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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 29, 2000
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.
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(Exact name of registrant as specified in its charter)
Virginia 54-0845694
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(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
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(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 346-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.50 par value
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(Title of Class)
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 _____
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
The aggregate market value of the voting stock held by
nonaffiliates of the registrant as of April 5, 2000, was
approximately $8,953,000
This figure was calculated by multiplying (i) the mean between
the high and low prices for the registrant's common stock on
April 5, 2000, as reported by The Nasdaq Stock Market, by (ii)
the number of shares of the registrant's common stock not held
by the officers or directors of the registrant or any persons
known to the registrant to own more than five percent of the
outstanding common stock of the registrant. Such calculation
does not constitute an admission or determination that any such
officer, director or holder of more than five percent of the
outstanding common stock of the registrant is an affiliate of
the registrant.
As of April 5, 2000, 4,612,560 shares of the registrant's
Common Stock, $0.50 par value were outstanding.
Documents Incorporated by Reference
The portions of the 1999 Annual Report to Shareholders for the fiscal year ended
January 29, 2000, referred to in Part II, are incorporated by reference into
Part II. The portions of the Proxy Statement for the Company's Annual Meeting of
Shareholders to be held on May 18, 2000, referred to in Part III, are
incorporated by reference into Part III.
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PART I.
Item 1. Business
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(a) General Development of Business
S&K Famous Brands, Inc. (the "Company") has been in business for 33 years. The
Company began operations with one store and as of April 5, 2000 operates 240
stores. The Company was incorporated in Virginia in 1970, as successor to a
business established in 1967. As used herein, the term "Company" includes the
Company and its predecessors. The Company's corporate headquarters is located at
11100 West Broad Street, Richmond, Virginia; the telephone number is (804) 346-
2500. For a discussion of the Company's business and its development during the
fiscal year ended January 29, 2000 ("fiscal 2000"), see "Narrative Description
of Business."
(b) Financial Information about Industry Segments
The Company operates in one segment, the retail sale of men's tailored clothing,
furnishings, sportswear and accessories. Accordingly, data with respect to
separate industry segments is not applicable and has not been reported herein.
(c) Narrative Description of Business
General
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The Company is engaged in the retail sale of men's tailored clothing,
furnishings, sportswear and accessories through stores trading as S&K Famous
Brand Menswear (S&K). The Company sells in-season, first-quality, men's apparel,
primarily with nationally recognized brand names, at 20% to 40% less than
regular, full-priced department and specialty store prices. This apparel
includes a full line of men's suits, sportcoats, slacks, shirts, ties,
sportswear and related accessories.
The Company's operations are generally conducted under the name S&K Famous Brand
Menswear. As of April 5, 2000 there are 240 stores in 27 states: Virginia,
Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Michigan, Mississippi, Missouri, New Jersey, New
York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee,
Texas, West Virginia and Wisconsin. Except for three locations, all of the S&K
stores are located either in strip shopping centers or enclosed shopping malls.
During fiscal 2000, the Company opened 22 new S&K stores, totaling 85,615 square
feet, in the following localities:
Florida: Jacksonville (Orange Park), Largo
Georgia: Dawsonville
Indiana: Clarksville
Kansas: Wichita (2 stores)
Kentucky: Louisville
Michigan: Benton Harbor, Muskegon
New York: Saratoga
North Carolina: Concord
Ohio: Columbus (2 stores), Huber Heights
South Carolina: Columbia
Tennessee: Kingsport, Murfreesboro
Texas: Grapevine, Longview
Virginia: Lynchburg/(1)/
Wisconsin: Appleton, Greenbay
(/1/) This new store was relocated from a previous location which closed (3,150
sq. ft.)
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Additionally, in fiscal 2000, the Company closed 15 under-performing stores (one
of which was a relocation), approximating 50,100 square feet, which were at the
end of their lease term and which had not met the Company's sales and
profitability expectations: Florida City, Florida; Daleville, Indiana; Baton
Rouge, Louisiana; Kimball, Monroe and Oshkosh, Michigan; Raleigh, North
Carolina; Stroud, Oklahoma; Somerset, Pennsylvania; Knoxville and Nashville,
Tennessee; Gainesville and Terrell, Texas; Lynchburg, Virginia and Martinsburg,
West Virginia.
The following table summarizes information concerning store openings and
closings during the fiscal years presented:
<TABLE>
<CAPTION>
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Fiscal Year Ended
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Stores: 1/29/00 1/30/99 1/31/98 1/25/97 1/27/96
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<S> <C> <C> <C> <C> <C>
Open at beginning of year 233 211 194 184 172
Closed during year 15 8 9 8 9
Opened during year 22 30 26 18 21
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Open at end of year 240 233 211 194 184
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Relocations 1 2 8 2 0
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</TABLE>
During fiscal 2001, the Company plans to open 15 new stores and close 15 under-
performing locations. As of April 5, 2000, the Company has opened one new store
in Garner, North Carolina and closed one store in Eddyville, Kentucky.
Average sales per selling square foot for the stores included in comparable
store sales statistics were: $214, $218, $226, $218 and $215, in the fiscal
years ended 2000 through 1996, respectively. Other than the general economic and
competitive environment, average sales per selling square foot are primarily
influenced by three factors: sales levels in existing stores from year to year;
an increasing proportion of newer stores which, although profitable, might not
have reached sales levels of more mature stores; and an increasing number of
additional stores in existing markets, where the Company does not expect sales
levels to be as high as in markets in which the Company operates a single store.
New stores opened in existing markets may negatively impact existing store sales
while increasing total market sales. The number of stores opened in existing
markets were 18, 16, 26, 8 and 8, in fiscal years ended 2000 through 1996,
respectively.
Merchandise and Marketing
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The merchandise offered in the Company's stores feature a wide variety of
nationally recognized labels from America's leading manufacturers as well as the
Company's exclusive, private labels. This first-quality merchandise is purchased
directly from manufacturers or produced to S&K's specifications and sold at
prices substantially lower than those regularly charged by department and
specialty stores. The Company does not purchase any "seconds" or "irregulars".
S&K offers a complete line of men's apparel: suits, sportcoats, furnishings,
casual clothing, shoes and accessories. Additionally, the Company offers a
custom-order program for the hard-to-fit customer with an emphasis toward the
"Big & Tall" market. The Company's "Corporate Casual" collection is sportcoat
driven, with a coordinating slack and sportswear focus, and responds to the
trend toward relaxed dress codes in the workplace.
S&K's sales associates provide the level and quality of customer service
generally found only in exclusive men's clothing stores. These services include
providing basic alterations at modest cost, soliciting comments from customers
as to their satisfaction with the merchandise and services, maintaining customer
files on special preferences, and offering a liberal refund policy for returned
merchandise, including a money-back guarantee.
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S&K promotes its Premier Club program for those customers who shop with the
Company on a repeat basis. Members of the Premier Club receive periodic mailings
throughout the year which usually contain special promotional opportunities, as
well as free alterations for the life of garments purchased. Additionally, in
fiscal 2000 the Company introduced its Elite Rewards Program which it expects
will further strengthen customer loyalty by awarding additional incentives to
those customers who reach various purchase levels.
The Company offers the S&K Premier Charge Card as another payment option for
it's customers and believes this further enhances its customer service.
Customers pay no annual fee and may even have special financing arrangements.
Additionally, this program allows S&K to communicate regularly with S&K Premier
Charge Card customers via their monthly statement.
S&K uses television as its primary advertising medium and secondarily began the
use of radio in fiscal 2000. Additionally, newspaper is used occasionally for
certain promotions or special events such as holiday sales or grand openings.
The Company uses direct mail for Premier Club promotions and prospective
customer mailings. The direct mail programs allow the Company to target Premier
Club customers who have been the most responsive and loyal to S&K in the past or
potential customers who fit the Company's demographic profile. Baseball Hall of
Famer, Johnny Bench, has been an advertising and marketing spokesperson for the
Company for the past several years and the S&K customer has been receptive to
this association.
Purchasing and Distribution
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Purchasing for all of the Company's stores is directed from the Company's
headquarters in Richmond, Virginia, by the Executive Vice President -
Merchandise.
The Company purchases branded merchandise directly from a number of nationally
recognized manufacturers that produce labels such as Jones New York, Bill Blass,
Daniel Hechter, Andrew Fezza, Emanuel Ungaro, Evan Picone, Claiborne for Men and
Oleg Cassini. These purchases consist primarily of merchandise produced
specifically from orders placed by S&K well in advance of manufacturers'
production cycles allowing them to purchase fabrics advantageously and schedule
production during off-peak manufacturing periods. The Company believes these
buying practices enable it to sell this merchandise at prices generally 20% to
40% below prices regularly offered by full-priced department and specialty
stores.
The Company also uses a number of high quality men's clothing factories which
manufacture goods to its specifications for Company-owned labels, such as
Tailors Row, Roberto Villini, Kilburne & Finch, Deansgate, Club Run, Fenzia and
others. The Tailors Row label (as well as Tailors Row Finery), which includes
suits, blazers and slacks, offers a 100% worsted wool product with an
exceptional level of tailoring and complements the Company's other clothing
lines. The Roberto Villini label is carried on suits, sportcoats and dress
slacks tailored in Italy from some of the finest Italian fabrics and imported
exclusively for S&K, as well as on complementing shirts and ties. The Kilburne &
Finch label is carried on the Company's opening price point suit programs. The
various manufacturing programs enable the Company to better control the quality,
selection and depth of its merchandise and supplement apparel purchased from
brand name manufacturers.
S&K works diligently to establish and maintain good vendor relationships. The
Company purchases merchandise from approximately 200 vendors. Except for one
vendor who accounted for approximately 12%, no other vendor exceeded 10% of the
Company's purchases in fiscal 2000. S&K does not believe that the loss of any
vendor would significantly impact the Company. The Company does not maintain any
long-term purchase commitments or arrangements with any supplier and believes
that there will be sufficient sources of merchandise to support its expansion
plans with no adverse effect on its purchasing practices.
5
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S&K has a basic item replenishment program with its major suppliers for much of
its merchandise to fulfill customers' needs on a timely basis and increase the
Company's inventory turnover. Substantially all of the Company's merchandise is
received centrally at its 110,000 square foot distribution center in Richmond,
Virginia. While the Company does have a program in place to ship direct to the
stores from its vendors, most merchandise is sorted, priced (if not pre-ticketed
by the vendor) and distributed from the distribution center. S&K's stores within
an average 200 mile radius of Richmond receive merchandise once a week with
deliveries generally made by the Company's own trucks. Deliveries are made one
to two times a week to stores outside this radius using common carriers or
package delivery companies. The Company continually enhances and refines its
allocation and distribution processes (generally through technology
improvements). The Company believes that through these enhancements and the
availability of direct vendor shipments to its stores that there is sufficient
capacity for receiving, storing and shipping merchandise to support the
Company's future expansion plans.
Store Operations
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Each store is under the direction of a general manager who is supervised by a
district or area manager. The district managers generally supervise ten to
fifteen stores while area managers supervise five to six stores. The district
and area managers visit the stores frequently to review merchandise needs,
personnel training and performance, and adherence to the Company's operating
procedures. In fiscal 2000, the Company created several market manager positions
whereby this individual maintains general manager responsibilities for a home
store while supervising one or two other stores in the same market. The Company
believes this program will assist in developing individuals for promotion to
district or area manager.
The Company uses a multi-disciplinary training course specifically developed for
S&K associates. All store associates participate in this 75-day self study
program, which the Company calls its "Gold Star" program. This program sets a
personalized standard of performance for each sales associate on a weekly basis
and closely monitors their progress. Additionally, throughout the year, the
Company conducts numerous one-week, in-house training seminars for selected
management trainees and full-time sales associates. These developmental programs
are enhanced by continuous on-the-job training, video training and periodic, in-
district meetings conducted by district and area managers or one of the four
Vice Presidents - Operations. Annually, all general managers are brought to
Richmond to participate in a 4-day corporate training and team building session.
The Company stresses promotion from within, and most of the Company's general
managers and district managers have been promoted in this manner. S&K has cash
bonuses and other incentive plans in effect for its store and district managers
which are based upon individual and store performance.
Each store employs an average of six sales associates, some on a part-time
basis. A weekly sales goal is established for each sales associate. The Company
evaluates weekly productivity reports and conducts semi-annual Management by
Development(R) goal reviews to assess each associate's performance.
All sales are accepted with cash, personal checks or independent credit cards
(Visa/Master Card/Discover/S&K Premier Charge Card). The Company assumes no
credit risk on credit card purchases but pays a customary percentage of those
sales to a credit card processor as a service charge. The Company has a liberal
refund policy on returned merchandise.
Information Management and Point-of-Sale System
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Inventory records are controlled centrally and updated daily utilizing an
automated point-of-sale (POS) system. Each store's POS system is polled nightly
by the Company's computerized information system. This system assimilates all
data and interfaces with the Company's automated merchandise control, ordering,
replenishment and open-to-buy systems. Physical inventories are conducted in the
stores twice a year to verify and enhance the accuracy of the merchandise
information system. Additionally, the store managers provide daily information
to the central office where it is subjected to various sales, cash and inventory
procedures.
6
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All stores have a customized POS system which includes the following features:
automatic price lookup including promotional pricing on markdown items, the
ability to scan barcoded merchandise price tickets, the ability to capture and
track Premiere Club purchase activity, store and employee productivity reporting
capabilities including manpower scheduling, a merchandise locator service,
alterations tracking and the ability to send and receive electronic mail. The
Company monitors the performance of its POS systems and works closely with the
vendor to develop enhancements to this software.
In fiscal 1998 the Company formalized a plan designed to ensure that all of its
computer systems would be Year 2000 compliant in advance of December 31, 1999.
This plan incorporated the Company's mainframe hardware and back office systems,
personal computers, point-of-sale equipment, distribution center systems, phone
and security systems and other non-critical applications with
modification/implementation costs of less than $100,000. The Company encountered
no problems related to the Year 2000 date change in its transition from 1999 to
2000. The Vice President - Management Information Systems continues to update
the Company's MIS Steering Committee monthly.
Store Expansion
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The Company plans to continue its policy of pursuing suitable locations and
opening new stores when attractive opportunities are presented. The general plan
for expansion is to increase sales and market share through the development of
additional store locations in both existing and new markets, subject to
favorable economic conditions.
The Company is currently seeking new S&K store locations in the eastern half of
the United States. The criteria used in selecting sites for new stores include
the geographic locations and the demographics and psychographics of the
surrounding area. Based on S&K's research, the Company locates its stores in
areas that appear most likely to be receptive to the Company's retailing
strategy. These store sites could be in regional shopping malls or strip
shopping centers generally located near a regional mall, or in outlet centers.
With respect to store sites in these centers, the Company considers the
principal anchor stores located in the center, tenant mix and the positioning of
the Company's site within that center.
The S&K stores are designed to provide what the Company believes is required by
the modern-day value-conscious consumers of menswear. The Company's store
formats are designed to attract a broad mix of customers by providing the
customer with the opportunity to make purchases quickly during leisure time as
well as having quality merchandise displayed in attractive store settings.
Additionally, each store format incorporates the latest advances in
merchandising techniques.
The Company currently has three formats: approximately 51% of the stores are
considered to be traditional stores, 25% are outlets and 24% are superstores.
The 3,900 square foot traditional S&K store provides a specialty store setting
and is generally located in or near regional malls in mid-size markets. The
3,500 square foot outlet store is located within outlet centers and is designed
to attract the bargain shopper. The 4,500-6,500 square foot superstore carries a
much broader merchandise assortment, especially in tailored clothing. The larger
format also enables the Company to use "shop concepts" within the store, i.e. -
formal shop, Big & Tall shop, shoes, etc., as well as attractively display its
"Corporate Casual" collection.
Seasonality
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The Company's business is highly seasonal, with peak sales periods occurring
during the fourth fiscal quarter, which includes the Christmas season. The
fourth fiscal quarter generally accounts for approximately 30-33% of the
Company's net sales and 50-55% of its net earnings for a fiscal year.
Working Capital
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The Company has historically funded its working capital from internally
generated funds and from bank borrowings and expects these sources to continue
to be adequate for the foreseeable future.
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Competition
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The retail men's apparel business is highly competitive. The Company's stores
compete with department stores, other men's specialty stores and discount
clothing stores. The Company competes on the basis of price, quality and
selection of merchandise, as well as customer service and store location. Many
of its competitors are considerably larger than the Company and have
substantially greater financial and other resources. At various times throughout
the year, department store chains and full-priced specialty shops offer brand
name merchandise at substantial markdowns, which may result in prices matching
or less than those regularly offered by the Company.
Employees
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As of January 29, 2000, the Company had approximately 2,100 employees, more than
half of whom worked part-time. A number of part-time employees are usually added
during the Christmas holiday season. None of the Company's employees are covered
by collective bargaining agreements. The Company considers its employee
relations to be good.
Information Regarding Forward-Looking Statements
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The provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") provide companies with a "safe harbor" when making forward-looking
statements. This "safe harbor" encourages companies to provide prospective
information about their companies without fear of litigation. The Company wishes
to take advantage of the "safe harbor" provisions of the Act and is including
this section in its Annual Report on Form 10-K in order to do so. Company
statements that are not historical facts, including statements about
management's expectations for fiscal year 2001 and beyond, are forward-looking
statements and involve various risks and uncertainties. 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, the
following:
(a) changes in the amount and degree of promotional intensity exerted by
current competitors and potential new competitors many of whom are, or may
be, larger and have greater financial and marketing resources;
(b) changes in general U.S. economic conditions including, but not limited
to, consumer credit availability, interest rates, inflation, and consumer
sentiment about the economy in general;
(c) changes in availability of working capital and capital expenditure
financing, including the availability of the Company's existing working
capital credit facilities to support development of retail stores;
(d) changes in the availability on acceptable terms of appropriate real
estate locations for expansion;
(e) the presence or absence of new products or product features in the
merchandise categories the Company sells and changes in the Company's
actual merchandise sales mix, including the trend toward corporate casual
attire;
(f) changes in availability of or access to both domestic and foreign
sources of merchandise inventory;
(g) the ability to maintain an effective leadership team in a dynamic
environment of changes in the cost or availability of a suitable work force
to manage and support the Company's service-driven operating strategy;
(h) changes in production or distribution costs of the Company's
advertising; and
(i) unusual weather patterns.
The United States retail industry and the specialty apparel retail industry in
particular are dynamic by nature and have undergone significant changes in
recent years. The Company's ability to anticipate and successfully respond to
continuing challenges is key to achieving its expectations.
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Trademarks and Service Marks
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The Company believes it has the right to use all trademarks and service marks
necessary to conduct its business as currently operated. The Company considers
these marks and the accompanying customer recognition and goodwill to be
valuable to its business, particularly in the case of its "S&K"-related service
marks and logos. The Company believes its existing rights to use such marks can
be preserved through continued use of the marks and, where applicable, renewal
of registrations.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales
The Company has no foreign operations or export sales.
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Item 2. Properties
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As of April 5, 2000 all but one of the Company's 240 stores are leased. The
Company owns a superstore which it built and opened in March 1998. With the
exception of three locations, all the stores are located in strip shopping
centers, enclosed malls, or outlet centers. The square footage of the stores
varies with store format. The traditional S&K store generally ranges in size
from approximately 3,500 to 4,500 square feet, the outlet stores from 3,000 to
4,000 square feet and the superstores from 4,500 to 6,500 square feet. All
stores are located in close proximity to population centers, department stores
and other retail operations and are often situated near a major highway or
thoroughfare.
As leases expire, the Company generally exercises a renewal option when
desirable. It is S&K's strategy to negotiate its leases to include termination
clauses exercisable within two years of initial occupancy. By exercising this
termination clause when appropriate, S&K is able to minimize any long-term
effect of opening an undesirable location which would be unable to meet volume
and profitability expectations. Additionally, these termination clauses give the
Company flexibility to relocate a store should a more attractive site become
available in that market. In most cases, the Company's new stores have been
profitable, on an operating basis, in the first quarter of their operation.
The company closed fifteen S&K stores in fiscal 2000 (one of which was a
relocation): Florida City, Florida; Daleville, Indiana; Baton Rouge, Louisiana;
Kimball, Monroe and Oshkosh, Michigan; Raleigh, North Carolina; Stroud,
Oklahoma; Somerset, Pennsylvania; Knoxville and Nashville, Tennessee;
Gainesville and Terrell, Texas; Lynchburg, Virginia and Martinsburg, West
Virginia.
As of April 5, 2000, the Company operated 240 stores in 27 states. The following
summary recaps the number of current locations by state.
Number of stores
Virginia.................................... 26
Alabama..................................... 11
Arkansas.................................... 4
Florida..................................... 20
Georgia..................................... 10
Illinois.................................... 9
Indiana..................................... 12
Iowa........................................ 2
Kansas...................................... 3
Kentucky.................................... 4
Louisiana................................... 4
Maine....................................... 2
Maryland.................................... 1
Michigan.................................... 13
Mississippi................................. 1
Missouri.................................... 3
New Jersey.................................. 1
New York.................................... 17
North Carolina.............................. 24
Ohio........................................ 15
Oklahoma.................................... 2
Pennsylvania................................ 9
South Carolina.............................. 13
Tennessee................................... 16
Texas....................................... 9
West Virginia............................... 2
Wisconsin................................... 7
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Total....................................... 240
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Store leases generally provide for an annual base rent of between $6.00 and
$21.50 per square foot. Most leases contain provisions which require the payment
of a percentage of sales as additional rent, generally when sales reach
specified levels.
The Company's executive offices are located at its Corporate Headquarters and
Central Distribution Center in Richmond, Virginia, and are owned by the Company.
The total facility contains approximately 130,000 square feet, with the
distribution center occupying approximately 110,000 of that square footage.
Item 3. Legal Proceedings
-----------------
There are no legal proceedings against the Company which are expected to have a
material adverse effect upon the Company or its financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
11
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Executive Officers of the Registrant
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The executive officers of the Company who serve at the discretion of the Board
of Directors are as follows:
Stuart C. Siegel, 57, is Chairman of the Board of Directors of the Company, and
is Chief Executive Officer.
Donald W. Colbert, 50, is President and Chief Operating Officer and is a
director of the Company.
Robert E. Knowles, 50, is Executive Vice President, Chief Financial Officer,
Secretary and Treasurer. Mr. Knowles is a Certified Public Accountant.
Robert J. Taphorn, 54, is Executive Vice President in charge of merchandising
and distribution.
Weldon J. Wirick, III, 49, is Senior Vice President--Operations.
Robert F. Videtic, 52, is Vice President, Divisional Merchandise Manager.
12
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
-----------------------------------------------------------------
Matters
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Please see page 1 of the 1999 Annual Report Financials under the caption "Price
Ranges of Common Shares," which is incorporated herein by reference.
During the fiscal year ended January 29, 2000, the Company contributed 9,588
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 6. Selected Financial Data
-----------------------
Please see page 1 of the 1999 Annual Report Financials under the caption "Five-
Year Summary of Selected Financial Data," which is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
- -------------
Please see pages 2-3 of the 1999 Annual Report Financials under the caption
"Management's Discussion and Financial Review," which is incorporated herein by
reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Please see page 3 of the 1999 Annual Report Financials under the caption
"Interest Rate Risk", which is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Please see Part IV, Item 14 (a) 1., captioned "Financial Statements," for a list
of financial statements which are incorporated herein by reference from the 1999
Annual Report Financials.
Please see page 3 of the 1999 Annual Report Financials under the caption
"Quarterly Financial Data (unaudited)," which is incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
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None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Please see page 4 of the registrant's definitive Proxy Statement under the
caption "Information Regarding Nominees", for information concerning directors,
which is incorporated herein by reference.
Please see section entitled "Executive Officers of the Registrant" in Part I of
this report for information concerning executive officers.
Item 11. Executive Compensation
----------------------
Please see pages 6-7 and page 11 of the registrant's definitive Proxy Statement
under the captions "Executive Compensation" and "Compensation Committee
Interlocks and Insider Participation," and page 5 of the registrant's definitive
Proxy Statement under the caption "Directors' Compensation", which are
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Please see pages 1-2 of the registrant's definitive Proxy Statement under the
captions "Security Ownership of Certain Beneficial Owners" and "Security
Ownership of Management," which is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Please see page 5 and page 8 of the registrant's definitive Proxy Statement
under the captions "Certain Relationships and Related Transactions" and "Stock
Purchase Loan Program" which are incorporated herein by reference.
14
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Documents filed as part of this report: Page in
Annual Report
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1. Financial Statements:
--------------------
The following financial statements of S&K Famous Brands,
Inc. and report of independent accountants, included in the
registrant's 1999 Annual Report Financials are incorporated
by reference in Item 8:
Statements of Income for the fiscal years ended January 29,
2000, January 30, 1999 and January 31, 1998. 4
Statements of Changes in Shareholders' Equity for the fiscal
years ended January 29, 2000, January 30, 1999 and January
31, 1998. 4
Balance Sheets at January 29, 2000 and January 30, 1999. 5
Statements of Cash Flows for the fiscal years ended January
29, 2000, January 30, 1999 and January 31, 1998. 6
Notes to Financial Statements 7-10
Report of Independent Accountants 11
2. Financial Statement Schedules:
-----------------------------
None.
3. Exhibits required to be filed by Item 601 of Regulation S-K:
-----------------------------------------------------------
See INDEX TO EXHIBITS
(b) Reports on Form 8-K filed during the last quarter of the year
ended January 29, 2000.
None.
</TABLE>
Except for the information referred to in Items 5, 6, 7, 8 and 14(a) 1. hereof,
the 1999 Annual Report to Shareholders for the fiscal year ended January 29,
2000 shall not be deemed to be filed pursuant to the Securities Exchange Act of
1934.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: April 7, 2000 /s/ Stuart C. Siegel
-------------------------------------------------
STUART C. SIEGEL
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Date: April 7, 2000 /s/ Robert E. Knowles
-------------------------------------------------
ROBERT E. KNOWLES
Executive Vice President, Chief Financial Officer,
Secretary and Treasurer (Principal Financial
Officer)
Date: April 7, 2000 /s/ Janet L. Jorgensen
-------------------------------------------------
JANET L. JORGENSEN
Vice President and Controller, Chief Accounting
Officer (Principal Accounting Officer)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: April 7, 2000 /s/ Stuart C. Siegel
-------------------------------------------------
STUART C. SIEGEL, Chairman of the Board of
Directors
Date: April 7, 2000 /s/ Robert L. Burrus, Jr.
-------------------------------------------------
ROBERT L. BURRUS, JR., Director
Date: April 7, 2000 /s/ Donald W. Colbert
-------------------------------------------------
DONALD W. COLBERT, President and Chief Operating
Officer, Director
Date: April 7, 2000 /s/ Selwyn S. Herson
-------------------------------------------------
SELWYN S. HERSON, Director
Date: April 7, 2000 /s/ Andrew M. Lewis
-------------------------------------------------
ANDREW M. LEWIS, Director
Date: April 7, 2000 /s/ Steven A. Markel
-------------------------------------------------
STEVEN A. MARKEL, Director
Date: April 7, 2000 /s/ Troy A. Peery, Jr.
-------------------------------------------------
TROY A. PEERY, JR., Director
Date: April 7, 2000 /s/ Marshall B. Wishnack
-------------------------------------------------
MARSHALL B. WISHNACK, Director
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
(3) Articles of incorporation and bylaws
a. Registrant's Amended and Restated Articles of Incorporation (conformed
to include amendments to date), filed as Exhibit 3(a) to registrant's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1999, are
expressly incorporated herein by this reference.
b. Registrant's amended and restated Bylaws (conformed to include
amendments to date), filed as Exhibit 3(b) to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1999, are
expressly incorporated herein by this reference.
(4) Instruments defining the rights of security holders, including indentures.
a. Amended and Restated Credit Agreement dated as of May 31, 1997,
between the registrant and Signet Bank/Virginia (now First Union
National Bank), filed as Exhibit 4(b) to the registrant's Quarterly
Report on Form 10-Q for the quarter ended July 26, 1997, is expressly
incorporated herein by this reference.
b. Bond Purchase Agreement and Agreement of Sale dated December 1, 1983,
by and among registrant and Industrial Development Authority of the
County of Henrico, Virginia, Bank of Virginia, and Bank of Virginia
Trust Company, filed as Exhibit 2(d) to registrant's Form 8-A
Registration Statement (File #0-11682), is incorporated herein by this
reference.
c. First Amendment to Bond Purchase Agreement and Agreement of Sale dated
November 1, 1984, by and among registrant, Industrial Development
Authority of the County of Henrico, Virginia, and United Virginia Bank
(now Crestar Bank), filed as Exhibit 19 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended October 27, 1984 (File #0-
11682), is expressly incorporated herein by this reference.
d. Credit Agreement dated as of March 10, 1994, between the registrant
and Crestar Bank, filed as Exhibit 4(d) to the registrant's Form 10-K
for the year ended January 29, 1994, is expressly incorporated herein
by this reference.
e. Amendment to Credit Agreement dated April 30, 1997, between the
registrant and Crestar Bank filed as Exhibit 4(a) to the registrant's
Form 10-Q for the quarter ended July 26, 1997, is expressly
incorporated herein by this reference.
f. Modification letter dated March 17, 1999 to the Credit Agreement dated
March 10, 1994 and the subsequent Amendment to the Credit Agreement
dated April 30, 1997 between the registrant and Crestar Bank filed as
Exhibit 4(a) to the registrant's Quarterly Report on Form 10-Q for the
quarter ended May 1, 1999, is expressly incorporated herein by this
reference.
g. First Amendment to Amended and Restated Credit Agreement dated April
2, 1999 between registrant and First Union National Bank as successor-
in-interest to Signet Bank/Virginia filed as Exhibit 4(b) to the
registrant's Quarterly Report on Form 10-Q for the quarter ended May
1, 1999, is expressly incorporated herein by this reference
h. Amendment dated August 3, 1999 extending the maturity of the Credit
Agreement dated March 10, 1994 between registrant and Crestar Bank
filed as Exhibit 4(a) to the registrant's Quarterly Report on Form 10-
Q for the quarter ended July 31, 1999, is expressly incorporated
herein by this reference.
<PAGE>
i. Second Amendment dated July 30, 1999 to Amended and Restated Credit
Agreement dated May 31, 1997 between registrant and First Union
National Bank as successor-in-interest to Signet Bank/Virginia filed
as Exhibit 4(b) to the registrant's Quarterly Report on Form 10-Q for
the quarter ended July 31, 1999, is expressly incorporated herein by
this reference.
(10) Material Contracts
a. Lease dated November 7, 1980, between registrant and Stuart C. Siegel
and amendment dated July 1, 1983, filed as Exhibit 10(e) to
registrant's Form S-1 Registration Statement (File #2-85291) and as
Exhibit (10)(e)(1) to Amendment No. 1 to registrant's Registration
Statement on Form S-1 (File #2-85291), respectively, are expressly
incorporated herein by reference.
* b. Deferred compensation agreements dated February 1, 1988, between
registrant and the following officers of the registrant: Stuart C.
Siegel, Donald W. Colbert, Robert E. Knowles, Harry S. Shendow
(retired), Weldon J. Wirick, III, and James D. Moore, Jr. filed as
Exhibit 19(a) to registrant's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1988 (File #0-11682), are expressly
incorporated herein by this reference.
* c. 1983 Stock Option Plan as amended on May 28, 1987, filed as Exhibit
10(c) to registrant's Annual Report on Form 10-K for the year ended
January 30, 1988 (File #0-11682), is expressly incorporated herein by
this reference.
* d. Executive Split Dollar Life Insurance Plan and Executive Split Dollar
Life Insurance Agreement, dated May 1, 1990, between registrant and
Stuart C. Siegel with a schedule of other participants and their
respective coverage amounts, filed as Exhibit 10(e) to registrant's
Annual Report on Form 10-K for the year ended January 30, 1993 (File
#0-11682), is expressly incorporated herein by this reference.
* e. 1991 Stock Option Plan, filed as Exhibit 19 to registrant's Quarterly
Report on Form 10-Q for the quarter ended July 27, 1991 (File #0-
11682), is expressly incorporated herein by this reference.
* f. Amendment to 1991 Stock Option Plan, filed as Exhibit 19 to
registrant's Quarterly Report on Form 10-Q for the quarter ended May
1, 1993 (File #0-11682), is expressly incorporated herein by this
reference.
* g. Amendment to 1991 Stock Option Plan, filed as Exhibit 10(g) to
registrant's Annual Report on form 10-K for the year ended January 31,
1998 (file #0-11682), is expressly incorporated herein by this
reference.
* h. 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 #0-11682) is incorporated herein by this
reference.
(13) Annual report to security holders, Form 10-Q or quarterly report to
security holders
a. Registrant's 1999 Annual Report to its Shareholders (1999 Annual
Report Financials) for the fiscal year ended January 29, 2000.
(23) Consents of Experts and Counsel
a. Consent of Independent Accountants
(27) Financial Data Schedule
* Management contract or compensatory plan or arrangement of the Company
required to be filed as an exhibit.
<PAGE>
EXHIBIT 13
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
(Dollar and share amounts in thousands, except per share data)
------------------------------------------------------------------------------------------
January 29, January 30, January 31, January 25, January 27,
2000 1999 1998 1997 1996
-------------- -------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................... $162,792 $154,446 $144,983 $130,222 $122,759
Gross profit........................ 78,431 73,640 68,898 60,268 54,863
Selling, general and
administrative expenses.......... 66,977 61,561 57,964 51,779 47,279
Interest............................ 1,068 772 536 546 797
Depreciation and amortization....... 3,071 2,757 2,404 2,242 2,174
Net income.......................... 4,899 5,486 4,981 4,610 2,731
EARNINGS PER SHARE DATA:
Basic earnings per share............ $ 1.04 $ 1.09 $ 0.99 $ 0.91 $ 0.55
Diluted earnings per share.......... 1.04 1.07 0.97 0.91 0.55
Weighted average shares
outstanding - basic.............. 4,719 5,040 5,026 5,066 4,989
Weighted average shares
outstanding - including dilutive
potential common shares.......... 4,729 5,119 5,118 5,092 5,006
BALANCE SHEET DATA:
Working capital..................... $ 43,670 $ 45,021 $ 35,000 $ 33,804 $ 33,046
Inventories......................... 51,538 50,779 43,896 41,511 39,702
Net property and equipment.......... 19,607 19,713 17,833 14,755 15,092
Total assets........................ 79,828 79,296 69,446 62,429 60,598
Long-term debt (including
current maturities).............. 10,019 12,377 4,260 4,340 8,234
Shareholders' equity................ 55,303 53,717 49,521 45,109 40,372
Book value per share................ 11.88 11.02 9.88 8.90 7.98
Current ratio....................... 4.8:1 5.3:1 3.6:1 4.1:1 4.3:1
Number of stores at year end........ 240 233 211 194 184
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
RESULTS OF OPERATIONS
The following table sets forth certain items in the Statements of Income as a
percentage of net sales for fiscal years 2000, 1999 and 1998.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Fiscal Year Ended
-----------------
1/29/00 1/30/99 1/31/99
------------ ------------- ------------
<S> <C> <C> <C>
Net sales..................................... 100.0 100.0 100.0
Cost of sales................................. 51.8 52.3 52.5
------------ ------------- ------------
Gross profit.................................. 48.2 47.7 47.5
Other costs and expenses:
Selling, general and administrative...... 41.1 39.9 40.0
Interest................................. 0.7 0.5 0.4
Depreciation and amortization............ 1.9 1.8 1.6
Other income, net........................ (0.3) (0.2) --
------------ ------------- ------------
Income before income taxes.................... 4.8 5.7 5.5
Provision for income taxes.................... 1.8 2.2 2.1
------------ ------------- ------------
Net income.................................... 3.0 3.5 3.4
============ ============= ============
</TABLE>
Year Ended January 29, 2000 Compared to Year Ended January 30, 1999
Net sales increased by 5%, or $8.3 million, from fiscal 1999 to fiscal 2000.
This increase in net sales reflects the addition of 22 new stores and 15
closures (one of which was a relocation). Comparable store sales decreased 1%
primarily due to reduced customer traffic in a group of outlet stores, lower
than planned sales in sportcoats and the opening of new stores in existing
markets.
Cost of sales in fiscal 2000 was 51.8% of net sales compared to 52.3% of net
sales in fiscal 1999. The .5% of net sales reduction was primarily due to lower
markdowns on merchandise sold, offset to a lesser degree by higher inventory
skrinkage.
Selling, general and administrative expenses in fiscal 2000 were 41.1% of net
sales compared to 39.9% of net sales in fiscal 1999. This 1.2% of net sales
increase was the net result of higher store occupancy and payroll costs, and to
a lesser degree, higher group health claims offset by lower year end incentive
bonuses.
Interest expense in fiscal 2000 was .7% of net sales compared to .5% of net
sales in fiscal 1999 and is primarily attributable to higher average borrowings
in fiscal 2000.
Other income, net in fiscal 2000 included $665,000 ($412,000 after tax, or $.09
per diluted share) representing a gain on the sale of real estate.
<PAGE>
Year Ended January 30, 1999 Compared to Year Ended January 31, 1998
Net sales increased $9.5 million, from fiscal 1998 which was a 53-week year, to
fiscal 1999 which was a 52-week year. The 7% increase in net sales reflected
the addition of 30 new stores and eight closures (two of which were relocated).
Comparable store sales on a 52-week basis decreased 1% and was due in part to
the opening of the majority of new stores over the last 18 months in existing
markets.
Cost of sales in fiscal 1999 was 52.3% of net sales compared to 52.5% of net
sales in fiscal 1998. The .2% of net sales reduction was due primarily to the
combined effect of greater leveraging of central office and distribution center
expenses relating to buying and processing merchandise, and due to lower
inventory shrinkage.
Selling, general and administrative expenses in fiscal 1999 were 39.9% of net
sales compared to 40.0% of net sales in fiscal 1998. This .1% of net sales
decrease was the combined result of lower incentive bonus payments and increased
alterations net income, both offset by higher advertising expense and store
occupancy costs.
Interest expense in fiscal 1999 was .5% of net sales compared to .4% of net
sales in fiscal 1998 and is primarily attributable to higher average borrowings
in fiscal 1999.
Other income, net, in fiscal 1999 included $266,000 ($165,000 after tax or $.03
per diluted share) related to income from an insurance claim.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 2000, the Company funded its operating activities, including capital
expenditures for the opening of new stores, from internally generated funds and
from bank borrowings. During fiscal 2000, the Company opened 22 new stores,
closed 15 stores (one of which was relocated), converted one store to the
superstore format and remodeled several others. During fiscal 2001, the Company
believes it will open approximately 15 new stores while also closing/relocating
approximately 15 under-performing locations and does not expect this to
significantly impact liquidity or capital resources. The Company believes that
its sources of liquidity and capital resources will continue to be sufficient to
fund its operations and capital expenditures.
Operating activities provided net cash of $9.0 million in fiscal 2000; used net
cash of $1.1 million in fiscal 1999 and provided net cash of $6.9 million in
fiscal 1998. The change between fiscal 2000 and 1999 was attributable to the
$6.1 million reduction in inventory growth year over year and, to a lesser
extent, the year over year growth in payables in fiscal 2000 compared to a
reduction in fiscal 1999. The change between fiscal 1999 and 1998 was primarily
the result of reductions in accounts payable and accrued compensation balances
and to increased inventory purchases.
Net cash used for investing activities for the last three fiscal years was
primarily for the purpose of store expansion and remodeling and approximated
$3.0 million, $5.2 million and $6.1 million, respectively. Fiscal 2000 capital
expenditures were lower due to eight fewer new stores partially offset by
approximately $1.0 million in expenditures for the completion of its point of
sale equipment rollout. Fiscal 1999 included capital expenditures for four more
new stores and approximately $0.4 million related to the point of sale equipment
rollout compared to fiscal 1998. Fiscal 1998 included $1.7 million in capital
expenditures for an owned superstore location which opened in March 1998.
Financing activities used net cash of $5.9 million in fiscal 2000, provided net
cash of $6.3 million in fiscal 1999 and used net cash of $0.8 million in fiscal
1998. Financing activities primarily relate to fluctuations in the borrowing
levels under the Company's revolving credit agreements which have an aggregate
borrowing capacity of $30.0 million. Financing activities for the last three
fiscal years included $3.6 million, $2.2 million and $0.8 million, respectively,
used for the repurchase of 403,800, 220,600 and 74,000 shares of common stock.
The Company has the right at the end of May 2001 to convert the revolving credit
agreements into four year term loans. At the end of fiscal 2000, the Company
had $21.8 million available for use under its bank revolving lines of credit.
<PAGE>
OTHER MATTERS
Historically, inflation has not significantly affected the Company's gross
margins. When necessary, the Company has generally been able to pass through
price increases as the cost of merchandise has increased.
Interest Rate Risk
The Company's bank revolving credit lines and Industrial Development Bonds bear
interest at variable rates which expose the Company to risk from interest rate
fluctuations. If interest rates were to increase or decrease by 10%, the effect
on net income and cash flows would not be material.
Year 2000
The Company experienced a successful transition from 1999 to 2000. During the
period immediately following the rollover through March 2000 the Company has
encountered no problems related to the year 2000 date change.
Forward-Looking Statements
Certain statements made in this Annual Report may constitute forward-looking
statements and are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve
known and unknown risks and uncertainties, which may cause the Company's actual
results in future periods to differ materially from forecasted or expected
results. Those risks include, among other things, the competitive environment
in the value-priced men's apparel industry in general and in the Company's
specific market area, inflation, changes in costs of goods and services,
economic conditions in general and in the Company's specific market area and
uncertainties associated with the Y2K issue. Those and other risks are more
fully described in the Company's filings with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the fiscal
year ended January 29, 2000.
PRICE RANGES OF COMMON SHARES
S&K Famous Brands, Inc. common shares are traded on The Nasdaq Stock Market
under the symbol SKFB. The following table is a quarterly composite of high and
low stock prices.
<TABLE>
<CAPTION>
Fiscal Year Ended January
-------------------------
Quarter 2000 1999
- ------- ------------------------- -------------------------
High Low High Low
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
First................................ 10 7/32 8 1/4 17 3/4 12 5/8
Second............................... 10 8 5/8 19 1/2 12 3/4
Third................................ 9 6 1/2 15 1/2 9 1/2
Fourth............................... 8 1/4 5 5/8 11 1/4 8 15/16
</TABLE>
As of January 29, 2000, there were approximately 1,800 holders of S&K common
stock, including approximately 250 holders of record. The number of record
holders does not reflect the number of beneficial owners of the Company's common
stock for whom shares are held by Cede & Co., certain brokerage firms and
others. The Company has not declared cash dividends and anticipates that for the
foreseeable future it will continue to follow its present policy of retaining
earnings in order to finance the expansion and development of its business.
<PAGE>
STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
---------------- ---------------- ---------------
<S> <C> <C> <C>
Net sales......................................... $ 162,792 $ 154,446 $ 144,983
Cost of sales..................................... 84,361 80,806 76,085
---------------- ---------------- --------------
Gross profit...................................... 78,431 73,640 68,898
Other costs and expenses:
Selling, general and administrative.......... 66,977 61,561 57,964
Interest..................................... 1,068 772 536
Depreciation and amortization................ 3,071 2,757 2,404
Other income, net............................ (585) (298) (40)
---------------- ---------------- --------------
Income before income taxes........................ 7,900 8,848 8,034
Provision for income taxes........................ 3,001 3,362 3,053
---------------- ---------------- --------------
Net income........................................ $ 4,899 $ 5,486 $ 4,981
================ ================ ==============
Earnings per common share:
Basic........................................ $ 1.04 $ 1.09 $ 0.99
================ ================ ==============
Diluted...................................... $ 1.04 $ 1.07 $ 0.97
================ ================ ==============
Weighted average common shares outstanding -
basic............................................ 4,719 5,040 5,026
Dilutive effect of stock options.................. 10 79 92
---------------- ---------------- --------------
Weighted average common shares outstanding -
including dilutive potential common shares....... 4,729 5,119 5,118
================ ================ ==============
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock Capital in Notes Receivable
------------------------ Excess of Stock Purchase Retained
Shares Amount Par Value Loan Plan Earnings Total
---------- ---------- -------------- -------------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance -- January 25, 1997............... 5,066 $ 2,533 $ 7,837 $ (1,377) $ 36,116 $ 45,109
Net income.............................. 4,981 4,981
Repurchase of common stock.............. (74) (37) (729) (766)
Issuances of common stock............... 5 3 48 51
Exercise of stock options............... 17 8 76 84
Reduction of notes receivable........... 62 62
---------- ---------- -------------- -------------------- ---------- --------
Balance -- January 31, 1998............... 5,014 2,507 7,232 (1,315) 41,097 49,521
Net income.............................. 5,486 5,486
Repurchase of common stock.............. (221) (110) (2,076) (2,186)
Issuances of common stock............... 5 2 78 80
Exercise of stock options............... 76 38 585 623
Reduction of notes receivable........... 193 193
---------- ---------- -------------- -------------------- ---------- --------
Balance - January 30, 1999................ 4,874 2,437 5,819 (1,122) 46,583 53,717
Net income.............................. 4,899 4,899
Repurchase of common stock.............. (404) (202) (3,356) (3,558)
Issuances of common stock............... 10 5 75 80
Issuances of common stock under
the Stock Purchase Loan Plan......... 176 88 1,412 1,500
Notes receivable - stock purchase....... (1,500) (1,500)
Reduction of notes receivable........... 165 165
---------- ---------- -------------- -------------------- ---------- --------
Balance - January 29, 2000................ 4,656 $ 2,328 $ 3,950 $ (2,457) $ 51,482 $ 55,303
========== ========== ============== ==================== ========== ========
</TABLE>
See Notes to Financial Statements.
<PAGE>
BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................ $ 619 $ 547
Accounts receivable............................................. 420 862
Merchandise inventories......................................... 51,538 50,779
Other current assets............................................ 2,740 3,286
---------------- ----------------
Total current assets.......................................... 55,317 55,474
Property and equipment, net...................................... 19,607 19,713
Other assets..................................................... 4,904 4,109
---------------- ----------------
$ 79,828 $ 79,296
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................ $ 180 $ 180
Accounts payable................................................ 7,534 6,345
Accrued compensation and related items.......................... 1,054 1,599
Current and deferred income taxes............................... 962 624
Other current liabilities....................................... 1,917 1,705
---------------- ----------------
Total current liabilities..................................... 11,647 10,453
Long-term debt................................................... 9,839 12,197
Other long-term liabilities...................................... 1,393 1,310
Deferred income taxes............................................ 1,646 1,619
Commitments
Shareholders' equity:
Preferred stock, $1 par value; authorized shares, 500;
issued and outstanding shares, none..................... 2,328 2,437
Common stock, $.50 par value; authorized shares, 10,000;
issued and outstanding shares, 4,656 (2000), and 4,874
(1999)................................................. 3,950 5,819
Capital in excess of par value.................................. (2,457) (1,122)
Notes receivable -- Stock Purchase Loan Plan.................... 51,482 46,583
---------------- ----------------
Retained earnings............................................... 55,303 53,717
---------------- ----------------
$ 79,828 $ 79,296
================ ================
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................................... $ 4,899 $ 5,486 $ 4,981
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization................................ 3,494 3,196 2,788
(Gain) loss on property dispositions, net.................... (349) 160 202
Other........................................................ 83 87 203
Changes in assets and liabilities:
Accounts receivable........................................ 442 (308) (156)
Merchandise inventories.................................... (759) (6,883) (2,385)
Other current assets....................................... 546 (116) (875)
Other assets............................................... (795) (709) (467)
Accounts payable and accrued expenses...................... 1,035 (2,273) 2,745
Current and deferred income taxes.......................... 365 232 (150)
--------------- --------------- ---------------
Net cash provided by (used for) operating activities 8,961 (1,128) 6,886
--------------- --------------- ---------------
Cash flows from investing activities:
Capital expenditures........................................... (4,324) (5,250) (6,083)
Proceeds from property dispositions............................ 1,285 14 15
--------------- --------------- ---------------
Net cash used for investing activities......................... (3,039) (5,236) (6,068)
--------------- --------------- ---------------
Cash flows from financing activities:
Net (paydowns) borrowings under revolving bank
lines of credit............................................ (2,178) 8,297 100
Repurchase of common stock..................................... (3,558) (2,186) (766)
Reduction of long-term debt.................................... (180) (180) (180)
Proceeds from exercise of stock options........................ 242 84
Principal paid on notes receivable--Stock Purchase
Loan Plan.................................................. 66 145
--------------- --------------- ---------------
Net cash (used for) provided by financing activities (5,850) 6,318 (762)
--------------- --------------- ---------------
Net increase (decrease) in cash................................. 72 (46) 56
Cash at beginning of period..................................... 547 593 537
--------------- --------------- ---------------
Cash at end of period........................................... $ 619 $ 547 $ 593
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest....................... $ 1,064 $ 759 $ 513
Cash paid during the year for income taxes................... 2,639 3,158 3,492
Non-cash financing activity--notes receivable................ 1,500
</TABLE>
See Notes to Financial Statements.
<PAGE>
QUARTERLY FINANCIAL DATA (unaudited)
Summarized quarterly financial data for fiscal 2000 and 1999 are as follows:
(in thousands, except per share data)
<TABLE>
<CAPTION>
2000 May 1 July 31 October 30 January 29
- ---- ------------ ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales......................................... $39,799 $35,667 $37,195 $50,131
Gross profit...................................... 19,287 16,834 18,309 24,001
Net income........................................ 1,425 373 323 2,778
Earnings per share--basic*........................ .30 .08 .07 .60
Earnings per share--diluted*...................... .30 .08 .07 .60
</TABLE>
<TABLE>
<CAPTION>
1999 May 2 August 1 October 31 January 30
- ---- ------------ ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales......................................... $37,109 $33,852 $35,120 $48,365
Gross profit...................................... 17,791 15,980 17,268 22,601
Net income........................................ 1,564 965 651 2,306
Earnings per share--basic......................... .31 .19 .13 .46
Earnings per share--diluted*...................... .30 .19 .13 .46
</TABLE>
*Note: Earnings per share does not add to total for year due to rounding.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies:
PRINCIPAL BUSINESS
S&K Famous Brands, Inc.(the Company) operates in one segment, the retail sale of
menswear, including tailored clothing, furnishings, sportswear and accessories.
The Company's fiscal year is the 52- or 53-week period which ends on the
Saturday closest to January 31. Fiscal years ended January 29, 2000 (fiscal
2000) and January 30, 1999 (fiscal 1999) were 52-week periods, January 31, 1998
(fiscal 1998) was a 53-week period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
that affect the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Allowances for
returned checks were $100,000 and $90,000 in fiscal 2000 and 1999, respectively.
MERCHANDISE INVENTORIES
Inventories are valued at the lower of average cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation for financial reporting
purposes is computed using both straight line and accelerated methods over the
estimated service lives which are between 25 and 40 years for buildings and
between three and seven years for fixtures and equipment. Leasehold improvements
are generally amortized over an eight year period.
The Company annually evaluates long-lived assets for any impairment using the
guidance of Statement of Financial Accounting Standards ("FAS") No. 121. This
evaluation has not resulted in adjustments to the Company's results of
operations or financial position.
Repair and maintenance expenditures are charged to expense as incurred. Upon
retirement or sale of an asset, its cost and related accumulated depreciation
are written off and any gain or loss is recognized.
OTHER ASSETS
Other assets consists primarily of cash surrender value related to various life
insurance policies aggregating $4.8 million and $4.1 million in fiscal 2000 and
1999, respectively.
ADVERTISING COSTS
Advertising costs are expensed in the period in which the advertisement
initially runs. Advertising expense of $13.1 million, $12.6 million and $11.2
million, respectively, was included in selling, general and administrative
expenses in each of the last three fiscal years. Deferred advertising costs
related to future programs included in the balance sheets were less than
$100,000 in each year.
EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted average
number of common shares outstanding during each period. Diluted earnings per
share includes the dilutive effect of stock options. Options which were anti-
dilutive of 525,000, 51,500 and 59,500 shares were not included in computing
diluted earnings per share for fiscal 2000, 1999 and 1998, respectively.
Note 2 - Merchandise Inventories:
Inventories are valued using an average cost method, under which the Company
tracks inventory costs for approximately 100 inventory categories which are used
to classify its inventory.
The Company capitalizes certain buying, holding and distribution costs to
inventory which at the end of the last three fiscal years were approximately
$2.6 million, $2.5 million and $2.3 million, respectively. Buying, holding and
distribution costs charged to cost of sales approximated $3.8 million in each
year.
<PAGE>
Note 3 - Property and Equipment:
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Land........................................................ $ 1,232 $ 1,620
Buildings................................................... 5,366 5,609
Furniture, fixtures and equipment........................... 14,754 14,550
Leasehold improvements...................................... 16,718 15,699
---------------- ---------------
38,070 37,478
Less - accumulated depreciation and amortization............ 18,463 17,765
---------------- ---------------
$19,607 $19,713
================ ===============
</TABLE>
Depreciation and amortization expense of approximately $400,000 was included in
cost of sales for each of the last three fiscal years.
Note 4 - Long-Term Debt:
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Industrial Development Revenue Bond;
$45 of principal plus interest at 65%
of prime, due quarterly to January 1, 2010,
secured by land and corporate headquarters............ $ 1,800 $ 1,980
Bank revolving lines of credit............................. 8,219 10,397
--------------- ---------------
10,019 12,377
Less - current maturities................................. 180 180
--------------- ---------------
$ 9,839 $12,197
=============== ===============
</TABLE>
The Company has available an aggregate of $30.0 million from two banks under its
unsecured, long-term bank revolving lines of credit. Interest is payable monthly
at a rate equal to the lower of the 30-day Federal Funds Rate plus three
quarters of one percent or the banks' prime interest rates (6.1% at January 29,
2000). The Company's financing agreements contain certain restrictive covenants,
none of which is presently significant to the Company. At the Company's option,
any outstanding balance at May 31, 2001 is convertible to four-year term loans
at the banks' prime interest rates and is payable in monthly or quarterly
installments.
At January 29, 2000, maturities of long-term debt, exclusive of the bank
revolving lines of credit, were $180,000 for each of the next five fiscal years.
Note 5 - Profit Sharing and Other Benefit Programs:
The Company maintains a noncontributory profit sharing plan for all employees
who meet age and service requirements. Contributions to the plan are determined
annually by the Board of Directors and were $120,000 in each of the last three
fiscal years.
Additionally, the profit sharing plan includes a qualified salary reduction plan
under Section 401(k) of the Internal Revenue Code. Eligible participants in the
Company's 401(k) Plan can elect to invest 1% to 15% of their pre-tax earnings.
The Company's contribution to the 401(k) Plan is at the discretion of the Board
of Directors, who authorized contributions of the Company's common stock in the
amount of $80,000 in each of the last three fiscal years.
The Company has receivables from certain officers in each of the last three
fiscal years in the amount of $416,000, $489,000 and $515,000, respectively,
relating to premiums paid under split dollar life insurance policies.
<PAGE>
The Company has unfunded deferred compensation agreements with certain officers
which fix a minimum level for retirement benefits to be paid based on age and
years of service. Deferred compensation expense is being accrued over the
vesting period using a discount rate of 8% and approximated $111,000, $89,000
and $203,000, respectively, in each of the last three fiscal years.
Note 6 - Stock Incentive and Stock Purchase Loan Plans:
The Company's stock incentive plan provides for the granting of up to 400,000
common shares to key management employees. Options to purchase the Company's
stock are granted at no less than the market value at the date of grant, are
exercisable after one to five years and expire after eight to ten years. The
Company applies the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, in accounting for its stock options.
Accordingly, the Company has not recognized any related compensation expense in
its Statements of Income.
Changes in options under the plan for the three years ended January 29, 2000
were as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Options Exercise Price Exercisable Exercise Price
--------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Outstanding - January 25, 1997 463,800 $ 9.54 375,534 $ 9.75
Granted......................... 77,800 9.63
Exercised....................... (33,466) 7.06
---------------
Outstanding - January 31, 1998 508,134 9.71 405,723 9.81
Granted......................... 70,000 11.94
Exercised....................... (108,631) 7.03
Surrendered..................... (9,667) 19.66
---------------
Outstanding - January 30, 1999 459,836 10.48 341,613 10.30
Granted......................... 94,200 8.41
---------------
Outstanding - January 29, 2000 554,036 10.13 379,725 10.32
===============
</TABLE>
Additional information regarding stock options outstanding at January 29, 2000
follows:
<TABLE>
<CAPTION>
Weighted Weighted
Range of Average Weighted Average
Exercise Outstanding Exercise Average Remaining Exercisable Exercise
Prices Options Price Contractual Life Options Price
- -------------------- ---------------- -------------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 6.00 - $7.69.... 103,000 $ 7.22 2.8 years 103,000 $ 7.22
$ 8.31 - $9.63.... 329,536 8.83 4.7 years 211,225 8.93
$11.94............ 70,000 11.94 6.6 years 14,000 11.94
$21.75............ 51,500 21.75 1.6 years 51,500 21.75
---------------- -----------------
$ 6.00 - $21.75... 554,036 379,725
================ =================
</TABLE>
<PAGE>
FAS No. 123 requires the Company to make certain proforma disclosures as if the
fair value based method of accounting had been applied to its stock option
grants. The fair value of these options was estimated at the date of grant using
the Black - Scholes option pricing model with the following weighted-average
assumptions for fiscal 2000, 1999 and 1998, respectively: risk free interest
rates of 5.8%, 5.0% and 6.5%; expected volatility of 35.9%, 42.0% and 44.0%;
expected life in years of 5, 5 and 4; and fair value per option of $3.48, $5.25
and $4.09.
Had compensation cost been determined including the weighted average fair-value
of options granted in fiscal years 2000, 1999 (both of which ratably vest over
five years) and 1998 (which ratably vests over three years), the Company's
proforma net income (and basic earnings per share) would be $4.8 million ($1.01)
in fiscal 2000, $5.4 million ($1.07) in fiscal 1999 and $4.9 million ($.97) in
fiscal 1998. Proforma disclosures are not likely to be representative of the
effect on net income in future periods.
Under the Company's Stock Purchase Loan Plan, the Company has full recourse
loans with fifteen officers approximating $2.5 million, of which, approximately
$1.5 million originated during fiscal 2000 when 175,812 additional shares were
purchased by Company officers. The Plan annually provides for reduction of a
portion of interest payable on the loans based on meeting certain operating
targets, as well as the opportunity for the officer to receive a reduction of a
portion of the principal balance of the loan if the officer remains an employee
of the Company for seven years and maintains ownership of the stock.
Compensation expense related to this program was $100,000, $79,000 and $147,000
for the last three fiscal years, respectively. At the end of fiscal 2000, the
Company has accrued interest receivable from these officers in the amount of
$138,000.
Note 7 - Provision for Income Taxes:
Significant components of the Company's deferred income tax liabilities (assets)
are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation............................ $ 2,347 $ 2,163 $ 1,890
Other items............................. 290 396 444
----------- ----------- -----------
Total deferred tax liabilities.... 2,637 2,559 2,334
Deferred tax assets, primarily compensation
related................................ (814) (728) (694)
----------- ----------- -----------
Net deferred tax liabilities................ $ 1,823 $ 1,831 $ 1,640
=========== =========== ===========
</TABLE>
The provision for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal................................. $ 2,464 $ 2,551 $ 2,419
State................................... 545 620 526
----------- ----------- -----------
3,009 3,171 2,945
Deferred.................................... (8) 191 108
----------- ----------- -----------
$ 3,001 $ 3,362 $ 3,053
=========== =========== ===========
</TABLE>
<PAGE>
The effective income tax rates consist of (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Income taxes at federal
statutory rate (34%)...................... $ 2,686 $ 3,008 $ 2,731
State income taxes,
net of federal benefit................... 360 374 339
Other - net................................. (45) (20) (17)
------------- ------------- -------------
$ 3,001 $ 3,362 $ 3,053
============= ============= =============
Effective income tax rate................... 38.0% 38.0% 38.0%
============= ============= =============
</TABLE>
Note 8 - Commitments:
The Company leases all of its stores under varying terms and arrangements which
generally provide renewal options and contingent rentals based on a percentage
of gross sales. Total rent expense under the leases approximated $12.6 million,
$11.1 million and $9.8 million in each of the last three years, respectively.
The future minimum payments under operating leases as of the end of fiscal 2000
aggregate $42.4 million and are payable as follows: fiscal 2001 - $12.9 million,
fiscal 2002 - $9.5 million, fiscal 2003 - $7.1 million, fiscal 2004 - $5.0
million and fiscal 2005 - $2.6 million and $5.3 million thereafter.
The Company leases two properties from a shareholder and an immediate family
member. Rent expense included approximately $189,000, $185,000 and $182,000 in
fiscal 2000, 1999 and 1998, respectively, paid to these related parties. The
Company is also obligated under these lease agreements to pay minimum rentals
approximating $195,000 per year through fiscal 2002 and $49,000 per year
thereafter through fiscal 2006.
Note 9 - Nonrecurring Items:
During fiscal 2000, other income, net, included $665,000 ($412,000 after tax or
$.09 per diluted share) related to a gain on the sale of real estate. During
fiscal 1999, other income, net, included $266,000 ($165,000 after tax or $.03
per diluted share) related to income from an insurance claim.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
S&K Famous Brands, Inc.
In our opinion, the accompanying balance sheets and the related statements of
income, of changes in shareholders' equity and of cash flows present fairly, in
all material respects, the financial position of S&K Famous Brands, Inc. at
January 29, 2000 and January 30, 1999, and the results of its operations and its
cash flows for each of the three fiscal years in the period ended January 29,
2000, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Richmond, Virginia
March 10, 2000
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (Nos. 2-93013, 33-23918, 33-72270 and 33-58703) of S&K
Famous Brands, Inc. of our report dated March 10, 2000 relating to the financial
statements, which appears in the 1999 Annual Report Financials which is
incorporated in this Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Richmond, Virginia
April 7, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> JAN-29-2000
<CASH> 619
<SECURITIES> 0
<RECEIVABLES> 420
<ALLOWANCES> 0
<INVENTORY> 51,538
<CURRENT-ASSETS> 55,317
<PP&E> 38,070
<DEPRECIATION> 18,463
<TOTAL-ASSETS> 79,828
<CURRENT-LIABILITIES> 11,647
<BONDS> 0
0
0
<COMMON> 2,328
<OTHER-SE> 52,975
<TOTAL-LIABILITY-AND-EQUITY> 79,828
<SALES> 162,792
<TOTAL-REVENUES> 162,792
<CGS> 84,361
<TOTAL-COSTS> 84,361
<OTHER-EXPENSES> 69,463
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,068
<INCOME-PRETAX> 7,900
<INCOME-TAX> 3,001
<INCOME-CONTINUING> 4,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,899
<EPS-BASIC> 1.04
<EPS-DILUTED> 1.04
</TABLE>
