SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
( ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended April 30, 1994.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File No. 33-28522
ANNTAYLOR, INC.
_______________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 51-0297083
___________________________ ______________________________
(State of other jurisdiction of (I.R.S. Employee Identification
incorporation or organization) Number)
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 May 28, 1994
_____________________________ __________________
Common Stock, $1.00 par value 1
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this
form) with the reduced disclosure format.
INDEX TO FORM 10-Q
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the Quarters Ended April 30, 1994 and
May 1, 1993 . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at
April 30, 1994 and January 29, 1994 . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
for the Quarters Ended April 30, 1994 and
May 1, 1993 . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ANNTAYLOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters Ended April 30, 1994 and May 1, 1993
(unaudited)
Quarters Ended
April 30, 1994 May 1, 1993
-------------- -----------
(in thousands)
Net sales . . . . . . . . . . . . . $145,283 $120,175
Cost of sales . . . . . . . . . . . 76,403 65,352
_______ _______
Gross profit . . . . . . . . . . . . 68,880 54,823
Selling, general and administrative
expenses. . . . . . . . . . . . . .. 46,973 40,036
Amortization of goodwill . . . . . . 2,377 2,377
_______ _______
Operating income. . . . . . . . . . . 19,530 12,410
Interest expense . . . . . . . . . . 3,456 4,969
Other expense, net . . . . . . . . . 140 50
_______ _______
Income before income taxes . . . . . 15,934 7,391
Income tax provision . . . . . . . . 7,874 4,101
_______ _______
Net income. . . . . . . . . . . . . $ 8,060 $ 3,290
======= =======
See accompanying notes to condensed consolidated financial statements.
ANNTAYLOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, 1994 and January 29, 1994
April 30, 1994 January 29, 1994
-------------- ----------------
(unaudited)
(in thousands)
ASSETS
Current assets
Cash . . . . . . . . . . . . . . . . . . . $ 640 $ 292
Accounts receivable, net of allowances of
$722,000 and $787,000, respectively . . . 57,967 49,279
Merchandise inventories . . . . . . . . . . 72,603 60,890
Prepaid expenses and other current assets . 4,914 7,184
Deferred income taxes . . . . . . . . . . . 3,750 3,750
------- -------
Total current assets . . . . . . . . . . 139,874 121,395
Property and equipment, net of accumulated
depreciation of $31,179,000 and $28,703,000,
respectively . . . . . . . . . . . . . . . . 50,304 48,053
Deferred financing costs, net of accumulated
amortization of $991,000 and $643,000,
respectively . . . . . . . . . . . . . . . . 4,764 4,990
Goodwill, net of accumulated amortization of
$50,090,000 and $47,713,000, respectively . 330,160 332,537
Deferred income taxes . . . . . .. . . . . . . 1,500 1,500
Investment in CAT . . . . . . . . . . . . . . . 2,395 2,245
Other assets . . . . . . . . . . . . . . . . . 2,521 2,679
------- -------
Total assets . . . . .. . . . . . . . . $531,518 $513,399
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable . . . . . . . . . . . . . $38,165 $37,564
Accrued expenses . . . . . . . . . . . . . 18,365 18,656
Accrued income taxes . . . . . . . . . . . 8,423 1,180
Accrued interest . . . . . . . . . . . . . 4,090 1,955
Current portion of long-term debt . . . . . 8,757 8,757
------- -------
Total current liabilities . . . . . . . . 77,800 68,112
Long-term debt . . . . . . . . . . . . . . . . 178,809 180,243
Other liabilities . . . . . . . . . . . . . . . 5,856 5,773
Commitments and contingencies
Stockholder's equity
Common stock, $1.00 par value; 1,000 shares
authorized; 1 share issued and outstanding. 1 1
Additional paid-in capital . . . . . . . . . 277,748 276,026
Accumulated deficit . . . . . . . . . . . . . (8,696) (16,756)
------- -------
Total stockholder's equity . . . . . . . 269,053 259,271
------- -------
Total liabilities and stockholder's
equity . . . . . . . . . . . . . . . . $531,518 $513,399
======= =======
See accompanying notes to condensed consolidated financial statements.
ANNTAYLOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters Ended April 30, 1994 and May 1, 1993
(unaudited)
Quarters Ended
----------------------
April 30, 1994 May 1, 1993
-------------- -----------
(in thousands)
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . $ 8,060 $ 3,290
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity earnings in CAT . . . . . . . . . . . . . . . (150) ---
Provision for loss on accounts receivable . . . . . 298 201
Depreciation and amortization . . . . . . . . . . . 2,583 2,242
Amortization of goodwill . . . . . . . . . . . . . . 2,377 2,377
Accretion of original issue discount . . . . . . . . --- 1,577
Amortization of deferred financing costs . . . . . . 348 325
Amortization of deferred compensation . . . . . . . 45 69
Loss on disposal of property and equipment . . . . . 46 86
(Increase) decrease in:
Receivables . . . . . . . . . . . . . . . . . . . (8,986) (6,158)
Merchandise inventories . . . . . . . . . . . . . (11,713) (12,621)
Prepaid expenses and other current assets . . . . 2,270 4,533
Increase in:
Accounts payable . . . . . . . . . . . . . . . . 601 7,449
Accrued expenses . . . . . . . . . . . . . . . . 7,489 1,182
Other non-current assets and liabilities, net . . 244 303
------- -------
Net cash provided by operating activities . . . . . . . . 3,512 4,855
Investing activities:
Purchases of property and equipment . . . . . . . . . (4,883) (3,039)
Investment in CAT . . . . . . . . . . . . . . . . . --- (88)
------- -------
Net cash used by investing activities . . . . . . . . (4,883) (3,127)
Financing activities:
Increase (decrease) in bank overdrafts . . . . . . . 1,598 (2,361)
Borrowing (repayments) under line of credit agreement 1,000 (4,000)
Parent company contribution . . . . . . . . . . . . . 1,677 4,543
Net repayments of receivables facility . . . . . . . (2,434) ---
Payment of financing costs . . . . . . . . . . . . . (122) ---
------- -------
Net cash provided by (used by) financing activities.. 1,719 (1,818)
------- -------
Net increase (decrease) in cash . . . . . . . . . . . . . 348 (90)
Cash, beginning of period . . . . . . . . . . . . . . . . 292 226
------- -------
Cash, end of period . . . . . . . . . . . . . . . . . . . $ 640 $ 136
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest . . . . . . . $ 973 $ 991
======= =======
Cash paid during the period for income taxes . . . . . $ 631 $ 527
======= =======
See accompanying notes to condensed consolidated financial statements.
ANNTAYLOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The condensed consolidated financial statements are unaudited but, in the
opinion of management, contain all adjustments (which are of a normal
recurring nature) necessary to present fairly the financial position, results
of operations and cash flows for the periods presented. All significant
intercompany accounts and transactions have been eliminated.
The results of operations for the 1994 interim period shown in this report
are not necessarily indicative of results to be expected for the fiscal year.
The January 29, 1994 condensed consolidated balance sheet amounts have
been derived from the previously audited consolidated balance sheet of
AnnTaylor, Inc.
Certain fiscal 1993 amounts have been reclassified to conform to the 1994
presentation.
It is not considered necessary to include detailed footnote information as
of April 30, 1994 and May 1, 1993. The financial information set forth herein
should be read in conjunction with the Notes to the Company's Consolidated
Financial Statements contained in the AnnTaylor, Inc. 1993 Annual Report on
Form 10-K.
2. Long-term Debt
The following summarizes long-term debt outstanding at April 30, 1994:
Senior debt: (in thousands)
Term Loan . . . . . . . . . . . . . . . . . . . $ 54,000
Revolving Credit Loan . . . . . . . . . . . . . . 3,000
8-3/4% Notes . . . . . . . . . . . . . . . 100,000
Receivables Facility . . . . . . . . . . . . . . 30,566
-------
Total senior debt . . . . . . . . . . . . . . . 187,566
Less: current portion . . . . . . . . . . . . . . 8,757
-------
Total long term debt . . . . . . . . . . . . . $178,809
=======
At April 30, 1994, the Company was not in compliance with one financial
covenant under its bank credit agreement relating to inventory turnover, which
event of noncompliance was waived by Bank of America, NT & SA, as agent for
the lenders under the bank credit agreement.
3. Subsequent Event
On May 18, 1994, AnnTaylor Stores Corporation ("ATSC") completed a public
offering of its common stock (the "Offering") in which it issued and sold
1,000,000 shares of common stock at a price of $32.00 per share, resulting in
aggregate net proceeds of approximately $30,600,000 (after payment of expenses
of the Offering). As required by the Company's bank credit agreement, the
proceeds were used to reduce the amount outstanding under the term loan.
The following unaudited proforma condensed consolidated operating data for
the three months ended April 30, 1994 have been presented to reflect the
Offering as if it occurred at the beginning of such period.
Quarter Ended April 30, 1994
----------------------------
Actual ProForma
------ --------
(in thousands)
Interest expense . . . . . . . . . . . . . $ 3,456 $ 3,056(a)
Income before extraordinary loss . . . . . . 8,060 8,266
===== =====
(a) Reflects interest expense savings of $400,000 related to the reduction of
the term loan.
The Offering was consummated concurrently with the public offering and
sale by certain affiliates of Merrill Lynch Capital Partners (the "Selling
Stockholders") of 4,075,000 shares of ATSC's Common Stock held by them. ATSC
or the Company did not receive any of the proceeds of the shares sold by the
Selling Stockholders. After giving effect to this sale, the Selling
Stockholders and other affiliates of Merrill Lynch Capital Partners held
shares representing approximately 32.5% of ATSC's Common Stock.
Item 2. Management's Discussion and Analysis of Operations
Results of Operations
Quarter Ended April 30, 1994 Compared to Quarter Ended May 1, 1993
The Company's net sales increased to $145,283,000 in the first quarter of
1994 from $120,175,000 in the first quarter of 1993, an increase of $25,108,000
or 20.9% over the first quarter of 1993. The increase in netsales was
attributable to the inclusion of the sales of 13 new stores and 10 expanded
stores opened during the last three quarters of 1993, three new Ann Taylor
stores, two expanded Ann Taylor stores and two Ann Taylor Factory Stores
opened in the first quarter of 1994, and an 8.6% increase in comparable store
sales. The Company operated 234 stores at April 30, 1994 compared to 218
stores at May 1, 1993. The increase in comparable store sales was due primarily
to positive customer response to the Company's merchandise assortments. The
increase in net sales was partially offset by the closing of two stores during
the first quarter of 1994.
Gross profit as a percentage of net sales increased to 47.4% in the first
quarter of 1994 from 45.6% in the first quarter of 1993. This increase in
gross margin reflected a higher level of full price selling and lower levels
of promotional activity.
Selling, general and administrative expenses decreased to 32.3% of net
sales in the first quarter of 1994 compared to 33.3% in the first quarter of
1993. The decrease in selling, general and administrative expenses as a
percentage of net sales was primarily attributable to an increase in net sales
at a rate greater than the rate of increase in selling, general and
administrative expenses; an increase in sales from the Company's factory
stores, which have lower store operating expenses than full price Ann Taylor
Stores; and improved expense management.
As a result of the above, operating income increased to $19,530,000, or
13.4% of net sales, in the first quarter of 1994 from $12,410,000, or 10.3% of
net sales, in the first quarter of 1993. Amortization of goodwill was
$2,377,000 in the first quarter of 1994 and 1993. Operating income, without
giving effect to such amortization in either year, was $21,907,000, or 15.1%
of net sales, in the 1994 period and $14,787,000, or 12.3% of net sales, in
the 1993 period.
Interest expense was $3,456,000, including $348,000 of non-cash interest
expense, in the first quarter of 1994, and $4,969,000, including $1,902,000 of
non-cash interest expense, in the first quarter of 1993. The decrease in
interest expense is primarily attributable to lower interest rates applicable
to the Company's debt obligations in the 1994 period, resulting principally
from refinancing transactions entered into in the fall of 1993.
The income tax provision was $7,874,000, or 49.4% of income before income
taxes, in the first quarter of 1994 compared to $4,101,000, or 55.5% of income
before income taxes, in the first quarter of 1993. The effective income tax
rate for both periods was higher than the statutory rate primarily because of
non-deductible goodwill amortization.
As a result of the foregoing factors, the Company had net income of
$8,060,000, or 5.5% of net sales, for the first quarter of 1994 compared to
$3,290,000, or 2.7% of net sales, for the first quarter of 1993.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.3 Consulting and Severance Agreement dated March 21, 1994 between
ATSC, AnnTaylor, Inc. and Bert A. Tieben. Incorporated
by reference to Exhibit 10.3 to the Quarterly Report on Form
10-Q of ATSC for the Quarter ended April 30, 1994 filed on
June 13, 1994.
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AnnTaylor, Inc.
Date: June 13, 1994 By: /s/ Paul E. Francis
------------------- --------------------
Paul E. Francis
Executive Vice President -
Finance and Administration
Chief Financial Officer
Date: June 13, 1994 By: /s/ Walter J. Parks
------------------ ----------------------
Walter J. Parks
Vice President -
Financial Reporting
Principal Accounting
Officer
