SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996 .
-----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________________to __________________.
Commission file number 1-9169
BERNARD CHAUS, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 13-2807386
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
1410 Broadway, New York, New York 10018
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 354-1280
- -------------------------------------------------------------------------------
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 issuer's
classes of common stock, as of the latest practicable date.
Date Class Shares Outstanding
- ------------------ ----------------------------- ---------------------
May 2, 1996 Common Stock, $0.01 par value 26,263,816
- ------------------ ----------------------------- ---------------------
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) PAGE
Condensed Consolidated Balance Sheets as of
March 31, 1996, June 30, 1995 and
March 31, 1995 3
Condensed Consolidated Statements of Operations
for the Nine Months and Quarters ended March 31,
1996 and 1995 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 12
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, June 30, March 31,
1996 1995(A) 1995
---- ------- ----
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 251 $ 418 $ 823
Accounts receivable, net 24,819 7,646 20,977
Inventories 25,736 16,203 15,394
Prepaid expenses and other current assets 1,268 1,523 1,295
-------- -------- --------
Total current assets 52,074 25,790 38,489
Fixed assets - net 1,964 2,392 2,924
Other assets 426 478 499
-------- -------- --------
$ 54,464 $ 28,660 $ 41,912
======== ======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Notes payable - banks 34,834 $ 18,698 $ 22,208
Accounts payable 20,857 12,922 15,216
Accrued expenses 5,337 5,549 5,418
Accrued restructuring expenses 465 2,535 1,819
-------- -------- --------
Total current liabilities 61,493 39,704 44,661
Subordinated promissory notes 22,935 21,066 20,476
Accrued restructuring expenses -- 269 1,706
-------- -------- --------
84,428 61,039 66,843
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.01 par value,
authorized shares -- 1,000,000;
outstanding shares -- none
Common stock, $.01 par value; authorized shares -- 50,000,000;
issued shares -- 26,886,516 at March 31, 1996, 21,073,081 at June
30, 1995 and 20,934,531 at
March 31, 1995 269 211 209
Additional paid-in capital 65,436 49,353 48,190
Deficit (94,189) (80,463) (71,850)
Less: Treasury stock, at cost --
622,700 shares (1,480) (1,480) (1,480)
-------- -------- --------
Total stockholders' deficiency (29,964) (32,379) (24,931)
-------- -------- --------
$ 54,464 $ 28,660 $ 41,912
======== ======== ========
</TABLE>
(A) The Balance Sheet at June 30, 1995 has been derived from the audited
financial statements at that date.
See accompanying notes to condensed consolidated financial statements.
3
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BERNARD CHAUS, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
FOR THE NINE FOR THE
MONTHS ENDED QUARTER ENDED
March 31, March 31,
---------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 137,881 $ 153,009 $ 39,961 41,071
Cost of goods sold 116,454 124,917 37,154 33,974
------------ ------------ ------------ ------------
Gross profit 21,427 28,092 2,807 7,097
Selling, general and administrative
expenses 30,114 34,073 10,437 10,926
Restructuring expenses -- 1,200 -- --
Unusual expenses -- 7,833 -- --
------------ ------------ ------------ ------------
(8,687) (15,014) (7,630) (3,829)
Interest expense (4,887) (4,080) (1,759) (1,552)
Interest and other income (expense), net 74 20 24 12
------------ ------------ ------------ ------------
Loss before provision for income taxes (13,500) (19,074) (9,365) (5,369)
Provision for income taxes 226 226 75 75
------------ ------------ ------------ ------------
Net loss ($ 13,726) ($ 19,300) ($ 9,440) ($ 5,444)
============ ============ ============ ============
Net loss per share ($.59) ($.98) ($.36) ($.27)
============ ============ ============ ============
Weighted average number of common
shares outstanding 23,233,000 19,773,000 26,262,000 20,312,000
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
FOR THE NINE
MONTHS ENDED
March 31,
----------------
1996 1995
---- ----
OPERATING ACTIVITIES
Net loss ($13,726) ($19,300)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 814 990
Provision for losses on accounts receivable 36 195
Deferred interest on subordinated promissory notes 1,869 1,687
Non-cash interest expense 520 456
Changes in operating assets and liabilities:
Accounts receivable (17,209) (3,415)
Inventories (9,531) 10,109
Prepaid expenses and other assets 307 2,350
Income taxes receivable -- 135
Accounts payable 7,935 1,055
Accrued expenses (214) (1,421)
Accrued restructuring expenses (2,339) (554)
-------- --------
Net cash used in operating activities (31,538) (7,713)
INVESTING ACTIVITIES
Purchases of fixed assets (386) (302)
-------- --------
Net cash used in investing activities (386) (302)
FINANCING ACTIVITIES
Net proceeds on short term bank borrowings 16,136 1,093
Net proceeds from issuance of stock 15,423 --
Principal payments on subordinated promissory notes -- (250)
Proceeds from the issuance of subordinated
promissory notes -- 7,527
Net proceeds from the exercise of options 198 --
-------- --------
Net cash provided by financing activities 31,757 8,370
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (167) 355
Cash and cash equivalents, beginning of period 418 468
-------- --------
Cash and cash equivalents, end of period $ 251 $ 823
======== ========
Cash paid for:
Taxes 12 6
Interest 2,734 1,689
Supplemental schedule of non-cash financing activities:
Exchange of subordinated promissory notes
for common stock -- 7,200
Issuance of warrants for credit support
by principal stockholder 520 456
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Nine Months Ended March 31, 1996 and March 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the periods ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending June 30,
1996 or any other period. For further information, refer to the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended June 30, 1995.
Net Loss Per Share: Net loss per share has been computed by dividing the
applicable net loss by the weighted average number of common shares
outstanding. Common equivalent shares were not included as their inclusion
would have been antidilutive.
2. INVENTORIES
Inventories (principally finished goods) are stated at the lower of cost,
using the first-in first-out (FIFO) method, or market. Included in inventories
is merchandise in transit of approximately $9.7 million at March 31, 1996,
$4.8 million at June 30, 1995 and $4.9 million at March 31, 1995.
3. FINANCIAL AGREEMENTS
An amended and restated financing agreement with BNY Financial Corporation
(BNYF), a wholly owned subsidiary of The Bank of New York, originally entered
into in July 1991, amended and restated effective as of February 21, 1995,
(the February Amendment) and further amended effective as of September 28,
1995 (the September Amendment) and May 9, 1996 (the May Amendment),
(collectively the Amended Financing Agreement), provides the Company with a
$60 million credit facility for letters of credit and direct borrowings, with
a sublimit for loans and advances ranging from $40.0 to $48.0 million. At
March 31, 1996, the Company had availability of $0.9 million. The amount of
financing available is based upon a formula incorporating eligible receivables
and inventory, cash balances, other collateral, and permitted overadvances,
all as defined in the Amended Financing Agreement. The Amended Financing
Agreement is collateralized by substantially all of the Company's assets,
including accounts receivable and inventory. Interest on direct borrowings is
payable monthly at an annual rate equal to the higher of (i) The Bank of New
York's prime rate (8.25% at March 31, 1996) plus 0.5% (The Bank of New York
prime rate plus 1.5% in the event the Company's overadvance position exceeds
the allowable overadvances) or (ii) the Federal Funds Rate in effect plus 1%
(Federal Funds Rate plus 2% in the event the Company's overadvance position
exceeds the allowable overadvances). There is a commitment fee of 0.375% of
the unused portion of the line, payable monthly, and letter of credit fees
equal to 0.125% of the outstanding letter of credit balance, payable monthly.
The
6
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BERNARD CHAUS, INC. AND SUBSIDIARIES
February Amendment required the payment of a due diligence and facility fee
aggregating $0.6 million and provides for the payment of minimum service
charges of $0.6 million per annum. In connection with the May Amendment, BNYF
was paid a fee of $25,000, and additional fees of $10,000 per month through
December 1996 were provided for, with BNYF agreeing to provide specified
levels of overadvances up to $10.0 million through the same period. The
Company may terminate the Amended Financing Agreement upon 90 days' prior
written notice at any time, subject to termination fees. BNYF may terminate
after February 21, 1998, upon 60 days' written notice to the Company.
The Amended Financing Agreement contains covenants relative to minimum levels
of working capital and net worth and restrictions on real and/or personal
property leases. The Company is also prohibited from declaring or paying
dividends, or making other distributions on its capital stock, with certain
exceptions. In connection with the May Amendment, BNYF waived covenant
compliance with the working capital and net worth covenants through March 31,
1996.
4. SUBORDINATED PROMISSORY NOTES
The Company had outstanding at March 31, 1996, $22.9 million of subordinated
promissory notes payable to Josephine Chaus, certain of which were originally
issued on June 30, 1986 and the remainder of which were issued in February and
March 1991 (the Subordinated Notes). The Company has been prohibited from
making payments of principal or interest on the Subordinated Notes since 1993
(with the exception of principal payments of approximately $0.5 million, $0.3
million and $0.3 million in November 1993, February 1994 and August 1994,
respectively) as a result of restrictive covenants under the Amended Financing
Agreement. In connection with the public offering (see Note 6), Ms. Chaus
extended the maturity date of the Subordinated Notes (which were to mature on
July 1, 1996) to July 1, 1998.
5. RESTRUCTURING AND UNUSUAL EXPENSES
During the first quarter of fiscal 1995, the Company recorded unusual expenses
of $7.8 million, primarily related to costs associated with the signing of the
Company's new Chief Executive Officer, (including $6.2 million paid as a
sign-on bonus and $1.0 million paid in recruiting fees), and $1.2 million in
restructuring expenses related to employee severance.
6. COMMON STOCK OFFERING
On November 22, 1995, pursuant to a Registration Statement on Form S-2 filed
on October 10, 1995, the Company issued 5,750,000 shares of Common Stock at a
price of $3.00 per share in an underwritten public offering. Proceeds from the
offering, net of commissions and other expenses totaling $1.8 million, were
$15.4 million.
7
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Operating results for the interim periods ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1996 or any other period.
For the nine months ended March 31, 1996, net sales decreased by $15.1 million
or 9.9% compared to the nine months ended March 31, 1995. The sales decrease
reflects the impact of significantly lower sales at regular and incentive
prices combined with an increase in sales to off price vendors at deeper
discounts than the prior year. Gross profit declined $6.7 million from the
prior year reflecting the impact of incentive pricing and deeper discounts on
sales to off price vendors combined with the impact of increased inventory
reserves. The Company's Dress division realized negative gross profit of $2.2
million for the nine month period with the most significant factors being
deeper discounts on sales to off price vendors and higher reserve levels on
inventory.
In the quarter ended March 31, 1996, net sales and gross profit as a
percentage of sales each declined from the prior year with net sales of $40.0
million and gross profit of 7.0% in the quarter ended March 31, 1996 versus net
sales of $41.1 million and gross profit of 17.3% in the corresponding quarter
of the prior year. The quarter ended March 31, 1996 was effected by
deteriorating market conditions (which negatively impacted regular price
sales) and consolidation in the off price marketplace which negatively
impacted prices obtained on off price sales. The decline in gross profit as a
percentage of net sales reflects the impact of increased off price sales
volume at deeper discounts. The Company has discontinued its Dress division,
which has adversely affected its results. In the quarter ended March 31,
1996, the Company's Dress division realized negative gross margin of $2.1
million, reflecting the impact of increased off price sales volume at deeper
discounts combined with increased reserve levels on inventory.
Selling, general and administrative expenses for the nine months ended March
31, 1996 decreased by $4.0 million (or 11.7%) as compared with the nine months
ended March 31, 1995. Selling, general and administrative expenses as a
percentage of net sales decreased from 22.3% of net sales for the nine months
ended March 31, 1995 to 21.8% of net sales for the nine months ended March 31,
1996. This decrease was primarily attributable to the implementation of cost
reduction programs under a corporate restructuring program which was partially
offset by expenditures of $0.6 million made in preparation for the launch of
the Company's licensed Nautica(R) women's career and casual sportswear line.
Payroll and related costs accounted for $3.2 million (or 81%) of this
decrease. Other areas with significant decreases included rent, professional
fees, freight and supplies.
8
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BERNARD CHAUS, INC. AND SUBSIDIARIES
At March 31, 1996, the Company had restructuring reserves of $0.5 million
reflecting a reduction in the reserve balance for the nine months of
approximately $2.3 million. Charges to the reserve over the nine month period
related to outlet store closings ($0.4 million), consolidation of office and
warehouse space ($1.3 million), and severance related costs ($0.6 million).
The remaining restructuring reserve balance is related to consolidation of
office and warehouse space ($0.2 million) and outlet store closings ($0.3
million). During the first quarter of fiscal 1995, the Company recorded
unusual expenses of $7.8 million, primarily related to costs associated with
the signing of the Company's new Chief Executive Officer, (including $6.2
million paid as a sign-on bonus and $1.0 million paid in recruiting fees), and
$1.2 million in restructuring expenses related to employee severance. and $1.2
million in restructuring expenses related to employee severance.
Interest expense for the nine months and for the quarter ended March 31, 1996
increased as compared with the comparable periods of the prior fiscal year,
primarily due to higher average bank borrowings at higher rates and increased
facility fees paid under the Amended Financing Agreement.
9
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BERNARD CHAUS, INC. AND SUBSIDIARIES
Financial Position, Liquidity and Capital Resources
General
Net cash used in operating activities was $31.5 million for the nine months
ended March 31, 1996, as compared to $7.7 million for the nine months ended
March 31, 1995. The net cash used in operating activities for the nine months
ended March 31, 1996 resulted primarily from the net loss of $13.7 million
inclusive of $3.2 million non-cash charges, increases in accounts receivable
of $17.2 million, increases in inventory of $9.5 million and decreases in
accrued restructuring expenses of $2.3 million, partially offset by higher
levels of accounts payable of $7.9 million. In the fall of 1995, management
anticipated expanding floor space in existing store customers and expanding to
new customers. Continued deterioration in the marketplace combined with the
impact of consolidation in the off price marketplace have resulted in less
than anticipated store penetration and higher inventory levels. The Company
has established an inventory reserve to reflect current market conditions.
Piece good inventories have increased partly relating to the introduction of
the Company's licensed Nautica(R) women's career and casual sportswear line.
The increase in receivable levels from March 31, 1995 to March 31, 1996
reflects timing of shipments for Spring and Summer sales and lower reserves
required due to lower promotional allowances.
Amended Financing Agreement
The Company and BNY Financial Corporation ("BNYF") entered into a financing
agreement in July 1991, which was amended and restated effective as of
February 21, 1995, (the "February Amendment") and further amended effective as
of September 28, 1995 (the "September Amendment") and as of May 9, 1996 (the
"May Amendment") (collectively the "Amended Financing Agreement"). The Amended
Financing Agreement provides the Company with a $60 million credit facility
for letters of credit and direct borrowings, with a sublimit for loans and
advances of $40.0 to $48.0 million. The amount of financing available is based
upon a formula incorporating eligible receivables and inventory, cash
balances, other collateral, and permitted overadvances, all as defined in the
Amended Financing Agreement. At March 31, 1996, the Company had availability
of approximately $0.9 million under the Amended Financing Agreement. The
Amended Financing Agreement is collateralized by substantially all of the
Company's assets, including accounts receivable and inventory.
Credit Support
Josephine Chaus has arranged for a letter of credit (the "Letter of Credit")
in various amounts since April 1994 in return for which BNYF has increased the
availability under the Amended Financing Agreement. As part of the
negotiations with BNYF in connection with the Amended Financing Agreement, in
February 1995 Josephine Chaus increased the Letter of Credit to $10.0 million
and extended its term until October 31, 1995. In September 1995, Ms. Chaus
further extended the term of the Letter of Credit to January 31, 1996.
Subsequently, in connection with the September Amendment, Ms. Chaus provided
the Company with an option to further extend the Letter of Credit to July 31,
1996 (the "July Option"), subject to the consummation of the Company's public
common stock offering (see "-- Nautica License Agreement/Future Financing
Requirements"). In January 1996, the
10
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BERNARD CHAUS, INC. AND SUBSIDIARIES
Company exercised the July Option to extend the Letter of Credit to July 31,
1996. In addition, in February 1995, Ms. Chaus provided a $5.0 million
personal guarantee (the "Guarantee"), to be in effect during the Amended
Financing Agreement's three-year term. In connection with the May Amendment,
Ms. Chaus agreed to extend the Letter of Credit to January 31, 1997
(the "January Extension") and additionally provided a collateralized increase of
$5.0 million in the Guarantee (the "Increased Guarantee").
The issuance of the warrants to Ms. Chaus, for certain credit support provided
by her was recorded at a value of $0.2 million in the second quarter and $0.3
million in the third quarter, respectively, and included as charges to
interest expense with corresponding increases to additional paid-in capital.
The consideration to be paid to Ms. Chaus for the January Extension and the
Increased Guarantee is being considered by a Special Committee comprised of
disinterested members of the Company's Board of Directors (the "Special
Committee").
Issuance of Stock in Exchange for Debt
In September 1994, Josephine Chaus loaned $7.2 million to the Company in
exchange for subordinated promissory notes bearing interest at 12% per annum.
Proceeds of such cash infusion were used for costs and associated expenses
related to the signing of the Company's new Chief Executive Officer. In
November 1994, upon the request of the Special Committee, in order to provide
additional equity to the Company, to enhance the Company's balance sheet and
to accommodate BNYF, Josephine Chaus exchanged such subordinated promissory
notes, including accrued interest thereon of $0.2 million, for 1,914,500
shares of Common Stock (based upon a purchase price of $3.85 per share).
Subordinated Debt
The Company had outstanding at March 31, 1996, $22.9 million of subordinated
notes payable to Josephine Chaus (the "Subordinated Notes"). In connection
with the Company's public offering (see "--Nautica License Agreement/Future
Financing Requirements"), Josephine Chaus extended the maturity date of the
Subordinated Notes (which were to mature on July 1, 1996) to July 1, 1998. The
Company has been unable to pay principal or interest, with certain exceptions,
under the Subordinated Notes as a result of covenants in the Amended Financing
Agreement. See Notes 3 and 4 to Notes to the Company's Condensed Consolidated
Financial Statements.
11
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BERNARD CHAUS, INC. AND SUBSIDIARIES
Nautica License Agreement/Future Financing Requirements
In September 1995, the Company entered into a license agreement (the "Nautica
License Agreement") with Nautica Apparel Inc. ("Nautica"), pursuant to which
the Company will arrange for the manufacture of, market, distribute and sell a
new women's career and casual sportswear line under the Nautica name. The
Nautica License Agreement runs through December 31, 1999 and was contingent
upon the Company raising a minimum of $10.0 million in equity capital by
December 31, 1995. Additionally, the Company is required to devote at least
$7.0 million to the fulfillment of the Company's obligations under the Nautica
License Agreement, including related capital expenditures. The Company's
obligations also include minimum royalty and advertising payments and the
construction of a separate showroom for the display of the Company's licensed
Nautica products.
On November 22, 1995, the Company consummated an underwritten public offering
of 5,750,000 shares of Common Stock at a price of $3.00 per share. Net
proceeds, after expenses and commissions of $1.8 million, were $15.4 million.
The Company intends to use approximately $7.0 million of the net proceeds from
the offering to develop and market the Company's licensed Nautica product
line, and the remaining net proceeds to provide working capital to support the
growth of the Company's existing product lines. Pending such uses, the
proceeds were used to reduce the outstanding balance under the Amended
Financing Agreement. Since it is a revolving credit facility, any amounts
repaid will be available to be reborrowed, subject to the borrowing formula in
the Amended Financing Agreement. (see "Amended Financing Agreement").
At March 31, 1996, the Company had a working capital deficiency of $9.4
million. The Company requires the availability of sufficient cash flow and
borrowing capacity to finance its existing product lines and to develop and
market its licensed Nautica product lines. The Company expects to satisfy such
requirements through cash flow from operations, its line of credit under the
Amended Financing Agreement, and, in the near term, continued credit support
from Josephine Chaus. The Company anticipates that its future operations will
be financed in the same manner, but may also explore additional sources of
financing.
In May 1996, Ms. Chaus increased her credit support to the Company by
increasing the Guarantee to $10.0 million. In consideration for her credit
support, BNYF has provided the Company with specified levels of overadvances
up to $10 million through December 31, 1996. The Company has no understanding
with Ms. Chaus pursuant to which Ms. Chaus would extend the Letter of Credit
beyond January 31, 1997. In addition, although BNYF historically has waived
compliance with certain covenants and permitted certain overadvances and has,
pursuant to the May Amendment, agreed to relax such covenants and permit
specified levels of overadvances through December 31, 1996, there can be no
assurance that it will continue to do so in the future. Moreover, growth of
the Company's existing product lines and/or the development of the Company's
licensed Nautica product line could increase the amount of the potential
shortfall in borrowing availability after the current fiscal year.
12
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BERNARD CHAUS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Attached hereto as Exhibits are the following:
10.73 - Amendment and waiver dated May 9, 1996 to the Financing
Agreement
27 - Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the quarter ended March
31, 1996.
13
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BERNARD CHAUS, INC. AND SUBSIDIARIES
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.
BERNARD CHAUS, INC.
(Registrant)
Date: May 15, 1996 By: /s/Josephine Chaus
------------------
JOSEPHINE CHAUS
Chairwoman of the Board and
Office of the Chairman
Date: May 15, 1996 By: /s/Andrew Grossman
------------------
ANDREW GROSSMAN
Chief Executive Officer and
Office of the Chairman
Date: May 15, 1996 By: /s/Wayne S. Miller
------------------
WAYNE S. MILLER
Executive Vice President -
Finance and Administration and
Chief Financial Officer
14
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BERNARD CHAUS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Number Description Page
10.73 Amendment and waiver dated May 9, 1996 to the Financing
Agreement
27 Financial Data Schedule.
15
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BERNARD CHAUS, INC. AND SUBSIDIARIES
EXHIBIT 10.73
May 9, 1996
Bernard Chaus, Inc.
1410 Broadway
New York, NY 10018
Gentlemen/Women:
Reference is made to the Restated and Amended Financing Agreement
between us bearing the effective date of February 21, 1995, as supplemented
and amended (the "Financing Agreement"). All capitalized terms not otherwise
defined therein shall have meaning set forth in the Financing Agreement.
It is hereby agreed that effective immediately the Financing
Agreement shall be amended as follows:
1. The definition of Applicable Permitted Overadvances set forth in
Paragraph 8 shall be amended to read in its entirety as follows:
"Applicable Permitted Overadvances" shall remain solely with respect
to the period commencing on the date hereof and ending on December 31, 1996
provided that no Event of Default has occurred or is continuing (in which
event the overadvance shall be immediately repaid in its entirety), the
amounts set forth below:
May 9, 1996 through May 31, 1996 $ 6,000,000
June 1, 1996 through September 27, 1996 $10,000,000
Sept. 28, 1996 through Oct. 27, 1996 $ 9,000,000
Oct. 28, 1996 through Nov. 5, 1996 $ 4,000,000
Nov. 6, 1996 through Nov. 27, 1996 $ 6,500,000
Nov. 28, 1996 through Dec. 5, 1996 $ 5,500,000
Dec. 6, 1996 through Dec. 31, 1996 $ 8,000,000
On January 1, 1997 and thereafter there shall be no further Applicable
Permitted Overadvances."
2. Section 9(a) (vi) of the Financing Agreement shall be amended by
deleting the dollar amount of "($14,500,000) appearing adjacent to the date of
"June 30, 1996" and by inserting the dollar amount of "($15,800,000) in its
place and stead, and by inserting the following dates and adjacent dollar
amounts immediately below the line in which the amount of "($14,500,000)"
appeared:
"As of September 30, 1996 ($12,600,000)
As of December 31, 1996 ($12,500,000)"
16
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
3. Section 9(a) (vii) of the Financing Agreement shall be amended by
deleting the dollar amount of "($15,500,000) appearing adjacent to the date of
"June 30, 1996" and by inserting the dollar amount of "($17,800,000) in its
place and stead, and by inserting the following dates and adjacent dollar
amounts immediately below the line in which the amount of "($15,500,000)"
appeared:
"As of September 30, 1996 ($14,300,000)
As of December 31, 1996 ($13,600,000)"
4. Section 2(a) of the Financing Agreement shall be amended such that
the dollar amount of "$40,000,000 appearing on the 8th and 12th line of said
section shall in each instance be temporarily increased to $43,000,000 during
June 1996, to $48,000,000 from September 1, 1996 through November 30, 1996,
and to $44,000,000 during December 1996, thereafter it shall in each instance
revert to $40,000,000.
Upon the occurrence of an Infusion Event of not less that $4,000,000
the dollar amount of the Applicable Permitted Overadvance, then remaining, as
set forth in section 1 of this letter for the period December 6, 1996 through
December 31,1996 shall be reduced to $5,000,000 and the dollar amounts for the
then remaining time periods set forth in sections 9(a) (vi) and (vii) of the
Financing Agreement as amended by sections 2 and 3 of this letter shall be
positively increased by an amount equal to 75% of the dollar amount of the
Infusion Event.
In consideration of the financial support provided by us to you by
the amendment set forth in section 1 herein above the preceding paragraph you
agree to pay us a fee of $10,000 per month commencing the date hereof and on
the same day in each month thereafter through December 1996. In the event you
continue to have advances in excess of the Formula Amount ("Overadvances")
outstanding under the Financing Agreement on January 1, 1997 or thereafter (it
being understood that nothing contained herein shall be construed as our
consenting to the existence of or the extending of any such Overadvances) you
shall pay us a fee of $10,000 for each month or part thereof that such
Overadvances are outstanding. These fees shall be in addition to any other
fees interest or charges which are payable by you under the Financing
Agreement.
This letter shall also serve to confirm that you have advised us that
you are in default under the Financing Agreement because of you failure to
meet the Tangible Net Worth Covenant set forth in section 9(a) (vi) of the
Financing Agreement for the period ending 3/31/96 as your actual Tangible Net
Worth was ($7,029,000) rather than the ($5,750,000) required under the
Agreement and due to your failure to achieve the Working Capital requirement
for the period ended 3/31/96 of ($7,250,000) as set forth in section 9(a)
(vii) of the Agreement your having achieved an actual Working Capital of
($9,419,000) during that period.
Pursuant to your request this is to advise you that we waive as
Events of Default under the Financing Agreement, your failure to achieve the
requirements of sections 9(a) (vi) and 9(a) (vii) of the Agreement for the
period ending 3/31/96. This waiver is only with respect to these two sections
of the Financing Agreement and only for the period stated and
17
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
only provided that your actual financial performance in the regards were no
worse that stated by you to us. Furthermore, the waiver should not be
construed as a waiver of any other provisions of the Financing Agreement not
of the provisions referred to here for any other period.
In consideration of the waiver provided by us to you in the preceding
paragraph you agree to pay us a waiver fee of $25,000 which shall likewise be
in addition to any fees interest or charges payable by you to us.
Except as hereby modified or amended all of the terms and conditions
of the Financing Agreement shall continue to remain in full force and effect.
If this letter correctly sets forth the agreement between us, please
execute a copy of this letter in the space provided below and return a fully
executed copy to our offices.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/ Andrew Rogow
---------------------------------------------
Title: Senior VP
READ & AGREED TO:
BERNARD CHAUS, INC.
BY: /s/ Wayne S. Miller
------------------------------
Title: CFO
18
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0
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