FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 1995
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 No. 0-11682
S & K FAMOUS BRANDS, INC.
...........................................
(Exact name of registrant as specified in its charter)
Virginia 54-0845694
....................... ....................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11100 West Broad Street, P. O. Box 31800, Richmond, Virginia 23294-1800
.......................................................................
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 346-2500
..............
Not Applicable
...................................................
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of April 29, 1995.
4,844,159 shares of Common Stock, $0.50 par value
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
S & K FAMOUS BRANDS, INC.
Statements of Income
(unaudited)
<TABLE>
Three Months Ended
April 29, April 30,
1995 1994
As restated
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 28,746,079 $ 24,688,433
Cost of sales . . . . . . . . . . . . . . . . . . . . . . 15,854,622 13,986,062
Gross profit . . . . . . . . . . . . . . . . . . . . . . . 12,891,457 10,702,371
Other costs and expenses:
Selling, general and administrative . . . . . . . . . . 11,103,416 9,396,016
Interest . . . . . . . . . . . . . . . . . . . . . . . 202,985 137,017
Depreciation and amortization . . . . . . . . . . . . . 533,369 473,000
Other, net . . . . . . . . . . . . . . . . . . . . . . (69,579) (14,672)
Income before income taxes . . . . . . . . . . . . . . . . 1,121,266 711,010
Provision for income taxes . . . . . . . . . . . . . . . . 426,100 272,500
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 695,166 $ 438,510
Net income per common share . . . . . . . . . . . . . . . $ 0.14 $ 0.09
Weighted average common shares outstanding . . . . . . . . 4,840,454 4,825,237
</TABLE>
See notes to financial statements.
<PAGE>
S & K FAMOUS BRANDS, INC.
Balance Sheets
<TABLE>
April 29, April 30, January 28,
1995 1994 1995
(unaudited) (unaudited)
As restated As restated
<S> <C> <C> <C>
Assets
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . $ 317,712 $ 253,762 $ 584,887
Accounts receivable . . . . . . . . . . . . . . . . 448,296 514,407 320,199
Merchandise inventories . . . . . . . . . . . . . . 45,443,902 44,703,727 40,397,436
Other current assets . . . . . . . . . . . . . . . . 2,195,985 1,948,641 2,263,805
Total current assets . . . . . . . . . . . . . . 48,405,895 47,420,537 43,566,327
Property and equipment, at cost:
Land and corporate facility . . . . . . . . . . . . 5,130,826 5,127,240 5,130,826
Furniture, fixtures and equipment . . . . . . . . . 10,489,624 9,429,966 10,415,365
Leasehold improvements . . . . . . . . . . . . . . . 10,286,751 8,861,272 10,227,203
25,907,201 23,418,478 25,773,394
Less: Accumulated depreciation and amortization . 11,565,305 9,573,160 10,974,249
14,341,896 13,845,318 14,799,145
Other assets . . . . . . . . . . . . . . . . . . . . . 2,098,980 1,663,669 1,975,313
$ 64,846,771 $ 62,929,524 $ 60,340,785
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt . . . . . . . $ 180,000 $ 180,000 $ 180,000
Accounts payable . . . . . . . . . . . . . . . . . 11,973,224 11,554,493 5,632,133
Accrued expenses:
Compensation-related items . . . . . . . . . . . 640,499 468,990 980,365
Current and deferred income taxes . . . . . . . . 933,673 896,166 1,120,887
Other current liabilities . . . . . . . . . . . . 1,259,125 976,556 1,009,159
Total current liabilities . . . . . . . . . . 14,986,521 14,076,205 8,922,544
Industrial Development Revenue Bond . . . . . . . . . . 2,475,000 2,655,000 2,520,000
Long-term debt . . . . . . . . . . . . . . . . . . . . 7,959,193 9,559,237 10,263,498
Deferred income taxes . . . . . . . . . . . . . . . . . 1,132,095 991,640 1,075,945
Commitments
Shareholders' equity:
Preferred stock, $1 par value; authorized shares,
500,000; issued and outstanding shares, none . .
Common stock, $.50 par value, authorized shares,
10,000,000; issued and outstanding shares,
4,844,159, 4,838,445 and 4,838,445, respectively 2,422,080 2,419,223 2,419,223
Capital in excess of par value . . . . . . . . . . . 6,402,428 6,365,287 6,365,287
Retained earnings . . . . . . . . . . . . . . . . . 29,469,454 26,862,932 28,774,288
38,293,962 35,647,442 37,558,798
$ 64,846,771 $ 62,929,524 $ 60,340,785
</TABLE>
See notes to financial statements.
<PAGE>
S & K FAMOUS BRANDS, INC.
Statements of Cash Flows
Increase (Decrease) in Cash
(unaudited)
<TABLE>
Three Months Ended
April 29, April 30,
1995 1994
As restated
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 695,166 $ 438,510
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization . . . . . . . . . . . . 633,771 552,729
Loss on property dispositions, net . . . . . . . . . 5,375 31,808
Other . . . . . . . . . . . . . . . . . . . . . . . . 30,694 28,420
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . (128,097) (70,107)
Inventories . . . . . . . . . . . . . . . . . . . (5,046,466) (6,108,916)
Other current assets . . . . . . . . . . . . . . . 67,820 (281,008)
Other assets . . . . . . . . . . . . . . . . . . . (123,667) (124,189)
Accounts payable and accrued expenses . . . . . . 6,291,189 7,121,266
Income taxes and deferred income taxes . . . . . . (131,064) (258,981)
Net cash provided by operating activities . . . . . . . 2,294,721 1,329,532
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . (181,897) (601,134)
Proceeds from property dispositions . . . . . . . . . . 0 2,000
Net cash used for investing activities . . . . . . . . . (181,897) (599,134)
Cash flows from financing activities:
Net borrowings under revolving bank lines of credit . . (2,334,999) (932,000)
Proceeds from exercise of stock options . . . . . . . . 0 95,438
Reduction of long-term debt . . . . . . . . . . . . . . (45,000) (45,000)
Net cash used for financing activities . . . . . . . . . (2,379,999) (881,562)
Net decrease in cash . . . . . . . . . . . . . . . . . . . (267,175) (151,164)
Cash at beginning of period . . . . . . . . . . . . . . . . 584,887 404,926
Cash at end of period . . . . . . . . . . . . . . . . . . . $ 317,712 $ 253,762
Supplemental cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . $ 191,500 $ 130,300
Income taxes . . . . . . . . . . . . . . . . . . . . 560,500 560,700
</TABLE>
See notes to financial statements.
<PAGE>
S & K FAMOUS BRANDS, INC.
Notes to Financial Statements
A. Accounting Policies
The accompanying unaudited interim financial statements have been
prepared by the Company in accordance with the regulations of the
Securities and Exchange Commission in regard to quarterly reporting. In the
opinion of the Company, the statements include all adjustments,
consisting only of normal recurring adjustments, which are necessary for
a fair representation of the financial position and results of operations
for interim periods.
B. Interim Results of Operations
The Company's business is highly seasonal, with peak sales periods
occurring during its fourth fiscal quarter which includes the Christmas
season. The net earnings of any interim quarter are seasonally
disproportionate to net sales since administrative and certain operating
expenses remain relatively constant during the year. Consequently, interim
results should not be considered necessarily indicative of the results for the
entire fiscal year.
C. Accounting Change
During the first quarter of fiscal 1996, the Company changed its method
of determining the cost of the majority of its inventories to the average
cost method. The Company had previously determined the cost of the majority
of its inventories using the last-in, first-out retail inventory method. Under
the retail LIFO inventory method, the Company has experienced no significant
inflation in retail prices in recent years. At the same time, the Company
had experienced cost reductions for certain goods as a result of volume and
inventory sourcing efficiencies. Using the average cost method, the Company
will track inventory costs for approximately 130 inventory categories which
are used to classify the Company's inventory. Management believes that
reporting inventories using the average cost method will result in better
matching of revenues and costs and reporting on a basis more consistent with
other companies in its industry.
The change in the method of valuing inventories has been applied
retroactively and the affect on net income per share as previously reported is
as follows:
Decrease In
Fiscal 1995 Quarter Ended
(unaudited)
April July October January
Net income . . . . . . . . . . $43,530 $43,709 $47,865 $63,036
Net income per share . . . . . $.01 $.01 $.01 $.01
Decrease In
Years Ended January
1995 1994
Net income . . . . . . . . . . $198,140 $404,301
Net income per share . . . . . $.04 $.09
The balances of retained earnings for fiscal 1995 and 1994 have been adjusted
for the affect (net of income taxes) of applying retroactively the new method of
accounting.
<PAGE>
Notes to Financial Statements (continued)
D. Expansion
Since the beginning of the year the Company has opened one new 3,285
square foot store in Durham, North Carolina on March 29, 1995. The Company
also closed its 3,000 square foot Azalea Mall store in Richmond, Virginia in
late March since it had not met the Company's sales and earnings expectations.
E. Stock Purchase Loan Plan
On May 25, 1995, the shareholders approved the Company's Stock Purchase
Loan Plan. Under this Plan, the Company issued 214,275 shares of stock
to seventeen Company officers and has loans with these officers approximating
$1.5 million.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
Three Months Ended April 29, 1995, Compared to Three Months Ended April 30, 1994
RESULTS OF OPERATIONS
The following table sets forth certain items in the Statements of
Income as a percentage of net sales for the three months ended April 29, 1995
and April 30, 1994.
Percentage of Net Sales
Three Months Ended
Restated
4/29/95 4/30/94
Net sales . . . . . . . . . . . . . . . . 100.0% 100.0%
Cost of sales . . . . . . . . . . . . . . 55.2 56.7
Gross profit . . . . . . . . . . . . . . . 44.8 43.3
Other costs and expenses:
Selling, general and administrative . . 38.6 38.0
Interest . . . . . . . . . . . . . . . .7 .5
Depreciation and amortization . . . . . 1.8 1.9
Other, net . . . . . . . . . . . . . . . (.2) - -
Income before income taxes . . . . . . . . 3.9 2.9
Provision for income taxes . . . . . . . 1.5 1.1
Net income . . . . . . . . . . . . . . . . 2.4% 1.8%
Net sales in the first quarter of fiscal 1996 increased 16.4%, or $4.1
million, over the same period last year, and reflects the net addition of 15
new stores. Comparable store sales were up approximately 9%. The sales
increases were attributable to strong performance in suits and an increased
marketing campaign. The Company has opened one store since the beginning of
fiscal 1996 while also closing a store in late March. There were 172 stores in
operation as of April 29,1995, compared to 157 stores at April 30, 1994.
Cost of sales in the first quarter of fiscal 1996 decreased to 55.2%
of net sales from 56.7% of net sales for the same period last year and was
primarily the result of decreased markdowns, and to a lesser degree, improved
initial markup on inventory purchased.
Selling, general and administrative expenses in the first quarter of
fiscal 1996 were 38.6% of net sales compared to 38.0% of net sales for
the first quarter of fiscal 1995. This increase was primarily
attributable to planned higher advertising costs initiated to increase
market share offset by, to a lesser degree, the leveraging of fixed overhead and
rent costs against 16.4% higher sales.
Interest expense was .7% of net sales in the first quarter of fiscal 1996
compared with .5% of net sales last year. Although average borrowing
levels for the period decreased approximately 15% from last year's levels,
increases in interest rates more than offset this improvement.
Other, net consisted of other income of approximately $70,000 in
the first quarter of fiscal 1996 compared to approximated $15,000 last year.
Last year's amount was net of the cost of assets written-off with a store
closing.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operating activities, including capital
expenditures for the opening of new stores, from internally generated funds
and from bank borrowings. The Company plans to open a number of new stores in
fiscal 1996, while also remodeling several others. The Company believes
that its sources of liquidity and capital resources will continue to be
sufficient to fund its operations.
Operating activities provided net cash of $2.3 million and $1.3
million during the first quarters of fiscal 1996 and 1995 periods, respectively.
Net cash used in investing activities in fiscal 1996 was for the
purpose of store expansion, while fiscal 1995 activities also included
both enhancements to the Distribution Center and the remodeling of several
stores. Capital expenditures for the first quarter of fiscal 1996 and 1995
approximated $182,000 and $601,000, respectively. The Company opened one new
store in the first quarter of fiscal 1996 compared with four new stores last
year.
Financing activities used net cash of approximately $2.4 million and $.9
million in the first quarter of fiscal 1996 and 1995, respectively.
Financing activities primarily relate to fluctuations in the borrowing levels
under the Company's revolving credit agreements. The Company's revolving
credit agreements with two banks aggregate $23.0 million. As of April
29, 1995, the Company had net unused commitments of approximately $14.8
million under the agreements.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the Company's shareholders was held on
May 25, 1995.
(b) At the annual meeting, the shareholders elected seven directors
and approved the Company's Stock Purchase Loan Plan. The
results of the voting were as follows:
Election of Directors
Director For Withheld Abstain
Stuart C. Siegel 4,360,654 20,389 0
Robert L. Burrus, Jr. 4,361,154 19,889 0
Donald W. Colbert 4,361,354 19,689 0
Selwyn S. Herson 4,361,554 19,489 0
Andrew M. Lewis 4,358,904 22,139 0
Richard L. Sharp 4,362,254 18,789 0
Marshall B. Wishnack 4,361,754 19,288 0
Approval of the Stock Purchase Loan Plan
For Against Abstain
3,278,298 191,289 17,244
Ratification of Price Waterhouse LLP as Independent Accountants
For Against Abstain
4,363,200 11,929 5,914
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Index to Exhibits
(b) There were no reports filed on Form 8-K during the three months
ended April 29, 1995.
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.
S & K FAMOUS BRANDS, INC.
(Registrant)
Date: June 7, 1995 /s/ Robert E. Knowles
Robert E. Knowles
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: June 7, 1995 /s/ Janet L. Jorgensen
Janet L. Jorgensen
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
(10) Material Contracts
a. Stock Purchase Loan Plan filed as Exhibit A to the
registrant's definitive proxy statement for the Annual Meeting of
Shareholders held on May 25, 1995 (File No. 0-11682) is
incorporated herein by this reference.
(18) Preferability Letter of Independent Accountants
(27) Financial Data Schedule
Exhibit 18
May 18, 1995
To the Board of Directors
of S&K Famous Brands, Inc.
Dear Directors:
We have been furnished with a copy of the Company's Form 10-Q for the quarter
ended April 29, 1995. Note C therein describes a change in the method of
determining the cost of inventories from the last-in, first-out method to the
average cost method. It should be understood that the preferability of one
acceptable method of inventory accounting over another has not been addressed
in any authoritative accounting literature and in arriving at our opinion
expressed below, we have relied on management's business planning and
judgment. Based upon our discussions with management and the stated reasons for
the change, we believe that such change represents, in your circumstances,
the adoption of a preferable alternative accounting principle for
inventories in conformity with Accounting Principles Board Opinion No. 20.
We have not made an audit in accordance with generally accepted
auditing standards of the financial statements of S&K Famous Brands, Inc. for
the three-month period ended April 29, 1995 or April 30, 1994 and, accordingly,
we express no opinion thereon or on the financial information filed as part of
the Form 10-Q of which this letter is to be an exhibit.
Price Waterhouse LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> JAN-29-1995
<PERIOD-END> APR-29-1995
<CASH> 317,712
<SECURITIES> 0
<RECEIVABLES> 448,296
<ALLOWANCES> 0
<INVENTORY> 45,443,902
<CURRENT-ASSETS> 48,405,895
<PP&E> 25,907,201
<DEPRECIATION> 11,565,305
<TOTAL-ASSETS> 64,846,771
<CURRENT-LIABILITIES> 14,986,521
<BONDS> 0
<COMMON> 2,422,080
0
0
<OTHER-SE> 35,871,882
<TOTAL-LIABILITY-AND-EQUITY> 64,846,771
<SALES> 28,746,079
<TOTAL-REVENUES> 28,746,079
<CGS> 15,854,622
<TOTAL-COSTS> 15,854,622
<OTHER-EXPENSES> 11,567,206
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 202,985
<INCOME-PRETAX> 1,121,266
<INCOME-TAX> 426,100
<INCOME-CONTINUING> 695,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 695,166
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
