<PAGE>
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 July 1, 2000.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________________ to
____________________________
Commission file number 0-18741
Leslie's Poolmart, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
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)
</TABLE>
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 August 14, 2000 the number of outstanding shares of the Registrant's
common stock was 1,433,643.
_______________________________________________________________________________
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LESLIE'S POOLMART, INC.
-----------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
July 1, October 2,
2000 1999
------------ -----------
ASSETS (UNAUDITED)
------
<S> <C> <C>
CASH $ 201 $ 193
RECEIVABLES, NET 8,505 7,350
INVENTORIES, NET 75,896 58,729
PREPAID EXPENSES 2,674 2,128
DEFERRED TAX ASSETS 5,122 5,122
-------- --------
TOTAL CURRENT ASSETS 92,398 73,522
PROPERTY, PLANT AND EQUIPMENT, NET 48,283 47,336
GOODWILL, NET 8,184 8,392
NON-COMPETE COVENANT, NET 279 627
DEFERRED FINANCING COSTS, NET 2,428 2,460
OTHER ASSETS 411 443
-------- --------
$151,983 $132,780
======== ========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
---------------------------------------
ACCOUNTS PAYABLE $ 45,434 $ 16,937
ACCRUED LIABILITIES 20,127 15,462
CURRENT PORTION OF LONG-TERM DEBT 100 101
INCOME TAXES 520 4,999
-------- --------
TOTAL CURRENT LIABILITIES 66,181 37,499
DEFERRED TAX LIABILITIES 3,106 3,106
LINE-OF-CREDIT BORROWINGS 4,210 7,512
LONG-TERM DEBT, NET OF CURRENT PORTION 1,039 1,095
SENIOR NOTES 90,000 90,000
PREFERRED STOCK 36,402 33,225
SHAREHOLDERS' (DEFICIT)
-----------------------
COMMON STOCK (45,277) (45,701)
RETAINED EARNINGS/(DEFICIT) (3,678) 6,044
-------- --------
TOTAL SHAREHOLDERS' DEFICIT (48,955) (39,657)
-------- --------
151,983 $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
--------------------------
July 1, July 3,
2000 1999
----------- ----------
<S> <C> <C>
SALES $ 138,286 $128,875
COST OF SALES 78,811 71,880
----------- ----------
GROSS PROFIT 59,475 56,995
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 30,799 31,610
AMORTIZATION OF ACQUISITION COSTS 185 185
LOSS ON DISPOSITION OF FIXED ASSETS 107 115
----------- ----------
INCOME FROM OPERATIONS 28,384 25,085
INTEREST EXPENSE 3,191 2,944
----------- ----------
INCOME BEFORE INCOME TAXES 25,193 22,141
INCOME TAX PROVISION 11,378 9,853
----------- ----------
NET INCOME 13,815 12,288
----------- ----------
SERIES A PREFERRED STOCK DIVIDENDS
AND ACCRETION 1,084 974
INCOME APPLICABLE TO COMMON SHAREHOLDERS $ 12,731 $ 11,314
=========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
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LESLIE'S POOLMART, INC.
-----------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------
July 1, July 3,
2000 1999
-------- --------
<S> <C> <C>
SALES $206,859 $188,396
COST OF SALES 130,232 116,663
--------- --------
GROSS PROFIT 76,627 71,733
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 77,586 71,366
AMORTIZATION OF ACQUISITION COSTS 556 556
LOSS ON DISPOSITION OF FIXED ASSETS 743 286
--------- --------
LOSS FROM OPERATIONS (2,258) (475)
INTEREST EXPENSE 9,633 8,638
--------- --------
LOSS BEFORE INCOME TAX BENEFIT (11,891) (9,113)
INCOME TAX BENEFIT 5,347 4,055
--------- --------
NET LOSS (6,544) (5,058)
--------- --------
SERIES A PREFERRED STOCK DIVIDENDS
AND ACCRETION 3,177 2,854
LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (9,721) $ (7,912)
========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
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LESLIE'S POOLMART, INC.
-----------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
July 1, July 3,
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
<S> <C> <C>
NET LOSS $(6,544) $ (5,058)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 6,360 6,108
LOSS ON DISPOSITION OF FIXED ASSETS 743 286
NON-CASH COMPENSATION CHARGE 424 --
INCOME TAXES (5,347) (4,055)
NET CHANGE IN RECEIVABLES,
INVENTORY AND PAYABLES 15,708 7,789
OTHER, NET (515) (867)
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,829 4,203
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (7,904) (13,831)
PROCEEDS FROM DISPOSITIONS OF PROPERTY,
PLANT & EQUIPMENT 442 210
NET CASH USED IN INVESTING ACTIVITIES (7,462) (13,621)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
NET LINE-OF-CREDIT (REPAYMENTS) BORROWINGS (3,302) 98
PAYMENTS OF LONG-TERM DEBT (57) (51)
--------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (3,359) 47
--------- --------
NET (DECREASE) INCREASE IN CASH 8 (9,371)
CASH AT BEGINNING OF PERIOD 193 9,564
--------- --------
CASH AT END OF PERIOD $ 201 $ 193
========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
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LESLIE'S POOLMART, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 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 and nine month periods ended July 1, 2000 and July 3, 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 and nine months ended
July 1, 2000 and July 3, 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 384 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.
(3) Inventories
Inventories consist of the following:
July 1, July 3,
2000 1999
------- -------
(in thousands)
Raw materials and supplies $ 1,958 $ 1,665
Finished goods 73,938 74,600
------- -------
Total Inventories $75,896 $76,265
======= =======
(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.
6
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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 384 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
<TABLE>
<CAPTION>
Summary
--------------------------------------------------------
(In thousands)
Three Months Ended Nine Months Ended
---------------------- ---------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Sales $138,286 $128,875 $206,859 $188,396
Income/Loss from Operations 28,384 25,085 (2,258) (475)
Depreciation 1,961 1,764 5,772 5,141
Amortization 185 185 556 556
Non-Cash Compensation Charge -- -- 424 --
Loss on Asset Dispositions 107 115 743 286
-------- -------- -------- --------
EBITDA $ 30,637 $ 27,149 $ 5,237 $ 5,508
======== ======== ======== ========
</TABLE>
In the third quarter ended July 1, 2000, the Company reported an EBITDA of
$30,637,000, as compared to an EBITDA of $27,149,000 for the third 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, 2 new stores were opened bringing the
total store count to 384 on July 1, 2000, up from 365 on July 3, 1999.
7
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<TABLE>
<CAPTION>
Sales
---------------------------------------------
(In thousands)
Three Months Ended Nine Months Ended
--------------------- ---------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Retail Stores $136,122 $126,694 $203,556 $185,066
Mail Order 2,164 2,181 3,303 3,330
-------- -------- -------- --------
Total Sales $138,286 $128,875 $206,859 $188,396
</TABLE>
Total sales for the third quarter increased 7.3% and are up 9.8% in the
fiscal year-to-date. Retail store sales grew 7.4% over prior year,
resulting in a year-to-date sales growth of 10.0%. Sales grew as a result
of an increase in the total number of stores in operation in 2000 versus
1999, as well as a comparable store sales increase of 4.5% in the third
quarter and 5.9% year-to-date. The increase in comparable store sales is
primarily the result of the maturing of the new stores opened over the
last several years, the continued growth in commercial sales, and the
rapid growth of store-based service operations.
Mail order catalog sales were flat in the third quarter and down slightly
compared to prior year.
Gross profit for the three months ended July 1, 2000 equaled $59,475,000
or 43.0% of sales, 1.2% of sales lower than was reported in the same
quarter of the prior year. Year-to-date gross margin was 37.0% or 1.1%
lower than the prior year. The decreased gross margin reflects increased
promotional activity as compared to prior year and the impact of strategic
pricing initiatives to improve sell through on slow moving and excess
inventory items that were targeted for action earlier in the quarter.
In the third quarter of fiscal 2000, selling, general and administrative
expenses equaled $30,799,000, a decrease of 2.6% versus the same period of
last year. This decrease is largely the result of the Company's expense
reduction initiatives implemented during the period.
Interest expense equaled $3,191,000 in the third quarter of fiscal 2000,
up 8.4% from the same period of last year. Increased line-of-credit
borrowings produced the higher interest expense in 2000.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Changes in Financial Condition
Between October 2, 1999 and July 1, 2000, total current assets increased
$18,876,000 principally as a result of inventory which increased
$17,167,000 during the period. The inventory increase results from the
seasonal nature of the Company's business and the new stores opened in
2000.
During the same period, current liabilities increased $28,682,000, due to
a $28,497,000 increase in accounts payable. The increase relates
primarily to more favorable terms on trade payables extended by vendors to
support the seasonal inventory buildup.
8
<PAGE>
Liquidity and Capital Resources
In the nine months ended July 1, 2000, net cash provided by operating
activities was $10,829,000 compared with $4,203,000 in the same period of
the prior year. Over the same period, cash used in investing activities as
$7,462,000 down from $13,621,000 in the same period of the prior year.
This decrease resulted primarily from lower capital expenditures
associated with new store openings planned for fiscal 2000 versus the
prior year.
On June 22, 2000, the Company completed a new Loan and Security Agreement
with Foothill Capital Corporation that replaces its existing facility.
This $65 million dollar facility is secured by certain assets of the
Company.
The Company believes that its internally generated funds, as well as its
borrowing capacity, are adequate to meet its working capital needs,
maturing obligations and capital expenditure requirements, including those
relating to the opening of new stores.
PART II. OTHER INFORMATION
ITEM 5: OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-A
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LESLIE'S POOLMART, INC.
Date: August 14, 2000 /s/ Donald J. Anderson
----------------------
Donald J. Anderson
Chief Financial Officer
9
