UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 1, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 1-13322
JumboSports Inc.
(Exact name of registrant as specified in its charter)
Florida 52-1643157
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4701 W. Hillsborough Avenue Tampa, FL 33614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 813/886-9688
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date 20,392,873 as of May 27, 1998.
<PAGE>
JumboSports Inc.
Index to Form 10-Q
May 1, 1998
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 8-11
Part II - Other Information 12
Signatures 13
2
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
January 30, May 1,
1998 1998
---------- ----------
Unaudited
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 345 $ 307
Accounts receivable, net 4,654 4,188
Inventories 185,047 140,009
Property under contract for sale 78,801 40,655
Prepaid expenses and other assets 3,819 5,119
Income tax receivable 1,556 1,422
---------- ----------
Total current assets 274,222 191,700
---------- ----------
Property held for sale 28,712 17,072
Property and equipment 145,747 130,004
Other assets:
Cost in excess of fair value
of net assets acquired, net 10,803 10,718
Other 7,065 7,101
---------- ----------
Total other assets 17,868 17,819
---------- ----------
Total assets $ 466,549 $ 356,595
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,008 $ 842
Accounts payable 26,443 36,151
Accrued expenses 13,717 11,658
Accrued non-recurring charges 32,984 9,821
Other 4,101 4,400
---------- ----------
Total current liabilities 78,253 62,872
Deferred rent and other
long-term liabilities 4,241 3,643
Revolving credit agreement 174,037 102,200
Long-term debt less current maturities 86,770 70,659
Convertible subordinated notes 74,750 74,750
---------- ----------
Total liabilities 418,051 314,124
---------- ----------
Stockholders' equity:
Common stock, $.01 par value,
100,000,000 shares authorized,
20,386,155 and 20,390,634 shares
issued and outstanding, respectively 204 204
Additional paid-in capital 149,809 149,819
Accumulated deficit (101,515) (107,552)
---------- ----------
Total stockholders' equity 48,498 42,471
---------- ----------
Total liabilities and
stockholders' equity $ 466,549 $ 356,595
========== ==========
</TABLE>
See Notes to the Consolidated Financial Statements.
3
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
May 2, May 1,
1997 1998
-------- --------
<S> <C> <C>
Sales $130,134 $ 86,544
Cost of sales including
buying & occupancy costs 99,480 66,284
-------- --------
Gross Profit 30,654 20,260
Selling, general and administrative expenses 27,178 19,978
-------- --------
Income from operations 3,476 282
Interest expense 5,815 6,319
-------- --------
Loss before benefit for income taxes (2,339) (6,037)
Benefit for income taxes (834)
-------- --------
Net loss $ (1,505) $ (6,037)
======== ========
Basic and dilutive earnings per common share $ (0.07) $ (0.30)
Weighted average shares outstanding 20,347 20,388
Stores closed during period 0 18
Stores open at end of period 85 59
</TABLE>
See Notes to the Consolidated Financial Statements.
4
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THIRTEEN WEEKS ENDED MAY 2, 1997 AND MAY 1, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Accumulated
Paid in Earnings
Shares Par Value Capital (Deficit) Total
------ --------- ------- --------- ------
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1997 20,339 $203 $149,639 $9,782 $159,624
Issuance of common stock 16 1 72 73
Net loss (1,505) (1,505)
------ ----- -------- -------- --------
Balance May 2, 1997 20,355 $204 $149,711 $8,277 $158,192
====== ===== ======== ======== ========
Balance, January 30,1998 20,386 $204 $149,809 $(101,515) $48,498
Issuance of common stock 5 10 10
Net loss (6,037) (6,037)
------ ----- ------- -------- --------
Balance May 1, 1998 20,391 $204 $149,819 $(107,552) $42,471
====== ===== ======= ======== ========
</TABLE>
See Notes to the Consolidated Financial Statements.
5
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
May 2,1997 May 1, 1998
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,505) $(6,037)
Adjustments to reconcile net income
to cash used in operating activities:
Depreciation 2,375 1,622
Loss (gain) on asset sales 7
Goodwill amortization 85 85
Deferred loan cost amortization
& other amortization 439 77
Increase in deferred tax asset (725)
Decrease (increase) in accounts receivable (607) 466
Decrease in income tax receivable 135
Decrease (increase) in inventories (19,757) 45,038
Decrease (increase) in prepaid expenses 218 (1,250)
Decrease (increase) in other assets (837) 74
Increase in accounts payable 20,463 9,708
Decrease in accrued expenses (2,899) (2,059)
Decrease in other current liabilities (820) (20,144)
Decrease in deferred rent (447) (647)
------ ------
Net cash provided by (used in)
operating activities (4,010) 27,068
------ ------
Cash flow from investing activities:
Capital expenditures (4,440) (1,023)
Cash proceeds from sale of property 515 62,209
------ ------
Net cash provided by (used in)
investing activities (3,925) 61,186
------ ------
Cash flows from financing activities:
Proceeds from sale of common stock-net 73 10
Net borrowings under
revolving credit agreements 7,606 378
Net repayments under
revolving credit agreements (1,229) (72,215)
Repayments of long term debt (15) (16,277)
Loan costs (828) (188)
------ ------
Net cash provided by (used in)
financing activities 5,607 (88,292)
------ ------
Net decrease in cash and cash equivalents (2,328) (38)
------ ------
Cash, beginning of period 4,944 345
------ ------
Cash, end of period $ 2,616 $ 307
======== =======
</TABLE>
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 30,
1998 contained in the Company's Form 10-K dated April 24, 1998.
(2) Legal Proceedings
In October 1997, the Company announced that it was terminating its
relationship with AMR Services Corporation ("AMR Services") for the operation of
the Company's warehouse facility in Nashville, Tennessee. On October 10, 1997,
the Company instituted litigation against AMR Services in the United States
District Court, Middle District of Florida, seeking damages, a declaratory
judgment, and injunctive relief for fraud in the inducement and breach of an
agreement to provide third-party logistic services at the warehouse facility. In
its complaint, the Company alleges that AMR Services misrepresented its
experience in the warehouse management industry and mismanaged the Nashville
facility. The Company is preliminarily seeking damages from AMR Services in
excess of $27 million. At the current time, very little discovery has been
completed and an evaluation of the likelihood of success in the litigation
cannot be made. AMR has filed a counterclaim in this action seeking damages in
excess of six million dollars for breach of contract and negligent
misrepresentation.
On October 11, 1997, AMR Services instituted litigation in Tennessee state
court alleging breach of contract arising from the Company's termination of the
third-party logistics agreement. In this action, AMR Services has also sought
possession of certain records and computer data which were generated at the
warehouse facility. This case has been removed to the United States District
Court, Middle District of Tennessee. AMR Services is seeking damages of
approximately $1,686,000. The parties recently filed a joint stipulation which
would result in the dismissal of this action and pursuit of all claims in the
Middle District of Florida action. All damages previously sought in this action
are now included in the six million dollar claim in the Florida lawsuit.
(3) Subsequent Events
On May 7, 1998, the Company announced the closing of two under-performing
stores located in the Texas cities of San Antonio and El Paso. The Company also
announced the opening of two new stores in the Florida cities of Brandon and
Daytona Beach. The new stores are expected to open in late summer 1998.
On May 28, 1998, the Company entered into a Second Amendment to the Amended
and Restated Revolving Credit Agreement. The Second Amendment provides for
increased credit commitment levels for the term of the Agreement and elimination
of LIBOR based loans after July 31, 1998.
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.
These factors include, but are not limited to, product demand and market
acceptance risks, the effect of economic conditions generally, the impact of
competition, commercialization and technological difficulties and the condition
of the retail and sporting goods industries.
Management's discussion and analysis of financial condition and results of
operations for the first quarter of fiscal 1998 should be read in conjunction
with the discussion and analysis set forth in Form 10-K filed April 24, 1998 for
the fiscal year ended January 30, 1998.
In May 1998, the Company announced the closing of two under-performing
stores located in the Texas cities of San Antonio and El Paso. The Company also
announced the opening of two new stores in the Florida cities of Brandon and
Daytona Beach. The new stores are expected to open in late summer 1998.
Results of Operations
The following table set forth certain operating data as a percentage of
sales for the periods indicated:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
May 2, 1997 May 1, 1998
----------- -----------
<S> <C> <C>
Sales 100.0% 100.0%
Cost of sales including buying
and occupancy costs 76.4 76.6
-------- -------
Gross profit 23.6 23.4
Operating expenses 20.9 23.1
-------- -------
Income from operations 2.7 0.3
Interest expense-net 4.5 7.3
-------- -------
Loss before benefit
for income taxes (1.8) (7.0)
Benefit for income taxes (0.6)
-------- -------
Net loss (1.2)% (7.0)%
======== =======
</TABLE>
8
<PAGE>
Thirteen Weeks Ended (First Quarter) May 1, 1998 Compared To Thirteen Weeks
Ended May 2, 1997
The Company closed 18 stores effective the beginning of the first quarter
of the current year ending the period with 59 stores compared to 85 stores in
the prior year.
Sales for the first quarter were $86.5 million compared with sales of
$130.1 million in the first quarter of the prior year. Same store sales (59
stores) for the first fiscal quarter decreased by 12.3%. Same stores sales have
been adversely affected by the following:
1. Poor in-stock inventory levels in the early part of the first quarter,
attributable to temporary shipment delays that were resolved by the
execution of the First Amendment to the Company's Revolving Credit
Agreement;
2. Planned reduction in advertising compared to the prior year's
extraordinary promotional campaign and discounts associated with the
JumboSports' name change and new concept roll-out;
3. Soft sales trends in the footwear categories due to decreased demand
for athletic footwear and industry over-supply; and
4. Generally soft sales throughout the sporting goods retail segment.
Gross profit for the first quarter was $20.3 million, or 23.4% of sales, as
compared to $30.7 million, or 23.6% of sales, for the first quarter of the prior
year. The decrease as a percentage of sales was attributable to a higher
shrinkage accrual in the current year, 0.9%, and higher buying and occupancy
costs as a percentage of sales, 0.3%, offset by improved merchandise margins,
0.8%. Higher merchandise margins are attributable to the closing of
under-performing stores and improvements resulting from better merchandise
replenishment and allocation.
Operating expenses for the first quarter were $20.0 million, or 23.1% of
sales, as compared to $27.2 million, or 20.9% of sales, for the first quarter of
the prior year. The increase as a percentage of sales was due to the following:
1. Advertising expense was up 0.4% primarily due to lower co-op
advertising participation resulting from planned reductions in
advertising expenditures and discontinuation of electronic media;
2. Inventory Service expense was up 0.2% as a result of increased
frequency of physical inventories;
3. Store payroll expense was lower by 0.8% due to the continued focus on
labor management and the implementation of a centralized replenishment
and allocation function;
4. Corporate general and administrative expenses were higher by 1.9% due
to the overhead costs associated with implementation of a centralized
replenishment and allocation function in the current year, 0.3%, the
settlement of an information technology outsourcing agreement, 0.4%,
legal fees associated with the AMR litigation, 0.1%, and lower
leverage due to sales volume; and
5. Depreciation was higher by 0.3% due to lower sales volume leverage,
0.1%, and depreciation on asset additions in the prior year for
projects relating to information systems upgrades, warehousing and
advertising, 0.2%.
9
<PAGE>
Income from operations in the first quarter was $0.3 million, or 0.3% of
sales, as compared to $3.5 million, or 2.7% of sales in the same quarter of the
prior year.
Interest expense for the first quarter was $6.3 million, or 7.3% of sales,
as compared to $5.8 million, or 4.5% of sales for the first quarter in the prior
year. The increase in interest expense was the result of the following:
1. The Company's bank credit facility called for borrowings at LIBOR plus
3.0% contributing to an overall 47 basis point increase in average
interest rates; and
2. Average debt increased $7.0 million over the same period of the prior
year, although by quarter end, debt levels were $52.4 million below
the same period of the prior year.
The Company did not recognize an income tax benefit in the first quarter
but rather recorded an adjustment to the valuation allowance offsetting the
deferred tax assets in excess of the deferred tax liabilities. In the prior
year, the Company recorded an income tax benefit of $0.8 million with an
effective tax rate of approximately 35.7%.
For the first quarter, the Company posted a net loss of $6.0 million, or
7.0% of sales, as compared to a net loss of $1.5 million, or 1.2% of sales for
the same quarter of the prior year.
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 have been funded through the combination of
external financing, internally generated funds and credit terms from vendors.
The Company's working capital needs peak in the fourth quarter.
Operating activities provided cash of $27.1 million for the thirteen weeks
of fiscal 1998 as compared to cash used of $4.0 million for the same period of
fiscal 1997. The improvement was attributable to lower inventory levels
resulting from the inventory liquidation of 18 closing stores, average same
store inventory reductions of $10,000 from year end and $275,000 from the same
period of the prior year and increased vendor credit support.
Net cash of $61.2 million was provided by investing activities for the
first thirteen weeks of fiscal 1998 compared to net cash used in investing
activities during the first thirteen weeks of fiscal 1997 of $3.9 million. In
the current year, cash was provided through the completion of real estate
transactions on 23 properties. In the prior year, the cash usage was related to
new store signage for the name change to JumboSports.
Cash flows from financing activities used $88.3 million for the first
thirteen weeks of fiscal 1998 compared to cash provided of $5.6 million for the
first thirteen weeks of fiscal 1997. In fiscal 1998, proceeds from the real
estate transactions and from cash provided by operating activities were used to
reduce bank and mortgage debt.
As of May 1, 1998, the Company had $2.8 million of long-term capital lease
obligations, $68.7 million of long-term mortgage obligations, $74.8 million of 4
1/4% Convertible Subordinated Notes, and $102.2 million of borrowings under its
revolving credit facility. The revolving credit facility, reduced to $114.7
million in total commitment, matures May 1999 and contains customary events of
default and a number of customary covenants, including restrictions on liens and
sales of assets, prohibitions on dividends and certain changes in control, and a
maintenance of two financial ratios. As of May 1, 1998, the Company was in
compliance with all bank covenants.
10
<PAGE>
The revolving credit facility limits the amount of capital expenditures to
$7.7 million for fiscal 1998. The Company has spent $1.0 million through
thirteen weeks.
Management believes its current cash position together with amounts
available under its revolving credit facility, certain leasing commitments and
net cash provided by operating activities will be sufficient to fund 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 fourth fiscal quarter,
which includes the Christmas selling season. During the fourth quarter of the
prior year, the Company recorded 26.7% of its sales and 31.7% of its income from
operations for the Company's 59 operating stores, prior to the non-recurring
charges taken in the third and fourth quarters of fiscal 1997. 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 thirteen weeks of fiscal 1998 or fiscal
1997. There can be no assurance, however, that the Company's business will not
be affected by inflation in the future.
11
<PAGE>
JUMBOSPORTS INC.
PART II - OTHER INFORMATION
- ------------------------------------------------------------------------------
Item 1. Legal Proceedings.
In October 1997, the Company announced that it was terminating its
relationship with AMR Services Corporation ("AMR Services") for the
operation of the Company's warehouse facility in Nashville, Tennessee.
On October 10, 1997, the Company instituted litigation against AMR
Services in the United States District Court, Middle District of
Florida, seeking damages, a declaratory judgment, and injunctive
relief for fraud in the inducement and breach of an agreement to
provide third-party logistic services at the warehouse facility. In
its complaint, the Company alleges that AMR Services misrepresented
its experience in the warehouse management industry and mismanaged the
Nashville facility. The Company is preliminarily seeking damages from
AMR Services in excess of $27 million. At the current time, very
little discovery has been completed and an evaluation of the
likelihood of success in the litigation cannot be made. AMR has filed
a counterclaim in this action seeking damages in excess of six million
dollars for breach of contract and negligent misrepresentation.
On October 11, 1997, AMR Services instituted litigation in Tennessee
state court alleging breach of contract arising from the Company's
termination of the third-party logistics agreement. In this action,
AMR Services has also sought possession of certain records and
computer data which were generated at the warehouse facility. This
case has been removed to the United States District Court, Middle
District of Tennessee. AMR Services is seeking damages of
approximately $1,686,000. The parties recently filed a joint
stipulation which would result in the dismissal of this action and
pursuit of all claims in the Middle District of Florida action. All
damages previously sought in this action are now included in the six
million dollar claim in the Florida lawsuit.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of the Security-Holders.
None
Item 5. Other Information.
Effective, April 28, 1998, Mr. Steven A. Raymund, a Director of the
Company since March 1993, resigned as a Director.
Item 6. Exhibits and Reports on Form 8-K.
1) Exhibits.
Exhibit 10 - Second Amendment Agreement to the Amended
and Restated Revolving Credit Agreement
Exhibit 27 - Financial Data Schedule
2) Reports on Form 8-K.
On or about February 10, 1998, the Company filed with the
Commission a current report on Form 8-K (including the exhibit
thereto) dated January 30, 1998 relating to the Company entering
into an Amended Credit Agreement.
12
<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)
06/11/98 /S/ Jack E. Bush
Date Chairman of the Board, Chief
Executive Officer and President
06/11/98 /S/ Raymond P. Springer
Date Executive Vice President and
Chief Financial Officer
13
SECOND AMENDMENT AGREEMENT
This Second Amendment Agreement, dated as of May ___, 1998 (this
"Agreement"), is among JumboSports Inc., a Florida corporation (the "Borrower"),
each of the Lenders (as defined below) signatories hereto, Barnett Bank, N.A.,
as Administrative Agent and Collateral Agent (the "Collateral Agent"), and
NationsBank, N.A. f/k/a NationsBank, N.A. (South), as Documentation Agent (the
"Documentation Agent").
RECITALS:
A. Pursuant to that certain Amended and Restated Credit Agreement, dated as
of May 28, 1997, among the Borrower, each of the Borrower's Subsidiaries, as
Guarantors, the lending and financial institutions party thereto (the
"Lenders"), the Collateral Agent and the Documentation Agent, the Lenders agreed
to make revolving loan and letter of credit facilities available to the
Borrower, such Amended and Restated Credit Agreement being amended by inter alia
(i) that Amendment and Forbearance Agreement, dated as of December 15, 1997,
among the Required Lenders, the Borrower and the Guarantors, and (ii) that
certain Amendment Agreement, dated as of January 30, 1998 among the Borrower,
the Guarantors, and each of the Lenders (as amended, the "Existing Credit
Agreement").
B. The Borrower has requested the Lenders to make certain further
amendments to the Existing Credit Agreement and to consent to the Borrower's
sale or other disposition of certain assets.
C. The Lenders are willing to amend the Existing Credit Agreement and
provide such consent based upon and subject to the terms and conditions
specified in this Agreement.
NOW, THEREFORE, based upon the foregoing, and for good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged, the
parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its preamble
and recitals, have the following meanings:
"Amended Credit Agreement" means the Existing Credit Agreement as amended
hereby.
"First Amendment Agreement" has the meaning set forth in the Recitals
hereto.
"First Amendment Fee" means the amendment fee of $1,800,000, previously
earned by the Lenders, as provided in Subpart 4.1.4 of the First Amendment
Agreement, of which two installment payments of $450,000 each were deferred
under the First Amendment Agreement until May 2, 1998 and August 1, 1998.
<PAGE>
"Second Amendment Effective Date" shall have the meaning ascribed to such
term in Subpart 4.1.
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its preamble
and recitals, have the meanings provided in the Existing Credit Agreement.
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Second Amendment
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part II. Except as so amended, the Existing Credit Agreement shall
continue in full force and effect.
SUBPART 2.1 Amendment to Existing Definitions. Article I of the Existing
Credit Agreement is amended by deleting in its entirety the existing definitions
of the following terms and replacing such terms, in the appropriate alphabetical
places, with the following new definitions:
"Revolving Committed Amount" means (a) from January 30, 1998 through
and including April 3, 1998, ONE HUNDRED EIGHTY MILLION DOLLARS
($180,000,000), (b) from April 4, 1998 through and including August 28,
1998, ONE HUNDRED SIXTY MILLION DOLLARS ($160,000,000), (c) from August 29,
1998 through and including January 1, 1999, ONE HUNDRED FORTY-FIVE MILLION
DOLLARS ($145,000,000), and (d) from and after January 2, 1999, ONE HUNDRED
TWENTY-FIVE MILLION DOLLARS ($125,000,000), or, in each instance and for
any period, such lesser amount as the Revolving Committed Amount may be
reduced pursuant to Section 2.1(d) or Section 3.3(c) hereof, giving effect
for each calculation of the Revolving Committed Amount to the cumulative
amounts of such Net Cash Proceeds (other than those amounts received in
connection with the sale of inventory) received by the Lenders from and
after January 30, 1998 on account of Asset Dispositions.
SUBPART 2.2 Amendment to Section 3.1. Section 3.1 of the Existing Credit
Agreement shall be amended by adding a new section 3.1(d), which reads in its
entirety as follows:
(d) Elimination of Option for Eurodollar Loans. Notwithstanding any
other term or condition of this Credit Agreement, from and after July 31,
1998 all outstanding Revolving Loans shall accrue interest at the Adjusted
Base Rate and the Borrower shall not have the option to designate any
Revolving Loan (made before, on or after such date) as a Eurodollar Loan.
Each Notice of Borrowing submitted by the Borrower on or after such date
shall be deemed to request a Base Rate Loan. Any Eurodollar Loans
outstanding on July 31, 1998 shall automatically be converted to Base Rate
<PAGE>
Loans on July 31, 1998, and the Borrower shall pay to the Lenders all
breakage, redeployment costs, and other costs, charges, and amounts arising
on account of the prepayment of Eurodolloar Loans on a day which is not the
last day of the applicable Interest Period(s).
SUBPART 2.3 Amendment to Section 3.4. Section 3.4 of the Existing Credit
Agreement shall be amended by adding a new section 3.4(e), which reads in its
entirety as follows:
(e) Incentive Fee. The Borrower shall pay to the Administrative Agent,
for the pro rata benefit of each Lender (based on each Lender's Revolving
Commitment Percentage of the Revolving Committed Amount) a fee (the
"Incentive Fee") equal to 1.0% of the Revolving Committed Amount existing
as of August 1, 1998; provided, however, in the event that, on or before
July 31, 1998, the Borrower has repaid in full the Loans and the
Commitments have been terminated, then the Borrower shall have no
obligation to pay such Incentive Fee, or any portion thereof, to the
Lenders. To the extent that the Loans have not been repaid and the
Commitments terminated as of July 31, 1998, then such Incentive Fee shall
have been fully earned by the Lenders and immediately due and payable. The
Incentive Fee shall constitute part of the Credit Party Obligations for all
purposes under the Credit Documents.
SUBPART 2.4 Amendment of Section 7.15. Section 7.15 of the Existing Credit
Agreement shall be amended to read in its entirety as follows:
7.15 Retention of Financial Consultant. The Borrower shall retain on or
before January 30, 1998, either as an officer or as an independent
financial consultant, an individual or firm reasonably satisfactory to the
Agents (the "Consultant"). The Borrower shall engage the Consultant to
investigate, evaluate and advise the Borrower concerning a wide range of
financial and operational issues relating to the Borrower's business plan.
The exact scope of the Consultant's services shall be agreed upon by the
Borrower and the Consultant, but must be reasonably satisfactory to the
Agents. The Borrower shall cause the Consultant (i) to meet periodically
with the Agents at their reasonable request to report upon the Consultant's
findings and recommendations, and (ii) to meet with the Lenders no less
frequently than once per quarter to report on the Consultant's findings and
recommendations. The Borrower shall pay all costs associated with its
retention of the Consultant. The Borrower shall not terminate the
Consultant's services, or deny the Consultant access to information
necessary to perform its services within the scope of its engagement, prior
to the repayment in full of the Revolving Loans and the termination of the
Commitments. All reports and information provided by the Consultant to the
Agents or the Lenders shall be subject to the confidentiality provisions of
Section 11.17 hereof.
SUBPART 2.5 Amendment of Section 8.5. Section 8.5 of the Existing Credit
Agreement shall be amended by striking the amount "$24,000,000" appearing in
section 8.5(d) and replacing such amount with "$100,000,000." The remainder of
section 8.5 shall remain unchanged.
<PAGE>
SUBPART 2.6 Amendment of Section 8.6. Section 8.6 of the Existing Credit
Agreement shall be amended by striking the amount "$50 million" appearing in
proviso (ii) and replacing such amount with "$60 million." The remainder of
section 8.6 shall remain unchanged.
SUBPART 2.7 Amendment of Section 11.3(b). Section 11.3(b) of the Existing
Credit Agreement shall be amended by striking the amount "$5,000,000" appearing
in proviso (i) and replacing it with "$2,000,000," such amount becoming the new
aggregate minimum amount of Commitments which may be assigned by any Lender. The
remainder of section 11.3(b) shall remain unchanged.
PART III
CONSENTS
SUBPART 3.1 Additional GOB Sales. Subject to the satisfaction of each of
the conditions precedent specified in Part IV of this Agreement, the Lenders
hereby consent to the Borrower's sale, out of the ordinary course of its
business, of inventory located at its retail stores in San Antonio, Texas (store
#26), El Paso, Texas (store #81), Ft. Wayne, Indiana (store #66), Boca Raton,
Florida (store #45), and Peoria, Illinois (store # 65) (collectively, the "New
GOB Sales"); provided, that (i) any agreement executed by the Borrower with any
agent or liquidator shall be reasonably satisfactory in form and substance to
the Agents, (ii) all Net Cash Proceeds from such New GOB Sales shall be paid to
the Lenders as a prepayment of the Loans as required by Section 3.3(b)(ii) of
the Existing Credit Agreement, and (iii) the Borrower provide the Agents with
written notice prior to the commencement of any such sales. The Lenders' consent
herein is a one-time consent to the Borrower's sale of inventory outside of the
ordinary course of its business and shall not be construed as a consent to any
other sale of inventory outside of the ordinary course of its business, now or
in the future, at any other locations.
SUBPART 3.2 NationsBank Assignment. The Borrower and each of the Lenders
hereby consent to the assignment by NationsBank, N.A. of 3.50877% of the
Revolving Committed Amount, such amount not being in an integral multiple of
$1,000,000 and not representing the assignment of the remaining Commitments held
by NationsBank, N.A. Such assignment represents the sale by NationsBank, N.A. of
the entire interest in the Loans and Commitments which it previously purchased
from The Sakura Bank, Limited. Section 11.3(b) of the Existing Credit Agreement
requires the consent of the Borrower and the Required Lenders to assignments of
interests in the Loans and Commitments which are not in integral multiples of
$1,000,000 or representing such assigning Lender's entire remaining Commitment
amount.
<PAGE>
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1 Effective Date. This Agreement shall be and become effective as
of the date hereof (the "Second Amendment Effective Date") when all of the
conditions set forth in this Subpart 4.1 shall have been satisfied.
SUBPART 4.1.1. Execution of Agreement. The Collateral Agent shall have
received original duly executed counterparts of this Agreement from the Borrower
and each of the Lenders.
SUBPART 4.1.2. Closing Certificate. The Collateral Agent shall have
received a certificate from the Borrower certifying that (i) no Default or Event
of Default exists as of the Second Amendment Effective Date (after giving effect
to the provisions hereof), and (ii) the representations and warranties of the
Borrower made in or pursuant to the Credit Documents are true in all material
respects on and as of the Effective Date.
SUBPART 4.1.3. Guarantors Consent. Each of the Guarantors shall have
executed the Consent included in the signature pages of this Agreement, and the
Collateral Agent shall have received such Consent executed by each Guarantor.
SUBPART 4.1.4. Payment of Deferred Amendment Fee. The Collateral Agent
shall have received, for the ratable benefit of the Lenders according to their
respective Revolving Loan Commitment Percentages, on or before the Borrower's
execution and delivery of this Agreement, the Borrower's full payment of the
aggregate unpaid balance of the First Amendment Fee.
SUBPART 4.1.5. Payment of Agents' Expenses. The Borrower shall reimburse
the Agents for their reasonable out-of-pocket expenses incurred in connection
with (i) their attendance at any meeting with the Borrower, (ii) the negotiation
and preparation of this Agreement, and (iii) all other costs and expenses
heretofore incurred by the Agents, including without limitation legal fees and
expenses, in connection with the negotiation, administration, amendment and
enforcement of any of the Credit Documents. Failure of either Agent to invoice
the Borrower by the date hereof for any such amounts shall not relieve the
Borrower of its obligation to pay promptly such reasonable expenses, but the
payment of any such expenses not invoiced to the Borrower by the date hereof
shall not constitute a condition precedent to the effectiveness of this
Agreement.
SUBPART 4.1.6. Corporate Action. The Borrower shall deliver to the Agents
certified copies of all corporate action taken by each Credit Party approving
this Agreement and each of the documents executed and delivered in connection
herewith (including, without limitation, a certificate setting forth the
resolutions of the Board of Directors of each Credit Party adopted in respect of
the transactions contemplated by this Agreement.)
SUBPART 4.1.7. Documentation. The Lenders and the Collateral Agent shall
have received all information and documentation, and such counterpart originals
or such certified or other copies of such originals, as they may reasonably
request (including without limitation, if requested by the Agents, an opinion of
legal counsel to the Credit Parties, opining as to inter alia the due
authorization, validity and enforceability of this Agreement), and all legal
matters incident to the transactions contemplated by this Agreement shall be
satisfactory to the counsel for the Lenders.
<PAGE>
PART V
MISCELLANEOUS
SUBPART 5.1 Cross-References. References in this Agreement to any Part or
Subpart are, unless otherwise specified, to such Part or Subpart of this
Agreement.
SUBPART 5.2 Instrument Pursuant to Existing Credit Agreement. This
Agreement is a document executed pursuant to the Existing Credit Agreement and
shall (unless otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the Existing Credit
Agreement.
SUBPART 5.3 Credit Documents. The Borrower hereby confirms and agrees that
the Credit Documents are, and shall continue to be, in full force and effect,
except as amended hereby, except that, on and after the Effective Date,
references in each Credit Document to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Existing Credit Agreement
shall mean the Amended Credit Agreement.
SUBPART 5.4. Representations and Warranties. The Borrower hereby represents
and warrants that (i) it has the requisite corporate power and authority to
execute, deliver and perform this Agreement, (ii) it is duly authorized to, and
has been authorized by all necessary corporate action, to execute, deliver and
perform this Agreement, (iii) it has no claims, counterclaims, offsets, or
defenses to the Credit Documents and the performance of its obligations
thereunder, or if the Borrower has any such claims, counterclaims, offsets, or
defenses to the Credit Documents or any transaction related to the Credit
Documents, the same are hereby waived, relinquished and released in
consideration of the Lenders' execution and delivery of this Agreement, (iv) the
representations and warranties contained in Section 6 of the Existing Credit
Agreement are, subject to the limitations set forth therein, true and correct in
all material respects on and as of the date hereof as though made on and as of
such date (except for those which expressly relate to an earlier date or those
which relate to specific schedules, the changes to which do not represent a
Material Adverse Effect), (v) no event of default under any other agreement,
document or instrument to which the Borrower is a party will occur as a result
of the transactions contemplated hereby, and (vi) as of the date of this
Agreement, no Event of Default (or any event or condition which, but for the
lapse of time or the giving of notice, would constitute an "event of default"
under Section 9.1 of the Existing Credit Agreement or the Amended Credit
Agreement) exists.
SUBPART 5.5. Costs and Expenses. The Borrower hereby agrees to pay on
demand all costs and expenses (including without limitation the reasonable fees
and expenses of counsel to the Agents) incurred by the Agents in connection with
the negotiation, preparation, execution, and delivery of this Agreement and the
enforcement or preservation of any rights and remedies of the Lenders and the
Collateral Agent hereunder (including without limitation any such fees and
expenses subsequently incurred by the Lenders and/or the Collateral Agent in any
bankruptcy or insolvency proceeding involving the Borrower).
<PAGE>
SUBPART 5.6. Counterparts, Effectiveness, Etc. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SUBPART 5.7. Captions. The captions in this Agreement are inserted only as
a matter of convenience and for reference and in no way define, limit or
describe the scope of this Agreement or any provision hereof.
SUBPART 5.8 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF FLORIDA WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SUBPART 5.9. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
[Remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized officers as of the day and year
first above written.
THE BORROWER: JUMBOSPORTS INC.,
a Florida corporation
/S/ R. P. Springer
Executive Vice President
THE LENDERS: BARNETT BANK, N.A.,
individually in its capacity as a
Lender and in its capacity as
Administrative Agent and
Collateral Agent
/S/ DeWitt W. King III
Senior Vice President
NATIONSBANK, N.A. f/k/a
NationsBank, N.A. (South),
individually in its capacity as a
Lender and in its capacity as
Documentation Agent
/S/ DeWitt W. King III
Senior Vice President
[Signatures Continued]
<PAGE>
HIBERNIA NATIONAL BANK
/S/ Frank J. Crifasi
Vice President
U.S. BANK NATIONAL
ASSOCIATION (f/k/a United States
National Bank of Oregon)
/S/ Dennis C. McCormick
Vice President
THE SUMITOMO BANK, LIMITED
/S/ J. H. Broadley
Vice President
/S/ Brian M. Smith
Senior Vice President
NATIONAL BANK OF CANADA
/S/ E. Lynn Forgosh
Group Vice President
/S/ L. Curnyn
Vice President
[Signatures Continued]
<PAGE>
LTCB TRUST COMPANY
/S/ Thomas Meyer
Senior Vice President
FIRST AMERICAN NATIONAL BANK
/S/ Samuel M. Ballesteros
Senior Vice President
SUNTRUST BANK, TAMPA BAY
/S/ Jason Lloyd
Vice President
PNC BANK, N.A.
/S/ Thomas J. McCool
Senior Vice President
<PAGE>
CONSENT TO AGREEMENT
Each of the undersigned, as a party to one or more of the Credit Documents,
hereby acknowledges the execution and delivery of the Second Amendment Agreement
dated as of May ___, 1998, hereby confirms and agrees that each Credit Document
to which it is a party is, and shall continue to be, in full force and effect,
and hereby ratifies and confirms in all respects its obligations thereunder.
This Consent may be executed by the parties hereto in counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same instrument.
SPORTS & RECREATION HOLDINGS OF PA, INC.
/S/ R. P. Springer
Vice President
GUIDE SERIES, INC.
/S/ R. P. Springer
Vice President
CONSTRUCTION RESOLUTION, INC.
/S/ R. P. Springer
Vice President
SPORTS & RECREATION, INC.
/S/ R. P. Springer
Executive Vice President
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 MAY 1, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jan-29-1999
<PERIOD-START> Jan-31-1998
<PERIOD-END> May-1-1998
<CASH> 307
<SECURITIES> 0
<RECEIVABLES> 5,904
<ALLOWANCES> 294
<INVENTORY> 140,009
<CURRENT-ASSETS> 191,700
<PP&E> 178,115
<DEPRECIATION> 31,039
<TOTAL-ASSETS> 356,595
<CURRENT-LIABILITIES> 62,872
<BONDS> 74,750
0
0
<COMMON> 204
<OTHER-SE> 42,267
<TOTAL-LIABILITY-AND-EQUITY> 356,595
<SALES> 86,544
<TOTAL-REVENUES> 86,544
<CGS> 60,887
<TOTAL-COSTS> 66,284
<OTHER-EXPENSES> 19,978
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,319
<INCOME-PRETAX> (6,037)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,037)
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<EXTRAORDINARY> 0
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<NET-INCOME> (6,037)
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