-----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, Wvtw7OcVJH/ulBbfoK7SRMtBHQ/NpWIHPw//shOPIzaT6mvSbw1D9t9ihyB8ZdL8 mS3fA3x4cjITEg/4AN6Wqw== 0000850090-97-000008.txt : 19970918 0000850090-97-000008.hdr.sgml : 19970918 ACCESSION NUMBER: 0000850090-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970912 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: SEC FILE NUMBER: 001-11980 FILM NUMBER: 97679325 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 August 2, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-10738 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 29, 1997 ----------------------------- ---------------- 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 Six Months Ended August 2, 1997 and August 3, 1996................... 3 Condensed Consolidated Balance Sheets at August 2, 1997 and February 1, 1997................. 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended August 2, 1997 and August 3, 1996...................................... 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 August 2, 1997 and August 3, 1996 (unaudited) Quarters Ended Six Months Ended ------------------ -------------------- August 2, August 3, August 2, August 3, 1997 1996 1997 1996 --------- -------- ---------- -------- (in thousands) Net sales........................ $184,999 $187,862 $382,063 $372,329 Cost of sales.................... 99,645 107,115 198,073 208,428 ------- ------- ------- ------- Gross profit..................... 85,354 80,747 183,990 163,901 Selling, general and administrative expenses........ 73,733 70,029 150,370 140,283 Amortization of goodwill......... 2,760 2,376 5,520 4,753 ------- ------- ------- ------- Operating income................. 8,861 8,342 28,100 18,865 Interest expense................. 5,027 6,210 10,573 12,331 Other expense (income), net...... 25 (293) 275 (424) ------- ------- ------- ------- Income before income taxes........ 3,809 2,425 17,252 6,958 Income tax provision.............. 2,824 1,798 9,792 4,519 ------- ------- ------- ------- Income before extraordinary loss.. 985 627 7,460 2,439 Extraordinary loss (net of income. tax benefit of $130,000)........ (173) --- (173) --- ------- ------- ------- ------- Net income........................ $ 812 $ 627 $ 7,287 $ 2,439 ======= ======= ======= ======= See accompanying notes to condensed consolidated financial statements. =============================================================================== ANNTAYLOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS August 2, 1997 and February 1, 1997 August 2, February 1, 1997 1997 ---------- ----------- (unaudited) (in thousands) ASSETS Current assets Cash and cash equivalents............... $ 25,751 $ 7,025 Accounts receivable, net................ 58,212 63,605 Merchandise inventories................. 88,855 100,237 Prepaid expenses and other current assets........................ 24,342 25,653 ------- ------- Total current assets.................. 197,160 196,520 Property and equipment..................... 221,596 209,081 Less accumulated depreciation and amortization........................ 78,098 65,648 ------- ------- Net property and equipment............ 143,498 143,433 Goodwill, net.............................. 336,259 341,779 Deferred financing costs, net.............. 1,848 2,743 Other assets............................... 3,623 3,664 ------- ------- Total assets.......................... $682,388 $688,139 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable........................ $ 41,387 $ 34,341 Accrued expenses........................ 45,226 43,042 Current portion of long-term debt....... 824 287 ------- ------- Total current liabilities............. 87,437 77,670 Long-term debt............................. 105,727 130,905 Deferred income taxes...................... 4,872 4,872 Other liabilities.......................... 8,950 7,952 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................ 445,444 443,952 Retained earnings......................... 29,957 22,787 ------- ------- Total stockholder's equity........... 475,402 466,740 ------- ------- Total liabilities and stockholder's equity...............$682,388 $688,139 ======= ======= See accompanying notes to condensed consolidated financial statements. ======================================================================== ANNTAYLOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended August 2, 1997 and August 3, 1996 (unaudited) Six Months Ended ----------------------- August 2, August 3, 1997 1996 ---------- ----------- (in thousands) Operating activities: Net income...................................... $ 7,287 $ 2,439 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss............................ 303 --- Equity earnings in CAT........................ --- (760) Provision for loss on accounts receivable..... 909 835 Depreciation and amortization................. 13,976 12,358 Amortization of goodwill...................... 5,520 4,753 Amortization of deferred financing costs...... 775 780 Amortization of deferred compensation......... 530 16 Loss on disposal of property and equipment.... 191 220 (Increase) decrease in: Receivables................................. 4,484 5,448 Merchandise inventories..................... 11,382 3,454 Prepaid expenses and other current assets... 1,311 (641) Increase (decrease) in: Accounts payable............................ 7,046 (6,797) Accrued expenses............................ 1,955 (2,695) Other non-current assets and liabilities, net 1,037 707 ------- ------- Net cash provided by operating activities........ 56,706 20,117 Investing activities: Purchases of property and equipment.............. (14,000) (5,059) ------- ------- Net cash used by investing activities............ (14,000) (5,059) Financing activities: Net repayments under revolving credit agreement... --- (97,000) Net repayments under term loan.................... (24,500) --- Term loan prepayment penalty...................... (184) --- Payments on mortgage.............................. (141) (131) Parent company contribution....................... 845 96,140 Net repayments under receivables facility......... --- (14,000) Payment of financing costs........................ --- (63) ------- ------- Net cash used by financing activities............. (23,980) (15,054) ------- ------- Net increase in cash............................... 18,726 4 Cash and cash equivalents, beginning of period..... 7,025 1,283 ------- ------- Cash and cash equivalents, end of period........... $ 25,751 $ 1,287 ======== ======= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest $ 10,103 $ 11,395 ======= ======= Cash paid during the period for income taxes $ 12,682 $ 3,405 ======= ======= 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 1997 interim period shown in this report are not necessarily indicative of results to be expected for the fiscal year. The February 1, 1997 condensed consolidated balance sheet amounts have been derived from the previously audited consolidated balance sheet of AnnTaylor, Inc. (the "Company") Certain fiscal 1996 amounts have been reclassified to conform to the 1997 presentation. Detailed footnote information is not included for the periods ended August 2, 1997 and August 3, 1996. The financial information set forth herein should be read in conjunction with the Notes to the Company's Consolidated Financial Statements contained in the Company's 1996 Annual Report on Form 10-K. 2. Long-Term Debt -------------- The following summarizes long-term debt outstanding at August 2, 1997: (in thousands) 8-3/4% Notes........................... $100,000 Mortgage............................... 6,551 ------- Total debt........................... 106,551 Less current portion................... 824 ------- Total long-term debt................. $105,727 ======= On July 2, 1997, the Company used available cash to prepay the outstanding balance of its $24,500,000 term loan due September 1998. This loan repayment resulted in an extraordinary charge to earnings of $173,000, net of income tax benefit. ====================================================================== On July 29, 1997, AnnTaylor Global Sourcing, Inc. amended its credit facility with the Hongkong and Shanghai Banking Corporation Limited, increasing the commitment available for letters of credit under the facility to $50,000,000 and extending the maturity date of the facility to January 30, 1998. 3. Supplementary Data ------------------ The following unaudited proforma condensed consolidated operating data for the quarter and six months ended August 3, 1996 have been presented to give effect to the acquisition of the Company's sourcing subsidiary, which was consummated in September 1996 (the "Sourcing Acquisition"), as if it had occurred at the beginning of such periods: Quarter Ended Six Months Ended ---------------- ------------------ August 3, 1996 August 3, 1996 ----------------- Actual Proforma Actual Proforma -------- --------- ------ -------- (in thousands) Sales......................... $187,862 $187,862 $372,329 $372,329 Net income.................... $ 627 $ 1,791 $ 2,439 $ 4,766 The proforma data set forth above does not purport to be indicative of the results that actually would have occurred if the Sourcing Acquisition had occurred at the beginning of the periods presented or of results which may occur in the future. 4. Recently Issued Statements of Financial Accounting Standards ------------------------------------------------------------ In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income", which requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. This statement is effective for periods beginning after December 15, 1997. The Company has determined that this statement will have no material effect on the Company's financial statements. Also, in June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information", which addresses segment reporting, including, where applicable, requirements to report selected segment information quarterly and provide entity-wide disclosures about products and services, major customers, and the material countries in which the entity holds assets and reports revenues. This statement is effective for financial statements for periods beginning after December 15, 1997. Management currently is evaluating the effects of this change on the Company's financial statements. ==================================================================== Item 2. Management's Discussion and Analysis of Operations -------------------------------------------------- Results of Operations - --------------------- Six Months Ended --------------------- August 2, August 3, 1997 1996 --------- --------- Number of Stores: Open at beginning of period.................. 309 306 Opened during period......................... 9 5 Expanded during period*...................... 1 1 Closed during period......................... 8 5 Open at end of period........................ 310 306 Type of Stores Open at End of Period: AnnTaylor Stores.......................... 268 257 AnnTaylor Factory Stores.................. 10 9 AnnTaylor Loft stores..................... 31 31 AnnTaylor Studio stores................... 1 9 - --------------- * Expanded stores are excluded from comparable store sales for the first year following expansion. Six Months Ended August 2, 1997 Compared to Six Months Ended - ----------------------------------------------------------------- August 3, 1996 - -------------- The Company's net sales in the first six months of 1997 increased to $382,063,000 from $372,329,000 in the first six months of 1996, an increase of $9,734,000 or 2.6%. The increase in net sales was attributable to an increase in sales during the first quarter of 1997 compared to the first quarter of 1996, resulting from the opening of new stores and the expansion of existing stores as well as positive customer reaction to the Company's first quarter merchandise offerings, offset by the decrease in sales during the second quarter of 1997. The second quarter decrease in sales was principally attributable to the Company's lower promotional inventory position during the period, and, to a lesser extent, lower customer acceptance of certain of the Company's second quarter merchandise offerings. Comparable store sales increased 0.4% for the first six months of 1997 compared to the first six months of 1996, reflecting a comparable store sales increase of 4.4% in the first quarter of 1997, offset by a comparable store sales decrease of 3.6% in the second quarter of 1997 compared to the same periods in the prior year. Gross profit as a percentage of net sales increased to 48.2% in the first six months of 1997 from 44.0% in the first six months of 1996. This increase was attributable to increased initial markups resulting from the Sourcing Acquisition, and lower markdowns associated with decreased promotional activities. ================================================================= Selling, general and administrative expenses were $150,370,000, which represented 39.4% of net sales, in the first six months of 1997, compared to $140,283,000 or 37.7% of net sales, in the first six months of 1996. The increase in expense was primarily attributable to increased tenancy and store payroll expense related to increased retail square footage. As a result of the foregoing, the Company had operating income of $28,100,000, or 7.4% of net sales, in the first six months of 1997, compared to operating income of $18,865,000, or 5.1% of net sales, in the first six months of 1996. Amortization of goodwill was $5,520,000 in the first six months of 1997 and $4,753,000 in the first six months of 1996. Operating income, without giving effect to goodwill amortization in either year, was $33,620,000, or 8.8% of net sales, in the 1997 period and $23,618,000, or 6.3% of net sales, in the 1996 period. Interest expense was $10,573,000 in the first six months of 1997 and $12,331,000 in the first six months of 1996. The decrease in interest expense is attributable to reduced outstanding indebtedness in the first six months of 1997 compared to the first six months of 1996. The income tax provision was $9,792,000, or 56.8% of income before income taxes and extraordinary loss, in the 1997 period, compared to $4,519,000, or 64.9% of income before income taxes, in the 1996 period. The effective income tax rate for both periods differed from the statutory rate primarily because of non- deductible goodwill amortization. On July 2, 1997, the Company used available cash to prepay $24,500,000, the outstanding balance of its term loan due September 1998. This loan repayment will result in annualized interest expense savings of approximately $2,200,000, and resulted in an extraordinary charge to earnings in the first six months of fiscal 1997 of $173,000. As a result of the foregoing factors, the Company had net income of $7,287,000, or 1.9% of net sales, for the first six months of 1997 compared to net income of $2,439,000 or 0.7% of net sales, for the first six months of 1996. ==================================================================== PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.14.1 Amendment to the AnnTaylor Stores Corporation ("ATSC") Amended and Restated 1992 Stock Option and Restricted Stock and Unit Award Plan, as approved by stockholders of ATSC on June 18, 1997. Incorporated by reference to Exhibit 10.15.1 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended August 2, 1997 filed on September 12, 1997. 10.15 AnnTaylor Stores Corporation Amended and Restated Management Performance Compensation Plan, as approved by stockholders of ATSC on June 18, 1997. Incorporated by reference to Exhibit 10.16 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended August 2, 1997 filed on September 12, 1997. 10.24.4 First Amendment to the Amended and Restated Credit Agreement, dated as of April 11, 1997, between AnnTaylor Global Sourcing, Inc. and the Hongkong and Shanghai Banking Corporation Limited. Incorporated by reference to Exhibit 10.25.4 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended August 2, 1997 filed on September 12, 1997. 10.24.5 Second Amendment to the Amended and Restated Credit Agreement, dated as of July 29, 1997, between AnnTaylor Global Sourcing, Inc. and the Hongkong and Shanghai Banking Corporation Limited. Incorporated by reference to Exhibit 10.25.5 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended August 2, 1997 filed on September 12, 1997. (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 12, 1997 By: /s/ J. Patrick Spainhour ----------------------- --------------------------- J. Patrick Spainhour Chairman and Chief Executive Officer Date: September 12, 1997 By: /s/ Walter J. Parks ------------------------- ---------------------- Walter J. Parks Senior Vice President and Chief Financial Officer EX-27 2 FDS
5 0000850090 ANNTAYLOR, INC. 1,000 6-MOS JAN-31-1998 AUG-02-1997 25,751 0 59,028 816 88,855 197,160 221,596 78,098 682,388 87,437 100,000 0 0 1 475,401 682,388 382,063 382,063 198,073 198,073 156,165 0 10,573 17,252 9,792 7,460 0 (173) 0 7,287 0 0
-----END PRIVACY-ENHANCED MESSAGE-----