-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rio2XTzPAxkDlgbocEi5MqSm30gp4s4LfDffQUWKrASz8Rr11FVqVQSkF6vrwide iOJ/OfcNMKFDuO9JY2QKEw== 0000931763-97-000971.txt : 19970606 0000931763-97-000971.hdr.sgml : 19970606 ACCESSION NUMBER: 0000931763-97-000971 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970504 FILED AS OF DATE: 19970605 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: K&G MENS CENTER INC CENTRAL INDEX KEY: 0001004526 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 581898817 STATE OF INCORPORATION: GA FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27348 FILM NUMBER: 97619381 BUSINESS ADDRESS: STREET 1: 1750-A ELLSWORTH INDUSTRIAL BLVD CITY: ATLANTA STATE: GA ZIP: 30318 BUSINESS PHONE: 4043517987 MAIL ADDRESS: STREET 1: 1750-A ELLSWORTH INDUSTRIAL BLVD CITY: ATLANTA STATE: GA ZIP: 30318 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 4, 1997 ______________________________________ 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 0-27348 K&G Men's Center, Inc. ________________________________________________________________________________ (Exact name of registrant as specified in its charter) Georgia 58-1898817 ________________________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation Identification Number) or organization) 1225 Chattahoochee Avenue, N.W. 30318 ________________________________________________________________________________ (Address of principal executive offices) (Zip Code) (404) 351-7987 ________________________________________________________________________________ (Registrant's telephone number, including area code) None ________________________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report.) 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. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 Par Value, 10,113,686 shares outstanding as of May 31, 1997. K&G Men's Center, Inc. and Subsidiaries Index to Form 10-Q May 4, 1997
Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets............................. 3 Consolidated Statements of Operations................... 4 Consolidated Statements of Cash Flows................... 5 Condensed Notes to the Financial Statements............. 6 Item 2. Management's Discussion and Analysis.................... 7-9 Item 3. Quantitative and Qualitative Disclosure about Market Risk............................................. 9 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders........................................ 10 Item 6. Exhibits and Reports on Form 8-K........................ 10 Signatures.................................................................. 11
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K & G Men's Center, Inc. and Subsidiaries Consolidated Balance Sheets May 4, 1997 February 2, 1997 ----------- ---------------- (Unaudited) Assets CURRENT ASSETS: Cash & cash equivalents $ 4,578,000 $ 6,440,000 Marketable securities 15,606,000 15,794,000 Accounts receivable 1,628,000 999,000 Merchandise inventory 18,428,000 15,839,000 Other assets 1,972,000 817,000 ----------- ----------- Total current assets 42,212,000 39,889,000 PROPERTY AND EQUIPMENT, net 2,210,000 2,131,000 OTHER ASSETS, net 367,000 364,000 Total assets $44,789,000 $42,384,000 =========== =========== Liabilities and Shareholders' Equity CURRENT LIABILITIES: Accounts payable $ 8,795,000 $ 7,410,000 Sales tax payable 684,000 760,000 Accrued expenses 1,495,000 1,540,000 Income taxes payable 773,000 874,000 ----------- ----------- Total current liabilities 11,747,000 10,584,000 LONG-TERM DEBT 205,000 205,000 MINORITY INTEREST 350,000 315,000 SHAREHOLDERS' EQUITY: Common stock 101,000 101,000 Additional paid-in capital 25,089,000 25,028,000 Retained earnings 7,297,000 6,151,000 ----------- ----------- Total shareholders' equity 32,487,000 31,280,000 Total liabilities and shareholders' equity $44,789,000 $42,384,000 =========== ===========
See accompanying Condensed Notes to the Financial Statements. 3 K&G Men's Center, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited)
Three Months Ended ------------------------------- May 4, 1997 April 28, 1996 -------------- --------------- NET SALES $23,742,000 $17,528,000 COST OF SALES, including occupancy cost 18,290,000 13,405,000 -------------- --------------- GROSS PROFIT 5,452,000 4,123,000 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 3,792,000 3,003,000 -------------- --------------- OPERATING INCOME 1,660,000 1,120,000 OTHER INCOME (EXPENSES): Interest expense (9,000) (11,000) Other income, net 292,000 172,000 -------------- --------------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST IN EARNINGS OF AFFILIATES 1,943,000 1,281,000 PROVISION FOR INCOME TAXES 762,000 490,000 -------------- --------------- INCOME BEFORE MINORITY INTEREST IN EARNINGS OF AFFILIATES 1,181,000 791,000 MINORITY INTEREST IN EARNINGS OF AFFILIATES (35,000) (22,000) -------------- --------------- NET INCOME APPLICABLE TO COMMON STOCK $1,146,000 $769,000 ============== =============== NET INCOME PER COMMON AND COMMON EQUIVALENT SHARES $0.11 $0.08 ============== =============== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 10,105,319 9,566,250 ============== ===============
See accompanying Condensed Notes to the Financial Statements. 4 K&G Men's Center, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended May 4, 1997 April 28, 1996 -------------- --------------- Cash Flows from Operating Activities: Net income $1,146,000 $769,000 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Minority interest in earnings (loss) of affiliates 35,000 22,000 Depreciation and amortization 117,000 96,000 Changes in assets and liabilities: Accounts receivable (629,000) (294,000) Merchandise inventory (2,589,000) (3,299,000) Other assets, net (1,155,000) 121,000 Accounts payable 1,385,000 2,964,000 Sales tax payable (76,000) 259,000 Accrued expenses (45,000) (485,000) Income taxes payable (101,000) (192,000) -------------- --------------- Total adjustments (3,058,000) (808,000) -------------- --------------- Net cash used in operating activities (1,912,000) (39,000) -------------- --------------- Cash Flows from Investing Activities: Additions to property and equipment (192,000) (546,000) Proceeds from marketable securites 3,688,000 0 Purchase of marketable securities (3,500,000) 0 Other assets (7,000) (24,000) -------------- --------------- Net cash used in investing activities (11,000) (570,000) -------------- --------------- Cash Flows from Financing Activities: Common stock issued 61,000 10,131,000 -------------- --------------- Net cash provided by financing activities 61,000 10,131,000 -------------- --------------- Net Increase in Cash and Cash Equivalents (1,862,000) 9,522,000 Cash and Cash Equivalents at Beginning of Period 6,440,000 2,504,000 -------------- --------------- Cash and Cash Equivalents at End of Period $4,578,000 $12,026,000 ============== =============== Supplemental Disclosure of Cash Paid For: Interest $2,000 $11,000 ============== =============== Income taxes $864,000 $664,000 ============== ===============
See accompanying Condensed Notes to the Financial Statements. 5 K&G Men's Center, Inc. and Subsidiaries Condensed Notes to the Financial Statements (Unaudited) 1. UNAUDITED FINANCIAL INFORMATION The accompanying financial statements of K&G Men's Center, Inc. and Subsidiaries as of May 4, 1997 and April 28, 1996, and for the three months then ended, are unaudited. In the opinion of the Company's management, these statements include all adjustments considered necessary for a fair presentation of financial condition and results of operations. Because of the seasonality of the Company's business, results for any quarter are not necessarily indicative of the results that may be achieved for the full year. In addition, quarterly results of operations are affected by the timing and amount of sales and cost associated with the opening of new stores. 2. EFFECT OF NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." This statement establishes new standards for computing and presenting earnings per share ("EPS") information. SFAS No. 128 simplifies the computation of earnings per share currently required by Accounting Principles Board Opinion No. 15 and its related interpretations. The new statement replaces the presentation of "primary" (and when required "fully diluted") earnings per share with "basic" and "diluted" earnings per share. This new statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; and early application is not permitted. The Company's earnings per share calculated under SFAS No. 128 is not expected to be materially different that the earnings per share reported. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. GENERAL During the three months ended May 4, 1997, the Company opened two new superstores, entering new markets in Cleveland, Ohio, and Cherry Hill, New Jersey, a suburb of metropolitan Philadelphia. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, statements of operations data expressed as a percentage of net sales:
Three Months Ended May 4, April 28, 1997 1996 Net sales 100.0% 100.0% Cost of sales, including occupancy cost 77.0 76.5 ----- ----- Gross profit 23.0 23.5 Selling, general and administrative 16.0 17.1 expenses ----- ----- Operating income 7.0 6.4 Other income (expenses): Interest expense (0.0) (0.1) Other income, net 1.2 1.0 ----- ----- Income before income taxes and minority interest in earnings of affiliates 8.2 7.3 Provision for income taxes 3.2 2.8 ----- ----- Income before minority interest in earnings of affiliates 5.0 4.5 Minority interest in earnings of (0.2) (0.1) affiliates ----- ----- Net income applicable to common stock 4.8% 4.4% ===== =====
Net sales of $23.7 million for the three month period ended May 4,1997 represents an increase of $6.2 million, or 35.5% over net sales of $17.5 million for the three month period ended April 28, 1996. The increase in net sales is a result of comparable store growth of 17.7% and the opening of five new superstores since May of 1996. Two of the five new stores were opened in the Washington, D.C., area in September of 1996, and the remaining three stores were opened in new markets in Columbus Ohio, in November 1996, Cherry Hill, New Jersey, a suburb of Philadelphia, in February 1997, and Cleveland, Ohio in April 1997. Comparable store sales increased 11.9% in the first fiscal quarter of 1996. Gross profit increased $1.3 million, or 32.2% to $5.5 million in the three month period ended May 4, 1997. Gross profit as a percentage of sales decreased to 23.0% in the three month period ended May 4, 1997 from 23.5% in the three month period ended April 28, 1996. The decrease in gross margin as a percentage of sales is due to the Company lowering its mark-up on specific goods in order to lower its selling prices and to enhance its competitive position, and the new stores having a higher occupancy cost as a percentage of sales and a lower initial gross margin. Selling, general and administrative expenses increased $789,000 or 26.3%, to $3.8 million in the three month period ended May 4, 1997. Selling, general and administrative expenses as a percentage of net sales decreased to 16.0% in the three month period ended May 4, 1997, from 17.1% for the three month 7 period ended April 28, 1996. The decrease in selling, general and administrative expenses as a percentage of sales is primarily attributable to a lower level advertising as a percentage of sales and a lower level of pre-opening expenses as a percentage of sales both of which are due to the timing of new store grand openings. As a result of the above factors, operating income was $1.7 million for the three month period ended May 4, 1997 compared to $1.1 million in the three month period ended April 28, 1996. Operating income as a percentage of net sales increased to 7.0% in the three month period ended May 4, 1997 from 6.4% in the three month period ended April 28, 1996. The factors discussed above resulted in an increase in net income to $1.1 million for the three month period ended May 4, 1997 from $769,000 in the three month period ended April 28, 1996. QUARTERLY RESULTS, SEASONALITY AND INFLATION The Company's business is seasonal in nature with the fourth quarter, which includes the holiday selling season, accounting for the largest percentage of the Company's net sales volume and operating profit in any given year. Because of the seasonality of the Company's business, results for any quarter are not necessarily indicative of the results that may be achieved for the full year. In addition, quarterly results of operations are affected by the timing and amount of sales and costs associated with the opening of new stores. Inflation can affect the cost incurred by the Company in the purchases of its merchandise, the leasing of its stores and certain components of its selling, general and administrative expenses. To date, inflation has not adversely affected the Company's business, although there can be no assurance that inflation will not have a material adverse effect in the future. LIQUIDITY AND CAPITAL RESOURCES The Company has historically funded its working capital and capital expenditure requirements from proceeds from the sale of equity securities, net cash provided by operating activities and through borrowings from related parties and under its bank credit facilities. The Company had working capital of $30.5 million and $29.3 million at May 4, 1997 and February 2, 1997, respectively. The principal use of working capital is to purchase inventory. The Company had $4.6 million in cash and cash equivalents, and $15.6 million in marketable securities as of May 4, 1997. The Company's capital expenditures totaled $192,000, and $546,000 in the three month periods ended May 4, 1997 and April 28, 1996, respectively. These capital expenditures were primarily used to open new stores and upgrade the Company's management information systems. The Company currently has a bank credit facility, which expires June 30, 1999, and permits borrowings of up to $5.0 million. The interest rate on this facility is the prime rate less 1% or LIBOR plus 1.5% per annum, at the option of the Company. As of May 4, 1997, K&G had no debt outstanding on this facility. The Company effected its initial public offering on January 24, 1996 and the transaction closed on January 30, 1996. The Company issued approximately 1,691,250 shares of its common stock at $6.67 per share and raised approximately $10,132,000 after estimated expenses of the offering. The Company effected a second public offering of its common stock on November 11, 1996, and the transaction closed on November 15, 1996. Pursuant to this offering, the Company issued an additional 538,275 shares of its 8 common stock at $14.83 per share and raised approximately $7,446,000 after estimated expenses of the offering. The Company's primary capital requirements are for the opening of new stores. The Company estimates that the total cash required to open a 15,000 to 20,000 square foot prototype store, including inventory, store fixtures and equipment, leasehold improvements, other net working capital and pre-opening costs (primarily stocking and training), typically ranges from $625,000 to $900,000 depending on landlord assistance and vendor financing. The Company anticipates opening an additional six stores in the remainder of fiscal 1997 and eight to ten new stores in fiscal 1998. The Company believes that the proceeds of its offerings, internally generated funds, cash on hand and its bank credit facility will be adequate to fund its anticipated needs for the foreseeable future. The success of this planned expansion strategy is dependent upon many factors, including identifying suitable markets and sites for new stores. In addition, the Company must be able to continue to hire, train and retain competent managers and store personnel. The failure of the Company in these areas could adversely affect its planned expansion strategy. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Certain of the statements contained in the body of this Report are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such forward-looking statements are typically identified by statements to the effect that the Company "believes," "estimates," "intends," "expects," or "anticipates" a certain state of affairs. In the preparation of this Report, where such forward-looking statements appear, the Company has sought to accompany such statements with meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those described in the forward-looking statements. Item 3. Quantitative and Qualitative Disclosure about Market Risk. None. 9 K&G Men's Center, Inc. and Subsidiaries Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K - None 10 K&G Men's Center, Inc. and Subsidiaries 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. K&G Men's Center, Inc. (Registrant) Date: June 6, 1997 /s/ Stephen H. Greenspan ------------------- ------------------------------------------------ Stephen H. Greenspan Chairman of the Board, President and Chief Executive Officer (principal executive officer) Date: June 6, 1997 /s/ John C. Dancu ------------------- ------------------------------------------------ John C. Dancu Chief Operation and Financial Officer (principal financial and accounting officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS FEB-01-1998 FEB-03-1997 MAY-04-1997 4,578,000 15,606,000 1,628,000 0 18,428,000 42,212,000 3,610,000 (1,400,000) 44,789,000 11,747,000 0 0 0 101,000 32,386,000 44,789,000 23,742,000 23,742,000 18,290,000 18,290,000 3,792,000 0 9,000 1,943,000 762,000 1,146,000 0 0 0 1,146,000 0.11 0
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