SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
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
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4900 Highlands Parkway
Smyrna, Georgia 30082
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 431-7971
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. [ ]
State the aggregate market value of the voting stock held by nonaffiliates 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 nonaffiliates 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 document has been incorporated by reference under the respective
parts of Form 10-K set forth below.
PART III, ITEM 11
Definitive Proxy Statement to be filed by Registrant Pursuant
to Regulation 14A for Annual Meeting of Stockholders to be
held May 15, 1996.
PART I.
ITEM 1. BUSINESS
(a) Kenwin Shops, Inc. ("Company") was incorporated on December 10, 1946,
in the State of New York. On December 12, 1961, the Company made its first
public offering of stock. On July 14, 1971, the Company was authorized to
begin trading its stock on the American Stock Exchange.
From 1991 through 1995, the Company has experienced a continuous drop
in sales resulting in the "downsizing" of the Company including the closing of
96 stores over the five-year period. Due to increasing difficulties in
obtaining sufficient credit to maintain adequate inventory levels in its
stores, the Company filed a voluntary petition for relief under Chapter 11 of
Title 11 of the United States Bankruptcy Code on September 19, 1994. The
Company emerged from bankruptcy on October 12, 1995, when the Plan of
Reorganization was confirmed by the Bankruptcy Court.
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 Alabama,
Arkansas, Florida, Georgia, Louisiana, Mississippi, South Carolina and Texas.
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.
(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.
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.
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
Registrant leases its corporate headquarters and distribution center
at 4747 Granite Drive, Tucker, Georgia. 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 four-year lease
of a portion of the property, with a four-year extension option.
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. As of December 31, 1995,
Registrant's 102 retail outlets were operated in leased premises ranging in
size from 1,800 square feet to 8,000 square feet with either fixed rentals or
under leases providing for payments of minimum guaranteed rentals plus a
percentage of sales. The 102 retail outlets were located in Alabama, Arkansas,
Florida, Georgia, Louisiana, Mississippi, South Carolina and Texas. In the
opinion of management, the Company's current retail space of approximately
352,000 square feet in total is adequate.
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.
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.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
Cash
Price of stock dividends paid
High Low during quarter
---------- ----------- --------------
1995
First Quarter 3 2-3/4 None
Second Quarter 4-9/16 2-7/8 None
Third Quarter 3 1-5/8 None
Fourth Quarter 3-5/16 1-13/16 None
1994
First Quarter 6-1/8 5-1/8 None
Second Quarter 6-1/8 5-1/4 None
Third Quarter 5-3/4 4-5/8 None
Fourth Quarter 4-1/8 2-7/16 None
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.
Dividend Policy
The Company has not paid cash dividends for the two most recent fiscal
years or any subsequent interim period. The Company presently intends to
retain all cash for use in the operation of the Company's business and does not
anticipate paying any cash dividends in the near future.
ITEM 6. SELECTED FINANCIAL DATA
(4)
December 31 January 1 January 2 January 3 December 29
1995 1995 1994 1993 1991
----------- ---------- ---------- ---------- -----------
(3) (3) (3) (3) (3)
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)
(2)
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 435,025 407,090 409,936 498,219 406,390
======= ======= ======= ======= =======
SELECTED BALANCE SHEET
December 31 January 1 January 2 January 3 December 29
1995 1995 1994 1993 1991
----------- ----------- ----------- ---------- -----------
(1)
Current assets 3,270,134 7,134,400 8,694,959 8,846,292 9,534,242
(1)
Current liabilities 1,643,176 2,199,098 5,010,142 4,550,032 5,719,094
--------- --------- ---------- ---------- ----------
(1)
Working capital 1,626,958 4,935,302 3,684,817 4,296,260 3,815,148
========== ========= ========== ========== ==========
(1)
Total assets 4,656,645 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
========== ========= =========== =========== ==========
(1) The accounts receivable were sold with recourse during the year ended
December 31, 1995 which affects the comparability of assets and liabilities.
(2) The Company filed a petition for relief under Chapter 11 of Title 11 of
the United States Bankruptcy Code on September 19, 1994. A gain on forgiveness
of debt of approximately $1,385,000, net of the tax effect, was recognized upon
exiting bankruptcy in October 1995.
(3) The decrease in sales from 1994 to 1995 was primarily the result of the
closing of 44 stores during 1994. The closing of the 44 stores in 1994 and 20
stores in 1993 resulted in a decrease in sales from January 2, 1994 and January
1, 1995 of approximately $3,374,000. The closing of 20 stores in 1993 and 3
stores in 1992 resulted in a decrease in sales of approximately $1,000,000
from January 3, 1993 to January 2, 1994. The closing of 3 stores in 1992 and
29 stores in 1991 resulted in a decrease in sales of approximately $2,100,000
from December 29, 1991 to January 3, 1993.
(4) The year ended January 3, 1993, was comprised of 53 weeks. Other years
contained 52 weeks. The additional week in 1992 amounted to approximately
$400,000 of additional sales.
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
quarters 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 3.7% in 1995 to 17.3% in 1994 to 31.0% in
1993. A reconciliation of income taxes is provided in Note 4 of the Notes to
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities, an agreement with the Bank of
Louisiana ("BOL") to purchase the Company's accounts receivable, and a line of
credit for short-term borrowings are the Company's primary sources of liquidity
and capital. Net cash totaling $1,714,493 was used by operating activities in
1995. The decrease in cash from 1994 to 1995 is also due to the repayment on
the line of credit at December 31, 1995.
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 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 six months, except for the initial reserve of
$750,000, to equal the actual dollar amount of the purchased accounts which are
90 days and more past due or 10% 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 and Trust
of New York ("Sterling") holds a subordinate security interest in the reserve.
A liability of approximately $458,800 has been recorded for estimated
uncollectible accounts. The balance of accounts receivable at December 31,
1995 is comprised of approximately $14,600 of receivables to be purchased by
BOL and approximately $560,600 of receivables either rejected by BOL or
repurchased from BOL under the recourse provisions, which are fully reserved.
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.
The line of credit is 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, 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 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. Although the Company's line of credit has decreased from
$2,750,000 to $1,500,000, due to the sale of accounts receivables, the Company
will be responsible for financing only inventory on its line of credit, not
accounts receivable and inventory, and therefore management believes the
$1,500,000 line of credit will be sufficient to finance an adequate supply of
inventory to the retail stores.
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.
The following items measure the Company's ability to meet its short-
term obligations:
1995 1994
------------ ------------
Working capital $ 1,627,000 $ 4,935,000
Working capital ratio 2.0 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.
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
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.
Atlanta, Georgia
February 16, 1996
KENWIN SHOPS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, January 1,
1995 1995
------------ ------------
ASSETS
CURRENT ASSETS
Cash (Note 2) $ 274,177 $ 507,164
Restricted cash (Note 3) 804,009 -
Accounts receivable, less
allowance for doubtful accounts
of $560,626 and $732,000, respectively
(Notes 2, 3, and 6) 14,624 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 tax asset (Note 4) - 965,060
------------ ------------
TOTAL CURRENT ASSETS 3,270,134 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 tax asset (Note 4) 183,453 -
------------ ------------
TOTAL OTHER ASSETS 252,325 62,673
------------ ------------
TOTAL ASSETS $ 4,656,645 $ 8,747,566
============ ============
KENWIN SHOPS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, January 1,
1995 1995
------------ ------------
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
Estimated liability for uncollectible
accounts (Note 3) 458,783 -
------------ ------------
TOTAL CURRENT LIABILITIES 1,643,176 2,199,098
LIABILITIES SUBJECT TO COMPROMISE (a) - 3,628,045
------------ ------------
TOTAL LIABILITIES 1,643,176 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 $ 4,656,645 $ 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
============ ============
KENWIN SHOPS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
----------------------------------------
December 31, January 1, January 2,
1995 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
------------ ------------ ------------
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 (Note 3) - 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 435,025 407,090 409,936
============ ============ ============
KENWIN SHOPS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Common
Common Paid-in Retained Stock in
Stock Capital Earnings Treasury
---------- ---------- ---------- ----------
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
========== ========== ========== ==========
KENWIN SHOPS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
-----------------------------------------
December 31, January 1, January 2,
1995 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
------------ ------------ ------------
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
Restricted cash (804,009) - -
Customers' accounts receivable,
net 587,508 124,321 (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)
Estimated liability for
uncollectible accounts 458,783 - -
------------ ------------ ------------
NET CASH USED BY
OPERATING ACTIVITIES (1,714,493) (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)
Sale of receivables 2,080,768 - -
------------ ------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 826,346 504,420 750,000
------------ ------------ ------------
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
============ ============ ============
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.
(3) Accounts receivable
On September 29, 1995, the Company entered into a two-year
agreement whereby it sold its initial accounts receivable to the Bank
of Louisiana ("BOL"). The Company received $2,080,768 in net proceeds
from the transfer of its receivables (Note 12). BOL set up an initial
reserve of $750,000 to guarantee delinquencies, claims and bad
debts. The amount held by the bank at December 31, 1995 was $804,009
which is reflected as restricted cash on the balance sheet. The
outstanding balance of accounts receivable at December 31, 1995
which the Company could be required to repurchase under the recourse
provisions of the agreement totaled $4,280,001. A liability of
approximately $458,800 has been recorded for estimated uncollectible
accounts. The balance of accounts receivable at December 31, 1995 is
comprised of approximately $14,600 of receivables to be purchased by
BOL and approximately $560,600 of receivables either rejected by BOL
or repurchased from BOL under the recourse provisions, which are fully
reserved.
Included in reorganization items is bad debt expense of
$352,586 for the year ended January 1, 1995. Customers of closed
stores generally have not paid their accounts receivable balances.
The low collection percentage for closed stores' accounts receivable
was because the accounts receivable were maintained at the store level
and customers generally paid cash in the store on their balance due.
Once the store in their town was closed, there was not another store
in the vicinty at which to pay. Since the average accounts receivable
balance was less than $200, it was often not economical to pursue
collection.
(4) Income taxes
The credit for income taxes is composed of the following:
Years Ended
-----------------------------------------
December 31, January 1, January 2,
1995 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
------------ ------------ ------------
Federal $ - $ - $ 166,163
State - - 3,581
Deferred 67,358 563,332 123,823
----------- ----------- ------------
Total $ 67,358 $ 563,332 $ 293,567
=========== =========== ============
Deferred income taxes resulting from temporary differences in
the recognition of income and expense for tax and financial reporting
purposes are as follows:
Years Ended
-----------------------------------------
December 31, January 1, January 2,
1995 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
------------ ------------ ------------
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
============ ============ ============
The following is a summary of the components of the net deferred
tax asset and liability accounts recognized in the accompanying
consolidated balance sheets:
1995 1994
------------ ------------
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
============ ============
The effective tax rate for the Company is reconcilable to the
federal statutory rate as follows:
Percent
--------------------------------
1995 1994 1993
------ ------ ------
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)
====== ====== ======
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,
management feels it is unlikely that the net operating loss will be
fully utilized during the carryforward period in the normal course of
operations. A reserve has been established to limit the net deferred
tax asset. As of January 1, 1995, the deferred tax asset was based on
management's plans for emerging from bankruptcy. During the year ended
December 31, 1995, the Company recognized gain on the forgiveness of
debt upon settlement of Chapter 11 bankruptcy of $2,234,118, thus
utilizing a like amount of its net operating loss carryforward.
(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.
(6) Credit arrangements
On November 14, 1994, the Company obtained a $2,750,000 line of
credit from Sterling National Bank and Trust 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
On August 7, 1995, the Company sold its office and warehouse
facility located in Tucker, Georgia, for $800,000. The Company
simultaneously entered into a lease agreement with the buyer to lease
a portion of the building for three years at an annual rental of
approximately $69,800 with a renewal option for an additional
three years at an annual rental of approximately $81,400.
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
noncancelable 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:
Years Ended
-----------------------------------------
December 31, January 1, January 2,
1995 1995 1994
------------ ------------ ------------
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
========== ========== ==========
(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. The price at which the 1988 options were
granted ranged from $7.50 to $8.25 per share. 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 nonqualified and expired May 18, 1993.
Stock option transactions under these plans are summarized as
follows:
Shares Option Price
------- -----------------------
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) $ 7.50 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
=======
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.
Nonqualified 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.
(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:
Years Ended
-----------------------------------------
December 31, January 1, January 2,
1995 1995 1994
------------ ------------ ------------
Loan costs paid $ - $ 95,963 $ -
Professional fees paid 521,028 70,000 -
Other costs paid 60,702 34,603 -
------------ ------------ -------------
Total $ 581,730 $ 200,566 $ -
============ ============ =============
(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.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
Executive
Director Officer
Name Age Principal Occupation Since Since
Ira Abramson 65 Chairman of the Board, CEO,
Vice President, Assistant (1)
Secretary of the Company 1971 1964
(2)
Robert Schwartz 50 President of the Company 1982 1976
Richard Moskowitz 48 Vice President and Secretary (3)
of the Company 1982 1972
Martin L. Conrad 73 Partner, Jaffin, Conrad,
Finkelstein and Frank, Attorneys (4)
New York, New York 1961 -
Henry S. Krauss 70 Senior Vice President
Westminster Securities Corp., (5)
Member, New York Stock Exchange 1964 -
(6)
Kenneth Sauer 44 Treasurer of the Company - 1995
(1) Mr. Abramson, an executive officer since 1964, was elected Chairman of
the Board in 1988 and Assistant Secretary in 1992.
(2) Mr. Schwartz, an executive officer since 1976, was elected President in
1988.
(3) Mr. Moskowitz, an executive officer since 1972, was elected Secretary
in 1992.
(4) Mr. Conrad is a partner for more than five years of the law firm of
Jaffin, Conrad, Finkelstein and Frank which has been counsel to the
Company for more than two years and has been selected as counsel to the
Company for the current fiscal year.
(5) Mr. Krauss has been a director since 1994 and has been a Senior Vice
President of Westminster Securities Corp. for more than five years.
(6) Mr. Sauer was elected Treasurer in 1995 and has served as controller
since 1987.
All directors are elected to serve a one-year term. All executive
officers serve at the discretion of the Board of Directors.
There is no family relationship among any of the foregoing executive
officers or directors.
There is no arrangement or understanding between or among any of the
foregoing directors, nominees, or exeuctive officers pursuant to which any of
them were selected as directors, nominees or officers.
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.
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:
Name and Address of Beneficial Owner Number of Percent of
Name of Individual or Identity of Group Shares Class
- ----------------------------------------- -------------- ----------
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
(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
During the fiscal year, the Company paid legal fees aggregating
$121,326 to Jaffin, Conrad, Finkelstein, and Frank Esqs., in which Martin L.
Conrad, a Director of the Company, is a partner. Mr. Conrad receives no
special compensation for acting as chairman of the Audit and Compensation
committees, but his law firm received its regular rate of compensation for the
time devoted by him for such services.
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
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 as 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 11 - Statement re: Computation of Per Share Earnings
Exhibit 21 - Subsidiaries of the Registrant
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.
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.
April 14, 1997 by ________________________________________
Donald Weiner,
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/ Donald Weiner President (Principal Executive April 14, 1997
Donald Weiner Officer) and Chairman
/s/ Richard Pedone Treasurer April 14, 1997
Richard Pedone (Pricipal Financial Officer)
/s/ Barbara Weiner Secretary, Assistant Treasurer April 14, 1997
Barbara Weiner
/s/ Edith Gins Assistant Secretary and Director April 14, 1997
Edith Gins
/s/ Arthur Gins Director April 14, 1997
Arthur Gins
SCHEDULE II
KENWIN SHOPS, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1995, January 1, 1995, and January 2, 1994
Column A Column B Column C Column D Column E
- --------------------- ---------- ---------------------- ----------- -----------
Additions
----------------------
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- --------------------- ---------- ---------- ----------- ----------- -----------
Allowance for doubtful
accounts
December 31, 1995 $ 732,000 $ 530,665 $ - $ (702,039) $ 560,626
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 $ - $ - $ - $ - $ -
Column C(2) charged against Deferred Tax Asset
Exhibit 11 - Statement re: Computation of per share earnings
Years Ended
--------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
____________ _____________ ____________
Average shares outstanding 435,025 407,090 409,936
Dilutive effect of stock
options computed by use of
treasury stock method - - -
-------- --------- ---------
Average common and common
equivalent shares outstanding 435,025 407,090 409,936
======== ========= =========
Computation of earnings per
share = Net loss/average common
and common equivalent shares
outstanding $(371,584) $(2,684,116) $ (652,027)
435,025 407,090 409,936
--------- ----------- -----------
Loss per share $ (0.85) $ (6.59) $ (1.59)
========= =========== ===========
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
Definitive Proxy Statement to be Filed
Form 10-K for Fiscal Year by Registrant for Annual Meeting of
Ended December 31, 1995 Stockholders to be Held May 15, 1996
- --------------------------- ---------------------------------------
PART III
Compensation of Directors and Executive
Officers
ITEM 11. - Executive Compensation pp. 5 et. seq.
<PAGE>
<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> 575,250
<ALLOWANCES> 560,626
<INVENTORY> 2,042,880
<CURRENT-ASSETS> 3,270,134
<PP&E> 4,080,571
<DEPRECIATION> 2,946,385
<TOTAL-ASSETS> 4,656,645
<CURRENT-LIABILITIES> 1,643,176
<BONDS> 0
<COMMON> 613,472
0
0
<OTHER-SE> 2,399,997
<TOTAL-LIABILITY-AND-EQUITY> 4,656,645
<SALES> 15,374,665
<TOTAL-REVENUES> 15,916,449
<CGS> 10,634,364
<TOTAL-COSTS> 6,578,423
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,824,095)
<INCOME-TAX> 67,358
<INCOME-CONTINUING> (1,756,737)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,385,153
<CHANGES> 0
<NET-INCOME> (371,584)
<EPS-PRIMARY> (0.85)
<EPS-DILUTED> (0.85)
</TABLE>
