-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QnFb+6vR/j9PRiqjrwVPivIYuiSZBfMnKvHPtlV0tym0kHqZCmmVJOa9m0lH6T48 6T79uluDUfdPKi2mdwmMcQ== 0001011438-96-000029.txt : 19960819 0001011438-96-000029.hdr.sgml : 19960819 ACCESSION NUMBER: 0001011438-96-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960815 FILED AS OF DATE: 19960816 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: 99 CENTS ONLY STORE CENTRAL INDEX KEY: 0001011290 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 952411605 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11735 FILM NUMBER: 96616641 BUSINESS ADDRESS: STREET 1: 4000 EAST UNION PACIFIC AVE CITY: CITY OF COMMERCE STATE: CA ZIP: 90023 BUSINESS PHONE: 2135825999 MAIL ADDRESS: STREET 1: 4000 EAST UNION PACIFIC AVENUE CITY: CITY OF COMMERCE STATE: CA ZIP: 90023 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 1-11735 99 CENTS ONLY STORES (Exact name of registrant as specified in its charter) CALIFORNIA 95-2411605 (State or other jurisdiction (I.R.S. Employer or organization) Identification No.) 4000 EAST UNION PACIFIC AVENUE CITY OF COMMERCE, CALIFORNIA 90023 (Address of principal executive offices) Registrant's telephone number, including area code: (213) LUCKY-99 NONE Former name, address and fiscal year, if changed since last report 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Common Stock, No Par Value, 14,816,635 shares as of August 13, 1996 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 99 CENTS ONLY STORES BALANCE SHEETS ASSETS
June 30, December 31, 1996 1995 ------------ ------------ (Unaudited) CURRENT ASSETS: Cash $ 6,146,000 $ 3,057,000 Short-term investments 26,731,000 - Accounts receivable, net of allowance for doubtful accounts of $34,000 and $52,000, as of December 31, 1995 and June 30, 1996, respectively 1,398,000 1,360,000 Inventories 30,903,000 34,313,000 Other 628,000 324,000 ------------ ----------- Total current assets 65,806,000 39,054,000 PROPERTY AND EQUIPMENT, at cost: Land 5,107,000 5,107,000 Buildings and improvements 8,553,000 8,553,000 Leasehold Improvements 5,773,000 5,025,000 Fixtures and equipment 4,549,000 3,992,000 Transportation equipment 421,000 421,000 Construction in progress 160,000 - ------------ ----------- 24,563,000 23,098,000 Less - Accumulated depreciation and amortization (6,258,000) (5,311,000) ------------ ----------- 18,305,000 17,787,000 OTHER ASSETS: Deferred income taxes 4,925,000 378,000 Deposits 231,000 231,000 Receivable from affiliated entity 107,000 107,000 Other - 41,000 ------------ ----------- 5,263,000 757,000 ------------ ----------- $ 89,374,000 $57,598,000 ============ ===========
The accompanying notes are an integral part of these balance sheets. LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31, 1996 1995 ------------ ----------- (Unaudited) CURRENT LIABILITIES: Current portion of capital lease obligation $ 634,000 $ 612,000 Accounts payable 4,141,000 5,750,000 Accrued expenses: Payroll and payroll-related 614,000 818,000 Sales tax 377,000 900,000 Liability for claims 763,000 959,000 Other 26,000 20,000 Workers' compensation 1,237,000 1,209,000 Income taxes payable 1,587,000 96,000 ----------- ----------- Total current liabilities 9,379,000 10,364,000 ----------- ----------- LONG-TERM LIABILITIES: Deferred rent 1,382,000 1,346,000 Accrued interest 1,228,000 965,000 Capital lease obligation, net of current portion 9,043,000 9,365,000 ----------- ----------- 11,653,000 11,676,000 =========== =========== COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, no par value Authorized - 1,000,000 shares Issued and outstanding - none - - Common stock, no par value: Authorized - 40,000,000 shares Issued and outstanding - 9,929,135 shares at December 31, 1995, and 14,816,635 shares at June 30, 1996 65,522,000 195,000 Retained earnings 2,820,000 35,363,000 ----------- ----------- 68,342,000 35,558,000 ----------- ----------- $89,374,000 $57,598,000 =========== ===========
The accompanying notes are an integral part of these balance sheets. 99 CENTS ONLY STORES STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- NET SALES: 99 Cents Only Stores $34,136,000 $29,807,000 $66,392,000 $56,899,000 Other retail - 165,000 - 492,000 Bargain Wholesale 9,037,000 6,370,000 19,057,000 12,508,000 ----------- ----------- ----------- ----------- 43,173,000 36,342,000 85,449,000 69,899,000 COST OF SALES 28,239,000 24,291,000 57,049,000 46,721,000 ----------- ----------- ----------- ----------- Gross profit 14,934,000 12,051,000 28,400,000 23,178,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,607,000 8,302,000 18,673,000 16,055,000 ----------- ----------- ----------- ----------- Operating income 5,327,000 3,749,000 9,727,000 7,123,000 INTEREST EXPENSE, NET 63,000 189,000 252,000 378,000 ----------- ----------- ----------- ----------- Income before pro forma provision for income taxes 5,264,000 3,560,000 9,475,000 6,745,000 PRO FORMA PROVISION FOR INCOME TAXES 2,162,000 1,408,000 3,881,000 2,646,000 ----------- ----------- ----------- ----------- PRO FORMA NET INCOME $ 3,102,000 $ 2,152,000 $ 5,594,000 $ 4,099,000 =========== =========== =========== =========== PRO FORMA EARNINGS PER COMMON SHARE $0.23 $0.42 =========== =========== PRO FORMA WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 13,698,000 13,247,000 =========== ===========
The accompanying notes are an integral part of these financial statements. 99 CENTS ONLY STORES STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 12,406,000 $ 6,667,000 Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts 18,000 - Depreciation and amortization 947,000 776,000 Loss on disposition of property and equipment - 10,000 Provision (benefit) for deferred income taxes (4,547,000) - Changes in assets and liabilities associated with operating activities: Accounts receivable (56,000) 74,000 Inventories 3,410,000 2,704,000 Other assets (263,000) 50,000 Deposits - 11,000 Accounts payable (1,609,000) (64,000) Accrued expenses (917,000) (781,000) Worker's compensation 28,000 73,000 Income taxes payable 1,491,000 (125,000) Deferred rent 36,000 267,000 Accrued interest 263,000 245,000 ------------ ------------ Net cash provided by operating activities 11,207,000 9,907,000 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,465,000) (1,196,000) Investments in short-term securities (26,731,000) - ------------ ------------ Net cash used in investing activities (28,196,000) (1,196,000) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments of capital lease obligation (300,000) (281,000) Net proceeds from initial public offering 65,327,000 - Payment of notes payable to shareholders (35,363,000) - Payment of dividend payable (4,586,000) - Distributions to shareholders (5,000,000) (6,800,000) ------------ ------------ Net cash provided by (used in) financing activities 20,078,000 (7,081,000) ------------ ------------ NET INCREASE IN CASH 3,089,000 1,630,000 CASH, beginning of period 3,057,000 212,000 ------------ ------------ CASH, end of period $ 6,146,000 $ 1,842,000 ============ ============
The accompanying notes are an integral part of these financial statements. 99 CENTS ONLY STORES NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in conformity with generally accepted accounting principles. However, certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been omitted or condensed pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). These statements should be read in conjunction with the Company's December 31, 1995 audited and pro forma financial statements and notes thereto included in the Company's Form S-1 registration statement dated March 26, 1996, including all amendments thereto. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position and results of operations for each of the periods presented. The results of operations and cash flows for such periods are not necessarily indicative of results to be expected for the full year. 2. PUBLIC OFFERING OF STOCK In May 1996, the Company completed its initial public offering of 4,887,500 shares (including 637,500 shares from the exercise of the over- allotment option granted to the underwriters) of common stock. Of the net proceeds of approximately $65.3 million, the Company used approximately $39.9 million to pay notes issued and dividends payable declared to the Existing Shareholders. The Company intends to use the balance of the net proceeds to continue to accelerate the expansion of its retail operations and for general corporate purposes. Any net proceeds not immediately used for such purposes have been invested in short term investment grade securities. 3. PRO FORMA PRESENTATION Through April 30, 1996, the Company had elected treatment as an S corporation under provisions of the Internal Revenue Code. Effective May 1, 1996, the Company terminated its S corporation election and became a C corporation. A. Pro Forma Statements of Income As an S corporation, the Company's income, whether distributed or not, was taxed at the shareholder level for federal income tax purposes. For California franchise tax purposes, as an S corporation, the Company was taxed at 1.5 percent of taxable income. Because of the Company's change in tax status, historical results of operations, including income taxes, and related earnings per share information may not, in all cases, be comparable to or indicative of current and future results. Therefore, pro forma information, which shows results as if the Company had always been a C Corporation, is presented on the face of the accompanying statements of income. The pro forma provision for income taxes included in the accompanying statements of income shows results as if the Company had always been subject to taxes as a C Corporation and had adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes," prior to fiscal 1991. Under SFAS 109, deferred income tax assets or liabilities are computed based on temporary differences between the financial statement and income tax bases of assets and liabilities using the enacted marginal income tax rate in effect for the year in which the differences are expected to reverse. Deferred income tax expenses or credits are based on the changes in the deferred income tax assets or liabilities from period to period. Under SFAS 109, deferred tax assets may be recognized for temporary differences that will result in deductible amounts in future periods and for loss carry forwards. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. For the three and six month periods ended June 30, 1996 and 1995, the pro forma provision for income taxes was based upon a combined federal and state tax rate of 41 percent, offset by the impact of various tax credits. B. Pro Forma Earnings Per Common Share Pro forma earnings per common share have been computed by dividing pro forma net income by the pro forma weighted average number of common shares outstanding plus the dilutive effect of common stock equivalents. Pro forma weighted average number of common shares outstanding also includes amounts(weighted from the beginning of the period to the initial public offering) for shares offered as a part of the public offering; the proceeds from such shares being used to fund a $39.9 million distribution to shareholders. Pursuant to the rules of the SEC, historical per share data are not presented and pro forma per share data are presented for the latest interim period only in the accompanying statements of income. Also pursuant to these rules the number of common shares issuable due to options granted during the twelve months preceding the Company's public offering are included in the calculation of shares outstanding using the treasury stock method from the beginning of all periods presented. 4. CHANGE IN TAX STATUS/INCOME TAX PROVISION As discussed in Note 3 above, effective May 1, 1996, the Company terminated its S corporation election and became a C corporation. As such, the actual taxes due by the Company through June 30, 1996 are based on S corporation tax rates for income from January 1, 1996 through April 30, 1996 and C corporation tax rates from May 1, 1996 through June 30, 1996. In connection with the Company's change in tax status, the Company recorded an increase in the deferred tax asset of $4,570,000. As a C corporation, the computation of deferred taxes is based on federal C corporation tax rates, which are not applicable to S corporations, and C corporation state tax rates, which are significantly larger than S corporation state tax rates. In accordance with SFAS 109, the gain resulting from the increase in the deferred tax asset is included as a credit to tax expense during the three and six month periods ended June 30, 1996. The historical provision (benefit) for income taxes and resulting historical net income, based on S corporation and C corporation tax rates as discussed above and including the effect of the increase in the deferred tax asset as discussed above, for the three and six month periods ended June 30, 1996 follows:
Three Month Six Month Period Ended Period Ended June 30, 1996 June 30, 1996 ------------- ------------- Income before provision (benefit) for income taxes $ 5,264,000 $ 9,475,000 ------------- ------------- Historical provision (benefit) for income taxes: During period as an S corporation 22,000 75,000 During period as an C corporation 1,564,000 1,564,000 Change in tax status (4,570,000) (4,570,000) _____________ _____________ (2,984,000) (2,931,000) ------------- ------------- Historical net income $ 8,248,000 $ 12,406,000 ============= =============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General 99 Cents Only Stores is a leading deep-discount retailer of general merchandise at a single price point. The Company has been engaged since 1976 in the purchase and sale of name-brand, close-out and regularly available general merchandise. Since that time, the Company has distributed its merchandise on a wholesale basis through its Bargain Wholesale division. In 1982, the Company opened the first of its 99 Cents Only Stores and as of the date of this 10-Q operates a chain of 39 99 Cents Only Stores. The Company's growth has primarily come from new store openings and growth in its Bargain Wholesale division. Bargain Wholesale's growth over the last three years ending December 31, 1995 was primarily attributable to an increased focus on large domestic and international accounts and expansion into new geographic markets. The Company intends to continue to expand its wholesale division by continuing this focus and increasing its marketing and promotional programs. The Company generally realizes a lower gross profit margin on Bargain Wholesale net sales than on 99 Cents Only Stores net sales. However, Bargain Wholesale complements the Company's retail operations by allowing the Company to purchase in larger volumes at more favorable pricing and to generate additional net sales with relatively small incremental increases in operating expenses. Initial Public Offering In May 1996, the Company completed its initial public offering of 4,887,500 shares (including 637,500 shares from the exercise of the over- allotment option granted to the underwriters) of common stock. Of the net proceeds of approximately $65.3 million, the Company used approximately $39.9 million to pay notes issued and dividends payable declared to the Existing Shareholders. The Company intends to use the balance of the net proceeds to continue to accelerate the expansion of its retail operations and for general corporate purposes. Any net proceeds not immediately used for such purposes have been invested in short-term investment grade securities. Effect Of Change In Form From An S Corporation To a C Corporation As part of its initial public offering, the Company changed in form from an S Corporation to a C Corporation which will affect its operations and financial condition by increasing the level of federal and state income taxes. As an S Corporation, the Company's income, whether or not distributed, was taxed at the shareholder level for federal income tax purposes. For California franchise tax purposes, S Corporations were taxed at 1.5% of taxable income for the first four months of 1996. Currently, the top federal tax rate for C Corporations is 35% and the corporate tax rate in California is 9.3%. As such, the change in form will affect the earnings and the cash flows of the Company. The pro forma provision for income taxes in the accompanying statements of income shows results as if the Company had always been a C Corporation and had adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" prior to January 1, 1991. (See Note 4 of Notes to Financial Statements.) Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995 Net sales: Total net sales increased $6.8 million, or 18.8%, from $36.3 million in the 1995 period to $43.2 million in the 1996 period. 99 Cents Only Stores net sales increased approximately $4.3 million, or 14.5%, from $29.9 million in the 1995 period to $34.1 million in the 1996 period, and Bargain Wholesale net sales increased approximately $2.7 million, or 41.9%, from $6.4 million in the 1995 period to $9.0 million in the 1996 period. The increase in 99 Cents Only Stores net sales was primarily attributable to the positive effect of 1 new store and 1 store relocation opened during each of the second and fourth quarters of 1995 and 2 new stores opened during the first quarter of 1996, and a 0.4% or $0.1 million increase in comparable store net sales from the 1995 period to the 1996 period. The increase in Bargain Wholesale net sales was primarily attributable to an increased focus on large domestic and international accounts, expansion into new geographic markets and increased marketing activity during the 1996 period. GROSS PROFIT: Gross profit increased approximately $2.9 million, or 23.9%, from $12.1 million in the 1995 period to $14.9 million in the 1996 period. The increase in gross profit was due to higher net sales. As a percentage of net sales, gross profit increased from 33.2% in the 1995 period to 34.6% in the 1996 period reflecting a favorable change in product mix. SELLING, GENERAL AND ADMINISTRATIVE: SG&A increased by $1.3 million, or 15.7%, from $8.3 million in 1995 to $9.6 million in 1996, primarily due to increased costs associated with new store growth. SG&A decreased as a percentage of net sales from 22.8% in 1995 to 22.3% in 1996. The decrease as of percentage of net sales in 1996 resulted primarily from spreading SG&A over a larger revenue base. OPERATING INCOME: As a result of the items discussed above, operating income increased $1.6 million, or 42.1%, from $3.7 million in 1995 to $5.3 million in 1996. INTEREST EXPENSE: Interest expense relates to interest accrued on the Company's capitalized warehouse lease, net of interest earned on the Company's cash balances and short term investments. The change in interest expense between 1995 and 1996 was due to interest income earned from proceeds of the initial public offering of May 23, 1996. During 1995 and 1996, the Company had no bank debt. PRO FORMA PROVISION FOR INCOME TAXES: The pro forma provision for income taxes in 1995 was $1.4 million, or 3.9% of net sales, compared to $2.2 million, or 5% of net sales in 1996. The effective rate of the pro forma provision for the income taxes was 41.1% in 1996. The effective rates are less than the statutory rates in each period due to the benefit of certain tax credits. See Note 4 of "Notes to Financial Statements." PROFORMA NET INCOME: As a result of the items discussed above, pro forma net income increased $950,000, or 44.1% from the $2.2 million in 1995 to $3.1 million in 1996 period. SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 NET SALES: Total net sales increased $15.5 million, or 22.2%, from $69.9 million in the 1995 period to $85.4 million in the 1996 period. 99 Cents Only Stores net sales increased approximately $9.5 million, or 16.7%, from $56.9 million in the 1995 period to $66.4 million in the 1996 period, and Bargain Wholesale net sales increased approximately $6.5 million, or 52.4%, from $12.5 million in the 1995 period to $19.1 million in the 1996 period. The increase in 99 Cents Only Stores net sales was primarily attributable to the positive effect of a net increase of 1 new store and 1 store relocation opened during each of the second and fourth quarters of 1995 and 2 new stores opened during the first quarter of 1996, and a 3.2% or $1.7 million increase in comparable store net sales from the 1995 period to the 1996 period. The increase in Bargain Wholesale net sales was primarily attributable to an increased focus on large domestic and international accounts, expansion into new geographic markets and increased marketing activity during the 1996 period. GROSS PROFIT: Gross profit increased approximately $5.2 million, or 22.5%, from $23.2 million in the 1995 period to $28.4 million in the 1996 period. The increase in gross profit was due to higher net sales. As a percentage of net sales, gross profit remained consistent at 33.2% in the 1995 and 1996 period. SELLING, GENERAL AND ADMINISTRATIVE: SG&A increased by $2.6 million, or 16.3%, from $16.1 million in 1995 to $18.7 million in 1996, primarily due to increased costs associated with new store growth. SG&A decreased as a percentage of net sales from 23.0% in 1995 to 21.9% in 1996. The decrease as of percentage of net sales in 1996 resulted primarily from spreading SG&A over a larger revenue base. OPERATING INCOME: As a result of the items discussed above, operating income increased $2.6 million, or 36.5%, from $7.1 million in 1995 to $9.7 million in 1996. INTEREST EXPENSE: Interest expense relates to interest accrued on the Company's capitalized warehouse lease, net of interest earned on the Company's cash balances. The change in interest expense between 1995 and 1996 was due to interest income earned from proceeds of the initial public offering of May 23, 1996. During 1995 and 1996, the Company had no bank debt. PRO FORMA PROVISION FOR INCOME TAXES: The pro forma provision for income taxes in 1995 was $2.6 million, or 3.8% of net sales, compared to $3.9 million, or 4.5% of net sales in 1996. The effective rate of the pro forma provision for the income taxes was 41.0% in 1996. The effective rates are less than the statutory rates in each period due to the benefit of certain tax credits. See Note 4 of "Notes to Financial Statements." PROFORMA NET INCOME: As a result of the items discussed above, pro forma net income increased $1.5 million, or 36.5% from the $4.1 million in 1995 to $5.6 million in 1996. LIQUIDITY AND CAPITAL RESOURCES The Company has funded its operations principally from cash provided by operations, and has not generally relied upon external sources of financing. The Company's capital requirements result primarily from purchases of inventory, expenditures related to store openings and the working capital requirements for new and existing stores. The Company takes advantage of close-out and other special situation opportunities which frequently results in large volume purchases, and as a consequence, its cash requirements are not constant or predictable during the year and can be affected by the timing and size of its purchases. In May 1996, the Company completed its initial public offering of 4,887,500 shares (including 637,500 shares from the exercise of the over- allotment option granted to the underwriters) of common stock. Of the net proceeds of approximately $65.3 million, the Company used approximately $39.9 million to pay notes issued and dividends payable declared to the Existing Shareholders. The Company intends to use the balance of the net proceeds to continue to accelerate the expansion of its retail operations and for general corporate purposes. Any net proceeds not immediately used for such purposes have been invested in short term investment grade securities. During the six months ended June 30, 1996, net cash provided by operations was $11.2 million. This amount reflects a $3.4 million decrease in inventories and an increase of $4.5 million in deferred income taxes. During this period, net cash used in investing activities was $28.2, consisting primarily of investments in short-term securities and expenditures for property and equipment. Net cash provided by financing activities was $20.1 million. These funds represented the net proceeds of the initial public offering in May 1996 of $65.3 million. The Company used approximately $39.9 million to pay notes payable and dividends payable declared to Existing Shareholders. The remaining funds represented payments of the capitalized warehouse lease and distributions to Existing Shareholders to cover, in part, federal and state income taxes payable by the Existing Shareholders with respect to the net income earned by the Company prior to the initial public offering. The Company has a $7.0 million bank credit facility bearing interest at the bank's prime rate. Under the terms of the facility, the Company must comply with certain financial and performance covenants including the maintenance of profitability, minimum current ratio, a minimum net worth, a maximum total liabilities to tangible net worth, a minimum fixed charge covered ratio and a maximum capital expenditures. Noncompliance by the Company with respect to any of the loan covenants constitutes an event of default that gives the bank the right to call the credit facility and to pursue certain remedies. As of June 30, 1996, the Company was in compliance with all such covenants. The credit agreement expires in August 1996, at which time the Company expects that it will be renewed. The Company believes that it can adequately fund its planned capital expenditures and working capital requirements for the next 12 months from net cash provided by operations, availability under its credit facilities and net proceeds from the initial public offering. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. 27.01 Financial Data Schedule -------- (b) FORM 8-K. None -------- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 99 CENTS ONLY STORES Date: August 15, 1996 /s/ Carl L. Wood ---------------- Carl L. Wood Chief Financial Officer EXHIBIT 27.1 6-MOS DEC 31 1996 JAN 01 1996 JUN 30 1996 [CASH] 6,146,000 [SECURITIES] 26,731,000 [RECEIVABLES] 1,450,000 [ALLOWANCES] (52,000) [INVENTORY] 30,903,000 65,806,000 [PP&E] 24,563,000 [DEPRECIATION] (6,258,000) 89,374,000 9,379,000 [BONDS] 0 0 [PREFERRED] 0 [COMMON] 65,522,000 2,820,000 89,374,000 [SALES] 85,449,000 85,449,000 [CGS] 57,049,000 18,673,000 0 0 252,000 9,475,000 3,881,000 5,594,000 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 5,594,000 .42 .42
Retained earnings. Represents pro forma adjustments to reflect conversion of Company from S corporation to C corporation. -----END PRIVACY-ENHANCED MESSAGE-----