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 October 31, 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 incorporation (I.R.S. employer
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 20,371,202 as of October 31,
1997.
<PAGE>
JumboSports Inc.
Index to Form 10-Q
October 31, 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 8-13
Part II - Other Information 14
Signatures 15
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE DATA)
January 31, 1997 October 31, 1997
---------------- ---------------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $4,944 $993
Accounts receivable, net 2,338 7,559
Inventories 201,090 254,303
Prepaid expenses and other assets 4,495 5,171
Income tax receivable 11,386 28
Deferred tax asset 1,586 3,389
---------- ----------
Total current assets 225,839 271,443
---------- ----------
Property and Equipment - net 282,651 266,787
---------- ----------
Other Assets:
Cost in excess of fair value of
net assets acquired, net 11,145 10,889
Other 5,951 7,549
---------- ----------
Total other assets 17,096 18,438
---------- ----------
Total assets $525,586 $556,668
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $185 $941
Accounts payable 37,050 49,434
Accrued expenses 16,462 17,909
Other 13,464 12,484
---------- ----------
Total current liabilities 67,161 80,768
Deferred rent and other
long-term liabilities 4,476 4,286
Long-term debt less current maturities 294,325 360,982
---------- ----------
Total liabilities 365,962 446,036
Stockholders' Equity
Common stock, $.01 par value, 100,000,000
shares authorized, 20,339,409 and
20,371,202 issued and outstanding,
respectively 203 204
Additional paid-in capital 149,639 149,793
Retained earnings (loss) 9,782 (39,365)
---------- ----------
Total stockholders' equity 159,624 110,632
---------- ----------
Total liabilities & stockholders' equity $525,586 $556,668
========== ==========
See Notes to the Consolidated Financial Statements.
3
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JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR SHARE DATA)
(UNAUDITED)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 27, October 31, October 27, October 31,
1996 1997 1996 1997
---------- ---------- ---------- ----------
Sales $136,798 $129,945 $449,470 $396,304
Cost of sales including
buying & occupancy costs 100,864 120,643 374,282 322,794
--------- --------- -------- --------
Gross profit 35,934 9,302 75,188 73,510
Selling, general and
administrative expenses 28,955 27,792 90,162 85,516
Non-recurring and
other charges -- 20,700 22,568 20,700
--------- --------- -------- --------
Income (loss) from
operations 6,979 (39,190) (37,542) (32,706)
Interest expense 5,530 6,573 14,281 18,327
--------- --------- -------- --------
Income (loss) before
income tax expense (benefit) 1,449 (45,763) (51,823) (51,033)
Income tax expense (benefit) 551 -- (19,143) (1,886)
--------- ---------- -------- ---------
Net income (loss) $898 $(45,763) $(32,680) $(49,147)
========= ========== ======== =========
Net loss per common share $ 0.04 $(2.25) $(1.64) $(2.41)
Weighted average
shares outstanding 20,277 20,368 19,904 20,358
Stores opened during period 0 0 5 0
Store open at end of period 85 85 85 85
See Notes to the Consolidated Financial Statements.
4
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JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 27, 1996 AND OCTOBER 31, 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 211 2 1,022 1,024
Net loss (32,680) (32,680)
------ --------- ------- -------- ------
Balance October 27, 1996 19,980 $200 $148,028 $7,646 $155,874
====== ========= ======= ======== ======
Balance, January 31, 1997 20,339 $203 $149,639 $9,782 $159,624
Issuance of common stock 32 1 154 155
Net loss (49,147) (49,147)
------ --------- ------- -------- ------
Balance October 31, 1997 20,371 $204 $149,793 $(39,365)$110,632
====== ========= ======= ======== ======
See Notes to the Consolidated Financial Statements.
5
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Thirty-Nine Weeks Ended
October 27, 1996 October 31, 1997
---------------- ----------------
Cash flows from operating activities:
Net loss $(32,680) $(49,147)
Adjustments to reconcile net income
to cash used in operating activities:
Depreciation 6,487 6,747
Loss (gain) on asset sales (223) 11
Goodwill amortization 256 256
Deferred loan cost amortization &
other amortization 719 1,299
Non-recurring and other charges 22,568 20,700
Increase in deferred tax asset (17,141) (1,803)
Decrease (increase) in accounts receivable 1,458 (5,221)
Decrease (increase) in income tax receivable (1,754) 11,358
Decrease (increase) in inventories 27,297 (53,213)
Increase in prepaid expenses (644) (807)
Decrease (increase) in other assets (1,502) 269
Increase in accounts payable 10,982 12,384
Increase (decrease) in accrued expenses (5,480) 1,399
Increase (decrease) in other current liabilities 532 (2,518)
Increase (decrease) in deferred rent 325 (190)
Increase (decrease) in income taxes payable 474 (20)
------- -------
Net cash provided by (used in)
operating activities 11,674 (58,496)
------- -------
Cash flow from investing activities:
Capital expenditures (11,174) (9,695)
Net collections under note receivable 25 --
Cash proceeds from sale of property -- 1,474
------- -------
Net cash used in investing activities (11,149) (8,221)
------- -------
Cash flows from financing activities:
Proceeds from sale of common stock-net 1,024 154
Stock purchase loan (319) 132
Borrowings under revolving credit agreement 24,595 21,470
Payments under revolving credit agreement (22,230) (26,280)
Proceeds from mortgage financing -- 72,425
Repayments of long term debt (376) (572)
Loan costs (2,868) (4,563)
------- -------
Net cash provided by financing activities (174) 62,766
------- -------
Net decrease in cash
and cash equivalents 351 (3,951)
------- -------
Cash, beginning of period 3,590 4,944
------- -------
Cash, end of period $3,941 $993
======= ======
See Notes to the Consolidated Financial Statements
6
<PAGE>
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) Contingencies
Pending Litigation - In October 1997, the Company announced that it was
terminating its relationship with AMR Service Corporation for the operation of
JumboSports' warehouse facility in Nashville, Tennessee. The Company has
instituted litigation against AMR Services Corporation in federal court in
Tampa, Florida alleging breach of its agreement with AMR in connection with the
operation of the Nashville facility. AMR Services Corporation has instituted
litigation against JumboSports in Tennessee State Court asking for the return of
certain equipment and alleging breach of contract. The Company expects the
litigation to be consolidated. The outcome is undeterminable at this time.
(3) Other Events
In October 1997, the Company announced that it would be closing eight
stores in its 85 store chain in early 1998. The stores to be closed are located
in the cities of : Atlanta, Georgia (2); Columbus, Ohio (1); Detroit, Michigan
(3); and Houston, Texas (2). Six of the eight stores are under agreement to be
sold, one is for sale and the remaining store is held under lease. The Company
took a charge in the third fiscal quarter of 1997 in the amount of $23.3 million
to recognize the loss on the disposition of the real estate and liquidation of
the stores' inventory.
In the third fiscal quarter, the Company took a charge in the amount of
$12.2 million due to excess athletic footwear and apparel.
As of the October 31, 1997 reporting period, the Company failed to comply
with certain financial covenants set forth in its existing credit agreement. The
Company's lenders have agreed to forbear from exercising any of their rights and
remedies through January 31, 1998.
(4) Subsequent Events
Subsequent to October 31, 1997, the Company received a commitment from GE
Capital Corporation, as Agent, and PPM Finance, Inc., as Co-Agent, to provide a
fully-underwritten four year $215 million senior secured credit facility.
Proceeds of the facility will be used to refinance the existing credit facility
and provide for on-going working capital needs and other general corporate
purposes. Consummation of the financing is subject to various terms and
conditions, including, but not limited to negotiation of a mutually acceptable
definite credit agreement and related documentation. The Agreement is expected
to be consummated prior to January 31, 1998.
On December 8, 1997, the Company announced that with the mutual consent of
the Company, Stephen Bebis has resigned as Chairman, Director, President and
Chief Executive Officer. Effective December 8, 1997. Jack E. Bush, a current
Director of the Company, has assumed the position of Chairman of the Board and
acting Chief Executive Officer. Raymond P. Springer, the Company's Chief
Financial Officer, has assumed additional responsibilities as the Company's
acting President and Chief Operating Officer.
7
<PAGE>
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 thirty-nine weeks 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.
In October 1997, the Company announced that it would be closing eight
stores in its 85 store chain in early 1998. The stores to be closed are located
in the cities of : Atlanta, Georgia (2); Columbus, Ohio (1); Detroit, Michigan
(3); and Houston, Texas (2). Six of the eight stores are under agreement to be
sold, one is for sale and the remaining store is held under lease. The Company
took a charge in the third fiscal quarter of 1997 in the amount of $23.3 million
for these store closings to recognize the loss on the disposition of the real
estate and liquidation of the stores' inventory.
Results of Operations
In the third quarter of fiscal 1997, the Company recorded one-time charges
of $37.8 million. The charges relate to the closing of eight stores, the
write-off of deferred debt costs and inventory writedowns in athletic footwear
and apparel. The components are as follows:
Cost of Sales:
Writedown for excess footwear and apparel inventory $12.2
Writedown for store closings inventory liquidation 4.9
--------
$17.1
Non-recurring and other charges:
Charges for store closings $18.4
Write-off of deferred debt costs 2.3
--------
$20.7
--------
Total $37.8
========
8
<PAGE>
The following table set forth certain operating data as a percentage of
sales for the periods indicated:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 27, October 31, October 27, October 31,
1996 1997 1996 1997
---------- ---------- ---------- ----------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales
including buying
and occupancy costs 73.7 92.8 83.3 81.5
------- ------- ------- ------
Gross profit 26.3 7.2 16.7 18.5
Selling, general and
administrative expenses 21.2 21.4 20.1 21.6
Non-recurring and
other charges -- 15.9 5.0 5.2
------- ------- ------- ------
Income (loss)
from operations 5.1 (30.1) (8.4) (8.3)
Interest expense-net 4.0 5.1 3.1 4.6
------- ------- ------- ------
Income (loss) before
provision (benefit)
for income taxes 1.1 (35.2) (11.5) (12.9)
Provision (benefit)
for income taxes 0.4 0.0 (4.2) (0.5)
------- ------- ------- ------
Net income (loss) 0.7% (35.2)% (7.3)% (12.4)%
======= ======= ======= ======
9
<PAGE>
Thirteen Weeks Ended (Third Quarter) October 31, 1997 Compared To Thirteen Weeks
Ended October 27, 1996
The Company operated 85 stores in both the current year and prior year.
Sales for the third quarter decreased 5.0% to $129.9 million compared with
sales of $136.8 million in the third quarter of the prior year. Same store sales
for the third fiscal quarter decreased by 5.4%. While these same store sales
were unfavorable, they are not truly comparable because sales in the prior year
were bolstered by the 1996 inventory clearance sale the Company started in June
1996 and continued through November 1996. Sales below cost for the inventory
clearance sale were $14.6 million in the third quarter of the prior year which
represents 10.7% of sales in the third quarter of the prior year. Adjusting the
same store sales in the prior year for the below cost clearance sale results in
a comparable store sales increase of 5.9% for the third fiscal quarter. Sales
have been affected by the following:
1. Sales continued to be generally soft throughout the sporting goods
retail segment;
2. Competition continues to increase, fifteen stores this quarter were
adversely affected by new big box competition which opened after the
third quarter of the prior year;
3 Certain merchandising categories were affected. Fitness continues to
be lower due to fewer "infomercial" driven product introductions. The
hunting category experienced a positive trend in the third quarter.
Athletic footwear and apparel were driven with promotionally oriented
inventory clearance retailing.
Gross profit for the third quarter was $9.3 million, or 7.2% of sales, as
compared to $35.9 million, or 26.3% of sales in the prior year. In the current
year the Company recorded a $17.1 million charge, or 13.2% of sales, for
inventory writedowns attributable to the closing of eight stores and to excess
athletic footwear and apparel inventory. The remaining differences in gross
margin percent relate to the promotion of athletic footwear and apparel to
enhance inventory liquidation (4.2%), point of sale markdowns due to pricing
discrepancies (2.3%), higher buying and occupancy costs (0.34%) and a higher
shrinkage accrual based on the prior year's experience (1.23%).
Selling, general and administrative expenses for the third quarter were
$27.8 million, or 21.4% of sales, as compared to $29.0 million, or 21.2% of
sales, for the third quarter of the prior year. The increase as a percentage of
sales was due to the following:
1. Advertising expense was up 46 basis points, primarily the result of
increased newspaper advertising early in the third quarter this year;
2. Physical inventory service expense was up 20 basis points;
3. Payroll expense was lower 18 basis points due to a focus on labor
management;
4. General and administrative expenses were lower 28 basis points.
In addition to the $17.1 million inventory write-down, the Company incurred
$20.7 million of non-recurring charges, or 15.9% of sales, in the third fiscal
quarter. Of the $20.7 million charge, $18.4 million is for store closings and
$2.3 million is for the write-off of deferred debt costs associated with
refinancing the existing credit agreement.
The loss from operations in the third quarter was $39.2 million, or (30.1)%
of sales, as compared to income from operations of $7.0 million, or 5.1% of
sales, in the same quarter of the prior year. The loss from operations in the
third fiscal quarter of the current year was primarily the result of the $37.8
million one time charges.
Interest expense for the third quarter was $6.6 million, or 5.1% of sales,
as compared to $5.5 million, or 4.0% of sales, in the same quarter of the prior
year. The increase in interest expense was the result of increased debt due to
higher inventory levels.
10
<PAGE>
The Company did not record an income tax benefit in the third quarter. In
the prior year, the Company recorded income tax expense of $0.5 million with an
effective tax rate of 38.0%.
For the third quarter, the Company posted a net loss of $45.8 million, or
(35.2)% of sales, as compared to net income of $0.9 million, or 0.7% of sales,
for the same quarter of the prior year. The net loss in the third quarter of the
current fiscal year is attributable to the $37.8 million one time charges.
Thirty-nine Weeks (First Three Quarters) Ended October 31, 1997 Compared to
Thirty-nine Weeks Ended October 27, 1996
The Company did not open any new stores in the thirty-nine weeks ended
October 31, 1997, compared to five new stores opened in the thirty-nine weeks
ended October 27, 1996.
Sales for the first three quarters decreased 11.8% to $396.3 million
compared to sales of $449.5 million in the comparable period last year. Same
store sales for this thirty-nine week period declined 12.6%. While these same
store sales were unfavorable, they are not truly comparable, because sales in
the prior year were bolstered by an inventory clearance in the second and third
quarters of the prior year. Sales below cost for the inventory clearance sale
were $32.8 million which represents 7.3% of the prior years sales. Adjusting
same store sales in the prior year for the below cost clearance sale, results in
a comparable sales decrease of 5.7%. Sales have been adversely impacted by the
following:
1. The Company's new information management systems were installed at the
beginning of the year. There have been significant disruptions in
merchandise flow due to problems encountered in receiving and making
product ready to sell at the store level through the first half of the
current year;
2. The Company's new centralized cross-dock operation began in late
November of the prior year. As the amount of merchandise ordered by
the new system increased, the facility became overloaded causing
mis-shipments and delays that adversely affected stock levels through
part of the second quarter;
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 continues to be lower due to fewer new "infomercial"-driven
product introductions, and in-line skates are a declining business
across the industry;
4. Sales were generally soft throughout the sporting goods retail
segment, partially as a result of comparisons against last year's
Olympic merchandise sales and last year's increased foot traffic due
to the Olympics;
5. Competition continued to increase. Twenty-one additional stores this
year were adversely affected by new big-box competitors which have
opened since the beginning of the prior year.
Gross profit for the thirty-nine week period of the current year was $73.5
million, or 18.5% of sales, compared to $75.2 million, or 16.7% of sales, for
the prior year. The Company incurred a $17.1 million inventory write-down
charge, or 4.3% of sales related to excess footwear and apparel and store
closings. Last year, the Company took a charge to cost of goods of $32.4
million, or 7.2% of sales, to recognize the loss on dated and discontinued
product. The remaining decrease was attributable to higher buying and occupancy
costs and a higher shrinkage accrual based on prior year's experience.
Selling, general and administrative expenses for the thirty-nine week
period were $85.5 million, or 21.6% of sales, compared to $90.2 million, or
20.1% of sales, in the same period of the prior year. The increase as a
percentage of sales was due to lower sales volume leverage on fixed costs and
certain higher operating costs. Payroll expense was up 77 basis points due to
the in-store problems encountered by the introduction of the new merchandise
systems as well as problems experienced in the implementation of a new
distribution center; also a higher average wage resulted from the
"ripple-effect" of the minimum wage increase and a generally tighter labor
market. Advertising expense was up 104 basis points, a result of the corporate
name change and increased expenditures for television advertising, newspaper
advertising and the multi-page advertising book.
11
<PAGE>
In addition to the $17.1 million inventory write-down, the Company incurred
$20.7 million of non-recurring charges, or 5.2% of sales, in the current year's
third fiscal quarter. Of the $20.7 million charge, $18.4 million was for store
closings and $2.3 million was for the write-off of deferred debt costs. In the
second quarter of the prior year, the Company recorded a $22.6 million charge,
or 5.0% of sales.
Loss from operations in the first three quarters of the current year was
$32.7 million, or (8.3)% of sales, compared to a loss from operations of $37.5
million, or (8.4)% of sales, in the same period of the prior year. The loss in
the current year was primarily attributable to the $37.8 million in charges
taken in the third fiscal quarter. The loss in the prior year was primarily
attributable to the $55.0 million in charges taken in the second fiscal quarter.
Interest expense for the thirty-nine weeks of the current year was $18.3
million, or 4.6% of sales, compared to $14.3 million, or 3.1% of sales, for the
comparable period in the prior year. This increase in interest expense was the
result of the following:
1. Average debt increased due to refinancing $58.0 million of tax
retention operating leases into the existing revolving credit facility
and higher inventory levels;
2. The re-negotiated existing credit facility calls for borrowings at
LIBOR plus 2% versus LIBOR plus 1% contributing to an overall 56 basis
point increase in average interest rates.
The Company's income tax benefit for the thirty-nine weeks of the current
year was $1.9 million with an effective rate of 3.7% compared to a tax benefit
of $19.1 million in the prior year with an effective tax rate of 36.9%.
The Company posted a net loss of $49.1 million, or (12.4)% of sales,
compared to a net loss of $32.7 million, or (7.3)% of sales, for the same period
of the prior year. The net loss for the thirty-nine week period of the current
year was primarily attributable to the $37.8 million charge for inventory and
non-recurring charges incurred in the third fiscal quarter resulting in the full
$37.8 million as a charge after tax. In the prior year, the net loss was
attributable to the $55.0 million charge for inventory, non-recurring and other
items incurred in the second quarter of the prior year, resulting in a net
charge after tax of $34.6 million.
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 typically peak in the fourth fiscal quarter.
Operating activities used $58.5 million for the thirty-nine weeks of fiscal
1997 as compared to cash provided of $11.7 million for the same period of fiscal
1996. The increased use of cash was primarily due to an increase in merchandise
inventory. Management attributes this above-normal level to problems encountered
as a result of the new merchandising system, the new distribution facility and
to certain over-reactions to out-of-stock inventory positions. Some product
returns have been arranged, future orders have been adjusted and an orderly sell
down plan has been developed. Controls have been installed to assure that these
conditions do not recur. Merchandise levels are expected to return to prior year
levels by year-end.
12
<PAGE>
Net cash of $8.2 million was used in investing activities during the first
thirty-nine weeks of fiscal 1997, compared to net cash used in investing
activities during the first thirty-nine weeks of fiscal 1996 of $11.1 million.
This year's 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 activity provided $62.8 million for the first
thirty-nine weeks of fiscal 1997, compared to cash used from financing activity
of $0.2 million for the first thirty-nine weeks of fiscal 1996. The increase in
cash provided by financing activities in fiscal 1997 was primarily due to the
completion of $72.4 million of mortgage financings.
As of October 31, 1997, the Company had $88.0 million of capital lease and
mortgage obligations, $74.8 million of 4 1/4% convertible subordinated notes due
2000 outstanding and had drawn $199.2 million on its $209.0 million revolving
credit facility. As of October 31, 1997, the existing credit facility commitment
was $20.9 million.
As of October 31, 1997, the Company failed to comply with certain financial
covenants set forth in its existing credit agreement. The Company's lenders have
agreed to forbear from exercising any of their rights and remedies through
January 31, 1998. The Company expects to refinance the existing credit facility
prior to January 31, 1998.
The current credit facility limits the amount of capital expenditures to
$22.0 million for fiscal 1997. The Company has spent $9.7 million through
thirty-nine weeks.
Management believes its current working capital, along with expected net
cash provided by operating activities and a new credit facility which is
currently being negotiated through GE Capital will be sufficient to fund the
anticipated capital expenditures and working capital requirements for the
upcoming twelve month period.
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. During the fourth quarter of last
year, 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 from operations for the first thirty-nine weeks of fiscal 1997 or 1996.
There can be no assurance, however, that the 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. Proforma effects of the change for prior periods is not
determinable.
13
<PAGE>
JUMBOSPORTS INC.
PART II - OTHER INFORMATION
- -------------------------------------------------------------------------------
Item 1. Legal Proceedings.
Pending Litigation - In October 1997, the Company announced that it
was terminating its relationship with AMR Service Corporation for the
operation of JumboSports' warehouse facility in Nashville, Tennessee.
The Company has instituted litigation against AMR Services Corporation
in federal court in Tampa, Florida alleging breach of its agreement
with AMR in connection with the operation of the Nashville facility.
AMR Services Corporation has instituted litigation against JumboSports
in Tennessee State Court asking for the return of certain equipment
and alleging breach of contract. The Company expects the litigation to
be consolidated. The outcome is undeterminable at this time.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 5. Other Information.
On December 8, 1997, the Company announced that with the mutual
consent of the Company, Stephen Bebis has resigned as Chairman,
Director, President and Chief Executive Officer. Effective December 8,
1997. Jack E. Bush, a current Director of the Company, has assumed the
position of Chairman of the Board and acting Chief Executive Officer.
Raymond P. Springer, the Company's Chief Financial Officer, has
assumed additional responsibilities as the Company's acting President
and Chief Operating Officer.
Item 6. Exhibits and Reports on Form 8-K.
1) Exhibits.
Exhibit 11 - Weighted Average Shares Outstanding Calculation
Exhibit 27 - Financial Data Schedule
2) Reports on Form 8-K.
None
14
<PAGE>
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)
12/15/97 /S/ Jack E. Bush
Date Chairman
12/15/97 /S/ Raymond P. Springer
Date Executive Vice President and
Chief Financial Officer
15
JUMBOSPORTS INC.
EXHIBIT 11
WEIGHTED AVERAGE SHARES OUTSTANDING CALCULATION
FOR THE PERIOD ENDED OCTOBER 31, 1997
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 31, 1997 October 31, 1997
-------------------- ----------------------
PRIMARY
Weighted average common
stock shares outstanding 20,367,790 20,357,586
Weighted average stock issued
assuming exercise of stock
options using the treasury stock
method at average market price 0 (1) 0 (1)
Total weighted average
shares outstanding 20,367,790 20,357,568
Net loss $(45,763,168) $(49,147,168)
Primary Loss Per Share $(2.25) $(2.41)
FULLY DILUTED
Weighted average common
stock shares outstanding 20,367,790 20,357,586
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) 0 (1)
Weighted average stock issued
assuming the as adjusted method
for the 4 1/4% Convertible
Subordinated Notes Due 2000 0 (2) 0 (2)
Total weighted average
shares outstanding 20,367,790 20,357,586
Net loss as reported $(45,763,168) $(49,147,168)
Interest adjustment net of
tax for the 4 1/4%
Convertible Subordinated Notes 0 (2) 0 (2)
Net loss $(45,763,168) $(49,147,168)
Fully diluted loss per share $(2.25) $(2.41)
(1) Not reported under GAAP as conversion would be anti-dilutive.
(2) Not reported under GAAP as conversion would be anti-dilutive, and dilution
less than 3%.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JUMBOSPORTS INC. FOR THE THREE MONTHS ENDED OCTOBER 31,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Jan-30-1998
<PERIOD-START> Feb-1-1997
<PERIOD-END> Oct-31-1997
<CASH> 993
<SECURITIES> 0
<RECEIVABLES> 7,769
<ALLOWANCES> 210
<INVENTORY> 254,303
<CURRENT-ASSETS> 271,443
<PP&E> 300,549
<DEPRECIATION> 33,762
<TOTAL-ASSETS> 556,668
<CURRENT-LIABILITIES> 80,768
<BONDS> 74,750
0
0
<COMMON> 204
<OTHER-SE> 110,428
<TOTAL-LIABILITY-AND-EQUITY> 556,668
<SALES> 396,304
<TOTAL-REVENUES> 396,304
<CGS> 297,408
<TOTAL-COSTS> 322,794
<OTHER-EXPENSES> 106,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,327
<INCOME-PRETAX> (51,033)
<INCOME-TAX> (1,886)
<INCOME-CONTINUING> (49,147)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,147)
<EPS-PRIMARY> (2.41)
<EPS-DILUTED> (2.41)
</TABLE>
