-----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, AG6wWy3GoRY/KN3JZj4BGHxRcAE0KkYoZr0QkisnK0uSqQRw21NAndgQpj0FJAAQ k0jhtJhLrffjT+VVlFsu7g== 0000916641-99-000945.txt : 19991210 0000916641-99-000945.hdr.sgml : 19991210 ACCESSION NUMBER: 0000916641-99-000945 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991030 FILED AS OF DATE: 19991209 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: 99771370 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 THIRD QUARTER REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _________________ Commission File No. 0-11682 S & K FAMOUS BRANDS, INC. ................................................................................ (Exact name of registrant as specified in its charter) Virginia 0-11682 54-0845694 ................................................................................ (State or other jurisdiction (Commission File No.) (I.R.S. Employer of incorporation) Identification No.) 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 ............................. Not Applicable ................................................................................ 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 _____ Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of October 30, 1999 4,666,487 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 earnings per share) (unaudited)
------------------------------------ ----------------------------------- Three Months Ended Nine Months Ended ------------------------------------ ----------------------------------- October 30, October 31, October 30, October 31, 1999 1998 1999 1998 ---------------- ---------------- --------------- --------------- Net sales.................................... $ 37,195 $ 35,120 $ 112,661 $ 106,081 Cost of sales................................ 18,886 17,852 58,231 55,041 ---------------- ---------------- --------------- --------------- Gross profit ................................ 18,309 17,268 54,430 51,040 Other costs and expenses: Selling, general and administrative........ 16,734 15,312 47,984 43,412 Interest................................... 316 239 818 533 Depreciation and amortization.............. 779 703 2,268 2,043 Other income, net.......................... (41) (36) (61) (77) ---------------- ---------------- --------------- --------------- Income before income taxes................... 521 1,050 3,421 5,129 Provision for income taxes................... 198 399 1,300 1,949 ---------------- ---------------- --------------- --------------- Net income................................... $ 323 $ 651 $ 2,121 $ 3,180 ================ ================ =============== =============== Net income per common share: Basic...................................... $ 0.07 $ 0.13 $ 0.45 $ 0.63 ================ ================ =============== =============== Diluted.................................... $ 0.07 $ 0.13 $ 0.45 $ 0.62 ================ ================ =============== =============== Weighted average common shares outstanding - basic....................... 4,691 5,067 4,739 5,057 ================ ================ =============== =============== Weighted average common shares outstanding including dilutive potential common shares. 4,694 5,137 4,751 5,152 ================ ================ =============== ===============
See Notes to Financial Statements. 2 S & K FAMOUS BRANDS, INC. Balance Sheets (in thousands, except par value per share)
-------------- -------------- --------------- October 30, October 31, January 30, 1999 1998 1999 (unaudited) (unaudited) -------------- -------------- --------------- Assets Current assets: Cash...................................................... $ 363 $ 510 $ 547 Accounts receivable....................................... 594 570 862 Merchandise inventories................................... 65,766 62,790 50,779 Prepaid income taxes...................................... 861 706 -- Other current assets...................................... 2,914 2,765 3,286 -------------- -------------- --------------- Total current assets................................... 70,498 67,341 55,474 Property and equipment, at cost: Land and buildings........................................ 7,235 7,169 7,229 Furniture, fixtures and equipment ........................ 16,011 13,886 14,550 Leasehold improvements.................................... 16,780 14,989 15,699 -------------- -------------- --------------- 40,026 36,044 37,478 Less: Accumulated depreciation and amortization.......... 19,330 17,091 17,765 -------------- -------------- --------------- 20,696 18,953 19,713 Other assets ................................................. 4,696 3,728 4,109 -------------- -------------- --------------- $ 95,890 $ 90,022 $ 79,296 ============== ============== =============== Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt...................... $ 180 $ 180 $ 180 Accounts payable.......................................... 16,029 13,442 6,345 Accrued expenses: Compensation-related items............................. 1,249 1,335 1,599 Current and deferred income taxes...................... 207 203 624 Other current liabilities.............................. 1,870 1,678 1,705 -------------- -------------- --------------- Total current liabilities............................ 19,535 16,838 10,453 Industrial Development Revenue Bond........................... 1,665 1,845 1,800 Long-term debt................................................ 20,491 16,546 11,707 Deferred income taxes......................................... 1,650 1,604 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, 4,666, 5,064 and 4,874, respectively........................................... 2,333 2,532 2,437 Capital in excess of par value............................ 4,023 7,514 5,819 Notes receivable--Stock Purchase Loan Plan................ (2,511) (1,134) (1,122) Retained earnings......................................... 48,704 44,277 46,583 -------------- -------------- --------------- 52,549 53,189 53,717 -------------- -------------- --------------- $ 95,890 $ 90,022 $ 79,296 ============== ============== ===============
See Notes to Financial Statements. 3 S & K FAMOUS BRANDS, INC. Statements of Cash Flows Increase (Decrease) in Cash (in thousands) (unaudited)
------------------------------------------- Nine Months Ended ------------------------------------------- October 30, October 31, 1999 1998 ---------------- ----------------- Cash flows from operating activities: Net income................................................. $ 2,121 $ 3,180 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Depreciation and amortization........................... 2,588 2,359 Loss on property dispositions, net...................... 104 70 Other .................................................. 47 67 Changes in assets and liabilities: Accounts receivable.................................. 267 (16) Merchandise inventories.............................. (14,987) (18,894) Other current assets................................. 372 405 Other assets......................................... (587) (328) Accounts payable and accrued expenses................ 9,653 4,521 Income taxes and deferred income taxes............... (1,247) (910) ---------------- ----------------- Net cash used for operating activities..................... (1,669) (9,546) ---------------- ----------------- Cash flows from investing activities: Capital expenditures....................................... (3,674) (3,550) ---------------- ----------------- Cash flows from financing activities: Net borrowings under revolving bank lines of credit........ 8,737 13,156 Proceeds from exercise of stock options.................... -- 242 Principal paydown on Stock Purchase Loan Plan.............. 36 145 Reduction of long-term debt................................ (135) (135) Repurchase of common stock................................. (3,479) (395) ---------------- ----------------- Net cash provided by financing activities.................. 5,159 13,013 ---------------- ----------------- Net decrease in cash.......................................... (184) (83) Cash at beginning of period................................... 547 593 ---------------- ----------------- Cash at end of period......................................... $ 363 $ 510 ================ ================= Supplemental cash flow information: Cash paid during the period for: Interest................................................ $ 771 $ 473 Income taxes............................................ 2,546 2,922
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. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's 1999 Annual report & Form 10-K. 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 the end of the second quarter, the Company has opened 13 new stores totaling 47,886 square feet as follows:
S&K Store Locations Date Opened Square Footage -------------------------------------------------------- ------------------------------- ------------------------ Florida: Jacksonville (Orange Park)* November 4, 1999 3,637 Largo October 4, 1999 3,750 Georgia: Dawsonville* November 12, 1999 3,002 Kentucky: Louisville October 22, 1999 4,547 Indiana: Clarksville* November 24, 1999 4,156 Michigan Benton Harbor October 20, 1999 4,528 Muskegon* November 19, 1999 2,885 New York: Saratoga September 25, 1999 3,045 North Carolina: Concord September 16, 1999 3,467 Ohio: Columbus September 21, 1999 4,000 Tennessee: Murfreesboro October 4, 1999 4,000 Texas: Grapevine* November 1, 1999 2,734 Virginia: Lynchburg August 3, 1999 4,135
* Opened in fourth quarter. Additionally, during the third quarter, the Company closed an underperforming store in Florida City, Florida (3,017 square feet) which had not met sales and profitability expectations. Year-to-date, the Company has closed ten stores. D. Stock Repurchases During the nine months ended October 30, 1999, the Company repurchased approximately 392,900 shares of its common stock for $3.5 million; 175,800 of these shares were purchased by 16 Company officers in March of this year for $1.5 million under the Company's Stock Purchase Loan Plan. In the same period in 1998 the Company repurchased 30,600 shares for $0.4 million. 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 expectation for fiscal 1999 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 and Nine Months Ended October 30, 1999 Compared to Three Months and Nine Months Ended October 31, 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 and nine months ended October 30, 1999 and October 31, 1998.
Percentage of Net Sales -------------------------------------------------------------------- Three Months Ended Nine Months Ended 10/30/99 10/31/98 10/30/99 10/31/98 ----------------------------- --------------------------------- Net sales................................... 100.0% 100.0% 100.0% 100.0% Cost of sales............................... 50.8 50.8 51.7 51.9 ------------ ------------- ------------ ------------- Gross profit................................ 49.2 49.2 48.3 48.1 Other costs and expenses: Selling, general and administrative...... 45.0 43.6 42.6 40.9 Interest................................. 0.8 0.6 0.7 0.5 Depreciation and amortization............ 2.1 2.0 2.0 1.9 Other, net............................... (0.1) -- -- -- ------------ ------------- ------------ ------------- Income before income taxes.................. 1.4 3.0 3.0 4.8 Provision for income taxes.................. 0.5 1.1 1.1 1.8 ============ ============= ============ ============= Net income.................................. 0.9% 1.9% 1.9% 3.0% ============ ============= ============ =============
Net sales in the third quarter increased by 6%, or $2.1 million, over the same period last year and reflects the net addition of 16 new stores since October 31, 1998. For the nine-month period, net sales increased by 6%, or $6.6 million over the same period last year. Comparable store sales for the quarter decreased 1% and for the nine months were down 1% due primarily to continued reduction of customer traffic in a group of outlet stores, lower than planned sales in sportscoats and the openings of new stores in existing markets. During the quarter ended October 30, 1999, the Company opened eight new stores. There were 240 total stores in operation as of October 30, 1999, compared to 224 stores at October 31, 1998. Cost of sales in the third quarters ended October 30, 1999 and October 31, 1998 were 50.8% of net sales. For the nine-month period, cost of sales was 51.7% of net sales compared to 51.9% of net sales last year, and this change was due to the combined effects of taking fewer markdowns as a percentage of net sales and improved initial mark-up on merchandise sold. 6 Selling, general and administrative expenses in the third quarter ended October 30, 1999 were 45.0% of net sales compared to 43.6% of net sales for the same quarter last year. For the nine-month period, selling, general and administrative expenses were 42.6% of net sales versus 40.9% of net sales in the same period last year. Higher percentages of net sales variances in the third quarter and the nine-month period of 1.4% and 1.7%, respectively, were due to incurring planned store payroll and rent costs while sales were less than plan, and to a lesser degree, higher group health claims. Interest expense in the third quarter of this year was 0.8% of net sales compared to 0.6% of net sales for the same quarter of last year. For the nine-month period, interest expense was 0.7% of net sales compared to 0.5% of net sales last year. These increases are primarily attributable to higher average borrowings this year. 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. Through the first nine months ended October 30, 1999, the Company opened 18 new S&K stores, closed ten under-performing stores, converted one store to the superstore format and remodeled several others. In the comparable prior year period, the Company opened 18 new stores, closed five stores (two of which were relocations), converted one store to the superstore format and remodeled 16 others. Since October 30, 1999, the Company has opened five new stores. 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 during the nine months ended October 30, 1999 and 1998 used net cash of $1.7 million and $9.5 million, respectively. This fluctuation is due primarily to increased accounts payable balances resulting from earlier payments in the prior year on inventory purchases and due to the timing of inventory purchases. Net cash used in investing activities is primarily for the purpose of store expansion and remodeling. Capital expenditures approximated $3.7 million and $3.6 million during the nine months ended October 30, 1999 and 1998 respectively. In the first nine months of this year, the Company opened 18 new stores, converted one store to its superstore format, remodeled three others and converted approximately 150 stores to its new POS register. For the same period last year, the Company opened 18 new stores, converted one store to its superstore format, remodeled 16 others and converted approximately 70 stores to its new POS register. Financing activities for the nine months ended October 30, 1999 and 1998 provided net cash of $5.2 million and $13.0 million, respectively. Financing activities primarily relate to fluctuations in the borrowing levels under the Company's revolving credit agreements which have an aggregate borrowing capacity of $30.0 million. During the first nine months of fiscal years 2000 and 1999, the Company used approximately $3.5 million and $.4 million respectively, for the repurchase of its common stock. As of October 30, 1999, the Company had net unused commitments of approximately $10.9 million available under these agreements. OTHER MATTERS Year 2000 (Y2K) Since 1997, the Company has followed a comprehensive plan designed to ensure that all of its computer systems are Year 2000 compliant in advance of December 31, 1999. Because of the substantial use of computers and embedded systems throughout the Company's business and the business of its vendors, if failures occur; they could have a material impact. The Company's plan has incorporated the Company's mainframe hardware and back office systems, personal computers, point-of-sale equipment, distribution center systems, phone and security systems and other non-critical applications. Preparation for Y2K compliance has required modifications to existing software costing less than $100,000, most of which was spent in 1998. The Company has completed its testing and installation of Y2K changes on all internal systems and believes it is Y2K compliant. 7 The Y2K issue may impact vendors that provide products or services to the Company. The Company has circulated a business partner survey to its significant vendors and has evaluated responses. The Company's significant vendors have responded that they believe themselves to be Y2K ready. In the opinion of management, the most likely worst-case scenario of the failure of the Company or its vendors to be Y2K compliant would be the inability to obtain or distribute products from significant vendors. This would require the Company to seek alternative sources which could have gross margin implications. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule (b) There were no reports filed on Form 8-K during the three months ended October 30, 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: December 8, 1999 /s/ Robert E. Knowles ---------------------------------------- Robert E. Knowles Executive Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer) Date: December 8, 1999 /s/ Janet L. Jorgensen ---------------------------------------- Janet L. Jorgensen Vice President and Controller Chief Accounting Officer (Principal Accounting Officer) 8 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JAN-29-2000 JAN-31-1999 OCT-30-1999 363 0 594 0 65,766 70,498 40,026 19,330 95,890 19,535 0 2,333 0 0 50,216 95,890 112,661 112,661 58,231 58,231 50,191 0 818 3,421 1,300 2,121 0 0 0 2,121 0.45 0.45
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