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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended 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 number 000-21543
WILSONS THE LEATHER EXPERTS INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1839933
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7401 BOONE AVE. N.
BROOKLYN PARK, MN 55428
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(612) 391-4000
----------------------------------------------------
(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 [ ]
As of December 9, 1999, there were 11,044,890 shares of common stock, $0.01 par
value per share, outstanding.
1
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WILSONS THE LEATHER EXPERTS INC.
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of October 30, 1999 and
January 30, 1999 3
Consolidated Statements of Operations for the
three months ended October 30, 1999 and October 31, 1998 4
Consolidated Statements of Operations for the
nine months ended October 30, 1999 and October 31, 1998 5
Consolidated Statements of Cash Flows for the
nine months ended October 30, 1999 and October 31, 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 3. Changes in Securities 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature 17
Index to Exhibits 18
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WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30,
1999 1999*
----------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 6,233 $ 116,160
Accounts receivable, net 16,235 6,325
Inventories 152,049 84,971
Prepaid expenses 2,831 1,595
Income taxes receivable 139 --
--------- ---------
Total current assets 177,487 209,051
Property and equipment, net 46,616 36,195
Other assets, net 2,582 3,532
--------- ---------
Total assets $ 226,685 $ 248,778
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 16,978 $ 17,328
Notes payable 39,130 --
Accrued expenses 33,831 33,033
Income taxes payable -- 22,894
Deferred income taxes 5,314 4,247
--------- ---------
Total current liabilities 95,253 77,502
Long-term debt 43,890 70,000
Other long-term liabilities 3,004 3,099
--------- ---------
Total liabilities 142,147 150,601
--------- ---------
Shareholders' Equity:
Common stock, $.01 par value; 100,000,000 shares authorized,
11,037,750 and 10,833,424 shares issued and outstanding on
October 30, 1999 and January 30, 1999, respectively 110 108
Additional paid-in capital 57,303 55,180
Retained earnings 27,156 42,931
Cumulative translation adjustment (31) (42)
--------- ---------
Total shareholders' equity 84,538 98,177
--------- ---------
Total liabilities and shareholders' equity $ 226,685 $ 248,778
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
* - Derived from audited consolidated financial statements.
3
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WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
OCTOBER 30, OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
NET SALES $ 104,250 $ 87,493
COSTS AND EXPENSES:
Cost of goods sold, buying and occupancy costs 67,578 61,404
Selling, general and administrative expenses 32,667 25,397
Depreciation and amortization 1,727 1,226
--------- ---------
Income (loss) from operations 2,278 (534)
INTEREST EXPENSE, NET 1,849 2,695
--------- ---------
Income (loss) before income taxes 429 (3,229)
INCOME TAX EXPENSE (BENEFIT) 169 (1,239)
--------- ---------
Income (loss) before extraordinary item 260 (1,990)
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
OF DEBT, NET OF TAX OF $78 (119) --
--------- ---------
Net income (loss) $ 141 $ (1,990)
========= =========
NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Income (loss) before extraordinary item $ 0.02 $ (0.18)
Extraordinary loss on early extinguishment
of debt, net of tax of $78 (0.01) --
--------- ---------
NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED $ 0.01 $ (0.18)
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC 10,995 10,826
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 11,569 10,826
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
OCTOBER 30, OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
NET SALES $ 237,590 $ 201,228
COSTS AND EXPENSES:
Cost of goods sold, buying and occupancy costs 172,090 154,149
Selling, general and administrative expenses 81,150 68,249
Depreciation and amortization 4,716 2,948
--------- ---------
Loss from operations (20,366) (24,118)
INTEREST EXPENSE, NET 4,052 5,667
--------- ---------
Loss before income taxes (24,418) (29,785)
INCOME TAX BENEFIT (9,600) (11,380)
--------- ---------
Loss before extraordinary item (14,818) (18,405)
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
OF DEBT, NET OF TAX OF $626 (958) --
--------- ---------
Net loss $ (15,776) $ (18,405)
========= =========
NET LOSS PER COMMON SHARE - BASIC AND DILUTED:
Loss before extraordinary item $ (1.36) $ (1.80)
Extraordinary loss on early extinguishment
of debt, net of tax of $626 (0.09) --
--------- ---------
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (1.45) $ (1.80)
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 10,902 10,199
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------
OCTOBER 30, OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (15,776) $ (18,405)
Adjustments to reconcile net loss to net cash used in
operating activities-
Extraordinary loss on early extinguishment of debt 958 --
Depreciation and amortization 4,716 2,948
Amortization of deferred financing costs 605 814
Loss on disposal of assets 534 168
Deferred income taxes 611 1,238
Changes in operating assets and liabilities:
Accounts receivable, net (9,910) (5,283)
Inventories (67,078) (79,508)
Prepaid expenses (1,236) (1,355)
Accounts payable and accrued expenses 409 (6,182)
Income taxes payable and other liabilities (21,897) (22,764)
--------- ---------
Net cash used in operating activities (108,064) (128,329)
--------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment (15,568) (12,740)
Additions to other noncurrent assets (656) (5,128)
--------- ---------
Net cash used in investing activities (16,224) (17,868)
--------- ---------
FINANCING ACTIVITIES:
Changes in notes payable 39,130 32,963
Proceeds from issuance of common stock, net 1,978 17,186
Repayment of long-term debt (26,110) --
Repurchase of CVS warrant -- (9,990)
Other (637) (10)
--------- ---------
Net cash provided by financing activities 14,361 40,149
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (109,927) (106,048)
CASH AND CASH EQUIVALENTS, beginning of period 116,160 112,975
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 6,233 $ 6,927
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 7,151 $ 9,065
========= =========
Income taxes $ 11,896 $ 11,065
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
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WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. NATURE OF ORGANIZATION
Wilsons The Leather Experts Inc. (Wilsons or the Company), incorporated in
Minnesota in 1996, is the leading specialty retailer of men's and women's
leather outerwear, apparel and accessories in the United States. As of October
30, 1999, the Company operated 538 retail stores located in 44 states, Canada
and England, including 465 mall stores, 32 airport locations and 41 factory
outlet stores. The Company's mall stores offer a full range of its leather
merchandise while the less seasonal airport and factory outlet stores offer
primarily accessories. The Company regularly supplements its mall-based
operations with seasonal holiday stores during its peak selling period from
October through December and plans to operate approximately 245 of these stores
during 1999.
2. BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include all accounts of Wilsons and
its wholly owned subsidiaries. All material intercompany balances and
transactions between the entities have been eliminated in consolidation.
The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosure, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the accompanying disclosures are
adequate to make the information presented not misleading, it is recommended
that these interim financial statements be read in conjunction with the
Company's most recent audited financial statements and related notes included in
its 1998 Annual Report on Form 10-K. In the opinion of management, all
adjustments (which include normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented have been made. The Company's business is highly
seasonal, and accordingly, interim operating results are not necessarily
indicative of the results that may be expected for the fiscal year ending
January 29, 2000.
3. INVENTORIES
Inventories, principally finished goods, consist of merchandise purchased
from domestic and foreign vendors and are carried at the lower of cost or market
value, determined by the retail inventory method on the last-in, first-out
(LIFO) basis. Quarterly inventory determinations under LIFO are partially based
on assumptions as to inventory levels at the end of the fiscal year, sales and
the projected rate of inflation for the year. If the first in, first out (FIFO)
method of accounting had been used by the Company, inventories at October 31,
1998, would have been $0.2 million higher than reported. The was no LIFO
provision included in inventory at October 30, 1999.
7
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4. SENIOR CREDIT FACILITY
On May 24, 1999, the Company entered into a new Senior Credit Facility with
General Electric Capital Corporation and a syndicate of banks. The new Senior
Credit Facility provides for borrowings of up to $125.0 million in aggregate
principal amount, which includes a letter of credit subfacility of up to $85.0
million. The maximum amount available under the new Senior Credit Facility is
limited to 60% of net inventories (65% during the months of September and
October plus a $7.5 million seasonal over-advance). The Company's borrowing
availability is also reduced by outstanding letters of credit.
Interest is payable on borrowings at one or more variable rates determined
by LIBOR plus 1.25%, commercial paper rate plus 1.25% or "prime" plus 0.0%. The
spreads are subject to change based on the Company's financial results. The new
Senior Credit Facility has covenants similar to the predecessor to the new
Senior Credit Facility. The new Senior Credit Facility expires in May 2002.
5. EXTRAORDINARY LOSS
The Company has purchased $26.1 million of its 11-1/4% Senior Notes, which
are due 2004, during the current fiscal year. The Company has incurred an
extraordinary loss, net of tax, of approximately $1.0 million for the early
extinguishment of debt.
6. RECLASSIFICATION
Certain reclassifications have been made to the consolidated financial
statements of the prior year to conform to the 1999 presentation.
7. NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133). The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. In June 1999, the effective date
of SFAS No. 133 was delayed by the FASB to fiscal years beginning after June 15,
2000. The Company will adopt SFAS No. 133 on January 30, 2000. The Company has
not yet quantified the impacts of adopting SFAS No. 133 on its financial
statements. However, the statement could increase volatility in earnings and
other comprehensive income.
The Company entered into a $40.0 million interest rate swap transaction on
July 7, 1999 with First Union National Bank (First Union) whereby First Union
pays the Company interest at a fixed rate of 11.25% and the Company pays First
Union interest at a commercial paper rate plus 5.37% (10.64% at October 30,
1999). The agreement terminates on August 15, 2001.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of Wilsons The Leather Experts Inc. and its wholly owned subsidiaries
(Wilsons or the Company) should be read in conjunction with the Company's most
recent audited financial statements and related notes included in its 1998
Annual Report on Form 10-K.
OVERVIEW
Wilsons is the leading specialty retailer of leather outerwear, apparel and
accessories in the United States. As of October 30, 1999, the Company operated
538 retail stores in 44 states, Canada and England, including 465 mall stores,
32 airport locations and 41 factory outlet stores. The Company regularly
supplements its mall-based operations with seasonal holiday stores to better
capitalize on its peak selling season from October through December and plans to
operate approximately 245 of these stores during 1999. Over 80% of the Company's
merchandise is designed and sold under Wilsons' proprietary labels, including M.
Julian(R), Maxima(R), Pelle Studio(R), and Wilsons The Leather Experts(TM), with
each label positioned to appeal to identified customer lifestyle segments.
Wilsons' mall stores average approximately 2,000 square feet and feature
merchandise tailored to the demographics and buying patterns of each store's
local customer base.
The Company's business is highly seasonal, therefore, the operating results
for the interim periods described below are not necessarily indicative of the
results that may be expected for a full fiscal year. A majority of the Company's
net sales and operating profit is generated in the peak selling season from
October through December, which includes the holiday selling season. Wilsons
recorded 56.6% of its sales for the fiscal year ended January 30, 1999, during
the peak selling season. As a result, the Company's annual operating results
have been, and will continue to be, heavily dependent on the results of its peak
selling season. Net sales are generally lowest during the period from April
through July, and the Company historically has not become profitable, if at all,
until the fourth quarter of a given fiscal year.
The Company does not believe that inflation has had a material adverse
effect on the results of operations for the periods presented, however, there
can be no assurance that the Company's business will not be affected by
inflation in the future.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 30, 1999 COMPARED TO
THE THREE MONTHS ENDED OCTOBER 31, 1998
Net sales increased 19.2% to $104.3 million in 1999 from $87.5 million in
1998. Contributing to the $16.8 million sales increase were (i) a $10.1 million,
or 11.8%, comparable store sales increase due to the continued strong sales of
young men's and women's merchandise, and (ii) a $6.7 million increase in
non-comparable store sales due to stores that have been open less than one year.
Wilsons opened 25 stores and closed one store in the third quarter ended
October 30, 1999 compared to 12 store openings during the third quarter last
year. Included in the 25 stores opened
9
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in the third quarter of 1999 are 20 mall stores, four airport stores and one
factory outlet store. As of October 30, 1999, Wilsons operated 538 stores
compared to 515 stores at October 31, 1998.
Cost of goods sold, buying and net occupancy costs were 64.8% of net sales,
or $67.6 million, compared to 70.2% of net sales, or $61.4 million, for the same
period a year ago. The decrease in the costs of 5.4 points as a percentage of
net sales is related to an increase in gross margin net of occupancy and a
decrease in occupancy costs. Gross margin net of occupancy costs increased 3.5
points as a percentage of sales for the quarter as compared to last year due
primarily to strong sales of higher margin fashion merchandise and fewer
markdowns as a result of lower levels of clearance merchandise at the beginning
of the quarter. The Company leveraged occupancy costs as they declined by 1.9%
of net sales for the quarter compared to last year. The Company's inventories
are valued under the retail inventory method on the last-in, first-out (LIFO)
basis. No LIFO provision was required for the quarter ended October 30, 1999;
the LIFO benefit included in cost of sales for the quarter ended October 31,
1998 was $0.4 million.
Selling, general and administrative expenses were 31.3% of net sales, or
$32.7 million, compared to 29.0% of net sales, or $25.4 million, for the same
period last year. The increase of 2.3 points as a percentage of net sales is
largely due to the investment of $1.2 million in an e-commerce initiative as
well as increased store signage and spending in support of the Company's
branding strategy.
Depreciation and amortization expense increased to $1.7 million from $1.2
million last year, and increased as a percentage of net sales to 1.7% from 1.4%.
The increase in depreciation and amortization resulted primarily from capital
expenditures for new store construction and the renovation of existing stores.
Net interest expense decreased to $1.8 million from $2.7 million during the
same period last year. The decrease is the result of $31.1 million less
long-term debt outstanding during 1999.
During the third quarter, the Company purchased $5.0 million of its 11-1/4%
Senior Notes, which are due 2004. As a result of the purchase, the Company
incurred an extraordinary loss, net of tax, of approximately $0.1 million for
the early extinguishment of debt.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 30, 1999 COMPARED TO THE
NINE MONTHS ENDED OCTOBER 31, 1998
Net sales increased 18.1% to $237.6 million in 1999 from $201.2 million in
1998. Contributing to the $36.4 million sales increase were (i) a $20.4 million,
or 10.5%, comparable store sales increase due to strong sales across all
merchandise categories, (ii) a $12.4 million increase in non-comparable store
sales due to 30 new store openings offset by 10 store closings year to date plus
the effect of stores that have been open less than one year and (iii) a $3.6
million increase resulting from the acquisition of 40 Wallet Works factory
outlet stores in May 1998.
Wilsons opened 30 stores and closed 10 stores during the nine months ended
October 30, 1999 compared to 28 store openings, 12 store closings and the
acquisition of 40 Wallet Works stores during the same period last year. Included
in the 30 stores opened in the first nine months of
10
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1999 are 25 mall stores, four airport stores and one factory outlet store. As of
October 30, 1999, Wilsons operated 538 stores compared to 515 stores at October
31, 1998.
Cost of goods sold, buying and occupancy costs were 72.4% of net sales, or
$172.1 million, compared to 76.6% of net sales, or $154.1 million, for the same
period a year ago. The decrease in the costs of 4.2 points as a percentage of
net sales is related to an increase in gross margin net of occupancy and
leveraging occupancy costs. Gross margin net of occupancy costs increased 2.6
points as a percentage of sales compared to last year due primarily to an
improvement in initial mark-on and fewer markdowns. Occupancy costs decreased
1.7 points as a percentage of sales compared to last year. The Company was able
to leverage occupancy costs and reduce them to 20.2% of net sales compared to
21.9% of net sales in 1998. The Company's inventories are valued under the
retail inventory method on the LIFO basis. No LIFO provision was required for
the nine months ended October 30, 1999; the LIFO provision included in cost of
sales for the nine months ended October 31, 1998 was $0.2 million.
Selling, general and administrative expenses were 34.2% of net sales, or
$81.2 million, compared to 33.9% of net sales, or $68.2 million, for the same
period last year. The increase of 0.3 points as a percentage of net sales is
largely due to the investment of $1.4 million in an e-commerce initiative as
well as increased store signage and product promotions in support of the
Company's branding strategy, partially offset by sales productivity improvements
in the stores and leveraging fixed costs in the stores.
Depreciation and amortization expense increased to $4.7 million from $2.9
million last year, and increased as a percentage of net sales to 2.0% from 1.5%.
The increase in depreciation and amortization resulted primarily from capital
expenditures for new store construction and the renovation of existing stores.
Net interest expense decreased $1.6 million to $4.1 million from $5.7
million last year. The decrease is the result of lower levels of long-term debt
outstanding during 1999.
The Company purchased $26.1 million of its 11-1/4% Senior Notes, which are
due 2004, during the first nine months of this fiscal year. As a result of the
purchase, the Company has incurred an extraordinary loss, net of tax, of
approximately $1.0 million for the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
Wilsons' capital requirements are primarily driven by the Company's
seasonal working capital needs and its strategy to open new stores, remodel
existing stores and upgrade information systems. The Company's peak working
capital needs typically occur during the period from August through early
December as inventory levels are increased in advance of the Company's peak
selling season from October through December.
General Electric Capital Corporation and a syndicate of banks have provided
the Company with a senior credit facility (the Senior Credit Facility). The
Senior Credit Facility provides for borrowings of up to $125.0 million in
aggregate principal amount, which includes a letter of credit subfacility of up
to $85.0 million. The maximum amount available under the Senior Credit Facility
is limited to 60% of net inventories (65% during the months of September and
October plus a $7.5
11
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million seasonal advance). The Company's borrowing availability is also reduced
by outstanding letters of credit.
Interest is payable on borrowings at one or more variable rates determined
by LIBOR plus 1.5%, commercial paper rate plus 1.5% or "prime" plus 0.0% rate.
The spreads are subject to change based on the Company's financial results. As
of October 30, 1999, the Company had $39.1 million of borrowings under the
Senior Credit Facility and $33.7 million of outstanding letters of credit. The
Company pays monthly fees on the unused portion of the Senior Credit Facility
and on the average daily amount of letters of credit outstanding during each
month. The Senior Credit Facility expires in May 2002.
The Senior Credit Facility contains certain covenants limiting, among other
things, the Company's ability to make capital expenditures, pay cash dividends
or make other distributions.
The Company plans to use the Senior Credit Facility for its immediate and
future working capital needs, including capital expenditures. For 1998, the peak
borrowings and letters of credit outstanding under the predecessor to the Senior
Credit Facility were $38.4 million and $48.7 million, respectively. The peak
time of year is October through December for borrowings and August through
September for letters of credit. The Company is dependent on the Senior Credit
Facility to fund working capital and letter of credit needs, and management
believes that borrowing capacity under the Senior Credit Facility, together with
current and anticipated cash flow from operations, should be adequate to meet
the Company's anticipated working capital and capital expenditure requirements.
On January 30, 1999, the Company had $70.0 million of 11-1/4% Senior Notes
outstanding. As of October 30, 1999, the Company had reduced the outstanding
balance to $43.9 million by purchasing, at various times, approximately $26.1
million of its Senior Notes.
The Company entered into a $40.0 million interest rate swap transaction on
July 7, 1999 with First Union National Bank (First Union) whereby First Union
pays the Company interest at a fixed rate of 11.25% and the Company pays First
Union interest at a commercial paper rate plus 5.37% at October 30, 1999. The
agreement terminates on August 15, 2001.
CASH FLOW ANALYSIS
Operating activities for the nine months ended October 30, 1999, resulted
in cash used of $108.1 million compared to cash used of $128.3 in 1998. The cash
used was primarily the result of the net loss of $15.8 million, the seasonal
increase of $77.0 million in inventories and accounts receivable and a seasonal
decrease of $21.5 million in accounts payable, accrued expenses, income taxes
payable and other liabilities.
Changes in certain balance sheet accounts between January 30, 1999, and
October 30, 1999, reflect normal seasonal variations within the retail industry.
The level of cash and cash equivalents, inventories, accounts receivable,
accounts payable and certain accrued liabilities fluctuate due to the seasonal
nature of the Company's operations.
12
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Investing activities for the nine months ended October 30, 1999, totaled
$16.2 million and were primarily comprised of capital expenditures of $15.6
million. The majority of the capital expenditures were for the renovation of and
improvements to existing stores and constructing 30 new stores.
Cash provided by financing activities for the nine months ended October 30,
1999, was $14.4 million. The $14.4 million was primarily the result of $39.1
million in net proceeds from the seasonal borrowings under the Senior Credit
Facility, offset by the $26.1 million used to repurchase Senior Notes.
Cash provided by financing activities for the nine months ended October 31,
1998 was $40.1 million. The $40.1 million provided by financing activities was
primarily the result of $33.0 million in net proceeds from the seasonal
borrowings under the predecessor to the Senior Credit Facility, $17.2 million
net proceeds received by the Company from the exercise of the common stock
redeemable purchase warrants, partially offset by the $10.0 million used to
repurchase the warrant issued to CVS New York, Inc. (formerly Melville
Corporation).
EFFECT OF YEAR 2000 ON INFORMATION SYSTEMS
The Company's operations are highly dependent on computerized record
keeping, financial reporting, and other systems, including inventory management
and distribution, point-of-sale and internal accounting systems. In addition,
many of the Company's vendors and other third parties with whom the Company
conducts business also utilize computer systems that may be adversely affected
by year 2000-related programming errors.
State of Readiness. In 1995, the Company began replacing its legacy
mainframe software systems with the goal of upgrading the functionality of the
Company's business systems. Certain business systems that were not year 2000
compliant were replaced with off-the-shelf vendor packaged software solutions.
By the end of 1997, merchandising, financial and human resource software were
implemented, replacing the Company's noncompliant, legacy mainframe software
systems. These vendor software packages have been certified by the vendors as
year 2000 compliant, and compliance testing was completed during the third
quarter of this year.
In order to support these new software packages, the Company's systems
infrastructures have been upgraded to become fully year 2000 compliant. The
Company completed its migration to year 2000 compliant servers, operating
systems and related data base software during 1998 and the first quarter of
1999.
In 1998, the Company created a Year 2000 Project Committee responsible for
planning and monitoring the Company's overall year 2000 program and for
reporting to the Company's senior management and Board of Directors. The
Company's year 2000 program encompasses both information and non-information
systems within the Company as well as investigation of the readiness of the
Company's significant business partners. The Company engaged an outside
consulting firm to assess Wilsons' readiness for the year 2000 and develop
project plans for remediation of year 2000 issues.
The Company has completed its assessment of hardware, software, embedded
systems (including facilities), goods suppliers, service providers and date
sensitive components. This
13
<PAGE>
assessment has resulted in a complete inventory of all of the Company's
date-sensitive components. In addition, key suppliers of goods and service
providers have been sent surveys and 90% have been returned. The Company is
currently following-up where it has not received a response or where the
response included a future date for Year 2000 completion. This resulted in the
identification of areas of risk and the development of project plans to ensure
year 2000 compliance in areas that present the greatest business risk.
The Company has communicated with all of its key "critical" and "important"
suppliers and other business partners or vendors seeking assurances they will be
year 2000 compliant. Although no method exists for achieving certainty that any
significant business partners will function without disruption in the year 2000,
the Company's goal was to identify those companies which appear to pose a
significant risk of failure to perform their obligations to the Company as a
result of year 2000 problems. The Company has reviewed significant business
partners to confirm their level of preparedness for the year 2000 and made
adjustments where necessary to avoid utilization of those partners who presented
an unacceptable level of risk.
Wilsons has implemented project plans to remediate non-compliant systems
identified in its assessment of year 2000 risks. The Company has implemented its
year 2000 solutions in three phases:
1. Projects were underway to repair or replace components determined to
pose significant risks. Desktop replacement was completed early in the
third quarter of fiscal 1999. Key software projects completed include
the remediation of distribution center systems, the upgrade and/or
replacement of store point-of-sale registers/or software, upgrades to
certain merchandising and financial systems, and the development of a
test environment.
2. Testing included validation of the solutions identified in the
remediation of internal systems and interfaces and off-the-shelf
vendor packages. System-wide testing was completed by the end of the
third quarter of fiscal 1999.
3. The final implementation of all remediated and tested components was
completed by the end of October 1999.
The Company's store back office communication system will not be year 2000
compliant. Alternative procedures are in place to ensure effective communication
to operate all stores from year-end 1999 until the new system is installed
during 2000. The Company believes that this will not have a material effect on
store operations.
Costs to Address the Year 2000 Issue. The Company is expensing costs for
modifications as incurred. These expenses are not expected to have a material
adverse impact on the Company's results of operations or cash flows. The Company
is funding the cost of its year 2000 program with cash flows from operations.
The Company's total year 2000 expenditures are estimated to be approximately
$1.0 million. The largest single year 2000 expenditure to date has been
consulting fees incurred in the assessment and remediation of year 2000 issues.
To date, the Company has spent $0.8 million, all of which has been expensed.
This amount should not be taken as an indication of the Company's degree of
completion of its year 2000 program.
14
<PAGE>
Risks Presented by the Year 2000 Issue. The Company faces significant risk
that would result from (a) the disruption of the merchandise supply chain,
including ports, transportation vendors, and the Company's distribution centers
due to system failures or loss of necessary infrastructure support such as
electricity or telecommunications, (b) the inability of primary suppliers to be
year 2000 compliant, which could cause delays in product availability and (c)
general failure of in-store systems or landlord infrastructure support systems
such as utilities which could severely limit the Company's ability to conduct
business in its stores.
Contingency Plans. The Company has prepared contingency plans to minimize
disruption to its operations in the event of a year 2000 failure. The Company
has formulated plans to handle a variety of failure scenarios, including
failures of its internal systems, as well as failures of significant business
partners. This planning focused on the prioritization of business processes and
the development of action plans to deal with potential events that could be
caused by the year 2000 that may disrupt the normal work routine. The Company's
contingency planning was completed by the end of November 1999.
While the Company believes its planning efforts are adequate to address its
year 2000 concerns, the year 2000 readiness of the Company's suppliers and
business partners may lag behind the Company's efforts. Although the Company
does not believe that the year 2000 matters discussed above will have a material
impact on its business, financial condition and results of operations, it is
uncertain as to what extent the Company may be affected by such matters.
There can be no assurance that all year 2000 problems will, in fact, be
identified and corrected by the Company or third parties or that expenditures
will not be significantly higher than currently anticipated. In addition, the
Company's business, financial condition and results of operations may be
adversely affected if the Company and/or other organizations with which the
Company does business are unsuccessful in completing in a timely manner the
conversion to applications that can process year 2000 dates or if the cost of
the Company's year 2000 initiative is significantly higher than estimated.
-----------------------------------
Except for historical information, matters discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements involve risks and uncertainties, and actual results
may be materially different. Because actual results may differ, readers are
cautioned not to place undue reliance on forward-looking statements. Factors
that could cause actual results to differ include: changing fashion trends and
consumer preferences or misjudgment in fashion trends; adverse economic
conditions and consumer shopping patterns; declines in comparable store sales;
seasonality of business; risks of foreign sourcing and international business;
effect of year 2000 on information systems; risks associated with future growth;
loss of key personnel; high levels of Company debt and restrictions imposed by
lenders and indentures; competition in the retail industry; price and
availability of raw material; availability of personnel; possible volatility of
stock price, dividend policy; effect of anti-takeover provisions; and control by
certain shareholders. Certain of these risk factors are more fully discussed in
the Company's Annual Report on Form 10-K for the fiscal year ended January 30,
1999.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" in Part I., Item
2., of the document for a description of limitations upon the payment of
dividends.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
EXHIBIT DESCRIPTION
------- -----------
10.1 First Amendment to the Amended and Restated Credit
Agreement dated as of September 24, 1999.
10.2 Reaffirmation of Guaranty dated September 24, 1999 by
Wilsons The Leather Experts Inc., Wilsons Center, Inc.,
Rosedale Wilsons, Inc. and River Hills Wilsons, Inc.
11.1 Computation of per share income (loss).
27.1 Financial Data Schedule.
B. Exhibits and Reports on Form 8-K: The Company did not file any reports
on Form 8-K during the third quarter ended October 30, 1999.
16
<PAGE>
SIGNATURE
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.
WILSONS THE LEATHER EXPERTS INC.
By: /s/ Douglas J. Treff
----------------------------------
Douglas J. Treff
Vice President, Finance,
Chief Financial Officer, and
Assistant Secretary
Date: December 14, 1999
-----------------
17
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description Method of Filing
- ----------- ----------- ----------------
10.1 First Amendment to the Amended Electronic Transmission
and Restated Credit Agreement
dated as of September 24, 1999.
10.2 Reaffirmation of Guaranty dated Electronic Transmission
September 24, 1999 by Wilsons The
Leather Experts Inc., Wilsons Center,
Inc., Rosedale Wilsons, Inc.
and River Hills Wilsons, Inc.
11.1 Computation of per share income (loss) Electronic Transmission
27.1 Financial Data Schedule Electronic Transmission
18
<PAGE>
Exhibit 10.1
FIRST AMENDMENT TO
------------------
THE AMENDED AND RESTATED CREDIT AGREEMENT
-----------------------------------------
This FIRST AMENDMENT AND CONSENT TO THE AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is entered into as of this 24th day of September,
1999 among WILSONS LEATHER HOLDINGS INC., a Minnesota corporation ("Borrower"),
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as for itself, as
Lender, as Swing Line Lender and as Agent ("Agent"), the Credit Parties
signatory hereto ("Credit Parties") and the Requisite Lenders signatory hereto.
Unless otherwise specified herein, capitalized terms used in this Amendment
shall have the meanings ascribed to them by the Credit Agreement (as hereinafter
defined).
RECITALS
--------
WHEREAS, Borrower, certain Credit Parties, Agent, and Lenders have
entered into that certain Amended and Restated Credit Agreement dated as of May
24, 1999, (as further amended, supplemented, restated or otherwise modified from
time to time, the "Credit Agreement"); and
WHEREAS, Borrower and Agent wish to enter into certain amendments to
the Credit Agreement, all as more fully set forth herein;
NOW THEREFORE, in consideration of the mutual covenants herein and
other good and valuable consideration, the parties hereto agree as follows:
Section 1 Amendments to the Credit Agreement.
-----------------------------------
Subject to the satisfaction of the conditions precedent set forth in
Section 3 hereof, the parties hereto hereby agree to amend the Credit Agreement
as follows:
(a) Subpart (b) of Section 6.17 of the Credit Agreement is hereby
amended by deleting the term "$30,000,000 of Senior Notes" therefrom and
inserting the term "$32,000,000 of Senior Notes."
Section 2 Representations and Warranties.
-------------------------------
Borrower and the Credit Parties represent and warranty that:
(a) the execution, delivery and performance by Borrower and the Credit
Parties of this Amendment have been duly authorized by all necessary corporate
action and this Amendment is a legal, valid and binding obligation of Borrower
and the Credit Parties enforceable against Borrower and Credit Parties in
accordance with its terms, except as the enforcement thereof may be subject to
(i) the effect of any applicable bankruptcy,
<PAGE>
insolvency, reorganization, moratorium or similar law affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law);
(b) each of the representations and warranties contained in the Credit
Agreement is true and correct in all material respects on and as of the date
hereof as if made on the date hereof, except to the extent that such
representations and warranties expressly relate to an earlier date;
(c) neither the execution, delivery and performance of this Amendment
nor the consummation of the transactions contemplated hereby does or shall
contravene, result in a breach of, or violate (i) any provision of Borrower's or
Credit Parties' certificate or articles of incorporation or bylaws, (ii) any law
or regulation, or any order or decree of any court or government instrumentality
or (iii) indenture, mortgage, deed of trust, lease, agreement or other
instrument to which Borrower, the Credit Parties or any of their Subsidiaries is
a party or by which Borrower, the Credit Parties or any of their Subsidiaries or
any of their property is bound, except in any such case to the extent such
conflict or breach has been waived by a written waiver document a copy of which
has been delivered to Agent on or before the date hereof; and
(d) no Default or Event of Default will exist or result after giving
effect hereto.
Section 3 Conditions to Effectiveness.
----------------------------
This Amendment will be effective only upon satisfaction of the
following;
(a) Execution and delivery of four counter-parts of this Amendment by
each of the parties hereto.
(b) The representations and warranties contained herein shall be true
and correct in all respects.
(c) Each Guarantor shall have executed and delivered the form of
Reaffirmation of Guaranty attached to this Amendment.
Section 4 Reference to and Effect Upon the Credit Agreement.
--------------------------------------------------
(a) Except as specifically amended above, the Credit Agreement and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Agent or any Lender
under the Credit Agreement or any Loan Document, nor constitute a waiver of any
provision of the Credit
-2-
<PAGE>
Agreement or any Loan Document, except as specifically set forth herein. Upon
the effectiveness of this Amendment, each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof", "herein" or words of similar import
shall mean and refer to the Credit Agreement as amended hereby.
Section 5 Waiver and Release.
-------------------
In consideration of the foregoing, Borrower and the Credit Parties
hereby waives, releases and covenants not to sue Agent with respect to, any and
all claims it may have against Agent, whether known or unknown, arising in tort,
by contract or otherwise prior to the date hereof.
Section 6 Costs and Expenses.
-------------------
As Provided in Section 11.3 of the Credit Agreement, Borrower agrees to
reimburse Agent for all fees, costs and expenses, including the fees, cost and
expenses of counsel or other advisors for advice, assistance, or other
representation in connection with this Amendment.
Section 7 GOVERNING LAW.
--------------
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF
ILLINOIS.
Section 8 Headings.
---------
Section headings in this Amendment are included herein for convenience
of reference only and shall not constitute a part of this amendment for any
other purposes.
Section 9 Counterparts.
-------------
This Amendment may be executed in any number of counterparts, each of
which when so executed shall be deemed an original but all such counterparts
shall constitute one and the same instrument.
[signature page follows]
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first written above.
BORROWER:
WILSONS LEATHER HOLDINGS INC.
By: /s/ Douglas J. Treff
------------------------------
Title CFO
----------------------------
AGENT:
Revolving Loan Commitment: GENERAL ELECTRIC CAPITAL
$45,000,000 (including CORPORATION, as Agent, Lender and
$10,000,000 Swing Line Swing Line Lender
Commitment)
By: /s/ Geoffrey K. Hall
------------------------------
Title Duly Authorized Signatory
----------------------------
LENDERS:
Revolving Loan Commitment BANKBOSTON, N.A., as Lender
$10,000,000
By: /s/ Kathy Dint
------------------------------
Title Vice President
----------------------------
Revolving Loan Commitment THE CIT GROUP/BUSINESS CREDIT,
$10,000,000 INC., as Lender
By: /s/ J.
------------------------------
Title SVP
----------------------------
-4-
<PAGE>
Revolving Loan Commitment: FIRST UNION NATIONAL BANK, as
$20,000,000 Lender
By: /s/ J.F.
------------------------------
Title EVP
----------------------------
Revolving Loan Commitment: U.S. BANK NATIONAL ASSOCIATION,
$15,000,000 as Lender
By: /s/ Kim Leppanen
------------------------------
Title Assistant Vice President
----------------------------
Revolving Loan Commitment: HARRIS TRUST AND SAVINGS BANK,
$15,000,000 as Lender
By: /s/ Andrew A. Pulas
------------------------------
Title Vice President
----------------------------
Revolving Loan Commitment: FLEET BUSINESS CREDIT CORPORATION,
$10,000,000 as Lender
By: /s/ Donald A. Mastro
------------------------------
Title Vice President
----------------------------
CREDIT PARTIES:
Wilsons The Leather Experts Inc.
By: /s/ Douglas J. Treff
------------------------------
Title CFO
----------------------------
-5-
<PAGE>
Wilsons Center, Inc.
By: /s/ Douglas J. Treff
------------------------------
Title CFO
----------------------------
Rosedale Wilsons, Inc.
By: /s/ Douglas J. Treff
------------------------------
Title CFO
----------------------------
River Hills Wilsons, Inc.
By: /s/ Douglas J. Treff
------------------------------
Title CFO
----------------------------
Bermans The Leather Experts Inc.
By: /s/ Douglas J. Treff
------------------------------
Title CFO
----------------------------
-6-
<PAGE>
Exhibit 10.2
REAFFIRMATION OF GUARANTY
-------------------------
September 24, 1999
General Electric Capital Corporation, as Agent
10 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
Attn: Wilsons Leather Account Manager
Please refer to (1) the Amended and Restated Credit Agreement dated May 24,
1999 (the "Credit Agreement"), amending and restating that certain Credit
Agreement dated as of May 25, 1996 among Wilsons Leather Holdings Inc.
("Borrower"), and the Loan Parties, General Electric Capital Corporation,
individually and as agent ("Agent") and the other lenders signatory thereto; (2)
the First Amendment to the Credit Agreement ("First Amendment"), (3) the Parent
Guaranty dated as of May 25, 1996 (as amended, the "Parent Guaranty"), by
certain of the undersigned in favor of Agent on behalf of the Lenders under the
Credit Agreement (4) the Store Guarantors' Guaranty (as amended, the "Store
Guarantors' Guaranty") dated as of May 25, 1996 by certain of the undersigned in
favor of Agent on behalf of the Lenders under the Credit Agreement, (5) the
Joinder Agreement dated July 31, 1997 between Wilsons International, Inc. and
Agent and (6) the Joinder Agreement of even date herewith between certain of the
under singed and Agent. Pursuant to the First Amendment, the Senior Note
repurchase basket set forth in Section 6.17 of the Credit Agreement has been
increased from $30,000,000 to $32,000,000. All capitalized terms used but not
otherwise defined herein have the meaning given to them in the Credit Agreement
or in Schedule A thereto.
<PAGE>
We hereby (i) acknowledge receipt of the First Amendment, (ii) acknowledge
and reaffirm all of our obligations and undertakings under the Parent Guaranty
and the Store Guarantors' Guaranty (as applicable) (collectively, the
"Guaranties"), and (iii) acknowledge and agree that subsequent to, and taking
into account such First Amendment, the Guaranties are and shall remain in full
force and effect in accordance with the terms thereof.
PARENTS:
Wilsons The Leather Experts Inc.
Wilsons Center, Inc.
Rosedale Wilsons, Inc.
River Hills Wilsons, Inc.
By: /s/ Douglas J. Treff
---------------------------------
Title: CFO
---------------------------------
The authorized officer of each of
the foregoing corporations
STORE GUARANTORS:
Bermans The Leather Experts Inc.
Wilsons International Inc.
Wilsons Leather of Airports Inc.
Wilsons Leather of Alabama Inc.
Wilsons Leather of Arkansas Inc.
Wilsons Leather of Canada Ltd.
Wilsons Leather of Connecticut Inc.
Wilsons Leather of Delaware Inc.
Wilsons Leather of Florida Inc.
Wilsons Leather of Georgia Inc.
Wilsons Leather of Indiana Inc.
Wilsons Leather of Iowa Inc.
Wilsons Leather of Louisiana Inc.
Wilsons Leather of Maryland Inc.
Wilsons Leather of Massachusetts Inc.
Wilsons Leather of Michigan Inc.
Wilsons Leather of Mississippi Inc.
Wilsons Leather of Missouri Inc.
Wilsons Leather of New Jersey Inc.
Wilsons Leather of New York Inc.
Wilsons Leather of North Carolina Inc.
Wilsons Leather of Ohio Inc.
Wilsons Leather of Pennsylvania Inc.
Wilsons Leather of Rhode Island Inc.
-2-
<PAGE>
Wilsons Leather of South Carolina Inc.
Wilsons Leather of Tennessee Inc.
Wilsons Leather of Texas Inc.
Wilsons Leather of Vermont Inc.
Wilsons Leather of Virginia Inc.
Wilsons Leather of West Virginia Inc.
Wilsons Leather of Wisconsin Inc.
By: /s/ Douglas J. Treff
----------------------------------
Name: CFO
----------------------------------
The authorized officer of each of
the foregoing corporations
-3-
<PAGE>
EXHIBIT 11.1
WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES
NET INCOME (LOSS) PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
OCTOBER 30, OCTOBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Net income (loss) $ 141 $ (1,990)
======== ========
Weighted average common shares outstanding - basic 10,995 10,826
Effect of options granted (1) 532 --
Effect of warrant (1) 42 --
-------- --------
Weighted average common shares outstanding - assuming
dilution 11,569 10,826
======== ========
Basic and diluted net income (loss) per common share $ 0.01 $ (0.18)
======== ========
NINE MONTHS NINE MONTHS
ENDED ENDED
OCTOBER 30, OCTOBER 31,
1999 1998
----------- -----------
Net loss $(15,776) $(18,405)
======== ========
Weighted average common shares outstanding - basic 10,902 10,199
Effect of options granted (1) -- --
Effect of warrant (1) -- --
-------- --------
Weighted average common shares outstanding - basic and
diluted 10,902 10,199
======== ========
Basic and diluted net loss per common share (1) $ (1.45) $ (1.80)
======== ========
</TABLE>
Note 1: Under Statement of Financial Accounting Standard No. 128 "Earnings per
Share," common stock equivalents are excluded when computing diluted net
income or loss per common share if the effect is anti-dilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WILSONS THE
LEATHER EXPERTS INC. AND SUBSIDIARIES AS OF OCTOBER 30, 1999 AND FOR THE THREE
AND NINE MONTH PERIODS ENDED OCTOBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JAN-29-2000 JAN-29-2000
<PERIOD-START> AUG-01-1999 JAN-31-1999
<PERIOD-END> OCT-30-1999 OCT-30-1999
<CASH> 6,233 6,233
<SECURITIES> 0 0
<RECEIVABLES> 17,717 17,717
<ALLOWANCES> 1,482 1,482
<INVENTORY> 152,049 152,049
<CURRENT-ASSETS> 177,487 177,487
<PP&E> 58,442 58,442
<DEPRECIATION> 11,826 11,826
<TOTAL-ASSETS> 226,685 226,685
<CURRENT-LIABILITIES> 95,253 95,253
<BONDS> 43,890 43,890
0 0
0 0
<COMMON> 110 110
<OTHER-SE> 84,428 84,428
<TOTAL-LIABILITY-AND-EQUITY> 226,685 226,685
<SALES> 104,250 237,590
<TOTAL-REVENUES> 104,250 237,590
<CGS> 67,578 172,090
<TOTAL-COSTS> 100,245 253,240
<OTHER-EXPENSES> 1,727 4,716
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,849 4,052
<INCOME-PRETAX> 429 (24,418)
<INCOME-TAX> 169 (9,600)
<INCOME-CONTINUING> 260 (14,818)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (119) (958)
<CHANGES> 0 0
<NET-INCOME> 141 (15,776)
<EPS-BASIC> 0.01 (1.45)
<EPS-DILUTED> 0.01 (1.45)
</TABLE>
