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 1, 1997
----------------
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
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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 15, 1997.
<PAGE>
TODAY'S MAN INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements - Unaudited
Consolidated Balance Sheets
November 1, 1997 and February 1, 1997...................................................1
Consolidated Statements of Operations
Thirteen weeks ended November 1, 1997 and November 2, 1996..............................2
Consolidated Statements of Operations
Thirty-nine weeks ended November 1, 1997 and November 2, 1996...........................3
Consolidated Statements of Cash Flows
Thirty-nine weeks ended November 1, 1997 and November 2, 1996...........................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
</TABLE>
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 1, February 1,
1997 1997
------------ ------------
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 11,575,600 $ 22,926,000
Due from credit card companies and other receivables, net 2,631,900 2,299,400
Inventory 44,958,000 28,636,600
Prepaid expenses and other current assets 2,644,600 3,548,300
Prepaid inventory purchases 4,001,600 2,047,100
------------ ------------
Total current assets 65,811,700 59,457,400
Property and equipment, less accumulated depreciation and
amortization 31,017,300 33,452,200
Loans to shareholders 228,400 228,400
Rental deposits and other noncurrent assets 2,760,800 2,258,700
------------ ------------
$ 99,818,200 $ 95,396,700
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 7,112,200 $ 3,801,800
Accrued expenses and other current liabilities 4,742,400 4,731,500
Current maturities of capital lease obligations 1,358,300 1,396,500
------------ ------------
Total current liabilities 13,212,900 9,929,800
Capital lease obligations, less current maturities 868,800 2,264,000
Deferred rent and other 4,351,600 4,580,300
Liabilities subject to settlement 71,570,300 63,367,900
------------ ------------
90,003,600 80,142,000
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
Retained earnings (deficit) (28,454,500) (23,014,400)
------------ ------------
Total shareholders' equity 9,814,600 15,254,700
------------ ------------
$ 99,818,200 $ 95,396,700
============ ============
</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. 1, 1997 NOV. 2, 1996
------------ ------------
<S> <C> <C>
Net sales $ 48,457,400 $ 44,616,800
Cost of goods sold 30,618,400 28,964,100
------------ ------------
Gross profit 17,839,000 15,652,700
Selling, general and administrative expenses 15,868,700 15,641,700
------------ ------------
Income from operations 1,970,300 11,000
Reorganization items:
Professional fees 1,385,500 796,400
Interest income (412,900) (41,600)
------------ ------------
Net reorganization items 972,600 754,800
Interest expense and other income, net 7,265,600 6,300
------------ ------------
Loss before income taxes (6,267,900) (750,100)
Income taxes -- --
------------ ------------
Net loss $ (6,267,900) $ (750,100)
============ ============
Net loss per share $ (0.58) $ (0.07)
============ ============
Weighted average shares outstanding 10,861,005 10,861,005
</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. 1, 1997 NOV. 2, 1996
------------- -------------
<S> <C> <C>
Net sales $ 142,851,900 $ 136,312,400
Cost of goods sold 91,082,100 90,845,600
------------- -------------
Gross profit 51,769,800 45,466,800
Selling, general and administrative expenses 47,022,800 48,078,100
------------- -------------
Income (loss) from operations 4,747,000 (2,611,300)
Reorganization items:
Professional fees 3,835,700 3,222,600
Interest income (941,300) (121,600)
------------- -------------
Net reorganization items 2,894,400 3,101,000
Interest expense and other income, net 7,238,800 34,100
------------- -------------
Loss before income taxes (5,386,200) (5,746,400)
Income taxes 53,900 --
------------- -------------
Net loss $ (5,440,100) $ (5,746,400)
============= =============
Net loss per share $ (0.50) $ (0.53)
============= =============
Weighted average shares outstanding 10,861,005 10,861,005
</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. 1, 1997 NOV. 2, 1996
------------ ------------
<S> <C> <C>
Operating activities
Net loss $ (5,440,100) $ (5,746,400)
Adjustments to reconcile net loss to net cash provided by
(used in)operating activities:
Depreciation and amortization 3,219,400 3,792,900
Deferred rent and other (228,700) 596,200
Changes in operating assets and liabilities:
(Increase) decrease in receivables (332,500) 741,300
Decrease in refundable income taxes -- 6,016,000
(Increase) decrease in inventory (16,321,400) 317,200
Increase in prepaid expenses and other current assets (1,050,800) (1,076,200)
(Increase) decrease in rental deposits and other non-current
assets (502,100) 1,315,900
Increase in payables, accrued expenses and liabilities
subject to settlement 11,462,000 2,519,500
Changes due to reorganization activities:
Reorganization costs 2,974,400 3,101,000
Payment of reorganization costs (2,912,700) (1,552,900)
------------ ------------
Total adjustments (3,692,400) 15,770,900
------------ ------------
Net cash (used in) provided by operating activities (9,132,500) 10,024,500
Cash flow used in investing activities:
Capital expenditures (784,500) (1,327,800)
------------ ------------
Net cash used in investing activities (784,500) (1,327,800)
Cash flow used in financing activities:
Repayment of capital leases (1,433,400) (1,766,400)
------------ ------------
Net cash used in financing activities (1,433,400) (1,766,400)
Net (decrease) increase in cash and cash equivalents (11,350,400) 6,930,300
Cash and cash equivalents at beginning of period 22,926,000 1,385,400
------------ ------------
Cash and cash equivalents at end of period $ 11,575,600 $ 8,315,700
============ ============
</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."
In addition, the filing of a voluntary petition under Chapter 11 was an event of
default under all of the Company's loan agreements. 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 has had no
borrowings under this DIP Facility since the inception of the loan. Loans under
the DIP Facility will have a superpriority administrative expense claims status
under the Bankruptcy Code, subject to certain exceptions.
The Company's Second Amended Joint Plan of Reorganization (the "Plan")
was confirmed by the U.S. Bankruptcy Court on December 12, 1997. The terms of
the Second Amended Plan call for the full and enhanced recovery to creditors of
their allowed claims through a combination of cash and equity in the reorganized
Company. The funding for the settlement of outstanding liabilities will be
through a combination of cash on hand, a rights offering to existing
shareholders, a term loan from Foothill Capital Corporation and the issuance of
common stock to the creditors. The enhanced recovery, more completely described
in the Plan, includes the payment of approximately $7,264,000 in excess of the
principal amount of the allowed claims. This payment, classified as interest
expense in the accompanying Consolidated Financial Statements, was an inducement
to secure the creditors support for the Plan. The payment will be made using
approximately $2,415,500 and 2,093,100 shares of common stock in the reorganized
entity. Additional stock to be issued pursuant to the rights offering and the
settlements with creditors will be distributed as soon as practical after the
Plan becomes effective. As a result of the Plan the number of common shares
outstanding will be approximately 27,325,000. The Company anticipates that the
complete impact of the Plan will be reflected in the Consolidated Financial
Statements upon its substantial consummation, which is expected during the
fourth quarter of Fiscal 1997.
.
5
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
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. As reflected in the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K, the Company
experienced significant net losses in fiscal 1996 and 1995, respectively. During
the Chapter 11 proceedings, the Company has incurred substantial reorganization
costs. The Company's ability to continue as a going concern is dependent upon
its emergence from Chapter 11 in accordance with the terms of its Plan;
maintaining compliance with all debt covenants under the post-petition
financing, combined with the achievement of profitable operations.
Under the Bankruptcy Code, the Company may elect to assume or reject
real estate leases, employment contracts, personal property leases, service
contracts and other unexpired executory pre-petition contracts, subject to
Bankruptcy Court approval. Certain leases and contracts have been rejected in
connection with the Chapter 11 proceedings. The Company's estimate of the
obligations related to these rejected items have been included in liabilities
subject to settlement in amounts pursuant to the Bankruptcy Code. The ultimate
amount of such claims is subject to adjustment based on the resolution of
objections to such claims. Accordingly, the Company cannot presently determine
the ultimate liability which may result from the filing of claims for any
contracts which have been rejected in the Chapter 11 proceedings. The Company
believes it has recorded an adequate reserve for rejection damages in accordance
with the applicable sections of the Bankruptcy Code.
There are approximately 4,000 scheduled liabilities and filed proofs of
claim against the Company. Included among the claims filed have been claims of
unspecified amounts. The aggregate amount of those claims which specified
amounts was approximately $270,000,000. The Company considers this amount to be
highly inflated and a totally unreliable estimate of its liabilities. The
Company has begun the process of requesting the Bankruptcy Court to approve
reductions of, or to expunge, overstated, duplicate or amended claims. The
ultimate amount of such liabilities will be subject to adjustment based on the
resolution of objections to such claims and, accordingly, are not presently
determinable. The Company has conducted an exhaustive reconciliation of all
claims and believes the amounts reflected in the accompanying Consolidated
Financial Statements approximate the ultimate amounts for which the claims will
be settled. Therefore, no provision has been made for the differences between
the amounts filed with the court and the balances reflected in the accompanying
Consolidated Financial Statements.
6
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 and the recording of
the accrual for the interest premium described in Note 1) 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 January 31, 1998. 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 1, 1997. The
Company has adopted the provisions of the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code."
3. Segregated Cash
The Company, in connection with the November 1995 Amendment and
Restatement of its Credit Agreement, granted the bank lenders a security
interest in certain non-inventory assets. Included in Cash and cash equivalents
is approximately $6.8 million representing the proceeds from receivables related
to credit card sales in the three days preceding the Chapter 11 filing and the
post petition refund of previously paid taxes which have been separated from the
Company's operating bank accounts for the potential benefit of the bank lenders.
These funds will be used, in conjunction with other cash, to satisfy the
principal amount of the bank group's claim.
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.
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
$16,773,500 and AMT credit carryforward of $412,900 are available to offset
future tax liabilities, subject to any applicable limitations under Internal
Revenue Code Section 382 and can be affected by the ultimate treatment of
liabilities subject to settlement. These carryforwards are fully offset by a
valuation allowance. The federal net operating loss carryforwards expire in 2010
and 2011. Current income taxes have been fully offset by available net operating
loss carry forwards.
7
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
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. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share", which is required to be adopted on
January 31, 1998. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options, if any, will be excluded. The impact of
Statement 128 is not expected to be material.
7. 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 1, 1997, a copy of which can be obtained, without charge except for
exhibits to the Report, upon written request to Mr. Frank E. Johnson, Executive
Vice President and Chief Financial Officer, Today's Man, Inc., 835 Lancer Drive,
Moorestown, New Jersey 08057.
8. Safe Harbor Statement under Private Securities Litigation
Reform Act of 1995
Certain statements in this Form 10-Q which are not historical facts,
including, without limitation, statements as to the Company's planned results
for 1997 or as to management's beliefs, expectations, or opinions, are forward
looking statements that involve risks and uncertainties and are subject to
change at any time. Certain factors, including, without limitation the risk that
the assumptions upon which the forward-looking statements are based ultimately
may prove incorrect, risks associated with the Company's Chapter 11 petition,
and the other risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission, including, without limitation, its Annual
Report on Form 10-K, can cause actual results and developments to be materially
different from those expressed or implied by such forward-looking statements. A
copy of the Company's Annual Report on Form 10-K can be obtained, without charge
except for exhibits to the Report, upon written request to Mr. Frank E. Johnson,
Executive Vice President and 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, the Company and certain of its subsidiaries filed
voluntary petitions in the United States Bankruptcy Court for the District of
Delaware seeking to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The
Company's Second Amended Joint Plan of Reorganization (the "Plan") was confirmed
on December 12, 1997.
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. As reflected in the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K, the Company
experienced significant net losses in fiscal 1996 and 1995, respectively. During
the Chapter 11 proceedings, the Company has incurred substantial reorganization
costs. The Company's ability to continue as a going concern is dependent upon
its emergence from Chapter 11 in accordance with the terms of its Plan;
maintaining compliance with all debt covenants under the post-petition
financing, combined with the achievement of profitable operations.
The following table sets forth, as a percentage of net sales, certain
items appearing in the consolidated statements of operations for the thirteen
and thirty-nine week periods ended November 1, 1997 and November 2, 1996,
respectively.
PERCENTAGE OF NET SALES
THIRTEEN AND THIRTY-NINE WEEKS ENDED
<TABLE>
<CAPTION>
NOV. 1, NOV. 2, NOV. 1, NOV. 2,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 63.2 64.9 63.8 66.6
----- ----- ----- -----
Gross profit 36.8 35.1 36.2 33.4
Selling, general and administrative expenses 32.7 35.1 32.9 35.3
----- ----- ----- -----
Income (loss) from operations 4.1 -- 3.3 (1.9)
Reorganization items, net 2.0 1.8 2.0 2.4
Interest expense and other income, net 15.0 -- 5.1 --
----- ----- ----- -----
Loss before income taxes (12.9) (1.8) (3.8) (4.3)
Income taxes -- -- -- --
----- ----- ----- -----
Net loss (12.9)% (1.8)% (3.8)% (4.3)%
===== ===== ===== =====
</TABLE>
THIRTEEN WEEKS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996:
NET SALES. Net sales increased $3,840,600 or 8.6% in the third quarter of fiscal
1997 compared to the year ago period. The sales increase is due to enhanced
merchandise assortment and better in-stock positions, augmented by the Company's
expanded utilization of a merchandise replenishment program. The replenishment
program serves to minimize stock outs and promotes reorders for fast selling
merchandise. Comparable store sales increased 8.6%. Sales from licensed shoe
departments increased $483,300 to $3,030,900 for the third quarter of fiscal
1997. There were 25 superstores in operation at November 1, 1997 and at November
2, 1996.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
GROSS PROFIT. Gross profit increased in dollars by $2,186,300 to $17,839,000 and
as a percentage of net sales to 36.8% for the third quarter of fiscal 1997 from
35.1% in the year ago period. The improvement in gross margin is primarily
attributable to the increase in net sales and the Company's ability to operate
with less markdowns than the year ago period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $227,000 or 1.5% in the third quarter of
fiscal 1997, and decreased as a percentage of net sales to 32.7% from 35.1% in
the third quarter of fiscal 1996. Store payroll, occupancy and advertising costs
decreased by $103,500 or 1.1% in the third quarter of fiscal 1997, and
represented 20.0% of net sales compared with 22.0% of net sales for the year ago
period. This decrease was partially offset by increases in the Company's credit
card processing costs due to increases in usage of the Company's private label
credit card.
INTEREST EXPENSE AND OTHER INCOME, NET. As a result of the confirmation of the
Company's Plan of Reorganization the Company recorded a charge of $7,264,000
representing the premium demanded by the Official Committee of the Unsecured
Creditors, the holders of the secured pre-petition bank claims and other holders
of unsecured pre-petition obligations of the Company to support a Plan that
provided a full recovery for all allowed claims. This premium will be paid on or
about the effective date of the Plan using approximately $2,415,000 and
2,093,100 shares of common stock in the reorganized entity.
REORGANIZATION ITEMS, NET. Reorganization items consist of legal and financial
advisory services incurred by the Company and the official Creditors' Committee
in the administration of the Chapter 11 proceedings. Also included in this
amount is the charge for the Retention Bonus Plan in fiscal 1996 as well as
interest income earned on accumulated cash balances. The reorganization items,
net increased by $217,800 from the prior year due to increased professional fees
of $589,100 offset by an increase in interest income due to higher average
invested balances.
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996:
NET SALES. Net sales increased $6,539,600 or 4.8% in the first nine months of
fiscal 1997 compared to the year ago period. Comparable store sales increased
7.9%. The increase is the result of better in-stock positions caused by the
Company's replenishment program, enhanced merchandise assortment and the fact
that the licensed shoe departments operated in all locations in fiscal 1997, but
in only nine locations during the first nine months of fiscal 1996. Partially
offsetting this increase was the fact that during the first quarter of fiscal
1996, the Company closed 10 underperforming superstores and one outlet store.
Those stores produced approximately $3,800,000 in net sales during the quarter
in which they were closed. Sales from licensed shoe departments increased
$3,525,000 to $8,851,400 for the first nine months of fiscal 1997. There were 25
superstores in operation at November 1, 1997 and November 2, 1996.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
GROSS PROFIT. Gross profit as a percentage of net sales increased to 36.2% for
the first nine months of fiscal 1997 from 33.4% in the year ago period. The
improvement in gross margin is primarily attributable to the Company's ability
to operate with less promotional sales and markdowns than the year ago period
partially offset by the impact of additional sales from the licensed shoe
departments which operate at a significantly lower gross profit margin.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $1,055,300 or 2.2% in the first nine months of
fiscal 1997, and decreased as a percentage of net sales to 32.9% from 35.3% in
the first nine months of fiscal 1996. The decrease was the result of the cost
savings obtained by operating eleven fewer locations which were closed during
the first quarter of fiscal 1996. Store payroll, occupancy and advertising costs
decreased by $1,554,000 or 5.1% in the first nine months of fiscal 1997, and
represented 20.3% of net sales compared with 22.4% of net sales for the year ago
period. This decrease was offset by increases in the Company's credit card
processing costs primarily due to increased utilization of the Company's private
label credit card program.
INTEREST EXPENSE AND OTHER INCOME, NET. As a result of the confirmation of the
Company's Plan of Reorganization the Company recorded a charge of $7,264,000
representing the premium demanded by the Official Committee of the Unsecured
Creditors, the holders of the secured pre-petition bank claims and other holders
of unsecured pre-petition obligations of the Company to support a Plan that
provided a full recovery for all allowed claims. This premium will be paid on or
about the effective date of the Plan using approximately $2,415,000 and
2,093,100 shares of common stock in the reorganized entity.
REORGANIZATION ITEMS, NET. Reorganization items consist of legal and financial
advisory services incurred by the Company and the official Creditors' Committee
in the administration of the Chapter 11 proceedings. Also included in this
amount is the charge for the Retention Bonus Plan as well as interest income
earned on accumulated cash balances. The reorganization items, net decreased by
$206,600 from the prior year due to an increase of $819,700 in interest income
due to higher average invested balances offset by increases in professional fees
of $613,100.
11
<PAGE>
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. On December 12, 1997 the Company's Second
Amended Joint Plan of Reorganization (the "Plan") was confirmed by the U.S.
Bankruptcy Court. The Plan calls for the settlement of allowed claims using a
combination of cash and equity. In addition to the principal amount of allowed
claims, the Company compromised with the various creditor constituencies on a
premium paid to the creditors to support the Plan. The total disbursements to
satisfy all claims is approximately $72 million. The Company will fund this
settlement through a combination of cash on hand and a draw on the Foothill
Capital Corporation revolving credit facility, if necessary aggregating
approximately $27.5 million, $16.3 million from a rights offering to existing
shareholders, a $12.5 million term loan from Foothill Capital Corporation and
the issuance of common stock to the creditors. Upon consummation of the Plan
approximately 27.3 million shares of common stock will be outstanding.
The Company's primary source of working capital is cash flow from operations. At
November 1, 1997, the Company had working capital of $52,598,800 as compared
with $49,527,600 at February 1, 1997.
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 are subject to availability under a borrowing base formula. Interest is
payable monthly at the bank's prime rate plus 0.5%. The Company has had no
direct borrowings under this DIP Facility since the inception of the loan. Loans
under the DIP Facility will have a super priority administrative expense claims
status under the Bankruptcy Code, subject to certain exceptions.
Pursuant to the terms of the DIP Facility, a replacement facility is required to
emerge from Bankruptcy. The Company has received a commitment from Foothill
Capital Corporation ("Foothill") to provide a $30,000,000 Revolving Credit
Facility. This revolving credit facility provides for a $20,000,000 sublimit for
letters of credit issuances, bears interest at the lenders prime plus 0.5%,
expires in five years, and is secured by the assets of the Company.
Additionally, Foothill has committed to extend the Company a $12,500,000 term
loan with a face amount of $13,250,000. The term loan bears interest at 11% and
requires monthly principal reductions for 36 months. Both the term loan and the
revolving facility are cross collaterallized and cross guaranteed. The loan
agreement provides for usual and customary financial covenants.
The Company believes that the sources of capital above and internally generated
funds will be adequate to meet the Company's anticipated needs through fiscal
1998; 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 is conducting a comprehensive review of its information systems to
determine which systems will require modification to enable proper processing of
transactions related to the year 2000 and beyond (year 2000 compliance). The
Company estimates that it will spend between $2.2 million and $3.7 million
through the end of the fiscal year ending January 30, 2000 ("Fiscal 1999") to
replace its existing merchandise, point-of-sale, and financial accounting
systems. One of the primary requirements imposed by the Company is certification
of year 2000 compliance and compatibility. The costs for new systems will be
capitalized and depreciated, to the extent permitted by Generally Accepted
Accounting Principles, in accordance with the Company's fixed asset policy.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On December 12, 1997 an order was entered in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court") confirming the Company's
Second Amended Plan of Reorganization. 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
<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 15, 1997 /s/ David Feld
--------------------------------------
David Feld
Chairman of the Board and
Chief Executive Officer
Date: December 15, 1997 /s/ Frank E. Johnson
--------------------------------------
Frank E. Johnson
Executive Vice President, Chief Financial
Officer and Treasurer
Principal Financial Officer
Date: December 15, 1997 /s/ Barry S. Pine
--------------------------------------
Barry S. Pine
Vice President and Controller
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets at November 1, 1997 and the Consolidated
Statements of Operations for the thirty-nine weeks ended November 1, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> NOV-01-1997
<CASH> 11,575,600
<SECURITIES> 0
<RECEIVABLES> 2,680,700
<ALLOWANCES> 48,800
<INVENTORY> 44,958,000
<CURRENT-ASSETS> 65,811,700
<PP&E> 48,006,600
<DEPRECIATION> (16,989,300)
<TOTAL-ASSETS> 99,818,200
<CURRENT-LIABILITIES> 13,212,900
<BONDS> 0
0
0
<COMMON> 38,269,100
<OTHER-SE> (28,454,500)
<TOTAL-LIABILITY-AND-EQUITY> 99,818,200
<SALES> 142,851,900
<TOTAL-REVENUES> 142,851,900
<CGS> 91,082,100
<TOTAL-COSTS> 91,082,100
<OTHER-EXPENSES> 47,022,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,238,800
<INCOME-PRETAX> (5,386,200)
<INCOME-TAX> 53,900
<INCOME-CONTINUING> (5,440,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,440,100)
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
