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 July 31, 1999
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
------------------ -----
(Address of principal executive offices) (Zip Code)
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 10, 1999; 9,052,607 and 26,087, respectively.
<PAGE>
Loehmann's, Inc.
Contents
Part I--Financial Information
Item 1. Financial Statements (Unaudited)
Balance Sheets--July 31, 1999 and January 30, 1999........................ 1
Statements of Operations--Quarters and six months ended
July 31, 1999 and August 1, 1998....................................... 2
Statements of Cash Flows--Quarters and six months ended
July 31, 1999 and August 1, 1998....................................... 3
Notes to Financial Statements............................................. 4
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition......................................... 6
Part II--Other Information
Item 1. Legal Proceedings................................................. 10
Item 3. Defaults Upon Senior Securities................................... 10
Item 5. Other Information................................................. 11
Item 6. Exhibits and Reports on Form 8-K.................................. 11
Signature................................................................. 12
<PAGE>
Loehmann's, Inc.
(Debtor-In-Possession)
Balance Sheets
<TABLE>
<CAPTION>
July 31, January 30,
1999 1999
---------------------------------
Unaudited
(In thousands, except
share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,349 $ 1,325
Accounts receivable and other assets 13,631 4,883
Merchandise inventory 43,810 69,605
---------------------------------
Total current assets 58,790 75,813
Property, equipment and leaseholds 58,509 71,462
Deferred debt issuance costs and other assets, net 3,501 3,195
Purchase price in excess of net assets acquired, net 37,574 38,223
---------------------------------
Total assets $ 158,374 $ 188,693
=================================
Liabilities and common stockholders' (deficit) equity
Current liabilities:
Accounts payable $ 4,869 $ 25,544
Accrued expenses 10,339 16,031
Accrued interest 299 2,688
Current portion of long-term debt 70 70
---------------------------------
Total current liabilities 15,577 44,333
Long-term debt:
Revolving line of credit 21,564 41,880
Revenue bonds and notes, less current portion 2,488 2,523
11 7/8% senior secured notes - 95,000
---------------------------------
Total long-term debt 24,052 139,403
Liabilities subject to compromise 146,324 -
Other noncurrent liabilities 3,550 339
Stockholders' (deficit) equity:
Common stock, $0.01 par value, 25,000,000 shares authorized; 9,052,607 shares
issued and outstanding at July 31, 1999 and January 30, 1999 90 90
Class B convertible common stock, 469,237 shares authorized; 26,087 shares
issued and outstanding at July 31, 1999 and January 30, 1999 142 142
Additional paid-in capital 81,758 81,758
Accumulated deficit (113,119) (77,372)
---------------------------------
Total stockholders' (deficit) equity (31,129) 4,618
---------------------------------
Total liabilities and stockholders' (deficit) equity $ 158,374 $ 188,693
=================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
Loehmann's, Inc.
(Debtor-In-Possession)
Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
---------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 89,984 $ 97,058 $ 198,179 $ 207,285
Cost of sales 66,798 65,739 140,441 138,921
---------------------------------------------------------------------
Gross profit 23,186 31,319 57,738 68,364
Selling, general and administrative expenses 29,611 26,229 61,153 54,833
Depreciation and amortization 3,175 2,914 6,365 6,049
---------------------------------------------------------------------
Operating (loss) income (9,600) 2,176 (9,780) 7,482
Interest expense, net 1,177 3,731 4,837 7,271
---------------------------------------------------------------------
(Loss) income before reorganization items and
income taxes (10,777) (1,555) (14,617) 211
Reorganization costs 21,064 - 21,064 -
---------------------------------------------------------------------
(Loss) income before income taxes (31,841) (1,555) (35,681) 211
Provision for income taxes 28 64 66 88
---------------------------------------------------------------------
(Loss) income before extraordinary item (31,869) (1,619) (35,747) 123
Extraordinary loss on extinguishment of debt - 560 - 560
---------------------------------------------------------------------
Net loss applicable to common stock $ (31,869) $ (2,179) $ (35,747) $ (437)
=====================================================================
Earnings per share:
Basic and diluted:
(Loss) before extraordinary item $ (3.51) $ (0.18) $ (3.94) $ 0.01
Extraordinary item $ - $ (0.06) $ - $ (0.06)
---------------------------------------------------------------------
(Loss) after extraordinary item $ (3.51) $ (0.24) $ (3.94) $ (0.05)
=====================================================================
Weighted average number of common shares
outstanding 9,079 9,072 9,079 9,049
Weighted average number of common shares and
common share equivalents outstanding 9,079 9,072 9,079 9,190
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
Loehmann's, Inc.
(Debtor-In-Possession)
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
---------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Cash flows used in operating activities
Net loss $ (31,869) $ (2,179) $ (35,747) $ (437)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Reorganization expenses 19,879 - 21,063 -
Depreciation and amortization 3,176 2,914 6,365 6,049
Loss on extinguishment of debt - 560 - 560
Changes in current assets and liabilities:
Accounts receivable and other assets (6,714) 609 (8,748) (1,036)
Merchandise inventory 39,922 9,181 25,795 (1,072)
Accounts payable (3,482) (8,999) 11,180 803
Accrued expenses (4,282) (3,689) (2,330) (7,782)
Accrued interest 456 (2,569) 3,283 266
---------------------------------------------------------------------
Net changes in current assets and liabilities: 25,900 (5,467) 29,180 (8,821)
Net change in other noncurrent assets and
liabilities 3,676 (1,092) 2,304 (1,153)
---------------------------------------------------------------------
Total adjustments, net 52,631 (3,085) 58,912 (3,365)
---------------------------------------------------------------------
Net cash provided by (used in) operating activities 20,762 (5,264) 23,165 (3,802)
---------------------------------------------------------------------
Cash flows used in investing activities
Capital expenditures (1,115) (2,094) (2,669) (4,984)
---------------------------------------------------------------------
Net cash used in investing activities (1,115) (2,094) (2,669) (4,984)
---------------------------------------------------------------------
Cash flows from financing activities
(Repayments) borrowings under credit facility, net (20,231) 6,537 (20,316) 8,354
Sale of common stock - 59 - 59
Other financing activities, net (149) (24) (156) (48)
---------------------------------------------------------------------
Net cash (used in) provided by financing activities (20,380) 6,572 (20,472) 8,365
---------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (733) (786) 24 (421)
Cash and cash equivalents at beginning of period 2,082 2,132 1,325 1,767
---------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,349 $ 1,346 $ 1,349 $ 1,346
=====================================================================
Supplemental disclosure of cash flow information
Cash interest paid during period $ 679 $ 6,656 $ 4,837 $ 7,169
=====================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Notes to Financial Statements
1. Basis of Presentation
Financial accounting and reporting during a chapter 11 case is prescribed in
Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"). Accordingly, certain
pre-petition liabilities, which may be subject to settlement, have been
classified as liabilities subject to compromise in the accompanying condensed
consolidated balance sheet at July 31, 1999. SOP 90-7 also requires that the
Company record all transactions incurred as a result of the chapter 11 filing
separately as reorganization items on the statement of operations for the three
month and six month periods ended July 31, 1999. The accompanying financial
statements have been prepared on a going concern basis, which assumes continuity
of operations, realization of assets and liquidation of liabilities in the
ordinary course of business. However, as a result of the chapter 11 filing and
circumstances relating to these events, such realization of assets and
liquidation of liabilities is subject to significant uncertainty. These
conditions raise substantial doubt as to the Company's ability to continue as a
going concern. An event or a sale of the Company or parts thereof may
necessitate a material write down of assets, including goodwill associated with
the Company's businesses. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The balance sheet at July 31, 1999 and the statements of operations and cash
flows for the quarters ended July 31, 1999 and May 1, 1999 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 July 31, 1999 are not
necessarily indicative of the results that may be expected for the fiscal year
ended January 29, 2000. It is suggested that these unaudited financial
statements be read in conjunction with the financial statements and notes for
the fiscal year ended January 30, 1999 included in the Company's Annual Report
on Form 10-K for such year.
2. Liabilities Subject to Compromise and Reorganization Items
Liabilities subject to compromise in the accompanying balance sheet includes the
following amounts at July 31, 1999:
11 7/8% senior secured notes $ 95,000
Accounts payable 31,857
Accrued lease rejection claims 7,721
Accrued interest on senior secured notes 5,672
Other liabilities 6,074
==============
Total liabilities subject to compromise $ 146,324
==============
4
<PAGE>
SOP 90-7 requires that the Company record all transactions incurred as a result
of the Chapter 11 filing separately as reorganization items. Accordingly,
reorganization items included in the statements of operations include the
following for the six month period ended July 31, 1999:
Asset impairments at closed stores $ 10,368
Accrued lease rejection claims 7,433
Professional fees 2,691
Other liabilities 572
==============
Total reorganization costs $ 21,064
==============
3. Charge for Store Closings
During the second quarter of fiscal 1999, the Company implemented a plan to
close 14 underperforming stores and, as a result, recorded a $18.4 million
charge to continuing operations. These closures are intended to improve the
Company's future profitability and liquidity.
The store closures will be materially completed by the end of September 1999.
Net sales and operating income (loss), including certain specifically allocated
charges, for these stores were $21.0 million and $ (1.6) million for the six
months ended July 31, 1999 and $20.5 million and $0.2 million for the same
period in the prior year.
The charge for store closings consisted of write-offs of property, plant and
equipment, costs associated with net lease rejection claims and other expenses
of $10.4 million, $7.4 million and $0.6 million, respectively.
4. 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.
5. 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
from the estimates.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Reorganization
Due to sales, gross margin and EBITDA levels in April 1999 being under plan,
especially in the latter part of the month, there was substantial risk that the
Company would be unable to secure sufficient trade credit for the second half of
the 1999 fiscal year. As a result on May 18, 1999 the Company filed a petition
for relief under chapter 11 of the Bankruptcy Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). Since the Petition Date, the Company has continued to operate as a
debtor-in-possession under the Bankruptcy Code.
The Company's management is in the process of developing a reorganization plan
and is evaluating its operations. Until a reorganization plan is confirmed by
the Bankruptcy Court, payments of pre-petition liabilities are limited to those
approved by the Bankruptcy Court.
As a result of the chapter 11 filing, the Company has defaulted on certain
indebtedness. See "Part II - Item 3 - Defaults Upon Senior Securities."
In its chapter 11 case, the Company may sell assets and settle liabilities for
amounts other than those reflected in the financial statements. The
administrative and reorganization expense resulting from the chapter 11 filing
will unfavorably affect results. Moreover, future results may be adversely
affected by other claims and factors resulting from the chapter 11 filing.
In July 1999, the Company finalized a plan to close 14 underperforming stores
and provided for a charge in the amount of $18.4 million. This charge consists
of write-offs of property, plant and equipment, costs associated with net lease
rejection claims and other expenses of $10.4 million, $7.4 million and $0.6
million, respectively. See Note 3 to the Financial Statements.
Liquidity and Capital Resources
On June 7, 1999, the Bankruptcy Court entered a final order approving a $75
million debtor-in-possession financing (the "DIP Facility") with Congress
Financial Corporation. The DIP Facility provides for a revolving line of credit
and a letter of credit facility aggregating $75.0 million. The DIP Facility
expires on the earlier of (a) the second anniversary of the DIP Facility, (b)
the effective date of a plan of reorganization for the Company, or (c)
acceleration following the occurrence of an event of default. The availability
of the revolving line of credit and letters of credit under the DIP Facility is
subject to certain inventory-related borrowing base requirements. The
indebtedness under the DIP Facility bears interest at variable rates based on
LIBOR plus 2.25% or the prime rate plus 0.5%. The DIP Facility contains certain
customary covenants (including limitations on indebtedness, liens and restricted
payments) but does not contain any financial covenants. The DIP Facility is
secured by substantially all of the Company's assets. As of September 7, 1999
the Company had borrowings of $15.1 million and letters of credit of $1.3
million outstanding under the DIP Facility, with $23.4 million of remaining
availability for borrowings under the DIP Facility. The Company intends to use
the DIP Facility during pendency of the chapter 11 case to finance its working
capital expenditure requirements.
6
<PAGE>
As previously noted, the Company is currently operating its business as a
debtor-in-possession under chapter 11 of the Bankruptcy Code. Continuation of
the Company as a going concern is contingent upon, among other things, the
ability to obtain acceptances from its creditors as provided in the Bankruptcy
Code and confirmation by the Bankruptcy Court of a reorganization plan, the
ability to comply with its DIP Facility and the Company's ability to return to
profitability, generate sufficient cash from operations and obtain financing
sources to meet its future obligations. In addition, the Company has experienced
recurring operating losses, working capital deficiencies, negative operating
cash flow and is currently in default on its Senior Notes. Those matters raise
substantial doubt about the Company's ability to continue as a going concern. In
the event a plan is confirmed and consummated, continuation of the business
thereafter is dependent on the Company's near-term ability to obtain adequate
exit financing to meet cash flow obligations and medium-term ability to generate
sufficient cash flow to meet its operational and financing requirements.
As a result of operating as a debtor-in-possession, cash provided by operations
for the three months ended July 31, 1999, was $20.8 million , of which $20.2
million was used to repay borrowings under the Company's credit facility. For
the six months ended July 31, 1999, $23.2 million of cash was generated from
operations and repayments on the Company's credit line were $20.3 million.
The Company believes that cash generated from operations and funds available
under the DIP Facility will be sufficient to satisfy its cash requirements
through fiscal 1999.
Result of Operations - Comparison of the Quarters Ended July 31, 1999 and August
1, 1998
Net sales for the thirteen week period ended July 31, 1999, were $90.0 million
as compared to $97.1 million for the comparable period in the prior year, a
decrease of approximately $7.1 million or 7.3%. Comparable store sales (sales at
stores that were in operation for both periods) decreased by 7.7%. The Company
believes that the overall sales decline is partially attributable to the impact
of its chapter 11 filing.
Gross profit for the thirteen week period ended July 31, 1999, was $23.2 million
as compared to $31.3 million for the same period in the prior year. Gross margin
percentage decreased to 25.8% from 32.3% in the prior year period. The decrease
in gross profit was due primarily to a charge of $6.1 million for the
liquidation of inventory at closed stores, in addition to the decrease in sales
for the period. Gross profit from ongoing operations was $29.3 million or 32.6%
as a percentage of net sales. The increase in gross margin percentage from
ongoing operations was due primarily to an increase in the initial mark-up
percentage of 1.2% as a percentage of net sales.
Selling, general and administrative expenses for the thirteen week period ended
July 31, 1999, were $29.6 million as compared to $26.2 million during the same
period in the prior year, an increase of $3.4 million, or 12.9%. The increase
was due primarily to (i) advertising expenses of $3.9 million in the first
quarter of 1999 compared to $2.4 million in the first quarter of the prior year
and (ii) increased occupancy costs of $0.5 million due to the new distribution
facility in Rutherford, New Jersey.
Depreciation and amortization expense for the thirteen week period ended July
31, 1999, was $3.2 million as compared to $2.9 million for the same period in
the prior year.
7
<PAGE>
The Company provided for a charge in the amount of $18.4 million for the closing
of 14 stores. This charge consists of the write-off of property, plant and
equipment, closing expenses and costs associated with net lease rejection claims
of $10.4 million, $0.6 million and $7.4 million, respectively. In addition, the
Company incurred $2.7 million of other reorganization costs.
Net interest expense for the thirteen week period ended July 31, 1999 was $1.2
million as compared to $3.7 million for the same period in the prior year, an
decrease of approximately $2.6 million or 68.5%. Interest expense has not been
accrued on the 11 7/8% senior notes since the chapter 11 filing on May 18, 1999.
For the thirteen week period ending July 31, 1999, interest expense was $0.5
million compared to $2.8 million for the same period last year. (see "Liquidity
and Capital Resources").
Result of Operations--Comparison of the Six Months Ended July 31, 1999 and
August 1, 1998
Sales for the six month period ended July 31, 1999 were $198.2 million versus
$207.3 million during the comparable period last year, a decrease of $9.1
million, or 4.4%. Comparable store sales (stores that were in operation for both
periods) decreased by 4.5%. The Company believes that the overall sales decline
is partially attributable to the impact of its chapter 11 filing.
Gross profit for the six month period ended July 31, 1999 was $57.7 million, as
compared to $68.4 million for the comparable period last year, an decrease of
$10.6 million, or 15.5%. Gross margin percentage decreased to 29.1% from 33.0%
in the comparable period last year. The decrease in gross profit was due
primarily to a charge of $6.1 million for the liquidation of inventory at closed
stores, in addition to the decrease in sales for the period. Gross profit from
ongoing operations was $63.8 million or 32.2% as a percentage of net sales.
Selling, general and administrative expenses for the six month period ended July
31, 1999 were $61.2 million as compared to $54.8 million during the comparable
period last year, an increase of approximately $6.3 million, or 11.5%. As a
percentage of net sales, selling, general and administrative expenses were 30.9%
versus 26.5% during the comparable period last year. The increase in selling,
general and administrative expenses was due primarily to (i) an increase in
advertising expenses of $3.3 million, (ii) increased occupancy costs of $1.0
million due to the new distribution facility and (iii) an increase on payroll
related expense of $1.0 million or 3.7% compared to the same period last year.
Depreciation and amortization for the six month period ended July 31, 1999 was
$6.4 million as compared to $6.0 million for the comparable period last year, an
increase of approximately $0.3 million, or 5.2%.
The Company provided for a charge in the amount of $18.4 million for the closing
of 14 stores. This charge consists of the write-off of property, plant and
equipment, closing expenses and costs associated with net lease rejection claims
of $10.4 million, $0.6 million and $7.4 million, respectively. In addition, the
Company incurred $2.7 million of other reorganization costs.
Net interest expense for the six month period ended July 31, 1999 was $4.8
million versus $7.3 million for the comparable period last year, an decrease of
$2.5 million, or 33.5%. Interest expense
8
<PAGE>
has not been accrued on the Senior Notes since the chapter 11 filing on May 18,
1999. For the twenty six week period ending July 31, 1999 interest expense on
the 11 7/8% senior notes was $3.3 million compared to $5.6 million for the same
period last year. (see "Liquidity and Capital Resources").
Year 2000
The "Year 2000 Issue" is caused by the fact that computers read dates as two
digit numbers. For example, a computer reads the year "1998" as "98". As a
result, in the year 2000, computers may be unable to distinguish between the
year 1900 and the year 2000, possibly resulting in computer malfunctions or
failures.
The efficient operation of the Company's business is dependent in part on its
computer software programs and operating system (collectively, "Programs and
Systems"). These Programs and Systems are used in several key areas of the
Company's business, including purchasing, inventory management, point-of-sale
and financial reporting, as well as in various administrative functions. Certain
of these Programs and Systems are maintained by third-party software providers.
The Company is in the process of addressing the Year 2000 issue, and as a result
of this process, the Company has identified three phases of its Year 2000
Project: i) inventory, ii) assessment, and iii) remediation and testing. The
Company has completed its inventory and assessment of its computer and
application software, as well as non-information technology equipment. Plans for
establishing compliance have been developed, which include, among other things:
the identification of which non-compliant hardware and software will be upgraded
or replaced, the timetable and resources (both internal and external) required
to achieve those objectives, and the estimated costs. The Company expects to
complete remediation and testing of its Programs and Systems by October 1999.
Approximately 70% of the necessary upgrades have occurred to date. The majority
of this work has been performed by third-party software providers, often as part
of existing software maintenance agreements.
The Company has communicated with its service providers, financial institutions
and suppliers to determine their Year 2000 state of readiness and the extent to
which the failure of any of these systems may impact the Company's operations.
Based upon current information, the Company estimates that the costs of
addressing the Year 2000 Issue have not been material and are expected to
continue to be immaterial. The planned expenditures for the Company's Year 2000
project are approximately $1.5 million, of which approximately 75% has been
spent. Although the Company is not currently aware of any material operational
issues or costs associated with preparing its systems for the Year 2000, there
can be no assurance that there will not be a delay in, or increased costs
associated with, the implementation of the necessary systems and changes to
address the Year 2000 issues.
The Company believes that it is difficult to identify its most likely worst case
Year 2000 scenario. However, a reasonable worst case scenario would be the
failure of major third-party software suppliers to finish their upgrades to both
store and financial systems. Continuing failures in these areas could have a
material adverse effect on the Company's results of operations. To date, the
Company has not established a contingency plan for Year 2000 issues. Where
needed, the Company will
9
<PAGE>
establish contingency plans, based on actual testing experience to limit, to the
extent possible, the effect of Year 2000 issues on the Company's results of
operations. Any such plans would necessarily be limited to situations which the
Company can reasonably be expected to control. The Company expects contingency
plans to be in place by October 31, 1999.
The cost of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's estimates. Based
on the testing done to date, the Company currently believes that the Year 2000
Issue will not pose significant operational problems for its computer systems.
However, due to uncertainties inherent in the Year 2000 Issue, the Company will
develop various courses of action to mitigate the effect of any unforeseen
disruptions resulting from failures either by the Company's computer systems, or
those of other companies on which the Company's systems and operations rely.
Notwithstanding any such contingency plans, if the required modifications and
conversions are not made, or are not completed on a timely basis, or the systems
of third parties ( i.e. suppliers and financial institutions) with whom the
Company relies on directly, or indirectly, to be Year 2000 compliant, are not
operational, the Year 2000 Issue could have a material adverse effect on the
future results of operations.
Part II. Other Information
Item 1. Legal Proceedings.
On May 18, 1999 (the "Petition Date"), the Company filed a petition for relief
under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the District of Delaware. Since the Petition Date , the Company has
continued to operate as a debtor-in-possession under the Bankruptcy Code. As a
result of the filing of the chapter 11 case, all pending litigation against the
Company became automatically stayed as provided in the Bankruptcy Code.
Item 3. Defaults Upon Senior Securities.
As previously disclosed, as a result of the chapter 11 filing, the Company did
not make the interest payment on its 11-7/8% Senior Notes due 2003, which
payment was due on May 17, 1999. As of the Petition Date, $100.6 million in
unpaid principal and interest of such notes was outstanding. Since the notes are
an unsecured obligation, the Company is not required to pay interest during its
chapter 11 case.
Prior to its chapter 11 case, the Company had a $7.9 million unsecured term loan
with a bank. The term loan was supported by a letter of credit issued under the
Company's secured credit facility with Congress Financial Corporation. As a
result of the chapter 11 filing, the bank drew on the letter of credit to pay
off the term loan. Because of the draw on the letter of credit, the indebtedness
under the DIP Facility was increased by $7.9 million.
10
<PAGE>
Item 5. Other Information
Other Information
This Quarterly Report on Form 10-Q and in particular Management's Discussion and
Analysis of Financial Condition and Results of Operations contain
forward-looking statements within the Securities Exchange Act of 1934. The
Company's actual results of operations and future financial condition may differ
materially from those expressed or implied in any such forward-looking
statements as a result of many factors, including factors that may be beyond the
Company's control. The Company is currently operating its business as
debtor-in-possession under chapter 11 of the Bankruptcy Code. Continuation of
the Company as a going concern is contingent upon its ability to comply with its
debtor-in-possession financing facility, the Company's ability to generate
sufficient cash from operations and its ability to obtain financing sources to
meet its future obligations. Other factors that may cause actual results of
operations and future financial condition to differ from those expressed or
implied in any forward-looking statements contained herein include adverse
changes in relationships with key factors and vendors, changes in consumer
preferences, competition from existing and potential competitors, timely and
cost effective compliance with the Year 2000 Issue and general economic
conditions.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company does not undertake to update any forward-looking
statements contained herein or that may be made from time to time by or on
behalf of the Company.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
(a) Exhibits
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
Report dated May 18, 1999
Report dated May 25, 1999
11
<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: September 14, 1999
Loehmann's, Inc.
By: /s/ Robert Glass
----------------
Robert Glass
President, Chief Operating Officer and Director
12
<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>
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> MAY-02-1999
<PERIOD-END> AUG-28-1999
<PERIOD-TYPE> 3-MOS
<CASH> 1349
<SECURITIES> 0
<RECEIVABLES> 13631
<ALLOWANCES> 0
<INVENTORY> 43810
<CURRENT-ASSETS> 58790
<PP&E> 58509
<DEPRECIATION> 0
<TOTAL-ASSETS> 158374
<CURRENT-LIABILITIES> 15577
<BONDS> 0
0
0
<COMMON> 90
<OTHER-SE> (31219)
<TOTAL-LIABILITY-AND-EQUITY> 158374
<SALES> 89984
<TOTAL-REVENUES> 89984
<CGS> 66798
<TOTAL-COSTS> 66798
<OTHER-EXPENSES> 32786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1177
<INCOME-CONTINUING> (10777)
<INCOME-PRETAX> (31841)
<INCOME-TAX> 28
<DISCONTINUED> 0
<EXTRAORDINARY> 21064
<CHANGES> 0
<NET-INCOME> (31869)
<EPS-BASIC> (3.51)
<EPS-DILUTED> (3.51)
</TABLE>
