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 the Quarterly Period Ended: August 4, 2001
Commission File Number: 000-23515
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GART SPORTS COMPANY
-------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1242802
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1000 Broadway, Denver, Colorado 80203
-------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (303) 861-1122
Indicate by check mark whether the registrant has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or shorter period that the registrant was required to
file such reports).
Yes [X] No [_]
Indicate by check mark whether the registrant has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
As of September 10, 2001, there were outstanding 10,903,817 shares of the
registrant's common stock, $.01 par value, and the aggregate market value of the
shares (based upon the closing price on that date of the shares on the NASDAQ
National Market) held by non-affiliates was approximately $79,700,000.
GART SPORTS COMPANY
QUARTERLY PERIOD ENDED AUGUST 4, 2001
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets......................................... 1
Consolidated Statements of Operations............................... 2
Consolidated Statements of Stockholders' Equity..................... 3
Consolidated Statements of Cash Flows............................... 4
Notes to Consolidated Financial Statements.......................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk.......... 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................. 15
Item 6. Exhibits and Reports on Form 8-K.................................... 16
SIGNATURES.......................................................................... 17
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GART SPORTS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share and Per Share Amounts)
August 4, February 3,
2001 2001
-------------- --------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 19,872 $ 8,107
Accounts receivable, net of allowance for doubtful accounts of $679 and $606,
respectively 7,451 6,273
Inventories 312,032 230,800
Prepaid expenses and other assets 10,915 7,655
Deferred income taxes 20,234 2,033
--------- ---------
Total current assets 370,504 254,868
Property and equipment, net 85,859 59,298
Favorable leases acquired, net of accumulated amortization of $280 at
August 4, 2001 13,282 --
Goodwill, net of accumulated amortization of $250 at August 4, 2001 65,688 --
Assets held for sale -- 1,671
Deferred tax asset 5,288 13,208
Other assets, net of accumulated amortization of $3,553 and $2,912, respectively 9,829 6,083
--------- ---------
Total assets $ 550,450 $ 335,128
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 153,150 $ 105,395
Current portion of capital lease obligations 601 470
Accrued expenses and other current liabilities 65,522 35,679
--------- ---------
Total current liabilities 219,273 141,544
Long-term debt 166,608 95,900
Capital lease obligations, less current portion 2,244 1,805
Deferred rent and other long-term liabilities 9,154 6,993
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Total liabilities 397,279 246,242
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Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value. 3,000,000 shares authorized; none issued -- --
Common stock, $.01 par value. 22,000,000 shares authorized;
11,285,972 and 7,739,203 shares issued and 10,903,817 and 7,357,064
shares outstanding at August 4, 2001 and February 3, 2001, respectively 113 77
Additional paid-in capital 118,191 57,014
Unamortized restricted stock compensation (1,762) (2,055)
Accumulated other comprehensive gain (loss) 53 (226)
Retained earnings 38,989 36,489
--------- ---------
155,584 91,299
Treasury stock, 382,155 and 382,139 common shares,respectively, at cost (2,413) (2,413)
--------- ---------
Total stockholders' equity 153,171 88,886
--------- ---------
Total liabilities and stockholders' equity $ 550,450 $ 335,128
========= =========
See accompanying notes to consolidated financial statements.
1
GART SPORTS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, Dollars in Thousands, Except Share and Per Share Amounts)
Thirteen weeks ended Twenty-six weeks ended
----------------------------- ------------------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
------------- ------------- -------------- --------------
Net sales $ 237,938 $ 187,600 $ 400,580 $ 353,349
Cost of goods sold, buying, distribution and
occupancy 178,616 140,395 301,932 266,834
------------- ------------- -------------- --------------
Gross profit 59,322 47,205 98,648 86,515
Operating expenses 50,693 40,150 86,876 76,310
Merger integration costs 3,477 -- 3,477 --
------------- ------------- -------------- --------------
Operating income 5,152 7,055 8,295 10,205
Non operating income (expense):
Interest expense, net (2,513) (2,922) (4,723) (5,512)
Other income 467 52 526 163
------------- ------------- -------------- --------------
Income before income taxes 3,106 4,185 4,098 4,856
Income tax (expense) benefit (1,211) 6,580 (1,598) 6,318
------------- ------------- -------------- --------------
Net income $ 1,895 $ 10,765 $ 2,500 $ 11,174
============= ============= ============== ==============
Earnings per share:
Basic $ 0.20 $ 1.46 $ 0.30 $ 1.51
============= ============= ============== ==============
Diluted $ 0.18 $ 1.44 $ 0.27 $ 1.49
============= ============= ============== ==============
Weighted average shares of common stock outstanding:
Basic 9,529,185 7,362,358 8,447,488 7,419,744
============= ============= ============== ==============
Diluted 10,268,375 7,471,653 9,102,633 7,517,143
============= ============= ============== ==============
See accompanying notes to consolidated financial statements.
2
GART SPORTS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, Dollars in Thousands)
Accumulated
Additional Unamortized other
Common paid-in restricted stock comprehensive Retained
stock capital compensation loss earnings
---------- ------------ ---------------- --------------- -----------
BALANCES AT FEBRUARY 3, 2001 $ 77 $ 57,014 $ (2,055) $ (226) $ 36,489
---------- ------------ ---------------- --------------- -----------
Net income -- -- -- -- 2,500
Unrealized gain on equity securities, net of tax -- -- -- 499 --
Unrealized loss on interest rate swap, net of tax -- -- -- (220) --
Comprehensive income
Issuance of common stock for acquisition 34 59,443 -- -- --
Issuance of common stock -- 69 -- -- --
Exercise of stock options 2 1,665 -- -- --
Amortization of restricted stock -- -- 293 -- --
---------- ------------ ---------------- --------------- -----------
BALANCES AT AUGUST 4, 2001 $ 113 $ 118,191 $ (1,762) $ 53 $ 38,989
========== ============ ================ =============== ===========
Total
Comprehensive Treasury Stockholders'
income stock equity
------------- ----------- --------------
BALANCES AT FEBRUARY 3, 2001 $ (2,413) $ 88,886
----------- --------------
Net income $ 2,500 -- 2,500
Unrealized gain on equity securities, net of tax 499 -- 499
Unrealized loss on interest rate swap, net of tax (220) -- (220)
---------------
Comprehensive income $ 2,779
===============
Issuance of common stock for acquisition -- 59,477
Issuance of common stock -- 69
Exercise of stock options -- 1,667
Amortization of restricted stock -- 293
----------- --------------
BALANCES AT AUGUST 4, 2001 $ (2,413) $ 153,171
=========== ==============
See accompanying notes to consolidated statements.
3
GART SPORTS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Dollars in Thousands)
Twenty-six weeks ended
----------------------------------
August 4, July 29,
2001 2000
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,500 $ 11,174
Adjustments to reconcile net income to net cash
and cash equivalents used in operating activities:
Depreciation and amortization 8,889 7,408
(Gain) loss on sale of assets (41) 83
Deferred taxes 1,598 (6,318)
Increase in deferred rent 849 736
Deferred compensation 69 21
Changes in operating assets and liabilities:
Accounts receivable, net (2,008) (1,016)
Inventories (12,624) (18,227)
Prepaid expenses and other current assets (1,028) (407)
Other assets (2,413) 55
Accounts payable 13,805 (10,296)
Accrued expenses and other current
liabilities (7,287) 2,828
-------------- ---------------
Net cash provided by (used in) operating activities 2,309 (13,959)
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (12,027) (7,567)
Proceeds from the sale of property and equipment 7,834 --
Payment of notes receivable (211) 82
Acquisition of Oshman's, net of cash acquired (46,848) --
-------------- ---------------
Net cash used in investing activities (51,252) (7,485)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 184,114 121,958
Principal payments on long-term debt (124,929) (97,658)
Principal payments on capital lease
obligations (144) (203)
Purchase of treasury stock -- (1,026)
Proceeds from sale of common stock
under option plans 1,667 52
-------------- ---------------
Net cash provided by financing activities 60,708 23,123
-------------- ---------------
Increase in cash and cash equivalents 11,765 1,679
Cash and cash equivalents at beginning of period 8,107 7,843
-------------- ---------------
-------------- ---------------
Cash and cash equivalents at end of period $ 19,872 $ 9,522
============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest, net $ 4,593 $ 5,458
============== ===============
============== ===============
Cash received during the period for income taxes -- $ (384)
============== ===============
See accompanying notes to consolidated financial statements.
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements do not include
all information and footnotes necessary for the annual presentation of
financial position, results of operations and cash flows in conformity with
accounting principles generally accepted in the United States of America,
and should be read in conjunction with the Company's 2000 Annual Report on
Form 10-K. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation of the
statement of financial position and the results of operations for the
interim periods have been included. The results for the thirteen and
twenty-six week periods ended August 4, 2001 are not necessarily indicative
of the results to be expected for the full year.
Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period presentation.
2. ACQUISITION
On June 7, 2001, the Company completed its acquisition of Oshman's Sporting
Goods, Inc. ("Oshman's"). The consideration consisted of approximately 3.4
million shares of Gart Sports Company common stock valued at approximately
$59.5 million and approximately $50.2 million in cash. Oshman's operates as
a wholly owned subsidiary of the Company. At the time of the acquisition,
Oshman's operated 58 sporting goods specialty stores, including 43
SuperSports USA stores and 15 traditional stores. The acquisition was
accounted for under the purchase method of accounting and accordingly the
statement of operations includes the results of Oshman's since the date of
the acquisition.
The total cost of the acquisition has been allocated to the tangible and
intangible assets acquired and liabilities assumed based on their
respective fair values. The allocation of the purchase price is preliminary
and the final allocation may differ. Goodwill will be amortized over forty
years, for the remainder of this fiscal year. The preliminary allocation of
the purchase price is as follows:
Inventory 68,593
Other current assets 19,538
Property and equipment 28,213
Favorable leases and other long term assets, excluding goodwill 13,669
Goodwill 65,938
Current liabilities (80,342)
Long term liabilities ( 5,918)
-------
Book value of net assets acquired 109,691
=======
5
The following unaudited pro forma combined financial information presents the
combined results of operations of Gart Sports Company and Oshman's as if the
acquisition had occurred as of the beginning of fiscal 2001 and 2000, after
giving effect to certain adjustments, including amortization of favorable
leases and goodwill, depreciation expense, and related income tax effects. No
adjustments have been made to the pro forma statement of operations to conform
accounting policies and practices or to recognize anticipated cost savings and
synergies. The pro forma combined financial information does not necessarily
reflect the results of operations that would have occurred had Gart Sports
Company and Oshman's constituted a single entity during such periods.
Thirteen weeks ended Twenty-six weeks ended
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---------- --------- --------- ---------
(Unaudited, in thousands except per share amounts)
Net Sales 264,757 265,885 502,053 506,296
========== ========= ========= =========
Net Income 369 (1) 11,880 (2) (4,441) (1)(3) 20,340 (2)(4)
========== ========= ========= =========
Basic earnings per share 0.04 (1) 1.11 (2) (0.53) (1)(3) 1.89 (2)(4)
========== ========= ========= =========
Diluted earnings per share 0.04 (1) 1.10 (2) (0.49) (1)(3) 1.87 (2)(4)
========== ========= ========= =========
(1) Includes $3.5 million, before taxes, of integration costs, due to the
acquisition of Oshman's.
(2) Includes one-time tax benefit recognized by Gart of $8.2 million.
(3) Includes $5.2 million, before taxes, of severance expense accrued by
Oshman's as part of the acqusition.
(4) Includes gain on sale of real estate owned by Oshman's of $6.8 million,
before taxes.
3. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Statement, as amended, became effective in the first quarter
of fiscal year 2001. The new statement requires that every derivative
instrument be recorded on the balance sheet as either an asset or liability,
measured at its fair value, and requires that changes in the derivative's
fair value be recognized currently in earnings, unless specific hedge
accounting criteria are met. The Company adopted this statement on February
4, 2001 and there was not a material impact on results of operations or
financial position.
In June 2001, FASB issued Statement No. 141, "Business Combinations" and
Statement No. 142, "Goodwill and Other Intangible Assets". FASB Statement No.
141 requires that the purchase method of accounting be used for all business
combinations consummated after June 30, 2001 and establishes criteria for
recognizing intangible assets separately from goodwill. The adoption of FASB
Statement No. 141 will not have a material impact on our consolidated
financial statements.
FASB Statement No. 142 requires that upon adoption, amortization of goodwill
and intangible assets deemed to have indefinite lives will cease and instead,
the carrying value of goodwill and these intangibles will be evaluated for
impairment on an annual basis or more frequently should certain factors be
present. Other intangible assets will continue to be amortized over their
useful lives and reviewed for impairment in accordance with FASB Statement
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of". FASB Statement No. 142 is effective for
fiscal years beginning after December 15, 2001. The Company will adopt FASB
Statement No. 142 on February 3, 2002, the beginning of its fiscal year.
Application of the non-amortization provisions of the statement is expected
to result in a decrease in amortization of $1.6 million per year. Goodwill
acquired in business combinations completed prior to July 1, 2001 will
continue to be amortized until February 2, 2002. Our initial evaluation of
impairment of existing goodwill is required to be completed no later than
August 3, 2002.
6
4. EARNINGS PER SHARE
The following table sets forth the computations of basic and diluted earnings
per share (in thousands, except share and per share amounts):
Thirteen weeks ended Twenty -six weeks ended
------------------------------ ----------------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
-------------- ------------- ------------ ------------
Net income available to common stockholders $ 1,895 $ 10,765 $ 2,500 $ 11,174
Weighted average shares of common stock
outstanding - basic 9,529,185 7,362,358 8,447,488 7,419,744
-------------- ------------- ------------ ------------
Basic earnings per share $ 0.20 $ 1.46 $ 0.30 $ 1.51
============== ============= ============ ============
Number of shares used for diluted earnings
per share:
Weighted average shares of common stock
outstanding - basic 9,529,185 7,362,358 8,447,488 7,419,744
Dilutive securities - stock options and restricted stock 739,190 109,295 655,145 97,399
-------------- ------------- ------------ ------------
Weighted average shares of common stock
outstanding - diluted 10,268,375 7,471,653 9,102,633 7,517,143
-------------- ------------- ------------ ------------
Diluted earnings per share $ 0.18 $ 1.44 $ 0.27 $ 1.49
============== ============= ============ ============
5. CONTINGENCIES
Tax Contingency
Under the terms of the Company's tax sharing agreement with its former
parent, the Company is responsible for its share, on a separate return basis,
of any tax payments associated with proposed deficiencies or adjustments, and
related interest and penalties charged to the controlled group which may
arise as a result of an assessment by the IRS.
On July 24, 1997, the IRS proposed adjustments to the Company's and former
parent's 1992 and 1993 federal income tax returns in conjunction with the
former parent's IRS examination. The proposed adjustments related to the
manner in which LIFO inventories were characterized on such returns. The IRS
has asserted that this basis difference should have been reflected in taxable
income in 1992 and 1993. The Company has taken the position that the
inventory acquired in connection with the acquisition of its former parent
was appropriately allocated to its inventory pools. The IRS has asserted the
inventory was acquired at a bargain purchase price and should be allocated to
a separate pool and liquidated as inventory turns. Based on management's
discussions with the Company's former parent, the Company believes the
potential accelerated tax liability, which could have a negative effect on
liquidity in the near term, ranges from approximately $2,500,000 to
$9,700,000. The Company recorded approximately $9,700,000 as a long-term net
deferred tax liability for the tax effect of the LIFO inventory basis
difference. The range of loss from possible assessed interest charges
resulting from the proposed adjustments range from approximately $200,000 to
$3,300,000. The Company has accrued approximately $1.2 million for estimated
interest charges in the consolidated financial statements. No penalties are
expected to be assessed relating to this matter. At August 4, 2001, the LIFO
inventory and other associated temporary differences continue to be
classified as long-term net deferred tax liabilities since final settlement
terms have not been negotiated.
The Company has reviewed the various matters that are under consideration and
believes that it has adequately provided for any liability that may result
from this matter. In the opinion of management, any additional liability
beyond the amounts recorded that may arise as a result of the IRS examination
will not have a material adverse effect on the Company's consolidated
financial condition, results of operations, or liquidity.
In addition, the Company is currently under examination for the fiscal tax
years ended September 1997 and 1998. No adjustments have been proposed at
this time.
7
Legal Proceedings
In June 2000, a former employee of Sportmart brought two class action
complaints in California against the Company, alleging certain wage and hour
claims in violation of the California Labor Code, California Business and
Professional Code section 17200 and other related matters. One complaint
alleges that the Company classified certain managers in its California stores
as exempt from overtime pay when they would have been classified as non-
exempt and paid overtime. The second complaint alleges that the Company
failed to pay hourly employees in its California stores for all hours worked.
In March 2001, a third class action complaint was filed in the same court in
California alleging the same wage and hour violations regarding
classification of certain managers as exempt from overtime pay. More
recently, in July 2001, a fourth complaint was filed alleging that store
managers should also not be classified as employees exempt from overtime pay.
All the complaints seek compensatory damages, punitive damages and penalties.
The amount of damages sought is unspecified. Although the court has denied
motions to dismiss the first two complaints, the Company intends to
vigorously defend these matters and at this time, the Company has not
ascertained the future liability, if any, as a result of these complaints.
The Company is a party to various other legal proceedings and claims arising
in the ordinary course of business. Management believes that the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial condition, results of operations or
liquidity.
6. SALE OF ASSETS HELD FOR SALE
The Company sold certain assets classified as Held for Sale, resulting in a
realized gain of approximately $200,000 on July 16, 2001. The Assets Held for
Sale consisted of land and buildings in Edmonton, Alberta, Canada acquired as
part of the Sportmart acquisition on January 9, 1998.
7. FINANCIAL INSTRUMENTS
Interest Rate Instrument
The Company entered into an interest rate swap agreement on June 28, 2001 to
minimize the risks and costs associated with its financing activities. Under
the swap agreement, the Company pays fixed rate interest and receives
variable interest rate payments periodically over the life of the instrument.
The notional amount is used to measure interest to be paid or received and
does not represent the exposure due to credit loss. The Company's interest
rate swap is designated as a cash flow hedge.
The notional interest rate swap amount is $20.0 million. At August 4, 2001
the fair value of the swap was a loss of $220,000, net of the related tax
benefit. This agreement terminates on June 30, 2004. The unrealized loss from
this interest rate swap is included in other comprehensive income and is
shown as a component of stockholders' equity.
8. E-COMMERCE AGREEMENT
On June 28, 2001, the Company entered into a long-term agreement with Global
Sports Interactive, Inc. ("Global"). Under the terms of the agreement, Global
developed and is currently operating three online sporting goods stores at
www.gartsports.com, www.sportmart.com, and www.oshmans.com. The Company
------------------ ----------------- ---------------
receives royalty payments from Global based on a certain percent of sales
from these sites. In connection with the e-commerce agreement, Global granted
the Company a warrant to purchase 60,000 shares of common stock of Global.
This warrant and a similar warrant for 30,000 Global shares acquired from
Oshman's at the time of the acquisition are classified as available-for-sale
marketable equity securities and have an aggregate fair value of $1.2 million
at August 4, 2001.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto included elsewhere
within this report and the Company's 2000 Annual Report on Form 10-K.
The Company is a leading retailer of sporting goods in the Midwest and
western United States. Given the economic characteristics of the store formats,
the similar nature of the products sold, the type of customer and method of
distribution, the operations of the Company are aggregated in one reportable
segment.
The Company uses a 52-53 week fiscal reporting year ending on the Saturday
closest to the end of January.
RESULTS OF OPERATIONS
On June 7, 2001, the Company acquired all of the outstanding common stock of
Oshman's Sporting Goods, Inc. ("Oshman's"). The acquisition was accounted for
under the purchase method of accounting and accordingly the results of
operations include the results of Oshman's since the date of the acquisition.
The following table sets forth the Company's consolidated statement of
operations data as a percentage of net sales and the number of stores open at
the end of each period for the periods indicated (dollars rounded to millions):
Thirteen weeks ended Twenty-six weeks ended
---------------------------------------------- ----------------------------------------------
August 4, 2001 July 29, 2000 August 4, 2001 July 29, 2000
Dollars % Dollars % Dollars % Dollars %
-------------- ------- ------------- ------- -------------- ------- ------------- -------
Net sales $ 237.9 100.0 % $ 187.6 100.0 % $ 400.6 100.0 % $ 353.3 100.0 %
Cost of goods sold, buying,
distribution and occupancy (178.6) (75.1) (140.4) (74.8) (301.9) (75.4) (266.8) (75.5)
----------- ------ ---------- ------ ---------- ------ ---------- ------
Gross profit 59.3 24.9 47.2 25.2 98.7 24.6 86.5 24.5
Operating expenses (50.7) (21.3) (40.2) (21.4) (86.9) (21.7) (76.3) (21.6)
Merger integration costs (3.5) (1.5) -- -- (3.5) (0.9) -- --
----------- ------ ---------- ------ ---------- ------ ---------- ------
Operating income 5.1 2.1 7.0 3.7 8.3 2.1 10.2 2.9
Interest expense, net (2.5) (1.0) (2.9) (1.5) (4.7) (1.2) (5.5) (1.6)
Other income 0.5 0.2 0.1 0.1 0.5 0.1 0.2 0.1
----------- ------ ---------- ------ ---------- ------ ---------- ------
Income before income taxes 3.1 1.3 4.2 2.2 4.1 1.0 4.9 1.4
Income tax benefit (expense) (1.2) (0.5) 6.6 3.5 (1.6) (0.4) 6.3 1.8
----------- ------ ---------- ------ ---------- ------ ---------- ------
Net income $ 1.9 0.8 % $ 10.8 5.8 % $ 2.5 0.6 % $ 11.2 3.2 %
=========== ====== ========== ====== ========== ====== ========== ======
Number of stores at end of period 177 123 177 123
=========== ========== ========== ==========
Pro-forma FY 2000 results excluding the effect of the significant tax benefit
and utilizing statutory tax rates:
Income before income taxes $ 4.2 2.3 % $ 4.9 1.4 %
Income tax expense (1.6) (0.9) (1.9) (0.5)
---------- ------ ---------- ------
Net income $ 2.6 1.4 % $ 3.0 0.9 %
========== ====== ========== ======
Earnings per share:
Basic $ 0.35 $ 0.40
========== ==========
Diluted $ 0.34 $ 0.39
========== ==========
Basic weighted average shares
outstanding 7,362,358 7,419,744
========== ==========
Diluted weighted average shares
outstanding 7,471,653 7,517,143
========== ==========
Pro-forma FY 2001 results excluding the effect of the one time merger
integration costs associated with the acquisition of Oshman's:
Income before income taxes $ 6.6 2.8 % $ 7.6 1.9 %
Income tax expense (2.6) (1.1) (3.0) (0.7)
----------- ------ ---------- ------
Net income $ 4.0 1.7 % $ 4.6 1.2 %
=========== ====== ========== ======
Earnings per share:
Basic $ 0.42 $ 0.55
=========== ==========
Diluted $ 0.39 $ 0.51
=========== ==========
Basic weighted average shares
outstanding 9,529,185 8,447,488
=========== ==========
Diluted weighted average shares
outstanding 10,268,375 9,102,633
=========== ==========
9
THIRTEEN WEEKS ENDED AUGUST 4, 2001 COMPARED TO THIRTEEN WEEKS ENDED JULY 29,
2000
Net Sales. Net sales for the thirteen weeks ended August 4, 2001 were
$237.9 million compared to $187.6 million for the thirteen weeks ended July 29,
2000. The acquisition of the 58 Oshman's stores increased the Company's sales by
$51.2 million. Comparable store sales during the quarter, excluding Oshman's,
increased 0.4% versus the prior year's comparable quarter. This comparable sales
performance was primarily due to strong sales of footwear and hardgoods. The
strong footwear sales were primarily driven by the successful program of
remodeling stores from a "chase" environment to an "open" stock environment.
These strong sales were partially offset by a decrease in sales of bikes and in-
line skates. This decrease in sales in the bike category is due to the
popularity of scooters in the prior year.
Gross Profit. Gross profit for the thirteen weeks ended August 4, 2001 was
$59.3 million, or 24.9% of net sales, compared to $47.2 million, or 25.2% of net
sales, for the thirteen weeks ended July 29, 2000. The decrease in gross profit
as a percent of sales is due primarily to an increase in occupancy costs as a
percent of sales.
Operating Expenses. Operating expenses for the thirteen weeks ended August
4, 2001 were $50.7 million, or 21.3% of net sales, compared to $40.2 million, or
21.4% of net sales, for the period ended July 29, 2000. Operating expense
dollars increased as a result of the Oshman's acquisition. As a percentage of
sales, operating expenses decreased slightly due to lower corporate expenses as
a result of continued cost controls.
Merger Integration Costs. Merger integration costs for the thirteen weeks
ended August 4, 2001 were $3.5 million, or 1.5% of net sales. These costs
consist primarily of $2.6 million of duplicative costs to operate two corporate
offices, employee training, and personnel integration for June and July, $0.7
million of consulting fees, and $0.2 million of relocation expenses. The Company
expects to incur approximately $4.0 to $5.5 million in additional merger
integration costs during the remainder of the 2001 fiscal year.
Operating Income. As a result of the factors described above, the Company
recorded operating income for the thirteen weeks ended August 4, 2001 of $5.1
million compared to operating income of $7.0 million for the thirteen weeks
ended July 29, 2000. Operating income excluding integration costs was $8.6
million for the thirteen weeks ended August 4, 2001, an increase of $1.6 million
versus the year ago quarter.
Interest Expense, Net. Interest expense, net for the thirteen weeks ended
August 4, 2001 decreased to $2.5 million, or 1.0% of net sales, from $2.9
million, or 1.5% of net sales, in the thirteen weeks ended July 29, 2000. The
decrease is primarily due to a decrease in the effective borrowing rate as a
result of lower interest rates over the prior year partially offset by an
increase in average outstanding debt as a result of the Oshman's acquisition.
Other Income. Other income was $0.5 million for the thirteen weeks ended
August 4, 2001 compared to $0.1 million for the thirteen weeks ended July 29,
2000. The increase in other income is primarily due to $0.2 million of income
generated by the sale of certain assets held in Edmonton, Alberta, Canada and
$0.2 million of income related to a consulting services agreement.
Income Taxes. The Company's income tax expense for the thirteen weeks
ended August 4, 2001 was $1.2 million compared to an income tax benefit of $6.6
million for the thirteen weeks ended July 29, 2000. The Company's estimated
effective tax rate remained at 39.0% for the thirteen weeks ended August 4,
2001. The income tax benefit in the prior year reflected the reversal of
valuation allowances, which had offset previously generated net operating
losses, the majority of which were acquired in the purchase of Sportmart during
January 1998.
TWENTY-SIX WEEKS ENDED AUGUST 4, 2001 COMPARED TO TWENTY-SIX WEEKS ENDED JULY
29, 2000
Net Sales. Net sales for the twenty-six weeks ended August 4, 2001 were
$400.6 million compared to $353.3 million for the twenty-six weeks ended July
29, 2000. The acquisition of the 58 Oshman's stores increased the Company's
sales by $51.2 million. Comparable store sales for the period, excluding
Oshman's, increased 0.2% versus the prior year's comparable period. This
comparable sales performance was primarily due to strong sales of footwear and
hardgoods. The strong footwear sales were primarily driven by the successful
program of remodeling stores from a "chase" environment to an "open" stock
environment. These strong sales were partially offset by a decrease in sales of
in-line skates, bikes, and golf products. The decrease in sales of in-line
skates, bikes and golf products is due primarily to unseasonably cold and wet
weather in the months of February and March. The decrease in sales in the bike
category compared to the prior year is also due to the popularity of scooters in
the prior year.
10
Gross Profit. Gross profit for the twenty-six weeks ended August 4, 2001
was $98.7 million, or 24.6% of net sales, compared to $86.5 million, or 24.5% of
net sales, for the twenty-six weeks ended July 29, 2000. The slight increase as
a percent of sales was primarily due to continued improvement in the
replenishment and allocation of merchandise to the Company's stores offset by
increased occupancy costs as a percent of sales.
Operating Expenses. Operating expenses for the twenty-six weeks ended
August 4, 2001 were $86.9 million, or 21.7% of net sales, compared to $76.3
million, or 21.6% of net sales, for the period ended July 29, 2000. Operating
expense dollars increased as a result of the Oshman's acquisition. As a
percentage of sales, operating expenses increased slightly due to increased
utility and insurance costs.
Merger Integration Costs. Merger integration costs for the thirteen weeks
ended August 4, 2001 were $3.5 million, or 1.5% of net sales. These costs
consist primarily of $2.6 million of duplicative costs to operate two corporate
offices, employee training, and personnel integration for June and July, $0.7
million of consulting fees, and $0.2 million of relocation expenses. The Company
expects to incur approximately $4.0 to $5.5 million in additional merger
integration costs during the remainder of the 2001 fiscal year.
Operating Income. As a result of the factors described above, the Company
recorded operating income for the twenty-six weeks ended August 4, 2001 of $8.3
million compared to operating income of $10.2 million for the twenty-six weeks
ended July 29, 2000. Operating income excluding integration costs was $11.8
million for the twenty-six weeks ended August 4, 2001, an increase of $1.6
million verses the year ago period.
Interest Expense, Net. Interest expense, net for the twenty-six weeks
ended August 4, 2001 decreased to $4.7 million, or 1.2% of net sales, from $5.5
million, or 1.6% of net sales, in the twenty-six weeks ended July 29, 2000. The
decrease is primarily due to a decrease in the effective borrowing rate as a
result of lower interest rates over the prior year partially offset by an
increase in average outstanding debt as a result of the Oshman's acquisition.
Other Income. Other income was $0.5 million for the twenty-six weeks ended
August 4, 2001 compared to $0.2 million for the twenty-six weeks ended July 29,
2000. The increase in other income is primarily due to $0.2 million of income
generated by the sale of certain assets held in Edmonton, Alberta, Canada and
$0.2 million of income related to a consulting services agreement.
Income Taxes. The Company's income tax expense for the twenty-six weeks
ended August 4, 2001 was $1.6 million compared to an income tax benefit of $6.3
million for the twenty-six weeks ended July 29, 2000. The Company's estimated
effective tax rate remained at 39.0% for the thirteen weeks ended August 4,
2001. The income tax benefit in the prior year reflected the reversal of
valuation allowances, which had offset previously generated net operating
losses, the majority of which were acquired in the purchase of Sportmart during
January 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements are for inventory, capital
improvements, and pre-opening expenses to support the Company's expansion plans,
as well as for various investments in store remodeling, store fixtures and
ongoing infrastructure improvements.
Cash Flow Analysis
Twenty-six weeks ended
--------------------------
August 4, July 29,
2001 2000
----------- -----------
Cash provided by (used in) operating activities $ 2,309 $ (13,959)
Cash used in investing activities (51,252) (7,485)
Cash provided by financing activities 60,708 23,123
Capital expenditures $ 12,027 $ 7,567
Long-term debt (at end of period) 166,608 130,200
Working capital (at end of period) 151,231 133,560
Current ratio (at end of period) 1.69 1.88
Debt to equity ratio (at end of period) 1.09 1.71
11
Cash provided by operating activities in the first six months of fiscal
2001 was primarily the result of increases in accounts payable and net income
adjusted for non-cash charges partially offset by inventory purchases and
payments of accrued expenses.
Cash used in investing activities in the first six months of fiscal 2001
was primarily for the acquisition of Oshman's and capital expenditures. These
uses were partially offset by cash received in the sale of the assets held for
sale and the sale of an Oshman's store location. The capital expenditures were
primarily for store remodeling, store fixtures, and the purchase or enhancement
of certain information systems.
Cash provided by financing activities in the first six months of fiscal
2001 primarily represents net proceeds from borrowings on the Company's
revolving line of credit and proceeds from the sale of common stock upon the
exercise of stock options, slightly offset by payments of capital lease
obligations.
The Company's liquidity and capital needs have been met by cash from
operations and borrowings under a revolving line of credit with CIT/Business
Credit, Inc., as agent, ("CIT"). In connection with the Oshman's acquisition,
the Company increased its revolving line of credit from $175 million to $300
million. The long-term debt currently consists of the Credit Agreement, which
allows the Company to borrow up to 70% of its eligible inventories (as defined
in the Credit Agreement) during the year and up to 75% of its eligible
inventories for two consecutive 90 day periods in the first loan year.
Borrowings are limited to the lesser of $300 million or the amount calculated in
accordance with the borrowing base, and are secured by substantially all
inventories, trade receivables, equipment, and intangible assets. The lenders
may not demand repayment of principal, absent an occurrence of default under the
Credit Agreement, prior to June 7, 2005. The Credit Agreement contains certain
covenants, including financial covenants that require the Company to maintain a
specified minimum level of tangible net worth at all times, specified earnings
before income taxes, depreciation and amortization to interest ratios, and
restrict the Company's ability to pay dividends. At August 4, 2001, the Company
was in compliance with all covenants of the Credit Agreement.
Under the terms of the revolving credit facility, loan interest is payable
monthly at Chase Manhattan Bank's prime rate plus a margin rate that cannot
exceed 0.25% or, at the option of the Company, at Chase Manhattan Bank's LIBOR
rate plus a margin that cannot exceed 2.25%. The Company's current margin rates
for the first loan year are 0.0% on prime and 2.0% on LIBOR borrowings.
Beginning June 7, 2002, the margin rate on LIBOR borrowings may be reduced to as
low as 1.50% if certain earnings levels are achieved. There was $58.5 million
available for borrowing at August 4, 2001. The Company entered into an interest
rate swap agreement on June 28, 2001 to minimize the risks and costs associated
with its financing activities. The notional interest rate swap amount is $20.0
million and the agreement terminates on June 30, 2004. Under the swap agreement,
the Company pays fixed rate interest and receives variable interest rate
payments periodically over the life of the instrument. See note 7 to the
Consolidated Financial Statements.
The Internal Revenue Service has proposed adjustments to the 1992 and 1993
consolidated federal income tax returns of the Company and its former parent,
now Thrifty PayLess Holdings, Inc., a subsidiary of RiteAid Corporation, due to
the manner in which LIFO inventories were characterized on such returns. Based
on management's discussion with the Company's former parent, the Company
believes the potential accelerated tax liability, which could have a negative
effect on liquidity in the near term, ranges from approximately $2,500,000 to
$9,700,000. See note 5 to the Consolidated Financial Statements.
Capital expenditures are projected to be approximately $22 million in
fiscal 2001. These capital expenditures will be for new store openings, store
remodeling, store fixtures, relocating the corporate office, information
systems, and improvements to distribution center facilities. The Company leases
all of its store locations and intends to continue to finance its new stores
with long-term operating leases. Based upon historical data, newly constructed
superstores require a cash investment of approximately $1.8 million for a 40,000
square foot store and $1.5 million for a 33,000 square foot store. Superstores
constructed in existing retail space historically have required additional
capital investments of approximately $700,000 in leasehold improvements per
location. The level of capital improvements will be affected by the mix of new
construction versus renovation of existing retail space.
The Company believes that cash generated from operations, combined with
funds available under the Credit Agreement, will be sufficient to fund projected
capital expenditures and other working capital requirements for the next twelve
months. The Company intends to utilize borrowings under the Credit Agreement to
meet seasonal fluctuations in cash flow requirements.
SEASONALITY AND INFLATION
The fourth quarter has historically been the strongest quarter for the
Company. The Company believes that two primary factors contribute to this
seasonality. First, increased sales of cold weather sporting goods, including
sales of ski and snowboard merchandise during the quarter, which corresponds
with much of the ski and snowboard season. Second, holiday sales contribute
significantly to
12
the Company's operating results. As a result of these factors, inventory levels,
which gradually increase beginning in April, generally reach their peak in
November and then decline to their lowest level following the December holiday
season. Any decrease in sales for the fourth quarter, whether due to a slow
holiday selling season, poor snowfall in ski areas near the Company's markets or
otherwise, could have a material adverse effect on the Company's business,
financial condition and operating results for the entire fiscal year.
Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation has a material impact on
the Company's results of operations. The Company believes that it is generally
able to pass along any inflationary increases in costs to its customer.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Statement, as amended, became effective in the first quarter of
fiscal year 2001. The new statement requires that every derivative instrument be
recorded on the balance sheet as either an asset or liability, measured at its
fair value, and requires that changes in the derivative's fair value be
recognized currently in earnings, unless specific hedge accounting criteria are
met. The Company adopted this statement on February 4, 2001 and there was not a
material impact on results of operations or financial position.
In June 2001, FASB issued Statement No. 141, "Business Combinations" and
Statement No. 142, "Goodwill and Other Intangible Assets". FASB Statement No.
141 requires that the purchase method of accounting be used for all business
combinations consummated after June 30, 2001 and establishes criteria for
recognizing intangible assets separately from goodwill. The adoption of FASB
Statement No. 141 will not have a material impact on our consolidated financial
statements.
FASB Statement No. 142 requires that upon adoption, amortization of goodwill and
intangible assets deemed to have indefinite lives will cease and instead, the
carrying value of goodwill and these intangibles will be evaluated for
impairment on an annual basis or more frequently should certain factors be
present. Other intangible assets will continue to be amortized over their useful
lives and reviewed for impairment in accordance with FASB Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of". FASB Statement No. 142 is effective for fiscal years beginning
after December 15, 2001. The Company will adopt FASB Statement No. 142 on
February 3, 2002, the beginning of its fiscal year. Application of the
non-amortization provisions of the statement is expected to result in a decrease
in amortization of $1.6 million per year. Goodwill acquired in business
combinations completed prior to July 1, 2001 will continue to be amortized until
February 2, 2002. Our initial evaluation of impairment of existing goodwill is
required to be completed no later than August 3, 2002.
13
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary interest rate risk exposure results from the
Company's long-term debt agreement. The Company's long-term debt bears interest
at variable rates that are tied to either the U.S. prime rate or LIBOR at the
time of the borrowing. At the end of each 90-day period, the interest rates on
the Company's outstanding borrowings are changed to reflect current prime or
LIBOR rates. Therefore, the Company's interest expense changes as prime or LIBOR
change. During the second quarter of fiscal 2001, the Company entered into an
interest rate swap instrument, designated as a cash flow hedge as shown in the
following table:
Fair value
Rate paid Rate received Notional amount at 8/4/01
----------- -------------- ----------------- --------------
5.35% 3-mo. US Libor $ 20,000,000 $ (220,000)
Based on the Company's overall interest rate exposure at August 4, 2001, a
hypothetical instantaneous increase or decrease of one percentage point in
interest rates applied to borrowings under the credit facility would change the
Company's after-tax earnings by approximately $1,016,000 over a 12-month period.
The Company's exposure to foreign currency exchange rates is limited
because the Company does not operate any stores outside of the United States. In
connection with the acquisition of Sportmart, the Company acquired one store in
Canada, which Sportmart had closed prior to the acquisition. The Company sold
this store during the second quarter of fiscal 2001. The Company does not
consider the market risk exposure relating to foreign currency exchange to be
material. Foreign currency fluctuations did not have a material impact on the
Company during the first quarter of fiscal 2001 or 2000.
The fair value of the Company's investments in marketable equity securities
at August 4, 2001 was $1.5 million. The fair value of these investments will
fluctuate as the quoted market prices of such securities fluctuate. As of August
4, 2001, the fair value of the Company's investments in marketable equity
securities was $589,000 greater than the adjusted basis of those investments.
Such unrealized holding gain has not been recognized in the Company's
consolidated statement of operations, but rather has been recorded as a
component of stockholders' equity in other comprehensive gain (loss). The actual
gain or loss that the Company will realize when such investments are sold will
depend on the fair value of such securities at the time of sale. Based on the
Company's marketable equity securities portfolio and quoted market prices at
August 4, 2001, a 50% increase or decrease in the market price of such
securities would result in an increase or decrease of approximately $750,000 in
the fair value of the marketable equity securities portfolio. Although changes
in quoted market prices may affect the fair value of the marketable equities
securities portfolio and cause unrealized gains or losses, such gains or losses
would not be realized unless the investments are sold or determined to have a
decline in value which is other than temporary.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The information discussed herein includes "forward-looking statements"
within the meaning of the federal securities laws. Although the Company believes
that the expectations reflected in such forward looking statements are
reasonable, the Company's actual results could differ materially as a result of
certain factors, including, but not limited to: the Company's ability to manage
its expansion efforts in existing and new markets, risks associated with the
acquisition of companies, availability of suitable new store locations at
acceptable terms, general economic conditions, and retail and sporting goods
business conditions, specifically, availability of merchandise to meet
fluctuating consumer demands, fluctuating sales margins, increasing competition
in sporting goods and apparel retailing, as well as other factors described from
time to time in the Company's periodic reports, including the Annual Report of
the Company on Form 10-K for its year ended February 3, 2001, filed with the
Securities and Exchange Commission.
14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, involved in various legal proceedings
incidental to the conduct of its business. The Company believes that the outcome
of all such pending legal proceedings to which it is a party will not, in the
aggregate, have a material adverse effect on the Company's business, financial
condition, or operating results.
As previously disclosed, a former employee of Sportmart brought two class
action complaints in California against the Company, alleging certain wage and
hour claims in violation of the California Labor Code, California Business and
Professional Code section 17200 and other related matters. One complaint alleges
that the Company classified certain managers in its California stores as exempt
from overtime pay when they would have been classified as non-exempt and paid
overtime. The second complaint alleges that the Company failed to pay hourly
employees in its California stores for all hours worked. In March 2001, a third
class action complaint was filed in the same court in California alleging the
same wage and hour violations regarding classification of certain managers as
exempt from overtime pay. More recently, in July 2001, a fourth complaint was
filed alleging that store managers should also not be classified as employees
exempt from overtime pay. All the complaints seek compensatory damages, punitive
damages and penalties. The amount of damages sought is unspecified. Although the
court has denied motions to dismiss the first two complaints, the Company
intends to vigorously defend these matters and at this time, the Company has not
ascertained the future liability, if any, as a result of these complaints.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of Stockholders in lieu of the Annual Meeting of
Stockholders held on June 7, 2001, the stockholders of the Company approved the
issuance of shares of the Company's common stock in the merger of Oshman's
Sporting Goods, Inc. with and into GSC Acquisition Corp. with votes cast as
follows:
FOR: 5,599,742
AGAINST : 3,513
ABSTAINED: 426,634
Abstentions had the effect of votes "against" this proposal. Broker non-
votes were not counted as votes "for" or "against" this proposal and
therefore had no impact on the outcome.
The stockholders elected the following nominees to the Board of Directors
until the next annual meeting and until their successors are elected with
votes cast as follows:
Number of votes
---------------------------------
Authority
Director Nominees For Withheld
-------------------------- -------------- -------------
John Douglas Morton 6,739,959 140,155
Jonathon D. Sokoloff 6,877,359 2,755
Jonathon A. Seiffer 6,877,359 2,755
Gordon D. Barker 6,877,359 2,755
Peter R. Formanek 6,877,359 2,755
Larry D. Strutton 6,877,359 2,755
There were no abstentions or broker non-votes applicable to the election
of directors. As a result of the merger with Oshman's, Alvin Lubetkin and
Marilyn Oshman were appointed to the Board of Directors. Larry J. Hochberg
did not stand for re-election.
The stockholders approved an amendment to the Company's 1994 Management
Equity Plan to increase the maximum number of shares of common stock that
may be issued under the plan with votes cast as follows:
FOR: 5,923,931
AGAINST : 38,998
ABSTAINED: 66,960
15
Abstentions had the effect of votes "against" this proposal. Broker non-
votes were not counted as votes "for" or "against" this proposal and
therefore had no impact on the outcome.
The stockholders ratified the selection of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending February 2,
2002 with votes cast as follows:
FOR: 6,873,222
AGAINST : 6,702
ABSTAINED: 190
Abstentions had the effect of votes "against" this proposal. Broker non-
votes were not counted as votes "for" or "against" this proposal and
therefore had no impact on the outcome.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS.
B. REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K with the Commission dated
June 7, 2001 to report, under Item 2, that the registrant had completed the
acquisition of Houston-based Oshman's Sporting Goods, Inc. ("Oshman's").
Stockholders of Oshman's received $7.00 in cash and 0.55 shares of Gart
Sports Company common stock for each share of Oshman's common stock,
resulting in the issuance of approximately 3.4 million shares of Gart
Sports Company common stock. In conjunction with the acquisition, the
Company increased its revolving line of credit from $175 million to $300
million.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on September 18, 2001 on its
behalf by the undersigned thereunto duly authorized.
GART SPORTS COMPANY
By: /s/ JOHN DOUGLAS MORTON
----------------------------------------
John Douglas Morton,
Chairman of the Board of Directors,
President and Chief Executive Officer
By: /s/ THOMAS T. HENDRICKSON
----------------------------------------
Thomas T. Hendrickson,
Executive Vice President, Chief
Financial Officer and Treasurer
17