<PAGE>
UNITED STATES
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 DECEMBER 31, 1998
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
---- ----- ------------------
January 25, 1999 Common Stock, $0.01 par value 27,115,907
---------------- ----------------------------- ------------------
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
December 31, 1998, June 30, 1998 and
December 31, 1997 3
Condensed Consolidated Statements of Operations
for the Quarters and Six Months ended December 31,
1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
for the Six Months ended December 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares)
<TABLE>
<CAPTION>
December 31, June 30, December 31,
1998 1998 1997
------------- -------- ------------
(Unaudited) ( * ) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ............... $ 778 $ 2,039 $ 481
Accounts receivable, net ................ 20,144 17,289 12,526
Inventories ............................. 17,739 17,486 14,627
Prepaid expenses ........................ 428 362 955
--------- --------- ---------
Total current assets ............... 39,089 37,176 28,589
Fixed assets - net ........................... 898 960 829
Other assets ................................. 540 876 617
--------- --------- ---------
$ 40,527 $ 39,012 $ 30,035
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable - banks ................... $ -- $ -- $ 23,087
Accounts payable ........................ 12,259 13,005 14,155
Accrued expenses ........................ 3,224 4,492 6,090
Accrued restructuring expenses .......... -- -- 185
Term loan - current ..................... 1,000 1,000 1,000
--------- --------- ---------
Total current liabilities .......... 16,483 18,497 44,517
Subordinated promissory notes ................ -- -- 27,888
Term loan .................................... 13,000 13,500 14,000
--------- --------- ---------
29,483 31,997 86,405
STOCKHOLDERS' EQUITY/(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 - 27,178,177 at
December 31, 1998 and
June 30, 1998, 2,689,997 at
December 31, 1997 .................. 272 272 27
Additional paid-in capital .............. 125,224 125,224 65,705
Deficit ................................. (112,972) (117,001) (120,622)
Less: Treasury stock at cost -
62,270 shares at December 31, 1998,
June 30, 1998, and December 31, 1997 (1,480) (1,480) (1,480)
--------- --------- ---------
Total stockholders' equity/(deficiency) . 11,044 7,015 (56,370)
--------- --------- ---------
$ 40,527 $ 39,012 $ 30,035
========= ========= =========
</TABLE>
*Derived from audited financial statements at June 30, 1998.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except number of shares and per share amounts)
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Months Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 44,670 $ 47,095 $ 94,342 $ 105,951
Cost of goods sold 34,967 35,809 70,847 80,241
--------- --------- --------- ----------
Gross profit 9,703 11,286 23,495 25,710
Selling, general and administrative expenses 8,404 10,180 18,105 20,231
--------- --------- --------- ----------
Income from operations 1,299 1,106 5,390 5,479
Interest expense, net 659 2,372 1,277 4,694
--------- --------- --------- ----------
Income before provision for income taxes 640 (1,266) 4,113 785
Provision for income taxes 14 45 84 95
--------- --------- --------- ----------
Net income (loss) $ 626 $ (1,311) $ 4,029 $ 690
========= ========== ========= ==========
Basic and diluted earnings (loss) per share $ 0.02 $ (0.20) $ 0.15 $ 0.10
========= ========= ========= ==========
Weighted average number of common shares
outstanding- basic 27,116,000 6,687,000 27,116,000 6,687,000
========== ========= ========== =========
Weighted average number of common and common
equivalent shares outstanding- diluted 27,118,000 6,687,000 27,118,000 6,687,000
========== ========= ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Six Months Ended
December 31, December 31,
1998 1997
------------ -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income .......................................... $ 4,029 $ 690
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization .................... 746 348
Provision for losses on accounts receivable ...... 20 38
Deferred interest on subordinated promissory notes -- 1,514
Non-cash interest expense ........................ 16 --
Changes in operating assets and liabilities:
Accounts receivable .............................. (2,875) (5,113)
Inventories ...................................... (253) 9,119
Prepaid expenses and other assets ................ (156) (302)
Accounts payable ................................. (746) (5,670)
Accrued expenses ................................. (1,268) 697
Accrued restructuring expenses ................... -- (1,434)
-------- --------
Net Cash Used In Operating Activities ............... (487) (113)
-------- --------
INVESTING ACTIVITIES
Purchases of fixed assets ......................... (174) (42)
Purchases of other assets ......................... (100) (25)
-------- --------
Net Cash Used In Investing Activities ............... (274) (67)
-------- --------
FINANCING ACTIVITIES
Net payments on short-term bank borrowings ........ (14,669)
Net proceeds from issuance of term loan ........... (15,000)
Principal payments on term loan ................... (500) --
-------- --------
Net Cash (Used In) Provided By Financing Activities . (500) 331
-------- --------
(Decrease) increase in cash and cash equivalents .... (1,261) 151
Cash and cash equivalents, beginning of period ...... 2,039 330
-------- --------
Cash and cash equivalents, end of period ............ $ 778 $ 481
======== ========
Cash Paid for:
Taxes ............................................. 312 7
Interest .......................................... 1,180 1,483
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Six Months Ended December 31, 1998 and December 31, 1997
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. All
significant intercompany balances and transactions were eliminated. Operating
results for the quarter and six months ended December 31, 1998 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1999 or any other period. The balance sheet at June 30, 1998 has been
derived from the audited financial statements at that date. For further
information, refer to the financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K/A for the year ended June 30, 1998.
Earnings Per Share: All share and per share data reflects the 1 for 10
reverse stock split which was effected December 9, 1997. Basic earnings per
share have been computed by dividing the applicable net income by the weighted
average number of common shares outstanding. Diluted earnings per share has
been computed by dividing the applicable net income by the weighted average
number of common shares outstanding and common stock equivalents. At December
31, 1997, the calculation of basic and diluted earnings per share reflects the
retroactive adjustment for the bonus element of the Rights Offering, which was
consummated on January 26, 1998. At December 31, 1998 and December 31, 1997,
2,794,000 and 687,000 common stock equivalents, respectively, were not included
in the computation of earnings per share as they were antidilutive.
New Accounting Pronouncements: The Company has adopted SFAS No. 130,
Reporting Comprehensive Income, during the current fiscal year. SFAS 130
establishes standards for reporting comprehensive income and its components in
a full set of general-purpose financial statements. This Statement requires
that an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement, and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
Currently, the Company has no items of other comprehensive income.
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 $8.1 million at December
31, 1998, $7.2 million at June 30, 1998 and $9.8 million at December 31, 1997.
6
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
3. Financing Agreement
The Company has a revolving credit facility and term loan (the "Credit
Facility") with BNY Financial Corporation, a wholly owned subsidiary of The
Bank of New York ("BNYF"). The Facility was entered into in October 1997 and
last amended in June 1998.
The Credit Facility provides for a $45.5 million revolving credit line
with a $34.0 million sub-limit for letters of credit and a $14.5 million term
loan facility. Each facility matures on December 31, 2002.
Interest on the revolving credit line accrues at 1/2 of 1% above the
Prime Rate (7.75% at December 31, 1998) and is payable on a monthly basis, in
arrears. Interest on the term loan accrues at an interest rate ranging from 1/2
of 1% above the Prime Rate to 1 1/2% above the Prime Rate, which interest rate
will be determined, from time to time, based upon the Company's availability
under the Credit Facility.
Amortization payments in the amount of $250,000 are payable quarterly
in arrears in connection with the term loan. Four amortization payments have
been made as of December 31, 1998. A balloon payment in the amount of $10.25
million is due on December 31, 2002. In the event of the earlier termination by
the Company of the Credit Facility, the Company will be liable for termination
fees initially equal to $2.8 million, and declining to $2.2 million after
October 8, 2000. The Company's obligations under the Credit Facility are
secured by a first priority lien on substantially all of the Company's assets,
including the Company's accounts receivable, inventory and trademarks.
The Credit Facility contains financial covenants requiring, among
other things, the maintenance of minimum levels of tangible net worth, working
capital and maximum permitted loss (minimum permitted profit).
4. Restructuring
In June 1997, the Company announced a proposed restructuring program
to be implemented by the Company. In September 1997, the disinterested members
of the Board of Directors of the Company unanimously approved the restructuring
plan which provided for the following: (i) the Company would raise, through an
offer of rights to subscribe ("Rights"), up to $20.0 million, but not less than
$12.5 million, of equity through a rights offering to all shares of Common
Stock of the Company (the "Rights Offering") of up to 13,977,270 shares of
Common Stock of the Company (on a post stock split basis); (ii) the conversion
of approximately $40.6 million of the Company's indebtedness to Ms. Chaus,
consisting of $28.1 million of then existing subordinated indebtedness
(including accrued interest through January 28, 1998) and $12.5 million of
additional indebtedness owed to Ms. Chaus, into 10,510,910 shares of Common
Stock of the Company; (iii) entering into the Credit Facility; (iv) the
implementation of a reverse stock split of the Company's Common Stock such that
every ten (10) shares of Common Stock would be converted into one (1) share of
Common Stock; and (v) the liquidation of the Company's retail outlet stores. On
October 10, 1997, the
7
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Company entered into the Credit Facility referred to in (iii) above. On
December 9, 1997, the reverse stock split described in (iv) above became
effective. By mid-January, the Company closed all of its retail outlet stores
as referenced in (v) above. On January 26, 1998, the Rights Offering described
in (i) above was consummated. On January 29, 1998, the conversion of
indebtedness into equity described in (ii) above was completed.
8
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
-----------------------------------------------------------------------
Results of Operations
- ---------------------
For the quarter ended December 31 1998, net sales decreased by $2.4
million or 5.2% as compared to the quarter ended December 31, 1997. For the six
months ended December 31, 1998, net sales decreased by $11.6 million or 11.0%.
The sales decrease for both the quarter and six months was primarily due to a
decrease in retail store sales ($5.0 million and $10.7 million, respectively)
resulting from the closing of all but one of the Company's retail outlet stores
in January 1998 and a decrease in sales associated with the Company's Nautica
licensed product line ($4.0 million and $6.4 million, respectively) which was
terminated in October of 1998. These decreases were offset by increased sales
of the Company's Chaus product line through department store channels ($6.6
million and $5.5 million, respectively). Due to the Company's financial
restructuring last year, fall goods were not shipped until July 1997, whereas
this year fall goods were shipped beginning in June. On a comparable basis, net
sales for fall products shipped in June 1998 through September 1998 increased
approximately 16% over net sales of fall products shipped in July 1997 through
September 1997. For the quarter and six months ended December 31, 1998, units
shipped related to sales of the Company's Chaus product line increased by 28.5%
and 5.5%, respectively. Average selling price of the Company's Chaus product
line for the quarter ended December 31, 1998 decreased by approximately 8% as
compared to the quarter ended December 31, 1997 primarily as a result of lower
product costs which were reflected in lower average selling prices while
maintaining Chaus product line gross profit margins. Average selling price of
the Company's Chaus product line for the six months ended December 31, 1998
remained relatively constant as compared to the six months ended December 31,
1997.
Gross profit as a percentage of net sales decreased to 21.7% for the
quarter ended December 31, 1998 from 24.0% in the comparable period last year.
The decrease in gross profit as a percentage of net sales primarily resulted
from the impact of winding down the Nautica licensed product line during the
second quarter of fiscal 1999.
Gross profit as a percentage of net sales increased to 24.9% for the
six months ended December 31, 1998 from 24.3% in the comparable period last
year. The increase in gross profit as a percentage of net sales was primarily
due to improved gross margins on the Chaus product lines as a result of an
improved initial mark-up, partially offset by the loss associated with the
winding down of the Nautica licensed product line.
Selling, general and administrative ("SG&A") expenses decreased by
$1.8 million for the quarter ended December 31, 1998 as compared with the
quarter ended December 31, 1997. This decrease was primarily attributable to
the closing of all but one of the Company's retail outlet stores in January
1998 ($1.3 million), the termination of the Nautica licensed product line ($0.7
million), offset by a nominal increase in expenses related to the increase in
sales of the Company's Chaus product lines ($0.2 million). SG&A expenses as a
percentage of net sales decreased to 18.8% for the quarter ended December 31,
1998 as compared to 21.6% for the quarter ended December 31, 1997. This
decrease was primarily due to the increase in sales associated with the
Company's
9
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Chaus product lines through department store channels without a comparable
percentage increase in SG&A and the elimination of the Company's retail outlet
stores which carried a higher SG&A expense as a percentage of net sales.
SG&A expenses decreased by $2.1 million for the six months ended
December 31, 1998 as compared with the six months ended December 31, 1997. This
decrease was primarily due to the closing of all but one of the Company's
retail outlet stores in January 1998 ($2.6 million) and the termination of the
Nautica licensed product line during the second quarter of fiscal 1999 ($0.4
million), offset by an increase in operating expenses ($0.9 million) related to
the increase in sales of the Company's Chaus product lines through department
store channels. SG&A expenses as a percentage of net sales increased to 19.2%
of net sales for the six months ended December 31, 1998 as compared to 19.1%
for the six months ended December 31, 1997. This small increase was due to the
decrease in sales associated with the termination of the Nautica licensed
product line without a comparable percentage decrease in expenses, partially
offset by a decrease in SG&A expense as a percentage of net sales related to
the Company's Chaus product lines, and the closing of all but one of the
Company's retail outlet stores which carried a higher SG&A expense as a
percentage of net sales. In connection with the termination of the employment
of the Company's former Chief Executive Officer, Andrew Grossman, the Company
is obligated to pay up to $1.66 million over a period of 20 months in
consideration for Mr. Grossman's agreement not to compete for twelve months.
Such amounts are charged to expense ratably over the twelve-month
non-competition period. In addition, the Company is obligated to make bonus
payments in an amount equal to 2 1/2% of net profits for fiscal years 1999 and
2000, and the pro rated portion of fiscal year 2001(i.e., 1/6 of such year).
Such bonus payments are being expensed over the respective fiscal years.
Interest expense for the quarter and six months ended December 31,
1998 decreased by $1.7 million and $3.4 million, respectively, from the
comparable period last year as a result of the conversion of subordinated debt
to equity in connection with the Company's Restructuring (as defined below)
which was completed on January 29, 1998. Decreases in bank borrowings and
decreased interest rates on bank borrowings also contributed to the decrease in
interest expense.
Net income for the quarter and six months ended December 31, 1998
includes a net loss of $1.9 million and $2.9 million, respectively, or a loss
of $0.07 and $0.11, respectively, per diluted share, associated with the
licensed Nautica business. The Company discontinued shipping Nautica products
during the second quarter of fiscal 1999. The conclusion of the Nautica license
is expected to have a positive impact on the Company's earnings in the future.
Financial Position, Liquidity and Capital Resources
- ---------------------------------------------------
General
Net cash used in operating activities was $0.5 million for the six
months ended December 31, 1998 as compared to $0.1 million for the six months
ended December 31, 1997. Cash used in operating activities resulted primarily
from an increase in accounts receivable of $2.9 million and
10
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
a decrease in accrued expenses and accounts payable of $2.0 million, offset by
net income of $4.0 million and depreciation and amortization of $0.7 million.
Financing Agreement
The Company has a revolving credit facility and term loan (the "Credit
Facility") with BNY Financial Corporation, a wholly owned subsidiary of The
Bank of New York. The Credit Facility was entered into in October 1997 and last
amended in June 1998.
The Credit Facility provides for a $45.5 million five-year revolving
credit line with $34.0 million sub-limit for letters of credit and $14.5
million term loan facility. Each facility matures on December 31, 2002. See
Note 3 to Condensed Consolidated Financial Statements. At December 31, 1998,
the Company had availability of approximately $5.5 million (inclusive of
overadvance availability) under the Credit Facility Agreement.
The Credit Facility contains financial covenants requiring, among
other things, the maintenance of minimum levels of tangible net worth, working
capital and maximum permitted loss (minimum permitted profit).
Restructuring Program
In June 1997, the Company announced a proposed restructuring program
to be implemented by the Company. In September 1997, the disinterested members
of the Board of Directors of the Company unanimously approved the restructuring
plan (the "Restructuring") which provided for the following: (i) the Company
raised, through an offer of rights to subscribe ("Rights"), up to $20.0
million, but not less than $12.5 million, of equity through a rights offering
to all shares of Common Stock of the Company (the "Rights Offering") of up to
13,977,270 shares of Common Stock of the Company (on a post stock split basis);
(ii) the conversion of approximately $40.6 million of the Company's
indebtedness to Ms. Chaus, consisting of $28.1 million of then existing
subordinated indebtedness (including accrued interest through January 28, 1998)
and $12.5 million of additional indebtedness owed to Ms. Chaus, into 10,510,910
shares of Common Stock of the Company; (iii) entering into the Credit Facility
; (iv) the implementation of a reverse stock split of the Company's Common
Stock such that every ten (10) shares of Common Stock would be converted into
one (1) share of Common Stock; and (v) the liquidation of the Company's retail
outlet stores. On October 10, 1997, the Company entered into the Credit
Facility referred to in (iii) above. On December 9, 1997, the reverse stock
split described in (iv) above became effective. By mid-January 1998, the
Company closed all of its retail outlet stores as referenced in (v) above. On
January 26, 1998, the Rights Offering described in (i) above was consummated.
On January 29, 1998, the conversion of indebtedness into equity described in
(ii) above was completed.
New Accounting Pronouncements
The Company adopted SFAS No. 130, Reporting Comprehensive Income,
during the current fiscal year. SFAS 130 establishes standards for reporting
comprehensive income and its components
11
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
in a full set of general-purpose financial statements. This Statement requires
that an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement, and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
Currently, the Company has no items of other comprehensive income.
The Company is required to adopt SFAS No. 132, Employers' Disclosure
About Pensions and Other Post-retirement Benefits during the year ending June
30, 1999. This Statement revises employers' disclosures about pension and other
post-retirement benefit plans. It does not change the measurement or
recognition of those plans. It standardizes the disclosure requirements for
pensions and other post-retirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminates certain
disclosures that are no longer useful. Restatement of disclosures for earlier
periods provided for comparative purposes is required. The Company is currently
considering the additional disclosures which are required by this statement.
Nautica License Agreement
On October 23, 1998, the Company discontinued its license agreement
with Nautica Enterprises, Inc. under which it had an exclusive license to
manufacture, market, distribute and sell licensed product for women under the
Nautica brand name.
Year 2000 Compliance
The Company has prepared a plan to become Year 2000 compliant.
Pursuant to the Company's Year 2000 Plan, major segments (approximately 80%) of
the Company's information technology ("IT") and non-IT systems have been
upgraded and tested for Year 2000 compliance. The Company anticipates that the
remaining IT and non-IT systems should be upgraded and tested to be Year 2000
compliant by June 30, 1999. The total costs of these system upgrades are
projected to approximate $0.3 million. As of December 31, 1998, the Company has
incurred $0.2 million of these costs. The remaining $0.1 million will be funded
out of existing cash flows from operations. Given that the Company expects to
be Year 2000 compliant by the end of June 1999, the Company has not prepared a
contingency plan and does not currently believe that a contingency plan is
necessary.
In some cases, the Company's computer systems are linked to its major
customers and the Company is in the process of assessing its customers'
compliance. The Company has had correspondence from its major customers
regarding Year 2000 compliance. The Company's major customers have advised the
Company that they generally comply with VICS (Voluntary Interindustry Commerce
Standards) standards. VICS establishes standards that simplify the flow of
product and information in the general merchandise retail industry for
retailers and suppliers alike. The Company expects to be compliant with VICS
Year 2000 Electronic Data Interchange standards by April 1999. The Company has
virtually no computer interfaces with its vendors; however, it does not know
the extent to which its vendors, or its customers, would be impaired by their
own Year
12
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
2000 issues and its impact on the Company. The costs of assessing compliance
are expected to be minimal. Although the Company believes it is adequately
addressing its Year 2000 issues, the failure to correct a material Year 2000
problem or the failure of a customer or a vendor to achieve compliance could
result in an interruption in, or a failure of, certain normal business
activities or operations. Such failure could materially adversely affect the
Company's results of operations, liquidity and financial condition.
Future Financing Requirements
At December 31, 1998, the Company had working capital of $22.6
million. The Company's business plan requires the availability of sufficient
cash flow and borrowing capacity to finance its product lines. The Company
expects to satisfy such requirements through cash flow from operations and
borrowings under the Credit Facility.
Although there can be no assurance, the Company believes that it has
adequate resources to meet its needs for the foreseeable future, assuming it
meets its business plan.
The foregoing discussion contains forward-looking statements which are
based upon current expectations and involve a number of uncertainties,
including the Company's ability to maintain its borrowing capabilities under
the Credit Facility, retail market conditions and consumer acceptance of the
Company's products.
13
<PAGE>
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:
27 Financial Data Schedules
(b) The Company filed no reports on Form 8-K during the quarter ended
December 31, 1998.
14
<PAGE>
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: February 12, 1999 By: /s/ Josephine Chaus
---------------------------------
JOSEPHINE CHAUS
Chairwoman of the Board,
President and Chief Executive Officer,
Office of the Chairman
Date: February 12, 1999 By: /s/ Stuart S. Levy
----------------------------------
STUART S. LEVY
Chief Financial Officer and
Secretary
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1999
<PERIOD-START> JUL-1-1998 JUL-1-1998
<PERIOD-END> DEC-31-1998 DEC-31-1998
<EXCHANGE-RATE> 1 1
<CASH> 778 778
<SECURITIES> 0 0
<RECEIVABLES> 22,473 22,473
<ALLOWANCES> 2,329 2,329
<INVENTORY> 17,739 17,739
<CURRENT-ASSETS> 39,089 39,089
<PP&E> 4,908 4,908
<DEPRECIATION> 4,010 4,010
<TOTAL-ASSETS> 40,527 40,527
<CURRENT-LIABILITIES> 16,483 16,483
<BONDS> 0 0
0 0
0 0
<COMMON> 272 272
<OTHER-SE> 10,772 10,772
<TOTAL-LIABILITY-AND-EQUITY> 40,527 40,527
<SALES> 44,670 94,342
<TOTAL-REVENUES> 44,670 94,342
<CGS> 34,967 70,847
<TOTAL-COSTS> 43,371 88,952
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 659 1,277
<INCOME-PRETAX> 640 4,113
<INCOME-TAX> 14 84
<INCOME-CONTINUING> 626 4,029
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 626 4,029
<EPS-PRIMARY> .02 .15
<EPS-DILUTED> .02 .15
</TABLE>
