SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended May 1, 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 No. 0-17870
LECHTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY No. 13-2821526
(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
1 Cape May Street, Harrison, NEW JERSEY 07029-2404
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (973) 481-1100
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, 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, without par value,
outstanding at June 7, 1999: 17,079,786:
<PAGE>
LECHTERS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR QUARTER ENDED MAY 1, 1999
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets May 1, 1999 and January 30, 1999 ............................................... 1
Consolidated Statements of Operations for the Thirteen Weeks Ended May 1, 1999 and May 2, 1998 ............. 2
Consolidated Statements of Cash Flows for the Thirteen Weeks Ended May 1, 1999 and May 2, 1998 ............. 3
Consolidated Statement of Shareholders' Equity for the Thirteen Weeks Ended May 1, 1999 .................... 4
Notes to Consolidated Financial Statements ................................................................. 5-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...................... 8-10
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K ........................................................................... 11
</TABLE>
<PAGE>
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (Reform Act), the Company is hereby filing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made by
or on behalf of the Company in this quarterly report on Form 10-Q, in
presentations, in response to questions or otherwise. Any statements that
express, or involve discussions as to expectations, beliefs, plans, objectives,
assumptions or future events or performance (often, but not always, through the
use of words or phrases such as "anticipates", "believes", "estimates",
"expects", "intends", "plans", "predicts", "projects", "will likely result",
"will continue", or similar expressions) are not statements of historical facts
and may be forward-looking.
Forward-looking statements involve estimates, assumptions, and uncertainties and
are qualified in their entirety by reference to, and are accompanied by, the
following important factors, which are difficult to predict, contain
uncertainties, are beyond the control of the Company and may cause actual
results to differ materially from those contained in forward-looking statements:
- - economic and geographic factors including political and economic risks;
- - changes in and compliance with environmental and safety laws and policies;
- - weather conditions;
- - population growth rates and demographic patterns;
- - competition for retail customers;
- - Year 2000 issues;
- - market demand, including structural market changes;
- - changes in tax rates or policies or in rates of inflation;
- - changes in project costs;
- - unanticipated changes in operating expenses and capital expenditures;
- - capital market conditions;
- - legal and administrative proceedings (whether civil or criminal) and
settlements that influence the business and profitability of the Company.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of any
such factor on the business or the extent to which any factor, or combination of
factors, may cause results to differ materially from those contained in any
forward-looking statement.
<PAGE>
LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
May 1, January 30,
1999 1999
----------- ----------
A S S E T S (unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 12,156 $ 35,503
Marketable Securities 62,844 62,750
Accounts Receivable 7,802 4,185
Merchandise Inventories 107,968 89,224
Prepaid Expenses 4,390 1,734
----------- ----------
Total Current Assets 195,160 193,396
Property and Equipment:
Fixtures and Equipment 58,355 57,678
Leasehold Improvements 96,891 96,452
----------- ----------
155,246 154,130
Less Accumulated Depreciation & Amortization 91,298 88,401
----------- ----------
Net Property and Equipment 63,948 65,729
Other Assets 9,955 8,519
----------- ----------
Total Assets $269,063 $267,644
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 15,315 $ 8,982
Dividends Payable - Preferred Stock -- 1,010
Salaries, Wages and Other Accrued Expenses 17,051 17,156
Taxes, Other Than Income Taxes 1,904 1,774
----------- ----------
Total Current Liabilities 34,270 28,922
Long-term Debt
5% Convertible Subordinated Debentures due
September 27, 2001 (Net of Unamortized
Discount of $3,444 and $3,768 respectively) 61,556 61,232
----------- ----------
Total Long-Term Debt 61,556 61,232
Deferred Income Taxes and Other Deferred Credits 18,484 18,356
Shareholders' Equity:
Convertible Preferred Stock, $100 Par Value
Authorized 1,000,000 Shares,
Issued and Outstanding - Series A - 149,999
Shares; Series B - 50,001 Shares 20,000 20,000
Common Stock, No Par Value,
Authorized 50,000,000 Shares,
Issued and Outstanding
17,176,286 and 17,176,286, respectively 58 58
Accumulated Other Comprehensive Income 5 109
Additional Paid-in Capital 62,380 62,380
Retained Earnings 72,310 76,587
----------- ----------
Total Shareholders' Equity 154,753 159,134
----------- ----------
Total Liabilities and Shareholders' Equity $269,063 $267,644
=========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
- 1 -
<PAGE>
LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
May 1, May 2,
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
Net Sales $ 83,407 $ 86,194
Cost of Goods Sold (including occupancy
and indirect costs) 61,837 64,536
------------ ------------
Gross Profit 21,570 21,658
Selling, General and Administrative Expenses 28,734 28,286
------------ ------------
Operating Loss (7,164) (6,628)
Other Expenses (Income):
Interest Expense 1,133 1,097
Interest Income (807) (1,421)
Net Investment
Gain/Income (240) (141)
------------ ------------
Total Other Expenses (Income) 86 (465)
------------ ------------
Loss Before Income Taxes (7,250) (6,163)
Income Tax Benefit (2,973) (2,523)
------------ ------------
Net Loss (4,277) (3,640)
Preferred Stock Dividend Requirement 252 252
------------ ------------
Net Loss Applicable to Common Shareholders ($ 4,529) ($ 3,892)
============ ============
Net Loss Per Common Share - Basic ($ 0.26) ($ 0.23)
============ ============
Net Loss Per Common Share - Diluted ($ 0.26) ($ 0.23)
============ ============
Weighted Average Common Shares Outstanding -Basic 17,176,000 17,175,000
============ ============
Weighted Average Common Shares Outstanding -Diluted 17,176,000 17,175,000
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
- 2 -
<PAGE>
LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
May 1, May 2,
1999 1998
----------- -----------
(unaudited)
Cash Flows From Operating Activities:
<S> <C> <C>
Net Loss ($ 4,277) ($ 3,640)
Adjustments to Reconcile Net Loss to Net
Cash Used In Operating Activities:
Depreciation and Amortization 3,960 4,162
Other 364 287
Changes in Assets and Liabilities:
Increase in Accounts Receivable (3,617) (574)
Increase in Merchandise Inventories (18,744) (11,095)
Increase in Prepaid Expenses (2,656) (2,134)
Increase in Accounts Payable,
Accrued Expenses and Taxes Other
Than Income Taxes 6,358 10,560
Decrease in Income Taxes Payable -- (2,016)
Increase in Other Assets (1,783) (1,463)
----------- -----------
Net Cash Used In Operating Activities (20,395) (5,913)
----------- -----------
Cash Flows From Investing Activities:
Capital Expenditures (1,672) (1,126)
(Increase) Decrease in Available for Sale Securities (270) 10,030
----------- -----------
Net Cash (Used) Provided by
Investing Activities (1,942) 8,904
----------- -----------
Cash Flows From Financing Activities:
Payment of Preferred Stock Dividend (1,010) (1,010)
Exercise of Stock Options -- 10
----------- -----------
Net Cash Used In Financing Activities (1,010) (1,000)
----------- -----------
Net (Decrease) Increase in Cash and Cash Equivalents (23,347) 1,991
Cash and Cash Equivalents, Beginning of Period 35,503 16,395
----------- -----------
Cash and Cash Equivalents, End of Period $ 12,156 $ 18,386
=========== ===========
Supplemental Disclosure of Cash Flows Information:
Cash Paid During the Period for:
Interest $ -- $ --
=========== ===========
Income Taxes $ 15 $ 2,017
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Preferred Additional Comprehensive
Stock Stock Paid-In Retained Income Comprehensive
Issued Issued Capital Earnings (Loss) Total Loss
--------- --------- --------- ---------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 30, 1999 $58 $20,000 $62,380 $76,587 $109 $159,134 $ --
Net Loss-Thirteen
Weeks Ended
May 1, 1999 -- -- -- (4,277) -- (4,277) (4,277)
Other Comprehensive Loss,
Net of tax:
Unrealized Loss on
Available-For-Sale
Securities -- -- -- -- (104) (104) (104)
--------- --------- --------- ---------- ------------- --------- -------------
Balance,
May 1, 1999 (unaudited) $58 $20,000 $62,380 $72,310 $ 5 $154,753 ($4,381)
========= ========= ========= ========== ============= ========= =============
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
LECHTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(UNAUDITED)
1. GENERAL
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with the instructions for Form 10-Q and do not
include all 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 for interim periods have
been included.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the audited financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
January 30, 1999.
The Company's results of operations for the thirteen weeks ended May 1,
1999 are not necessarily indicative of the operating results for the
full year.
Certain reclassifications have been made to the financial statements of
the prior year to conform with the classifications used for Fiscal 1999.
2. NET LOSS PER SHARE
"Basic" net loss per share data were computed by dividing net loss,
reduced by the Convertible Preferred Stock Dividend requirement, by the
weighted average number of common shares outstanding during the thirteen
weeks ended May 1, 1999 and May 2, 1998. With respect to "diluted" net
loss per share, stock options which are potential common shares, were
excluded from the weighted average of outstanding shares because
inclusion would reduce the loss per share. With respect to the Company's
5% Convertible Subordinated Debentures and the Company's Convertible
Preferred Stock, for the purpose of computing diluted net loss per
share, the assumed conversion of such debentures and such preferred
stock would each have an anti-dilutive effect on diluted loss per share
for the thirteen weeks ended May 1, 1999 and May 2, 1998.
- 5 -
<PAGE>
3. SEGMENT INFORMATION
The Company defines its principal business segments as follows: the
Specialty Housewares segment which operates as Lechters Housewares(R)
and Lechters Kitchen Place(R), and the Off-Price Home Business segment
which operates as Famous Brands Housewares Outlet(R) and Cost Less Home
Store(SM). The contribution of these segments, as well as "corporate and
other" for the thirteen weeks ended May 1, 1999 and May 2, 1998 are
summarized below. The caption "corporate and other" includes general
corporate expenses, principally expenses of service office and
distribution centers as well as interest income and expense.
Thirteen Weeks Ended
May 1, May 2,
1999 1998
--------- ---------
SALES
Specialty Housewares $ 64,646 $ 67,413
Off-Price Home Business 18,761 18,781
--------- ---------
Total Sales $ 83,407 $ 86,194
========= =========
(LOSS) INCOME BEFORE TAX PROVISION
Specialty Housewares ($ 385) $ 215
Off-Price Home Business 378 151
Corporate and Other (7,157) (6,994)
--------- ---------
Operating (Loss)/Income (7,164) (6,628)
Interest Expense (Income) 86 (465)
--------- ---------
Total (Loss) Income Before Income Tax Provision ($ 7,250) ($ 6,163)
========= =========
DEPRECIATION AND AMORTIZATION EXPENSE
Specialty Housewares $ 2,250 $ 2,399
Off-Price Home Business 369 401
Corporate and Other 1,341 1,362
--------- ---------
Total Depreciation and Amortization Expense $ 3,960 $ 4,162
========= =========
CAPITAL EXPENDITURES
Specialty Housewares $ 1,024 $ 525
Off-Price Home Business 367 210
Corporate and Other 281 391
--------- ---------
Total Capital Expenditures $ 1,672 $ 1,126
========= =========
TOTAL ASSETS
Specialty Housewares $ 102,762 $ 108,429
Off-Price Home Business 23,617 27,104
Corporate and Other 142,684 146,159
--------- ---------
Total Assets $ 269,063 $ 281,692
========= =========
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<PAGE>
4. COMPREHENSIVE LOSS
The following is a summary of the Company's comprehensive loss:
Thirteen Weeks Ended
May 1, May 2,
1999 1998
------- --------
Net Loss ($4,277) ($3,640)
Components of
Comprehensive Loss:
Unrealized Loss on Available-For-Sale Securities -
Net of Applicable Income Tax Benefit (104) (104)
------- --------
Comprehensive Loss ($4,381) ($3,744)
======= =======
5. STOCK REPURCHASE PLAN
On May 3, 1999, the Company announced the approval by the Board of
Directors of a program to repurchase from time to time of up to
1,000,000 shares of the Company's Common Stock. Share purchases
commenced on May 17, 1999 and as of June 7, 1999, totaled approximately
96,500 shares at a cost of $206. The Company's intention is to hold
these shares as treasury stock.
- 7 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MAY 1, 1999 IN COMPARISON WITH THIRTEEN WEEKS ENDED MAY 2,
1998.
(Amounts in thousands, except share and per share amounts)
Net sales for the thirteen weeks ended May 1, 1999 decreased $2,787 to
$83,407, a 3.2% decrease from $86,194 reported for the comparable thirteen week
period of the prior fiscal year. The decrease was primarily attributable to
fewer stores in operation in the first quarter of Fiscal 1999. The number of
stores open for the quarter averaged 42 fewer stores than the comparable period
last year. For the first quarter of Fiscal 1999, sales for the Specialty
Housewares segment which is comprised of Lechters Housewares(R) and Lechters
Kitchen Place(R) decreased 4.1%, while sales for the Off-Price Home Business
segment comprised of Famous Brands Housewares Outlet(R) and Cost Less Home
Store(SM) decreased 0.1%. On a comparable store basis, sales for the Company
decreased 1.5%. Specialty Housewares comparable store sales decreased 2.5% while
Off-Price Home Business comparable store sales increased 2.6%. During the first
quarter of Fiscal 1999, the Company opened four stores and closed six stores,
reducing the stores in operation at May 1, 1999 to 576 from the 578 open as of
January 30, 1999. At the close of the first quarter of Fiscal 1998, the Company
operated 615 stores.
Gross Profit for the first quarter decreased $88 to $21,570, which at 25.9% of
sales was 0.8 percentage points higher than the 25.1% reported for the
comparable thirteen week period of Fiscal 1998. The higher gross profit rate
reflects an improved merchandise margin performance from higher markup in the
beginning inventory and reduced markdowns. The Gross Profit rate also improved
due to reduced occupancy costs as a result of fewer stores in operation during
the first quarter of Fiscal 1999 compared to the comparable thirteen week period
of Fiscal 1998.
Selling, General and Administrative Expenses increased $448 to $28,734. At 34.5%
of sales, the expense rate was 1.7 percentage points higher than the rate for
the comparable period of the prior fiscal year. Store payroll expenses and
freight costs were higher due to increased merchandise shipments to the stores.
Advertising expense increased due to an additional circular. These expense
increases were partially offset by reductions in asset write-offs and reduced
Service Office expenses.
Other (Income)/Expense for the first quarter decreased $551 to an expense of
$86, 0.1% of sales compared to income of $465, 0.5% of sales, for the first
quarter of the prior fiscal year. The decrease was due to the reduction in the
interest income. Interest income for the first quarter of Fiscal 1998 included
approximately $450 of interest income related to federal income tax refunds for
prior fiscal years.
The Net Loss for the first Quarter of Fiscal 1999 was $4,277 or ($0.26) per
share compared to a loss of $3,640 or ($0.23) per share for the comparable
period of Fiscal 1998. While the gross profit rate improved, the reduction in
sales and gross profit due primarily to fewer stores could not be offset.
- 8 -
<PAGE>
YEAR 2000
The Company repeats its disclosure made in its Annual Report to Shareholders on
Form 10-K revised for information which has changed from the Form 10-K filing
date of April 28,1999.
The Year 2000 ("Y2K") issue is primarily the result of computer programs using
two digits instead of four digits to indicate the year. From the Company's
perspective, the major risks associated with the Year 2000 involve areas in
which the Company is dependent on others to take appropriate and timely actions
before January 1, 2000. Specifically, as a retailer, the Company is dependent
upon an uninterrupted supply of merchandise to its stores, upon landlords to
provide normal operating conditions at the properties leased by the Company in
which to transact business and upon service providers who supply such items as
phone service and utilities which allow the Company to operate its stores
located in 42 states and the District of Columbia from its headquarters in New
Jersey. These key factors must be resolved by outside parties. Without a
successful resolution of these factors, the Company will not be able to operate
in its normal manner and severe adverse economic consequences will result. With
respect to the products sold by the Company, for the most part, they do not
contain embedded electronic devices which would make them subject to Y2K issues.
To monitor these outside parties in their Y2K process and to ensure that all
factors over which it had control from a Y2K perspective were resolved before
the start of the Y2K, the Company initiated its Year 2000 compliance project
during Fiscal Year 1997 with a review of all existing information technology
("IT") software systems.
In Fiscal Year 1996, prior to the recognition of the Year 2000 as a significant
business risk and in the normal course of business, the Company identified key
core systems which needed to be replaced. A new financial suite including
modules for general ledger, accounts payable and fixed assets was installed at
the beginning of Fiscal 1998. A new merchandise inventory analysis and control
system has been acquired. The core software package was installed during Fiscal
Year 1998. The new merchandise analysis systems are scheduled to be operational
in stages during the first half of Fiscal Year 1999. Finally, the Company has
also contracted to install a new warehouse management system which is in
development and will be implemented by August 1999. All three major systems
acquisitions have been certified Year 2000 compliant by the vendor. All new
software to be acquired by the Company will be required to be certified as Year
2000 compliant by the vendor.
The Company established a Year 2000 Compliance Task Force in the third quarter
of Fiscal 1998 whose charter is to review all of the Company's efforts to ensure
that the Company will be Year 2000 compliant prior to December 31, 1999.
Comprised of representatives from Information Technology, Operations, Finance,
Loss Prevention, Merchandising and Human Resources, the task force has reviewed
all known potential Year 2000 issues and has established a Master Schedule of
items ready to be resolved to ensure that the Y2K will have no adverse impact on
the Company. The Y2K Task Force's initial focus was to review steps taken to
date primarily in the IT area.
The Y2K Task Force also commenced its review of non-IT related issues involving
equipment with embedded technology which may not be Year 2000 compliant. This
phase of the project has been completed, and it has identified limited amounts
of equipment with embedded technology subject to Y2K exposure. Early in Fiscal
1999, the Company mailed a Y2K readiness questionnaire to all of its vendors. A
second mailing was also made to key vendors who did not respond to the initial
mailing.
With the receipt of questionnaire responses, which was completed at the end
of May 1999, the third phase of the Year 2000 compliance project will focus on
evaluating the results of the questionnaire, reviewing the results of the non-IT
equipment survey and verifying IT software surveys previously conducted. Based
on the completion of the above process, the Y2K Task Force will issue its final
Y2K Master Schedule and remediation plan, which will be completed by the third
quarter of Calendar Year 1999. If deemed necessary, third party consultants will
be engaged to evaluate and/or assist in the completion of the plan.
- 9 -
<PAGE>
The final two phases of the Year 2000 remediation plan involve the establishment
of contingency plans scheduled for development during the second quarter of
Fiscal Year 1999 and the development of "worst case" scenarios. The development
of "worst case" scenarios will be based on the assessment of the Company's
readiness and the readiness of its key vendors, major suppliers, landlords and
key service suppliers. Given the fact that the Company operates a large number
of stores which are geographically dispersed and has a large supplier base, the
Company's initial evaluations to date indicate that these two conditions will
tend to mitigate potential adverse impacts of the Year 2000 issues. This
evaluation, however, is based on certain expectations and assumptions which may
ultimately prove to be inaccurate.
As part of their oversight responsibilities, the Audit Committee of the Board of
Directors has requested and will be provided with periodic status reports, on at
least a monthly basis, on the progress the Company has made with respect to Year
2000 readiness and compliance.
The cost of the software purchased for the major systems as described above
approximates $4,700. Future costs of new software for major systems are
estimated to be $625 for the completion of the merchandise inventory analysis
and control system and $900 for a warehouse management system. Costs of
compliance such as hardware upgrades, equipment replacement and miscellaneous
software, which are "capitalized" as other assets, are estimated to be $300.
Costs of re-training or modifications to existing programs will be expensed as
incurred and are estimated to be $400. It is anticipated that funds for Year
2000 compliance costs will be generated by internal sources.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities decreased $7,927 from the
balances at the close of the first quarter of Fiscal 1998.
Cash flow during the thirteen weeks ended May 1, 1999 as reflected on the
Consolidated Statements of Cash Flows, was a net decrease in cash and cash
equivalents of $23,347. Operating activities, comprised of the operating loss of
$4,277 adjusted for non-cash expenses such as depreciation and amortization and
by changes in operating assets, utilized $20,395 of cash during Fiscal 1999 to
date. Significant components of operating activities for the first quarter
included depreciation and amortization which is a non-cash expense of $3,960,
merchandise inventories which increased using $18,744 of cash and accounts
payable, accrued expenses and taxes other than income taxes which increased and
provided cash of $6,358. The increases in inventory and accounts payable were
normal occurrences as the Company has increased its inventories from their low
year-end balances. Total merchandise inventories were $2,161 lower at May 1,
1999 than at May 2, 1998. Investing activities, capital expenditures and
reductions in marketable (available-for-sale) securities used $1,942 in cash
with capital expenditures utilizing $1,672 of cash.
Capital expenditures were primarily for construction of and fixtures for new
stores, renovations and remodels of existing stores. Financing activities
utilized $1,010, of cash as the Company paid the dividend on the convertible
preferred stock.
- 10 -
<PAGE>
STOCK REPURCHASE PLAN
On May 3, 1999, the Company announced the approval by the Board of Directors of
a program to repurchase from time to time of up to 1,000,000 shares of the
Company's Common Stock. Share purchases commenced on May 17, 1999 and as of June
7, 1999, totaled approximately 96,500 shares at a cost of $206. The Company's
intention is to hold these shares as treasury stock.
Item 6- Exhibits and Reports on Form 8-K
a. Exhibits.
3.1 Restated Certificate of Incorporation of the Company (Incorporated
herein by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-1 File No. 33-29465 (the "Registration Statement")).
3.2 By-laws of the Company (Incorporated herein by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-1 File No. 33-40372).
4.1 Preferred Stock Purchase Agreement dated April 5, 1996. (Incorporated
herein by reference to the Company's Annual Report on Form 10-K for the
year ended February 1, 1997).
4.2 Indenture, dated as of September 27, 1991, between the Company and
Chemical Bank, as Trustee. (Incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended January 25,
1992).
27 Financial Data Schedule*.
b. Reports on Form 8-K
1. No reports on Form 8-K were filed for the quarter for which this report
is filed.
*Filed herewith
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.
LECHTERS, INC.
By: /s/ James J. Sheppard
James J. Sheppard
Senior Vice President and
Chief Financial Officer
Date: June 11, 1999
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> MAY-1-1999
<CASH> 12,156
<SECURITIES> 62,844
<RECEIVABLES> 7,802
<ALLOWANCES> 0
<INVENTORY> 107,968
<CURRENT-ASSETS> 195,160
<PP&E> 155,246
<DEPRECIATION> 91,298
<TOTAL-ASSETS> 269,063
<CURRENT-LIABILITIES> 34,270
<BONDS> 61,556
0
20,000
<COMMON> 58
<OTHER-SE> 134,695
<TOTAL-LIABILITY-AND-EQUITY> 269,063
<SALES> 83,407
<TOTAL-REVENUES> 83,407
<CGS> 61,837
<TOTAL-COSTS> 28,734
<OTHER-EXPENSES> 86
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,133
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</TABLE>
