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 2, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 33-69532
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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
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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.
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BRYLANE, L.P.
BRYLANE CAPITAL CORP.
FORM 10-Q
For the Quarterly Period Ended
May 2, 1998
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INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page
Part I - Financial Information
Item 1 - Financial Statements
a) Report of Independent Accountants . . . . . . . . . . . . . . . . 3
b) Consolidated Balance Sheets
May 2, 1998 (unaudited) and January 31, 1998 . . . . . . . . . 4
c) Consolidated Statements of Income (unaudited)
Thirteen weeks ended May 2, 1998 and May 3, 1997 . . . . . . . 5
d) Consolidated Statements of Cash Flows (unaudited)
Thirteen weeks ended May 2, 1998 and May 3, 1997 . . . . . . . 6
e) Consolidated Statements of Partnership Equity
February 1, 1997, January 31, 1998 and thirteen weeks ended
May 2, 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . 7
f) Notes to Unaudited Consolidated Financial Statements . . . . . . 8
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . 9 - 12
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 13
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Page 2
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Representatives of
Brylane, L.P.
We have reviewed the accompanying consolidated balance sheet of Brylane, L.P.
as of May 2, 1998, the related consolidated statement of income and cash flows
for the thirteen weeks ended May 2, 1998 and May 3, 1997 and the consolidated
statements of partnership equity for the thirteen weeks ended May 2, 1998.
These consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
May 20, 1998
Page 3
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PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
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BRYLANE, L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
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May 2, January 31,
1998 1998
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . $ 9,085 $ 5,081
Deferred receivables (net of allowance for doubtful
accounts of $1,004 and $1,474, respectively) . . . . 20,611 8,194
Accounts receivable, other . . . . . . . . . . . . . . 7,477 7,851
Inventories. . . . . . . . . . . . . . . . . . . . . . 214,161 219,553
Catalog costs and paper inventory. . . . . . . . . . . 51,075 51,982
Other. . . . . . . . . . . . . . . . . . . . . . . . . 6,062 6,426
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . 308,471 299,087
Property and equipment, net. . . . . . . . . . . . . . . 78,601 77,095
Intangibles, organization and deferred financing fees. . 330,269 333,319
Deferred tax asset . . . . . . . . . . . . . . . . . . . 1,039 1,039
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . $ 718,380 $ 710,540
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . $ 133,274 $ 139,480
Accrued expenses . . . . . . . . . . . . . . . . . . . 34,082 38,704
Reserve for returns. . . . . . . . . . . . . . . . . . 21,593 17,844
Revolving line of credit - current portion . . . . . . 10,000 19,000
Current portion of long-term debt. . . . . . . . . . . 12,500 10,000
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . 211,449 225,028
Long-term debt . . . . . . . . . . . . . . . . . . . . . 314,483 329,753
Other long-term liabilities. . . . . . . . . . . . . . . 9,940 9,010
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . 535,872 563,791
Convertible redeemable preferred stock of Brylane Inc. . 1,370 1,370
Partnership equity:
General partner, 2,562,500 units . . . . . . . . . . . 25,625 25,625
Limited partners, 17,642,717 units at May 2, 1998 and
17,268,353 units at January 31, 1998 . . . . . . . . 89,020 101,756
Note receivable from parent. . . . . . . . . . . . . . (82,207) (113,439)
Retained earnings. . . . . . . . . . . . . . . . . . . 148,700 131,437
Total partnership equity . . . . . . . . . . . . 181,138 145,379
TOTAL LIABILITIES AND EQUITY . . . . . . . . . . . $ 718,380 $ 710,540
<FN>
The accompanying notes are an integral part of the unaudited consolidated financial
statements.
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Page 4
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BRYLANE, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
(Unaudited)
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Thirteen Weeks Ended
May 2, May 3,
1998 1997
Net sales . . . . . . . . . . . . . . $ 347,604 $ 328,801
Cost of goods sold. . . . . . . . . 176,417 169,047
Gross margin. . . . . . . . . . . . . 171,187 159,754
Operating expenses:
Catalog and advertising . . . . . . 85,994 83,339
Fulfillment . . . . . . . . . . . . 30,166 28,070
Support services. . . . . . . . . . 24,351 22,010
Intangibles and organization cost
amortization. . . . . . . . . . . 2,824 2,732
Total operating expenses. . . . . . 143,335 136,151
Operating income. . . . . . . . . . . 27,852 23,603
Interest expense:
Interest expense. . . . . . . . . . 7,770 7,528
Less: Interest income on note
receivable from parent. . . . . . 1,709 --
Interest expense,net. . . . . . . . . 6,061 7,528
Income before income taxes
and extraordinary charge. . . . . . 21,791 16,075
Provision for income taxes. . . . . . -- 28
Income before extraordinary charge. . 21,791 16,047
Extraordinary charge related to early
retirement of debt. . . . . . . . . -- 6,524
Net income. . . . . . . . . . . . . . $ 21,791 $ 9,523
<FN>
The accompanying notes are an integral part of the unaudited consolidated financial
statements.
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Page 5
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BRYLANE, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
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Thirteen Weeks Ended
May 2, May 3,
1998 1997
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . $ 21,791 $ 9,523
Impact of other operating activities
on cash flows:
Depreciation . . . . . . . . . . . 2,819 2,526
Amortization . . . . . . . . . . . 3,074 3,176
Non-recurring inventory charge . . -- 2,486
Extraordinary charge related to
early retirement of debt . . . . -- 6,524
Non-cash compensation expense. . . -- 175
Loss on sale of asset. . . . . . . 12 --
Changes in operating assets and
liabilities:
Accounts receivable. . . . . . . (12,043) 5,749
Inventories. . . . . . . . . . . 5,392 9,557
Catalog costs and paper
inventory. . . . . . . . . . . 907 5,784
Accounts payable . . . . . . . . (6,206) 13,070
Accrued expenses . . . . . . . . (4,626) (4,911)
Reserve for returns. . . . . . . 3,749 5,057
Other assets and liabilities . . 280 610
Net cash provided by operating
activities . . . . . . . . . . . . . 15,149 59,326
INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . (5,188) (4,047)
Proceeds from sale of asset. . . . . 10 --
Net cash used in investing activities. (5,178) (4,047)
FINANCING ACTIVITIES:
Payments on 1996 and 1997 Bank
Credit Facilities. . . . . . . . . (11,500) (293,000)
Proceeds from issuance of 1997 Bank
Credit Facility. . . . . . . . . . -- 181,663
Proceeds from initial public
offering of Brylane Inc. . . . . . -- 96,000
Offering fees and expenses related
to Brylane Inc . . . . . . . . . . -- (8,046)
Debt issuance fees and expenses. . . -- (203)
Cash payments on management notes. . 985 --
Proceeds received from exercise of
stock options of Brylane Inc . . . 9,076 --
Distributions to partners. . . . . . (4,528) --
Net cash used in financing activities. (5,967) (23,586)
Cash and cash equivalents, at
beginning of year. . . . . . . . . . 5,081 3,285
Cash and cash equivalents, at end of
period . . . . . . . . . . . . . . . $ 9,085 $ 34,978
<FN>
The accompanying notes are an integral part of the unaudited consolidated financial
statements.
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BRYLANE, L.P.
CONSOLIDATED STATEMENTS OF PARTNERSHIP EQUITY
(Dollars in thousands)
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General Partner Limited Partners
Units Amount Units Amount
Balance, February 1, 1997. . . . . . . . . . . . 2,562,500 $25,625 12,908,945 $ 5,298
Net income. . . . . . . . . . . . . . . . . . - - - -
Contribution of proceeds from initial
public offering of Brylane Inc . . . . . . - - 4,000,000 96,000
Initial public offering expenses
of Brylane Inc . . . . . . . . . . . . . . - - - (8,850)
Note receivable from parent . . . . . . . . . - - - -
Exchange of stock options . . . . . . . . . . - - - 700
Repayment of management notes . . . . . . . . - - - 1,465
Conversion of convertible note. . . . . . . . - - 352,908 9,705
Conversion of preferred stock of Brylane Inc. - - 6,500 130
Exercise of stock options of Brylane Inc. . . - - - (2,674)
Distributions to partners . . . . . . . . . . - - - (18)
Balance, January 31, 1998. . . . . . . . . . . . 2,562,500 25,625 17,268,353 101,756
Net income. . . . . . . . . . . . . . . . . . - - - -
Distributions to partners . . . . . . . . . . - - - -
Exercise of stock options of Brylane Inc. . . - - - (24,016)
Interest on note receivable . . . . . . . . . - - - -
Franchise tax . . . . . . . . . . . . . . . . - - - -
Conversion of convertible note. . . . . . . . - - 374,364 10,295
Repayment of management notes . . . . . . . . - - - 985
Balance, May 2, 1998 (unaudited) . . . . . . . . 2,562,500 $25,625 17,642,717 $ 89,020
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Note
Receivable
from Retained
Parent Earnings Total
Balance, February 1, 1997. . . . . . . . . . . . - $ 72,940 $ 103,863
Net income. . . . . . . . . . . . . . . . . . - 79,438 79,438
Contribution of proceeds from initial
public offering of Brylane Inc . . . . . . - - 96,000
Initial public offering expenses
of Brylane Inc . . . . . . . . . . . . . . - - (8,850)
Note receivable from parent . . . . . . . . . (113,439) - (113,439)
Exchange of stock options . . . . . . . . . . - - 700
Repayment of management notes . . . . . . . . - - 1,465
Conversion of convertible note. . . . . . . . - - 9,705
Conversion of preferred stock of Brylane Inc. - - 130
Exercise of stock options of Brylane Inc. . . - - (2,674)
Distributions to partners . . . . . . . . . . - (20,941) (20,959)
Balance, January 31, 1998. . . . . . . . . . . . $(113,439) 131,437 145,379
Net income. . . . . . . . . . . . . . . . . . - 21,791 21,791
Distributions to partners . . . . . . . . . . - (4,528) (4,528)
Exercise of stock options of Brylane Inc. . . 33,092 - 9,076
Interest on note receivable . . . . . . . . . (1,709) - (1,709)
Franchise tax . . . . . . . . . . . . . . . . (151) - (151)
Conversion of convertible note. . . . . . . . - - 10,295
Repayment of management notes . . . . . . . . - - 985
Balance, May 2, 1998 (unaudited) . . . . . . . . $(82,207) $ 148,700 $ 181,138
<FN>
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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Page 7
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BRYLANE, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS:
Brylane, L.P., a Delaware limited partnership ("Brylane" or the
"Partnership" or the "Company") is a leading catalog retailer of special-size
and regular-size women's and men's apparel. The women's catalogs market
apparel in the budget and low to moderate price range and the men's catalogs
market apparel in the moderate price range. Brylane services the special-size
customer through its Lane Bryant, Roaman's, Jessica London and KingSize
(men's) catalogs, and the regular-size customer through its Chadwick's,
Lerner, Bridgewater and Brett (men's) catalogs. Brylane also markets apparel
to these same customer segments through four catalogs which it distributes
under licensing arrangements with Sears Shop at Home Services, Inc. ("Sears").
Brylane's merchandising strategy is to provide value-priced, 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 customers
contemporary, traditional and basic apparel.
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION:
The consolidated financial statements at May 2, 1998 are unaudited and
have been prepared from the books and records of the Company in accordance
with generally accepted accounting principles and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. All adjustments (consisting
only of normal recurring accruals) which are, in the opinion of management,
necessary for a fair presentation of financial position and operating results
for the interim periods are reflected. These financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Company's most recent Annual Report on Form 10-K,
which includes financial statements for the year ended January 31, 1998.
(3) SIGNIFICANT STOCKHOLDER - PINAULT-PRINTEMPS-REDOUTE:
On April 3, 1998, Pinault-Printemps-Redoute, S.A., a company organized
under the laws of France ("PPR"), through an affiliate, REDAM LLC, a Delaware
limited liability company, acquired 43.7% of the outstanding common stock from
certain stockholders of Brylane Inc., the parent company of Brylane, L.P.
Concurrently, Brylane Inc. and PPR entered into a governance agreement (the
"Governance Agreement") pursuant to which PPR's ability to acquire additional
common stock and to take other actions is limited.
(4) COMMITMENTS AND CONTINGENCIES:
Brylane is involved in various legal proceedings that are incidental to
the conduct of its business. Although the amount of any liability with
respect to these proceedings cannot be determined, in the opinion of
management after consultation with legal counsel, any such liability will not
have a material adverse effect on the financial position or results of
operations of Brylane.
The Company is under audit by the Indiana Department of Revenue ("IDR")
and anticipates an assessment will be issued. Based on discussions with the
IDR, the Company currently projects that the assessment, adjusted for the
federal tax benefit, will aggregate approximately $2.3 million including
interest. The Company intends to vigorously contest this assessment, and
believes it has made adequate provision such that final settlement of its
Indiana tax liability for the years under audit will not have a material
adverse effect on its consolidated financial statements.
(5) RECLASSIFICATIONS:
Certain amounts in the prior period financial statements have been
reclassified to be consistent with the current period presentation. Such
reclassifications had no effect on previously reported net income.
Page 8
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ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation
RESULTS OF OPERATIONS
The following table sets forth certain operating data of Brylane L.P. for the
periods indicated.
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Thirteen Weeks Ended
(In thousands)
(Unaudited)
May 2, 1998 May 3, 1997
Net sales. . . . . . . . . . . . . . . . . . . $ 347,604 100.0% $ 328,801 100.0%
Gross margin . . . . . . . . . . . . . . . . . 171,187 49.2 159,754 48.6
Operating expenses:
Catalog and advertising . . . . . . . . . . 85,994 24.7 83,339 25.3
Fulfillment . . . . . . . . . . . . . . . . 30,166 8.7 28,070 8.6
Support services. . . . . . . . . . . . . . 24,351 7.0 22,010 6.7
Amortization of acquisitions
Intangibles and organization costs . . . 2,824 0.8 2,732 0.8
Operating income . . . . . . . . . . . . . . . 27,852 8.0 23,603 7.2
Add back:
Non-recurring inventory charge (1). . . -- -- 2,486 0.7
Compensation expense (2) . . . -- -- 175 0.1
Operating adjustments (3) 1,610 0.5 -- --
Operating income before acquisitions
related and non-recurring adjustments . . . $ 29,462 8.5% $ 26,264 8.0%
<FN>
(1) The non-recurring inventory charge resulted from increasing inventory by $5.0 million for the
Chadwick's Acquisition to reflect the fair market value of the inventory at December 9, 1996, the
closing date of the Chadwick's Acquisition and was completely amortized into cost of goods sold at
January 31, 1998.
(2) Represents non-cash compensation expense related to amendments to options granted under the
Brylane, L.P. 1993 Partnership United Option Plan.
(3) Represents $0.7 million in merchandise loss due to the discontinuance of the Sue Brett catalog
concept, $0.5 million in expenses associated with the canceled common stock registration and $0.4
million related to the relocation costs for the KingSize business from Hingham, Massachusetts to New
York.
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THIRTEEN WEEKS ENDED MAY 2, 1998 COMPARED TO THIRTEEN WEEKS ENDED MAY 3, 1997
NET SALES:
Net sales increased 5.7% for the thirteen weeks ended May 2, 1998 to
$347.6 million from $328.8 million in the comparable period of fiscal 1997.
The increase in net sales is primarily due to a 3.4% and a 3.3% increase in
circulation and average order size, respectively.
GROSS MARGIN:
Gross margin for the thirteen weeks ended May 2, 1998 increased to $171.2
million (49.2% of net sales) from $159.8 million (48.6% of net sales) for the
same period of fiscal 1997. Excluding the charge for merchandise losses due
to the discontinuance of the Sue Brett catalog, this quarter's gross margin
was $171.9 million (49.4% of net sales) compared to $162.2 million (49.3% of
net sales) for the comparable period excluding the non-recurring inventory
charge of $2.5 million (0.7% of net sales) related to the step-up in the value
of inventory in connection with the Chadwick's acquisition. The increase in
the gross margin as a percent of net sales is due primarily to higher initial
mark-ups created by favorable merchandise sourcing.
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 names of prospective customers. For the thirteen weeks
ended May 2, 1998, catalog and advertising expense increased to $86.0 million
(24.7% of net sales) from $83.3 million (25.3% of net sales) for the same
period of fiscal 1997. The decrease on a percent of net sales basis was
primarily due to a better in stock position that improved the net sales to
gross demand conversion resulting in a 2% improvement in book productivity.
FULFILLMENT EXPENSE:
Fulfillment expense includes distribution center, telemarketing, credit
services and customer service expenses, partially offset by net merchandise
postage revenue. Fulfillment expense as reported in the thirteen weeks ended
May 2, 1998 increased to $30.2 million (8.7% of net sales) from $28.1 million
(8.6% of net sales) for the same period in fiscal 1997.
SUPPORT SERVICES EXPENSE:
Support services expense includes staffing and other administrative
overhead costs associated with the operation of the business and the license
fees associated with the Company's agreements with Sears Shop At Home.
Support services expense as reported for the thirteen weeks ended May 2, 1998
increased to $24.4 million (7.0% of net sales) from $22.0 million (6.7% of net
sales) for the same period in fiscal 1997. The increase on a percent of net
sales basis was primarily due to the $0.4 million related to the relocation
cost for the KingSize business from Massachusetts to New York and $0.5
million for expenses associated with a canceled common stock registration.
AMORTIZATION EXPENSE:
The increase in the amortization expense for the quarter ending May 2,
1998 as compared to the prior year's period is due to increased amortization
of the remaining net book value of certain trademarks which was accelerated
concurrent with changes in ownership which occurred in conjunction with
Brylane Inc.'s secondary offering in October, 1997.
Page 10
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OPERATING INCOME:
Operating income before acquisitions-related and non-recurring adjustments
in the thirteen weeks ended May 2, 1998 increased to $29.5 million (8.5% of
net sales) from $26.3 million (8.0% of net sales) for the same period of
fiscal 1997. Operating income improved by $3.2 million due to an increase in
net sales and a decrease in catalog and advertising expenses as a percent of
net sales.
INTEREST:
Interest expense, net, in the thirteen weeks ended May 2, 1998 decreased
to $6.1 million compared to $7.5 million for the comparable period in 1997.
Excluding interest income of $1.7 million pertaining to the parent company
note in 1998 and $1.0 million related to a purchase price adjustment
associated with the Chadwick's Acquisition in 1997, interest expense decreased
by $0.7 million which was due to both lower average outstanding debt and
slightly lower interest rates on the term loans of the 1997 Bank Credit
Facility and the term loan of the Amended 1997 Bank Credit Facility.
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. The Company's
liquidity requirements have also included servicing the debt incurred to
finance various acquisitions and includes servicing debt incurred to finance
the repurchase of common stock of Brylane Inc. in the third quarter of fiscal
1997.
Cash flow provided by operating activities was $15.1 million for the
thirteen weeks ended May 2, 1998, from $59.3 million for the thirteen weeks
ended May 3, 1997. This decrease was primarily due to an increase in net
working capital due to a reduction in accounts payable, an increase in
deferred accounts receivable and a smaller decrease in all inventories and
catalog costs as compared to the prior year. During the quarter the Company
paid $11.5 million in debt payments and received $9.1 million in cash from
employees exercising stock options as discussed below.
Investing activities resulted in net cash used of $5.2 million in the
thirteen weeks ended May 2, 1998 compared to $4.0 million in the same period
in fiscal 1997. The Company's capital expenditures for the remainder of
fiscal 1998 are estimated to be $7.8 million. Brylane plans to fund its
capital expenditures for fiscal 1998 using cash generated from operations.
Financing activities for the thirteen weeks ended May 2, 1998 resulted in
a net use of cash of $6.0 million compared with $23.6 million in the prior
year. The Company received proceeds of $9.1 million related to the exercise
of stock options, $1.0 million from management notes related to stock
subscriptions and made distributions to partners of $4.5 million in the
thirteen weeks ended May 2, 1998. The Company made a scheduled payment of
$2.5 million on the Term Loan and a payment of $9.5 million on the short-term
revolver. The Revolving Credit Facility can be used for general corporate
purposes, including working capital needs, letters of credit and permitted
acquisitions. As of May 2, 1998, Brylane had $212.5 million in borrowings
under the Revolving Credit Facility and, after giving effect to the issuance
of letters of credit for $47.7 million which the Company intends to pay
through funds generated from operations, had additional capacity under the
Revolving Credit Facility of approximately $112.3 million.
While no assurances can be given in this regard, based on 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 Amended 1997 Bank
Credit Facility), and planned capital expenditures for the foreseeable future.
In addition, the Company will have availability under the Revolving Credit
Facility to finance capital needs.
Page 11
<PAGE>
This Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are subject to a number of
risks and uncertainties, including among other things, competition, risks
associated with the Sears Agreement, the impact of increases in costs of
postage, paper and printing, control of Brylane Inc. by PPR, risks associated
with acquisitions and risks related to unionized employees. Actual results in
the future could differ materially from those described in the forward-looking
statements as a result of such risk factors or other risks. The Company
undertakes no obligation to publicly release the results of any revisions of
these forward-looking statements that may be made to reflect any future events
or circumstances.
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.
On April 28, 1998, Brylane, L.P. filed a Form 8-K in connection with
"Item 4 - Control of the Company," whereby Pinault-Printemps-Redoute acquired
43.7% of the outstanding common stock which was held by certain stockholders
of Brylane Inc., the parent company of Brylane, L.P.
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 11, 1998 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 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
<PAGE>
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