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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 August 2, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended _______________________to _______________________
_________________________________________________
Commission File No. 0-20234
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
- ---------------------------------------- -----------------
(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 September 16, 1997
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<PAGE>
TODAY'S MAN INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements - Unaudited
Consolidated Balance Sheets
August 2, 1997 and February 1, 1997............................1
Consolidated Statements of Operations
Thirteen weeks ended August 2, 1997 and August 3, 1996.........2
Consolidated Statements of Operations
Twenty-six weeks ended August 2, 1997 and August 3, 1996.......3
Consolidated Statements of Cash Flows
Twenty-six weeks ended August 2, 1997 and August 3, 1996.......4
Notes to Consolidated Financial Statements...................5-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................10-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................14
Item 2. Changes in Securities.........................................14
Item 3. Defaults Upon Senior Securities...............................14
Item 4. Submission of Matters to a Vote of Security Holders...........14
Item 5. Other Information.............................................14
Item 6. Exhibits and Reports on Form 8-K..............................14
Signatures...........................................................15
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 2, February 1,
1997 1997
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $16,902,000 $22,926,000
Due from credit card companies and other receivables, net 2,627,800 2,299,400
Inventory 33,271,000 28,636,600
Prepaid expenses and other current assets 2,919,200 3,548,300
Prepaid inventory purchases 5,633,600 2,047,100
---------- ----------
Total current assets 61,353,600 59,457,400
Property and equipment, less accumulated depreciation and
amortization 31,660,800 33,452,200
Loans to shareholders 228,400 228,400
Rental deposits and other noncurrent assets 2,735,900 2,258,700
----------- -----------
$95,978,700 $95,396,700
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 4,530,400 3,801,800
Accrued expenses and other current liabilities 4,179,200 4,731,500
Current maturities of capital lease obligations 1,358,300 1,396,500
----------- ---------
Total current liabilities 10,067,900 9,929,800
Capital lease obligations, less current maturities 1,274,800 2,264,000
Deferred rent and other 4,244,500 4,580,300
Liabilities subject to settlement 64,309,000 63,367,900
----------- ----------
79,896,200 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) (22,186,600) (23,014,400)
----------- -----------
Total shareholders' equity 16,082,500 15,254,700
----------- ----------
$95,978,700 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
AUG. 2, 1997 AUG. 3, 1996
------------ ------------
<S> <C> <C>
Net sales $50,465,600 45,298,200
Cost of goods sold 32,465,900 28,701,700
---------- ----------
Gross profit 17,999,700 16,596,500
Selling, general and administrative expenses 16,092,000 16,338,400
---------- ----------
Income from operations 1,907,700 258,100
Reorganization items:
Professional fees 1,518,800 1,100,100
Interest income (250,600) (39,600)
---------- ---------
Net reorganization items 1,268,200 1,060,500
Interest expense and other income, net (excluding
contractual interest of approximately $701,200 for the
second quarter of fiscal 1997 and 1996, respectively) (29,600) (14,800)
---------- ----------
Income (loss) before income taxes 669,100 (787,600)
Income taxes - -
---------- ----------
Net income (loss) $ 669,100 $ (787,600)
========== ==========
Net income (loss) per share $ 0.06 (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 TWENTY-SIX WEEKS ENDED
AUG. 2, 1997 AUG. 3, 1996
------------ ------------
<S> <C> <C>
Net sales $94,394,500 91,695,600
Cost of goods sold 60,463,700 61,881,500
----------- ----------
Gross profit 33,930,800 29,814,100
Selling, general and administrative expenses 31,154,100 32,436,400
----------- ----------
Income (loss) from operations 2,776,700 (2,622,300)
Reorganization items:
Professional fees 2,450,200 2,426,200
Interest income (528,400) (80,000)
----------- ---------
Net reorganization items 1,921,800 2,346,200
Interest expense and other income, net (excluding
contractual interest of approximately $1,402,400 and
$1,382,800, for the twenty-six weeks of fiscal 1997 and (26,800) 27,800
1996, respectively)
Income (loss) before income taxes 881,700 (4,996,300)
Income taxes 53,900 -
----------- ----------
Net income (loss) $ 827,800 (4,996,300)
=========== ==========
Net income (loss) per share $ 0.08 (0.46)
=========== ==========
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 TWENTY-SIX WEEKS ENDED
AUG. 2, 1997 AUG. 3, 1996
------------ ------------
<S> <C> <C>
Operating activities
Net income (loss) $ 827,800 $(4,996,300)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,146,800 2,592,900
Deferred rent and other (335,800) 397,800
Changes in operating assets and liabilities:
(Increase) decrease in receivables (328,400) 120,600
(Increase) decrease in inventory (4,634,400) 4,393,800
Increase in prepaid expenses and other current assets (2,957,400) (2,030,000)
(Increase) decrease in rental deposits and other non-current
assets (477,200) 989,200
Increase in payables, accrued expenses and liabilities subject
to settlement 1,112,000 2,162,600
Changes due to reorganization activities:
Reorganization costs 1,921,800 2,346,200
Payment of reorganization costs (1,916,400) (1,162,400)
----------- ----------
Total adjustments (5,469,000) 9,810,700
----------- ----------
Net cash (used in) provided by operating activities (4,641,200) 4,814,400
Cash flow used in investing activities:
Capital expenditures (355,400) (499,500)
----------- ----------
Net cash used in investing activities (355,400) (499,500)
Cash flow used in financing activities:
Repayment of capital leases (1,027,400) (1,081,300)
----------- ----------
Net cash used in financing activities (1,027,400) (1,081,300)
Net (decrease) increase in cash and cash equivalents (6,024,000) 3,233,600
Cash and cash equivalents at beginning of period
22,926,000 1,385,400
----------- ----------
Cash and cash equivalents at end of period $16,902,000 $4,619,000
=========== ==========
</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 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 operating losses, and current economic conditions, such realization of
assets and liquidation of liabilities are subject to significant uncertainties.
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 and will continue to incur substantial reorganization
costs. The Company's ability to continue as a going concern is dependent upon
the confirmation of a plan of reorganization by the Bankruptcy Court, the
ability to secure adequate exit financing and to maintain compliance with all
debt covenants under the post-petition financing, combined with the achievement
of profitable operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
5
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
A plan of reorganization, as finally approved by the Bankruptcy Court,
and/or resolution of the Company's objections to claims could materially change
the currently recorded amounts of assets and liabilities. 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 the 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.
The Company filed its Plan of Reorganization and accompanying Disclosure
Statement on June 23, 1997, and filed its First Amended Plan of Reorganization
and accompanying First Amended Disclosure Statement on July 30, 1997. The terms
of the First Amended Plan call for the full recovery to creditors of their
allowed claims through a combination of cash and equity in the reorganized
Company. The funding for the settlement of the outstanding liabilities will be
through a combination of cash on hand, a rights offering to existing
shareholders, a term loan and a draw on revolving credit facility from Foothill
Capital Corporation and the issuance of common stock to the creditors. A
Bankruptcy Court hearing was held on approval of the First Amended Disclosure
Statement on August 21, 1997, and the Company is in the process of submitting
revised documents.
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 or may subsequently be rejected in the Chapter 11 proceedings.
The Court established September 3, 1996 (the "Bar Date") as the deadline for
filing proofs of claim in the Chapter 11 proceedings. The Company notified all
known claimants for the purposes of identifying all pre-petition claims against
the Company.
6
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 intends to request the Bankruptcy Court to approve reductions of, or to
expunge, overstated, duplicate or amended claims. The ultimate amount of and
settlement terms for such liabilities will be subject to an approved plan of
reorganization and, accordingly, are not presently determinable. 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.
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 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 (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 credit card sales in the three days
preceeding the Chapter 11 filing which have been separated from the Company's
operating bank accounts for the potential benefit of the bank lenders if it is
ultimately determined that they have valid liens.
The Company's fiscal 1995 loss was carried back and generated a post
petition refund of previously paid taxes of approximately $5,800,000. 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
refund would be applied as a reduction of the Company's pre-petition liability
to the lenders. Included in Cash and cash equivalents are the proceeds from the
tax refund which have been separated from operating bank accounts for the
potential benefit of the bank lenders, if it is ultimately determined that they
have valid liens.
7
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
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.
6. Net Income (Loss) Per Share
Net income (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 income (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 primary earnings
per share, the dilutive effect of stock options, if any, will be excluded. The
impact of StatNet income (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 income (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 primary
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
<PAGE>
TODAY'S MAN, INC.
(Debtor-In-Possession)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
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.
9
<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 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 operating losses, and current economic conditions, such realization of
assets and liquidation of liabilities are subject to significant uncertainties.
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 and will continue to incur substantial reorganization
costs. The Company's ability to continue as a going concern is dependent upon
the confirmation of a plan of reorganization by the Bankruptcy Court, the
ability to secure adequate exit financing and to maintain compliance with all
debt covenants under the post-petition financing, combined with the achievement
of profitable operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
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.
The following table sets forth, as a percentage of net sales, certain
items appearing in the consolidated statements of operations for the thirteen
and twenty-six week periods ended August 2, 1997 and August 3, 1996,
respectively.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
THIRTEEN AND TWENTY-SIX WEEKS ENDED
AUG. 2, AUG. 3, AUG. 2, AUG. 3,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 64.3 63.4 64.1 67.5
----- ----- ----- -----
Gross profit 35.7 36.6 35.9 32.5
Selling, general and administrative expenses 31.9 36.1 33.0 35.4
----- ----- ----- -----
Income (loss) from operations 3.8 0.5 2.9 (2.9)
Reorganization items, net 2.5 2.3 2.0 2.6
Interest expense and other income, net - - - -
----- ----- ----- -----
Income (loss) before income taxes 1.3 (1.8) 0.9 (5.4
Income taxes - - - -
----- ----- ----- -----
Net income (loss) 1.3% (1.8)% 0.9 (5.4)%
===== ===== ===== =====
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
THIRTEEN WEEKS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996:
NET SALES. Net sales increased $5,167,400 or 11.4% in the second quarter of
fiscal 1997 compared to the year ago period. Comparable store sales increased
11.4%. This increase was due to better in-stock positions, enhanced merchandise
assortment and the fact that licensed shoe departments were in operation in all
locations in fiscal 1997, but in only nine locations during the second quarter
of fiscal 1996. Sales from licensed shoe departments increased $1,223,400 to
$3,060,400 for the second quarter of fiscal 1997. There were 25 superstores in
operation at August 2, 1997 and at August 3, 1996.
GROSS PROFIT. Gross profit increased in dollars by $1,403,200 to $17,999,700 but
decreased as a percentage of net sales to 35.7% for the second quarter of fiscal
1997 from 36.6% in the year ago period. The improvement in dollars in gross
margin is primarily attributable to the increase in net sales and the Company's
ability to operate with less promotional sales and markdowns than the year ago
period. The decrease as a percentage of net sales reflects 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 $246,400 or 1.5% in the second quarter of
fiscal 1997, and decreased as a percentage of net sales to 31.9% from 36.1% in
the second quarter of fiscal 1996. Store payroll, occupancy and advertising
costs decreased by $625,900 or 6.0% in the second quarter of fiscal 1997, and
represented 19.3% of net sales compared with 22.9% of net sales for the year ago
period. This decrease was offset by increases in the Company's credit card
processing costs.
INTEREST EXPENSE, AND OTHER INCOME, NET. Interest expense, and other income,
net, increased by $14,800 from the second quarter of fiscal 1996. 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, 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 increased by
$207,700 from the prior year due to increased professional fees of $418,700
offset by an increase in interest income due to higher invested balances.
TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996:
NET SALES. Net sales increased $2,698,900 or 2.9% in the first six months of
fiscal 1997 compared to the year ago period. Comparable store sales increased
7.5%. The increase is the result of better in-stock positions, 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 six
months of fiscal 1996. 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
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
increased $3,041,900 to $5,820,500 for the first six months of fiscal 1997.
There were 25 superstores in operation at August 2, 1997.
GROSS PROFIT. Gross profit as a percentage of net sales increased to 35.9% for
the first six months of fiscal 1997 from 32.5% 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
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 $1,282,300 or 4.0% in the first six months of
fiscal 1997, and decreased as a percentage of net sales to 33.0% from 35.4% in
the first six months of fiscal 1996. The decrease was the result of the cost
savings obtained by operating eleven fewer locations. Store payroll, occupancy
and advertising costs decreased by $1,450,500 or 7.0% in the first six months of
fiscal 1997, and represented 20.4% of net sales compared with 22.6% of net sales
for the year ago period. This decrease was offset by increases in the Company's
credit card processing costs.
INTEREST EXPENSE, AND OTHER INCOME, NET. Interest expense, and other income,
net, increased by $54,600 from the first six months of fiscal 1996. 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, 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
$424,400 from the prior year due to an increase in interest income due to higher
average invested balances.
12
<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. 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. Other liabilities may
arise or be subject to compromise as a result of rejection of executory
contracts and unexpired leases, or the Bankruptcy Court's resolution of claims
for contingencies and other disputed amounts.
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 certain property and
equipment under lease, principal and interest payments on pre-petition 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 the plan of reorganization proposed by the Company will be approved by
the Creditors or confirmed by the Bankruptcy Court.
The Company's primary sources of working capital are cash flow from
operations. At August 2, 1997, the Company had working capital of $51,285,700 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.
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, the Company cannot predict the outcome of the
Chapter 11 filing, in general, or its effect on the future business of the
Company or on the ultimate interests of creditors or shareholders.
The Company believes that the sources of capital above and internally generated
funds will be adequate to meet the Company's anticipated needs during the period
it is in bankruptcy; 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 filed its Plan of Reorganization
and accompanying Disclosure Statement on June 23, 1997, and filed its First
Amended Plan of Reorganization and accompanying First Amended Disclosure
Statement on July 30, 1997. The terms of the First Amended Plan call for the
full recovery to creditors of their allowed claims through a combination of cash
and equity in the reorganized Company. The funding for the settlement of the
outstanding liabilities will be through a combination of cash on hand, a rights
offering to existing shareholders, a term loan and a draw on revolving credit
facility from Foothill Capital Corporation and the issuance of common stock to
the creditors. A Bankruptcy Court hearing was held on approval of the First
Amended Disclosure Statement on August 21, 1997, and the Company is in the
process of submitting revised documents.
13
<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
14
<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: September 16, 1997 /s/ David Feld
-----------------------------------
David Feld
Chairman of the Board and
Chief Executive Officer
Date: September 16, 1997 /s/ Frank E. Johnson
-----------------------------------
Frank E. Johnson
Executive Vice President, Chief Financial
Officer and Treasurer
Principal Financial Officer
Date: September 16, 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 August 2, 1997 and the Consolidated
Statements of Operations for the twenty-six weeks ended August 2, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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<NAME> Today's Man Inc.
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