SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended February 1, 1997
Commission File No. 1-11722
CHIC BY H.I.S, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3494627
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
1372 Broadway, New York, New York 10018
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 302-6400
- ------------------------------
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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares
Date Class Outstanding
- -------------- ---------------------------- -----------
March 13, 1997 Common Stock, $.01 Par Value 9,753,868
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<PAGE>
CHIC BY H.I.S, INC.
INDEX
=======================
Page
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Part I. Financial Information
Item 1: Financial Statements (unaudited, except as noted):
Consolidated Balance Sheets at
February 1, 1997 and November 2, 1996 (audited) 3
Consolidated Statements of Operations
for the thirteen weeks ended February 1,
1997 and February 3, 1996 4
Consolidated Statements of Cash Flows
for the thirteen weeks ended
February 1, 1997 and February 3, 1996 5
Consolidated Statements of Stockholders'
Equity for the thirteen weeks ended
February 1, 1997 and February 3, 1996 6
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
Part II. Other Information
Item 5: Special Note Regarding Forward-Looking Statements 13-14
Item 6: Exhibits and Reports on Form 8-K 15
Signature Page 16
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
==============================================
<TABLE>
<CAPTION>
February 1,1997 November 2,1996
(Unaudited) (Audited)
----------- ---------
ASSETS
------
<S> <C> <C>
CURRENT:
Cash and cash equivalents $ 3,143 $ 27,178
Accounts receivable (net of reserve
for possible losses) 26,360 33,309
Inventories 71,465 58,360
Deferred income taxes 6,535 5,010
Prepaid expenses and other
current assets 4,518 1,465
-------- --------
TOTAL CURRENT ASSETS 112,021 125,322
PROPERTY, PLANT AND EQUIPMENT, at
cost, less accumulated depreciation
and amortization 61,570 61,430
INTANGIBLE ASSET RELATING TO PENSION 396 396
DEFERRED FINANCING COSTS 150 --
OTHER ASSETS 2,441 1,112
-------- --------
TOTAL ASSETS $176,578 $188,260
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
CURRENT:
Revolver debt $ 25,900 $ --
Foreign revolver debt 4,113 --
Current maturities of long-term debt 750 750
Obligations under capital leases 835 864
Accounts payable 17,212 11,625
Accrued liabilities
Payroll, payroll taxes and commissions 5,498 4,639
Income taxes 2,279 2,009
Other 1,791 4,666
-------- --------
TOTAL CURRENT LIABILITIES 58,378 24,553
-------- --------
NONCURRENT:
Long-term debt 28,213 71,444
Pension liability 10,023 10,023
Obligation under capital leases 1,170 1,362
-------- --------
TOTAL NONCURRENT LIABILITIES 39,406 82,829
-------- --------
STOCKHOLDERS' EQUITY 78,794 80,878
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $176,578 $188,260
======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except share and per share data)
==============================================
<TABLE>
<CAPTION>
Thirteen weeks Thirteen weeks
ended ended
February 1, February 3,
1997 1996
----------- -----------
<S> <C> <C>
NET SALES $ 56,031 $ 70,829
COST OF GOODS SOLD 41,220 54,656
----------- -----------
Gross profit 14,811 16,173
LICENSING REVENUES 538 1,619
----------- -----------
15,349 17,792
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 14,339 13,416
RESTRUCTURING AND SPECIAL CHARGES -- 15,000
----------- -----------
OPERATING INCOME (LOSS) BEFORE INTEREST
AND FINANCE COSTS 1,010 (10,624)
LESS: Interest and finance cost 1,187 1,863
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY ITEMS (177) (12,487)
PROVISION FOR INCOME TAXES 217 1,285
----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM (394) ($ 13,772)
EXTRAORDINARY LOSS
FROM EXTINGUISHMENT OF DEBT (330) --
----------- -----------
NET LOSS ($ 724) ($ 13,772)
=========== ===========
PER SHARE DATA:
Loss before extraordinary items ($ .04) ( $1.41)
=========== ===========
Net loss ($ .07) ( $1.41)
=========== ===========
AVERAGE OUTSTANDING COMMON SHARES 9,753,868 9,753,868
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
==============================================
<TABLE>
<CAPTION>
Thirteen weeks Thirteen weeks
ended ended
February 1, February 3,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
($ 724) ($13,772)
-------- --------
Adjustments to reconcile net loss to
net cash used in operating
activities:
Non-cash restructuring and special charges -- 12,436
Depreciation and amortization 976 159
Decrease (increase) in:
Accounts receivable 6,949 (1,039)
Inventories (13,105) 6,289
Deferred income taxes (1,525) --
Prepaid expenses and other (3,053) (1,645)
Other assets (1,329) (212)
Increase (decrease) in:
Accounts payable 5,587 (3,037)
Accrued liabilities (1,746) (2,469)
-------- --------
Total adjustments (7,246) 10,482
-------- --------
Net cash used in operating activities (7,970) (3,290)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,216) (1,905)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior notes payable (43,000) --
Increase (decrease) in loans under revolver 25,900 (3,500)
Increase in foreign revolver debt 4,113 3,557
Principal payments under capitalized leases (221) (215)
Increase in deferred financing costs (150) --
Due from trustee -- (2)
-------- --------
Net cash used in financing activities (13,358) (160)
-------- --------
DECREASE IN CASH (22,544) (5,355)
EFFECT OF EXCHANGE RATES ON CASH (1,491) (1,360)
CASH AND CASH EQUIVALENTS, beginning of period 27,178 15,197
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 3,143 $ 8,482
======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
===============================================
<TABLE>
<CAPTION>
Excess
of addi-
tional
pension
liability
Foreign over
Retained currency intangible
Common Paid-in earnings translation pension
Total stock capital (deficit) adjustment asset
----- ----- ------- --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 4, 1995 $113,427 $98 $105,526 $8,800 $3,068 ($4,065)
Net loss (13,772) - - (13,772) - -
Foreign currency
translation adjustment (1,083) - - - (1,083) -
--------------------------------------------------------------------
BALANCE, FEBRUARY 3, 1996 $ 98,572 $98 $105,526 ($4,972) $1,985 ($4,065)
====================================================================
BALANCE, NOVEMBER 5, 1996 $80,878 $98 $105,526 $(16,764) $1,645 ($9,627)
Net loss (724) - - (724) - -
Foreign currency
translation adjustment (1,360) - - - (1,360) -
--------------------------------------------------------------------
BALANCE, FEBRUARY 1, 1997 $ 78,794 $98 $105,526 ($17,488) $285 ($9,627)
====================================================================
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==============================================
1. Basis of Presentation
The accompanying unaudited 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 Article
10 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.
2. Inventories
Inventories consist of the following:
(In Thousands) February 1, 1997 November 2, 1996
- --------------------------------------------------------------------------------
Raw Materials $10,511 $ 9,162
Work-in-process 18,651 12,629
Finished Goods 42,303 36,569
- --------------------------------------------------------------------------------
$71,465 $ 58,360
================================================================================
3. Recent Accounting Standards
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation," which allows a choice of either the intrinsic value method or the
fair value method of accounting for employee stock options effective for fiscal
years beginning after December 15, 1995. The Company has selected the option to
continue the use of the current intrinsic value method.
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
Item 2: Management's discussion and
analysis of financial condition
and results of operations
General
- -------
As a designer, manufacturer and marketer of moderately priced, basic style male
and female denim jeans, casual pants and shorts, Chic by H.I.S, Inc. (the
"Company") believes that its products constitute basic apparel and, as such,
generally do not depend upon impulse buying or high fashion trends. The Company
distributes its products primarily through mass merchandisers which constitute
the Company's traditional channel of distribution.
The following discussion provides information and analysis of the results of
operations of the Company for the thirteen weeks ended February 1, 1997 and
February 3, 1996 and its liquidity and capital resources.
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
The following table sets forth selected operating data as a
percentage of net sales for the periods indicated.
Thirteen weeks ended
------------------------------
February 1, February 3,
1997 1996
------------- -------------
Net sales:
United States 54.0% 66.4%
Europe 46.0 33.6
----- -----
Consolidated 100.0 100.0
Gross margin:
United States 13.8 13.0
Europe 41.2 42.2
----- -----
Consolidated 26.4 22.8
Licensing revenues 1.0 2.3
Selling, general and administrative
expenses 25.6 18.9
Restructuring and special charges - 21.2
Operating income (loss) 1.8 (15.0)
Interest and finance costs 2.1 2.6
Loss before provision for
income taxes and extraordinary item (.3) (17.6)
Provision for income taxes .4 1.8
Loss before extraordinary item (.7) (19.4)
Extraordinary item (.6) -
Net loss (1.3) (19.4)
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
Thirteen Weeks ended February 1, 1997 (the "1997 First Quarter") Compared to
Thirteen Weeks ended February 3, 1996 (the "1996 First Quarter")
NET SALES. Net sales for the 1997 First Quarter decreased $14.8
million, or 20.9%, from $70.8 million for the 1996 First Quarter to $56.0
million. United States sales decreased by $16.7 million, or 35.5%, to $30.3
million due primarily to the downturn of retail sales. As of February 1, 1997,
the Company had a total backlog of confirmed domestic purchase orders of $46.3
million, a decrease of 41.0% compared to $78.5 million on February 3, 1996. In
the 1997 First Quarter, European sales increased by $2.0 million, or 8.4%, to
$25.8 million due to continued penetration of the market. As of February 1,
1997, the Company had a backlog of confirmed European purchase orders of 65.0
million deutsche marks, an increase of 55.5% compared to 39.7 million deutsche
marks on February 3, 1996. The confirmed European backlog, when converted into
U.S. currency at the then prevailing rate, was $39.7 million, an increase of
41.3% compared to $28.1 million on February 3, 1996.
GROSS PROFIT. Gross profit for the 1997 First Quarter decreased
$1.4 million, or 8.4%, from $16.2 million in the 1996 First Quarter to $14.8
million, and gross margin increased to 26.4% from 22.8%. United States gross
profit decreased $1.9 million from $6.1 million for the 1996 First Quarter to
$4.2 million. The reduction of the gross profit amount in the United States was
primarily due to the decrease in sales, while the domestic gross margin
increased from 13.0% to 13.8% as a percentage of net sales primarily due to
improved utilization of plant capacity and inventory management. European gross
margin decreased from 42.2% in the 1996 First Quarter to 41.2% primarily due to
product mix and additional costs incurred in connection with the assumption of
sales activities in the Czech Republic.
LICENSING REVENUES. Licensing revenues for the 1997 First Quarter
decreased $1.1 million, or 66.8%, from $1.6 million for the 1996 First Quarter
to $.5 million primarily due to the poor retail business in the United States
and the discontinuation of a licensing agreement in the Czech Republic. The
licensing agreement in the Czech Republic was discontinued to allow the Company
to pursue full sales and marketing efforts in this region.
SG&A EXPENSES. Selling, general and administrative expenses
increased $.9 million, or 6.9%, to $14.3 million for the 1997 First Quarter
primarily attributable to increased operating expenses related to the Company's
expansion into Poland and the Czech Republic, as well as additional domestic
merchandising expenses, which were partially offset by a decrease in selling
expenses resulting from the decrease in net sales.
RESTRUCTURING AND SPECIAL CHARGES. In the 1996 First Quarter, the
Company decided to restructure certain manufacturing operations due to the
continuing downturn in the retail market. Such restructuring included the
closing of certain manufacturing facilities and an accompanying reduction in the
workforce. In connection with the foregoing the Company recorded a restructuring
charge against earnings in the amount of $15 million in the 1996 First Quarter.
The Company believes that these actions will result in cost savings to the
Company in excess of $3,600,000 over a 12-month period.
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
OPERATING INCOME. Operating income for the 1997 First Quarter
increased $11.6 million from an operating loss of $10.6 million in the 1996
First Quarter to an operating profit of $1.0 million, primarily due to the
Company's restructuring charge recorded in the 1996 First Quarter and the
decrease in net sales in the 1997 First Quarter.
INTEREST AND FINANCE COSTS. Interest and finance costs decreased
$.7 million or 36.3%, from $1.9 million for the 1996 First Quarter to $1.2
million in the 1997 First Quarter. The decrease in interest cost was primarily
due to reduced borrowing levels resulting from the repayment of notes payable.
INCOME TAXES. The provision for income taxes for the 1997 First
Quarter was $ .2 million as compared to $1.3 million for the 1996 First Quarter.
EXTRAORDINARY ITEM. In the 1997 First Quarter, the Company
recorded an extraordinary charge of $330,000 attributable to the early
extinguishment of $43 million of senior notes payable.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements have been to fund
working capital needs and capital expenditures. The Company has historically
relied primarily on internally generated funds, trade credit, bank borrowings
and other debt offerings to finance these needs.
In the 1997 First Quarter, net cash of $8.0 million was used in
operations, as compared to $3.3 million in the 1996 First Quarter. The net cash
used in operations was primarily attributable to the increases in inventories
and prepaid and other assets of $13.1 million and $5.9 million, respectively,
which were partially offset by the decrease in accounts receivable of $6.9
million and the increase in accounts payable and accrued expenses of $3.8
million. The changes in accounts receivable, inventories and accounts payable
are primarily attributable to the decrease in net sales for the quarter. The
decrease in the accrued expenses is primarily due to the payment of vacation
benefits accrued at the year end in December 1996.
Net cash used in investing activities decreased by $.7 million in
the 1997 First Quarter to $1.2 million as compared to $1.9 million in the 1996
First Quarter. Cash used in investing activities was primarily attributable to
the acquisition and renovation of manufacturing, laundry and warehouse
facilities.
The Company has no material outstanding capital expenditure commitments.
Net cash used by financing activities was $13.4 million in the
1997 First Quarter, as compared to $.2 million used in financing activities in
the 1996 First Quarter. The cash used in financing activities in the 1997 First
Quarter was primarily attributable to the repayment of the $43 million in senior
notes payable, which was partially offset by increased borrowings against the
Company's revolving credit facilities.
As of February 1, 1997, the Company had domestic credit
agreements providing a $37.5 revolving line of credit, of which $25.9 million
was outstanding. In addition, the Company had $29.0 million of IRBs outstanding
at February 1, 1997, the proceeds of which have been used to finance plant
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
expansions. The Company also has foreign financing agreements with three banks
providing term loans aggregating 4,600,000 deutsche marks (approximately $2.8
million, based on the February 1, 1997 foreign currency exchange rate) and lines
of credit aggregating 18 million deutsche marks (approximately $11.0 million,
based on the February 1, 1997 foreign currency exchange rate). Approximately
$4.1 million was outstanding against the foreign lines of credit as of February
1, 1997.
In recent years, certain retail customers have experienced
significant financial difficulties. The Company attempts to minimize its credit
risk associated with these customers by closely monitoring its accounts
receivable balances and their ongoing financial performance and credit status.
Historically, the Company has not experienced material adverse effects from
transactions with these customers. However, considering the customer
concentration of the Company's net sales, any material financial difficulty
experienced by a significant customer could have an adverse effect on the
Company's financial position or results of operations.
The Company is a holding company, and is dependent upon the
receipt of dividends or other payments from its subsidiaries. The Company
expects that cash generated from operations and the credit agreements will
provide the financial resources sufficient to meet its foreseeable working
capital and capital expenditure requirements. There can be no assurance,
however, that the Company will not need to borrow from other sources during such
period.
In January 1997, the Company announced that it had retained a
managing underwriter for a proposed initial public offering that may result in
the sale by the Company of a significant minority interest in the Company's
wholly-owned German subsidiary. Consummation of the sale would be subject to
market conditions, approval by the Company's Board of Directors, receipt of a
fairness opinion from the Company's financial advisor, execution of an
underwriting agreement and other definitive documentation and satisfaction of
certain legal and regulatory requirement. The sale is expected to occur in the
second quarter of 1997.
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
Part II OTHER INFORMATION
Item 5: SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Except for the historical information
contained or incorporated by reference in this filing, the matters discussed or
incorporated by reference herein are forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance, or achievements of
the Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, those set forth
below under the heading "Additional Cautionary Statements" as well as the
following: general economic and business conditions; industry capacity; fashion,
apparel and other industry trends; competition; overseas expansion; the loss of
major customers; changes in demand for the Company's products; cost and
availability of raw materials; changes in business strategy or development
plans; quality of management; and availability, terms and deployment of capital.
Special attention should be paid to the forward-looking statements contained
herein including, but not limited to, statements relating to the Company's
ability to obtain sufficient financial resources to meet its capital expenditure
and working capital needs, financial risks associated with customers
experiencing financial difficulties, the benefits expected to be derived from
the restructuring and Mexican plant opening described in this report,
international expansion and competition.
ADDITIONAL CAUTIONARY STATEMENTS
DEPENDENCE ON MAJOR CUSTOMERS. The Company's two largest customers, Kmart
Corporation ("K-Mart") and Target, a division of Dayton Hudson Corporation
("Target"), together accounted for approximately 37% and 38% of the Company's
consolidated net sales during fiscal 1995 and fiscal 1996, respectively. Each of
these customers accounted for more than ten percent of the Company's
consolidated net sales in such periods. The loss of either K-Mart or Target
could have an adverse effect on the results of the Company's operations. In
addition, several of the Company's licensees sell products bearing the Company's
trademarks to the same retailers, including K-Mart. The Company has no long-term
commitments or long-term contracts with any of its customers.
RECENT APPAREL INDUSTRY TRENDS. Competition in the apparel industry has
been exacerbated by the recent consolidations and closings of major stores. Like
many of its competitors, the Company sells to certain retailers who have
recently experienced financial difficulties and some of whom are currently
operating under the protection of the federal bankruptcy laws. Although the
Company monitors the financial condition of its customers, the Company cannot
predict what effect, if any, the financial condition of such customers will have
on the Company. The Company believes that developments to date within these
companies have not had a material adverse effect on the Company's financial
position or results of operations.
NATURE OF INDUSTRY; DEPENDENCE ON JEANS. The apparel industry is highly
competitive and characterized generally by ease of entry. Many of the Company's
competitors are substantially larger and have greater financial, marketing and
other resources than the Company. The Company's revenues are derived principally
from sales of jeans products. Although the Company's products for the domestic
market have historically been less sensitive to fashion trends than higher
fashion lines, the apparel industry is subject
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<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
to rapidly changing consumer preferences, which may have an adverse effect on
the results of the Company's operations if the Company materially misjudges such
preferences.
DEPENDENCE ON KEY PERSONNEL. The Company depends on the services
of certain key personnel, including Mr. Burton M. Rosenberg, the Chairman of the
Board and Chief Executive Officer of the Company. The Company believes that the
loss of the services of any of these key personnel could have an adverse effect
on the results of the Company's operations
RISKS OF DOING BUSINESS OVERSEAS. The Company's sales and
earnings attributable to its European operations have generally been increasing
in recent years and may in the future constitute a greater proportion of the
Company's sales and earnings. In general, the Company believes that the demand
for jeans in foreign markets is more susceptible to changes in fashion
preferences than in the domestic market. In addition, it is not possible to
predict accurately the effect that the continued elimination of trade barriers
among members of the European Union will have on the Company's operations in
Europe. The Company is also expanding its activities in Eastern Europe, where
economic, political and financial conditions are changing rapidly, and expects
to commence manufacturing operations in Mexico during the second quarter of
fiscal 1997. In general, there can be no assurance that the results of the
Company's European operations or any operations in Mexico that the Company may
establish will not be adversely affected by factors such as restrictions on
transfer of funds, political instability, competition, the relative strength of
the U.S. dollar, changes in fashion preferences and general economic conditions.
ABSENCE OF DIVIDENDS. The Company has not, in recent years, paid
any cash or other dividends on its Common Stock, and there can be no assurance
that the Company will pay cash dividends in the foreseeable future. As a holding
company, the ability of the Company to pay dividends is dependent upon the
receipt of dividends or other payments from its subsidiaries. The Company's
domestic credit agreements (the "Loan Agreements") contain certain limitations
on the Company's ability to pay dividends. In addition, an agreement between the
Company's wholly owned German subsidiary ("Sportswear"), and one of its lenders
would prohibit Sportswear from paying dividends to the Company under certain
circumstances.
LEVERAGE AND FINANCIAL COVENANTS. Although the Company's initial public
offering in February 1993 and the other components of its refinancing plan (the
"Refinancing Plan") improved the Company's operating and financial flexibility,
the Company continues to have indebtedness that could adversely affect its
ability to respond to changing business and economic conditions. At February 1,
1997, the Company had an aggregate of approximately $61.0 million of
indebtedness (including capital leases) outstanding and the Company's
stockholders' equity was approximately $79.0 million. In addition, the Company's
Loan Agreements contain covenants that impose certain operating and financial
restrictions on the Company. Such restrictions affect, and in many respects
limit or prohibit, among other things, the ability of the Company to incur
additional indebtedness, create liens, sell assets, engage in mergers or
acquisitions, make capital expenditures and pay dividends.
-14-
<PAGE>
CHIC BY H.I.S, INC. AND SUBSIDIARIES
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
-15-
<PAGE>
SIGNATURE
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.
CHIC BY H.I.S, INC.
Dated: March 13 , 1997 By: /s/ Burton M. Rosenberg
------------------------
Burton M. Rosenberg
Chief Executive Officer
Dated: March 13 , 1997 By: /s/ Christine A. Hadjigeorge
-----------------------------
Christine A. Hadjigeorge
Chief Financial Officer
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AS FILED
AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-02-1996
<PERIOD-END> FEB-01-1997
<CASH> 3,143
<SECURITIES> 0
<RECEIVABLES> 26,519
<ALLOWANCES> 159
<INVENTORY> 71,465
<CURRENT-ASSETS> 112,021
<PP&E> 88,529
<DEPRECIATION> 26,959
<TOTAL-ASSETS> 176,578
<CURRENT-LIABILITIES> 58,378
<BONDS> 29,383
0
0
<COMMON> 98
<OTHER-SE> 78,696
<TOTAL-LIABILITY-AND-EQUITY> 176,578
<SALES> 56,031
<TOTAL-REVENUES> 56,569
<CGS> 41,220
<TOTAL-COSTS> 14,299
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 40
<INTEREST-EXPENSE> 1,187
<INCOME-PRETAX> (177)
<INCOME-TAX> 217
<INCOME-CONTINUING> (394)
<DISCONTINUED> 0
<EXTRAORDINARY> (330)
<CHANGES> 0
<NET-INCOME> (724)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
