0001564590-21-042189.txt : 20210806 0001564590-21-042189.hdr.sgml : 20210806 20210806170125 ACCESSION NUMBER: 0001564590-21-042189 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 66 CONFORMED PERIOD OF REPORT: 20210703 FILED AS OF DATE: 20210806 DATE AS OF CHANGE: 20210806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Leslie's, Inc. CENTRAL INDEX KEY: 0001821806 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39667 FILM NUMBER: 211153661 BUSINESS ADDRESS: STREET 1: 2005 E. INDIAN SCHOOL ROAD CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 602-366-3817 MAIL ADDRESS: STREET 1: 2005 E. INDIAN SCHOOL ROAD CITY: PHOENIX STATE: AZ ZIP: 85016 10-Q 1 lesl-10q_20210703.htm 10-Q lesl-10q_20210703.htm
false Q3 0001821806 --10-02 2021-03-31 2031-10-31 P2Y10M24D P7Y4M24D P6Y6M P7Y4M24D P6M P3Y7M6D P8Y3M18D P6Y1M6D P8Y2M12D P1Y3M18D P3Y10M24D P7Y P6Y3M18D P8Y6M P1Y6M 0001821806 2020-10-04 2021-07-03 xbrli:shares 0001821806 2021-08-02 iso4217:USD 0001821806 2021-07-03 0001821806 2020-10-03 0001821806 2020-06-27 iso4217:USD xbrli:shares 0001821806 2021-04-04 2021-07-03 0001821806 2020-03-29 2020-06-27 0001821806 2019-09-29 2020-06-27 0001821806 us-gaap:CommonStockMember 2019-03-28 0001821806 us-gaap:AdditionalPaidInCapitalMember 2019-03-28 0001821806 us-gaap:RetainedEarningsMember 2019-03-28 0001821806 2019-03-28 0001821806 us-gaap:AdditionalPaidInCapitalMember 2019-03-29 2020-06-27 0001821806 2019-03-29 2020-06-27 0001821806 us-gaap:RetainedEarningsMember 2019-03-29 2020-06-27 0001821806 us-gaap:CommonStockMember 2020-06-27 0001821806 us-gaap:AdditionalPaidInCapitalMember 2020-06-27 0001821806 us-gaap:RetainedEarningsMember 2020-06-27 0001821806 us-gaap:CommonStockMember 2021-04-03 0001821806 us-gaap:AdditionalPaidInCapitalMember 2021-04-03 0001821806 us-gaap:RetainedEarningsMember 2021-04-03 0001821806 2021-04-03 0001821806 us-gaap:CommonStockMember 2021-04-04 2021-07-03 0001821806 us-gaap:AdditionalPaidInCapitalMember 2021-04-04 2021-07-03 0001821806 us-gaap:RetainedEarningsMember 2021-04-04 2021-07-03 0001821806 us-gaap:CommonStockMember 2021-07-03 0001821806 us-gaap:AdditionalPaidInCapitalMember 2021-07-03 0001821806 us-gaap:RetainedEarningsMember 2021-07-03 0001821806 us-gaap:CommonStockMember 2019-09-28 0001821806 us-gaap:AdditionalPaidInCapitalMember 2019-09-28 0001821806 us-gaap:RetainedEarningsMember 2019-09-28 0001821806 2019-09-28 0001821806 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-09-28 0001821806 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-09-28 0001821806 us-gaap:AdditionalPaidInCapitalMember 2019-09-29 2020-06-27 0001821806 us-gaap:RetainedEarningsMember 2019-09-29 2020-06-27 0001821806 us-gaap:CommonStockMember 2020-10-03 0001821806 us-gaap:AdditionalPaidInCapitalMember 2020-10-03 0001821806 us-gaap:RetainedEarningsMember 2020-10-03 0001821806 us-gaap:CommonStockMember 2020-10-04 2021-07-03 0001821806 us-gaap:AdditionalPaidInCapitalMember 2020-10-04 2021-07-03 0001821806 us-gaap:RetainedEarningsMember 2020-10-04 2021-07-03 0001821806 us-gaap:IPOMember 2020-11-01 2020-11-30 0001821806 us-gaap:IPOMember 2020-11-30 0001821806 lesl:SeniorUnsecuredNotesMember 2020-11-01 2020-11-30 0001821806 lesl:SubsequentPublicOfferingMember 2021-02-01 2021-02-28 0001821806 lesl:SubsequentPublicOfferingMember 2021-05-02 2021-06-01 0001821806 lesl:SubsequentPublicOfferingMember 2021-02-28 0001821806 lesl:SubsequentPublicOfferingMember 2021-06-01 0001821806 lesl:SubsequentPublicOfferingMember srt:MaximumMember 2021-02-01 2021-02-28 0001821806 lesl:SubsequentPublicOfferingMember srt:MaximumMember 2021-05-02 2021-06-01 0001821806 us-gaap:FairValueMeasurementsRecurringMember 2021-07-03 0001821806 us-gaap:FairValueMeasurementsRecurringMember 2020-10-03 0001821806 lesl:TermLoanDueInTwentyTwentyEightMember us-gaap:FairValueInputsLevel2Member 2021-07-03 0001821806 lesl:InterestRateCapAgreementMember 2020-10-04 2021-07-03 0001821806 lesl:InterestRateCapAgreementMember 2021-07-03 lesl:Location 0001821806 lesl:DenverColoradoMember 2021-03-01 2021-03-31 0001821806 lesl:MedfordOregonMember 2021-05-01 2021-05-31 lesl:State 0001821806 2021-03-01 2021-03-31 0001821806 lesl:PacificNorthwestMember 2019-10-01 2019-10-31 0001821806 2019-10-01 2019-10-31 0001821806 us-gaap:TrademarksAndTradeNamesMember 2020-10-04 2021-07-03 0001821806 us-gaap:NoncompeteAgreementsMember 2020-10-04 2021-07-03 0001821806 us-gaap:CustomerRelationshipsMember 2020-10-04 2021-07-03 0001821806 us-gaap:ComputerSoftwareIntangibleAssetMember 2020-10-04 2021-07-03 0001821806 us-gaap:OtherIntangibleAssetsMember 2020-10-04 2021-07-03 0001821806 us-gaap:TrademarksAndTradeNamesMember 2021-07-03 0001821806 us-gaap:NoncompeteAgreementsMember 2021-07-03 0001821806 us-gaap:CustomerRelationshipsMember 2021-07-03 0001821806 us-gaap:ComputerSoftwareIntangibleAssetMember 2021-07-03 0001821806 us-gaap:OtherIntangibleAssetsMember 2021-07-03 0001821806 us-gaap:TrademarksAndTradeNamesMember 2020-10-04 2021-07-03 0001821806 us-gaap:TrademarksAndTradeNamesMember 2021-07-03 0001821806 us-gaap:TrademarksAndTradeNamesMember 2019-09-29 2020-10-03 0001821806 us-gaap:NoncompeteAgreementsMember 2019-09-29 2020-10-03 0001821806 us-gaap:CustomerRelationshipsMember 2019-09-29 2020-10-03 0001821806 us-gaap:ComputerSoftwareIntangibleAssetMember 2019-09-29 2020-10-03 0001821806 us-gaap:OtherIntangibleAssetsMember 2019-09-29 2020-10-03 0001821806 us-gaap:TrademarksAndTradeNamesMember 2020-10-03 0001821806 us-gaap:NoncompeteAgreementsMember 2020-10-03 0001821806 us-gaap:CustomerRelationshipsMember 2020-10-03 0001821806 us-gaap:ComputerSoftwareIntangibleAssetMember 2020-10-03 0001821806 us-gaap:OtherIntangibleAssetsMember 2020-10-03 0001821806 us-gaap:TrademarksAndTradeNamesMember 2019-09-29 2020-10-03 0001821806 us-gaap:TrademarksAndTradeNamesMember 2020-10-03 0001821806 us-gaap:TrademarksAndTradeNamesMember 2019-09-28 2020-06-27 0001821806 us-gaap:NoncompeteAgreementsMember 2019-09-28 2020-06-27 0001821806 us-gaap:CustomerRelationshipsMember 2019-09-28 2020-06-27 0001821806 us-gaap:ComputerSoftwareIntangibleAssetMember 2019-09-28 2020-06-27 0001821806 us-gaap:OtherIntangibleAssetsMember 2019-09-28 2020-06-27 0001821806 us-gaap:TrademarksAndTradeNamesMember 2020-06-27 0001821806 us-gaap:NoncompeteAgreementsMember 2020-06-27 0001821806 us-gaap:CustomerRelationshipsMember 2020-06-27 0001821806 us-gaap:ComputerSoftwareIntangibleAssetMember 2020-06-27 0001821806 us-gaap:OtherIntangibleAssetsMember 2020-06-27 0001821806 us-gaap:TrademarksAndTradeNamesMember 2019-09-28 2020-06-27 0001821806 us-gaap:TrademarksAndTradeNamesMember 2020-06-27 0001821806 2020-03-28 2020-06-27 0001821806 2019-09-28 2020-06-27 0001821806 lesl:TermLoanDueOnMarchNineTwoThousandTwentyEightMember 2021-07-03 0001821806 lesl:TermLoanDueOnMarchNineTwoThousandTwentyEightMember 2020-10-03 0001821806 lesl:TermLoanDueOnMarchNineTwoThousandTwentyEightMember 2020-06-27 0001821806 lesl:SeniorUnsecuredNotesMember 2020-10-03 0001821806 lesl:SeniorUnsecuredNotesMember 2020-06-27 xbrli:pure 0001821806 lesl:ABLCreditFacilityMember 2021-07-03 0001821806 lesl:TermLoanDueOnMarchNineTwoThousandTwentyEightMember srt:MaximumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanDueOnMarchNineTwoThousandTwentyEightMember srt:MinimumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-10-04 2021-07-03 0001821806 srt:MaximumMember us-gaap:BaseRateMember lesl:ABLCreditFacilityMember 2020-10-04 2021-07-03 0001821806 srt:MinimumMember us-gaap:BaseRateMember lesl:ABLCreditFacilityMember 2020-10-04 2021-07-03 0001821806 srt:MaximumMember us-gaap:EurodollarMember lesl:ABLCreditFacilityMember 2020-10-04 2021-07-03 0001821806 srt:MinimumMember us-gaap:EurodollarMember lesl:ABLCreditFacilityMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember 2021-03-31 0001821806 lesl:TermLoanMember 2021-03-01 2021-03-31 0001821806 lesl:TermLoanMember lesl:AmendmentOfTermLoanMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember us-gaap:LondonInterbankOfferedRateLIBORMember lesl:ApplicableRateMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember lesl:ABRMember lesl:ApplicableRateMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember srt:MinimumMember lesl:FirstLienLeverageRatioGreaterThanTwoPointSevenFiveToOneHundredMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember srt:MaximumMember lesl:FirstLienLeverageRatioGreaterThanTwoPointSevenFiveToOneHundredMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember us-gaap:LondonInterbankOfferedRateLIBORMember lesl:FirstLienLeverageRatioGreaterThanTwoPointSevenFiveToOneHundredMember lesl:ApplicableRateMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember lesl:ABRMember lesl:FirstLienLeverageRatioGreaterThanTwoPointSevenFiveToOneHundredMember lesl:ApplicableRateMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember srt:MaximumMember lesl:FirstLienLeverageRatioLessThanOrEqualToTwoPointSevenFiveToOneMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember srt:MinimumMember lesl:FirstLienLeverageRatioLessThanOrEqualToTwoPointSevenFiveToOneMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember us-gaap:LondonInterbankOfferedRateLIBORMember lesl:FirstLienLeverageRatioLessThanOrEqualToTwoPointSevenFiveToOneMember lesl:ApplicableRateMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember lesl:ABRMember lesl:FirstLienLeverageRatioLessThanOrEqualToTwoPointSevenFiveToOneMember lesl:ApplicableRateMember 2020-10-04 2021-07-03 0001821806 lesl:TermLoanMember us-gaap:LondonInterbankOfferedRateLIBORMember srt:MaximumMember 2020-10-04 2021-07-03 0001821806 lesl:ABLCreditFacilityMember 2021-04-12 2021-04-12 0001821806 lesl:ABLCreditFacilityMember 2020-10-03 0001821806 lesl:ABLCreditFacilityMember 2021-04-12 0001821806 lesl:ABLCreditFacilityMember us-gaap:StandbyLettersOfCreditMember 2021-07-03 0001821806 lesl:ABLCreditFacilityMember srt:MinimumMember us-gaap:BaseRateMember 2021-04-12 2021-04-12 0001821806 lesl:ABLCreditFacilityMember srt:MinimumMember us-gaap:BaseRateMember 2021-04-11 2021-04-11 0001821806 lesl:ABLCreditFacilityMember srt:MaximumMember us-gaap:BaseRateMember 2021-04-12 2021-04-12 0001821806 lesl:ABLCreditFacilityMember srt:MaximumMember us-gaap:BaseRateMember 2021-04-11 2021-04-11 0001821806 lesl:ABLCreditFacilityMember srt:MinimumMember us-gaap:EurodollarMember 2021-04-12 2021-04-12 0001821806 lesl:ABLCreditFacilityMember srt:MinimumMember us-gaap:EurodollarMember 2021-04-11 2021-04-11 0001821806 lesl:ABLCreditFacilityMember srt:MaximumMember us-gaap:EurodollarMember 2021-04-12 2021-04-12 0001821806 lesl:ABLCreditFacilityMember srt:MaximumMember us-gaap:EurodollarMember 2021-04-11 2021-04-11 0001821806 lesl:ABLCreditFacilityMember srt:MinimumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2021-04-12 2021-04-12 0001821806 lesl:ABLCreditFacilityMember srt:MaximumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2021-04-12 2021-04-12 0001821806 lesl:ABLCreditFacilityMember srt:MinimumMember 2021-04-12 2021-04-12 0001821806 lesl:ABLCreditFacilityMember srt:MaximumMember 2021-04-12 2021-04-12 0001821806 lesl:SeniorUnsecuredNotesMember 2020-11-03 0001821806 lesl:SeniorUnsecuredNotesMember 2020-10-04 2021-07-03 0001821806 lesl:SeniorUnsecuredNotesMember 2020-11-03 2020-11-03 0001821806 us-gaap:LondonInterbankOfferedRateLIBORMember lesl:SeniorUnsecuredNotesMember 2020-10-04 2021-07-03 0001821806 srt:MinimumMember lesl:SeniorUnsecuredNotesMember 2020-10-04 2021-07-03 0001821806 us-gaap:LondonInterbankOfferedRateLIBORMember lesl:InterestRateCapAgreementMember 2017-03-31 0001821806 lesl:InterestRateCapAgreementMember 2017-03-31 0001821806 lesl:InterestRateCapAgreementMember 2020-10-03 0001821806 lesl:InterestRateCapAgreementMember 2021-04-04 2021-07-03 0001821806 lesl:InterestRateCapAgreementMember 2020-03-28 2020-06-27 0001821806 lesl:InterestRateCapAgreementMember 2019-09-28 2020-06-27 0001821806 srt:MinimumMember 2021-07-03 0001821806 srt:MaximumMember 2021-07-03 0001821806 us-gaap:WorkersCompensationInsuranceMember srt:MaximumMember 2021-07-03 0001821806 lesl:GeneralLiabilityInsuranceProgramMember srt:MaximumMember 2021-07-03 0001821806 lesl:EmployeeGroupMedicalPlanMember srt:MaximumMember 2021-07-03 0001821806 us-gaap:WorkersCompensationInsuranceMember srt:MaximumMember 2020-10-03 0001821806 lesl:GeneralLiabilityInsuranceProgramMember srt:MaximumMember 2020-10-03 0001821806 lesl:EmployeeGroupMedicalPlanMember srt:MaximumMember 2020-10-03 0001821806 us-gaap:WorkersCompensationInsuranceMember us-gaap:StandbyLettersOfCreditMember 2021-07-03 0001821806 us-gaap:WorkersCompensationInsuranceMember us-gaap:StandbyLettersOfCreditMember 2020-10-03 0001821806 us-gaap:EmployeeStockOptionMember 2021-04-04 2021-07-03 0001821806 us-gaap:EmployeeStockOptionMember 2020-10-04 2021-07-03 0001821806 us-gaap:RestrictedStockUnitsRSUMember 2021-04-04 2021-07-03 0001821806 us-gaap:RestrictedStockUnitsRSUMember 2020-10-04 2021-07-03 0001821806 lesl:StockOptionsWithPerformanceConditionsMember 2021-04-04 2021-07-03 0001821806 lesl:StockOptionsWithPerformanceConditionsMember 2020-10-04 2021-07-03

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 3, 2021

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: 001-39667

 

 

LESLIE’S, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

20-8397425

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

2005 East Indian School Road

Phoenix, AZ

85016

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (602) 366-3999

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.001 per share

 

LESL

 

The Nasdaq Global Select Market

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  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

As of August 2, 2021, the registrant had 189,323,108 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Stockholders’ Deficit

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3.

Defaults Upon Senior Securities

24

Item 4.

Mine Safety Disclosures

24

Item 5.

Other Information

24

Item 6.

Exhibits

25

 

 

 

Signatures

26

 

 

 

i


Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. Our actual results could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others:

 

our ability to execute on our growth strategies;

 

our ability to maintain favorable relationships with suppliers and manufacturers;

 

competition from mass merchants and specialty retailers;

 

impacts on our business from the sensitivity of our business to weather conditions, changes in the economy, and the housing market;

 

our ability to implement technology initiatives that deliver the anticipated benefits, without disrupting our operations;

 

regulatory changes and development affecting our current and future products;

 

our ability to obtain additional capital to finance operations;

 

commodity price inflation and deflation;

 

impacts on our business from the COVID-19 pandemic;

 

impacts on our business from cyber incidents and other security threats or disruptions; and

 

other risks and uncertainties, including those listed in the section titled “Risk Factors” in our filings with the United States Securities and Exchange Commission

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended October 3, 2020, Part II, Item 1A, “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended January 2, 2021, Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q, and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q are based on events or circumstances as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

1


Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

LESLIE’S, INC.

Condensed Consolidated Balance Sheets

(Amounts in Thousands, Except Share and Per Share Amounts)

 

 

 

July 3, 2021

 

 

October 3, 2020

 

 

June 27, 2020

 

Assets

 

(Unaudited)

 

 

(Audited)

 

 

(Unaudited)

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

309,077

 

 

$

157,072

 

 

$

148,901

 

Accounts and other receivables, net

 

 

47,848

 

 

 

31,481

 

 

 

35,854

 

Inventories

 

 

224,526

 

 

 

148,966

 

 

 

181,108

 

Prepaid expenses and other current assets

 

 

28,615

 

 

 

34,614

 

 

 

24,539

 

Total current assets

 

 

610,066

 

 

 

372,133

 

 

 

390,402

 

Property and equipment, net

 

 

66,363

 

 

 

66,391

 

 

 

69,254

 

Operating lease right-of-use assets

 

 

169,001

 

 

 

177,655

 

 

 

191,343

 

Goodwill and other intangibles, net

 

 

127,740

 

 

 

121,186

 

 

 

121,711

 

Deferred tax assets

 

 

6,386

 

 

 

6,583

 

 

 

 

Other assets

 

 

18,238

 

 

 

2,490

 

 

 

1,193

 

Total assets

 

$

997,794

 

 

$

746,438

 

 

$

773,903

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

155,525

 

 

$

92,372

 

 

$

133,090

 

Accrued expenses

 

 

117,888

 

 

 

101,167

 

 

 

112,628

 

Operating lease liabilities

 

 

53,700

 

 

 

54,459

 

 

 

63,606

 

Income taxes payable

 

 

18,906

 

 

 

1,857

 

 

 

 

Current portion of long-term debt

 

 

8,100

 

 

 

8,341

 

 

 

8,341

 

Total current liabilities

 

 

354,119

 

 

 

258,196

 

 

 

317,665

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

782

 

Operating lease liabilities, noncurrent

 

 

118,941

 

 

 

130,234

 

 

 

142,307

 

Long-term debt, net

 

 

787,731

 

 

 

1,179,550

 

 

 

1,182,780

 

Other long-term liabilities

 

 

2,729

 

 

 

5,457

 

 

 

1

 

Total liabilities

 

 

1,263,520

 

 

 

1,573,437

 

 

 

1,643,535

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 1,000,000,000 shares authorized and

  189,284,566 issued and outstanding as of July 3, 2021 and

   156,500,000 shares authorized, issued and outstanding as of

   October 3, 2020 and June 27, 2020, respectively.

 

 

189

 

 

 

157

 

 

 

157

 

Additional paid in capital (deficit)

 

 

201,085

 

 

 

(278,063

)

 

 

(278,056

)

Retained deficit

 

 

(467,000

)

 

 

(549,093

)

 

 

(591,733

)

Total stockholders’ deficit

 

 

(265,726

)

 

 

(826,999

)

 

 

(869,632

)

Total liabilities and stockholders’ deficit

 

$

997,794

 

 

$

746,438

 

 

$

773,903

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

 

2


Table of Contents

 

LESLIE’S, INC.

Condensed Consolidated Statements of Operations

(Amounts in Thousands, Except Per Share Amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

July 3, 2021

 

 

June 27, 2020

 

 

July 3, 2021

 

 

June 27, 2020

 

Sales

 

$

596,543

 

 

$

479,929

 

 

$

933,991

 

 

$

729,285

 

Cost of merchandise and services sold

 

 

312,845

 

 

 

269,160

 

 

 

526,895

 

 

 

437,526

 

Gross profit

 

 

283,698

 

 

 

210,769

 

 

 

407,096

 

 

 

291,759

 

Selling, general and administrative expenses

 

 

117,264

 

 

 

99,165

 

 

 

265,127

 

 

 

214,933

 

Operating income

 

 

166,434

 

 

 

111,604

 

 

 

141,969

 

 

 

76,826

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

7,399

 

 

 

19,472

 

 

 

27,041

 

 

 

64,597

 

Loss on debt extinguishment

 

 

 

 

 

 

 

 

9,169

 

 

 

 

Other expenses, net

 

 

861

 

 

 

585

 

 

 

1,917

 

 

 

910

 

Total other expense

 

 

8,260

 

 

 

20,057

 

 

 

38,127

 

 

 

65,507

 

Income before taxes

 

 

158,174

 

 

 

91,547

 

 

 

103,842

 

 

 

11,319

 

Income tax expense (benefit)

 

 

39,372

 

 

 

19,613

 

 

 

21,749

 

 

 

(4,602

)

Net income

 

$

118,802

 

 

$

71,934

 

 

$

82,093

 

 

$

15,921

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.63

 

 

$

0.46

 

 

$

0.45

 

 

$

0.10

 

Diluted

 

$

0.61

 

 

$

0.46

 

 

$

0.43

 

 

$

0.10

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

188,264

 

 

 

156,500

 

 

 

184,021

 

 

 

156,500

 

Diluted

 

 

194,200

 

 

 

156,500

 

 

 

189,603

 

 

 

156,500

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

 

3


Table of Contents

 

LESLIE’S, INC.

Condensed Consolidated Statements of Stockholders’ Deficit

(Amounts in Thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

Paid in

Capital

 

 

Retained

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

(Deficit)

 

 

Deficit

 

 

Deficit

 

Balance, March 28, 2019

 

 

156,500

 

 

$

157

 

 

$

(278,653

)

 

$

(663,667

)

 

$

(942,163

)

Equity-based compensation

 

 

 

 

 

 

 

 

597

 

 

 

 

 

 

597

 

Net income

 

 

 

 

 

 

 

 

 

 

 

71,934

 

 

 

71,934

 

Balance, June 27, 2020

 

 

156,500

 

 

$

157

 

 

$

(278,056

)

 

$

(591,733

)

 

$

(869,632

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 3, 2021

 

 

186,885

 

 

$

187

 

 

$

194,605

 

 

$

(585,802

)

 

$

(391,010

)

Issuance of shares under stock incentive plans

 

 

2,400

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Equity-based compensation

 

 

 

 

 

 

 

 

6,480

 

 

 

 

 

 

6,480

 

Net income

 

 

 

 

 

 

 

 

 

 

 

118,802

 

 

 

118,802

 

Balance, July 3, 2021

 

 

189,285

 

 

$

189

 

 

$

201,085

 

 

$

(467,000

)

 

$

(265,726

)

 

 

 

Common Stock

 

 

Additional

Paid in

Capital

 

 

Retained

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

(Deficit)

 

 

Deficit

 

 

Deficit

 

Balance, September 28, 2019

 

 

156,500

 

 

$

157

 

 

$

(279,848

)

 

$

(607,666

)

 

$

(887,357

)

Impact of adoption of new accounting pronouncements

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

12

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,792

 

 

 

 

 

 

1,792

 

Net income

 

 

 

 

 

 

 

 

 

 

 

15,921

 

 

 

15,921

 

Balance, June 27, 2020

 

 

156,500

 

 

$

157

 

 

$

(278,056

)

 

$

(591,733

)

 

$

(869,632

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, October 3, 2020

 

 

156,500

 

 

$

157

 

 

$

(278,063

)

 

$

(549,093

)

 

$

(826,999

)

Issuance of shares under stock incentive plans

 

 

2,785

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Issuance of common stock upon initial public offering,

   net of offering costs

 

 

30,000

 

 

 

30

 

 

 

458,557

 

 

 

 

 

 

458,587

 

Equity-based compensation

 

 

 

 

 

 

 

 

20,591

 

 

 

 

 

 

20,591

 

Net income

 

 

 

 

 

 

 

 

 

 

 

82,093

 

 

 

82,093

 

Balance, July 3, 2021

 

 

189,285

 

 

$

189

 

 

$

201,085

 

 

$

(467,000

)

 

$

(265,726

)

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

4


Table of Contents

LESLIE’S, INC.

Condensed Consolidated Statements of Cash Flows

(Amounts in Thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

July 3, 2021

 

 

June 27, 2020

 

Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

82,093

 

 

$

15,921

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

19,205

 

 

 

20,462

 

Equity-based compensation

 

 

20,591

 

 

 

1,792

 

Amortization of deferred financing costs and debt discounts

 

 

1,551

 

 

 

2,548

 

Provision for doubtful accounts

 

 

134

 

 

 

368

 

Deferred income taxes

 

 

197

 

 

 

(457

)

(Gain) loss on disposition of assets

 

 

(1,668

)

 

 

486

 

Loss on debt extinguishment

 

 

9,169

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

(16,501

)

 

 

(16,194

)

Inventories

 

 

(74,401

)

 

 

(30,380

)

Prepaid expenses and other current assets

 

 

6,289

 

 

 

(2,993

)

Other assets

 

 

(15,696

)

 

 

227

 

Accounts payable and accrued expenses

 

 

73,761

 

 

 

86,283

 

Income taxes payable

 

 

17,049

 

 

 

(6,713

)

Operating lease assets and liabilities, net

 

 

(3,397

)

 

 

14,571

 

Net cash provided by operating activities

 

 

118,376

 

 

 

85,921

 

Investing Activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(17,799

)

 

 

(15,483

)

Business acquisitions, net of cash acquired

 

 

(6,806

)

 

 

(6,188

)

Proceeds from disposition of fixed assets

 

 

2,429

 

 

 

7

 

Net cash used in investing activities

 

 

(22,176

)

 

 

(21,664

)

Financing Activities

 

 

 

 

 

 

 

 

Borrowings on revolving commitment

 

 

 

 

 

238,750

 

Payments on revolving commitment

 

 

 

 

 

(238,750

)

Repayment of long term debt

 

 

(394,110

)

 

 

(6,255

)

Issuance of long term debt

 

 

907

 

 

 

 

Payment of deferred financing costs

 

 

(9,579

)

 

 

 

Proceeds from issuance of common stock upon initial public offering, net

 

 

458,587

 

 

 

 

Net cash provided by (used in) financing activities

 

 

55,805

 

 

 

(6,255

)

Net increase in cash and cash equivalents

 

 

152,005

 

 

 

58,002

 

Cash and cash equivalents, beginning of period

 

 

157,072

 

 

 

90,899

 

Cash and cash equivalents, end of period

 

$

309,077

 

 

$

148,901

 

Supplemental Disclosure of Cash Payments for:

 

 

 

 

 

 

 

 

Interest

 

$

29,549

 

 

$

68,599

 

Income taxes

 

$

4,503

 

 

$

2,832

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

 

5


Table of Contents

 

LESLIE’S, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Operations

Leslie’s, Inc. (“Leslie’s,” “we,” “our,” “us,” “its,” or the “Company”) is the leading direct-to-consumer pool and spa care brand. We market and sell pool and spa supplies and related products and services, which primarily consist of maintenance items such as chemicals, equipment and parts, cleaning accessories, as well as safety, recreational, and fitness-related products. We currently market our products through 946 company-operated locations in 38 states and e-commerce websites.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

We prepared the accompanying interim condensed consolidated financial statements following United States generally accepted accounting principles (“GAAP”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. The condensed consolidated financial statements include the accounts of Leslie’s, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated. These interim condensed consolidated financial statements and the related notes should be read in conjunction with the audited condensed consolidated financial statements and notes for the years ended October 3, 2020 and September 28, 2019.

Initial and Subsequent Public Offering

In November 2020, the Company completed an initial public offering (“IPO”) of 30.0 million shares of common stock at a public offering price of $17.00 per share for net proceeds of $458.6 million, after deducting underwriting discounts and commissions of $45.0 million and offering costs of $6.3 million. The shares of common stock sold in the IPO and the net proceeds from the IPO included the full exercise of the underwriters’ option to purchase additional shares. The Company used the net proceeds from the IPO to repay the entire outstanding amount related to its $390.0 million Senior Unsecured Notes. The remaining proceeds will be used for working capital and general corporate purposes.

In February 2021, certain of the Company’s stockholders, completed a subsequent public offering of 29.0 million shares of common stock, with a 30-day option for the underwriters to purchase up to 4.4 million additional shares of common stock, at a public offering price of $26.00 per share for net proceeds of $731.4 million, after deducting underwriting discounts and commissions of $22.6 million.  All proceeds from the sale of shares of common stock in this offering were received by the selling stockholders.

In June 2021, certain of the Company’s stockholders, completed an additional subsequent public offering of 24.5 million shares of common stock, with a 30-day option for the underwriters to purchase up to 3.7 million additional shares of common stock, at a public offering price of $27.64 per share for net proceeds of $656.9 million, after deducting underwriting discounts and commissions of $20.3 million. All proceeds from the sale of shares of common stock in this offering were received by the selling stockholders.  

Stock Split

All share and per share information included in the accompanying condensed consolidated financial statements has been adjusted to reflect a 156,500-for-1 stock split which was effective on October 23, 2020. The par value of the common stock was not adjusted as the result of the stock split.

Fiscal Periods

We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to fiscal year 2021 refer to the fiscal year ending October 2, 2021, which contains 52 weeks, and references to fiscal year 2020 refer to the fiscal year ended October 3, 2020, which contained 53 weeks. References to the three months ended July 3, 2021 and the three months ended June 27, 2020 refer to the 13 weeks ended July 3, 2021 and June 27, 2020, respectively. References to the nine months ended July 3, 2021 and the nine months ended June 27, 2020 refer to the 39 weeks ended July 3, 2021 and June 27, 2020, respectively.

Use of Estimates

To prepare financial statements that conform to GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Our most significant estimates relate to the allowance for doubtful accounts, inventory obsolescence reserves, vendor programs, income taxes, self-insurance, and goodwill impairment evaluations. We continually review our estimates and make adjustments as necessary, but actual results could be significantly different from what we expected when we made these estimates.

6


Table of Contents

Fair Value Measurements

As of July 3, 2021 and October 3, 2020, we held no assets that were required to be measured at fair value on a recurring basis.

Fair Value of Financial Instruments

We evaluate our financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period.

The fair value of the Term Loan due in 2028 (see Note 7) was determined to be $804.4 million as of July 3, 2021. These fair value estimates, determined to be Level 2, are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

The fair value of the interest rate cap agreements (see Note 7) was determined to be Level 2 and is included in other assets on the condensed consolidated balance sheets as of October 3, 2020. Our interest rate cap agreements expired in March 2021; consequently, we had no interest rate cap agreements as of July 3, 2021. Changes in fair value of the interest rate cap are recorded in other expenses, net on our condensed consolidated statements of operations.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturity of these instruments.

There were no transfers between levels in the fair value hierarchy during the three and nine months ended July 3, 2021 and June 27, 2020, respectively.

Seasonality

Our business is highly seasonal. In general, sales and earnings are highest during our fiscal third and fourth quarters, which include April through September and represent the peak months of swimming pool use. Sales are substantially lower during our fiscal first and second quarters.

Prior Period Reclassifications

Reclassifications of certain immaterial prior period amounts have been made to conform to current period presentation.

Note 3—Business Combinations

The following acquisitions did not have a material impact on our financial position or results of operations. Our condensed consolidated financial statements include the results of operations of these acquisitions from the date of acquisition. The total purchase consideration was allocated to the assets acquired and the liabilities assumed at their estimated fair values as of the date of acquisition, as determined by management. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed has been recorded as goodwill. The goodwill resulting from these acquisitions are expected to be deductible for income tax purposes.

Fiscal 2021 Acquisitions

In March 2021, we acquired the assets of a retailer of supplies and services for hot tubs, swim spas and fireplaces with four locations in the Denver, Colorado area, expanding our physical presence to 38 states. In May 2021, we acquired the assets of a similar retailer with one location in the Medford, Oregon area. Our estimates and assumptions are subject to change as we gather additional information throughout the measurement period, which is up to 12 months after the acquisition date, and if we make changes to the amounts recorded, such amounts are recorded in the period in which they are identified.

Fiscal 2020 Acquisition

In October 2019, we acquired the assets of a retailer of supplies and services for hot tubs, swim spas and saunas. The acquisition included six locations in the Pacific Northwest and expanded our physical presence to 37 states. The purchase accounting for this acquisition is complete.

Note 4 —Goodwill and Other Intangibles, Net

Goodwill

The carrying amounts of goodwill are as follows (in thousands):

 

 

Carrying Value

 

Balance, July 3, 2021

 

$

98,669

 

Balance, October 3, 2020

 

 

93,295

 

Balance, June 27, 2020

 

 

92,821

 

7


Table of Contents

 

 

Changes in the carrying value of goodwill relate to acquisition activity.

 

Other Intangible Assets

 

Other intangible assets consisted of the following as of July 3, 2021 (in thousands, except weighted average remaining useful life):

 

 

 

Weighted

Average

Remaining

Useful Life

(in Years)

 

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

Trade name and trademarks (finite life)

 

 

2.9

 

 

$

5,940

 

 

$

(5,236

)

 

$

704

 

Trade name and trademarks (indefinite life)

 

Indefinite

 

 

 

17,750

 

 

 

 

 

 

17,750

 

Non-compete agreements

 

 

7.4

 

 

 

9,333

 

 

 

(7,174

)

 

 

2,159

 

Consumer relationships

 

 

6.5

 

 

 

19,000

 

 

 

(11,276

)

 

 

7,724

 

Internally developed software

 

 

7.4

 

 

 

4,000

 

 

 

(3,577

)

 

 

423

 

Other intangibles

 

 

0.5

 

 

 

2,620

 

 

 

(2,309

)

 

 

311

 

Total

 

 

 

 

 

$

58,643

 

 

$

(29,572

)

 

$

29,071

 

 

Other intangible assets are as follows as of October 3, 2020 (in thousands, except weighted average remaining useful life):

 

 

 

Weighted

Average

Remaining

Useful Life

(in Years)

 

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

Trade name and trademarks (finite life)

 

 

3.6

 

 

$

5,540

 

 

$

(5,139

)

 

$

401

 

Trade name and trademarks (indefinite life)