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 July 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 Identification No.)
incorporation or organization)
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 July 29, 1995.
5,058,434 shares of Common Stock, $0.50 par value
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
S & K FAMOUS BRANDS, INC.
Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 29, 1995 July 30, 1994 July 29, 1995 July 30, 1994
As restated As restated
<S> <C> <C> <C> <C>
Net income $27,267,166 $24,821,547 $56,013,245 $49,509,980
Cost of sales 15,121,826 14,153,702 30,976,448 28,139,764
Gross profit 12,145,340 10,667,845 25,036,797 21,370,216
Other costs and expenses:
Selling, general and administrative 10,732,685 9,744,506 21,836,101 19,140,522
Interest 200,158 166,208 403,143 303,225
Depreciation and amortization 536,545 499,075 1,069,914 972,076
Other, net (27,227) (113,813) (96,806) (128,485)
Income before income taxes 703,179 371,869 1,824,445 1,082,878
267,200 138,800 693,300 411,300
Provision for income taxes
Net income $435,979 $233,069 $1,131,145 $671,578
Net income per common share $0.09 $0.05 $0.23 $0.14
Weighted average common shares 4,999,567 4,838,445 4,920,011 4,831,841
</TABLE>
See notes to financial statements.
<PAGE>
S & K FAMOUS BRANDS, INC.
Balance Sheets
<TABLE>
<CAPTION>
As restated
July 29, 1995 July 30, 1994 January 28, 1995
(unaudited) (unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash . . . . . . . . . . . . . $ 189,795 $ 214,003 $ 584,887
Accounts receivable . . . . . . 395,718 461,897 320,199
Merchandise inventories . . . . 40,470,045 40,690,558 40,397,436
Other current assets . . . . . 2,196,701 2,226,107 2,263,805
Total current assets . . . . 43,252,259 43,592,565 43,566,327
Property and equipment, at cost:
Land and corporate facility . . 5,125,041 5,121,909 5,130,826
Furniture, fixtures and equipment 10,547,041 9,976,654 10,415,365
Leasehold improvements . . . . 10,317,364 9,437,996 10,227,203
25,989,446 24,536,559 25,773,394
Less: Accumulated depreciation and
amortization . . . . . . . 12,041,811 10,126,863 10,974,249
13,947,635 14,409,696 14,799,145
Other assets . . . . . . . . . . 2,170,714 1,759,453 1,975,313
$ 59,370,608 $ 59,761,714 $ 60,340,785
Liabilities and Shareholders' Equity
Current liabilities: $ 180,000 $ 180,000 $ 180,000
Current maturities of long-term debt
Accounts payable . . . . . . . 3,925,983 5,729,363 5,632,133
Accrued expenses:
Compensation-related items . 853,276 786,515 980,365
Current and deferred income taxes 317,062 415,377 1,120,887
Other current liabilities . . 1,093,513 1,004,962 1,009,159
Total current liabilities . 6,369,834 8,116,217 8,922,544
Industrial Development Revenue Bond 2,430,000 2,610,000 2,520,000
Long-term debt . . . . . . . . . 10,707,887 12,154,658 10,263,498
Deferred income taxes . . . . . . 1,118,270 1,000,329 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 2,529,217 2,419,223 2,419,223
outstanding shares, 5,058,434,
4,838,445 and 4,838,445, respectively
Capital in excess of par value 7,795,215 6,365,287 6,365,287
Notes receivable--Stock Purchase Loan
Plan (1,485,248) 0 0
Retained earnings . . . . . . . 29,905,433 27,096,000 28,774,288
38,744,617 35,880,510 37,558,798
$ 59,370,608 $ 59,761,714 $ 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>
<CAPTION>
Six Months Ended
July 29, 1995 July 30, 1994
As restated
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . $ 1,131,145 $ 671,578
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization . . 1,266,269 1,128,418
Loss on property dispositions, (net) 45,548 52,762
Other . . . . . . . . . . . . . . 61,389 56,841
Changes in assets and liabilities:
Accounts receivable . . . . . (75,519) (17,597)
Inventories . . . . . . . . . (72,609) (2,095,747)
Other current assets . . . . . 67,104 (558,474)
Other assets . . . . . . . . . (195,401) (219,973)
Accounts payable and accrued expenses (1,694,211) 1,668,866
Income taxes and deferred income taxes (761,500) (757,881)
Net cash used for operating activities (227,785) (71,207)
Cash flows from investing activities:
Capital expenditures . . . . . . (464,357) (1,762,155)
Proceeds from property dispositions 4,050 2,000
Net cash used for investing activities (460,307) (1,760,155)
Cash flows from financing activities: 383,000 1,635,001
Net borrowings under revolving bank lines of credit 0 95,438
Proceeds from exercise of stock options
Reduction of long-term debt . . . (90,000) (90,000)
Net cash provided by financing activities 293,000 1,640,439
Net decrease in cash . . . . . . . . (395,092) (190,923)
Cash at beginning of period . . . . . 584,887 404,926
Cash at end of period . . . . . . . . $ 189,795 $ 214,003
Supplemental cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . $ 401,700 $ 285,300
Income taxes . . . . . . . . . . 1,458,100 1,171,600
</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 (LIFO) retail
inventory method. Under the retail LIFO inventory method, the Company had
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 effect 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 effect (net of income taxes) of applying retroactively the
new method of accounting.
D. Expansion
During the second quarter, the Company opened one new 17,700 square
foot Menswear Mega Center in the Washington, D.C., market (New Carrollton,
Maryland) on June 22, 1995. The Company closed a 3,880 square foot store
in Moline, Illinois, and a 3,715 square foot store in Davenport, Iowa, in
late July since both stores 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.
Item 2. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
Three Months and Six Months Ended July 29, 1995, Compared to Three Months
and Six Months Ended July 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 and six months
ended July 29, 1995 and July 30, 1994.
Percentage of Net Sales
Three Months Ended Six Months Ended
7/29/95 7/30/94 7/29/95 7/30/94
Net sales . . . . . . . . . . 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales . . . . . . . 55.4 57.0 55.3 56.8
Gross profit . . . . . . . . 44.6 43.0 44.7 43.2
Other costs and expenses:
Selling, general and
administrative . . . . . 39.4 39.3 39.0 38.7
Interest . . . . . . . . .7 .7 .7 .6
Depreciation and amortization 2.0 2.0 1.9 2.0
Other, net . . . . . . . (.1) (.5) (.1) (.3)
Income before incomes taxes 2.6 1.5 3.2 2.2
Provision for income taxes 1.0 .6 1.2 .8
Net income . . . . . . . . 1.6 % .9 % 2.0 % 1.4 %
Net sales in the second quarter increased by 9.9%, or $2.4 million,
over the same period last year, and reflects the net addition of 11 new
stores since July 30, 1994. Comparable store sales were up 3%. For the
six-month period, net sales increased by 13.1% or $6.5 million over the
same period last year with comparable stores sales up 6%. These sales
increases were attributable to strong performance in suits and to an
aggressive marketing campaign. During the quarter ended July 29, 1995, the
Company opened one new Menswear Mega Center in late June and closed two S&K
stores in late July. There were 171 stores in operation as of July 29,
1995, compared to 160 stores at July 30, 1994.
Cost of sales in the second quarter of fiscal 1996 was 55.4% of net
sales compared to 57.0% of net sales for the same period last year. For
the six-month period, cost of sales was 55.3% of net sales compared to
56.8% last year. These cost reductions were the result of reduced
markdowns associated with the clearance of seasonal merchandise and
improved initial markup on new inventory purchases.
Selling, general and administrative expenses in the second quarter of
fiscal 1996 were 39.4% of net sales compared to 39.3% of net sales for the
second quarter of fiscal 1995. For the six-month period, selling,
general and administrative expenses were 39.0% of net sales compared to
38.7% of net sales last year. These increases were primarily attributable
to higher planned advertising costs initiated to increase market share,
offset by, to a lesser degree, the leveraging of fixed overhead on higher
sales.
Interest expense was .7% of net sales in the second quarter of both
fiscal 1996 and 1995. For the six-month period, interest expense was .7%
of net sales compared to .6% of net sales last year. Although average
borrowing levels for the periods decreased 8% from the same periods last
year, increases in interest rates offset the improvement.
Other, net in the second quarter of fiscal 1996 consisted of other
income of .1% of net sales compared to .5% of net sales for the same period
last year. On a year to date basis, other income was .1% of sales compared
to .3% last year. These decreases are primarily attributable to an insured
loss last year in which claim proceeds exceeded the net book value of the
Company's assets.
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. Through the first six months of fiscal 1996 the
Company opened two new stores and remodeled two others. By Thanksgiving
1995, the Company plans to open a number of new stores and remodel several
others. The Company believes that its sources of liquidity and capital
resources will continue to be sufficient to fund its operations.
Operating activities used net cash of approximately $.2 million and $.1
million during the first six months of fiscal 1996 and 1995, respectively.
Excluding the effects of changes in working capital, net cash provided by
operating activities in the first six months was $2.5 million this year
compared to $1.9 million last year.
Net cash used in investing activities in fiscal 1996 and fiscal 1995
was for the purpose of store expansion and remodelings; additionally fiscal
1995 included enhancements to the Distribution Center. Capital
expenditures for the first six months of fiscal 1996 and 1995 approximated
$.5 million and $1.8 million, respectively, of which in fiscal 1995
approximately $.4 million related to the Distribution Center. In the first
six months of fiscal 1996, the Company opened two new stores (including one
Menswear Mega Center) and remodeled two other stores. For the same period
last year the Company opened seven new stores, relocated one, and remodeled
one.
Financing activities provided net cash of approximately $.3 million in
the first six months of fiscal 1996 compared with $1.6 million in the same
period in fiscal 1995. This decrease is primarily due to a $1.3 million
reduction in the increases in year over year borrowing levels under the
Company's revolving credit agreements. The Company's revolving credit
agreements with two banks aggregate $23.0 million. As of July 29, 1995,
the Company had net unused commitments of approximately $13.1 million under
the agreements.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) There were no reports filed on Form 8-K during the three
months ended July 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: September 5, 1995 /s/ Robert E. Knowles
Robert E. Knowles
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: September 5, 1995 /s/ Janet L. Jorgensen
Janet L. Jorgensen
Vice President and Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> JAN-29-1995
<PERIOD-END> JUL-29-1995
<CASH> 189,795
<SECURITIES> 0
<RECEIVABLES> 395,718
<ALLOWANCES> 0
<INVENTORY> 40,470,045
<CURRENT-ASSETS> 43,252,259
<PP&E> 25,989,446
<DEPRECIATION> 12,041,811
<TOTAL-ASSETS> 59,370,608
<CURRENT-LIABILITIES> 6,369,834
<BONDS> 0
<COMMON> 2,529,217
0
0
<OTHER-SE> 36,215,400
<TOTAL-LIABILITY-AND-EQUITY> 59,370,608
<SALES> 56,013,245
<TOTAL-REVENUES> 56,013,245
<CGS> 30,976,448
<TOTAL-COSTS> 30,976,448
<OTHER-EXPENSES> 22,809,209
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 403,143
<INCOME-PRETAX> 1,824,445
<INCOME-TAX> 693,300
<INCOME-CONTINUING> 1,131,145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,131,145
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
