UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM February 3, 2002 TO December 31, 2002
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
908-222-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -----------------------------------------
None Not Applicable
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, NO PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act. Yes ___ No X
The aggregate market value of voting stock held by nonaffiliates of the
Registrant was approximately $7.4 million at March 21, 2003. The number of
common shares outstanding at March 6, 2003 was 9,060,695.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of the Registrant with respect to the 2003
Annual Meeting of Stockholders are incorporated by reference into Part III.
#
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business....................................................3
Item 2. Properties..................................................7
Item 3. Legal Proceedings...........................................8
Item 4. Submission of Matters to a Vote of Security Holders.........8
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.........................................8
Item 6. Selected Financial Data.....................................9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................11
Item 7a. Quantitative and Qualitative Disclosures about Market
Risk.......................................................18
Item 8. Financial Statements and Supplementary Data................18
Item 9. Changes and Disagreements with Accountants on Accounting and
Financial Disclosures......................................18
PART III
Item 10. Directors and Executive Officers of the Company............18
Item 11. Executive Compensation.....................................20
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................20
Item 13. Certain Relationships and Related Transactions.............20
Item 14. Controls and Procedures....................................21
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form
8-K........................................................22
#
PART I
ITEM 1. BUSINESS
GENERAL
Odd Job Stores, Inc. (the "Company") is a major regional closeout retail
business. Prior to June 2002, the Company operated under the name "Mazel Stores
Inc."
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. At
December 31, 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 had fiscal 2002 sales of $233.8 million.
The Company was founded in 1975 as a wholesaler of close out merchandise.
Management's business strategy has primarily focused on the growth of its Odd
Job stores, the initial 12 stores having been acquired by the Company in 1995.
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 Mid-Atlantic and Midwest
regions, with a concentration in metropolitan New York. The Company's
corporate and administrative offices are located at 200 Helen Street, South
Plainfield.
RECENT DEVELOPMENTS
On March 18, 2003 the Company announced that it had named Steve Furner
as its Chief Executive Officer. Mr Furner has held the position on an interim
basis since December 3, 2002. Mr. Furner replaces Peter Hayes who resigned from
the Company and its Board of Directors to pursue other interests. Mr. Furner's
background includes 35 years in retailing of which 21 years were with Wal-Mart
Stores, Inc.
On December 9, 2002, the Company announced the addition of Phil Carter
to its Board of Directors. Mr. Carter's background includes serving as
President and Chief Executive Officer of Mac Frugal's Bargain Centers, which
was acquired by Big Lots in 1998.
INDUSTRY OVERVIEW
Closeout retailing is an important segment of the retailing industry in
the United States. Closeout retailers provide a valuable service to
manufacturers by purchasing excess products. Closeout merchandisers also take
advantage of generally lower prices in the off-season by buying and warehousing
seasonal merchandise for future sale. As a result of acquiring merchandise at a
deeper discount, closeout merchandisers can offer merchandise at prices
significantly lower than those offered by traditional retailers.
The closeout sector has benefited from several industry trends.
Consolidations in the retail industry and the expansion of just-in-time
inventory requirements have generally had the effect of shifting inventory risk
from retailers to manufacturers. In addition, a trend toward shorter product
cycles, particularly in the consumer goods sector, has increased the frequency
of new product and new product packaging introductions. These factors have
increased the reliance of manufacturers on closeout retailers like the Company,
who frequently are able to purchase larger quantities of excess inventory and
successfully control the distribution of such goods.
OPERATIONS
General. The Company's chain of 77 retail stores as of December 31, 2002
operate under the names "Odd Job," "Odd Job Trading" and "Mazel's" and are
located in New York (30, including 8 in Manhattan), New Jersey (23), Ohio (8),
Pennsylvania (7), Michigan (4), Connecticut (3), Delaware (1), and Kentucky
(1). The retail stores generated sales of $233.8 million in fiscal 2002.
Merchandising and Marketing. The Company believes that its customers are
attracted to its stores principally because of the availability of a large
assortment of quality consumer items, which are frequently brand-name, at
attractive prices. The Company offers certain general categories of merchandise
on a continual basis, although specific lines, products and manufacturers
change continuously. Inventories depend primarily on the types of merchandise
that the
Company is able to acquire at any given time. The Company believes that this
changing variety of merchandise from one day to the next results in customers
shopping at the stores more frequently than they might otherwise. The Company
refers to such frequent shoppers as "treasure hunters" due to their regular
visits to the Company's stores in an effort to seek out bargains. The Company's
stores offer substantial savings on housewares, domestics, cards and
stationary, books, candles, party supplies, health and beauty aids, food, toys,
hardware, giftware, electronics and garden supplies. Brands carried by the
Company's stores may include, at any given time, Kodak, American Greetings,
Sunbeam, Keebler, M&M Mars, Mattel, Mikasa, Newell/Rubbermaid and Sony. In
addition, the Company has increased the breadth and quality of its seasonal
merchandise and has sought to promote these items through in-store displays
designed around specific holidays.
The Company believes its large selection of brand-name products often
attracts a customer seeking a particular brand or product, who will check the
Company's stores in search of the lowest price before resorting to a large
discount store where the customer assumes the product is in stock. In addition,
the Company's stores carry, on a consistent basis, selected goods manufactured
to the Company's specifications. The Company is able to negotiate competitive
prices with manufacturers of these products, many of whom are located outside
the United States. Such products enable the Company to provide high-quality,
cost-effective merchandise on a continuous basis.
Management believes the presentation of its merchandise is critical to
communicating value and quality to its customers. The Company uses a variety of
adaptable merchandising fixtures and displays that add flexibility in the
presentation of a changing merchandise mix. Some merchandise is displayed in
its initial packaging, stacked floor-to-ceiling. A message board appears in
every store, indicating both new arrivals and coming merchandise, in an effort
to appeal to the "treasure hunters." The Company utilizes attractive exterior
signage and in-store merchandising as primary forms of advertising. The
Company's print advertising program uses mailers, in-paper ads, and circulars,
on a periodic basis, to promote up to 40 value-oriented and easily recognizable
items. As a result of its merchandise mix, visual merchandising methods and
high-traffic store locations, the average inventory turn rate is approximately
4 times per year.
Purchasing. The Company believes that the primary factor contributing to
the success of its business is its ability to locate and take advantage of
opportunities to purchase large quantities of quality brand-name merchandise at
prices that allow the Company to resell the merchandise at prices that are
substantially below traditional retail prices. The Company's buyers purchase
merchandise from approximately 1,500 suppliers throughout the world.
Store Operations. Each store is staffed with section managers who have
primary responsibility for helping customers and monitoring sales floor
inventory in several merchandise categories. Section managers continually
replenish the shelves, communicate information as to fast-selling items to
store managers and identify slow-moving products for clearance. Each store has
between six and fourteen check-out stations and provides sales personnel for
customer assistance. Sales are primarily for cash, personal checks and credit
cards. The Company's Manhattan stores offer free daily storage that enables
customers to
pick up items purchased during the day on their way home from work, and UPS
shipment for larger purchases. The Company's stores have seven day-a-week
operations and have extended weekend hours. The Company has created an
infrastructure consisting of District Managers each responsible for the
operations of approximately thirteen stores, reporting directly to the Senior
Vice President-Store Operations.
Store Locations. The Company's 69 suburban stores at December 31, 2002
are located in strip shopping centers. The 8 Manhattan stores are located in
high-traffic urban corridors (i.e. near Grand Central Station, Rockefeller
Center, Port Authority, Penn Station, Empire State Building, City Hall Park,
Union Square, and across from Bloomingdale's) that provide access to large
numbers of commuters. As a result, the Manhattan stores generate higher sales
volumes during the work week. The Company's suburban stores are generally near
a major highway or thoroughfare, making them easily accessible to customers.
The suburban stores generate higher sales volumes during the weekends. The
Company
attempts to tailor its merchandising and marketing strategies to respond to
the differences in its urban and suburban stores. The Company's stores range in
size from 6,500 to 30,000 square feet. On average, approximately 80% of the
area of each store represents selling space. All of the stores are located in
leased facilities.
No new stores were opened in fiscal 2002 or fiscal 2001, but the Company
expects to open between 2 and 5 new stores in fiscal 2003. In fiscal 2001, the
Company permanently closed two stores and temporarily closed a third store due
to fire damage. That store was reopened in April 2002. No stores were closed
in fiscal year 2002 but the Company has plans to close two stores in fiscal
2003 at the expiration of their leases.
In choosing specific sites for expansion, the Company considers numerous
factors including demographics, traffic patterns, location of competitors, rent
costs in relation to current market, and overall retail activity. The Company's
standards for evaluating these factors are flexible and are based on the nature
of the market. The Company may seek to expand in both suburban and urban
markets. Due to its broader selection of closeout merchandise than other
closeout retailers, the Company seeks high volume regional centers with a
strong anchor tenant.
In selecting new store locations, the Company has historically sought
existing structures that it can refurbish in a manner consistent with its
merchandising concept. This strategy, which typically requires minimal
leasehold improvements by the Company, enables the Company to open stores in
new locations generally within six to twelve weeks following occupancy of the
space.
Warehousing and Distribution. Merchandise is distributed to the retail
stores primarily from the Company's 510,000 square foot South Plainfield, New
Jersey warehouse and distribution facility. The Company believes the South
Plainfield facility has the capacity to support its longer-term retail
expansion plans.
The majority of the Company's inventory is shipped directly from suppliers
to the Company's South Plainfield, New Jersey warehouse and distribution
facility. Since the South Plainfield, New Jersey warehouse and distribution
facility maintains back-up inventory and provides deliveries several times per
week to each store, in-store inventory requirements are reduced and the Company
is able to operate with smaller stores. Off-hours stocking is utilized to
support the store's inventory turnover, particularly during the busy fourth
quarter. The Company's inventory is delivered to the stores by a contract
carrier, as well as by direct vendor shipments.
Distribution to the stores is controlled by the Company's product
allocators, buyers and senior management. The Company's merchandise is
distributed based on variables such as store volume and certain demographic and
physical characteristics of each store. Stores receive shipments of merchandise
several times per week based on budgeted inventory requirements, distribution
models, available storage and direct communications between store managers,
product allocators and the Company's buyers and senior management.
MANAGEMENT INFORMATION SYSTEMS
The Company's operations are supported by a third party owned and
internally managed IBM AS400-based computer system. The system utilizes vendor
purchased integrated distribution, merchandising, inventory and warehousing
software. The Company also uses vendor purchased retail purchasing and
perpetual inventory systems and a vendor purchased general ledger accounting
system.
The Company has installed point-of-sale (POS) systems in all retail
locations to fully capture store transactions and provide updated data to its
purchasing staff and other corporate personnel, and for transfer into the
Company's accounting, merchandising and distribution systems.
COMPETITION
The Company competes with other closeout retailers, discount stores, deep
discount drugstore chains, supermarkets and other value-oriented specialty
retailers. Some of these competitors have substantially greater financial
resources and wider distribution capabilities than those of the Company, and
competition is often intense. Competition is based primarily on product
selection and availability, price and customer service. The Company believes
that by virtue of its ability to make purchases of closeout, bulk and surplus
items, its prices compare favorably with those of its competitors.
In addition to competition in the sale of merchandise, the Company
encounters significant competition in locating and obtaining closeout,
overproduction and similar merchandise for its operations. There is increasing
competition for the purchase of such merchandise. However, the Company believes
that it will have sufficient sources to enable it to continue purchasing such
merchandise in the future.
TRADEMARKS
The Company has registered "Odd Job" and "Odd Job Trading" as trademarks
in the United States. The Company has registered or has filed registration
applications for certain other trademarks and trade names.
In connection with the sale of its Wholesale Division, the Company sold
the "Mazel" name and in June 2002 changed its corporate name to "Odd Job
Stores, Inc." The Company expects to change the name of its Midwest stores,
which currently operated under the name "Mazel", over the next several years.
EMPLOYEES
At December 31, 2002 the Company had 2,192 employees including 2,089 in
direct retail and warehouse operations. Corporate employees included 103 in
general management, administrative and support positions. The Company considers
its relationship with its employees to be good. However, from time to time
there have been attempts to organize the employees of one or more stores. To
date, no such organizational efforts have been successful. Approximately 144
of the warehouse employees in South Plainfield, New Jersey, are subject to a
48-month collective bargaining agreement that expires on January 28, 2005. The
Company is not a party to any other labor agreements.
DISCONTINUED OPERATIONS
On February 11, 2002, the Company affected the sale of its Wholesale
Division. As a result of the divestiture, the Company has repositioned itself
solely as a closeout retailer. The financial statements and notes have been
reclassified for all periods presented to reflect the wholesale segment as a
discontinued operation. Net proceeds from the sale of approximately $26.2
million in cash were received in fiscal 2002, based upon the Division's balance
sheet. An additional $0.3 million of balance sheet adjustments are being
disputed, however the parties expect to resolve this matter through
arbitration. Proceeds from the sales were primarily used to pay off existing
borrowings under the Company's Revolving Credit Facility.
TERMINATION OF JOINT VENTURE
On February 2, 2002, the Company and Value City Department Stores (VCDS)
reached an agreement on the terms of the previously announced termination of
their VCM, Ltd. joint venture that operated various departments in VCDS stores.
VCDS now operates such departments directly. Under the terms of the Agreement,
VCDS paid the Registrant $8.4 million in consideration of the termination of
Registrant's rights in and to the joint venture. Registrant also received $4.1
million in management fees for the year ended February 2, 2002.
ITEM 2. PROPERTIES
The Company leases a 535,000 square foot facility in South Plainfield, New
Jersey from a limited liability company in which two of its Directors are
minority owners. Housing the Company's corporate offices, approximately 510,000
square feet of the facility is utilized by the warehouse and distribution
operation, with the remainder used for office space. The lease for the facility
expires November 30, 2022.
The Company believes its facilities will be generally adequate for its
operational requirements for the foreseeable future.
The Company leases all of its stores. Store leases generally provide for
fixed monthly rental payments, plus the payment, in most cases, of real estate
taxes, utilities, liability insurance and common area maintenance. In certain
locations, the leases provide formulas requiring the payment of a percentage of
sales as additional rent. Such payments are generally only required when sales
reach a specified level. The typical store lease is for an initial term of five
or ten years, with certain leases having renewal options.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various other legal proceedings and claims that
arise in the ordinary course of business. The Company believes that the amount
of any ultimate liability with respect to all actions will not have a material
adverse effect on the Company's financial condition, liquidity or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock currently trades on the NASDAQ Stock Market(sm)
under the symbol "ODDJ." Prior to June 2002, the Company traded under the
symbol "MAZL" on the NASDAQ Stock Market. The following table shows the
quarterly high and low closing sale prices of the Common Stock for the periods
presented.
FISCAL YEAR 2002 FISCAL YEAR 2001
----------------- ----------------
FISCAL QUARTER HIGH LOW HIGH LOW
- -------------- ------- ------- ------- ------
First Quarter................. $6.20 $3.00 $2.94 $2.25
Second Quarter................ 5.74 2.85 3.88 2.50
Third Quarter................. 3.02 1.91 3.70 1.50
Fourth Quarter................ 2.43(1) 1.58(1) 3.40 1.97
(1) The fourth quarter of fiscal year 2002 is an approximate two-month period.
As of March 7, 2003, the Company believes that there were approximately
695 beneficial owners of the Company's Common Stock.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain its future earnings to finance
the expansion of its business and for general corporate purposes and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. Any payment of cash dividends in the future will be at the discretion
of the Board of Directors and will depend upon, among other things, the
Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to the payment of dividends
and other factors that the Company's Board of Directors deems relevant. In
addition, the Company's credit facility prohibits declaring or paying any
dividends without the prior written consent of the Lender.
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial data presented under the captions
Statement of Operations Data and Balance Sheet Data for the eleven-month period
ended December 31, 2002, and the fiscal years ended February 2, 2002, February
3, 2001, January 29, 2000, and January 30, 1999 (fiscal years 2002, 2001, 2000,
1999, and 1998, respectively) were derived from the consolidated financial
statements of the Company. The selected data referred to above should be read
in conjunction with the consolidated financial statements and related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this filing.
The financial statements have been reclassified for all periods presented
to reflect the wholesale segment as a discontinued operation.
STATEMENT OF OPERATIONS DATA
FISCAL YEAR
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
Net sales $233,790 $258,149 $239,695 $203,799 $156,242
Cost of sales 145,748 158,215 149,639 122,023 95,089
Special charge - - 4,550 - -
-------- -------- -------- -------- --------
Gross profit 88,042 99,934 85,506 81,776 61,153
% of sales 37.66% 38.71% 35.67% 40.13% 39.14%
S, G & A expenses 95,296 100,671 101,198 78,462 59,441
Special charge - - 996 - -
-------- -------- -------- -------- --------
Operating (loss) profit (7,254) (737) (16,688) 3,314 1,712
% of sales (3.10)% (0.29)% 6.96% 1.63% 1.10%
Interest expense -- net 866 2,298 3,057 1,984 1,464
Other (income) expense -- net(1) 746 1,443 240 (1,338) 627
-------- -------- -------- -------- --------
Income (loss) from continuing operations
before income taxes (8,866) (4,478) (19,985) 2,668 (379)
Income tax expense (benefit) 5,191 (1,746) (7,794) 1,067 (152)
-------- -------- -------- -------- --------
Income (loss) from continuing operations (14,057) (2,732) (12,191) 1,601 (227)
Income (loss) from operations of the
discontinued Wholesale Division, net of tax - 2,554 (843) 5,156 5,400
Loss on the disposal of the Wholesale Division,
net of tax - (3,665) - - -
Change in accounting principle (9,447) - - - -
--------- -------- --------- -------- --------
Net income (loss) $ (23,504) $ (3,843) $ (13,034) $6,757 $5,173
========= ======== ========= ======== ========
(1) The Company's portion of the VCM, Ltd., a joint venture with Value City
Department Stores, operations income/(loss) is reported as other
(income)/expense along with charges related to the extinguishment of debt.
Also reported as other (income)/expense is the $650 loss related to the sale of
the joint venture in fiscal 2001.
FISCAL YEAR
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
Net income (loss) per common share - basic:
Continuing operations $(1.56) $(0.30) $(1.34) $0.18 $(0.02)
Income (loss) from operations of the
discontinued segment - 0.28 (0.09) 0.56 0.59
Loss on the disposal of the discontinued segment (0.40)
Change in accounting principles (1.04) - - - -
------ ------ ------ ----- -----
Net income (loss) per common share - basic $(2.60) $(0.42) $(1.43) $0.74 $ 0.57
====== ====== ====== ===== =====
Net income (loss) per common share - diluted:
Continuing operations. $(1.56) $(0.30) $(1.34) $0.18 $(0.02)
Income (loss) from operations of the
discontinued segment - 0.28 (0.09) 0.56 0.59
Loss on the disposal of the discontinued
Segment - (0.40) - - -
Change in accounting principles (1.04) - - - -
------ ------ ------ ----- -----
Net income (loss) per common share - diluted $(2.60) $(0.42) $(1.43) $0.74 $ 0.57
====== ====== ====== ===== =====
Weighted average common shares outstanding:
Basic: 9,043,900 9,120,700 9,141,800 9,141,800 9,141,600
Diluted: 9,043,900 9,120,700 9,141,800 9,154,700 9,146,800
BALANCE SHEET DATA:
FISCAL YEAR
2002 2001 2000 1999 1998
--------- --------- --------- --------- ---------
Working capital $28,390 $39,577 $61,632 $66,789 $58,715
Total assets 71,679 107,108 138,365 140,182 123,844
Long term debt - 6,083 38,280 30,066 21,985
Total liabilities 27,496 39,583 66,612 55,395 45,814
Stockholders' equity 44,183 67,525 71,753 84,787 78,030
SELECTED OPERATIONS DATA:
Number of stores 77 76 79 64 47
Total square footage 1,206,300 1,168,200 1,236,610 943,545 689,750
Total store sales growth (9.4)% 7.7% 17.6% 30.4% 8.0%
Calculation -- avg. net sales per gross
sq ft 194 217 223 257 258
Comparable store net sales increase
(decrease) (3.0)% 5.5% (4.8%) 4.1% 0.1%
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Odd Job Stores, Inc. is a major regional closeout retailer. At December
31, 2002, the Company operated 77 closeout retail stores, including 30 in New
York (eight of which are in Manhattan), 23 in New Jersey, 8 in Ohio, 7 in
Pennsylvania, 4 in Michigan, 3 in Connecticut, and 1 each in Delaware and
Kentucky. At the end of fiscal 2001, the company operated 76 retail stores,
with one store closed for renovations due to fire damage. In both fiscal 2002
and 2001, the Company refrained from opening new stores to allow management to
focus its efforts on improving the return on its existing retail locations.
Effective for fiscal year 2002, the Company elected to change its fiscal
year end to December 31. The change in fiscal year end provides significant
cash flow benefits by allowing the Company to take advantage of expanded tax
net operating loss carry-back provisions allowed in the Job Creation and Worker
Assistance Act of 2002, which expires after December 31, 2002. Fiscal years
2001 and 2000 followed the reporting calendar as published by the National
Retail Federation and are defined as the fiscal years ended February 2, 2002,
and February 3, 2001, respectively. As a result of the change in fiscal year
end, the comparable financial information contained in this report and
discussed below represents approximately eleven months of results for fiscal
year 2002, compared with twelve months of results for fiscal years 2001 and
2000.
On February 11, 2002, the Company effected the sale of its Wholesale
Division. As a result of the divestiture, the Company has repositioned itself
solely as a closeout retailer. The financial information discussed below
reflects the wholesale segment as a discontinued operation for fiscal years
2001 and 2000. The Company received cash proceeds on the sale of approximately
$26.2 million in fiscal year 2002, based upon the balance sheet of the
Wholesale Division. Proceeds from the sales were primarily used to pay off
existing borrowings under the Company's credit facility.
On June 19, 2002, the Company announced that it had changed its name
from Mazel Stores, Inc. to Odd Job Stores, Inc. and its ticker symbol on the
NASDAQ from MAZL to ODDJ. The change reflects the strategic repositioning of
the Company after the divestiture of its Wholesale Division.
CRITICAL ACCOUNTING POLICIES
The Company's critical accounting policies include the following:
- Valuation of inventory; and
- Accounting for income taxes
Valuation of inventory. The Company uses the retail method of
accounting. Inventories are not recorded in excess of market value. Management
tracks the inventory for changes in circumstances, such as changes in customer
merchandise preference, which could cause the Company's inventory to be exposed
to obsolescence or slow moving merchandise. The decision to write down
inventory is based in part on its age and the extent of the write down is based
on Management's best estimates of its resale value and thus inherently
subjective in nature.
Accounting for income taxes. As part of the process of preparing the
Company's financial statements, management is required to estimate income
taxes. This process involves estimating the Company's actual current tax
exposure together with assessing temporary differences resulting from differing
treatment of items. These differences result in deferred tax assets and
liabilities. The Company assesses the recoverability of its deferred tax assets
in accordance with the provisions of FAS 109. In accordance with that standard,
the Company recorded a full valuation allowance for its net deferred tax assets
as of December 31, 2002. The Company intends to maintain a full valuation
allowance for its net deferred tax assets and net operating loss carryforwards
until sufficient positive evidence exists to support the reversal of the
remaining reserve. Until such time, except for minor state and local tax
provisions, the Company will have no reported tax provision, net of valuation
allowance adjustments. In the event the Company was to determine, based on the
existence of sufficient positive evidence, that it would be able to realize its
deferred tax assets in the future in excess of its net recorded amount, an
adjustment to the valuation allowance would increase income in the period such
determination was made.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
Statements of Operations data as a percentage of net sales:
Fiscal Year
2002 2001 2000
Net sales 100.0% 100.0% 100.0%
Gross profit 37.7 38.7 35.7
Selling, general & administrative
expense 40.8 39.0 42.7
Operating loss (3.1) (0.3) (7.0)
Loss from continuing operations (6.0) (1.1) (5.1)
Loss from discontinued operations - (0.4) (0.4)
Net loss (10.1) (1.5) (5.4)
FISCAL 2002 RESULTS VERSUS FISCAL 2001
Net sales for the eleven-month period of fiscal 2002 were $233.8
million, compared to $258.1 million for the twelve-month period of fiscal 2001,
a decrease of $24.3 million, or 9.4%. On a comparable store basis (76 stores),
net sales decreased 3.0%. Net sales for the comparable periods ending December
31 of both fiscal years declined $8.3 million or 3.4% and sales on a comparable
store basis declined $6.1 million or 2.6%. The decline in comparable sales for
2002 is largely the result of reduced customer transactions offsetting a slight
increase in average sales.
Gross profit was $88.0 million for fiscal 2002, compared to $99.9 million
for fiscal 2001. Gross profit decreased $11.9 million or 11.9% and declined as
a percentage of sales from 38.7% in fiscal 2001 to 37.7% in fiscal 2002 due
primarily to higher markdowns.
Selling, general and administrative expense ("S,G & A") reflects the four-
wall cost of the stores, the distribution facility, and corporate support.
During fiscal 2002, S, G & A was $95.3 million or 40.8% of sales, compared to
$100.7 million, or 39.0% of sales for fiscal 2001. Store expenses over a
comparable eleven-month period increased slightly, while corporate support
expenses declined reflecting the cost savings associated with the consolidation
of functions at the New Jersey facility. Offsetting S, G & A expense in fiscal
2002 is approximately $0.9 million of insurance proceeds for claims received in
connection with property damage on one store and a store closure related to the
events of September 11, 2001. S, G & A expenses for fiscal 2001 included $0.3
million for the amortization of goodwill, which did not recur in 2002 due to
the adoption of SFAS No. 142. S, G & A expenses for fiscal 2001 were offset by
$4.1 million in management fee revenue, related to a 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 or related expenses in
fiscal 2002.
The Company reported an operating loss of $7.3 million or 3.1% of sales
for fiscal 2002, compared to an operating loss of $0.7 million or 0.3% of sales
for fiscal 2001.
Other expenses for fiscal 2002 and fiscal 2001 include charges for the
extinguishment of debt totaling $0.7 million and $0.4 million, respectively.
The 2001 charge for the extinguishment of debt was reclassified from an
extraordinary item due to the early adoption of Statement of Financial
Accounting Standards No. 145. The 2001 fiscal period also included expense of
$1.0 million for the Company's 50% equity share in VCM, Ltd.'s net loss.
Interest expense was $0.9 million for fiscal 2002, compared to $2.3 million for
fiscal 2001. The reduction is due to lower average borrowings and lower
interest rates.
The Company's net loss from continuing operations totaled $14.1 million
or 6.0% sales for fiscal 2002, compared to $2.7 million, or 1.1% of sales for
fiscal 2001. The fiscal 2002 net loss includes a non-cash charge against
earnings for the Company's tax valuation allowance of $9.4 million for its
deferred tax assets. Due to its recent operating losses, the Company believes
it is more likely than not that these deferred tax assets will not be utilized
in the future, and therefore recorded the valuation allowance. The Company's
total net loss of $23.5 million, or $2.60 per share for fiscal 2002 also
included a one-time non-cash charge of $9.4 million, or $1.04 per diluted
share, for a change in accounting principles related to a write-off of
unamortized goodwill under the adoption of Statement of Financial Accounting
Standards No. 142. Further information on the Company's accounting for goodwill
and tax valuation allowance can be found in Notes 1-F and 1-G, respectively.
FISCAL 2001 RESULTS VERSUS FISCAL 2000
Net sales were $258.1 million for fiscal 2001, compared to $239.7 million
for fiscal 2000, an increase of $18.4 million, or 7.7%. The increase in net
sales was attributable to a comparable store (62 stores) net sales increase of
5.5% with the balance of the increase occurring in stores opened in fiscal 2000
offsetting the loss of sales from the three stores closed in 2001.
Gross profit was $99.9 million for fiscal 2001, compared to $85.5 million
for fiscal 2000, an increased of $14.4 million or 16.9%. Gross profit
increased to 38.7% in fiscal 2001 from 35.6% in fiscal 2000 due primarily to
improved shrink results. Included in gross profit for fiscal 2000 was a
special charge related to the write-down of inventory, which lowered the 2000
gross profit by 2.0%.
During fiscal 2001, selling, general and administrative expense was $100.7
million, compared to $102.2 million for fiscal 2000. Fiscal 2000 included a $1
million special charge for lease terminations and the write-down of other
assets. The decrease when comparing fiscal 2001 to the prior year was also due
to the absence of any pre-opening costs in 2001 as compared to $2.1 million in
2000. Additional factors include an $0.8 million reduction in corporate support
expense and a $0.2 million reduction in warehouse costs, offset, in part, by a
$0.1 million decline in management fee revenue received from VCM, Ltd., store
level expense increase of $1.6 million primarily attributable to the full year
operation of stores opened during fiscal 2000, and increased advertising
expense of $0.9 million primarily due to the
larger store base. Selling, general and administrative expense including the
fiscal 2000 special charge, decreased as a percentage of net sales to 39.0% in
fiscal 2001, from 42.2% in fiscal 2000.
The operating loss was $0.7 million or .3% of sales for fiscal 2001,
compared to an operating loss of $16.7 million for fiscal 2000. This
improvement was primarily due to the special charges, which totaled $5.5
million in fiscal 2000, as well as the other factors described above.
Interest expense was $2.3 million for fiscal 2001, compared to $3.1
million for fiscal 2000, reflecting lower average borrowings. Other (loss)
income was comprised of the Company's 50% equity share in VCM, Ltd., a net loss
of $1.0 million in fiscal 2001 compared to a net loss of $0.2 million in fiscal
2000. Included in the 2001 loss was a $0.7 million loss on the sale of the
joint venture to Value City Department Stores, Inc. and a $0.4 million charge
for the extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have been financed through its cash flows,
borrowings under its revolving credit facility and the extension of trade
credit.
The Company's primary requirements for capital consist of inventory
purchases, expenditures related to new store openings, 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.
Prior to the close of fiscal 2001, the Company received payments of $8.4
million for its 50% ownership and $4.1 million in management fees for fiscal
2001 as a result of terminating the VCM, Ltd., joint venture with Value City
Department Stores, Inc. In fiscal 2002, the Company received cash proceeds of
approximately $26.2 million from the sale of its Wholesale Division. The
proceeds from these two transactions were used to payoff all bank indebtedness
and finance operating activities during the year.
As a result of the VCM, Ltd. termination and Wholesale divestiture, the
Company amended its credit facility that now provides for $30 million of
revolving credit. The Revolving Credit Facility ("Facility") expires in August
of 2004. Availability under the Facility is dependent on a borrowing base
calculation based primarily upon the Company's inventories. The Facility
contains restrictive covenants that require minimum EBITDA levels, maximum
annual capital expenditure levels, and minimum inventory leverage ratios. The
revolving credit facility also contains a "deemed waiver" which waives any
covenant violations as long as the Company maintains availability in excess of
$10.0 million for a consecutive sixty-day period subsequent to any violation
date. The Company currently uses its credit facility to cover seasonal and
potentially larger opportunistic inventory purchases.
The Company was not in compliance with certain covenants as of December
31, 2002; however, due to a "deemed waiver" provision in the Agreement which
waives any covenant failure as long as the Company maintains availability in
excess of $10 million for a consecutive 60-day period subsequent to any such
date, the Company is not in default under the Credit Facility. At December
31, 2002, the Company had availability under the formula established in the
revolving credit facility of $19.4 million, but because of the provision
referenced above net availability was $9.4 million. As of December 31, 2002,
the Company had no borrowings under the facility.
During fiscal year 2002, operating activities from continuing operations
used cash totaling $6.6 million, compared to cash provided totaling $14.6
million in fiscal year 2001. Additional cash for fiscal 2001 of $11.9 million
was provided by discontinued operations. The decrease in net cash from
operating activities is primarily due to a higher net loss for fiscal year
2002, compared to the net loss for fiscal 2001, partially offset by non-cash
charges of $9.4 million for a change in accounting principles on goodwill and a
valuation allowance against the future use of deferred tax assets of $9.4
million. Changes in operating assets and liabilities, comparing fiscal 2002 to
the prior year consisted primarily of higher inventory and lower accounts
payable balances primarily due to the change in fiscal year ends. At December
31, 2002, the company has a federal income tax receivable of $4.2 million,
compared to a tax receivable of $2.8 million at February 2, 2002. On March 17,
2003 the Company received the full amount of its expected federal income tax
refund.
Cash provided by investing activities increased to $24.8 million in fiscal
2002 from $7.5 million in fiscal 2001, due primarily to the proceeds received
from the sale of the net assets of the Wholesale Division. Capital
expenditures, net increased to $1.3 million in 2002 from $0.5 million in fiscal
2001. In fiscal 2001, cash was provided by the proceeds from the sale of VCM,
Ltd., which totaled $8.4 million. Cash used in financing activities declined to
$8.9 million in fiscal 2002, from $32.2 million in fiscal 2001. The decline is
due to the high level of debt payments made in fiscal 2001.
Total assets were $71.7 million at December 31, 2002 and $107.1 million at
February 2, 2002, respectively. Working capital decreased to $28.4 million at
December 31 2002, from $39.6 million at February 2, 2002, due primarily to the
funds received for the sale of discontinued operations, the valuation allowance
on current deferred tax assets, and the fiscal year operating loss. The
current ratio was 2.3 to 1 at December 31, 2002, compared to 2.4 to 1 at fiscal
year-end 2001. The Company had total cash and cash equivalents of $13.3 million
and no outstanding borrowings at December 31, 2002, compared with cash and cash
equivalents of $4.0 million and outstanding debt of $9.1 million at February 2,
2002. Net fixed assets were $18.5 million at the end of fiscal 2002, a
decrease of $3.8 million over the prior year, primarily related to
depreciation.
The Company has plans to open between 2 and 5 new stores in fiscal 2003
and is currently evaluating its future expansion policy. The Company also has
plans for remodeling several of its existing stores during fiscal 2003. The
Company anticipates that its cash flow from operations along with its current
borrowing capacity will be sufficient to finance ongoing operating requirements
and estimated future capital expenditures of approximately $3.0 million during
the coming fiscal year.
SEASONALITY
The Company's retail orientation results in a greater weighting of sales
and earnings toward the second half of the fiscal year.
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 actions 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.
NEW ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board issued
Statement No. 143, Accounting for Asset Retirement Obligations, (SFAS No. 143).
SFAS No. 143 addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS No. 143 is effective for fiscal years beginning
after June 14, 2002. The Company has reviewed the provisions of SFAS No. 143,
and believes that upon adoption on January 1, 2003, it will not have a material
impact on its financial position, results of operations or cash flow.
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. Management believes that upon adoption of
this new standard, it will not have a material impact on its financial
position, results of operations or cash flow.
In December 2002, the Financial Accounting Standards Board issued
Statement No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure, (SFAS No. 148). SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. SFAS No 148 will also require improved disclosure of
comparable information on accounting methods used to value such compensation.
SFAS No. 148 is effective for fiscal years beginning after December 15, 2002.
The Company has reviewed the provisions of SFAS No. 148 and believes that its
adoption will not have a material impact on its financial position, results of
operations or cash flow.
The Financial Accounting Standards Board's Emerging Issues Task Force
released a consensus ruling in November 2002 for application in 2003 that
requires companies to classify amounts received from vendors as a reduction of
product cost unless certain criteria can be met. One such requirement is that
the amounts received from vendors represent a reimbursement of costs incurred
by the company in selling the vendor's products. A change in the accounting for
cooperative advertising arrangements could increase gross profit and increase
advertising expense. It could also reduce product cost in inventory and
thereby impact the timing of recognition through cost of sales. The Company
does not expect that this ruling will materially impact its financial position,
results of operations or cash flow.
FORWARD-LOOKING STATEMENTS
Forward-looking statements 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 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.
#
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the Market Risk Section under the Management's Discussion and
Analysis.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Part IV, Item 14 of this Form 10-K for the
information required by Item 8.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information required in connection with directors and executive officers
is set forth below, as well as under the caption "Election of Directors," in
the Registrant's Proxy Statement with respect to the Company's 2003 Annual
Meeting of Stockholders (the "Proxy Statement"), which information is
incorporated herein by reference.
The following table sets forth certain information regarding the Directors
and executive officers of the Company as of March 19, 2003.
NAME AGE CURRENT POSITION
---- --- ----------------
Steve Furner 55 Chief Executive Officer
Edward Cornell 54 Executive Vice President and Chief
Financial Officer
Charles Bilezikian 66 Director
Philip Carter 54 Director
Reuven D. Dessler 55 Director
Robert Horne 44 Director
Jacob Koval 55 Director
Mark Miller 50 Director
Joseph Nusim 69 Director
Ned L. Sherwood 53 Director
Steve Furner has served as a member of the Company's Board of Directors
since June 2002. In March 2003, Mr. Fuener was named Chief Executive Officer
of the Company after holding the position on an interim basis since December
2002. Since 1998, Mr. Furner has been Vice President of Alliance Consulting,
specializing in strategic initiatives and operating programs for retail
companies. From 1977 to 1998 he served as President and Chief Operating Officer
of Wal-Mart Argentina.
Edward Cornell has been Executive Vice President and Chief Financial
Officer of the Company since October 2001 having served since June 2001 as
interim Chief Financial Officer. From February 1992 until joining the Company,
he served as Executive Vice President and CFO as well as Executive Vice
President, Non-Retail for Office Max, Inc.
Charles Bilezikian has been the President of Christmas Tree Shops, Inc., a
specialty New England retailer, since its formation in 1971. He has served as a
Director since January 1997.
Philip Carter has been a member of the Company's Board of Directors
since December 2002. From 1998 to 2002, Mr. Carter served as Chief Executive
Officer of Apria Healthcare and has recently accepted the position of President
and Chief Executive Officer of Rotech Healthcare. From 1995 to 1998 he was
President and Chief Executive Officer of MacFrugal's Bargain Close-out's, Inc.,
a specialty retailer.
Reuven Dessler is Chief Executive Officer of MZ Wholesale Acquisition, LLC
d/b/a Mazel Company, which purchased the Company's Wholesale Division in
February 2002. Mr. Dessler served as Chairman of
the Board of the Company from November 1996 to February 2002 and as its Chief
Executive Officer from November 1996 to May 2001. He has served as a Director
since November 1996.
Robert Horne has been a principal of ZS Fund L.P., a Company engaged in
making private investments, for more than five years. He has served as a
Director of the Company since November 1996.
Jacob Koval is Chief Operating Officer of MZ Wholesale Acquisition, LLC
d/b/a Mazel Company, which purchased the Company's Wholesale Division in
February 2002. Mr. Koval served as Executive Vice President -- Wholesale of the
Company from November 1996 to May 2001. He has served as a a Director since
November 1996.
Mark Miller has been the Executive Vice President of RedTagBiz.com, since
2000. Previously, Mr. Miller was Executive Vice President and Chief Operating
Officer for the Home Products Division of Value City Department Stores from
July 1999 to July 2000, and President of the Closeout Division of Consolidated
Stores from the 1998 acquisition of MacFrugal's Bargain Close-out's, Inc.
through March
1999. Mr. Miller was MacFrugal's Executive Vice President of Merchandise and
Stores from 1995 until the acquisition by Consolidated Stores. He has served as
a Director of the Company since November 1999.
Joseph Nusim has been President of the Nusim Group, a retail consulting
company, since 1995. Mr. Nusim has been Co-Chairman of the Board for
Woodworkers Warehouse Stores since October 2001 and Co-Chairman of the Board
for Loehmann's Stores since October 2000. Mr. Nusim served as Acting Chief
Executive Officer of Frankel's Home Furnishings, Inc. from 1998 to 1999 and
Rickel Home Centers from 1997 to 1998. Mr. Nusim had been Chairman, President
and Chief Executive Officer of Channel Home Centers from 1990 to 1995. He has
served as a Director since February 2002.
Ned L. Sherwood has been a principal and President of ZS Fund L.P. for
more than five years. Mr. Sherwood is currently a member of the Board of
Directors of Kaye Group, Inc. He has served as a Director since November 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Information required by Item 405 of Regulation S-K is set forth in the
Proxy Statement under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance," which information is incorporated herein by reference.
#
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item is included under the captions
"Executive Compensation" and in the "Summary Compensation Table" in the
Registrant's Proxy Statement, which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
See the following portions of the Registrant's Proxy Statement, all of
which information is incorporated herein by reference: (i) the information
under the caption "Security Ownership and Transactions with Certain Beneficial
Owners" and (ii) the information included under the caption "Election of
Directors."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 11, 2002, the Company sold to MZ Wholesale Acquisition, LLC
d/b/a Mazel Company (the "Buyer"), an enterprise involving Reuven Dessler,
former Chairman and Chief Executive Officer, and Jacob Koval, former Executive
Vice President, of the Company, the assets of its Wholesale Division and
certain other assets, including the notes receivable from Messrs. Dessler and
Koval valued (together with accrued interest at fiscal 2001 fiscal year end) at
$1,147,136 and $808,586, respectively. Under the sale agreement, Company
received cash payments to date totaling $26,218,000 based on the book value of
the acquired assets and assumed liabilities. Under the terms of the sale
agreement, the Company has agreed not to compete in the wholesale sale of
closeout merchandise, subject to certain limitations, for a period expiring on
the earlier of (i) the three-year anniversary of the sale or (ii) the sale of a
majority of the Company's stock or assets to a third-party (the "Restricted
Period"). In the event the Company purchases closeout merchandise in quantities
exceeding those required by its retail operations, during the Restricted
Period, it has the right to put up to $3.5 million of such merchandise annually
to a joint venture (equally owned by Buyer and Company and managed by Buyer).
Under the sale agreement, Company has assigned the "Mazel" name to Buyer, but
may continue the use of the name on its retail stores for up to five (5) years.
In June 2002, the Company changed its corporate name to Odd Job Stores, Inc.
Messrs. Dessler, Koval and Jay L. Schottenstein ("MZ Related Parties") and ZS
Fund LP., the Company's largest beneficial shareholder, have entered into a
Standstill Agreement pursuant to which: (i) the MZ Related Parties have agreed
not to purchase additional shares of Common Stock that would cause their
aggregate ownership to exceed thirty-three percent (33%) of the outstanding
shares of Company without the consent of ZS Fund and a majority of the
disinterested directors of Company; and (ii) ZS Fund has agreed not to purchase
additional shares of Common Stock that would cause its aggregate ownership to
exceed thirty-six percent (36%) of the Company's outstanding shares without the
consent of Buyer's affiliates and a majority of the disinterested directors of
Company. The parties entered into an interim services agreement with respect to
certain transitional services, shared personnel and facilities which runs
through August 2003. During fiscal 2002, the Company paid $114,000 under this
agreement. Finally, as part of the sale, the Company and Messrs. Dessler and
Koval each of who remains a director of the Company, executed mutual releases
resolving various compensator and other claims of the parties. The Company and
MZ Wholesale have approximately $300,000 in closing date balance sheet
adjustments in dispute, which the parties expect to resolve through arbitration
in accordance with the provisions of the sales agreement.
The Company's warehouse in South Plainfield, New Jersey is leased from a
limited liability company in which Messrs. Dessler and Koval own approximately
34% and 10% membership interests, respectively. Neither Mr. Dessler or Mr.
Koval is involved in the management of the lessor and the Company believes the
terms are no less favorable than could be obtained from unrelated parties.
ITEM 14. CONTROLS AND PROCEDURES
a. Evaluation of disclosure controls and procedures.
Based on their evaluation of our disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934) as of a date within 90 days of the filing date of this Annual Report on
Form 10-K, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures are designed to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms and are
operating in an effective manner.
b. Changes in internal controls.
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date
of their most recent evaluation.
#
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a)(1) Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 2002 and
February 2, 2002
Consolidated Statements of Operations for the Eleven Months
Ended December 31, 2002 and Fiscal Years Ended, February 2,
2002 and February 3, 2001.
Consolidated Statements of Cash Flows for the Eleven Months
Ended December 31, 2002 and Fiscal Years Ended, February 2,
2002 and February 3, 2001.
Consolidated Statements of Stockholders' Equity for the
Eleven Months Ended December 31, 2002 and Fiscal Years Ended,
February 2, 2002 and February 3, 2001.
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts
(a)(3) Exhibits
See the Index to Exhibits included on page 40.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 2002. However, an 8-K was filed on January 14,
2003 to report the change in fiscal year end of the Company.
#
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Odd Job Stores, Inc.:
We have audited the accompanying consolidated financial statements of Odd Job
Stores, Inc. and subsidiaries (Company) as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Odd Job Stores,
Inc. and subsidiaries as of December 31, 2002 and February 2, 2002, and the
results of their operations and their cash flows for the eleven months ended
December 31, 2002, and the fiscal years ended February 2, 2002 and February 3,
2001, in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects, the
information set forth herein.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 2002, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets.
Cleveland, Ohio
March 7, 2003
#
ODD JOB STORES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, FEBRUARY 2,
2002 2002
------------ -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 13,322 $ 4,046
Notes and accounts receivable
- related parties (note 5) - 90
Other receivables 218 1,176
Income tax receivable (note 6) 4,239 2,770
Inventories 31,942 27,580
Prepaid expenses and other
current assets 956 585
Deferred income taxes (note 6) - 5,612
Net assets of discontinued
operations (note 10) - 26,218
------------ -----------
Total current assets 50,677 68,077
Property and equipment, net (note 2) 18,485 22,286
Other assets 2,517 3,480
Goodwill, net - 9,447
Deferred income taxes (note 6) - 3,818
------------ -----------
Total assets $ 71,679 $107,108
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt (note 4) $ - $ 3,017
Accounts payable 13,032 16,568
Accrued expenses and other current
liabilities (note 3) 9,255 8,915
------------ -----------
Total current liabilities 22,287 28,500
Long-term debt, net of current
portion (note 4) - 6,083
Other non-current liabilities 5,209 5,000
------------ -----------
Total liabilities 27,496 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; 9,050,400 and
8,981,700 shares issued and outstanding,
respectively 64,097 63,935
Retained earnings (deficit) (19,914) 3,590
------------ -----------
Total stockholders' equity 44,183 67,525
Commitments and contingencies (note 7) - -
------------ -----------
Total liabilities and stockholders'
equity $ 71,679 $107,108
============ ===========
See accompanying notes to consolidated financial statements
#
ODD JOB STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ELEVEN MONTHS
ENDED FISCAL YEAR ENDED
------------- --------------------------
DECEMBER 31, FEBRUARY 2, FEBRUARY 3,
2002 2002 2001
------------ ----------- -----------
Net sales $ 233,790 $ 258,149 $ 239,695
Cost of sales 145,748 158,215 149,639
Special charge (note 13) - - 4,550
------------ ----------- -----------
Gross profit 88,042 99,934 85,506
Selling, general & administrative 95,296 100,671 101,198
Special charge (note 13) - - 996
------------ ----------- -----------
Operating loss (7,254) (737) (16,688)
Other expense (note 4) 746 1,443 240
Interest expense 866 2,298 3,057
------------ ----------- -----------
Loss from continuing operations
before income taxes (8,866) (4,478) (19,985)
Income tax expense(benefit)(note 6) 5,191 (1,746) (7,794)
------------ ----------- -----------
Loss from continuing operations (14,057) (2,732) (12,191)
Income (loss) from operations of the
discontinued Wholesale Division,
net of income tax expense (benefit)
of $1,633, and ($540) in fiscal
years 2001, and 2000, respectively - 2,554 (843)
Loss on the disposal of the Wholesale
Division, including provision of
$778 for operating losses during the
phase-out period, net of tax benefit
of $2,344 in fiscal year 2001 - (3,665) -
Change in accounting principle
(note 1-F) (9,447) - -
------------ ----------- -----------
Net loss $(23,504) $ (3,843) $(13,034)
============ =========== ===========
Net income (loss) per common share-basic:
Loss from continuing operations $ (1.56) $ (0.30) $ (1.34)
Income (loss) from operations of
the discontinued segment - 0.28 (0.09)
Loss on the disposal of the
discontinued segment - (0.40) -
Change in accounting principle (1.04) - -
------------ ----------- -----------
Net loss per common share-basic $ (2.60) $ (0.42) $ (1.43)
============ =========== ===========
Net income (loss) per common share - diluted:
Loss from continuing operations $ (1.56) $ (0.30) $ (1.34)
Income (loss) from operations of
the discontinued segment - 0.28 (0.09)
Loss on the disposal of the
discontinued segment - (0.40) -
Change in accounting principle (1.04) - -
------------ ----------- -----------
Net loss per common share-diluted $ (2.60) $ (0.42) $ (1.43)
============ =========== ===========
Weighted average common shares outstanding
- basic 9,043,900 9,120,700 9,141,800
- diluted 9,043,900 9,120,700 9,141,800
See accompanying notes to consolidated financial statements
#
ODD JOB STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
ELEVEN MONTHS
ENDED FISCAL YEAR ENDED
------------- --------------------------
DECEMBER 31, FEBRUARY 2, FEBRUARY 3,
2002 2002 2001
------------ ----------- -----------
Cash flows from operating activities
Net loss $ (23,504) $ (3,843) $ (13,034)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Change in accounting principle 9,447 - -
Loss (income) from operations of
discontinued Wholesale Division,
net of tax - (2,554) 843
Loss on disposal of discontinued
Wholesale Division, net of tax - 3,665 -
Depreciation and amortization 5,758 7,074 5,966
Deferred income taxes 9,430 718 (5,274)
Equity in VCM, Ltd. - 398 266
Loss on sale of VCM, Ltd. - 650 -
Changes in operating assets
and liabilities:
Other receivables 958 (252) 177
Income tax receivable (1,469) (145) (2,625)
Notes and accounts receivables
- related parties 90 4,856 (1,372)
Inventories (4,362) 2,567 2,809
Other assets 435 46 325
Prepaid expenses and
other current assets (371) 516 (8)
Accounts payable (3,536) 559 2,981
Accrued expenses and other
liabilities 549 343 22
------------ ----------- -----------
Net cash (used in) provided by
continuing operations (6,575) 14,598 (8,924)
------------ ----------- -----------
Net cash provided by discontinued
operations - 11,851 11,666
------------ ----------- -----------
Net cash (used in) provided by
operating activities (6,575) 26,449 2,742
------------ ----------- -----------
Cash flow from investing activities
Capital expenditures, net (1,333) (501) (10,216)
Proceeds from sale of net assets of
discontinued operations 26,218 - -
Proceeds from sale of VCM, Ltd. - 8,375 -
Other (96) - (28)
------------ ----------- -----------
Net cash provided by (used in)
continuing operations 24,789 7,874 (10,244)
------------ ----------- -----------
Net cash used in discontinued
operations - (369) (761)
------------ ----------- -----------
Net cash provided by (used in)
investing activities 24,789 7,505 (11,005)
------------ ----------- -----------
Cash flow from financing activities
Net borrowings (payments) under
term debt - 4,494 (2,013)
Net borrowings (payments) under
credit facility (9,100) (35,769) 10,227
Financing costs paid - (951) -
Common stock repurchases (365) - -
Proceeds from the exercise of
stock options 527 - -
------------ ----------- -----------
Net cash (used in) provided by
financing activities (8,938) (32,226) 8,214
Net increase (decrease) in cash and
cash equivalents 9,276 1,728 (49)
Cash and cash equivalents at
beginning of period 4,046 2,318 2,367
------------ ----------- -----------
Cash and cash equivalents at
the end of the year $ 13,322 $ 4,046 $ 2,318
============ =========== ===========
Supplemental cash flow information:
Cash paid for interest $ 284 $ 3,410 $ 4,180
============ =========== ===========
Cash paid (received) for income taxes $ (2,876) $ (4,776) $ 2,100
============ =========== ===========
See accompanying notes to consolidated financial statements
#
ODD JOB STORES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
COMMON COMMON RETAINED
SHARES STOCK EARNINGS TOTAL
---------- -------- -------- --------
BALANCE AS OF JANUARY 29, 2000 9,141,800 $ 64,320 $ 20,467 $ 84,787
Net loss - - (13,034) (13,034)
---------- -------- -------- --------
BALANCE AS OF FEBRUARY 3, 2001 9,141,800 64,320 7,433 71,753
Shares retired (160,100) (385) - (385)
Net loss - - (3,843) (3,843)
---------- -------- -------- --------
BALANCE AS OF FEBRUARY 2, 2002 8,981,700 63,935 3,590 67,525
Stock options exercised 170,800 527 - 527
Shares retired (102,100) (365) - (365)
Net loss - - (23,504) (23,504)
---------- -------- -------- --------
BALANCE AS OF DECEMBER 31, 2002 9,050,400 $ 64,097 $(19,914) $ 44,183
========== ======== ======== ========
See accompanying notes to consolidated financial statements
#
ODD JOB STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of Odd Job Stores, Inc. ("Odd Job" or
"Company"), which are summarized below, are consistent with accounting
principles generally accepted in the United States of America and reflect
practices appropriate to the industry in which the Company operates. In June
2002, the Company changed its corporate name from Mazel Stores Inc., reflecting
the sale of its wholesale division, as discussed further in Note 10.
A. DESCRIPTION OF BUSINESS
The Company was originally established with two complimentary
operations: (i) a major regional closeout retail business; and (ii) one of the
nation's largest closeout wholesale business. As a result of the sale of the
Wholesale Division (see note 10) on February 11, 2002, the Company now operates
solely as a major regional closeout retail business. The Company sells quality,
value-oriented consumer products at a broad range of price points offered at a
substantial discount to the original retail price. As of December 31, 2002, the
Company operated a chain of 77 closeout retail stores, including 30 in New York
(8 of which are in Manhattan), 23 in New Jersey, 8 in Ohio, 7 in Pennsylvania,
4 in Michigan, 3 in Connecticut, and 1 each in Delaware and Kentucky.
B. PRINCIPLES OF CONSOLIDATION
The financial statements of the Company are presented on a consolidated
basis to reflect the economic substance of activities arising from common
management and control. All significant intercompany balances and transactions
have been eliminated in consolidation.
C. CASH AND CASH EQUIVALENTS
For financial reporting purposes, the Company considers all investments
purchased with an original maturity date of three months or less to be cash
equivalents.
D. INVENTORIES
Inventories are valued at the lower of cost or market, with cost
determined by using the retail method. Inventories are not recorded in excess
of market value. Management tracks the inventory for changes in circumstances,
such as changes in customer merchandise preference, which could cause the
Company's inventory to be exposed to obsolescence or slow moving merchandise.
The decision to write down inventory is based in part on its age and the extent
of the write down is based on Management's best estimates of its resale value
and thus inherently subjective in nature.
E. PROPERTY AND EQUIPMENT
Depreciation is provided for the cost of depreciable properties at
rates based on their estimated useful lives, which range from 3 to 10 years for
furniture and equipment, or extending to the life of the related lease for
leasehold improvements. All equipment, furniture and leasehold improvements are
depreciated on the straight-line basis over their estimated useful lives.
F. GOODWILL
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. This charge is shown as a change in accounting
principle for the eleven months ended December 31, 2002. The following table
shows the pro forma effects of applying SFAS No. 142 to fiscal years 2001 and
2000.
February 2, February 3,
2002 2001
----------- -----------
Goodwill amortization
Pretax $ 313 $ 313
After tax 191 191
Net loss
As reported $(3,843) $(13,034)
Add back goodwill amortization 191 191
--------- ---------
Pro forma $(3,652) $(12,843)
========= =========
Net loss per basic and diluted share
As reported $(0.42) $(1.43)
Add back goodwill amortization 0.02 0.02
--------- ---------
Pro forma $(0.40) $(1.41)
========= =========
Prior to the adoption of SFAS No. 142, the Company evaluated the
potential impairment of goodwill on an ongoing basis by comparing the book
value of such assets to the sum of the undiscounted expected future cash flows
of the acquired businesses over the remaining amortization period of the asset.
G. INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The Company assesses the recoverability of its deferred tax
assets in accordance with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). In accordance
with that standard, the Company recorded a full valuation allowance for its net
deferred tax assets as of December 31, 2002. See note 6 to Consolidated
Financial Statements for additional information regarding income taxes.
H. ADVERTISING
The Company expenses advertising costs as incurred. Advertising expense
was $7,418, $7,164, and $6,245, for the eleven months ended December 31, 2002
and fiscal years ended February 2, 2002, and February 3, 2001, respectively.
I. FISCAL YEAR
The Company has elected to change its fiscal year end to December 31
effective for the fiscal year 2002. The change in fiscal year end provided
significant cash flow benefits by allowing the Company to take advantage of
expanded tax net operating loss carry-back provisions allowed in the Job
Creation and Worker Assistance Act of 2002. Fiscal years 2001 and 2000
followed the reporting calendar as published by the National Retail Federation
and are defined as the fiscal years ended February 2, 2002, and February 3,
2001, respectively.
J. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, as well as the disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual future results could differ from those estimates.
K. RECLASSIFICATIONS
Certain reclassifications have been made to financial data reported in
prior periods in order to conform to the fiscal 2002 presentation.
L. REVENUE RECOGNITION
Revenue from merchandise sales is recognized when the related goods are
sold directly to the consumer through the Company's retail chain of stores.
M. FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, notes and other
receivables, accounts payable, and accrued expenses are considered to
approximate their fair value due to their short maturity. The interest rates on
debt instruments and notes receivable are considered to approximate market
rates, and accordingly, their cost is reflective of fair value.
N. ADOPTION OF NEW ACCOUNTING STANDARDS
In 2002, the Company early adopted Statement of Financial Accounting
Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13, and Technical Corrections, (SFAS No.145). 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 to other expenses, net on the Consolidated
Statements of Operations in the amount of $395 for the fiscal year ended
February 2, 2002.
O. IMPAIRMENT OF LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, (SFAS No. 144) requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted expected future cash
flow estimated to be generated by those assets are less than the assets'
carrying amount. The Company's policy is to evaluate long-lived assets for
impairment at a store level for retail operations.
P. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board issued
Statement No. 143, Accounting for Asset Retirement Obligations, (SFAS No. 143).
SFAS No. 143 addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS No. 143 is effective for fiscal years beginning
after June 14, 2002. The Company has reviewed the provisions of SFAS No. 143,
and believes that upon adoption, it will not have a material impact on its
financial position, results of operations or cash flow.
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. Management believes that
upon adoption of this new standard, it will not have a material impact on its
financial position, results of operations or cash flow.
In December 2002, the Financial Accounting Standards Board issued
Statement No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure, (SFAS No. 148). SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. SFAS No 148 will also require improved disclosure of
comparable information on accounting methods used to value such compensation.
SFAS No. 148 is effective for fiscal years beginning after December 15, 2002.
The Company has reviewed the provisions of SFAS No. 148 and believes that its
adoption will not have a material impact on its financial position, results of
operations or cash flow.
The Financial Accounting Standards Board's Emerging Issues Task Force
released a consensus ruling in November 2002 for application in 2003 that
requires companies to classify amounts received from vendors as a reduction of
product cost unless certain criteria can be met. One such requirement is that
the amounts received from vendors represent a reimbursement of costs incurred
by the company in selling the vendor's products. A change in the accounting for
cooperative advertising arrangements could increase gross profit and increase
advertising expense. It could also reduce product cost in inventory and
thereby impact the timing of recognition through cost of sales. The Company
does not expect that this ruling will materially impact its financial position,
results of operations or cash flow.
(2) PROPERTY AND EQUIPMENT
The major classes of property and equipment consist of the following:
DECEMBER 31, FEBRUARY 2,
2002 2002
----------- -----------
Furniture & Equipment .................. $18,451 $18,666
Leasehold improvements ................. 18,949 19,761
Construction in Progress ............... 112 54
------- -------
37,512 38,481
Less accumulated depreciation .......... 19,027 16,195
------- -------
$18,485 $22,286
======= =======
(3) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
December 31, February 2,
2002 2002
----------- ----------
Accrued sales tax $2,553 $1,065
Accrued payroll 2,255 2,060
Accrued insurance 1,970 1,025
Costs related to sale of Wholesale Division - 3,266
All other 2,477 1,499
------ ------
Total accrued expenses and other
current liabilities $9,255 $8,915
====== ======
(4) LONG-TERM DEBT
The Company's long-term debt as of December 31, 2002, and February 2, 2002
consisted of the following:
DECEMBER 31, FEBRUARY 2,
2002 2002
----------- -----------
Term debt.............................. $ - $ 9,100
Less: current portion.................. - (3,017)
------- -------
$ - $ 6,083
======= =======
On February 3, and February 5, 2002, the Company paid off its term loans'
balances of $8,100 and $1,000, respectively. In connection with the repayment
of the $1,000 loan, a previously reported warrant for 2.5% of the Company's
outstanding shares was extinguished. On February 11, 2002, the Company reduced
the borrowing limit of its revolving credit facility from $70,000 to $30,000,
and modified certain covenants. In November 2002 certain other covenants were
modified. Availability on the revolving credit facility is dependent on 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 revolving credit facility also contains a "deemed waiver"
which waives any covenant violations as long as the Company maintains
availability in excess of $10,000 for a consecutive sixty-day period subsequent
to any violation date.
The Company was not in compliance with certain covenants as of December 31,
2002; however, due to a "deemed Waiver" provision in the Agreement which waives
any covenant failure as long as the Company maintains availability in excess of
$10 million for a consecutive 60-day period subsequent to any such date, the
Company is not in default under the Credit Facility. At December 31, 2002,
the Company had availability under the formula established in the revolving
credit facility of $19,380, but because of the provision referenced above net
availability was $9,380. As of December 31, 2002, the Company had no
borrowings under the facility.
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. 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. These charges are reported in other expense on the
Consolidated Statements of Operations.
(5) RELATED PARTY TRANSACTIONS
As of February 2, 2002 tax loans to certain key executives relating to
stock issued in lieu of compensation reductions and to former shareholders of
the Company in payment of indebtedness at the time of the Company's Initial
Public Offering totaled $90. Such amounts include accrued interest of $13 at a
rate of 6.6 percent. During fiscal 2002, all remaining loans were paid off in
full via cash settlements.
Prior to the sale of the Wholesale Division, the Company leased an office
and warehouse facility located in Solon, Ohio, from the Aurora Road Realty
Development Company, a partnership 46 percent owned by two former key
executives and current members of the Board of Directors. Pursuant to the
lease agreement between the parties, the Company made rent payments totaling
$1,930 for fiscal years 2001 and 2000, at rental rates which approximate fair
value.
The Company's warehouse in South Plainfield, New Jersey is leased from a
limited liability company which is 41% owned by two former key executives and
current members of the Board of Directors. Pursuant to the lease agreement
between the parties, the Company made rent payments totaling $1,795, $1,941,
and $2,080, for the eleven months ended December 31, 2002 and fiscal years
ended February 2, 2002, and February 3, 2001, respectively, at rental rates
which approximate fair value.
On February 11, 2002, the Company sold its Wholesale Division to a group
including two former key executives and current members of the Board of
Directors noted above (see note 10). As part of this transaction, the tax loans
due from these executives were included in the net assets sold. The amount
outstanding under these was loans was $2,038, at February 2, 2002. During the
eleven months ended December 31, 2002, the Company purchased goods and services
totaling $2,586 from its former Wholesale Division.
#
ODD JOB STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(6) INCOME TAXES
Income tax expense (benefit) attributable to income from continuing
operations is as follows:
FISCAL YEAR ENDED
---------------------------------------
DECEMBER 31, FEBRUARY 2, FEBRUARY 3,
2002 2002 2001
----------- ----------- -----------
Current federal $(4,239) $(2,309) $(2,625)
State and local - 65 105
Deferred taxes 9,430 498 (5,274)
-------- -------- --------
Total income tax expense
(benefit) from continuing
operations $ 5,191 $(1,746) $(7,794)
======== ======== ========
Total income tax expense (benefit) was recorded as follows:
FISCAL YEAR ENDED
---------------------------------------
DECEMBER 31, FEBRUARY 2, FEBRUARY 3,
2002 2002 2001
----------- ----------- -----------
Loss from continuing operations $5,191 $(1,746) $(7,794)
Loss from discontinued operations - (711) (540)
------ -------- ---------
Total income tax expense
(benefit) $5,191 $(2,457) $(8,334)
====== ======== ========
A reconciliation of the federal statutory rate to the Company's
effective tax rate for continuing operations is as follows:
FISCAL YEAR ENDED
---------------------------------------
DECEMBER 31, FEBRUARY 2, FEBRUARY 3,
2002 2002 2001
----------- ----------- -----------
Federal statutory rate (35.0)% (35.0)% (35.0)%
State and local taxes,
net of federal benefit - (4.0)% (4.7)%
Other - - 0.7 %
Deferred tax valuation allowance 93.5% - -
------- ------- -------
Total income tax
expense (benefit) 58.5% (39.0)% (39.0)%
======= ======= =======
The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
#
ODD JOB STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, FEBRUARY 2,
2002 2002
----------- -----------
Current deferred tax assets
Inventory capitalization and reserve $ 1,184 $ 2,065
Accrued expenses 248 3,515
Other 466 32
------ -------
Total current deferred tax assets 1,898 5,612
------ -------
Noncurrent deferred tax assets
Equipment, furniture, and leasehold
improvements basis differences 2,360 1,461
Accrued lease obligations 1,007 2,034
Net operating loss carryforward-state 3,453 1,553
Federal tax credit carryforwards 997 -
Goodwill 1,766
Other 396 -
------ -------
Total noncurrent deferred tax assets 9,879 5,048
------ -------
Total gross deferred tax assets 11,777 10,660
Noncurrent deferred tax liabilities
Goodwill - (1,230)
Deferred tax asset valuation allowance (11,777) -
-------- -------
Net deferred tax asset $ - $ 9,430
======== =======
At December 31, 2002, state net operating losses will be carried
forward to offset state taxable income in future years. The loss carryforward
period varies by state, but will expire in a range of six to 21 years.
A valuation allowance is established to reduce the deferred tax asset
if it is more likely than not that the related tax benefit will not be
realized. Due to its recent operating losses, the Company believes it is more
likely than not that these deferred tax assets will not be utilized in the
future, and therefore recorded the valuation allowance of $11,777 at December
31, 2002, of which $9,430 relates to deferred tax assets existing at the
beginning of the year. No valuation allowance was established as of February
2, 2002.
(7) COMMITMENTS AND CONTINGENCIES
A. LEASES
The Company is obligated for office, warehouse and retail space under
operating lease arrangements which expire at various dates through fiscal 2022.
Some of these leases are subject to certain escalation clauses based on real
estate taxes and other occupancy expense, and several leases provide for
additional rent based on a percentage of sales. The Company amortizes its
lease obligations using the straight lined method over the life of the lease.
The unamortized lease balances are reported as other non-current liabilities on
its Consolidated Balance Sheets.
At December 31, 2002, minimum annual rental commitments under
noncancellable leases for the Company are as follows, for the fiscal years
ending:
2003........................................................ $15,996
2004........................................................ 15,347
2005........................................................ 14,328
2006........................................................ 13,174
2007........................................................ 10,923
2008 and thereafter......................................... 18,608
-------
$88,376
=======
Rent expense for all leases for the eleven months ended December
31, 2002, and the fiscal years ended February 2, 2002, and February 3, 2001,
was $17,166, $18,471, and $20,467, respectively. These amounts include
contingent rentals of $132, $135, and $234, respectively.
B. LETTERS OF CREDIT
At December 31, 2002, and February 2, 2002, the Company had outstanding
letters of credit issued primarily for import purchases from various parties,
aggregating $3,886 and $2,802, respectively.
C. CONTINGENT CONSIDERATION
In connection with prior store acquisitions, the Company was obligated
to make additional payments annually to a maximum of $675 and $275, based on
the achievement of store's profits, as defined. This arrangement expired on
December 31, 2002 with no amounts having been paid under these agreements.
D. LITIGATION
The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business. The Company believes that the amount
of any ultimate liability with respect to all actions will not have a material
adverse effect on the Company's financial condition, liquidity or results of
operations.
(8) RETIREMENT AND SAVINGS PLAN
The Company maintains separate defined contribution plans under Section
401(k) of the Internal Revenue Code, for its non-union and union employees who
meet certain age and service requirements. In early fiscal 1998, the Company
amended its Section 401(k) plan covering non-union employees. The Company's
contribution for the non-union plan is equal to 25 percent of employee
contributions up to three percent of employee compensation, with the Company's
contributions vesting ratably over five years. Contributions to these plans by
the Company were $51, $67, and $69 for the eleven months ended
December 31, 2002 and fiscal years ended February 2, 2002, and February 3,
2001, respectively.
(9) COMPENSATORY PLANS
The Mazel Stores, Inc. 1996 Stock Option Plan ("Stock Option Plan"), as
amended, provides for issuance of 2,500,000 stock options ("Options") to
acquire the common stock of the Company. Pursuant to the provisions of the
Stock Option Plan, employees of the Company may be granted options, including
both incentive stock options and nonqualified stock options ("NQSO").
Consultants may receive only NQSO under the Stock Option Plan. Non-employee
directors automatically receive, upon the date they first become Directors, a
grant of Options to purchase 15,000 shares of common stock of the Company. The
purchase price of a share of common stock pursuant to an Option shall not be
less than the fair market value at the grant date. The Options typically vest
in five equal installments of 20 percent of the grant, and have a term of 10
years.
The Company applies the intrinsic value method to account for stock
based compensation. Accordingly, no compensation expense has been recognized.
The following table provides net income and net income per share reduced to the
pro forma amounts calculating compensation expense consistent with the fair
value method.
December 31, February 2, February 3,
2002 2002 2001
------------ ----------- -----------
Net loss
As reported $ (23,504) $ (3,843) $ (13,034)
Pro forma (24,708) (4,122) (13,279)
Net loss per diluted share
As reported (2.60) (0.42) (1.43)
Pro forma (2.73) (0.45) (1.45)
The fair value of each Option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in the eleven months ended December 31,
2002 and fiscal years ended February 2, 2002, and February 3, 2001.
December 31, February 2, February 3,
2002 2002 2001
------------ ----------- -----------
Expected life of option 7.7 yrs 7.7 yrs 7.7 yrs
Risk-free interest rate 4.8% 5.0% 5.1%
Expected volatility of stock 71% 100% 75%
Expected dividend yield on stock 0% 0% 0%
The above results may not be representative of the effect of the fair value
method of net income on future years.
The following is a summary of option activity for the eleven months ended
December 31, 2002 and fiscal years ended February 2, 2002, and February 3,
2001, and the related weighted average exercise price:
December 31, February 2, February 2,
2002 2002 2001
-------------------- ------------------- -------------------
Weighted Weighted Weighted
Avg. Avg. Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- ---------- --------
Outstanding at the
beginning of the
fiscal year 1,827,550 $ 7.71 1,608,005 $11.12 1,1157,780 $14.30
Granted at market 438,700 3.38 655,000 2.66 550,100 4.94
Exercised (170,812) 3.09 - - - -
Expired or forfeited (575,538) 12.13 (435,455) 10.53 (99,875) 13.70
--------- ----- ---------- ------ ----------- ------
Outstanding at the
end of the fiscal
year 1,519,900 $5.30 1,827,550 $ 7.71 1,608,005 $11.12
========= ===== ========= ====== ========= ======
December 31, February 2, February 2,
2002 2002 2001
------------- ------------ -----------
Options available for
grant at the end of the
fiscal year 980,100 - -
Weighted average fair
value of options granted
during the year $2.75 $2.40 $1.30
#
ODD JOB STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Options Outstanding Options Exercisable
---------------------------------- ---------------------
Weighted Weighted Weighted
Year Range of Number of Avg. Avg. Number of Avg.
of Exercise Options Remaining Exercise Options Exercise
Grant Prices Outstanding Life Price Exercisable Price
1996 $16.00 118,500 3.91 $16.00 118,500 $16.00
1997 $14.00-21.25 28,000 4.70 17.15 28,000 17.15
1998 $10.00-17.25 84,550 5.47 12.96 67,640 12.96
1999 $9.00-9.63 131,900 6.47 9.08 79,140 9.08
2000 $2.50-9.25 118,250 7.77 3.10 68,850 2.91
2001 $1.67-4.50 665,000 8.42 2.66 133,000 2.66
2002 $2.19-3.50 373,700 9.22 3.36 - -
---------- ------ ------ ------- ------
1,519,900 6.54 $ 5.30 495,130 $9.14
========== ====== ====== ======= ======
(10) 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.
MZ has paid the Company $26,218 for the purchase of the assets of the
Wholesale Division, based on the agreed net value of the assets of the
Division. Additional $300 of balance sheet adjustments are being disputed,
however the parties expect to resolve this matter through arbitration.
As a result of the sale, the Company recorded an after-tax loss $3,665, or
$0.40 per diluted share, and reflected this business as a discontinued
operation in fiscal year 2001. The loss on the sale included closing costs
related to the transaction such as severance costs, professional fees, and the
write-down of long-lived assets, as well as a provision for the operating loss
of the discontinued business from February 3, 2002 through February 11, 2002
(the disposal date). At February 2, 2002, $3,266 was included in accrued
expenses and other current liabilities related to closing costs on the disposal
of the Wholesale Division. The Consolidated Financial Statements and related
notes for the period ended February 3, 2001 have been reclassified, where
applicable, to reflect the Wholesale Division as a discontinued operation.
Operating results of discontinued operations (after elimination of intercompany
transactions) for fiscal years 2001 and 2000 were as follows:
FEBRUARY 2, FEBRUARY 3,
2002 2001
----------- -----------
Net Sales $72,343 $88,812
Cost of Sales 52,932 64,677
Selling, General and Administrative 14,286 15,687
Special Charge - 8,403
Interest Expense 938 1,248
------- -------
Income (loss) before income taxes 4,187 (1,383)
Income tax expense (benefit) 1,633 (540)
------- -------
Income (loss) from discontinued
Wholesale Division 2,554 (843)
Loss on disposal of discontinued
Wholesale Division (3,665) -
------- -------
Loss from discontinued operations $(1,111) $ (843)
======== ========
Net loss per basic and diluted
share from discontinued operations $ (0.12) $ (0.09)
======== ========
The net assets of the Wholesale Division as of February 2, 2002, were as
follows:
FEBRUARY 2,
2002
-----------
Assets
Trade receivables, net $ 7,944
Inventories, net 21,138
Prepaid expenses 506
Property and equipment 538
Notes and other receivables 1,970
Other assets 617
-------
Total assets $32,713
-------
Liabilities
Accounts payable $ 5,093
Accrued expenses 1,402
-------
Total liabilities 6,495
-------
Net assets of discontinued operations $26,218
=======
#
ODD JOB STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(11) INVESTMENT IN VCM, LTD.
In 1997, the Company commenced the operation of VCM, Ltd. ("VCM"), a 50
percent owned joint venture with the Value City Department Stores chain
("VCDS"). 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 net
sales. On February 2, 2002, the parties reached an agreement to terminate the
joint venture.
Under the terms of the termination agreement, VCDS paid the Company
$8,375 in consideration of the termination of it's 50 percent ownership rights
in the joint venture. The Company also recorded a $650 loss during the fourth
quarter of fiscal year 2001 as a result of this termination. The Company's 50%
share of VCM's net loss totaled $398 and $240, and the associated management
fee revenue, within selling, general and administrative costs, totaled $4,085,
and $4,206, for fiscal years 2001 and 2000, respectively.
(12) EARNINGS PER SHARE
Basic earnings per common share are computed using net income available to
common shareholders divided by the weighted average number of common shares
outstanding. For computation of diluted earnings per share, the weighted
average number of common shares outstanding is increased to give effect to
stock options considered to be common stock equivalents. The following table
shows the amounts used in computing earnings per share for the eleven months
ended December 31, 2002 and fiscal years ended February 2, 2002, and February
3, 2001:
DECEMBER 31, FEBRUARY 2, FEBRUARY 3,
2002 2002 2001
----------- ----------- -----------
Numerator:
Net loss available
to common shareholders $ (23,504) $ (3,843) $ (13,034)
Denominator:
Basic weighted average
Shares 9,043,900 9,121,000 9,141,800
Effect of dilutive stock
options - - -
---------- ---------- ----------
Diluted weighted
average shares 9,043,900 9,121,000 9,141,800
========== ========== ==========
Basic net income (loss)
per share $ (2.60) $ (0.42) $ (1.43)
========== ========== ==========
Diluted net income (loss)
per share $ (2.60) $ (0.42) $ (1.43)
========== ========== ==========
The effect of incremental shares from stock options (see note 9) of
10,000, 16,400, and 21,700 at December 31, 2002, February 2, 2002, and February
3, 2001, respectively, have been excluded from diluted weighted average shares,
as the net loss for the related periods would cause the incremental shares to
be antidilutive.
(13) SPECIAL CHARGE
In fiscal year 2000, the Company's Board of Directors adopted a strategic
plan to focus the operations of the Company on increasing its return on
invested assets. The Company identified the increase of inventory turns as a
key facet of that initiative and to that end has realigned its targeted
inventory by department to include new categories and to discontinue other
categories or groups of items that do not meet its productivity standards in
both the retail and wholesale operation. As a result, the Company recorded a
special pre-tax charge totaling $5,446 ($3,322 after tax, or $0.36 per share).
Of the charge, $4,550 related to inventory realignment and was recorded to cost
of sales, and $996 related to lease terminations and the write-down of other
assets was recorded to selling, general and administrative expense. An
additional charge of $8,403 for inventory realignment charges, the write-off of
bad debts, and professional fees incurred was recorded by the wholesale segment
disposed of on February 11, 2002 (see note 10). As of December 31, 2002 all
amounts related to these special charges have been paid.
(14) UNAUDITED QUARTERLY FINANCIAL DATA
The following table represents certain unaudited financial information for
the periods indicated:
#
ODD JOB STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FIRST SECOND THIRD FOURTH(1)
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
Eleven Months Ended
December 31, 2002
Net sales $ 54,702 $57,198 $57,040 $64,850
------- ------- ------- --------
Gross profit $ 21,631 $22,403 $21,898 $22,110
------- ------- ------- --------
Loss from continuing operations
before change in accounting
principle (2,497) (1,294) (2,049) (8,217)
Change in accounting principle (9,447) - - -
-------- ------- ------- --------
Net loss $(11,944) $(1,294) $(2,049) $(8,217)
======== ======= ======= ========
Net loss per share - basic and diluted:
Continuing Operations $ (0.29) $ (0.14) $ (0.22) $ (0.91)
Change in accounting
principle (1.04) - - -
------- ------- ------- --------
Net loss $ (1.33) $ (0.14) $ (0.22) $ (0.91)
======= ======= ======= ========
Year Ended February 2, 2002 (2)
Net sales $54,915 $60,135 $57,394 $85,705
------- ------- ------- -------
Gross profit $20,865 $22,590 $22,799 $33,680
------- ------- ------- -------
Income (loss) from continuing
operations (2,670) (2,181) (2,804) 4,923
Income (loss) from discontinued
operations 1,068 503 1,040 (3,722)
------- ------- ------- --------
Net income (loss) $(1,602) $(1,678) $(1,764) $ 1,201
======= ======= ======= ========
Net income (loss) per share -- basic and diluted:
Continuing Operations..... $ (0.29) $ (0.24) $ (0.31) $ 0.54
Discontinued Operations... 0.12 0.05 0.11 (0.41)
------- ------- ------- -------
Net income (loss)......... $ (0.17) $ (0.19) $ (0.20) $ 0.13
======= ======= ======= =======
(1) The fourth quarter of fiscal year 2002 is an approximate two-month period.
(2) Income (loss) from continuing operations has been restated for the adoption
of SFAS No. 145. See note 1-N. for details to this adoption.
#
ODD JOB STORES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
Balance at Charge to Charge to Balance at
Beginning of Costs and Other End of
Description Period Expense Accounts Deductions Period
- ------------------ ------------ --------- --------- ---------- ----------
Inventory Reserve
Fiscal 2002 $1,165 $ - $ - $ 219 $ 946
Fiscal 2001 4,310 - - 3,145 1,165
Fiscal 2000 510 3,800 - - 4,310
#
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 25, 2003.
ODD JOB STORES, INC.
By: /s/ STEVE FURNER
-----------------------
Steve Furner
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on March 25, 2003.
SIGNATURES
----------
/s/ STEVE FURNER Chief Executive Officer
- -------------------------- and Director
Steve Furner
/s/ EDWARD CORNELL Chief Financial Officer
- -------------------------
Edward Cornell
DIRECTORS
---------
/s/ CHARLES BILEZIKIAN /s/ ROBERT HORNE
- --------------------------------- --------------------------------
Charles Bilezikian Robert Horne
/s/ JACOB KOVAL /s/ MARK MILLER
- --------------------------------- ---------------------------------
Jacob Koval Mark Miller
/s/ NED L. SHERWOOD /s/ REUVEN DESSLER
- --------------------------------- --------------------------------
Ned L. Sherwood Reuven Dessler
/s/ JOSEPH NUSIM /s/ PHILIP CARTER
- --------------------------------- ---------------------------------
Joseph Nusim Philip Carter
#
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, Chief Executive Officer certify that:
(1) I have reviewed this annual report on Form 10-K of Odd Job Stores, Inc.;
(2) Based on my knowledge, this annual 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 annual
report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation Date"); and
c. Presented in this annual 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
annual 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: March 25, 2003 By: /s/ Steve Furner
-----------------------
Steve Furner,
Chief Executive Officer
#
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
(SECTION 906 OF THE SATBANES-OXLEY ACT OF 2002)
I, Steve Furner, the Chief Executive Officer of Odd Job Stores, Inc. (the
"Company"), certify that to the best of my knowledge, based upon a review of
the Annual Report on Form 10-K for the eleven months ended December 31, 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: March 25, 2003 By: /s/Steve Furner
-----------------------
Steve Furner,
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, Chief Financial Officer certify that:
(1) I have reviewed this annual report on Form 10-K of Odd Job Stores, Inc.;
(2) Based on my knowledge, this annual 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 annual
report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation Date"); and
c. Presented in this annual 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
annual 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: March 25, 2003 By: /s/ Edward Cornell
------------------------------
Edward Cornell
Executive Vice President and
Chief Financial Officer
#
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
(SECTION 906 OF THE SARBANES-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 Annual Report on Form 10-K for the eleven months ended December 31, 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: March 25, 2003 By: /s/ Edward Cornell
-----------------------------
Edward Cornell
Executive Vice President and
Chief Financial Officer
#
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
2.1 Asset Purchase Agreement between Registrant, as seller, and
MZ Wholesale Acquisition, LLC, dated February 11, 2002**
3.1 Amended and Restated Articles of Incorporation*
3.2 Amendment to Amended and Restated Articles of Incorporation
3.3 Amended and Restated Code of Regulations*
4.1 Amended and Restated Loan and Security Agreement dated
February 11, 2002 by and among the Registrant and
subsidiaries and IBJ Whitehall Business Credit Corp., as
Administrative Agent for lenders.**
4.2 Third Amendment to Amended and Restated Loan and Security
Agreement###
10.1 Employment Agreement dated May 7, 2001 between Registrant
and Peter J. Hayes.***
10.2 Operating Agreement of MZ Put JV, LLC, dated February 11,
2002.**
10.3 Standstill Agreement dated February 11, 2002, by and among
Reuven Dessler, Jacob Koval, Jay Schottenstein, ZS Fund
L.P. and Registrant.**
1.1 Settlement and Termination Agreement, dated February 2,
2002 between Odd Job Trading Corp. and GB Retailers, Inc.
(An affiliate of Value City Department Stores).****
10.5 Employment Letter dated October 31, 2001 for Edward
Cornell.#
10.6 South Plainfield, New Jersey Facility Lease.*****
10.7 1996 Stock Option Plan, as amended
10.8 Agreement, dated May 3, 2002 between Registrant and Jerry
Sommers#
10.9 Agreement, dated June 10, 2002 between Registrant and
Brady Churches##
10.10 Interim Services Agreement, as amended between MZ Wholesale
and Registrant
21.0 List of Subsidiaries
23.0 Consent of Independent Auditors
24.1 Powers of Attorney
- ---------------
* Incorporated by reference to exhibit included in the
Registrant's Registration Statement on Form S-1 (File #333-
11739) as amended.
** Incorporated by reference to an exhibit included in the Current
Report on Form 8-K dated February 11, 2002.
*** Incorporated by reference to an exhibit included in the Quarterly
Report on Form 10-Q for the quarter ended May 5, 2001.
**** Incorporated by reference to an exhibit included in the Current Report on
Form 8-K dated February 2, 2002.
***** Incorporated by reference to an exhibit included in the Annual
Report on Form 10-K for the fiscal year ended January 30, 1999.
# Incorporated by reference to an exhibit included in the Annual Report on
From 10-K for the fiscal year ended February 2, 2002
## Incorporated by reference to an exhibit included in the Quarterly Report
on Form 10-Q for the fiscal quarter ended May 4, 2002
### Incorporated by reference to an exhibit included in the Quarterly Report
on Form 10-Q for the fiscal quarter ended November 2, 2002
#