<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR
/__/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 1-9647
JAN BELL MARKETING, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2290953
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
13801 N.W. 14th Street
Sunrise, Florida 33323
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 846-2705
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.0001 par value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES / X / NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge in definitive proxy or information statements,
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
/ X /
<PAGE> 2
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX Page No.
<S> <C>
Independent Auditors' Report .......................................... 31
Consolidated Balance Sheets as of
December 31, 1993 and 1992 ....................................... 32
Consolidated Statements of Operations for
Each of the Three Years in the
Period Ended December 31, 1993 ................................... 33
Consolidated Statements of Stockholders'
Equity for Each of the Three
Years in the Period Ended
December 31, 1993 ................................................ 34
Consolidated Statements of Cash Flows
for Each of the Three Years
in the Period Ended December 31, 1993 ............................ 35
Notes to Consolidated Financial Statements............................. 37
</TABLE>
30
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Jan Bell Marketing, Inc.
Sunrise, Florida
We have audited the accompanying consolidated balance sheets of Jan Bell
Marketing, Inc. and its subsidiaries (the "Company") as of December 31, 1993
and 1992, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1993. Our audits also included the financial statement schedules listed at
Item 14(a)(2). These financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1993 and
1992, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
/s/ DELOITTE & TOUCHE
Certified Public Accountants
Fort Lauderdale, Florida
March 31, 1994
31
<PAGE> 4
JAN BELL MARKETING, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS SHOWN IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1993 1992
-------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 30,178 $ 49,634
Accounts receivable (net of
allowance for doubtful
accounts and sales returns
of $3,428 and $5,005) 22,064 66,794
Inventories (Notes C and D) 177,538 106,739
Refundable income taxes (Note H) 15,075 5,387
Prepaid expenses 1,103 1,344
Other current assets 1,914 2,082
-------- --------
Total current assets 247,872 231,980
Property, net (Note E) 28,846 20,804
Excess of cost over fair
value of net assets acquired 27,850 28,979
(Notes C and G)
Customer deposit (Note B) --- 15,822
Other assets (Note B) 7,686 4,373
-------- --------
$312,254 $301,958
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 29,339 $ 25,851
Accrued expenses 8,734 4,122
Accrued lease payment 1,877 1,882
Liability for inventory
repurchased (Note B) 33,426 ---
Deferred income taxes (Note H) --- 2,082
-------- --------
Total current liabilities 73,376 33,937
-------- --------
Long-term debt (Note F) 33,496 33,047
-------- --------
Commitments and contingencies (Note I)
Stockholders' Equity (Notes I and K)
Common stock, $.0001 par value,
50,000,000 shares authorized,
25,851,738 and 26,553,664
shares issued 3 3
Additional paid-in capital 180,367 182,158
Retained earnings (Note F) 28,871 64,595
-------- --------
209,241 246,756
Treasury stock, at cost
(1,120,700 shares) --- (8,468)
Deferred compensation (3,859) (3,314)
-------- --------
205,382 234,974
-------- --------
$312,254 $301,958
======== ========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE> 5
JAN BELL MARKETING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS SHOWN IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------
1993 1992 1991
-------------------------------------------------
<S> <C> <C> <C>
Net sales $275,177 $333,521 $224,261
Less:
Effect of Sam's
agreement (Note B) 99,718 --- ---
-------- -------- --------
175,459 333,521 224,261
-------- -------- --------
Cost of sales 245,310 276,872 184,447
Less:
Effect of Sam's
agreement (Note B) 79,687 --- ---
-------- -------- --------
165,623 276,872 184,447
-------- -------- --------
Gross profit 9,836 56,649 39,814
Interest and other
income 635 550 3,033
-------- -------- --------
10,471 57,199 42,847
Selling, general and
administrative
expenses 44,492 34,826 23,685
Other costs (Notes B and J) 10,217 --- 6,440
Interest expense 3,195 916 2,419
-------- -------- --------
Income (loss) before income
taxes and minority interest (47,433) 21,457 10,303
Income tax provision
(benefit) (Note H) (11,709) 6,682 2,674
Minority interest -- --- 684
-------- -------- --------
Net income (loss) $(35,724) $ 14,775 $ 6,945
======== ======== ========
Net income (loss) per
common share $ (1.40) $ .59 $ .31
======== ======== ========
Weighted average number
of common shares 25,484,544 25,164,798 22,624,956
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
33
<PAGE> 6
JAN BELL MARKETING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
Common Total
Shares Common Paid-in Retained Treasury Deferred Stockholders'
Issued Stock Capital Earnings Stock Compensation Equity
----------- ------ ----------- ----------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 22,346,131 $ 2 $138,531 $ 42,875 $(8,468) $172,940
Purchase plan exercise 4,142 25 25
Exercise of options 126,819 1,051 1,051
Issuance of common stock 2,646,688 1 26,246 26,247
Stock bonus plan issuance 325,000 4,392 $(4,392) ---
Tax benefit on exercise of
stock options 243 243
Amortization of deferred
compensation 797 797
Net income 6,945 6,945
---------- ----- -------- -------- -------- ------- --------
Balance at December 31, 1991 25,448,780 3 170,488 49,820 (8,468) (3,595) 208,248
Purchase plan exercise 12,101 133 133
Exercise of options 844,178 8,132 8,132
Issuance of common stock 63,688 550 550
Exercise of warrants 141,717
Stock bonus plan issuance 43,200 584 (584) ---
Tax benefit on exercise of
stock options 2,271 2,271
Amortization of deferred
compensation 865 865
Net income 14,775 14,775
---------- ----- -------- -------- -------- ------- --------
Balance at December 31, 1992 26,553,664 3 182,158 64,595 (8,468) (3,314) 234,974
Purchase plan exercise 12,236 112 112
Exercise of options 37,580 323 323
Issuance of common stock 63,688 550 550
Stock bonus plan issuance 331,500 5,925 (5,925)
Repurchase of common stock (258) (258)
Retirement of treasury stock (1,149,500) (8,726) 8,726
401(k) Plan contribution 2,570 25 25
Amortization of deferred
compensation 5,380 5,380
Net loss (35,724) (35,724)
---------- ----- -------- --------- -------- ------- --------
Balance at December 31, 1993 25,851,738 $ 3 $180,367 $ 28,871 $ - 0 - $(3,859) $205,382
========== ===== ======== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
34
<PAGE> 7
JAN BELL MARKETING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS SHOWN IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------
1993 1992 1991
----------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Cash received from customers $319,907 $ 303,951 $222,541
Cash paid to suppliers and
employees (324,893) (296,273) (210,699)
Interest and other income
received 635 411 2,313
Interest paid (3,195) ( 348) (1,982)
Income tax refunds received 4,297 --- ---
Income taxes paid (3,798) (9,109) (3,333)
Cash paid for
customer deposit --- --- (17,822)
-------- --------- --------
Net cash (used in)
operating
activities (7,047) (1,368) (8,982)
-------- --------- --------
Cash flows from investing
activities:
Capital
expenditures -- net (12,611) (6,693) (4,388)
Acquisition costs --- --- (600)
Increase in other assets --- (966) (615)
-------- --------- --------
Net cash (used in) investing
activities (12,611) (7,659) (5,603)
-------- --------- --------
Cash flows from financing
activities:
Net (repayments) borrowings
under lines of credit --- --- (18,001)
Proceeds from long-term
debt financing --- 35,000 ---
Debt financing costs --- (1,953) ---
Proceeds from exercise
of options 323 8,132 1,294
Proceeds from issuance of
common stock 25 --- ---
Stock purchase plan payments
withheld 112 104 61
Distribution of minority
interest --- --- (2,569)
Purchase of treasury stock (258) --- ---
-------- -------- --------
Net cash provided by
(used in) financing
activities 202 41,283 (19,215)
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents (19,456) 32,256 (33,800)
Cash and cash equivalents at
beginning of year 49,634 17,378 51,178
-------- -------- --------
Cash and cash equivalents at
end of year $ 30,178 $ 49,634 $ 17,378
======== ======== ========
</TABLE>
35
<PAGE> 8
JAN BELL MARKETING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS SHOWN IN THOUSANDS)
(CONTINUED)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------
1993 1992 1991
---------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net income (loss)
to net cash (used in)
operating activities:
Net income (loss) $(35,724) $14,775 $ 6,945
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 6,761 5,076 3,893
Minority interest in
consolidated joint venture --- --- 685
Stock compensation expense 5,929 1,415 1,346
Debt financing costs 449 --- ---
(Increase) decrease
in assets:
Accounts receivable
(net) 44,730 (29,571) (1,721)
Inventories (70,799) (4,348) (8,922)
Refundable income taxes (9,688) --- ---
Prepaid expenses 241 (536) 937
Other assets (4,207) (1,559) 1,206
Customer deposit 15,822 --- (17,822)
Increase (decrease) in
liabilities:
Accounts payable 3,488 14,357 3,971
Accrued expenses 4,607 1,268 2,683
Liability for inventory
repurchased 33,426 --- ---
Deferred income taxes (2,082) (2,245) (2,183)
-------- ------- ------
Net cash (used in)
operating activities $ (7,047) $(1,368) $ (8,982)
======== ======= ========
</TABLE>
See notes to consolidated financial statements.
36
<PAGE> 9
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
A. The Company:
The Company is principally engaged in the sale of jewelry, watches and
other consumer products through leased departments in wholesale clubs and
through its own wholesale operations.
B. Agreement with Sam's Wholesale Club:
In May 1993, the Company entered into an agreement (the "Agreement") to
operate an exclusive leased department at all existing and future Sam's
Wholesale Club ("Sam's") locations through February 1, 1999. Under the terms of
the Agreement, the Company repurchased Sam's existing inventory which included
goods Sam's had previously purchased from the Company as well as from other
vendors. As consideration for entering into the Agreement, the Company paid to
Sam's a one-time fee of $7.0 million, which is included in Other Assets in 1993
and is being amortized over the term of the Agreement. The unamortized amount
as of December 31, 1993 was approximately $6.7 million. The Company will pay
Sam's a tenancy fee of 9 1/4% of future net sales.
As a result of this new Agreement with Sam's, the Company recorded a
sales reversal of $99.7 million for the amount of inventory previously sold by
Jan Bell to Sam's which became subject to repurchase. In addition, cost of
sales was reduced by $79.7 million resulting in a $20.0 million one-time charge
to pre-tax earnings. The Company had originally estimated the amount of
inventory subject to be repurchase at $77.1 million and the related cost of
sales at $59.0 million which resulted in an $18.1 million one-time charge to
pre-tax earnings which was recorded in the first quarter of 1993. In
connection with the transition to become a fully-integrated retailer, Jan Bell
also incurred approximately $6.0 million (included in "Other Costs"), including
additional one-time charges for costs such as hiring and training personnel,
systems implementations, other activities related to commencing operations
under the new Agreement, and
37
<PAGE> 10
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
the transition to primarily retail operations, and a valuation adjustment for
certain inventory acquired which Sam's had purchased from other vendors. As of
year end, the Company owed Sam's approximately $42.5 million, of which
approximately $33.4 million is for inventory repurchased from Sam's and
approximately $9.1 million which is included in accounts payable, for certain
third party merchandise acquired by the Company from Sam's. Final payment of
this amount is due in May 1994.
A refundable non-interest bearing cash deposit of $17.8 million was
paid with Sam's in 1991 in consideration for the Company becoming the primary
jewelry vendor over the term of the agreement and any renewals. In July 1992,
the Company and Sam's agreed to reduce the amount of the deposit to be refunded
to $15.8 million. The $2.0 million reduction represented a payment for the
extension of the Agreement for a three year period from February 1, 1994 to
February 1, 1997. The aggregate $17.8 million was applied towards the $7.0
million one-time fee and the repurchased inventory.
During 1991, the Company entered into an agreement with Pace Membership
Warehouse ("Pace") to operate leased jewelry departments at all present and
future Pace locations and to merchandise fine jewelry, watches, fragrances,
fine writing instruments and sunglasses on an exclusive basis until January
1997. The Pace agreement required payments based upon a percentage of monthly
net sales subject to an adjustment based on Pace total merchandise sales
growth.
In November 1993, Wal-Mart Stores, Inc. announced that it would
purchase most of the Pace locations and operate them as Sam's. The Pace
locations not being acquired would be closed. At that time, the Company was
operating leased jewelry departments at all 117 Pace locations, 30 of which
were closed and 87 were converted to Sam's during January 1994. The Company is
operating leased jewelry departments in the converted Pace locations in
accordance with the Sam's Agreement through February 1, 1999. Included in
selling, general and administrative expenses are $648,000 in direct costs
associated with the Pace location closings.
Net sales to certain customer relationships which exceed ten percent of
the Company's net sales for the respective periods were as follows:
<TABLE>
<CAPTION>
Customer relationship (in thousands)
--------------------------------------
Sam's Pace
<S> <C> <C>
Years ended December 31,
1993 $169,686 $64,018
1992 200,067 69,498
1991 116,076 39,148
</TABLE>
C. Summary of Significant Accounting Policies:
(1) Principles of Consolidation -- The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in the consolidation.
(2) Sales of Consignment Merchandise -- Income is recognized on the
sale of consignment merchandise at such time as the merchandise is sold by the
consignee.
38
<PAGE> 11
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
(3) Allowance for Sales Returns -- The Company generally gives its
customers the right to return merchandise purchased by them and records an
allowance for the amount of gross profit on estimated returns.
(4) Hedging Activities -- The Company uses gold commodities futures
contracts to hedge gold inventories. Commodity futures contracts are contracts
for delayed delivery of commodities in which the seller agrees to make and the
purchaser agrees to take delivery at a specified future date of a specified
commodity, at a specified price. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
commodity values and interest rates. Gains and losses on futures used to hedge
gold inventories valued at cost are deferred and included in the determination
of income upon disposition of such inventories. Gains and losses on futures
contracts used to hedge gold inventories valued at market are included in the
determination of income currently. At December 31, 1993, the Company had
futures contracts maturing at various dates through December 1994 to purchase
277,000 ounces and sell 308,400 ounces of gold at various specified prices for
an aggregate of $95.2 million and $120.6 million, respectively. U.S. Treasury
securities with a carrying value of $500,000 and $350,000 at December 31, 1993
and 1992, respectively, have been pledged to cover margin requirements under
futures contracts. The Company is in the process of evaluating the need for
continued hedging activities due to its transition from being primarily a
wholesale operation to being primarily a retail operation.
(5) Inventories -- Inventories of precious and semi-precious stones
and gem jewelry-related merchandise (and associated gold) watches, and other
consumer products are valued at the lower of cost (first-in, first-out method)
or market.
Inventories of gold jewelry-related merchandise, exclusive of the gold
component of precious and semi-precious gem jewelry related inventories, are
valued principally at market, which includes adjustments for unrealized gains
or losses.
Costs of activities related to acquiring, receiving, preparing and
distributing inventory to the point of being ready for sale are included in
inventory.
(6) Property -- Property is stated at cost and is depreciated using
the straight-line method over the estimated useful lives of the respective
assets.
39
<PAGE> 12
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
(7) Income Taxes -- The Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," ("SFAS No. 109")
effective January 1, 1993. This Statement supersedes SFAS No. 96, "Accounting
for Income Taxes," which was adopted by the Company in 1988. During 1993, the
Company provided deferred taxes in accordance with SFAS No. 109 for the future
effects on income taxes of temporary differences between financial reporting
and tax bases of assets and liabilities.
(8) Net Income (Loss) Per Common Share -- Net income (loss) per common
share is based upon the weighted average number of shares of common stock
outstanding in each period, adjusted for the dilutive effects, if any, of
options granted under the Company's option plans.
(9) Cash and Cash Equivalents -- For the purpose of the statements of
cash flows, the Company considers all highly-liquid investments purchased with
maturities of three months or less to be cash equivalents.
(10) Cost in Excess of Fair Value of Assets Acquired -- Cost in excess
of fair value of assets acquired, which arises from acquisitions, is amortized
on a straight-line basis over 20 to 30 years. Accumulated amortization of these
assets at December 31, 1993 and 1992 was approximately $2.7 million and $1.6
million, respectively. Amortization expense for 1993, 1992 and 1991 was
approximately $1.1 million, $1.1 million and $0.5 million, respectively.
(11) Reclassifications - Certain reclassifications have been made to
the 1992 and 1991 consolidated financial statements to conform to the 1993
presentation.
D. Inventories:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
1993 1992
---------------------------
(amounts shown in thousands)
<S> <C> <C>
Precious and semi-precious jewelry-
related merchandise (and associated
gold):
Raw materials $ 10,885 $ 12,103
Finished goods 57,158 33,209
Gold jewelry-related merchandise:
Raw materials 13 492
Finished goods 26,794 12,592
Watches 62,688 41,387
Other consumer products 20,000 6,956
-------- -------
$177,538 $106,739
======== ========
</TABLE>
40
<PAGE> 13
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
E. Property:
The components of property are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1992
----------------------------
(amounts shown in thousands)
<S> <C> <C>
Land $ 4,171 $ 4,171
Buildings 4,384 4,908
Furniture and fixtures 26,649 19,299
Leasehold improvements 514 187
Automobiles and trucks 892 865
-------- -------
36,610 29,430
Less accumulated depreciation (12,055) (8,626)
-------- --------
24,555 20,804
Construction in progress-distribution center 4,291 ---
------- --------
$ 28,846 $ 20,804
======== ========
</TABLE>
Depreciation expense for the years ended December 31, 1993, 1992 and
1991 was approximately $4.6 million, $3.6 million and $2.8 million,
respectively.
F. Financing Arrangements
The Company finalized in August 1992 a $50 million two year unsecured
revolving bank credit facility. The bank credit facility, which was due to
expire in August 1994 and bears interest at the bank's prime rate or two
percent over LIBOR (London Interbank Offered Rate) or the applicable secondary
CD rate, was renewed for $25 million and extended to February 1, 1995. In
addition, the Company is seeking renewal of the remaining $25 million. In
October 1992, the Company finalized a $35 million unsecured private placement
of senior notes with an interest rate of 6.99%. Semi-annual interest payments
on the notes began in April 1993 and annual principal payments of $6.5 million
commence in April 1996 with a final $9.0 million principal payment due in
October 1999. Each of these financing agreements require the Company to
maintain various financial ratios and covenants and with respect to the bank
credit facility, prohibit dividend payments. As of year-end, the Company had
violated certain covenants in the foregoing arrangements with respect to fixed
charge coverage. The Company has obtained waivers and amendments with
respect to such violations and amendments to make such violated covenants less
restrictive for the next fiscal year.
41
<PAGE> 14
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
In connection with issuing the senior notes, the Company entered into
agreements to protect against interest rate increases while preparing the
documentation and completing other activities necessary to obtain fixed
interest rate commitments from the purchasers of the senior notes. The impact
of these arrangements resulting from decreases in interest rates has been
deferred as debt financing costs and are amortized using the interest method
over the term of the senior notes.
Information concerning the Company's short-term borrowings follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------
1993 1992 1991
----------------------------------------------
(amounts shown in thousands)
<S> <C> <C> <C>
Maximum borrowings outstanding
during the period........... $19,950 $29,400 $30,431
Average outstanding balance
during the period........... 5,607 4,092 20,969
Weighted average interest rate
for the period.............. 6.00% 6.00% 8.44%
</TABLE>
G. Joint Venture and Acquisition:
In May 1990, the Company and a watch distributor formed a joint venture
partnership, Big Ben '90. The Company contributed $10.0 million to the
partnership's capital and received a 50.1% controlling interest and,
accordingly, the accounts of the partnership have been consolidated in the
accompanying financial statements.
During September 1991, the Company acquired the remaining minority
interest, in exchange for 2,583,000 newly issued shares of the Company's common
stock. The acquisition was accounted for under the purchase method of
accounting. Proforma consolidated net income for 1991, assuming the
acquisition of the minority interest had occurred as of January 1, 1991, is
$6.7 million ($.27 per share).
H. Income Taxes:
Effective January 1, 1993, the Company adopted SFAS No. 109. SFAS No.
109 supersedes SFAS No. 96, "Accounting for Income Taxes," which the Company
previously used. There was no material effect of adopting SFAS No. 109 on the
Company's financial statements.
42
<PAGE> 15
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
Under SFAS 109, deferred income taxes reflect the net tax effects of
(a) temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes, and (b) operating loss and tax credit carryforwards. The tax
effects of significant items composing the Company's net deferred tax liability
as of January 1, and December 31, 1993 are as follows:
<TABLE>
<CAPTION>
December 31, 1993 January 1, 1993
----------------- ---------------
(amounts shown in thousands)
<S> <C> <C>
Deferred Tax Liabilities:
Difference between book
and tax basis of property $ 331 $ 401
Unrealized gains on hedging,
net 5,483 3,415
Other 34 173
------ ------
5,848 3,989
------ ------
Deferred Tax Assets:
Sales returns and doubtful
accounts allowances not
currently deductible 1,942 1,882
Inventory reserves not
currently deductible 579 ---
Federal net operating loss and
tax credit carryforward 5,084 ---
State net operating loss
carryforward 3,376 ---
Charitable contribution
carryforward 43 ---
Other 1,660 25
------ -------
12,684 1,907
------ -------
Valuation allowance 6,836 ---
------- -------
Net Deferred Tax Liability $ --- $ 2,082
======= =======
</TABLE>
43
<PAGE> 16
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
The components of income (loss) before taxes are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
(amounts shown in thousands)
<S> <C> <C> <C>
Domestic $(51,665) $14,132 $ 7,692
Foreign 4,232 7,325 2,611
------- ------ ------
$(47,433) $21,457 $10,303
======= ====== ======
</TABLE>
The current and deferred income tax components of the provision
(benefit) for income taxes consist of the following:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
(amounts shown in thousands)
<S> <C> <C> <C>
Current:
Federal $(10,170) $ 6,887 $ 3,491
State --- 1,165 601
Foreign 543 875 75
------- ------ ------
(9,627) 8,927 4,167
------- ------ ------
Deferred:
Federal (1,778) (1,917) (1,293)
State (304) (328) (200)
------- ------ ------
(2,082) (2,245) (1,493)
------- ------ ------
$(11,709) $ 6,682 $ 2,674
======== ======= =======
</TABLE>
The provision (benefit) for income taxes varies from the amount computed
by applying the statutory rate for reasons summarized below:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory rate 35.0% 34.0% 34.0%
Benefit of graduated rates (1.0) -- --
State taxes (net of federal
benefit) .4 2.6 2.6
Tax effect of income from
foreign subsidiaries 1.9 (7.5) (8.6)
Tax effect of minority
interest in consolidated
joint return -- -- (2.3)
Valuation allowance (14.4) -- --
Other 2.8 2.0 .2
---- ---- ----
24.7% 31.1% 25.9%
==== ==== ====
</TABLE>
44
<PAGE> 17
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
The Company will have a federal net operating loss carryforward, after
carryback, of approximately $12.6 million and a state net operating loss
carryforward of approximately $48.2 million. The Federal net operating loss
carryforward expires in 2008 and the state net operating loss carry forward
expires beginning in 1998 through 2008. The Company also will have an
alternative minimum tax credit carryforward of $794,000 to offset future
federal income taxes.
At the time the Company purchased Exclusive Diamonds International,
Limited ("EDI") in August of 1990, EDI applied to and received from the Israeli
government under the Capital Investments Law of 1959 "approved enterprise"
status, which results in reduced tax rates given to foreign owned
corporations to stimulate the export of Israeli manufactured products. The
benefit to the Company amounted to approximately $1.2 million or $0.05 per
share, $2.0 million or $0.08 per share, and $1.1 million or $0.05 per share in
1993, 1992, and 1991, respectively. The "approved enterprise" tax benefit
is available to the Company until the year 2000.
The Company has not provided federal and state taxes on approximately
$12.4 million of undistributed earnings of foreign subsidiaries which it
considers invested in such subsidiaries indefinitely. The amount of
unrecognized deferred tax liability on the unremitted earnings of the foreign
subsidiaries at December 31, 1993 approximates $4.6 million exclusive of any
benefit from utilization of foreign tax credits. At December 31, 1993, the
Company has approximately $1.3 million of unrecognized foreign tax credits
which, depending on circumstances, may be available to reduce federal income
taxes on the unremitted earnings of the foreign subsidiaries in the event such
earnings are repatriated.
I. Commitments and Contingencies:
(1) The Company leases approximately 84,000 square feet of office and
warehouse space in various locations. Such leases expire between March 1994
and June 1997. The aggregate commitment under such leases was $1.5 million at
December 31, 1993.
(2) At December 31, 1993 commitments under letters of credit amounted
to $9.0 million.
(3) The Company has entered into employment agreements with certain
employees providing for minimum annual compensation of $2.8 million in the
aggregate between 1994 through 1997. Five of these agreements provide for
additional annual compensation aggregating three and one-half percent of income
before income taxes and after minority interest.
45
<PAGE> 18
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
(4) During 1994, under various licensing and agency agreements, the
Company is obligated to pay minimum amounts approximating $2.7 million in the
aggregate between 1994 through 1998.
(5) The Company has issued warrants to purchase 700,000 shares of
common stock. The warrants expire December 16, 1998 and have an exercise
price of $24.70.
(6) In connection with the acquisition of EDI, the Company entered
into non-compete agreements with the prior owners which provide for the
issuance of an aggregate of 317,881 shares of the Company's common stock over
five years commencing August 1991. During 1991, 1992 and 1993, 63,688 shares
valued at $550,000 were issued each year.
J. Legal Proceedings and Other Costs:
The Company is from time to time involved in litigation incident to the
conduct of its business. While it is not possible to predict with certainty
the outcome of such matters, management believes that all litigation currently
pending to which the Company is a party will not have a material adverse
effect on the Company's financial position and results of operations.
Other costs in 1991 include expenses of $2.0 million incurred as a
result of the terminated acquisition of Michael Anthony Jewelers, Inc. in
August of that year. Such costs include legal, accounting, investment banking
and certain compensation related expenses. Additionally, $4.4 million in other
costs reflects the expense for the settlement of the class action litigation
which includes the amounts of cash paid, legal and other professional expenses,
estimated value of the warrants issued, and certain costs which resulted from
terminated customer relationships that were involved in the litigation.
Included in Other Costs in 1993 are the $6.0 million in charges
discussed in Note B related to the Sam's agreement and retail transition.
Also included are compensation costs of $4.2 million in connection with the
departure of Mr. Mills as Chairman of the Board of Directors on March 29, 1994,
consisting primarily of the acceleration of vesting of previously granted stock
bonus awards and amounts due under his employment contract.
K. Stock Benefit Plans:
The Company maintains various stock option, bonus and purchase plans
for the benefit of its employees, officers, directors and certain third
parties. A summary of the activity in the stock option plans is as follows:
46
<PAGE> 19
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
<TABLE>
<CAPTION>
STOCK
OPTION PLANS
SHARES PRICE
--------------------------------
<S> <C> <C>
Outstanding, December 31, 1990 1,057,500 $ 7.88-14.09
Granted 484,500 $ 9.63-14.50
Exercised ( 126,819) $ 7.88-14.09
Expired/cancelled --- ---
--------------------------------
Outstanding, December 31, 1991 1,415,181 $ 7.88-14.50
Granted 537,500 $13.50-14.50
Exercised ( 844,178) $ 7.88-14.09
Expired/cancelled ( 62,123) ---
--------------------------------
Outstanding, December 31, 1992 1,046,380 $ 7.88-14.50
Granted 954,675 $ 9.00-19.63
Exercised (37,580) $ 7.88-13.25
Expired/cancelled (92,286) $ 7.88-13.50
--------------------------------
Outstanding, December 31, 1993 1,871,189 $ 7.88-19.63
================================
Shares reserved under
the Plans 3,497,609
=========
</TABLE>
As of December 31, 1993, options to purchase 596,743 shares were
exercisable.
Bonus shares have been granted to various executive officers.
Deferred compensation relating to these plans is included in stockholders'
equity and is being amortized to expense over the term of the agreements.
A total of 562,500 shares are reserved for issuance under the Employee
Stock Purchase Plan of which 12,236, 12,101, and 4,142 shares were issued
during the years ended December 31, 1993, 1992 and 1991, respectively.
L. Fair Value of Financial Instruments:
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value.
47
<PAGE> 20
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that would be realized in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
(1) Cash and Cash Equivalents, Accounts Receivable, Accounts Payable,
Accrued Expenses, and Liability for Inventory Repurchased -- The carrying
amount of these items are a reasonable estimate of their fair value.
(2) Long Term Debt -- The present value of the future principal and
interest payments on the senior notes issued in October, 1992 is used to
estimate fair value for this debt which is not quoted on an exchange. The
notes have a net book value of $33.5 million and are estimated to have a fair
value at December 31, 1993 and 1992 of approximately $36.2 million and $37.0
million, respectively.
(3) Gold Futures Contracts -- The fair value of gold futures contracts
is the amount at which they could be settled, based on market prices on
commodity exchanges. At December 31, 1993 and 1992 open gold futures
contracts are included in the financial statements at their fair value which
approximates $13.2 million and $9.9 million, respectively.
(4) Letters of Credit -- Letters of credit principally support
corporate obligations. At December 31, 1993, $4.1 million of commercial
letters of credit expire within a 30 day period, and $4.9 million of standby
letters of credit expire within a 120 day period. At December 31, 1992, $2.0
million of commercial letters of credit expired within a 30 day period, and
$1.1 million of standby letters of credit expired within a 334 day period.
The estimated fair value, which is estimated using fees currently charged
for similar arrangements, is insignificant.
48
<PAGE> 21
JAN BELL MARKETING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(continued)
M. Selected Quarterly Financial Data (unaudited):
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------------
March 31, June 30, September 30, December 31,
------------- ---------- --------------- --------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
1993
Net Sales...................... $ 45,571 $ 49,845 $ 42,601 $ 137,160
Less: Effect of Sam's
agreement (1)................. 77,052 --- --- 22,666
------- ------- ------- -------
(31,481) 49,845 42,601 114,494
------- ------- ------- -------
Cost of sales.................. 36,934 41,319 36,547 130,510
Less: Effect of Sam's
agreement (1)................. 58,945 --- --- 20,742
------- ------- ------- -------
(22,011) 41,319 36,547 109,768
------- ------- ------- -------
Gross Profit (loss)............ ( 9,470) 8,526 6,054 4,726
Net Income (loss) (2).......... (10,154) 181 (2,887) (22,864)
Net income (loss) per Common
Share......................... ( .40) .01 ( .11) ( .90)
1992
Net Sales...................... $ 40,010 $ 60,736 $ 80,014 $ 152,761
Gross Profit................... 7,473 11,417 15,529 22,230
Net Income..................... 1,399 2,926 4,665 5,785
Income per Common Share........ .06 .12 .19 .23
</TABLE>
(1) As a result of the new agreement with Sam's, the Company recorded a sales
reversal of $99.7 million for the amount of inventory previously sold by
Jan Bell to Sam's which became subject to repurchase. In addition, cost
of sales was reduced by $79.7 million resulting in a $20.0 million
one-time charge to pre-tax earnings. In the first quarter of 1993, the
Company had estimated the amount of inventory subject to repurchase at
$77.1 million and the related cost of sales at $59.0 million which
resulted in an $18.1 million one-time charge to pre-tax earnings.
(2) Pre-tax income in the fourth quarter of 1993 was decreased by (a)
Other Costs consisting of $5.2 million of one-time charges related to the
Sam's agreement and other retail transition costs, and compensation
expense of $4.2 million related to the departure of the Company's
Chairman of the Board and (b) adjustments for slow-moving and damaged
inventory and shrinkage of approximately $8.5 million.
49
<PAGE> 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no Form 8-K filed within 24 months prior to the date of
the most recent financial statements reporting a change of accountants or
reporting disagreements on any matter of accounting principle or financial
statement disclosure.
PART III
ITEMS 10 THROUGH 13.
Within 120 days after the close of the fiscal year, the Company intends
to file with the Securities and Exchange Commission a definitive proxy
statement pursuant to Regulation 14A which will involve the election of
directors. The answers to Items 10 through 13 are incorporated by reference
pursuant to General Instruction G(3); provided, however, the Compensation
Committee Report, the Performance Graphs, and all other items of such report
that are not required to be incorporated are not incorporated by reference into
this Form 10-K or any other filing with the Securities and Exchange Commission
by the Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. The following is a list of the financial
statements of Jan Bell Marketing, Inc. included in Item 8 of Part II.
Independent Auditors' Report.
Consolidated Balance Sheets - December 31, 1993 and 1992.
Consolidated Statements of Operations - Years Ended December 31, 1993, 1992 and
1991.
Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1993, 1992 and 1991.
Consolidated Statements of Cash Flows - Years Ended December 31, 1993, 1992 and
1991.
Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules. The following is a list of financial
statement schedules filed as part of this annual report on Form 10-K: Schedule
II and Schedule VIII. All other schedules are omitted because they are not
applicable, or not required, or because the required information is included
in the financial statements or notes thereto.
50
<PAGE> 23
(a)(3) The following list of schedules and exhibits are incorporated
by reference as indicated in this Form 10-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
2.1 - Acquisition of Joint Venture Interest. Incorporated by reference from Company's Form 8-K filed in October
1991.
3.1 - Certificate of Incorporation. Incorporated by reference from Company's Form S-1 (No. 33-15347) declared
effective in August 1987.
3.2 - Bylaws. Incorporated by reference from Company's Form 8-K filed in July 1993.
4.1 - Specimen Certificate. Incorporated by reference from Company's Form 10-K filed in March 1991.
4.2 - Jan Bell Marketing, Inc. 1987 Stock Option Plan. Incorporated by reference from Company's Form 10-K filed
in March 1991.
4.3 - Jan Bell Marketing, Inc. Employee Stock Purchase Plan. Incorporated by reference from Company's Form 10-K
filed in March 1991.
4.4 - Jan Bell Marketing, Inc. 1990 Stock Bonus Plan. Incorporated by reference from Company's Form 10-K filed
in March 1991.
4.5 - Jan Bell Marketing, Inc. 1991 Stock Bonus Plan. Incorporated by reference from Company's Definitive Proxy
Statement filed in April 1991.
4.6 - Jan Bell Marketing, Inc. 1991 Stock Option Plan. Incorporated by reference from Company's Definitive Proxy
Statement filed in April 1993.
10.1 - Employment Agreement dated August 1, 1991 between Alan Lipton and the Company. Incorporated by reference
from Company's Form 10-K filed in March 1992.
10.2 - Amended Employment Agreement dated August 1, 1991 between Lee Mills and the Company. Incorporated by
reference from Company's Form 10-K filed in March 1992.
10.3 - Employment Agreement dated May 1, 1991 between Richard Bowers and the Company. Incorporated by reference
from Company's Form 10-K filed in March 1992.
10.4 - Form of Indemnification Agreement. Incorporated by reference from Company's Form S-1 (No. 33-26947)
declared effective in February 1989.
10.5 - Credit Agreement dated August 6, 1992. Incorporated by reference from Company's Form 10-Q filed in
November 1992.
10.6 - Note Purchase Agreement dated October 8, 1992. Incorporated by reference from Company's Form 10-Q filed in
November 1992.
10.7 - Agreement with Sam's dated July 19, 1993. Incorporated by reference from Company's 8-K filed in July 1993.
10.8 - Employment Agreement dated May 4, 1993 between Frank S. Fuino, Jr. and the Company.
10.9 - Addendum to Sam's Agreement dated July 19, 1993.
10.10 - Waiver and First Amendment to Note Purchase Agreement dated
October 8, 1992.
10.11 - Waiver and Second Amendment to Note Purchase Agreement
dated October 8, 1992.
10.12 - Modification to Credit Agreement dated August 6, 1992.
21.1 - Subsidiaries of Registrant:
Wholly-owned subsidiaries of the Company include JBM Venture Co., Inc., JBM Retail Company, Inc., Delaware
corporations, Exclusive Diamonds International, Ltd., an Israeli company, Jan Bell de Mexico, S.A. de C.V., and
Elico Mexicana, a Mexican corporation, and Jan Bell Marketing/Puerto Rico, Inc., a Puerto Rican corporation.
23.1 - Consent of Deloitte & Touche
(b) Reports on Form 8-K. The Company filed reports on Form 8-K during the fourth quarter ending December 31, 1993
as follows:
None
</TABLE>
51
<PAGE> 24
SCHEDULE II.
JAN BELL MARKETING, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER
THAN RELATED PARTIES
(Amounts shown in thousands)
<TABLE>
<CAPTION>
Balance at Balance
Beginning Amounts at End
Name of Debtor of Period Additions Deductions Written Off of Period
- -------------- ---------- --------- ---------- ----------- ---------
Richard Bowers
<S> <C> <C> <C> <C> <C>
Year Ended:
December 1991 -- $ 125 -- -- $ 125
December 1992 $ 125 -- $ 125 -- --
</TABLE>
52
<PAGE> 25
SCHEDULE VIII.
JAN BELL MARKETING, INC.
VALUATION AND QUALIFICATION ACCOUNTS
(Amounts shown in thousands)
<TABLE>
<CAPTION>
Charged to
Beginning Costs and Ending
Description Balance Expenses Deductions Balance
- ----------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
December 31, 1991
Allowance for Doubtful
Accounts $ 30 -- -- $ 30
Allowance for Sales
Returns $2,232 6,901 5,913 $3,220
December 31, 1992
Allowance for Doubtful
Accounts $ 30 200 -- $ 230
Allowance for Sales
Returns $3,220 7,145 5,590 $4,775
December 31, 1993
Allowance for Doubtful
Accounts $ 230 594 74 $ 750
Allowance for Sales
Returns $4,775 24,531 26,628 $2,678
Allowance for Damaged and
slow moving Inventory $ 300 1,700 -- $2,000
</TABLE>
53
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
------------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C> <C>
SEE PAGE 51 FOR A COMPLETE LIST OF EXHIBITS FILED,
INCLUDING EXHIBITS INCORPORATED BY REFERENCE FROM
PREVIOUSLY FILED DOCUMENTS.
10.8 - Employment Agreement dated May 4, 1993 between Frank S. Fuino, Jr. and the Company.
10.9 - Addendum to Sam's Agreement dated July 19, 1993.
10.10 - Waiver and First Amendment to Note Purchase Agreement
dated October 8, 1992.
10.11 - Waiver and Second Amendment to Note Purchase Agreement
dated October 8, 1992.
10.12 - Modification to Credit Agreement dated August 6, 1992.
21.1 - Subsidiaries of Registrant:
Wholly-owned subsidiaries of the Company include JBM Venture Co., Inc., JBM Retail
Company, Inc., Delaware corporations, Exclusive Diamonds International, Ltd., an
Israeli company, Jan Bell de Mexico, S.A. de C.V., and Elico Mexicana, a Mexican
corporation, and Jan Bell Marketing/Puerto Rico, Inc., a Puerto Rican corporation.
23.1 - Consent of Deloitte & Touche
</TABLE>
54
<PAGE> 1
EXHIBIT 10.9
ADDENDUM
This Addendum is entered into as of, and is to be deemed effective,
on March 30, 1994 (hereinafter the "Addendum"), between SAM'S CLUB, a division
of Wal-Mart, Inc. (hereinafter "Sam's") and JBM RETAIL COMPANY, INC.
(hereinafter "Jan Bell").
WHEREAS, the parties hereto have entered into an Agreement dated July
19, 1993 (the "Agreement"); and
WHEREAS, Sam's and Jan Bell now desire to amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants contained herein, Jan Bell and Sam's agree as follows:
Section 3.,Term. of the Agreement is hereby deleted in its entirety
and the following language is inserted in its place:
3. Term.
(a) Subject to the provisions of Section 18, the primary term of
this Agreement shall commence on the Commencement Date and shall
continue until February 1, 2001 ("Primary Term").
(b) The Primary Term of this Agreement can be extended for one (1)
successive five (5) year period following February 1, 2001 by the
party desiring to extend the Agreement giving the other party notice
of this desire at least one hundred eighty (180) days prior to the
expiration of the Primary Term; however, the receiving party of the
notice shall have thirty (30) days to notify the other party in
writing of its desire to terminate the Agreement and the Agreement
shall be terminated.
Sections 1. through 2. and 4. through 25. of the Agreement, included
and made a part hereof by reference in this Addendum, remain unchanged and in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum by
their duly authorized officers as of the date set forth above.
JBM RETAIL COMPANY, INC. SAM'S CLUB
By: /s/ Alan Lipton By: /s/ Dean Sanders
----------------- -----------------
Alan Lipton, President Dean Sanders
President and
Chief Executive
Officer
64
<PAGE> 1
EXHIBIT 10.10
WAIVER AND FIRST AMENDMENT
WHEREAS each of Metropolitan Life Insurance Company, Texas Life
Insurance Company and The Great-West Life Assurance Company (collectively the
"Holders") is a holder of the 6.99% Senior Notes (the "Notes") of Jan Bell
Marketing, Inc., a Delaware corporation (the "Company"); and
WHEREAS the several Note Purchase Agreements (collectively the
"Agreements") pursuant to which the Notes have been issued provide for
consents, waivers and amendments of any provision of the Agreements or the
Notes upon the consent of the Holders of all outstanding Notes; and
WHEREAS the Company has requested that this First Waiver and Amendment
be entered into in light of the facts and circumstances referred to in Section
1 hereof,
NOW THEREFORE the Holders and the Company agree as follows, all terms
not separately defined herein having the meaning given them in the Agreements:
1. Background. The Company has entered into an agreement dated
July 19, 1993 with one of its Key Customers, Sam's Wholesale Club ("Sam's"),
pursuant to which the Company will operate leased departments in certain Sam's
locations and, in respect of such locations, will no longer sell inventory to
Sam's for re-sale by it. The Company has informed the Holders that the
repurchase of inventory currently owned by Sam's resulted in a one-time charge
to earnings for the quarter ended March 31, 1993 and such arrangement has
resulted in a Loss of Key Customer. The Company has further informed the
Holders that the One-Time Charge (as hereinafter defined) has caused the
Company not to be in compliance with the provisions of Section 8.8 as of the
end of the Company's fiscal quarter ended June 30, 1993. The Company has
further informed the Holders that (a) it requires this Waiver and First
Amendment only in respect of the One-Time Charge to earnings in the quarter
ended March 31, 1993 and not in respect of any charges which may be taken in
any other fiscal period and (b) the amount of such One-Time Charge (together
with any adjustments thereof required to be made in connection with any audit
of the Company's financial statements which includes that fiscal quarter) shall
not exceed $20,000,000 in the aggregate. The One-Time Charge in the quarter
ended March 31, 1993 as so adjusted and limited is referred to herein as the
"One-Time Charge."
65
<PAGE> 2
In light of the foregoing, the Company has requested the waivers and
amendments referred to below.
2. Requested Waiver. At the request of the Company, the Holders
hereby waive the following defaults:
(a) default under Section 6.4 of the Agreements inasmuch
as the agreement with Sam's with respect to leased departments
and the consequent reduction of sales to Sam's constituted a
Loss of Key Customer upon the occurrence of which the Company
did not make an offer to prepay any Notes;
(b) default under Section 8.8 of the Agreements occurring
solely by reason of the fact that the One-Time Charge has
caused the ratio of Consolidated Net Income Available For
Fixed Charges to Fixed Charges, during four consecutive of the
five fiscal quarters ended June 30, 1993, to be less than 2:1;
(c) default under Section 5.1(e) insofar as the Company
failed to give written notice, as required, of the defaults
referred to above.
3. Amendment of Section 8.8 of the Agreements. Section 8.8 of
the Agreements is hereby amended by adding at end thereof the following:
"For the purposes of this Section 8.8, there shall be
disregarded in the calculation of Consolidated Net Income Available
for Fixed Charges a charge to earnings in the quarter ended March 31,
1993 arising out of the repurchase of inventory pursuant to an
agreement between the Company and Sam's Wholesale Club dated July 19,
1993 but only to the extent such charge (together with any adjustments
thereof required to be made in connection with any audit of the
Company's financial statements which includes that fiscal quarter),
shall not exceed $20,000,000 in the aggregate.
4. Amendment of Section 10 of the Agreements. Section 10 of the
Agreements is hereby amended by adding a new definition, to read as follows:
(a) "Customer" shall mean any Person (i) to whom the
Company or a Restricted Subsidiary sells products of the
Company for resale by such person or (ii) which operates a
retail establishment in which the Company or a Restricted
Subsidiary leases floor space (or floor space and related
inventory storage area) for the operation by the Company or a
Restricted Subsidiary of an entire "leased department" (as
that term is commonly understood
66
<PAGE> 3
in the retail merchandising business) pursuant to a written
agreement entered into by the Company or such Restricted
Subsidiary."
(b) The definition of "Key Customer" shall be amended to
read, in relevant part, as follows: "'Key Customer' means any
Customer of the Company..."
(c) The definition of "Loss of Key Customer" shall be
amended by inserting after the words "a level" in line six
thereof the following: "such that the aggregate of (i) all
orders placed by such Customer and (ii) all sales made by the
Company and its Restricted Subsidiaries in "leased
departments" (as that term is commonly understood in the
retail merchandising business), after deduction of all amounts
required to be paid pursuant to any lease or other agreement
relating to the leased department (whether or not designated
as rent or as additional rent) on account of maintenance,
repairs, insurance, taxes, assessments, utilities, percentage
rentals and similar charges in respect of such leased
departments, shall be less than 50% of the level of all such
orders and sales during the four fiscal quarters preceding the
giving of such notice..." and shall be further amended to the
extent that the references to "orders" in lines eight and ten
shall each be exchanged to "such orders and sales."
5. Limited Waiver and Amendment. Nothing in this First Waiver
and Amendment shall be deemed (a) to waive any default or Event of Default
which may have occurred or may in the future occur other than those occurrences
and defaults which are specifically described in Section 2 hereof or (b) to
amend the Agreements, or any provision thereof, other than to the extent
specifically set forth in Sections 3 and 4 hereof.
6. Expenses. The Company shall pay, and hold the Holders
harmless against the payment of, all expenses incurred by any of the Holders in
connection with this Waiver and First Amendment and the preparation, execution
and delivery hereof, as provided in Section 12.1 of the Agreements.
7. Governing Law. This First Waiver and Amendment shall be
governed by the laws of the State of New York.
8. Counterparts. This First Waiver and Amendment may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this First Waiver
and Amendment to produce or account for more than one such counterpart.
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<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Waiver and
First Amendment as of this 30th day of August, 1993.
JAN BELL MARKETING, INC.
By: /s/ Frank S. Fuino, Jr.
-----------------------
Frank S. Fuino, Jr.
Title: Executive Vice
President Finance
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ Thomas S. Lenihan
----------------------
Thomas S. Lenihan
Title: Vice President
TEXAS LIFE INSURANCE COMPANY
By: /s/ Steven Auppler
----------------------
Steven Auppler
Title: Senior Vice President
THE GREAT-WEST LIFE
ASSURANCE COMPANY
By: /s/ Wayne Hoffman
----------------------
Wayne Hoffman
Title: Vice President
Private Placement
Investments
By: /s/ E.A. Marr
----------------------
E.A. Marr
Title: Assistant Vice
President Private
Placement Investments
68
<PAGE> 1
EXHIBIT 10.11
WAIVER AND SECOND AMENDMENT
WHEREAS each of Metropolitan Life Insurance Company, Texas Life
Insurance Company and The Great-West Life Assurance Company (collectively the
"Holders") is a holder of the 6.99% Senior Notes (the "Notes") of Jan Bell
Marketing, Inc., a Delaware corporation (the "Company"); and
WHEREAS the several Note Purchase Agreements, as amended by a Waiver
and First Amendment (collectively the "Agreements") pursuant to which the Notes
have been issued provide for consents, waivers and amendments of any provision
of the Agreements or the Notes upon the consent of the Holders of Notes; and
WHEREAS the Company has requested that this Waiver and Second
Amendment be entered into in light of the facts and circumstances referred to
in Section 1 hereof,
NOW THEREFORE the Holders and the Company agree as follows, all terms
not separately defined herein having the meaning given them in the Agreements,
as amended:
1. Background. The Company entered into an agreement dated July
19, 1993 with one of its Key Customers, Sam's Wholesale Club ("Sam's"). That
agreement occasioned a Waiver and First Amendment among the Holders and the
Company relating to a One Time Charge (as defined in the Waiver and First
Amendment) to earnings for the quarter ended March 31, 1993. The Company has
informed the Holders that a further charge to earnings has occurred in the
fiscal quarter ended December 31, 1993 (the "Fourth Quarter Charge"), as a
result of which the Company will not be in compliance with the provisions of
Section 8.8 as of the end of the Company's fiscal quarter ended December 31,
1993. The Company has further informed the Holders that the amount of such
Fourth Quarter Charge (together with any adjustments thereof required to be
made in connection with any audit of the Company's financial statements which
includes that fiscal quarter) shall not exceed $13,000,000 in the aggregate.
2. Representations and Warranties. The Company repeats and
reaffirms, as though made on and as of the date of this Waiver and Second
Amendment, the representations and warranties made in the Agreements in
Sections 2.1 (but with respect to all fiscal periods ended on or before
December 31, 1993), 2.2 (but with respect to all Annual Reports on Form 10-K
for fiscal years ended on or before December 31, 1993) 2.3, 2.4, 2.5, 2.6, 2.7,
2.8, 2.9, 2.10, 2.12, 2.13 (but the date referred to in the last sentence
thereof shall be deemed to be "December 31, 1990"), 2.14 and 2.15.
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<PAGE> 2
3. Requested Waiver. At the request of the Company, the Holders
hereby waive the following defaults:
(a) default under Section 8.8 of the Agreements occurring
solely by reason of the fact that the One Time Charge, the Fourth Quarter
Charge and operating losses for the year may cause the ratio of Consolidated
Net Income Available For Fixed Charges to Fixed Charges during four consecutive
of the five, fiscal quarters ended January 29, 1995, to be less than 2:1;
(b) default under Section 5.1(e) insofar as the Company
failed to give written notice, as required, of the default referred to above.
4. Amendment of the Agreements.
(a) Section 5.1 is hereby amended by deleting the word
"and" at the end of subsection "(g)," renumbering subsection "(h)" thereof as
subsection "(i)" and adding a new subsection "(h)" to read as follows:
(h) promptly upon receipt thereof, a copy of each
other report (including, without limitation, any
reports to management on internal controls) submitted
to the Company or any of its Subsidiaries by
independent accountants in connection with any
annual, interim or special audit made by them of the
books of the Company or any such Subsidiary; and
(b) Section 8.1 of the Agreements is hereby amended to
read as follows:
8.1 Indebtedness.
Neither the Company nor any Restricted Subsidiary
will be liable for or cause or permit to exist,
contingently or otherwise and whether by creation,
assumption, incurrence or otherwise, any Indebtedness
unless (a) such Indebtedness shall be permitted by
Section 8.2 through 8.6 and (b) Consolidated Total
Indebtedness shall not be more than (i) 50% of
Consolidated Total Capitalization at any time prior
to January 29, 1995 or (ii) 65% of Consolidated Total
Capitalization at any time thereafter.
(c) Section 8.8 of the Agreements is hereby amended to
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<PAGE> 3
read as follows:
8.8 Maintenance of Fixed Charges Coverage;
Consolidated Net Earnings Before Taxes. (a) The
Company will at all times after January 29, 1995,
cause the ratio of (i) Consolidated Net Income
Available For Fixed Charges for four consecutive
fiscal quarters of the five most recently completed
fiscal quarters (such four quarters to be taken as a
whole) to (ii) the aggregate amount of Fixed Charges
of the Company and its Subsidiaries for each such
period of four consecutive fiscal quarters (taken as
a whole) to be not less than 2:1, all as determined
in accordance with Generally Accepted Accounting
Principles consistently applied.
(b) The Company shall, in the periods described
below, cause Consolidated Net Earnings Before Taxes
to be not less than:
(i) ($8,500,000) during the fiscal quarter
ending April 30, 1994;
(ii) ($11,000,000) during the two fiscal
quarters ending July 30, 1994, taken as a
single period;
(iii) ($13,000,000) during the three fiscal
quarters ending October 9, 1994, taken as a
single period; and
(iv) $1.00 during the fiscal year ending
January 29, 1995.
(d) Section 10 is hereby amended by adding thereto a new
definition, to read as follows:
"Consolidated Net Earnings Before Taxes"means, with
respect to any period, Consolidated Net Income for
such period plus all amounts deducted in the
computation thereof on account of income taxes in
respect of Consolidated Net Income.
5. Limited Waiver and Amendment. Nothing in this Waiver and
Second Amendment shall be deemed (a) to waive any default or Event of Default
which may have occurred or may in the future occur other than those occurrences
and defaults which are specifically described in Section 3 hereof or (b) to
amend the Agreements, or any provision thereof, other than to the extent
specifically set forth in Section 4 hereof.
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<PAGE> 4
6. Fees and Expenses.
(a) The Company shall pay, and hold the Holders harmless
against the payment of, all expenses incurred by any of the Holders in
connection with this Waiver and Second Amendment and the preparation, execution
and delivery hereof, as provided in Section 12.1 of the Agreements.
(b) The Company shall pay to the Holders of the Notes,
pro rata according to the principal amount of Notes held by each, a Waiver and
Amendment fee of $70,000.00.
7. Governing Law. The Waiver and Second Amendment shall be
governed by the law of the State of New York.
8. Counterparts. This Waiver and Second Amendment may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, and it shall not be necessary in making proof of this
Waiver and Second Amendment to produce or account for more than one such
counterpart.
IN WITNESS WHEREOF, the undersigned have executed this Waiver and
Second Amendment as of this 30th day of March, 1994.
JAN BELL MARKETING, INC.
By: /s/ Frank S. Fuino, Jr.
-----------------------
Frank S. Fuino, Jr.
Title: Executive Vice
President Finance
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ John Endres
-----------------------
John Endres
Title: Vice President
TEXAS LIFE INSURANCE COMPANY
By: /s/ Bradley Rhoads
-----------------------
Bradley Rhoads
Title: Authorized Signatory
THE GREAT-WEST LIFE
ASSURANCE COMPANY
By: /s/ E.A. Marr
-----------------------
E.A. Marr
Title: Assistant Vice
President Private
Placement Investments
By: /s/ Wayne Hoffman
-----------------------
Wayne Hoffman
Title: Vice President
Private Placement
Investments
72
<PAGE> 1
EXHIBIT 10.12
SunBank/Miami, N.A.
Corporate Banking Division
777 Brickell Avenue
Miami, Florida 33131
March 25, 1994
Mr. Frank Fuino
Senior Vice President
Jan Bell Marketing, Inc.
13801 NW 14th Street
Sunrise, Florida 33323
Dear Frank:
SunBank/Miami N.A. hereby agrees to modify our present credit agreement with
Jan Bell Marketing, Inc., as follows:
1. The amount of the facility is hereby reduced from
$50,000,000.00 to $25,000,000.00.
2. The expiry is hereby extended from August 1, 1994 to February
1, 1995.
3. Paragraph 5.9 of our Current Agreement relating to a minimum
Fixed Charge Coverage ratio is hereby eliminated.
4. A new covenant will be added that will set a ceiling on
pre-tax losses of $8,500,000 for the quarter ending April 30,
1994, $11,000,000 for the six-months ending July 30, 1994 and
$13,000,000 for the nine-months ending October 29, 1994. At
January 28, 1995, Jan Bell will be required to show at least a
break-even position on a pre-tax basis for the year then
ended.
5. Paragraph 5.1 of our current agreement will be modified to
eliminate the payment of dividends during the fiscal year
ending January 28, 1995.
6. Paragraph 4.17 of our current agreement will be modified such
that the termination of Jan Bell's agreement with Sam's to
operate leased departments in all Sam's stores through
February 2, 1999, shall be an event of default and all
obligations under this line must be fully re-paid and/or cash
collateralized within thirty (30) days from the date of
written notification from Jan Bell that such an event has
occurred. Jan Bell shall have five (5) days to provide such
notice.
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<PAGE> 2
MR. FRANK FUINO
MARCH 25, 1994 Page 2
7. Should Jan Bell be in violation of any of the covenants
contained within our agreement, the Company's interest rate
will increase by 50 basis points for the duration of our
commitment.
8. The full availability under this line of credit will be
available for commercial import letters of credit, having an
expiry of no later than February 1, 1995.
Through August 1, 1994, standby letters of credit will be
limited to $4,000,000. Effective August 2, 1994, standby
letters of credit are not to exceed $500,000.
All outstanding letters of credit, both commercial and
standby, will be 100% reserved against availability under the
line of credit. Direct borrowings under the line will be
limited to the amount of the line less any outstanding letters
of credit, either commercial or standby.
All other terms and conditions of our Credit Agreement dated August 6,
1992, and The First Modification To Credit Agreement dated January 24,
1994, remain in effect and binding upon the parties. In any instance
where the above agreements and this letter appear to be contradictory,
the terms and conditions of this letter shall govern.
Sincerely,
/s/ Jerry D. Weisman
- --------------------
Jerry D. Weisman
Vice President
cc: Alan Lipton
Richard Bowers
74
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-20026, 33-20031, 33-42410, 33-42419, 33-44025 and 33-45778 of Jan Bell
Marketing, Inc. on Form S-8 of our report dated March 31, 1994, appearing
in this Annual Report on Form 10-K of Jan Bell Marketing, Inc. for the year
ended December 31, 1993.
/s/ DELOITTE & TOUCHE
Certified Public Accountants
Fort Lauderdale, Florida
March 31, 1994
Exhibit 23.1
76
