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 29, 2000
Commission File Number 0-28410
LOEHMANN'S, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2341356
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(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 12, 2000; 9,053,967 and 26,087, respectively.
<PAGE>
Loehmann's, Inc.
(Debtor-In-Possession)
CONTENTS
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets--July 29, 2000 and January 29, 2000 ......................... 1
Statements of Operations--Quarters and six months ended
July 29, 2000 and July 31, 1999.......................................... 2
Statements of Cash Flows--Quarters and six months ended
July 29, 2000 and July 31, 1999.......................................... 3
Notes to Financial Statements............................................... 4
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition........................................... 7
PART II--OTHER INFORMATION
Item 5. Other Information................................................... 9
Item 6. Exhibits and Reports on Form 8-K.................................... 11
Signature................................................................... 12
<PAGE>
PART I - FINANCIAL INFORMATION
Loehmann's, Inc.
(Debtor-In-Possession)
Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
JULY 29, JANUARY 29,
2000 2000
---------------------------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,998 $ 1,229
Accounts receivable and other assets 3,460 3,388
Merchandise inventory 41,065 46,674
---------------------------------
Total current assets 46,523 51,291
Property, equipment and leaseholds, net 49,620 56,019
Deferred debt issuance costs and other assets, net 1,012 1,021
Purchase price in excess of net assets acquired, net 36,273 36,923
---------------------------------
Total assets $ 133,428 $145,254
=================================
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
DIP credit agreement $ -- $ 9,120
Accounts payable 7,453 6,530
Accrued expenses 13,721 12,552
Current portion of long-term debt 2,504 391
---------------------------------
Total current liabilities 23,678 28,593
Liabilities subject to compromise 145,543 141,733
Other noncurrent liabilities 3,674 3,776
Common stockholders' deficit:
Common stock, $0.01 par value, 25,000,000 shares authorized; 9,053,967 shares
issued and outstanding at July 29, 2000 and January 29, 2000 90 90
Class B convertible common stock, 469,237 shares authorized; 26,087 shares
issued and outstanding at July 29, 2000 and January 29, 2000 142 142
Additional paid-in capital 81,760 81,760
Accumulated deficit (121,459) (110,840)
---------------------------------
Total common stockholders' deficit (39,467) (28,848)
---------------------------------
Total liabilities and common stockholders' deficit $ 133,428 $145,254
=================================
</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 29, JULY JULY 29, JULY 31,
31,
2000 1999 2000 1999
--------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales $ 75,385 $ 89,984 $ 167,606 $ 198,179
Cost of sales 49,015 66,798 111,680 140,441
--------------------------------------------------------------------
Gross profit 26,370 23,186 55,926 57,738
Selling, general and administrative expenses 22,790 29,611 49,970 61,153
Depreciation and amortization 2,575 3,175 5,248 6,365
--------------------------------------------------------------------
Operating income (loss) 1,005 (9,600) 708 (9,780)
Interest expense, net 244 1,177 667 4,837
--------------------------------------------------------------------
Income (loss) before reorganization items and
Income taxes 761 (10,777) 41 (14,617)
Reorganization costs 1,730 21,064 10,542 21,064
--------------------------------------------------------------------
Loss before income taxes (969) (31,841) (10,501) (35,681)
Provision for income taxes 61 28 111 66
--------------------------------------------------------------------
Net loss applicable to common stock $ (1,030) $ (31,869) $ (10,612) $ (35,747)
====================================================================
Loss per share: basic and diluted: $ (0.11) $ (3.51) $ (1.17) $ (3.94)
====================================================================
Weighted average number of common shares outstanding
9,079 9,079 9,079 9,079
Weighted average number of common shares and common
share equivalents outstanding 9,079 9,079 9,079 9,079
</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 29, JULY JULY 29, JULY 31,
31,
2000 1999 2000 1999
----------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss $ (1,030) $ (31,869) $ (10,612) $ (35,747)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Reorganization expenses (218) 19,879 8,197 21,063
Depreciation and amortization 2,575 3,176 5,248 6,365
Changes in current assets and liabilities:
Accounts receivable and other assets 1,268 (6,714) (72) (8,748)
Merchandise inventory 11,407 39,922 5,609 25,795
Accounts payable (1,691) (3,482) 333 11,180
Accrued expenses 198 (3,826) 1,656 953
----------------------------------------------------------------------
Net changes in current assets and liabilities: 11,182 25,900 7,526 29,180
Net change in other noncurrent assets and liabilities 290 3,676 (241) 2,304
----------------------------------------------------------------------
Total adjustments, net 13,829 52,631 20,730 58,912
----------------------------------------------------------------------
Net cash provided by operating activities 12,799 20,762 10,118 23,165
----------------------------------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures (1,990) (1,115) (2,215) (2,669)
----------------------------------------------------------------------
Net cash used in investing activities (1,990) (1,115) (2,215) (2,669)
----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments under credit facility, net (12,765) (20,231) (9,120) (20,316)
Other financing activities, net 1,996 (149) 1,986 (156)
----------------------------------------------------------------------
Net cash used in by financing activities (10,769) (20,380) (7,134) (20,472)
----------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 40 (733) 769 24
Cash and cash equivalents at beginning of period 1,958 2,082 1,229 1,325
----------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,998 $ 1,349 $ 1,998 $ 1,349
======================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash interest paid during period $ 288 $ 679 $ 690 $ 1,475
======================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
Notes to Financial Statements
1. BASIS OF PRESENTATION
On May 18, 1999 (the "Petition Date") 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.
On July 28, 2000 the Company filed a Second Amended Plan of Reorganization (the
"Second POR") with the Bankruptcy Court. The Second POR was subsequently
accepted by the required percentages of those creditors entitled to vote on the
plan. A plan confirmation hearing was held on September 6, 2000 and the Second
POR, as further modified on that date (the "Amended POR"), was confirmed by the
Bankruptcy Court. In order for the Amended POR to become effective, the Company
or one of its subsidiaries must, among other things, enter into a new senior
secured credit facility (the "New Credit Facility") and the indenture for the
New Senior Notes described below must be finalized. The Company expects that
within two weeks from the date of the confirmation hearing, both of these
agreements will be finalized and the Amended POR will become effective, thereby
allowing the Company to emerge from bankruptcy.
Under the Amended POR, a holding company ("Loehmann's Holdings") will be formed
which will own 100% of the Company and which will issue its common stock, par
value $0.01 per share (the "New Common Stock"), and up to $25,000,000 in its 11%
Senior Notes due 2005 (the "New Senior Notes"). Distributions to the Company's
general unsecured creditors will be in New Common Stock or in a combination of
New Common Stock and New Senior Notes depending on the elections made by the
holders of general unsecured claims. The Amended POR provides that all
stockholders and option holders of the Company's old stock shall not be entitled
to, and shall not, receive any property or interest in property or on account of
their shares of Common Stock and options to purchase Common Stock.
The Amended POR also provides that two new subsidiaries of the Company will be
formed and that all of the Company's assets will be transferred to such
subsidiaries. The Company will own 100% of the newly formed subsidiaries.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern, which
principles, except as otherwise disclosed, assume that assets will be realized
and liabilities will be discharged in the normal course of business. As a result
of the chapter 11 case, such realization of assets and liquidation of
liabilities are subject to uncertainty. In the chapter 11 case, substantially
all liabilities as of the Petition Date are subject to compromise or other
treatment under a plan of reorganization. For financial reporting purposes,
those liabilities and obligations whose disposition is dependent on the outcome
of the chapter 11 case have been segregated and classified as liabilities
subject to compromise in the balance sheets. Generally, actions to enforce or
otherwise effect repayment of all pre-chapter 11 liabilities as well as all
pending litigation against the Company are stayed while the Company continues
its business operations as a debtor-in-possession. Schedules have been filed by
the Company with the Bankruptcy Court setting forth the assets and liabilities
of the Company as of the Petition Date as reflected in the Company's accounting
records. Differences between amounts reflected in such schedules and
4
<PAGE>
claims filed by creditors are currently being investigated and either amicably
resolved or adjudicated. The ultimate amount of and settlement terms for such
are not presently determinable.
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,
pre-petition liabilities, which may be subject to settlement, have been
classified as liabilities subject to compromise in the accompanying balance
sheet at July 29, 2000. 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 six month period
ended July 29, 2000.
During its chapter 11 case, the Company operated its business as a
debtor-in-possession and had a $75 million debtor-in-possession financing
facility, which was subsequently reduced to $60 million (the"DIP Facility"). The
Company is in the process of finalizing the New Credit Facility, which the
Company will use to, among other things, pay off the DIP Facility. The Company
believes that the New Credit Facility will allow it to meet its merchandise
inventory and normal operating expense needs, as well as presently anticipated
capital expenditure requirements, for the remainder of the fiscal year.
The accompanying financial statements do not reflect any adjustment to the
carrying value of assets or liabilities that may result from the Amended POR
discussed above. Such adjustments will include recognition of the forgiveness of
debt, the revaluation of assets, and other "Fresh Start" related items, where
applicable.
The balance sheet at July 29, 2000 and the statements of operations and cash
flows for the quarters ended July 29, 2000 and July 31, 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 29, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ended February 3, 2001. It is suggested that these unaudited financial
statements be read in conjunction with the financial statements and notes for
the fiscal year ended January 29, 2000 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 29, 2000:
11 7/8% senior notes $ 95,000
Accounts payable 31,423
Accrued lease rejection claims 8,653
Accrued interest on senior notes 5,740
Other liabilities 4,727
----------
Total liabilities subject to compromise $ 145,543
==========
5
<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 29, 2000:
Asset impairments at closed stores $ 4,015
Accrued lease rejection claims 3,963
Proceeds from sales of leases (1,200)
Professional fees 1,800
Other liabilities 1,964
---------
Total reorganization costs $ 10,542
=========
3. CHARGE FOR STORE CLOSINGS
During the first quarter of fiscal 2000, the Company implemented a plan to close
eleven underperforming stores. These closures are intended to improve the
Company's future profitability and liquidity.
The store closures were completed during the second quarter. Net sales and
operating loss, including certain specifically allocated charges, for these
stores were $6.4 million and $(1.3) million for the six months ended July 29,
2000 and $36.3 million and $(1.9) 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 $4.0 million, $2.5 million, and $0.9 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.
6. SUBSEQUENT EVENTS
The Company filed the Second POR with the Bankruptcy Court on July 28, 2000. The
Second POR was subsequently accepted by the required percentages of those
creditors entitled to vote on the plan. A plan confirmation hearing was held on
September 6, 2000 and the Amended POR was confirmed by the Bankruptcy Court. The
approved Amended POR, which will facilitate the Company's emergence from
bankruptcy, is expected to become effective approximately two weeks after the
hearing date. For further details refer to Note 1.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
REORGANIZATION
On May 18, 1999, 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.
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.
RESULT OF OPERATIONS - COMPARISON OF THE QUARTERS ENDED JULY 29, 2000 AND JULY
31, 1999
Comparable store sales (sales at stores that were in operation for both periods)
decreased by 0.3%. Net sales for the thirteen week period ended July 29, 2000,
were $75.4 million as compared to $90.0 million for the comparable period in the
prior year, a decrease of approximately $14.6 million or 16.2%. The overall
sales decline is attributable to the impact of the fourteen stores closed in
July 1999 which generated $9.8 million in sales, and the eleven stores closed in
March 2000 which generated an additional $4.8 million in sales for the quarter
ended July 29, 2000.
Gross profit for the thirteen week period ended July 29, 2000, was $26.4 million
as compared to $23.2 million for the same period in the prior year. Gross margin
percentage increased to 35.0% from 25.8% in the prior year period. The increase
in gross profit was due primarily to a prior year charge of $6.1 million for the
liquidation of inventory at closed stores, in addition to a $1.6 million
positive impact from the liquidation sale of inventory at closed stores. Gross
profit from ongoing operations was $25.4 million or 34.9% as a percentage of net
sales compared to $24.5 million or 33.5% for the same period last year. The
increase in gross margin percentage from ongoing operations was due primarily to
an increase in the initial markup of goods.
Selling, general and administrative expenses for the thirteen week period ended
July 29, 2000, were $22.8 million as compared to $29.6 million during the same
period in the prior year, a decrease of $6.8 million, or 23.0%. As a percentage
of net sales, selling, general and administrative expenses were 30.2% versus
32.9% during the comparable period last year. The decrease was due primarily to
the closing of fourteen stores in July 1999 and the eleven stores closed in
March of 2000 along with reductions in corporate overhead.
Depreciation and amortization expense for the thirteen week period ended July
29, 2000, was $2.6 million as compared to $3.2 million for the same period in
the prior year.
Reorganization costs for the thirteen week period ended July 29, 2000, were $1.7
million as compared to $21.4 million for the same period in the prior year. In
the prior year the company incurred a charge
7
<PAGE>
in the amount of $18.4 million for the closing of 14 stores. This charge
consisted 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.
Net interest expense for the thirteen week period ended July 29, 2000 was $0.2
million as compared to $1.2 million for the same period in the prior year, a
decrease of approximately $1.0 million or 83.3%. The decrease was due primarily
to lower borrowings on the DIP Facility than in the comparable period last year.
Interest expense has not been accrued on the Company's 11 7/8% senior notes (the
"Senior Notes") since the chapter 11 filing on May 18, 1999. (see "Liquidity and
Capital Resources"). In the quarter ended July 31, 1999, interest expense for
the Senior Notes was $0.5 million.
RESULT OF OPERATIONS--COMPARISON OF THE SIX MONTHS ENDED JULY 29, 2000 AND JULY
31, 1999
Comparable store sales (stores that were in operation for both periods)
increased by 0.4%. Net sales for the six month period ended July 29, 2000 were
$167.6 million as compared to $198.2 million during the comparable period last
year, a decrease of $30.6 million, or 15.4%. The overall sales decline is
attributable to the impact of the fourteen stores closed in July 1999 which
generated $20.8 million in sales, and the eleven stores closed in March 2000
which generated an additional $9.8 million in sales for the six month period
ended July 31, 1999.
Gross profit for the six month period ended July 29, 2000 was $55.9 million, as
compared to $57.7 million for the comparable period last year. Gross margin
percentage increased to 33.4% from 29.1% in the prior year period. The increase
in gross profit percentage was due primarily to a prior year charge of $6.1
million for the liquidation of inventory at closed stores, in addition to a $0.3
million net positive impact from the liquidation sale of inventory at closed
stores, which occurred in the current year. Gross profit from ongoing operations
was $55.8 million or 34.6% as a percentage of net sales compared to $53.9
million or 33.3% for the same period last year. The increase in gross margin
percentage from ongoing operations was due primarily to an increase in the
initial markup.
Selling, general and administrative expenses for the six-month period ended July
29, 2000 were $50.0 million as compared to $61.2 million during the same period
in the prior year, a decrease of approximately $11.2 million, or 18.3%. As a
percentage of net sales, selling, general and administrative expenses were 29.8%
versus 30.8% during the comparable period last year. The decrease was due
primarily to the closing of fourteen stores in July 1999 and the eleven stores
closed in March of 2000 along with reductions in corporate overhead.
Depreciation and amortization for the six month period ended July 29, 2000 was
$5.2 million as compared to $6.4 million for the same period in the prior year.
In the six-month period ending July 29, 2000, the Company provided for a charge
in the amount of $7.4 million for the closing of 11 stores. This charge consists
of the write-off of property, plant and equipment, closing expenses and costs
associated with net lease rejection claims of $4.0 million, $0.9 million and
$2.5 million, respectively. In addition, the Company incurred $3.1 million of
other reorganization costs. In the prior year six-month period ending July 31,
1999, 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
8
<PAGE>
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 29, 2000 was $0.7
million as compared to $4.8 million for the same period in the prior year, a
decrease of approximately $4.1 million, or 85.4%. The decrease is primarily due
to the interest on the Senior Notes which has not been accrued since the chapter
11 filing on May 18, 1999. (see "Liquidity and Capital Resources"). In the
six-month period ended July 31, 1999, interest expense for the 11 7/8% notes was
$3.3 million. In addition, interest related to borrowings under the DIP Facility
was $0.7 million, compared to $1.5 million for the comparable period in the
prior year.
LIQUIDITY AND CAPITAL RESOURCES
As previously mentioned, the Company has a DIP Facility which provides for a
revolving line of credit and a letter of credit facility aggregating $60.0
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 1, 2000, the Company had borrowings of $7.3 million and letters of
credit of $2.2 million outstanding under the DIP Facility, with $25.0 million of
remaining availability for borrowings under the DIP Facility. The Company has
been using the DIP Facility during the chapter 11 case to finance its working
capital and capital expenditure requirements.
As previously noted, the Company is currently operating its business as a
debtor-in-possession under chapter 11 of the Bankruptcy Code. The Company is in
the process of finalizing an agreement for the New Credit Facility. The Company
believes that cash generated from operations and funds available under the New
Credit Facility will be sufficient to satisfy its cash requirements through
fiscal 2000.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
(A) BANKRUPTCY OR RECEIVERSHIP
On September 6, 2000 (the "Confirmation Date"), the United States Bankruptcy
Court for the District of Delaware signed an order confirming the Amended POR.
The material features of the Amended POR, which is filed as Exhibit 10.1 hereto,
are:
CORPORATE GOVERNANCE
The Amended POR provides that the board of directors of the Company will consist
of seven members, five of whom have been selected jointly by the Company's
Creditors Committee and Informal Noteholders
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Committee, and who are: William J. Fox, Joseph Nusim, Cory Lipoff, Erwin Marks
and Carol Greer. The remaining two directors will be Robert Friedman and Robert
Glass, who are both currently directors of the Company. The officers of the
Company immediately prior to the effective date of the Amended POR (the
"Effective Date") will be the initial officers of the Company on and after the
Effective Date.
The Amended POR also provides for the creation of a new holding company,
Loehmann's Holdings, Inc. ("Holdings"), a Delaware corporation, which will own
100% of the Company. Holdings will issue up to 5 million shares of New Common
Stock and up to $25 million of New Senior Notes, to the general unsecured
creditors of the Company. The former general unsecured creditors of the Company
will own approximately 100% of the issued and outstanding common stock of
Holdings (subject to dilution in respect of common stock that will be issued
pursuant to Holdings' Equity Incentive Plan, which is a stock option plan that
permits Holdings to grant to its officers and directors and the officers and
directors of the Company, options to acquire shares of New Common Stock).
The Amended POR also provides that two new subsidiaries of the Company will be
formed and that all of the Company's assets will be transferred to such
subsidiaries. The Company will own 100% of the newly formed subsidiaries.
The initial board of directors of Holdings will consist of 7 members, five of
whom have been selected jointly by the Company's Creditors Committee and
Informal Noteholders Committee, and who are: William J. Fox, Joseph Nusim, Cory
Lipoff, Erwin Marks and Carol Greer. The remaining two directors will be Robert
Friedman and Robert Glass. After the Effective Date, the holders of Holdings'
common stock will be entitled to elect all of the directors of the Company. The
initial officers of Holdings are Robert Friedman and Robert Glass.
PLAN CLASSIFICATIONS
The Amended POR divides the Company's creditors and equity security holders into
six classes: Other Priority Claims (Class 1); Other Secured Claims (Class 2);
DIP Financing Claims (Class 3); Convenience Claims (Class 4); General Unsecured
Claims (Class 5); and Equity Interests (Class 6). Administrative Claims and
Priority Tax Claims against the Company have not been classified, as provided in
the Bankruptcy Code. The definitions for each class of claims is set forth the
Amended POR.
In general, the Amended POR provides that holders of Administrative Claims,
Priority Tax Claims, Other Priority Claims and DIP Financing Claims will either
receive payment in full in cash on account of their claims or such other
treatment as set forth in the Amended POR. Holders of General Unsecured Claims
against the Company will receive their pro rata share of up to 5 million shares
of New Common Stock and their pro rata share of $25 million principal amount of
New Senior Notes, depending upon certain elections made under the Amended POR.
Unsecured creditors holding claims of $2,000 or less will receive cash equal to
50% of the allowed amount of such claim. Holders of claims in excess of $2,000
will be permitted to reduce their claims to $2,000 to receive such treatment.
Holders of the Company's common stock (and other instruments evidencing
ownership in the Company) will receive no distributions under the Amended POR
and such instruments will be canceled.
ASSETS AND LIABILITIES OF THE COMPANY
10
<PAGE>
Information about the assets and liabilities of the Company as of August 26,
2000, a date as close as practicable to September 6, 2000, is included as
Exhibit 99 hereto.
(B) CREDIT FACILITY
Upon consummation of the Amended POR, the Company expects one of its
subsidiaries to enter into a $75 million Credit Facility with a syndicate of
lenders led by Bankers Trust Company, as agent.
FORWARD-LOOKING STATEMENTS
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, its ability to consummate and implement the
Amended POR 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 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
2.1 Second Amended Plan of Reorganization
2.2 Second Amended Disclosure Statement
27 Financial Data Schedule (for SEC use only)
99 Balance Sheet of the Company as of August 26, 2000
(b) No reports on Form 8-K were filed during the quarter ended July 29,
2000.
<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 18, 2000
Loehmann's, Inc.
By /s/ Robert Glass
-----------------------------------------------
Robert Glass
President, Chief Operating Officer and Director
