<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 2000
Commission File No. 0-11682
S & K FAMOUS BRANDS, INC.
......................................................................
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Virginia 54-0845694
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
</TABLE>
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 October 28, 2000
4,138,660 shares of Common Stock, $0.50 par value
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
S & K FAMOUS BRANDS, INC.
Statements of Income
(in thousands, except earnings per share)
(unaudited)
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
------------ -----------
October 28, October 30, October 28, October 30,
2000 1999 2000 1999
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................... $37,235 $37,195 $115,419 $112,661
Cost of sales............................... 18,504 18,886 58,133 58,231
---------- ----------- ----------- -----------
Gross profit................................ 18,731 18,309 57,286 54,430
Other costs and expenses:
Selling, general and administrative........ 17,115 16,734 51,313 47,984
Interest................................... 266 316 598 818
Depreciation and amortization.............. 818 779 2,404 2,268
Other, net................................. 9 (41) (72) (61)
---------- ----------- ----------- -----------
Income before income taxes.................. 523 521 3,043 3,421
Provision for income taxes.................. 199 198 1,156 1,300
---------- ----------- ----------- -----------
Net income.................................. $ 324 $ 323 $ 1,887 $ 2,121
========== =========== =========== ===========
Earnings per common share:
Basic...................................... $ 0.08 $ 0.07 $ 0.42 $ 0.45
========== =========== =========== ===========
Diluted.................................... $ 0.08 $ 0.07 $ 0.42 $ 0.45
========== =========== =========== ===========
Weighted average common shares
outstanding - basic....................... 4,220 4,691 4,463 4,739
========== =========== =========== ===========
Weighted average common shares outstanding
including dilutive potential shares........ 4,223 4,694 4,466 4,751
========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
2
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Balance Sheets
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
October 28, October 30, January 29,
2000 1999 2000
(unaudited) (unaudited)
---------------- ------------------- ------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash........................................................ $ 160 $ 363 $ 619
Accounts receivable......................................... 480 594 420
Merchandise inventories..................................... 66,602 65,766 51,538
Prepaid income taxes........................................ 964 861 --
Other current assets........................................ 3,060 2,914 2,740
------- ------- -------
Total current assets..................................... 71,266 70,498 55,317
Property and equipment, at cost:
Land and buildings.......................................... 6,598 7,235 6,598
Furniture, fixtures and equipment........................... 15,389 16,011 14,754
Leasehold improvements...................................... 16,873 16,780 16,718
------- ------- -------
38,860 40,026 38,070
Less: Accumulated depreciation and amortization............ 19,871 19,330 18,463
------- ------- -------
18,989 20,696 19,607
Other assets.................................................. 5,567 4,696 4,904
------- ------- -------
$95,822 $95,890 $79,828
======= ======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt........................ $ 180 $ 180 $ 180
Accounts payable............................................ 20,861 16,029 7,534
Accrued expenses:
Compensation-related items................................. 1,353 1,249 1,054
Other current liabilities.................................. 1,847 1,870 1,917
Current and deferred income taxes........................... 130 207 962
------- ------- -------
Total current liabilities................................ 24,371 19,535 11,647
Industrial Development Revenue Bond........................... 1,485 1,665 1,620
Long-term debt................................................ 13,288 19,134 8,219
Other long-term liabilities................................... 1,463 1,357 1,393
Deferred income taxes......................................... 1,703 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, 4,139, 4,666 and 4,656,
respectively............................................... 2,069 2,333 2,328
Capital in excess of par value................................ 454 4,023 3,950
Notes receivable--Stock Purchase Loan Plan.................... (2,380) (2,511) (2,457)
Retained earnings............................................. 53,369 48,704 51,482
------- ------- -------
53,512 52,549 55,303
------- ------- -------
$95,822 $95,890 $79,828
======= ======= =======
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Statements of Cash Flows
Increase (Decrease) in Cash
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
October 28, 2000 October 30, 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $ 1,887 $ 2,121
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization..................................... 2,723 2,588
Loss on property dispositions, net................................ 145 104
Other............................................................. 70 47
Changes in assets and liabilities:
Accounts receivable.............................................. (60) 267
Merchandise inventories.......................................... (15,064) (14,987)
Other current assets............................................. (320) 372
Other assets..................................................... (663) (587)
Accounts payable and accrued expenses............................ 13,692 9,653
Current and deferred income taxes................................ (1,739) (1,247)
-------- --------
Net cash provided by (used for) operating activities............... 671 (1,669)
-------- --------
Cash flows from investing activities:
Capital expenditures............................................... (2,250) (3,674)
-------- --------
Cash flows from financing activities:
Net borrowings of long-term debt................................... 5,069 8,737
Repurchase of common stock......................................... (3,814) (3,479)
Reduction of Industrial Development Revenue Bond................... (135) (135)
Principal paid on notes receivable -Stock Purchase Loan Plan....... --- 36
-------- --------
Net cash provided by financing activities.......................... 1,120 5,159
-------- --------
Net decrease in cash................................................ (459) (184)
Cash at beginning of period......................................... 619 547
-------- --------
Cash at end of period............................................... $ 160 $ 363
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest....................... $ 594 $ 771
Cash paid during the period for income taxes................... 2,895 2,546
Non-cash financing activity - notes receivable................. 0 1,500
</TABLE>
See Notes to Financial Statements.
4
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S & K FAMOUS BRANDS, INC.
Notes to Financial Statements
(unaudited)
A. Accounting Policies
The accompanying unaudited interim financial statements have been prepared by
S&K Famous Brands, Inc. (the "Company") in accordance with the regulations of
the Securities and Exchange Commission in regard to quarterly reporting. In the
opinion of the Company's management, 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 the end of the second quarter, the Company has opened nine new stores
totaling approximately 37,000 square feet, three of which were relocations.
<TABLE>
<CAPTION>
Approximate
S&K Store Locations Date Opened Square Footage
---------------------------------------------- ------------------- -----------------
<S> <C> <C> <C>
Alabama: Birmingham ** September 23, 2000 3,200
Birmingham (Trussville) October 18, 2000 4,300
Florida: Tampa August 31, 2000 5,000
Iowa: Des Moines August 4, 2000 4,900
Kentucky: Louisville September 9, 2000 4,800
Maryland: Hanover November 17, 2000* 3,600
Mississippi: South Haven (Memphis, TN) September 17, 2000 4,000
South Carolina: Myrtle Beach ** August 25, 2000 3,200
Virginia: Roanoke ** November 12, 2000* 4,000
</TABLE>
* Opened in fourth quarter.
** Relocated store
Since January 29, 2000 the Company has opened 14 new stores totaling
approximately 56,500 square feet.
During the third quarter the Company relocated two stores, one in Birmingham,
Alabama (4,000 sq. ft.) and one in Myrtle Beach, South Carolina (4,000 sq. ft.)
and closed a store in Nashville, Tennessee (3,000 sq. ft.). Also, in mid
November, the Company relocated a store in Roanoke, Virginia (4,100 sq. ft.),
and closed it's stores in Marco Isle, Florida (3,100 sq. ft.) and Fort Worth,
Texas (4,700 sq. ft.) because they had not met the Company's sales and
profitability expectations.
5
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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 expectation 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 1999 Annual Report on Form
10-K.
Three Months and Nine Months Ended October 28, 2000 Compared to Three Months and
Nine Months Ended October 30, 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 months and nine months ended October 28,
2000 and October 30, 1999.
<TABLE>
<CAPTION>
Percentage of Net Sales
-------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------- -----------------------
<S> <C> <C> <C> <C>
10/28/00 10/30/99 10/28/00 10/30/99
-------- -------- -------- --------
Net sales...................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................. 49.7 50.8 50.4 51.7
-------- -------- -------- --------
Gross profit................................... 50.3 49.2 49.6 48.3
Other costs and expenses:
Selling, general and administrative........... 46.0 45.0 44.5 42.6
Interest...................................... 0.7 0.8 0.5 0.7
Depreciation and amortization................. 2.2 2.1 2.1 2.0
Other, net.................................... --- (0.1) (0.1) ----
-------- -------- -------- --------
Income before income taxes..................... 1.4 1.4 2.6 3.0
Provision for income taxes..................... 0.5 0.5 1.0 1.1
-------- -------- -------- --------
Net income..................................... 0.9% 0.9% 1.6% 1.9%
======== ======== ======== ========
</TABLE>
Net sales in the third quarter were approximately equal with the net sales of
same period last year and reflect the net addition of four new stores since
October 30, 1999. Comparable store sales for the quarter decreased 3%. For the
nine-month period, net sales increased by 2%, or $2.8 million over the same
period last year. Comparable store sales for the nine months decreased 1%.
During the third quarter, the Company opened seven new stores, two of which were
relocations and closed one store which was not meeting the Company's sales and
earnings expectations. There were 244 stores in operation as of October 28,
2000, compared to 240 stores at October 30, 1999.
Cost of sales for the third quarter of fiscal 2001 was 49.7% of net sales
compared to 50.8% of net sales for the third quarter last year. This 1.1% of
net sales reduction was primarily due to a change in the mix of merchandise sold
to inventory with higher initial markup offset to a small degree by increased
freight activity and inventory shrinkage. For the nine-month period, cost of
sales was 50.4% of net sales compared to 51.7% of net sales last year. The
nine-month 1.3% of net sales reduction was primarily due to a change in the mix
of merchandise sold to inventory with higher initial markup and, to a lesser
extent, not needing to take as many markdowns, both offset to a small degree by
increased inventory shrinkage.
6
<PAGE>
Selling, general and administrative expenses in the third quarter of fiscal
2001 were 46.0% of net sales compared to 45.0% of net sales last year. This
1.0% of net sales increase is attributable to increased store occupancy and
supervision costs and higher than planned group health insurance claims. For
the nine-month period, selling, general and administrative expenses were 44.5%
of net sales versus 42.6% of net sales last year. This 1.9% of net sales
increase in the year-to-date period was primarily due to higher cost and
frequency of advertising in the first six months related to the Company's
heavier emphasis on marketing which included the launch of a branding message
campaign. The company's third quarter marketing costs were in-line with the
levels of the third quarter last year. To a lesser degree, the year-to-date
increase is attributable to higher store occupancy and supervision costs.
Interest expense in the third quarter of fiscal 2001 was 0.7% of net sales
compared to 0.8% of net sales last year. For the nine-month period, interest
expense was 0.5% of net sales compared to 0.7% of net sales last year. These
reductions of 0.1% and 0.2% of net sales, respectively, were primarily
attributable to lower average borrowing levels this year offset in part by
average interest rates which increased from 5.7% to 7.0% in the third quarter
and from 5.5% to 6.8% in the first nine months.
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. Through the first nine months of fiscal 2001,
the Company opened 12 new stores, four of which were relocations. The Company
also expects to continue to repurchase it'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 $.7 million during the first nine
months of fiscal year 2001 while it used net cash of $1.7 million in the
comparable period last year. This fluctuation is primarily attributable to
higher leveraging of trade payables.
Net cash used in investing activities in fiscal 2001 was primarily for the
purpose of store expansion, remodeling and the development of the Company's
internet store. Net cash used in investing activities in fiscal 2000 was
primarily for store expansion, remodelings and purchases of upgraded point-of-
sale (POS) systems. Capital expenditures approximated $2.3 million and $3.7
million during the first nine months of fiscal 2001 and 2000, respectively. In
the first nine months of fiscal 2001, the Company opened 12 new stores, four of
which were relocations, remodeled four stores and developed it's internet store.
For the same period last year, the Company opened 18 new stores, converted one
to it's superstore format, remodeled three others and upgraded approximately 150
stores to its new POS systems.
Financing activities for the first nine months of fiscal years 2001 and 2000
provided net cash of $1.1 million and $5.2 million, respectively. Financing
activities primarily relate to fluctuations in the borrowing levels under the
Company's revolving credit agreements which have an aggregate borrowing capacity
of $40.0 million. In May, 2000, the Company renewed its credit agreements to
May 31, 2003, which, at the Company's option, are then convertible to term loans
expiring May 31, 2007. During the first nine months of fiscal years 2001 and
2000, the Company repurchased approximately $3.8 million and $3.5 million,
respectively, of its common stock. As of October 28, 2000, the Company had net
unused commitments of approximately $26.7 million under its revolving credit
agreements.
Item 2. QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKET RISK
During the first nine 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule (quarter ended October 28, 2000)
(b) There were no reports filed on Form 8-K during the three months ended
October 28, 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: December 5, 2000 /s/ Robert E. Knowles
-----------------------------------------
Robert E. Knowles
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: December 5, 2000 /s/ Janet L. Jorgensen
-------------------------------------------
Janet L. Jorgensen
Vice President and Controller
Chief Accounting Officer
(Principal Accounting Officer)
8
