10-K405 1 g68809e10-k405.txt MAYOR'S JEWELERS, INC. FORM 10-K 2-3-2001 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2001 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 1-9647 MAYOR'S JEWELERS, INC. (Formerly 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.) 14051 N.W. 14TH STREET SUNRISE, FLORIDA 33323 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 846-2709 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: COMMON STOCK, $.0001 PAR VALUE RIGHTS TO PURCHASE COMMON STOCK 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 [ ] 2 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 ] As of April 13, 2001, the aggregate market value of the voting stock beneficially held by non-affiliates of the registrant was $72,659,219. The aggregate market value was computed with reference to the closing price on the American Stock Exchange on such date. Affiliates are considered to be executive officers and directors of the registrant and their affiliates for which beneficial ownership is not disclaimed. As of April 13, 2001, 19,312,770 shares of Common Stock ($.0001 par value) were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement for the 2001 Annual Shareholders' meeting to be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year ended February 3, 2001 are incorporated by reference into Part III of this Form 10-K. LOCATION OF EXHIBIT INDEX: The index of exhibits is contained in Part IV herein on page number 42. 2 3 MAYOR'S JEWELERS, INC. TABLE OF CONTENTS
PAGE NO. -------- PART I Item 1 Business 4 Item 2 Properties 11 Item 3 Legal Proceedings 12 Item 4 Submission of Matters to a Vote of Security Holders 12 PART II Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters 13 Item 6 Selected Financial Data 14 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A Quantitative and Qualitative Disclosure about Market Risk 16 Item 8 Financial Statements and Supplementary Data 23 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 40 PART III Item 10 Directors and Executive Officers of the Registrant 41 Item 11 Executive Compensation 41 Item 12 Security Ownership of Certain Beneficial Owners and Management 41 Item 13 Certain Relationships and Related Transactions 41 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 41
3 4 PART I ITEM 1. BUSINESS GENERAL The information in this section pertains to the business of Mayor's Jewelers, Inc. and subsidiaries ("Mayor's" or the "Company"). Fiscal 2000, throughout this document, refers to the Company's fiscal year ended February 3, 2001. Please refer to Item 7 regarding "Forward-Looking Statements and Cautionary Factors That May Affect Future Results." MAYOR'S JEWELERS Mayor's is a leading upscale retailer of fine quality guild jewelry, watches and giftware. Mayor's was founded in 1910 and currently operates 22 stores in Florida, 2 stores each in California and Texas, and 1 store each in Illinois, Michigan, Nevada, and metropolitan Washington DC under the "Mayor's" name and 5 stores in the Atlanta, Georgia metropolitan area under the "Mayor's" and "Maier & Berkele" name (both referred to as "Mayor's"). Mayor's has a long-established reputation in its principal market areas as a premier guild jeweler offering fine quality merchandise in an elegant environment conducive to the purchase of luxury items. As a guild jeweler, the Company does not sell "costume" or gold filled jewelry; rather, all of its jewelry products are constructed of 14 or 18 karat gold, platinum, or sterling silver, with or without precious gemstones, with significant emphasis on quality and craftsmanship. The average price per item of all merchandise sold in Fiscal 2000 was approximately $1,192, an amount the Company believes is substantially higher than that of any other publicly-traded domestic jewelry retailer. Mayor's distinguishes itself from most of its competitors by offering a larger selection of distinctive and higher quality merchandise at many different price points, and by placing substantial emphasis on professionalism and training in its sales force. Mayor's experienced buyers procure distinctive merchandise directly from manufacturers, diamond cutters and other suppliers throughout the world, enabling Mayor's to sell fine quality merchandise often not available from other jewelers in its markets. Management believes it has one of the best trained staff of sales professionals in the industry as a result of Mayor's emphasis on classroom training, in-store training and participation in industry-recognized educational programs. DISCONTINUED SAM'S CLUB OPERATIONS Through February 1, 2001, the Company retailed fine jewelry, watches and certain other select non-jewelry consumer products primarily to warehouse club members through Sam's Club, ("Sam's"), a division of Wal-Mart, Inc., pursuant to an arrangement whereby the Company operated a concession at all of Sam's domestic and Puerto Rico locations. During Fiscal 2000, the Company developed and executed a transition plan to efficiently exit from the Sam's business as of February 1, 2001. Sales to Sam's customers during Fiscal 2000 accounted for approximately 56% of the Company's net sales. The Company's acquisition of Mayor's mitigates the loss of the Sam's business, although the concession non-renewal will have a material adverse effect on the business of the Company. GROWTH OPPORTUNITIES The Company will seek to expand its business. The acquisition of Mayor's was a significant initial step towards that goal. Through the reduction of working capital requirements and the infusion of capital from the Sam's termination through inventory reductions, the Company believes that it has the financial strength to embark on other retail growth strategies. Management intends to capitalize on the Mayor's business strategy to pursue growth opportunities in selected new geographic markets where the local demographics and the nature of competition would support new high-volume luxury guild jewelry stores. In Fiscal 2000, the Company opened ten new Mayor's locations in Florida, Illinois, Virginia, Texas, California, Nevada and 4 5 Michigan. In Fiscal 2001 and subsequent years, the Company intends to add new stores (4 to 7 per year are targeted) either through new store openings or, as the opportunity arises, through acquisitions. The Company estimates that the investment required to open a new Mayor's store is approximately $1.2 million for fixtures and leasehold improvements (after landlord concessions) and approximately $3 million for inventory. The Company has identified potential new markets which appear attractive, but there can be no assurance that the Company will be able to find appropriate sites or in fact develop or acquire new stores in these or other markets. In addition, the Company will consider other acquisitions. Growth opportunities will be subject to all the risks inherent in the establishment of a new product or service, including competition, lack of sufficient customer demand, unavailability of experienced management, unforeseen communications, delays and cost increases. The Company may incur costs in connection with pursuing new growth opportunities that it cannot recover, and the Company may be required to expense certain of these costs, which may negatively impact the Company's reported operating performance for the periods during which such costs are incurred. Please refer to Item 7 regarding "Forward-Looking Statements and Cautionary Factors that May Affect Future Results." The Company's principal offices are located at 14051 Northwest 14th Street, Sunrise, Florida 33323 (telephone: (954) 846-2709). SPECIAL RETAIL RISK CONSIDERATIONS The Company's retail operations require expertise in the areas of merchandising, sourcing, store operations, selling, personnel, training, systems and accounting. The Company must look to increasing the number of retail locations, thereby increasing the Company's customer base, for expansion. The retail jewelry market is particularly subject to the level of consumer discretionary income and the subsequent impact on the type and value of goods purchased. With the consolidation of the retail industry, the Company believes that competition both within the luxury goods marketplace and with other competing general and specialty retailers will continue to increase. The opening and success of current locations and locations to be opened in later years, if any, will depend on various factors, including general economic and business conditions affecting consumer spending, the performance of the Company's retail operations, the acceptance by consumers of the Company's retail programs and concepts, and the ability of the Company to manage the locations and future expansion and hire and train personnel. Please refer to Item 7 regarding "Forward-Looking Statements and Cautionary Factors That May Affect Future Results." PRODUCTS Mayor's offers a large selection of distinctive and high quality merchandise at many different price points. This merchandise includes designer jewelry, diamond jewelry, rings, wedding bands, earrings, bracelets, necklaces, pearls, charms, and high fashion watches which are often not available from other jewelers in its markets. All of Mayor's jewelry products are constructed of 18 karat gold, platinum, or sterling silver with significant emphasis on quality and craftsmanship. Mayor's carries a large selection of brand name watches, including Rolex, Cartier, Patek Philippe, Baume & Mercier, Omega, Gucci, Bvlgari, Charriol, Tag Heuer, Harry Winston, Chaumet, Boucheron, Ebel, Girard Perregeaux, Breitling and Raymond Weil, designer jewelry including Quadrillion, David Yurman, Pasquale Bruni and Carrera Y Carrera, and a variety of high quality giftware, including Correia, Mont Blanc, Moser and Herend. Management believes that Mayor's is one of the largest authorized jewelers for selected products in North America. Management believes that the wide selection of merchandise positions the Mayor's stores as a "destination of choice" for purchasers of fine quality jewelry and watches. During Fiscal 2000 net sales by product were as follows: watches - 45%; diamonds basic - 22%; jewelry - 23%; other - 10%. The Rolex brand, which is included in watch sales, accounted for 28% of total Mayor's sales. 5 6 PURCHASING The Mayor's staff of experienced buyers procures distinctive merchandise directly from manufacturers, diamond cutters, and other suppliers worldwide enabling Mayor's to sell fine quality merchandise often not available from others jewelers in its markets. Buyers generally specialize in purchasing merchandise in categories such as diamonds, watches, gold jewelry, and giftware. Buyers frequently visit both Mayor's and competitors' stores to compare value, selection, and service, as well as to observe client reaction to merchandise selection and determine future needs. The Company's worldwide buying power allows Mayor's to pass its savings on to its clients through competitively priced merchandise at Mayor's stores. While Mayor's does not emphasize discounting, it does actively compete with other jewelry retailers on the basis of price, particularly with regard to brand name items such as watches, with respect to which comparison shopping is common. WATCHES Mayor's purchases watches from a number of leading manufactures and suppliers. During Fiscal 2000, merchandise supplied by Rolex, the Company's largest supplier, accounted for approximately 28% of Mayor's net sales. Certain brand name watch manufacturers, including Rolex, have distribution agreements with the Company that among other matters provide for specific sales locations, yearly renewal terms, and earlier termination provisions at the manufacturer's discretion. Although management believes the Company enjoys excellent relationships with all of its major suppliers of watches, there is no assurance that its operations would not be adversely affected if it were no longer able to purchase watches from such suppliers. Please refer to Item 7 regarding "Forward-Looking Statements and Cautionary Factors That May Affect Future Results." DIAMOND AND GEMSTONES During Fiscal 2000, revenues from sales of diamond jewelry and diamond jewelry with gemstones represented approximately 30% of Mayor's net sales. Whenever possible, Mayor's purchases unset diamonds and other precious gemstones directly from cutters in international markets, such as Antwerp, Bangkok and Tel Aviv, gold jewelry from Italy, and pearls from Japan. These diamonds and other gemstones are frequently furnished to independent goldsmiths for setting, polishing and finishing pursuant to Company instructions as well as to Mayor's facilities in order to deliver a finished product at the best possible value. OTHER PRODUCTS In Fiscal 2000, Mayor's purchased jewelry and giftware for sale in Mayor's stores from over 500 suppliers. Many of these suppliers have long standing relationships with Mayor's. Another source of jewelry is Mayor's estate division, which purchased approximately $3.6 million in jewelry from estates, individuals and bank and trust departments during Fiscal 2000. Management believes that the estate division often provides Mayor's with the ability to obtain jewelry and raw material inventory at significant savings, thereby increasing gross profit margins. AVAILABILITY OF PRODUCTS FOR MAYOR'S Although purchases of several critical raw materials, notably gold and gemstones, are made from a limited number of sources, the Company believes that there are numerous alternative sources for all raw materials used in the manufacture of its finished jewelry, and that the failure of any principal supplier would not have a material adverse effect on operations. Any changes in foreign or domestic laws and policies affecting international trade may have a material adverse effect on the availability or price of the diamonds, other gemstones, precious metals and non-jewelry products purchased by the Company. 6 7 CHANGING PRICES AND AVAILABILITY Changes in foreign or domestic laws and policies affecting international trade may also have an adverse effect on the availability or price of the diamonds, gemstones and precious metals required by the Company. Other risks to the Company's supplies of merchandise include fluctuation in the price of precious gems and metals. Because substantially all of the Company's purchase transactions are denominated in U.S. dollars, the Company does not engage in any hedging activities in foreign currencies. The Company does not speculate in gems or precious metals or engage in any hedging activity with respect to possible fluctuations in the prices of these items, since historically the Company has been able to make compensatory adjustments in its retail prices as material fluctuations in the price of supplies have occurred. If such fluctuations should be unusually large, rapid or prolonged, there is no assurance that the necessary adjustments could be made quickly enough to prevent the Company from being adversely affected. Please refer to Item 7 regarding "Forward-Looking Statements and Cautionary Factors That May Affect Future Results." SEASONALITY The Company's jewelry business is highly seasonal, with the fourth quarter (which includes the Holiday shopping season) historically contributing significantly higher sales than any other quarter during the year. Approximately 39% of the Company's Fiscal 2000 net sales were made during the fourth quarter. MANUFACTURING In addition to Mayor's purchases of finished jewelry and the subcontracting of certain fabrication activities to others, Mayor's also has a jewelry design studio and manufacturing and repair facility located in its executive offices. In keeping with Mayor's identity as a full service guild jeweler, this studio and workshop offers custom designed jewelry in response to customers' special requests and manufactures jewelry for retail sale when it is economical to do so. Mayor's also provides jewelry and watch refurbishment and repair services, which are performed in stores or at the Mayor's centralized repair facility. In addition to repair work, jewelers will perform other work, including ring sizing on new purchases and repairs covered under warranty. RETAIL OPERATIONS, MERCHANDISING AND MARKETING GENERAL The Company distinguishes itself from most of its competitors by offering a larger selection of distinctive and higher quality merchandise at many different price points. Mayor's keeps substantially its entire inventory on display in its stores rather than at its distribution facility. Although each store stocks a representative array of jewelry, watches, giftware and other accessories, certain inventory is tailored to meet local tastes and historical merchandise sales patterns of the individual store. The Company believes that the elegant ambiance of its stores and attractive merchandise displays play an important role in providing an atmosphere for encouraging sales. The Company pays careful attention to detail in the design and layout of each of its stores, particularly lighting, colors, choice of materials and placement of display cases. The Company also places substantial emphasis on its window displays as a means of attracting walk-in traffic and reinforcing its distinctive image. The Company's display department designs and creates window and store merchandise case displays for all stores. Window displays are frequently changed to provide variety and to reflect seasonal events such as Christmas, Valentine's Day and Mother's Day. A manager, two assistant managers, six additional sales professionals, and an office manager along with two office associates staff a typical Mayor's store with an average of approximately $6 million in annual sales. Each store manager reports to one of five regional directors. The five regional directors report to the Vice President of Mayor's Store Operations. Many Mayor's stores also have a watchmaker or jeweler on the premises to make repairs. Management believes that the availability of these craftsmen reinforces the Company's image as a full-service guild jeweler and encourages customers to patronize its stores. 7 8 PERSONNEL AND TRAINING Mayor's places substantial emphasis on the professionalism of its sales force to maintain its position as a leading upscale jeweler. Mayor's strives to hire only highly motivated, friendly and customer-oriented individuals. All new sales professionals attend a course where they are trained in technical areas of the jewelry business, specific service techniques and Mayor's commitment to client service. In general, Mayor's trains its sales personnel to establish a personal rapport with each client, to identify client preferences with respect to both product and price range, and to successfully conclude a sale. Management believes that attentive personal service and knowledgeable sales professionals are key components of Mayor's success. As part of Mayor's commitment to training, the Company established "Mayor's University", a formalized system of in-house training with a primary focus on client service that involves extensive classroom training, the use of detailed operational manuals, in-store mentorship programs and product knowledge testing. All attendees must perform satisfactorily on written tests and quizzes that are administered during the training program in order to retain their employment with the Company. To help ensure successful skill transference from the classroom training environment to the sales floor, a manager works with each new sales professional on a one-to-one basis in the store for a structured 90 day period and then a bi-weekly coaching session on an ongoing basis. Each new sales professional is partnered with a mentor in the store, who trains the new associate on basic operational procedures. In addition, the Company conducts in-house training seminars on a periodic basis and administers training modules with audits to (i) enhance the quality and professionalism of all sales professionals, (ii) measure the level of knowledge of each sales professional and (iii) identify needs for additional training. The Company also provides store managers with more extensive management and client service training that emphasizes "on-the-job" coaching and training instruction techniques. Mayor's also stresses external training for its sales professionals. The Company encourages all associates to complete a series of courses offered by the Gemological Institute of America (GIA), an independent industry-recognized diamond grading laboratory and gemological school. ADVERTISING AND PROMOTION Mayor's marketing philosophy is to build on its well-established reputation in each of its market areas as a premier guild jeweler offering fine quality merchandise in an elegant, sophisticated environment conducive to the purchase of luxury items. Mayor's stresses its role as a fashion leader that does not promote discounting, but instead prices all of its merchandise with the goal of delivering consistent value to its clients. Mayor's marketing efforts, which consist of advertising, direct mailings, promotional events, attractive store design and elegant display, are shaped in large part by demographic and consumer trends affecting both the jewelry industry generally and Mayor's specifically. Mayor's advertisements stress its image as a full service guild jeweler, its tradition of integrity, value and reliability, its longevity in the jewelry business and its emphasis on superior client service. In addition, advertisements frequently associate Mayor's with internationally recognized brand names such as Rolex, Patek Philippe, Cartier and Mikimoto. Advertising and promotions for all stores are developed by Company personnel at its headquarters in conjunction with outside advertising agencies. CREDIT OPERATIONS Sales under Mayor's proprietary credit card accounted for approximately 33% of the Company's net sales during Fiscal 2000. Mayor's credit programs are intended to complement its overall merchandising and sales strategy by encouraging larger and more frequent sales to a loyal customer base. Mayor's extends credit solely to its Mayor's customers under its own private label revolving charge account. Clients may select from two financing plans: the 3 Month Interest Free Plan or the Revolving Plan with interest. Finance charges, which are subject to a rate ceiling imposed by state law, are currently assessed on the average daily balance method at a rate of 1.5% per month, unless otherwise controlled by state law. 8 9 Mayor's credit operations are located at the Company's corporate office. The credit staff makes all credit decisions; sales personnel or store managers are not authorized to grant credit. Mayor's has developed a detailed creditworthiness analysis on which it bases its credit decisions. A customer will generally receive a credit decision in less than 15 minutes. Mayor's custom-designed, computerized accounts receivable systems provide credit personnel with on-line decision making information, including new account processing, credit authorizations and client inquiries. As of February 3, 2001 Mayor's had approximately 59,000 credit card holders. Mayor's utilizes its credit card client base in its targeted marketing programs. Mayor's has an Account Receivable Management Department, which manages delinquent accounts. Representatives are trained on advanced account management techniques and programs, which have been developed in-house by the credit organization. Early stage delinquencies are handled with an approach to client goodwill. If an account continues to progress in delinquency, more assertive action is taken. Ultimately, if a delinquent account cannot be collected in-house, outside legal action is undertaken. During Fiscal 2000, Mayor's net bad debt expense as a percentage of credit sales was approximately 3.7% All clients may also take advantage of Mayor's layaway plan, which allows them to set aside and pay for items over a limited period of time with no interest charges. DISTRIBUTION The Company's retail locations receive the majority of their merchandise directly from the Company's distribution warehouse located in Sunrise, Florida. Merchandise is shipped from the distribution warehouse utilizing various air and ground carriers. Presently, a small portion of merchandise is delivered directly to the retail locations from suppliers. The Company transfers merchandise between retail locations to balance inventory levels and to fulfill customer requests. COMPETITION The retailing industry is highly competitive. The Company's competitors include foreign and domestic jewelry retailers, national and regional jewelry chains, department stores, catalog showrooms, discounters, direct mail suppliers, televised home shopping networks, manufacturers, distributors and large wholesalers and importers, some of whom have greater resources than the Company. The Company believes that competition in its markets is based primarily on price, design, product quality and service. With the consolidation of the retail industry that is occurring, the Company believes that competition with other general and specialty retailers and discounters will continue to increase. REGULATION The Company generally utilizes the services of independent customs agents to comply with U.S. customs laws in connection with its purchases of gold, diamond and other jewelry merchandise from foreign sources. The Company's operations are affected by numerous federal and state laws that impose disclosure and other requirements upon the origination, servicing and enforcement of credit accounts and limitations on the maximum amount of finance charges that may be charged by a credit provider. In addition to the Company's private label credit cards, credit to the Company's customers is primarily through bank cards such as Visa (R), Mastercard (R) and Discover (R), without recourse to the Company based upon a customer's failure to pay. Any change in the regulation of credit which would materially limit the availability of credit to the Company's traditional customer base could adversely affect the Company's results of operations or financial condition. Please refer to Item 7 regarding "Forward-Looking Statements and Cautionary Factors That May Affect Future Results." 9 10 EMPLOYEES As of April 1, 2001, the Company employed approximately 811 persons on a full-time basis, including approximately 565 in regional and local sales in the Mayor's stores, 83 in inventory and distribution and 163 in administrative and support functions. In addition, the Company also employed approximately 31 persons on a part-time or temporary basis which varies with the seasonal nature of its business. None of its employees are governed by a collective bargaining agreement, and the Company believes that its relations with employees are good. 10 11 ITEM 2. PROPERTIES The Company's corporate headquarters is owned by the Company and located on 11.1 acres in a 131,000 square foot building in Sunrise, Florida. As of April 1, 2001, Mayor's had a total of 35 leased stores, all of which are currently operating. Mayor's leases its stores, with rent generally the greater of a percentage of the store's sales volume (subject to certain adjustments) or a fixed minimum base rent. The Mayor's lease terms are generally ten years from inception. Due to Mayor's high volume of sales, Mayor's has historically paid rent for most stores based on sales. Lease rental payments are also subject to annual increases for tax and maintenance. The following table summarizes all operating store leases:
TOTAL OPERATING STORES SQUARE FEET EXPIRATION LOCATION ---------------- ----------- ---------- -------- Altamonte Mall 5782 Jan-2011 Altamonte Springs, FL Aventura Mall 3447 Jan-2009 N. Miami Beach, FL Bayside Marketplace 1806 Jan-2011 Miami, FL Bell Tower 4578 Jan-2012 Fort Myers, FL Boca Town Center 5878 Jan-2007 Boca Raton, FL Brandon Town Center 4110 Jun-2005 Brandon, FL Broward Mall 2236 Dec-2004 Plantation, FL Buckhead Store 10000 Apr-2009 Atlanta, GA Citrus Park Town Center 3953 Jan-2010 Tampa, FL CityPlace at West Palm Beach 6113 Jan-2011 West Palm Beach, FL Coral Gables 2500 Dec-2002 Coral Gables, FL Dadeland Mall 5700 Jan-2007 Miami, FL Desert Passage 5128 Jan-2011 Las Vegas, NV The Falls 1643 Jan-2004 Miami, FL Fashion Island 5879 Jul-2011 Newport Beach, CA Florida Mall 5070 Jan-2010 Orlando, FL The Galleria at Fort Lauderdale 3682 Jan-2005 Ft. Lauderdale, FL The Galleria at Roseville 6010 Jan-2011 Roseville, CA The Gardens of the Palm Beaches 2907 Jan-2004 Palm Beach Gardens, FL Lenox Square Mall 4587 Dec-2003 Atlanta, GA Lincoln Road 4250 May-2009 Miami Beach, FL Mall of Georgia 3486 Jan-2010 Buford, GA Miami International Mall 3226 Jan-2006 Miami, FL North East Mall 5172 Jan-2011 Hurst, TX North Point Mall 4752 Jan-2012 Alpharetta, GA Northbrook Court Mall 3896 Jan-2011 Northbrook, IL Orlando Fashion Square 4095 Jun-2005 Orlando, FL Perimeter Mall 5157 Jan-2009 Atlanta, GA Seminole Towne Center 3461 Jan-2006 Sanford, FL The Shops at Sunset Place 2051 Jan-2010 South Miami, FL
11 12
TOTAL OPERATING STORES SQUARE FEET EXPIRATION LOCATION ---------------- ----------- ---------- -------- Somerset Collection 6000 Jan-2011 Troy, MI Southgate Plaza 4605 Mar-2010 Sarasota, FL Stonebriar Centre 5263 Jan-2011 Frisco, TX Treasure Coast Square 2506 Jan-2003 Jensen Beach, FL Tyson Galleria 4626 Jan-2011 McLean, VA
ITEM 3. LEGAL PROCEEDINGS The Company is from time to time involved in litigation incident to the conduct of its business. There are no pending legal proceedings reportable pursuant to this Item 3. Although certain litigation with third parties and present and former employees of the Company is routine and incidental, such litigation can result in large monetary awards for compensatory or punitive damages; however, the Company believes that no litigation which is currently pending involving the Company will have a material adverse effect on the Company's financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company did not submit any matters to a vote of security holders in the fourth quarter of the fiscal year ended February 3, 2001. 12 13 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock has been listed on the American Stock Exchange since the Company's initial public offering in August 1987. The following table sets forth for the periods indicated, the range of sales prices per share on the American Stock Exchange Composite Tape as furnished by the National Quotation Bureau, Inc. HIGH LOW ---- --- Year Ended February 3, 2001 Thirteen Weeks Ended April 29, 2000 $3.25 $2.19 Thirteen Weeks Ended July 29, 2000 2.94 1.88 Thirteen Weeks Ended October 28, 2000 4.13 2.75 Fourteen Weeks Ended February 3, 2001 3.70 2.00 Year Ended January 29, 2000 Thirteen Weeks Ended May 1, 1999 $7.19 $2.31 Thirteen Weeks Ended July 31, 1999 3.81 2.75 Thirteen Weeks Ended October 30, 1999 3.25 2.44 Thirteen Weeks Ended January 29, 2000 3.50 2.31 The last reported sales price of the Common Stock on the American Stock Exchange Composite Tape on April 13, 2001 was $3.80. On April 13, 2001, the Company had 706 stockholders of record. The Company has never paid a cash dividend on its Common Stock. The Company currently anticipates that all of its earnings will be retained for use in the operation and expansion of its business and does not intend to pay any cash dividends on its Common Stock in the foreseeable future. Any future determination as to cash dividends will depend upon the earnings, capital requirements and financial condition of the Company at that time, applicable legal restrictions and such other factors as the Board of Directors may deem appropriate. Currently, the Company's working capital facility prohibits dividend payments. 13 14 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with the Consolidated Financial Statements and Related Notes thereto appearing elsewhere in this Form 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
FIFTY-THREE FIFTY-TWO FIFTY-TWO FIFTY-TWO FIFTY-TWO WEEKS WEEKS WEEKS WEEKS WEEKS ENDED ENDED ENDED ENDED ENDED FEB. 3, JAN. 29, JAN. 30, JAN. 31, FEB. 1, 2001 2000(2) 1999(2) 1998 1997 ------------- ------------ ------------- ------------ ------------ INCOME STATEMENT DATA: Net Sales $ 181,256 $ 157,629 $ 84,379 $ -- $ -- Cost of Sales 102,463 95,155 50,113 -- -- --------- --------- -------- ---------- ---------- Gross Profit 78,793 62,474 34,266 -- -- Store operating and selling expenses 42,110 39,624 17,197 -- -- --------- --------- -------- ---------- ---------- Store contribution 36,683 22,580 17,069 -- -- General and administrative expenses 20,086 20,534 12,124 -- -- Advertising and marketing expenses 7,869 3,070 5,614 -- -- Depreciation and amortization 8,046 7,648 3,390 -- -- --------- --------- -------- ---------- ---------- Operating income (loss) 682 (8,402) (4,059) -- -- Interest and other income 213 90 24 -- -- Interest expense (3,450) (2,619) (1,744) -- -- --------- --------- -------- ---------- ---------- Loss from continuing operations before cumulative effect of a change in accounting principle (2,555) (10,931) (5,779) -- -- Cumulative effect of a change in accounting principle -- (2,173) -- -- -- --------- --------- -------- ---------- ---------- Loss from continuing operations (2,555) (13,104) (5,779) -- -- Income from discontinued operations (1) 13,552 8,019 22,997 10,043 761 --------- --------- -------- ---------- ---------- Net income (loss) $ 10,997 $ (5,085) $ 17,218 $ 10,043 $ 761 ========= ========= ======== ========== ========== Net income (loss) per common share: Continuing operations before cumulative effect of a change in accounting principle $ (0.13) $ (0.43) $ (0.21) $ -- $ -- Cumulative effect of a change in accounting principle -- (0.09) -- -- -- Discontinued operations 0.69 0.32 0.84 0.39 0.03 --------- --------- -------- ---------- ---------- $ 0.56 $ (0.20) $ 0.63 $ 0.39 $ 0.03 ========= ========= ======== ========== ==========
14 15 (CONTINUED)
FIFTY-THREE FIFTY-TWO FIFTY-TWO FIFTY-TWO FIFTY-TWO WEEKS WEEKS WEEKS WEEKS WEEKS ENDED ENDED ENDED ENDED ENDED FEB. 3, JAN. 29, JAN. 30, JAN. 31, FEB. 1, 2001 2000 1999 1998 1997 ------------- ------------ ------------- ------------ ------------ BALANCE SHEET DATA (AT PERIOD END): Working capital $124,672 $ 65,118 $ 53,366 $111,764 $ 96,828 Total assets 224,052 220,463 236,595 151,712 139,385 Credit facility, less amounts classified as current 44,390 24,424 26,409 -- -- Stockholders' equity 144,259 136,555 163,686 135,579 125,373
---------------- (1) Discontinued operations include other charges for the fifty-two weeks ended January 29, 2000 which consists of a $2 million write-off of goodwill for Exclusive Diamonds, International related to the termination of the Sam's agreement. Discontinued operations include other charges for the fifty-two weeks ended February 1, 1997 which consists of (a) $2 million in severance payments to the Company's former President and Chief Executive Officer; (b) $630,000 write-off of financing costs in connection with the Company's repayment of senior notes; (c) $1.5 million write-down of the corporate headquarters building which the Company placed on the market for sale; and (d) $1.5 million provision for the closing of two Jewelry Depot locations. (2) The fifty-two weeks ended January 29, 2000 and January 30, 1999 were adjusted by certain reclasses to conform to the presentation for the fifty-three weeks ended February 3, 2001. These reclasses include finance charge income, employee sales, Estate department administrative expenses and interest-free programs. 15 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The years ended February 3, 2001, January 29, 2000 and January 30, 1999 are referred to herein as Fiscal 2000, Fiscal 1999 and Fiscal 1998, respectively. The operating results presented represent the activity of the Company's continuing operation, Mayor's Jewelers, Inc., a 35 store luxury jewelry chain the Company acquired on July 28, 1998. As the Mayor's business is highly seasonal with the fourth quarter (which includes the Holiday shopping season) historically contributing significantly higher sales and operating results than any other quarter, it should be noted that the six months of operating results in Fiscal 1998 included are not representative of the operating results of an annual period because they do not include the much less profitable first six months of the year. Through February 1, 2001 the Company also sold fine jewelry, watches and certain other select non-jewelry consumer products primarily to warehouse club members of Sam's Club, a division of Wal-Mart, Inc., pursuant to an arrangement whereby the Company operated a concession at all of Sam's domestic and Puerto Rico locations. In April 1999, the company was informed by Sam's that the concession agreement would not be renewed beyond its expiration date of February 1, 2001. As a result of the non-renewal, the Company developed a plan for the discontinuance of the Sam's business. This plan included the July 1999 sale of the Company's Mexico subsidiary, Jan Bell de Mexico S.A. de C.V., which supplied selected fine jewelry, watches and fragrances to Sam's locations in Mexico. Beginning in the second quarter of Fiscal 1999, the Company began to account for its Sam's operating results, field and back office expenses associated with the transition out of the clubs, its loss from the sale of the Mexico subsidiary and its loss from the operations of its Israel subsidiary as discontinued operations in its financial statements. The assets and liabilities of the Sam's business are recorded in the "Net assets of discontinued operations" and "Net liabilities of discontinued operations" accounts of the Company's Consolidated Balance Sheets. The operation of the Sam's business and the costs of the discontinuance since the date of adoption of the plan are included in the "Gain from disposition of discontinued operations" account of the Company's Consolidated Statement of Operations. The net results of operations of the Sam's business prior to the adoption of the plan are included in "Income from discontinued operations" included in the accompanying Consolidated Statements of Operations. Accordingly, the results of continuing operations include only the results of the Mayor's stores. As evidenced by the net gain of $13.6 million the Company recorded on disposition of its discontinued Sam's Club operations, Mayor's has successfully withdrawn from that business and is focused on continuing the plan for geographical expansion of its Mayor's stores begun in Fiscal 2000. The Company successfully opened ten new stores during the year including one in Chicago, Illinois, one in metropolitan Washington DC, one in Las Vegas, Nevada, one in Troy, Michigan, two in Dallas, Texas, one in Newport Beach and one in Sacramento, California and two in Florida. The Fiscal 2000 class of new stores represented the Company's first foray into markets outside of its historical base in Florida and Georgia. Current plans have Mayor's continuing its growth plan in Fiscal 2001 as it looks to construct seven new stores; one more in Chicago, Illinois, two more in Dallas, Texas, three more in Florida and its first store in Scottsdale, Arizona. Mayor's continuing operations realized net losses of $2.6 million, $13.1 million and $5.8 million in Fiscal 2000, Fiscal 1999 and Fiscal 1998, respectively. The Company intends to attain profitability through the expansion of the Mayor's chain as well as reducing costs in the Company's infrastructure. The Company has implemented a focused merchandising, marketing and real estate strategy that will serve to solidify Mayor's position as a growing premier luxury guild jeweler, and has retained Deloitte & Touche as consultants on a cost reduction plan. The results of operations for Fiscal 1998 include the results of Mayor's for the period subsequent to the acquisition date of July 28, 1998. During this period, the Company began to implement ongoing strategies to increase revenues and achieve expense savings in the Mayor's business. These include efforts to reduce and better balance inventory levels, to reduce the amount of discontinued inventory in stock and replace it with current 16 17 merchandise, and to increase inventory turns. Also, the Company began its ongoing initiative to improve gross profit margins through sales and purchasing efficiencies and through merchandise management strategies that improve initial markup and inventory management. The retail jewelry business is seasonal in nature with a higher proportion of sales and a significant portion of earnings generated during the fourth quarter holiday selling season. The following discussion includes pro forma results for the Mayor's chain in Fiscal 1998 as if the acquisition had occurred February 1, 1998, thus incorporating results for the full year ended January 30, 1999 for comparative purposes. The following table for continuing operations sets forth for the periods indicated the percentage of net sales for certain items in the Company's Consolidated Statements of Operations and related pro forma information as defined above:
YEAR ENDED FEB. 3, 2001 YEAR ENDED JAN. 29, 2000 YEAR ENDED JAN. 30, 1999 (ACTUAL) (ACTUAL) (PRO FORMA UNAUDITED) ----------------------- ----------------------- ----------------------- Net sales $ 181,256 100.0% $ 157,629 100.0% $ 146,013 100.0% Cost of sales 102,463 56.5 95,155 60.4 86,731 59.4 --------- ----- --------- ----- --------- ----- Gross Profit 78,793 43.5 62,474 39.6 59,282 40.6 Store operating and selling expenses 42,110 23.3 39,624 25.1 32,205 22.1 --------- ----- --------- ----- --------- ----- Store contribution 36,683 20.2 22,850 14.5 27,077 18.5 General and administrative expenses 20,086 11.1 20,534 13.0 23,703 16.2 Advertising and marketing expenses 7,896 4.3 3,070 1.9 7,736 5.3 Depreciation and amortization 8,046 4.4 7,648 4.9 7,346 5.0 --------- ----- --------- ----- --------- ----- Operating income (loss) 682 0.4 (8,402) (5.3) (11,708) (8.0) Interest and other income 213 0.1 90 0.1 41 0.0 Interest expense 3,450 1.9 2,619 (1.7) 5,242 (3.6) --------- ----- --------- ----- --------- ----- Loss from continuing operations before cumulative effect of a change in accounting principle $ (2,555) (1.4%) $ (10,931) (6.9%) $ (16,909) (11.6%) ========= ===== ========= ===== ========= ===== Number of stores 35 26 24 ===== ===== =====
SALES The Company's net sales from the Mayor's continuing operations for Fiscal 2000 were $181.3 million compared to $157.6 million and $146.0 million for Fiscal 1999 and pro forma Fiscal 1998, respectively. Comparative store net sales for Fiscal 2000 increased 2.9% compared to Fiscal 1999. The increase in sales for Fiscal 2000 is due to revenue contribution of new locations as well as the comparable store sales increase, created in part because of the fifty-three week calendar for Fiscal 2000. The comparable store sales increase is also a result of per store sales improvement in the Company's two flagship stores in Miami's Dadeland Mall and Boca Raton's Town Center Mall. Many of the Company's other stores in Florida and metropolitan Atlanta, Georgia also recorded comparable store sales increases. Comparative store net sales for Fiscal 1999 increased 10.8% compared to pro forma Fiscal 1998. The increase in revenues in Fiscal 1999 is mainly attributable to increases in all product categories, with the largest increase in the watch category. By opening new stores outside of Mayor's current geographical marketplace, the Company is seeking to expand its Mayor's chain to a national luxury jeweler. However, the retail jewelry market is particularly subject to the level of consumer discretionary income and the subsequent impact on the type and value of goods purchased. With the consolidation of the retail industry, the Company believes that competition both within the luxury goods retail industry and with other competing general and specialty retailers and discounters will continue to increase. The superior watch brands business comprises a significant portion of the Mayor's business, which is a result of the Company's ability to 17 18 effectively market high-end watches. The Company's future sales results in stores outside of its traditional markets in Florida and Georgia could be adversely impacted because some current watch vendor distribution agreements do not permit the Company to market their products in these new locations. As the Company brings in new merchandise for the stores it opens, the Company's merchants are able to freshen the assortment of inventory in all stores which should, in turn, lead to improved sales and margins. COST OF SALES AND GROSS PROFIT Gross profit in Fiscal 2000 was 43.5% compared to 39.6% and 40.6% in Fiscal 1999 and pro forma Fiscal 1998, respectively. The increase in gross profit as a percentage of net sales for Fiscal 2000 is primarily because of improvements achieved through sales and purchasing efficiencies and merchandise management initiatives that improved initial markup and inventory management. The decrease in gross profit as a percentage of net sales for Fiscal 1999 compared to Fiscal 1998 is a result of the Company's liquidation of its slow moving inventory acquired with the acquisition in July 1998 at significantly reduced prices and a disproportionate increase in watch sales over the prior year, which generally have a lower gross profit than other product categories. The Company believes there is opportunity to increase gross profit over the next couple of years. Areas for gross margin improvement include strategies to lower the cost of merchandise purchased and to move the mix of sales towards higher margin jewelry items. In addition, the Company expects to continue to refine the allocation and management of inventory in its stores, and as a result, other direct costs such as slow moving reserves are expected to decrease. STORE OPERATING AND SELLING EXPENSES Store operating and selling expenses were $42.1 million, or 23.3% of sales for Fiscal 2000 compared to $39.6 million, or 25.1% of sales, and $32.2 million, or 22.1% of sales, for Fiscal 1999 and pro forma Fiscal 1998, respectively. The increase in store operating and selling expenses for Fiscal 2000 over Fiscal 1999 is mainly attributable to an increase in the number of stores, and to increases in chargecard and check processing fees and in percentage rent, which are all directly related to the increased sales. As a percentage of sales, store operating and selling costs fell to 23.3% in Fiscal 2000 from 25.1% in Fiscal 1999 as a result of increased comparable store sales. These expenses increased in both absolute dollars and as a percentage of sales in Fiscal 1999 from Fiscal 1998 primarily as a result of the introduction of a new sales commission structure and increased security costs introduced in Fiscal 1999. The Company does not believe there is significant opportunity to reduce these expenses. The Company believes it has a very well executed front end in its Mayor's stores which includes highly professional, trained associates. Also, the Company believes that the elegance of the Mayor's stores helps set the business apart from other jewelers and adds to the experience of shopping in a Mayor's store. STORE CONTRIBUTION As a result of the foregoing improvements in sales and gross margin, store contribution to central overhead increased to $36.7 million, or 20.2% of sales, in Fiscal 2000 from $22.9 million in Fiscal 1999. Store contribution fell to $22.9 million, or 14.5% of sales, in Fiscal 1999 from $27.1 million, or 18.5% of sales, in Fiscal 1998 primarily because of the increased commission expense, as well as because of lower gross margin contribution in Fiscal 1999. Total store contribution percentage could be imparted in future periods based on the timing of profitability of the Company's newly constructed stores. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $20.1 million for Fiscal 2000 compared to $20.5 million and $23.7 million for Fiscal 1999 and pro forma Fiscal 1998, respectively. General and administrative expenses as a percentage of net sales decreased to 11.1% in Fiscal 2000 compared to 13.0% and 16.2% in Fiscal 1999 and pro forma Fiscal 1998, respectively. The decrease in Fiscal 2000 is primarily a result of the greater efficiencies in these expenses as sales 18 19 increased. The decrease in general and administrative expenses for Fiscal 1999 is primarily due to the efficiencies created by the consolidation of the Mayor's back office functions and locations. General and administrative expenses also include store opening costs of $674,000 and $392,000 for Fiscal 2000 and Fiscal 1999, respectively. The percentage of general and administrative expenses to net sales should continually decrease as the Company expands its business. Management believes that it can aggressively realize long term general and administrative savings thereby increasing profitability, and has begun to implement courses of action recommended in a study prepared for the Company by Deloitte & Touche's retail consulting group. ADVERTISING AND MARKETING EXPENSES Advertising and marketing expenses were $7.9 million in Fiscal 2000 compared to $3.1 million and $7.7 million in Fiscal 1999 and pro forma Fiscal 1998, respectively. The increase in Fiscal 2000 is primarily attributable to the Company's efforts to introduce the Mayor's name for the new stores in metropolitan Washington DC, Nevada, Michigan, Texas and California, as well as starting to develop a national brand identity this year. The decrease in advertising and marketing expenses in Fiscal 1999 was primarily due to the Company's efforts to reduce expenses. The Company anticipates spending less on advertising and marketing in Fiscal 2001 than it did in Fiscal 2000. DEPRECIATION AND AMORTIZATION Depreciation and amortization expenses were $8.0 million for Fiscal 2000, compared to $7.6 million and $7.3 million for Fiscal 1999 and pro forma Fiscal 1998, respectively. The increase in depreciation expense for Fiscal 2000 and Fiscal 1999 is a result of the capital expenditures associated with the construction of new and remodeled stores which are net of the write-off of the fixed assets at the previous Mayor's headquarters in 1999. The increase in amortization expense for Fiscal 1999 is primarily attributable to the goodwill recorded in connection with the Mayor's acquisition, as well as to the amortization of financing costs relating to the Company's revolving credit facility. INTEREST AND OTHER INCOME AND INTEREST EXPENSE Interest and other income was $213,000 in Fiscal 2000, $90,000 in Fiscal 1999 and $41,000 in pro forma Fiscal 1998, respectively. Interest expense was $3.5 million for Fiscal 2000, compared to $2.6 million and $5.2 million for Fiscal 1999 and pro forma Fiscal 1998, respectively. The decrease in the refinancing of the interest expense in Fiscal 1999 is attributable to the partial paydown of Mayor's pre-acquisition debt and debt at a lower interest rate. The increase in interest expense for Fiscal 2000 is primarily attributable to the build out of new stores and the incremental inventory needed to stock these stores. LIQUIDITY AND CAPITAL RESOURCES As of February 3, 2001, cash and cash equivalents totaled $1.4 million and the Company had $44.4 million outstanding under its working capital facility. These outstanding borrowings reflect the Company's higher than anticipated inventory levels resulting primarily from less than projected year end holiday sales. Further, these amounts also are a result of an unnaturally low accounts payable balance created by the timing of the Company's inventory receipts, its payment cycle and decision to aggressively take advantage of early payment purchase discounts. Availability under this facility is determined based upon a percentage formula applied to inventory and accounts receivable. Based upon this formula, the maximum of $80 million was available to the Company at February 3, 2001. The Company has the right to request an increase up to $110 million contingent upon lender approval. The Company amended its agreement in April 2001 for all appropriate terms and conditions related to the expiration of the Sam's agreement. The amendment terms provides that the credit facility bears interest at floating rates and the Company has the option of LIBOR plus 2.25% or the bank's adjusted base rate plus 1.00%. These interest rates can be increased if the Company's average leverage ratio does not meet certain levels. In addition, the Company pays a commitment fee of .25% of the unused line balance as well as 2.5% of the aggregate outstanding letter of credit liability. The amended agreement contains covenants which require the Company to maintain a fixed charge ratio, an interest coverage ratio, a consolidated EBITDA minimum, tangible net worth minimum, and also limits capital expenditures, incurrence of additional debt, and prohibits payment of dividends. During Fiscal 2000, cash flows from continuing operating activities used $53.4 million in cash. Cash flows net of discontinued operations provided $5.2 million in cash. The Company's business is highly seasonal. Consequently, 19 20 seasonal working capital needs peak in October and November, before the holiday shopping season. During Fiscal 2000 these seasonal needs and the Company's additional Mayor's locations opened during Fiscal 2000 were supplied primarily by the Company's cash from operating activities. During Fiscal 2000, the Company's peak level of inventory for both continuing and discontinued operations was $164.3 million requiring a maximum outstanding borrowing on the line of credit of $74.8 million. Net cash used in investing activities was $19.8 million in Fiscal 2000, primarily related to capital expenditures for the ten new stores and two remodeled locations. Fiscal 2000 capital expenditures include back office computer software and hardware as well. The Company currently plans to open seven Mayor's stores during 2001. Subject to the availability of desirable real estate locations, the Company plans to open approximately four to seven new stores per year thereafter. Management estimates that the Company's cash requirements will be approximately $4.2 million for each new store, with approximately $1.2 million (after consideration of lease concessions from landlords) related to leasehold improvements, fixtures, point of sale terminals and other equipment in the stores, and approximately $3 million related to incremental accounts receivable and inventory investment, net of incremental accounts payable. The Company also estimates it will make back office capital expenditures of approximately $1.5 million during Fiscal 2001, primarily for operating software upgrades, as well as other management information system enhancements. On April 16, 1999, the Company's Board of Directors authorized the expenditure of up to $15 million to repurchase the Company's common stock over a period of one year. On October 29, 1999, the authorized amount to repurchase was increased by an additional $5 million, which has subsequently increased another $10 million to a total of $30 million. The acquired shares will be held in treasury or canceled. As of February 3, 2001, the Company had repurchased 9,983,954 shares at a cost of $29.4 million, all held in treasury. The Company believes that its cash on hand, projected cash from operations and availability under the current working capital facility will be sufficient to meet its anticipated working capital and capital expenditure needs for Fiscal 2001; however, there can be no assurance that the Company's operating results will be sufficient to sustain all future debt service and working capital needs. EFFECTS OF INFLATION Gold prices are affected by political, industrial and economic factors and by changing perceptions of the value of gold relative to currencies. Investors commonly purchase gold and other precious metals perceived to be rising in value as a hedge against a perceived increase in inflation, thereby bidding up the price of such metals. The Company's sales volume and net income are potentially affected by the fluctuations in prices of gold, diamonds and other precious or semi-precious gemstones as well as watches and other accessories. Because of the manner in which the Company procures and sells gold products, the Company believes that it is not necessary to hedge its gold inventories. Hedging is not available with respect to possible fluctuations in the price of precious and semi-precious gemstones, watches or other accessories. The Company's selling, general and administrative expenses are directly affected by inflation resulting in an increased cost of doing business. Although inflation has not had and the Company does not expect it to have a material effect on operating results, there is no assurance that the Company's business will not be affected by inflation in the future. INTEREST RATE RISK The Company's credit facility accrues interest at floating rates, currently based upon LIBOR plus 2.25% or the bank's adjusted base rate plus 1.00%, at the Company's option. The Company manages its borrowings under this credit facility each day in order to minimize interest expense. The impact on the Company's earnings per share of a one-percentage point interest rate change on the outstanding balance as of February 3, 2001 would increase or decrease earnings per share by $.01 per share. The Company extends credit to its Mayor's customers under its own revolving charge plan with up to two-year payment terms. Finance charges are generally currently assessed on customers' balances at a rate of 1.5% per month. 20 21 Since the interest rate is fixed at the time of sale, market interest rate changes would not impact the Company's finance charge income. FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS This report and other written reports and releases and oral statements made from time to time by the Company contain forward-looking statements which can be identified by their use of words like "plans," "expects," "believes," "will," "anticipates," "intends," "projects," "estimates," "could," "would," "may," "planned," "goal," and other words of similar meaning. All statements that address expectations, possibilities or projections about the future, including without limitation statements about the Company's strategy for growth, expansion plans, sources or adequacy of capital, expenditures and financial results are forward-looking statements. One must carefully consider such statements and understand that many factors could cause actual results to differ from the forward-looking statements, such as inaccurate assumptions and other risks and uncertainties, some known and some unknown. No forward-looking statement is guaranteed and actual results may vary materially. Such statements are made as of the date provided, and the Company assumes no obligation to update any forward-looking statements to reflect future developments or circumstances. One should carefully evaluate such statements by referring to the factors described in the Company's filings with the SEC, especially on Form's 10-K, 10-Q and 8-K. Particular review is to be made of Items 1, 2, 3 and 7 of the Form 10-K and Item 2 of the Form's 10-Q where the Company discusses in more detail various important risks and uncertainties that could cause actual results to differ from expected or historical results. The Company notes these factors for investors as permitted by the Private Securities Litigation Act of 1995. Since it is not possible to predict or identify all such factors, the identified items are not a complete statement of all risks or uncertainties. In addition to the factors discussed in this report, the following are some of the important factors that could cause results to vary. The Company operates today primarily through mall based stores under the Mayor's and Maier & Berkele names. Management continuously considers other growth opportunities including acquisitions of, or investments in businesses similar or complementary to that of the Company, which could require a significant investment of funds and management attention by the Company. Any such growth opportunities will be subject to all of the risks inherent in the integration of, or establishment of a new product or service offering, including competition, lack of sufficient customer demand, unavailability of experienced management, unforeseen complications, delays and cost increases and integration difficulties. The Company may incur costs in connection with pursuing new growth opportunities that it cannot recover, and the Company may be required to expense certain of these costs, which may negatively impact the Company's reported operating performance for the periods during which such costs are incurred. The Company plans to open seven new Mayor's stores in 2001. The Company considers its Mayor's expansion program to be an integral part of its future plans to replace the Sam's business. However, there can be no assurance that the Company will be able to find favorable store locations, negotiate favorable leases, hire and train new store and account managers, and integrate the new stores in a manner that will allow the Company to meet its expansion program. Conditions outside the Company's control, such as adverse weather conditions affecting construction schedules, unavailability of materials, labor disputes and similar issues also could impact anticipated store openings. The failure to expand by opening new stores as planned could have a material adverse effect on the Company's future sales growth, profitability and operating results. All but four of the Mayor's stores are located in major regional malls. The success of the Company's operations depends to a certain extent on the ability of mall anchor tenants and other attractions to generate customer traffic in the vicinity of the Mayor's stores. The loss of mall anchor tenants in the regional malls where the Mayor's stores are located, the opening of competing regional malls or other economic downturns affecting customer mall traffic could have an adverse effect on the Company's net sales and profitability. 21 22 The working capital facility agreement contains covenants, which require the Company to maintain financial ratios including a leverage ratio, fixed-charge ratio, tangible net worth, and also limits capital expenditures, incurrence of additional debt, and prohibits the payment of dividends. There can be no assurance that the Company's future operating results will be sufficient to meet the requirements of the foregoing covenants. 22 23 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX PAGE ---- Independent Auditors' Report 24 Consolidated Balance Sheets as of February 3, 2001 and January 29, 2000 25 Consolidated Statements of Operations for the Year Ended February 3, 2001, the Year Ended January 29, 2000, and the Year Ended January 30, 1999 26 Consolidated Statements of Stockholders' Equity for the Year Ended February 3, 2001, the Year Ended January 29, 2000, and the Year Ended January 30, 1999 27 Consolidated Statements of Cash Flows for the Year Ended February 3, 2001, the Year Ended January 29, 2000, and the Year Ended January 30, 1999 28-29 Notes to Consolidated Financial Statements 30 23 24 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Mayor's Jewelers, Inc Sunrise, Florida We have audited the accompanying consolidated balance sheets of Mayor's Jewelers, Inc. (formerly Jan Bell Marketing, Inc.) and its subsidiaries (the "Company") as of February 3, 2001 and January 29, 2000 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three fiscal years in the period ended February 3, 2001. Our audits also included the financial statement schedule listed at Item 14(a)(2). These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 3, 2001 and January 29, 2000, and the results of its operations and its cash flows for each of the three fiscal years in the period ended February 3, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note D(6) to the consolidated financial statements during the year ended January 29, 2000, the Company changed its method of accounting for certain direct and indirect costs related to inventory in prior years. /s/ Deloitte & Touche LLP Certified Public Accountants Miami, Florida March 23, 2001, except for the second paragraph of Note G, as to which the date is April 27, 2001 24 25 MAYOR'S JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (AMOUNTS SHOWN IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
FEBRUARY 3, JANUARY 29, 2001 2000 --------- --------- ASSETS Current Assets: Cash and cash equivalents $ 1,363 $ 1,049 Accounts receivable (net of allowance for doubtful accounts of $1,403 and $1,274, respectively) 34,974 25,884 Inventories 107,674 78,640 Other current assets 10,913 2,088 --------- --------- Total current assets 154,924 107,661 --------- --------- Property, net 42,651 28,238 Excess of cost over fair value of net assets acquired 24,204 26,614 Other assets 2,273 2,653 --------- --------- Total non-current assets 69,128 57,505 Net assets of discontinued operations -- 55,297 --------- --------- Total assets $ 224,052 $ 220,463 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 14,039 $ 24,387 Accrued expenses 11,374 13,061 Due to former Mayor's shareholders -- 5,095 Net liabilities of discontinued operations 4,839 -- --------- --------- Total current liabilities 30,252 42,543 --------- --------- Long term debt 44,390 24,424 Other long term liabilities 5,151 1,817 --------- --------- Total long term liabilities 49,541 26,241 Deferred gain from discontinued operations -- 15,124 --------- --------- Commitments and contingencies (Note I) -- -- Stockholders' Equity: Common stock, $.0001 par value, 50,000,000 shares authorized, 29,210,886 and 28,457,634 shares issued, respectively 3 3 Additional paid-in capital 193,821 191,810 Accumulated deficit (20,165) (31,162) Less: 9,983,954 and 8,078,798 shares of treasury stock, at cost, respectively (29,400) (24,096) --------- --------- Total stockholders' equity 144,259 136,555 --------- --------- Total liabilities and stockholders' equity $ 224,052 $ 220,463 ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 25 26 MAYOR'S JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS SHOWN IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED YEAR ENDED YEAR ENDED FEBRUARY 3, JANUARY 29, JANUARY 30, 2001 2000 1999 ------------ ------------ ------------ Net sales $ 181,256 $ 157,629 $ 84,379 Cost of sales 102,463 95,155 50,113 ------------ ------------ ------------ Gross profit 78,793 62,474 34,266 Store operating and selling expenses 42,110 39,624 17,197 ------------ ------------ ------------ Store contribution 36,683 22,850 17,069 General and administrative expenses 20,086 20,534 12,124 Advertising and marketing expenses 7,869 3,070 5,614 Depreciation and amortization 8,046 7,648 3,390 ------------ ------------ ------------ 36,001 31,252 21,128 ------------ ------------ ------------ Operating income (loss) 682 (8,402) (4,059) Interest and other income 213 90 24 Interest expense 3,450 2,619 1,744 ------------ ------------ ------------ Loss from continuing operations before cumulative effect of a change in accounting principle (2,555) (10,931) (5,779) Cumulative effect of a change in accounting principle -- (2,173) -- ------------ ------------ ------------ Loss from continuing operations (2,555) (13,104) (5,779) Income from discontinued operations, net of income tax liability (benefit) of $531 and ($2,257), respectively -- 8,019 22,997 Gain from disposition of discontinued operations, net of income tax liability of $393 in 2000 13,552 -- -- ------------ ------------ ------------ Net income (loss) $ 10,997 $ (5,085) $ 17,218 ============ ============ ============ Weighted average shares outstanding 19,587,322 25,535,852 27,401,952 (Loss) earnings per share: Continuing operations before cumulative effect of a change in accounting principle $ (0.13) $ (0.43) $ (0.21) Cumulative effect of a change in accounting principle -- (0.09) -- Discontinued operations 0.69 0.32 0.84 ------------ ------------ ------------ $ 0.56 ($ 0.20) $ 0.63 ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26 27 MAYOR'S JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
ACCUMULATED OTHER COMMON ADDITIONAL COMPREHENSIVE COMPREHENSIVE SHARES COMMON PAID-IN ACCUMULATED INCOME INCOME TREASURY ISSUED STOCK CAPITAL DEFICIT (LOSS) (LOSS) STOCK TOTAL ------ ----- ------- ------- ------ ------ ----- ----- BALANCE AT JANUARY 31, 1998 25,981,970 $3 $180,649 $(43,295) $(1,778) $ -- $135,579 COMPREHENSIVE INCOME: NET INCOME 17,218 $17,218 17,218 ======= PURCHASE PLAN EXERCISE 30,921 106 106 ISSUANCE OF COMMON STOCK 816,034 3,078 3,078 ISSUANCE OF COMMON STOCK-MAYOR'S ACQUISITION 1,529,550 7,705 7,705 --------- ------ ------ ------- ----- ------- BALANCE AT JANUARY 30, 1999 28,358,475 3 191,538 (26,077) (1,778) -- 163,686 COMPREHENSIVE INCOME: NET LOSS (5,085) $(5,085) (5,085) FOREIGN CURRENCY TRANSLATION ADJUSTMENT 1,778 1,778 1,778 -------- $(3,307) ======== PURCHASE PLAN EXERCISE 76,261 216 216 ISSUANCE OF COMMON STOCK 22,898 56 56 TREASURY STOCK (8,078,798) (24,096) (24,096) --------- ------ ------- ------- ------- ------- ------- BALANCE AT JANUARY 29, 20,378,836 3 191,810 (31,162) 0 (24,096) 136,555 2000 COMPREHENSIVE INCOME: NET INCOME 10,997 $10,997 10,997 ======= PURCHASE PLAN EXERCISE 87,796 182 182 ISSUANCE OF COMMON STOCK 665,456 1,829 1,829 TREASURY STOCK (1,905,156) (5,304) (5,304) --------- ------ ------- ------ ------- ------- ------- BALANCE AT FEBRUARY 3, 2001 (1,905,154) $3 $193,821 $(20,165) $0 $(29,400) $144,259 ========== == ======== ========= ======= ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 27 28 MAYOR'S JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS SHOWN IN THOUSANDS)
YEAR ENDED YEAR ENDED YEAR ENDED FEBRUARY 3, JANUARY 29, JANUARY 30, 2001 2000 1999 ---------------- ---------------- ----------------- Cash flows from operating activities: Cash received from customers $ 172,164 $ 157,130 $ 82,221 Cash paid to suppliers and employees (222,239) (170,806) (83,927) Interest and other income received 213 91 1,061 Interest paid (3,450) (2,619) (1,744) Income taxes paid (58) (262) -- --------- --------- -------- Net cash used in continuing operating activities (53,370) (16,466) (2,389) Net cash provided by discontinued operations 58,563 51,543 61,669 --------- --------- -------- Net cash provided by operating activities 5,193 35,077 59,280 --------- --------- -------- Cash flows from investing activities: Investment in Mayor's, net of cash acquired 423 (2,686) (59,111) Capital expenditures (20,214) (8,373) (2,784) --------- --------- -------- Net cash used in investing activities (19,791) (11,059) (61,895) --------- --------- -------- Cash flows from financing activities: Borrowings under line of credit 461,950 501,703 -- Line of credit repayments (441,984) (503,689) -- Purchase of treasury stock (5,304) (24,096) -- Proceeds from sale of employees stock plans 2,011 272 -- (Cash paid)/ increase in due to Mayor's shareholders (5,095) (1,050) 6,145 Payment of commitment fee -- (75) -- Other 3,334 436 -- --------- --------- -------- Net cash provided by (used in) financing activities 14,912 (26,499) 6,145 --------- --------- -------- Net increase (decrease) in cash and cash equivalents 314 (2,481) 3,530 Cash and cash equivalents at beginning of year 1,049 3,530 -- --------- --------- -------- Cash and cash equivalents at end of year $ 1,363 $ 1,049 $ 3,530 ========= ========= ========
(CONTINUED) 28 29
YEAR ENDED YEAR ENDED YEAR ENDED FEBRUARY 3, JANUARY 29, JANUARY 30, 2001 2000 1999 ----------- ------------ ------------ Reconciliation of net income (loss) to net cash provided by operating activities: Net income (loss) $ 10,997 $ (5,085) $ 17,218 Deduct gain/income from discontinued operations (13,552) (8,019) (22,997) -------- -------- -------- Loss from continuing operations (2,555) (13,104) (5,779) -------- -------- -------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 8,046 7,648 3,390 Provision for doubtful accounts 1,403 1,274 -- Cumulative effect of change in accounting principle -- 2,173 -- (Increase) decrease in assets: Accounts receivable (10,493) (1,773) -- Inventories (29,034) (10,665) -- Other assets (8,702) (492) -- Increase (decrease) in liabilities: Accounts payable (10,348) (1,359) -- Accrued expenses (1,687) (168) -- -------- -------- -------- Net cash used in continuing operating activities (53,370) (16,466) (2,389) Net cash provided by discontinued operations 58,563 51,543 61,669 -------- -------- -------- Net cash provided by operating activities $ 5,193 $ 35,077 $ 59,280 ======== ======== ========
(CONCLUDED) SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 29 30 MAYOR'S JEWELERS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEARS ENDED FEBRUARY 3, 2001, JANUARY 29, 2000 AND JANUARY 30, 1999 A. NATURE OF BUSINESS: Mayor's Jewelers, Inc. (formerly Jan Bell Marketing, Inc.) and subsidiaries ("Mayor's" or the "Company") are primarily engaged in the sale of jewelry, watches and other consumer products, operating Mayor's and Maier & Berkele luxury jewelry stores. This chain operates 35 locations in South and Central Florida, metropolitan Atlanta, Georgia, Chicago, Illinois, metropolitan Washington DC, Las Vegas, Nevada, Troy, Michigan, Dallas, Texas and Newport Beach and Sacramento, California. The Fiscal 2000 class of new stores represented the Company's first foray into markets outside of Florida and Georgia. The Company announced on June 30, 2000 at its Annual Meeting of Shareholders that its stockholders had approved the change of the Company's name from Jan Bell Marketing, Inc. to Mayor's Jewelers, Inc. The Company's consolidated financial statements are prepared on a 52/53-week retail fiscal year basis. The fifty-three weeks ended February 3, 2001 and the fifty-two weeks ended January 29, 2000 and January 30, 1999 are referred to herein as Fiscal 2000, Fiscal 1999 and Fiscal 1998, respectively. B. DISCONTINUED OPERATIONS: The Company also retailed fine jewelry, watches and certain other select non-jewelry consumer products primarily to warehouse club members through Sam's Club, a division of Wal-Mart, Inc., pursuant to an agreement whereby the Company operated a concession at all of Sam's domestic and Puerto Rico locations through February 1, 2001. During April 1999, the Company was informed by Sam's that the concession agreement would not be renewed beyond its expiration date. Sam's Division is therefore accounted for as a discontinued operation due to the expiration on February 1, 2001. In connection therewith, the Company recorded a gain from disposition of $13.6 million, net of a tax liability of $393,000. Sam's Division sales during Fiscal 2000 through the date of disposition were $227.3 million. Sales for Fiscal 1999 and Fiscal 1998 were $277.6 million and $278.8 million, respectively. Income (loss) from discontinued operations for Fiscal 2000, Fiscal 1999 and Fiscal 1998 were ($1.6) million, $26.4 million and $23.0 million, respectively. The following table discloses the net assets/liabilities of the discontinued operations as of each of the following year-ends:
FEBRUARY 3, JANUARY 29, 2001 2000 ------------- -------------- (AMOUNTS SHOWN IN THOUSANDS) Cash $ -- $ 392 Accounts Receivable -- 6,025 Inventories -- 47,090 Other current assets -- 8,097 Fixed assets -- 858 Other (187) (965) Accounts Payable (4,652) (8,130) ------- -------- Net (liabilities) assets of discontinued items $(4,839) $ 55,297 ======= ========
30 31 C. MAYOR'S ACQUISITION: In July 1998, the Company acquired Mayor's Jewelers, Inc. Total consideration consisted of approximately $18 million cash, 2 million shares of the Company's common stock, and the assumption of Mayor's outstanding debt which was refinanced through a new $80 million working capital facility with a syndicate of banks led by Citicorp, U.S.A., Inc. Following the closing, the Company had approximately $40 million outstanding under its new facility. The accompanying Consolidated Balance Sheet as of February 3, 2001 includes goodwill of approximately $24.2 million, net of $4.0 million in accumulated amortization, resulting from the Mayor's acquisition. The operating results of Mayor's are included in the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the year ended January 30, 1999, effective as of August 1, 1998, which is the acquisition date for accounting purposes. In connection with the Mayor's acquisition, certain former minority shareholders of Mayor's filed a lawsuit in state court in Miami, Florida against Mayor's and the Company and two directors of Mayor's claiming that the acquisition and merger violated their shareholders' rights and that the acquisition of the Mayor's stock was unlawful. The lawsuit was settled in February 2000 without any material impact. The consideration for the stock of the former minority shareholders is reflected in the Consolidated Balance Sheet as of January 29, 2000 and classified as Due to Former Mayor's Shareholders. D. 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) USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (3) SALES OF CONSIGNMENT MERCHANDISE -- Income is recognized on the sale of inventory held on consignment at such time as the merchandise is sold. (4) SALES RETURNS -- The Company generally gives its customers the right to return merchandise purchased by them and records an accrual at the time of sale for the effect of the estimated returns. (5) ACCOUNTS RECEIVABLE - - Accounts receivable arise primarily from customers' use of the Mayor's credit cards. Several installment sales plans are offered which vary as to repayment terms and finance charges assessed. Finance charges, when applicable, accrue at rates ranging from 10% to 18% per annum. Finance charge income for Fiscal 2000 was $3.0 million, Fiscal 1999 was $2.1 million and was $1.1 million for the six months ended January 30, 1999 and is recorded as net sales in the accompanying Consolidated Statements of Operations. Certain sales plans of Mayor's provide for revolving lines of credit under which the payment terms may exceed one year. In accordance with industry practice, these receivables are included in current assets in the accompanying Consolidated Balance Sheets. The portion of these receivables as of February 3, 2001 that is not scheduled to be collected during the year ending February 2, 2002 is approximately $8.9 million or 27% of Mayor's chargecard receivable. (6) INVENTORIES -- The Mayor's inventories are valued at last-in, first-out ("LIFO") cost which is not in excess of market. Under the first-in, first-out ("FIFO") cost method of accounting, the Mayor's LIFO inventories would have been $71,000 less than what is reported at February 3, 2001. The Company records reserves for lower of cost or market, damaged goods, and slow-moving inventory. 31 32 Costs incurred in acquiring, receiving, preparing and distributing inventory to the point of being ready for sale were included in inventory for Fiscal 1998. The amount of these costs included in inventory as of January 30, 1999 was approximately $2.2 million. During Fiscal 1999, the Company changed its methodology from capitalizing such costs in the inventory balance to expensing these costs as incurred. As a result of this change in accounting principle, the Company recognized a $2.2 million charge. The impact of the change on Fiscal 1998 results is insignificant. (7) PROPERTY -- Property is stated at cost net of accumulated deprecation and is depreciated using the straight-line method over the following estimated useful lives of the respective assets: ESTIMATED ASSET USEFUL LIFE ----- ----------- Building 30 years Furniture and fixtures 5 years Automobiles and trucks 3 years Computer hardware and software 3 years Leasehold improvements are amortized over the shorter of the term of the respective lease, including renewal options, or the useful life of the asset. (8) INCOME TAXES -- The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." 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 bases for income tax purposes, and (b) operating loss and tax credit carryforwards. (9) CASH AND CASH EQUIVALENTS -- The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. (10) COST IN EXCESS OF FAIR VALUE OF ASSETS ACQUIRED ("GOODWILL") -- The Company on an ongoing basis evaluates the recoverability of the carrying amount of Goodwill based on projected operating income. Goodwill resulting from the Mayor's acquisition is being amortized using the straight line method over 15 years. Goodwill resulting from the Company's acquisition of Exclusive Diamonds, Inc. in 1990 was written-off during Fiscal 1999 and is included as other charges in the gain from disposition of discontinued operations in the Consolidated Statement of Operations. Accumulated amortization related to the Company's Goodwill at February 3, 2001 and January 29, 2000 was approximately $4.0 million and $2.0 million, respectively. (11) LONG-LIVED ASSETS -- Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Measurement of an impairment loss for such long-lived assets would be based on the fair value of the asset. Long-lived assets to be disposed of are reported generally at the lower of the carrying amount or fair value less cost to sell. (12) DEFERRED FINANCING COSTS -- The Company amortizes deferred financing costs incurred in connection with its financing agreements over the related period. Such deferred costs are included in Other Assets in the accompanying Consolidated Balance Sheets. (13) ADVERTISING COSTS -- Advertising costs are charged to expense as incurred or, for direct response advertising, capitalized and amortized in proportion to related revenues. The Company and its vendors participate in cooperative advertising programs in which the vendors reimburse the Company for a portion of certain advertising costs. Advertising expense, net of vendor cooperative advertising allowances, amounted to $7.9 million, $3.3 million and $7.7 million in Fiscal 2000, 1999 and 1998, respectively. (14) PRE-OPENING EXPENSES -- Pre-opening expenses related to the opening of new and relocated stores are expensed as incurred. 32 33 (15) COMPREHENSIVE INCOME (LOSS) - Comprehensive income (loss) includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Accumulated other comprehensive income as presented in the accompanying consolidated statements for Fiscal 1998 represents net income and foreign currency translation adjustments. (16) RECLASSIFICATIONS - Certain amounts in the prior years' financial statements have been reclassified to conform to the current year presentation. (17) NEWLY ISSUED ACCOUNTING STANDARDS - In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 137, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES- DEFERRAL OF THE EFFECTIVE DATE OF FASB STATEMENT NO. 133" ("SFAS 137"). SFAS 137 amends FASB Statement of Financial Accounting Standards No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS FOR HEDGING ACTIVITIES" ("SFAS 133") by deferring the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS 133 was amended in June 2000 by Statement of Financial Accounting Standards No. 138 ("SFAS 138") for certain derivative instruments and hedging activities as indicated by SFAS 138. The effect of adopting SFAS 133 will not have a significant effect on the Company's consolidated financial statements. (18) EARNINGS (LOSS) PER SHARE -- Earnings (loss) per share is calculated based upon the weighted average number of shares outstanding during each period. Diluted earnings per share is not presented as the assumed conversion of options and warrants would not result in the requirement for such a presentation. E. INVENTORIES: Inventories are summarized as follows:
FEBRUARY 3, JANUARY 29, 2001 2000 ----------------------- ----------------------- COMPANY HELD ON COMPANY HELD ON OWNED CONSIGNMENT OWNED CONSIGNMENT ----- ----------- ----- ----------- (AMOUNTS SHOWN IN THOUSANDS) Precious and semi-precious gem jewelry- related merchandise (and associated gold): Raw materials $ 636 $ -- $ 2,806 $ -- Finished goods 67,551 15,827 52,152 15,422 Watches 35,810 551 21,027 190 Other consumer products 3,677 469 2,655 128 -------- -------- ------- -------- $107,674 $ 16,847 $78,640 $ 15,740 ======== ======== ======= ========
F. PROPERTY: The components of property are as follows: FEBRUARY 3, JANUARY 29, 2001 2000 ----------- ------------ (AMOUNTS SHOWN IN THOUSANDS) Land $ 3,248 $ 3,248 Buildings and improvements 8,259 8,234 Furniture and fixtures 25,410 21,210 Leasehold improvements 32,901 19,922 Automobiles and trucks 347 356 -------- -------- 70,165 52,970 Less accumulated depreciation (27,514) (24,732) --------- -------- $ 42,651 $ 28,238 ======== ======== 33 34 Depreciation expense for Fiscal 2000, Fiscal 1999 and Fiscal 1998 was approximately $5.8 million, $5.7 million and $2.6 million, respectively. G. LONG-TERM DEBT: On July 28,1998, the Company entered into a loan and security agreement with a syndicate of banks led by Citicorp, U.S.A., Inc. for an $80 million credit facility. Availability under this facility is determined based upon a percentage formula applied to inventory and accounts receivable. Based upon this formula, the maximum of $80 million was available to the Company at February 3, 2001 and January 29, 2000. The Company has the right to request an increase up to $110 million contingent upon lender approval. Of this total, an aggregate maximum of $10 million can be used for the issuance of one or more Letters of Credit. The credit facility is collateralized by substantially all of the Company's assets. The Company amended its agreement in April 2001 for all appropriate terms and conditions related to the expiration of the Sam's agreement. The amended agreement contains covenants which require the Company to maintain a fixed charge ratio, an interest coverage ratio, a consolidated EBITDA minimum, tangible net worth minimum, and also limits capital expenditures, incurrence of additional debt, and prohibits payments of dividends. The credit facility bears interest at floating rates, currently a portion is based upon LIBOR plus 2.25% and the remaining portion at the bank's adjusted base rate plus 1.00%, at the Company's option. The interest rate at February 3, 2001 based upon LIBOR and the bank's adjusted base rate was 7.12% and 9.25%, respectively. These interest rates can be increased if the Company's average leverage ratio does not meet certain levels. In addition, the Company pays a commitment fee of .25% of the unused line balance as well as 2.5% of the aggregate outstanding letter of credit liability. At February 3, 2001, the Company had approximately $44.3 million outstanding under this facility and had $.8 million in letters of credit outstanding. The loan and security agreement expires on July 28, 2003. Information concerning the Company's short-term borrowings follows. Any borrowings that exceed $50 million are considered short term. As of February 3, 2001 and January 29, 2000, there were no short-term borrowings. YEAR ENDED YEAR ENDED FEB. 3, JAN. 29, 2001 2000 ------------ ------------ (DOLLARS SHOWN IN THOUSANDS) Maximum borrowings outstanding during the period $ 24,807 $ 12,902 Average outstanding balance during the period $ 3,401 $ 1,772 Weighted average interest rate for the period 8.6% 7.6% 34 35 H. INCOME TAXES: The significant items comprising the Company's net deferred taxes as of February 3, 2001 and January 29, 2000 are as follows:
FEBRUARY 3, 2001 JANUARY 29, 2000 --------------------- -------------------- (AMOUNTS SHOWN IN THOUSANDS) Deferred Tax Liabilities: Difference between book and tax basis of property $ -- $ 260 Purchase accounting differences in basis of inventories acquired 8,987 8,987 Foreign income subject to tax net of available credits 1,793 2,023 ------- ------- 10,780 11,270 ------- ------- Deferred Tax Assets: Difference between book and tax basis of property 649 -- Sales Returns and doubtful accounts allowances not currently deductible 677 761 Inventory reserves not currently deductible 3,723 3,397 Federal net operating loss and tax credit carryforward 5,137 4,752 State net operating loss carryforward 815 2,327 Other reserves not currently deductible 2,199 2,613 Deferred gain from discontinued operations -- 5,943 Change in accounting principle 839 839 ------- ------- 14,039 20,632 ------- ------- Net deferred tax asset before valuation allowance 3,259 9,362 Valuation allowance 490 6,593 ------- ------- Net Deferred Tax Asset $ 2,769 $ 2,769 ======= =======
The Company has a federal net operating loss carryforward of approximately $9.9 million and state net operating loss carryforward of approximately $17.7 million. The amount of Mayor's NOL included in the $9.9 million is approximately $2.9 million, of which, due to Section 385 limitations, the Company can utilize each year approximately $1.5 million. The federal net operating loss carryforward expires beginning in 2010 through 2020 and the state net operating loss carryforward expires beginning in 2009 through 2020. The Company also has an alternative minimum tax credit carryforward of approximately $1.8 million to offset future federal income taxes. The valuation allowance has been recorded to offset the net deferred tax asset, which is included in the Other Current Assets in the accompanying Consolidated Balance Sheets, to the amount that the Company believes, after evaluating the currently available evidence, will more likely than not be realized. 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 effect in Fiscal 2000, Fiscal 1999 and Fiscal 1998 was not material. The "approved enterprise" tax benefit was available to EDI until the year 2000. Upon its sale or liquidation, EDI will be subject to a 10% tax on any income that was previously exempted from tax as a result of its "approved enterprise" status. Furthermore, depending on the specific form of the transaction, the Company may be subject to additional Israeli taxes, at rates ranging from 15% to 36%, upon the sale of either EDI's assets or the Company's stock of EDI. 35 36 Mayor's 1994, 1995 and 1996 federal income tax returns are currently under examination by the IRS. The impact of the IRS examination on the Company's financial condition, results of operations and cash flow cannot be ascertained at this time. I. COMMITMENTS AND CONTINGENCIES: In connection with prior financing arrangements, there are outstanding warrants to purchase 519,756 shares of common stock at $2.25 per share which expire May 31, 2005 and warrants to purchase 234,000 shares of common stock at $3.25 to $4.00 per share which expire May 1, 2005. Operating Leases- The Company had a land and building lease with a trust which expired on January 30, 1999, which had been extended on a month to month basis through May 1999. Certain beneficiaries of the trust were shareholders of Mayor's prior to the acquisition and are also current shareholders. Rent expense related to this lease was $118,000 through May 1999 and $190,000 for the six-month period subsequent to acquisition. The Company leases all of its Mayor's division retail stores under operating leases. The rentals are based primarily on a percentage of sales with required minimum annual rentals. In addition, most leases are subject to annual adjustment for increases in real estate taxes and maintenance costs. The Company also has non-cancelable operating leases for copiers, postage machines, and computer equipment. At February 3, 2001, the Company was obligated for the following minimum annual rentals under non-cancelable operating leases: FISCAL AMOUNTS YEAR IN THOUSANDS ---- ------------ 2001 $ 8,783 2002 10,183 2003 10,016 2004 9,511 2005 9,269 Thereafter 42,900 -------- $90,662 ======== Rent expense for the Mayor's stores was approximately $9.6 million including $1.8 million of contingent rent for 2000, $7.7 million including $2.4 million of contingent rent for Fiscal 1999 and $3.7 million including $1.5 million of contingent rent during the six months ended January 30, 1999. J. LEGAL PROCEEDINGS: The Company is involved in litigation arising from the normal course of business. All previously reported litigation with a former vendor was settled and concluded with no material adverse effect. In all other pending matters, the Company believes the facts and the law support its position and those matters should not materially affect the Company's financial position; however, there can be no assurance as to the final result of legal matters. K. EMPLOYEE BENEFIT PLANS: STOCK OPTION PLANS As of February 3, 2001 the Company had 1,053,219 shares of common stock available for grant to its key employees and directors under its 1987 and 1991 Stock Option Plans. Under these plans, the option price must be equal to the market price of the stock on the date of the grant, or in the case of an individual who owns 10% or more of common stock, the minimum price must be 110% of the market price. Options granted to date generally become exercisable from six months to three years after the date of grant, provided that the individual is continuously employed by the Company, or in the case of directors, remains on the Board of Directors. All options generally expire no more than ten years after the date of grant. 36 37 EMPLOYEE STOCK PURCHASE PLAN In June 1987, the Board of Directors approved an Employee Stock Purchase Plan, which permits eligible employees to purchase common stock from the Company at 85% of its fair market value through regular payroll deductions. A total of 562,500 shares are reserved for issuance under the Employee Stock Purchase Plan of which 87,796, 76,261 and 30,921 shares were issued during the years ended February 3, 2001, January 29, 2000 and January 30, 1999, respectively. PROFIT SHARING PLANS In December 1992, the Board of Directors approved the Jan Bell Marketing, Inc. 401(k) Profit Sharing Plan & Trust, which permits eligible employees to make contributions to the Plan on a pretax salary reduction basis in accordance with the provisions of Section 401(k) of the Internal Revenue Code. The Company makes a cash contribution of 25% of the employee's pretax contribution, up to 4% of the employee's compensation, in any calendar year. The employer match for Fiscal 2000, Fiscal 1999 and Fiscal 1998 were $187,587, $202,094 and $88,713, respectively. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations in accounting for its stock-based compensation plans. Accordingly, no compensation cost has been recognized for such plans. Had compensation cost for the Company's stock-based compensation plans been determined using the fair value method described in Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," at the grant dates for awards granted in Fiscal 2000, Fiscal 1999 and Fiscal 1998 under these plans, the Company's net earnings and earnings per share would have been reduced to the proforma amounts presented below:
FISCAL FISCAL FISCAL 2000 1999 1998 ---------- ---------- ---------- Net income/(loss) (in thousands) As reported: Continuing operations $ (2,555) $ (13,104) $ (5,779) Discontinued operations 13,552 8,019 22,997 ---------- ---------- ---------- $ 10,997 $ (5,085) $ 17,218 ========== ========== ========== Proforma: Continuing operations $ (3,481) $ (15,786) $ (8,879) Discontinued operations 13,552 8,019 22,997 ---------- ---------- ---------- $ 10,071 $ (7,767) $ 14,118 ========== ========== ========== Income/(loss) per share As reported basic and diluted: Continuing operations $ (0.13) $ (0.52) $ (0.21) Discontinued operations 0.69 0.32 0.84 ---------- ---------- ---------- $ 0.56 $ (0.20) $ 0.63 ========== ========== ========== Proforma basic and diluted: Continuing operations $ (0.18) $ (0.62) $ (0.32) Discontinued operations 0.69 0.32 0.84 ========== ========== ========== $ 0.51 $ (0.30) $ 0.52 ========== ========== ==========
37 38 The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in Fiscal 2000, Fiscal 1999 and Fiscal 1998: expected volatility of 59%, 84% and 67%, respectively, risk-free interest rate of 4.70%, 6.58% and 5.23%, respectively, expected lives of approximately five years and a dividend yield of zero for all three fiscal years presented. The weighted average fair values of options granted during Fiscal 2000, Fiscal 1999 and Fiscal 1998 were $2.94, $3.03 and $3.90, respectively. The following is a summary of the activity in the option plans during Fiscal 2000, Fiscal 1999 and Fiscal 1998:
FISCAL 2000 FISCAL 1999 FISCAL 1998 --------------------- --------------------- --------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ ----- ------ ----- ------ ----- Outstanding at beginning of year 7,118,216 $4.35 6,918,124 $4.43 6,951,624 $4.41 Granted 1,388,500 2.62 367,500 2.95 1,101,009 5.61 Canceled (752,461) 5.80 (144,510) 4.82 (318,478) 9.65 Exercised (665,456) 2.75 (22,898) 2.46 (816,031) 3.77 ---------- ----- ---------- ----- ---------- ----- Outstanding at end of year 7,088,799 $4.01 7,118,216 $4.35 6,918,124 $4.43 ========== ===== ========== ===== ========== =====
A summary of the status of the option plans as of February 3, 2001 is presented below:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------- ------------------------- WEIGHTED AVG REMAINING WEIGHTED WEIGHTED RANGE OF CONTRACTUAL AVERAGE AVERAGE EXERCISE NUMBER LIFE EXERCISE NUMBER EXERCISE PRICES OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE ------ ----------- ---------- ----- ----------- ----- $ 2.06 - $2.08 85,000 5.7 $ 2.06 85,000 $ 2.06 $ 2.09 - $3.09 4,187,114 4.0 $ 2.52 2,838,459 $ 2.54 $ 3.10 - $4.64 1,000,908 5.7 $ 3.99 649,973 $ 4.01 $ 4.65 - $6.95 1,215,320 3.8 $ 5.69 947,652 $ 5.54 $ 6.96 - $10.43 254,460 2.0 $ 9.12 254,460 $ 9.12 $ 10.44 - $14.10 345,997 3.1 $ 12.92 345,997 $ 12.92 ---------------- ---------- ---- -------- ---------- -------- $ 2.06 - $14.10 7,088,799 4.1 $ 4.01 5,121,541 $ 4.30 ================ ========= ===== ========= ========= ========
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 required in interpreting market data to develop the estimates of fair value. 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. The following methods and assumptions were used to estimate fair value: 38 39 - The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of their short term nature. - The fair value of the Company's long term debt approximates carrying value based on the quoted market prices for the same or similar issues. 39 40 M. SUPPLEMENTAL INFORMATION OF NONCASH ACTIVITIES: The Statement of Cash Flows for the year ended January 30, 1999 does not include noncash financing and investing transactions associated with the issuance of common stock and debt for the acquisition of Mayor's. The components of the transaction are as follows: Fair value of assets acquired (including goodwill) $134,434 Liabilities assumed 28,628 -------- Net assets acquired 105,806 Cash acquired 990 Issuance of common stock 7,705 Borrowing under working capital facility 38,000 -------- Cash used to acquire Mayor's $ 59,111 ======== N. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
FOURTEEN THIRTEEN WEEKS ENDED WEEKS ENDED ----------------------------------------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) APR. 29, JUL. 29, OCT. 28, FEB. 3, 2000 2000 2000 2001 -------- -------- -------- ------- Net Sales $ 34,648 $ 39,220 $ 35,874 $71,513 Gross Profit 13,834 16,499 14,515 33,945 Net income (loss) (3,281) (992) (4,987) 20,258 Basic earnings (loss) per Common Share (0.16) (0.05) (0.26) 1.06 Diluted earnings (loss) per Common Share (0.16) (0.05) (0.26) 1.01
THIRTEEN WEEKS ENDED ------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) MAY 1, JUL. 31, OCT. 30, JAN. 29, 1999 1999 1999 2000 ------ -------- -------- -------- Net Sales $ 27,389 $31,989 $ 32,192 $63,774 Gross Profit 10,086 11,604 11,568 26,890 Net income (loss) (2,845) 623 (5,381) 2,518 Basic earnings (loss) per Common Share (0.10) 0.02 (0.22) 0.10 Diluted earnings (loss) per Common Share (0.10) 0.02 (0.22) 0.10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 40 41 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, Audit 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 consolidated financial statements of Mayor's Jewelers, Inc. included in Item 8 of Part II. INDEPENDENT AUDITORS' REPORT. CONSOLIDATED BALANCE SHEETS - February 3, 2001 and January 29, 2000. CONSOLIDATED STATEMENTS OF OPERATIONS - Years Ended February 3, 2001, January 29, 2000 and January 30, 1999. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Years Ended February 3, 2001, January 29, 2000 and January 30, 1999. CONSOLIDATED STATEMENTS OF CASH FLOWS - Years Ended February 3, 2001, January 29, 2000 and January 30, 1999. (a)(2) FINANCIAL STATEMENT SCHEDULES. The following is the financial statement schedule filed as part of this Form 10-K: Schedule II. 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. (a)(3) The following list of schedules and exhibits are included or incorporated by reference as indicated in this Form 10-K: 41 42 EXHIBIT NUMBER DESCRIPTION ------ ----------- 3.1- Certificate of Incorporation. Incorporated by reference from Company's Form 10-Q filed in September 2000. 3.2- Bylaws. Incorporated by reference from Company's Form 10-K filed May 15, 1995. 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. 1991 Stock Option Plan. Incorporated by reference from Company's Definitive Proxy Statement filed in April 1993. 4.5- Rights Agreement dated November 21, 1996. Incorporated by reference from Form 8-K filed November 21, 1996. 10.1- Form of Indemnification Agreement. 10.4- Warrant Agreement dated May 31, 1995 between the Company and Various Lenders. Incorporated by reference from Company's Form 10-K/A filed in May 1995. 10.5- Warrant Agreement dated May 31, 1995 between the Company, GBFC, Inc. and Foothill Capital Corporation. Incorporated by reference from Company's Form 10-K/A filed in May 1995. 10.6- Employment Agreement dated June 2, 1997 between Isaac Arguetty and the Company. Incorporated by reference from the Company's Form 10-Q filed September 17, 1997. 10.7- Employment Agreement dated October 20, 1997 between David Boudreau and the Company. Incorporated by reference from Company's Form 10-K filed March 1, 1998. 10.9- Employment Agreement dated October 20, 1997 between Marc Weinstein and the Company. Incorporated by reference from Company's Form 10-K filed March 1, 1998. 10.10- Loan and Security Agreement dated July 28, 1998, among Citicorp USA, Inc. and JBM Retail Company, Inc., Mayor's Jewelers, Inc. and the Company. Incorporated by reference from Company's Form 10-Q filed September 15, 1998. 10.11- Amendment to Loan and Security Agreement dated April 27, 2001, among Citicorp USA, Inc. Mayor's Jewelers, Inc., JBM Retail Company, Inc. and the Company. 21.1- Subsidiaries of Registrant: Wholly-owned subsidiaries of the Company include Ultimate Fine Jewelry and Watches, Inc and JBM Retail Company, Inc., Delaware corporations; Regal Diamonds International Ltd. and Exclusive Diamonds International, Ltd., Israeli companies; Jan Bell Marketing/Puerto Rico, Inc., a Puerto Rican corporation; and Mayor's Jewelers, Inc., a Florida corporation. 42 43 23.1- Consent of Deloitte & Touche LLP (b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the fourth quarter ended February 3, 2001. 43 44 SCHEDULE II MAYOR'S JEWELERS, INC. VALUATION AND QUALIFYING ACCOUNTS (AMOUNTS SHOWN IN THOUSANDS)
CHARGED TO BEGINNING MAYOR'S COST AND ENDING DESCRIPTION BALANCE ACQUISITION EXPENSES DEDUCTIONS BALANCE ----------- ------- ----------- -------- ---------- ------- Fiscal year ended January 30, 1999 Allowance for Doubtful Accounts -- $3,237 $2,346 $2,239 $3,344 Inventory Allowances -- 4,814 2,997 3,361 4,450 Fiscal year ended January 29, 2000 Allowance for Doubtful Accounts 3,344 -- 1,786 3,856 1,274 Inventory Allowances 4,450 -- 5,478 3,603 6,325 Fiscal year ended February 3, 2001 Allowance for Doubtful Accounts 1,274 -- 2,011 1,882 1,403 Inventory Allowances 6,325 -- 4,879 4,482 6,722
44 45 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized. MAYOR'S JEWELERS, INC. Date: April 27, 2001 /s/ Isaac Arguetty ------------------------------ Isaac Arguetty, Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ ISAAC ARGUETTY Chairman of the Board and April 27, 2001 ----------------------- Chief Executive Officer (Principal Isaac Arguetty Executive Officer) /s/ DAVID BOUDREAU Director, Chief Financial Officer, April 27, 2001 ----------------------- Senior Vice President of David Boudreau Finance and Treasurer (Principal Financial and Accounting Officer) /s/ MARC WEINSTEIN Director and Chief Operating Officer April 27, 2001 ----------------------- Marc Weinstein /s/ TOM EPSTEIN Director April 27, 2001 ----------------------- Tom Epstein /s/ MARGARET GILLIAM Director April 27, 2001 ----------------------- Margaret Gilliam /s/ PETER OFFERMANN Director April 27, 2001 ----------------------- Peter Offermann /s/ ROBERT ROBISON Director April 27, 2001 ----------------------- Robert Robison /s/ GREGG BEDOL Director April 27, 2001 ----------------------- Gregg Bedol
45 46 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION ------ ----------- SEE PAGE 42 FOR A COMPLETE LIST OF EXHIBITS FILED, INCLUDING EXHIBITS INCORPORATED BY REFERENCE FROM PREVIOUSLY FILED DOCUMENTS. 21.1 Subsidiaries of Registrant: Wholly-owned subsidiaries of the Company include Ultimate Fine Jewelry and Watches, Inc and JBM Retail Company, Inc., Delaware corporations; Regal Diamonds International Ltd. and Exclusive Diamonds International, Ltd., Israeli companies; Jan Bell Marketing/Puerto Rico, Inc., a Puerto Rican corporation; and Mayor's Jewelers, a Florida corporation. 23.1 Consent of Deloitte & Touche LLP 46