<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 AUGUST 2, 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 as registrant 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)
(617) 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 September 9, 1997
-----
Common Stock, $0.01 par value 32,203,447
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<PAGE> 2
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION ----
Item 1: Financial Statements
Condensed Consolidated Statements of Operations
for the Thirteen and Twenty-Six Weeks Ended
August 2, 1997 and August 3, 1996.........................3
Condensed Consolidated Balance Sheets as of
August 2, 1997, February 1, 1997 and
August 3, 1996............................................4
Condensed Consolidated Statements of Cash Flows
for the Twenty-Six Weeks Ended August 2,
1997 and August 3, 1996...................................5
Notes to Condensed Consolidated
Financial Statements....................................6-7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations....................8-12
PART II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders............13
Item 6: Exhibits and Reports on Form 8-K...............................13
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE TALBOTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THIRTEEN AND
TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996
(Amounts in thousands except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------- ----------------------
AUGUST 2, AUGUST 3, AUGUST 2, AUGUST 3,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 244,852 $ 232,109 $ 485,594 $ 468,296
COSTS AND EXPENSES
Cost of sales, buying and occupancy 196,296 162,016 340,460 295,371
Selling, general and administrative 65,552 57,931 134,119 125,043
--------- --------- --------- ---------
OPERATING (LOSS) INCOME (16,996) 12,162 11,015 47,882
INTEREST EXPENSE, net 1,639 1,154 2,840 2,242
--------- --------- --------- ---------
(LOSS) INCOME BEFORE TAXES (18,635) 11,008 8,175 45,640
INCOME TAX (BENEFIT) EXPENSE (7,174) 4,403 3,148 18,256
--------- --------- --------- ---------
NET (LOSS) INCOME ($ 11,461) $ 6,605 $ 5,027 $ 27,384
========= ========= ========= =========
NET (LOSS) INCOME PER SHARE ($ 0.35) $ 0.20 $ 0.15 $ 0.82
========= ========= ========= =========
CASH DIVIDENDS PER SHARE $ 0.11 $ 0.09 $ 0.20 $ 0.16
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 32,407 33,191 32,654 33,339
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
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THE TALBOTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AUGUST 2, 1997, FEBRUARY 1, 1997 AND AUGUST 3, 1996
(Dollar amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUGUST 2, FEBRUARY 1, AUGUST 3,
1997 1997 1996
--------- ----------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,230 $ 12,348 $ 10,799
Customer accounts receivable - net 91,235 97,274 80,553
Merchandise inventories 193,348 161,230 149,828
Deferred catalog costs 7,739 9,566 11,273
Due from affiliates 2,927 4,978 5,824
Deferred income taxes 3,534 3,319 2,955
Prepaid and other current assets 40,702 23,088 33,998
--------- --------- ---------
TOTAL CURRENT ASSETS 341,715 311,803 295,230
PROPERTY AND EQUIPMENT - NET 170,480 170,805 165,222
GOODWILL - NET 41,560 42,233 42,905
INTANGIBLES - NET 1,189 1,789 2,989
TRADEMARKS - NET 86,613 87,805 88,997
DEFERRED INCOME TAXES 8,107 7,354 11,839
--------- --------- ---------
TOTAL ASSETS $ 649,664 $ 621,789 $ 607,182
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $ 74,000 $ 24,000 $ 50,000
Accounts payable 51,817 54,658 48,510
Accrued liabilities 47,935 48,703 42,704
--------- --------- ---------
TOTAL CURRENT LIABILITIES 173,752 127,361 141,214
LONG-TERM DEBT 50,000 50,000 50,000
DEFERRED RENT UNDER LEASE COMMITMENTS 14,120 12,969 11,140
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 40,000,000
authorized; 34,930,925 shares, 34,928,092
shares and 34,926,592 shares issued,
respectively, and 32,218,108 shares,
32,916,257 shares and 33,077,665
shares outstanding, respectively 349 349 349
Additional paid-in capital 286,944 286,874 286,837
Retained earnings 205,929 207,433 177,144
Cumulative foreign currency translation
adjustment (522) (1,154) (1,138)
Deferred pension cost -- -- (470)
Restricted stock award (845) (1,164) (1,483)
Treasury stock, at cost; 2,712,817 shares,
2,011,835 shares and 1,848,927 shares,
respectively (80,063) (60,879) (56,411)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 411,792 431,459 404,828
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 649,664 $ 621,789 $ 607,182
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
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THE TALBOTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
--------------------------
AUGUST 2, AUGUST 3,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
<S> <C> <C>
Net income $ 5,027 $ 27,384
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 21,274 16,362
Deferred rent 1,163 992
Amortization of restricted stock award 319 319
Loss on disposal of property and equipment 495 491
Deferred income taxes (967) (6,961)
Changes in current assets and liabilities:
Customer accounts receivable 6,026 (6,789)
Merchandise inventories (32,194) (6,284)
Deferred catalog costs 1,827 1,484
Due from affiliates 2,051 (1,816)
Prepaid and other current assets (16,881) (7,513)
Accounts payable (2,834) (2,613)
Accrued liabilities (752) 4,173
Income taxes payable -- (3,300)
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (15,446) 15,929
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Additions to property and equipment (19,024) (24,824)
Proceeds from disposal of property and equipment 1 8
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (19,023) (24,816)
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Borrowings under notes payable to banks 50,000 26,000
Proceeds from options exercised 59 307
Cash dividend (6,531) (5,331)
Purchase of treasury stock (19,184) (16,145)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,344 4,831
EFFECT OF EXCHANGE RATE CHANGES ON CASH 7 (10)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,118) (4,066)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,348 14,865
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,230 $ 10,799
======== ========
</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. NEW ACCOUNTING STANDARDS
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. Implementation of SFAS No. 128 will not 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.
6
<PAGE> 7
3. 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.
4. FEDERAL AND STATE INCOME TAXES
The Company has provided for income taxes based on the estimated
annual effective rate method.
5. RECLASSIFICATIONS
Certain reclassifications have been made to the August 3, 1996
condensed consolidated financial statements to conform with the August 2,
1997 presentation.
7
<PAGE> 8
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 operations for the fiscal periods shown below:
<TABLE>
<CAPTION>
========================================================================================================
Thirteen Twenty-Six
Weeks Ended Weeks Ended
- --------------------------------------------------------------------------------------------------------
August 2, August 3, August 2, August 3,
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 80.2% 69.8% 70.1% 63.1%
occupancy expenses
- --------------------------------------------------------------------------------------------------------
Selling, general and 26.8% 25.0% 27.6% 26.7%
administrative expenses
- --------------------------------------------------------------------------------------------------------
Operating (loss) income (6.9%) 5.2% 2.3% 10.2%
- --------------------------------------------------------------------------------------------------------
Interest expense, net 0.7% 0.5% 0.6% 0.5%
- --------------------------------------------------------------------------------------------------------
(Loss) income before income taxes (7.6%) 4.7% 1.7% 9.7%
- --------------------------------------------------------------------------------------------------------
Income tax (benefit) expense (2.9%) 1.9% 0.6% 3.9%
- --------------------------------------------------------------------------------------------------------
Net (loss) income (4.7%) 2.8% 1.0% 5.8%
========================================================================================================
</TABLE>
THE THIRTEEN WEEKS ENDED AUGUST 2, 1997 COMPARED TO THE THIRTEEN WEEKS
ENDED AUGUST 3, 1996 (SECOND QUARTER)
Net sales in the second quarter of 1997 increased by $12.8 million to
$244.9 million, or 5.5% over the second quarter of 1996. The operating loss was
$17.0 million in the second quarter of 1997 compared to operating income of
$12.2 million in the second quarter of 1996.
8
<PAGE> 9
Retail store sales in the second quarter of 1997 increased by $16.3
million to $215.6 million, or 8.2%, over the second quarter of 1996. The
percentage of the Company's net sales derived from its retail stores increased
to 88.0% in the second quarter of 1997 from 85.9% in the second 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 13 new stores opened
in the second quarter of 1997, the 23 new stores opened in the first quarter of
1997 and the 39 non-comparable stores that opened in the last 26 weeks of 1996.
Comparable store sales were flat for the thirteen-week period mainly due to
weaker than expected customer response to the spring merchandise line, which the
Company believes did not contain an appropriate balance between casual and
career offerings. The Company has adjusted its upcoming fall merchandise line to
obtain what it believes is a better balance between casual and career items,
providing more choices appropriate for working women. 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 second quarter of 1997 decreased by $3.5 million, to
$29.3 million, a decrease of 10.7% from the second quarter of 1996. The
percentage of the Company's net sales derived from its catalogs decreased to
12.0% in the second quarter of 1997 from 14.1% in the second quarter 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 merchandise line, accentuated by changes to the spring and transitional
catalog presentation formats which affected overall response rates. The Company
has adjusted its upcoming fall catalog presentation, restoring the density of
the number of items being offered per page back to historical levels. However,
the Company expects continued weakness in the catalog business in the third
quarter due to the residual impact of under-performing transitional fall
catalogs and a drop in customer demand as a result of the UPS strike.*
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 80.2% in the second quarter of 1997 from 69.8% in the second
quarter of 1996 due to buying and occupancy costs rising at a greater rate than
sales and 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 sale. The Company has recorded all estimated markdowns
related to the spring and transitional merchandise in the second quarter.
Selling, general and administrative expenses as a percentage of net sales
increased in the second
9
<PAGE> 10
quarter of 1997 to 26.8% from 25.0% in the second quarter of 1996 due to
incremental payroll expense to support the semiannual sale business, increased
sale advertising and the inability to leverage fixed catalog production costs
due to lower than anticipated catalog sales.
Interest expense, net, increased by $0.4 million, to $1.6 million in the
second quarter of 1997 over the second quarter of 1996 due to higher average
debt levels. The average total debt level, including short-term and long-term
bank borrowings, was $119.2 million in the second quarter of 1997 compared to
$104.9 million in the second quarter of 1996. The average interest rate,
including interest on short-term and long-term bank borrowings, was 6.2% in the
second quarter of 1997 compared to 6.0% in the second quarter of 1996.
The effective tax rate for the Company declined to 38.5% in the second
quarter of 1997 from 40.0% in the second quarter of 1996 following the
identification and implementation of several tax strategies at the federal,
state and international level.
THE 26 WEEKS ENDED AUGUST 2, 1997 COMPARED TO THE 26 WEEKS ENDED AUGUST 3, 1996
Net sales in the first 26 weeks of 1997 increased by $17.3 million to $485.6
million, or 3.7%, over the first 26 weeks of 1996. Operating income was $11.0
million in the first 26 weeks of 1997 compared to $47.9 million in the first 26
weeks of 1996, a decrease of 77.0%.
Retail store sales in the first 26 weeks of 1997 increased by $27.4 million,
to $414.8 million, or 7.1%, over the first 26 weeks of 1996. The percentage of
the Company's net sales derived from its retail stores increased to 85.4% in the
first 26 weeks of 1997 from 82.7% in the first 26 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 36 new stores opened in the first
26 weeks of 1997 and the 39 non-comparable stores that opened in the last 26
weeks of 1996, partially offset by a decrease of $8.3 million in comparable
stores sales, or 2.6%, over the comparable 26 week period in the previous year.
The decrease in comparable store sales was mainly due to weaker than expected
customer response to the spring merchandise line, which the Company believes did
not contain an appropriate balance between casual and career offerings.
Catalog sales in the first 26 weeks of 1997 decreased by $10.1 million, to
$70.8 million, or 12.5% compared to the first 26 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
merchandise line, 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 70.1% in the first 26 weeks of 1997 from 63.1% in the first 26
weeks of 1996. The increase in cost of sales, buying and occupancy as a
percentage of sales is due primarily to higher occupancy costs as a percent of
sales and a significant erosion in merchandise margins caused by a lower
10
<PAGE> 11
percentage of sales at full price and higher than normal markdowns during the
Company's semiannual sale.
Selling, general and administrative expenses increased as a percentage of net
sales to 27.6% in the first 26 weeks of 1997 from 26.7% in the first 26 weeks of
1996 due to incremental payroll expense to support the semiannual sale and an
increase in variable store operating expenses, partially offset by increased
finance charge income.
Interest expense, net, increased by $0.6 million, to $2.8 million for the
first 26 weeks of 1997 from the first 26 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 $109.9 million in the first 26
weeks of 1997 compared to $99.2 million in the first 26 weeks of 1996. The
average interest rate, including interest on short-term and long-term bank
borrowings, was 6.2% in the first 26 weeks of 1997 compared to 6.0% in the first
26 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 August 2, 1997 and August
3, 1996, the Company had $74.0 and $50.0 million of outstanding borrowings under
this line-of-credit facility, respectively. Additionally, the Company has a
revolving credit facility with maximum available borrowings of $50.0 million. At
August 2, 1997 and August 3, 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 26 weeks of 1997, cash and cash equivalents decreased $10.1
million compared to a decrease of $4.1 million during the first 26 weeks of
1996. Contributing to the decrease in cash and cash equivalents were 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 an increase in
purchases of treasury stock pursuant to the Company's third stock repurchase
plan, partially offset by decreases in capital expenditures, increased
borrowings and decreased accounts receivable. The third 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,
on a basis consistent with the earlier repurchase programs. During the first 26
weeks of 1997, the Company repurchased 700,982 shares of its common stock under
this program at an average price of approximately $27 per share.
Capital expenditures for the first 26 weeks of 1997 were $19.0 million
compared to $24.8 million in the first 26 weeks of 1996. The Company used
approximately $16.6 million and $23.2 million in the first 26 weeks of 1997 and
1996, respectively, for opening new stores and
11
<PAGE> 12
expanding and renovating existing stores. This change in capital expenditures
was largely caused by the timing of construction allowances granted by landlords
for the construction of new stores. For the remainder of the fiscal year, the
Company currently anticipates an additional approximately $36.0 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.
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, the funding of the third 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 August 5, 1997, the Company announced that the Board of
Directors approved a quarterly dividend of $.11 per share payable on September
15, 1997 to shareholders of record as of September 2, 1997.
- --------------------------------------------------------------------------------
*The foregoing contains forward-looking information within the meaning of The
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve certain risks and uncertainties including levels of sales,
store traffic, and acceptance of Talbots fashion and expansion plans 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 617-741-4500) 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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 22, 1997, the Company held its Annual Meeting of Shareholders (the
"Annual Meeting"). At the Annual Meeting, the following persons were
elected to serve as directors of the Company: Takuya Okada, Arnold B.
Zetcher, Eiji Akiyama, Clark J. Hinkley, Masaharu Isogai, Elizabeth T.
Kennan, Motoya Okada and Mark H. Willes. There are no other directors of
the Company.
At the Annual Meeting, no fewer than 31,368,263 votes were cast in favor
of, and no more than 199,225 were withheld with respect to, the proposal
to elect the above-listed persons as directors of the Company. See
Schedule of Votes attached hereto and made a part hereof for a separate
tabulation with respect to each nominee for office.
Also at the Annual Meeting, on a proposal to ratify the appointment of
Deloitte & Touche LLP to serve as independent auditors of the Company for
the 1997 fiscal year, 31,533,695 votes were cast in favor of such
proposal, 17,204 votes were cast against and 16,589 votes abstained.
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
The Company filed a Current Report on Form 8-K on June 19, 1997
pursuant to which the second extension of the Share Repurchase
Program was filed by the Company, as identified therein.
The Company filed a Current Report on Form 8-K on July 25, 1997
pursuant to which an amended Independent Auditors' Consent, which
was originally filed with the Company's Form 10-K for the year
ended February 1, 1997, was filed by the Company, as identified
therein.
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: September 11, 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> 15
ATTACHMENT TO REPORT ON FORM 10-Q
SCHEDULE OF VOTES
-----------------
<TABLE>
<CAPTION>
Total Vote For Total Vote Withheld
Each Director From Each Director
----------------------------------------
<S> <C> <C>
Takuya Okada 31,455,863 111,625
Arnold B. Zetcher 31,456,177 111,311
Eiji Akiyama 31,453,833 113,655
Clark J. Hinkley* 31,454,509 112,979
Masaharu Isogai 31,368,263 199,225
Elizabeth T. Kennan 31,489,979 77,508
Motoya Okada 31,453,548 113,940
Mark H. Willes 31,490,774 76,714
</TABLE>
* Effective July 8, 1997 Clark J. Hinkley resigned from the Board of Directors.
<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 Twenty-Six Weeks Ended
---------------------- ----------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
------ ------ ------ ------
(Shares in 000's)
<S> <C> <C> <C> <C>
Primary (a)
- -----------
Weighted average number of common
shares outstanding 32,407 33,191 32,654 33,339
Assumed exercise of certain dilutive stock
options based on average market values 142 244 169 220
------ ------ ------ ------
Weighted average number of shares used
in primary per share computations 32,549 33,435 32,823 33,559
====== ====== ====== ======
Fully diluted (a)
- -----------------
Weighted average number of common
shares outstanding 32,407 33,191 32,654 33,339
Assumed exercise of all dilutive options
based on higher of average or closing
market value 142 244 169 220
------ ------ ------ ------
Weighted average number of shares used
in fully diluted per share computations 32,549 33,435 32,823 33,559
====== ====== ====== ======
</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 OPERATIONS FOR THE THIRTEEN WEEKS ENDED
AUGUST 2, 1997 AND THE BALANCE SHEETS AS OF AUGUST 2, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<CIK> 0000912263
<NAME> THE TALBOTS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> MAY-04-1997
<PERIOD-END> AUG-02-1997
<EXCHANGE-RATE> 1
<CASH> 2,230
<SECURITIES> 0
<RECEIVABLES> 91,235
<ALLOWANCES> 0
<INVENTORY> 193,348
<CURRENT-ASSETS> 341,715
<PP&E> 170,480
<DEPRECIATION> 0
<TOTAL-ASSETS> 649,664
<CURRENT-LIABILITIES> 173,752
<BONDS> 0
0
0
<COMMON> 349
<OTHER-SE> 411,443
<TOTAL-LIABILITY-AND-EQUITY> 649,664
<SALES> 244,852
<TOTAL-REVENUES> 244,852
<CGS> 196,296
<TOTAL-COSTS> 261,848
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,639
<INCOME-PRETAX> (18,635)
<INCOME-TAX> (7,174)
<INCOME-CONTINUING> (11,461)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,461)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> 0
</TABLE>
