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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
April 30, 1998 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.)
7400 Cahaba Valley Road, Birmingham, Alabama 35242
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 408-3000
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N/A
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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 30,162,341 shares
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Class Outstanding at June 10, 1998
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PART I. FINANCIAL INFORMATION
ITEM I. Financial Statements
JUST FOR FEET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
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APRIL 30, JANUARY 31,
1998 1998
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,624 $ 82,490
Accounts receivable 16,881 15,840
Merchandise inventories 211,972 206,128
Other 6,472 6,709
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Total current assets 240,949 311,167
PROPERTY AND EQUIPMENT, NET 104,135 94,529
REPURCHASED FRANCHISE RIGHTS, NET 2,868 2,913
GOODWILL, NET 35,857 36,106
OTHER ASSETS 4,059 3,637
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$387,868 $448,352
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 26,716 $ 90,667
Accounts payable 42,021 51,162
Accrued expenses 10,498 9,292
Income taxes 4,788 1,363
Current maturities of long-term obligations 3,470 3,222
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Total current liabilities 87,493 155,706
LONG-TERM OBLIGATIONS 17,283 16,646
DEFERRED LEASE RENTALS 7,651 7,212
DEFERRED INCOME TAXES 676 704
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Total liabilities 113,103 180,268
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SHAREHOLDERS' EQUITY:
Common stock - par value $.0001 per share; 70,000 shares authorized;
30,093, and 29,993 shares issued and outstanding at April 30, 1998
and January 31, 1998, respectively 3 3
Paid-in capital 219,481 218,616
Retained earnings 55,281 49,465
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Total shareholders' equity 274,765 268,084
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$387,868 $448,352
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The accompanying notes are an integral part of these unaudited condensed financial statements.
</TABLE>
1
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JUST FOR FEET INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share amounts)
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THREE MONTHS ENDED
APRIL 30,
----------------------
1998 1997
Net sales $151,921 $92,803
Cost of sales 88,303 53,801
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Gross profit 63,618 39,002
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Franchise fees, royalties and other revenue 308 208
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Operating expenses:
Store operating 44,756 27,197
Store opening costs 3,352 1,060
Amortization of intangibles 360 110
General and administrative 5,399 3,035
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Total operating expenses 53,867 31,402
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Operating income 10,059 7,808
Interest (expense) income, net (602) 445
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Earnings before income taxes 9,457 8,253
Provision for income taxes 3,641 3,052
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Net earnings $ 5,816 $ 5,201
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EARNINGS PER SHARE:
Basic $ 0.19 $ 0.18
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Diluted $ 0.19 $ 0.18
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WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 30,044 28,687
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Diluted 31,172 29,580
======== =======
The accompanying notes are an integral part of these unaudited condensed
financial statements.
2
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JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
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Three Months Ended
April 30,
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1998 1997
OPERATING ACTIVITIES:
Net earnings 5,816 5,201
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation and amortization 2,965 1,445
Deferred income taxes (28) (15)
Deferred lease rentals 439 438
Changes in assets and liabilities providing (using) cash, net of
effects of acquisitions in 1997:
Accounts receivable (1,041) (1,100)
Merchandise inventories (5,844) (391)
Other assets (185) (3,067)
Accounts payable (9,141) (23,240)
Accrued expenses 1,206 3,355
Income taxes 3,425 2,783
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Net cash used by operating activities (2,388) (14,591)
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INVESTING ACTIVITIES:
Purchases of marketable securities (10,658)
Maturities and sales of marketable securities 13,431
Purchases of property and equipment (12,277) (10,199)
Acquisitions, net of cash acquired (10,795)
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Net cash used for investing activities (12,277) (18,221)
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FINANCING ACTIVITIES:
Short-term borrowings (repayments), net (63,951) (100,000)
Borrowings of long-term debt 1,701 4,040
Principal payments on long-term obligations (816) (416)
Proceeds from exercise of options 865 553
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Net cash used for financing activities (62,201) (95,823)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (76,866) (128,635)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 82,490 138,785
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CASH AND CASH EQUIVALENTS, END OF PERIOD 5,624 10,150
======== =========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
3
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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, Regulation S-X and 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 months ended April 30, 1998 are not
necessarily indicative of the results to be expected for the full year ending
January 31, 1999. For further information, refer to the financial statements
and notes thereto for the fiscal year ended January 31, 1998 included in the
Company's Form 10-K as filed with the Securities and Exchange Commission.
COMMON STOCK
At the Company's annual meeting of shareholders on May 28, 1996, the Company's
shareholders adopted an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized capital shares
to 75 million shares, consisting of 70 million shares of common stock and five
million shares of preferred stock, and to eliminate Series A preferred shares
then existing (the "Charter Amendment"). Notice of the 1996 meeting was first
given to shareholders on May 8, 1996. The Revised Alabama Business Corporation
Act, together with the Constitution of the State of Alabama of 1901, requires at
least thirty days notice to shareholders prior to increasing the number of
authorized shares. The Company inadvertently provided the shareholders with
only twenty days notice. The Company believes, based in part upon opinions of
counsel, that the inadvertent failure to provide notice of the 1996 annual
meeting in a timely manner does not render the Charter Amendment void, and that
the Charter Amendment and subsequent share issuances are valid. However, the
Company has included in its 1998 Proxy Statement a resolution ratifying the
Charter Amendment and related share issuances. In the event shareholders fail
to ratify the charter Amendment and the share issuances at its 1998 Annual
Meeting, the Company will continue to treat the Charter Amendment and the share
issuances as valid and may in the future seek a judicial declaration that the
Charter Amendment and the share issuances are valid.
SHORT-TERM BORROWINGS
The Company has an unsecured line of credit bank agreement which has recently
been increased to $70 million, reducing to $40 million after September 6, 1998,
and expiring July 1, 1999.
NOTE 2 - ACQUISITIONS
On March 17, 1997, the Company acquired Athletic Attic for approximately $9.7
million in cash, net of cash acquired, the repayment of approximately $1.3
million of Athletic Attic's debt, and approximately $5.6 million of common stock
(259,000 shares). On May 14, 1997, the Company acquired Imperial Sports for
approximately $5.8 million in cash, net of cash acquired, the repayment of
approximately $8.7 million of Imperial Sports' debt, and approximately $21.5
million of common stock (1,077,000 shares). These acquisitions have been
accounted for as purchases and, accordingly, each purchase price has been
allocated to assets acquired and liabilities assumed based upon their estimated
fair values as of the acquisition dates. The accompanying consolidated
statements of earnings for the three months ended April 30, 1997 includes the
results of operations of Athletic Attic from the acquisition date of March 17,
1997 through April 30, 1997, whereas the accompanying consolidated statement of
earnings for the three months ended April 30, 1998 includes the results of
operations of Athletic Attic and Imperial Sports (collectively "the specialty
store division") for the full three month period.
4
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NOTE 3 - NEW ACCOUNTING STANDARDS
The Company was required to adopt Statement of Financial Accounting Standards
("SFAS") No. 130 Reporting Comprehensive Income in the quarter ended April 30,
1998. However, the Company has no components of comprehensive income requiring
special treatment under SFAS No. 130. The Company was also required to adopt
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. Because the Company operates primarily in the retail athletic
footwear and apparel industry, management believes that the implementation of
SFAS No. 131 will have no significant impact on future financial reporting.
In April 1998 the Financial Accounting Standards Board issued Statement of
Position No. 98-5 (the "SOP") which requires that costs of start-up activities
and organization costs be expensed as incurred. The Company currently expenses
start-up costs for new stores in the month that the new store opens. The SOP is
effective for years beginning after December 15, 1998. If the SOP had been
adopted for the quarter ended April 30, 1998, the cumulative effect of the
change in accounting principle would have resulted in a net charge to earnings
of approximately $605,000 ($0.02 per basic and diluted weighted average share),
net of applicable income taxes of $363,000. The change would have been
immaterial with respect to total operating expenses and income before the
cumulative effect of change in accounting principle.
NOTE 4 - SHAREHOLDER SUIT
In July 1997, a lawsuit was filed by a shareholder (individually and on behalf
of others) against the Company and certain of its current and former officers, a
former director and two of the four managing underwriters in the Company's June
1996 public offering of common stock. The suit alleges that the Company's
registration statement and prospectus used in such offering contained certain
misleading financial information. The Company, its named officers and directors
deny any liability on those claims (the dollar amount of which is currently
unspecified) and are vigorously defending the suit.
NOTE 5 - SUBSEQUENT EVENT
On June 6, 1998, the Company executed a non-binding letter of intent to acquire
Sneaker Stadium, Inc., a privately held athletic retailer with 38 superstores
located primarily in the Northeast and Mid-Atlantic states. The letter of
intent provides that the Company will assume $43.0 million of existing Sneaker
Stadium bank debt. In addition, if Sneaker Stadium attains certain future
financial targets, the Company may make additional payments of up to $31.0
million on or after April 30, 2002. The Company intends to convert Sneaker
Stadium stores to the Just For Feet name and format.
Pursuant to a separate non-binding letter of intent also dated June 6, 1998,
concurrently with and conditioned upon the acquisition of Sneaker Stadium,
Thomas H. Lee Company, a Boston-based private equity firm that currently owns a
controlling interest in Sneaker Stadium, will purchase from the Company an
aggregate of 926,355 units, each unit consisting of one share of common stock of
the Company and a warrant to purchase .997 of a share of common stock of the
Company at a purchase price of $21.59 per share. The aggregate purchase price
for the units will be $20.0 million. Thereafter, Thomas H. Lee Company would be
entitled to designate a member of the Company's Board of Directors.
The closing of the transaction is conditional upon the satisfactory completion
of due diligence, definitive documentation, expiration or early termination of
the Hart-Scott-Rodino waiting period and the approval of Sneaker Stadium
creditors.
5
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company was founded in 1977 with the opening of a small mall-based
store and in 1988, Just For Feet opened its first superstore in Birmingham,
Alabama. As a result of the success and high sales volume generated by the
larger store format, the Company has focused on developing and refining its
superstore concept. There were 95 Just For Feet superstores at April 30, 1998,
operating in 21 states and Puerto Rico, including eleven stores operated by Just
For Feet's only superstore franchisee.
Of the 84 Company operated superstores, eleven superstores were opened in
the first quarter ended April 30, 1998. The Company expects to open
approximately 25 superstores during fiscal 1998. The Company may accelerate the
opening of new stores in any one fiscal quarter.
As part of its long-term growth strategy, the Company entered the specialty
store segment of the athletic and outdoor footwear and apparel market in fiscal
1997 through the acquisitions of Athletic Attic and Imperial Sports. The
acquired stores are operated as the specialty store division of the Company.
At April 30, 1998, there were 101 Company-owned and 48 franchised specialty
stores in 22 states and Puerto Rico. The Company anticipates opening
approximately 25 to 35 specialty stores during fiscal 1998.
To accommodate the Company's superstore expansion strategy and the
development of the specialty store division, the Company has expanded and
upgraded its corporate staff. In addition, the specialty store division has a
higher general and administrative expense structure as a percent of net sales
than the superstore operations. These factors primarily resulted in general and
administrative costs increasing to 3.6% of sales during the quarter ended April
30, 1998 from 3.3% for the quarter ended April 30, 1997.
Minimum wage increases have resulted in an increase in the Company's
payroll expense. As a result, store operating expenses as a percentage of net
sales have increased over prior year periods. The Company has implemented new
scheduling policies and practices to help mitigate the overall impact of the
increase. However, there can be no assurance that additional increases in the
minimum wage will not affect store operating expenses in future periods.
In recent years, the Company has achieved positive comparable store sales
growth on an annual basis. During the three months ended April 30, 1998 and
1997, comparable store sales increased 3.5% and 5.0%, respectively. The Company
does not expect comparable store sales to continue to increase in the future at
historical rates, nor can any assurance be given that increases in comparable
store sales will continue. The quarter ended April 30, 1998 is the first
quarter that the Company has included the specialty stores in the comparable
store sales base.
The Company's fiscal year ends on January 31. References to fiscal year by
date refer to the fiscal year beginning February 1 of that calendar year; for
example "fiscal 1998" began on February 1, 1998 and will end on January 31,
1999.
6
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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
APRIL 30,
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1998 1997
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<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 58.1 58.0
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Gross profit 41.9 42.0
Franchise fees, royalties and other revenue 0.2 0.2
Operating expenses:
Store operating 29.5 29.3
Store opening costs 2.2 1.1
Amortization of intangibles 0.2 0.1
General and administrative 3.6 3.3
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Operating income 6.6 8.4
Interest (expense) income, net (0.4) 0.5
----- -----
Earnings before income taxes 6.2 8.9
Provision for income taxes 2.4 3.3
----- -----
Net earnings 3.8% 5.6%
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</TABLE>
THREE MONTHS ENDED APRIL 30, 1998 COMPARED TO THREE MONTHS ENDED APRIL 30, 1997
Net Sales - Net sales increased $59.1 million, or approximately 63.7%, to
$151.9 million in the first quarter of fiscal 1998 compared to net sales of
$92.8 million for the first quarter of fiscal 1997. This increase was primarily
attributable to 23 new superstores opened during fiscal 1997 and eleven new
superstores opened during the first quarter of fiscal 1998 and additional sales
from the specialty store division. Sales from the specialty store division for
the first quarter ended April 30, 1997 included sales from Athletic Attic from
its acquisition on March 17, 1997 through April 30, 1997, whereas sales for the
first quarter ended April 30, 1998 included sales from the specialty store
division for the full three month period. The calculation of comparable store
sales included 49 superstores and 74 specialty stores at April 30, 1998.
Gross Profit - Gross profit increased in the first quarter of fiscal 1998 by
$24.6 million or 63.1%, primarily the result of increased sales. As a
percentage of net sales, gross profit remained relatively constant at 41.9% and
42.0% for the first quarter of fiscal 1998 and 1997, respectively.
Store Operating Expenses - Store operating expenses increased $17.6 million or
approximately 64.6% to $44.8 million in the first quarter of fiscal 1998 from
$27.2 million in the first quarter of fiscal 1997. The increase was primarily
attributable to the operating expenses of the 34 superstores opened since
January 31, 1997, as well as the operating expenses of the specialty store
division acquired during 1997.
Store Opening Costs - Store opening costs are charged to operations in the
month the applicable store opens. These costs increased approximately $2.3
million to approximately $3.4 million in the first quarter of fiscal 1998 from
approximately $1.1 million in the first quarter of fiscal 1997 due to the
opening of 11 new superstores and 10 new specialty stores in the first quarter
of fiscal 1998 as compared to four new superstores in the first quarter of
fiscal 1997.
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General and Administrative Expenses - General and administrative expenses
increased to approximately $5.4 million, or approximately 77.9%, in the first
quarter of fiscal 1998 from approximately $3.0 million in the first quarter of
fiscal 1997. As a percentage of net sales, general and administrative expenses
increased to approximately 3.6% in the first quarter of fiscal 1998 from
approximately 3.3% in the first quarter of fiscal 1997. This increase was
primarily attributable to increased corporate staff to support the Company's
planned growth and the addition of the specialty store division which has higher
general and administrative expenses as a percentage of net sales than the
Company's superstore operations.
Amortization of Intangibles - Amortization of intangibles, which includes
amortization of goodwill and franchise rights, increased to approximately
$360,000 for the first quarter of fiscal 1998 from approximately $110,000 in the
first quarter of fiscal 1997. This increase is attributable to the amortization
of goodwill resulting from the acquisitions of the specialty stores.
Operating Income - Operating income increased 28.8% to $10.1 million in the
first quarter of fiscal 1998 from $7.8 million in the first quarter of fiscal
1997. Operating income, as a percentage of net sales, decreased to 6.6% in the
first quarter of fiscal 1998 from 8.4% in the first quarter of fiscal 1997
primarily due to the increase in store opening costs as well as increases in
store operating and general and administrative expenses as outlined above.
Interest (Expense) Income, Net - Net interest expense was approximately
$602,000 in the first quarter of fiscal 1998, compared to net interest income of
approximately $445,000 in the first quarter of fiscal 1997. The decrease was
primarily due to the decrease in cash available for investment as a result of
the financing of the acquisitions of the specialty stores and the cash
requirements for opening 34 new superstores since February 1, 1997 and 20 new
specialty stores from the respective acquisition dates.
Provision for Income Taxes - The Company's effective combined federal and state
income tax rate increased to 38.5% in the quarter ending April 30, 1998 compared
to 37.0% in the first quarter of the prior year. The increase in the effective
tax rate resulted primarily from the impact in the prior year quarter of non-
taxable interest income and the inclusion of non-deductible goodwill resulting
from the acquisition of the specialty store division and the expansion into
states with higher tax jurisdictions.
Net Income - As a result of the above factors, net income increased 11.8% to
approximately $5.8 million in the first quarter of fiscal 1998 from $5.2 million
in the first quarter of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Just For Feet's primary sources of working capital are cash flows from
operations and borrowings under its line of credit, which has recently been
increased to $70 million, reducing to $40 million after September 6, 1998.
In addition, the Company's working capital was augmented by a portion of the
proceeds of three public offerings of Common Stock in January and September 1995
and June 1996. The Company had working capital of $153.5 million and $155.5
million at April 30, 1998 and January 31, 1998, respectively. The principal use
of cash has been to fund store operations and to purchase inventory, equipment
and fixtures. During the first three months of fiscal 1998, the Company acquired
approximately $12.3 million of property and equipment, including approximately
$5.9 million to open new stores, approximately $3.8 million for improvements to
existing stores, and approximately $2.6 million for corporate and store level
management information systems. The Company's short-term operational cash
requirements are not highly seasonal. The Company had approximately $5.6 million
in cash and cash equivalents as of April 30, 1998.
As of April 30, 1998, the Company had borrowed $26.7 million under its
revolving bank line of credit. The line of credit, which expires July 1, 1999,
permits the Company to borrow up to $70.0 million for general working capital
purposes. Borrowings under the line of credit bear interest at a floating rate
above LIBOR (7.2% at April 30, 1998) and are unsecured. The line of credit
contains
8
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certain financial covenants and other restrictions. The Company also has several
financing arrangements to finance certain store fixtures, point-of-sale ("POS")
equipment and management information systems.
Just For Feet's future capital requirements are primarily for the opening of
new superstores and specialty stores. 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 $1.5 million to $2.5
million, depending on the amount of vendor and landlord assistance. The Company
estimates that the total cash required to open a 4,000 to 6,000 square foot
specialty store ranges from $300,000 to $400,000. The Company currently expects
to open approximately 25 superstores and approximately 25 to 35 specialty stores
in fiscal 1998.
Except as may be required pursuant to the Company's proposed acquisition of
Sneaker Stadium, Inc. (see "Recent Events"), the Company is not currently
planning any material major expenditures other than those mentioned above, and
believes that internally generated funds, cash on hand, bank borrowings and
additional future public offerings of securities will be adequate to fund its
anticipated needs through at least the end of fiscal 1998.
SEASONALITY
The Company's business is subject to some seasonal fluctuations with slightly
heavier concentrations of sales during the spring, back-to-school and Christmas
selling seasons. The Company also generally experiences lower margins during
January and February due to retail markdowns taken to clear seasonal
merchandise. Quarterly results may fluctuate as new stores open.
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.
YEAR 2000
The Company has established policies and procedures to coordinate changes to
computer systems and applications necessary to achieve a year 2000 date
conversion with no effect on customers or disruption to business operations.
These actions are necessary to ensure that the systems and applications will
recognize and process the year 2000 and beyond. Major areas of potential
business impact have been identified and conversion efforts have been completed
or are underway. The Company also is communicating with suppliers, vendors,
financial institutions and others with which it does business to coordinate year
2000 conversion. The total cost of compliance and its effect on the Company's
future results of operations is being determined as part of the conversion
planning, but is not expected to be material.
RECENT EVENTS
On June 6, 1998, the Company executed a non-binding letter of intent to
acquire Sneaker Stadium, Inc., a privately held athletic retailer with 38
superstores located primarily in the Northeast and Mid-Atlantic states. The
letter of intent provides that the Company will assume $43.0 million of existing
Sneaker Stadium bank debt. In addition, if Sneaker Stadium attains certain
future financial targets, the Company may make additional payments of up to
$31.0 million on or after April 30, 2002. The Company intends to convert Sneaker
Stadium stores to the Just For Feet name and format.
9
<PAGE>
Pursuant to a separate non-binding letter of intent also dated June 6, 1998,
concurrently with and conditioned upon the acquisition of Sneaker Stadium,
Thomas H. Lee Company, a Boston-based private equity firm that currently owns a
controlling interest in Sneaker Stadium, will purchase from the Company an
aggregate of 926,355 units, each unit consisting of one share of common stock of
the Company and a warrant to purchase .997 of a share of common stock of the
Company at a purchase price of $21.59 per share. The aggregate purchase price
for the units will be $20.0 million. Thereafter, Thomas H. Lee Company would be
entitled to designate a member of the Company's Board of Directors.
The closing of the transaction is conditional upon the satisfactory completion
of due diligence, definitive documentation, expiration or early termination of
the Hart-Scott-Rodino waiting period and the approval of Sneaker Stadium
creditors.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements relating to financial results and plans for future business
development activities, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors which could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, general economic conditions, competition and
other uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------- ---------------------------------
(a) Exhibits. The following exhibit has been filed with this Report-
10.5.1 Modification to increase the principal amount of the Master
Revolving Promissory Note dated January 26, 1998 payable to
Compass Bank to $70,000,000 from $40,000,000
(b) Reports on Form 8-K. No Reports on Form 8-K were filed during the three
months ended April 30, 1998
10
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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.
JUST FOR FEET, INC.
Dated: June 12, 1998 By: /s/ Harold Ruttenberg
-----------------------
Harold Ruttenberg
Chairman, President and Chief
Executive Officer
Dated: June 12, 1998 By: /s/ Eric L. Tyra
------------------
Eric L. Tyra
Executive Vice President and
Chief Financial Officer
11
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LOAN MODIFICATION AGREEMENT
THIS LOAN MODIFICATION AGREEMENT (this "Agreement") is being entered into
by and between COMPASS BANK, an Alabama banking corporation ("Bank"), and JUST
FOR FEET, INC., an Alabama corporation ("Borrower"), as of the fifth day of
June, 1998.
R E C I T A L S
Borrower is the maker of a certain Sixty Million and no/100 Dollars
($60,000,000) Master Revolving Promissory Note dated as of May 6, 1998 (the
"Note") which evidences Borrower's indebtedness to Bank under a $60,000,000
Revolving Line of Credit (the "Line of Credit"). The Borrower has requested
that the credit availability under the Note be increased to $70,000,000 through
September 6, 1998 and thereafter reduced back to $40,000,000.
A G R E E M E N T
NOW THEREFORE, in consideration of the premises, the mutual agreements of
the parties as set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Borrower and Bank,
intending to be legally bound hereby, agree as follows:
1. MODIFICATION OF LINE OF CREDIT. Provided that no event of default
------------------------------
occurs under the Note, the principal credit availability under the Line of
Credit shall be increased from $60,000,000 to $70,000,000 through September 6,
1998 and thereafter shall be reduced back to $40,000,000.
2. AMENDMENT OF NOTE. The Note shall be and is hereby amended as set
-----------------
forth in the form of Master Revolving Promissory Note attached hereto as
Exhibit A.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES. Each representation, warranty and
-------------------------------
covenant contained in the Note is hereby reaffirmed as of the date hereof.
Borrower represents that Borrower has no offsets or claims against Bank arising
under, related to or connected with the Note.
4. EXECUTION AND EFFECTIVENESS. This Agreement has been negotiated, and
---------------------------
is being executed and delivered, in the State of Alabama. The effective date of
this Loan Modification Agreement is June fifth, 1998. Except as expressly set
forth herein or as is necessary to carry out the intent of this Agreement, the
Note shall remain in full force and effect in accordance with its terms, as
amended hereby.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed and effective as of the date first above set forth, but actually signed
on the dates set forth below.
BORROWER:
--------
ATTEST: JUST FOR FEET, INC.
By /s/ Scott C. Wynne By /s/ Eric L. Tyrn
------------------- ------------------
Its Secretary Its Executive Vice President
--------------- ----------------------------
Date Executed: June 5, 1998
-----------------
(CORPORATE SEAL)
2
<PAGE>
BANK:
----
COMPASS BANK
________________________ By______________________________
Witness Its________________________
Date Executed:__________________
3
<PAGE>
STATE OF ALABAMA)
COUNTY OF SHELBY)
I, Doris Lee Sewell, a Notary Public in and for said County in said State,
----------------
hereby certify that Eric L. Tyrn, whose name as Executive VP of JUST FOR FEET,
------------ ------------
INC., a corporation, is signed to the foregoing instrument and who is known to
me, acknowledged before me on this day that, being informed of the contents of
the instrument, he, as such officer and with full authority, executed the same
voluntarily for and as the act of said corporation.
Given under my hand this the fifth day of June, 1998.
----- ----
/s/ Doris Lee Sewell
---------------------------
Notary Public
[NOTARIAL SEAL]
My Commission Expires: August 30, 1999
---------------
STATE OF ALABAMA )
COUNTY OF JEFFERSON )
I, ____________________________________, a Notary Public in and for said
County in said State, hereby certify that _________________________ , whose name
as _______________ of COMPASS BANK, an Alabama corporation, is signed to the
foregoing instrument and who is known to me, acknowledged before me on this day
that, being informed of the contents of the instrument, he, as such officer and
with full authority, executed the same voluntarily for and as the act of said
corporation.
Given under my hand this the _______ day of ________, 1998.
_______________________________________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires: ________________________
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-31-1999 JAN-31-1998
<PERIOD-START> FEB-01-1998 FEB-01-1997
<PERIOD-END> APR-30-1998 APR-30-1997
<CASH> 5,624 82,490
<SECURITIES> 0 0
<RECEIVABLES> 16,881 15,840
<ALLOWANCES> 0 0
<INVENTORY> 211,972 206,128
<CURRENT-ASSETS> 240,949 311,167
<PP&E> 120,764 108,487
<DEPRECIATION> 16,629 13,958
<TOTAL-ASSETS> 387,868 448,352
<CURRENT-LIABILITIES> 87,493 155,706
<BONDS> 0 0
0 0
0 0
<COMMON> 3 3
<OTHER-SE> 274,762 268,081
<TOTAL-LIABILITY-AND-EQUITY> 387,868 448,352
<SALES> 151,921 92,803
<TOTAL-REVENUES> 152,354<F1> 93,772<F1>
<CGS> 88,303 53,801
<TOTAL-COSTS> 136,411<F2> 82,058<F2>
<OTHER-EXPENSES> 5,769<F3> 3,145<F3>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 727 316
<INCOME-PRETAX> 9,457 8,253
<INCOME-TAX> 3,641 3,052
<INCOME-CONTINUING> 5,816 5,201
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,816 5,201
<EPS-PRIMARY> $0.19 $0.18
<EPS-DILUTED> $0.19 $0.18
<FN>
<F1>INCLUDES: SALES, FRANCHISE FEES, ROYALTIES AND OTHER REVENUE AND INTEREST
INCOME.
<F2>INCLUDES: CGS, STORE OPERATING AND STORE OPENING COSTS
<F3>INCLUDES: AMORTIZATION OF INTANGIBLES AND GENERAL AND ADMINISTRATIVE COSTS.
</FN>
</TABLE>
