UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 2002.
OR
| | 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 0-15385
ONE PRICE CLOTHING STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0779028
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(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
Highway 290, Commerce Park
1875 East Main Street
Duncan, South Carolina 29334
----------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 433-8888
-------------------------
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
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Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
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The number of shares of the registrant's common stock outstanding as of December
3, 2002, was 3,006,019.
INDEX
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - November 2, 2002,
February 2, 2002 and November 3, 2001
Condensed consolidated statements of operations - Three-month
and nine-month periods ended November 2, 2002 and November 3,
2001
Condensed consolidated statements of cash flows - Nine-month
periods ended November 2, 2002 and November 3, 2001
Notes to unaudited condensed consolidated financial statements
Independent accountants' report on review of interim financial
information
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
PART I. FINANCIAL INFORMATION
Item I. Financial Statements (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
One Price Clothing Stores, Inc. and Subsidiaries
November 2, February 2, November 3,
2002 2002 2001
----------------- ------------------ ----------------
(1)
Assets
CURRENT ASSETS
Cash and cash equivalents $ 954,000 $ 2,277,000 $ 2,131,000
Merchandise inventories 51,690,000 54,131,000 56,559,000
Other current assets 10,443,000 10,219,000 10,066,000
------------------ ------------------ ----------------
TOTAL CURRENT ASSETS 63,087,000 66,627,000 68,756,000
------------------ ------------------ ----------------
PROPERTY AND EQUIPMENT, at cost 75,034,000 73,607,000 72,441,000
Less accumulated depreciation 41,382,000 37,992,000 36,410,000
------------------ ------------------ ----------------
33,652,000 35,615,000 36,031,000
------------------ ------------------ ----------------
DEFERRED INCOME TAXES 3,241,000 2,825,000 4,775,000
------------------ ------------------ ----------------
OTHER ASSETS 5,002,000 4,735,000 4,773,000
------------------ ------------------ ----------------
$ 104,982,000 $ 109,802,000 $ 114,335,000
================== ================== ================
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable $ 37,206,000 $ 35,656,000 $ 32,589,000
Revolving credit agreement 33,640,000 32,084,000 33,024,000
Current portion of long-term debt 4,824,000 2,257,000 5,258,000
Income taxes payable 494,000 503,000 -
Sundry liabilities 6,620,000 5,614,000 5,518,000
------------------ ------------------ ----------------
TOTAL CURRENT LIABILITIES 82,784,000 76,114,000 76,389,000
------------------ ------------------ ----------------
LONG-TERM DEBT 7,674,000 11,835,000 8,413,000
------------------ ------------------ ----------------
OTHER NON-CURRENT LIABILITIES 2,623,000 2,548,000 2,527,000
------------------ ------------------ ----------------
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.01 --
authorized and unissued 500,000 shares
Common stock, par value $0.01 --
authorized 10,000,000 shares; issued and outstanding
3,006,019, 2,943,769, and 2,943,769, respectively 30,000 29,000 29,000
Additional paid-in capital 11,546,000 11,822,000 11,709,000
Retained earnings 366,000 7,844,000 15,658,000
Less: Treasury stock at cost - 7,150, 67,400 and 67,400
shares, respectively (41,000) (390,000) (390,000)
------------------ ------------------ ----------------
11,901,000 19,305,000 27,006,000
------------------ ------------------ ----------------
$ 104,982,000 $ 109,802,000 $ 114,335,000
================== ================== ================
(1) Derived from audited financial statements See notes to unaudited condensed
consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
One Price Clothing Stores, Inc. and Subsidiaries
Three-Month Period Ended Nine-Month Period Ended
------------------------------- --------------------------------
November 2, November 3, November 2, November 3,
2002 2001 2002 2001
-------------- --------------- --------------- --------------
NET SALES $ 73,308,000 $ 72,957,000 $ 250,706,000 $ 257,188,000
Cost of goods sold, exclusive of depreciation and
amortization shown separately below 48,731,000 51,918,000 159,156,000 168,739,000
-------------- --------------- --------------- --------------
GROSS MARGIN 24,577,000 21,039,000 91,550,000 88,449,000
-------------- --------------- --------------- --------------
Selling, general and administrative expenses 21,582,000 21,760,000 65,712,000 66,277,000
Store rent and related expenses 8,555,000 8,277,000 25,410,000 25,147,000
Depreciation and amortization expense 1,645,000 1,557,000 5,098,000 4,945,000
Interest expense 798,000 768,000 2,551,000 2,535,000
-------------- --------------- --------------- --------------
32,580,000 32,362,000 98,771,000 98,904,000
-------------- --------------- --------------- --------------
LOSS BEFORE INCOME TAXES (8,003,000) (11,323,000) (7,221,000) (10,455,000)
Provision for (benefit from) income taxes 21,000 (386,000) 257,000 1,443,000
-------------- --------------- --------------- --------------
NET LOSS $ (8,024,000) $ (10,937,000) $ (7,478,000) $ (11,898,000)
============== =============== =============== ==============
Net loss per common share - basic and diluted $ (2.67) $ (3.72) $ (2.49) $ (4.04)
============== =============== =============== ==============
Weighted average number of common shares
outstanding -- basic and diluted 3,006,019 2,942,701 2,999,544 2,942,460
============== =============== =============== ==============
See notes to unaudited condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
One Price Clothing Stores, Inc. and Subsidiaries
Nine-Month Period Ended
---------------------------------------
November 2, November 3,
2002 2001
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,478,000) $ (11,898,000)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 5,098,000 4,945,000
Provision for compensation - common stock awards 75,000 22,000
Decrease in other non-current assets 183,000 208,000
Increase in other non-current liabilities 196,000 241,000
Deferred income taxes 200,000 1,690,000
Loss on disposal of property and equipment and impairment charges 420,000 625,000
Changes in operating assets and liabilities 4,094,000 (2,576,000)
------------------ ------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,788,000 (6,743,000)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,016,000) (1,485,000)
Purchases of other non-current assets (559,000) (491,000)
------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (3,575,000) (1,976,000)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving credit agreement 1,556,000 4,473,000
Proceeds from long-term term debt borrowings - 4,000,000
Repayment of long-term debt (548,000) (178,000)
Debt financing costs incurred (409,000) (478,000)
Payment of capital lease obligations (984,000) (986,000)
Decrease in amount due to related parties (151,000) (101,000)
------------------ ------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (536,000) 6,730,000
------------------ ------------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,323,000) (1,989,000)
Cash and cash equivalents at beginning of period 2,277,000 4,120,000
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 954,000 $ 2,131,000
------------------ ------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 2,326,000 $ 2,283,000
Income taxes paid 151,000 1,046,000
Non-cash investing and financing activities:
Capital leases - 1,131,000
Issuance of common stock awards 108,000 8,000
See notes to unaudited condensed consolidated financial statements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
One Price Clothing Stores, Inc. and Subsidiaries
NOTE A - BASIS OF PRESENTATION, OPERATIONS AND STRATEGIES, AND CERTAIN
ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and
include the accounts of One Price Clothing Stores, Inc. and its subsidiaries,
all of which are wholly-owned (the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
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. Due
to the seasonality of the Company's sales, operating results for the three-month
and nine-month periods ended November 2, 2002 are not necessarily indicative of
the results that may be expected for the year ending February 1, 2003 (fiscal
2002). For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
February 2, 2002 (fiscal 2001).
The Company's sales and operating results are seasonal. Historically, sales and
operating results have been higher in the first quarter (February - April) and
second quarter (May - July) and lower in the third quarter (August - October)
and fourth quarter (November - January).
Operations and Strategies
The Company has incurred operating losses during the two most recent fiscal
years. In response to these operating losses, the Company:
o initiated a restructuring plan during the fourth quarter of fiscal 2000
which was completed during fiscal 2001.
o improved its liquidity by amending its credit facilities in September 2001
to obtain a term loan of $4 million which matures in fiscal 2003 (See Note
C). At November 2, 2002, a balance of $3,625,000 remained on this term
loan, which is classified in current liabilities in the Condensed
Consolidated Balance Sheet.
o increased the borrowing limit on its revolving credit agreement to
$40,000,000 and extended its term through July 2005 (See Note C).
o implemented a revised merchandising strategy which focuses the Company's
resources on higher- margin, faster-turning women's and children's apparel
and women's accessories categories and eliminates and/or de-emphasizes
low-margin, slow-turning categories of merchandise (including gifts, home
furnishings, children's accessories, uniforms and men's apparel). The
Company plans to continue this focused merchandising approach.
o refocused the store development strategy by reducing the number of new
store openings while focusing on relocating and expanding existing stores
in proven locations, including several large stores. This store development
approach includes the opening or reconfiguration of approximately ten large
"Tri-Box" stores which offer the Company's "BestPrice! Kids" and
"BestPrice! Plus" concepts as separate "stores within a store."
o implemented a marketing and advertising strategy involving targeted
programs for specific regions, including direct mail, newspaper inserts,
in-store collateral and electronic media.
o implemented changes in its distribution system to increase efficiencies
including increasing the amount of floor-ready merchandise thereby reducing
processing costs.
Management expects that these strategies will contribute to improved results of
operations and financial condition during the remainder of fiscal 2002 and
during fiscal 2003. However, because there are certain risks and uncertainties
related to achieving these results, including the success of the development of
the Tri-Box store development concept, the availability of first quality
merchandise from vendors on acceptable terms and the availability of sufficient
capital to execute these plans, there is no assurance that these strategies will
lead to the expected level of improvement.
Effect of New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") 144, "Accounting for the Impairment of
Long-Lived Assets," which supercedes SFAS 121 and the accounting and reporting
provisions of APB 30 related to the disposal of a segment of a business. The
adoption of SFAS 144 on February 3, 2002 had no material effect on the Company's
consolidated financial statements.
The FASB has issued SFAS 146, "Accounting for Costs Associated with Exit or
Disposal Activities," which nullifies the accounting and reporting provisions of
Emerging Issues Task Force ("EITF") 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (Including
Certain Costs in a Restructuring)." This statement is effective for exit or
disposal activities that are initiated after December 31, 2002, with earlier
adoption encouraged. The Company is in the process of reviewing the effect, if
any, that the adoption of SFAS 146 will have on its balance sheet, results of
operations and cash flows.
In November 2002, the EITF reached a consensus on issues raised in EITF 02-16,
"Accounting by a Reseller for Cash Consideration Received from a Vendor." This
EITF issue addresses the timing of recognition for rebates that are earned by
resellers based on specified levels of purchases or over specified periods of
time. This guidance related to timing of recognition is to be applied
prospectively to new rebate arrangements entered into in fiscal periods
beginning after December 15, 2002. This EITF issue also addresses the
classification of cash consideration received from vendors in a reseller's
statement of operations. The guidance related to income statement classification
is to be applied in annual and interim financial statements for periods
beginning after December 15, 2002. The Company is in the process of reviewing
the effect, if any, that the application of EITF 02-16 will have on its balance
sheet, results of operations and cash flows.
NOTE B - EARNINGS PER SHARE
Basic earnings per share are computed based upon the weighted average number of
common shares outstanding. Diluted earnings per share are computed based upon
the weighted average number of common and common equivalent shares (when
dilutive) outstanding. Common equivalent shares consist of shares under option
and warrants. There were no dilutive common equivalent shares for any of the
periods presented. Accordingly, basic and diluted weighted average number of
shares outstanding are equal for each time period presented.
NOTE C - CREDIT FACILITIES
The Company amended its revolving credit agreement with its primary lender in
September 2002 to extend the term of the agreement through July 2005 and to
increase the maximum borrowing amount to $40,000,000 (including a letter of
credit sub-facility of up to $25,000,000). The agreement also includes a
$4,000,000 term loan. At November 2, 2002, a balance of $3,625,000 remained on
this term loan, which is classified in current liabilities in the Condensed
Consolidated Balance Sheet. A final principal payment on the term loan of
$2,525,000 is due in July 2003. Borrowings under the Company's revolving credit
agreement with its primary lender are collateralized by all assets owned by the
Company during the term of the revolving credit agreement (other than the land,
buildings, fixtures and improvements collateralizing the mortgage loan discussed
below). Under the revolving credit agreement, the borrowings bear interest, at
the Company's option (subject to certain limitations in the agreement), at the
Prime Rate plus 0.5% or the Adjusted Eurodollar Rate, as defined in such
agreement, plus 2.25%.
Maximum borrowings under the revolving credit agreement and utilization of the
letter of credit facility are based on a borrowing base formula determined with
respect to eligible inventory as defined in such agreement. As a result,
availability under the revolving credit agreement fluctuates in accordance with
the Company's seasonal variations in inventory levels. The lending formula may
be revised from time to time in response to changes in the composition of the
Company's inventory or other business conditions. At November 2, 2002, the
Company had approximately $2.1 million of excess availability under the
borrowing base formula (see also the related debt covenant discussed below). The
Company is charged a commitment fee of 0.25% per annum on the unused portion of
the revolving credit agreement. Under the term loan portion of the revolving
credit agreement, the borrowings bear interest at the rate of 15.0% per annum
and guarantees certain minimum payments to the lender if the term loan is fully
repaid prior to January 2003.
The Company's revolving credit agreement contains certain covenants which, among
other things, prohibit the Company from paying dividends, restrict the ability
of the Company to incur other indebtedness or encumber or dispose of assets,
limit the amount of its own stock the Company can repurchase, and require the
Company to maintain a minimum level of excess availability of $1,500,000
($2,000,000 from November 16, 2002 through December 31, 2002). Under this
revolving credit agreement, the Company is required to maintain a $5,000,000
minimum level of adjusted working capital (excluding amounts outstanding under
the revolving credit agreement) and to maintain a $22,000,000 minimum adjusted
net worth (excluding valuation reserves against the Company's deferred income
tax assets up to a maximum of $14,000,000). As of November 2, 2002, adjusted
working capital and adjusted net worth were $13,943,000 and $24,844,000,
respectively. Accordingly, the Company was in compliance with these financial
covenants as of November 2, 2002.
The Company also has an agreement with a commercial bank to provide a separate
letter of credit facility of up to $8,000,000, under which $4,095,000 of
documentary letters of credit were outstanding at November 2, 2002. This
agreement expires on the earlier of June 30, 2003 or termination of the
Company's revolving credit agreement with its primary lender. Letters of credit
issued under the agreement are collateralized by inventories purchased using
such letters of credit. Under this agreement, which was amended on November 1,
2002, the Company is required to maintain a $5,000,000 minimum level of adjusted
working capital (excluding amounts outstanding under the revolving credit
agreement) and to maintain a $12,000,000 minimum adjusted net worth ($9,000,000
through May 3, 2003). The agreement contains other covenants, which are
substantially the same as those within the Company's revolving credit agreement
discussed above. The Company was in compliance with these restrictive covenants
as of November 2, 2002.
The Company's credit facilities require that these financial covenants be
measured on a monthly basis. Management believes that the Company will be in
compliance with all financial covenants required by each credit facility during
the period of each respective agreement, based upon achieving its currently
forecasted operating results. However, achievement of these currently forecasted
operating results is dependent upon the Company meeting certain targets of net
sales, gross margin and operating expenses and, as a result, is not certain. If
the Company does not achieve its currently forecasted operating results, it is
possible that the adjusted minimum net worth covenants of the revolving credit
agreement and/or separate letter of credit facility may not be met during fiscal
2003. The Company successfully obtained an amendment to its adjusted net worth
covenants under the revolving credit agreement and letter of credit facility in
September 2002 and November 2002, respectively, and, if necessary, would seek
additional amendments to this covenant. However, there is no guarantee that the
Company would be able to obtain additional amendments if it is not in compliance
with these covenants.
The Company entered into a twenty-year mortgage agreement with a commercial bank
in June 1997. The agreement, which had an original balance of $8,125,000, is
secured by the Company's real property located at its corporate offices
including land, buildings, fixtures and improvements. The mortgage agreement,
which had a balance of $7,196,000 at November 2, 2002, is payable in 240
consecutive equal monthly installments (including interest at the rate of 9.125%
per annum) through July 2017. Certain fees may be payable by the Company if the
mortgage loan is repaid prior to June 2014.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Shareholders of
One Price Clothing Stores, Inc.
Duncan, South Carolina
We have reviewed the accompanying condensed consolidated balance sheets of One
Price Clothing Stores, Inc. and subsidiaries (the "Company") as of November 2,
2002 and November 3, 2001, and the related condensed consolidated statements of
operations for the three-month and nine-month periods then ended and the related
condensed consolidated statements of cash flows for the nine-month periods then
ended. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of the
Company as of February 2, 2002, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 13, 2002, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of February 2, 2002 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
November 15, 2002
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Private Securities Litigation Reform Act of 1995
All statements contained in this Quarterly Report on Form 10-Q as to future
expectations and financial results including, but not limited to, statements
containing the words "believes," "anticipates," "expects," "projects," "should,"
"will," "plans" and similar expressions, should be considered forward-looking
statements subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. The statements may address items such as future
sales, earnings expectations, planned store openings, closings and expansions,
future comparable store sales, future product sourcing plans, inventory levels,
planned capital expenditures and future cash needs. In addition, the Company may
issue press releases and other written communications, and representatives of
the Company may make oral statements which contain forward-looking information.
There are a number of important factors that could cause the Company's actual
results in fiscal 2002 and beyond to differ materially from those expressed in
such forward-looking statements. These factors include, but are not limited to,
changes in the current policies, practices or rules of NASDAQ with respect to
continued listing criteria; general economic conditions; fluctuations in
interest rates and other economic factors; consumer preferences; weather
patterns; competitive factors; pricing and promotional activities of
competitors; the impact of excess retail capacity and the availability of
desirable store locations on suitable terms; the availability, selection and
purchasing of attractive merchandise on favorable terms; credit availability,
including adequate levels of credit support provided to certain of the Company's
vendors by factors and insurance companies; access to additional debt or equity
financing; the effect of litigation resulting from the Company's operations;
import risks, including potential disruptions and duties, tariffs and quotas on
imported merchandise; regulatory matters, including legislation affecting wage
rates; and other factors described in the Company's filings with the Securities
and Exchange Commission from time to time and in "Certain Considerations,"
contained herein. The Company does not undertake to publicly update or revise
its forward-looking statements even if experience or future changes make it
clear that any projected results expressed or implied therein will not be
realized.
Results of Operations
Net sales for the three-month period ended November 2, 2002 increased 0.5% to
$73,308,000 compared with $72,957,000 for the same time period in 2001. Net
sales for the nine-month period ended November 2, 2002 decreased 2.5% to
$250,706,000 compared with $257,188,000 for the same time period in 2001. The
Company operated 13 fewer stores during the three-month period ended November 2,
2002 and operated 15 fewer stores during the nine-month period ended November 2,
2002 as compared with the same periods last year.
Comparable store sales increased 0.2% in the third quarter of fiscal 2002.
Comparable store sales for the nine-month period ended November 2, 2002
decreased 1.8%. Management believes that the comparable store sales decrease for
the nine-month period ended November 2, 2002 was due to the elimination of
slow-turning and lower-margin categories of apparel and accessories combined
with weak consumer demand for apparel in general during the period. The Company
considers stores that have been open 18 months or more to be comparable, and
there were 603 such stores at November 2, 2002.
During the first nine months of fiscal 2002, the Company opened seven stores and
relocated or expanded seventeen of its stores. In addition, the Company closed
nineteen under-performing stores. At November 2, 2002, the Company operated 611
stores, 16 fewer than at quarter-end last year. The stores are located in 30
states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.
Gross margin as a percentage of net sales increased to 33.5% in the third
quarter of fiscal 2002 compared with 28.8% of net sales in the third quarter of
fiscal 2001. For the first nine months of fiscal 2002, gross margin as a
percentage of net sales was 36.5% compared with 34.4% of net sales in the same
period last year. These increases in gross margin as a percentage of net sales
resulted from efficiencies in the Company's distribution system and a more
profitable mix of merchandise driven by the elimination of slow-turning and
lower-margin categories of apparel and accessories and a reallocation of the
associated working capital to the Company's core women's and children's apparel
categories.
Selling, general and administrative ("SG&A") expenses were 29.4% of net sales in
the third quarter of fiscal 2002 compared with 29.8% of net sales in the third
quarter of fiscal 2001. SG&A expenses decreased in the third quarter as a result
of initiatives to reduce operating expenses in the Company's corporate offices.
SG&A expenses were 26.2% of net sales in the first nine months of fiscal 2002
compared with 25.8% of net sales during the same time period in fiscal 2001.
SG&A expenses were higher as a percentage of net sales in the first nine months
of 2002 due to the lack of sales leverage resulting from the comparable store
sales decrease, higher insurance costs and to an increase in store payroll
driven by an increase in the average hourly wage rate, offset partially by
initiatives to reduce operating expenses in the Company's corporate offices.
Store rent and related expenses were 11.7% of net sales in the third quarter of
fiscal 2002 compared with 11.3% of net sales in the third quarter of fiscal
2001. Store rent and related expenses for the nine-month period ended November
2, 2002 were 10.1% compared with 9.8% for the same period in 2001. These
increases in store rent as a percentage of net sales in both periods were due to
year-over-year increases in average store rent. Store rent and related expenses
per average store for the three-month and nine-month periods ended November 2,
2002 increased 5.6% and 3.5%, respectively, compared with the corresponding
periods last year. These increases in average store rent and related expenses in
both periods presented were primarily due to the Company's continuing store
expansion strategy of opening larger stores with higher rents while closing
older stores with lower average rent costs.
Depreciation and amortization expense increased to 2.2% of net sales in the
third quarter of fiscal 2002 compared with 2.1% in the same period last year.
Depreciation and amortization expense increased to 2.0% of net sales in the
first nine months of fiscal 2002 compared with 1.9% in the same time period last
year. Depreciation and amortization expense increased as a percentage of net
sales in both periods due to opening larger stores which carry a higher average
capital investment than the Company's older, smaller stores and investing in
information technology during fiscal 2001 and the first nine months of fiscal
2002.
Interest expense was 1.1% of net sales in the third quarters of both fiscal 2002
and fiscal 2001. Interest expense was 1.0% of net sales in the first nine months
of both fiscal 2002 and fiscal 2001. Year-over-year interest expense increased
in dollars in both periods due to higher average borrowings in fiscal 2002,
offset partially by lower average interest rates.
The Company's income tax provision of 3.6% of pre-tax loss in the first nine
months of fiscal 2002 and 13.8% of pre-tax loss in the first nine months of
fiscal 2001 reflect increases in the Company's valuation allowance against its
deferred income tax assets. At November 2, 2002 the Company's gross deferred
income tax assets of $16.0 million were reduced by a valuation allowance of
$12.9 million. Because management cannot be assured that certain net operating
loss carryforwards, credit carryforwards and net cumulative temporary
differences for U.S. Federal and state income tax purposes will be fully
utilized or realized prior to their expirations, a valuation allowance has been
provided for a substantial portion of the net deferred income tax assets. A
valuation allowance has not been recorded on the remaining net deferred income
tax assets based, in large part, upon a tax planning strategy that would, based
on historical results, result in the realization of such remaining deferred
income tax assets, if implemented. Management will continue to assess the
adequacy of or the need for the valuation allowance based upon future
operations.
Business Strategy and Outlook
During the remainder of fiscal 2002 and in fiscal 2003, the Company plans to
focus its store development efforts and business strategy on its self-described
Tri-Box store concept which consists of stores ranging from approximately 9,000
to 11,000 square feet offering the Company's "BestPrice! Kids" and "BestPrice!
Plus" concepts along with substantially the same junior/misses apparel and
accessories found in the Company's "BestPrice! Fashions" stores. To date, the
Company has opened five new Tri-Box stores and has converted three existing
stores to the Tri-Box concept. Sales volumes in each of these stores have
exceeded the Company's standard "BestPrice! Fashions" store. In fact, based on
results to date, management projects that these stores, on average, will
generate substantially more annual sales volume and significantly more net store
contribution than the Company's average non-Tri-Box store. Management expects to
realize improved leverage of its fixed overhead and operations as the Company
focuses its store development on these Tri-Box stores. There is no guarantee,
however, that the initial success of the Tri-Box stores will continue. There are
other factors, many of which are beyond the Company's control, that could affect
the Company's sales and operating results. See "Certain Considerations," herein.
As a part of the Company's focus on the Tri-Box concept, the Company may, over a
period of time, close or sell certain under-performing and/or smaller
square-footage stores that do not strategically fit with the Company's Tri-Box
focus. Management believes that this strategy of opening new Tri-Box stores,
while at the same time closing or selling under-performing and/or smaller
square-footage stores, will contribute to improved cash flow, results of
operations and financial condition of the Company during the remainder of fiscal
2002 and fiscal 2003. However, there are a number of risks and uncertainties
related to this strategy. See "Certain Considerations," herein.
The Company also plans to continue to focus its efforts on increasing comparable
store sales by, among other things, focusing on its higher-margin core apparel
merchandise categories of women's and children's apparel and women's
accessories. In addition, the Company will focus its efforts on maintaining its
tight expense controls. Given the continuing economic uncertainty and lower
demand for apparel, management intends to maintain conservative inventory
levels.
The Company's sales and operating results are seasonal. See "Certain
Considerations," herein. Historically, sales and operating results have been
higher in the first quarter (February - April) and second quarter (May - July)
and lower in the third quarter (August - October) and fourth quarter (November -
January).
Liquidity and Capital Resources
Historically, the Company's primary needs for liquidity and capital have been to
fund its store development which has included reconfiguring certain existing
stores and opening new stores and the related growth in merchandise inventories.
The Company historically has relied upon cash provided by operations and
borrowed funds from its revolving credit agreement to meet its liquidity needs.
During the two most recent fiscal years, the Company has primarily relied upon
its credit facilities to offset cash used in operations and to expand, relocate
and open new stores. Because of its relatively fixed cost structure and existing
levels of debt, management considers its primary risk to liquidity to be its
ability to generate adequate levels of net sales and gross margin while
effectively controlling operating expenses. When net sales and gross margin
levels have not met plan in the past, the Company has drawn funds under its
credit facilities and/or negotiated with its lenders to provide additional
availability to meet its liquidity needs. Based upon current projections, and
subject to the risks and uncertainties outlined below (see "Certain
Considerations," herein), these credit facilities, together with cash provided
by operations, are expected to be sufficient to meet the Company's liquidity and
capital needs during fiscal 2003. In the future, the Company may consider the
sale of certain smaller non-strategic stores to support the development of its
Tri-Box strategy and to generate additional liquidity. Also, the Company may
seek to renew or replace the term loan portion of its revolving credit agreement
which matures in July 2003. However, there is no assurance that the Company's
credit facilities, proceeds from potential sales of non-strategic assets and/or
the potential renewal or replacement of the term loan will provide the liquidity
necessary to support the development of its Tri-Box strategy and to meet its
operating needs. See "Certain Considerations," herein.
In the first nine months of fiscal 2002, net cash provided by operations and
borrowings on the Company's revolving credit agreement were primarily used to
fund capital expenditures, including the opening of seven new stores and the
relocation or expansion of seventeen stores. In the first nine months of fiscal
2001, short-term borrowings were used to supplement the lower than expected
operating results and cash flows for the same period.
The dollar amount of merchandise in the Company's stores at November 2, 2002
decreased compared with November 3, 2001. Total merchandise inventories at the
end of the third quarter of fiscal 2002 decreased 8.6% compared with the end of
the third quarter of fiscal 2002, due primarily to a one-week delay
year-over-year in increasing inventory levels to meet the demand of the 2002
Thanksgiving Day holiday weekend which occurred one week later than in 2001.
Total merchandise inventories at the end of the third quarter of fiscal 2002
were 4.5% lower on an average store basis than at February 2, 2002. The level
and source of inventories are subject to fluctuations because of the Company's
seasonal operations and business conditions prevailing at the time.
The level of outstanding documentary letters of credit decreased to $4.1 million
as of November 2, 2002 compared with $7.8 million as of November 3, 2001. The
Company currently expects to continue to pursue purchases of merchandise from
primarily domestic sources, but will purchase merchandise from foreign sources
when it is deemed to be in the best interests of the Company. Accounts payable
increased at the end of the third quarter of fiscal 2002 compared with both the
end of the third quarter of fiscal 2001 and February 2, 2002 due to improved
vendor financing. Total amounts outstanding under the credit facilities
(including the term loan portion of the revolving credit agreement) increased at
the end of the third quarter of fiscal 2002 compared with both the end of the
third quarter of fiscal 2001 and February 2, 2002 due to the Company's lower
than expected operating performance in fiscal 2002. The level of accounts
payable and amounts outstanding under the credit facilities are subject to
fluctuations based on changes in the Company's inventory levels and rate of
capital expenditures.
The Company's credit facilities consist of a revolving credit agreement and term
loan to meet short-term liquidity needs, a mortgage loan collateralized by the
Company's corporate offices and distribution center and letter of credit
facilities. The Company's revolving credit agreement expires in July 2005 and is
classified in current liabilities in the accompanying balance sheet.
Collectively, the credit facilities contain certain financial and non-financial
covenants with which the Company was in compliance at November 2, 2002. Please
refer to Note C to the unaudited condensed consolidated financial statements for
a more detailed description of the Company's credit facilities.
The Company's credit facilities require that these financial covenants be
measured on a monthly basis. Management believes that the Company will be in
compliance with all financial covenants required by each credit facility during
the period of each respective agreement based upon achieving its currently
forecasted operating results. However, achievement of these currently forecasted
operating results is dependent upon the Company meeting certain targets of net
sales, gross margin and operating expenses and, as a result, is not certain. If
the Company does not achieve its currently forecasted operating results, it is
possible that the adjusted minimum net worth covenants of the revolving credit
agreement and/or separate letter of credit facility may not be met during fiscal
2003. The Company successfully obtained an amendment to its adjusted net worth
covenants under the revolving credit agreement and letter of credit facility in
September 2002 and November 2002, respectively and if necessary, would seek
additional amendments to this covenant. However, there is no guarantee that the
Company would be able to obtain additional amendments if it is not in compliance
with these covenants.
On August 2, 2000, the Board of Directors authorized the Company to repurchase
up to 285,715 shares of its outstanding common stock at market prices. The
repurchase program authorizes purchases from time to time in the open market or
privately negotiated block transactions and contains no expiration date. The
authorization represented approximately 9.5% of the outstanding common stock of
the Company as of August 2, 2000. As of November 2, 2002, the Company had
repurchased 67,400 shares of its outstanding common stock for an aggregate
purchase price of $392,000 (average of $5.82 per share). During the first nine
months of fiscal 2002, the Company awarded 60,250 of these 67,400 shares to
certain of its employees.
In fiscal 2002, the Company plans to spend approximately $3.8 million on capital
expenditures, most of which will be used to open approximately seven new stores,
to remodel, re-fixture, expand and relocate existing stores, and invest in
information technology. The Company spent approximately $3.6 million on capital
expenditures, including purchases of non-current assets, during the nine-month
period ended November 2, 2002. The Company's liquidity requirements in the
foreseeable future are expected to be met principally through the use of its
credit facilities and through cash provided by operations. If deemed by
management to be in the best interest of the Company, additional long-term debt,
equity, capital leases, or other permanent financing may be considered. However,
there is no assurance that such financing will be available on acceptable terms.
Certain Considerations
Terrorism and the uncertainty of war may affect the Company's business.
The possibility of terrorist attacks, such as the attacks that occurred in New
York and near Washington, D.C. on September 11, 2001, and potential war with
Iraq (which the Company views as an increasing risk) have affected and may
continue to affect the markets in which the Company operates and the Company's
operations. The consequences of war with Iraq are unpredictable, and management
is unable to determine the effects such events could have on the Company's
markets or its business. Much of the Company's merchandise is imported (either
directly by the Company or indirectly through its domestic vendors) and,
although any potential impact cannot be quantified, an armed conflict could
affect the supply of imported merchandise. The Company experienced a significant
decline in sales during the Gulf War with Iraq in 1991. Immediately following
the September 11 attacks, the Company experienced sluggish demand for apparel in
its stores located along the border with Mexico and in areas whose local
economies are heavily dependent upon tourism. The potential near-term and
long-term effects that any future terrorist attacks may have for the Company's
customers, the markets for its products and the United States economy are
uncertain.
The Company faces significant competition.
The Company operates in the highly competitive discount retail merchandise
business. The Company competes with large discount retail chains such as
Wal-Mart, Kmart and Target and with off-price chains such as TJ Maxx, AJ Wright,
Ross Stores, Factory-2-U Stores and Marshall's, most of which have substantially
greater capital and other resources than the Company's. The Company also
competes with independent and small chain retailers which serve the same low-
and middle-income market. In the future, new companies may also enter the
deep-discount retail industry. Although management believes that the Company is
well-positioned to compete in its markets, there is no guarantee that the
Company will be able to compete successfully against its current and future
competitors.
As a result of competition, the Company is subject to the risk of reduced
profitability resulting from lower net sales and reduced margins. Management
expects that competition will continue and increase in the future. To counteract
such competitive pressures, the Company has started new merchandise strategies
including concentrating on its core apparel and accessories categories, better
execution of its core businesses, and broader methods of marketing its business;
all designed to improve gross margin, customer frequency and attract new
customers. However, management can not guarantee that these merchandising and
marketing strategies and other actions taken will improve results or be adequate
to minimize the Company's exposure to any negative impacts due to competition.
The Company's improvement in operating results depends on improvement
in net sales and gross margin.
The Company's improvement in operating results depends largely on its ability to
improve net sales and gross margin. To that end, in the future, the Company will
seek to focus its resources on its core merchandise categories of women's and
children's apparel and women's accessories. Within these core merchandise
categories, management believes that plus-size women's apparel, children's
apparel and women's accessories offer the most potential to increase net sales
and gross margin. To achieve this, the Company has increased the square footage
devoted to these categories in many of its stores. The Company will seek to
improve its gross margin in existing stores by continuing to focus its resources
on higher margin, faster-turning apparel categories and by increasing, as
proportions of its total merchandise offerings, accessories and its own brands
of merchandise.
The Company's Tri-Box store development efforts may not result in the
improved operating results as expected by management.
The Company's improvement in operating results also depends on its ability to
improve net sales and gross margin through its Tri-Box store strategy. The
Company's Tri-Box store development strategy depends on many factors, including
its ability to identify suitable markets and sites for Tri-Box stores, negotiate
leases with acceptable terms, appropriately upgrade its financial and management
information systems and controls, and manage its operating expenses. In
addition, the Company must be able to continue to hire, train, motivate and
retain competent managers and store personnel. Many of these factors are beyond
the Company's control. As a result, the Company may not be able to achieve its
future store development goals. Any failure by the Company to achieve its
Tri-Box store development goals on a timely basis, continue to enjoy acceptance
in its current markets, attract and retain management and other qualified
personnel, appropriately upgrade its financial and management information
systems, or control or manage operating expenses could adversely affect its
future operating results and its ability to execute its Tri-Box store
development strategy.
There is no guarantee that the Company's Tri-Box store development strategy will
improve the Company's results of operations as expected by management or that
the trend of increased sales in Tri-Box stores compared to the Company's
traditional stores will continue. A variety of factors are critical to the
success of the Company's Tri-Box stores and such factors include but are not
limited to store sales, store location, store size, lease terms, initial
advertising effectiveness and brand recognition. Management cannot assure that
such large stores will achieve the sales per selling square foot and store
contributions achieved in the Company's current Tri-Box stores.
Planned changes to and disruptions in distribution of merchandise could
impact the Company's business.
The Company's success depends upon whether its receiving and shipping schedules
for merchandise are well organized and managed. The Company anticipates an
increased level of purchases of pre-ticketed and pre-packaged merchandise from
vendors, which it believes will reduce the handling costs associated with
distributing merchandise to its stores. However, there is no guarantee that
these plans will provide the Company with the efficiencies anticipated.
In addition, the Company may face unexpected demands on its distribution
operations that could cause delays in delivery of merchandise from its
distribution center to its stores. A fire, earthquake or other disaster at the
Company's distribution center could harm its business, financial condition and
results of operations. The Company maintains commercial property, business
interruption, earthquake and flood insurance to minimize the potential financial
impact of these risks.
Relationships with the Company's vendors and the availability of
in-season merchandise affect its business.
The Company's success depends in large part on its ability to locate and
purchase first quality merchandise at attractive prices on acceptable terms.
Management cannot be certain that such merchandise will continue to be available
in the future on acceptable terms. Further, the Company may not be able to find
and purchase such first quality merchandise in quantities necessary to
accommodate its planned growth. Although management believes that the Company's
relationships with its vendors are good, the Company does not have long-term
agreements with any vendor. As a result, the Company must continuously seek out
buying opportunities from its existing suppliers and from new sources. The
Company competes for these opportunities with other retailers, discount and
deep-discount chains and mass merchandisers. Although the Company does not
depend on any single vendor or group of vendors, and believes it can
successfully compete in seeking out new vendors, a disruption in the
availability of merchandise at attractive prices and acceptable terms could
impair its business.
The Company's business is subject to seasonality.
The Company has historically realized its highest levels of sales and income
during the first and second quarters of its fiscal year (the quarters ending in
April and July) because of heavy sales associated with the Easter and Mother's
Day holidays. Any adverse events during the first and second quarter could
therefore affect the Company's financial performance. Historically, the Company
has realized a significant portion of its net sales and net income during these
two quarters. In anticipation of the Easter and Mother's Day holidays, the
Company may purchase substantial amounts of seasonal merchandise. If for any
reason, the Company's net sales during these seasons were below seasonal norms
or its expectations, a seasonal merchandise inventory imbalance could result. If
such an imbalance occurred, markdowns might be required to clear excess
inventory. The Company's profitability and operating results could be adversely
affected by higher than expected markdowns.
The shortened holiday buying season in 2002 may adversely affect the
Company's sales.
The 2002 holiday buying season consists of six fewer shopping days as compared
with 2001 due to a shift in the Thanksgiving Day holiday. This calendar shift
may have an adverse effect on the Company's sales for its fourth fiscal quarter
and for fiscal 2002. The Company experienced strong sales over the weekend
following Thanksgiving and reported comparable store sales results even with the
prior year for the month of November. However, due to a decreased level of
traffic in the Company's stores, sales during the first two weeks of December
have been well below expectations. The Company anticipates that the late
Christmas sales surge experienced in recent years could result in sales
rebounding to expected levels for the month of December. However, there is no
guarantee that such historical surge in late December sales will occur or, if it
does, that it will be sufficient to fully offset the sales decline experienced
since Thanksgiving weekend.
The Company's capital requirements may impact its operating results.
Historically, the Company's capital needs have been to maintain and expand its
stores and inventories. In the future, the Company may require additional
capital in order to successfully implement its Tri-Box store strategy. If the
Company is unable to generate sufficient cash flow from its results of
operations, enter into acceptable debt financing arrangements, sell additional
equity and/or generate sufficient cash flow from the potential sale of
non-strategic assets, it may be forced to limit the number of the Tri-Box stores
that it can open, which could adversely affect the Company's financial
condition, and the financial success of this strategy.
The Company may need additional financing to meet its future capital
requirements.
The Company's financial resources are limited and the amount of funding that the
Company will require in the future is uncertain. The Company's term loan under
its revolving credit agreement is due in July 2003. If the Company's results of
operations and/or proceeds from the potential sale of non-strategic assets fall
short of management's expectations, the Company may seek to renew or replace
such term loan. However, there is no guarantee that the Company will be able to
renew or replace such term loan on acceptable terms, if at all. This could
adversely affect the Company's ability to fund its Tri-Box store development
strategy, take advantage of opportunities, or respond to competitive pressures.
The Company's business is vulnerable to economic factors beyond its
control.
The Company's ability to provide quality merchandise at everyday low prices
could be hindered by certain economic factors beyond its control including, but
not limited to:
o increases in inflation;
o increases in operating costs;
o increases in employee health care and workers' compensation costs;
o increases in prevailing wage levels;
o increases in the minimum wage rate both at the Federal and state levels; and
o decreases in consumer confidence levels.
The market price of the Company's common stock has experienced
substantial fluctuation.
The market price of the Company's common stock has fluctuated substantially over
the last several years. Trading prices for its common stock could continue to
fluctuate significantly due to many factors, including:
o the depth of the market for the Company's common stock;
o changes in expectations of the Company's future financial performance,
including financial estimates by securities analysts and investors;
o variations in the Company's operating results;
o conditions or trends in the Company's industry;
o additions or departures of key personnel; and
o future sales of the Company's common stock.
The Company's common stock may not continue to be listed on The NASDAQ
National Market.
On July 24, 2002, the Company received notification from NASDAQ that the Company
was not in compliance with the NASDAQ National Market rule requiring a minimum
value of $5 million for the Company's publicly held shares over the previous
thirty consecutive trading days. The Company was automatically granted a 90-day
grace period in which to regain compliance with the rule. On October 25, 2002,
the Company received notification from NASDAQ that its common stock will be
de-listed from the NASDAQ National Market because the minimum value of publicly
held shares of the Company's common stock did not reach the required minimum of
$5 million during any ten-day period during the grace period. In response, the
Company has submitted materials to the NASDAQ Listing Qualifications Panel to
determine whether the Company's common stock qualifies for continued listing on
the NASDAQ National Market. The Company currently meets all other NASDAQ
National Market listing requirements.
In the event that the NASDAQ Listing Qualifications Panel determines that the
Company's stock does not qualify for continued listing on the National Market
system, the Company intends to apply to have its common stock listed on the
NASDAQ SmallCap Market. The Company's stock currently meets all of the
qualifications for the NASDAQ SmallCap Market where shareholders have electronic
access to current trading information, including last trade, bid and ask
quotations and trading volume.
Market Risk and Risk Management Policies
The Company is exposed to market risk from changes in interest rates affecting
its credit arrangements, including a variable-rate revolving credit agreement,
fixed-rate term loan and a fixed-rate mortgage loan agreement, which may
adversely affect the Company's results of operations and cash flows. The Company
seeks to minimize its interest rate risk through its day-to-day operating and
financing activities. The Company does not engage in speculative or derivative
financial or trading activities.
A hypothetical 100 basis point adverse change (increase) in interest rates
relating to the Company's revolving credit agreement would have increased
pre-tax loss for the nine months ended November 2, 2002 and November 3, 2001 by
approximately $235,000 and $203,000, respectively.
Effect of New Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") 144, "Accounting for the Impairment of Long-Lived
Assets," which supercedes SFAS 121 and the accounting and reporting provisions
of APB 30 related to the disposal of a segment of a business. The adoption of
SFAS 144 on February 3, 2002 had no material effect on the Company's
consolidated financial statements.
The FASB has issued SFAS 146, "Accounting for Costs Associated with Exit or
Disposal Activities," which nullifies the accounting and reporting provisions of
Emerging Issues Task Force ("EITF") 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (Including
Certain Costs in a Restructuring)." This statement is effective for exit or
disposal activities that are initiated after December 31, 2002, with earlier
adoption encouraged. The Company is in the process of reviewing the effect, if
any, that the adoption of SFAS 146 will have on its balance sheet, results of
operations and cash flows.
In November 2002, the EITF reached a consensus on issues raised in EITF 02-16,
"Accounting by a Reseller for Cash Consideration Received from a Vendor." This
EITF issue addresses the timing of recognition for rebates that are earned by
resellers based on specified levels of purchases or over specified periods of
time. This guidance related to timing of recognition is to be applied
prospectively to new rebate arrangements entered into in fiscal periods
beginning after December 15, 2002. This EITF issue also addresses the
classification of cash consideration received from vendors in a reseller's
statement of operations. The guidance related to income statement classification
is to be applied in annual and interim financial statements for periods
beginning after December 15, 2002. The Company is in the process of reviewing
the effect, if any, that the application of EITF 02-16 will have on its balance
sheet, results of operations and cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See required information contained within Item 2 of this Form 10-Q.
Item 4. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluations within 90 days prior to the filing date of
this report, that the Company's disclosure controls and procedures are effective
for gathering, analyzing and disclosing the information which it is required to
disclose in its reports filed under the Securities Exchange Act of 1934. There
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
the previously mentioned evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
10(a) Amendment Number Twelve to the Continuing Commercial
Credit Agreement by and between Congress Financial
Corporation (Southern) as Lender and the Registrant and
One Price Clothing of Puerto Rico, Inc. as Borrowers dated
September 25, 2002.
10(b) Amendment Number One to the Amended and Restated
Credit Agreement by and between Carolina First Bank as
Lender and the Registrant, One Price Clothing of Puerto
Rico, Inc. and One Price Clothing - U.S. Virgin Islands,
Inc. as Borrowers dated November 1, 2002.
10(c) Directors Deminimis Stock Incentive Plan dated
October 11, 2002.
10(d) Management Deminimis Stock Incentive Plan dated
October 11, 2002.
15 Acknowledgement of Deloitte & Touche LLP, independent accountants.
(b) Reports on Form 8-K
On September 26, 2002, the Company filed Form 8-K to report
the amendment of its revolving credit agreement with Congress
Financial (Southern), an affiliate of Wachovia Corporation.
- --------------------------------------------------------------------------------
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.
ONE PRICE CLOTHING STORES, INC. (Registrant)
Date: December 17, 2002 /s/ Leonard M. Snyder
----------------------------------------------------
Leonard M. Snyder
Chairman of the Board of Directors and Chief
Executive Officer (principal executive officer)
Date: December 17, 2002 /s/ H. Dane Reynolds
----------------------------------------------------
H. Dane Reynolds
Senior Vice President and Chief Financial Officer
(principal financial officer and principal
accounting officer)
CERTIFICATIONS:
I, Leonard M. Snyder, certify that:
1. I have reviewed this quarterly report on Form 10-Q of One Price
Clothing Stores, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: December 17, 2002
/s/ Leonard M. Snyder
Leonard M. Snyder
Chief Executive Officer
I, H. Dane Reynolds, certify that:
1. I have reviewed this quarterly report on Form 10-Q of One Price
Clothing Stores, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: December 17, 2002
/s/ H. Dane Reynolds
H. Dane Reynolds
Chief Financial Officer