-----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, GRYv45zxdKTRAAhhziXBXc9G/2+hOnP0TF+i4lv+x1ebc0N7rVS8lcHVck1R5ReF UpyfSRDcyU4+AakmxkGZKQ== 0000898430-99-000546.txt : 19990217 0000898430-99-000546.hdr.sgml : 19990217 ACCESSION NUMBER: 0000898430-99-000546 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990102 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LESLIES POOLMART INC CENTRAL INDEX KEY: 0000866048 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 954620298 STATE OF INCORPORATION: DE FISCAL YEAR END: 0927 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18741 FILM NUMBER: 99540539 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 FOR PERIOD ENDED JANUARY 02, 1999 ================================================================================ 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 January 2, 1999. OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-18741 Leslie's Poolmart, Inc. (Exact name of registrant as specified in its charter) Delaware 95-4620298 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 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 February 15, 1999 the number of outstanding shares of the Registrant's common stock was 1,433,643. ================================================================================ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LESLIE'S POOLMART, INC. ----------------------- CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
January 2, October 3, 1999 1998 ----------- ----------- ASSETS (UNAUDITED) - ------ CASH $ 169 $ 9,564 RECEIVABLES, NET 2,878 5,270 INVENTORIES, NET 48,347 47,440 PREPAID EXPENSES 1,851 1,583 DEFERRED TAX ASSETS 4,271 4,271 DEFERRED INCOME TAX CHARGE 1,319 -- -------- -------- TOTAL CURRENT ASSETS 58,835 68,128 PROPERTY, PLANT AND EQUIPMENT, NET 41,745 39,842 GOODWILL, NET 8,629 8,699 NON-COMPETE COVENANT 975 1,091 DEFERRED FINANCING COSTS 2,870 3,007 OTHER ASSETS 517 519 -------- -------- $113,571 $121,286 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) - ---------------------------------------------- ACCOUNTS PAYABLE $ 11,551 $ 14,692 ACCRUED LIABILITIES 12,559 12,559 CURRENT PORTION OF LONG-TERM DEBT 94 94 INCOME TAXES -- 4,681 -------- -------- TOTAL CURRENT LIABILITIES 24,204 32,026 DEFERRED TAX LIABLITIES 3,619 3,619 LINE-OF-CREDIT BORROWINGS 7,784 -- LONG-TERM DEBT, NET OF CURRENT PORTION 1,183 1,195 SENIOR NOTES 90,000 90,000 PREFERRED STOCK 30,284 29,361 SHAREHOLDERS' EQUITY (DEFICIT) - ------------------------------ COMMON STOCK (45,701) (45,701) RETAINED EARNINGS 2,198 10,786 -------- -------- TOTAL SHAREHOLDERS' DEFICIT (43,503) (34,915) -------- -------- $113,571 $121,286 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED BALANCE SHEETS 2 LESLIE'S POOLMART, INC. ----------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS)
Three Months Ended ------------------------- January 2, December 27, 1999 1997 ---------- ------------ SALES $26,132 $24,238 COST OF SALES 19,886 17,512 ------ ------ GROSS PROFIT 6,246 6,726 SELLING, GENERAL & ADMINISTRATIVE EXPENSES 17,101 13,323 AMORTIZATION OF ACQUISITION COSTS 186 64 LOSS ON DISPOSITION OF FIXED ASSETS 127 106 ------ ------ LOSS FROM OPERATIONS (11,168) (6,767) INTEREST EXPENSE 2,642 2,429 ------ ------ LOSS BEFORE INCOME TAX BENEFIT (13,810) (9,196) INCOME TAX BENEFIT 6,145 3,814 ------ ------ NET LOSS (7,665) (5,382) ------ ------ SERIES A PREFERRED STOCK DIVIDENDS AND ACCRETION 923 834 LOSS APPLICABLE TO COMMON SHAREHOLDERS $(8,588) $(6,216) ====== ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 LESLIE'S POOLMART, INC. ----------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Three Months Ended --------------------------- January 2, December 27, 1999 1997 ----------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES - ------------------------------------ NET LOSS $ (7,665) $(5,382) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 1,912 1,562 LOSS ON DISPOSITION OF FIXED ASSETS 127 106 INCOME TAX BENEFIT (6,145) (3,814) NET CHANGE IN RECEIVABLES, INVENTORY AND PAYABLES (1,511) 629 OTHER, NET (266) (320) -------- ------- NET CASH USED IN OPERATING ACTIVITIES (13,548) (7,219) -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES - ------------------------------------ PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (3,619) (2,096) PROCEEDS FROM DISPOSITIONS OF PROPERTY, PLANT AND EQUIPMENT -- -- -------- ------- NET CASH USED IN INVESTING ACTIVITIES (3,619) (2,096) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES - ------------------------------------ NET LINE-OF-CREDIT BORROWINGS 7,784 -- PAYMENTS OF LONG-TERM DEBT (12) (11) -------- ------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,772 (11) -------- ------- NET DECREASE IN CASH (9,395) (9,326) CASH AT BEGINNING OF PERIOD 9,564 14,829 -------- ------- CASH AT END OF PERIOD $ 169 $ 5,503 ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 LESLIE'S POOLMART, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 2, 1999 (Unaudited) (1) Presentation of Financial Information The financial statements included herein have been prepared by Leslie's Poolmart, Inc. (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 January 2, 1999 and December 27, 1997 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 1998 Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 22, 1998. 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 October 3, 1998 and for the year then ended. The results of operations for the three months ended January 2, 1999 and December 27, 1997 are not indicative of the results for a full year. (2) Organization and Operations Leslie's Poolmart, Inc. is a specialty retailer of swimming pool supplies and related products. The Company markets its products under the trade name Leslie's Swimming Pool Supplies through 319 retail stores in 28 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 and all of its operating profits are generated in the quarters ending June and September. (3) Inventories Inventories consist of the following:
January 2, December 27, 1999 1997 ---------- ------------ Raw materials and supplies $ 1,122,000 $ 1,403,000 Finished goods 47,225,000 40,264,000 ----------- ----------- Total Inventories $48,347,000 $41,667,000 =========== ===========
(4) Fiscal Periods In 1997, the Company changed its fiscal year end from the Saturday closest to December 31 to the Saturday closest to September 30. The 1998 fiscal year ended on October 3, 1998 and included 53 weeks. The 1996 fiscal year ended on December 28, 1996 included 52 weeks while the nine month transition period ended September 27, 1997 included 39 weeks. Each fiscal quarter will have 13 weeks and will close on the Saturday closest to December 31, March 31 and June 30. 5 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Leslie's Poolmart, Inc. is the leading specialty retailer of swimming pool supplies and related products in the United States. The Company currently markets its products through 319 Company-owned retail stores in 28 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. In December 1998, the Company opened its fourth distribution center in Covington, Kentucky. 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 fiscal quarters ending in June and September, which represent the peak months of swimming pool use. Sales are substantially lower during the quarters ending December and March when the Company will typically incur operating 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 generally attempts to open its new stores in the quarter ending in March in order to position itself for the following peak season. RESULTS OF OPERATIONS
Summary ------------------------- (In thousands) Three Months Ended ------------------------- January 2, December 27, 1999 1997 --------- ------------ Sales $ 26,132 $24,238 Loss from Operations (11,168) (6,767) Depreciation 1,588 1,372 Goodwill Amortization 186 64 Loss on Asset Dispositions 127 106 -------- ------- EBITDA Loss $ (9,267) $(5,225)
In the first quarter ended January 2, 1999, the Company reported an EBITDA loss of $9,267,000, as compared to an EBITDA loss of $5,225,000 for the December quarter of 1997. EBITDA represents earnings before interest, taxes, depreciation, amortization, loss or gain on fixed asset dispositions, and LIFO adjustments. During the quarter, 5 new stores were opened and 2 stores were closed, bringing the total store count to 319 on January 2, 1999, up from 278 in December of 1997. The Company historically incurs an operating loss in the quarter of the year ending in December and generally expects such losses to grow as new stores continue to be added at a significant rate. 6
Sales ------------------------- (In thousands) Three Months Ended ------------------------- January 2, December 27, 1999 1997 ---------- ------------ Retail Stores $25,546 $22,697 Mail Order 586 749 Service Departments -- 792 ------ ------ $26,132 $24,238
Sales for the first fiscal quarter increased 7.8% over the same fiscal quarter of 1997 but were up 19.8% on a comparable week basis. Fiscal 1998 was a 53 week year, and, as a result, the fiscal quarter-to-quarter comparisons do not include the same 13 weeks. Retail store sales grew 12.6% in the fiscal quarter and 25.4% over the comparable 13 weeks due to an increase in the total number of stores in operation in 1998 versus 1997 as well as a comparable store sales increase (over the comparable 13 weeks) of 17.3%. The increase in comparable store sales is primarily the result of the maturing of the new stores opened over the last several years, the continued growth in commercial sales, and the rapid growth of the store-based service operations. Mail order catalog sales in the first quarter declined 21.8% compared to the same quarter of the prior year, and was down 10.5% on a comparable week basis, due to continued cannabilization from new store openings. Service Department sales declined versus prior years reflecting the transition to store-based service operations. Gross profit for the three months ended January 2, 1999 equaled $6,246,000 or 23.9% of sales, 3.8% of sales lower than was reported in the same quarter of the prior year. The lower gross margin is primarily due to increased rent expense as a percentage of sales. Rent increased as a percentage of sales due to the increased number of new stores opened in 1998 versus 1997 and the lower sales growth in the fiscal quarter compared to the same fiscal quarter of last year, resulting from the 1998 53 week year and its impact on the fiscal quarter-to- quarter comparisons described above. In the first quarter of 1999, selling, general and administrative expenses equaled $17,101,000, an increase of 28.4% over the same period of last year. This increase is largely the result of higher store expenses and increased overhead costs associated with the continued growth in the number of stores. In addition, the Company changed its' store manager compensation plan to better tie the manager compensation to the performance and profitability of the stores. An additional element of the plan was the partial leveling out of the managers' income over the 12 months of the year. As a result, store manager compensation increased in the quarter ended January 2, 1999 more than it would under the old compensation plan, with a corresponding decrease expected in the third and fourth quarters of the year. Interest expense equaled $2,642,000 in the first quarter of 1999, up slightly from the same period of last year. Increased line-of-credit borrowings produced the higher interest expense in 1998. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Changes in Financial Condition Between October 3, 1998 and January 2, 1999, total current assets decreased $9,293,000 principally the result of lower cash balances which decreased $9,395,000 during the period. The cash decreased due to the seasonal nature of the Company's business, specifically; funding the usual December quarter operating loss. During the same period, current liabilities decreased $7,822,000, due to a $3,141,000 decrease in accounts payable and a $4,681,000 decrease in current income tax liabilities. The reduced income tax liability reflects the accrued tax benefit associated with the quarterly operating loss. 7 Liquidity and Capital Resources In the quarter ended January 2, 1999, net cash used in operating activities was $13,548,000 compared with $7,219,000 in the December quarter of the prior year. In the December quarter, cash is typically used to finance the operating losses experienced outside of the Company's peak selling season. In the December quarter, cash used in investing activities was $3,619,000, up from $2,096,000 in the same quarter of the prior year. This increase resulted from higher capital expenditures associated with new store openings and the purchase of new corporate computer software which is Year 2000 compliant. Cash provided by financing activities was $7,772,000 in the quarter, compared with cash used of $11,000 in the same quarter of 1997. Line-of- credit borrowings increased primarily to finance the usual December quarter operating loss whereas, in 1997, no additional borrowings were needed as the Company had sufficient cash balances available. 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. PART II. OTHER INFORMATION ITEM 5: OTHER INFORMATION ITEM 6: Exhibits and Reports on Form 8-A (a) Exhibits 27. Financial Data Schedule (a) Reports on Form 8-K None 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: February 16, 1999 /s/ Robert D. Olsen --------------------------------- Robert D. Olsen Chief Financial Officer 8 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 OCT-02-1999 OCT-04-1998 JAN-02-1999 169 0 2,878 0 48,347 58,835 41,745 0 113,571 24,204 0 30,284 0 (45,701) 0 113,571 0 26,132 0 19,886 0 0 2,642 (13,810) (6,145) (7,665) 0 0 0 (7,665) 0 0
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