-----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, MSju7DofNVn2/+cNHCGMTTy3pRTbkDN4pGktJOriA3a1LCe0Q8pAb7tS0D2f37pT UCTj7IETNj+5C63pa0F+Tw== 0001047469-98-023397.txt : 19980610 0001047469-98-023397.hdr.sgml : 19980610 ACCESSION NUMBER: 0001047469-98-023397 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980502 FILED AS OF DATE: 19980609 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WET SEAL INC CENTRAL INDEX KEY: 0000863456 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 330415940 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18632 FILM NUMBER: 98644367 BUSINESS ADDRESS: STREET 1: 26972 BURBANK CITY: FOOTHILL RANCH STATE: CA ZIP: 92610 BUSINESS PHONE: 7145839029 MAIL ADDRESS: STREET 1: 26972 BURBANK CITY: FOOTHILL RANCH STATE: CA ZIP: 92610 10-Q 1 10-Q THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF ----- THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 2, 1998 OR ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-18632 THE WET SEAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 33-0415940 (State of Incorporation) (I.R.S. Employer Identification No.) 26972 BURBANK FOOTHILL RANCH, CALIFORNIA 92610 (Address of principal executive offices) (Zip code) (949) 583-9029 (Registrant's telephone number, including area code) 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 --- --- The number of shares outstanding of the registrant's Class A Common Stock and Class B Common Stock, par value $.10 per share, at June 2, 1998 were 10,669,578 and 2,912,665, respectively. There were no shares of Preferred Stock, par value $.01 per share, outstanding at June 2, 1998. THE WET SEAL, INC. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets as of May 2, 1998 (unaudited) and January 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . 3-4 Statements of Operations (unaudited) for the 13 weeks ended May 2, 1998 and May 3, 1997. . . . . . . . . . . . . . . . . 5 Statements of Cash Flows (unaudited) for the 13 weeks ended May 2, 1998 and May 3, 1997. . . . . . . . . . . . . . . . . 6 Notes to Financial Statements. . . . . . . . . . . . . . . . . . 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . .9-14 PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .15 SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . .16 THE WET SEAL, INC. BALANCE SHEETS
MAY 2, JANUARY 31, 1998 1998 ------------ ------------ (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 71,603,000 $ 76,056,000 Short-term investments 9,371,000 19,817,000 Other receivables 2,915,000 3,209,000 Merchandise inventories 32,107,000 26,884,000 Prepaid expenses 5,483,000 330,000 Deferred tax charges 1,137,000 1,137,000 ------------ ------------ Total current assets 122,616,000 127,433,000 ------------ ------------ EQUIPMENT AND LEASEHOLD IMPROVEMENTS: Leasehold improvements 72,757,000 65,465,000 Furniture, fixtures and equipment 27,137,000 24,965,000 Leasehold rights 3,692,000 3,692,000 Construction in progress 455,000 2,000 ------------ ------------ 104,041,000 94,124,000 Less accumulated depreciation (51,933,000) (49,171,000) ------------ ------------ Net equipment and leasehold improvements 52,108,000 44,953,000 ------------ ------------ LONG-TERM INVESTMENTS 13,850,000 499,000 OTHER ASSETS: Deferred tax charges and other assets 10,988,000 10,817,000 Goodwill, net of accumulated amortization of $623,000 and $611,000 as of May 2, 1998 and January 31, 1998, respectively 509,000 521,000 ------------ ------------ Total other assets 11,497,000 11,338,000 ------------ ------------ $200,071,000 $184,223,000 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. THE WET SEAL, INC. BALANCE SHEETS
MAY 2, JANUARY 31, 1998 1998 ------------ ------------ (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 51,073,000 $ 35,858,000 Accrued liabilities 16,997,000 20,570,000 Income taxes payable 3,328,000 2,553,000 Current portion of long-term debt 2,000,000 2,000,000 ------------ ------------ Total current liabilities 73,398,000 60,981,000 ------------ ------------ LONG-TERM LIABILITIES: Long-term debt 764,000 1,264,000 Deferred rent 6,408,000 6,254,000 Other long-term liabilities 2,902,000 2,730,000 ------------ ------------ Total long-term liabilities 10,074,000 10,248,000 ------------ ------------ Total liabilities 83,472,000 71,229,000 ------------ ------------ STOCKHOLDERS' EQUITY: Preferred Stock, $.01 par value, authorized 2,000,000 shares; none issued and outstanding - - Common Stock, Class A, $.10 par value, authorized 20,000,000 shares; 10,669,578 and 10,656,578 shares issued and outstanding at May 2, 1998 and January 31, 1998, respectively 1,067,000 1,066,000 Common Stock, Class B Convertible, $.10 par value, authorized 10,000,000 shares; 2,912,665 shares issued and outstanding at May 2, 1998 and January 31, 1998, respectively 291,000 291,000 Paid-in capital 57,333,000 57,217,000 Retained earnings 57,908,000 54,420,000 ------------ ------------ Total stockholders' equity 116,599,000 112,994,000 ------------ ------------ $200,071,000 $184,223,000 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. THE WET SEAL, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
13 WEEKS ENDED -------------------------- MAY 2, MAY 3, 1998 1997 ------------ ----------- SALES $104,845,000 $95,563,000 COST OF SALES (INCLUDING BUYING, DISTRIBUTION AND OCCUPANCY COSTS) 74,872,000 70,122,000 ------------ ----------- GROSS MARGIN 29,973,000 25,441,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 25,420,000 20,197,000 ------------ ----------- OPERATING INCOME 4,553,000 5,244,000 INTEREST INCOME, NET (1,119,000) (714,000) ------------ ----------- INCOME BEFORE PROVISION FOR INCOME TAXES 5,672,000 5,958,000 PROVISION FOR INCOME TAXES 2,184,000 2,443,000 ------------ ----------- NET INCOME $3,488,000 $3,515,000 ------------ ----------- ------------ ----------- NET INCOME PER SHARE, BASIC $0.26 $0.26 NET INCOME PER SHARE, DILUTED $0.25 $0.25 ------------ ----------- ------------ ----------- WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC 13,575,518 13,541,539 WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED 14,103,040 13,832,051 ------------ ----------- ------------ -----------
See accompanying notes to financial statements. THE WET SEAL, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
13 WEEKS ENDED ---------------------------- MAY 2, MAY 3, 1998 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,488,000 $ 3,515,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,774,000 2,798,000 Changes in operating assets and liabilities: (Increase) decrease in: Other receivables 294,000 (235,000) Merchandise inventories (5,223,000) (7,682,000) Prepaid expenses (5,153,000) (6,200,000) Other assets (171,000) (2,000) (Decrease) increase in: Accounts payable and accrued liabilities 11,642,000 11,178,000 Income taxes payable 775,000 (168,000) Deferred rent 154,000 60,000 Other long-term liabilities 172,000 - ------------ ------------ Net cash provided by operating activities 8,752,000 3,264,000 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of marketable securities 16,164,000 4,000,000 Investment in equipment and leasehold improvements (9,917,000) (2,116,000) Investment in marketable securities (19,069,000) (10,500,000) ------------ ------------ Net cash used in investing activities (12,822,000) (8,616,000) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (500,000) (500,000) Proceeds from issuance of stock 117,000 - ------------ ------------ Net cash used in financing activities (383,000) (500,000) ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (4,453,000) (5,852,000) CASH AND CASH EQUIVALENTS, beginning of period 76,056,000 71,483,000 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 71,603,000 $ 65,631,000 ------------ ------------ ------------ ------------ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 61,000 $ 98,000 Income taxes, net 1,362,000 2,611,000
See accompanying notes to financial statements. THE WET SEAL, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION: The information set forth in these financial statements is unaudited except for the January 31, 1998 balance sheet. These statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation have been included. The results of operations for the 13 weeks ended May 2, 1998 are not necessarily indicative of the results that may be expected for the year ending January 30, 1999. For further information, refer to the financial statements and notes thereto included in the Company's Annual Report for the year ended January 31, 1998. NOTE 2 - LINE OF CREDIT AND LOAN PAYABLE TO BANK: Under an unsecured revolving line-of-credit arrangement with Bank of America National Trust and Savings Association ("Bank of America"), the Company may borrow up to a maximum of $30 million on a revolving basis through July 1, 2000. The cash borrowings under the arrangement bear interest at Bank of America's prime rate or, at the Company's option, LIBOR plus 1.75%. As of May 2, 1998, the Company had no borrowings outstanding under the credit arrangement. In June 1995, the Company entered into an unsecured five-year, $10 million term loan. The loan bears interest at the Bank of America's prime rate plus 0.25% or, at the Company's option, LIBOR plus 1.75%. The estimated annual principal payments on the loan are $2,000,000 payable in quarterly installments of $500,000 which commenced October 31, 1995. As of May 2, 1998, the loan has a remaining outstanding balance of $2,764,000. The credit arrangement and the term loan impose quarterly and annual financial covenants requiring the Company to maintain certain financial ratios and achieve certain levels of annual income. In addition, the credit arrangement and the term loan NOTE 2 - LINE OF CREDIT AND LOAN PAYABLE TO BANK (CONTINUED): require that Bank of America approve the payment of dividends and restrict the level of capital expenditures. At May 2, 1998, the Company was in compliance with these covenants. NOTE 3 - NET INCOME PER SHARE: The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128") beginning with the Company's fourth quarter of fiscal 1997. All prior period earnings per common share data have been restated to conform to the provisions of this statement. Net income per share, basic, is computed based on the weighted average number of common shares outstanding for the period. Net income per share, diluted, is computed based on the weighted average number of common and potentially dilutive common equivalent shares outstanding for the period. A reconciliation of the numerators and denominators used in basic and diluted net income per share is as follows:
MAY 2, 1998 MAY 3, 1997 ----------- ----------- Net income: Basic and diluted. . . . . . . . . . . $3,488,000 $3,515,000 ---------- ---------- ---------- ---------- Weighted average number of common shares: Basic. . . . . . . . . . . . . . . . . . . . . . . 13,575,518 13,541,539 Effect of dilutive securities - stock options. . . 527,522 290,512 ---------- ---------- Diluted. . . . . . . . . . . . . . . . . . . . . . 14,103,040 13,832,051 Net income per share: Basic. . . . . . . . . . . . . . . . . . . . . . . $0.26 $0.26 Effect of dilutive securities - stock options. . . 0.01 0.01 ---------- ---------- Diluted. . . . . . . . . . . . . . . . . . . . . . $0.25 $0.25
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The Company is one of the largest national mall-based specialty retailers focusing primarily on young women's apparel, and currently operates 411 retail stores in 42 states and Puerto Rico under the names "Wet Seal", "Contempo Casuals", "Limbo Lounge" and "Next". The Company sells moderately priced, fashionable, casual apparel and accessory items designed for consumers with a young, active lifestyle. On July 1, 1995, the Company acquired Contempo Casuals, Inc. The acquisition increased the number of stores the Company operates by 237 stores. Acquiring Contempo Casuals enabled the Company to significantly reduce fixed expenses as a percentage of sales through the consolidation and integration of the two companies' management teams, corporate offices and distribution centers. This process was substantially completed at the time of the acquisition. As of May 2, 1998 the Company operated 407 stores compared to 362 stores as of May 3, 1997, the end of the first quarter of fiscal 1997. The Company opened 54 stores during the period from May 3, 1997 to May 2, 1998 and closed nine stores. Effective February 2, 1997, Contempo Casuals, Inc. was merged with and into The Wet Seal, Inc. In January 1998 the Company mailed its first edition of the Wet Seal Catalog and in March 1998 the second catalog was mailed. The first quarter of fiscal 1998 includes the results of the catalog operations, which as of May 2, 1998 are not significant. The Company plans to mail up to four catalogs during the remainder of fiscal 1998. Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's Financial Statements and the Notes related thereto. RESULTS OF OPERATIONS THE 13 WEEKS ENDED MAY 2, 1998 (FIRST QUARTER OF FISCAL 1998) AS COMPARED TO THE 13 WEEKS ENDED MAY 3, 1997 (FIRST QUARTER OF FISCAL 1997) Sales in the first quarter of fiscal 1998 were $104,845,000 compared to sales in the first quarter of fiscal 1997 of $95,563,000, an increase of $9,282,000 or 9.7%. The dollar increase in sales was primarily due to the net increase of 45 stores; 407 stores at the end of the first quarter of fiscal 1998 compared to 362 stores at the end of the first quarter of fiscal 1997. The increase was also due to the sales related to the two catalog mailings in the first quarter of fiscal 1998, offset to some extent by a decrease of 3.2% in comparable store sales. Comparable store sales are defined as sales in stores that were open throughout the full fiscal year and throughout the full prior fiscal year. The decrease in comparable store sales is due to some extent to the unusual weather patterns encountered in various regions, in particular, California. The sales declines were most noted in the merchandise areas of tops, dresses and jewelry. Cost of sales, including buying, distribution and occupancy costs, was $74,872,000 in the first quarter of fiscal 1998 compared to $70,122,00 in the first quarter of fiscal 1997, an increase of $4,750,000. The dollar increase in cost of sales was due to the increase in sales. As a percentage of sales, cost of sales decreased from 73.4% in the first quarter of fiscal 1997 to 71.4% in the first quarter of fiscal 1998, a decrease of 2.0%. This decrease as a percentage of sales related to a 1.9% decrease in the cost of merchandise due primarily to improvement in the initial margins in the first quarter of fiscal 1998. The decrease was also due to a 0.4% improvement in occupancy costs as a percentage of total sales relating to the fact the catalog operation does not have any occupancy costs. The improvement as a result of the catalog operation sales leverage was somewhat offset by an increase in occupancy costs as a percentage of sales for the stores as a result of the decrease in comparable store sales. The improvements in cost of sales as a percentage of sales were also somewhat offset by an increase of 0.2% in the distribution costs as a percentage of sales related to the catalog operation and a 0.1% increase in the buying costs as a percentage of sales related to the increase in personnel to better support the multiple merchandising concepts. Selling, general and administrative expenses were $25,420,000 in the first quarter of fiscal 1998 compared to $20,197,000 in the first quarter of fiscal 1997, an increase of $5,223,000. The dollar increase in selling, general and administrative expenses ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED: was related to the increase in total sales and to the catalog operation. As a percentage of sales, selling, general and administrative expenses increased from 21.1% in the first quarter of fiscal 1997 to 24.2% in the first quarter of fiscal 1998, an increase of 3.1%. The increase as a percentage of sales was related to the catalog operation as well as to the impact of the decrease in the comparable store sales on the Company's ability to leverage the fixed components of these expenses. Interest income, net, was $1,119,000 in the first quarter of fiscal 1998 compared to $714,000 in the first quarter of fiscal 1997, an increase of $405,000. The increase was due to an increase in the average cash balance invested in the current year period as compared to the prior year. Income tax provision was $2,184,000 in the first quarter of fiscal 1998 compared to $2,443,000 in the first quarter of fiscal 1997. The effective tax rate was 38.5% compared to 41.0% in the prior year. The decrease in the effective tax rate is due to the impact of changes in the corporate cash investment strategy. Due to the factors noted above, net income was $3,488,000 in the first quarter of fiscal 1998 compared to $3,515,000 in the first quarter of fiscal 1997. As a percentage of sales, net income was 3.3% in the first quarter of fiscal 1998 compared to 3.7% in the first quarter of fiscal 1997. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities for the first quarter of fiscal 1998 was $8,752,000 compared to $3,264,000 for the first quarter of fiscal 1997. The increase of $5,488,000 was attributable to an increase in accounts payable, accrued liabilities, taxes payable, deferred rent and other long-term liabilities of $1,673,000, along with a decrease in merchandise inventories, prepaids and other receivables of $4,035,000, offset by a slight increase in other assets. Working capital at May 2, 1998 was $49,218,000 compared to $66,452,000 at January 31, 1998, a decrease of $17,234,000. This decrease was primarily due to an increase in long-term investments in the first quarter of fiscal 1998, as current year cash was invested to a larger extent in investments with maturities beyond one year, as well as an increase in capital expenditures for new store and remodel construction. Inventory was $32,107,000 at May 2, 1998 compared to $26,884,000 at January 31, 1998, an increase of $5,223,000, due to the 21 new stores opened during this period, the new ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED catalog operation, and the seasonal nature of the business; inventory levels are typically at a low point at year end. The increase in accounts payable and accrued liabilities of $11,642,000 at May 2, 1998 compared to January 31, 1998 was primarily attributable to the increase in inventory as well as to the increase in payables related to capital expenditures for new store and remodel construction. In the first quarter of fiscal 1998, the Company invested $9,917,000 in equipment and leasehold improvements, compared to $2,116,000 in the prior year first quarter. These expenditures related primarily to the 21 new stores opened and 11 stores remodeled in the first quarter of fiscal 1998 along with construction in progress for additional new and remodeled stores. The Company currently estimates that the capital expenditures for the remainder of fiscal 1998 will be approximately $25,000,000. These planned expenditures relate primarily to new store openings and remodels. The Company has an unsecured revolving line of credit arrangement with Bank of America National Trust and Savings Association ("Bank of America") in an aggregate principal amount of $30,000,000 and a five year amortizing term loan with Bank of America in the amount of $10,000,000, maturing on July 1, 2000. At May 2, 1998, there were no outstanding borrowings under the credit arrangement, and the Company believes it was in compliance with all terms and covenants of the credit arrangement and the term loan. The Company invests its excess funds primarily in a short-term investment grade money market fund, investment grade commercial paper and U.S. Treasury and Agency obligations. Management believes the Company's working capital and cash flows from operating activities will be sufficient to meet the Company's operating and capital requirements in the foreseeable future. SEASONALITY AND QUARTERLY OPERATING RESULTS The Company's business is seasonal by nature with the Christmas season (beginning the week of Thanksgiving and ending the first Saturday after Christmas) and the back-to-school season (beginning the last week of July and ending the first week of September) historically accounting for the largest percentage of sales volume. In the Company's three fiscal years ended January 31, 1998, the Christmas and back-to-school seasons together accounted for an average of approximately 33% of the Company's ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED annual sales, after adjusting for sales increases related to new stores. The Company does not believe that inflation has had a material effect on the results of operations during the past three years. However, there can be no assurance that the Company's business will not be affected by inflation in the future. STATEMENT REGARDING FORWARD LOOKING DISCLOSURE Certain sections of this Quarterly Report on Form 10-Q, including the preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain various forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including, without limitation, the retention by the Company of suppliers for both brand name and Company-developed merchandise, the ability of the Company to expand and to continue to increase comparable store sales, the sufficiency of the Company's working capital and cash flows from operating activities, a decline in demand for the merchandise offered by the Company, the ability of the Company to locate and obtain acceptable store sites and lease terms or renew existing leases, the ability of the Company to obtain adequate merchandise supply, the ability of the Company to hire and train employees, the ability of the Company to gauge the fashion tastes of its customers and provide merchandise that satisfies customer demand, management's ability to manage the Company's expansion, the effect of economic conditions, the effect of severe weather or natural disasters and the effect of competitive pressures from other retailers. NEW ACCOUNTING PRONOUNCEMENTS The Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS 130), in the first quarter of fiscal 1998. SFAS 130 establishes standards for the reporting and display of comprehensive income. Components of comprehensive income may include foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains and losses on marketable securities ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED classified as available-for-sale. The adoption of SFAS 130 required no additional disclosure for the Company and did not have a material effect on the Company's financial position or results of operations. In February 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits" which is effective for fiscal years beginning after December 15, 1997. This statement standardized the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis and eliminates certain disclosures that are no longer as useful as they were under previous statements. The Company will adopt the disclosure requirements in its Form 10-K for the fiscal year ending January 30, 1999. YEAR 2000 COMPLIANCE During fiscal 1998 and fiscal 1999, the Company plans to convert substantially all of its computer systems and hardware. Prior to the purchase of the new systems and hardware the Company obtained or is in the process of obtaining assurance from the vendors that the products purchased are in fact Year 2000 compliant. The Company will also complete an independent review of such systems to further verify Year 2000 compliance. The Company has performed a preliminary review of its existing computer systems and hardware to identify processes which may be affected by Year 2000 problems. At this time, no significant issues have been identified, however the Company will complete a more thorough review of its existing systems by the end of fiscal 1998 in order to ensure an adequate plan exists for Year 2000 compliance in the event the conversions fall behind schedule. During fiscal 1998 and fiscal 1999, the Company will also complete a Year 2000 review of its relationships with suppliers and financial institutions and obtain assurance, where necessary, that these entities are Year 2000 compliant. Because the majority of the Company's computer systems and hardware have been purchased or developed recently and were designed to be Year 2000 compliant, the Company does not expect to incur significant costs in addressing the Year 2000 issue. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS. The Company is not party to any material legal proceedings, other than ordinary routine litigation incidental to the Company's business. ITEM 2 - CHANGES IN SECURITIES. Not Applicable ITEM 3 - DEFAULTS UPON SENIOR SECURITIES. Not Applicable ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable ITEM 5 - OTHER INFORMATION. Not Applicable ITEM 6(a) - EXHIBITS. Not Applicable ITEM 6(b) - REPORTS ON FORM 8-K. Not Applicable 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. The Wet Seal, Inc. (Registrant) Date: June 8, 1998 /S/KATHY BRONSTEIN -------------------------- ----------------------------- Kathy Bronstein Vice Chairman and Chief Executive Officer (Principal Executive Officer) Date: June 8, 1998 /S/EDMOND THOMAS -------------------------- ----------------------------- Edmond Thomas President and Chief Operating Officer Date: June 8, 1998 /S/ANN CADIER KIM -------------------------- ----------------------------- Ann Cadier Kim Vice President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE WET SEAL, INC. BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JAN-30-1999 FEB-01-1998 MAY-02-1998 71,603,000 23,221,000 2,915,000 0 32,107,000 122,616,000 104,041,000 51,933,000 200,071,000 73,398,000 0 0 0 1,358,000 115,241,000 200,071,000 104,845,000 104,845,000 74,872,000 25,420,000 0 0 (1,119,000) 5,672,000 2,184,000 3,488,000 0 0 0 3,488,000 0.26 0.25
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