SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
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For quarterly period ended May 31, 2001
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 1-8501
HARTMARX CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 36-3217140
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 North Wacker Drive
Chicago, Illinois 60606
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code 312/372-6300
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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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No ___
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At June 30, 2001 there were 30,043,519 shares of the Company's common stock
outstanding.
HARTMARX CORPORATION
INDEX
Page
Number
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Statement of Earnings
for the three months and six months
ended May 31, 2001 and May 31, 2000. 3
Unaudited Condensed Consolidated Balance Sheet
as of May 31, 2001, November 30, 2000 and
May 31, 2000. 4
Unaudited Condensed Consolidated Statement of
Cash Flows for the six months ended May 31, 2001
and May 31, 2000. 6
Notes to Unaudited Condensed Consolidated Financial
Statements. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 12
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 14
Part II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
-2-
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
HARTMARX CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF EARNINGS
(000's omitted)
Three Months Ended Six Months Ended
May 31, May 31,
-------------------------------- --------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net sales $ 146,078 $ 172,452 $ 287,235 $ 335,641
Licensing and other income 374 423 1,058 1,501
------------ ------------ ------------ ------------
146,452 172,875 288,293 337,142
------------ ------------ ------------ ------------
Cost of goods sold 107,656 125,557 209,869 245,707
Selling, general and administrative expenses 42,302 41,279 80,135 79,374
------------ ------------ ------------ ------------
149,958 166,836 290,004 325,081
------------ ------------ ------------ ------------
Earnings (loss) before interest, taxes and
extraordinary item (3,506) 6,039 (1,711) 12,061
Interest expense 3,374 4,029 6,649 8,241
------------ ------------ ------------ ------------
Earnings (loss) before taxes and
extraordinary item (6,880) 2,010 (8,360) 3,820
Tax (provision) benefit 2,720 (765) 3,305 (1,455)
------------ ------------ ------------ ------------
Earnings (loss) before extraordinary item (4,160) 1,245 (5,055) 2,365
Extraordinary item, net (69) 227 (69) 227
------------ ------------ ------------ ------------
Net earnings (loss) ($4,229) $ 1,472 ($5,124) $ 2,592
============ ============ ============ ============
Earnings (loss) per share (basic and diluted):
Before extraordinary item ($.14) $.04 ($.17) $.08
============ ============ ============ ============
After extraordinary item ($.14) $.05 ($.17) $.09
============ ============ ============ ============
Dividends per common share $ - $ - $ - $ -
============ ============ ============ ============
Average shares outstanding:
Basic 29,972 29,369 29,903 29,307
============ ============ ============ ============
Diluted 29,972 29,481 29,903 29,424
============ ============ ============ ============
(See accompanying notes to unaudited consolidated financial statements)
-3-
HARTMARX CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(000's omitted)
May 31, Nov. 30, May 31,
CURRENT ASSETS 2001 2000 2000
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Cash and cash equivalents $ 626 $ 1,755 $ 750
Accounts receivable, less allowance for doubtful
accounts of $9,311, $7,770 and $9,698 122,751 135,421 126,133
Inventories 177,394 167,111 169,230
Prepaid expenses 7,890 8,867 7,166
Recoverable and deferred income taxes 17,899 17,899 15,005
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Total current assets 326,560 331,053 318,284
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INVESTMENTS AND OTHER ASSETS 37,104 36,014 35,957
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DEFERRED INCOME TAXES 39,406 35,001 40,831
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PROPERTIES
Land 2,289 2,289 2,363
Buildings and building improvements 42,773 42,971 42,243
Furniture, fixtures and equipment 108,447 107,244 106,834
Leasehold improvements 19,820 18,548 19,919
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173,329 171,052 171,359
Accumulated depreciation and amortization (138,062) (134,645) (134,534)
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Net properties 35,267 36,407 36,825
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TOTAL ASSETS $ 438,337 $ 438,475 $ 431,897
============= ============== ==============
(See accompanying notes to unaudited consolidated financial statements)
-4-
HARTMARX CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(000's omitted)
May 31, Nov. 30, May 31,
2001 2000 2000
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CURRENT LIABILITIES
Current maturities of long-term debt $ 15,080 $ 15,077 $ 15,074
Accounts payable and accrued expenses 97,343 113,815 93,633
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Total current liabilities 112,423 128,892 108,707
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LONG-TERM DEBT, less current maturities 131,003 110,470 131,340
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SHAREHOLDERS' EQUITY
Preferred shares, $1 par value;
2,500,000 shares authorized and unissued - - -
Common shares, $2.50 par value; 75,000,000
shares authorized; 36,317,564 shares issued
at May 31, 2001, 36,328,564 shares issued at
November 30, 2000 and 36,200,564 shares 90,794 90,821 90,501
issued at May 31, 2000.
Capital surplus 81,369 82,237 83,162
Retained earnings 55,599 60,723 54,503
Unearned employee benefits (4,677) (5,716) (6,420)
Common shares in treasury, at cost,
6,303,144 shares at May 31, 2001,
6,564,404 shares at November 30, 2000 and
6,778,333 shares at May 31, 2000. (27,800) (28,952) (29,896)
Accumulated other comprehensive income (loss) (374) - -
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Total shareholders' equity 194,911 199,113 191,850
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $438,337 $438,475 $431,897
============= ============= ============
(See accompanying notes to unaudited consolidated financial statements)
-5-
HARTMARX CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
(000's omitted)
Six Months Ended
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May 31, May 31,
2001 2000
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Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from operating activities:
Net earnings (loss) $ (5,124) $ 2,592
Reconciling items to adjust net earnings (loss) to
net cash provided by (used in) operating activities:
Extraordinary item, net 69 (227)
Depreciation and amortization 3,982 3,948
Changes in:
Receivables, inventories, prepaids and other assets 2,429 25,055
Accounts payable and accrued expenses (16,472) (6,519)
Taxes and deferred taxes on earnings (4,361) (621)
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Net cash provided by (used in) operating activities (19,477) 24,228
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Cash Flows from investing activities:
Capital expenditures (3,068) (1,692)
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Net cash used in investing activities (3,068) (1,692)
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Cash Flows from financing activities:
Increase (decrease) in borrowings under Credit Facility 30,421 (1,229)
Purchase of 10 7/8% Senior Subordinated Notes (27,236) (22,763)
Proceeds from mortgage financing 17,375 -
Payment of long-term debt (66) (37)
Purchase of treasury shares - (1,163)
Other equity transactions 922 1,273
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Net cash provided by (used in) financing activities 21,416 (23,919)
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Net decrease in cash and cash equivalents (1,129) (1,383)
Cash and cash equivalents at beginning of period 1,755 2,133
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Cash and cash equivalents at end of period $ 626 $ 750
============= =============
Supplemental cash flow information:
Net cash paid during the period for:
Interest $ 7,300 $ 9,200
Income taxes 1,100 2,000
(See accompanying notes to unaudited consolidated financial statements)
-6-
HARTMARX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
The accompanying financial statements are unaudited but in the opinion of
management include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations,
financial position and cash flows for the applicable periods presented. Results
of operations for any interim period are not necessarily indicative of results
for any other periods or for the full year. These unaudited interim financial
statements should be read in conjunction with the financial statements and
related notes contained in the Annual Report on Form 10-K for the year ended
November 30, 2000.
Note 2
The calculation of basic earnings per share for each period is based on the
weighted average number of common shares outstanding. The calculation of
diluted earnings per share reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted
into common stock using the treasury stock method. None of the 2,500,000
authorized preferred shares for Hartmarx Corporation have been issued.
Note 3
Long-term debt comprised the following (000's omitted):
May 31, Nov. 30, May 31,
2001 2000 2000
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Borrowings under Credit Facility $ 74,150 $ 43,729 $ 64,385
10 7/8% Senior Subordinated Notes, net 34,706 61,900 62,076
Industrial development bonds 17,315 17,315 17,330
Mortgages and other debt 19,912 2,603 2,623
------------ ------------ ------------
146,083 125,547 146,414
Less - current 15,080 15,077 15,074
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Long-term debt $131,003 $110,470 $131,340
============ ============ ============
During fiscal 1994, the Company issued $100 million principal amount of 10 7/8%
Senior Subordinated Notes due January 15, 2002 ("Notes") in a public offering,
and also entered into a then three year financing agreement ("Credit Facility")
with a group of lenders providing for maximum borrowings of $175 million
(including a $35 million letter of credit facility) collateralized by eligible
inventories, accounts receivable and the intangibles of the Company and its
subsidiaries. Various Credit Facility amendments in July 1995, November 1995,
January 1996 and October 1997, among other things, resulted in a reduction in
fees, administrative charges and effective borrowing rates, adjustment or
elimination of certain covenants and the extension of the Credit Facility term
from March 1997 to July 2000.
-7-
In August 1999, the Company completed an amendment and extension of the Credit
Facility which increased the maximum borrowing level and extended its duration.
Additional amendments were effected during fiscal 2001. Among other things, the
Credit Facility now provides for maximum borrowings of $200 million, up from
$175 million, (including a $50 million letter of credit facility, up from $35
million) and the term of the Credit Facility was extended from July 2000 to June
2003. Borrowing availability under the Credit Facility is being utilized for
general corporate purposes. Borrowings are subject to a borrowing base formula
based upon eligible accounts receivable and inventories; at the Company's
option, borrowing rates are based either on LIBOR or the prime rate of a major
bank. As of May 31, 2001, the weighted average borrowing rate under the Credit
Facility was 6.8%. Financing fees pertaining to the Notes and Credit Facility,
as amended, are being amortized over the life of the respective agreements.
Certain other fees are also payable under the Credit Facility and Notes based on
services provided.
During the second quarter of 2001, the Company entered into mortgage financings
on two of its owned manufacturing facilities. The average interest rate on the
mortgages, which have durations of ten and fifteen years, is approximately 7.5%.
The $17.4 million proceeds from these mortgages, along with availability under
the Credit Facility, were used to repurchase $27.2 million face value of the
Company's Notes in several open market transactions during the six months ended
May 31, 2001. During the six months ended May 31, 2000, the Company acquired
$22.8 million face value of its Notes in several open market transactions. The
extraordinary item in the second quarter of 2001 and 2000 reflected these
purchases made at par or at a small discount to par and applicable write-off of
issue costs. The Company's 10 7/8% Senior Subordinated Notes, due in January
2002, are expected to be retired utilizing availability under the Credit
Facility.
The Notes and Credit Facility contain various restrictive covenants covering
ratios relating to maximum funded debt to EBITDA and minimum fixed charge
coverage, additional debt incurrence, capital expenditures, asset sales,
operating leases, as well as other customary covenants, representations and
warranties, funding conditions and events of default. A Credit Facility
amendment dated July 10, 2001 requires the Company to maintain certain minimum
excess borrowing availability levels subsequent to the date of the amendment,
provide additional collateral, and by approximately October 15, 2001 obtain at
least $15 million of additional financing to reduce borrowings currently
outstanding. Additionally, the effective borrowing rate was increased 50 basis
points and financial covenants related to debt leverage and interest coverage,
among others, were adjusted for periods ending May 31, 2001 and subsequent.
After reflecting this amendment, the Company was in compliance with the
covenants under the respective borrowing agreements.
Note 4
Inventories at each date consisted of (000's omitted):
May 31, Nov. 30, May 31,
2001 2000 2000
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Raw materials $ 56,003 $ 55,450 $ 57,599
Work-in-process 14,339 15,262 20,188
Finished goods 107,052 96,399 91,443
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$177,394 $167,111 $169,230
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-8-
Inventories are stated at the lower of cost or market. At May 31, 2001,
November 30, 2000 and May 31, 2000, approximately 52%, 49% and 46% of the
Company's total inventories, respectively, are valued using the last-in, first-
out (LIFO) method representing certain work-in-process and finished goods. The
first-in, first-out (FIFO) method is used for substantially all raw materials
and the remaining inventories.
Note 5
The Company is engaged in manufacturing and marketing of apparel. The Company's
customers comprise major department and specialty stores, value oriented
retailers and direct mail companies. The Company's Men's Apparel Group
designs, manufactures and markets tailored clothing, slacks, sportswear and
dress furnishings; the Women's Apparel Group markets women's career apparel,
sportswear and accessories to both retailers and to individuals who purchase
women's apparel through a direct mail catalog.
Information on the Company's operations and total assets for the three and six
months ended and as of May 31, 2001 and 2000 is summarized as follows (in
millions):
Men's Women's
Apparel Apparel
Three Months Ended May 31, Group Group Adj. Consol.
------------- ------------- ----------- -------------
2001
Sales $ 132.9 $ 13.2 - $ 146.1
Earnings (loss) before taxes and
extraordinary item 0.1 (0.3) (6.7) (6.9)
2000
Sales $ 158.5 $ 14.0 - $ 172.5
Earnings (loss) before taxes and
extraordinary item 8.2 1.0 (7.2) 2.0
Six Months Ended May 31,
2001
Sales $ 259.8 $ 27.4 - $ 287.2
Earnings (loss) before taxes and
extraordinary item 4.3 0.3 (13.0) (8.4)
Total assets 310.4 33.1 94.8 438.3
2000
Sales $ 308.3 $ 27.3 - $ 335.6
Earnings (loss) before taxes and
extraordinary item 16.3 2.0 (14.5) 3.8
Total assets 314.9 26.0 91.0 431.9
During the periods ended May 31, 2001 and 2000, there were no intergroup sales
and there was no change in the basis of measurement of group earnings or loss.
-9-
Operating expenses incurred by the Company in generating sales are charged
against the respective group's sales; indirect operating expenses are allocated
to the groups benefitted. Group results exclude any allocation of general
corporate expense, interest expense or income taxes.
Amounts included in the "adjustment" column for earnings (loss) before taxes and
extraordinary item consist principally of interest expense and general corporate
expenses. Adjustments of gross assets are for cash, recoverable and deferred
income taxes, investments, other assets and corporate properties.
Note 6
Effective December 1, 2000, the Company adopted Financial Accounting Standards
Board (FASB) Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as amended by FASB Statement No. 138. Under the new
standards, the fair value of derivatives has been recorded in the financial
statements. Upon adoption of the new standards, the after-tax transition
adjustment at December 1, 2000 was an unrealized loss of $.3 million, reflected
in the accumulated other comprehensive income (loss) component of shareholders'
equity as of that date. Changes in fair values of the derivatives are recognized
periodically in other comprehensive income for derivatives designated as hedges
of future cash flows or net income for all other derivatives. It is anticipated
that the entire transition adjustment loss reflected as accumulated other
comprehensive income (loss) as of December 1, 2000 will be reflected in the
Company's Consolidated Statement of Earnings during fiscal 2001 as the currency
hedge contracts are settled. The effects of the adoption of the new standards
did not significantly affect the Company's results of operations, its financial
position, or its cash flows.
Note 7
Comprehensive income, which includes all changes in the Company's equity during
the period, except transactions with stockholders, was as follows (000's
omitted):
Six Months Ended
----------------------------------
May 31, May 31,
2001 2000
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Net earnings (loss) $(5,124) $2,592
Other comprehensive income (loss):
Change in fair value of foreign currency hedge
contracts, net of tax of $45 (68) -
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Comprehensive income (loss) $(5,192) $2,592
============= =============
-10-
Accumulated Other Comprehensive Income (Loss) consists of the following (000's
omitted):
May 31,
2001
---------------
Initial unrealized loss on derivatives upon implementation of FASB
Statement No. 133 on December 1, 2000,
net of tax of $199 $(306)
Year-to-date change in fair value of foreign exchange
contracts, net of tax of $45 (68)
---------------
Total Accumulated Other Comprehensive Income (Loss) $(374)
===============
Note 8
Emerging Issues Task Force 00-10, "Accounting for Shipping and Handling Costs",
requires that amounts billed to customers for shipping and handling costs be
reflected as a component of net revenue, if material. Emerging Issues Task
Force 00-25, "Accounting for Consideration from a Vendor to a Retailer in
Connection with the Purchase or Promotion of the Vendor's Products," requires
that consideration from a vendor to a customer in connection with the purchase
of the vendor's products or to promote sales of the vendor's products should be
reflected as a reduction of net revenue, if material.
The Company's billings to customers for such shipping and handling costs and the
consideration given to customers to promote the sale of the Company's products
are not significant.
-11-
HARTMARX CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
November 30, 2000 to May 31, 2001
---------------------------------
Since November 30, 2000, net accounts receivable decreased $12.7 million or 9.4%
to $122.8 million, reflecting the seasonal change from tailored clothing
shipments in the Men's Apparel Group. Inventories of $177.4 million increased
$10.3 million or 6.2% attributable in part to seasonal factors preceding
anticipated shipments in the third fiscal quarter. Net properties decreased
$1.1 million to $35.3 million as depreciation expense exceeded capital
additions. Accounts payable and accrued expenses declined $16.5 million
reflecting normal seasonal payments. Total debt, including current maturities,
increased $20.5 million to $146.1 million, reflecting seasonal working capital
requirements, and represented 43% of total capitalization at May 31, 2001
compared to 39% at November 30, 2000. During the first half of 2001, the
Company purchased $27.2 million par value of its 10 7/8% Senior Subordinated
Notes utilizing proceeds from new mortgages and availability under its Revolving
Credit Facility. A Credit Facility amendment dated July 10, 2001 requires the
Company to maintain certain minimum excess borrowing availability levels
subsequent to the date of the amendment, provide additional collateral, and by
approximately October 15, 2001 obtain at least $15 million of additional
financing to reduce borrowings currently outstanding. Additionally, financial
covenants related to debt leverage and interest coverage, among others, were
adjusted for periods ending May 31, 2001 and subsequent.
May 31, 2000 to May 31, 2001
----------------------------
Net accounts receivable of $122.8 million decreased $3.4 million or 2.7%,
reflecting the lower sales compared to the prior period. Inventories of $177.4
million increased $8.2 million or 4.8%, as the generally lackluster environment
at retail for apparel products resulted in delays in the timing of shipments,
principally tailored clothing, relative to units available for sale. Net
properties of $35.3 million decreased $1.6 million, attributable to depreciation
expense exceeding capital additions. Total debt of $146.1 million declined $.3
million from the year earlier period. Total debt represented 43% of total
capitalization at May 31, 2001, the same as the prior year.
Results of Operations
Second Quarter 2001 Compared to Second Quarter 2000
---------------------------------------------------
Second quarter consolidated sales were $146.1 million compared to $172.5 million
in 2000. Consumer spending for apparel at the Company's major retail customers
continued to be below prior year levels, adversely affecting both the advance
order and in-stock business. Among general product categories, womenswear
revenues were approximately even with last year, while menswear revenues,
especially tailored clothing suit units, declined. The tailored clothing
declines also reflected the planned deemphasis of certain lower margin tailored
clothing brands and programs. Sportswear and other non-tailored clothing product
categories represented approximately 28% of total second quarter revenues
compared to 27% a year ago.
-12-
Women's Apparel Group revenues, which represented 10% and 8% of consolidated
sales in 2001 and 2000, respectively, decreased approximately $.8 million.
The consolidated gross margin percentage to sales decreased to 26.3% compared to
27.2% last year, as the favorable effect of product mix changes of brands and
programs with higher gross margins were more than offset by approximately $2.3
million of costs associated with closing production facilities and related
inventory dispositions. Consolidated selling, general and administrative
expenses increased slightly to $42.3 million in the current period from $41.3
million in 2000, and the ratio to sales increased to 29.0% in 2001 from 23.9% in
2000, principally as a result of the lower sales; the current period also
included approximately $1.2 million of incremental costs associated with the
development of various sportswear brands and programs.
Earnings before interest, taxes and extraordinary item (EBIT) was a loss of $3.5
million in 2001 compared to earnings of $6.0 million last year; EBIT represented
-2.4% of net sales in 2001 and 3.5% of net sales in 2000. Interest expense of
$3.4 million was $.7 million lower than last year, reflecting lower average
rates. The consolidated pre-tax loss before extraordinary item was $6.9 million
compared to earnings of $2.0 million last year. After reflecting the applicable
tax benefit or provision, the consolidated net loss before extraordinary item in
fiscal 2001 was $4.2 million compared to earnings of $1.2 million a year ago.
The basic and diluted loss per share was $.14 compared to earnings of $.04 per
share in 2000. After the extraordinary item in each period, related to the
purchase of the Company's subordinated debentures, the net loss in 2001 was $4.2
million or $.14 per share compared to net earnings in 2000 of $1.5 million or
$.05 per share.
Six Months 2001 Compared to Six Months 2000
-------------------------------------------
Consolidated sales decreased $48.4 million or 14.4% to $287.2 million from
$335.6 million in 2000, attributable to the Men's Apparel Group. Within the
Men's Apparel Group, tailored clothing product revenues represented the
principal component of the decline, reflecting both lackluster consumer demand
for apparel and previously stated plans to reduce revenues in lower profit
potential moderate priced tailored clothing product categories. Women's Apparel
Group revenues, which represented 10% and 8% of consolidated sales in 2001 and
2000, respectively, increased approximately $.1 million, primarily in the
catalog business. Sportswear and other non-tailored clothing product
categories, including women's, represented 29% of first half sales versus 27% a
year ago.
The consolidated gross margin percentage to sales was 26.9% compared to 26.8%
last year, reflecting product mix changes and improved sourcing principally
offset by costs associated with closing production facilities. Consolidated
selling, general and administrative expenses were $80.1 million in the current
period compared to $79.4 million in 2000, and represented 27.9% of sales in 2001
compared to 23.6% of sales in 2000. The current year included, among other
things, $2.1 million of incremental costs associated with the sportswear product
lines development and expenses associated with the higher women's catalog sales.
Licensing and other income of $1.1 million decreased $.4 million compared to the
previous period, reflecting the softness in the Far East economies, especially
in Japan, where a significant portion of the Company's licensing revenue is
derived.
Earnings before interest, taxes and extraordinary item were a loss of $1.7
million in 2001 compared to $12.1 million earned last year and represented -.6%
of sales in 2001 compared to 3.6% of sales in 2000. Interest expense decreased
to $6.6 million from $8.2 million last year, principally due to lower borrowing
rates, partially offset by higher average borrowings. Consolidated pre-tax
earnings before the extraordinary item were a loss of $8.4 million this year
compared to $3.8 million earnings last year. Consolidated net earnings
-13-
before the extraordinary item were a loss of $5.1 million or $.17 per basic and
diluted share this year compared to $2.4 million or $.08 per share last year.
After the extraordinary item, the net loss this year was $5.1 million or $.17
per share compared to net earnings of $2.6 million or $.09 per share last year.
Second half fiscal 2001 results will be impacted by the level of consumer
spending for apparel and related expectations of major retail customers. Also,
the Company's actions to reduce owned manufacturing capacities and other
administrative expenses and the development of non-tailored clothing product
lines will continue. Based on current conditions, we expect second half
revenues and related operating results to be below the second half of fiscal
2000.
This quarterly report on Form 10-Q contains forward-looking statements made in
reliance upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The statements could be significantly impacted by such
factors as the level of consumer spending for men's and women's apparel, the
prevailing retail environment, the Company's relationships with its suppliers,
customers, licensors and licensees, actions of competitors that may impact the
Company's business and the impact of unforeseen economic changes, such as
interest rates, or in other external economic and political factors over which
the Company has no control. The reader is also directed to the Company's 2000
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
additional factors that may impact the Company's results of operations and
financial condition. Forward-looking statements are not guarantees as actual
results could differ materially from those expressed or implied in forward-
looking statements. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
Item 3 -- Quantitative and Qualitative Disclosures About Market Risk
The Company enters into foreign exchange forward contracts from time to time to
limit the currency risks associated with purchase obligations denominated in
foreign currencies. The Company does not hold financial instruments for trading
purposes or engage in currency speculation. Foreign exchange contracts are
generally for amounts not to exceed forecasted purchase obligations and require
the Company to exchange U.S. dollars for foreign currencies at rates agreed to
at the inception of the contracts. These contracts are closed by either cash
settlement or actual delivery of goods. The effects of movements in currency
exchange rates on these instruments, which are not significant, are recognized
in earnings in the period in which the purchase obligations are satisfied. As
of May 31, 2001, the Company had entered into foreign exchange contracts,
aggregating approximately $7 million corresponding to approximately 14 billion
Italian lire and 63 million Japanese yen, primarily related to inventory
purchases in the next twelve months.
The Company is subject to the risk of fluctuating interest rates in the normal
course of business, primarily as a result of borrowings under its Credit
Facility, which bear interest at variable rates. The variable rates may
fluctuate over time based on economic conditions, and the Company could be
subject to increased interest payments if market interest rates fluctuate. The
Company does not expect that a change in the interest rates would have a
material adverse effect on the Company's results of operations. In the last
three years, the Company has not used derivative financial instruments to manage
interest rate risk.
-14-
Part II -- OTHER INFORMATION
Item 4. Results of Votes of Security Holders
The annual meeting of the stockholders of the Registrant was held on April
12, 2001. The Directors listed in the Registrant's Proxy Statement for the
Annual Meeting of Stockholders dated February 26, 2001 were elected for one year
terms with voting for each as follows:
Director For Abstentions
-------- --- -----------
Samawal A. T. Bakhsh 24,603,435 3,072,770
Jeffrey A. Cole 25,917,620 1,758,585
Raymond F. Farley 25,951,189 1,725,016
Elbert O. Hand 25,946,843 1,729,362
Donald P. Jacobs 25,943,057 1,733,148
Charles Marshall 25,965,243 1,710,962
Homi B. Patel 25,957,332 1,718,873
Michael B. Rohlfs 25,945,986 1,730,219
Stuart L. Scott 25,972,210 1,703,995
Ella D. Strubel 25,969,003 1,707,202
The Voluntary Employee Stock Option Surrender Program was ratified with
24,348,410 shares for, 1,831,456 shares opposed and 1,496,339 shares abstaining.
The amendment to the 1998 Incentive Stock Plan was ratified with 24,313,319
shares for, 1,828,286 shares opposed and 1,534,600 shares abstaining.
The reappointment of PricewaterhouseCoopers LLP as independent auditors was
ratified with 26,675,993 shares for, 270,398 shares opposed and 729,814 shares
abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
4-C-3 Third Amendment to the Amended and Restated Credit Agreement
dated July 10, 2001.
(b) No reports on Form 8-K were filed in the second quarter of 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARTMARX CORPORATION
July 13, 2001 By /s/ GLENN R. MORGAN
---------------------------
Glenn R. Morgan
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
July 13, 2001 By /s/ ANDREW A. ZAHR
---------------------------
Andrew A. Zahr
Vice President and Controller
(Principal Accounting Officer)
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