<PAGE>
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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 January 1, 2000.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 February 7, 2000 the number of outstanding shares of the
Registrant's common stock was 1,433,643.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LESLIE'S POOLMART, INC.
-----------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
January 1, October 2,
2000 1999
--------- ---------
ASSETS (UNAUDITED)
- ------
<S> <C> <C>
CASH $ 195 $ 193
RECEIVABLES, NET 4,412 7,350
INVENTORIES, NET 65,759 58,729
PREPAID EXPENSES 2,091 2,128
DEFERRED TAX ASSETS 5,121 5,122
DEFERRED INCOME TAX CHARGE 2,714 --
--------- ---------
TOTAL CURRENT ASSETS 80,292 73,522
PROPERTY, PLANT AND EQUIPMENT, NET 47,661 47,336
GOODWILL, NET 8,323 8,392
NON-COMPETE COVENANT 511 627
DEFERRED FINANCING COSTS 2,323 2,460
OTHER ASSETS 435 443
--------- ---------
$ 139,545 $ 132,780
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
ACCOUNTS PAYABLE $ 23,929 $ 16,937
ACCRUED LIABILITIES 14,420 15,462
CURRENT PORTION OF LONG-TERM DEBT 100 101
INCOME TAXES -- 4,999
--------- ---------
TOTAL CURRENT LIABILITIES 38,449 37,499
DEFERRED TAX LIABILITIES 3,106 3,106
LINE-OF-CREDIT BORROWINGS 22,749 7,512
LONG-TERM DEBT, NET OF CURRENT PORTION 1,081 1,095
SENIOR NOTES 90,000 90,000
PREFERRED STOCK 34,253 33,225
SHAREHOLDERS' EQUITY (DEFICIT)
- ------------------------------
COMMON STOCK (45,701) (45,701)
RETAINED EARNINGS (4,392) 6,044
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT (50,093) (39,657)
--------- ---------
$ 139,545 $ 132,780
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED BALANCE SHEETS
2
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LESLIE'S POOLMART, INC.
-----------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
January 1, January 2,
2000 1999
----------- ------------
<S> <C> <C>
SALES $ 30,890 $ 26,132
COST OF SALES 23,538 19,886
-------- --------
GROSS PROFIT 7,352 6,246
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 20,969 17,101
AMORTIZATION OF ACQUISITION COSTS 185 186
LOSS ON DISPOSITION OF FIXED ASSETS 301 127
-------- --------
LOSS FROM OPERATIONS (14,103) (11,168)
INTEREST EXPENSE 3,033 2,642
-------- --------
LOSS BEFORE INCOME TAX BENEFIT (17,136) (13,810)
INCOME TAX BENEFIT 7,729 6,145
-------- --------
NET LOSS (9,407) (7,665)
-------- --------
SERIES A PREFERRED STOCK DIVIDENDS
AND ACCRETION 1,028 923
LOSS APPLICABLE TO COMMON SHAREHOLDERS $(10,435) $ (8,588)
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
LESLIE'S POOLMART, INC.
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
January 1, January 2,
2000 1999
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
NET LOSS $ (9,407) $ (7,665)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 2,241 1,912
LOSS ON DISPOSITION OF FIXED ASSETS 301 127
INCOME TAX BENEFIT (7,729) (6,145)
NET CHANGE IN RECEIVABLES,
INVENTORY AND PAYABLES 1,875 (1,511)
OTHER, NET 44 (266)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (12,675) (13,548)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (2,545) (3,619)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (2,545) (3,619)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
NET LINE-OF-CREDIT BORROWINGS 15,237 7,784
PAYMENTS OF LONG-TERM DEBT (15) (12)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 15,222 7,772
-------- --------
NET INCREASE (DECREASE) IN CASH 2 (9,395)
CASH AT BEGINNING OF PERIOD 193 9,564
-------- --------
CASH AT END OF PERIOD $ 195 $ 169
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
LESLIE'S POOLMART, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2000
(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 month periods ended January 1, 2000 and
January 2, 1999 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 1999 Annual
Report on Form 10-K filed with the Securities and Exchange Commission
on December 22, 1999. 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 2, 1999 and for the year then ended. The
results of operations for the three months ended January 1, 2000 and
January 2, 1999 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 370 retail
stores in 30 states; a nationwide mail order catalog; and a new
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.
On January 3, 2000, Brian P. McDermott was appointed Chairman of the
Board, while Lawrence H. Hayward assumed the responsibilities of
President and Chief Executive Officer, the post previously occupied by
Mr. McDermott. Mr. Hayward also serves on the Board of Directors of
the Company. Michael J. Fourticq, the outgoing Chairman of the Board,
remains on the Board of Directors.
Mr. Hayward joined Leslie's from Fleming Companies, Inc. In 1999,
while at Fleming, Mr. Hayward served as President of ABCO Desert
Markets, an Arizona based retail chain. From 1995 to 1999, Mr. Hayward
served as President and CEO of Carr Gottstein Foods Company, Alaska's
largest food and drug retailer and wholesale distributor. Between 1990
to 1995, Mr. Hayward served as Vice President, Retail Operations for
Buttrey Food & Drug. Prior to this, Mr. Hayward served in positions of
increasing responsibility at American Stores Companies.
5
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(3) Inventories
Inventories consist of the following:
January 1, January 2,
2000 1999
------------ ------------
(in thousands)
Raw materials and supplies $ 1,043,000 $ 1,122,000
Finished goods 64,716,000 47,225,000
------------ ------------
Total Inventories $ 65,759,000 $ 48,347,000
============ ============
(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
1999 fiscal year ended on October 2, 1999 and included 52 weeks. The
1998 fiscal year ended on October 3, 1998, and included 53 weeks.
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 370 Company-owned retail stores
in 30 states; a nationwide mail order catalog; and a new 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
Summary
-------
(In thousands)
Three Months Ended
---------------------------------
January 1, January 2,
2000 1999
-------------- ------------
Sales $30,890 $26,132
Loss from Operations (14,103) (11,168)
Depreciation 1,919 1,588
Goodwill Amortization 185 186
Loss on Asset Dispositions 301 127
-------- --------
EBITDA Loss $(11,698) $(9,267)
6
<PAGE>
In the first quarter ended January 1, 2000, the Company reported an
EBITDA loss of $11,698,000, as compared to an EBITDA loss of
$9,267,000 for the first quarter of fiscal 1999. EBITDA represents
earnings before interest, taxes, depreciation, amortization, loss or
gain on fixed asset dispositions, and any other non-cash income or
expenses. During the quarter, 11 new stores were opened and 5 stores
were closed, bringing the total store count to 370 on January 1, 2000,
up from 319 on January 2, 1999. The Company historically incurs an
operating loss in the quarter ending in December and generally expects
such losses to grow as new stores continue to be added at a
significant rate.
Sales
---------------------------------
(In thousands)
Three Months Ended
---------------------------------
January 1, January 2,
2000 1999
-------------- ------------
Retail Stores $ 30,366 $ 25,546
Mail Order 524 586
------ --------
$ 30,890 $ 26,132
Total sales for the first fiscal quarter increased 18.2% over the same
quarter of 1999. Retail store sales grew 18.9% in the period due to an
increase in the total number of stores in operation this year versus
last as well as a comparable store sales increase of 11.8%. 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 in the first quarter declined 10.6% compared
to the same quarter of the prior year due to continued cannabilization
from new store openings.
Gross profit for the three months ended January 1, 2000 equaled
$7,352,000 or 23.8% of sales, .1% of sales lower than was reported in
the same quarter of the prior year. The slightly lower gross margin is
primarily due to increased promotional activity in the quarter as
compared to prior year. Partially offsetting this were occupancy costs
which declined slightly as a percentage of sales versus prior year on
the quarter's strong sales performance.
In the first quarter of fiscal 2000, selling, general and
administrative expenses equaled $20,969,000, an increase of 22.6% over
the same period of last year. This increase is largely the result of
higher store expenses and increased overhead costs associated with the
continued growth in the number of stores.
The loss on disposition of fixed assets increased slightly versus
prior year with the closure of 5 under-performing stores in the
quarter.
Interest expense equaled $3,033,000 in the first quarter of fiscal
2000, up slightly from the same period of last year. Increased
line-of-credit borrowings produced the higher interest expense in this
quarter.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Changes in Financial Condition
Between October 2, 1999 and January 1, 2000, total current assets
increased $6,770,000 principally the result of inventory which
increased $7,030,000 during the period. The inventory increase is due
to several early buys of merchandise, for which extended dating terms
were received from vendors, in preparation for the upcoming selling
season.
During the same period, current liabilities increased $950,000, due to
a $6,992,000 increase in accounts payable partially offset by a
$4,999,000 decrease in current income tax liabilities. The higher
accounts payable reflects the increased inventory in the period while
the reduced income tax liability reflects the accrued tax benefit
associated with the quarterly operating loss.
7
<PAGE>
Liquidity and Capital Resources
In the quarter ended January 1, 2000, net cash used in operating
activities was $12,675,000 compared with $13,548,000 in the comparable
quarter of the prior year. In the first fiscal quarter, cash is
typically used to finance the operating losses experienced outside of
the Company's peak selling season. In the quarter, cash used in
investing activities was $2,545,000, down from $3,619,000 in the same
quarter of the prior year. This decrease resulted from lower capital
expenditures associated with reduced new store openings planned for
fiscal 2000 versus the prior year.
Cash provided by financing activities was $15,222,000 in the quarter,
compared with cash provided of $7,772,000 in the same quarter of last
year. Line-of-credit borrowings increased primarily to finance the
usual first quarter operating loss whereas, in the prior year, lesser
additional borrowings were needed as the Company had substantial cash
balances available at the start of the quarter.
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.
YEAR 2000 ISSUE
The computer systems issue relating to dates beyond 1999 is the result
of many computer programs being written to use and store dates with
only the last two digits of the applicable year. As a result, these
programs may assume that all two digit dates are twentieth century
dates. This could have resulted in system failure, anomalous system
behavior or incorrect system reporting. To date, the Company has not
experienced any significant issues related to Year 2000.
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, INC.
Date: February 11, 2000 /s/ Robert D. Olsen
-------------------
Robert D. Olsen
Chief Financial Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-03-1999
<PERIOD-END> JAN-01-2000
<CASH> 195
<SECURITIES> 0
<RECEIVABLES> 4,412
<ALLOWANCES> 0
<INVENTORY> 65,759
<CURRENT-ASSETS> 80,292
<PP&E> 47,661
<DEPRECIATION> 0
<TOTAL-ASSETS> 139,545
<CURRENT-LIABILITIES> 38,449
<BONDS> 0
34,253
0
<COMMON> (45,701)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 139,545
<SALES> 0
<TOTAL-REVENUES> 30,890
<CGS> 0
<TOTAL-COSTS> 23,538
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,033
<INCOME-PRETAX> (17,136)
<INCOME-TAX> (7,729)
<INCOME-CONTINUING> (9,407)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,407)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
