<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
For the quarterly period ended September 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
For the transition period from __________________ to _________________________
Commission File Number : 33-61300 and 33-61096
BIG 5 CORP.
FKA: UNITED MERCHANDISING CORP.
(Exact name of registrant as specified in its charter)
California
(State of Incorporation)
95-1854273
(I.R.S employer identification number)
2525 EAST EL SEGUNDO BOULEVARD
EL SEGUNDO, CALIFORNIA 90245
(310) 536-0611
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether the registrant 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). Yes [X] No [ ]
Indicate by check mark whether the registrant has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding for each of the registrant's classes
of common stock, as of the latest practicable date. 1,300 shares of common
stock, zero par value, at August 8, 1997.
1
<PAGE> 2
BIG 5 CORP.
FKA: UNITED MERCHANDISING CORP.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Title Page 1
Index 2
PART I -FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - September 28, 1997 and
December 29, 1996 3
Statements of Operations -
3 months and 9 months ended September 28, 1997 and
September 29, 1996 4
Statements of Cash Flows -
9 months ended September 28, 1997 and
September 29, 1996 5
Unaudited Pro Forma Condensed Balance Sheet -
As of September 28, 1997 6
Notes to Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security-Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15-17
SIGNATURES 18
</TABLE>
2
<PAGE> 3
BIG 5 CORP.
FKA: UNITED MERCHANDISING CORP.
Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 28, December 29,
1997 1996
--------- ---------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 416 $ 4,797
Trade & other receivables, net of allowance for
doubtful accounts of $397 and $464, respectively 2,232 4,054
Merchandise inventories 146,513 134,886
Prepaid expenses 865 1,031
--------- ---------
Total current assets 150,026 144,768
--------- ---------
Property and equipment:
Land 186 186
Buildings, improvements, furniture and equipment 47,064 44,423
Less accumulated depreciation and
amortization (20,487) (17,079)
--------- ---------
Net property and equipment 26,763 27,530
--------- ---------
Deferred income taxes, net 4,995 1,700
Leasehold interest, net of amortization of $13,441 and
$12,117, respectively 15,051 16,375
Other assets, at cost, less accumulated
amortization of $1,208 and $713, respectively 1,539 1,829
Goodwill, less accumulated amortization of
$1,063 and $878, respectively 5,482 5,667
--------- ---------
$ 203,856 $ 197,869
========= =========
Liabilities and stockholder's equity
Current liabilities:
Accounts payable $ 44,453 $ 44,239
Accrued expenses 26,015 30,101
--------- ---------
Total current liabilities 70,468 74,340
Deferred rent 5,793 5,224
Long-term debt 87,226 86,450
--------- ---------
Total liabilities 163,487 166,014
--------- ---------
Commitments and contingencies
Stockholder's equity
Common stock, no par value. Authorized 2,500 shares;
issued and outstanding 1,300 shares 35,103 35,080
Retained Earnings (accumulated deficit) 5,266 (3,225)
--------- ---------
Total stockholder's equity 40,369 31,855
--------- ---------
$ 203,856 $ 197,869
========= =========
</TABLE>
See accompanying notes to unaudited financial statements
3
<PAGE> 4
BIG 5 CORP.
FKA: UNITED MERCHANDISING CORP.
Statements of Operations
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 28, 1997 September 29, 1996 September 28, 1997 September 29, 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 117,079 $ 106,523 $ 324,177 $ 296,356
Cost of goods sold, buying and
occupancy 80,274 73,310 218,675 203,420
--------- --------- --------- ---------
Gross profit 36,805 33,213 105,502 92,936
--------- --------- --------- ---------
Operating expenses:
Selling and administrative 28,532 25,953 82,603 76,651
Depreciation and amortization 2,089 2,310 6,087 7,109
--------- --------- --------- ---------
Total operating expenses 30,621 28,263 88,690 83,760
--------- --------- --------- ---------
Operating income 6,184 4,950 16,812 9,176
Interest expense 2,495 2,700 7,913 8,589
--------- --------- --------- ---------
Income before income taxes
and extraordinary loss 3,689 2,250 8,899 587
Income taxes 408 -- 408 --
--------- --------- --------- ---------
Net income before extraordinary
loss 3,281 2,250 8,491 587
Extraordinary loss from early
extinguishment of debt -- -- -- (2,222)
--------- --------- --------- ---------
Net income (loss) $ 3,281 $ 2,250 $ 8,491 $ (1,635)
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited financial statements.
4
<PAGE> 5
BIG 5 CORP.
FKA: UNITED MERCHANDISING CORP.
Statement of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
September 28, 1997 September 29, 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 8,491 $ (1,635)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,087 7,109
Extraordinary loss from early extinguishment of debt -- 2,222
Amortization of deferred finance charges 495 454
Deferred tax benefit (3,295) --
Change in assets and liabilities:
Merchandise inventories (11,627) 1,139
Trade & other receivables 1,822 1,855
Prepaid expenses and other assets (54) (153)
Accounts payable 214 (679)
Accrued expenses (4,086) (2,785)
-------- --------
Net cash (used in) provided by operating activities (1,953) 7,527
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (3,227) (1,555)
Purchases of assets held pending sale and leaseback -- (8,910)
Proceeds from sale of property and equipment -- 13,900
-------- --------
Net cash (used in) provided by investing activities (3,227) 3,435
-------- --------
Cash flows from financing activities:
Net borrowings/(repayments) under revolving credit facilities 776 (8,176)
Debt issuance costs -- (1,434)
Debt prepayments -- (1,160)
Other 23 --
-------- --------
Net cash provided by (used in) financing activities 799 (10,770)
-------- --------
Net (decrease) increase in cash and cash equivalents (4,381) 192
Cash and cash equivalents at beginning of period 4,797 3,198
-------- --------
Cash and cash equivalents at end of period $ 416 $ 3,390
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
5
<PAGE> 6
BIG 5 CORP.
FKA: UNITED MERCHANDISING CORP.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
As of September 28, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
--------- ------- ---------
(dollars in thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 416 $ $ 416
Trade & other receivables, net of allowance for
doubtful accounts of $397 and $464, respectively 2,232 2,232
Merchandise inventories 146,513 146,513
Prepaid expenses 865 865
--------- ---------
Total current assets 150,026 150,026
--------- ---------
Property and equipment:
Land 186 186
Buildings, improvements, furniture and equipment 47,064 47,064
Less accumulated depreciation and
amortization (20,487) (20,487)
--------- ---------
Net property and equipment 26,763 26,763
--------- ---------
Deferred income taxes, net 4,995 4,995
Leasehold interest, net of amortization 15,051 15,051
Other assets, at cost, less accumulated amortization 1,539 5,075(a) 6,614
Excess of cost over net assets acquired, less
accumulated amortization 5,482 5,482
--------- ------- ---------
Total assets 203,856 5,075 208,931
========= ======= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable 44,453 44,453
Accrued expenses 26,015 26,015
--------- ---------
Total current liabilities 70,468 70,468
Deferred rent 5,793 5,793
Long-term debt 87,226 89,498(b) 176,724
========= ------- =========
Total liabilities 163,487 89,498 252,985
========= ------- =========
Commitments and contingencies
Stockholder's equity 40,369 (84,423)(c) (44,054)
========= ------- =========
Total stockholder's equity $ 203,856 $ 5,075 $ 208,931
========= ======= =========
</TABLE>
See accompanying notes to unaudited financial statements.
6
<PAGE> 7
BIG 5 CORP.
FKA: UNITED MERCHANDISING CORP.
Notes to Unaudited Financial Statements
(Dollars in Thousands)
FINANCIAL INFORMATION
1. In the opinion of management of United Merchandising Corp. ("the Company"),
the accompanying unaudited financial statements contain all adjustments,
consisting only of normal recurring adjustments, necessary to present
fairly and in accordance with generally accepted accounting principles the
financial position and cash flows as of and for the period ended September
28, 1997.
2. These unaudited financial statements should be read in conjunction with the
Company's 1996 audited financial statements included in the Company's
Report on Form 10-K.
3. In November 1997, the Company and its Parent completed a Plan of
Recapitalization and Stock Repurchase Agreement ("Recapitalization"). The
following transactions directly effecting the Company resulted from the
Recapitalization: (i) the Company issued $131,000 of 10 7/8% Senior Notes
due 2007 (New Notes) at an unamortized discount of $591; (ii) the Company
defeased and called for repayment all of its outstanding 13 5/8% Senior
Subordinated Notes due 2002 (Old Notes), paying a redemption premium of
$2,128; (iii) the Company amended its Revolving Credit Facility and (iv)
the Company provided a dividend of $81,707 to its parent.
The Company incurred transaction fees of $5,450 related to the offering of
the $131,000 of New Notes and $213 related to the amendment of the
Revolving Credit Facility. The Company also incurred a write-off of $588 of
deferred financing fees related to the defeasance and repayment of the Old
Notes.
The Unaudited Pro Forma Condensed Balance Sheet reflects adjustments as if
the Recapitalization had been consumated and was effective as of September
28, 1997. These adjustments are summarized as follows:
a) Represents the net change in deferred financing:
<TABLE>
<S> <C>
Financing costs associated with issuance of New Notes $ 5,663
Write-off of deferred fees on Old Notes (588)
-------
$ 5,075
=======
</TABLE>
b) Represents the net change in long-term debt:
<TABLE>
<S> <C>
Issuance of New Notes, net of discount $ 130,409
Repayment of Old Notes (36,450)
Partial repayment of Revolving Credit Facility (4,461)
---------
$ 89,498
=========
</TABLE>
7
<PAGE> 8
c) Represents the net change in stockholder's equity:
<TABLE>
<S> <C>
Cash dividend to Parent $81,707
Premium on repayment of Old Notes 2,128
Write-off of deferred financing fees on Old Notes 588
-------
$84,423
=======
</TABLE>
4. The Company was reincorporated in Delaware as Big 5 Corp. in conjunction with
the Recapitalization.
8
<PAGE> 9
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
RESULTS OF OPERATIONS
The results of the interim periods are not necessarily indicative of results for
the entire year.
THREE MONTHS ENDED SEPTEMBER 28, 1997 VERSUS THREE MONTHS ENDED SEPTEMBER 29,
1996
The following table sets forth for the periods indicated operating results in
thousands of dollars and expressed as a percentage of sales.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
September 28, 1997 September 29, 1996
--------------------- ---------------------
<S> <C> <C> <C> <C>
Net sales $117,079 100.0% $106,523 100.0%
Cost of goods sold, buying and
occupancy 80,274 68.6 73,310 68.8
-------- ------ -------- ------
Gross profit 36,805 31.4 33,213 31.2
-------- ------ -------- ------
Operating expenses:
Selling and administrative 28,532 24.4 25,953 24.4
Depreciation and amortization 2,089 1.8 2,310 2.2
-------- ------ -------- ------
Total operating expense 30,621 26.2 28,263 26.6
-------- ------ -------- ------
Operating income 6,184 5.2 4,950 4.6
Interest expense 2,495 2.1 2,700 2.5
-------- ------ -------- ------
Income before taxes 3,689 3.1 2,250 2.1
Income taxes 408 0.3 -- --
-------- ------ -------- ------
Net income $ 3,281 2.8% $ 2,250 2.1%
======== ====== ======== ======
EBITDA (a) $ 8,273 7.1% $ 7,260 6.8%
</TABLE>
(a) EBITDA represents net income before taking into consideration interest
expense, income tax expense, depreciation expense, amortization expense
and non-cash rent expense charge (included in depreciation).
9
<PAGE> 10
1. Net Sales
Net sales increased 9.9% (or $10.6 million) from $106.5 million reported
for the three months ended September 29, 1996 to $117.1 million for the
three months ended September 28, 1997. Same store sales increased 6.3%
compared with the same period last year, reflecting improved economic
conditions in the regions in which the Company operates, together with
continuing refinements in advertising and merchandising programs partially
resulting from utilization of the management tools derived from the
Company's enhanced information systems. Sales attributable to an increase
in store count from 193 at September 29, 1996 to 202 at September 28, 1997
constituted the remainder of the 9.9% sales increase for the three month
period.
2. Gross Profit
Gross profit increased 10.8% (or $3.6 million) from $33.2 million for the
three months ended September 29, 1996 to $36.8 million for the three months
ended September 28, 1997, reflecting increased sales discussed above and
improved gross profit margin. Gross profit margin increased from 31.2% of
sales for the three month period in 1996 to 31.4% for the comparable three
month period this year. The improvement is a result of leveraging of fixed
costs due to increased sales.
3. Operating Expenses
Selling and administrative expenses increased 9.6% (or $2.5 million) from
$26.0 million for the three months ended September 29, 1996 to $28.5
million for the three months ended September 28, 1997. As a percentage of
sales, selling and administrative expenses remained at 24.4% of sales for
the 1996 and 1997 periods.
Depreciation and amortization decreased 8.7% (or $0.2 million) from $2.3
million for the prior year period to $2.1 million for the three months
ended September 28, 1997. The decrease reflected primarily a reduction in
leasehold improvements amortization resulting from the sale/leaseback of
the Company's Fontana distribution center in the prior year and an increase
in the amortization term of the Company's leasehold interests.
4. Interest Expense
Interest expense decreased 7.4% (or $0.2 million) from $2.7 million for the
prior year period to $2.5 million for the nine months ended September 28,
1997. This decrease reflected lower average borrowing levels on the
Company's revolving credit facility during the current year period
resulting primarily from improved earnings. The Company's revolving debt
balance was $50.8 million at September 28, 1997 versus a balance of $59.0
million at September 29, 1996. The decrease also reflected a .75% reduction
in the rate of interest payable on revolving debt balances resulting from
an amendment to the Company's revolving credit facility effective August
11, 1997 (see "Liquidity and Capital Resources").
5. Income Taxes
The Company recorded an income tax provision against operations of $0.4
million for the three months ended September 28, 1997 versus no tax
provision for the same period last year.
10
<PAGE> 11
6. Net Income
Net income for the three months ended September 28, 1997 increased
43.5% (or $1.0 million) from $2.3 million for the three months ended
September 29, 1996 to $3.3 million for the three months ended September 28,
1997. This improvement reflects the positive sales results achieved during
the three months ended September 28, 1997.
7. Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA")
EBITDA increased 13.7% (or $1.0 million) from $7.3 million for the three
months ended September 29, 1996 to $8.3 million for the three months ended
September 28, 1997. This improvement reflects the positive sales results
achieved during the three months ended September 28, 1997.
NINE MONTHS ENDED SEPTEMBER 28, 1997 VERSUS NINE MONTHS ENDED SEPTEMBER 29, 1996
The following table sets forth for the periods indicated operating results in
thousands of dollars and expressed as a percentage of sales.
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------------------
September 28, 1997 September 29, 1996
--------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales $ 324,177 100.0% $ 296,356 100.0%
Cost of goods sold, buying and
occupancy 218,675 67.5 203,420 68.6
--------- ----- --------- -----
Gross profit 105,502 32.5 92,936 31.4
--------- ----- --------- -----
Operating expenses:
Selling and administrative 82,603 25.5 76,651 25.9
Depreciation and amortization 6,087 1.8 7,109 2.4
--------- ----- --------- -----
Total operating expense 88,690 27.3 83,760 28.3
--------- ----- --------- -----
Operating income 16,812 5.2 9,176 3.1
Interest expense 7,913 2.5 8,589 2.9
--------- ----- --------- -----
Net income (loss) before
income taxes and
extraordinary loss 8,899 2.7 587 0.2
Income taxes 408 0.1 -- --
--------- ----- --------- -----
Net income (loss) before
extraordinary loss 8,491 2.6 587 0.2
Extraordinary (loss) from
early extinguishment of debt -- -- (2,222) (0.8)
--------- ----- --------- -----
Net income (loss) $ 8,491 2.6% $ (1,635) (0.6)%
========= ===== ========= =====
EBITDA (a) $ 22,899 7.1% $ 16,285 5.5%
</TABLE>
(a) EBITDA represents net income (loss) before taking into consideration
interest expense, income tax expense, depreciation expense,
amortization expense, non-cash rent expense (included in depreciation)
and extraordinary loss from early extinguishment of debt.
11
<PAGE> 12
1. Net Sales
Net sales increased 9.4% (or $27.8 million) from $296.4 million reported
for the nine months ended September 29, 1996 to $324.2 million for the nine
months ended September 28, 1997. Same store sales increased 7.1% compared
with the same period last year, reflecting improved economic conditions in
the regions in which the Company operates, together with continuing
refinements in advertising and merchandising programs partially resulting
from improved utilization of the management tools derived from the
Company's information systems. Sales attributable to an increase in store
count from 193 at September 29, 1996 to 202 at September 28, 1997
constituted the remainder of the 9.4% sales increase for the nine month
period.
2. Gross Profit
Gross profit increased 13.6% (or $12.6 million) from $92.9 million for the
nine months ended September 29, 1996 to $105.5 million for the nine months
ended September 28, 1997, reflecting increased sales (as discussed above)
and improved gross profit margin. Gross profit margin increased from 31.4%
of sales for the nine month period ended September 29, 1996 to 32.5% for
the comparable nine month period this year. The improvement is a result of
positive comparisons of gross profit margins in the majority of the
Company's product categories and improved store inventory shrink results,
both of which were aided by the Company's enhanced information systems.
3. Operating Expenses
Selling and administrative expenses increased 7.7% (or $5.9 million) from
$76.7 million for the nine months ended September 29, 1996 to $82.6 million
for the nine months ended September 28, 1997. As a percentage of sales,
selling and administrative expenses decreased from 25.9% of sales for the
1996 period to 25.5% of sales in the 1997 period, reflecting management's
continued focus on controlling expenses and its leveraging of fixed costs
due to increased sales.
Depreciation and amortization decreased 14.1% (or $1.0 million) from $7.1
million for the prior year period to $6.1 million for the nine months ended
September 28, 1997. The decrease reflected primarily a reduction in
leasehold improvements amortization resulting from the sale/leaseback of
the Company's Fontana distribution center in the prior year and an increase
in the amortization term of the Company's leasehold interests.
4. Interest Expense
Interest expense decreased 8.1% (or $0.7 million) from $8.6 million for the
prior year period to $7.9 million for the nine months ended September 28,
1997. This decrease reflected lower average borrowing levels on the
Company's revolving credit facility during the current year period
resulting from improved earnings and a continued focus on managing
inventory levels. The Company's revolving debt balance was $50.8 million at
September 28, 1997 versus a balance of $59.0 million at September 29, 1996.
The decrease also reflected a .75% reduction in the rate of interest
payable on revolving debt balances resulting from an amendment to the
Company's revolving credit facility effective August 11, 1997 (see
"Liquidity and Capital Resources").
5. Income Taxes
The Company recorded an income tax provision against operations of $0.4
million for the nine months ended September 28, 1997 versus no tax
provision for the same period last year.
12
<PAGE> 13
6. Extraordinary Loss from Early Extinguishment of Debt
During the nine months ended September 29, 1996, the Company refinanced
its indebtedness under a prior credit facility with borrowings under a new
facility with the CIT Group/Business Credit, Inc.. In connection with the
refinancing, the Company accelerated amortization of $1.0 million of
certain fees and paid $1.2 million in prepayment premiums and other fees.
Accordingly, a charge of $2.2 million was recorded as an extraordinary loss
for the nine months ended September 29, 1996. No such event occurred during
the nine month period this year.
7. Net Income (Loss)
Net income for the nine months ended September 28, 1997 increased $10.1
million from a net loss of $1.6 million for the nine months ended September
29, 1996 to a net income of $8.5 million for the nine months ended
September 28, 1997. This improvement reflects the very positive sales and
gross profit results achieved during the nine months ended September 28,
1997.
8. Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA")
EBITDA increased 40.5% (or $6.6 million) from $16.3 million for the nine
months ended September 29, 1996 to $22.9 million for the nine months ended
September 28, 1997. Increased same store sales, gross margin and operating
efficiencies were the primary factors contributing to the significant
improvement.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a credit agreement with the CIT Group/Business Credit,
Inc. (the "CIT Credit Agreement"), which provides the Company with a three-year,
non-amortizing, $100 million revolving debt facility (the "CIT Facility"). Prior
to August 11, 1997, the CIT Facility bore interest at a rate of LIBOR plus 2.5%,
or the Chemical Bank prime lending rate plus .75%. Effective August 11, 1997,
the CIT Credit Agreement was amended changing the interest rate charged the
Company to LIBOR plus 1.75%, or the Chase Manhattan Bank's rate. The CIT
Facility is secured by trade accounts receivable, merchandise inventories and
general intangible assets (as defined) of the Company, and has a borrowing
limit, including advances, outstanding letters of credit and unreimbursed
drawings under letters of credit at any time equal to the lesser of $100 million
and the Borrowing Base. The Borrowing Base is equal to 65% of the aggregate
value of Eligible Inventory (as defined) from time to time. As of September 28,
1997, the Company maintained eligible inventory of $137.3 million with an
aggregate balance of $50.8 million outstanding under the CIT facility. This
balance compares to an aggregate balance of $59.0 million outstanding on
September 29, 1996. The Company is in compliance with all of the covenants under
the CIT Credit Agreement.
Net cash used in operating activities was $1.9 million in the nine
months ended September 28, 1997 compared to cash provided from operating
activities of $7.5 million in the nine months ended September 29, 1996. The
change between periods was primarily due to increased inventory purchases as the
Company normalized its inventory purchasing after the planned inventory
reduction program which resulted in reduced purchases in prior year periods.
Nine months 1996 cash flow also benefited from the receipt of $5.0
million in net proceeds from the sale/leaseback of the Company's Fontana,
California distribution center and Culver City, California store.
13
<PAGE> 14
Capital expenditures for the nine months ended September 28, 1997 were
$3.2 million. During this period the Company has opened six new stores. Capital
expenditures are expected to be approximately $2.2 million for the remainder of
Fiscal 1997 as the Company returns to its historical new store growth program by
opening a total of 14 new stores in Fiscal 1997. Management expects capital
expenditures for Fiscal 1998 will be approximately $6.0 to $7.5 million and will
be used primarily to fund the opening of 15 to 20 new stores. The Company's
store format requires a low investment in fixtures and equipment (approximately
$250,000), working capital (approximately $500,000, of which one-third is
typically financed by vendors) and real estate (leased, "built-to-suit")
locations.
Net cash provided by financing activities was $0.8 million for the nine
months ended September 28, 1997 reflecting increased borrowings under the
Company's CIT Facility. As of September 28, 1997, there were borrowings of $50.8
million and letter of credit commitments of $9.6 million outstanding under the
existing CIT revolving credit facility, and the Company's cash and cash
equivalents balance was $0.4 million versus a balance of $3.4 million at
September 29, 1996
The Company believes that net cash provided by operating activities and
borrowings under the CIT Credit Facility will be sufficient to fund anticipated
capital expenditures and working capital requirements for the foreseeable
future.
IMPACT OF INFLATION
Although the operations of the Company are influenced by general
economic conditions, the Company does not believe that inflation has had a
material effect on its results of operations during the 39 weeks ended September
28, 1997.
FORWARD-LOOKING STATEMENTS
Certain information contained herein includes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and is subject to the safe harbor created by that Act. Forward-looking
statements can be identified by the use of forward-looking terminology, such as
"may," "will," "should," "expect," "anticipate," "estimate," "continue," "plan,"
"intend" or other similar terminology. Such forward-looking statements, which
relate to, among other things, the financial condition, results of operations
and business of the Company, are subject to certain risks and uncertainties that
could cause actual results to differ materially from those set forth in such
statements. These include, without limitation, the Company's ability to open new
stores on a timely and profitable basis, the impact of competition on revenues
and margins, the effect of weather conditions and general economic conditions in
the western United States (which is the Company's area of operation), the
seasonal nature of the Company's business, and other risks and uncertainties as
may be detailed from time to time in the Company's public announcements and
filings with the Securities and Exchange Commission.
14
<PAGE> 15
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions arising in the
ordinary course of business. In the opinion of management, the
ultimate disposition of matters currently pending against the
Company will not have a material adverse effect on the Company's
financial position.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security-Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1* Purchase and Sale Agreement among Big 5 Holdings, Thrifty and
PE dated as of May 22, 1992.
3.1(a)* Certificate of Incorporation of the Company filed with the
California Secretary of State on September 7, 1955.
3.1(b)* Amendment to Articles of Incorporation of the Company filed
with the California Secretary of State on September 21, 1992.
3.2* Bylaws of the Company.
4.1* Indenture among the Company, Big 5 Holdings and First Trust
National Association relating to the Senior Notes dated as of
September 25, 1992.
4.2* Form of the Senior Notes.
4.3* Purchase Agreement among the Company, Big 5 Holdings and the
original purchasers of the Senior Notes dated as of September 25,
1992.
4.4* Registration Rights Agreement among the Company, Big 5 Holdings
and the original purchasers of the Senior Notes dated as of
September 25, 1992.
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.5* Form of Amendment of Registration Rights Agreement among the
Company, Big 5 Holdings and Holders of the Senior Notes (re:
ongoing registration rights).
4.6* Form of Amendment of Registration Rights Agreement among the
Company, Big 5 Holdings and Holders of the Senior Notes (re:
extension of Effectiveness Date).
10.1(a)*** Financing Agreement dated March 8, 1996 between The CIT
Group/Business Credit, Inc. and the Company.
10.1(b)*** Grant of Security Interest in and Collateral Assignment of
Trademarks and Licenses dated as of March 8, 1996 by the Company
in favor of The CIT Group/Business Credit, Inc.
10.1(c)*** Guarantee dated March 8, 1996 by Big 5 Corporation in favor
of The CIT Group/Business Credit, Inc.
10.2* Tax Indemnity Agreement by and among PE, TPH, Thrifty and Big 5
Holdings dated as of September 25, 1992.
10.3(a)** Amended and Restated Indemnification Implementation
Agreement between UMC and TPH dated as of April 20, 1994.
10.3(b)** Agreement and Release among PE, TPH, TPI, Thrifty and UMC
dated as of March 11, 1994.
10.4(a)* Big 5 Corporation 1992 Equity Plan.
10.4(b)* Stock Subscription Agreement between Parent and GEI dated
as of September 25, 1992.
10.5(a)* Employment Agreement between the Company and Robert W.
Miller dated as of January 1, 1993.
10.5(b)* Employment Agreement between the Company and Steve G.
Miller dated as of January 1, 1993.
10.5(d)* Sublease between the Company and Thrifty dated as of
September 25, 1992 (1).
10.6(a)*** Agreement on Purchase and Sale among the Company and the State of
Wisconsin dated as of February 13, 1996.
10.6(b)*** Lease among the Company (Lessee) and the State of Wisconsin
Investment Board (Lessor) dated as of March 5,1996.
21 Subsidiaries of the Company: None
27 Financial Data Schedule.
</TABLE>
- ------------------------
* Incorporated by reference to the Company's Registration Statement
on Form S-4 (file no. 33-61096) effective as of June 29, 1993.
16
<PAGE> 17
** Incorporated by reference to the Company's report on Form 10-K
for the year ended January 1, 1995.
*** Incorporated by reference to the Company's report on Form 10-K
for the year ended December 31, 1995.
(b) Reports on Form 8-k
None.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15 (d) OF THE ACT BY REGISTRANTS WHICH HAVE
NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
The Company has not provided any annual report covering its last
fiscal year nor any proxy statement to security holders.
17
<PAGE> 18
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.
BIG 5 CORP.
FKA: UNITED MERCHANDISING CORP.
A CALIFORNIA CORPORATION
Date: 2/13/98 By: /S/ STEVEN G. MILLER
-------------------------------
Steven G. Miller
President and
Chief Operating Officer
Date: 2/13/98 By: /S/ CHARLES P. KIRK
-------------------------------
Charles P. Kirk
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S STATEMENT OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 416
<SECURITIES> 0
<RECEIVABLES> 2,232
<ALLOWANCES> 397
<INVENTORY> 146,513
<CURRENT-ASSETS> 150,026
<PP&E> 26,763
<DEPRECIATION> 20,487
<TOTAL-ASSETS> 203,856
<CURRENT-LIABILITIES> 70,468
<BONDS> 87,226
0
0
<COMMON> 35,103
<OTHER-SE> 5,266
<TOTAL-LIABILITY-AND-EQUITY> 203,856
<SALES> 324,177
<TOTAL-REVENUES> 324,177
<CGS> 218,675
<TOTAL-COSTS> 218,675
<OTHER-EXPENSES> 88,690
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,913
<INCOME-PRETAX> 8,899
<INCOME-TAX> 408
<INCOME-CONTINUING> 8,491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,491
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
