-----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, IHL4W8yPioEZlT8Da0xndHSpverCGMsVXJ3JFgwwXR2C4c4atG1Br4sZpByCKFHr 1R1KrIhxvj9TJOS3JsD7zg== 0000899243-99-001938.txt : 19990914 0000899243-99-001938.hdr.sgml : 19990914 ACCESSION NUMBER: 0000899243-99-001938 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSHMANS SPORTING GOODS INC CENTRAL INDEX KEY: 0000075043 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 741031691 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11493 FILM NUMBER: 99710176 BUSINESS ADDRESS: STREET 1: 2302 MAXWELL LN CITY: HOUSTON STATE: TX ZIP: 77023-4899 BUSINESS PHONE: 7139283171 MAIL ADDRESS: STREET 1: 2302 MAXWELL LANE STREET 2: 2302 MAXWELL LANE CITY: HOUSTON STATE: TX ZIP: 77023-4899 FORMER COMPANY: FORMER CONFORMED NAME: OSHMANS INC DATE OF NAME CHANGE: 19710603 10-Q 1 FORM 10-Q 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 July 31, 1999 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 0-5648 OSHMAN'S SPORTING GOODS, INC. ------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 74-1031691 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2302 MAXWELL LANE, HOUSTON, TEXAS 77023 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (713) 928-3171 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) NO CHANGE - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $1.00 par value 5,827,249 ----------------------------- --------- PART I -- FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1999, JANUARY 30, 1999 AND AUGUST 1, 1998 (IN THOUSANDS)
JULY 31, JANUARY 30, AUGUST 1, 1999 1999 1998 ---------------- --------------- --------------- (UNAUDITED) (UNAUDITED) ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS 290 356 4,870 ACCOUNTS RECEIVABLE, LESS ALLOWANCE OF $88 JUL 99, $88 JAN 99 AND $130 AUG 98 1,413 1,496 1,696 MERCHANDISE INVENTORIES 101,094 86,184 92,689 PREPAID EXPENSES AND OTHER 2,752 2,453 3,612 ---------------- --------------- --------------- TOTAL CURRENT ASSETS 105,549 90,489 102,867 PROPERTY, PLANT AND EQUIPMENT, AT COST 89,205 87,262 90,363 LESS ACCUMULATED DEPRECIATION AND AMORTIZATION 54,313 52,014 50,134 ---------------- --------------- --------------- NET PROPERTY, PLANT AND EQUIPMENT 34,892 35,248 40,229 OTHER ASSETS 229 267 315 ---------------- --------------- --------------- 140,670 126,004 143,411 ================ =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES CURRENT MATURITIES OF LONG-TERM OBLIGATIONS 17 - - TRADE ACCOUNTS PAYABLE 40,039 33,478 33,034 ACCRUED LIABILITIES 17,836 15,919 16,679 STORE CLOSING RESERVE 693 1,022 2,938 ---------------- --------------- --------------- TOTAL CURRENT LIABILITIES 58,585 50,419 52,651 LONG-TERM OBLIGATIONS 36,565 28,679 40,277 OTHER NONCURRENT LIABILITIES 7,036 6,911 6,853 STOCKHOLDERS' EQUITY COMMON STOCK 5,830 5,830 5,830 ADDITIONAL CAPITAL 4,210 4,210 4,198 RETAINED EARNINGS 28,465 29,976 33,623 LESS TREASURY STOCK, AT COST (21) (21) (21) ---------------- --------------- --------------- STOCKHOLDERS' EQUITY 38,484 39,995 43,630 ---------------- --------------- --------------- 140,670 126,004 143,411 ================ =============== ===============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTERS AND SIX MONTHS ENDED JULY 31, 1999 AND AUGUST 1, 1998 (in thousands, except per share data) (UNAUDITED)
Three Months Ended Six Months Ended 1999 1998 1999 1998 ---------- ---------- ---------- ---------- NET SALES $ 76,274 $ 79,032 $ 147,648 $ 151,172 COST OF GOODS SOLD 50,063 52,186 96,275 98,945 ---------- ---------- ---------- ---------- GROSS PROFIT 26,211 26,846 51,373 52,227 OPERATING EXPENSES SELLING AND ADMINISTRATIVE EXPENSES 26,469 26,744 51,406 52,619 PRE-OPENING EXPENSES 17 - 320 - STORE CLOSING PROVISION - (499) - (499) MISCELLANEOUS (INCOME)LOSS 34 (3,493) (175) (3,838) ---------- ---------- ---------- ---------- OPERATING INCOME(LOSS) (309) 4,094 (178) 3,945 INTEREST EXPENSE, NET 701 842 1,298 1,814 ---------- ---------- ---------- ---------- EARNINGS(LOSS) BEFORE INCOME TAXES (1,010) 3,252 (1,476) 2,131 INCOME TAX EXPENSE (BENEFIT) 4 (168) 35 (165) ---------- ---------- ---------- ---------- NET EARNINGS/(LOSS) $ (1,014) $ 3,420 $ (1,511) $ 2,296 ========== ========== ========== ========== NET EARNINGS(LOSS) BASIC EARNINGS(LOSS) PER SHARE $ (.17) $ .59 $ (.26) $ .39 ========== ========== ========== ========== DILUTED EARNINGS(LOSS) PER SHARE $ (.17) $ .57 $ (.26) $ .39 ========== ========== ========== ========== WEIGHTED AVERAGE SHARES OUTSTANDING 5,830 5,830 5,830 5,830 DILUTIVE EFFECT OF STOCK OPTIONS - 135 - 114 ---------- ---------- ---------- ---------- DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 5,830 5,965 5,830 5,944 ========== ========== ========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JULY 31, 1999 AND AUGUST 1, 1998 (in thousands) (UNAUDITED)
1999 1998 ---------- ----------- CASH FLOWS OF OPERATING ACTIVITIES: NET EARNINGS/(LOSS) $ (1,511) $ 2,296 ADJUSTMENTS TO RECONCILE NET CASH (USED)PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 3,254 3,833 CHARGE TO RESERVE FOR STORE CLOSINGS (724) (1,215) STOCK OPTION AND BONUS PLAN EXPENSE - 21 LOSS(GAIN) ON DISPOSITION OF FIXED ASSETS 48 (3,390) AMORTIZATION OF DEFERRED RENTAL ALLOWANCES (250) (232) CHANGES IN ASSETS AND LIABILITIES: DECREASE IN ACCOUNTS RECEIVABLE 83 33 (INCREASE)DECREASE IN MERCHANDISE INVENTORIES (14,599) 7,297 (INCREASE) IN PREPAID EXPENSES AND OTHER (1,207) (886) DECREASE IN OTHER ASSETS 0 2 INCREASE(DECREASE) IN TRADE ACCOUNTS PAYABLE 6,561 (9,333) INCREASE(DECREASE) IN ACCRUED LIABILITIES 1,907 (470) INCREASE IN DEFERRED RENTAL ALLOWANCES 375 - INCREASE(DECREASE) IN INCOME TAXES 10 (21) ---------- ----------- NET CASH USED BY OPERATING ACTIVITIES (6,053) (2,065) CASH FLOWS OF INVESTING ACTIVITIES: PROCEEDS FROM SALE OF FIXED ASSETS - 63 PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (2,862) (1,199) PROCEEDS FROM DISPOSITION OF REAL ESTATE AND LEASEHOLDS - 3,820 PROCEEDS FROM NOTE RECEIVABLE 38 25 PROCEEDS FROM LANDLORDS 908 105 ---------- ----------- NET CASH (USED)PROVIDED BY INVESTING ACTIVITIES (1,916) 2,814 CASH FLOWS OF FINANCING ACTIVITIES: PAYMENTS OF LONG-TERM OBLIGATIONS (10) (427) PROCEEDS FROM LONG-TERM OBLIGATIONS 149 - PROCEEDS FROM REVOLVING CREDIT FACILITY, NET 7,764 4,185 ---------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 7,903 3,758 NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (66) 4,507 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 356 363 ---------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 290 $ 4,870 ========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID(RECEIVED) DURING THE YEAR FOR INCOME TAXES $ 2 $ (15) INTEREST 555 1,731 NONCASH FINANCING ACTIVITIES: BORROWINGS UNDER THE REVOLVING CREDIT FACILITY TO SETTLE LONG-TERM OBLIGATIONS $ - $ 3,100
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JULY 31, 1999 AND AUGUST 1, 1998 (UNAUDITED) NOTE A The financial statements are condensed and should be read in conjunction with the 1998 annual report. The financial information contained herein is unaudited, but in the opinion of the management of the Company, includes all adjustments (consisting of normal recurring adjustments) for a fair presentation of the results of operations for the periods indicated. The results for the six months ended July 31, 1999 are not necessarily indicative of the results to be expected for the full year. PART II -- OTHER INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations The following table sets forth selected statements of operations data of the Company expressed as a percentage of net sales for the periods indicated:
Percentage of Net Sales ---------------------------------------------------------------------------- 2nd Quarter Six Months ------------------------------------ ----------------------------------- 1999 1998 1999 1998 --------------- --------------- --------------- --------------- Net sales 100.0 100.0 100.0 100.0 Cost of goods sold 65.6 66.0 65.2 65.5 --------------- --------------- --------------- --------------- Gross profit 34.4 34.0 34.8 34.5 Operating expenses Selling and administrative expenses 34.7 33.8 34.8 34.8 Pre-opening expenses - - .2 - Store closing provision - (.6) - (.3) Miscellaneous income - (4.4) (.1) (2.5) --------------- --------------- --------------- --------------- Operating income (loss) (.4) 5.2 (.1) 2.6 Interest expense, net .9 1.1 .9 1.2 --------------- --------------- --------------- --------------- Earnings (loss) before income taxes (1.3) 4.1 (1.0) 1.4 Income taxes - (.2) - (.1) --------------- --------------- --------------- --------------- Net earnings (loss) (1.3) 4.3 (1.0) 1.5 =============== =============== =============== ===============
Net sales for the second quarter of fiscal 1999 decreased 3.5% to $76.3 million from $79.0 million in the second quarter of fiscal 1998 while comparable store sales declined 1.5%. Net sales for the first six months of fiscal 1999 decreased 2.3% to $147.6 million from $151.2 million in the first six months of fiscal 1998. Comparable store sales declined .8% in the first half of fiscal 1999. The net reduction in sales is attributable primarily to lost sales from stores closed during the last 12 months, partially offset by sales from a new SuperSports USA megastore opened in March 1999. Net sales in the first half of fiscal 1999 were also negatively impacted by certain out-of-stock conditions related to the startup of a new merchandising information system in March 1999. Cost of goods sold as a percentage of net sales decreased slightly to 65.6% and 65.2% respectively in the quarter and six months ending July 31, 1999 compared to 66.0% and 65.5% respectively in the same periods of fiscal 1998. Selling and administrative expenses as a percentage of net sales were 34.7% and 34.8% respectively for the quarter and six months ended July 31, 1999 compared to 33.8% and 34.8% respectively in the same periods of fiscal 1998. The increased rate of selling and administrative expenses as a percentage of sales in the second quarter is primarily due to lower sales as discussed above. Also contributing to the increased rate was a slight increase in warehousing and distribution costs caused by higher than planned merchandise inventory levels related to the startup of the Company's new merchandise system. Pre-opening expenses of $320,000 are related to a new SuperSports USA megastore opened in the first quarter of fiscal 1999. No new stores were opened in fiscal 1998. Store closing provision was a benefit of $499,000 in the second quarter and first six months of fiscal 1998. The benefit was related to management's re-evaluation of store closing reserves for lease termination costs, leasehold and other asset writeoffs and other incremental store closing costs. Miscellaneous income (expense) was ($34,000) and $175,000 respectively in the second quarter and six months ending July 31, 1999 compared to $3.5 million and $3.8 million respectively in the same periods of fiscal 1998. The second quarter of fiscal 1998 includes a gain of $3.5 million from a sale of real estate that was not being used in the Company's retail business. Net interest expense decreased to $701,000 and $1.3 million respectively in the second quarter and first six months of fiscal 1999 from $842,000 and $1.8 million respectively in the same periods last year. The reductions are related to lower average borrowings in fiscal 1999 compared to the prior year. Income taxes in fiscal 1999 are related primarily to state income taxes. Income tax (benefit) in fiscal 1998 includes a benefit of $219,000 related to a refund of prior years Federal income taxes. In fiscal 1999, net operating loss carryforwards are anticipated to be realized, resulting in no Federal income tax expense. In the first six months of fiscal 1999, the Company had pretax loss of $1.5 million compared to earnings of $2.1 million before income taxes in the same period in fiscal 1998. The decline in results in fiscal 1999 compared to fiscal 1998 is primarily attributable to the non-recurrance of the gain on sale of real estate and the benefit of a reduction of store closing reserve in fiscal 1998. In addition, lower sales than expected further contributed to lower results in fiscal 1999. Liquidity and Capital Resources In the first six months of fiscal 1999, operating activities used cash totaling $6.1 million primarily as a result of an increase in inventory of $14.6 million, partially offset by a related increase in trade accounts payable of $6.6 million. Investing activities used cash of $1.9 million primarily for the purchase of property, plant and equipment totalling $2.9 million offset by landlord contributions. Financing activities provided net cash of $7.9 million primarily through the utilization of the Company's credit facility. Cash was $4.9 million at August 1, 1998 primarily as a result of a temporary over-advanced condition under the Company's revolving credit facility. Merchandise inventories increased to $101.1 million from $86.2 million at the beginning of the fiscal year. Trade accounts payable had a corresponding increase to $40.0 million from $33.5 million at the beginning of the year. The increased inventory level is primarily due to (i) management's strategy of increasing inventories in reaction to certain out-of-stock conditions related to the startup of the Company's new merchandising system in March, (ii) a decision to maintain warehouse backup stocks for certain items in order to improve store replenishment and in-stock condition and (iii) normal seasonal fluctuations. Net additions to property, plant and equipment of $2.9 million during the first six months of fiscal 1999 were related to a new SuperSports USA megastore opened in March and to renovations and refurbishment in existing locations. The Company expects to open at least one additional SuperSports USA megastore in fiscal 1999. The Company's primary source of liquidity in the first six months of fiscal 1999 was its credit facility, under which average borrowings were $33.0 million compared to $43.0 million in the first six months of fiscal 1998. Long-term obligations increased to $36.6 million from $28.7 million at the beginning of fiscal 1999 as the Company utilized its credit facility to meet its seasonal working capital requirements. The Company believes that its revolving credit facility together with cash provided by operations will be adequate to meet anticipated capital needs for fiscal 1999. Year 2000 Issue The year 2000 issue is the result of computer programs written using two digits rather than four to define the applicable year. Without corrective actions, programs with time-sensitive software would potentially recognize a date ending in "00" as the year 1900 rather than the year 2000, causing many computer applications to fail or create erroneous results and potentially causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business practices. During fiscal 1996, the Company completed the installation of new financial accounting and reporting systems and payroll and human resources systems, and in fiscal 1997 the Company installed new sales audit software. The Company also installed a new IBM AS400 computer in fiscal 1997 to accommodate the new systems and those to be installed in 1998, and further upgraded all operating systems software in the last quarter of 1998. During fiscal 1998, the Company upgraded its personal computers making them year 2000 compliant. In addition, the Company implemented its new merchandising information and inventory management systems in March 1999. The Company completed a significant upgrade to its financial accounting and reporting systems software in July 1999, and has scheduled a minor update to its merchandising information and inventory management systems software for the third quarter of fiscal 1999. The Company is continuing to test these systems, and expects to finalize testing once upgrades are installed. Testing done to date has identified problem areas that will be addressed by the upgrades. The Company presently believes that upon completion of its installation of upgrades and testing in fiscal 1999 of computer hardware and software systems described above, the Year 2000 issue will have been adequately addressed with respect to all of the Company's internal computer systems. Any failure of the Company's systems to be timely compliant, however, could have a material and adverse impact on the business and operations of the Company. Cumulatively, capital costs of approximately $5.5 million have been incurred for the purchase and installation of hardware and software related to the year 2000 issue. Certain other internal costs incurred for work relating to year 2000 matters have not been included in the capital costs and are not tracked separately by the Company, but such costs are included in the related payroll costs for its information system group. The Company does not expect future expenditures related to the year 2000 issue to be significant for its internal systems. The Company has substantially completed its review and assessment of its non- information technology systems, and has contacted vendors to uncover any potential year 2000 problems. At this time, the Company is not aware of any compliance problems from its non-information technology systems that could have a material effect on the Company's operation. In addition to its internal computer and non-information technology systems, the Company may face risks to the extent that suppliers of products, services and systems purchased by the Company and others with whom the Company transacts business do not have business systems or products that comply with the year 2000 requirements. The Company is currently assessing the year 2000 compliance of its major providers of products, services and systems through the use of surveys and formal communications. However, there can be no assurance that the Company can correctly assess the year 2000 readiness of all its major suppliers. Some suppliers have not responded to the Company's requests for information. The Company is in the process of evaluating the potential effects of non-compliance by its vendors. In the event that any such third parties cannot timely provide the Company with products, services or systems as a result of any such non- compliance, the Company's operating results could be materially adversely affected. The Company is developing contingency plans for its internal computer and non- information technology systems, as well as for failure of its key suppliers to perform. With respect to suppliers, these contingency plans are being done on a case by case basis for those suppliers that the Company determines are at a high risk of non- compliance. These plans may include booking orders for delivery in advance of January 1, 2000, or finding alternative suppliers. The Company has received responses from 70% of its top 100 suppliers of merchandise that they are or expect to become Year 2000 compliant by January 1, 2000. Those suppliers responding positively account for approximately 84% of the Company's fiscal 1998 purchases of merchandise for sale from the top 100 suppliers. If the Company's contingency plans are not adequate to address non-compliance by its computer and non-information technology systems, or by suppliers, this could have a material adverse effect on the operating results of the Company. Disclosure Regarding Forward-Looking Statements The information discussed herein includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included herein regarding planned capital expenditures, store openings and closings, the Company's financial position, business strategy and other plans and objectives for future operations (typically using the words "expect," "plan," "anticipate," "believe," "intend" or similar expressions), are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties, and the Company can give no assurance that such expectations will prove to have been correct. The Company's actual results could differ materially from those anticipated by such forward-looking statements as a result of certain factors, including: the Company's ability to manage its expansion efforts in existing and new markets, availability of suitable new store locations at acceptable terms, levels of discretionary consumer spending, availability of merchandise to meet fluctuating consumer demands, customer response to the Company's merchandise offerings, fluctuating sales margins, increasing competition in sporting goods and apparel retailing, the results of financing efforts and financial market conditions. Many of such factors are beyond the Company's ability to control or predict. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligations to update these forward-looking statements, whether as a result of new information, future events or otherwise. 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. OSHMAN'S SPORTING GOODS, INC. Date: September 13, 1999 By: /s/ A. LYNN BOERNER ---------------------------- A. Lynn Boerner Vice-President and Chief Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS JAN-29-2000 JAN-31-1999 JUL-31-1999 290 0 1,413 0 101,094 105,549 89,205 54,313 140,670 58,685 36,665 0 0 5,830 32,654 140,670 147,648 147,648 96,275 96,275 0 0 1,298 (1,476) 35 (1,511) 0 0 0 (1,511) (0.26) (0.26)
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