-----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, S+nXyZYQu4qdFoXxo8Te6lX5ScQ8wBlu9IrZTtil7ttMzXmuKX/xgQXCd9F2Dnt/ MTEMsmBl4pBZjOBpDVkP/Q== 0000850090-97-000010.txt : 19971217 0000850090-97-000010.hdr.sgml : 19971217 ACCESSION NUMBER: 0000850090-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971101 FILED AS OF DATE: 19971216 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: 97739226 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 November 1, 1997 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 28, 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 Nine Months Ended November 1, 1997 and November 2, 1996.............................. 3 Condensed Consolidated Balance Sheets as of November 1, 1997 and February 1, 1997............. 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended November 1, 1997 and November 2, 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 ======================================================================== [PAGE 3] PART I. FINANCIAL INFORMATION Item 1. Financial Statements -------------------- ANNTAYLOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Quarters and Nine Months Ended November 1, 1997 and November 2, 1996 (unaudited) Quarters Ended Nine Months Ended ------------------- ------------------ Nov. 1, Nov. 2, Nov. 1, Nov. 2, 1997 1996 1997 1996 -------- -------- -------- ------- (in thousands) Net sales............................. $187,200 $212,670 $569,263 $584,999 Cost of sales......................... 94,468 115,580 292,541 324,008 ------- ------- ------- ------- Gross profit.......................... 92,732 97,090 276,722 260,991 Selling, general and administrative expenses............. 78,669 75,838 229,039 216,121 Employment contract separation expense --- 3,500 --- 3,500 Amortization of goodwill.............. 2,760 2,578 8,280 7,331 ------- ------- ------- ------- Operating income...................... 11,303 15,174 39,403 34,039 Interest expense...................... 4,958 6,345 15,531 18,676 Other expense, net.................... 342 898 617 474 ------- ------- ------- ------- Income before income taxes............ 6,003 7,931 23,255 14,889 Income tax provision.................. 3,818 4,669 13,610 9,188 ------- ------- ------- ------- Income before extraordinary loss...... 2,185 3,262 9,645 5,701 Extraordinary loss (net of income tax benefit of $130,000)............ --- --- (173) --- ------- ------- ------- ------- Net income......................... $ 2,185 $ 3,262 $ 9,472 $ 5,701 ======= ======= ======= ======= See accompanying notes to condensed consolidated financial statements. ============================================================================== [PAGE 4] ANNTAYLOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS November 1, 1997 and February 1, 1997 November 1, February 1, 1997 1997 ----------- ----------- (unaudited) (in thousands) ASSETS Current assets Cash and cash equivalents.................... $ 7,116 $ 7,025 Accounts receivable, net..................... 66,662 63,605 Merchandise inventories...................... 114,377 100,237 Prepaid expenses and other current assets.... 23,333 25,653 ------- ------- Total current assets....................... 211,488 196,520 Property and equipment.......................... 234,809 209,081 Less accumulated depreciation and amortization............................. 91,968 65,648 ------- ------- Net property and equipment................. 142,841 143,433 Goodwill, net................................... 333,499 341,779 Deferred financing costs, net................... 1,596 2,743 Other assets.................................... 2,715 3,664 ------- ------- Total assets............................... $692,139 $688,139 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable............................. $ 43,921 $ 34,341 Accrued expenses............................. 50,357 43,042 Current portion of long-term debt............ 964 287 ------- ------- Total current liabilities.................. 95,242 77,670 Long-term debt.................................. 105,515 130,905 Deferred income taxes........................... 3,872 4,872 Other liabilities............................... 9,630 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.................... 445,795 443,952 Retained earnings............................. 32,084 22,787 ------- ------- Total stockholder's equity............... 477,880 466,740 ------- ------- Total liabilities and stockholder's equity................................. $692,139 $688,139 ======= ======= See accompanying notes to condensed consolidated financial statements. ============================================================================ [PAGE 5] ANNTAYLOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended November 1, 1997 and November 2, 1996 (unaudited) Nine Months Ended ------------------ Nov. 1, Nov. 2, 1997 1996 ------ -------- (in thousands) Operating activities: Net income......................................... $ 9,472 $ 5,701 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss............................... 303 --- Employment contract separation expense........... --- 3,500 Equity earnings in CAT........................... --- (1,043) Provision for loss on accounts receivable........ 1,366 1,315 Depreciation and amortization.................... 21,022 19,232 Amortization of goodwill......................... 8,280 7,331 Amortization of deferred financing costs......... 1,097 1,198 Amortization of deferred compensation............ 797 25 Deferred income taxes............................ --- 3,200 Loss on disposal of property and equipment....... 246 641 Change in assets and liabilities net of effects from purchase of ATGS: (Increase) decrease in: Receivables.................................. (4,423) (1,441) Merchandise inventories...................... (14,140) (19,731) Prepaid expenses and other current assets.... 1,320 1,472 Increase (decrease) in: Accounts payable............................. 9,580 (3,515) Accrued expenses............................. 7,315 5,576 Other non-current assets and liabilities, net 2,171 208 ------- ------- Net cash provided by operating activities.......... 44,406 23,669 Investing activities: Purchases of property and equipment................ (20,220) (9,795) Purchase of ATGS................................... --- (356) ------- ------- Net cash used by investing activities.............. (20,220) (10,151) ------- ------- Financing activities: Net repayments under revolving credit agreement.... --- (94,000) Net repayments under term loan..................... (24,500) --- Term loan prepayment penalty....................... (184) --- Payments on mortgage............................... (213) (198) Parent company contribution........................ 871 96,200 Net repayments under receivables facility.......... --- (14,000) Payments of financing costs........................ (69) (382) ------- ------- Net cash used by financing activities.............. (24,095) (12,380) ------- ------- Net increase in cash................................ 91 1,138 Cash, beginning of period........................... 7,025 1,283 ------- ------- Cash, end of period................................. $ 7,116 $ 2,421 ======= ======= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest........... $ 12,491 $ 14,998 ======= ======= Cash paid during the period for income taxes....... $ 12,973 $ 4,803 ======= ======= See accompanying notes to condensed consolidated financial statements. ============================================================================ [PAGE 6] 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 November 1, 1997 and November 2, 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 November 1, 1997. (in thousands) 8-3/4% Notes........................... $100,000 Mortgage............................... 6,479 ------- Total debt........................... 106,479 Less current portion................... 964 ------- Total long-term debt................. $105,515 ======= 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. ====================================================================== [PAGE 7] 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. On November 19, 1997, the maturity date of the facility was extended to July 29, 1998. 3. Supplementary Data ------------------ The following unaudited proforma condensed consolidated operating data for the quarter and nine months ended November 2, 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 Nine Months Ended ----------------- ----------------- November 2, 1996 November 2, 1996 ----------------- ----------------- Actual Proforma Actual Proforma ------ -------- ------ -------- (in thousands) Sales..................... $212,670 $212,670 $584,999 $584,999 Net income................ $ 3,262 $ 3,863 $ 5,701 $ 8,629 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. ================================================================= [PAGE 8] Item 2. Management's Discussion and Analysis of Operations -------------------------------------------------- Results of Operations Nine Months Ended ----------------------- November 1, November 2, 1997 1996 ----------- ----------- Number of Stores: Open at beginning of period............ 309 306 Opened during period................... 24 9 Expanded during period*................ 8 7 Closed during period................... 9 6 Open at end of period.................. 324 309 Type of Stores Open at End of Period: AnnTaylor Stores....................... 283 260 AnnTaylor Factory Stores............... 14 13 AnnTaylor Loft stores.................. 27 27 AnnTaylor Studio stores................ --- 9 - ------------------- * Expanded stores are excluded from comparable store sales for the first year following expansion. Nine Months Ended November 1, 1997 Compared to Nine Months Ended - ---------------------------------------------------------------- November 2, 1996 - ---------------- The Company's net sales in the first nine months of 1997 decreased to $569,263,000 from $584,999,000 in the first nine months of 1996, a decrease of $15,736,000 or 2.7%. Management believes that the decrease in net sales was primarily attributable to lower customer acceptance of certain of the Company's summer and third quarter merchandise offerings and the Company's lower promotional inventory position in the second quarter and the beginning of the third quarter, compared to the prior year. Comparable stores sales decreased 5.5% for the first nine months of 1997 compared to the first nine months of 1996 due principally to the same factors. Gross profit as a percentage of net sales increased to 48.6% in the first nine months of 1997 from 44.6% in the first nine months of 1996. This increase was attributable to increased initial markups resulting from the Sourcing Acquisition and lower markdowns associated with decreased promotional activities compared to the prior year. Selling, general and administrative expenses were $229,039,000, or 40.2% of net sales, in the first nine months of 1997, compared to $216,121,000, or 36.9% of net sales, in the first nine months of 1996. The increase in operating expense was =================================================================== [PAGE 9] primarily attributable to increased expenses in marketing and information systems as well as increased tenancy and store payroll expense related to increased retail square footage. The increase in operating expense as a percentage of net sales was primarily the result of decreased leverage on fixed expenses as a result of lower sales. As a result of the foregoing, operating income increased to $39,403,000, or 6.9% of net sales, in the first nine months of 1997, from $34,039,000, or 5.8% of net sales, in the first nine months of 1996. Operating income for the first nine months of 1996 reflects a one-time charge of $3,500,000, or 0.4% of net sales, representing the Company's obligations under the former chairperson's employment contract. Amortization of goodwill was $8,280,000 in the first nine months of 1997 compared to $7,331,000 in the first nine months of 1996. Operating income, without giving effect to such goodwill amortization in either year, was $47,683,000, or 8.4% of net sales, in the 1997 period and $41,370,000, or 7.1% of net sales, in the 1996 period. Interest expense was $15,531,000 in the first nine months of 1997 and $18,676,000 in the first nine months of 1996. The decrease in interest expense is primarily attributable to reduced outstanding indebtedness in the first nine months of 1997. The income tax provision was $13,610,000, or 58.5% of income before income taxes in the 1997 period, compared to $9,188,000, or 61.7% of income before income taxes in the 1996 period. The effective income tax rate for both periods was higher than the statutory rate primarily as a result 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 $9,472,000, or 1.7% of net sales, for the first nine months of 1997, compared to net income of $5,701,000, or 1.0% of net sales, for the first nine months of 1996. =================================================================== [PAGE 10] PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.24.6 Notification of extension of termination date of the Amended and Restated Credit Agreement, dated as of September 20, 1996 between AnnTaylor Global Sourcing, Inc. and the HongKong and Shanghai Banking Corporation Limited. Incorporated by reference to Exhibit 10.25.6 to the Quarterly Report on Form 10-Q of ATSC for the Quarter ended November 1, 1997 filed on December 16, 1997. (b) Reports on Form 8-K: None ========================================================================= [PAGE 11] 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 16, 1997 By: /s/ J. Patrick Spainhour --------------------- ---------------------------- J. Patrick Spainhour Chairman and Chief Executive Officer Date: December 16, 1997 By: /s/ Walter J. Parks --------------------- ----------------------------- Walter J. Parks Senior Vice President and Chief Financial Officer EX-27 2 FDS
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