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 May 3, 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.
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(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
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(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 30, 1997
----------------------------- -----------------
Common Stock, $1.00 par value 1
This registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this form with the reduced disclosure format.
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INDEX TO FORM 10-Q
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the Quarters Ended May 3, 1997
and May 4, 1996...................................... 3
Condensed Consolidated Balance Sheets at
May 3, 1997 and February 1, 1997..................... 4
Condensed Consolidated Statements of Cash Flows
for the Quarters Ended May 3, 1997 and
May 4, 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
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- - ------------------------------
ANNTAYLOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters Ended May 3, 1997 and May 4, 1996
(unaudited)
Quarters Ended
------------------------
May 3, 1997 May 4, 1996
----------- -----------
(in thousands)
Net sales........................................ $197,064 $184,467
Cost of sales.................................... 98,428 101,313
------- -------
Gross profit..................................... 98,636 83,154
Selling, general and administrative expenses..... 76,637 70,254
Amortization of goodwill......................... 2,760 2,377
------- -------
Operating income................................. 19,239 10,523
Interest expense................................. 5,546 6,121
Other expense (income), net...................... 250 (131)
------- -------
Income before income taxes....................... 13,443 4,533
Income tax provision............................. 6,968 2,721
------- -------
Net income..................................... $ 6,475 $ 1,812
======= =======
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
ANNTAYLOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
May 3, 1997 and February 1, 1997
May 3, February 1,
1997 1997
------ -----------
(unaudited)
(in thousands)
ASSETS
Current assets
Cash and cash equivalents........................ $ 30,990 $ 7,025
Accounts receivable, net......................... 63,388 63,605
Merchandise inventories.......................... 97,562 100,237
Prepaid expenses and other current assets........ 25,236 25,653
------- -------
Total current assets........................... 217,176 196,520
Property and equipment
Land and building................................ 8,603 8,603
Leasehold improvements........................... 77,243 76,576
Furniture and fixtures........................... 122,215 120,595
Construction in progress......................... 7,683 3,307
------- -------
215,744 209,081
Less accumulated depreciation and
amortization................................. 72,545 65,648
------- -------
Net property and equipment..................... 143,199 143,433
Goodwill, net....................................... 339,019 341,779
Deferred financing costs, net....................... 2,351 2,743
Other assets........................................ 3,553 3,664
------- -------
Total assets................................... $705,298 $688,139
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable................................. $ 33,102 $ 34,341
Accrued tenancy and income taxes................. 19,212 13,233
Accrued expenses................................. 34,632 29,809
Current portion of long-term debt................ 618 287
------- -------
Total current liabilities...................... 87,564 77,670
Long-term debt...................................... 130,504 130,905
Deferred income taxes............................... 4,872 4,872
Other liabilities................................... 8,454 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....................... 444,699 443,952
Retained earnings................................ 29,204 22,787
------- -------
Total stockholder's equity.................. 473,904 466,740
------- -------
Total liabilities and stockholder's equity.. $705,298 $688,139
======= =======
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
ANNTAYLOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters Ended May 3, 1997 and May 4, 1996
(unaudited)
Quarters Ended
-----------------
May 3, May 4,
1997 1996
---- ----
(in thousands)
Operating activities:
Net income......................................... $ 6,475 $1,812
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity earnings in CAT........................... --- (312)
Provision for loss on accounts receivable........ 409 360
Depreciation and amortization.................... 6,965 6,002
Amortization of goodwill......................... 2,760 2,377
Amortization of deferred financing costs......... 391 389
Amortization of deferred compensation............ 263 8
Loss on disposal of property and equipment....... --- 81
(Increase) decrease in:
Receivables.................................... (192) (2,580)
Merchandise inventories........................ 2,675 4,500
Prepaid expenses and other current assets...... 417 476
Increase (decrease) in:
Accounts payable............................... (1,239) (2,701)
Accrued liabilities............................ 10,573 2,434
Other non-current assets and liabilities, net.. 612 254
------- -------
Net cash provided by operating activities...... 30,109 13,100
Investing activities:
Purchases of property and equipment................ (6,500) (2,391)
------- -------
Net cash used by investing activities.............. (6,500) (2,391)
Financing activities:
Repayments under revolving credit agreement........ --- (90,000)
Payments on mortgage............................... (70) (65)
Parent company contribution........................ 426 83,394
Net repayments under receivables facility.......... --- (4,000)
Payment of financing costs......................... --- (25)
------- -------
Net cash (used by) provided by financing
activities....................................... 356 (10,696)
------- -------
Net increase in cash................................ 23,965 13
Cash and cash equivalents, beginning of period...... 7,025 1,283
------- -------
Cash and cash equivalents, end of period............ $ 30,990 $ 1,296
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest........... $ 2,932 $ 3,357
======= =======
Cash paid during the period for income taxes....... $ 1,073 $ 116
======= =======
See accompanying notes to condensed consolidated financial statements.
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<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 quarters
ended May 3, 1997 and May 4, 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, Inc. 1996 Annual Report on Form 10-K.
2. Long-Term Debt
--------------
The following summarizes long-term debt outstanding at May 3,
1997:
(in thousands)
Term Loan............................ $ 24,500
8-3/4% Notes......................... 100,000
Mortgage............................. 6,622
-------
Total debt........................ 131,122
Less current portion................. 618
-------
Total long-term debt.............. $130,504
=======
3. Supplementary Data
------------------
The following unaudited pro forma condensed consolidated
operating data for the quarter ended May 4, 1996 has been
presented to reflect the acquisition of the Company's sourcing
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<PAGE> 7
subsidiary, that was consummated in September 1996 (the "Sourcing
Acquisition"), as if it had occurred at the beginning of such
period:
Quarter Ended
------------------
May 4, 1996
-------------------
Actual Proforma
------ --------
(in thousands)
Sales...................... $184,467 $184,467
Net income................. 1,812 2,976
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
period presented or of results which may occur in the future.
Item 2. Management's Discussion and Analysis of Operations
- - ----------------------------------------------------------
Results of Operations
Quarters Ended
-------------------------
May 3, 1997 May 4, 1996
----------- ------------
Number of Stores:
Open at beginning of period.............. 309 306
Opened during period..................... 2 4
Expanded during period*.................. --- ---
Closed during period..................... --- 3
Open at end of period.................... 311 307
Type of Stores Open at End of Period:
Ann Taylor Stores..................... 261 258
Ann Taylor Factory Stores............. 10 9
Ann Taylor Loft stores................ 31 31
Ann Taylor Studio stores.............. 9 9
----------------
* Expanded stores are excluded from comparable store sales for
the first year following expansion.
Quarter Ended May 3, 1997 Compared to Quarter Ended May 4, 1996
- - ---------------------------------------------------------------
The Company's net sales in the first quarter of 1997 increased
to $197,064,000 from $184,467,000 in the first quarter of 1996,
an increase of $12,597,000 or 6.8%. The increase in net sales
was attributable to the opening of new stores and the expansion
of existing stores as well as a 4.4% increase in comparable store
sales. Management believes that the increase in comparable store
sales was due primarily to positive customer reaction to the
Company's Spring 1997 merchandise offerings.
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<PAGE> 8
Gross profit as a percentage of net sales increased to 50.1%
in the first quarter of 1997 from 45.1% in the first quarter of
1996. This increase was attributable to decreased cost of goods
sold resulting from higher initial markups, and lower markdowns
associated with decreased promotional activities.
Selling, general and administrative expenses represented 38.9%
of net sales in the first quarter of 1997, compared to 38.1% of
net sales in the first quarter of 1996.
As a result of the foregoing, the Company had operating income
of $19,239,000, or 9.8% of net sales, in the first quarter of
1997, compared to operating income of $10,523,000, or 5.7% of net
sales, in the first quarter of 1996. Amortization of goodwill
was $2,760,000 in the first quarter of 1997 and $2,377,000 in the
first quarter of 1996. Operating income, without giving effect
to goodwill amortization in either year, was $21,999,000, or
11.2% of net sales, in the 1997 period and $12,900,000, or 7.0%
of net sales, in the 1996 period.
Interest expense was $5,546,000 in the first quarter of 1997
and $6,121,000 in the first quarter of 1996. The decrease in
interest expense is attributable to reduced outstanding
indebtedness in the first quarter of 1997 compared to the first
quarter of 1996.
The income tax provision was $6,968,000, or 51.8% of income
before income taxes, in the first quarter of 1997 compared to
$2,721,000, or 60.0% of income before income taxes, in the first
quarter of 1996. The effective income tax rate for both periods
differed from the statutory rate primarily because of non-
deductible goodwill amortization.
As a result of the foregoing factors, the Company had net
income of $6,475,000, or 3.3% of net sales, for the first quarter
of 1997 compared to net income of $1,812,000, or 1.0% of net
sales, for the first quarter of 1996.
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<PAGE> 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
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<PAGE> 10
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 16, 1997 By: /s/ J. Patrick Spainhour
---------------------- ---------------------------
J. Patrick Spainhour
Chairman and Chief
Executive Officer
Date: June 16, 1997 By: /s/ Walter J. Parks
---------------------- ---------------------------
Walter J. Parks
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated statements of operations and condensed consolidated
balance sheets and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000850090
<NAME> ANNTAYLOR, INC.
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> MAY-03-1997
<CASH> 30,990
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<RECEIVABLES> 64,174
<ALLOWANCES> 786
<INVENTORY> 97,562
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<PP&E> 215,744
<DEPRECIATION> 72,545
<TOTAL-ASSETS> 705,298
<CURRENT-LIABILITIES> 87,564
<BONDS> 100,000
0
0
<COMMON> 1
<OTHER-SE> 473,903
<TOTAL-LIABILITY-AND-EQUITY> 705,298
<SALES> 197,064
<TOTAL-REVENUES> 197,064
<CGS> 98,428
<TOTAL-COSTS> 98,428
<OTHER-EXPENSES> 79,647
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<INTEREST-EXPENSE> 5,546
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<INCOME-TAX> 6,968
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<NET-INCOME> 6,475
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</TABLE>
