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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended May 1, 2004.
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File No. 0-31787
LOEHMANN'S HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-4129380
- ---------------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2500 Halsey Street, Bronx, New York 10461
(Address of Principal Executive Offices, Including Zip Code)
(718) 409-2000
(Registrant's Telephone Number, Including Area Code)
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 (or for such shorter period as the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed under 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
--- ---
Below are indicated the number of shares outstanding of each of the registrant's
classes of common stock.
Class Outstanding at June 1, 2004
----- ---------------------------
Common Stock, $.01 par value per share 6,729,236
Loehmann's Holdings Inc.
Contents
Part I--Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets--May 1, 2004, January 31, 2004 (Audited), and May 3, 2003................. 2
Consolidated Statements of Operations--Quarters ended May 1, 2004 and May 3, 2003..................... 3
Consolidated Statements of Cash Flows--Quarters ended May 1, 2004 and May 3, 2003..................... 4
Notes to Consolidated Financial Statements............................................................ 5
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition...................................................................... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................... 12
Item 4. Controls and Procedures...................................................................... 12
Part II--Other Information
Item 1. Legal Proceedings............................................................................ 12
Item 6. Exhibits and Reports on Form 8-K............................................................. 12
Signature............................................................................................. 14
Part 1. Financial Information
Item 1. Financial Statements
Loehmann's Holdings Inc.
Consolidated Balance Sheets
(In thousands)
May 1, January 31, May 3,
2004 2004 2003
-------- -------- --------
(Unaudited) (Audited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 11,519 $ 8,046 $ 1,525
Accounts receivable and other assets 8,647 7,392 7,677
Merchandise inventory 69,139 59,177 64,070
-------- -------- --------
Total current assets 89,305 74,615 73,272
Property, equipment and leaseholds, net 44,682 43,893 45,519
Deferred financing fees and other assets, net 1,977 1,305 1,514
Deferred tax asset 8,252 8,252 2,968
Reorganization value in excess of identifiable assets, net 11,322 11,243 15,988
-------- -------- --------
Total assets $155,538 $139,308 $139,261
======== ======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 35,651 $ 28,330 $ 24,370
Revolving credit facility - - 3,573
Accrued expenses 18,563 19,041 17,857
Current portion of long-term debt - - 5,700
Income taxes payable 3,278 - 683
-------- -------- --------
Total current liabilities 57,492 47,371 52,183
11% Senior notes due December 2005 - - 5,707
Deferred tax liability 3,441 3,441 -
Other noncurrent liabilities 8,689 7,870 6,334
Stockholders' equity:
Common stock, $0.01 par value, 20,000,000 shares
authorized; 6,729,236 shares issued and outstanding at May
1, 2004 and January 31, 2004; and 6,659,236 shares issued
and outstanding at May 3, 2003 67 67 66
Additional paid-in capital 50,361 50,361 49,934
Retained earnings 35,488 30,198 25,037
-------- -------- --------
Total stockholders' equity 85,916 80,626 75,037
-------- -------- --------
Total liabilities and stockholders' equity $155,538 $139,308 $139,261
======== ======== ========
The accompanying notes are an integral part of these financial statements.
2
Loehmann's Holdings Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
Quarter Quarter
ended ended
May 1, 2004 May 3, 2003
-------- --------
Net sales $107,019 $ 90,428
Cost of sales 63,059 54,001
-------- --------
Gross profit 43,960 36,427
Revenue from leased department 353 329
-------- --------
Operating profit 44,313 36,756
Selling, general, and administrative expenses 32,994 29,246
Depreciation and amortization 2,436 2,345
-------- --------
Operating income 8,883 5,165
Interest expense, net 38 458
-------- --------
Income before income taxes 8,845 4,707
Provision for income taxes, net 3,555 1,955
-------- --------
Net income $ 5,290 $ 2,752
======== ========
Earnings per share:
Basic
Earnings per share $ 0.79 $ 0.41
======== ========
Weighted average shares outstanding 6,729 6,659
======== ========
Diluted
Earnings per share $ 0.69 $ 0.37
======== ========
Weighted average shares outstanding 7,687 7,510
======== ========
The accompanying notes are an integral part of these financial statements.
3
Loehmann's Holdings Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Quarter Quarter
ended ended
May 1, 2004 May 3, 2003
-------- --------
Cash flows provided by (used in) operating activities:
Net income $ 5,290 $ 2,752
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,435 2,345
Gain on disposal of assets - (5)
Adjustments to reorganization value (79) -
Changes in current assets and liabilities:
Accounts receivable and other assets (1,255) (1,879)
Merchandise inventory (9,962) (12,564)
Accounts payable 7,321 767
Accrued expenses (621) (1,451)
Income taxes payable 3,278 (668)
-------- --------
Net changes in current assets and liabilities (1,239) (15,795)
Net change in other noncurrent assets and liabilities (350) 139
-------- --------
Total adjustments, net 767 (13,316)
-------- --------
Net cash provided by (used in) operating activities 6,057 (10,564)
-------- --------
Cash flows from investing activities:
Capital expenditures (2,611) (2,701)
-------- --------
Net cash used in investing activities (2,611) (2,701)
-------- --------
Cash flows from financing activities:
Borrowings under the credit facility - 3,573
Other financing activities, net 27 -
-------- --------
Net cash provided by financing activities 3,573
27
-------- --------
Net increase (decrease) in cash and cash equivalents 3,473 (9,692)
Cash and cash equivalents at beginning of period 8,046 11,217
-------- --------
Cash and cash equivalents at end of period $ 11,519 $ 1,525
======== ========
Supplemental disclosure of cash flow information:
Cash interest paid during period $ 7 $ 752
======== ========
Cash taxes paid during period $ 351 $ 2,622
======== ========
The accompanying notes are an integral part of these financial statements.
4
Loehmann's Holdings Inc.
Notes to Consolidated Financial Statements
Loehmann's Holdings Inc. ("Holdings" and collectively with its
subsidiaries, "Loehmann's" or the "Company"), a Delaware corporation
incorporated in 2000, is the parent company of Loehmann's, Inc. Loehmann's,
founded in 1921 as the "Original Designer Outlet," is a leading national
specialty retailer of well known designer and brand name women's fashion
apparel, men's furnishings, accessories, and shoes offered at prices that are
typically 30% to 65% below department store prices. The Company has a strong
brand name, loyal customer base and long-standing relationships with leading
designers and vendors of quality merchandise. The Company's target customers are
relatively affluent women between the ages of 30 and 55 with household incomes
greater than $100,000, who are attracted to designer and other name brand
merchandise offered at exceptional values. As of May 1, 2004, the Company
operated 48 stores in major metropolitan markets located in 17 states and the
District of Columbia.
1. Basis of Presentation
The balance sheet at May 1, 2004 and the statements of operations and
cash flows for the quarter ended May 1, 2004 include, in the opinion of
management, all adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation.
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information. Certain information and footnote disclosure normally
included in financial statements required by generally accepted accounting
principles have been omitted. Operating results for the quarter ended May 1,
2004 are not necessarily indicative of the results that may be expected for the
fiscal year ending January 29, 2005. It is suggested that these unaudited
financial statements be read in conjunction with the financial statements and
notes for the fiscal year ended January 31, 2004 included in the Company's
Annual Report on Form 10-K for such year.
2. Proposed Merger
On April 22, 2004, the Company, Designer Apparel Holding Company, a
Delaware corporation ("Parent"), and DAH Merger Corporation, a Delaware
corporation and wholly-owned subsidiary of Parent ("Sub"), entered into an
Agreement and Plan of Merger, dated as of April 22, 2004 (the "Merger
Agreement").
Pursuant to the Merger Agreement, following the satisfaction of certain
conditions, including the approval of the Merger (as defined below) by
stockholders of the Company representing a majority of the outstanding shares of
common stock, par value $.01 per share, of the Company (collectively, the
"Shares") entitled to vote, Sub will be merged with and into the Company with
the Company being the surviving corporation. In the Merger the stockholders of
the Company will be entitled to receive, for each outstanding Share, $23.00 per
Share without interest thereon. After consummation of the Merger, the Shares
will no longer be traded on The NASDAQ National Market or any other securities
exchange and the Company will become a privately-held company.
On April 22, 2004, Parent entered into a Voting Agreement with Alpine
Associates, A Limited Partnership, Alpine Partners, L.P., Alpine Associates
Offshore Fund Ltd. and Palisades Partners, L.P.(collectively "Alpine"),
collectively the beneficial owners of approximately 32.7% of the outstanding
Shares, pursuant to which Alpine has agreed to vote its Shares in favor of the
Merger.
5
On April 22, 2004, the Company entered into new Employment Agreements
with each of Robert N. Friedman and Robert Glass which will be effective upon
consummation of the Merger.
On April 22, 2004, the Company entered into Agreements as to Surrender
and Cancellation of Options with each of Robert N. Friedman and Robert Glass
which will be effective upon consummation of the Merger.
On April 27, 2004, a complaint was filed by Davidco Investments in the
Court of Chancery of the State of Delaware in and for New Castle County, against
the Company and its directors. The complaint purports to be brought as a class
action on behalf of the Company's stockholders. The complaint alleges, among
other things, that the members of the board of directors of the Company breached
their fiduciary duties to the Company's stockholders by approving the terms of
the proposed sale of the Company for $23.00 per share. The complaint seeks,
among other things, injunctive relief (including enjoining the proposed sale or
rescission if the proposed sale is consummated) and compensatory and/or
rescissory damages. The Company and its directors intend to vigorously contest
the allegations set forth in the complaint. On April 29, 2004, a complaint was
filed by Bernard Shatz in the Court of Chancery of the State of Delaware in and
for New Castle County. The second complaint is substantially similar to the
first complaint but also names Crescent Capital Investments, Inc. ("Crescent")
as a defendant. The defendants have not yet filed answers to the complaints The
Company, its directors and Crescent intend to vigorously defend the allegations
set forth in the complaints.
3. Income Taxes
Income taxes are provided for under the liability method using an
effective tax rate of 40.2% for fiscal 2004 and 39.3% in fiscal 2003.
4. Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States for interim
financial information requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual amounts could differ from the estimates.
5. Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure" ("SFAS 148"), which
amends SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. The
Company has not adopted a method under SFAS 148 to expense stock options but
rather continues to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for stock options and accordingly, has recognized
no compensation expense with respect to options granted to key employees or
options granted to non-employee directors. Had compensation cost been determined
based upon the fair value at grant date for awards consistent with the
methodology prescribed by SFAS 123, "Accounting for Stock-Based Compensation",
the Company's net income and net income per share would have been the pro forma
amounts indicated below:
6
May 1, May 3,
2004 2003
------- -------
(In thousands, except per share data)
Net income - as reported $ 5.3 $ 2.8
Less total stock-based employee compensation expense
under the fair value method, net of tax 0.1 0.6
------- -------
Net income - pro forma $ 5.2 $ 2.2
======= =======
Net income per share:
Basic - as reported $ 0.79 $ 0.41
Basic - pro forma 0.76 0.33
Diluted - as reported 0.69 0.37
Diluted - pro forma 0.67 0.29
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Executive Summary
Loehmann's is a leading national specialty retailer of well known
designer and brand name women's fashion apparel, men's furnishings, accessories,
and shoes offered at prices that are typically 30% to 65% below department store
prices. The Company currently operates 48 stores in 17 states and the District
of Columbia with a concentration of stores in the New York Metro/Mid Atlantic
area, California and Florida.
The Company opened one new store in 2004 in Northbrook, IL. The Company
will continue to follow a conservative strategy by opening 3-5 new stores per
year in existing markets.
Comparable store sales increased for the quarter by 12.4% primarily due
to the increase in overall consumer confidence fueled by a stronger economy. Net
income per diluted share was $0.69, up from $0.37 in the prior year period.
Loehmann's generated cash from operations of $6.1 million and used $2.6
million for capital expenditures. As a result of the Company's redemption of the
outstanding balance of the 11% Senior Notes due December 2005 during fiscal
2003, the Company reduced its interest expense by $0.3 million.
The discussion and analysis below further explains the Company's
results of operations for the quarter ended May 1, 2004.
7
Results of Operations - Comparison of the Quarters Ended May 1, 2004 and May 3,
2003
May 1, May 3,
2004 2003
-------- --------
% of Sales % of Sales
-------- --------
Net sales 100.0% 100.0%
Cost of sales 58.9% 59.7%
-------- --------
Gross profit 41.1% 40.3%
Revenue from leased departments 0.3% 0.3%
-------- --------
Operating profit 41.4% 40.6%
Selling, general and administrative expenses 30.8% 32.3%
Depreciation and amortization 2.3% 2.6%
-------- --------
Operating income 8.3% 5.7%
Interest expense, net 0.0% 0.5%
-------- --------
Income before income taxes 8.3% 5.2%
Provision for income taxes, net 3.3% 2.2%
-------- --------
Net income 5.0% 3.0%
======== ========
Net sales for the quarter ended May 1, 2004 were $107.0 million as
compared to $90.4 million for the comparable period in the prior year. The
increase of $16.6 million is primarily attributable to (i) the comparable store
sales increase of $10.7 million and (ii) a net increase of $6.0 million in sales
related to five new stores.
Comparable store sales increased by 12.4% compared to the same period
in fiscal 2003. The increase in comparable store sales in the first quarter were
largely attributable to the increase in overall consumer confidence fueled by a
stronger economy. Included in the comparable store sales are the expansions to
the stores in San Francisco, CA and East Brunswick, NJ. Comparable store sales
for the quarter ended May 3, 2003 decreased by 7.7% compared to the same period
in fiscal 2002.
Gross profit for the quarter ended May 1, 2004 was $44.0 million as
compared to $36.4 million for the same period in the prior year. Gross profit
percentage increased to 41.1% from 40.3% in the prior year period. The increase
in gross profit percentage is attributed to more full price sell through and
lower markdowns as a percent of net sales.
Selling, general and administrative ("SG&A") expenses as a percentage
of net sales for the quarter decreased to 30.8% of net sales as compared to
32.3% of net sales in the prior period. SG&A expenses for the quarter ended May
1, 2004 increased by $3.8 million to $33.0 million from $29.2 million in the
prior period. The increase of $3.8 million was primarily due to (i) a net
increase of $1.6 million of expenses related to the five new stores opened
within the past twelve months and (ii) an increase of $0.7 million in occupancy
expenses primarily due to the two expanded stores mentioned previously.
8
Comparable store SG&A expenses as a percentage of nets sales for the
period ended May 1, 2004 decreased to 31.0 % from 32.4% in the prior period. The
decrease of 140 basis points was due primarily to an increase in comparable
store sales in the current quarter. Comparable SG&A expenses increased $2.1
million to $30.1 million compared to $28.0 million in the prior period.
Reconciliation of SG&A expenses to comparable store SG&A expenses is as follows:
Quarter Ended
-----------------------
(In thousands) May 1, May 3,
2004 2003
-------- --------
Total SG&A expenses $ 32,994 $ 29,246
New stores SG&A expenses (2,866) (1,253)
Closed stores SG&A expenses - (13)
-------- --------
Comparable store SG&A expenses $ 30,128 $ 27,980
======== ========
Depreciation and amortization expense for the quarter ended May 1, 2004
was $2.4 million as compared to $2.3 million for the same period in the prior
year. The increase in depreciation expense is due primarily to assets placed in
service at new stores opened within the last 18 months.
There was net interest expense of $38,000 for the quarter ended May 1,
2004 as compared to $0.5 million for the same period in the prior year. In
fiscal year 2003, the Company redeemed the remainder of its 11% Senior notes due
December 2005, resulting in a decrease in interest on the Company's senior notes
of $0.3 million.
As a result of the items explained above, net income was $5.3 million,
or 5.0% of net sales, for the quarter ended May 1, 2004 as compared to net
income of $2.8 million, or 3.0% of net sales, in the quarter ended May 3, 2003.
Liquidity and Capital Resources
The Company has a $50.0 million credit facility with The CIT
Group/Business Credit, Inc. (the "Credit Facility"). The availability of the
revolving line of credit under the Credit Facility is subject to certain
inventory-related borrowing base requirements. Repayment of amounts borrowed
under the Credit Facility is secured by a lien on substantially all the assets
of the Company.
The indebtedness under the Credit Facility bears interest at variable
rates based on LIBOR plus 2.0% or the prime rate plus 0.5% on borrowings. There
is an unused line fee of 0.25% per annum on the unused portion of the Credit
Facility.
The Credit Facility contains certain customary covenants, including
capital expenditure limitations, limitations on indebtedness, liens, and
restricted payments. There are no financial performance covenants under the
Credit Facility.
As of May 1, 2004, the Company had documentary letters of credit of
$3.0 million outstanding with $45.9 million of unused availability under the
Credit Facility.
Net cash provided by operations for the quarter ended May 1, 2004 was
$6.1 million compared to $10.6 million used in operations in the prior year. The
increase in cash flow provided by operations is primarily due to the following,
(i) an increase in accounts payable of $6.6 million relating to favorable vendor
terms compared to the same period in the prior year, (ii) net income, which
increased by $2.5 million, (iii) a decrease in the change in
9
merchandise inventory purchased over the prior year period of $2.6 million and
(iv) an increase in income taxes payable of $3.3 million. The increase in income
taxes payable is due primarily to (a) an increase in the provision for income
taxes of $1.6 million over the prior period and (b) a decrease in cash taxes
paid during the quarter of $2.3 million as compared to the prior period.
Due to the seasonal nature of the Company's business, inventory is
normally at its lowest point at the end of the fiscal year and increases to peak
levels during the first quarter of the fiscal year. Therefore, there will
typically be a large increase in inventory from the end of a fiscal year to the
end of the first quarter of the following fiscal year. For the first quarter of
fiscal year 2004, inventory increased by $9.9 million to $69.1 million from
$59.2 million at January 31, 2004. The increase of $9.9 million was primarily
attributable to an increase in the inventory at stores in operation for at least
one year of $9.0 million.
Inventory at the end of the first fiscal quarter is $5.1 million higher
than one year ago due to (i) an increase in the Company's pack-away inventory of
$2.1 million due to opportunistic purchases of fall season merchandise made
during the period and (ii) inventory for new stores of $2.3 million.
Accounts receivable and other current assets for the quarter ended May
1, 2004 were $8.6 million compared to $7.4 million at January 31, 2004. The
increase of $1.2 million was due primarily to an increase in third-party credit
card sales receivable of $1.6 million attributable to sales made in the last 2
days of the quarter.
Accounts payable increased $7.3 million in the first quarter of fiscal
year 2004. The increase in accounts payable was primarily the result of an
increase in favorable payment terms with the Company's vendors as compared to
the same period in the prior year.
Capital expenditures for the quarter were $2.6 million. The opening of
a shoe store in White Plains, NY, a new store in Northbrook, IL, and the
purchase of new POS register equipment accounted for $1.8 million of the $2.6
million.
Income taxes payable for the quarter ended May 1, 2004 were $3.3
million compared to no amount payable at January 31, 2004. The increase is
primarily due to an increase in the provision for income taxes to $3.6 million
less $0.3 million of cash taxes paid during the period for estimated prior year
state taxes.
The Company believes that cash generated from operations and funds
available under the Credit Facility will be sufficient to satisfy its cash
requirements through the remainder of the fiscal year.
This Quarterly Report on Form 10-Q and, in particular, Management's
Discussion and Analysis of Financial Condition and Results of Operations contain
forward-looking statements within the Securities Exchange Act of 1934. The
Company's actual results of operations and future financial condition may differ
materially from those expressed or implied in any such forward-looking
statements as a result of many factors, including factors that may be beyond the
Company's control. Other factors that may cause actual results of operations and
future financial condition to differ from those expressed or implied in any
forward-looking statements contained herein include adverse changes in
relationships with key vendors, changes in consumer preferences, competition
from existing and potential competitors and general economic conditions.
Investors are also directed to the discussion of risks and uncertainties
associated with forward-looking statements contained in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statements contained herein or that may be made from time to time by or on
behalf of the Company.
10
Critical Accounting Policies
Inventory
Merchandise inventory is valued at the lower of cost or market as
determined by the retail inventory method, which the Company believes
approximates fair value. However, certain warehoused inventory, referred to as
pack-away inventory, a portion of which is not immediately available for sale,
is valued on a specific cost basis. The pack-away inventory valued on a specific
cost basis at May 1, 2004 and May 3, 2003 was $23.6 million and $21.5 million,
respectively.
The Company takes permanent markdowns to reduce prices as goods age.
The resulting gross margin reduction is recognized in the period the markdown is
recorded.
Shrinkage is estimated as a percentage of sales for the period from the
last physical inventory date to the end of each reporting period. Such estimates
are based on experience and recent physical inventory results. Physical
inventories are taken twice annually and inventory records are adjusted
accordingly.
Revenue Recognition and Leased Sales
The Company recognizes revenue when goods are sold, at retail, to
customers in its stores. Sales of fragrances, a leased department, are not
reflected in the net sales reported on the Company's statement of operations.
The gross profit on fragrance sales is shown as revenue from leased department
on the Company's statement of operations.
Proposed Merger
On April 22, 2004, the Company, Parent and Sub entered into the Merger
Agreement.
Pursuant to the Merger Agreement, following the satisfaction of certain
conditions, including the approval of the Merger (as defined below) by
stockholders of the Company representing a majority of the Shares entitled to
vote, Sub will be merged with and into the Company with the Company being the
surviving corporation. In the Merger the stockholders of the Company will be
entitled to receive, for each outstanding Share, $23.00 per Share without
interest thereon. After consummation of the Merger, the Shares will no longer be
traded on The NASDAQ National Market or any other securities exchange and the
Company will become a privately-held company.
On April 22, 2004, Parent entered into a Voting Agreement with Alpine
the beneficial owner of approximately 32.7% of the outstanding Shares, pursuant
to which Alpine has agreed to vote its Shares in favor of the Merger.
On April 22, 2004, the Company entered into new Employment Agreements
with each of Robert N. Friedman and Robert Glass which will be effective upon
consummation of the Merger.
On April 22, 2004, the Company entered into Agreements as to Surrender
and Cancellation of Options with each of Robert N. Friedman and Robert Glass
which will be effective upon consummation of the Merger.
11
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has assessed its vulnerability to certain market risks,
including interest rate risk associated with financial instruments included in
cash and cash equivalents. Due to the short-term nature of these investments the
Company has determined that the risks associated with interest rate fluctuations
related to these financial instruments do not pose a material risk to the
Company.
Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures
that is designed to provide reasonable assurance that information that is
required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act of 1934, as amended, is accumulated and
communicated to management in a timely manner. The Company's Chief Executive
Officer and Chief Financial Officer have evaluated this system of disclosure
controls and procedures as of the end of the period covered by this quarterly
report, and believe that the system is operating effectively to ensure
appropriate disclosure. There have been no changes in the Company's internal
control over financial reporting during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
The Company filed a report on Form 8-K under items 5 and 7 of Form 8-K,
dated April 28, 2004, reporting that on April 27, 2004, a complaint was filed by
Davidco Investments in the Court of Chancery of the State of Delaware in and for
New Castle County, against the Company and its directors. The complaint purports
to be brought as a class action on behalf of the Company's stockholders. The
complaint alleges, among other things, that the members of the board of
directors of the Company breached their fiduciary duties to the Company's
stockholders by approving the terms of the proposed sale of the Company for
$23.00 per share. The complaint seeks, among other things, injunctive relief
(including enjoining the proposed sale or rescission if the proposed sale is
consummated) and compensatory and/or rescissory damages. The Company and its
directors intend to vigorously contest the allegations set forth in the
complaint. On April 29, 2004, a complaint was filed by Bernard Shatz in the
Court of Chancery of the State of Delaware in and for New Castle County. The
second complaint is substantially similar to the first complaint but also names
Crescent as a defendant. The defendants have not yet filed answers to the
complaints. Loehmann's, its directors and Crescent intend to vigorously defend
the allegations set forth in the complaints.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
(a) Exhibits
31.1 Certificate of Chief Executive Officer required by Section 13a-14(a) of the
Rules and Regulations under the Securities Exchange Act of 1934.
31.2 Certificate of Chief Financial Officer required by Section 13a-14(a) of the
Rules and Regulations under the Securities Exchange Act of 1934.
12
32.1 Certificate of Chief Executive Officer required by 18 U.S.C. Section 1350.
32.2 Certificate of Chief Financial Officer required by 18 U.S.C. Section 1350.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K under items 5 and 7 of Form 8-K, dated
April 26, 2004, announcing the signing of a definitive merger agreement
providing for the acquisition of the Company by an affiliate of Crescent Capital
Investments, Inc., an Atlanta-based private equity investment firm.
The Company filed a report on Form 8-K under items 5 and 7 of Form 8-K, dated
April 28, 2004, reporting that a complaint was filed against the Company and its
Board of Directors on April 27, 2004 by Davidco Investments in the Court of
Chancery of the State of Delaware in and for New Castle County.
13
Loehmann's Holdings Inc.
Signature
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.
Dated: June 9, 2004
Loehmann's Holdings Inc.
By /s/ Robert Glass
----------------------------------------------------
Robert Glass
Chief Operating Officer, Chief Financial Officer and
Secretary
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