<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended August 31, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from to
Commission file number 0-14674
ANDOVER TOGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-5677957
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
One Penn Plaza, New York, New York 10119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)244-0700
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 twelve 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 4,458,315 shares of common
stock, $.10 par value, of the Registrant were outstanding as of October 1, 1995
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1995
INDEX
Page
Part I - FINANCIAL INFORMATION
Item 1. - Consolidated Financial Statements:
Balance Sheets
August 31, 1995 (unaudited), November 30, 1994
and August 31, 1994 (unaudited) 1
Statements of Operations (unaudited)
Nine months ended August 31, 1995 and 1994 2
Three months ended August 31, 1995 and 1994 3
Statements of Stockholders' Equity (unaudited)
Nine months ended August 31, 1995 and 1994 4
Statements of Cash Flows (unaudited)
Nine months ended August 31, 1995 and 1994 5
Notes to Consolidated Financial Statements
(unaudited) 6-7
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Part II - OTHER INFORMATION
ITEM 6. - Exhibits and reports on form 8-K 10
SIGNATURES 12
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, November 30, August 31,
ASSETS 1995 1994 1994
------------- ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 905,000 $ 584,000 $ 371,000
Accounts receivable -
Net (Note 3) 15,206,000 12,659,000 11,992,000
Inventories (Note 2) 20,586,000 13,972,000 18,763,000
Deferred income taxes 270,000 248,000 257,000
Other current assets 736,000 224,000 1,026,000
----------- ----------- -----------
Total current assets 37,703,000 27,687,000 32,409,000
PROPERTY, PLANT AND EQUIPMENT -
Net (Note 3) 7,981,000 8,554,000 8,789,000
RESTRICTED FUNDS 360,000 360,000 360,000
OTHER ASSETS 306,000 279,000 538,000
COST IN EXCESS OF ASSETS
ACQUIRED (Note 4) 789,000 -- --
----------- ----------- -----------
TOTAL $47,139,000 $36,880,000 $42,096,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank (Note 3) $13,900,000 $ 2,400,000 $ 8,400,000
Accounts payable 5,848,000 4,632,000 5,309,000
Accrued expenses and other
current liabilities 2,574,000 3,049,000 2,466,000
Current portion of long-term
debt and obligations under
capital leases 1,515,000 1,520,000 1,506,000
----------- ----------- -----------
Total current liabilities 23,837,000 11,601,000 17,681,000
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASES 4,088,000 5,238,000 5,577,000
OTHER LIABILITIES 122,000 61,000 41,000
DEFERRED INCOME TAXES PAYABLE 946,000 1,025,000 1,117,000
----------- ----------- -----------
Total liabilities 28,993,000 17,925,000 24,416,000
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 464,000 454,000 454,000
Additional paid-in capital 11,135,000 10,870,000 10,870,000
Retained earnings 7,187,000 8,271,000 6,996,000
Less treasury stock, at cost (640,000) (640,000) (640,000)
----------- ----------- -----------
Total stockholders' equity 18,146,000 18,955,000 17,680,000
----------- ----------- -----------
TOTAL $47,139,000 $36,880,000 $42,096,000
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-1-
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED AUGUST 31, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NET SALES $58,383,000 $45,939,000
COST OF GOODS SOLD (Note 2) 48,735,000 37,571,000
----------- -----------
GROSS PROFIT 9,648,000 8,368,000
SELLING,GENERAL AND ADMINISTRATIVE
EXPENSES 10,312,000 9,488,000
----------- -----------
OPERATING LOSS (664,000) (1,120,000)
INTEREST EXPENSE 955,000 600,000
----------- -----------
LOSS BEFORE BENEFIT FOR INCOME TAXES (1,619,000) (1,720,000)
BENEFIT FOR INCOME TAXES (535,000) (570,000)
----------- -----------
NET LOSS $(1,084,000) $(1,150,000)
=========== ===========
LOSS PER SHARE $(.24) $(.26)
====== ======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,426,200 4,358,300
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NET SALES $24,616,000 $18,988,000
COST OF GOODS SOLD (Note 2) 21,308,000 16,307,000
----------- -----------
GROSS PROFIT 3,308,000 2,681,000
SELLING,GENERAL AND ADMINISTRATIVE
EXPENSES 3,566,000 2,892,000
----------- -----------
OPERATING LOSS (258,000) (211,000)
INTEREST EXPENSE 480,000 247,000
----------- -----------
LOSS BEFORE BENEFIT FOR INCOME TAXES (738,000) (458,000)
BENEFIT FOR INCOME TAXES (252,000) (65,000)
----------- -----------
NET LOSS $ (486,000) $ (393,000)
=========== ===========
LOSS PER SHARE $(.11) $(.09)
====== ======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,458,300 4,385,300
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED AUGUST 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------------- Paid-in Retained ------------------
Shares Amount Capital Earnings Shares Amount Total
------ ------ ---------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
NINE MONTHS ENDED
AUGUST 31, 1995
BALANCE
DECEMBER 1, 1994 4,542,990 $454,000 $10,870,000 $8,271,000 184,675 $(640,000) $18,955,000
Issuance of stock 100,000 10,000 265,000 275,000
(Note 4)
Net loss (1,084,000) (1,084,000)
---------- -------- ----------- ---------- ------- --------- -----------
BALANCE
AUGUST 31, 1995 4,642,990 $464,000 $11,135,000 $7,187,000 184,675 $(640,000) $18,146,000
========== ======== =========== ========== ======= ========= ===========
NINE MONTHS ENDED
AUGUST 31, 1994
BALANCE
DECEMBER 1, 1993 4,542,990 $454,000 $10,870,000 $8,146,000 184,675 $(640,000) $18,830,000
Net loss (1,150,000) (1,150,000)
---------- -------- ----------- ---------- ------- --------- -----------
BALANCE,
AUGUST 31, 1994 4,542,990 $454,000 $10,870,000 $6,996,000 184,675 $(640,000) $17,680,000
========== ======== =========== ========== ======= ========== ===========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED AUGUST 31, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,084,000) $(1,150,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,011,000 1,036,000
Deferred income taxes (101,000) 3,000
Changes in assets and liabilities, net of
acquisition:
Increase in accounts receivable (2,547,000) (1,319,000)
Increase in inventories (3,019,000) (7,551,000)
Increase in other assets (810,000) (508,000)
Increase in accounts payable 1,216,000 1,333,000
Decrease in accrued expenses
and other liabilities (414,000) (775,000)
----------- -----------
Net cash used in operating activities (5,748,000) (8,931,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business (3,938,000) --
Capital expenditures (338,000) (271,000)
----------- -----------
Net cash used in investing activities (4,276,000) (271,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in notes payable - bank 11,500,000 8,400,000
Repayments of long-term debt (1,155,000) (1,172,000)
Increase in long-term borrowings -- 250,000
----------- -----------
Net cash provided by financing
activities 10,345,000 7,478,000
----------- -----------
NET INCREASE (DECREASE) IN CASH 321,000 (1,724,000)
CASH, BEGINNING OF PERIOD 584,000 2,095,000
----------- -----------
CASH, END OF PERIOD $ 905,000 $ 371,000
=========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest $ 810,000 $ 659,000
=========== ===========
Income taxes $ 170,000 $ 86,000
=========== ===========
SCHEDULE OF NON CASH INVESTING ACTIVITIES:
Acquisition of business:
Fair value of assets acquired $ 4,213,000
Common stock issued 275,000
-----------
Total cash paid for the net
assets acquired $ 3,938,000
===========
</TABLE>
See notes to consolidated financial statements.
-5-
ANDOVER TOGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of August 31, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the periods presented have been prepared by the Company without
audit. In the opinion of management, all adjustments consisting of only
normal recurring adjustments necessary for a fair presentation of the
financial position of the Company, the results of its operations, and cash
flows have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report to Shareholders for the
year ended November 30, 1994.
The results of operations for the period ended August 31, 1995 are not
necessarily indicative of the operating results for the full year.
Per share information is computed by dividing the net loss amounts by the
weighted average number of shares of common stock outstanding during each
period.
2. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
August 31, November 30, August 31,
1995 1994 1994
----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Raw materials $ 3,334,000 $ 3,458,000 $ 3,741,000
Work in process 5,685,000 4,597,000 6,872,000
Finished goods 11,567,000 5,917,000 8,150,000
----------- ----------- -----------
$20,586,000 $13,972,000 $18,763,000
=========== =========== ===========
</TABLE>
Inventories and cost of goods sold at August 31, 1995 and 1994 are determined
based upon the estimated gross profit method.
-6-
<PAGE>
3. NOTES PAYABLE - BANK
Effective May 31, 1995, the Company and its lenders renewed its loan
agreement which provides for a $22,216,000 line of credit and a $7,400,000
letter of credit facility, subject to maximum aggregate borrowings of
$26,000,000. Related loans bear interest at prime plus 1/2%. The Company is
expected to maintain a 5% compensating balance on outstanding loans. The
Company has pledged its accounts receivable, import inventories under letters
of credit, and certain personal property and equipment as collateral. The
agreement expires in May, 1996.
4. ACQUISITION OF BUSINESS
On February 27, 1995, the Company acquired the inventory, trade names,
customer orders and certain items of machinery and equipment of Dobie
Industries, Inc. ('Dobie'), a manufacturer of children's and ladies apparel.
The purchase price was approximately $3,938,000 in cash, subject to final
adjustments, 100,000 shares of the Company's common stock valued at $275,000,
a warrant to purchase 50,000 additional shares of stock at $2.50 per share
and certain contingent payments based on the Company's consolidated
operations over the next five years. Maximum contingent payments are capped
at $4,000,000. The cash portion of the purchase price was obtained by
utilizing the Company's existing line of credit.
Under certain conditions the holders of the 100,000 shares have the right to
require the Company to purchase the 100,000 shares at $5.00 per share in five
years.
The acquisition has been accounted for as a purchase, and Dobie has been
included in operations since the effective date of the acquisition. The
purchase price has been allocated to the assets acquired based on estimated
fair values. The purchase price and costs associated with the acquisition
exceeded the fair value of assets by approximately $812,000 which has been
allocated to cost in excess of assets acquired. Such amount is being
amortized over 15 years.
-7-
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter Ended August 31, 1995 vs. 1994
Net sales for the three-month period ended August 31, 1995 were $24,616,000, an
increase of $5,628,000 or 29.6% over the comparable 1994 net sales of
$18,988,000. Of the $5,628,000 increase, approximately $3,978,000 represented
the shipment of orders acquired from Dobie. Of the Dobie shipments,
approximately $864,000 represented sales of ladies merchandise which the
Company will not continue to sell for Spring 1996.
Gross profit as a percentage of net sales decreased to 13.4% from 14.1% in the
comparable 1994 three-month period. Pricing pressures remain intense and the
Company is unable to pass through cost increases to its customers. The Company
has accepted business at lower margins in order to maintain market share.
Margins continue to be adversely affected due to competition. Due to the
continued depressed retail environment the Company does not expect any overall
improvements in its profit margins for the balance of 1995 and into Spring 1996.
Selling, general and administrative expenses for the three months ended August
31, 1995 were $3,566,000 or 14.5% of net sales as compared to $ 2,892,000 or
15.2% in the 1994 period. The increase of $674,000 was primarily attributable to
the Dobie acquisition. Included in the increase is approximately $177,000 of
rent expense due to the savings realized in the third quarter of fiscal 1994,
when the Company renegotiated its lease. The decrease as a percentage of sales
is a result of increased sales volume in the three month period.
The increase in interest expense for the three-month period of $233,000 is a
reflection of higher short-term borrowing levels due to increased inventory
levels and higher interest rates which were offset, in part, by the reduction of
long-term debt.
Nine Months Ended August 31, 1995 vs. 1994
Net sales for the nine months ended August 31, 1995 were $58,383,000 an increase
of $12,444,000 or 27.1% over the comparable 1994 net sales of $45,939,000. Of
the $12,444,000 increase, approximately $7,204,000 represented the shipment of
orders acquired from Dobie. Of the Dobie shipments approximately $1,975,000
represented sales of ladies merchandise which the Company will not continue to
sell for Spring 1996.
Gross profit as a percentage of net sales decreased to 16.5% from 18.2% in the
comparable 1994 period for similar reasons as noted in the three month period.
-8-
<PAGE>
Selling, general and administrative expenses for the nine months ended August
31, 1995 were $10,312,000 or 17.7% of net sales compared to $9,488,000 or 20.7%
for the comparable period. The increase of $824,000 was primarily attributable
to the addition of the Dobie acquisition including certain transition expenses.
The decrease as a percentage of sales is a result of increased sales volume in
the nine month period.
The increase in interest expense for the nine month period of $355,000 is a
reflection of higher short-term borrowing levels due to increased inventory
levels and higher interest rates, which were offset in part by the reduction of
long-term debt.
FINANCIAL CONDITION
The Company's working capital at August 31, 1995 decreased $2,220,000 to
$13,866,000 compared to $16,086,000 at November 30, 1994, due primarily to
principal payments of long term debt and the Company's net loss for the period,
offset by depreciation and amortization. In addition, working capital decreased
approximately $537,000 related to the acquisition of Dobie. The Company's
long-term debt at August 31, 1995 decreased $1,489,000 from August 31, 1994.
With the weak retail and apparel environment the Company continues to evaluate
consolidating its manufacturing facilities.
Inventory levels at August 31, 1995 are in line with expected sales volume. On a
comparable basis finished goods inventory in 1994 was low due to delayed
production.
The Company does not traditionally make material commitments to purchase piece
goods without corresponding orders. The Company generally does not have long
term commitments other than under its lease for its New York premises and the
financings associated with its manufacturing facilities.
The Company believes that cash generated from operations and available
borrowings will be sufficient to meet anticipated working capital needs.
-9-
<PAGE>
Part II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
- ------- -----------
3(a) Certificate of Incorporation of the Company, incorporated by
reference to Exhibit 3(a) to Registration Statement on Form
S-1 (SEC File No. 33-5363) of the Company (the 'Form S-1').
3(b) Certificate of Merger of Andover Togs, Inc., a New York
corporation, into and with Andover Togs, Inc., a Delaware
corporation, incorporated by reference to Exhibit 3(b) to the
Form S-1.
3(c) Certificate of Amendment of Certificate of Incorporation,
filed June 1, 1987, incorporated by reference to Exhibit 3(a)
to the Company's quarterly report on Form 10-Q dated May 31,
1994 (the 'May 1994 10-Q').
3(d) By-laws of the Company, as amended through November 12, 1986,
incorporated by reference to Exhibit 3(b) to the May 1994
10-Q.
4(a) Specimen of certificate for shares of Common Stock of the
Company, incorporated by reference to Exhibit 4(a) to the
Form S-1.
4(b) The Company's Incentive Stock Option Plan, as amended April
20, 1987, incorporated by reference to Exhibit 4(a) to the
Registration Statement on Form S-8 (SEC File No. 33-33963)
as filed with the Securities and Exchange Commission on March
22, 1990.
4(c) The Company's Non-Qualified Stock Option Plan, as amended May
21, 1987 and April 9, 1992, incorporated by reference to
Exhibit 4(a) to the Amendment to the Registration Statement
on Form S-8 (SEC File No. 33-33963) as filed with the
Securities and Exchange Commission on November 2, 1992.
4(d) Common Stock Purchase Warrant, dated February 27, 1995,
issued to Dobie Industries, Inc., incorporated by reference
to Exhibit 4(d) to the Company's annual report on Form 10-K
for the year ended November 30, 1994 (the '1994 10-K').
-10-
<PAGE>
4(e) Registration Rights Agreement, dated February 27, 1995, by
and between the Company and Dobie Industries, Inc.,
incorporated by reference to exhibit 4(e) to the 1994 10-K.
4(f) The Company's 1995 Stock Option Plan, incorporated by
reference to Exhibit 4(f) to the Company's quarterly report
on Form 10Q dated May 31, 1995.
*10(a) First Lease Modification Agreement dated January 17, 1995
between Mid-City Associates and the Company
*10(b) Second Lease Modification Agreement dated September 11, 1995
between Mid-City Associates and the Company.
*27 Financial Data Schedule.
- ----------------
* Filed herewith
(b) Reports on Form 8-K - None
Reports on Form 8-K. No reports on Form 8-K have been filed for the quarter
ended August 31, 1995.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANDOVER TOGS, INC.
(Registrant)
Date October 12, 1995 By /s/ William L. Cohen
------------------- ---------------------------
Chairman of the Board and
President
Date October 12, 1995 By /s/ Alan Kanis
------------------- -----------------------------
Treasurer and Chief Financial
and Accounting Officer
-12-
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3(a) Certificate of Incorporation of the Company, incorporated by
reference to Exhibit 3(a) to Registration Statement on Form
S-1 (SEC File No. 33-5363) of the Company (the 'Form S-1').
3(b) Certificate of Merger of Andover Togs, Inc., a New York
corporation, into and with Andover Togs, Inc., a Delaware
corporation, incorporated by reference to Exhibit 3(b) to the
Form S-1.
3(c) Certificate of Amendment of Certificate of Incorporation,
filed June 1, 1987, incorporated by reference to Exhibit 3(a)
to the Company's quarterly report on Form 10-Q dated May 31,
1994 (the 'May 1994 10-Q').
3(d) By-laws of the Company, as amended through November 12, 1986,
incorporated by reference to Exhibit 3(b) to the May 1994
10-Q.
4(a) Specimen of certificate for shares of Common Stock of the
Company, incorporated by reference to Exhibit 4(a) to the
Form S-1.
4(b) The Company's Incentive Stock Option Plan, as amended April
20, 1987, incorporated by reference to Exhibit 4(a) to the
Registration Statement on Form S-8 (SEC File No. 33-33963)
as filed with the Securities and Exchange Commission on March
22, 1990.
4(c) The Company's Non-Qualified Stock Option Plan, as amended May
21, 1987 and April 9, 1992, incorporated by reference to
Exhibit 4(a) to the Amendment to the Registration Statement
on Form S-8 (SEC File No. 33-33963) as filed with the
Securities and Exchange Commission on November 2, 1992.
4(d) Common Stock Purchase Warrant, dated February 27, 1995,
issued to Dobie Industries, Inc., incorporated by reference
to Exhibit 4(d) to the Company's annual report on Form 10-K
for the year ended November 30, 1994 (the '1994 10-K').
-i-
<PAGE>
4(e) Registration Rights Agreement, dated February 27, 1995, by
and between the Company and Dobie Industries, Inc.,
incorporated by reference to exhibit 4(e) to the 1994 10-K.
4(f) The Company's 1995 Stock Option Plan, incorporated by
reference to Exhibit 4(f) to the Company's quarterly report
on Form 10Q dated May 31, 1995.
*10(a) First Lease Modification Agreement dated January 17, 1995
between Mid-City Associates and the Company
*10(b) Second Lease Modification Agreement dated September 11, 1995
between Mid-City Associates and the Company.
*27 Financial Data Schedule.
- ----------------
* Filed herewith
-ii-
<PAGE>
FIRST LEASE MODIFICATION AGREEMENT
AGREEMENT, made as of this 17th day of January, 1995, between MID-CITY
ASSOCIATES, a partnership with an office at 60 East 42nd Street, New York, New
York 10165 (hereinafter called 'Landlord'), and ANDOVER TOGS, INC. a New York
corporation with an office at One Penn Plaza, New York, New York 10119
(hereinafter called 'Tenant').
W I T N E S S E T H:
WHEREAS, Landlord and Tenant are respectively the landlord and tenant
under that certain lease, dated as of August 18, 1994, covering the entire
rentable area of the 46th floor, certain storage space on the Intermediate
Level, and Storage Rooms 10B, 10C, 10E and 10F, in the building known as One
Penn Plaza, New York, New York (which lease, as same may have been modified and
amended, is hereinafter called the 'Lease'); and
WHEREAS, in accordance with Subdivision B(c)1 of Article 48, Storage
Room 10B has been combined with Storage Room 10C to create as single storage
Room 10B/C, and Storage Room 10E has been combined with Storage Room 10F to
create a single Storage Room 10E/F; and
WHEREAS, Landlord has requested that the Lease be modified so that: (i)
Landlord, at its expense, may remove the entrance doors to the B and F sides of
Storage Rooms 10B/C, and 10E/F and replace said doors with building standard
demising walls; and (ii) Tenant's option to delete any of the tenth floor
storage spaces under Subdivision B(d) of Article 48 shall be limited to either
the combined Storage Room 10B/C and/or the combined Storage Room 10E/F (with
Tenant no longer having the right to delete any one of the storage rooms
originally demised under the Lease, i.e., 10B, 10C, 10E or 10F); and
WHEREAS, Tenant has agreed to such modifications, subject to the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the
Lease shall be deemed to be, and the same hereby is, modified as follows:
1. (a) Tenant agrees that Landlord may, at its expense, remove the
entrance doors to the B and F sides of the now combined Storage Rooms 10B/C and
10E/F and replace said doors with building standard demising walls.
<PAGE>
(b) In consideration of Tenant's agreements herein, Landlord
agrees that, at its expense, it will install a building standard
air-conditioning diffuser in the C side of Storage Room 10B/C.
(c) Tenant agrees that it will cooperate with Landlord by
providing Landlord with such access to Storage Rooms 10B/C and 10E/F as is need
for Landlord to effect the foregoing work. Landlord will seek to minimize any
interference with Tenant's business. Tenant understands, however, that such work
will be effected on Landlord's business days, during Landlord's business hours.
Landlord will also effect such work in a good and workmanlike manner and in
accordance with applicable law.
2. In further consideration for Tenant's agreements herein, Landlord
agrees that Tenant shall be entitled to a rent credit in the amount of
$2,071.91, which rent credit shall be applied, until depleted, against the fixed
annual rent (without electricity) next due under this Lease.
3. Subdivision B(d) of Article 48 shall be deemed to be, and hereby is,
deleted from the lease, and the following new Subdivision B(d) shall be
substituted in its place and stead:
'(d) If and so long as Tenant is not in default beyond any
grace period in its obligation to pay any rent or additional
rent under this Lease, Tenant shall have the option to delete
from the Tenth Floor Storage Space the combined Storage Room
10B/C and/or the combined Storage Room 10E/F (the 'Deletion
Storage Space'), upon ninety (90) days' prior written notice
to Landlord. (Any Storage Room remaining after the exercise of
such deletion right by Tenant are hereinafter collectively
called the 'Remaining Tenth Floor Storage Space'). Such
deletion shall be deemed effective as of the last day of the
calendar month in which last day of the aforedescribed ninety
(90) day notice period occurs (the 'Deletion Date'). Time
shall be of the essence in connection with the exercise by
Tenant of any election in accordance with the terms hereof. On
or before the Deletion Date, Tenant shall vacate the Deletion
Storage Space and surrender broom clean possession thereof to
Landlord in accordance with the provisions of this Lease, as
if the Deletion Date were the date set forth in this Lease for
the expiration of the leasing of the Deletion Space. From and
after the Deletion Date, for the Remaining Tenth Floor Storage
Space: the fixed annual rental rate (without electricity)
shall be reduced by an amount equal to $15 per rentable square
foot for each rentable square foot of Deletion Storage Space
being deleted by Tenant hereunder; 'The Percentage' for
purposes of calculating tax and operating expense escalation
under Article 45 shall be reduced in accordance with the terms
of said Article, based on the number of rentable square feet
of the Remaining Tenth Floor Storage Space; Tenant shall
accept and continue possession of the Remaining Tenth Floor
Storage Space in its then 'as is' condition, and Tenant
acknowledges that Landlord shall have no obligation to do any
work in and to such space to make it suitable and ready for
Tenant's
2
<PAGE>
continued occupancy and use; and all other provisions of this
Lease shall be deemed to be, and hereby are, appropriately
modified with respect to the Remaining Tenth Floor Storage
Space; otherwise, the Remaining Tenth Floor Storage Space
shall continue to be leased pursuant to all of the applicable
terms, covenants and conditions of the Lease, as herein
modified, including, without limitation, the 'base tax year',
the 'base year' and the 'comparative years' for purposes of
Article 45 tax and operating expense escalation, and the ERIF
under Section 27.04. Tenant, however, shall remain liable to
Landlord for any rent, additional rent or other obligations
payable or accruing with respect to the Deletion Storage Space
prior to the Deletion Date and the surrender to Landlord of
the Deletion Storage Space.'
4. Except as herein modified, all of the terms, covenants and
conditions of the Lease are and shall remain in full force and effect and are
hereby ratified and confirmed.
5. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WITNESS: (As to Landlord) MID-CITY ASSOCIATES
By: Helmsley-Spear, Inc., Agent
By:
- -------------------------- -----------------------------
Name: Daniel E. North
Title: Vice President
WITNESS: (As to Tenant) ANDOVER TOGS, INC.
By:
- ----------------------------- -----------------------------
Name:
Title:
3
<PAGE>
SECOND LEASE MODIFICATION AGREEMENT
AGREEMENT, made as of this 11th day of September, 1995, between
MID-CITY ASSOCIATES, a partnership with an office at 60 East 42nd Street, New
York, New York 10165 (hereinafter called 'Landlord'), and ANDOVER TOGS, INC., a
New York corporation with an office at One Penn Plaza, New York, New York 10119
(hereinafter called 'Tenant').
W I T N E S S E T H:
WHEREAS, Landlord and Tenant are respectively the landlord and tenant
under that certain lease, dated as of August 18, 1994, covering the entire
rentable area of the 46th floor, and Storage Rooms 10B, 10C, 10E and 10F on the
10th floor, of the building (the 'Building') known as One Penn Plaza, New York,
New York which lease was modified by a certain First Lease Modification
Agreement, dated as of January 17, 1995 (which lease, as so modified, is
hereinafter called the 'Lease'); and
WHEREAS, the parties wish to modify the Lease (i) so as to delete
Storage Rooms 10B, 10C, 10E and 10F (the 'Deletion Space') from the premises
demised under the Lease, and (ii) so as to add to the premises demised under the
Lease approximately 1,390 rentable square feet of space on the 6th floor of the
Building (Room 602), approximately as shown on the space diagram annexed hereto
and made a part hereof (the 'Additional Space'), all in accordance with the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the
Lease shall be deemed to be, and the same hereby is, modified as follows:
1. Effective as of July 17, 1995 (the 'Effective Date'), the
Deletion Space is hereby deleted from the premises demised under the Lease.
On or before the Effective Date, Tenant shall vacate the
Deletion Space and surrender broom-clean possession thereof to Landlord in
accordance with the provisions of the Lease, as if the Deletion Date were the
date set forth in the Lease for the expiration of the leasing of the Deletion
Space.
Notwithstanding such deletion of the Deletion Space, Tenant
shall remain liable to Landlord for any rent, additional rent or other
obligations payable or accruing with respect to the Deletion Space prior to the
Effective Date and the surrender to Landlord of said space.
<PAGE>
2. The Additional Space is hereby added to the premises demised
under the Lease for a term to commence as of the Effective Date and to end on
April 30, 2004 (unless it shall sooner terminate as in the Lease provided).
For the Additional Space: the fixed annual rental rate
(without electricity) shall be $21,570 a year; Tenant shall use the Additional
Space solely as and for storage and a mail room relating to Tenant's business,
and for no other purpose; the minimum ERIF under Section 27.04 of the Lease,
effective as of the Effective Date, shall be $3.00 per rentable square foot per
annum, which ERIF shall be subject to increases based on rate changes after such
date, or based on Tenant's consumption, as provided in said Section 27.04; there
shall be no cleaning services provided to the Additional Space; Tenant shall
take and accept possession of the Additional Space in its 'as is' condition,
with no obligation in Landlord to effect any work in and to such space, except
as provided in paragraph 3 below; for purposes of calculating real estate tax
escalation additional rent under Article 45, 'The Percentage' shall mean .0627
percent (.0627%); for purposes of calculating operating expense escalation
additional rent under Article 45, 'The Percentage' shall mean .0681 percent
(.0681%); and the provisions of Article 48 shall not apply to the Additional
Space. Except as herein set forth, the Additional Space otherwise is being
rented pursuant to all of the terms, covenants and conditions of the lease,
including, without limitation, the 'base tax year', 'base year' and 'comparative
year', each as defined in Article 45 of the Lease.
3. Landlord, at its expense, shall effect the following work in
and to the Additional Space, in a Building standard manner and using Building
standard materials: (i) the work set forth in Exhibit A hereto; and (ii) all
work needed to put the existing electrical outlets in working order. Landlord
shall effect such work promptly and expeditiously after the execution and
delivery of this Agreement.
4. Landlord, at its expense and with Tenant's cooperation, shall
furnish all necessary moving and other labor to move Tenant's personal property
from the Deletion Space to the Additional Space or the 46th floor portion of the
premises demised under the Lease, as Tenant may request.
Additionally, Tenant shall be entitled to a rent credit in an
amount equal to the reasonable out-of-pocket cost to Tenant, if any, of (i)
taking apart the existing storage racks and bins in the Deletion Space and
reassembling such racks and bins in the Additional Space, and (ii) transferring
Tenant's telephone service from the Deletion Space to the Additional Space. Such
rent credit shall be applied, until fully depleted, to the first fixed annual
rents (without electricity) due under the Lease with respect to the Additional
Space. Tenant shall provide Landlord with copies of invoices or other
documentation reasonable requested by Landlord to verify such cost.
5. A. Subject to the provisions of subdivision B of this
paragraph 5, at any time after the first year of the term of the leasing of the
Additional Space, Landlord, upon ninety (90) days' prior written notice to
Tenant (the 'Substitution Notice'), shall have the right to substitute
2
<PAGE>
for the Additional Space other storage space in the Building (the 'Substitute
Storage Space'), provided that such Substitute Storage Space shall be
substantially equivalent in area to the Additional Space. Any such substitution
of space shall be deemed to be effective as of the last day of the month in
which the last day of the aforedescribed ninety (90) day notice period occurs
(the 'Substitution Date'). From and after the Substitution Date, the Lease (as
modified hereby) and all of its terms, including, without limitation, the rental
rate for the Additional Space as set forth herein, (i) shall no longer apply to
the Additional Space, except with respect to obligations which accrued on or
prior to the Substitution Date; and (ii) shall apply to the Substitute Storage
Space as if said Substitute Storage Space had been said originally demised
Additional Space. Notwithstanding the foregoing, Tenant shall be permitted to
continue to occupy the Additional Space for a period of thirty (30) days after
the Substitution Date, which occupancy shall be pursuant to all of the terms,
covenants and conditions of the Lease (as modified hereby), except that Tenant
shall not be required to pay any rent or additional rent. On or before such
thirtieth (30th) day after the Substitution Date, Tenant shall vacate the
Additional Space and surrender broom clean possession thereof to Landlord in
accordance with the provisions of the Lease, as if such thirtieth (30th) day
after the Substitution Date were the date set forth in the Lease (as modified
hereby) for the expiration of the leasing of the Additional Space.
Landlord agrees that, prior to the Substitution Date, at its
expense, it will paint the walls, doors and trim in the Substitute Storage
Space, painted surfaces only, Building standard colors, one coat, one color per
room, color to be selected by Tenant (dark colors and additional colors per room
will be charged for as additional rent). Additionally, Landlord at its expense
and with Tenant's cooperation, shall furnish all necessary moving and other
labor to move Tenant's personal property from the Additional Space to the
Substitute Storage Space or Tenant's office premises, as Tenant may request.
Tenant shall be entitled to a rent credit in an amount equal
to the reasonable out-of-pocket cost to Tenant, if any, of (i) taking apart the
then existing storage racks and bins in the Additional Space and reassembling
such racks and bins in the Substitute Storage Space, and (ii) transferring
Tenant's then existing telephone service from the Additional Space to the
Substituted Storage Space. Such rent credit shall be applied, until fully
depleted, to the first fixed annual rents (without electricity) due under the
Lease with respect to the Substitute Storage Space. Tenant shall provide
Landlord with copies of invoices or other documentation reasonable requested by
Landlord to verify such cost.
B. Notwithstanding anything contained in the foregoing
subdivision A to the contrary, Tenant, within thirty (30) days after it has been
given the Substitution Notice by Landlord, instead of accepting the Substitute
Storage Space, may elect to cancel such Substitution Notice and to delete the
Additional Space from the then existing demised premises under the Lease. Tenant
shall exercise such election by giving Landlord notice thereof on or before the
last day of such thirty (30) day period. Such deletion shall be deemed effective
as of the Substitution Date. Time shall be of the essence with respect to
Tenant's exercise of such election in accordance with the terms hereof. On or
before the Substitution Date, Tenant shall vacate the Additional Space and
surrender broom clean possession thereof to Landlord in
3
<PAGE>
accordance with the provisions of the Lease, as if the Substitution Date were
the date set forth in the Lease (as modified hereby) for the expiration of the
term of the leasing of the Additional Space. Notwithstanding such deletion of
the Additional Space, Tenant shall remain liable to Landlord for any rent,
additional rent or other obligations payable or accruing with respect to the
Additional Space prior to the Substitution Date and the surrender to Landlord of
said space.
C. If and so long as Tenant is not in default beyond any grace
period in its obligation to pay any rent or additional rent under the Lease (as
modified hereby), Tenant shall have the option to delete from the premises
demised under the Lease all but not part of the Additional Space, upon ninety
(90) days' prior written notice to Landlord. Such deletion shall be deemed
effective as of the last day of the calendar month in which the last day of the
aforedescribed ninety (90) day period occurs (the 'Deletion Date'). Time shall
be of the essence in connection with the exercise by Tenant of any election in
accordance with the terms hereof. On or before the Deletion Date, Tenant shall
vacate the Additional Space and surrender broom clean possession thereof to
Landlord in accordance with the provisions of the Lease, as if the Deletion Date
were the date set forth in the lease for the expiration of the term of the
leasing of the Additional Space. Tenant, however, shall remain liable to
Landlord for any rent, additional rent, or other obligations payable or accruing
with respect to the Additional Space prior to the Deletion Date and the
surrender to Landlord of possession of the Additional Space.
6. Except as herein modified, all of the terms, covenants and
conditions of the Lease are and shall remain in full force and effect and are
hereby ratified and confirmed.
7. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives, successors and
permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year fist above written.
WITNESS: (As to Landlord) MID-CITY ASSOCIATES
By: Helmsley-Spear, Inc., Agent
- ----------------------------- By:
-----------------------------
Name: Daniel E. North
Title: Vice President
WITNESS: (As to Tenant) ANDOVER TOGS, INC.
- ----------------------------- By:
-----------------------------
Name:
Title:
4
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-1-1994
<PERIOD-END> AUG-31-1995
<CASH> 905,000
<SECURITIES> 0
<RECEIVABLES> 15,319,000
<ALLOWANCES> 113,000
<INVENTORY> 20,586,000
<CURRENT-ASSETS> 37,703,000
<PP&E> 19,942,000
<DEPRECIATION> 11,961,000
<TOTAL-ASSETS> 47,139,000
<CURRENT-LIABILITIES> 23,837,000
<BONDS> 4,088,000
<COMMON> 464,000
0
0
<OTHER-SE> 11,599,000
<TOTAL-LIABILITY-AND-EQUITY> 18,146,000
<SALES> 58,383,000
<TOTAL-REVENUES> 58,383,000
<CGS> 48,735,000
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<INCOME-PRETAX> (1,619,000)
<INCOME-TAX> (535,000)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,084,000)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> 0
