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 period ended: November 2, 2002
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. 0-21597
ODD JOB STORES, INC.
(Exact name of Registrant as specified in its charter)
Ohio 34-1830097
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Helen Street
South Plainfield, NJ 07080
(Address of principal executive offices)
(Zip Code)
908-222-1000
(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 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 * No
Indicate the number of shares outstanding of each of the issuer's
common stock, as of the latest practical date. Common Shares, no
par value, outstanding as of December 6, 2002: 9,060,695
ODD JOB STORES, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - as of
November 2, 2002 (unaudited) and
February 2, 2002 4
Consolidated Statements of Operations
(unaudited) - for the thirteen and
thirty-nine week periods ended
November 2, 2002 and November 3, 2001 5
Consolidated Statements of Cash Flows
(unaudited) - for the thirty-nine week
periods ended November 2, 2002 and
November 3, 2001 6
Condensed Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
Item 3. Quantitative and Qualititative
Disclosures about Market Risk 16
Item 4. Controls and Procedures 16
PART II - OTHER INFORMATION
Items 1- 5. 17
Item 6. 18
Signatures 18
Certifications pursuant to Section 302 and
906 of the Sarbanes-Oxley Act of 2002 19
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
The Registrant's Consolidated Financial Statements follow this
page.
ODD JOB STORES, INC.
Consolidated Balance Sheets
(Dollars in thousands)
November 2, February 2,
2002 2002
---------- ----------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 3,911 $ 4,046
Notes and accounts receivable-related parties -- 90
Other receivables 995 1,176
Income tax receivable -- 2,396
Inventories 56,548 27,580
Prepaid expenses and other current assets 1,535 585
Deferred income taxes 9,240 5,986
Net assets of discontinued operations -- 26,218
------- -------
Total current assets 72,229 68,077
Property and equipment, net 19,197 22,286
Other assets 2,244 3,480
Goodwill, net -- 9,447
Deferred income taxes 3,818 3,818
-------- --------
Total assets $ 97,488 $107,108
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 13 $ 3,017
Accounts payable 20,199 16,568
Accrued expenses and other current liabilities 6,518 8,915
------- ---------
Total current liabilities 26,730 28,500
Revolving line of credit 13,190 --
Long-term debt, net of current portion -- 6,083
Other liabilities 5,162 5,000
------- ---------
Total liabilities 45,082 39,583
Stockholders' equity:
Preferred stock, no par value,
2,000,000 shares authorized;
no shares issued or outstanding -- --
Common stock, no par value,
14,000,000 shares authorized;
9,052,500 and 8,981,700 shares
issued and outstanding, respectively 64,104 63,935
Retained earnings (deficit) (11,698) 3,590
-------- --------
Total stockholders' equity 52,406 67,525
Commitments and contingencies -- --
-------- --------
Total liabilities and stockholders' equity $ 97,488 $107,108
======== ========
See accompanying condensed notes to consolidated financial statements
ODD JOB STORES, INC.
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share data)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
------------------------ ------------------------
November 2, November 3, November 2, November 3,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net sales $57,040 $57,394 $168,940 $172,444
Cost of sales 35,142 34,595 103,007 106,190
-------- -------- --------- ---------
Gross profit 21,898 22,799 65,933 66,254
Selling, general and
administrative expenses 25,023 24,963 74,024 73,875
-------- -------- -------- --------
Operating loss (3,125) (2,164) (8,091) (7,621)
Other expense, net -- 1,636 746 3,012
Interest expense, net 235 797 737 1,913
-------- -------- ------- --------
Loss from continuing
operations before
income taxes (3,360) (4,597) (9,574) (12,546)
Income tax benefit (1,311) (1,795) (3,733) (4,894)
-------- -------- ------- --------
Net loss from continuing
operations (2,049) (2,802) (5,841) (7,652)
Income from operations of
the discontinued Wholesale
Division net of tax provisions
of $665 and $1,668,
respectively) -- 1,038 -- 2,608
-------- -------- --------- ---------
Net loss before change in
accounting principle (2,049) (1,764) (5,841) (5,044)
Change in accounting principle -- -- (9,447) --
-------- -------- --------- ----------
Net loss $(2,049) $(1,764) $(15,288) $ (5,044)
======== ======== ========= ==========
Basic and diluted net income
(loss) per common share:
Loss from continuing
operations $(0.22) $(0.31) $(0.65) $(0.84)
Income from discontinued
operations -- 0.12 -- 0.29
------- ------- ------- -------
Net loss per common share,
before change in accounting
principle (0.22) (0.19) (0.65) (0.55)
Loss per share from change
in accounting principle -- -- (1.04) --
-------- ------- ------- -------
Net loss per common share $(0.22) $(0.19) $(1.69) $(0.55)
======== ======= ======= =======
Weighted average common
shares outstanding-basic
and diluted 9,052,500 9,117,100 9,042,300 9,131,800
========= ========= ========= =========
See accompanying condensed notes to consolidated financial statements
ODD JOB STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Thirty-nine Weeks Ended
---------------------------
November 2, November 3,
2002 2001
----------- -----------
Net loss $(15,288) $(5,044)
---------- ---------
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities
Income from operations of discontinued
wholesale division, net of tax -- (2,608)
Change in accounting principle 9,447 --
Depreciation and amortization 4,682 5,230
Deferred income taxes (3,545) 2,592
Equity in net loss from VCM, Ltd. -- 2,617
Changes in operating assets and liabilities
Notes and other receivables 271 65
Income tax receivable 2,396 2,625
Inventories (28,968) (18,693)
Prepaid expenses (204) (587)
Other assets 849 (1)
Accounts payable 3,631 7,874
Accrued expenses and other liabilities (2,235) (1,965)
-------- --------
Total adjustments (13,676) (2,851)
-------- --------
Net cash used in continuing
operations (28,964) (7,895)
Net cash provided by discontinued
operations -- 12,357
-------- --------
Net cash (used in) provided by operating
Activities (28,964) 4,462
-------- --------
Cash flows from investing activities
Capital expenditures, net (1,152) (400)
Lease acquisitions (54) (62)
Net proceeds from sale of net assets
of discontinued operations 26,218 --
-------- --------
Net cash provided by (used in)
investing activities 25,012 (462)
-------- --------
Cash flows from financing activities
Debt repayments (92,163) (99,718)
Debt borrowings 96,266 97,521
Financing costs paid (455) --
Purchase of common shares (358) (74)
Proceeds from exercise of stock options 527 --
--------- ---------
Net cash provided by (used in)
financing activities 3,817 (2,271)
--------- ---------
Net (decrease) increase in cash and
cash equivalents (135) 1,729
Cash and cash equivalents at beginning
of period 4,046 2,318
--------- ---------
Cash and cash equivalents at end of period $ 3,911 $ 4,047
========= =========
Supplemental disclosures
Cash paid for interest 195 2,783
Cash received for income taxes (2,876) (4,509)
========= =========
See accompanying condensed notes to consolidated financial statements
ODD JOB STORES, INC.
Condensed Notes to Consolidated Financial Statements
For the Thirteen and Thirty-nine Week Periods Ended
November 2 2002 and November 3, 2001
(Dollars in thousands, except per share data)
(1) Basis of Presentation
The consolidated financial statements for the thirteen-week
(fiscal third quarter) and thirty-nine week (fiscal nine months)
periods ended November 2, 2002 and November 3, 2001,
respectively, represent the retail operations of Odd Job Stores,
Inc. (formerly Mazel Stores Inc.). Comparative consolidated
financial statements for both periods have been restated, where
applicable, to reflect the Company's former Wholesale Division as
a discontinued operation.
In the opinion of management, this information includes all
adjustments that are normal and recurring in nature and necessary
to present fairly the results of the interim periods shown in
accordance with accounting principles generally accepted in the
United States of America. Operating results for the interim
period are not necessarily indicative of the results that may be
expected for the full fiscal year.
The unaudited interim consolidated financial statements have been
prepared using the same accounting principles that were used in
the preparation of the Company's Annual Report on Form 10-K for
the fiscal year ended February 2, 2002, except as described in
Notes 2 and 3 below, and should be read in conjunction with the
consolidated financial statements and the notes thereto. The
Company has made certain reclassifications to the 2001 condensed
consolidated financial statements to conform to the 2002
presentation.
(2) Adoption of New Accounting Standards
In the third quarter of 2002, the Company early adopted Statement
of Financial Accounting Standards (SFAS) No. 145, Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No.
13, and Technical Corrections. Adoption of this statement
eliminated the requirement to classify gains and losses from the
extinguishment of debt as an extraordinary item, net of the
related income tax effect. Under SFAS No.145, the Company
reclassified extraordinary losses on the extinguishment of debt
in the amount of $746 for the nine-month period of 2002 and $395
for the third quarter and nine-month periods of 2001. These
charges are reflected in other expenses, net on the Consolidated
Statement of Operations.
(3) Goodwill and Other Intangible Assets
Effective February 3, 2002, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. Under the provisions of
SFAS No. 142, intangible assets with indefinite lives and
goodwill are no longer amortized but are subject to annual
impairment tests. In the first quarter of 2002, the Company
determined, using the goodwill impairment provisions of SFAS
No. 142, that its unamortized goodwill was impaired and recorded
a non-cash charge of $9,447 to write-off the entire goodwill
balance. The charge was taken as a one-time cumulative effect of
a change in accounting principle in the first quarter of 2002.
Amortization expense related to goodwill was $78 and $235, for
the third quarter and thirty-nine week periods of 2001,
respectively.
(4) Discontinued Operations
On February 11, 2002, the Company signed an agreement that sold
substantially all assets of its Wholesale Division ("Division")
to MZ Wholesale Acquisition LLC (MZ), d/b/a Mazel Company, a
group headed by two former executives and current members of the
Board of Directors. The Division was engaged in the business of
acquiring closeout merchandise at prices substantially below
traditional wholesale prices and selling such merchandise through
a variety of channels. The Division's wholesale operations
purchased and resold many of the same lines of merchandise sold
through the Company's current retail operations.
On the date of the sale, MZ paid the Company $22,292 for the
purchase of the assets of the Wholesale Division, based on a
preliminary estimate of the net assets of the Division. On May
21, 2002, MZ paid the Company an additional $5,245 based upon a
finalized balance sheet of the Division and other advances after
the balance sheet date. At November 2, and February 2, 2002, $237
and $3,266, respectively, were included in accrued expenses and
other current liabilities related to closing costs on the
disposal of the Wholesale Division.
Operating results of discontinued operations for the thirteen and
thirty-nine week periods ended November 3, 2001, (after
elimination of Intercompany losses) were as follows:
Thirteen Weeks Thirty-nine Weeks
Ended Ended
November 3, November 3,
2001 2001
------------ -----------------
Net sales $19,035 $58,334
Cost of sales 13,800 42,441
------- -------
Gross margin 5,235 15,893
Selling, general and
administrative expenses 3,297 10,912
------- ------
Operating income 1,938 4,981
Interest expense 235 705
------- -------
Income before income taxes 1,703 4,276
Income tax expense 665 1,668
------- -------
Income from discontinued
operations $ 1,038 $ 2,608
======= =======
Net income per basic and
diluted share from discontinued
operations $ 0.12 $ 0.29
======= =======
(5) Investment in VCM, Ltd.
On February 2, 2002, the Company reached an agreement to
terminate the operation of VCM, Ltd. ("VCM"), a 50 percent owned
joint venture with Value City Department Stores. The Company's
original investment in VCM was accounted for under the equity
method. In addition to its 50 percent equity share of VCM's net
profit or loss, the Company received a management fee equal to
three percent of VCM's net sales. For the third quarter and
first nine-month periods of 2001, the Company recorded management
fee revenue of $867 and $2,324, respectively (within selling,
general and administrative expenses) and its share of VCM's net
losses of $1,241 and $2,617, respectively.
(6) Earnings Per Share
The following data shows the amounts used in computing earnings
per share and the effect on the weighted-average number of shares
of dilutive potential common stock.
The effect of incremental shares from stock options for the
thirteen and thirty-nine week periods ending November 2, 2002,
and November 3, 2001, respectively, have been excluded from
diluted weighted average shares, as the net losses for the
related periods would cause the incremental shares to be
antidilutive.
Thirteen Weeks Thirty-nine Weeks
Ended Ended
November November November November
2, 2002 3, 2001 2, 2002 3, 2001
-------- -------- -------- --------
Numerator:
Net loss available to
common shareholders used
in basic and diluted net
income per share $(2,049) $(1,764) $(15,288) $(5,044)
Denominator:
Basic weighted average
shares 9,052,500 9,117,100 9,042,300 9,131,800
Effect of dilutive stock
options -- -- -- --
--------- --------- --------- ---------
Diluted weighted average
shares 9,052,500 9,117,100 9,042,300 9,131,800
========= ========= ========= =========
Basic loss per common
share $(0.22) $(0.19) $(1.69) $(0.55)
Diluted loss per common
share $(0.22) $(0.19) $(1.69) $(0.55)
(7) Long-term Debt
On February 3, and February 5, 2002, the Company paid off its
entire outstanding loan balances of $8,000 with Wingate Capital
(Tranche B term loan) and $1,000 with The Provident Bank and
National City Bank (Tranche C term loan), respectively. In
connection with the repayment of the Tranche C term loan, a
previously reported warrant for 2.5% of the Company's outstanding
shares has been extinguished. On February 11, 2002, the Company
reduced the borrowing limit of its revolving credit facility with
IBJ Whitehall Retail Finance from $70,000 to $30,000, and
modified certain covenants.
During the first quarter of 2002, the Company recorded a charge
of $746 for the extinguishment of debt and modifications made to
the revolving credit facility and during the third quarter of
2001 the Company recorded a charge of $395 for the write-off of
debt issuance costs related to the Company's former credit
facility.
The Company had an outstanding balance under the amended
Revolving Credit Facility of $13,190 as of November 2, 2002 and
total borrowing base availability of $14,166.
(8) Recently Issued Accounting Pronouncements
In July 2002, the Financial Accounting Standards Board issued
Statement No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, (SFAS No. 146). This statement addresses
financial accounting and reporting for costs associated with exit
or disposal activities and nullifies EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)" ("EITF No. 94-3"). SFAS No. 146
requires that a liability be recognized for those costs only when
the liability is incurred. In contrast, under EITF No. 94-3, a
company recognized a liability for an exit cost when it committed
to an exit plan. SFAS No. 146 also establishes fair value as the
objective for initial measurement of liabilities related to exit
or disposal activities. SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002.
The Company is currently assessing the financial statement
impact, if any, of the adoption of this new standard.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Odd Job Stores, Inc. (the "Company") is a major regional closeout
retail business. The Company changed its corporate name from
Mazel Stores, Inc. effective on June 19, 2002 reflecting the
strategic repositioning of the company as discussed below. The
Company sells quality, value-oriented consumer products at a
broad range of price points offered at a substantial discount to
the original retail. The Company's merchandise primarily
consists of new, frequently brand-name products that are
available to the Company for a variety of reasons, including
overstock positions of a manufacturer, wholesaler or retailer;
the discontinuance of merchandise due to a change in style,
color, shape or repackaging; a decrease in demand for a product
through traditional channels; or the termination of business by a
manufacturer, wholesaler or retailer. As of November 2, 2002,
the Company operated a chain of 77 closeout retail stores in New
York, New Jersey, Pennsylvania, Connecticut, Delaware, Ohio,
Michigan, and Kentucky.
The Company was founded in 1975 as a wholesaler of close-out
merchandise. In fiscal 1996, the Company purchased the
established Odd Job retail business, consisting of 12 retail
stores and a warehouse and distribution facility. Management's
business strategy has primarily focused on the growth of its Odd
Job retail business. In February 2002, the Company sold its
Wholesale Division to focus exclusively on the growth and
profitability of the retail stores. The stores, which operate
primarily under the name Odd Job, are located in the Northeast
and Midwest regions with a concentration in metropolitan New
York. The company has consolidated all management, buying and
administrative functions to its New Jersey offices.
Recent Developments
On December 3, 2002 the Company announced the appointment of
Steve Furner as interim Chief Executive Officer. Mr. Furner
replaces Peter Hayes who resigned from the Company and its Board
of Directors to pursue other interests. The Company has engaged a
retail search firm to recruit a permanent Chief Executive
Officer.
Mr. Furner has been a member of the Company's Board of Directors
since June 2002 and has been providing consulting services to the
Company since then. Mr. Furner's background includes 35 years in
retailing of which 21 years were with Wal-Mart Stores, Inc. Prior
to his retirement from Wal-Mart in 1998, he served as President
and Chief Operating Officer of Wal-Mart Argentina. Since then, he
has been Vice President of Alliance Consulting advising retail
companies on their strategic initiatives and operating programs.
Thirteen Weeks 2002 versus Thirteen Weeks 2001 (Fiscal Third
Quarters)
Net sales for the third quarter 2002 were $57.0 million, compared
to $57.4 million for the third quarter 2001, a decrease of $0.4
million, or 0.6%. Comparable store sales increased 0.1% during
the third quarter. The comparable sales increase during the third
quarter included an 8.0% increase in September that was due to
the September 2001 sales slow down in the weeks immediately
following the events of September 11th, as well as some
additional advertising in September 2002. Offsetting the
September sales increase was a continued trend of reduced
customer transactions as compared to the third quarter of fiscal
2001.
Gross profit for the third quarter of fiscal 2002 was $21.9
million, a decrease of $0.9 million or 4.0% from gross profit of
$22.8 million for the third quarter of 2001. As a percentage of
sales, gross margin declined in the third quarter to 38.4% of
sales compared to 39.7% of sales in the same period last year.
The decline is a result of higher markdowns during the quarter on
competitively priced merchandise, as well as lower initial
markups in some high volume departments.
Selling, general and administrative expenses reflect the four-
wall cost of the stores, the distribution facility and office
support. Selling, general and administrative expenses for the
third quarter of 2002 were $25.0 million, or 43.9% of sales in
the third quarter this year compared to $25.0 million, or 43.5%
of sales in the same period last year. Last year's SG&A included
a benefit of $0.9 million due to the management fee income
related to the prior year joint venture with Value City
Department Stores. The joint venture was terminated at the end of
fiscal 2001 and, therefore, there is no management fee income in
the 2002 period. In this year's third quarter SG&A, there is
approximately $0.5 million of income related to insurance
proceeds for claims received in connection with the closure of
one store related to the events of September 11th. Excluding
these one-time benefits from both years, SG&A would be 44.8% of
sales this year as compared to 45.0% last year.
The Company reported an operating loss of $3.1 million or 5.5% of
sales for the third quarter of 2002, compared to an operating
loss of $2.2 million or 3.8% of sales for the third quarter 2001.
Interest expense was $0.2 million for the third quarter of 2002,
compared to $0.8 million for the third quarter of 2001,
reflecting lower average borrowings. Other expense for the third
quarter of 2001 was comprised of $1.2 million for the Company's
50% equity share in VCM, Ltd.'s net loss and $0.4 million for the
reclassification of the Company's loss on the extinguishment of
debt due to the early adoption of Statement of Financial
Accounting Standards No. 145.
Thirty-nine Weeks 2002 versus Thirty-nine Weeks 2001 (Fiscal Nine
Months)
Net sales for the fiscal 2002 first nine months were $168.9
million, compared to $172.4 million for the prior year, a
decrease of $3.5 million, or 2.0%. Comparable store sales for
the first nine months of 2002 declined 0.2% compared to the same
period in fiscal 2001. Two stores were closed in the 2001 nine-
month period. Gross profit for the fiscal 2002 first nine months
was $65.9 million, compared to $66.3 million in the fiscal 2001
first nine months, a decrease of $0.4 million, or 0.5%. Despite
the decline in gross margin dollars, the gross margin rate
improved to 39.0% in the current year first nine months, from
38.4% in the prior year. The increase in gross margin was due
primarily to higher realized product markup.
Selling, general and administrative expenses were $74.0 million
for the fiscal 2002 first nine months, increasing slightly when
compared to $73.9 million in the prior year. Excluding the
insurance proceeds of $0.9 million for fiscal 2002 and joint
venture management fee income of $2.3 million for fiscal 2001,
selling, general and administrative expenses declined $1.3
million or 1.7% on a period-to-period basis. The decline
primarily reflects cost savings associated with the consolidation
of corporate support functions. In the fiscal 2002 first nine
months, the operating loss totaled $8.1 million or 4.8%, compared
to $7.6 million or 4.4% for the same prior year period.
Interest expense was $0.7 million for the first nine months of
2002, compared to $1.9 million for the first nine months of 2001,
due to lower average borrowings and lower interest rates. Other
expense for the first nine months of both years include the
reclassification of the Company's losses on the extinguishment of
debt due to the early adoption of Statement of Financial
Accounting Standards No. 145. Losses on the extinguishment of
debt amounted to $0.7 million for the first nine months of 2002,
compared to $0.4 million for the first nine months of 2001. The
nine-month 2001 period also included a $2.6 million loss for the
Company's 50% equity share in VCM, Ltd.'s net loss.
As discussed in Note 2 to Consolidated Financial Statements,
effective February 3, 2002, the Company adopted SFAS No. 142,
Goodwill and Other Intangible Assets. Upon adoption the Company
determined that its unamortized goodwill was impaired and
recorded a non-cash charge of $9.4 million to write-off the
entire goodwill balance. The charge is shown as a change in
accounting principle for the fiscal 2002 first quarter.
Amortization expenses related to goodwill were $235 and $78 for
the first nine months and third quarter of fiscal 2001,
respectively.
Liquidity and Capital Resources
The Company's growth has been financed through cash flow from
operations, borrowings under its revolving credit facility and
the extension of trade credit.
The Company's primary requirements for capital consist of
inventory purchases, existing store remodeling, warehouse
enhancements, MIS initiatives, and other working capital needs.
The Company takes advantage of closeout and other special
situation purchasing opportunities that frequently result in
large volume purchases, and as a consequence, its cash
requirements are not constant or predictable during the year and
can be affected by the timing and size of its purchases. The
Company's high level of committed credit allows it to take
immediate advantage of special situation purchasing
opportunities. Having such credit availability provides the
Company with a competitive advantage measured against many of its
competitors.
As a result of terminating the VCM, Ltd., joint venture with
Value City Department Stores, Inc., the Company received
approximately $12 million in cash prior to the Company's February
2, 2002 year-end. The cash proceeds were used to completely
paydown the debt under its prior Revolving Credit Facility. At
February 2, 2002, the Company had no debt under the credit
facility and term loans of approximately $9.1 million.
On February 11, 2002, the Company effected the sale of the
Wholesale Division resulting in cash proceeds of approximately
$26.2 million for the first nine months of 2002 which were used
by the Company to payoff all the term loans and all debt under
its Revolving Credit Facility. As a result of the VCM, Ltd.
termination and Wholesale divestiture, the Company amended its
credit facility to provide $30 million of revolving credit. The
amended Revolving Credit Facility expires in August of 2004.
Availability under the revolving credit facility is determined
using a borrowing base calculation based primarily upon the
Company's inventories. The entire facility contains restrictive
covenants that require minimum EBITDA levels, maximum annual
capital expenditure levels, and minimum inventory leverage
ratios. The Company had an outstanding balance under the amended
Revolving Credit Facility of $13.2 million as of November 2, 2002
and total borrowing base availability of $14.2 million. During
the first nine months of 2002, the Company was compliant with all
restrictive covenants under the agreement. With the reduction of
inventory to post-seasonal levels, the Company anticipates that
it will have no balance outstanding on its Revolving Credit
Facility at the end of the fiscal year.
For the first nine months of fiscal 2002, cash used in operating
activities was $29.0 million, compared to cash provided by
operating activities of $4.5 million in the first nine months of
fiscal 2001. For the first nine months of fiscal 2002, cash used
by operating activities was primarily due to higher inventories
of $29.0 million, generated by seasonal and opportunistic
purchases. A $2.7 million tax refund received in the period and
higher accounts payable provided cash for operating activities in
the first nine months of fiscal 2002 which was offset by higher
deferred tax assets and lower accrued expenses and other current
liabilities. For the first nine months of 2001, cash provided by
operating activities benefited from net income of the
discontinued Wholesale Division and other cash provided by
discontinued operations aggregating $12.4 million as well as an
income tax refund of $2.6 million received in the 2001 period.
Cash provided by investing activities was $25.0 million in the
first nine months of 2002, primarily from the sale of the net
assets of the discontinued operation. Cash used in investing
activities was $0.5 million in the first nine months of 2001,
primarily from capital expenditures. Capital expenditures totaled
$1.2 million in the first nine months of 2002. Cash provided by
financing activities totaled $3.8 million in the first nine
months of 2002 primarily due to the higher level of borrowing
under the Company's credit facility during the third quarter.
Cash used in financing activities totaled $2.3 million in the
first nine months of 2001 from the net debt payments.
Total assets were $97.5 million at November 2, 2002, compared to
$107.1 million at February 2, 2002. Working capital increased to
$45.5 million at the end of the first nine months of 2002 from
$39.6 million at fiscal 2001 year-end and the current ratio
improved to 2.7 to 1 at November 2, 2002, compared to 2.4 to 1 at
February 2, 2002. The increase in working capital is primarily
from higher inventory levels due to the seasonal nature of the
business and an increase in deferred tax assets in the 2002
period. The Company is currently reviewing the status of its
deferred tax assets and assessing the likelihood of future
realization for these assets. As one of the factors to be
considered in the realization of these assets is the generation
of future taxable income, this assessment will again be performed
in the fourth quarter after the results of the peak season sales
are known. If necessary, the Company will record a valuation
allowance against its deferred tax assets when it becomes more
likely than not that they will not be realized.
The Company currently has no plans to open new stores in the
fourth quarter of 2002 and is currently evaluating its expansion
policy to determine when such program will recommence. When the
Company resumes its expansion program, it does not anticipate
opening more than 6-12 stores in the first year of the program.
Seasonality
The Company's retail operations result in a greater weighting of
sales and earnings toward the second half of the fiscal year.
Recently Issued Accounting Pronouncements
In July 2002, the Financial Accounting Standards Board issued
Statement No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, (SFAS No. 146). This statement addresses
financial accounting and reporting for costs associated with exit
or disposal activities and nullifies EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)" ("EITF No. 94-3"). SFAS No. 146
requires that a liability be recognized for those costs only when
the liability is incurred. In contrast, under EITF No. 94-3, a
company recognized a liability for an exit cost when it committed
to an exit plan. SFAS No. 146 also establishes fair value as the
objective for initial measurement of liabilities related to exit
or disposal activities. SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002.
The Company is currently assessing the financial statement
impact, if any, of the adoption of this new standard.
Forward Looking Statements
Forward-looking statements in this report are made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject
to certain risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks
and uncertainties include, but are not limited to: (i) the
Company's continuing execution of its plan to restore its retail
stores to profitability, (ii) the ability to purchase sufficient
quality closeout and other merchandise at acceptable terms; and
(iii) the ability of the Company to attract and retain qualified
management and store personnel. Please refer to the Company's
subsequent SEC filings under the Securities Exchange Act of 1934,
as amended, for further information.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company does not have significant exposure to changing
interest rates, other than the Company's variable-rate on its
Revolving Credit Facility. The Company does not undertake any
specific action to cover its exposure to interest rate risk and
the Company is not party to any interest rate risk management
transactions. The Company does not purchase or hold any
derivative financial instruments.
Item 4. CONTROLS AND PROCEDURES
The Company maintain a set of disclosure controls and procedures
designed to ensure that information required to be disclosed by
the company in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Within the
90 day period prior to the filing of this report, an evaluation
was carried out under the supervision and with the participation
of the Company's management, including the Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"), of the
effectiveness of our disclosure controls and procedures. Based
on that evaluation, the CEO and CFO have concluded that the
Company's disclosure controls and procedures are effective.
Subsequent to the date of their evaluation, there have been no
significant changes in the Company's internal controls or in
other factors that could significantly affect these controls.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default upon Senior Securities
None
Item 4. Submission of matters to a vote of security holders
The Company's Annual Meeting of Shareholders was held on
September 4, 2002.
At the Annual Meeting, the Company's shareholders elected
Reuven D. Dessler, William Shenk, Mark J. Miller and Ned L.
Sherwood as Directors whose term expires at the annual
meeting of shareholders in 2005. Charles Bilezikian, Steve
Furner and Robert Horne continue as Directors whose term
expires at the annual meeting of shareholders in 2004.
Robert Horne, Peter Hayes, Jacob Koval and Joseph Nusim
continue as Directors whose term expires at the annual
meeting of shareholders in 2003. The following tabulation
represents the voting for the elected Directors:
Nominee For Against
---------------- ----------- ----------
Reuven D. Dessler 7,574,293 780,300
William Shenk 7,574,293 780,300
Mark J. Miller 7,574,293 780,300
Ned L. Sherwood 7,574,293 780,300
At the Annual Meeting, the Company's shareholders' ratified the
appointment of KPMG LLP as independent auditors of the Company
for the fiscal year ended February 1, 2003. The holders of
8,354,043 Common Shares voted to ratify the appointment, 150
voted against the ratification, and the holders of 400 shares
abstained.
At the Annual Meeting, the Company's shareholders' approved the
amendment in the 1996 Stock Option Plan. The holders of
5,199,118 Common Shares voted to ratify the amendment, 1,827,477
voted against the ratification, and the holders of 4,040 shares
abstained.
Item 5. Other Information
On December 3, 2002 the Company announced the appointment of
Steve Furner as interim Chief Executive Officer. Mr. Furner
replaces Peter Hayes who resigned from the Company and its
Board of Directors to pursue other interests.
On December 9, 2002 the Company announced the addition of Phil
Carter to the Board of Directors
Item 6. Exhibits and Reports on Form 8K
(a) Exhibits
Exhibit 4.1 Third Amendment to Amended and Restated
Loan and Security Agreement. Pg. 25
Exhibit 99.1 Press Release dated December 3, 2002
announcing Steve Furner as Interim
Chief Financial Office. Pg. 30
Exhibit 99.1 Press Release dated December 9, 2002
announcing the addition of Phil Carter
to the Board of Directors. Pg. 31
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during
the quarter ended November 2, 2002.
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.
ODD JOB STORES, INC.
(Registrant)
12/16/02 /s/ Steve Furner
- -------- -----------------------
Date Steve Furner
Interim Chief Executive
Officer
12/16/02 /s/ Edward Cornell
- --------- -----------------------
Date Edward Cornell
Executive Vice President and
Chief Financial Officer
Certification of the Principal Executive Officer
Pursuant to15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Steve Furner, the Interim Chief Executive Officer certify that:
(1) I have reviewed this quarterly report on Form 10-Q of Odd Job Stores, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing of this
quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
(5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weakness in internal controls; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
(6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in the internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: December 16, 2002 By: /s/ Steve Furner
--------------------
Steve Furner,
Interim Chief Executive Officer
Certification of the Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350,
(Section 906 of the Satbanes-Oxley Act of 2002)
I, Steve Furner, the Interim Chief Executive Officer of Odd Job Stores, Inc.
(the "Company"), certify that to the best of my knowledge, based upon a
review of the Quarterly Report on Form 10-Q for the period ended November
2, 2002 of the Company (the "Report"):
(1) The Report fully complies with the requirements of Section 13(a)
of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: December 16, 2002 By: /s/ Steve Furner
------------------
Steve Furner,
Interim Chief Executive Officer
Certification of the Principal Financial Officer
Pursuant to15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Edward Cornell, the Chief Financial Officer certify that:
(1) I have reviewed this quarterly report on Form 10-Q of Odd Job Stores, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing of this
quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
(5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weakness in internal controls; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
(6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in the internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: December 16, 2002 By: /s/ Edward Cornell
------------------------
Edward Cornell,
Executive Vice President and
Chief Financial Officer
Certification of the Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350,
(Section 906 of the Satbanes-Oxley Act of 2002)
I, Edward Cornell, the Chief Financial Officer of Odd Job Stores, Inc.
(the "Company"), certify that to the best of my knowledge, based upon a
review of the Quarterly Report on Form 10-Q for the period ended November
2, 2002 of the Company (the "Report"):
(1) The Report fully complies with the requirements of Section 13(a)
of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: December 16, 2002 By: /s/ Edward Cornell
------------------------
Edward Cornell,
Executive Vice President and
Chief Financial Officer