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SECURITIES AND EXCHANGE COMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 15, 1999
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CYGNE DESIGNS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-22102 04-2843286
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
680 Fifth Avenue, New York, New York 10019
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (212) 489-3900
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Item 2. Acquisition or Disposition of Assets
On November 15, 1999, with an effective date of October 31,1999, Cygne
Designs, Inc. (the "Company") consummated the sale of its Knit business to
Jordache Limited pursuant to, the Amended and Restated Acquisition Agreement
dated as of August 1, 1999, by and among M.T.G.I.- Textiles Manufacturing Group
(Israel) Ltd. ("MTGI"), MBS(Cygne) Company, A.C. Services, Inc. and Jordache
Limited.
The assets transferred to Jordache consist of substantially all of the
assets used by the Knit business in the manufacture of women's Knit clothing,
including machinery, equipment, raw materials, leases, rental agreements,
supplies used in the business, furniture, computer hardware and software, and
certain operating data and the records of MTGI and network equipment, as well as
all of the outstanding stock of Wear & Co. S.r.l ("Wear"). MTGI is the Company's
wholly-owned Israeli subsidiary and Wear was the Company's wholly-owned Italian
subsidiary.
The sale did not include cash, accounts receivable and certain other assets
of the MTGI business.
The liabilities assigned to, and assumed by, Jordache are all obligations
of MTGI under the contracts and registration included within the assets sold to
Jordache. In consideration of the sale to Jordache of the assets, Jordache paid
the Company consideration equal to (a) the adjusted net book value of the
inventory, fixed assets, advances to vendors and an investment in a dye house
facility owned by MTGI, all subject to posting closing adjustments, less an
amount equal to the difference between (I) the sum (a) $80,000 and (b) MTGI's
income before taxes for the period from August 1, 1999 to October 31,1999 and
(i) the operating expense of Wear & Co. International, Inc., the U.S. marketing
company for MTGI and (ii) $100,000 for the outstanding stock of Wear and assumed
liabilities described above. In addition, Jordache has paid Cygne a commission
of $600,000 on unfilled orders for products included the assets and $400,000 for
a non-compete payment in the transaction. The Company received a note from
Jordache in the amount of $2,717,062 due November 30, 1999 and cash of $500,000.
The Company will use the proceeds from the sale to fund transaction expenses and
taxes related to the sale, and together with retained cash and collections of
MTGI accounts receivable, repay bank borrowings related to MTGI and other MTGI
liabilities including severance of $800,000 to Jonathon Kafri, who ran the Knit
business.
Item 7. Financial Statements and Exhibits
(b) Pro forma financial information.
1. The unaudited pro forma condensed balance sheet of Cygne Designs,
Inc. as of July 31, 1999, giving effect to the sale of the Knit
business as if such transaction occurred on July 31, 1999.
2. The unaudited pro forma condensed consolidated statement of
operations of Cygne Designs, Inc. for the fiscal year ended
January 30, 1999, giving effect to the sale of the Knit business,
as if such sale were consummated on the first day of the fiscal
year.
3. The unaudited pro forma condensed consolidated statement of
operations of Cygne Designs, Inc. for the six months ended July
31, 1999, giving effect to the sale of the Knit business, as if
such sale was consummated on the first day of the fiscal period.
The Company did not declare any cash dividends during the periods for which
financial data is presented. The pro forma adjustments are based upon available
information and certain assumptions that management believes are reasonable. The
unaudited pro forma financial information set forth below is not necessarily
indicative of the Company's financial position or the results of operations that
actually would have occurred if the transactions had been consummated on the
dates shown. In addition, they are not intended to be a projection of results of
operations that may be obtained by the Company in the future.
(c) Exhibits
4. Amended and Restated Acquisition Agreement dated as of August 1,
1999 by and between MTGI,- Textiles Manufacturers Group (Israel)
Ltd., MBS (Cygne) Company, A.C. Services, Inc. and Jordache
Limited(previously filed with the Commission as Appendix A
incorporated herein by reference from the Company's proxy
statement dated September 28,1999.
CYGNE DESIGNS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JULY 31, 1999
($ in thousands)
As Reported Adjustments Pro Forma
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ASSETS
Current assets:
Cash $3,950 $3,950
Trade accounts receivable 5,505 5,505
Inventory 1,733 1,733
Assets held for sale 10,752 ($10,752)(a) 0
Other receivables and prepaid expenses 1,763 1,763
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Total current assets 23,703 (10,752) 12,951
Fixed assets, net 2,604 2,604
Other assets 550 550
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Total assets $26,857 ($10,752) $16,105
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LIABILITIES AND STOCKHOLDER' EQUITY
Liabilities
Current liabilities:
Short-term borrowing $7,501 ($7,501)(b) $0
Accounts payable and accrued expenses 7,824 (3,051) 4,773
Income taxes payable 6,072 6,072
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Total current liabilities 21,397 (10,552) 10,845
Stockholders' Equity 5,460 (200)(c) 5,260
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Total liabilities and
stockholders' equity $26,857 ($10,752) $16,105
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(a) Historical net assets recorded at net realizable value based upon the
proceeds from this transaction as if it occurred on July 31, 1999.
(b) Cash proceeds ($500,000 payment and collection of note receivable) from
sale of assets, including $400,000 non-compete payment, used first to pay
amounts outstanding under our Israeli bank facility and transaction
expenses, then outstanding accounts payable and accrued expenses. In
addition, cash from operations during the period August 1, 1999 to closing
were used to substantially reduce short-term borrowings.
(c) Consists of:
o Our payment of $800,000 in severance to Mr. Kafri, who runs our knit
business.
o Our receipt of a commission payment of $600,000 from Jordache.
CYGNE DESIGNS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED JANUARY 30, 1999
(In thousands, except per share amounts)
As Knit Pro Forma
Reported Operations Adjustments Pro Forma
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Net sales $ 43,013 $ 25,891 $ -- $ 17,122
Cost of goods sold 42,753 24,838 -- 17,915
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Gross profit (loss) 260 1,053 -- (793)
Selling, general and
administrative expenses 4,381 841 -- 3,540
Provision for impairment of Knit
business assets 2,564 2,564 -- --
Provision (recoupment) for lease
termination expenses (902) -- -- (902)
Amortization of intangibles 364 364 -- --
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(Loss) from operations (6,147) (2,716) -- (3,431)
Interest income (expense), net 91 (272) -- 363
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(Loss) before income taxes (6,056) (2,988) -- (3,068)
Provision for income taxes 269 171 -- 98
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Net (loss) income ($ 6,325) ($ 3,159) $ -- ($ 3,166)
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Net (loss) per share - basic ($0.51) ($0.25)
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Weighted average number of common
shares outstanding 12,438 12,438
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Net (loss) per share assuming
dilution ($0.51) ($0.25)
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Weighted average number of common
shares and dilutive securities 12,438 12,438
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CYGNE DESIGNS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JULY 31, 1999
($ in thousands, except per share amounts)
As Knit Pro Forma
Reported Operations Adjustments Pro Forma
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Net sales $ 26,727 $ 13,970 $ -- $ 12,757
Cost of goods sold 24,033 13,177 -- 10,856
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Gross profit 2,694 793 -- 1,901
Selling, general and
administrative expenses 2,024 440 -- 1,584
Provision for impairment of Knit
business assets 886 886 -- 0
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(Loss) income from operations (216) (533) -- 317
Interest income (expense), net (326) (306) -- (20)
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(Loss) income before income taxes (542) (839) -- 297
Provision for income taxes 44 17 -- 27
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Net (loss) income $ (586) $ (856) $ -- $ 270
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Net (loss) per share - basic $(0.05) $ 0.02
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Weighted average number of common
shares outstanding 12,438 12,438
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Net (loss) per share assuming dilution $(0.05) $ 0.02
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Weighted average number of common
shares and dilutive securitie 12,438 12,438
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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.
CYGNE DESIGNS, INC.
Date: November 29, 1999 By: /s/ ROY E. GREEN
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Roy E. Green
Secretary