-----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, GCrqqf6j8DjvehL9ps9Y5p4f/7lYrlG4oSeaD+7Tko3AXQcS3sEmqR7GkfI1jzv6 /hIJwkNiD/eBHRDbzfcEmQ== 0000890093-97-000001.txt : 19970624 0000890093-97-000001.hdr.sgml : 19970624 ACCESSION NUMBER: 0000890093-97-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970502 FILED AS OF DATE: 19970616 DATE AS OF CHANGE: 19970623 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JUMBOSPORTS INC CENTRAL INDEX KEY: 0000890093 STANDARD INDUSTRIAL CLASSIFICATION: 5940 IRS NUMBER: 521643157 STATE OF INCORPORATION: DE FISCAL YEAR END: 0128 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13322 FILM NUMBER: 97624982 BUSINESS ADDRESS: STREET 1: 4701 W HILLSBOROUGH AVE CITY: TAMPA STATE: FL ZIP: 33614 BUSINESS PHONE: 8138869688 MAIL ADDRESS: STREET 1: 4701 W HILLSBOROUGH AVENUE CITY: TAMPA STATE: FL ZIP: 33614 FORMER COMPANY: FORMER CONFORMED NAME: SPORTS & RECREATION INC DATE OF NAME CHANGE: 19940912 10-Q 1 FIRST QUARTER 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 May 2, 1997 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 1-13322 JumboSports Inc. (Exact name of registrant as specified in its charter) Florida 52-1643157 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 4701 W. Hillsborough Avenue Tampa, FL 33614 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 813/886-9688 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 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 ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date 20,355,354 as of May 2, 1997. JumboSports Inc. Index to Form 10-Q May 2, 1997 Page Number Part I - Financial Information Item 1 - Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statements of Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to the Consolidated Financial Statements 7 Item 2 - Management's Discussion and Analysis 8-10 Part II - Other Information 11 Signatures 12 JUMBOSPORTS INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT FOR SHARE DATA) January 31, May 2, 1997 1997 ---------- --------- (Unaudited) ASSETS Current Assets Cash and cash equivalents $4,944 $2,616 Accounts receivable, net 2,338 2,945 Inventories 201,090 220,847 Prepaid expenses and other assets 4,495 4,278 Income tax receivable 11,386 11,386 Deferred tax asset 1,586 2,310 ---------- ---------- Total current assets 225,839 244,382 Property and Equipment - net 282,651 284,231 Other Assets: Cost in excess of fair value of net assets acquired, net 11,145 11,060 Other 5,951 7,177 ---------- ---------- Total other assets 17,096 18,237 ---------- ---------- Total assets $525,586 $546,850 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $185 $108 Accounts payable 37,050 57,513 Accrued expenses 16,462 13,599 Other 13,464 12,646 ---------- ---------- Total current liabilities 67,161 83,866 Deferred rent and other long-term liabilities 4,476 4,028 Long-term debt less current maturities 294,325 300,764 ---------- ---------- Total liabilities 365,962 388,658 ---------- ---------- Stockholders' Equity Common Stock,$.01 par value, 100,000,000 shares authorized, 20,339,409 and 20,355,354 issued and outstanding, respectively 203 204 Additional paid-in capital 149,639 149,711 Retained earnings 9,782 8,277 ---------- ---------- Total stockholders' equity 159,624 158,192 ---------- ---------- Total Liabilities & Stockholders' Equity $525,586 $546,850 ========== ========== See Notes to the Consolidated Financial Statements. 3 JUMBOSPORTS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT FOR SHARE DATA) (UNAUDITED) Thirteen Weeks Ended April 28, May 2, 1996 1997 --------- --------- Sales $143,658 $130,134 Cost of sales including buying & occupancy costs 110,835 99,480 --------- --------- Gross Profit 32,823 30,654 Selling, general and administrative expenses 29,695 27,178 --------- --------- Income from operations 3,128 3,476 Interest expense 3,685 5,815 --------- --------- Loss before benefit for income taxes (557) (2,339) Benefit for income taxes (212) (834) --------- --------- Net loss $(345) ($1,505) ========= ========= Net loss per common share $(0.02) $(0.07) Weighted average shares outstanding 20,090 20,347 Stores opened during period 4 0 Store open at end of period 84 85 See Notes to the Consolidated Financial Statements. 4 JUMBOSPORTS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THIRTEEN WEEKS ENDED APRIL 28, 1996 AND MAY 2, 1997 (IN THOUSANDS) (UNAUDITED) Additional Common Stock Paid in Retained Shares Par Value Capital Earnings Total ----------------- ------- -------- ----- Balance, January 28, 1996 19,769 $198 $147,006 $40,326 $187,530 Issuance of common stock 59 5 5 Net loss (345) (345) Balance April 28, 1996 19,828 $198 $147,011 $39,981 $187,190 Balance, January 31, 1997 20,339 $203 $149,639 $9,782 $159,624 Issuance of common stock 16 1 72 73 Net loss (1,505) (1,505) Balance May 2, 1997 20,355 $204 $149,711 $8,277 $158,192 See Notes to the Consolidated Financial Statements. 5 JUMBOSPORTS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) Thirteen Weeks Ended April 28, 1996 May 2, 1997 -------------- ----------- Cash flows from operating activities: Net loss $(345) $(1,505) Adjustments to reconcile net income to cash used in operating activities: Depreciation 2,009 2,375 Loss (gain) on asset sales (221) 7 Goodwill amortization 85 85 Deferred loan cost amortization & other amortization 135 439 Increase in deferred tax asset - (725) Decrease in deferred income tax expense 1,923 - Decrease (increase) in accounts receivable 1,518 (607) Increase in income tax receivable (2,430) - Increase in inventories (19,253) (19,757) Increase in prepaid expenses 615 218 Increase in other assets (254) (837) Increase in accounts payable 9,121 20,463 Increase (decrease) in accrued expenses 1,638 (2,899) Increase (decrease) in other current liabilities 603 (820) Increase (decrease) in deferred rent 94 (447) Increase in income taxes payable 436 - ------- ------- Net cash used in operating activities (4,326) (4,010) ------- ------- Cash flows from investing activities: Capital expenditures (3,818) (4,440) Net collections under note receivable 25 - Cash proceeds from sale of property - 515 ------- ------- Net cash used in investing activities (3,793) (3,925) ------- ------- Cash flows from financing activities: Proceeds from sale of common stock-net 5 73 Net borrowings under revolving credit agreements 8,500 6,377 Repayments of long term debt (151) (15) Loan costs (275) (828) ------- ------- Net cash provided by financing activities 8,079 5,607 ------- ------- Net decrease in cash and cash equivalents (40) (2,328) ------- ------- Cash, beginning of period 3,590 4,944 ------- ------- Cash, end of period $3,550 $2,616 ======= ======== See Notes to the Consolidated Financial Statements. 6 JUMBOSPORTS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, 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 material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for a full year. The financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended January 31, 1997 contained in the Company's Form 10-K dated May 1, 1997. (2) Changes in Accounting Principle The Company elected to change its method of accounting for merchandise inventories effective February 1, 1997. The Company changed from the lower of average first-in, first-out (FIFO) cost or market method of accounting to the lower of cost (computed using the FIFO retail method) or market. The Company believes that the FIFO retail method provides improved information for the operation of its business in a manner consistent with the method used widely in the retail industry. The cumulative effect of the change to the FIFO retail method was immaterial. Proforma effects of the change for prior periods is not determinable. (3) Subsequent Events The Company completed an agreement extending the existing bank credit facility from May 1998 to May 1999. The agreement also incorporated additional capital expenditure flexibility allowing the ability to continue with new store development, renovation of selected locations and completion of upgrading the Company's infra structure. Also, the Company completed an additional $37 million of real estate financings, which effectively lowered the revolving credit facility to a limit of $235 million from $271 million. In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share." SFAS 128 requires companies with complex capital structure that have publicly held common stock or common stock equivalents to present both basic and diluted earnings per share ("EPS") on face of the income statement. The presentation of basic EPS replaces the presentation of primary EPS currently required by Accounting Principles Board Opinion No. 15 ("APB No.15"), "Earnings Per Share." Basic EPS is calculated as income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Dilluted EPS (previously referred to as fully diluted EPS) is calculated using the "if converted" method for convertible securities and the treasury stock method for options and warrants as prescribed by APB No. 15. This statement is effective for financial statements issued for interim and annual periods ending after December 15, 1997. The Company will adopt FAS 128 for its annual period ending January 30, 1998. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General This management's discussion and analysis contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from these forward-looking statements. Management's discussion and analysis of financial condition and results of operations for the first quarter of fiscal 1997 should be read in conjunction with the discussion and analysis set forth in Form 10-K filed May 1, 1997 for the fiscal year ended January 31, 1997. Results of Operations The following table sets forth certain operating data as a percentage of sales for the periods indicated: Thirteen Weeks Ended April 28, 1996 May 2, 1997 -------------- ----------- Sales 100.0% 100.0% Cost of sales including buying and occupancy costs 77.1 76.4 ------- ------- Gross profit 22.9 23.6 Operating expenses 20.7 20.9 ------- ------- Income from operations 2.2 2.7 Interest expense-net 2.6 4.5 ------- ------- Loss before benefit for income taxes (0.4) (1.8) Benefit for income taxes (0.2) (0.6) ------- ------- Net loss (0.2)% (1.2)% ======= ======= 8 Thirteen Weeks Ended (First Quarter) May 2, 1997 Compared To Thirteen Weeks Ended April 28, 1996 The Company did not open any new stores in its first quarter compared to four new stores in the same quarter last year, ending the quarter with 85 stores this year compared to 84 stores last year. Sales for the first quarter decreased 9.4% to $130.1 million compared with sales of $143.7 million in the first quarter of the prior year. Same store sales for the first fiscal quarter decreased by 11.6%. Sales have been adversely affected by the following: 1) The Company's new information management systems were installed at the beginning of the quarter. There have been significant disruptions in merchandise flow due to problems encountered in receiving and making product ready to sell at the store level; 2) The Company's new centralized cross-dock operation began in late November of last year. As the amount of merchandise ordered by the new system increased, the facility became overloaded causing misshipments and delays that adversely affected stock levels; 3) Certain merchandise categories were further affected. Outerwear sales in the prior year were substantially higher due to clearance sales necessitated by a poor sell-through during the winter-wear season. There was little clearance product available for sale this year. Fitness was lower due to fewer new product introductions and delivery problems encountered by certain manufacturers of high demand products; 4) Sales were generally soft throughout the sporting goods retail segment; 5) Competition continues to increase. Seventeen additional stores this year were adversely affected by a new big box competitor. Gross profit for the first quarter was $30.7 million, or 23.6% of sales, as compared to $32.8 million or 22.9% of sales for the first quarter of the prior year. The primary difference in gross margin relates to increased margin contributions by the soft goods departments slightly offset by higher buying and occupancy costs as a percentage of sales. Operating expenses for the first quarter were $27.2 million, or 20.9%, as compared to $29.7 million, or 20.7% of sales, for the first quarter of the prior year. The increase as a percentage of sales was attributable to increases in advertising and promotion, primarily due to the name change, offset by a reduction in payroll and payroll related expenses. Income from operations in the first quarter was $3.5 million, or 2.7% of sales, as compared to $3.1 million, or 2.2% of sales in the same quarter of the prior year. Interest expense for the first quarter was $5.8 million, or 4.5% of sales as compared to $3.7 million, or 2.6% of sales for the first quarter in the prior year. The increase in interest expense was the result of the following: 1) Average debt increased due to refinancing $58 million of tax retention operating leases into the revolving credit facility; 2) The renegotiated credit facility calls for borrowings at LIBOR plus 2% versus LIBOR plus 1% contributing to an overall 139 basis point increase in average interest rates; 3) Capitalized interest was lower due to less construction activity. The Company's income tax benefit for the quarter was $834,000 with an effective tax rate of approximately 35.7%. The tax benefit was $212,000 in the same quarter of the prior year with an effective tax rate of 38.0%. For the first quarter the Company posted a net loss of $1.5 million or (1.2)% of sales, as compared to a net loss of $0.3 million or (0.2)% of sales for the same quarter of the prior year. 9 Liquidity and Capital Resources The Company's primary capital requirements have been to support capital investment for the opening of new stores, to purchase inventory for new stores, to meet seasonal working capital needs and to retire indebtedness. The Company's working capital needs peak in the fourth fiscal quarter. Operating activities used cash of $4.0 million for the thirteen weeks of fiscal 1997 as compared to cash used of $4.3 million for the same period of fiscal 1996. The improvement was primarily due to an increase in accounts payable supporting inventory. Net cash of $3.9 million was used in investing activities during the first thirteen weeks of fiscal 1997 compared to net cash used in investing activities during the first thirteen weeks of fiscal 1996 of $3.8 million. This years amount was related to the store signage for the name change to JumboSports and maintenance capital spending. In the prior year, the amount related primarily to the completion of new stores. Cash flows from financing activities provided $5.6 million for the first thirteen weeks of fiscal 1997 compared to $8.1 million for the first thirteen weeks of fiscal 1996. The decrease in cash provided by financing activities in fiscal 1997 was primarily due to less borrowing activity of the Company's revolving line of credit from the prior year. As of May 2, 1997, the Company had $15.7 million of capital lease and mortgage obligations, $74.8 million of 4 1/4% convertible subordinated notes due 2000 outstanding and had drawn $210.4 million on its $271 million revolving credit facility. The current credit facility limits the amount of capital expenditures to $10 million for fiscal 1997. Subsequent to the first thirteen weeks, the Company extended its revolving credit facility an additional year to 1999 and increased the capital expenditure limit to $22 million for fiscal 1997. The Company has spent $4.4 million through thirteen weeks. Management believes its current cash position, along with expected net cash provided by operating activities and its revolving credit facility will be sufficient to fund anticipated capital expenditures and working capital requirements for the upcoming year. Seasonality and Inflation The Company's business is seasonal in nature, with its highest sales and operating profitability historically occurring during the fiscal fourth quarter, which includes the Christmas selling season. The Company recorded 28.0% of its sales and 52.0% of its income from operations, prior to the inventory write-down for shrink and obsolete and slow moving merchandise and non-recurring and other charges taken in the second quarter in fiscal 1996. In the future, the number and timing of the opening of new stores may impact this historical trend. The Company does not believe that inflation had a material effect on its results form operations for the first thirteen weeks of fiscal 1997 or 1996. There can be no assurance, however, that Company's business will not be affected by inflation in the future. Change in Accounting Principle The Company elected to change its method of accounting for merchandise inventories effective February 1, 1997. The Company changed from the lower of average first-in, first-out (FIFO) cost or market method of accounting to the lower of cost (computed using the FIFO retail method) or market. The Company believes that the FIFO retail method provides improved information for the operation of its business in a manner consistent with the method used widely in the retail industry. The cumulative effect of the change to the FIFO retail method was immaterial. 10 JUMBOSPORTS INC. PART II - OTHER INFORMATION - - ------------------------------------------------------------------------------- Item 1. Legal Proceedings. None Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of the Security-Holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. 1) Exhibits. Exhibit 11 - Weighted Average Shares Outstanding Calculation Exhibit 18 - Letter Regarding Change In Accounting Principle Exhibit 27 - Financial Data Schedule 2) Reports on Form 8-K. None 11 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. JumboSports Inc. (Registrant) 06/16/97 /S/ Stephen Bebis Date Stephen Bebis Chairman of the Board, Chief Executive Officer and President 06/16/97 /S/ Raymond P. Springer Date Raymond P. Springer Executive Vice President and Chief Financial Officer 12 EX-11 2 WEIGHTED AVERAGE SHARES OUTSTANDING JUMBOSPORTS INC. EXHIBIT 11 WEIGHTED AVERAGE SHARES OUTSTANDING CALCULATION FOR THE PERIOD ENDED MAY 2, 1997 Thirteen Weeks Ended May 2, 1997 PRIMARY Weighted average common stock shares outstanding 20,347,382 Weighted average stock issued assuming exercise of stock options using the treasury stock method at average market price 0 (1) Total weighted average shares outstanding 20,347,382 Net loss $(1,505,041) Primary Loss Per Share $(0.07) FULLY DILUTED Weighted average common stock shares outstanding 20,347,382 Weighted average stock issued assuming exercise of stock options using the treasury stock method at the higher of average market price or ending market price 0 (1) Weighted average stock issued assuming the as adjusted method for the 4 1/4% Convertible Subordinated Notes Due 2000 0 (2) Total weighted average shares outstanding 20,347,382 Net loss as reported $(1,505,041) Interest adjustment net of tax for the 4 1/4% Convertible Subordinated Notes 0 (2) Net loss $(1,505,041) Fully diluted loss per share $(0.07) (1) Not reported under GAAP as conversion would be anti-dilutive (2) Note reported under GAAP as conversion would be anti-dilutive, and dilution less than 3%. EX-18 3 LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLE JUMBOSPORTS INC. EXHIBIT 18 LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLE June 13, 1997 JumboSports Inc. 4701 W. Hillsborough Ave. Tampa, Florida 33614 Gentlemen: We are providing this letter to you for inclusion as an exhibit to your Form 10-Q filing pursuant to Item 601 of Regulation S-K. We have read management's justification for the change in accounting from the lower of first-in, first-out (FIFO) cost or market method to the lower of FIFO retail or market method contained in the Company's Form 10-Q for the quarter ended May 2, 1997. Based on our reading of the data and discussions with Company officials of the business judgment and business planning factors relating to the change, we believe management's justification to be reasonable. Accordingly, in reliance on management's determination as regards elements of business judgment and business planning, we concur that the newly adopted accounting principle described above is preferable in the Company's circumstances to the method previously applied. We have not audited any financial statements of JumboSports Inc. as of any date or for any period subsequent to January 31, 1997, nor have we audited the application of the change in accounting principle disclosed in Form 10-Q of JumboSports Inc. for the three months ended May 2, 1997; accordingly, our comments are subject to revision on completion of an audit of the financial statements that include the accounting change. Very truly yours, Coopers & Lybrand L.L.P. EX-27 4 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF JUMBOSPORTS INC. FOR THE THREE MONTHS ENDED MAY 2, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS Jan-30-1998 Feb-1-1997 May-2-1997 2,616 0 14,581 250 220,847 244,382 311,966 27,735 546,850 83,866 74,750 0 0 204 157,988 546,850 130,134 130,134 91,214 99,480 27,178 0 5,815 (2,339) (834) (1,505) 0 0 0 (1,505) (0.07) (0.07)
-----END PRIVACY-ENHANCED MESSAGE-----