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: September 20, 1996
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(Date of earliest event reported)
ANNTAYLOR STORES CORPORATION ANNTAYLOR, INC.
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(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
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(State or (Commission (IRS Employer (State or (Commission (IRS Employer
Jurisdic- File Number) Identification Jurisdic- File Number) Identification
tion of Number) tion of Number)
incorpor- incorpor-
ation) ation)
_______________________________________________________
142 West 57th Street
New York, New York 10019
(Address, including zip code, of Registrants' principal executive
offices)
Registrants' telephone number including area code: (212) 541-3300
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ITEM 2. Acquisition of Disposition of Assets
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On September 20, 1996, AnnTaylor Stores Corporation, a
Delaware corporation (the "Company"), through its wholly
owned subsidiary, AnnTaylor, Inc., a Delaware corporation
("Ann Taylor"), acquired (the "Acquisition") (i) the entire
interest of Cygne Designs, Inc. ("Cygne") and its wholly
owned subsidiary Cygne Group (F.E.) Limited, a Hong Kong
corporation ("CGFE"), in Ann Taylor's direct sourcing joint
venture with Cygne, known as CAT US Inc. and C.A.T. (Far
East) Limited (together, "CAT") and (ii) the assets (the
"Assets") of Cygne's Ann Taylor Woven Division (the
"Division") formerly used for sourcing merchandise for Ann
Taylor. The Assets include inventory related to the
Division ("Inventory") and certain fixed assets and office
equipment, primarily located in New York City.
As consideration for the Acquisition, (i) the Company
issued to Cygne and CGFE an aggregate of 2,348,145 shares of
common stock, par value $.0068 per share ("ATSC Common
Stock"), of the Company (such shares of ATSC Common Stock
having an aggregate market value of $36,000,000 based on the
market price of the ATSC Common Stock during the ten trading
days ended September 19, 1996), and (ii) Ann Taylor paid to
Cygne approximately $3.2 million in cash for the fixed
assets of the Division and the Inventory, which amount is
subject to post-closing adjustments. In addition, Ann
Taylor assumed certain liabilities of Cygne including
certain capital lease obligations and the payment of $1.6
million to the former President of CAT with respect to
amounts due under his previous employment agreement with
CAT, and forgave $7,985,000 of advances made by Ann Taylor
to Cygne.
In connection with the Acquisition, (i) Cygne received
an additional $6,500,000 cash payment from Ann Taylor in
settlement of certain accounts receivable, and (ii) the
Company and Ann Taylor entered into Consulting Agreements
(the "Consulting Agreements") with Cygne and each of Bernard
M. Manuel, the Chairman and Chief Executive Officer of
Cygne, and Irving Benson, the President of Cygne. Under the
Consulting Agreements, Ann Taylor will pay Cygne an
aggregate of $450,000 annually for three years in
consideration for consulting services to be provided by
Messrs. Manuel and Benson.
The Company has agreed to register the shares of ATSC
Common Stock issued to Cygne and CGFE pursuant to a
Stockholders Agreement among the Company, Cygne and CGFE,
dated September 20, 1996.
The consideration for the Acquisition was determined by
arms-length negotiations between Ann Taylor and Cygne. Ann
Taylor's source of funds for the cash portion of such
consideration was borrowings under its existing line of
credit with a syndicate of banks led by Bank of America.
As a result of the Acquisition, CAT became an indirect
wholly owned subsidiary of the Company and will perform all
of Ann Taylor's direct sourcing functions, including those
previously provided by the Division, under the name
AnnTaylor Global Sourcing, Inc.
A copy of a press release issued by the Company on
September 23, 1996 with respect to the transaction is
attached hereto as Exhibit 1 and is incorporated herein by
reference.
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ITEM 7. Financial Statements and Exhibits
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(a) The financial statements required by Item 7(a) of
Form 8-K were filed by the Registrants in their
Current Report, dated June 21, 1996.
(b) The pro forma financial information required by Item
7(b) of Form 8-K is filed herewith as Exhibit 2
and is incorporated herein by reference.
(c) Exhibit No.
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1. Press release issued by the Company on
September 23, 1996.
2. Unaudited historical and pro forma combined
balance sheets, statements of operations and
notes thereto of the Company and the Acquired
Businesses.
3. Stock and Asset Purchase Agreement, dated
as of June 7, 1996, by and among AnnTaylor
Stores Corporation, AnnTaylor, Inc., Cygne
Designs, Inc. and Cygne Group (F.E.) Limited.
Incorporated by reference to Exhibit 2 to the
Registrants' Current Report on Form 8-K filed
on June 10, 1996.
4. Amendment to Stock and Asset Purchase
Agreement, dated as of August 27, 1996, by and
among AnnTaylor Stores Corporation, AnnTaylor,
Inc., Cygne Designs, Inc. and Cygne Group (F.E.)
Limited. Incorporated by reference to Exhibit 3
to the Registrants' Current Report on Form 8-K,
filed on August 30, 1996.
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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
Date: September 26, 1996 By: /s/ J. Patrick Spainhour
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J. Patrick Spainhour
Chairman of the Board and Chief
Executive Officer
Date: September 26, 1996 By: /s/ Walter J. Parks
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Walter J. Parks
Senior Vice President - Finance
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<PAGE> 5
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.
Date: September 26, 1996 By: /s/ J. Patrick Spainhour
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J. Patrick Spainhour
Chairman of the Board and
Chief Executive Officer
Date: September 26, 1996 By: /s/ Walter J. Parks
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Walter J. Parks
Senior Vice President - Finance
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<PAGE> 6
EXHIBIT INDEX
Exhibit
Number Description
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1 Press release issued by the Company on September
23, 1996.
2 Unaudited historical and pro forma combined
balance sheets, statements of operations and
notes thereto of the Company and the Acquired
Businesses.
3 Stock and Asset Purchase Agreement, dated as of
June 7, 1996, by and among AnnTaylor Stores
Corporation, AnnTaylor, Inc., Cygne Designs, Inc.
and Cygne Group (F.E.) Limited. Incorporated by
reference to Exhibit 2 to the Registrants'
Current Report on Form 8-K filed on June 10, 1996.
4 Amendment to Stock and Asset Purchase Agreement,
dated as of August 27, 1996, by and among
AnnTaylor Stores Corporation, AnnTaylor, Inc.,
Cygne Designs, Inc. and Cygne Group (F.E.)
Limited. Incorporated by reference to Exhibit 3
to the Registrants' Current Report on Form 8-K,
filed on August 30, 1996.
EXHIBIT 1
ANNTAYLOR
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NEWS RELEASE
------------
142 West 57th Street
New York, N.Y. 10019
FOR IMMEDIATE RELEASE
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ANN TAYLOR ANNOUNCES CLOSING OF TRANSACTION
WITH CYGNE DESIGNS
New York, New York, September 23, 1996 -- AnnTaylor
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Stores Corporation (NYSE: ANN) and its wholly owned
subsidiary AnnTaylor, Inc. today announced that, pursuant to
their previously announced agreement with Cygne Designs, Inc.
("Cygne") and Cygne's wholly owned subsidiary Cygne Group
(F.E.) Limited, the Company consummated the acquisition of
Cygne's entire interest in Ann Taylor's direct sourcing joint
venture with Cygne known as CAT, and the assets of what is
known as the Ann Taylor Woven Division of Cygne, the division
of Cygne that was responsible for sourcing merchandise for
Ann Taylor.
In payment of the purchase price for Cygne's interest in
CAT and the Woven Division assets, the Company issued
2,348,145 shares of Company Common Stock and paid Cygne
approximately $3,200,000 in cash for inventory and fixed
assets, and approximately $6,500,000 in cash in settlement of
open accounts payable by Ann Taylor to Cygne for merchandise
delivered by Cygne prior to the closing, subject to post-
closing adjustments. The Company also assumed certain
liabilities related to the operations of the Woven Division.
Ann Taylor is one of the country's leading women's
specialty retailers, operating 306 stores in 40 states and
the District of Columbia.
Contact: Investor Marketing/Public
Relations: Relations:
Walter J. Parks Gina Iaderosa
SVP - Finance Director of Marketing &
(212) 541-3318 Communications
(212) 541-3347
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
Designs, 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 August 3, 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 six months
ended August 3, 1996, giving effect to the CAT/Cygne
Transaction as though it had occurred at the beginning of
such period.
The historical six months ended August 3, 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 six month period. The data at and
for the six months ended August 3, 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 six month
period.
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ANNTAYLOR STORES CORPORATION AND ACQUIRED COMPANIES
UNAUDITED HISTORICAL AND PRO FORMA COMBINED FINANCIAL
INFORMATION
BALANCE SHEETS
August 3, 1996
(in thousands)
Historical Pro Forma
---------------- ------------------------
Acquired
Company Businesses Adjustments Combined
------- ---------- ----------- --------
ASSETS
Current Assets:
Cash and cash equivalents $1,287 $ 121 $ --- $ 1,408
Accounts receivable, net 64,112 18,057 (18,057)(a) 64,112
Inventories 99,231 14,384 3,985 (b) 117,600
Prepaid and other current assets 24,948 942 (2,537)(a) 23,353
------- ------- ------- -------
Total current assets 189,578 33,504 (16,609) 206,473
Property and equipment, net 146,377 3,685 --- 150,062
Other assets 12,586 188 (6,198)(c) 6,576
Goodwill, net 308,772 --- 38,571 (d) 347,343
------- ------ ------ -------
Total assets $657,313 $37,377 $15,764 $710,454
======= ====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt $ 26,276 $ 622 $ --- $ 26,898
Accounts payable 36,112 14,288 (12,609)(a) 37,791
Accrued expenses 26,323 2,418 1,000 (e) 29,741
------- ------ ------ ------
Total current liabilities 88,711 17,328 (11,609) 94,430
Long-term debt 135,051 422 11,000 (f) 146,473
Other liabilities 9,268 --- --- 9,268
Company-Obligated Manditorily
Preferred Securities of
AnnTaylor Finance Trust
Holding Solely Convertible
Debentures 96,042 --- --- 96,042
Stockholders' equity:
Common stock 157 --- 16 (g) 173
Additional paid in capital 311,582 --- 35,984 (g) 347,566
Retained earnings and other
items 16,502 19,627 (19,627)(g) 16,502
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Total stockholders' equity 328,241 19,627 16,373 364,241
------- ------- ------- -------
Total liabilities and stockholders'
equity $657,313 $37,377 $ 15,764 $710,454
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See notes to unaudited historical and pro forma combined financial information.
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ANN TAYLOR STORES CORPORATION AND ACQUIRED COMPANIES
UNAUDITED HISTORICAL AND PRO FORMA STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 3, 1996
(in thousands, except per share amounts)
Acquired
Company Businesses Adjustments Combined
------- ---------- ----------- ----------
Net sales $372,329 $117,097 $(117,097)(h) $ 372,329
Cost of sales 208,428 101,441 (108,434)(h)(i)(j) 201,435
------- ------- -------- -------
Gross profit 163,901 15,656 (8,663) 170,894
Selling, general and
administrative expense 140,283 9,037 (9,037)(j) 140,283
Amortization of goodwill 4,753 --- 771 (k) 5,524
------- ------ -------- -------
Operating income 18,865 6,619 (397) 25,087
Interest expense 12,331 390 774 (i) 13,495
Other (income) expense, net (424) --- 760 (l) 336
------- ------ -------- -------
Income before income taxes 6,958 6,229 (1,931) 11,256
Income tax provision 4,519 2,293 (322)(l)(m) 6,490
------- ------ ------- -------
Net income $ 2,439 $ 3,936 $ (1,609) $ 4,766
======= ====== ======== =======
Net income per share $ 0.11 $ 0.19
======= =======
See notes to unaudited historical and pro forma combined financial information.
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NOTES TO UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL
STATEMENTS
Note 1 - Basis of Presentation
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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 Businesses'
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 purchase of the CAT stock as a stock acquisition,
which will provide no step up in basis for income tax purposes
and the purchase of the Cygne assets as an asset purchase,
which will provide for a step up in basis for income tax
purposes.
Note 2 - Accounting Period
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The pro forma periods for the six months ended August
3, 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 26-
week reporting period.
Note 3 - Purchase Price Determination
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The purchase price of $47.0 million was computed
assuming (i) the issuance of 2,348,145 shares of common
stock of the Company at a price of $15.331 per share, (ii)
cash consideration of $9.4 million, and (iii) the assumption
of the obligation to make payment to the president of CAT of
approximately $1.6 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 $11.0 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 share 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.
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NOTES TO UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL
STATEMENTS (continued)
Note 4 - Pro Forma Adjustments (continued)
- - -------------------------------------------
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 $38.6
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(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 2,348,145 shares of
common stock of the Company at an assumed price of
$15.331 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 goodwill relative to CAT is non-deductible.
