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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________________ TO _____________________
Commission file number: 1-12552
THE TALBOTS, INC. RETIREMENT SAVINGS VOLUNTARY PLAN
(Title of the Plan)
THE TALBOTS, INC.
(Issuer of the securities held)
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)
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THE TALBOTS, INC.
RETIREMENT SAVINGS
VOLUNTARY PLAN
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
Supplementary Schedules
As of December 31, 1999
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THE TALBOTS, INC.
RETIREMENT SAVINGS VOLUNTARY PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 1999:
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at End of Year 8
SIGNATURES 9
EXHIBIT I - Independent Auditors' Consent 10
</TABLE>
Schedules required under the Employee Retirement Income Security Act of 1974,
other than the schedule listed above, are omitted because of the absence of the
conditions under which the schedules are required.
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INDEPENDENT AUDITORS' REPORT
Trustees of The Talbots, Inc.
Retirement Savings Voluntary Plan:
We have audited the accompanying statements of net assets available for benefits
of The Talbots, Inc. Retirement Savings Voluntary Plan (the "Plan") as of
December 31, 1999 and 1998, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31, 1999
and 1998, and the changes in net assets available for benefits for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in our audit of
the basic 1999 financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/s/ Deloitte & Touche LLP
June 23, 2000
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THE TALBOTS, INC.
RETIREMENT SAVINGS VOLUNTARY PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS:
Cash $ 6,181 $ -
----------- -----------
Investments, at fair value:
Nonparticipant-directed investments - participant loans 1,836,557 1,783,871
Participant-directed investments 73,246,959 61,597,076
----------- -----------
Total investments 75,083,516 63,380,947
----------- -----------
Receivables:
Employer contributions -- 595,481
Employee contributions -- 538,996
Due from broker for investments sold 20,702 160,028
Dividends and interest 494 136,288
Other -- 812
----------- -----------
Total receivables 21,196 1,431,605
----------- -----------
Total assets 75,110,893 64,812,552
----------- -----------
LIABILITIES:
Payable for investments purchased 11,737 331,706
Accrued management fee -- 78,533
----------- -----------
Total liabilities 11,737 410,239
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $75,099,156 $64,402,313
=========== ===========
</TABLE>
See the accompanying notes to financial statements.
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THE TALBOTS, INC.
RETIREMENT SAVINGS VOLUNTARY PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ADDITIONS:
Employer contributions $ 2,449,801 $ 2,260,145
Employee contributions 7,163,661 6,726,384
Rollover contributions -- 32,063
Dividend and interest income 5,555,979 1,844,565
Net appreciation in fair value of investments 2,199,320 2,388,180
----------- -----------
Total additions 17,368,761 13,251,337
----------- -----------
DEDUCTIONS:
Benefit payments 6,249,793 5,865,227
Investment management fee 422,125 472,804
----------- -----------
Total deductions 6,671,918 6,338,031
----------- -----------
INCREASE 10,696,843 6,913,306
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 64,402,313 57,489,007
----------- -----------
End of year $75,099,156 $64,402,313
=========== ===========
</TABLE>
See the accompanying notes to financial statements.
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THE TALBOTS, INC.
RETIREMENT SAVINGS VOLUNTARY PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following brief description of The Talbots, Inc. Retirement Savings
Voluntary Plan (the "Plan") is for general information purposes only.
Participants should refer to the plan document for more complete
information.
GENERAL INFORMATION - The Plan is a defined contribution 401(k) plan
established by The Talbots, Inc. (the "Company") on January 1, 1989 and
amended and restated effective as of November 1, 1993 for the employees of
the Company. Employees are eligible to participate following completion of
one year of service, attainment of age 21, and at least 1,000 hours worked
during the plan year. Prior to October 1, 1999, State Street Bank and
Trust Company served as trustee of the Plan and Watson Wyatt Worldwide
served as the recordkeeper. Effective October 1, 1999, American Express
Trust Co. ("AETC") Retirement Services serves as both trustee and
recordkeeper of the Plan. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
PARTICIPATION - Once an employee becomes eligible to participate in the
Plan, he or she may elect to become a participant by entering into a
compensation reduction authorization agreement. This agreement provides
that the participant accept a reduction in compensation in an amount equal
to 1% to 15% of his or her compensation. The maximum employee deferral is
the lesser of 15% of the participant's compensation or $10,000 (for 1999)
indexed for inflation in accordance with the Internal Revenue Code.
CONTRIBUTIONS - During each plan year, the Company makes matching
contributions. Prior to October 1, 1999, the Company determined the rate
at which the matching contribution, if any, would be made each quarter.
Effective October 1, 1999, the Company's matching contribution, if any, is
determined each week. The Company-matching contribution for the periods
covered by these financial statements was 50% of the employee contribution
up to 6% of the employee compensation.
VESTING AND FORFEITURES - All employee contributions are 100% vested.
Company contributions vest 20% after each year of service. Forfeitures are
reallocated on a pro rata basis to active participants, as employer
contributions, based on the participant's compensation.
BENEFIT ARRANGEMENTS - The Plan provides for the payment of a
participant's account balance to participants who have reached the later
of the normal retirement age of 65 or who have completed five years of
vesting service. A participant may also choose to withdraw his or her
vested account balance upon attainment of the early retirement age or age
59-1/2. If the participant's service with the Company terminates other
than by reason of retirement, the participant may elect to receive his or
her vested account balance as soon as possible following termination of
employment. Distributions will be made in a lump sum, provided that no
payment may be made without the participant's consent before his or her
normal or early retirement age, if such payment would be in excess of
certain amounts designated in the plan document.
PARTICIPANT LOANS - Participants may borrow from their accounts up to 50%
of the vested value of their accounts. The minimum loan amount is $500.
Loan terms range from 1-5 years or up to 10 years for the purpose of
purchasing a primary residence. Interest rates range from 7% to 10%.
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1. DESCRIPTION OF THE PLAN (CONTINUED)
INVESTMENT OPTIONS PRIOR TO OCTOBER 1, 1999 - Employee and employer
contributions were invested in the following options:
Fixed Income Fund - Funds are invested in the Fidelity Managed Income
Portfolio.
Equity Fund - Funds are invested in common stock of various companies,
with residual amounts invested in a short-term investment fund.
Talbots Stock Fund - Funds are invested in Talbots, Inc. common stock,
with residual amounts invested in a short-term investment fund.
Balanced Fund - Funds are invested in fixed income securities,
corporate debt and common stock of various companies, with remaining
amounts invested in a short-term investment fund.
INVESTMENT OPTIONS EFFECTIVE OCTOBER 1, 1999 - Employee and employer
contributions are invested in the following options. Investment objectives
are as stated in the prospectus:
AXP New Dimensions Fund - Funds are invested in a master portfolio,
which primarily invests in common stocks showing potential for
significant growth, seeking to provide shareholders with long-term
growth of capital.
Invesco Total Return Fund - Funds are invested in a combination of
common stocks of companies with a strong history of paying regular
dividends and debt securities seeking to achieve a high total return on
investment through capital appreciation and current income.
PIMCO Total Return Fund - Funds are invested in intermediate maturity
fixed income securities seeking maximum total return consistent with
preservation of capital and prudent investment management.
Baron Asset Fund - Funds are invested in securities of small- and
medium-sized companies with undervalued assets or favorable growth
prospects seeking capital appreciation.
Janus Overseas Fund - At least 65% of the Funds are invested in
securities of issuers from at least five different countries, excluding
the United States, seeking long-term growth of capital.
Davis New York Venture Fund (Class A) - Funds are invested in common
stock of U.S. companies with market capitalization of at least $5
billion seeking growth of capital.
AETC Income Fund II - Funds are invested in another common, commingled
or collective fund which has the same investment objective of seeking
to preserve principal and income while maximizing current income.
AETC Equity Index Fund II - Funds are invested in another common,
commingled or collective fund, which has the same investment objective
and which has a portfolio consisting of some or all of the securities
based upon the Standard & Poor's 500 Index, seeking to achieve, as
closely as possible, the rate of return of such an index.
Talbots Stock Fund - Funds are invested in Talbots, Inc. common stock,
with residual amounts invested in a short-term investment fund.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECLASSIFICATION AND ADOPTION OF SOP 99-3 - The Plan has adopted Statement
of Position ("SOP") 99-3, "Accounting for and Reporting of Certain Defined
Contribution Plan Investments and Other Disclosure Matters," issued by the
American Institute of Certified Public Accountants. As a result, a
reclassification has been made to eliminate the by-fund reporting for
participant-directed investments in 1998.
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared on
the accrual basis of accounting. Purchases and sales of securities are
recorded on a trade-date basis. Interest income is recorded on the accrual
basis. Dividends are recorded on the ex-dividend date.
VALUATION OF INVESTMENTS - The investments of the Plan are stated at fair
value. The Talbots, Inc. common stock is recorded at quoted market prices;
shares of mutual funds or collective funds are recorded at net asset
value. Participant loans are recorded at cost which approximates fair
value.
BENEFIT PAYMENTS - Benefit payments to participants are recorded when
paid.
ADMINISTRATIVE PLAN EXPENSES - Most expenses incurred in administering the
Plan, including those necessary for the administration of the Trust, are
paid out of the principal or income of the Trust unless paid by the
Company at its sole discretion. For the years ended December 31, 1999 and
1998, the Company did not pay any material administrative expenses of the
Plan. Investment management fees incurred by the funds are paid out of the
assets of the individual funds.
ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the plan administrator to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual
results may differ from those estimates.
3. INVESTMENTS
During 1999 and 1998, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year)
appreciated in value by $2,199,320 and $2,388,180, respectively, as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
At fair value:
Common stock $1,636,389 $2,331,129
Mutual funds 562,931 --
Government notes and bonds -- 49,680
Corporate notes and bonds -- 7,371
---------- ----------
Total $2,199,320 $2,388,180
========== ==========
</TABLE>
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4. NONPARTICIPANT-DIRECTED INVESTMENTS
In 1999 and 1998, the Plan had nonparticipant-directed investments
representing loans to participants in the amount of $1,836,557 and
$1,783,871, respectively. The amount of interest income on these loans for
the years ended December 31, 1999 and 1998 was $136,198 and $198,034,
respectively.
5. PLAN TERMINATION
In the event of termination of the Plan, or complete discontinuance of
contributions thereto by the Company, the rights of all employees shall be
fully vested and nonforfeitable. Following termination of the Plan,
subject to reasonable administrative delays, all benefits under the Plan
shall be paid in conformity with the standard benefit distribution
policies of the Plan.
6. TAX STATUS OF THE PLAN
The Plan obtained a favorable determination letter in 1995 in which the
Internal Revenue Service stated that the Plan, as then designed, was in
compliance with the applicable requirements of the Internal Revenue Code
(the "Code"). The plan administrator believes that the Plan is currently
designed and being operated in compliance with the applicable requirements
of the Code. Accordingly, no provision for income taxes has been included
in the Plan's financial statements.
* * * * * *
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THE TALBOTS, INC.
RETIREMENT SAVINGS VOLUNTARY PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF
YEAR DECEMBER 31, 1999
<TABLE>
<CAPTION>
c) DESCRIPTION OF INVESTMENT,
INCLUDING MATURITY DATE,
b) IDENTITY OF ISSUE, BORROWER, INTEREST RATE, COLLATERAL, e) CURRENT
(a) LESSOR OR SIMILAR PARTY PAR OR MATURITY VALUE d) COST VALUE
<S> <C> <C> <C> <C> <C>
Nonparticipant-Directed Investments:
* Participant loans Participants (Interest rates ranging
from 7.0% to 10.0%; various
maturity dates through
December 30, 2009) $1,836,557 $ 1,836,557
-----------
Total Nonparticipant-Directed 1,836,557
Investments -----------
Participant-Directed Investments:
* Talbots, Inc. Common Stock Talbots, Inc. Common Stock (216,479 9,701,390
shares)
* AETC Income Fund II American Express Trust Co. Collective Fund (598,841 11,684,590
shares)
* AETC Equity Index Fund II American Express Trust Co. Collective Fund (13,977 557,958
shares)
PIMCO Total Return Fund PIMCO Funds Mutual Fund (23,095 228,647
shares)
Invesco Total Return Fund Invesco Mutual Fund (693,518 20,084,271
shares)
* AXP New Dimensions Fund American Express Mutual Fund (831,367 29,771,253
Financial Advisors shares)
Baron Asset Fund Baron Funds Mutual Fund (5,607 329,498
shares)
Davis New York Venture Fund
(Class A) Davis Funds Mutual Fund (5,335 153,439
shares)
Janus Overseas Fund Janus Mutual Fund (19,782 735,913
shares) -----------
Total Participant-Directed
Investments 73,246,959
-----------
TOTAL INVESTMENTS $75,083,516
===========
</TABLE>
* Party-in-interest
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this report to be signed on its behalf by the
undersigned.
THE TALBOTS, INC. RETIREMENT SAVINGS VOLUNTARY PLAN
Dated: June 27, 2000 PLAN ADMINISTRATOR
By Administrative Committee
By: /s/ Edward L. Larsen
Edward L. Larsen
Administrative Committee Member
By: /s/ Stuart M. Stolper
Stuart M. Stolper
Administrative Committee Member
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