SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 20, 1996
CYGNE DESIGNS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-22102 04-2843286
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1372 Broadway, New York, New York 10018
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Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 354-6474
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 20, 1996, Cygne Designs, Inc. (the "Company" or "Cygne")
consummated the sale to AnnTaylor, Inc. ("AnnTaylor") of Cygne's merchandising
and sourcing capabilities used for product sales to AnnTaylor, consisting of (a)
the Company's 60% interest in each of CAT US Inc., a Delaware corporation
("CAT US"), and C.A.T. (Far East) Limited, a Hong Kong corporation ("CAT Far
East", and together with CAT US, "CAT"), the Company's joint venture arrangement
with AnnTaylor, which owned the remaining 40% interest in CAT, and (b) the
assets of Cygne's AnnTaylor Woven Division (the "Division" and together with
CAT, the "AnnTaylor Operations"), pursuant to a Stock and Asset Purchase
Agreement by and between Cygne, Cygne Group (F.E.) Limited, a Hong Kong
corporation and wholly owned subsidiary of Cygne, AnnTaylor and AnnTaylor Stores
Corporation, a Delaware corporation and parent corporation to AnnTaylor, dated
as of June 7, 1996, as amended. In the transaction, Cygne received 2,348,145
shares of common stock, par value $.0068 per share, of AnnTaylor Stores
Corporation (determined by dividing $36 million by $15.33125 (the average of the
high and low sale prices of the AnnTaylor Stores Corporation Common Stock on
each of the 10 consecutive trading days ending on the trading day immediately
prior to the closing of the transaction)), and $3.2 million in cash (based on
the net book value of the inventory of the Division (less related payables and
advances and certain other assumed liabilities)) and fixed assets of the
Division, subject to post-closing adjustments. AnnTaylor also assumed certain
liabilities of the AnnTaylor Operations and paid to Cygne $6.5 million in
settlement of accounts receivable for merchandise delivered by Cygne prior to
the closing. The Company used the $9.7 million of cash received in the
transaction to repay a portion of its outstanding senior bank indebtedness. The
Company has granted a security interest in the shares of AnnTaylor Stores
Corporation Common Stock received by it to its senior and subordinated lenders
and pledged such shares to its senior lender. The Company intends to sell the
shares of AnnTaylor Stores Corporation Common Stock from time to time to repay
its outstanding debt obligations and to finance its working capital needs. As a
result of the sale, the Company will realize a pre-tax gain of approximately $31
million.
In connection with the transaction, the Company entered into two 3-year
consulting agreements with AnnTaylor for the services of Mr. Bernard Manuel, the
Company's Chairman of the Board and Chief Executive Officer, and Mr. Irving
Benson, the Company's President and a director, to facilitate the integration of
CAT and the Division into AnnTaylor's operations. These agreements, which
provide for an annual fee of $225,000 for the services of each of Messrs. Benson
and Manuel, will automatically be assigned to the consultant if his employment
with the Company is terminated for any reason.
The sale of the AnnTaylor Operations is part of the Company's previously
disclosed intention to restructure its operations and reduce liquidity
pressures.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information.
1. The unaudited pro forma condensed balance sheet of Cygne Designs,
Inc. as of August 3, 1996, giving effect to the sale of the AnnTaylor
Operations as if such transaction occurred on August 3, 1996.
2. The unaudited pro forma condensed consolidated statement of
operations of Cygne Designs, Inc. for the fiscal year ended February
3, 1996, giving effect to the sale of the AnnTaylor Operations and its
GJM intimate apparel and sleepwear business (the "GJM Business"),
which was sold on February 9, 1996, as if such sales were consummated
on the first day of the fiscal year.
3. The unaudited pro forma condensed consolidated statement of
operations of Cygne Designs, Inc. for the six months ended August 3,
1996, giving effect to the sale of the AnnTaylor Operations as if such
sale was consummated on the first day of the fiscal period.
(c) Exhibits.
1. Stock and Asset Purchase Agreement by and between Cygne Designs,
Inc., Cygne Group (F.E.) Limited, AnnTaylor Stores Corporation and
AnnTaylor, Inc., dated as of June 7, 1996, as amended. (previously
filed with the Commission as Exhibit 10.1 to, and incorporated herein
by reference from, the Company's quarterly report on Form 10-Q for the
fiscal quarter ended August 3, 1996).
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Consolidated Financial
Statements are based upon the consolidated historical statements of the Company
adjusted to give effect to (i) the February 9, 1996 sale of substantially all of
the assets of the Company's GJM intimate apparel and sleepwear business to
Warnaco, Inc. for approximately $12.5 million in cash and the assumption of
certain liabilities of the GJM Business (the "GJM Disposition") and (ii) the
September 20, 1996 sale of the AnnTaylor Operations (the "AnnTaylor
Disposition"). The aggregate purchase price paid to the Company in the AnnTaylor
Disposition consisted of unregistered shares of AnnTaylor Stores Corporation
("ATSC") Common Stock having a market value of approximately $38.2 million
(based on the closing price of the ATSC common stock on the closing date of the
AnnTaylor Disposition) and a cash payment in an amount equal to the tangible net
book value of the Divisions's fixed assets and inventory, less the amount of
certain liabilities assumed by AnnTaylor.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of August
3, 1996 gives effect to the AnnTaylor Disposition assuming it had occurred on
August 3, 1996 and the purchase price had been received at that time. The
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year
ended February 3, 1996 gives effect to both the GJM Disposition and AnnTaylor
Disposition as if such transactions had occurred at the beginning of the period.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
six months ended August 3, 1996 gives effect to the AnnTaylor Disposition as if
such transaction had occurred at the beginning of the period.
The Company did not declare any cash dividends during the periods for which
financial data is presented. The pro forma adjustments are based upon available
information and certain assumptions that management believes are reasonable. The
unaudited pro forma financial information set forth below is not necessarily
indicative of the Company's financial position or the results of operations that
actually would have occurred if the transactions had been consummated on the
dates shown. In addition, they are not intended to be a projection of results of
operations that may be obtained by the Company in the future.
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CYGNE DESIGNS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AUGUST 3, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
AnnTaylor Pro Forma
As Reported Operations Adjustments Pro Forma
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<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash ......................................................... $ 2,815 $ 121 $ 0 $ 2,694
Trade accounts receivable, net ............................... 32,602 18,057 0 14,545
Inventory .................................................... 21,937 14,384 0 7,553
Other receivables and prepaid expenses ....................... 4,773 744 0 4,029
Investment in ATSC ........................................... 0 0 38,157 (a) 38,157
Deferred income taxes ........................................ 4,081 198 (3,586)(b) 297
-------- -------- -------- --------
Total current assets .................................... 66,208 33,504 34,571 67,275
Fixed assets, net .............................................. 13,151 3,685 0 9,466
Other assets ................................................... 848 188 0 660
Deferred income taxes .......................................... 2,000 0 (2,000)(b) 0
Goodwill, net .................................................. 2,608 0 0 2,608
-------- -------- -------- --------
Total Assets ............................................ $ 84,815 $ 37,377 $ 32,571 $ 80,009
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current Liabilities:
Accounts payable ............................................. $ 21,874 $ 14,288 $ 0 $ 7,586
Short-term borrowings ........................................ 19,586 356 (9,598)(c) 9,632
Trade credit facilities ...................................... 9,364 0 0 9,364
Accrued expenses ............................................. 9,322 1,043 0 8,279
Income taxes payable ......................................... 6,259 1,375 0 4,884
Current portion of long-term debt ............................ 1,930 266 0 1,664
-------- -------- -------- --------
Total current liabilities ............................... 68,335 17,328 (9,598) 41,409
Long-term debt ................................................. 1,192 422 0 770
Deferred rent credits .......................................... 1,513 0 0 1,513
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Total Liabilities ....................................... 71,040 17,750 (9,598) 43,692
Minority interests in subsidiaries ............................. 4,749 4,749 0 0
Stockholders' Equity ........................................... 9,026 14,878 42,169 36,317
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Total Liabilities and Stockholders' Equity .............. $ 84,815 $ 37,377 $ 32,571 $ 80,009
======== ======== ======== ========
</TABLE>
See accompanying notes.
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CYGNE DESIGNS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED FEBRUARY 3, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
GJM AnnTaylor Pro Forma
As Reported Business Operations Adjustments Pro Forma
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<S> <C> <C> <C> <C> <C>
Net Sales....................................... $ 540,063 $ 105,123 $231,385 $ 0 $ 203,555
Cost of goods sold.............................. 510,761 91,222 204,236 0 215,303
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Gross profit (loss)............................. 29,302 13,901 27,149 0 (11,748)
Selling, general and administrative expenses.... 72,182 12,037 17,387 274(a) 43,032
Gain on sale of subsidiary...................... (4,742) 0 0 4,742(b) 0
Loss on sale of GJM Business.................... 31,239 31,239 0 0 0
Write-off of goodwill........................... 48,949 0 0 0 48,949
Amortization of intangibles..................... 3,425 1,357 0 0 2,068
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(Loss) income from operations................... (121,751) (30,732) 9,762 5,016 (105,797)
Interest expense................................ 8,813 2,710 1,088 (2,926)(c) 2,089
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(Loss) income before income taxes and
minority interests............................ (130,564) (33,442) 8,674 2,090 (107,886)
(Benefit) provision for income taxes............ (6,216) (553) 2,637 (8,300)(d) 0
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(Loss) income before minority interests......... (124,348) (32,889) 6,037 10,390 $(107,886)
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Income attributable to minority interests....... 1,710 0 1,710 0 0
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Net (loss) income............................... $(126,058) $(32,889) $ 4,327 $10,390 $(107,886)
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Net (loss) per share............................ $ (10.04) $ (8.60)
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Weighted average number of common shares
outstanding.................................... 12,550 12,550
========= =========
</TABLE>
See accompanying notes.
<PAGE>
CYGNE DESIGNS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED AUGUST 3, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AnnTaylor Pro Forma
As Reported Operations Adjustments Pro Forma
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<S> <C> <C> <C> <C>
Net Sales ....................................................... $ 159,642 $ 117,097 $ 0 $ 42,545
Cost of goods sold .............................................. 139,256 (101,441) 0 37,815
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Gross profit .................................................... 20,386 15,656 0 4,730
Selling, general and administrative expenses .................... 17,337 9,037 133(a) 8,433
Amortization of intangibles ..................................... 182 0 0 182
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Income (loss) from operations ................................... 2,867 6,619 (133) (3,885)
Other income .................................................... 554 0 0 554
Interest expense ................................................ 1,930 390 (1,207)(c) 333
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Income (loss) before income taxes and minority interests ........ 1,491 6,229 1,074 (3,664)
Provision for income taxes ...................................... 817 2,293 1,476 0
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Income (loss) before minority interests ......................... 674 3,936 (402) (3,664)
Income attributable to minority interests ....................... 731 731 0 0
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Net (loss) income ............................................... $ (57) $ 3,205 $ (402) $ (3,664)
========= ========= ========= =========
Net income (loss) per share ..................................... $ 0.00 $ (0.29)
========= =========
Weighted average number of common shares outstanding ............ 12,438 12,438
========= =========
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AT AUGUST 3, 1996 AND FOR THE YEAR ENDED
FEBRUARY 3, 1996 AND THE SIX MONTHS ENDED AUGUST 3, 1996 (UNAUDITED)
NOTE 1. BALANCE SHEET FOOTNOTES
(a) Market value of AnnTaylor Stores Corporation Common Stock (2,348,145
shares) on the closing date of the AnnTaylor Disposition.
(b) Elimination of deferred taxes realized upon consummation of the AnnTaylor
Disposition.
(c) Cash proceeds from sale of the Division's assets, less liabilities assumed,
and payment of trade accounts receivable used to pay a portion of amounts
outstanding under the Company's bank facility.
NOTE 2. INCOME STATEMENT FOOTNOTES
(a) Excess of allocated overhead to be borne by the Company after the AnnTaylor
Disposition, less excess of expenses assumed by AnnTaylor over the
Company's allocations to the operations of both CAT and the Division.
<TABLE>
<CAPTION>
Year Ended Six Months
February 3, 1996 August 3, 1996
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<S> <C> <C>
Allocated overhead amounts to be borne by the Company................ $938,000 $466,000
Excess of expense to be assumed by AnnTaylor (rent,
utilities, depreciation and amortization, and real estate
taxes) over the Company's allocations to the operations of
both CAT and the Division .......................................... (214,000) (108,000)
Consulting fees to be paid by AnnTaylor for services of
Company management.................................................. (450,000) (225,000)
-------- --------
Net adjustment....................................................... $274,000 $133,000
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</TABLE>
(b) Elimination of gain on sale of subsidiary.
(c) Interest reduction upon paydown of outstanding balances under credit
facilities as of the beginning of the respective periods using net proceeds
from the sale of the Division's assets, less liabilities assumed, and
payment of trade accounts receivable.
(d) Elimination of deferred taxes realized upon consummation of the AnnTaylor
Disposition as of the beginning of the respective periods.
<PAGE>
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.
CYGNE DESIGNS, INC.
Date: October 4, 1996 By /s/ ROY E. GREEN
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Roy E. Green
Senior Vice President, Chief Financial
Officer and Treasurer
