FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended November 2, 1996
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended to
---------------------- -------------------------
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Commission File No. 0-20234
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Today's Man, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1743137
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
835 Lancer Drive, Moorestown, NJ 08057
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number 609-235-5656
--------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
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, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
------ ------
10,861,005 common shares were outstanding as of December 14, 1996.
<PAGE>
TODAY'S MAN INC.
----------------
INDEX
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PAGE
----
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements - Unaudited
Consolidated Balance Sheets
November 2, 1996 and February 3, 1996............................1
Consolidated Statements of Operations
Thirteen weeks ended November 2, 1996 and October 28, 1995.......2
Consolidated Statements of Operations
Thirty-nine weeks ended November 2, 1996 and October 28, 1995....3
Consolidated Statements of Cash Flows
Thirty-nine weeks ended November 2, 1996 and October 28, 1995....4
Notes to Consolidated Financial Statements......................5-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................9-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................13
Item 2. Changes in Securities...........................................13
Item 3. Defaults Upon Senior Securities.................................13
Item 4. Submission of Matters to a Vote of Security Holders.............13
Item 5. Other Information...............................................13
Item 6. Exhibits and Reports on Form 8-K................................13
Signatures............................................................14
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOV. 2, 1996 FEB. 3, 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,315,700 $ 1,385,400
Due from credit card companies and other receivables 2,232,300 2,973,600
Refundable income taxes -- 6,016,000
Inventory 35,148,600 35,465,800
Prepaid expenses and other current assets 3,614,500 2,413,200
Prepaid inventory purchases 4,199,400 4,324,500
-------------------- -------------------
Total current assets 53,510,500 52,578,500
Property and equipment, less accumulated
depreciation and amortization 33,065,400 35,530,500
Loans to shareholders 228,400 228,400
Rental deposits and other noncurrent assets 8,549,200 9,865,100
==================== ===================
$ 95,353,500 $ 98,202,500
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 2,940,900 $ 2,543,700
Accrued expenses and other current liabilities 5,837,600 3,085,700
Income taxes payable -- 30,700
Current maturities of capital lease obligations 1,679,200 2,134,600
-------------------- -------------------
Total current liabilities 10,457,700 7,794,700
Capital lease obligations 2,032,400 3,343,400
Deferred credits 4,707,700 4,111,500
Liabilities subject to settlement 62,836,100 61,886,900
-------------------- -------------------
80,033,900 77,136,500
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares
authorized, none issued -- --
Common stock, no par value, 20,000,000 shares
authorized, 10,861,005 shares issued and
outstanding 38,269,100 38,269,100
Accumulated deficit (22,949,500) (17,203,100)
-------------------- -------------------
Total shareholders' equity 15,319,600 21,066,000
==================== ===================
$ 95,353,500 $ 98,202,500
==================== ===================
</TABLE>
See accompanying notes
1
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THIRTEEN WEEKS ENDED
NOV. 2, 1996 OCT. 28, 1995
------------- -------------
<S> <C> <C>
Net sales $ 44,616,800 $ 54,898,300
Cost of goods sold 28,964,100 37,685,400
-------------------- --------------------
Gross profit 15,652,700 17,212,900
Selling, general and administrative expenses 15,641,700 22,399,000
-------------------- --------------------
Income/(loss) from operations 11,000 (5,186,100)
Reorganization items:
Professional fees and other 796,400 --
Interest income (41,600) --
-------------------- --------------------
Net reorganization items 754,800 --
Interest expense and other income, net 6,300 1,119,000
-------------------- --------------------
Loss before income tax benefit (750,100) (6,305,100)
Income tax benefit -- (2,206,800)
-------------------- --------------------
Net loss $ (750,100) $ (4,098,300)
==================== ====================
Net loss per share $ (0.07) $ (0.38)
==================== ====================
Weighted average shares outstanding 10,861,005 10,853,552
</TABLE>
See accompanying notes
2
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THIRTY-NINE WEEKS ENDED
NOV. 2, 1996 OCT. 28, 1995
------------ -------------
<S> <C> <C>
Net sales $ 136,312,400 $ 180,508,200
Cost of goods sold 90,845,600 118,792,500
-------------------- --------------------
Gross profit 45,466,800 61,715,700
Selling, general and administrative expenses 48,078,100 66,932,500
-------------------- --------------------
Loss from operations (2,611,300) (5,216,800)
Reorganization items:
Professional fees and other 3,222,600 --
Interest income (121,600) --
-------------------- --------------------
Net reorganization items 3,101,000 --
Interest expense and other income, net 34,100 2,464,800
-------------------- --------------------
Loss before income tax benefit (5,746,400) (7,681,600)
Income tax benefit -- (2,688,600)
-------------------- --------------------
Net loss $ (5,746,400) $ (4,993,000)
==================== ====================
Net loss per share $ (0.53) $ (0.46)
==================== ====================
Weighted average shares outstanding 10,861,005 10,836,664
</TABLE>
See accompanying notes
3
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THIRTY-NINE WEEKS ENDED
NOV. 2, 1996 OCT. 28, 1995
------------ -------------
<S> <C> <C>
Operating activities
Net loss $ (5,746,400) $ (4,993,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,792,900 3,731,400
Deferred credits 596,200 1,512,200
Changes in operating assets and liabilities:
Decrease in receivables 741,300 507,300
Decrease in refundable income taxes 6,016,000 --
Decrease (increase) in inventory 317,200 (5,819,800)
Increase in prepaid expenses and other current assets (1,076,200) (9,023,000)
Decrease in rental deposits and other non current assets 1,315,900 1,201,600
Increase (decrease) in payables, accrued expenses and
liabilities subject to settlement 4,067,600 (7,729,300)
------------------- -------------------
Total adjustments 15,770,900 (15,619,600)
------------------- -------------------
Net cash provided by (used in) operating activities 10,024,500 (20,612,600)
Cash flow used in investing activities:
Capital expenditures (1,327,800) (11,584,600)
Shareholder loans -- 357,200
------------------- -------------------
Net cash used in investing activities (1,327,800) (11,227,400)
Cash flow used in financing activities:
Borrowings under pre-petition revolving credit facility -- 125,716,000
Subordinated loan from majority shareholder -- 5,000,000
Repayment of pre-petition debt -- (98,501,700)
Repayment of capital leases (1,766,400) (1,539,100)
Proceeds from exercise of stock options -- 170,900
------------------- -------------------
Net cash (used in) provided by financing activities (1,766,400) 30,846,100
Net increase (decrease) in cash and cash equivalents 6,930,300 (993,900)
Cash and cash equivalents at beginning of period 1,385,400 1,092,100
------------------- -------------------
Cash and cash equivalents at end of period $ 8,315,700 $ 98,200
=================== ===================
</TABLE>
See accompanying notes
4
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Chapter 11 Proceedings
On February 2, 1996 Today's Man, Inc. ("the Company") and certain of its
subsidiaries filed voluntary petitions in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court") seeking to
reorganize under Chapter 11 of the U.S. Bankruptcy Code. Under Chapter 11,
certain claims against the Company in existence prior to the filing of the
petition for relief under federal bankruptcy law are stayed while the
Company continues business operations as debtor-in-possession. These claims
are reflected in the accompanying Consolidated Balance Sheet as
"liabilities subject to settlement." Additional claims have arisen
subsequent to the filing of the Chapter 11 petitions from further rejection
of certain executory contracts and unexpired leases and from the
determination by the Court (or agreed to by the parties in interest) of
allowed claims for contingencies and other disputed amounts. The Court
established September 3, 1996 (the "Bar Date") as the deadline for filing
proofs of claim in the Chapter 11 proceedings. Subject to a final
reconciliation between the scheduled claims listed on the Company's
Bankruptcy petitions and the filed claims, the Company does not anticipate
any substantial change in this amount. Claims secured against the Company's
assets are also stayed, although the holders of such claims may move the
Court for relief from the stay. Secured claims may be asserted against the
Company's accounts receivable, intangible assets and certain fixed assets.
One subsidiary was not included in the Chapter 11 filings. The results of
its operations and financial position are not material to the consolidated
financial statements.
On March 11, 1996 by order of the Bankruptcy Court, the Company received
final approval for a $20 million Debtor-In-Possession Revolving Credit
Facility (the "DIP Facility") with the CIT Group/Business Credit, Inc. The
DIP Facility permits borrowings of up to $20 million, including a letter of
credit sublimit of $15.0 million, through the earlier of February 13, 1998
or the date of substantial consummation of a plan of reorganization.
Borrowings under the DIP Facility will be subject to availability under a
borrowing base formula. Interest is payable monthly at the prime rate plus
0.5%. The Company had no borrowings under this DIP Facility during the nine
months ended November 2, 1996. Loans under the DIP Facility will have a
superpriority administrative expense claims status under the Bankruptcy
Code, subject to certain exceptions.
The accompanying Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles applicable to a
company on a "going concern" basis, which, except as otherwise noted,
contemplates the realization of assets and the liquidation of liabilities
in the ordinary course of business; however, as a result of the Chapter 11
proceedings, and circumstances relating to this event, including the
Company's debt structure, its recent operating losses, and current economic
conditions, such realization of assets and liquidation of liabilities are
subject to significant uncertainties. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. As a
result of the reorganization proceedings, the Company may settle or
otherwise dispose of assets and liquidate or settle liabilities for amounts
different from those reflected in the Consolidated Financial Statements
5
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Further, a plan of reorganization, as finally approved by the Bankruptcy
Court, could materially change the currently recorded amounts. These
financial statements do not reflect further adjustments to the carrying
value of assets and the amounts and classifications of liabilities or
shareholders' equity that might be necessary as a consequence of these
bankruptcy proceedings. Events completed in relation to the Company's
ongoing operational restructuring include the closing of ten
underperforming locations and its outlet center and reductions in store
operating expenses and corporate overhead. Additional components of the
operational restructuring include ongoing evaluation of store operations,
review of both corporate and store expenses and a refocusing of the
Company's merchandising and marketing strategies.
Since the commencement of the Chapter 11 filing, the Company has had the
exclusive right to file a plan of reorganization. The period of exclusivity
granted to the Company has been extended and is now scheduled to expire on
January 31, 1997. It is expected that the Company will seek and receive a
further extension of the period of exclusivity if it is not able to file a
plan of reorganization by January 31, 1997, all within the discretion of
the Bankruptcy Court which also could elect not to extend such period of
exclusivity.
2. Basis of Financial Statement Presentation
The accompanying unaudited consolidated financial statements, which include
the accounts of the Company and its wholly owned subsidiaries, have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. All significant intercompany
transactions and accounts have been eliminated in consolidation. In the
opinion of management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been included.
Due to the seasonal nature of the Company's sales and the Chapter 11
filing, operating results for the interim period are not necessarily
indicative of results that may be expected for the fiscal year ending
February 1, 1997. For further information, refer to the financial
statements and footnotes thereto which are included in the Company's Annual
Report on Form 10-K for the fiscal year ended February 3, 1996.
3. Segregated Cash
The Company, in connection with the November 1995 Amendment and Restatement
of its Credit Agreement (the "Amended and Restated Credit Agreement"),
granted the bank lenders a security interest in certain non-inventory
assets. Included in cash and cash equivalents is approximately $1.0 million
representing the proceeds from receivables related to pre-petition credit
card sales which has been segregated from the Company's operating assets
and held in a separate account for the potential benefit of the bank
lenders if it is ultimately determined that they have valid liens.
6
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company's fiscal 1995 loss was carried back and generated a refund of
previously paid taxes of approximately $5,900,000. The bank lenders have,
under the terms of the Amended and Restated Credit Agreement, asserted a
lien on the amounts of such refunds. While the Company believes this
assertion is without merit, if the lenders' assertion was deemed successful
any proceeds from such refund would be applied as a reduction of the
Company's pre-petition liability to the lender. The proceeds from the tax
refund and the pre-petition credit card sales are being held in a separate
operating account until the ultimate ownership is determined.
4. Use of Estimates
In addition to the uncertainties related to the Chapter 11 proceedings the
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates. On an annual
basis, inventory and cost of sales amounts are based on actual costs. In
prior years, for purposes of interim reporting, these amounts were based on
the Company's annualized estimated gross profit percentage. As a result of
the uncertainty of the Company's current operating environment, 1996
interim inventory and cost of sales amounts are based on actual costs for
the quarter. Historically, actual margins were lower in the first quarter
and higher in the second and third quarter relative to amounts reported
under the prior method. This change will have no impact on annual results.
5. Income Taxes
There are no additional taxes paid in prior years which are available for
refund. As such, the remaining net operating loss carryforward of
approximately $19,000,000 and AMT credit carryforward of $394,000 are
available to offset future tax liabilities, subject to any applicable
limitations under Internal Revenue Code section 382. The tax benefits of
these carryforwards have been fully offset by a valuation allowance due to
the uncertainty of realizing their benefits.
6. Net Loss Per Share
Net loss per share is computed using the weighted average number of common
shares and common share equivalents outstanding during each period. The
calculation of net loss per common share does not include share equivalents
in determining the weighted average shares outstanding as the result would
be antidilutive.
7
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
7. Reclassification
Certain amounts in the October 28, 1995 consolidated financial statements
have been reclassified to conform with the current period presentation.
8. Investment Considerations
In analyzing whether to make, or to continue, an investment in the Company,
investors should consider, among other factors, certain investment
considerations more particularly described in "Item 1: Business -
Investment Considerations" in the Company's Annual Report on Form 10-K for
the year ended February 3, 1996, a copy of which can be obtained upon
written request to Mr. Frank E. Johnson, Chief Financial Officer, Today's
Man, Inc., 835 Lancer Drive, Moorestown, New Jersey 08057.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
- ----------------------
On February 2, 1996 Today's Man, Inc. ("the Company") and certain of its
subsidiaries filed voluntary petitions in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court") seeking to
reorganize under Chapter 11 of the U.S. Bankruptcy Code.
The consolidated financial statements have been presented on the basis that
the Company is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. As a result of the Chapter 11 filing and circumstances relating
to this event, realization of assets and satisfaction of liabilities is
subject to uncertainty. A plan of reorganization could materially change
the amounts reported in the accompanying consolidated financial statements,
which do not give effect to all adjustments to the carrying values of
assets and liabilities which may be necessary as a consequence of a plan of
reorganization. The ability of the Company to continue as a going concern
is dependent on, among other things, approval of an acceptable plan of
reorganization, future profitable operations, compliance with the DIP
Facility and the ability to generate sufficient cash from operations and
obtain financing sources to meet future obligations, all of which are
uncertain. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
Events completed in relation to the Company's ongoing operational
restructuring include the closing of ten underperforming locations and its
outlet center and reductions in store operating expenses and corporate
overhead. Additional components of the operational restructuring include
ongoing evaluation of store operations, further review of both corporate
and store expenses and a refocusing of the Company's merchandising and
marketing strategies.
The following table sets forth, as a percentage of net sales, certain items
appearing in the statements of operations for the thirteen and thirty-nine
week periods ended November 2, 1996 and October 28, 1995, respectively.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
THIRTEEN WEEKS THIRTY-NINE WEEKS
ENDED ENDED
NOV. 2, OCT. 28, NOV. 2, OCT. 28,
1996 1995 1996 1995
-------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 64.9 68.6 66.6 65.8
-------------------------- --------------------------------
Gross profit 35.1 31.4 33.4 34.2
Selling, general and administrative expenses 35.1 40.8 35.3 37.1
-------------------------- --------------------------------
Income (loss) from operations - (9.4) (1.9) (2.9)
Reorganization items 1.8 - 2.4 -
Interest expense and other income, net - (2.1) - (1.4)
-------------------------- --------------------------------
Loss before income tax benefit (1.8) (11.5) (4.3) (4.3)
Income tax benefit - (4.0) - (1.5)
========================== ================================
Net loss (1.8)% (7.5)% (4.3)% (2.8)%
========================== ================================
</TABLE>
9
<PAGE>
THIRTEEN WEEKS ENDED NOVEMBER 2, 1996 AND OCTOBER 28, 1995:
- -----------------------------------------------------------
NET SALES. Net sales decreased $10,281,500 or 18.7% in the third quarter of
fiscal 1996 compared to the year ago period. Comparative store sales increased
0.5% due primarily to better in stock positions throughout the quarter. The
decline in sales was attributable to fewer stores in operation and a decrease in
promotional activities. There were 25 superstores in operation at November 2,
1996, compared to 35 superstores and one outlet center at October 28, 1995.
GROSS PROFIT. Gross profit as a percentage of net sales increased to 35.1% for
the third quarter of fiscal 1996 from 31.4% in the year ago period. The increase
in gross profit was attributable to lower costs of goods in the third quarter of
1996 as compared to 1995, as well as from a change in the interim inventory
reporting practice employed by the Company as more fully described in Note 4 to
the Consolidated Financial Statements.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $6,757,300 or 30.2% in the third quarter of
fiscal 1996, and decreased as a percentage of sales to 35.1% from 40.8% in the
third quarter of fiscal 1995. The decrease was the result of the cost savings
obtained by operating eleven fewer locations. Store payroll, occupancy and
advertising costs decreased by $5,268,100 or 36.3% in the third quarter of
fiscal 1996, and represented 20.7% of sales compared with 26.4% of sales for the
year ago period.
INTEREST EXPENSE, INTEREST INCOME AND OTHER EXPENSE, NET. Interest expense,
interest income and other expense, net, decreased by $1,154,300 from the third
quarter of fiscal 1995. The Company has not accrued interest on its pre-petition
debt due to the stay imposed pursuant to the Chapter 11 filing which precludes
the payment of principal and interest on pre-petition obligations during the
reorganization period.
REORGANIZATION ITEMS. Reorganization items consist primarily of legal and
accounting fees incurred by the Company and the official Creditors' Committee
appointed by the U.S. Trustee to represent the interest of the unsecured
creditors in the bankruptcy proceedings. Additionally, the Company has
instituted, with the approval of the Bankruptcy Court and the Creditor's
Committee, a Retention Bonus Plan (the "Retention Plan") to provide meaningful
incentive compensation to designated employees to continue their employment with
the Company during the first 18 months of the Company's bankruptcy proceeding.
The charge for the Retention Plan was approximately $135,000 for the third
quarter.
10
<PAGE>
THIRTY-NINE WEEKS ENDED NOVEMBER 2, 1996 AND OCTOBER 28, 1995:
- --------------------------------------------------------------
NET SALES. Net sales decreased $44,195,800 or 24.5% in the first nine months of
fiscal 1996 compared to the year ago period. Comparative store sales decreased
12.1% for the first nine months of fiscal 1996. The decline in sales was
attributable to the closing of ten underperforming locations in the greater
Chicago, New York, Washington, D.C. markets and the Florida outlet location, a
difficult retail environment, a decrease in promotional activities and
merchandise disruptions caused by the Chapter 11 proceedings. There were 25
superstores in operation at November 2, 1996, compared to 35 superstores and one
outlet center at October 28, 1995.
GROSS PROFIT. Gross profit as a percentage of net sales decreased to 33.4% for
the first nine months of fiscal 1996 from 34.2% in the year ago period. The
decrease in gross profit was attributable to markdowns taken in the first
quarter of fiscal 1996 to clear inventory from the closed locations, as well as
from a change in the interim inventory reporting practice employed by the
Company as more fully described in Note 4 to the Consolidated Financial
Statements.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $18,854,400 or 28.2% in the first nine months
of fiscal 1996, and represented 35.3% and 37.1% of sales in each period,
respectively. The decrease was the result of the cost savings obtained by
operating eleven fewer locations. Store payroll, occupancy and advertising costs
decreased by $16,815,800 or 36.9% in the first nine months of fiscal 1996, and
represented 21.1% of sales compared with 25.2% of sales for the year ago period.
INTEREST EXPENSE, INTEREST INCOME AND OTHER EXPENSE, NET. Interest expense,
interest income and other expense, net, decreased by $2,552,300 from the first
nine monthhs of fiscal 1995. This decrease is a result of the stay imposed
pursuant to the Chapter 11 filing which precludes the payment of principal and
interest on pre-petition obligations during the reorganization period.
REORGANIZATION ITEMS. Reorganization items consist primarily of legal and
accounting fees incurred by the Company and the official Creditors' Committee
appointed by the U.S. Trustee to represent the interest of the unsecured
creditors in the bankruptcy proceedings. Also included in this amount is
$405,000 representing the charge for the Retention Plan.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Under Chapter 11, actions to enforce certain claims against the Company are
stayed if the claims arose, or are based on, events that occurred on or before
the petition date of February 2, 1996. The ultimate terms of settlement of these
claims will be determined in accordance with a plan of reorganization which
requires the approval of the impaired prepetition creditors and shareholders and
confirmation by the Bankruptcy Court. Additional claims may arise subsequent to
the filing of the Chapter 11 petitions resulting from further rejection of
certain executory contracts and unexpired leases and from the determination by
the Court (or agreed to by the parties in interest) of allowed claims for
contingencies and other disputed amounts. The ultimate resolution of such
liabilities, all of which are subject to compromise, will be part of a plan of
reorganization
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (continued)
- --------------------------------------------
Until a plan of reorganization is confirmed by the Bankruptcy Court, only such
payments on prepetition obligations that are approved or required by the
Bankruptcy Court will be made. Except for payments for property and equipment
under lease, principal and interest payments on prepetition debt have not been
made since the filing date and will not be made without the Bankruptcy Court's
approval or until a plan of reorganization, defining the repayment terms, has
been confirmed by the Bankruptcy Court. There is no assurance at this time that
a plan of reorganization will be proposed by the Company or if a proposed plan
will be approved or confirmed by the Bankruptcy Court.
The Company's primary sources of working capital are cash flow from operations
and borrowings under its DIP Facility. At November 2, 1996, the Company had
working capital of $43,052,800 as compared with $44,783,800 at February 3, 1996.
This decrease in working capital was due to a decrease in inventory and
receivable levels commensurate with the closing of ten underperforming stores
and one outlet store in the first quarter of 1996.
On March 11, 1996 by order of the Bankruptcy Court, the Company received final
approval for a $20 million Debtor-In-Possession Revolving Credit Facility (the
"DIP Facility") with the CIT Group/Business Credit, Inc. The DIP Facility
permits borrowings of up to $20 million, including a letter of credit sublimit
of $15 million, through the earlier of February 13, 1998 or the date of
substantial consummation of a plan of reorganization. Borrowings under the DIP
Facility will be subject to availability under a borrowing base formula.
Interest is payable monthly at the bank's prime rate plus 0.5%. The Company had
no borrowings under this DIP Facility during the nine months ended November 2,
1996. Loans under the DIP Facility will have a super priority administrative
expense claims status under the Bankruptcy Code, subject to certain exceptions.
Inherent in a successful plan of reorganization is a capital structure which
permits the Company to generate sufficient cash flow after reorganization to
meet its restructured obligations and fund the current obligations of the
reorganized Company. Under the Bankruptcy Code, the rights of and ultimate
payment to prepetition creditors may be substantially altered and, as to some
classes, eliminated. At this time, it is not possible to predict the outcome of
the Chapter 11 filing, in general, or its effects on the business of the Company
or on the interests of creditors or shareholders.
The Company believes that the sources of capital described above and internally
generated funds will be adequate to meet the Company's anticipated needs through
fiscal 1996; however as a result of the Company's Chapter 11 proceedings and the
other events described above, no assurance can be given with respect to the
Company's liquidity. The Company, in cooperation with the Creditor's Committee,
has agreed to use its best efforts to attract third parties who may be
interested in financially assisting it in a plan of reorganization. Upon
emergence from the Chapter 11 proceedings, the Company will need to replace the
DIP Facility with a suitable financing structure to meet its plan of
reorganization.
12
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
-----------------
On February 2, 1996 Today's Man, Inc. ("the Company") and certain of its
subsidiaries filed voluntary petitions in the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court") seeking to reorganize under
Chapter 11 of the U.S. Bankruptcy Code. See Item 1. "Business - Chapter 11
Proceedings."
Item 2. Changes in Securities
---------------------
None - not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
None - not applicable
Item 4. Submission of Matters to a Vote of Shareholders
-----------------------------------------------
None - not applicable
Item 5. Other Information
-----------------
None - not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
None - not applicable
Reports on Form 8-K
None - not applicable
13
<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.
TODAY'S MAN, INC.
(Registrant)
Date: December 16, 1996 -------------------------------------
David Feld
Chairman of the Board and
Chief Executive Officer
Date: December 16, 1996 -------------------------------------
Frank E. Johnson
Vice President, Chief Financial
Officer and Treasurer
Principal Financial Officer
Date: December 16, 1996 -------------------------------------
Barry S. Pine
Controller
Principal Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at November 2, 1996 (Unaudited)
and the Consolidated Statement of Operations for the Thirty-Nine Weeks ended
November 2, 1996 (Unaudited) and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> NOV-02-1996
<CASH> 8,315,700
<SECURITIES> 0
<RECEIVABLES> 2,232,300
<ALLOWANCES> 0
<INVENTORY> 35,148,600
<CURRENT-ASSETS> 53,510,500
<PP&E> 50,032,500
<DEPRECIATION> (16,967,100)
<TOTAL-ASSETS> 95,353,500
<CURRENT-LIABILITIES> 10,457,700
<BONDS> 0
0
0
<COMMON> 38,269,100
<OTHER-SE> (22,949,500)
<TOTAL-LIABILITY-AND-EQUITY> 95,353,500
<SALES> 136,312,400
<TOTAL-REVENUES> 136,312,400
<CGS> 90,845,600
<TOTAL-COSTS> 90,845,600
<OTHER-EXPENSES> 48,078,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,100
<INCOME-PRETAX> (5,746,400)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,746,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,746,400)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
