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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 July 29, 2000 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 - 0-26229
BARNEYS NEW YORK, INC.
(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 September 7, 2000 there were 13,903,227 shares of Barneys New
York, Inc. common stock, par value $0.01 per share, outstanding.
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21645.0001
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BARNEYS NEW YORK, INC.
FORM 10-Q
QUARTER ENDED JULY 29, 2000
Table of Contents
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Page No.
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed consolidated statements of operations - Three and six months
ended July 29, 2000 and July 31, 1999 3
Condensed consolidated balance sheets - July 29, 2000 and
January 29, 2000 4
Condensed consolidated statements of cash flows - Six months
ended July 29, 2000 and July 31, 1999 5
Notes to condensed consolidated financial statements - July 29, 2000 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
INDEX OF EXHIBITS 15
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ITEM 1. FINANCIAL STATEMENTS
Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(UNAUDITED)
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THREE MONTHS ENDED SIX MONTHS ENDED
JULY 29, 2000 JULY 31, 1999 JULY 29, 2000 JULY 31, 1999
----------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 84,252 $ 77,923 $ 180,863 $ 163,764
Cost of sales 43,396 41,748 95,438 87,523
----------------- ----------------- --------------- -----------------
Gross profit 40,856 36,175 85,425 76,241
Expenses:
Selling, general and administrative expenses
(including occupancy costs) 38,210 36,669 77,450 74,083
Depreciation and amortization 4,468 4,341 8,826 8,657
Other income - net (1,068) (1,099) (2,212) (2,111)
----------------- ----------------- --------------- -----------------
(Loss) income before interest and financing
costs and income taxes (754) (3,736) 1,361 (4,388)
Interest and financing costs, net of interest income 2,772 3,228 5,802 6,348
----------------- ----------------- --------------- -----------------
Loss before income taxes (3,526) (6,964) (4,441) (10,736)
Income taxes 63 19 82 38
----------------- ----------------- --------------- -----------------
Net loss $ (3,589) $ (6,983) $ (4,523) $ (10,774)
================= ================= =============== =================
Basic and diluted net loss per share of common stock $ (0.26) $ (0.56) $ (0.34) $ (0.86)
================= ================= =============== =================
Weighted average number of shares of common
stock outstanding 13,627 12,500 13,352 12,500
================= ================= =============== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(UNAUDITED)
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JULY 29, JANUARY 29,
2000 2000
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ASSETS
Current assets:
Cash and cash equivalents $ 16,068 $ 10,333
Restricted cash 2,494 2,443
Receivables, less allowances of $3,751 and $3,599 24,379 28,134
Inventories 60,237 58,689
Other current assets 8,057 6,454
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Total current assets 111,235 106,053
Fixed assets at cost, less accumulated depreciation
and amortization of $12,878 and $8,406 48,421 48,974
Excess reorganization value, less accumulated amortization of $13,186 and $8,840 162,625 166,970
Other assets 2,098 2,485
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Total assets $ 324,379 $ 324,482
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LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 26,127 $ 15,760
Accrued expenses 38,297 41,746
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Total current liabilities 64,424 57,506
Long-term debt 94,720 105,915
Other long-term liabilities 8,076 6,565
Redeemable Preferred Stock 500 500
Shareholders' equity:
Common stock--$.01 par value; authorized
25,000,000 shares--issued 13,903,227 and 13,076,266 shares 139 131
Additional paid-in capital 166,389 159,211
Accumulated deficit (9,869) (5,346)
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Total shareholders' equity 156,659 153,996
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Total liabilities and shareholders' equity $ 324,379 $ 324,482
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(UNAUDITED)
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<CAPTION>
SIX MONTHS ENDED
JULY 29, 2000 JULY 31, 1999
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Cash flows from operating activities:
Net loss $ (4,523) $ (10,774)
Adjustments to reconcile net loss to net cash provided (used)
by operating activities:
Depreciation and amortization 9,355 9,157
Deferred rent 1,511 1,606
Decrease (increase) in:
Receivables 3,755 6,978
Inventories (1,548) 1,342
Other current assets (1,603) 852
Long-term assets 21 (16)
Increase (decrease) in:
Accounts payable and accrued expenses 6,916 (17,584)
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Net cash provided (used) by operating activities 13,884 (8,439)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed asset additions (3,929) (1,154)
Reduction of restricted cash (51) 2,699
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Net cash (used) provided by investing activities (3,980) 1,545
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 190,125 182,679
Repayments of debt (201,480) (177,639)
Proceeds from exercise of warrants 7,186 -
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Net cash (used) provided by financing activities (4,169) 5,040
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Net increase (decrease) in cash and equivalents 5,735 (1,854)
Cash and equivalents - beginning of period 10,333 6,824
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Cash and equivalents - end of period $ 16,068 $ 4,970
================= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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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 leading upscale retailer of men's, women's and children's
apparel and accessories and items for the home. 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. The
balance sheet at January 29, 2000 has been derived from the audited financial
statements at that date. 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, the accompanying unaudited
financial statements contain all adjustments (consisting of normal recurring
adjustments) which management considers necessary to present fairly the
financial position of the Company as of July 29, 2000, and the results of its
operations and its cash flows for the three and six month periods ended July 29,
2000 and July 31, 1999. The results of operations for the three and six month
periods may not be indicative of the results for the entire year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
These financial statements should be read in conjunction with the
audited financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 29, 2000.
(2) Long-Term Debt
Long-Term Debt consisted of the following at July 29, 2000:
(000's)
Revolving Credit Facility $ 37,818
Isetan note 21,113
Equipment Lessors notes 35,789
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Total $ 94,720
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In addition, under the Company's Revolving Credit Facility,
$21,485,000 was committed under unexpired letters of credit. As of July 29,
2000, 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 2000 or 1999, 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 ("EPS")
Basic EPS is computed as net income (loss) available to common
stockholders divided by the weighted average number of common shares
outstanding. Diluted EPS reflects the incremental increase in common shares
outstanding assuming the exercise of stock options and warrants that would have
had a dilutive effect on EPS. Net income (loss) attributed to common
stockholders is not materially affected by the 1% dividend on the 5,000 issued
and outstanding shares of preferred stock.
Options and warrants to acquire an aggregate of 1,084,779 shares of
common stock were not included in the computation of diluted earnings per common
share for the three and six months ended July 29, 2000, as including them would
have been anti-dilutive. Options and warrants to acquire an aggregate of
2,622,191 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 29, 2000, the Company's common stock was not actively
traded.
(5) Warrant Exercise
Holders of 826,961 warrants exercised their rights to acquire an
equivalent amount of Holdings common stock prior to the warrants expiration on
May 30, 2000. The total aggregate proceeds received by the Company were
approximately $7.2 million.
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
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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; 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.
Three Months Ended July 29, 2000 Compared to the Three Months Ended July 31,
1999
Net sales for the three months ended July 29, 2000 were $84.3 million
compared to $77.9 million a year ago, an increase of 8.1%. 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. Excluding such sales,
sales increased 9.8%. The sales increase was primarily driven by comparable
store sales growth of 11.1%. Sales were strong in many of our men's and women's
merchandise classifications and continue to be positively impacted by the
healthy economy and the Company's continued focus on initiating markdowns timely
to maximize inventory turn.
Gross profit on sales increased 12.9% to $40.9 million for the three
months ended July 29, 2000 from $36.2 million in the three months ended July 29,
1999, primarily due to the sales increase mentioned above. As a percentage of
net sales, gross profit was 48.5% for the three months ended July 29, 2000
compared to 46.4% in the year ago period. This improvement was primarily
attributed to significantly lower actual shrink in the current quarter as
compared to the year ago period.
Selling, general and administrative expenses, including occupancy
expenses, increased 4.2% in the three-month period ended July 29, 2000 to $38.2
million from $36.7 million in the three month period ended July 31, 1999. This
increase is principally driven by higher personnel costs associated with annual
wage increases, increased advertising costs, as well increases in certain
expenses, such as commission costs and third party credit card fees associated
with the increased sales volume. Selling, general and administrative expenses
were 45.3% of sales in the three months ended July 29, 2000 as compared to 47.1%
(47.8% exclusive of Bulk Sales) in the three months ended July 31, 1999,
principally due to leveraging of expenses.
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Depreciation and amortization increased 2.9% in the three-month
period ended July 29, 2000 to $4.5 million from $4.3 million in the prior year.
Interest expense decreased 14.1% in the three months ended July 29,
2000 to $2.8 million from $3.2 million in the prior year. Interest associated
with borrowings under the Company's credit facility declined principally as a
result of lower average borrowings.
Average borrowings under the credit facility for the three months
ended July 29, 2000 and July 31, 1999 were $39.9 million and $66.3 million,
respectively, and the effective interest rate on this portion of the Company's
outstanding debt was 12.5% in the three months ended July 29, 2000 compared to
9.0% in the comparable period of the prior year.
The Company's net loss for the three months ended July 29, 2000 was
$3.6 million compared to a net loss of $7.0 million for the three months ended
July 31, 1999. Basic and diluted net loss per common share for the three months
ended July 29, 2000 and July 31, 1999 were $0.26 and $0.56, respectively, per
common share.
Six Months Ended July 29, 2000 Compared to the Six Months Ended July 31, 1999
Net sales for the six months ended July 29, 2000 were $180.9 million
compared to $163.8 million a year ago, an increase of 10.4%. Comparable store
sales increased approximately 12.9%. This increase was principally driven by
double digit increases in both our full price and outlet stores, including a
14.8% increase at the full-price stores.
Gross profit on sales increased 12.0% to $85.4 million for the six
months ended July 29, 2000 from $76.2 million in the six months ended July 31,
2000, primarily due to the sales increase discussed above. The Company
experienced substantial reductions in actual shrink in the six months ended July
29, 2000 as compared to the year ago period. On a comparative basis, this
reduction in expense was partially offset by more promotional selling in the
current period as compared to the prior year. As a percentage of net sales,
gross profit was 47.2% for the six months ended July 29, 2000 compared to 46.6%
in the year ago period.
Selling, general and administrative expenses, including occupancy
expenses, increased 4.5% in the six-month period ended July 29, 2000 to $77.4
million from $74.1 million in the six month period ended July 29, 1999. This
increase is principally driven by higher personnel costs associated with annual
wage increases as well as increases in certain expenses, such as commission
costs and third party credit card fees associated with the increased sales
volume. In addition, advertising costs increased $.9 million from the year ago
period as part of the Company's continuing efforts to strengthen its brand
equity. Selling, general and administrative expenses were 42.8% of sales in the
six months ended July 29, 2000 as compared to 45.2% in the six months ended July
31, 1999, principally due to leveraging of expenses.
Depreciation and amortization increased 2.0% in the six-month period
ended July 29, 2000 to $8.8 million from $8.7 million in the prior year.
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Interest expense decreased in the six months ended July 29, 2000 to
$5.8 million from $6.3 million a year ago. Interest associated with borrowings
under the Company's credit facility declined principally as a result of lower
average borrowings.
Average borrowings under the credit facility for the six months ended
July 29, 2000 and July 31, 1999 were $43.7 million and $64.9 million,
respectively, and the effective interest rate on this portion of the Company's
outstanding debt was 11.9% in the six months ended July 29, 2000 compared to
9.0% in the comparable period of the prior year.
The Company's net loss for the six months ended July 29, 2000 was
$4.5 million compared to a net loss of $10.8 million for the six months ended
July 31, 1999. Basic and diluted net loss per common share for the six months
ended July 29, 2000 and July 31, 1999 were $0.34 and $0.86, respectively, per
common share.
LIQUIDITY AND CAPITAL
Liquidity and Capital Resources
Cash provided by operations for the six months ended July 29, 2000
was approximately $13.9 million compared to cash used by operations of $8.4
million in the year ago period. This increase is being driven by improvement in
the company's earnings before non-cash charges and tighter inventory management
resulting in a $4.0 million reduction in inventory from the prior year. In
addition, the six months ended July 31, 1999 included non-recurring payments
related to administrative claims and certain other current liabilities
aggregating approximately $10.5 million. The Company's working capital was $46.8
million at July 29, 2000 compared to $48.5 million at January 29, 2000. The
Company's primary source of liquidity has been borrowings under the Revolving
Credit Facility.
The Company incurred capital expenditures of $3.9 million during the
six-month period ended July 29, 2000 principally due to the opening of a new
full-price store and improvements in its existing stores. Pursuant to the
covenants contained in the Revolving Credit Facility, the Company's total
capital expenditures for fiscal year 2000 may not exceed a base level of
$7,500,000, subject to adjustment for unused expenditures from the prior year as
well as additional capital contributions. The Company will fund its capital
expenditures through a combination of borrowings under the Revolving Credit
Facility and proceeds received in connection with the exercise of the Plan
Investors options and the exercise of certain of the outstanding warrants.
At July 29, 2000, the Company had approximately $38.0 million of
availability under the Revolving Credit Facility, after considering $37.8
million of revolving loans and $21.5 million of letters of credit outstanding.
The Company believes that it will have sufficient liquidity for the
balance of fiscal 2000. However, should there be a material deviation from
anticipated revenues, the Company might be required to seek alternative sources
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of financing or reduce expenditures. There can be no assurance that alternative
financing could be obtained, or if obtained, that it would be on terms
acceptable to the Company.
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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PART 2. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Holders of 826,961 warrants exercised their rights to acquire an
equivalent amount of shares of the Company's common stock prior to
the warrants' expiration on May 30, 2000. The total aggregate
proceeds received by the Company were approximately $7,200,000. The
warrants were issued to certain creditors of the Company in
connection with its plan of reorganization. The issuance of such
shares pursuant to the exercise of the warrants was exempt from
registration under the Securities Act of 1933, as amended, pursuant
to Section 1145 of Title 11 of the United States Code.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on June
27, 2000.
(b) Each of the Directors listed in item (c) below was elected a Director
at the Annual Meeting for a one-year term.
(c) Voting for the election of directors of the Company to serve until
the next Annual Meeting:
FOR WITHHELD
(including broker
non-votes)
Shelley F. Greenhaus 11,619,480 206
John Halpern 11,619,483 203
Yasuo Okamoto 11,619,483 203
Allen I. Questrom 11,619,418 268
Carl Spielvogel 11,619,483 203
David A. Strumwasser 11,619,483 203
Robert J. Tarr, Jr. 11,619,483 203
Douglas P. Teitelbaum 11,619,413 273
Steven A. Van Dyke 11,619,483 203
Shelby S. Werner 11,619,483 203
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Other Matters:
11,616,290 shares were voted in favor of the proposal to approve the Company's
Employee Stock Option Plan with 1,820 shares voted against, 1,576 abstentions
and no broker non-votes, 11,619,326 shares were voted in favor of the proposal
to ratify the appointment of Ernst & Young LLP as independent auditors of the
Company for the fiscal year ending February 3, 2001 with 70 shares voted
against, 290 abstentions and no broker non-votes. Reference is made to the
Company's Proxy Statement dated May 22, 2000 for its 2000 Annual Meeting for
additional information concerning the matters voted on at the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On August 1, 2000 the Company filed a report under Item 5, Other
Events, on Form 8-K, incorporating by reference the Company's press release
disclosing the resignation of Allen I. Questrom from the positions of President
and Chief Executive Officer.
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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: September 11, 2000
BARNEYS NEW YORK, INC.
By: /s/ Steven M. Feldman
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Name: Steven M. Feldman
Title: Executive Vice President,
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
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27.1 Financial Data Schedule
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