UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
FORM 10-Q
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(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 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.
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(Exact name of registrant as specified in its charter)
Delaware 51-0297083
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
142 West 57th Street, New York, NY 10019
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(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 26, 2000
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Common Stock, $1.00 par value 1
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
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INDEX TO FORM 10-Q
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Page No.
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the Quarters Ended April 29, 2000
and May 1, 1999..................................... 3
Condensed Consolidated Balance Sheets at
April 29, 2000 and January 29, 2000................ 4
Condensed Consolidated Statements of Cash Flows
for the Quarters Ended April 29, 2000 and
May 1, 1999........................................ 5
Notes to Condensed Consolidated Financial Statements.. 6
Item 2. Management's Discussion and Analysis of Results
of Operations...................................... 7
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K...................... 9
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
ANNTAYLOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters Ended April 29, 2000 and May 1, 1999
(unaudited)
Quarters Ended
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April 29, May 1,
2000 1999
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(in thousands)
Net sales...........................................$ 277,068 $ 249,400
Cost of sales....................................... 128,472 118,063
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Gross profit........................................ 148,596 131,337
Selling, general and administrative expenses........ 124,097 97,823
Amortization of goodwill............................ 2,760 2,760
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Operating income.................................... 21,739 30,754
Interest income..................................... 464 721
Interest expense.................................... 1,796 5,042
Other expense, net.................................. 6 1
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Income before income taxes.......................... 20,401 26,432
Income tax provision................................ 9,119 11,677
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Net income.......................................$ 11,282 $ 14,755
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See accompanying notes to condensed consolidated financial statements.
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ANNTAYLOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
April 29, 2000 and January 29, 2000
April 29, Jan. 29,
2000 2000
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(unaudited)
ASSETS (in thousands)
Current assets
Cash and cash equivalents............................... $ 27,178 $ 35,081
Accounts receivable, net ............................... 71,733 67,092
Merchandise inventories ................................ 164,497 140,026
Prepaid expenses and other current assets .............. 29,146 29,390
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Total current assets ............................... 292,554 271,589
Property and equipment, net .............................. 182,186 173,639
Goodwill, net ............................................ 305,899 308,659
Deferred financing costs, net ............................ 5,092 5,358
Other assets ............................................. 5,431 5,872
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Total assets........................................ $791,162 $765,117
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable........................................ $ 64,727 $ 56,175
Accrued salaries and bonus ............................. 11,811 23,297
Accrued tenancy ........................................ 8,329 7,800
Gift certificates and merchandise credits redeemable ... 12,949 15,618
Accrued expenses ....................................... 32,194 16,031
Current portion of long-term debt ...................... 1,326 1,300
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Total current liabilities .......................... 131,336 120,221
Long-term debt, net ...................................... 114,915 114,485
Deferred lease costs and other liabilities ............... 16,361 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 ............................. 378,801 377,155
Retained earnings ...................................... 149,748 138,466
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Total stockholder's equity ......................... 528,550 515,622
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Total liabilities and stockholder's equity.......... $791,162 $765,117
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See accompanying notes to consolidated financial statements.
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ANNTAYLOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters Ended April 29, 2000 and May 1, 1999
(unaudited)
Quarters Ended
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April 29, May 1,
2000 1999
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(in thousands)
Operating activities:
Net income................................................$ 11,282 $14,755
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loss on accounts receivable.............. 121 291
Depreciation and amortization.......................... 8,219 7,569
Amortization of goodwill............................... 2,760 2,760
Amortization of deferred compensation.................. 655 161
Non-cash interest...................................... 1,057 336
Loss on disposal of property and equipment............. 93 653
(Increase) decrease in:
Receivables.......................................... (4,762) (2,700)
Merchandise inventories.............................. (24,471) 395
Prepaid expenses and other current assets............ 244 (1,328)
Increase (decrease) in:
Accounts payable..................................... 8,552 (17,399)
Accrued liabilities.................................. 2,537 (830)
Other non-current assets and liabilities, net........ 2,010 185
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Net cash provided by operating activities................. 8,297 4,848
Investing activities:
Purchases of property and equipment....................... (16,857) (13,137)
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Net cash used by investing activities..................... (16,857) (13,137)
Financing activities:
Payments on mortgage...................................... (316) (294)
Payment of financing costs................................ (19) ---
Parent company activity................................... 992 7,025
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Net cash provided by financing activities................. 657 6,731
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Net decrease in cash........................................ (7,903) (1,558)
Cash and cash equivalents, beginning of period.............. 35,081 67,031
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Cash and cash equivalents, end of period....................$ 27,178 $65,473
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Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest..................$ 333 $ 2,503
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Cash paid during the period for income taxes..............$ 867 $ 744
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See accompanying notes to condensed consolidated financial statements.
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ANNTAYLOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
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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
April 29, 2000 and May 1, 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.
2. LONG-TERM DEBT
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The following summarizes long-term debt outstanding at April 29, 2000:
(in thousands)
Mortgage................................... $ 3,634
Note Payable to ATSC, net.................. 112,607
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Total debt ............................... 116,241
Less current portion....................... 1,326
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Total long-term debt.................... $ 114,915
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3. ENTERPRISE-WIDE OPERATING INFORMATION
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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.
.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
Quarters Ended
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April 29, May 1,
2000 1999
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Number of Stores:
Open at beginning of period....................... 405 365
Opened during period.............................. 17 11
Expanded or remodeled during period*.............. 2 ---
Closed during period.............................. 1 5
Open at end of period............................. 421 371
Type of Stores Open at End of Period:
Ann Taylor stores................................. 320 309
Ann Taylor Loft stores............................ 88 50
Ann Taylor Factory Stores......................... 13 12
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* Expanded stores are excluded from comparable store sales for the first
year following expansion.
QUARTER ENDED APRIL 29, 2000 COMPARED TO QUARTER ENDED MAY 1, 1999
The Company's net sales in the first quarter of 2000 increased to
$277,068,000 from $249,400,000 in the first quarter of 1999, an increase of
$27,668,000 or 11.1%. Comparable store sales for the first quarter of 2000
decreased 0.5%, compared to an increase of 16.9% in the first quarter of
1999. Management believes that the sales increase was primarily attributable
to the opening of new stores, partially offset by the net decrease in
comparable store sales. The net decrease in comparable store sales was the
result of a sales shortfall in April that management believes was principally
attributable to the unseasonably cold weather that affected many parts of the
country during that month.
Gross profit as a percentage of net sales increased to 53.6% in the first
quarter of 2000 from 52.7% in the first quarter 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 quarter of 1999.
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Selling, general and administrative expenses, excluding certain
nonrecurring expenses described below, represented 41.7% of net sales in the
first quarter of 2000, compared to 39.2% of net sales in the first quarter of
1999. The Company incurred a pre-tax nonrecurring charge of approximately
$8,500,000, or 3.1% of net sales, in connection with an extensive review
conducted with the Company's financial and legal advisors of various
strategic approaches to enhance shareholder value. The increase in selling,
general, and administrative expenses as a percentage of net sales, excluding
the nonrecurring charge, was primarily attributable to approximately
$2,000,000 of expenses relating to the development of the Company's proposed
Internet e-commerce web site, and also reflected increases in tenancy
expenses, and increases in Ann Taylor Loft store operations and marketing
expenses, in support of the Company's strategic initiatives to enhance the
Ann Taylor brand.
As a result of the foregoing, the Company had operating income, after
taking into account the nonrecurring charge, of $21,739,000, or 7.8% of net
sales, in the first quarter of 2000, compared to operating income of
$30,754,000, or 12.3% of net sales, in the first quarter of 1999.
Amortization of goodwill was $2,760,000 in both the first quarter of 2000 and
the first quarter of 1999. Operating income, without giving effect to
goodwill amortization in either year or the nonrecurring charge described
above, was $24,499,000, or 8.8% of net sales, in the first quarter of 2000
and $33,514,000, or 13.5% of net sales, in the first quarter of 1999.
Interest income was $464,000 in the first quarter of 2000 compared to
$721,000 in the first quarter of 1999. The decrease was primarily attributable
to lower cash on hand as a result of the Company's use of cash to repurchase
shares of common stock of AnnTaylor Stores Corporation ("ATSC") the company's
parent company during the third and fourth quarters of Fiscal 1999.
Interest expense was $1,796,000 in the first quarter of 2000 compared to
$5,042,000 in the first quarter of 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 due 2000 were redeemed. 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 $9,119,000, or 44.7% of income before income
taxes, in the first quarter of 2000 compared to $11,677,000, or 44.2% of
income before income taxes, in the first quarter of 1999. The effective
income tax rates for both periods were higher than the statutory rates,
primarily as a result of non-deductible goodwill expense.
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As a result of the foregoing factors, the Company had net income of
$11,282,000, or 4.1% of net sales, for the first quarter of 2000, compared to
net income of $14,755,000, or 5.9% of net sales, for the first quarter of
1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
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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 12, 2000 By: /s/ J. Patrick Spainhour
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J. Patrick Spainhour
Chairman and Chief Executive
Officer
Date: June 12, 2000 By: /s/ Barry Erdos
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Barry Erdos
Executive Vice President -
Chief Financial Officer and
Treasurer
