<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
- -----
For quarterly period ended February 29, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
_____ OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-8501
HARTMARX CORPORATION
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3217140
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
---------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code 312/372-6300
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No _______
-----
At March 31, 1996 there were 32,956,048 shares of the Company's common stock
outstanding.
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HARTMARX CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statement of Earnings for the
three months ended February 29, 1996 and
February 28, 1995. 3
Consolidated Balance Sheet as of February 29,
1996, November 30, 1995 and February 28, 1995. 4
Condensed Consolidated Statement of Cash Flows
for the three months ended February 29, 1996
and February 28, 1995. 6
Notes to Consolidated Financial Statements. 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 9
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(000'S OMITTED)
<TABLE>
<CAPTION>
Three Months Ended
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February 29, 1996 February 28, 1995
----------------- -----------------
<S> <C> <C>
Net sales $150,859 $149,283
Licensing and other income 1,214 1,296
-------- --------
152,073 150,579
-------- --------
Cost of goods sold 116,985 112,576
Selling, general and administrative expenses 33,407 32,947
-------- --------
150,392 145,523
-------- --------
Earnings before interest, taxes, discontinued
operation and extraordinary gain 1,681 5,056
Interest expense 4,251 4,964
-------- --------
Earnings (loss) before taxes, discontinued
operation and extraordinary gain (2,570) 92
Tax (provision) benefit 975 (35)
-------- --------
Earnings (loss) before discontinued operation
and extraordinary gain (1,595) 57
Discontinued operation:
Operating earnings, net of tax - 78
-------- --------
Earnings (loss) before extraordinary gain (1,595) 135
Extraordinary gain, net of tax 661 -
-------- --------
Net earnings (loss) for the period $ (934) $ 135
======== ========
Earnings (loss) per share:
Continuing operations $(.05) $ -
Discontinued operation - -
----- -----
Before extraordinary gain $(.05) $ -
===== =====
After extraordinary gain $(.03) $ -
===== =====
Dividends per common share $ - $ -
===== =====
Average number of common shares
and common share equivalents 32,837 32,543
======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
3
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(000'S OMITTED)
<TABLE>
<CAPTION>
Feb. 29, Nov. 30, Feb. 28,
1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 632 $ 5,700 $ 1,820
Accounts receivable, less allowance
of $9,205, $7,920 and $7,880
for doubtful accounts 142,680 108,486 135,425
Inventories 141,655 154,898 178,331
Prepaid expenses 5,811 3,471 7,783
Recoverable and deferred income taxes 5,154 6,938 4,767
-------- -------- --------
Total current assets 295,932 279,493 328,126
-------- -------- --------
INVESTMENTS AND OTHER ASSETS 21,597 21,438 16,026
-------- -------- --------
DEFERRED INCOME TAXES 31,081 31,081 11,817
-------- -------- --------
PROPERTIES
Land 2,626 2,626 3,852
Buildings and building improvements 47,358 47,837 58,095
Furniture, fixtures and equipment 100,203 98,626 112,129
Leasehold improvements 18,471 18,963 27,700
-------- -------- --------
168,658 168,052 201,776
Accumulated depreciation and amortization (124,638) (123,428) (151,607)
-------- -------- --------
Net properties 44,020 44,624 50,169
-------- -------- --------
TOTAL ASSETS $392,630 $376,636 $406,138
======== ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
4
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HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(000'S OMITTED)
<TABLE>
<CAPTION>
Feb. 29, Nov. 30, Feb. 28,
1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES
Notes payable $ 10,000 $ 10,000 $ 20,000
Current maturities of long term debt 447 497 663
Accounts payable and accrued expenses 67,024 78,867 70,339
-------- -------- --------
Total current liabilities 77,471 89,364 91,002
-------- -------- --------
LONG TERM DEBT, less current maturities 180,707 152,781 185,793
-------- -------- --------
SHAREHOLDERS' EQUITY
Preferred shares, $1 par value;
2,500,000 authorized and unissued - - -
Common shares, $2.50 par value; authorized
75,000,000; issued 32,939,539 in February 1996,
32,759,797 in November 1995 and
32,565,139 in February 1995. 82,349 81,899 81,413
Capital surplus 76,801 76,771 76,294
Retained earnings (deficit) (15,018) (14,084) (17,096)
Unearned employee benefits (9,680) (10,095) (11,268)
-------- -------- --------
Total shareholders' equity 134,452 134,491 129,343
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $392,630 $376,636 $406,138
======== ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
5
<PAGE>
HARTMARX CORPORATION
CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
Three Months Ended
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February 29, 1996 February 28, 1995
------------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss), including discontinued operation
and extraordinary gain $ (934) $ 135
Extraordinary gain, net of tax provision (661) -
Reconciling items to adjust net earnings (loss)
to net cash used in operating activities:
Depreciation and amortization 2,405 3,120
Changes in:
Receivables, inventories and prepaids (23,291) (16,925)
Other assets 490 (63)
Accounts payable and accrued expenses (11,843) (5,710)
Taxes and deferred taxes 1,784 231
-------- --------
Net cash used in operating activities (32,050) (19,212)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,769) (1,282)
-------- --------
Net cash used in investing activities (1,769) (1,282)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 36,553 18,800
Purchase of $10 million principal amount of
10 7/8% Senior Subordinated Debentures (8,590) -
Decrease in other long term debt (107) (150)
Proceeds from other equity transactions 895 841
-------- --------
Net cash provided by financing activities 28,751 19,491
-------- --------
Net decrease in cash and cash equivalents (5,068) (1,003)
Cash and cash equivalents at beginning of period 5,700 2,823
-------- --------
Cash and cash equivalents at end of period $ 632 $ 1,820
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Net cash paid (received) during period for:
Interest expense $ 7,300 $ 7,700
Income taxes (2,400) (300)
</TABLE>
(See accompanying notes to consolidated financial statements)
6
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HARTMARX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The accompanying financial statements are unaudited, but in the opinion of
management include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations and
financial position for the applicable period. Results of operations for any
interim period are not necessarily indicative of results for any other periods
or for the full year. These interim financial statements should be read in
conjunction with the financial statements and related notes contained in the
Annual Report on Form 10-K for the year ended November 30, 1995. Certain prior
year amounts have been reclassified to conform to the presentation in the
current period. As further described in Note 5, the results of operations in
the first quarter of 1995 relating to Kuppenheimer, a business segment sold in
July 1995, have been reclassified as a discontinued operation.
NOTE 2
The calculation of earnings (loss) per share for each period is computed based
on the weighted average number of common shares outstanding. When dilutive,
stock options are included as share equivalents using the treasury stock method.
None of the 2,500,000 authorized preferred shares for Hartmarx Corporation have
been issued.
NOTE 3
Long-term debt comprised the following (000's omitted):
<TABLE>
<CAPTION>
Feb. 29, Nov. 30, Feb. 28,
1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
Notes payable $ 83,500 $ 45,590 $ 85,700
10 7/8% Senior Subordinated Notes, net 89,543 99,470 99,405
Industrial development bonds 17,805 17,853 20,594
Other debt 306 365 757
-------- -------- --------
191,154 163,278 206,456
Less - current 10,447 10,497 20,663
-------- -------- --------
Long term debt $180,707 $152,781 $185,793
======== ======== ========
</TABLE>
7
<PAGE>
During fiscal 1994, the Company issued $100 million principal amount of 10 7/8%
Senior Subordinated Notes due January 15, 2002 ("Notes") in a public offering,
and also entered into a then three year financing agreement ("Credit Facility")
with a group of lenders providing for maximum borrowings of $175 million
(including a $25 million letter of credit facility) secured by eligible
inventories, accounts receivable and the intangibles of the Company and its
subsidiaries. Credit Facility amendments in July 1995, November 1995 and
January 1996, among other things, resulted in a reduction in the fees,
administrative charges and effective borrowing rates, adjustment of certain
covenants and the extension of the term from March 1997 to July 2000. The
Credit Facility contains various restrictive covenants pertaining to minimum net
worth, additional debt incurrence, capital expenditures, asset sales, operating
leases, and ratios relating to minimum accounts payable to inventory, maximum
funded debt to EBITDA and minimum fixed charge coverage, as well as other
customary covenants, representations and warranties, funding conditions and
events of default. The Company was in compliance with the above noted covenants.
During the first quarter of 1996, the Company purchased $10 million face value
of its Notes at a discount, resulting in an extraordinary gain, net of $.4
million tax provision, of $.7 million or $.02 per share.
NOTE 4
Inventories at each date consisted of (000's omitted):
<TABLE>
<CAPTION>
Feb. 29, Nov. 30, Feb. 28,
1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
Raw materials $ 40,128 $ 39,617 $ 44,410
Work-in-process 21,300 21,687 27,132
Finished goods 80,227 93,594 106,789
-------- -------- --------
$141,655 $154,898 $178,331
======== ======== ========
</TABLE>
Inventories are stated at the lower of cost or market. At February 29, 1996,
November 30, 1995 and February 28, 1995, approximately 39%, 42% and 37% of the
Company's total inventories, respectively, are valued using the last-in, first-
out (LIFO) method representing certain work-in-process and finished goods. The
first-in, first-out (FIFO) method is used for substantially all raw materials
and the remaining inventories.
NOTE 5
On July 27, 1995, the Company sold the capital stock of Kuppenheimer, its
vertically integrated factory direct-to-consumer business; Kuppenheimer's
results of operations for the period ended February 28, 1995, net of tax
provision, have been reclassified as a discontinued operation in the
accompanying Consolidated Statement of Earnings.
8
<PAGE>
HARTMARX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
November 30, 1995 to February 29, 1996
- --------------------------------------
Since November 30, 1995, net accounts receivable increased $34.2 million or
31.5% to $142.7 million, reflecting the normal seasonal increase from tailored
clothing shipments in the Men's Apparel Group. The allowance for doubtful
accounts was $9.2 million compared to $7.9 million; the increase reflected
increased credit exposure of certain customers. Inventories of $141.7 million
declined $13.2 million or 8.5%, principally due to seasonal shipments of
tailored clothing in the Men's Apparel Group. Net properties decreased $.6
million to $44.0 million reflecting depreciation expense exceeding capital
additions. Total debt, including current maturities, increased $27.9 million to
$191.2 million, reflecting normal seasonal working capital requirements, and
represented 58.7% of total capitalization compared to 54.8% at November 30,
1995.
February 28, 1995 to February 29, 1996
- --------------------------------------
Net accounts receivable of $142.7 million increased $7.3 million from the higher
first quarter sales and pre-petition balances due from customers currently
operating in bankruptcy as debtors-in-possession. The allowance for doubtful
accounts increased to $9.2 million representing 6.1% of gross receivables
compared to $7.9 million and 5.5%, respectively, at February 28, 1995.
Inventories of $141.7 million decreased $36.7 million principally related to the
disposition of Kuppenheimer. Net properties of $44.0 million declined $6.1
million, primarily reflecting the disposition of Kuppenheimer and depreciation
expense exceeding capital additions. Total debt of $191.2 million decreased
$15.3 million and represented 58.7% of total capitalization compared to 61.5%
at February 28, 1995.
RESULTS OF OPERATIONS
First Quarter 1996 Compared to First Quarter 1995
- -------------------------------------------------
Consolidated sales of $150.9 million increased $1.6 million or 1.1% from $149.3
million in 1995. Men's Apparel Group sales increased approximately 1.8%. The
Hickey-Freeman and Hart Schaffner & Marx businesses positioned in the upper end
of the tailored clothing market had a combined 7% revenue increase despite sales
declines with several retail customers which have filed bankruptcy. However,
the businesses which market moderately priced tailored clothing continued to
operate in a difficult environment and experienced a 5% sales decline and
reduced profitability. Golfwear revenues increased 21% for the quarter.
Revenues in the women's businesses declined approximately 8%, attributable to
the Barrie Pace direct mail catalog business, and represented 7% of consolidated
sales in 1996 and 8% in 1995. As discussed in Note
9
<PAGE>
5 in the accompanying Notes to Consolidated Financial Statements, the
Kuppenheimer business was sold in July 1995 and, accordingly, its results of
operations for the period ended February 28, 1995 have been reclassified as a
discontinued operation.
The consolidated gross margin percentage to sales was 22.5% compared to 24.6%
last year. The Men's Apparel Group gross margin rate was lower, reflecting
industry-wide conditions and most significantly affecting the moderately priced
product categories; margin rates were also unfavorably impacted by start-up
costs associated with off-shore manufacturing facilities. Gross margins in the
women's businesses improved, attributable to International Women's Apparel.
Consolidated selling, general and administrative expenses were $33.4 million
compared to $32.9 million and represented 22.1% of sales in each period; the
current period included non-recurring severance related charges associated with
cost reduction programs which adversely reflected the 1996 ratio to sales by
.5%.
Earnings before interest, taxes, discontinued operation and extraordinary gain
were $1.7 million in 1996 compared to $5.1 million last year. Interest expense
declined $.7 million to $4.3 million primarily attributable to lower average
borrowings; interest expense included amortization of financing fees of $.3
million in 1996 and $.4 million in 1995. The consolidated pre-tax loss for 1996
was $2.6 million compared to earnings of $.1 million in 1995. After reflecting
the applicable tax provision or benefit, the consolidated loss before
extraordinary gain was $1.6 million in 1996 compared to earnings of $.1 million
in 1995. The current period results also included an extraordinary gain, net of
$.4 million tax provision, of $.7 million related to public market purchases of
$10 million face value of the Company's 10 7/8% Senior Subordinated Debentures.
10
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 Financial Data Schedules
(b) The Company filed a Form 8-K on December 29, 1995 relating to the
Company's new shareholder rights plan.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARTMARX CORPORATION
April 12, 1996 By /s/ GLENN R. MORGAN
----------------------------------
Glenn R. Morgan
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
April 12, 1996 By /s/ ANDREW A. ZAHR
----------------------------------
Andrew A. Zahr
Controller
(Principal Accounting Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Statement of Earnings and the Consolidated Balance Sheet and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> FEB-29-1996
<CASH> 632
<SECURITIES> 0
<RECEIVABLES> 142,680
<ALLOWANCES> (9,205)
<INVENTORY> 141,655
<CURRENT-ASSETS> 295,932
<PP&E> 168,658
<DEPRECIATION> (124,638)
<TOTAL-ASSETS> 392,630
<CURRENT-LIABILITIES> 77,471
<BONDS> 180,707
<COMMON> 82,349
0
0
<OTHER-SE> 52,103
<TOTAL-LIABILITY-AND-EQUITY> 392,630
<SALES> 150,859
<TOTAL-REVENUES> 152,073
<CGS> 116,985
<TOTAL-COSTS> 150,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,251
<INCOME-PRETAX> (2,570)
<INCOME-TAX> (975)
<INCOME-CONTINUING> (1,595)
<DISCONTINUED> 0
<EXTRAORDINARY> 661
<CHANGES> 0
<NET-INCOME> (934)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
