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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 - 000-26229
BARNEYS NEW YORK, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-4040818
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
575 Fifth Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 339-7300
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 that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes {X} No { }
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 { }
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
As of December 1, 1999 there were 13,076,144 shares of Barneys New
York, Inc. common stock, par value $0.01 per share, outstanding.
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<PAGE>
BARNEYS NEW YORK, INC.
FORM 10-Q
QUARTER ENDED OCTOBER 30, 1999
Table of Contents
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed consolidated statements of operations - Three and nine months
ended October 30, 1999 and October 31, 1998 3
Condensed consolidated balance sheets - October 30, 1999 and
January 30, 1999 4
Condensed consolidated statements of cash flows - Nine months
ended October 30, 1999 and October 31, 1998 5
Notes to condensed consolidated financial statements - October 30, 1999 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 15
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
INDEX OF EXHIBITS 18
</TABLE>
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<PAGE>
ITEM 1. FINANCIAL STATEMENTS
Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR | PREDECESSOR SUCCESSOR | PREDECESSOR
COMPANY | COMPANY COMPANY | COMPANY
THREE MONTHS | THREE MONTHS NINE MONTHS | NINE MONTHS
ENDED | ENDED ENDED | ENDED
OCTOBER 30, 1999 | OCTOBER 31, 1998 OCTOBER 30, 1999 | OCTOBER 31, 1998
------------------| ------------------ ------------------ | ------------------
<S> <C> | <C> <C> | <C>
Net sales $ 100,988 | $ 91,640 $ 263,526 | $ 250,847
Cost of sales 53,606 | 48,122 139,903 | 133,047
------------------| ------------------ ------------------ | ------------------
| |
Gross profit 47,382 | 43,518 123,623 | 117,800
| |
Expenses: | |
| |
Selling, general and administrative expenses | |
(including occupancy costs) 38,516 | 37,059 112,599 | 110,317
Depreciation and amortization 4,293 | 2,259 12,950 | 7,056
Other income - net (1,069)| (921) (3,179) | (2,578)
------------------| ------------------ ------------------ | ------------------
Income before interest and financing costs, | |
reorganization costs and income taxes 5,642 | 5,121 1,253 | 3,005
| |
Interest and financing costs, net 3,472 | 2,336 9,819 | 8,724
------------------| ------------------ ------------------ | ------------------
| |
Income (loss) before reorganization costs | |
and income taxes 2,170 | 2,785 (8,566) | (5,719)
| |
Reorganization costs - | 2,672 - | 9,960
------------------| ------------------ ------------------ | ------------------
Income (loss) before income taxes 2,170 | 113 (8,566) | (15,679)
| |
Income taxes 19 | 19 56 | 57
------------------| ------------------ ------------------ | ------------------
| |
Net income (loss) $ 2,151 | $ 94 $ (8,622) | $ (15,736)
==================| ================== ================== | ==================
| |
| |
| |
Basic and diluted earnings (loss) per share: $ 0.17 | $ (0.69) |
==================| ================== |
| |
| |
Weighted average number of common and common | |
equivalent shares outstanding 12,500 | 12,500 |
==================| ================== |
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30,
1999 1999
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(UNAUDITED) (NOTE 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,485 $ 6,824
Restricted cash 2,417 5,082
Receivables, less allowances of $4,454 and $4,356 25,879 27,841
Inventories 65,186 65,551
Other current assets 4,514 6,347
--------- ---------
Total current assets 103,481 111,645
Fixed assets at cost, less accumulated depreciation
and amortization of $6,283 and $0 48,438 51,356
Excess reorganization value, less accumulated amortization of $6,667 and $0 171,104 177,767
Other assets 2,703 3,186
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Total assets $ 325,726 $ 343,954
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,267 $ 15,996
Accrued expenses 38,397 54,585
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Total current liabilities 54,664 70,581
Long-term debt 122,432 118,533
Other long-term liabilities 2,412 --
Redeemable Preferred Stock - Aggregate liquidation preference $2,000 627 500
Shareholders' equity:
Common stock--$.01 par value; authorized
25,000,000 shares--issued 12,500,022 shares 125 125
Additional paid-in capital 154,088 154,215
Accumulated deficit (8,622) --
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Total shareholders' equity 145,591 154,340
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Total liabilities and shareholders' equity $ 325,726 $ 343,954
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE>
Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SUCCESSOR | PREDECESSOR
COMPANY | COMPANY
NINE MONTHS | NINE MONTHS
ENDED | ENDED
OCTOBER 30, 1999 | OCTOBER 31, 1998
-------------------- | --------------------
<S> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net loss $ (8,622) | $ (15,736)
Adjustments to reconcile net loss to net cash used |
by operating activities: |
Depreciation and amortization 13,710 | 8,699
Deferred rent 2,412 | (291)
Other (65) | 2
Decrease (increase) in: |
Receivables 1,962 | (5,735)
Inventories 365 | (6,005)
Other current assets 1,833 | 985
Long-term assets - | 615
Increase (decrease) in: |
Accounts payable and accrued expenses (15,920) | 513
-------------------- | --------------------
Net cash used by operating activities (4,325) | (16,953)
-------------------- | --------------------
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
Fixed asset additions (3,363) | (2,278)
Contributions from landlords - | 203
Reduction of restricted cash 2,665 | -
-------------------- | --------------------
Net cash used by investing activities (698) | (2,075)
-------------------- | --------------------
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
Proceeds from credit facility 286,079 | 292,935
Repayments of credit facility (282,395) | (274,317)
-------------------- | --------------------
Net cash provided by financing activities 3,684 | 18,618
-------------------- | --------------------
|
Net decrease in cash (1,339) | (410)
Cash and equivalents - beginning of period 6,824 | 3,977
-------------------- | --------------------
Cash and equivalents - end of period $ 5,485 | $ 3,567
==================== | ====================
The accompanying notes are an integral part of these financial statements.
</TABLE>
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BARNEYS NEW YORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
Barneys New York, Inc. ("Holdings") and Subsidiaries (collectively
the "Company") is a retailer of men's and women's apparel and accessories and
items for the home. On January 10, 1996, Barney's, Inc. and Subsidiaries (the
"Predecessor Company") filed voluntary petitions for reorganization under
chapter 11 of the United States Bankruptcy Code ("Chapter 11"). The Predecessor
Company's Plan of Reorganization (the "Plan of Reorganization") was confirmed on
December 21, 1998 and became effective on January 28, 1999 (the "Effective
Date"). On that date, the Company adopted "fresh-start" reporting in accordance
with the American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7") which resulted in adjustments to the Company's
stockholders' equity and the carrying value of certain assets and liabilities.
Accordingly, the Company's post-reorganization (Successor Company) financial
statements are not prepared on the same basis as the pre-reorganization
(Predecessor Company) financial statements. A vertical black line is shown in
the accompanying financial statements to separate the post-reorganization
periods from the pre-reorganization periods.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and
nine-month periods ended October 30, 1999 are not necessarily indicative of the
results that may be expected for the fiscal year ending January 29, 2000.
The balance sheet at January 30, 1999 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
For further information, refer to the consolidated financial
statements and footnotes thereto for the six month period ended January 30, 1999
included in the Company's Registration Statement on Form 10, as amended, filed
with the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the date of the financial
statements, and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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As used herein, Successor Company refers to Barneys New York, Inc.
and Subsidiaries from and after the Effective Date and Predecessor Company
refers to Barney's, Inc. and Subsidiaries prior to the Effective Date.
(2) Long-Term Debt
Long-Term Debt consisted of the following at October 30, 1999:
(000's)
----------
Revolving Credit Facility $ 65,773
Isetan note 20,870
Equipment Lessors notes 35,789
----------
Total $ 122,432
==========
At October 30, 1999, $11,391,000 was committed pursuant to unexpired
letters of credit under the Company's revolving credit facility (the "Revolving
Credit Facility").
Effective June 2, 1999, the Company and the lenders under the
Revolving Credit Facility entered into an amendment thereto adjusting the
definition of earnings before interest, taxes, depreciation and amortization
("EBITDA") to allow for the inclusion of up to $3 million of cash equity
contributed to the Company during the fiscal year ending January 29, 2000 as
part of EBITDA, as defined. As of October 30, 1999, the Company was in
compliance with each of the covenants contained in the Revolving Credit
Facility.
(3) Income Taxes
The Company provides United States federal income taxes based on its
estimated annual effective tax rate for the fiscal year. A federal income tax
benefit was not recorded in either 1999 or 1998, as the future use of net
operating losses generated in those periods was uncertain. In the respective
periods, however, the Company has provided income taxes principally for state,
local and franchise taxes.
(4) Earnings (loss) Per Share
Earnings (loss) per common share is computed as net income (loss)
divided by the weighted average number of common shares outstanding. Earnings
per common share of the Predecessor Company has not been included herein as the
computation would not provide meaningful results because the capital structure
of the Successor Company is not comparable to that of the Predecessor Company.
Options and warrants to acquire an aggregate of 2,667,191 shares and
2,418,907 shares of common stock were not included in the computation of diluted
earnings per common share for the three and nine months ended October 30, 1999,
respectively, as including them would have been anti-dilutive.
As of October 30, 1999, the Company's common stock was not actively
traded.
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<PAGE>
(5) Subsequent Event
On November 12, 1999, Bay Harbour Management L.C. and Whippoorwill
Associates, Inc., the two largest shareholders of Holdings Common Stock,
notified the Company of their intention to exercise on behalf of their clients
their option to purchase, for an aggregate exercise price of $5 million, a total
of 576,122 shares of Holdings Common Stock. The closing of the exercise occurred
on November 19, 1999.
(6) Recent Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board approved
deferral of Statement No. 133 - Accounting for Derivatives Instruments and
Hedging Activities, which the Company is required to adopt in fiscal year
beginning February 2001. SFAS No. 133 requires that all derivative instruments
be recorded on the balance sheet at fair value. Changes in the fair value of
derivatives are recorded for each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. The ineffective portion
of all hedges will be recognized in earnings. While not expected to be material,
the Company is in the process of determining the impact that the adoption of
SFAS No. 133 will have on the consolidated financial position, results of
operations and cash flows of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward looking statements are based on management's expectations,
estimates, projections and assumptions. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates," and variations of such words and
similar expressions are intended to identify such forward looking statements
which include, but are not limited to, projections of revenues, earnings and
cash flows. These forward looking statements are subject to risks and
uncertainties which could cause the Company's actual results or performance to
differ materially from those expressed or implied in such statements. These
risks and uncertainties include, but are not limited to, the following: general
economic and business conditions, both nationally and in those areas in which
the Company operates; demographic changes; prospects for the retail industry;
competition; changes in business strategy or development plans; the loss of
management and key personnel; the availability of capital to fund the expansion
of the Company's business; changes in consumer preferences or fashion trends;
adverse weather conditions, particularly during peak selling seasons; failure of
the Company or third parties to be Year 2000 compliant; and changes in the
Company's relationships with designers, vendors and other suppliers.
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<PAGE>
Results of Operations
The Company is engaged in three distribution channels which encompass
its various product offerings: the full-price stores, the outlet stores and the
warehouse sale events. The Company's emergence from bankruptcy on the Effective
Date is a key factor affecting comparability of operating results for the three
and nine months ended October 30, 1999 as compared to the three and nine months
ended October 31, 1998. On the Effective Date, the Company adopted "fresh-start"
reporting which resulted in adjustments to the Company's stockholders' equity
and the carrying value of certain assets and liabilities. Further, the Company
recorded reorganization value in excess of amounts allocable to identifiable
assets ("Excess Reorganization Value") of $177.8 million. This excess
reorganization value is being amortized by the straight-line method over 20
years. In addition, upon emergence from Chapter 11, the Company changed its
fiscal year-end to the Saturday closest to January 31 from the Saturday closest
to July 31. As a result, there are year-end adjustments in the nine-month period
ended October 30, 1998, as discussed below, which affect the comparability of
operating results with the same period in fiscal 1999.
Three Months Ended October 30, 1999 Compared to the Three Months Ended October
31, 1998
Net sales for the three months ended October 30, 1999 were $101.0
million compared to $91.6 million a year ago, an increase of 10.2%. Excluding
sales from the outlet stores which closed during the period, comparable store
sales increased approximately 11.2%, principally due to a 10.7% comparable store
sales increase in the full-price stores.
Gross profit on sales increased 8.9% to $47.4 million for the three
months ended October 30, 1999 from $43.5 million in the three months ended
October 31, 1998, primarily due to the sales increase mentioned above. As a
percentage of net sales, gross profit was 46.9% for the three months ended
October 30, 1999 compared to 47.5% in the year ago period partially due to
higher markdowns offset, to an extent, by the impact of greater foreign exchange
gains realized upon settlement of foreign denominated purchases in 1999.
Selling, general and administrative expenses, including occupancy
expenses, increased 3.9% in the three-month period ended October 30, 1999 to
$38.5 million from $37.1 million in the three month period ended October 31,
1998. This increase is principally driven by higher sales volume generating
higher costs, particularly commission expense and credit card fees, as well as
slightly higher occupancy costs. Selling, general and administrative expenses
declined to 38.1% of sales in the three months ended October 30, 1999 from 40.4%
in the three months ended October 31, 1998 principally due to tighter management
and leveraging of expenses.
As a direct consequence of the Plan of Reorganization becoming
effective, occupancy expense at the Company's three flagship stores in New York,
Beverly Hills and Chicago for the three months ended October 30, 1999 as
compared to the three months ended October 31, 1998 increased approximately $1.5
million due to increased
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<PAGE>
rent expense in accordance with the renegotiated leases for these properties.
This increase in occupancy costs, however, was substantially offset by the
elimination of expense associated with certain equipment previously leased by
the Predecessor Company, again as a direct consequence of the Plan of
Reorganization becoming effective.
Depreciation and amortization increased 90.0% in the three-month
period ended October 30, 1999 to $4.3 million from $2.3 million in the prior
year. This increase was primarily due to the amortization of the excess
reorganization value.
Interest expense increased 48.6% in the three months ended October
30, 1999 to $3.5 million from $2.3 million in the prior year. Interest
associated with borrowings under the Company's credit facility declined
significantly from the interest expense associated with the borrowings of the
Predecessor Company under the debtor in possession credit agreement, due to a
lower effective interest rate, driven by a reduction in the portion of interest
expense associated with the amortization of related bank fees, as well as lower
average borrowings. This reduction was offset by approximately $1.7 million of
interest expense associated with the new notes issued pursuant to the Plan of
Reorganization.
Average borrowings under the Revolving Credit Facility for the three
months ended October 30, 1999 and under the Predecessor Company's debtor in
possession credit agreement for the three months ended October 31, 1998 were
$68.7 million and $83.8 million, respectively, and the effective interest rate
on this portion of the Company's outstanding debt was 9.4% in the three months
ended October 30, 1999 compared to 10.4% in the comparable period of the prior
year.
There were no reorganization costs incurred subsequent to the Plan of
Reorganization becoming effective. In the three-month period ended October 31,
1998 there were $2.7 million of reorganization costs.
The Company's net income for the three months ended October 30, 1999
was $2.2 million compared to net income of $0.1 million for the three months
ended October 31, 1998. Basic and diluted net income per common share for the
three months ended October 30, 1999 was $0.17 per common share. Earnings per
common share of the Predecessor Company has not been included herein as the
computation would not provide meaningful results as the capital structure of the
Successor Company is not comparable to that of the Predecessor Company.
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<PAGE>
Nine Months Ended October 30, 1999 Compared to the Nine Months Ended October 31,
1998
Net sales for the nine months ended October 30, 1999 were $263.5
million compared to $250.8 million a year ago, an increase of 5.1%. Included in
net sales for the nine months ended October 31, 1998 is $2.2 million generated
from a full-price store which closed in July 1998. Excluding sales from the four
outlet stores which closed during the period, comparable store sales increased
approximately 6.4%, principally due to a 7.1% increase at the full-price stores.
Gross profit on sales increased 4.9% to $123.6 million for the nine
months ended October 30, 1999 from $117.8 million in the nine months ended
October 31, 1998, primarily due to the sales increase discussed above. The
Company experienced higher shrink and markdowns in the nine months ended October
30, 1999 as compared to the year ago period. These additional expenses were
substantially offset by greater foreign exchange gains, realized upon settlement
of foreign denominated purchases in 1999 and certain non-recurring year-end
adjustments recorded against gross profit in 1998. As a percentage of net sales,
gross profit was 46.9% for the nine months ended October 30, 1999 compared to
47.0% in the year ago period.
Selling, general and administrative expenses, including occupancy
expenses, increased 2.1% in the nine month period ended October 30, 1999 to
$112.6 million from $110.3 million in the nine month period ended October 31,
1998. Selling, general and administrative expenses declined to 42.7% of sales in
the nine months ended October 30, 1999 from 44.0% in the nine months ended
October 30, 1998 principally due to tighter management and leveraging of
expenses.
Selling, general and administrative expenses in the nine months ended
October 31, 1998 were impacted by year-end adjustments made to certain employee
benefit costs, including medical and workers compensation insurance expense to
reflect positive trends in costs associated with these programs. As these
expense trends were factored into the expenses being recorded for these items in
the current period, similar adjustments are not recurring in the nine months
ended October 30, 1999. Further, increases in costs such as commission expense
and credit card fees, in connection with the aforementioned sales growth, and
occupancy costs in line with contractual inflationary increases, were offset by
continuing improvements from the Company's cost-reduction initiatives, as well
as the non-recurring costs related to the full-price store which closed in July
1998.
As a direct consequence of the Plan of Reorganization becoming
effective, occupancy expense for the Company's three flagship stores in New
York, Beverly Hills and Chicago for the nine months ended October 30, 1999 as
compared to the nine months ended October 31, 1998 increased more than $4.5
million due to increased rent expense in accordance with the renegotiated leases
for these properties. This increase in occupancy costs, however, was
substantially offset by the elimination of expense associated with certain
equipment previously leased by the Predecessor Company, again as a direct
consequence of the Plan of Reorganization becoming effective.
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<PAGE>
Depreciation and amortization increased 83.5% in the nine month
period ended October 30, 1999 to $12.9 million from $7.1 million in the prior
year. This increase was primarily due to the amortization of the excess
reorganization value.
Interest expense increased in the nine months ended October 30, 1999
to $9.8 million from $8.7 million a year ago. Interest associated with
borrowings under the Company's credit facility declined significantly from the
interest expense associated with the borrowings of the Predecessor Company under
the debtor in possession credit agreement due to a lower effective interest
rate, driven by a reduction in the portion of interest expense associated with
the amortization of related bank fees, as well as lower average borrowings. This
reduction was offset by approximately $4.9 million of interest expense
associated with the new notes issued pursuant to the Plan of Reorganization.
Average borrowings under the Revolving Credit Facility for the nine
months ended October 30, 1999 and under the Predecessor Company's debtor in
possession credit agreement for the nine months ended October 31, 1998 were
$66.2 million and $74.0 million, respectively, and the effective interest rate
on this portion of the Company's outstanding debt was 9.6% in the nine months
ended October 30, 1999 compared to 14.3% in the comparable period of the prior
year.
There were no reorganization costs incurred subsequent to the Plan of
Reorganization becoming effective. In the nine-month period ended October 31,
1998 there were $10.0 million of reorganization costs.
The Company's net loss for the nine months ended October 30, 1999 was
$8.6 million compared to a net loss of $15.7 million for the nine months ended
October 31, 1998. Basic and diluted net loss per common share for the nine
months ended October 30, 1999 was $0.69 per common share. Earnings per common
share of the Predecessor Company has not been included herein as the computation
would not provide meaningful results as the capital structure of the Successor
Company is not comparable to that of the Predecessor Company.
LIQUIDITY AND CAPITAL
Liquidity and Capital Resources
The Company's net cash used by operating activities for the nine
months ended October 30, 1999 was $4.3 million as compared to net cash used by
operating activities for the nine months ended October 31, 1998 of $16.9
million. Improvement in the Company's net loss before non-cash items was offset
by increased working capital requirements principally related to payments made
for administrative claims and certain assumed pre-petition liabilities of the
Predecessor Company aggregating approximately $11.1 million in the current
period. The Company's working capital was $48.8 million at October 30, 1999
compared to $41.1 million at January 30, 1999. The Company's primary source of
liquidity has been borrowings under the Revolving Credit Facility.
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<PAGE>
The Company incurred capital expenditures of $3.4 million during the
nine-month period ended October 30, 1999. The Company's capital expenditures are
expected to be approximately $7.2 million in fiscal 1999 primarily for the
remodeling of existing stores. The Company will fund these expenditures through
borrowings under the Revolving Credit Facility. Pursuant to the covenants
contained in the Revolving Credit Facility, the Company's total capital
expenditures for fiscal year 1999 may not exceed $7.25 million.
At October 30, 1999, the Company had approximately $31.8 million of
availability under the Revolving Credit Facility, after considering $65.8
million of revolving loans and $11.4 million of letters of credit outstanding.
Effective June 2, 1999, the Company and the lenders under the
Revolving Credit Facility entered into an amendment thereto adjusting the
definition of earnings before interest, taxes, depreciation and amortization
("EBITDA") to allow for the inclusion of up to $3 million of cash equity
contributed to the Company during the fiscal year ending January 29, 2000 as
part of EBITDA, as defined. As of October 30, 1999, the Company was in
compliance with each of the covenants contained in the Revolving Credit
Facility.
There can be no assurance that the Company can achieve its financial
forecasts in its fiscal year ending January 29, 2000 or beyond. Any material
deviations from the Company's forecasts could require the Company to seek
alternative sources of financing or to reduce expenditures. There can also be no
assurance that alternative financing could be obtained, or if obtained, that it
would be on terms acceptable to the Company.
Year 2000
The Year 2000 ("Y2K") issue relates to the inability of information
systems to properly recognize and process date-sensitive information as of
January 1, 2000. Many computer systems and software products may not be able to
interpret dates after December 31, 1999 because such systems and products allow
only two digits to indicate the year in a date. As a result, these systems and
products are unable to distinguish January 1, 2000 from January 1, 1900, which
could have adverse consequences on the operations of an entity and the integrity
of information processing.
The Company's management recognized the need to address the Y2K issue
in all internal systems and applications. A Y2K plan was developed in April 1998
to define all applications requiring system upgrades.
Letters were mailed to all system related vendors in March through
July of 1998. The letters instructed vendors to confirm status of their systems
and/or applications in connection with Y2K compliance needs. The Company
required modifications to software and hardware systems to make reasonably
certain these applications should perform properly after December 31, 1999.
System related vendors responded, providing schedules for upgrades on hardware
and software utilized by the Company. As of November 1999, all vendors have
complied with written requests to address Y2K limitations.
The Company has modified or replaced portions of its software systems
to attempt to make all applications Y2K compliant. The components requiring
upgrade
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<PAGE>
included software related applications controlling merchandising, credit,
marketing, accounting, distribution, sales audit and store security systems.
The Company is utilizing both internal and external resources to
reprogram, replace and test software for Y2K modifications. All computer network
servers utilizing Novell technology were upgraded with Y2K compliant software
versions. System related upgrades began in March 1998 when STS, the retail
system vendor, began installing Y2K compliant software on the Company's main
frame computer.
Additionally, the Company has established an ongoing program to
communicate with its significant suppliers and vendors to determine the extent
to which the Company's systems and operations are vulnerable to those third
parties' failure to rectify their own Y2K issues. The Company is not presently
aware of any significant exposure arising from potential third party failures.
However, there can be no assurance that the systems of other companies on which
the Company's systems or operations rely will be converted on a timely basis or
that any failure of such parties to achieve Y2K compliance would not have any
adverse effect on the Company's results of operations.
Based on the expenses incurred to date and management's current
estimates, the costs of Y2K remediation, including both system and software
application modifications, which have been and will be expensed as incurred as
appropriate, have not been and are not expected to be material to the results of
operations or the financial position of the Company. To date, the Company has
incurred approximately $280,000 of costs related to Y2K, of which approximately
$171,000 has been expensed with the remainder capitalized. The Company
anticipates additional Y2K expenses will total approximately $25,000.
The Company believes that it is difficult to identify its most
reasonable likely worst case Y2K scenario. However, a reasonable worst case
scenario could arise from a business interruption caused by, for instance,
governmental agencies, utility and telecommunication companies, shipping
companies or other merchandise and service providers outside the Company's
control. There can be no assurance that such providers will not suffer business
interruption caused by a Y2K matter. Such interruption could have a material
adverse effect on the Company's results of operations.
In addition to the steps outlined above, a Y2K disaster recovery task
force has been created. The primary function of this task force is to continue
testing on and after January 1, 2000 all Y2K related functionality for
applications that the Company currently uses. This process should enable the
task force to quickly identify any problem areas and react to those problems in
an efficient manner, thereby minimizing potential disruption to the Company.
The Company's future costs of the Y2K project are based on
management's best estimates. Currently no contingency plan exists in the event
that Y2K modifications are not complete prior to January 1, 2000 or are
ineffective, but management will periodically evaluate the need for one and
adapt accordingly. There is no certainty or guarantee that the Y2K expense
estimates will be achieved, and actual costs could be materially greater than
anticipated. Specific factors that might cause such differences include, but are
not limited to, the availability and cost of personnel trained in the Y2K
-14-
<PAGE>
area, the compliance by merchandise and other suppliers and other third parties,
and similar uncertainties.
No assurances can be given that the Company will be able to
completely identify or address all Y2K compliance issues, or that third parties
with whom the Company does business will not experience system failures as a
result of the Y2K issues, nor can the Company fully predict the consequences of
noncompliance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the reported market risks
since the end of the most recent fiscal year.
-15-
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) On November 15, 1999, Bay Harbour Management L.C. and Whippoorwill
Associates, Inc. each exercised in full on behalf of their clients
their options to acquire 288,061 shares of Holdings Commons Stock
each, for an exercise price of $2,500,000 each. The options were
granted to them pursuant to the Predecessor Company's Plan of
Reorganization. The issuance of such shares pursuant to the exercise
of the options was exempt from registration under the Securities Act
of 1933, as amended, pursuant to Section 4(2) thereof since it
constituted a private placement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
No. Description
27.1 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the quarter
ended October 30, 1999.
-16-
<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.
Date: December 14, 1999
BARNEYS NEW YORK, INC.
By: /s/ Steven M. Feldman
-------------------------------------
Name: Steven M. Feldman
Title: Senior Vice President,
Chief Financial Officer
-17-
<PAGE>
EXHIBIT INDEX
(a) Exhibit
No. Description
27.1 Financial Data Schedule
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Barneys New York, Inc. and Subsidiaries contained in the
accompanying Quarterly Report on Form 10Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> OCT-30-1999
<CASH> 7,902
<SECURITIES> 0
<RECEIVABLES> 30,333
<ALLOWANCES> 4,454
<INVENTORY> 65,186
<CURRENT-ASSETS> 103,481
<PP&E> 54,721
<DEPRECIATION> 6,283
<TOTAL-ASSETS> 325,726
<CURRENT-LIABILITIES> 54,664
<BONDS> 122,432
627
0
<COMMON> 125
<OTHER-SE> 145,466
<TOTAL-LIABILITY-AND-EQUITY> 325,726
<SALES> 263,526
<TOTAL-REVENUES> 263,526
<CGS> 139,903
<TOTAL-COSTS> 262,273
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,433
<INTEREST-EXPENSE> 9,819
<INCOME-PRETAX> (8,566)
<INCOME-TAX> 56
<INCOME-CONTINUING> 1,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,622)
<EPS-BASIC> (.69)
<EPS-DILUTED> (.69)
</TABLE>
