0000850090-95-000004.txt : 19950914 0000850090-95-000004.hdr.sgml : 19950914 ACCESSION NUMBER: 0000850090-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950729 FILED AS OF DATE: 19950912 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: 95573212 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 July 29, 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 August 27, 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 Six Months Ended July 29, 1995 and July 30, 1994 3 Condensed Consolidated Balance Sheets at July 29, 1995 and January 28, 1995 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 29, 1995 and July 30, 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 Six Months Ended July 29, 1995 and July 30, 1994 (unaudited) Quarters Ended Six Months Ended -------------------- ----------------- July 29, July 30, July 29, July 30, 1995 1994 1995 1994 -------- -------- -------- -------- (in thousands) Net sales $183,695 $159,936 $352,001 $305,219 Cost of sales 114,869 87,991 206,224 164,394 ------- ------- ------- ------- Gross profit 68,826 71,945 145,777 140,825 Selling, general and administrative expenses 67,233 50,836 129,684 97,809 Amortization of goodwill 2,376 2,376 4,753 4,753 ------- ------- ------- ------- Operating income (loss) (783) 18,733 11,340 38,263 Interest expense 4,468 3,117 8,966 6,573 Other (income) expense, net (231) 186 (174) 326 ------- ------ ------- ------- Income (loss) before income taxes (5,020) 15,430 2,548 31,364 Income tax provision (benefit) (1,211) 7,507 2,866 15,381 ------- ------- ------- ------ Income (loss) before extraordinary loss (3,809) 7,923 (318) 15,983 Extraordinary loss (net of income tax benefit of $654,000) --- (868) --- (868) ------- ------- ------- ------- Net income (loss) $(3,809) $ 7,055 $ (318) $15,115 ======= ======= ======= ======= See accompanying notes to condensed consolidated financial statements. =============================================================================== ANNTAYLOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS July 29, 1995 and January 28, 1995 July 29, January 28, 1995 1995 -------- ----------- (unaudited) (in thousands) ASSETS Current assets Cash $ 1,820 $ 1,551 Accounts receivable, net of allowances of $628,000 and $931,000, respectively 72,373 61,211 Merchandise inventories 99,411 93,705 Prepaid expenses and other current assets 14,302 7,956 Deferred income taxes 3,650 3,650 ------- ------- Total current assets 191,556 168,073 Property and equipment Land and building 9,175 499 Leasehold improvements 50,573 43,370 Furniture and fixtures 72,367 59,105 Construction in progress 36,952 24,867 ------- ------- 169,067 127,841 Less accumulated depreciation and amortization 38,950 31,503 ------- ------- Net property and equipment 130,117 96,338 Goodwill, net of accumulated amortization of $61,972,000 and $57,219,000, respectively 318,278 323,031 Investment in CAT 4,436 3,792 Deferred income taxes 1,600 1,600 Deferred financing costs, net of accumulated amortization of $1,341,000 and $956,000, respectively 2,444 2,829 Other assets 2,351 2,591 ------- ------- Total assets $650,782 $598,254 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable $ 45,425 $ 36,625 Accrued rent 6,487 5,243 Accrued salaries 4,781 5,929 Accrued expenses 12,087 18,095 ------- ------- Total current liabilities 68,780 65,892 Long-term debt 249,000 200,000 Other liabilities 6,874 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 311,449 311,115 Retained earnings 14,678 14,996 ------- ------- Total stockholder's equity 326,128 326,112 ------- ------- Total liabilities and stockholder's equity $650,782 $598,254 ======= ======= See accompanying notes to condensed consolidated financial statements. ========================================================================= ANNTAYLOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended July 29, 1995 and July 30, 1994 (unaudited) Six Months Ended --------------------------- July 29, July 30, 1995 1994 -------- ------- (in thousands) Operating activities: Net income (loss) $(318) $15,115 Adjustments to reconcile net income (loss) to net cash (used by) provided by operating activities: Equity earnings in CAT (644) (694) Extraordinary loss --- 1,522 Provision for loss on accounts receivable 457 811 Depreciation and amortization 9,139 5,278 Amortization of goodwill 4,753 4,753 Amortization of deferred financing costs 385 613 Amortization of deferred compensation 52 250 Loss on disposal of property and equipment 401 759 (Increase) decrease in: Receivables (11,619) (6,485) Merchandise inventories (5,706) (7,418) Prepaid expenses and other current assets (6,346) 931 Increase (decrease) in: Accounts payable 8,800 3,093 Accrued expenses (5,912) 61 Other non-current assets and liabilities, net 864 258 ------ ------ Net cash (used by) provided by operating activities (5,694) 18,847 Investing activities: Purchases of property and equipment (43,319) (21,861) ------- ------- Net cash used by investing activities (43,319) (21,861) Financing activities: Borrowing under revolving credit agreement 45,000 26,000 Payment of bank term loan --- (56,000) Net proceeds from common stock offering --- 30,414 Parent Company contribution 282 2,121 Net borrowings under receivables facility 4,000 1,566 Payment of financing costs --- (122) ------- ------- Net cash provided by financing activities 49,282 3,979 ------- ------- Net increase in cash 269 965 Cash, beginning of period 1,551 292 ------- ------- Cash, end of period $ 1,820 $ 1,257 ======= ======= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest $ 8,035 $ 5,969 ====== ======= Cash paid during the period for income taxes $ 5,915 $14,169 ====== ====== 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, Inc. 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 July 29, 1995 and July 30, 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 July 29, 1995: (in thousands) Revolving Credit Agreement $109,000 8-3/4% Notes 100,000 Receivables Facility 40,000 ------- Total long-term debt $249,000 ======== The maturity date of the revolving credit agreement was extended through July 29, 1998. At July 29, 1995, the Company and AnnTaylor Funding, Inc. were not in compliance with one financial covenant under the revolving credit agreement and the receivables facility relating to the Company's fixed charge coverage ratio. The revolving credit agreement and the receivables facility were amended as of September 7, 1995 and September 11, 1995, respectively, to reduce the required fixed charge coverage ratio for the second quarter, as a result of which the Company satisfied this covenant, and to reduce the required fixed charge coverage ratio for the third and fourth quarters of 1995. The amendment to the revolving credit agreement also, among other things, revised the cleandown provision for 1995 to require the Company to reduce the outstanding loan balance under the agreement to $85,000,000 or less for at least fifteen consecutive days during the last six months of fiscal 1995 and added limitations on capital expenditures for fiscal 1995 through 1998 as follows: 1995: $78.2 million; 1996: $45 million; 1997: $30 million; and 1998: $30 million. ================================================================== Item 2. Management's Discussion and Analysis of Operations Results of Operations Six Months Ended ------------------ July 29, July 30, 1995 1994 ------- ------- Number of Stores: Open at beginning of period 262 231 Opened during period 29 8 Expanded during period* 17 13 Closed during period 2 4 Open at end of period 289 235 Type of Stores Open at End of Period: AnnTaylor Stores 247 222 AnnTaylor Factory Stores 23 13 Ann Taylor Loft stores 11 --- AnnTaylor Studio stores 8 --- --------------- * Expanded stores are excluded from comparable store sales for the first year following expansion. Six Months Ended July 29, 1995 Compared to Six Months Ended July 30, 1994 The Company's net sales in the first six months of 1995 increased to $352,001,000 from $305,219,000 in the first six months of 1994, an increase of $46,782,000 or 15.3%. 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 3.3% decrease in comparable store sales in the first six months of 1995. The decrease in comparable store sales is attributable to weak customer response to the Company's spring merchandise selections, as well as to continued weakness in demand for women's apparel generally. Gross profit as a percentage of net sales decreased to 41.4% in the first six months of 1995 from 46.1% in the first six months of 1994. This decrease was attributable to the increased cost of goods sold as a percentage of net sales primarily resulting from markdowns associated with increased promotional activities. Selling, general and administrative expenses represented 36.8% of net sales in the first six months of 1995, compared to 32.0% of net sales in the first six 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 71% of the increase), higher distribution center expense relating to the start-up costs in the second quarter of the Company's new distribution facility in Louisville, Kentucky in the second quarter (approximately 7% of the increase), additional catalog expense relating to the Company's test of its catalog as a mail order vehicle (approximately 11% of the increase) and higher merchandising and design expense (approximately 11% of the increase). The Company has decided to return 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 $11,340,000, or 3.2% of net sales, in the first six months of 1995, from $38,263,000, or 12.5% of net sales, in the first six months of 1994. Amortization of goodwill was $4,753,000 in the first six months of 1995 and 1994. Operating income, without giving effect to such amortization in either year, was $16,093,000, or 4.6% of net sales, in the 1995 period and $43,016,000, or 14.1% of net sales, in the 1994 period. Interest expense was $8,966,000 in the first six months of 1995 and $6,573,000 in the first six months of 1994. The increase in interest expense is primarily attributable to higher interest rates applicable to the Company's debt obligations and higher outstanding indebtedness in 1995. The income tax provision was $2,866,000, or 112.5% of income before income taxes in the 1995 period, compared to $15,381,000, 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 loss of $318,000 or 0.1% of net sales, for the first six months of 1995 compared to net income before extraordinary loss of $15,983,000, or 5.2% of net sales, for the first six months of 1994. In connection with the debt refinancing activities in May and July 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 $15,115,000 in the first six months of 1994. ================================================================ PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.4.2 Extension of the final maturity date of the Revolving Credit Agreement to July 29, 1998, dated as of June 29, 1995, among the Company, Bank of America National Trust and Savings Association ("Bank of America"), Fleet Bank, the financial institutions party thereto, and Bank of America, as Agent. Incorporated by reference to Exhibit 10.9.2 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended July 29, 1995 filed on September 12, 1995. 10.4.3 Amendment No. 2 to the Revolving Credit Agreement, dated as of September 7, 1995, among the Company, Bank of America, Fleet Bank, the financial institutions party thereto, and Bank of America, as Agent. Incorporated by reference to Exhibit 10.9.3 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended July 29, 1995 filed on September 12, 1995. 10.26.3 Third Amendment to the Receivables Financing Agreement, dated as of September 11, 1995, among AnnTaylor Funding, Inc., the Company, Clipper Receivables Corporation, State Street Boston Capital Corporation and PNC Bank National Association. Incorporated by reference to Exhibit 10.31.3 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended July 29, 1995 filed on September 12, 1995. 10.28.1 Amendment to the AnnTaylor Stores Corporation Deferred Compensation Plan as approved by the Board of Directors on August 11, 1995. Incorporated by reference to Exhibit 10.33.1 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended July 29, 1995 filed on September 12, 1995. (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: September 11, 1995 By: /s/ Paul E. Francis --------------------- -------------------- Paul E. Francis Executive Vice President - Finance and Administration (Chief Financial Officer) Date: September 11, 1995 By: /s/ Walter J. Parks -------------------- ---------------------- Walter J. Parks Senior Vice President - Finance (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 6-MOS FEB-03-1996 JUL-29-1995 1,820 0 73,001 628 99,411 191,556 169,067 38,950 650,782 68,780 0 1 0 0 326,127 650,782 352,001 352,001 206,224 206,224 134,263 0 8,966 2,548 2,866 0 0 0 0 (318) 0 0