Jennifer Convertibles Reports Third Quarter Results
- Returns to profitability
WOODBURY, N.Y., July 12 /PRNewswire-FirstCall/ -- Jennifer Convertibles, Inc. (AMEX:JEN) announced today its unaudited financial results for the third fiscal
quarter ended May 28, 2005.
For the third quarter, revenue from continuing operations decreased by 8.6% to
$30.6 million from the $33.5 million reported for the same period last year.
Last year's results were impacted by the delivery of the backlog of orders not
shipped in the prior quarter increasing revenues for the third quarter. For
the nine-month period, revenue from continuing operations decreased 11.2% to
$87.2 million from the $98.2 reported in the same period last year. Such
decreases during the third quarter of fiscal 2005, were impacted by the
deflationary pressure in the furniture industry caused by a change in the
source of supply to China, which reduced unit prices to customers. In
addition, the reduction in merchandise sales was affected by an overall decline
in demand within the furniture industry sector. The decrease in merchandise
sales directly impacted revenues from home delivery and service contracts.
For the third quarter, net income was $1,373,000 or $0.19 per basic share
compared to net income of $1,283,000 or $0.18 per basic share for the same
period last year. On a fully diluted basis, income per share was $0.19 for the
third quarter of fiscal 2005 and income per share was $0.17 for the same period
last year. The income for the third quarter included $2,000,000 from
collection of receivables, which had been reserved, from the Private Company. For the nine-month period, the net loss was $6,455,000 or ($1.12) per basic
share compared to a net loss of $1,535,000 or ($0.27) per basic share for the
same period last year. On a fully diluted basis, loss per share was ($1.12)
for the nine-month period of fiscal 2005 and loss per share was ($0.27) for the
same period last year. The loss for fiscal 2005 included a write-down of a
deferred tax asset of $1.8 million, which represents estimated future tax
benefits, which may be realized when the Company returns to profitability.
Operating margins from continuing operations decreased during the current three
and nine month periods to 28.7% and 26.8%, respectively, compared to operating
margins from continuing operations of 31.7% and 29.6%, respectively, during the
three and nine month periods last year. The decrease is primarily attributable
to an increase in store occupancy costs, including rent, combined with the
decrease in revenues.
For the third quarter, selling, general, and administrative expenses from
continuing operations increased to 29.9% as a percentage of revenue from
continuing operations compared to 26.4% for the same period last year. For the
nine-month period, selling, general and administrative expenses from continuing
operations increased to 32.5% compared to 29.4% for the same period last year. These increases are primarily due to the reductions in revenues.
During the third quarter, the Company closed one store in Indianapolis,
Indiana, one store in Miami, Florida and one clearance center store in the
metropolitan New York City area. Revenues from these stores, exclusive of the
clearance center store in the metropolitan New York City, amounted to $446,000
and $1,486,000 in the third quarters of fiscal 2005 and 2004, respectively. For
the third quarter of fiscal 2005, the income from operations of these stores
was $48,000, including income related to store closings of $31,000. For the
third quarter in fiscal 2004, loss from operations of these stores amounted to
$100,000.
Commenting on the results for the quarter, Harley J. Greenfield, Chief
Executive of Jennifer said, "During our third fiscal quarter, we continued to
make progress as is evidenced by our significant improvement in quarterly
results compared to our last three fiscal quarters. Written sales continue to
be strong which should result in increased revenue in future periods." On July 11, 2005, the Company entered into a Credit Facility with Caye Home
Furnishings, LLC and its affiliates (the "Lender") who is also a vendor of the
Company. Under the credit facility the Company can draw down up to $10 million
for the purchase of merchandise from the Lender subject to a formula based on
eligible accounts receivable, inventory and cash in deposit accounts. The
borrowings under the Credit Agreement are due 105 days from the date goods are
received by the Company and bear interest at a rate of margin over prime for
borrowings outstanding more than 75 days. If the borrowings are not repaid
after 105 days the interest rate will be prime plus 2.75% The credit facility is collateralized by a security interest in all of the
Company's assets, excluding restricted cash and the annuity contract. Under
the terms of the Credit Facility the Company is required to maintain certain
financial conditions at the end of each fiscal quarter and annually. The
Credit Facility also prohibits the Company from: incurring certain additional
indebtedness, liens, and certain guarantees; limits certain investments,
issuance of additional equity, and certain advances or loans; restricts
substantial asset sales, capital expenditures and cash dividends.
The Company may terminate the Credit Agreement at any time, so long as it has
paid in full all outstanding amounts. The Company may also terminate the
Credit Agreement if it has (i) maintained a tangible net worth of at least $3.0
million for 180 days and (ii) adjusted net earnings from continuing operations
of either at least $2.0 million for four fiscal quarters.
Mr. Greenfield added, "The $2 million payment received during the quarter from
the Private Company, strengthened our financial position. We believe that
this, together with the Credit Agreement we received from Caye provides us with
adequate working capital. We now feel everything is in place to complete our
turn around and continue to report improving profitability." Jennifer Convertibles is the owner and licensor of the largest group of sofabed
specialty retail stores in the United States, with 183 Jennifer Convertibles(R)
stores and 16 Jennifer Leather stores. As of May 28, 2005, the Company owned
174 stores and licensed 25 (including 22 owned and operating stores by a
private company on a royalty free basis.) Statements in this press release other than the statements of historical fact
are "forward-looking statements." Such statements are subject to certain risks
and uncertainties, including changes in retail demand, vendor performance and
other risk factors identified from time to time in the Company's filings with
the Securities and Exchange Commission that could cause actual results to
differ materially from any forward-looking statements. These forward-looking
statements represent the Company's judgment as of the date of the release. The
Company disclaims, however, any interest or obligations to update these
forward-looking statements.
JENNIFER CONVERTIBLES, INC. & SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) 05/28/05 08/28/04 CASH AND CASH EQUIVALENTS $7,895 $3,294
RESTRICTED CASH 112 110
ACCOUNTS RECEIVABLE 1,027 935
MERCHANDISE INVENTORIES, Net 13,647 14,044
DUE FROM AFFILIATED COMPANY, Net 3,847 3,288
FEDERAL INCOME TAX REFUND RECEIVABLE - 314
DEFERRED TAX ASSET - 1,172
PREPAID EXPENSES AND OTHER CURRENT ASSETS 1,262 1,195
27,790 24,352 FIXTURES, EQUIPMENT & LEASEHOLD IMPROVEMENTS, Net 2,361 3,032
ANNUITY CONTRACT 1,005 1,088
DEFERRED LEASE COSTS AND OTHER INTANGIBLES, Net 33 42
GOODWILL, Net 1,650 1,796
OTHER ASSETS 580 607
DEFERRED TAX ASSET - 605 $33,419 $31,522 ACCOUNTS PAYABLE $16,823 $12,812
CUSTOMER DEPOSITS 9,708 7,878
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 6,154 3,709
DUE TO AFFILIATED COMPANY 450 500
DEFERRED RENT AND ALLOWANCES - Current Portion 506 489
TOTAL CURRENT LIABILITIES 33,641 25,388 DEFERRED RENT AND ALLOWANCES -
Net of Current Portion 3,272 3,320 STOCKHOLDERS' EQUITY (CAPITAL DEFICIT) (3,494) 2,814 $33,419 $31,522
JENNIFER CONVERTIBLES, INC. & SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA) THREE MONTHS ENDED NINE MONTHS ENDED
05/28/05 05/29/04 05/28/05 05/29/04
REVENUE:
NET SALES $ 28,564 $31,311 $81,483 $91,694
REVENUE FROM SERVICE CONTRACTS 2,083 2,225 5,694 6,492
30,647 33,536 87,177 98,186 COST OF SALES AND OTHER CHARGES 21,847 22,921 63,779 69,074 SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 9,168 8,863 28,355 28,890 IMPAIRMENT OF GOODWILL 0 0 146 0 DEPRECIATION AND AMORTIZATION 290 358 868 1,183 RECOVERY OF PRIOR YEAR RECEIVABLES
FROM PRIVATE COMPANY (2,000) 0 (2,000) 0 29,305 32,142 91,148 99,147 INCOME (LOSS) FROM OPERATIONS 1,342 1,394 (3,971) (961) INTEREST INCOME 33 19 83 69 INTEREST EXPENSE 1 1 2 3 INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 1,374 1,412 (3,890) (895) INCOME TAXES 49 29 1,887 91 INCOME (LOSS) FROM CONTINUING
OPERATIONS 1,325 1,383 (5,777) (986) INCOME (LOSS) FROM OPERATIONS OF
DISCONTINUED OPERATIONS (including
income (loss) on store closings
of $31 and ($300) for the thirteen
and thirty-nine weeks ended in
2005, respectively) 48 (100) (678) (549) NET INCOME (LOSS) $1,373 $1,283 $(6,455) (1,535) BASIC INCOME (LOSS) PER COMMON SHARE: INCOME (LOSS) FROM CONTINUING
OPERATIONS $0.18 $0.19 $(1.00) $(0.17)
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS 0.01 (0.01) (0.12) (0.10)
NET INCOME (LOSS) PER
COMMON SHARE $0.19 $0.18 $(1.12) $(0.27) DILUTED INCOME (LOSS) PER COMMON SHARE: INCOME (LOSS) FROM CONTINUING
OPERATIONS $0.18 $ 0.18 $(1.00) $(0.17)
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS 0.01 (0.01) (0.12) (0.10)
NET INCOME (LOSS) PER COMMON SHARE $0.19 $ 0.17 $(1.12) $(0.27) WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,783,058 5,713,058 5,767,948 5,713,058 COMMON SHARES ISSUABLE ON
CONVERSION OF SERIES A
PARTICIPATING PREFERRED
STOCK 1,424,500 1,424,500 0 0 TOTAL WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING BASIC
INCOME (LOSS) PER SHARE 7,207,558 7,137,558 5,767,948 5,713,058 EFFECT OF POTENTIAL COMMON
SHARE ISSUANCE:
STOCK OPTIONS 103,550 468,427 0 0
SERIES B CONVERTIBLE PREFERRED
STOCK 40,167 40,167 0 0 WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
DILUTED INCOME (LOSS) 7,351,275 7,646,152 5,767,948 5,713,058
DATASOURCE: Jennifer Convertibles, Inc.
CONTACT: Donald Radcliffe of Radcliffe & Associates, Inc., +1-212-605-0534, for Jennifer Convertibles, Inc.
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