Exhibit 2
UNAUDITED HISTORICAL AND PRO FORMA COMBINED BALANCE SHEETS,
STATEMENTS OF OPERATIONS AND NOTES THERETO
The following Unaudited Historical and Pro Forma
combined balance sheets, statements of operations and the
notes thereto give effect to the acquisition (the "CAT/Cygne
Transaction") of the remaining 60% interest of CAT U.S.,
Inc. ("CAT") and the AnnTaylor Woven Division of Cygne
Designs, Inc. ("Division") (collectively, the "Acquired
Businesses") by an indirect wholly owned subsidiary of
AnnTaylor Stores Corporation (the "Company") under the
"purchase" method of accounting, Cygne Designs, Inc. owns
the Division and a 60% interest in CAT. These Unaudited
Historical and Pro Forma Combined balance sheets, statements
of operations and the notes thereto are presented for
illustrative purposes only, and therefore are not
necessarily indicative of the operating results and
financial position that might have been achieved had the
CAT/Cygne Transaction occurred as of an earlier date, nor
are they necessarily indicative of operating results and
financial position that may occur in the future.
An Unaudited Historical and Pro Forma Combined Balance
Sheet is provided as of August 3, 1996, giving effect to the
CAT/Cygne Transaction as though it had been consummated on
that date. Unaudited Historical and Pro Forma Combined
Statements of Operations are provided for the six months
ended August 3, 1996, giving effect to the CAT/Cygne
Transaction as though it had occurred at the beginning of
such period.
The historical six months ended August 3, 1996
information has been derived from the unaudited financial
statements of the Company. These financial statements
include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the
results for the unaudited six month period. The data at and
for the six months ended August 3, 1996 for the Acquired
Businesses have been derived from the unaudited financial
statements which, in the opinion of the management of the
Acquired Businesses, include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair
presentation of the results for the unaudited six month
period.
- - ------------------------------------------------------------------------------
ANNTAYLOR STORES CORPORATION AND ACQUIRED COMPANIES
UNAUDITED HISTORICAL AND PRO FORMA COMBINED FINANCIAL
INFORMATION
BALANCE SHEETS
August 3, 1996
(in thousands)
Historical Pro Forma
---------------- ------------------------
Acquired
Company Businesses Adjustments Combined
------- ---------- ----------- --------
ASSETS
Current Assets:
Cash and cash equivalents $1,287 $ 121 $ --- $ 1,408
Accounts receivable, net 64,112 18,057 (18,057)(a) 64,112
Inventories 99,231 14,384 3,985 (b) 117,600
Prepaid and other current assets 24,948 942 (2,537)(a) 23,353
------- ------- ------- -------
Total current assets 189,578 33,504 (16,609) 206,473
Property and equipment, net 146,377 3,685 --- 150,062
Other assets 12,586 188 (6,198)(c) 6,576
Goodwill, net 308,772 --- 38,571 (d) 347,343
------- ------ ------ -------
Total assets $657,313 $37,377 $15,764 $710,454
======= ====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt $ 26,276 $ 622 $ --- $ 26,898
Accounts payable 36,112 14,288 (12,609)(a) 37,791
Accrued expenses 26,323 2,418 1,000 (e) 29,741
------- ------ ------ ------
Total current liabilities 88,711 17,328 (11,609) 94,430
Long-term debt 135,051 422 11,000 (f) 146,473
Other liabilities 9,268 --- --- 9,268
Company-Obligated Manditorily
Preferred Securities of
AnnTaylor Finance Trust
Holding Solely Convertible
Debentures 96,042 --- --- 96,042
Stockholders' equity:
Common stock 157 --- 16 (g) 173
Additional paid in capital 311,582 --- 35,984 (g) 347,566
Retained earnings and other
items 16,502 19,627 (19,627)(g) 16,502
------- ------- ------- -------
Total stockholders' equity 328,241 19,627 16,373 364,241
------- ------- ------- -------
Total liabilities and stockholders'
equity $657,313 $37,377 $ 15,764 $710,454
======= ====== ======= =======
See notes to unaudited historical and pro forma combined financial information.
===============================================================================
ANN TAYLOR STORES CORPORATION AND ACQUIRED COMPANIES
UNAUDITED HISTORICAL AND PRO FORMA STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 3, 1996
(in thousands, except per share amounts)
Acquired
Company Businesses Adjustments Combined
------- ---------- ----------- ----------
Net sales $372,329 $117,097 $(117,097)(h) $ 372,329
Cost of sales 208,428 101,441 (108,434)(h)(i)(j) 201,435
------- ------- -------- -------
Gross profit 163,901 15,656 (8,663) 170,894
Selling, general and
administrative expense 140,283 9,037 (9,037)(j) 140,283
Amortization of goodwill 4,753 --- 771 (k) 5,524
------- ------ -------- -------
Operating income 18,865 6,619 (397) 25,087
Interest expense 12,331 390 774 (i) 13,495
Other (income) expense, net (424) --- 760 (l) 336
------- ------ -------- -------
Income before income taxes 6,958 6,229 (1,931) 11,256
Income tax provision 4,519 2,293 (322)(l)(m) 6,490
------- ------ ------- -------
Net income $ 2,439 $ 3,936 $ (1,609) $ 4,766
======= ====== ======== =======
Net income per share $ 0.11 $ 0.19
======= =======
See notes to unaudited historical and pro forma combined financial information.
===============================================================================
NOTES TO UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL
STATEMENTS
Note 1 - Basis of Presentation
- - ------------------------------
The Unaudited Historical and Pro Forma Combined balance
sheets, statements of operations and the notes thereto are
presented for illustrative purposes only giving effect to
the acquisition of the Acquired Businesses by the Company
accounted for as a "Purchase", as such term is used under
generally accepted accounting principles. The Acquired
Businesses' information includes the acquisition by the
Company of CAT and the Division.
Certain amounts reported in the Acquired Businesses'
historical financial information have been reclassified to
conform with the Company presentations in the Unaudited
Historical and Pro Forma Combined Balance Sheets and
Statements of Operations.
The Unaudited Historical and Pro Forma balance sheets,
statements of operations and the notes thereto giving effect
to the acquisition of the Acquired Businesses by the
Company have been prepared assuming the Company elected to
treat the purchase of the CAT stock as a stock acquisition,
which will provide no step up in basis for income tax purposes
and the purchase of the Cygne assets as an asset purchase,
which will provide for a step up in basis for income tax
purposes.
Note 2 - Accounting Period
- - --------------------------
The pro forma periods for the six months ended August
3, 1996 are the historical financial reporting periods of
both the Company and the Acquired Businesses. The Company
and the Acquired Businesses have historically reported a 26-
week reporting period.
Note 3 - Purchase Price Determination
- - -------------------------------------
The purchase price of $47.0 million was computed
assuming (i) the issuance of 2,348,145 shares of common
stock of the Company at a price of $15.331 per share, (ii)
cash consideration of $9.4 million, and (iii) the assumption
of the obligation to make payment to the president of CAT of
approximately $1.6 million becoming due under his existing
employment agreement with CAT as a result of the CAT/Cygne
Transaction. The cash portion of the purchase price
(including the obligation to the president of CAT) will be
provided by additional bank borrowings, assumed to be
approximately $11.0 million at 8% per annum. The aggregate
purchase price includes an amount payable to an executive of
CAT pursuant to his employment contract, which requires a
payment to him based on the value of the share of CAT being
transferred.
Note 4 - Pro Forma Adjustments
- - ------------------------------
The following items were recorded as adjustments to
effect the combination of the Company and the Acquired
Businesses.
4(a) Adjustments recorded to reflect (i) the elimination
of amounts due to/from the Company and the Acquired
Businesses, and (ii) the elimination of advances
made to the Division.
==============================================================================
NOTES TO UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL
STATEMENTS (continued)
Note 4 - Pro Forma Adjustments (continued)
- - -------------------------------------------
4(b) Adjustments to reduce the inventories of CAT and the
Division to the current fair value, and the
elimination of advances made to the Division.
4(c) The elimination of the investment account on the
Company's books for the 40% interest in CAT.
4(d) Adjustment recorded to reflect the creation of
goodwill representing the excess of purchase price
over net assets acquired which results in a $38.6
million adjustment, based on management's estimate
and without the performance of any due diligence
procedures. Accordingly, such estimate of goodwill
is preliminary and subject to change. At this time,
the Company has not attributed any value to
intangible assets other than goodwill.
4(e) Adjustment to record a liability for an estimate of
fees related to the CAT/Cygne Transaction.
4(f) Adjustments to reflect a portion of the purchase
price expected to be financed through additional
bank borrowings.
4(g) Common stock, additional paid-in capital and
retained earnings have been adjusted to eliminate
the equity balances of the Acquired Businesses and
reflect the common stock and additional paid-in
capital for the issuance of 2,348,145 shares of
common stock of the Company at an assumed price of
$15.331 per share.
4(h) To eliminate sales previously recorded by the
Acquired Businesses against the cost of sales
previously recorded by the Company. Cost of sales
is reduced by the reclassification of certain
expenses discussed in Notes 4(i) and 4(j).
4(i) To reclassify interest expense from cost of sales as
reported in the Acquired Businesses' historical
financial information to interest expense, to
conform with the Company's presentations.
4(j) Historically, the Acquired Businesses have
classified certain expenses as selling, general and
administrative expenses. An adjustment has been
recorded to reclassify certain expenses, such as
costs of design and procurement, to cost of sales.
4(k) Adjusted to reflect the charge relating to the
amortization of goodwill, which represents the
excess of purchase price over net assets acquired.
Such goodwill will be amortized over a 25 year life.
4(l) The elimination of the equity in earnings of 40% of
the net income of CAT by the Company and the related
income tax expense.
4(m) The income tax provision represents the assumed
effective tax rate for the Acquired Businesses
assuming goodwill relative to CAT is non-deductible.