8-K 1 nyc525160.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) September 21, 2004 (September 20, 2004) Loehmann's Holdings Inc. ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 000-31787 13-4129380 ------------------------------------------------------------------------------- (State or other jurisdiction of (Commission (IRS Employer incorporation) File Number) Identification No.) 2500 Halsey Street Bronx, NY 10461 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (718) 409-2000 ---------------------------- ------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 8.01. Other Events. In connection with a proposed private placement of debt securities (the "Notes") by Loehmann's Capital Corp. ("LCC"), a special purpose corporation formed for the sole purpose of issuing the Notes in connection with the financing of the merger (the "Merger") of DAH Merger Corporation ("DAH Merger") with and into Loehmann's Holdings Inc. ("Loehmann's"), LCC has prepared and distributed a confidential offering circular ("Offering Circular"). The Notes offered by LCC pursuant to the Offering Circular have not been and will not be registered under the Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold absent registration or an applicable exemption from the registration requirements. The filing of the information in this report is not intended to, and does not, constitute a determination or admission by Loehmann's that the information in this report is material or complete or that investors or others should consider this information before making an investment decision with respect to any security of Loehmann's. Loehmann's has disclosed certain information pursuant to the Offering Circular that may be considered material non-public information. This information is set forth below. NON-GAAP FINANCIAL MEASURES EBITDA represents net income plus interest expense, income taxes and depreciation and amortization. Adjusted EBITDA is calculated as EBITDA: (a) minus (i) the net proceeds to Loehmann's from the gain on the sale of a building in fiscal year 2002 and (ii) a gain on discharge of debt in the period from January 30, 2000 to October 9, 2000; and (b) plus (i) a write off of deferred financing fees in fiscal year 2003, (ii) charges for store closings in fiscal year 2001 and fiscal year 2002, (iii) reorganization costs and fresh start adjustments in fiscal year 1999 and in the period from January 30, 2000 to October 9, 2000, and (iv) fees and expenses related to the Merger and the related transactions. Loehmann's management uses EBITDA and adjusted EBITDA, in addition to net income, operating income and cash flows from operating activities, to assess Loehmann's performance and believes it is important for investors and others to be able to evaluate Loehmann's using the same measures used by management. In addition, Loehmann's management uses adjusted EBITDA to establish targets for certain executive compensation plans. Loehmann's management believes that EBITDA and adjusted EBITDA are important supplemental measures of operating performance because EBITDA and adjusted EBITDA provide investors and others with an indication of Loehmann's ability to fund Loehmann's operating capital expenditures and debt service requirements through earnings. In addition, Loehmann's management uses adjusted EBITDA because management believes adjusted EBITDA adds back and subtracts items to and from net income which management believes are generally not indicative of the core operating performance of Loehmann's continuing operations. Loehmann's management also believes that EBITDA and adjusted EBITDA are supplemental measurement tools used by analysts and investors to help evaluate a company's overall operating performance by including only transactions related to core cash operating business activities. Loehmann's management believes that the net proceeds received by Loehmann's from the sale of a building in fiscal year 2002 and the fees and expenses related to the Merger are not related to Loehmann's core business. Loehmann's management believes that the write off of deferred financing fees and charges for store closings will not be repetitive in nature over the long-term and that it is therefore meaningful to adjust for these items in calculating Loehmann's adjusted EBITDA. Loehmann's management believes that it is informative to adjust for these items so that Loehmann's core operating performance can be easily compared to that of other companies that have not incurred such a charge or write off. Reorganization costs for the periods presented include items such as the write-off of assets at closed stores, professional fees incurred in connection with Loehmann's reorganization and emergence from bankruptcy, lease rejection claims and related expenses. Loehmann's management does not believe these reorganization costs or the gain on extinguishment of debt are indicative of the core operating performance of Loehmann's continuing operations following Loehmann's reorganization. Loehmann's therefore believes that it is appropriate to adjust for these costs in calculating Loehmann's adjusted EBITDA to illustrate the earnings generated by Loehmann's ongoing business activities. Loehmann's management prepares adjusted EBITDA by adjusting EBITDA to eliminate the impact of a number of items that management does not consider indicative of Loehmann's ongoing operating performance. Investors and others are encouraged to evaluate each adjustment and the reasons Loehmann's management considers such adjustments appropriate for supplemental analysis. As an analytical tool, adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating adjusted EBITDA, investors and others should be aware that in the future Loehmann's may incur expenses similar to the adjustments in this presentation. Loehmann's presentation of adjusted EBITDA should not be construed as an inference that Loehmann's future results will be unaffected by unusual or non-recurring items. EBITDA and adjusted EBITDA have limitations as analytical tools, and investors and others should not consider EBITDA and adjusted EBITDA in isolation, or as substitutes for analysis of the results of Loehmann's as reported under GAAP. Some of these limitations are: o they do not reflect Loehmann's cash expenditures, or future requirements for capital expenditures or contractual commitments; o they do not reflect changes in, or cash requirements for, Loehmann's working capital needs; o they do not reflect the significant expenses associated with Loehmann's financings, or the cash requirements necessary to service required payments under those financings; o although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements; o they are not adjusted for all non-cash income or expense items that are reflected in Loehmann's statements of cash flows; and o other companies in Loehmann's industry may calculate these measures differently than LCC does, limiting the usefulness of such measures as comparative measures. EBITDA and adjusted EBITDA as calculated by Loehmann's management are not necessarily comparable to similarly titled measures reported by other companies. In addition, EBITDA and adjusted EBITDA are not prepared in accordance with GAAP, should not be considered as alternatives for net income, operating income, net cash provided by continuing operations or Loehmann's other financial information determined under GAAP and should not be considered as measures of Loehmann's profitability or liquidity. Loehmann's management believes the line on Loehmann's consolidated statement of operations entitled net income is the most directly comparable GAAP measure to EBITDA and adjusted EBITDA. The following table reconciles EBITDA and adjusted EBITDA to net income for each of the respective periods:

BUSINESS Attractive Customer Base Loehmann's core customer base is dominated by women between the ages of 30 and 55 with household incomes in excess of $100,000. Loehmann's maintains a database that is generated by Loehmann's "Insider Club," Loehmann's no-fee loyalty program. Loehmann's Insider Club database contains more than 1.2 million "active customers," defined as customers who have purchased merchandise at Loehmann's stores in the past 12 months. The Insider Club customers accounted for approximately 80% of Loehmann's net sales in fiscal year 2003. Among Loehmann's active customers, there are approximately 200,000 "Best Customers" who average approximately $1,000 in annual purchases, purchase goods an average of approximately 12 times per year and represent approximately 50% of Loehmann's net sales. Many of Loehmann's Best Customers have been Loehmann's customers for over 10 years. The size of Loehmann's Best Customer group increased by 24% during the past two years, and that group's average individual spending increased 8% during the same time period. Loehmann's management believes that Loehmann's long-standing and loyal customer base provides Loehmann's with a significant competitive advantage. Strong Relationships with Wholesalers and Designers Loehmann's management has cultivated long-standing relationships with vendors, many of whom have been selling merchandise to Loehmann's for over 10 years. Loehmann's currently offers many highly recognizable American and European brand names, and no single vendor accounts for more than 4% of Loehmann's annual net sales. Increased Comparable Store Sales Loehmann's management works to drive positive comparable store sales by expanding Loehmann's active customer database and increasing the annual average purchases of Loehmann's customers. Since 2001, through word of mouth, prospecting, point of sale data capture and customer retention programs, Loehmann's has successfully increased the size of Loehmann's active customer database by 36% to more than 1.2 million names. The percentage of net sales derived from Loehmann's active customers has increased from approximately 70% in fiscal year 2001 to approximately 80% in fiscal year 2003. During the same period, the number of Loehmann's Best Customers increased by 24% to approximately 200,000 and the average annual purchases of Loehmann's Best Customers increased by 8% to approximately $1,000. In the first six months of fiscal 2004, Loehmann's comparable store sales grew 7.6% compared to the first six months of fiscal year 2003. As of August 31, 2004, Loehmann's has generated positive comparable store sales growth for ten consecutive months. Disciplined Growth Strategy for Traditional Stores Since February 3, 2002, Loehmann's has opened eight new stores. Six of these stores have been open for more than one full year, each of which was profitable on a store level basis for the twelve month period ended July 31, 2003. Development of Free-Standing Shoe Stores Shoes are destination items at traditional Loehmann's stores and are Loehmann's fastest growing product category. Loehmann's management believes there is a significant opportunity to expand this business as no national discount retailer of shoes focusing solely on high-end brands currently exists. Loehmann's management began to implement the strategy of developing free-standing shoe stores in November 2003 and since then has opened shoe stores next to Loehmann's existing traditional stores in San Francisco, California and White Plains, New York. Both stores have exceeded Loehmann's sales and store contribution targets from inception. These shoe stores have allowed Loehmann's to fill the selling space that was dedicated to shoes in Loehmann's traditional stores with high-margin apparel. Loehmann's management believes these new shoe stores will allow Loehmann's to increase overall sales volume and bring new customers into Loehmann's traditional stores. Loehmann's management plans to open three to four shoe stores per year over the next five years at locations adjacent to or within close proximity to Loehmann's traditional stores to capitalize on Loehmann's brand equity. CERTAIN RELATIONSHIPS Upon the consummation of the Merger, Loehmann's intends to enter into management agreements with each of Crescent Capital Investments, Inc. ("Crescent") and Casas, Benjamin & White, LLC ("CBW") pursuant to which each of Crescent and CBW will provide advisory services to Loehmann's with respect to, among other things, strategic planning; obtaining, structuring and negotiating financing; selecting professional service providers; and corporate transactions such as acquisitions and dispositions of assets and mergers. Each of the management agreements will remain in effect until the earliest to occur of: (i) the sale of Loehmann's to a non-affiliate, (ii) an initial public offering of Loehmann's common stock, (iii) gross negligence or willful misconduct by Crescent or CBW, as applicable, (iv) the dissolution of Loehmann's, (v) the mutual agreement of the parties, or (vi) the fifth anniversary of the consummation of the Merger. Pursuant to its respective management agreement, each of Crescent and CBW will receive a fixed annual advisory fee. Loehmann's, Crescent and CBW intend to fix the combined annual advisory fees to Crescent and CBW at an amount approximately equal to the historical annual cost to Loehmann's associated with being a public company, which amount will not exceed $420,000. CAPITAL LEASE OBLIGATIONS Loehmann's OpCo has financed the purchase of certain equipment through capital leases and as a result, Loehmann's liabilities include outstanding capital lease obligations of approximately $570,000. LEASES The following table summarizes lease expirations and any renewal options as of July 31, 2004:

LEGAL PROCEEDINGS On September 14, 2004, the plaintiffs in the consolidated purported class action pending against Loehmann's and its directors in the Court of Chancery of the State of Delaware in and for New Castle County filed a Motion for Expedited Proceeding and Discovery (the "Motion"). In the Motion, the plaintiffs indicated that they plan to file a motion for preliminary injunction to enjoin the Merger on the grounds that (i) Loehmann's and its directors allegedly failed to disclose material facts concerning the Merger to Loehmann's stockholders in the definitive proxy statement filed with the Securities and Exchange Commission and mailed to Loehmann's stockholders (the "Proxy Statement") in connection with the Merger and (ii) the members of Loehmann's board of directors allegedly failed to put Loehmann's stockholders' interests above the interests of the members of the board and failed to maximize stockholder value in agreeing to the terms of the Merger. The plaintiffs asked the court (i) to schedule a hearing on a motion for preliminary injunction in advance of the stockholders meeting, currently scheduled for October 13, 2004, to approve the Merger and (ii) to order expedited discovery so that discovery can be completed before the hearing. On September 17, 2004, the defendants filed a brief asking the court to deny the plaintiff's Motion. On September 15, 2004, the plaintiffs filed a Consolidated Amended Complaint (the "Amended Complaint") that names Loehmann's and Loehmann's directors as defendants and alleges among other things that the defendants breached their fiduciary duties to Loehmann's stockholders by approving the terms of the Merger. The Amended Complaint also includes allegations that Loehmann's failed to disclose in the Proxy Statement allegedly material information relating to the opinion delivered by and the financial analysis conducted by Peter J. Solomon Company, L.P. in connection with the board's consideration of the fairness of the proposed Merger to Loehmann's stockholders. The Amended Complaint seeks, among other things, certification as a class action, injunctive relief (including enjoining the Merger or rescission if the Merger is consummated), and compensatory and/or rescissory damages. The defendants have not yet answered the Amended Complaint. The defendants intend to vigorously defend against the allegations set forth in the Amended Complaint. The Amended Complaint does not name Crescent as a defendant. UNAUDITED CONSOLIDATING FINANCIAL INFORMATION Set forth below is certain unaudited consolidating financial information for Loehmann's and its subsidiaries which was included in the Offering Circular.

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 hereunto duly authorized. LOEHMANN'S HOLDINGS INC. By: /s/ Robert Glass -------------------------- Name: Robert Glass Title: Chief Operating Officer, Chief Financial Officer and Secretary Date: September 21, 2004

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