-----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, GFRVVXfgJBg7cEaT+fdq+TR2K0QcsL9btHYhkpCKuFA6OJnx9Th7mBYMsGnfKVJ2 gbu7XoPP5tdFcTarTtPYBQ== 0000898430-01-501817.txt : 20010815 0000898430-01-501817.hdr.sgml : 20010815 ACCESSION NUMBER: 0000898430-01-501817 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 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: 1934 Act SEC FILE NUMBER: 000-18741 FILM NUMBER: 1708140 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 d10q.txt 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 June 30, 2001 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 1-18741 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 incorporation or organization) Identification No.) 3925 E. Broadway Road Phoenix, Arizona 85040 (Address of principal executive offices) Registrant's telephone number, including area code: (602) 366-3999 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to 12(g) of the Act: Common Stock Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 [ ] The number of shares of the registrant's Common Stock outstanding at August 14, 2001 was 7,057,105 shares. ================================================================================ LESLIE'S POOLMART, INC. AND SUBSIDIARIES FORM 10-Q For the Quarterly Period Ended June 30, 2001 INDEX Part I. Financial Information Page ---- Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2001 (unaudited) and September 30, 2000 1 Consolidated Statements of Operations for the 13 weeks and 39 weeks Ended June 30, 2001 (unaudited) and July 1, 2000 (unaudited) 2 Consolidated Statements of Cash Flows for the 39 weeks ended June 30, 2001 (unaudited) and July 1, 2000 (unaudited) 3 Notes to Consolidated Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II. Other Information 8 Signatures 8 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Leslie's Poolmart, Inc. and Subsidiaries
Consolidated Balance Sheets - ------------------------------------------------------------------------------------------------------------------- Amounts In Thousands, except share amounts - ------------------------------------------------------------------------------------------------------------------- June 30, September 30, 2001 2000 - ------------------------------------------------------------------------------------------------------------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 203 $ 199 Accounts receivable, net 8,613 9,143 Inventories 79,907 57,430 Prepaid expenses and other current assets 2,962 1,334 Deferred tax assets 4,035 6,335 - ------------------------------------------------------------------------------------------------------------------- Total current assets 95,720 74,441 Property, plant and equipment, at cost, net of accumulated depreciation 44,375 46,678 Goodwill, net 7,934 8,114 Intangible assets, net of accumulated amortization 1,907 2,583 Other assets 571 496 - ------------------------------------------------------------------------------------------------------------------- $150,507 $132,312 =================================================================================================================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 42,716 $ 24,141 Accrued expenses 26,678 18,102 Income taxes payable - 4,273 Current maturities of long-term debt 93 108 - ------------------------------------------------------------------------------------------------------------------- Total current liabilities 69,487 46,624 Deferred tax liabilities 3,037 3,036 Line of credit borrowings, net 2,278 1,902 Long-term debt, excluding current maturities 945 988 Senior Notes 90,000 90,000 - ------------------------------------------------------------------------------------------------------------------- Total liabilities 165,747 142,550 Preferred Stock, $0.001 par value; Authorized - 2,000,000 shares; Issued and outstanding - 28,000 Series A at June 30, 2001 And September 30, 2000; liquidation preference $28,000,000 41,062 37,526 Commitments and contingencies - - Shareholder's equity (deficit): Common stock, $0.001 par value, authorized 12,000,000 shares, Issued and outstanding 7,057,105 shares at June 30, 2001 and 7,334 880 at September 30, 2000, respectively 1 1 Loan to officers (450) - Additional paid-in capital (45,295) (44,795) Deficit (10,558) (2,970) - ------------------------------------------------------------------------------------------------------------------- Total shareholders' deficit (56,302) (47,764) - ------------------------------------------------------------------------------------------------------------------- $150,507 $132,312 ===================================================================================================================
See accompanying notes to consolidated financial statements. 1 Leslie's Poolmart, Inc. and Subsidiaries
Consolidated Statements of Operations - ------------------------------------------------------------------------------------------------------------------------ Amounts In Thousands - ------------------------------------------------------------------------------------------------------------------------ 13 Weeks Ended 39 Weeks Ended ------------------ ------------------ June 30, July 1, June 30, July 1, 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------ (unaudited) (unaudited) - ------------------------------------------------------------------------------------------------------------------------ Sales $140,465 $138,286 $201,609 $206,859 Cost of merchandise sold and services sold, including warehousing and transportation expenses 72,778 75,209 109,391 119,189 - ------------------------------------------------------------------------------------------------------------------------ Gross profit 67,687 63,077 92,218 87,670 Operating and administrative expense 36,756 34,587 87,584 88,762 Stock compensation expense - - - 424 Unusual expense - - 1,466 - - ------------------------------------------------------------------------------------------------------------------------ Operating income/(loss) 30,931 28,490 3,168 (1,516) Other expenses: Interest expense, net 3,116 3,191 9,467 9,633 Other expense 60 106 75 742 - ------------------------------------------------------------------------------------------------------------------------ Total other expense 3,176 3,297 9,542 10,375 - ------------------------------------------------------------------------------------------------------------------------ Net income/(loss) before taxes 27,755 25,193 (6,374) (11,891) Income tax expense/(benefit) 10,824 11,378 (2,322) (5,347) - ------------------------------------------------------------------------------------------------------------------------ Net income/(loss) 16,931 13,815 (4,052) (6,544) Series A Preferred Stock dividends and accretion (1,206) (1,084) (3,536) (3,177) - ------------------------------------------------------------------------------------------------------------------------ Income/(loss) applicable to common shareholders $ 18,137 $ 14,899 $ (7,588) $ (9,721) ========================================================================================================================
See accompanying notes to consolidated financial statements. 2 Leslie's Poolmart, Inc. and Subsidiaries
Consolidated Statements of Cash Flows - ---------------------------------------------------------------------------------------------------------------- Amounts in Thousands - ---------------------------------------------------------------------------------------------------------------- 39 Weeks Ended June 30, July 1, 2001 2000 - ---------------------------------------------------------------------------------------------------------------- (unaudited) (unaudited) Operating activities: Net loss $ (4,052) $ (6,544) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 6,482 6,329 Amortization of loan fees and discounts 512 456 Deferred income taxes 2,300 - Loss on disposition of assets 75 743 Compensation recognized for stock options - 424 Changes in operating assets and liabilities: Accounts and other receivables 530 (1,157) Inventories (22,477) (17,167) Prepaid expenses and other (1,628) (546) Other assets (75) 32 Accounts payable and accrued liabilities 27,151 33,162 Income taxes (4,272) (4,479) - ---------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 4,546 11,253 - ---------------------------------------------------------------------------------------------------------------- Investing activities: Additions to property and equipment (4,043) (7,904) Proceeds from sale of property and equipment 133 442 - ---------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,910) (7,462) - ---------------------------------------------------------------------------------------------------------------- Financing activities: Net short-term borrowings 376 (3,302) Payments on long-term debt (58) (57) Payments of deferred financing costs - (424) Purchase of common stock (500) - Loan to officers (450) - - ---------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (632) (3,783) - ---------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 4 8 Cash and cash equivalents and beginning of period 199 193 - ---------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 203 $ 201 ================================================================================================================
See accompanying notes to consolidated financial statements. 3 Leslie's Poolmart, Inc. and Subsidiaries Notes to Consolidated Financial Statements (unaudited) (1) Presentation and Financial Information The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the 39 weeks ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ended September 29, 2001. The balance sheet at June 30, 2001 has been derived from the unaudited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain reclassifications have been made to the prior year. During prior years, warehousing, transportation and the related occupancy costs were reported as operating and administrative expenses and certain retail occupancy costs were classified as cost of sales. For the current year presentation, these distribution expenses have been reclassified as cost of sales and the retail occupancy costs have been reclassified as operating and administrative expenses. On February 15, 2001, the Board of Directors approved a resolution to amend the Corporation's Certificate of Incorporation (the "Charter Amendment") to effectuate a 5 for 1 stock split whereby each outstanding share of the Corporation's common stock, par value $.001 per share, was converted into five shares of common stock. Following approval by the Corporation's shareholders, the Charter Amendment was filed with the Delaware Secretary of State on February 22, 2001. The consolidated financial statements reflect the split as though it occurred at beginning of the periods presented. During the first quarter 2001, the Company recorded an additional $1.5 million for expenses associated with its Corporate headquarter relocation to Phoenix, Arizona. Termination expenses of $0.7 million were paid to approximately 100 employees that did not relocate to Arizona. It is anticipated that the majority of the relocation costs have been expensed and that there will not be any material changes in future periods. For further information, refer to the consolidated financial statements and footnotes thereto included in Leslie's Poolmart, Inc.'s annual report on Form 10-K for the year ended September 30, 2000. (2) Organization and Operation 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 391 retail stores in 30 states; a nationwide mail order catalog; and an Internet E-commerce capability. 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. 4 (3) Inventories Inventories consists of the following:
June 30, September 30, Amounts in thousands 2001 2000 - ----------------------------------------------------------------------------------------------- Raw materials and supplies $ 3,240 $ 430 Finished goods 76,667 57,000 - ----------------------------------------------------------------------------------------------- Total Inventories $79,907 $57,430 ===============================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General 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 391 Company-owned retail stores in 30 states; a nationwide mail order catalog; and an Internet E-commerce capability. 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 Net Sales. Net sales for the 13 weeks ended June 30, 2001 were $140.5 million compared to $138.3 million for the 13 weeks ended July 1, 2000. The 1.6% increase was due to additional store openings during the fiscal year partially offset by the closure of certain unprofitable retail locations and the closure of certain service centers. Sales were also impacted by unseasonably cool weather experienced in certain markets during the early part of the quarter. Year-to-date sales were $201.6 million as compared to $206.9 million in the prior year. Retail comparable store sales for the 13 weeks increased 1.3% versus the prior year and year-to-date sales decreased 2.8%, as compared to the prior year sales. Gross Profit. Gross profit for the 13 weeks ended June 30, 2001 was $67.7 million compared to $63.1 million for the 13 weeks ended July 1, 2000. As a percentage of sales, gross profit was 48.2% for the 13 weeks of fiscal 2001 compared to 45.6% for the 13 weeks of fiscal 2000. Gross profit as a percentage of sales for the 13 weeks 2000 improved partially as a result of the Company's decision to moderate its promotional spending as compared to the prior year, lower distribution expenses and improved acquisition 5 and manufacturing costs. For the 39 weeks ended June 30, 2001, gross profit was $92.2 million as compared to $87.7 million in the prior year. As a percentage of sales, gross profit was 45.7% as compared to 42.4% in the prior year. Operating and Administrative Expenses. Operating and administrative expenses for the 13 weeks ended June 30, 2001, were $36.8 million compared to $34.6 million for the 13 weeks ended July 1, 2000. Operating and administrative expenses as a percentage of sales were 26.2% for the 13 weeks ended June 30, 2001 compared to 25.0% for the 13 weeks ended July 1, 2000. Operating expenses for the fiscal 2001 quarter increased as compared to the 2000 quarter primarily from increased occupancy costs due to the new store openings, increased advertising and other operating expenses during the quarter. For the 39 weeks ended June 30, 2001, excluding an unusual charge of $1.5 million for expenses associated with the Company's relocation of its Corporate office from Chatsworth, California to Phoenix, Arizona, operating expenses were $87.6 million compared to $89.2 million for the 39 weeks ended July 1, 2000. Operating Income/(Loss). Operating income, for the 13 weeks ended June 30, 2001 was $30.9 million as compared to $28.5 million during the 13 weeks ended July 1, 2000. The $2.4 million improvement in the quarter was due primarily to the improved gross margin during the quarter. Operating income for the 39 weeks ended June 30, 2001, excluding the unusual charge in the first quarter, improved by $6.1 million to $4.6 million as compared to a $1.5 million loss for the 39 weeks ended July 1, 2000. Other Income and Expense. Net interest expense was $3.1 million for the 13 weeks ended June 30, 2001 as compared to $3.2 million for the 13 weeks ended July 1, 2000. For the 39 weeks ended June 30, 2001, net interest expense was $9.5 million as compared to $9.6 million in the prior year. Income Taxes. The Company's income tax expense for the 13 weeks ended June 30, 2001 was $10.8 million as compared to $11.4 million for the 13 weeks ended July 1, 2000. For the 39 weeks ended June 30, 2001, the income tax benefit was $2.3 million as compared to a $5.3 million benefit in the prior year. EBITDA. EBITDA for the 13 weeks ended June 30, 2001 was $33.1 million, versus EBITDA of $30.6 million, for the 13 weeks ended July 1, 2000. For the 39 weeks ended June 30, 2001, EBITDA improved by $5.9 million to $11.1 million as compared to $5.2 million in the prior year. EBITDA is determined as follows:
13 Weeks Ended 39 Weeks Ended - ------------------------------------------------------------------------------------------------------------------- June 30, July 1, June 30, July 1, Amounts in thousands 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------- Operating income/(loss) $30,931 $28,490 $ 3,168 $(1,516) Depreciation 2,064 1,962 6,138 5,773 Amortization 69 185 344 556 Unusual Charge - - 1,466 - Non-cash compensation - - - 424 - ------------------------------------------------------------------------------------------------------------------- EBITDA $33,064 $30,637 $11,116 $ 5,237 ===================================================================================================================
Financial Condition, Liquidity and Capital Resources Changes in Financial Condition. Between September 30, 2000 and June 30, 2001, total current assets increased by $21.3 million primarily as the result of increases in inventory partially offset by decreases in accounts receivable and deferred taxes during the same period. 6 During the same period, current liabilities increased $22.9 million due primarily to an increase in accounts payable and accrued liabilities partially offset by a $4.3 million decrease in current income tax liabilities. The change in accounts payable reflects the timing of payments between periods. Liquidity and Capital Resources. Net cash provided by operating activities was $4.5 million for the 39 weeks ended June 30, 2001 compared to net cash provided by operating activities of $11.3 million for the same period in the prior year. The change in the 39 weeks 2001 compared to 2000 was due primarily to larger increases in inventory than accounts payable, partially offset by the reduction in accounts receivable. Capital expenditures for the 39 weeks ended June 30, 2001 were $4.0 million. Capital expenditures are expected to range between $6.0 and $9.0 million for fiscal 2001. It is anticipated that the balance of 2001 capital expenditures will be funded out of cash provided by operations and borrowings under the working capital revolver. Net cash used in financing activities for the 39 weeks ended June 30, 2001 was $0.6 million. Funds borrowed under the revolving credit portion of the Company's credit facility are restricted to working capital and general corporate purposes. The level of borrowings under the Company's revolving debt is dependent primarily upon cash flows from operations, the timing of disbursements, long-term borrowing activity and capital expenditure requirements. The Company believes 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 and the relocation of the corporate office. 7 PART II. OTHER INFORMATION -------------------------- Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K - None SIGNATURES Pursuant to the requirements of the Securities and 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, INC. By: /s/ Lawrence H. Hayward ---------------------------- Lawrence H. Hayward President and Chief Executive Officer Date: August 14, 2001 By: /s/ Donald J. Anderson ---------------------------- Donald J. Anderson Executive Vice-President and Chief Financial Officer Date: August 14, 2001 8 -----END PRIVACY-ENHANCED MESSAGE-----