10-Q 1 ten-q.txt 10-Q 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 May 5, 2001 ----------------------------------------------- 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 856-235-5656 --------------------------------------------------- Not Applicable -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO . --------- ------------ 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 . --------- ------------ 27,040,725 common shares were outstanding as of June 15, 2001. TODAY'S MAN INC. ---------------- INDEX -----

TODAY'S MAN, INC. CONSOLIDATED BALANCE SHEETS

See accompanying notes. TODAY'S MAN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

See accompanying notes. 2 TODAY'S MAN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

See accompanying notes. 3 TODAY'S MAN, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. 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 accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States for complete financial statements. All significant intercompany transactions and accounts have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring accruals and the asset write-offs and lease termination costs disclosed in Note 3) 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 February 2, 2002. 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 February 3, 2001. 2. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. 3. Store Closings During the thirteen weeks ended April 29, 2000, the Company recorded store closing and other unusual charges of $3,987,600 to cover estimated lease terminations costs and asset impairment charges primarily related to store closings. At May 5, 2001, $1,601,300 of these charges, including charges incurred in fiscal 2000 subsequent to the first quarter of fiscal 2000, have not been paid and are reported in accrued expenses and other current liabilities. 4 Item 2. 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 February 3, 2001, 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 plans for fiscal 2001, 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 relating to the Company's growth strategy, small store base and geographic concentration, the declining unit sales of men's tailored clothing, seasonality and global economic conditions, 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 May 5, 2001 and April 29, 2000, respectively.

THIRTEEN WEEKS ENDED MAY 5, 2001 AND APRIL 29, 2000: ---------------------------------------------------- NET SALES. Net sales decreased $9,506,500 or 23.1% in the first quarter of fiscal 2001 compared to the year ago period. Comparative store sales decreased 18.9%. The decrease in sales was due to a decline in foot traffic and hence a decline in sales. There were 25 and 29 superstores in operation at May 5, 2001 and April 29, 2000, respectively. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) GROSS PROFIT. Gross profit as a percentage of net sales increased to 40.7% for the first quarter of fiscal 2001 compared to 38.7% in the first quarter of fiscal 2000. The increase in the gross profit percentage was a result of the Company's strategy of higher initial mark-ups on its inventory purchases. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased $5,912,800 or 28.8% in the first quarter of fiscal 2001, and decreased as a percentage of sales to 46.4% from 50.0% in the first quarter of fiscal 2000. The first quarter of fiscal 2000 included $3,987,600 in asset impairment charges and lease termination costs for underperforming stores closed in fiscal 2000. Store payroll, rent and occupancy and credit card expenses decreased $1,540,200 in the first quarter of fiscal 2001 as a result of operating 25 stores in the first quarter of fiscal 2001 versus 29 stores in the first quarter of fiscal 2000. INTEREST EXPENSE AND OTHER INCOME, NET. Interest expense, interest income and other expense, net decreased by $188,300 from the first quarter of fiscal 2000. The decrease in interest expense was attributable to the decreased amount of average borrowings incurred as well as the decrease in the interest rate charged under the Company's Amended Loan and Security Agreement with Mellon Bank. The Company had average borrowings under its revolving credit facility of $18,179,000 during the quarter ended May 5, 2001 as compared to average borrowings of $24,243,700 under its revolving credit facility during the quarter ended April 29, 2000. The interest rate in effect was 8.625% as of May 5, 2001 as compared to 9.750% as of April 29, 2000. As a result of revolving credit borrowings, the Company recorded interest expense of $417,400 during the quarter ended May 5, 2001. 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 May 5, 2001, the Company had working capital of $19,032,700 as compared with $14,512,800 at February 3, 2001. On December 4, 1998, the Company entered into a Loan and Security Agreement with Mellon Bank, N.A., ("Mellon") individually and as agent. Proceeds from this loan were used to refinance the Company's previous revolving credit facility and term loan with Foothill Capital Corporation. The Loan and Security Agreement, as amended, provides for a $28.0 million revolving credit facility with a $15.0 million sublimit for letters of credit. The facility bears interest at 1.125% per annum above Mellon's prime rate and expires on August 31, 2002. Availability under the revolver is determined by a formula based on inventory and credit card receivables, less applicable reserves. The amended agreement provides for an over-advance facility. The agreement contains financial covenants including tangible net worth, indebtedness to tangible net worth, maximum net loss per month and limitations on new store openings and capital expenditures as well as restrictions on the payment of dividends. The Company granted Mellon Bank a lien on its tangible and intangible assets to secure this facility. Additionally, Mr. David Feld, Chairman of the Board and principal shareholder of the Company, provided additional collateral to secure the credit facility. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) On February 28, 2001, the Company and Mellon Bank entered into Amendment 8 to the revolving credit facility. The amended Agreement recast all of the Company's financial covenants as of and for the year ended February 3, 2001 and for the remaining term of the loan agreement. The Company was in compliance with all covenants under the amended Agreement as of May 5, 2001. The permitted out-of-formula advances may not exceed $2,000,000 from February 28, 2001 to May 15, 2001. The over-advance facility is then reduced to $1,250,000 on May 16, 2001, $0 on June 16, 2001, increases to $2,000,000 on August 5, 2001, reduces to $1,500,000 on November 4, 2001, $1,000,000 on December 1, 2001, $500,000 on December 21, 2001 and expires on December 30, 2001. The amendment also changed the interest charged on the facility to 1.125% per annum above Mellon's prime rate from 0.75%. (Mellon Bank's prime rate was 7.5% at May 5, 2001). Subsequent to the first quarter of fiscal 2001, the Company and Mellon Bank entered into Amendment 9 to the revolving credit facility. The amendment recasts certain of the Company's financial covenants and extends the term of the loan to August 31, 2002 from March 14, 2002. The permitted out-of-formula advances may not exceed $2,000,000 from February 28, 2001 to May 15, 2001. The overadvance facility is then reduced to $1,250,000 on May 16, 2001, $0 on June 16, 2001, increases to $2,000,000 on July 16, 2001, reduces to $1,500,000 on December 1, 2001, $1,000,000 on December 15, 2001, $500,000 on December 21, 2001, and expires on December 30, 2001. The Company must pay a termination fee of $1,050,000 if the facility is terminated after March 15, 2001 but on or before August 31, 2002. In January 2001, the Company retained investment banker Berwind Financial, L.P. to explore opportunities for raising additional capital and enhancing shareholder value. In fiscal 2000, the Company closed four under-performing stores. Subsequent to year end, the Company closed its e-commerce website, Todaysman.com. The closing of the four stores and website resulted in a charge to operations in fiscal 2000 of approximately $6.3 million for the write-off of furniture and fixtures and the accrual of lease termination costs. The Company has been substantially dependent upon borrowings under its credit facility to finance its operations and received an amended credit facility from Mellon, which allows the Company additional liquidity through an over-advance facility through December 30, 2001 as discussed above. Additionally, the Company is in the process of implementing a plan to reverse the trend of losses noted above. Management's plans implemented thus far, as well as actions initiated that will continue into fiscal 2001, include the execution of the amended credit facility, a layoff of non-operating personnel in January 2001, the closing of four under-performing stores in fiscal 2000 and the closing of the e-commerce website. Management believes the Company's cash requirements in 2001 will be generated by operations and borrowings under the Company's credit facility. Management also believes that the actions initiated and its 2001 plans will result in the successful funding of its working capital and cash requirements while enabling the Company to meet its financial covenants under its credit facility. 7 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS -------------------------------------------------------------------- The Company is a retail company doing business within the United States. Its primary market risk is exposure to interest rates fluctuations on its debt instruments. The Company's bank revolving credit facility bears interest at variable rates. The variable interest rate is the rate in effect at the quarter ended May 5, 2001, and it fluctuates with the lending bank's prime rate. The change in interest expense of the Company's bank revolving credit facility resulting from a hypothetical 2% increase in interest rates would not be material. 8 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- None - not applicable Item 2. Changes in Securities and Use of Proceeds ----------------------------------------- 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 9 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: June 19, 2001 /s/David Feld ------------------------------------- David Feld Chairman of the Board Date: June 19, 2001 /s/Bruce Weitz ------------------------------------- Bruce Weitz President and Chief Executive Officer Date: June 19, 2001 /s/Frank E. Johnson ------------------------------------- Frank E. Johnson Executive Vice President, Chief Financial Officer and Treasurer Principal Financial Officer Date: June 19, 2001 /s/Barry S. Pine ------------------------------------- Barry S. Pine Vice President and Controller Principal Accounting Officer

TODAYS MAN INC 10-Q