CMRG » Topics » LIQUIDITY AND CAPITAL RESOURCES

This excerpt taken from the CMRG 10-Q filed May 22, 2009.

LIQUIDITY AND CAPITAL RESOURCES

Our primary cash needs are for working capital (essentially inventory requirements) and capital expenditures. As discussed below, our capital expenditure program for fiscal 2009 is $5.0 million and is considerably less than in prior years. For fiscal 2009, we have no plans for new store growth and will only pursue those capital projects which we deem imperative to our business and to promote improved customer service.

The current retail environment has been impacted by the recent volatility in the financial markets and the uncertainty in the economy, all of which could result in unanticipated adverse effects on our business. However, we currently believe that our existing cash generated by operations together with our availability under our credit facility will be sufficient within current forecasts for us to meet our foreseeable liquidity requirements. In determining future liquidity and cash flow for fiscal 2009, we factored in potential decreases in comparable sales for fiscal 2009 of 10%. We anticipate that we will be able to generate free cash flow of approximately $25 million in fiscal 2009 despite a lower sales base. See “Presentation of Non-GAAP Measures” above regarding non-GAAP free cash flow.

For the first three months of fiscal 2008, cash used for operating activities was $(2.1) million as compared to cash used for operating activities of $(8.1) million for the corresponding period of the prior year. The improvement in cash flows from operations was primarily due to the continued reduction in inventory, which we are closely managing in response to current sales trends as well as cost reductions in SG&A.

In addition to cash flow from operations, our other primary source of working capital is our Credit Facility which has a total commitment of $110.0 million, although the amounts that can be borrowed is limited to the borrowing base as defined by the Credit Facility, which is comprised primarily of the liquidation value of our inventory. The maturity date of the Credit Facility is October 29, 2011. Borrowings under the Credit Facility bear interest at variable rates based on

 

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Bank of America’s prime rate or the London Interbank Offering Rate (“LIBOR”) and vary depending on our levels of excess availability. Our Credit Facility is described in more detail in Note 2 to the Notes to the Consolidated Financial Statements.

We had outstanding borrowings under the Credit Facility at May 2, 2009 of $43.8 million. Outstanding standby letters of credit were $2.1 million and outstanding documentary letters of credit were $2.2 million. Average monthly borrowings outstanding under this facility during the first three months of fiscal 2009 were approximately $43.1 million, resulting in an average unused excess availability of approximately $27.4 million. Unused excess availability at May 2, 2009 was $30.8 million. Our obligations under the Credit Facility are secured by a lien on all of our assets.

At May 2, 2009, we have reduced our total debt, including our long-term debt, by $15.1 million, or 21.5%, to $55.0 million from $70.1 million at May 3, 2008.

Master Loan and Security Agreement

On July 20, 2007, we entered into a Master Loan and Security Agreement (the “Master Agreement”) with Banc of America Leasing & Capital, LLC (“BALC”) for equipment financing. In conjunction with the Master Agreement, we entered into an Equipment Security Note (the “First Secured Note”), whereby we borrowed an aggregate of $17.4 million from BALC. The First Secured Note is due July 20, 2011.

On January 16, 2008, we entered into a second Equipment Security Note (the “Second Secured Note”), pursuant to the same terms and provisions of the Master Agreement, whereby we borrowed an additional $2.1 million. The Second Secured Note is due January 16, 2012.

Both secured notes accrue interest at a per annum rate of 1.75% plus the rate of interest equal to the 30-day published LIBOR rate. Principal and interest, in arrears, are payable monthly on each note, commencing one month after issuance of such note. We are subject to a prepayment penalty on both secured notes equal to 1% of the prepaid principal until the first anniversary of the respective secured note, 0.5% of the prepaid principal from the first day after the first anniversary through the end of the second anniversary and no prepayment penalty thereafter. At May 2, 2009, the outstanding balance of the secured notes was $11.2 million.

Both notes are secured by a security interest in all of our rights, title and interest in and to certain equipment.

Capital Expenditures

The following table sets forth the stores opened and related square footage at May 2, 2009 and May 3, 2008, respectively:

 

     At May 2, 2009    At May 3, 2008

Store Concept

   Number of
Stores
   Square
Footage
   Number of
Stores
   Square
Footage

(square footage in thousands)

           

Casual Male XL

   466    1,638    466    1,616

Rochester Big & Tall

   27    220    26    216
                   

Total Stores

   493    1,858    492    1,832

Total cash outlays for capital expenditures for the first three months of fiscal 2009 were $0.7 million as compared to $2.7 million for the first three months of fiscal 2008.

Our capital expenditures for fiscal 2009 are expected to approximate $5.0 million, which we believe to be an adequate level of expenditures to maintain our infrastructure, the condition of our stores, conduct certain number of necessary real estate relocations and advance its technology projects for further productivity enhancements. Our capital projects will be limited to those that we believe will provide a substantial financial benefit, such as our inventory integration project. With the exception of $0.5 million for the conversion and development of five hybrid Rochester/Casual Male XL stores, we do not plan on opening any new store locations during fiscal 2009.

 

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Below is a summary of store openings and closings since January 31, 2009:

 

    Casual Male   Rochester
Big & Tall
  Total stores

At January 31, 2009

  467   27   494

New outlet stores

  —     —     —  

New retail stores

  —     —     —  

Closed stores

  1   —     1
           

At May 2, 2009

  466   27   493
           

Relocations

  2   —     2
This excerpt taken from the CMRG 10-K filed Mar 23, 2009.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are our cash generated from operations and availability under our credit facility, as amended (“Credit Facility”), with Bank of America, N.A. Our current cash needs are primarily for working capital (essentially inventory requirements) and capital expenditures. As discussed below, our capital expenditure program for fiscal 2009 is $5.0 million and is considerably less than in prior years. For fiscal 2009, we have no plans for new store growth and will only pursue those capital projects which we deem imperative to our business and to promote improved customer service.

The current retail environment has been impacted by the recent volatility in the financial markets and the uncertainty in the economy, all of which could result in unanticipated adverse effects on our business. However, we currently believe that our existing cash generated by operations together with our availability under our Credit Facility will be sufficient within current forecasts for us to meet our foreseeable liquidity requirements. In determining future liquidity and cash flow for fiscal 2009, we factored in potential decreases in comparable sales for fiscal 2009 of 10%. We anticipate that we will be able to generate free cash flow of $15 million in fiscal 2009 despite a lower sales base. See “Presentation of Non-GAAP Measures” above regarding non-GAAP free cash flow.

The following table sets forth financial data regarding our liquidity position at the end of the past three fiscal years:

 

     FISCAL YEARS
     2008    2007    2006
(in millions, except ratios)          

Cash provided by operations

   $ 23.2    $ 11.7    $ 12.1

Working capital

     20.0      41.0      66.8

Current ratio

     1.2:1      1.4:1      1.9:1

Although we had an operating loss for fiscal 2008, from a cash flow perspective, we generated an increase of $11.5 million in cash flow provided by operations for fiscal 2008 over the prior year. This increase was primarily the result of our management of inventory and other working capital accounts which offset our lower profitability as compared to fiscal 2007. The decrease in cash flow from operations for fiscal 2007, as compared to fiscal 2006, was primarily due to lower profitability, adjusted for non-cash activity, offset by the timing of working capital payments.

This excerpt taken from the CMRG 10-K filed Mar 26, 2008.

LIQUIDITY AND CAPITAL RESOURCES

Our primary cash needs are for working capital (essentially inventory requirements), capital expenditures and our stock repurchase program. Specifically, our capital expenditure program includes projects for new store openings, remodeling, downsizing or combining existing stores, and improvements and integration of our systems infrastructure. We expect that cash flow from operations, external borrowings and trade credit will enable us to finance our current working capital and expansion requirements. We have financed our working capital requirements, store expansion program, stock repurchase programs and acquisitions with cash flow from operations, external borrowings, and proceeds from equity offerings. Our objective is to maintain a positive cash flow after capital expenditures such that we can support our growth activities with operational cash flows and without the use of incurring any additional debt.

The following table sets forth financial data regarding our liquidity position at the end of the past three fiscal years:

 

     FISCAL YEARS
     2007    2006    2005
     (in millions, except ratios)

Cash provided by operations

   $ 11.7    $ 12.1    $ 16.8

Working capital

     41.0      66.8      33.3

Current ratio

     1.4:1      1.9:1      1.3:1

The decrease in cash flow provided by operations in fiscal 2007 of $0.4 million from fiscal 2006 was primarily due to lower profitability, adjusted for non-cash activity, offset by the timing of working capital payments, such as inventory purchases, prepaid rent and advertising. Cash flow from operations for fiscal 2006, before changes in working capital accounts, increased from fiscal 2005 primarily as a result of improved profitability.

 

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This excerpt taken from the CMRG 10-K filed Apr 2, 2007.

LIQUIDITY AND CAPITAL RESOURCES

Our primary cash needs are for working capital (essentially inventory requirements), capital expenditures and our stock repurchase program. Specifically, our capital expenditure program includes projects for new store openings, remodeling, downsizing or combining existing stores, and improvements and integration of our systems infrastructure. We expect that cash flow from operations, external borrowings and trade credit will enable us to finance our current working capital and expansion requirements. We have financed our working capital requirements, store expansion program, stock repurchase programs and acquisitions with cash flow from operations, external borrowings, and proceeds from equity offerings. Our objective is to maintain a positive cash flow after capital expenditures such that we can support our growth activities with operational cash flows and without the use of incurring any additional debt.

The following table sets forth financial data regarding our liquidity position at the end of the past three fiscal years:

 

     Fiscal Years
     2006    2005    2004
     (in millions, except ratios)

Cash provided by operations

   $ 12.1    $ 16.8    $ 13.4

Working capital

     66.8      33.3      22.2

Current ratio

     1.9:1      1.3:1      1.3:1

The decrease in cash flow provided by operations in fiscal 2006 of $4.7 million from fiscal 2005 was primarily due to the timing of working capital payments, such as inventory purchases, prepaid rent and advertising. Cash flow from operations, before changes in working capital accounts, increased primarily as a result of improved profitability as compared to fiscal 2005. Cash flow provided by operations in fiscal 2005 increased from fiscal 2004 as a result of improved profitability and the timing of other working capital payments.

With the net proceeds from our sale-leaseback transaction of approximately $55.9 million, we repaid in full our term loan for $5.6 million and our borrowings under our credit facility, which at the time of repayment were higher as a result of the repayment of our mortgage and the repurchase of $5.3 million of our Convertible Notes during the fourth quarter of fiscal 2005.

During the fourth quarter of fiscal 2006, on December 18, 2006 and January 8, 2007, we provided notices to the note-holders of our Convertible Notes that we would be redeeming our Convertible Notes of which $94.8 million were then outstanding. By the end of business on January 26, 2007, substantially all of the note-holders had elected to convert their notes into approximately 8.9 million shares of common stock, resulting in us redeeming only $9,000 of the Convertible Notes for cash.

Our debt financing costs, which were incurred in connection with the issuance of the Convertible Notes, were being amortized to interest expense on a straight-line basis over the contractual term of the notes. Upon conversion, the remaining unamortized balance of the deferred financing costs of $3.6 million was reclassified to additional paid-in capital.

This excerpt taken from the CMRG 10-Q filed May 30, 2006.

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, remodeling, downsizing or combining existing stores, and improvements and integration of its systems infrastructure. The Company expects that cash flow from operations, external borrowings and trade credit will enable it to finance its current working capital and expansion requirements. The Company has financed its working capital requirements, store expansion program, stock repurchase programs and acquisitions with cash flow from operations, external borrowings, and proceeds from equity and debt offerings. The Company’s objective is to maintain a positive cash flow after capital expenditures such that it can support its growth activities with operational cash flows and without the use of incurring any additional debt.

For the first three months of fiscal 2006, cash used by operating activities was $12.7 million as compared to $4.7 million for the corresponding period of the prior year. There was a substantial improvement in operating income for the first quarter of fiscal 2006 as compared to fiscal 2005, although as expected due to seasonal fluctuations, there was a decrease in cash flow from operations which was the result of changes in normal working capital accounts.

In addition to cash flow from operations, the Company’s other primary source of working capital is its credit facility with Bank of America Retail Group, Inc., which was most recently amended on January 30, 2006 in connection with the sale-leaseback transaction (the “Amended Credit Facility”). The Amended Credit Facility continues to principally provide for a total commitment of $90 million with the ability to issue documentary and standby letters of credits of up to $20 million. The maturity date of the Amended Credit Facility was extended to October 29, 2007 and is subject to prepayment penalties through October 29, 2006. Borrowings under the Amended Credit Facility bear interest at variable rates based on Bank of America’s prime rate or the London Interbank Offering Rate and vary depending on the Company’s levels of excess availability.

The Company had no outstanding borrowings under the Amended Credit Facility at April 29, 2006. Outstanding standby letters of credit were $4.4 million and outstanding documentary letters of credit were $1.5 million. Average borrowings outstanding under this facility during the first three months of fiscal 2006 were approximately $1.4 million, resulting in an average unused excess availability of approximately $70.0 million. Unused excess availability at April 29, 2006 was $74.0 million.

Capital Expenditures

The following table sets forth the stores opened and related square footage at April 29, 2006 and April 30, 2005, respectively:

 

     At April 29, 2006    At April 30, 2005

Store Concept

   Number of Stores    Square Footage    Number of Stores    Square Footage

(square footage in thousands)

           

Casual Male XL and Casual Male Big & Tall

   487    3,421    495    3,417

Rochester Big & Tall

   23    7,727    22    7,813

Sears Canada

   13    1,160    13    1,160
                   

Total Stores

   523       530   


Total cash outlays for capital expenditures for the first three months of fiscal 2006 were $2.5 million as compared to $1.8 million for the first three months of fiscal 2005. Below is a summary of store openings and closings since January 28, 2006:

 

     Casual Male   

Rochester

Big & Tall

   

Sears

Canada

   Total stores  

At January 28, 2006

   481    24     13    518  

New outlet stores

   2    —       —      2  

New retail stores

   4    —       —      4  

Closed stores

   —      (1 )   —      (1 )
                      

At April 29, 2006

   487    23     13    523  
                      

Remodels

   2    —       —      2  

The Company expects that its total capital expenditures for fiscal 2006 will be approximately $20.0 million, of which $8.0 million relates to its re-branding of the Casual Male Big & Tall retail stores to Casual Male XL. The Company expects to incur approximately $6.2 million for store capital related to new stores as well as remodels and relocations, with the remainder of the $20.0 million for system enhancements and other corporate level expenditures. Included in store expansion are funds to remodel an additional 13 of its existing Casual Male Big & Tall retail stores at an estimated $35,000 to $45,000 for each location.

For the remainder of fiscal 2006, the Company intends to open two additional Casual Male stores and close up to 13 of its older Casual Male stores as their respective leases expire. The Company also plans to open 4 new Rochester Big & Tall retail stores.

This excerpt taken from the CMRG 10-K filed Mar 31, 2006.

Liquidity and Capital Resources

Our primary cash needs are for working capital (essentially inventory requirements) and capital expenditures. Specifically, our capital expenditure program includes projects for new store openings, remodeling, downsizing or combining existing stores, and improvements and integration of our systems infrastructure. We expect that cash flow from operations, external borrowings and trade credit will enable us to finance our current working capital and expansion requirements. We have financed our working capital requirements, store expansion program, stock repurchase programs and acquisitions with cash flow from operations, external borrowings, and proceeds from equity offerings. Our objective is to maintain a positive cash flow after capital expenditures such that we can support our growth activities with operational cash flows and without the use of incurring any additional debt. As a result of our recent sale-leaseback transaction and the repayment of certain debt obligations, during fiscal 2006, we expect our average monthly liquidity, including amounts available under our credit facility, to be approximately $75.0 million.

The following table sets forth financial data regarding our liquidity position at the end of the past three fiscal years:

 

     Fiscal Years
     2005    2004    2003
     (in millions, except ratios)

Cash provided by operations

   $ 16.8    $ 13.4    $ 12.0

Working capital

     33.3      22.2      48.4

Current ratio

     1.3:1      1.3:1      1.7:1

Cash flow provided by operations in fiscal 2005 increased from fiscal 2004 as a result of improved profitability and the timing of other working capital payments. This positive cash flow in fiscal 2005 was primarily used to finance capital expenditures.

On January 20, 2006, we prepaid our outstanding mortgage note for $10.0 million. This amount included a prepayment penalty of $1.2 million that we recognized in the fourth quarter of fiscal 2005. In addition, during the fourth quarter of fiscal 2005, we also repurchased $5.3 million of our outstanding convertible notes, due 2024. As part of this repurchase, we recognized income of $0.2 million, net of the write-off of deferred financing costs, associated with the related discount on the notes.

We borrowed from our credit facility to fund both of these transactions, which resulted in a higher than expected balance for our credit facility at the end of fiscal 2005 and lower working capital. Once the funding from the sale-leaseback transaction was completed in February 2006, the revolver was paid in full. In addition, subsequent to year end, we also repaid in full our term loan for $5.6 million.

The result of these transactions significantly improves our liquidity position for fiscal 2006 and reduces our debt obligations, and corresponding interest costs, to primarily our remaining $94.8 million of convertible notes due 2024 and $4.0 million of our 5% senior subordinated notes due 2007.

Credit Facility

On December 15, 2005 and January 31, 2006, we amended our credit facility with Bank of America Retail Group (formerly known as Fleet Retail Group, Inc.) by executing the Second Amendment and the Third Amendment, respectively, to our Fourth Amended and Restated Loan and Security Agreement (the “Amendments”). In summary, the Amendments amended the credit facility (the “Amended Credit Facility”) to allow us to (i) assume the outstanding mortgage on our corporate headquarters in Canton, Massachusetts, (ii) prepay or retire our convertible notes, subject to being able to maintain excess availability of at least $30.0 million, (iii) prepay our term loan, (iv) enter into a sale-leaseback transaction for our corporate headquarters and (v) extend our advance rate on borrowings through December 15, 2005 to February 1, 2006, enabling us to

 

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receive increased availability under the Amended Credit Facility. See Note C to the Notes to the Consolidated Financial Statements for a more complete description of these amendments.

The Amended Credit Facility continues to principally provide for a total commitment of $90 million with the ability to issue documentary and standby letters of credits of up to $20 million. The maturity date of the Amended Credit Facility is October 29, 2007 and is subject to prepayment penalties through October 29, 2006. Borrowings under the Amended Credit Facility bear interest at variable rates based on Bank of America’s prime rate or the London Interbank Offering Rate (“LIBOR”) and vary depending on the Company’s levels of excess availability. Our ability to borrow under the Amended Credit Facility is determined using an availability formula based on eligible assets, with increased advance rates based on seasonality.

At January 28, 2006, we had borrowings outstanding under the Amended Credit Facility of $37.4 million and outstanding standby letters of credit of $2.4 million and documentary letters of credit of $0.7 million. Average borrowings outstanding under this facility during fiscal 2005 were approximately $30.5 million, resulting in an average unused excess availability of approximately $36.8 million. As we discussed above, the amounts outstanding under the Amended Credit Facility at January 28, 2006, were higher than expected due to our repayments of certain long-term debt obligations.

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