-----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, Qeszn2C0KLdmQzDacYFHYEJkdbronome68D1zt63P0+l+KIBA4TMiKBEjW9/uAU3 ICZJvDNZKXKXwnLxREV1ag== 0000916641-99-000499.txt : 19990603 0000916641-99-000499.hdr.sgml : 19990603 ACCESSION NUMBER: 0000916641-99-000499 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990501 FILED AS OF DATE: 19990602 FILER: COMPANY DATA: COMPANY CONFORMED NAME: S&K FAMOUS BRANDS INC CENTRAL INDEX KEY: 0000723924 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 540845694 STATE OF INCORPORATION: VA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11682 FILM NUMBER: 99638920 BUSINESS ADDRESS: STREET 1: 11100 W BROAD ST STREET 2: PO BOX 31800 CITY: RICHMOND STATE: VA ZIP: 23294-1800 BUSINESS PHONE: 8043462500 MAIL ADDRESS: STREET 1: P O BOX 31800 CITY: RICHMOND STATE: VA ZIP: 23294-1800 10-Q 1 FIRST QUARTER REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 1, 1999 Commission File No. 0-11682 S & K FAMOUS BRANDS, INC. ............................................................................... (Exact name of registrant as specified in its charter) Virginia 54-0845694 ............................... .................................... (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 11100 West Broad Street, P. O. Box 31800, Richmond, Virginia 23294-1800 ............................................................................... (Address of principal executive offices) Registrant's telephone number, including area code: (804) 346-2500 .................... 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 ________ Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of May 1, 1999. 4,773,433 shares of Common Stock, $0.50 par value PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS S & K FAMOUS BRANDS, INC. Statements of Income (in thousands, except per share amounts) (unaudited)
Three Months Ended ------------------------------ May 1, May 2, 1999 1998 ------------- ------------- Net sales $ 39,799 $ 37,109 Cost of sales 20,512 19,318 ------------- ------------- Gross profit 19,287 17,791 Other costs and expenses: Selling, general and administrative 16,049 14,512 Interest 215 108 Depreciation and amortization 729 651 Other, net (4) (3) ------------- ------------- Income before income taxes 2,298 2,523 Provision for income taxes 873 959 ------------- ------------- Net income $ 1,425 $ 1,564 ============= ============= Net income per common share: Basic $ 0.30 $ 0.31 ============= ============= Diluted $ 0.30 $ 0.30 ============= ============= Weighted average common shares outstanding - basic 4,779 5,028 ============= ============= Weighted average common shares outstanding including dilutive potential common shares 4,800 5,138 ============= =============
See notes to financial statements. 2 S & K FAMOUS BRANDS, INC. Balance Sheets (In thousands, except per share amounts) (unaudited)
May 1, May 2, January 30, 1999 1998 1999 -------- -------- -------- Assets Current assets: Cash $ 430 $ 411 $ 547 Accounts receivable 261 636 862 Merchandise inventories 61,122 53,282 50,779 Other current assets 3,224 2,064 3,286 -------- -------- -------- Total current assets 65,037 56,393 55,474 Property and equipment, at cost: Land and buildings 7,229 7,174 7,229 Furniture, fixtures and equipment 14,872 13,225 14,550 Leasehold improvements 16,138 14,352 15,699 -------- -------- -------- 38,239 34,751 37,478 Less: Accumulated depreciation and amortization 18,111 16,214 17,765 -------- -------- -------- 20,128 18,537 19,713 Other assets 4,252 3,497 4,109 -------- -------- -------- $ 89,417 $ 78,427 $ 79,296 ======== ======== ======== Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt $ 180 $ 180 $ 180 Accounts payable 10,823 9,989 6,345 Accrued expenses: Compensation-related items 1,662 1,445 1,599 Current and deferred income taxes 775 877 624 Other current liabilities 1,778 1,760 1,705 -------- -------- -------- Total current liabilities 15,218 14,251 10,453 Industrial Development Revenue Bond 1,755 1,935 1,800 Long-term debt 18,106 9,233 11,707 Deferred income taxes 1,650 1,476 1,619 Commitments Shareholders' equity: Preferred stock, $1 par value; authorized shares, 500; issued and outstanding shares, none Common stock, $.50 par value, authorized shares, 10,000; issued and outstanding shares, 4,773, 5,055 and 4,874, respectively 2,387 2,527 2,437 Capital in excess of par value 4,893 7,528 5,819 Notes receivable--Stock Purchase Loan Plan (2,599) (1,184) (1,122) Retained earnings 48,007 42,661 46,583 -------- -------- -------- 52,688 51,532 53,717 -------- -------- -------- $ 89,417 $ 78,427 $ 79,296 ======== ======== ========
See notes to financial statements. 3 S & K FAMOUS BRANDS, INC. Statements of Cash Flows Increase (Decrease) in Cash (in thousands) (unaudited)
Three Months Ended ------------------------------ May 1, May 2, 1999 1998 -------- -------- Cash flows from operating activities: Net income $ 1,425 $ 1,564 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization 836 756 Loss on property dispositions, net 55 45 Other 16 22 Changes in assets and liabilities: Accounts receivable 601 (82) Inventories (10,343) (9,386) Other current assets 62 1,106 Other assets (143) (97) Accounts payable and accrued expenses 4,716 1,237 Income taxes and deferred income taxes 182 170 -------- -------- Net cash used for operating activities (2,593) (4,665) -------- -------- Cash flows from investing activities: Capital expenditures (1,306) (1,505) -------- -------- Cash flows from financing activities: Net borrowings under revolving bank lines of credit 6,383 5,888 Proceeds from exercise of stock options 0 27 Principal paydown on Stock Purchase Loan Plan 0 118 Reduction of long-term debt (45) (45) Repurchase of common stock (2,556) 0 -------- -------- Net cash provided by financing activities 3,782 5,988 -------- -------- Net decrease in cash (117) (182) Cash at beginning of period 547 593 -------- -------- Cash at end of period $ 430 $ 411 ======== ======== Supplemental cash flow information: Cash paid during the period for: Interest $ 212 $ 107 Income taxes 690 842
See notes to financial statements. 4 S & K FAMOUS BRANDS, INC. Notes to Financial Statements (unaudited) A. Accounting Policies The accompanying unaudited interim financial statements have been prepared by the Company in accordance with the regulations of the Securities and Exchange Commission in regard to quarterly reporting. In the opinion of the Company, the statements include all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair representation of the financial position and results of operations for interim periods. B. Interim Results of Operations The Company's business is highly seasonal, with peak sales periods occurring during its fourth fiscal quarter which includes the Christmas season. The net earnings of any interim quarter are seasonally disproportionate to net sales since administrative and certain operating expenses remain relatively constant during the year. Consequently, interim results should not be considered necessarily indicative of the results for the entire fiscal year. C. Expansion Since January 30, 1999, the Company has opened nine new stores totaling approximately 37,700 square feet.
S & K Store Locations Date Opened Square Footage - -------------------------------------------------- ------------------------------ ---------------------------- Kansas: Wichita --Town East Square March 24, 1999 4,813 --Town West Square March 24, 1999 2,900 Ohio: Columbus * May 21, 1999 5,000 Huber Heights * May 21, 1999 5,000 South Carolina: Columbia March 1, 1999 4,261 Tennessee: Kingsport May 1, 1999 4,064 Texas: Longview April 28, 1999 3,722 Wisconsin: Appleton March 2, 1999 4,500 Green Bay March 30, 1999 3,449
* Stores opened in the second quarter Since the beginning of the year, the Company has closed five under-performing stores in Somerset, Pennsylvania (2,820 square feet); Stroud, Oklahoma (3,000); Monroe, Michigan (3,605); Port Huron, Michigan (3,000) and one of its three stores in Raleigh, North Carolina (4,000). These stores had not met the Company's sales and profitability expectations. 5 Item 2. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW Information regarding forward-looking statements. The statements contained in this quarterly report that are not historical facts, including statements about management's expectations for fiscal 2000 and beyond, may be forward-looking statements. The forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially from historical results or those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements. Factors that could cause the Company's actual results to differ materially from management's projections, forecasts, estimates and expectations include, but are not limited to, those discussed in the Company's Annual Report on Form 10-K. Three Months Ended May 1, 1999 Compared to Three Months Ended May 2, 1998 RESULTS OF OPERATIONS The following table sets forth certain items in the Statements of Income as a percentage of net sales for the three months ended May 1, 1999 and May 2, 1998. Percentage of Net Sales --------------------------- Three Months Ended --------------------------- 5/1/99 5/2/98 ---------- ---------- Net sales..................................... 100.0% 100.0% Cost of sales................................. 51.5 52.1 -------- -------- Gross profit.................................. 48.5 47.9 Other costs and expenses: Selling, general and administrative...... 40.3 39.1 Interest................................. 0.6 0.3 Depreciation and amortization............ 1.8 1.7 Other, net............................... -- -- -------- -------- Income before income taxes.................... 5.8 6.8 Provision for income taxes.................... 2.2 2.6 -------- -------- Net income.................................... 3.6% 4.2% ======== ======== Net sales in the first quarter of fiscal 2000 increased 7%, or $2.7 million, over the same period last year, and reflects the net addition of 22 new stores. Comparable store sales were down 1% due primarily to weaker than planned customer traffic in April, 1999, and in part to the opening of new stores in existing markets. During the first quarter the Company opened seven new stores and closed four locations which had not met sales and profitability expectations. There were 236 stores in operation as of May 1, 1999, compared to 214 stores at May 1, 1998. Cost of sales in the first quarter of fiscal 2000 was 51.5% of net sales compared to 52.1% of net sales for the same period last year. This 0.6% of net sales reduction was primarily due to the higher capitalization of buying and occupancy costs in inventory. Selling, general and administrative expenses in the first quarter of fiscal 2000 were 40.3% of net sales compared to 39.1% of net sales in the previous year. This 1.2% of net sales increase was due primarily to incurring planned store payroll and rent costs while sales were less than planned. 6 Interest expense in the first quarter of fiscal 2000 was 0.6% of net sales compared to 0.3% of net sales last year due primarily to higher borrowing levels. Approximately half of the Company's increased borrowings was the result of the Company's stock buy-back program and the balance of the increase relates to inventory purchases and capital expenditures for the 22 net new stores. Net income was $1.4 million ($0.30 per diluted share) and $1.6 million ($0.30 per diluted share) for the first quarter of fiscal 2000 and 1999 respectively. Diluted earnings per share remained constant as a result of the reduced number of weighted average shares outstanding which was attributable to the Company's stock buyback program. LIQUIDITY AND CAPITAL RESOURCES The Company has funded its operating activities, including capital expenditures for the opening of new stores, from internally generated funds and from bank borrowings. The Company plans to open 20 - 25 new stores in fiscal 2000, expects to close approximately fifteen under-performing stores, while also remodeling several others. During the three months ended May 1, 1999, the Company opened seven new stores and closed four. The Company also expects to continue to repurchase the Company's common stock in the open market. The Company believes that its sources of liquidity and capital resources will continue to be sufficient to fund its operations, capital expenditures and stock repurchase initiatives. Operating activities used net cash of $2.6 million and $4.7 million during the first quarter of fiscal 2000 and 1999, respectively. This fluctuation was primarily attributable to improved payment terms on inventory purchases this year versus last year, which resulted in higher payables at May 1, 1999 compared to May 2, 1998. Net cash used for investing activities was primarily for the purpose of store expansion and remodeling, as well as point of sale (POS) register purchases. Capital expenditures for the first quarter of fiscal 2000 and 1999 approximated $1.3 million and $1.5 million, respectively. In the first quarter of fiscal 2000 the Company opened seven new stores, converted one store to its superstore format and converted approximately 55 stores to its new POS register. During the first quarter of the prior year, the Company opened six new stores, converted one to its superstore format, remodeled three stores and converted approximately ten stores to its new POS register. Financing activities for the first quarter of fiscal 2000 and 1999 provided net cash of approximately $3.8 million and $6.0 million, respectively. Financing activities primarily relate to fluctuations in the borrowing levels under the Company's revolving credit agreements. During the first quarter of fiscal 2000, the Company used approximately $2.6 million for the repurchase of 286,000 shares of its common stock. The Company's revolving credit agreements with two banks aggregate $30.0 million. As of May 1, 1999, the Company had net unused commitments of approximately $13.3 million under the agreements. 7 PART II. OTHER INFORMATION Item 2. Changes in Securities (c) During the quarter ended May 1, 1999, the Company contributed 9,588 shares of its common stock to the S&K Famous Brands Employees' Profit Sharing/Savings Plan. The contribution was exempt from registration pursuant to section 3 (a) 2 of the Securities Act of 1933, as amended, because the Plan does not permit employee contributions to be invested in the Company's securities. Item 3. Quantitative and Qualitative Disclosures on Market Risk During the first three months of fiscal 2000 there were no material changes in the Company's market risk exposure or in management strategy as stated in the Company's 1998 Annual Report. Item 4. Submission of Matters to a Vote of Security Holders (a) The annual meeting of the Company's shareholders was held on May 19, 1999. (b) & (c) At the annual meeting, the shareholders elected eight directors, approved the Company's 1999 Stock Incentive Plan and ratified the selection of independent accountants. The results of the voting were as follows: Election of Directors Director For Withheld --------------------------- ---------------- ------------ Stuart C. Siegel 4,406,790 10,549 Robert L. Burrus, Jr. 4,401,690 15,649 Donald W. Colbert 4,406,606 10,733 Selwyn S. Herson 4,405,490 11,849 Andrew M. Lewis, Ph.D. 4,404,928 12,411 Steven A. Markel 4,405,790 11,549 Troy A. Peery, Jr. 4,404,190 13,149 Marshall B. Wishnack 4,405,590 11,749 Approval of 1999 Stock Incentive Plan For Against Abstain ------------------ -------------- ----------- 3,443,153 692,545 7,896 Ratification of PricewaterhouseCoopers LLP as Independent Accountants For Against Abstain ------------------ -------------- ----------- 4,409,116 3,095 5,128 8 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (4)a Modification letter dated March 17, 1999 to the Credit Agreement dated March 10, 1994 and the subsequent Amendment to the Credit Agreement dated April 30, 1997, between the registrant and Crestar Bank. (4)b First Amendment to Amended and Restated Credit Agreement dated April 2, 1999 between registrant and First Union National Bank as successor-in-interest to Signet Bank/Virginia. (27) Financial Data Schedule (b) There were no reports filed on Form 8-K during the three months ended May 1, 1999. 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. S & K FAMOUS BRANDS, INC. (Registrant) Date: June 1, 1999 /s/ Robert E. Knowles -------------------------------- Robert E. Knowles Executive Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer) Date: June 1, 1999 /s/ Janet L. Jorgensen -------------------------------- Janet L. Jorgensen Vice President and Controller Chief Accounting Officer (Principal Accounting Officer) 9 EX-4.A 2 MODIFICATION AGREEMENT Exhibit (4) a Crestar Bank P. O. Box 26665 Richmond, VA 23261-6665 (804) 782-5000 March 17, 1999 Mr. Robert E. Knowles Executive Vice President Chief Financial Officer S & K Famous Brands, Inc. P. O. Box 31800 Richmond, VA 23294 Dear Bob: I am writing to document the modifications to the Credit Agreement dated March 10, 1994, and the subsequent Amendment to the Credit Agreement dated April 30, 1997, between S & K Famous Brands, Inc. (the "Company"), and Crestar Bank (the "Bank") related to the $16,000,000 Revolver offered to the Company. The revisions to the above agreements in order to permit the Company to pursue the repurchase of its stock are as follows: 1. Section 7.3.3 Investments. Subsection (h) is added to the Credit Agreement to permit the repurchase of the Company's outstanding shares, if, after giving effect thereto, there would not exist any Default hereunder. Any previous Event of Default prior to the addition of this clause, as a result of the repurchase of the Company's outstanding stock, is hereby waived, as long as the repurchase meets the requirements of the above language. 2. Section 7.1.3 Minimum Consolidated Tangible Net Worth in the Amendment to the Credit Agreement is modified to require the Company to maintain at least $48,300,000 of Consolidated Tangible Net Worth at January 30, 1999 and for each fiscal year thereafter, of not less than $48,300,000 plus 80% of each successive year's net income. However, during the fiscal year beginning February 1, 1999 and all periods thereafter, upon approval of the Company's Board of Directors and notification to Crestar, S & K Famous Brands may repurchase up to an additional $12,800,000 of its own stock. Any such repurchases shall reduce the minimum Consolidated Tangible Net Worth requirement by 90% of the value of the stock repurchased. The minimum Consolidated Net Worth will not be adjusted for any net loss reported by the Company. These revisions shall be incorporated into the Amendment to the Credit Agreement dated April 30, 1997 and the Credit Agreement dated March 10, 1994. I hope these modifications will give you the flexibility needed to implement your repurchase strategy. Thanks for allowing Crestar to meet the banking requirements of S & K. Please give me a call should you have any questions. Sincerely, /s/ William A. Stratton William A. Stratton Senior Vice President Approved and accepted this 31 day of March, 1999 S & K Famous Brands, Inc. By: /s/ Robert E. Knowles Executive Vice President EX-4.B 3 1ST AMEND. TO AMENDED & RESTATED CREDIT AGR Exhibit (4) b FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT is dated as of April 2, 1999, and is between S & K FAMOUS BRANDS, INC. (the "Company") and FIRST UNION NATIONAL BANK, as successor-in-interest to Signet Bank/Virginia (the "Bank"). Recitals A. The Company and the Bank entered into an Amended and Restated Credit Agreement dated as of May 31, 1997 (the "Loan Agreement"). B. The Company and the Bank have agreed to modify certain provisions in the Loan Agreement, subject to the terms and conditions of this First Amendment. Agreement NOW, THEREFORE, for and in consideration of the terms, conditions and agreements herein, the Bank and the Company hereby agree as follows: 1. Definitions. Except as provided specifically herein, all defined terms used herein shall have the meanings ascribed to such terms in the Loan Agreement. 2. Amendments. The Loan Agreement is hereby amended as follows: A. Section 7.3 is amended and restated as follows: SECTION 7.3 Consolidated Tangible Net Worth. The Company will maintain Consolidated Tangible Net Worth (i) as of January 30, 1999, of not less than $48,300,000 and (ii) for each fiscal year thereafter, of not less than $48,300,000 plus eighty percent (80%) of each successive year's net income. However, during the fiscal year beginning February 1, 1999 and all periods thereafter, upon approval of the Company's Board of Directors and notification to the Bank, S & K may repurchase its own stock, provided the aggregate market value of such repurchases does not exceed $12,800,000. Any such repurchases shall reduce the minimum Consolidated Tangible Net Worth requirement by 90% of the value of the stock repurchased. In no event, however, shall the Consolidated Tangible Net Worth as calculated herein be reduced in the event of any net loss for any fiscal year. B. Section 7.14 is amended to provide that the Company is permitted to repurchase outstanding shares of the Company, if, after giving effect thereto, there would not exist any Default or any Potential Default under the Loan Agreement, and that any previous Event of Default prior to this First Amendment, as a result of the repurchase of the Company's outstanding stock, is hereby waived. C. Section 10.5 is amended to change the manner in which interest is calculated for Money Market Loans (made pursuant to section 2.3 of the Loan Agreement) from the basis of a year of 365 days to a 360-day year basis. Interest shall continue to be calculated on a 365-day-year basis for Fed Funds Loans (made pursuant to section 2.1 of the Loan Agreement). 3. Limited Amendment. Except as provided expressly in this First Amendment, each term, condition or agreement in the Loan Agreement shall continue to be fully enforceable in accordance with its terms. WITNESS the following authorized signatures of the parties hereto: Company: S & K FAMOUS BRANDS, INC. By: /s/ Robert E. Knowles Robert E. Knowles Executive Vice President and Chief Financial Officer Bank: FIRST UNION NATIONAL BANK (formerly, Signet Bank/Virginia) By: /s/ Joyce L. Barry Joyce L. Barry Senior Vice President EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-29-2000 JAN-31-1999 MAY-01-1999 430 0 261 0 61,122 65,037 38,239 18,111 89,417 15,218 0 2,387 0 0 50,301 89,417 39,799 39,799 20,512 20,512 16,774 0 215 2,298 873 1,425 0 0 0 1,425 0.30 0.30
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