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UNITED STATES
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 November 25, 2000
OR
| / / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 0-19972
CHRISTOPHER & BANKS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) | 06 - 1195422 (I.R.S. Employer Identification Number) | |
2400 Xenium Lane North, Plymouth, Minnesota (Address of principal executive offices) | ||
55441 (Zip Code) | ||
(763) 551-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes /x/ No / /
As of December 29, 2000, 10,493,623 shares of the registrant's common stock were outstanding.
CHRISTOPHER & BANKS CORPORATION
FORM 10-Q QUARTERLY REPORT
INDEX
| | | Page | ||
|---|---|---|---|---|
| PART I FINANCIAL INFORMATION | ||||
Item 1. | Consolidated Condensed Financial Statements: | |||
Consolidated Condensed Balance Sheet As of November 25, 2000, February 26, 2000 and November 27, 1999 | 3 | |||
Consolidated Condensed Statement of Income For the Quarters Ended November 25, 2000 and November 27, 1999 | 4 | |||
Consolidated Condensed Statement of Income For the Three Quarters Ended November 25, 2000 and November 27, 1999 | 5 | |||
Consolidated Condensed Statement of Cash Flows For the Three Quarters Ended November 25, 2000 and November 27, 1999 | 6 | |||
Notes to Consolidated Condensed Financial Statements | 7 | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 9 | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 13 | ||
PART II OTHER INFORMATION | ||||
Item 1. | Legal Proceedings | 14 | ||
Item 2. | Changes in Securities and Use of Proceeds | 14 | ||
Item 3. | Defaults Upon Senior Securities | 14 | ||
Item 4. | Submission of Matters to a Vote of Security Holders | 14 | ||
Item 5. | Other Information | 14 | ||
Item 6. | Exhibits and Reports on Form 8-K | 14 | ||
Signatures | 15 | |||
2
CHRISTOPHER & BANKS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
| | November 25, 2000 | February 26, 2000 | November 27, 1999 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | (Unaudited) | (Audited) | (Unaudited) | |||||||||
| ASSETS | ||||||||||||
Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 18,216,830 | $ | 22,685,876 | $ | 8,935,791 | ||||||
| Accounts receivable | 3,647,861 | 1,170,927 | 2,364,929 | |||||||||
| Merchandise inventory | 22,405,718 | 11,421,417 | 15,681,696 | |||||||||
| Prepaid expenses | 1,983,824 | 1,314,733 | 1,118,768 | |||||||||
| Current deferred tax asset | 697,907 | 697,907 | 275,493 | |||||||||
| Total current assets | 46,952,140 | 37,290,860 | 28,376,677 | |||||||||
| Equipment and improvements, net | 27,286,083 | 19,780,675 | 17,382,556 | |||||||||
| Other assets: | ||||||||||||
| Long-term deferred tax asset | 1,629,813 | 1,629,813 | 1,468,101 | |||||||||
| Other | 31,005 | 17,296 | 410,431 | |||||||||
| Total other assets | 1,660,818 | 1,647,109 | 1,878,532 | |||||||||
| Total assets | $ | 75,899,041 | $ | 58,718,644 | $ | 47,637,765 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
| Accounts payable | $ | 1,951,472 | $ | 2,650,116 | $ | 1,627,928 | ||||||
| Accrued liabilities | 10,258,610 | 10,190,225 | 6,426,679 | |||||||||
| Current maturities of long-term debt | 24,885 | 169,410 | 239,485 | |||||||||
| Income taxes payable | 1,223,161 | 2,180,804 | 1,750,460 | |||||||||
| Total current liabilities | 13,458,128 | 15,190,555 | 10,044,552 | |||||||||
| Long-term liabilities: | ||||||||||||
| Long-term debt | 5,168,204 | 5,053,359 | 5,015,648 | |||||||||
| Accrued rent obligation | 1,173,442 | 1,089,899 | 1,103,010 | |||||||||
| Total long-term liabilities | 6,341,646 | 6,143,258 | 6,118,658 | |||||||||
| Stockholders' equity: | ||||||||||||
| Preferred stock—$0.01 par value, 1,000,000 shares authorized; none outstanding | — | — | — | |||||||||
| Common stock—$0.01 par value, 29,000,000 shares authorized; 10,493,623, 10,122,954 and 10,025,004 shares issued and outstanding at November 25, 2000, February 26, 2000 and November 27, 1999, respectively | 113,216 | 109,511 | 108,530 | |||||||||
| Additional paid-in capital | 32,231,112 | 30,531,715 | 29,810,127 | |||||||||
| Retained earnings | 27,115,942 | 10,088,048 | 4,830,341 | |||||||||
| 59,460,270 | 40,729,274 | 34,748,998 | ||||||||||
| Common stock held in treasury, 828,000 shares at cost | (2,999,961 | ) | (2,999,961 | ) | (2,999,961 | ) | ||||||
| Common stock subscriptions receivable | (361,042 | ) | (344,482 | ) | (274,482 | ) | ||||||
| Total stockholders' equity | 56,099,267 | 37,384,831 | 31,474,555 | |||||||||
| Total liabilities and stockholders' equity | $ | 75,899,041 | $ | 58,718,644 | $ | 47,637,765 | ||||||
See accompanying notes to unaudited consolidated condensed financial statements.
3
CHRISTOPHER & BANKS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
| | Quarter Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| | November 25, 2000 | November 27, 1999 | ||||||
| Net sales | $ | 57,261,694 | $ | 39,803,720 | ||||
| Cost of sales: | ||||||||
| Merchandise, buying and occupancy | 31,130,547 | 24,122,363 | ||||||
| Gross profit | 26,131,147 | 15,681,357 | ||||||
| Selling, general and administrative | 11,929,353 | 8,331,646 | ||||||
| Depreciation and amortization | 1,301,891 | 889,436 | ||||||
| Operating income | 12,899,903 | 6,460,275 | ||||||
| Interest (income) expense, net | (111,571 | ) | 85,831 | |||||
| Income before income taxes | 13,011,474 | 6,374,444 | ||||||
| Income tax provision | 5,074,474 | 2,454,161 | ||||||
| Net income | $ | 7,937,000 | $ | 3,920,283 | ||||
| Basic earnings per common share: | ||||||||
| Net income | $ | 0.76 | $ | 0.39 | ||||
| Basic shares outstanding | 10,486,848 | 9,939,903 | ||||||
| Diluted earnings per common share: | ||||||||
| Net income | $ | 0.69 | $ | 0.37 | ||||
| Diluted shares outstanding | 11,529,210 | 10,645,017 | ||||||
See accompanying notes to unaudited consolidated condensed financial statements.
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CHRISTOPHER & BANKS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
| | Three Quarters Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| | November 25, 2000 | November 27, 1999 | ||||||
| Net sales | $ | 141,146,143 | $ | 98,216,714 | ||||
| Cost of sales: | ||||||||
| Merchandise, buying and occupancy | 78,864,109 | 62,598,378 | ||||||
| Gross profit | 62,282,034 | 35,618,336 | ||||||
| Selling, general and administrative | 31,407,681 | 22,801,765 | ||||||
| Depreciation and amortization | 3,417,190 | 2,424,566 | ||||||
| Operating income | 27,457,163 | 10,392,005 | ||||||
| Interest (income) expense, net | (457,417 | ) | 184,786 | |||||
| Income before income taxes | 27,914,580 | 10,207,219 | ||||||
| Income tax provision | 10,886,686 | 3,929,779 | ||||||
| Net income | $ | 17,027,894 | $ | 6,277,440 | ||||
| Basic earnings per common share: | ||||||||
| Net income | $ | 1.65 | $ | 0.64 | ||||
| Basic shares outstanding | 10,330,667 | 9,861,308 | ||||||
| Diluted earnings per common share: | ||||||||
| Net income | $ | 1.51 | $ | 0.60 | ||||
| Diluted shares outstanding | 11,313,171 | 10,416,273 | ||||||
See accompanying notes to unaudited consolidated condensed financial statements.
5
CHRISTOPHER & BANKS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
| | Three Quarters Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| | November 25, 2000 | November 27, 1999 | |||||||
| Cash flows from operating activities: | |||||||||
| Net income | $ | 17,027,894 | $ | 6,277,440 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 3,417,190 | 2,424,566 | |||||||
| Income tax benefit on exercise of stock options | 519,014 | — | |||||||
| Loss on disposals of equipment | 96,198 | 93,416 | |||||||
| Increase in accrued rent obligation | 83,543 | 30,420 | |||||||
| Changes in operating assets and liabilities: | |||||||||
| Increase in accounts receivable, merchandise inventory, prepaid expenses, and other assets | (14,144,035 | ) | (6,802,485 | ) | |||||
| Increase (decrease) in accounts payable, accrued liabilities and income taxes payable | (1,587,902 | ) | 893,003 | ||||||
| Net cash provided by operating activities | 5,411,902 | 2,916,360 | |||||||
| Cash flows from investing activities: | |||||||||
| Purchase of equipment and improvements | (11,029,226 | ) | (7,024,374 | ) | |||||
| Proceeds from sale of equipment | 10,430 | 78,800 | |||||||
| Net cash used in investing activities | (11,018,796 | ) | (6,945,574 | ) | |||||
| Cash flows from financing activities: | |||||||||
| Principal payments on long-term debt | (144,525 | ) | (201,517 | ) | |||||
| Interest on 12% Senior Notes added to principal | 114,845 | 111,454 | |||||||
| Exercise of stock options | 1,184,088 | 566,831 | |||||||
| Common stock subscriptions receivable | (16,560 | ) | (99,482 | ) | |||||
| Net cash provided by financing activities | 1,137,848 | 377,286 | |||||||
| Net decrease in cash and cash equivalents | (4,469,046 | ) | (3,651,928 | ) | |||||
| Cash and cash equivalents at beginning of period | 22,685,876 | 12,587,719 | |||||||
| Cash and cash equivalents at end of period | $ | 18,216,830 | $ | 8,935,791 | |||||
See accompanying notes to unaudited consolidated condensed financial statements.
6
CHRISTOPHER & BANKS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—BASIS OF PRESENTATION
The financial statements included in this Form 10-Q have been prepared by Christopher & Banks Corporation, formerly Braun's Fashions Corporation, and subsidiary (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations. These financial statements should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 2000.
The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature.
NOTE 2—COMPANY NAME CHANGE
On July 26, 2000, the Company's shareholders approved an amendment to the Company's Certificate of Incorporation to change the Company name from Braun's Fashions Corporation to Christopher & Banks Corporation. The name change became effective immediately upon shareholder approval.
NOTE 3—STOCK SPLITS
In November 1999, the Company's Board of Directors approved a 3-for-2 stock split in the form of a stock dividend on the Company's outstanding common stock. The record date was November 30, 1999 and the stock dividend was distributed on December 14, 1999.
In May 2000, the Company's Board of Directors approved another 3-for-2 stock split in the form of a stock dividend. The record date was June 27, 2000 and the stock dividend was distributed on July 11, 2000.
Share and per share data for all periods presented have been restated to reflect both stock splits.
NOTE 4—NET INCOME PER SHARE
Basic earnings per share ("EPS") is computed based on the weighted average number of shares of common stock outstanding during the applicable periods while diluted EPS is computed based on the weighted average number of common and common equivalent shares (dilutive stock options) outstanding.
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The following is a reconciliation of the number of shares (denominator) and per share amounts used in the basic and diluted EPS computations:
| | Quarter Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | November 25, 2000 | November 27, 1999 | ||||||||||
| | Shares | Net Income | Shares | Net Income | ||||||||
| Basic EPS | 10,486,848 | $ | 0.76 | 9,939,903 | $ | 0.39 | ||||||
| Effect of dilutive stock options | 1,042,362 | (0.07 | ) | 705,114 | (0.02 | ) | ||||||
| Diluted EPS | 11,529,210 | $ | 0.69 | 10,645,017 | $ | 0.37 | ||||||
| | Three Quarters Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | November 25, 2000 | November 27, 1999 | ||||||||||
| | Shares | Net Income | Shares | Net Income | ||||||||
| Basic EPS | 10,330,667 | $ | 1.65 | 9,861,308 | $ | 0.64 | ||||||
| Effect of dilutive stock options | 982,504 | (0.14 | ) | 554,965 | (0.04 | ) | ||||||
| Diluted EPS | 11,313,171 | $ | 1.51 | 10,416,273 | $ | 0.60 | ||||||
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Christopher & Banks Corporation, formerly Braun's Fashions Corporation, is a Minneapolis-based retailer of women's specialty apparel, which operates through its wholly-owned subsidiary, Christopher & Banks, Inc. As of December 29, 2000, the Company operated 274 stores in 27 states under the names Christopher & Banks, Brauns and C.J. Banks, primarily in the northern half of the United States. The Company's stores offer coordinated assortments of exclusively designed sportswear, sweaters, and dresses.
On July 26, 2000, the Company's shareholders approved a change in the Company name from Braun's Fashions Corporation to Christopher & Banks Corporation. As of December 29, 2000, the Company operated 150 Christopher & Banks stores, 104 Brauns stores and 20 C.J. Banks stores. In addition, the Company anticipates all remaining Braun's stores will be converted to Christopher & Banks by December 2002. Effective July 28, 2000, the Company's stock began trading under the ticker symbol "CHBS" on the Nasdaq Stock Market.
The Company opened 33 new Christopher & Banks stores in the first three quarters of fiscal 2001 and plans to open approximately 40 new Christopher & Banks stores in fiscal 2002. The Company also opened 20 C.J. Banks stores in the second and third quarters of fiscal 2001. These stores cater to the casual wardrobing needs of 35 to 55 year old women who wear sizes 14W to 24W. As of December 29, 2000, the Company operated 20 C.J. Banks stores. The Company plans to open approximately 40 new C.J. Banks stores in fiscal 2002.
Results of Operations
The following table sets forth, for the periods indicated, certain items from the Company's statement of income expressed as a percentage of net sales.
| | Quarter Ended | Three Quarters Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | November 25, 2000 | November 27, 1999 | November 25, 2000 | November 27, 1999 | ||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||
| Merchandise, buying and occupancy | 54.4 | 60.6 | 55.9 | 63.7 | ||||||
| Gross profit | 45.6 | 39.4 | 44.1 | 36.3 | ||||||
| Selling, general and administrative | 20.8 | 20.9 | 22.2 | 23.2 | ||||||
| Depreciation and amortization | 2.3 | 2.3 | 2.4 | 2.5 | ||||||
| Operating income | 22.5 | 16.2 | 19.5 | 10.6 | ||||||
| Interest (income) expense, net | (0.2 | ) | 0.2 | (0.3 | ) | 0.2 | ||||
| Income before income taxes | 22.7 | 16.0 | 19.8 | 10.4 | ||||||
| Income tax provision | 8.8 | 6.2 | 7.7 | 4.0 | ||||||
| Net income | 13.9 | % | 9.8 | % | 12.1 | % | 6.4 | % | ||
QUARTER ENDED NOVEMBER 25, 2000 COMPARED TO QUARTER ENDED
NOVEMBER 27, 1999
Net Sales. Net sales for the quarter ended November 25, 2000 were $57.3 million, an increase of 44% from $39.8 million for the quarter ended November 27, 1999. The increase in sales was attributable to a 17% increase in same-store sales combined with an increase in the number of stores
9
operated by the Company. The Company operated 274 stores at November 25, 2000 compared to 223 at November 27, 1999.
Gross Profit. Gross profit, which is net sales less cost of merchandise, buying and occupancy expenses, was $26.1 million, or 45.6% of net sales, during the third quarter of fiscal 2001 compared to $15.7 million or 39.4% of net sales during the same period in fiscal 2000. The increase in gross margin as a percent of net sales was primarily due to improved merchandise margins resulting from increased sales of merchandise at regular prices.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the third quarter of fiscal 2001 were $11.9 million or 20.8% of net sales compared to $8.3 million or 20.9% of net sales in the third quarter of fiscal 2000. The decrease as a percent of net sales was primarily the result of leveraging of expenses associated with increased sales, offset by start-up costs associated with new store openings and increased bonus and employee benefits expenses as a percent of net sales.
Operating Income. As a result of the foregoing factors, operating income for the quarter ended November 25, 2000 was $12.9 million, or 22.5% of net sales, compared to operating income of $6.5 million, or 16.2% of net sales, in the quarter ended November 27, 1999.
Interest (Income) Expense, Net. For the quarter ended November 25, 2000 net interest income was $111,571 compared to net interest expense of $85,831 for the quarter ended November 27, 1999. The difference was primarily due to increased interest income resulting from a higher cash balance and higher interest rates earned on short-term investments during the third quarter of fiscal 2001.
Income Taxes. Income tax expense in the third quarter of fiscal 2001 was $5.1 million with an effective tax rate of 39.0% compared to $2.5 million with an effective tax rate of 38.5% in the third quarter of fiscal 2000.
Net Income. As a result of the foregoing factors, net income for the quarter ended November 25, 2000 was $7.9 million, or 13.9% of net sales, compared to $3.9 million, or 9.8% of net sales, for the quarter ended November 27, 1999.
THREE QUARTERS ENDED NOVEMBER 25, 2000 COMPARED TO THREE QUARTERS ENDED
NOVEMBER 27, 1999
Net Sales. Net sales for the three quarters ended November 25, 2000 were $141.1 million, an increase of 44% from $98.2 million for the three quarters ended November 27, 1999. The increase in sales was attributable to a 19% increase in same-store sales combined with an increase in the number of stores operated by the Company. The Company operated 274 stores at November 25, 2000 compared to 223 at November 27, 1999.
Gross Profit. Gross profit, which is net sales less cost of merchandise, buying and occupancy expenses, was $62.3 million, or 44.1% of net sales, during the first three quarters of fiscal 2001 compared to $35.6 million or 36.3% of net sales during the same period in fiscal 2000. The increase in gross margin as a percent of net sales was primarily due to improved merchandise margins resulting from increased sales of merchandise at regular prices.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the first three quarters of fiscal 2001 were $31.4 million or 22.2% of net sales compared to $22.8 million or 23.2% of net sales in the first three quarters of fiscal 2000. The decrease as a percent of net sales was primarily the result of leveraging of expenses associated with increased sales, offset by an increase in start-up costs associated with new store openings and an increase in bonus expense as a percent of net sales.
10
Operating Income. As a result of the foregoing factors, operating income for the three quarters ended November 27, 2000 was $27.5 million, or 19.5% of net sales, compared to operating income of $10.4 million, or 10.6% of net sales, in the three quarters ended November 27, 1999.
Interest (Income) Expense, Net. For the three quarters ended November 25, 2000 net interest income was $457,417 compared to net interest expense of $184,786 for the three quarters ended November 27, 1999. The difference was primarily due to increased interest income resulting from a higher cash balance and higher interest rates earned on short term investments during the first three quarters of fiscal 2001.
Income Taxes. Income tax expense in the first three quarters of fiscal 2001 was $10.9 million with an effective tax rate of 39.0% compared to $3.9 million with an effective tax rate of 38.5% in the first three quarters of fiscal 2000.
Net Income. As a result of the foregoing factors, net income for the three quarters ended November 25, 2000 was $17.0 million, or 12.1% of net sales, compared to $6.3 million, or 6.4% of net sales, for the quarter ended November 27, 1999.
Liquidity and Capital Resources
The Company's principal on-going cash requirements are to finance the construction of new stores and the remodeling of certain existing stores, to purchase merchandise inventory and to fund other working capital requirements. Merchandise purchases vary on a seasonal basis, peaking in the fall. As a result, the Company's cash requirements historically reach their peak in October and November. Conversely, cash balances reach their peak in January, after the holiday season is completed.
Net cash provided by operating activities totaled $5.4 million for the first three quarters of fiscal 2001. Cash was used to finance $11.0 million of capital expenditures to open 53 new stores, to substantially complete ten major store remodelings and to make various expenditures for the Company's headquarters facility including enhancements to the merchandise handling system at its distribution center. Financing activities, primarily the exercise of stock options, provided net cash of $1.1 million. As a result of the foregoing, cash decreased by $4.5 million in the first three quarters of fiscal 2001. During the remainder of the fiscal year, the Company intends to spend approximately $3 million on additional capital expenditures relating to new stores planned to open in the first quarter of fiscal 2002.
The Company anticipates it will spend approximately $22 million in fiscal 2002, net of construction allowances, to open up to 40 new Christopher & Banks stores and 40 new C.J. Banks stores, to complete 15 major store remodelings and to make other various capital expenditures including an estimated $5 million for new point-of-sale hardware and software for all the Company's new and existing stores. The Company expects its cash on hand combined with cash flow from operations to be sufficient to meet its anticipated capital expenditure, working capital, and other requirements for liquidity during the remainder of fiscal 2001 and fiscal 2002.
In March 1999, the Company entered into an Amended and Restated Revolving Credit and Security agreement with Wells Fargo Bank, National Association, formerly Norwest Bank Minnesota, National Association, (the "Wells Fargo Revolver") which expires on June 30, 2002. The Wells Fargo Revolver provides the Company with revolving credit loans and letters of credit up to $12 million, subject to a borrowing base formula tied to inventory levels.
Loans under the Wells Fargo Revolver bear interest at Wells Fargo's base rate (9.5% as of December 29, 2000) plus 0.25%. Interest is payable monthly in arrears. The Wells Fargo Revolver carries a facility fee of 0.25% on the unused portion of the Wells Fargo Revolver as defined in the Wells Fargo Revolver. This facility is collateralized by substantially all of the Company's assets. The
11
borrowing base at December 29, 2000, was $12.0 million. As of December 29, 2000, the Company had no borrowings and outstanding letters of credit in the amount of $3.8 million under the Wells Fargo Revolver. Accordingly, the availability of revolving credit loans under the Wells Fargo Revolver was $8.2 million at that date.
The Wells Fargo Revolver contains certain restrictive covenants including restrictions on incurring additional indebtedness, limitations on certain types of investments and prohibitions on paying dividends, as well as requiring the maintenance of certain financial ratios. As of November 25, 2000, the most recent measurement date, the Company was in compliance with all covenants of the Wells Fargo Revolver.
In January 1997, the Company issued $10,300,200 of debt in the form of 12% Senior Notes (the "Senior Notes") due January 2005. In fiscal 1999 and fiscal 1998, the Company repurchased $4,676,000 and $1,033,000, respectively, of principal face amount of its Senior Notes at a discount from par. These purchases satisfied all of the annual mandatory redemption requirements through January 1, 2004, leaving no additional mandatory payments due until maturity on January 1, 2005. The Senior Notes were issued pursuant to an Indenture dated as of December 2, 1996. The principal amount of the Senior Notes bears interest at the rate of 12% per annum. Interest at the rate of 9% per annum on the outstanding principal amount is due monthly. Interest at the rate of 3% per annum on the outstanding principal amount accrues monthly and upon accrual is treated as principal for all purposes, including without limitations, the calculation of all interest payments due thereafter, and is payable in full on January 1, 2005.
The Senior Notes are general uncollateralized senior obligations of the Company. The Indenture for the Senior Notes (the "Indenture") contains certain covenants which, among other things, limit the ability of the Company to incur liens and additional indebtedness. As of November 25, 2000, the most recent measurement date, the Company was in compliance with all covenants of the Indenture.
Quarterly Results and Seasonality
The Company's sales reflect seasonal variation as sales in the third and fourth quarters, which include the fall and holiday seasons, generally have been higher than sales in the first and second quarters. Sales generated during the fall and holiday seasons have a significant impact on the Company's annual results of operations. Quarterly results may fluctuate significantly depending on a number of factors including adverse weather conditions, shifts in the timing of certain holidays and promotional events, timing of new store openings, and customer response to the Company's seasonal merchandise mix.
Inflation
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 quarters ended November 25, 2000 and November 27, 1999.
Forward Looking Information and Risk
Information contained in this Form 10-Q contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "plan", "anticipate", "estimate" or "continue" or the negative thereof or other variations thereon or comparable terminology. There are certain important factors that could cause results to differ materially from those anticipated by some of these forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. The factors, among others, that could cause actual results to differ materially include: consumers' spending and debt levels; the Company's ability to execute its business plan
12
including the successful expansion of its Christopher & Banks and C.J. Banks concepts; the Company's ability to open new stores on favorable terms and the timing of such store openings; the acceptance of the Company's merchandising strategies by its target customers; the ability of the Company to anticipate marketing trends and consumer needs; the loss of one or more of the Company's key executives; continuity of a relationship with or purchases from major vendors, particularly those from whom the Company imports merchandise; competitive pressures on sales and pricing; increases in other costs which cannot be recovered through improved pricing of merchandise; and the adverse effect of weather conditions from time to time on consumers' ability or desire to purchase new clothing.
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
Not applicable.
13
There are no material legal proceedings pending against the Company.
ITEM 2.
CHANGES IN SECURITIES
AND USE OF PROCEEDS
There have been no material modifications to the Company's registered securities.
ITEM 3.
DEFAULTS UPON
SENIOR SECURITIES
There has been no default with respect to any indebtedness of the Company.
ITEM 4.
SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the third quarter of fiscal 2001.
None.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
- (a)
- Exhibits
None
- (b)
- Reports on Form 8-K
None
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: January 5, 2001
| CHRISTOPHER & BANKS CORPORATION | |||
By | /s/ ANDREW K. MOLLER Andrew K. Moller Senior Vice President and Chief Financial Officer Signing on behalf of the Registrant and as principal financial officer. | ||
15
CHRISTOPHER & BANKS CORPORATION CONSOLIDATED CONDENSED BALANCE SHEET
CHRISTOPHER & BANKS CORPORATION CONSOLIDATED CONDENSED STATEMENT OF INCOME (Unaudited)
CHRISTOPHER & BANKS CORPORATION CONSOLIDATED CONDENSED STATEMENT OF INCOME (Unaudited)
CHRISTOPHER & BANKS CORPORATION CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
CHRISTOPHER & BANKS CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED NOVEMBER 25, 2000 COMPARED TO QUARTER ENDED NOVEMBER 27, 1999
THREE QUARTERS ENDED NOVEMBER 25, 2000 COMPARED TO THREE QUARTERS ENDED NOVEMBER 27, 1999
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
PART II.
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES