SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period
Ended November 2, 2002 Commission File Number 0-15898
CASUAL MALE RETAIL GROUP, INC.
(Exact name of registrant as
specified in its charter)
Delaware 04-2623104
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
555 Turnpike Street, Canton, MA 02021
(Address of principal executive offices) (Zip Code)
(781) 828-9300
(Registrant's telephone
number, including area code)
Indicate by "X" 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 "X" whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).
Yes No X
The number of shares of common stock outstanding as of December 13, 2002 was
34,944,511.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
November 2, 2002 and February 2, 2002
(In thousands, except share data)
November 2, February 2,
2002 2002
ASSETS (unaudited)
---------- ----------
Current assets:
Cash and cash equivalents $ 3,394 $ -
Accounts receivable 7,651 491
Inventories 143,928 57,734
Deferred income taxes 652 652
Prepaid expenses 10,748 2,887
---------- ----------
Total current assets 166,373 61,764
Property and equipment, net of
accumulated depreciation and amortization 61,037 20,912
Other assets:
Deferred income taxes 7,232 7,326
Intangible assets 75,648 -
Other assets 9,898 899
---------- ----------
Total assets $ 320,188 $ 90,901
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 857 $ -
Accounts payable 42,897 7,074
Accrued expenses and other current liabilities 24,922 13,661
Notes payable 80,492 27,752
---------- ----------
Total current liabilities 149,168 48,487
Long-term debt, net of current portion 52,865 -
---------- ----------
Total liabilities 202,033 48,487
---------- ----------
Minority interest 987 -
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000,000 shares
authorized, 180,162 shares of Series B Convertible
Preferred Stock converted into common
stock as of August 6, 2002, none outstanding at
November 2, 2002 and February 2, 2002 - -
Common Stock, $0.01 par value, 50,000,000 shares
authorized, 38,351,724 and 17,608,000 shares issued
at November 2, 2002 and February 2, 2002, respectively 383 176
Additional paid-in capital 146,230 56,189
Accumulated deficit (20,335) (5,304)
Treasury stock at cost, 3,119,236 and 3,040,000 shares
at November 2, 2002 and February 2, 2002,
respectively (8,913) (8,450)
Loan to executive (197) (197)
---------- ----------
Total stockholders' equity 117,168 42,414
---------- ----------
Total liabilities and stockholders' equity $ 320,188 $ 90,901
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
---------------------------------------
November November November November
2, 2002 3, 2001 2, 2002 3, 2001
---------------------------------------
Sales $ 125,155 $ 54,301 $ 277,287 $ 141,394
Cost of goods sold including
occupancy 82,082 41,657 190,354 106,330
----------------------------------------
Gross profit 43,073 12,644 86,933 35,064
Expenses:
Selling, general and administrative 37,803 10,202 80,932 29,979
Provision for restructuring, store
closings and impairment of assets - - 7,985 -
Depreciation and amortization 2,298 1,134 6,687 3,947
----------------------------------------
Total expenses 40,101 11,336 95,604 33,926
----------------------------------------
Operating income (loss) 2,972 1,308 (8,671) 1,138
Interest expense, net 3,170 440 6,229 1,517
----------------------------------------
(Loss) income before minority interest
and income taxes (198) 868 (14,900) (379)
Minority interest 132 - 131 -
Provision (benefit) for income taxes - 330 - (262)
----------------------------------------
Net (loss) income $ (330) $ 538 $(15,031) $ (117)
========================================
(Loss) earnings per share-
Basic and Diluted $ (0.01) $ 0.04 $ (0.69) $ (0.01)
Weighted average number of common
shares outstanding
Basic 33,984 14,492 21,633 14,476
Diluted 33,984 15,065 21,633 14,476
The accompanying notes are an integral part of the consolidated
financial statements.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
-------------------------
November 2, November 3,
2002 2001
----------- ----------
Cash flows from operating activities:
Net loss $ ( 15,031) $ (117)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 6,687 3,947
Accretion of warrants 895 -
Restructuring, store closings and impairment 11,048 -
Issuance of common stock and options 72 189
Loss on sale or disposal of fixed assets 34 17
Changes in operating assets and liabilities:
Accounts receivable (3,187) (1,118)
Inventories (17,553) 16,851)
Prepaid expenses (4,026) 113
Other assets (4,793) (75)
Reserve for severance and store closings - (648)
Income taxes 94 (1,866)
Accounts payable 18,095 8,480
Accrued expenses and other current liabilities (5,338) 2,656
Minority interest 131 -
----------- ----------
Net cash used for operating activities (12,872) (5,273)
----------- ----------
Cash flows from investing activities:
Additions to property and equipment (6,906) (2,563)
Proceeds from disposal of property and equipment 1 21
Acquisition of Casual Male, net of cash acquired (160,814) -
----------- ----------
Net cash used for investing activities (167,719) (2,542)
----------- ----------
Cash flows from financing activities:
Net borrowings under credit facility 52,740 7,829
Proceeds from the issuance of long term debt 40,676 -
Proceeds from the issuance of Series B Preferred Stock 76,449 -
Net Proceeds from minority equityholder of joint venture 856 -
Issuance (repurchase) of common stock 6,000 (33)
Proceeds from the issuance of warrants 9,589 -
Issuance of common stock under option program 284 19
Payment of equity transaction costs (2,609) -
----------- ----------
Net cash provided by financing activities 183,985 7,815
----------- ----------
Net change in cash and cash equivalents 3,394 -
Cash and cash equivalents:
Beginning of the year - -
----------- ----------
End of the period $ 3,394 $ -
=========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
CASUAL MALE RETAIL GROUP, INC,
Notes to Consolidated Financial Statements
1. Basis of Presentation
In the opinion of management of Casual Male Retail Group, Inc., a Delaware
corporation formerly known as Designs, Inc. (the "Company"), the accompanying
unaudited consolidated financial statements contain all adjustments necessary
for a fair presentation of the interim financial statements. These financial
statements do not include all disclosures associated with annual financial
statements and, accordingly, should be read in conjunction with the notes to
the Company's audited consolidated financial statements for the fiscal year
ended February 2, 2002 (included in the Company's Annual Report on Form 10-K,
as amended, filed with the Securities and Exchange Commission).
The interim financial statements for the three and nine months ended November
2, 2002 contain the results of operations since May 14, 2002, of the Company's
acquisition of substantially all of the assets of Casual Male Corp. and certain
of its subsidiaries ("Casual Male"). For a complete description of the
acquisition, see Note 2 below.
The information set forth in these statements may be subject to normal year-end
adjustments. The information reflects all adjustments that, in the opinion of
management, are necessary to present fairly the Company's results of
operations, financial position and cash flows for the periods indicated. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
Company's business historically has been seasonal in nature and the results of
the interim periods presented are not necessarily indicative of the results to
be expected for the full year.
2. Acquisition
On May 14, 2002, pursuant to an asset purchase agreement entered into as of May
2, 2002, the Company completed the acquisition of Casual Male for a purchase
price of approximately $170 million, plus the assumption of certain operating
liabilities. The Company was selected as the highest and best bidder for the
Casual Male assets at a bankruptcy court ordered auction commencing on May 1,
2002 and concluding on May 2, 2002. The U.S. Bankruptcy Court for the Southern
District of New York subsequently granted its approval of the acquisition on
May 7, 2002.
Casual Male, which was a leading independent specialty retailer of fashion,
casual and dress apparel for big and tall men, had annual sales that exceeded
$350 million. Casual Male sold its branded merchandise through various
channels of distribution including full price and outlet retail stores, direct
mail and the internet. Casual Male had been operating under the protection of
the U.S. Bankruptcy Court since May 2001.
Under the terms of the asset purchase agreement, the Company acquired
substantially all of Casual Male's assets including, but not limited to, the
inventory and fixed assets of approximately 475 retail store locations and
various intellectual property. In addition, the Company assumed certain
operating liabilities including, but not limited to, existing retail store
lease arrangements and the existing mortgage for Casual Male's corporate
headquarters located in Canton, Massachusetts.
The allocation of purchase price as disclosed by the Company in the second
quarter of fiscal 2003 has been adjusted to reflect the results of certain
asset valuations which were completed during the third quarter of fiscal 2003.
The revised allocation of purchase price as of November 2, 2002 (subject to
further adjustments) was as follows:
Debit(Credit)
(in thousands)
Cash and cash equivalents $ 190
Accounts receivable 1,473
Merchandise inventory 71,705
Prepaid expenses 3,832
Property and equipment 46,629
Other assets 6,798
Goodwill 39,049
Casual Male trademark 35,000
Customer lists 1,600
Accounts payable (17,728)
Accrued expenses and other current liabilities (6,979)
Accrual for estimated transaction and severance costs (8,417)
Mortgage note (12,151)
-------
Total cash paid for assets acquired and liabilities assumed $ 161,004
The Casual Male acquisition, along with the payment of certain related fees and
expenses, was completed with funds provided by: (i) approximately $30.2 million
in additional borrowings from the Company's amended three-year $120.0 million
senior secured credit facility with the Company's bank, Fleet Retail Finance,
Inc. ("FRFI"), (ii) $15.0 million from a three-year term loan with a subsidiary
of FRFI, (iii) proceeds from the private placement of $24.5 million principal
amount of 12% senior subordinated notes due 2007 together with detachable
warrants to acquire 1,715,000 shares of the Company's common stock at an
exercise price of $.01 per share, and additional detachable warrants to acquire
1,176,471 shares of common stock at an exercise price of $8.50 per share, (iv)
proceeds from the private placement of $11.0 million principal amount of 5%
senior subordinated notes due 2007, (v) approximately $82.5 million of proceeds
from the private placement of approximately 1.4 million shares of common stock
and 180,162 shares of newly designated Series B Convertible Preferred Stock,
par value $0.01 per share (which shares were automatically converted on August
8, 2002 into 18,016,200 shares of common stock), and (vi) the assumption of a
mortgage note in the principal amount of approximately $12.2 million.
Below are the pro forma results for the three and nine months ended November 2,
2002, assuming that the acquisition had occurred on February 3, 2002, and the
pro forma results for the three and nine months ended November 3, 2001,
assuming that the acquisition had occurred on February 4, 2001:
For the three months ended (unaudited):
Casual Male Designs Total Consolidated
11/2/02 11/3/01(1) 11/2/02 11/3/01 11/2/02 11/3/01
-------------------- ------------------- ------------------
(in millions)
Sales $ 74.7 $ 74.0 $ 50.5 $ 54.3 $ 125.2 $ 128.3
Gross Margin 31.8 32.4 11.8 12.6 43.6 45.0
Selling, general
and administrative 28.0 30.1 10.4 10.2 38.4 40.3
Restructuring Reserve - - - - - -
Depreciation and
Amortization 1.5 1.5 0.8 1.1 2.3 2.6
Interest Expense 2.6 2.6 0.5 0.4 3.1 3.0
------------------ ------------------ -------------------
Pre-tax income(loss) $ (0.3) $( 1.8) $ 0.1 $ 0.9 $ ( 0.2) $ (0.9)
For the nine months ended (unaudited):
Casual Male Designs Total Consolidated
11/2/02 11/3/01(1) 11/2/02(2) 11/3/01 11/2/02 11/3/01
-------------------- ------------------- ------------------
(in millions)
Sales $234.4 $233.5 $ 129.2 $ 141.4 $ 363.6 $ 374.9
Gross Margin 99.3 98.6 25.2 35.1 124.5 133.7
Selling, general
and administrative 88.2 89.5 29.5 30.0 117.7 119.5
Restructuring Reserve - - 8.0 - 8.0 -
Depreciation and
Amortization 5.7 5.9 3.7 3.9 9.4 9.8
Interest Expense 7.6 9.5 1.4 1.5 9.0 11.0
------------------ ------------------ -------------------
Pre-tax income(loss) $ (2.2) $( 6.3) $ (17.4) $( 0.3) $ (19.6) $ (6.6)
(1) Adjusted to eliminate the results of operations for closed store
locations, which were not purchased by the Company.
(2) Includes the impact of restructuring charges totaling $11.0 million
related to the downsizing of the Levi's(r)/Dockers(r) business which were
recorded by the Company during the second quarter of fiscal 2003.
The pro forma results have been prepared based on available information, using
assumptions that the Company's management believes are reasonable. The results
do not purport to represent the actual results of operations that would have
occurred if the acquisition had occurred on the dates specified. The above
results are also not necessarily indicative of the results that may be achieved
in the future.
The Company anticipates total annualized cost savings and synergies of
approximately $20 to $25 million. Through the end of the third quarter of
fiscal 2003, the Company has begun to realize benefits from approximately $12
million of these projected annualized savings as a result of overhead cost
reductions and the integration of the Casual Male business with the former
Designs business. The above pro formas do not reflect these anticipated cost
savings except to the extent that such costs have been realized.
3. Debt
Revolver
- --------
The Company has a credit facility with Fleet Retail Finance Inc., which was
most recently amended on May 4, 2002 in connection with the financing of the
Casual Male acquisition (the "Amended Credit Agreement"). The Amended Credit
Agreement, which expires May 14, 2005, principally provides for a total
commitment of $120 million with the ability for the Company to issue
documentary and standby letters of credit of up to $20 million. The Company's
ability to borrow under the facility is determined using an availability
formula based on eligible assets. The Company's obligations under the Amended
Credit Agreement continue to be secured by a lien on all of its assets. The
Amended Credit Agreement continues to include certain covenants and events of
default customary for credit facilities of this nature, including change of
control provisions and limitations on payment of dividends by the Company.
At November 2, 2002, the Company had outstanding borrowings of approximately
$80.5 million under this credit facility. Outstanding standby letters of
credit were $325,000 and outstanding documentary letters of credit were
approximately $506,000 at November 2, 2002. Average borrowings outstanding
under this facility during the first nine months of fiscal 2003 were
approximately $53.0 million, resulting in an average unused excess availability
of approximately $12.8 million during the first nine months of fiscal 2003. At
November 2, 2002, the unused availability was $16.7 million. The Company was
in compliance with all debt covenants under the Amended Credit Agreement at
November 2, 2002.
Long-Term Debt
- --------------
Components of Long-term debt are as follows:
(in thousands)
Term Loan $ 15,101
12% senior subordinated notes due 2007 15,806
5% senior subordinated notes due 2007 11,000
Mortgage note 11,815
------
Total long-term debt 53,722
Less: current portion of mortgage note (857)
------
Long-term debt, less current portion $ 52,865
On May 14, 2002, the Company entered into a three-year term loan with Back Bay
Capital, a subsidiary of Fleet Retail Finance, Inc. Interest on the term loan
includes a 12% coupon, 3% paid-in-kind and a 3% annual commitment fee, for a
total annual yield of 18%.
In May 2002, the Company also issued $24.5 million principal amount
of 12% senior subordinated notes through private placements. The carrying value
of $15.8 million is net of the assigned value of unamortized warrants
to acquire 1,715,000 shares of common stock at an exercise price of $0.01 per
share and additional detachable warrants to acquire 1,176,471 shares of common
stock at an exercise price of $8.50 per share. The total assigned value of the
warrants of approximately $9.6 million, which has been reclassified to equity,
is being amortized over the five-year life of the notes as interest expense.
At November 2, 2002, the unamortized value of the warrants was $8.7 million.
In addition, in May 2002 the Company also issued $11.0 million principal amount
of 5% senior subordinated notes through a private placement with the Kellwood
Company, with whom the Company has entered into a product sourcing agreement.
Beginning at the end of the second quarter of fiscal 2004, the Company will
make principal payments in the amount of $625,000 per quarter through the
remaining term of the notes. Accrued interest is payable quarterly.
In connection with the Casual Male acquisition, the Company also assumed an
outstanding mortgage note for real estate and buildings located in Canton,
Massachusetts. The mortgage note, which bears interest at 9%, had an
outstanding principal balance of $11.8 million at November 2, 2002.
4. Equity
Series B Preferred Stock Conversion and Issuance of Warrants
- ------------------------------------------------------------
In connection with the Casual Male acquisition, the Company issued 180,162
shares of its Series B Convertible Preferred Stock through private placements.
On August 8, 2002, all 180,162 shares of the Series B Convertible Preferred
Stock were automatically converted into 18,016,200 shares of the Company's
common stock. No value was assigned to this conversion feature since the price
paid on that date for one share of preferred stock was the same price as the
price at which 100 shares of common stock could be purchased on the date of the
transaction.
Warrants to purchase common stock of the Company were also issued in connection
with the acquisition. As part of the private placement of the Company's 12%
senior subordinated notes, the Company issued warrants to purchase 1,715,000
shares of common stock at an exercise price of $0.01 per share and additional
warrants to purchase 1,176,471 shares of common stock at an exercise price of
$8.50 per share. The Company has assigned a value, based on the Black Scholes
model, of $9.6 million for these warrants. The value of the warrants has been
reflected as a component of stockholders' equity and is being amortized over
the
term of the corresponding debt, which is five years. Also, as part of the
equity financing, the Company issued to its investment advisor warrants to
purchase 500,000 shares of common stock at an exercise price of $4.25 per
share. The total assigned value of these warrants of $1.2 million has been
reflected as a cost of raising equity at August 3, 2002. All warrants are
immediately exercisable.
At November 2, 2002, warrants to purchase 927,500 shares of the Company's
common stock at an exercise price of $0.01 remained outstanding and all of the
warrants to purchase shares of the Company's common stock at exercise prices of
$4.25 and $8.50 per share described above were outstanding.
Earnings Per Share
- ------------------
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
requires the computation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the respective
period. Diluted earnings per share is determined by giving effect to the
exercise of stock options and certain warrants using the treasury stock method.
The following table provides a reconciliation of the number of shares
outstanding for basic and diluted earnings per share.
For the: Three months ended Nine months ended
(In thousands) 11/2/02 11/3/01 11/2/02 11/3/01
- -----------------------------------------------------------------------------
Basic weighted average common
shares outstanding 33,984 14,492 21,633 14,476
Stock options, excluding the effect
of anti-dilutive options and warrants
totaling 1,036 shares for the three
months ended November 2, 2002 and 1,075
and 600 shares for the nine months ended
November 2, 2002 and November 3, 2001,
respectively -- 573 -- --
------ ------ ------ ------
Diluted weighted average common
shares outstanding 33,984 15,065 21,633 14,476
The following potential common stock equivalents were excluded from the
computation of diluted earnings per share, in each case, because the exercise
price of such options and warrants was greater than the average market price
per share of Common Stock for the periods reported:
Three months ended Nine months ended
(In thousands) 11/2/02 11/3/01 11/2/02 11/3/01
- -----------------------------------------------------------------------------
Stock Options 1,140 458 143 458
Warrants 1,676 - 1,176 -
5. Restructuring, Store Closing and Impairment of Assets
During the second quarter of fiscal 2003, the Company recorded charges totaling
$11.0 million related to the Company's restructuring of its
Levi's(r)/Dockers(r)business and the integration of the Casual Male operations.
Of the total $11.0 million in restructuring charges, $4.5 million related to
the impairment of assets of 38 stores which are among the 34 to 40 Levi's(r)
and Dockers(r) stores that the Company intends to close over the next several
years and $3.0 million related to inventory losses. The $3.0 million provision
for inventory was included in gross margin on the statement of operations for
the nine months ended November 2, 2002. In addition, the charge included $3.5
million related to the integration plan to combine the operations of Casual
Male with that of the Company, which included relocating the Company's
distribution facility and corporate offices to Canton, Massachusetts.
Of the total charge of $11.0 million, the total non-cash costs represented
approximately $7.5 million of the charge, with the remaining consisting of the
cash costs for integration expense and the inventory costs of liquidating
stores. Of the total $11.0 million charge, $7.5 million, which was related to
impairment of assets for store closings and the write-off of certain other
assets in connection with the relocation of the Company's headquarters and
distribution facility, was reflected as a reduction in Property, Plant and
Equipment, and $3.5 million was recorded as a write-down of inventory on the
Consolidated Balance Sheet at August 3, 2002. At November 2, 2002, the
remaining reserve was $2.8 million, which primarily related to inventory
reserves of $2.3 million and severance and other costs of $500,000.
6. Income Taxes
As the result of the Company recording the above restructuring charges in the
second quarter of fiscal 2003 and the anticipated impact of the charges on the
Company's full year results, no income tax benefit was recognized for the
nine months ended November 2, 2002.
Realization of the Company's existing deferred tax assets, which relate
principally to federal net operating loss carryforwards that expire from 2017
through 2022 is dependent on generating sufficient taxable income in the near-
term. At November 2, 2002, the Company evaluated the realizability of its
existing deferred tax assets, net of a previously established valuation
allowance, and concluded that no additional increase in the valuation allowance
was necessary at November 2, 2002.
7. Minority Interest
In March 2002, the Company entered into joint venture with Ecko Complex,
LLC("EcKo") under which the Company, a 50.5% partner, would own and manage
retail outlet stores bearing the name EcKo Unltd. and featuring EcKo(r) brand
merchandise. EcKo, a 49.5% partner, will contribute to the joint venture the
use of its trademark and the merchandise requirements, at cost, of the retail
outlet stores. The Company will contribute all real estate and operating
requirements of the retail outlet stores, including but not limited to, the
real estate leases, payroll needs and advertising. Each partner will share in
the operating profits of the joint venture, after each partner has received
reimbursements for its cost contributions. Under the terms of the agreement,
the Company must maintain a prescribed store opening schedule and open 75
stores over a six-year period in order to maintain the joint venture
exclusivity. At certain times during the term of the agreement, the Company
may exercise a put option to sell its share of the retail joint venture, and
EcKo has an option to acquire the Company's share of the retail joint venture
at a price based on the performance of the retail outlet stores.
As of November, 2, 2002, the Company's investment in the joint venture was
approximately $900,000.
8. Proposed Divestiture of Subsidiary
Subsequent to the end of the third quarter of fiscal 2003, LP Innovations, Inc.
("LPI"), the Company's loss prevention services subsidiary, filed with the
Securities and Exchange Commission a registration statement on Form S-1 to
register common stock and warrants proposed to be distributed to the Company's
stockholders and optionholders, in anticipation of a divestiture of LPI. The
Company expects the completion of the registration process and distribution of
the shares before the end of fiscal 2003 at which time LPI will become a stand-
alone and separately traded company. No shares of LPI common stock have been
registered under the Securities Act of 1933, as amended, and may not be offered
or sold in the United States absent such registration and compliance with any
applicable state securities laws. The business of LPI, which provides loss
prevention services and system solutions primarily to the retail industry, is a
subsidiary of the business that was acquired as part of the Casual Male
acquisition.
Part I. Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
SUMMARY OF SIGNIFICANT FISCAL 2003 EVENTS
Acquisition
On May 14, 2002, the Company completed the acquisition of substantially all of
the assets of Casual Male Corp. and certain subsidiaries ("Casual Male") for a
purchase price of approximately $170 million, plus the assumption of certain
operating liabilities. The Company was selected as the highest and best bidder
at a bankruptcy court ordered auction commencing on May 1, 2002 and concluding
on May 2, 2002. The U.S. Bankruptcy Court for the Southern District of New York
subsequently granted its approval of the acquisition on May 7, 2002.
Casual Male was a leading independent specialty retailer of fashion, casual and
dress apparel for big and tall men, with annual sales that exceeded $350
million. Casual Male sold its branded merchandise through various channels of
distribution including full price and outlet retail stores, direct mail and the
internet. Casual Male had been operating under the protection of the U.S.
Bankruptcy Court since May 2001.
Under the terms of the asset purchase agreement, the Company acquired
substantially all of Casual Male's assets including, but not limited to, the
inventory and fixed assets of approximately 475 retail store locations and
various intellectual property. In addition, the Company assumed
certain operating liabilities including, but not limited to, existing retail
store lease arrangements and the existing mortgage for Casual Male's corporate
office located in Canton, Massachusetts.
Corporate Name Change
In view of the significance of the Casual Male acquisition to the growth and
future identity of the Company, at the Annual Meeting of Stockholders
held on August 8, 2002, the Company's stockholders approved the Board of
Directors' recommendation to change the Company's name to "Casual Male Retail
Group, Inc." The Company believes that the Casual Male division will be a
significant future contributor to the Company's overall business and that this
name change was an important step to align the customer and investor
identification of the Company with the Casual Male store concept.
Proposed Divestiture of Subsidiary
On November 27, 2002, subsequent to the end of the third quarter, LP
Innovations, Inc. ("LPI"), the Company's loss prevention services subsidiary,
filed with the Securities and Exchange Commission a registration statement on
Form S-1 to register common stock and warrants proposed to be distributed to
the Company's stockholders and optionholders, in anticipation of a divestiture
of LPI. The Company expects the completion of the registration process and
distribution of the shares before the end of fiscal 2003 at which time LPI will
become a stand-alone and separately traded company. No shares of LPI common
stock have been registered under the Securities Act of 1933, as amended, and
may not be offered or sold in the United States absent such registration and
compliance with any applicable state securities laws. The business of LPI,
which provides loss prevention services and system solutions primarily to the
retail industry, is a subsidiary of the business that was acquired as part of
the Casual Male acquisition.
Restructuring, Store Closing and Impairment of Assets
During the second quarter of fiscal 2003, as a result of the continued erosion
of the Levi Strauss & Co. brands in the marketplace and Levi Strauss & Co.'s
inability to provide the Company with a balanced assortment of products for the
Company's Levi's(r)/Dockers(r) outlet stores, the Company implemented an
aggressive plan to downsize its Levi's(r) and Dockers(r) businesses. As a
result, the Company plans to close between 40 and 45 stores, combine 6 to 8
other stores and reduce the square footage in another 20 to 25 stores. By the
end of fiscal 2003, the Company expects to have closed 17 of these
Levi's(r)/Dockers(r) outlet stores while continuing to work on closing the
remaining 23 to 28 stores.
As a result, in the second quarter of fiscal 2003, the Company recorded $11.0
million in restructuring charges. Of the total charge of $11.0 million, $4.5
million related to the impairment of assets for 38 stores which are among
in the 34 to 40 stores that the Company intends to close over the next several
years and $3.0 million related to inventory costs to close the initial 15 to 20
stores. In addition, the restructuring charge included $3.5 million related to
the integration plan to combine the operations of Casual Male with that of the
Company, which included relocating the Company's distribution facility and
corporate offices to Canton, Massachusetts. Of the total charge of $11.0
million, the total non-cash costs represented approximately $7.5 million, with
the remainder consisting of cash costs for integration expenses and the
inventory costs of liquidating stores.
RESULTS OF OPERATIONS
The Company's results of operations for the three and nine months ended
November 2, 2002 include the results, since May 14, 2002, of the Company's
acquisition of Casual Male.
Sales
Total sales for the third quarter of fiscal 2003, which ended November 2, 2002,
were $125.2 million as compared to $54.3 million in the third quarter of fiscal
2002. The Casual Male stores, including catalog and internet sales,
represented approximately $74.7 million, or 60% of the total sales, for the
third quarter of fiscal 2003. The Casual Male business achieved a comparable
store sales increase of 0.2% for the third quarter.
For the nine months ended November 2, 2002, total sales were $277.3 million as
compared to $141.4 million in the prior year. The Casual Male business
represented $148.1 million, or 53% of the total sales for the nine months ended
November 2, 2002. For the period from May 14, 2002 to November 2, 2002, the
Casual Male business achieved a comparable store sales increase of
approximately 1.9% when compared to the corresponding period in the prior year.
The Company's Levi's(r)/Dockers(r) business had comparable store sales
decreases of 13.2% and 12.9% for the three and nine months ended November 2,
2002, respectively. The Company is working closely with Levi Strauss & Co. on
addressing the current product issues that the Company is experiencing and
expects to see improvements beginning in the Spring of 2003. These
improvements include the introduction of the Company's own private label tops
for the Levi's outlets and higher margin product offerings. However, many of
these actions will not take effect until fiscal 2004. As a result, in the
second quarter of fiscal 2003, based on the Company's Levi's(r) and Dockers(r)
businesses continuing to show significant negative trends, the Company
determined that it needed to downsize the Levi's(r)/Dockers(r) chain, as
discussed in more detail above under "Restructuring, Store Closing and
Impairment of Assets". Once the Company's plan to downsize the
Levi's(r)/Dockers(r) business is complete, the remaining Levi's(r)/Dockers(r)
business will represent less than 20% of the combined sales of the Company.
Gross Profit Margin
The following table shows the gross margin percentages, including occupancy
costs, for the three and nine months ended November 2, 2002 and November 3,
2001 and the percentage point change over the prior year:
November 2, 2002 November 3, 2001 Change
- --------------------------------------------------------------------------
For the three months ended 34.4% 23.3% 11.1%
For the nine months ended 31.4% 24.8% 6.6%
The increase in gross margin for the three and nine months ended November 2,
2002 as compared to the corresponding periods in the prior year was due to the
higher merchandise margins generated by the Company's Casual Male business.
The 11.1 percentage point increase in gross margin for the three months ended
November 2, 2002 was solely due to the Casual Male business, the gross margin
rate for the Levi's(r)/Dockers(r) business for the third quarter of fiscal 2003
remained unchanged as compared to the prior year. For the nine months ended
November 2, 2002, the gross margin rate increased 6.6 percentage points which
was a combination of a 12.1 percentage point increase from the Casual Male
business offset by a 5.5 percentage point decrease in the Levi's(r)/Dockers(r)
business.
The deterioration of the Levi's(r) brands in the marketplace, coupled with Levi
Strauss & Co.'s inability to provide an adequate balance of merchandise, has
caused the Company to maintain an aggressive promotional posture in an effort
to improve sales and liquidate inventory. This increase in promotional
activity as compared to prior periods has had a negative impact on merchandise
margins.
The Casual Male business has been a significant benefit to the Company's
overall gross margin rates. Casual Male has a substantial portion of private
label merchandise, which by its nature produces higher gross margins. In
addition, due to the limited competition in the Big and Tall market, the
Company's promotional rates trend lower than the men's apparel industry in
general.
Included in gross margin for the nine months ended November 2, 2002 was $3.0
million in inventory reserves recorded during the second quarter of fiscal 2003
in connection with the Company's plan to downsize its Levi's(r)/Dockers(r)
business. The $3.0 million related specifically to the liquidation of
inventory in the stores that the Company will be closing over the next twelve
to eighteen months.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for the three months
ended November 2, 2002 were 30.2% of sales as compared to 18.8% for the
corresponding period in the prior year. For the nine months ended November 2,
2002, SG&A expenses were 29.2% as compared to 21.2% for the corresponding
period in the prior year.
The increase in SG&A as a percent to sales for the three and nine months ended
November 2, 2002 was due principally to the addition of the Casual Male cost
structure to the Company's existing low cost base. The Company has started to
implement several cost reduction and synergy initiatives which the Company
expects will ultimately result in savings in the range of $20 to $25 million on
an annualized basis. Since the acquisition in May 2002, approximately $12
million in annualized savings have started to be realized.
Depreciation and Amortization
Depreciation and amortization expense for the three and nine months ended
November 2, 2002 increased over the corresponding periods for the prior year
due to the addition of approximately $46.6 million in assets acquired in
connection with the Casual Male acquisition, offset partially by the $3.0
million in impaired assets which the Company wrote off in connection with the
restructuring charge recorded in the second quarter of fiscal 2003.
Interest Expense, Net
Net interest expense was $3.2 million for the three months ended November 2,
2002 as compared to $440,000 for the corresponding period in the prior year.
For the nine months ended November 2, 2002, net interest expense was $6.2
million as compared to $1.5 million for the corresponding period in the prior
year. The significant increase in interest expense for both the three and nine
months ended November 2, 2002 was due to the increased debt levels of the
Company as a result of the acquisition of Casual Male. Approximately $90
million of new debt was issued in connection with the acquisition of Casual
Male. The interest rate incurred on this additional debt averaged
approximately 8.3% on an annualized basis.
Income Taxes
As the result of the Company recording $11.0 million in restructuring charges in
the second quarter of fiscal 2003 related to the downsizing of the Levi's(r) and
Dockers(r) businesses and the anticipated impact of the charges on the
Company's full year results, no income tax benefit was recognized for the
nine months ended November 2, 2002.
Realization of the Company's existing deferred tax assets, which relate
principally to federal net operating loss carryforwards that expire from 2017
through 2022 is dependent on generating sufficient taxable income in the near
term. At November 2, 2002, the Company evaluated the realizability of its
existing deferred tax assets, net of a previously established valuation
allowance, and concluded that no additional increase in the valuation allowance
was necessary at November 2, 2002.
Net Loss
For the three months ended November 2, 2002, the Company reported a net loss of
$(330,000) as compared to net income of $538,000 for the corresponding three
months of the prior year. Net loss for the nine months ended November 2, 2002,
which included restructuring charges totaling $11.0 million, was $(15.0)
million as compared to a net loss of $(117,000) for the nine months ended
November 3, 2001. On an operating basis since the acquisition on May 14, 2002,
the Casual Male business earned operating income of approximately $7.3 million
for the nine months ended November 2, 2002 while the Levi's(r)/Dockers(r)
business generated an operating loss of approximately $5.0 million for the same
period.
SEASONALITY
Historically, the Company has experienced seasonal fluctuations in revenues and
income with increases occurring during the Company's third and fourth quarters
as a result of the "Fall" and "Holiday" seasons.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs are for working capital, essentially inventory
requirements, and capital expenditures. Specifically, the Company's capital
expenditure program includes projects for new store openings, downsizing or
combining existing stores, and improvements and integration of its systems
infrastructure. For the remainder of fiscal 2003, the Company expects that
much of the Company's capital requirements will be used for expansion of its
Casual Male business as well as its Ecko Unltd.(r) outlet stores.
As previously discussed, the Company's acquisition of Casual Male in May 2002
was funded through a combination of the issuance of new debt and equity. The
Company anticipates that cash flow from operations and availability under the
Company's amended $120 million credit facility with Fleet Retail Finance, Inc.
will be sufficient to meet all debt payments and operating needs of its
business.
During the first nine months of fiscal 2003, cash used for operations was $12.9
million as compared to cash used for operations of $5.3 million for the first
nine months of the prior year. This decrease in cash from operations was
primarily due to the operating loss and the timing of certain working capital
accounts.
At November 2, 2002, total inventory equaled $143.9 million, compared to $57.7
million at February 2, 2002. This increase in inventory is principally due to
approximately $72.0 million in inventory acquired in the Casual Male
acquisition in addition to the normal inventory acquired in preparation for the
holiday selling season. The Company is continuing to focus on reducing its
inventory levels, and on a comparative basis, inventory levels are down 15%
from the prior year.
Total cash outlays for capital expenditures, net of landlord allowances, for
the first nine months of fiscal 2003 were $6.9 million compared to $2.6 million
during the first nine months of fiscal 2002. During the first nine months of
fiscal 2003, the Company opened five new Casual Male stores, twelve new
Candies(r) outlet stores, three of which were carve-outs from the Company's
existing Levi's(r)/Dockers(r) outlet stores, and six Ecko Unltd.(r) outlet
stores.
The Company's expansion plans for the remainder of fiscal 2003 will focus on
opening five to six Casual Male stores and investing in the Company's systems
infrastructure, as part of its integration plan. Based on the performance of
the twelve Candies(r) outlet stores year to date, which has been below the
Company's expectations, the Company currently has no plans to open additional
Candies(r) outlet stores and will continue to monitor the profitability of the
existing twelve locations.
In connection with the Casual Male acquisition, the Company amended its
existing credit facility with Fleet Retail Finance, Inc. to provide for a
total commitment of $120.0 million with a $20.0 million carve-out for
standby and documentary letters of credit. This facility will continue
to provide the Company with its on-going working cash needs. At November 2,
2002, the Company had borrowings of approximately $80.5 million outstanding
under this credit facility and had outstanding standby letters of credit
totaling approximately $325,000 and outstanding documentary letters of
credit of $506,000, with availability of approximately $16.7 million.
The Company's working capital at November 2, 2002 was approximately $17.2
million, compared to $13.3 million at February 2, 2002. The change in working
capital since February 2, 2002 was primarily the result of the Company's
acquisition of Casual Male in the second quarter of fiscal 2003.
The foregoing discussion of the Company's results of operations, liquidity,
capital resources and capital expenditures includes certain forward-looking
information. Such forward-looking information requires management to make
certain estimates and assumptions regarding the Company's expected strategic
direction and the related effect of such plans on the financial results of
the Company. Accordingly, actual results and the Company's implementation
of its plans and operations may differ materially from forward-looking
statements made by the Company. The Company encourages readers of this
information to refer to Exhibit 99.3 to the Company's Form 8-K, filed with
the Securities and Exchange Commission on September 17, 2002, which identifies
certain risks and uncertainties that may have an impact on future earnings
and the direction of the Company.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, the financial position and results of
operations of the Company are routinely subject to a variety of risks,
including market risk associated with interest rate movements on borrowings.
The Company regularly assesses these risks and has established policies and
business practices to seek to protect against the adverse effect of these and
other potential exposures.
The Company utilizes cash from operations and short-term borrowings to
fund its working capital needs. Borrowings under the Company's bank credit
agreement, which expires in May 2005, bear interest at variable rates
based on Fleet National Bank, N.A.'s prime rate or the London Interbank
Offering Rate ("LIBOR"). These interest rates at November 2, 2002 were 5.25%
for prime based borrowings and included various LIBOR contracts with interest
rates ranging from 4.579% to 4.898%. Based upon sensitivity analysis as of
November 2, 2002, a 10% increase in interest rates would result in a potential
cost to the Company of approximately $278,000 on an annualized basis. In
addition, the Company has available letters of credit as sources of financing
for its working capital requirements.
ITEM 4. Controls and Procedures
Based on their evaluation of the registrant's disclosure controls and
procedures as of a date within 90 days of the filing of this Report, the
Chief Executive Officer and the Chief Financial Officer have concluded
that such controls and procedures are effective.
There were no significant changes in the registrant's internal controls
or in other factors that could significantly affect such controls
subsequent to the date of their evaluation.
Part II. Other Information
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Default Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
See "Submission of Matters to a Vote of Security Holders" in the
Company's Form 10-Q for the Quarterly Period ended August 3, 2002.
ITEM 6. Exhibits and Reports on Form 8-K
A. Reports on Form 8-K:
A Current Report on Form 8-K/A was filed by the Company on September 11,
2002 to restate Item 7(b) of the Current Report on Form 8-K filed by the
Company on May 23, 2002 and amended on May 23, 2002 and June 14, 2002.
A Current Report on Form 8-K was filed by the Company on September 11,
2002 to put on file the certifications of the Chief Executive Officer and the
Chief Financial Officer of the Company accompanying Amendment No. 1 to its
Annual Report on Form 10-K for the fiscal year ended February 2, 2002,
submitted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350)
..
A Current Report on Form 8-K was filed by the Company on September 11,
2002 to put on file the certifications of the Chief Executive Officer and the
Chief Financial Officer of the Company accompanying Amendment No. 1 to its
Quarterly Report on Form 10-Q for the quarterly period ended May 4, 2002,
submitted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350).
A Current Report on Form 8-K was filed by the Company on September 17,
2002 to put on file the certifications of the Chief Executive Officer and the
Chief Financial Officer of the Company accompanying its Quarterly Report on
Form 10-Q for the quarterly period ended August 3, 2002, submitted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
B. Exhibits:
3.1 Restated Certificate of Incorporation of the Company, as
amended (included as Exhibit 3.1 to Amendment No. 3 of the
Company's Registration Statement on Form S-1 (No. 33-13402),
and incorporated herein by reference). *
3.2 Certificate of Amendment to Restated Certificate of
Incorporation, as amended, dated June 22, 1993 (included as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
dated June 17, 1996, and incorporated herein by reference). *
3.3 Certificate of Amendment to Restated Certificate of Incorporation
dated August 8, 2002 (included as Exhibit 3.3 to the Company's
Quarterly Report on Form 10-Q dated September 17, 2002, and
incorporated herein by reference). *
3.4 Certificate of Designations, Preferences and Rights of a
Series of Preferred Stock of the Company established Series A
Junior Participating Cumulative Preferred Stock dated May 1,
1995 (included as Exhibit 3.2 to the Company's Annual Report
on Form 10-K dated May 1, 1996, and incorporated herein by
reference). *
3.5 Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Series B Convertible Preferred
Stock dated May 14, 2002 (included as Exhibit 3.1 to the Company's
Form 8-K filed on May 23, 2002, and incorporated herein by reference). *
3.6 By-Laws of the Company, as amended (included as Exhibit 3.4 to
the Company's Quarterly Report on Form 10-Q dated December 12, 2000,
and incorporated herein by reference). *
10.1 1992 Stock Incentive Plan, as amended (included as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q dated September 18,
2001, and incorporated herein by reference). *
10.2 Third Amended and Restated Loan and Security Agreement dated
as of May 14, 2002, by and among Fleet Retail Finance, Inc.,
as Administrative Agent and Collateral Agent, the Lenders
identified therein, the Company, as Borrowers' Representative,
and the Company and Designs Apparel, Inc., as Borrowers.
(included as Exhibit 10.9 to the Company's Current Report on
Form 8-K/A filed on May 23, 2002, and incorporated herein by
reference). *
10.3 Consulting Agreement dated as of December 15, 1999 between the
Company and George T. Porter, Jr. (included as Exhibit 10.22
to the Company's Annual Report on Form 10-K dated April 28, 2000,
and incorporated herein by reference). *
10.4 Extension to Consulting Agreement, dated as of April 28, 2001,
between the Company and Jewelcor Management, Inc. (included as
Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q dated
September 18, 2001, and incorporated herein by reference). *
10.5 Extension to Consulting Agreement, dated as of April 28, 2002,
between the Company and Jewelcor Management, Inc (included as
Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q filed
on June 18, 2002, and incorporated herein by reference). *
10.6 Employment Agreement dated as of March 31, 2000 between the
Company and David A. Levin (included as Exhibit 10.27 to the
Company's Annual Report on Form 10-K dated April 28, 2000, and
incorporated herein by reference). *
10.7 Amendment to Employment Agreement dated as of April 10, 2001
between the Company and David A. Levin (included as Exhibit 10.19 to
the Company's Quarterly Report on Form 10-Q dated June 19, 2001, and
incorporated herein by reference). *
10.8 Secured Promissory Note dated as of June 26, 2000 between the
Company and David A. Levin (included as Exhibit 10.28 to the
Company's Quarterly Report on Form 10-Q dated September 12, 2000,
and incorporated herein by reference). *
10.9 Pledge and Security Agreement dated June 26, 2000 between the
Company and David A. Levin (included as Exhibit 10.29 to the
Company's Quarterly Report on Form 10-Q dated September 12, 2000,
and incorporated herein by reference). *
10.10 Employment Agreement dated as of August 14, 2000 between the
Company and Dennis R. Hernreich (included as Exhibit 10.30 to the
Company's Quarterly Report on Form 10-Q dated September 12, 2000,
and incorporated herein by reference). *
10.11 Amendment to Employment Agreement dated as of April 25, 2001
between the Company and Dennis R. Hernreich (included as Exhibit 10.23
to the Company's Quarterly Report on Form 10-Q dated June 19, 2001,
and incorporated herein by reference). *
10.12 Employment Agreement dated as of October 22, 2001 between the
Company and Ronald N. Batts (incorporated as Exhibit 10.25 to the
Company's Quarterly Report on Form 10-Q dated December 14, 2001,
and incorporated herein by reference). *
10.13 Employment Agreement dated as of August 19, 2002 between the
Company and Stephen Gatsik.
10.14 Retail Store License Agreement dated as of January 9, 2002 between
the Company and Candie's, Inc. (incorporated as Exhibit 10.23 to the
Company's Annual Report on Form 10-K dated May 1, 2002, and
incorporated herein by reference). *
10.15 Retail Store License Agreement Amendment No. 1 dated as of
January 15, 2002 between the Company and Candie's, Inc. (incorporated
as Exhibit 10.24 to the Company's Annual Report on Form 10-K dated
May 1, 2002, and incorporated herein by reference). *
10.16 Asset Purchase Agreement entered into as of May 2, 2002, by and among
the Company and Casual Male Corp. and certain subsidiaries (included
as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.17 Amended and Restated Note Agreement, dated as of April 26, 2002,
and amended and restated as of May 14, 2002, among the Company,
certain subsidiaries of the Company and the purchasers identified
therein (included as Exhibit 10.2 to the Company's Current Report on
Form 8-K filed on May 23, 2002, and incorporated herein by reference). *
10.18 Form of 12% Senior Subordinated Note due 2007 (included as
Exhibit 10.3 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.19 Form of 5% Subordinated Note due April 26, 2007 (included as
Exhibit 10.4 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.20 Form of Warrant to Purchase Shares of Common Stock (aggregating
787,500 shares)(included as Exhibit 10.5 to the Company's Current
Report on Form 8-K filed on May 23, 2002, and incorporated herein by
reference). *
10.21 Form of Warrant to Purchase Shares of Common Stock (aggregating
927,500 shares, subject to shareholder approval)(included as
Exhibit 10.6 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.22 Form of Warrant to Purchase Shares of Common Stock (aggregating
1,176,471 shares, subject to shareholder approval)(included as
Exhibit 10.7 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.23 Registration Rights Agreement entered into as of April 26, 2002, by
and between the Company and the persons party thereto
(included as Exhibit 10.8 to the Company's Current Report on Form 8-K
filed on May 23, 2002, and incorporated herein by reference). *
10.24 Sourcing Agreement dated May 1, 2002, between the Company and
Kellwood Company (included as Exhibit 10.29 to the Company's
Quarterly Report on Form 10-Q filed on June 18, 2002, and
incorporated herein by reference). *
10.25 Form of Warrant to Purchase Shares of Common Stock (aggregating
500,000 shares) (included as Exhibit 10.31 to the Company's Quarterly
Report on Form 10-Q filed on September 17, 2002, and incorporated
herein by reference). *
18.1 Letter of Preferability from Ernst & Young dated June 13, 2001 (included
as Exhibit 18.1 to the Company's Quarterly Report on Form 10-Q dated June
19, 2001, and incorporated herein by reference). *
99 Certain cautionary statements of the Company to be taken into account
in conjunction with consideration and review of the Company's publicly-
disseminated documents (including oral statements made by others on
behalf of the Company) that include forward looking information (included
as Exhibit 99.3 to the Company's Current Report on Form 8-K filed on
September 17, 2002, and incorporated herein by reference). *
* Previously filed with the Securities and Exchange Commission.
SIGNATURES
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.
CASUAL MALE RETAIL GROUP, INC.
Date: December 17, 2002 By: /S/ DENNIS R. HERNREICH
---------------------------------
Dennis R. Hernreich, Executive Vice
President and Chief Financial Officer
Casual Male Retail Group, Inc.
Certifications Pursuant Rule 13a-14 or 15d-14 of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
I, David A. Levin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Casual Male Retail
Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of
1934, as amended) for the registrant and we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within that
entity, particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: December 17, 2002
/s/ DAVID A.LEVIN
---------------------------------
David A. Levin
Chief Executive Officer
(Principal Executive Officer)
I, Dennis R. Hernreich, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Casual Male Retail
Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of
1934, as amended) for the registrant and we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within that
entity, particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: December 17, 2002
/s/ DENNIS R. HERNREICH
-------------------------------------
Dennis R. Hernreich
Chief Financial Officer
(Principal Financial and Accounting Officer)