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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
{ X } Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended May 1, 1999 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 - None
BARNEYS NEW YORK, INC.
----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-4040818
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
575 Fifth Avenue, New York, New York 10017
- ------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 339-7300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes { } No { X }
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes { X } No { }
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
As of June 13, 1999 there were 12,500,022 shares of Barneys New York,
Inc. common stock, par value $0.01 per share, outstanding.
<PAGE>
BARNEYS NEW YORK, INC.
FORM 10-Q
QUARTER ENDED MAY 1, 1999
Table of Contents
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed consolidated statements of operations - Three months ended
May 1, 1999 and May 2, 1998.......................................................... 3
Condensed consolidated balance sheets - May 1, 1999 and
January 30, 1999..................................................................... 4
Condensed consolidated statements of cash flows - Three months ended
May 1, 1999 and May 2, 1998.......................................................... 5
Notes to condensed consolidated financial statements - May 1, 1999........................ 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................. 7
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk........................... 11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.................................................... 12
SIGNATURES......................................................................................... 13
INDEX OF EXHIBITS.................................................................................. 14
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR | PREDECESSOR
COMPANY | COMPANY
3 MONTHS | 3 MONTHS
ENDED | ENDED
5/1/99 | 5/2/98
------------ | -------------
<S> <C> | <C>
Net sales $ 85,841 | $ 87,309
Cost of sales 45,775 | 46,298
------------ | -------------
|
Gross profit 40,066 | 41,011
|
Expenses: |
|
Selling, general and administrative expenses |
(including occupancy costs) 37,414 | 38,562
Depreciation and amortization 4,316 | 2,313
Other income - net (1,012) | (1,015)
------------ | -------------
(Loss) income before interest and financing costs, |
reorganization costs and income taxes (652) | 1,151
|
Interest and financing costs, net of interest income 3,120 | 3,035
------------ | -------------
|
Loss before reorganization costs |
and income taxes (3,772) | (1,884)
|
Reorganization costs - | 2,889
------------ | -------------
Loss before income taxes (3,772) | (4,773)
|
Income taxes 19 | 19
------------ | -------------
|
Net loss $ (3,791) | $ (4,792)
============ | =============
|
Basic and diluted net loss per share of common stock $ (0.30) |
============ |
|
Weighted average number of shares of common |
stock outstanding 12,500 |
============ |
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
MAY 1, JANUARY 30,
1999 1999
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,028 $ 6,824
Restricted cash 4,625 5,082
Receivables, less allowances of $4,456 and $4,356 25,097 27,841
Inventories 63,928 65,551
Other current assets 5,105 6,347
--------------- ---------------
Total current assets 104,783 111,645
Fixed assets at cost, less accumulated depreciation
and amortization of $2,093 and $0 49,495 51,356
Excess reorganization value, less accumulated amortization of $2,222 and $0 175,548 177,767
Other assets 3,025 3,186
--------------- ---------------
Total assets $ 332,851 $ 343,954
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,991 $ 15,996
Accrued expenses 41,541 54,585
--------------- ---------------
Total current liabilities 53,532 70,581
Long-term debt 127,465 118,533
Other long-term liabilities 805 -
Redeemable Preferred Stock 542 500
Shareholders' equity:
Common stock--$.01 par value; authorized
25,000,000 shares--issued 12,500,000 shares 125 125
Additional paid-in capital 154,173 154,215
Accumulated deficit (3,791) -
--------------- ---------------
Total shareholders' equity 150,507 154,340
--------------- ---------------
Total liabilities and shareholders' equity $ 332,851 $ 343,954
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Barneys New York, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR | PREDECESSOR
COMPANY | COMPANY
3 MONTHS | 3 MONTHS
ENDED | ENDED
5/1/99 | 5/2/98
-------------- | --------------
<S> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net loss $ (3,791) | $ (4,792)
Adjustments to reconcile net loss to net cash used |
by operating activities: |
Depreciation and amortization 4,559 | 2,991
Deferred rent 805 | (74)
Other - | 4
Decrease (increase) in: |
Receivables 2,744 | (1,798)
Inventories 1,623 | (555)
Other current assets 1,242 | 2,510
Long-term assets (9) | 29
Increase (decrease) in: |
Accounts payable and accrued expenses (17,053) | (1,841)
-------------- | --------------
Net cash used by operating activities (9,880) | (3,526)
-------------- | --------------
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
Fixed asset additions (232) | (643)
Reduction of restricted cash 457 | -
-------------- | --------------
Net cash provided (used) by investing activities 225 | (643)
-------------- | --------------
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
Proceeds from credit facility 96,879 | 100,173
Repayments of credit facility (88,020) | (97,323)
-------------- | --------------
Net cash provided by financing activities 8,859 | 2,850
-------------- | --------------
|
Net decrease in cash (796) | (1,319)
Cash and equivalents - beginning of period 6,824 | 3,977
-------------- | --------------
Cash and equivalents - end of period $ 6,028 | $ 2,658
============== | ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
BARNEYS NEW YORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
Barneys New York, Inc. ("Holdings") and Subsidiaries (collectively the
"Company") is a retailer of men's and women's apparel and accessories and items
for the home. On January 10, 1996, Barney's, Inc. and Subsidiaries (the
"Predecessor Company") filed voluntary petitions for reorganization under
chapter 11 of the United States Bankruptcy Code. The Predecessor Company's Plan
of Reorganization (the "Plan of Reorganization") was confirmed on December 21,
1998 and became effective on January 28, 1999 (the "Effective Date"). On that
date, the Company adopted "fresh-start" reporting in accordance with the
American Institute of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7") which resulted in adjustments to the Company's stockholders equity
and the carrying value of certain assets and liabilities. Accordingly, the
Company's post-reorganization (Successor Company) financial statements are not
prepared on the same basis as the pre-reorganization (Predecessor Company)
financial statements. A vertical black line is shown in the accompanying
financial statements to separate the post-reorganization periods from the
pre-reorganization periods.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring adjustments)
which management considers necessary to present fairly the financial position of
the Company as of May 1, 1999, and the results of its operations and its cash
flows for the three-month periods ended May 1, 1999 and May 2, 1998. The results
of operations for the three-month period may not be indicative of the results
for the entire year.
These financial statements should be read in conjunction with the
audited financial statements for the six months ended January 30, 1999 and
related notes which are included in the Company's Registration Statement on Form
10. Accordingly, significant accounting policies and other disclosures necessary
for complete financial statements in conformity with generally accepted
accounting principles have been omitted since such items are reflected in the
Company's audited financial statements and related notes thereto.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain 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 amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
As used herein, Successor Company refers to Barneys New York, Inc. and
Subsidiaries from and after the Effective Date and Predecessor Company refers to
Barney's, Inc. and Subsidiaries prior to the Effective Date.
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(2) Long-Term Debt
At May 1, 1999, there were outstanding loans under the Company's
revolving credit facility (the "Revolving Credit Facility") of approximately
$70,953,000, and $11,100,000 was committed under unexpired letters of credit.
Effective June 2, 1999, the Company and the lenders under the Revolving
Credit Facility entered into an amendment thereto adjusting the definition of
earnings before interest, taxes, depreciation and amortization ("EBITDA") to
allow for the inclusion of up to $3 million of cash equity contributed to the
Company during the fiscal year ending January 29, 2000 as part of EBITDA, as
defined. As of May 1, 1999, the Company was in compliance with each of the
covenants contained in the Revolving Credit Facility.
(3) Income Taxes
The Company provides United States federal income taxes based on its
estimated annual effective tax rate for the fiscal year. A federal income tax
benefit was not recorded in either the first quarter of 1999 or 1998, as the
future use of net operating losses generated in those periods was uncertain. In
the respective periods, however, the Company has provided income taxes
principally for state, local and franchise taxes.
(4) Earnings (loss) Per Share
Earnings (loss) per common share is computed as net loss divided by the
weighted average number of common shares outstanding. Earnings per common share
of the Predecessor Company has not been included herein as the computation would
not provide meaningful results as the capital structure of the Successor Company
is not comparable to that of the Predecessor Company.
As of May 1, 1999, the Company's common stock was not actively traded.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward looking statements are based on management's expectations, estimates,
projections and assumptions. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "estimates," and variations of such words and similar
expressions are intended to identify such forward looking statements which
include, but are not limited to, projections of revenues, earnings and cash
flows. These forward looking statements are subject to risks and uncertainties
which could cause the Company's actual results or performance to differ
materially from those expressed or implied in such statements. These risks and
uncertainties include, but are not limited to, the following: general economic
7
<PAGE>
and business conditions, both nationally and in those areas in which the Company
operates; demographic changes; prospects for the retail industry; competition;
changes in business strategy or development plans; the loss of management and
key personnel; the availability of capital to fund the expansion of the
Company's business; changes in consumer preferences or fashion trends; adverse
weather conditions, particularly during peak selling seasons; failure of the
Company or third parties to be Year 2000 compliant; and changes in the Company's
relationships with designers, vendors and other suppliers.
Results of Operations
The Company is engaged in three distribution channels which encompass
its various product offerings: the full-price stores, the outlet stores and the
warehouse sale events. The Company's emergence from bankruptcy on the Effective
Date is a key factor affecting comparability of operating results for the three
months ended May 1, 1999 as compared to the three months ended May 2, 1998. On
the Effective Date, the Company adopted "fresh-start" reporting which resulted
in adjustments to the Company's stockholders' equity and the carrying value of
certain assets and liabilities. Further, the Company recognized reorganization
value in excess of amounts allocable to identifiable assets ("Excess
Reorganization Value") of $177.8 million. This excess reorganization value is
being amortized by the straight-line method over 20 years.
Three Months Ended May 1, 1999 Compared to the Three Months Ended May 2, 1998
Net Sales for the three months ended May 1, 1999 were $85.8 million
compared to $87.3 million a year ago, a decrease of 1.7%. Included in net sales
for the three months ended May 2, 1998 is $1.1 million generated from a
full-price store which closed in July 1998. Comparable store sales decreased
approximately 0.4%, principally due to a weakness in both the outlet and
warehouse sale locations partially offset by an increase at full-price stores.
Gross profit on sales decreased 2.3% to $40.1 million for the three
months ended May 1, 1999 from $41.0 million in the three months ended May 2,
1998, primarily due to lower revenues as a result of the store closing. As a
percentage of net sales, gross profit was 46.7% for the three months ended May
1, 1999 compared to 47.0% in the year ago period, principally due to higher
markdowns in the outlet and warehouse sale locations.
Selling, general and administrative expenses, including occupancy
expenses, declined 3.0% in the three-month period ended May 1, 1999 to $37.4
million from $38.6 million in the three month period ended May 2, 1998
principally due to continuing improvements from the Company's cost-reduction
initiatives as well as additional reductions in personnel and occupancy costs
related to the full-price store which closed in July 1998. Selling, general and
administrative expenses were 43.6% of sales in the three months ended May 1,
1999 as compared to 44.2% in the three months ended May 2, 1998. As a direct
consequence of the Predecessor Company's Plan of Reorganization becoming
effective, occupancy expense in the three months ended May 1, 1999 as compared
to the three months ended May 2, 1998 increased approximately $1.5 million due
to increased rent expense at the Company's three flagship stores in New York,
Beverly Hills and Chicago. This increase, however, was substantially offset by
8
<PAGE>
the elimination of rental expense, again as a direct consequence of the
Predecessor Company's Plan of Reorganization becoming effective, associated with
certain equipment previously leased by the Predecessor Company.
Depreciation and amortization increased 86.6% in the three-month period
ended May 1, 1999 to $4.3 million from $2.3 million in the prior year. This
increase was primarily due to the amortization of the excess reorganization
value.
Interest expense increased in the three months ended May 1, 1999 to
$3.1 million from $3.0 million a year ago. Interest associated with borrowings
under the Company's credit facility declined significantly due to a lower
effective interest rate, driven by a reduction in the portion of interest
expense associated with the amortization of related bank fees, as well as lower
average borrowings. This reduction was offset by approximately $1.5 million of
interest expense associated with the new notes issued pursuant to the Plan of
Reorganization.
Average borrowings for the three months ended May 1, 1999 and May 2,
1998 were $63.8 million and $66.6 million, respectively, and the effective
interest rate on the Company's outstanding debt was 10.6% in the three months
ended May 1, 1999 compared to 17.7% in the comparable period of the prior year.
There were no Reorganization costs incurred subsequent to the Plan of
Reorganization becoming effective. In the three-month period ended May 2, 1998
there were $2.9 million of reorganization costs.
The Company's net loss for the first quarter of 1999 was $3.8 million
compared to a net loss of $4.8 million for the first quarter of 1998. Basic and
diluted net loss per common share for the first quarter of 1999 was ($0.30) per
common share.
LIQUIDITY AND CAPITAL
Liquidity and Capital Resources
The Company's cash used in operations for the three months ended May 1,
1999 was $9.9 million compared to $3.5 million in the three months ended May 2,
1998. The increase is primarily due to payments made during the three months
ended May 1, 1999 for administrative claims and certain assumed pre-petition
liabilities of the Predecessor Company in the aggregate amount of approximately
$9.6 million. The Company's working capital was $51.3 million at May 1, 1999
compared to $41.1 million at January 30, 1999. The Predecessor Company's working
capital (deficiency) was ($23.9) million at May 2, 1998. The Company's primary
source of liquidity has been borrowings under the Revolving Credit Facility.
The Company incurred capital expenditures of $0.2 million during the
three-month period ended May 1, 1999. The Company's capital expenditures are
expected to be approximately $7.0 million in fiscal 1999 primarily for the
remodeling of existing stores. The Company will fund these expenditures through
borrowings under the Revolving Credit Facility. Pursuant to the covenants
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contained in the Revolving Credit Facility, the Company's total capital
expenditures for fiscal year 1999 may not exceed $7,250,000.
At May 1, 1999, the Company had approximately $24.1 million of
availability under the Revolving Credit Facility, after considering $71.0
million of revolving loans and $11.1 million of letters of credit outstanding.
Effective June 2, 1999, the Company and the lenders under the Revolving
Credit Facility entered into an amendment thereto adjusting the definition of
earnings before interest, taxes, depreciation and amortization ("EBITDA") to
allow for the inclusion of up to $3 million of cash equity contributed to the
Company during the fiscal year ending January 29, 2000 as part of EBITDA, as
defined. As of May 1, 1999, the Company was in compliance with each of the
covenants contained in the Revolving Credit Facility.
There can be no assurance that the Company can achieve its financial
forecasts in its fiscal year ending January 29, 2000 or beyond. Any material
deviations from the Company's forecasts could require the Company to seek
alternative sources of financing or to reduce expenditures. There can also be no
assurance that alternative financing could be obtained, or if obtained, that it
would be on terms acceptable to the Company.
YEAR 2000
The Year 2000 ("Y2K") issue relates to the inability of information
systems to properly recognize and process date-sensitive information beyond
January 1, 2000. Many computer systems and software products may not be able to
interpret dates after December 31, 1999 because such systems and products allow
only two digits to indicate the year in a date. As a result, these systems and
products are unable to distinguish January 1, 2000 from January 1, 1900, which
could have adverse consequences on the operations of an entity and the integrity
of information processing.
The Company's management recognized the need to address the Y2K issue
in all internal systems and applications. A Y2K plan was developed in April 1998
to define all applications requiring system upgrades.
Letters were mailed to all system related vendors in March through July
of 1998. The letters instructed vendors to confirm status of their systems
and/or applications in connection with Y2K compliance needs. The Company
required modifications to software and hardware systems to make reasonably
certain these applications should perform properly after December 31, 1999.
Vendors responded, providing schedules for upgrades on hardware and software
utilized by the Company. As of May, 1999, 85% of all vendors have complied with
written requests to address Y2K limitations. The remaining 15% of
software/hardware vendors have been contacted and schedules are being
coordinated with various departments and locations. Completion of modifications
is currently scheduled for Fall 1999.
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The Company is modifying or replacing portions of its software systems
to attempt to make all applications Y2K compliant. The components requiring
upgrade include software related applications controlling merchandising, credit,
marketing, accounting, distribution, sales audit and store security systems. The
process has provided an opportunity to introduce the latest versions of software
as well as to upgrade hardware for loss prevention, purchasing and distribution.
New security software computers were installed at the Madison Avenue and Beverly
Hills stores. New versions of software are to be installed on the VAX system
which controls the Distribution Center sorting equipment.
The Company is utilizing both internal and external resources to
reprogram, replace and test software for Y2K modifications. All computer network
servers utilizing Novell technology will be upgraded with Y2K compliant software
versions. System related upgrades began in March 1998 when STS, the retail
system vendor, began installing Y2K compliant software on the Company's main
frame computer.
Expenditures for Y2K related projects between April 1998 to May 1999
were $165,000, predominately to modify software applications. The Company's
management anticipates additional Y2K expenses will total approximately $50,000.
The Company's cost of the Y2K project, and the dates on which the
Company believes it will substantially complete Y2K modifications are based on
management's best estimates. Currently no contingency plan exists in the event
that Y2K modifications are not complete or ineffective but management will
periodically evaluate the need for one and adapt accordingly. There is no
certainty or guarantee that these estimates will be achieved, and actual costs
could be materially greater than anticipated. Specific factors that might cause
such differences include, but are not limited to, the availability and cost of
personnel trained in the Y2K area, the compliance by merchandise and other
suppliers and other third parties, and similar uncertainties.
No assurances can be given that the Company will be able to completely
identify or address all Year 2000 compliance issues, or that third parties with
whom the Company does business will not experience system failures as a result
of the Year 2000 issues, nor can the Company fully predict the consequences of
noncompliance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the reported market risks since
the end of the most recent fiscal year.
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PART 2. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
10.1 Second Amendment, dated as of June 2, 1999 to the
Credit Agreement
27.1 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the quarter ended
May 1, 1999.
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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.
Date: June 15, 1999
BARNEYS NEW YORK, INC.
By: /s/ Steven M. Feldman
----------------------------------------
Name: Steven M. Feldman
Title: Senior Vice President,
Interim Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10.1 Second Amendment, dated as of June 2, 1999 to the
Credit Agreement
27.1 Financial Data Schedule
14
Exhibit 10.1
EXECUTION COPY
SECOND AMENDMENT
Dated as of June 2, 1999
This SECOND AMENDMENT among Barney's, Inc., a New York corporation
("Barneys"), Barneys America, Inc., a Delaware corporation ("BAI"), PFP Fashions
Inc., a New York corporation ("PFP"), Barneys (CA) Lease Corp., a Delaware
corporation ("CA Lease"), Barneys (NY) Lease Corp., a Delaware corporation ("NY
Lease"), Basco All-American Sportswear Corp., a New York corporation ("Basco"),
BNY Licensing Corp., a Delaware corporation ("BNY"), and Barneys America
(Chicago) Lease Corp., a Delaware corporation ("Chicago Lease;" and together
with Barney's, BAI, PFP, CA Lease, NY Lease, Basco and BNY collectively the
"Borrowers"), the Lenders (as defined below) and the Administrative Agent (as
defined below), and amends the Credit Agreement dated as of January 28, 1999 (as
amended hereby and as the same may be further amended, supplemented or otherwise
modified from time to time, the "Credit Agreement") entered into among the
Borrowers, the financial institutions from time to time parties thereto (the
"Lenders"), the issuing banks from time to time parties thereto (the "Issuing
Banks"), General Electric Capital Corporation, in its capacity as documentation
agent and Citicorp USA, Inc., in its capacity as agent for the Lenders and the
Issuing Banks (the "Administrative Agent"). Unless otherwise defined herein, the
terms defined in the Credit Agreement shall be used herein as therein defined.
PRELIMINARY STATEMENTS:
(1) The Borrowers have requested the Lenders to amend the Credit
Agreement to amend the definition of "Consolidated EBITDA".
(2) The Borrowers and the Requisite Lenders have agreed to amend the
Credit Agreement as hereinafter set forth.
SECTION 1. Amendment to Credit Agreement. The definition of
"Consolidated EBITDA" in Section 1.01 of the Credit Agreement is, effective as
of the date hereof and subject to the satisfaction of the conditions precedent
set forth in Section 2 hereof, hereby amended by deleting in its entirety such
definition and substituting therefor the following:
"'Consolidated EBITDA' means, for any twelve-month period on a
consolidated basis for any Person and its Subsidiaries, (i) the sum of (A)
Consolidated Net Income, (B) depreciation and amortization expense, (C)
Consolidated Interest Expense, (D) federal, state, local and foreign income
taxes, (E) other non-cash charges and (F) up to $3,000,000 of any cash equity
contributed to the Borrowers during Fiscal Year 1999, minus (ii) extraordinary
gains not already excluded from the determination of Consolidated Net Income."
SECTION 2. Conditions Precedent to Effectiveness. This Second
Amendment shall become effective as of the date hereof on the date (the
"Amendment Effective Date") when the following conditions precedent have been
satisfied:
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(a) Certain Documents. The Administrative Agent shall have received
all of the following:
(i) this Second Amendment executed by the Borrowers and the
Requisite Lenders; and
(ii) an Acknowledgment substantially in the form of Exhibit A
attached hereto executed by Barneys New York, Inc. ("Holdings").
(b) Representations and Warranties. Each of the representations and
warranties made by the Borrowers or Holdings in or pursuant to the Credit
Agreement, as amended by this Second Amendment, and the other Loan
Documents to which any Borrower or Holdings is a party or by which each
Borrower or Holdings is bound, shall be true, correct and complete in all
material respects on and as of the Amendment Effective Date (other than
representations and warranties in any such Loan Document which expressly
speak as of a different date).
(c) No Events of Default. No Event of Default or Default shall have
occurred and be continuing on the Amendment Effective Date.
SECTION 3. Representations and Warranties. Each Borrower represents
and warrants as follows:
(a) After giving effect to this Second Amendment, all of the
representations and warranties contained in Section 6.01 of the Credit
Agreement and in the other Loan Documents shall be true, correct and
complete in all material respects.
(b) After giving effect to this Second Amendment, no Default or
Event of Default shall have occurred and be continuing.
(c) As of the date hereof, no material adverse change shall have
occurred in the condition (financial or otherwise), performance,
properties, operations or prospects of the Barneys Group since August 1,
1998 except as publicly disclosed prior to the date hereof.
SECTION 4. Reference to and Effect on the Loan Documents. (a) Upon
the effectiveness of this Second Amendment, on and after the date hereof each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended hereby.
2
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(b) Except as specifically amended above, the Credit Agreement and
all other Loan Documents, are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the Loan Documents and all of the Collateral
described therein do and shall continue to secure the payment of all obligations
of the Borrowers under the Credit Agreement, the Notes and the other Loan
Documents, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this Second
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of any Lender or the Agent under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
SECTION 5. Execution in Counterparts. This Second Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
SECTION 6. Governing Law. This Second Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed as of the date first above written.
BARNEY'S, INC.
BARNEYS AMERICA, INC.
PFP FASHIONS INC.
BARNEYS (CA) LEASE CORP.
BARNEYS (NY) LEASE CORP.
BASCO ALL-AMERICAN SPORTSWEAR CORP.
BNY LICENSING CORP.
BARNEYS AMERICA (CHICAGO) LEASE CORP.
By: /s/ Steven M. Feldman
--------------------------------------------
Title: Senior Vice President,
Interim Chief Financial Officer
CITICORP USA, INC., as Administrative Agent and
Lender
By: /s/ Brenda Cotsen
--------------------------------------------
Vice President
<PAGE>
GENERAL ELECTRIC CAPITAL
CORPORATION, as Lender
By: /s/ Peggy Erlenkotter
--------------------------------------------
Title: Duly Authorized Signatory
BNY FINANCIAL CORPORATION, as Lender
By: /s/ Sam Cirelli
--------------------------------------------
Title: Senior Vice President
NATIONAL CITY COMMERCIAL
FINANCE, INC., as Lender
By: /s/ Kathryn Ellero
--------------------------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT A
ACKNOWLEDGMENT
Reference is hereby made to the Holdings Guaranty (as defined in the
Credit Agreement) to which the undersigned is a party. The undersigned hereby
consents to the terms of the foregoing Second Amendment to Credit Agreement and
agrees that the terms thereof shall not affect in any way its obligations and
liabilities under the undersigned's Holdings Guaranty or any other Loan
Document, all of which obligations and liabilities shall remain in full force
and effect and each of which is hereby reaffirmed.
BARNEYS NEW YORK, INC.
By: /s/ Steven M. Feldman
--------------------------------------------
Title: Senior Vice President,
Interim Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Barneys New York, Inc. and Subsidiaries contained in
the accompanying Quarterly Report on Form 10-Q and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> MAY-01-1999
<CASH> 10,653
<SECURITIES> 0
<RECEIVABLES> 25,097
<ALLOWANCES> 4,456
<INVENTORY> 63,928
<CURRENT-ASSETS> 104,783
<PP&E> 51,588
<DEPRECIATION> 2,093
<TOTAL-ASSETS> 332,851
<CURRENT-LIABILITIES> 53,532
<BONDS> 127,465
542
0
<COMMON> 125
<OTHER-SE> 150,382
<TOTAL-LIABILITY-AND-EQUITY> 332,851
<SALES> 85,841
<TOTAL-REVENUES> 85,841
<CGS> 45,775
<TOTAL-COSTS> 86,493
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 501
<INTEREST-EXPENSE> 3,120
<INCOME-PRETAX> (3,772)
<INCOME-TAX> 19
<INCOME-CONTINUING> (652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,791)
<EPS-BASIC> (.30)
<EPS-DILUTED> (.30)
</TABLE>
