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 October 31, 1998
-------------------------------------------------
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
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Today's Man, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-1743137
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(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
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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 .
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APPLICABLE ONLY TO REGISTRANTS INVOLVED IN A BANKRUPTCY DURING THE PRECEDING
FIVE YEARS
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO .
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27,278,783 common shares were outstanding as of December 10, 1998.
<PAGE>
TODAY'S MAN INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Financial Statements - Unaudited
Consolidated Balance Sheets
October 31, 1998 and January 31, 1998....................................................1
Consolidated Statements of Operations
Thirteen weeks ended October 31, 1998 and November 1, 1997...............................2
Consolidated Statements of Operations
Thirty-nine weeks ended October 31, 1998 and November 1, 1997............................3
Consolidated Statements of Cash Flows
Thirty-nine weeks ended October 31, 1998 and November 1, 1997............................4
Notes to Consolidated Financial Statements.............................................5-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................................8-11
Item 3. Quantitative and Qualitative Disclosures about Market Risks.............................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................12
Item 2. Changes in Securities and Use of Proceeds...............................................12
Item 3. Defaults Upon Senior Securities.........................................................12
Item 4. Submission of Matters to a Vote of Security Holders.....................................12
Item 5. Other Information.......................................................................12
Item 6. Exhibits and Reports on Form 8-K........................................................12
Signatures.......................................................................................13
</TABLE>
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, January 31,
----------- -----------
1998 1998
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 125,000 $ 219,500
Cash restricted for pre-petition settlements 2,285,000 11,005,500
Due from credit card companies and other receivables, net 2,028,500 2,136,400
Inventory 42,944,500 34,652,100
Prepaid expenses and other current assets 4,137,100 2,753,600
Prepaid inventory purchases 3,873,700 2,611,400
------------------- --------------------
Total current assets 55,393,800 53,378,500
Property and equipment, less accumulated depreciation and
amortization 32,168,900 31,553,600
Loans to shareholders 228,400 228,400
Rental deposits and other noncurrent assets 1,477,000 2,003,500
------------------- --------------------
$89,268,100 $87,164,000
=================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 5,970,800 $ 7,670,800
Accrued expenses and other current liabilities 5,837,900 4,784,900
Current portion of term loan - 4,416,700
Liabilities subject to settlement 328,300 8,987,600
Current maturities of capital lease obligations 1,234,200 1,226,600
------------------- --------------------
Total current liabilities 13,371,200 27,086,600
Capital lease obligations, less current maturities - 1,037,200
Obligations under revolving credit facility 11,875,000 -
Deferred rent and other 5,381,000 4,489,000
Term loan, less current maturities 9,194,400 7,751,700
------------------- --------------------
39,821,600 40,364,500
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized, none issued
Common stock, no par value, 100,000,000 shares authorized,
27,278,783 and 27,274,588 shares issued and outstanding at
October 31, 1998 and January 31, 1998 respectively, net of
accumulated retained deficit of $27,316,200 as of January 31,
1998
47,787,300 46,799,500
Retained earnings (from February 1, 1998) 1,659,200 -
------------------- --------------------
Total shareholders' equity 49,446,500 46,799,500
------------------- --------------------
$ 89,268,100 $ 87,164,000
=================== ====================
</TABLE>
See accompanying notes.
1
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THIRTEEN WEEKS ENDED
Oct. 31, Nov. 1,
-------- -------
1998 1997
---- ----
<S> <C> <C>
Net sales $48,269,900 $48,457,400
Cost of goods sold 29,334,300 30,618,400
------------- --------------
Gross profit 18,935,600 17,839,000
Selling, general and administrative expenses 16,933,900 15,868,700
------------- --------------
Income from operations 2,001,700 1,970,300
Reorganization items:
Professional fees - 1,385,500
Interest income - (412,900)
------------- --------------
Net reorganization items - 972,600
Interest expense and other income, net 1,172,800 7,265,600
------------- --------------
Income (loss) before income taxes 828,900 (6,267,900)
Income taxes 307,000 -
------------- --------------
Net income (loss) $ 521,900 $(6,267,900)
============= ==============
Earnings per share - basic $ 0.02 $ (0.58)
============= ==============
Weighted average shares outstanding $27,278,687 $10,861,005
Earnings per share, assuming dilution 0.02 (0.58)
============= ==============
Weighted average shares outstanding, assuming dilution 27,278,687 10,876,478
</TABLE>
See accompanying notes.
2
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THIRTY-NINE WEEKS ENDED
Oct. 31, Nov. 1,
-------- -------
1998 1997
---- ----
<S> <C> <C>
Net sales $146,103,400 $142,851,900
Cost of goods sold 92,474,900 91,082,100
-------------- -------------
Gross profit 53,628,500 51,769,800
Selling, general and administrative expenses 48,289,800 47,022,800
-------------- -------------
Income from operations 5,338,700 4,747,000
Reorganization items:
Professional fees - 3,835,700
Interest income - (941,300)
-------------- -------------
Net reorganization items - 2,894,400
Interest expense and other income, net 2,704,500 7,292,700
-------------- -------------
Income (loss) before income taxes 2,634,200 (5,440,100)
Income taxes 975,000 -
-------------- -------------
Net income (loss) $ 1,659,200 $(5,440,100)
============== =============
Earnings per share - basic $ 0.06 $ (0.50)
============== =============
Weighted average shares outstanding 27,281,646 10,861,005
Earnings per share, assuming dilution $ 0.06 $ (0.50)
============== =============
Weighted average shares outstanding, assuming dilution 27,281,646 10,876,049
</TABLE>
See accompanying notes.
3
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THIRTY-NINE WEEKS ENDED
Oct. 31, Nov. 1,
-------- -------
1998 1997
---- ----
<S> <C> <C>
Operating activities
Net income $ 1,659,200 $ (5,440,100)
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 2,256,400 3,219,400
Accretion of debt discount 713,600 --
Deferred credits 892,000 (228,700)
Tax benefit of net operating loss carryforward 975,000 --
Changes in operating assets and liabilities:
Decrease (increase) in receivables 107,900 (332,500)
Increase in inventory (8,292,400) (16,321,400)
Increase in prepaid expenses and other current assets (2,645,800) (1,050,800)
Decrease (increase) in rental deposits and other non current 526,500 (502,100)
assets
Decrease in payables, accrued expenses and liabilities subject to
settlement 9,306,300 11,462,000
Decrease in restricted cash 8,720,500 --
Changes due to reorganization activities:
Reorganization costs -- 2,974,400
Payment of reorganization costs -- (2,912,700)
------------ ------------
Total adjustments (6,052,600) (3,692,400)
------------ ------------
Net cash used in operating activities (4,393,400) (9,132,500)
Cash flow used in investing activities:
Capital expenditures (2,871,700) (784,500)
------------ ------------
Net cash used in investing activities (2,871,700) (784,500)
Cash flow provided by (used in) financing activities:
Repayment of capital leases (1,029,600) (1,433,400)
Borrowings under revolving credit facility 47,885,000 --
Repayment of term loan and revolving credit facility (39,697,600) --
Proceeds from exercise of stock options and common stock purchase
warrants 12,800 --
------------ ------------
Net cash provided by (used in) financing activities 7,170,600 (1,433,400)
Net increase (decrease) in cash and cash equivalents (94,500) (11,350,400)
Cash and cash equivalents at beginning of period 219,500 22,926,000
------------ ------------
Cash and cash equivalents at end of period $ 125,000 $ 11,575,600
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Bankruptcy Reorganization
Reorganization Proceedings. On December 12, 1997, the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court")
entered an order confirming the Company's Second Amended Joint Plan of
Reorganization (the "Reorganization Plan") proposed by Today's Man, Inc.
("the Company") and certain of its subsidiaries. On December 31, 1997, the
Reorganization Plan became effective and the Company emerged from
bankruptcy reorganization proceedings. Those proceedings had begun on
February 2, 1996 when the Company and certain of its subsidiaries filed
voluntary petitions in seeking to reorganize under Chapter 11 of the U.S.
Bankruptcy Code. The Chapter 11 filing was the result of banking
difficulties, operating losses, deterioration of vendor support, and cash
flow problems. The Company operated as a debtor-in-possession under
supervision of the Bankruptcy Court for the duration of those proceedings
and, as such, was prohibited from paying pre-petition liabilities or
engaging in transactions outside of the ordinary course of business without
the approval of the Bankruptcy Court.
The Reorganization Plan provided for the payment in full of allowed
claims, including the payment of post-petition interest. The Reorganization
Plan was funded by an equity infusion of approximately $16.3 million raised
from an Equity Investment Group led by Mr. David Feld, Chairman of the
Board, President, and Chief Executive Officer of the Company and a rights
offering to existing shareholders, including a credit of $3.3 million to
Mr. David Feld in respect of the cash distribution portion of his
subordinated claim; the proceeds from a $12.5 million term loan and a draw
of approximately $4.0 million on a new $30.0 million revolving credit
facility from Foothill Capital Corporation; and approximately $23.7 million
in cash on hand.
Pursuant to the Reorganization Plan, the Company paid an aggregate of
$53.3 million and issued 9,920,568 shares of Common Stock to its creditors
in settlement of $76.2 million of outstanding indebtedness, including
post-petition interest. Under the Reorganization Plan, holders of the
Company's Common Stock received for each share of old Common Stock: (1) one
share of new Common Stock and (2) 0.5 of a Common Stock Purchase Warrant
("Warrant"). Each whole Warrant entitles the holder to purchase one share
of New Common Stock at an exercise price of $2.70 per share at any time on
or before December 31, 1999. The additional shares issued pursuant to the
Reorganization Plan increased the total shares outstanding to 27,274,588 as
of January 31, 1998. A total of 5,430,503 Warrants were issued to the
Company's pre-reorganization shareholders.
Professional fees and other costs directly related to the bankruptcy
proceedings were expensed as incurred, and have been reflected in the
Consolidated Statement of Operations as "Reorganization items."
Reorganization items consisted primarily of fees paid to legal and
financial advisors of the Company and the Official Committee of Unsecured
Creditors. In addition, these expenses include incentives paid to employees
who remained with the Company during the Bankruptcy proceedings. Interest
income earned by the Company during the Bankruptcy proceeding has been
reported as a reduction of Reorganization items.
As of October 31, 1998, approximately $328,300 in claims remained to
be distributed. These distributions are expected to be made upon receipt of
certified taxpayer identification numbers.
5
<PAGE>
TODAY'S MAN, INC.
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) considered necessary
for a fair presentation have been included. Due to the seasonal nature of the
Company's sales, operating results for the interim period are not necessarily
indicative of results that may be expected for the fiscal year ending January
30, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto which are included in the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1998.
As of January 31, 1998, the Company effected a quasi-reorganization through
the application of $27,316,200 of its $74,115,700 Common Stock account to
eliminate its retained deficit. The Company's Board of Directors decided to
effect a quasi-reorganization given that the Company had completed its
restructuring, obtained long-term financing and successfully emerged from
bankruptcy. The Company's retained deficit at January 31, 1998 was related to
operations that resulted in the restructuring of the Company and the losses
incurred during the Chapter 11 proceeding and was not, in management's view,
reflective of the Company's current financial condition.
3. Use of Estimates
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.
4. Income Taxes
As a result of the Company's quasi-reorganization, subsequent recognition
of any tax benefits from deductible temporary differences and net operating loss
carryforwards that existed at January 31, 1998 will result in credits to common
stock, rather than a reduction of income tax expense. As of October 31, 1998,
the Company recorded a credit to Common Stock of $975,000 to reflect the tax
benefit of the net operating loss carryforward.
5. Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128
Earnings per Share. Statement 128 replaced the calculations of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effect of outstanding stock options. Earnings per common share amounts for all
periods have been presented in accordance with Statement 128 requirements.
6
<PAGE>
TODAY'S MAN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income and Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information, both of which are required to
be adopted in fiscal 1998. Statement 130 requires financial statement reporting
of all non-owner related changes in equity for the periods being presented.
Statement 131 requires disclosure of revenue, earnings and other financial
information pertaining to business segments by which a company is managed as
well as factors used by management to determine segments. The Company believes
adoption of both Statements 130 and 131 will not have a material effect on its
financial position or results of operations; however, management is still
assessing the impact of these statements on its financial statement disclosures.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
January 31, 1998, 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.
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 1998, new store openings, estimated costs of new systems, and the costs to
address year 2000 compliance issues, 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 arising from the
Company's growth strategy, small store base and geographic concentration,
declining unit sales of men's tailored clothing, control by principal
shareholder, year 2000 compliance issues, the Company's relationship with its
suppliers, foreign currency fluctuations, dependence on senior management,
seasonality and general economic conditions and competition 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. See "Investment
Considerations," above, for instructions on how to receive a copy of the
Company's Annual Report.
RESULTS OF OPERATIONS:
The following table sets forth, as a percentage of net sales, certain items
appearing in the consolidated statements of operations for the thirteen week and
thirty-nine periods ended October 31, 1998 and November 1, 1997, respectively.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
1998 1997 1998 1997
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 60.8 63.2 63.3 63.8
---------------------------- ----------------------------
Gross profit 39.2 36.8 36.7 36.2
Selling, general and administrative expenses 35.1 32.7 33.0 32.9
---------------------------- ----------------------------
Income from operations 4.1 4.1 3.7 3.3
Reorganization items, net - 2.0 - 2.0
Interest expense and other income, net 2.4 15.0 1.9 5.1
---------------------------- ----------------------------
Income before income taxes 1.7 (12.9) 1.8 (3.8)
Income taxes 0.6 - 0.7 -
---------------------------- ----------------------------
Net income 1.1% (12.9%) 1.1% (3.8%)
============================ ============================
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
THIRTEEN WEEKS ENDED OCTOBER 31, 1998 AND NOVEMBER 1, 1997:
NET SALES. Net sales decreased $187,500 or 0.4% in the third quarter of fiscal
1998 compared to the year ago period. Comparative store sales were essentially
unchanged, decreasing 0.4%. There were 25 superstores in operation at October
31, 1998 and November 1, 1997, respectively.
GROSS PROFIT. Gross profit as a percentage of net sales increased to 39.2% for
the third quarter 1998 compared to 36.8% for third quarter 1997. The increase in
the gross profit percentage is partly a result of the elimination during the
third quarter of 1998 of the initial 10% off the first purchase when using the
Company's private label card.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1,065,200 or 6.7% in the third quarter of
fiscal 1998, and increased as a percentage of sales to 35.1% from 32.7% in the
third quarter of fiscal 1997. The increase is primarily due to increased
advertising costs associated with the Company's direct mail campaign. Store
payroll, occupancy and advertising costs increased by $711,100 or 7.3% in the
third quarter of fiscal 1998, and represented 21.6% of sales compared with 20.0%
of sales for the year ago period.
INTEREST EXPENSE AND OTHER INCOME, NET. Interest expense, interest income and
other expense, net decreased by $6,092,800 for the third quarter of fiscal 1998.
The decrease is a result of the one-time charge taken in the third quarter of
1997 of $7,264,000 to reflect the payments made in connection with the Company's
exit from Chapter 11. Additionally, interest expense in the third quarter of
1998 includes a penalty incurred due to termination of the revolving credit
facility with Foothill Capital Corporation. The Company had average borrowings
under its revolving credit facility of $11,738,700 during the quarter ended
October 31, 1998.
REORGANIZATION ITEMS, NET. For the 13 week period ended November 1, 1997,
reorganization items consisted of legal and financial advisory services fees
incurred by the Company and the official Creditors' Committee in the
administration of the Chapter 11 proceedings. Also included in this amount was
the charge for the Retention Bonus Plan, as well as interest income earned on
accumulated cash balances. No reorganization items were incurred during the
third quarter of fiscal 1998.
THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998 AND NOVEMBER 1, 1997:
NET SALES. Net sales increased $3,251,500 or 2.3% for the first nine months of
fiscal 1998 compared to the year ago period. Comparative store sales increased
2.3%. The increase in net sales is a result of the continuing efforts to
transition merchandise from season to season more effectively, maintaining
appropriate stock levels through replenishment and continued consumer acceptance
of the values expressed in the Today's Man brand. There were 25 superstores in
operation at October 31, 1998 and November 1, 1997, respectively.
GROSS PROFIT. Gross profit as a percentage of net sales increased to 36.7% for
the first nine months 1998 compared to 36.2% for the first nine months 1997. The
increase in gross profit percentage is a result of fewer markdowns due to better
timing of merchandise receipts and the increased use of replenishment
merchandise.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1,267,000 or 2.7% in the first nine months of
fiscal 1998, and increased slightly as a percentage of sales to 33.0% from 32.9%
in the third quarter of fiscal 1997. The increase is due to advertising costs
related to our direct mail campaign. Additionally, the cost of the Today's Man
Rewards Program increased approximately $500,000 over the year ago period. Store
payroll, occupancy and advertising costs increased $607,700 or 2.1% for the
first nine months of fiscal 1998 yet were a consistent 20.3% of sales for both
nine month periods. Offsetting these increases is a decrease in credit card
costs resulting from a new contract with our private label credit card provider.
INTEREST EXPENSE AND OTHER INCOME, NET. Interest expense, interest income and
other expense, net decreased by $4,588,200 from the first nine months of fiscal
1998. During the third quarter of 1997, the Company recorded $7,264,000 in
Chapter 11 interest expense. Included in 1998 is refinancing charges of $405,000
and interest expense of $2,510,000. The Company had average borrowings under its
revolving credit facility of $8,463,200 during the nine months ended October 31,
1998.
REORGANIZATION ITEMS, NET. For the 39 week period ended November 1, 1997,
reorganization items consisted of legal and financial advisory services fees
incurred by the Company and the official Creditors' Committee in the
administration of the Chapter 11 proceedings. Also included in this amount was
the charge for the Retention Bonus Plan, as well as interest income earned on
accumulated cash balances. No reorganization items were incurred during the
third quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 1997, the Company entered into a Loan and Security
Agreement with Foothill Capital Corporation ("Foothill"), individually and as
agent. The Loan and Security Agreement provided for a $12.5 million term loan
and a $30.0 million revolving credit facility. The Company granted Foothill
Capital Corporation a lien on its tangible and intangible assets to secure this
term loan and revolving credit facility. Proceeds from these loans were used to
fund a portion of the Company's Plan of Reorganization. There were borrowings of
$11,875,000 outstanding under the Foothill revolving credit facility at October
31, 1998. Additionally, the Company had approximately $7,656,800 in outstanding
letters of credit at October 31, 1998.
On December 4, 1998, the Company entered into a Loan and Security Agreement
with Mellon Bank, N.A., ("Mellon") individually and as agent. The Loan and
Security Agreement provides for a $45.0 million revolving credit facility. The
Company has granted Mellon a lien on its tangible and intangible assets to
secure this revolving credit facility. Proceeds from this loan were used to
refinance the Company's previous revolving credit facility and term loan from
Foothill. In accordance with the early termination provisions of the Foothill
loan document, the Company paid an early termination fee of $720,000 to
Foothill.
The Mellon revolving credit facility bears interest at the option of the
Company at prime (7.75% at November 30, 1998) or LIBOR (5.28% at November 30,
1998) plus a margin ranging from 1.75% to 3.25% depending upon the Company's
EBITDA has a term of five years and includes a $20.0 million sublimit for letter
of credit advances. Availability under the revolver is based on a formula of
inventory and credit card receivables, less applicable reserves.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The Mellon Loan and Security Agreement contains customary financial
covenants including tangible net worth, indebtedness to tangible net worth and
fixed charge coverage ratios, and limitations new store openings and capital
expenditure as well as restrictions on the payment of dividends. The Company was
in compliance with all covenants as of and for the quarter ended October 31,
1998.
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 1999.
The Company's primary sources of working capital are cash flow from
operations and borrowings under the revolving credit facility. At October 31,
1998, the Company had working capital of $42,022,600 as compared with
$26,291,900 at January 31, 1998.
Year 2000 Compliance
The Company is conducting a comprehensive review of its information
technology and non information technological systems to determine which systems
will require modification to enable proper processing of transactions related to
the year 2000 and beyond. The primary information systems upon which the Company
relies for its daily operations are the point of sale register systems, its
merchandising system and its general ledger accounting system. The Company has
completed testing of its point of sale and existing general ledger system and
concluded that these systems are capable of processing transactions in the year
2000 and beyond. The Company's merchandising system will require remediation
that is estimated to cost less than $250,000. A further and complete analysis of
the Company's internal systems has indicated that despite the systems' ability
to properly process transactions related to the year 2000 and beyond the
Company's overall operations would be better served by replacing the existing
general ledger and merchandising systems. As of October 31, 1998, the Company
has substantially completed the installation of its new general ledger system.
During November and December of 1998 testing and any modifications will be made
to ensure that the general ledger will be able to be implemented as of January
31, 1999 the first day of Fiscal 1999. The Company's new merchandising system
installation and testing continues and management believes that the Year 2000
compliant system will be fully installed, tested and functioning by the end of
the second quarter of Fiscal 1999. The Company estimates that it will spend
between $3.2 million and $4.5 million of budgeted funds through the end of the
fiscal year ending January 30, 2000 ("Fiscal 1999") to replace its existing
merchandise, and financial accounting systems. Included in the capital
expenditures for the nine months ended October 31, 1998 is approximately $2.4
million of new system costs. One of the primary requirements imposed by the
Company on its new systems vendors 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.
In an effort to determine and ensure that there would be no material and
adverse impact on the results of the Company's operations caused by non
informational technological systems an internal committee was developed using a
cross section of all disciplines within the Company. All of the Company's
vendors and suppliers were polled and asked to evaluate and confirm their
individual company's abilities to process transactions in the year 2000 and
beyond. This committee, which reports directly to the management committee of
the organization, is currently evaluating responses from vendors and anticipates
preliminarily identifying all mission critical non information technological
systems by the end of this fiscal year. These systems would then be tested and
contingency plans would be developed for those systems deemed to be
non-compliant. It is the committee's intention to complete its testing and
contingency planning before September 30, 1999.
11
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
None - not applicable
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None - not applicable
Item 2. Changes in Securities and Use of Proceeds
Since January 1, 1998, the Company has issued 2,575 shares pursuant to the
exercise of Common Stock Purchase Warrants. Such shares were issued without
registration under the Securities Act of 1933 in reliance on Section 1145 of the
Bankruptcy Code and the Bankruptcy Court Order confirming the Company's Plan of
Reorganization.
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
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K
None - not applicable
12
<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 11, 1998 /s/David Feld
------------------------------------------
David Feld
Chairman of the Board and
Chief Executive Officer
Date: December 11, 1998 /s/Frank E. Johnson
------------------------------------------
Frank E. Johnson
Executive Vice President, Chief Financial
Officer and Treasurer
Principal Financial Officer
Date: December 11, 1998 /s/Barry S. Pine
------------------------------------------
Barry S. Pine
Vice President and Controller
Principal Accounting Officer
13
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1998
<CASH> 2,410,500
<SECURITIES> 0
<RECEIVABLES> 2,063,500
<ALLOWANCES> 35,000
<INVENTORY> 42,944,500
<CURRENT-ASSETS> 55,393,800
<PP&E> 49,497,600
<DEPRECIATION> (17,328,700)
<TOTAL-ASSETS> 89,268,100
<CURRENT-LIABILITIES> 13,371,200
<BONDS> 0
0
0
<COMMON> 47,787,300
<OTHER-SE> 1,659,200
<TOTAL-LIABILITY-AND-EQUITY> 89,268,100
<SALES> 146,103,400
<TOTAL-REVENUES> 146,103,400
<CGS> 92,474,900
<TOTAL-COSTS> 92,474,900
<OTHER-EXPENSES> 48,289,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,704,500
<INCOME-PRETAX> 2,634,200
<INCOME-TAX> 975,000
<INCOME-CONTINUING> 1,659,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,659,200
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
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