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 May 3, 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
Convertible Common Stock, as of May 27, 1997; 8,853,608 and 48,431,
respectively.
<PAGE>
Loehmann's, Inc.
Quarter ended May 3, 1997
CONTENTS
PART I--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets--May 3, 1997 and February 1, 1997............... 1
Consolidated Statements of Operations--Quarter ended
May 3, 1997 and May 4, 1996.............................................. 2
Consolidated Statements of Cash Flows--Quarter ended
May 3, 1997 and May 4, 1996.............................................. 3
Notes to Consolidated Financial Statements.................................. 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 6
PART II--OTHER INFORMATION
Item 5. Other Information................................................... 8
Item 6. Exhibits and Reports on Form 8-K.................................... 8
Signatures.................................................................. 9
<PAGE>
Loehmann's, Inc.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
MAY 3, FEBRUARY 1,
1997 1997
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,498 $ 2,292
Accounts receivable and other assets 6,150 4,400
Merchandise inventory 72,545 58,304
--------- ---------
Total current assets 81,193 64,996
Property, equipment and leaseholds, net 66,473 66,515
Deferred debt issuance costs and other assets, net 3,623 3,870
Purchase price in excess of assets acquired, net 40,495 40,819
========= =========
Total assets $ 191,784 $ 176,200
========= =========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable 30,425 $ 19,634
Accrued expenses 18,139 20,484
Accrued interest 5,332 2,530
Current portion of long-term debt 70 70
--------- ---------
Total current liabilities 53,966 42,718
Long-term debt:
Revolving Line of Credit 14,143 10,188
11-7/8% senior secured notes 95,000 95,000
Revenue bonds and notes, less current portion 2,646 2,662
--------- ---------
Total long-term debt 111,789 107,850
Other noncurrent liabilities 389 389
Common stockholders' equity:
Common stock, 25,000,000 shares authorized; 8,779,322 and 8,756,739 shares
issued and outstanding at May 3, 1997 and February 1, 1997,
respectively 87 87
Class B convertible common stock, 469,237 shares authorized;
122,726 and 142,277 shares issued and outstanding at May 3, 1997 and
February 1, 1997, respectively 615 713
Additional paid-in capital 81,110 80,995
Accumulated deficit (56,172) (56,552)
--------- ---------
Total common stockholders' equity 25,640 25,243
========= =========
Total liabilities and common stockholders' equity $ 191,784 $ 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)
QUARTER ENDED
MAY 3, MAY 4,
1997 1996
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Net sales $112,595 $104,120
Cost of sales 77,489 70,386
-------- --------
Gross profit 35,106 33,734
Sales, general and administrative expenses 28,868 23,885
Depreciation and amortization 2,864 3,147
-------- --------
Operating income 3,374 6,702
Interest expense, net 2,972 4,231
-------- --------
Income before income taxes 402 2,471
Provision for income taxes 22 50
-------- --------
Net income 380 2,421
Stock dividends on and accretion of preferred stock -- 586
-------- --------
Net income applicable to common stock $ 380 $ 1,835
======== ========
Net income per share applicable to common stock $ 0.04 $ 0.31
======== ========
Weighted average number of common shares
outstanding 9,418 5,914
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
MAY 3, 1997 MAY 4, 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 380 $ 2,421
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,864 3,147
Accretion of 10-1/2% senior secured notes -- 392
Changes in current assets and liabilities:
Accounts receivable, net (1,707) (1,062)
Merchandise inventory (14,241) (12,684)
Prepaid expenses and other (43) (137)
Accounts payable 10,791 13,831
Accrued expenses (2,345) 634
Accrued interest 2,802 (4,047)
------------ ------------
Net changes in current assets and liabilities: (4,743) (3,465)
Net change in other assets and liabilities 93 (34)
------------ ------------
Net adjustments (1,786) 40
------------ ------------
Net cash (used in) provided by operating activities (1,406) 2,461
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,338) (1,336)
------------ ------------
Net cash used in investing activities (2,338) (1,336)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under credit facility, net 3,955 --
Purchase of 10-1/2% senior secured notes -- (1,568)
Sale of common stock 17 33
Other financing activities, net (22) (16)
------------ ------------
Net cash provided by (used in) financing activities 3,950 (1,551)
------------ ------------
Net increase (decrease) in cash and cash equivalents 206 (426)
Cash and cash equivalents at beginning of period 2,292 12,512
------------ ------------
Cash and cash equivalents at end of period $ 2,498 $ 12,086
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash interest paid during period $ 292 $ 8,158
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
Loehmann's, Inc.
Notes to Consolidated Financial Statements (Unaudited)
May 3, 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 May 3, 1997 and the statements of operations and cash flows
for the quarters ended May 3, 1997 and May 4, 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 May 3, 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 income per share amounts were determined by dividing net income (after
deducting dividends on and accretion of preferred stock) by the weighted average
number of common shares and common share equivalents outstanding during each
period.
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)
May 3, 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. Upon the adoption of FAS 128 at the end of 1997,
reported primary earnings per share of $0.04 and $0.31 for the quarters ended
May 3, 1997 and May 4 1996, respectively, will be restated to reflect basic
earnings per common share of $0.04 and $0.35 and diluted income per common share
$0.04 and $0.31 per common share and common share equivalents.
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 (the "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 (collectively, the "Existing Obligations").
As a result of these transactions, the Company incurred approximately $4.7
million in extraordinary losses on the early extinguishment of debt and $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 MAY 3, 1997 AND MAY 4,
1996
Net sales for the thirteen week period ended May 3, 1997, were $112.6 million as
compared to $104.1 million for the comparable period in the prior year, an
increase of approximately $8.5 million or 8.1%. Comparable store sales (sales at
stores that were in operation for both periods) decreased by 6.2%. The increase
in net sales was due to the sales contribution from eight new stores opened
during the preceding 52 weeks, partially offset by the closure of four stores
during the same period and the decrease in comparable stores results.
Gross profit for the thirteen week period ended May 3, 1997, was $35.1 as
compared to $33.7 million for the same period in the prior year, an increase of
$1.4 million or 4.1%. Gross margin percent decreased to 31.2% from 32.4% 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 thirteen week period ended
May 3, 1997, were $28.9 million as compared to $23.9 million during the same
period in the prior year, an increase of $5.0 million, or 20.9%. 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 was due to additional payroll, occupancy,
advertising and other costs related to the opening of eight new stores since the
first quarter of 1996.
Depreciation and amortization expense for the thirteen week period ended May 3,
1997, was $2.9 million as compared to $3.1 million for the same period in the
prior year, a decrease of approximately $0.2 million, or 9.0%. This decrease was
primarily due to the reduction in amortization expense associated with the
refinancing of debt pursuant to the Debt Offering.
Net interest expense for the thirteen week period ended May 3, 1997 was $3.0
million as compared to $4.2 million for the same period in the prior year, a
decrease of approximately $1.2 million or 29.8%. 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.
6
<PAGE>
Loehmann's, Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Net cash used as a result of operating activities totaled $1.4 million during
the quarter ended May 3, 1997. Cash of $3.2 million was provided from operations
after adding back non-cash charges, offset by the use of net working capital of
approximately $4.7 million primarily related to seasonal needs, the three new
stores opened during the quarter and two stores opened in May, 1997.
Net cash used in investing activities totaled $2.3 million during the quarter
ended May 3, 1997. These expenditures were principally related to capital
expenditures for leasehold improvements and fixtures primarily associated with
the opening of three new stores during the first quarter of 1997.
Net cash provided by financing activities was approximately $4.0 million during
the quarter ended May 3, 1997, and reflects the proceeds from borrowings under
the Company's revolving line of credit.
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.
7
<PAGE>
Loehmann's, Inc.
PART II--OTHER INFORMATION
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" with 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the quarter ended May 3, 1997.
8
<PAGE>
Loehmann's, Inc.
Signature
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: June 6, 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
9
<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> FEB-2-1997
<PERIOD-END> MAY-3-1997
<CASH> 2,498
<SECURITIES> 0
<RECEIVABLES> 6,150
<ALLOWANCES> 0
<INVENTORY> 72,545
<CURRENT-ASSETS> 81,193
<PP&E> 134,158
<DEPRECIATION> (67,685)
<TOTAL-ASSETS> 191,784
<CURRENT-LIABILITIES> 53,966
<BONDS> 95,000
0
0
<COMMON> 87
<OTHER-SE> 25,553
<TOTAL-LIABILITY-AND-EQUITY> 191,784
<SALES> 112,595
<TOTAL-REVENUES> 112,595
<CGS> 77,489
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28,868
<INTEREST-EXPENSE> 2,972
<INCOME-PRETAX> 402
<INCOME-TAX> 22
<INCOME-CONTINUING> 402
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 380
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
