SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995 Commission File No. 1-6680
KENWIN SHOPS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5607936
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4747 Granite Drive
Tucker, Georgia 30084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 938-0451
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Each Exchange on which Registered
Common Stock American Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(3) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
<PAGE>
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date
within sixty (60) days prior to the date of filing.
Aggregate Market Value of shares held by non-affiliates as of
March 8, 1996 - $868,223.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
As of March 8, 1996, there were 556,350 shares outstanding of
the Registrant's common stock.
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
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been incorporated by reference under the
respective parts of Form 10-K set forth below.
PART III, ITEMS 10 & 11 & 13
Definitive Proxy Statement to be filed by Registrant
Pursuant to Regulation 14A for Annual Meeting of
Stockholders to be held May 15, 1996.
PART 1.
ITEM 1. BUSINESS
(a) On December 31, 1995, Registrant operated 102 retail stores
under the names "Dress for LE$$" and "Kenwin/Dress for LE$$" which sell
a line of popularly priced ladies' and children's wearing apparel,
located in Georgia, Alabama, Mississippi, South Carolina, Louisiana,
Texas, Arkansas, and Florida. Registrant's stores are located in
leased premises and are generally located in the center of the
commercial area. The stores are all relatively modern, having store
fronts, fixtures, and lighting modernized to Registrant's
specifications. All stores are completely air conditioned.
The parent corporation operates as a merchandising and selling
entity, and also provides substantial advertising, promotional,
bookkeeping, inventory control and executive services for the stores.
All of the merchandise sold by Registrant is purchased by the parent
corporation directly from manufacturers and is received at Registrant's
warehouse located in Tucker, Georgia. All distribution of merchandise
and all inventory control for merchandising is done from the warehouse.
<PAGE>
(b) Registrant is involved in only one line of business or
industry segment.
(c) Registrant's stores are operated pursuant to a policy of
retailing its products at prices designed to meet local competitive
conditions, emphasizing quality leasehold locations, inventory controls,
and localized advertising and promotional policies. Registrant
competes with other chains, some of which are larger and have greater
financial resources than Registrant, and with numerous independent local
stores. While the business is highly competitive, Registrant believes
that it is able, through its centralized controls and services, volume
purchasing power, efficiency of operations, and packaging and display
methods, to compete on favorable terms with its competitors.
(d) The Company's business is highly seasonal, with most of its
earnings and sales occurring in the Easter and Christmas seasons. The
Easter season occurred entirely in the second quarter of 1995, and
entirely in the first quarter of 1994. For a discussion of the
Company's Liquidity and Capital Resources, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
in Item 7.
(e) The average sales per store and per square foot for the past
three years are as follows:
Annual Sales
Annual Sales Per Square
Year Per Store Foot
- ----- -------------- --------------
1995 $ 150,679 $ 43.90
1994 $ 149,281 $ 43.03
1993 $ 148,968 $ 42.61
Registrant and its subsidiaries, as of December 31, 1995,
employed 285 persons.
ITEM 2. PROPERTIES
As of December 31, 1995, Registrant's 102 retail outlets were
operated in leased premises with either fixed rentals or under leases
providing for payments of minimum guaranteed rentals plus a percentage
of sales.
The number of stores in operation at the beginning of the year
was 102. During the year, the Company did not open or close any stores,
leaving the same 102 stores in operation at the end of the year.
Registrant's general office and warehouse both operate out of
its Tucker, Georgia, location. The Registrant owned its warehouse until
August 7, 1995. On that date, the property was sold. Simultaneously
with the closing of this sale, the Registrant entered into a three-year
lease of the property, with a three-year extension option.
ITEM 3. LEGAL PROCEEDINGS
On September 19, 1994, Registrant filed a voluntary petition for
relief under Chapter 11 of Title 11 of the United States Bankruptcy
Code. On October 12, 1995, the Registrant's Plan of Reorganization was
confirmed by the Bankruptcy Court, and the Registrant emerged from
bankruptcy. Under arrangements made with the American Stock Exchange,
the Registrant's outstanding stock continued to be listed and traded
during the bankruptcy proceedings and is still so listed and traded.
There were no other material legal proceedings pending as of December
31, 1995, to which Registrant or any of its subsidiaries were a party or
of which any of their property was the subject.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended
December 31, 1995, Registrant did not submit any matters to a vote of
security holders.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Price of Stock Dividends
High Low Paid
--------------------- --------
1995
First Quarter 3 2-3/4 omitted
Second Quarter 4-9/16 2-7/8 omitted
Third Quarter 3 1-5/8 omitted
Fourth Quarter 3-5/16 1-13/16 omitted
1994
First Quarter 6-1/8 5-1/8 omitted
Second Quarter 6-1/8 5-1/4 omitted
Third Quarter 5-3/4 4-5/8 omitted
Fourth Quarter 4-1/8 2-7/16 omitted
The Company's stock is traded on the American Stock Exchange
under the symbol KWN. The approximate number of record holders of the
Company's common stock as of March 8, 1996 was 278.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
December 31, January 1, January 2, January 3, December 29,
1995 1995 1994 1993* 1991
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales $ 15,374,665 $ 18,510,861 $ 23,090,064 $ 25,993,935 $ 28,146,436
============== ============== ============== ============== ==============
Income (loss) before
extraordinary item $ (1,756,737) $ (2,684,116) $ (652,027) $ 265,692 $ (565,743)
Extraordinary item 1,385,153 - - - -
-------------- -------------- -------------- -------------- --------------
Net income (loss) $ (371,584) $ (2,684,116) $ (652,027) $ 265,692 $ (565,743)
============== ============== ============== ============== ==============
Net earnings (loss) per
share of common stock
Primary $ (0.85) $ (6.59) $ (1.59) $ 0.65 $ (1.39)
============== ============== ============== ============== ===============
Fully diluted $ (0.85) $ (6.59) $ (1.59) $ 0.59 $ (1.39)
============== ============== ============== ============== ===============
Dividends paid per share $ - $ - $ - $ - $ -
============== ============== ============== ============== ===============
Weighted average number
of common shares in
computing earnings
(loss) per share
Primary 435,025 407,090 409,936 452,507 406,390
============== ============== ============== ============== ==============
Fully diluted 435,025 407,090 411,076 498,219 406,390
============== ============== ============== ============== ==============
*Year ended January 3,
1993 was 53 weeks.
All other years were
52 weeks.
December 31, January 1, January 2, January 3, December 29,
SELECTED BALANCE SHEET 1995 1995 1994 1993* 1991
-------------- -------------- -------------- -------------- --------------
Current assets $ 2,811,351 $ 7,134,400 $ 8,694,959 $ 8,846,292 $ 9,534,242
Current liabilities 1,184,393 2,199,098 5,010,142 4,550,032 5,719,094
-------------- -------------- -------------- -------------- --------------
Working capital $ 1,626,958 $ 4,935,302 $ 3,684,817 $ 4,296,260 $ 3,815,148
============== ============== ============== ============== ==============
Total assets $ 4,197,862 $ 8,747,566 $ 10,627,613 $ 10,872,598 $ 11,761,068
============== ============== ============== ============== ==============
Stockholders' equity $ 3,013,469 $ 2,920,423 $ 5,604,539 $ 6,256,566 $ 5,986,974
============== ============== ============== ============== ==============
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales decreased $3,136,000 (16.9%) from 1994 to 1995 and
$4,579,000 (19.8%) from 1993 to 1994. The decrease in sales from 1994
to 1995 was primarily the result of the closing of 44 stores during the
year 1994. In addition, same store (those stores operating fully in each
year) sales increased approximately $150,000 (9.8%) from 1994 to 1995.
Management attributes the decrease in overall sales to the closing of 44
stores during the second half of 1994. The same store sales increase is
due primarily to a better merchandise mix and access to higher quality
vendors in 1995. Kenwin's credit problems, which ultimately led to the
Chapter 11 filing, had a detrimental effect on the quantity and quality
of stock at the retail level, resulting in higher markdowns and loss of
customers in 1994.
Management attributes the decrease in sales from 1993 to 1994 to
the closing of under-performing stores in connection with the Company's
Chapter 11 filing. The closing of 44 stores in 1994 and 20 stores in
1993 resulted in a decrease in sales of approximately $3,374,000. In
addition, same store (those stores operating fully in each year) sales
decreased approximately $1,205,000 (7.3%) from 1993 to 1994. This
decrease was the result of a lackluster market for women's fashions as
well as the Company's increasing difficulties with its creditors, which
severely impacted its ability to stock its retail outlets.
Cost of goods sold, including occupancy and distribution
expenses as a percentage of sales increased from 68.5% in 1993 to 74.8%
in 1994 and decreased from 74.8% in 1994 to 69.18% in 1995. The
decrease from 1994 to 1995 is primarily due to an increase in the
Company's maintained markup for the period. The increase from 1993 to
1994 is due primarily to additional markdowns taken during late 1994 to
fully liquidate obsolete and slow-moving goods.
Selling, general and administrative expenses ("SG&A") decreased
$1,044,649 (13.5%) from 1994 to 1995 due principally to a reduction in
store operating expenses, including $588,799 of store payroll and
payroll taxes, resulting from the closing of 44 retail locations during
the third and fourth quarter of 1994. SG&A decreased $1,073,450 (12.2%)
from 1993 to 1994 due principally to a reduction in store operating
expenses, including $476,000 of store payroll and payroll taxes,
resulting from the closing of 20 stores in 1993 and 44 stores in 1994.
(Gain) Loss on disposal of property and equipment represents a
$586,229 gain on the sale of the Company's office and warehouse facility
and the direct costs incurred with the closing of stores (44 stores in
1994, 20 in 1993, and 3 in 1992). The major costs associated with the
closing of stores relate to the write-off of fixed assets, accounts
receivable, and lease settlement costs. Store closing costs subsequent
to the filing of the Chapter 11 bankruptcy petition have been presented
as reorganization items in the Consolidated Statements of Income.
Interest expense is primarily the result of short-term bank
borrowings.
Credit for income taxes as a percentage of loss before taxes and
extraordinary item fluctuated from 31.0% in 1993 to 17.3% in 1994 to
3.7% in 1995. A reconciliation of income taxes is provided in Note 4 of
the Notes to Consolidated Financial Statements.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities as well as an available
line of credit with a bank for short-term borrowings are the Company's
primary sources of liquidity and capital. Net cash provided by
operating activities amounted to $366,275 in 1995. Net cash totaling
$1,412,548 was used by the net loss plus noncash items. The decrease in
cash from 1994 to 1995 is also due to the repayment on the line of
credit at December 31, 1995.
The line of credit for short-term borrowings and the anticipated
funds from operations are current financial resources available to the
Company which are expected to be adequate to finance the foreseeable
capital and operating requirements.
In connection with the Company's Chapter 11 filing, management
adopted a plan to restructure the Company in order to better utilize its
current financial resources. In this regard, the Company closed 44
stores in the third and fourth quarters of 1994. Although the Company
incurred reorganization costs of approximately $1,214,000 in connection
with this plan, management believes the end result will be to increase
profitability and to improve liquidity. Management plans to monitor
each of its remaining stores closely and will close unprofitable stores.
Management does not anticipate any significant changes in 1996 in the
number of stores in operation.
On August 7, 1995, the Company sold its office and warehouse
facility located in Tucker, Georgia, for $800,000. Simultaneously, the
Company entered into a lease agreement to lease a portion of the
building for three years at an annual rental of $67,340 with a renewal
option for an additional three years at an annual rental of $74,074.
On September 29, 1995, Kenwin executed a private charge card
agreement for a period of two years with the Bank of Louisiana ("BOL")
whereby BOL agreed to purchase substantially all of Kenwin's outstanding
customer accounts receivable, less $750,000 which was withheld as a
delinquency reserve. BOL issued Kenwin store credit cards to existing
charge account customers and all customer credit sales are processed by
BOL. The proceeds from the charge transactions are credited to Kenwin's
bank account at BOL, less a 2% processing charge and a 2% delinquency
reserve. The 2% delinquency reserve maintains the reserve account. The
reserve account will be adjusted every 6 months, except for the initial
reserve of $750,000, to equal the actual dollar amount of the purchased
accounts which are ninety days and more past due or ten percent of the
outstanding balance of purchased accounts, whichever is greater. The
reserve is placed in an insured money market account earning interest at
BOL's current money market rate. The reserve is in the Company's name
and is pledged to BOL to cover current and future delinquencies, claims,
and bad debts. Sterling National Bank holds a subordinate security
interest in the reserve. The responsibility to process customer
charges, mail statements, and follow up on collections rests with BOL.
However, the Company participates in following up on collections and
customer complaints to increase collections.
On October 12, 1995, an order confirming the Debtor's plan of
reorganization was entered by the court. Pursuant to the plan, on
October 23, 1995, the unsecured creditors were paid a 25% cash
settlement and were issued 149,260 shares of common stock (rounded to
account for fractional shares). On the same date, the Company executed
a new $1,500,000 post-bankruptcy line of credit with Sterling, at which
point the existing loan balance was paid in full and the related
security and loan agreement was terminated.
<PAGE>
<TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following items measure the Company's ability to meet its
short-term obligations:
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Working capital $ 1,627,000 $ 4,935,000
Working capital ratio 2.4 3.2
IMPACT OF INFLATION AND CHANGING PRICES
In the past four years, inflation has had little effect on both
the price for which the Company sells its merchandise and on the
Company's cost of merchandise and operating expenses.
</TABLE>
<PAGE>
KENWIN SHOPS, INC.
FINANCIAL STATEMENTS COMPRISING
ITEM 8 OF ANNUAL REPORT ON FORM 10-K
TO SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Kenwin Shops, Inc.
We have audited the accompanying consolidated balance sheets of
Kenwin Shops, Inc. as of December 31, 1995, and January 1, 1995, and the
related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to in the first paragraph present fairly, in all material respects, the
financial position of Kenwin Shops, Inc. as of December 31, 1995, and
January 1, 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
has experienced significant operating losses for the past three fiscal
years. As described in Note 13, this condition raises substantial doubt
about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Our audits were conducted for the purpose of forming an opinion
on the basic financial statements taken as a whole. The schedule listed
in the index at Item 14(a)(2) is the responsibility of the Company's
management and is presented for purposes of additional analysis and is
not a required part of the basic financial statements but is
supplementary information required by rules of the Securities and
Exchange Commission. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
/s/ Gross, Collins + Cress, P.C.
Atlanta, Georgia
February 16, 1996
<PAGE>
<TABLE>
KENWIN SHOPS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, January 1,
1995 1995
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (Note 2) $ 274,177 $ 507,164
Accounts receivable, less allowance for
doubtful accounts of $1,019,409 and
$732,000, respectively (Notes 2, 3,
and 6) 359,850 3,213,565
Miscellaneous other accounts receivable 4,812 13,175
Merchandise inventories 2,042,880 2,239,352
Prepaid expenses and refundable taxes 129,632 196,084
Deferred income taxes (Note 4) - 965,060
-------------- --------------
TOTAL CURRENT ASSETS 2,811,351 7,134,400
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 6)
Land - 76,628
Building and building improvements 3,632 403,971
Furniture and fixtures 2,968,598 2,920,805
Automobiles 88,434 121,607
Leasehold improvements 1,019,907 834,201
-------------- --------------
4,080,571 4,357,212
Less accumulated depreciation and amortization 2,946,385 2,806,719
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT, net 1,134,186 1,550,493
OTHER ASSETS
Cash surrender value of life insurance,
net of loans of $42,073 and $42,073,
respectively (Note 5) 25,878 24,584
Deposits 42,994 38,089
Deferred income taxes (Note 4) 183,453 -
-------------- --------------
TOTAL OTHER ASSETS 252,325 62,673
-------------- --------------
TOTAL ASSETS $ 4,197,862 $ 8,747,566
============== ==============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
KENWIN SHOPS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, January 1,
1995 1995
-------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES NOT SUBJECT TO COMPROMISE
CURRENT LIABILITIES
Line of credit (Note 6) $ - $ 1,254,422
Bank overdraft 182,897 -
Accounts payable, trade 534,129 185,233
Accrued expenses and other liabilities 259,470 505,091
Taxes withheld and accrued 129,408 156,534
Customers' deposits on layaways 78,489 97,818
-------------- --------------
TOTAL CURRENT LIABILITIES 1,184,393 2,199,098
LIABILITIES SUBJECT TO COMPROMISE (a) - 3,628,045
-------------- --------------
TOTAL LIABILITIES 1,184,393 5,827,143
STOCKHOLDERS' EQUITY
Common stock, par value $1, authorized
1,000,000 shares, issued 613,472
shares (Note 8) 613,472 464,212
Additional paid-in capital 991,819 676,449
Retained earnings 2,311,295 2,682,879
-------------- --------------
3,916,586 3,823,540
Less treasury stock, at cost, 57,122 shares 903,117 903,117
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 3,013,469 2,920,423
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,197,862 $ 8,747,566
============== ==============
(a) LIABILITIES SUBJECT TO COMPROMISE
CONSIST OF THE FOLLOWING:
Accounts payable, trade $ - $ 3,598,251
Accrued expenses - 29,794
-------------- --------------
TOTAL $ - $ 3,628,045
============== ==============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
KENWIN SHOPS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years Ended
----------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES
Retail sales (Note 9) $ 15,374,665 $ 18,510,861 $ 23,090,064
Other income, principally finance charges 541,784 1,006,282 1,277,584
-------------- -------------- --------------
TOTAL REVENUES 15,916,449 19,517,143 24,367,648
-------------- -------------- --------------
COSTS AND EXPENSES
Cost of goods sold, including occupancy
and distribution expenses 10,634,364 13,851,760 15,822,008
Selling, general and administrative expenses 6,685,008 7,729,657 8,803,107
(Gain) loss on disposal of property and equipment (586,229) 2,157 198,169
Depreciation and amortization 347,376 419,211 464,583
Interest expense 132,268 75,651 25,375
-------------- -------------- --------------
TOTAL COSTS AND EXPENSES 17,212,787 22,078,436 25,313,242
-------------- -------------- --------------
LOSS BEFORE REORGANIZATION ITEMS,
CREDIT FOR INCOME TAXES AND
EXTRAORDINARY ITEM (1,296,338) (2,561,293) (945,594)
-------------- -------------- --------------
REORGANIZATION ITEMS (Note 11)
Professional fees 362,064 228,965 -
Loss on disposal of assets, closed stores - 50,669 -
Bad debts on accounts receivable, closed stores - 352,586 -
Other costs and fees 165,693 53,935 -
-------------- -------------- --------------
TOTAL REORGANIZATION ITEMS 527,757 686,155 -
-------------- -------------- --------------
LOSS BEFORE CREDIT FOR INCOME TAXES
AND EXTRAORDINARY ITEM (1,824,095) (3,247,448) (945,594)
CREDIT FOR INCOME TAXES (Note 4) 67,358 563,332 293,567
-------------- -------------- --------------
NET LOSS BEFORE EXTRAORDINARY ITEM (1,756,737) (2,684,116) (652,027)
EXTRAORDINARY ITEM - Gain on forgiveness of
debt in settlement of Chapter 11 bankruptcy,
net of tax of $848,965 (Note 12) 1,385,153 - -
-------------- -------------- --------------
NET LOSS $ (371,584) $ (2,684,116) $ (652,027)
============== ============== ==============
NET LOSS PER SHARE (Note 10)
Primary $ (0.85) $ (6.59) $ (1.59)
============== ============== ==============
Fully diluted $ (0.85) $ (6.59) $ (1.59)
============== ============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES
Primary 435,025 407,090 409,936
============== ============== ==============
Fully diluted 435,025 407,090 411,076
============== ============== ==============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
KENWIN SHOPS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Additional Common
Common Paid-In Retained Stock In
Stock Capital Earnings Treasury
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 3, 1993 $ 464,212 $ 676,449 $ 6,019,022 $ 903,117
NET LOSS - - (652,027) -
-------------- -------------- -------------- --------------
BALANCE AT JANUARY 2, 1994 464,212 676,449 5,366,995 903,117
NET LOSS - - (2,684,116) -
-------------- -------------- -------------- --------------
BALANCE AT JANUARY 1, 1995 464,212 676,449 2,682,879 903,117
NET LOSS - - (371,584) -
ISSUANCE OF 149,260 SHARES OF
COMMON STOCK (Note 12) 149,260 315,370 - -
-------------- -------------- -------------- --------------
BALANCE AT DECEMBER 31, 1995 $ 613,472 $ 991,819 $ 2,311,295 $ 903,117
============== ============== ============== ==============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
KENWIN SHOPS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended
----------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (371,584) $ (2,684,116) $ (652,027)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities
Depreciation and amortization 467,111 428,068 464,583
Provision for doubtful accounts 530,665 526,871 399,823
(Gain) loss on disposal of property
and equipment (586,229) 49,990 19,986
(Gain) on forgiveness of debt (Note 12) (2,234,118) - -
Deferred income taxes, net 781,607 (563,332) (123,823)
Changes in assets (increase) decrease
Customers' accounts receivable, net 2,323,050 124,321 (6,350)
Miscellaneous other accounts receivable 8,363 22,858 (19,645)
Merchandise inventories 196,472 1,014,234 128,261
Prepaid expenses and refundable taxes (53,283) 39,586 (179,903)
Other assets (6,199) (5,778) (10,326)
Changes in liabilities increase (decrease)
Pre-petition accounts payable, trade (921,666) (11,831) (49,745)
Pre-petition accrued expenses and
other liabilities (7,631) (311,236) (53,376)
Post-petition accounts payable, trade 348,896 185,233 -
Post-petition accrued expenses and
other liabilities (245,621) 505,091 -
Bank overdraft 182,897 - -
Taxes withheld and accrued (27,126) (423) (144,700)
Customers' deposits on layaways (19,329) (54,255) (42,069)
-------------- -------------- --------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 366,275 (734,719) (269,311)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (121,425) (154,983) (380,591)
Proceeds from sale of property and equipment 776,585 5,650 -
-------------- -------------- --------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 655,160 (149,333) (380,591)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings 3,270,614 2,094,620 950,000
Repayments of bank borrowings (4,525,036) (1,590,200) (200,000)
-------------- -------------- --------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (1,254,422) 504,420 750,000
-------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH (232,987) (379,632) 100,098
CASH, BEGINNING OF YEAR 507,164 886,796 786,698
-------------- -------------- --------------
CASH, END OF YEAR $ 274,177 $ 507,164 $ 886,796
============== ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid during the year $ 132,268 $ 75,651 $ 25,375
============== ============== ==============
Income taxes paid during the year $ - $ - $ 125,290
============== ============== ==============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
KENWIN SHOPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of significant accounting policies
Kenwin Shops, Inc. and its wholly owned subsidiaries (the
"Company") operate a chain of retail women and children's apparel stores
in eight (8) states, all of which are located in the southern United
States. The Company ceased operations in a ninth state during 1994.
Cash and cash equivalents - The Company considers all highly
liquid investments with original maturities of three months or less to
be cash equivalents.
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires the
use of estimates based on management's knowledge and experience. Due to
their prospective nature, actual results could differ from those
estimates.
Fiscal year - The Company has a 52-53 week year ending on the
Sunday closest to December 31.
Income taxes - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred taxes are recognized for
differences between the basis of assets and liabilities for financial
statement and income tax purposes. The differences relate primarily to
depreciable assets (use of different depreciation methods and lives for
financial statement and income tax purposes), allowance for doubtful
receivables (deductible for financial statement purposes but not for
income tax purposes), and inventory (certain general and administrative
expenses capitalized for income tax purposes but not for financial
statement purposes). The deferred tax assets and liabilities represent
the future tax consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses and
tax credits that are available to offset future taxable income. A
valuation allowance may be established when there is uncertainty
regarding the ultimate realization of deferred tax assets and
liabilities.
Inventories - Merchandise inventories are valued at the lower of
cost or market as determined by the retail method (average cost basis)
and consist of finished goods.
Principles of consolidation - The consolidated financial
statements include the accounts of Kenwin Shops, Inc. and its
subsidiaries, all of which are wholly owned. In consolidation, all
intercompany balances and transactions have been eliminated.
Property, plant and equipment - Depreciation of property, plant
and equipment has been provided by using the straight-line method, based
upon the estimated lives of the respective assets, ranging from 4 to 25
years. Amortization of leasehold improvements is provided by using the
straight-line method based upon the life of the asset or term of the
lease without regard to renewal options, whichever is shorter.
(2) Concentrations of credit risk
The Company maintains commercial checking accounts at several
financial institutions. As of December 31, 1995, one of its operating
accounts at a regional bank had a total balance which was $46,687, in
excess of federally insured limits.
The Company grants credit to customers, substantially all of
whom are local residents in the same geographic region, and requires no
collateral.
<PAGE>
KENWIN SHOPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) Accounts receivable
On September 29, 1995, the Company sold its accounts receivable
to the Bank of Louisiana. The Company received $2,080,768 in net
proceeds from the transfer of its receivables with recourse (Note 12).
An initial reserve of $750,000 was set up which is increased by 2% of
credit sales. This reserve will be used to guarantee delinquencies,
claims and bad debts. The outstanding balance of accounts receivable at
December 31, 1995 for which the company could be required to repurchase
under the recourse provisions of the agreement totaled $4,280,001.
(4) Income taxes
The credit for income taxes is composed of the following:
<TABLE>
<CAPTION>
Years Ended
----------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
-------------- -------------- --------------
<S> <C> <C> <C>
Federal $ - $ - $ 166,163
State - - 3,581
Deferred 67,358 563,332 123,823
-------------- -------------- --------------
Total $ 67,358 $ 563,332 $ 293,567
============== ============== ==============
</TABLE>
Deferred income taxes, resulting from temporary differences in
the recognition of income and expense for tax and financial reporting
purposes, are as follows:
<TABLE>
<CAPTION>
Years Ended
----------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
-------------- -------------- --------------
<S> <C> <C> <C>
Difference between tax and book:
Depreciation and amortization $ 25,594 $ 87,722 $ (48,260)
Allowance for doubtful accounts 109,215 118,940 16,220
Basis of merchandise inventories (19,092) (2,216) (25,604)
Alternative minimum tax credit
carryforward - (16,327) (23,673)
Net operating loss carryforward (538,951) 1,143,767 205,140
Taxes applicable to extraordinary item 848,965 - -
-------------- -------------- --------------
425,731 1,331,886 123,823
Change in valuation allowance (358,373) (768,554) -
-------------- -------------- --------------
Net deferred tax credit $ 67,358 $ 563,332 $ 123,823
============== ============== ==============
</TABLE>
<PAGE>
KENWIN SHOPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Income taxes (continued)
The following is a summary of the components of the net deferred
tax asset and liability accounts recognized in the accompanying
consolidated balance sheets:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Deferred tax assets
Difference between tax and book:
Amortization $ 214,393 $ 202,384
Allowance for doubtful accounts 387,375 278,160
Basis of merchandise inventories 51,088 70,180
Tax effect of net operating loss carryforward 872,861 1,411,812
-------------- --------------
Total 1,525,717 1,962,536
Deferred tax liability
Difference between tax and book:
Depreciation (215,337) (228,922)
-------------- --------------
Net deferred taxes 1,310,380 1,733,614
Less valuation allowance (1,126,927) (768,554)
-------------- --------------
Net deferred tax asset $ 183,453 $ 965,060
============== ==============
</TABLE>
The effective tax rate for the Company is reconcilable to the
federal statutory rate as follows:
<TABLE>
<CAPTION>
Percent
----------------------------------------------
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Statutory rate (34.0) (34.0) (34.0)
State income taxes, net of federal
income tax benefit (4.0) (4.0) (4.0)
Valuation allowance 10.9 23.7 -
Extraordinary item - forgiveness of debt 2.4 - -
Expenses producing no tax benefit 11.2 2.8 0.4
Change in net operating loss 3.4 - -
Net temporary differences 6.4 (5.8) 8.6
Sundry - - (2.0)
-------------- -------------- --------------
(3.7) (17.3) (31.0)
============== ============== ==============
</TABLE>
For income tax purposes, the Company has a net operating loss
carryforward of $2,297,004 which expires as follows: $1,316,168 in the
year 2009 and $980,836 in the year 2010. Based upon historical results
and future plans, management anticipates that the loss will be utilized
during the carryforward period in the normal course of operations. Due
to going concern issues a reserve has been established to limit the net
deferred tax asset (Note 13).
(5) Cash surrender value of life insurance
The Company is the owner and beneficiary of insurance policies
on the lives of three of its former officers with face amounts totaling
$84,000.
<PAGE>
KENWIN SHOPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Credit arrangements
On November 14, 1994, the Company obtained a $2,750,000 line of
credit from Sterling National Bank & Trust Company of New York
("Sterling"). The note is secured by the general assets of the Company,
including, but not limited to cash, accounts receivable, property and
equipment, and intangibles.
On October 23, 1995, the Company executed a new $1,500,000
post-bankruptcy line of credit with Sterling, at which point the
existing loan balance was paid in full and the related security and loan
agreement was terminated. The line of credit was secured by the general
assets of the Company, including, but not limited to cash, property and
equipment, and intangibles. The line of credit bears interest at
Sterling's base rate plus 2.50%, which is payable monthly. The base
rate was 8.75% at December 31, 1995.
At December 31, 1995, the Company's earnings before interest,
taxes, depreciation and amortization (EBITDA), eligible inventory value,
and minimum net worth, as defined in the loan agreement with Sterling,
were less than the amounts required. Therefore, the Company was in
default of its loan agreement. Management has requested a waiver from
Sterling of these covenants for the period ended December 31, 1995.
The weighted average interest rate for short-term borrowings was
11.25% at December 31, 1995, and 11% at January 1, 1995.
(7) Lease commitments
The Company's warehouse and retail stores are operated in leased
premises. The following is a schedule of future minimum rental payments
required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year, as of December 31,
1995:
Year ending Amount
- ---------------- --------------
1996 $ 519,423
1997 134,439
1998 56,508
--------------
Total $ 710,370
==============
The following schedule shows the composition of total rental
expense for all retail store operating leases:
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Minimum rentals $ 704,000 $ 832,000 $ 1,007,000
Contingent rentals 63,000 61,000 96,000
-------------- -------------- --------------
Total rent $ 767,000 $ 893,000 $ 1,103,000
============== ============== ==============
</TABLE>
<PAGE>
KENWIN SHOPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) Stockholders' equity
Stock option plan (1990 Plan) - The plan provides that options
to purchase 100,000 shares of common stock of the Company at prices
ranging from 100% to 110% of the fair market value of the shares at the
date of grant may be granted to officers of the Company and to certain
key employees. Pursuant to this plan, the Board of Directors granted
options to purchase 6,000 shares of the Company's common stock in 1992
to certain key employees at $6.25 per share, the fair market value of
the shares at the date of grant. There are an additional 40,000 options
outstanding under this plan granted in 1990 to four key employees who
were also officers and directors of the Company. All are qualified
incentive stock options expiring between August 1995 and March 1997.
Stock option plan (1988 Plan) - The plan provided that options
to purchase up to 100,000 shares of the Company's common stock at prices
ranging from 100% to 110% of the fair market value of the shares at the
date of grant may be granted to officers of the Company and to certain
key employees. Pursuant to this plan, the Board of Directors granted
options to purchase 99,500 shares of the Company's common stock. These
were the only outstanding options under this plan. The qualified
incentive stock options expired between March 1993 and December 1994.
Stock option plan (1983 Plan) - Under the plan, three key
employees, who are also officers and directors of the Company, were
granted options to purchase 19,323 shares of common stock of the Company
at $14.75 per share, the fair market value of the shares at the date of
grant. These were the only outstanding options under this plan. The
options were non-qualified and expired May 18, 1993.
Stock option transactions under these plans are summarized as
follows:
<TABLE>
<CAPTION>
Shares Option Price
-------------- -----------------------
<S> <C> <C>
Outstanding January 3, 1993 164,823 $ 5.64 to $ 14.75
Expiring during the year ended January 2, 1994 (74,323) $ 9.77 to $ 14.75
Terminated employee (500) $ 7.50
--------------
Outstanding and exercisable at January 2, 1994 90,000 $ 5.64 to $ 8.25
Expiring during the year ended January 1, 1995 (40,000) $ 5.64 to $ 8.25
Terminated employee (500) $ 6.25
--------------
Outstanding and exercisable at January 1, 1995 49,500 $ 5.64 to $ 6.25
Expiring during the year ended December 31, 1995 (44,000) $ 5.64 to $ 6.00
--------------
Outstanding and exercisable at December 31, 1995 5,500 $ 6.25
==============
</TABLE>
There were 1,000 options held by an officer of the Company at
December 31, 1995. There were 54,000 shares available for future option
grants under the 1990 Plan at December 31, 1995 and January 1, 1995.
Non-qualified stock option plan (1990 Plan) - The plan provides
that options to purchase up to 50,000 shares of the Company's common
stock at 100% of the fair market value of the shares at the date of
grant may be granted to outside directors of the Company. Pursuant to
this plan, the outside directors were granted options to purchase 4,000
shares of the Company's common stock at $6.00 per share. These options
expired June 22, 1995.
There were also options outstanding which were held by outside
directors of the Company granted in May 1983 to purchase 10,000 shares
of the Company's common stock at $14.75 per share. These options
expired May 18, 1993.
<PAGE>
KENWIN SHOPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Leased department sales
Leased department sales are included in net sales and amounted
to approximately $832,150, $911,000, and $1,148,000 for the years ended
December 31, 1995, January 1, 1995, and January 2, 1994, respectively.
(10) Earnings per share
Primary earnings per share are based on the weighted average
number of shares of common stock and common stock equivalents (stock
options) outstanding, computed in accordance with the assumptions
required by the modified treasury stock method. Common stock equivalent
shares include shares which would be issuable upon the exercise of
outstanding options reduced by the number of shares which are assumed to
be repurchased by the Company with the proceeds from the exercise of the
options. The shares are assumed to be repurchased at the average market
price during the year.
Fully diluted earnings per share have been computed in the same
manner as primary earnings per share, except that shares are assumed to
be purchased at the higher of the average or year-end market price.
The incremental shares computed under the modified treasury
stock method and included in the weighted average number of common and
common equivalent shares outstanding amount to 2,846 shares (primary)
and 3,986 shares (fully diluted) in 1993.
In 1995 and 1994, shares issuable upon the exercise of stock
options have not been included in the per share computations because the
effect of such would be anti-dilutive.
In 1995, primary and fully diluted earnings per share is
comprised of the following amounts:
Loss before extraordinary item $ (4.04)
Extraordinary item 3.19
--------------
Net loss $ (0.85)
==============
(11) Reorganization items
The accompanying consolidated condensed financial statements
include a reorganization charge of $527,757 for the year ended December
31, 1995 and $686,155 for the year ended January 1, 1995. The
reorganization charge relates primarily to legal and professional fees
in connection with the Chapter 11 filing, amortization of due diligence
and other fees for the post-petition line of credit, and losses
associated with the abandonment of leasehold improvements and store
fixtures in stores which were closed.
Reorganization items representing outflows of cash are as
follows:
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Loan costs paid $ - $ 95,963 $ -
Professional fees paid 521,028 70,000 -
Other costs paid 60,702 34,603 -
-------------- -------------- --------------
Total $ 581,730 $ 200,566 $ -
============== ============== ==============
</TABLE>
<PAGE>
KENWIN SHOPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) Bankruptcy
On September 19, 1994, Kenwin Shops, Inc. (the "Debtor") filed a
petition for relief under Chapter 11 of the federal bankruptcy laws in
the United States Bankruptcy Court for the Southern District of New
York. Under Chapter 11, certain claims against the Debtor in existence
prior to the filing of the petition for relief under the federal
bankruptcy laws were stayed while the Debtor continued business
operations as Debtor-in-Possession. These claims are reflected in the
January 1, 1995 balance sheet as "liabilities subject to compromise."
On October 12, 1995, an order confirming the Debtor's plan of
reorganization was entered by the court. On October 23, 1995, the
unsecured creditors were paid a 25% cash settlement and were issued
149,260 shares of common stock (rounded to account for fractional
shares). Cash was provided for the settlement by the sale of the
Company's accounts receivable (Note 3). The conversion of debt to
common stock resulted in a noncash financing activity totaling $464,630.
On October 23, 1995, the Company executed a new $1,500,000
post-bankruptcy line of credit with Sterling, at which point the
existing loan balance was paid in full and the related security and loan
agreement was terminated.
(13) Contingency - going concern
As presented in the accompanying financial statements, the
Company incurred losses before income taxes and extraordinary items of
$1,824,095, $3,247,448 and $945,594 for the years ended December 31,
1995, January 1, 1995 and January 2, 1994, respectively. The Company
also experienced difficulty obtaining sufficient credit from its bank
and its suppliers during these periods.
During 1996, management intends to closely monitor the
operations of its existing locations and streamline administrative
overhead. One of the key factors in the Company's recent financial
difficulties was an increasing inability to obtain adequate credit with
which to finance inventory purchases. This condition impacted the
quantity and selection of goods in the stores, with the result being an
expanding cycle of lost sales and customers. Management believes that
the Company's Chapter 11 reorganization plan and the $1,500,000 line of
credit (Note 6) will allow the Company to maintain sufficient inventory
levels and selection to draw customers back and enable it to capitalize
on major sales seasons such as Easter, Mother's Day, and Christmas, when
historically the Company has generated much of its profits.
The ability of the Company to continue as a going concern is
dependent on the continuation of financing to fund purchases of
inventory and the ability of management to return the Company's
operations to profitability. The financial statements do not include
any adjustments that might be necessary if the Company is unable to
continue as a going concern.
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information in response to this item is incorporated
by reference to the Definitive Proxy Statement to be filed by
Registrant for the Annual Meeting of Stockholders to be held on
May 15, 1996.
ITEM 11. EXECUTIVE COMPENSATION
The information in response to this item is incorporated
by reference to the Definitive Proxy Statement to be filed by
Registrant for the Annual Meeting of Stockholders to be held on
May 15, 1996.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following information is furnished as to all
persons, known to the beneficial owner of more than 5 percent of
the Company's common stock, and as to all directors and
nominees, and all directors and officers, as a group:
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Number of Percent
Name of Individual or Identity of Group Shares Class
---------------------------------------------- -------------- --------------
<S> <C> <C>
Philip Abramson 43,900 (1) 7.89
4747 Granite Drive
Tucker, Georgia 30084
Kenneth Silberstein 37,190 (2) 6.68
4747 Granite Drive
Tucker, Georgia 30084
Richard Moskowitz 24,978 4.49
Robert Schwartz 20,086 (3) 3.61
Ira Abramson 9,944 (4) 1.79
Martin L. Conrad 500 0.09
Henry S. Krauss 500 0.09
Donald Schwartz 350 0.06
Kenneth Sauer 100 0.02
All Officers and Directors as a Group (7 persons) 93,298 (5) 16.77
</TABLE>
(1) Includes 21,163 shares owned by Mr. Abramson's wife.
(2) Includes 12,051 shares owned by Mr. Silberstein's wife.
(3) Includes 8,906 shares owned by Mr. Schwartz's wife, 200
shares owned by Mr. Schwartz as custodian for his minor
children, and 200 shares owned by Mr. Schwartz's wife as
custodian for their minor children.
(4) Includes 1,106 shares owned by Ira Abramson's wife, 190
shares owned by Mr. Abramson's wife as custodian for one
of their daughters, 227 shares owned by Mr. Abramson's
wife as custodian for their other daughter, 112 shares
owned by Mr. Abramson as custodian for one of their
daughters and 75 shares owned by Mr. Abramson as
custodian for their other daughter.
(5) Includes shares owned by Mr. Silberstein, who was a
director during the fiscal year ended December 31, 1995,
but who is not a nominee, and does not include the
shares owned by Mr. Donald Schwartz, who is a nominee.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in response to this item is incorporated
by reference to the Definitive Proxy Statement to be filed by
Registrant for the Annual Meeting of Stockholders to be held on
May 15, 1996.
<PAGE>
KENWIN SHOPS, INC.
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a)(1), (a)(2), and (b)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
REPORTS ON FORM 8-K
FINANCIAL STATEMENT SCHEDULES
FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE>
SCHEDULE II
KENWIN SHOPS, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1995, January 1, 1995, and January 2, 1994
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------- -------------- ------------------------------ -------------- --------------
Additions
------------------------------
(1) (2)
Balance at Charged to Charge to
Beginning Costs and Other Balance at
Description of Period Expenses Accounts Deductions End of Period
- -------------------------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
December 31, 1995 $ 732,000 $ 530,665 $ - $ (243,256) $ 1,019,409
January 1, 1995 $ 419,000 $ 526,871 $ - $ (213,871) $ 732,000
January 2, 1994 $ 377,000 $ 399,823 $ - $ (357,823) $ 419,000
Deferred Tax Asset Valuation
Account
December 31, 1995 $ 768,554 $ - $ 425,731 $ (67,358) $ 1,126,927
January 1, 1995 $ - $ - $ 1,331,886 $ (563,332) $ 768,554
January 2, 1994 $ - $ - $ - $ - $ -
</TABLE>
Column C(2) charged against Deferred Tax Asset
<PAGE>
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES
AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of
Kenwin Shops, Inc. are included in Part II, Item 8:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1995 and
January 1, 1995
Consolidated Statements of Income for the years ended
December 31, 1995, January 1, 1995, and January 2, 1994
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, January 1, 1995, and
January 2, 1994
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, January 1, 1995, and January 2,
1994
Notes to Consolidated Financial Statements, Notes 1 to
13
2. Financial Statement Schedules
The following consolidated financial statement schedule
of Kenwin Shops, Inc. is included in Part IV:
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted as the required
information is either (a) not present or is not present
in sufficient amounts to require submission of the
schedules, or (b) included in the financial statements
or notes thereto.
3. Exhibits
Exhibit 2 - Second Amended Plan of Reorganization and
copy of the Bankruptcy Court's order,
filed as an Exhibit to the Company's
Current Report on Form 8-K, dated
October 12, 1995, and incorporated
herein by reference.
Exhibit 3 - Articles of Incorporation and By-Laws,
filed as Exhibit 3 to the Company's 1994
Annual Report on Form 10-K, and
incorporated herein by reference.
Exhibit 21 - Subsidiaries of the Registrant
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Cross Reference to Proxy Statement
Incorporated by Reference
(b) Reports on Form 8-K
One Report on Form 8-K was filed during the fourth
quarter of the fiscal year ended December 31, 1995. On
October 12, 1995, an order confirming a plan of
reorganization was entered by a court having
jurisdiction over the business and assets of the
Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
KENWIN SHOPS, INC.
March 15, 1996 by /s/ Ira Abramson
______________________
Ira Abramson,
Chairman of the Board,
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report is signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
/s/ Ira Abramson Chairman of the Board, Assistant Secretary and
- ----------------------- Director March 15, 1996
Ira Abramson
/s/ Robert Schwartz President and Director March 15, 1996
- -----------------------
Robert Schwartz
/s/ Kenneth Silberstein Director March 15, 1996
- -----------------------
Kenneth Silberstein
/s/ Richard Moskowitz Vice President, Secretary and Director
- ----------------------- March 15, 1996
Richard Moskowitz
/s/ Kenneth G. Sauer Treasurer (Principal Financial Officer)
- ----------------------- March 15, 1996
Kenneth G. Sauer
/s/ Martin L. Conrad Director March 15, 1996
- -----------------------
Martin L. Conrad
/s/ Henry S. Krauss Director March 15, 1996
- -----------------------
Henry S. Krauss
<PAGE>
Exhibit 21 - Subsidiaries of the Registrant
For the fiscal year ended December 31, 1995, Registrant owned
and operated eight (8) subsidiaries in the United States. Each
subsidiary is wholly owned and is involved in the same line of business
as Registrant. All of Registrant's subsidiaries have been included in
Registrant's consolidated Financial Statements. The names of said
subsidiaries have been omitted from this report.
Exhibit 99 - Cross Reference to Proxy Statement Incorporated by
Reference
<TABLE>
<CAPTION>
Definitive Proxy Statement to be Filed
by Registrant for Annual Meeting of
Form 10-K for Fiscal Year Ended December 31, 1995 Stockholders to be Held May 15, 1996
- ----------------------------------------------------------- --------------------------------------------
<S> <C>
PART III
ITEM 10. - Directors and Executive Officers of the Directors and Executive Officers
Registrant pp. 2-4
Compensation of Directors and
Executive Officers
ITEM 11. - Executive Compensation pp. 5 et. seq.
Related Transactions
ITEM 13. - Certain Relationship and Related Transactions pp. 4 and 8
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-02-1995
<PERIOD-END> Dec-31-1995
<CASH> 274,177
<SECURITIES> 0
<RECEIVABLES> 1,379,259
<ALLOWANCES> 1,019,409
<INVENTORY> 2,042,880
<CURRENT-ASSETS> 2,811,351
<PP&E> 4,080,571
<DEPRECIATION> 2,946,385
<TOTAL-ASSETS> 4,197,862
<CURRENT-LIABILITIES> 1,184,393
<BONDS> 0
<COMMON> 613,472
0
0
<OTHER-SE> 2,399,997
<TOTAL-LIABILITY-AND-EQUITY> 4,197,862
<SALES> 15,374,665
<TOTAL-REVENUES> 15,916,449
<CGS> 10,634,364
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<INCOME-CONTINUING> (1,756,737)
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<EXTRAORDINARY> 1,385,153
<CHANGES> 0
<NET-INCOME> (371,584)
<EPS-PRIMARY> (0.85)
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</TABLE>
