<PAGE> 1
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 NOVEMBER 1, 1997
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 number: 1-12552
THE TALBOTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1111318
----------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 Beal Street, Hingham, Massachusetts 02043
- ------------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
(781) 749-7600
---------------------------------------------------
(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 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class December 10, 1997
----- -----------------
Common Stock, $0.01 par value 32,179,630
1
<PAGE> 2
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Statements of Earnings for the Thirteen and
Thirty-Nine Weeks Ended November 1, 1997 and November 2,
1996......................................................................... 3
Condensed Consolidated Balance Sheets as of November 1, 1997,
February 1, 1997 and November 2, 1996........................................ 4
Condensed Consolidated Statements of Cash Flows for the Thirty-Nine
Weeks Ended November 1, 1997 and November 2, 1996............................ 5
Notes to Condensed Consolidated Financial Statements.............................. 6
Item 2: Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 7-12
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K................................................. 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE TALBOTS, INC. AND SUBSIDIARIES
<TABLE>
------------------------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
(Amounts in thousands except per share data)
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------------------- ----------------------------------
NOVEMBER 1, NOVEMBER 2, NOVEMBER 1, NOVEMBER 2,
1997 1996 1997 1996
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
NET SALES $255,968 $247,467 $741,562 $715,763
COSTS AND EXPENSES
Cost of sales, buying and occupancy 157,528 145,874 497,988 441,246
Selling, general and administrative 78,090 67,593 212,209 192,635
-------- -------- -------- --------
OPERATING INCOME 20,350 34,000 31,365 81,882
INTEREST EXPENSE, net 2,209 1,709 5,049 3,951
-------- -------- -------- --------
INCOME BEFORE TAXES 18,141 32,291 26,316 77,931
INCOME TAX EXPENSE 6,984 12,527 10,132 30,783
-------- -------- -------- --------
NET INCOME $ 11,157 $ 19,764 $ 16,184 $ 47,148
======== ======== ======== ========
NET INCOME PER SHARE $ 0.35 $ 0.60 $ 0.50 $ 1.42
======== ======== ======== ========
CASH DIVIDENDS PER SHARE $ 0.11 $ 0.09 $ 0.31 $ 0.25
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 32,201 33,074 32,503 33,266
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
THE TALBOTS, INC. AND SUBSIDIARIES
<TABLE>
- ------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
NOVEMBER 1, 1997, FEBRUARY 1, 1997 AND NOVEMBER 2, 1996
(Dollar amounts in thousands)
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
NOVEMBER 1, FEBRUARY 1, NOVEMBER 2,
1997 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,331 $ 12,348 $ 13,435
Customer accounts receivable - net 93,587 97,274 90,530
Merchandise inventories 235,337 161,230 195,769
Deferred catalog costs 11,586 9,566 10,604
Due from affiliates 5,153 4,978 5,136
Deferred income taxes 3,867 3,319 2,979
Prepaid and other current assets 31,552 23,088 23,435
--------- --------- ---------
TOTAL CURRENT ASSETS 394,413 311,803 341,888
PROPERTY AND EQUIPMENT - NET 176,063 170,805 166,604
GOODWILL - NET 41,225 42,233 42,569
INTANGIBLES - NET 889 1,789 2,389
TRADEMARKS - NET 86,017 87,805 88,401
DEFERRED INCOME TAXES 6,763 7,354 11,919
--------- --------- ---------
TOTAL ASSETS $ 705,370 $ 621,789 $ 653,770
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $ 120,000 $ 24,000 $ 79,000
Accounts payable 51,003 54,658 45,579
Accrued liabilities 51,582 48,703 45,022
Income taxes payable -- -- 2,316
--------- --------- ---------
TOTAL CURRENT LIABILITIES 222,585 127,361 171,917
LONG-TERM DEBT 50,000 50,000 50,000
DEFERRED RENT UNDER LEASE COMMITMENTS 14,362 12,969 11,636
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 40,000,000
authorized; 34,938,425 shares, 34,928,092
shares and 34,928,092 shares issued,
respectively, and 32,189,590 shares,
32,916,257 shares and 33,038,248 shares
outstanding, respectively 349 349 349
Additional paid-in capital 287,156 286,874 286,874
Retained earnings 213,543 207,433 193,932
Cumulative foreign currency translation
adjustment (1,159) (1,154) (1,634)
Deferred pension cost -- -- (470)
Restricted stock award (586) (1,164) (1,323)
Treasury stock, at cost; 2,748,835 shares,
2,011,835 shares and 1,889,844 shares,
respectively (80,880) (60,879) (57,511)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 418,423 431,459 420,217
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 705,370 $ 621,789 $ 653,770
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
THE TALBOTS, INC. AND SUBSIDIARIES
<TABLE>
- ----------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
(In thousands)
- ----------------------------------------------------------------------------------------------------
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------------
NOVEMBER 1, NOVEMBER 2,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,184 $ 47,148
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 30,398 26,270
Deferred rent 1,415 1,472
Amortization of restricted stock award 578 478
Loss on disposal of property and equipment 1,159 615
Deferred income taxes 49 (7,061)
Changes in current assets and liabilities:
Customer accounts receivable 3,668 (16,747)
Merchandise inventories (74,237) (52,027)
Deferred catalog costs (2,020) 2,153
Due from affiliates (175) (1,128)
Prepaid and other current assets (8,271) (383)
Accounts payable (3,645) 1,181
Accrued liabilities 2,899 (949)
Income taxes payable -- 2,316
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (31,998) 3,338
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (33,225) (35,469)
Proceeds from disposal of property and equipment 2 1,102
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (33,223) (34,367)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under notes payable to banks 96,000 55,000
Proceeds from options exercised 235 336
Cash dividend (10,074) (8,308)
Purchase of treasury stock (20,001) (17,245)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 66,160 29,783
EFFECT OF EXCHANGE RATE CHANGES ON CASH 44 (184)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 983 (1,430)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,348 14,865
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,331 $ 13,435
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
THE TALBOTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. OPINION OF MANAGEMENT
With respect to the unaudited condensed consolidated financial
statements set forth herein, it is the opinion of management of The
Talbots, Inc. and its subsidiaries (the "Company") that all adjustments,
which consist only of normal recurring adjustments necessary to present a
fair statement of the results for such interim periods, have been
included. These condensed consolidated financial statements should be read
in conjunction with the Company's audited consolidated financial
statements for the year ended February 1, 1997, included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission. All significant intercompany accounts and transactions have
been eliminated.
The February 1, 1997 condensed consolidated balance sheet amounts
have been derived from the Company's audited consolidated balance sheet
accounts.
2. SEASONAL VARIATIONS IN BUSINESS
Due to seasonal variations in the retail industry, the results of
operations for any interim period are not necessarily indicative of the
results expected for the full fiscal year.
3. FEDERAL AND STATE INCOME TAXES
The Company has provided for income taxes based on the estimated
annual effective rate method.
4. RECLASSIFICATIONS
Certain reclassifications have been made to the November 2, 1996
condensed consolidated financial statements to conform with the November
1, 1997 presentation.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements of the Company and the notes
thereto appearing elsewhere in this document.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items in the Company's condensed
consolidated statements of earnings for the fiscal periods shown below:
<TABLE>
<CAPTION>
=========================================================================================================
Thirteen Thirty-Nine
Weeks Ended Weeks Ended
- ---------------------------------------------------------------------------------------------------------
November 1, November 2, November 1, November 2,
1997 1996 1997 1996
(unaudited) (unaudited) (unaudited) (unaudited)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
- ---------------------------------------------------------------------------------------------------------
Cost of sales, buying and
occupancy expenses 61.5% 58.9% 67.2% 61.6%
- ---------------------------------------------------------------------------------------------------------
Selling, general and
administrative expenses 30.5% 27.3% 28.6% 26.9%
- ---------------------------------------------------------------------------------------------------------
Operating income 8.0% 13.7% 4.2% 11.4%
- ---------------------------------------------------------------------------------------------------------
Interest expense, net 0.9% 0.7% 0.7% 0.6%
- ---------------------------------------------------------------------------------------------------------
Income before income taxes 7.1% 13.0% 3.5% 10.9%
- ---------------------------------------------------------------------------------------------------------
Income tax expense 2.7% 5.1% 1.4% 4.3%
- ---------------------------------------------------------------------------------------------------------
Net income 4.4% 8.0% 2.2% 6.6%
=========================================================================================================
</TABLE>
THE THIRTEEN WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO THE THIRTEEN WEEKS ENDED
NOVEMBER 2, 1996 (THIRD QUARTER)
Net sales in the third quarter of 1997 increased by $8.5 million to $256.0
million, or 3.4% over the third quarter of 1996. Operating income was $20.3
million in the third quarter of 1997 compared to operating income of $34.0
million in the third quarter of 1996.
7
<PAGE> 8
Retail store sales in the third quarter of 1997 increased by $14.5 million
to $213.7 million, or 7.3%, over the third quarter of 1996. The percentage of
the Company's net sales derived from its retail stores increased to 83.5% in the
third quarter of 1997 from 80.5% in the third quarter of 1996. The increase in
retail store sales as a percentage of the Company's total net sales was due to
growth in retail store sales and a decline in catalog sales. The increase in
retail store sales was attributable to the 24 new stores opened in the third
quarter of 1997, the 36 new stores opened in the first two quarters of 1997 and
the nine non-comparable stores that opened in the last 13 weeks of 1996.
Comparable store sales decreased 0.7% for the thirteen-week period mainly due to
weaker than expected customer traffic. Comparable stores are those which were
open for at least one full fiscal year. When a new Talbots Petites store or a
new Talbots Accessories & Shoes store is opened adjacent to or in close
proximity to an existing Misses store which would qualify as a comparable store,
such Misses store is excluded from the computation of comparable store sales for
a period of 13 months so that the performance of the full Misses assortment may
be properly compared.
Catalog sales in the third quarter of 1997 decreased by $6.0 million, to
$42.3 million, a decrease of 12.4% from the third quarter of 1996. The
percentage of the Company's net sales derived from its catalogs decreased to
16.5% in the third quarter of 1997 from 19.5% in the third quarter of 1996. The
Company believes that the decrease in catalog sales was mainly attributable to
under performing early fall and transitional catalogs.
Because the Company sells a wide range of products which by their nature
are subject to constantly changing business strategies and competitive
positioning, it is not possible to attribute changes in retail sales or catalog
sales to specific changes in prices, changes in volume or changes in product
mix.
Cost of sales, buying and occupancy expenses increased as a percentage of
net sales to 61.5% in the third quarter of 1997 from 58.9% in the third quarter
of 1996 due mainly to a significant erosion in merchandise margins caused by a
lower percentage of sales at full price and higher than normal markdowns during
the Company's midseason sale and occupancy costs rising at a greater rate than
sales.
Selling, general and administrative expenses as a percentage of net sales
increased in the third quarter of 1997 to 30.5% from 27.3% in the third quarter
of 1996 due to higher marketing expenses related to the Company's "Brand
Essence" advertising campaign ("Ad Campaign") and incremental store payroll and
operating expenses to support the Ad Campaign and provide increased customer
support.
Interest expense, net, increased by $0.5 million, to $2.2 million in the
third quarter of 1997 over the third quarter of 1996 due to higher average debt
levels. The average total debt level, including short-term and long-term bank
borrowings, was $153.6 million in the third quarter of 1997 compared to $129.2
million in the third quarter of 1996. The average interest rate, including
interest on short-term and long-term bank borrowings, was 6.1% in the third
8
<PAGE> 9
quarter of 1997 and 1996.
The effective tax rate for the Company declined to 38.5% in the third
quarter of 1997 from 38.8% in the third quarter of 1996 following the
identification and implementation of several tax strategies at the federal,
state and international level in fiscal 1996.
THE 39 WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO THE 39 WEEKS ENDED NOVEMBER 2,
1996
Net sales in the first 39 weeks of 1997 increased by $25.8 million to
$741.6 million, or 3.6%, over the first 39 weeks of 1996. Operating income was
$31.4 million in the first 39 weeks of 1997 compared to $81.9 million in the
first 39 weeks of 1996, a decrease of 61.7%.
Retail store sales in the first 39 weeks of 1997 increased by $41.9
million, to $628.5 million, or 7.1%, over the first 39 weeks of 1996. The
percentage of the Company's net sales derived from its retail stores increased
to 84.7% in the first 39 weeks of 1997 from 82.0% in the first 39 weeks of 1996.
The increase in retail store sales as a percentage of the Company's total net
sales was due to the growth in retail store sales and the decline in catalog
sales. The increase in retail store sales was attributable to the 60 new stores
opened in the first 39 weeks of 1997 and the nine non-comparable stores that
opened in the last 13 weeks of 1996, partially offset by a decrease of $9.4
million in comparable store sales, or 2.0%, over the comparable 39 week period
in the previous year. The decrease in comparable stores sales was mainly due to
weaker than expected customer traffic.
Catalog sales in the first 39 weeks of 1997 decreased by $16.1 million, to
$113.1 million, or 12.5% compared to the first 39 weeks of 1996. The Company
believes that the decrease in catalog sales was mainly attributable to a lack of
appropriate balance between casual and career assortments in its spring and
transitional fall merchandise lines, accentuated by changes to the spring and
transitional catalog presentation formats which affected overall response rates.
Cost of sales, buying and occupancy expenses increased as a percentage of
net sales to 67.2% in the first 39 weeks of 1997 from 61.6% in the first 39
weeks of 1996. The increase in cost of sales, buying and occupancy expenses as a
percentage of sales is due primarily to a significant erosion in merchandise
margins caused by a lower percentage of sales at full price and higher than
normal markdowns during the Company's semiannual and midseason sales and to
higher occupancy costs as a percent of sales.
Selling, general and administrative expenses increased as a percentage of
net sales to 28.6% in the first 39 weeks of 1997 from 26.9% in the first 39
weeks of 1996 due to incremental payroll and variable store operating expenses
to support the spring sale and the fall introduction of the Ad Campaign and
increased marketing expenses associated with the Ad Campaign, partially offset
by increased finance charge income.
9
<PAGE> 10
Interest expense, net, increased by $1.1 million, to $5.0 million for the
first 39 weeks of 1997 from the first 39 weeks of 1996 due to higher average
debt levels and higher interest rates. The average total debt level, including
short-term and long-term bank borrowings, was $124.5 million in the first 39
weeks of 1997 compared to $109.2 million in the first 39 weeks of 1996. The
average interest rate, including interest on short-term and long-term bank
borrowings, was 6.1% in the first 39 weeks of 1997 compared to 6.0% in the first
39 weeks of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital are cash flows from
operating activities and a line-of-credit facility from five banks, with maximum
available short-term borrowings of $125.0 million. At November 1, 1997 and
November 2, 1996, the Company had $120.0 and $79.0 million of outstanding
borrowings under this line-of-credit facility, respectively. This increase is
mainly due to lower net income and higher inventories, which resulted from
slower than anticipated sales and planned inventory increases. Additionally, the
Company has a revolving credit facility with maximum available borrowings of
$50.0 million. At November 1, 1997 and November 2, 1996, the Company's
borrowings under the revolving credit facility were $50.0 million. The Company's
working capital needs are typically at their lowest in the spring and peak
during the fall selling season.
In the first 39 weeks of 1997, cash and cash equivalents increased $1.0
million compared to a decrease of $1.4 million during the first 39 weeks of
1996. Mainly contributing to the increase in cash and cash equivalents were
higher borrowings, decreased accounts receivable and decreased deferred income
taxes, partially offset by lower net income, increases in inventories due to
slower than anticipated sales and to support new store openings, higher
prepayments for estimated federal income taxes due to an expectation of higher
taxable income and decreased accounts payable.
A third authorization under the Company's stock repurchase plan was
established on May 22, 1997 and authorizes the Company to utilize up to $40
million to purchase shares of its common stock from time to time over a two year
period, including repurchases from JUSCO (USA), Inc., its 63.4% majority owner.
During the first 39 weeks of 1997, the Company repurchased 731,600 shares of its
common stock under this program at an average price of approximately $27 per
share.
Capital expenditures for the first 39 weeks of 1997 were $33.2 million
compared to $35.5 million in the first 39 weeks of 1996. The Company used
approximately $28.5 million and $32.6 million in the first 39 weeks of 1997 and
1996, respectively, for opening new stores and expanding and renovating existing
stores. For the remainder of the fiscal year, the Company currently anticipates
an additional approximately $20 million of capital expenditures primarily for
the opening of new stores and expanding and renovating existing stores.* The
actual amount of such capital expenditures will depend on the number and type of
stores being opened, expanded and renovated, and the schedule of such activity
during the remainder of fiscal 1997.
10
<PAGE> 11
In response to recent operating trends, the Company anticipates opening
approximately 45-50 new stores in fiscal 1998, down from the recent pace of
approximately 65-75.*
The Company's primary ongoing cash requirements through the end of fiscal
1998 are expected to be the financing of working capital buildups during peak
selling seasons, the funding of new stores and the expansion and renovation of
existing stores, expenditures under the stock repurchase plan and the payment of
any dividends that may be declared from time to time. The Company anticipates
that cash from operating activities and from its borrowing facilities will be
sufficient to meet these current requirements.*
The payment of dividends and the amount of any dividends will be
determined by the Board of Directors and will depend on many factors, including
earnings, operations, financial condition, capital requirements and general
business outlook. On November 3, 1997, the Company announced that the Board of
Directors approved a quarterly dividend of $.11 per share payable on December
15, 1997 to shareholders of record as of December 1, 1997.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," which is effective for the Company for the period ended January 31,
1998. SFAS No. 128 is intended to simplify the standards for computing earnings
per share and makes the United States standards for computing earnings per share
more comparable to international standards. SFAS No. 128 requires the
presentation of "basic" earnings per share (which excludes dilution) and
"diluted" earnings per share. The Company does not believe that implementation
of SFAS No. 128 will have a material impact on the Company's net income per
share calculation.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which is effective for the Company for the period ended January 30,
1999. SFAS No. 130 has no impact on net income and requires that certain
components of stockholders' equity from nonowner sources be reclassified and
presented as "other comprehensive income." Currently, the Company's consolidated
balance sheets contain no material components of stockholders' equity that would
be reclassified as "other comprehensive income."
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which is effective for the Company for
the period ended January 30, 1999. The impact of SFAS No. 131 on the Company has
not yet been determined.
- --------------------------------------------------------------------------------
*The foregoing contains forward-looking information within the meaning of The
Private Securities Litigation Reform Act of 1995. The statements may be
identified by an "asterisk" ("*") or such forward-looking terminology as
"expect", "look", "believe", "anticipate", "may", "will" or similar
11
<PAGE> 12
statements or variations of such terms. Such forward-looking statements involve
certain risks and uncertainties including levels of sales, effectiveness of the
Company's brand awareness and marketing programs, store traffic, acceptance of
Talbots fashion and expansion plans, appropriate balance of merchandise
offerings and responsiveness of the Company's core customers and, in each case,
actual results may differ materially from such forward-looking information.
Certain factors that may cause actual results to differ from such
forward-looking statements are included in the Company's Current Report on Form
8-K dated October 30, 1996 filed with the Securities and Exchange Commission (a
copy of which may also be obtained from the Company at 781-741-4500) as well as
other periodic reports filed by the Company with the Securities and Exchange
Commission and you are urged to consider such factors. The Company assumes no
obligation for updating any such forward-looking statements.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
11.1 Computation of weighted average number of
shares outstanding used in determining
primary and fully diluted earnings per share.
27 Financial Data Schedule (for electronic filing only)
(B) REPORTS ON FORM 8-K
None
13
<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.
THE TALBOTS, INC.
Dated: December 12, 1997 By: /s/ Edward L. Larsen
-----------------------------
Edward L. Larsen
Duly authorized officer and Senior
Vice President of Finance, Chief
Financial Officer, and Treasurer
14
<PAGE> 1
EXHIBIT 11.1
Computation of weighted average number of shares outstanding used in determining
primary and fully diluted earnings per share:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------- -----------------------------
November 1, November 2, November 1, November 2,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
(Shares in 000's)
<S> <C> <C> <C> <C>
Primary (a)
- -----------
Weighted average number of common
shares outstanding 32,201 33,074 32,503 33,266
Assumed exercise of certain dilutive stock
options based on average market values 155 240 170 250
------ ------ ------ ------
Weighted average number of shares used
in primary per share computations 32,356 33,314 32,673 33,516
====== ====== ====== ======
Fully Diluted (a)
- -----------------
Weighted average number of common
shares outstanding 32,201 33,074 32,503 33,266
Assumed exercise of all dilutive options
based on higher of average or closing
market value 155 240 170 250
------ ------ ------ ------
Weighted average number of shares used
in fully diluted per share computations 32,356 33,314 32,673 33,516
====== ====== ====== ======
</TABLE>
(a) This calculation is submitted in accordance with the Securities Exchange
Act of 1934 Release No. 9083 although not required by Footnote 2 to
Paragraph 14 of APB Opinion No. 15 because it results in dilution of less
than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THIRTEEN WEEKS ENDED
NOVEMBER 1, 1997 AND THE BALANCE SHEETS AS OF NOVEMBER 1, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> AUG-03-1997
<PERIOD-END> NOV-01-1997
<CASH> 13,331
<SECURITIES> 0
<RECEIVABLES> 93,587
<ALLOWANCES> 0
<INVENTORY> 235,337
<CURRENT-ASSETS> 394,413
<PP&E> 176,063
<DEPRECIATION> 0
<TOTAL-ASSETS> 705,370
<CURRENT-LIABILITIES> 222,585
<BONDS> 0
0
0
<COMMON> 349
<OTHER-SE> 418,074
<TOTAL-LIABILITY-AND-EQUITY> 705,370
<SALES> 255,968
<TOTAL-REVENUES> 255,968
<CGS> 157,528
<TOTAL-COSTS> 235,618
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,209
<INCOME-PRETAX> 18,141
<INCOME-TAX> 6,984
<INCOME-CONTINUING> 11,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,157
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0
</TABLE>
