<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT
For the Quarter Ended: Commission File Number:
September 29, 1996 0-21258
CHICO'S FAS, INC.
(Exact name of registrant as specified in charter)
Florida 59-2389435
(State of Incorporation) (I.R.S. Employer Identification No.)
11215 Metro Parkway, Fort Myers, Florida 33912
(Address of principal executive offices)
941-277-6200
(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, 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 practical date.
At November 5, 1996, there were 7,882,287 shares outstanding of Common Stock,
$.01 par value per share.
<PAGE> 2
CHICO'S FAS, INC.
Index
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheets - September 29, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . 3
Condensed Statements of Income for the Thirteen and Thirty-Nine Week Periods Ended
September 29, 1996 and October 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows for the Thirty-Nine Weeks Ended
September 29, 1996 and October 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
CHICO'S FAS, INC.
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
As of As of
9/29/96 12/31/95
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,463,613 $ 1,099,929
Receivables, net 695,508 571,482
Inventories 9,055,363 6,775,374
Prepaid expenses 419,643 376,987
Deferred taxes 982,000 867,000
------------- -------------
Total Current Assets 14,616,127 9,690,772
------------- -------------
Land, Building and Equipment:
Cost 20,867,841 20,067,061
Less accumulated depreciation and amortization (4,501,419) (3,847,093)
------------- -------------
Land, Building and Equipment, Net 16,366,422 16,219,968
------------- -------------
Other Assets:
Deferred taxes 516,000 540,000
Other assets 631,135 558,540
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Total Other Assets 1,147,135 1,098,540
------------- -------------
$ 32,129,684 $ 27,009,280
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,439,157 $ 2,035,074
Accrued liabilities 2,452,779 2,467,231
Accrued income taxes 333,748 -
Current portion of notes payable and lease obligations 495,205 652,264
------------- -------------
Total Current Liabilities 6,720,889 5,154,569
------------- -------------
Noncurrent Liabilities:
Notes and capital leases payable 5,200,336 3,683,099
Credit line payable - 722,942
Deferred rent 1,476,970 1,489,720
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Total Noncurrent Liabilities 6,677,306 5,895,761
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Stockholders' Equity:
Common stock 78,821 77,825
Additional paid-in capital 7,544,891 7,087,636
Retained earnings 11,107,777 8,793,489
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Total Stockholders' Equity 18,731,489 15,958,950
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$ 32,129,684 $ 27,009,280
============= =============
</TABLE>
Page 3
See Accompanying Notes
<PAGE> 4
CHICO'S FAS, INC.
Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended Thirteen Weeks Ended
9/29/96 10/1/95 9/29/96 10/1/95
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net Sales by Company Stores $ 46,676,048 $ 43,255,773 $ 14,975,845 $ 14,569,307
Net Sales to Franchisees 1,421,912 2,200,480 666,893 699,776
----------------- ----------------- ----------------- --------------
NET SALES 48,097,960 45,456,253 15,642,738 15,269,083
Cost of Goods Sold 19,742,150 19,738,706 6,088,713 6,528,042
----------------- ----------------- ----------------- --------------
Gross Profit 28,355,810 25,717,547 9,554,025 8,741,041
General, Administrative and Store
Operating Expenses 24,208,523 22,836,637 8,116,977 7,664,398
----------------- ----------------- ----------------- --------------
Income from Operations 4,147,287 2,880,910 1,437,048 1,076,643
Interest Expense, Net 290,997 439,226 92,161 150,000
----------------- ----------------- ----------------- --------------
Income Before Taxes 3,856,290 2,441,684 1,344,887 926,643
Provision for Income Taxes 1,542,000 976,000 538,000 351,000
----------------- ----------------- ----------------- --------------
NET INCOME $ 2,314,290 $ 1,465,684 $ 806,887 $ 575,643
================= ================= ================= ==============
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.29 $ 0.19 $ 0.10 $ 0.07
================= ================= ================= ==============
Weighted average common and
common equivalent shares
outstanding 8,093,786 7,894,796 8,148,704 7,875,100
================= ================= ================= ==============
</TABLE>
Page 4
See Accompanying Notes
<PAGE> 5
CHICO'S FAS, INC.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
9/29/96 10/1/95
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,314,290 $ 1,465,684
-------------- --------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,359,857 1,237,536
Deferred taxes (91,000) 24,000
Loss on disposal of property and equipment 195,046 23,260
Decrease in deferred rent (12,750) (29,619)
Change in assets and liabilities:
(Increase) decrease in receivables, net (124,026) 11,761
Increase in inventories (2,279,989) (1,614,889)
Increase in prepaids and other assets (10,395) (42,280)
Increase (decrease) in accounts payable 1,404,083 (372,446)
Decrease in accrued liabilities (14,454) (282,887)
Increase in accrued income taxes 333,748 187,351
-------------- --------------
Total adjustments 760,120 (858,213)
-------------- --------------
Net cash provided by operating activities 3,074,410 607,471
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets - 16,327
Purchases of land, buildings and equipment (1,573,522) (832,972)
-------------- --------------
Net cash used in investing activities (1,573,522) (816,645)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 458,251 8,167
Credit line (payments) receipts (722,942) 631,072
Principal payments on debt (4,227,322) (511,807)
Borrowings under noncurrent debt 5,587,500 -
Deferred finance costs (232,691) (137,544)
-------------- --------------
Net cash provided by (used in) financing activities 862,796 (10,112)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 2,363,684 (219,286)
CASH AND CASH EQUIVALENTS - Beginning of Period 1,099,929 805,979
-------------- --------------
CASH AND CASH EQUIVALENTS - End of Period $ 3,463,613 $ 586,693
============== ==============
</TABLE>
Page 5
See Accompanying Notes
<PAGE> 6
CHICO'S FAS, INC.
Notes to Condensed Financial Statements
(Unaudited)
September 29, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying unaudited condensed financial statements of Chico's
FAS, Inc. (the "Company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and
notes 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. For further information, refer
to the financial statements and notes thereto for the year ended
December 31, 1995, included in the Company's Annual Report on Form 10-K
filed on March 29, 1996. The December 31, 1995 balance sheet amounts
were derived from audited financial statements included in the
Company's Annual Report.
Operating results for the thirty-nine weeks ended September 29, 1996
are not necessarily indicative of the results that may be expected for
the entire fiscal year.
Net Income Per Common and Common Equivalent Share
Net income per common and common equivalent share is computed by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the periods, adjusted to include
the number of additional shares (248,125 and 118,732 for the
thirty-nine weeks ended September 29, 1996 and October 1, 1995,
respectively, and 267,195 and 98,125 for the thirteen weeks ended
September 29, 1996 and October 1, 1995, respectively) that would have
been outstanding if the stock options granted had been exercised, with
the proceeds being used to buy shares from the market (i.e., the
treasury stock method). Net income per common and common equivalent
share represents both primary and fully diluted per share information.
2. RENEWED CREDIT FACILITIES
In September 1996 the Company renewed its $6 million letter and line of
credit facilities such that the facilities now expire in May, 1998. In
addition, the letter of credit facility was increased to $4 million and
the line of credit was modified to include any portion of the total $6
million facility which remains available after a reduction for any
outstanding letters of credit and after taking into account further
limits imposed by a borrowing base formula dependent on inventory
levels. The collateral and interest rates did not change.
Page 6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED SEPTEMBER 29, 1996 COMPARED TO
THE THIRTEEN WEEKS ENDED OCTOBER 1, 1995.
Net Sales. Net sales by Company-owned stores for the thirteen weeks ended
September 29, 1996 increased by approximately $407,000, or 2.8%, over net sales
by Company-owned stores for the comparable thirteen weeks ended October 1,
1995. The increase was the result of approximately $600,000 additional sales
from the new (or reacquired) stores not yet included in the Company's
comparable store base (net of prior year sales of approximately $344,000 from
six stores closed in 1995), and by a comparable Company-owned store net sales
decrease of approximately $193,000.
Net sales to franchisees for the thirteen weeks ended September 29, 1996
decreased approximately $33,000, or 4.7% compared to net sales to franchisees
for the thirteen weeks ended October 1, 1995. The Company believes that the
decrease in net sales to franchisees was primarily caused by the Company
acquiring five franchises in 1995 and one franchise closing in early 1996
accounting for approximately $21,000 of the decrease.
Gross Profit. Gross profit for the thirteen weeks ended September 29, 1996 was
$9.6 million, or 61.1% of net sales, compared with $8.7 million, or 57.2% of
net sales for the thirteen weeks ended October 1, 1995. The increase in the
gross profit percentage primarily resulted from a revised merchandising
strategy for the Company's outlet stores which resulted in significantly higher
margins for these seven stores.
General, Administrative and Store Operating Expenses. General, administrative
and store operating expenses increased to $8.1 million, or 51.9% of net sales,
in the thirteen weeks ended September 29, 1996 from $7.7 million, or 50.2% of
net sales, in the thirteen weeks ended October 1, 1995. The increase in
general, administrative and store operating expenses was, for the most part,
the result of increases in store operating expenses, including store
compensation, occupancy and other costs associated with additional store
openings. The increase in these expenses as a percentage of net sales was
principally due to an increase in marketing costs. To a lesser degree, the
increase resulted from current period expenses associated with a Company-wide
refixturing program and from an increase in accruals for contributions to the
Company's retirement plan.
Interest Expense, Net. Net interest expense decreased to approximately $92,000
in the thirteen weeks ended September 29, 1996 from approximately $150,000 in
the thirteen weeks ended October 1, 1995. This decrease was primarily a
result of increased interest income due to improved cash flow generated from
the Company's improved profitability.
Net Income. As a result of the factors discussed above, net income reflects an
increase of 40.2% to approximately $807,000 in the thirteen weeks ended
September 29, 1996 from net income of approximately $576,000 in the thirteen
weeks ended October 1, 1995.
Page 7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED SEPTEMBER 29, 1996 COMPARED TO
THE THIRTEEN WEEKS ENDED OCTOBER 1, 1995. (CONTINUED)
Comparable Company Store Net Sales. Comparable Company store net sales
decreased by 1.3% in the thirteen weeks ended September 29, 1996 when compared
to the comparable period in fiscal 1995. Comparable Company store net sales
data is calculated based on the change in net sales of currently open
Company-owned stores that have been operated as a Company store for at least
thirteen months (106 stores).
The Company believes that the decrease in comparable Company store net sales
resulted from the introduction of the Company's fall line, including darker
colors and heavier fabrics, too early in the summer transition season. The
Company also believes that some of the changes that the Company implemented in
merchandise design, construction, fabric and product assortment tended to
focus on a less resort-wear based customer. As a result, the Company believes
that it needs additional time to carry out more effective and focused marketing
efforts in order to promote its new merchandise look. The Company believes this
change in merchandise direction provides the Company with access to a larger
customer base in the 35-55 age group.
RESULTS OF OPERATIONS - THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 1996 COMPARED TO
THE THIRTY-NINE WEEKS ENDED OCTOBER 1, 1995.
Net Sales. Net sales by Company-owned stores for the thirty-nine weeks ended
September 29, 1996 increased by $3.4 million, or 7.9%, over net sales by
Company-owned stores for the comparable thirty-nine weeks ended October 1,
1995. The increase was the result of approximately $968,000 in additional
sales generated through a warehouse sale held at the Company's headquarters and
at a temporary outlet store located in Florida that has since been closed, $1.6
million in additional sales from the new (or reacquired) stores not yet
included in the Company's comparable store base (net of prior year sales of
$1.5 million from six stores closed in 1995), and by a comparable Company-owned
store net sales increase of approximately $824,000.
Net sales to franchisees for the thirty-nine weeks ended September 29, 1996
decreased approximately $779,000, or 35.4% compared to net sales to franchisees
for the thirty-nine weeks ended October 1, 1995. The decrease in net sales to
franchisees was principally caused by an approximate $423,000 decrease in net
sales to franchisees resulting from the acquisition of five franchises by the
Company during 1995 and the closing of one franchise in early 1996. Management
believes the balance of the decrease in net sales to franchisees resulted in
part from conservative buying positions established by the franchisees as the
Company began delivering its new designs and styles in late March 1996,
combined with increased returns of older merchandise in anticipation of a new,
more restrictive return policy which became effective in July 1996.
Gross Profit. Gross profit for the thirty-nine weeks ended September 29, 1996
was $28.4 million, or 59.0% of net sales, compared with $25.7 million, or 56.6%
of net sales for the thirty-nine weeks ended October 1, 1995. The increase in
the gross profit percentage primarily resulted from improved gross margins
related to the Company's new spring and summer goods, and an increase in the
Company's outlet gross margins due to a change in its merchandising strategies.
To a lesser degree, the increase in gross profit percentage was caused by an
increase in the proportion of net sales by Company-owned stores as compared to
the net sales to franchisees (which sales carry lower gross margins).
Page 8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS - THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 1996 COMPARED TO
THE THIRTY-NINE WEEKS ENDED OCTOBER 1, 1995. (CONTINUED)
General, Administrative and Store Operating Expenses. General, administrative
and store operating expenses increased to $24.2 million, or 50.3% of net sales,
in the thirty-nine weeks ended September 29, 1996 from $22.8 million, or 50.2%
of sales, in the thirty-nine weeks ended October 1, 1995. The increase in
general, administrative and store operating expenses was, for the most part,
the result of increases in store operating expenses, including store
compensation, occupancy and other costs associated with additional store
openings. The increase in these expenses as a percentage of net sales was
principally due to increased marketing costs.
Interest Expense, Net. Net interest expense decreased to approximately
$291,000 in the thirty-nine weeks ended September 29, 1996 from approximately
$439,000 in the thirty-nine weeks ended October 1, 1995. This decrease was
primarily a result of increased interest income due to improved cash flow
generated from the Company's improved profitability since the beginning of
1996.
Net Income. As a result of the factors discussed above, net income reflects an
increase of 57.9% to $2.3 million in the thirty-nine weeks ended September 29,
1996 from net income of $1.5 million in the thirty-nine weeks ended October 1,
1995. The income tax provision represented an effective rate of 40.0% for both
the thirty-nine weeks ended September 29, 1996 and October 1, 1995.
Comparable Company Store Net Sales. Comparable Company store net sales
increased by 2.0% in the thirty-nine weeks ended September 29, 1996 when
compared to the comparable period in fiscal 1995. Comparable Company store net
sales data is calculated based on the change in net sales of currently open
Company-owned stores that have been operated as a Company store for at least
thirteen months (106 stores).
The Company believes that the increase in comparable Company store net sales
reflects improvements in the merchandise offered by the Company, including
changes in merchandise design, construction, fabric and product assortment. In
addition, the Company believes the increase is also attributable to an increase
in average price points and a general improvement in the women's retail apparel
environment in the second quarter of 1996.
In March 1996 the Company moved to a more full price environment in its
Company's front-line stores, while continuing inventory clearance via a local
warehouse sale which was not included in the comparable store sales base.
During 1995, inventory was still being cleared via sidewalk sales at individual
Company-owned stores. Due to this change in inventory clearance strategies,
the Company excluded approximately $176,000 in the first thirty-nine weeks of
1995 local store sales to more accurately portray its year-over-year sales. See
the Company's Annual Report on Form 10-K and Annual Report to Stockholders for
the fiscal year ended December 31, 1995 for a more detailed description of the
comparable company store sales trends appearing on page 6 of the Annual Report
to Stockholders, and the status of the Company's transition plan appearing on
page 2 and 3 of the Company's Annual Report on Form 10-K; such portions of the
Annual Report to Stockholders and Annual Report on Form 10-K are incorporated
by reference into this Quarterly Report.
Page 9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing capital requirements are for funding capital
expenditures related to new store openings, refixturing and remodeling of
existing stores and merchandise inventory purchases.
During the first thirty-nine weeks of fiscal 1996 and the first thirty-nine
weeks of fiscal 1995, the Company's primary source of working capital was cash
flow from operations of $3.1 million and approximately $607,000, respectively.
The increase in cash flow from operations was primarily due to an increase in
accounts payable in fiscal 1996 of $1.4 million principally related to large
receipts of merchandise near the end of the quarter for which payment had not
yet been made. This compares to a decrease in accounts payable of
approximately $372,000 in fiscal 1995 due to payments of the final liabilities
related to the Company's new combined corporate headquarters, distribution
center and woodshop. Approximately $849,000 of the increase in cash flow was
due to improved overall profitability of the Company. This increase in cash
flow from operations was partially offset by an increase in inventories of $2.3
million, in the first thirty-nine weeks of fiscal 1996, as compared to an
increase of $1.6 million, in the first thirty-nine weeks of fiscal 1995.
In early January 1996, the Company obtained a seven year $5.6 million mortgage
facility from a lender which was in addition to the Company's then current $6
million working capital line and letter of credit facility made available by
another lender. The proceeds of the mortgage facility were used in part to
repay the $3.9 million balance of certain term and note facilities that had
been put in place in 1994 and were used in part to provide $1.6 million of cash
to serve as collateral (along with inventories and accounts receivable which
serve as collateral for both the line and letter of credit facilities) for its
letter of credit facility. As part of this refinancing, the collateral
deposits previously provided by certain shareholders to secure the letter of
credit facility were no longer required. The Company also repaid approximately
$327,000 of other indebtedness in the first thirty-nine weeks of fiscal 1996.
During the third quarter of 1996, the Company's $6 million credit facilities
were renewed with maturity in May, 1998.
Also, during the first thirty-nine weeks of fiscal 1996, the Company repaid
approximately $723,000 under its available working capital credit lines, while
in the first thirty-nine weeks of fiscal 1996, the Company borrowed
approximately $631,000 under its then available credit lines.
The Company has aggressively pursued a strategy during fiscal 1995, and
continuing into 1996, to expand and shift its vendor base to new vendors in
Hong Kong, Turkey, Guatemala, Peru, India and the U.S. This shift in vendor
base has been implemented by the Company for several reasons. First,
management was concerned that the quality and timeliness of deliveries from its
vendor base were not measuring up to the standards required for the new line of
merchandise. Second, management determined that it was important to make
further efforts to reduce its reliance on a limited number of suppliers.
Although the Company has achieved satisfactory results on the merchandise
received thus far from these new vendors, there can be no assurance that the
Company will achieve its goal of continuing to improve the quality and
timeliness of deliveries. In addition, this shift to new vendors has increased
the Company's needs for documentary letters of credit. As of September 29,
1996, the Company had issued and outstanding letters of credit which totaled
$2.2 million. The Company has letter of credit facilities totaling $4.0
million available under the recently renewed credit facilities which now mature
in May 1998. See "Item 1-Business" appearing on pages 12 through 15 of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 for additional information about the impact of the shift in vendors and
the business and political risks associated with these vendors' countries; such
portions of the Annual Report on Form 10-K are incorporated by reference into
this Quarterly Report.
Page 10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company invested $1.6 million, during the first thirty-nine weeks of fiscal
1996 for capital expenditures principally associated with the opening of seven
new Company stores, the remodeling of eight existing Company stores and the
costs of new fixtures for a Company-wide refixturing program to convert all
Company stores from principally folded merchandise displays to principally
hanging displays. This refixturing effort was essentially completed with
capital expenditures of approximately $675,000. The Company further intends to
expand its store remodeling program in 1997 to include up to 30 stores for the
first six months of 1997, with a similar program for the last six months, if
management believes this is appropriate at that time. The 1997 remodeling
program would include replacing certain floors, installing hanging panel units
and other general refurbishment as deemed necessary. The cost per store is
estimated to be between $15,000 and $50,000 with an estimated 30 store cost of
between $600,000 to $900,000 The Company also closed, during this period, the
temporary store located in Florida which was used as an outlet and one store
whose lease had expired which the Company elected not to renew.
During the first quarter of 1996, one of the Company's former officers
exercised 71,540 stock options at the price of $4.08. In addition, during the
first thirty-nine weeks of fiscal 1996, several other employees exercised 7,046
options at various prices ranging from $5.50 to $8.75 and the Company sold
21,037 shares at a price of $3.83 under its Employee Stock Purchase Plan. The
proceeds from these issuances of stock amounted to approximately $458,000. In
1995, the proceeds from issuance of stock under its Employee Stock Purchase
Plan amounted to approximately $8,000.
During the first thirty-nine weeks of fiscal 1995, the Company invested
approximately $833,000 for capital expenditures associated with the opening of
five new Company stores and remodeling at four stores. During this time frame,
the Company also acquired the assets and franchise rights for five franchise
locations in exchange for two year notes of approximately $324,000, net of
receivables due to the Company. These transactions are not included in the
condensed statement of cash flows since they were noncash transactions. In
addition, the Company also repaid approximately $512,000 of indebtedness.
In the first quarter of fiscal 1995, the Company also received from a
franchisee a thirty month note of approximately $274,000 in exchange for past
due receivables to assist the franchisee through a transition period and in an
effort to help support the operations of the franchisee's most recently opened
franchised store. The note is current, with approximately $152,000 of
principal remaining to be paid.
The Company plans to open approximately 13-14 new stores in fiscal 1996, 7 of
which were open as of September 29, 1996. Previously the Company had indicated
that it was considering testing the sale of folk art and other lifestyle
accessories in one or more of its Company stores in 1996. The Company has
decided that it will postpone this test until at least late 1997 to allow it to
concentrate on its transition and new store opening programs. The Company
believes that the liquidity needed for its planned new store growth, remodel
program and maintenance of proper inventory levels associated with this growth
will be funded primarily from cash flow from operations. The Company further
believes that this liquidity will be sufficient, based on currently planned new
store openings, to fund anticipated capital needs over the near-term, including
scheduled debt repayments. If cash flow from operations should prove to be
less than anticipated or if there should arise a need for additional letter of
credit capacity due to establishing new and expanded sources of supply, or if
the Company were to increase the number of new Company stores planned to be
opened in future periods, the Company might need to seek other sources of
financing to conduct its operations or pursue its expansion plans and there can
be no assurance that such other sources of financing would be available.
Page 11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
SEASONALITY AND INFLATION
The Company has historically experienced, and expects to continue to
experience, seasonal fluctuations in its sales and net income. Historically, a
greater portion of the Company's sales have been realized during the period
from approximately November 1 through March 31, thus impacting the first and
fourth quarters. Historically, sales generated during this period have had a
significant impact on the Company's results of operations. Fewer of the
Company's new stores have been opened in warm-weather tourist locations and, as
a result, the difference in sales and net income during the first three
quarters of the fiscal year has been reduced. Moreover, performance during the
first quarter of 1995 and during the first quarter of 1996 was negatively
impacted by separate transitions needed to clear out the old merchandise and
prepare for the arrival of new designs and styles.
Even though the Company is not as dependent on the Christmas selling season as
many other retailers are, sales in the months of November and December are
still expected to continue to represent, in the future, a greater portion of
the Company's sales. If for any reason the Company's sales during November and
December do not represent increased sales activity as compared with the
remainder of the year, or if there is a decrease in availability of working
capital in the months prior to November and December, the Company's
profitability could be materially and adversely affected. The Company's
quarterly results of operations may also fluctuate significantly as a result of
a variety of factors, including the timing of new stores openings, the net
sales contributed by new stores, and store closings.
Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation has had a material
effect on the results of operations during the first thirty-nine weeks of
fiscal 1996 and during the first thirty-nine weeks of fiscal 1995.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders of the Company was held on June 11,
1996. There were 7,854,038 shares of Common Stock entitled to vote. The
following matters were voted upon at the meeting:
(a) Board of Directors proposal to approve the reduction in the number of
members of the Board of Directors from seven members to five members
through the elimination of two Class II Director positions.
Voting Results: For the proposal: 7,081,819
Against the proposal: 92,912
Abstentions: 18,141
(b) Election of Director --
Votes Votes
For Withheld
----- --------
Class III - Term Expiring in 1998:
Marvin J. Gralnick 7,197,447 65,726
The terms of office for the other directors continued after the meeting as
follows: W. Keith Schilit (1997), Charles J. Kleman (1997), Helene B. Gralnick
(1998), and Verna K. Gibson (1998).
Page 12
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Continued)
(c) Board of Directors proposal to ratify the appointment of Arthur
Andersen LLP as independent certified public accountants.
Voting Results: For the proposal: 7,235,521
Against the proposal: 10,630
Abstentions: 17,022
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 10.7 First Amendment to Third Amended and Restated
Credit Agreement
10.8 Lease Termination & Settlement Agreement
27 Financial Data Schedule (for SEC use only)
(b) Reports on
Form 8-K: The Company did not file any reports on
Form 8-K during the Thirteen weeks ended
September 29, 1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 11, 1996 By: /s/ Marvin Gralnick
-------------------------------
Marvin Gralnick
Chief Executive Officer
(Principal Executive Officer)
Date: November 11, 1996 By: /s/ Charles J. Kleman
--------------------------------
Charles J. Kleman
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 13
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(the "Amendment") is dated as of September 15, 1996, between CHICO'S FAS, INC.,
a Florida corporation (the "Borrower"), and NATIONSBANK, N.A. (SOUTH), a
national banking association (successor by merger to NCNB National Bank of
Florida and NationsBank of Florida, N.A.) (the "Bank").
BACKGROUND
Borrower and Bank executed a Third Amended and Restated Credit
Agreement dated December 30, 1995 (the "Agreement"). Pursuant to the
provisions of the Agreement, Bank established a $3,000,000.00 renewal working
capital line of credit (the "Renewal First Working Capital Line") and a
$3,000,000.00 renewal documentary letter of credit facility (the "Letter of
Credit Line").
Borrower has now requested the: (1) renewal and reduction of the
Renewal First Working Capital Line so as to be in the amount of $2,000,000.00,
and (2) renewal and increase of the Letter of Credit Line so as to be in the
amount of $4,000,000.00. Bank has agreed to the request of Borrower on the
terms and conditions of this Amendment.
TERMS
NOW, THEREFORE, in consideration of the foregoing and the promises
contained herein, the parties agree as follows:
1. DEFINED TERMS. Any capitalized terms used but not defined
herein shall have the meanings set forth in the Agreement.
2. RENEWAL FIRST WORKING CAPITAL LINE. Subject to the terms and
conditions of the Agreement, as amended by this Amendment, the Renewal First
Working Capital Line is hereby renewed in the maximum principal amount of
$2,000,000.00. The Renewal First Working Capital Line will expire on May 31,
1998, at which time all indebtedness thereunder will be due and payable in
full. Interest shall be payable monthly in arrears. The Renewal First Working
Capital Line will be evidenced by a $2,000,000.00 renewal promissory note of
Borrower in form and substance satisfactory to Bank (the "Renewal First
Working Capital Line Note").
3. RENEWAL LETTER OF CREDIT LINE. Subject to the terms and
conditions of the Agreement, as amended by this Amendment, the Letter of Credit
Line is hereby renewed in the maximum principal amount of $4,000,000.00 (the
"Renewal Letter of Credit Line"). The Renewal Letter of Credit Line will
expire on May 31, 1998, at which time all indebtedness thereunder will be due
and payable in full. Interest shall be payable monthly in arrears. The
Renewal Letter of Credit Line shall be evidenced by a $4,000,000.00 renewal
promissory note of Borrower in form and substance satisfactory to Bank (the
"Renewal Letter of Credit Line Note"). Bank will not make any Advances of
funds to Borrower under the Renewal Letter of Credit Line unless the Renewal
First Working Capital Line is fully funded. Subject to the foregoing, the Bank
agrees to make Advances of funds to Borrower under the Renewal Letter of Credit
Line upon receipt of written request therefor from Borrower, upon and subject
to the terms and conditions set forth herein and in the Agreement, so long as
(a) the Renewal First Working Capital Line
<PAGE> 2
is fully funded, (b) there has occurred no Default or Event of Default, and (c)
the sum of all outstanding unpaid Advances does not exceed the Borrowing Base.
4. AFFIRMATION OF COLLATERAL DOCUMENTS. Payment of the Renewal
First Working Capital Line Note and the Renewal Letter of Credit Line Note
shall be and is hereby secured by all Collateral described in Article III of
the Agreement. Borrower ratifies and confirms the provisions of the Agreement
and the Security Agreement with respect to the Collateral and agrees to execute
or otherwise provide to Bank any and all modifications, financing statements,
and other agreements or consents reasonably required by Bank now or in the
future in connection therewith. Borrower will execute or otherwise provide to
Bank any and all modifications, financing statements, and other agreements or
consents required by Bank now or in the future in connection therewith.
5. AMENDED PROVISIONS. Subject to the conditions set forth in
paragraph 7 hereof, the Agreement shall be and hereby is further amended,
effective as of the date hereof, as follows:
(a) the definition of "Advances" in Section 1.1 of the
Agreement is hereby replaced with the following definition:
"Advance" or "Advances" means: (i) funds paid by Bank to
Borrower under the Renewal First Working Capital Line or the Renewal
Letter of Credit Line, and (ii) funds advanced by Bank to third
parties under Letters of Credit and Acceptances issued under the
Renewal Letter of Credit Line.
(b) The definition of "Advance Account" in Section 1.1 of
the Agreement is hereby replaced with the following definition:
"Advance Account" means account number 3601213648 on the books
of the Bank and created under this Agreement, pursuant to which: (i)
any Advance by the Bank to Borrower under the Renewal First Working
Capital Line shall be credited thereto by recording therein on the
date of such Advance a credit entry in the amount of such Advance; and
(ii) debits shall be made thereto if: (A) there exist any funds in
such account when there are outstanding amounts under the Renewal
First Working Capital Line, in which case such funds will be debited
thereto and applied to the Renewal First Working Capital Line by
recording therein a debit entry in the amount of such funds, and (B)
any Advance is made to fund a Letter of Credit draw, in which case
there shall be debited thereto the amount of such Advance by recording
therein a debit entry in the amount of such Advance on the date of
such Advance.
(c) The definition of "Certificate of Deposit" in Section
1.1 of the Agreement is hereby replaced with the following definition:
"Certificate of Deposit" means the $1,600,000.00 Certificate
of Deposit issued to Borrower by Bank, together with all proceeds and
replacements thereof.
(d) The definition of "Termination Date" in Section 1.1
of the Agreement is hereby replaced with the following definition:
2
<PAGE> 3
"Termination Date" means May 31, 1998, with respect to the
indebtedness evidenced by the Renewal First Working Capital Line Note
and the Renewal Letter of Credit Line Note.
(e) Each reference to "Letter of Credit Line" shall be
deemed to refer to the Renewal Letter of Credit Line, wherever such reference
appears in the Agreement. Each reference to "Letter of Credit Line Note" shall
be deemed to refer to the Renewal Letter of Credit Line Note, wherever such
reference appears in the Agreement.
(f) The number "$3,000,000.00" with respect to the Letter
of Credit Line is replaced with the number "$4,000,000.00" with respect to the
Renewal Letter of Credit Line wherever it appears in Section 2.1, or elsewhere,
in the Agreement.
(g) The number "$3,000,000.00" with respect to the
Renewal First Working Capital Line is replaced with the number "$2,000,000.00"
wherever it appears in Section 2.2, or elsewhere, in the Agreement.
(h) Section 2.1B of the Agreement is amended in its
entirety to read as follows:
B. Issuances of Letters of Credit and Acceptances;
Advances. The Bank has agreed, upon and subject to the terms and
conditions set forth herein, during the period from the date hereof
until the earlier of: (a) the occurrence of any Default or Event of
Default, or (b) the Termination Date, to issue Letters of Credit and
Acceptances under the Renewal Letter of Credit Line. In addition,
wherever the Renewal Working Capital Line is fully advanced, and
subject to the terms and conditions set forth herein, the Bank will
make available any unused portion of the Renewal Letter of Credit Line
for additional Advances, so long as there has occurred no Default or
Event of Default.
Immediately after giving effect to each Advance made or Letter
of Credit or Acceptance issued under the Renewal Letter of Credit
Line, the sum of all outstanding unpaid Advances thereunder plus the
aggregate stated amount of Letters of Credit and Acceptances issued
and outstanding thereunder shall not exceed $4,000,000.00. Also
immediately after giving effect to each Advance made under the Renewal
Letter of Credit Line, the sum of all outstanding unpaid Advances
thereunder shall not exceed the lesser of: (i) $4,000,000.00 less the
then aggregate stated amount of Letters of Credit and Acceptances
issued and outstanding thereunder, and (ii) the Borrowing Base.
During the period from the date hereof to the Termination
Date, the Borrower may, subject to the terms and conditions hereof,
use the Renewal Letter of Credit Line by borrowing, paying, or
repaying the principal amount thereof, and reborrowing all in
accordance with the terms hereof. The Borrower agrees that if at any
time with respect to the Renewal Letter of Credit Line the amounts
outstanding thereunder exceed the permitted amounts described above,
the Borrower shall immediately reduce the amount of the Loans
outstanding thereunder to the extent necessary to comply with the
restrictions set forth herein.
3
<PAGE> 4
Notwithstanding the foregoing, all beneficiary draws on
Letters of Credit and Acceptances shall be funded immediately by
Borrower as follows: (1) first, through Bank's debit of the Advance
Account, which Advance Account has been pledged and assigned to Bank
as collateral; (2) second, from any remaining availability under the
Renewal First Working Capital Line; and (3) third, from any remaining
availability under the Renewal Letter of Credit Line. Notwithstanding
the foregoing, the occurrence of a draw under a Letter of Credit or
Acceptance constitutes a default hereunder except as set forth in
Section 8(m) below.
(i) Section 2.1D of the Agreement is amended in its
entirety to read as follows:
D. Advance Account. Subject to the terms and conditions
of this Agreement, as amended, all Advances under the Renewal Working
Capital Line will be funded by Bank by deposit into the Advance
Account; Advances under the Renewal Letter of Credit Line shall not be
funded by deposit into the Advance Account unless otherwise so
directed in writing by Borrower.
(j) Section 2.1F of the Agreement is amended in its
entirety to read as follows:
F. Use of Proceeds and Available Credit. The Renewal
Letter of Credit Line hereunder shall be used for the issuance from
time to time of Letters of Credit and Acceptances as provided above.
The Letters of Credit and Acceptances issued hereunder shall be used
to facilitate the purchase of Inventory. Any Advances under the
Renewal Letter of Credit Line shall be used by the Borrower: (1) for
working capital purposes or for the acquisition of plant, property or
equipment; and (2) to fund the reimbursement to Bank for payments made
by Bank in respect of drawings under the Letters of Credit and
Acceptances and for related charges and expenses.
(k) The second paragraph of Section 2.2A of the Agreement
is amended in its entirety to read as follows:
Immediately after giving effect to each Advance made under the
Renewal First Working Capital Line, the sum of all outstanding unpaid
Advances thereunder shall not exceed $2,000,000.00. Also, immediately
giving effect to each Advance made under the Renewal First Working
Capital Line, the sum of all outstanding unpaid Advances (including
all Advances under both the Renewal First Working Capital Line and the
Renewal Letter of Credit Line) shall not exceed the lesser of: (i)
$6,000,000.00 less the then aggregate stated amount of Letters of
Credit and Acceptances issued and outstanding thereunder, and (ii) the
Borrowing Base.
(l) The following sentence is added at the end of Section
6.18(a):
At the end of the 1996 Fiscal Year, maintain a Consolidated
Tangible Net Worth of at least $15,800,000.00.
4
<PAGE> 5
(m) Schedule 5.5(a) of the Agreement is amended in its
entirety so that, as amended, it shall read as set forth on Schedule 5.5(a)
attached to this Amendment.
(n) Exhibit "A" of the Agreement is amended in its
entirety so that, as amended, it shall read as set forth on Exhibit "A"
attached to this Amendment.
6. EXPENSES. Without limiting the provisions of the Agreement,
Borrower covenants and agrees to pay all costs and expenses of Bank in
connection with the closing of the transactions evidenced hereby, including,
but not limited to, Bank's reasonable attorneys' fees, recording or filing
costs or expenses, intangible taxes, documentary stamps, surtax and other
revenue fees, and similar items.
7. LOAN AGREEMENT, RATIFICATION, NO NOVATION. The Renewal First
Working Capital Line Note and the Renewal Letter of Credit Line Note each shall
be deemed issued pursuant to and shall be subject to the terms of the
Agreement, as amended hereby, except as may be expressly modified or
supplemented hereby or by the terms of such notes, together with this
Amendment, shall each be deemed to be a "Loan Document" for the purposes of the
Agreement and hereof. Except as expressly modified or supplemented hereby, the
Loan Documents and all agreements, instruments, and documents executed or
delivered pursuant thereto have remained and shall remain at all times in full
force and effect in accordance with their respective terms, and have not been
novated by the provisions of this Amendment.
8. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into
this Amendment and to perform the transactions described herein, Borrower
hereby represents and warrants to Bank that Borrower has re-examined the
Agreement and on and as of the date hereof:
(a) The representations and warranties made by the
Borrower in Article V of the Agreement (except that the financial statements
referred to in Section 5.03 shall be those most recently furnished to the Bank
pursuant to Section 6.01) are correct and complete as of the date of this
Amendment, except to the extent written waivers have been provided by the Bank;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower since the date of the most
recent financial reports of the Borrower received by the Bank under Section
6.01 thereof, other than changes in the ordinary course of business; and
(c) No event has occurred and no condition exists that,
upon the consummation of the transaction contemplated hereby, constitutes a
default or an Event of Default on the part of the Borrower under the Agreement
or any Note, either immediately or with the lapse of time or the giving of
notice, or both.
9. CONDITIONS PRECEDENT. The obligation of the Bank to continue
to make the Loans from and after the date of this Amendment and to continue to
issue Letters of Credit under the Agreement are subject to the conditions
precedent set forth in the Agreement and the additional conditions precedent
that the Bank shall have received, on the date of this Amendment in form and
substance satisfactory to the Bank, the following:
(a) Executed originals of each of the Loan Documents,
together with all schedules and exhibits thereto in form and substance
satisfactory to the Bank (it being understood that the Loan
5
<PAGE> 6
Documents shall also include this Amendment, the Renewal First Working Capital
Line Note and the Renewal Letter of Credit Line Note);
(b) Favorable written opinion of counsel to the Borrower
dated the date of this Amendment, addressed to the Bank and satisfactory to
Holland & Knight, counsel to the Bank;
(c) Resolutions of the board of directors of the Borrower
certified by its secretary or assistant secretary as of the date of this
Amendment, approving and adopting the Loan Documents to be executed by the
Borrower in connection with this Amendment;
(d) All fees payable by the Borrower on the date of this
Amendment to Bank; and
(e) Such other documents, instruments, certificates, and
opinions as the Bank may reasonably request on or before the date of this
Amendment in connection with the consummation of the transactions contemplated
hereby.
10. NO WAIVER BY BANK. The execution of this Amendment and the
new Loan Documents shall not constitute a waiver of any default or Event of
Default in the Agreement or any other Loan Document existing on the date
hereof, nor shall it eliminate any right which Bank may otherwise have to
accelerate the indebtedness subject to the Agreement by virtue of any default
or Event of Default.
11. RELIANCE UPON, SURVIVAL OF, AND MATERIALITY OF REPRESENTATIONS
AND WARRANTIES, AGREEMENTS, AND COVENANTS. All representations and warranties,
agreements, and covenants made by Borrower herein are material and shall be
deemed to have been relied upon by Bank, notwithstanding any investigation
heretofore or hereafter made by Bank, shall survive the execution and delivery
of this Amendment, and shall continue in full force and effect so long as any
indebtedness is owed by Borrower to Bank.
12. COOPERATION, FURTHER ASSURANCES. Borrower agrees to cooperate
with Bank so that the interests of Bank are protected and the intent of the
Loan Documents and this Amendment can be effectuated. Borrower agrees to
execute whatever further documents and to provide whatever further assurances
Bank may reasonably request or deem necessary to effectuate the terms of the
Renewal First Working Capital Line, the Renewal Letter of Credit Line, and this
Amendment.
13. ESTOPPEL AND RELEASE. Borrower hereby acknowledges and
agrees that, as of the date hereof, there exists no right of offset, defense,
counterclaim, claim, or objection in favor of such party as against Bank with
respect to any of the Loan Documents, any collateral therefor, or any other
aspect of the transactions contemplated by the Agreement or the Loan Documents.
In connection with the foregoing, Borrower hereby releases and discharges Bank,
its subsidiaries, affiliates, directors, officers, employees, attorneys,
agents, successors, and assigns from any and all rights, claims, demands,
actions, causes of action, suits, proceedings, agreements, contracts,
judgments, damages, debts, duties, liabilities, or obligations of any kind or
character, including without limitation such claims and defenses as fraud,
mistake, and usury, whether in law or in equity, known or unknown, choate or
inchoate, which it has had, now has, or hereafter may have, arising under or in
any manner relating to, whether directly or indirectly, the Loan Documents, any
collateral therefor or guaranties thereof, or any other aspect of the
transactions contemplated thereby, from the beginning of time until the date
hereof.
6
<PAGE> 7
14. COURSE OF DEALING; AMENDMENT; SUPPLEMENTAL AGREEMENTS. No
course of dealing between the parties hereto shall be effective to amend,
modify, or change any provision of this Amendment or the other Loan Documents.
This Amendment, the Agreement and the other Loan Documents may not be amended,
modified, or changed in any respect except by an agreement in writing signed by
the party against whom such change is to be enforced. The parties hereto may,
subject to the provisions of this Section, from time to time, enter into
written agreements supplemental hereto for the purpose of adding any provision
to this Amendment or the other Loan Documents or changing in any manner the
rights and obligations of the parties hereunder. Any such supplemental
agreement in writing shall be binding upon the parties thereto.
15. HEADINGS. The titles and headings preceding the text of the
paragraphs of this Amendment have been inserted solely for convenience of
reference and shall neither constitute a part of this Amendment nor affect its
meaning, interpretation, or effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
WITNESSES: CHICO'S FAS, INC.,
a Florida corporation
/s/ By: /s/ Charles J. Kleman
- -------------------------------- -----------------------------------
Charles J. Kleman,
/s/ Senior Vice President-Finance
- --------------------------------
NATIONSBANK, N.A. (SOUTH),
a national banking association
By: /s/ Karen Orebaugh
-----------------------------------
Karen Orebaugh,
Assistant Vice President
7
<PAGE> 8
SCHEDULE 5.5(A)
LITIGATION
BNY/Reading dispute and litigation
Bethlehem Construction litigation
<PAGE> 9
EXHIBIT A
BORROWING BASE CERTIFICATE
<PAGE> 10
EXHIBIT A
BORROWING BASE CERTIFICATE
Reference is hereby made to the Third Amended and Restated Credit Agreement,
dated as of _________________, 19_____ as amended (the "Agreement"), between
NationsBank, N.A. (South), (the "Bank"), and CHICO'S FAS, INC. (the "Borrower").
Capitalized terms used but not defined herein shall have the respective
meanings therefore set forth in the Agreement.
This Certificate is furnished to the Bank by the Borrower in accordance with
the provisions of the Agreement. The Borrower certifies that the computation of
the Borrowing Base and the amount available set forth below complies with all
applicable provisions of the Agreement and have been prepared from the
Borrower's books of account and records which represent fairly and accurately
the status and value of each component of the Borrowing Base as at the date
hereof.
Borrowing Base
(A) Eligible Inventory Located at or in transit to Chico's
Warehouse Facilities in Ft. Myers, FL (amount of
in-transit inventory equals $____________) $_____________
(B) Line (A) x .50 $_____________
(C) Eligible Inventory Located at Borrower's Retail
Locations in the continental United States $_____________
(D) Line (C) x .40 $_____________
(E) Borrowing Base for Funded Borrowings:
Line (B) divided by Line (D) $_____________
(F) Outstanding Funded Principal Balance
of Renewal First Working Capital Line $_____________
(not to exceed $2,000,000)
(G) Outstanding Letters of Credit under
the Letter of Credit Line $_____________
(not to exceed $4,000,000)
(H) Outstanding Funded Principal Balance
of Letter of Credit Line
(not to exceed $4,000,000 - Line (G)} $_____________
(I) Line (E) - Line (F) - Line (H) $_____________
(J) $6,000,000 - Line (F) - Line (G) - Line (H) $_____________
(If either Line (I) or Line (J) is negative, such amount shall
be repaid immediately)
(K) Amount Available for Advances is the
lesser of Line (I) or Line (J) $_____________
<PAGE> 11
The Borrower hereby further certifies to the Bank that as of the date hereof:
1. The representations and warranties contained in Article V of the Agreement
and the other Loan Documents are true and correct on and as of the date
hereof as though made on and as of such date.
2. No Default or Event of Default has occurred under the Agreement.
This the ______________ day of __________________, 19___.
CHICO'S FAS, INC.
By: _____________________________
Authorized Officer
<PAGE> 1
EXHIBIT 10.8
LEASE TERMINATION AND SETTLEMENT AGREEMENT
THIS LEASE TERMINATION AND SETTLEMENT AGREEMENT is made and entered on
June 13, 1996, by and between MARVIN GRALNICK, BARRY SZUMLANSKI AND LYNN MANN
(collectively, "Landlord") and CHICO'S FAS, INC. , a Florida corporation
("Tenant").
RECITALS:
1. Landlord and Tenant are bound under a valid and existing Lease
Agreement, dated February 1, 1988 (the "Existing Lease") for the lease and
rental of land and a building thereon located in the City of Fort Myers, Lee
County, Florida, and having a street address of 11580 Marshwood Lane, Fort
Myers, Florida (the "Premises"). As of June 1, 1996 the Lease has an unexpired
term of one (1) year and eight (8) months, and will expire on January 31, 1998
(the "Unexpired Term"). Tenant has asked Landlord to cancel the Existing Lease
and relieve Tenant of its obligations thereunder, substituting for such
obligations those set forth in this Agreement.
2. As an inducement to Landlord to cancel the Lease, Tenant has
procured a prospective new tenant for the Premises, being Steve Hanna and Becky
Hanna, individually (collectively, the "New Tenant"). Landlord has evaluated
the creditworthiness and business of the New Tenant and, having determined to
Landlord's satisfaction that New Tenant is financially responsible, desires to
enter into a new lease agreement of the Premises with New Tenant ("New Lease").
As a further inducement to Landlord to cancel the Existing Lease and to enter
into the New Lease, Tenant is willing to pay to Landlord, subject to execution
and delivery of the New Lease, on a monthly basis, a fixed monthly contribution
equal to the positive difference between the rent that would have been payable
under the Existing Lease (with due regard for any future increases in rent that
might have occurred under the terms of the Existing Lease) and the rent payable
under the New Lease (the "Rent Differential"). Tenant will continue to pay the
Rent Differential to Landlord until the date that the Existing Lease would have
expired pursuant to its terms, that is, until January 31, 1998.
3. For information purposes, as of May 1, 1996, the base rent
payable under the Existing Lease would be $13,543.34 per month. Such base rent
would be subject to increase on February 1, 1997 by multiplying the base rent
payable during the preceding twelve month period by the greater of five percent
(5%) or the annual increase in the level of the United States Bureau of Labor
Statistics Consumer Price Index since the previous adjustment date. The term
of the New Lease will be three (3) years, commencing upon the date that the new
Tenant receives a zoning variance to permit the operation of a roller skating
rink on the Premises. The rent proposed to be paid under the New Lease is
$80,000 annually, payable in monthly installments of $6,666.66, plus applicable
sales and rental tax, commencing thirty (30) days after the term of the New
Lease commences. The rental rate under the New Lease will not be subject to
increase during the entire term of the New Lease.
4. As a further inducement to Landlord to cancel the Existing
Lease, Tenant is willing to pay, for Landlord's benefit, one hundred percent
(100%) of the real estate brokerage commission payable in connection with
procuring the New Lease, as hereinafter provided. Tenant is also willing to
pay, for Landlord's benefit, the entire amount of the annual real estate taxes
and assessments for
<PAGE> 2
the Premises, beginning with the 1996 tax year and continuing until the 1998
tax year in which the Existing Lease expires, with Tenant's liability for the
first and last partial tax years being prorated between Landlord and Tenant.
5. The New Lease provides that the landlord thereunder will pay the
cost of a roof inspection, perform certain air conditioning maintenance and
remove all racks and equipment from the demised premises. Tenant agrees to pay
all such costs for the benefit of Landlord.
6. In addition to Tenant's obligation to pay the Rent
Differential, the real property taxes and the other amounts set forth above,
until January 31, 1998 (but not thereafter), Landlord has requested that Tenant
unconditionally guarantee to Landlord payment of the rent, real estate taxes,
and any other consideration payable under the New Lease, if and to the extent
that New Tenant fails to pay such obligations as and when due. Tenant is
willing to make such a guaranty in favor of Landlord.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises set forth in this Agreement, Landlord and Tenant, agreeing to
be bound legally, hereby agree as follows.
1. RECITALS. The above recitals are true and correct and are an integral
part of this Agreement.
2. CONDITION OF THIS AGREEMENT. Notwithstanding any provision of this
Agreement to the contrary, all rights and obligations of Landlord and Tenant
under this Agreement are subject to the condition precedent that Landlord and
New Tenant shall have entered into the New Lease with New Tenant, on terms and
conditions satisfactory to Landlord and Tenant, in their sole and absolute
discretion, simultaneous with the execution and delivery of this Agreement. If
such condition fails to occur, then this Agreement shall be null and void and
without any effect whatsoever.
3. CANCELLATION OF EXISTING LEASE. Subject to the condition set forth in
Section 2 above, Landlord and Tenant hereby (a) cancel the Existing Lease and
terminate all obligations thereunder to the extent accruing from and after the
date of this Agreement, and (b) agree that Tenant's liability to Landlord shall
lie solely upon and subject to the terms and conditions of this Agreement. The
parties intend this Agreement to serve as a complete substitute for the
Existing Lease and a novation of the obligations of the parties thereunder.
4. OBLIGATIONS OF TENANT AND LANDLORD.
a. Tenant hereby agrees to pay to Landlord, in monthly
installments, the following: (a) a sum equal to the rent and other
consideration payable under the Existing Lease until the date that New Tenant
commences paying the rent under the New Lease and (b) thereafter, the Rent
Differential, with the first such payment to be due on the date that New Tenant
is obligated to begin paying rent under the New Lease. The first payment will
be prorated through the end of the month in which such first payment is due.
Each subsequent monthly payment of the Rent Differential will be due and
payable on the first day of each month, continuing until the last such payment
is due on
2
<PAGE> 3
January 1, 1998. The parties agree that the foregoing payments of Rent
Differential do not constitute rent or consideration for occupancy of real
property, but rather are liquidated consideration for settlement of a financial
obligation of Tenant arising out of cancellation of the Existing Lease.
Accordingly, no sales or rental tax will be collected or payable in connection
with payments of the Rent Differential under this Agreement.
b. In addition to the foregoing, Tenant agrees to pay for the
account of Landlord one hundred percent (100%) of the real estate brokerage
commission that will become due to Shaffer & Associates, licensed Florida real
estate brokers, as Tenant and the brokers may determine. The total commission
will be $17,654.00.
c. Tenant hereby agrees to pay for Landlord's benefit all ad
valorem real estate taxes and assessments imposed against the Premises (the
"Taxes") to the extent accruing between the date of Delivery of Possession and
January 31, 1998, with liability for the 1998 tax year to be prorated in a fair
and equitable manner between the parties upon Landlord's receipt of the bill
for such tax year, whereupon Tenant will remit its proportionate share to
Landlord promptly.
d. In addition to Tenant's obligation to pay the Rent
Differential, as set forth above, until January 31, 1998 (but not thereafter),
Tenant unconditionally guarantees to Landlord payment of the rent and other
consideration payable under the New Lease, if and to the extent that New Tenant
fails to pay such obligations as and when due. Landlord agrees to give Tenant
simultaneous notice of any default by New Tenant in payment or performance of
its obligations under the New Lease.
5. NO VERBAL MODIFICATION; ENTIRE AGREEMENT. This Agreement may not be
changed, modified, discharged, or terminated orally or in any manner other than
by an agreement in writing signed by Landlord and Tenant. This Agreement set
forth all the covenants, promises, agreements, conditions and understandings
between Landlord and Tenant concerning the subject matter hereof and there are
no covenants, promises, agreements, conditions or understandings, either oral
or written, between them other than are herein set forth.
6. ATTORNEYS' FEES AND COSTS. The prevailing party in any litigation or
other proceedings arising between Landlord and Tenant from time to time will be
entitled to recover from the non-prevailing party the reasonable attorneys' and
paralegal assistants' fees, costs and expenses incurred by such party, in
connection with the enforcement of this Agreement or any judicial declaration
of the rights of the parties hereunder, whether or not suit is brought, and
whether such fees, costs and expenses are incurred before, during or at trial,
on appeal or in bankruptcy or reorganization proceedings.
7. BINDING EFFECT. This Agreement is applicable to the Lease and shall
be applicable to and binding upon the heirs, representatives, successors and
assigns of Landlord and Tenant.
8. NOTICES. Any notice or demand that must or may be given by Landlord
or Tenant under this Agreement shall be in writing, and shall be deemed given
on the date personally delivered to the party
3
<PAGE> 4
for which intended, or one (1) day after deposit in Federal Express or other
courier that guarantees next day delivery, or five (5) days after deposit in
the United States First Class Mail, registered or certified, return receipt
requested, postage prepaid, addressed to the party for which intended at the
addresses first set forth above.
9. WAIVER. The waiver by either party to this Agreement of any breach of
any term, covenant or condition herein contained will not be deemed to be a
waiver of such term, covenant or condition or any subsequent breach of the same
or any other term, covenant or condition herein contained.
10. CAPTIONS. The captions and section numbers appearing in this
Agreement are inserted only as a matter of convenience and in no way define,
limit, construe, or describe the scope or intent of such sections or articles
of this Agreement.
11. PARTIAL INVALIDITY. If any term, covenant or condition of this
Agreement or the application thereof to any person or circumstance is, to any
extent, invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, will not be
affected thereby and each term, covenant or condition of this Agreement will be
valid and be enforced to the fullest extent permitted by law.
12. CHOICE OF LAW AND VENUE. Landlord and Tenant agree that venue for any
action or proceeding relating to construction, interpretation or enforcement of
this Agreement is proper in any court of competent jurisdiction in Lee County,
Florida. This Agreement shall be construed, governed, interpreted and enforced
according to the law of the State of Florida.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement
effective as of the date and year first above written.
Signed, Sealed and Delivered
in the Presence of:
/s/ Kathleen Mc Menanz /s/ Barry Szumlanski
- -------------------------------- --------------------------------
BARRY SZUMLANSKI
/s/ Illegible
- --------------------------------
As to Barry Szumlanski
/s/ Karen Fannenhalz /s/ Marvin Gralnick
- -------------------------------- --------------------------------
MARVIN GRALNICK
4
<PAGE> 5
/s/
- --------------------------------
As to Marvin Gralnick
/s/ /s/ Lynn Mann
- -------------------------------- --------------------------------
LYNN MANN
/s/
- --------------------------------
As to Lynn Mann "LANDLORD"
Signed, Sealed and Delivered
in the Presence of: CHICO'S FAS, INC., A FLORIDA
CORPORATION
/s/ Robin Martin By: /s/ Scott A. Edmonds
- -------------------------------- --------------------------------
Name: Scott A. Edmonds
As its Senior Vice President
/s/ (CORPORATE SEAL)
- --------------------------------
As to Chico's FAS, Inc.
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS (UNAUDITED) OF CHICO'S FAS, INC. FOR THE
THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-29-1996
<CASH> 3,463,613
<SECURITIES> 0
<RECEIVABLES> 695,508
<ALLOWANCES> 0
<INVENTORY> 9,055,363
<CURRENT-ASSETS> 14,616,127
<PP&E> 20,867,841
<DEPRECIATION> 4,501,419
<TOTAL-ASSETS> 32,129,684
<CURRENT-LIABILITIES> 6,720,889
<BONDS> 5,200,336
0
0
<COMMON> 78,821
<OTHER-SE> 18,652,668
<TOTAL-LIABILITY-AND-EQUITY> 32,129,684
<SALES> 48,097,960
<TOTAL-REVENUES> 48,097,960
<CGS> 19,742,150
<TOTAL-COSTS> 19,742,150
<OTHER-EXPENSES> 24,208,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 290,997
<INCOME-PRETAX> 3,856,290
<INCOME-TAX> 1,542,000
<INCOME-CONTINUING> 2,314,290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,314,290
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
