PROSPECTUS
1,150,043 SHARES
CHIC BY H.I.S, INC.
COMMON STOCK
All of the shares of Common Stock, par value $.01 per share
("Common Stock"), of Chic by H.I.S, Inc. (the "Company") offered hereby (the
"Offering") may be sold from time to time by the selling stockholder named
herein (the "Selling Stockholder") in transactions on the New York Stock
Exchange (the "NYSE") or otherwise at prices and on terms prevailing at the time
of sale, at prices related to the then-current market price or in negotiated
transactions or otherwise. See "Plan of Distribution." The aggregate proceeds to
the Selling Stockholder from the sale of the Common Stock offered hereby will be
the purchase price thereof, less the aggregate brokerage commissions, agent's
discount or underwriter's discount, if any, and the expenses of distribution not
borne by the Company. The Company will not receive any of the proceeds from the
sale of Common Stock offered hereby. All expenses incurred in connection with
this Offering, estimated at approximately $18,000, will be borne by the Company,
other than approximately $ 1,594 of expenses to be borne by the Selling
Stockholder and any commissions or discounts paid or allowed by the Selling
Stockholder to underwriters, dealers, brokers or agents.
The Common Stock is traded on the NYSE under the symbol "JNS."
On March 2, 1998, the last reported sales price of the Common Stock on the NYSE
was $7.75 per share.
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SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is March 3,1998
<PAGE>
RISK FACTORS
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 PROSPECTUS, 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, THE RISK
FACTORS SET FORTH BELOW 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 SUCH
FORWARD- LOOKING STATEMENTS INCLUDING, BUT NOT LIMITED TO, STATEMENTS RELATING
TO THE COMPANY'S ABILITY TO OBTAIN SUFFICIENT FINANCIAL RESOURCES TO MEET ITS
CAPITAL EXPENDITURES AND WORKING CAPITAL NEEDS, FINANCIAL RISKS ASSOCIATED WITH
CUSTOMERS EXPERIENCING FINANCIAL DIFFICULTIES, THE BENEFITS EXPECTED TO BE
DERIVED FROM THE RESTRUCTURING DESCRIBED IN CERTAIN DOCUMENTS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS, INTERNATIONAL EXPANSION AND COMPETITION.
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY.
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 38% and 30% of the
Company's consolidated net sales during fiscal 1996 and fiscal 1997,
respectively. Each of these customers accounted for more than ten percent of the
Company's consolidated net sales in fiscal 1996, while only K-Mart represented
more than ten percent of the Company's consolidated net sales in fiscal 1997.
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 jean products. Although the Company's products
for
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the domestic market have historically been less sensitive to fashion trends than
higher fashion lines, the apparel industry is subject 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. 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 has commenced manufacturing operations in Mexico in fiscal 1997. In general,
there can be no assurance that the results of the Company's European operations
or the operations in Mexico 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.
LEVERAGE AND FINANCIAL COVENANTS. Although debt and equity
transactions have 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 November 1,
1997, the Company had an aggregate of approximately $44.3 million of
indebtedness (including capital leases) outstanding and the Company's
stockholders' equity was approximately $89.1 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.
ANTI-TAKEOVER PROVISIONS. Certain provisions in the Company's
charter documents, such as the authorization of "blank check" preferred stock
and certain shareholder rights arising under the Company's Rights Agreement
dated February 28, 1997, could have the effect of discouraging certain attempts
to acquire the Company or remove incumbent directors even if some of the
Company's stockholders deem such an attempt to be in the Company's and their
best interest.
FUTURE SALES OF COMMON STOCK. The Company granted certain
registration rights to the representatives of the underwriters of its initial
public offering with respect to 600,000 shares of Common Stock underlying
warrants sold to such representatives at the time of such offering and to other
holders of an aggregate of 838,545 shares of Common Stock. The Company expects
that
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<PAGE>
certain of such warrantholders or stockholders or both may wish to sell shares
of Common Stock in the relatively near future, either through the exercise of
their registration rights or pursuant to Rule 144 or both. The shares of Common
Stock offered hereby represent in the aggregate approximately 11.7% of the
outstanding Common Stock.
No prediction can be made as to the effect, if any, that
future sales of shares of Common Stock, or the availability of shares of Common
Stock for future sale, will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock in
the public market, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock. If such sales
reduce the market price of the Common Stock, the Company's ability to raise
additional capital in the equity markets could be adversely affected.
THE COMPANY
The Company designs, manufactures and markets moderately
priced, basic style, cotton denim jeans, casual pants and shorts for women,
girls, men and boys, which are sold throughout the United States principally
through mass merchandisers. The Company also markets similar apparel in Europe,
primarily in Germany. In the United States, women's and girls' jeans and casual
pants are generally marketed under the CHIC(R) brand name, and men's and boys'
jeans and casual pants are generally marketed under the H.I.S(R) brand name,
while in Europe all of the Company's apparel is sold under the H.I.S brand name.
The Company also licenses the use of its trademark, primarily
the CHIC brand name, to manufacturers of a variety of products that the Company
does not manufacture, including women's sportswear, intimate apparel, shirts,
accessories, hosiery and footwear. Many of these products are sold by the same
retailers that sell the Company's products and are generally promoted at the
retail level in a manner that complements the Company's products. In the United
States, the Company sells its apparel primarily to mass merchandisers. The
Company's marketing and advertising strategy emphasizes the quality, comfortable
fit and competitive pricing of its jeans and pants. The Company believes that
its ability to respond quickly to its domestic customers' needs, as a result of
its experienced manufacturing capabilities and its state-of-the-art ordering,
inventory and management information systems, gives it an advantage over many of
its competitors, particularly those which import finished goods. The Company's
excellence in servicing mass merchandisers has been recognized by industry-wide
awards and, in the opinion of management, is an important asset in maintaining
and broadening its business.
Unless the context indicates otherwise, the term "Company," as
used in this Prospectus, refers to Chic by H.I.S, Inc., its subsidiaries and its
predecessors. The Company's executive offices are located at 1372 Broadway, New
York, New York 10018, and its telephone number is (212) 302-6400.
RECENT DEVELOPMENT
On January 13, 1998, the Company announced that it had
received a letter on January 12, 1998 from Herbert Denton of Providence Capital,
Inc. notifying the Company of his intention to nominate 10 individuals for
election to the Company's Board of Directors at the Company's 1998
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Annual Meeting of Stockholders. On February 20, 1998, the Company announced that
an agreement had been reached to reconstitute the Board of Directors in order to
avert a contested election for directors. The new Board of Directors, which will
be effective on March 7, 1998 (such day being the "Effective Date"), will
initially consist of three incumbent directors, Burton M. Rosenberg, Richard K.
Howe and Harvey Silverman, and four new directors, Arnold M. Amster, Herbert A.
Denton, Daniel Rubin and Kenneth Zimmerman. Jesse S. Siegel, the Selling
Stockholder, resigned from the Board effective on the Effective Date. The two
remaining vacancies on the nine-person Board can be filled by the unanimous
consent of the directors.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale
of shares of Common Stock offered hereby, nor will any such proceeds be
available for use by the Company or otherwise for the Company's benefit.
SELLING STOCKHOLDER
The shares of Common Stock offered hereby are being registered
pursuant to the demand of Jesse S. Siegel (the "Selling Stockholder") pursuant
to a Registration Rights Agreement, dated as of November 20, 1992, among the
Company, the Selling Stockholder and certain other parties. Mr. Siegel has
agreed to bear the filing fee of approximately $1,594 for registering 650,043
shares of Common Stock beneficially owned by him which are not covered by such
Registration Rights Agreement and to pay the Company a fee in connection
therewith of approximately $ 23,406.
The following table sets forth certain information regarding
the beneficial ownership of the voting securities of the Company before and
after the Offering by the Selling Stockholder. Until the Effective Date, the
Selling Stockholder will be a director of the Company.
<TABLE>
<CAPTION>
SHARES OWNED SHARES
BEFORE THE OFFERED SHARES OWNED AFTER THE
OFFERING HEREBY OFFERING (2)
PERCENT- PERCENT-
NUMBER AGE (%) NUMBER AGE (%)
<S> <C> <C> <C> <C> <C>
Jesse S. Siegel......... 1,150,043 (1) 11.7 1,150,043 0 0
</TABLE>
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(1) Includes 10,000 shares of Common Stock that Mr. Siegel has the right to
acquire pursuant to outstanding stock options.
(2) Assumes that all the shares of Common Stock offered hereby are sold.
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PLAN OF DISTRIBUTION
The Selling Stockholder has advised the Company that he may from
time to time offer and sell the shares of Common Stock offered hereby on the New
York Stock Exchange (the "NYSE"), in privately negotiated transactions or
otherwise at prices prevailing in such market or as may be negotiated at the
time of sale. Such shares may also be publicly offered through agents,
underwriters or dealers, in which event the Selling Stockholder may enter into
agreements with respect to such offering. In effecting sales, brokers and
dealers engaged by the Selling Stockholder may arrange for other brokers or
dealers to participate. Brokers or dealers will receive usual and customary
commissions or discounts from the Selling Stockholder in amounts to be
negotiated (and, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser). Brokers or dealers may agree with the Selling
Stockholder to sell a specified number of shares at a stipulated price per share
and, to the extent such a broker or dealer is unable to do so acting as agent
for the Selling Stockholder, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer commitment to the Selling
Stockholder. Brokers or dealers who acquire shares as principal may thereafter
resell such shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other brokers
or dealers, including transactions of the nature described above) on the NYSE,
in negotiated transactions or otherwise, at market prices prevailing at the time
of sale or at negotiated prices or otherwise, and in connection with such
resales may pay to or receive from the purchasers of such shares commissions as
described above.
Other than approximately $1,594 of expenses being borne by the
Selling Stockholder, all expenses incurred in connection with the registration
of the shares offered hereby, estimated at approximately $18,000, will be borne
by the Company, except that any brokerage commissions or discounts paid or
allowed by the Selling Stockholder to brokers, agents, underwriters or dealers
shall also be payable by the Selling Stockholder. In connection with any sales,
the Selling Stockholder and any brokers participating in such sales may be
deemed to be "Underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions received by them and any
profit on the resale of shares sold by them may be deemed to be underwriting
discounts or commissions.
In connection with the offering contemplated hereby, the Company
has agreed to indemnify the Selling Stockholder against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon
for the Company by Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019-6064.
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EXPERTS
The consolidated financial statements and schedule of the Company
incorporated by reference herein and in the Registration Statement have been
audited by BDO Seidman, LLP, independent certified public accountants, to the
extent and for the periods set forth in their reports with respect thereto, and
are incorporated by reference herein and in the Registration Statement in
reliance upon such reports given upon the authority of said firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (the "Registration
Statement") (which term encompasses any amendments thereto) under the Securities
Act, with respect to the shares of Common Stock offered hereby. This Prospectus,
which is a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Copies of such reports, proxy statements and other information,
as well as the Registration Statement and the exhibits thereto, filed by the
Company with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048, and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition,
reports and other information concerning the Company can be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005, on which the Common Stock is listed. Materials that the Company
files electronically with the Commission are available at the Commission's
website (http://www.sec.gov), which contains reports, proxy statements,
information statements and other information regarding registrants that file
electronically with the Commission.
DOCUMENTS INCORPORATED BY REFERENCE
The Company incorporates herein by reference the following
documents filed with the Commission under the Exchange Act: (a) the Company's
Annual Report on Form 10-K for the fiscal year ended November 1, 1997; (b) the
Company's Current Report on Form 8-K filed on February 24, 1998; (c) an
Information Statement filed by the Company on February 24, 1998 pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder, as amended on
February 25, 1998; and (d) the description of the Common Stock contained in the
Company's Registration Statement on Form 8-A filed on May 8, 1997, as amended.
All documents filed with the Commission by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering registered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of the filing of such documents. Any statement con-
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tained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated by reference herein
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus incorporates).
Written or telephone requests should be directed to Chief Financial Officer,
Chic by H.I.S, Inc., 1372 Broadway, New York, New York 10018, telephone (212)
302-6400.
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TABLE OF CONTENTS
Page
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Risk Factors............................................................... 2
The Company................................................................ 4
Use of Proceeds............................................................ 5
Recent Developments........................................................ 5
Selling Stockholder........................................................ 5
Plan of Distribution....................................................... 6
Legal Matters.............................................................. 7
Experts.................................................................... 7
Available Information ..................................................... 7
Documents Incorporated by
Reference............................................................... 8
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH
IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
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1,150,043 Shares
CHIC BY H.I.S, INC.
Common Stock
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PROSPECTUS
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March 3, 1998
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