SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 5, 2001
Commission File No. 0-11682
S & K FAMOUS BRANDS, INC.
..............................................................
(Exact name of registrant as specified in its charter)
Virginia 54-0845694
............................... ...................................
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11100 West Broad Street, P. O. Box 31800, Richmond, Virginia 23294-1800
.......................................................................
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 346-2500
...................
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _______
--------
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of May 5, 2001.
4,041,563 shares of Common Stock, $0.50 par value
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
S & K FAMOUS BRANDS, INC.
Statements of Income
(in thousands, except per share amounts)
(unaudited)
----------------------
Three Months Ended
----------------------
May 5, April 29,
2001 2000
---------- ----------
Net sales......................................... $ 41,820 $ 41,350
Cost of sales..................................... 21,195 20,621
-------- --------
Gross profit...................................... 20,625 20,729
Other costs and expenses:
Selling, general and administrative............ 17,436 17,570
Interest....................................... 112 143
Depreciation and amortization.................. 817 783
Other income, net.............................. (48) (72)
-------- --------
Income before income taxes........................ 2,308 2,305
Provision for income taxes........................ 877 876
-------- --------
Net income........................................ $ 1,431 $ 1,429
======== ========
Earnings per common share: $ 0.35 $ 0.31
Basic ======== ========
Diluted........................................ $ 0.35 $ 0.31
======== ========
Weighted average common shares
Outstanding - basic............................ 4,088 4,624
======== ========
Weighted average common shares outstanding
including dilutive potential common shares..... 4,089 4,626
======== ========
See Notes to Financial Statements
2
S & K FAMOUS BRANDS, INC.
Balance Sheets
(In thousands, except per share amounts)
----------- ---------- -----------
May 5, April 29, February 3,
2001 2000 2001
----------- ---------- -----------
(unaudited) (unaudited)
Assets
Current assets:
Cash.............................................................. $ 372 $ 444 $ 439
Accounts receivable............................................... 301 461 255
Merchandise inventories........................................... 57,596 58,269 52,031
Other current assets.............................................. 2,746 2,867 2,896
---------- --------- ---------
Total current assets.......................................... 61,015 62,041 55,621
Property and equipment, at cost:
Land and buildings................................................ 6,601 6,598 6,601
Furniture, fixtures and equipment................................. 15,772 15,160 15,358
Leasehold improvements............................................ 16,592 16,736 16,789
---------- --------- ---------
38,965 38,494 38,748
Less: Accumulated depreciation and amortization.................. 20,734 19,074 20,226
---------- --------- ---------
18,231 19,420 18,522
Other assets........................................................ 5,933 5,117 5,805
---------- --------- ---------
$ 85,179 $ 86,578 $ 79,948
========== ========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt.............................. $ 180 $ 180 $ 180
Accounts payable.................................................. 15,774 15,359 6,691
Accrued compensation and related items............................ 863 1,632 2,131
Current and deferred income taxes................................. 517 696 694
Other current liabilities......................................... 1,906 1,978 2,156
---------- --------- ---------
Total current liabilities.................................... 19,240 19,845 11,852
Long-term debt...................................................... 5,610 7,189 9,050
Other long-term liabilities......................................... 1,510 1,417 1,485
Deferred income taxes............................................... 1,699 1,672 1,695
Commitments
Shareholders' equity:
Preferred stock, $1 par value; authorized shares, 500;
issued and outstanding shares, none............................
Common stock, $.50 par value, authorized shares,
10,000; issued and outstanding shares, 4,042,
4,613 and 4,109, respectively................................ 2,021 2,306 2,054
Capital in excess of par value.................................... 0 3,669 266
Notes receivable--Stock Purchase Loan Plan........................ (2,083) (2,431) (2,467)
Retained earnings................................................. 57,182 52,911 56,013
---------- --------- ---------
57,120 56,455 55,866
---------- --------- ---------
$ 85,179 $ 86,578 $ 79,948
========== ========= =========
See Notes to Financial Statements.
S & K FAMOUS BRANDS, INC.
Statements of Cash Flows
Increase (Decrease) in Cash
(in thousands)
(unaudited)
---------------------------------------------
Three Months Ended
---------------------------------------------
May 5, April 29,
2001 2000
------------------- -------------------
Cash flows from operating activities:
Net income........................................... $ 1,431 $ 1,429
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 924 885
Gain on property dispositions, net............. (12) 0
Other.......................................... 25 24
Changes in assets and liabilities:
Accounts receivable......................... (46) (41)
Merchandise inventories..................... (5,565) (6,731)
Other current assets........................ 150 (127)
Other assets................................ (128) (213)
Accounts payable and accrued expenses....... 7,663 8,549
Current and deferred income taxes........... (154) (239)
------------------- -------------------
Net cash provided by operating activities............ 4,288 3,536
------------------- -------------------
Cash flows from investing activities:
Capital expenditures................................. (677) (705)
Proceeds from property disposition................... 56 7
------------------- -------------------
Net cash used for investing activities............... (621) (698)
------------------- -------------------
Cash flows from financing activities:
Net paydowns of long term debt....................... (3,395) (2,605)
Repurchase of common stock........................... (661) (363)
Reduction of Industrial Development Revenue Bond..... (45) (45)
Principal paid on notes receivable -
Stock Purchase Loan Plan.......................... 367 0
------------------- -------------------
Net cash used for financing activities............... (3,734) (3,013)
------------------- -------------------
Net decrease in cash.................................... (67) (175)
Cash at beginning of period............................. 439 619
------------------- -------------------
Cash at end of period................................... $ 372 $ 444
=================== ===================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............ $ 125 $ 153
Cash paid during the period for income taxes........ 1,051 1,120
See Notes to Financial Statements.
4
S & K FAMOUS BRANDS, INC.
Notes to Financial Statements
(unaudited)
A. Accounting Policies
The accompanying unaudited interim financial statements have been prepared
by S & K Famous Brands, Inc. (the "Company") in accordance with the regulations
of the Securities and Exchange Commission in regard to quarterly reporting. In
the opinion of the Company's management, the statements include all adjustments,
consisting only of normal recurring adjustments, which are necessary for a fair
representation of the financial position and results of operations for interim
periods. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's 2000 Annual
Report and Form 10-K.
B. Interim Results of Operations
The Company's business is highly seasonal, with peak sales periods
occurring during its fourth fiscal quarter which includes the Christmas season.
The net earnings of any interim quarter are seasonally disproportionate to net
sales since administrative and certain operating expenses remain relatively
constant during the year. Consequently, interim results should not be considered
necessarily indicative of the results for the entire fiscal year.
C. Expansion
Since February 3, 2001, the Company has opened three new stores totaling
11,800 square feet, all of which were relocations.
S & K Store Locations Date Opened Square Footage
- ------------------------------------------ ----------------------------- ---------------------------
Georgia: Augusta February 24, 2001 4,100
Ohio: Youngstown March 31, 2001 4,500
Pennsylvania: York February 15, 2001 3,200
Since the beginning of the year, the Company has relocated three stores--one in
Augusta, Georgia (4,000 square feet), one in Youngstown, Ohio (5,000 square
feet) and one in York, Pennsylvania (3,000 square feet) and closed one store--
in Toledo, Ohio (6,100 square feet). Since the end of the first quarter, the
Company has also closed a store in Locust Grove, Georgia (3,000 square feet).
These stores had not met the Company's sales and profitability expectations.
C. Other Matters
The Company issued 11,035 shares of its common stock to the S&K Famous
Brands Employees' Savings/Profit Sharing Plan which resulted in an increase in
Shareholders' Equity of $80,000. This $80,000 expense was accrued in fiscal
2001.
5
Item 2. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
Information regarding forward-looking statements.
The statements contained in this quarterly report that are not historical
facts, including statements about management's expectations for fiscal 2002 and
beyond, may be forward-looking statements. The forward-looking statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from historical results or those anticipated. Readers are
cautioned not to place undue reliance on these forward-looking statements.
Factors that could cause the Company's actual results to differ materially from
management's projections, forecasts, estimates and expectations include, but are
not limited to, those discussed in the Company's 2000 Annual Report on Form 10-
K.
Three Months Ended May 5, 2001 Compared to Three Months Ended April 29, 2000
RESULTS OF OPERATIONS
The following table sets forth certain items in the Statements of Income as
a percentage of net sales for the three month periods ended May 5, 2001 and
April 29, 2000.
Percentage of Net Sales
-----------------------------------
Three Months Ended
-----------------------------------
5/05/01 4/29/00
--------------- --------------
Net sales........................................ 100.0% 100.0%
Cost of sales.................................... 50.7 49.9
--------------- --------------
Gross profit..................................... 49.3 50.1
Other costs and expenses:
Selling, general and administrative......... 41.7 42.5
Interest.................................... 0.3 0.3
Depreciation and amortization............... 1.9 1.9
Other income, net........................... (0.1) (0.2)
--------------- --------------
Income before income taxes....................... 5.5 5.6
Provision for income taxes....................... 2.1 2.1
--------------- --------------
Net income....................................... 3.4% 3.5%
=============== ==============
Net sales in the first quarter of fiscal 2002 increased 1%, or $0.5
---------
million, over the same period last year, and reflect a net reduction of three
stores. Comparable store sales were up 1% over last year. During the first
quarter the Company opened three new stores (all of which were relocations) and
closed one other location which had not met sales and profitability
expectations. There were 237 stores in operation as of May 5, 2001, compared to
240 stores at April 29, 2000.
Cost of sales in the first quarter of fiscal 2002 was 50.7% of net sales
-------------
compared to 49.9% of net sales for the same period last year. This 0.8% of net
sales increase was primarily due to changes in promotional programs on
merchandise sold.
Selling, general and administrative expenses in the first quarter of fiscal
--------------------------------------------
2002 were 41.7% of net sales compared to 42.5% of net sales in the previous
year. This 0.8% of net sales reduction was due primarily to lower advertising
expense which was generally in-line with levels experienced in fiscal 2000.
During the first half of fiscal 2001 the Company incurred higher cost and
frequency of advertising in a one-time branding message campaign. These
reductions in advertising were offset to a small degree by higher store payroll
costs, utilities and group health claims.
6
Interest expense was $112,000 in the first quarter of fiscal 2002 compared
----------------
to $143,000 in fiscal 2001, or .3% of net sales in both years. The lower expense
was the result of lower average borrowings and lower rates over the previous
year.
Other income, net in the first quarter of fiscal 2002 was 0.1% of net sales
-----------------
compared to .2% of net sales last year and is due to lower costs associated with
store closings and slightly higher interest income.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has funded its operating activities, including
capital expenditures for the opening of new stores, from internally generated
funds and from bank borrowings. The Company plans to open approximately 10 new
stores in fiscal 2002, and plans to close or relocate approximately 10 under-
performing locations. During the three months ended May 5, 2001, the Company
opened three new stores (all of which were relocations) and closed one other
store. The Company believes that its sources of liquidity and capital resources
will continue to be sufficient to fund its operations and capital expenditures.
Operating activities provided net cash of $4.3 million and $3.5 million in
the first quarter of fiscal 2002 and 2001, respectively, and relates primarily
to decreases in working capital.
Net cash used for investing activities was primarily for the purpose of
store expansion. Capital expenditures for the first quarter of fiscal 2002 and
2001 approximated $0.6 million and $0.7 million, respectively. In the first
quarter of fiscal 2002 the Company opened three new stores while in fiscal 2001
it opened two new stores and developed it's Internet store.
Financing activities for the first quarter of fiscal 2002 and 2001, used
net cash of approximately $3.7 million and $3.0 million, respectively. Financing
activities primarily relate to fluctuations in the borrowing levels under the
Company's revolving credit agreements. During the first quarter of fiscal 2002,
the Company used approximately $0.7 million for the repurchase of 84,450 shares
of its common stock compared to $0.4 million for 51,300 shares in the same
period last year. Additionally, during the first quarter of fiscal 2002 a former
officer paid off notes receivable under the Stock Purchase Loan Plan
approximating $0.4 million. The Company's revolving credit agreements with two
banks aggregate $40.0 million. As of May 5, 2001, the Company had net unused
commitments of approximately $35.8 million under the agreements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKET RISK
During the first three months of fiscal 2002 there were no material changes in
the Company's market risk exposure or in management strategy as stated in the
Company's 2000 Annual Report.
7
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(c) During the quarter ended May 5, 2001, the Company contributed 11,035
shares of its common stock to the S&K Famous Brands Employees'
Savings/Profit Sharing Plan. The contribution was exempt from
registration pursuant to section 3(a)2 of the Securities Act of 1933,
as amended, because the Plan does not permit employee contributions
to be invested in the Company's securities.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the Company's shareholders was held on May 31,
2001.
(b) & (c) At the annual meeting, the shareholders elected seven directors and
ratified the selection of independent accountants. The results of the
voting were as follows:
Election of Directors
---------------------
Director For Withheld
-------------------------------- ------------ -------------
Stuart C. Siegel 3,890,534 19,847
Robert L. Burrus, Jr. 3,884,034 26,347
Donald W. Colbert 3,897,445 12,936
Andrew M. Lewis, Ph.D. 3,891,034 19,347
Steven A. Markel 3,798,134 112,247
Troy A. Peery, Jr. 3,885,487 24,894
Marshall B. Wishnack 3,895,834 14,547
Ratification of PricewaterhouseCoopers LLP as Independent Accountants
---------------------------------------------------------------------
For Against Abstain
----------- ----------- -----------
3,907,997 1,450 934
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) There were no reports filed on Form 8-K during the three months ended May
5, 2001.
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.
S & K FAMOUS BRANDS, INC.
---------------------------------------
(Registrant)
Date: June 13, 2001 /s/ Robert E. Knowles
---------------------------------------
Robert E. Knowles
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: June 13, 2001 /s/ Janet L. Jorgensen
---------------------------------------
Janet L. Jorgensen
Vice President and Controller
Chief Accounting Officer
(Principal Accounting Officer)