<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 4, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-69532
BRYLANE, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 35-1895382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
BRYLANE CAPITAL CORP.
(Exact name of co-registrant as specified in its charter)
DELAWARE 95-4439747
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
463 SEVENTH AVENUE
NEW YORK, NY 10018
(Address of principal executive offices)
Registrant's telephone number, including area code:
(212) 613-9500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The number of shares of the registrant's common stock outstanding: Not
Applicable.
Page 1 of 14 pages
===============================================================================
<PAGE>
BRYLANE, L.P.
BRYLANE CAPITAL CORP.
Form 10-Q
FOR THE QUARTERLY PERIOD ENDED
May 4, 1996
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements
a) Consolidated Balance Sheets
February 3, 1996 and May 4, 1996 (unaudited) 3
b) Consolidated Statements of Operations (unaudited)
Thirteen weeks ended April 29, 1995 and Thirteen weeks ended May 4, 1996 4
c) Consolidated Statements of Cash Flows (unaudited)
Thirteen weeks ended April 29, 1995 and Thirteen weeks ended May 4, 1996 5
d) Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. - FINANCIAL STATEMENTS
- - ------------------------------
BRYLANE, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
February 3, May 4,
1996 1996
----------- ----------
ASSETS (Unaudited)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................. $ 7,469 $ 17,756
Accounts receivable................................................................... 2,387 1,845
Inventories........................................................................... 76,627 83,360
Paper inventory....................................................................... 16,102 13,045
Other................................................................................. 4,559 3,283
---------- ----------
Total current assets............................................................. 107,144 119,289
Property and equipment, net............................................................. 28,223 27,640
Catalog costs........................................................................... 18,131 18,731
Organization and deferred financing costs............................................... 8,228 7,846
Intangibles and other assets............................................................ 166,177 164,792
---------- ----------
Total assets..................................................................... $ 327,903 $ 338,298
========== ==========
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Accounts payable...................................................................... $ 47,131 $ 56,752
Accrued interest...................................................................... 6,366 3,437
Accrued expenses...................................................................... 12,712 15,508
Reserve for returns................................................................... 4,192 5,159
Current portion of long-term debt..................................................... 13,720 13,720
---------- ----------
Total current liabilities........................................................ 84,121 94,576
Long-term debt.......................................................................... 213,020 209,671
Other long-term liabilities............................................................. 3,575 3,944
---------- ----------
Total liabilities................................................................ 300,716 308,191
Partnership equity:
General partner, 2,562,500 units...................................................... 25,625 25,625
Limited partners, 10,340,000 units at February 3, 1996 and 10,342,500 units
at May 4, 1996...................................................................... 105,204 105,257
Reduction for predecessor cost-carryover basis........................................ (152,067) (152,067)
Loans to management investors......................................................... (2,515) (2,490)
Accumulated earnings.................................................................. 50,940 53,782
---------- ----------
Total partnership equity......................................................... 27,187 30,107
---------- ----------
Total liabilities and equity..................................................... $ 327,903 $ 338,298
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Financial Statements.
Page 3
<PAGE>
BRYLANE, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 29, May 4,
1995 1996
--------- ---------
<S> <C> <C>
Net sales.......................................... $ 143,195 $ 150,680
Cost of goods sold............................... 71,628 72,662
--------- ---------
Gross margin....................................... 71,567 78,018
Operating expenses:
Catalog and advertising.......................... 42,973 47,518
Fulfillment...................................... 8,782 8,274
Support services................................. 8,626 10,544
Intangibles and organization cost amortization .. 1,060 1,409
--------- ---------
Total operating expenses........................... 61,441 67,745
--------- ---------
Operating income................................... 10,126 10,273
Interest expense, net.............................. 5,050 5,556
--------- ---------
Income before income taxes......................... 5,076 4,717
Provision for income taxes......................... 40 29
--------- ---------
Net income......................................... $ 5,036 $ 4,688
========= =========
</TABLE>
See Accompanying Notes to Unaudited Financial Statements.
Page 4
<PAGE>
BRYLANE, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 29, May 4,
1995 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................. $ 5,036 $ 4,688
Impact of other operating activities on cash flows:
Depreciation....................................................... 793 1,072
Amortization:
Intangibles and organization costs............................. 1,060 1,409
Deferred financing costs (included in interest expense)........ 367 367
Discount on notes (included in interest expense)............... 24 24
Loss on disposal of assets......................................... - 5
Changes in assets and liabilities:
Inventories.................................................... 2,421 (6,733)
Catalog costs and paper inventory.............................. (1,240) 2,457
Accounts payable and accrued expenses.......................... 2,123 11,847
Accrued interest............................................... (3,170) (2,929)
Other assets and liabilities................................... 1,892 3,144
--------- ---------
Net cash provided by operating activities.................................. 9,306 15,351
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures................................................... (2,375) (521)
--------- ---------
Net cash used in investing activities...................................... (2,375) (521)
--------- ---------
FINANCING ACTIVITIES:
Payments on bank credit facility....................................... (12,403) (3,374)
Tax distributions to partners.......................................... (593) (1,246)
Deferred offering costs................................................ (95) -
Proceeds from the sale, net of repurchase, of partnership interests,
net of management notes.............................................. - 77
--------- ---------
Net cash used in financing activities...................................... (13,091) (4,543)
--------- ---------
Cash and cash equivalents, at beginning of period.......................... 28,495 7,469
--------- ---------
Cash and cash equivalents, at end of period................................ $ 22,335 $ 17,756
========= =========
Supplemental disclosure of cash flow information:
Interest paid.......................................................... $ 8,118 $ 8,129
========= =========
</TABLE>
Income taxes paid during each of the periods presented were not material.
See Accompanying Notes to Unaudited Financial Statements.
Page 5
<PAGE>
BRYLANE, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS:
Brylane is a catalog retailer of special size women's apparel, regular
size women's apparel, and special size men's apparel. The women's catalogs
market apparel in the budget to low-moderate price range, and the men's catalogs
market apparel in the moderate price range. Brylane reaches the special size
customer through its Lane Bryant, Roaman's and KingSize catalogs, the regular
size misses customer through its Lerner catalog, and the mature misses customer
through its Sue Brett catalog. Brylane also markets apparel to these same
customer segments through four catalogs under licensing arrangements with Sears
Shop at Home Services, Inc. ("Sears").
Brylane's merchandising strategy is to provide affordable, private label
apparel with a consistent quality and fit, to concentrate on apparel with
limited fashion risk, and to offer a broader selection of sizes and styles in
special size apparel than can be found at most retail stores and in other
competing catalogs. Each of Brylane's catalogs offers its value-conscious
customers contemporary, traditional and basic apparel.
(2) ORGANIZATION AND BASIS OF FINANCIAL STATEMENT PRESENTATION:
In August, 1993, certain affiliates of Freeman Spogli & Co. ("FS&Co.") and
of The Limited, Inc. ("The Limited") formed Brylane, L.P. ("Brylane" or the
"Company"), a Delaware limited partnership, and acquired the Lane Bryant,
Roaman's and Lerner catalog businesses (the "Brylane Acquisition") formerly
conducted by certain direct and indirect subsidiaries of The Limited (the
"Predecessor"). The aggregate purchase price was $335 million. The Brylane
Acquisition closed on August 30, 1993. For accounting purposes, the transaction
was accounted for on the effective date of August 1, 1993.
In connection with the Brylane Acquisition, certain affiliates of FS&Co.
and certain management investors contributed $75 million to the capital of
Brylane for a 60% (currently 58.6%) aggregate interest. Certain affiliates of
The Limited contributed substantially all assets and liabilities of the catalog
business to Brylane and received cash of $285 million and a 40% (currently
38.7%) aggregate interest in Brylane with an assigned value at $50 million. The
Limited also received a warrant (Limited Warrant) entitling it to purchase up to
1,250,000 newly issued partnership units in Brylane, at a price of $10 per unit.
Exercise of the Limited Warrant is subject to Brylane's achievement of certain
operating performance goals.
The consolidated financial statements include the accounts of Brylane and
its wholly-owned subsidiaries and partnerships, including Brylane Capital Corp.,
B.L. Management Services, Inc., B.L. Catalog Distribution, Inc., B.L. Management
Services Partnership, B.L. Catalog Distribution Partnership, B.N.Y. Service
Corp., KingSize Catalog Sales, L.P., KingSize Catalog Sales, Inc., and K.S.
Management Services, Inc. These entities are collectively referred to as Brylane
or the Partnership. Accounts between the consolidated entities have been
eliminated. Each of the wholly-owned subsidiaries and partnerships has
guaranteed Brylane's 10% Senior Subordinated Notes due 2003 (the "Notes").
Separate financial statements of these subsidiary guarantors have not been
included as the subsidiaries guarantee the Notes on a full, unconditional, and
joint and several basis. Management believes that the aggregate assets,
liabilities, earnings, and equity of the subsidiary guarantors are currently,
both on an individual and a combined basis, inconsequential to Brylane on a
consolidated basis.
(3) ACQUISITION:
In October, 1995, KingSize Catalog Sales, L.P., an Indiana limited
partnership ("KingSize Partnership") and an indirect wholly-owned entity of
Brylane, L.P., a Delaware limited partnership ("Brylane"), completed the
acquisition of the assets of the KingSize division of WearGuard Corporation, a
wholly-owned subsidiary of Aramark Corporation (the "KingSize Acquisition"). The
KingSize
Page 6
<PAGE>
BRYLANE, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Acquisition closed on October 16, 1995. For accounting purposes, the transaction
was accounted for on the effective date of October 1, 1995. The business
acquired is a catalog business devoted to big and tall men's apparel, footwear
and related accessories. The KingSize Acquisition included the sale by WearGuard
to KingSize Partnership of the inventory, contracts, customer lists, goodwill,
accounts receivable and certain equipment including personal computers relating
to the operation of the business, and the assumption of certain liabilities
relating to the business by the KingSize Partnership. In addition, the parties
entered into a Noncompetition Agreement dated October 16, 1995.
In connection with the KingSize Acquisition, Brylane paid to WearGuard
$52.5 million in cash and issued to WearGuard 350,000 newly issued limited
partnership units (currently 2.7%) in Brylane (the "Purchase Price"). Brylane
financed the cash portion of the Purchase Price out of available funds as well
as additional borrowings under its senior credit agreement. In connection with
the KingSize Acquisition, Brylane further amended its Bank Credit Facility
Agreement to provide an additional $35.0 million in available borrowing
capacity.
(4) RECLASSIFICATIONS:
Certain reclassifications have been made to the consolidated statements of
cash flows for the thirteen weeks ended April 29, 1995 to conform with the
financial statement presentation adopted for the fiscal year ending February 3,
1996. Such reclassifications had no effect on previously reported net income.
(5) UNAUDITED INTERIM FINANCIAL STATEMENTS:
The financial statements as of and for the thirteen weeks ended April 29,
1995 and May 4, 1996 are unaudited and are presented pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, the
financial statements should be read in conjunction with the financial statement
disclosures contained in Brylane's Form 10-K for the fiscal year ended February
3, 1996. In the opinion of management, the accompanying financial statements
reflect all adjustments necessary (which are of a normal recurring nature,
unless separately disclosed) to present fairly the financial position and
results of operations and cash flows for the interim periods presented, but are
not necessarily indicative of the results of operations and cash flows for a
full fiscal year.
Page 7
<PAGE>
BRYLANE, L.P.
ITEM 2.-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - -------------------------------------------------------------------------------
OF OPERATIONS
- - -------------
The following discussion should be read in conjunction with the financial
statements and related notes thereto which appear elsewhere in this Form 10-Q
and in conjunction with the Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on May 3, 1996 (File No. 33-69532).
As a result of the Brylane Acquisition and the KingSize Acquisition and the
application of purchase accounting related thereto, the results of operations
for the thirteen weeks ended May 4, 1996 reflect amortization of intangible
assets related to the Brylane Acquisition of $1.1 million and related to the
KingSize Acquisition of $349,000. Transition costs to move inventory acquired as
a result of the KingSize Acquisition from its pre-acquisition location in
Norwell, Massachusetts to the Company's Indianapolis, Indiana fulfillment center
also negatively impacted the Company's gross margin in the first quarter by
$170,000. There will be no further impact on the Company's gross margin due to
these transition costs. However, the Company's results will reflect the
amortization of intangible assets related to the Brylane Acquisition of
approximately $4.2 million per year, additional depreciation associated with the
write-up of certain fixed assets in connection with the Brylane Acquisition of
$368,000 per year, and the amortization of intangible assets related to the
KingSize Acquisition of approximately $1.4 million per year.
Page 8
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth certain operating data of Brylane for the
periods indicated.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 29, 1995 May 4, 1996
-------------- -----------
(in thousands)
<S> <C> <C>
Net sales.................................. $ 143,195 $ 150,680
Gross profit............................... 71,567 78,018
Operating expenses:
Catalog and advertising................... 42,973 47,518
Fulfillment............................... 8,782 8,274
Support services.......................... 8,626 10,544
Amortization of acquisition
intangibles and organization costs (a)... 1,060 1,409
---------- ----------
Operating income.......................... 10,126 10,273
Add back: Amortization of acquisition
intangibles and organization costs(a)... 1,060 1,409
Add back: Step-up depreciation(b)........ 92 92
---------- ----------
Operating income before acquisition
related adjustments...................... $ 11,278 $ 11,774
========== ==========
</TABLE>
The following table sets forth certain operating data of Brylane expressed
as a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 29, 1995 May 4, 1996
-------------- -----------
<S> <C> <C>
Net sales.................................. 100.0% 100.0%
Gross profit............................... 50.0 51.8
Operating expenses:
Catalog and advertising................... 30.0 31.6
Fulfillment............................... 6.1 5.5
Support services.......................... 6.0 7.0
Amortization of acquisition
intangibles and organization costs(a).... 0.7 0.9
------ ------
Operating income........................... 7.1 6.8
Add back: Amortization of acquisition
intangibles and organization costs(a).... 0.7 0.9
Add back: Step-up depreciation(b)......... 0.1 0.1
------ ------
Operating income before acquisition
related adjustments........................ 7.9% 7.8%
====== ======
</TABLE>
- - --------------------
(a) Represents amortization of goodwill and other intangible assets related to
the Brylane Acquisition of $125,450 over a 30-year composite life and
amortization of organizational costs of $300 over five years, and, subsequent
to October 1, 1995, includes amortization related to the KingSize Acquisition
of goodwill of $50,762 over a 40-year life, customer file of $520 over an eight
year life, and a noncompetition agreement of $300 over a five year life.
(b) Property and equipment were written up by $2,943 at the time of the Brylane
Acquisition. This step-up is being depreciated over eight years using the
straight-line method.
Page 9
<PAGE>
THIRTEEN WEEKS ENDED MAY 4, 1996 COMPARED TO THIRTEEN WEEKS ENDED APRIL 29, 1995
NET SALES. Net sales for the thirteen weeks ended May 4, 1996 increased
5.2% to $150.7 million from $143.2 million in the comparable period of fiscal
1995. The increase in net sales came principally from the recently acquired
KingSize Big & Tall catalog and to a lesser extent from the Company's other
catalog titles.
GROSS PROFIT. Gross profit for the thirteen weeks ended May 4, 1996,
improved to $78.0 million (51.8% of net sales) from $71.6 million (50.0% of net
sales) for the same period of fiscal 1995. The increase in gross profit as a
percent of net sales is due to higher initial mark-ups and slightly lower
planned markdowns.
CATALOG AND ADVERTISING EXPENSE. Catalog and advertising expense is
comprised of the costs to produce and distribute catalogs, primarily paper,
printing and catalog mailing costs, and the cost of acquiring new prospect
names. For the thirteen weeks ended May 4, 1996, catalog and advertising expense
increased to $47.5 million (31.6% of net sales) from $43.0 million (30.0% of net
sales) for the same period of fiscal 1995. The increase in catalog and
advertising expense on a percent of net sales basis in the thirteen weeks ended
May 4, 1996 is primarily due to higher per catalog production costs in the
fiscal 1996 period resulting from increased paper prices. The Company has
experienced increases in its paper costs since the second half of fiscal 1994.
In response to these increased costs, the Company has, since the fall of 1994,
taken steps designed to mitigate their impact, including a reduction in the trim
size, a reduction in page count and a change in the paper grade of certain of
its catalogs. However, the Company was unable to fully offset these increased
costs during the thirteen weeks ended May 4, 1996, and expects that the cost of
paper consumed in the second quarter of fiscal 1996 will exceed the cost of
paper consumed in the second quarter of fiscal 1995. The Company believes,
however, that if paper prices remain at the levels currently being experienced
by the Company, then both paper prices and the costs of paper consumed in the
third and fourth quarters of fiscal 1996 would be below the prices and costs of
paper consumed in the third and fourth quarters of fiscal 1995.
FULFILLMENT EXPENSE. Fulfillment expense includes distribution center,
telemarketing, credit services and customer service expenses, partially offset
by net merchandise postage revenue. Fulfillment expense in the thirteen weeks
ended May 4, 1996 decreased to $8.3 million (5.5% of net sales) from $8.8
million (6.1% of net sales) for the same period in fiscal 1995. As a percent of
net sales, fulfillment expense improved primarily due to an increase in
merchandise net postage revenue and reduced credit card processing fees
resulting from an amendment to the Credit Card Agreement with Word Financial in
fall 1995.
SUPPORT SERVICES EXPENSE. Support services expense includes staffing and
other administrative overhead costs associated with merchandising, advertising,
quality assurance, management information systems, finance, human resources, the
New York and Boston offices and the license fees associated with the Company's
agreements with Sears Shop At Home. Support services expense for the thirteen
weeks ended May 4, 1996 increased to $10.5 million (7.0% of net sales) from $8.6
million (6.0% of net sales) for the same period in fiscal 1995. The increase in
support services expense as a percent of net sales is primarily due to the
increase in license fees paid to Sears.
AMORTIZATION EXPENSE. Acquisition related intangibles and organization
cost amortization expense in the thirteen weeks ended May 4, 1996 included $1.1
million related to the Brylane Acquisition and $0.3 million related to the
KingSize Acquisition. Acquisition related intangibles and organization cost
amortization expense in the thirteen weeks ended April 29, 1995 included $1.1
million related to the Brylane Acquisition. The intangible assets related to
the amortization for the Brylane Acquisition include goodwill, organization
costs, and other intangible assets and for the KingSize Acquisition include
goodwill, a noncompetition agreement, customer file and other intangible assets.
OPERATING INCOME. Operating income before acquisition related amortization
in the thirteen weeks ended May 4, 1996 increased 4.4% to $11.8 million (7.8%
of net sales) from $11.3 million (7.9% of net sales) for the same period of
fiscal 1995, primarily as a result of the increase in gross profit as described
above, partially offset by the increase in catalog and advertising expenses and
support service expenses, also described above.
Page 10
<PAGE>
INTEREST EXPENSE. Interest expense in the thirteen weeks ended May 4, 1996
increased to $5.6 million from $5.1 million for the same period of fiscal 1995
due to the increased borrowings of $35.0 million incurred in connection with the
KingSize Acquisition offset by slightly lower interest rates on the Term Loan
(as defined below).
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its working capital needs, principally
building inventory to meet increased sales, and its capital expenditure
requirements primarily through funds generated from operations. After the
Brylane Acquisition and the KingSize Acquisition, the Company's liquidity
requirements have also included service on the debt incurred at the time of
these acquisitions and, to a lesser extent, tax distributions to its partners.
Cash flow provided by operating activities increased to $15.4 million for
the thirteen weeks ended May 4, 1996, from $9.3 million for the thirteen weeks
ended April 29, 1995. This increase was primarily due to the higher merchandise
payables on inventory owned by the Company at May 4, 1996. The Company's cash
balance was $17.8 million at May 4, 1996, compared to $7.5 million at February
3, 1996. The increase in the cash balance from February 3, 1996 to May 4, 1996
was achieved while using $4.5 million for financing activities, which included
$3.4 million in debt payments and $1.2 million in tax distributions to partners,
as well as $521,000 in capital expenditures as discussed below. Although the
Company's available cash exceeds its current operating requirements, the
Company's ability to prepay debt has been limited by the terms of the
Partnership Agreement entered into at the time of the Brylane Acquisition.
Capital expenditures were $521,000 in the thirteen weeks ended May 4, 1996
compared to $2.4 million in the same period in fiscal 1995. The Company's
capital expenditures for fiscal 1996 are estimated to be $3.7 million. A
significant portion of this amount will be expended toward a $2.9 million
project which began in April 1996 to replace the original tilt tray sorter
located at the Company's Indianapolis, Indiana fulfillment center. This project
is scheduled for completion in the third quarter of 1996, and had an initial
expenditure of $198,000 during the first quarter of 1996. The remaining capital
expenditures during the first quarter were on miscellaneous improvements.
Brylane plans to fund its capital expenditures for fiscal 1996 through funds
generated from operations.
In connection with the Brylane Acquisition, the Company entered into that
certain credit agreement dated August 30, 1993 among Brylane and its
Subsidiaries, Morgan Guaranty Trust Company of New York, as agent, and the other
lenders parties thereto (as amended, the "Credit Agreement"), which then
consisted of (i) a $110 million six-year amortizing term loan (the "Term Loan")
and (ii) a $40 million five-year revolving credit facility (the "Revolving
Credit Facility") (with a $20 million sublimit for letters of credit). The Term
Loan was used to fund a portion of the required distribution to The Limited upon
the closing of the Brylane Acquisition, and requires scheduled quarterly
prepayments over its term. In addition to scheduled principal prepayments on the
Term Loan, Brylane is obligated to make certain mandatory prepayments of the
Term Loan and the Revolving Credit Facility under certain circumstances. The
Revolving Credit Facility may be used for letters of credit and, if necessary,
general corporate purposes, including working capital needs. In order to fund a
portion of the purchase price for the KingSize Acquisition, Brylane amended its
Credit Agreement to provide for an additional $35.0 million term loan.
Additionally, the letter of credit sublimit of $20.0 million was increased to
$30.0 million. The new term loan bears interest at the same rate as the existing
Term Loan and begins amortizing in October 1999. A scheduled principal payment
of the Term Loan in the amount of $3.4 million was made in the first quarter of
fiscal 1996. Additional scheduled principal payments will equal $10.3 million
during the remainder of 1996. As of May 4, 1996, Brylane had no borrowings under
the Revolving Credit Facility and, after giving effect to the issuance of
letters of credit for $14.0 million which the Company intends to pay through
funds generated from operations, had additional capacity under the Revolving
Credit Facility of approximately $26.0 million.
Also in connection with the Brylane Acquisition, the Partnership issued
$125.0 million aggregate principal amount of its senior subordinated notes (the
"Senior Subordinated Notes"). The Senior
Page 11
<PAGE>
Subordinated Notes bear interest at 10% per annum, payable semi-annually, and
mature in 2003. The Credit Agreement, as amended, and the Indenture dated as of
August 30, 1993 among Brylane and Brylane Capital Corp., as Issuers, the
Subsidiaries of Brylane, as Guarantors, and United States Trust Company of New
York, as Trustee (as supplemented, the "Indenture") pursuant to which the Senior
Subordinated Notes were issued contain covenants (the "Covenants") that, among
other things, restrict the Company's ability to incur debt, make distributions,
incur liens, make capital expenditures and make investments or acquisitions.
During the first quarter of fiscal 1996, Brylane made tax distributions to its
partners totaling $1.2 million. The Company expects that it will make total
tax distributions to its partners during fiscal 1996 that will approximate the
tax payments the Company would be required to make if it were a tax paying
corporation, rather than a partnership. Brylane's estimated tax distributions
and capital expenditures for the first quarter of fiscal 1996 were in compliance
with the Covenants.
While no assurances can be given in this regard, based on the current and
projected operating results, Brylane believes that cash flow from operations
will provide adequate funds for ongoing operations, debt service on its
indebtedness (including scheduled prepayments under the Credit Agreement), tax
distributions to its partners and planned capital expenditures through the
remaining term of the Credit Agreement. In addition, the Company will have
availability under the Revolving Credit Facility.
Page 12
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 6.- EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
(a) Exhibits.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
May 4, 1996.
Page 13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
Dated: June 13, 1996 BRYLANE, L.P.
BRYLANE CAPITAL CORP.
By: \s\ Robert A. Pulciani
-------------------------------
Robert A. Pulciani
Authorized Representative of Brylane,
L.P. and Executive Vice President,
Chief Financial Officer and Secretary
and Treasurer of Brylane, L.P. and
Brylane Capital Corp.
(On behalf of the Registrants and as
the principal financial and accounting
officer of each of the Registrants)
Page 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000912276
<NAME> BRYLANE CAPITAL CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 17,756
<SECURITIES> 0
<RECEIVABLES> 1,845
<ALLOWANCES> 0
<INVENTORY> 83,360
<CURRENT-ASSETS> 119,289
<PP&E> 53,546
<DEPRECIATION> 25,906
<TOTAL-ASSETS> 338,298
<CURRENT-LIABILITIES> 94,576
<BONDS> 209,671
0
0
<COMMON> 0
<OTHER-SE> 30,107
<TOTAL-LIABILITY-AND-EQUITY> 338,298
<SALES> 150,680
<TOTAL-REVENUES> 150,680
<CGS> 72,662
<TOTAL-COSTS> 72,662
<OTHER-EXPENSES> 66,336
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,556
<INCOME-PRETAX> 4,717
<INCOME-TAX> 29
<INCOME-CONTINUING> 4,688
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,688
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
