Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended August 2, 1997
Commission File Number 0-28410
LOEHMANN'S, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2341356
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 Halsey Street
Bronx, New York 10461
- ------------------------------- -------------------
Registrant's telephone number, including area code (718) 409-2000
-------------------
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period as the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Number of shares outstanding of Registrant's Common Stock and Class B Common
Stock, as of September 11, 1997; 8,929,121 and 48,431, respectively.
<PAGE>
Loehmann's, Inc.
CONTENTS
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets--August 2, 1997 and February 1, 1997........... 1
Consolidated Statements of Operations--Quarters and six months ended
August 2, 1997 and August 3, 1996....................................... 2
Consolidated Statements of Cash Flows--Quarters and six months ended
August 2, 1997 and August 3, 1996....................................... 3
Notes to Consolidated Financial Statements................................. 4
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.......................................... 6
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................ 9
Item 5. Other Information.................................................. 10
Item 6. Exhibits and Reports on Form 8-K................................... 11
Signatures........................................................ 12
<PAGE>
Loehmann's, Inc.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
AUGUST 2, FEBRUARY 1,
1997 1997
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,268 $ 2,292
Accounts receivable and other assets 7,436 4,400
Merchandise inventory 64,159 58,304
--------- ---------
Total current assets 72,863 64,996
Property, equipment and leaseholds, net 68,701 66,515
Deferred debt issuance costs and other assets, net 3,472 3,870
Purchase price in excess of net assets acquired 40,171 40,819
--------- ---------
Total assets $ 185,207 $ 176,200
========= =========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 23,486 $ 19,634
Accrued expenses 14,921 20,484
Accrued interest 2,459 2,530
Current portion of long-term debt 70 70
--------- ---------
Total current liabilities 40,936 42,718
Long-term debt:
Revolving Line of Credit 25,157 10,188
11-7/8% senior notes payable 95,000 95,000
Revenue bonds and notes, less current portion 2,630 2,662
--------- ---------
Total long-term debt 122,787 107,850
Other noncurrent liabilities 389 389
Common stockholders' equity:
Common stock, $0.01 par value, 25,000,000 shares authorized; 8,899,122
and 8,756,739 shares issued and outstanding, respectively 89 87
Class B convertible common stock, 469,237 shares authorized;
48,431 and 142,277 shares issued, respectively 244 713
Additional paid-in capital 81,521 80,995
Accumulated deficit (60,759) (56,552)
--------- ---------
Total common stockholders' equity 21,095 25,243
========= =========
Total liabilities and common stockholders' equity $ 185,207 $ 176,200
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
1
<PAGE>
Loehmann's, Inc.
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
AUGUST 2, AUGUST 3, AUGUST 2, AUGUST 3,
1997 1996 1997 1996
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales $ 95,292 $ 90,652 $ 207,887 $ 194,772
Cost of sales 69,671 62,552 147,160 132,938
--------- --------- --------- ---------
Gross profit 25,621 28,100 60,727 61,834
Selling, general and administrative expenses 24,393 20,802 53,261 44,687
Depreciation and amortization 2,668 2,899 5,532 6,046
--------- --------- --------- ---------
Operating (Loss) Income (1,440) 4,399 1,934 11,101
Interest expense, net 3,140 3,759 6,112 7,990
--------- --------- --------- ---------
(Loss) Income before income taxes (4,580) 640 (4,178) 3,111
Provision for income taxes 7 10 29 60
--------- --------- --------- ---------
(Loss) Income before extraordinary item (4,587) 630 (4,207) 3,051
Extraordinary loss on early retirement of debt -- 7,101 -- 7,101
--------- --------- --------- ---------
Net loss (4,587) (6,471) (4,207) (4,050)
Stock dividends on and normal and accelerated
accretion of preferred stock -- 5,082 -- 5,668
--------- --------- --------- ---------
Net loss applicable to common stock $ (4,587) $ (11,553) $ (4,207) $ (9,718)
========= ========= ========= =========
Net loss per share applicable to common stock before
extraordinary item $ (0.51) $ (0.51) $ (0.47) $ (0.38)
========= ========= ========= =========
Net loss per share applicable to common stock
$ (0.51) $ (1.33) $ (0.47) $ (1.40)
========= ========= ========= =========
Weighted average number of common shares and common
share equivalents outstanding 8,934 8,669 8,934 6,934
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
2
<PAGE>
Loehmann's, Inc.
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
AUGUST 2, AUGUST 3, AUGUST 2, AUGUST 3,
1997 1996 1997 1996
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,587) $ (6,471) $ (4,207) $ (4,050)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 2,668 2,899 5,532 6,046
Accretion of 10-1/2% senior secured notes -- 118 -- 510
Loss on early retirement of senior notes -- 7,101 -- 7,101
Changes in current assets and liabilities:
Accounts receivable and other assets (1,286) 304 (3,036) (895)
Merchandise inventory 8,386 9,845 (5,855) (2,839)
Accounts payable (6,939) (16,793) 3,852 (2,962)
Accrued expenses (3,219) (700) (5,564) (66)
Accrued interest (2,873) (135) (71) (4,182)
--------- --------- --------- ---------
Net changes in current assets and liabilities: (5,931) (7,479) (10,674) (10,944)
Net change in other noncurrent assets and
liabilities (18) (3,374) 69 (3,408)
--------- --------- --------- ---------
Total adjustments, net (3,281) (735) (5,073) (695)
--------- --------- --------- ---------
Net cash used in operating activities (7,868) (7,206) (9,280) (4,745)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4,403) (2,391) (6,741) (3,727)
--------- --------- --------- ---------
Net cash used in investing activities (4,403) (2,391) (6,741) (3,727)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under credit facility, net 11,014 2,791 14,969 2,791
Purchase of senior notes -- (137,827) -- (139,395)
Sale of 11-7/8% senior secured notes, net of
issuance costs -- 100,000 -- 100,000
Redemption of Series A Preferred Stock -- (20,947) -- (20,947)
Sale of common stock 46 55,388 63 55,421
Other financing activities, net (19) (10) (35) (26)
--------- --------- --------- ---------
Net cash provided by (used in) financing activities 11,041 (605) 14,997 (2,156)
--------- --------- --------- ---------
Net decrease in cash and cash equivalents (1,230) (10,202) (1,024) (10,628)
Cash and cash equivalents at beginning of period 2,498 12,086 2,292 12,512
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 1,268 $ 1,884 $ 1,268 $ 1,884
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash interest paid during period $ 6,138 $ 4,194 $ 6,430 $ 12,352
========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
Loehmann's, Inc.
Notes to Consolidated Financial Statements (Unaudited)
August 2, 1997
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Loehmann's, Inc. and its wholly-owned subsidiaries, collectively referred to
hereafter as the Company. All significant intercompany items have been
eliminated in consolidation.
The balance sheet at August 2, 1997 and the statements of operations and cash
flows for the quarters ended August 2, 1997 and August 3, 1996 include, in the
opinion of management, all adjustments (consisting of only normal recurring
adjustments) considered necessary for a fair presentation.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Certain information and footnote disclosures normally included in financial
statements required by generally accepted accounting principles have been
omitted. Operating results for the quarter ended August 2, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ended January 31, 1998. It is suggested that these unaudited consolidated
financial statements be read in conjunction with the financial statements and
notes for the fiscal year ended February 1, 1997 included in the Company's
Annual Report on Form 10-K for such year.
Net loss per share amounts were determined by dividing net loss (after deducting
dividends on and accretion of preferred stock) by the weighted average number of
common shares. Options to purchase common stock were not considered in
calculations of net loss per share as their effect was antidilutive.
2. INCOME TAXES
The provision for income taxes primarily represents alternative minimum tax and
state and local taxes for states that do not allow net operating loss
carryforwards.
3. USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles for interim financial information requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual amounts could differ.
4
<PAGE>
Loehmann's, Inc.
Notes to Consolidated Financial Statements (Unaudited) (continued)
August 2, 1997
4. EARNINGS PER SHARE
Effective December 31, 1997, the Company will adopt Statement of Financial
Accounting Standard No. 128, EARNINGS PER SHARE, ("FAS 128") which will simplify
the calculation and presentation of earnings per share data and require the
restatement of earnings per share data for all periods presented. Earlier
adoption is not permitted. The adoption of FAS 128 at the end of 1997, will not
materially impact reported primary loss per share for the quarters and six
months ended August 2, 1997 and August 3, 1996, respectively.
5. EQUITY AND DEBT OFFERING
On May 10, 1996, the Company sold 3,572,000 shares of Common Stock and $100.0
million principal amount of 11-7/8% Senior Notes due 2003 (the "Senior Notes").
The net proceeds received from such offerings were used (i) to redeem in full
$52.5 million face amount of the Company's 10-1/2% Senior Secured Notes due
1997, at a redemption price of 103.5% of the face amount of such notes, plus
accrued and unpaid interest, (ii) to redeem in full $77.6 million face amount of
the Company's 13-3/4% Senior Subordinated Notes due 1999 at a redemption price
of 101.0% of the face amount of such notes, plus accrued and unpaid interest and
(iii) to redeem all issued and outstanding shares of the Company's Series A
Preferred Stock at its liquidation price of $0.56 per share for a total of $20.9
million.
As a result of these transactions, the Company incurred approximately $4.7
million in extraordinary losses on the early extinguishment of debt, $2.0
million in losses from the write-off of related deferred financing costs
associated with such indebtedness and a $5.1 million charge to accumulated
deficit from the accelerated accretion of the Series A Preferred Stock to its
liquidation price of $0.56 per share.
5
<PAGE>
Loehmann's, Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULT OF OPERATIONS--COMPARISON OF THE QUARTERS ENDED AUGUST 2, 1997 AND AUGUST
3, 1996
Sales for the quarter ended August 2, 1997, were $95.3 million versus $90.7
million for the comparable period in the prior year, an increase of $4.6 million
or 5.1%. Comparable store sales (stores that were in operation for both periods)
decreased by 11.9%. The increase in net sales was due to the sales contribution
from ten new stores opened during the preceding 52 weeks, partially offset by
the closure of five stores during the same period and the decrease in comparable
store results.
Gross profit for the quarter ended August 2, 1997, was $25.6 million as compared
to $28.1 million for the same period in the prior year, a decrease of $2.5
million or 8.9%. Gross margin decreased to 26.9% from 31.0% in the prior year
period. The decline in margin percent was primarily a result of an increase in
markdowns as a percentage of sales.
Selling, general and administrative expenses for the quarter ended August 2,
1997, were $24.4 million as compared to $20.8 million during the same period in
the prior year, an increase of $3.6 million, or 17.3%. As a percentage of net
sales, selling, general and administrative expenses were 25.6% versus 22.9%
during the same period in the prior year. The increase in selling, general and
administrative expenses of $3.6 million was due to $4.4 million of additional
payroll, occupancy, advertising and other costs related to the ten new stores
opened since the second quarter of 1996, offset by $0.8 million of expense
reductions attributable to the comparable stores.
Depreciation and amortization expense for the quarter ended August 2, 1997, was
$2.7 million as compared to $2.9 million for the same period in the prior year,
a decrease of approximately $0.2 million, or 6.9%. The decrease was primarily
due to a change in estimate of the useful lives of certain leasehold
improvements related to lease extensions.
Net interest expense for the quarter ended August 2, 1997 was $3.1 million
versus $3.8 million for the same period in the prior year, a decrease of
approximately $0.7 million or 18.4%. The reduction in net interest expense
primarily resulted from the Company's reduction of approximately $35.0 million
of senior notes and a reduction of the average interest rate paid on the long
term debt by approximately 60 basis points, partially offset by interest expense
incurred on increased borrowings under the revolving line of credit. In May
1996, the Company redeemed its 10-1/2% Senior Secured Notes and 13-3/4% Senior
Subordinated Notes totaling $130.0 million face value and issued $100.0 million
face value of 11-7/8% Senior Notes, of which, $5.0 million was repurchased
during fiscal 1996.
6
<PAGE>
Loehmann's, Inc.
RESULT OF OPERATIONS--COMPARISON OF THE SIX MONTHS ENDED AUGUST 2, 1997 AND
AUGUST 3, 1996
Sales for the six month period ended August 2, 1997 were $207.9 million versus
$194.8 million during the same period in the prior year, an increase of $13.1
million, or 6.7%. Comparable store sales (stores that were in operation for both
periods) decreased by 8.8%. The increase in net sales was due to the sales
contribution from twelve new stores opened during the preceding 52 weeks,
partially offset by the closure of five stores during the same period and the
decrease in comparable stores results.
Gross profit for the six month period ended August 2, 1997 was $60.7 million, as
compared to $61.8 million for the comparable period in the prior year, an
decrease of $1.1 million, or 1.8%. Gross margin decreased to 29.2% from 31.7% in
the prior year period. The decline in margin percent was a result of an increase
in markdowns as a percentage of sales.
Selling, general and administrative expenses for the six month period ended
August 2, 1997 were $53.3 million as compared to $44.7 million during the
comparable period in the prior year, an increase of approximately $8.6 million,
or 19.2%. As a percentage of net sales, selling, general and administrative
expenses were 25.6% versus 22.9% during the same period in the prior year. The
increase in selling, general and administrative expenses of $8.6 million was
all attributed to additional payroll, occupancy, advertising and other costs
related to the twelve new stores opened since the second quarter of 1996.
Depreciation and amortization for the six month period ended August 2, 1997, was
$5.5 million as compared to $6.0 million for the same period in the prior year,
a decrease of approximately $0.5 million, or 8.3%. This decrease was due to a
change in estimate of useful lives of certain leasehold improvements related to
lease extensions, and the reduction in amortization expense associated with the
refinancing of debt completed on May 20, 1996.
Net interest expense for the six month period ended August 2, 1997 was $6.1
million versus $8.0 million for the comparable period in the prior year, a
decrease of $1.9 million, or 23.8%. The reduction in net interest expense
primarily resulted from the Company's reduction of approximately $35.0 million
of senior notes and a reduction of the average interest rate paid on the long
term debt by approximately 60 basis points, partially offset by interest expense
incurred on borrowings under the revolving line of credit. In May 1996, the
Company redeemed its 10-1/2% Senior Secured Notes and 13-3/4% Senior
Subordinated Notes totaling $130.0 million face value and issued $100.0 million
face value of 11-7/8% Senior Notes, of which, $5.0 million was repurchased
during fiscal 1996.
7
<PAGE>
Loehmann's, Inc.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used as a result of operating activities totaled $7.9 million during
the quarter ended August 2, 1997. Cash of $1.9 million was used in operations
after adding back non-cash charges. The Company increased its borrowings under
its credit facility by $11.0 million using the proceeds principally to fund
capital expenditures of $4.4 million and net working capital requirements of
approximately $5.9 million.
Net cash used as a result of operating activities totaled $9.3 million during
the six months ended August 2, 1997. Cash of $1.3 million was provided from
operations after adding back non-cash charges. The Company increased its
borrowings under its credit facility by approximately $15.0 million using the
proceeds principally to fund capital expenditures of $6.7 million and net
working capital requirements of approximately $10.7 million.
On August 15, 1997, the Company increased the amount of available borrowings
under its credit facility from $35.0 million to $45.0 million. The increase is
effective during the Company's peak borrowing periods from August 15, 1997
through December 31, 1997 and from March 1, 1998 through May 31, 1998.
The Company believes that cash generated from operations and funds available
under its revolving credit agreement will be sufficient to satisfy its cash
requirements through fiscal 1997.
8
<PAGE>
Loehmann's, Inc.
PART II--OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of the Company's Stockholders on June 19, 1997, the
stockholders elected both of management's nominees for director for three-year
terms. Management's nominees for directors received the following votes:
Against or Broker Non-
For Withheld Abstentions Votes
--------- ---------- ----------- -----------
Richard E. Kroon 7,985,453 0 174,279 0
Christina A. Mohr 7,988,910 0 170,822 0
Continuing directors of the Company are: Norman S. Matthews, Robert N. Friedman,
Philip Kaplan, Janet A. Hickey, Arthur E. Reiner and Cynthia R. Cohen.
Also, the following proposals were approved by the Company's Stockholders at the
annual meeting:
(i) A proposal to amend and restate the Certificate of Incorporation of the
Company pursuant to which, among other things, the number of authorized
shares of Preferred Stock was reduced from 41,500,000 to 1,000,000.
6,829,104 shares were voted in favor of, 22,991 shares were voted against,
8,235 shares abstained from, such proposal. Additionally, 1,299,402 shares
were not voted by brokers.
(ii) The adoption of the Company's Stock Option Plan for Non-Employee Directors.
5,770,311 shares were voted in favor of, 1,181,079 shares were voted
against, 11,895 shares abstained from, such proposal.
Additionally, 1,196,447 shares were not voted by brokers.
(iii)The adoption of the Company's Directors Deferred Compensation Plan.
6,605,125 shares were voted in favor of, 349,465 shares were voted against,
8,695 shares abstained from, such proposal.
Additionally, 1,196,447 shares were not voted by brokers.
(iv) A proposal, among other things, to increase the number of shares of Common
Stock reserved for issuance under the Company's Amended and Restated New
Stock Incentive Plan by 200,000. 4,619,612 shares were voted in favor of,
2,322,508 shares were voted against, 21,165 shares abstained from, such
proposal. Additionally, 1,196,447 shares were not voted by brokers.
9
<PAGE>
Loehmann's, Inc.
(v) The appointment of Ernst & Young LLP as independent accountants for the
Company for the fiscal year ending January 31, 1998. 8,075,212 shares were
voted in favor of, 75,825 shares were voted against, 8,695 shares abstained
from, such proposal.
ITEM 5. OTHER INFORMATION
Certain statements in this quarterly report on Form 10-Q under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this quarterly report and in future filings by the
Company with the Securities and Exchange Commission, constitute "forward looking
statements" within the meaning of the Reform Act. Such forward looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward looking statements. Such factors include,
among others, the following: general economic and business conditions;
competition; success of operating initiatives; development and operating costs;
advertising and promotional efforts; brand awareness; the existence or adherence
to development schedules; the existence or absence of adverse publicity;
availability, locations and terms of sites for store development; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs; changes
in, or the failure to comply with, government regulations; construction costs
and other factors referenced in this quarterly report.
10
<PAGE>
Loehmann's, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Amendment No. 1 to Second Amended and Restated Credit Agreement
dated July 23, 1997.
4.2 Amendment No. 2 to Second Amended and Restated Credit Agreement
August 15, 1997.
27.0 Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the quarter ended August 2, 1997.
11
<PAGE>
Loehmann's, Inc.
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.
Dated: September 15, 1997
Loehmann's, Inc.
By /S/ Philip Kaplan
---------------------------------------------
Philip Kaplan
President, Chief Operating Officer and Director
By /S/ Robert Glass
---------------------------------------------
Robert Glass
Senior Vice President, Chief Financial Officer,
and Assistant Secretary
12
Exhibit 4.1
FIRST AMENDMENT
TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of July 23, 1997
(this "Amendment"), amends in certain respects the Second Amended and Restated
Credit Agreement (the "Loan Agreement") dated as of May 6, 1996 between
Loehmann's, Inc. (the "Borrower"), and BankAmerica Business Credit Inc., as
Agent and sole lender (the "Lender"), as amended.
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lender amend certain of
the provisions set forth in Sections 1.1, 6.1, 6.3 and 6.4 of the Loan
Agreement;
WHEREAS, the Lender is willing to modify the provisions of Sections
1.1, 6.1, 6.3 and 6.4 of the Loan Agreement on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Amendment and for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower and
the Lender hereby agree as follows.
SECTION 1. DEFINED TERMS. Terms defined in the Loan Agreement and not
otherwise defined herein shall have the meanings set forth in the Loan
Agreement.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT.
(a)The definition of "Net Worth" set forth in Section 1.1 of
the Loan Agreement is hereby deleted in its entirety and
the following substituted therefor:
"Net Worth" means the excess of total assets over
total liabilities, each to be determined in
accordance with GAAP consistent with those applied in
the preparation of the financial statements referred
to in Section 5.1."
(b)Section 6.1 of the Loan Agreement is hereby amended by
deleting the amounts set forth opposite the Fiscal
Quarters ending on July 31, 1997 and each Fiscal Quarter
thereafter in the table set forth in such Section 6.1 and
substituting the following therefor:
"July 31 and October 31, 1997 $21,000,000
January 31 and April 30, 1998 $21,000,000
July 31 and October 31, 1998 $24,000,000
<PAGE>
January 30 and April 30, 1999 $24,000,000
July 31, 1999 and each Fiscal $30,000,000
Quarter thereafter"
(c)Section 6.3 of the Loan Agreement is hereby amended
by deleting the amounts set forth opposite the Fiscal
Quarters ending on July 31, 1997 and each Fiscal
Quarter thereafter in the table set forth in such
Section 6.3 and substituting the following therefor:
"July 31, 1997 1.6 to 1.0
October 31, 1997 1.6 to 1.0
January 31, 1998 1.6 to 1.0
April 30, 1998 1.6 to 1.0
July 31, 1998 1.7 to 1.0
October 31, 1998 1.7 to 1.0
January 30, 1999 1.8 to 1.0
April 30, 1999 1.8 to 1.0
July 31, 1999 2.2 to 1.0
October 31, 1999 2.2 to 1.0
January 29, 2000 and each 2.25 to 1.0"
Fiscal Quarter thereafter
(d)Section 6.4 of the Loan Agreement is hereby amended by
deleting the amounts set forth opposite the Fiscal
Quarters ending July 31, 1997 and each Fiscal Quarter
thereafter in the table set forth in such Section 6.4 and
substituting therefor:
"July 31, 1997 $17,500,000
October 31, 1997 $19,000,000
January 31, 1998 $19,000,000
April 30, 1998 $20,000,000
July 31, 1998 $20,000,000
October 31, 1998 $20,000,000
January 30, 1999 $20,000,000
April 30, 1999 $20,000,000
July 31, 1999 $20,000,000
October 31, 1999 $27,000,000
January 29, 2000 and $27,000,000"
each Fiscal Quarter thereafter
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall be
effective as of the date above written when the Agent shall have received the
following:
(a) counterparts of this Amendment executed by the Borrower
and the Lender;
<PAGE>
(b) payment by Borrower to Lender of an amendment fee in the
amount of $25,000; and
(c) such other certificates, representations, instruments and
other documents as the Lender may require, in form and
substance satisfactory to the Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lender and the Agent that (i) the execution, delivery and
performance of this Amendment by the Borrower is within its corporate powers and
has been duly authorized by all necessary corporate action, (ii) no consent,
approval, authorization of, or declaration or filing with, any Public Authority,
and no consent of any other Person, is required in connection with the
execution, delivery and performance of this Amendment, except for those already
duly obtained, (iii) this Amendment has been duly executed by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower, enforceable
against it in accordance with its terms and (iv) the execution, delivery and
performance by the Borrower of this Amendment does not and will not conflict
with, or constitute a violation or breach of, or constitute a default under, or
result in the creation or imposition of any Lien upon the property of Borrower
or any of its Subsidiaries by reason of the terms of (a) any contract, mortgage,
Lien, lease, agreement, indenture, or instrument to which Borrower or any
Subsidiary is party or which is binding upon it, (b) any Requirement of Law
applicable to Borrower or any Subsidiary, or ( c) the Certificates or Articles
of Incorporation or By-laws of Borrower or any Subsidiary.
SECTION 5. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS,
5.1 On and after the date hereof, each reference in the Loan
Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in
the other Loan Documents to the Loan Agreement, shall
mean and be a reference to the Loan Agreement as amended
hereby.
5.2 Except as specifically amended above, all of the terms of
the Loan Agreement shall remain unchanged and in full
force effect.
5.3 The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right,
power or remedy of the Lender or the Agent under the Loan
Agreement or any of the other Loan Documents, nor
constitute a waiver of any provision of the Loan
Agreement or any of the other Loan Documents.
SECTION 6. EXECUTION IN COUNTERPARTS. This 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 one and the same
instrument.
<PAGE>
SECTION 7. GOVERNING LAW. This Amendment shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of New
York.
SECTION 8. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment or be given any substantive effect.
IN WITNESS WHEREOF, This Amendment has been duly executed as of the
date first written above.
LOEHMANN'S INC.
By: \S\ Robert Glass
---------------------------------
Title: Senior Vice President
------------------------------
BANKAMERICA BUSINESS CREDIT, INC.,
as Lender and Agent
By: \S\ Louis Alexander
---------------------------------
Title: Vice President
------------------------------
Exhibit 4.2
SECOND AMENDMENT
TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of August 15, 1997
(this "Amendment"), amends in certain respects the Second Amended and Restated
Credit Agreement (the "Loan Agreement") dated as of May 6, 1996 between
Loehmann's, Inc. (the "Borrower"), and BankAmerica Business Credit Inc., as
Agent and sole lender (the "Lender"), as amended.
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lender increase the amount
of Revolving Credit Commitments:
WHEREAS, the Lender is willing to do so on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Amendment and for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower and
the Lender hereby agree as follows.
SECTION 1. DEFINED TERMS. Terms defined in the Loan Agreement and not
otherwise defined herein shall have the meanings set forth in the Loan
Agreement.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT.
(a) The definition of "Revolving Credit Loan Commitment" set
forth in Section 1.1 of the Loan Agreement is hereby
deleted in its entirety and the following substituted
therefor:
"Revolving Credit Loan Commitment" means, as to each
Bank the commitment of such Bank to make Revolving
Credit Loans to Borrower pursuant to Section 2.1(b)
in the aggregate principal amount of any time
outstanding not to exceed the amount set forth
opposite such Bank's name on the signature pages
hereof under the caption "Commitment" less such
Bank's Ratable Portion of the aggregate amount of the
outstanding reserves (if any) referred to in clause
(b) of the definition of Borrowing Base."
(b) The second sentence of Section 2.1(b) hereby deleted in
its entirety and the following is substituted therefor:
<PAGE>
"The aggregate Revolving Credit Loan Commitments
shall not exceed $45,000,000, from (a) August 15,
1997 through December 31, 1997 and (B) March 1, 1998
through May 31, 1998; and $35,000,000 at other
times."
(c) The amount set forth opposite Lender's name on the
signature pages of the Loan Agreement under the caption
"Commitment" is hereby deemed amended in its entirety to
read as follows:
"'Commitment':
$45,000,000 from (i) August 15, 1997 through December
31, 1997 and (ii) March 1, 1998 through May 31, 1998;
and $35,000,000 at all other times."
(d) Lender and Borrower hereby agree that at any time the
aggregate Revolving Credit Loan Commitments in effect at
such time exceed $35,000,000, Lender may maintain a
reserve against Availability of up to $1,000,000.
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall be
effective as of the date first above written when the Agent shall have received
the following:
(a) counterparts of this Amendment executed by the Borrower
and the Lender;
(b) payment by Borrower to Lender of an amendment fee in the
amount of $25,000; and
(c) a certification from a Responsible Officer of the
Borrower that the provisions of this Amendment do not
contravene the provisions of any other agreement to which
Borrower is a party or would constitute a default under
any such agreement.
(d) such other certificates, representations, instruments and
other documents as the Lender may require, in form and
substance satisfactory to the Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lender and the Agent that (i) the execution, delivery and
performance of this Amendment by the Borrower is within its corporate powers and
has been duly authorized by all necessary corporate action, (ii) no consent,
approval, authorization of, or declaration or filing with, any Public Authority,
and no consent of any other Person, is required in connection with the
execution, delivery and performance of this Amendment, except for those already
duly obtained, (iii) this Amendment has been duly executed by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower, enforceable
against it in accordance with its terms and (iv) the execution, delivery and
performance by the Borrower of this Amendment does not
<PAGE>
and will not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition of any Lien
upon the property of Borrower or any of its Subsidiaries by reason of the terms
of (a) any contract, mortgage, Lien, lease, agreement, indenture, or instrument
to which Borrower or any Subsidiary is party or which is binding upon it, (b)
any Requirement of Law applicable to Borrower or any Subsidiary, or ( c) the
Certificates or Articles of Incorporation or By-laws of Borrower or any
Subsidiary.
SECTION 5. REFERNCE TO AND EFFECT ON LOAN DOCUMENTS.
5.1 On and after the date hereof, each reference in the Loan
Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in
the other Loan Documents to the Loan Agreement, shall
mean and be a reference to the Loan Agreement as amended
hereby.
5.2 Except as specifically amended above, all of the terms of
the Loan Agreement shall remain unchanged and in full
force effect.
5.3 The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right,
power or remedy of the Lender or the Agent under the Loan
Agreement or any of the other Loan Documents, nor
constitute a waiver of any provision of the Loan
Agreement or any of the other Loan Documents.
SECTION 6. EXECUTION IN COUNTERPARTS. This 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 one and the same
instrument.
SECTION 7. GOVERNING LAW. This Amendment shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of New
York.
SECTION 8. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment or be given any substantive effect.
<PAGE>
IN WITNESS WHEREOF, This Amendment has been duly executed as of the
date first written above.
LOEHMANN'S INC.
By: \S\ Robert Glass
---------------------------------
Title: Senior Vice President
------------------------------
BANKAMERICA BUSINESS CREDIT, INC.,
as Lender and Agent
By: \S\ Louis Alexander
---------------------------------
Title: Vice President
------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC 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-31-1998
<PERIOD-START> MAY-3-1997
<PERIOD-END> AUG-2-1997
<CASH> 1,268
<SECURITIES> 0
<RECEIVABLES> 7,436
<ALLOWANCES> 0
<INVENTORY> 64,159
<CURRENT-ASSETS> 72,863
<PP&E> 138,561
<DEPRECIATION> (69,860)
<TOTAL-ASSETS> 185,207
<CURRENT-LIABILITIES> 40,936
<BONDS> 95,000
0
0
<COMMON> 89
<OTHER-SE> 21,006
<TOTAL-LIABILITY-AND-EQUITY> 185,207
<SALES> 95,292
<TOTAL-REVENUES> 95,292
<CGS> 69,671
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,393
<INTEREST-EXPENSE> 3,140
<INCOME-PRETAX> (4,580)
<INCOME-TAX> 7
<INCOME-CONTINUING> (4,587)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,587)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
