credit and cash transaction is the number of cash repair sales, that
yield a lower price per transaction, the Company transacts. The Company's credit
marketing efforts resulted in 4.8% more applications being obtained and 25.3%
more new accounts being opened during the first quarter of the current year than
during the same period a year ago.
Gross Profit
Gross margins were 50.9% of net sales for the first quarter of 1999 and were
50.8% during the same period a year ago. The improvement in gross margins
resulted from minor improvements in the three major categories, diamonds,
watches, and gold, than the same time last year. Sales of diamonds, the
Company's largest category, rose 17.5%, sales of gold and semi-precious color
increased 13.4%, and sales of watches increased 10.5%.
Selling, General, and Administrative Expenses (SG&A)
Selling, general, and administrative expenses as a percentage of net sales were
41.7%, and 42.3% for the three month periods ended May 31, 1999 and 1998,
respectively. The following table shows the significant expenses as a percentage
of net sales for the first quarters of the last two years:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Compensation - salaries & hourly wages 18.7 % 18.8 %
Compensation - bonuses & commissions 4.5 % 4.4 %
Rents for space 12.0 % 12.5 %
Advertising 6.0 % 6.0 %
Bad debt 3.5 % 3.9 %
Finance charges (9.1)% (9.3)%
</TABLE>
7
<PAGE> 8
Bad debt increased 3.1% to $827,000 from $802,000 and fell to 3.5% of net sales
for the quarter compared to 3.9% a year earlier. Gross write-off for bad debts
increased 5.0% and net write-off, after recovery of amounts previously written
off, increased 1.0%. Actual write-offs as a percentage of net sales were 4.0%
and 4.5% during each quarter ended May 31, 1999, and 1998, respectively. The
allowance for doubtful accounts was 7.65% of customer receivables (prior to the
allowance for doubtful accounts) for the first quarter of the last two years.
Delinquent accounts (accounts over 90 days past due) represented 8.7% and 8.5%
of the Company's accounts receivable portfolio on the last day of May 1999 and
1998, respectively. Credit extension and collection policies were consistent
during each of the two periods.
During the first quarter of last year, the Company stopped selling its own
extended service contracts and began selling such contracts on behalf of
unrelated third parties only. These contracts provide for warranty periods of 24
to 36 months. As a result of this change, the Company will continue to recognize
existing deferred revenues from previously sold contracts through January 31,
2001 and will now recognize commission revenue for the unrelated third-party
extended warranty plans at the time of sale. The effect of this change during
the first quarter of this year was an additional $264,000, compared to $408,000
during the first quarter a year ago, which has been shown as a reduction of
selling, general, and administrative expenses. Extended service agreements
equaled 2.8%, and 4.4% of net sales at the end of the first quarter of fiscal
2000 and 1999, respectively.
Interest Expense
Interest expense decreased $54,000 during the quarter to $797,000. Average
borrowings were 4.8% higher than during the first quarter of last year. However,
the Company's effective interest rate during the current quarter fell to 6.4%
from 7.3% a year ago.
Income Taxes and Net Earnings
The provision for income taxes was $163,000 during the first quarter ended May
31, 1999, compared to $22,000 for the same period a year earlier. The Company's
anticipated tax rate was 33.0% in the first quarter of both years. The Company
earned $331,000 in the quarter ended May 31, 1999, compared to a $45,000 in the
previous year. On a basic and diluted basis, the Company earned $0.04 per share
in the first quarter of 1999 compared to $0.01 per share in the same quarter of
1998.
Year 2000 ("Y2K")
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define a specific year. Any programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in systems failures or miscalculations causing
disruptions to various activities and operations. Now that Year 2000 is upon us,
this problem is posing a threat to many companies and may be expensive for many
companies to correct. Reeds Jewelers had Year 2000 in mind in 1985 when it began
the first stages of developing its inventory and credit systems that would allow
the Company to grow and move into the next century.
The Company is using external and internal resources to test, reprogram, or
replace its operating software and hardware, application systems, EDI systems,
user written systems, network components, PC hardware and software, and embedded
chips. The Company has completed its initial review of these areas and believes
that its systems are Y2K compliant. The Company continues to run additional
tests to increase the likelihood that any unexpected problems are identified and
corrected. All vendors and suppliers have been contacted and have assured the
Company that they are or will be compliant by mid-1999. No material costs have
been incurred, nor are any expected to be incurred, by the Company related to
the Y2K issue.
8
<PAGE> 9
There can be no guarantee that actual results will not differ materially from
those planned. Specific factors that might cause such material differences
include, but are not limited to, the ability to locate and correct all relevant
computer codes, the ability of third parties to identify and resolve all Year
2000 issues, and similar uncertainties. However, since we expect no significant
problems, our contingency plan is limited to the handling of shipments and
invoices from any vendor or vendors that may have erroneously assessed their
readiness regarding Y2K.
Liquidity and Capital Resources
Working Capital
Working capital increased 20.2% to $77,793,000 at May 31, 1999 from $64,719,000
at May 31, 1998. The ratio of current assets to current liabilities as of May
31, 1999 was 5.3 to 1, compared to 4.3 to 1 a year earlier.
Merchandise inventories at the end of the first quarter of 2000 were 14.1%
higher than a year earlier --- $46,674,000 compared to $40,920,000. The
investment in owned inventories on a per store basis was up 5.1% from a year
earlier. In addition to owned inventories, the Company's offerings included an
additional 30.0% in consigned inventories at May 31, 1999 and an additional
22.2% at May 31, 1998.
Capital Expenditures
Capital expenditures totaled $966,000 at the end of the first quarter of fiscal
2000, compared to $1,014,000 during the same period a year ago. During the first
quarter of the fiscal 2000 the Company opened new stores in Louisville, KY,
Chattanooga, TN, Dulles, VA, and Norfolk, VA. The Company also sold an
under-performing store in Memphis, TN at its depreciated value.
Debt
Borrowings under the Company's revolving credit facility averaged $46.0 million
during the quarter ended May 31, 1999 and $43.9 million during the same quarter
of 1998. The maximum borrowings outstanding under the facility at any time
during the two quarters were $54.8 and $47.9, respectively. At May 31, 1999,
$54.8 was outstanding under the facility, compared to $47.9 at May 31, 1998.
Substantially all of the Company's assets serve as collateral for the revolving
bank facility.
On December 21, 1995, the Company entered into a revolving credit agreement with
two commercial banks whereby the Company could borrow up to $40,000,000 based on
specified percentages of eligible inventory and accounts receivable. In June
1997, the Company increased its revolving credit facility to $45,000,000 and
extended its expiration to July 31, 2000; covenants and other terms remained
unchanged. In May 1998, the Company and the banks agreed to an additional
seasonal increase to $50,000,000 from May 10 through December 31, 1998. The
Company pays interest under the revolving credit facility at 30-day LIBOR plus
160-200 basis points or at the banks' prime rate plus 37 1/2 to 62 1/2 basis
points, depending upon the Company's debt-to-worth ratio.
In April 1999, the Company, its existing banks, and two additional banks entered
into an amended revolving credit agreement whereby the Company may borrow up to
$65,000,000 through June 30, 2002 on terms similar to those of the previous
agreement. Under the amended agreement, the Company pays interest at an interest
rate ranging from the 30-day LIBOR plus 125 basis points to 185 basis points or
at the banks' prime rate plus 25 basis points, depending upon the Company's
debt-to-worth ratio. As of May 31, 1999, the Company's rate was 30-day LIBOR
plus 145 basis points.
9
<PAGE> 10
The Company also has subordinated notes totaling $845,000 with three related
parties, with interest payable monthly at the prime rate quoted in The Wall
Street Journal. The notes are unsecured and are subordinate to the revolving
bank note.
Strategic Expenditure
The Company intends to spend approximately $1,000,000 during the remainder of
the fiscal year to develop a strategic channel of distribution on the internet.
Disclosure Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements to encourage companies to provide prospective
information about their companies without fear of litigation so long as those
statements are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in the statement. Accordingly,
the Company hereby identifies the following important factors that could cause
the Company's actual financial results to differ materially from those projected
by the Company in forward-looking statements: (a) unexpected changes in the
marketing and pricing strategies of competitors; (b) adverse changes in the
political environments of countries providing raw materials for the jewelry
industry; (c) lack of available locations on terms acceptable to the Company;
(d) significant changes in interest rates; and (e) loss of key executives.
Impact of Inflation
The Company generally follows the practice of passing on price changes to its
customers. As a result, management believes its operations have not been
materially affected by inflationary factors during the periods reported herein.
Increases in labor and other costs must be recovered through operating
efficiencies and improved gross profits.
At this time, management knows of no other material events or uncertainties that
would cause the financial information contained herein not be indicative of the
operating results or future financial condition of Reeds Jewelers, Inc.
10
<PAGE> 11
Item 3. OPERATING SEGMENT INFORMATION
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," was issued effective for fiscal years ending after
December 15, 1998. The Company now reports two segments, retail operations and
credit operations. Separate financial information is produced internally and is
regularly reviewed by the chief operating decision-maker ("CODM").
The retail operations segment consists of all store locations and corporate
headquarters. The stores have all been combined into one segment because they
have similar basic characteristics, such as the nature of products, and the
class of customers for their products. Corporate headquarters is included in
this same segment due to the fact that its revenues earned are incidental to the
Company's activities and it serves as a support system to the stores.
The credit operations segment is primarily engaged in providing and maintaining
financing for our customers. This operation is aggregated since the CODM
evaluates it separately. It also meets one of the three quantitative thresholds,
the asset test, since it represents 10.0% or more of the combined assets of all
operating segments.
The following table summarizes the revenues, operating income, assets,
depreciation, and capital expenditures for each reportable segment for the
quarters ended May 31, 1999, and 1998:
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------ ----------------- --------------------
Retail Credit
Operations Operations Total
- --------------------------------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C>
For the quarter ended May 31, 1999
- --------------------------------------------- ------------------ ----------------- --------------------
Revenues $23,419,000 $ 2,603,000 $ 26,022,000
Operating income (499,000) 1,790,000 1,291,000
Identifiable assets 71,000,000 44,626,000 115,626,000
Depreciation and Amortization 806,000 45,000 851,000
Capital expenditures 837,000 129,000 966,000
- --------------------------------------------- ------------------ ----------------- --------------------
For the quarter ended May 31, 1998
- --------------------------------------------- ------------------ ----------------- --------------------
Revenues $20,431,000 $ 2,182,000 $ 22,613,000
Operating income 387,000 531,000 918,000
Identifiable assets 64,923,000 39,096,000 104,019,000
Depreciation and Amortization 786,000 30,000 816,000
Capital expenditures 950,000 64,000 1,014,000
</TABLE>
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is from time to time involved in routine litigation
incidental to the conduct of its business. The Company believes that no
currently pending litigation to which it is a party will have a
material adverse effect on its consolidated financial condition or
results of operations.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Shareholders was held Wednesday, July 7,
1999, and the following matters were submitted to a vote of
the shareholders:
(b) To elect nine directors (Garland Waddy Garrett, Fenton H.
Hord, Arlene Z. Schreiber, Richard F. Sherman, Alan M. Zimmer,
Herbert J. Zimmer, Jeffrey L. Zimmer, Roberta G. Zimmer, and
William R. Zimmer) to serve until the 2000 Annual Meeting of
Shareholders or until their successors are elected and
qualified: for Garland Waddy Garrett, Fenton H. Hord, Arlene
Z. Schreiber, Richard F. Sherman, Alan M. Zimmer, Herbert J.
Zimmer, Jeffrey L. Zimmer, and William R. Zimmer, 7,954,456
votes were cast in favor, and 31,252 votes were withheld: for
Roberta G. Zimmer, 7,947,226 votes were cast in favor, and
38,482 votes were withheld.
(c) To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending February
29, 2000: 7,954,164 votes were cast in favor, 31,010 votes
against, and 534 votes abstained.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27 Financial Data Schedule
(For SEC use only)
(b) Reports on Form 8-K.
Not applicable.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REEDS JEWELERS, INC.
July 12, 1999 /s/ James R. Rouse
------------------- ------------------------
James R. Rouse
Treasurer and
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REEDS JEWELERS, INC. FOR THE QUARTER ENDED MAY 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> MAY-31-1999
<CASH> 1,376
<SECURITIES> 0
<RECEIVABLES> 47,822
<ALLOWANCES> 3,658
<INVENTORY> 46,674
<CURRENT-ASSETS> 95,710
<PP&E> 31,592
<DEPRECIATION> 18,596
<TOTAL-ASSETS> 115,626
<CURRENT-LIABILITIES> 17,917
<BONDS> 54,769
0
0
<COMMON> 847
<OTHER-SE> 39,652
<TOTAL-LIABILITY-AND-EQUITY> 115,626
<SALES> 23,419
<TOTAL-REVENUES> 23,419
<CGS> 11,510
<TOTAL-COSTS> 11,510
<OTHER-EXPENSES> 9,791
<LOSS-PROVISION> 827
<INTEREST-EXPENSE> 797
<INCOME-PRETAX> 494
<INCOME-TAX> 163
<INCOME-CONTINUING> 331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 331
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
