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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 1)
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 31, 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
------------------------------------ -----
(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 September 8, 1999 there were 12,500,022 shares of Barneys New
York, Inc. common stock, par value $0.01 per share, outstanding.
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21645.0001
<PAGE>
BARNEYS NEW YORK, INC.
FORM 10-Q
QUARTER ENDED JULY 31, 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 six months
ended July 31, 1999 and August 1, 1998 3
Condensed consolidated balance sheets - July 31, 1999 and
January 30, 1999 4
Condensed consolidated statements of cash flows - Six months
ended July 31, 1999 and August 1, 1998 5
Notes to condensed consolidated financial statements - July 31, 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 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
INDEX OF EXHIBITS 18
</TABLE>
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
(UNAUDITED)
SUCCESSOR | PREDECESSOR SUCCESSOR | PREDECESSOR
COMPANY | COMPANY COMPANY | COMPANY
THREE MONTHS | THREE MONTHS SIX MONTHS | SIX MONTHS
ENDED | ENDED ENDED | ENDED
JULY 31, 1999 | AUGUST 1, 1998 JULY 31, 1999 | AUGUST 1, 1998
---------------- | ----------------- ---------------- | -----------------
| |
<S> <C> | <C> <C> | <C>
Net sales $ 77,923 | $ 71,898 $ 163,764 | $ 162,175
Cost of sales 41,748 | 38,627 87,523 | 87,893
---------------- | ----------------- --------------- | ----------------
| |
Gross profit 36,175 | 33,271 76,241 | 74,282
| |
Expenses: | |
| |
Selling, general and administrative expenses (including | |
occupancy costs) 36,669 | 34,696 74,083 | 73,258
Depreciation and amortization 4,341 | 2,484 8,657 | 4,797
Other income - net (1,099) | (642) (2,111) | (1,657)
---------------- | ----------------- --------------- | ----------------
Loss before interest and financing costs, | |
reorganization costs and income taxes (3,736) | (3,267) (4,388) | (2,116)
| |
Interest and financing costs, net of interest income 3,228 | 3,353 6,348 | 6,388
---------------- | ----------------- --------------- | ----------------
| |
Loss before reorganization costs | |
and income taxes (6,964) | (6,620) (10,736) | (8,504)
| |
Reorganization costs - | 4,399 - | 7,288
---------------- | ----------------- --------------- | ----------------
Loss before income taxes (6,964) | (11,019) (10,736) | (15,792)
| |
Income taxes 19 | 19 38 | 38
---------------- | ----------------- --------------- | ----------------
| |
Net loss $ (6,983) | $ (11,038) $ (10,774) | $ (15,830)
================ | ================= =============== | ================
| |
Basic and diluted net loss per share of common stock $ (0.56) | $ (0.86) |
================ | =============== |
| |
Weighted average number of shares of common | |
stock 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>
JULY 31, JANUARY 30,
1999 1999
------------------ ------------------
(UNAUDITED) (NOTE 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,970 $ 6,824
Restricted cash 2,383 5,082
Receivables, less allowances of $4,382 and $4,356 20,863 27,841
Inventories 64,209 65,551
Other current assets 5,495 6,347
------------------ ------------------
Total current assets 97,920 111,645
Fixed assets at cost, less accumulated depreciation
and amortization of $4,212 and $0 48,297 51,356
Excess reorganization value, less accumulated amortization of $4,444 and $0 173,323 177,767
Other assets 2,844 3,186
------------------ ------------------
Total assets $ 322,384 $ 343,954
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,883 $ 15,996
Accrued expenses 40,117 54,585
------------------ ------------------
Total current liabilities 53,000 70,581
Long-term debt 123,712 118,533
Other long-term liabilities 1,606 -
Redeemable Preferred Stock - Aggregate liquidation preference $2,000 500 500
Shareholders' equity:
Common stock--$.01 par value; authorized
25,000,000 shares--issued 12,500,022 shares 125 125
Additional paid-in capital 154,215 154,215
Accumulated deficit (10,774) -
------------------ ------------------
Total shareholders' equity 143,566 154,340
------------------ ------------------
Total liabilities and shareholders' equity $ 322,384 $ 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
SIX MONTHS | SIX MONTHS
ENDED | ENDED
JULY 31, 1999 | AUGUST 1, 1998
----------------- | ------------------
<S> <C> | <C>
Cash flows from operating activities: |
Net loss $ (10,774) | $ (15,830)
Adjustments to reconcile net loss to net cash used |
by operating activities: |
Depreciation and amortization 9,157 | 6,069
Deferred rent 1,606 | (181)
Other - | 2
Decrease (increase) in: |
Receivables 6,978 | 296
Inventories 1,342 | (8,178)
Other current assets 852 | 1,192
Long-term assets (16) | 580
Increase (decrease) in: |
Accounts payable and accrued expenses (17,584) | 7,615
----------------- | ------------------
Net cash used by operating activities (8,439) | (8,435)
----------------- | ------------------
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
Fixed asset additions (1,154) | (1,416)
Contributions from landlords - | 203
Reduction of restricted cash 2,699 | -
|
----------------- | ------------------
Net cash provided (used) by investing activities 1,545 | (1,213)
----------------- | ------------------
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
Proceeds from credit facility 182,679 | 187,639
Repayments of credit facility (177,639) | (178,490)
----------------- | ------------------
Net cash provided by financing activities 5,040 | 9,149
----------------- | ------------------
|
Net decrease in cash (1,854) | (499)
Cash and equivalents - beginning of period 6,824 | 3,977
----------------- | ------------------
Cash and equivalents - end of period $ 4,970 | $ 3,478
================= | ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
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
six-month periods ended July 31, 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 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 July 31, 1999:
(000's)
----------
Revolving Credit Facility $ 67,128
Isetan note 20,795
Equipment Lessors notes 35,789
----------
Total $ 123,712
==========
At July 31, 1999, $21,059,000 was committed under 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 which
could be contributed to the Company during the fiscal year ending January 29,
2000 as part of EBITDA, as defined. As of July 31, 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 loss available to
common stockholders 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 2,622,191 shares and
2,249,765 shares of common stock were not included in the computation of diluted
earnings per common share for the three and six months ended July 31, 1999,
respectively, as including them would have been anti-dilutive.
As of July 31, 1999, the Company's common stock was not actively
traded.
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<PAGE>
(5) 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.
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 six months ended July 31, 1999 as compared to the three and six months ended
August 1, 1998. On the Effective
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<PAGE>
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 recognized 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 three and six-month periods ended August 1, 1998, as
discussed below, which affect the comparability of operating results with the
same periods in fiscal 1999.
Three Months Ended July 31, 1999 Compared to the Three Months Ended August 1,
1998
Net sales for the three months ended July 31, 1999 were $77.9 million
compared to $71.9 million a year ago, an increase of 8.4%. Included in net sales
for the three months ended July 31, 1999 are bulk sales of merchandise to
jobbers ("Bulk Sales") of approximately $1.2 million. Included in net sales for
the three months ended August 1, 1998 is approximately $1.1 million generated
from a full-price store which closed in July 1998. Excluding Bulk Sales and
sales from two of the outlet stores which closed at the end of July 1999 and the
beginning of August 1999, comparable store sales increased approximately 7.7%,
principally due to a 9.3% comparable store sales increase in the full-price
stores. Comparable store sales increases were driven by a strong flow of new
seasonal receipts into the stores and, to an extent, by more promotional
activities.
Gross profit on sales increased 8.7% to $36.2 million for the three
months ended July 31, 1999 from $33.3 million in the three months ended August
1, 1998, primarily due to the sales increase mentioned above. The Company
experienced higher actual shrink in the second quarter of 1999 as compared to
the year ago period. On a comparative basis, this additional expense was
substantially offset by greater foreign exchange gains ($388,000), realized upon
settlement of foreign denominated purchases in 1999 and certain non-recurring
year-end adjustments recorded against gross profit of approximately $700,000
principally to reserve against aged vendor chargebacks in 1998. As a percentage
of net sales, gross profit was 46.4% for the three months ended July 31, 1999
compared to 46.3% in the year ago period.
Selling, general and administrative expenses, including occupancy
expenses, increased 5.7% in the three-month period ended July 31, 1999 to $36.7
million from $34.7 million in the three month period ended August 1, 1998.
Selling, general and administrative expenses were 47.1% (47.8% exclusive of Bulk
Sales) of sales in the three months ended July 31, 1999 as compared to 48.3% in
the three months ended August 1, 1998.
The three months ended August 1, 1998 previously represented the
fourth quarter of the Predecessor Company coinciding with the Predecessor
Company's year-end. During that quarter, year-end adjustments were 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 three months ended July 31, 1999. Further, increases in costs such as
commission expense, in line with sales growth, and occupancy costs in line with
contractual inflationary increases were offset by continuing improvements from
the
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<PAGE>
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 at the Company's three flagship stores in New York,
Beverly Hills and Chicago for the three months ended July 31, 1999 as compared
to the three months ended August 1, 1998 increased approximately $1.5 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.
Depreciation and amortization increased 74.8% in the three-month
period ended July 31, 1999 to $4.3 million from $2.5 million in the prior year.
This increase was primarily due to the amortization of the excess reorganization
value.
Interest expense decreased 3.7% in the three months ended July 31,
1999 to $3.2 million from $3.4 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 July 31, 1999 and under the Predecessor Company's debtor in
possession credit agreement for the three months ended August 1, 1998 were $66.3
million and $71.5 million, respectively, and the effective interest rate on this
portion of the Company's outstanding debt was 9.0% in the three months ended
July 31, 1999 compared to 15.7% 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 August 1,
1998 there were $4.4 million of reorganization costs.
The Company's net loss for the three months ended July 31, 1999 was
$7.0 million compared to a net loss of $11.0 million for the three months ended
August 1, 1998. Basic and diluted net loss per common share for the three months
ended July 31, 1999 was $0.56 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>
Six Months Ended July 31, 1999 Compared to the Six Months Ended August 1, 1998
Net sales for the six months ended July 31, 1999 were $163.8 million
compared to $162.2 million a year ago, an increase of 1.0%. Bulk Sales decreased
$1.7 million in the current year to $1.2 million from $3.0 million in the year
ago period. In addition, included in net sales for the six months ended August
1, 1998 is $2.2 million generated from a full-price store which closed in July
1998. Excluding Bulk Sales and sales from the two outlet stores which closed at
the end of July 1999 and the beginning of August 1999, comparable store sales
increased approximately 3.5%, principally due to a 5.0% increase at the
full-price stores offset by weakness at both the outlet stores and warehouse
sale locations. Comparable store sales increases were driven by a strong flow of
new seasonal receipts into the stores, particularly in the second quarter and,
to an extent, by more promotional activities.
Gross profit on sales increased 2.6% to $76.2 million for the six
months ended July 31, 1999 from $74.3 million in the three months ended August
1, 1998, primarily due to the sales increase discussed above. Principally as a
result of the reduced volume of the Bulk Sales, related markdowns declined to
approximately $0.6 million from $1.9 million in the year ago period. The Company
experienced higher actual shrink in the six months ended July 31, 1999 as
compared to the year ago period. On a comparative basis, this additional expense
was substantially offset by greater foreign exchange gains ($390,000), realized
upon settlement of foreign denominated purchases in 1999 and certain
non-recurring year-end adjustments recorded against gross profit of
approximately $700,000 principally to reserve for aged vendor chargebacks in
1998. As a percentage of net sales, gross profit was 46.6% for the six months
ended July 31, 1999 compared to 45.8% in the year ago period.
Selling, general and administrative expenses, including occupancy
expenses, increased 1.1% in the six-month period ended July 31, 1999 to $74.1
million from $73.3 million in the six month period ended August 1, 1998.
Selling, general and administrative expenses were 45.2% of sales in the six
months ended July 31, 1999 as compared to 45.2% in the six months ended August
1, 1998. Excluding the effect of the Bulk Sales, the corresponding percentages
were 45.6% and 46.0% in the respective periods.
Selling, general and administrative expenses in the six months ended
August 1, 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 six months
ended July 31, 1999. Further, increases in costs such as commission expense, in
line with 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 six months ended July 31, 1999 as
compared to the six months ended August 1, 1998 increased more than $3 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.
-11-
<PAGE>
Depreciation and amortization increased 80.5% in the six-month period
ended July 31, 1999 to $8.7 million from $4.8 million in the prior year. This
increase was primarily due to the amortization of the excess reorganization
value.
Interest expense decreased in the six months ended July 31, 1999 to
$6.3 million from $6.4 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 $3.2 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 six
months ended July 31, 1999 and under the Predecessor Company's debtor in
possession credit agreement for the six months ended August 1, 1998 were $64.9
million and $69.1 million, respectively, and the effective interest rate on this
portion of the Company's outstanding debt was 9.0% in the six months ended July
31, 1999 compared to 16.7% in the comparable period of the prior year.
There were no reorganization costs incurred subsequent to the Plan of
Reorganization becoming effective. In the six-month period ended August 1, 1998
there were $7.3 million of reorganization costs.
The Company's net loss for the six months ended July 31, 1999 was
$10.8 million compared to a net loss of $15.8 million for the six months ended
August 1, 1998. Basic and diluted net loss per common share for the six months
ended July 31, 1999 was $0.86 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 cash used by operations for the six months ended July
31, 1999 and August 1, 1998 was $8.4 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 $10.5 million in the current period. The Company's working capital
was $44.9 million at July 31, 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 $1.2 million during the
six-month period ended July 31, 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 July 31, 1999, the Company had approximately $17.8 million of
availability under the Revolving Credit Facility, after considering $67.1
million of revolving loans and $21.1 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 July 31, 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 August 1999, all vendors have
complied with written requests to address Y2K limitations.
The Company is modifying or replacing portions of its software
systems to attempt to make all applications Y2K compliant. The components
requiring upgrade include software related applications controlling
merchandising, credit, marketing,
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<PAGE>
accounting, distribution, sales audit and store security systems. Completion of
modifications is currently scheduled for Fall 1999.
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 will be 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 $255,000 of costs related to Y2K, of which approximately
$147,000 has been expensed with the remainder capitalized. The Company
anticipates additional Y2K expenses will total approximately $50,000.
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 test 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 cost of the Y2K project, and the dates on which the
Company believes it will substantially complete Y2K modifications are based on
management's best estimates. Currently no contingency plan exists in the event
that Y2K modifications are not complete 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 area, the compliance by merchandise and
other suppliers and other third parties, and similar uncertainties.
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<PAGE>
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.
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<PAGE>
PART 2. OTHER INFORMATION
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 July 31, 1999.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 2000
BARNEYS NEW YORK, INC.
By: /s/ Steven M. Feldman
------------------------------------------
Name: Steven M. Feldman
Title: Executive Vice President and
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
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/A AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JUL-31-1999
<CASH> 7,353
<SECURITIES> 0
<RECEIVABLES> 25,245
<ALLOWANCES> 4,382
<INVENTORY> 64,209
<CURRENT-ASSETS> 97,920
<PP&E> 52,509
<DEPRECIATION> 4,212
<TOTAL-ASSETS> 322,384
<CURRENT-LIABILITIES> 53,000
<BONDS> 123,712
500
0
<COMMON> 125
<OTHER-SE> 143,566
<TOTAL-LIABILITY-AND-EQUITY> 322,384
<SALES> 163,764
<TOTAL-REVENUES> 163,764
<CGS> 87,523
<TOTAL-COSTS> 168,152
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 891
<INTEREST-EXPENSE> 6,347
<INCOME-PRETAX> (10,736)
<INCOME-TAX> 38
<INCOME-CONTINUING> (4,388)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,774)
<EPS-BASIC> (.86)
<EPS-DILUTED> (.86)
</TABLE>
