1
[COVER]
[PICTURE OF WOMAN STANDING WEARING BLACK OUTFIT OVER WHITE T-SHIRT]
[INSIDE FRONT COVER]
[PICTURE OF TWO WOMEN WALKING BAREFOOT IN SURF]
[INSIDE BACK COVER]
[PICTURE OF CHICO'S WORLD HEADQUARTERS FACILITY]
[BACK COVER]
[PICTURE OF WOMAN SEATED ON PARK BENCH WEARING PATTERNED TOP AND BLACK PANTS]
2
[PICTURE - INSIDE FRONT COVER OF ANNUAL REPORT]
3
To our Shareholders,
Fiscal 1999 was a banner year for Chicos. We exceeded all of our sales
expectations and twenty of our stores topped one million dollars in sales! We
had a comparable Company-owned store sales increase of 30.3% for the year and a
41.7% overall sales increase. Our stores averaged $574 in sales per square foot
and we more than tripled our earnings from $.34 to $1.07 per share for fiscal
year 99.
In fiscal 1999, we opened 23 new Chicos stores and remodeled or
relocated 10 of our existing locations. At year end, we had 162 stores,
including 8 franchise stores and 7 outlets in 35 states. We have streamlined
our site selection and new store opening procedures to enable us to open stores
more efficiently.
The average store net selling square footage for our stores is 1330
square feet, although we have successfully opened larger stores. We will
continue our flexible real estate strategy by opening stores with net selling
square footage ranging from 1000-3000 square feet, with a new target of
1700-1800 net selling square feet for our prototype store.
We have finalized a new, more extensive, training program emphasizing
customer service and product knowledge. Based on overwhelmingly positive
customer feedback, we believe this program is proving to be a huge success.
Our Travelers collection, made from a high performance, easy care
synthetic fabric, is an extensive, ever evolving collection which continues to
outperform all sales expectations. The Sausalito collection, another big winner
in a unique textured viscose fabric, is continually being restyled in new
shapes and colors. Natural fabrics such as linen, silk and cotton, as well as
the introduction of new synthetics, have proven to excite our customers as we
have continued to set new sales records.
We seek to control and improve our product by working closely on
partnerships with our long term vendors. We want Chicos clothing to offer value
with designer quality and style, while at a price which we feel the customer
will recognize and appreciate. Our accessories also have the same attention to
style and value, with many accessory items being developed in-house.
Our marketing efforts include direct mail brochures that have
generated high percentage returns and have contributed greatly to our sales
increases. We recently relaunched our Passport Frequent Buyer Incentive Program
(which had been on hold since 1994). Immediate response has been remarkable and
we expect to use this renewed program to dramatically expand our loyal and
repeat customer base.
Our overall sales for December 1998 of $11.3 million topped our
monthly overall sales record set in June 1998 of $10.5 million. For the Holiday
season, we introduced many Chicos branded products including our Goddess
Collection of body care products, Chicos Time watches, shoes and gift items. We
foresee the expansion of these product lines as we further extend the Chicos
brand. By the year 2001, we expect to initiate catalog sales; and we are
investigating the launching of e-commerce Internet sales.
We plan to open a minimum of 30 stores this year and increase this
number every year as long as the economy and momentum of the Company maintains
its forward pace.
Above all, we plan to stay focused on our target customer and concept,
build our team to support our growth, maintain margins and reduce SG&A,
maintain a 25% or better overall continuing growth rate and stay innovative and
creative.
As we grow, we see more and more opportunities. Our future has never
looked brighter. Watch us!
Sincerely,
/s/ Marvin J. Gralnick
Marvin J. Gralnick
CEO
4
(CHICO'S LOGO)
FINANCIAL HIGHLIGHTS
PRO
ONE FORMA
MONTH FISCAL YEAR
PERIOD ENDED
FISCAL YEAR ENDED ENDED (UNAUDITED) FISCAL YEAR ENDED
-------------------------- ----------- ----------- ----------------------------------------
JANUARY 1, DECEMBER 31, JANUARY 28, JANUARY 28, FEBRUARY 1, JANUARY 31, JANUARY 30,
1995 1995 1996(1) 1996(1) 1997(1) 1998 1999
(52 WEEKS) (52 WEEKS) (4 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS)
----------- ------------ ----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net Sales.................. $59,271 $60,343 $3,747 $60,763 $64,073 $75,339 $106,742
Income (loss) from
Operations.............. 5,685 3,485 (524) 3,437 3,622 4,914 15,134
Net Income (loss).......... 3,291 1,704 (338) 1,676 1,931 2,770 9,139
Basic Earnings (loss) Per
Share................... 0.42 0.22 (0.04) 0.22 0.25 0.35 1.12
Diluted Earnings (loss) Per
Share................... 0.41 0.22 (0.04) 0.21 0.24 0.34 1.07
OPERATING DATA:
Total Assets............... $27,352 $27,009 $27,681 $31,248 $34,472 $ 49,000
Long-Term Debt............. 4,663 5,896 7,231 7,008 6,703 6,713
Stockholders' Equity....... 14,226 15,959 15,621 18,021 21,456 34,303
# of Stores (at end of
period):
Company Owned......... 104 111 111 123 132 154
Franchised............ 17 12 12 10 9 8
------- ------- ------- ------- ------- --------
Total...................... 121 123 123 133 141 162
======= ======= ======= ======= ======= ========
- ---------------
(1) In December 1996, the Company elected to change its fiscal year end,
effective January 29, 1996, from a 52/53 week fiscal year ending on the
Sunday closest to December 31st to a 52/53 week fiscal year ending on the
Saturday closest to January 31st. The selected financial data presents
financial results for, among other periods, the short one month transition
period in January 1996 and a pro forma fiscal year ended January 28, 1996.
INDEX
3 Management's Discussion & Analysis
9 Stock Information
10 Financial Statements
26 Store Listing
28 Executive Officers/Directors
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Since the Company opened its first store in 1983 principally selling folk
art, its retail store system, now selling principally women's apparel, has grown
to 162 stores as of January 30, 1999 (fiscal 1999), of which 154 are
Company-owned and 8 are franchised stores. Since fiscal 1989, the Company has
de-emphasized the granting of new franchises as a strategy for growth and, at
the same time, has been expanding its store base by opening Company-owned
stores. Where possible and practical, the Company has also acquired stores from
its franchisees. Since the beginning of fiscal 1994, the Company has acquired
nine stores from franchisees and opened 83 new Company-owned stores, and one
franchisee has opened two new franchised stores in this period. Of these new
company-owned stores, 22 were opened in fiscal 1999, 14 were opened in fiscal
1998, 13 were opened in fiscal 1997, 8 were opened in the pro forma fiscal year
ended January 28, 1996 and 26 were opened in the fiscal year ended January 1,
1995. During this same time period, the Company closed 16 Company-owned stores
and one franchised store also closed. The Company plans to open a minimum of 30
new Company-owned stores in the fiscal year ending January 29, 2000 (fiscal
2000). In addition, the Company is evaluating certain existing Company-owned
store locations, including stores with leases coming up for renewal, and is
considering the possibility of closing between one and three existing
Company-owned stores in fiscal 2000.
RESULTS OF OPERATIONS
The following table sets forth, for each of the respective periods
indicated, certain operating statement data and the percentage of the Company's
net sales represented by each line item presented.
FISCAL YEAR ENDED (000'S)
---------------------------------------------------------------
FEBRUARY 1, JANUARY 31, JANUARY 30,
1997 1998 1999
(53 WEEKS) % (52 WEEKS) % (52 WEEKS) %
----------- ----- ----------- ----- ----------- -----
Net sales by company stores................................. $62,318 97.3% $73,597 97.7% $104,981 98.4%
Net sales to franchisees.................................... 1,755 2.7 1,742 2.3 1,761 1.6
------- ----- ------- ----- -------- -----
Net sales............................................... 64,073 100.0 75,339 100.0 106,742 100.0
Cost of goods sold.......................................... 26,713 41.7 33,240 44.1 44,197 41.4
------- ----- ------- ----- -------- -----
Gross profit............................................ 37,360 58.3 42,099 55.9 62,545 58.6
General, administrative and store operating expenses........ 33,738 52.6 37,185 49.4 47,411 44.4
------- ----- ------- ----- -------- -----
Income from operations.................................. 3,622 5.7 4,914 6.5 15,134 14.2
Interest expense, net....................................... 404 0.7 372 .5 151 .2
------- ----- ------- ----- -------- -----
Income before taxes..................................... 3,218 5.0 4,542 6.0 14,983 14.0
Provision for income taxes.................................. 1,287 2.0 1,772 2.3 5,844 5.4
------- ----- ------- ----- -------- -----
Net income.............................................. $ 1,931 3.0% $ 2,770 3.7% $ 9,139 8.6%
======= ===== ======= ===== ======== =====
FIFTY-TWO WEEKS ENDED JANUARY 30, 1999 COMPARED TO THE FIFTY-TWO WEEKS ENDED
JANUARY 31, 1998.
Net Sales. Net sales by Company-owned stores for the fifty-two weeks ended
January 30, 1999 (fiscal 1999) increased by $31.3 million, or 42.6%, over net
sales by Company-owned stores for the comparable fifty-two weeks ended January
31, 1998 (fiscal 1998). The increase was the result of a comparable Company
store net sales increase of $21.1 million and $10.2 million additional sales
from the new (or reacquired) stores not yet included in the Company's comparable
store base (net of sales of $1.0 million from seven stores closed in fiscal 1998
and fiscal 1999).
Net sales to franchisees for fiscal 1999 increased by approximately
$18,000, or 1.0% compared to net sales to franchisees for fiscal 1998. The
increase in net sales to franchisees primarily reflects increased sales to
franchisees due to the opening of one additional franchised location by an
existing franchisee and increased purchases by existing franchisees, net of
reduced sales attributable to the re-acquisition of three franchised stores in
fiscal 1998 and fiscal 1999.
Gross Profit. Gross profit for fiscal 1999 was $62.5 million, or 58.6% of
net sales, compared with $42.1 million, or 55.9% of net sales, for fiscal 1998.
The increase in the gross profit percentage primarily resulted from merchandise
planning and distribution costs which decreased by 1% of net sales as a result
3
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
of leverage associated with the Company's 30.3% comparable Company store net
sales increase for fiscal 1999, and higher margins in its front-line stores as a
result of fewer and less aggressive markdowns believed to be attributable to the
Company's refocusing of its product development departments as described more
fully below under the heading "Comparable Company Store Net Sales." To a lesser
degree, this increase in the gross profit percentage was due to decreased
shipping costs to the Company's stores because of a change in common carriers,
offset by an increase in inventory reserves for merchandise intended for
liquidation.
General, Administrative and Store Operating Expenses. General,
administrative and store operating expenses increased to $47.4 million, or 44.4%
of net sales, in fiscal 1999 from $37.2 million, or 49.4% of net sales, in
fiscal 1998. The increase in general, administrative and store operating
expenses was, for the most part, the result of increases in store operating
expenses, including store compensation, occupancy and other costs associated
with additional store openings. The decrease in these expenses as a percentage
of net sales was principally due to leverage in direct store costs, including
store compensation, associated with the Company's 30.3% comparable Company store
sales increase for fiscal 1999, net of an effective increase in general and
administrative costs attributable to the fact that administrative costs in
fiscal 1998 had reflected the benefit of certain business interruption insurance
proceeds related to the temporary closing of one of the Company's stores.
Interest Expense, Net. Net interest expense decreased to approximately
$151,000 in fiscal 1999 from approximately $372,000 in fiscal 1998. This
decrease was primarily a result of increased interest earnings during fiscal
1999 resulting from the Company's increased cash position.
Net Income. As a result of the factors discussed above, net income
reflects an increase of 237% to $9.1 million in fiscal 1999 from net income of
$2.8 million in fiscal 1998. The income tax provision represented an effective
rate of 39% for both the current and prior periods.
FIFTY-TWO WEEKS ENDED JANUARY 31, 1998 COMPARED TO FIFTY-THREE WEEKS ENDED
FEBRUARY 1, 1997.
Net Sales. Net sales by Company-owned stores for the fifty-two weeks ended
January 31, 1998 (fiscal 1998) increased by $11.3 million, or 17.6%, over net
sales by Company-owned stores for the fifty-three weeks ended February 1, 1997
(fiscal 1997). The increase was the result of $4.7 million additional sales from
the new (or reacquired) stores not yet included in the Company's comparable
store base (net of sales of $1.1 million from eight stores closed in fiscal 1997
and fiscal 1998), a comparable Company-owned store net sales increase of $6.1
million, and approximately $464,000 in additional sales resulting from the
liquidation of inventory through an independent liquidator.
Net sales to franchisees for fiscal 1998 decreased by approximately
$13,000, or .7% compared to net sales to franchisees for fiscal 1997. The
Company believes that the decrease in net sales to franchisees was primarily
caused by the reacquisition of two franchises in fiscal 1998 and fiscal 1997,
and a decrease in purchases by the Company's largest franchisee, offset by a
decrease in the volume of returned merchandise under the Company's new return
policy implemented in mid 1996.
Gross Profit. Gross profit for fiscal 1998 was $42.1 million, or 55.9% of
net sales, compared with $37.4 million, or 58.3% of net sales for fiscal 1997.
The decrease in the gross profit percentage primarily resulted from a revised
merchandising strategy as the Company reduced price points to more effectively
meet competitive price points and increased sales promotions and other markdowns
at both front line and outlet stores in an effort to reduce the Company's levels
of inventories, particularly older inventory that was being held at the
Company's warehouse for future clearance. To a lesser degree, the decrease in
gross margins resulted from (1) increased freight costs due to an increased use
of air shipments as the Company attempted to rapidly increase its in-store
inventory levels of newer merchandise, (2) a sale, at cost, of approximately
$464,000 of inventory to an independent liquidator, and (3) additional inventory
charges associated with certain of the Company's older designs and styles.
General, Administrative and Store Operating Expenses. General,
administrative and store operating expenses increased to $37.2 million, or 49.4%
of net sales, in fiscal 1998 from $33.7 million, or 52.7% of net sales, in
fiscal 1997. The increase in general, administrative and store operating
expenses
4
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
was, for the most part, the result of increases in store operating expenses,
including store compensation, occupancy and other costs associated with new
store openings. The decrease in these expenses as a percentage of net sales was
principally due to direct store costs which decreased by 2.4% of net sales due
to leverage associated with the Company's 10.7% comparable store sales increase.
To a lesser degree, the decrease is also attributable to net business
interruption insurance proceeds related to the temporary closing of one of the
Company's stores and a prior year nonrecurring cost of approximately $325,000
related to separation expenses associated with the former president of the
Company, all net of the impact of an increase in marketing expenses.
Interest Expense, Net. Net interest expense decreased to approximately
$372,000 in fiscal 1998 from approximately $404,000 in fiscal 1997. This
decrease was primarily a result of an increase in interest earnings associated
with the Company's improved cash position.
Net Income. As a result of the factors discussed above, net income
reflects an increase of 43.5% to $2.7 million in fiscal 1998 from net income of
$1.9 million in fiscal 1997. The provision for income taxes represented an
effective rate of 39.0% in the fifty-two weeks ended January 31, 1998, as
compared to 40.0% in the fifty-three weeks ended February 1, 1997. The decrease
in the effective income tax rate resulted from a lower effective state income
tax rate.
COMPARABLE COMPANY-OWNED STORE NET SALES
Comparable Company store net sales increased by 30.3% for the fifty-two
weeks ended January 30, 1999 when compared to the comparable fifty-two weeks of
the previous period. Comparable Company store net sales data is calculated based
on the change in net sales of currently open Company-owned stores that have been
operated as a Company store for at least thirteen months.
The Company believes that the increase in comparable Company store net
sales resulted from a refocusing of the Company's product development,
merchandise planning and buying departments on Chico's target customer. The
Company also believes that the look, fit, timing of receipts and pricing policy
(including markdowns) of the Company's product were in line with the refocusing
effort and that the increase in comparable store sales was fueled by increased
direct mailings and a larger database of existing customers for such mailings.
To a lesser degree, the Company believes the increase was due to increased
store-level training efforts associated with the Company's newly introduced
training programs and continuing sales associated with several styles of
clothing produced from a fabric newly introduced by the Company in the fourth
quarter of fiscal 1998. Clothing which utilized this newly introduced fabric
represented approximately 25% of net apparel sales in fiscal 1999.
Because of the perceived success of the Company's direct mail efforts, and
its past success during 1991-1994 with its frequent shopping club (the "Passport
Club"), the Company has, in the first quarter of fiscal 2000, re-established a
new and modified "Passport Club" program. This new "Passport Club" program
allows the Company to track customer sales at the SKU level through the use of
newly licensed software, allows for mailings to separate niches of customers and
offers discounts and other benefits for increased frequent shopping. The Company
believes that the re-introduction of the "Passport Club" should help the Company
as it seeks to continue store sales increases over the strong monthly comparable
store sales increases that were achieved in fiscal 1999 and 1998.
The following table sets forth for each of the four quarters of fiscal
1999, 1998 and 1997, the percentage changes in comparable store net sales at
Company-owned stores:
FISCAL QUARTERS
------------------
1ST QTR 2ND QTR 3RD QTR 4TH QTR FULL YEAR
------- ------- ------- ------- ---------
Fiscal year ended 1/30/99: ................... 31.7% 23.0% 28.5% 30.4% 30.3%
Fiscal year ended 1/31/98: ................... (1.1)% 13.3% 12.0% 20.1% 10.7%
Fiscal year ended 2/1/97: ................... 2.9% 2.2% (0.3)% (10.6)% (1.3)%
5
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing capital requirements are for funding capital
expenditures related to new store openings and merchandise inventory purchases.
In addition, over the next 18 months, the Company anticipates experiencing the
need for capital to address certain expansions of its office and design facility
at its headquarters facilities.
During the fifty-two weeks ended January 30, 1999 (fiscal 1999) and the
fifty-two weeks ended January 31, 1998 (fiscal 1998), the Company's primary
source of working capital was cash flow from operations of $12.2 million and
$3.6 million, respectively. The $8.6 million increase in the cash flow generated
from operations was primarily a result of an increase in net income to $9.1
million in fiscal 1999 from $2.8 million in fiscal 1998, an increase of
approximately $580,000 in inventory in fiscal 1999 versus an increase of $1.7
million in fiscal 1998, a decrease in prepaid expenses and other assets of
approximately $110,000 in fiscal 1999, versus an increase of approximately
$234,000 in fiscal 1998 and an increase in accounts payable and accrued
liabilities of $1.6 million in fiscal 1999, versus an increase of approximately
$298,000 in fiscal 1998, net of an increase in deferred taxes of approximately
$588,000 in fiscal 1999 as compared to a decrease of approximately $32,000 in
fiscal 1998. The increase in accounts payable and accrued liabilities is
associated with the Company's improved sales and profitability.
The Company invested $5.0 million in fiscal 1999 for capital expenditures
primarily associated with the opening of 24 new (or reacquired) Company-owned
stores and the remodeling of several existing stores. During fiscal 1998, the
Company invested approximately $2.0 million for capital expenditures associated
with the opening of 15 new (or reacquired) Company-owned stores, and the
remodeling of several existing stores.
During fiscal 1999, two of the Company's officers exercised 137,000 stock
options at prices ranging from $3.25 to $7.00, one of the Company's independent
directors exercised 25,000 options at prices ranging from $3.25 to $5.0625, a
former director exercised 61,000 options at prices ranging from $5.50 to $8.75
and several employees and former employees exercised in the aggregate 123,924
options at prices ranging from $3.25 to $12.00. Also during fiscal 1999, the
Company sold 34,775 shares of common stock under its employee stock purchase
plan at prices of $7.70 and $13.23. These various issuances of common stock
during fiscal 1999 resulted in an aggregate cash flow to the Company of $3.7
million, which included a benefit to the Company of $1.5 million attributable to
a reduction in corporate income taxes from associated income tax deductions.
The Company also invested approximately $233,000 in fiscal 1999 and
approximately $154,000 in fiscal 1998 in intangible assets associated with the
reacquisition of franchised stores and the extension of its credit lines for an
additional year. The Company repaid indebtedness of approximately $149,000 and
$354,000 in the current and prior periods, respectively. In addition, the
Company repaid under its then available credit lines approximately $285,000 in
fiscal 1998.
As more fully described in "Item 1 -- Business" under the heading "Imports
and Import Restrictions" of the Company's Annual Report on Form 10-K for the
fiscal year ended January 30, 1999, the Company is subject to ongoing risks
associated with imports. Although the Company has increased its percentage of
sourcing from United States vendors in fiscal 1999, the Company continues to
rely heavily on foreign sourcing for its product offerings. This continued
reliance on sourcing from foreign countries causes the Company to be exposed to
certain unique business and political risks. Import restrictions, including
tariffs and quotas, and changes in such tariffs or quotas could affect the
importation of apparel generally and, in that event, could increase the cost or
reduce the supply of apparel available to the Company and have an adverse effect
on the Company's business, financial condition and/or results of operations. The
Company's merchandise flow could also be adversely affected by political
instability in any of the countries in which its goods are manufactured, by
significant fluctuations in the value of the U.S. dollar against applicable
foreign currencies and by restrictions on the transfer of funds.
The Company plans to open a minimum of 30 new stores in fiscal 2000 and is
in the initial planning stages for an expansion of the office and design
facilities at its headquarters site. The Company also will
6
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
have capital needs associated with its planned catalog and internet sales
activities and the larger silhouette division which is currently being explored
as an additional opportunity. The Company believes that the liquidity needed for
its planned new store growth, continuing remodel program, maintenance of proper
inventory levels associated with this growth, expansion of its office and design
facilities, establishment of catalog and internet sales operations and the
possible development of a larger silhouette store concept will be funded
primarily from cash flow from operations and its strong existing cash balances.
The Company further believes that this liquidity will be sufficient, based on
currently planned new store openings, headquarters expansion plans and other
planned expansions of its business operations, to fund anticipated capital needs
over the near-term, including scheduled debt repayments. Given the Company's
strong cash balances, the Company does not believe that it would need to seek
other sources of financing to conduct its operations or pursue its expansion
plans even if cash flow from operations should prove to be less than anticipated
or even if there should arise a need for additional letter of credit capacity
due to establishing new and expanded sources of supply, or if the Company were
to increase the number of new Company stores planned to be opened in future
periods.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Company has utilized a derivative financial instrument to reduce its
exposure resulting from fluctuations in interest rates. The derivative financial
instrument in effect at January 31, 1999, consisted of an interest rate swap
agreement with a notional principal amount of $5.4 million at a term of four
years. For the applicable period, the interest rate swap agreement effectively
converts the interest on the outstanding mortgage loan with respect to the
Company's headquarters facility to a fixed effective swap rate of 9%. The
Company has entered into this interest rate swap for non-trading purposes. Risks
associated with the interest rate swap include those associated with changes in
the market value and interest rates. The interest rate swap agreement was
entered into with a major financial institution with the goal of minimizing the
risk of credit loss. Accordingly, management considers the potential for loss in
future earnings and cash flows attributable to the interest rate swap not to be
material. As indicated under the heading of Liquidity and Capital Resources, the
Company is currently in a strong cash position. However, in order to utilize a
portion of the available cash to prepay all or any portion of the mortgage loan
would require a simultaneous termination of the interest rate swap. The cost to
terminate the outstanding interest rate swap as of January 30, 1999, was
approximately $149,700. The Company intends to continue to reevaluate from time
to time the advisability of prepaying all or a portion of the outstanding
mortgage loan.
SEASONALITY AND 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 current or prior periods.
Although sales have recently been somewhat higher in the Company's first
and second fiscal quarters (February through July), the Company does not
consider its business to be seasonal.
7
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Annual Report may contain forward looking statements which reflect the
current views of the Company with respect to certain events that could have an
effect on the Company's future financial performance. These statements include
the words "expects," "believes," and similar expressions. These forward-looking
statements are subject to various risks and uncertainties that could cause
actual results to differ materially from historical results or those currently
anticipated. These potential risks and uncertainties include the development of
new styles, the ability to secure customer acceptance of Chico's styles,
propriety of inventory mix and sizing, quality of merchandise received from
vendors, timeliness of vendor production and deliveries, increased competition,
extent of the market demand by women for private label clothing and related
accessories, continued demand for the Company's "slinky" line of clothing,
adequacy and perception of customer service, ability to coordinate product
development with buying and planning, rate of new store openings, performance of
management information systems, ability to hire, train, energize and retain
qualified sales associates and other employees, availability of quality store
sites, ability to hire and retain qualified managerial employees and other
risks. In addition, there are potential risks and uncertainties that are
peculiar to the Company's heavy reliance on sourcing from foreign vendors
including the impact of work stoppages, transportation delays and other
interruptions, political instability, foreign currency fluctuation, imposition
of and changes in tariffs and import and export controls such as import quotas,
changes in governmental policies in or towards such foreign countries and other
similar factors.
8
11
TRADING AND DIVIDEND INFORMATION
The following table sets forth, for the periods indicated, the range of
high and low closing sale prices for the Common Stock, as reported on the NASDAQ
National Market System.
HIGH LOW
------ ------
FOR THE FISCAL YEAR ENDED JANUARY 30, 1999
Fourth Quarter (November 1, 1998 -- January 30,
1999)................................................. $28.00 $15.50
Third Quarter (August 2, 1998 -- October 31, 1998)..... 17.63 10.00
Second Quarter (May 3, 1998 -- August 1, 1998)......... 18.00 9.38
First Quarter (February 1, 1998 -- May 2, 1998)........ 10.00 6.38
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
Fourth Quarter (November 2, 1997 -- January 31,
1998)................................................. $ 8.75 $ 6.25
Third Quarter (August 3, 1997 -- November 1, 1997)..... 7.88 4.88
Second Quarter (May 4, 1997 -- August 2, 1997)......... 5.50 2.75
First Quarter (February 2, 1997 -- May 3, 1997)........ 4.25 2.69
The Company does not intend to pay any cash dividends for the foreseeable
future and intends to retain earnings, if any, for the future operation and
expansion of the Company's business. Any determination to pay dividends in the
future will be at the discretion of the Company's Board of Directors and will be
dependent upon the Company's results of operations, financial condition,
contractual restrictions and other factors deemed relevant by the Board of
Directors.
The approximate number of equity security holders of the Company is as
follows:
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF APRIL 1, 1999
------------------------ -------------------
Common Stock, par value $.01 per share...................... 431
9
12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO CHICO'S FAS, INC.:
We have audited the accompanying balance sheets of Chico's FAS, Inc. (a Florida
corporation) as of January 30, 1999, and January 31, 1998, and the related
statements of income, stockholders' equity and cash flows for the fiscal years
ended January 30, 1999, January 31, 1998, and February 1, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chico's FAS, Inc. as of January
30, 1999, and January 31, 1998, and the results of its operations and its cash
flows for the fiscal years ended January 30, 1999, January 31, 1998, and
February 1, 1997, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Tampa, Florida,
March 4, 1999
10
13
CHICO'S FAS, INC.
BALANCE SHEETS
ASSETS JANUARY 30, JANUARY 31,
------ 1999 1998
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents................................. $14,484,776 $ 2,943,916
Receivables, less allowances of $90,000 and $75,000 for
sales returns, respectively............................ 1,149,078 894,895
Inventories............................................... 10,105,153 9,525,472
Prepaid expenses.......................................... 510,885 667,145
Deferred taxes............................................ 1,586,000 1,251,000
----------- -----------
Total current assets.............................. 27,835,892 15,282,428
CERTIFICATE OF DEPOSIT...................................... -- 1,000,000
PROPERTY AND EQUIPMENT, net................................. 19,665,261 16,979,386
DEFERRED TAXES.............................................. 812,000 559,000
OTHER ASSETS, net........................................... 686,923 650,702
----------- -----------
$49,000,076 $34,471,516
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------
CURRENT LIABILITIES:
Accounts payable.......................................... $ 3,995,123 $ 3,520,265
Accrued liabilities....................................... 3,679,355 2,540,375
Current portion of debt and lease obligations............. 309,520 251,762
----------- -----------
Total current liabilities......................... 7,983,998 6,312,402
DEBT AND LEASE OBLIGATIONS, excluding current portion....... 6,713,045 6,703,229
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 25,000,000 shares authorized
and 8,393,016 and 8,011,317 shares issued and
outstanding, respectively.............................. 83,930 80,113
Additional paid-in capital................................ 11,923,930 8,219,707
Retained earnings......................................... 22,295,173 13,156,065
----------- -----------
Total stockholders' equity........................ 34,303,033 21,455,885
----------- -----------
$49,000,076 $34,471,516
----------- -----------
The accompanying notes are an integral part of these balance sheets.
11
14
CHICO'S FAS, INC.
STATEMENTS OF INCOME
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
------------ ----------- -----------
NET SALES BY COMPANY STORES............................... $104,981,219 $73,596,969 $62,317,817
NET SALES TO FRANCHISEES.................................. 1,760,374 1,742,183 1,754,788
------------ ----------- -----------
Net sales............................................... 106,741,593 75,339,152 64,072,605
COST OF GOODS SOLD........................................ 44,196,426 33,240,162 26,712,475
------------ ----------- -----------
Gross profit............................................ 62,545,167 42,098,990 37,360,130
GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES...... 47,411,057 37,184,671 33,738,523
------------ ----------- -----------
Income from operations.................................. 15,134,110 4,914,319 3,621,607
INTEREST EXPENSE, net..................................... 151,002 372,303 404,054
------------ ----------- -----------
Income before income taxes.............................. 14,983,108 4,542,016 3,217,553
INCOME TAX PROVISION...................................... 5,844,000 1,772,000 1,287,000
------------ ----------- -----------
Net income.............................................. $ 9,139,108 $ 2,770,016 $ 1,930,553
------------ ----------- -----------
PER SHARE DATA:
NET INCOME PER COMMON SHARE -- BASIC.................... $ 1.12 $ .35 $ .25
NET INCOME PER COMMON AND COMMON EQUIVALENT
SHARE -- DILUTED..................................... $ 1.07 $ .34 $ .24
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -- BASIC..... 8,167,759 7,912,126 7,863,121
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING -- DILUTED............................... 8,529,896 8,032,871 7,976,466
The accompanying notes are an integral part of these statements.
12
15
CHICO'S FAS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK
------------------- ADDITIONAL
PAR PAID-IN RETAINED
SHARES VALUE CAPITAL EARNINGS TOTAL
--------- ------- ----------- ----------- -----------
BALANCE, JANUARY 28, 1996.............. 7,782,498 $77,825 $ 7,087,636 $ 8,455,496 $15,620,957
Issuance of common stock............. 101,620 1,016 468,072 -- 469,088
Net income for the fiscal year ended
February 1, 1997.................. -- -- -- 1,930,553 1,930,553
--------- ------- ----------- ----------- -----------
BALANCE, FEBRUARY 1, 1997.............. 7,884,118 78,841 7,555,708 10,386,049 18,020,598
Issuance of common stock............. 127,199 1,272 509,999 -- 511,271
Tax benefit of stock options
exercised......................... -- -- 154,000 -- 154,000
Net income for the fiscal year ended
January 31, 1998.................. -- -- -- 2,770,016 2,770,016
--------- ------- ----------- ----------- -----------
BALANCE, JANUARY 31, 1998.............. 8,011,317 80,113 8,219,707 13,156,065 21,455,885
Issuance of common stock............. 381,699 3,817 2,209,223 -- 2,213,040
Tax benefit of stock options
exercised......................... -- -- 1,495,000 -- 1,495,000
Net income for the fiscal year ended
January 30, 1999.................. -- -- -- 9,139,108 9,139,108
--------- ------- ----------- ----------- -----------
BALANCE, JANUARY 30, 1999.............. 8,393,016 $83,930 $11,923,930 $22,295,173 $34,303,033
========= ======= =========== =========== ===========
The accompanying notes are an integral part of these statements.
13
16
CHICO'S FAS, INC.
STATEMENTS OF CASH FLOWS
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
--------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 9,139,108 $ 2,770,016 $ 1,930,553
-------------- -------------- --------------
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization............... 2,407,799 2,114,146 1,896,196
Deferred tax (benefit) provision............ (588,000) 32,000 (515,000)
Deferred rent expense, net.................. 216,978 129,712 (77,610)
Loss from disposal of property and
equipment................................. 195,027 317,206 200,103
(Increase) decrease in assets --
Receivables............................... (254,183) (131,444) 113,063
Inventories............................... (579,681) (1,680,110) (1,724,081)
Prepaid expenses.......................... 156,260 (193,700) (64,529)
Other assets.............................. (46,418) (40,180) (65,991)
Increase in liabilities --
Accounts payable.......................... 474,858 218,275 1,266,986
Accrued liabilities....................... 1,138,980 79,349 222,091
-------------- -------------- --------------
Total adjustments...................... 3,121,620 845,254 1,251,228
-------------- -------------- --------------
Net cash provided by operating
activities........................... 12,260,728 3,615,270 3,181,781
-------------- -------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Redemption of certificate of deposit........... 1,000,000 600,000 --
Purchases of property and equipment............ (5,045,809) (2,010,618) (2,926,309)
Proceeds from sale of property and equipment... -- 34,500 --
-------------- -------------- --------------
Net cash used in investing
activities........................... (4,045,809) (1,376,118) (2,926,309)
-------------- -------------- --------------
14
17
CHICO'S FAS, INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net.......... 3,708,040 665,271 469,088
Net (payments) borrowings under line of credit
agreement......................................... -- (284,919) 29,103
Principal payments on debt........................... (72,000) (265,872) (288,311)
Principal payments on lease obligations.............. (77,404) (88,374) (115,006)
Deferred finance costs............................... (232,695) (153,518) (62,536)
----------- ----------- ----------
Net cash provided by (used in) financing
activities................................. 3,325,941 (127,412) 32,338
----------- ----------- ----------
Net increase in cash and cash equivalents.... 11,540,860 2,111,740 287,810
CASH AND CASH EQUIVALENTS,
Beginning of period.................................. 2,943,916 832,176 544,366
----------- ----------- ----------
CASH AND CASH EQUIVALENTS,
End of period........................................ $14,484,776 $2,943,916 $ 832,176
=========== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest............................ $ 611,238 $ 609,956 $ 571,038
Income taxes...................................... $ 4,873,065 $1,757,259 $1,769,400
The accompanying notes are an integral part of these statements.
15
18
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 30, 1999
1. BUSINESS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS ORGANIZATION
Chico's FAS, Inc. (the Company) is a specialty retailer of exclusively designed,
private label casual clothing and related accessories. As of January 30, 1999,
the Company's retail store system consisted of 162 stores located throughout the
United States, 154 of which were owned and operated by the Company, and eight of
which were owned and operated by franchisees.
FRANCHISE OPERATIONS
A summary of the changes in the number of the Company's franchise stores as
compared to total company-owned stores as of January 30, 1999, and January 31,
1998, and for the fiscal years then ended is as follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 30, JANUARY 31,
1999 1998
----------------- -----------------
Franchise stores opened..................................... 1 --
Franchise stores purchased from franchisees................. 2 1
Franchise stores in operation at fiscal year-end............ 8 9
Company-owned stores at fiscal year-end..................... 154 132
USE OF ESTIMATES
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.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and investments with maturities
of less than three months.
INVENTORIES
Raw material inventories of approximately $639,000 as of January 30, 1999, are
recorded at the lower of cost using the first-in, first-out (FIFO) method or
market. All other inventories consist of finished clothing and accessories and
are recorded at the lower of cost using the last-in, first-out (LIFO) method or
market. If the lower of FIFO or market method had been used, inventories would
have been approximately $360,000 and $267,000 higher at January 30, 1999, and
January 31, 1998, respectively, than those reported in the accompanying balance
sheets. Purchasing, distribution and design costs are expensed as incurred, and
are included in the accompanying statements of income as cost of goods sold.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Fixtures manufactured and leasehold
improvements constructed by the Company are recorded at cost, which includes
elements of raw materials, labor and overhead. Depreciation of property and
equipment is provided on a straight-line basis over the estimated useful lives
of the assets. Assets acquired under capital lease obligations and leasehold
improvements are depreciated over the lesser of the useful lives of the assets
or the lease terms.
16
19
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Maintenance and repairs of property and equipment are expensed as incurred, and
major improvements are capitalized.
Upon retirement, sale or other disposition of property and equipment, the cost
and accumulated depreciation or amortization are eliminated from the accounts,
and any gain or loss is charged to operations.
OTHER ASSETS
Included in other assets are intangible assets which include legal and other
costs of obtaining the Company's trademark and debt financing agreements,
territory rights agreements related to franchise repurchases and franchise
cancellation fees for stores that were acquired by the Company, and are
currently in operation as Company-owned stores. Trademark costs and non-compete
agreements are being amortized on a straight-line basis over 10 and five years,
respectively, debt-financing costs are being amortized over the term of the
respective debt agreement, and franchise cancellation fees are being amortized
over the remaining terms of the related facilities' leases. Intangible assets,
net of accumulated amortization, are approximately $421,000 and $431,000 as of
January 30, 1999, and January 31, 1998, respectively.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets and identifiable intangibles are reviewed periodically for
impairment if events or changes in circumstances indicate that the carrying
amount should be addressed. The Company has determined that there has been no
impairment in the carrying value of long-lived assets, as of January 30, 1999.
INCOME TAXES
The provision for income taxes includes federal and state income taxes currently
payable and deferred income taxes, which are provided for temporary differences
between the recognition of income and expenses for financial and income tax
reporting purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The book value of all financial instruments approximates their fair market value
as of January 30, 1999.
REVENUE RECOGNITION
Net sales by Company stores includes sales made to retail customers during the
period, net of estimated customer returns. Net sales to franchisees includes
merchandise sold to franchisees, net of estimated returns.
STORE PRE-OPENING COSTS
Operating costs (including store set-up, rent and training expenses) incurred
prior to the opening of new stores are expensed as incurred and are included in
general, administrative and store operating expenses in the accompanying
statements of income.
INCOME PER COMMON AND COMMON EQUIVALENT SHARE
During the fiscal year ended January 31, 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" (SFAS 128).
SFAS 128 establishes new standards for
17
20
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
computing and presenting earnings per share (EPS). Specifically, SFAS 128
replaces the presentation of primary EPS with a presentation of basic EPS,
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Basic EPS is based
upon the weighted average number of common shares outstanding and diluted EPS is
based upon the weighted average number of common shares outstanding plus the
dilutive common equivalent shares outstanding during the period. The following
is a reconciliation of the denominators of the basic and diluted EPS
computations shown on the face of the accompanying statements of income:
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
------------- ------------- -------------
Weighted average common shares outstanding -- Basic......... 8,167,759 7,912,126 7,863,121
Dilutive effect of options outstanding...................... 362,137 120,745 113,345
------------ ------------ ------------
Weighted average common and common equivalent shares
outstanding -- Diluted.................................... 8,529,896 8,032,871 7,976,466
------------ ------------ ------------
The following options were outstanding as of the end of the fiscal years but
were not included in the computation of diluted EPS because the options'
exercise prices were greater than the average market price of the common shares:
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
------------------- --------------- ---------------
Number of options........................................... 2,000 418,204 341,696
Exercise price.............................................. $ 23.06 - $26.25 $5.50 - $12.00 $7.00 - $12.00
Expiration date............................................. December 21, 2008 - March 31, 2003 - March 31, 2003 -
January 6, 2009 Sept. 21, 2007 April 30, 2005
CURRENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5) effective for fiscal years beginning after December 15,
1998. This SOP provides guidance on the financial reporting of start-up costs
and organization costs. Management does not believe the implementation of SOP
98-5 will have any impact on the Company's financial statements.
In the fiscal year ended January 31, 1998, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131). SFAS 131 established standards for reporting information about operating
segments of a business. The Company is not required to report any segment
information due to it not meeting or exceeding any of the quantitative
thresholds listed under SFAS 131.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133),
with an effective date for all fiscal years beginning after June 15, 1999. SFAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as Derivatives) and for hedging activities. SFAS 133
requires an entity to recognize all Derivatives as either assets or liabilities
and measures those instruments at fair value. As of January 30, 1999, management
of the Company has not assessed the future impact of SFAS 133 on the Company's
financial statements.
18
21
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following as of January 30, 1999, and
January 31, 1998:
ESTIMATED JANUARY 30, JANUARY 31,
USEFUL LIVES 1999 1998
------------- ----------- -----------
Land........................................................ $ 1,039,904 $ 1,039,904
Land improvements........................................... 35 years 1,785,161 1,785,161
Building.................................................... 20 - 35 years 6,273,250 6,247,920
Equipment................................................... 2 - 10 years 4,213,678 4,076,277
Furniture and fixtures...................................... 3 - 10 years 4,268,966 3,618,457
Leasehold improvements...................................... 1 - 10 years 10,086,055 6,829,258
----------- -----------
27,667,014 23,596,977
Less -- Accumulated depreciation and amortization........... (8,001,753) (6,617,591)
----------- -----------
$19,665,261 $16,979,386
----------- -----------
Assets acquired under capital lease obligations with a cost of $487,548 are
included in equipment as of January 30, 1999, and January 31, 1998. The
accumulated depreciation related to these assets is $455,893 and $408,399 as of
January 30, 1999, and January 31, 1998, respectively.
3. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following as of January 30, 1999, and
January 31, 1998:
JANUARY 30, JANUARY 31,
1999 1998
----------- -----------
Accrued payroll, bonuses and severance costs................ $1,759,928 $1,206,621
Allowance for estimated merchandise returns................. 1,065,000 720,000
Other....................................................... 854,427 613,754
---------- ----------
$3,679,355 $2,540,375
---------- ----------
4. INCOME TAXES:
The Company's total income tax provision consisted of the following:
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
----------------- ----------------- -----------------
Current:
Federal................................................... $5,080,000 $1,378,000 $1,434,000
State..................................................... 1,352,000 362,000 368,000
Deferred:
Federal................................................... (462,000) 24,000 (404,000)
State..................................................... (126,000) 8,000 (111,000)
------------- ------------- -------------
Total income tax provision.............................. $5,844,000 $1,772,000 $1,287,000
------------- ------------- -------------
The reconciliation of the income tax provision based on the U.S. statutory
federal income tax rate (34 percent) to the Company's income tax provision is as
follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
----------------- ----------------- -----------------
Tax expense at the statutory rate........................... $5,094,000 $1,544,000 $1,094,000
State income tax expense, net of federal tax benefit........ 769,000 225,000 176,000
Other....................................................... (19,000) 3,000 17,000
------------- ------------- -------------
Total income tax provision................................ $5,844,000 $1,772,000 $1,287,000
------------- ------------- -------------
19
22
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Deferred tax assets are recorded due to different carrying amounts for financial
and income tax reporting purposes arising from cumulative temporary differences.
These differences consisted of the following as of January 30, 1999, and January
31, 1998:
JANUARY 31, JANUARY 31,
1998 1998
----------- -----------
Accruals and allowances..................................... $1,480,000 $1,105,000
Inventories................................................. 828,000 786,000
Property and equipment...................................... 243,000 43,000
Net operating loss carryforward............................. 117,000 146,000
---------- ----------
2,668,000 2,080,000
Less -- Valuation allowance................................. (270,000) (270,000)
---------- ----------
$2,398,000 $1,810,000
========== ==========
Approximately $449,000 of a net operating loss for tax reporting purposes can be
carried forward ratably for the six subsequent fiscal years following the fiscal
year ended February 1, 1997. The remaining net operating loss carryforward was
approximately $300,000 as of January 30, 1999.
5. DEBT AND LEASE OBLIGATIONS:
Debt and lease obligations consisted of the following as of January 30, 1999,
and January 31, 1998:
JANUARY 30, JANUARY 31,
1999 1998
----------- -----------
Line of credit (the Line), variable borrowing capability of
up to $6 million, depending on inventory levels and the
amount of outstanding commercial letters of credit (Note
7), interest payable at prime (7.75% percent as of January
30, 1999), secured by substantially all of the Company's
assets other than land, land improvements and building,
maturing in May 2000...................................... $ -- $ --
Mortgage note secured by a first priority mortgage on land,
land improvements, building and certain equipment......... 5,365,500 5,437,500
Obligations under capital leases, imputed interest rate of
5.9 percent, secured by equipment, varying monthly
payments of principal and interest, maturing September
1999...................................................... 89,772 167,176
Deferred rent............................................... 1,567,293 1,350,315
---------- ----------
Total debt and lease obligations....................... 7,022,565 6,954,991
Less -- Current portion................................ (309,520) (251,762)
---------- ----------
$6,713,045 $6,703,229
========== ==========
The mortgage note (the Mortgage Note) was financed with a bank, bearing interest
at the bank's prime rate plus .5 percent. The Mortgage Note is payable in 84
monthly installments of $6,000, plus accrued interest, through January 2003, at
which time the remaining principal balance is due. On October 14, 1997, an
interest rate swap with a notional principal amount of approximately $5,400,000
as of January 30, 1999, and January 31, 1998, was effectuated, whereby the
interest at the bank's prime rate plus .5 percent was exchanged for a fixed rate
of 9 percent of the outstanding principal of the Mortgage Note. The Company
incurred no additional costs associated with the interest rate swap; however, a
termination fee would be assessed if the Mortgage Note is paid before January
2003.
20
23
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
As of January 31, 1998, a $1,000,000 certificate of deposit (CD) was held at the
bank to secure the Line. During the fiscal year ended January 30, 1999, the bank
waived the CD requirement and the CD was redeemed.
As of January 30, 1999, the Line and Mortgage Note contained certain covenants
requiring, among other things, approval of acquisitions of businesses and
maintenance of specified tangible net worth, working capital, debt to equity and
debt service coverage ratios. As of January 30, 1999, the Company was in
compliance with all covenants under these agreements.
Deferred rent represents the difference between actual operating lease
obligations due and operating lease expense, which is recorded by the Company on
a straight-line basis over the terms of its leases.
Maturities of the Mortgage Note are as follows as of January 30, 1999:
FISCAL YEAR
ENDING AMOUNT
- ----------- ----------
2000........................................................ $ 72,000
2001........................................................ 72,000
2002........................................................ 72,000
2003........................................................ 5,149,500
----------
$5,365,500
==========
Future minimum lease payments under capital lease obligations are as follows as
of January 30, 1999:
FISCAL YEAR
ENDING AMOUNT
- ----------- --------
2000........................................................ $112,918
Less -- Interest imputed at 5.9 percent..................... (23,146)
--------
Present value of capital lease obligations.................. $ 89,772
========
During the fiscal year ended February 1, 1997, capital lease obligations of
$130,598 were incurred when the Company entered into leases for new equipment.
In addition, existing capital lease obligations were refinanced to the terms
shown above during the fiscal year ended February 1, 1997.
6. RELATED PARTY TRANSACTIONS:
All officers have entered into agreements with the Company which provide for
base salaries, annual bonuses or consulting fees, and certain severance benefits
in the event that their employment is terminated by the Company "without cause"
or by such officer or director following a "change of control."
7. COMMITMENTS AND CONTINGENCIES:
The Company leases retail store space and various office equipment under
operating leases expiring in various years through 2012. Certain of the leases
provide that the Company may cancel the lease if the Company's retail sales at
that location fall below an established level, while certain leases provide for
additional rent payments to be made when sales exceed a base amount. Certain
operating leases provide for renewal options for periods from three to five
years at their fair rental value at the time of renewal. In the normal course of
business, operating leases are generally renewed or replaced by other leases.
21
24
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Minimum future rental payments under noncancellable operating leases (exclusive
of common area maintenance charges and/or contingent rental payments based on
sales) as of January 30, 1999, were as follows:
FISCAL YEAR
ENDING AMOUNT
- ----------- -----------
2000........................................................ $ 8,361,959
2001........................................................ 8,089,959
2002........................................................ 7,313,208
2003........................................................ 6,151,876
2004........................................................ 5,023,492
Thereafter.................................................. 11,473,798
-----------
$46,414,292
===========
For the fiscal years ended January 30, 1999, January 31, 1998, and February 1,
1997, total rent expense under the Company's operating leases was $11,332,480,
$9,728,207, and $8,624,193, respectively, including common area maintenance
charges of $1,480,176, $1,328,466, and $1,252,635, other rental charges of
$1,637,276, $1,469,512, and $1,296,100, and contingent rental expense of
$425,859, $140,523, and $81,674, based on sales, respectively.
At January 30, 1999, the Company had $2,899,419 in commercial letters of credit
outstanding, which have arisen in the normal course of business due to foreign
purchase commitments. The commercial letters of credit are secured by the same
assets as the Line (see Note 5).
The Company is involved in claims and actions arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate disposition of these matters is not expected to have a material
adverse effect on the financial position of the Company.
8. STOCK OPTION PLANS AND CAPITAL STOCK TRANSACTIONS:
1992 STOCK OPTION PLAN
During fiscal year 1992, the Company adopted a stock option plan (the 1992
Plan), which reserved 548,800 shares of common stock for future issuance under
the 1992 Plan to eligible employees of the Company. The per share exercise price
of each stock option is not less than the fair market value of the stock on the
date of grant or, in the case of an employee owning more than 10 percent of the
outstanding stock of the Company and to the extent incentive stock options, as
opposed to nonqualified stock options, are issued, the price is not less than
110 percent of such fair market value. Also, the aggregate fair market value of
the stock with respect to which incentive stock options are exercisable for the
first time by an employee in any calendar year may not exceed $100,000. As of
January 30, 1999, 227,529 nonqualified options were outstanding and 320,569 had
been exercised under the 1992 Plan.
1993 STOCK OPTION PLAN
During fiscal year 1993, the Company adopted a stock option plan (the 1993
Plan), which reserved 680,000 shares of common stock for future issuance under
the 1993 Plan to eligible employees of the Company. The terms of the 1993 Plan
are the same as the 1992 Plan. As of January 30, 1999, 464,124 nonqualified
options were outstanding and 125,488 had been exercised under the 1993 Plan.
22
25
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
OTHER STOCK OPTIONS
Since 1993, four independent directors of the Company have been granted a total
of 197,000 nonqualified options at exercise prices ranging from $3.25 to $12.81.
As of January 30, 1999, 111,000 nonqualified options were outstanding and 86,000
had been exercised. In October 1998, the Board of Directors (the Board) approved
a stock option plan (the Independent Directors' Plan), subject to stockholder
approval, which reserved 150,000 shares of common stock for future issuance to
eligible independent directors of the Company. As of January 30, 1999, no shares
had been granted under the Independent Directors' Plan.
AGGREGATE STOCK OPTION ACTIVITY
As of January 30, 1999, 802,653 nonqualified options were outstanding at a
weighted average exercise price of $6.04 per share, and 241,090 remained
available for future grants. Of the options outstanding, 432,693 options were
immediately exercisable. The Company recognized no compensation expense for
these options.
Stock option activity for the fiscal years ended January 30, 1999, January 31,
1998, and February 1, 1997, was as follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 30, 1999 JANUARY 31, 1998 FEBRUARY 1, 1997
-------------------- -------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
-------- --------- -------- --------- ------- ---------
Outstanding, beginning of period......... 977,777 $5.14 971,206 $5.97 825,850 $5.74
Granted................................ 195,750 8.99 354,700 3.36 319,200 6.97
Exercised.............................. (346,924) 5.27 (105,931) 4.15 (78,752) 4.33
Canceled or expired.................... (23,950) 4.92 (242,198) 6.42 (95,092) 8.85
-------- -------- -------
Outstanding, end of period............... 802,653 $6.04 977,777 $5.14 971,206 $5.97
======== ======== =======
Options vested, end of period............ 432,693 $6.09 537,637 $5.84 534,789 $5.59
The following table summarizes information about stock options as of January 30,
1999:
OPTIONS OUTSTANDING OPTIONS VESTED
-------------------------------------------- ----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGES OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE VESTED PRICE
- ----------------------------- ----------- ------------ --------- ------- ---------
$ 3.25-$ 6.50 482,953 7.20 $ 4.11 292,544 $4.64
$ 6.75-$12.81 317,700 7.60 8.86 140,149 9.10
$23.06-$26.25 2,000 9.90 25.45 -- --
------- ---- ------ ------- -----
802,653 7.48 $ 6.04 432,693 $6.09
======= ==== ====== ======= =====
CAPITAL STOCK TRANSACTIONS
The Board adopted a noncompensatory employee stock purchase plan (ESPP), which
became effective upon the consummation of the Company's initial public offering
on April 1, 1993, and was amended on December 18, 1993 and October 9, 1998,
covering an aggregate of 210,000 shares of common stock. Under the ESPP, all
employees are given the right to purchase up to 600 shares of the common stock
of
23
26
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
the Company two times a year at a price equal to 85 percent of the value of the
stock immediately prior to the beginning of each exercise period. For the fiscal
years ended January 30, 1999, January 31, 1998, and February 1, 1997, 34,775,
21,268, and 22,868, respectively, were purchased under the ESPP. The Company
recognized no compensation expense for the issuance of these shares.
SFAS NO. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION"
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25), under which no compensation expense has been recognized.
The FASB later issued SFAS No. 123, "Accounting for Stock-Based Compensation"
(SFAS 123). SFAS 123 allows companies to continue following the accounting
guidance of APB 25, but requires pro forma disclosure of net income and EPS for
the effects on compensation expense had the accounting guidance of SFAS 123 been
adopted. The pro forma disclosures are required only for options granted in
fiscal years that begin after December 15, 1994.
The Company adopted SFAS 123 for disclosure purposes in 1996. For SFAS 123
purposes, the fair value of each option granted has been estimated as of the
grant date using the Black-Scholes option pricing model with the following
weighted average assumptions: risk-free interest rate of 6.3 percent as of
January 30, 1999, and January 31, 1998, and 6.2 percent for the fiscal year
ended February 1, 1997, expected life of seven years, no expected dividends, and
expected volatility of 75 percent. The weighted average fair value of options
granted during the fiscal years ended January 30, 1999, January 31, 1998 and
February 1, 1997, was $9.05, $3.16, and $5.21, respectively. Options granted
under the 1992 Plan and 1993 Plan vest ratably over three years. All other
options were either immediately exercisable or vested ratably over three years.
The term of all options granted is 10 years. Had compensation expense been
determined consistent with SFAS 123, utilizing the assumptions detailed above,
the Company's net income and net income per common and common equivalent shares
outstanding would have been changed to the following pro forma amounts for the
fiscal years ended January 30, 1999, January 31, 1998, and February 1, 1997:
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
----------- ----------- -----------
Net income:
As reported............................................... $9,139,108 $2,770,016 $1,930,553
Pro forma................................................. 8,443,686 2,218,609 1,539,000
Net income per common share -- Basic:
As reported............................................... $ 1.12 $ .35 $ .25
Pro forma................................................. 1.01 .28 .20
Net income per common and common equivalent
share -- Diluted:
As reported............................................... $ 1.07 $ .34 $ .24
Pro forma................................................. .96 .28 .19
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 2, 1995, the resulting pro forma compensation expense
may not be representative of that to be expected in future years.
9. PROFIT SHARING PLAN:
In fiscal year 1992, the Company adopted a defined contribution profit sharing
plan (the Plan) covering substantially all employees. Employees' rights to
Company-contributed benefits vest over two to six years of service, as specified
in the Plan. For the fiscal years ended January 30, 1999, January 31, 1998,
24
27
CHICO'S FAS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
and February 1, 1997, the Company's profit sharing expense was approximately
$471,000, $280,000 and $185,000, respectively.
Effective as of January 1, 1999, the Company amended the Plan to incorporate a
401(k) savings plan feature (the 401(k)) into the Plan. Under the 401(k),
employees may contribute up to 20 percent of their annual compensation, subject
to certain statutory limitations. The Company matches employee contributions at
33 1/3 percent up to 6 percent of the employees' contributions. The Company
contributions to the 401(k) vest ratably over two to six years of service, as
specified in the Plan. The Company matching contributions related to the 401(k)
totaled approximately $16,000 for the one-month period ended January 30, 1999.
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
NET INCOME (LOSS) PER
NET GROSS INCOME NET INCOME (LOSS) PER COMMON AND COMMON
SALES PROFIT (LOSS) COMMON SHARE -- BASIC EQUIVALENT SHARE -- DILUTED
----------- ----------- ---------- --------------------- ---------------------------
Fiscal year ended
February 1, 1997:
First quarter...... $17,302,552 $ 9,862,647 $1,080,368 $ .14 $ .14
Second quarter..... 16,073,289 10,080,421 940,998 .12 .12
Third quarter...... 15,727,262 9,368,363 655,964 .08 .08
Fourth quarter..... 14,969,502 8,048,699 (746,777) (.09) (.09)
Fiscal year ended
January 31, 1998:
First quarter...... $18,719,797 $10,603,437 $1,002,456 $ .13 $ .13
Second quarter..... 20,080,574 10,918,044 967,556 .12 .12
Third quarter...... 18,923,374 10,884,187 955,532 .12 .12
Fourth quarter..... 17,615,407 9,693,322 (155,528) (.02) (.02)
Fiscal year ended
January 30, 1999:
First quarter...... $25,895,908 $15,126,755 $2,328,505 $ .29 $ .28
Second quarter..... 27,358,542 16,346,471 2,713,082 .34 .32
Third quarter...... 26,754,149 15,713,456 2,371,442 .29 .28
Fourth quarter..... 26,732,994 15,358,485 1,726,079 .21 .20
25
28
ALABAMA Santa Ana Union Station
Birmingham Main Place 202-289-4547
The Summit 714-558-2909
205-298-0440 FLORIDA
Santa Barbara Boca Raton
Foley Paseo Nuevo Boca Center
Riviera Centre Factory 805-568-0039 561-392-7181
Outlet Shops
334-943-2321 Santa Monica Mizner Park
Montana Avenue 561-361-9969
ARIZONA 310-394-2481
Scottsdale Bonita Springs
The Borgata of Scottsdale Sonoma The Promenade
602-483-8654 Sonoma Court Shops 941-948-2288
707-933-0100
CALIFORNIA Brandon
Carmel Vacaville Brandon Town Center
Carmel Plaza Factory Stores at Nut Tree II 813-689-7231
831-622-9618 707-453-1336
Captiva
Del Mar Valencia two locations:
Del Mar Plaza Valencia Town Center Chadwick Square
619-792-7080 805-284-1289 941-472-4426
941-472-6101
Encino Walnut Creek
Encino Place Broadway Plaza Destin
818-990-2519 925-906-0604 The Marketplace at
SanDestin
Fresno COLORADO 850-837-1358
Fig Garden Village Boulder
559-229-3596 Pearl Street Mall Estero
303-449-3381 Miromar Outlet
La Jolla 941-949-2252
Girard Avenue Castle Rock
619-456-6273 Castle Rock Factory Shops Fort Lauderdale
303-688-2950 The Galleria
Prospect Street 954-561-7527
619-456-9226 Denver
Cherry Creek North Fort Myers
Laguna Beach 303-377-6501 Bell Tower Shops
Forest Avenue 941-482-2831
949-494-0858 CONNECTICUT
Avon Key West
Palm Desert Shops at Riverpark Duval Street
El Paseo Collection North 860-674-8919 305-296-6685
760-779-1079
Glastonbury Miami
Pasadena Somerset Square Aventura Mall
West Colorado Boulevard 860-657-4737 305-933-0960
626-793-5519
Mystic The Falls
Pleasanton Main Street 305-259-0047
Stoneridge Mall 860-572-8530
925-598-0010 The Shops at Sunset Place
Ridgefield 305-662-2821
Sacramento Main Street
The Pavillions 203-431-0692 Miami Beach
916-567-1894 Lincoln Road
Stamford 305-604-3936
San Diego Stamford Towne Center
University Towne Centre 203-358-8846 Naples
619-457-3180 Fifth Avenue South
West Hartford 941-643-3148
San Francisco Farmington Avenue
San Francisco 860-523-1894 The Village on Venetian Bay
Shopping Center 941-261-0253
415-495-2748 DISTRICT OF
COLUMBIA Waterside Shops
Stonestown Galleria Georgetown 941-592-1108
415-664-8376 M Street NW
202-338-5723 Orlando
The Crossroads
407-827-1090
The Pointe Skokie
407-352-4780 Old Orchard Center
847-673-5837
Palm Beach Gardens
The Gardens Wheaton
561-627-1460 Wheaton Town Square
630-653-4600
Sanibel
Palm Ridge Plaza INDIANA
941-472-3773 Indianapolis
Fashion Mall
Periwinkle Place 317-848-2676
941-472-0202
Michigan City
Sarasota The Works
Southgate Plaza 219-872-8699
941-957-6426
KANSAS
St. Armands Circle Leawood
two locations: Town Center Plaza
941-388-2926 913-498-8284
941-388-1393
KENTUCKY
St. Augustine Louisville
St. Augustine Outlet Center Mall St. Matthews
904-823-3669 502-896-6459
Stuart LOUISIANA
Harbour Bay Plaza Mandeville
561-283-3447 The Village
504-624-9459
Tampa
Citrus Park Town Center New Orleans
813-926-6536 Jackson Brewery Marketplace
504-568-9783
Old Hyde Park Village
813-254-4575 Riverwalk Marketplace
504-568-1201
Winterpark
Park Avenue North MARYLAND
407-645-0010 Annapolis
Market Space
GEORGIA 410-216-9251
Atlanta
Park Place Bethesda
770-673-0813 Norfolk Avenue
301-718-2539
Phipps Plaza
404-233-0603 Columbia
ILLINOIS The Mall in Columbia
Chicago 410-964-1904
Water Tower Place
312-943-2442 Potomac
River Road
Rush Street 301-765-8985
312-944-8832
MASSACHUSETTS
Gurnee Boston
Gurnee Mills Outlet Prudential Center
847-855-0110 617-247-3771
Naperville Burlington
W. Jefferson Burlington Mall
630-579-4207 781-270-1020
Northbrook Chestnut Hill
Northbrook Court The Mall at Chestnut Hill
847-272-9881 617-964-3365
Schaumburg
Woodfield Shopping Center
847-413-8233
26
29
Chico's Store Directory
Natick Princeton Cincinnati TENNESSEE
Natick Mall Market Fair at Marketplace Kenwood Towne Centre Chattanooga
508-650-5895 609-452-0089 513-792-9750 Warehouse Row Outlet
Palmer Square 423-267-4481
MICHIGAN 609-921-7086 Cleveland
Petoskey The Avenue at Germantown
Gas Light Direct Short Hills Tower City Center Saddle Creek South
616-347-2999 The Mall at Short Hills 216-566-0631 901-754-1670
973-258-9392
Troy Columbus Knoxville
Somerset Collection North Shrewsbury West Lane Avenue West Town Mall
248-816-1669 The Grove at Shrewsbury 614-488-7237 423-694-8388
732-758-0047
West Bloomfield Worthington Mall Nashville
The Boardwalk Westfield 614-846-4706 Grace's Plaza
248-932-5715 East Broad Street 615-292-0902
908-301-1737 Rocky River
MINNESOTA Beachcliff Market Square TEXAS
Bloomington Westwood 440-895-9261 Austin
Mall of America Westwood Avenue The Arboretum
612-851-0882 201-263-0273 Woodmere 512-346-3163
Eton Collection
Edina NEW MEXICO 216-292-3560 Highland Mall
France Avenue Santa Fe 512-450-1079
612-925-5474 Guadalupe Station OREGON
505-984-1132 Portland Dallas
St. Paul NW Westover Inwood Village
Grand Avenue Palace Court 503-227-5649 214-350-1735
651-227-5819 505-984-3134
PENNSLYVANIA Southlake Town Square
Wayzata West Marcy Street Ardmore 817-251-8797
East Lake Street 505-989-7702 Suburban Square
612-476-1812 610-645-0999 Fort Worth
NEW YORK Hulen Mall
White Bear Lake Albany King of Prussia 817-370-6220
Fourth Street Crossgates Mall The Court at King of Prussia
651-407-2579 518-464-9616 610-878-9390 Houston
Baybrook Mall
Woodbury Long Island Manayunk 281-286-5490
Tamarack Village Southampton Main Street
612-501-2000 516-287-9081 215-482-3536 Champions Forest Plaza
281-444-8420
MISSOURI Rye Pittsburgh
Kansas City Purchase Street Fifth Avenue Place River Oaks Center
Country Club Plaza 914-925-2503 412-471-6556 713-524-4787
816-931-3777
Stony Brook The Galleria at Southpointe Village Arcade
St. Louis Stony Brook Village 412-571-0122 Shopping Center
St. Louis Galleria 516-689-6426 713-527-8220
314-725-9099 RHODE ISLAND
White Plains Cranston San Antonio
NEBRASKA The Westchester Mall Garden City Center Alamo Quarry Market
Omaha 914-328-2628 401-946-0450 210-828-1718
One Pacific Place
402-391-2771 Woodbury Newport Huebner Oaks Center
Woodbury Commons Thames Street 210-558-7690
NEVADA Shopping Center 401-849-8286
Las Vegas 516-692-5098 The Rivercenter
Fashion Show Mall SOUTH CAROLINA 210-227-5954
702-791-3661 NORTH CAROLINA Charleston
Charlotte The Shops at UTAH
NEW JERSEY SouthPark Mall Charleston Place Provo
Hackensack 704-365-1005 843-937-8218 Shops at Riverwoods
Riverside Square 801-802-7917
201-525-1893 Raleigh Hilton Head
Crabtree Valley Mall Coligny Plaza Salt Lake City
Paramus 919-571-0109 843-686-6300 Crossroads Plaza
Paramus Park 801-328-2424
201-262-1844 OHIO Mall at Shelter Cove
Beachwood 843-785-4780 VERMONT
Beachwood Place Mall Burlington
216-831-6030 Church Street
802-860-1499
VIRGINIA
Alexandria
King Street
703-535-1050
Charlottesville
Barracks Road
Shopping Center
804-295-4085
Fairfax
Fair Oaks
703-352-3698
Norfolk
MacArthur Center
757-627-4460
Reston
Reston Town Center
703-925-0856
WASHINGTON
Bellevue
Bellevue Square
425-454-4654
Redmond
Redmond Town Center
425-869-1875
Seattle
Pacific Place
206-624-5549
WYOMING
Jackson
Crabtree Corner
307-734-9141
COMING SOON:
Brea, CA ~ May
Birch Street Promenade
Los Gatos, CA ~ May
Old Town at Los Gatos
Chicago, IL ~ June
Halsted Road
West Palm Beach, FL ~ June
Clematis Street
Columbus, OH ~ June
Easton Town Center
Atlanta, GA ~ August
Avenue at East Cobb
Marlton, NJ ~ October
Marlton Square
VISIT US ONLINE
www.chicos.com
27
30
REPORTS ON FORM 10-K
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K will be sent to any shareholder without charge upon written
request to Investor Relations at the current
mailing address or website address below:
Chico's FAS, Inc.
11215 Metro Parkway
Fort Myers, Florida 33912
Website: www.chicos.com
*
Transfer Agent and Registrar:
The Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
Legal Counsel:
Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A.
Tampa, Florida
Independent Certified Public Accountants:
Arthur Andersen LLP
Tampa, Florida
*
Annual Shareholders' Meeting:
Tuesday, June 8, 1999 at 2:00 p.m.
South Seas Resort
Captiva, Florida
CHICO'S(R) FAS, Inc.
Executive Officers Directors
*** ***
Marvin J. Gralnick Marvin J. Gralnick
Chief Executive Officer Chairman of the Board
President
Helene B. Gralnick
Helene B. Gralnick Senior Vice President - Design & Concept
Senior Vice President - Design & Concept
Charles J. Kleman
Charles J. Kleman Chief Financial Officer
Chief Financial Officer Executive Vice President - Finance
Executive Vice President - Finance Secretary/Treasurer
Secretary/Treasurer
Verna K. Gibson
Scott A. Edmonds Partner-Retail Options, Inc.
Senior Vice President - Operations
Assistant Secretary Ross E. Roeder
Chairman and Chief Executive Officer - Smart & Final, Inc.
John W. Burden
Retailing Consultant
28
31
[PICTURE - INSIDE BACK COVER OF ANNUAL REPORT]
32
[PICTURE - BACK COVER OF ANNUAL REPORT]