-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, t2dUkBcESelMXUkMQVE3OROKt2ct6lnu0HB+e9BwsbKwkPVj3SHQPRyV/D44nfm1 CKIu/R+6hHMLLjJkbOJPjA== 0000850090-94-000004.txt : 19941213 0000850090-94-000004.hdr.sgml : 19941213 ACCESSION NUMBER: 0000850090-94-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941029 FILED AS OF DATE: 19941212 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANNTAYLOR INC CENTRAL INDEX KEY: 0000850090 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [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: 94564219 BUSINESS ADDRESS: STREET 1: 142 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125413300 10-Q 1 ANNTAYLOR, INC. 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 29, 1994. OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission File No. 33-28522 ----------------------------- 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 October 29, 1994 ----- ---------------- Common Stock, $1.00 par value 1 The 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 29, 1994 and October 30, 1993 3 Condensed Consolidated Balance Sheets at October 29, 1994 and January 29, 1994 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 29, 1994 and October 30, 1993 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Operations 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 ===================================================================== PART I. FINANCIAL INFORMATION Item 1. Financial Statements ANNTAYLOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Quarters and Nine Months Ended October 29, 1994 and October 30, 1993 (unaudited) Quarters Ended Nine Months Ended ------------------- ------------------- Oct 29, Oct 30, Oct 29, Oct 30, 1994 1993 1994 1993 ---- ---- ---- ---- (in thousands) Net sales $164,632 $122,025 $469,851 $367,037 Cost of sales 87,576 64,929 251,970 199,001 ------- ------- ------- ------- Gross profit 77,056 57,096 217,881 168,036 Selling, general and administrative expenses 54,826 41,870 152,635 122,717 Amortization of goodwill 2,377 2,376 7,130 7,130 ------- ------- ------- ------- Operating income 19,853 12,850 58,116 38,189 Interest expense 3,642 3,917 10,215 13,994 Other (income) expense, net (10) (2) 316 (111) ------- ------- ------- ------- Income before income taxes and extraordinary loss 16,221 8,935 47,585 24,306 Income tax provision 7,937 4,614 23,318 13,065 ------- ------- ------- ------- Income before extraordinary loss 8,284 4,321 24,267 11,241 Extraordinary loss (net of income tax benefit of $654,000 and $5,652,000, respectively) --- --- (868) (10,496) ------- ------- ------- ------- Net income $8,284 $4,321 $23,399 $ 745 ====== ====== ======= ======= See accompanying notes to condensed consolidated financial statements. ============================================================================ ANNTAYLOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS October 29, 1994 and January 29, 1994 Oct 29, Jan 29, 1994 1994 ------- -------- (unaudited) (in thousands) ASSETS Current assets Cash $ 2,841 $ 292 Accounts receivable, net of allowances of $802,000 and $787,000, respectively 60,919 49,279 Merchandise inventories 104,324 60,890 Prepaid expenses and other current assets 6,186 7,184 Deferred income taxes 3,750 3,750 ------- ------- Total current assets 178,020 121,395 Property and equipment, net of accumulated depreciation of $33,231,000 and $28,703,000, respectively 71,610 48,053 Deferred financing costs, net of accumulated amortization of $771,000 and $643,000, respectively 2,969 4,990 Goodwill, net of accumulated amortization of $54,843,000 and $47,713,000, respectively 325,407 332,537 Deferred income taxes 1,500 1,500 Investment in CAT 3,353 2,245 Other assets 2,393 2,679 ------- ------- Total assets $585,252 $513,399 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable $ 46,673 $ 37,564 Accrued expenses 17,055 16,252 Accrued interest 4,722 1,955 Accrued rent 4,905 3,584 Current portion of long-term debt --- 8,757 ------ ------ Total current liabilities 73,355 68,112 Long-term debt 189,049 180,243 Other liabilities 5,933 5,773 Commitments and contingencies Stockholder's equity Common stock, $1.00 par value; 1,000 shares authorized; 1 share issued and outstanding 1 1 Additional paid-in capital 310,271 276,026 Retained earnings (accumulated deficit) 6,643 (16,756) ------- ------- Total stockholder's equity 316,915 259,271 ------- ------- Total liabilities and stockholder's equity $585,252 $513,399 ======= ======= See accompanying notes to condensed consolidated financial statements. ============================================================================= ANNTAYLOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended October 29, 1994 and October 30, 1993 (unaudited) Nine Months Ended ------------------ Oct 29, Oct 30, 1994 1993 ---- ---- (in thousands) Operating activities: Net income $23,399 $ 745 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss 1,522 16,148 Equity earnings in CAT (1,108) (409) Provision for loss on accounts receivable 1,193 984 Depreciation and amortization 8,591 6,323 Amortization of goodwill 7,130 7,130 Accretion of original issue discount --- 2,864 Amortization of deferred financing costs 793 1,005 Amortization of deferred compensation 280 209 Deferred income taxes --- (250) Loss on disposal of property and equipment 1,125 288 (Increase) decrease in: Receivables (12,833) (8,107) Merchandise inventories (43,434) (12,462) Prepaid expenses and other current assets 998 5,379 Increase (decrease) in: Accounts payable 9,109 7,110 Accrued expenses 4,891 (1,281) Other non-current assets and liabilities, net 446 527 ------- ------- Net cash provided by operating activities 2,102 26,203 Investing activities: Purchases of property and equipment (33,273) (13,897) Investment in CAT --- (1,640) ------- ------- Net cash used by investing activities (33,273) (15,537) ------- ------- Financing activities: Decrease in bank overdrafts --- (2,361) Borrowings under line of credit agreement --- 6,500 Payments of long-term debt --- (96,969) Parent company contribution 33,965 9,233 Repurchase of Debt Securities --- (93,689) Net proceeds from 8-3/4% Subordinated Notes --- 107,387 Payments of financing costs (294) (3,505) Repayment of note due from stockholder --- 999 Repayment of 10% Junior Subordinated Notes --- (14,641) Proceeds from (payment of) Term Loan (56,000) 80,000 Borrowing under revolving credit facility 53,000 --- Net borrowing on receivables facility 3,049 --- ------- ------- Net cash provided by (used by) financing activities 33,720 (7,046) ------- ------- Net increase in cash 2,549 3,620 Cash, beginning of period 292 226 ------- ------- Cash, end of period $ 2,841 $ 3,846 ======= ======= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest $ 6,655 $ 7,601 ======= ======= Cash paid during the period for income taxes $21,065 $ 3,744 ======= ======= 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 1994 interim period shown in this report are not necessarily indicative of results to be expected for the fiscal year. The January 29, 1994 condensed consolidated balance sheet amounts have been derived from the previously audited consolidated balance sheet of AnnTaylor, Inc.. Certain fiscal 1993 amounts have been reclassified to conform to the 1994 presentation. It is not considered necessary to include detailed footnote information as of October 29, 1994 and October 30, 1993. 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. 1993 Annual Report on Form 10-K. 2. Long-term Debt -------------- In May 1994, the Company applied $30,000,000 of the net proceeds from its public stock Offering referred to in Note 3 below, to reduce the amount of the Term Loan outstanding under its then-existing bank credit agreement. In July 1994, the Company completed the refinancing of its outstanding bank debt by entering into a new credit agreement (the "Revolving Credit Agreement") providing for a revolving loan facility of $75,000,000. The Company borrowed funds under this revolving credit facility to prepay in full its outstanding Term Loan and other obligations under its then-existing bank credit agreement. The Revolving Credit Agreement has an initial term of three years. There are no amortization payments required to be made under the agreement during its term, although the Company is required to reduce the outstanding loan balance under the facility to $50,000,000 or less for thirty consecutive days during fiscal 1994, to $40,000,000 or less for thirty consecutive days during fiscal 1995, and to $30,000,000 or less for thirty consecutive days in each fiscal year thereafter. The revolving credit facility bears interest at a rate per annum equal to, at the Company's option, Bank of America's (1) Base Rate or (2) Eurodollar rate plus .75%. The Revolving 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. The following summarizes long-term debt outstanding at October 29, 1994: (in thousands) Revolving Credit Facility $ 53,000 8-3/4% Notes 100,000 Receivables Facility 36,049 -------- Total Long-term Debt $189,049 ======== 3. Extraordinary Item ------------------ On May 18, 1994, AnnTaylor Stores Corporation ("ATSC"), the parent of the Company, completed a public offering of its common stock (the "Offering") in which it issued and sold 1,000,000 shares of common stock at a price of $32.00 per share, resulting in aggregate net proceeds of $30,414,000 (after payment of underwriting discounts and expenses of the Offering payable by the Company). As required by the Company's then-existing bank credit agreement, $30,000,000 of the net proceeds of the Offering were used to reduce the amount of the Term Loan outstanding under that agreement. The non-cash charge associated with the payment on the Term Loan with the proceeds of the Offering and refinancing of long term debt (see Note 2) resulted in an extraordinary loss of $1,522,000 ($868,000 net of taxes). The Offering was consummated concurrently with the public offering and sale by certain affiliates of Merrill Lynch Capital Partners (the "Selling Stockholders") of 4,075,000 shares of ATSC's Common Stock held by them. Neither ATSC nor the Company received any of the proceeds of the shares sold by the Selling Stockholders. After giving effect to this sale, the Selling Stockholders and other affiliates of Merrill Lynch Capital Partners held shares representing approximately 32.5% of ATSC's Common Stock. On November 22, 1994, the Selling Stockholders filed with the Securities and Exchange Commission Notices on Form 144 of the proposed sale of an aggregate of 804,000 shares of ATSC's Common Stock held by them. Upon sale of such shares, the interest of the Selling Stockholders and other affiliates of Merrill Lynch Capital Partners would be reduced to approximately 28.9% of ATSC's Common Stock. 4. Supplementary Data ------------------ The unaudited pro forma income before extraordinary loss, assuming the Offering had occurred at the beginning of the year, would have been $24,522,000 for the nine months ended October 29, 1994. Such computation reflects interest expense savings of $500,000 related to the reduction of the term loan with the net proceeds of the Offering. =========================================================================== Item 2. Management's Discussion and Analysis of Operations -------------------------------------------------- Results of Operations Nine Months Ended ----------------- Oct. 29, Oct. 30, 1994 1993 ---- ---- Number of Stores: Open at beginning of period 231 219 Opened during period 26 7 Expanded during period* 21 7 Closed during period 4 1 Open at end of period 253 225 Type of Stores Open at End of Period: AnnTaylor Stores 231 219 AnnTaylor Factory Stores 17 6 AnnTaylor Studio Stores** 5 --- ---------------- * Expanded stores are excluded from comparable store sales for the first year following expansion. ** The Company's free-standing shoe and accessory store concept. ========================================================================== Nine Months Ended October 29, 1994 Compared to Nine Months Ended October 30, 1993 - ------------------------------------------------------------------- The Company's net sales increased to $469,851,000 in the first nine months of 1994, from $367,037,000 in the first nine months of 1993, an increase of $102,814,000, or 28.0%. The increase in net sales was attributable to the opening of new stores, the expansion of existing stores and an 11.5% increase in comparable store sales, partially offset by the closing of 4 stores during the first six months of 1994. The increase in comparable store sales was due primarily to positive customer response to the Company's merchandise assortments. Gross profit as a percentage of net sales increased to 46.4% in the first nine months of 1994, from 45.8% in the first nine months of 1993. The increase in gross margin reflected a higher level of full price selling and lower levels of promotional activity. Selling, general and administrative expenses represented 32.5% of net sales in the first nine months of 1994, compared to 33.4% of net sales in the first nine months of 1993. The decrease as a percentage of net sales was primarily attributable to an increase in net sales at a rate greater than the rate of increase in selling, general and administrative expenses, principally as a result of improved leverage on fixed expenses resulting from strong comparable store sales growth, an increase in sales from the Company's factory stores, which have lower store operating expenses than full price Ann Taylor stores, and improved expense management. As a result of the foregoing, operating income increased to $58,116,000, or 12.4% of net sales, in the first nine months of 1994, from $38,189,000, or 10.4% of net sales, in the first nine months of 1993. Amortization of goodwill was $7,130,000 in the first nine months of 1994 and in the first nine months of 1993. Operating income, without giving effect to such amortization in either year, was $65,246,000, or 13.9% of net sales, in the 1994 period and $45,319,000, or 12.3% of net sales, in the 1993 period. Interest expense was $10,215,000, including $793,000 of non- cash interest expense, in the first nine months of 1994 and $13,994,000, including $3,869,000 of non-cash interest expense, in the first nine months of 1993. The decrease in interest expense is attributable to lower interest rates applicable to the Company's debt obligations in the 1994 period, resulting principally from refinancing transactions entered into in the fall of 1993 and the reduction of the Company's term loan with the net proceeds from the Offering in May 1994. The income tax provision was $23,318,000, or 49.0% of income before income taxes and extraordinary loss, in the 1994 period, compared to $13,065,000, or 53.8% of income before income taxes and extraordinary loss, in the 1993 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 net income before extraordinary loss of $24,267,000, or 5.2% of net sales, for the first nine months of 1994, compared to net income before extraordinary loss of $11,241,000, or 3.1% of net sales, for the first nine months of 1993. In connection with the debt refinancing activities described above (see Financial Statements Notes 2 and 3), the Company incurred an extraordinary loss of $868,000 net of taxes, in the second quarter of 1994. The Company also incurred an extraordinary loss of $10,496,000, net of taxes, in the second quarter of 1993 as a result of debt refinancing activities undertaken in the second quarter of 1993. After giving effect to these extraordinary losses, the Company had net income of $23,399,000 in the first nine months of 1994 compared to a net income of $745,000 in the first nine months of 1993. =================================================================== PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.8 Employment Agreement dated as of February 1, 1994 between ATSC and Sally Frame Kasaks. Incorporated by Reference to Exhibit 10.8 on Form 10-Q of ATSC for the Quarter ended October 29, 1994 filed on December 9, 1994. 27 Financial Data Schedule for the nine months ended October 29, 1994. (b) Reports on Form 8-K: None =================================================================== 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 9, 1994 By: /s/ Paul E. Francis ------------------ --------------------------- Paul E. Francis Executive Vice President - Finance and Administration (Chief Financial Officer) Date: December 9, 1994 By: /s/ Walter J. Parks ----------------- --------------------------- Walter J. Parks Vice President - Finance (Principal Accounting Officer) EX-27 2 EXHIBIT 27 FDS
5 THIS SCHEDULE CONTAINS SUMMARY 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 JAN-28-1995 OCT-29-1994 2,841 0 61,721 802 104,324 178,020 104,841 33,231 585,252 73,355 0 1 0 0 316,914 585,252 469,851 469,851 251,970 251,970 160,081 0 10,215 47,585 23,318 0 0 (868) 0 23,399 0 0
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