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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended July 27,1996
OR
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file number 0-11736
THE DRESS BARN, INC.
(Exact name of registrant as specified in its charter)
Connecticut 06-0812960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Dunnigan Drive, Suffern, New York 10901
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (914) 369-4500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Common Stock - par value $.05 per share
Section 12(g) of the Act: (Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K Yes
No X
Page 1 of Cover Page
As of October 18, 1996, 22,634,083 shares of common shares were outstanding. The
aggregate market value of the common shares (based upon the closing price on
October 17, 1996 on the NASDAQ) of The Dress Barn, Inc. held by non-affiliates
was approximately $80,965,000. For the purposes of such calculation, all
outstanding shares of Common Stock have been considered held by non-affiliates,
other than the 6,890,610 shares beneficially owned by Directors and Officers of
the registrant. In making such calculation, the registrant does not determine
the affiliate or non-affiliate status of any shares for any other purpose.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on December 16, 1996 are incorporated into Parts I and
III of this Form 10-K.
Page 2 of Cover Page
PART I
ITEM 1. BUSINESS
General
As of July 27, 1996, The Dress Barn, Inc. (the "Company", which
includes, unless otherwise noted, its subsidiaries and predecessor), operated a
national chain of 726 women's value priced specialty apparel stores offering
career fashion to the working woman. The Company utilizes three merchandising
formats : Dress Barn ("DB"), Dress Barn Woman ("DBW") and DB/DBW Combination
stores ("Combos"). Dress Barn stores operate primarily under the names "Dress
Barn" and "Westport Ltd.". DBW stores mostly operate as "Dress Barn Woman" or
"Westport Woman". As of July 27, 1996, there were 492 Dress Barn stores, 97 DBW
stores and 137 Combos.
The Company's merchandise strategy is to offer in-season, moderate to
better price women's apparel emphasizing fashion and quality merchandise at a
substantial discount from department store prices. The Company's target
customers are price conscious and fashion minded working women in middle to
upper income brackets and predominantly in the 24-50 year age range.
The DB format stores carry Junior and Misses sizes, while the DBW stores
feature larger sizes of styles similar to those found in the DB stores. The DB
stores average 4,500 square feet, with the DBW stores averaging about 4,000
square feet. The Combo locations, with an average size of 9,000 square feet,
carry both DB and DBW merchandise. The Company's Combo units have many cost and
merchandising efficiencies. The Company has accelerated the expansion of its
Combo concept by opening new Combo locations and expanding existing DB and DBW
locations and converting them to the Combo format.
The Company has been in business since 1962. The Company's current
strategy is to open Combo stores, convert existing single format stores into
Combos, while aggressively closing underperforming locations. During fiscal
1996, the Company opened 45 stores and closed 72 stores. The Company also
converted 37 DB single format and 13 DBW single format stores to Combos.
In fiscal 1997, approximately 60 new stores are planned, of which almost
all are planned as Combo stores. The Company also expects to convert 30 single
format DB and DBW stores to Combos and close approximately 60 underperforming
locations. Through October 1, 1996, the Company has opened 8 Combos, closed 9
single format stores and converted 10 single format stores to Combos for a total
of 729 stores in operation.
Merchandising and Marketing
The Company's stores offer first-quality current merchandise, with
approximately half of the Company's sales volume derived from sportswear, and
the remainder consisting of dresses, suits, blazers and accessories. DB and DBW
are organized as separate divisions, each with a separate merchandising staff to
focus on its individual merchandise styles. Combos have merchandise offerings
from both the DB and DBW merchandising divisions.
In addition to domestically purchased brand name merchandise, the
Company's stores also offer private label merchandise. This merchandise, which
is also first quality, is typically manufactured under contract to the Company
either domestically or abroad. The Company's strategy is to gradually increase
the ratio of private label merchandise it offers, as quality, price and fashion
become more important to its target customers than brand names. Such private
label merchandise is typically both less expensive for the customer and more
profitable for the Company, and promotes the unique "fashion at a fraction"
image that the Company seeks to convey to its target customers. In Spring 1997,
the Company plans to offer specially styled merchandise under the "Dress Barn"
label, taking greater advantage of the 35 year old company logo, now known to
customers in 43 states.
In fiscal 1996, the Company introduced two new departments: shoes and
petites, primarily in its larger Combo locations. Both tests exceeded their
initial plans and are being expanded to additional stores. Currently, 45 stores
have shoe departments and 12 stores feature petite sizes. The Company expects to
add another 30 shoe departments and 5 petite departments in the Spring of 1997.
Virtually all merchandising decisions affecting the Company's stores are
made centrally. Pricing and markdowns are determined centrally but may be
adjusted locally in response to competitive situations. Generally, the majority
of the merchandise sold by the Company is uniformly carried by all stores with a
growing percentage varied by management according to regional or consumer tastes
or the size of particular stores. To keep merchandise seasonal and in current
fashion, inventory is reviewed weekly and markdowns are taken to expedite
selling.
The Company's stores provide a high degree of customer service including
personal sales assistance by Company employees and an attended dressing room
area with individual dressing rooms. The Company's stores are designed and
maintained to project an attractive, quality image. Exteriors carry a
distinctive logo for ease of identification. Interiors feature department store
type fixtures and carpeting and premium quality lighting. Merchandise is
attractively displayed and arranged by department such as sportswear, dresses
and suits.
The Company uses mainly print advertising that emphasizes current
fashion apparel at discount prices. The Company continues to experiment with
television and radio advertising in selected markets. The Company's Dress Barn
credit card program, in its third year, continues to add cardholders, with over
800,000 as of September 1996. The average transaction on the card is 50% greater
than other transactions. The Company believes this increase is incremental and
is developing programs to further encourage card usage. In addition to the
convenience the card provides the Company's customers, it serves as a vehicle to
communicate with them on a regular basis.
Store Locations
As of July 27, 1996 the Company was operating 726 stores in 43 states
and the District of Columbia, primarily in suburban strip centers and outlet
malls and strip centers. The Company's outlet stores are more productive and
profitable than the average strip center store, and cost less to own and
operate. Nearly all of the Company's stores occupy between 3,500 and 5,000
square feet of selling space, except the Combos which typically occupy between
7,500 and 10,000 square feet.
The table on the following page indicates the states in which the stores
operating on July 27, 1996 were located:
Stores Open At July 27, 1996:
Location DB DBW Combos
-------- ------- ------- ------
Alabama ................................ 4 1 4
Arizona ................................ 10 1 2
Arkansas ............................... 1 -- 2
California ............................. 29 6 7
Colorado ............................... 6 1 1
Connecticut ............................ 18 2 10
District of Columbia ................... -- -- 1
Delaware ............................... 4 1 1
Florida ................................ 17 2 6
Georgia ................................ 19 3 5
Idaho .................................. 2 1 1
Illinois ............................... 22 1 7
Indiana ................................ 12 1 1
Kansas ................................. 3 1 1
Kentucky ............................... 3 2 2
Louisiana .............................. 2 -- 1
Maine .................................. 3 1 --
Maryland ............................... 13 2 5
Massachusetts .......................... 30 4 6
Michigan ............................... 22 3 6
Minnesota .............................. 1 -- 2
Mississippi ............................ 1 -- 2
Missouri ............................... 7 2 5
Nebraska ............................... 2 -- --
Nevada ................................. 3 1 2
New Hampshire .......................... 5 1 1
New Jersey ............................. 38 13 6
New Mexico ............................. -- -- 1
New York ............................... 48 9 10
North Carolina ......................... 24 8 3
Ohio ................................... 16 2 3
Oklahoma ............................... 2 -- --
Oregon ................................. 3 2 --
Pennsylvania ........................... 39 10 10
Rhode Island ........................... 1 -- --
South Carolina ......................... 16 1 1
Tennessee .............................. 10 3 4
Texas .................................. 19 3 6
Utah ................................... 3 2 1
Vermont ................................ 2 -- --
Virginia ............................... 28 6 3
Washington ............................. 3 1 3
West Virginia .......................... -- -- 1
Wisconsin .............................. 1 -- 4
--- --- ---
Total .................................. 492 97 137
=== === ===
The following table indicates the type of shopping facility in which the stores
are located:
Dress Barn
Dress Barn Woman Combo
Type of Facility Stores Stores Stores
------ ------ ------
Strip Shopping Centers ................... 294 44 39
Outlet Malls and Outlet Strip Centers .... 129 46 79
Free Standing, Downtown and Enclosed Malls 69 7 19
--- --- ---
Total .................................... 492 97 137
=== === ===
During the fiscal year ended July 27, 1996, no store accounted for as
much as 1% of the Company's total sales.
Buying and Distribution
The Company utilizes a buying organization that parallels those used by
most large specialty store chains. Buying is conducted on a departmental basis
for each of the DB and DBW divisions by the Company's staff of buyers and
assistant buyers supervised by the President and six Merchandise Managers. The
Company also utilizes the services of independent buying representatives in New
York and overseas.
The Company obtains its domestic merchandise from approximately 350-450
vendors and its private label merchandise from approximately 30 overseas and
domestic vendors. The Company has in the past always been able to purchase
sufficient quantities of first-quality domestic merchandise at attractive prices
from vendors who typically sell to department and specialty stores, and
management believes that there will continue to be an adequate supply of such
merchandise available. The Company has also established strong relationships
with its private label manufacturers, and does not anticipate any difficulties
in obtaining sufficient quantities of its private label merchandise. No vendor
accounted for as much as 5% of the Company's purchases in the fiscal year ended
July 27, 1996.
All merchandise is received from vendors at the Company's central
warehouse and distribution facilities in Suffern, New York, where it is
inspected, ticketed and shipped to its stores. The Suffern facility has a total
of 510,000 square feet, with 100,000 square feet of office space and the
remainder for merchandise distribution.
The Company generally does not warehouse merchandise, but distributes it
promptly to stores, shipments being made at least twice a week to each store.
Turnaround time between receipt from the vendor and shipment to the stores is
usually three days or less. Because of such frequent shipments, the stores
themselves do not require significant storage space. The Company may on occasion
buy certain basic clothing that does not change in style from year to year at
attractive prices and warehouse such items until the following year.
Store Operations and Management
Virtually all the Company's stores are open seven days a week. Stores
located in strip shopping centers and malls conform to the hours of other stores
in the shopping centers and are open most evenings, while downtown and free
standing stores are usually open two nights per week.
Approximately 42% of the Company's sales are for cash and checks with
the remainder credit card sales. The Company's stores accept Visa, MasterCard,
American Express and Discover credit cards. In February 1994, the Company
introduced its own Dress Barn private-label credit card. As with the other
credit cards, the Company assumes no credit risk with respect to its Dress Barn
card but pays a percentage of sales as a service charge. The Company has a
chain-wide policy of cash refunds within 14 days of purchase upon presentation
of a register receipt; additionally the customer has the option of receiving a
credit redeemable at a later date.
Each store has a manager who reports to a District Sales Manager, who is
in charge of between 8 and 10 stores. District Sales Managers generally visit
each store at least once a week to review merchandise levels and presentation,
staff training and personnel performance, expense control, security, cleanliness
and adherence to Company operating procedures. District Sales Managers report to
one of 11 Regional Sales Managers, who are each responsible for approximately 9
District Sales Managers.
Each store has an attended dressing room area and generally one cash
register, which is constantly attended. These practices serve a security as well
as a service function. The Company utilizes article surveillance security tag
systems where they are cost justified. The Company's inventory shrinkage rate is
within industry norms.
Management Information Systems
The Company's management information systems are currently undergoing a
transformation at both the store and distribution center levels. The Company is
converting from a processor using custom-written software to a processor
utilizing off-the-shelf software on a client-server platform. The Company
believes that the new technologies should result in reduced costs, greater
capabilities, improved efficiencies, and less training time.
The Company has developed and continues to improve its fully integrated,
on-line merchandise information system that can accommodate substantial growth
in the number of stores. The system tracks merchandise from the inception of the
purchase order, through receipt at the distribution center, through the
distribution planning process, and ultimately to the point of sale.
To monitor the performance of the various styles, management reviews
online sales and inventory levels, organized by department, class, vendor,
style, color and store. Thus, the sales performance of every style and color of
merchandise in every store is monitored centrally online.
Trademarks
The Company has previously been issued U.S. Certificates of Registration
of Trademark for the operating names of its stores and its major private label
merchandise. The Company believes the following trademarks are materially
important to its business:
Trademark Registration Date
--------- -----------------
Dress Barn March 5, 1985
Westport, Ltd. August 20, 1985
Atrium March 16, 1993
Princeton Club April 30, 1985
Lise J. February 15, 1984
Lee David Ltd. May 7, 1985
Employees
As of July 27, 1996, the Company had approximately 7,000 employees of
whom approximately 4,000 worked part time. A number of temporary employees are
usually added during the peak selling periods. None of the Company's employees
are covered by any collective bargaining agreement. The Company considers its
employee relations to be good.
Competition
The women's retail apparel business continues to be highly competitive.
The Company's stores compete with discount stores, off-price stores, women's
apparel specialty stores and department stores. Some of the stores with which
the Company competes are units of large national or regional chains that have
greater financial and other resources than the Company. Dress Barn accounts for
a small fraction of the total market for women's apparel.
Seasonality
The Company's sales are evenly split between its Fall and Spring
seasons. Though the Company does not consider its business seasonal, it has
historically experienced substantially lower earnings in its second fiscal
quarter than during the other three fiscal quarters. This decline reflects the
intense promotional atmosphere that has accompanied the Christmas shopping
season in recent years. The Company does not expect this trend to change in
fiscal 1997 and anticipates earnings for its second quarter of fiscal 1997 to be
significantly less than the other three quarters.
Forward-Looking Statements and Factors Affecting Future Performance
This Annual Report on Form 10-K contains forward looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. These statements reflect the Company's current views with respect to
future events and financial performance. The Company's actual results of
operations and future financial condition may differ materially from those
expressed or implied in any such forward looking statements.
The woman's retail apparel industry in which the Company operates is
subject to rapid change and is highly competitive. It currently is plagued by
overcapacity. The industry is subject to changes in the retail environment which
may be affected by overall economic conditions, woman's apparel fashions,
demographics, macroeconomic factors that may affect the level of spending for
the types of merchandise sold by the Company and other factors. Apparel
retailers have also experienced continuing price deflation during the last
several years. The Company's sales and results of operations may also be
affected by unusual weather patterns, the prevalence of discounting, close-outs
and going-out-of-business sales and other promotional activities by other
women's apparel retailers, among other factors. The level of occupancy costs,
merchandise, labor and other costs will affect future results of operations. The
Company's long term continued success also will depend upon its ability to open
and operate new stores on a profitable basis.
The Company's strategy in what it believes to be a difficult retail
environment is a commitment to being leaner and more productive. The Company is
planning to continue to close or relocate underperforming stores and replace
them with larger and more productive Combo locations and maintain tight cost
controls in all areas with a view to increasing shareholder value. There can be
no assurance that the Company's strategy will result in a continuation of
revenue and profit growth. Future economic and industry trends that could impact
revenue and profitability remain difficult to predict.
ITEM 2. PROPERTIES
The Company leases all its stores. Store leases generally have an
initial term ranging from 5 to 15 years with one or more 5-year options to
extend the lease. The table on the following page, covering all stores operated
by the Company on July 27, 1996, indicates the number of leases expiring during
the period indicated and the number of expiring leases with and without renewal
options:
Number of Number with Number Without
Fiscal Years Leases Expiring Renewal Options Renewal Options
--------------- --------------- ---------------
1997 ........................ 127 97 30
1998 ........................ 120 104 16
1999 ........................ 138 114 24
2000 ........................ 146 135 11
2001-2003 .................... 128 102 26
2004 and thereafter .......... 67 42 25
--- --- ---
Total ........................ 726 594 132
=== === ===
New store leases generally provide for a base rent of between $14 and
$18 per square foot per annum. Most leases have formulas requiring the payment
of a percentage of sales as additional rent, generally when sales reach
specified levels. The Company's aggregate minimum rentals under operating leases
in effect at July 27, 1996, and excluding locations acquired after July 27,
1996, for fiscal 1997 are approximately $47 million. In addition, the Company is
also responsible under its store leases for its pro rata share of maintenance
expenses and common charges in mall and strip locations.
A substantial number of store leases give the Company the option to
terminate the lease if certain specified sales volumes are not achieved. In
addition, a number of these leases also provide for such termination at the
option of the landlord. Usually these provisions are operative only during the
first few years of the lease.
The Company leases its executive offices and distribution facilities at
30 Dunnigan Drive in Suffern, New York. This lease expires on April 30, 2007,
with three 5 year options to extend the lease. Management believes the Suffern
facility is more than adequate to meet its current needs and any moderate
increase in the Company's store base due to acquisition or expansion.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company or any of
its subsidiaries is a party or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
Market Prices of Common Stock
The Common Stock of the Dress Barn, Inc. is traded over-the-counter
on the NASDAQ National Market System under the symbol DBRN.
The table below sets forth the high and low bid prices as reported by
NASDAQ for the last eight fiscal quarters. These quotations represent prices
between dealers and do not include retail mark-ups, mark-downs or other fees or
commissions and may not represent actual transactions.
Fiscal 1996 Fiscal 1995
Bid Prices Bid Prices
High Low High Low
Fiscal Period ------ ------- ------ ------
First Quarter ................ $10.63 $9.50 $11.13 $8.63
Second Quarter ............... 10.13 8.75 11.13 9.25
Third Quarter ................ 11.75 9.00 10.50 9.25
Fourth Quarter ............... 12.25 9.25 10.63 8.75
Number of Record Holders
The number of record holders of the Company's common stock as of
October 15, 1996 was approximately 2,000.
Dividend Policy
The Company has never paid cash dividends on its common stock. Payment
of dividends is within the discretion of the Company's Board of Directors.
ITEM 6- SELECTED FINANCIAL DATA
Fiscal Year Ended
---------------------------------------------------------------------
July 27, July 29, July 30, July 31, July 25,
1996 1995 1994 1993(*) 1992
---------------------------------------------------------------------
Statement of earnings data:
Net sales ..... $515,522,451 $500,836,364 $457,324,621 $419,585,581 $363,089,914
Cost of sales,
including
occupancy and
buying costs 337,998,321. 327,165,606 301,153,755 274,433,316 238,061,208
Gross profit .. 177,524,130 173,670,758 156,170,866 145,152,265 125,028,706
Selling, general
and administrative
expenses 132,175,827 133,253,149 120,130,587 108,565,208 95,349,636
Depreciation &
amortization 15,828,346 14,063,455 12,126,781 9,177,014 7,689,825
Write-down of
underperforming and
closed store
assets 2,848,000 -- -- -- --
Operating income 26,671,957 26,354,154 23,913,499 27,410,043 21,989,246
Interest income 3,343,202 2,670,331 1,726,717 2,338,217 3,002,872
Earnings before
income taxes .. 30,015,159 29,024,485 25,640,216 29,748,260 24,992,118
Income taxes .. 11,106,000 10,739,000 9,487,000 10,709,000 8,798,000
Net earnings .. $ 18,909,159 $ 18,285,485 $ 16,153,216 $ 19,039,260 $ 16,194,118
Earnings per
share $ 0.84 $ 0.82 $ 0.73 $ 0.86 $ 0.74
Weighted average
shares
outstanding 22,413,267 22,266,091 22,177,063 22,019,742 21,805,478
Balance sheet data:
Working capital $122,729,756 $103,309,912 $ 89,050,887 $ 83,476,171 $ 73,477,379
Total assets .. $265,722,687 $243,521,055 $217,862,655 $202,385,657 $173,360,191
Long-term debt $ 3,500,000 $ 3,500,000 -- -- --
Shareholders'
equity $199,095,904 $178,937,938 $159,197,953 $142,002,672 $120,339,195
Percent of net sales:
Cost of sales,
including occupancy and
buying costs 65.6% 65.3% 65.9% 65.4% 65.6%
Gross profit 34.4% 34.7% 34.1% 34.6% 34.4%
Selling, general and
administrative expenses 25.6% 26.6% 26.3% 25.9% 26.3%
Operating income 5.2% 5.3% 5.2% 6.5% 6.1%
Net earnings 3.7% 3.7% 3.5% 4.5% 4.5%
Certain reclassifications have been made to prior years' data to conform with
the current year's presentation
(*) Consists of 53 weeks. All other fiscal years presented consist of 52 weeks.
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The table below sets forth certain financial data of the Company expressed
as a percentage of net sales for the periods indicated:
Fiscal Year Ended
July 27, July 29, July 30,
1996 1995 1994
-------- -------- --------
Net sales ............................ 100.0% 100.0% 100.0%
Cost of sales, including
occupancy and buying costs ......... 65.6% 65.3% 65.9%
Selling, general and
administrative expenses ............ 25.6% 26.6% 26.3%
Depreciation and amortization ........ 3.1% 2.8% 2.6%
Writedown of underperforming and
closed store assets (see footnote 8) 0.6% -- --
Interest income ...................... 0.6% 0.5% 0.4%
Income before income taxes ........... 5.8% 5.8% 5.6%
Net income ........................... 3.7% 3.7% 3.5%
Fiscal 1996 Compared to Fiscal 1995
Net sales increased by 2.9% to $515.5 million in fiscal 1996, from $500.8
million in fiscal 1995. Same-store sales decreased 3.5% from the prior year. The
Company operated 726 stores at July 27, 1996, compared to 766 stores operated at
July 29, 1995.
The increase in net sales in the current year resulted from the Company's
store development activity. Although the Company closed 72 stores in fiscal
1996, the Company increased its selling square footage approximately 1% by
opening 45 new stores and converting 50 single-format stores into combo stores.
The Company's strategy for fiscal 1997 is to continue opening primarily combo
stores and converting its existing single-format stores into combos, while
aggressively closing its underperforming locations. The decrease in same-store
sales in fiscal 1996 resulted primarily from competitive pressures, unseasonable
weather and a general price deflation in the women's apparel retail sector.
Gross Profit (net sales less cost of sales, including occupancy and buying
costs) was $177.5 million, or 34.4% of net sales, in fiscal 1996, compared to
$173.7 million, or 34.7% of net sales, in fiscal 1995. The decrease in gross
profit as a percentage of sales resulted primarily from spreading relatively
fixed occupancy and buying costs over decreased comparable store sales.
Selling, general and administrative expenses (SG&A), expressed as a
percentage of net sales, decreased 1.0% in fiscal 1996 versus fiscal 1995. The
expense economies of converting stores to the larger combination format and an
enhanced company-wide focus on cost controls contributed to this decrease. These
factors more than offset the effect of lower comparable store sales on these
relatively fixed expenses.
Depreciation expense was $15.8 million in fiscal 1996, compared to $14.0
million in fiscal 1995. The 12.5% increase in fiscal 1996 resulted primarily
from additions to property and equipment for the expansion of the Company's
distribution facility in fiscal years 1994 and 1995. Depreciation expense in
fiscal 1996 also included a $3.0 million loss on disposal of closed store assets
versus $2.3 million in fiscal 1995.
In the fourth quarter of fiscal 1996, the Company implemented the
provisions of Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." This statement addresses the timing of recognition and the measurement of
impairment of (a) long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used, and (b) long-lived assets
and certain identifiable intangibles to be disposed of. The statement requires
that such assets be reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable, and
that such assets be reported at the lower of carrying amount or fair value. The
Company recorded a one time pre-tax charge of $2.8 million in fiscal 1996
resulting from adoption of this statement.
Interest income in fiscal 1996 increased 25% over fiscal 1995. The increase
resulted primarily from an increase in the market value of the Company's managed
municipal bond portfolio. (See also Notes 1 and 2 to the Consolidated Financial
Statements).
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales increased by 9.5% to $500.8 million in fiscal 1995 from $457.3
million in fiscal 1994. Same-store sales decreased 1.4% from the prior year. The
Company operated 766 stores at July 29, 1995 compared to 688 stores operated at
July 30, 1994.
The increase in net sales in fiscal 1995 resulted primarily from the
Company's store development activities. In fiscal 1995, the Company increased
selling square footage by approximately 4% by opening 108 new stores while
closing 30 existing stores.
Gross Profit increased to 34.7% of sales in fiscal 1995 from 34.1% of net
sales, in fiscal 1994. The decrease in cost of goods sold as a percentage of net
sales resulted primarily from improved initial margins which offset higher
occupancy costs from both new stores and expanded existing stores.
SG&A expenses (restated to exclude depreciation) were $133.3 million in
fiscal 1995, compared to $120.1 million in fiscal 1994, an increase of 10.9%. As
a percentage of net sales, SG&A was 26.6% compared to 26.3% of net sales in the
prior year. The increase in SG&A as a percentage of sales primarily resulted
from spreading relatively fixed occupancy and buying costs over decreased
comparable store sales and the corporate relocation to Suffern, New York.
Depreciation expense was $14.0 million in fiscal 1995, compared to $12.1
million in fiscal 1994. The increase in fiscal 1995 resulted primarily from
additions to property and equipment from the Company's store development
activities. The loss on disposal of closed store assets was $2.3 million in
fiscal 1995 versus $1.2 million in fiscal 1994.
Interest income in fiscal 1995 increased by 54.6% over fiscal 1994. The
increase resulted primarily from the increase in the market value of the
Company's managed municipal bond portfolio.
Liquidity and Capital Resources
The Company has generally funded, through internally generated cash flow,
all of its operating and capital needs. These include the opening of new stores,
the remodeling of existing stores, the continued expansion of its successful
Dress Barn Woman and combo formats and the relocation of its headquarters. Total
capital expenditures were $17.1 million, $22.0 million and $23.4 million in
fiscal 1996, 1995 and 1994, respectively. A total of approximately $15 million
of capital expenditures during fiscal 1994 and fiscal 1995 were for the new
Suffern facility. In conjunction with the new facility, the Company accepted a
$3.5 million low interest industrial revenue loan in fiscal 1995 from New York
State Urban Development Corporation.
The Company's cash, cash equivalents, marketable securities and investments
increased approximately $19 million in fiscal 1996 from fiscal 1995. This was
primarily due to the increase in earnings and a decrease in SG&A expenses. The
Company funds inventory expenditures through cash flows from operations and the
favorable payment terms the Company has established with its vendors. This has
allowed the Company's quick ratio (i.e., the ratio of current assets less
inventory to current liabilities) to improve steadily over the past three years
(1.50, 1.25 and 1.17 at the end of the 1996, 1995 and 1994 fiscal years,
respectively). Merchandise inventories at July 27, 1996 increased a modest $1.7
million from July 29, 1995 as the Company has continued to keep its inventory
levels in line with sales. The Company's net cash provided by operations in
fiscal 1996 increased to $35.6 million as compared to $27.6 million in fiscal
1995 and $23.7 million in fiscal 1994. The increase in fiscal 1996 was due to
the increase in earnings and favorable income tax cash planning. During this
three-year period, the Company has increased its cash and investments by $30.2
million and financed its expansion and corporate relocation while only incurring
$3.5 million in long-term debt.
In fiscal 1997 the Company plans to spend approximately $17.5 million to
open approximately 60 additional stores and continue its store remodeling
program. The Company expects to finance this expansion and its foreseeable
operating and capital needs through internally generated funds.
At July 27, 1996, the Company had $81.8 million in marketable securities
and other investments. The portfolio consists primarily of municipal bonds that
can readily be converted to cash. The Company holds no options or other
derivative instruments. Working capital was $122.7 million at July 27, 1996. In
addition, the Company had available $95 million in unsecured lines of credit
bearing interest at below the prime rate. The Company had no debt outstanding
under any of the lines at July 27, 1996. However, borrowings were limited by
approximately $32 million of outstanding letters of credit primarily to vendors
for import merchandise purchases.
Inflation
General inflation has historically had only a minor effect on the Company'
results of operations as the Company has generally been able to maintain its
sales prices of merchandise sold. The Company expects this trend to continue in
fiscal 1997, with no significant increase in its selling prices planned.
Seasonality
Though the Company does not consider its business seasonal, it has
historically experienced substantially lower earnings in its second fiscal
quarter ending in January than during the other three fiscal quarters. This
decline reflects the intense promotional atmosphere that has accompanied the
Christmas shopping season in recent years. The Company does not expect this
trend to change in fiscal 1997 and anticipates earnings for its second quarter
of fiscal 1997 to be significantly less than the other three quarters.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of The Dress Barn, Inc. and
subsidiaries are filed together with this report: See Index to Financial
Statements, Item 14.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The information called for by Items 10, 11, 12 and 13 is incorporated
herein by reference from the definitive proxy statement to be filed by the
Company in connection with its 1996 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
ITEM 14. (a) (1) FINANCIAL STATEMENTS PAGE NUMBER
- --------------------------------------- -----------
Independent Auditors' Report ............................... F-1
Consolidated Balance Sheets ................................ F-2
Consolidated Statements of Earnings ........................ F-3
Consolidated Statements of Shareholders' Equity ............ F-4
Consolidated Statements of Cash Flows ...................... F-5
Notes to Consolidated Financial Statements ................. F-6 to F-11
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
ITEM 14. (a) (3) LIST OF EXHIBITS
The following exhibits are filed as part of this Report and except Exhibits
10(nn), 22 and 24 are all incorporated by reference (utilizing the same exhibit
numbers) from the sources shown.
Incorporated By
Reference From
3(c) Amended and Restated Certificate of Incorporation ............. (1)
3(e) Amended and Restated By-Laws .................................. (1)
3(f) Amendments to Amended and Restated Certificate of Incorporation (5)
3(g) Amendments to Amended and Restated By-Laws .................... (5)
3(h) Amendments to Amended and Restated By-Laws .................... (6)
4(a) Specimen Common Stock Certificate ............................. (1)
10(a) 1993 Incentive Stock Option Plan .............................. (10)
10(b) Employment Agreement With Burt Steinberg ...................... (1)
10(e) Agreement for Issuance of Stock to Arthur Ziluck .............. (1)
10(f) Agreement terminating Agreement for Purchase of Certain Stock
from Elliot S. Jaffe upon death ............................... (6)
10(g) Agreement terminating Agreement for Purchase of Certain Stock
from Roslyn S. Jaffe upon death ............................... (6)
Leases of Company premises of which the lessor is Elliot S. Jaffe or members of
his family or related trusts:
10(k) Wilton, CT store (1)
10(l) Danbury, CT store (1)
10(m) Branford, CT store (1)
10(o) Mt. Kisco, NY store (1)
10(hh) Norwalk, CT Dress Barn Woman store (8)
10(ii) Branford, CT Dress Barn Woman store (8)
10(r) Amendments to Employment Agreement with Burt Steinberg ........ (2)
10(v) Employment Agreement with Eric Hawn ........................... (4)
10(w) Agreement for Advances with Eric Hawn ......................... (4)
10(z) Extension of Employment Agreement with Burt Steinberg ......... (5)
10(aa) The Dress Barn, Inc. 1987 Non-Qualified Stock Option Plan ..... (5)
10(cc) Employment Agreement with Armand Correia ...................... (7)
10(dd) Nonqualified Stock Option Agreement with Armand Correia ....... (7)
10(ff) Nonqualified Stock Option Agreement with Elliot Jaffe ......... (7)
10(gg) Nonqualified Stock Option Agreement with Burt Steinberg ....... (7)
10(jj) Employment Agreement with David Montieth ...................... (8)
10(kk) Employment Agreement with David Jaffe ......................... (8)
10(mm) Lease between Dress Barn and AT&T for ......................... (9)
Office and Distribution Space in Suffern, New York
10(nn) The Dress Barn, Inc. 1995 Stock Option Plan
22 Subsidiaries of the Registrant
24 Independent Auditors' Consent
(1) The Company's Registration Statement on Form S-1 under the Securities Act
of 1933 (Registration No. 2-82916) declared effective May 4, 1983.
(2) The Company's Annual Report on Form 10-K for the fiscal year ended
July 28, 1984.
(3) The Company's Annual Report on Form 10-K for the fiscal year ended
July 27, 1985.
(4) The Company's Annual Report on Form 10-K for the fiscal year ended
July 26, 1986.
(5) The Company's Annual Report on Form 10-K for the fiscal year ended
July 30, 1988.
(6) The Company's Annual Report on Form 10-K for the fiscal year ended
July 28, 1990.
(7) The Company's Annual Report on Form 10-K for the fiscal year ended
July 27, 1991.
(8) The Company's Annual Report on Form 10-K for the fiscal year ended
July 25, 1992.
(9) The Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1993.
(10) The Company's Registration Statement on Form S-8 under the Securities Act
of 1933 (Registration No. 33-60196) filed on March 29, 1993.
ITEM 14. (b) REPORT ON FORM 8-K
The Company has not filed any reports on Form 8-K during the last
quarter of the fiscal year ended July 27, 1996.
ITEM 14. (c) EXHIBITS
All exhibits are incorporated by reference as shown in Item 14(a)3, except
Exhibits 10(nn), 22 and 24 which are filed as part of this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
The Dress Barn, Inc.
by /s/ ELLIOT S. JAFFE
Elliot S. Jaffe
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ ELLIOT S. JAFFE
Elliot S. Jaffe Chairman of the Board and 10/23/96
Chief Executive Officer
(Principal Executive Officer)
/s/ ROSLYN S. JAFFE
Roslyn S. Jaffe Director and Secretary and Treasurer 10/23/96
/s/ BURT STEINBERG
Burt Steinberg Director and President 10/23/96
and Chief Operating Officer
/s/ KLAUS EPPLER
Klaus Eppler Director 10/23/96
/s/ DONALD JONAS
Donald Jonas Director 10/23/96
/s/ MARK S. HANDLER
Mark S. Handler Director 10/23/96
/s/ EDWARD D. SOLOMON
Edward D. Solomon Director 10/23/96
/s/ ARMAND CORREIA
Armand Correia Chief Financial Officer (Principal 10/23/96
Financial and Accounting Officer)
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The Dress Barn, Inc.
Suffern, New York
We have audited the accompanying consolidated balance sheets of The Dress Barn,
Inc. and subsidiaries as of July 27, 1996 and July 29, 1995, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended July 27, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Dress Barn, Inc.
and subsidiaries as of July 27, 1996 and July 29, 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
July 27, 1996, in conformity with generally accepted accounting principles.
Stamford, Connecticut
September 20, 1996
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
July 27, July 29,
ASSETS 1996 1995
Current Assets:
Cash & cash equivalents ...................... $ 9,517,302 $ 7,378,747
Marketable securities and investments (Note 2) 81,787,882 64,412,660
Merchandise inventories ...................... 89,790,984 88,044,774
Prepaid expenses and other ................... 2,769,809 3,439,685
Total Current Assets ...................... 183,865,977 163,275,866
Property and Equipment:
Leasehold improvements ....................... 51,008,298 48,908,048
Fixtures and equipment ....................... 88,454,311 80,617,805
Computer software ............................ 7,603,314 6,915,150
Automotive equipment ......................... 342,283 255,237
147,408,206 136,696,240
Less accumulated depreciation
and amortization ........................... 66,503,707 57,072,264
80,904,499 79,623,976
Other Assets ...................................... 952,211 621,213
$265,722,687 $243,521,055
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade ...................... $ 37,198,907 $ 38,424,376
Accrued expenses .............................. 20,903,368 16,652,543
Customer credits .............................. 2,062,184 1,487,579
Income taxes payable .......................... 971,762 3,401,456
Total Current Liabilities .................. 61,136,221 59,965,954
Deferred Income Taxes .............................. 1,990,562 1,117,163
Long-Term Debt (Note 3) ............................ 3,500,000 3,500,000
Commitments (Note 6)
Shareholders' Equity:
Preferred stock, par value $.05 per share:
Authorized- 100,000 shares
Issued and outstanding- none ................ -- --
Common stock, par value $.05 per share:
Authorized- 30,000,000 shares
Issued- 23,573,462 and 23,320,108
shares, respectively
Outstanding- 22,568,462 and 22,315,108
shares, respectively ................ 1,178,673 1,166,005
Additional paid-in capital .................... 16,529,497 15,055,061
Retained earnings ............................. 187,110,242 168,201,083
Treasury stock, at cost ....................... (5,705,612) (5,705,612)
Unrealized holding (loss) gain on marketable .. (16,896) 221,401
securities
199,095,904 178,937,938
$265,722,687 $243,521,055
See notes to consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings
Year Ended
------------------------------------------------------
July 27, July 29, July 30,
1996 1995 1994
------------------------------------------------------
Statement of earnings data:
Net sales ........................ $515,522,451 $500,836,364 $457,324,621
Cost of sales, including
occupancy and buying costs ..... 337,998,321 327,165,606 301,153,755
Gross profit ..................... 177,524,130 173,670,758 156,170,866
Selling, general and
administrative expenses ........ 132,175,827 133,253,149 120,130,587
Depreciation and amortization .... 15,828,346 14,063,455 12,126,781
Write-down of underperforming
and closed store assets (Note 8) 2,848,000 -- --
Operating income ................. 26,671,957 26,354,154 23,913,499
Interest income- net ............. 3,343,202 2,670,331 1,726,717
Earnings before
income taxes ................ 30,015,159 29,024,485 25,640,216
Income taxes ..................... 11,106,000 10,739,000 9,487,000
Net earnings .................. $ 18,909,159 $ 18,285,485 $ 16,153,216
Earnings per share ............... $ 0.84 $ 0.82 $ 0.73
Weighted average
shares outstanding ............. 22,413,267 22,266,091 22,177,063
See notes to consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity Unrealized
Additional Holding(Loss) Total
Common Stock Paid-In Retained Treasury Gain on Shareholders'
Shares Amount Capital Earnings Stock Marketable Equity
Securities
----------------------------------------------------------------------------------------------
Balance, July 31, 1993 ................... 22,129,662 $ 1,156,733 $12,789,169 $133,762,382 $(5,705,612) $- $142,002,672
Deferred compensation .................... 15,000 750 453,730 454,480
Employee Stock Purchase Plan activity .... 35,244 1,762 390,047 391,809
Shares issued pursuant to exercise of stock 41,862 2,093 193,683 195,776
options
Net earnings ............................. 16,153,216 16,153,216
Balance, July 30, 1994 ................... 22,221,768 1,161,338 13,826,629 149,915,598 (5,705,612) -- 159,197,953
Deferred compensation .................... 25,000 1,250 644,053 645,303
Employee Stock Purchase Plan activity .... 43,490 2,175 389,586 391,761
Shares issued pursuant to exercise of stock 15,461 773 85,786 86,559
options
Shares issued in connection with purchase
of JRL Consulting Corp. ............. 9,389 469 109,007 109,476
Unrealized holding gain on marketable secur 221,401 221,401
Net earnings ............................. 18,285,485 18,285,485
Balance, July 29, 1995 ................... 22,315,108 1,166,005 15,055,061 168,201,083 (5,705,612) 221,401 178,937,938
Deferred compensation .................... 42,882 2,144 183,405 185,549
Employee Stock Purchase Plan activity .... 21,643 1,082 226,150 227,232
Shares issued pursuant to exercise of stock 188,829 9,442 1,064,881 1,074,323
options
Unrealized holding loss on marketable secur (238,297) (238,297)
Net earnings ............................. 18,909,159 18,909,159
Balance, July 27, 1996 ................... 22,568,462 $ 1,178,673 $16,529,497 $187,110,242 ($5,705,612) ($ 16,896) $199,095,904
See notes to consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended
----------------------------------------------
July 27, July 29, July 30,
1996 1995 1994
----------------------------------------------
Operating Activities:
Net earnings ......................................... $ 18,909,159 $ 18,285,485 $ 16,153,216
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment (net) .............................. 12,855,213 11,453,788 9,822,273
Write-down of underperforming and
closed store assets (Note 8) ................. 2,848,000 -- --
Loss on disposal of closed store assets ........ 2,973,133 2,301,332 1,152,254
Increase (decrease) in deferred income taxes ... 873,399 (770,000) 609,812
Deferred compensation .......................... 185,549 754,779 251,480
Changes in assets and liabilities:
Increase in merchandise inventories ......... (1,746,210) (8,443,758) (6,197,778)
Decrease in prepaid expenses ................ 669,876 797,741 3,862,595
(Increase) decrease in other assets ......... (330,998) 60,498 175,330
(Decrease) increase - accounts payable- trade (1,225,469) (3,276,232) 1,710,136
Increase (decrease) in accrued expenses ..... 1,402,825 3,611,530 (2,657,896)
Increase (decrease) in customer credits ..... 574,605 346,056 (265,464)
(Decrease) increase in income taxes payable . (2,429,694) 2,507,061 (911,871)
Total adjustments ............................. 16,650,229 9,342,795 7,550,871
Net cash provided by operating activities .... 35,559,388 27,628,280 23,704,087
Investing Activities
Purchases of property and equipment - net ........ (17,108,869) (22,026,578) (23,380,234)
Sales and maturities of marketable securities and 110,613,332 24,548,148 9,516,454
investments
Purchases of marketable securities and investments (128,226,751) (33,417,429) (13,814,678)
Net cash used in investing activities ......... (34,722,388) (30,895,859) (27,678,458)
Financing Activities
Proceeds from long term debt ..................... -- 3,500,000 --
Proceeds from Employee Stock Purchase Plan ....... 227,232 391,761 391,809
Proceeds from stock options exercised ............ 1,074,323 86,559 195,776
Net cash provided by financing activities ...... 1,301,555 3,978,320 587,585
Net increase (decrease) in cash and cash equivalents . 2,138,555 710,741 (3,386,786)
Cash and cash equivalents- beginning of period ....... 7,378,747 6,668,006 10,054,792
Cash and cash equivalents- end of period ............. $ 9,517,302 $ 7,378,747 $ 6,668,006
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes ....................... $ 13,839,736 $ 9,001,939 $ 9,285,361
See notes to consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Years Ended July 27, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Dress Barn, Inc. (including The Dress Barn, Inc. and it's wholly-owned
subsidiaries (the "Company")) operates a chain of discount women's apparel
specialty stores. The stores, operating principally under the name "Dress Barn",
offer in-season, moderate to better quality fashion apparel. The Company
operates in one business segment.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany balances and transactions are
eliminated. The Company reports on a 52-53 week fiscal year ending on the last
Saturday in July.
Merchandise inventories
Merchandise inventories are valued at the lower of cost, on a first-in,
first-out basis, or market as determined by the retail method.
Property and equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the related assets which range from 3 to 10 years. For income tax purposes,
accelerated methods are generally used.
Income taxes
Deferred income taxes are provided using the asset and liability method,
whereby deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements.
Store preopening costs
Expenses associated with the opening of new stores are charged to expense
as incurred.
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers its
highly liquid investments with a maturity of three months or less when purchased
to be cash equivalents. These amounts are stated at cost which approximates
market value. The majority of the Company's money market funds are maintained
with one financial institution.
Marketable securities and investments
The Company has categorized its marketable securities as available for
sale, stated at market value. The unrealized holding gains and losses are
included in shareholders' equity until realized. The amortized cost is adjusted
for amortization of premiums and discounts to maturity, with the net
amortization included in interest income. Other investments, due to their
nature, are carried at cost.
Earnings per share
Earnings per share is based on the weighted average number of common shares
and common share equivalents outstanding for the years presented.
Reclassifications
Certain amounts in prior years' financial statements have been reclassified
for comparative purposes.
Use of estimates
The preparation of the financial statements in conjunction with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Stock based compensation
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation", ("SFAS 123"), was issued. SFAS 123
requires the Company elect to either adopt a fair value based expense
recognition method of accounting for stock-based compensation plans or continue
to use the current valuation methods with pro forma disclosure of net income and
earnings per share as if the fair value based method of accounting defined in
SFAS 123 had been applied. The Company has elected to retain its current method
of accounting for stock-based compensation and provide the required disclosures
in its financial statements. The Company will adopt SFAS 123 in the fiscal year
ending July 26, 1997.
Disclosure about fair value of financial instruments
The fair value of financial instruments classified as current assets or
liabilities approximate carrying amount due to the short-term maturity of the
instruments. The fair value of long term debt, discounted using current
borrowing rates available for financings with similar terms and maturities, was
approximately $2.0 million and $1.9 million at the end of the 1996 and 1995
fiscal years, respectively.
2. MARKETABLE SECURITIES AND INVESTMENTS
Marketable securities and investments included the following:
July 27, 1996 July 29, 1995
------------- -------------
Fair Amortized Fair Amortized
Value Cost Value Cost
------ ------- ------ -------
Money Market Funds ......... $ 1.876,000 $ 1.876,000 $18,313,000 $18,313,000
US Govt. Bonds & Notes ..... 25,853,000 25,842,000
Short Term Investments ..... 9,019,000 9,019,000
Other Investments .......... 5,012,000 5,012,000
Tax Free Municipal Bonds ... 38,373,000 38,178,000 44,409,000 44,000,000
US Govt. Securities Fund ... 1,655,000 1,878,000 1,691,000 1,878,000
----------- ----------- ----------- -----------
$81,788,000 $81,805,000 $64,413,000 $64,191,000
=========== =========== =========== ===========
The scheduled maturities of marketable securities and investments at
July 27, 1996 are:
Due In Fair Value Amortized Cost
- ------------------------- --------------- -------------
One year or less ............................ $ 36,047,000 $ 36,236,000
One year through five years ................. 45,519,000 45,349,000
Six years through ten years ................. 222,000 220,000
After ten years ............................. -- --
-------------- --------------
$ 81,788,000 $ 81,805,000
============== ==============
Unrealized holding gains and losses at July 27, 1996 netted to an
unrealized loss of approximately $17,000. Proceeds and gross realized gains from
the sale of securities in Fiscal 1996 were $110,613,000 and $607,000,
respectively. For the purposes of determining gross realized gains and losses,
the cost of securities is based upon specific identification.
3. LONG-TERM DEBT
The Company incurred long term debt for the first time in October 1994 when
it borrowed $3.5 million from New York State Urban Development Corporation. The
$3.5 million unsecured loan, due October 1, 2004, provides for the payment of
interest at rates ranging from 0% to 3% over the term of the loan. Interest
commences November 1, 1996 and is paid monthly thereafter. The loan agreement
has no restrictive covenants, but requires a $3.5 million irrevocable letter of
credit in favor of the lender to guarantee its repayment. The Company had no
other long-term debt outstanding at any time during the three years ended July
27, 1996.
At July 27, 1996 the Company had unsecured lines of credit with three banks
totaling $95 million with interest payable at rates below prime. None of the
Company's lines of credit contain any significant covenants or commitment fees.
The Company had no debt outstanding under any of the lines at July 27, 1996.
However, the credit lines available were reduced by approximately $32 million of
outstanding letters of credit.
4. EMPLOYEE BENEFIT PLANS
In August 1995, the Company established a defined contribution retirement
savings plan (401(k)) covering all eligible employees. This plan succeeds the
previous discretionary profit-sharing plan, with all prior individual account
balances and vesting terms transferred to the new plan. The Company has also
established an Executive Retirement Plan for certain officers and key executives
not participating in the 401(k) plan. Both plans allow participants to defer a
portion of their annual compensation and receive a matching employer
contribution on a portion of that deferral. During fiscal 1996, 1995 and 1994,
the Company incurred expenses of $712,000, $555,000, and $575,000, respectively,
relating to the contributions to and administration of the above plans. The
Company also has an Employee Stock Purchase Plan which allows employees to
purchase shares of company stock during each quarterly offering period at a 10%
discount through weekly payroll deductions. The Company does not provide any
additional postretirement benefits.
5. INCOME TAXES
The components of the provision for income taxes were as follows:
Year ended
July 27, July 29, July 30,
1996 1995 1994
--------- -------- --------
Federal:
Current ........................ $ 8,428,000 $ 8,815,000 $ 7,280,000
Deferred ....................... 169,000 (608,000) 228,000
----------- ----------- -----------
8,597,000 8,207,000 7,508,000
State:
Current ........................ 2,742,000 2,694,000 1,919,000
Deferred ....................... (233,000) (162,000) 60,000
----------- ---------- ----------
2,509,000 2,532,000 1,979,000
---------- ---------- ----------
$11,106,000 $10,739,000 $9,487,000
=========== =========== ===========
Significant components of the Company's deferred tax liabilities and
assets were as follows:
July 27, July 29, July 30,
1996 1995 1994
--------- -------- --------
Deferred tax liabilities:
Depreciation .......................... $5,433,007 $6,482,842 $4,646,641
Other items ........................... 1,315,251 953,237 3,027,557
---------- ---------- ----------
Total deferred tax liabilities ..... 6,748,258 7,436,079 7,674,198
---------- ---------- ----------
Deferred tax assets:
Inventory capitalization for tax purposes 1,619,554 2,302,648 2,067,669
Other items ........................... 3,138,135 4,016,268 3,719,366
---------- ---------- ----------
Total deferred tax assets .......... 4,757,689 6,318,916 5,787,035
---------- ---------- ----------
Net deferred tax liabilities $1,990,562 $1,117,163 $1,887,163
========== ========== ==========
The net deferred tax liabilities were comprised of approximately $410,000
in state deferred taxes and $1,581,000 in federal deferred taxes. Following is a
reconciliation of the statutory Federal income tax rate and the effective income
tax rate applicable to earnings before income taxes:
Year ended
July 27, July 29, July 30,
1996 1995 1994
--------- -------- --------
Statutory tax rate ..................... 35.0% 35.0% 35.0%
State taxes - net of federal
benefit .............................. 5.6 6.1 5.5
Other - net ............................ (3.6) (4.1) (3.5)
-------- -------- --------
Effective tax rate ..................... 37.0% 37.0% 37.0%
======== ======== ========
6. COMMITMENTS
Lease commitments
The Company leases all its stores and warehouses. Certain leases provide
for additional rents based on percentages of net sales, charges for real estate
taxes, insurance and other occupancy costs. Store leases generally have an
initial term ranging from 5 to 15 years with one or more 5 year options to
extend the lease. Some of these leases have provisions for rent escalations
during the initial term. In July 1993, the Company entered into a lease for
510,000 square feet of office and distribution space in Suffern, New York. The
lease has an initial term of 14 years with three 5 year options to extend the
lease.
A summary of occupancy costs follows:
Year ended
July 29, July 27, July 30,
1996 1995 1994
------------ ------------ ------------
Base rentals ........................... $ 56,113,000 $ 47,942,000 $ 42,641,000
Percentage rentals ..................... 94,000 167,000 149,000
Other occupancy costs .................. 19,626,000 18,299,000 13,796,000
------------ ------------ ------------
Total .................................. $ 75,833,000 $ 66,408,000 $ 56,586,000
============ ============ ============
The following is a schedule of future minimum rentals under noncancellable
operating leases as of July 27, 1996:
Fiscal Year Amount
------------- ------------
1997 $ 49,380,000
1998 43,291,000
1999 35,332,000
2000 26,342,000
2001 17,178,000
Subsequent years 41,458,000
Total future minimum rentals $212,981,000
Although the Company has the ability to cancel certain leases if specified
sales levels are not achieved, future minimum rentals under such leases have
been included in the above table.
Leases with related parties
The Company leases five stores from the Chief Executive Officer or related
trusts. Future minimum rentals under leases with such related parties which
extend beyond July 27, 1996, included in the above schedule, are approximately
$413,631 annually and aggregate $1,578,694. The leases also contain provisions
for cost escalations and additional rent based on net sales in excess of
stipulated amounts. Rent expense for fiscal years 1996, 1995 and 1994 under
these leases amounted to approximately $492,000, $429,000 and $430,000,
respectively.
7. STOCK OPTION PLANS
The Company's 1983 Incentive Stock Option Plan expired on April 4, 1993,
and accordingly, the Company can no longer grant options under such plan. The
Company's 1993 Incentive Stock Option Plan, which contains provisions similar to
the expired plan, provides for the grant of options to purchase up to 1,250,000
shares of the Company's Common Stock. The exercise price of the options granted
under both plans may not be less than the market price of the Common Stock at
the date of grant. All options granted under both plans vest over a five year
period. The Company's 1987 Non-Qualified Stock Option Plan provides for the
granting of options to purchase up to 1,000,000 shares of Common Stock to key
employees. The Company's 1995 Stock Option Plan provides for the granting of
either incentive or non-qualified options to purchase up to 2,000,000 shares of
Common Stock. As of July 27, 1996 no options had been issued under the 1995
Stock Option Plan. Compensation expense resulting from the issuance of
non-qualified options is recognized on a straight-line basis over the vesting
term of the option agreement. As of July 27, 1996, a total of 675,914 options
issued to date were exercisable.
The following summarizes the activities in all Stock Option Plans:
Number of Option Price Range
Shares (Per share)
Outstanding - July 31,1993 823,102 $ 3.00 -12.50
Granted .......... 528,950 10.53 -11.25
Exercised ........ (41,862) 5.36 - 8.25
Canceled ......... (52,848) 5.36 - 8.38
--------- ------- ----
Outstanding - July 30,1994 1,257,342 $ 3.00 -12.50
--------- ------- ----
Granted .......... 406,079 8.25 - 8.87
Exercised ........ (15,461) 5.36 - 6.41
Canceled ......... (255,327) 3.34 -10.53
--------- ------- ----
Outstanding - July 29,1995 1,392,633 $ 3.00- 12.50
--------- ------- ----
Granted .......... 124,750 9.15 - 9.15
Exercised ........ (188,829) 5.36 - 9.15
Canceled ......... (55,261) 5.36 - 8.53
--------- ------- ----
Outstanding - July 27,1996 1,273,293 $ 3.00- 12.50
========= ======= ====
8. WRITE-DOWN OF UNDERPERFORMING AND CLOSED STORE ASSETS
In the fourth quarter of fiscal 1996, the Company implemented the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." This statement addresses the
timing of recognition and the measurement of impairment of (a) long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and (b) long-lived assets and certain identifiable
intangibles to be disposed of. The statement requires that such assets be
reviewed for impairment whenever events or changes in circumstances indicate
that their carrying amount may not be recoverable, and that such assets be
reported at the lower of carrying amount or fair value. The effect of such
accounting change on periods prior to the fourth quarter of fiscal 1996 was not
material.
9. QUARTERLY RESULTS OF OPERATIONS (unaudited)
($000 omitted except per share amounts)
Fourth Third Second First
Quarter Quarter Quarter Quarter
Year ended July 27, 1996 ------- ------- ------- -------
Net Sales .................... $133,871 $125,174 $119,127 $137,351
Gross Profit,
less occupancy
and buying costs ........... 46,604 43,783 38,750 48,387
Income Taxes ................. 3,533 3,018 1,017 3,538
Net Earnings ................. 6,016 5,137 1,731 6,025
Earnings Per Share(*) ........ $ .27 $ .23 $ .08 $ .27
Fourth Third Second First
Quarter Quarter Quarter Quarter
Year ended July 29, 1995 ------- ------- ------- -------
Net Sales .................... $130,559 $123,541 $116,660 $130,076
Gross Profit,
less occupancy
and buying costs ........... 44,603 43,798 38,578 46,692
Income Taxes ................. 2,623 2,941 1,421 3,754
Net Earnings ................. 4,468 5,002 2,423 6,392
Earnings Per Share(*) ........ $ .20 $ .22 $ .11 $ .29
(*) Earnings per share is computed independently for each period presented. As a
result, the total of the per share earnings for the four quarters does not equal
the annual earnings per share in fiscal 1996.
EXHIBIT 10(nn)
THE DRESS BARN, INC.
1995 STOCK OPTION PLAN
(Effective September 27, 1995)
1. Purpose. The purpose of this Stock Option Plan (the "Plan") is to
further the best interests of The Dress Barn, Inc., a Connecticut corporation
(the "Corporation"), and its subsidiaries ("Subsidiaries", as such term is
defined in Section 424 of Internal Revenue Code of 1986, as amended (the
"Code")), from time to time, by encouraging its key employees and persons who
are not employees of the Corporation but whose efforts are expected to be of
substantial benefit to the Corporation, as is more fully set forth in Section 5
of this Plan, to continue association with the Corporation, and by providing
additional incentive for outstanding performance through offering an opportunity
to acquire a proprietary stake in the Corporation and its future growth. The
Corporation believes that this goal may best be achieved by granting stock
options to such persons.
The stock options to be granted pursuant to this Plan (hereinafter
called "Options") may be Incentive Stock Options ("ISOs") as provided for in
Section 422 of the Code, or may be Non-Incentive Stock Options ("Non-ISOs"). All
Options which are intended to qualify as ISOs shall be clearly identified in
writing as such. The terms and conditions of ISOs shall comply with the
provisions of this Plan which have been inserted herein to reflect the
requirements of the aforementioned Section 422 of the Code. All ISOs granted
pursuant to this Plan, as well as the provisions of this Plan pertaining to
ISOs, shall be construed and interpreted in a manner consistent with the
requirements of the aforementioned Section 422 of the Code and the regulations
thereunder, and any provisions of this Plan that would be in conflict with the
requirements of Section 422 shall be inapplicable to such Options. The Non-ISOs
will not be subject to such conditions and limitations and may be granted in
amounts that may be in excess of or less than the permissible annual amounts of
ISOs as set forth in Section 6(a) hereof. All Non-ISOs shall be clearly
identified in writing as Non-ISOs.
2. Option Shares. (a) The shares of the Corporation's stock which may be
made subject to Options granted pursuant to this Plan shall be no more than a
total of 2,000,000 shares of the authorized but unissued common stock, par value
$.05 per share, of the Corporation, or shares of common stock held in the
treasury (hereinafter called "Common Stock"). If any outstanding Options granted
pursuant to this Plan expire, lapse or terminate for any reason other than the
exercise thereof, the shares of Common Stock subject to the unexercised portion
of such Options may again be made subject to Options granted pursuant to this
Plan. Until termination of the Plan, the Corporation shall at all times reserve
a sufficient number of shares of Common Stock to meet the requirements of the
Plan. Any shares of Common Stock not subject to Options at the termination of
this Plan shall cease to be reserved for the purposes of the Plan.
(b) The maximum number of shares of Common Stock that may be
granted under this Plan during each calendar year to any Employee (as defined
herein) shall not exceed 150,000 (the "Cap") (subject to any adjustment in
accordance with Section 14 hereof); provided, however, that if the Corporation
grants to an Employee during any calendar year Options to purchase a number of
shares of Common Stock that is less than the Cap, or does not grant any Options
during any calendar year to an Employee, then the amount of such shortfall shall
be carried forward and added to the Cap in subsequent years with respect to such
Employee until it is eliminated.
3. Effective Date of Plan. This Plan has been adopted by the Board of
Directors of the Corporation (the "Board of Directors") and shall take effect
immediately upon the date hereof, subject to approval by the Corporation's
shareholders.
4. Administration of the Plan. The Plan shall be administered by a
committee of two or more individuals (the "Committee"), which shall be appointed
by the Board of Directors. All members of the Committee shall be "disinterested
persons" within the meaning of Rule 16(b)-3 under the Securities Exchange Act of
1934, as amended, and "outside directors" within the meaning of any applicable
regulation under the Code. No member of the Committee shall, while a member, be
eligible to participate in this Plan. The Committee may from time to time
interpret this Plan, adopt, amend and rescind such rules and regulations for
carrying out this Plan, and take such other action in the administration of this
Plan, not inconsistent with the provisions hereof, as the Committee shall deem
advisable. Any determination, interpretation or decision of the Committee under
this Plan may be made by a writing signed by its members, without a notice or
meeting of the Committee. All decisions and determinations in respect of and all
interpretations of the provisions of the Plan shall be made solely by the
Committee, which decisions, determinations and interpretations shall be
conclusive and binding on the Corporation and all other persons or entities. No
member of the Committee shall be liable for any action, decision, determination
or interpretation made in good faith with respect to the Plan or any Options
granted under it.
5. Eligibility. The persons eligible to participate in the Plan as
recipients of Options shall include the employees of the Corporation or of any
of its Subsidiaries who hold executive or other positions in the management of
the affairs of the Corporation and of its Subsidiaries ("Employees"), and
persons who are not employees of the Corporation, but whose efforts are expected
to be of substantial benefit to the Corporation (together with Employees,
"Eligible Persons").
6. Grant of Options. (a) The Corporation, by action of the Committee,
subject to the provisions of this Plan, may, from time to time, grant Options to
purchase shares of Common Stock to such Eligible Persons and for such number of
shares of Common Stock as may be selected by the Committee; provided, however,
that only Employees shall be eligible to receive ISOs. Each grant of an Option
pursuant to this Plan shall be made in writing and upon such terms and
conditions as may be determined by the Committee at the time of grant, subject
to the provisions and limitations set forth in this Plan. The grant of such
Option shall be evidenced by written notice executed by such person(s) as have
been authorized by the Committee. The aggregate fair market value (determined as
of the time an Option is granted) of the Common Stock for which any Employee is
granted ISOs that are first exercisable by such Employee at any time in any
calendar year under all plans of the Corporation and its Subsidiaries shall not
exceed $100,000.
(b) No Option shall be granted hereunder on or after the tenth
anniversary of the date on which the Plan is adopted by the Board of Directors,
but Options previously granted may extend beyond that date.
7. Option Price. (a) The purchase price for each share of Common Stock
issued upon exercise of an Option granted pursuant to this Plan (hereinafter
called the "Option Price") shall be determined by the Committee; provided,
however, that in the case of grants of ISOs, the Option Price shall in no event
be less than 100% (110% for ISOs granted to a greater than ten-percent holder)
of the Fair Market Value (as hereinafter defined) of a share of Common Stock on
the date the ISO is granted. A "greater than ten-percent holder" shall mean any
Employee who at the time of grant owns directly, or is deemed to own by reason
of the attribution rules set forth in Section 424(d) of the Code, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Corporation or any Subsidiary.
(b) The Fair Market Value of a share of Common Stock shall equal
the mean between the high and low sales prices of the Common Stock quoted
through the National Association of Securities Dealers, Inc. Automated
Quotations System on the day of determination or, in the absence of reported
sales on such day, the mean between the reported bid and asked prices through
such market system on such day; provided, however, that if the Committee
determines that such mean does not properly reflect the fair market value of the
Common Stock, the Fair Market Value shall be determined by the Committee using
such method as it deems reasonable and consistent with the applicable
requirements of the Code and the regulations issued thereunder that are
applicable to incentive options.
8. Duration of Options. The period for which each Option granted
hereunder shall be effective shall commence upon the date of the grant of the
Option and shall continue until the date that is determined by the Committee,
not to exceed ten (10) years (five (5) years in the case of an ISO granted to a
greater than ten-percent holder) from the date of grant (the "Option Period").
In addition to and in limitation of the above, the Option Period of any Option
granted pursuant to this Plan shall terminate upon the earliest of the following
dates:
(a) One (1) month after the date upon which the Eligible Person
holding such Option (hereinafter called the "Optionee") ceases to be an employee
of, a consultant to or otherwise associated with, the Corporation and its
Subsidiaries, unless such cessation occurs in a manner described in subsections
(b), (c) or (d) below.
(b) Three (3) months after an option who is an Employee ceases to
be an employee by reason of "Retirement", which term shall mean the Optionee's
termination of employment with the Corporation or any of its subsidiaries at or
after (I) age 65 if the Optionee has been employed by the Corporation or any of
its Subsidiaries for at least one year or (ii) age 60 if the Optionee has been
employed by the Corporation or any of its Subsidiaries for at least three years.
(c) Six (6) months after the death or permanent disability of the
Optionee if the Optionee dies or becomes permanently disabled while being an
Employee or a consultant to or otherwise associated with the Corporation or any
of its Subsidiaries. (For purposes of this Plan, "permanent disability" shall
mean the failure or inability of any Optionee to perform substantially the usual
duties and obligations of such individual on behalf of the Corporation or its
Subsidiaries for 180 days during any 270 day period because of any mental or
physical incapacity, as determined by the Committee).
(d) At the time the employee or other association of the Optionee
with the Corporation or its Subsidiaries is terminated by the Corporation for
cause. (For purposes of this Plan, "cause" shall mean any of the following: (i)
willful malfeasance, willful misconduct or gross negligence by the Optionee in
connection with his or her duties, (ii) continuing refusal by an Optionee to
perform his or her duties under any lawful direction of his or her supervisor or
the Board of Directors of the Corporation after notice of any such refusal to
perform such duties or direction was given to such Optionee, (iii) any willful
and material breach of fiduciary duty owing to the Corporation or its
Subsidiaries by the Optionee, (iv) the conviction of the Optionee for commission
of a felony or any other crime resulting in pecuniary loss to the Corporation or
its subsidiaries (such as theft, embezzlement or fraud) or involving moral
turpitude, or (v) habitual drunkenness or narcotics addiction.)
Nothing contained herein shall limit whatever right the Corporation or
any of its Subsidiaries might otherwise have to terminate the employment of any
Employee, or any contractual arrangement with any Optionee, and neither this
Plan nor any Option granted hereunder shall confer on an Optionee any right to
continue in the employ of the Corporation or to continue any contract or
association with the Corporation.
Successive Options may be granted to the same Eligible Person whether or
not the Option or Options first granted to such Eligible Person remain
unexercised, subject to the limitations set forth in Section 6(a) above.
9. Non-Transferability. No Option granted pursuant to this Plan may be
transferred by the Optionee except by will or the laws of descent or
distribution, and, further, during the lifetime of the Optionee, the Option may
be exercised only by such Optionee.
10. Termination of the Plan. This Plan shall terminate upon the close of
business on September 26, 2005 unless it shall have sooner terminated by there
having been granted and fully exercised Options covering the entire 2,000,000
shares of Common Stock subject to this Plan.
11. Excercisability of Options. Subject to Section 8 hereof, the
Committee shall determine, at the time of each grant, the date or dates when the
Options granted to any Eligible Person pursuant to this Plan shall become
exercisable. Notwithstanding anything to the contrary contained in the Plan, all
Options shall forthwith become immediately exercisable in full upon the
consummation of a sale of all or substantially all of the assets or capital
stock of the Corporation that has not been approved by the Board of Directors
(whether by means of stock sale, asset sale, merger, consolidation or
otherwise); provided, however, that, to the extent the Fair Market Value
(determined as of the time an Option is granted) of ISOs granted to any Employee
hereunder that would become exercisable pursuant to the provisions of this
Section 11 exceeds $100,000, then only such number of ISOs as shall have a Fair
Market Value of $100,000 or less shall become immediately exercisable and the
balance shall be carried forward and become exercisable, in whole or in part, in
the next calendar year, but only to the extent that the Fair Market Value of
ISOs granted to such Employee by the Corporation and its Subsidiaries that
become exercisable during such calendar year does not exceed $100,000, and the
excess shall be similarly carried forward to future calendar years; provided,
however, that the Committee shall have the discretion to convert the excess
amount of such ISOs to non-ISOs in lieu of carrying forward such excess amounts.
12. Procedure for Exercise and Payment for Shares. Exercise of an Option
shall be made by the giving of written notice to the Corporation by the
Optionee. Such written notice shall be deemed sufficient for this purpose only
if delivered to the Corporation at its principal office and only if such written
notice states the number of shares with respect to which the Option is being
exercised and, further, states the date, not more than ninety (90) days after
the date of such notice, upon which the shares of Common Stock shall be
purchased and payment therefor shall be made. Payment for shares of Common Stock
purchased pursuant to exercise of an Option shall be made at the principal
offices of the Corporation. Upon the exercise of any Option in compliance with
the provisions of this Section 12 and upon receipt by the Corporation of the
payment for the Common Stock so purchased, together with the payment of the
amount of any taxes required to be collected or withheld as a result of the
exercise of this Option, the Corporation shall deliver or cause to be delivered
to the Optionee so exercising an Option a certificate or certificates for the
number of shares of Common Stock with respect to which the Option is so
exercised and payment is so made. The shares of Common Stock shall be registered
in the name of the exercising Optionee, provided that, in no event shall any
shares of Common Stock of the Corporation be issued pursuant to exercise of an
Option until full payment therefor shall have been made as provided under this
Plan. Payment for shares of Common Stock issued pursuant to exercise of an
Option may be made, at the election of the Optionee: (i) in cash or by check
satisfactory to the Committee, (ii) through the delivery to the Corporation of
shares of Common Stock owned by the Optionee (and for which the Optionee has
good title free and clear of any liens and encumbrances) or by reduction in the
number of shares of Common Stock issuable upon such exercise, based in each
case, on the Fair Market Value of the Common Stock on the date of payment, or
(iii) any combination of the foregoing. The Optionee may elect to satisfy any
taxes required to be collected or withheld as a result of the exercise of an
Option by reducing the number of shares of Common Stock issuable upon such
exercise, based on the Fair Market Value of the Common Stock on the date of
payment. For purposes of this paragraph, the date of issuance shall be the date
upon which payment in full has been received by (or tendered to) the Corporation
as provided herein.
13. Requirements of Law and of Certain Agreements. If any law or any
regulation of any commission or agency of competent jurisdiction shall require
the Corporation or the exercising Optionee to take any action with respect to
the shares of Common Stock acquired by the exercise of an Option, then the date
upon which the Corporation shall issue or cause to be issued the certificate or
certificates for the shares of Common Stock shall be postponed for a reasonable
period to permit compliance with such requirements of law or regulation.
Further, if requested by the Corporation, at or before the time of the issuance
of the shares with respect to which exercise of an Option has been made, the
exercising Optionee shall deliver to the Corporation his or her written
statement, reasonably satisfactory in form and content to the Corporation, that
he or she intends to hold the shares so acquired by him or her on exercise of
his or her Option for investment and not with a view to resale or other
distribution thereof to the public in violation of the Securities Act of 1933,
as amended. Moreover, in the event that the Corporation shall determine that, in
compliance with such Act or other applicable statutes or regulations, it is
necessary to register any of the shares of Common Stock with respect to which an
exercise of an Option has been made, or to qualify any such shares for exemption
from any of the requirements of such Act or any other applicable statute or
regulation, no Options may be exercised and no shares shall be issued to the
exercising Optionee for a reasonable period to permit the completion of such
required action. An Optionee shall acquire none of the rights of a shareholder
of the Corporation under this Plan unless and until a certificate or
certificates for shares are issued to him or her upon the exercise of Options.
14. Adjustments. In the event of the declaration of any stock dividend
on the Common Stock or in the event of any reorganization, merger,
consolidation, recapitalization, stock-split, combination or exchange of shares
of Common Stock or like adjustment, the number of shares of Common Stock and the
class of shares of Common Stock available pursuant to this Plan and the number
and class of shares of Common Stock subject to any Option granted pursuant to
this Plan, and the Option exercise prices, shall be adjusted by appropriate
changes in this Plan and in any Options outstanding pursuant to this Plan. New
stock options may be issued or assumed in a transaction to which Section 424(a)
of the Code applies. Any such adjustment to the Plan or to Options or Option
exercise prices shall be made by action of the Board of Directors or the
Committee, as the case may be, whose determination shall be conclusive;
provided, however, that if such Option is an ISO, then such Option granted
pursuant to this Plan shall be so adjusted as to continue to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
15. Amendment or Discontinuance of the Plan. The Committee may, insofar
as permitted by law, amend, suspend, or discontinue this Plan at any time
without restriction; provided, however, that the Committee may not alter or
amend or discontinue or revoke or otherwise impair (or change any terms or
provisions which would otherwise have been applicable to) any outstanding
Options which have been granted pursuant to this Plan and which remain
unexercised, except in the event of a merger, reorganization, or other
adjustment referred to in Section 14 above, or except in the event that there is
secured the written consent of the holder of the outstanding Option proposed to
be so altered or amended and, without approval of the shareholders, the
Committee may not amend, alter or revise the Plan to increase the number of
shares subject to the Plan.
16. Governing Law. The provisions of this Plan shall be governed by the
internal laws of the State of Connecticut, without giving effect to principles
governing conflicts of law.
EXHIBIT 22
THE DRESS BARN, INC.
SUBSIDIARIES OF THE REGISTRANT
(All 100% Owned)
State of
Subsidiary Incorporation
D.B.R., Inc. Delaware
The Dress Barn, Inc. of
New Hampshire, Inc. (**) New Hampshire
Raxton Corp. (**) Massachusetts
JRL Consulting Corp. New Jersey
D.B.X. Inc. New York
(**) Inactive Subsidiary
EXHIBIT 24
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in registration statement Nos.
33-16857 and 33-17488 (on Form S-8) and 33-16856 (on Form S-3) of our report,
dated September 20, 1996 on the consolidated financial statements of The Dress
Barn, Inc. and subsidiaries in the Annual Report on Form 10-K for the year
ended July 27, 1996.
Stamford, Connecticut
September 20, 1996