|
|
|
|
|
|
|
|
|
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 July 29, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-11980
ANNTAYLOR, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0297083
(State or 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 25, 2000
----- ---------------
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.
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the Quarters and Sixth Months Ended July 29, 2000
and July 31, 1999....................................... 3
Condensed Consolidated Balance Sheets at
July 29, 2000 and January 29, 2000...................... 4
Condensed Consolidated Statements of Cash Flows
for the Sixth Months Ended July 29, 2000 and
July 31, 1999........................................... 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2. Management's Discussion and Analysis of Results
of Operations........................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................... 11
Item 1. Financial Statements
Quarters Ended Six Months Ended
------------------- -------------------
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
------- ------- ------- -------
(in thousands)
Net sales......................................... $ 306,252 $ 265,747 $ 583,320 $ 515,147
Cost of sales .................................... 162,444 139,842 290,916 257,905
------- ------- ------- -------
Gross profit ..................................... 143,808 125,905 292,404 257,242
Selling, general and administrative expenses ..... 116,049 97,761 240,146 195,584
Amortization of goodwill ......................... 2,760 2,760 5,520 5,520
------- ------- ------- -------
Operating income ................................. 24,999 25,384 46,738 56,138
Interest income .................................. 806 1,397 1,270 2,118
Interest expense ................................. 1,830 2,660 3,626 7,702
Other expense/(income), net ...................... 13 (7) 19 (6)
------- ------- ------- -------
Income before income taxes and extraordinary loss 23,962 24,128 44,363 50,560
Income tax provision ............................. 10,536 10,755 19,655 22,432
------- ------- ------- -------
Income before extraordinary loss ................. 13,426 13,373 24,708 28,128
Extraordinary loss (net of income tax benefit
of $641,000) .................................. -- 962 -- 962
------- ------- ------- -------
Net income ................................... $ 13,426 $ 12,411 $ 24,708 $ 27,166
======= ======= ======= =======
July 29, January 29,
2000 2000
------- ---------
ASSETS (in thousands)
Current assets
Cash and cash equivalents ............................. $ 34,602 $ 35,081
Accounts receivable, net .............................. 67,092 67,092
Merchandise inventories ............................... 154,691 140,026
Prepaid expenses and other current assets ............. 34,210 29,390
------- -------
Total current assets .............................. 290,595 271,589
Property and equipment, net ............................. 195,584 173,639
Goodwill, net ........................................... 303,139 308,659
Deferred financing costs, net ........................... 4,833 5,358
Other assets ............................................ 7,284 5,872
------- -------
Total assets ...................................... $801,435 $765,117
======== ========
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable ...................................... $ 62,863 $ 56,175
Accrued salaries and bonus ............................ 15,947 23,297
Accrued tenancy ....................................... 9,066 7,800
Gift certificates and merchandise credits redeemable .. 12,586 15,618
Accrued expenses ...................................... 26,019 16,031
Current portion of long-term debt ..................... 1,349 1,300
------- -------
Total current liabilities ......................... 127,830 120,221
Long-term debt, net ..................................... 115,346 114,485
Deferred lease costs and other liabilities .............. 15,427 14,789
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 ............................ 379,657 377,155
Retained earnings ..................................... 163,174 138,466
------- -------
Total stockholder's equity ........................ 542,832 515,622
------- -------
Total liabilities and stockholder's equity ........ $801,435 $765,117
======== ========
See accompanying notes to condensed consolidated financial statements.
Six Months Ended
------------------
July 29, July 31,
2000 1999
------- -------
(in thousands)
Operating activities:
Net income ....................................... $ 24,708 $ 27,166
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary loss ............................ -- 1,603
Provision for loss on accounts receivable ..... 595 481
Depreciation and amortization ................. 16,521 15,205
Amortization of goodwill ...................... 5,520 5,520
Non-cash interest ............................. 2,114 985
Amortization of deferred compensation ......... 1,159 382
Loss on disposal of property and equipment .... 859 885
(Increase) decrease in:
Receivables ................................. (595) 4,832
Merchandise inventories ..................... (14,665) 2,360
Prepaid expenses and other current assets ... (4,820) (3,122)
Increase (decrease) in:
Accounts payable ............................ 6,688 (3,117)
Accrued expenses ............................ 873 (15,939)
Other non-current assets and liabilities, net (744) 1,082
------- -------
Net cash provided by operating activities ........ 38,213 38,323
Investing activities:
Purchases of property and equipment .............. (39,357) (27,486)
------- -------
Net cash used by investing activities ............ (39,357) (27,486)
Financing activities:
Payments on mortgage ............................. (638) (593)
Parent company activity .......................... 1,344 118,753
Redemption of 8-3/4% Notes ....................... -- (101,375)
Payment of financing costs ....................... (41) (4,050)
------- -------
Net cash provided by financing activities ........ 665 12,735
------- -------
Net increase (decrease) in cash .................... (479) 23,572
Cash and cash equivalents, beginning of period ..... 35,081 67,031
------- -------
Cash and cash equivalents, end of period ........... $ 34,602 $ 90,603
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest ......... $ 1,216 $ 6,423
========= =========
Cash paid during the period for income taxes ..... $ 22,411 $ 19,956
========= =========
The condensed consolidated financial statements of AnnTaylor, Inc. (the "Company") 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 2000 interim period shown in this report are not necessarily indicative of results to be expected for the fiscal year.
The January 29, 2000 condensed consolidated balance sheet amounts have been derived from the previously audited consolidated balance sheet of the Company.
Certain Fiscal 1999 amounts have been reclassified to conform to the Fiscal 2000 presentation.
Detailed footnote information is not included for the quarters ended July 29, 2000 and July 31, 1999. The financial information set forth herein should be read in conjunction with the Notes to the Company's Consolidated Financial Statements contained in the Company's 1999 Annual Report on Form 10-K.
The following summarizes long-term debt outstanding at July 29, 2000:
(in thousands)
Mortgage................................... $ 3,312
Note Payable to ATSC, net.................. 113,383
--------
Total debt ............................. 116,695
Less current portion....................... 1,349
--------
Total long-term debt.................... $ 115,346
========
The Company is a specialty retailer of women's apparel, shoes, and accessories. Given the economic characteristics of the store formats, the similar nature of the products sold, the type of customer and method of distribution, the operations of the Company are aggregated into one reportable segment. The Company believes that the customer base for its stores consists primarily of relatively affluent, fashion-conscious women from the ages of 25 to 55, and that the majority of its customers are working women with limited time to shop.
Six Months Ended
-------------------
July 29, July 31,
2000 1999
---- ----
Number of Stores:
Open at beginning of period...... 405 365
Opened during period............. 30 27
Expanded during period*.......... 2 2
Closed during period............. 5 5
Open at end of period............ 430 387
Type of Stores Open at End of Period:
Ann Taylor stores................ 319 313
Ann Taylor Loft stores........... 98 62
Ann Taylor Factory Stores........ 13 12
__________________
* Expanded stores are excluded from comparable store sales for the first year
following expansion.
Six Months ended July 29, 2000 Compared to Six Months ended July 31, 1999
The Company's net sales in the first six months of Fiscal 2000 increased to $583,320,000 from $515,147,000 in the first six months of Fiscal 1999, an increase of $68,173,000 or 13.2%. The increase is attributable to the opening of new stores and the expansion of existing stores and an increase in comparable store sales of 1.4%.
Gross profit as a percentage of net sales increased to 50.1% in the first six months of 2000 from 49.9% in the first six months of 1999. This increase in gross margin primarily reflects improvements made in the Company's sourcing, merchandising and inventory management processes, which resulted in higher initial mark-ups and higher gross margins achieved on full price sales compared to the first six months of 1999 partially offset by aggressive end-of-season markdowns during the second quarter of 2000.
Selling, general and administrative expenses, excluding certain nonrecurring expenses described below, were 39.7% of net sales in the first six months of 2000, compared to 38.0% of net sales in the first six months of 1999. Selling, general, and administrative expenses for the first six months of 2000 included approximately $3,300,000 of expenses relating to the development of the Company's proposed Internet e-commerce web site. Selling, general and administrative expenses as a percentage of net sales also reflected increases in tenancy expenses, and increases in Ann Taylor Loft store operations expenses and marketing expenses, in support of the Company's strategic initiatives to enhance the Ann Taylor brand, offset in part by leverage achieved on certain other expenses as a result of increased sales. The Company incurred a pre-tax nonrecurring charge of approximately $8,500,000 during the first quarter of fiscal 2000 in connection with an extensive review conducted with the Company's financial and legal advisors of various strategic approaches to enhance shareholder value.
As a result of the foregoing, the Company had operating income, after taking into account the nonrecurring charge, of $46,738,000, or 8.0% of net sales, in the first six months of 2000, compared to operating income of $56,138,000, or 10.9% of net sales, in the first six months of 1999. Amortization of goodwill was $5,520,000 in each of the first six months of Fiscal 2000 and Fiscal 1999. Operating income, without giving effect to goodwill amortization, was $52,258,000, or 9.0% of net sales, in the 2000 period and $61,658,000, or 12.0% of net sales, in the 1999 period.
Interest income was $1,270,000 in the first six months of Fiscal 2000 compared to $2,118,000 in the first six months of Fiscal 1999. The decrease was primarily attributable to lower cash on hand, as a result of a dividend to the Company's parent AnnTaylor Stores Corporation ("ATSC") to facilitate the repurchase by ATSC of shares of its common stock during the third and fourth quarters of Fiscal 1999.
Interest expense was $3,626,000 in the first six months of Fiscal 2000 and $7,702,000 in the first six months of Fiscal 1999. The decrease in interest expense was primarily attributable to the net reduction in the Company's outstanding long term debt and other obligations and a decrease in the interest rate borne by the Company's remaining outstanding long term debt. During the second quarter of 1999, the intercompany note issued by the Company to ATSC in August 1998 was forgiven, and the Company's 8 3/4% Notes were redeeemed. These transactions were completed using, in part, the proceeds from the issuance in June 1999 of the Note Payable to ATSC, which bears interest at a rate of 3.75% per annum.
The income tax provision was $19,655,000, or 44.3% of income before income taxes, in the 2000 period, compared to $22,432,000, or 44.4% of income before income taxes and extraordinary loss, in the 1999 period. The effective income tax rate for both periods differed from the statutory rate primarily because of non-deductible goodwill amortization.
The redemption of the outstanding 8 3/4% Notes on July 22, 1999 resulted in an extraordinary charge to earnings in the first six months of Fiscal 1999 of $962,000.
As a result of the foregoing factors, the Company had net income of $24,708,000, or 4.2% of net sales, for the first six months of 2000, compared to net income of $27,166,000 or 5.3% of net sales, for the first six months of 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a report dated June 21, 2000 with the Commission on
Form 8-K on June 26, 2000, reporting that the United States Court of
Appeals for the Second Circuit vacated the dismissal of the amended
complaint in the purported class action lawsuit against the Company, ATSC,
certain present and former directors and officers of the Company and ATSC
and Merrill Lynch & Co. and certain of its affiliates (Novak v. Kasaks, et
al., No. 96 CIV 3073 (S.D.N.Y. 1996)).
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AnnTaylor, Inc.
Date: September 8, 2000 By: /s/ J. Patrick Spainhour
--------------------------- ------------------------
J. Patrick Spainhour
Chairman and Chief Executive
Officer
Date: September 8, 2000 By: /s/ Barry Erdos
--------------------------- ---------------
Barry Erdos
Executive Vice President -
Chief Financial Officer
and Treasurer
|
|