UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Thirteen Weeks Ended October 29, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
Commission File Number 1-8057
L. LURIA & SON, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-0620505
(State of incorporation) (IRS Employer
Identification No.)
5770 Miami Lakes Drive, Miami Lakes, Florida 33014
(Address of principal executive offices) (zip code)
(305) 557-9000
(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
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
Common stock, par value $.01 per share: 4,031,689
outstanding as of December 9, 1994
Class B stock, par value $.01 per share: 1,375,844
outstanding as of December 9, 1994
L. LURIA & SON, INC.
CONTENTS
Page
No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - October 29, 1994
(Unaudited) October 30, 1993 (Unaudited),
and January 29, 1994 . . . . . . . . . . . .
Unaudited Condensed Statements of Operations
for the thirteen and thirty-nine weeks
ended October 29, 1994 and October 30,
1993 . . . . . . . . . . . . . . . . . . . .
Unaudited Condensed Statements of Cash
Flows for the thirty-nine weeks ended
October 29, 1994 and October 30, 1993. . . .
Notes to Condensed Financial Statements. . .
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . .
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . .
Signatures . . . . . . . . . . . . . . . . .
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
L. LURIA & SON, INC.
CONDENSED BALANCE SHEETS
October 29, October 30, January 29,
(in thousands) 1994 1993 1994
(Unaudited) (Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash
equivalents $ 8,805 $1,524 $17,371
Accounts receivable 1,508 1,532 2,277
Inventories 107,007 111,255 87,470
Prepaid expenses 3,879 4,125 2,205
Total current assets 121,199 118,436 109,323
Property, net 36,653 28,903 29,448
Other assets 1,332 2,708 1,204
Total assets $159,184 $150,047 $139,975
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and
short-term
borrowings $27,300 $11,500 $ -
Accounts payable
and accrued
liabilities 48,618 52,776 53,567
Current portion of
long-term debt 206 223 223
Total current
liabilities 76,124 64,499 53,790
Long-term debt 1,055 1,212 1,156
Deferred taxes 1,721 2,448 1,283
Shareholders' Equity:
Preferred stock: $1
par value, 5,000,000
shares authorized;
no shares issued - - -
Common stock:
Common: $.01 par value,
14,000,000 shares
authorized; 4,031,689
shares issued and
outstanding at
October 29, 1994;
3,950,533 shares issued
and outstanding at October
30, 1993; and 3,987,314
shares issued and
outstanding at January 29,
1994 40 39 39
Class B: $.01 par value,
6,000,000 shares
authorized; 1,375,844
shares issued and
outstanding at October 29,
1994; 1,449,547 shares
issued and outstanding at
October 30, 1993; and
1,426,947 shares issued
and outstanding at
January 29, 1994 14 14 14
Additional paid-in
capital 18,260 17,928 18,353
Retained earnings 61,970 63,907 65,340
Total shareholders'
equity 80,284 81,888 83,746
Total liabilities and
shareholders' equity $159,184 $150,047 $139,975
See accompanying notes to condensed financial statements
L. LURIA & SON, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except Thirteen Weeks Thirteen Weeks
net income (loss) per Ended Ended
common share) October 29, 1994 October 30, 1993
Net sales $37,697 $44,827
Cost of goods sold,
buying and
warehousing costs 26,933 32,740
Gross margin 10,764 12,087
Operating expenses 12,981 12,750
Income (loss) from
operations (2,217) (663)
Interest expense - net 241 115
(Loss) before income tax
(benefit) expense (2,458) (778)
Income tax (benefit)
expense (925) (293)
Net (loss) $(1,533) (485)
Weighted average number
of common shares
outstanding 5,411 5,379
Net (loss) per common
share (.28) (.09)
(continued)
(in thousands, except Thirty-nine Weeks Thirty-nine Weeks
net income (loss) per Ended Ended
common share) October 29, 1994 October 30, 1993
Net sales $124,201 $138,062
Cost of goods sold,
buying and
warehousing costs 90,995 98,448
Gross margin 33,206 39,614
Operating expenses 38,299 39,585
Income (loss) from
operations (5,093) 29
Interest expense - net 312 90
(Loss) before income
tax (benefit) expense (5,405) (61)
Income tax (benefit)
expense (2,035) (23)
Net (loss) $(3,370) (38)
Weighted average number of
common shares outstanding 5,411 5,379
Net (loss) per common share (.62) (.01)
See accompanying notes to condensed financial statements.
L. LURIA & SON, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
[S] [C] [C]
(in thousands) Thirty-nine Weeks Thirty-nine Weeks
Ended Ended
October 29, 1994 October 30, 1993
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $(3,370) $ (38)
Adjustments to reconcile
net income (loss) to
net cash used in
operating activities:
Depreciation 3,591 2,939
Deferred income taxes 438 (499)
(Increase) in other
assets (128) (1,287)
Decrease in accounts
receivable 769 1,096
Increase in inventories (19,537) (33,355)
Increase in prepaid
expenses (1,674) (1,685)
(Decrease) Increase in
accounts payable and
accrued liabilities (4,949) 2,183
Net cash used in operating
activities (24,860) (30,646)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property (10,796) (4,284)
Net cash used in investing
activities (10,796) (4,284)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under line of
credit agreements 27,300 11,500
Repayments of long-term
debt and obligations under
capital leases (118) (150)
Treasury shares acquired (92) (64)
Exercise of stock options - 310
Net cash provided by
financing activities 27,090 11,596
Net decrease in cash and
cash equivalents (8,566) (23,334)
Cash and cash equivalents,
beginning of period 7,371 24,858
Cash and cash equivalents,
end of period $8,805 $1,524
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period
for:
Interest $ 515 $ 217
Income taxes $1,440 $3,320
[/TABLE]
See accompanying notes to condensed financial statements.
L. LURIA & SON, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED
October 29, 1994 AND October 30, 1993
GENERAL
The accompanying condensed financial statements have been prepared
in accordance with the instructions to Form 10-Q of the Securities
and Exchange Commission and in accordance with generally accepted
accounting principles applicable to interim financial statements
and do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management of L. Luria & Son, Inc.
(the "Company"), the accompanying condensed financial statements
reflect all adjustments necessary to present fairly the financial
position of the Company as of October 29, 1994 and October 30,
1993, and the results of its operations and cash flows for the
periods ended October 29, 1994 and October 30, 1993. Furthermore,
all adjustments were of a normal and recurring nature.
SEASONALITY
The results of operations for the quarter and nine months ended
October 29, 1994 are not indicative of the results to be expected
for the entire year because the Company's operations are seasonal.
ACCOUNTING POLICIES
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements in the 1994 L. Luria
& Son, Inc. Annual Report, which is incorporated by reference in
Form 10-K.
ACCOUNTING CHANGE
As set forth in Note 2 to the Company's financial statements in the
1994 L. Luria & Son, Inc. Annual Report, which is incorporated by
reference in Form 10-K, in the fourth quarter of fiscal year 1994,
the Company changed its method of valuing jewelry inventory from
the LIFO (last-in, first-out) to the FIFO (first-in, first-out)
method. As required, all prior year financial statements presented
have been restated to reflect this change. Accordingly, the prior
year results were restated to reduce earnings by $39,000 or $.01
per share in the first quarter, $34,000 or $.01 per share in the
second quarter and $0 in the third quarter.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SUMMARY
The following table sets forth for the periods indicated
percentages which certain items reflected in the financial data
bear to net sales of the Company:
Thirteen Weeks Thirteen Weeks
Ended Ended
October 29, October 30,
1994 1993
Net sales 100.0% 100.0%
Cost of goods sold, buying
and warehousing costs 71.4 73.0
Gross margin 28.6 27.0
Operating expenses 34.4 28.4
Income (loss) from operations (5.8) (1.4)
Interest expense - net .6 .3
Income (loss) before income tax
(benefit) expense (6.4) (1.7)
Income tax (benefit) expense (2.4) (.6)
Net (loss) (4.0)% (1.1)%
(continued)
Thirty-Nine Thirty-Nine
weeks Ended weeks Ended
October 29, October 30,
1994 1993
Net sales 100.0% 100.0%
Cost of goods sold, buying
and warehousing costs 73.3 71.2
Gross margin 26.7 28.8
Operating expenses 30.8 28.7
Income (loss) from operations (4.1) .1
Interest expense - net .3 .1
Income (loss) before income tax
(benefit) expense (4.4) .0
Income tax (benefit) expense (1.7) .0
Net (loss) (2.8)% (.0)%
NET SALES
Net sales for the thirteen (third quarter) and thirty-nine weeks
(nine months) ended October 29, 1994 decreased 15.9% and 10.0%,
respectively, compared to the same periods last year. Comparable
store sales decreased 14.6% and 8.7% during the quarter and nine
months ended October 29, 1994, respectively, compared to the same
periods last year. This year's sales were impacted by reductions
in advertising expenditures and a move towards fewer price-
aggressive promotions. In addition, sales were impacted by
softening demand in the Company's markets, particularly south
Florida, when compared to the prior year sales which benefited from
significant hurricane replacement purchases.
GROSS MARGINS
Gross margins as a percent of net sales were 28.6% for the third
quarter compared to 27.0% for the prior year's quarter, and 27.1%
compared to 28.8%, for the nine months, respectively. For the
quarter, gross margins improved primarily due to fewer price
aggressive promotions. Gross margins for the nine months were
lower primarily due to substantial markdowns incurred in the second
quarter of this year to reduce inventory levels and to accelerate
the reduction of inventory assortments to adjust to the new
superstore format featuring more massed-out merchandise. As of
October 29, 1994, inventories were $4.3 million below last year's
level. Jewelry sales as a percent of sales were 31.4% this year
versus 32.4% last year for the quarter and 35.8% this year and
35.2% last year for the nine-month periods, respectively. As set
forth in Note 2 to the Company's financial statements in the 1994
L. Luria & Son, Inc. Annual Report, in the fourth quarter of fiscal
year 1994, the Company changed its method of valuing jewelry
inventory from the LIFO (last-in, first-out) to the FIFO (first-in,
first-out) method. As required, all prior year financial
statements presented have been restated to reflect this change.
Accordingly, the first, second and third quarters of last year
were restated to reduce net earnings by $39,000 or $.01 per share;
$34,000 or $.01 per share; and $0, respectively.
OPERATING EXPENSES
Operating expenses for the current quarter and nine months
increased as a percent of net sales to 34.4% this year from 28.4%
last year, and to 30.8% from 28.7%, respectively, due primarily to
the shortfall in sales versus last year. Operating expenses
increased 2.0% for the quarter and decreased 3.0% for the nine
months from last year's expenditure level. Expenses were reduced
from last year's levels in most expense categories, with
significant reductions in advertising and sales promotion,
equipment lease costs, payroll and other overhead expenses.
Preopening expenses related to the three new superstores were
$279,000 or $.03 per share for the nine months versus none last
year. As part of the Restructuring Plan, during the nine-month
period, the Company relocated two stores, closed one jewelry mall
store and entered into negotiations on closing or relocating
several additional stores. Approximately $1.4 million of
incremental costs associated with relocating two stores, closing
one jewelry mall store and the carrying costs associated with
previously closed stores have been charged to the Restructuring
Plan reserves established last year. The Company currently
operates nine superstores and plans to open four additional
superstores next year to replace existing showrooms.
INTEREST EXPENSE (INCOME) - NET
Net interest expense for the quarter and nine months ended October
29, 1994 increased compared to the prior year due to increased
short-term borrowings and higher interest rates in the current
year. The increase in short-term borrowings at October 29, 1994
versus last year is primarily due to the shortfall in sales and the
opening of new superstores.
INCOME TAX (BENEFIT)
Income tax (benefit) for the quarter and nine months ended October
29, 1994 is estimated at 37.6% of the pre-tax loss which is
management's best estimate of the projected effective tax rate for
fiscal year 1995.
INVENTORIES
At October 29, 1994, inventory levels were approximately $107
million, or 4.0% below last year's $111 million due to the
Company's inventory control efforts. The inventory levels at the
end of the third quarter reflect the build up in inventory in
preparation for the Christmas selling season.
LIQUIDITY AND CAPITAL RESOURCES
At October 29, 1994, the Company had approximately $80 million in
equity and approximately $1 million in long-term debt and capital
leases. During the nine months ended October 29, 1994, cash and
cash equivalents decreased $8.6 million since the beginning of the
fiscal year. The decrease was primarily to finance the payment of
inventory and capital expenditures. While the Company has had a
decrease in working capital compared to last year it has maintained
working capital of $45 million. At October 29, 1994, the Company
had available lines of credit of $45 million, of which
approximately $18 million remained unused. The Company plans to
open four additional superstores next year to replace existing
showrooms.
Management believes that cash provided by operations, available
lines of credit and access to the capital markets will be adequate
to meet its future working capital and capital expenditure
requirements for fiscal year 1995.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
b) There were no reports on Form 8-K filed for the
thirteen weeks ended October 29, 1994.
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.
L. LURIA & SON, INC.
Date: December 13, 1994 \s\ Peter Luria
Peter Luria
President and Chief
Operating Officer
Date: December 13, 1994 \s\ Duane R. Wolter
Duane R. Wolter
Sr. Vice President-Finance
and Chief Financial Officer