UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended July 31, 2004
Commission File Number 0-15898
CASUAL MALE RETAIL GROUP, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 04-2623104 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| 555 Turnpike Street, Canton, MA | 02021 | |
| (Address of principal executive offices) | (Zip Code) |
(781) 828-9300
(Registrant’s telephone number, including area code)
Indicate by “X” whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by “X” whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of shares of common stock outstanding as of September 1, 2004 was 34,208,094.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| July 31, 2004 |
January 31, 2004 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 5,832 | $ | 4,179 | ||||
| Accounts receivable |
5,158 | 5,556 | ||||||
| Notes receivable |
6,470 | — | ||||||
| Inventories |
87,452 | 98,673 | ||||||
| Prepaid expenses and other current assets |
5,779 | 5,275 | ||||||
| Total current assets |
110,691 | 113,683 | ||||||
| Property and equipment, net of accumulated depreciation and amortization |
66,713 | 68,345 | ||||||
| Other assets: |
||||||||
| Goodwill |
50,677 | 50,677 | ||||||
| Other intangible assets |
30,579 | 30,629 | ||||||
| Other assets |
8,664 | 9,408 | ||||||
| Total assets |
$ | 267,324 | $ | 272,742 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ | 3,754 | $ | 3,710 | ||||
| Accounts payable |
20,700 | 32,125 | ||||||
| Accrued expenses and other current liabilities |
21,504 | 22,884 | ||||||
| Accrued liabilities for severance and store closings |
2,645 | 2,945 | ||||||
| Notes payable |
33,878 | 3,623 | ||||||
| Total current liabilities |
82,481 | 65,287 | ||||||
| Long-term liabilities: |
||||||||
| Long-term debt, net of current portion |
114,071 | 122,374 | ||||||
| Other long-term liabilities |
468 | 436 | ||||||
| Total long-term liabilities |
114,539 | 122,810 | ||||||
| Minority interest |
— | 3,804 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.01 par value, 1,000,000 shares authorized, none outstanding at July 31, 2004 and January 31, 2004 |
— | — | ||||||
| Common stock, $0.01 par value, 75,000,000 shares authorized, 39,379,038 and 39,246,364 shares issued at July 31, 2004 and January 31, 2004, respectively |
394 | 392 | ||||||
| Additional paid-in capital |
154,432 | 153,650 | ||||||
| Accumulated deficit |
(61,160 | ) | (56,165 | ) | ||||
| Treasury stock at cost, 5,171,930 and 4,171,930 shares at July 31, 2004 and January 31, 2004, respectively |
(23,362 | ) | (17,036 | ) | ||||
| Total stockholders’ equity |
70,304 | 80,841 | ||||||
| Total liabilities and stockholders’ equity |
$ | 267,324 | $ | 272,742 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| July 31, 2004 |
August 2, 2003 |
July 31, 2004 |
August 2, 2003 |
|||||||||||||
| Sales |
$ | 106,569 | $ | 100,530 | $ | 207,576 | $ | 190,651 | ||||||||
| Cost of goods sold, including occupancy |
66,362 | 63,146 | 130,514 | 119,603 | ||||||||||||
| Gross profit |
40,207 | 37,384 | 77,062 | 71,048 | ||||||||||||
| Expenses: |
||||||||||||||||
| Selling, general and administrative |
34,962 | 31,392 | 71,516 | 63,055 | ||||||||||||
| Depreciation and amortization |
2,807 | 2,043 | 5,294 | 3,943 | ||||||||||||
| Total expenses |
37,769 | 33,435 | 76,810 | 66,998 | ||||||||||||
| Operating income |
2,438 | 3,949 | 252 | 4,050 | ||||||||||||
| Other income, net |
308 | — | 308 | — | ||||||||||||
| Interest expense, net |
(1,977 | ) | (2,976 | ) | (4,157 | ) | (5,861 | ) | ||||||||
| Income (loss) from continuing operations before minority interest and income taxes |
769 | 973 | (3,597 | ) | (1,811 | ) | ||||||||||
| Minority interest |
(354 | ) | (20 | ) | (701 | ) | (92 | ) | ||||||||
| Provision for income taxes |
— | — | — | — | ||||||||||||
| Income (loss) from continuing operations |
1,123 | 993 | (2,896 | ) | (1,719 | ) | ||||||||||
| Loss from discontinued operations |
(1,024 | ) | (335 | ) | (2,099 | ) | (378 | ) | ||||||||
| Net income (loss) |
$ | 99 | $ | 658 | $ | (4,995 | ) | $ | (2,097 | ) | ||||||
| Net income (loss) per share - basic and diluted |
||||||||||||||||
| Income (loss) from continuing operations |
$ | 0.03 | $ | 0.03 | $ | (0.08 | ) | $ | (0.05 | ) | ||||||
| Loss from discontinued operations |
(0.03 | ) | (0.01 | ) | (0.06 | ) | (0.01 | ) | ||||||||
| Net income (loss) |
$ | 0.00 | $ | 0.02 | $ | (0.14 | ) | $ | (0.06 | ) | ||||||
| Weighted average number of common shares outstanding |
||||||||||||||||
| - Basic |
34,485 | 35,839 | 34,805 | 35,796 | ||||||||||||
| - Diluted |
36,103 | 36,891 | 34,805 | 35,796 | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended |
||||||||
| July 31, 2004 |
August 2, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (4,995 | ) | $ | (2,097 | ) | ||
| Adjustments to reconcile net loss to net cash (used for) provided by operating activities: |
||||||||
| Loss from discontinued operations |
2,099 | 378 | ||||||
| Depreciation and amortization |
5,294 | 3,943 | ||||||
| Other expenses, principally related to debt redemption costs |
2,832 | — | ||||||
| Gain on sale of investment in joint venture |
(3,140 | ) | — | |||||
| Accretion of warrants |
103 | 831 | ||||||
| Issuance of common stock to related party |
101 | 340 | ||||||
| Issuance of common stock to Board of Directors |
48 | 38 | ||||||
| Minority interest |
(701 | ) | (92 | ) | ||||
| Loss on disposal of fixed assets |
69 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
327 | 3,149 | ||||||
| Inventories |
7,608 | 4,376 | ||||||
| Prepaid expenses |
(1,535 | ) | (7,582 | ) | ||||
| Other assets |
(158 | ) | (179 | ) | ||||
| Reserve for severance and store closings |
(300 | ) | (811 | ) | ||||
| Accounts payable |
(10,058 | ) | 2,300 | |||||
| Accrued expenses and other current liabilities |
(2,707 | ) | (3,945 | ) | ||||
| Net cash (used for) provided by operating activities |
(5,113 | ) | 649 | |||||
| Cash flows from investing activities: |
||||||||
| Additions to property and equipment |
(9,363 | ) | (6,016 | ) | ||||
| Proceeds from sale of investment in joint venture |
1,530 | — | ||||||
| Net cash used for investing activities |
(7,833 | ) | (6,016 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net borrowings (repayments) under credit facility |
30,255 | (5,265 | ) | |||||
| Principal payments on long-term debt |
(9,654 | ) | (1,001 | ) | ||||
| Payment of premiums associated with prepayment of long-term debt |
(312 | ) | — | |||||
| Proceeds from issuance of long-term debt, net of discount |
— | 9,564 | ||||||
| Proceeds from issuance of warrants |
— | 1,447 | ||||||
| Repurchase of common stock |
(6,326 | ) | (36 | ) | ||||
| Issuance of common stock under option program and warrants |
636 | 288 | ||||||
| Net cash provided by financing activities |
14,599 | 4,997 | ||||||
| Net change in cash and cash equivalents |
1,653 | (370 | ) | |||||
| Cash and cash equivalents: |
||||||||
| Beginning of the period |
4,179 | 4,692 | ||||||
| End of the period |
$ | 5,832 | $ | 4,322 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
CASUAL MALE RETAIL GROUP, INC,
Notes to Consolidated Financial Statements
1. Basis of Presentation
In the opinion of management of Casual Male Retail Group, Inc., a Delaware corporation (the “Company”), the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of the interim financial statements. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the notes to the Company’s audited consolidated financial statements for the fiscal year ended January 31, 2004 (included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on April 15, 2004).
The information set forth in these statements may be subject to normal year-end adjustments. The information reflects all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s business historically has been seasonal in nature, and the results of the interim periods presented are not necessarily indicative of the results to be expected for the full year.
Certain amounts for the three and six months ended August 2, 2003 have been reclassified to conform to the presentation for the three and six months ended July 31, 2004. These adjustments relate to the reclassification for discontinued operations in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”). For further discussion regarding discontinued operations, see Note 5 below.
The Company’s fiscal year is a 52- or 53- week period ending on the Saturday closest to January 31. Fiscal 2004 is a 52-week period ending on January 29, 2005.
2. Debt