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EX-31.2 - EX-31.2 - CHAUS BERNARD INC | y05325exv31w2.htm |
EX-32.1 - EX-32.1 - CHAUS BERNARD INC | y05325exv32w1.htm |
EX-32.2 - EX-32.2 - CHAUS BERNARD INC | y05325exv32w2.htm |
EX-31.1 - EX-31.1 - CHAUS BERNARD INC | y05325exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended October 1, 2011.
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from to .
Commission file number 1-9169
BERNARD CHAUS, INC.
(Exact Name of Registrant as Specified in its Charter)
New York | 13-2807386 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) |
530 Seventh Avenue, New York, New York | 10018 | |
(Address of Principal Executive Offices) | (Zip Code) |
(212) 354-1280
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days Yes þ No o.
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any , every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for shorter period that the registrant was required to submit and post such files). Yes o No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
o Large accelerated filer | o Accelerated filer | o Non-accelerated filer | þ Smaller reporting company | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of
the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
Date | Class | Shares Outstanding | ||
November 15, 2011 | Common Stock, $0.01 par value | 37,481,373 |
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. | Financial Statements |
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and per share amounts)
(In thousands, except number of shares and per share amounts)
October 1, | July 2, | October 2, | ||||||||||
2011 | 2011 | 2010 | ||||||||||
(Unaudited) | ( * ) | (Unaudited) | ||||||||||
Assets |
||||||||||||
Current Assets |
||||||||||||
Cash |
$ | 2 | $ | 3 | $ | 3 | ||||||
Accounts receivable factored |
13,729 | 6,466 | 18,793 | |||||||||
Accounts receivable net |
1,466 | 1,004 | 2,568 | |||||||||
Inventories net |
6,470 | 5,077 | 8,785 | |||||||||
Prepaid expenses and other current assets |
429 | 1,476 | 498 | |||||||||
Total current assets |
22,096 | 14,026 | 30,647 | |||||||||
Fixed assets net |
1,407 | 1,159 | 920 | |||||||||
Other assets |
| | 7 | |||||||||
Trademarks |
1,000 | 1,000 | 1,000 | |||||||||
Total assets |
$ | 24,503 | $ | 16,185 | $ | 32,574 | ||||||
Liabilities and Stockholders Deficiency |
||||||||||||
Current Liabilities |
||||||||||||
Revolving credit borrowings |
$ | 5,640 | $ | 2,577 | $ | 9,990 | ||||||
Accounts payable |
25,449 | 20,605 | 20,732 | |||||||||
Accrued expenses |
2,444 | 1,473 | 1,353 | |||||||||
Total current liabilities |
33,533 | 24,655 | 32,075 | |||||||||
Deferred income |
2,734 | 2,834 | 3,135 | |||||||||
Long term liabilities |
1,957 | 1,927 | 1,773 | |||||||||
Deferred income taxes |
207 | 200 | 180 | |||||||||
Total liabilities |
38,431 | 29,616 | 37,163 | |||||||||
Commitments and Contingencies |
||||||||||||
Stockholders Deficiency |
||||||||||||
Preferred stock, $.01 par value, authorized
shares 1,000,000; issued and
outstanding shares none |
| | | |||||||||
Common stock, $.01 par value,
authorized shares 50,000,000; issued shares
37,543,643 at October 1,
2011, July 2, 2011 and
October 2, 2010 |
375 | 375 | 375 | |||||||||
Additional paid-in capital |
133,443 | 133,443 | 133,441 | |||||||||
Deficit |
(145,181 | ) | (144,684 | ) | (135,885 | ) | ||||||
Accumulated other comprehensive loss |
(1,085 | ) | (1,085 | ) | (1,040 | ) | ||||||
Less: Treasury stock at cost
62,270 shares at October 1, 2011, at July 2, 2011
and October 2, 2010 |
(1,480 | ) | (1,480 | ) | (1,480 | ) | ||||||
Total stockholders deficiency |
(13,928 | ) | (13,431 | ) | (4,589 | ) | ||||||
Total liabilities and stockholders deficiency |
$ | 24,503 | $ | 16,185 | $ | 32,574 | ||||||
* | Derived from audited financial statements at July 2, 2011. |
See accompanying notes to consolidated financial statements.
3
Table of Contents
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(In thousands, except per share amounts)
For the Three Months Ended | ||||||||
October 1, 2011 | October 2, 2010 | |||||||
(Unaudited) | ||||||||
Net revenue |
$ | 22,347 | $ | 27,716 | ||||
Cost of goods sold |
16,259 | 21,123 | ||||||
Gross profit |
6,088 | 6,593 | ||||||
Selling, general and administrative expenses |
6,462 | 7,295 | ||||||
Accrued gain on early termination of license agreement |
| (1,857 | ) | |||||
Income (loss) from operations |
(374 | ) | 1,155 | |||||
Interest expense |
114 | 201 | ||||||
Income (loss) before income tax provision |
(488 | ) | 954 | |||||
Income tax provision |
9 | 12 | ||||||
Net income (loss) |
$ | (497 | ) | $ | 942 | |||
Basic earnings (loss) per share |
$ | (0.01 | ) | $ | 0.03 | |||
Diluted earnings (loss) per share |
$ | (0.01 | ) | $ | 0.03 | |||
Weighted average number of shares outstanding- basic |
37,481 | 37,481 | ||||||
Weighted average number of common and common
equivalent shares outstanding- diluted |
37,481 | 37,481 | ||||||
See accompanying notes to consolidated financial statements.
4
Table of Contents
For the Three Months Ended | ||||||||
October 1, | October 2, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
Operating Activities |
||||||||
Net income (loss) |
$ | (497 | ) | $ | 942 | |||
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
||||||||
Depreciation and amortization |
79 | 89 | ||||||
Amortization of deferred income |
(100 | ) | (99 | ) | ||||
Stock compensation expense |
| 1 | ||||||
Deferred rent expense |
15 | 26 | ||||||
Deferred income taxes |
7 | 7 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable factored |
(7,263 | ) | 611 | |||||
Accounts receivable |
(462 | ) | (779 | ) | ||||
Inventories |
(1,393 | ) | 61 | |||||
Prepaid expenses and other assets |
1,047 | 38 | ||||||
Accounts payable |
4,844 | 1,333 | ||||||
Accrued expenses and long term liabilities |
986 | (940 | ) | |||||
Net cash provided by (used in) operating activities |
(2,737 | ) | 1,290 | |||||
Investing Activities |
||||||||
Purchases of fixed assets |
(327 | ) | (106 | ) | ||||
Cash used in investing activities |
(327 | ) | (106 | ) | ||||
Financing Activities |
||||||||
Net proceeds from (repayments of) revolving credit borrowings |
3,063 | (1,185 | ) | |||||
Net cash provided by (used in) financing activities |
3,063 | (1,185 | ) | |||||
Decrease in cash |
(1 | ) | (1 | ) | ||||
Cash, beginning of year |
3 | 4 | ||||||
Cash, end of period |
$ | 2 | $ | 3 | ||||
Supplemental Disclosure of Cash Flow Information: |
||||||||
Cash paid for: |
||||||||
Taxes |
$ | 2 | $ | 14 | ||||
Interest |
$ | 84 | $ | 182 | ||||
See accompanying notes to consolidated financial statements.
5
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BERNARD CHAUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Three Months Ended October 1, 2011 and October 2, 2010
(UNAUDITED)
Three Months Ended October 1, 2011 and October 2, 2010
1. Business and Summary of Significant Accounting Policies
Business:
Bernard Chaus, Inc. (the Company or Chaus) designs, arranges for the manufacture of and
markets an extensive range of womens career and casual sportswear principally under the JOSEPHINE
CHAUS®, JOSEPHINE®, JOSEPHINE STUDIO®, CHAUS®, CHAUS SPORT®, CYNTHIA STEFFE®, SEAMLINE CYNTHIA
STEFFE® and CYNTHIA CYNTHIA STEFFE® trademarks and under private label brand names. The Companys
products are sold nationwide through department store chains, specialty retailers, discount stores,
wholesale clubs and other retail outlets. The Companys CHAUS product lines sold through the
department store channels are in the opening price points of the better category. The Companys
CYNTHIA STEFFE product lines are upscale contemporary womens apparel lines sold through department
stores and specialty stores. The Companys private label product lines are designed and sold to
various customers. On November 18, 2010, the Company entered into a trademark license agreement
(Camuto License Agreement) with Camuto Consulting, Inc. d/b/a Camuto Group (Camuto). This
agreement grants the Company an exclusive license to design, manufacture, sell and distribute
womens sportswear and ready-to-wear apparel under the trademark Vince Camuto in approved
department stores, specialty retailers and off-price channels in the United States, Canada and
Mexico. The Company began shipping Camuto licensed products in June 2011.
The Company had a license agreement (the KCP License Agreement) with Kenneth Cole
Productions, Inc. (KCP) to manufacture and sell womens sportswear under various labels. On
October 19, 2010, the Company entered into an agreement with KCP (the KCP Termination Agreement)
pursuant to which the KCP License Agreement terminated on June 1, 2011. Under the KCP Termination
Agreement, the Company was relieved of certain restrictions on engaging in transactions and
activities in the apparel industry as well as the obligation to pay certain promotional, marketing
and advertising fees required under the license agreement. KCP agreed to assume certain of the
Companys liabilities associated with the Companys performance under the license agreement, as
well as to pay the Company a termination fee upon termination of the agreement in June 2011 based
on sales to certain customers through June 1, 2011, as specified in the agreement.
Recent Developments:
As stated above, the Company began shipment of Camuto licensed products pursuant to the Camuto
License Agreement in June 2011.
We are currently in negotiations with one of our suppliers, China Ting Group Holdings Limited
(CTG), to convert approximately $12 million of debt owed by the Company to CTG from accounts
payable into two interest-bearing term loans with initial terms of two years and five years. The
Company is currently in discussions with The CIT Group/Commercial Services, Inc. (CIT) about a
new or amended financing agreement that would, among other things, permit the conversion of the
accounts payable owed to CTG into a secured term obligation.
On September 15, 2011, the Company received a cash merger proposal from Camuto pursuant to
which shareholders other than members of the Chaus family, CTG and Camuto would receive $0.13 per
share. The proposal is subject to a number of conditions including, among other things, the
negotiation and execution of definitive agreements, the approval of the transaction by Chaus Board
and shareholders, the receipt of a fairness opinion, the approval of the transaction by the Boards
of Camuto and CTG, the conversion of certain amounts owed by Chaus to CTG into term loans and the
entry by Chaus into a new financing agreement with CIT on terms satisfactory to all parties. The
proposal from Camuto must be approved by 2/3 of the Companys shareholders and is currently being
considered by the Companys independent directors, assisted by legal and financial advisers.
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BERNARD CHAUS, INC. AND SUBSIDIARIES
On September 29, 2011, the Company was served with a summons and complaint in connection with
a purported shareholder class action lawsuit relating to the Camuto proposal. The lawsuit was filed
in the Supreme Court of the State of New York and alleges, among other things, breach of fiduciary
duties by certain current and prior directors of the Company. The Company filed for an extension of
time to submit its response, and the plaintiff agreed to an extension.
There can be no assurance that the negotiations discussed in this section between the Company
and CTG or CIT will be successful. Also, the proposal received from Camuto on September 15, 2011 is
only a proposal and has not yet been fully considered by the Board of Directors of the Company nor
approved by the shareholders of the Company. There is no assurance that any transactions or
agreements contemplated by the Camuto proposal or the negotiations with CTG and CIT will take place
or be entered into by the Company.
Liquidity:
For the three months ended October 1, 2011, the Company realized losses from operations and as
of October 1, 2011 had a working capital deficit of $11.4 million and stockholders deficiency of
$13.9 million. The Companys business plan requires the availability of sufficient cash flow and
borrowing capacity to finance its product lines and to meet its cash needs. The Company expects to
satisfy such requirements through cash on hand, cash flow from operations and borrowings from its
lender. The Companys fiscal 2012 business plan anticipates improvement from fiscal 2011, primarily
by achieving increased revenues and improved gross margin percentages. The Companys ability to
achieve its fiscal 2012 business plan is critical to maintaining adequate liquidity. The Company
relies on CIT, the sole source of its external financing, to borrow money in order to fund its operations.
Should CIT cease funding its operations, the Company may not have sufficient cash flow from
operations to meet its liquidity needs. In addition, CTG manufactures the majority of the Companys
product on favorable payment terms (see Note 4). In the event CTG terminates the agreement with
the Company or requires a change in the favorable payment terms, the Company may be unable to
locate alternative suppliers in a timely manner or obtain similarly favorable payment terms. For
the fiscal year ended July 2, 2011, the KCP License Agreement accounted for approximately 54% of
the Companys revenues, and this agreement terminated on June 1, 2011. While the Company entered
into the Camuto License Agreement, there can be no assurance that it will be able to derive revenue
from this agreement sufficient to offset the loss in revenue resulting from the termination of the
KCP License Agreement. There could be a material adverse effect on the Companys business,
liquidity and financial condition should any of the following occur: a) CIT ceases its funding of
the Companys operations, b) CTG terminates its agreement with the Company or requires a change in
the favorable payment terms, or c) the Company fails to offset the revenue lost as a result of the
termination of the KCP License Agreement.
Basis of Presentation:
The accompanying unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America (GAAP) for interim
financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Operating results for
the three months ended October 1, 2011 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2012 or any other period. The balance sheet as of July 2,
2011 is based on the audited financial statements as of that date. For further information, refer
to the financial statements and footnotes thereto included in the Companys Annual Report on Form
10-K for the year ended July 2, 2011.
Fiscal Year:
The Company reports on a fifty-two/fifty-three week fiscal year-end. The three months ended
October 1, 2011 and October 2, 2010 each contained 13 weeks.
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and its
subsidiaries. Intercompany accounts and transactions have been eliminated.
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BERNARD CHAUS, INC. AND SUBSIDIARIES
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 as of 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.
Revenue Recognition:
Sales are recognized upon shipment of products to customers since title and risk of loss pass
upon shipment. Revenue relating to goods sold on a consignment basis is recognized when the Company
has been notified that the buyer has resold the product. Provisions for estimated uncollectible
accounts, discounts and returns and allowances are provided when sales are recorded based upon
historical experience and current trends. While such amounts have been within expectations and the
provisions established, the Company cannot guarantee that it will continue to experience the same
rates as in the past.
Historically, the Companys sales and operating results fluctuate by quarter, with the
greatest sales typically occurring in the Companys first and third fiscal quarters. It is in
these quarters that the Companys Fall and Spring product lines, which traditionally have had the
highest volume of net sales, are shipped to customers, with revenues recognized at the time of
shipment. As a result, the Company experiences significant variability in its quarterly results
and working capital requirements. Moreover, delays in shipping can cause revenues to be recognized
in a later quarter, resulting in further variability in such quarterly results.
Factoring Agreement and Accounts Receivable:
The Company has a financing agreement with CIT that includes a non-recourse factoring
arrangement that provides notification factoring on substantially all of the Companys sales. CIT,
based on credit approved orders, assumes the accounts receivable risk of the Companys customers in
the event of insolvency or non-payment. The Company assumes the accounts receivable risk on sales
factored to CIT but not approved by CIT as non-recourse factored receivables, which approximated
$66,000 as of October 1, 2011, $0.2 million as of July 2, 2011, and $0.7 million as of October 2,
2010. The Company receives payment on non-recourse factored receivables from CIT as of the earliest
of: a) the date that CIT has been paid by the Companys customers; b) the date of the customers
longest maturity if the customer is in bankruptcy or insolvency proceedings; or c) the last day of
the third month following the customers longest maturity date if the receivable remains unpaid.
All other receivable risks for customer deductions that reduce the customer receivable balances are
retained by the Company, including, but not limited to, allowable customer markdowns, operational
chargebacks, disputes, discounts, and returns. These deductions, totaling $2.2 million as of
October 1, 2011, $2.3 million as of July 2, 2011 and $1.4 million as of October 2, 2010, have been
recorded as a reduction of either accounts receivable factored or accounts receivable net
based upon the classification of the respective customer balance to which they pertain. The
Company also assumes the risk on accounts receivable not factored to CIT, which is shown as
accounts receivable-net on the accompanying balance sheets.
Inventories:
Inventories are stated at the lower of cost or market, cost being determined on the first-in,
first-out method. The majority of the Companys inventory purchases are shipped FOB shipping point
from the Companys suppliers. The Company takes title, assumes the risk of loss and records
inventory when the merchandise is received at the boat or airplane overseas. Reserves for slow
moving and aged merchandise are provided to write down inventory costs to net realizable value
based on historical experience and current product demand. Inventory reserves were approximately
$0.6 million as of October 1, 2011, $0.4 million as of July 2, 2011 and $0.7 million as of October
2, 2010. Inventory reserves are based upon the level of excess and aged inventory and the
Companys estimated recoveries on the sale of the inventory. While markdowns have been within
expectations and the provisions established, the Company cannot guarantee that it will continue to
experience the same level of markdowns as in the past.
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BERNARD CHAUS, INC. AND SUBSIDIARIES
Long-Lived Assets and Trademarks:
Trademarks relate to the Cynthia Steffe trademarks and were determined to have an indefinite
life. The Company does not amortize assets with indefinite lives and conducts impairment testing
annually in the fourth quarter of each fiscal year, or sooner if events and changes in
circumstances suggest that the carrying amount may not be recoverable from its estimated future
cash flows including market participant assumptions, when available. The review of trademarks and
long lived assets is based upon projections of anticipated future undiscounted cash flows. While
the Company believes that its estimates of future cash flows are reasonable, different assumptions
regarding such cash flows could materially affect evaluations. To the extent these future
projections or the Companys strategies change, the conclusion regarding impairment may differ from
the current estimates. There were no impairment charges for the three months ended October 1, 2011
and October 2, 2010.
Income Taxes:
The Company accounts for income taxes under the asset and liability method in accordance with
the Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC) 740.
Deferred income taxes reflect the future tax consequences of differences between the tax bases of
assets and liabilities and their financial reporting amounts at year-end. The Company periodically
reviews its historical and projected taxable income and considers available information and
evidence to determine if it is more likely than not that a portion of the deferred tax assets will
be realized. A valuation allowance is established to reduce the deferred tax assets to the amount
that is more likely than not to be realized. As of October 1, 2011, July 2, 2011 and October 2,
2010, based upon its evaluation of the Companys historical and projected results of operations,
the current business environment and the magnitude of the net operating loss, the Company recorded
a full valuation allowance on its deferred tax assets. If the Company determines that it is more
likely than not that a portion of the deferred tax assets will be realized in the future, that
portion of the valuation allowance will be reduced and the Company will provide for an income tax
benefit in its Statement of Operations at its estimated effective tax rate.
The Companys trademarks are not amortized for book purposes, however, they continue to be
amortized for tax purposes and therefore the Company records a deferred tax liability on the
temporary difference. The temporary difference will not reverse until such time as the assets are
impaired or sold, therefore the likelihood of being offset by the Companys net operating loss
carryforward is uncertain.
Earnings (Loss) Per Share:
Basic earnings (loss) per share have been computed by dividing the applicable net income
(loss) by the weighted average number of common shares outstanding. Diluted earnings per share have
been computed by dividing the applicable net income by the weighted average number of common shares
outstanding and common share equivalents. Options to purchase approximately 640,000 and 754,000
shares of common stock were excluded from the computation of diluted earnings per share for the
three months ended October 1, 2011 and October 2, 2010, respectively, because their exercise prices
were greater than the average market price.
For the Three Months Ended | ||||||||
October 1, | October 2, | |||||||
2011 | 2010 | |||||||
Denominator for earnings (loss) per share (in millions): |
||||||||
Denominator for basic earnings (loss) per share
weighted-average shares outstanding |
37.5 | 37.5 | ||||||
Assumed exercise of potential common shares |
| | ||||||
Denominator for diluted earnings (loss) per share |
37.5 | 37.5 | ||||||
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BERNARD CHAUS, INC. AND SUBSIDIARIES
Fair Value of Financial Instruments:
The carrying amounts of financial instruments, including accounts receivable, accounts payable
and revolving credit borrowings, approximated fair value due to their short-term maturity or
variable interest rates.
New Accounting Pronouncements:
In June 2011, the FASB issued Accounting Standards Update (ASU) 2011-05, Comprehensive
Income (Topic 220): Presentation of Comprehensive Income, which allows an entity the option to
present the total of comprehensive income, the components of net income, and the components of
other comprehensive income either in a single continuous statement of comprehensive income or in
two separate but consecutive statements. In both choices, an entity is required to present each
component of net income along with total net income, each component of other comprehensive income
along with a total for other comprehensive income. ASU 2011-05 eliminates the option to present the
components of other comprehensive income as part of the statement of changes in stockholders
equity. The amendments do not change the items that must be reported in other comprehensive income
or when an item of other comprehensive income must be classified to net income. ASU 2011-05 should
be applied retrospectively and is effective for fiscal years, and interim periods within those
years, beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-05
to have a material impact on the Companys consolidated financial statements.
2. Inventories net
October 1, | July 2, | October 2, | ||||||||||
2011 | 2011 | 2010 | ||||||||||
(in thousands) | ||||||||||||
(unaudited) | (*) | (unaudited) | ||||||||||
Raw materials |
$ | 32 | $ | 184 | $ | 399 | ||||||
Work-in-process |
| 7 | 46 | |||||||||
Finished goods |
6,438 | 4,886 | 8,340 | |||||||||
Total |
$ | 6,470 | $ | 5,077 | $ | 8,785 | ||||||
* | Derived from the audited financial statements as of July 2, 2011. |
Included in finished goods inventories is merchandise in transit of approximately $3.3 million
as of October 1, 2011, $2.8 million as of July 2, 2011 and $3.5 million as of October 2, 2010.
3. Financing Agreements
The Company has a financing agreement with CIT that permits CIT to make loans and advances on
a revolving basis at CITs Sole Discretion, which is defined as the sole and absolute discretion
exercised in good faith in accordance with customary business practices for similarly situated
asset-based lenders in comparable asset-based lending transactions. Borrowings are based on a
borrowing base formula, as defined, and include a sublimit in the amount of $2 million for the
issuance of letters of credit. The Companys obligations under the agreement are secured by a first
priority lien on substantially all of the Companys assets, including the Companys accounts
receivable, inventory, intangibles, equipment, and trademarks, and a pledge of the Companys
interest in its subsidiaries. The agreement had an original maturity of September 30, 2011 with
automatic annual extensions to September 30th (Anniversary Date) unless terminated by CIT with
written notice at least sixty days in advance of the Anniversary Date. No such termination notice
has been received by the Company from CIT.
The borrowings under the agreement accrue interest at a rate of 3.00% above prime; however,
the applicable margin shall revert to the original 2.00% interest rate in the event that the
Company achieves two successive quarters of profitable business. The interest rate as of October 1,
2011 was 6.25%. The Company has the option to terminate the agreement with CIT. If the Company
terminates the agreement with CIT due to non-performance by CIT of certain of its obligations for a
specified period of time, the Company will not be liable for any termination fees. Otherwise, in
the event of an early termination by the Company, the Company will be liable for minimum factoring
fees.
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BERNARD CHAUS, INC. AND SUBSIDIARIES
On October 1, 2011, the Company had $1.2 million of outstanding letters of credit, total
availability of approximately $5.9 million and revolving credit borrowings of $5.6 million under
the agreement. On October 2, 2010, the Company had $1.3 million of outstanding letters of credit,
total availability of approximately $3.8 million and revolving credit borrowings of $10.0 million
under the agreement.
Factoring Agreement
The agreement with CIT also provides for a non-recourse factoring arrangement which provides
notification factoring on substantially all of the Companys sales. The proceeds of this agreement
are assigned to CIT as collateral for all indebtedness, liabilities and obligations due to CIT. A
factoring commission based on various rates is charged on the gross face amount of all accounts
with minimum fees as defined in the agreement.
4. Deferred Income
The Company has an exclusive supply agreement with CTG. Under this agreement, CTG will act as
the exclusive supplier of substantially all merchandise purchased by the Company, in addition to
providing sample making and production supervision services. In consideration for the Company
appointing CTG as the sole supplier of its merchandise in Asia/China for a term of 10 years, CTG
paid the Company an exclusive supply premium of $4.0 million. The Company recorded this premium as
deferred income and as of October 1, 2011, $0.4 million of the premium is included in accrued
expenses and approximately $2.7 million is considered long-term. The Company will recognize the
premium as income on a straight line basis over the 10-year term of the agreement. For the three
months ended October 1, 2011 and October 2, 2010, the Company recognized approximately $0.1 million
in each quarter, which was recorded as a reduction to cost of goods sold. As of October 1, 2011,
July 2, 2011 and October 2, 2010, amounts owed to CTG for merchandise approximated $21.7 million,
$17.4 million and $12.8 million, respectively, and are included in accounts payable on the
accompanying consolidated balance sheet. In April 2011, CTG became a stockholder of the Company.
5. Pension Plan
Components of Net Periodic Benefit Cost
For the Three Months Ended | ||||||||
October 1, | October 2, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Service cost |
$ | 3 | $ | 2 | ||||
Interest cost |
31 | 28 | ||||||
Expected return on plan assets |
(28 | ) | (26 | ) | ||||
Amortization of net loss |
10 | 9 | ||||||
Net periodic benefit cost |
$ | 16 | $ | 13 | ||||
Employer Contributions
The Company will be required to contribute approximately $62,000 to the pension plan in fiscal
2012.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
Forward-looking Statements
Certain statements contained herein are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
that have been made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are indicated by words or phrases such as anticipate,
estimate, project, expect, believe, may, could, would, plan, intend and similar
words or phrases. Such statements are based on current expectations and are subject to certain
risks, uncertainties and assumptions, including, but not limited to, the overall level of consumer
spending on apparel; the financial strength of the retail industry generally and our customers in
particular; changes in trends in the market segments in which we compete and our ability to gauge
and respond to changing consumer demands and fashion trends; the level of demand for our products;
our dependence on our major department store customers; the success of the new Camuto License
Agreement ; the highly competitive nature of the fashion industry; our ability to satisfy our cash
flow needs, including the cash requirements under the Camuto License Agreement; our ability to
achieve our business plan and have adequate access to capital; our ability to operate within
production and delivery constraints, including the risk of failure of manufacturers and our
exclusive supplier to deliver products in a timely manner or to quality standards; the ability and
willingness of our exclusive supplier to continue to supply product to us on favorable payment
terms; our ability to meet the requirements of the Camuto License Agreement; our ability to source
product in an environment of high volatility and inflationary pressures on prices of labor and raw
materials; our ability to attract and retain qualified personnel; and changes in economic or
political conditions in the markets where we sell or source our products, including war and
terrorist activities and their effects on shopping patterns, as well as other risks and
uncertainties set forth in the Companys publicly-filed documents, including this Quarterly Report
on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those anticipated, estimated
or projected.
There are important factors that could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. For a detailed discussion of some of the
foregoing risks and uncertainties, see Item 1A. Risk Factors in Part I of our Annual Report on
Form 10-K for the year ended July 2, 2011, as well as the other reports filed by us with the
Securities and Exchange Commission.
We undertake no obligation (and expressly disclaim any such obligation) to publicly update any
forward-looking statements, whether as a result of new information, future events or otherwise,
except as required by law. You are advised, however, to consult any further disclosures we make on
related subjects in our filings with the United States Securities and Exchange Commission (SEC),
all of which are available in the SEC EDGAR database at www.sec.gov and from us.
Unless the context otherwise requires, the terms Company, we, us, and our refer to
Bernard Chaus, Inc.
Overview
The Company designs, arranges for the manufacture of and markets an extensive range of womens
career and casual sportswear principally under the JOSEPHINE CHAUS®, JOSEPHINE®, JOSEPHINE STUDIO®,
CHAUS®, CHAUS SPORT®, CYNTHIA STEFFE®, SEAMLINE CYNTHIA STEFFE® and CYNTHIA CYNTHIA STEFFE®
trademarks and under private label brand names. Our products are sold nationwide through department
store chains, specialty retailers, discount stores, wholesale clubs and other retail outlets. On
November 18, 2010, the Company entered into the Camuto License Agreement, which grants us an
exclusive license to design, manufacture, sell and distribute womens sportswear and ready-to-wear
apparel under the trademark Vince Camuto in approved department stores, specialty retailers and
off-price channels in the United States, Canada and Mexico. We began shipping Camuto licensed
products in June 2011.
Under the terms of the KCP License Agreement, we manufactured and sold womens sportswear
under various labels. The KCP License Agreement terminated on June 1, 2011. KCP agreed to pay the
Company a termination fee upon termination of the agreement based on sales to certain customers
through June 1, 2011, as specified in the agreement.
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Accordingly, we recorded a $4.4 million gain
on early termination of the license agreement for the year ended July 2, 2011.
Fiscal year 2011 was one of substantial transition as a result of the termination of the KCP
License Agreement, the
arrangements relating to that termination, and the commencement of product design and development
under the Camuto license in advance of material levels of shipments, which began in the last month
of fiscal 2011. Our financial information should be viewed in the context of these changes and
events.
Results of Operations
The following table sets forth, for the periods indicated, certain items expressed as a percentage
of net revenue.
For the Three Months Ended | ||||||||
October 1, | October 2, | |||||||
2011 | 2010 | |||||||
Net Revenue |
100.0 | % | 100.0 | % | ||||
Gross Profit |
27.2 | % | 23.8 | % | ||||
Selling, general and administrative expenses |
28.9 | % | 26.3 | % | ||||
Accrued gain on early termination of
license agreement |
| % | (6.7 | )% | ||||
Interest expense |
0.5 | % | 0.7 | % | ||||
Net income (loss) |
(2.2 | )% | 3.4 | % |
Net revenues for the three months ended October 1, 2011 decreased by 19.4%, or $5.4 million,
to $22.3 million from $27.7 million for the three months ended October 2, 2010. Units sold
decreased by approximately 37.0% and the overall price per unit increased by approximately 27.9%.
Our net revenues decreased in our licensed product line by $4.6 million and in our private label
product lines by $2.9 million, which were partially offset by increases in our Chaus product lines
of $1.8 million and in our Cynthia Steffe product lines of $0.3 million. The decrease in licensed
product revenues reflects the net impact of the launch of the Vince Camuto licensed product line
this quarter versus the terminated Kenneth Cole licensed product line. In addition, there were
lower licensed product shipments in the quarter to the discount channel, which may be viewed as
timing differences. The private label revenue decrease was largely a result of the loss
of business with two customers during fiscal 2011. The increase in the Chaus product line was
largely a result of increases in our Chaus Sport product line and to discount channels. The
increase in the Cynthia Steffe product line was largely a result of increases in the department
store channel of distribution. The overall increase in the average price per unit was primarily a
result of product mix, particularly associated with a higher proportion of overall revenues to the
department store channel and to a much lesser extent selective increases in wholesale prices.
Gross profit for the three months ended October 1, 2011 decreased by $0.5 million to $6.1
million as compared to $6.6 million for the three months ended October 2, 2010 as a result of a
decrease in revenues, offset partially by an increase in gross profit percentage. The decrease in
gross profit dollars was due to decreases in gross profit in our private label product lines of
$0.8 million, licensed product lines of $0.3 million, and in our Cynthia Steffe product lines of
$0.3, which were partially offset by an increase in our Chaus product lines of $0.9 million. As a
percentage of sales, gross profit increased to 27.2% for the three months ended October 1, 2011
from 23.8% for the three months ended October 1, 2010. The increase in gross profit percentage
reflected a strategic focus on key volume programs to achieve negotiated lower material and
production costs, higher wholesale prices, and product mix particularly associated with a higher
proportion of overall revenues to the department store channel. This overall improvement was
partially offset by costs incurred as a result of shifting domestic production operations to Asia
for the Cynthia Steffe product line.
Selling, general and administrative (SG&A) expenses decreased by $0.8 million to $6.5
million for the three months ended October 1, 2011 from $7.3 million for the three months ended
October 2, 2010. As a percentage of net revenue, SG&A expenses increased to 28.9% for the three
months ended October 1, 2011 compared to 26.3% for the three months ended October 2, 2010. The
decrease in SG&A expenses for the three months ended October 1, 2011, was the result of decreases
in payroll and payroll related expenses of $0.3 million, design sample expenses of $0.2 million,
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distribution expenses of $0.2 million and professional fee expenses of $0.1 million. The decreases
in payroll and payroll related expenses were due to staff reductions during the third and fourth
quarters of fiscal 2011. The decrease in distribution expenses was primarily due to lower volume,
while the expense decreases for design samples and professional fees were largely due to
tighter management control. The increase in SG&A as a percentage of net revenue was due to the
overall decrease in sales volume, which decreased our leverage on SG&A expenses.
Accrued gain on early termination of the KCP License Agreement was $1.9 million for the three
months ended October 2, 2010. This gain was based on sales to certain customers as defined in the
KCP Termination Agreement.
Interest expense decreased for the three months ended October 1, 2011 to $0.1 million as
compared to $0.2 million for the three months ended October 2, 2010, primarily due to lower bank
borrowings.
Our income tax provision for the three months ended October 1, 2011 and October 2, 2010
includes provisions for state and local taxes and a deferred provision for the temporary difference
associated with the Companys trademarks.
We periodically review our historical and projected taxable income and consider available
information and evidence to determine if it is more likely than not that a portion of the deferred
tax assets will be realized. A valuation allowance is established to reduce the deferred tax assets
to the amount that is more likely than not to be realized. As of October 1, 2011 and October 2,
2010, based upon its evaluation of taxable income and the current business environment, we recorded
a full valuation allowance on our deferred tax assets including net operating losses (NOL). If we
determine that a portion of the deferred tax assets will be realized in the future, that portion of
the valuation allowance will be reduced and we will provide for an income tax benefit in our
Statement of Operations at our estimated effective tax rate. See Critical Accounting Policies and
Estimates below for more information regarding income taxes and our federal NOL carry-forward.
Financial Position, Liquidity and Capital Resources
General
Net cash used in operating activities was $2.7 million for the three months ended October 1,
2011, as compared to net cash provided by operating activities of $1.3 million for the three months
ended October 2, 2010. Net cash used in operating activities for the three months ended October 1,
2011 resulted primarily from increases in accounts receivable- factored of $7.3 million
and inventories of $1.4 million, which was partially offset by a decrease in prepaid expenses and
other assets of $1.0 million and an increase in accounts payable of $4.8 million. The increase in
accounts receivable-factored of $7.3 million was due to the increase of sales for the three months
ended October 1, 2011 as compared to the three months ended July 2, 2011. Net cash provided by
operating activities for the three months ended October 2, 2010 resulted primarily from an increase
in accounts payable of $1.3 million and net income of $0.9 million, which was partially offset by a
decrease in accrued expenses and long-term liabilities of $0.9 million. The increase in accounts
payable of $1.3 million was due to extended terms provided by CTG.
Cash used in investing activities for the three months ended October 1, 2011 was $327,000
compared to $106,000 in the previous year. The purchases of fixed assets for the three months ended
October 1, 2011 consisted primarily of store fixtures for the new Camuto licensed products.
Net cash provided by financing activities of $3.1 million for the three months ended October
1, 2011 resulted from revolving credit borrowings. Net cash used in financing activities of $1.2
million for the three months ended October 2, 2010 resulted from repayments of revolving credit
borrowings.
Financing Agreement
We have a financing agreement with CIT that permits CIT to make loans and advances on a
revolving basis at CITs Sole Discretion, which is defined as the sole and absolute discretion
exercised in good faith in accordance with customary business practices for similarly situated
asset-based lenders in comparable asset-based lending transactions. Borrowings are based on a
borrowing base formula, as defined, and include a sublimit in the amount of $2 million for the
issuance of letters of credit. Our obligations under the agreement are secured by a first priority
lien on substantially all of
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our assets, including our accounts receivable, inventory, intangibles,
equipment, and trademarks, and a pledge of our interest in our subsidiaries. The agreement had an
original maturity of September 30, 2011 with automatic annual extensions to September 30th
(Anniversary Date) unless terminated by CIT by written notice at least sixty days before the
Anniversary Date. No such termination notice has been received by the Company from CIT.
The borrowings under the agreement accrue interest at a rate of 3.00% above prime; however,
the applicable rate shall revert to the original 2.00% interest rate in the event that we achieve
two successive quarters of profitable business. The interest rate as of October 1, 2011 was 6.25%.
We have the option to terminate the agreement with CIT. If we terminate the agreement with CIT due
to non-performance by CIT of certain of its obligations for a specified period of time, we will not
be liable for any termination fees. Otherwise, in the event of an early termination by us, we will
be liable for minimum factoring fees.
On October 1, 2011, we had $1.2 million of outstanding letters of credit, total availability
of approximately $5.9 million and revolving credit borrowings of $5.6 million under the agreement.
On October 2, 2010, we had $1.3 million of outstanding letters of credit, total availability of
approximately $3.8 million and revolving credit borrowings of $10.0 million under the agreement.
Factoring Agreement
The agreement with CIT also provides for a non-recourse factoring arrangement which provides
notification factoring on substantially all of our sales. The proceeds of this agreement are
assigned to CIT as collateral for all indebtedness, liabilities and obligations due to CIT. A
factoring commission based on various rates is charged on the gross face amount of all accounts
with minimum fees as defined in the agreement.
Off-balance Sheet Arrangements
As of October 1, 2011, we do not have any off-balance sheet arrangements except for letters of
credit under the agreement with CIT. The borrowings under the letters of credit finance the
Companys operating expenses and are a significant source of liquidity for the Company. For more
information about borrowing terms, see Financing Agreement discussion above.
Future Financing Requirements
For the three months ended October 1, 2011, we realized losses from operations, and as of
October 1, 2011 we had a working capital deficit of $11.4 million and stockholders deficiency of
$13.9 million. Our business plan requires the availability of sufficient cash flow and borrowing
capacity to finance our product lines and to meet our cash needs. We expect to satisfy such
requirements through cash on hand, cash flow from operations and borrowings from our lender. Our
fiscal 2012 business plan anticipates improvement from fiscal 2011, primarily by achieving
increased revenues and improved gross margin percentages. Our ability to achieve our fiscal 2012
business plan is critical to maintaining adequate liquidity. We rely on CIT, the sole source of our
external financing, to borrow money in order to fund our operations. Should CIT cease funding our
operations, we may not have sufficient cash flow from operations to meet our liquidity needs. In
addition, CTG manufactures the majority of our product on favorable payment terms. In the event CTG
terminates the agreement or requires a change in the favorable payment terms, we may be unable to
locate alternative suppliers in a timely manner or obtain similarly favorable payment terms. For
the fiscal year ended July 2, 2011, the KCP License Agreement accounted for approximately 54% of
our revenues, and this agreement terminated on June 1, 2011. While we entered into the Camuto
License Agreement, there can be no assurance that we will be able to derive revenue from this
agreement sufficient to offset the loss in revenue resulting from the termination of the KCP
License Agreement. There could be a material adverse effect on our business, liquidity and
financial condition should any of the following occur: a) CIT ceases its funding of our operations,
b) CTG terminates its agreement with us or requires a change in the favorable payment terms, or c)
we fail to offset the revenue lost as a result of the termination of the KCP License Agreement.
We are also in negotiations with CTG to convert approximately $12 million of debt owed by the
Company to CTG from accounts payable to two term loans with initial terms of two years and five
years. There can be no assurance that negotiations with CTG will be successful and result in the
conversion of the Companys debt.
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The foregoing discussion contains forward-looking statements which are based upon current
expectations and involve a number of uncertainties, including our ability to maintain our borrowing
capabilities, maintain our current arrangement with CTG and replace the revenues which will be lost
as a result of the termination of the KCP License Agreement. Should any of these events fail to
occur, this could result in a material adverse effect on our business, liquidity and financial
condition.
Critical Accounting Policies and Estimates
Significant accounting policies are more fully described in Note 1 to the consolidated
financial statements. Certain of our accounting policies require the application of significant
judgment by management in selecting the appropriate assumptions for calculating financial
estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These
judgments are based on historical experience, observation of trends in the industry, information
provided by customers and information available from other outside sources, as appropriate.
Significant accounting policies include:
Revenue Recognition Sales are recognized upon shipment of products to customers since title
and risk of loss pass upon shipment. Revenue relating to goods sold on a consignment basis is
recognized when we have been notified that the buyer has resold the product. Provisions for
estimated uncollectible accounts, discounts and returns and allowances are provided when sales are
recorded based upon historical experience and current trends. While such amounts have been within
expectations and the provisions established, we cannot guarantee that we will continue to
experience the same rates as in the past.
Factoring Agreement and Accounts Receivable We have a factoring agreement with CIT whereby
substantially all of our receivables are factored. The factoring agreement is a non-recourse
factoring agreement whereby CIT, based on credit approved orders, assumes the accounts receivable
risk of our customers in the event of insolvency or nonpayment. We assume the accounts receivable
risk on sales factored to CIT but not approved by CIT as non-recourse which approximated $66,000
of October 1, 2011, $0.2 million as of July 2, 2011 and $0.7 million as of October 2, 2010. We
receive payment on non-recourse factored receivables from CIT as of the earlier of: a) the date
that CIT has been paid by our customers; b) the date of the customers longest maturity if the
customer is in a bankruptcy or insolvency proceedings; or c) the last day of the third month
following the customers longest maturity date if the receivable remains unpaid. All receivable
risks for customer deductions that reduce the customer receivable balances are retained by us,
including, but not limited to, allowable customer markdowns, operational chargebacks, disputes,
discounts and returns. These deductions totaling approximately $2.2 million as of October, 1, 2011,
$2.3 million as of July 2, 2011 and $1.4 million as of October 2, 2010, have been recorded as a
reduction of either accounts receivable-factored or accounts receivable-net based on the
classification of the respective customer balance to which they pertain. We also assume the risk on
accounts receivable not factored to CIT, which are shown as Accounts Receivable-net on the
accompanying balance sheets.
Inventories Inventories are stated at the lower of cost or market, cost being determined on
the first-in, first-out method. The majority of our inventory purchases are shipped FOB shipping
point from our suppliers. We take title and assume the risk of loss when merchandise is received at
the boat or airplane overseas. Reserves for slow moving and aged merchandise are provided to adjust
inventory costs based on historical experience and current product demand. Inventory reserves were
$0.6 million as of October 1, 2011, $0.4 million as of July 2, 2011 and $0.7 million as of October
2, 2010. Inventory reserves are based upon the level of excess and aged inventory and estimated
recoveries on the sale of the inventory. While markdowns have been within expectations and the
provisions established, we cannot guarantee that we will continue to experience the same level of
markdowns as in the past.
Valuation of Long-Lived Assets and Trademarks Trademarks relate to the Cynthia Steffe
trademarks and were determined to have an indefinite life. We conduct impairment testing annually
in the fourth quarter of each fiscal year, or sooner if events and changes in circumstances suggest
that the carrying amount may not be recoverable from its estimated future cash flows including
market participant assumptions, when available. The review of trademarks and long lived assets is
based upon projections of anticipated future undiscounted cash flows. While we believe that our
estimates of future cash flows are reasonable, different assumptions regarding such cash flows
could materially affect evaluations. To
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the extent these future projections or our strategies
change, the conclusion regarding impairment may differ from the current estimates. There were no
impairment charges for the three months ended October 1, 2011 and October 2, 2010.
Income Taxes Results of operations have generated a federal tax NOL carryforward of
approximately $59.5 million as of July 2, 2011. Approximately 15% of the Companys NOL carryforward
expires in 2012. Generally accepted
accounting principles require that we record a valuation allowance against the deferred tax asset
associated with this NOL if it is more likely than not that we will not be able to utilize it to
offset future taxable income. As of October 1, 2011, based upon its evaluation of our historical
and projected results of operations, the current business environment and the magnitude of the NOL,
we recorded a full valuation allowance on our deferred tax assets including NOLs. The provision for
income taxes primarily relates to provisions for state and local taxes and a deferred provision for
temporary differences associated with indefinite lived intangibles. It is possible, however, that
we could be profitable in the future at levels which cause us to conclude that it is more likely
than not we will realize all or a portion of the NOL carryforward. Upon reaching such a conclusion,
we would record the estimated net realizable value of the deferred tax asset at that time and would
then provide for income taxes at a rate equal to our combined federal and state effective rates.
Subsequent revisions to the estimated net realizable value of the deferred tax asset could cause
our provision for income taxes to vary from period to period, although our cash tax payments would
remain unaffected until the benefit of the NOL is utilized.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed by the Company in the reports filed or submitted by it under
the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms. The Companys controls and procedures are designed to ensure that
information required to be disclosed by the Company in such reports is accumulated and communicated
to the Companys management, including the Companys Chairwoman and the Companys Interim Chief
Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
Each fiscal quarter the Company carries out an evaluation, under the supervision and with the
participation of the Companys management, including the Companys Chairwoman and Chief Executive
Officer (CEO) and the Companys CFO, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based on this
evaluation, our management, with the participation of the CEO and CFO, concluded that, as of
October 1, 2011, our internal controls over financial reporting were effective.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
We are involved in legal proceedings from time to time arising out of the ordinary course of
business. We believe that the outcome of these proceedings in the aggregate will not have a
material adverse effect on our financial condition, results of operations or cash flows.
On September 29, 2011, the Company was served with a summons and complaint in connection with a
purported shareholder class action lawsuit relating to the Camuto proposal discussed in Note 1 to
the consolidated financial statements included herein. The named plaintiff is Kenneth Braun and
the purported class is shareholders of the Companys Common Stock and their successors in interest,
other than the named defendants, who include current and former officers and directors of the
Company, Camuto and the Company itself. The lawsuit was filed in the Supreme Court of the State of
New York and alleges, among other things, breach of fiduciary duties by certain current and prior
directors of the Company. The Company filed for an extension of time to submit its response, and
the plaintiff agreed to an extension.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 5. Other Information.
None.
Item 6. Exhibits (filed herewith)
31.1 | Certification of Chief Executive Officer pursuant to Rule13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Interim Chief Financial Officer pursuant to Rule13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Josephine Chaus, Chairwoman of the Board and Chief Executive Officer of Bernard Chaus, Inc. | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by William P. Runge, Interim Chief Financial Officer of Bernard Chaus, Inc. | |
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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.
BERNARD CHAUS, INC. |
||||
Date: November 15, 2011 | By: | /s/ Josephine Chaus | ||
Josephine Chaus | ||||
Chairwoman of the Board, and Chief Executive Officer |
||||
Date: November 15, 2011 | By: | /s/ William P. Runge | ||
William P. Runge | ||||
Interim Chief Financial Officer | ||||
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