<PAGE>
THE 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 APRIL 29, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-18632
THE WET SEAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0415940
(State of Incorporation) (I.R.S. Employer Identification No.)
26972 BURBANK
FOOTHILL RANCH, CALIFORNIA 92610
(Address of principal executive offices) (Zip code)
(949) 583-9029
(Registrant's telephone number, including area code)
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
--- ---
The number of shares outstanding of the registrant's Class A
Common Stock and Class B Common Stock par value $.10 per share, at June 6, 2000
were 10,904,023 and 2,912,665, respectively. There were no shares of Preferred
Stock, par value $.01 per share, outstanding at June 6, 2000.
<PAGE>
THE WET SEAL, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets as of April 29, 2000 (unaudited) and
January 29, 2000 ...................................................3-4
Consolidated statements of income and comprehensive income (unaudited)
for the 13 weeks ended April 29, 2000 and May 1,1999..................5
Consolidated statements of cash flows (unaudited) for the 13 weeks
ended April 29, 2000 and May 1,1999...................................6
Notes to consolidated financial statements..........................7-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................9-14
PART II. OTHER INFORMATION...................................................15
SIGNATURE PAGE......................................................16
2
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THE WET SEAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 29, JANUARY 29,
2000 2000
------------------- -------------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $36,730,000 $44,921,000
Short-term investments 22,241,000 26,395,000
Other receivables 4,095,000 3,909,000
Merchandise inventories 39,769,000 33,288,000
Deferred tax charges 1,560,000 1,560,000
------------------- -------------------
Total current assets 104,395,000 110,073,000
------------------- -------------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Leasehold improvements 102,472,000 99,679,000
Furniture, fixtures and equipment 48,562,000 47,488,000
Leasehold rights 2,944,000 2,944,000
Construction in progress 133,000 -
------------------- -------------------
154,111,000 150,111,000
Less accumulated depreciation (75,840,000) (73,167,000)
------------------- -------------------
Net equipment and leasehold improvements 78,271,000 76,944,000
------------------- -------------------
LONG-TERM INVESTMENTS 23,475,000 7,287,000
OTHER ASSETS:
Deferred taxes and other assets 11,579,000 11,594,000
Goodwill, net of accumulated amortization of
$1,090,000 and $992,000 as of April 29, 2000
and January 29, 2000, respectively 7,013,000 7,111,000
------------------- -------------------
Total other assets 18,592,000 18,705,000
------------------- -------------------
$224,733,000 $213,009,000
=================== ===================
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
THE WET SEAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 29, JANUARY 29,
2000 2000
------------------- -------------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $53,151,000 $39,448,000
Accrued liabilities 17,048,000 20,611,000
Income taxes payable - 543,000
Current portion of long-term debt 1,264,000 1,764,000
------------------- -------------------
Total current liabilities 71,463,000 62,366,000
------------------- -------------------
LONG-TERM LIABILITIES:
Deferred rent 8,640,000 8,501,000
Other long-term liabilities 4,128,000 3,909,000
------------------- ----------------------
Total long-term liabilities 12,768,000 12,410,000
------------------- -------------------
Total liabilities 84,231,000 74,776,000
=================== ===================
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, authorized
2,000,000 shares; none issued and outstanding - -
Common Stock, Class A, $.10 par value,
authorized 20,000,000 shares;
10,904,023 and 10,900,023 shares issued and outstanding
at April 29, 2000 and January 29, 2000, respectively 1,090,000 1,090,000
Common Stock, Class B Convertible, $.10 par value,
authorized 10,000,000 shares;
2,912,665 shares issued and outstanding
at April 29, 2000 and January 29, 2000 291,000 291,000
Paid-in capital 62,545,000 62,493,000
Retained earnings 96,774,000 94,557,000
Other comprehensive income (139,000) (139,000)
Treasury stock, 1,347,600 shares at cost (20,059,000) (20,059,000)
------------------- -------------------
Total stockholders' equity 140,502,000 138,233,000
------------------- -------------------
$224,733,000 $213,009,000
=================== ===================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
THE WET SEAL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------------------------
APRIL 29, MAY 1,
2000 1999
------------ ------------
<S> <C> <C>
SALES ................................................. $130,600,000 $122,835,000
COST OF SALES (INCLUDING BUYING, DISTRIBUTION
AND OCCUPANCY COSTS) .............................. 96,883,000 86,992,000
------------ ------------
GROSS MARGIN .......................................... 33,717,000 35,843,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES .......... 30,956,000 29,365,000
------------ ------------
OPERATING INCOME ...................................... 2,761,000 6,478,000
INTEREST INCOME, NET .................................. 874,000 854,000
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES .............. 3,635,000 7,332,000
PROVISION FOR INCOME TAXES ............................ 1,418,000 2,933,000
------------ ------------
NET INCOME ............................................ $ 2,217,000 $ 4,399,000
============ ============
COMPREHENSIVE INCOME ................................. $ 2,217,000 $ 4,399,000
============ ============
NET INCOME PER SHARE, BASIC ........................... $ 0.18 $ 0.36
============ ============
NET INCOME PER SHARE, DILUTED ......................... $ 0.18 $ 0.34
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC ............ 12,465,934 12,316,908
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED .......... 12,630,886 12,807,031
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
THE WET SEAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
----------------------------
APRIL 29, MAY 1,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................................. $ 2,217,000 $ 4,399,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................................................... 5,016,000 3,904,000
Loss on disposal of equipment and leasehold improvements .......................... 39,000 --
Changes in operating assets and liabilities:
Other receivables ............................................................... (186,000) (926,000)
Merchandise inventories ......................................................... (6,481,000) (9,830,000)
Prepaid expenses ................................................................ -- (7,674,000)
Other assets .................................................................... 15,000 (41,000)
Accounts payable and accrued liabilities ........................................ 10,140,000 16,889,000
Income taxes payable ............................................................ (543,000) (6,190,000)
Deferred rent ................................................................... 139,000 392,000
Other long-term liabilities ..................................................... 219,000 172,000
------------ ------------
Net cash provided by operating activities ............................................ 10,575,000 1,095,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in equipment and leasehold improvements ..................................... (6,284,000) (17,780,000)
Acquisition of store leases and store assets ........................................... -- (15,702,000)
Investment in marketable securities .................................................... (16,188,000) (3,051,000)
Proceeds from sale of marketable securities ............................................ 4,154,000 22,890,000
------------ ------------
Net cash used in investing activities ................................................ (18,318,000) (13,643,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt ................................................... (500,000) --
Proceeds from issuance of stock ........................................................ 52,000 1,702,000
------------ ------------
Net cash (used in) provided by financing activities .................................. (448,000) 1,702,000
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS ................................................. (8,191,000) (10,846,000)
CASH AND CASH EQUIVALENTS, beginning of period ............................................ 44,921,000 31,590,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of period .................................................. $ 36,730,000 $ 20,744,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .......................................................................... $ 24,000 $ 38,000
Income taxes, net ................................................................. $ 2,989,000 $ 10,177,000
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
THE WET SEAL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
The information set forth in these consolidated financial statements is
unaudited except for the January 29, 2000 balance sheet. These statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information, 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 only of
normal recurring accruals, necessary for a fair presentation have been included.
The results of operations for the 13 weeks ended April 29, 2000 are not
necessarily indicative of the results that may be expected for the year ending
February 3, 2001 (fiscal 2000). For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report for the year ended January 29, 2000.
NOTE 2 - LINE OF CREDIT AND LOAN PAYABLE TO BANK:
Under an unsecured revolving line-of-credit arrangement with Bank of
America National Trust and Savings Association ("Bank of America"), the Company
may borrow up to a maximum of $50,000,000 on a revolving basis through July 1,
2001. The cash borrowings under the arrangement bear interest at Bank of
America's prime rate or, at the Company's option, LIBOR plus 1.5%. As of April
29, 2000, the Company had no borrowings outstanding under the credit
arrangement.
In June 1995, the Company entered into an unsecured five-year,
$10,000,000 term loan. The loan bears interest at Bank of America's prime rate
plus 0.25% or, at the Company's option, LIBOR plus 1.5%. The outstanding debt
balance as of April 29, 2000 was $1,264,000. This loan was repaid in full on May
24, 2000.
The credit arrangement and the term loan impose quarterly and annual
financial covenants requiring the Company to maintain certain financial ratios
and achieve certain levels of annual income. In addition, the credit arrangement
and the term loan require that Bank of America approve the payment of dividends
and restrict the level of capital expenditures. At April 29, 2000, the Company
was in compliance with these covenants.
7
<PAGE>
NOTE 3 - NET INCOME PER SHARE:
The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS No. 128") beginning with the Company's fourth
quarter of fiscal 1997. Net income per share, basic, is computed based on the
weighted average number of common shares outstanding for the period. Net income
per share, diluted, is computed based on the weighted average number of common
and potentially dilutive common equivalent shares outstanding for the period. A
reconciliation of the numerators and denominators used in basic and diluted net
income per share is as follows:
<TABLE>
<CAPTION>
13 WEEKS ENDED 13 WEEKS ENDED
APRIL 29, 2000 MAY 1, 1999
-------------- ------------
<S> <C> <C>
Net income: ........................................... $ 2,217,000 $ 4,399,000
============ ============
Weighted average Number of common shares:
Basic ................................................. 12,465,934 12,316,908
Effect of dilutive
Securities-stock options .............................. 164,952 490,123
------------ ------------
Diluted ............................................... 12,630,886 12,807,031
Net income per share: ................................. $ 0.18 $ 0.36
Basic
Effect of dilutive
Securities-stock options .............................. 0.00 0.02
------------ ------------
Diluted ............................................... $ 0.18 $ 0.34
</TABLE>
NOTE 4 - TREASURY STOCK:
The Company's Board of Directors authorized the repurchase of up to 20%
of the outstanding shares of the Company's Class A common stock. As of April 29,
2000, 1,347,600 shares had been repurchased at a cost of $20,059,000. Such
repurchased shares are reflected as Treasury Stock in the Company's consolidated
balance sheet.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The Company is one of the largest national mall-based specialty retailers
focusing primarily on young women's apparel, and currently operates 560 retail
stores in 42 states, Washington D.C. and Puerto Rico. Of the 560 stores, 245 are
Contempo Casuals stores and 207 are Wet Seal stores which cater to the junior
customer, 82 are Arden B. stores which focus on a young, contemporary woman and
26 are Limbo Lounge stores, a unisex concept. The Company initiated a catalog in
fiscal 1998 and an e-commerce web-site in August 1999. In fiscal 2000, the
Company does not plan to mail any catalogs, but will continue its e-commerce
initiatives.
On July 1, 1995, the Company acquired Contempo Casuals. The purchase
price consisted of a $100,000 cash payment and the issuance of 254,676 shares of
Class A Common Stock which had a market value of $1,178,000 as of the
acquisition date. In addition, the Company assumed approximately $27,700,000 of
current liabilities of Contempo Casuals. The transaction was accounted for under
the purchase method and resulted in negative goodwill. The acquisition
substantially increased the number of stores the Company operates. Effective
February 2, 1997, Contempo Casuals, Inc. was merged with and into The Wet Seal,
Inc.
On December 1, 1998, the Company acquired the leases and furniture and
fixtures for 19 store locations from Mothers Work, Inc. The purchase price of
$1,911,000 was allocated to leasehold improvements and furniture, fixtures and
equipment. The majority of the locations acquired were converted to Arden B.
stores.
On February 1, 1999, the Company acquired the leases and furniture and
fixtures for 78 store locations from Britches of Georgetowne, Inc. for
$15,704,000. Based upon a third-party appraisal, the purchase price was
allocated to leasehold improvements, lease rights, and furniture, fixtures and
equipment. Excess of cost over net assets acquired (goodwill) totaling
$6,972,000 is being amortized on the straight-line method over 20 years. The
majority of the locations acquired were converted to Arden B. stores.
As of April 29, 2000, the Company operated 559 stores compared to 537
stores as of May 1, 1999, the end of the first quarter of fiscal 1999. The
Company opened 19 stores in the first quarter of fiscal 2000 and closed 8
stores.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED:
Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the Company's consolidated
financial statements and the notes thereto.
RESULTS OF OPERATIONS
THE 13 WEEKS ENDED APRIL 29, 2000 (FIRST QUARTER OF FISCAL 2000) AS COMPARED TO
THE 13 WEEKS ENDED MAY 1, 1999 (FIRST QUARTER OF FISCAL 1999)
Sales in the first quarter of fiscal 2000 were $130,600,000 compared to
sales in the first quarter of fiscal 1999 of $122,835,000, an increase of
$7,765,000 or 6.3%. The dollar increase in sales was due to the net increase
of 22 stores; 559 stores at the end of the first quarter of fiscal 2000
compared to 537 stores at the end of the first quarter of fiscal 1999.
Comparable store sales decreased 4.6% for the first quarter compared to an
increase of 2.9% in the first quarter of fiscal 1999. Comparable store sales
are defined as sales in stores that were open throughout the full prior 14
months.
Cost of sales, including buying, distribution and occupancy costs, was
$96,883,000 in the first quarter of fiscal 2000 compared to $86,992,000 in the
first quarter of fiscal 1999, an increase of $9,891,000. The dollar increase in
cost of sales in fiscal 2000 compared to fiscal 1999 was due primarily to the
increase in sales. As a percentage of sales, cost of sales was 74.2% in the
first quarter of fiscal 2000 compared to 70.8% in the first quarter of fiscal
1999, a increase of 3.4%. The increase in cost of sales as a percentage of sales
related primarily to an increase in occupancy costs as a percent of sales due to
the decrease in comparable store sales. The cost of merchandise as a percent of
sales increased over the prior year due to the increase in markdowns offset by a
slight improvement in the shrink rate in fiscal 2000 compared to fiscal 1999.
The increase in markdowns resulted from the need to clear merchandise due to the
decrease in comparable store sales. To a lesser extent, the increase was due to
an increase in buying costs as a percentage of sales due to additional headcount
added to support the increase in the number of stores. Offsetting these
increases was a decrease in distribution costs related primarily to the decrease
in the unit cost of processing in the current year and to the leveraging of
fixed costs such as rent and depreciation to a higher overall sales base.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED:
Selling, general and administrative expenses were $30,956,000 in the
first quarter of fiscal 2000 compared to $29,365,000 in the first quarter of
fiscal 1999, an increase of $1,591,000, or 5.4%. As a percentage of sales,
selling, general and administrative expenses was 23.7% in fiscal 2000 compared
to 23.9% in fiscal 1999, a decrease of 0.2%. The dollar increase in selling,
general and administrative expenses in fiscal 2000 compared to fiscal 1999 was
primarily due to the increase in total sales. The decrease as a percentage of
sales was primarily related to a decrease in merchandise delivery costs and a
decrease in advertising from the prior year. Offsetting this decrease, is the
increase in selling wages and office wages as a percentage of sales due to the
impact of the decrease in the comparable store sales on the fixed portion of
these wages.
Interest income, net, was $874,000 in the first quarter of fiscal 2000
compared to $854,000 in the first quarter of fiscal 1999, an increase of
$20,000. This increase was due primarily to an increase in the average cash
balance invested during the year.
Income tax provision was $1,418,000 in first quarter of fiscal 2000
compared to $2,933,000 in the first quarter of fiscal 1999. The effective income
tax rate was 39.0% compared to 40.0% in the prior year. The decrease in the
effective tax rate was due to the decrease in income generated from states with
higher effective tax rates.
Based on the factors noted above, net income was $2,217,000 in the
first quarter of fiscal 2000 compared to $4,399,000 in the first quarter of
fiscal 1999, a decrease of $2,182,000 or 49.6%. As a percentage of sales, net
income was 1.7% in the first quarter of fiscal 2000 compared to 3.6% in the
first quarter of fiscal 1999.
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED:
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the first quarter of
fiscal 2000 was $10,575,000. Working capital at April 29, 2000 was $32,932,000
compared to $47,707,000 at January 29, 2000, a decrease of $14,775,000. This
decrease was primarily due to a net increase in long-term investments of
$16,188,000, as current year excess cash has been invested in long-term
investments with maturities of more than one year. This was offset to some
extent by the increase in inventory and accounts payable. Inventory was
$39,769,000 at April 29, 2000 compared to $33,288,000 at January 29, 2000, an
increase of $6,481,000. The increase was due to a net increase of 11 stores, and
the seasonal nature of the business; inventory levels are typically at a low
point at year end. The increase in accounts payable and accrued liabilities of
$10,140,000 compared to January 29, 2000 was primarily due to the increase in
inventory.
In the first quarter of fiscal 2000, the Company invested $6,284,000 in
equipment and leasehold improvements, compared to $17,780,000 in the same period
of the prior year. In the first quarter of fiscal 2000, the Company opened 19
stores compared to 85 stores opened in the first quarter of fiscal 1999. The
Company currently estimates that the capital expenditures for the remainder of
fiscal 2000 will be approximately $19,000,000. These planned expenditures relate
primarily to new store openings and remodel construction.
In September 1998, the Company's Board of Directors authorized the
repurchase of up to 20% of the outstanding shares of the Company's Class A
Common Stock. As of April 29, 2000, 1,347,600 shares had been repurchased at a
cost of $20,059,000. Such repurchased shares are reflected as treasury stock in
the accompanying consolidated financial statements.
The Company has an unsecured revolving line of credit arrangement with
Bank of America National Trust and Savings Association ("Bank of America") in an
aggregate principal amount of $50,000,000, maturing on July 1, 2001 and a five
year amortizing unsecured term loan with Bank of America in an amount up to
$10,000,000. As of April 29, 2000, the term loan had an outstanding balance of
$1,264,000. This loan was repaid in full on May 24, 2000. At April 29, 2000,
there were no outstanding
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED:
borrowings under the credit arrangement. The Company was in compliance with all
terms and covenants of the credit arrangement and the term loan. The Company
invests its excess funds primarily in a short-term investment grade money market
fund, investment grade commercial paper and U.S. Treasury and Agency
obligations. Management believes the Company's working capital and cash flows
from operating activities will be sufficient to meet the Company's operating and
capital requirements in the foreseeable future.
SEASONALITY AND QUARTERLY OPERATING RESULTS
The Company's business is seasonal by nature with the Christmas season
(beginning the week of Thanksgiving and ending the first Saturday after
Christmas) and the back-to-school season (beginning the last week of July and
ending the first week of September), historically accounting for the largest
percentage of sales volume. In the Company's three fiscal years ended January
30, 1999, the Christmas and back-to-school seasons together accounted for an
average of approximately 32% of the Company's annual sales, after adjusting for
sales increases related to new stores. The Company does not believe that
inflation has had a material effect on the results of operations during the past
three years. However, there can be no assurance that the Company's business will
not be affected by inflation in the future.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
The preceding "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections may contain various
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended, which represent the Company's
expectations or beliefs concerning future events. The Company cautions that
these statements are further qualified by important factors that could cause
actual results to differ materially from those in the forward looking
statements, including, without limitation, the retention by the Company of
suppliers for both brand name and Company-developed merchandise, the ability of
the Company to expand and to continue to increase comparable store sales, and
the sufficiency of the Company's working capital and cash flows from operating
activities. In addition, these statements are further qualified by important
factors that could cause actual results to differ materially from those in the
forward looking statements, including, without limitation, a decline in demand
for the merchandise offered by the Company, the ability of the Company to locate
and obtain acceptable
13
<PAGE>
store sites and lease terms or renew existing leases, the ability of the
Company to obtain adequate merchandise supply, the ability of the Company to
hire and train employees, the ability of the Company to gauge the fashion tastes
of its customers and provide merchandise that satisfies customer demand,
management's ability to manage the Company's expansion, the effect of economic
conditions, the effect of severe weather or natural disasters and the effect of
competitive pressures from other retailers. The Company disclaims any
obligation or undertaking to disseminate any updates or revisions to any
forward looking statement contained herein or to reflect any change in the
expectations of the Company after the date hereof or any change in events,
conditions or circumstances on which any statement is based.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FSAB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS No. 133
was initially effective for fiscal years beginning after June 15, 1999. In July
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,"
which delays the effective date of SFAS No. 133 to fiscal years beginning after
June 15, 2000. The Company does not believe the adoption of SFAS No. 133 will
have a material effect on the Company's consolidated results of operations or
financial condition.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
The Company is not party to any material legal proceedings, other than
ordinary routine litigation incidental to the Company's business.
ITEM 2 - CHANGES IN SECURITIES. Not Applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES. Not Applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
ITEM 5 - OTHER INFORMATION. Not Applicable
ITEM 6(a) - EXHIBITS.
(27) Financial Data Schedule
ITEM 6(b) - REPORTS ON FORM 8-K. Not Applicable
15
<PAGE>
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.
The Wet Seal, Inc.
(Registrant)
Date: JUNE 12, 2000 /S/KATHY BRONSTEIN
------------------------ -----------------------------
Kathy Bronstein
Vice Chairman and Chief
Executive Officer and
Director (Principal
Executive Officer)
Date: JUNE 12, 2000 /S/EDMOND THOMAS
------------------------ -----------------------------
Edmond Thomas
President and
Chief Operating Officer
and Director
Date: JUNE 12, 2000 /S/ANN CADIER KIM
------------------------ -----------------------------
Ann Cadier Kim
Senior Vice President of
Finance and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
16
