UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 000-23157
A.C. MOORE ARTS & CRAFTS, INC. (Exact name of
--------------------------------------------------------------------------------
registrant as specified in charter)
-------------------------------- -----------------------
Pennsylvania 22-3527763
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 University Court, Blackwood, NJ 08012
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(Address of principal executive offices)
(Zip Code)
(856) 228-6700
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at July 28, 2003
------------------------------------ --------------------------------
Common Stock, no par value 19,244,207
A.C. MOORE ARTS & CRAFTS, INC.
TABLE OF CONTENTS
Page
Number
PART I: FINANCIAL INFORMATION --------
Item 1.Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002.......................3
Consolidated Statements of Income for the three and six month periods
ended June 30, 2003 and 2002................................................................4
Consolidated Statements of Cash Flows for the three and six month periods
ended June 30, 2003 and 2002................................................................5
Notes to Consolidated Financial Statements..................................................6
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................................................7
Item 3.Quantitative and Qualitative Disclosures About Market Risk...................................12
Item 4.Controls and Procedures......................................................................12
PART II:OTHER INFORMATION
Item 1. Legal Proceedings..........................................................................13
Item 2. Changes in Securities and Use of Proceeds..................................................13
Item 3. Defaults Upon Senior Securities............................................................13
Item 4. Submission of Matters to a Vote of Security Holders........................................13
Item 5. Other Information..........................................................................13
Item 6. Exhibits and Reports on Form 8-K...........................................................14
SIGNATURES ..................................................................................................15
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
A. C. MOORE ARTS & CRAFTS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
2003 2002
----------- ------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $36,503 $61,584
Inventories 108,883 102,497
Prepaid expenses and other current assets 4,589 2,729
--------- ---------
149,975 166,810
Marketable securities 14,189 --
Property and equipment, net 30,459 27,997
Other assets 1,821 1,851
--------- ---------
$196,444 $196,658
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of capital leases $ 1,161 $ 1,342
Trade accounts payable 26,966 24,253
Accrued payroll and payroll taxes 3,376 5,737
Accrued expenses 6,538 8,326
Income taxes payable -- 3,341
--------- ---------
38,041 42,999
--------- ---------
Long-term liabilities:
Capitalized equipment leases, less current portion -- 504
Deferred tax liability 5,850 5,150
Other long-term liabilities 4,292 3,974
--------- ---------
10,142 9,628
--------- ---------
48,183 52,627
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares
authorized, none issued
Common stock, no par value, 40,000,000 shares
authorized, 19,139,665 shares outstanding at June 30, 2003 and
18,806,047 outstanding at December 31, 2002 102,413 99,654
Retained earnings 45,848 44,377
--------- ---------
148,261 144,031
--------- ---------
$196,444 $196,658
========= =========
See accompanying notes to financial statements
3
A. C. MOORE ARTS & CRAFTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ----------- ------------ -----------
Net sales $ 93,686 $ 82,866 $ 185,638 $ 168,719
Cost of sales (including buying and distribution costs) 58,893 52,170 117,310 106,332
------------ ----------- ------------ -----------
Gross Margin 34,793 30,696 68,328 62,387
Selling, general and administrative expenses 32,838 29,514 65,424 59,099
Pre-opening expenses 372 384 750 1,038
------------ ----------- ------------ -----------
Income from operations 1,583 798 2,154 2,250
Net interest (income) (118) (187) (227) (176)
------------ ----------- ------------ -----------
Income before income taxes 1,701 985 2,381 2,426
Income tax expense 650 401 910 966
------------ ----------- ------------ -----------
Net income $ 1,051 $ 584 $ 1,471 $ 1,460
============ =========== ============ ===========
Basic net income per share $ 0.06 $ 0.03 $ 0.08 $ 0.09
============ =========== ============ ===========
Weighted average shares outstanding 19,033,158 18,682,222 18,939,205 17,083,448
============ =========== ============ ===========
Diluted net income per share $ 0.05 $ 0.03 $ 0.07 $ 0.08
============ =========== ============ ===========
Weighted average shares outstanding plus impact of
stock options 19,762,411 19,779,186 19,620,269 18,134,658
============ =========== ============ ===========
See accompanying notes to financial statements
4
A.C. MOORE ARTS & CRAFTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Six Months Ended
June 30,
-----------------------------
2003 2002
--------- ---------
Cash flows from operating activities:
Net Income $ 1,471 $ 1,460
Adjustments to reconcile net income to net cash (used in) operating activities:
Depreciation and amortization 3,297 2,968
Provision for deferred income taxes 700 --
Changes in assets and liabilities:
Inventories (6,386) (8,799)
Prepaid expenses and other current assets (1,860) (774)
Accounts payable, accrued payroll, payroll taxes
and accrued expenses (1,436) (2,870)
Income taxes payable (2,141) (3,680)
Other long-term liabilities 318 350
Other 30 16
--------- ---------
Net cash (used in) operating activities (6,007) (11,329)
--------- ---------
Cash flows from investing activities:
Capital expenditures (5,759) (5,008)
Investment in marketable securities (14,189) --
--------- ---------
Cash flows (used in) investing activities (19,948) (5,008)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of shares -- 52,130
Proceeds from line of credit -- 2,000
Repayment of line of credit -- (2,000)
Exercise of stock options 1,559 1,151
Repayment of capital leases (685) (644)
--------- ---------
Net cash provided by financing activities 874 52,637
--------- ---------
Net increase (decrease) in cash (25,081) 36,300
Cash and cash equivalents at beginning of period 61,584 10,818
--------- ---------
Cash and cash equivalents at end of period $ 36,503 $ 47,118
========= =========
See accompanying notes to financial statements
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The consolidated financial statements included herein include the accounts of
A.C. Moore Arts & Crafts, Inc. and its wholly owned subsidiaries (collectively
the "Company"). The Company is a chain of 74 retail stores selling arts and
crafts merchandise. The stores are located throughout the eastern United States.
These financial statements have been prepared by management without audit and
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2002. Due to the seasonality of the Company's business, the
results for the interim periods are not necessarily indicative of the results
for the year. The accompanying consolidated financial statements reflect, in the
opinion of management, all adjustments necessary for a fair presentation of the
interim financial statements. In the opinion of management, all such adjustments
are of a normal and recurring nature.
(2) Common Stock and Earnings per Share
On June 25, 2002, the Company's Board of Directors declared a two-for-one stock
split to shareholders of record as of the close of business on July 15, 2002
payable on July 31, 2002. All references to the number of shares of common
stock, per share prices and earnings per share amounts in the consolidated
financial statements and accompanying notes included in this Quarterly Report on
Form 10-Q have been adjusted to reflect the split on a retroactive basis.
(3) Management Estimates
The preparation of these consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of expenses during
the reported period and related disclosures. Significant estimates made as of
and for the three and six month periods ended June 30, 2003 and 2002 include
provisions for shrinkage, capitalized buying, warehousing and distribution costs
related to inventory, and markdowns of merchandise inventories. Actual results
could differ materially from those estimates.
(4) Marketable Securities
Marketable securities represent investments in municipal bonds with maturities
of twelve months or longer from time of purchase. They are classified as
held-to-maturity and recorded at amortized cost.
(5) Recent Accounting Pronouncements
In November 2002, the Emerging Issues Task Force reached consensus on Issue
02-16, Accounting by a Customer (including a Reseller) for Cash Consideration
Received from a Vendor. EITF Issue 02-16 addresses the accounting for cash
consideration received by a customer from a vendor (e.g., slotting fees,
cooperative advertising payments, buydowns) and rebates or refunds from a vendor
that is payable only if the customer completes a specified cumulative level of
purchases or remains a customer for a specified time period. The EITF is
effective for agreements modified or entered into after January 1, 2003. We are
currently evaluating the impact of EITF Issue 02-16, and have not determined
whether or not the adoption of the provisions of EITF Issue 02-16 will have a
material impact on our consolidated operating results or financial position.
6
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure an amendment of FASB Statement No.
123". SFAS 148 amends SFAS 123 to provide alternative methods of transition for
an entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation. It also amends the disclosure provisions
of SFAS 123 to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation. It also amends APB Opinion No. 28, "Interim Financial
Reporting", to require disclosure about those effects in interim financial
information. The Company adopted the disclosure requirements of SFAS 148 for the
fiscal year ended December 31, 2002.
The Company accounts for its employee stock options using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25). Compensation cost for stock options is
measured as the excess of the quoted market price of the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock.
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant date for awards under those
plans, consistent with the requirements of SFAS No. 123, "Accounting for
Stock-Based Compensation," net income and earnings per share would have been
reduced to the following pro-forma amounts:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ----------- -----------
Net income.................. As reported $ ,051,000 $ 584,000 $ 1,471,000 $ 1,460,000
Compensation cost, net 277,000 139,000 554,000 278,000
Pro forma 774,000 445,000 917,000 1,182,000
Basic earnings per share.... As reported $ .06 $ .03 $ .08 $ .09
Pro forma .04 .02 .05 .07
Diluted earnings per share.. As reported $ .05 $ .03 $ .07 $ .08
Pro forma .04 .02 .05 .07
The pro forma results may not be representative of the effects on reported
operations for future years. The fair value of the options was calculated using
a Black-Scholes options pricing model with the following weighted-average
assumptions: risk-free interest rate of 4.1% for 2002, 5.1% for 2001, 6.3% for
2000 and; no dividend yield; and a weighted average expected life of the options
of seven years. In accordance with the provisions of SFAS No. 123 the expected
stock price volatility was 45.2% for 2002, 48.4% for 2001, and 46.6% for 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis contains certain forward-looking
statements. These forward-looking statements do not constitute historical facts
and involve risks and uncertainties. Actual results could differ materially from
those referred to in the forward-looking statements due to a number of factors,
including, but not limited to, the following: customer demand, the effect of
economic conditions, the impact of adverse weather conditions, the impact of
competitors' locations or pricing, the availability of acceptable real estate
locations for new stores, difficulties with respect to new information system
technologies, supply constraints or difficulties, the effectiveness of
advertising strategies and the impact of the threat of terrorist attacks and
war. For additional information concerning factors that could cause actual
results to differ materially from the information contained herein, reference is
made to the information under the heading "Cautionary Statement Relating to
Forward Looking Statements" in our Annual Report on Form 10-K as filed with the
Securities and Exchange Commission.
7
Due to the importance of our peak selling season, which includes Fall/Halloween,
Thanksgiving and Christmas, the fourth quarter has historically contributed, and
we expect it will continue to contribute, disproportionately to our
profitability for the entire year. As a result, our quarterly results of
operations may fluctuate. In addition, results of a period shorter than a full
year may not be indicative of results expected for the entire year.
Our quarterly results of operations also may fluctuate based upon such factors
as the length of holiday seasons, the date on which holidays fall, the number
and timing of new store openings, the amount of store pre-opening expenses, the
amount of net sales contributed by new and existing stores, the mix of products
sold, the amount of sales returns, the timing and level of markdowns and other
competitive factors.
Results of Operations
The following table sets forth, for the periods indicated, selected statement of
operations data expressed as a percentage of net sales and the number of stores
open at the end of each such period:
Three months ended Six months ended
June 30, June 30,
--------------------- --------------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales.............................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales.......................................... 62.9% 63.0% 63.2% 63.0%
----- ----- ----- -----
Gross margin........................................... 37.1% 37.0% 36.8% 37.0%
Selling, general and administrative expenses........... 35.0% 35.6% 35.2% 35.0%
Store pre-opening expenses............................. 0.4% 0.4% 0.4% 0.6%
----- ----- ----- -----
Income from operation.................................. 1.7% 1.0% 1.2% 1.4%
Net interest (income) expense.......................... (0.1)% (0.2)% (0.1)% (0.1)%
----- ----- ----- -----
Income before income taxes............................. 1.8% 1.2% 1.3% 1.5%
Income tax expense..................................... 0.7% 0.5% 0.5% 0.6%
----- ----- ----- -----
Net income............................................. 1.1% 0.7% 0.8% 0.9%
===== ===== ===== =====
Number of stores open at end of period................. 74 65
Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002
Net Sales. Net sales increased $10.8 million, or 13.1%, to $93.7
million in the three months ended June 30, 2003 from $82.9 million in the
comparable 2002 period. This increase is comprised of (i) net sales of $1.7
million from three new stores opened in 2003, (ii) net sales of $5.8 million
from stores opened in 2002 not included in the comparable store base, and (iii)
a comparable store sales increase of $3.3 million, or 4%. Stores are added to
the comparable store base at the beginning of the fourteenth full month of
operation.
8
Gross Margin. Gross margin is net sales minus the cost of merchandise
and certain distribution and purchasing costs. The gross margin increased to
37.1 % of net sales in the three months ended June 30, 2003 from 37.0% in the
three months ended June 30, 2002.
Selling, General, and Administrative Expenses. Selling, general and
administrative expenses include (a) direct store level expenses, including rent
and related operating costs, payroll, advertising, depreciation and other direct
costs, and (b) corporate level costs not directly associated with or allocable
to cost of sales including executive salaries, accounting and finance, corporate
information systems, office facilities and other corporate expenses. Selling,
general and administrative expenses increased $3.3 million, or 11.3%, in the
three months ended June 30, 2003 to $32.8 million from $29.5 million in the
three months ended June 30, 2002. The increase is principally accountable from
stores opened in 2003 which were not open during 2002 and the stores opened in
2002 not in the comparable store base. As a percentage of sales, selling,
general and administrative costs decreased to 35.0% of net sales in the three
months ended June 30, 2003 from 35.6% of net sales in the three months ended
June 30, 2002. This decrease is primarily due to leveraging store and central
costs from the increase in sales in our comparable store base.
Store Pre-Opening Expenses. We expense store pre-opening expenses as
incurred. Pre-opening expenses for the new store which opened in the second
quarter of 2003 and the two stores which opened in July amounted to $372,000. In
the second quarter of 2002, we incurred store pre-opening expenses of $384,000
related to the two stores opened in that quarter, the two stores which opened in
July and one store which was relocated in July.
Net Interest (Income). In the second quarter of 2003, we had net
interest income of $118,000 compared with net interest income of $187,000 in
2002. The change is due to lower interest rates earned on proceeds from the
proceeds of our sale of shares in March 2002.
Income Taxes. Our effective income tax rate was 38.2% for the second
quarter ended June 30, 2003 and 40.7% for the second quarter ended June 30,
2002. The decrease in the effective tax rate is principally the result of tax
free interest income in 2003.
Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002
Net Sales. Net sales increased $16.9 million, or 10.0%, to $185.6
million in the six months ended June 30, 2003 from $168.7 million in the
comparable 2002 period. This increase is comprised of (i) net sales of $2.3
million from three new stores opened in 2003, (ii) net sales of $13.3 million
from stores opened in 2002 not included in the comparable store base, and (iii)
a comparable store sales increase of $1.3 million, or 1%. Sales were
significantly impacted by severe weather conditions throughout our trading area
in the first quarter.
Gross Margin. The gross margin decreased to 36.8% of net sales in the
six months ended June 30, 2003 from 37.0% in the six months ended June 30, 2002.
The decrease occurred during the first quarter due to more aggressive promotions
in response to the difficult sales environment and to a change in sales mix
resulting from the weather and a later Easter.
Selling, General, and Administrative Expenses. Selling, general and
administrative expenses increased $6.3 million, or 10.7%, in the six months
ended June 30, 2003 to $65.4 million from $59.1 million in the six months ended
June 30, 2002. The increase is principally accountable from stores opened in
2003 which were not open during 2002 and the stores opened in 2002 not in the
comparable store base. These increases were partially offset by a decrease in
net advertising expense from higher vendor co-op advertising allowances compared
to the first quarter of 2002. As a percentage of sales, selling, general and
administrative costs increased to 35.2% of net sales in the six months ended
June 30, 2003 from 35.0% of net sales in the six months ended June 30, 2002.
This increase is primarily due to de-leveraging store and central costs from the
relatively small increase in sales in our comparable store base.
9
Store Pre-Opening Expenses. Pre-opening expenses for the three new
stores opened in the first half of 2003 and the two stores opened in July
amounted to $750,000. In the first half of 2002, we incurred store pre-opening
expenses of $1.0 million related to the four stores opened and the two stores
which opened in July.
Net Interest (Income). In the first half of 2003, we had net interest
income of $227,000 compared with net interest income of $176,000 in 2002. The
change is due to interest earned over the full six months from the proceeds of
our sale of shares in March 2002.
Income Taxes. Our effective income tax rate was 38.2% for the first
half of 2003 and 39.8% for the first half of 2002. The decrease in the effective
tax rate is principally the result of tax free interest income in 2003.
Liquidity and Capital Resources
Our cash is used primarily for working capital to support inventory
requirements and capital expenditures, pre-opening expenses and beginning
inventory for new stores. In recent years, we have financed our operations and
new store openings primarily with cash from operations, the net proceeds we
received from our initial public offering in 1997 and with borrowing under bank
financing agreements. In March 2002 we completed a secondary offering in which
we sold 3,500,000 new post-split shares, with net cash proceeds of $52,130,000.
At June 30, 2003 and December 31, 2002 our working capital was $111.9
million and $123.8 million, respectively. Cash used in operations was $6.0
million for the six months ended June 30, 2003 as a result of an increase in
inventory of $6.4 million to support the new stores, the seasonal reduction of
accounts payable and accrued expenses of $1.4 million and income tax payments of
$2.1 million.
Net cash used in investing activities during the six months ended June
30, 2002 was $19.9 million. This included $14.2 million for investments in
marketable securities with a maturity of over one year and $5.8 million for
capital expenditures. In 2003, we expect to spend approximately $32.0 million on
capital expenditures, which includes approximately $22.0 million for land,
building, equipment and systems for our new distribution center, $7.0 million
for new store openings, and the remainder for remodeling existing stores,
upgrading systems in existing stores, warehouse equipment, and corporate systems
development. The total cost of the new distribution center is estimated to be
between $40.0 and $42.0 million. We expect to finance two-thirds of this project
through long-term debt.
In the year ended December 31, 2002, net cash provided by financing
activities was principally the $52.1 million proceeds from our sale of shares in
March 2002.
The Company currently has a $25.0 million one year line of credit
agreement with First Union National Bank, which expires on July 1, 2004.
Borrowing under this line will bear interest at LIBOR plus 95 basis points. We
believe the cash generated from operations during the year, funds received
through the financing of the new distribution center and available borrowings
under the credit agreement will be sufficient to finance our working capital and
capital expenditure requirements for at least the next 12 months.
10
Recent Accounting Pronouncements
In November 2002, the Emerging Issues Task Force reached consensus on
Issue 02-16, Accounting by a Customer (including a Reseller) for Cash
Consideration Received from a Vendor. EITF Issue 02-16 addresses the accounting
for cash consideration received by a customer from a vendor (e.g., slotting
fees, cooperative advertising payments, buydowns) and rebates or refunds from a
vendor that is payable only if the customer completes a specified cumulative
level of purchases or remains a customer for a specified time period. The EITF
is effective for agreements modified or entered into after January 1, 2003. We
are currently evaluating the impact of EITF Issue 02-16, and have not determined
whether or not the adoption of the provisions of EITF Issue 02-16 will have a
material impact on our consolidated operating results or financial position.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure an amendment of FASB
Statement No. 123". SFAS 148 amends SFAS 123 to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation. It also amends the
disclosure provisions of SFAS 123 to require prominent disclosure about the
effects on reported net income of an entity's accounting policy decisions with
respect to stock-based employee compensation. It also amends APB Opinion No. 28,
"Interim Financial Reporting", to require disclosure about those effects in
interim financial information. The Company adopted the disclosure requirements
of SFAS 148 for the fiscal year ended December 31, 2002 and the interim periods.
General
On June 25, 2002, our Board of Directors approved a two-for-one stock
split to shareholders of record as of the close of business on July 15, 2002.
The shares were distributed on July 31, 2002.
Critical Accounting Policies
Our critical accounting policies relate to merchandise inventories and
advertising costs.
We value our inventories at stores at the lower of cost or market as
determined using the retail inventory method. Because we do not have perpetual
inventory records for inventory in our stores, we perform complete physical
inventories in each of our stores at the end of each year. The actual physical
count of merchandise is made principally by third party inventory counting
service firms. We believe our process results in reasonable estimates of our
retail inventory on hand at year end.
Inventory valuation methods also require certain management estimates
and judgments. These include estimates of net realizable value on product
designated for clearance or on slow moving merchandise. The accuracy of our
estimates can be affected by many factors, some of which are outside of our
control, including changes in economic conditions and consumer buying trends.
Historically, we have not experienced significant differences in our estimates
of recovery compared with actual results. We believe our process results in
reasonable estimates of our inventory each quarter.
The costs incurred for advertising are expensed the first time the
advertising takes place, and are offset by re-imbursements received under
cooperative advertising programs with certain vendors. Co-op advertising funds
are only recognized when we have performed our contractual obligation under a
co-op advertising agreement.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Based on their
evaluation of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days of the
filing date of this Quarterly Report on Form 10-Q, the Company's principal
executive officer and principal financial officer have concluded that the
Company's disclosure controls and procedures are effective to timely alert
management to material information relating to the Company during the period
when its periodic reports are being prepared.
(b) Changes in internal controls. There were no significant changes in
the Company's internal controls or in other factors that could significantly
affect these controls subsequent to the date of the principal executive
officer's and principal financial officer's evaluation referred to above,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
12
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on May 22, 2003. At
the meeting, shareholders voted on the following:
1. To elect two Class A directors to hold office for a
term of three years until their successors are duly
elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers
LLP as the Company's independent auditors for the
fiscal year ending December 31, 2003.
The results of the voting was as follows:
Withhold
For Against Abstain Authority
---------- --------- -------- ----------
William Kaplan 17,424,031 0 0 700,236
John E. (Jack) Parker 17,414,551 0 0 709,716
Ratification of
PricewaterhouseCoopers LLP 18,095,430 26,062 2,775 --
The term of office for each of the following directors continued after
the meeting: Richard J. Bauer, Richard J. Drake, Lawrence H. Fine, Richard
Lesser and Eli J. Segal.
ITEM 5. OTHER INFORMATION
None
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
99.31.1 Certification of Chief Executive Officer pursuant to
Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act").
99.31.2 Certification of Chief Financial Officer pursuant to
Rules 13a-14(a) and 15d-14(a) promulgated under the Exchange Act.
99.32 Certification of the Company's Chief Executive Officer
and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K filed in the quarter ended June 30, 2003:
8-K, Item 9, filed on April 4, 2003 regarding a Company press
release concerning earnings and other information.
8-K, Item 9, filed on April 17, 2003 regarding a Company press
release concerning earnings and other information.
8-K, Item 5, filed on May 1, 2003 regarding the plan of Mr.
Richard Drake under Rule 10b5-1 under the Exchange Act.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A.C. MOORE ARTS & CRAFTS, INC.
Date: July 30, 2003 By: /s/ Leslie H. Gordon
------------------------------------
Leslie H. Gordon
Executive Vice President and Chief
Financial Officer (duly authorized
officer and principal financial
officer)
15