-----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, UlRP8Omxl6/V3p9MgRXSyTusNvhf4lTl69Z1GuZQcBX8gA1ySEj+JBHdP0Hl5wg9 6L6Wa+Dlk20EstgmMjS3PA== 0000898430-97-002014.txt : 19970513 0000898430-97-002014.hdr.sgml : 19970513 ACCESSION NUMBER: 0000898430-97-002014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LESLIES POOLMART CENTRAL INDEX KEY: 0000866048 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 930976447 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18741 FILM NUMBER: 97601264 BUSINESS ADDRESS: STREET 1: 20630 PLUMMER ST CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8189934212 MAIL ADDRESS: STREET 1: 20222 PLUMMER ST CITY: CHATSWORTH STATE: CA ZIP: 91311 10-Q 1 FORM 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 29, 1997. 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 0-19096 LESLIE'S POOLMART (Exact name of registrant as specified in its charter) California 93-0976447 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 20630 Plummer Street, Chatsworth, California 91311 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (818) 993-4212 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock (Title of Class) 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 ----- ----- Applicable only to issuers involved in bankruptcy proceedings during the preceding five years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ______ No _______ APPLICABLE ONLY TO CORPORATE REGISTRANTS: As of May 5, 1997 the number of outstanding shares of the Registrant's common stock was 6,554,672. ================================================================================ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LESLIE'S POOLMART ----------------- CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
March 29, December 28, 1997 1996 ----------- ------------ ASSETS (UNAUDITED) - ------ ----------- CASH $ 133 $ 87 RECEIVABLES, NET 2,900 2,550 INVENTORIES, NET 56,552 33,948 PREPAID EXPENSES 2,650 1,693 DEFERRED TAX ASSETS 2,602 2,602 DEFERRED INCOME TAX CHARGE 4,326 --- -------- ------- TOTAL CURRENT ASSETS 69,163 40,880 PROPERTY, PLANT AND EQUIPMENT, NET 35,557 33,307 GOODWILL, NET 8,235 8,298 OTHER ASSETS 701 672 -------- ------- $113,656 $83,157 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ ACCOUNTS PAYABLE 36,554 $ 6,055 ACCRUED LIABILITIES 5,651 4,480 LINE-OF-CREDIT BORROWINGS ---- 15,440 CURRENT PORTION OF LONG-TERM DEBT 131 2,187 -------- ------- TOTAL CURRENT LIABILITIES 42,336 28,162 DEFERRED INCOME TAXES 3,099 3,099 LONG-TERM DEBT, NET OF CURRENT PORTION 27,986 5,581 CONVERTIBLE SUBORDINATED DEBENTURE 10,000 10,000 SHAREHOLDERS' EQUITY - -------------------- COMMON STOCK 32,646 32,625 RETAINED (DEFICIT) EARNINGS (2,411) 3,690 TOTAL SHAREHOLDERS'EQUITY 30,235 36,315 -------- ------- $113,656 $83,157 ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED BALANCE SHEETS 2 LESLIE'S POOLMART ----------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended ----------------------- March 29, March 30, 1997 1996 --------- --------- SALES $ 23,816 $18,064 COST OF SALES 18,254 13,806 -------- ------- GROSS PROFIT 5,562 4,258 SELLING, GENERAL & ADMINISTRATIVE EXPENSES 15,126 12,804 AMORTIZATION OF ACQUISITION COSTS 64 64 -------- ------- LOSS FROM OPERATIONS (9,628) (8,610) INTEREST EXPENSE 799 834 -------- ------- LOSS BEFORE INCOME TAX BENEFIT (10,427) (9,444) INCOME TAX BENEFIT 4,326 3,919 -------- ------- NET LOSS $ (6,101) $(5,525) ======== ======= NET LOSS PER SHARE OF COMMON STOCK $ (.90) $ (.82) ======== ======= WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AND COMMON STOCK EQUIVALENTS 6,789 6,769
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 LESLIE'S POOLMART ----------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Three Months Ended ---------------------- March 29, March 30, 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES - ------------------------------------ NET LOSS $(6,101) $(5,525) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 1,314 1,057 LOSS ON DISPOSITION OF FIXED ASSETS 71 --- INCOME TAX BENEFIT (4,326) (3,919) NET CHANGE IN RECEIVABLES, 8,716 4,627 INVENTORY AND PAYABLES OTHER, NET (987) (324) ------- ------- NET CASH USED IN OPERATING ACTIVITIES (1,313) (4,084) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES - ------------------------------------ PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (4,739) (2,393) PROCEEDS FROM DISPOSITIONS OF PROPERTY, PLANT AND EQUIPMENT 1,168 --- ------- ------- NET CASH USED IN INVESTING ACTIVITIES (3,571) (2,393) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES - ------------------------------------ NET LINE-OF-CREDIT BORROWINGS 4,929 6,412 PAYMENTS OF LONG-TERM DEBT (20) --- PROCEEDS FROM ISSUANCE OF COMMON STOCK 21 73 ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 4,930 6,485 ------- ------- NET INCREASE IN CASH 46 8 CASH AT BEGINNING OF PERIOD 87 74 ------- ------- CASH AT END OF PERIOD $ 133 $ 82 ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 LESLIE'S POOLMART NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 29, 1997 (UNAUDITED) (1) PRESENTATION OF FINANCIAL INFORMATION The financial statements included herein have been prepared by Leslie's Poolmart (the "Company"), without audit, and include all adjustments of a normal recurring nature which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three month periods ended March 29, 1997 and March 30, 1996 pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures in these financial statements are adequate to make the information presented not misleading. The following material under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" is written with the presumption that the users of the interim financial statements have read or have access to the Company's 1996 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 1997. This document contains the latest audited financial statements and notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results of Operations as of December 28, 1996 and for the year then ended. The results of operations for the three months ended March 29, 1997 and March 30, 1996 are not indicative of the results for a full year. (2) ORGANIZATION AND OPERATIONS Leslie's Poolmart is a specialty retailer of swimming pool supplies and related products. The Company currently markets its products under the trade name Leslie's Swimming Pool Supplies through 278 retail stores in 27 states and through mail order catalogs sent to selected swimming pool owners. The Company also repackages certain bulk chemical products for retail sale. The Company's business is highly seasonal as the majority of its sales (79% in 1996 and 1995) and all of its operating profits are generated in the second and third quarters. (3) INVENTORIES Inventories consist of the following:
March 29, March 30, 1997 1996 --------- --------- (in thousands) Raw materials and supplies 2,007 3,120 Finished goods 54,545 51,610 ------- ------- Total Inventories $56,552 $54,730 ======= =======
(4) RECENT ACCOUNTING PRONOUNCEMENTS In March 1997, the FASB issued SFAS No. 128, "Earnings per Share" (SFAS 128) and SFAS No. 129, "Disclosure of Information about Capital Structure" (SFAS 129). SFAS 128 revises and simplifies the computation for earnings per share and requires certain additional disclosures. SFAS 129 requires additional disclosures regarding the Company's capital structure. Both standards will be adopted in the fourth quarter of fiscal 1997. Management does not expect the adoption of these standards to have a material effect on the Company's financial position or results of operations. 5 (5) PROPOSED REINCORPORATION AND MERGER On February 26, 1997, the Company's Board of Directors approved an Agreement of Merger providing for the reincorporation of the Company in Delaware by merger into a wholly-owned subsidiary, and an Agreement and Plan of Merger providing for the merger of Poolmart USA Inc., a newly- formed corporation, with and into the Company. Following consummation of the reincorporation and upon effectiveness of the subsequent merger, (i) each outstanding share of common stock of the Company would be converted into $14.50 cash (other than 359,505 shares owned primarily by members of management, including Michael Fourticq, the Chairman of the Company, and Brian McDermott, the President and CEO of the Company and other than shares as to which the holders perfect dissenters' rights) and (ii) outstanding options covering approximately 846,000 shares of common stock, including those not yet vested, would be cancelled for payment of the difference between the exercise price and $14.50 per share. The total value of the shares and options at the transaction price of $14.50 approximates $101 million. The proposed mergers are subject to various conditions, including financing and approval by the Company's shareholders. The shareholders are expected to vote on June 10, 1997. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Leslie's Poolmart is the leading specialty retailer of swimming pool supplies and related products in the United States. The Company currently markets its products through 278 Company-owned retail stores in 27 states and through a nationwide mail order catalog. Leslie's is vertically integrated, operating a chemical repackaging facility in Ontario, California. It supplies its retail stores from distribution facilities located in Ontario, California; Dallas, Texas; and Bridgeport, New Jersey. SEASONALITY AND QUARTERLY FLUCTUATIONS The Company's business exhibits substantial seasonality which the Company believes is typical of the swimming pool supply industry. In general, sales and net income are highest during the second and third fiscal quarters which represent the peak months of swimming pool use. Sales are substantially lower during the first and fourth quarters when the Company will typically incur net losses. The Company expects that its quarterly results of operations will fluctuate depending on the timing and amount of revenue contributed by new stores and, to a lesser degree, the timing of costs associated with the opening of new stores. The Company attempts to open its new stores in the first quarter or early in the second quarter in order to position itself for the following peak season. RESULTS OF OPERATIONS In the first quarter ended March 29, 1997, the Company reported a net loss of $6,101,000 or $.90 per share, as compared to a net loss of $5,525,000 or $.82 per share for the first quarter of 1996. During the quarter 11 new stores were opened and 2 stores were closed, bringing the total store count to 278 on March 29, 1997. The Company historically incurs a net loss in the first quarter of the year and generally expects such losses to grow as new stores continue to be added at a significant rate. 6 1997 compared to 1996:
Sales --------------------- (In thousands) Three Months Ended --------------------- March 29, March 30, 1997 1996 --------- --------- Retail Stores $22,134 $16,461 Mail Order 794 757 Service Departments 888 846 ------- ------- $23,816 $18,064
Sales for the first quarter increased 31.8% over the first quarter of 1996. Retail store sales grew 34.5% for the three-month period due to an increase in the total number of stores in operation in 1997 versus 1996 as well as a comparable store sales increase of 20.8%. The increase in comparable store sales is primarily the result of the maturing of the new stores opened over the last several years, and continued growth in commercial sales. Commercial sales increased 21% in the first quarter of 1997 compared to the same period last year. Additionally, in the Southern California market, the Company is testing the operation of its service technicians out of the local stores, and as a result, is reflecting these service sales in the retail store sales total. This added approximately 2.0% to the first quarter comparable store sales growth. Mail order catalog sales in the first quarter increased 4.9% compared to the first quarter of the prior year on increased residential mail order sales, resulting from an expanded catalog mailing in 1997 and generally favorable weather. Service Department sales increased 5.0% in the first quarter, reflecting strong growth in the Texas service centers, offset by the reclassification of the Southern California service sales to retail store sales. Gross profit for the three months ended March 29, 1997 equaled $5,562,000 or 23.4% of sales, .2% of sales lower than was reported in the first quarter of 1996. The lower gross margin is primarily due to increased promotional activity in 1997 supporting new store openings, offset by lower rent expense as a percentage of sales due to the decrease in the number of new stores opened in 1997 versus 1996. In the first quarter of 1997, selling, general and administrative expenses equaled $15,126,000, an increase of 18.1% over the same period of last year. This increase is the result of higher store expenses and increased corporate overhead costs required to support the continued growth in the number of stores. Interest expense equalled $799,000 in the first quarter of 1997, down slightly from $834,000 in the same period last year. The lower interest expense was primarily the result of decreased borrowings due to improved working capital management in the first quarter of 1997. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Changes in Financial Condition Between December 28, 1996 and March 29, 1997, total current assets increased $28,283,000 principally the result of inventory which increased $22,604,000 during the period. The inventory increase results from the seasonal nature of the Company's business and the new stores opened in 1997. Over the same period, current liabilities increased $14,174,000, largely due to a $30,499,000 increase in accounts payable, offset by the reclassification of $15,440,000 line of credit borrowings to long-term debt. The increase in account payable related primarily to favorable dating terms on trade payables extended by vendors to support the seasonal inventory buildup. 7 Liquidity and Capital Resources In the first quarter of 1997, net cash used in operating activities was $1,313,000 compared with $4,084,000 in first quarter of the prior year. In the first quarter, cash is typically used to finance operating losses experienced prior to the Company's peak selling season. The impact of the increased operating loss in 1997 was offset by reduced working capital requirements in 1997 relative to 1996. For the first quarter, cash used in investing activities was $3,571,000 compared with $2,393,000 in the first quarter of the prior year. This increase results from increased capital expenditures in 1997 as compared to 1996, primarily due to opening the 1997 new stores earlier in the season as compared to the last several years. Also, in the first quarter of 1997, two retail store properties were sold generating proceeds totaling approximately $1,168,000. Cash provided by financing activities was $4,930,000 in the first quarter of 1997 compared with $6,485,000 in the first quarter of 1996. Borrowings increased primarily to finance the usual first quarter operating loss and capital expenditures associated with the continued new store openings. In January of 1997 the Company amended its credit agreement with Wells Fargo Bank to consolidate the existing line of credit facility, the project financing facility, and the term loan into one expanded $38,000,000 line of credit facility. The term of the expanded line of credit facility was extended through February 16, 2000 and as a result, the line of credit has been classified as long-term debt on the March 29, 1997 balance sheet. Interest accrues at the lender's reference rate (8.5% at March 29, 1997) or at LIBOR plus 1.75% at the Company's election. On February 26, 1997, the Company's Board of Directors approved an Agreement of Merger providing for the reincorporation of the Company in Delaware by merger into a wholly-owned subsidiary, and an Agreement and Plan of Merger providing for the merger of Poolmart USA Inc., a newly- formed corporation, with and into the Company. Following consummation of the reincorporation and upon effectiveness of the subsequent merger, (i) each outstanding share of common stock of the Company would be converted into $14.50 cash (other than 359,505 shares owned primarily by members of management, including Michael Fourticq, the Chairman of the Company, and Brian McDermott, the President and CEO of the Company and other than shares as to which the holders perfect dissenters' rights) and (ii) outstanding options covering approximately 846,000 shares of common stock, including those not yet vested, would be cancelled for payment of the difference between the exercise price and $14.50 per share. The total value of the shares and options at the transaction price of $14.50 approximates $101 million. The proposed mergers are subject to various conditions, including financing and approval by the Company's shareholders. The shareholders are expected to vote on June 10, 1997. The Company believes that its internally generated funds, as well as its borrowing capacity, are adequate to meet its working capital needs, maturing obligations and capital expenditure requirements, including those relating to the opening of new stores. 8 PART II. OTHER INFORMATION ITEM 5: OTHER INFORMATION 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. LESLIE'S POOLMART Date: May 12, 1997 /s/ Robert D. Olsen --------------------------------- Robert D. Olsen Chief Financial Officer 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-03-1998 DEC-29-1996 MAR-29-1997 133 0 2,900 0 56,552 69,163 35,557 0 113,656 42,336 0 0 0 32,646 0 113,656 0 23,816 0 18,254 15,190 0 799 (10,427) 4,326 (6,101) 0 0 0 (6,101) (.90) (.90)
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