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 28, 1995
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 (zip code)
executive offices)
(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: 4,076,880
outstanding as of December 6, 1995
Class B stock, par value $.01 per share: 1,346,634
outstanding as of December 6, 1995
L. LURIA & SON, INC.
CONTENTS
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - October 28,
1995 (Unaudited) October 29, 1994
(Unaudited), and January 28, 1995
Unaudited Condensed Statements of Operations
for the thirteen and thirty-nine weeks ended
October 28, 1995 and October 29, 1994
Unaudited Condensed Statements of Cash Flows
for the thirty-nine weeks ended October 28,
1995 and October 29, 1994
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
Item 1. FINANCIAL STATEMENTS
L. LURIA & SON, INC.
CONDENSED BALANCE SHEETS
[CAPTION]
October 28, October 29, January 28,
(in thousands) 1995 1994 1995
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equiva-
lents $1,340 $1,828 $11,100
Accounts receivable 1,252 1,508 1,634
Inventories 79,540 107,007 82,931
Prepaid expenses 2,809 3,879 2,716
Total current assets 84,941 114,222 98,381
Property, net 39,738 38,430 40,429
Other assets 204 1,332 214
Total assets $124,883 $153,984 $139,024
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and
short-term
borrowings $24,150 $23,100 $ -
Accounts payable and
accrued liabilities 22,182 47,618 52,169
Current portion of
long-term debt 206 206 206
Total current liabili-
ties 46,538 70,924 52,375
Long-term debt 791 1,055 976
Deferred taxes 1,995 1,721 1,895
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; 4,076,880
shares issued and
outstanding at
October 28, 1995;
4,031,689 shares
issued and outstanding
at October 29, 1994;
and 3,991,780 shares
issued and outstanding
at January 28, 1995 41 40 39
Class B: $.01 par value,
6,000,000 shares
authorized; 1,346,634
shares issued and
outstanding at October
28, 1995; 1,375,844 shares
issued and outstanding
at October 29, 1994; and
1,434,534 shares issued
and outstanding at
January 28, 1995 13 14 14
Additional paid-in
capital 18,230 18,260 18,230
Retained earnings 57,275 61,970 65,495
Total shareholders'
equity 75,559 80,284 83,778
Total liabilities
and shareholders'
equity $124,883 $153,984 $139,024
See accompanying notes to condensed financial statements
L. LURIA & SON, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
[CAPTION]
(in thousands, except
net loss per common Thirteen Weeks Thirteen Weeks
share) Ended Ended
October 28, 1995 October 29, 1994
Net sales $31,150 $37,697
Cost of goods sold,
buying and ware-
housing costs 24,930 26,933
Gross margin 6,220 10,764
Operating expenses 13,645 12,981
Loss from operations (7,425) (2,217)
Interest expense - 392 241
Loss before income taxes (7,817) (2,458)
Income tax (benefit) (2,532) (925)
Net loss $(5,285) $(1,533)
Weighted average
number of
common shares
outstanding 5,424 5,411
Loss per common share (.97) (.28)
(continued)
(in thousands, except
net loss per common Thirty-nine Weeks Thirty-nine Weeks
share) Ended Ended
October 28, 1995 October 29, 1994
Net sales $102,892 $124,201
Cost of goods sold,
buying and ware-
housing costs 76,295 90,995
Gross margin 26,597 33,206
Operating expenses 38,218 38,299
Loss from operations (11,621) (5,093)
Interest expense - net 891 312
Loss before income taxes (12,512) (5,405)
Income tax (benefit) (4,292) (2,035)
Net loss $(8,220) (3,370)
Weighted average number of
common shares outstanding 5,416 5,411
Loss per common share $(1.52) $(.62)
See accompanying notes to condensed financial statements.
L. LURIA & SON, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
[CAPTION]
(in thousands) Thirty-nine Thirty-nine
Weeks Ended Weeks Ended
October 28, October 29,
1995 1994
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(8,220) $(3,370)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation & amorti-
zation 2,968 3,591
Deferred income taxes 100 438
(Increase) Decrease in
other assets 10 (128)
(Increase) Decrease in
accounts receivable 382 769
(Increase) Decrease in
inventories 3,391 (19,537)
(Increase) Decrease in
prepaid expenses (93) (1,674)
(Decrease) Increase in
accounts payable and
accrued liabilities (29,987) (5,949)
Net cash used in operating
activities (31,449) (25,860)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property (2,276) (12,573)
Net cash used in investing
activities (2,276) (12,573)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under line
of credit agreements 24,150 23,100
Repayments of long-term
debt and obligations
under capital leases (185) (118)
Treasury shares acquired - (92)
Exercise of stock options - -
Net cash provided by
financing activities 23,965 22,890
Net decrease in cash and
cash equivalents (9,760) (15,543)
Cash and cash equivalents,
beginning of period 11,100 17,371
Cash and cash equivalents,
end of period $1,340 $1,828
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
Cash paid (received)
during the period for:
Interest $1,045 $ 451
Income taxes $ (292) $1,440
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 28, 1995 AND October 29, 1994
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 28, 1995 and October 29,
1994, and the results of its operations and cash flows for the
periods ended October 28, 1995 and October 29, 1994.
SEASONALITY
The results of operations for the quarter and nine months ended
October 28, 1995 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 1995 L. Luria
& Son, Inc. Annual Report, which is incorporated by reference in
Form 10-K.
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:
RELATIONSHIPS TO NET SALES
PERIODS ENDED
[CAPTION]
Thirteen Weeks Thirteen Weeks
Ended Ended
October 28, October 29,
1995 1994
Net sales 100.0% 100.0%
Cost of goods sold,
buying and ware-
housing costs 80.0 71.4
Gross margin 20.0 28.6
Operating expenses 43.8 34.4
Loss from operations (23.8) (5.8)
Interest expense - net 1.3 .6
Loss before income taxes (25.1) (6.4)
Income tax (benefit) (8.1) (2.4)
Net loss (17.0)% (4.0)%
(continued)
Thirty-nine Weeks Thirty-nine Weeks
Ended Ended
October 28, October 29,
1995 1994
Net sales 100.0% 100.0%
Cost of goods sold,
buying and ware-
housing costs 74.2 73.3
Gross margin 25.8 26.7
Operating expenses 37.1 30.8
Loss from operations (11.3) (4.1)
Interest expense - net .9 .3
Loss before income taxes (12.2) (4.4)
Income tax (benefit) (4.2) (1.7)
Net loss (8.0)% (2.8)%
NET SALES
Net sales for the thirteen weeks (third quarter) and thirty-nine
weeks (nine months) ended October 28, 1995 decreased 17.4% and
17.2%, respectively, compared to the same periods last year.
Comparable store sales decreased 15.8% and 18.5% during the quarter
and nine months ended October 28, 1995, respectively, compared to
the same periods last year. This year's sales were impacted by
increased competition primarily from electronics specialty
retailers. Jewelry sales as a percent of net sales, for the
quarter and nine-month period were 37.0% and 38.4%, respectively,
in comparison to 31.4% and 35.8%, respectively, for the previous
fiscal year. General merchandise sales as a percent of net sales,
for the quarter and nine month periods were 63.0% and 61.6%,
respectively, compared to 68.6% and 64.2%, respectively, for the
same periods last year.
GROSS MARGINS
Gross margins as a percent of net sales were 20.0% for the third
quarter compared to 28.6% for the prior year's quarter, and 25.8%
for the nine months compared to 26.7% for the same period last
year. Gross margins for the third quarter were lower primarily due
to substantial markdowns incurred during the quarter to reduce
inventory levels. Gross margins were also impacted by greater
overhead absorption as a result of reduced inventory levels and
higher reserves reflecting the impact of management's efforts to
further reduce inventory and improve the mix of products. In the
second quarter of the current fiscal year, the Company launched a
new private label credit card combined with discounts on
merchandise for cardholders. This discount program continued into
the third quarter adversely affecting gross margins. During the
quarter, the Company held relocation sales at two catalog showrooms
deeply discounting merchandise in an effort to sell remaining
inventory, which also reduced gross margins. Management expects
these trends to continue through the fourth quarter.
OPERATING EXPENSES
Operating expenses for the current quarter and nine months
increased as a percent of net sales to 43.8% this year from 34.4%
last year, and for the nine months increased to 37.1% this year
from 30.8% last year, primarily due to the shortfall in sales this
year versus last year. Operating expenses increased 5.1% for the
quarter and decreased 0.2% 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
equipment lease costs, payroll and other overhead expenses. Net
advertising and sales promotion expense, however, increased
substantially. As part of the restructuring plan, during the nine-
month period, the Company relocated two stores and closed one
jewelry mall store and four catalog showrooms. Approximately $0.9
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 in fiscal year ended 1994.
The Company currently operates eleven superstores.
INTEREST EXPENSE (INCOME) - NET
Net interest expense for the quarter and nine months ended October
28, 1995 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 28, 1995
versus last year is primarily attributed to the operating loss that
has been incurred.
INCOME TAX (BENEFIT)
Income tax (benefit) for the quarter and nine months ended October
28, 1995 is estimated at 34.3% of the pre-tax loss which is
management's best estimate of the projected effective tax rate for
fiscal year 1996.
INVENTORIES
At October 28, 1995, inventory levels were approximately $79.5
million, or 25.7% below last year's $107 million due to the
management's commitment to reduce inventory levels while at the
same time, improving the mix of products. The inventory levels at
the end of the third quarter reflect a moderate build-up in
preparation for the Christmas selling season.
LIQUIDITY AND CAPITAL RESOURCES
At October 28, 1995, the Company had approximately $75.6 million in
equity and approximately $0.8 million in long-term debt and capital
leases. During the nine months ended October 28, 1995, cash and
cash equivalents decreased $9.8 million. The decrease primarily
financed operating losses and capital expenditures. The Company
had working capital of $38.4 million at the end of the third
quarter. At October 28, 1995, the Company had available lines of
credit of approximately $31 million, of which approximately $7
million remained unused.
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 1996.
Item 1. LEGAL PROCEEDINGS
On November 28, 1995 a Florida Circuit Court jury returned a
verdict of $13.8 million in favor of the Company in a trial
relating to a dispute with competitor, Service Merchandise Co.,
Inc. The Company filed a law suit against Service Merchandise
alleging tortious interference with the Company's business
relationship and lease rights in the Sawgrass Mills Shopping Center
in Broward County.
The jury decided in favor of the Company on both counts,
intentional interference of a binding contract and intentional and
wrongful interference in a business relationship. Service
Merchandise Co., Inc. has indicated that they will appeal the
verdict. The Company expects that the appellate court will uphold
the jury verdict.
The Company has not accrued any of this award into its financial
statements.
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 28, 1995.
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 11, 1995 \s\ Peter Luria
Peter Luria
President and Chief
Operating Officer
Date: December 11, 1995 \s\ Tom Floerchinger
Tom Floerchinger
Vice President-Finance and
Chief Financial Officer