-----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, WjLcyO6xa6yqpz7Q1yOa0nDamgvneYZPmFRAUgDUTRikYPWtP59H8HfJ7DKqfrv8 dwz22tyFDLA0WBbItpMscw== 0000950144-97-013388.txt : 19971217 0000950144-97-013388.hdr.sgml : 19971217 ACCESSION NUMBER: 0000950144-97-013388 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971101 FILED AS OF DATE: 19971216 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHICOS FAS INC CENTRAL INDEX KEY: 0000897429 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 592389435 STATE OF INCORPORATION: FL FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21258 FILM NUMBER: 97738822 BUSINESS ADDRESS: STREET 1: 11215 METRO PKWY CITY: FT MYERS STATE: FL ZIP: 33912-1206 BUSINESS PHONE: 8134335505 MAIL ADDRESS: STREET 1: 11215 METRO PKY CITY: FT MYERS STATE: FL ZIP: 33912-1206 10-Q 1 CHICO'S FAS, INC. 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the Quarter Ended: Commission File Number: November 1, 1997 0-21258 CHICO'S FAS, INC. (Exact name of registrant as specified in charter) Florida 59-2389435 (State of Incorporation) (I.R.S. Employer Identification No.) 11215 Metro Parkway, Fort Myers, Florida 33912 (Address of principal executive offices) 941-277-6200 (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, 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 issuer's classes of common stock, as of the latest practical date. At December 12, 1997, there were 8,011,117 shares outstanding of Common Stock, $.01 par value per share. 2 CHICO'S FAS, INC. Index
Page PART I - Financial Information Item 1. Financial Statements (Unaudited): Condensed Balance Sheets - November 1, 1997 and February 1, 1997 . . . . . . . . . . . . . . . . . 3 Condensed Statements of Income for the Thirteen and Thirty-Nine Week Periods Ended November 1, 1997 and October 27, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Condensed Statements of Cash Flows for the Thirty-Nine Weeks Ended November 1, 1997 and October 27, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 PART II - Other Information Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3 CHICO'S FAS, INC. Condensed Balance Sheets (Unaudited)
As of As of 11/1/97 2/1/97 ----------------- ---------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,390,143 $ 832,176 Receivables, net 872,864 763,451 Inventories 8,560,681 7,845,362 Prepaid expenses 507,252 473,444 Deferred taxes 1,229,000 1,290,000 --------------- --------------- Total Current Assets 15,559,940 11,204,433 --------------- -------------- LAND, BUILDING AND EQUIPMENT: Cost 23,444,068 22,330,612 Less accumulated depreciation and amortization (6,227,477) (5,093,660) --------------- -------------- Land, Building and Equipment, Net 17,216,591 17,236,952 --------------- -------------- OTHER ASSETS: Certificate of deposit 1,000,000 1,600,000 Deferred taxes 564,000 552,000 Other assets 627,116 654,673 --------------- -------------- Total Other Assets 2,191,116 2,806,673 --------------- -------------- $ 34,967,647 $ 31,248,058 =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,846,019 $ 3,301,990 Accrued liabilities 3,133,351 2,461,026 Current portion of noncurrent liabilities 308,777 456,602 --------------- -------------- Total Current Liabilities 7,288,147 6,219,618 --------------- -------------- NONCURRENT LIABILITIES: Notes and capital leases payable 5,493,052 5,604,677 Credit line payable - 284,919 Deferred rent 1,189,700 1,118,246 --------------- -------------- Total Noncurrent Liabilities 6,682,752 7,007,842 --------------- -------------- STOCKHOLDERS' EQUITY: Common stock 79,018 78,841 Additional paid-in capital 7,606,138 7,555,708 Retained earnings 13,311,592 10,386,049 --------------- -------------- Total Stockholders' Equity 20,996,748 18,020,598 --------------- -------------- $ 34,967,647 $ 31,248,058 =============== ==============
Page 3 See Accompanying Notes 4 CHICO'S FAS, INC. Condensed Statements of Income (Unaudited)
Thirty-Nine Weeks Ended Thirteen Weeks Ended 11/1/97 10/27/96 11/1/97 10/27/96 ----------------- ----------------- ----------------- ----------------- Net Sales by Company Stores $ 56,304,505 $ 47,703,631 $ 18,332,112 $ 15,102,836 Net Sales to Franchisees 1,419,240 1,399,472 591,262 624,426 ----------------- ----------------- ----------------- ----------------- NET SALES 57,723,745 49,103,103 18,923,374 15,727,262 Cost of Goods Sold 25,318,077 19,791,672 8,039,187 6,358,899 ----------------- ----------------- ----------------- ----------------- Gross Profit 32,405,668 29,311,431 10,884,187 9,368,363 General, Administrative and Store Operating Expenses 27,255,961 24,559,809 9,220,152 8,177,078 ----------------- ----------------- ----------------- ----------------- Income from Operations 5,149,707 4,751,622 1,664,035 1,191,285 Interest Expense, Net 273,163 290,292 70,503 98,321 ----------------- ----------------- ----------------- ----------------- Income Before Taxes 4,876,544 4,461,330 1,593,532 1,092,964 Provision for Income Taxes 1,951,000 1,784,000 638,000 437,000 ----------------- ----------------- ----------------- ----------------- NET INCOME $ 2,925,544 $ 2,677,330 $ 955,532 $ 655,964 ================= ================= ================= ================= NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ 0.36 $ 0.33 $ 0.12 $ 0.08 ================= ================= ================= ================= Weighted average common and common equivalent shares outstanding 8,137,236 8,088,416 8,216,096 8,119,022 ================= ================= ================= =================
Page 4 See Accompanying Notes 5 CHICO'S FAS, INC. Condensed Statements of Cash Flows (Unaudited)
Thirty-Nine Weeks Ended 11/1/97 10/27/96 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,925,544 $ 2,677,330 ----------------- --------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,598,110 1,378,596 Deferred taxes 49,000 (95,000) Loss on disposal of property and equipment 239,899 198,368 Increase (decrease) in deferred rent 71,454 (8,394) Change in assets and liabilities: (Increase) decrease in receivables, net (109,413) 277,786 Increase in inventories (715,319) (2,590,257) Decrease in prepaids and other assets 545,496 37,591 Increase in accounts payable 544,029 230,851 Increase in accrued liabilities 672,325 621,571 ----------------- --------------- Total adjustments 2,895,581 51,112 ----------------- --------------- Net cash provided by operating activities 5,821,125 2,728,442 ----------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of fixed assets 34,500 - Purchase of land, buildings and equipment (1,703,896) (2,170,089) ----------------- --------------- Net cash used in investing activities (1,669,396) (2,170,089) ----------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock, net 50,607 459,164 Credit line payments (284,919) (255,816) Principal payments on debt (259,450) (358,259) Deferred finance costs (100,000) (152,536) ----------------- --------------- Net cash used in financing activities (593,762) (307,447) ----------------- --------------- Net increase in cash and cash equivalents 3,557,967 250,906 CASH AND CASH EQUIVALENTS - Beginning of Period 832,176 544,366 ----------------- --------------- CASH AND CASH EQUIVALENTS - End of Period $ 4,390,143 $ 795,272 ================= ===============
Page 5 See Accompanying Notes 6 CHICO'S FAS, INC. Notes to Condensed Financial Statements November 1, 1997 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation The accompanying unaudited condensed financial statements of Chico's FAS, Inc. (the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and notes thereto for the year ended February 1, 1997, included in the Company's Annual Report on Form 10-K filed on April 30, 1997. The February 1, 1997 balance sheet amounts included in this report were derived from audited financial statements included in the Company's Annual Report. Operating results for the thirty-nine weeks ended November 1, 1997 are not necessarily indicative of the results that may be expected for the entire fiscal year. Net Income Per Common and Common Equivalent Share Net income per common and common equivalent share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the periods, adjusted to include the number of additional shares (314,789 and 232,534 for the thirty-nine weeks ended November 1, 1997 and October 27, 1996, respectively and 243,887 and 237,233 for the thirteen weeks ended November 1, 1997 and October 27, 1996, respectively) that would have been outstanding if the stock options granted had been exercised, with the proceeds being used to buy shares from the market (i.e., the treasury stock method). Net income per common and common equivalent share represents both primary and fully diluted per share information. Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share" which establishes standards for computing and presenting earnings per share. The statement replaces the presentation of primary earnings per share on the income statement and provides for certain disclosures. The Company will adopt Statement No. 128 in the fourth quarter of fiscal 1998 and does not believe the effect of adoption will be material. 2. RENEWED CREDIT FACILITIES In December 1997 the Company renewed its $6 million letter and line of credit facilities such that the facilities now expire in May 1999 and the mortgage note is no longer cross collateralized with the letter and line of credit facilities. In addition, the interest rate provisions of the letter and line of credit facilities were modified to permit reductions of the interest rate from prime plus 1% to prime, based on the Company's financial performance. As of the date of the renewal, the Company's financial performance allows for the interest rate to be set at prime. Certain of the financial covenants were modified to reflect the Company's improved financial performance. Page 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO THE THIRTEEN WEEKS ENDED OCTOBER 27, 1996. NET SALES. Net sales by Company-owned stores for the thirteen weeks ended November 1, 1997 increased by $3.2 million, or 21.4%, over net sales by Company-owned stores for the comparable thirteen weeks ended November 1, 1996. The increase was the result of $1.5 million additional sales from the new (or reacquired) stores not yet included in the Company's comparable store base (net of sales of approximately $532,000 from six stores closed in 1996 and 1997), and a comparable Company-owned store net sales increase of $1.7 million. Net sales to franchisees for the thirteen weeks ended November 1, 1997 decreased by approximately $33,000, or 5.3% compared to net sales to franchisees for the thirteen weeks ended October 27, 1996. The Company believes that the decrease in net sales to franchisees was primarily caused by the reacquisition of two franchised stores in fiscal 1998 and fiscal 1997. GROSS PROFIT. Gross profit for the thirteen weeks ended November 1, 1997, was $10.9 million, or 57.5% of net sales, compared with $9.4 million, or 59.6% of net sales for the thirteen weeks ended October 27, 1996. The decrease in the gross profit percentage primarily resulted from a revised merchandising strategy as the Company reduced price points to more effectively meet competitive price points and increased sales promotions and other markdowns at both front line and outlet stores in an effort to carry out a strategy of maintaining lower levels of inventories held at the Company's warehouse for future clearance. To a lesser degree, the decrease in gross margins resulted from increased freight costs due to an increased use of air shipments as the Company attempted to rapidly increase its in-store inventory levels of newer merchandise. GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative and store operating expenses increased to $9.2 million, or 48.7% of net sales, in the thirteen weeks ended November 1, 1997 from $8.2 million, or 52.0% of net sales, in the thirteen weeks ended October 27, 1996. The increase in general, administrative and store operating expenses was, for the most part, the result of increases in store operating expenses, including store compensation, occupancy and other costs associated with new store openings. The decrease in these expenses as a percentage of net sales was principally due to direct store costs, including store compensation, which decreased by 3.6% of net sales due to leverage associated with the Company's 12.0% comparable store sales increase for the quarter, net of an increase in marketing and promotion costs as a percent of sales. INTEREST EXPENSE, NET. Net interest expense decreased to approximately $71,000 in the thirteen weeks ended November 1, 1997 from approximately $98,000 in the thirteen weeks ended October 27, 1996. Although the net expense remained relatively level, the amount included a small increase in gross interest expense attributable to an increase in the variable rate of the Company's mortgage note, offset by increased interest earnings from the Company's increased cash position. NET INCOME. As a result of the factors discussed above, net income reflects an increase of 45.6% to $1.0 million in the thirteen weeks ended November 1, 1997 from net income of approximately $656,000 in the thirteen weeks ended October 27, 1996. The provision for income taxes represented an effective rate of 40.0% for the thirteen weeks ended November 1, 1997 and October 27, 1996. Page 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO THE THIRTEEN WEEKS ENDED OCTOBER 27, 1996. (CONTINUED) COMPARABLE COMPANY STORE NET SALES. Comparable Company store net sales increased by 12.0% in the thirteen weeks ended November 1, 1997 when compared to the comparable period in the thirteen weeks ended October 27, 1996. Comparable Company store net sales data is calculated based on the change in net sales of currently open Company-owned stores that have been operated as a Company store for at least thirteen months. The Company believes that the increase in comparable Company store net sales resulted primarily from the Company's return in June 1997 to its traditional Chico's look, fit and pricing policies. The Company also believes that the increase in comparable Company store net sales was fueled by an increase in direct mail promotions during September and October 1997. RESULTS OF OPERATIONS - THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO THE THIRTY-NINE WEEKS ENDED OCTOBER 27, 1996. NET SALES. Net sales by Company-owned stores for the thirty-nine weeks ended November 1, 1997 increased by $8.6 million, or 17.6%, over net sales by Company-owned stores for the comparable thirty-nine weeks ended October 27, 1996. The increase was the result of $4.6 million additional sales from the new (or reacquired) stores not yet included in the Company's comparable store base (net of sales of $1.7 million from seven stores closed in 1996 and 1997), a comparable Company-owned store net sales increase of $3.5 million, and approximately $464,000 in additional sales resulting from the liquidation of inventory through an independent liquidator. Net sales to franchisees for the thirty-nine weeks ended November 1, 1997 increased by approximately $20,000, or 1.4% compared to net sales to franchisees for the thirty-nine weeks ended October 27, 1996. The Company believes that the increase in net sales to franchisees was primarily caused by a decrease in the volume of returned merchandise under the Company's new return policy implemented in mid 1996, offset by the reacquisition of two franchises in fiscal 1998 and fiscal 1997 and a decrease in purchases from the Company's largest franchisee. GROSS PROFIT. Gross profit for the thirty-nine weeks ended November 1, 1997, was $32.5 million, or 56.1% of net sales, compared with $29.3 million, or 59.7% of net sales for the thirty-nine weeks ended October 27, 1996. The decrease in the gross profit percentage primarily resulted from a revised merchandising strategy as the Company reduced price points to more effectively meet competitive price points and increased sales promotions and other markdowns at both front line and outlet stores in an effort to reduce the Company's levels of inventories, particularly older inventory that was being held at the Company's warehouse for future clearance. To a lesser degree, the decrease in gross margins resulted from (1) increased freight costs due to an increased use of air shipments as the Company attempted to rapidly increase its in-store inventory levels of newer merchandise, (2) a sale, at cost, of approximately $464,000 of inventory to an independent liquidator, and (3) additional inventory charges associated with certain of the Company's older designs and styles. Page 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS - THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO THE THIRTY-NINE WEEKS ENDED OCTOBER 27, 1996. (CONTINUED) GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative and store operating expenses increased to $27.3 million, or 47.2% of net sales, in the thirty-nine weeks ended November 1, 1997 from $24.6 million, or 50.0% of net sales, in the thirty-nine weeks ended October 27, 1996. The increase in general, administrative and store operating expenses was, for the most part, the result of increases in store operating expenses, including store compensation, occupancy and other costs associated with new store openings. The decrease in these expenses as a percentage of net sales was principally due to direct store costs which decreased by 2.1% of net sales due to leverage associated with the Company's 8.0% comparable store sales increase. To a lesser degree, the decrease is also attributable to net business interruption insurance proceeds related to the temporary closing of one of the Company's stores, net of an increase in marketing expenses. INTEREST EXPENSE, NET. Net interest expense decreased to approximately $273,000 in the thirty-nine weeks ended November 1, 1997 from approximately $290,000 in the thirty-nine weeks ended October 27, 1996. This decrease was primarily a result of an increase in earnings associated with the Company's improved cash position. NET INCOME. As a result of the factors discussed above, net income reflects an increase of 9.3% to $2.9 million in the thirty-nine weeks ended November 1, 1997 from net income of $2.7 million in the thirty-nine weeks ended October 27, 1996. The provision for income taxes represented an effective rate of 40.0% for the thirty-nine weeks ended November 1, 1997 and October 27, 1996. COMPARABLE COMPANY STORE NET SALES. Comparable Company store net sales increased by 8.0% in the thirty-nine weeks ended November 1, 1997 when compared to the comparable period in the thirty-nine weeks ended October 27, 1996. Comparable Company store net sales data is calculated based on the change in net sales of currently open Company-owned stores that have been operated as a Company store for at least thirteen months. The Company believes that the increase in comparable Company store net sales resulted primarily from the Company's return in June 1997 to its traditional Chico's look, fit and pricing policies. The Company also believes that the increase in comparable store sales was fueled by increased direct mail and other promotions, sales and markdowns of previous styles and designs as well as the Company's national sidewalk sale held in July 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's primary ongoing capital requirements are for funding capital expenditures related to new store openings and merchandise inventory purchases. During the thirty-nine weeks ended November 1, 1997 (fiscal 1998) and the thirty-nine weeks ended October 27,1996 (fiscal 1997), the Company's primary source of working capital was cash flow from operations of $5.8 million and $2.7 million, respectively. The increase in cash flow from operations was primarily due to the reduction in the inventory growth as reflected in the increase in inventories of approximately $715,000 in the first thirty-nine weeks of fiscal 1998, as compared to an increase of $2.6 million in the first thirty-nine weeks of fiscal 1997. The smaller increase in inventories was primarily due to the Company's ongoing effort to reduce the balance of goods held at the Company's distribution center offset by a planned increase in the level of newer merchandise at the Company's stores. This increase in cash flow provided by operations was also due to a decrease in other assets in fiscal 1998 of approximately $500,000, principally due to a reclassification of assets reflected in an amendment to the Company's credit facilities which reduced a required certificate of deposit from $1.6 million to $1.0 million and to an increase in accounts payable of approximately $545,000 in fiscal 1998 versus an increase in accounts payable of approximately $231,000 in fiscal 1997. These increases in cash flow from operations were offset in part by an increase in receivables of approximately $109,000 in fiscal 1998, versus a decrease in receivables of approximately $278,000 in fiscal 1997. Page 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The Company invested $1.7 million during the first thirty-nine weeks of fiscal 1998 for capital expenditures primarily associated with the opening of ten new (or reacquired) stores, the relocating of three existing stores and the remodeling of several existing stores. In addition, the Company invested $100,000 in intangible assets associated with the reacquisition of one franchised store. The Company also sold a small piece of land it originally acquired for its headquarters (with a cost of approximately $60,000) for approximately $35,000. The Company also closed during this period four stores, and intends to close one more store this fiscal year. During the first thirty-nine weeks of fiscal 1997, the Company invested $2.2 million for capital expenditures associated with the opening of eleven new stores, the remodeling of several existing stores and a companywide refixturing program which continued throughout fiscal 1997. The Company repaid under its then available credit lines approximately $285,000 and $256,000 in the first thirty-nine weeks of fiscal 1998 and 1997, respectively. In addition, the Company repaid other indebtedness of approximately $259,000 and $358,000 in the same periods. As more fully described in "Item 1-Business" appearing on pages 13 through 16 of the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1997, the Company is subject to ongoing risks associated with imports. The Company's reliance on sourcing from foreign countries causes the Company to be exposed to certain unique business and political risks. Import restrictions, including tariffs and quotas, and changes in such tariffs or quotas could affect the importation of apparel generally and, in that event, could increase the cost or reduce the supply of apparel available to the Company and have an adverse effect on the Company's business, financial condition and/or results of operations. The Company's merchandise flow could also be adversely affected by political instability in any of the countries in which its goods are manufactured, by significant fluctuations in the value of the U.S. dollar against applicable foreign currencies and by restrictions on the transfer of funds. During the first thirty-nine weeks of fiscal 1998, the Company sold 14,934 shares at a price of $2.44 under its Employee Stock Purchase Plan and two employees exercised an aggregate of 2,732 stock options at prices ranging from $5.50 to $7.35. The proceeds from these issuances of stock amounted to approximately $51,000. During the first thirty-nine weeks of fiscal 1997, one of the former officers exercised 71,540 stock options at a price of $4.08, several other employees exercised an aggregate of 7,046 options at prices ranging from $5.50 to $8.75 and the Company sold 21,037 shares at a price of $3.83 under its Employee Stock Purchase Plan. The proceeds from these issuances of stock amounted to approximately $459,000. The Company plans to open approximately 14 to 15 new stores in fiscal 1998, 11 of which were open as of November 30, 1997 and the Company plans to open 16 to 20 new stores in fiscal 1999. The Company believes that the liquidity needed for its planned new store growth, remodel program and maintenance of proper inventory levels associated with this growth will be funded primarily from cash flow from operations. The Company further believes that this liquidity will be sufficient, based on currently planned new store openings, to fund anticipated capital needs over the near-term, including scheduled debt repayments. If cash flow from operations should prove to be less than anticipated or if there should arise a need for additional letter of credit capacity due to establishing new and expanded sources of supply, or if the Company were to increase the number of new Company stores planned to be opened in future periods, the Company might need to seek other sources of financing to conduct its operations or pursue its expansion plans and there can be no assurance that such other sources of financing would be available. SEASONALITY AND INFLATION Although the operations of the Company are influenced by general economic conditions, the Company does not believe that inflation has had a material effect on the results of operations during the first thirty-nine weeks of fiscal 1998 or during the first thirty-nine weeks of fiscal 1997. Although sales have recently been somewhat higher in the Company's first and second fiscal quarters (February through July), the company does not consider its business to be seasonal. Page 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS This 10-Q may contain forward looking statements which reflect the current views of the Company with respect to certain events that could have an effect on the Company's future financial performance. These statements include the words "expects," "believes," and similar expressions. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. These potential risks and uncertainties include ability to secure customer acceptance of Chico's styles, propriety of inventory mix and sizing, quality of merchandise received from vendors, timeliness of vendor production and deliveries, increased competition, extent of the market demand by women for private label clothing and related accessories, adequacy and perception of customer service, ability to coordinate product development along with buying and planning, rate of new store openings, performance of management information systems, ability to hire, train, energize and retain qualified sales associates and other employees, availability of quality store sites, ability to hire and retain qualified managerial employees and other risks. In addition, there are potential risks and uncertainties that are peculiar to the Company's heavy reliance on sourcing from foreign vendors including the impact of work stoppages, transportation delays and other interruptions, political instability, foreign currency fluctuations, imposition of and changes in tariffs and import and export controls such as import quotas, changes in governmental policies in or towards such foreign countries and other similar factors. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27 Financial Data Schedule (b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during the thirty-nine weeks ended November 1, 1997 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: December 12, 1996 By: /s/ Marvin Gralnick --------------------------- Marvin Gralnick Chief Executive Officer (Principal Executive Officer) Date: December 12, 1996 By: /s/ Charles J. Kleman --------------------------- Charles J. Kleman Chief Financial Officer (Principal Financial and Accounting Officer) Page 11 EX-27 2 FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) OF CHICO'S FAS, INC. FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS JAN-31-1998 FEB-02-1997 NOV-01-1997 4,390,143 0 872,864 0 8,560,681 15,559,940 23,444,068 6,227,477 34,967,647 7,288,147 5,493,052 0 0 79,018 20,917,730 34,967,647 57,723,745 57,723,745 25,318,077 25,318,077 27,255,961 0 273,163 4,876,544 1,951,000 2,925,544 0 0 0 2,925,544 .36 .36
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