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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
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BRYLANE INC.
(Name of Subject Company)
BRYLANE INC.
(Name of Person Filing Statement)
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Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
117661 10 8
(CUSIP Number of Class of Securities)
Robert A. Pulciani
Executive Vice President,
Chief Financial Officer, Secretary and Treasurer
Brylane Inc.
463 Seventh Avenue, 21st Floor
New York, New York 10018
Telephone: (212) 613-9500
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications
on Behalf of the Person Filing this Statement)
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COPIES TO:
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Roger H. Lustberg, Esq. Bruce A. Mann, Esq.
Thomas M. Cleary, Esq. Matthew S. Crowley, Esq.
Riordan & McKinzie Morrison & Foerster LLP
300 South Grand Avenue, 29th Floor 425 Market Street
Los Angeles, California 90071 San Francisco, California 94105
Telephone: (213) 629-4824 Telephone: (415) 268-7584
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This Amendment No. 1 (this "Amendment") amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 of Brylane Inc., a
Delaware corporation (the "Company"), filed with the Securities and Exchange
Commission (the "Commission") on March 16, 1999 (the "Schedule 14D-9"). This
Amendment relates to the tender offer by Buttons Acquisition Corporation, a
Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of
Pinault-Printemps-Redoute S.A., a societe anonyme organized and existing under
the laws of the Republic of France ("Parent") to purchase all of the issued and
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
the Company not already beneficially owned by Parent at a price of $24.50 per
Share, net to the seller in cash (the "Offer Price"), upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated March 16, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, together
with the Offer to Purchase, each as amended or supplemented from time to time,
constitute the "Offer").
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
On March 29, 1999, Parent received early termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, with respect to the Offer and the Merger. Therefore, the condition
to the Offer relating to such waiting period has been satisfied.
The following amendments are set forth in this Item 8. However, the
cross-references to the Offer to Purchase contained throughout the Schedule
14D-9, as originally filed, continue to apply, giving effect to the amendments
contained in this Item 8.
(a) Item 8 is hereby amended by deleting and replacing in its entirety the
fourth sentence of the fifth paragraph under "SPECIAL FACTORS -- Background of
the Offer -- History and Background of the Company and Arrangements between the
Company, Parent and Purchaser" on page 4 in the Offer to Purchase with the
following:
In connection with the April 1998 Stock Purchase, the Company and Parent
entered into a Governance Agreement, dated as of April 3, 1998 (the
"Governance Agreement"), pursuant to which, among other things, Parent's
ability to acquire additional Shares and to take other actions has been
limited. However, the provisions of the Governance Agreement did permit
Parent (and its affiliates) to purchase a limited number of additional
Shares up to a maximum of approximately 47.5% of outstanding Shares as set
forth in the Governance Agreement (Parent's beneficial ownership of
approximately 49.9% is a result of the Company's Share repurchases, which
were approved by the independent directors). Also in connection with the
April 1998 Stock Purchase, the Company and Parent entered into a
Registration Rights Agreement, dated as of April 3, 1998 (the "Registration
Rights Agreement"), pursuant to which the Company has granted Parent
certain registration rights to facilitate the resale of the Shares
beneficially owned by Parent under certain conditions.
(b) Item 8 is hereby amended by deleting and replacing in its entirety the
first sentence of the tenth paragraph under "SPECIAL FACTORS -- Background of
the Offer -- History and Background of the Company and Arrangements between the
Company, Parent and Purchaser" on page 4 in the Offer to Purchase with the
following:
On December 2, 1998, a special meeting of the Company Board was held, at
which Mr. Weinberg stated that Parent desired to make a proposal to acquire
the outstanding Shares not beneficially owned by Parent. Pursuant to the
Governance Agreement, Mr. Weinberg requested that the independent directors
of the Company consent to Parent's making a proposal. The special meeting
was temporarily adjourned to permit the independent directors to meet
separately to consider Parent's request. The independent directors
concluded that there was no inherent reason why a proposal to acquire the
remaining Shares should not be considered, that without knowing the terms
of Parent's proposal the independent directors could not determine whether
the proposal was in the best interests of the Stockholders, other than
Parent, and that, accordingly, the independent directors should waive the
provisions of the Governance Agreement to the extent necessary to permit
Parent to present its proposal to the Company Board. At that meeting, the
independent directors did not waive the provisions of the Governance
Agreement which
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prohibited Parent from conducting a tender offer. The special meeting of
the Company Board reconvened and Parent submitted a proposal letter (the
"Proposal Letter") to the Company Board.
(c) Item 8 is hereby amended by adding the following immediately prior to
the text of the Proposal Letter under "SPECIAL FACTORS -- Background of the
Offer -- History and Background of the Company and Arrangements between the
Company, Parent and Purchaser" on page 5 in the Offer to Purchase:
Parent is aware that the Commission takes the position that the safe harbor
for forward-looking statements does not apply to statements made in a press
release in connection with a tender offer.
Item 8 is hereby amended by adding the following after the fourth paragraph
following the text of the Proposal Letter under "SPECIAL FACTORS -- Background
of the Offer -- History and Background of the Company and Arrangements between
the Company, Parent and Purchaser" on page 7 in the Offer to Purchase:
The preliminary analysis of the Proposal that Bear Stearns presented at the
January 29, 1999 meeting of the Special Committee was based, in part, on
the Budget Projections (as defined below) provided to Bear Stearns by the
Company's management in early January 1999 after being retained by the
Special Committee. In the course of the meeting, Bear Stearns indicated
that it had not yet completed its due diligence but was attempting to
provide the Special Committee with its preliminary findings based on the
information available at that time.
The analysis of the Proposal was based, in part, upon the Budget
Projections, which were the only projections available at that time. As
described in "-- Certain Financial Projections (Unaudited)," the Budget
Projections, at the time of their preparation, reflected management's best
judgment as to the most likely future financial results of the Company. The
Budget Projections no longer represent the Company's management's judgment
of the most likely future financial results of the Company. See "-- Certain
Financial Projections (Unaudited)" for a description of the difference
between the Budget Projections and the Management Projections (as defined
below).
Bear Stearns utilized several valuation methodologies in order to frame a
preliminary range of values for the Special Committee.
Comparable Public Company Analysis
Bear Stearns initially reviewed a broad universe of direct marketing
retailers. Applying a 11x-13x price earnings multiple to the 1999 Budget
Projection of earnings per share of $2.29 implied a value range of $25-$30
per share. Applying a slightly higher 12x-14x price earnings multiple to
the consensus estimate of four Wall Street equity research analysts for
1999 of $1.66 implied a value range of $20-$23 per share.
Present Value of Hypothetical Stock Price
Bear Stearns conducted a theoretical analysis of the present value of
future share prices of the Company assuming the achievability of the Budget
Projection of earnings per share of $2.29 for 1999, $2.65 for 2000 and
$3.08 for 2001. Bear Stearns assumed a range of required annual return on
equity of between 15%-20% and price earnings multiple of 12x-14x. The range
of values implied by this analysis was $26-$32 per share.
Comparable Acquisitions/Precedent Transaction Analysis
Using publicly available information, Bear Stearns applied 1998 mean
multiples for earnings per share and earnings before interest, taxes,
depreciation and amortization (EBITDA) from precedent transactions to the
preliminary 1998 Company earnings per share of $1.25 and EBITDA of $89
million (taken from the Budget Projections). In addition, Bear Stearns
noted the acquisition of Arizona Mail Order by Fingerhut Companies Inc. as
being particularly recent and comparable at 6.7x latest twelve months
EBITDA. The range of values implied by this analysis was $22-$27 per share.
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Discounted Cash Flow Analysis
Bear Stearns performed a discounted cash flow analysis of the Company for
the fiscal years ended 1999 through 2003 based on the Budget Projections
and a sensitivity case reflecting less aggressive sales and earnings
recovery assumptions. Bear Stearns' analysis applied a range of discount
rates from 11-11.5% and exit multiples of 6.0-7.5x EBITDA for 2003. The
implied value range based on the Budget Projections was $25-$35 per share.
The sensitivity case, which assumed compounded annual sales growth of 4.0%
for 1998-2000 versus the Budget Projections of 5.5% and operating income
margin of 6.4% for 1999 and 6.8% average for 2000-2003 versus the Budget
Projections of 7.3% for 1999 and 7.9% average for 2000-2003. The implied
value range based on the sensitivity case was $18-$26 per share.
A copy of the written materials prepared by Bear Stearns for the January
29, 1999 meeting of the Special Committee containing the foregoing analyses
is filed as Exhibit (b)(6) to Amendment No. 1 (the "Schedule 13E-3
Amendment") to Schedule 13E-3, filed by Parent and Purchaser on April 5,
1999 ("Schedule 13E-3").
(d) Item 8 is hereby amended by deleting and replacing in their respective
entireties the sixth, ninth and tenth bullet points of the first paragraph under
"SPECIAL FACTORS -- Position of Parent and Purchaser Regarding Fairness of the
Offer and the Merger -- Position of Parent and Purchaser" on page 9 in the Offer
to Purchase with the following:
- the historical and projected financial performance of the Company and its
financial results (including, without limitation, sales, EBITDA, and net
income), and Parent's views as to the likelihood of achieving such
results under various scenarios (See "-- Certain Financial Projections
(Unaudited)");
- the consideration to be paid to the Stockholders is entirely in cash,
which is more liquid, and the value of which is more easily ascertainable
and less subject to risk, than securities;
- in the Merger, Stockholders will receive an amount in cash equal to
$24.50 or any greater amount per Share paid pursuant to the Offer (the
"Per Share Amount"), so that Stockholders that do not participate in the
Offer receive the same consideration as Stockholders that do participate;
and
(e) Item 8 is hereby amended by deleting and replacing in its entirety the
second paragraph under "SPECIAL FACTORS -- Position of Parent and Purchaser
Regarding Fairness of the Offer and the Merger -- Position of Parent and
Purchaser" on page 9 in the Offer to Purchase:
Parent and Purchaser did not find it practicable to assign, nor did they
assign, relative weights to the individual factors considered in reaching
their conclusion as to fairness. In light of the nature of the Company's
business as a financially sound and growing corporation, Parent and
Purchaser did not deem net book value, going concern value or liquidation
value to be relevant indicators of value of the Shares. Moreover, Parent is
not aware of any firm offers made by any unaffiliated person during the
preceding 18 months for the merger or consolidation of the Company, the
sale or transfer of all or any substantial part of the assets of the
Company or securities of the Company which would enable the holder thereof
to exercise control of the Company. In their fairness determination, Parent
and Purchaser considered the fact that Parent, through its subsidiaries,
acquired Shares at prices significantly higher than $24.50 within the past
year. See "-- Background of the Offer" and "-- Interests of Certain Persons
in the Offer and the Merger." However, Parent and Purchaser believe that
the present and projected performance of the Company and the decline in the
trading prices of the Shares indicate that the Share prices paid by
Parent's subsidiaries significantly in excess of $24.50 are no longer
indicative of the current value of the Company.
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(f) Item 8 is hereby amended by adding the following sentence at the end of
the second paragraph under "SPECIAL FACTORS -- Position of Parent and Purchaser
Regarding Fairness of the Offer and the Merger -- J.P. Morgan Reports" on page 9
in the Offer to Purchase:
The November 17 Report contained a review of the Company and Parent's
investment in the Company, including:
- global market factors (turmoil in financial markets, collapse in exports
and a lowering of business confidence), direct mail and apparel sector
factors (catalog sales for Christmas season 20% below expectations at the
time of the November 17 Report, increasing competition, softening of the
apparel sector as more dollars shift towards home furnishings) and
Company-specific factors (a general slowdown continuing across all
catalog divisions, continued weakness in the Lerner catalogs due to
merchandising miscues, slowdown in core large size Lane Bryant catalog
and sustained pressure on Chadwick's performance, increased markdowns on
fall inventories and increased competition), all of which have negatively
impacted the Company's performance and prospects;
- the recent Share price performance, including in relation to that of the
Company's peers and the broader market (indicating under performance),
and factors relating to such Share price performance (including lower
analysts earnings per share estimates and significant contraction in 12
month-forward earnings per share and price earnings ratios, which are
consistent with share price erosion and multiple contraction in the
direct mail/apparel sector);
- significant reductions in analysts' earnings estimates for the Company,
to a Street median as of November 13, 1998 of $2.06 and $2.55 earnings
per share estimates for fiscal years ended January 1999 and January 2000,
respectively; and
- analysts' comments in the fall of 1998 emphasizing the weaknesses in the
Company's catalogs and the Company's below-expectations performance.
The November 17 Report set forth the valuation implications of the Company,
reviewing J.P. Morgan's discounted cash flow analysis, comparative trading
analysis, comparative operating performance analysis, and comparable trading
multiples analysis, all of which were based on publicly available information
and which showed a range of $18 to $30 per Share. The November 17 Report also
contained a review of certain issues to consider, such as acquisition premiums,
in an exploration of alternatives, including a possible acquisition. For more
detailed information regarding the foregoing, see the full text of the November
17 Report, filed as Exhibit (b)(5) to the Schedule 13E-3.
(h) Item 8 is hereby amended by adding the following sentence after the
second sentence of the third paragraph under "SPECIAL FACTORS -- Position of
Parent and Purchaser Regarding Fairness of the Offer and the Merger -- J.P.
Morgan Reports" on page 9 in the Offer to Purchase:
The February 22 Report reviewed the fiscal year 1998 below-expectations
operating performance for the Company. The February 22 Report then set
forth that the Company management's projection of an extremely rapid
recovery from the challenges that the Company faced in fiscal year 1998,
including the projections that fiscal year 1999 operating profit would grow
24% over (pre-reserve) fiscal year 1998 levels and that the West
Bridgewater division's operating profit would grow 61% over (pre-reserve)
fiscal year 1998 levels. For more detailed information regarding such
projections, "-- Certain Financial Projections (Unaudited) -- Brylane Inc.
Budget Projections."
In response to such projections, the February 22 Report reviewed strategic
concerns, operating risks and challenges associated with the Company,
including:
- problems associated with the Company's Chadwick's division for the second
half of fiscal year 1998, including the facts that average revenue per
order on customer sales were off over 20% from the prior year, that
response rates on customer sales, reactivations and prospects were off
9%, 22% and 17% over the prior year, respectively, and operating income
(before inventory adjustment) of $(1.5) million compared to $32.5 million
one year prior;
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- the short-term nature of the Company's contract with Sears, which
accounted for approximately 18.7% of second half of fiscal year 1998
operating profit and 11.5% of fiscal year 1998 operating profit;
- recent order fulfillment problems, which are expected to take two years
to turn around;
- the aggressive nature of the Budget Projections, including the facts that
fiscal year 1999 response rates were forecast to exceed the record fiscal
year 1997 results, and that gross margin improvement is projected given
an aggressive pricing policy;
- expectations regarding future capital expenditures;
- increasing competition in the Company's core markets;
- expiration of certain key trademarks in October 2007 which will
necessitate higher advertising expenditures; and
- chief executive officer succession planning.
The February 22 Report set forth the valuation implications of the Company,
reviewing J.P. Morgan's discounted cash flow analysis, discounted cash flow
sensitivity analysis, and comparable company trading multiples analysis.
The highest implied value per Share derived from the foregoing analyses was
$23.89 based on the most optimistic case analyzed. For more detailed
information regarding the foregoing, see the full text of the February 22
Report, filed as Exhibit (b)(4) to the Schedule 13E-3.
(i) Item 8 is hereby amended by adding the following sentence at the end of
the fifth paragraph under "SPECIAL FACTORS -- Position of Parent and Purchaser
Regarding Fairness of the Offer and the Merger -- J.P. Morgan Reports" on page
10 in the Offer to Purchase:
J.P. Morgan has consented to the inclusion of the descriptions of its
November 17 Report, February 22 Report and March 4 Report contained herein
and to the filing of such Reports as exhibits to the Schedule 13E-3.
(j) Item 8 is hereby amended by adding the following sentence after the
first sentence of the second paragraph under "SPECIAL FACTORS -- Recommendation
of the Company Board; Fairness of the Offer and the Merger -- Recommendation of
the Special Committee and the Company Board -- Company Board" on page 13 in the
Offer to Purchase:
The Company Board and the Special Committee concluded that the Offer Price
adequately reflected the Company's historical results of operations based
on the Bear Stearns' precedent transaction analysis, and that the Offer
Price adequately reflected the Company's future growth prospects based on
the Bear Stearns' comparable public company and discounted cash flow
analyses, all of which are discussed under "-- Opinion of Bear Stearns."
The Company Board also recognized that the Offer Price was significantly
lower than prices the Company paid to repurchase Shares in the open market
less than six months before the Offer commenced, but concluded that in
light of the lower than expected Company earnings and the decline in the
trading price of the Shares, those prices were not relevant to a
determination at this time of whether the Offer Price was fair to the
Stockholders other than Parent.
(k) Item 8 is hereby amended by moving the nineteenth paragraph under
"SPECIAL FACTORS -- Recommendation of the Company Board; Fairness of the Offer
and the Merger -- Opinion of Bear Stearns" on page 16 in the Offer to Purchase
to follow the seventh paragraph under "SPECIAL FACTORS -- Recommendation of the
Company Board; Fairness of the Offer and the Merger -- Opinion of Bear Stearns"
on page 15 in the Offer to Purchase.
(l) Item 8 is hereby amended by amending and restating the first sentence
of the eighth paragraph under "SPECIAL FACTORS -- Recommendation of the Company
Board; Fairness of the Offer and the Merger -- Opinion of Bear Stearns" on page
15 in the Offer to Purchase as follows:
Set forth below is a brief summary of certain analyses performed by Bear
Stearns, contained in the Bear Stearns Report and reviewed with the Special
Committee on March 9, 1999 in connection with the preparation of Bear
Stearns' opinion.
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(m) Item 8 is hereby amended by adding the following sentence after the
first sentence of the fourteenth paragraph under "SPECIAL
FACTORS -- Recommendation of the Company Board; Fairness of the Offer and the
Merger -- Opinion of Bear Stearns" on page 16 in the Offer to Purchase:
Based on guidance from the Company's management, solely for purposes of the
discounted cash flow analysis, Bear Stearns assumed that net sales would
grow at a 7.5% annual rate in years 2002 and 2003, that the EBITDA margin
to sales would be 7.8% in 2002 and 8.2% in 2003, and that working capital
would remain at a constant percentage of sales as in prior years. Bear
Stearns also used the Company's management's estimate for capital
expenditures of $50 million and $20 million in 2002 and 2003, respectively.
No other material assumptions regarding 2002 and 2003 were necessary for
Bear Stearns' discounted cash flow analysis or any other analyses
undertaken by Bear Stearns.
(n) Item 8 is hereby amended by adding the following sentence as the last
paragraph under "SPECIAL FACTORS -- Recommendation of the Company Board;
Fairness of the Offer and the Merger -- Opinion of Bear Stearns" on page 17 in
the Offer to Purchase:
Bear Stearns has consented to the references to its opinion and the
foregoing description of the analyses it performed in this Offer to
Purchase.
(o) Item 8 is hereby amended by deleting and replacing in its entirety the
fourth paragraph under "SPECIAL FACTORS -- Certain Financial Projections
(Unaudited)" on page 17 in the Offer to Purchase with the following:
Several factors were considered by the Company's management in developing
the Management Projections, including, without limitation:
- substantially fewer orders from certain initial spring mailings
reflecting disappointing responses to several merchandising changes,
resulting in, among other things, an approximately 15% decline in
projected orders from the Company's Bridgewater catalog and an
approximately 13% decline in the projected orders from the Company's
combined Lerner weekend and spring sale catalogs;
- changes in the industry indicating more intense competition from existing
and new entrants (including the recent acquisition of Fingerhut
Companies, Inc. by Federated Department Stores, Inc.)
- changes in the industry resulting in more alternatives for the customer,
including the Internet as a distribution channel, at competitive prices;
and
- loss of key management in the Chadwick's division, including the
resignation of Carol Meyrowitz, head merchandiser for Chadwick's, and of
the chief financial officer of Chadwick's and the vice president of
operations of Chadwick's.
(p) Item 8 is hereby amended by deleting the second to the last sentence
under "SPECIAL FACTORS -- Cautionary Statement Concerning Forward-Looking
Statements" on page 20 in the Offer to Purchase.
(q) Item 8 is hereby amended by deleting and replacing in its entirety the
first paragraph under "SPECIAL FACTORS -- Purpose and Structure of the Offer;
Reasons of Parent and Purchaser for the Offer and the Merger" on page 20 in the
Offer to Purchase with the following:
The purpose of the Offer, the Merger and the Merger Agreement is to enable
Parent to acquire complete control of the Company Board and the entire
equity interest in the Company. The possible alternatives available to
Parent to accomplish its purpose were restricted by the standstill
provisions of the Governance Agreement. See "-- Interests of Certain
Persons in the Offer and the Merger -- Governance Agreement." Parent sought
to achieve its goal of acquiring complete control of the Company Board and
the entire equity interest in the Company through the means which it
believed had the greatest likelihood of success in a relatively short
timeframe. Based on advice from its legal and financial advisors, Parent
believed that the Offer and Merger were the means to achieve its goal with
the greatest likelihood of success in a relatively short timeframe.
Therefore, Parent did not consider or pursue any alternative
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means to accomplish its goal of acquiring the entire equity interest of the
Company and complete control of the Company Board.
Upon consummation of the Merger, the Company will become a wholly owned
subsidiary of Parent. The Offer is being made pursuant to the Merger
Agreement. The two-step Offer and Merger structure has been used in lieu of
a one-step merger because Parent believes that a tender offer may be
consummated more quickly than a one-step merger transaction.
(r) Item 8 is hereby amended by adding the following sentence after the
third sentence of the third paragraph under "SPECIAL FACTORS -- Purpose and
Structure of the Offer; Reasons of Parent and Purchaser for the Offer and the
Merger" on page 20 in the Offer to Purchase:
Parent has not yet taken any steps to implement the changes referenced in
the preceding sentence.
(s) Item 8 is hereby amended by adding the following paragraph after the
third paragraph under "SPECIAL FACTORS -- Purpose and Structure of the Offer;
Reasons of Parent and Purchaser for the Offer and the Merger" on page 20 in the
Offer to Purchase:
The Company Board and the Special Committee had no role in determining the
timing of Parent in making its proposal to acquire the outstanding Shares
that it does not already beneficially own or the Offer. Recognizing that
Parent's proposal to acquire the outstanding Shares that it does not
already beneficially own and the transactions contemplated by the Offer
could be amended or withdrawn by Parent at any time in its discretion, the
Company Board and the Special Committee concluded that because they had
determined that the Offer was fair to and in the best interests of the
Stockholders, other than Parent, the prohibitions of the Governance
Agreement should be waived rather than risking withdrawal of Parent's
proposal or the transactions contemplated by the Offer.
(t) Item 8 is hereby amended by deleting and replacing in its entirety the
fourth paragraph under "THE TENDER OFFER -- Section 8. Certain Information
Concerning Parent and Purchaser" on page 44 of the Offer to Purchase with the
following:
On March 10, 1999, Parent announced its audited consolidated results for
the year ended December 31, 1998. As at such date, Parent had consolidated
revenues of 108,329 million French Francs (or approximately $18,080
million), operating income of 5,977 million French Francs (or approximately
$998 million) and net income of 3,331 million French Francs (or
approximately $556 million). The foregoing approximate dollar equivalents
are based on the exchange rate on March 10, 1999 of 5.9916 French Francs to
a United States dollar, as reported in The Wall Street Journal for such
date. A copy of the Parent Results Press Release is filed as Exhibit
(a)(12) to the Schedule 14D-1.
Parent's financial statements are prepared in accordance with French
generally accepted accounting principles ("French GAAP"). Parent does not,
nor is it otherwise required to, audit its financial statements in
accordance with GAAP. The following represents, in the opinion of Parent,
the significant differences between GAAP and French GAAP that would affect
the foregoing financial data of Parent. No attempt has been made to
identify future differences between GAAP and French GAAP resulting from
prescribed changes in accounting standards. It should also be noted that
regulatory bodies that promulgate French GAAP and GAAP have significant
on-going projects which could affect comparisons between GAAP and French
GAAP. Finally, the following does not identify all of the differences
between French GAAP and GAAP that may be relevant.
DEFERRED TAXATION
Under French GAAP, deferred tax is calculated under the liability
method on temporary timing differences between taxable and accounting
earnings.
Net deferred tax balances are calculated on the basis of the tax
position of each company or group of companies participating in a group tax
election. Deferred tax assets are capitalized only if the company or the
fiscally consolidated entity has a reasonable degree of certainty of
recovering them during subsequent
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years; the assets corresponding to carried forward tax losses are
capitalized only when they are virtually certain to be offset against
future taxable profits.
Irrecoverable taxes relative to the payment of dividends of
consolidated entities are provisioned. No provision is made for possible
future distribution of reserves of either consolidated or unconsolidated
companies.
Where there is no intention of disposal, potential tax liabilities on
intangible assets recognized at the time of the acquisitions are not
recorded.
Under GAAP, deferred taxes are provided for all temporary differences
between the tax and commercial balance sheets. Not all these differences
that qualify for deferred tax calculation are permissible under French
GAAP. Under GAAP, deferred taxes are also calculated for tax loss
carryforwards and certain other adjustments using the liability method and
based on enacted tax rates. A valuation allowance is established when it is
more likely than not that deferred tax assets will not be realized.
CONSOLIDATION POLICIES
Parent does not consolidate certain entities in which it owns a
majority interest, in particular its Financial Services Division is
accounted for under the equity method. Under GAAP, majority owned entities
(over 50% ownership) are generally required to be fully consolidated,
whereas non-majority owned entities are generally required to be accounted
for using either the cost or equity method depending upon the amount of
influence the applicable company is able to exert over the owned entity.
DEPRECIATION/AMORTIZATION POLICIES
As permitted under French GAAP, Parent has not amortized certain
intangible assets (trade names and market shares). Under GAAP these
intangible assets would be amortized over their expected useful lives, not
exceeding 40 years.
LEASE TRANSACTIONS
Parent has entered into certain lease transactions for land buildings
and other fixed assets. Pursuant to French GAAP Parent has disclosed the
nature of the transactions, the gross amount of the related contracts, and
the remaining amounts due under these contracts. Under French GAAP the
related obligations under these contracts are considered period expenses
and are not accrued for in the balance sheet (i.e., the obligation is
considered an operating lease obligation). Under GAAP such leases would be
considered capital leases and would require that an asset and related debt
liability be initially recorded and subsequently adjusted to reflect the
lease payments and use of the asset.
(u) Item 8 is hereby amended by deleting and replacing in its entirety the
last sentence of the first paragraph before the bulleted list under "THE TENDER
OFFER -- Section 12. Certain Conditions of the Offer" on page 46 in the Offer to
Purchase with the following:
Furthermore, notwithstanding any other provision of the Offer, Purchaser
may, subject to the terms of the Merger Agreement, amend or terminate the
Offer or postpone the acceptance for payment of or payment for tendered
Shares if at any time on or after March 10, 1999 (unless otherwise
indicated below) and before the Expiration Date, any of the following
events shall occur:
Item 8 is hereby amended by making the following revisions to Schedule I to
the Offer to Purchase:
(i) the second sentence of the Employment History of Philippe LaGayette
under Parent is amended and restated as follows: President of J.P. Morgan
et cie S.A. since 1998; (ii) the second sentence of the Employment History
of Francois Henrot under Parent is amended and restated as follows: General
Partner of Rothschild et Cie Banque since March, 1997; (iii) the first
sentence under Parent and the second sentence under Purchaser of the
Employment History of Serge Weinberg are amended and restated as follows:
Chairman of the Management Board since July, 1995; (iv) the second sentence
of the
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Employment History of Serge Weinberg under Redcats is amended and restated
as follows: Chairman of the Management Board of Parent since July, 1995 (v)
the Employment History of Francois Henri Pinault under Parent is hereby
amended and restated as follows: Member of Management Board since 1993.
Member of Artemis since 1992. Chairman of the Board of FNAC since May,
1997; (vi) the Employment History of Francois Henri Pinault under Artemis
is hereby amended and restated as follows: Director for more than 5 years.
Chairman of the Board of FNAC since May, 1997; (vii) the Employment History
of Andre Guilbert under Parent is hereby amended and restated as follows:
Member of Management Board since 1998; and (viii) Jean Loyrette no longer
sits on the Board of Parent.
10
<PAGE> 11
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Item 9 is hereby amended by adding the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT NAME
- ------- ------------
<C> <S>
(a)(11) Memorandum, dated March 29, 1999, to Participants in the
1996 Stock Option Plan and 1996 Performance Stock Option
Plan (incorporated by reference to Exhibit (a)(16) to
Amendment No. 1 to Parent and Purchaser's Tender Offer
Statement on Schedule 14D-1, dated April 5, 1999 (the "14D-1
Amendment")).
(a)(12) Memorandum, dated March 29, 1999, to Participants in the
Brylane, L.P. Savings and Retirement Plan and Brylane Inc.
Employee Stock Purchase Plan (incorporated by reference to
Exhibit (a)(17) to the 14D-1 Amendment).
(a)(13) Memorandum, dated March 29, 1999, to Participants in the
Brylane Inc. Stock Subscription Plan (incorporated by
reference to Exhibit (a)(18) to the 14D-1 Amendment).
</TABLE>
11
<PAGE> 12
SIGNATURE
After due inquiry and to the best of my knowledge and belief, each of the
undersigned hereby certifies that the information set forth in this statement is
true, complete and correct.
April 6, 1999
BRYLANE INC.
By: /s/ ROBERT A. PULCIANI
-----------------------------------
Name: Robert A. Pulciani
Title: Executive Vice President,
Chief Financial
Officer, Secretary and Treasurer
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT NAME
- ------- ------------
<C> <S>
(a)(11) Memorandum, dated March 29, 1999, to Participants in the
1996 Stock Option Plan and 1996 Performance Stock Option
Plan (incorporated by reference to Exhibit (a)(16) to
Amendment No. 1 to Parent and Purchaser's Tender Offer
Statement on Schedule 14D-1, dated April 5, 1999 (the "14D-1
Amendment")).
(a)(12) Memorandum, dated March 29, 1999, to Participants in the
Brylane, L.P. Savings and Retirement Plan and Brylane Inc.
Employee Stock Purchase Plan (incorporated by reference to
Exhibit (a)(17) to the 14D-1 Amendment).
(a)(13) Memorandum, dated March 29, 1999, to Participants in the
Brylane Inc. Stock Subscription Plan (incorporated by
reference to Exhibit (a)(18) to the 14D-1 Amendment).
</TABLE>
