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 5, 2001 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. 0-23671 ------- WEINER'S STORES, INC. --------------------- (exact name of registrant as specified in its charter) Delaware 76-0355003 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 6005 Westview Drive, Houston, TX 77055 --------------------------------------------------- (Address of principal executive offices) (zip code) Registrant's telephone number, including area code (713) 688-1331 --------------- 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 that 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 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 __ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. As of June 7, 2001, there were 18,509,710 shares of Weiner's Stores, Inc. common stock, par value $.01 per share, outstanding. WEINER'S STORES, INC. FORM 10-Q QUARTER ENDED MAY 5, 2001 Table of Contents

~~Table of Contents~~ Page No. -------- PART I. FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements 3 Consolidated Statements of Operations 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6-109 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 109-1512 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 1612 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 1712 ITEM 2. Changes in Securities and Use of Proceeds 1712 ITEM 3. Defaults Upon Senior Securities 1712 ITEM 4. Submission of Matters to a Vote of Security Holders 1713 ITEM 5. Other Information 1713 ITEM 6. Exhibits and Reports on Form 8-K ~~17-18~~13 SIGNATURES 1914 EXHIBIT INDEX 2015

2 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements WEINER'S STORES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Thirteen Weeks Thirteen Weeks Ended Ended May 5, 2001 April 29, 2000 ----------- -------------- Net sales $ 48,805,000 $ 66,207,000 Leased department revenues 120,000 215,000 ------------ ------------ Net revenues 48,925,000 66,422,000 Cost of goods sold 32,179,000 42,355,000 ------------ ------------ Gross margin 16,746,000 24,067,000 Selling, administrative and other operating costs 16,965,000 23,836,000 Reorganization expense 939,000 - ------------ ------------ Operating (loss) income (1,158,000) 231,000 Interest expense (505,000) (397,000) Interest income - - ------------ ------------ Loss before income taxes (1,663,000) (166,000) Income taxes - - ------------ ------------ Loss before cumulative effect adjustment $ (1,663,000) $ (166,000) Cumulative effect adjustment, net of tax - (294,000) ------------ ------------ Net loss $ (1,663,000) $ (460,000) ============ ============ Loss before cumulative effect adjustment $ (0.09) $ (0.01) per share of common stock Cumulative effect of accounting change per share of common stock - (0.01) ============ ============ Net loss per share of common stock $ (0.09) $ (0.02) ============ ============ Weighted average number of shares of common stock outstanding 18,510,000 18,510,000 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 3 WEINER'S STORES, INC. CONSOLIDATED BALANCE SHEETS

~~PART~~May I.5, ~~FINANCIAL~~February ~~INFORMATION ITEM 1. FINANCIAL STATEMENTS WEINER'S STORES~~3, ~~INC.~~2001 ~~CONSOLIDATED~~2001 ~~STATEMENTS~~------------------ OF----------------- ~~OPERATIONS~~ (Unaudited) ~~Thirteen~~ASSETS ~~Thirteen~~Current ~~Thirty-Nine~~Assets: ~~Thirty-Nine~~Cash ~~Weeks~~$ ~~Ended~~5,605,000 ~~Weeks~~$ ~~Ended~~5,607,000 ~~Weeks~~Receivables, ~~Ended~~net ~~Weeks~~715,000 ~~Ended~~841,000 ~~October~~Merchandise 28inventories, ~~2000~~net ~~October~~45,433,000 3050,822,000 ~~1999~~Prepaid ~~October~~expenses ~~28,~~and ~~2000~~other ~~October~~assets 304,054,000 ~~1999~~3,459,000 ------------------ ----------------- Total current assets 55,807,000 60,729,000 ------------------ ------------------ ~~Net~~Property ~~sales~~and $Equipment: 64Land 258,~~791,~~000 ~~$ 58~~258,~~859,~~000 $Building ~~193~~- distribution center and office facility 1,~~476~~996,000 ~~$ 207~~1,~~993~~996,000 ~~Leased~~Furniture, ~~department~~fixtures ~~revenues~~and ~~145~~leasehold improvements 28,868,000 ~~- 587~~28,785,000 - -----------------~~------------------~~ -----------------~~-------------------~~ ~~Net~~Total ~~revenues 64~~31,~~936~~122,000 5831,~~859~~039,000 ~~194,063,000~~Less ~~207,993,000~~accumulated ~~Cost~~depreciation ofand ~~goods~~amortization ~~sold 43~~(11,~~983~~607,000) 38(10,~~061~~630,000) ~~128,345,000 138,422,000~~ ------------------ ----------------- Total property and equipment, net 19,515,000 20,409,000 ------------------ ------------------ ~~Gross~~$ ~~margin 20~~75,~~953~~322,000 ~~20,798,000~~$ 6581,~~718~~138,000 ~~69,571,000~~================== ~~Selling,~~================= ~~administrative~~LIABILITIES ~~and~~AND ~~other~~STOCKHOLDERS' ~~operating~~EQUITY ~~costs~~Current ~~23,300,000~~Liabilities: ~~22,986,000~~Trade ~~72,284,000~~accounts ~~68,703,000~~payable ~~Reorganization~~$ ~~expense 10~~6,~~955~~275,000 -$ 10,~~955~~233,000 -Accrued ~~Store~~expenses ~~closing~~and ~~costs~~other 8current liabilities 7,~~851~~247,000 ~~- 8~~6,~~851~~383,000 - ----------------- ------------------ Total current liabilities 13,522,000 16,616,000 ------------------ ------------------ ~~Operating~~Other ~~(loss)~~Liabilities ~~income (22~~397,~~153,~~000) (2397,~~188,~~000) ~~(26~~Long-term portion of debtor-in-possession credit facility 19,~~372~~923,000) ~~868~~20,694,000 ~~Interest~~Liabilities ~~expense~~subject ~~(702,000)~~to ~~(249,000)~~settlement (1under reorganization proceedings 25,~~647~~032,000) ~~(809~~25,320,000) ~~Interest~~Commitments ~~income~~and -Contingencies - - -Stockholders' ~~-----------------------------------~~Equity: ~~------------------------------------~~Common ~~(Loss)~~stock, ~~income~~$.01 ~~before~~par ~~income~~value, ~~taxes~~50,000,000 ~~(22~~shares authorized,~~855~~ 19,000),000 shares issued 190,000 190,000 Additional paid-in capital 63,664,000 63,664,000 Accumulated deficit (247,~~437~~406,000) (2845,~~019~~743,000) 59Treasury stock,~~000~~ ~~Income~~at ~~taxes~~cost, -523,170 -shares - - ------------------ ----------------- Total stockholders' equity 16,448,000 18,111,000 ------------------ ------------------ ~~(Loss) income before cumulative effect adjustment~~ $ ~~(22~~75,~~855~~322,000) $ (281,~~437~~138,000) ~~$ (28,019,000) $ 59,000 Cumulative effect adjustment, net of tax - - (294,000) - Net (loss) income $ (22,855,000) $ (2,437,000) $ (28,313,000) $ 59,000~~ ==================~~=================~~ ==================================== (Loss) Income before cumulative effect adjustment per share of common stock $ (1.23) $ - $ (1.52) $ - Cumulative effect of accounting change per share of common stock - - $ (0.01) - Net (loss) income per share of common stock $ (1.23) $ (0.13) $ (1.53) $ 0.00 =================================== ==================================== Weighted average number of shares of Common stock 18,510,000 18,497,000 18,510,000 18,486,000 =================================== ====================================

The accompanying notes are an integral part of these consolidated financial statements. 4 WEINER'S STORES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

~~WEINER'S~~Thirteen ~~STORES,~~Weeks ~~INC.~~Thirteen ~~CONSOLIDATED~~Weeks ~~BALANCE~~Ended ~~SHEETS~~Ended ~~October~~May 285, ~~January~~2001 April 29, 2000 ~~2000~~ ------------ ------------ ~~(Unaudited) ASSETS Current Assets: Cash $ 5,355,000 $ 3,336,000 Receivables, net 1,780,000 1,100,000 Other receivables 11,985,000~~ - ~~Merchandise inventories, net 43,923,000 57,293,000 Prepaid expenses and other assets 5,575,000 3,287,000~~ ------------ ---------~~---~~ ~~Total~~Net ~~current~~cash ~~assets~~provided 68by (used in) operating activities $ 852,~~618,~~000 65$ (6,~~016~~378,000) ------------ ------~~------~~ ~~Property and Equipment: Land 258,000 258,000 Building~~ - ~~distribution center and office facility 1,996,000 1,996,000 Furniture, fixtures and leasehold improvements 27,227,000 26,759,000~~ ------------ -----~~-------~~ ~~Total~~Cash ~~29,481,000~~Flows ~~29,013,000~~from ~~Less~~Investing ~~accumulated~~Activities: ~~depreciation~~Capital ~~and~~expenditures ~~amortization~~ (983,~~646,~~000) (71,~~967~~593,000) ------------ ------~~------~~ ~~Total property and equipment, net 19,835,000 21,046,000~~ ------------ ------~~------~~ ~~Excess~~Net ~~Reorganization~~cash ~~Value,~~used ~~less~~in ~~accumulated~~investing ~~amortization~~activities ~~of $ 799~~(83,000) ~~- 3~~(1,~~612~~593,000) ------------------ ------------------ $Cash ~~88,453,000~~Flows $from ~~89,674,000~~Financing ~~============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities~~Activities: ~~Trade~~Payments ~~accounts~~to ~~payable~~debtor-in-possession ~~$ 3~~(771,~~582,~~000) $- ~~21,592,000~~credit ~~Accrued~~facility ~~expenses~~Proceeds ~~and~~from ~~other~~pre-petition ~~current~~working ~~liabilities~~- 148,~~286,~~000 7,~~841,~~000 ~~Pre-petition working~~ capital facility ~~12,773,000~~ - ----------------- ------------------ ~~Total~~Net ~~current~~cash ~~liabilities~~(used 30in) provided by financing activities (771,~~641,~~000) 298,~~433~~000,000 ------------ ------ ------ ~~Other Liabilities 397,000 397,000 Long~~-~~term debt under pre~~-~~petition credit facility~~ - ~~10,000,000 Long~~-~~term portion of debtor~~-in-~~possession credit facility 6,610,000~~ - ~~Liabilities subject to settlement under reorganization proceedings 29,274,000~~ - ~~Commitments and Contingencies~~ - --- ~~Stockholders'~~Net ~~Equity:~~(Decrease) ~~Common~~Increase ~~stock,~~in ~~$.01~~cash ~~par value~~(2, ~~50,~~000~~,000~~) ~~shares authorized~~29, ~~19,~~000~~,000~~ ~~shares issued 190~~Cash,~~000~~ ~~190,000~~beginning ~~Additional~~of ~~paid-in~~period ~~capital 63~~5,~~664~~607,000 633,~~664~~336,000 ~~Accumulated deficit (42,323,000) (14,010,000) Treasury stock, at cost, 523,170 shares~~ - - ---------------- ------------------ ~~Total~~Cash, ~~stockholders'~~end ~~equity~~of 21period $ 5,~~531~~605,000 49$ 3,~~844~~365,000 ------------------ ------------ ~~$ 88,453,000 $ 89,674,000 ============ ============~~------

The accompanying notes are an integral part of these consolidated financial statements. 5 WEINER'S STORES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) which management considers necessary to present fairly the financial position of Weiner's Stores, Inc. (the "Company") as of May 5, 2001, and the results of its operations and its cash flows for each of the thirteen week periods ended May 5, 2001 and April 29, 2000. The results of operations for the thirteen-week period ended May 5, 2001 may not be indicative of the results for the entire year. These financial statements should be read in conjunction with the audited financial statements for the fiscal year ended February 3, 2001 and related notes which are included in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2001. Accordingly, significant accounting policies and other disclosures necessary for complete financial statements in conformity with generally accepted accounting principles have been omitted since such items are reflected in the Company's audited financial statements and related notes thereto. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) Reorganization As a result of the Company's poor financial performance, lack of adequate trade support to fund its inventory working capital requirements and lack of sufficient financial flexibility and liquidity, on October 16, 2000 (the "Petition Date") the Company filed a voluntary petition for relief under Chapter 11 ("Chapter 11") of Title 11 of the United States Code in United States Bankruptcy Court for the District of Delaware (the "Court"). Under Chapter 11, the Company is operating its business as a debtor-in-possession, subject to approval of the Court for certain actions. Additionally, a creditor committee was formed and has the right to review and object to any non-ordinary course of business transactions and participate in the formulation of any plan or plans of reorganization. In connection with the Company's Chapter 11 reorganization, the Company has retained an investment banking firm to explore and advise the Company with respect to various financial and business options, including but not limited to identifying sources of additional debt or equity financing and/or possible acquirers of all or substantially all of the Company's assets. There can be no assurance that the Company will succeed in reorganizing under Chapter 11 or that the reorganization will not result in a liquidation. As of the Petition Date, actions to collect pre-petition indebtedness are stayed and certain other contractual obligations may not be enforced against the Company. In addition, the Company may reject executory contracts and lease obligations, and parties affected by these rejections may file claims with the Court in accordance with the reorganization process. Substantially all liabilities as of the Petition Date are subject to settlement under a plan of reorganization to be voted upon by all impaired classes of creditors and equity security holders and approved by the Court. Until a plan of reorganization is confirmed by the Court and becomes effective, it is not possible to predict with certainty the ultimate recoveries for creditors and stockholders, the length of time the Company will be under the protection of Chapter 11, the outcome of the Chapter 11 proceedings in general, the effects of the proceedings on the business of the Company or the extent of the negative effects on the interests of the various creditors and stockholders. While management currently believes the Company has made adequate provision for the liabilities to be incurred in connection with Chapter 11 claims, there can be no assurance as to the final amount of such liabilities or the final impact on such liabilities of a confirmed plan of reorganization. 6 The Consolidated Condensed Financial Statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of the Company's Chapter 11 filing, such realization of assets and liquidation of liabilities is subject to uncertainty. Further, a plan of reorganization could materially change the amounts reported in the consolidated financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of a plan of reorganization. As of June 7, 2001, no plan of reorganization has been submitted to the Court. The ability of the Company to continue as a going concern is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations, its ability to comply with debtor-in-possession agreements and its ability to generate sufficient cash from operations and financing sources to satisfy its obligations. Additionally, the accompanying Consolidated Condensed Financial Statements do not include any adjustments that would be required if the Company were in liquidation. Substantially all of the Company's pre-petition liabilities are subject to compromise under the reorganization proceedings. (3) Long-Term Debt On October 16, 2000, in conjunction with the Company's filing under Chapter 11, the Company entered into a two-year, $35,000,000 Debtor-in-Possession Credit Agreement (the "DIP Credit Agreement") which includes a $15,000,000 sub-facility for the issuance of letters of credit. The DIP Credit Agreement is a revolving credit facility that is secured by substantially all of the Company's assets. The DIP Credit Agreement provides that proceeds may be used solely in the ordinary course of business and for other general corporate purposes during the Company's Chapter 11 reorganization proceedings. Borrowings under the DIP Credit Agreement bear interest at the reference rate thereunder plus 0.75% or, at the option of the Company, the Eurodollar Rate thereunder plus 2.75%. At May 5, 2001, the Company had approximately $6,961,000 of availability under the DIP Credit Agreement, after considering outstanding letters of credit of approximately $4,563,000 and borrowings of $19,923,000. The Company may prepay amounts outstanding under the working capital facility without penalty. The DIP Credit Agreement requires that the Company maintain certain financial covenants and stipulates certain borrowing limitations based on the Company's inventory levels. The DIP Credit Agreement also restricts future liens and indebtedness, sales of assets and dividend payments. Capital expenditures are restricted to $3,000,000 for the period ending February 2, 2002 and $2,000,000 for the period commencing February 3, 2002 and ending on November 2, 2002. At May 5, 2001, the Company was in compliance with all of its covenants under the DIP Credit Agreement. The Company's current liquidity needs are provided by existing cash balances, operating cash flow, the DIP Credit Agreement, and trade credit terms from the vendor and factor community. The Company continually monitors its liquidity position. Due to the Company's poor financial performance and the other factors that resulted in its filing for relief under Chapter 11, any further material adverse development affecting the business of the Company could significantly limit its ability to withstand competitive pressures or adverse economic conditions, to take advantage of expansion opportunities or other significant business opportunities that may arise, to meet its obligations as they become due or to comply with the various covenant requirements under the DIP Credit Agreement. Moreover, the Company is highly dependent upon its ability to obtain merchandise on normal trade terms. Due to the Company's Chapter 11 filing and poor financial performance, some of the Company's key vendors and factors have become more restrictive in granting trade credit either through reducing the Company's credit lines or shortening payment terms. The tightening of credit was one of the factors which contributed to the Company's filing for relief under Chapter 11. 7 (4) Accrued Expenses Accrued expenses consisted of the following:

~~Thirty-Nine~~May ~~Thirty-Nine Weeks Ended Weeks Ended October 28~~5, ~~2000~~2001 ~~October~~February 303, ~~1999~~2001 ------------------- ------------------- ~~Net~~Payroll ~~cash~~and ~~used~~related inbenefits ~~operating activities~~ $ (2800,~~042,~~000) $ (61,~~376~~110,000) ~~-------------------~~Taxes ~~-------------------~~other ~~Cash~~than ~~Flows~~income ~~from~~taxes ~~Investing Activities: Capital expenditures (5~~1,~~322~~418,000) (3598,~~904,~~000) ~~-------------------~~Rent ~~-------------------~~and ~~Net~~other ~~cash~~related ~~used~~costs ~~in investing activities (5~~686,~~322,~~000) (3286,~~904,~~000) ~~-------------------~~Restructuring ~~-------------------~~costs ~~Cash Flows from Financing Activities: Proceeds from debtor-in-possession credit facility 6~~1,~~610~~716,000 ~~Proceeds from pre-petition working capital facility 2~~1,~~773~~489,000 ~~8,000,000~~Layaway ~~-------------------~~deposit ~~-------------------~~payments ~~Net cash provided by financing activities 9~~505,~~383,~~000 81,~~000~~092,000 ~~-------------------~~Other ~~------------------- Net Increase in cash~~ 2,~~019~~122,000 (21,~~280~~509,~~000)~~710 ~~Cash, beginning of period 3,336,000 7,176,000~~ --------------------- --------------------- ~~Cash,~~Total ~~end of period~~ $ 57,~~355~~247,000 $ 46,~~896~~383,000 ===================== =====================

(5) Leases During the thirteen weeks ended May 5, 2001 the Company entered into no new leases and executed renewal options on several locations. Future minimum rental payments have decreased approximately $1,017,000 since February 3, 2001 bringing the total future minimum rental payments under all noncancelable operating leases with initial or remaining lease terms of one year or more to approximately $36,431,000. Under its Chapter 11 proceedings, the Company has the right, subject to Court approval, to assume or reject executory contracts and unexpired leases. In this context, "assumption" means that the Company agrees to perform its obligations to perform further under the contract or lease but is subject to a claim of damages for the breach thereof. Therefore, the commitment mentioned above may not reflect the actual cash outlay in the future. Total rent expense for all operating leases was as follows: Thirteen Thirteen Weeks Ended Weeks Ended May 5, 2001 April 29, 2000 ------------------ ------------------ Minimum rentals $ 2,122,000 $ 2,960,000 Contingent rentals 85,000 121,000 ------------------ ------------------ Total $ 2,207,000 $ 3,081,000 ================== ================== (6) Stock Based Awards At May 5, 2001, there were vested options outstanding to purchase 496,667 shares of common stock at a weighted average price per share of $1.04. (7) Income Taxes The Company provides United States federal income taxes based on its estimated annual effective tax rate for the fiscal year. No income tax provision was recorded in either the first thirteen weeks of 2001 or 2000. The recognition of income tax benefits is affected by limitations on the Company's ability to utilize net operating loss carryforwards. (8) Earnings Per Share Net income per share of common stock is computed based on the weighted average number of shares of common stock and equivalent shares of common stock outstanding during the period. The computation of weighted average shares of common stock outstanding is as follows: 8

~~October~~May 285, ~~2000~~2001 ~~January~~April 29, 2000 ------------------- ------------------- ~~Payroll~~Weighted ~~and~~average ~~related~~number ~~benefits~~of $shares ~~1,171,000~~of $common ~~1,664,000~~stock ~~Taxes~~outstanding ~~other than income taxes 1~~18,~~882~~509,~~000~~710 118,~~371~~509,~~000~~710 ~~Rent~~Common ~~and~~stock ~~other~~equivalent ~~related~~- ~~costs~~shares ~~177,000~~issuable ~~1,943,000~~under ~~Layaway~~the ~~deposits~~stock ~~and~~incentive ~~payments~~plans ~~1,880,000~~ - ~~Reorganization expense 2,374,000~~ - ~~Closed stores 5,252,000~~ - ~~Other 1,550,000 2,863,000~~ ------------------- ------------------- ~~Total~~Weighted $average 14shares of common stock outstanding assuming full dilution 18,~~286~~509,~~000~~710 ~~$ 7~~18,~~841~~509,~~000~~710 =================== ===================

The Company has determined that none of its common stock had appreciated beyond the underlying exercise price of the option based on the most recent trading activity as of May 5, 2001 (resulting in no dilution for the earnings per share computations). ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "anticipate," "believe," "expect," "plan," "intend," "seek," "estimate," "project," "will," "could," "may" and similar expressions are intended to identify forward-looking statements. These statements include, among others, information regarding future operations, future capital expenditures and future net cash flow. Such statements reflect the current views of Weiner's Stores, Inc. (the "Company") with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, general economic and business conditions, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, the ability of the Company and its competitors to predict fashion trends and customer preferences and achieve further market penetration and additional customers, consumer apparel buying patterns, adverse weather conditions, inventory risks due to shifts in market demand, risks related to the Company's reorganization under Chapter 11 and various other matters, many of which are beyond the Company's control. The risks included here are not exhaustive. Other sections of this Report and the Company's other filings with the Securities and Exchange Commission include additional factors that could adversely affect the Company's business and financial performance. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated. Consequently, all of the forward-looking statements made in this Report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effect on the Company or its business or operations. The Company does not undertake and expressly disclaims any obligation to publicly update or revise any such forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. Reorganization As a result of the Company's poor financial performance, lack of adequate trade support to fund its inventory working capital requirements and lack of sufficient financial flexibility and liquidity, on October 16, 2000 (the "Petition Date") the Company filed a voluntary petition for relief under Chapter 11 ("Chapter 11") of Title 11 of the United States Code in United States Bankruptcy Court for the District of Delaware (the "Court"). Under Chapter 11, the Company is operating its business as a debtor-in-possession, subject to approval of the Court for certain actions. Additionally, a creditor committee was formed and has the right to review and object to any non-ordinary course of business transactions and participate in the formulation of any plan or plans of reorganization. In connection with the Company's Chapter 11 reorganization, the Company has retained an investment banking firm to explore and advise the Company with respect to various financial and business options, including but not limited to identifying sources of additional debt or equity financing and/or possible acquirers of all or substantially all of the Company's assets. There can be no assurance that the Company will succeed in reorganizing under Chapter 11 or that the reorganization will not result in a liquidation. 9 As of the Petition Date, actions to collect pre-petition indebtedness are stayed and certain other contractual obligations may not be enforced against the Company. In addition, the Company may reject executory contracts and lease obligations, and parties affected by these rejections may file claims with the Court in accordance with the reorganization process. Substantially all liabilities as of the Petition Date are subject to settlement under a plan of reorganization to be voted upon by all impaired classes of creditors and equity security holders and approved by the Court. Until a plan of reorganization is confirmed by the Court and becomes effective, it is not possible to predict with certainty the ultimate recoveries for creditors and stockholders, the length of time the Company will be under the protection of Chapter 11, the outcome of the Chapter 11 proceedings in general, the effects of the proceedings on the business of the Company or the extent of the negative effects on the interests of the various creditors and stockholders. While management currently believes the Company has made adequate provision for the liabilities to be incurred in connection with Chapter 11 claims, there can be no assurance as to the final amount of such liabilities or the final impact on such liabilities of a confirmed plan of reorganization. The Consolidated Condensed Financial Statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of the Company's Chapter 11 filing, such realization of assets and liquidation of liabilities is subject to uncertainty. Further, a plan of reorganization could materially change the amounts reported in the consolidated financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of a plan of reorganization. As of June 7, 2001 no plan of reorganization has been submitted to the Court. The ability of the Company to continue as a going concern is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations, its ability to comply with debtor-in-possession agreements and its ability to generate sufficient cash from operations and financing sources to satisfy its obligations. Additionally, the accompanying Consolidated Condensed Financial Statements do not include any adjustments that would be required if the Company were in liquidation. Substantially all of the Company's pre-petition liabilities are subject to compromise under the reorganization proceedings. Results of Operations Thirteen Weeks Ended May 5, 2001 Compared to Thirteen Weeks Ended April 29, 2000 Total net sales for the first quarter of 2001 decreased 26.3% to $48,805,000 from $66,207,000 in the first quarter of 2000. The decrease is primarily attributable to the closing of 44 underperforming stores in October 2000 in connection with the Company's Chapter 11 reorganization and a 4.6% comparable stores sales decrease over such period, offset by the six new stores opened after the first quarter of 2000. Further, due to the adoption of Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"), the Company, in the first quarter of fiscal 2000, recognized an additional $851,000 in revenue related to those layaway transactions held as accounts receivable at the end of fiscal year 1999. Leased department revenue in the first quarter of 2001 decreased 44.2% to $120,000 from $215,000. The decrease is primarily attributable to the store closings discussed above. Further, during the first quarter of fiscal 2000, the Company tested a leased department for unbranded shoes in eight stores. The leased shoe department was unsuccessful and the lease was discontinued. Cost of goods sold for the first quarter of 2001 decreased $10,176,000 or 24.0% to $32,179,000 from $42,355,000 in the first quarter of 2000. As a percentage of revenues, cost of goods sold for the first quarter 2001 increased to 65.8% from 63.8% in the first quarter of 2000. Gross margin decreased $7,321,000 or 30.4% to $16,746,000 from $24,067,000 in the first quarter of 2000. Gross margin as a percentage of sales decreased to 34.2% from 36.2% in the first quarter of 2000. The decreases in cost of goods sold and gross margin dollars were primarily attributable to the store closings and sales decline discussed above. The decrease in gross margin percentage was primarily attributable to increased promotional markdowns, offset by decreased seasonal markdowns and higher initial markup. 10 Selling, administrative and other operating costs decreased to $16,965,000 in the first quarter of 2001 from $23,836,000 in the first quarter of 2000. The decrease is primarily attributable to the store closings discussed above. As a percentage of revenues, selling, administrative and other operating costs in the first quarter of 2001 decreased to 34.7% from 35.9% in the first quarter of 2000. This decrease is primarily attributable to the expense reduction and control programs the Company has implemented in the Chapter 11 process. In the first quarter of 2001 the Company incurred $939,000 in reorganization expense attributable to its filing under Chapter 11. This expense is primarily attributable to professional fees and the Company's employee Retention Plan, which was adopted in connection with the Company's Chapter 11 reorganization. There was no reorganization expense in the first quarter of 2000. The Company incurred an operating loss of $1,158,000 in the first quarter of 2001 compared to operating income of $231,000 in the first quarter of 2000. Had the Company not incurred reorganization expense, the operating loss for the first quarter of 2001 would have been $219,000. The Company recorded interest expense of $505,000 in the first quarter of 2001 compared to $397,000 in the first quarter of 2000. The increase is primarily attributable to an increase in average borrowing in the first quarter of 2001, offset by the reduction of the effective interest rate. The Company recorded a cumulative effect adjustment for a change in accounting of $294,000 in the first quarter of 2000 due to the adoption of SAB 101. The change reflects a restatement for those layaways held as accounts receivable at the end of fiscal year 1999. The Company provides United States federal income taxes on its estimated annual effective tax rate for the fiscal year. No income tax provision was recorded in either the first quarter of 2001 or the first quarter of 2000. The recognition of income tax benefits is affected by limitations on the Company's ability to utilize net operating loss carryforwards. The Company's net loss for the first quarter of 2001 was $1,663,000, or $0.09 per share of its common stock, par value $.01 per share ("Common Stock"), compared to a net loss of $460,000, or $0.02 per share of Common Stock, for the first quarter of 2000. Liquidity and Capital Resources Cash from Operations and Working Capital The Company's cash provided by operations was $852,000 during the thirteen weeks ended May 5, 2001 compared to cash used in operations of $6,378,000 during the thirteen weeks ended April 29, 2000. The decrease in cash used in operations is primarily attributable to the Company's efforts to control inventory levels. The Company's primary source of liquidity has been borrowings under its credit agreement in effect prior to the Petition Date and the current DIP Credit Agreement referred to below. DIP Credit Agreement On October 16, 2000, in conjunction with the Company's filing under Chapter 11, the Company entered into a two-year, $35,000,000 Debtor-in-Possession Credit Agreement (the "DIP Credit Agreement") which includes a $15,000,000 sub-facility for the issuance of letters of credit. The DIP Credit Agreement is a revolving credit facility that is secured by substantially all of the Company's assets. The DIP Credit Agreement provides that proceeds may be used solely in the ordinary course of business and for other general corporate purposes during the Company's Chapter 11 reorganization proceedings. Borrowings under the DIP Credit Agreement bear interest at the reference rate thereunder plus 0.75% or, at the option of the Company, the Eurodollar Rate thereunder plus 2.75%. 11 At May 5, 2001 the Company had approximately $6,961,000 of availability under the DIP Credit Agreement, after considering outstanding letters of credit of approximately $4,563,000 and borrowings of $19,923,000. The Company may prepay amounts outstanding under the working capital facility without penalty. The DIP Credit Agreement requires that the Company maintain certain financial covenants and stipulates certain borrowing limitations based on the Company's inventory levels. The DIP Credit Agreement also restricts future liens and indebtedness, sales of assets and dividend payments. Capital expenditures are restricted to $3,000,000 for the period ending February 2, 2002 and $2,000,000 for the period commencing February 3, 2002 and ending on November 2, 2002. At May 5, 2001, the Company was in compliance with all of its covenants under the DIP Credit Agreement. The Company's current liquidity needs are provided by existing cash balances, operating cash flow, the DIP Credit Agreement, and trade credit terms from the vendor and factor community. The Company continually monitors its liquidity position. Due to the Company's poor financial performance and the other factors that resulted in its filing for relief under Chapter 11, any further material adverse development affecting the business of the Company could significantly limit its ability to withstand competitive pressures or adverse economic conditions, to take advantage of expansion opportunities or other significant business opportunities that may arise, to meet its obligations as they become due or to comply with the various covenant requirements under the DIP Credit Agreement. Moreover, the Company is highly dependent upon its ability to obtain merchandise on normal trade terms. Due to the Company's Chapter 11 filing and poor financial performance, some of the Company's key vendors and factors have become more restrictive in granting trade credit either through reducing the Company's credit lines or shortening payment terms. The tightening of credit was one of the factors which contributed to the Company's filing for relief under Chapter 11. Capital Expenditures The Company's capital expenditures are expected to be approximately $1,000,000 in fiscal 2001 primarily for the remodeling of existing stores, fixtures and enhancements of the management information systems. The Company expects to fund these capital expenditures from cash flows from operations and borrowings under the DIP Credit Agreement. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings The Company is party to ordinary routine litigation, arbitration and proceedings incidental to its business, the disposition of which is not expected to have a material adverse effect on the Company's business or financial condition. Due to the Company's filing under Chapter 11, certain of such cases have been stayed pursuant to the automatic stay issued by the Court. Under Chapter 11, these cases require Court approval or must be specifically exempt for litigation proceedings to continue. ITEM 2. Changes in Securities and Use of Proceeds None. ITEM 3. Defaults Upon Senior Securities None. 12 ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibit No. Description ------ ----------- 3.1 Amended and Restated Certificate of Incorporation of the Company. 3.2 Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's registration statement on Form 10 filed April 14, 1998) (b) Reports on Form 8-K During the first quarter of fiscal 2001, the Company filed reports on Form 8-K on March 29, 2001 and April 20, 2001 to disclose, pursuant to Regulation FD, for informational purposes only, the certificate of compliance and certain financial statements contained in the Company's reports dated March 28, 2001 and April 20, 2001, respectively, to the United States Trustee in connection with the Company's reorganization under Chapter 11. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WEINER'S STORES, INC. June 8, 2001 By: /s/ Michael S. Marcus ------------ --------------------- (Date) Michael S. Marcus Vice President, Chief Financial Officer, Treasurer and Secretary 14 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 3.1 Amended and Restated Certificate of Incorporation of the Company. 3.2 Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's registration statement on Form 10 filed April 14, 1998) 15

Thirteen Thirteen Thirty-Nine Thirty-Nine Weeks Ended Weeks Ended Weeks Ended Weeks Ended October 28, 2000 October 30, 1999 October 28, 2000 October 30, 1999 ---------------- ------------------ ----------------- ------------------ Minimum rentals $ 2,989,000 $ 2,796,000 $ 9,061,000 $ 8,174,000 Contingent rentals 9,000 116,000 259,000 369,000 ---------------- ------------------ ----------------- ------------------ Total $ 2,998,000 $ 2,912,000 $ 9,320,000 $ 8,543,000 ================ ================== ================= ==================

Thirteen Weeks Ended Thirty-Nine Weeks Ended -------------------------------- ------------------------------- October 28, October 30, October 28, October 30, 2000 1999 2000 1999 ------------- --------------- ------------- -------------- Weighted average number of shares of common stock outstanding 18,509,710 18,476,830 18,509,710 18,476,830 Common stock equivalents - shares issuable under the stock incentive plans - 19,829 - 9,224 ------------- --------------- ------------- -------------- Weighted average number of shares of common stock outstanding, assuming full dilution 18,509,710 18,496,659 18,509,710 18,486,054 ============= =============== ============= ==============

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