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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 8-K
_____________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 18, 1999
Friedman's Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-22356 58-20583
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4 West State Street
Savannah, Georgia 31401
(Address of principal executive offices)
912-233-9333
(Registrant's telephone number, including area code)
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Item 5. Other Events.
5.1 Attached hereto as Exhibit 99.1 and incorporated by reference herein is
financial information for Friedman's Inc. for the quarter and fiscal year ended
September 30, 1999, and forward-looking statements relating to fiscal year 2000
as presented in a press release dated as of November 18, 1999.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits:
99.1 Financial information for Friedman's Inc. for the quarter and fiscal year
ended September 30, 1999 and forward looking statements relating to fiscal year
2000.
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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 hereunto duly authorized.
Friedman's Inc.
(Registrant)
Date: November 24, 1999 By: /s/ Victor M. Suglia
------------------------
Victor M. Suglia
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
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EXHIBIT 99.1
Friedman's Inc. Announces Results for the Quarter And Year Ended September 30,
1999
SAVANNAH, Ga., Nov. 18 /PRNewswire/ -- Friedman's Inc. (Nasdaq: FRDM -
news), a leading specialty retailer of fine jewelry, today announced financial
results for the quarter and fiscal year ended September 30, 1999.
The Company also announced that it is changing an accounting policy
relating to revenue recognition for diamond and gold bond products. The decision
to change the Company's policy is based on its observations of accounting
practices in the retail industry and concerns raised by the accounting staff of
the Securities and Exchange Commission in its public announcements. While the
Company has not received any comments on its revenue recognition policies from
the SEC, management nevertheless believes that it is appropriate to adjust its
policy based upon the above factors. In consultation with its independent public
accountants, Ernst & Young, LLP, it has concluded that the revenue for the sale
of its diamond and gold bond products should be deferred and recognized ratably
over the estimated life of the contract. The Company's previous policy was to
recognize these revenues at the time of the sale.
The Company will give retroactive effect to this new accounting policy in
its financial statements beginning with the fiscal year ended September 30,
1995. This change in accounting policy impacts the timing of recognizing
revenues, but has no impact on the Company's cash flows. As a result of the
change in policy, diluted earnings per share is reduced by $0.04 in both fiscal
1999 and 1998, respectively.
For the fourth fiscal quarter ended September 30, 1999, net merchandise
sales increased 15.0%, to $51.6 million from $44.9 million in the comparable
period last year. Comparable store sales increased 3.5% during the fourth fiscal
quarter. Total revenues increased 15.6%, to a record $62.5 million in the fourth
quarter versus a restated $54.1 million during the same period in 1998. The
Company opened 27 net new stores during the fourth fiscal quarter and at
September 30, 1999, had 531 stores in operation.
The Company incurred a net loss for the fourth fiscal quarter of $1.0
million, a decrease from a restated net loss of $6.8 million during the same
period in 1998. Diluted earnings per share improved to a loss of $0.07 per share
from a prior year restated loss of $0.46 per share in the fourth quarter of
fiscal 1998.
For the fiscal year ended September 30, 1999, net merchandise sales
increased 18.2%, to $296.1 million from $250.5 million during the comparable
period last year. Comparable store sales increased 8.7% for the fiscal year
ended September 30, 1999. Total revenues increased 18.5%, to a record $339.2
million from a restated $286.2 million during the same period in 1998.
Net income for the fiscal year ended September 30, 1999 increased 55.6%, to
$16.5 million from a restated $10.6 million during the same period in 1998.
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Diluted earnings per share for the fiscal year ended September 30, 1999
increased 56.9%, to $1.13 per share, compared to a restated $0.72 per share, for
the comparable period last year.
The table below summarizes the operating results for the fiscal years ended
September 30, 1999 and 1998.
(amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended
September 30,
1999 1998* % Increase
<S> <C> <C> <C>
(Decrease)
Net Merchandise Sales $296.1 $250.5 18.2%
Total Revenue 339.2 286.2 18.5%
Income from Operations 27.4 18.0 52.3%
Net Income 16.5 10.6 55.6%
Diluted Earnings Per Share $ 1.13 $ 0.72 56.9%
Weighted Average Shares
Outstanding 14.6 14.8 (1.2%)
Number of Stores 531 471 12.7%
Credit Data**
Allowance as a Percent of
Receivables 10.0% 10.5% (0.5%)
Currency*** 84.0% 80.5% 3.5%
Delinquency 90+ Days Past Due 4.7% 7.1% (2.4%)
</TABLE>
(*) Restated.
(**) As of September 30, 1999 and 1998, respectively.
(***) Percentage of accounts receivable less than 30 days past due.
Commenting on the results, Bradley J. Stinn, President and Chief Executive
Officer of Friedman's, said, "Entering fiscal 1999 our goals were to improve
the daily execution of our business formula and to deliver improved
profitability. We believe that our financial results in fiscal 1999 demonstrate
achievement of these objectives: income from operations increased 52.3%;
earnings per share increased 56.9%; and, return on average equity (after-tax)
increased to 8.9% from 6.1% in fiscal 1998. In addition, total debt outstanding
was reduced 57.9%, from $67.0 million at September 30, 1998 to $28.2 million at
September 30, 1999. Furthermore, we made significant investments during fiscal
1999 in building our management team and installing new systems that we expect
to benefit us as we go forward."
On September 15, 1999, the Crescent Jewelers restructuring transaction
closed, resulting in the repayment of Friedman's $25 million investment (plus
all accrued interest) and a continuing strategic relationship with Crescent. As
part of this transaction, Friedman's received a 15 year warrant for 50% of
Crescent's equity and, in exchange for
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credit enhancement related to Crescent's line of credit, a guarantee fee of 2%
per annum of amounts outstanding under Crescent's line of credit.
Mr. Stinn, who is also the Chief Executive Officer of Crescent, said, "The
restructuring transaction completed in September has given Crescent the ability
to restock its inventory for the current Christmas season and beyond. Crescent's
merchandise in-stock positions are currently at the highest levels in several
years."
The table below presents certain financial and operating information
regarding Crescent Jewelers.
Crescent Jewelers
Twelve Months Ended
September 30, 1999* (Unaudited)
(dollars in millions)
Number of Stores 150
Comparable Store Sales
Increase 5.9%
Total Revenue $138.6
EBITDA 10.2
Total Operating Assets** 95.1
Total Bank Debt 93.0
* This financial information was provided to Friedman's by Crescent's
management and has not been independently verified by Friedman's or its
accountants. Number of stores, results from operations and balance
sheet data as of September 30, 1999.
** Consists of cash, accounts receivable (net), inventory, and fixtures
and equipment (net).
Mr. Stinn continued, "Fiscal 1999 was an important year for Friedman's as
we regained positive business momentum and laid the foundation for future growth
and increases in profits. Our major goals for the upcoming fiscal year are to
increase sales per unit, enhance credit profitability and further improve our
return on investment."
Friedman's Inc. is a specialty retailer of fine jewelry based in Savannah,
Georgia. The Company is the leading operator of fine jewelry stores located in
power strip centers. At November 18, 1999, Friedman's Inc. operated a total of
553 stores in 21 states, of which 344 were located in power strip centers and
209 were located in regional malls. Crescent Jewelers, Friedman's West-Coast
affiliate, operates 150 stores in seven states, 95 of which are located in
regional malls and 55 of which are located in power strip centers. The Company's
Class A Common Stock is traded on the Nasdaq National Market (Nasdaq symbol,
FRDM).
Some of the statements included in the press release contain forward-
looking statements that involve a number of risks and uncertainties. In addition
to the factors
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discussed above, among the other factors that could cause actual results to
differ materially are the following: the successful performance of the Company's
new merchandising and retail information systems; the Company's ability to
continue to improve its credit operations, including the currency of its
accounts receivable; the Company's ability to identify and secure suitable
locations for new stores and hire and train the additional store personnel
necessary to implement its expansion plans; the economic conditions in the new
areas into which the Company expands and uncertainties in the customer credit
portfolios in these areas; competitive pressures from other retail jewelry
operators, department stores, and discount stores; business conditions and
growth in the retail jewelry industry and the general economy, including the
effect, if any, of the upcoming year 2000; and other risk factors listed from
time to time in the Company's SEC reports and other announcements.
FRIEDMAN'S INC.
Consolidated Income Statements
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Fiscal Year Ended
September 30 September 30
1999 1998* 1999 1998*
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Net merchandise
sales $ 51,639 $ 44,906 $296,133 $250,538
Finance charges
and other 10,904 9,179 43,077 35,636
Total revenues 62,543 54,085 339,210 286,174
Operating Costs and Expenses:
Cost of goods sold
including occupancy,
distribution and
buying 30,834 26,304 158,705 132,296
Selling, general
and administrative 24,935 25,772 114,762 99,050
Special charges --- 1,833 --- 1,833
Provision for
doubtful accounts 6,799 9,140 32,006 29,767
62,568 63,049 305,473 262,946
Operating income (loss)
before depreciation
and amortization (25) (8,964) 33,737 23,228
Depreciation and
amortization 1,869 1,379 6,379 5,269
Income (loss) from
operations (1,894) (10,343) 27,358 17,959
Interest expense 381 547 1,421 874
Income (loss) before
income taxes (2,275) (10,890) 25,937 17,085
Income tax expense (1,265) (4,138) 9,454 6,491
Net income (loss) $(1,010) $ (6,752) $ 16,483 $ 10,594
Diluted earnings
(loss) per share ($0.07) ($0.46) $1.13 $0.72
Weighted average shares 14,417 14,635 14,590 14,762
Number of stores open 531 471 531 471
</TABLE>
* Restated
Certain balances as of September 30, 1998, have been reclassified to
conform to the current year financial statement presentation.
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FRIEDMAN'S INC.
Consolidated Balance Sheets
(Dollars in thousands, except per share and share amounts)
<TABLE>
<CAPTION>
September 30
1999 1998*
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,076 $ 243
Accounts receivable, net of
allowance for doubtful
accounts of $10,862 and
$10,072 at September 30,
1999 and 1998, respectively 97,780 85,900
Inventories, at cost 114,128 105,586
Deferred income taxes 3,629 2,193
Other current assets 3,791 2,924
Total current assets 220,404 196,846
Equipment and
improvements, net 44,160 36,421
Notes receivable
from related party --- 25,000
Tradename rights, net 5,964 6,435
Other receivable --- 1,625
Other assets 4,768 1,556
Total assets $275,296 $267,883
Liabilities and Equity
Current Liabilities:
Accounts payable $ 40,818 $ 16,757
Accrued liabilities
and other 12,196 4,224
Total current liabilities 53,014 20,981
Bank debt 28,184 66,969
Deferred income
taxes and other 2,194 1,419
Stockholders' Equity:
Preferred stock, par value
$.01, 10,000,000 shares
authorized and none issued --- ---
Class A common stock, par
value $.01, 25,000,000
shares authorized,
13,226,127 issued
and outstanding 132 134
Class B common stock, par
value $.01, 7,000,000 shares
authorized, 1,196,283 issued
and outstanding 12 12
Additional paid-in capital 118,543 119,889
Retained earnings 74,416 58,479
Stock purchase loans (1,199) ---
Total stockholders' equity 191,904 178,514
Total liabilities
and equity $275,296 $267,883
</TABLE>
* Restated
Certain balances as of September 30, 1998, have been reclassified to
conform to the current year financial statement presentation.
CONTACT: Joseph M. Donaghy, Vice President, Finance of Friedman's Inc.,
510-874-7689
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