Barry's reports fiscal 1997 third quarter results; change in nature of restructuring program.MONROVIA, Calif.--(BUSINESS WIRE)--April 21, 1997--Barry's Jewelers Inc. (NASDAQ/NM:BARY) Monday reported operating results for its fiscal 1997 third quarter and nine months ended Feb. 28, 1997. For the quarter ended Feb. 28, 1997, net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight decreased $1,632,000, or 3.2 percent to $49,236,000, vs. net sales of $50,868,000 for the fiscal 1996 third quarter, due to a 7.3 percent fall in comparable store sales from the comparable period a year ago. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the company, the net sales decrease in comparable stores was due, in part, to a more restrictive credit policy implemented in November 1995, which has reduced sales in the short term, but is expected to result in higher quality receivables. Additionally, net sales were adversely impacted by late receipt of merchandise in the stores for the Christmas selling season which resulted in excessive stock outs, as well as the sales mix sales mix See product mix. of promotionally priced merchandise, and a competitive discounting environment. Costs of goods sold, buying and occupancy expenses were 65.0 percent and 54.8 percent of net sales for the third quarter of fiscal years 1997 and 1996, respectively. Included in cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold , buying and occupancy expenses for the quarter ended Feb. 28, 1997, was a $1,095,000 non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. in connection with the company's cost savings initiatives to hasten has·ten v. has·tened, has·ten·ing, has·tens v.intr. To move or act swiftly. v.tr. 1. To cause to hurry. 2. the liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of aged inventory in an effort to improve cash flow. The remaining increase was primarily due to a combination of the company's continued value-pricing strategy, rent and a higher shrinkage Shrinkage The amount by which inventory on hand is shorter than the amount of inventory recorded. Notes: The missing inventory could be due to theft, damage, or book keeping errors. reserve in fiscal 1997 than in fiscal 1996. Cost of goods sold was also impacted by the sales mix of promotionally priced merchandise and a competitive discounting environment. Selling, general and administrative expenses were 38.8 percent and 28.9 percent of net sales for the three months ended Feb. 28, 1997, and Feb. 29, 1996, respectively. In the current quarter, $1,970,000 of expense was included in selling, general and administrative expense related principally to the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of leasehold improvements Leasehold Improvement Improvements on a leased asset that increase the value of the asset. Notes: A leasehold improvement is classified as an asset that must be depreciated over time. , property and equipment related to 26 under-performing stores. Excluding such charge, selling, general and administrative expense as a percentage of net sales for the current quarter would have been 34.8 percent. The increase as a percentage of net sales was attributable to a combination of the decline in net sales and the increase in total expenses. The dollar increase was primarily the result of increases in the cost of advertising and display, professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. and shipping. The company's new management team announced that it is carefully reviewing restructuring initiatives that the former management began earlier this year. As previously announced, those initiatives were expected to require various charges to third quarter operations of between $10 million to $14 million. The company's new management has not yet determined if all initiatives will be adopted, or whether certain initiatives may be added due to new operating strategies being developed. As a result, the composition of the charges will change and such charges will occur in both the third and fourth quarters as the initiatives are finalized See finalization. . Although management does not anticipate that the magnitude of the various charges will significantly increase as compared to what was previously announced, due to uncertainties regarding the components of the various initiatives, an estimate of these charges cannot be reasonably determined until management's reevaluation is completed. During the current quarter, $1,336,000 was charged to restructuring expense. This charge consisted of $949,000 for severance items; $93,000 and $241,000 for costs associated with terminating leases and abandoning, or selling the leasehold improvements, fixtures and equipment, respectively for 11 closed stores; and $53,000 for other items related to the restructuring. In addition, the company changed its customer receivable write-off policy. Previously, the company would fully reserve for accounts that fell within certain aged parameters but would continue internal collection efforts until such time as a determination was made that the accounts should be written off against the allowance for doubtful accounts Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. . With this change in policy, the internal collection efforts for these fully reserved accounts will be discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: and the accounts will be sent to outside collection agencies, at which time the account balances will be written off against the allowance for doubtful accounts. As a result, the company accelerated the write-off of approximately $6,780,000 of customer receivables against the allowance for doubtful accounts. Such charge was fully reserved for and had no material impact on current operations. In the quarter ended Feb. 28, 1997, net interest expense increased $696,000 vs. the comparable quarter last year. Such increase was primarily due to a combination of an increase in the amortization of deferred financing fees associated with the Amended Revolving Credit Agreement Revolving credit agreement A legal commitment in which a bank promises to lend a customer up to a specified maximum amount during a specified period. revolving credit agreement See line of credit. , an amendment fee in connection with an amendment to the Amended Revolving Credit Agreement and an increase in average revolving debt. The average total revolving debt for the third quarter of fiscal 1997 was approximately $4.9 million higher than the comparable period of the prior year. As a result of the foregoing, the net loss for the quarter was $6,818,000, or $1.70 per share, vs. net income of $3,159,000, or 79 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , in the comparable period of fiscal 1996. For the first nine months of fiscal 1997, net sales decreased 5.5 percent to $104,685,000 from $110,732,000 in the same period a year ago. Comparable store sales for such nine month period declined 9.6 percent from the comparable period for fiscal 1996. The net loss for the first nine months of fiscal 1997 was a loss of $19,220,000, or $4.81 per share, vs. net income of $1,706,000, or 43 cents per share, for the nine month period a year ago. Commenting on the company's results, recently appointed Barry's Jewelers President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Sam Merksamer said: "This is a new management team and restructuring Barry's operations has been our goal since day one. We're still in mid-stream at this point. We are in the process of carefully and quickly reviewing all areas of our business, looking at ways of achieving greater efficiencies -- both long and short term. "It's a difficult task, but we are making progress. We have an experienced, hands on management team in place, we've reduced corporate staff size, closed certain unprofitable stores and made substantial improvements to our credit policies." The company failed to meet certain financial covenants contained in the Amended Revolving Credit Agreement as of the Feb. 28, 1997, testing date. The failure to meet such covenants constitutes an Event of Default under the Amended Revolving Credit Agreement. While the company is continuing negotiations with the bank group to obtain a forbearance Refraining from doing something that one has a legal right to do. Giving of further time for repayment of an obligation or agreement; not to enforce claim at its due date. A delay in enforcing a legal right. or waiver of the Event of Default, or a modification of the covenants, there can be no assurance that the company will be able to obtain such forbearance or waiver, or that such forbearance or waiver can be obtained on acceptable terms. Under the terms of the Amended Revolving Credit Agreement, the company may not make the interest payment due April 30, 1997, or any subsequent payment due under its 11 percent Senior Secured Notes due Dec. 22, 2000, after an Event of Default under the Amended Revolving Credit Agreement has occurred and is continuing unless such Event of Default has been waived. Except for the historical information contained herein, certain of the matters in this release are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. which involve certain risks and uncertainties which could cause actual financial results to differ materially from those discussed herein, including, without limitation, risks related to the company's pricing policies,the company's need for additional financing or liquidity, collection of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and competition. For a further discussion of these and other risks and uncertainties applicable to the company's business, see the relevant discussion in the company's periodic reports and other documents filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended May 31, 1996 and the company's Form 10-Q Form 10-Q See 10-Q. for the quarter ended Feb. 28, 1997. Barry's Jewelers, the nation's fourth largest independent retailer of fine jewelry jewelry, personal adornments worn for ornament or utility, to show rank or wealth, or to follow superstitious custom or fashion. The most universal forms of jewelry are the necklace, bracelet, ring, pin, and earring. , operates 163 retail jewelry stores in 17 states throughout the country, primarily in California, Texas, Arizona, North and South Carolina South Carolina, state of the SE United States. It is bordered by North Carolina (N), the Atlantic Ocean (SE), and Georgia (SW). Facts and Figures Area, 31,055 sq mi (80,432 sq km). Pop. (2000) 4,012,012, a 15. , Utah, Montana, Colorado and Ohio. -0-
BARRY'S JEWELERS INC.
FINANCIAL HIGHLIGHTS
(unaudited, in 000s, except per share data and number
of common shares outstanding)
Three Months Ended Nine Months Ended
Feb. 28, Feb. 29 , Feb. 28, Feb. 29,
1997 1996 1997 1996
Net sales $49,236 $50,868 $104,685 $110,732
Operating (loss)
income before
restructuring items (1,865) 8,168 (7,520) 11,142
Restructuring
expenses (1,336) -- (1,336) --
Operating (loss)
income (3,201) 8,186 (8,856) 11,142
(Loss) income before
income taxes and
extraordinary item (6,818) 5,265 (18,344) 2,844
Income taxes -- 2,106 -- 1,138
(Loss) income before
extraordinary item (6,818) 3,159 (18,344) 1,706
Extraordinary item -- -- (876) --
Net (loss) income $(6,818) $3,159 $(19,220) $1,706
Net (loss) income
per share $(1.70) $0.79 $(4.81) $0.43
Weighted average
common shares
outstanding 4,000,747 3,973,658 3,999,855 3,970,530
CONTACT: Barry's Jewelers Inc., Monrovia E. Peter Healey, 818/303-4741 or Silverman Heller Associates Eugene Heller, 310/208-2550 |
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