-----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, BWqNnJl9yhuVLw3+dZZW5TdYqFjnADLTRmRZVKxQThlRQLpGGcR6JJwTW/7+UGKP A7fyJDCfhRfQfkW6wANUwA== 0000950116-00-001130.txt : 20000511 0000950116-00-001130.hdr.sgml : 20000511 ACCESSION NUMBER: 0000950116-00-001130 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: A C MOORE ARTS & CRAFTS INC CENTRAL INDEX KEY: 0001042809 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 223527763 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23157 FILM NUMBER: 624406 BUSINESS ADDRESS: STREET 1: 500 UNIVERSITY COURT CITY: BLACKWOOD STATE: NJ ZIP: 08012 BUSINESS PHONE: 6092286700 MAIL ADDRESS: STREET 1: 500 UNIVERSITY COURT CITY: BLACKWOOD STATE: NJ ZIP: 08012 10-Q 1 10-Q 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 March 31, 2000 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: 000-23157 --------- A.C. MOORE ARTS & CRAFTS, INC. ------------------------------ (Exact name of registrant as specified in its charter) Pennsylvania 22-3527763 ------------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 500 University Court, Blackwood, NJ 08012 ----------------------------------------- (Address of principal executive offices) (Zip Code) (856) 228-6700 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) 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: Class Outstanding at May 8, 2000 - ----- -------------------------- Common Stock, no par value 7,405,000 A.C. MOORE ARTS & CRAFTS, INC. TABLE OF CONTENTS Page Number PART I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 3 Consolidated Statements of Income for the three months ended March 31, 2000 and 1999 4 Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosure About Market Risk 9 PART II: OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities and Use of Proceeds 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 EXHIBIT INDEX 12 2 A.C. MOORE ARTS & CRAFTS, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands)

See accompanying notes to consolidated financial statements 3 A.C. MOORE ARTS & CRAFTS, INC. CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data) (unaudited)

See accompanying notes to consolidated financial statements 4 A.C. MOORE ARTS & CRAFTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited)

Three months ended March 31, ------------------------- 2000 1999 -------- --------- See accompanying notes to consolidated financial statements 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) Basis of Presentation The consolidated financial statements included herein include the accounts of A.C. Moore Arts & Crafts, Inc. and its wholly owned subsidiaries (collectively the "Company"). The Company is a chain of 44 retail superstores selling arts and crafts merchandise. The stores are located throughout the Eastern United States. These financial statements have been prepared by management without audit and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Due to the seasonality of the Company's business, the results for the interim periods are not necessarily indicative of the results for the year. The accompanying consolidated financial statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of the interim financial statements. In the opinion of management, all such adjustments are of a normal and recurring nature. (2) Management Estimates The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reported period and related disclosures. Significant estimates made as of and for the three month periods ended March 31, 2000 and 1999 include provisions for shrinkage, capitalized buying, warehousing and distribution costs related to inventory and markdowns of merchandise inventories. Actual results could differ from those estimates. (3) Earnings Per Share The weighted average shares outstanding plus impact of stock options for the three month period ended March 31, 1999 excludes potentially dilutive shares as the result would be antidilutive. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis contains certain forward-looking statements. These forward-looking statements do not constitute historical facts and involve risks and uncertainties. Actual results could differ materially from those referred to in the forward-looking statements due to a number of factors, including, but not limited to, the following: customer demand, the effect of economic conditions, the impact of competitors' locations or pricing, the availability of acceptable real estate locations for new stores, difficulties with respect to new information system technologies, supply constraints or difficulties, the effectiveness of advertising strategies and the ability to meet capital needs. For additional information concerning factors that could cause actual results to differ materially from the information contained herein, reference is made to the information under the heading "Cautionary Statement Relating to Forward Looking Statements" in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission. Due to the importance of the fall selling season, the fourth quarter has historically contributed, and the Company expects it will continue to contribute, disproportionately to the Company's profitability for the entire year. As a result, the Company's quarterly results of operations may fluctuate. In addition, results of a period shorter than a full year may not be indicative of results expected for the entire year. Results of Operations The following table sets forth, for the periods indicated, selected statement of operations data expressed as a percentage of net sales and the number of stores open at the end of each such period: Three months ended March 31, --------------------------------- 2000 1999 ------------- -------------- Net sales 100.0% 100.0% Cost of sales 63.2% 63.4% ------------- -------------- Gross margin 36.8% 36.6% Selling, general and administrative expenses 35.2% 35.1% Pre-opening expenses 1.3% 0.0% ------------ -------------- Income from operations 0.3% 1.5% Net interest (income) (0.1)% (0.1)% ------------- -------------- Income before income taxes 0.4% 1.6% Income tax expense 0.1% 0.6% ------------- -------------- Net income 0.3% 1.0% ============= ============== Number of stores open at end of period 42 37 7 Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Net Sales. Net sales increased $4.6 million, or 9.7%, to $52.8 million in the three months ended March 31, 2000 from $48.1 million in the comparable 1999 period. This increase resulted from (i) net sales of $3.1 million from superstores opened in 1999 and 2000 not included in the comparable store base, and (ii) a comparable store sales increase of $1.5 million, or 3%. Stores are added to the comparable store base at the beginning of the fourteenth full month of operation. Gross Margin. Cost of sales includes the cost of merchandise, plus certain distribution and purchasing costs. Cost of sales increased $2.9 million, or 9.4%, to $33.4 million in the three months ended March 31, 2000 from $30.5 million in the three months ended March 31, 1999. The gross margin increased $1.8 million, or 10.2%, to $19.4 million in the three months ended March 31, 2000 from $17.6 million in the three months ended March 31, 1999. The gross margin increased to 36.8% of net sales in the three months ended March 31, 2000 from 36.6% in the three months ended March 31, 1999. Selling, General and Administrative Expenses. Selling, general and administrative expenses include (a) direct store level expenses, including rent and related operating costs, payroll, advertising, depreciation and other direct costs, and (b) corporate level costs not directly associated with or allocable to cost of sales including executive salaries, accounting and finance, corporate information systems, office facilities and other corporate expenses. Selling, general and administrative expenses increased $1.7 million, or 9.9%, in the three months ended March 31, 2000 to $18.6 million from $16.9 million in the three months ended March 31, 1999. Of the increase, $1.1 million was attributable to the superstores open in 2000 which were not open during 1999 and the superstores opened in 1999 not in the comparable store base. Of the remainder, $300,000 is due to increases in the comparable superstores and $300,000 is attributable to the increase in corporate costs to support the growth of the Company. As a percentage of sales, selling, general and administrative costs increased to 35.2% of net sales in the three months ended March 31, 2000 from 35.1% of net sales in the three months ended March 31, 1999. This increase is primarily due to the newer stores, which, on average, have higher operating costs as a percent of sales than older stores. Pre-Opening Expense. The Company expenses store pre-opening expense as incurred. Pre-opening expense for the two new superstores opened in the first quarter of 2000 and the two new stores which opened in the second quarter amounted to $645,000. In the first quarter of 1999, the Company did not open any superstores and incurred no pre-opening expense. Net Interest (Income). In the first quarter of 2000 the Company had net interest income of $66,000 compared with interest income of $71,000 in 1999. The reduction is due to lower cash balances resulting from the use of cash to fund the new stores added in 1999 and 2000. Income Taxes. The Company's effective income tax rate was 38% for the first quarter ended March 31, 2000 and 39% for the first quarter ended March 31, 1999. Liquidity and Capital Resources. The Company's cash needs are primarily for working capital to support its inventory requirements and capital expenditures, pre-opening costs and beginning inventory for new superstores. 8 At March 31, 2000 and December 31, 1999 the Company's working capital was $44.9 million and $46.6 million, respectively. Cash used in operations was $9.2 million for the three months ended March 31, 2000 as a result of the seasonal reduction of accounts payable and accrued payroll in the amount of $6.3 million and an increase in inventory of $2.2 million to support the new superstores. Net cash used in investing activities during the three months ended March 31, 2000 was $2.8 million. This use of cash was for capital expenditures, primarily related to new stores. In 2000, the Company expects to spend approximately $9.0 million on capital expenditures, which includes approximately $5.4 million for new store openings, $2.6 million for remodeling and systems in existing stores, and the remainder for warehouse equipment and systems development. There are no other material commitments for capital expenditures other than new store openings in the next 12 months. Net cash provided by financing activities includes $223,000 of proceeds from book overdrafts. The overdrafts represented outstanding checks at certain banks in excess of funds on deposit at those banks. These accounts are maintained as zero balance accounts and are covered as required from funds available at other banks. On March 11, 1998 the Company entered into a new four year financing agreement with a bank which provides a $25 million revolving credit facility, $20 million of which is available immediately with the remainder available July 2000, provided the Company is in compliance with the agreement's covenants. A portion of the credit facility was used to finance the acquisition of various equipment purchases through a series of five year capital leases. The Company believes the cash generated from operations during the year and available borrowings under the financing agreement will be sufficient to finance its working capital and capital expenditure requirements for at least the next 12 months. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. 9 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not Applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. ITEM 5. OTHER INFORMATION Not Applicable. ITEM 6. EXHIBITS AND REPORTS ON 8-K (a) Exhibits: 27.1 Financial Data Schedule (b) There were no reports on Form 8-K filed during the quarter ended March 31, 2000. 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. A.C. MOORE ARTS & CRAFTS, INC. Date: May 10, 2000 By: /s/ Leslie H. Gordon -------------------------------------------- Executive Vice President and Chief Financial Officer (duly authorized officer and principal financial officer) 11 EXHIBIT INDEX 27.1 Financial Data Schedule 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 2,743 0 0 0 61,480 65,711 26,896 (10,262) 82,976 20,806 0 0 0 43,151 14,001 82,976 52,783 52,783 33,375 18,596 0 0 (66) 233 89 144 0 0 0 144 .02 .02

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