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 27, 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 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 April 27, 1996.
5,066,371 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
April 27, April 29,
1996 1995
---- ----
<S> <C>
Net income..................................................... $ 31,448,524 $ 28,746,079
Cost of sales ................................................. 17,049,746 15,854,622
-------------- --------------
Gross profit .................................................. 14,398,778 12,891,457
Other costs and expenses:
Selling, general and administrative ........................ 12,287,874 11,103,416
Interest 128,058 202,985
Depreciation and amortization .............................. 564,416 533,369
Other, net ................................................. (55,723) (69,579)
--------------- --------------
Income before income taxes .................................... 1,474,153 1,121,266
Provision for income taxes .................................... 560,200 426,100
--------------- --------------
Net income .................................................... $ 913,953 $ 695,166
============== ==============
Net income per common share ................................... $ 0.18 $ 0.14
============== ==============
Weighted average common shares outstanding .................... 5,062,969 4,840,454
============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
S & K FAMOUS BRANDS, INC.
Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
April 27, April 29, January 27,
1996 1995 1996
--------- --------- -----------
<S> <C>
Assets
Current assets:
Cash ................................................... $ 120,202 $ 317,712 $ 520,005
Accounts receivable...................................... 1,011,738 448,296 609,194
Merchandise inventories.................................. 46,428,610 45,443,902 39,701,702
Other current assets..................................... 2,322,112 2,195,985 2,299,519
-------------- -------------- --------------
Total current assets.................................. 49,882,662 48,405,895 43,130,420
Property and equipment, at cost:
Land and corporate facility.............................. 5,125,041 5,130,826 5,125,041
Furniture, fixtures and equipment ....................... 10,990,633 10,489,624 10,934,539
Leasehold improvements................................... 11,875,562 10,286,751 11,651,414
-------------- -------------- --------------
27,991,236 25,907,201 27,710,994
Less: Accumulated depreciation and amortization.......... 13,143,371 11,565,305 12,619,333
-------------- -------------- --------------
14,847,865 14,341,896 15,091,661
Other assets ................................................ 2,475,015 2,098,980 2,376,115
-------------- -------------- --------------
$ 67,205,542 $ 64,846,771 $ 60,598,196
============== ============== ==============
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt .................... $ 180,000 $ 180,000 $ 180,000
Accounts payable ........................................ 12,203,133 11,973,224 6,360,399
Accrued expenses:
Compensation-related items............................ 1,089,932 640,499 1,273,585
Current and deferred income taxes..................... 1,026,799 933,673 1,010,152
Other current liabilities............................. 1,524,544 1,259,125 1,260,258
-------------- -------------- --------------
Total current liabilities.......................... 16,024,408 14,986,521 10,084,394
Industrial Development Revenue Bond.......................... 2,295,000 2,475,000 2,340,000
Long-term debt............................................... 6,327,425 7,959,193 6,601,276
Deferred income taxes........................................ 1,214,325 1,132,095 1,200,811
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, 5,066,371
4,844,159 and 5,058,434, respectively................. 2,533,185 2,422,080 2,529,217
Capital in excess of par value........................... 7,836,571 6,402,428 7,795,215
Notes receivable--Stock Purchase Loan Plan .............. (1,445,072) 0 (1,458,464)
Retained earnings........................................ 32,419,700 29,469,454 31,505,747
-------------- -------------- --------------
41,344,384 38,293,962 40,371,715
============== ============== ==============
$ 67,205,542 $ 64,846,771 $ 60,598,196
============== ============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
S & K FAMOUS BRANDS, INC.
Statements of Cash Flows
Increase (Decrease) in Cash
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 27, April 29,
1996 1995
--------- ---------
<S> <C>
Cash flows from operating activities:
Net income.................................. $ 913,953 $ 695,166
Adjustments to reconcile net income to net
cash provided by (used for) operating
activities:
Depreciation and amortization............ 668,080 633,771
Loss on property dispositions, net ...... 8,251 5,375
Other 33,149 30,694
Changes in assets and liabilities:
Accounts receivable................... (402,544) (128,097)
Inventories........................... (6,726,908) (5,046,466)
Other current assets.................. (22,593) 67,820
Other assets.......................... (98,900) (123,667)
Accounts payable and accrued
expenses.............................. 5,982,083 6,291,189
Income taxes and deferred income
taxes................................. 30,161 (131,064)
------------- ------------
Net cash provided by operating activities 384,732 2,294,721
Cash flows from investing activities:
Capital expenditures........................ (432,535) (181,897)
Proceeds from property dispositions......... 0 0
------------- ------------
Net cash used for investing activities...... (432,535) (181,897)
------------- ------------
Cash flows from financing activities:
Net paydowns under revolving bank lines (307,000) (2,334,999)
of credit
Reduction of long-term debt................. (45,000) (45,000)
------------- ------------
Net cash used for financing activities...... (352,000) (2,379,999)
------------- ------------
Net decrease in cash (399,803) (267,175)
Cash at beginning of period...................................... 520,005 584,887
------------- ------------
Cash at end of period............................................ $ 120,202 $ 317,712
============ ============
Supplemental cash flow information:
Cash paid during the period for:
Interest................................. $ 124,000 $ 191,500
Income taxes............................. 534,000 560,500
</TABLE>
See notes to financial statements.
<PAGE>
S & K FAMOUS BRANDS, INC.
Notes to Financial Statements
(unaudited)
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. Expansion
Since the beginning of the year the Company has opened four new stores
totaling 19,550 square feet.
<TABLE>
S & K Store Locations Date Opened Square Footage
--------------------------------- --------------------------- --------------------------
<S> <C>
Michigan: Walker April 20, 1996 4,400
Ohio: Columbus April 16, 1996 5,350
Pennsylvania: Harrisburg April 29, 1996 4,400
Tennessee: Brentwood April 20, 1996 5,400
</TABLE>
The Company also converted the existing Columbus, Ohio store (Newmarket
Mall) into a superstore, adding 3,200 square feet.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
Three Months Ended April 27, 1996, Compared to Three Months Ended April 29, 1995
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 27, 1996 and April
29, 1995.
Percentage of Net Sales
Three Months Ended
--------------------------------
4/27/96 4/29/95
Net sales ................................... 100.0% 100.0%
Cost of sales ............................... 54.2 55.2
----- -----
Gross profit ................................ 45.8 44.8
Other costs and expenses:
Selling, general and administrative ...... 39.1 38.6
Interest ................................. .4 .7
Depreciation and amortization ............. 1.8 1.8
Other, net ................................ (.2) (.2)
----- -----
Income before income taxes .................. 4.7 3.9
Provision for income taxes ................. 1.8 1.5
----- -----
Net income .................................. 2.9% 2.4%
===== =====
Net sales in the first quarter of fiscal 1997 increased 9.4%, or $2.7
million, over the same period last year, and reflects the net addition of 12 new
stores. Comparable store sales were up approximately 3%. These increases were
primarily attributable to strong sales in the suit and sportcoat categories.
During the first quarter the Company opened three stores and converted one
existing store to its larger superstore format. There were 184 stores in
operation as of April 27,1996, compared to 172 stores at April 29, 1995.
Cost of sales in the first quarter of fiscal 1997 decreased by 1.0% of net
sales to 54.2% of net sales from 55.2% of net sales for the same period last
year. This decrease was primarily the result of improved initial markup on
inventory purchased and, to a lesser degree, increased capitalization of buying
and occupancy costs to inventory due to increased growth in quarter over quarter
inventory levels.
Selling, general and administrative expenses in the first quarter of
fiscal 1997 were 39.1% of net sales compared to 38.6% of net sales in the
previous year. This .5% of net sales increase was primarily attributable to
this quarter's level of medical claims compared to last year under the Company's
group health plan.
Interest expense was .4% of net sales in the first quarter of fiscal 1997
compared with .7% of net sales last year. This .3% of net sales improvement is
primarily attributable to reductions in average borrowing levels from $8.9
million in fiscal 1996 to $5.9 million this year.
<PAGE>
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 three months of fiscal 1997, the Company
opened three new S & K stores and converted an existing store to its superstore
format. The Company plans to open a number of new stores in fiscal 1997, 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 $.4 million and $2.3 million
during the first quarters of fiscal 1997 and 1996 periods, respectively. This
decrease is primarily due to increased inventory levels this year versus last
year as a result of twelve net new stores as well as an increased number of
superstores carrying higher inventory levels.
Net cash used in investing activities is primarily for the purpose of
store openings and remodelings. Capital expenditures for the first quarter of
fiscal 1997 and 1996 approximated $.4 million and $.2 million, respectively. The
Company opened three new stores and remodeled another in the first quarter of
fiscal 1997 compared with opening one new store last year.
Financing activities used net cash of approximately $.4 million and $2.4
million in the first quarter of fiscal 1997 and 1996, 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 $24.0 million. As of April 27, 1996, the Company had
net unused commitments of approximately $18.6 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 30, 1996.
(b) & (c) At the annual meeting, the shareholders elected eight directors and
ratified the selection of independent accountants. The results of the voting
were as follows:
Election of Directors
Director For Withheld Abstain
---------------------------- ------------- -------- -------
Stuart C. Siegel 4,746,777 12,805 0
Robert L. Burrus, Jr. 4,746,388 13,194 0
Donald W. Colbert 4,746,777 12,805 0
Selwyn S. Herson 4,744,382 15,200 0
Andrew M. Lewis 4,745,777 13,805 0
Steven A. Markel 4,747,582 12,000 0
Troy A. Peery 4,745,282 14,300 0
Marshall B. Wishnack 4,747,282 12,300 0
Ratification of Price Waterhouse LLP as Independent Accountants
For Against Abstain
4,754,262 4,150 1,170
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 April 27, 1996
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: May 30, 1996 /s/ Robert E. Knowles
---------------------
Robert E. Knowles
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: May 30, 1996 /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> 3-MOS
<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-START> JAN-28-1996
<PERIOD-END> APR-27-1996
<CASH> 120,202
<SECURITIES> 0
<RECEIVABLES> 1,011,738
<ALLOWANCES> 0
<INVENTORY> 46,428,610
<CURRENT-ASSETS> 49,882,662
<PP&E> 27,991,236
<DEPRECIATION> 13,143,371
<TOTAL-ASSETS> 67,205,542
<CURRENT-LIABILITIES> 16,024,408
<BONDS> 0
<COMMON> 2,533,185
0
0
<OTHER-SE> 38,811,199
<TOTAL-LIABILITY-AND-EQUITY> 67,205,542
<SALES> 31,448,524
<TOTAL-REVENUES> 31,448,524
<CGS> 17,049,746
<TOTAL-COSTS> 17,049,746
<OTHER-EXPENSES> 12,796,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,058
<INCOME-PRETAX> 1,474,153
<INCOME-TAX> 560,200
<INCOME-CONTINUING> 913,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 913,953
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
