UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
____ SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY FISCAL
PERIOD ENDED JUNE 30,1995, OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. FOR THE
TRANSITION PERIOD FROM
__________ TO __________
Commission File No. 015767
The Sportsman's Guide, Inc.
(Exact name of registrant as specified in its charter)
Minnesota 41-1293081
(State or other jurisdiction (I.R.S. Employer I.D. Number)
of incorporation or organization)
411 Farwell Ave., So. St. Paul, Minnesota 55075
(Address of principal executive offices)
(612) 451-3030
(Registrant's telephone number, including area code)
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
----- -----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution under a plan confirmed
by a court. Yes X No
----- -----
As of August 4, 1995 there were 23,335,833 shares of the registrant's Common
Stock outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE SPORTSMAN'S GUIDE, INC.
BALANCE SHEETS
(UNAUDITED)
(In thousands of dollars)
ASSETS
June 30, December 30,
1995 1994
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ - $ 653
Accounts receivable 507 785
Inventory 21,057 13,571
Prepaid expenses 1,575 703
Promotional material 1,023 2,155
---------- ----------
Total current assets 24,162 17,867
PROPERTY AND EQUIPMENT - NET 4,051 3,288
---------- ----------
Total assets $ 28,213 $ 21,155
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $ 9,345 $ -
Current maturities of long-term debt
Related parties 2,095 150
Other 1,429 314
Trade creditors' obligation - 561
Accounts payable 11,641 10,890
Accrued expenses 311 1,238
Customer deposits and other liabilities 665 763
--------- ----------
Total current liabilities 25,486 13,916
LONG-TERM OBLIGATIONS:
Long-term debt
Related parties - 2,095
Other 230 1,678
Other long-term obligations 161 174
--------- ----------
Total long-term obligations 391 3,947
--------- ----------
Total liabilities 25,877 17,863
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Series A Preferred Stock-$.01 par value;
200,000 shares authorized, issued and
outstanding 2 2
Common Stock-$.01 par value; 36,800,000
shares authorized; 23,335,833 shares
issued and outstanding 233 233
Additional paid-in capital 2,138 2,138
Retained earnings (deficit) (37) 919
---------- ----------
Total stockholders' equity 2,336 3,292
---------- ----------
Total liabilities & stockholders'
equity $ 28,213 $ 21,155
========== ==========
SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
2
THE SPORTSMAN'S GUIDE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Thirteen Weeks and Twenty-six Weeks Ended
June 30, 1995 and July 1, 1994
(In thousands, except for per share data)
Thirteen Weeks Twenty-six Weeks
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
Sales $17,594 $15,142 $41,377 $35,412
Cost of sales 11,871 10,135 27,072 24,715
-------- -------- -------- --------
Gross profit 5,723 5,007 14,305 10,697
Selling, general and administrative
expenses 6,933 4,779 15,241 10,059
-------- -------- -------- --------
Earnings (loss) from operations (1,210) 228 (936) 638
Interest expense (239) (136) (388) (198)
Miscellaneous income (expense) 10 (41) 18 (30)
-------- -------- -------- --------
Earnings(loss)before income taxes (1,439) 51 (1,306) 410
Income tax benefit 393 - 350 -
-------- -------- -------- --------
Net earnings (loss) $(1,046) $ 51 $ (956) $ 410
======== ======== ======== ========
Net earnings (loss) per share $ (.04) $ - $ (.04) $ .02
======== ======== ======== ========
Weighted average number of common
shares and common share equivalents
outstanding 23,336 26,129 23,336 25,335
======== ======== ======== ========
SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
3
THE SPORTSMAN'S GUIDE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Thirteen Weeks and Twenty-six Weeks Ended
June 30, 1995 and July 1, 1994
(In thousands of dollars)
Thirteen Weeks Twenty-six Weeks
----------------- -----------------
1995 1994 1995 1994
-------- ------- -------- -------
Cash flows from operating activities:
Net earnings (loss) $(1,046) $ 51 $ (956) $ 410
Adjustments to reconcile net earnings
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 155 99 305 187
Other (11) 44 (17) 49
Changes in assets and liabilities:
Accounts receivable 211 (127) 278 (159)
Inventory (4,103) (7,768) (7,486) (6,677)
Prepaid expenses (791) (178) (872) (401)
Promotional material 935 (1,391) 1,132 (557)
Accounts payable 2,666 5,542 751 1,652
Accrued expenses (695) (4) (927) (122)
Customer deposits & other
liabilities (161) (212) (98) (1,088)
-------- -------- -------- --------
Cash flows used in operating
activities (2,840) (3,944) (7,890) (6,706)
Cash flows from investing activities:
Purchases of property and equipment (421) (712) (1,200) (1,031)
Disposals of property and equipment - 67 149 67
-------- -------- -------- --------
Cash flows used in investing
activities (421) (645) (1,051) (964)
Cash flows from financing activities:
Gross borrowings under line of credit 9,395 6,555 8,540 6,555
Gross payments under line of credit (6,270) (1,855) (9,195) (1,855)
Payments on trade creditors' obligation (561) (150) (561) (150)
Borrowings under long-term debt - - - 2,500
Payments under long-term debt (76) (46) (496) (101)
-------- -------- -------- --------
Cash flows provided by financing
activities 2,488 4,504 8,288 6,949
Increase (decrease) in cash and cash
equivalents (773) (85) (653) (721)
Cash and cash equivalents at beginning
of the period 773 85 653 721
-------- -------- -------- --------
Cash and cash equivalents at end of the
period $ - $ - $ - $ -
======== ======== ======== ========
SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
4
THE SPORTSMAN'S GUIDE, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
For the Thirteen Weeks and Twenty-six Weeks Ended
June 30, 1995 and July 1, 1994
(In thousands of dollars)
Thirteen Weeks Twenty-six Weeks
---------------- ----------------
1995 1994 1995 1994
-------- ------- ------- -------
Supplemental disclosure of cash flow
information
Cash paid during the periods for:
Interest $ 241 $ 41 $ 395 $ 177
Income taxes $ 110 $ - $ 190 $ -
Supplemental noncash investing activities
Fixed assets purchased with a capital lease $ - $ 11 $ 17 $ 11
SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
5
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of Presentation
The accompanying financial statements are unaudited and reflect all
adjustments which are normal and recurring in nature, and which,
in the opinion of management, are necessary for a fair presentation
of operations and cash flows. Reclassifications have been made to
prior year financial information wherever necessary to conform to
the current year presentation. Results of operations for the
interim periods are not necessarily indicative of full-year results.
Note 2: Per Share Data
The computation of earnings per share for the twenty-six and
thirteen week periods of 1995 is based on the weighted average
number of shares outstanding during the periods. The exercise of
outstanding options and warrants is not considered in the computa-
tion because their inclusion would have been anti-dilutive for all
periods presented for 1995.
The computation of earnings per share for the twenty-six and
thirteen week periods of 1994 is based on the weighted average
number of shares of common stock and common stock equivalents
outstanding during the period. The dilutive effect of the poten-
tial exercise of outstanding options and warrants to purchase
shares of common stock is calculated using the treasury stock
method.
Note 3: Credit Facility
Effective February 16, 1995, the Company entered into a new credit
facility providing a revolving line of credit up to $15,500,000,
subject to an adequate borrowing base, expiring March 1997. The
revolving credit facility provides an available base amount of
$5,000,000 with an additional seasonal amount of $10,500,000
available from May 1 through November 30 of each year. The
revolving line of credit is secured by substantially all of the
assets of the Company.
Note 4: Stockholders' Equity
In January 1995, options for an additional 1,000,000 common shares
were granted under a new non-qualified plan to management at $.875
per share. These options are subject to forfeiture if certain
performance goals are not met during fiscal year 1995. The 1995
Non-Qualified Stock Option Plan was approved and ratified by the
Company's stockholders at the annual meeting held on April 26, 1995.
6
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
(UNAUDITED)
Note 4 (Continued):
On April 26, 1995, the Company's stockholders authorized the Board
of Directors to determine at any time prior to December 29, 1995
that the number of outstanding shares of common stock of the
Company will be changed into one new share of common stock in a
ratio of not less than 5 to 1 nor more than 20 to 1, or if such
reverse stock split is not advisable, no further action will be
taken in such regard.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company meets its operating cash requirements through funds generated
from operations, borrowings under its revolving line of credit and sub-
ordinated debt with existing shareholders and new investors. Because of
increasing sales and correspondingly higher levels of inventory, the
Company's needs for external sources to fund working capital has increased.
Effective February 16, 1995, the Company entered into a new credit facility
providing a revolving line of credit up to $15,500,000, subject to an
adequate borrowing base, expiring March 1997. The revolving credit facility
provides an available base amount of $5,000,000 with an additional seasonal
amount of $10,500,000 available from May 1 through November 30 of each year.
The revolving line of credit is secured by substantially all of the assets
of the Company. As of June 30, 1995, the Company borrowed $9,345,000
against the revolving line of credit.
The cash flow used in operating activities for the thirteen week period
ended June 30, 1995 was $2,840,000 compared to $3,944,000 for the same
period last year. This decrease in cash flow used in operating activities
was primarily as a result of a decrease in promotional material due to
timing of the receipt of catalogs. The cash flow used in operating
activities for the twenty-six week period ended June 30, 1995 was $7,890,000
compared to $6,706,000 for the same period last year. This increase in cash
flow used in operating activities was largely due to the net loss in 1995 as
compared to the net earnings in 1994.
The Company had a working capital deficit of $1,324,000 as of June 30, 1995
as compared to working capital of $3,951,000 as of December 30, 1994. The
decrease in working capital was primarily as a result of an increase in the
current maturities of long-term debt. The inventory level as of June 30,
1995 increased $7,486,000 from the fiscal year ended December 30, 1994.
This increase was primarily due to the seasonality of the Company's business
with greater sales generated during the second half of the year. In
addition, the higher level of inventory was as a result of lower than
expected catalog sales in the first half of 1995 along with planned sales
growth over prior year periods. The notes payable-bank as of June 30, 1995
increased $9,345,000 from the fiscal year ended December 30, 1994. This
increase was primarily due to the higher level of inventory and lower
earnings in 1995 as compared to 1994.
The Company believes it will have sufficient funds available to meet current
and future commitments.
8
Results of Operations
Comparison of the thirteen and twenty-six week periods ended June 30, 1995
to the thirteen and twenty-six week periods ended July 1, 1994
The Company's sales for the thirteen and twenty-six week periods ended
June 30, 1995, increased $2,452,000 and $5,965,000 or 16% and 17%,
respectively, from the same periods last year. This increase in sales is
attributable to a planned increase in catalog circulation. The Company was
able to offset the majority of the postal rate and paper price increases
with the use of a slightly lower grade of paper and printing efficiencies,
thus allowing for an aggressive marketing plan.
Gross profit for the thirteen and twenty-six week periods ended June 30,
1995, was 32.5% and 34.6% of sales, respectively, compared to 33.1% and
30.2% of sales, respectively, for the same periods last year. When
comparing to the same period last year, the decrease in the gross profit as
a percent of sales, for the thirteen week period, was primarily due to lower
shipping revenue on the average outgoing parcel to customers. The increase
in the gross profit as a percent of sales, for the twenty-six week period,
was primarily due to reduced shipping costs of outgoing parcels to customers,
an increase in the shipping and handling charges to the customer and
improved retail product margins in the clothing and footwear categories.
Selling, general and administrative expenses for the thirteen week period
ended June 30, 1995, were $6,933,000 or 39.4% of sales compared to
$4,779,000 or 31.6% of sales for the same period last year. Selling,
general and administrative expenses for the twenty-six week period ended
June 30, 1995, were $15,241,000 or 36.8% of sales compared to $10,059,000 or
28.4% of sales for the same period last year. The increase in the dollar
spending level, for the thirteen week and twenty-six week period ended
June 30, 1995, was due to higher catalog costs with the planned increase in
catalog circulation. The increase as a percent of sales was primarily due
to lower customer response on the catalogs.
Interest expense for the thirteen and twenty-six week periods ended June 30,
1995, was $239,000 and $388,000, respectively as compared to $136,000 and
$198,000 for the same periods last year. The increase was primarily due to
interest on the revolving line of credit to finance the increased inventory
level.
Income tax benefit for the thirteen and twenty-six week periods ended
June 30, 1995, was $393,000 and $350,000, respectively. The income tax
benefit for the periods ended June 30, 1995 represents recoverable income
taxes from the prior year. In 1994, the Company utilized net operating loss
carryforwards to offset any income tax charges.
As a result of the above, the net losses for the thirteen and twenty-six
week periods ended June 30, 1995, were ($1,046,000) and ($956,000),
respectively, as compared to net earnings of $51,000 and $410,000,
respectively, for the same periods last year.
9
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.
THE SPORTSMAN'S GUIDE, INC.
Date: August 11, 1995 BY: /s/ Charles B. Lingen
---------------------------
Charles B. Lingen
Vice President Finance/CFO
10