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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 26,1997
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 17, 1997, 22,974,469 shares of common shares were outstanding. The
aggregate market value of the common shares (based upon the closing price on
October 23, 1997 on the NASDAQ) of The Dress Barn, Inc. held by non-affiliates
was approximately $92,753,000. For the purposes of such calculation, all
outstanding shares of Common Stock have been considered held by non-affiliates,
other than the 4,216,055 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 15, 1997 are incorporated into Parts I and
III of this Form 10-K.
Page 2 of Cover Page
PART I
ITEM 1. BUSINESS
General
Dress Barn operates a national chain of value-priced specialty stores
offering in-season, moderate to better quality career apparel and accessories to
the fashion-conscious working woman. In addition, the Company's stores carry a
broad assortment of casual wear to suit its customers' total lifestyle needs.
Over the past several years, the Company has evolved from an off-price chain to
a value-priced specialty retailer. The Company distinguishes itself from (i)
off-price retailers by its carefully edited selection of in-season,
first-quality merchandise, service-oriented salespeople and its comfortable
shopping environment, (ii)department stores by its value pricing and convenient
locations and (iii) other specialty apparel retailers by its continuous focus on
Dress Barn's target customer for more than 35 years. As part of this focus, the
Company has successfully developed its own line of private brands, which
constituted approximately 55% of net sales for the fiscal year ended July 25,
1997 ("fiscal 1997").
The Company's stores operate primarily under the names Dress Barn and
Dress Barn Woman, the latter featuring larger sizes of styles similar to those
found in the Dress Barn stores. The Company also operates combination Dress
Barn/Dress Barn Woman stores ("Combo Stores"), which carry both Dress Barn and
Dress Barn Woman merchandise. As of July 26, 1997, Dress Barn operated 690
stores in 43 states and the District of Columbia, consisting of 403 Dress Barn
stores, 83 Dress Barn Woman stores and 204 Combo Stores. The Dress Barn and
Dress Barn Woman stores average approximately 4,500 and approximately 3,900
square feet, respectively, and the Combo Stores average approximately 8,400
square feet. Based on the success of its Combo Stores, the Company is focusing
its expansion strategy on opening new Combo Stores and converting existing Dress
Barn and Dress Barn Woman stores to the combination format. The Company plans to
open approximately 45 additional Combo Stores by the end its fiscal year ending
July 25, 1998 ("fiscal 1998").
Industry Background
The retail apparel industry has undergone significant contraction in
recent years, with the closing of over 30 major retail chains and considerable
consolidation. As a result of this consolidation, the Company believes it is the
second largest national specialty retail chain of value-priced women's clothing.
This period was characterized by strong competition and price deflation, which
resulted in operating margin pressure for the retail apparel industry. The
Company believes that these trends are reversing. Another significant trend in
retailing has been the steady reduction in regional shopping mall traffic.
Studies show that busy consumers have less time to contend with suburban
congestion and are, instead, shopping closer to home. With the majority of its
stores located in strip centers, the Company believes it is well positioned to
benefit from these trends.
Company Strengths
Dress Barn is a leading specialty store offering women's career fashions
at value prices. Dress Barn attributes its success to its: (i) strong name
recognition and loyal customer base; (ii) long-standing relationships with
vendors of quality merchandise; (iii) experienced management team; (iv)
commitment to technology; (v) strong, consistent customer focus; (vi) low cost
operating structure; and (vii) strong balance sheet.
Since the Company's formation in 1962, Dress Barn has established and
reinforced its image as a source of fashion and value for the working woman. The
Company's 690 store locations in 43 states and the District of Columbia provide
it with a nationally recognized name. In addition, the Company believes it has
developed high awareness among its target customers through on-going advertising
and local marketing activities.
The Company has developed and maintains strong and lasting relationships
with its domestic and offshore vendors. Dress Barn has worked with many of its
vendors for more than 15 years, and often is one of the vendors' largest
accounts. These relationships, along with the Company's buying power and strong
credit profile, enable the Company to receive favorable purchase terms,
exclusive merchandise and expedited delivery times.
The three senior members of the Company's merchandising team have worked
together at Dress Barn for over 15 years, with each having substantial previous
fashion retailing experience. This team engineered the Company's evolution from
an off-price retailer to a value-priced specialty store. The Company's executive
officers have an average tenure at Dress Barn of 14 years. The stability of its
management has enabled the Company to develop a shared culture and vision and to
maintain its focus on growing and refining its business.
Dress Barn has used technology to improve merchandising and customer
service, reduce costs and enhance productivity. The Company's management
information systems, which include an IBM AS/400 integrated financial system and
IBM 4694 point-of-sale system, allow it to provide better service to customers
by reducing paperwork and decreasing the average transaction processing time.
This enables sales associates to spend more time assisting customers. The
Company has also developed a laptop system that delivers up-to-date store
related information to its regional sales managers. The Company's distribution
center systems, installed in 1994, have reduced per-unit distribution costs by
over 50%, representing approximately $1.0 million in annual savings.
All aspects of Dress Barn's business are designed to be responsive to the
Dress Barn customer. Since 1962, the Company has been consistent in targeting
price-conscious and fashion-minded working women. The convenient locations of
the Company's stores primarily in strip and outlet centers, carefully edited
merchandise arranged for ease of shopping, comfortable store environment and
friendly customer service embody Dress Barn's strong focus on its customers.
Dress Barn's comprehensive training program encourages its sales associates to
assist customers in a low-key and friendly manner. The Company believes it
enhances its customers' shopping experience by avoiding aggressive sales tactics
that would result from a commission-based compensation structure.
The Company continually seeks to reduce costs in all aspects of its
operations and to create cost-consciousness at all levels. The Company believes
that its highly liquid balance sheet and internally generated funds provide a
competitive advantage that enables the Company to pursue its long-term
strategies regarding new stores, capital expenditures and acquisitions. The
Company has an ongoing strategy of supplementing the Company's growth and
enhancing shareholder value through acquisitions. The Company considers three
types of acquisition opportunities: (i) real estate oriented acquisitions to
gain access to attractive sites and favorable lease terms; (ii) other retail
operations that could benefit from Dress Barn's management and expertise, such
as chains offering a complementary product line; and (iii) alternate channels of
distribution, such as mail order catalogs. The Company believes that its highly
liquid balance sheet, with cash, cash equivalents and marketable securities of
approximately $124 million as of July 26, 1997, will enable it to take advantage
of such acquisition opportunities should they arise.
Operating Strategies
The Company's objective is to become the leading national chain of
value-priced specialty apparel stores offering career fashions to the moderate
income working woman. The Company has developed the following strategies to
achieve this goal: (i) further development of Dress Barn's private brands; (ii)
maintenance of Dress Barn's merchandise focus; (iii) continuation of the Combo
Store roll-out; (iv) further development of customer targeted marketing; and (v)
further improvement of customer service.
The Company has gradually increased the percentage of sales from goods
manufactured under Dress Barn's private brands, as well as goods produced by
national brand manufacturers exclusively for Dress Barn, to approximately 60%
and 15%, respectively, of the Company's net sales for fiscal 1997. While the
Company intends to continue to offer a balanced mix of both national brand name
and private brand merchandise, it plans to continue to increase the percentage
of private brand merchandise sold by its stores, including its successful
Westport(R), Princeton Club(R) and Atrium(R) brands. Dress Barn's private brands
typically create more value for its customers and promote Dress Barn's "fashion
at a fraction" image.
The Company's stores carry a broad assortment of career wear, including
dresses, suits, separates, blouses, sweaters and other knitwear, as well as
casual wear items, that are carefully edited to suit the lifestyle needs of its
target customer. Dress Barn does not seek to dictate fashion trends; rather it
offers current styles but avoids fashion-forward merchandise that is subject to
rapidly changing trends. While career fashions remain the Company's primary
focus, it continues to adapt to the evolving definition of "career," such as
casual Fridays. In addition, the Company seeks to broaden its appeal by
expanding its merchandise mix, such as introducing shoe and petite departments.
Based on the success of the Combo Stores, the Company expects most future
store openings to be Combo Stores. Because of their larger size, the Combo
Stores provide the Company with greater presence in shopping centers, give the
Company more leverage in negotiating lease terms, enable the Company to achieve
lower operating cost ratios and offer increased flexibility in merchandise
presentation. Of the approximately 60 additional Combo units which the Company
plans to open by the end of fiscal 1998, 45 are expected to be new stores and 15
are expected to be conversions from existing Dress Barn or Dress Barn Woman
stores.
In conjunction with its strategy of adding Combo stores, the Company is
aggressively closing underperforming locations and expects to close
approximately 60 such locations during fiscal 1998. The Company has the option
under a substantial number of its store leases to terminate the lease at little
or no cost if specified sales volumes are not achieved, affording the Company
greater flexibility to close certain underperforming stores. The Company's
continued opening of new Combo Stores, net of store closings, is expected to
result in a small increase in the Company's aggregate store square footage for
fiscal 1998.
The Company uses several marketing tools, such as transactional analyses
through point-of-sale systems and customer surveys, in order to determine the
preferences of its target customers, working women ages 25-55. The Company is
also collecting data from its credit card program for use in future marketing
initiatives. Management believes that these tools will further improve the
Company's ability to align its operations with the demands of its target
customers on a consistent basis.
Dress Barn continually seeks to improve the customer's shopping experience.
For example, the Company's new management information systems enable store
managers and sales associates to spend more time serving customers. The Company
has also developed an ongoing video training program to continue to improve
customer service and sales associates' product knowledge and selling skills.
Merchandising
In addition to the Company's broad assortment of career wear and casual
wear, the Company offers other wardrobe items including accessories, jewelry,
hosiery and shoes. Dress Barn and Dress Barn Woman are organized as separate
divisions, each with a separate merchandising team. Combo Stores have
merchandise offerings from both the Dress Barn and Dress Barn Woman
merchandising divisions.
A key component of the Company's merchandising strategy is to increase the
percentage of its sales derived from private brands. Private brands allow the
Company to differentiate itself from other retailers by providing an assortment
of merchandise that is not available elsewhere and to improve the Company's
control over the flow of merchandise into its stores by enabling the Company to
better specify quantities, styles, colors, size breaks and delivery dates. In
addition, the Company believes private brands provide it with more flexibility
in the marketing process by allowing for higher initial mark-ons and limiting
the ability of customers to compare prices with competing retailers. The Company
believes it has the expertise to execute its private brand strategy due to its
extensive experience sourcing goods, primarily overseas, its position as a
merchandiser of established fashions and its already successful line of private
brands. The percentage of the Company's sales generated from private brands has
increased to approximately 55% for fiscal 1997 from 40% during its fiscal year
ended July 27, 1996 ("fiscal 1996").
In fiscal 1996, the Company introduced two new departments, shoes and
petites, primarily in its Combo Stores. Following initial tests, these
departments are being rolled out to additional stores. As of July 26, 1997, 99
stores had shoe departments and 35 stores featured petites. The Company expects
to add another approximately 100 shoe departments and approximately 50 petite
departments in fiscal 1998.
Virtually all merchandising decisions affecting the Company's stores are
made centrally. Merchandising policy is under the direction of the Chairman, the
President and five merchandise managers. Prices 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 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 as appropriate to expedite selling. 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.
Buying and Distribution
Buying is conducted on a departmental basis for each of the Dress Barn and
Dress Barn Woman divisions by the Company's staff over 35 buyers and assistant
buyers supervised by the President and five merchandise managers. The Company
also uses independent buying representatives in New York and overseas. The
Company obtains its nationally branded merchandise from approximately 350
vendors and its private brand merchandise from more than 50 vendors. Typical
lead times for the Company in making purchases from its vendors range from
approximately one month for items such as t-shirts, socks and hosiery to
approximately six months for items such as suits and dresses. Generally, lead
times do not vary significantly between the Company's private brands and
nationally branded merchandise.
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 fiscal 1997.
All merchandise is received from vendors at the Company's central warehouse
and distribution facility in Suffern, New York, where it is inspected, allocated
and shipped to its stores. The Company seeks to use its strong relationships
with vendors to lower its operating costs by shifting freight and insurance
costs to the vendors and by requiring them to provide ancillary services. For
example, over 90% of the Company's merchandise is pre-ticketed by vendors and
over 30% is pre-packaged for distribution to stores, which allows cross-docking
in the distribution center to the stores. In addition, nearly half of the
hanging garments purchased by the Company are delivered on floor-ready hangers.
The Company generally does not warehouse merchandise, but distributes it
promptly to stores. Turnaround time between the receipt of merchandise from the
vendor and shipment to the stores is usually three days or less, and shipments
are made daily to most stores, maintaining the freshness of merchandise. Because
of such frequent shipments, the stores 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 at its
distribution center until needed.
Store Locations and Properties
As of July 26, 1997, the Company operated 690 stores in 43 states and the
District of Columbia. 348 of the stores were conveniently located in strip
centers and 259 stores were located in outlet centers. During the fiscal year
ended July 26, 1997, no store accounted for as much as 1% of the Company's total
sales. The following table indicates the type of shopping facility in which the
stores were located:
Dress Dress Barn
Barn Woman Combo
Type of Facility Stores Stores Stores
Strip Shopping Centers ...................... 238 38 72
Outlet Malls and Outlet Strip Centers ....... 111 40 108
Free Standing, Downtown and Enclosed Malls .. 54 5 24
Total ....................................... 403 83 204
The table on the following page indicates the states in which the stores
operating on July 26, 1997 were located, and the number of stores in each state:
Location DB DBW Combos
Alabama ................................ 3 1 3
Arizona ................................ 9 1 4
Arkansas ............................... 1 -- 2
California ............................. 25 5 12
Colorado ............................... 6 1 2
Connecticut ............................ 13 2 12
District of Columbia ................... -- -- 1
Delaware ............................... 3 -- 2
Florida ................................ 15 1 7
Georgia ................................ 16 3 9
Idaho .................................. 2 1 1
Illinois ............................... 15 -- 10
Indiana ................................ 12 1 1
Iowa ................................... -- -- 2
Kansas ................................. 2 1 2
Kentucky ............................... 2 1 3
Louisiana .............................. 1 -- 2
Maine .................................. 2 1 --
Maryland ............................... 11 2 7
Massachusetts .......................... 25 3 11
Michigan ............................... 18 2 8
Minnesota .............................. 1 -- 2
Mississippi ............................ 1 -- 2
Missouri ............................... 5 1 6
Nebraska ............................... -- -- 2
Nevada ................................. 3 1 2
New Hampshire .......................... 5 1 2
New Jersey ............................. 30 12 10
New Mexico ............................. -- -- --
New York ............................... 38 8 18
North Carolina ......................... 20 7 6
Ohio ................................... 9 1 8
Oklahoma ............................... 2 -- --
Oregon ................................. 2 2 1
Pennsylvania ........................... 32 9 13
Rhode Island ........................... 1 -- --
South Carolina ......................... 16 1 2
Tennessee .............................. 9 3 5
Texas .................................. 18 3 8
Utah ................................... 3 2 2
Vermont ................................ 1 -- --
Virginia ............................... 23 5 5
Washington ............................. 3 1 4
West Virginia .......................... -- -- 1
Wisconsin .............................. -- -- 4
Total .................................. 403 83 204
Store Development, Operations and Management
In considering new store locations, the Company typically focuses on
several criteria, such as concentration of the Company's target customer base,
the average household income in the surrounding area and the location of the
proposed store relative to competitive retailers. Within the specific strip or
outlet center, the Company evaluates the proposed co-tenants, the traffic count
of the existing center and the location of the store within the center. The
Company's real estate committee, which includes members of senior management,
must approve each new lease. The committee receives input from field management.
The Company's stores are designed to create a comfortable and pleasant
shopping environment for its customers. Merchandise and displays at all of the
stores are set up according to uniform guidelines and plans distributed by the
Company. The Company's merchandise is carefully arranged by lifestyle category
(e.g., career, casual and weekend wear) for ease of shopping. The stores also
have private fitting rooms, drive aisles, appealing lighting, carpeting,
background music and centralized cashier desks. Strategically located throughout
the stores are "lifestyle" posters showing the customer complete outfits
coordinated from among the stores' fashion offerings.
All stores are directly managed and operated by the Company. Each store is
staffed by a supervisor, who may be the store manager, and at least one sales
associate during non-peak hours, with additional sales associates added as
needed at peak hours. The supervisors and sales associates perform all store
operations, from receiving and processing merchandise and arranging it for
display, to assisting customers. Each store manager reports to a District Sales
Manager who, in turn, reports to a Regional Sales Manager. Dress Barn employs 10
Regional Sales Managers and approximately 90 District Sales Managers. District
sales managers typically 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.
The Company motivates its sales associates through promotion from within,
creative incentive programs, competitive wages and the opportunity for bonuses.
Sales associates compete in a broad variety of Company-wide contests involving
sales goals and other measures of performance. The contests are designed to
boost store profitability, create a friendly competitive atmosphere among
associates and offer opportunities for additional compensation. Management
believes that Dress Barn's creative incentive programs provide an important tool
for building cohesive and motivated sales teams. The Company has also
implemented comprehensive training programs at the store level in order to
ensure that the customer will receive friendly and helpful service, which
include (i) on-going video training, (ii) workbooks and manuals and (iii)
one-on-one training of sales associates by store managers.
In fiscal 1997, approximately 58% of the Company's sales were paid for by
credit card, with the remainder being by cash or check. The Company utilizes its
own Dress Barn credit card. Consistent with the other credit cards it accepts,
the Company assumes no credit risk with respect to its Dress Barn card but pays
a percentage of sales as a service charge. The number of card holders has
steadily increased, to approximately 900,000 currently. The average transaction
on the Dress Barn credit card during fiscal 1997 was approximately 50% more than
the average of all other transactions.
The Company mainly uses print advertising that emphasizes current fashion
apparel at value prices, as epitomized by Dress Barn's "fashion at a fraction"
slogan. The Company also uses direct mail programs, with six mailings during
fiscal 1997, each to approximately one million households including its credit
card holders. At the store level, the store supervisors host local marketing
programs, including fashion shows and in-store events designed to create greater
awareness of Dress Barn's merchandise. In addition, the Company considers its
credit card program to be a significant component in the development of its
targeted marketing efforts, enabling it to develop segmented marketing programs.
Virtually all of the Company's stores are open seven days a week. Stores
located in strip and outlet centers conform to the hours of other stores in the
center and are open most evenings, while downtown and free-standing stores are
usually open two nights per week.
Management Information Systems
In the past several years, the Company has made a significant investment in
technology to improve customer service, gain efficiencies and reduce operating
costs. Dress Barn has installed an IBM AS/400 management information system,
which integrates all major aspects of the Company's business, including sales,
distribution, purchasing, inventory control, merchandise planning and
replenishment, and financial systems. In August 1997, the Company completed
rolling out to all its stores IBM 4694 point-of-sale systems with price look-up
capabilities for both inventory and sales transactions. These systems can
accommodate substantial growth in additional stores with minimal incremental
investment. The Company has also developed a laptop system that delivers
up-to-date store-related information to its Regional Sales Managers.
The Company's merchandising 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 various styles, management reviews sales and inventory levels
on-line, organized by department, class, vendor, style, color and store. The
system enables the Company to mark down slow-moving merchandise or efficiently
transfer it to stores selling such items more rapidly. Through sophisticated yet
inexpensive off-the-shelf systems, the Company analyzes historical hourly and
projected sales trends to efficiently schedule sales personnel, minimizing labor
costs while producing a higher level of customer service. The Company believes
that such investments in technology enhance operating efficiencies and position
Dress Barn for future growth.
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
Approximately 10% of the Company's stores currently in operation, located
in outlet centers, operate under the name Westport Ltd. and Westport Woman. The
Company intends to convert most of these stores to the Dress Barn or Dress Barn
Woman name by the end of fiscal 1998.
Employees
As of July 26, 1997, the Company had approximately 7,100 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.
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 ending in
January than during its other three fiscal quarters, reflecting the intense
promotional atmosphere that has characterized the Christmas shopping season in
recent years. In addition, the Company's quarterly results of operations may
fluctuate materially depending on, among other things, the timing of new store
openings, net sales contributed by new stores, increases or decreases in
comparable store sales, adverse weather conditions, shifts in timing of certain
holidays, changes in the Company's merchandise mix and the timing of
acquisitions.
Forward-Looking Statements and Factors Affecting Future Performance
This Annual Report on Form 10-K contains in the "Business" section, in the
"Properties" section, in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere, 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 as a result of
certain factors set forth below and elsewhere in this Form 10-K.
The women's retail apparel industry is subject to rapid change and is
highly competitive. 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. The Company's
sales and results of operations may also be affected by unusual weather patterns
in areas where the Company has its greatest concentration of stores. The level
of occupancy costs, merchandise, labor and other costs will affect future
results of operations.
The Company competes primarily with department stores, off-price retailers,
specialty stores, discount stores and mass merchandisers, many of which have
substantially greater financial, marketing and other resources than the Company.
Many department stores offer a broader selection of merchandise than the
Company. In addition, many department stores have in the past been more
promotional than they are now and have reduced their selling prices, and certain
of the Company's competitors and vendors have opened outlet stores which offer
off-price merchandise. The Company's sales and results of operations may also be
affected by close-outs and going-out-of-business sales by other women's apparel
retailers. The Company may face periods of strong competition in the future
which could have an adverse effect on its financial results.
The growth of the Company is dependent, in large part, upon the Company's
ability to successfully execute its strategy of adding new stores and taking
advantage of acquisition opportunities. The success of the Company's growth
strategy will depend upon a number of factors, including the identification of
suitable markets and sites for new Combo stores, negotiation of leases on
acceptable terms, construction or renovation of sites in a timely manner at
acceptable costs, and maintenance of the productivity of the existing store
base. In addition, the Company must be able to hire, train and retain competent
managers and personnel and manage the systems and operational components of its
growth. The failure of the Company to open new Combo stores on a timely basis,
obtain acceptance in markets in which it currently has limited or no presence,
attract qualified management and personnel or appropriately adjust operational
systems and procedures would adversely affect the Company's future operating
results. In addition, there can be no assurance that the opening of new Combo
stores in existing markets will not have an adverse effect on sales at existing
stores in these markets. There can be no assurance that the Company will be able
to successfully implement its growth strategy of continuing to introduce the
Combo stores or to maintain its current growth levels.
The Company generally considers three types of acquisition opportunities:
(i) real estate oriented acquisitions, to gain access to attractive sites and
favorable lease terms; (ii) other retail operations that could benefit from the
Company's management and expertise, such as other apparel chains offering a
complementary product line; and (iii) alternate channels of distribution, such
as mail order catalogs. While the Company has completed a number of real-estate
oriented acquisitions, it has not been able to complete an acquisition of the
types listed in (ii) and (iii) above. At any given time, the Company generally
is in various stages of consideration of acquisition opportunities. Such
acquisitions are subject to due diligence, the negotiation of definitive
agreements and other conditions typical in acquisition transactions, certain of
which may be beyond the Company's control. There is no assurance that the
Company will be able to identify desirable acquisition candidates or will be
successful in completing such acquisitions, or if completed, that the
anticipated benefits of the acquisition will be realized.
The Company's success also depends in part on its ability to anticipate and
respond to changing merchandise trends and consumer preferences in a timely
manner. Accordingly, any failure by the Company to anticipate, identify and
respond to changing fashion trends could adversely affect consumer acceptance of
the merchandise in the Company's stores, which in turn could adversely affect
the Company's business and its image with its customers. If the Company
miscalculates either the market for its merchandise or its customers' purchasing
habits, it may be required to sell a significant amount of unsold inventory at
below average markups over the Company's cost, or below cost, which would have
an adverse effect on the Company's financial condition and results of
operations. In addition, the Company has increased its use of private brands.
The nature of the Company's obligations with respect to private brand purchases
may make it more difficult to respond to changing trends by reducing order
quantities. These factors could result in higher markdowns and lower gross
profits to the extent that sales of private brand merchandise are lower than
expected.
The Company's success is largely dependent on the efforts and abilities of
its executive officers, particularly Elliot S. Jaffe, its Chairman and Chief
Executive Officer, and Burt Steinberg, its President and Chief Operating
Officer. The loss of the services of any of its executive officers could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company relies upon its existing management information systems in
operating and monitoring all major aspects of the Company's business, including
sales, warehousing, distribution, purchasing, inventory control, merchandising
planning and replenishment, as well as various financial systems. Any disruption
in the operation of the Company's management information systems, or the
Company's failure to continue to upgrade, integrate or expend capital on such
systems as its business expands, would have a material adverse effect on the
Company. In addition, any disruption in the operations of the Company's
distribution center would have a material adverse effect on the Company's
business.
The Company's is committed to being leaner and more productive. The Company
is planning to continue to aggressively close or relocate underperforming stores
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 below, covering all stores operated by the Company
on July 26, 1997, indicates the number of leases expiring during the period
indicated and the number of expiring leases with and without renewal options:
Leases Number with Number Without
Fiscal Years Expiring Renewal Options Renewal Options
1998 122 76 46
1999 145 122 23
1999 143 129 14
2000 93 84 9
2001-2003 149 122 27
2004 and thereafter 38 31 7
Total 690 564 126
New store leases generally provide for a base rent of between $11 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 26, 1997, and excluding locations acquired after July 26,
1997, for fiscal 1998 are approximately $52.3 million. In addition, the Company
is also responsible under its store leases for its pro rata share of maintenance
expenses and common charges in strip and outlet centers.
A substantial number of store leases give the Company the option to
terminate the lease at little or no cost if certain specified sales volumes are
not achieved. This affords the Company greater flexibility to close
underperforming stores. Usually these provisions are operative only during the
first few years of the lease.
The Company's investment in new stores consists primarily of inventory,
net of vendor payables, leasehold improvements, fixtures and equipment. Dress
Barn often receives tenant improvement allowances from the landlords to offset
these initial investments. The Company's stores are typically profitable within
the first 12 months of operation.
The Company leases its executive offices and distribution facilities in
Suffern, New York. 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. This lease expires on April 30, 2007, with three five-year options
to extend the lease. Management believes the Suffern facility is sufficient to
meet its current needs and any foreseeable increase in the Company's store base
resulting from expansion or acquisition.
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 1997 Fiscal 1996
Bid Prices Bid Prices
High Low High Low
Fiscal Period
First Quarter ........... $ 13.88 $ 8.63 $ 10.63 $ 9.50
Second Quarter .......... $ 17.00 $ 13.38 $ 10.13 $ 8.75
Third Quarter ........... $ 18.75 $ 13.38 $ 11.75 $ 9.00
Fourth Quarter .......... $ 22.00 $ 14.75 $ 12.25 $ 9.25
Number of Record Holders
The number of record holders of the Company's common stock as of
October 15, 1997 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
Dollars in thousands except per share
information
Fiscal Year Ended
-------------------------------------------------------------------------------------
July 26, July 27, July 29, July 30, July 31,
1997 1996 1995 1994 1993(*)
-------------------------------------------------------------------------------------
Net sales $554,843 $515,522 $500,836 $457,325 $419,586
Cost of sales, including
occupancy and buying costs 358,093 337,998 327,166 301,154 274,434
-------------------------------------------------------------------------------------
Gross profit 196,750 177,524 173,670 156,171 145,152
Selling, general and
administrative expenses 135,384 132,176 133,253 120,131 108,565
Depreciation & amortization 16,139 15,828 14,063 12,127 9,177
Write-down of underperforming
and closed store assets ---- 2,848 ---- ---- ----
-------------------------------------------------------------------------------------
Operating income 45,227 26,672 26,354 23,913 27,410
Interest income- net 4,800 3,343 2,670 1,727 2,338
-------------------------------------------------------------------------------------
Earnings before
income taxes 50,027 30,015 29,024 25,640 29,748
Income taxes 18,260 11,106 10,739 9,487 10,709
-------------------------------------------------------------------------------------
Net earnings $31,767 $18,909 $18,285 $16,153 $19,039
=====================================================================================
Earnings per share - primary $1.35 $0.84 $0.82 $0.73 $0.86
=====================================================================================
Earnings per share - fully diluted $1.34 $0.84 $0.82 $0.73 $0.86
=====================================================================================
Balance sheet data:
Working capital $153,579 $122,730 $103,310 $89,051 $83,476
Total assets $309,502 $265,723 $243,521 $217,863 $202,386
Long-term debt $3,500 $3,500 $3,500 -- --
Shareholders' equity $232,822 $199,096 $178,938 $159,198 $142,003
Percent of net sales:
Cost of sales, including
occupancy and buying costs 64.5% 65.6% 65.3% 65.9% 65.4%
Gross profit 35.6% 34.4% 34.7% 34.1% 34.6%
Selling, general and
administrative expenses 24.4% 25.6% 26.6% 26.3% 25.9%
Operating income 8.1% 5.2% 5.3% 5.2% 6.5%
Net earnings 5.7% 3.7% 3.7% 3.5% 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 26, July 27, July 29,
1997 1996 1995
Net sales 100.0% 100.0% 100.0%
Cost of sales, including
occupancy and buying costs 64.5% 65.6% 65.3%
Selling, general and
administrative expenses 24.4% 25.6% 26.6%
Depreciation and amortization 2.9% 3.1% 2.8%
Writedown of underperforming and
closed store assets (see footnote 8) -- 0.6% --
Interest income - net 0.9% 0.6% 0.5%
Earnings before income taxes 9.0% 5.8% 5.8%
Net earnings 5.7% 3.7% 3.7%
Fiscal 1997 Compared to Fiscal 1996
Net sales increased by 7.6% to $554.8 million for the 52 weeks
ended July 26, 1997 ("fiscal 1997"), from $515.5 million for the 52 weeks ended
July 27, 1996 ("fiscal 1996"), due primarily to a 5.4% increase in comparable
store sales. The increase in comparable store sales resulted primarily from
better weather conditions during fiscal 1997 and positive reaction by customers
to the Company's merchandise offerings. The improvement in net sales was also
attributable to an approximately 3.5% increase in total selling square footage,
which was due to the opening of new combination Dress Barn/Dress Barn Woman
stores ("combo stores"), which carry both Dress Barn and Dress Barn Woman
merchandise, and the conversion of single-format stores into combo stores. This
offset the closing of underperforming stores, which resulted in the number of
stores in operation declining to 690 stores as of July 26, 1997, from 726 stores
in operation as of July 27, 1996. The Company's strategy for fiscal 1998 is to
continue opening primarily combo stores and converting its existing
single-format stores into combo stores, while aggressively closing its
underperforming locations.
Gross profit (net sales less cost of goods sold, including
occupancy and buying costs) increased by 10.8% to $196.7 million, or 35.5% of
net sales, in fiscal 1997 from $177.5 million, or 34.4% of net sales, in fiscal
1996 period. The increase in gross profit as a percentage of net sales was
primarily due to higher initial margins resulting from the increased percentage
of private brand merchandise, decreased markdowns and lower shrinkage. Occupancy
costs also decreased as a percentage of sales as leverage from the increase in
comparable store sales offset higher rents paid for new stores and lease
renewals.
Selling, general and administrative ("SG&A") expenses
increased by 2.4% to $135.4 million, or 24.4% of net sales, in fiscal1997 from
$132.2 million, or 25.6% of net sales, in fiscal 1996. The Company's continued
productivity improvements from the larger-size combo stores, focus on
controlling costs and the comparable store sales increase all contributed to the
decline in SG&A as a percentage of sales.
Depreciation expense increased by 2.0% to $16.1 million for
fiscal 1997 from $15.8 million for fiscal 1996. Depreciation expense for both
periods also includes certain writeoffs related to the closure of 61 stores and
72 stores during the 1997 and 1996 periods, respectively.
Interest income - net increased by 44.0% to $4.8 million for
fiscal 1997 from $3.3 million for fiscal 1996. The increase resulted primarily
from an increase in the Company's investment portfolio. (See also Notes 1 and 2
to the Consolidated Financial Statements).
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 fiscal 1996 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 new stores and converting single-format stores into combo stores. 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, expressed as a
percentage of net sales, decreased 1.0% in fiscal 1996 versus fiscal 1995. The
expense economies of converting stores to larger combo stores 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 - net 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).
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 or
acquisition of new stores, the remodeling of existing stores, the continued
expansion of its successful combination store format, the implementation of a
new point of sale register system for its stores and the relocation of its
headquarters. Total capital expenditures were $16.5 million, $17.1 million and
$22.0 million in fiscal 1997, 1996 and 1995, 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. In addition,
approximately $7 million in capital expenditures during fiscal 1997 and fiscal
1996 were for the new point-of-sale system.
The Company's cash, cash equivalents, marketable securities
and investments increased approximately $32.7 million in fiscal 1997 from fiscal
1996. This was primarily due to the increase in earnings. The Company funds
inventory expenditures through cash flows from operations and the favorable
payment terms the Company has established with its vendors. The Company's quick
ratio (i.e., the ratio of current assets less inventory to current liabilities)
has improved steadily over the past three years (1.75, 1.54 and 1.25 at the end
of fiscal 1997, 1996 and 1995, respectively). Merchandise inventories at July
26, 1997 increased $10.0 million from July 27, 1996 as the Company has continued
to grow its inventory levels in line with projected sales. The Company's net
cash provided by operations in fiscal 1997 increased to $48.4 million as
compared to $35.6 million in fiscal 1996 and $27.6 million in fiscal 1995. The
increase in fiscal 1997 was due primarily to the increase in earnings. During
this three-year period, the Company has increased its cash, cash equivalents,
marketable securities and investments by $62.0 million and financed its
expansion and corporate relocation while only incurring $3.5 million in
long-term debt.
At July 26, 1997, the Company had $122.9 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 $153.6 million at July 26,
1997. In addition, the Company had $100 million available 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 26, 1997. However, borrowings were
limited by approximately $34 million of outstanding letters of credit primarily
to vendors for import merchandise purchases.
In fiscal 1998, the Company plans to spend approximately $15.3
million to open approximately 50 additional stores, convert approximately 20
single-format stores to its larger combination store format and continue its
store remodeling program. In addition, the Company continues to pursue
acquisition opportunities. The Company believes that its cash, cash equivalents,
marketable securities and investments, together with cash flow from operations,
will be adequate to fund the Company's proposed capital expenditures and any
other operating requirements.
Inflation
The Company does not believe that inflation had a material
effect on its results of operations during the past three years. However, there
can be no assurance that the Company's business will not be affected by
inflation in the future.
In fiscal 1996 and fiscal 1995 there was deflation in the cost
of apparel. The Company believes that this deflation had a modest effect on the
Company's net sales in those fiscal years.
Seasonality
The Company has historically experienced substantially lower
earnings in its second fiscal quarter ending in January than during its other
three fiscal quarters, reflecting the intense promotional atmosphere that has
characterized the Christmas shopping season in recent years. The Company expects
this trend to continue for fiscal 1998. In addition, the Company's quarterly
results of operations may fluctuate materially depending on, among other things,
the timing of new store openings, net sales contributed by new stores, increases
or decreases in comparable store sales, adverse weather conditions, shifts in
timing of certain holidays and changes in the Company's merchandise mix.
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 1997 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(oo), 10(pp), 10(qq), 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)
Incorporated By
Reference From
4. 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)
Incorporated By
Reference From
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 (11)
10(oo) Split Dollar Agreement between Dress Barn and
Steinberg Family Trust f/b/o Michael Steinberg
10(pp) Split Dollar Agreement between Dress Barn and
Steinberg Family Trust f/b/o Jessica Steinberg
10(qq) Split Dollar Agreement between Dress Barn and
Jaffe 1996 Insurance Trust
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.
(11)The Company's Annual Report on Form 10-K for the fiscal year ended July
27, 1996.
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 26, 1997.
ITEM 14. (c) EXHIBITS
All exhibits are incorporated by reference as shown in Item 14(a)3, except
Exhibits 10(oo), 10(pp), 10(qq), 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 10/23/97
Chief Executive Officer
(Principal Executive Officer)
/s/ ROSLYN S. JAFFE
Roslyn S. Jaffe Director and Secretary and Treasurer 10/23/97
/s/ BURT STEINBERG
Burt Steinberg Director and President 10/23/97
and Chief Operating Officer
/s/ KLAUS EPPLER
Klaus Eppler Director 10/23/97
Donald Jonas Director
Mark S. Handler Director
Edward D. Solomon Director
/s/ ARMAND CORREIA
Armand Correia Chief Financial Officer (Principal 10/23/97
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 26, 1997 and July 27, 1996, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended July 26, 1997. 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 26, 1997 and July 27, 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
July 26, 1997, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Stamford, Connecticut
September 12, 1997
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollars in thousands, except share data July 26, July 27,
ASSETS 1997 1996
------------------ ----------------
Current Assets:
Cash and cash equivalents $1,124 $9,517
Marketable securities and investments (Note 2) 122,888 81,788
Merchandise inventories 99,835 89,791
Prepaid expenses and other 2,469 2,770
------------------ ----------------
Total Current Assets 226,316 183,866
------------------ ----------------
Property and Equipment:
Leasehold improvements 54,261 51,008
Fixtures and equipment 92,438 88,454
Computer software 7,924 7,604
Automotive equipment 301 342
------------------ ----------------
154,924 147,408
Less accumulated depreciation
and amortization 73,171 66,503
------------------ ----------------
81,753 80,905
------------------ ----------------
Other Assets 1,433 952
------------------ ----------------
$309,502 $265,723
================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $40,168 $37,199
Accrued expenses 27,814 20,903
Customer credits 2,489 2,062
Income taxes payable 2,266 972
------------------ ----------------
Total Current Liabilities 72,737 61,136
------------------ ----------------
Deferred Income Taxes 443 1,991
------------------ ----------------
Long-Term Debt (Note 3) 3,500 3,500
------------------ ----------------
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- 23,887,538 and 23,573,462
Shares, respectively
Outstanding- 22,742,538 and 22,568,462
Shares, respectively 1,194 1,179
Additional paid-in capital 19,856 16,530
Retained earnings 218,877 187,110
Treasury stock, at cost (8,214) (5,706)
Unrealized holding gain (loss) on marketable securities 1,109 (17)
------------------ ----------------
232,822 199,096
================== ================
$309,502 $265,723
================== ================
See notes to consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings
Dollars in thousands except per share amounts
Year Ended
-----------------------------------------------------------
July 26, July 27, July 29,
1997 1996 1995
-----------------------------------------------------------
Net sales $554,843 $515,522 $500,836
Cost of sales, including
Occupancy and buying costs 358,093 337,998 327,166
-----------------------------------------------------------
Gross profit 196,750 177,524 173,670
Selling, general and
Administrative expenses 135,384 132,176 133,253
Depreciation and amortization 16,139 15,828 14,063
Write-down of underperforming
And closed store assets (Note 8) ---- 2,848 ----
-----------------------------------------------------------
Operating income 45,227 26,672 26,354
Interest income- net 4,800 3,343 2,670
-----------------------------------------------------------
Earnings before
Income taxes 50,027 30,015 29,024
Income taxes 18,260 11,106 10,739
-----------------------------------------------------------
Net earnings $31,767 $18,909 $18,285
===========================================================
Earnings per share:
Primary $1.35 $0.84 $0.82
===========================================================
Fully diluted $1.34 $0.84 $0.82
===========================================================
See notes to consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of
Shareholders' Equity Unrealized
Dollars and shares in thousands. Holding Gain
Additional (Loss) Total
Common Stock Paid-In Retained Treasury On Marketable Shareholders'
Shares Amount Capital Earnings Stock Securities Equity
Balance, July 30, 1994 22,222 $1,161 $13,827 $149,916 $(5,706) -- $159,198
Deferred compensation 25 1 644 645
Employee Stock Purchase Plan activity 43 2 390 392
Shares issued pursuant to exercise of stock options 15 1 86 87
Shares issued in connection with purchase
of JRL Consulting Corp. 9 1 109 110
Unrealized holding gain on marketable securities $221 221
Net earnings 18,285 18,285
Balance, July 29, 1995 22,314 1,166 15,056 168,201 (5,706) 221 178,938
Deferred compensation 43 3 183 186
Employee Stock Purchase Plan activity 21 1 226 227
Shares issued pursuant to exercise of stock options 190 9 1,065 1,074
Unrealized holding loss on marketable securities (238) (238)
Net earnings 18,909 18,909
Balance, July 27, 1996 22,568 1,179 16,530 187,110 (5,706) (17) 199,096
Deferred compensation 1,160 1,160
Employee Stock Purchase Plan activity 13 1 149 150
Shares issued pursuant to exercise of stock options 302 14 2,017 2,031
Purchase of treasury stock (140) (2,508) (2,508)
Unrealized holding gain on marketable securities 1,126 1,126
Net earnings 31,767 31,767
---------------------------------------------------------------------------
Balance, July 26, 1997 22,743 $1,194 $19,856 $218,877 ($8,214) $1,109 $232,822
==========================================================================
See notes to consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands Year Ended
--------------------------------------------------------
July 26, July 27, July 29,
1997 1996 1995
--------------------------------------------------------
Operating Activities:
Net earnings $31,767 $18,909 $18,285
--------------------------------------------------------
Adjustments to reconcile net earnings to net cash Provided by operating
activities:
Depreciation and amortization of property and
Equipment (net) 13,351 12,855 11,454
Write-down of underperforming and
Closed store assets (Note 8) --- 2,848 ---
Loss on disposal of closed store assets 2,788 2,973 2,301
(Decrease) increase in deferred income taxes (1,548) 873 (770)
Deferred compensation 1,159 185 755
Changes in assets and liabilities:
Increase in merchandise inventories (10,044) (1,746) (8,444)
Decrease in prepaid expenses 301 670 798
(Increase) decrease in other assets (481) (331) 60
Increase (decrease) in accounts payable- trade 2,969 (1,225) (3,276)
Increase in accrued expenses 6,410 1,403 3,612
Increase in customer credits 427 575 346
Increase (decrease) in income taxes payable 1,294 (2,430) 2,507
--------------------------------------------------------
Total adjustments 16,627 16,650 9,343
--------------------------------------------------------
Net cash provided by operating activities 48,394 35,559 27,628
--------------------------------------------------------
Investing Activities
Purchases of property and equipment - net (16,487) (17,109) (22,026)
Sales and maturities of marketable securities and investments 38,911 110,613 24,548
Purchases of marketable securities and investments (78,885) (128,226) (33,417)
--------------------------------------------------------
Net cash used in investing activities (56,461) (34,722) (30,895)
--------------------------------------------------------
Financing Activities
Proceeds from long term debt --- --- 3,500
Purchase of treasury stock (2,508) --- ---
Proceeds from Employee Stock Purchase Plan 150 227 392
Proceeds from stock options exercised 2,032 1,074 86
--------------------------------------------------------
Net cash (used in) provided by financing activities (326) 1,301 3,978
--------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (8,393) 2,138 711
Cash and cash equivalents- beginning of period 9,517 7,379 6,668
--------------------------------------------------------
Cash and cash equivalents- end of period $1,124 $9,517 $7,379
========================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $16,966 $13,840 $9,002
========================================================
See notes to consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Three Years Ended July 26, 1997
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 women's apparel specialty
stores. The stores, operating principally under the names "Dress Barn" and
"Dress Barn Woman", 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 (EPS)
Earnings per share is calculated by dividing net earnings by the total of
the weighted average number of common shares and common share equivalents
outstanding during the period, assuming the dilutive effect of stock options,
computed in accordance with the treasury stock method. The number of shares used
in the computation of primary earnings per share was 23,541,442, 22,413,267 and
22,266,091 for fiscal 1997, fiscal 1996 and fiscal 1995, respectively. The
number of shares used in the computation of fully diluted earnings per share was
23,765,618, 22,629,567 and 22,591,085 for fiscal 1997, fiscal 1996 and fiscal
1995, respectively.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS128). SFAS
128 requires dual presentation of basic EPS and diluted EPS on the face of all
income statements issued after December 15, 1997 for all entities with complex
capital structures. Basic EPS will be computed as net income divided by the
weighted average number of common shares outstanding for the period. Diluted EPS
will reflect the potential dilution that could occur from common shares issuable
through stock options, warrants and other convertible securities. The Company
will adopt this statement for fiscal 1998. The Company expects that this
statement will not have a material effect on earnings per share.
Reclassifications
Certain amounts in prior years' financial statements have been
reclassified for comparative purposes.
Use of estimates
The preparation of the financial statements in conformity 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 accounts for stock-based awards to employees using the
intrinsic value method in accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees". Compensation expense, if any, is measured as the
excess of the market price of the stock over the exercise price on the
measurement date.
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 financing with similar terms and maturities, was
approximately $2.1 million and $2.0 million at the end of the 1997 and 1996
fiscal years, respectively.
2. MARKETABLE SECURITIES AND INVESTMENTS
Marketable securities and investments included the following:
July 26, 1997 July 27, 1996
------------- -------------
(In 000's) Fair Amortized Fair Amortized
Value Cost Value Cost
Money Market Funds $1,893 $1,893 $1,876 $1,876
US Govt. Bonds & Notes 8,010 7,983 25,853 25,842
Short Term Investments 24,642 24,642 9,019 9,019
Other Investments 9,108 8,917 5,012 5,012
Tax Free Municipal Bonds 77,524 76,457 38,373 38,178
US Govt. Securities Fund 1,711 1,887 1,655 1,878
$122,888 $121,779 $81,788 $81,805
========= ========= ======== =======
The scheduled maturities of marketable securities and investments at
July 26, 1997 are:
Due In Fair Value Amortized Cost
- ------------------- ------------- --------------
(in 000's)
One year or less $51,528 $51,448
One year through five years 65,409 64,456
Six years through ten years 2,851 2,775
Over ten years 3,100 3,100
$122,888 $121,779
========= ========
Unrealized holding gains and losses at July 26, 1997 netted to an
unrealized gain of approximately $1.1 million. Proceeds and gross realized gains
from the sale of securities in fiscal 1997, 1996 and 1995 were $38.9 million and
$0.3 million, $110.6 million and $0.6 million, and $9.6 million and a loss of
$0.4 million, 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 has a $3.5 million unsecured loan, due October 1, 2004,
with interest at rates ranging from 0% to 3% over the term of the loan, from the
New York State Urban Development Corporation. Interest commenced 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 26, 1997.
At July 26, 1997, the Company had unsecured lines of credit with three
banks totaling $100 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 26,
1997. However, the credit lines available were reduced by approximately $34
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
1997, 1996 and 1995, the Company incurred expenses of $692,000, $712,000 and
$555,000, 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
(In 000's) July 26, July 27, July 29,
1997 1996 1995
Federal:
Current $15,986 $8,428 $8,815
Deferred (1,240) 169 (608)
14,746 8,597 8,207
State:
Current 3,822 2,742 2,694
Deferred (308) (233) (162)
3,514 2,509 2,532
Provision for income taxes $18,260 $11,106 $10,739
======== ======== =======
Significant components of the Company's deferred tax liabilities and
assets were as follows:
July 26, July 27, July 29,
(in 000's) 1997 1996 1995
Deferred tax liabilities:
Depreciation $6,627 $5,433 $6,483
Other items 1,320 1,316 953
Total deferred tax liabilities 7,947 6,749 7,436
Deferred tax assets:
Inventory capitalization
for tax purposes 1,449 1,620 2,303
Other items 6,055 3,138 4,016
Total deferred tax assets 7,504 4,758 6,319
Net deferred tax liabilities $ 443 $1,991 $1,117
====== ====== ======
The net deferred tax liabilities were comprised of approximately
$237,000 in state deferred taxes and $206,000 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 26, July 27, July 29,
1997 1996 1995
Statutory tax rate 35.0% 35.0% 35.0%
State taxes - net of federal
Benefit 5.1% 5.6% 6.1%
Other - net -3.6% -3.6% -4.1%
Effective tax rate 36.5% 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 26, July 27, July 29,
in 000's) 1997 1996 1995
Base rentals $59,906 $56,113 $47,942
Percentage rentals 229 94 167
Other occupancy costs 19,526 19,626 18,299
Total $79,661 $75,833 $66,408
======== ======== =======
The following is a schedule of future minimum rentals under
noncancellable operating leases as of July 26, 1997 (dollars in thousands):
Fiscal Year Amount
------------- ------------
1998 $ 52,391
1999 44,375
2000 35,547
2001 25,396
2002 18,126
Subsequent years 31,410
Total future minimum rentals $207,245
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 26, 1997, included in the above schedule, are
approximately $404,000 annually and aggregate $2.1 million. 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 1997, 1996 and
1995 under these leases amounted to approximately $500,000, $492,000 and
$429,000, respectively.
7. STOCK-BASED COMPENSATION PLANS
At July 26, 1997, the Company had five stock-based compensation 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 and generally expire after ten years from date of grant. The Company's
1987 Non-Qualified Stock Option Plan, which will expire December 7, 1997,
provides for the granting of options to purchase up to 1,000,000 shares of
Common Stock to key employees. At July 26, 1997, there were 805,300 shares under
the 1993 plan and 26,418 shares under the 1987 plan available for future grant.
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 26, 1997, 400,000 options had been issued under the 1995 Stock
Option Plan. The Company's Employee Stock Purchase Plan allows employees to
purchase shares of company stock during each quarterly offering period at a 10%
discount through weekly payroll deductions.
The following summarizes the activities in all Stock Option Plans:
Weighted Average
Number of Exercise Price
Shares (Per share)
Outstanding - July 30,1994 1,257,342 $ 8.17
Granted 406,079 8.58
Exercised -15,461 5.60
Canceled -255,327 10.15
Outstanding - July 29,1995 1,392,633 $ 7.04
Granted 124,750 9.15
Exercised -188,829 5.69
Canceled -55,261 8.28
Outstanding - July 27,1996 1,273,293 $ 8.39
Granted 882,055 7.43
Exercised -302,202 6.68
Canceled -106,154 10.11
Outstanding - July 26,1997 1,746,992 $ 8.09
========= ======
At July 26, 1997, July 27, 1996 and July 29, 1995, there were exercisable
484,460 options, 675,914 options and 532,224 options, respectively, which have
weighted average exercise prices of $8.23 per share, $7.50 per share and $6.50
per share, respectively.
The following table summarizes information about stock options
outstanding at July 26, 1997:
Options Exercised
Number Options Granted Number Weighted
Outstanding Weighted Average Weighted Average Exercisable Average
Range of Exercise Prices as of 7/26/97 Remaining Life Exercise Price as of 7/26/97 Exercise Price
$3.00 - $6.00 485,500 6.87 years $5.12 185,500 $5.31
6.50 - $8.68 774,515 8.49 years $8.62 63,149 $8.28
8.75 - 12.50 486,977 6.83 years $10.20 235,811 $10.51
$3.00 - $12.50 1,746,992 7.58 years $8.09 484,460 $8.23
================================================================================================================================
The estimated fair value of options granted during fiscal 1997 and
fiscal 1996 was $3.79 and $4.00 per share, respectively, for options that were
issued at the market price. In fiscal 1997, the Company granted 300,000 options
at $5.00 per share, less than the market price on the date of grant, which had a
fair value of $5.36 per share. The Company records compensation expense for all
stock-based compensation plans using the method prescribed by Accounting
Principles Board Opinion No. 25, where compensation expense, if any, is measured
as the excess of the market price of the stock over the exercise price on the
measurement date. No compensation expense is recognized for the Company's option
grants that have an exercise price equal to the market price on the date of
grant or for the Company's Employee Stock Purchase Plan. Had compensation cost
for the Company's stock option plans been determined based on the fair value at
the option grant dates for awards in accordance with the accounting provisions
of SFAS 123, The Company's net earnings and earnings per share for fiscal 1997
and fiscal 1996 would have been reduced to the pro forma amounts indicated
below:
Year Ended
July 26, July 29,
1997 1996
Net earnings (in 000's):
As reported $31,767 $18,909
Pro forma $31,226 $18,862
Earnings per share - primary:
As reported $1.35 $0.84
Pro forma $1.33 $0.84
The fair values of the options granted under the Company's
fixed stock option plans during fiscal 1997 and fiscal 1996 were estimated on
the dates of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions: dividend yield of zero, expected
volatility of approximately 39.6%, risk-free interest rate of approximately
5.7%, and expected lives of option grants of approximately 5.0 years. These pro
forma adjustments are not indicative of future period pro forma adjustments,
when the calculation will apply to all applicable stock options. SFAS 123 does
not apply to awards prior to fiscal 1996, and additional awards in future years
are anticipated.
8. WRITE-DOWN OF UNDERPERFORMING AND CLOSED STORE ASSETS
In 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.
QUARTERLY RESULTS OF OPERATIONS (unaudited)
($000 omitted except per share amounts)
Fourth Third Second First
Quarter Quarter Quarter Quarter
Year ended July 26, 1997
Net Sales $146,527 $134,103 $131,457 $142,755
Gross Profit,
less occupancy
and buying costs 54,533 48,309 43,947 49,960
Income Taxes 6,446 4,232 3,028 4,554
Net Earnings 11,211 7,364 5,268 7,924
Earnings Per Share(*)
Primary $0.47 $0.32 $0.23 $0.35
Fully Diluted $0.46 $0.31 $0.22 $0.34
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(*)
Primary $0.27 $0.23 $0.08 $0.27
Fully Diluted $0.26 $0.23 $0.08 $0.27
(*) 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 1997 and fiscal 1996.
(**) Include $2.8 million pre-tax charge for the write-down of underperforming
and closed store assets (see note 8 to the financial statements).
EXHIBIT 10 (oo)
AGREEMENT CONCERNING "SPLIT-DOLLAR" LIFE INSURANCE PLAN
AGREEMENT made as of the 1st day of January, 1997, among THE
DRESS BARN, INC. (the "Employer"), MICHAEL DINSTEIN, as Trustee (the "Trustee")
of the STEINBERG FAMILY TRUST F/B/0 MICHAEL STEINBERG (the "Trust"), BURT B.
STEINBERG and FRANCINE STEINBERG.
WHEREAS:
1. The Trust owns a fifty percent interest in two policies of
insurance on the joint lives of BURT B. STEINBERG and his wife, FRANCINE
STEINBERG (the "Insureds").
2. The policies of insurance owned by the Trust and referred
to in this Agreement were issued by the JOHN HANCOCK LIFE INSURANCE COMPANY as
Policy No. 20012191 and by the PRUDENTIAL INSURANCE COMPANY OF AMERICA as Policy
No. 4021402, respectively. In this Agreement, each insurance company is referred
to as the "Insurer", both insurance companies are collectively referred to as
the "Insurers", each policy is referred to as the "Policy" and both policies are
collectively referred to as the "Policies".
3. BURT B. STEINBERG (the "Employee") is employed by the
Employer.
4. The Employer has agreed to establish a split-dollar life
insurance plan (the "Plan") to assist the Trustee in paying premiums due on the
Policies.
5. The Trust has agreed to assign to the Employer certain
specific rights in and to the Policies in consideration of payment by the
Employer of premiums due on the Policy.
NOW, THEREFORE, the Employer, the Trust and the Insureds agree
that:
1. Payment of Premiums: On or before the date or dates on
which each premium becomes due (a) the Trust will pay to each Insurer a portion
of the premium for the Policy issued by it equal to the current term rate
(defined below) for the portion of the insurance proceeds the Trust would
receive on the death of the last surviving Insured during the year in which such
premium is due and (b) the Employer will pay to each Insurer the balance of the
premium for the Policy issued by it. The "current term rate" with respect to
each Policy is (a)
1
while the Insureds are both living, an amount equal to the lesser of the issuing
Insurer's rate for a joint/survivorship one year term life insurance policy
available to all standard risks or the rate determined under the principles of
Revenue Rulings 64-328 and 66-110 (commonly known as the "U.S. 38 rates") and
(b) while only one of the Insureds is living, an amount equal to the lesser of
the issuing Insurer's rate for a single life one year term life insurance policy
available to all standard risks or the rate determined under the principles of
Revenue Rulings 64-328 and 66-110 (commonly known as the "P.S. 58 rates").
Notwithstanding the foregoing, in the event that the Employee
predeceases his wife, after the death of the Employee the Employer will pay to
each Insurer the entire premium for the Policy issued by it.
2. Dividends: Dividends declared by the Prudential Insurance
Company of America shall be used to purchase paid-up additions. The policy
issued by John Hancock Life Insurance Company does not provide for the payment
of dividends.
3. Policy Ownership and Collateral Assignment: The Trust will
continue to own each Policy and shall assign to the Employer, subject to the
terms and conditions of each Policy and to any superior liens that each Insurer
may have against the Policy issued by it, the following specific rights in and
to each Policy:
(a) The right to obtain, upon surrender of said Policy by the Trust, an
amount from the surrender proceeds equal to, but not exceeding, the amount of
the Employer's Interest in the Policy (as defined in Paragraph 4 below).
(b) The right to collect, upon a claim by the Trust under said Policy by
reason of the death of the Insureds, an amount from the proceeds equal to but
not exceeding the amount of the Employer's Interest in the Policy (as defined in
Paragraph 4 below).
(c) The right to receive from the Trust upon its exercise of its right to
obtain loans from the Insurers with respect to each such Policy the amount, if
any, by which the proceeds of said loan exceed the difference between (i) the
cash surrender value of such Policy immediately preceding said loan and (ii) the
Employer's Interest in such Policy (as defined in Paragraph 4 below) immediately
preceding said loan.
As owner of each Policy, the Trust will possess and exercise exclusively
all remaining rights in and to each Policy not otherwise assigned to the
Employer by reason of this Agreement, including, without limitation, the right
to assign each Policy to a third party, the right to designate the beneficiary
or beneficiaries of any death benefit of each Policy in excess of the Employer's
Interest in the Policy and the right to surrender each Policy.
The Employer agrees that it will not exercise its rights in
and to the Policies in any way that may conflict with the exercise by the Trust
of its rights in and to the Policies or
2
that may delay or otherwise interfere with receipt by its designated beneficiary
or beneficiaries of any death benefit under each Policy in excess of the
Employer's Interest in the Policy. The Employer agrees that it will not assign
its rights in and to the Policies to any person or entity other than the Trust
without the prior consent of the Trustee.
The Trust agrees to notify the Employer of any assignment of
its rights in and to each Policy, in whole or in part.
4. Employer's Interest in the Policy: With respect to each
Policy, the amount of the Employer's interest in the Policy, wherever referred
to in this Agreement, is an amount equal to the lesser of (a) the aggregate
amount of premiums paid by the Employer less the aggregate amount, if any, paid
by or on behalf of the Trust to the Employer in reimbursement of premiums paid
by the Employer, and (b) the net cash value or proceeds of the Policy.
5. Termination of Agreement: This Agreement will terminate
with respect to each Policy upon whichever of the following is the first to
occur:
(a) Surrender of the Policy by the Trust (who has the sole and exclusive
right of surrender).
(b) Payment by or on behalf of the Trust to the Employer of an amount equal
to the amount of the Employer's Interest in the Policy, accompanied by a notice
of termination signed by the Trustee.
(c) The death of the survivor of the Insureds.
(d) Termination of the Employee by the Employer for "Cause" (as defined in
Paragraph 6 below).
(e) "Retirement" (as defined in Paragraph 6 below) of the Employee, but
only if the Employee engages in "Competitive Activity" (as defined in Paragraph
6 below) within 24 months after retirement.
(f) Resignation of the Employee prior to "Retirement" (as defined below).
Upon termination of this Agreement and receipt by the Employer
of the amount of the Employer's Interest in the Policy, the Employer agrees to
execute such documents as may be reasonably required by the Trust to release the
Employer's rights in and to said Policy.
6. Definitions:
3
(a) Termination for "Cause" means a termination by the Employer for
criminal dishonesty, repeated acts or omissions which significantly impair the
ability of the Employer to conduct business in its usual manner provided that
the Employer has provided the Employee with written notice of each alleged act
or omission, or any other acts or omissions which are determined by arbitration,
in accordance with the applicable rules of the American Arbitration Association,
to be a material violation of any employment agreement in effect from time to
time between the Employer and the Employee sufficient to justify the Employer's
termination of the Employee's employment.
(b) Retirement means the Employee's Termination of Employment (as defined
in (c) of this Paragraph 6 below) at or after age 65 or such earlier age after
age 55 as shall be approved by the Employer, such approval not to be
unreasonably withheld.
(c) Termination of Employment means that the Employee is no longer actively
performing services for the Employer on a full-time basis, irrespective of
whether or not the Employee is receiving salary, continuance pay, is continuing
to participate in other employee benefit programs or is otherwise receiving
severance type payments. A Termination of Employment shall not include a leave
of absence approved by the Employer, such approval not to be unreasonably
withheld. For purposes of this Agreement, a full time basis, except as may be
otherwise provided in any agreement between the Participant and the Company,
shall mean scheduled work of at least thirty (30) hours per week.
(d) Competitive Activity means that if employment is terminated during the
term of any employment agreement voluntarily by the Employee, or by the Employer
for cause, during the two year period commencing on the day following such
termination, the Employee will not, within ten (10) miles of the location of any
store then owned by the Employer compete with the Employer by starting up any
business, or by directly or indirectly owning any interest in excess of fifty
(50%) percent in the equity of any existing business which owns or operates a
store in competition with the Employer within such ten (10) mile radius.
7. Amendment and Effect: This Agreement contains the entire understanding
between the Trust, the Employer and the Insureds concerning the matters
addressed herein. This Agreement, or any of its provisions, may not be amended,
supplemented, modified or waived unless by a writing signed by the party to be
bound thereby. If any provision of this Agreement is determined to be void,
invalid or unenforceable, the remaining provisions will not be affected, but
will continue in effect as though such void, invalid or unenforceable provision
were not originally a part of this Agreement. This Agreement will benefit and
bind the heirs, executors, administrators, personal representatives, successors
and assigns of each of the parties hereto. Notwithstanding the foregoing, the
Trustee is entering into this Agreement solely in his capacity as Trustee and
not individually.
4
8. Special Provisions: The following provisions are part of this Agreement
and are intended to meet the requirements of the Employee Retirement Income
Security Act of 1974:
(a) The named fiduciary: The Secretary of the
Employer.
(b) The funding policy under this Plan is that
all premiums on the Policy shall be remitted
to the Insurer when due.
(c) Direct payment by the Insurer is the basis
of payment of benefits under this Plan, with
those benefits in turn being based on the
payment of premiums as provided in the Plan.
(d) For claims procedure purposes, the "Claims
Manager" shall be the Secretary of the
Employer.
(1) If for any reason a claim for
benefits under this plan is denied
by the Employer, the Claims Manager
shall deliver to the claimant a
written explanation setting forth
the specific reasons for the denial,
pertinent references to the Plan
section on which the denial is
based, such other data as may be
pertinent and information on the
procedures to be followed by the
claimant in obtaining a review of
the claim, all written in a manner
calculated to be understood by the
claimant. For this purpose:
(A) The claimant's
claim shall be
deemed filed when
presented orally
or in writing to
the Claims
Manager.
(B) The Claims
Manager's
explanation shall
be in writing
delivered to the
claimant within 90
days of the date
the claim is
filed.
(2) The claimant shall have 60 days
following receipt of the denial of
the claim to file with the Claims
Manager a written request for review
of the denial. For such review, the
claimant or the claimant's
representative may submit pertinent
documents and written issues and
comments.
(3) The Claims Manager shall decide the
issue on review and furnish the
claimant with a copy within 60 days
of receipt of the claimant's request
for review of the claim. The
decision on review shall be in
writing and shall include specific
reasons for the decision, written in
a manner calculated to be understood
by the claimant, as well as specific
references to the pertinent Plan
provisions on
5
which the decision is based. If a
copy of the decision is not so
furnished to the claimant within
such 60 days, the claim shall be
deemed denied on review.
9. Governing Law: This Agreement will be governed by and its
validity, effect and interpretation determined by the laws of the State of New
York applicable to contracts made and to be performed wholly in that state.
9. Further Assurances: Each party, upon the other's request
and without cost to the other, agrees to take any action, and to sign,
acknowledge and deliver to the other party any additional document, necessary or
expedient to effectuate the purposes of this Agreement.
10. Counterparts: This Agreement may be executed in
counterparts, each of which will be an original, which, together, will
constitute one Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement as
of the day and year first written above.
ATTEST: THE DRESS BARN, INC.
_______________________ By:/S/ ARMAND CORREIA
A Duly Authorized
Officer
WITNESS: STEINBERG FAMILY TRUST F/B/0
MICHAEL STEINBERG
_______________________ By: /S/ NICHAEL DINSTEIN
MICHAEL DINSTEIN, as Trustee
and not individually
- ----------------------- /S/ BURT STEINBERG
BURT B. STEINBERG
- ----------------------- /S/ FRANCINE STEINBERG
FRANCINE STEINBERG
6
EXHIBIT 10 (pp)
AGREEMENT CONCERNING "SPLIT-DOLLAR" LIFE INSURANCE PLAN
AGREEMENT made as of the 1st day of January, 1997, among THE
DRESS BARN, INC. (the "Employer"), MICHAEL DINSTEIN, as Trustee (the "Trustee")
of the STEINBERG FAMILY TRUST F/B/0 JESSICA STEINBERG (the "Trust"), BURT B.
STEINBERG and FRANCINE STEINBERG.
WHEREAS:
1. The Trust owns a fifty percent interest in two policies of
insurance on the joint lives of BURT B. STEINBERG and his wife, FRANCINE
STEINBERG (the "Insureds").
2. The policies of insurance owned by the Trust and referred
to in this Agreement were issued by the JOHN HANCOCK LIFE INSURANCE COMPANY as
Policy No. 20012191 and by the PRUDENTIAL INSURANCE COMPANY of AMERICA as Policy
No. 4021402, respectively. In this Agreement, each insurance company is referred
to as the "Insurer", both insurance companies are collectively referred to as
the "Insurers", each policy is referred to as the "Policy" and both policies are
collectively referred to as the "Policies".
3. BURT B. STEINBERG (the "Employee") is employed by the
Employer.
4. The Employer has agreed to establish a split-dollar life
insurance plan (the "Plan") to assist the Trustee in paying premiums due on the
Policies.
5. The Trust has agreed to assign to the Employer certain
specific rights in and to the Policies in consideration of payment by the
Employer of premiums due on the Policy.
NOW, THEREFORE, the Employer, the Trust and the Insureds agree
that:
1. Payment of Premiums: On or before the date or dates on
which each premium becomes due (a) the Trust will pay to each Insurer a portion
of the premium for the Policy issued by it equal to the current term rate
(defined below) for the portion of the insurance proceeds the Trust would
receive on the death of the last surviving Insured during the year in which such
premium is due and (b) the Employer will pay to each Insurer the balance of the
premium for the Policy issued by it. The "current term rate" with respect to
each Policy is (a) while the Insureds are both living, an amount equal to the
lesser of the issuing Insurer's rate for a joint/survivorship one year term life
insurance policy available to all standard risks or the rate determined under
the principles of Revenue Rulings 64-328 and 66-110 (commonly known as the "U.S.
38 rates") and (b) while only one of the Insureds is living, an amount equal to
the lesser of the issuing Insurer's rate for a single life one year term life
insurance policy available to all standard risks or the rate determined under
the principles of Revenue Rulings 64-328 and 66-110 (commonly known as the "P.S.
58 rates").
Notwithstanding the foregoing, in the event that the Employee
predeceases his wife, after the death of the Employee the Employer will pay to
each Insurer the entire premium for the Policy issued by it.
2. Dividends: Dividends declared by the Prudential Insurance
Company of America shall be used to purchase paid-up additions. The policy
issued by John Hancock Life Insurance Company does not provide for the payment
of dividends.
3. Policy Ownership and Collateral Assignment: The Trust will
continue to own each Policy and shall assign to the Employer, subject to the
terms and conditions of each Policy and to any superior liens that each Insurer
may have against the Policy issued by it, the following specific rights in and
to each Policy:
(a) The right to obtain, upon surrender of said Policy by the Trust, an
amount from the surrender proceeds equal to, but not exceeding, the amount of
the Employer's Interest in the Policy (as defined in Paragraph 4 below).
(b) The right to collect, upon a claim by the Trust under said Policy by
reason of the death of the Insureds, an amount from the proceeds equal to but
not exceeding the amount of the Employer's Interest in the Policy (as defined in
Paragraph 4 below).
(c) The right to receive from the Trust upon its exercise of its right to
obtain loans from the Insurers with respect to each such Policy the amount, if
any, by which the proceeds of said loan exceed the difference between (i) the
cash surrender value of such Policy immediately preceding said loan and (ii) the
Employer's Interest in such Policy (as defined in Paragraph 4 below) immediately
preceding said loan.
As owner of each Policy, the Trust will possess and exercise exclusively
all remaining rights in and to each Policy not otherwise assigned to the
Employer by reason of this Agreement, including, without limitation, the right
to assign each Policy to a third party, the right to designate the beneficiary
or beneficiaries of any death benefit of each Policy in excess of the Employer's
Interest in the Policy and the right to surrender each Policy.
2
The Employer agrees that it will not exercise its rights in
and to the Policies in any way that may conflict with the exercise by the Trust
of its rights in and to the Policies or that may delay or otherwise interfere
with receipt by its designated beneficiary or beneficiaries of any death benefit
under each Policy in excess of the Employer's Interest in the Policy. The
Employer agrees that it will not assign its rights in and to the Policies to any
person or entity other than the Trust without the prior consent of the Trustee.
The Trust agrees to notify the Employer of any assignment of
its rights in and to each Policy, in whole or in part.
4. Employer's Interest in the Policy: With respect to each
Policy, the amount of the Employer's interest in the Policy, wherever referred
to in this Agreement, is an amount equal to the lesser of (a) the aggregate
amount of premiums paid by the Employer less the aggregate amount, if any, paid
by or on behalf of the Trust to the Employer in reimbursement of premiums paid
by the Employer, and (b) the net cash value or proceeds of the Policy.
5. Termination of Agreement: This Agreement will terminate
with respect to each Policy upon whichever of the following is the first to
occur:
(a) Surrender of the Policy by the Trust (who has the sole and exclusive
right of surrender).
(b) Payment by or on behalf of the Trust to the Employer of an amount equal
to the amount of the Employer's Interest in the Policy, accompanied by a notice
of termination signed by the Trustee.
(c) The death of the survivor of the Insureds.
(d) Termination of the Employee by the Employer for "Cause" (as defined in
Paragraph 6 below).
(e) "Retirement" (as defined in Paragraph 6 below) of the Employee, but
only if the Employee engages in "Competitive Activity" (as defined in Paragraph
6 below) within 24 months after retirement.
(f) Resignation of the Employee prior to "Retirement" (as defined below).
Upon termination of this Agreement and receipt by the Employer
of the amount of the Employer's Interest in the Policy, the Employer agrees to
execute such documents as may be reasonably required by the Trust to release the
Employer's rights in and to said Policy.
3
6. Definitions:
(a) Termination for "Cause" means a termination by the Employer for
criminal dishonesty, repeated acts or omissions which significantly impair the
ability of the Employer to conduct business in its usual manner provided that
the Employer has provided the Employee with written notice of each alleged act
or omission, or any other acts or omissions which are determined by arbitration,
in accordance with the applicable rules of the American Arbitration Association,
to be a material violation of any employment agreement in effect from time to
time between the Employer and the Employee sufficient to justify the Employer's
termination of the Employee's employment.
(b) Retirement means the Employee's Termination of Employment (as defined
in (c) of this Paragraph 6 below) at or after age 65 or such earlier age after
age 55 as shall be approved by the Employer, such approval not to be
unreasonably withheld.
(c) Termination of Employment means that the Employee is no longer actively
performing services for the Employer on a full-time basis, irrespective of
whether or not the Employee is receiving salary, continuance pay, is continuing
to participate in other employee benefit programs or is otherwise receiving
severance type payments. A Termination of Employment shall not include a leave
of absence approved by the Employer, such approval not to be unreasonably
withheld. For purposes of this Agreement, a full time basis, except as may be
otherwise provided in any agreement between the Participant and the Company,
shall mean scheduled work of at least thirty (30) hours per week.
(d) Competitive Activity means that if employment is terminated during the
term of any employment agreement voluntarily by the Employee, or by the Employer
for cause, during the two year period commencing on the day following such
termination, the Employee will not, within ten (10) miles of the location of any
store then owned by the Employer compete with the Employer by starting up any
business, or by directly or indirectly owning any interest in excess of fifty
(50%) percent in the equity of any existing business which owns or operates a
store in competition with the Employer within such ten (10) mile radius.
7. Amendment and Effect: This Agreement contains the entire
understanding between the Trust, the Employer and the Insureds concerning the
matters addressed herein. This Agreement, or any of its provisions, may not be
amended, supplemented, modified or waived unless by a writing signed by the
party to be bound thereby. If any provision of this Agreement is determined to
be void, invalid or unenforceable, the remaining provisions will not be
affected, but will continue in effect as though such void, invalid or
unenforceable provision were not originally a part of this Agreement. This
Agreement will benefit and bind the heirs, executors, administrators, personal
representatives, successors and assigns of each of the parties hereto.
Notwithstanding the foregoing, the Trustee is entering into this Agreement
solely in his capacity as Trustee and not individually.
4
8. Special Provisions: The following provisions are part of this Agreement
and are intended to meet the requirements of the Employee Retirement Income
Security Act of 1974:
(a) The named fiduciary: The Secretary of the
Employer.
(b) The funding policy under this Plan is that
all premiums on the Policy shall be remitted
to the Insurer when due.
(c) Direct payment by the Insurer is the basis
of payment of benefits under this Plan, with
those benefits in turn being based on the
payment of premiums as provided in the Plan.
(d) For claims procedure purposes, the "Claims
Manager" shall be the Secretary of the
Employer.
(1) If for any reason a claim for
benefits under this plan is denied
by the Employer, the Claims Manager
shall deliver to the claimant a
written explanation setting forth
the specific reasons for the denial,
pertinent references to the Plan
section on which the denial is
based, such other data as may be
pertinent and information on the
procedures to be followed by the
claimant in obtaining a review of
the claim, all written in a manner
calculated to be understood by the
claimant. For this purpose:
(A) The claimant's
claim shall be
deemed filed when
presented orally
or in writing to
the Claims
Manager.
(B) The Claims
Manager's
explanation shall
be in writing
delivered to the
claimant within 90
days of the date
the claim is
filed.
(2) The claimant shall have 60 days
following receipt of the denial of
the claim to file with the Claims
Manager a written request for review
of the denial. For such review, the
claimant or the claimant's
representative may submit pertinent
documents and written issues and
comments.
(3) The Claims Manager shall decide the
issue on review and furnish the
claimant with a copy within 60 days
of receipt of the claimant's request
for review of the claim. The
decision on review shall be in
writing and shall include specific
reasons for the decision, written in
a manner
5
calculated to be understood by the
claimant, as well as specific
references to the pertinent Plan
provisions on which the decision is
based. If a copy of the decision is
not so furnished to the claimant
within such 60 days, the claim shall
be deemed denied on review.
9. Governing Law: This Agreement will be governed by and its
validity, effect and interpretation determined by the laws of the State of New
York applicable to contracts made and to be performed wholly in that state.
9. Further Assurances: Each party, upon the other's request
and without cost to the other, agrees to take any action, and to sign,
acknowledge and deliver to the other party any additional document, necessary or
expedient to effectuate the purposes of this Agreement.
10. Counterparts: This Agreement may be executed in
counterparts, each of which will be an original, which, together, will
constitute one Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement as
of the day and year first written above.
ATTEST: THE DRESS BARN, INC.
_______________________ By:/S/ DAVID MONTIETH
A Duly Authorized
Officer
WITNESS: STEINBERG FAMILY TRUST F/B/0
JESSICA STEINBERG
_______________________ By: /S/ NICHAEL DINSTEIN
MICHAEL DINSTEIN, as Trustee
and not individually
- ----------------------- /S/ BURT STEINBERG
BURT B. STEINBERG
- ----------------------- /S/ FRANCINE STEINBERG
FRANCINE STEINBERG
6
EXHIBIT 10 (qq)
AGREEMENT CONCERNING "SPLIT-DOLLAR" LIFE INSURANCE PLAN
AGREEMENT made as of the 17th day of January, 1997, among THE DRESS BARN,
INC. (the "Employer"), GRACE AWH, as Trustee (the "Trustee") of the JAFFE 1996
INSURANCE TRUST (the "Trust"), DAVID R. JAFFE and HELEN KAHNG JAFFE.
WHEREAS:
1. The Trust owns two policies of insurance on the joint lives
of DAVID R. JAFFE and his wife, HELEN KAHNG JAFFE (the "Insureds").
2. The policies of insurance owned by the Trust and referred
to in this Agreement were issued by the JOHN HANCOCK LIFE INSURANCE COMPANY as
Policy No. 20012183 and by the PACIFIC MUTUAL LIFE INSURANCE COMPANY as Policy
No. 1A23192350, respectively. In this Agreement, each insurance company is
referred to as the "Insurer", both insurance companies are collectively referred
to as the "Insurers", each policy is referred to as the "Policy" and both
policies are collectively referred to as the "Policies".
3. DAVID R. JAFFE (the "Employee") is employed by the
Employer.
4. The Employer has agreed to establish a split-dollar life
insurance plan (the "Plan") to assist the Trustee in paying premiums due on the
Policies.
5. The Trust has agreed to assign to the Employer certain
specific rights in and to the Policies in consideration of payment by the
Employer of premiums due on the Policy.
NOW, THEREFORE, the Employer, the Trust and the Insureds agree
that:
1. Payment of Premiums: On or before the date or dates on
which each premium becomes due (a) the Trust will pay to each Insurer a portion
of the premium for the Policy issued by it equal to the current term rate
(defined below) for the portion of the insurance proceeds the Trust would
receive on the death of the last surviving Insured during the year in which such
premium is due and (b) the Employer will pay to each
Insurer the balance of the premium for the Policy issued by it. The "current
term rate" with respect to each Policy is (a) while the Insureds are both
living, an amount equal to the lesser of the issuing Insurer's rate for a
joint/survivorship one year term life insurance policy available to all standard
risks or the rate determined under the principles of Revenue Rulings 64- 328 and
66-110 (commonly known as the "U.S. 38 rates") and (b) while only one of the
Insureds is living, an amount equal to the lesser of the issuing Insurer's rate
for a single life one year term life insurance policy available to all standard
risks or the rate determined under the principles of Revenue Rulings 64- 328 and
66-110 (commonly known as the "P.S. 58 rates").
2. Dividends: Dividends declared by the Pacific Mutual Life
Insurance Company shall be used to purchase paid-up additions. The policy issued
by John Hancock Life Insurance Company does not provide for the payment of
dividends.
3. Policy Ownership and Collateral Assignment: The Trust will
continue to own each Policy and shall assign to the Employer, subject to the
terms and conditions of each Policy and to any superior liens that each Insurer
may have against the Policy issued by it, the following specific rights in and
to each Policy:
(a) The right to obtain, upon surrender of said
Policy by the Trust, an amount from the surrender proceeds equal to, but not
exceeding, the amount of the Employer's Interest in the Policy (as defined in
Paragraph 4 below).
(b) The right to collect, upon a claim by the
Trust under said Policy by reason of the death of the Insureds, an amount from
the proceeds equal to but not exceeding the amount of the Employer's Interest in
the Policy (as defined in Paragraph 4 below).
(c) The right to receive from the Trust upon its
exercise of its right to obtain loans from the Insurers with respect to each
such Policy the amount, if any, by which the proceeds of said loan exceed the
difference between (i) the cash surrender value of such Policy immediately
preceding said loan and (ii) the Employer's Interest in such Policy (as defined
in Paragraph 4 below) immediately preceding said loan.
As owner of each Policy, the Trust will possess and exercise
exclusively all remaining rights in and to each Policy not otherwise assigned to
the Employer by reason of this Agreement, including, without limitation, the
right to assign each Policy to a third party, the right to designate the
beneficiary or beneficiaries of any death benefit of each Policy
2
in excess of the Employer's Interest in the Policy and the right
to surrender each Policy.
The Employer agrees that it will not exercise its rights in
and to the Policies in any way that may conflict with the exercise by the Trust
of its rights in and to the Policies or that may delay or otherwise interfere
with receipt by its designated beneficiary or beneficiaries of any death benefit
under each Policy in excess of the Employer's Interest in the Policy. The
Employer agrees that it will not assign its rights in and to the Policies to any
person or entity other than the Trust without the prior consent of the Trustee.
The Trust agrees to notify the Employer of any assignment of
its rights in and to each Policy, in whole or in part.
4. Employer's Interest in the Policy: With respect to each
Policy, the amount of the Employer's interest in the Policy, wherever referred
to in this Agreement, is an amount equal to the lesser of (a) the aggregate
amount of premiums paid by the Employer less the aggregate amount, if any, paid
by or on behalf of the Trust to the Employer in reimbursement of premiums paid
by the Employer, and (b) the net cash value or proceeds of the Policy.
5. Termination of Agreement: This Agreement will terminate
with respect to each Policy upon whichever of the following is the first to
occur:
(a) Surrender of the Policy by the Trust (who
has the sole and exclusive right of surrender).
(b) Payment by or on behalf of the Trust to the
Employer of an amount equal to the amount of the Employer's Interest in the
Policy, accompanied by a notice of termination signed by the Trustee.
(c) The death of the survivor of the Insureds.
(d) Termination of the Employee by the Employer
for "Cause" (as defined in Paragraph 6 below).
(e) "Retirement" (as defined in Paragraph 6
below) of the Employee, but only if the Employee engages in "Competitive
Activity" (as defined in Paragraph 6 below) within 24 months after retirement.
(f) Resignation of the Employee prior to
"Retirement" (as defined below).
3
Upon termination of this Agreement and receipt by the Employer
of the amount of the Employer's Interest in the Policy, the Employer agrees to
execute such documents as may be reasonably required by the Trust to release the
Employer's rights in and to said Policy.
6. Definitions:
(a) Termination for "Cause" means a termination
by the Employer for criminal dishonesty, repeated acts or omissions which
significantly impair the ability of the Employer to conduct business in its
usual manner provided that the Employer has provided the Employee with written
notice of each alleged act or omission, or any other acts or omissions which are
determined by arbitration, in accordance with the applicable rules of the
American Arbitration Association, to be a material violation of any employment
agreement in effect from time to time between the Employer and the Employee
sufficient to justify the Employer's termination of the Employee's employment.
(b) Retirement means the Employee's Termination
of Employment (as defined in (c) of this Paragraph 6 below) at or after age 65
or such earlier age after age 55 as shall be approved by the Employer, such
approval not to be unreasonably withheld.
(c) Termination of Employment means that the
Employee is no longer actively performing services for the Employer on a
full-time basis, irrespective of whether or not the Employee is receiving
salary, continuance pay, is continuing to participate in other employee benefit
programs or is otherwise receiving severance type payments. A Termination of
Employment shall not include a leave of absence approved by the Employer, such
approval not to be unreasonably withheld. For purposes of this Agreement, a full
time basis, except as may be otherwise provided in any agreement between the
Participant and the Company, shall mean scheduled work of at least thirty (30)
hours per week.
(d) Competitive Activity means that if
employment is terminated during the term of any employment agreement voluntarily
by the Employee, or by the Employer for cause, during the two year period
commencing on the day following such termination, the Employee will not, within
ten (10) miles of the location of any store then owned by the Employer compete
with the Employer by starting up any business, or by directly or indirectly
owning any interest in excess of fifty (50%) percent in the equity of any
existing business which owns or operates a store in competition with the
Employer within such ten (10) mile radius.
4
7. Amendment and Effect: This Agreement contains the entire
understanding between the Trust, the Employer and the Insureds concerning the
matters addressed herein. This Agreement, or any of its provisions, may not be
amended, supplemented, modified or waived unless by a writing signed by the
party to be bound thereby. If any provision of this Agreement is determined to
be void, invalid or unenforceable, the remaining provisions will not be
affected, but will continue in effect as though such void, invalid or
unenforceable provision were not originally a part of this Agreement. This
Agreement will benefit and bind the heirs, executors, administrators, personal
representatives, successors and assigns of each of the parties hereto.
Notwithstanding the foregoing, the Trustee is entering into this Agreement
solely in his capacity as Trustee and not individually.
8. Special Provisions: The following provisions are part of
this Agreement and are intended to meet the requirements of the Employee
Retirement Income Security Act of 1974:
(a) The named fiduciary: The Secretary of the
Employer.
(b) The funding policy under this Plan is that
all premiums on the Policy shall be remitted
to the Insurer when due.
(c) Direct payment by the Insurer is the basis
of payment of benefits under this Plan, with
those benefits in turn being based on the
payment of premiums as provided in the Plan.
(d) For claims procedure purposes, the "Claims
Manager" shall be the Secretary of the
Employer.
(1) If for any reason a claim for
benefits under this plan is denied
by the Employer, the Claims Manager
shall deliver to the claimant a
written explanation setting forth
the specific reasons for the denial,
pertinent references to the Plan
section on which the denial is
based, such other data as may be
pertinent and information on the
procedures to be followed by the
claimant in obtaining a review of
the claim, all written in a manner
calculated to be understood by the
claimant. For this purpose:
(A) The claimant's claim shall be
deemed filed when presented
5
orally or in writing to the
Claims Manager.
(B) The Claims
Manager's
explanation shall
be in writing
delivered to the
claimant within 90
days of the date
the claim is
filed.
(2) The claimant shall have 60 days
following receipt of the denial of
the claim to file with the Claims
Manager a written request for review
of the denial. For such review, the
claimant or the claimant's
representative may submit pertinent
documents and written issues and
comments.
(3) The Claims Manager shall decide the
issue on review and furnish the
claimant with a copy within 60 days
of receipt of the claimant's request
for review of the claim. The
decision on review shall be in
writing and shall include specific
reasons for the decision, written in
a manner calculated to be understood
by the claimant, as well as specific
references to the pertinent Plan
provisions on which the decision is
based. If a copy of the decision is
not so furnished to the claimant
within such 60 days, the claim shall
be deemed denied on review.
9. Governing Law: This Agreement will be governed by and its
validity, effect and interpretation determined by the laws of the State of New
York applicable to contracts made and to be performed wholly in that state.
9. Further Assurances: Each party, upon the other's request
and without cost to the other, agrees to take any action, and to sign,
acknowledge and deliver to the other party any additional document, necessary or
expedient to effectuate the purposes of this Agreement.
6
10. Counterparts: This Agreement may be executed in
counterparts, each of which will be an original, which,
together, will constitute one Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement as
of the day and year first written above.
ATTEST: THE DRESS BARN, INC.
____________________ By:/S/ DAVID MONTIETH
A Duly Authorized
Officer
WITNESS: JAFFE 1996 INSURANCE TRUST
_____________________ By:/S/ GRACE AWH
GRACE AWH, as Trustee
and not individually
- --------------------- /S/ DAVID R. JAFFE
DAVID R. JAFFE
- --------------------- /S/ HELEN KAHNG JAFFE
HELEN KAHNG JAFFE
7
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, 33-17488, 33-47415, 33-60196 and 333-18135 of our report, dated
September 12, 1997, appearing in this Annual Report on Form 10-K of The Dress
Barn, Inc. and Subsidiaries for the year ended July 26, 1997.
Deloitte & Touche LLP
Stamford, Connecticut
October 23, 1997