<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 2000
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
.....................
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, 2000.
4,612,560 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
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
April 29, May 1,
2000 1999
--------- --------
<S> <C> <C>
Net sales............................... $ 41,350 $ 39,799
Cost of sales........................... 20,621 20,512
-------- --------
Gross profit............................ 20,729 19,287
Other costs and expenses:
Selling, general and administrative.... 17,570 16,049
Interest............................... 143 215
Depreciation and amortization.......... 783 729
Other income, net...................... (72) (4)
-------- --------
Income before income taxes.............. 2,305 2,298
Provision for income taxes.............. 876 873
-------- --------
Net income.............................. $ 1,429 $ 1,425
======== ========
Earnings per common share :
Basic.................................. $ 0.31 $ 0.30
======== ========
Diluted................................ $ 0.31 $ 0.30
======== ========
Weighted average common shares
outstanding - basic................. 4,624 4,779
======== ========
Wtd average common shares outstanding
including dilutive potential common
shares.............................. 4,626 4,800
======== ========
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
S & K FAMOUS BRANDS, INC.
Balance Sheets
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
------------- -------------- --------------
April 29, May 1, January 29,
2000 1999 2000
------------- -------------- -------------
<S> <C> <C> <C>
Assets
Current assets:
Cash....................................................... $ 444 $ 430 $ 619
Accounts receivable........................................ 461 261 420
Merchandise inventories.................................... 58,269 61,122 51,538
Other current assets....................................... 2,867 3,224 2,740
----------- ------------ ------------
Total current assets..................................... 62,041 65,037 55,317
Property and equipment, at cost:
Land and buildings......................................... 6,598 7,229 6,598
Furniture, fixtures and equipment.......................... 15,160 14,872 14,754
Leasehold improvements..................................... 16,736 16,138 16,718
------------- -------------- -------------
38,494 38,239 38,070
Less: Accumulated depreciation and amortization........... 19,074 18,111 18,463
------------- -------------- -------------
19,420 20,128 19,607
Other assets................................................ 5,117 4,252 4,904
------------- -------------- -------------
$ 86,578 $ 89,417 $ 79,828
============= ============== =============
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt....................... $ 180 $ 180 $ 180
Accounts payable........................................... 15,359 10,823 7,534
Accrued expenses:
Compensation-related items............................... 1,632 1,662 1,054
Other current liabilities................................ 1,978 1,778 1,917
Current and deferred income taxes.......................... 696 775 962
------------- -------------- -------------
Total current liabilities............................... 19,845 15,218 11,647
Industrial Development Revenue Bond......................... 1,575 1,755 1,620
Long-term debt.............................................. 5,614 16,780 8,219
Other long-term liabilities................................. 1,417 1,326 1,393
Deferred income taxes....................................... 1,672 1,650 1,646
Commitments
Shareholders' equity:
Preferred stock, $1 par value; authorized shares, 500;
issued and outstanding shares, none......................
Common stock, $.50 par value, authorized shares,
10,000; issued and outstanding shares, 4,613,
4,773 and 4,656, respectively............................. 2,306 2,387 2,328
Capital in excess of par value............................. 3,669 4,893 3,950
Notes receivable--Stock Purchase Loan Plan................. (2,431) (2,599) (2,457)
Retained earnings.......................................... 52,911 48,007 51,482
------------- -------------- -------------
56,455 52,688 55,303
------------- -------------- -------------
$ 86,578 $ 89,417 $ 79,828
------------- -------------- -------------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
S & K FAMOUS BRANDS, INC.
Statements of Cash Flows
Increase (Decrease) in Cash
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
--------------------------------------------
Three Months Ended
--------------------------------------------
April 29, May 1,
2000 1999
---------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 1,429 $ 1,425
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization...................... 885 836
Loss on property dispositions, net................. 0 55
Other.............................................. 24 16
Changes in assets and liabilities:
Accounts receivable............................. (41) 601
Merchandise inventories......................... (6,731) (10,343)
Other current assets............................ (127) 62
Other assets.................................... (213) (143)
Accounts payable and accrued expenses........... 8,549 4,716
Current and deferred income taxes............... (239) 182
---------------- -----------------
Net cash provided by (used for) operating activities.... 3,536 (2,593)
---------------- -----------------
Cash flows from investing activities:
Capital expenditures.................................... (698) (1,306)
---------------- -----------------
Cash flows from financing activities:
Net (paydowns) borrowings of long-term debt............. (2,605) 6,383
Repurchase of common stock.............................. (363) (2,556)
Reduction of Industrial Development Revenue Bond........ (45) (45)
---------------- -----------------
Net cash (used for) provided by financing activities.... (3,013) 3,782
---------------- -----------------
Net decrease in cash..................................... (175) (117)
Cash at beginning of period.............................. 619 547
---------------- -----------------
Cash at end of period.................................... $ 444 $ 430
=============== ==================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest............. $ 153 $ 212
Cash paid during the year for income taxes......... 1,120 690
Non-cash financing activity - notes receivable..... 0 1,500
</TABLE>
See Notes to Financial Statements.
4
<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. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's 1999 annual report and Form 10-K.
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 January 29, 2000, the Company has opened three new stores totaling
11,936 square feet.
<TABLE>
<CAPTION>
S & K Store Locations Date Opened Square Footage
- ------------------------- --------------- ------------------
<S> <C> <C>
Louisiana: Alexandria April 15, 2000 4,109
North Carolina: Garner March 21, 2000 4,200
Tennessee: Nashville* May 11, 2000 3,627
</TABLE>
* Store opened in the second quarter.
Since the beginning of the year, the Company has closed two locations-the one
relocated in Alexandria, Louisiana in MacArthur Village Shopping Center (4,080
square feet) and an outlet in Eddyville, Kentucky (3,000 square feet). These
stores had not met the Company's sales and profitability expectations.
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
Information regarding forward-looking statements.
The statements contained in this quarterly report that are not historical
facts, including statements about management's expectations for fiscal 2001 and
beyond, may be forward-looking statements. The forward-looking statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from historical results or those anticipated. Readers are
cautioned not to place undue reliance on these forward-looking statements.
Factors that could cause the Company's actual results to differ materially from
management's projections, forecasts, estimates and expectations include, but are
not limited to, those discussed in the Company's Annual Report on Form 10-K.
Three Months Ended April 29, 2000 Compared to Three Months Ended May 1, 1999
RESULTS OF OPERATIONS
The following table sets forth certain items in the Statements of Income as a
percentage of net sales for the three month periods ended April 29, 2000 and May
1, 1999.
<TABLE>
<CAPTION>
Percentage of Net Sales
---------------------------
Three Months Ended
---------------------------
<S> <C> <C>
4/29/00 5/1/99
--------- ---------
Net sales.............................. 100.0% 100.0%
Cost of sales.......................... 49.9 51.5
---------- ----------
Gross profit........................... 50.1 48.5
Other costs and expenses:
Selling, general and administrative. 42.5 40.3
Interest............................ 0.3 0.6
Depreciation and amortization....... 1.9 1.8
Other income, net................... (0.2) --
---------- ----------
Income before income taxes............. 5.6 5.8
Provision for income taxes............. 2.1 2.2
---------- ----------
Net income............................. 3.5% 3.6%
========== ==========
</TABLE>
Net sales in the first quarter of fiscal 2001 increased 4%, or $1.6 million,
over the same period last year, and reflect the net addition of four new stores.
Comparable store sales were even with last year. During the first quarter the
Company opened two new stores and closed two locations (one of which was a
relocation) which had not met sales and profitability expectations. There were
240 stores in operation as of April 29, 2000, compared to 236 stores at May 1,
1999.
Cost of sales in the first quarter of fiscal 2001 was 49.9% of net sales
compared to 51.5% of net sales for the same period last year. This 1.6% of net
sales reduction was due to a change in the mix of merchandise sold, to inventory
with higher initial markup and not needing to take as many markdowns as a
percentage of net sales.
Selling, general and administrative expenses in the first quarter of fiscal
2001 were 42.5% of net sales compared to 40.3% of net sales in the previous
year. This 2.2% of net sales increase was due primarily to higher cost and
frequency of advertising as part of the Company's heavier emphasis on
marketing.
6
<PAGE>
Interest expense in the first quarter of fiscal 2001 was 0.3% of net sales
compared to 0.6% of net sales last year due primarily to lower borrowing levels
resulting from higher leverage of trade payables and a reduction in inventory
year over year. To a lesser extent, debt is lower due to less cash being used
for repurchasing the Company's stock.
Other income, net in the first quarter of fiscal 2001 was 0.2% of net sales
higher than the comparable period last year due to higher costs associated with
store closings and remodels in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically 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 approximately 15 new
stores in fiscal 2001, and plans to close or relocate approximately 15 under-
performing locations. During the three months ended April 29, 2000, the Company
opened two new stores and closed two (one of which was a relocation). The
Company also expects to continue to repurchase the Company's common stock in the
open market. The Company believes that its sources of liquidity and capital
resources will continue to be sufficient to fund its operations, capital
expenditures and stock repurchase initiatives.
Operating activities provided net cash of $3.5 million in the first quarter
of fiscal 2001 while it used net cash of $2.6 million in the comparable period
last year. This fluctuation was primarily attributable to higher leveraging of
trade payables and a reduction in inventory growth year over year.
Net cash used for investing activities was primarily for the purpose of store
expansion and remodeling. Capital expenditures for the first quarter of fiscal
2001 and 2000 approximated $0.7 million and $1.3 million, respectively. In the
first quarter of fiscal 2001 the Company opened two new stores; and incurred
costs of its new internet store. In the prior year's quarter, seven new stores
were opened and 55 stores were upgraded to new POS systems.
Financing activities used net cash of approximately $3.0 million for the
first quarter of fiscal 2001 and provided net cash of approximately $3.8 million
in the same period last year. Financing activities primarily relate to
fluctuations in the borrowing levels under the Company's revolving credit
agreements. During the first quarter of fiscal 2001, the Company used
approximately $0.4 million for the repurchase of 51,300 shares of its common
stock compared to $2.6 million for 286,000 shares in the same period last year.
The Company's revolving credit agreements with two banks aggregate $30.0
million. As of April 29, 2000, the Company had net unused commitments of
approximately $24.4 million under the agreements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKET RISK
During the first three months of fiscal 2001 there were no material changes in
the Company's market risk exposure or in management strategy as stated in the
Company's 1999 Annual Report.
7
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(c) During the quarter ended April 29, 2000, the Company contributed 8126
shares of its common stock to the S&K Famous Brands Employees' Profit
Sharing/Savings Plan. The contribution was exempt from registration
pursuant to section 3(a)2 of the Securities Act of 1933, as amended,
because the Plan does not permit employee contributions to be invested
in the Company's securities.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the Company's shareholders was held on May 18,
2000.
(b) & (c) At the annual meeting, the shareholders elected eight directors,
approved the Company's 2000 Stock Purchase Loan Plan and ratified the
selection of independent accountants. The results of the voting were
as follows:
Election of Directors
---------------------
<TABLE>
<CAPTION>
Director For Withheld
---------------------------- ---------- --------------
<S> <C> <C>
Stuart C. Siegel 4,015,447 9,400
Robert L. Burrus, Jr. 3,965,047 59,800
Donald W. Colbert 4,015,958 8,889
Selwyn S. Herson 3,965,747 59,100
Andrew M. Lewis, Ph.D. 3,964,697 60,150
Steven A. Markel 3,964,547 60,300
Troy A. Peery, Jr. 3,965,247 59,600
Marshall B. Wishnack 3,965,747 59,100
</TABLE>
Approval of 2000 Stock Purchase Loan Plan
-----------------------------------------
<TABLE>
<CAPTION>
For Against Abstain
----------- -------------- ------------
<S> <C> <C>
3,631,654 70,585 10,948
</TABLE>
Ratification of PricewaterhouseCoopers LLP as Independent Accountants
---------------------------------------------------------------------
<TABLE>
<CAPTION>
For Against Abstain
---------- -------------- ------------
<S> <C> <C>
4,024,221 526 100
</TABLE>
8
<PAGE>
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
29, 2000.
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 24 , 2000 /s/ Robert E. Knowles
---------------------------
Robert E. Knowles
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: May 24, 2000 /s/ Janet L. Jorgensen
---------------------------
Vice President and Controller
Chief Accounting Officer
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-03-2001
<PERIOD-START> JAN-30-2000
<PERIOD-END> APR-29-2000
<CASH> 444
<SECURITIES> 0
<RECEIVABLES> 461
<ALLOWANCES> 0
<INVENTORY> 58,269
<CURRENT-ASSETS> 62,041
<PP&E> 38,494
<DEPRECIATION> 19,074
<TOTAL-ASSETS> 86,578
<CURRENT-LIABILITIES> 19,845
<BONDS> 0
0
0
<COMMON> 2,306
<OTHER-SE> 54,149
<TOTAL-LIABILITY-AND-EQUITY> 86,578
<SALES> 41,350
<TOTAL-REVENUES> 41,350
<CGS> 20,621
<TOTAL-COSTS> 20,621
<OTHER-EXPENSES> 18,281
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 143
<INCOME-PRETAX> 2,305
<INCOME-TAX> 876
<INCOME-CONTINUING> 1,429
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,429
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.31
</TABLE>
