UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 10-Q
(Mark One)
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 1, 2000
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. 0-26079
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David's Bridal, Inc.
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(Exact name of registrant as specified in its charter)
Florida 65-0214563
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(State or other jurisdiction of (I.R.S. Employer ID number)
incorporation or organization)
44 W. Lancaster Ave, Ardmore, Pennsylvania 19003
-----------------------------------------------------------------
(Address of principal executive offices) (Zip code)
610-896-2111
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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 ( )
As of April 1, 2000 there were 19,417,721 shares of the registrant's
Common Stock outstanding.
<PAGE> 1
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Index Page
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PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Condensed Consolidated
Financial Statements (unaudited)
Consolidated Balance Sheets -
April 1, 2000 and January 1, 2000 3
Consolidated Statements of Operations-
Thirteen weeks ended April 1, 2000
and April 3, 1999 4
Consolidated Statements of
Cash Flows - Thirteen weeks ended
April 1, 2000 and April 3, 1999 5
Notes to Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 13
PART II - OTHER INFORMATION 14
- ----------------------------
SIGNATURE 15
<PAGE> 2
Item 1.
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
April 1, 2000 January 1, 2000
-------------- ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................. $ 8,461 $ 1,751
Accounts receivable........................................ 2,710 2,870
Merchandise inventories.................................... 50,590 49,675
Prepaid and other expenses................................. 3,446 3,505
Deferred tax asset......................................... 208 208
------------- -------------
Total Current Assets.................................... 65,415 58,009
------------- -------------
Property and Equipment-at cost:
Land and land improvements................................. 1,196 1,196
Building and improvements.................................. 24,838 17,003
Furniture, fixtures and equipment.......................... 20,246 19,462
Construction in progress................................... 4,095 875
------------- -------------
50,375 38,536
Less accumulated depreciation and amortization............. 11,829 10,466
------------- -------------
Total Property and Equipment............................ 38,546 28,070
Deferred tax asset........................................... 1,248 1,248
Other........................................................ 1,316 721
------------- -------------
Total Assets.................................................. $ 106,525 $ 88,048
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank overdrafts............................................ $ 6,197 $ 2,747
Current portion of capitalized lease obligations........... 299 294
Current portion of long-term debt.......................... 125 132
Accounts payable........................................... 7,196 8,964
Accrued expenses........................................... 13,665 7,643
Income taxes payable....................................... 4,116 213
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Total Current Liabilities............................... 31,598 19,993
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Deferred Rent................................................ 4,232 3,993
------------- -------------
Capitalized Lease Obligations, net of current portion........ 587 664
------------- -------------
Long-Term Debt, less current maturities...................... 2,103 2,134
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Commitments and Contingencies
Stockholders' Equity:
Common Stock, $.01 par value, 100,000,000 shares
authorized, 19,417,721 shares issued and outstanding...... 194 194
Additional paid-in capital.................................. 41,145 41,145
Retained earnings........................................... 26,666 19,925
------------ -----------
Total Stockholders' Equity.............................. 68,005 61,264
------------ -----------
Total Liabilities and Stockholders' Equity.................... $ 106,525 $ 88,048
============ ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Thirteen weeks ended
----------------------------
April 1, 2000 April 3, 1999
------------- -------------
<S> <C> <C>
Net sales...................................... $71,408 $54,087
Other income................................... 4,368 2,717
------------- -------------
Total revenues................................. 75,776 56,804
Cost of sales, including buying, distribution
and occupancy costs.......................... 37,994 28,969
------------- -------------
Gross profit................................... 37,782 27,835
Selling, general and administrative expenses... 26,908 20,191
------------- -------------
Income from operations......................... 10,874 7,644
Interest expense, net.......................... 88 272
------------- -------------
Income before income taxes..................... 10,786 7,372
Provision for income taxes..................... 4,045 2,802
------------- -------------
Net income..................................... $ 6,741 $ 4,570
============= =============
Net income per share:
Basic.......................................... $ 0.35 $ 0.47
Diluted........................................ $ 0.34 $ 0.25
Weighted shares outstanding:
Basic.......................................... 19,418,721 9,740,848
Diluted........................................ 19,763,268 18,614,443
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(dollar amounts in thousands)
<TABLE>
<CAPTION>
Thirteen weeks ended
----------------------------------
April 1, 2000 April 3, 1999
--------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income............................................ $ 6,741 $ 4,570
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization....................... 1,363 887
Amortization of debt issuance costs................. 17 15
Provision for deferred rent......................... 239 161
Equity income in affiliate.......................... (225) (50)
Changes in assets and liabilities--
(Increase) decrease in--
Account receivable.............................. 160 27
Prepaid expenses and other assets............... (328) (510)
Inventories..................................... (915) 2,460
Increase (decrease) in--
Accounts payable................................ (1,768) 588
Accrued expense................................. 6,022 5,058
Income tax payable.............................. 3,903 2,011
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Net Cash Provided by Operating Activities.................. 15,209 15,217
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Cash Flows from Investing Activities:
Capital expenditures.................................. (11,839) (3,361)
Other, net............................................ - 170
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Net Cash Used in Investing Activities................. (11,839) (3,191)
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Cash Flows from Financing Activities:
Repayment of long-term debt and capital leases........ (110) (105)
Borrowings on revolving credit agreement.............. 13,700 8,900
Repayment on revolving credit agreement............... (13,700) (19,000)
Increase (decrease) in bank overdrafts................ 3,450 (152)
Payment of debt issue costs........................... - (43)
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Net Cash Provided by (Used in)Financing Activities.... 3,340 (10,400)
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Net Increase in Cash....................................... 6,710 1,626
Cash at Beginning of Year.................................. 1,751 320
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Cash at End of Period...................................... $ 8,461 $ 1,946
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. Consolidated Financial Statements
The consolidated balance sheet as of April 1, 2000, the consolidated
statements of operations for the thirteen week periods ended April 1, 2000 and
April 3, 1999 and the consolidated statements of cash flows for the thirteen
week periods ended April 1, 2000 and April 3, 1999 have been prepared by the
Company without audit. In the opinion of management, all adjustments,
consisting of normal and recurring adjustments, necessary to present fairly
the financial position, results of operations and cash flows at April 1, 2000
and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10-K for the year ended January 1, 2000 as filed with the Securities and
Exchange Commission. The results of operations for the thirteen week period
ended April 1, 2000 are not necessarily indicative of the operating results
for the full year.
NOTE 2. Initial Public Offering
In June of 1999 the Company completed an initial public offering of its Common
stock at a price of $13 per share. All outstanding shares of Preferred stock
converted into 7,543,817 shares of Common stock. A total of 8,400,000 shares
of Common stock were sold during the offering which included 1,935,581 shares
sold by the Company, 6,317,499 shares sold by shareholders and 146,920 shares
sold which were issued immediately prior to completion of the offering in
connection with the exercise of stock options. The net proceeds to the Company
were $21.5 million.
NOTE 3. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents for the purpose of determining
cash flows. Checks issued in excess of cash balances are reflected as bank
overdrafts. Cash and cash equivalents includes investments of $5.2 million in
overnight securities as of April 1, 2000.
NOTE 4. Merchandise Inventories
Merchandise inventories are valued at the lower of cost (first-in, first-out)
or market. Costs associated with certain buying, receiving and distribution
activities are included in inventories.
NOTE 5. Property
In January 2000, the Company purchased a corporate office building for
$7,275,000 with available cash and the revolving credit agreement. The
company plans to relocate to the new corporate offices in the second quarter
of fiscal 2000.
<PAGE> 6
NOTE 6. Net Income Per Share
<TABLE>
<CAPTION>
(in thousands, except per share data)
Thirteen weeks ended
----------------------------
April 1, 2000 April 3, 1999
------------- -------------
<S> <C> <C>
(a) Net Income................................... $6,741 $4,570
- -------------------------------------------------------------------------------
(b) Basic weighted average number of Common
shares outstanding during the period....... 19,418 9,740
(c) Weighted average Common shares assumed
issued upon conversion of preferred stock.. - 8,242
(d) Weighted average Common shares assumed
issued upon exercise of dilutive stock
options, net of assumed repurchase, at
the average market price................... 345 632
- -------------------------------------------------------------------------------
(e) Diluted weighted average number of
Common shares assumed outstanding during
the period................................. 19,763 18,614
- -------------------------------------------------------------------------------
Basic Income per Share (a/b)................. $ .35 $ .47
Diluted Income per Share (a/e)............... $ .34 $ .25
- -------------------------------------------------------------------------------
</TABLE>
Note 7. Commitments and Contingencies
The Company has entered into a lease agreement to expand their warehouse by
25,000 square feet increasing the total warehouse space to 115,000 square
feet.
From time to time the Company is named as a defendant in legal actions arising
from its normal business activities. Although the amount of any liability
that could arise with respect to currently pending actions of this nature
cannot be accurately predicted, in the opinion of the Company, any such
liability will not have a material adverse effect on the financial position or
results of operations of the Company.
Note 8. Certain Reclassifications
Certain amounts in prior year financial statements have been reclassified to
conform with the current year presentation.
Note 9. Stock Options
The Company's 1995 Stock Option Plan, as amended, provides for the grant of
Common stock options to key employees, members of the board of directors and
certain consultants at prices determined by the Board. The Company has
reserved 2,450,000 shares of its Common stock for awards under the 1995 Stock
Option Plan. In the first quarter of 2000, the Company established the 2000
Stock Option Plan for the purpose of granting Common stock options to
designated employees who are not officers of the Company. The Company has
reserved 175,000 shares of its Common stock for awards under the 2000 Stock
Option Plan. The Company accounts for the plans under APB Opinion No. 25,
under which no compensation cost has been recognized since the options were
issued at or above fair value.
Information with respect to options outstanding is as follows:
<TABLE>
<CAPTION>
Option Price Aggregate
Shares Per Share Exercise Price
------- ------------ --------------
<S> <C> <C> <C>
Options outstanding, January 1, 2000 2,148,227 $4.92-13.00 $18,565,528
Granted 368,200 $9.00 3,313,800
Cancellation (9,473) $6.79-13.00 (114,000)
--------- ----------- -----------
Options outstanding, April 1, 2000 5,820,754 $4.92-13.00 $21,765,328
</TABLE>
As of April 1, 2000 there were 53,771 shares reserved under the plans
which were not granted.
<PAGE> 7
Item 2.
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This report contains forward-looking statements under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this report.
For example, our statements regarding our continued growth plans,
estimated capital expenditures, anticipated expenditures and funding
requirements, sources of funding, adequacy of funding, anticipated new store
openings and the payment of dividends. In addition, when used in this report,
the words "anticipate", "believe", "estimate" and similar expressions are
generally intended to identify forward-looking statements. For these
statements we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
There are important factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements,
including:
- - changes in general economic and business conditions and those in the bridal
industry in particular
- - actions of competitors
- - the level of demand for our product
- - developments in international markets
- - our inability to obtain financing when required
These and other important factors that may cause actual results to
differ materially from such forward-looking statements are discussed in this
report and included in the "Risk Factors" section of our Registration
Statement on Form S-1 as filed with the Securities and Exchange Commission and
any further disclosures we make on related subjects in our filings with the
Securities and Exchange Commission. You are urged to consider such factors.
We assume no obligation for updating any such forward-looking statements.
<PAGE> 8
Results of Operation -
The following table presents for the periods indicated certain items in the
consolidated statements of operations as a percentage of total revenues and
the percentage change in dollar amounts of such items compared to the
indicated prior period.
<TABLE>
<CAPTION>
Percentage of Total Revenues Percentage Change
- ----------------------------------------------- ---------------------------------- -----------------
Thirteen weeks ended April 1, 2000 April 3, 1999 Fiscal 2000 vs.
(Fiscal 2000) (Fiscal 1999) Fiscal 1999
- ----------------------------------------------- --------------- --------------- -----------------
<S> <C> <C> <C>
Net sales....................................... 94.2% 95.2% 32.0%
Other income.................................... 5.8 4.8 60.8
------ ------
Total revenues.................................. 100.0 100.0 33.4
Cost of sales, including buying, distribution
and occupancy costs........................... 50.1 51.0 31.2
------ ------
Gross profit.................................... 49.9 49.0 35.7
Selling, general and administrative expenses.... 35.5 35.5 33.3
------ ------
Income from operations.......................... 14.4 13.5 42.3
Interest expense, net........................... 0.2 0.5 (67.8)
------ ------
Income before income taxes...................... 14.2 13.0 46.3
Income tax provision............................ 5.3 5.0 44.4
------ ------
Net income...................................... 8.9% 8.0% 47.5
====== ======
</TABLE>
<PAGE> 9
Thirteen Weeks Ended April 1, 2000 vs. Thirteen Weeks Ended April 3, 1999
- ----------------------------------------------------------------------------
TOTAL REVENUES. Total revenues for the thirteen weeks ended April 1, 2000
(first quarter of fiscal 2000) were $75.8 million, an increase of $19.0
million, or 33.4% from the thirteen weeks ended April 3, 1999 (first quarter
of fiscal 1999). We attribute the $19.0 million increase to a $5.3 million,
or 9.5%, increase in comparable store sales, $1.0 million from stores opened
in fiscal 2000, $12.0 million from stores opened in fiscal 1999 but not
qualifying as comparable stores and an increase in third party promotional
fees.
GROSS PROFIT. Gross profit for the first quarter of fiscal 2000 was $37.8
million (49.9% of total revenues) as compared with $27.8 million (49.0% of
total revenues) in the first quarter of fiscal 1999. We were able to achieve
higher gross profit as a percentage of total revenues due to an improvement in
merchandise margins offset by increases in buying, distribution and occupancy
costs as a percentage of total revenues. We were able to achieve higher
merchandise margins through our international and domestic direct sourcing
efforts, which have resulted in lower product costs. Buying and distribution
costs increased as a percentage of total revenues due primarily to increased
personnel costs. Occupancy costs increased due primarily to higher store
rental expense.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $26.9 million (35.5% of total revenues) in the
first quarter of fiscal 2000 as compared with $20.2 million (35.5% of total
revenues) in the first quarter of fiscal 1999, which is a $6.7 million
increase. The significant components of selling, general and administrative
expenses include store personnel costs, store selling expenses, back office
support costs and advertising expenses. Store personnel costs remained
consistent as a percentage of total revenues. Store selling and advertising
expenses increased as a percentage of total revenues while offset by a
decrease in back office support expenses as a percentage of total revenues.
Advertising expense increased as a percentage of total revenues due to
heightened levels of national and local advertising.
INTEREST EXPENSE, net. Net interest expense in the first quarter of fiscal
2000 was $88,000 as compared to $272,000 in the first quarter of fiscal 1999.
Interest expense decreased as compared to last year due to lower debt levels
as a result of financing more of our growth and operating activities with cash
provided by operations.
TAXES. Our effective tax rate was 37.5% in first quarter of fiscal 2000,
compared to 38.0% in the first quarter of fiscal 1999.
NET INCOME. As a result of the factors described above, our net income in the
first quarter of fiscal 2000 was $6.7 million, an increase of 47.5%, or $2.2
million, over our first quarter of fiscal 1999 net income of $4.6 million.
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES - April 1, 2000
- -------------------------------------------------
We require cash principally to finance capital investment in new stores,
new store inventory and seasonal working capital. We opened 4 stores in the
first quarter of fiscal 2000 and anticipate opening approximately 17
additional stores during the balance of fiscal 2000. We currently estimate
that our capital expenditures will be approximately $16-$17 million in fiscal
2000, excluding the $7.3 million corporate office. Our capital expenditures
will be incurred to open new stores, remodel or expand existing stores and
fund capital investment activities.
In January 2000, the Company purchased a corporate office building for
$7.3 million with cash from operations. Additional capital improvements are
necessary to prepare the building for use. The company plans to relocate to
the new corporate offices in the second quarter of fiscal 2000.
We believe that our cash flow from operations and amounts available under
our revolving credit agreement will be sufficient to fund anticipated capital
expenditures and working capital requirements for at least the next 12 months.
Our working capital was $33.8 million as of April 1, 2000 as compared to $18.5
million at April 3, 1999.
Our cash flows provided by operating activities was $15.2 million for the
first quarter of fiscal 2000 as compared to $15.2 million in the first quarter
of fiscal 1999. Higher net income in fiscal 2000 was partially offset with
increases in prepaid assets and inventory levels related to new store openings
and comparable store sales growth. Accrued expenses and net income taxes
payable increased in fiscal 2000 while accounts payable decreased.
Our net cash used in investing activities in the first quarter of fiscal
2000 was $11.8 million as compared to $3.2 million in the first quarter of
fiscal 1999. Our cash used in investing activities primarily represents our
capital expenditures in opening new stores and the purchase of our corporate
office building.
Our net cash provided by financing activities in the first quarter of
fiscal 2000 was $3.3 million as compared to net cash used of $10.4 million in
the first quarter of fiscal 1999. The $3.3 million of cash provided by
financing activities in the first thirteen weeks of fiscal 2000 was primarily
from an increase in bank overdrafts. The $10.4 million used in the first
quarter of fiscal 1999 primarily represents repayments on our revolving credit
facility.
The Revolving Credit Agreement provides for borrowings up to $30.0
million, of which up to $25.0 million may be used for letters of credit. Cash
borrowings and letters of credit are secured by all of our assets. Our
borrowings under this agreement are restricted to a specified percentage of
our accounts receivable and inventory. Specifically we are not permitted to
borrow amounts that are greater than the sum of 80% of our eligible accounts
receivable and 60% of our eligible inventory. The revolving credit agreement
provides some exceptions to these limitations. These exceptions allow us to
exceed these limitations by $3.0 million from October 1, 1999 to March 31,
2000 and $2.0 million from October 1, 2000 to March 31, 2001. The interest
rates that we are charged under our revolving credit agreement are variable.
We can choose to have our interest rate based on:
- - The higher of the U.S. federal funds rate plus 0.5% and our bank's prime
rate, or
- - Adjusted LIBOR plus an applicable margin of between 1.25% and 1.75%
depending on our financial performance.
<PAGE> 11
As of April 1, 2000, we had no cash borrowings, issued $3.8 million of
letters of credit and had $24.4 million available to borrow under our
revolving credit agreement. Our long-term debt including capitalized lease
obligations, as a percentage of our total capitalization, was 3.8% at the end
of the first quarter of fiscal 2000 as compared to 23.9% at the end of the
first quarter of fiscal 1999.
We currently intend to retain all future earnings to fund the development
and growth of our business. We do not currently anticipate paying any cash
dividends. Our board of directors will make future decisions regarding cash
dividends on our common stock. These decisions will depend on our results of
operations, financial position, capital requirements, general business
conditions and restrictions imposed by any financing arrangements. Our
revolving credit agreement currently prohibits the payment of dividends.
SEASONALITY
Our business is subject to seasonal variations and our revenues and
income historically have been higher from January through April and lower from
October through December. Our working capital requirements tend to fluctuate
throughout the year and increase during the months of November and December.
This is because we increase our inventory in these months to support sales,
which tend to be higher from January through April.
<PAGE> 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's operations are exposed to market risks primarily as a result of
changes in interest rates. The Company does not use derivative financial
instruments for speculative or trading purposes.
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates relates to
its long-term debt obligations. The fixed rate of 8% on the Company's long-
term debt at April 1, 2000 approximates market rates: thus, the fair value of
the debt approximates its reported value. Borrowings under the Company's
Revolving Credit Agreement are based on current market rates and are fixed for
a period not exceeding 6 months. Thus, the fair value of these borrowings
approximates its reported value. No borrowings were outstanding under this
agreement at April 1, 2000. In the past, the Company has not entered into
financial instruments such as interest rate swaps or interest rate lock
agreements. However, it may consider these instruments to manage the impact
of changes in interest rates based on management's assessment of future
interest rates, volatility of the yield curve and the Company's ability to
access the capital markets in a timely manner.
<PAGE> 13
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
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) Exhibits
(10) 2000 Employee Stock Option Plan
(27) Financial Data Schedule
<PAGE> 14
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAVID'S BRIDAL, INC.
--------------------
(Registrant)
Date: May 16, 2000 By: /s/ Edward S. Wozniak
------------------ --------------------------
Edward S. Wozniak
Senior Vice President Finance,
& Chief Financial Officer
<PAGE> 15
DAVID'S BRIDAL, INC.
2000 EMPLOYEE STOCK OPTION PLAN
The purpose of the David's Bridal, Inc. 2000 Employee Stock Option Plan
(the "Plan") is to provide designated employees of David's Bridal, Inc. (the
"Company") and its subsidiaries who are not officers of the Company with the
opportunity to receive grants of nonqualified stock options. The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefiting the Company's
shareholders, and will align the economic interests of the participants with
those of the shareholders.
1. Administration
(a) The Plan shall be administered by the Board of Directors of the
Company (the Board") or by a committee appointed by the Board (the Board
or committee authorized to administer the Plan is referred to as the
"Committee"). Notwithstanding anything in the Plan to the contrary, all
actions of the Committee hereunder shall be subject to ratification by the
Board.
(b) Committee Authority. The Committee shall have the authority to
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the size and terms of the grants to be made to each such individual,
(iii) determine the time when the grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for
exercisability and the acceleration of exercisability and (iv) deal with any
other matters arising under the Plan. All actions of the Committee hereunder
shall be subject to ratification by the Board.
(c) Committee Determinations. The Committee shall have full power
and authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as it
deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding
on all persons having any interest in the Plan or in any awards granted
hereunder. All powers of the Committee shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals. All actions of the Committee hereunder shall be subject
to ratification by the Board.
2. Grants
Awards under the Plan shall consist of grants of nonqualified stock
options as described in Section 5 (referred to as "Options" or "Grants"). All
Grants shall be subject to the terms and conditions set forth herein and to
such other terms and conditions consistent with this Plan as the Committee
deems appropriate and as are specified in writing by the Committee to the
individual in a grant instrument or an amendment to the grant instrument (the
"Grant Instrument"). The Committee shall approve the form and provisions
of each Grant Instrument.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below,
the aggregate number of shares of common stock of the Company
("Company Stock") that may be issued or transferred under the Plan is
175,000 shares. The shares may be authorized but unissued shares of
Company Stock or reacquired shares of Company Stock, including shares
purchased by the Company on the open market for purposes of the Plan. If
and to the extent Options granted under the Plan terminate, expire, or are
canceled, forfeited, exchanged or surrendered without having been
exercised, the shares subject to such Grants shall again be available for
purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of
shares of Company Stock outstanding (i) by reason of a stock dividend,
spinoff, recapitalization, stock split, or combination or exchange of shares,
(ii) by reason of a merger, reorganization or consolidation in which the
Company is the surviving corporation, (iii) by reason of a reclassification or
change in par value, or (iv) by reason of any other extraordinary or unusual
event affecting the outstanding Company Stock as a class without the
Company's receipt of consideration, or if the value of outstanding shares of
Company Stock is substantially reduced as a result of a spinoff or the
Company's payment of an extraordinary dividend or distribution, the
maximum number of shares of Company Stock available for Grants, the
number of shares covered by outstanding Grants, the kind of shares issued
under the Plan, and the price per share of such Grants shall be appropriately
adjusted by the Committee to reflect any increase or decrease in the number
of, or change in the kind or value of, issued shares of Company Stock to
preclude, to the extent practicable, the enlargement or dilution of rights and
benefits under such Grants; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. Any adjustments
determined by the Committee shall be final, binding and conclusive.
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its
subsidiaries who are not officers of the Company ("Employees") shall be
eligible to participate in the Plan.
(b) Selection of Grantees. The Committee shall select the Employees
to receive Grants and shall determine the number of shares of Company Stock
subject to a particular Grant in such manner as the Committee determines.
Employees who receive Grants under this Plan shall hereinafter be referred to
as "Grantees."
5. Granting of Options
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to
Employees.
(b) Type of Option and Price.
(i) Options under the Plan shall be nonqualified stock options,
which are not intended to qualify as "incentive stock options" within the
meaning of section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and may be equal
to, greater than, or less than the Fair Market Value (as defined below) of a
share of Company Stock on the date the Option is granted.
(iii) If the Company Stock is not publicly traded or, if publicly
traded, is not subject to reported transactions or "bid" or "asked"
quotations as set forth below, the Fair Market Value per share shall be as
determined by the Committee. If the Company Stock is publicly traded,
then the Fair Market Value per share shall be determined as follows: (x) if
the principal trading market for the Company Stock is a national securities
exchange or the Nasdaq National Market, the last reported sale price
thereof on the relevant date or, if there were no trades on that date, the
latest preceding date upon which a sale was reported, or (y) if the
Company Stock is not principally traded on such exchange or market, the
mean between the last reported "bid" and "asked" prices of Company
Stock on the relevant date, as reported on Nasdaq or, if not so reported, as
reported by the National Daily Quotation Bureau, Inc. or as reported in a
customary financial reporting service, as applicable and as the Committee
determines.
(c) Option Term. The Committee shall determine the term of each
Option. The term of any Option shall not exceed ten years from the date of
grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may
be determined by the Committee and specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding Options
at any time for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the Company as an
Employee, Key Advisor or member of the Board. In the event that a Grantee
ceases to be employed by, or provide service to, the Company for any reason
other than Disability, Retirement, death, or termination for Cause, any Option
which is otherwise exercisable by the Grantee shall terminate unless exercised
within 90 days after the date on which the Grantee ceases to be employed by,
or provide service to, the Company (or within such other longer or shorter
period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Unless otherwise
specified by the Committee, any of the Grantee's Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be
employed by, or provide service to, the Company shall terminate as of such
date.
(ii) In the event the Grantee ceases to be employed by, or
provide service to, the Company on account of a termination for Cause,
any Option held by the Grantee shall terminate as of the date the Grantee
ceases to be employed by, or provide service to, the Company.
(iii) In the event the Grantee ceases to be employed by, or
provide service to, the Company because the Grantee is Disabled or on
account of Retirement, any Option which is otherwise exercisable by the
Grantee shall terminate unless exercised within six months after the date
on which the Grantee ceases to be employed by, or provide service to,
the Company (or within such other longer or shorter period of time as
may be specified by the Committee), but in any event no later than the
date of expiration of the Option term. Unless otherwise specified by the
Committee, any of the Grantee's Options which are not otherwise
exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such date.
(iv) If the Grantee dies while employed by, or providing
service to, the Company or within 90 days after the date on which the
Grantee ceases to be employed or provide service on account of a
termination of employment or service specified in Section 5(e)(i) above
(or within such other longer or shorter period of time as may be
specified by the Committee), any Option that is otherwise exercisable by
the Grantee shall terminate unless exercised within six months after the
date on which the Grantee ceases to be employed by, or provide service
to, the Company (or within such other longer or shorter period of time as
may be specified by the Committee), but in any event no later than the
date of expiration of the Option term. Unless otherwise specified by the
Committee, any of the Grantee's Options that are not otherwise
exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such date.
(v) In addition, if the Grantee breaches any non-competition
agreement in effect with the Company, all of the Grantee's outstanding
Options shall immediately terminate, and the Company may require that the
Grantee pay to the Company (in Company Stock or cash) an amount equal to
any Option gain arising from the exercise of Options during the period
described below. The forfeiture period is the period beginning on the date
that is 90 days before the Grantee's termination of employment or service
with the Company and ending one year after such termination. The Option
gain is the amount by which the Fair Market Value of the Company Stock on
the date of the Committee's determination (or the date of any earlier sale or
other disposition of the Company Stock covered by the Option, if greater)
exceeds the Exercise Price of the Option.
(vi) For purposes of this Section 5(e):
(A) "Cause" shall mean (i) any act of fraud, intentional
misrepresentation, embezzlement or theft, (ii) conviction of a felony, or (iii)
unauthorized disclosure of trade secrets or confidential information of the
Company, as determined by the Committee. In the event a Grantee's
employment or service is terminated for Cause, in addition to the immediate
termination of all Options, the Grantee shall automatically forfeit all shares
underlying any exercised portion of an Option for which the Company has
not yet delivered the share certificates, upon refund by the Company of the
Exercise Price paid by the Grantee for such shares.
(B) The term "Company" shall mean the Company and its
parent and subsidiary corporations.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of the Company's long-term disability plan applicable to
the Grantee, or if there is none, within the meaning of section 22(e)(3) of the
Code.
(D) "Employed by, or provide service to, the Company"
shall mean employment as an Employee or the provision of services to the
Company as a key advisor or member of the Board (so that, for purposes
of exercising Options, a Grantee shall not be considered to have
terminated employment or ceased to provide service until the Grantee
ceases to be an Employee, key advisor and member of the Board), unless
the Grant Instrument provides otherwise.
(E) The term "Retirement" shall mean the Grantee's
retirement from employment with the Company at or after age 65, or
such other age as the Committee may determine.
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option by such method as the Committee shall approve
from the following methods: (i) in cash, (ii) by delivering shares of Company
Stock owned by the Grantee (including Company Stock acquired in
connection with the exercise of an Option, subject to such restrictions as the
Committee deems appropriate) and having a Fair Market Value on the date of
exercise equal to the Exercise Price, or (iii) by such other method as the
Committee may approve, including payment through a broker in accordance
with procedures permitted by Regulation T of the Federal Reserve Board.
Shares of Company Stock used to exercise an Option shall have been held by
the Grantee for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option. The Grantee shall
pay the Exercise Price and the amount of any withholding tax due (pursuant to
Section 6) at the time of exercise.
6. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be made
subject to any applicable federal (including FICA), state and local tax
withholding requirements. The Company shall have the right to deduct from
wages paid to the Grantee any federal, state or local taxes required by law to
be withheld with respect to Grants, or the Company may require the Grantee
or other person receiving such shares to pay to the Company the amount of
any such taxes that the Company is required to withhold.
(b) Election to Withhold Shares. Subject to Committee consent, a
Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option by having shares withheld up to an amount that does
not exceed the Grantee's minimum applicable withholding tax rate for federal
(including FICA), state and local tax liabilities. The election must be in a
form and manner prescribed by the Committee and shall be subject to the
prior approval of the Committee.
7. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only
the Grantee or his or her authorized representative may exercise rights
under a Grant. A Grantee may not transfer those rights except by will or
by the laws of descent and distribution or, if permitted in any specific case
by the Committee, pursuant to a domestic relations order. When a Grantee
dies, the representative or other person entitled to succeed to the rights of
the Grantee ("Successor Grantee") may exercise such rights. A Successor
Grantee must furnish proof satisfactory to the Company of his or her right
to receive the Grant under the Grantee's will or under the applicable laws
of descent and distribution.
(b) Transfer of Options. Notwithstanding the foregoing, the
Committee may permit a Grantee to transfer Options to family members
of the Grantee or to one or more trusts or other entities for the benefit of
or owned by such family members, provided that the Grantee receives
no consideration for the transfer of an Option and the transferred Option
shall continue to be subject to the same terms as were applicable to the
Option before the transfer.
8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) After the effective date of the Plan, any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing more
than 25% of the voting power of the then outstanding securities of the
Company;
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing
for (i) the merger or consolidation of the Company with another
corporation where the shareholders of the Company, immediately prior
to the merger or consolidation, will not beneficially own, immediately
after the merger or consolidation, shares entitling such shareholders to
more than 50% of all votes to which all shareholders of the surviving
corporation would be entitled in the election of directors and where,
immediately after the merger or consolidation, persons who were
directors of the Company immediately before the merger or
consolidation do not constitute a majority of the board of directors of the
surviving corporation, (ii) a sale or other disposition of all or
substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company;
(c) Any person has commenced a tender offer or exchange offer for
25% or more of the voting power of the then outstanding shares of the
Company; or
(d) After the effective date of this Plan, directors are elected
such that a majority of the members of the Board shall have been
members of the Board for less than two years, unless the election or
nomination for election of each new director who was not a director at
the beginning of such two-year period was approved by a vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of such period.
9. Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control, except as
provided in subsection (b) below, unless the Committee determines
otherwise, (i) the Company shall provide each Grantee with outstanding
Grants written notice of such Change of Control, (ii) all outstanding Options
shall automatically accelerate and become fully exercisable and (iii) the
restrictions and conditions on all outstanding Restricted Stock shall
immediately lapse.
(b) Assumption of Grants. Upon a Change of Control where the
Company is not the surviving corporation (or survives only as a subsidiary of
another corporation), unless the Committee determines otherwise, all
outstanding Options that are not exercised shall be assumed by, or replaced
with comparable options by, the surviving corporation and such Options shall
not become fully exercisable upon the Change of Control. Any replacement
options shall entitle the Grantee to receive the same amount and type of
securities as the Grantee would have received as a result of the Change of
Control had the Grantee exercised the Options immediately prior to the
Change of Control.
(c) Surrender of Options. Notwithstanding the foregoing, subject to
subsection below, in the event of a Change of Control, the Committee may
require that Grantees surrender their outstanding Options in exchange for a
payment by the Company, in cash or Company Stock as determined by the
Committee, in an amount equal to the amount by which the then Fair Market
Value of the shares of Company Stock subject to the Grantee's unexercised
Options exceeds the Exercise Price of the Options. Such surrender shall take
place as of the date of the Change of Control or such other date as the
Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the
contrary, in the event of a Change of Control, the Committee shall not
have the right to take any actions described in the Plan (including without
limitation actions described in Subsection (c) above) that would make the
Change of Control ineligible for pooling of interests accounting treatment
or that would make the Change of Control ineligible for desired tax
treatment if, in the absence of such right, the Change of Control would
qualify for such treatment and the Company intends to use such treatment
with respect to the Change of Control.
10. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any
time.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless
terminated earlier by the Board or extended by the Board.
(c) Termination and Amendment of Outstanding Grants. A termination
or amendment of the Plan that occurs after a Grant is made shall not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 17(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an
outstanding Grant.
(d) Governing Document. The Plan shall be the controlling
document. No other statements, representations, explanatory materials or
examples, oral or written, may amend the Plan in any manner. The Plan
shall be binding upon and enforceable against the Company and its
successors and assigns.
11. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant.
12. Rights of Participants
Nothing in this Plan shall entitle any Employee or other person to any
claim or right to be granted a Grant under this Plan. Neither this Plan nor
any action taken hereunder shall be construed as giving any individual any
rights to be retained by or in the employ of the Company or any other
employment rights.
13. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether
cash, other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
14. Requirements for Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection with
any Grant hereunder unless and until all legal requirements applicable to
the issuance or transfer of such Company Stock have been complied with
to the satisfaction of the Committee. The Committee shall have the right
to condition any Grant made to any Grantee hereunder on such Grantee's
undertaking in writing to comply with such restrictions on his or her
subsequent disposition of such shares of Company Stock as the Committee
shall deem necessary or advisable as a result of any applicable law,
regulation or official interpretation thereof, and certificates representing
such shares may be legended to reflect any such restrictions. Certificates
representing shares of Company Stock issued or transferred under the Plan
will be subject to such stop-transfer orders and other restrictions as may be
required by applicable laws, regulations and interpretations, including any
requirement that a legend or legends be placed thereon.
15. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section
shall control.
16. Effective Date of the Plan
The Plan shall be effective as of February 16, 2000.
17. Miscellaneous
(a) Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including Grants to employees
thereof who become Employees of the Company, or for other proper corporate
purposes, or (ii) limit the right of the Company to grant stock options or make
other awards outside of this Plan. Without limiting the foregoing, the
Committee may make a Grant to an employee of another corporation who
becomes an Employee by reason of a corporate merger, consolidation,
acquisition of stock or property, reorganization or liquidation involving the
Company or any of its subsidiaries in substitution for a stock option or
restricted stock grant made by such corporation. The Committee shall
prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Committee may
revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The
Committee may also adopt rules regarding the withholding of taxes on
payments to Grantees. The Committee may, in its sole discretion, agree to
limit its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be
governed and construed by and determined in accordance with the laws of the
State of Florida, without giving effect to the conflict of laws provisions
thereof.
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF APRIL 1, 2000 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED APRIL 1, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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