<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
July 31, 1996 0-23570
JUST FOR FEET, INC.
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(Exact name of registrant as specified in its charter)
Alabama 63-0734234
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
153 Cahaba Valley Parkway North, Birmingham, Alabama 35124
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 403-8000
--------------
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(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
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Common Stock, par value $.0001 per share 28,355,928 shares
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Class Outstanding at September 5, 1996
The following items are amended:
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
Just For Feet, Inc. and subsidiaries (the "Company") hereby amends Items 1 and 2
of Part 1 of its statement on Form 10Q for its quarter ended July 31, 1996 as
follows:
<TABLE>
<CAPTION>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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July 31, January 31,
1996 1996
(Unaudited)
ASSETS (Restated)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 90,621,800 $ 96,854,200
Marketable securities available for sale 27,721,400 32,634,200
Accounts receivable, net 4,178,600 3,409,500
Merchandise inventories 94,590,200 56,637,900
Other current assets 1,376,900 4,166,100
------------ ------------
Total current assets 218,488,900 193,701,900
PROPERTY AND EQUIPMENT, NET 35,603,900 23,387,900
MARKETABLE SECURITIES AVAILABLE FOR SALE 9,581,600 22,647,400
FRANCHISE RIGHTS 3,203,000 3,293,200
OTHER ASSETS 67,600 549,500
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$266,945,000 $243,579,900
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 55,000,000
Accounts payable - trade $ 43,515,600 22,268,600
Accrued expenses 5,192,100 2,777,200
Income taxes 19,200 3,552,000
Deferred income taxes 681,100
Obligations under capital leases and
long-term debt due within one year 1,171,800 1,119,500
------------ ------------
Total current liabilities 49,898,700 85,398,400
LONG-TERM DEBT 5,327,400 5,239,500
CAPITAL LEASE OBLIGATIONS 1,741,000 1,456,200
DEFERRED LEASE RENTALS 2,371,000 1,580,400
DEFERRED INCOME TAXES 358,700 635,600
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Total liabilities 59,696,800 94,310,100
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SHAREHOLDERS' EQUITY
Common stock - par value $.0001 per share; authorized
70,000,000 shares; 28,348,642 and 26,298,144 shares issued and
outstanding at July 31, 1996 and January 31, 1996, respectively 2,800 2,600
Paid-in capital 189,039,500 135,124,200
Retained earnings 18,205,900 14,143,000
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Total shareholders' equity 207,248,200 149,269,800
------------ ------------
$266,945,000 $243,579,900
============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
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<TABLE>
<CAPTION>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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Three Months Ended Six Months Ended
July 31, July 31,
-------------------------------- ----------------------------------
1996 1995 1996 1995
(Restated) (Restated)
<S> <C> <C> <C> <C>
NET SALES $ 58,379,200 $ 25,434,900 $ 107,529,400 $ 46,571,200
COST OF SALES 33,567,300 14,624,200 61,964,100 26,902,000
------------ ------------ ------------- ------------
GROSS PROFIT 24,811,900 10,810,700 45,565,300 19,669,200
------------ ------------ ------------- ------------
FRANCHISE FEES AND ROYALTIES EARNED 112,600 111,000 232,700 216,000
------------ ------------ ------------- ------------
OPERATING EXPENSES:
Store operating 15,434,200 6,830,400 29,339,500 12,930,000
Store opening costs 4,094,900 531,600 5,602,700 1,040,800
General and administrative 1,866,600 868,300 3,387,200 1,635,100
------------ ------------ ------------- ------------
Total operating expenses 21,395,700 8,230,300 38,329,400 15,605,900
------------ ------------ ------------- ------------
OPERATING INCOME 3,528,800 2,691,400 7,468,600 4,279,300
INTEREST INCOME 1,263,400 603,700 2,384,300 1,164,600
INTEREST EXPENSE (257,500) (190,400) (420,400) (259,700)
------------ ------------ ------------- ------------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 4,534,700 3,104,700 9,432,500 5,184,200
PROVISION FOR INCOME TAXES 1,604,900 1,048,500 3,328,900 1,669,500
------------ ------------ ------------- ------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 2,929,800 2,056,200 6,103,600 3,514,700
CUMULATIVE EFFECT ON PRIOR YEARS (TO
JANUARY 31, 1996) OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF INCOME TAXES 2,040,700
------------ ------------ ------------- ------------
NET INCOME $ 2,929,800 $ 2,056,200 $ 4,062,900 $ 3,514,700
============ ============ ============= ============
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ 0.10 $ 0.08 $ 0.21 $ 0.14
CUMULATIVE EFFECT ON PRIOR YEARS (TO
JANUARY 31, 1996) OF CHANGE IN
ACCOUNTING PRINCIPLE 0.07
------------ ------------ ------------- ------------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.10 $ 0.08 $ 0.14 $ 0.14
============ ============ ============= ============
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARE 28,888,232 24,557,340 28,422,179 24,367,889
============ ============ ============= ============
PROFORMA AMOUNTS ASSUMING THE CHANGE
IS APPLIED RETROACTIVELY:
NET INCOME $ 1,344,200 $ 2,896,800
============ ============
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.05 $ 0.12
============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
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<TABLE>
<CAPTION>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Six Months Ended
July 31,
-------------------------------
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,062,900 $ 3,514,700
Adjustments to reconcile net income to net cash
used in operating activities:
Cumulative effect of change in accounting 2,040,700
Depreciation and amortization 1,605,100 598,000
Amortization of franchise rights 90,200 90,500
Deferred income taxes (275,300) 355,000
Deferred lease rentals 790,600 257,600
Changes in assets and liabilities providing (using) cash:
Accounts receivable (769,100) (478,300)
Merchandise inventories (37,952,300) (27,828,500)
Other assets 547,700 (1,607,600)
Accounts payable - trade 21,247,000 18,988,600
Accrued expenses 2,414,900 306,300
Income taxes (3,532,800) 1,067,700
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Net cash used in operating activities (9,730,400) (4,736,000)
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INVESTING ACTIVITIES:
Purchases of marketable securities (21,743,300) (28,013,100)
Maturities and sales of marketable securities 39,721,900 9,548,500
Purchases of property and equipment (13,287,700) (3,460,600)
----------- -----------
Net cash provided by (used in) investing activities 4,690,900 (21,925,200)
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FINANCING ACTIVITIES:
Net short-term borrowings (repayments) (55,000,000) 6,336,400
Proceeds from long-term debt 350,000 686,700
Principal payments on long-term debt (289,600) (560,400)
Principal payments on capital lease obligations (168,800) (15,700)
Net proceeds from issuance of common stock 52,916,700 0
Exercise of stock options 998,800 144,100
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Net cash provided by (used in) financing activities (1,192,900) 6,591,100
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (6,232,400) (20,070,100)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 96,854,200 36,353,300
----------- -----------
END OF PERIOD $90,621,800 $16,283,200
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
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<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 1 - GENERAL
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions of Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
unaudited financial statements include all adjustments, consisting of normal,
recurring accruals, which Just For Feet, Inc. (the "Company") considers
necessary for a fair presentation of the financial position and the results of
operations for these periods.
The results of operations for the three month period and the six month period
ended July 31, 1996 are not necessarily indicative of the results of operations
to be expected for the full year ending January 31, 1997. For further
information, refer to the financial statements and footnotes thereto for the
fiscal year ended January 31, 1996 included in the Company's Form 10-K as filed
with the Securities and Exchange Commission.
RESTATEMENT
In the fourth quarter of fiscal year 1996, the Company decided to change its
method of accounting for store opening costs effective February 1, 1996, which
are costs principally for pre-opening salaries and travel that are incremental
and directly attributable to the opening of a new store. Under the new method of
accounting the Company charges store opening costs to operations in the month
that the store opens. Previously, store opening costs were capitalized and
amortized over the twelve months following the store opening. The cumulative
effect of this change in accounting principle resulted in $2,040,700 ($0.07 per
share) charge to operations for the effect on prior years (to January 31, 1996),
net of income taxes of $1,136,600. This change increased operating expenses for
the three months ended July 31, 1996 by $2,523,000 and decreased income before
the cumulative effect of the change in accounting principle by $1,620,200. The
effect on the six month period ended July 31, 1996 was to increase operating
expense by $2,986,400 and to decrease income before the cumulative effect of the
change in accounting principle by $1,919,400.
The accompanying unaudited condensed financial statements for the three and six
month periods ended July 31, 1996 have been restated to reflect the effects of
the change in accounting principle.
The Company effected 3 for 2 stock splits in July 1995 and October 1996. All
share and per share information in the accompanying unaudited condensed
financial statements have been restated to reflect the stock splits as if they
had occurred as of the beginning of the earliest period presented.
NOTE 2 - LINE OF CREDIT
During July 1996, the Company renewed its line of credit agreement to now expire
on July 1, 1997. The line of credit permits the Company to borrow up to
$20,000,000 with interest payable at either
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<PAGE>
the bank's prime rate or a rate based on LIBOR. Borrowings under the line of
credit, if any, are unsecured.
NOTE 3 - STOCKHOLDERS' EQUITY
On May 28, 1996, the Company's shareholders increased the authorized number of
common shares to 70,000,000 and the number of common shares reserved for
issuance under the employees incentive stock option plan to 4,500,000.
In June 1996, the Company completed an offering of common stock in which the
Company sold 1,638,500 shares of common stock at a price of $34.25 for which
net proceeds (after offering costs) to the Company totaled approximately
$52,916,700.
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<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Just For Feet, Inc., was founded in 1977 by its current Chairman and Chief
Executive Officer, Harold Ruttenberg, with the opening of a small mall-based
store in Birmingham, Alabama. In 1988, Just For Feet opened its first
superstore adjacent to the Galleria Mall in Birmingham. As a result of the
success and high sales volume generated by the larger store format, since that
time the Company has focused on developing and refining its superstore concept.
As of July 31, 1996, there were 46 Just For Feet stores operating in 12
states, including seven stores operated by the Company's only franchisee. Of
the 39 Company operated stores, 12 have been opened during fiscal 1996. The
Company expects to open a total of 27 new stores during fiscal 1996 and the
first quarter of fiscal 1997, with a total of approximately 17 new stores
expected to open in fiscal 1996 and approximately 10 new stores expected to open
in the first quarter of fiscal 1997. The Company intends to open 11 additional
stores prior to the end of fiscal 1997 for a total of 65 Company operated
stores. The Company may accelerate the opening of new stores in any one fiscal
quarter.
In addition to its prototype stores, the Company has opened three high-
visibility, high-profile "flagship" stores, including its original Las Vegas
store. The Company has plans to open approximately an additional three flagship
stores in selected locations. Initial capital expenditures associated with
opening such flagship stores are higher than for prototype stores; however, the
Company believes that such increased costs will be offset by additional revenue
generated by the enhanced entertainment and visibility provided by such stores,
and that the overall profitability of such stores will be equivalent to that of
the Company's prototype stores.
In order to access markets too small to support a traditional Just For Feet
superstore, the Company is contemplating the introduction of a smaller store,
offering a more limited selection of athletic and outdoor footwear. Management
anticipates that, should it elect to pursue this new concept, it would be
developed either internally or through the acquisition of an existing footwear
retailer currently operating in the manner envisioned for the new stores.
Regardless of the means by which it may be developed, implementation of this new
concept could involve significant start-up costs.
In recent years, the Company has achieved positive comparable store sales
growth on an annual basis. During the first six months of fiscal 1996,
comparable store sales increased 36.0%. No assurance can be given that
comparable store sales will continue to increase.
For fiscal 1996, the Company adopted a bonus plan for all corporate level
employees. Under the plan, such employees are eligible to receive a year-end
bonus equal to a percentage of their annual salaries based on the Company's per
share operating results in excess of a target level. A maximum of $2.5 million
can be distributed to participants under the plan.
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<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, income statement
data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
--------------------- -------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
-------- --------- ------- -------
(Restated) (Restated)
NET SALES 100.0% 100.0% 100.0% 100.0%
COST OF SALES 57.5 57.5 57.6 57.8
----- ----- ----- -----
GROSS PROFIT 42.5 42.5 42.4 42.2
FRANCHISE FEES AND ROYALTIES
EARNED 0.2 0.4 0.2 0.5
OPERATING EXPENSES:
Store operating 26.4 26.8 27.3 27.8
Store opening costs 7.0 2.1 5.2 2.2
General and administrative 3.2 3.4 3.2 3.5
----- ----- ----- -----
OPERATING INCOME 6.1 10.6 6.9 9.2
INTEREST INCOME - NET 1.7 1.6 1.9 1.9
INCOME BEFORE INCOME TAXES ----- ----- ----- -----
AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 7.8 12.2 8.8 11.1
PROVISION FOR INCOME TAXES 2.8 4.1 3.1 3.6
----- ----- ----- -----
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING 5.0 8.1 5.7 7.5
CUMULATIVE EFFECT ON PRIOR
YEARS (TO JANUARY 31, 1996)
OF CHANGE IN ACCOUNTING
PRINICPLE, NET OF INCOME -- -- 1.9 --
----- ----- ----- -----
NET INCOME 5.0% 8.1% 3.8% 7.5%
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED JULY 31, 1996 COMPARED TO THREE MONTHS ENDED JULY 31, 1995
Net Sales. Net sales increased $33.0 million or 130% to $58.4 million in the
second quarter of fiscal 1996 compared to net sales of $25.4 million for the
second quarter of fiscal 1995. This increase was primarily attributable to 18
new stores opened since July 31, 1995 and an increase in comparable store sales
of 30.4%. The calculation of comparable store sales included a total of 19
stores at July 31, 1996. The comparable store sales increase was due primarily
to a 44.0% increase in the number of footwear units sold.
Gross Profit. Gross profit as a percentage of net sales remained constant in
the second quarter of fiscal 1996 at 42.5%.
Store Operating Expenses. Store operating expenses increased $8.6 million or
126% to $15.4 million from $6.8 million in the second quarter of fiscal 1995.
The increase was primarily attributable to the operating expenses of the 18
stores opened since July 31, 1995. As a percentage of net sales, store
operating expenses decreased to 26.4% in the second quarter of fiscal 1996 from
26.8% in the second quarter of fiscal 1995.
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<PAGE>
Store Opening Costs. As discussed in Note 1 to the Company's unaudited
financial statements, effective February 1, 1996, the Company changed its method
of accounting for store opening costs, which are costs principally for pre-
opening salaries and travel that are incremental and directly attributable to
the opening of a new store. Under the new method, the Company charges these
costs to operations in the month that the store opens. Previously, store
opening costs were capitalized and amortized over the twelve months following
the store opening. The accompanying condensed financial statements as of and
for the three and six month periods ended July 31, 1996 have been restated to
reflect this change as though it occurred as of February 1, 1996. Had the
statement of income for the three month period ended July 31, 1995 been restated
for the effects of this change, store opening costs for the three months ended
July 31, 1995 would have increased from the $531,600 as reported in the
accompanying statement of operations to $1,597,700. The increase from the pro
forma 1995 amount of $1,597,700 to the restated 1996 amount of $4,094,900
resulted from increased store openings and an increase in the dedicated
corporate staff to support new store openings.
General and Administrative Expense. General and administrative expense
increased $998,300 or 115% but decreased as a percentage of net sales in the
second quarter of fiscal 1996 to 3.2% from 3.4% in the second quarter of fiscal
1995. The dollar increase was primarily due to increased personnel and
infrastructure costs associated with store operations and management information
systems, as well as the accrual of amounts related to the corporate bonus plan.
The percentage decrease resulted from greater economies of scale in the
Company's operations.
Operating Income. Operating income increased to $3.5 million in the second
quarter of fiscal 1996 from $2.7 million ($1.6 million on a pro forma basis) in
the second quarter of fiscal 1995. As a percentage of net sales, operating
income decreased to 6.1% in the second quarter of fiscal 1996 from 10.6% (8.5%
on a pro forma basis) in the second quarter of fiscal 1995.
Net Interest Income. Net interest income increased $592,600 to $1.0 million
in the second quarter of fiscal 1996 compared to $413,300 in the second quarter
of fiscal 1995. This increase was primarily attributable to investment income
realized from investing the proceeds of public offerings of the Company's common
stock in September 1995 and June 1996. See "-- Liquidity and Capital
Resources."
Income Before Cumulative Effect of Change in Accounting Principle and Net
Income. As the result of the above factors, income before the cumulative effect
of the change in accounting principle for the quarter ended July 31, 1996
increased to $2.9 million compared to $2.1 million ($1.3 million on a pro forma
basis) for the quarter ended July 31, 1995.
SIX MONTHS ENDED JULY 31, 1996 COMPARED TO SIX MONTHS ENDED JULY 31, 1995
Net Sales. Net sales increased $60.9 million or 131% for the first six
months fiscal 1996 to $107.5 million compared to net sales of $46.6 million for
the same period of fiscal 1995. This increase was primarily attributable to 18
new stores opened since July 31, 1995 and an increase in comparable store sales
of 36.0%. The calculation of comparable store sales included a total of 19
stores at July 31, 1996. The comparable store sales increase was due primarily
to a 49.0% increase in the number of footwear units sold.
Gross Profit. Gross profit as a percentage of net sales increased slightly
to 42.4% in the first six months of fiscal 1996 from 42.2% in the same period of
fiscal 1995.
Store Operating Expenses. Store operating expenses increased $16.4 million
or 127% to $29.3 million in the first six months of fiscal 1996 from $12.9
million in the first six months of fiscal 1995. This increase was primarily
attributable to the operating expenses of the 18 stores opened since July 31,
1995. As a percentage of net sales, store operating expenses decreased to 27.3%
in the first six months of fiscal 1996 from 27.8% in the first six months of
fiscal 1995.
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Store Opening Costs. After considering the effects of the change in
accounting (see Note 1 to the accompanying unaudited financial statements),
store opening costs for the six months ended July 31, 1996 increased to $5.6
million. Had the statement of income for the six months ended July 31, 1995
been restated, store opening expense would have increased from the $1.0 million
as reported in the accompanying statement of income to $2.0 million. The
increase from the pro forma amount of $2.0 million in 1995 to the restated
amount of $5.6 million in 1996 resulted from increased store openings and an
increase in the dedicated corporate staff to support new store openings.
General and Administrative Expense. General and administrative expense
increased $1.8 million or 107% but decreased as a percentage of net sales in the
first six months of fiscal 1996 to 3.2% from 3.5% in the first six months of
fiscal 1995. The dollar increase was primarily due to increased personnel and
infrastructure costs associated with store operations and management information
systems, as well as the accrual of amounts related to the corporate bonus plan.
The percentage decrease resulted from greater economies of scale in the
Company's operations.
Operating Income. Operating income increased to $7.5 million in the first
six months of fiscal 1996 from $4.3 million ($3.4 million on a pro forma basis)
in the first six months of fiscal 1995. This increase was primarily due to 18
new stores opened since July 31, 1995.
Net Interest Income. Net interest income increased $1.1 million to $2.0
million in the first six months of fiscal 1996 compared to $904,900 in the first
six months of fiscal 1995. The increase was primarily attributable to investment
income realized from investing the proceeds of public offerings, of the
Company's common stock in September 1995 and June 1996. See "-- Liquidity and
Capital Resources."
Income Before Cumulative Effect of Change in Accounting and Net Income. As a
result of the above factors, income before the cumulative effect of the change
in accounting principle for the six months ended July 31, 1996 increased to $6.1
million compared to $3.5 million ($2.9 million on a pro forma basis) for the six
months ended July 31, 1995. The cumulative effect on prior years (to January
31, 1996) totaled $2.0 million net of income taxes of $1.1 million.
LIQUIDITY AND CAPITAL RESOURCES
Just For Feet's primary sources of working capital are the proceeds of three
public offerings of common stock (January 1995, September 1995 and June 1996)
and the Company's ability to borrow under its line of credit. The Company had
working capital of $172.6 million and $108.3 million as of July 31, 1996 and
January 31, 1996, respectively. The principal use of working capital has been
to purchase inventory, equipment and fixtures. During the first six months of
fiscal 1996, the Company acquired property and equipment totaling $13.3 million
to open 12 new stores and to support its continued growth. The Company's short
term operational cash requirements are not highly seasonal. The Company had
$118.3 million in cash and short-term marketable securities as of July 31, 1996.
In September 1995, the Company completed a public offering of 3,150,000
shares of common stock at $22.00 per share. Net proceeds of approximately $65.6
million are being used to acquire fixed assets and inventory for the opening of
new stores. A portion of such net proceeds was also used to upgrade and expand
the Company's management information systems.
In June 1996, the Company completed a public offering of 1,638,750 shares of
common stock at $34.25 per share. Net proceeds of approximately $52.9 million
are being used to acquire fixed assets and inventory for the opening of new
stores and for general corporate purposes.
As of July 31, 1996, the Company had no borrowings under its revolving bank
line of credit. The line of credit, which expires July 1, 1997, permits the
Company to borrow up to $20.0 million for general
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<PAGE>
working capital purposes. Borrowings under such line of credit bear interest at
either the bank's prime rate (8.25% at July 31, 1996) or a rate based on LIBOR,
and are unsecured. The line of credit contains certain financial covenants and
other restrictions. The Company also has several lease arrangements with
leasing companies that the Company uses to finance certain store fixtures,
point-of-sale equipment and management information systems.
Just For Feet's primary capital requirements are for the openings of new
superstores. The Company estimates that the total cash required to open a new
15,000 to 20,000 square foot prototype superstore, including store fixtures and
equipment, leasehold improvements, net working capital and pre-opening costs,
typically ranges from $1.2 to $2.2 million, depending on the amount of vendor
and landlord assistance. During fiscal 1996 and the first quarter of fiscal
1997, the Company expects to open a total of 27 stores, with approximately 17
stores expected to open in fiscal 1996 and approximately 10 stores expected to
open in the first quarter of fiscal 1997. Twelve of such 27 stores have been
opened during fiscal 1996 to date. The Company intends to open 11 additional
stores prior to the end of fiscal 1997, for a total of 65 Company operated
stores. Of the new stores to be opened, approximately three are expected to be
flagship stores.
The Company is planning the construction of a new corporate headquarters
facility. The Company has closed the purchase of approximately 25 acres of land
in Birmingham, Alabama at a cost of approximately $1,150,000, financed through a
construction line of credit. The Company has very preliminary plans for the
construction of an approximately 40,000 to 50,000 square foot, three story
building. The Company currently estimates construction costs to be between $4
million and $8 million, which the Company may also finance with a loan from a
bank. The Company expects to commence construction in the third or fourth
quarter of the current fiscal year.
Although the Company has no current commitments or understanding with respect
to the acquisition of any entity, the Company has explored and continues to
explore acquisitions, including acquisitions of entities employing an
alternative format to that of Just For Feet. The Company may utilize an
acquisition to develop a new smaller store concept currently being considered by
management. Regardless of whether the Company utilizes an acquisition to
implement its new concept or develops the concept internally, the Company may
incur significant start-up costs. In addition, to support the Company's
continued growth, the Company plans to continue to invest in information systems
and personnel. Except as described above, the Company currently is not planning
any major expenditures other than new store openings and believes that the
proceeds of its public stock offerings, internally generated funds, cash on hand
and its line of credit will be adequate to fund its anticipated needs through at
least the end of fiscal 1997.
SEASONALITY
The Company does not experience significant seasonal fluctuations in its
business. However, the highest sales periods for the Company are the spring,
back-to-school and Christmas selling seasons. The Company also generally
experiences lower gross margins during January and February due to retail
markdowns taken to clear seasonal merchandise. Quarterly results may fluctuate
materially depending on the timing of new store openings and related pre-opening
expenses, net sales contributed by new stores and increases or decreases in
comparable store sales.
IMPACT OF INFLATION
The Company does not believe that inflation has had a material, adverse
effect on net sales or results of operations. The Company has generally been
able to pass on increased costs through increases in selling prices.
-10-
<PAGE>
PART II. OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits. The following exhibits are filed with this report:
18 Letter from Deloitte & Touche LLP regarding change in
Accounting Principles
(b) Reports on Form 8-K.
None.
-11-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
JUST FOR FEET, INC.
Dated: April 28, 1997 By: /s/ Harold Ruttenberg
-------------------------------------
Harold Ruttenberg
Chairman, President and Chief
Executive Officer
Dated: April 28, 1997 By: /s/ Robert C. Wabler
-------------------------------------
Robert C. Wabler
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- -------- ----------------------------------------------------------------
18 Letter from Deloitte & Touche LLP regarding change in
Accounting Principles
<PAGE>
EXHIBIT 18
April 24, 1997
Just For Feet, Inc.
153 Cahaba Valley Parkway North
Pelham, Alabama 35124
Dear Sirs:
We have audited the financial statements of Just For Feet, Inc., as of
January 31, 1997 and 1996, and for each of the three years in the period ended
January 31, 1997, included in your Annual Report on Form 10-K to the Securities
and Exchange Commission and have issued our report thereon dated March 17, 1997.
Note 1 to such financial statements contains a description of your adoption
during the year ended January 31, 1997 of a policy to defer store opening costs
and then expense all such costs at the date of store opening rather than to
defer and then amortize all such costs over the twelve month period following a
store opening. In our judgment, such change is to an alternative accounting
principle that is preferable under the circumstances.
Yours truly,
DELOITTE & TOUCHE LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JAN-31-1997 JAN-31-1996
<PERIOD-START> FEB-01-1996 FEB-01-1995
<PERIOD-END> JUL-31-1997 JUL-31-1996
<CASH> 90,621,800 96,854,200
<SECURITIES> 37,303,000 55,281,600
<RECEIVABLES> 4,178,600 3,409,500
<ALLOWANCES> 0 0
<INVENTORY> 94,590,200 56,637,900
<CURRENT-ASSETS> 218,488,900 193,701,900
<PP&E> 40,003,100 26,182,000
<DEPRECIATION> 4,399,200 2,794,100
<TOTAL-ASSETS> 266,945,000 243,579,900
<CURRENT-LIABILITIES> 49,898,700 85,398,400
<BONDS> 0 0
0 0
0 0
<COMMON> 2,800 2,600
<OTHER-SE> 207,245,400 149,267,200
<TOTAL-LIABILITY-AND-EQUITY> 207,248,200 243,579,900
<SALES> 107,529,400 46,571,200
<TOTAL-REVENUES> 110,146,400<F1> 47,951,800<F1>
<CGS> 61,964,100 26,902,000
<TOTAL-COSTS> 96,906,300<F2> 40,872,800<F2>
<OTHER-EXPENSES> 3,387,200 1,635,100
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 420,400 259,700
<INCOME-PRETAX> 9,432,500 5,184,200
<INCOME-TAX> 3,328,900 1,669,500
<INCOME-CONTINUING> 6,103,600 3,514,700
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 2,040,700 0
<NET-INCOME> 4,062,900 3,514,700
<EPS-PRIMARY> $0.14 $0.14
<EPS-DILUTED> $0.14 $0.14
<FN>
<F1>Includes sales, franchise fees and royalties and interest income.
<F2>Includes CGS, store operating and store opening costs.
</FN>
</TABLE>
