-----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, Wd09ffl+pP/fMT0bwraz+m1SoCZi9/c/LzOjBONetZ6EtlHiwfIEr1Hi8ppw6GkX bZSK68w049A0USF1rFl1cg== 0000898430-99-001836.txt : 19990505 0000898430-99-001836.hdr.sgml : 19990505 ACCESSION NUMBER: 0000898430-99-001836 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990504 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: 99609949 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 PERIOD ENDED APRIL 3, 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 April 3, 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 0-18741 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 April 1, 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)
April 3, October 3, 1999 1998 ----------- ----------- ASSETS (UNAUDITED) - ------------------------------------------------- CASH $ 189 $ 9,564 RECEIVABLES, NET 2,868 5,270 INVENTORIES, NET 73,161 47,440 PREPAID EXPENSES 3,380 1,583 DEFERRED TAX ASSETS 4,271 4,271 DEFERRED INCOME TAX CHARGE 9,154 -- ----------- ----------- TOTAL CURRENT ASSETS 93,023 68,128 PROPERTY, PLANT AND EQUIPMENT, NET 46,353 39,842 GOODWILL, NET 8,560 8,699 NON-COMPETE COVENANT 859 1,091 DEFERRED FINANCING COSTS 2,734 3,007 OTHER ASSETS 637 519 ----------- ----------- $152,166 $121,286 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) - ------------------------------------------------- ACCOUNTS PAYABLE $ 44,132 $ 14,692 ACCRUED LIABILITIES 13,273 12,559 CURRENT PORTION OF LONG-TERM DEBT 94 94 INCOME TAXES -- 4,681 ----------- ----------- TOTAL CURRENT LIABILITIES 57,499 32,026 DEFERRED TAX LIABLITIES 3,619 3,619 LINE-OF-CREDIT BORROWINGS 22,768 -- LONG-TERM DEBT, NET OF CURRENT PORTION 1,185 1,195 SENIOR NOTES 90,000 90,000 PREFERRED STOCK 31,241 29,361 SHAREHOLDERS' EQUITY (DEFICIT) - ------------------------------------------------- COMMON STOCK (45,701) (45,701) RETAINED EARNINGS (8,445) 10,786 ----------- ----------- TOTAL SHAREHOLDERS' DEFICIT (54,146) (34,915) ----------- ----------- $152,166 $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 -------------------- April 3, March 28, 1999 1998 -------- --------- SALES $33,389 $24,403 COST OF SALES 24,897 18,667 -------- --------- GROSS PROFIT 8,492 5,736 SELLING, GENERAL & ADMINISTRATIVE EXPENSES 22,655 17,880 AMORTIZATION OF ACQUISITION COSTS 185 136 LOSS ON DISPOSITION OF FIXED ASSETS 44 -- -------- --------- LOSS FROM OPERATIONS (14,392) (12,280) INTEREST EXPENSE 3,052 2,767 -------- --------- LOSS BEFORE INCOME TAX BENEFIT (17,444) (15,047) INCOME TAX BENEFIT 7,763 6,543 -------- --------- NET LOSS (9,681) (8,504) -------- --------- SERIES A PREFERRED STOCK DIVIDENDS AND ACCRETION 957 861 LOSS APPLICABLE TO COMMON SHAREHOLDERS $(10,638) $(9,365) ======== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 LESLIE'S POOLMART, INC. ----------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS)
Six Months Ended ---------------- April 3, March 28, 1999 1998 --------- --------- SALES $59,521 $48,641 COST OF SALES 44,783 36,179 --------- --------- GROSS PROFIT 14,738 12,462 SELLING, GENERAL & ADMINISTRATIVE EXPENSES 39,756 31,203 AMORTIZATION OF ACQUISITION COSTS 371 200 LOSS ON DISPOSITION OF FIXED ASSETS 171 106 --------- --------- LOSS FROM OPERATIONS (25,560) (19,047) INTEREST EXPENSE 5,694 5,196 --------- --------- LOSS BEFORE INCOME TAX BENEFIT (31,254) (24,243) INCOME TAX BENEFIT 13,908 10,357 --------- --------- NET LOSS (17,346) (13,886) --------- --------- SERIES A PREFERRED STOCK DIVIDENDS AND ACCRETION 1,880 1,700 LOSS APPLICABLE TO COMMON SHAREHOLDERS $(19,226) $(15,586) ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 LESLIE'S POOLMART, INC. ----------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Six Months Ended ----------------------- April 3, March 28, 1999 1998 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES - ------------------------------------ NET LOSS $(17,346) $(13,886) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 4,022 3,280 LOSS ON DISPOSITION OF FIXED ASSETS 172 106 INCOME TAX BENEFIT (13,908) (10,357) NET CHANGE IN RECEIVABLES, INVENTORY AND PAYABLES 6,908 6,263 OTHER, NET (1,920) (902) -------- -------- NET CASH USED IN OPERATING ACTIVITIES (22,072) (15,496) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES - ------------------------------------ PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (10,061) (7,160) BUSINESS ACQUISITIONS -- (2,196) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (10,061) (9,356) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES - ------------------------------------ NET LINE-OF-CREDIT BORROWINGS 22,768 10,179 PAYMENTS OF LONG-TERM DEBT (10) (7) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 22,758 10,172 -------- -------- NET DECREASE IN CASH (9,375) (14,680) CASH AT BEGINNING OF PERIOD 9,564 14,829 -------- -------- CASH AT END OF PERIOD $ 189 $ 149 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 LESLIE'S POOLMART, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS April 3, 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 and six month periods ended April 3, 1999 and March 28, 1998 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 and six months ended April 3, 1999 and March 28, 1998 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 350 retail stores in 29 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:
April 3, March 28, 1999 1998 ------------ ----------- Raw materials and supplies $ 1,049,000 $ 1,091,000 Finished goods 72,112,000 61,755,000 ----------- ----------- Total Inventories $73,161,000 $62,846,000 =========== ===========
(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. 6 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 350 Company-owned retail stores in 29 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; Bridgeport, New Jersey and 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 Six Months Ended --------------------- -------------------- April 3, March 28, April 3, March 28, 1999 1998 1999 1998 -------- -------- -------- --------- Sales $ 33,389 $ 24,403 $ 59,521 $ 48,641 Loss from Operations (14,392) (12,280) (25,560) (19,047) Depreciation 1,789 1,435 3,377 2,807 Amortization 185 136 371 200 Loss on Asset Dispositions 45 -- 172 106 -------- -------- -------- --------- EBITDA Loss $(12,373) $(10,709) $(21,640) ($15,934)
In the second quarter ended April 3, 1999, the Company reported an EBITDA loss of $12,373,000, as compared to an EBITDA loss of $10,709,000 for the second quarter of 1998. EBITDA represents earnings before interest, taxes, depreciation, amortization and loss or gain on fixed asset dispositions. During the quarter, 32 new stores were opened and 1 store was closed, bringing the total store count to 350 on April 3, 1999, up from 313 on March 28, 1998. The Company historically incurs an operating loss in the quarters ending in December and March and expects such losses to grow as new stores continue to be added at a significant rate. 7
Sales ------------------------------------------- (In thousands) Three Months Ended Six Months Ended -------------------- -------------------- April 3, March 28, April 3, March 28, 1999 1998 1999 1998 -------- --------- -------- --------- Retail Stores $32,826 $23,573 $58,372 $46,270 Mail Order 563 743 1,149 1,492 Service Departments -- 87 -- 879 ------- ------- ------- ------- Total Sales $33,389 $24,403 $59,521 $48,641
Total sales for the second quarter increased 36.8% and are up 22.4% in the fiscal year-to-date. Fiscal 1998 was a 53 week year, and as a result, the fiscal quarter-to-quarter comparisons do not include the same 13 weeks. On a same week basis, sales grew 14.0% in the quarter and 16.5% year-to-date. Retail store sales for the quarter grew 39.3% over prior year, resulting in a year-to-date sales growth of 26.2%. On a same week basis, store sales grew 15.8% in the quarter and 19.8% year-to-date. Sales grew as a result of an increase in the total number of stores in operation in 1999 versus 1998 as well as comparable store sales increases (over the same 13 and 26 weeks) of 9.1% in the second quarter and 12.5% year-to-date. 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 declined 23.0% year-to-date compared to prior year, due to continued cannibalization from new store openings. Service Department sales declined versus prior years reflecting the final transition to the store-based service operations in 1998. Gross profit for the three months ended April 3, 1999 equaled $8,492,000 or 25.4% of sales, 1.9% of sales higher than was reported in the same quarter of the prior year. This brings the year-to-date gross margin to 24.8%, .8% lower than the prior year. In the second quarter, the higher gross margin is primarily due to reduced rent expense as a percentage of sales. Rent declined as a percentage of sales due to the strong sales growth in the quarter compared to the prior year, partly resulting from the 1998 53-week year and its impact on the fiscal quarter-to-quarter comparisons described above. Year-to-date, gross margins are down somewhat due to both slightly lower product gross margins and slightly higher rent expenses as a percentage of sales. In the second quarter of 1999, selling, general and administrative expense equaled $22,655,000, an increase of 26.7% versus the same period of last year. This increase is largely the result of higher store expenses, distribution center costs and increased overhead costs associated with the continued growth in the number of stores. In January 1999, the Company opened its fourth distribution center in Covington, Kentucky to support the store expansion program. In addition, this year 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 and year to date periods ending April 3, 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 $3,052,000 in the second quarter, up slightly from the same period of last year. Increased line-of-credit borrowings produced the higher interest expense in 1999. 8 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Changes in Financial Condition Between October 3, 1998 and April 3,1999, total current assets increased $24,895,000, principally the result of inventories which increased $25,721,000 during the period. The inventory increase results from the seasonal nature of the Company's business and the new stores opened in 1999. During the same period, current liabilities increased $25,473,000 due to a $29,440,000 increase in accounts payable. The increase in accounts payable relates primarily to favorable dating terms on trade payables extended by vendors to support the seasonal inventory buildup. Liquidity and Capital Resources In the six months ended April 3, 1999, net cash used in operating activities was $22,072,000 compared with $15,496,000 in the same period of the prior year. During these six months, cash is typically used to finance the operating losses experienced outside of the Company's peak selling season. In the first six months, cash used in investing activities as $10,061,000, up from $9,356,000 in the same period of the prior year. This increase resulted primarily 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 $22,758,000 in the six months of fiscal 1999. Line-of-credit borrowings increased primarily to finance the usual first and second quarter operating losses and capital expenditures associated with the continued new store openings. 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 (b) 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: May 4, 1999 /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 6-MOS OCT-02-1999 OCT-04-1998 APR-03-1999 189 0 2,868 0 73,161 93,023 46,353 0 152,166 57,499 0 31,241 0 (45,701) 0 152,166 0 59,521 0 44,783 0 0 5,694 (31,254) (13,908) (17,346) 0 0 0 (17,346) 0 0
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