SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period
Ended August 3, 2002 Commission File Number 0-15898
CASUAL MALE RETAIL GROUP, INC.
(Exact name of registrant as
specified in its charter)
Delaware 04-2623104
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
555 Turnpike Street, Canton, MA 02021
(Address of principal executive offices) (Zip Code)
(781) 828-9300
(Registrant's telephone
number, including area code)
Indicate by "X" whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
The number of shares of common stock outstanding as of September 16, 2002 was
34,115,807.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
August 3, 2002 and February 2, 2002
(In thousands, except share data)
August 3, February 2,
2002 2002
ASSETS (unaudited)
---------- ----------
Current assets:
Cash and cash equivalents $ 3,420 $ -
Accounts receivable 6,157 491
Inventories 135,009 57,734
Deferred income taxes 652 652
Prepaid expenses 7,496 2,887
---------- ----------
Total current assets 152,734 61,764
Property and equipment, net of
accumulated depreciation and amortization 73,074 20,912
Other assets:
Deferred income taxes 7,232 7,326
Intangible assets 66,674 -
Other assets 11,690 899
---------- ----------
Total assets $ 311,404 $ 90,901
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 839 $ -
Accounts payable 45,265 7,074
Accrued expenses and other current liabilities 22,744 11,120
Restructuring reserve 500 -
Accrued rent 2,280 2,541
Notes payable 70,121 27,752
---------- ----------
Total current liabilities 141,749 48,487
---------- ----------
Long-term debt, net of current portion 52,369 -
---------- ----------
Total liabilities 194,118 48,487
---------- ----------
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000,000 shares
authorized, 180,162 shares of Series B Convertible
Preferred Stock issued and outstanding at
August 3, 2002 2 -
Common Stock, $0.01 par value, 50,000,000 shares
authorized, 19,455,000 and 17,608,000 shares issued
at August 3, 2002 and February 2, 2002, respectively 195 176
Additional paid-in capital 145,753 56,189
Accumulated deficit (20,017) (5,304)
Treasury stock at cost, 3,040,000 shares at
August 3, 2002 and February 2, 2002, respectively (8,450) (8,450)
Loan to executive (197) (197)
---------- ----------
Total stockholders' equity 117,286 42,414
---------- ----------
Total liabilities and stockholders' equity $ 311,404 $ 90,901
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended Six Months Ended
---------------------------------------
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
---------------------------------------
Sales $ 115,691 $ 47,698 $ 152,132 $ 87,093
Cost of goods sold including
occupancy 79,824 34,683 108,272 64,673
----------------------------------------
Gross profit 35,867 13,015 43,860 22,420
Expenses:
Selling, general and administrative 34,060 10,065 43,137 19,771
Provision for restructuring, store
closings and impairment of assets 7,985 - 7,985 -
Depreciation and amortization 2,978 1,418 4,389 2,814
----------------------------------------
Total expenses 45,023 11,483 55,511 22,585
----------------------------------------
Operating (loss) income (9,156) 1,532 (11,651) (165)
----------------------------------------
Interest expense, net 2,706 534 3,059 1,081
----------------------------------------
(Loss) income before income taxes (11,862) 998 (14,710) (1,246)
Provision for income taxes 1,053 283 - 591
----------------------------------------
Net (loss) income $ (12,915) $ 715 $ (14,710) $ (655)
========================================
(Loss) earnings per share-
Basic and Diluted $ ( 0.80) $ 0.05 $ (0.95) $ (0.05)
Weighted average number of common
shares outstanding
Basic 16,050 14,477 15,421 14,468
Diluted 16,050 15,524 15,421 14,468
The accompanying notes are an integral part of the consolidated
financial statements.
CASUAL MALE RETAIL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
--------------------------
August 3, August 4,
2002 2001
----------- -----------
Cash flows from operating activities:
Net loss $ ( 14,710) $ (655)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 4,389 2,814
Restructuring, store closings and impairment 11,048 (454)
Issuance of common stock and options 34 150
(Loss) gain on sale or disposal of fixed assets 34 (21)
Changes in operating assets and liabilities:
Accounts receivable (4,193) (881)
Inventories (7,634) (11,987)
Prepaid expenses (767) 227
Other assets (2,073) (74)
Income taxes 94 47
Accounts payable 9,518 3,282
Accrued expenses and other current liabilities (1,064) 2,788
Accrued rent (261) 61
----------- -----------
Net cash used for operating activities (5,585) (4,703)
----------- -----------
Cash flows from investing activities:
Additions to property and equipment (3,155) (1,985)
Proceeds from disposal of property and equipment - 19
Acquisition of Casual Male, net of cash acquired (160,814) -
----------- -----------
Net cash used for investing activities (163,969) (1,966)
----------- -----------
Cash flows from financing activities:
Net borrowings under credit facility 42,369 6,655
Issuance of common stock under option program 119 14
Proceeds from the issuance of long term debt 41,057 -
Proceeds from the issuance of Series B Preferred Stock 76,569 -
Proceeds from the issuance of common stock 5,862 -
Proceeds from the issuance of warrants 9,589 -
Payment of equity transaction costs (2,591) -
----------- -----------
Net cash provided by financing activities 172,974 6,669
----------- -----------
Net change in cash and cash equivalents 3,420 -
Cash and cash equivalents:
Beginning of the year - -
----------- -----------
End of the period $ 3,420 $ -
=========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
CASUAL MALE RETAIL GROUP, INC,
Notes to Consolidated Financial Statements
1. Basis of Presentation
In the opinion of management of Casual Male Retail Group, Inc., a Delaware
corporation formerly known as Designs, Inc. (the "Company"), the accompanying
unaudited consolidated financial statements contain all adjustments necessary
for a fair presentation of the interim financial statements. These financial
statements do not include all disclosures associated with annual financial
statements and, accordingly, should be read in conjunction with the notes to the
Company's audited consolidated financial statements for the year ended February
2, 2002 (included in the Company's Annual Report on Form 10-K, as amended,
filed with the Securities and Exchange Commission).
The interim financial statements for the three and six months ended August 3,
2002 contain the results of operations since May 14, 2002, of the Company's
acquisition of substantially all of the assets of Casual Male Corp. and certain
of its subsidiaries ("Casual Male"). For a complete description of the
acquisition, see Note 2 below.
The information set forth in these statements may be subject to normal year-end
adjustments. The information reflects all adjustments that, in the opinion of
management, are necessary to present fairly the Company's results of operations,
financial position and cash flows for the periods indicated. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The Company's business
historically has been seasonal in nature and the results of the interim periods
presented are not necessarily indicative of the results to be expected for the
full year.
2. Acquisition
On May 14, 2002, pursuant to an asset purchase agreement entered into as of May
2, 2002, the Company completed the acquisition of Casual Male for a purchase
price of approximately $170 million, plus the assumption of certain operating
liabilities. The Company was selected as the highest and best bidder for the
Casual Male assets at a bankruptcy court ordered auction commencing on May 1,
2002 and concluding on May 2, 2002. The U.S. Bankruptcy Court for the Southern
District of New York subsequently granted its approval of the acquisition.
Casual Male, which was a leading independent specialty retailer of fashion,
casual and dress apparel for big and tall men, had annual sales that exceeded
$350 million. Casual Male sold its branded merchandise through various channels
of distribution including full price and outlet retail stores, direct mail and
the internet. Casual Male had been operating under the protection of the U.S.
Bankruptcy Court since May 2001.
Under the terms of the asset purchase agreement, the Company acquired
substantially all of Casual Male's assets including, but not limited to, the
inventory and fixed assets of approximately 475 retail store locations and
various intellectual property. In addition, the Company assumed certain
operating liabilities including, but not limited to, existing retail store
lease arrangements and the existing mortgage for Casual Male's corporate
headquarters, which are located in Canton, Massachusetts.
Allocation of purchase price:
Debit(Credit)
(in thousands)
Cash and cash equivalents $ 190
Accounts receivable 1,473
Merchandise inventory 72,705
Prepaid expenses 3,842
Property and equipment 60,569
Other assets 9,062
Goodwill 30,074
Casual Male trademark 35,000
Customer lists 1,600
Accounts payable (28,673)
Accrued expenses and other current liabilities (1,656)
Accrual for estimated transaction and severance costs (11,029)
Mortgage note (12,151)
-------
Total cash paid for assets acquired and liabilities assumed $ 161,004
The Casual Male acquisition, along with the payment of certain related fees and
expenses, was completed with funds provided by: (i) approximately $30.2 million
in additional borrowings from the Company's amended three-year $120.0 million
senior secured credit facility with the Company's bank, Fleet Retail Finance,
Inc. ("FRFI"), (ii) $15.0 million from a three-year term loan with a subsidiary
of FRFI, (iii) proceeds from the private placement of $24.5 million principal
amount of 12% senior subordinated notes due 2007 together with detachable
warrants to acquire 1,715,000 shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), at an exercise price of $.01 per share, and
additional detachable warrants to acquire 1,176,471 shares of Common Stock at an
exercise price of $8.50 per share, (iv) proceeds from the private placement of
$11.0 million principal amount of 5% senior subordinated notes due 2007, (v)
approximately $82.5 million of proceeds from the private placement of
approximately 1.4 million shares of Common Stock and 180,162 shares of newly
designated Series B Convertible Preferred Stock, par value $0.01 per share
("Series B Preferred Stock")(which were automatically converted on August 8,
2002, subsequent to the end of the second quarter of fiscal 2003, into
18,016,200 shares of Common Stock), and (vi) the assumption of a mortgage note
in the principal amount of approximately $12.2 million.
Below are the pro forma results for the three and six months ended August 3,
2002 and August 4, 2001, assuming that the acquisition had occurred February 3,
2002 and February 1, 2001, respectively. The results for the three and six
months ended August 3, 2002 include the $11.0 restructuring charge recorded by
the Company related to the downsizing of its Levi's(r) and Dockers(r)
businesses:
For the three months ended:
Casual Male Designs Total Consolidated
8/3/02 8/4/01(1) 8/3/02(2) 8/4/01 8/3/02 8/4/01
-------------------- ------------------- -------------------
(in thousands)
Sales $ 82,390 $ 79,146 $ 42,270 $ 47,698 $124,660 $ 126,844
Gross Margin 35,235 33,536 5,320 13,015 40,555 46,551
Selling, general
and administrative 28,041 28,637 10,049 10,065 38,090 38,702
Depreciation and
Amortization 1,831 1,429 1,387 1,418 3,218 2,847
Interest Expense 2,438 3,615 514 534 2,952 4,149
----------------- ------------------ -------------------
Pre-tax income(loss) $2,924 $( 146) $(14,615) $ 998 $(11,691) $ 853
For the six months ended:
Casual Male Designs Total Consolidated
8/3/02 8/4/01(1) 8/3/02(2) 8/4/01 8/3/02 8/4/01
------------------- ---------------- ------------------
(in thousands)
Sales $160,761 $159,446 $ 78,711 $ 87,093 $239,472 $246,539
Gross Margin 68,397 64,895 13,313 22,420 81,710 87,315
Selling, general
and administrative 56,230 54,641 27,111 19,771 83,341 74,412
Depreciation and
Amortization 3,531 3,406 2,798 2,814 6,329 6,220
Interest Expense 5,142 6,911 867 1,081 6,009 7,992
------------------ ------------------ --------------------
Pre-tax income(loss) $3,493 $( 63) $(17,463) $(1,246) $(13,970) $(1,309)
(1) Adjusted to eliminate the results of operations for closed store
locations, which were not purchased by the Company.
(2) Includes the impact of restructuring charges totaling $11.0 million
related to the downsizing of the Levi's(r)/Dockers(r) business.
The pro forma results have been prepared based on available information, using
assumptions that the Company's management believes are reasonable. The results
do not purport to represent the actual financial position or results of
operations that would have occurred if the acquisition had occurred on the dates
specified. The results above are not necessarily indicative of the results that
may be achieved in the future. These results also do not reflect any
adjustments for the effect of certain operating synergies or expected cost
reductions that the Company may realize as a result of the acquisition. No
assurances can be given that the amount of financial benefits, if any, may
actually be realized as the result of the acquisition. The Company has started
to implement several cost reduction and synergy initiatives which are not
reflected in these pro forma results, which the Company expects will ultimately
result in savings in the range of $20 million to $25 million on an annualized
basis. Since the acquisition in May 2002, almost half of the total expected
savings were realized and will begin to be reflected in the Company's operating
results during the second half of the fiscal year.
3. Debt
Revolver
- --------
The Company has a credit facility with Fleet Retail Finance Inc., which was most
recently amended on May 4, 2002 in connection with the financing for the Casual
Male acquisition (the "Amended Credit Agreement"). The Amended Credit Agreement,
which expires May 14, 2005, principally provides for a total commitment of $120
million with the ability for the Company to issue documentary and standby
letters of credit of up to $20 million. The Company's ability to borrow under
the facility is determined using an availability formula based on eligible
assets. The Company's obligations under the Amended Credit Agreement continue
to be secured by a lien on all of its assets. The Amended Credit Agreement
continues to include certain covenants and events of default customary for
credit facilities of this nature, including change of control provisions and
limitations on payment of dividends by the Company.
At August 3, 2002, the Company had outstanding borrowings of approximately $70.1
million under this credit facility. Outstanding standby letters of credit were
$1.4 million and outstanding documentary letters of credit were $1.4 million at
August 3, 2002. Average borrowings outstanding under this facility during the
first six months of fiscal 2003 were approximately $46.7 million, resulting in
an average unused excess availability of approximately $12.2 million during the
first six months of fiscal 2003. At August 3, 2002, the unused availability was
$17.6 million. The Company was in compliance with all debt covenants under the
Amended Credit Agreement at August 3, 2002.
Long-Term Debt
- --------------
Components of Long-term debt are as follows:
(in thousands)
Term Loan $ 15,000
12% senior subordinated notes due 2007 15,189
5% senior subordinated notes due 2007 11,000
Mortgage note 12,019
------
Total long-term debt 53,208
Less: current portion of mortgage note (839)
------
Long-term debt, less current portion $ 52,369
On May 14, 2002, the Company entered into a three year Term Loan with Back Bay
Capital, a subsidiary of Fleet Retail Finance, Inc. Interest on the term loan
includes a 12% coupon, 3% paid-in-kind and a 3% annual commitment fee, for a
total annual yield of 18%.
In April and May 2002, the Company also issued $24.5 million principal amount
of 12% senior subordinated notes through private placements. The principal
amount of $15.2 million is net of the assigned value of unamortized warrants
to acquire 1,715,000 shares of common stock at an exercise price of $0.01 per
share and additional detachable warrants to acquire 1,176,471 shares of common
stock at an exercise price of $8.50 per share. The total assigned value of the
warrants of approximately $9.6 million, which has been reclassified to equity,
is being amortized over the five-year life of the notes as interest expense.
In addition, the Company also issued $11.0 million principal amount of 5% senior
subordinated notes through a private placement with the Kellwood Company, with
whom the Company has entered into a product sourcing agreement. Beginning at
the end of the second quarter of fiscal 2004, the Company will make principal
payments in the amount of $625,000 per quarter through the remaining term of the
notes.
In connection with the Casual Male acquisition, the Company also assumed an
outstanding mortgage note for real estate and buildings located in Canton,
Massachusetts. The mortgage note, which bears interest at 9%, has an
outstanding principal balance of $12.0 million at August 3, 2002.
4. Equity
Series B Preferred Stock Conversion and Issuance of Warrants
- ------------------------------------------------------------
In connection with the Casual Male acquisition, the Company issued 180,162
shares of its Series B Convertible Preferred Stock through private placements.
On August 8, 2002, subsequent to the end of the second quarter, all 180,162
shares of the Series B Convertible Preferred Stock were automatically converted,
upon shareholder approval, to 18,016,200 shares of the Company's Common Stock.
No value was assigned to this conversion feature since the price paid on that
date for one share of preferred stock was the same price as the price at which
100 shares of Common Stock could be purchased on the date of the transaction.
Warrants to purchase common stock of the Company were also issued in connection
with the acquisition. As part of the private placement of the Company's 12%
senior subordinated notes, the Company issued warrants to purchase 1,715,000
shares of Common Stock at an exercise price of $0.01 per share and additional
warrants to purchase 1,176,471 shares of Common Stock at an exercise price of
$8.50 per share. The Company has assigned a value, based on the Black Scholes
model, of $9.6 million for these warrants. The value of the warrants has been
reflected as a component stockholders' equity and is being amortized over the
term of the corresponding debt, which is five years. Also, as part of the
equity financing, the Company issued to its investment advisor warrants to
purchase 500,000 shares of Common Stock at an exercise price of $4.25 per
share. The total assigned value of these warrants of $1.2 million have been
reflected as a cost of equity at August 3, 2002. Subsequent to the end of the
second quarter of fiscal 2002, all warrants became immediately exercisable,
subject to applicable notice requirement.
Earnings Per Share
- ------------------
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
requires the computation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the respective
period. Diluted earnings per share is determined by giving effect to the
exercise of stock options and certain warrants using the treasury stock method.
In addition, for the three and six months ended August 3, 2002 the Company also
gave effect to the prospective convertibility of its Series B Convertible
Preferred Stock, which is discussed more fully above. The following table
provides a reconciliation of the number of shares outstanding for basic and
diluted earnings per share.
For the: Three months ended Six months ended
(In thousands) 8/3/02 8/4/01 8/3/02 8/4/01
- -----------------------------------------------------------------------------
Basic weighted average common
shares outstanding 16,050 14,477 15,421 14,468
Stock options, excluding the effect
of anti-dilutive options and warrants
totaling 1,839 shares for the three
months ended August 3, 2002 and 1,267
and 852 shares for the six months ended
August 3, 2002 and August 4, 2001,
respectively -- 1,047 -- --
Shares of Series B Convertible Preferred
Stock of 13,512 shares and 7,721 shares were
Excluded for the three and six months ended
August 3, 2002, respectively, because the
effect was anti-dilutive -- -- -- --
------ ------ ------ -------
Diluted weighted average common
shares outstanding 16,050 15,524 15,421 14,468
The following potential common stock equivalents were excluded from the
computation of diluted earnings per share, in each case, because the exercise
price of such options and warrants was greater than the average market price per
share of Common Stock for the periods reported:
Three months ended Six months ended
(in thousands) 8/3/02 8/4/01 8/3/02 8/4/01
- -----------------------------------------------------------------------------
Stock Options 118 151 118 151
Warrants 1,176 - 1,176 -
5. Restructuring, Store Closing and Impairment of Assets
During the second quarter of fiscal 2003, the Company recorded charges totaling
$11.0 million related to the Company's restructuring of its Levi's(r)/Dockers(r)
business and the integration of the Casual Male operations. Of the total $11.0
million in restructuring charges, $4.5 million relates to the impairment of
assets of between 34 and 40 Levi's(r) and Dockers(r) stores that the Company
intends to close over the next several years and $3.0 million relates to
inventory losses. The $3.0 million provision for inventory is included in gross
margin on the statement of operations for the three and six months ended August
3, 2002. In addition, the charge includes $3.5 million related to the
integration plan to combine the operations of Casual Male with that of the
Company, which includes relocating the Company's distribution facility and
corporate offices to Canton, Massachusetts.
Of the total charge of $11.0 million, the total non-cash costs represent
approximately $7.5 million of the charge, with the remaining consisting of the
cash costs for integration expense and the inventory costs of liquidating
stores. Of the total $11.0 million charge, $7.5 million, which was related to
impairment of assets for store closings and the write-off of certain other
assets in connection with the relocating of the Company's headquarters and
distribution facility was reflected as a reduction in Property, Plant and
Equipment, and $3.5 million was recorded as a write-down of inventory on the
Consolidated Balance Sheet at August 3, 2002. The remaining $0.5 million of the
charge was reflected in accrued expenses at August 3, 2002.
6. Income Taxes
During the second quarter of fiscal 2003, the Company experienced a continuing
sales decreases in its Levi's(r)/Dockers(r) business as a result of the
deterioration of the Levi's(r) brand. As the result of the Company recording
the above restructuring charges and the anticipated impact of the charges on the
Company's full year results, the Company reversed the income tax benefit it
previously recorded in the first quarter of fiscal 2003, such that no income tax
benefit has been recognized for the six months ended August 3, 2002.
Realization of the Company's deferred tax assets, which relate principally to
federal net operating loss carryforwards, which expire from 2017 through 2022,
is dependent on generating sufficient taxable income in the following three
years of the carryforward period. At August 3, 2002, the Company evaluated the
realizability of its existing deferred tax assets, net of a previously
established valuation allowance, and concluded that no additional increase in
the valuation allowance was necessary at August 3, 2002.
Part I. Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
SUMMARY OF SIGNIFICANT SECOND QUARTER EVENTS
Acquisition
On May 14, 2002 the Company completed the acquisition of substantially all of
the assets of Casual Male Corp. and certain subsidiaries ("Casual Male") for a
purchase price of approximately $170 million, plus the assumption of certain
operating liabilities. The Company was selected as the highest and best bidder
at a bankruptcy court ordered auction commencing on May 1, 2002 and concluding
on May 2, 2002. The U.S. Bankruptcy Court for the Southern District of New York
subsequently granted its approval of the acquisition of Casual Male on May 7,
2002.
Casual Male was a leading independent specialty retailer of fashion, casual and
dress apparel for big and tall men, with annual sales that exceeded $350
million. Casual Male sold its branded merchandise through various channels of
distribution including full price and outlet retail stores, direct mail and the
internet. Casual Male had been operating under the protection of the U.S.
Bankruptcy Court since May 2001.
Under the terms of the asset purchase agreement, the Company acquired
substantially all of Casual Male's assets including, but not limited to, the
inventory and fixed assets of approximately 475 retail store locations and
various intellectual property. In addition, the Company will also assume
certain operating liabilities including, but not limited to, existing retail
store lease arrangements and the existing mortgage for Casual Male's corporate
office, which is located in Canton, Massachusetts.
Corporate Name Change
In view of the significance of the Casual Male acquisition to the growth and
future identity of the Company, at the Company's Annual Meeting of Stockholders
which was held on August 8, 2002, the stockholders approved the Board of
Directors' recommendation to change the Company's name to "Casual Male Retail
Group, Inc." The Company believes that the Casual Male division will be a
significant future contributor to the Company's overall business and that this
name change was an important step to align the customer and investor
identification of the Company with the Casual Male store concept.
Planned Divestiture
On August 12, 2002, the Company announced its intention, subject to market and
other conditions, to conduct a rights offering resulting in a divesture of its
loss prevention services subsidiary, referred to as LPI. The shares of LPI
common stock are not presently registered under the Securities Act of 1933, as
amended. In the rights offering, common stock of LPI is expected to be offered
for purchase to stockholders of Casual Male Retail Group, Inc. LPI,
which provides loss prevention services and system solutions primarily to
the retail industry, is a subsidiary of the Company that was acquired as part of
the Casual Male acquisition.
Restructuring, Store Closing and Impairment of Assets
During the second quarter of fiscal 2003, as a result of the continued erosion
of the Levi Strauss & Co. brands in the marketplace and Levi Strauss & Co.'s
inability to provide the Company with a balanced assortment of product for the
Company's Levi's(r)/Dockers(r) outlet stores, the Company implemented an
Aggressive plan to downsize its Levi's and Dockers business. As a result, the
Company plans to close between 34 and 40 stores, combine 6 to 8 other stores and
Reduce the square footage in another 20 to 25 stores. The Company expects to
close between 15 and 20 of these Levi's(r)/Dockers(r) outlet stores over the
next twelve to eighteen months, and has started negotiations with several
landlords to terminate leases on the remaining underperforming stores.
As a result, in the second quarter of fiscal 2003, the Company recorded $11.0
million in restructuring charges. Of the total $11.0 million, $4.5 million
relates to the impairment of assets for between 34 and 40 stores that the
Company intends to close over the next several years and $3.0 million relates to
inventory costs to close the initial 15 to 20 stores. In addition, the
restructuring charge includes $3.5 million related to the integration plan to
combine the operations of Casual Male with that of the Company, which includes
relocating the Company's distribution facility and corporate offices to Canton,
Massachusetts. Of the total charge of $11.0 million, the total non-cash costs
represent approximately $7.5 million, with the remainder consisting of cash
costs for integration expenses and the inventory costs of liquidating stores.
RESULTS OF OPERATIONS
The Company's results for the second quarter of fiscal 2003 include the results,
since May 14, 2002, of the Company's acquisition of Casual Male.
Sales
Total sales for the second quarter of fiscal 2003, which ended August 3, 2002,
were $115.7 million as compared to $47.7 million in the second quarter of fiscal
2002. The Casual Male stores, including the catalog sales, represented
approximately $73.0 million, or 63% of the total sales for the second quarter
of fiscal 2003. For the period from May 14, 2002 to August 3, 2002, the Casual
Male business achieved a comparable store sales increase of approximately 4%
when compared to the corresponding period in the prior year.
The Company's Levi's(r)/Dockers(r) business had a comparable store sales
decrease of 15% for the second quarter of fiscal 2003. The Company is working
closely with Levi Strauss & Co. on addressing the current product issues that
the Company is experiencing and expects to see improvements beginning in the
Spring of fiscal 2004. However, these actions are not yet implemented and the
Company's Levi's(r) and Dockers(r) businesses are continuing to show
Significant negative trends during the important Back to School selling
season. As a result, the Company determined that it needed to downsize the
Levi's(r)/Dockers(r) chain, as discussed in more detail above under
"Restructuring and Store Closing". Once the Company's plan to downsize the
Levi's(r)/Dockers(r) business is complete, the remaining Levi's(r)/Dockers(r)
business will represent less than 20% of the combined sales of the Company.
Gross Profit Margin
The increase in gross margin for the three and six months ended August 3, 2002
as compared to the corresponding periods in the prior year is due to the higher
merchandise margins generated in the Company's Casual Male business. The 3.7
percentage point increase in gross margin for the three months ended August 3,
2002 is due to an increase of 6.4 percentage points in merchandise margin
partially offset by a 2.6 percentage point decrease related to inventory write-
downs taken during the second quarter of fiscal 2003. The 6.4 percentage point
increase in merchandise margin was comprised of a decrease of 4.8 percentage
points in the Levi's(r)/Dockers(r) business offset by an 11.2 percentage point
benefit from the Company's Casual Male business. Similarly, for the six months
ended August 3, 2002, the 3.2 percentage point increase in gross margin was due
to a 5.1 percentage point increase in merchandise margin partially offset by the
impact of the inventory write-down of 2.0 percentage points. The 5.1 percentage
point increase in margin was comprised of a 2.6 percentage point decrease in the
Levi's(r)/Dockers(r) business offset by a 7.7 percentage point benefit from the
Casual Male business.
The deterioration of the Levi's brands in the marketplace, coupled with Levi
Strauss & Co.'s inability to provide an adequate balance of merchandise, has
caused the Company to maintain an aggressive promotional posture in an effort to
improve sales and liquidate inventory. This increase in promotional activity as
compared to prior periods has had a negative impact on merchandise margins.
The Casual Male business has had a significant benefit to the Company's overall
gross margin rates. Casual Male has a substantial portion of private label
merchandise, which by its nature produces higher gross margins. In addition,
due to the limited competition in the Big and Tall market, the Company's
promotional rates trend lower than the men's apparel industry in general.
As mentioned, included in gross margin for the three and six months ended August
3, 2002 is $3.0 million in inventory reserves taken during the second quarter of
fiscal 2003 in connection with the Company's plan to downsize its
Levi's(r)/Dockers(r) business. The $3.0 million relates specifically to the
liquidation of inventory in the stores that the Company will be closing over the
next twelve to eighteen months.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for the three months ended
August 3, 2002 were 29.4% of sales as compared to 21.1% for the corresponding
period in the prior year. For the six months ended August 3, 2002, SG&A
expenses were 28.4 % as compared to 22.7% for the corresponding period in the
prior year.
The increase in SG&A as a percent to sales for the three and six months ended
August 3, 2002 is due principally to the addition of the Casual Male cost
structure to the Company's existing low cost base. The Company has started to
implement several cost reduction and synergy initiatives which the Company
expects will ultimately result in savings in the range of $20 to $25 million on
an annualized basis. Since the acquisition in May 2002, almost half of the
total expected savings were realized and will begin to be reflected in the
Company's operating results during the second half of the fiscal year.
Depreciation and Amortization
Depreciation and amortization expense for the three and six months ended August
3, 2002 increased over the prior year due to the addition of approximately $61.0
million in assets acquired in connection with the Casual Male acquisition.
Interest Expense, Net
Net interest expense was $2.7 million for the three months ended August 3, 2002
as compared to $534,000 for the corresponding period in the prior year. For the
six months ended August 3, 2002, net interest expense was $3.1 million as
compared to $1.1 million for the corresponding period in the prior year. The
significant increase in interest expense for both the three and six months ended
August 3, 2002 is due to the increased debt levels of the Company as a result of
the acquisition of Casual Male. Approximately $90 million of new debt was
issued in connection with the acquisition of Casual Male. The interest rate
incurred on this additional debt averages approximately 8.3% on an annualized
basis.
Income Taxes
During the second quarter of fiscal 2003, the Company experienced continuing
sales decreases in its Levi's(r)/Dockers(r) business as a result of the
deterioration of the Levi Strauss & Co.'s brands in the marketplace. As the
result of the Company recording the above restructuring charges and the
anticipated impact of the charges on the Company's full year results, the
Company reversed the income tax benefit it previously recorded in the first
quarter of fiscal 2003, such that no income tax benefit has been recognized
for the six months ended August 3, 2002.
Realization of the Company's deferred tax assets, which relate principally to
federal net operating loss carryforwards, which expire from 2017 through 2022,
is dependent on generating sufficient taxable income in the following three
years of the carryforward period. At August 3, 2002, the Company evaluated the
realizability of its existing deferred tax assets, net of a previously
established valuation allowance, and concluded that no additional increase in
the valuation allowance was necessary at August 3, 2002.
Net Loss
For the three months ended August 3, 2002, the Company reported a net loss of
$(12.9) million, which includes restructuring charges totaling $11.0 million.
This loss compares to net income of $0.7 million for the three months ended
August 4, 2001. For the six months ended August 3, 2002, the Company reported a
net loss of $(14.7) million, of which $11.0 million related to the
aforementioned restructuring charges, compared to net loss of $(0.7) million for
the six months ended August 4, 2001. On an operating basis since the
acquisition on May 14, 2002, the Casual Male business earned operating income of
approximately $4.9 million during the second quarter of fiscal 2003 while the
Levi's(r)/Dockers(r) business generated an operating loss of approximately $3.1
million for the second quarter of fiscal 2003.
SEASONALITY
Historically, the Company has experienced seasonal fluctuations in revenues and
income with increases occurring during the Company's third and fourth quarters
as a result of "Fall" and "Holiday" seasons.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs are for working capital, essentially inventory
requirements, and capital expenditures. Specifically, the Company's capital
expenditure program includes projects for new store openings, downsizing or
combining existing stores, and improvements and integration of its systems
infrastructures. For the remainder of fiscal 2003, the Company expects that
much of the Company's capital requirements will be used for expansion of its
Casual Male business as well as its Candies(R) and Ecko Unltd.(R) outlet stores.
As previously discussed, the Company's recent acquisition of Casual Male was
funded through a combination of the issuance of new debt and equity. The
Company anticipates that cash flow from operations and availability under the
Company's amended $120 million credit facility with FRFI will be sufficient to
meet all debt payments and operating needs of its business.
During the first six months of fiscal 2003, cash used for operations was $5.6
million as compared to cash used for operations of $4.7 million for the first
six months of the prior year. Cash from operations as compared to the prior
year decreased $882,000 as a result of the Company's operating loss for the
three months ended August 3, 2002 as compared to the three months ended
August 4, 2001.
At August 3, 2002, total inventory equaled $135.0 million, compared to $57.7
million at February 2, 2002. This increase in inventory is principally due to
approximately $77.0 million in inventory acquired in the Casual Male
acquisition.
Total cash outlays for capital expenditures, net of landlord allowances, for
the first six months of fiscal 2003 were $3.2 million compared to $2.0 million
during the first six months of fiscal 2002. During the first six months of
fiscal 2003, the Company opened eleven new Candies(R) outlet stores, three of
which were carve-outs from the Company's existing Levi's(R)/Dockers(R) outlet
stores and three Ecko Unltd.(R) outlet stores.
The Company's expansion plans for the remainder of fiscal 2003 will focus on
opening 5 to 6 Casual Male stores and investing in the Company's systems
infrastructure, as part of its integration plan.
In connection with the Casual Male acquisition, the Company amended its
Existing credit facility with Fleet Retail Finance, Inc. to provide for a
total commitment of $120.0 million with a $20.0 million carve-out for
standby and documentary letters of credit. This facility will continue
to provide the Company with its on-going working cash needs. At August 3,
2002, the Company had borrowings of approximately $70.1 million outstanding
under this credit facility and had outstanding standby letters of credit
totaling approximately $1.4 million and outstanding documentary letters of
credit of $1.4 million, with availability approximating $18.0 million.
The Company's working capital at August 3, 2002 was approximately $11.0
million, compared to $13.3 million at February 2, 2002. This decrease in
working capital was primarily attributable to the long-term investment of the
Casual Male acquisition.
The foregoing discussion of the Company's results of operations, liquidity,
capital resources and capital expenditures includes certain forward-looking
information. Such forward-looking information requires management to make
certain estimates and assumptions regarding the Company's expected strategic
direction and the related effect of such plans on the financial results of
the Company. Accordingly, actual results and the Company's implementation
of its plans and operations may differ materially from forward-looking
statements made by the Company. The Company encourages readers of this
information to refer to Exhibit 99.3 to the Company's Form 8-K, filed with
the Securities and Exchange Commission on September 17, 2002, which identifies
certain risks and uncertainties that may have an impact on future earnings
and the direction of the Company.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, the financial position and results of
operations of the Company are routinely subject to a variety of risks,
including market risk associated with interest rate movements on borrowings.
The Company regularly assesses these risks and has established policies and
business practices to seek to protect against the adverse effect of these and
other potential exposures.
The Company utilizes cash from operations and short-term borrowings to
fund its working capital needs. Borrowings under the Company's bank credit
agreement, which expires in May 2005, bear interest at variable rates
based on Fleet National Bank, N.A.'s prime rate or the London Interbank Offering
Rate ("LIBOR"). These interest rates at August 3, 2002 were 5.25% for prime
based borrowings and included various LIBOR contracts with interest rates
ranging from 4.630% to 5.124%. Based upon sensitivity analysis as of August 3,
2002, a 10% increase in interest rates would result in a potential cost to the
Company of approximately $367,000 on an annualized basis. In addition, the
Company has available letters of credit as sources of financing for its working
capital requirements.
Part II. Other Information
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Default Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on August 8, 2002.
The matters submitted to a vote of the Company's stockholders were (i)
the election of eight directors, (ii) amendment to the Company's
Restated Certificate of Incorporation to change the Company's name
from "Designs, Inc." to "Casual Male Retail Group, Inc.", (iii)
amendment to the Company's Restated Certificate of Incorporation to
increase the authorized number of shares of the Company's common stock
from 50,000,000 to 75,000,000, (iv) approval for the issuance of
additional common stock of the Company upon the conversion of
outstanding preferred stock and the exercise of outstanding warrants,
(v) approval for the change of the Company's state of incorporation
from Delaware to Nevada through a reincorporation merger, and (vi)the
ratification of Ernst & Young LLP as independent auditors for the
Company for the current fiscal year.
(b) The Company's Stockholders elected eight directors to hold office
until the 2003 Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified. The results of
the voting were as follows:
Directors Votes FOR Votes Withheld
Seymour Holtzman 15,351,360.5245 111,892
David A. Levin 15,352,460.5245 110,792
Jesse Choper 15,352,260.5245 110,992
Alan Cohen 15,352,260.5245 110,992
Stephen M. Duff 15,352,365.5245 110,887
Jeremiah P. Murphy, Jr. 15,352,660.5245 110,592
Joseph Pennacchio 15,352,260.5245 110,992
George T. Porter, Jr. 15,352,360.5245 110,892
(c) The Company's stockholders approved an amendment to the Company's
Restated Certificate of Incorporation to change to the Company's name
from "Designs, Inc" to "Casual Male Retail Group, Inc." The results
of the voting were as follows:
Votes FOR Votes AGAINST Votes Withheld
15,413,578.5245 44,087 5,587
(d) The Company's stockholders approved an amendment to the Company's
Restated Certificate of Incorporation to increase the authorized
number of shares of the Company's common stock from 50,000,000 to
75,000,000. The results of the voting were as follows:
Votes FOR Votes AGAINST Votes Withheld Non-Votes
10,300,178.5245 1,037,850 11,876 4,113,348
(e) The Company's stockholders approved the issuance of additional common
stock of the Company upon the conversion of outstanding preferred
stock and the exercise of outstanding warrants. The results of the
voting were as follows:
Votes FOR Votes AGAINST Votes Withheld Non-Votes
11,085,112.5245 242,841 21,951 4,113,348
(f) The Company's stockholders approved the change to the Company's state
of incorporation from Delaware to Nevada through a reincorporation
merger. The results of the voting were as follows:
Votes FOR Votes AGAINST Votes Withheld Non-Votes
9,816,102.5245 1,523,215 10,587 4,113,348
(g) The Company's stockholders also ratified the selection of Ernst &
Young LLP as the Company's independent auditors for the current fiscal
year. The results of the voting were as follows:
Votes FOR Votes AGAINST Votes Withheld
15,445,945.5245 8,671 8,636
ITEM 6. Exhibits and Reports on Form 8-K
A. Reports on Form 8-K:
The Company reported under Item 2 of Form 8-K, dated May 23, 2002, and amended
on May 23, 2002, June 14, 2002 and September 11, 2002, its acquisition of
substantially all of the assets of Casual Male Corp. and certain subsidiaries,
and reported under Item 7 of such Form 8-K the historical audited consolidated
financial statements of Casual Male Corp. and the unaudited pro forma financial
information giving effect to the Company's acquisition of Casual Male Corp. and
to the financing transactions completed by the Company as of May 14, 2002.
B. Exhibits:
3.1 Restated Certificate of Incorporation of the Company, as
amended (included as Exhibit 3.1 to Amendment No. 3 of the
Company's Registration Statement on Form S-1 (No. 33-13402),
and incorporated herein by reference). *
3.2 Certificate of Amendment to Restated Certificate of
Incorporation, as amended, dated June 22, 1993 (included as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
dated June 17, 1996, and incorporated herein by reference). *
3.3 Certificate of Amendment to Restated Certificate of Incorporation
dated August 8, 2002.
3.3 Certificate of Designations, Preferences and Rights of a
Series of Preferred Stock of the Company established Series A
Junior Participating Cumulative Preferred Stock dated May 1,
1995 (included as Exhibit 3.2 to the Company's Annual Report
on Form 10-K dated May 1, 1996, and incorporated herein by
reference). *
3.4 Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Series B Convertible Preferred
Stock dated May 14, 2002 (included as Exhibit 3.1 to the Company's
Form 8-K filed on May 23, 2002, and incorporated herein by reference). *
3.5 By-Laws of the Company, as amended (included as Exhibit 3.4 to
the Company's Quarterly Report on Form 10-Q dated December 12, 2000,
and incorporated herein by reference). *
10.1 1992 Stock Incentive Plan, as amended (included as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q dated September 18,
2001, and incorporated herein by reference). *
10.2 License Agreement between the Company and Levi Strauss & Co.
dated as of April 14, 1992 (included as Exhibit 10.8 to the
Company's Annual Report on Form 10-K dated April 29, 1993, and
incorporated herein by reference). *
10.3 Amended and Restated Trademark License Agreement between the
Company and Levi Strauss & Co. dated as of October 31, 1998
(included as Exhibit 10.4 to the Company's Current Report on
Form 8-K dated December 3, 1998, and incorporated herein by
reference). *
10.4 Amendment to the Amended and Restated Trademark License
Agreement between the Company and Levi Strauss & Co. dated
March 22, 2000 (included as Exhibit 10.7 to
the Company's Form 10-K dated April 28, 2000, and incorporated
herein by reference). *
10.5 Second Amended and Restated Loan and Security Agreement dated
as of December 7, 2000 among the Company and Fleet Retail
Finance Inc., as agent for the Lender(s) identified therein.
(included as Exhibit 10.12 to the Company's Form 10-Q dated
December 12, 2000, and incorporated herein by reference). *
10.6 Third Amended and Restated Loan and Security Agreement dated
as of May 14, 2002, by and among Fleet Retail Finance, Inc.,
as Administrative Agent and Collateral Agent, the Lenders
identified therein, the Company, as Borrowers' Representative,
and the Company and Designs Apparel, Inc., as Borrowers.
(included as Exhibit 10.9 to the Company's Current Report on
Form 8-K/A filed on May 23, 2002, and incorporated herein by
reference). *
10.7 Amendment and Distribution Agreement dated as of October 31,
1998 among the Designs JV Corp., LDJV Inc. and The Designs/OLS
Partnership (included as Exhibit 10.2 to the Company's Current
Report on Form 8-K dated December 3, 1998, and incorporated
herein by reference). *
10.8 Guaranty by the Company of the indemnification obligation of
Designs JV Corp. dated as of October 31, 1998 in favor of
LDJV, Inc. (included as Exhibit 10.3 to the Company's Current
Report on Form 8-K dated December 3, 1998, and incorporated
herein by reference). *
10.9 Asset Purchase Agreement dated as of September 30, 1998
between the Company and Levi's Only Stores relating to the purchase
by the Company of 16 Dockers(R) Outlet and nine Levi's(R) Outlet stores
(included as Exhibit 10.1 to the Company's Current Report on
Form 8-K dated December 3, 1998, and incorporated herein by
reference). *
10.10 Consulting Agreement dated as of December 15, 1999 between the
Company and George T. Porter, Jr. (included as Exhibit 10.22
to the Company's Annual Report on Form 10-K dated April 28, 2000,
and incorporated herein by reference). *
10.11 Extension to Consulting Agreement, dated as of April 28, 2001,
between the Company and Jewelcor Management, Inc. (included as
Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q dated
September 18, 2001, and incorporated herein by reference). *
10.12 Employment Agreement dated as of March 31, 2000 between the
Company and David A. Levin (included as Exhibit 10.27 to the
Company's Annual Report on Form 10-K dated April 28, 2000, and
incorporated herein by reference). *
10.13 Amendment to Employment Agreement dated as of April 10, 2001
between the Company and David A. Levin (included as Exhibit 10.19 to
the Company's Quarterly Report on Form 10-Q dated June 19, 2001, and
incorporated herein by reference). *
10.14 Secured Promissory Note dated as of June 26, 2000 between the
Company and David A. Levin (included as Exhibit 10.28 to the
Company's Quarterly Report on Form 10-Q dated September 12, 2000,
and incorporated herein by reference). *
10.15 Pledge and Security Agreement dated June 26, 2000 between the
Company and David A. Levin (included as Exhibit 10.29 to the
Company's Quarterly Report on Form 10-Q dated September 12, 2000,
and incorporated herein by reference). *
10.16 Employment Agreement dated as of August 14, 2000 between the
Company and Dennis R. Hernreich (included as Exhibit 10.30 to the
Company's Quarterly Report on Form 10-Q dated September 12, 2000,
and incorporated herein by reference). *
10.17 Amendment to Employment Agreement dated as of April 25, 2001
between the Company and Dennis R. Hernreich (included as Exhibit 10.23
to the Company's Quarterly Report on Form 10-Q dated June 19, 2001,
and incorporated herein by reference). *
10.18 Employment Agreement dated as of October 22, 2001 between the
Company and Ronald N. Batts (incorporated as Exhibit 10.25 to the
Company's Quarterly Report on Form 10-Q dated December 14, 2001,
and incorporated herein by reference). *
10.19 Retail Store License Agreement dated as of January 9, 2002 between
the Company and Candie's, Inc. (incorporated as Exhibit 10.23 to the
Company's Annual Report on Form 10-K dated May 1, 2002, and
incorporated herein by reference). *
10.20 Retail Store License Agreement Amendment No. 1 dated as of
January 15, 2002 between the Company and Candie's, Inc. (incorporated
as Exhibit 10.24 to the Company's Annual Report on Form 10-K dated
May 1, 2002, and incorporated herein by reference). *
10.21 Asset Purchase Agreement entered into as of May 2, 2002, by and among
the Company and Casual Male Corp. and certain subsidiaries (included
as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.22 Amended and Restated Note Agreement, dated as of April 26, 2002,
and amended and restated as of May 14, 2002, among the Company,
certain subsidiaries of the Company and the purchasers identified
therein (included as Exhibit 10.2 to the Company's Current Report on
Form 8-K filed on May 23, 2002, and incorporated herein by reference). *
10.23 Form of 12% Senior Subordinated Note due 2007 (included as
Exhibit 10.3 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.24 Form of 5% Subordinated Note due April 26, 2007 (included as
Exhibit 10.4 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.25 Form of Warrant to Purchase Shares of Common Stock (aggregating
787,500 shares)(included as Exhibit 10.5 to the Company's Current
Report on Form 8-K filed on May 23, 2002, and incorporated herein by
reference). *
10.26 Form of Warrant to Purchase Shares of Common Stock (aggregating
927,500 shares, subject to shareholder approval)(included as
Exhibit 10.6 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.27 Form of Warrant to Purchase Shares of Common Stock (aggregating
1,176,471 shares, subject to shareholder approval)(included as
Exhibit 10.7 to the Company's Current Report on Form 8-K filed on
May 23, 2002, and incorporated herein by reference). *
10.28 Registration Rights Agreement entered into as of April 26, 2002, by
and between the Company and the persons party thereto
(included as Exhibit 10.8 to the Company's Current Report on Form 8-K
filed on May 23, 2002, and incorporated herein by reference). *
10.29 Sourcing Agreement dated May 1, 2002, between the Company and
Kellwood Company (included as Exhibit 10.29 to the Company's
Quarterly Report on Form 10-Q filed on June 18, 2002, and
incorporated herein by reference). *
10.30 Extension to Consulting Agreement, dated as of April 28, 2002,
between the Company and Jewelcor Management, Inc (included as
Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q filed
on June 18, 2002, and incorporated herein by reference). *
10.31 Form of Warrant to Purchase Shares of Common Stock (aggregating
500,000 shares).
18.1 Letter of Preferability from Ernst & Young dated June 13, 2001 (included
as Exhibit 18.1 to the Company's Quarterly Report on Form 10-Q dated June
19, 2001, and incorporated herein by reference). *
99 Certain cautionary statements of the Company to be taken into account
in conjunction with consideration and review of the Company's publicly-
disseminated documents (including oral statements made by others on
behalf of the Company) that include forward looking information (included
as Exhibit 99.3 to the Company's Current Report on Form 8-K filed on
September 17, 2002, and incorporated by reference). *
* Previously filed with the Securities and Exchange Commission.
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.
CASUAL MALE RETAIL GROUP, INC.
Date: September 17, 2002 By: /S/ DENNIS R. HERNREICH
------------------------------------------
Dennis R. Hernreich, Senior Vice President,
And Chief Financial Officer
Casual Male Retail Group, Inc.
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, David A. Levin, certify that:
1. I have reviewed this report on Form 10-Q of Casual Male Retail Group, Inc.
(formerly Designs, Inc.);
2. Based on my knowledge, this 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
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report.
Date: September 17, 2002
/s/ DAVID A.LEVIN
---------------------------------
David A. Levin
Chief Executive Officer
(Principal Executive Officer)
I, Dennis R. Hernreich, certify that:
1. I have reviewed this report on Form 10-Q of Casual Male Retail Group, Inc.
(formerly Designs, Inc.);
2. Based on my knowledge, this 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
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report.
Date: September 17, 2002
/s/ DENNIS R. HERNREICH
-------------------------------------
Dennis R. Hernreich
Chief Financial Officer
(Principal Financial and Accounting Officer)