SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 3, 1998
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: 0-24179
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KASPER A.S.L., Ltd.
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(Exact name of registrant as specified in its charter)
Delaware 22-3497645
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(State of Incorporation) (IRS Employer Identification No)
77 Metro Way, Secaucus, New Jersey 07094
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(Address and zip code of principal executive office)
(201) 864-0328
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(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
-- --
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
-- --
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of November 16, 1998 was 6,800,000.
<PAGE>
KASPER A.S.L., LTD. AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX
Page No.
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PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at October 3, 1998 and January 3, 1998..........................1
Condensed Consolidated Statements of Operations for the Thirteen weeks
ended October 3, 1998 and Thirteen weeks ended October 4, 1997.....................................2
Condensed Consolidated/Combined Statements of Operations for the Thirty-nine weeks
ended October 3, 1998, Seventeen weeks ended October 4, 1997, and Twenty-three weeks
ended June 4, 1997.................................................................................3
Condensed Consolidated/Combined Statements of Cash Flows for the Thirty-nine weeks
ended October 3, 1998, Seventeen weeks ended October 4, 1997, and Twenty-three weeks
ended June 4, 1997.................................................................................4
Notes to Condensed Consolidated/Combined Financial Statements.........................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........................................................19
Item 6. Exhibits and Reports on Form 8-K...........................................................................19
SIGNATURES..........................................................................................................20
EXHIBIT INDEX.......................................................................................................21
</TABLE>
<PAGE>
KASPER A.S.L., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
October 3, January 3,
ASSETS 1998 1998
---------------- ---------------
(Unaudited)
Current Assets:
<S> <C> <C>
Cash and cash equivalents...................................... $ 2,219 $ 16,677
Accounts receivable-net of allowances for possible losses of
$20,125 and $18,725 respectively............................ 63,391 30,000
Inventories.................................................... 87,277 78,796
Prepaid expenses and other current assets...................... 5,435 4,462
---------------- ---------------
Total Current Assets...................................... 158,322 129,935
---------------- ----------------
Property, Plant and Equipment, at cost less accumulated
depreciation and amortization of $4,718 and $2,985,
respectively................................................... 16,781 14,337
Reorganization value in excess of identifiable assets, net of
accumulated amortization of $4,345 and $1,902, respectively.... 60,836 63,279
Trademarks, net of accumulated amortization of $1,943 and $850,
respectively................................................... 49,057 50,150
Other Assets, at cost less accumulated amortization of $1,241 and
$596, respectively............................................. 2,309 2,955
---------------- ---------------
Total Assets.............................................. $ 287,305 $ 260,656
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................... $ 13,085 $ 17,637
Accrued expenses and other current liabilities................. 6,902 6,703
Interest Payable............................................... 108 3,555
Income taxes payable........................................... 3,533 1,164
---------------- ---------------
Total Current Liabilities................................. 23,628 29,059
Long-Term Liabilities:
Deferred Taxes................................................. 639 639
Long-Term Debt................................................. 110,000 110,000
Bank Revolver.................................................. 24,551 --
Minority Interest.............................................. 617 --
---------------- ---------------
Total Liabilities......................................... 159,435 139,698
Commitments and Contingencies
Shareholders' Equity:
Common Stock, $0.01 par value; 20,000,000 shares authorized;
6,800,000 shares issued and outstanding..................... 68 68
Preferred Stock, $0.01 par value; 1,000,000 shares authorized;
none issued and outstanding................................. -- --
Capital in excess of par value................................. 119,932 119,932
Retained Earnings.............................................. 7,929 972
Accumulated Comprehensive Income:
Cumulative Translation Adjustment.............................. (59) (14)
Total Shareholders' Equity................................ 127,870 120,958
---------------- ---------------
Total Liabilities and Shareholders' Equity..................... $ 287,305 $ 260,656
================ ===============
</TABLE>
The accompanying Notes to Condensed Consolidated/Combined Financial Statements
are an integral part of these balance sheets.
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<PAGE>
KASPER A.S.L., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks
Ended Ended
-------------- --------------
October 3, October 4,
1998 1997
---------------------- ----------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales.................................... $ 94,080 $ 103,795
Cost of Sales................................ 63,252 74,530
---------------------- ----------------------
Gross profit.............................. 30,828 29,265
Operating Expenses:
Selling, warehouse, general and
administrative expenses................... 15,221 13,738
Depreciation and Amortization................ 2,173 2,012
---------------------- ----------------------
Total operating expenses............... 17,394 15,750
---------------------- ----------------------
Operating income............................. 13,434 13,515
Interest and Financing Costs................. 4,514 4,325
---------------------- ----------------------
Income before provision for income taxes..... 8,920 9,190
Provision for Income Taxes................... 3,745 3,420
---------------------- ----------------------
Net Income................................... $ 5,175 $ 5,770
====================== ======================
Basic earnings per share..................... .76 .85
====================== ======================
Diluted earnings per share................... .76 .85
====================== ======================
Weighted average number of shares used in
computing Basic earnings per share........ 6,800,000 6,800,000
Weighted average number of shares used in
computing Diluted earnings per share...... 6,800,000 6,808,000
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
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<PAGE>
KASPER A.S.L., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
| Predecessor
Reorganized Company | Company
-------------------------------------------- |--------------------
Thirty-nine Seventeen | Twenty-three
Weeks Ended Weeks Ended | Weeks Ended
----------- ----------- | -----------
October 3, October 4, | June 4,
1998 1997 | 1997
------------------- -------------------- | -------------------
(Unaudited) (Unaudited) |
<S> <C> <C> | <C>
Net Sales...................................... $ 252,582 $ 120,659 | $ 136,107
Cost of Sales.................................. 175,583 86,685 | 101,479
------------------- -------------------- | -------------------
Gross profit................................ 76,999 33,974 | 34,628
Operating Expenses: |
Selling, warehouse, general and |
administrative expenses..................... 45,940 18,005 | 23,374
Depreciation and Amortization.................. 6,424 2,662 | 1,191
------------------- -------------------- | -------------------
Total operating expenses................. 52,364 20,667 | 24,565
------------------- -------------------- | -------------------
Operating income............................... 24,635 13,307 | 10,063
Interest and Financing Costs................... 12,644 5,462 | 667
------------------- -------------------- | -------------------
Income before provision for income taxes....... 11,991 7,845 | 9,396
Provision for Income Taxes..................... 5,034 3,531 | 3,758
------------------- -------------------- | -------------------
Net Income..................................... $ 6,957 $ 4,314 | $ 5,638
=================== ==================== | ===================
Basic earnings per share....................... 1.02 .63 | --
=================== ==================== |
Diluted earnings per share..................... 1.02 .63 | --
=================== ==================== |
Weighted average number of shares used in |
computing Basic earnings per share.......... 6,800,000 6,800,000 | --
Weighted average number of shares used in |
computing Diluted earnings per share........ 6,800,000 6,809,000 | --
</TABLE>
The accompanying Notes to Condensed Consolidated/Combined Financial Statements
are an integral part of these financial statements.
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<PAGE>
KASPER A.S.L., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
| Predecessor
Reorganized Company | Company
--------------------------------------------| ------------------
Thirty-nine Seventeen | Twenty-three
Weeks Ended Weeks Ended | Weeks Ended
----------- ----------- | -----------
October 3, October 4, | June 4,
1998 1997 | 1997
------------------- -------------------- | ------------------
(Unaudited) (Unaudited) |
|
<S> <C> <C> | <C>
Cash Flows from Operating Activities: |
Net income................................................. $ 6,957 $ 4,314 | $ 5,638
Adjustments to reconcile net income to net cash (used in) / |
provided by operating activities: |
Depreciation and amortization........................... 3,980 1,578 | 916
Amortization of reorganization value in excess of |
identifiable assets................................... 2,444 1,100 | --
Amortization of excess purchase price over net assets |
acquired.............................................. -- -- | 275
Excess of cost over fair value of assets acquired....... -- -- | (26)
Income applicable to minority interest.................. 617 -- | --
Change in provision for possible losses on accounts |
receivable............................................ 1,400 3,912 | (4,348)
(Increase) decrease in: |
Accounts receivable................................... (34,791) (28,199) | 9,071
Inventories........................................... (8,481) (1,942) | 24,158
Prepaid expenses and other current assets............. (973) (1,332) | (1,080)
Increase (decrease) in: |
Accounts payable, accrued expenses and other |
current liabilities................................ (4,353) 3,608 | (1,236)
Interest Payable...................................... (3,447) -- | --
Income taxes payable.................................. 2,369 3,890 | 246
------------------- -------------------- | -------------------
Total adjustments.................................. (41,235) (17,385) | 27,976
------------------- -------------------- | -------------------
Net cash (used in) / provided by operating activities...... (34,278) (13,071) | 33,614
------------------- -------------------- | -------------------
|
Cash Flows from Investing Activities: |
Capital expenditures net of proceeds from the sale of fixed |
assets.................................................. (4,686) (907) | (2,960)
------------------- -------------------- | -------------------
Net cash used in investing activities................. (4,686) (907) | (2,960)
------------------- -------------------- | ------------------
|
Cash Flows from Financing Activities: |
Bank Revolver.............................................. 24,551 12,664 | --
Net (decrease) in cash invested with Leslie Fay............ -- -- | (30,479)
------------------- -------------------- | ------------------
Net cash provided by / (used in) financing activities.. 24,551 12,664 | (30,479)
------------------- -------------------- | ------------------
Effect of exchange rate changes on cash and cash equivalents.. (45) 38 | --
------------------- -------------------- | ------------------
Net (decrease) increase in cash and cash equivalents.......... (14,458) (1,276) | 175
|
Cash and cash equivalents, at beginning of period............. 16,677 3,081 | 1,886
------------------- -------------------- | ------------------
|
Cash and cash equivalents, at end of period................... $ 2,219 $ 1,805 | $ 2,061
=================== ==================== | ==================
</TABLE>
The accompanying Notes to Condensed Consolidated/Combined Financial Statements
are an integral part of these financial statements.
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<PAGE>
KASPER A.S.L., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
| Predecessor
Reorganized Company | Company
---------------------------------------- | -----------------
Thirty-nine Seventeen | Twenty-three
Weeks Ended Weeks Ended | Weeks Ended
----------- ----------- | ------------
October 3, October 4, | June 4,
1998 1997 | 1997
----------------- ----------------- | -----------------
(Unaudited) (Unaudited) |
Supplemental schedule of noncash operating, investing and |
financing activities |
|
|
<S> <C> <C> <C>
Noncash operating |
Other current assets recorded upon emergence from Bankruptcy $ -- $ (23) |$ --
Other current liabilities recorded upon emergence from Bankruptcy -- 4,923 | --
Deferred financing costs recorded upon emergence from Bankruptcy -- (2,422) | --
|
Noncash investing |
Elimination of divisional equity upon emergence from Bankruptcy -- (132,363) | --
Elimination of excess of costs over fair value of assets upon |
emergence from Bankruptcy -- 16,066 | --
Establishment of reorganization in excess of identifiable assets |
upon emergence from Bankruptcy -- (65,181) | --
Establishment of Trademark valuation upon emergence from |
Bankruptcy -- (51,000) | --
|
Noncash financing |
Senior notes issued to creditors upon emergence from Bankruptcy -- 110,000 | --
Issuance of Common Stock to creditors upon emergence from |
Bankruptcy -- 120,000 | --
</TABLE>
The accompanying Notes to Consolidated/Combined Financial Statements are an
integral part of these financial statements.
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<PAGE>
KASPER A.S.L., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED/COMBINED FINANCIAL STATEMENTS
NOTE 1. GENERAL
The Condensed Consolidated/Combined Financial Statements included
herein have been prepared by Kasper A.S.L., Ltd. (name legally changed from
Sassco Fashions, Ltd. on November 5, 1997) and subsidiaries (Kasper A.S.L., Ltd.
being sometimes referred to, and together with its subsidiaries collectively
referred to, as the "Company" or "Kasper" as the context may require) without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted from this report;
as is permitted by such rules and regulations; however the Company believes that
the disclosures are adequate to make the information presented not misleading.
These Condensed Consolidated/Combined Financial Statements included herein
should be read in conjunction with the Consolidated/Combined Financial
Statements and the notes thereto included in the Company's Registration
Statement on Form S-1 which was declared effective by the Commission on May 1,
1998.
In the opinion of management, the accompanying interim Condensed
Consolidated/Combined Financial Statements contain all material adjustments
necessary to present fairly the Condensed Consolidated/Combined financial
condition, results of operations, and changes in financial position of Kasper
and its subsidiaries for the interim periods presented.
Due to the Company's Reorganization and implementation of Fresh Start
Reporting (see Note 2), the Condensed Consolidated/Combined Financial Statements
for the new Reorganized Company (period starting June 5, 1997, the effective
date of the Reorganized Company's emergence from bankruptcy) are not comparable
to those of the Predecessor Company.
A black line has been drawn on the accompanying Condensed
Consolidated/Combined Financial Statements to distinguish between the
Reorganized Company and the Predecessor Company.
NOTE 2. FRESH START REPORTING
Kasper was a division of The Leslie Fay Companies, Inc. ("Leslie Fay"),
a Delaware corporation which operated its business as a debtor in possession
subject to the jurisdiction and supervision of the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court") until June
4, 1997. The Condensed Consolidated/Combined Financial Statements herein
presented include the operations of three related Hong Kong corporations, Asia
Expert Limited ("AEL"), Tomwell Limited ("Tomwell"), and Viewmon Limited
("Viewmon"), none of which were part of the Leslie Fay bankruptcy proceeding.
These three Hong Kong corporations were subsidiaries of Leslie Fay (upon
emergence from bankruptcy these entities became subsidiaries of Kasper) that
procure and arrange for the manufacture of apparel products in the Far East
solely for the benefit of Kasper. The Condensed Consolidated/Combined Financial
Statements also include the results of Kasper Europe, Ltd., Kasper Canada, ASL
Retail Outlets, Inc. ("ASL Retail") and ASL/K Licensing Corp., all of which are
wholly-owned subsidiaries of the Company. Kasper Canada is a 70% owner of Kasper
Partnership, a Canadian partnership through which the Company conducts sales and
distribution activity in Canada. The portion of Kasper Partnership pertaining to
its minority owner is reflected in the accompanying financial statements as
minority interest. The Condensed Consolidated/Combined Financial Statements of
Kasper, AEL, Tomwell and Viewmon have been prepared on a stand-alone basis in
accordance with generally accepted accounting principles applicable to a going
concern. The Predecessor Company financial data reflects the combined results of
Kasper, AEL, Tomwell, and Viewmon. The financial statements of the Reorganized
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<PAGE>
Company are consolidated as opposed to combined because as of the date of
reorganization, the three Hong Kong corporations became subsidiaries of Kasper.
Prior to the reorganization, these entities were subsidiaries of Leslie Fay and,
accordingly, the financial statements were combined for those periods. The
Company's fiscal year ends on the Saturday closest to December 31st. The fiscal
year ended January 3, 1998 ("1997") included 53 weeks.
Prior to June 4, 1997, Leslie Fay was operating its business as a
debtor in possession subject to the jurisdiction of the Bankruptcy Court. On
April 5, 1993, Leslie Fay and certain of its wholly owned subsidiaries filed a
voluntary petition under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"), as a result of the announcement of accounting
irregularities, numerous stockholder and other party lawsuits filed against the
Company and its directors, and the breach of certain provisions of its financing
agreement at the time. On October 31, 1995, the Debtors and the Committee of
Unsecured Creditors (the "Creditors Committee") filed Leslie Fay's Plan of
Reorganization (the "Plan") pursuant to Chapter 11 of the Bankruptcy Code.
The Plan was subsequently amended on March 13, 1996, December 5, 1996,
February 3, 1997 and February 28, 1997. On December 5, 1996, the Debtors filed a
Disclosure Statement for the Amended Joint Plan of Reorganization pursuant to
Chapter 11 of the Bankruptcy Code (the "Disclosure Statement"), which was also
subsequently amended on February 3, 1997 and February 28, 1997. The Plan
provided for, among other things, the separation of the Debtors' estates and
assets into two separate reorganized entities. Under the Plan, stockholders of
the Company would not retain or receive any value for their interest. The
Debtors obtained Bankruptcy Court approval of the Disclosure Statement on
February 28, 1997. The Plan was approved by the creditors and on April 21, 1997,
the Bankruptcy Court confirmed the Plan. Refer to the Condensed Consolidated
Financial Statements of Leslie Fay for the fiscal year ended December 28, 1996,
included in Leslie Fay's Annual Report on Form 10-K, for more information
regarding Leslie Fay's bankruptcy proceedings.
The Plan called for the spin-off of Kasper as a newly organized entity
and which consists of Kasper, AEL, Tomwell, Viewmon, Sassco Europe, Ltd. (now
known as Kasper Europe, Ltd.) and ASL Retail.
On June 4, 1997, the Plan was consummated by Leslie Fay 1) transferring
the equity interest in both Leslie Fay and Kasper, to its creditors in exchange
for relief from the aggregate amount of the claims estimated at $338,000,000; 2)
assigning to certain creditors the ownership rights to notes aggregating
$110,000,000 payable by Kasper; and 3) transferring the assets (including
$10,963,000 of cash) and liabilities of the then Sassco division to Kasper and
the assets and liabilities of Leslie Fay's Dress and Sportswear divisions to
three wholly-owned subsidiaries of Leslie Fay. In addition, Leslie Fay retained
approximately $41,080,000 in cash, of which $23,580,000 will be used to pay
administrative claims as defined in the Plan. As provided for in the Plan, the
Company has issued approximately eighty (80%) percent of its 6,800,000 of new
shares to its creditors in July 1997. The remaining shares will be held back
pending the resolutions of certain litigation before the Bankruptcy Court. On
June 4, 1997, Leslie Fay emerged from bankruptcy and Kasper has emerged as a
newly organized separate entity.
Pursuant to the guidelines provided by SOP 90-7, the Company adopted
fresh-start reporting with a reorganization value of $120,000,000 and allocated
the reorganization value to its net assets on the basis of the purchase method
of accounting.
The fresh-start reporting reorganization value of $120,000,000 was
based on averaging several valuation methodologies prepared by an independent
appraiser. A five-year analysis of the Company's actual and projected operations
(fiscal years ended 1997-2001) was prepared by management and a discounted cash
flow methodology was applied to those numbers. An equity value was determined by
calculating the impact of various assumption changes to the five year
projections and adding the projected cash flows for the first four years to a
"capitalization" of the fifth year's projected cash flow under each assumption.
The fifth year's projected cash flow was capitalized into value and discounted
to the present.
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<PAGE>
The aggregate cash flow value was then discounted to its present value,
using a discount rate of 14%. The reorganization values were then weighted with
a range between $118,000,000 and $123,000,000, and $120,000,000 was established
as the Company's reorganization value.
The five-year cash flow projections were based on estimates and
assumptions about circumstances and events that have not yet taken place. Such
estimates and assumptions are inherently subject to significant economic and
competitive uncertainties and contingencies beyond the control of the Company,
including, but not limited to, those with respect to the future course of the
Company's business activity.
NOTE 3. INVENTORIES
Inventories are valued at lower of cost or (first-in, first-out,
"FIFO") market.
Inventories, net of reserves, consist of the following:
October 3, January 3,
1998 1998
---- ----
(in thousands)
Raw materials $ 33,647 $ 32,121
Finished goods 53,630 46,675
------ ------
Total inventories $ 87,277 $ 78,796
======== ========
NOTE 4. INCOME PER SHARE
The computation of income per common share is based upon the weighted
average number of common shares outstanding during the period. The pro forma
weighted average number of common shares outstanding and pro forma net income
per common share for the period ended June 4, 1997 have not been presented
because, due to the restructuring and implementation of Fresh Start Reporting
they are not comparable to subsequent periods.
NOTE 5. DEBT
At October 3, 1998, there were direct borrowings of $24,551,000
outstanding under the BankBoston Credit Agreement and approximately $17,492,000
outstanding in letters of credit under the facility. The Company has
approximately $24,205,000 available for future borrowings as of October 3, 1998.
The Company paid $2,422,000 in commitment and related fees in
connection with the credit facility in June 1997. These fees are included in
other assets and will be amortized over the term of the Credit Agreement (three
years).
NOTE 6. COMMITMENTS AND CONTINGENCIES
On April 5, 1993, Leslie Fay and several of its subsidiaries filed
voluntary petitions in the Bankruptcy Court under Chapter 11 of the Bankruptcy
Code. All civil litigation commenced against Leslie Fay and those referenced
subsidiaries prior to that date was stayed under the Bankruptcy Code. By an
order dated April 30, 1997 (the "Confirmation Order"), the Bankruptcy Court
confirmed the Plan. The Plan was consummated on June 4, 1997.
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<PAGE>
The Confirmation Order, inter alia, dismissed with prejudice all
pending litigations, and released all claims that could have been brought in
litigation. Both prior to and subsequent to the Filing Dates, various class
action suits were commenced on behalf of certain prior stockholders of the
Company. Any claims against the Company arising out of these suits were
discharged as part of and in accordance with the terms of the Plan. Accordingly,
whatever the eventual outcome of these cases, there can be no material financial
impact on the Company based on the terms of the Plan.
NOTE 7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In 1998, AcSEC issued SOP No. 98-5 "Reporting on the Costs of Start-Up
Activities." SOP No. 98-5 establishes standards on accounting for start-up and
organization costs and in general, requires such costs to be expensed as
incurred. This standard is required to be adopted on January 1, 1999. The
Company's current policy is to expense such costs as incurred.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction
with the foregoing consolidated financial statements and notes thereto. This
discussion contains forward-looking statements based on current expectations
that involve risks and uncertainties. Actual results and the timing of certain
events may differ significantly from those projected in such forward-looking
statements due to a number of factors, including those set forth at the end of
this Item.
Overview
On June 4, 1997 Kasper A.S.L., Ltd. (the "Company") was separated from
The Leslie Fay Companies, Inc. ("Leslie Fay"), in accordance with the Fourth
Amended and Restated Joint Plan of Reorganization (the "Reorganization Plan")
approved by the U.S. Bankruptcy Court. On that date, all assets and
corresponding liabilities associated with the operation of the Sassco Fashions
Division of Leslie Fay, including the Nipon trademarks, were sold to the
Company. Prior to that date, the Company operated as the Sassco Fashions
Division of Leslie Fay, from the time it was acquired by Leslie Fay in 1980. The
Company received the assets and liabilities of the former Sassco Fashions
Division as part of the Reorganization Plan of Leslie Fay. In the aggregate,
$249.6 million of assets, subject to $19.6 million of liabilities, were sold by
Leslie Fay to the creditors in satisfaction of creditor claims of like amount.
The Company in turn transferred to the creditors 6,800,000 shares of its common
stock with a market value of $120 million and 12.75% Senior Notes with an
aggregate principal amount of $110 million in exchange for the net assets. The
Company is one of the largest marketers and manufacturers of career women's
suits in the United States. The Company also markets career dresses, sportswear
and knitwear. The Company has grown through the extension of existing product
lines, the introduction of new brands and the expansion of its retail outlet
operations.
The accompanying financial statements have been prepared to show the
Company as a freestanding entity apart from Leslie Fay. Until 1996, the Company
was totally dependent upon Leslie Fay for all administrative support, including
accounting, credit, collections, legal, etc. As such, the financial statements
reflect an allocation of Leslie Fay administrative expenses to the Company.
As a division of Leslie Fay, the Company was not subject to Federal,
State and Local income taxes. Effective June 4, 1997, the Company became subject
to such taxes. The effective tax rate used for the predecessor company financial
statements reflects the rate that would have been applicable, had the Company
been independent at that time. Provisions for deferred taxes were not reflected
on the Company's books, but were reflected on Leslie Fay's books and records.
Going forward, the Company will record deferred taxes in accordance with the
provision of Statement of Financial Accounting Standards Number 109, "Accounting
for Income Taxes."
The Company's business is primarily the design, distribution and
wholesale sale of women's career suits, dresses and sportswear to, principally,
major department stores and specialty shops. Over the last five years, the
Company has increased its share of the wholesale market by expanding into all
women's career suit markets, including the "lower moderate" (Le Suit(TM)),
"upper moderate" (Kasper(R)) and "bridge"(Nipon(R)) markets. The Company has
also introduced a career sportswear label, Kasper and Company(R), and career
knitwear under the name Nina Charles(TM). In analyzing the performance of the
knitwear division and its capital and operational requirements, the Company has
decided to discontinue the Nina Charles(TM) label at wholesale in the United
States for the Fall 1998 season. The Company will continue to market the label
in its retail stores and in Canada and Europe. For Fall 1998, the Company will
incorporate its knitwear business into its Dress and Sportswear lines.
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<PAGE>
In July 1995, the Company, then a division of Leslie Fay, started its
retail outlet operations by acquiring 22 leased properties, which were assigned
to the Company by Leslie Fay on June 4, 1997 pursuant to the Reorganization
Plan. As of October 3, 1998, the Company had 55 retail outlet stores throughout
the United States. Sales at the retail outlet stores totaled $38.6 million in
the year ended January 3, 1998. The stores operate under the name Kasper ASL(R),
but also sell the Company's other labels including Nipon(R), Kasper and
Company(R), Nina Charles(TM), Le Suit(TM) and b. bennett(TM).
In connection with the separation from Leslie Fay, Leslie Fay
transferred all rights and title to the Nipon trademarks to the Company. At the
time of the transfer, there were several licensing agreements in effect,
including men's sportswear, dress slacks, ties, ladies coats, etc. In 1997, the
Company received approximately $900,000 in licensing income from licensing
agreements.
On June 4, 1997, the Company acquired the trade name Kasper(R) from
Forecast Designs, Inc., a company owned by Herbert Kasper, for $6 million. Prior
to June 4, the Company paid royalties for the use of the Kasper name to Forecast
Designs, Inc. In accordance with the agreement, Forecast Designs, Inc. will
retain the right to the licensing income from pre-existing licenses, which
licenses will be transferred to the Company upon Mr. Kasper's death. The Company
will be entitled to 50% of the income generated by any new licenses. Pursuant to
the terms of the acquisition agreement, the Company also entered into an
Employment, Consulting and NonCompetition agreement with Herbert Kasper. Such
agreement, which has a term of ten years, provides for the payment to Mr. Kasper
of $300,000 in annual salary and $7,500 for each 1% by which the gross profits
from the Company's sales of Kasper(R) women's apparel, namely suits, dresses and
sportswear in each of the six years 1998 to 2003, exceeds the total gross profit
derived by the Company from the sale of such products in the year 1995. Under
the terms of the agreement, Mr. Kasper may and has been dedicating his business
time to the licensing activities of ASL/K Licensing Corp., which includes
meeting with current and prospective licensees of the Kasper(R) brand name. He
also participates in marketing trips and is involved in the Company's ad
campaigns, reviews competitor's products and meets with prospective wholesale
buyers on behalf of the Company. Mr. Kasper may also perform such other tasks as
he and Mr. Levine, the Chairman of the Board of Directors and Chief Executive of
the Company, may agree.
The Company launched its initial advertising campaign in the first half
of 1998. Anticipated costs relating to the advertising campaign are $2.0
million. Costs for advertising are expensed as incurred.
Results of Operations
Thirteen Weeks Ended October 3, 1998 as Compared to Thirteen Weeks ended October
4, 1997
Net Sales
Net Sales for the thirteen weeks ended October 3, 1998 (the "third
quarter 1998") were $94.1 million as compared to $103.8 million for the thirteen
weeks ended October 4, 1997 (the "third quarter 1997"). The decrease in net
sales of approximately $9.7 million, or 9.3%, is primarily due to a decrease in
wholesale sales of $11.2 million offset by an increase in retail sales of $1.5
million. Wholesale sales decreased to $82.0 million for the third quarter 1998,
from $93.2 million in the third quarter 1997, a decrease of approximately $11.2
million, or 12.0%, and is primarily due to the discontinuance of the Nina
Charles knitwear line, as well as a reduction in Sportswear sales as a result of
the competitive pressure in career sportswear.
-11-
<PAGE>
Retail sales increased to $12.1 million in the third quarter 1998 from
$10.6 million in the third quarter 1997, an increase of approximately $1.5
million, or 14.2%, due primarily to the net addition of 10 retail outlet stores
over the last 12 months. Comparable store sales for the third quarter 1998 were
$9.4 million as compared to $10.4 million for the third quarter 1997, a decrease
of approximately $1.0 million, or 9.6%, due primarily to lower consumer traffic
in the stores.
Gross Profit
Gross Profit as a percentage of net sales increased to 32.8% for the
third quarter 1998, compared to 28.2% for the third quarter 1997. The
improvement over the third quarter 1997 can be attributed to lower supply and
production costs in 1998 due to macroeconomic conditions in the Far East and was
offset partially by higher markdowns and allowances which reflect the general
slowdown in retail sales at the Company's customers stores. Wholesale gross
profit as a percentage of sales increased to 31.3% in the third quarter 1998
from 26.8% in the third quarter 1997.
Retail gross profit as a percentage of sales increased to 42.1% in the
third quarter 1998 from 39.6% in the third quarter 1997. The increase in gross
profit is primarily due to a decrease in markdowns and lower supply and
production costs in 1998 due to macroeconomic conditions in the Far East.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $15.2 million
in the third quarter 1998 as compared to $13.7 million in the third quarter
1997, an increase of $1.5 million. Approximately $600 thousand of this increase
is attributed to increased selling, administrative and occupancy costs related
to the net addition of 10 retail outlet stores.
The remaining increase of $900 thousand is primarily due to increased
advertising expenses of $600 thousand as a result of the new advertising
campaign, and approximately $300 thousand in additional selling, general and
administrative expenses as a result of the consolidation of Kasper Canada in
1998.
Selling, general and administrative expenses include the following: (i)
design expenses; (ii) production expenses, which includes purchasing of raw
materials, production planning and scheduling and product costing; (iii) selling
and marketing expenses, including showroom sales personnel and sales
representatives outside the showroom; (iv) administrative expenses, which
include all back office functions such as finance, human resources, import
management, accounts receivable and payable, etc.; (v) advertising expenses;
(vi) shipping expenses; and (vii) occupancy expenses, which include costs
related to all owned and or leased facilities, including rent, utilities, etc.
These expenses are expected to remain stable in the near future with the
exception of advertising, which is expected to increase in connection with the
new advertising campaign and continued retail expansion.
Amortization of Reorganization Value in Excess of Identifiable Assets
As a result of the Reorganization, the portion of the Company's
reorganization value not attributable to specific identifiable assets has been
reported as "reorganization value in excess of identifiable assets." This asset
is being amortized over a 20-year period beginning June 4, 1997. The Company
incurred amortization charges for both the third quarter 1998 and the third
quarter 1997 totaling approximately $825 thousand.
-12-
<PAGE>
Depreciation and Amortization
Depreciation and amortization amounted to approximately $1.3 million in
the third quarter 1998 as opposed to approximately $1.2 million in the third
quarter 1997, and consist of the amortization charges associated with the
trademarks and bank fees associated with the financing agreement, as well as
fixed asset depreciation. The trademarks are being amortized over 35 years
beginning June 4, 1997 and resulted in amortization charges in the third quarter
1998 and 1997 of approximately $365 thousand. The bank fees are being amortized
over the life of the financing agreement, which is three years, beginning June
4, 1997 and resulted in approximately $200 thousand of amortization charges for
the third quarter 1998 and 1997.
Interest and Financing Costs
Interest and financing costs increased to $4.5 million in the third
quarter 1998 from $4.3 million in the third quarter 1997. Interest is primarily
attributable to the expense on the $110 million Senior Notes, which were issued
on June 4, 1997. The Senior Notes bear interest at 12.75% per annum and mature
on March 31, 2004. Interest is payable semi-annually on March 31 and September
30. Interest relating to the Senior Notes totaled $3.5 million for both the
third quarter 1998 and third quarter 1997. There are no principal payments due
until maturity. To the extent that the Company elects to undertake a public
offering or elects to prepay certain amounts, a premium will be required to be
paid.
Income Taxes
Provision for income taxes was $3.7 million for the third quarter 1998
and $3.4 million for the third quarter 1997. This amount differs from the amount
computed by applying the federal income tax statutory rate of 34% to income
before taxes because of state and foreign taxes, and timing differences relating
primarily to customer reserves and allowances, inventory, depreciation and
amortization.
Thirty-nine Weeks Ended October 3, 1998 as Compared to Forty Weeks ended October
4, 1997
Net Sales
Net Sales for the thirty-nine weeks ended October 3, 1998 ("1998")
were $252.6 million as compared to $256.8 million for the forty weeks ended
October 4, 1997 ("1997") a decrease of $4.2 million, or 1.6% primarily due to a
decrease in wholesales sales. Wholesale sales decreased to $219.6 million in
1998, from $229.6 million in 1997, a decrease of $10.0 million, or 4.4%
primarily due to the discontinuance of the Nina Charles knitwear line, as well
as a reduction in Sportswear sales as a result of the competitive pressure in
career sportswear both occurring during the third quarter 1998. Overall, on a
comparable thirty-nine week basis, wholesale sales decreased $4.6 million as the
result of an extra week's wholesale sales of $5.4 million in 1997.
Retail sales increased to $32.9 million in 1998 from $27.2 million in
1997, an increase of approximately $5.7 million, or 21.0%, due primarily to the
net addition of 10 retail outlet stores over the last 12 months. The extra
week's retail sales in 1997 amounted to approximately $500 thousand, resulting
in an overall increase of $6.2 million on a comparable thirty-nine week basis.
Comparable store sales in 1998 were $25.9 million as compared to $25.4 million
in 1997, an increase of $500 thousand, or 2.0%.
-13-
<PAGE>
Gross Profit
Gross Profit as a percentage of net sales increased to 30.4% in 1998,
compared to 26.7% in 1997. The improvement over 1997 can be attributed to an
increase in retail store margins, and lower supply and production costs in 1998
due to macroeconomic conditions in the Far East. Wholesale gross profit as a
percentage of sales increased to 28.7% in 1998 from 25.2% in 1997.
Retail gross profit as a percentage of sales increased to 41.7% in 1998
from 39.0% in 1997. The increase in gross profit is primarily due to a decrease
in markdowns and lower supply and production costs in 1998 due to macroeconomic
conditions in the Far East.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $45.9 million
in 1998 compared to $41.4 million in 1997, an increase of $4.5 million. The
extra week in 1997 contributed an extra $1.1 million in selling, general and
administrative expenses, resulting in an overall increase of $5.6 million on a
comparable thirty-nine week period. Approximately $2.5 million of this increase
is attributed to increased selling, administrative and occupancy costs related
to the net addition of 10 retail outlet stores.
The remaining increase of $3.1 million is primarily due to increased
advertising expenses of approximately $2.1 million primarily as a result of the
new advertising campaign. In addition, administrative expenses increased by
approximately $900 thousand and relate to additional expenses incurred as a
result of becoming an independent, public company. The consolidation of Kasper
Canada in 1998 contributed approximately $900 thousand in additional selling,
general and administrative expenses. These increases were offset by a decrease
in royalty expense of approximately $600 thousand as a result of the trademark
acquisition, as well as a decrease in occupancy costs of approximately $400
thousand as a result of the new warehouse. All other selling, general and
administrative expenses increased by approximately $200 thousand.
Amortization of Reorganization Value in Excess of Identifiable Assets
As a result of the Reorganization, the portion of the Company's
reorganization value not attributable to specific identifiable assets has been
reported as "reorganization value in excess of identifiable assets". This asset
is being amortized over a 20-year period beginning June 4, 1997. Accordingly,
the Company incurred amortization charges in 1998 totaling approximately $2.4
million as opposed to approximately $1.1 million in 1997. The increase is
primarily attributable to the nine months of amortization charges in 1998 versus
only four months in 1997.
Depreciation and Amortization
Depreciation and amortization increased to approximately $4.0 million
in 1998 from approximately $2.8 million in 1997 primarily as a result of the
amortization charges associated with the Company's trademarks and bank fees
associated with the financing agreement. The trademarks are being amortized over
35 years beginning June 4, 1997 and resulted in amortization charges in 1998 of
approximately $1.1 million compared with $475 thousand in 1997. The bank fees
are being amortized over the life of the financing agreement, which is three
years, beginning June 4, 1997 and resulted in approximately $600 thousand of
amortization charges for 1998 versus approximately $260 thousand in 1997. These
increases are primarily attributable to the nine months of bank fee and
trademark amortization charges for 1998 versus only four months for 1997.
-14-
<PAGE>
Interest and Financing Costs
Interest and financing costs increased to $12.6 million in 1998 from
$6.1 million in 1997, an increase of approximately $6.5 million. The increase is
primarily attributable to the nine months of interest expense on the $110
million Senior Notes in 1998, which were issued on June 4, 1997 versus only four
months in 1997. The Senior Notes bear interest at 12.75% per annum and mature on
March 31, 2004. Interest is payable semi-annually on March 31 and September 30.
Interest relating to the Senior Notes totaled $10.5 million for 1998 compared to
approximately $4.7 million in 1997. There are no principal payments due until
maturity. To the extent that the Company elects to undertake a public offering
or elects to prepay certain amounts, a premium will be required to be paid.
Income Taxes
Provision for income taxes was $5.0 million in 1998. This amount
differs from the amount computed by applying the federal income tax statutory
rate of 34% to income before taxes because of state and foreign taxes, and
timing differences relating primarily to customer reserves and allowances,
inventory, depreciation and amortization. Income taxes for periods prior to June
4, 1997 were computed using the effective tax rate that would have been
applicable had the Company been an independent entity.
Liquidity and Capital Resources
Net cash used in operating activities was $34.3 million during 1998 as
compared to cash provided by operations of $20.5 million for 1997, primarily as
a result of the increase in inventory and accounts receivable. The increase in
inventories is primarily due to higher levels of finished goods necessary to
stock the expanding Quick Response replenishment program and the growing retail
outlet store operations, and due to the earlier receipt of inventory to ensure
timely shipments to customers. The increase in accounts receivable is related to
the seasonal nature of cash collections.
The Company's main sources of liquidity historically have been cash
flows from operations and credit facilities. Prior to June 4, 1997, as a
division of Leslie Fay, the Company either borrowed from, or invested its excess
cash with Leslie Fay. The Company's capital requirements primarily result from
working capital needs, retail expansion and renovation of department store
boutiques and other corporate activities.
Effective June 5, 1997, the Company entered into a $100 million working
capital facility with BankBoston as the agent bank for a consortium of lending
institutions. The facility provides for a sub-limit for letters of credit of $50
million. The working capital facility is secured by substantially all the assets
of the Company. The working capital facility expires in fiscal 2000 and provides
for various borrowing rate options, including rates based upon a fixed spread
over LIBOR. The facility provides for the maintenance of certain financial
ratios and covenants and sets limits on the amount of capital expenditures and
dividends to shareholders. Availability under the facility is limited to a
borrowing base calculated upon eligible accounts receivable, inventory and
letters of credit. As of October 3, 1998, there were direct borrowings of $24.6
million outstanding, $17.5 million in letters of credit outstanding and $24.2
million available for future borrowings.
Pursuant to the Reorganization Plan, the Company issued $110 million in
Senior Notes. The Senior Notes bear interest at 12.75% per annum and mature on
March 31, 2004. Interest is payable semi-annually on March 31 and September 30.
Interest relating the Senior Notes for 1998 totaled $10.5 million. There are no
-15-
<PAGE>
principal payments due until maturity. To the extent that the Company elects to
undertake a public offering or elects to prepay certain amounts, a premium will
be required to be paid.
The Company assumed from Leslie Fay a factoring/financing agreement
with Heller. The agreement was for the sole purpose of supporting the Sassco
Fashions Division of Leslie Fay. The agreement had a two-year term expiring in
February 1998. It provided for Heller to act as the credit and collection arm of
the Company. The Company would receive funds from Heller as the receivables were
collected. Any amounts unpaid after 120 days would be guaranteed and paid to the
Company by the factor. The cost was .4% for the first $240 million in sales and
.35% for sales above that amount. The agreement was amended in January 1998 to
add an additional 18 months to the term of the arrangement and lower the rate to
.35% for the first $250 million in sales and .3% on the excess over that amount.
Capital expenditures were $4.7 million for 1998 and $3.8 million in
1997. Capital expenditures for 1998 represent spending associated with the
relocation to a new sales, production and design office, continued retail outlet
store development, overseas facilities development and computer system
improvements. Capital expenditures for the fiscal year ending January 2, 1999
are anticipated to total approximately $5.5 million.
Year 2000 Compliance
State of Readiness
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the "Year 2000" issue.
The Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in a major system
failure or miscalculation. The Company uses software developed and supported by
third parties for all mission critical applications including order entry,
distribution, shipping, electronic data interchange ("EDI") and for its retail
operations. Each of these software vendors has assured the Company in writing
that the current version of their software has been tested and is Year 2000
compliant. The Company has initiated a testing project that will verify such
assurances. This testing is expected to be completed by the early part of the
second quarter 1999.
The Company is also highly dependent on its customers' ability to
transmit and receive EDI documents such as purchase orders, invoices and advance
shipping notices. The Company is in the process of testing the exchange of
electronic information with a number of its significant customers in order to
ensure Year 2000 compliance and expects this evaluation to be completed by the
early part of the second quarter 1999.
In addition, the Company may face some risk to the extent that
suppliers of products and others with whom the Company has a material business
relationship will not be Year 2000 compliant. Accordingly, the Company has
initiated formal communications with significant suppliers and third parties in
order to determine the extent to which the Company may be vulnerable to the
failure of these suppliers and third parties to remediate their own Year 2000
issues. The Company will review and evaluate the responses it receives and
periodically monitor the progress of these suppliers and third parties in
addressing their own Year 2000 issues.
The Company is also reviewing its non-information technology systems to
determine the extent of any changes that may be necessary and currently believes
that minimal changes are necessary for Year 2000 compliance.
-16-
<PAGE>
Costs
The total cost associated with the required testing and modifications
to become Year 2000 compliant is not expected to be material to the Company's
financial position. The estimated total cost of the Year 2000 project is
approximately $500,000. This cost estimate may change as the Company progresses
in its Year 2000 project and obtains additional information and conducts further
testing.
Risks
Despite all efforts, however, there is no assurance that these systems
will be Year 2000 compliant under all the circumstances and volume stresses that
may actually be required. The possible consequences of the Company or its key
vendors, suppliers and customers not being fully year 2000 compliant by January
1, 2000 include, among other things, delays in the delivery of products, delays
in the receipt of goods, invoice and collection errors and inventory
obsolescence. Consequently, the business and results of operations of the
Company could be materially adversely affected by a temporary inability of the
Company to conduct its business in the ordinary course for a period of time
until after January 1, 2000.
Contingency Plans
As an additional precaution, the Company intends to develop contingency
plans to mitigate the possible disruption in business operations that may
result. These plans, which are dependent in large part to the responses the
Company receives from third parties with whom the Company has a material
business relationship, are also expected to be completed during the second
quarter 1999. Once developed, contingency plans and related cost estimates will
be continually refined as additional information becomes available.
Recently Issued Accounting Pronouncements
In 1998, AcSEC issued SOP No. 98-5 "Reporting on the Costs of Start-Up
Activities." SOP No. 98-5 establishes standards on accounting for start-up and
organization costs and in general, requires such costs to be expensed as
incurred. This standard is required to be adopted on January 1, 1999. The
Company's current policy is to expense such costs as incurred.
Change in Method of Accounting
The effects of the Company's reorganization under Chapter 11 have been
accounted for in the Company's financial statements using the principles
required by the American Institute of Certified Public Accountants' Statement of
Position 90-7, Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code ("Fresh Start Accounting"). Pursuant to such principles, the
Company's assets, upon emergence from Chapter 11 are stated at "reorganization
value", which is defined as the value of the entity before considering
liabilities on a going-concern basis following the reorganization and represents
the estimated amount a willing buyer would pay for the assets of the Company
immediately after the reorganization. The reorganization value for the Company
was determined by reference to the remaining liabilities plus the estimated
value of shareholders' equity of the outstanding shares of the Common Stock. The
reorganization value of the Company was allocated to the assets of the Company
in conformity with the procedures specified by Accounting Principles Board
Opinion No. 16, Business Combinations, for transactions reported on the basis of
the purchase method of accounting. In this allocation, identifiable assets were
valued at estimated fair values, and any excess
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<PAGE>
reorganization value has been recorded as "reorganization value in excess of
identifiable assets" (a long-term intangible asset similar to "goodwill").
Impact of Asian Financial and Currency Crisis
To date, the Company has not experienced any difficulty in obtaining
needed raw materials from its primary sources of supply in the Far East which
are located in Japan, nor has it experienced any problems with its sewing
contractors in Taiwan, the Philippines, Hong Kong and China. Over the past year,
the region has suffered extreme volatility in its local financial markets and
currency exchanges. As a result, no assurance can be given that the Company will
continue to have an uninterrupted source of supply from the region. The
inability of certain suppliers to provide needed items on a timely basis could
materially adversely affect the Company's operations, business and financial
condition. During 1998, the Company has experienced favorable pricing as a
result of the Asian financial situation, which may not be sustainable in the
long term.
Disclosure Regarding Forward-Looking Information
This report contains 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 (the "Exchange Act").
Forward-looking statements are typically identified by the words "believe",
"expect", "intend", "estimate" and similar expressions. Those statements appear
in an number of places in this report and include statements regarding the
intent, belief or current expectation of the Company or its directors or
officers with respect to, among other things, trends affecting the Company's
financial conditions and results of operations and the Company's business and
growth strategies. Such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those projected, expressed or implied in the forward-looking
statements as a result of various factors (such factors are referred to herein
as "Cautionary Statements"), including but not limited to the following: (i) the
Company's limited operating history, (ii) potential fluctuations in the
Company's quarterly operating results, (iii) the Company's concentration of
revenues, (iv) challenges facing the Company related to its rapid growth, (v)
the Company's dependence on a limited number of suppliers and (vi) the ability
of the Company and third parties, including customers or suppliers, to
adequately address Year 2000 issues. The accompanying information contained in
this report, including the information set forth under "Management's Discussion
and Analysis of Financial Condition and Results of Operations", identifies
important factors that could cause such differences. Such forward-looking
statements speak only as of the date of this report, and the Company cautions
potential investors not to place undue reliance on such statements. The Company
undertakes no obligation to update or revise any forwardlooking statements. All
subsequent written or oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
-18-
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of the Company was held on July 30,
1998 for the purpose of: (1) electing seven directors; (2) approving the
Company's 1997 Management Stock Option Plan; and (3) ratifying the appointment
of Arthur Andersen LLP as the Company's independent certified public accountants
for the fiscal year ending January 2, 1999. Proxies for the meeting were
solicited pursuant to Regulation 14A of the Exchange Act and there was no
solicitation in opposition.
First, the following directors were elected by the following vote:
Votes
-----
For Withheld
--- --------
Arthur S. Levine 6,006,407 15,460
William J. Nightingale 6,006,407 15,460
Salvatore M. Salibello 6,006,294 15,573
Larry G. Schafran 6,006,294 15,573
Lester E. Schreiber 6,006,294 15,573
Denis J. Taura 6,006,294 15,573
Olivier Trouveroy 6,006,294 15,573
Second, the proposal to approve the Company's 1997 Management Stock
Option Plan was approved by the following vote: (a) 3,094,496 votes were cast
"for" the matter; (b) 463,111 votes were cast "against" the matter; and (c)
1,433 votes "abstained" from voting on the matter. There were 2,462,827 broker
non-votes.
Third, the proposal to ratify the appointment of Arthur Andersen LLP as
the Company's independent certified public accountants for the fiscal year
ending January 2, 1999 was approved by the following vote: (a) 6,007,354 votes
were cast "for" the matter; (b) 14,402 votes were cast "against" the matter; and
(c) 111 votes "abstained" from voting on the matter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
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<PAGE>
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.
Dated: November 16, 1998 KASPER A.S.L., Ltd.
(Registrant)
/s/ Lester E. Schreiber
---------------------------
Lester E. Schreiber
Chief Operating Officer
Dated: November 16, 1998 /s/ Dennis P. Kelly
---------------------------
Dennis P. Kelly
Chief Financial Officer
-20-
<PAGE>
Exhibit Index
Exhibits
27 Financial Data Schedule
-21-
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<NAME> Kasper A.S.L., LTD
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JUL-05-1998
<PERIOD-END> OCT-03-1998
<CASH> 2,219
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<RECEIVABLES> 83,516
<ALLOWANCES> 20,125
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<CURRENT-ASSETS> 158,322
<PP&E> 21,499
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<TOTAL-ASSETS> 287,305
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0
0
<COMMON> 68
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<TOTAL-LIABILITY-AND-EQUITY> 287,305
<SALES> 94,080
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<TOTAL-COSTS> 16,566
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<INTEREST-EXPENSE> 4,514
<INCOME-PRETAX> 8,920
<INCOME-TAX> 3,745
<INCOME-CONTINUING> 5,175
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