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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 25, 1996
GANDER MOUNTAIN, INC.
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(Exact name of registrant as specified in its charter)
Wisconsin
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(State or other jurisdiction or incorporation)
0-14579 39-1742710
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(Commission File Number) (I.R.S. Employer I.D. No.)
Highway W, P.O. Box 128
Wilmot, Wisconsin 53192
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(Address of Principal Executive ( Zip Code )
Offices)
414-862-2331
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(Registrant's telephone number; including area code)
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Item 2. Acquisition or Disposition of Assets
a. On May 17, 1996, the Company sold selected catalog assets including
the customer list, certain other intangible assets and selected
inventory with an aggregate net book value of approximately $26.5
million to Cabela's Incorporated for $35.0 million in cash. As a
result of the sale, the Company is exiting the catalog business and
winding-down its catalog operations during the fourth quarter of
fiscal 1996. No additional catalogs are planned to be mailed and no
new catalog inventory is being purchased. The catalog business exit
strategy will include liquidation of the remaining catalog inventory
not sold above (primarily through the retail stores), selling the
fixed assets of the catalog business and selling the Company's
combined headquarters, distribution and retail store facility in
Wilmot, WI with the intent of leasing back the portion needed for
the retail business. The sale price was determined by arms length
negotiation.
On July 25, 1996, the Company sold the assets of its three Minnesota
stores (Duluth, Maple Grove and St. Cloud) and two stores in
Wisconsin (Eau Claire and LaCrosse) to Holiday Stationstores, Inc.
("Holiday") for $16.2 million. The sale included the purchase of
inventory, store fixtures and leasehold improvements, along with the
assumption of certain existing leases for the facilities. In
addition, Holiday offered employment to all of Gander Mountain's
existing employees in the above stores. Holiday will continue to
have the right to operate the stores under the Gander Mountain name
until January 31, 1997.
On July 31, 1996, the Company sold its combined headquarters,
distribution and retail store facility in Wilmot, Wisconsin to
Pleasant Company for net proceeds of $6.6 million after tax
prorations and escrowed funds. Under the agreement, the Company can
continue to occupy the facility until June 1, 1997 with extended
rental option periods for the retail store space beyond that date.
Item 7. Financial Statements and Exhibits
b. Pro forma financial information is attached for the transactions
described in Item 2 above.
c. Exhibits
2.1 Asset Purchase Agreement between Cabela's, Inc. and Gander
Mountain, Inc., dated as of April 10, 1996. *
2.2 Asset Purchase Agreement between Holiday Stationstores, Inc.
and Gander Mountain, Inc. dated as of July 11, 1996.
* Incorporated by reference from the Registrant's Form 8-K
filing on June 3, 1996.
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SIGNATURE
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 hereunto duly authorized.
GANDER MOUNTAIN, INC.
Date: August 1, 1996 BY______________________
Kenneth C. Bloom
Chief Financial Officer
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GANDER MOUNTAIN, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited pro forma consolidated financial statements include
the effects of the sale of selected catalog assets to Cabela's Incorporated on
May 17, 1996, the catalog business wind-down and exit strategy, as described
below, the sale of the assets of five retail stores to Holiday Stationstores
on July 25, 1996, and the sale of the Company's Wilmot facility on July 31,
1996, as if such events had occurred, for balance sheet purposes, on March 30,
1996 and, for statement of operations purposes, on July 3, 1994. These
unaudited pro forma consolidated financial statements are provided for
informational purposes only and should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto.
On May 17, 1996, the Company sold selected catalog assets including the
customer list, certain other intangible assets and selected inventory with an
aggregate net book value of $26.5 million to Cabela's Incorporated for $35.0
million in cash. As a result of the sale, the Company is exiting the catalog
business and winding-down it's catalog operations during the fourth quarter of
fiscal 1996. No additional catalogs will be mailed and no new catalog
inventory is being purchased. The catalog business exit strategy includes
liquidation of the remaining catalog inventory not sold above (primarily
through the retail stores), selling the fixed assets of the catalog business
and selling the Company's combined headquarters, distribution and retail store
facility in Wilmot, WI with the intent of leasing back the portion needed for
the retail business.
On July 25, 1996, the Company sold the assets of its three Minnesota stores
(Duluth, Maple Grove and St. Cloud) and two stores in Wisconsin (Eau Claire and
LaCrosse) to Holiday Stationstores, Inc. ("Holiday") for $16.2 million. The
sale included the purchase of inventory, store fixtures and leasehold
improvements, along with the assumption of certain existing leases for the
facilities. In addition, Holiday offered employment to all of Gander
Mountain's existing employees in the above stores. Holiday will continue to
have the right to operate the stores under the Gander Mountain name until
January 31, 1997.
On July 31, 1996, the Company sold its combined headquarters, distribution and
retail store facility in Wilmot, Wisconsin to Pleasant Company for net proceeds
of $6.6 million after tax prorations and escrowed funds. Under the agreement,
the Company can continue to occupy the facility until June 1, 1997 with
extended rental option periods for the retail store space beyond that date.
The unaudited pro forma adjustments are based upon available information and
certain assumptions and estimates that management believes are reasonable in
the circumstances and are subject to audit adjustments. The unaudited pro
forma consolidated financial information purports neither to represent what the
Company's financial position or results of operations would actually have been
if the events had occurred on the dates specified nor to be indicative of the
Company's future results.
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GANDER MOUNTAIN, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended July 1, 1995
(in thousands, except for per share data)
Pro Forma Pro Forma
Adjustments for Adjustments
Sale of Catalog for Sale of
Assets and Exit Retail Store
from Catalog Assets and Pro Forma
Historical Business (1) Facility (2) As Adjusted
---------- ------------ ------------ -----------
Net sales 297,784 (202,270) (23,278) 72,236
Cost of goods sold 201,843 (136,992) (15,773) 49,078
-------- -------- ------- ------
Gross profit 95,941 (65,278) (7,505) 23,158
Selling, general & administrative(3) 95,453 (62,421) (5,283) 27,749
Special charge (4) 11,510 (11,200) - 310
-------- -------- ------- ------
Loss from operations (11,022) 8,343 (2,222) (4,901)
Net interest expense (5) 4,635 (2,577) (1,537) 521
Other - net (6) 1,326 (602) - 724
-------- -------- ------- ------
Loss before income taxes (16,983) 11,522 (685) (6,146)
Income tax provision (7) (6,199) 4,206 (250) (2,243)
-------- -------- ------- ------
Net loss (10,784) 7,316 (435) (3,903)
Preferred redeemable stock dividends 1,112 - - 1,112
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Net loss to common shareholders ($11,896) $7,316 ($435) ($5,015)
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Net loss per share:
Primary ($3.69) ($1.56)
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Fully Diluted ($3.69) ($1.56)
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Weighted Average common and
common equivalent shares:
Primary 3,224 3,224
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Fully Diluted 3,224 3,224
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GANDER MOUNTAIN, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Thirty-Nine Weeks Ended March 30, 1996
(in thousands, except for per share data)
Pro Forma Pro Forma
Adjustments for Adjustments
Sale of Catalog for Sale of
Assets and Exit Retail Store
from Catalog Assets and Pro Forma
Historical Business (1) Facility (2) As Adjusted
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Net sales 264,486 (151,105) (25,802) 87,579
Cost of goods sold 186,014 (104,791) (18,531) 62,692
-------- -------- ------- ------
Gross profit 78,472 (46,314) (7,271) 24,887
Selling, general & administrative (3) 81,159 (49,221) (5,721) 26,217
Special charge (4) 5,300 (1,627) - 3,673
-------- -------- ------- ------
Loss from operations (7,987) 4,534 (1,550) (5,003)
Net interest expense (5) 5,006 (2,092) (1,402) 1,512
Other - net (6) 406 (205) - 201
-------- -------- ------- ------
Loss before income taxes (13,399) 6,831 (148) (6,716)
Income tax provision 408 - - 408
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Net loss (13,807) 6,831 (148) (7,124)
Preferred redeemable stock dividends 832 - - 832
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Net loss to common shareholders ($14,639) $6,831 ($148) ($7,956)
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Net loss per share:
Primary ($4.51) ($2.45)
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Fully Diluted ($4.51) ($2.45)
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Weighted Average common and
common equivalent shares:
Primary 3,247 3,247
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Fully Diluted 3,247 3,247
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GANDER MOUNTAIN, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
March 30, 1996
(in thousands)
Pro Forma Adjustments (1), (2)
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Sale of Catalog Exit from Catalog Sale of Store Pro Forma
Historical Assets Business Assets & Facility As Adjusted
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ASSETS
Current assets:
Cash $5,278 - - - $5,278
Accounts receivable 5,076 - - - 5,076
Inventory 69,828 (26,315)(8) - (9,102)(16) 34,411
Prepaid catalog expenses 3,723 - (1,923)(10) - 1,800
Assets held for sale 100 - 7,335 (11) (7,000)(17) 435
Other current assets 36 - - - 36
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84,041 (26,315) 5,412 (16,102) 47,036
Property and equipment - net 33,697 - (19,085)(12) (3,464)(17) 11,148
Intangible assets - net 610 (149)(8) (438)(13) - 23
-------- -------- -------- -------- -------
$118,348 ($26,464) ($14,111) ($19,566) $58,207
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $25,021 - - - $25,021
Notes payable to bank 47,459 (14,071)(9) - (22,974)(18) 10,414
Current portion of long-term obligation 19,500 (19,500)(9) - - 0
Other current liabilities 10,478 - 4,127 (14) (599)(19) 14,006
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102,458 (33,571) 4,127 (23,573) 49,441
Long-term obligations 0 - 2,119 (14) 500 (20) 2,619
Redeemable preferred stock 20,000 - - - 20,000
Shareholders' deficit (4,110) 7,107 (15) (20,357)(15) 3,507 (21) (13,853)
-------- -------- -------- -------- -------
$118,348 ($26,464) ($14,111) ($19,566) $58,207
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GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Reflects the sale of catalog inventory and intangible assets to
Cabela's which occurred on May 17, 1996 and subsequent exit from
the catalog business in the fourth quarter of fiscal 1996.
(2) Reflects the sale of the assets of five retail stores to Holiday
Stationstores, Inc. which occurred on July 25, 1996 and the sale
of the Company's Wilmot facility which occurred on July 31, 1996.
(3) Selling, general and administrative expenses for the catalog
business include historical allocations of centralized
distribution center, information technology, accounting,
administrative, human resource and loss prevention expenses of
$11.7 million and $9.2 million, respectively, for the year ended
July 1, 1995 and the thirty-nine weeks ended March 30, 1996. The
allocations represent the estimated incremental expenses incurred
on behalf of the catalog operations. Selling, general and
administrative expenses for the retail stores include expenses
directly attributable to individual stores and do not include
allocations of general corporate overhead.
(4) The fiscal 1995 special charge attributed to the catalog business
includes $5.0 million for the abandonment of certain internally
developed catalog business software, $4.5 million for the
write-down of catalog aged inventory, $1.0 million severance for
catalog personnel, $0.5 million EZ pay receivable bad debt reserve
and $0.2 million in costs related to termination of two catalog
joint ventures. The fiscal 1996 special charge attributed to the
catalog business of $1.6 million is based on the proportion of
catalog inventory to total inventory included in the liquidation
plan.
(5) The pro forma adjustments to interest expense were calculated
assuming the net proceeds from the catalog assets sale of $33.6
million were used to retire all long term loans outstanding and,
including the net proceeds from the retail store assets sale of
$15.8 million, the new long term loan of $0.5 million and the
proceeds from the sale of the Wilmot facility of $6.6 million, a
portion of the revolving line of credit indebtedness at July 3,
1994. The average interest rates for such indebtedness was 7.1
percent and 8.2 percent, respectively, for the year ended July 1,
1995 and the thirty-nine weeks ended March 30, 1996. Also,
interest expense was increased for the six percent annual interest
due on the new $0.5 million long term loan.
(6) The pro forma adjustments to other expense include amortization
associated with intangible assets sold or written-off as part of
the disposition of the catalog business of $0.3 million and $0.2
million, respectively, for the year ended July 1, 1995 and the
thirty-nine weeks ended March 30, 1996.
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GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(7) The pro forma income tax benefit adjustment for the year ended
July 1, 1995 is based on the Company's historical effective tax
rate.
(8) Book value of inventory and customer list intangible asset
included in catalog assets sold.
(9) Cash proceeds have been reduced by $1.4 million representing
estimated transaction costs for financial advisors, associate
transaction incentives, bank fees and legal expenses. The net
proceeds from the catalog assets sale of $33.6 million were used
to retire all long term loans outstanding and with the remainder
applied against the revolving line of credit indebtedness.
(10) Represents write-off of prepaid catalog expenses of $1.4 million
for which there will be no future catalog sales benefit as a
result of exiting the catalog business and the write-down to
estimated net realizable value of prepaid paper stock of $0.3
million and the reclassification of the balance of $0.3 million to
assets held for sale.
(11) Represents reclassification of various catalog fixed assets to
assets held for sale at estimated net realizable value less
selling costs as well as the paper stock noted in Note (10).
(12) Represents the net book value of assets which will be held for
sale including the fixed assets of the catalog business and the
Company's combined headquarters, distribution and retail store
facility.
(13) Represents the write-off of deferred organization and financing
costs with no future benefits as a result of the disposition of
the catalog operation.
(14) Represents future costs associated with the disposition of the
catalog business. The remaining value of operating lease
obligations relating to computer equipment used only in the
catalog business amounts to $3.1 million, of which $2.1 million
extends beyond one year. Severance and stay-put bonuses for
catalog associates amount to $1.5 million and reserves of $1.7
million for future estimated costs, claims and contingencies.
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GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(15) The net estimated pro forma increase to shareholders' deficit of
$13.3 million is calculated as follows (in millions):
Gross proceeds $ 35.0
Less:
Book value of assets sold 26.5
Direct transaction costs 1.4
Assets held for sale write-downs to net realizable value 12.1
Value of remaining catalog lease obligations 3.1
Severance and stay-put bonuses 1.5
Write-off prepaid catalog expenses 1.4
Reserve for future estimated costs, claims and contingencies 1.7
Write-off deferred organization and financing costs 0.4
Other 0.2
Tax benefit - offset entirely by valuation allowance -
-------
Net adjustment to shareholders' deficit $ 13.3
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(16) Represents the book value of inventory sold.
(17) Represents the net book value of assets sold.
(18) Cash proceeds, net of transaction costs, include $15.8 million
from the sale of the stores, $0.5 million from a new long term
loan payable to the purchaser and $6.6 million from the sale of
the Wilmot facility.
(19) Represents the book value of liabilities assumed by purchaser and
amounts escrowed for accrued taxes payable in the future.
(20) Represents new long term loan payable to purchaser in four years
and accruing interest at 6 percent annually, paid at maturity.
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GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(21) The net estimated pro forma reduction in shareholders' deficit of
$3.5 million is calculated as follows (in millions):
Gross proceeds from sale of store assets $ 16.2
Gross proceeds from sale of Wilmot facility 7.0
Less:
Book value of store assets sold 12.2
Book value of Wilmot facility held for sale 7.0
Direct transaction costs 0.3
Tax expense - offset entirely by reduction
in valuation allowance -
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Net reduction in shareholders' deficit $ 3.5