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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 10-Q/A
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from
October 30, 1994 to January 28, 1995 Commission File Number 0-15542
Lamonts Apparel, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware #75-2076160
(State of Incorporation) (I.R.S. Employer Identification Number)
3650 131st Avenue S.E., Bellevue, Washington 98006
(Address of Principal Executive Offices)
(206) 562-8386
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that 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
----
As of April 17, 1995 there were 17,887,775 shares of the Registrant's Common
Stock, par value $.01 per share, outstanding.
Page 1
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LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 28, OCTOBER 29,
1995 1994
----------- ----------
<S> <C> <C>
Current Assets:
Cash $7,972 $2,694
Receivables, net 3,050 1,994
Inventories 28,399 61,713
Prepaid expenses and other 5,517 5,924
Restricted cash 532
----------- ----------
Total current assets 45,470 72,325
Property and equipment 51,924 54,661
Leasehold interests 5,058 5,241
Excess of cost over net assets acquired 13,639 13,730
Deferred financing costs 3,436 3,617
Restricted cash 256 1,884
Other assets 486 1,131
----------- ----------
Total assets $120,269 $152,589
----------- ----------
----------- ----------
Liabilities not subject to settlement
under reorganization proceedings:
Current Liabilities:
Borrowings under working capital facility $15,838 $24,593
Accounts payable 1,754 16,151
Accrued payroll and related costs 2,913 4,979
Accrued taxes 455 1,699
Accrued interest 336 1,249
Accrued store closure costs 2,951 3,557
Other accrued expenses 5,198 8,047
Current maturities of obligations
under capital leases 1,316
Current maturities of long term debt 796
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Total current liabilities 29,445 62,387
Long term debt to related party 66,026
Obligations under capital leases 14,616
Other 2,000
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Total liabilities not subject to settlement
under reorganization proceedings 29,445 145,029
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Liabilities subject to settlement under
reorganization proceedings: 108,333
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Stockholders' Equity (Deficit):
Common stock, $.01 par value; 40,000,000
shares authorized, 17,887,775 and 17,875,230 179 179
shares issued and outstanding, respectively
Additional paid in capital 62,843 62,777
Accumulated deficit (80,531) (55,396)
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Total stockholders' equity (deficit) (17,509) 7,560
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Total liabilities and stockholders'
equity (deficit) $120,269 $152,589
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----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------
JANUARY 28, JANUARY 29,
1995 1994
----------- ----------
<S> <C> <C>
Revenues $71,014 $77,737
Cost of merchandise sold 60,587 48,954
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Gross profit 10,427 28,783
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Operating and administrative expenses 22,400 23,112
Depreciation and amortization 2,666 2,753
----------- ----------
Operating costs 25,066 25,865
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Earnings (loss) before other income (expense)
and reorganization expenses (14,639) 2,918
Other income (expense):
Interest expense (contractual interest of
$3,581 in 1995)
Cash (1,356) (2,787)
Non-cash (1,670)
Other 29 (367)
----------- ----------
Loss before reorganization expenses (17,636) (236)
Reorganization expenses 7,499
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Net loss (25,135) (236)
Accumulated deficit, beginning of period (55,396) (10,871)
----------- ----------
Accumulated deficit, end of period ($80,531) ($11,107)
----------- ----------
----------- ----------
Net loss per common share ($1.41) ($0.03)
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------
JANUARY 28, JANUARY 29,
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($25,135) ($236)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 2,666 2,753
Store closure costs (970)
Non-cash interest 1,670
Write-off of deferred financing costs 369
Reorganization expenses 7,499
Decrease in inventories 32,400 19,089
Decrease in prepaid expenses and other 992 1,396
Decrease in accounts payable (3,245) (11,943)
Decrease in accrued interest (666) (2,637)
Other 1,791 253
----------- -----------
Cash provided by operating activities
before reorganization items 17,002 9,044
Operating cash flows used by reorganization items:
Payments for professional fees and other expenses
related to the Chapter 11 proceedings (1,872)
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Cash provided by operating activities 15,130 9,044
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Cash flows from investing activities:
Capital expenditures (694) (985)
Other (3) 146
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Cash used in investing activities (697) (839)
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Cash flows from financing activities:
Proceeds from sale of preferred stock 13,399
Payment of long-term debt (13,000)
Pre-petition borrowings under working capital
facility 26,667 18,778
Pre-petition payments under working capital
facility (35,422) (26,100)
Payments on obligations under capital leases (373) (360)
Payment of financing costs (417)
Other (27) (319)
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Cash used by financing activities (9,155) (8,019)
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Net increase in cash 5,278 186
Cash, beginning of period 2,694 2,925
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Cash, end of period $7,972 $3,111
----------- -----------
----------- -----------
Supplemental cash flow information:
Cash interest paid $1,401 $5,454
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 28, 1995
NOTE 1 - PETITION FOR RELIEF UNDER CHAPTER 11
On January 6, 1995 (the "Petition Date"), Lamonts Apparel, Inc. (the "Company")
filed a voluntary petition for relief (the "Filing") under chapter 11 ("Chapter
11") of title 11 of the United States Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the Western District of Washington at Seattle (the
"Bankruptcy Court"), seeking to reorganize under Chapter 11. In Chapter 11, the
Company will continue to manage its affairs and operate its business as a
debtor-in-possession while it develops a reorganization plan that will
restructure the Company and allow its emergence from Chapter 11. As a debtor-
in-possession in Chapter 11, the Company may not engage in transactions outside
of the ordinary course of business without approval, after notice and hearing,
of the Bankruptcy Court.
As of the Petition Date, payment of pre-petition liabilities to unsecured
creditors, including trade creditors and noteholders, and pending litigation
against the Company are stayed while the Company continues its business
operations as a debtor-in-possession. These liabilities are included in the
January 28, 1995 balance sheet as "liabilities subject to settlement under
reorganization proceedings."
As a result of the Filing, the Company is currently in default under the
indentures (the "Indentures") governing the Company's 10-1/4% Subordinated Notes
due November 1999 (the "10-1/4% Notes") and 13-1/2% Senior Subordinated Notes
due February 1995 (the "13-1/2% Notes"). As a result, all unpaid principal of,
and accrued pre-petition interest on, such debt became immediately due and
payable. The payment of such debt and accrued but unpaid interest thereon is
prohibited during the pendency of the Company's Chapter 11 case, and these
liabilities have been included in the January 28, 1995 balance sheet as
"liabilities subject to settlement under reorganization proceedings."
In accordance with the Bankruptcy Code, the Company can seek court approval for
the rejection of pre-petition executory contracts, including real property
leases. Any such rejection may give rise to a prepetition claim for breach of
contract. In connection with the Company's Chapter 11 proceedings, nine real
property leases and certain executory contracts have been rejected with
Bankruptcy Court approval.
In connection with the Company's Chapter 11 case, the United States Trustee has
appointed committees for the Company's (i) bondholders, (ii) other general
unsecured creditors and (iii) equityholders.
As a result of the reorganization proceedings, the Company may sell or otherwise
realize assets and liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of reorganization could
materially change the amounts currently recorded in the financial statements,
including amounts recorded for the excess of cost over net assets acquired.
Except as discussed in Note 6, the financial statements do not give effect to
any adjustments to the carrying value of assets, or amounts and classification
of liabilities that might be necessary as a consequence of these matters.
NOTE 2 - BASIS OF PRESENTATION
The consolidated financial statements present the consolidated financial
position and results of operations of the Company and its subsidiaries. On
March 9, 1995, the Company elected to change its fiscal year end from the
Saturday closest to October 31 to the Saturday closest to January 31 in order to
enhance comparability of the Company's results of operations with other apparel
retailers. Accordingly, the accompanying financial statements include the
results of operations of the Company for the transitional quarter ended January
28, 1995 and for the comparable prior year period, and should be read in
conjunction with the audited, annual financial statements for the year ended
October 29, 1994, included in the Company's Annual Report on Form 10-K.
The accompanying consolidated financial statements have been prepared in
accordance with the American Institute of Certified Public Accountants Statement
of Position 90-7 - FINANCIAL REPORTING BY ENTITIES IN REORGANIZATION UNDER THE
BANKRUPTCY CODE. The financial statements have been prepared on a going concern
basis of accounting and do not reflect any adjustments that might result should
the Company be unable to continue as a going concern. Although the Company's
recurring losses from operations have raised substantial doubt about its ability
to continue as a going concern,
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the Chapter 11 filing has afforded the Company the opportunity to improve its
operating performance and restructure its balance sheet. The appropriateness of
using the going concern basis is dependent upon, among other things, (i) the
ability to comply with its debtor-in-possession financing agreement, (ii)
confirmation of a plan of reorganization under the Bankruptcy Code, (iii) the
ability to achieve profitable operations after such confirmation and (iv) the
ability to generate sufficient cash from operations to meet its obligations.
The financial statements presented herein reflect all adjustments that are, in
the opinion of management, necessary to present fairly the operating results for
the quarterly periods reported. Except as discussed in Notes 3 and 6, all such
adjustments are normal and recurring in nature. The results of operations for
the quarterly periods are not necessarily indicative of results for the entire
year.
NOTE 3 - INVENTORIES
Inventories are valued at the lower of cost (using the retail last-in, first-out
("LIFO") method) or net realizable value. At October 30, 1992, as a result of a
comprehensive recapitalization, the purchase price allocated to inventories was
computed based on the estimated selling prices of such merchandise less the
costs of disposal and a profit for the selling effort. As a result of purchase
accounting and the use of the LIFO method, the Company has recorded a carrying
value in excess of the weighted average cost of inventories (the "Step-up").
Accordingly, the carrying value of the Company's inventories at January 28, 1995
and October 29, 1994, exceeded the weighted average cost of inventories by $2.6
million and $5.5 million, respectively.
The decrease in the Step-up is primarily attributable to the Company's election
to change its fiscal year end. As inventory quantities at the end of January
are typically lower than inventory quantities at the end of October, the use of
the LIFO method resulted in a liquidation of a portion of the remaining Step-up.
The effect of this liquidation was to decrease the Company's gross profit by
$2.9 million during the quarter ended January 28, 1995.
NOTE 4 - LOAN AND SECURITY AGREEMENT
On January 12, 1995, the Bankruptcy Court approved an interim working capital
facility (the "Interim Facility") between the Company and Foothill Capital
Corporation ("Foothill"). Interest on borrowings under the Interim Facility
accrued at the rate of 3% per annum in excess of the Reference Rate (as defined
therein).
On February 17, 1995, the Company replaced the Interim Facility with a Loan and
Security Agreement (the "DIP Facility") with Foothill. The DIP Facility, as
approved by the Bankruptcy Court, provides a borrowing capacity of up to $32.0
million in revolving loans and letters of credit, subject to borrowing base
limitations based upon, among other things, the value of inventory and certain
real property. Letters of credit issuable under the facility are limited to
$15.0 million.
The DIP Facility provides that interest upon advances made pursuant thereto will
accrue at the rate of 3% per annum in excess of the Reference Rate (as defined
therein), payable monthly in arrears. The DIP Facility also provides that in the
event of a default in the payment of any amount due thereunder, the interest
rate on such defaulted amount shall be 4.5% per annum in excess of the Reference
Rate, payable on demand.
The obligations of the Company under the DIP Facility are collateralized by,
among other things, inventory and certain real property. The DIP Facility
imposes limitations on the Company with respect to, among other things, (i) the
creation or incurrence of liens, (ii) consolidations, mergers and sales of
assets, (iii) the incurrence of guarantees or other contingent obligations, (iv)
capital expenditures in excess of specified levels, (v) the creation or
incurrence of any indebtedness for borrowed money or the payment of principal of
or interest on any prepetition indebtedness, (vi) the prepayment of certain
indebtedness and (vii) transactions with affiliates. Additionally, the Company
must maintain a minimum Net Worth (as defined in the DIP Facility to exclude,
among other items, reorganization expenses, certain liabilities incurred prior
to the Filing, write-offs of goodwill, store closure reserves and non-cash
interest) of $10.0 million. The Company is currently in compliance in all
material respects with the terms contained in the DIP Facility.
The DIP Facility expires on the earlier of (i) May 17, 1996, with provisions for
three quarterly renewals, and (ii) the effective date of the Company's plan of
reorganization in the Chapter 11 case.
The Company paid Foothill $80,000 upon the closing of the DIP Facility. Future
fees payable under the DIP Facility consist primarily of (i) remaining closing
fees totalling $240,000 to be paid during the year ending January 31, 1996, plus
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certain other expenses, (ii) monthly payments equal to 1/2% of the average
unused borrowing capacity and (iii) quarterly payments equal to 1/4% of the
borrowing capacity for each quarterly renewal period.
NOTE 5 - LIABILITIES SUBJECT TO SETTLEMENT UNDER REORGANIZATION PROCEEDINGS
Liabilities subject to settlement under reorganization proceedings include the
following as of January 28, 1995 (dollars in thousands):
Accounts payable and accrued liabilities $23,714
Capital Lease Obligations 15,560
10-1/4% Notes (including pre-petition accrued interest) 67,576
13-1/2% Notes (including pre-petition accrued interest) 838
Notes Payable 645
--------
$108,333
--------
--------
As a result of the Filing, payment of principal and interest under the
Indentures has been stayed while the Company continues with its business
operations as a debtor-in-possession. The Company discontinued accruing
interest on these obligations as of the date of the Filing. Contractual
interest on these obligations, which is $0.6 million in excess of reported
interest expense, amounted to $2.2 million for the quarter ended January 28,
1995.
NOTE 6 - REORGANIZATION EXPENSES
Reorganization expenses represent costs directly related to the Company's
Chapter 11 case and include (i) estimated costs associated with the rejection of
real property leases, (ii) estimated costs for the court-approved closure of six
underperforming stores and (iii) professional fees and other expenditures.
Closure of the six stores is estimated to result in a reduction of future
minimum rental commitments of approximately $19.0 million for periods reported
after the Petition Date.
NOTE 7 - LOSS PER COMMON SHARE
Net loss per common share has been computed by dividing net loss by the weighted
average number of common shares outstanding during the period. The Company's
common stock equivalents, represented by stock options, warrants and Series A
Preferred Stock (outstanding from December 1, 1993 to March 13, 1994) were not
considered in the calculation as they either have an exercise price greater than
the applicable market price, or the effect of assuming their exercise or
conversion is anti-dilutive. The weighted average number of common shares
outstanding for the quarters ended January 28, 1995 and January 29, 1994 were
17,883,135 and 8,934,428, respectively.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a lawsuit originally brought as a class action in
state court in Anchorage, Alaska on September 18, 1992. Plaintiffs alleged that
store "area managers" in the State of Alaska are not exempt from overtime pay
requirements under the Alaska Wage and Hour Act (the "AWHA") and thus have
worked hours for which they have not been compensated. The complaint seeks back
wages, liquidated damages, attorneys fees and costs. The class has not yet been
certified and the case had been removed to Federal District Court in Anchorage.
In November 1993, plaintiffs amended the complaint to allege a new claim on
behalf of themselves and allegedly similarly situated employees under Section
216(b) of the Fair Labor Standards Act (the "FLSA"), in addition to the original
claim under the AWHA. However, on March 25, 1994, the plaintiffs dismissed
their new FLSA claim. In consideration of that dismissal, the parties agreed to
remand the remaining original AWHA claim back to state court and the remand was
ordered by the court on May 27, 1994. On August 8, 1994, Plaintiffs moved for
partial summary judgment declaring that they were not paid on a salary basis
required for exemption from AWHA overtime requirements and on September 30, 1994
the Company cross-moved for partial summary judgment declaring that certain of
its employment policies did not violate the salary requirement for exemption
from AWHA. On December 15, 1994 the court denied Plaintiffs' motion holding
that they had failed to show that they were not paid a salary and that factual
issues remained. The court contemporaneously denied the Company's motion
holding that there were genuine issues of material fact.
The Company is also involved in various other matters of litigation arising in
the ordinary course of business. In the opinion of management, the ultimate
outcome of all such matters should not have a material adverse effect on the
financial
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position of the Company, but, if decided adversely to the Company, could have a
material effect on quarterly or annual operating results during the period such
matters are resolved.
NOTE 9 - RESTATEMENT OF FINANCIAL STATEMENTS
The financial statements for the Quarter ended January 28, 1995 have been
restated resulting in an increase in the net loss to $25.1 million from $24.0
million as previously reported, and increasing the accumulated deficit to $80.5
million from $79.4 million as previously reported.
The amended Transitional Quarterly Report reflects a decrease in gross margin of
$746,000 and an increase in operating costs of $400,000. As a result of these
changes, earnings (loss) per share increased from a previously reported loss of
($1.34) to a loss of ($1.41) per share.
The $746,000 charge to gross margin results from a physical inventory
adjustment. The final result of the 1994 physical count was not finalized as of
the filing date of the Transitional Quarterly Report. The increase in cost of
sales or "inventory shrink" is attributable to periods prior to January 28,
1995, and should be reflected as a reduction in inventory value as of January
28, 1995.
The $400,000 increase in operating costs and reduction in current assets
represents the expense recognition of insurance premiums paid by the Company
during the Transition Period.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
Lamonts Apparel, Inc. (the "Company") retails brand-name apparel and accessories
for the entire family through its 43 full-line apparel stores. Lamonts
currently operates in malls and regional shopping centers located in the states
of Alaska, Idaho, Montana, Oregon, Utah and Washington.
On January 6, 1995 (the "Petition Date"), the Company filed a voluntary petition
for relief (the "Filing") under chapter 11 ("Chapter 11") of title 11 of the
United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the Western District of Washington at Seattle (the "Bankruptcy Court"),
seeking to reorganize under Chapter 11. In Chapter 11, the Company will
continue to manage its affairs and operate its business as a debtor-in-
possession while it develops a reorganization plan that will restructure the
Company and allow its emergence from Chapter 11. As a debtor-in-possession in
Chapter 11, the Company may not engage in transactions outside of the ordinary
course of business without approval, after notice and hearing, of the Bankruptcy
Court.
As of the Petition Date, payment of pre-petition liabilities to unsecured
creditors, including trade creditors and noteholders, and pending litigation
against the Company are stayed while the Company continues its business
operations as a debtor-in-possession. In a Chapter 11 reorganization plan, the
rights of the creditors may be significantly altered. Creditors may receive
substantially less than the full face amount of claims. No estimate of the
amount of adjustments, if any, from recorded amounts, to amounts to be realized
by creditors, is available at this time.
As a result of the Filing, the Company is currently in default under the
indentures (the "Indentures") governing the Company's 10-1/4% Subordinated Notes
due November 1999 (the "10-1/4% Notes") and 13-1/2% Senior Subordinated Notes
due February 1995 (the "13-1/2% Notes"). As a result, all unpaid principal of,
and accrued prepetition interest on, such debt became immediately due and
payable. The payment of such debt and accrued but unpaid interest thereon is
prohibited during the pendency of the Company's Chapter 11 case.
Since January 29, 1994, the Company has closed 15 stores, six of which, with the
approval of the Bankruptcy Court, were closed subsequent to January 28, 1995.
Of the 15 stores closed, one was closed due to the expiration of its lease and
14 were closed due to poor performance. Management is continually evaluating
store locations and operations to determine whether to close, downsize or
relocate stores that do not meet performance objectives. In March 1995, the
Company opened a store in Issaquah, Washington.
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On October 18, 1994, the holders of all outstanding 10-1/4% Notes (i) granted
the Company the option, subject to certain conditions, to exchange the 10-1/4%
Notes held by them for shares of common stock, par value $0.01 per share (the
"Common Stock"), representing approximately 70% of the Common Stock of the
Company outstanding immediately following the exchange and $50.0 million
aggregate liquidation preference of a new series of preferred stock of the
Company and (ii) released the collateral securing the 10-1/4% Notes and
generally subordinated the Company's obligations under the 10-1/4% Notes so that
they are junior to trade payables and certain other liabilities, subject to
certain exceptions. On March 27, 1995, the Company received an extension from
the holders of the 10-1/4% Notes to extend, indefinitely, the time in which the
Company may exercise its option to require the holders to exchange their 10-1/4%
Notes, provided, however, that a majority of the holders of the 10-1/4% Notes
may terminate such extension upon 60 days notice to the Company.
On March 9, 1995, the Company elected to change its fiscal year end from the
Saturday closest to October 31 to the Saturday closest to January 31 in order to
enhance comparability of the Company's results of operations with other apparel
retailers. Accordingly, the following discussion encompasses the results of
operations of the Company for the transitional quarter ended January 28, 1995
and for the comparable prior year period, and should be read in conjunction with
the audited, annual financial statements for the year ended October 29, 1994,
included in the Company's Annual Report on Form 10-K.
RESULTS OF OPERATIONS
QUARTER ENDED JANUARY 28, 1995 COMPARED TO
QUARTER ENDED JANUARY 29, 1994
REVENUES. Revenues of $71.0 million for the quarter ended January 28, 1995
decreased 8.6% on a total store basis from $77.7 million for the quarter ended
January 29, 1994. Comparable store revenues decreased 6.4% for the quarter
ended January 28, 1995 as compared to the same period for the prior year. Store
closures contributed $2.4 million to the total store revenue decline.
Management believes that revenues have been and will continue to be adversely
affected, in part, by (i) a weak retail environment for apparel, (ii) the
adverse publicity associated with the Filing and (iii) the interruption in the
receipt of merchandise due to a reduction in available credit since the Filing.
GROSS PROFIT. Gross profit, as a percentage of revenues (excluding the effects
of non-cash charges of $3.9 million during the quarter ended January 28, 1995
and $0.3 million during the quarter ended January 29, 1994), decreased
approximately 17.3% for the quarter ended January 28, 1995, to 20.2% as compared
to 37.5% for the quarter ended January 29, 1994. The decrease in gross profit,
excluding non-cash items, is primarily attributable to the significant markdowns
taken during the quarter ended January 28, 1995 in order to clear aged and slow-
moving merchandise from the Company's inventory. Non-cash charges, primarily
resulting from the Company's usage of the last-in, first-out method for valuing
inventories, increased during the quarter ended January 28, 1995 due to the
liquidation of a step-up layer included in inventory (see Note 3 of the Notes
to the Consolidated Financial Statements contained elsewhere in this document).
The Company's new management has developed and commenced the implementation of
new merchandising strategies, which are intended to (i) improve the quality of
merchandise offered while maintaining price points geared to the Company's
customer base, (ii) reduce or eliminate low-margin items and departments and add
higher margin goods and (iii) reduce inventory levels and increase inventory
turns. The Company has also initiated a policy to mark-down and clear out slow-
moving and seasonal merchandise in a timely manner.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses of
$22.4 million for the quarter ended January 28, 1995 were $0.7 million lower
than the $23.1 million incurred for the quarter ended January 29, 1994. The
closure of nine stores subsequent to January 29, 1994 resulted in a decrease of
$1.8 million in operating and administrative expenses offset, in part, by a
slight increase in comparable store operating and administrative expenses. As a
percentage of revenues, operating and administrative expenses increased to 31.5%
for the quarter ended January 28, 1995 compared to the 29.7% for the same period
of the prior year due to lower revenues.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense of $2.7
million for the quarter ended January 28, 1995 remained relatively unchanged
from $2.8 million recorded for the quarter ended January 29, 1994. Increased
depreciation and amortization associated with newly acquired assets offset
reductions associated with assets retired as a result of store closures and
assets becoming fully depreciated or amortized.
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INTEREST EXPENSE. Interest expense of $3.0 million ($1.3 million cash and $1.7
million non-cash) for the quarter ended January 28, 1995 increased $0.2 million
from $2.8 million (all cash) in the prior year period primarily due to (i) the
accrual of payment-in-kind interest on the 10-1/4% Notes at the rate of 13%
through the date of the Filing as compared to a cash interest rate of 10-1/4% in
effect for the majority of the prior year period and (ii) higher borrowing
levels and higher interest rates under the Company's working capital facilities,
offset by (i) the termination of interest accruals on the 10-1/4% Notes and on
the 13-1/2% Notes as of the date of the Filing and (ii) the December 1993
repurchase of $13.0 million aggregate principal amount of the 10-1/4% Notes.
OTHER. Other expense of $0.4 million for the quarter ended January 29, 1994
reflects the write-off of the pro-rata portion of deferred financing costs
attributable to the $13.0 million aggregate principal amount of 10-1/4% Notes
repurchased in December 1993.
REORGANIZATION EXPENSES. Reorganization expenses represent costs directly
related to the Company's Chapter 11 case and include (i) estimated costs
associated with the rejection of real property leases, (ii) estimated cost of
closing six underperforming stores and (iii) professional fees and other
expenditures.
NET LOSS. The Company reported a net loss of $25.1 million for the quarter
ended January 28, 1995 as compared to a net loss of $0.2 million for the quarter
ended January 29, 1994. The decrease in net earnings of $24.9 million is
primarily attributable to decreased gross profit dollars and the recognition of
reorganization expenses attributable to the Chapter 11 proceedings offset, in
part, by lower operating and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
The Company generated $17.0 million of cash from operating activities before
reorganization items for the quarter ended January 28, 1995, an increase of $8.0
million as compared to $9.0 million for the quarter ended January 29, 1994. The
increase is primarily due to (i) a $13.3 million decrease in inventory
purchases, (ii) an $8.7 million reduction in payments on vendor accounts payable
as a result of the Filing, (iii) the Company's election to pay its November 1,
1994 interest payment in additional 10-1/4% Notes as compared to $4.4 million of
interest paid in cash during the prior year period and (iv) a $0.7 million
decrease in operating and administrative expenses. These amounts were partially
offset by a $18.4 million decrease in gross profit and the payment of $1.0
million of store closure costs.
The Company used $0.7 million of cash in investing activities in the quarter
ended January 28, 1995 as compared to $0.8 million in the quarter ended January
29, 1994, primarily for capital expenditures.
The $1.1 million increase in cash used by financing activities is primarily due
to higher payments (net) under the Company's working capital facilities during
the quarter ended January 28, 1995 as compared to the quarter ended January 29,
1994, offset by payments of financing costs in the prior year period.
WORKING CAPITAL
As of January 28, 1995, the Company had $8.0 million of cash and an additional
$0.5 million of current restricted cash, representing the funding of payroll and
taxes in connection with the Filing. The Company's current assets exceeded
current liabilities not subject to settlement under reorganization proceedings
by $16.0 million and $9.9 million at January 28, 1995 and October 29, 1994,
respectively. A substantial portion of the increase in the Company's working
capital resulted from the reclassification of certain current liabilities
existing on the date of the Filing into the portion of the Company's balance
sheet entitled "liabilities subject to settlement under reorganization
proceedings."
CAPITAL RESOURCES
On February 17, 1995, the Company replaced its interim working capital facility
with a Loan and Security Agreement (the "DIP Facility") with Foothill Capital
Corporation ("Foothill"). The DIP Facility, as approved by the Bankruptcy
Court, provides a borrowing capacity of up to $32.0 million in revolving loans
and letters of credit, subject to borrowing base limitations based upon, among
other things, the value of inventory and certain real property. Letters of
credit issuable under the facility are limited to $15.0 million.
10
<PAGE>
The DIP Facility provides that interest upon advances made pursuant thereto will
accrue at the rate of 3% per annum in excess of the Reference Rate (as defined
in the DIP Facility), payable monthly in arrears. The DIP Facility also provides
that in the event of a default in the payment of any amount due thereunder, the
interest rate on such defaulted amount shall be 4.5% per annum in excess of the
Reference Rate, payable on demand.
The obligations of the Company under the DIP Facility are collateralized by,
among other things, inventory and certain real property. The DIP Facility
imposes limitations on the Company with respect to, among other things, (i) the
creation or incurrence of liens, (ii) consolidations, mergers, and sales of
assets, (iii) the incurrence of guarantees or other contingent obligations, (iv)
capital expenditures in excess of specified levels, (v) the creation or
incurrence of any indebtedness for borrowed money or the payment of principal of
or interest on any prepetition indebtedness, (vi) the prepayment of certain
indebtedness and (vii) transactions with affiliates. Additionally, the Company
must maintain a minimum Net Worth (as defined in the DIP Facility to exclude,
among other items, reorganization expenses, certain liabilities incurred prior
to the Filing, write-off of goodwill, store closure reserves and non-cash
interest) of $10.0 million. The Company is currently in compliance in all
material respects with the terms contained in the DIP Facility.
The DIP Facility expires on the earlier of (i) May 17, 1996, with provisions for
three quarterly renewals, and (ii) the effective date of the Company's plan of
Reorganization in the Chapter 11 case.
Under the terms of the DIP Facility, the Company's borrowing base is limited to
a specified percentage of eligible inventory and real property (as defined
therein). At April 10, 1995, the Company had $11.5 million of borrowings and no
letters of credit outstanding under the DIP Facility, with additional borrowing
capacity of $8.0 million.
The Company's primary cash requirement is the procurement of inventory which is
currently funded through (i) borrowings under the DIP Facility (ii) trade credit
and (iii) cash generated from operations. Like other apparel retailers, the
Company is dependent upon its ability to obtain trade credit, which is generally
extended by its vendors and a small number of factoring institutions that
continually monitor the Company's credit lines. If the Company is able to
obtain its expected trade credit terms and the inclusion in the borrowing base
of certain real property in accordance with the terms of the DIP Facility, the
Company believes that borrowings under the DIP Facility and cash generated from
operations will provide the cash necessary to fund the Company's cash
requirements.
CAPITAL EXPENDITURES
In March 1995, the Company opened a new 36,000 square foot full-line store in a
465,000 square foot shopping center in Issaquah, Washington. Initial fixed
costs approximated $1.0 million, $0.7 million of which the lessor is required,
pursuant to the terms of the lease, to reimburse the Company. The Company
intends to seek an order from the Bankruptcy Court compelling the lessor to make
such reimbursement. Management does not anticipate additional expansion during
the next fiscal year.
OTHER
The Company has never declared or paid cash dividends on its Common Stock or any
other equity security, and does not anticipate paying cash dividends on the
Common Stock, or any other equity security, in the foreseeable future. Any
future determination as to the payment of dividends will depend upon certain
debt instrument limitations, future earnings, results of operations, capital
requirements, the financial condition of the Company, the terms and conditions
specified in the plan of reorganization and such other factors as the Company's
Board of Directors may consider. The ability of the Company to pay dividends is
directly and indirectly restricted under the terms of the DIP facility. Such
restrictions prohibit the payment of dividends for the foreseeable future. In
addition, the Bankruptcy Code prohibits the Company's payment of cash dividends.
SEASONALITY
The Company's revenues are seasonal, with the Christmas season (included in the
quarter ending the Saturday closest to January 31) generally its strongest
period.
11
<PAGE>
LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
EXHIBIT 11.1
COMPUTATION OF PER SHARE LOSS
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------
JANUARY 28, 1995 JANUARY 29, 1994
-------------------------------- -------------------------------
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
LOSS ($25,135,000) ($25,135,000) ($236,000) ($236,000)
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Net loss
NUMBER OF SHARES
Weighted average shares:
Outstanding 17,883,135 17,883,135 8,934,428 8,934,428
Incremental shares for
conversion of preferred stock 5,889,502
Incremental shares for
outstanding stock options 522,553 414,479
------------ ------------ ----------- -----------
17,883,135 18,405,688 8,934,428 15,238,409
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Net loss per share ($1.41) ($1.37) ($0.03) ($0.02)
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> OCT-30-1994
<PERIOD-END> JAN-28-1995
<CASH> 7,972
<SECURITIES> 0
<RECEIVABLES> 3,050
<ALLOWANCES> 0
<INVENTORY> 28,399
<CURRENT-ASSETS> 45,470
<PP&E> 51,924
<DEPRECIATION> 0
<TOTAL-ASSETS> 120,269
<CURRENT-LIABILITIES> 29,445<F1><F2>
<BONDS> 0<F1>
0
0
<COMMON> 179
<OTHER-SE> (17,688)
<TOTAL-LIABILITY-AND-EQUITY> 120,269
<SALES> 71,014
<TOTAL-REVENUES> 71,014
<CGS> 60,587
<TOTAL-COSTS> 60,587
<OTHER-EXPENSES> 32,565<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,026<F4>
<INCOME-PRETAX> (25,135)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25,135)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,135)
<EPS-PRIMARY> (1.41)
<EPS-DILUTED> 0
<FN>
<F1>Excludes liabilities subject to settlement under reorganization proceedings.
<F2>Includes $3.0 million accrual for store closure costs.
<F3>Includes operating and administrative expenses of $22.4 million, depreciation
and amortization of $2.7 million and reorganization expenses of $7.5 million.
<F4>Includes cash interest expense of $1.3 million and non-cash interest expense of
$1.7 million.
</FN>
</TABLE>
