-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AflzQSs+78ooMPdWBxA4X05JzhPbHPT8C5ao01OR8cD2v/wR2aU81DTw7Jb3WaVq 8EPMH+nGeu+6+iw6yEgo+A== 0000850090-95-000007.txt : 19951226 0000850090-95-000007.hdr.sgml : 19951226 ACCESSION NUMBER: 0000850090-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951028 FILED AS OF DATE: 19951208 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANNTAYLOR INC CENTRAL INDEX KEY: 0000850090 STANDARD INDUSTRIAL CLASSIFICATION: 5621 IRS NUMBER: 510297083 STATE OF INCORPORATION: DE FISCAL YEAR END: 0128 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11980 FILM NUMBER: 95600363 BUSINESS ADDRESS: STREET 1: 142 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125413300 10-Q 1 ANNTAYLOR, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 28, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-11980 ANNTAYLOR, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 51-0297083 - - ------------------------------ -------------------------------------- (State of other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 142 West 57th Street, New York, NY 10019 - - ---------------------------------- ------------ (Address of principal executive offices) (Zip Code) (212) 541-3300 ------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether 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 the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Outstanding as of Class November 24, 1995 ---------------------- ------------------ Common Stock, $1.00 par value 1 This registrant meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. =================================================================== INDEX TO FORM 10-Q Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Operations for the Quarters and Nine Months Ended October 28, 1995 and October 29, 1994 3 Condensed Consolidated Balance Sheets at October 28, 1995 and January 28, 1995 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 28, 1995 and October 29, 1994 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Operations 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 ===================================================================== PART I. FINANCIAL INFORMATION Item 1. Financial Statements ANNTAYLOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Quarters and Nine Months Ended October 28, 1995 and October 29, 1994 (unaudited) Quarters Ended Nine Months Ended ----------------- ------------------ Oct. 28, Oct. 29, Oct. 28, Oct. 29, 1995 1994 1995 1994 -------- -------- -------- ------- (in thousands) Net sales $178,500 $164,632 $530,501 $469,851 Cost of sales 98,362 87,576 304,586 251,970 ------- ------- ------- ------- Gross profit 80,138 77,056 225,915 217,881 Selling, general and administrative expenses 69,074 54,826 198,758 152,635 Amortization of goodwill 2,377 2,377 7,130 7,130 ------- ------- ------- ------- Operating income 8,687 19,853 20,027 58,116 Interest expense 5,402 3,642 14,368 10,215 Other (income) expense, net 374 (10) 200 316 ------- ------ ------- ------- Income before income taxes and extraordinary loss 2,911 16,221 5,459 47,585 Income tax provision 2,225 7,937 5,091 23,318 ------- ------- ------- ------- Income before extraordinary loss 686 8,284 368 24,267 Extraordinary loss (net of income tax benefit of $654,000) --- --- --- 868 ------- ------- ------- ------- Net income $ 686 $ 8,284 $ 368 $ 23,399 ======= ======= ====== ======== See accompanying notes to condensed consolidated financial statements. =============================================================================== ANNTAYLOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS October 28, 1995 and January 28, 1995 October 28, 1995 January 28,1995 ---------------- --------------- (unaudited) (in thousands) ASSETS Current assets Cash $ 1,251 $ 1,551 Accounts receivable, net of allowances of $684,000 and $931,000, respectively 73,849 61,211 Merchandise inventories 120,966 93,705 Prepaid expenses and other current assets 14,577 7,956 Deferred income taxes 3,650 3,650 -------- ------- Total current assets 214,293 168,073 Property and equipment Land and building 9,189 499 Leasehold improvements 62,000 43,370 Furniture and fixtures 82,877 59,105 Construction in progress 33,966 24,867 ------- ------- 188,032 127,841 Less accumulated depreciation and amortization 38,605 31,503 ------- ------- Net property and equipment 149,427 96,338 Goodwill, net of accumulated amortization of $64,349,000 and $57,219,000, respectively 315,901 323,031 Investment in CAT 4,856 3,792 Deferred income taxes 400 1,600 Deferred financing costs, net of accumulated amortization of $1,580,000 and $956,000, respectively 3,848 2,829 Other assets 2,837 2,591 ------- ------- Total assets $691,562 $598,254 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable $ 62,483 $ 36,625 Accrued rent 7,396 5,243 Accrued interest 5,370 1,994 Accrued expenses 13,541 22,030 ------- ------- Total current liabilities 88,790 65,892 Long-term debt 268,000 200,000 Other liabilities 7,826 6,250 Commitments and contingencies Stockholder's equity Common stock, $1.00 par value; 1,000 shares authorized; 1 share issued 1 1 Additional paid-in capital 311,581 311,115 Retained earnings 15,364 14,996 ------- ------- Total stockholder's equity 326,946 326,112 ------- ------- Total liabilities and stockholder's equity $691,562 $598,254 ======= ======= See accompanying notes to condensed consolidated financial statements. ============================================================================ ANNTAYLOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended October 28, 1995 and October 29, 1994 (unaudited) Nine Months Ended ------------------------------- Oct. 28, 1995 Oct. 29, 1994 ------------- ------------- (in thousands) Operating activities: Net income $ 368 $ 23,399 Adjustments to reconcile net income to net cash providedby operating activities: Extraordinary loss --- 1,522 Equity earnings in CAT (1,064) (1,108) Provision for loss on accounts receivable 866 1,193 Depreciation and amortization 14,008 8,591 Amortization of goodwill 7,130 7,130 Amortization of deferred financing costs 624 793 Amortization of deferred compensation 78 280 Deferred income taxes 1,200 --- Loss on disposal of property and equipment 947 1,125 (Increase) decrease in: Receivables (13,444) (12,833) Merchandise inventories (27,261) (43,434) Prepaid expenses and other current assets (6,621) 998 Increase (decrease) in: Accounts payable 25,372 9,109 Accrued expenses (2,071) 4,891 Other non-current assets and liabilities, net 1,331 446 ------- ------- Net cash provided by operating activities 1,463 2,102 Investing activities: Purchases of property and equipment (68,994) (33,273) ------- ------- Net cash used by investing activities (68,994) (33,273) ------- ------- Financing activities: Increase in bank overdrafts 486 --- Borrowing under revolving credit agreement 39,000 53,000 Parent company contribution 388 33,965 Payments of financing costs (1,643) (294) Proceeds from (payment of) term loan 25,000 (56,000) Net borrowing on receivables facility 4,000 3,049 ------- ------- Net cash provided by financing activities 67,231 33,720 ------- ------- Net increase (decrease) in cash (300) 2,549 Cash, beginning of period 1,551 292 ------ -------- Cash, end of period $ 1,251 $ 2,841 ====== ====== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest $10,398 $ 6,655 ======= ======= Cash paid during the period for income taxes $ 7,549 $21,065 ======= ======= See accompanying notes to condensed consolidated financial statements. =========================================================================== ANNTAYLOR, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation --------------------- The condensed consolidated financial statements are unaudited but, in the opinion of management, contain all adjustments (which are of a normal recurring nature) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All significant intercompany accounts and transactions have been eliminated. The results of operations for the 1995 interim period shown in this report are not necessarily indicative of results to be expected for the fiscal year. The January 28, 1995 condensed consolidated balance sheet amounts have been derived from the previously audited consolidated balance sheet of AnnTaylor Stores Corporation. Certain fiscal 1994 amounts have been reclassified to conform to the 1995 presentation. It is not considered necessary to include detailed footnote information as of October 28, 1995 and October 29, 1994. The financial information set forth herein should be read in conjunction with the Notes to the Company's Consolidated Financial Statements contained in the AnnTaylor, Inc. 1994 Annual Report on Form 10-K. 2. Long-term Debt -------------- The following summarizes long-term debt outstanding at October 28, 1995: (in thousands) Revolving Credit Agreement $103,000 Term Loan 25,000 8-3/4% Notes 100,000 Receivables Facility 40,000 ------ Total long-term debt $268,000 ======= On September 29, 1995, AnnTaylor, Inc. ("the Company") entered into an amended and restated credit agreement to replace its existing bank credit agreement. The amended and restated credit agreement provides, among other things, for a new $25,000,000 term loan, in addition to the $125,000,000 revolving credit facility provided for under the original credit agreement. The term loan bears interest at a rate equal to, at the Company's option, the Bank of America National Trust and Savings Association ("Bank of America") (1) Base Rate plus 1.50%, or (2) Eurodollar Rate plus 2.50%, and amounts outstanding under the revolving credit facility bear interest at a rate equal to, at the Company's option, the Bank of America (1) Base Rate plus .75%, or (2) Eurodollar Rate plus 1.75%. Effective December 6, 1995, the interest rate on the term loan will increase by 1%. The principal amount of the term loan is payable on September 29, 1998, and the maturity date of the revolving credit facility is July 29, 1998. The amended and restated credit agreement contains financial and other covenants, including limitations on indebtedness, liens and investments, restrictions on dividends or other distributions to stockholders, and maintaining certain financial ratios and specified levels of net worth, some of which provisions were amended by the new credit agreement. The amended and restated credit agreement also provides for, among other things, a limitation on capital expenditures commencing in fiscal 1996. The Company's payment obligations under the agreement are guaranteed by its parent company, Ann Taylor Stores Corporation ("ATSC"). On October 31, 1995, AnnTaylor Funding, Inc., a wholly owned subsidiary of the Company, entered into an amended and restated receivables financing agreement, refinancing its existing receivables financing facility on substantially the same terms as the prior facility, except that the Lender under the agreement changed from Clipper Receivables Corporation to Market Street Capital Corp. The financial covenants in the new agreement were revised to mirror certain of the financial covenants contained in the Company's amended and restated bank credit agreement. On November 27, 1995, the Company and its wholly owned subsidiary AnnTaylor Distribution Services, Inc., received the proceeds of a $7,000,000 seven year mortgage loan secured by the Company's distribution center land and building in Louisville, Kentucky. The mortgage loan bears interest at 7.5% and is payable in monthly installments of $64,891 through December 1, 1997, and thereafter in monthly installments sufficient to amortize the then remaining principal balance over a period of five years. ================================================================= Item 2. Management's Discussion and Analysis of Operations Results of Operations Nine Months Ended ----------------------------------- October 28, 1995 October 29, 1994 ---------------- ---------------- Number of Stores: Open at beginning of period 262 231 Opened during period 43 26 Expanded during period* 29 21 Closed during period 2 4 Open at end of period 303 253 Type of Stores Open at End of Period: AnnTaylor Stores 256 231 AnnTaylor Factory Stores 23 17 Ann Taylor Loft stores 15 --- AnnTaylor Studio stores 9 5 ------------------ * Expanded stores are excluded from comparable store sales for the first year following expansion. ======================================================================== Nine Months Ended October 28, 1995 Compared to Nine Months Ended October 29, 1994 The Company's net sales in the first nine months of 1995 increased to $530,501,000 from $469,851,000 in the first nine months of 1994, an increase of $60,650,000 or 12.9%. The increase in net sales was attributable to the opening of new stores and the expansion of existing stores, offset by the closing of two stores and a 6.2% decrease in comparable store sales in the first nine months of 1995. The decrease in comparable store sales is attributable to weak customer response to the Company's Spring and Summer merchandise assortments, as well as continued weakness in demand for women's apparel generally. Gross profit as a percentage of net sales decreased to 42.6% in the first nine months of 1995 from 46.4% in the first nine months of 1994. This decrease was primarily attributable to markdowns associated with increased promotional activities. Selling, general and administrative expenses represented 37.5% of net sales in the first nine months of 1995, compared to 32.5% of net sales in the first nine months of 1994. The increase in selling, general and administrative expenses as a percentage of net sales was primarily attributable to higher tenancy, store maintenance and store selling costs as a percentage of sales (approximately 74% of the increase), higher distribution center expense relating to start-up costs of the Company's distribution facility in Louisville, Kentucky in the second quarter (approximately 8% of the increase), additional catalog expense relating to the Company's test of its catalog as a mail order vehicle (approximately 7% of the increase), higher merchandising and design expense (approximately 8% of the increase) and higher packaging and supplies expense (approximately 3% of the increase). The Company returned its catalog format to principally an advertising vehicle, rather than a mail order business, commencing Fall 1995. As a result of the foregoing, operating income decreased to $20,027,000, or 3.8% of net sales, in the first nine months of 1995, from $58,116,000, or 12.4% of net sales, in the first nine months of 1994. Amortization of goodwill was $7,130,000 in the first nine months of each of 1995 and 1994. Operating income, without giving effect to such amortization in either year, was $27,157,000, or 5.1% of net sales, in the 1995 period and $65,246,000, or 13.9% of net sales, in the 1994 period. Interest expense was $14,368,000 in the first nine months of 1995 and $10,215,000 in the first nine months of 1994. The increase in interest expense is attributable to higher interest rates applicable to the Company's debt obligations and higher outstanding indebtedness in 1995. The income tax provision was $5,091,000, or 93.3% of income before income taxes in the 1995 period, compared to $23,318,000, or 49.0% of income before income taxes and extraordinary loss, in the 1994 period. The effective income tax rate for both periods was higher than the statutory rate primarily because of non- deductible goodwill amortization. As a result of the foregoing factors, the Company had a net income of $368,000 or 0.1% of net sales, for the first nine months of 1995 compared to net income before extraordinary loss of $24,267,000, or 5.2% of net sales, for the first nine months of 1994. In connection with debt financing activities undertaken in May and July of 1994, the Company incurred an extraordinary loss of $868,000 net of taxes, in the second quarter of 1994. After giving effect to these extraordinary losses, the Company had net income of $23,399,000 in the first nine months of 1994. ================================================================== PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.4.4 Amended and Restated Credit Agreement, dated as of September 29, 1995, among the Company, Bank of America, Fleet Bank, National Association, as Co-Agents, the financial institutions from time to time party thereto, BA Securities, Inc., as Arranger, and Bank of America, as Agent. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company filed on October 17, 1995. 10.5.1 Amended and Restated Guaranty, dated as of September 29, 1995, made by ATSC in favor of Bank of America, as Agent. Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of the Company filed on October 17, 1995. 10.6.1 Amended and Restated Security and Pledge Agreement, dated as of September 29, 1995, made by the Company in favor of Bank of America, as Agent. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company filed on October 17, 1995. 10.7.1 Amended and Restated Security and Pledge Agreement, dated as of September 29, 1995, made by ATSC in favor of Bank of America, as Agent. Incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of the Company filed on October 17, 1995. ======================================================================= Item 6. Exhibits and Reports on Form 8-K (continued) (a) Exhibits (continued) 10.8 Trademark Security Agreement, dated as of September 29, 1995, made by the Company in favor of Bank of America, as Agent. Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of the Company filed on October 17, 1995. 10.26.4 Amended and Restated Receivables Financing Agreement dated October 31, 1995, among AnnTaylor Funding, Inc., the Company, Market Street Capital Corp. and PNC Bank, National Association. Incorporated by reference to Exhibit 10.31.4 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended October 28, 1995 filed on December 8, 1995. 10.29 Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Financing Statement dated November 20, 1995, between AnnTaylor Distribution Services, Inc., as Mortgagor, and General Electric Capital Assurance Company, as Mortgagee. Incorporated by reference to Exhibit 10.34 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended October 28, 1995 filed on December 8, 1995. 10.30 Promissory Note dated November 20, 1995 from the Company and AnnTaylor Distribution Services, Inc., collectively as Borrower, to General Electric Capital Assurance Company, as Lender. Incorporated by reference to Exhibit 10.35 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended October 28, 1995 filed on December 8, 1995. (b) Reports on Form 8-K: The Company filed a report with the Commission on Form 8-K dated September 29, 1995 with respect to the amendment and restatement of the Company's then existing revolving credit agreement and ATSC's amended and restated guarantee of the Company's indebtedness under that agreement. ======================================================================== SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AnnTaylor, Inc. Date: December 8, 1995 By: /s/ Walter J. Parks ------------------- -------------------------- Walter J. Parks Senior Vice President - Finance (Duly Authorized Officer and Principal Accounting Officer) EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY OF FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND CONDENSED CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000850090 ANNTAYLOR, INC. 1,000 9-MOS FEB-03-1996 OCT-28-1995 1,251 0 74,533 684 120,966 214,293 188,032 38,605 691,562 88,790 0 1 0 0 326,945 691,562 530,501 530,501 304,586 304,586 206,088 0 14,368 5,459 5,091 0 0 0 0 368 0 0
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