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 Design, 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 May 4, 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 quarter ended May 4, 1996, giving
effect to the CAT/Cygne Transaction as though it had occurred at the beginning
of such quarter.
The historical quarter ended May 4, 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 quarter.
The data at and for the quarter ended May 4, 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 quarter.
ANN TAYLOR STORES CORPORATION AND ACQUIRED COMPANIES
UNAUDITED HISTORICAL AND PRO FORMA COMBINED FINANCIAL INFORMATION
BALANCE SHEETS
MAY 4, 1996
(IN THOUSANDS)
HISTORICAL PRO FORMA
----------------------- --------------------------
ACQUIRED
COMPANY BUSINESSES ADJUSTMENTS COMBINED
-------- ----------- ----------- --------
ASSETS
Current Assets
Cash and cash equivalents.................. $ 1,296 $ 59 $ -- $ 1,355
Accounts receivable, net................... 72,615 27,063 (26,555)(a) 73,123
Inventories................................ 98,185 10,223 3,985 (b) 112,393
Prepaid and other current assets........... 23,831 328 (3,438)(a) 20,721
-------- ----------- ----------- --------
Total current assets................. 195,927 37,673 (26,008) 207,592
Property and equipment, net.................. 150,203 4,179 -- 154,382
Other assets................................. 12,541 151 (5,750)(c) 6,942
Goodwill, net................................ 311,148 -- 36,960(d) 348,108
-------- ----------- ----------- --------
Total assets................................. $669,819 42,003 5,202 717,024
-------- ----------- ----------- --------
-------- ----------- ----------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt.......... $ 36,269 $ 6,082 $ -- $ 42,351
Accounts payable........................... 40,208 12,267 (22,008)(a) 30,467
Accrued expenses........................... 31,452 2,018 1,000(e) 34,470
-------- ----------- ----------- --------
Total current liabilities............ 107,929 20,367 (21,008) 107,288
Long-term debt............................... 142,124 546 11,300(f) 153,970
Other liabilities............................ 8,864 -- 8,864
Preferred Securities......................... 83,350 -- -- 83,350
Stockholders' equity
Common stock............................... 157 -- 12(g) 169
Additional paid in capital................. 311,336 -- 35,988(g) 347,324
Retained earnings and other items.......... 16,059 21,090 (21,090)(g) 16,059
-------- ----------- ----------- --------
Total stockholders' equity........... 327,552 21,090 14,910 363,552
-------- ----------- ----------- --------
Total liabilities and stockholders' equity... $669,819 $42,003 $ 5,202 $717,024
-------- ----------- ----------- --------
-------- ----------- ----------- --------
See notes to unaudited historical and pro forma combined financial information.
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ANN TAYLOR STORES CORPORATION AND ACQUIRED COMPANIES
UNAUDITED HISTORICAL AND PRO FORMA STATEMENTS OF OPERATIONS
QUARTER ENDED MAY 4, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
---------------------- PRO FORMA
ACQUIRED -----------------------------
COMPANY BUSINESSES ADJUSTMENTS COMBINED
-------- ---------- ----------- --------
Net sales.................................. $184,467 $ 60,527 $ (60,527)(h) $184,467
Cost of sales.............................. 101,313 52,544 (56,287)(h)(i)(j) 97,570
-------- ---------- ----------- --------
Gross profit............................... 83,154 7,983 (4,240) 86,897
Selling, general and administrative
expenses................................... 70,254 4,427 (4,427)(j) 70,254
Amortization of goodwill................... 2,377 -- 370(k) 2,747
-------- ---------- ----------- --------
Operating income........................... 10,523 3,556 (183) 13,896
Interest expense........................... 6,121 183 387(i) 6,691
Other (income) expense, net................ (131) -- 312(l) 181
-------- ---------- ----------- --------
Income before income taxes................. 4,533 3,373 (882) 7,024
Income tax provision....................... 2,721 1,216 (62)(l)(m) 3,875
-------- ---------- ----------- --------
Net income (loss).......................... $ 1,812 $ 2,157 $ (820) $ 3,149
-------- ---------- ----------- --------
-------- ---------- ----------- --------
Net income (loss) per share................ $ 0.08 $ 0.13
-------- --------
-------- --------
See notes to unaudited historical and pro forma combined financial information.
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NOTES TO UNAUDITED HISTORICAL AND PRO FORMA COMBINED BALANCE SHEETS,
STATEMENTS OF OPERATIONS AND NOTES THERETO
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 Business' 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 transaction as a stock acquisition, which will provide
no step up in basis for income tax purposes.
NOTE 2--ACCOUNTING PERIOD
The pro forma periods for the quarter ended May 4, 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
13-or 14-week reporting period.
NOTE 3--PURCHASE PRICE DETERMINATION
The purchase price of $47.3 million was computed assuming (i) the issuance
of 1,800,000 shares of common stock of the Company at a price of $20.00 per
share, (ii) cash consideration of $9.3 million, and (iii) the assumption of the
obligation to make payment to the president of CAT of approximately $2.0 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 $11.3 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 shares 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.
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 $36.9 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.
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NOTES TO UNAUDITED HISTORICAL AND PRO FORMA COMBINED BALANCE SHEETS,
STATEMENTS OF OPERATIONS AND NOTES THERETO--(CONTINUED)
NOTE 4--PRO FORMA ADJUSTMENTS--(CONTINUED)
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 1,800,000
shares of common stock of the Company at an assumed price of $20.00 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 (i) approximately 50% of the Acquired Businesses'
income is foreign source and not subject to U.S. taxation until repatriation and
(ii) amortized goodwill is not deductible.
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