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 1, 1998
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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
------------------------------- -------------------
(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
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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 .
--- ---
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 .
--- ---
27,278,783 common shares were outstanding as of September 10, 1998.
<PAGE>
TODAY'S MAN, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I. FINANCIAL INFORMATION:
<S> <C> <C> <C>
Item 1. Condensed Consolidated Financial Statements - Unaudited
Consolidated Balance Sheets
August 1, 1998 and January 31, 1998......................................1
Consolidated Statements of Operations
Thirteen weeks ended August 1, 1998 and August 2, 1997...................2
Consolidated Statements of Operations
Twenty-six weeks ended August 1, 1998 and August 2, 1997.................3
Consolidated Statements of Cash Flows
Twenty-six weeks ended August 1, 1998 and August 2, 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.......................................13
Signatures......................................................................14
</TABLE>
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 1, January 31,
1998 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 325,000 $ 219,500
Cash restricted for pre-petition settlements 3,072,700 11,005,500
Due from credit card companies and other receivables, net 1,716,400 2,136,400
Inventory 36,652,600 34,652,100
Prepaid expenses and other current assets 3,507,000 2,753,600
Prepaid inventory purchases 3,659,800 2,611,400
----------- -----------
Total current assets 48,933,500 53,378,500
Property and equipment, less accumulated depreciation and amortization 29,843,100 31,553,600
Loans to shareholders 228,400 228,400
Rental deposits and other noncurrent assets 3,231,900 2,003,500
----------- -----------
$82,236,900 $87,164,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 3,656,900 $ 7,670,800
Accrued expenses and other current liabilities 3,046,400 4,784,900
Current portion of term loan 4,416,700 4,416,700
Liabilities subject to settlement 437,500 8,987,600
Obligations under revolving credit facility 9,905,000 --
Current maturities of capital lease obligations 1,226,600 1,226,600
----------- -----------
Total current liabilities 22,689,100 27,086,600
Capital lease obligations, less current maturities 346,400 1,037,200
Deferred rent and other 4,838,400 4,489,000
Term loan, less current maturities 5,745,400 7,751,700
----------- -----------
33,619,300 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
August 1, 1998 and January 31, 1998 respectively, net of
accumulated retained deficit of $27,316,200 as of January 31, 1998 46,812,300 46,799,500
Retained earnings (from February 1, 1998) 1,805,300 --
----------- -----------
Total shareholders' equity 48,617,600 46,799,500
----------- -----------
$82,236,900 $87,164,000
=========== ===========
</TABLE>
See accompanying notes.
1
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THIRTEEN WEEKS ENDED
------------------------------
August 1, August 2,
1998 1997
----------- -----------
<S> <C> <C>
Net sales $51,580,100 $50,465,600
Cost of goods sold 33,685,400 32,465,900
----------- -----------
Gross profit 17,894,700 17,999,700
Selling, general and administrative expenses 16,016,200 16,092,000
----------- -----------
Income from operations 1,878,500 1,907,700
Reorganization items:
Professional fees -- 1,518,800
Interest income -- (250,600)
----------- -----------
Net reorganization items -- 1,268,200
Interest expense and other income, net 774,500 (29,600)
----------- -----------
Income before income taxes 1,104,000 669,100
Income taxes 408,500 --
----------- -----------
Net income $ 695,500 $ 669,100
=========== ===========
Earnings per share - basic $ 0.03 $ 0.06
=========== ===========
Weighted average shares outstanding 27,278,687 10,861,005
Earnings per share, assuming dilution $ 0.03 $ 0.06
=========== ===========
Weighted average shares outstanding, assuming dilution 27,308,569 10,876,267
</TABLE>
See accompanying notes.
2
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR TWENTY-SIX WEEKS ENDED
------------------------------
August 1, August 2,
1998 1997
----------- -----------
<S> <C> <C>
Net sales $97,833,500 $94,394,500
Cost of goods sold 63,140,600 60,463,700
----------- -----------
Gross profit 34,692,900 33,930,800
Selling, general and administrative expenses 31,355,900 31,154,100
----------- -----------
Income from operations 3,337,000 2,776,700
Reorganization items:
Professional fees -- 2,450,200
Interest income -- (528,400)
----------- -----------
Net reorganization items -- 1,921,800
Interest expense and other income, net 1,531,700 27,100
----------- -----------
Income before income taxes 1,805,300 827,800
Income taxes 668,000 --
----------- -----------
Net income $ 1,137,300 $ 827,800
=========== ===========
Earnings per share - basic $ 0.04 $ 0.08
=========== ===========
Weighted average shares outstanding 27,277,485 10,861,005
Earnings per share, assuming dilution $ 0.04 $ 0.08
=========== ===========
Weighted average shares outstanding, assuming dilution 27,699,157 10,875,780
</TABLE>
See accompanying notes.
3
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR TWENTY-SIX WEEKS ENDED
---------------------------------
August 1, August 2,
1998 1997
------------ ------------
<S> <C> <C>
Operating activities
Net income $ 1,137,300 $ 827,800
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 1,906,500 2,146,800
Accretion of debt discount 202,100 --
Deferred credits 349,400 (335,800)
Tax benefit of net operating loss carryforward 668,000 --
Changes in operating assets and liabilities:
Decrease (increase) in receivables 420,000 (328,400)
Increase in inventory (2,000,500) (4,634,400)
Increase in prepaid expenses and other current assets (1,801,800) (2,957,400)
Increase in rental deposits and other non current assets (1,228,400) (477,200)
Decrease in payables, accrued expenses and liabilities subject to
settlement (14,302,500) 1,112,000
Decrease in restricted cash 7,932,800 --
Changes due to reorganization activities:
Reorganization costs -- 1,921,800
Payment of reorganization costs -- (1,916,400)
------------ ------------
Total adjustments (7,854,400) (5,469,000)
------------ ------------
Net cash used in operating activities (6,717,100) (4,641,200)
Cash flow used in investing activities:
Capital expenditures (196,000) (355,400)
------------ ------------
Net cash used in investing activities (196,000) (355,400)
Cash flow provided by (used in) financing activities:
Repayment of capital leases (690,800) (1,027,400)
Borrowings under revolving credit facility 35,315,000 --
Repayment of term loan and revolving credit facility (27,618,400) --
Proceeds from exercise of stock options and common stock purchase
warrants 12,800 --
------------ ------------
Net cash provided by (used in) financing activities 7,018,600 (1,027,400)
Net increase (decrease) in cash and cash equivalents 105,500 (6,024,000)
Cash and cash equivalents at beginning of period 219,500 22,926,000
------------ ------------
Cash and cash equivalents at end of period $ 325,000 $ 16,902,000
============ ============
</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 August 1, 1998, approximately $437,500 in claims remained to be
distributed. These distributions are expected to be made upon receipt of
certified tax payer 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. Year-to-date ending August
1, 1998, the Company recorded a credit to Common Stock of $668,000 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, 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
periods ended August 1, 1998 and August 2, 1997, respectively.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
THIRTEEN AND TWENTY-SIX WEEKS ENDED
---------------------------------------------------
Aug. 1, Aug. 2, Aug. 1, Aug. 2,
1998 1997 1998 1997
---------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 65.3 64.3 64.5 64.1
---------------------------------------------------
Gross profit 34.7 35.7 35.5 35.9
Selling, general and administrative expenses 31.1 31.9 32.1 33.0
---------------------------------------------------
Income from operations 3.6 3.8 3.4 2.9
Reorganization items, net -- 2.5 -- 2.0
Interest expense and other income, net 1.5 -- 1.6 --
---------------------------------------------------
Income before income taxes 2.1 1.3 1.8 0.9
Income taxes 0.8 -- 0.6 --
---------------------------------------------------
Net income 1.3% 1.3% 1.2% 0.9%
===================================================
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
THIRTEEN WEEKS ENDED AUGUST 1, 1998 AND AUGUST 2, 1997:
NET SALES. Net sales increased $1,114,500 or 2.2% in the second quarter of
fiscal 1998 compared to the year ago period. Comparative store sales increased
2.2%. 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 Today's Man branded merchandise. There were 25
superstores in operation at August 1, 1998 and August 2, 1997, respectively.
GROSS PROFIT. Gross profit as a percentage of net sales dropped to 34.7% for the
second quarter 1998 compared to 35.7% for second quarter 1997. The decrease in
the gross profit percentage is a result of more markdowns taken in response to a
more robust clearance event in July 1998 as compared to July 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $75,800 or 0.5% in the second quarter of
fiscal 1998, and decreased as a percentage of sales to 31.1% from 31.9% in the
second quarter of fiscal 1997. The decrease is primarily due to lower credit
costs resulting from a new contract with the Company's private label credit card
provider. Partially offsetting this decrease, store payroll, occupancy and
advertising costs increased by $470,100 or 5.0% in the second quarter of fiscal
1998, and represented 19.8% of sales compared with 19.3% of sales for the year
ago period. This increase was primarily a result of advertising costs to promote
the seasonal clearance event.
INTEREST EXPENSE AND OTHER INCOME, NET. Interest expense, interest income and
other expense, net increased by $804,100 from the second quarter of fiscal 1998.
As a result of revolving credit borrowings and the term loan, the Company
recorded interest expense of $855,400 during the quarter offset by interest
income of $77,700 earned on the Company's restricted cash. The Company had
average borrowings under its revolving credit facility of $8,875,400 during the
quarter ended August 1, 1998.
REORGANIZATION ITEMS, NET. For the 13 week period ended August 2, 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
second quarter of fiscal 1998.
TWENTY-SIX WEEKS ENDED AUGUST 1, 1998 AND AUGUST 2, 1997:
NET SALES. Net sales increased $3,439,000 or 3.6% for the first six months of
fiscal 1998 compared to the year ago period. Comparative store sales increased
3.6%. 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 Today's Man branded merchandise. There were 25
superstores in operation at August 1, 1998 and August 2, 1997, respectively.
GROSS PROFIT. Gross profit as a percentage of net sales decreased to 35.5% for
the first six months 1998 compared to 35.9% for the first six months 1997. The
decrease in the gross profit percentage is a result of more markdowns taken in
response to a more robust clearance event in July 1998 as compared to July 1997.
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 $201,800 or 0.6% in the first six months of
fiscal 1998, but decreased as a percentage of sales to 32.1% from 33.0% in the
second quarter of fiscal 1997. The dollar increase is due primarily to an
increase in store payroll, occupancy and advertising costs of $103,300 or 0.5%,
representing 19.6% of sales compared with 20.4% of sales for the year ago
period. Additionally, the cost of the Today's Man Rewards Program increased
approximately $400,000 over the prior year period. Partially offsetting this
increase was 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 increased by $1,504,600 from the first six months of fiscal
1998. As a result of revolving credit borrowings and the term loan, the Company
recorded interest expense of $1,734,500 during the quarter offset by interest
income of $199,600 earned on the Company's restricted cash. The Company had
average borrowings under its revolving credit facility of $6,898,200 during the
quarter ended August 1, 1998.
REORGANIZATION ITEMS, NET. For the 26 week period ended August 2, 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
second quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital are cash flow from
operations and borrowings under the revolving credit facility. At August 1,
1998, the Company had working capital of $26,244,400 as compared with
$26,291,900 at January 31, 1998.
On December 31, 1997, the Company entered into a Loan and Security
Agreement with Foothill Capital Corporation, individually and as agent. The Loan
and Security Agreement provides for a $12.5 million term loan and a $30.0
million revolving credit facility. The Company has 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.
The term loan bears interest at 11%, matures in three years and requires
monthly principal payments of $368,055, reflecting a $750,000 discount. In
addition to the discount, the term loan contains a provision requiring the
payment of a monthly fee beginning in January 1999 of approximately $42,000.
This monthly fee, which could amount to $1.0 million if paid for 24 months, is
being accrued ratably over the life of the loan as an adjustment to interest
expense using the effective interest method. After giving effect to the
amortization of the discount and the monthly fee, the effective interest rate on
the term loan is 18.99%. In the event the Company is able to refinance the term
loan prior to December 31, 1998, the principal amount owed to Foothill would be
equal to the original principal of $12.5 million plus a $375,000 premium less
any principal payments made on the loan. After December 31, 1998, the term loan
repayment amount increases monthly by the monthly fee of $42,000 and $15,625,
representing the straight-line impact of the remaining discount to the face
amount of $13,250,000. There is no penalty for early termination of the term
loan. In addition to the monthly fees associated with the term
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
loan, the loan document contains a provision that requires an annual repayment
equal to 25% of the Company's excess cash flow, as defined. Excess cash flow
represents the Company's earnings before interest, taxes, depreciation, and
amortization ("EBITDA"), less principal payments on indebtedness, payments for
interest, taxes and capital expenditures. No such repayments were required for
the year ended January 31, 1998.
The revolving credit facility bears interest at prime plus one half of one
percentage point (9.0% at August 1, 1998), and provides that the interest rate
cannot be less than 8.0%. The revolving credit facility has an initial term of
five years, with provisions for annual renewals thereafter. The revolving credit
facility 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. There were borrowings of $9,905,000
outstanding under the revolving credit facility at August 1, 1998. Additionally,
the Company had approximately $6,812,500 in outstanding letters of credit at
August 1, 1998. The revolving credit facility contains a provision that, in the
event the Company elects to refinance the facility, Foothill would be paid an
early termination fee equal to the greater of $250,000 or $15,000 times the
number of months remaining until the Renewal date, December 31, 2002.
The Loan and Security Agreement contains usual and customary financial
covenants including maintenance of minimum monthly inventory levels, tangible
net worth, EBITDA, and capital expenditure limitations as well as restrictions
on the payment of dividends. The Company was in compliance with all covenants as
of and for the quarter ended August 1, 1998.
The Loan and Security Agreement was amended in May, 1998 to allow the
Company to reduce its exposure to foreign currency fluctuations by engaging in
forward exchange contracts.
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.
Year 2000 Compliance
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 on its 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.
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
The Annual Meeting of Shareholders of the Company was held on June 24,
1998. At the Annual Meeting, the shareholders elected Leonard Wasserman for a
term of four years as described below:
Name For Withhold Authority
---- --- ------------------
Leonard Wasserman 18,152,921 109,165
In addition, the terms of the following directors continued after the
Annual Meeting:
David Feld
Larry Feld
Ira Brind
Verna K. Gibson
Bernard J. Korman
Randall Lambert
Item 4. Submission of Matters to a Vote of Shareholders
None - not applicable
Item 5. Other Information
Pursuant to recent amendments to the proxy rules under the Securities
Exchange Act of 1934 as amended, the Company's shareholders are notified that
the deadline for providing the Company timely notice of any shareholder proposal
to be submitted for consideration at the Company's 1999 Annual Meeting of
Shareholders (the "Annual Meeting") will be January 29, 1999. As to all such
matters which the Company does not have notice on or prior to January 29, 1999,
the proxy solicited on behalf of the Board of Directors in connection with the
matters to be considered at such Annual Meeting will confer discretionary voting
authority on the persons designated in such proxy.
Shareholder proposals for the 1999 Annual Meeting of Shareholders must be
submitted to the Company by January 29, 1999 to receive consideration for
inclusion in the Company's Proxy Statement relating to the 1999 Annual Meeting
of Shareholders.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K
None - not applicable
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TODAY'S MAN, INC.
(Registrant)
Date: September 11, 1998 /s/ David Feld
-----------------------------------------
David Feld
Chairman of the Board and
Chief Executive Officer
Date: September 11, 1998 /s/ Frank E. Johnson
-----------------------------------------
Frank E. Johnson
Executive Vice President, Chief Financial
Officer and Treasurer
Principal Financial Officer
Date: September 11, 1998 /s/ Barry S. Pine
-----------------------------------------
Barry S. Pine
Vice President and Controller
Principal Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Consolidated Balance Sheets at August 1, 1998 and the
Consolidated Statements of Operations for the twenty-six weeks ended
August 1, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> AUG-01-1998
<CASH> 3,397,700
<SECURITIES> 8
<RECEIVABLES> 1,718,400
<ALLOWANCES> 2,000
<INVENTORY> 36,652,600
<CURRENT-ASSETS> 48,933,500
<PP&E> 46,830,200
<DEPRECIATION> (16,987,100)
<TOTAL-ASSETS> 82,236,900
<CURRENT-LIABILITIES> 22,689,100
<BONDS> 0
0
0
<COMMON> 46,812,300
<OTHER-SE> 1,805,300
<TOTAL-LIABILITY-AND-EQUITY> 82,236,900
<SALES> 97,833,500
<TOTAL-REVENUES> 97,833,500
<CGS> 63,140,600
<TOTAL-COSTS> 63,140,600
<OTHER-EXPENSES> 31,355,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,734,500
<INCOME-PRETAX> 1,805,300
<INCOME-TAX> 668,000
<INCOME-CONTINUING> 1,137,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,137,300
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
