-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FdMObJ6FFrIkg1K/lnCiyEqeUKR6pkn8E1VPCldCBimi0ghUJCh5cPGH06B4WVBX nSEarWPwVs1gNhRTCy5Cgw== 0000950112-96-002103.txt : 19960624 0000950112-96-002103.hdr.sgml : 19960624 ACCESSION NUMBER: 0000950112-96-002103 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960621 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960621 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAYLOR ANN STORES CORP CENTRAL INDEX KEY: 0000874214 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 133499319 STATE OF INCORPORATION: DE FISCAL YEAR END: 0202 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10738 FILM NUMBER: 96584003 BUSINESS ADDRESS: STREET 1: 142 WEST 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125413300 8-K 1 ANNTAYLOR STORES CORP. FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: June 21, 1996 (Date of earliest event reported) ANNTAYLOR STORES CORPORATION ANNTAYLOR, INC. ---------------------------- ----------------------------- (Exact name of registrant as (Exact name of registrant as specified in its charter) specified in its charter)
Delaware 1-10738 13-3499319 Delaware 1-11980 51-0297083 -------- ------- ---------- -------- ------- ----------------- (State or other (Commission (IRS Employer (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) jurisdiction of File Number) Identification No.) incorporation) incorporation)
------------------------------------------------------------------------------ 142 West 57th Street New York, New York 10019 (212) 541-3300 (Address including zip code, and telephone number including area code of registrants' principal executive offices) Item 5. Other Events. ------------ As previously reported, AnnTaylor Stores Corporation, a Delaware corporation (the "Company"), and its wholly owned subsidiary, AnnTaylor, Inc., a Delaware corporation ("Ann Taylor"), have entered into a definitive agreement (the "Agreement") with Cygne Designs, Inc., a Delaware corporation ("Cygne"), and its wholly owned subsidiary, Cygne Group (F.E.) Limited, a Hong Kong corporation, regarding the acquisition (the "Acquisition") of (i) Cygne's entire interest in Ann Taylor's direct sourcing joint venture with Cygne, known as CAT US, Inc. and C.A.T. (Far East) Limited, and (ii) the assets of Cygne's AnnTaylor Woven Division that are used for sourcing merchandise for Ann Taylor. Consummation of the Acquisition is subject to the satisfaction of various conditions. It is currently anticipated that the Acquisition will close in August 1996, although there can be no assurance that the transaction will be consummated or that it will be consummated within the anticipated time frame. Attached hereto and incorporated by reference herein are: (i) Exhibit 1 - the audited combined financial statements of CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne as of 2 February 3, 1996 and January 28, 1995 and for each of the fiscal years then ended together with the Report of Independent Auditors attached thereto and (ii) Exhibit 2 - the unaudited historical and pro forma combined balance sheets, statements of operations and notes thereto of the Company for the fiscal quarter ended May 4, 1996 which give effect to the Acquisition. 3 Item 7. Financial Statements and Exhibits. --------------------------------- (c) Exhibits: -------- 1. Combined financial statements of CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne and Report of Independent Auditors. 2. Unaudited historical and pro forma combined balance sheets, statements of operations and notes thereto of the Company. 4 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 hereunto duly authorized. ANNTAYLOR STORES CORPORATION By:/s/ WALTER J. PARKS --------------------------------------- Walter J. Parks Senior Vice President - Finance and Principal Accounting Officer Date: June 21, 1996 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 hereunto duly authorized. ANNTAYLOR, INC. By:/s/ WALTER J. PARKS --------------------------------------- Walter J. Parks Senior Vice President - Finance and Principal Accounting Officer Date: June 21, 1996 EXHIBIT INDEX ------------- Exhibit Description ----------- Number -------- 1 Combined financial statements of CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Wo- ven Division of Cygne and Report of Independent Auditors. 2 Unaudited historical and pro forma combined balance sheets, statements of operations and notes thereto of the Company. EX-1 2 EXHIBIT 1 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Combined Financial Statements CONTENTS Report of Independent Auditors....................................... F-2 Combined Balance Sheets - February 3, 1996 and January 28, 1995...... F-3 Combined Statements of Income - Years ended February 3, 1996 and January 28, 1995................................................... F-4 Combined Statements of Cash Flows - Years ended February 3, 1996 and January 28, 1995............................................... F-5 Notes to Combined Financial Statements............................... F-6 F-1 Report of Independent Auditors Cygne Designs, Inc. We have audited the accompanying combined balance sheets of CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary (subsidiaries of Cygne Designs, Inc. ("Cygne"), referred to hereafter as "CAT", and the AnnTaylor Woven Division of Cygne, collectively the "Companies" at February 3, 1996 and January 28, 1995 and the related combined statements of income and cash flows for the years then ended. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Companies at February 3, 1996 and January 28, 1995, and the combined results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ ENRST & YOUNG LLP New York, New York April 15, 1996, except for Note 5, as to which the date is May 15, 1996 F-2 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Combined Balance Sheets FEBRUARY JANUARY 3, 1996 28, 1995 --------------------------- (In Thousands) ASSETS Current assets: Cash $ 200 $ 1,735 Accounts receivable--AnnTaylor, Inc. (less allowance of $379 in 1995 and $1,427 in 1994) 22,284 13,002 Inventory 21,728 18,486 Other current assets including deferred income taxes of $198 and $395 291 522 --------------------------- Total current assets 44,503 33,745 Fixed assets, net 4,315 2,873 Other long term assets 187 289 =========================== Total assets $49,005 $36,907 =========================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $21,090 $10,391 Credit facility and current portion of long-term debt 1,576 1,667 Accrued expenses 1,124 2,966 Income taxes payable 981 1,384 --------------------------- Total current liabilities 24,771 16,408 Long-term debt, less current portion 684 182 --------------------------- Total liabilities 25,455 16,590 Stockholders' equity 23,550 20,317 =========================== Total liabilities and stockholders' equity $49,005 $36,907 =========================== See accompanying notes. F-3 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Combined Statements of Income FEBRUARY JANUARY 3, 1996 28, 1995 ------------------------- (In Thousands) Net sales $231,385 $193,038 Cost of goods sold 204,236 167,428 ------------------------- Gross profit 27,149 25,610 Selling, general and administrative expenses 17,387 15,019 ------------------------- Income from operations 9,762 10,591 Interest expense 1,088 707 ------------------------- Income before provision for income taxes 8,674 9,884 Provision for income taxes 2,637 3,232 ========================= Net income $ 6,037 $ 6,652 ========================= See accompanying notes. F-4 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Combined Statements of Cash Flows FEBRUARY JANUARY 3, 1996 28, 1995 --------------------------- (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $6,037 $6,652 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 346 279 Deferred taxes 197 (395) Changes in operating assets and liabilities: Accounts receivable--AnnTaylor, Inc. (9,500) (1,611) Inventory (3,242) (12,954) Other current assets 34 (127) Due to/from Cygne Designs, Inc. and affiliates (1,371) 2,470 Accounts payable 9,484 1,491 Accrued expenses 801 (347) Amounts due to AnnTaylor, Inc.--sales adjustment (2,643) 2,014 Income taxes payable (403) 704 --------------------------- Net cash used in operating activities (260) (1,824) --------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (981) (1,947) Other 102 (251) --------------------------- Net cash used in investing activities (879) (2,199) --------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net (repayments) borrowings (396) 1,483 --------------------------- Net cash (used in) provided by financing activities (396) 1,483 --------------------------- Net decrease in cash (1,535) (2,540) Cash at the beginning of the period 1,735 4,275 =========================== Cash at the end of the period $ 200 $1,735 =========================== SUPPLEMENTAL DISCLOSURES Income taxes paid $1,615 $1,150 Interest paid 1,088 707 Equipment acquired through capital leases 807 - See accompanying notes. F-5 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements 1. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The combined financial statements include the accounts of CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary referred to hereafter as "CAT", and Cygne Designs, Inc.'s ("Cygne") wholly-owned AnnTaylor Woven Division (the "Division"), collectively the "Companies." The Companies are affiliated by commonality of operations and ownership. CAT US Inc. was incorporated in Delaware on May 11, 1992. C.A.T. (Far East) Limited was incorporated in Hong Kong on March 10, 1992. CAT US Inc. and C.A.T. (Far East) Limited commenced operations in June 1992. C.A.T. Italy S.r.l. was incorporated on July 26, 1994 and is a wholly-owned subsidiary of C.A.T. (Far East) Limited. Cygne is a 60% stockholder and AnnTaylor, Inc. ("AnnTaylor") is a 40% stockholder of CAT. All material intercompany balances and transactions have been eliminated. On April 8, 1996, AnnTaylor agreed in principle to acquire Cygne's 60% interest in CAT and the net assets, as defined, of the Division. The accompanying combined balance sheets at February 3, 1996 and January 28, 1995, and the combined statements of operations and cash flows for the years then ended reflect the Companies historical cost basis prior to the AnnTaylor acquisition. Certain corporate expenses incurred by Cygne were allocated to the Division including officers' and administrative salaries, occupancy costs, depreciation and amortization, professional fees and other selling, general and administrative expenses amounting to $449,000 and $2,316,000, $1,167,000 and $730,000, $212,000 and $200,000, $343,000 and $117,000, and $5,806,000 and $4,722,000, in fiscal 1995 and fiscal 1994, respectively. Costs charged to the Division for these services are allocated based on specific identification of direct expenses, where applicable, or the Division's proportionate share of such expenses. Interest expense, amounting to $1,088,000 and $707,000 for fiscal 1995 and fiscal 1994, respectively, was allocated at market rates to the Division for intercompany indebtedness to Cygne. Management believes such expense allocations are reasonable and proper. F-6 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Amounts transferred to/from Cygne in fiscal 1995 and fiscal 1994 represent Cygne's investment in and advances to the Division on a historical basis adjusted for equity in operations and intercompany transactions. Expenses allocated to the Division not settled become a permanent component of Cygne's investment. FISCAL YEAR The Companies' fiscal year ends on the Saturday nearest to January 31. PRINCIPAL BUSINESS ACTIVITY Pursuant to an agreement, CAT is engaged in the design, manufacturing and sale of women's apparel exclusively to AnnTaylor. This agreement further provides that AnnTaylor will pay to CAT the delivered cost for the apparel, plus a commission and reimbursement of certain expenses, as defined. Either party may terminate this agreement upon six months notice. The Division's principal operation is to source woven merchandise for AnnTaylor. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make 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. REVENUE Revenue is recognized upon shipment of merchandise. F-7 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORY Inventory is stated at the lower of cost (determined on a first-in, first-out basis) or market. DEPRECIATION AND AMORTIZATION Depreciation and amortization of equipment, furniture and fixtures is provided for by the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the term of the related lease. FOREIGN CURRENCY TRANSLATION The Companies consider the United States dollar to be the functional currency for its operations in Hong Kong and Italy. INCOME TAXES Deferred income taxes are calculated on the liability method. 2. INVENTORY Inventory consists of the following: FEBRUARY JANUARY 3, 1996 28, 1995 ----------------------------- Fabric $17,212,000 $12,093,000 Finished goods, including in-transit inventory 4,516,000 6,393,000 ============================= $21,728,000 $18,486,000 ============================= F-8 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements (continued) 3. FIXED ASSETS Fixed assets are stated at cost, less accumulated depreciation and amortization and are summarized below together with estimated useful lives used in computing depreciation and amortization: FEBRUARY JANUARY ESTIMATED 3, 1996 28, 1995 USEFUL LIVES ----------------------------------- Equipment, furniture and fixtures $3,990,000 $2,535,000 3-10 Leasehold improvements 1,792,000 1,458,000 3-15 ------------------------ 5,782,000 3,993,000 Less accumulated depreciation and amortization 1,467,000 1,120,000 ======================== $4,315,000 $2,873,000 ======================== 4. LEASES The future minimum lease payments due (on a fiscal year basis) under a noncancellable operating lease for office space in Hong Kong is $360,000 in 1996. The lease stipulates that fair market rent shall be paid from January 1997 through January 1999. Total rent expense for fiscal 1995 and fiscal 1994 was approximately $628,000 and $225,000, respectively. In addition, CAT was charged rent of approximately $89,000 and $98,000, respectively, by Cygne under an office sharing arrangement for these respective periods. 5. CREDIT FACILITIES CAT has an agreement with a bank whereby the bank provides CAT with letters of credit in an amount not to exceed $40,000,000, including loans against imports up to $8,000,000 at an interest rate of 0.5% above the prime rate of 8.25% at February 3, 1996. The facility is subject to periodic review by the bank. Open letters of credit at February 3, 1996 amounted to approximately $27,925,000. F-9 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements (continued) 5. CREDIT FACILITIES (CONTINUED) The bank has a first lien over all of CAT's accounts receivable and inventory. AnnTaylor has provided the bank with a $4,000,000 standby letter of credit. Cygne has guaranteed 60% of the credit facility. In addition, 60% of CAT US Inc.'s stock owned by Cygne has been pledged to the bank as collateral for CAT US Inc.'s credit facility. The CAT (Far East) Limited stock owned by Cygne has been pledged for the Cygne line of credit facility from the same bank. CAT's facility is provided by the same bank that provides Cygne with its primary working capital facility. At February 3, 1996, Cygne was not in compliance with its credit agreement's working capital requirements, current ratio, leverage ratio and tangible net worth financial covenants. The bank has permanently waived all defaults under Cygne's credit agreement. In addition, on May 15, 1996, Cygne received a commitment letter from the bank to provide them with a new credit facility to replace the existing facility. Based on the agreement between AnnTaylor and CAT, AnnTaylor shall reimburse CAT for any finance charges incurred by CAT in financing AnnTaylor merchandise purchases. Finance charges reimbursable by AnnTaylor for fiscal 1995 and 1994, amounted to approximately $627,000 and $ 541,000, respectively. Such amounts were netted against amounts due to AnnTaylor. The Companies also have equipment financing outstanding at February 3, 1996 and January 28, 1995 of $1,173,000 and $366,000, respectively. F-10 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements (continued) 6. INCOME TAXES For financial reporting purposes, income before income taxes includes the following: YEAR ENDED FEBRUARY JANUARY 3, 1996 28, 1995 ---------------------------- Pretax income: United States $4,944,000 $6,681,000 Foreign 3,730,000 3,203,000 ---------------------------- $8,674,000 $9,884,000 ============================ CAT files its own Federal income tax return. The Division is included in Cygne's Federal income tax return. The Division is charged by Cygne for taxes as if it filed a separate return. Significant components of the provision for income taxes are as follows: YEAR ENDED FEBRUARY JANUARY 3, 1996 28, 1995 ---------------------------- Current: Federal $1,719,000 $2,570,000 Foreign 353,000 542,000 State 368,000 515,000 ---------------------------- Total current 2,440,000 3,627,000 Deferred: United States 215,000 (391,000) Foreign (18,000) (4,000) ---------------------------- $2,637,000 $3,232,000 ============================ F-11 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements (continued) 6. INCOME TAXES (CONTINUED) Significant components of the Companies deferred tax assets (liabilities) are as follows: YEAR ENDED FEBRUARY JANUARY 3, 1996 28, 1995 ---------------------------- Deferred tax (liabilities) assets: United States: Employee benefit accruals $ - $242,000 Depreciation (7,000) 8,000 Inventory cost capitalization 121,000 79,000 Cost basis of fixed assets 62,000 62,000 ---------------------------- 176,000 391,000 Foreign: Depreciation 22,000 4,000 ---------------------------- Total U.S. and foreign deferred tax assets $198,000 $395,000 ============================ Undistributed earnings of C.A.T. (Far East) Limited and Subsidiary amounted to approximately $7,700,000 at February 3, 1996. Those earnings are considered to be indefinitely reinvested in Hong Kong and if repatriated would be taxable to the stockholders. Accordingly, no provision for U.S. federal and state income taxes has been provided thereon. F-12 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements (continued) 7. STOCKHOLDERS' EQUITY Stockholders' equity consists of the following (in thousands): CAT INVESTMENT OF ---------------------------- CYGNE DESIGNS, ADDITIONAL INC. IN COMMON PAID-IN RETAINED ANNTAYLOR TOTAL STOCK CAPITAL EARNINGS WOVEN DIVISION ----------------------------------------------------- Balance at January 29, 1994 $ 9,487 $20 $2 $ 2,402 $ 7,063 ----------------------------------------------------- Transfers to/from Cygne Designs, Inc. 4,178 - - - 4,178 Net income for the year ended January 28, 1995 6,652 - - 3,998 2,654 ----------------------------------------------------- Balance at January 28, 1995 $20,317 $20 $2 $ 6,400 $13,895 ----------------------------------------------------- Transfers to/from Cygne Designs, Inc. (2,804) - - - (2,804) Net income for the year ended February 3, 1996 6,037 - - 4,275 1,762 ----------------------------------------------------- Balance at February 3, 1996 $23,550 $20 $2 $10,675 $12,853 ===================================================== CAT US Inc. had 10,000 shares of $.01 par value common stock authorized, issued and outstanding at February 3, 1996. C.A.T. (Far East) Limited had 150,000 of HK$1 ordinary shares authorized, issued and outstanding at February 3, 1996. 8. COMMITMENTS AND OTHER MATTERS The CAT Businesses have employment agreements with two officers which provide for minimum aggregate annual payments of approximately $200,000 in fiscal 1995, $175,000 in fiscal 1996 and $44,000 in fiscal 1997. In addition, these officers may receive additional compensation based on pretax income of the CAT, as defined. F-13 CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary and the AnnTaylor Woven Division of Cygne Designs, Inc. Notes to Combined Financial Statements (continued) 8. COMMITMENTS AND OTHER MATTERS (CONTINUED) The employment agreement entered into with one of the officers provides that, in the event of a transfer of the CAT's common stock or in the event of a transfer of all or substantially all of the CAT's assets during the officer's employment, the officer shall have the option to receive a lump-sum bonus equal to 10% of the CAT's valuation (as defined) at the time of such transfer. Substantially all cash is held on deposit at one financial institution. 9. RELATED PARTY TRANSACTIONS CAT paid approximately $225,071 and $190,000 to Cygne for administrative and other services (including rent) during fiscal 1995 and fiscal 1994, respectively. 10. SUBSEQUENT EVENT On April 8, 1996, AnnTaylor agreed in principle to acquire Cygne's 60% interest in CAT and the net assets, as defined, of the Division. F-14 EX-2 3 EXHIBIT 2 UNAUDITED HISTORICAL AND PRO FORMA COMBINED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND NOTES THERETO The following Unaudited Historical and Pro Forma Combined balance sheets, statements of operations and the notes thereto give effect to the acquisition (the "CAT/Cygne Transaction") of the remaining 60% interest of CAT U.S., Inc. ("CAT") and the AnnTaylor Woven Division of Cygne Design, Inc. ("Division") (collectively, the "Acquired Businesses") by an indirect wholly owned subsidiary of AnnTaylor Stores Corporation (the "Company") under the "purchase" method of accounting. Cygne Designs, Inc. owns the Division and a 60% interest in CAT. These Unaudited Historical and Pro Forma Combined balance sheets, statements of operations and the notes thereto are presented for illustrative purposes only, and therefore are not necessarily indicative of the operating results and financial position that might have been achieved had the CAT/Cygne Transaction occurred as of an earlier date, nor are they necessarily indicative of operating results and financial position that may occur in the future. An Unaudited Historical and Pro Forma Combined Balance Sheet is provided as of May 4, 1996, giving effect to the CAT/Cygne Transaction as though it had been consummated on that date. Unaudited Historical and Pro Forma Combined Statements of Operations are provided for the quarter ended May 4, 1996, giving effect to the CAT/Cygne Transaction as though it had occurred at the beginning of such quarter. The historical quarter ended May 4, 1996 information has been derived from the unaudited financial statements of the Company. These financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the unaudited quarter. The data at and for the quarter ended May 4, 1996 for the Acquired Businesses have been derived from the unaudited financial statements which, in the opinion of the management of the Acquired Businesses, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the unaudited quarter. ANN TAYLOR STORES CORPORATION AND ACQUIRED COMPANIES UNAUDITED HISTORICAL AND PRO FORMA COMBINED FINANCIAL INFORMATION BALANCE SHEETS MAY 4, 1996 (IN THOUSANDS)
HISTORICAL PRO FORMA ----------------------- -------------------------- ACQUIRED COMPANY BUSINESSES ADJUSTMENTS COMBINED -------- ----------- ----------- -------- ASSETS Current Assets Cash and cash equivalents.................. $ 1,296 $ 59 $ -- $ 1,355 Accounts receivable, net................... 72,615 27,063 (26,555)(a) 73,123 Inventories................................ 98,185 10,223 3,985 (b) 112,393 Prepaid and other current assets........... 23,831 328 (3,438)(a) 20,721 -------- ----------- ----------- -------- Total current assets................. 195,927 37,673 (26,008) 207,592 Property and equipment, net.................. 150,203 4,179 -- 154,382 Other assets................................. 12,541 151 (5,750)(c) 6,942 Goodwill, net................................ 311,148 -- 36,960(d) 348,108 -------- ----------- ----------- -------- Total assets................................. $669,819 42,003 5,202 717,024 -------- ----------- ----------- -------- -------- ----------- ----------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt.......... $ 36,269 $ 6,082 $ -- $ 42,351 Accounts payable........................... 40,208 12,267 (22,008)(a) 30,467 Accrued expenses........................... 31,452 2,018 1,000(e) 34,470 -------- ----------- ----------- -------- Total current liabilities............ 107,929 20,367 (21,008) 107,288 Long-term debt............................... 142,124 546 11,300(f) 153,970 Other liabilities............................ 8,864 -- 8,864 Preferred Securities......................... 83,350 -- -- 83,350 Stockholders' equity Common stock............................... 157 -- 12(g) 169 Additional paid in capital................. 311,336 -- 35,988(g) 347,324 Retained earnings and other items.......... 16,059 21,090 (21,090)(g) 16,059 -------- ----------- ----------- -------- Total stockholders' equity........... 327,552 21,090 14,910 363,552 -------- ----------- ----------- -------- Total liabilities and stockholders' equity... $669,819 $42,003 $ 5,202 $717,024 -------- ----------- ----------- -------- -------- ----------- ----------- --------
See notes to unaudited historical and pro forma combined financial information. 2 ANN TAYLOR STORES CORPORATION AND ACQUIRED COMPANIES UNAUDITED HISTORICAL AND PRO FORMA STATEMENTS OF OPERATIONS QUARTER ENDED MAY 4, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL ---------------------- PRO FORMA ACQUIRED ----------------------------- COMPANY BUSINESSES ADJUSTMENTS COMBINED -------- ---------- ----------- -------- Net sales.................................. $184,467 $ 60,527 $ (60,527)(h) $184,467 Cost of sales.............................. 101,313 52,544 (56,287)(h)(i)(j) 97,570 -------- ---------- ----------- -------- Gross profit............................... 83,154 7,983 (4,240) 86,897 Selling, general and administrative expenses................................... 70,254 4,427 (4,427)(j) 70,254 Amortization of goodwill................... 2,377 -- 370(k) 2,747 -------- ---------- ----------- -------- Operating income........................... 10,523 3,556 (183) 13,896 Interest expense........................... 6,121 183 387(i) 6,691 Other (income) expense, net................ (131) -- 312(l) 181 -------- ---------- ----------- -------- Income before income taxes................. 4,533 3,373 (882) 7,024 Income tax provision....................... 2,721 1,216 (62)(l)(m) 3,875 -------- ---------- ----------- -------- Net income (loss).......................... $ 1,812 $ 2,157 $ (820) $ 3,149 -------- ---------- ----------- -------- -------- ---------- ----------- -------- Net income (loss) per share................ $ 0.08 $ 0.13 -------- -------- -------- --------
See notes to unaudited historical and pro forma combined financial information. 3 NOTES TO UNAUDITED HISTORICAL AND PRO FORMA COMBINED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND NOTES THERETO NOTE 1--BASIS OF PRESENTATION The Unaudited Historical and Pro Forma Combined balance sheets, statements of operations and the notes thereto are presented for illustrative purposes only, giving effect to the acquisition of the Acquired Businesses by the Company accounted for as a "Purchase", as such term is used under generally accepted accounting principles. The Acquired Businesses' information includes the acquisition by the Company of CAT and the Division. Certain amounts reported in the Acquired Business' historical financial information have been reclassified to conform with the Company presentations in the Unaudited Historical and Pro Forma Combined Balance Sheets and Statements of Operations. The Unaudited Historical and Pro Forma balance sheets, statements of operations and the notes thereto giving effect to the acquisition of the Acquired Businesses by the Company have been prepared assuming the Company elected to treat the transaction as a stock acquisition, which will provide no step up in basis for income tax purposes. NOTE 2--ACCOUNTING PERIOD The pro forma periods for the quarter ended May 4, 1996 are the historical financial reporting periods of both the Company and the Acquired Businesses. The Company and the Acquired Businesses have historically reported a 13-or 14-week reporting period. NOTE 3--PURCHASE PRICE DETERMINATION The purchase price of $47.3 million was computed assuming (i) the issuance of 1,800,000 shares of common stock of the Company at a price of $20.00 per share, (ii) cash consideration of $9.3 million, and (iii) the assumption of the obligation to make payment to the president of CAT of approximately $2.0 million becoming due under his existing employment agreement with CAT as a result of the CAT/Cygne Transaction. The cash portion of the purchase price (including the obligation to the president of CAT) will be provided by additional bank borrowings, assumed to be approximately $11.3 million at 8% per annum. The aggregate purchase price includes an amount payable to an executive of CAT pursuant to his employment contract, which requires a payment to him based on the value of the shares of CAT being transferred. NOTE 4--PRO FORMA ADJUSTMENTS The following items were recorded as adjustments to effect the combination of the Company and the Acquired Businesses. 4(a) Adjustments recorded to reflect (i) the elimination of amounts due to/from the Company and the Acquired Businesses, and (ii) the elimination of advances made to the Division. 4(b) Adjustments to reduce the inventories of CAT and the Division to the current fair value, and the elimination of advances made to the Division. 4(c) The elimination of the investment account on the Company's books for the 40% interest in CAT. 4(d) Adjustment recorded to reflect the creation of goodwill representing the excess of purchase price over net assets acquired which results in a $36.9 million adjustment, based on management's estimate and without the performance of any due diligence procedures. Accordingly, such estimate of goodwill is preliminary and subject to change. At this time, the Company has not attributed any value to intangible assets other than goodwill.
4 NOTES TO UNAUDITED HISTORICAL AND PRO FORMA COMBINED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND NOTES THERETO--(CONTINUED) NOTE 4--PRO FORMA ADJUSTMENTS--(CONTINUED) 4(e) Adjustment to record a liability for an estimate of fees related to the CAT/Cygne Transaction.
4(f) Adjustments to reflect a portion of the purchase price expected to be financed through additional bank borrowings. 4(g) Common stock, additional paid-in capital and retained earnings have been adjusted to eliminate the equity balances of the Acquired Businesses and reflect the common stock and additional paid-in capital for the issuance of 1,800,000 shares of common stock of the Company at an assumed price of $20.00 per share. 4(h) To eliminate sales previously recorded by the Acquired Businesses against the cost of sales previously recorded by the Company. Cost of sales is reduced by the reclassification of certain expenses discussed in Notes 4(i) and 4(j). 4(i) To reclassify interest expense from cost of sales as reported in the Acquired Businesses' historical financial information to interest expense, to conform with the Company's presentations. 4(j) Historically, the Acquired Businesses have classified certain expenses as selling, general and administrative expenses. An adjustment has been recorded to reclassify certain expenses, such as costs of design and procurement, to cost of sales. 4(k) Adjusted to reflect the charge relating to the amortization of goodwill, which represents the excess of purchase price over net assets acquired. Such goodwill will be amortized over a 25 year life. 4(l) The elimination of the equity in earnings of 40% of the net income of CAT by the Company and the related income tax expense. 4(m) The income tax provision represents the assumed effective tax rate for the Acquired Businesses assuming (i) approximately 50% of the Acquired Businesses' income is foreign source and not subject to U.S. taxation until repatriation and (ii) amortized goodwill is not deductible.
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