SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 27, 2002 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)
(845) 369-4500
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock $.05 par value
Indicate 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 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. [ ].
As of October 15, 2002, 37,034,276 shares of common shares were outstanding. The aggregate market value of the common shares (based upon the October 14, 2002 closing price of $15.01 on the NASDAQ Stock Market) of The Dress Barn, Inc. held by non-affiliates was approximately $439.1 million. For the purposes of such calculation, all outstanding shares of Common Stock have been considered held by non-affiliates, other than the 8,259,810 shares beneficially owned by Directors and Executive 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 9, 2002 are incorporated into Parts I and III of this Form 10-K.
Cover Page
THE DRESS BARN, INC.
FORM 10-K
FISCAL YEAR ENDED JULY 27, 2002
TABLE OF CONTENTS
PART I PAGE
Item 1 Business
General 3
Company Strengths and Strategies 3
Merchandising 6
Buying and Distribution 7
Store Locations and Properties 7
Operations and Management 10
Advertising and Marketing 11
Management Information Systems 11
Trademarks 11
Employees 12
Seasonality 12
Forward-Looking Statement and Factors
Affecting Future Performance 14
Item 2 Properties 14
Item 3 Legal Proceedings 14
Item 4 Submission of Matters to a Vote of
Security Holders 15
Item 4A Executive Officers of the Registrant 15
PART II
Item 5 Market for Registrant's Common Stock and
Related Security Holders Matters 17
Item 6 Selected Financial Data 18
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 19
Item 8 Financial Statement and Supplementary Data 24
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 24
PART III
Item 10 Directors and Executive Officers of the Registrant 24
Item 11 Executive Compensation 24
Item 12 Security Ownership of Certain Beneficial Owners
and Management 24
Item 13 Certain Relationships and Related Transactions 24
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K 25
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PART I
ITEM 1. BUSINESS
General
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 career and casual fashion to the working woman at value prices. The Company differentiates 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. As part of this focus, the Company has successfully developed its own brand, which constituted approximately 90% of net sales for the fiscal year ended July 27, 2002 ("fiscal 2002").
The Company operates primarily combination Dress Barn/Dress Barn Woman stores ("Combo Stores"), which carry both Dress Barn and larger-sized Dress Barn Woman merchandise, as well as freestanding Dress Barn and Dress Barn Woman stores. As of July 27, 2002, the Company operated 754 stores in 43 states and the District of Columbia, consisting of 483 Combo Stores, 211 Dress Barn stores and 60 Dress Barn Woman stores. The Dress Barn and Dress Barn Woman stores average approximately 4,500 and approximately 4,000 square feet, respectively, and the Combo Stores average approximately 8,500 square feet.
On September 18, 2002, the Company's Board of Directors approved the initiation of a "Dutch Auction" Tender Offer by the Company to purchase up to 8 million shares of its outstanding common stock at a price per share of not less than $15.00 nor in excess of $17.00 per share. The tender offer commenced September 19, 2002 and is scheduled to expire, unless extended, October 18, 2002.
Company Strengths and Strategies
Dress Barn strives to be the preferred career and casual women's specialty store for the moderate customer (size 4 to 24), providing current fashion merchandise at value price points in a comfortable shopping environment with a strong focus on customer service. The Company caters to the time-pressured working women who want their shopping trips to be efficient. To accommodate this customer, the Company locates its stores primarily in nearby strip shopping centers and operates most of these stores seven days and six nights a week. The Company seeks to maintain a distinct fashion point of view, editing its assortments frequently, in accordance with its targeted customer's tastes. Merchandise is arranged conveniently by lifestyle and category. Customers develop a high degree of confidence that they will quickly find the styles that match their preferences. This, along with attentive service, which Dress Barn is known for, helps to create a loyal repeat customer.
Dress Barn is one of the largest national specialty store chains offering in-season women's career and casual fashions at value prices. Dress Barn attributes its success to its: (i) national brand recognition and loyal customer base; (ii) long-standing relationships with vendors and manufacturers of quality merchandise, both domestic and overseas; (iii) strong, consistent customer focus; (iv) low cost operating structure; (v) experienced merchandise management team and (vi) 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, focusing on its target customer - fashion minded working women. The Company has built its brand image as a core resource for a stylish, value-priced assortment of career and casual fashions tailored to its customers' needs. The Company's over 750 store locations in 43 states provide it with a nationally recognized brand name. The Company has developed long-standing relationships with its existing customers, enjoying strong customer loyalty. The Company's customer database program tracks customer transactions.
The Company has developed and maintains strong and lasting relationships with its domestic and offshore vendors and manufacturers, including its buying agents, often being one of their largest accounts. These relationships, along with the Company's buying power and strong credit profile, enable the Company to receive favorable purchasing terms, exclusive merchandise and expedited delivery times.
Over the past several years, the Company has been gradually repositioning itself to appeal to a younger-feeling customer while maintaining the Company's focus on its target customer. This repositioning includes enhancing the existing Dress Barn image, building brand awareness through various marketing and advertising campaigns, adopting a new logo and creating a "personality" for the Dress Barn brand that is unique and proprietary to the marketplace. To enhance the development of the Dress Barn brand, the Company changed and updated its in-store graphics, newspaper ads, and developed a new prototype store format. During this period, the Company has expanded the use of its dressbarn(R) label to virtually all its merchandise offerings, emphasizing quality, value and fashion.
During fiscal 2002, the Company engaged a national firm to conduct extensive customer surveys to better understand its customers, their concerns and issues, as well as those who have never shopped or used to shop Dress Barn. The goal was to enhance the Company's branding and advertising strategy, culminating with a comprehensive brand image campaign to strengthen brand awareness as well as bring new customers for the Spring 2003 selling season. In September 2002, the Company hired Vivian Behrens as Senior Vice President, Marketing. Ms. Behrens previously held senior marketing positions at Avon, The Limited Inc., and Charming Shoppes, Inc., and was formerly a member of the Company's Board of Directors. Ms. Behrens will be responsible for all of the Company's marketing, including brand development and brand image campaigns, advertising, sales promotion and the internet.
The Company's merchandise offerings reflect a focused and balanced assortment of career and casual fashions tailored to its customers' demands. The merchandise mix has evolved to younger and contemporary in style, including in its mix more fashion merchandise. The Company has shifted its focus from structured, career looks to softer outfit dressings and assortments. The Company has traded up its fabrications, offering value, style and fashion while maintaining its quality and price points. The Company attempts to insure its merchandise sizes are true, the fit is consistent, it is easy to care for and is long lasting wear. In February 2002, the Company promoted Keith Fulsher to Senior Vice President and General Merchandising Manager, responsible for all merchandising, product development, merchandise planning and store visual presentation. Mr. Fulsher had been with the Company for eight years, most recently as Merchandise Manager, Sportswear. Previously he was at Macy's for 18 years, leaving as Group Vice President of Better Sportswear.
The Company's stores reflect newness and fashion, with key items in depth accented by six floorset changes a year. Stores receive shipments daily for a constant flow of new looks to keep the assortments fresh and exciting. Lifestyle merchandising is key; emphasizing mix and match outfit dressing within strong color stories. The Company has a store design prototype that features an easier to shop layout, warmer colors and redesigned fixtures and in-store graphics for enhanced merchandise presentation. During fiscal 2002, the Company updated to the prototype design or remodeled approximately 100 stores; the Company plans to update or remodel approximately 100 of its store locations during its fiscal year ending July 26, 2003 ("fiscal 2003").
Dress Barn has used technology to improve merchandising and customer service, reduce costs and enhance productivity. The Company continues to enhance its management information systems. The Company utilizes a field information system for all its Regional and District Sales Managers via laptop computers, providing sales, inventories and other operational data. The Company upgraded its back-office store system software during fiscal 2002, with plans to begin upgrading its store locations' cash register software and hardware to an enhanced PC-based system during fiscal 2003. The Company's distribution center systems continue to be refined, further reducing per-unit distribution costs.
All aspects of Dress Barn's stores are designed to be responsive to the Dress Barn customer. In past customer surveys, customer service was viewed as superior and was a competitive advantage. 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 coordinated merchandise with all items going together and matching, arranged for ease of shopping, comfortable store environment and friendly customer service embody Dress Barn's strong focus on its customers. Dress Barn's training program encourages its customer service associates to assist customers in a low-key and friendly manner. The Company has various programs to recognize and reward its best customer service associates. 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 potential acquisitions. The Company believes its tender offer which commenced September 19, 2002 and expires October 18, 2002, unless extended, is consistent with its goal of maximizing shareholder value, giving its shareholders an opportunity to sell shares back to the Company at a favorable price with no transaction fees. Upon completion of the tender offer, shareholders will realize a proportionate increase in their relative ownership interest in the Company's future earnings and assets, subject to the issuance of additional securities.
Based on the economic success of its larger size Combo Stores, most fiscal 2003 store openings will probably be Combo Stores between 8,000 and 9,000 square feet. 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. The Company has also been successfully experimenting with opening smaller, freestanding Dress Barn and Dress Barn Woman stores, especially in downtown, urban or other higher-rent areas. The Company has also purchased locations from bankrupt retailers, most of which were too small for a Combo and were opened as freestanding locations. Of the 74 stores the Company opened during fiscal 2002, 51 were Combo locations and 23 were freestanding locations. The Company has an ongoing program of converting its older freestanding stores to Combo Stores. Eight stores were converted during fiscal 2002. The Company expects to continue to open stores primarily in strip centers, as well as in downtown and outlet locations. In fiscal 2003, the company plans to open approximately 55 new stores and convert 5 to 10 existing stores to Combo Stores, including expanding into new markets such as Southern California.
In conjunction with its strategy of adding mostly Combo Stores, the Company continues to close or relocate its underperforming locations and closed 32 such locations during fiscal 2002, compared to 37 closed in fiscal 2001. The Company also plans to close approximately 30 more such locations in fiscal 2003. 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 stores, net of store closings, resulted in an aggregate store square footage increase of approximately 6% in fiscal 2002, after a 7% increase in fiscal 2001.
The Company marketing programs focus on developing stronger relationships with its existing customers and acquiring new customers. One major asset is the Dress Barn credit card; with almost 2 million cardholders, giving the Company the ability to "talk" to and reward its best customers. The credit card purchasing information, combined with transactional data from the stores, is creating a customer database for our customer relationship management ("CRM") system. The CRM database is designed to track customer transactions, with the ability to target customers with specific offers and promotions, including coupons, pre-sale announcements, and special events. The CRM database also enhances the Company's direct mail program, providing more productive direct mail lists as well as targeting potential customers within each store's trading area and for new stores. The Company believes these efforts can lead to new customers as well as a more loyal customer base. The Company believes it complies with current consumer privacy rules and regulations for the protection of its customers.
Dress Barn continually seeks to improve the customer's shopping experience. The Company's enhanced store systems enable store managers and store associates to spend more time servicing customers. The Company utilizes an ongoing training program to improve customer service and the product knowledge and selling skills of its store associates. The Company recently implemented its new DVDi Learning Management System (LMS), where customer service associates are able to take tests and plans to have the results tracked centrally for consistency across all of its stores. The LMS system is part of the new back-office store system which also included automated time and attendance, quicker processing of credit card applications and integrated email and messaging.
Due to the continued operating losses of its catalog and e-commerce operations and significant weaknesses in its new fulfillment and order processing software, the Company suspended all mailing of catalogs and e-commerce sales in November 2001. The Company believes direct selling via its internet site represents a complementary channel of distribution to its existing core business and can help drive store traffic. The Company is reevaluating its direct selling strategy and intends to resume selling a limited assortment of merchandise via its web site (www.dressbarn.com) and via telephone during fiscal 2003.
Merchandising
Virtually all merchandising decisions affecting the Company's stores are made centrally. Day to day store merchandising is under the direction of the General Merchandise Manager and five additional merchandise managers. The Company utilizes a Visual Merchandising Department to communicate various floorsets and presentations to the stores. The Company generally has 6 complete floorset changes per year to keep its merchandise presentation fresh and exciting. There is a constant flow of new merchandise to the stores to maintain newness. Store 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 offers first-quality in season merchandise, with approximately 65% of the Company's sales volume derived from sportswear, including sweaters, knit and woven tops, pants and skirts. The remainder of the Company's sales volume consists of dresses, suits, blazers, outerwear and accessories. Dress Barn Woman merchandise features larger sizes of styles similar to Dress Barn merchandise. The Company's Petite departments feature merchandise similar to Dress barn merchandise in petite sizes. In addition to the Company's broad assortment of career and casual wear, the Company offers other wardrobe items including in selected stores accessories, jewelry, hosiery and shoes. There are separate merchandising teams for Dress Barn and Dress Barn Woman.
The Company's direct sourcing of its merchandise purchasing improves its control over the flow of merchandise into its stores and enables the Company to better specify quantities, styles, colors, size breaks and delivery dates. In addition, the Company believes its direct sourcing provides it with more flexibility in the marketing process by allowing for higher initial mark-ons. The Company believes it has the expertise to execute its Dress Barn brand strategy due to its extensive experience sourcing goods (primarily overseas), its position as a merchandiser of established fashions, and its prior experience with private brands. The percentage of the Company's sales generated from all private brand labels has increased to approximately 90% in fiscal 2002 from 80% in fiscal 2001.
The Company continues to expand the number of its stores with shoe and petite-size departments. As of July 27, 2002, 309 stores had shoe departments and 143 stores featured petites. The Company currently plans to add approximately 20 shoe departments and add approximately 20 petite departments in fiscal 2003.
Buying and Distribution
Buying is conducted on a departmental basis for Dress Barn and Dress Barn Woman by the Company's staff of over 45 buyers and assistant buyers supervised by the General Merchandise Manager and five merchandise managers. The Company also uses independent buying representatives in New York and overseas. The Company obtains its merchandise from approximately 200 vendors, and no vendor accounted for over 5% of the Company's purchases. In fiscal 2002, imports accounted for over 50% of merchandise purchases and no vendor accounted for over 5% of the Company's purchases. Typical lead times for the Company in making purchases from its vendors range from approximately one month for items such as dresses, t-shirts, socks and hosiery to approximately six months for items such as suits and sweaters.
All merchandise for its stores 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 uses its strong relationships with vendors to lower its operating costs by shifting freight and insurance costs to the vendors and typically requires them to provide ancillary services. For example, over 90% of the Company's merchandise is pre-ticketed by vendors and over half of the hanging garments purchased by the Company are delivered on floor-ready hangers. In addition, 45% of its merchandise receipts are pre-packaged for distribution to stores, which allows for efficiencies in its distribution center by using cross-docking.
The Company generally does not warehouse store 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.
Store Locations and Properties
As of July 27, 2002, the Company operated 754 stores in 43 states and the District of Columbia. 369 of the stores were conveniently located in strip centers and 289 stores were located in outlet centers. During fiscal 2002, no store accounted for as much as 1% of the Company's total sales. The table on the following page indicates the type of shopping facility in which the stores were located:
Dress Barn
Dress Barn Woman Combo
Type of Facility Stores Stores Stores Total
Strip Shopping Centers 122 26 221 369
Outlet Malls and Outlet Strip Centers 55 23 211 289
Free Standing, Downtown and Enclosed Malls 34 11 51 96(*)
Total 211 60 483 754
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(*) Includes 31 downtown locations
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The table on the following page indicates the states in which the stores operating on July 27, 2002 were located, and the number of stores in each state:
Location DB DBW Combos
------- ------- ------
Alabama - - 6
Arizona 1 - 7
Arkansas - - 2
California 20 3 21
Colorado 3 1 8
Connecticut 7 3 22
District of Columbia 2 1 1
Delaware 3 1 3
Florida 12 1 15
Georgia 3 1 20
Idaho - - 2
Illinois 3 1- 24
Indiana 4 - 9
Iowa - - 4
Kansas - - 5
Kentucky 1 - 6
Louisiana - - 5
Maine 2 1 -
Maryland 5 3 19
Massachusetts 12 2 26
Michigan 8 1 21
Minnesota 1 - 7
Mississippi - - 6
Missouri 4 2 14
Nebraska - - 4
Nevada 2 - 5
New Hampshire 1 - 5
New Jersey 22 9 18
New York 27 5 38
North Carolina 10 5 18
Ohio 4 1 16
Oklahoma - - 2
Oregon 2 2 3
Pennsylvania 23 7 18
Rhode Island 1 - 3
South Carolina 6 3 8
Tennessee 3 2 11
Texas 4 1 39
Utah 0 0 5
Vermont - - 2
Virginia 13 3 22
Washington 1 1 5
West Virginia - - 1
Wisconsin 1 - 7
Total 211 60 483
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Operations and Management
In considering new store locations, the Company's focus is on expanding in its existing major trading and high-density markets, in certain cases seeking downtown or urban locations and/or adding to a cluster of suburban or other locations. Downtown and urban locations are considered based on pedestrian traffic and daytime population, proximity to major corporate centers and occupancy costs at the location, which are substantially higher than in suburban locations. With respect to suburban and other locations the Company considers the 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. The Company also seeks to expand into new markets; in fiscal 2003 the Company is opening several locations in Southern California. 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 all new leases. The committee also 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 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. The Company has updated its interior signage and fixturing for a more open and easier to shop environment. During fiscal 2002 the Company updated 100 of its existing stores and plans over time to update many of its remaining stores, another 100 of which will be updated in fiscal 2003.
All stores are directly managed and operated by the Company. A supervisor, who may be the store manager, staffs each store with at least one customer service associate during non-peak hours, with additional customer service associates added as needed at peak hours. The supervisors and customer service 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 11 Regional Sales Managers and approximately 100 District Sales Managers. District Sales Managers visit each store on a regular basis 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 customer service associates through promotion from within, creative incentive programs, competitive wages and the opportunity for bonuses. Customer service 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 at each store. The Company utilizes comprehensive training programs at the store level in order to ensure that the customer will receive friendly and helpful service. They include (i) its DVDi LMS training system (ii) ongoing video training and (iii) one-on-one training of customer service associates by store managers.
Approximately 66% of the Company's sales in fiscal 2002 versus 64% in fiscal 2001 were paid for by credit card, with the remainder being paid by cash or check. This increase was partially due to the Company's increased promotion of the Dress Barn card. Consistent with the other credit cards it accepts, the Company assumes no credit risk with respect to the Dress Barn card but pays a percentage of sales as a service charge. As of July 27, 2002, the number of cardholders was approximately 1.9 million. The average transaction on the Dress Barn credit card during fiscal 2002 was approximately 30% greater than the average of all other transactions and represented approximately 16% of the Company's sales.
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 freestanding stores are usually open two nights per week.
Advertising and Marketing
The Company primarily uses print advertising. At the store level, the store managers host local marketing programs, including fashion shows and in-store events designed to create greater awareness of Dress Barn's merchandise. The Company also uses direct mail programs, with eight mailings during fiscal 2002. In addition, there were several smaller, more targeted mailings during fiscal 2002. The Company is considering launching a national brand awareness campaign in 2003 after conducting extensive customer research and surveys during Spring 2002.
The Company believes that identifying its customers and their purchasing patterns is essential to its business. During fiscal 2002, the Company implemented a customer relationship management program to track customer transactions.
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 a 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. All stores utilize a point-of-sale system with price look-up capabilities for both inventory and sales transactions. The Company continues to refine its laptop system that delivers up-to-date store-related and other information to its Regional and District Sales Managers and automates many of their reporting functions.
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. The Company analyzes historical hourly and projected sales trends to efficiently schedule store personnel, minimizing labor costs while producing a higher level of customer service. The Company upgraded its back-office store system software during fiscal 2002, with plans to begin upgrading its store locations' cash register software and hardware to an enhanced PC-based system during fiscal 2003. The Company believes that such investments in technology enhance operating efficiencies and position Dress Barn for future growth. The Company recently implemented its new DVDi Learning Management System (LMS), where customer service associates are able to take tests and have the results tracked centrally for consistency across all of its stores. The LMS system was part of the new back-office store system which also included automated time and attendance, quicker processing of credit card applications and integrated email and messaging.
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 its Dress Barn (R) trademark is materially important to its business. A small number of the Company's stores currently in operation, primarily located in outlet centers, operate under the name Westport Ltd.(R) and Westport Woman.
Employees
As of July 27, 2002, the Company had approximately 8,900 employees of whom approximately 5,000 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 holiday shopping season in recent years. In addition, the Company's quarterly results of operations may fluctuate materially depending on, among other things, increases or decreases in comparable store sales, adverse weather conditions, shifts in timing of certain holidays, the timing of new store openings, net sales contributed by new stores, and changes in the Company's merchandise mix.
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 in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section below.
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, women's apparel fashions, demographics, macroeconomic factors such as consumer confidence that may affect the level of spending for the types of merchandise sold by the Company, as well as 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, specialty stores, discount stores, mass merchandisers and off-price retailers, 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 continue to be promotional and reduce 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 closeouts 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 Company's success is largely dependent on the efforts and abilities of its senior management team. During fiscal 2002, the Company promoted a key member of its management team, David Jaffe to President and Chief Executive Officer from Chief Operating Officer. In addition, during fiscal 2002 the Company promoted Keith Fulsher to Senior Vice President and General Merchandising Manager from Merchandise Manager, Sportswear. The Company's results of operations may be impacted by the effect, if any, of these changes on its day-to-day operations, merchandising and store activities, growth plans and ability to continue servicing its existing customer base.
The growth of the Company's store operations is dependent, in large part, upon the Company's ability to successfully execute its strategy of adding new stores. The success of the Company's growth strategy for its stores 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, 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 expansion of the dressbarn(R) brand to the vast majority of the Company's merchandise offerings and the marketing campaign to promote the Company's brand and image may not generate positive reaction from its customers and may not increase sales. Failure of the Company to maintain its existing customer base may negatively impact sales.
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.
The Company imports a significant portion of its merchandise from manufacturers in Asia, the Middle East and Africa, among others. Importing involves risks including potential disruptions such as the recent West Coast Longshoreman's work stoppage, economic and political problems in countries from which merchandise is imported, and duties, tariffs and quotas on imported merchandise. The Company's ability to manage the importing of goods from overseas, their production, timing of deliveries and US Customs-related compliance is an important component of its merchandising strategy. Failure of the Company to manage its import activities would have an adverse effect on the Company's 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 is committed to being more productive. The Company is planning to continue to 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 10 years with one or more 5-year options to extend the lease. The table on the following page, covering all stores operated by the Company on July 27, 2002, 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
2002 124 77 47
2003 136 117 19
2004 113 89 24
2005-2007 283 250 33
2008 and thereafter 98 91 7
--- --- ---
Total 754 624 130
--- --- ---
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New store leases generally provide for a base rent of between $15 and $25 per square foot per annum. Most leases have formulas requiring the payment of a percentage of sales as additional rent, generally when sales reach specified levels. The Company's aggregate minimum rentals under operating leases in effect at July 27, 2002, and excluding locations acquired after July 27, 2002, for fiscal 2003 are approximately $85.3 million. In addition, the Company is also responsible under its store leases for it's pro rata share of maintenance expenses and common charges in strip and outlet centers.
Most of the store leases give the Company the right 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, 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 used 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 current expansion plans for its stores. The Company believes any substantial increase in the Company's store base resulting from expansion or acquisition may require additional distribution facilities.
ITEM 3. LEGAL PROCEEDINGS
On May 18, 2000, Alan M. Glazer, GLZR Acquisition Corp. and Bedford Fair Industries, Ltd. commenced an action against the Company in the Superior Court of Connecticut, Stamford Judicial District, seeking compensatory and punitive damages in an unspecified amount for alleged unfair trade practices and alleged breach of contract arising out of negotiations before Bedford Fair Industries' Chapter 11 bankruptcy filing for the acquisition of the Bedford Fair business which the Company never concluded. The Company believes there is no merit in any of the plaintiffs' asserted claims, is vigorously defending the litigation, and, in any event, does not expect the outcome of these proceedings to have a material adverse effect on the Company.
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.
ITEM 4A. Executive Officers of the Registrant
The following table sets forth the name, age and position with the Company of the Executive Officers of the Registrant:
Name Age Positions
Elliot S. Jaffe 76 Chairman of the Board,
Founder and Director
David R. Jaffe 43 President,
Chief Executive Officer and Director
Burt Steinberg 57 Executive Director and
Director
Vivian Behrens 49 Senior Vice President
Marketing
Armand Correia 56 Senior Vice President and Chief
Financial Officer
Keith Fulsher 48 Senior Vice President
And General Merchandise Manager
Eric Hawn 52 Senior Vice President
Store Operations
Elise Jaffe 47 Senior Vice President
Real Estate
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Mr. Elliot S. Jaffe was Chief Executive Officer of the Company from 1966 until February 2002.
Mr. David R. Jaffe became President and Chief Executive Officer in February 2002. Previously he had been Vice Chairman, Chief Operating Officer and a member of the Board of Directors since September 2001. He had been Vice Chairman since February 2001. He joined the Company in 1992 as Vice President Business Development and became Senior Vice President in 1995 and Executive Vice President in 1996. Mr. Jaffe is the son of Elliot S. and Roslyn S. Jaffe, Secretary, Treasurer and Director of the Company.
Mr. Steinberg became Executive Director of the Company in August 2001. He had been President and Chief Operating Officer of the Company since 1989 and Vice Chairman since February 2001.
Ms. Behrens started with the Company in September 2002 as Senior Vice President, Marketing. Ms. Behrens is President of Vivian B Consulting, a marketing consultant to several retail and consumer product companies. She was Chief Executive Officer of Posh & Sticks, Ltd., a consumer products multi-channel retailer, from 1999 to 2000. From 1998 to 1999 she was Senior Vice President-Marketing of the Foot Locker Division of Venator, Inc. From 1994 to 1997 she was Vice President-Marketing of Charming Shoppes, Inc. Previously she held senior marketing positions at Limited Inc. and Avon Products, Inc. and was formerly a member of the Company's Board of Directors.
Mr. Correia has been Senior Vice President and Chief Financial Officer of the Company since 1991.
Mr. Fulsher became Senior Vice President and General Merchandise Manager of the Company in February 2002. Previously, Mr. Fulsher had been with the Company for eight years, most recently as Merchandise Manager, Sportswear. Previously he was at Macy's for 18 years, leaving as Group Vice President of Better Sportswear.
Mr. Hawn has been Senior Vice President of the Company since 1989.
Ms. Elise Jaffe has been Senior Vice President of the Company since January 1, 1995. She previously was Vice President. Ms. Jaffe is the daughter of Elliot S. and Roslyn S. Jaffe.
The Company's officers are elected by the Board of Directors for one-year terms and serve at the discretion of the Board of Directors.
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 Company's Board of Directors approved a 2-for-1 stock split in the form of a 100% stock dividend on the Company's issued and outstanding common stock in May 2002. The stock dividend was distributed on May 31, 2002 to shareholders of record on May 17, 2002. All historic share and per share information contained in this report have been adjusted to reflect the impact of the stock split.
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 2002 Fiscal 2001
Bid Prices Bid Prices
High Low High Low
Fiscal Period
First Quarter $12.20 $9.64 $12.69 $9.94
Second Quarter $13.94 $10.83 $15.50 $11.63
Third Quarter $15.62 $12.55 $15.38 $10.69
Fourth Quarter $17.50 $12.14 $14.46 $10.78
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Number of Record Holders
The number of record holders of the Company's common stock as of October 1, 2002 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.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes our equity compensation plans as of July 27,
2002.
Number of securities
remaining available
for future issuance
under equity
Number of securities Weighted average compensation plans
to be issues upon exercise price (excluding
exercise of of outstanding securities reflected
Plan Category outstanding options options in column (a))
-------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
Equity compensation plans approved by security holders 2,734,352 $8.14 4,866,516
Equity compensation plans not approved by security holders 0 0 0
..........................................................
Total 2,734,352 $8.14 4,866,516
==========================================================
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ITEM 6. SELECTED FINANCIAL DATA
Dollars in thousands except per share
information
Fiscal Year Ended
------------------------------------------------------------------------------------
July 27, July 28, July 29, July 31, July 25,
2002 2001 2000 1999 1998
------------------------------------------------------------------------------------
Net sales $717,136 $695,008 $656,174 $615,975 $598,175
Cost of sales, including
occupancy and buying costs 453,428 443,426 419,479 398,282 381,354
------------------------------------------------------------------------------------
Gross profit 263,708 251,582 236,695 217,693 216,821
Selling, general and
administrative expenses 186,375 180,991 165,336 150,897 142,098
Depreciation & amortization 23,508 23,916 21,164 23,104 17,758
------------------------------------------------------------------------------------
Operating income 53,825 46,675 50,195 43,692 56,965
Interest income- net 5,458 8,949 7,667 8,787 6,385
------------------------------------------------------------------------------------
Earnings before
income taxes 59,283 55,624 57,862 52,479 63,350
Income taxes 21,342 20,303 21,120 19,155 23,123
------------------------------------------------------------------------------------
Net earnings $37,941 $35,321 $36,742 $33,324 $40,227
====================================================================================
Earnings per share - basic (1) $ 1.04 $ .97 $ .97 $ .78 $ .87
====================================================================================
====================================================================================
Earnings per share - diluted (1) $ 1.01 $ .94 $ .95 $ .77 $ .85
====================================================================================
Balance sheet data:
Working capital $230,959 $197,257 $159,105 $159,089 $170,412
Total assets $458,247 $402,282 $374,236 $363,579 $341,154
Long-term debt -- -- -- -- --
Shareholders' equity $334,253 $296,597 $259,561 $253,600 $265,608
Percent of net sales:
Cost of sales, including
occupancy and buying costs 63.2% 63.8% 63.9% 64.7% 63.8%
Gross profit 36.8% 36.2% 36.1% 35.3% 36.2%
Selling, general and
administrative expenses 26.0% 26.0% 25.2% 24.5% 23.8%
Operating income 7.5% 6.7% 7.6% 7.1% 9.5%
Net earnings 5.3% 5.1% 5.6% 5.4% 6.7%
(1) All earnings per share amounts reported above reflect the effect of the
2-for-1 stock split, distributed May 31, 2002.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Certain statements contained in this Annual Report are forward-looking and
involve a number of risks and uncertainties. Among the factors that could cause
actual results to differ materially are, but are not limited to, the following:
general economic conditions and consumer confidence, including consumers'
reaction to global political instability; competitive factors and pricing
pressures, including the promotional activities of department stores, mass
merchandisers and other specialty chains; consumer apparel buying patterns, such
as the ongoing shift to more casual apparel; import risks, including potential
disruptions such as the recent West Coast Longshoreman's work stoppage, economic
and political problems in countries from which merchandise is imported, and
duties, tariffs and quotas on imported merchandise; the Company's ability to
predict fashion trends; the availability, selection and purchasing of attractive
merchandise on favorable terms; adverse weather conditions; inventory risks due
to shifts in market demand and other factors that may be described in the
Company's filings with the Securities and Exchange Commission. The Company does
not undertake to publicly update or revise the forward-looking statements even
if experience or future changes make it clear that the projected results
expressed or implied therein will not be realized.
Critical Accounting Policies and Estimates
The Company's accounting policies are more fully described in Note 1 of the Notes to Consolidated Financial Statements. Management's discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, income taxes and related disclosures of contingent assets and liabilities. On an ongoing basis, the Company evaluates estimates, including those related primarily to inventories, investments, long-lived assets, income taxes and claims and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following accounting principles are the most critical because they involve the most significant judgments, assumptions and estimates used in preparation of the Company's financial statements.
Revenue Recognition
While the Company's recognition of revenue does not involve significant
judgment, revenue recognition represents an important accounting policy of the
Company. As discussed in Note 1 to the Consolidated Financial Statements, the
Company recognizes sales at the point of purchase when the customer takes
possession of the merchandise and pays for the purchase, generally with cash or
credit card. Sales from purchases made with gift certificates and layaway sales
are also recorded when the customer takes possession of the merchandise. Gift
certificates and merchandise credits issued by the Company are recorded as a
liability until they are redeemed.
Merchandise Inventories
The Company's inventory is valued using the retail method of accounting and
is stated at the lower of cost or market. Under the retail inventory method, the
valuation of inventory at cost and resulting gross margin are calculated by
applying a calculated cost to retail ratio to the retail value of inventory. The
retail inventory method is an averaging method that has been widely used in the
retail industry due to its practicality. Inherent in the retail method are
certain significant management judgments and estimates including, among others,
initial merchandise markup, markdowns and shrinkage, which significantly impact
the ending inventory valuation at cost as well as the resulting gross margins.
Estimates are used to charge inventory shrinkage for the first and third fiscal
quarters of the fiscal year. Physical inventories are conducted at the end of
the second fiscal quarter and at the end of the fiscal year to calculate actual
shrinkage and inventory on hand. The Company continuously reviews its inventory
levels to identify slow-moving merchandise and broken assortments, using markdowns to clear merchandise. A provision is recorded to reduce the cost of inventories to its estimated net realizable value. Consideration is given to a number of quantitative factors, including anticipated subsequent markdowns and aging of inventories. To the extent that actual markdowns are higher or lower than estimated, the Company's gross margins could increase or decrease and, accordingly, affect its financial position and results of operations. A significant variation between the estimated provision and actual results could have a substantial impact on the Company's results of operations.
Long-lived assets
The Company primarily invests in property and equipment in connection with
the opening and remodeling of stores and in computer software and hardware. Most
of the Company's store leases give the Company the option to terminate the lease
if certain specified sales volumes are not achieved during the first few years
of the lease. The Company periodically reviews its store locations and estimates
the recoverability of its assets, recording an impairment charge when the
Company expects to exercise its right to terminate the store's lease early using
this option. This determination is based on a number of factors, including the
store's historical operating results and cash flows, estimated future sales
growth, real estate development in the area and perceived local market
conditions that can be difficult to predict and may be subject to change. In
addition, the Company regularly evaluates its computer-related and other assets
and may accelerate depreciation over the revised useful life if the asset is no
longer in use or has limited future value. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation or amortization are
removed from the accounts, and any resulting gain or loss is reflected in income
for that period.
Claims and Contingencies
The Company is subject to various claims and contingencies related to
insurance, taxes, lawsuits and other matters arising out of the normal course of
business. The Company has risk participation agreements with insurance carriers
with respect to workers' compensation and medical insurance. Pursuant to these
arrangements, the Company is responsible for paying claims up to designated
dollar limits. The Company accrues its estimate of the eventual costs related to
these claims, which can vary based on changes in assumptions or claims
experience. The Company accrues its estimate of probable settlements of domestic
and foreign tax audits. At any one time, many tax years are subject to audit by
various taxing jurisdictions. The results of these audits and negotiations with
taxing authorities may affect the ultimate settlement of these issues. If the
Company believes the likelihood of an adverse legal outcome is probable and the
amount is estimable it accrues a liability. The Company consults with legal
counsel on matters related to litigation and seeks input from other experts both
within and outside the Company with respect to matters in the ordinary course of
business. The Company is generally conservative in the estimation of its claims
and contingencies, and therefore believes its accruals for claims and
contingencies are adequate.
Income taxes.
The Company does business in various jurisdictions that impose income
taxes. Management determines the aggregate amount of income tax expense to
accrue and the amount currently payable based upon the tax statutes of each
jurisdiction. This process involves adjusting income determined using generally
accepted accounting principles for items that are treated differently by the
applicable taxing authorities. Deferred tax assets and liabilities are reflected
on the Company's balance sheet for temporary differences that will reverse in
subsequent years. If different judgments had been made, the Company's tax
expense, assets and liabilities could be different.
Stock Split
The Company's Board of Directors approved a 2-for-1 stock split in the form of a 100% stock dividend on the Company's issued and outstanding common shares in May 2002 (the "stock split"). The stock dividend was distributed on May 31, 2002 to shareholders of record on May 17, 2002. All historic share and per share information contained in this report have been adjusted to reflect the impact of the stock split.
Results of Operations
The table on the following page sets forth certain financial data of the
Company expressed as a percentage of net sales for the periods indicated:
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Fiscal Year Ended
July 27, July 28, July 29,
2002 2001 2000
--------- --------- ---------
Net sales 100.0% 100.0% 100.0%
Cost of sales, including
occupancy and buying costs 63.2% 63.8% 63.9%
Selling, general and
administrative expenses 26.0% 26.0% 25.2%
Depreciation and amortization 3.3% 3.5% 3.2%
Interest income - net 0.8% 1.3% 1.2%
Earnings before income taxes 8.3% 8.0% 8.8%
Net earnings 5.3% 5.1% 5.6%
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Fiscal 2002 Compared to Fiscal 2001
Net sales increased by 3.2% to $717.1 million for the 52 weeks ended July 27, 2002 ("fiscal 2002"), from $695.0 million for the 52 weeks ended July 28, 2001 ("fiscal 2001"). The sales increase from fiscal 2001 was due to an approximately 6% increase in total selling square footage, offset in part by a 1.9% decrease in comparable store sales. The increase in store square footage was due to the opening of 74 new stores, primarily combination Dress Barn/Dress Barn Woman stores ("Combo Stores"), which carry both Dress Barn and Dress Barn Woman merchandise, offset in part by the square footage reduction from the closing of 32 under-performing stores. The number of stores in operation increased to 754 stores as of July 27, 2002, from 720 stores in operation as of July 28, 2001.
The Company believes that the events of September 11th and the economic uncertainty that followed were the key influences of the weak fall selling season resulting in a 5% decrease in comparable store sales for the first six months of fiscal 2002. Sales strengthened modestly in the spring, helped by the unseasonably warm weather in April, with comparable store sales increasing 2% for the second half of fiscal 2002. The Company believes the second half of fiscal 2002 benefited from easier sales comparisons versus fiscal 2001's spring season. Nevertheless, diminished consumer confidence, a perceived slowing economy and international uncertainties negatively impacted sales during the second half of fiscal 2002. As a result, the Company is operating its business conservatively during its fiscal year ending July 26, 2003 ("fiscal 2003").
The Company's real estate strategy for fiscal 2003 is to continue opening primarily Combo Stores and converting its existing single-format stores into Combo Stores, while closing its under-performing locations. Store expansion will focus on both expanding in the Company's existing major trading markets, in certain cases seeking a downtown location and/or adding to a cluster of suburban or other locations, and developing and expanding into new markets, including Southern California.
Due to the continued operating losses of its catalog and e-commerce operations and significant weaknesses in its new fulfillment and order processing software, the Company suspended all mailing of catalogs and e-commerce sales in November 2001. The Company believes direct selling via its internet site represents a complementary channel of distribution to its existing core business and can help drive store traffic. The Company is reevaluating its direct selling strategy and intends to resume selling a limited assortment of merchandise via its web site (www.dressbarn.com) and via telephone during fiscal 2003. The Company's fiscal 2002 earnings per share-diluted were reduced by approximately $.11 due to the operating costs of the catalog and e-commerce operations, versus approximately $.20 for fiscal 2001.
Gross profit (net sales less cost of goods sold, including occupancy and buying costs) increased by 4.8% to $263.7 million, or 36.8% of net sales, in fiscal 2002 from $251.6 million, or 36.2% of net sales, in fiscal 2001. The increase in gross profit as a percentage of sales was primarily due to higher initial margins from the Company's increased mix to more dressbarn (R) brand merchandise and lower markdowns due to tight inventory controls, which helped increase inventory turns and minimize markdowns. Markdowns as a percentage of sales were lower than fiscal 2001, particularly during the fourth fiscal quarter of fiscal 2002. This was offset, in part, by higher store occupancy costs as a percentage of sales resulting from higher rents for new stores, store expansions and lease renewals.
Selling, general and administrative ("SG&A") expenses increased by 3.0% to $186.4 million, or 26.0% of net sales, in fiscal 2002 from $181.0 million, also 26.0% of sales, in fiscal 2001. The increase in SG&A expenses versus the prior year was reduced by the suspension of the catalog and e-commerce operations in November 2001. Combined with cost controls and productivity improvements, SG&A as a percent of sales was flat as compared to fiscal 2001. This was in spite of the negative leverage from the 1.9% decrease in comparable store sales and its impact on fixed costs, and increases in store operating, benefits and insurance costs.
Depreciation expense decreased by 1.7% to $23.5 million in fiscal 2002, versus $23.9 million in fiscal 2001, primarily due to the write-off of certain obsolete computer equipment and software in fiscal 2001. Depreciation expense for both periods also includes certain write-offs related to the closure of 32 stores and 37 stores during fiscal 2002 and fiscal 2001, respectively.
Interest income - net decreased by 39.0% to $5.5 million for fiscal 2002 from $8.9 million for fiscal 2001. This was the result of the dramatic reduction in interest rates, although funds available for investment increased during the year.
Net earnings for fiscal 2002 increased 7.4% to $37.9 million versus $35.3 million in fiscal 2001, while diluted earnings per share also increased 7.4% to $1.01 per share versus $0.94 in fiscal 2001.
Fiscal 2001 Compared to Fiscal 2000
Net sales increased by 5.9% to $695.0 million for the 52 weeks ended July 28, 2001 ("fiscal 2001"), from $656.2 million for the 52 weeks ended July 29, 2000 ("fiscal 2000"). The sales increase from fiscal 2000 was due to an approximately 7% increase in total selling square footage, offset in part by a 1.2% decrease in comparable store sales. The increase in store square footage was due to the opening of 68 new stores, primarily Combo Stores, which carry both Dress Barn and Dress Barn Woman merchandise, offset in part by the square footage reduction from the closing of 37 underperforming stores. The number of stores in operation increased to 720 stores as of July 28, 2001, from 689 stores in operation as of July 29, 2000. The Company believes its strategic initiatives, including the development of its Dress Barn(R) brand merchandise and brand image contributed to a strong Fall selling season. Sales slowed in the Spring, reflecting diminished consumer confidence and continuing concerns over the slowing economy, resulting in an overall 1.2% decline in comparable store sales for fiscal 2001.
The Company mailed a total of 11 million Dress Barn catalogs during fiscal 2001. The Company also sells merchandise on the internet via its web site (www.dressbarn.com). The Company's fiscal 2001 earnings per share-diluted were reduced by approximately $.20 due to the operating costs of the catalog and e-commerce operations.
Gross profit (net sales less cost of goods sold, including occupancy and buying costs) increased by 6.3% to $251.6 million, or 36.2% of net sales, in fiscal 2001 from $236.7 million, or 36.1% of net sales, in fiscal 2000. The increase in gross profit as a percentage of sales was primarily due to higher initial margins from the Company's increased mix to more dressbarn (R) brand merchandise and lower markdowns due to tight inventory controls, which helped increase inventory turns and minimize markdowns. This was offset, in part, by higher store occupancy costs as a percentage of sales resulting from higher rents for new stores, store expansions and lease renewals.
Selling, general and administrative ("SG&A") expenses increased by 9.5% to $181.0 million, or 26.0% of net sales, in fiscal 2001 from $165.3 million, or 25.2% of net sales, in fiscal 2000. Cost controls and productivity improvements were not sufficient to offset a combination of negative leverage from the 1.2% decrease in comparable store sales and its impact on fixed costs, increased store operating costs and catalog and e-commerce expenses.
Depreciation expense increased by 13.0% to $23.9 million for fiscal 2001 from $21.1 million for fiscal 2000. Fiscal 2001's depreciation expense included the write-off of certain obsolete computer equipment and software. Depreciation expense for both periods also includes certain write-offs related to the closure of 37 stores and 47 stores during fiscal 2001 and fiscal 2000, respectively.
Interest income - net increased by 16.7% to $8.9 million for fiscal 2001 from $7.7 million for fiscal 2000. This was the result of increased funds available for investment during the year, partially offset by decreased interest rates.
Net earnings for fiscal 2001 decreased 3.9% to $35.3 million versus $36.7 million in fiscal 2000, while diluted earnings per share fell 0.5% to $.94 per share versus $.95 in fiscal 2000. The earnings per share decrease was less than the decrease in net earnings primarily due to the Company's repurchase of .6 million and 4.8 million shares of its common stock in fiscal 2001 and 2000, respectively.
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, and the continued expansion of its Combo Stores. Total capital expenditures were $28.3 million, $25.8 million and $22.3 million in fiscal 2002, 2001 and 2000, respectively. Capital expenditures increased $2.6 million in fiscal 2002 primarily due to the investment in new store technology and back office operating systems. The Company also repurchased 757,600 outstanding shares of its stock for a total cost of $9.0 million during fiscal 2002, 620,000 outstanding shares for $7.4 million during fiscal 2001 and 4,798,800 outstanding shares for $33.9 million during fiscal 2000. Shares repurchased are retired and treated as authorized but unissued shares, with the cost of the reacquired shares debited to retained earnings and the par value debited to common stock.
On September 18, 2002, the Company's Board of Directors approved the initiation of a "Dutch Auction" Tender Offer by the Company to purchase up to 8 million shares of its outstanding common stock at a price per share of not less than $15.00 nor in excess of $17.00 per share. The tender offer commenced September 19, 2002 and is scheduled to expire, unless extended, October 18, 2002. The Company believes that the repurchase of its shares is consistent with its goal of maximizing shareholder value, giving its shareholders an opportunity to sell shares back to the Company at a favorable price with no transaction fees. Upon completion of the tender offer, shareholders will realize a proportionate increase in their relative ownership interest in the Company's future earnings and assets, subject to the issuance of additional securities. The Company will need a maximum of approximately $137 million to purchase the maximum 8 million shares, assuming the price paid per share is $17.00, and to pay related expenses. The Company intends to utilize its available cash to fund the tender offer.
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 net cash provided by operations in fiscal 2002 increased to $77.0 million as compared to $63.2 million in fiscal 2001 and $61.5 million in fiscal 1999. The increase in fiscal 2002 was primarily due to the timing of its income tax payments and the estimated realization of a portion of its deferred tax asset during fiscal 2002.
At July 27, 2002, the Company had $163.5 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 approximately $239.4 million at July 27, 2002. In addition, the Company had available $135 million in unsecured lines of credit bearing interest below the prime rate. The Company had no debt outstanding under any of the lines at July 27, 2002. However, potential borrowings were limited by approximately $38 million of outstanding letters of credit primarily to vendors for import merchandise purchases. The Company does not have any off-balance sheet arrangements or transactions with unconsolidated, limited purpose entities, other than operating leases entered into in the normal course of business and letters of credit. The Company does not have any undisclosed material transactions or commitments involving related persons or entities.
In fiscal 2003, the Company plans to open approximately 55 additional stores, convert 5 to 10 single-format stores to its larger combo store format and continue its store-remodeling program. The Company intends to focus on both expanding in the Company's existing major trading markets, in certain cases seeking a downtown location and/or adding to a cluster of suburban or other locations, and developing and expanding into new markets. The Company considers from time to time and may in the future consider acquisition opportunities in the following areas to enhance shareholder value and supplement our growth: (1) real estate oriented acquisitions to gain access to attractive sites and favorable lease terms; (2) other retail operations that could benefit from our management and expertise; and (3) alternative channels of distribution. 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.
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 2003. In addition, the Company's quarterly results of operations may fluctuate materially depending on, among other things, increases or decreases in comparable store sales, adverse weather conditions, shifts in timing of certain holidays, the timing of new store openings, net sales contributed by new stores, 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. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The information called for 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 2002 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
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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(tt), 10(uu), 21 and 23 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 (13)
3(f) Amendments to Amended and Restated Certificate of Incorporation (5)
4. Specimen Common Stock Certificate (1)
10(a) 1993 Incentive Stock Option Plan (10)
10(b) Employment Agreement With Burt Steinberg (14)
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)
|
Incorporated By
Reference From
Leases of Company premises of which the lessor is Elliot S. Jaffe or members of
his family or related trusts:
10(l) Danbury, CT store (1)
10(hh) Norwalk, CT Dress Barn/Dress Barn Woman store (8)
10(aa) The Dress Barn, Inc. 1987 Non-Qualified Stock Option Plan (5)
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(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 (12)
Steinberg Family Trust f/b/o Michael Steinberg
10(pp) Split Dollar Agreement between Dress Barn and (12)
Steinberg Family Trust f/b/o Jessica Steinberg
10(qq) Split Dollar Agreement between Dress Barn and (12)
Jaffe 1996 Insurance Trust
10(ss) The Dress Barn, Inc. 2001 Stock Option Plan (14)
10(tt) Employment Agreement with Elliot S. Jaffe
10(uu) Employment Agreement with David R. Jaffe
21. Subsidiaries of the Registrant
23. Independent Auditors' Consent
References on following page:
|
ITEM 14. (b) REPORT ON FORM 8-K
The Company has not filed any reports on Form 8-K during the last quarter of the fiscal year ended July 27, 2002.
ITEM 14. (c) EXHIBITS
All exhibits are incorporated by reference as shown in Item 14(a)3, except Exhibits 10(tt), 10(uu), 21 and 23 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 10/15/02
--------------------
Elliot S. Jaffe Chairman of the Board
/s/ ROSLYN S. JAFFE 10/15/02
---------------------
Roslyn S. Jaffe Director and Secretary and Treasurer
/s/ DAVID R. JAFFE 10/15/02
---------------------
David R. Jaffe Director, President and
Chief Executive Officer
(Principal Executive Officer)
/s/ BURT STEINBERG 10/15/02
---------------------
Burt Steinberg Director and Executive Director
/s/ KLAUS EPPLER 10/15/02
-----------------------
Klaus Eppler Director
/s/ DONALD JONAS 10/15/02
----------------
Donald Jonas Director
/s/ EDWARD D. SOLOMON 10/15/02
---------------------
Edward D. Solomon Director
JOHN USDAN 10/15/02
-----------
John Usdan Director
/s/ ARMAND CORREIA 10/15/02
---------------------
Armand Correia Chief Financial Officer (Principal
Financial and Accounting Officer)
|
CERTIFICATIONS
I, David R. Jaffe, President and Chief Executive Officer of The Dress Barn Inc. ("the Company"), certify that:
1. I have reviewed the Company's Annual Report on Form 10-K for the period ending July 27, 2002.
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report.
Dated: October 15, 2002 /s/ DAVID R. JAFFE --------------------- David R. Jaffe President and Chief Executive Officer (Principal Executive Officer) |
I, Armand Correia, Senior Vice President and Chief Financial Officer of The Dress Barn Inc. ("the Company"), certify that:
1. I have reviewed the Company's Annual Report on Form 10-K for the period ending July 27, 2002.
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report.
Dated: October 15, 2002 /s/ ARMAND CORREIA --------------------- Armand Correia Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
INDEPENDENT AUDITORS' REPORT
The 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 (the "Company") as of July 27, 2002 and July 28, 2001, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended July 27, 2002. 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 auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of July 27, 2002 and July 28, 2001, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended July 27, 2002 in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
September 16, 2002
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
Amounts in thousands, except share data July 27, July 28,
ASSETS 2002 2001
------------------ ------------------
Current Assets:
Cash and cash equivalents $ 75,926 $ 16,834
Marketable securities and investments (Note 2) 163,474 177,474
Merchandise inventories 113,371 104,487
Prepaid expenses and other 2,182 4,147
------------------ ------------------
Total Current Assets 354,953 302,942
------------------ ------------------
Property and Equipment:
Leasehold improvements 61,414 59,019
Fixtures and equipment 154,139 144,468
Computer software 17,344 14,277
Automotive equipment 554 547
------------------ ------------------
233,451 218,311
Less accumulated depreciation
and amortization 140,025 129,712
------------------ ------------------
93,426 88,599
------------------ ------------------
Deferred Income Taxes (Note 5) 5,869 7,278
------------------ ------------------
Other Assets 3,999 3,463
------------------ ------------------
$458,247 $402,282
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $ 62,802 $ 53,681
Accrued salaries, wages and related expenses 18,089 17,219
Other accrued expenses 27,798 27,787
Customer credits 6,650 5,811
Income taxes payable 8,655 1,187
------------------ ------------------
Total Current Liabilities 123,994 105,685
------------------ ------------------
Commitments and Contingencies (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- 50,000,000 shares
Issued - 36,507,919 and
51,312,464 shares, respectively
Outstanding- 36,507,919 and
36,474,064 shares, respectively 1,825 2,566
Additional paid-in capital 52,209 44,056
Retained earnings 279,672 364,491
Treasury stock, at cost -- (114,577)
Accumulated other comprehensive income 547 61
------------------ ------------------
334,253 296,597
------------------ ------------------
$458,247 $402,282
================== ==================
See notes to consolidated financial statements
|
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings
Amounts in thousands, except per share amounts
Fiscal Year Ended
------------------------------------------------------------
July 27, July 28, July 29,
2002 2001 2000
------------------------------------------------------------
Net sales $717,136 $695,008 $656,174
Cost of sales, including
occupancy and buying costs 453,428 443,426 419,479
------------------------------------------------------------
Gross profit 263,708 251,582 236,695
Selling, general and
administrative expenses 186,375 180,991 165,336
Depreciation and amortization 23,508 23,916 21,164
------------------------------------------------------------
Operating income 53,825 46,675 50,195
Interest income- net 5,458 8,949 7,667
------------------------------------------------------------
Earnings before provision for
income taxes 59,283 55,624 57,862
Provision for income taxes 21,342 20,303 21,120
------------------------------------------------------------
Net earnings $37,941 $35,321 $36,742
============================================================
Earnings per share:
Basic $ 1.04 $ 0.97 $ 0.97
============================================================
Diluted $ 1.01 $ 0.94 $ 0.95
============================================================
Weighted average shares outstanding:
Basic 36,495 36,481 37,916
============================================================
Diluted 37,516 37,494 38,815
============================================================
See notes to consolidated financial statements
|
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
Amounts and shares in thousands.
Accumulated Total
Additional Other Share-
Common Stock Paid-In Retained Treasury Comprehensive holders'
Shares Amount Capital Earnings Stock Income(Loss) Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 1999 39,872 $2,464 $27,565 $292,428 ($68,274) ($583) $253,600
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 36,742
Unrealized holding loss on marketable securities (202)
-----------
Total comprehensive income 36,540
-----------
Tax benefit from exercise of stock options 4,050 4,050
Employee Stock Purchase Plan activity 14 2 108 110
Shares issued pursuant to exercise of stock options 884 44 4,105 4,149
Purchase of treasury stock (4,798) (38,888) (38,888)
------------------------------------------------------------------------------------------------------------------------------------
Balance, July 29, 2000 35,972 2,510 35,828 329,170 (107,162) (785) 259,561
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 35,321
Unrealized holding gain on marketable securities 846
-----------
Total comprehensive income 36,167
-----------
Deferred compensation 16 183 183
Tax benefit from exercise of stock options 1,668 1,668
Employee Stock Purchase Plan activity 10 102 102
Shares issued pursuant to exercise of stock options 1,096 56 6,275 6,331
Purchase of treasury stock (620) (7,415) (7,415)
------------------------------------------------------------------------------------------------------------------------------------
Balance, July 28, 2001 36,474 2,566 44,056 364,491 (114,577) 61 296,597
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 37,941
Unrealized holding gain on marketable securities 486
-----------
Total comprehensive income 38,427
-----------
Deferred compensation 291 291
Tax benefit from exercise of stock options 2,953 2,953
Employee Stock Purchase Plan activity 9 1 90 91
Shares issued pursuant to exercise of stock options 783 39 4,819 4,858
Purchase of treasury stock (758) (8,964) (8,964)
Retirement of treasury stock (781) (122,760) 123,541 0
------------------------------------------------------------------------------------------------------------------------------------
Balance, July 27, 2002 36,508 $1,825 $52,209 $279,672 $0 $547 $334,253
====================================================================================================================================
See notes to consolidated financial statements
|
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Amounts in thousands Fiscal Year Ended
---------------------------------------------------
July 27, July 28, July 29,
2002 2001 2000
---------------------------------------------------
Operating Activities:
Net earnings $37,941 $35,321 $36,742
-------------------------------------------------
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization of property and
equipment (net) 21,827 22,309 16,481
Loss on disposal of closed store assets 1,681 1,607 4,683
Deferred income tax assets 1,409 2,586 2
Deferred compensation 291 183 ---
Changes in assets and liabilities:
(Increase) decrease in merchandise inventories (8,884) 7,414 (1,763)
Decrease (increase) in prepaid expenses and other 1,965 704 (2,813)
(Increase) decrease in other assets (536) 372 (545)
Increase (decrease) in accounts payable- trade 9,121 (11,099) 2,565
Increase (decrease) in accrued salaries and wages 870 (753) 3,879
Increase (decrease) in accrued expenses 11 6,126 (2,819)
Increase in customer credits 839 556 1,891
Increase (decrease) in income taxes payable 10,421 (2,152) 3,160
-------------------------------------------------
Total adjustments 39,015 27,853 24,790
-------------------------------------------------
Net cash provided by operating activities 76,956 63,174 61,532
-------------------------------------------------
Investing Activities:
Purchases of property and equipment - net (28,335) (25,758) (26,565)
Sales and maturities of marketable securities and investments 108,764 119,697 22,132
Purchases of marketable securities and investments (94,278) (142,275) (36,984)
-------------------------------------------------
Net cash used in investing activities (13,849) (48,336) (41,417)
-------------------------------------------------
Financing Activities:
Purchase of treasury stock (8,964) (7,415) (38,888)
Proceeds from Employee Stock Purchase Plan 91 102 110
Proceeds from stock options exercised 4,858 6,331 4,149
-------------------------------------------------
Net cash used in financing activities (4,015) (982) (34,629)
-------------------------------------------------
Net increase (decrease) in cash and cash equivalents 59,092 13,856 (14,514)
Cash and cash equivalents- beginning of year 16,834 2,978 17,492
-------------------------------------------------
Cash and cash equivalents- end of year $75,926 $16,834 $2,978
=================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $9,511 $20,005 $18,047
=================================================
See notes to consolidated financial statements
|
The Dress Barn, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Three Years Ended July 27, 2002
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 is a specialty retailer of women's apparel (in both regular and large sizes), including shoes and accessories. Given the majority of the Company's locations are Combo Stores; the operations of the Company are aggregated into one reportable 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. The fiscal year ended July 31, 1999 consisted of 53 weeks; the other years presented consisted of 52 weeks.
Revenue recognition
Revenues from retail sales, net of returns, are recognized at the point of purchase upon delivery of the merchandise to the customer and exclude sales taxes. Sales from purchases made with gift certificates and layaway sales are also recorded when the customer takes possession of the merchandise. Gift certificates and merchandise credits issued by the Company are recorded as a liability until they are redeemed.
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 at July 27, 2002 were 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 other comprehensive income, a component of 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.
Merchandise inventories
Merchandise inventories are valued at the lower of cost or market as determined by the retail method.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. 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 taxes are provided using the asset and liability method, whereby deferred income taxes result from temporary differences between the reported amounts in the financial statements and the tax basis of assets and liabilities, as measured by presently enacted tax rates.
Store preopening costs
Expenses associated with the opening of new stores are charged to expense as incurred.
Earnings per share (EPS)
The Company calculates EPS in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". SFAS No. 128 requires dual presentation of basic EPS and diluted EPS on the face of all income statements for all entities with complex capital structures. Basic EPS is computed as net income divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities.
Advertising costs
Advertising costs are included in selling, general and administrative expenses and are expensed in the period in which they are incurred. Advertising expenses were $10.0 million, $8.6 million and $8.8 million for fiscal 2002, 2001 and 2000, respectively.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 provides that intangible assets with finite useful lives be amortized and that goodwill and intangible assets with indefinite lives will not be amortized, but will rather be tested at least annually for impairment. The Company is required to adopt SFAS No. 142 in fiscal 2003. The adoption of SFAS No. 142 will have no impact on the consolidated financial position, results of operations, or cash flows of the Company since the Company did not have any assets or liabilities relating to either goodwill or intangibles assets.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143), which will become effective for the Company at the beginning of fiscal 2003. SFAS 143 addresses the financial accounting and reporting for obligations and retirement costs related to the retirement of tangible long-lived assets, requiring the recognition of a liability for an asset retirement obligation in the period in which it is incurred. The Company does not expect that the adoption of SFAS No. 143 will have a significant impact on its financial statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 will become effective
for the Company at the beginning of fiscal 2003. SFAS No. 144 supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and the accounting and reporting provisions relating
to the disposal of a segment of a business of Accounting Principals Board No.
30. The Company does not expect that the adoption of SFAS No. 144 will have a
significant impact on its financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue No. 94-3. The Company will adopt the provisions of SFAS No. 146 for any restructuring activities initiated after December 31, 2002. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost was recognized at the date of the company's commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing any future restructuring costs as well as the amounts recognized.
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.
Comprehensive income
Comprehensive income consists of net earnings and unrealized holding gains and losses on marketable securities, net of tax.
Valuation of long-lived assets
The Company periodically reviews its long-lived assets for potential impairment, where events or changes in circumstances indicate that their carrying amount may not be recoverable. In that event, a loss is recognized based on the amount the carrying amount exceeds the fair market value of the long-lived asset.
Stock based compensation
The Company follows the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 encourages, but does not require, companies to adopt a fair value based method for determining expense related to stock-based compensation. The disclosures are set forth in Note 7. The Company continues to account for stock-based compensation using the intrinsic value method as prescribed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
Financial instruments
Concentration of Credit Risk - Financial instruments, which potentially subject the Company to concentrations of credit risk, are principally bank deposits and short-term investments. Cash and cash equivalents are deposited with high credit quality financial institutions. Short-term investments principally consist of triple A or double A rated instruments.
Fair Value of Financial Instruments - The carrying amounts of cash, cash equivalents, short-term investments and accounts payable approximate fair value because of the short-term nature, and maturity of such instruments.
Stock Split
The Company's Board of Directors approved a 2-for-1 stock split in the form of a 100% stock dividend on the Company's issued and outstanding common stock in May 2002. The stock dividend was distributed on May 31, 2002 to shareholders of record on May 17, 2002. All historic share and per share information contained in this report have been adjusted to reflect the impact of the stock split.
Treasury (Reacquired) Shares
Shares repurchased are retired and treated as authorized but unissued shares, with the cost of the reacquired shares debited to retained earnings and the par value debited to common stock.
2. MARKETABLE SECURITIES AND INVESTMENTS
The amortized cost and estimated fair value of marketable securities and
investments consisted of the following:
July 27, 2002 July 28, 2001
------------- -------------
(In 000's) Estimated Estimated
Fair Value Cost Fair Value Cost
Money Market Funds $ 15,712 $15,712 $33,189 $33,189
Short Term Investments 43,041 43,041 60,985 60,985
Tax Free Municipal Bonds 102,980 102,296 81,592 81,366
US Govt. Securities Fund 1,741 1,878 1,708 1,878
--------- --------- --------- ---------
$163,474 $162,927 $177,474 $177,418
========= ========= ========= =========
|
The scheduled maturities of marketable securities and investments at July
27, 2002 are:
Estimated
Due In (in 000's) Fair Value Cost
------ ----------- --------
One year or less $100,021 $ 99,909
One year through five years 55,114 54,741
Six years through ten years -- --
Over ten years 8,339 8,277
--------- ---------
$163,474 $162,927
========= =========
|
Unrealized holding gains and losses at July 27, 2002 netted to an unrealized gain of approximately $547,000. Proceeds and gross realized gains (losses) from the sale of securities in fiscal 2002, 2001 and 2000 were $108.8 million and $1.0 million, $119.7 million and $0.3 million, and $22.1 million and ($0.1) million, respectively. For the purposes of determining gross realized gains and losses, the cost of securities is based upon specific identification.
3. EARNINGS PER SHARE
Basic earnings per share are computed based upon the weighted average number of common shares outstanding. Diluted earnings per share are computed based upon the weighted average number of common and common equivalent shares outstanding. Common equivalent shares outstanding consist of shares covered by stock options.
A reconciliation of basic and diluted weighted average number of common
shares outstanding is presented below:
Fiscal Year Ended
(In 000's) July 27, July 28, July 29,
2002 2001 2000
---------- ---------- ---------
Weighted average number of common shares outstanding - basic 36,495 36,481 37,916
Net effect of dilutive stock options based on the treasury
stock method using the average market price 1,021 1,013 899
-------- --------- --------
Weighted average number of common shares outstanding - diluted 37,516 37,494 38,815
======== ========= ========
|
Common stock equivalents of 150,000 and 275,600 for the fiscal years ended July 27, 2002 and July 29, 2000, respectively, were excluded because such common stock equivalents were anti-dilutive. All common stock equivalents were dilutive for the fiscal year ending July 28, 2001.
4. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution retirement savings plan
(401(k)) covering all eligible employees. The Company also sponsors 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 2002, 2001 and 2000 the Company incurred expenses of
$1,156,000, $1,619,000 and $1,980,000, respectively, relating to the
contributions to and administration of the above plans. The Company also
sponsors 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:
Fiscal Year Ended
(In 000's) July 27, July 28, July 29,
2002 2001 2000
---------- ---------- ---------
Federal:
Current $16,517 $16,210 $18,420
Deferred 1,090 (749) (2,128)
---------- ---------- ----------
17,607 15,461 16,292
----------- ---------- ----------
State:
Current 3,415 5,562 5,734
Deferred 320 (720) (906)
---------- ---------- ----------
3,735 4,842 4,828
---------- ---------- ----------
Provision for income taxes $21,342 $20,303 $21,120
========== ========== =========
|
Significant components of the Company's deferred tax assets and
liabilities were as follows:
July 27, July 28,
(in 000's) 2002 2001
--------- ---------
Deferred tax assets:
Inventory capitalization for tax purposes $1,927 $2,822
Capital loss carryover 2,759 2,622
Employee benefits 2,754 1,494
Other items 4,739 8,382
--------- ---------
Total deferred tax assets 12,179 15,320
--------- ---------
Deferred tax liabilities:
Depreciation 4,878 4,630
Other items 1,432 3,412
--------- ---------
Total deferred tax liabilities 6,310 8,042
--------- ---------
Net deferred tax assets $5,869 $7,278
========= =========
|
The net deferred tax assets were comprised of approximately $1,168,000 in state deferred taxes and $4,701,000 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:
Fiscal Year Ended
---------------------
July 27, July 28, July 29,
2002 2001 2000
---------- ---------- ---------
Statutory tax rate 35.0 % 35.0 % 35.0 %
State taxes - net of federal
Benefit 5.2 % 5.5 % 5.4 %
Other - net, primarily tax-free interest (4.2)% (4.0)% (3.9)%
---------- ---------- ---------
Effective tax rate 36.0 % 36.5% 36.5%
========== ========== =========
|
6. COMMITMENTS AND CONTINGENCIES
Lease commitments
The Company leases all of its stores and its distribution center. 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. The Company leases its 510,000 square foot office and distribution center in Suffern, New York. The lease has an initial term expiring in 2007 with three 5-year options to extend the lease.
A summary of occupancy costs follows:
Fiscal Year Ended
---------------------
July 27, July 28, July 29,
(in 000's) 2002 2001 2000
---------- ---------- ---------
Base rentals $85,593 $78,920 $74,450
Percentage rentals 2,591 2,192 842
Other occupancy costs 25,349 23,114 21,168
---------- ---------- ---------
Total $113,533 $104,226 $96,460
========== ========== =========
|
The following is a schedule of future minimum rentals under noncancellable
operating leases as of July 27, 2002 (dollars in thousands):
Fiscal Year Amount
------------- -----------
2003 $ 85,303
2004 73,915
2005 61,824
2006 49,566
2007 36,695
Subsequent years 59,381
-----------
Total future minimum rentals $366,684
===========
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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 two stores from its Chief Executive Officer or related trusts. Future minimum rentals under leases with such related parties which extend beyond July 27, 2002, included in the above schedule, are approximately $247,000 annually and in the aggregate $0.6 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 2002, 2001 and 2000 under these leases amounted to approximately $288,000, $346,000 and $426,000, respectively.
Lines of credit
At July 27, 2002, the Company had unsecured lines of credit with three banks totaling $135 million with interest payable at rates below prime. None of the Company's lines of credit contain any significant covenants or commitment fees. The Company had no debt outstanding under any of the lines at July 27, 2002. However, approximately $38 million of outstanding letters of credit reduced the credit lines available.
Legal proceedings
The Company is involved in various routine legal proceedings incident to the ordinary course of business. On May 18, 2000, an action was filed against the Company seeking compensatory and punitive damages in an unspecified amount for alleged unfair trade practices and alleged breach of contract arising out of negotiations for an acquisition the Company never concluded. The Company believes there is no merit in any of the plaintiffs' asserted claims, is vigorously defending the litigation, and, in any event, does not expect the outcome of these proceedings to have a material adverse effect on the Company. The Company believes that the outcome of all pending and threatened legal proceedings will, on the whole, not have a material adverse effect on its financial condition or results of operations.
7. STOCK-BASED COMPENSATION PLANS
At July 27, 2002, the Company had five stock-based compensation plans. The Company's 1993 Incentive Stock Option Plan provides for the grant of incentive stock options ("ISO's") to purchase up to 2,500,000 shares of the Company's common stock. As of July 27, 2002, there were 612,802 shares under the 1993 plan available for future grant. The Company's 1995 Stock Option Plan provides for the granting of either ISO's or non-qualified options to purchase up to 4,000,000 shares of common stock. As of July 27, 2002, there were 253,714 shares under the 1995 plan available for future grant. The Company's 2001 Stock Option Plan provides for the granting of either ISO's or non-qualified options to purchase up to 4,000,000 shares of common stock. As of July 27, 2002, no options had been granted under the 2001 plan.
The exercise price of ISO's granted under any of the option plans may not be less than the market price of the common stock at the date of grant. Generally, all options granted under these plans vest over a five-year period and expire after ten years from the date of grant.
The Company's 1983 Incentive Stock Option Plan expired on April 4, 1993, and the Company's 1987 Non-Qualified Stock Option Plan expired December 7, 1997. Accordingly, the Company can no longer grant options under either of the two expired plans. The Company's Employee Stock Purchase Plan allows employees to purchase shares of the Company's common stock during each quarterly offering period at a 10% discount through weekly payroll deductions.
The following table summarizes the activities in all Stock Option Plans and
changes during each of the fiscal years presented:
July 27, 2002 July 28, 2001 July 29, 2000
------------- ------------- -------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------------------------------------------------------------------------------------------------
Options outstanding - beginning of
year 3,164,870 $7.26 3,641,286 $6.16 2,878,334 $5.19
Granted 797,266 10.95 716,938 10.50 1,769,486 7.03
Cancelled (444,580) 10.26 (95,848) 6.92 (122,462) 6.32
Exercised (783,204) 6.21 (1,097,506) 5.77 (884,072) 4.70
----------------------------------------------------------------------------------------------
Outstanding end of year 2,734,352 $8.14 3,164,870 $7.26 3,641,286 $6.16
==============================================================================================
Options exercisable
at year-end 334,108 $4.09 469,044 $5.61 638,992 $5.69
==============================================================================================
Weighted-average fair
value of options granted
during the year
$4.81 $4.92 $3.16
============== ============== ==============
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The following table summarizes information about stock options outstanding
at July 27, 2002:
Number Weighted Average Number Weighted
Outstanding as of Weighted Average Exercise Price Exercisable as Average
Range of Exercise Prices 7/27/02 Remaining Life of 7/27/02 Exercise Price
----------------------------------------------------------------------------------------------------------------------------
$ 2.50 - $ 4.65 273,086 4.08 years $3.26 259,600 $3.21
5.25 - 5.69 201,500 5.44 years $5.63 12,760 $5.51
7.03 - 7.81 1,103,800 7.05 years $7.04 53,288 $7.10
9.75 - 9.86 525,800 9.16 years $9.86 --
10.38 - 15.11 630,166 8.20 years $11.58 8,460 $10.26
----------------------------------------------------------------------------------------------
$ 2.50 - $15.11 2,734,352 7.31 years $8.14 334,108 $4.09
==============================================================================================
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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 No. 123 (which does not apply to awards prior to fiscal 1996), the Company's net earnings and earnings per share for fiscal 2002, fiscal 2001 and fiscal 2000 would have been reduced to the pro forma amounts indicated on the following page:
Fiscal Year Ended
------------------------
July 27, July 28, July 29,
2002 2001 2000
--------- --------- ---------
Net earnings (in 000's):
As reported $37,941 $35,321 $36,742
Pro forma $36,512 $33,959 $35,082
Earnings per share - basic:
As reported $1.04 $0.97 $0.97
Pro forma $1.00 $0.93 $0.93
Earnings per share - diluted:
As reported $1.01 $0.94 $0.95
Pro forma $0.97 $0.91 $0.90
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The fair values of the options granted under the Company's fixed stock
option plans were estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
Fiscal Year Ended
------------------------
July 27, July 28, July 29,
2002 2001 2000
--------- --------- ---------
Weighted average risk-free interest rate 4.0% 5.4% 5.9%
Weighted average expected life (years) 5.0 5.0 5.0
Expected volatility of the market price of the Company's
common stock 43.9% 44.8% 41.0%
|
These pro forma adjustments are not indicative of future period pro forma adjustments, when the calculation will apply to all applicable stock options.
8. QUARTERLY RESULTS OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
Fourth Third Second First
Quarter Quarter Quarter Quarter
Fiscal Year ended July 27, 2002
Net Sales $186,697 $177,119 $171,241 $182,079
Gross Profit,
less occupancy
and buying costs 74,267 65,315 61,752 62,374
Income Taxes 7,547 5,359 3,999 4,437
Net Earnings 13,418 9,526 7,109 7,888
Earnings Per Share
Basic $0.37 $0.26 $0.19 $0.22
Diluted $0.36 $0.25 $0.19 $0.21
Fourth Third Second First
Quarter Quarter Quarter Quarter
Fiscal Year ended July 28, 2001
Net Sales $177,335 $165,111 $164,234 $188,328
Gross Profit,
less occupancy
and buying costs 64,409 60,087 59,777 67,309
Income Taxes 4,724 3,556 4,674 7,349
Net Earnings 8,250 6,155 8,130 12,786
Earnings Per Share(*)
Basic $0.23 $0.17 $0.22 $0.36
Diluted $0.22 $0.16 $0.21 $0.34
(*) 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.
|
EXHIBIT 10(tt)
May 2, 2002
Mr. Elliot S. Jaffe
The Dress Barn, Inc.
30 Dunnigan Drive
Suffern, NY 10901
Dear Mr. Jaffe:
The purpose of this letter is to set forth the terms under which The Dress Barn, Inc. (the "Company" or "we") have agreed to continue to employ you and you have agreed to continue to be employed by the Company. The terms set forth in this letter have been approved by the Compensation Committee of the Board of Directors of the Company.
As founder of the Company, you have been employed by the Company in a senior management capacity for over 40 years and your current title is Chairman of the Board. It is the Company's hope and desire that you continue to be active in the management of the Company for many years and that even after your active participation ceases, you will continue to provide consultative advice and guidance to the Company to which you have devoted virtually your entire working life.
1. We and you have agreed that unless sooner terminated as described below, your term as Executive Chairman of the Board shall continue until the end of our fiscal year ending July 2005. That term will be extended for each of two successive one year periods unless either you or we gives the other written notice of non-extension at least 90 days prior to the end of the term then in effect. Beyond the fiscal year ending July 2007, a further extension of your term as Executive Chairman of the Board will require our mutual written agreement. Notwithstanding the foregoing, you may elect to terminate your term as Executive Chairman of the Board on 90 days' notice to us effective at any time after July 31, 2004.
As Executive Chairman of the Board you will continue to have the customary duties and responsibilities of an executive chairman of the board and you will continue to be involved in the senior management of the Company, including active participation in major decisions relating to real estate, operations and other matters.
2. Effective upon the termination of your term of employment as Executive Chairman of the Board, you and we have agreed that you will continue for the rest of your life to be employed by the Company in a non-executive capacity, at least initially as the Non- Executive Chairman of the Board. You will have the customary duties and responsibilities of a non-executive chairman of the board and shall provide such advisory and consultative services as the Chief Executive Officer of the Company (or if you so elect, the Board of Directors) may request, it being understood that such advisory and consultative services may be provided by you at times and at locations that are reasonably satisfactory to you and that do not involve more than twenty-four (24) days per fiscal year. During this non-executive term we shall have the right to change your title to Chairman Emeritus, Honorary Chairman or the like.
3. During your term as Executive Chairman of the Board, you shall receive a salary at the annual rate of $600,000 per year. During the period following the termination of your term of employment as Executive Chairman of the Board, you will receive a salary (which is in the nature of a pension payment) at the annual rate of $300,000 or such higher amount as results from an increase in the cost of living (recalculated at the end of each of our fiscal years) from July 31, 2002. Nothing contained in this letter shall preclude the Board of Directors in its discretion from increasing your salary at any time.
4. During your term as Executive Chairman of the Board, you shall be entitled to participate in all of the Company's bonus and incentive plans and all employee pension, insurance and benefit plans and programs available to the Company's senior executives or its employees in general. You will also be entitled to office and secretarial and administrative assistance comparable to the office and assistance you currently have, to the exclusive use of a Company car and driver, to tax preparation services including the services of an outside accounting firm, and to the use of a Dress Barn apartment in New York City. During the period of your employment by the Company in a non-executive capacity, you will be entitled to participate in all group insurance plans and programs available to the Company's senior executives or its employees generally (and in any event to health insurance coverage), tax preparation services, and, for as long as you may want them, an office and secretarial and administrative assistance.
5. It is the company's intention that you continue to serve as a member of the Board of Directors of the Company both during your term as Executive Chairman of the Board and thereafter. However, your salary and other benefits as provided in this letter shall not be reduced or eliminated even if you are no longer a Director or no longer have any Chairman title.
6. If your employment by the Company terminates by reason of your death, you will be entitled to a death benefit of one year's salary at the compensation rate in effect on the date of your death.
7. If there is a Change in Control (as defined below) during your term as
Executive Chairman of the Board, you may, at your option, by notice to the
Company at any time thereafter, terminate your term as Executive Chairman of the
Board and relinquish your Chairman and directorship positions. Upon such
election, the Company shall pay you in a single lump sum on or before the 30th
day following such election an amount equal to two times your annual salary in
effect immediately prior to such election. In the event such payment or any part
thereof is determined to constitute a "parachute payment", as that term is
defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"), notwithstanding anything to the contrary in this letter, you shall
be entitled to receive a "Gross-Up Payment" in an amount such that after payment
by you of all taxes, including any income taxes and any excise taxes imposed by
Section 4999 of the Code (including any interest or penalties imposed with
respect to such taxes), upon the Gross-Up Payment, you will retain an amount of
the Gross-Up Payment equal to the taxes imposed on the "parachute payment".
Notwithstanding your making such election and your receipt of a lump sum payment following a Change in Control, you will be entitled to receive the benefits described in Paragraph 4 as applicable during the period of your employment in a non-executive capacity, be entitled to receive the salary (in the nature of a pension payment) described in Paragraph 3 beginning two years thereafter, be relieved of the obligation to provide advisory and consultative services as provided in Paragraph 2, but shall continue to be subject to the non-competition restrictions described in Paragraph 8 below.
A Change in Control shall mean the occurrence of any one of the following events:
(i) any "person," as such term is used in sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a "beneficial owner," as such term is used in Rule 13d-3 under that act, of 30% or more of the outstanding common stock of the Company, excluding a person that is an affiliate (as such term is used under that act) of the Company on the date of this letter, or any affiliate of any such person;
(ii) the majority of the board of directors of the Company consists of individuals other than Incumbent Directors, which term means the members of the board of directors of the Company on the date of this letter; provided that any person becoming a director subsequent to such date whose election or nomination for election was supported by two-thirds of the directors who then comprised the Incumbent Directors shall be considered an Incumbent Director;
(iii)the Company adopts any plan of liquidation providing for the distribution of all or substantially all its assets;
(iv) all or substantially all the assets or business of the Company are disposed of pursuant to a merger, consolidation or other transaction (unless the shareholders of the Company immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they own the common stock of the Company, all the common stock or other ownership interests of the entity or entities, if any, that succeed to the business of the Company); or
(v) the Company combines with another company and is the surviving corporation, but, immediately after the combination, the shareholders of the Company immediately prior to the combination hold, directly or indirectly, 50% or less of the common stock or other ownership interests of the combined company (there being excluded from the number of shares held by such shareholders, but not from the common stock or other ownership interests of the combined company, any shares or other ownership interests received by affiliates of such other company in exchange for stock of such other company).
8. You have agreed that so long as you are receiving any salary payments from the Company (including the two year hiatus if you exercise your option to receive and have received a lump sum payment following a "Change in Control"), neither you nor any person, entity or enterprise controlled by you will become a director, officer, agent, employee, lender or shareholder of a corporation or member of or lender to a partnership, engage as a sole proprietor in any business, or act as a consultant to any of the foregoing or otherwise directly or indirectly engage in any business that is in direct competition with the business then conducted by the Company in any state in the United States or in any other country in which the Company has engaged in such business, except with the Company's written permission, provided, however, that this shall not prohibit you from owning less than 1% of the outstanding securities of any class of capital stock of a corporation the securities of which are regularly traded or quoted on a national securities exchange or on an inter- dealer quotation system. You have acknowledged that there is no adequate remedy at law for a breach of this Paragraph 8 and that, in the event of such a breach or threatened breach, the Company shall be entitled to injunctive or other equitable relief to prevent any such breach without prejudice to any other remedies for damages or otherwise. You and we have both acknowledged that the type and periods of restriction described in this Paragraph 8 are fair and reasonable in your case and are reasonably required for the protection of Dress Barn.
9. The agreement set forth in this letter shall inure to your and the Company's benefit and our respective successors, heirs (in your case) and assigns. No rights or obligations of the Company under this agreement may be assigned or transferred by the Company, except pursuant to a merger or consolidation, or the sale or liquidation of all or substantially all the assets of the Company, provided that, in the case of such a sale or liquidation, the assignee or transferee assumes in writing the obligation to perform this agreement (it being understood, however, that no such assignment or transfer shall relieve the Company of its liabilities or obligations under this agreement). This agreement may not be amended or waived, except by an instrument in writing signed by the party to be charged.
If any provision of this agreement is invalid or unenforceable, the remaining provisions of this agreement shall remain in effect. This agreement shall be governed by and construed and interpreted in accordance with the law of the State of New York as applied to agreements among New York residents entered into and to be performed entirely within New York. Any notice or other communication under this letter shall be in writing and shall be deemed to have been duly given when personally delivered or mailed by registered or certified mail, postage prepaid, return receipt requested, or by facsimile to the respective addresses listed below or to such other addresses as each party may specify by notice to the other:
to The Dress Barn, Inc.
30 Dunnigan Drive
Suffern, NY 10901
Attention: Chief Executive Officer
to you: Elliot S. Jaffe
30 Dunnigan Drive
Suffern, NY 10901
|
This letter contains the entire agreement and understanding of the parties concerning its subject matter and supersedes all prior agreements and understandings with respect to that subject matter. Nothing in this agreement is intended to or shall affect the rights or obligations of the parties under any agreement relating to the maintenance of life insurance, stock options or other employee benefits.
If the foregoing accurately sets forth our agreement, please countersign and return to us a copy of this letter.
Very truly yours,
THE DRESS BARN, INC.
By:/S/ ARMAND CORREIA Senior Vice President Chief Financial Officer May 2, 2002 |
ACCEPTED AND AGREED TO:
/S/ ELLIOT S. JAFFE Elliot S. Jaffe May 2, 2002 |
EXHIBIT 10(uu)
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") by and between THE DRESS BARN, INC. ("Dress Barn"), and DAVID R. JAFFE ("Executive") dated as of May 2, 2002.
WHEREAS, Executive has been employed by Dress Barn for approximately 10 years in increasingly senior executive positions; and
WHEREAS, Executive has recently been promoted to President and Chief Executive Officer.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Dress Barn and Executive agree as follows:
1. Employment. Dress Barn hereby agrees to employ Executive, and Executive hereby agrees to be employed by Dress Barn, upon the terms and subject to the conditions set forth in this Agreement.
2. Term of Employment. The period of Executive's employment under this Agreement shall begin as of May 2, 2002 (the "Effective Date") and shall continue for a period ending July 30, 2005, unless sooner terminated in accordance with Section 5 below ("Initial Term"). The Employment Term shall be extended for successive one (1) year periods (each a "Renewal Term") unless either party gives written notice of non-renewal to the other party not less than one year prior to the end of the Initial Term or Renewal Term (as applicable) then in effect. As used in this Agreement, the phrase "Employment Term" refers to Executive's period of employment from the date of this Agreement until his "Termination Date" (as defined in Section 5(f) below).
3. Duties and Responsibilities.
(a) Dress Barn will employ Executive as its President and Chief Executive Officer. In these capacities, Executive shall perform the customary duties and have the customary responsibilities of such positions. Executive shall report to the Chairman of Dress Barn's Board of Directors (the "Board") and the Board, and shall perform such other duties as may be assigned to Executive from time to time by the Chairman or the Board.
(b) Executive agrees to faithfully serve Dress Barn, devote his full working time, attention and energies to the business of Dress Barn, its subsidiaries and affiliated entities, and perform the duties under this Agreement to the best of his abilities. Executive agrees not to engage in any other business or employment without the written consent of Dress Barn except as otherwise specifically provided herein. Executive may perform uncompensated services in connection with either the management of personal investments or with charitable or civic organizations; provided that such activities do not interfere with Executive's duties pursuant to this Agreement. Executive may serve on other corporate boards of directors, with the approval of the Board, which approval will not be unreasonably withheld. Executive shall also be entitled to appropriate vacation each year.
4. Compensation and Benefits.
(a) Base Salary. During the Employment Term, Dress Barn shall pay Executive a base salary at the annual rate of $650,000 per year or such higher rate as may be determined from time to time by the Board or a Compensation Committee of the Board ("Base Salary"). Such Base Salary shall be paid in accordance with Dress Barn's standard payroll practices for senior executives.
(b) Benefit Plans, Fringe Benefits and Incentive Programs. Executive shall be entitled to participate in all of Dress Barn's pension, insurance and other benefit plans and programs and in all bonus and incentive plans, including the Dress Barn Management Incentive Plan and stock option plans. Executive shall be entitled to office, secretarial and administrative assistance, exclusive use of an automobile (and payment for gasoline, maintenance, repairs, insurance, taxes and other related automobile expenses), tax preparation services including the services of an outside accounting firm, and the non-exclusive use of a Dress Barn apartment located in New York City.
(c) Stock Option Grant. In connection with Executive's promotion to President and Chief Executive Officer, Dress Barn shall, within 90 days of the Effective Date, grant Executive options to purchase 150,000 shares of Dress Barn Common Stock at a price to be determined by Dress Barn within 90 days of the Effective Date, such option to be granted pursuant to Dress Barn's 1995 Non-Qualified Stock Option Plan.
(d) Expense Reimbursement. Dress Barn shall promptly reimburse Executive for the ordinary and necessary business expenses incurred by Executive in the performance of his duties under this Agreement in accordance with Dress Barn's customary practices applicable to senior executives.
5. Termination of Employment. Executive's employment under this Agreement shall terminate at the end of the Initial Term or Renewal Term by notice of non-renewal by either party in accordance with Section 2, unless earlier terminated under any of the circumstances set forth in this Section 5 (a) through (d). Upon termination, Executive (or his beneficiary or estate, as the case may be) shall be entitled to receive the compensation and benefits described in Section 6 below, and, if applicable, Section 7 below.
(a) Death. Executive's employment shall terminate upon Executive's death.
(b) Total Disability. Dress Barn may terminate Executive's employment upon his becoming "Totally Disabled". For purposes of this Agreement, Executive shall be "Totally Disabled" if Executive is physically or mentally incapacitated so as to render Executive incapable of performing the material and substantial duties of President under this
Agreement for a period of ninety (90) consecutive days or one hundred twenty
(120) non-consecutive days in any twelve (12) month period. Executive's receipt
of disability benefits under Dress Barn's long-term disability benefits plan or
receipt of Social Security disability benefits shall be deemed conclusive
evidence of Total Disability (as defined in this Section 5(b)) for purpose of
this Agreement; provided, however, that in the absence of Executive's receipt of
such long-term disability benefits or Social Security benefits, the Board may
determine that Executive is Totally Disabled (as defined in this Section 5(b))
based upon the opinion of an impartial reputable physician ("Impartial
Physician") selected by mutual agreement of the parties or their
representatives, or failing agreement within 10 days of a written request
therefor by Dress Barn to Executive, then an Impartial Physician designated by
mutual agreement of a physician selected by Executive (or his representatives)
and a physician selected by Dress Barn; the written opinion of such Impartial
Physician as to the issue of Total Disability shall be final and binding on the
parties.
(c) Termination by Dress Barn for Cause. Dress Barn may terminate Executive's employment for "Cause." Such termination shall be effective as of the date specified in the written Notice of Termination provided to Executive.
(i) For purposes of this Agreement, the term "Cause" shall mean any of the following:
(A) conviction of a crime (including conviction on a nolo contendere plea) involving the commission by Executive of a felony or of a criminal act involving, in the good faith judgment of the Board, fraud, dishonesty, or moral turpitude but excluding any conviction which results solely from Executive's title or position with Dress Barn and is not based on his personal conduct;
(B) intentional and willful failure to satisfactorily perform employment duties reasonably requested by the Board after thirty (30) days' written notice of such failure to perform, specifying that the failure constitutes cause (other than as a result of vacation, sickness, illness or injury);
(C) fraud or embezzlement;
(D) gross misconduct or gross negligence in connection with the business of Dress Barn or an affiliate which has a substantial adverse effect on Dress Barn or the affiliate;
(E) Executive's intentional and willful act or omission which is materially detrimental to the business or reputation of Dress Barn; or
(F) willful breach of any of the covenants set forth in Section 8 hereof.
(d) Termination by Executive for "Good Reason." Executive may terminate his employment under this Agreement for "Good Reason" after providing a Notice of Termination to Dress Barn at least sixty (60) days prior to the Termination Date.
(i) For purposes of this Agreement, the term "Good Reason" shall mean the occurrence, without Executive's consent, of any of the following circumstances:
(i) any material demotion of Executive from his position, job duties, or responsibilities as President and Chief Executive Officer (except in connection with the termination of Executive's employment for Cause or due to Total Disability or as a result of Executive's death, or temporarily as a result of Executive's illness or other absence);
(ii) a failure by Dress Barn to pay Executive's compensation and benefits in accordance this Agreement;
(iii)relocation of Executive's principal place of work outside of a thirty-five (35) mile radius of its current location;
(iv) any material breach (not covered by clauses (i) - (iii) above) of any of Dress Barn's obligations under this Agreement; or
(v) a Change in Control, as defined in Paragraph 6 below, shall have occurred and Executive shall have provided a Notice of Termination thereafter.
(e) Notice of Termination. Any termination of Executive's employment by Dress Barn or by Executive (other than by reason of Executive's death) shall be communicated by delivery of a written notice of termination to the other party in accordance with Section 9 below ("Notice of Termination"). Any notice of non-renewal pursuant to Section 2 shall be delivered in accordance with Section 9 below.
(f) Termination Date. The effective date of Executive's termination of employment (the "Termination Date") shall be
(i) in the event of termination for non-renewal by Dress Barn or Executive pursuant to Section 2, at the end of the then current Initial Term or Renewal Term;
(ii) in the event of Executive's death, the date of death;
(iii)in the event of termination for Total Disability, the date specified in the Notice of Termination;
(iv) in the event of termination for Cause, the date specified in the Notice of Termination;
(v) in the event of termination for Good Reason, the date specified in the Notice of Termination or such later date as may be mutually agreed by the parties; and
(vi) in the event of any other termination, the last day of the sixty (60) day period beginning on the date on which written Notice of Termination is given or such earlier date as may be specified by Dress Barn or such later date as may be mutually agreed by the parties.
6. Compensation Following Termination of Employment; Change in Control.
(a) In the event Executive's employment is terminated during the Initial Term or Renewal Term for a reason other than for death, Total Disability, for Cause or following a Change in Control, in addition to all other payments and benefits to which Executive shall be entitled, Executive shall be entitled to receive an amount equal to the amount of Executive's Base Salary (at the rate in effect on Executive's Termination Date) for a period equal to what would have otherwise been the period remaining in the applicable term, but not less than one year. Payments to Executive under this Section shall be made at the same time and in the same manner as such compensation had been paid prior to such termination of employment.
(b) Upon a Change in Control (as hereinafter defined), Executive may, at his option, terminate his employment under this Agreement by Notice of Termination given at any time thereafter. In the event Executive's employment is terminated by reason of a Notice of Termination following a Change in Control, Dress Barn shall pay the Executive in a single lump sum on or before the sixtieth day following such election, an amount equal to two times the Base Salary at the rate in effect on the date of the Notice of Termination. Notwithstanding receipt of such lump sum payment, Executive shall be entitled to receive the payments and benefits hereinafter referred to in this Paragraph 6.
A Change in Control shall mean the occurrence of any one of the following events:
(i) any "person," as such term is used in sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a "beneficial owner," as such term is used in Rule 13d-3 under that act, of 30% or more of the outstanding common stock of Dress Barn, excluding a person that is an affiliate (as such term is used under that act) of Dress Barn on the date of this Agreement, or any affiliate of any such person;
(ii) the majority of the board of directors of Dress Barn consists of individuals other than Incumbent Directors, which term means the members of the board of directors of Dress Barn on the date of this Agreement; provided that any person becoming a director subsequent to such date whose election or nomination for election was supported by two-thirds of the directors who then comprised the Incumbent Directors shall be considered an Incumbent Director;
(iii)Dress Barn adopts any plan of liquidation providing for the distribution of all or substantially all its assets;
(iv) all or substantially all the assets or business of Dress Barn are disposed of pursuant to a merger, consolidation or other transaction (unless the shareholders of Dress Barn immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they own the common stock of Dress Barn, all the common stock or other ownership interests of the entity or entities, if any, that succeed to the business of Dress Barn); or (v) Dress Barn combines with another company and is the surviving corporation, but, immediately after the combination, the shareholders of Dress Barn immediately prior to the combination hold, directly or indirectly, 50% or less of the common stock or other ownership interests of the combined company (there being excluded from the number of shares held by such shareholders, but not from the common stock or other ownership interests of the combined company, any shares or other ownership interests received by affiliates of such other company in exchange for stock of such other company).
(c) Upon termination of Executive's employment under this Agreement for any reason, Executive (or his designated beneficiary or estate, as the case may be) shall be entitled to receive the following compensation:
(i) Earned but Unpaid Compensation. Dress Barn shall pay Executive any accrued but unpaid Base Salary for services rendered to the date of termination and any accrued but unpaid expenses required to be reimbursed under this Agreement.
(ii) Other Compensation and Benefits. Except as may otherwise be provided under this Agreement, any benefits to which Executive may be entitled pursuant to any other plans, programs and benefits referred to in Section 4 above shall be determined and paid in accordance with the terms of such plans, programs and benefits.
7. Benefits Payable Following Death or Total Disability.
(a) Death. In the event that Executive's employment is terminated by reason of his death, Executive or his designated beneficiary or estate (as the case may be) shall receive (i) such life insurance or benefits to which Executive is entitled under the plans and policies maintained by the Company, (ii) Executive's full Base Salary at the rate in effect on the date of Executive's death, as if his employment had continued until one year following Executive's death, payments of Base Salary to be made at the same time and in the same manner as such compensation had been paid prior to such termination of employment, and (iii) continuation of Executive's health and medical insurance coverage for his family until one year following Executive's death.
(b) Total Disability. In the event that Executive's employment is
terminated by reason of his Total Disability as determined in accordance with
Section 5(b), Executive or his designated beneficiary or estate (as the case may
be) shall receive (i) such life insurance or disability benefits, if any, to
which Executive is entitled under the plans and policies maintained by Dress
Barn; (ii) Executive's Base Salary as determined under Section 4(a) at the rate
in effect on his Termination Date, as if his employment had continued through
the period remaining in the applicable term, and in no event less than one year
following the Termination Date. Such payments shall be made at the same time and
in the same manner as such compensation had been paid prior to such termination
of employment. Executive's health and medical insurance coverage for the
Executive and his family shall also continue in effect for the same period as
his Base Salary as provided in (ii) above.
8. Restrictive Covenants.
(a) Non-Competition. Executive covenants and agrees that at all times during the Employment Term and for one (1) year thereafter, unless Dress Barn at its sole discretion) gives its prior written consent to such activity by Executive, Executive will not, directly or indirectly, engage in, assist, or have any active interest or involvement whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holdings of less than 1% of the stock of a public company), partner, proprietor or any type of principal whatsoever in any person, firm, or business entity which, directly or indirectly, is engaged in "Competition" with Dress Barn.
For purposes of this Agreement, "Competition" with Dress Barn shall mean
(x) the business of owning and/or operating one or more retail specialty stores
that sell women's apparel, or (y) the business of selling women's apparel
through catalogs or internet sales, or (z) any other business engaged in by
Dress Barn or any subsidiary of Dress Barn (i.e., any entity in which Dress Barn
owns 25% or more of the outstanding equity interests) during the Employment
Term. As used in this Section 8, the term "affiliate" shall mean, with respect
to a particular person, a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such person.
(b) Non-Solicitation. Executive covenants and agrees that at all times during the Employment Term and for one (1) year thereafter, he will not directly or indirectly recruit, solicit, hire, or cause to be hired, any individual who is then, or who has been within the preceding six (6) month period, an employee of Dress Barn.
(c) Non-Disparagement. Executive covenants and agrees that during the course of his employment by Dress Barn or at any time thereafter, Executive shall not, directly or indirectly, in public or private, deprecate, impugn, disparage, or make any remarks that would tend to or be construed to tend to defame Dress Barn or any of its employees, members of its board of directors or agents, nor shall Executive assist any other person, firm or company in so doing.
(d) Right to Injunction. Executive acknowledges that the services to be rendered by him to Dress Barn are of a special and unique character, which gives this Agreement a peculiar value to Dress Barn. Executive acknowledges that a breach of the covenants set forth in this Section 8 will cause irreparable damage to Dress Barn with respect to which Dress Barn's remedy at law for damages will be inadequate. Therefore, in the event of breach or anticipatory breach of the covenants set forth in this Section 8 by Executive, Executive and Dress Barn agree that Dress Barn shall be entitled, in addition to remedies otherwise available to it at law or equity, to injunctions, both preliminary and permanent, enjoining or restraining such breach or anticipatory breach and Executive hereby consents to the issuance thereof forthwith and without bond by any court of competent jurisdiction.
(e) Acknowledgments and Separability of Covenants. The parties acknowledge that the type and periods of restriction imposed in Section 8 are fair and reasonable and are reasonably required for the protection of Dress Barn; and that the time, scope and other provisions of such Section have been specifically negotiated by the parties. Executive specifically acknowledges that the restrictions contemplated by this Agreement will not prevent
him from being employed or earning a livelihood. The covenants contained in this
Section constitute a series of separate covenants, one for each applicable State
in the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding, a court shall hold that any of
the covenants set forth in Section 8 are not permitted by applicable laws,
Executive and Dress Barn agree that such covenants shall and are hereby reformed
to the maximum time, geographic, or occupational limitations permitted by such
laws. Further, in the event a court shall hold unenforceable any of the separate
covenants deemed included herein, then such unenforceable covenant or covenants
shall be deemed eliminated from the provisions of this Agreement for the purpose
of such proceeding to the extent necessary to permit the remaining separate
covenants to be enforced in such proceeding. 9. Notices. Any notice, consent,
request or other communication made or given in connection with this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by registered or certified mail, return receipt requested, or by
facsimile or by hand delivery, to the party listed below at their following
respective addresses or at such other address as each may specify by notice to
the other:
To Dress Barn:
The Dress Barn, Inc.
30 Dunnigan Drive
Suffern, NY 10901
Attention: Chairman of the Board of Directors
To Executive:
David R. Jaffe
45 Hemlock Ridge
Weston, CT 06883
10. Miscellaneous.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in New York. Any dispute between the parties hereto
arising out of or relating to this Agreement (other than any dispute relating to
Section 8 above) shall be settled exclusively by arbitration in New York, New
York in accordance with the provisions of this Agreement and the commercial
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
(b) The article and section headings contained herein are for reference purposes
(c) This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersede all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof. It may not be amended except by a written agreement signed by both parties.
(d) Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns. This Agreement and the rights and benefits of Executive under this Agreement shall not be assignable by Executive; provided, however, that nothing in this Section 10 shall preclude Executive from designating a beneficiary or beneficiaries to receive any benefit payable on his death.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
DRESS BARN, INC.
Date: May 2, 2002 By:/S/ ARMAND CORREIA
Name:Armand Correia
Title:Senior Vice President
Date: May 2, 2002 By:/S/ DAVID R. JAFFE
Name:David R. Jaffe
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EXHIBIT 21
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
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(**) Inactive Subsidiary
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Shareholders
The Dress Barn, Inc.
Suffern, New York
We consent to the incorporation by reference in Registration Statement Nos. 33-17488, 33-47415, 33-60196 and 333-18135 on Form S-8 of The Dress Barn, Inc. of our report dated September 16, 2002, appearing in this Annual Report on Form 10-K of The Dress Barn, Inc. and Subsidiaries for the year ended July 27, 2002.
Deloitte & Touche LLP
New York, New York
October 14, 2002