-----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, NZe2B2tR+sCck2EEdbVqeXUEmzj/72hNIurDoHF3tpOoiaeU667mZRoyMyhDVYVL FhtdOHR8GhgDhBIdVvjtHw== 0000874214-97-000009.txt : 19970918 0000874214-97-000009.hdr.sgml : 19970918 ACCESSION NUMBER: 0000874214-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970912 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAYLOR ANN STORES CORP CENTRAL INDEX KEY: 0000874214 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 133499319 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10738 FILM NUMBER: 97679322 BUSINESS ADDRESS: STREET 1: 142 WEST 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125413300 10-Q 1 ANNTAYLOR STORES CORP 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 STORES CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3499319 - ------------------------------- ------------------------------------- (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, $.0068 par value 25,637,853 ========================================================================== 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.... 9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders... 15 Item 6. Exhibits and Reports on Form 8-K...................... 16 ========================================================================== PART I. FINANCIAL INFORMATION Item 1. Financial Statements ANNTAYLOR STORES CORPORATION 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 except per share amounts) 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 ======= ======= ======= ======= Net income per share of common stock: Income per share before extraordinary loss.......... 0.04 0.03 0.29 0.11 Extraordinary loss per share.. (0.01) --- (0.01) --- ------- ------- ------- ------- Net income per share.......... $ 0.03 $ 0.03 $ 0.28 $ 0.11 ======= ======= ======= ======= See accompanying notes to condensed consolidated financial statements. =============================================================================== ANNTAYLOR STORES CORPORATION 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 STOCKHOLDERS' 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 Company-Obligated Mandatorily Redeemable Convertible Preferred Securities of AnnTaylor Finance Trust Holding Solely Convertible Debentures................... 96,275 96,158 Stockholders' equity Common stock, $.0068 par value; 40,000,000 shares authorized; 25,649,454 and 25,598,489 shares issued, respectively.................... 174 174 Additional paid-in capital................ 350,531 349,545 Warrants to acquire 2,814 shares of common stock......................... 46 46 Retained earnings......................... 29,783 22,613 Deferred compensation on restricted stock................................... (1,201) (1,590) ------- ------- 379,333 370,788 Less treasury stock, 11,601 shares, at cost................................. (206) (206) ------- ------- Total stockholders' equity........... 379,127 370,582 ------- ------- Total liabilities and stockholders' equity...............$682,388 $688,139 ======= ======= See accompanying notes to condensed consolidated financial statements. ========================================================================== ANNTAYLOR STORES CORPORATION 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) Net proceeds from issuance of Preferred Securities................................... --- 95,985 Exercise of stock options...................... 845 155 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 STORES CORPORATION 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 Stores Corporation. 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 AnnTaylor Stores Corporation 1996 Annual Report to Stockholders. 2. Income Per Share ---------------- Net income per share is calculated by dividing net income by the total of the weighted average number of common shares and common share equivalents outstanding, assuming the exercise of outstanding warrants and the dilutive effect of outstanding stock options, computed in accordance with the treasury stock method. The number of shares used in the calculation was as follows: Quarters Ended Six Months Ended ------------------- ------------------ August 2, August 3, August 2, August 3, 1997 1996 1997 1996 --------- --------- --------- --------- (in thousands) Common shares.......... 25,631 23,097 25,616 23,091 Warrants............... 3 32 2 34 Stock options.......... 165 108 164 101 ------ ------ ------ ------ 25,799 23,237 25,782 23,226 ====== ====== ====== ====== ====================================================================== Fully diluted income per share, assuming the conversion into common stock of the 8-1/2% Convertible Trust Originated Preferred Securities, is not presented for the quarter and six months ended August 2, 1997 or August 3, 1996, as there is no dilutive effect of the assumed conversion. The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which specifies the computation, presentation and disclosure requirements for basic and diluted earnings per share. This statement is effective for financial statements for periods ending after December 15, 1997. The Company has determined that this statement will have no material effect on the Company's reported earnings per share. 3. 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, or $0.01 per share. 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. ====================================================================== 4. 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, except per share amounts) Sales....................... $187,862 $187,862 $372,329 $372,329 Net income.................. $ 627 $ 1,791 $ 2,439 $ 4,766 Net income per share........ $ .03 $ .07 $ .11 $ .19 Weighed average shares outstanding.............. 23,237 25,585 23,226 25,574 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. 5. 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 - --------------------- Quarters Ended Six Months Ended ------------------- ------------------- August 2, August 3, August 2, August 3, 1997 1996 1997 1996 --------- --------- --------- ---------- Number of Stores: Open at beginning of period....... 311 307 309 306 Opened during period.............. 7 1 9 5 Expanded during period*........... 1 1 1 1 Closed during period.............. 8 2 8 5 Open at end of period............. 310 306 310 306 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. Quarter Ended August 2, 1997 Compared to Quarter Ended August 3, 1996 - ---------------------------------------------------------------------- The Company's net sales in the second quarter of 1997 decreased to $184,999,000 from $187,862,000 in the second quarter of 1996, a decrease of $2,863,000 or 1.5%. Management believes that the decrease in net 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 for the second quarter of 1997 decreased 3.6% compared to the second quarter of 1996, due principally to the same factors. On a per square foot basis, inventories were 29.6% lower at the end of the second quarter of 1997 than at the end of the second quarter of 1996, excluding inventories associated with AnnTaylor Global Sourcing. Gross profit as a percentage of net sales increased to 46.1% in the second quarter of 1997 from 43.0% in the second quarter of 1996. This increase was primarily attributable to increased initial markups resulting from the Sourcing Acquisition. Selling, general and administrative expenses were $73,733,000, or 39.9% of net sales in the second quarter of 1997, compared to $70,029,000, or 37.3% of net sales in the second quarter of 1996. The increase in operating expenses as a percentage of net sales was primarily the result of decreased leverage on fixed expenses as a result of negative comparable store sales. The increase in expense dollars 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 $8,861,000, or 4.8% of net sales, in the second quarter of 1997, compared to operating income of $8,342,000, or 4.4% of net sales, in the second quarter of 1996. Amortization of goodwill was $2,760,000 in the second quarter of 1997 and $2,376,000 in the second quarter of 1996. Operating income, without giving effect to goodwill amortization in either year, was $11,621,000, or 6.3% of net sales, in the 1997 period and $10,718,000, or 5.7% of net sales, in the 1996 period. Interest expense was $5,027,000 in the second quarter of 1997 and $6,210,000 in the second quarter of 1996. The decrease in interest expense is attributable to reduced outstanding indebtedness in the second quarter of 1997 compared to the second quarter of 1996. The income tax provision was $2,824,000, or 74.1% of income before income taxes and extraordinary loss, in the second quarter of 1997 compared to $1,798,000, or 74.1% of income before income taxes, in the second quarter of 1996. 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 the outstanding balance of its $24,500,000 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 second quarter of $0.01 per share. As a result of the foregoing factors, the Company had net income of $812,000, or 0.4% of net sales, for the second quarter of 1997 compared to net income of $627,000, or 0.3% of net sales, for the second quarter of 1996. AnnTaylor Stores Corporation conducts no business other than the management of Ann Taylor. 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 for the reasons described above. =================================================================== 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 $0.01 per share. ======================================================================== 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. Financial Condition - ------------------- For the first six months of 1997, net cash provided by operating activities totaled $56,706,000, primarily as a result of non-cash operating expenses, a decrease in non-cash current assets and an increase in current liabilities. Cash used for investing activities during the first six months of 1997 amounted to $14,000,000, for the purchase of property and equipment. Cash used for financing activities during the first six months of 1997 amounted to $23,980,000, primarily attributable to funds used for repayment of the term loan. Accounts receivable decreased to $58,212,000 at August 2, 1997 from $63,605,000 at February 1, 1997, a decrease of $5,393,000 or 8.5%. This decrease is primarily attributable to a decrease in Ann Taylor credit card receivables of $7,265,000 or 12.7%. Accounts payable increased to $41,387,000 at August 2, 1997 from $34,341,000 at February 1, 1997, an increase of $7,046,000 or 20.5%, primarily due to timing of payments. Merchandise inventories were $88,855,000 at August 2, 1997, compared to inventories of $100,237,000 at February 1, 1997. Total square footage increased to 1,732,000 square feet at August 2, 1997 from 1,705,000 square feet at February 1, 1997. On a per square foot basis, merchandise inventories were 29.6% lower at the end of the second quarter of 1997 than at the end of the second quarter of 1996, excluding inventories associated with AnnTaylor Global Sourcing. At August 2, 1997, there were no borrowings outstanding under either Ann Taylor's revolving credit facility or AnnTaylor Funding, Inc.'s receivables facility. Ann Taylor can borrow up to $122,000,000 under the revolving credit facility and AnnTaylor Funding, Inc. can borrow up to $40,000,000 under the receivables facility, depending upon its accounts receivable balance. Also as of August 2, 1997, commercial and standby letters of credit under AnnTaylor Global Sourcing, Inc.'s credit facility totaled $37,583,000 and there were no borrowings outstanding under that facility. This facility, which was scheduled to mature on July 29, 1997, was extended to January 30, 1998 and was increased to $50,000,000, and is available principally for the issuance of ===================================================================== letters of credit; cash borrowings under the facility are limited to a maximum of $5,000,000. In addition, the Company has outstanding an aggregate of $100,625,000 of preferred securities issued by its financing vehicle, AnnTaylor Finance Trust. The Company's capital expenditures, which are primarily attributable to the Company's store expansion, renovation and refurbishment programs, totaled $14,000,000 for the six months ended August 2, 1997. The Company expects to open a total of 27 new Ann Taylor Stores and to expand 9 existing Ann Taylor Stores in fiscal 1997. Dividends and distributions from Ann Taylor to the Company are restricted by the terms of the credit agreements relating to the revolving credit facility and the receivables facility and the Indenture for AnnTaylor, Inc.'s 8-3/4% Notes due 2000. The payment of cash dividends by the Company on its capital stock is also subject to certain restrictions contained in the Company's guarantee of Ann Taylor's obligations under its bank credit agreement. Any determination to pay cash dividends in the future will be at the discretion of the Company's Board of Directors and will be dependent upon the Company's results of operations, financial condition, contractual restrictions and other factors deemed relevant at that time by the Company's Board of Directors. In order to finance its operations and capital requirements, the Company expects to use internally generated funds, trade credit and funds available to it under the credit facilities described above. The Company believes that cash flow from operations and funds available under these facilities are sufficient to enable it to meet its on-going cash needs for its business, as presently conducted, for the foreseeable future. The FASB issued SFAS No. 128, "Earnings per Share", which specifies the computation, presentation and disclosure requirements for basic and diluted earnings per share. This statement is effective for financial statements for periods ending after December 15, 1997. The Company has determined that this statement will have no material effect on the Company's reported earnings per share. 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. Statement Regarding Forward Looking Disclosures - ----------------------------------------------- Sections of this Quarterly Report on Form 10-Q, including the preceding Management's Discussion and Analysis of Financial Condition and Results of Operations, contain various forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations and business of the Company. These forward looking statements involve certain risks and uncertainties, and no assurance can be given that any of such matters will be realized. Actual results may differ materially from those contemplated by such forward looking statements as a result of, among other things, increased competition in the retail apparel industry; failure by the Company to accurately predict customer fashion preferences; a decline in the demand for merchandise offered by the Company; greater costs or difficulties than expected related to the assimilation of the sourcing functions and employees acquired in connection with the Sourcing Acquisition; general economic conditions that are less favorable than expected; the inability of the Company to locate new store sites or negotiate favorable lease terms for additional stores or for the expansion of existing stores; a significant change in the regulatory environment applicable to the Company's business; an increase in the rate of import duties or export quotas with respect to the Company's merchandise; an adverse outcome of certain litigation described under "Legal Proceedings" in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1997 that materially and adversely affects the company's financial condition; or lack of sufficient customer acceptance of the Ann Taylor Loft concept in the moderate-priced women's apparel market. ================================================================== PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------- AnnTaylor Stores Corporation's 1997 Annual Meeting of Stockholders was held on June 18, 1997. The following matters were voted upon and approved by the Company's stockholders at the meeting: 1. Mr. Gerald S. Armstrong and Ms. Hanne M. Merriman were re- elected as Class III Directors of the Company for terms expiring in 2000. 22,558,073 and 22,558,419 shares were voted in favor of, and 267,799 and 267,453 were voted against or abstained from voting on the proposal for the reelection of Mr. Armstrong and Ms. Merriman, respectively. Mr. Robert C. Grayson, Ms. Rochelle B. Lazarus and Mr. J. Patrick Spainhour continued as Class I Directors with terms expiring in 1998, and Mr. James J. Burke, Jr. and Ms. Patricia DeRosa continued as Class II Directors with terms expiring in 1999. 2. An amendment to the Company's Amended and Restated 1992 Stock Option and Restricted Stock and Restricted Unit Award Plan to (i) increase by 1,500,000 the number of shares available for option grants under the Plan and (ii) establish a maximum number of shares with respect to which options, restricted stock awards and restricted unit awards may be granted to any employee was approved. 18,176,534 shares were voted in favor of, and 2,648,424 were voted against or abstained from voting on the amendment. 3. A proposal to amend and restate the Company's Management Performance Plan to, among other things, (i) increase the amount of the maximum individual award payable in any performance period and (ii) expand the types of corporate business criteria that the Compensation committee may consider in establishing each performance period's performance goals, was approved. 22,522,835 shares were voted in favor of, and 303,037 were voted against or abstained from voting on, the approval of this proposal. 4. The appointment of Deloitte & Touche llp as the Company's independent auditors for the 1997 fiscal year was ratified. 22,793,840 shares were voted in favor of, and 32,032 shares were voted against or abstained from voting on, this proposal. ======================================================================= Item 6. Exhibits and Reports on Form 8-K --------------------------------- (a) Exhibits: 10.15.1 Amendment to the AnnTaylor Stores Corporation Amended and Restated 1992 Stock Option and Restricted Stock and Unit Award Plan, as approved by stockholders on June 18, 1997. 10.16 AnnTaylor Stores Corporation Amended and Restated Management Performance Compensation Plan, as approved by stockholders on June 18, 1997. 10.25.4 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. 10.25.5 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. (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 Stores Corporation 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-10 2 EXHIBIT 10.15.1 FIRST AMENDMENT TO THE ANNTAYLOR STORES CORPORATION 1992 STOCK OPTION AND RESTRICTED STOCK AND UNIT AWARD PLAN, AS AMENDED AND RESTATED AS OF FEBRUARY 23, 1994 The AnnTaylor Stores Corporation 1992 Stock Option and Restricted Stock and Unit Award Plan, as amended and restated as of February 23, 1994 (the "Plan"), is hereby amended, effective as of February 20, 1997, subject to the approval of stockholders, as set forth below. 1. The first clause of the second sentence of Section 5 of the Plan is hereby amended and restated in its entirety as follows: The aggregate number of shares of Common Stock as to which Options may be granted from time to time under this Plan shall not exceed 3,100,000. 2. The last sentence of the first paragraph of Section 5 is hereby amended and restated in its entirety as follows: No single employee may be granted Options covering more than 400,000 shares of Common Stock, or Restricted Stock Awards or Restricted Unit Awards (constituting performance based compensation within the meaning of Section 162(m) of the Code) covering more than 50,000 shares of Common Stock, (subject to any adjustments pursuant to Section 6(i) below) during any fiscal year of the Company. Except as set forth above, the Plan is hereby ratified and affirmed in all respects. EX-10 3 EXHIBIT 10.16 ANNTAYLOR STORES CORPORATION MANAGEMENT PERFORMANCE COMPENSATION PLAN Effective as of August 7, 1992 the Board adopted the Management Performance Compensation Plan and, effective as of the beginning of the Fall 1994 Performance Period, amended and restated such plan (the "Prior Plan"). The Prior Plan, as amended and restated hereby (the "Plan") is effective as of the beginning of the Fall 1997 Performance Period, subject to the approval of the stockholders of the Company at the 1997 Annual Meeting of the stockholders of the Company. 1. PURPOSE. This Plan is an integral part of the ------- Company's over-all compensation strategy which is aimed at attracting and retaining in the employ of the Company and its Subsidiaries highly motivated, results-oriented personnel of experience and ability, by basing such personnel's compensation, in part, on their contributions to the growth and profitability of the Company, thereby giving them incentive to remain with the Company and its Subsidiaries and to continue to make contributions to the Company in the future. Further, the purpose of the Plan is to serve as a qualified performance-based compensation program under Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the "Code"). 2. DEFINITIONS. As used in this Plan, the following ----------- capitalized terms shall have the meanings set forth below: (a) "Board" means the Board of Directors of the Company. (b) "Budget" means the Company's operating budget for a Performance Period. (c) "Committee" means the Compensation Committee of the Board, as appointed by the Board from time to time and consisting of not less than two directors, at least two of whom must be "outside directors" within the meaning of Section 162(m). All actions taken by the Committee under this Plan with respect to Executive Officers shall be taken solely by those members of the Committee who are "outside directors", even if less than a majority of the Committee, and such members shall constitute a subcommittee for purposes of Section 162(m). With respect to Eligible Associates who are neither Executive Officers nor members of the Executive Committee of the Company, the Committee may, in its discretion, delegate to one or more officers of the Company its duties hereunder. (d) "Company" means AnnTaylor Stores Corporation. (e) "Eligible Associate" has the meaning assigned thereto in Section 3 hereof. (f) "Executive Officer" means an officer of the Company who, as of the beginning of a Performance Period, is an "executive officer" within the meaning of Rule 3b-7 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). (g) "Participant" means an Eligible Associate who has been designated as a Participant by the Committee in accordance with Section 4 of this Plan. (h) "Performance Compensation" means the cash amount payable to a Participant pursuant to this Plan. (i) "Performance Goals" has the meaning assigned thereto in Section 5(b) hereof. (j) "Performance Percentage" and "Performance Ratio" have the meanings assigned thereto in Section 5(a) hereof. (k) "Performance Period" means a period designated by the Committee during which Performance Compensation will be earned. A Performance Period may range in length from the six-month period that coincides with the Company's fiscal six-month Spring or Fall season to the twelve-month period that coincides with the Company's fiscal year. (l) "Plan" means this AnnTaylor Stores Corporation Management Performance Compensation Plan. (m) "Subsidiary" means any corporation of which the Company owns, directly or indirectly, at least a majority of the outstanding voting capital stock. 3. ELIGIBILITY. Any salaried associate in the employ ----------- of the Company or any of its Subsidiaries (including officers and directors, but excluding persons who are directors only or who are members of the Committee) shall be eligible (an "Eligible Associate") to become a Participant and receive Performance Compensation under this Plan. 4. SELECTION OF PARTICIPANTS. -------------------------- (a) As promptly as possible after the Company's Budget for a Performance Period shall have become available, and after having received the recommendations of the Company's Chief Executive Officer pursuant to Section 4(b) below, the Committee shall designate from among all Eligible Associates those who shall be Participants under this Plan for such Performance Period. (b) Prior to the beginning of a Performance Period, or by such later date permissible under Section 162(m), and after the Company's Budget for a Performance Period shall have become available, the Chief Executive Officer of the Company shall submit to the Committee a list of the names, titles, salaries and suggested Performance Percentages of those Eligible Associates whom the Chief Executive Officer recommends that the Committee designate as Participants under this Plan for such Performance Period. (c) The Committee shall have the authority to designate from time to time prior to the commencement of as well as during a Performance Period additional Eligible Associates as Participants under this Plan for such Performance Period. (d) In selecting from among all Eligible Associates those who shall become Participants in any Performance Period and in determining the Performance Percentages of such Participants for such Performance Period, the Committee shall consider the position and responsibilities of the Eligible Associates, the value of their services to the Company and such other factors as the Committee deems relevant. 5. FORMULA FOR DETERMINING AMOUNT OF PERFORMANCE ----------------------------------------------------- COMPENSATION. - ------------ (a) At the time the Committee selects Participants under this Plan for a Performance Period, or within such other time period which may comply with Section 162(m), the Committee shall, for each Participant: (i) assign to such Participant their individual "Performance Percentage" for such Performance Period; and (ii) establish a matrix, assigning a "Performance Ratio" to various levels of Performance Goals which might be achieved for such Performance Period. (b) As used in this Plan, "Performance Goals" means the specific objectives established by the Committee for each Participant for a Performance Period. In setting these objectives, the Committee shall consider one or more of the following business criteria: revenue; net or gross sales; comparable store sales; gross margin; operating profit; earnings before all or any of interest, taxes, depreciation and/or amortization; cash flow; working capital; return on equity, assets, capital or investment; market share; sales (net or gross) measured by store, product line, territory, operating or business unit, customers, or other category; earnings or book value per share; earnings from continuing operations; net worth; turnover in inventory; levels of expense, cost or liability by store, product line, territory, operating or business unit or other category; appreciation in the price of shares of the Company's common stock; total shareholder return (stock price appreciation plus dividends); and implementation of critical projects or processes. Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the selected criterion or the attainment of a percentage increase or decrease in the selected criterion, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. Such Performance Goals may relate to the performance of a store, business unit, product line, division, territory, the Company or an individual or any combination thereof. With respect to Participants who are not Executive Officers, Performance Goals may also include such individual objective or subjective performance criteria as the Committee may, from time to time, establish. Performance Goals may include a threshold level of performance below which no award payment shall be made and levels of performance at which specified percentages of the target award shall be paid, and may also include a maximum level of performance above which no additional award shall be paid. Each of the foregoing Performance Goals shall be determined in accordance with generally acceptable accounting principles and, for Executive Officers and Executive Committee members, shall be subject to certification by the Committee. The Performance Goals established by the Committee may be different with respect to different Participants, different Performance Periods and/or different operations. The Committee shall have the authority to make equitable adjustments to the Performance Goals in recognition of unusual or nonrecurring events affecting the Company, its financial statements or its shares, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the acquisition, disposition or discontinuance of a business or a segment of a business, or related to a change in accounting principles, or to reflect capital changes. (c) Subject to adjustment pursuant to Section 5(d) below, unless otherwise determined by the Committee, a Participant's Performance Compensation for the Performance Period for which he or she was designated by the Committee as a Participant pursuant to Section 4 hereof shall be equal to the product of (i) the Participant's annual base salary for the fiscal year of which such Performance Period is a part (prorated, as to any Participant who shall have become an Eligible Associate and designated as a Participant after the commencement of such fiscal year), multiplied by (ii) the Performance Percentage assigned to such Participant for such Performance Period pursuant to Section 5(a)(i) above, multiplied by (iii) the Performance Ratio achieved by the Company for such Performance Period. (d) For any Performance Period, the Board may establish a ceiling on the aggregate amount which may be paid out in Performance Compensation for such Performance Period. In the event that such a limit is established for any Performance Period, the Performance Compensation otherwise payable to all Participants for such Performance Period pursuant to Section 5(c) above shall be reduced pro rata. Notwithstanding any other provision of the Plan, no participant who is an Executive Officer may receive Performance Compensation for a twelve-month Performance Period in excess of $1,500,000, such amount to be reduced proportionately for Performance Periods of shorter duration. (e) Performance Compensation shall be paid by the Company or the Subsidiary employing the Participant promptly following the end of the Performance Period to which it relates. The foregoing notwithstanding, no payment of Performance Compensation for a Performance Period may be made to an Executive Officer until the performance results for that Performance Period are certified by the Committee. A Participant shall not be entitled to receive payment of Performance Compensation unless such Participant is still in the employ of (and shall not have delivered notice of resignation to) the Company or one of its Subsidiaries at the time the Performance Compensation is actually paid. 6. FINALITY OF DETERMINATIONS. The Committee shall -------------------------- administer this Plan and construe its provisions. Any determination by the Committee in carrying out, administering or construing this Plan shall be final and binding for all purposes and upon all interested persons and their respective heirs, successors, and legal representatives. 7. LIMITATIONS. ----------- (a) No person shall at any time have any right to receive Performance Compensation hereunder, unless such person shall have been designated as a Participant by the Committee pursuant to Section 4 hereof and the other terms and conditions of this Plan shall have been satisfied. No person shall have authority to enter into any agreement for the inclusion of anyone as a Participant or the awarding of Performance Compensation hereunder or to make any representation or warranty with respect thereto. Designation of an Eligible Associate as a Participant in any Performance Period shall not guarantee or require that such Eligible Associate be designated as a Participant in any later Performance Period. (b) No action of the Company or the Board in establishing this Plan, nor any action taken by the Company, the Board or the Committee under this Plan, nor any provision of this Plan, shall be construed as conferring upon any associate any right to continued employment for any period by the Company or any of its Subsidiaries, or shall interfere in any way with the right of the Company or any Subsidiary to terminate such employment. 8. AMENDMENT AND TERMINATION OF PLAN. The Board at --------------------------------- any time and from time to time may modify, amend, suspend or terminate this Plan, without notice, provided that no amendment which requires stockholder approval in order to comply with Section 162(m) of the Code shall be effective unless the same shall be approved by the requisite vote of stockholders of the Company. 9. COMPLIANCE WITH SECTION 162(m). The Plan is -------------------------------- designed and intended to comply with Section 162(m), and all provisions hereof shall be construed in a manner to so comply. EX-10 4 EXHIBIT 10.25.4 AMENDMENT NO. 1 AMENDMENT NO. 1 dated as of April 11, 1997 between ANNTAYLOR GLOBAL SOURCING, INC., a Delaware corporation (the "Company"), and THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, a foreign banking corporation acting through its New York Branch (the "Bank"). ---- The Company and the Bank are parties to an Amended and Restated Credit Agreement dated as of September 20, 1996 (as heretofore amended, modified and supplemented and in effect on the date hereof, the "Credit Agreement") providing, subject to ---------------- the terms and conditions thereof, for extensions of credit (by issuing letters of credit and making loans) to be made by the Bank to the Company in an aggregate face or principal amount not exceeding $40,000,000. The Company and the Bank wish to amend the Credit Agreement (i) to decrease the Loan Commitment to an aggregate principal amount not exceeding $5,000,000, (ii) to amend the calculation of the Borrowing Base, and (iii) to permit the consignment to the Borrower of certain goods and merchandise relating to Letters of Credit issued by the Bank under the Credit Agreement. Accordingly the parties hereto hereby agree as follows: Section 1. Definitions. Terms defined in the Credit ----------- Agreement are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction ---------- of the conditions precedent specified in Section 4 below, but effective as of the date hereof, the Credit Agreement shall be amended as follows: A. References in the Credit Agreement to "this Agreement" shall be deemed to be references to the Credit Agreement as amended hereby. B. The definition of "Borrowing Base" in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows: "Borrowing Base" shall mean, as at any day of -------------- determination thereof, the sum of (i) 80% of the aggregate amount of Eligible Receivables at said date plus (ii) 50% of the aggregate amount of ---- Eligible Inventory at said date, which Eligible Inventory shall in no event exceed $4,000,000 in the aggregate prior to such fractional reduction, plus (iii) 50% of the aggregate face amount of all ---- undrawn Letters of Credit at said date plus (iv) ---- the undrawn face amount of the AT Credit at said date minus (v) an amount equal to two times the ----- average monthly commissions or processing fees (to the extent such are included in the value of Inventory) paid to bailees, warehousemen, terminal operators, Processors (as defined in the definition of "Eligible Inventory" set forth in ================================================================== [Page 2] this Section 1.01) or other third parties with whom the Company has lodged Inventory during the period of two fiscal quarters most recently ended on or before such date. C. The definition of "Loan Commitment" in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows: "Loan Commitment" shall mean the obligation ---------------- of the Bank to make Loans up to an aggregate principal amount for all Loans at any one time outstanding up to $5,000,000. D. Section 2.02(e) of the Credit Agreement is deleted in its entirety. Section 3. Representations and Warranties. The Company -------------------------------- represents and warrants to the Bank that the representations and warranties set forth in Section 7 of the Credit Agreement are true and complete on the date hereof as if made on and as of the date hereof and as if each reference in said Section 7 to "this Agreement" included reference to this Amendment No. 1. Section 4. Conditions Precedent. As provided in Section 2 -------------------- above, the amendments to the Credit Agreement set forth in said Section 2 shall become effective, as of the date hereof, upon the satisfaction of the following conditions precedent: A. Execution by all Parties. This Amendment No. 1 shall have ------------------------ been executed and delivered by each of the parties hereto. B. Corporate Action. The Bank shall have received certified ----------------- copies of (i) the charter and by-laws (or equivalent documentation) of the Company and (ii) all corporate action (or its equivalent) taken by the Company approving this Amendment No. 1, the Credit Agreement as amended hereby and the borrowings by the Company under the Credit Agreement as amended hereby (including, without limitation, a certificate setting forth the resolutions of the Board of Directors of the Company adopted in respect of the transactions contemplated hereby and thereby). C. Incumbency. The Bank shall have received a ---------- certificate of the Company in respect of each of the officers (i) who is authorized to sign this Amendment No. 1 on its behalf and (ii) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Amendment No. 1 and the Credit Agreement as amended hereby, and the transactions contemplated hereby and thereby (and the Bank may conclusively rely on such certificate until it receives notice in writing from the Company to the contrary). D. Certain Conditions. The Bank shall have received ------------------ a certificate of the president or a vice president of the Company to the effect that (i) the Company has complied and is then in ====================================================================== [Page 3] compliance with all of the terms, conditions and covenants of the Credit Agreement, (ii) no Default or Event of Default has occurred thereunder, (iii) the representations and warranties of the Company contained in the Credit Agreement are true in all respects as if such representations and warranties had been made on the date hereof, and (iv) there shall have been no material adverse change in the financial condition, business, operations or property of the Company since December 31, 1996. E. Opinion of Counsel to the Company. The Bank shall --------------------------------- have received an opinion of counsel to the Company, substantially in the form of Exhibit A hereto. F. Other Documents. The Bank shall have received ---------------- such other documents as the Bank or its counsel may reasonably request. Section 5. Miscellaneous. THIS AMENDMENT NO. 1 SHALL BE ------------- GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 1 by signing any such counterpart. --------------------------------------- ============================================================================== IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed as of the day and year first above written. ANNTAYLOR GLOBAL SOURCING, INC. By /s/James M. Smith ------------------------------ Name: James M. Smith Title:Vice President THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, NEW YORK BRANCH By /s/AD Collins -------------------------------- Name: AD Collins Title:SVP EX-10 5 EXHIBIT 10.25.5 AMENDMENT NO. 2 AMENDMENT NO. 2 dated as of July 29, 1997 between ANNTAYLOR GLOBAL SOURCING, INC., a Delaware corporation (the "Company"), and THE HONGKONG AND SHANGHAI BANKING CORPORATION ------- LIMITED, a foreign banking corporation acting through its New York Branch (the "Bank"). ---- The Company and the Bank are parties to an Amended and Restated Credit Agreement dated as of September 20, 1996 (as heretofore amended, modified and supplemented and in effect on the date hereof, the ("Credit Agreement") providing, subject to ----------------- the terms and conditions thereof, for extensions of credit (by issuing letters of credit and making loans) to be made by the Bank to the Company in an aggregate face or principal amount not exceeding $40,000,000. The Company and the Bank wish to increase the Letter of Credit Commitment to an aggregate face amount not exceeding $50,000,000, and to amend the Credit Agreement in certain other respects, and accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Terms defined in the ----------- Credit Agreement are used herein as defined therein. Section 2. Amendments. Subject to the ---------- satisfaction of the conditions precedent specified in Section 4 below, but effective as of the date hereof, the Credit Agreement shall be amended as follows: A. References in the Credit Agreement to "this Agreement" shall be deemed to be references to the Credit Agreement as amended hereby. B. The definition of "Letter of Credit Commitment" in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows: "Letter of Credit Commitment" shall mean the --------------------------- obligation of the Bank to issue Letters of Credit up to an aggregate face amount for all Letters of Credit at any one time outstanding up to $50,000,000. C. The definition of "Termination Date" in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows: "Termination Date" shall mean January 30, ------------------ 1998, unless otherwise extended to a later date by the Bank pursuant to Section 2.06 hereof. D. The definition of "Total Facility" in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows: "Total Facility" shall mean, as to all --------------- Credits hereunder, the aggregate face or principal amount of $50,000,000. ===================================================================== Page 2 E. Section 2.04(a)(ii) of the Credit Agreement is amended to read in its entirety as follows: The Company shall pay to the Bank a commitment fee at a rate per annum equal to 0.125% of the daily average Available Facility for the period from and including the date hereof to and including the date the Commitments expire or are terminated. F. Section 8.01(c) of the Credit Agreement is amended to read in its entirety as follows: As soon as available and in any event within ten (10) days after the end of each month of each fiscal year of the Company, an updated aged accounts receivable schedule and inventory schedule, which schedules shall be in form and substance satisfactory to the Bank and certified by the executive vice president, the senior vice president - finance or the vice-president/controller of the Company. G. Section 8.01(d) of the Credit Agreement is amended to read in its entirety as follows: As soon as available and in any event within ten (10) days after the end of each month of each fiscal year of the Company, an updated Borrowing Base Certificate, which certificate shall be in form and substance satisfactory to the Bank and certified by the executive vice president, the senior vice president - finance or the vice president/controller of the Company. H. Section 8.10 of the Credit Agreement is deleted in its entirety. I. Section 8.11 of the Credit Agreement is deleted in its entirety. J. Section 8.12 of the Credit Agreement is deleted in its entirety. K. Section 8.14 of the Credit Agreement is amended to read in its entirety as follows: Without the prior written consent of the Bank, the Company shall not engage to any substantial extent in any line or lines of business activity other than the business of purchase and wholesale distribution of apparel, shoes and accessories with respect to AT, ATSC and their respective Affiliates. L. Section 8.21 of the Credit Agreement is amended to read in its entirety as follows: Operating Account. Other than in connection ------------------ with its trade payable disbursements and payroll operations, the Company shall maintain all of its principal bank accounts with the Bank. ======================================================================== Page 3 Section 3. Representations and Warranties. -------------------------------- The Company represents and warrants to the Bank that the representations and warranties set forth in Section 7 of the Credit Agreement are true and complete on the date hereof as if made on and as of the date hereof and as if each reference in said Section 7 to "this Agreement" included reference to this Amendment No. 2. Section 4. Conditions Precedent. As provided -------------------- in Section 2 above, the amendments to the Credit Agreement set forth in said Section 2 shall become effective, as of the date hereof, upon the satisfaction of the following conditions precedent: A. Execution by all Parties. This Amendment No. 2 ------------------------ shall have been executed and delivered by each of the parties hereto. B. Initial Commitment Fee. Evidence that the Company ----------------------- shall have paid to the Bank the commitment fee set forth in that certain Commitment Letter dated July 17, 1997 relating to this Amendment No. 2. C. AT Credit. Evidence that the expiry date of the --------- AT Credit shall have been extended to a date no earlier than January 30, 1998. D. Corporate Action. The Bank shall have received ----------------- certified copies of (i) the charter and by-laws (or equivalent documentation) of the Company and (ii) all corporate action (or its equivalent) taken by the Company approving this Amendment No. 2, the Credit Agreement as amended hereby and the borrowings by the Company under the Credit Agreement as amended hereby (including, without limitation, a certificate setting forth the resolutions of the Board of Directors of the Company adopted in respect of the transactions contemplated hereby and thereby). E. Incumbency. The Bank shall have received a ---------- certificate of the Company in respect of each of the officers (i) who is authorized to sign this Amendment No. 2 on its behalf and (ii) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Amendment No. 2 and the Credit Agreement as amended hereby, and the transactions contemplated hereby and thereby (and the Bank may conclusively rely on such certificate until it receives notice in writing from the Company to the contrary). F. Certain Conditions. The Bank shall have received ------------------ a certificate of the president or a vice president of the Company to the effect that (i) the Company has complied and is then in compliance with all of the terms, conditions and covenants of the Credit Agreement, (ii) no Default or Event of Default has occurred thereunder, (iii) the representations and warranties of the Company contained in the Credit Agreement are true in all respects as if such representations and warranties had been made on the date hereof, and (iv) there shall have been no material adverse change in the financial condition, business, operations or property of the Company since December 31, 1996. G. Opinion of Counsel to the Company. The Bank shall --------------------------------- have received an opinion of counsel to the Company, substantially in the form of Exhibit A hereto. ===================================================================== Page 4 H. Other Documents. The Bank shall have received ---------------- such other documents as the Bank or its counsel may reasonably request. Section 5. Miscellaneous. THIS AMENDMENT NO. ------------- 2 SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 2 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 2 by signing any such counterpart. --------------------------- ===================================================================== Page 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed as of the day and year first above written. ANNTAYLOR GLOBAL SOURCING, INC. By: /s/ Walter J. Parks ------------------------- Name: Walte J. Parks Title: Senior Vice President THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, NEW YORK BRANCH By /s/ Adriana D. Collins ------------------------- Name: Adriana D. Collins Title: Assistant Vice President EX-27 6 FDS
5 0000874214 ANNTAYLOR STORES CORPORATION 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 0 174 378,953 682,388 382,063 382,063 198,073 198,073 156,165 0 10,573 17,252 9,792 7,460 0 (173) 0 7,287 .28 .28
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