SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED].
For the fiscal year ended January 28, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
Commission File No. 1-10738
ANNTAYLOR STORES CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3499319
- -------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
Common Stock, The New York Stock Exchange
$.0068 Par Value
Securities registered pursuant to Section 12(g) of the Act:
None.
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No ____.
The aggregate market value of the registrant's voting
stock held by non-affiliates of the registrant as of April 10,
1995 was $509,684,815.
The number of shares of the registrant's Common Stock
outstanding as of April 10, 1995 was 23,109,618.
Documents Incorporated by Reference:
None.
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PART I
ITEM 1. Business
General
AnnTaylor Stores Corporation (the "Company"), through its
wholly owned subsidiary, AnnTaylor, Inc. ("Ann Taylor"), is a
leading national specialty retailer of better quality women's
apparel, shoes and accessories sold primarily under the Ann
Taylor brand name.
The Company is a holding company that was incorporated under
the laws of the state of Delaware in 1988 under the name
AnnTaylor Holdings, Inc. The Company changed its name to
AnnTaylor Stores Corporation in April 1991. Unless the context
indicates otherwise, all references herein to the Company
include the Company and its wholly owned subsidiary Ann Taylor.
The first Ann Taylor store was opened in New Haven,
Connecticut in 1954. Over the years, the number of stores
gradually expanded, and by 1981, there were 36 stores. Allied
Stores Corporation ("Allied Stores") acquired the then parent of
Ann Taylor in 1981 and began a rapid expansion program for the
Ann Taylor stores, which continued after Allied Stores was
acquired by the Campeau Corporation in 1986. Ann Taylor grew
significantly after 1981, with the number of stores increasing
to 119 by the end of 1988, at which time Ann Taylor was acquired
by the Company (the "Acquisition"). As of January 28, 1995, the
Company operated 262 stores in 38 states and the District of
Columbia.
In May 1991, the Company completed an initial public offering
(the "IPO") in which it issued and sold 6,882,395 shares of its
common stock, par value $.0068 per share (the "Common Stock"),
at a price of $26.00 per share, resulting in aggregate net
proceeds of approximately $166,541,000 (after payment of
expenses of the offering by the Company). The net proceeds from
the IPO were used to repurchase certain debt securities issued
by Ann Taylor in connection with financing the Acquisition. The
Company completed a public offering of an additional 1,000,000
shares of Common Stock (the "Offering") at a price of $32.00 per
share in May 1994. The net proceeds of the Offering were used
to reduce the Company's outstanding long-term debt by
$30,000,000.
The Company believes that the Ann Taylor name is a fashion
brand, defining a distinctive collection of apparel, shoes and
accessories which emphasizes classic styles, updated to reflect
current fashion trends. The Company's merchandising strategy
focuses on offering career and casual separates, dresses, tops,
weekend wear, shoes and accessories, coordinated as part of a
total wardrobing strategy.
This total wardrobing strategy is reinforced by an emphasis
on customer service. Ann Taylor sales associates assist
customers in merchandise selection and wardrobe coordination,
helping them achieve the "Ann Taylor look" while reflecting the
customers' personal styles. The Company believes that its
customer base consists primarily of relatively affluent, fashion-
conscious women from the ages of 25 to 55, and that the majority
of its customers is working women with limited time to shop, who
are attracted to Ann Taylor by its focused merchandising and
total wardrobing strategies, personalized customer service,
efficient store layouts and continual flow of new merchandise.
Since becoming Chairman and Chief Executive Officer in
February 1992, Sally Frame Kasaks has redirected the Company's
merchandising and marketing efforts to enhance the position of
Ann Taylor as a fashion brand. The Company's growth strategy
has been broadened to include not only the opening of new stores
in new and existing markets, but also the expansion of existing
stores and the introduction of product line extensions and
additional channels of distribution. The principal elements of
the Company's strategy include:
* Emphasis on product design and development to reinforce
the exclusivity of Ann Taylor merchandise by expanding the
Company's fabric and merchandise design team.
* Renewed focus on consistent quality and fit by
strengthening the production management team responsible
for technical design and factory and merchandise quality
assurance.
* Development of the Company's global and direct sourcing
capabilities to reduce costs and shorten lead times. The
Company increased its merchandise purchases through its
direct sourcing joint venture, which acts as an agent
exclusively for Ann Taylor, placing orders directly with
manufacturers, from 23.5% of merchandise purchased in
fiscal 1993 to 36.3% in fiscal 1994. See "Business --
Merchandise Design and Production".
* Development of a merchandise pricing structure that
emphasizes consistent every day value rather than
promotions, adding to the credibility of the Ann Taylor
brand.
* Introduction of product line extensions building on the
strength of the Ann Taylor brand name. Over the past three
years, the Company has (i) increased its presence in casual
wear by introducing its own line of denim known as ATdenim,
(ii) introduced Ann Taylor petites, (iii) introduced its
signature fragrance "destination" and a limited line of
related personal care products, (iv) introduced its
"Action" label active wear line and (v) begun testing "Navy
label" merchandise, which offers career separates and
dresses at somewhat higher price points to compete with
designer bridge and diffusion lines. See "Business --
Merchandising".
* Introduction of two larger store prototypes. Since
1993, most new and expanded Ann Taylor Stores average
approximately 6,000 square feet and, in certain premier
markets, new and expanded stores are approximately 10,000
to 12,000 square feet. These store prototypes are designed
to allow the proper presentation of Ann Taylor product
extensions, reinforce the Ann Taylor total wardrobing
concept and improve customer service and ease of shopping.
See "Business -- Expansion".
* Introduction of additional channels of distribution. In
addition to its Ann Taylor Stores, at the end of fiscal
1994 the Company operated 21 Ann Taylor Factory Stores,
which were introduced beginning in 1993, and five AnnTaylor
Studio stores, a free-standing shoe and accessory store
concept introduced in fall 1994. In 1995 the Company will
begin testing AnnTaylor Loft stores, a moderate price store
concept. See "Business -- Merchandising".
* Increased investment in more sophisticated point-of-sale
and inventory management systems, including the integration
of the Company's merchandise planning, store assortment
planning, and merchandise allocation and replenishment
systems. These enhancements are designed to enable the
Company to manage its business more effectively and cost
efficiently by improving customer service and providing the
ability to better manage inventory levels. See "Business -
- Information Systems".
* Construction of a 256,000 square foot distribution
center in Louisville, Kentucky to replace, in late spring
1995, the Company's existing 90,000 square foot
distribution facilities in Connecticut. See "Properties".
Merchandising
The Company's Ann Taylor Stores offer a distinctive
collection of career and casual separates, dresses, tops,
weekend wear, shoes and accessories, consisting primarily of
exclusive Ann Taylor brand name fashions. The Company's
merchandising strategy focuses on achieving the "Ann Taylor
look" which emphasizes classic styles, updated to reflect
current fashion trends. Ann Taylor Stores offer a variety of
coordinated apparel and an assortment of shoes and accessories,
to enable customers to assemble complete outfits. Sales
associates are trained to assist customers in merchandise
selection and wardrobe coordination, helping them achieve the
Ann Taylor look while reflecting the customers' personal styles.
The Company encourages sales associates to become familiar with
regular customers to assist these customers in finding
merchandise suited to their tastes and wardrobe needs. The
Company has a liberal return policy, which it believes is
comparable to those offered by better department stores and
other specialty retail stores.
A principal element of the Company's business strategy since
1992 has been the introduction of product line extensions. For
example, Ann Taylor shoes, which were sold in 99 Ann Taylor
Stores in 1992, were expanded to 157 stores by the end of
fiscal 1994, as well as the Company's five AnnTaylor Studio
stores. In fall 1992, the Company increased its presence in
casual wear by introducing its own line of denim known as
"ATdenim", that is sold in all Ann Taylor Stores and store
concepts, other than the Ann Taylor Studio stores. In fall
1993, Ann Taylor petites was tested in the career separates and
dress categories in 25 Ann Taylor Stores; by the end of fiscal
1994, a broader range of Ann Taylor petites was carried in 119
Ann Taylor Stores. In fall 1994, the Company introduced a
fragrance and limited line of personal care products under the
name "destination", which is sold in all Ann Taylor Stores and
store concepts. The Company intends to expand the products
included in its "destination" personal care line by fall 1995.
In fall 1994, the Company also introduced a line of active wear
now sold under the "Action" label, which will be sold in all Ann
Taylor Stores and store concepts other than the Studio stores.
In spring 1995 the Company began testing Ann Taylor "navy label"
merchandise in the career separates and dress categories in 30
Ann Taylor Stores and the Company's catalog. Navy label
merchandise is intended to compete with designer bridge and
diffusion lines and is priced approximately 30% higher than
traditional Ann Taylor label merchandise.
In addition to expanding the Company's product lines,
principal element of the Company's growth strategy since 1992
has been the introduction of additional channels of
distribution. The Company began testing Ann Taylor Factory
Stores as an additional channel of distribution in 1993. Ann
Taylor Factory Stores, which are located in factory outlet
malls, serve as a clearance vehicle for merchandise from Ann
Taylor Stores and also sell merchandise produced specifically
for the Factory Stores. Merchandise produced specifically for
the Factory Stores has an average initial price approximately
25% to 35% lower than the average initial price of merchandise
carried in Ann Taylor Stores. Ann Taylor Factory Stores also
sell certain products that the Company believes represent
exceptional value, such as ATdenim, Action wear, and the
"destination" fragrance and personal care line, concurrently
with and at the same price as the Ann Taylor Stores. In 1994,
approximately 30% of the merchandise sold in Ann Taylor Factory
Stores represented clearance merchandise from Ann Taylor Stores,
65% was merchandise manufactured specifically for the Factory
Stores, and 5% was merchandise sold concurrently at both Ann
Taylor Stores and Factory Stores. Commencing in 1995,
merchandise produced specifically for these stores will bear an
Ann Taylor Factory Stores label. The Company expects to reduce
the amount of merchandise produced specifically for Ann Taylor
Factory Stores in 1995.
The success of the Company's Factory Stores led the Company
to initiate, in 1995, a test of a moderate price store concept,
Ann Taylor Loft, for customers who have an appreciation for the
Ann Taylor fashion viewpoint and style, but have a smaller
budget for apparel and accessories. Merchandise in these stores
will cover the full assortment of career and casual separates,
dresses, tops, weekend wear and accessories under the Ann Taylor
Loft label and shoes under The Shoe Loft label, and will be
priced approximately 25% to 30% lower than merchandise carried
in the Ann Taylor Stores. Loft stores will also carry ATdenim,
Action wear and the "destination" product line concurrently with
and at the same prices as the Ann Taylor Stores and the Ann
Taylor Factory Stores.
In fall 1994, the Company began testing AnnTaylor Studio
stores, a free standing shoe and accessory store concept. These
stores carry the broadest selection of Ann Taylor footwear and
also offer Ann Taylor hosiery, small leather accessories such as
belts and handbags, and the "destination" product line. As of
January 28, 1995, the Company had five Ann Taylor Studio stores.
The Company intends to continue testing the Ann Taylor Studio
store concept, and will open approximately five Studio stores in
fiscal 1995.
Merchandise Design and Production
Ann Taylor merchandise is developed based upon current
fashion trends and analysis of prior year sales. The
Company's merchandising and product development groups
determine needs for the upcoming season, design styles to fill
those needs and arrange for the production of merchandise
either through vendors who are private label specialists or
directly with a factory.
The Company's production management department establishes
the technical specifications for all Ann Taylor merchandise,
inspects and certifies factories in which Ann Taylor
merchandise is produced, conducts periodic inspections of
factories while goods are in production to identify potential
problems prior to shipment of merchandise by vendors, and upon
receipt, inspects merchandise on a test basis for uniformity
of sizes and colors, as well as for overall quality of
manufacturing.
The Company is continuing to develop its capability to
source its merchandise directly with manufacturers. The
Company believes that direct sourcing improves its competitive
position by reducing costs and shortening lead times. To this
end, in May 1992, the Company commenced a joint venture known
as CAT U.S., Inc. ("CAT") with Cygne Designs, Inc. ("Cygne"),
which was formed for the purpose of acting as a sourcing agent
exclusively for Ann Taylor, placing merchandise orders
directly with manufacturers. Merchandise purchased by Ann
Taylor through CAT represented 36.3% and 23.5% of all
merchandise purchased by the Company in 1994 and 1993,
respectively. The Company currently owns a 40% interest in
CAT.
In 1994, the Company purchased merchandise from
approximately 141 vendors, including five vendors each of whom
accounted for 4% or more of the Company's merchandise
purchases: CAT (36.3%), Cygne (14.3%), Parigi (5.5%), Depeche
(4.7%) and D.S. Studio (4.5%). In 1994, nearly all of the
Company's merchandise was purchased from domestic vendors,
including CAT. Consistent with the retail apparel industry as
a whole, most of the Company's domestic vendors import a large
portion of their merchandise from abroad. Substantially all
of the merchandise purchased through CAT is manufactured
outside the United States. The Company's suppliers (other than
CAT) include vendors who either manufacture merchandise or
supply merchandise manufactured by others, as well as vendors
that are both manufacturers and suppliers.
The Company cannot predict whether any of the foreign
countries in which its products are currently manufactured or
any of the countries in which the Company may manufacture its
products in the future will be subject to future import
restrictions by the U.S. government, including the likelihood,
type or effect of any trade retaliation. Trade restrictions,
including increased tariffs or quotas, or both, against
apparel items could affect the importation of apparel
generally and, in that event, could increase the cost or
reduce the supply of apparel available to the Company and
adversely affect the Company's business, financial condition
and results of operations. The Company's merchandise flow may
also be adversely affected by political instability in any of
the countries in which its goods are manufactured, significant
fluctuation in the value of the U.S. dollar against foreign
currencies and restrictions on the transfer of funds.
The Company does not maintain any long-term or exclusive
commitments or arrangements to purchase merchandise from any
supplier, although it does have an equity investment in CAT.
The Company believes it has a good relationship with its
suppliers and that, as the number of stores increases and
existing stores are expanded, there will continue to be
adequate sources that will be able to produce a sufficient
supply of quality goods in a timely manner and on satisfactory
economic terms.
The Company's agreement with Cygne relating to the parties'
ownership of CAT provides that, at any time after July 1, 1995
either Cygne or Ann Taylor may offer to purchase the other
party's interest in CAT. The party that receives the offer
then has the option to either accept the offer and sell its
interest in CAT on the terms offered, or purchase the offering
party's interest in CAT on the terms offered. The closing of
such purchase would occur upon six months' prior notice, but
not before February 5, 1996. There can be no assurance that
if the Company were to offer to purchase Cygne's interest in
CAT, that Cygne would not elect
instead to purchase the Company's interest or that, if Cygne
were to offer to purchase the Company's interest in CAT, that
such offer would reflect the value of such interest, that the
Company would have the financial ability to purchase Cygne's
interest in CAT at the offered price, or that, if Cygne were
to purchase the Company's interest in CAT, the Company would
be able to continue to do business with CAT on terms having
the same economic effect as its current arrangement or to
replace CAT as a merchandise sourcing agent on similar terms.
Inventory Control and Merchandise Allocation
The Company's merchandise planning and allocation department
analyzes each store's size, location, demographics, sales and
inventory history to determine the quantity of merchandise to be
purchased for and the allocation of merchandise to the Company's
stores. Upon receipt, merchandise is allocated in order to
achieve an emphasis that is suited to each store's customer
base.
Merchandise typically is sold at its original marked price
for several weeks, with the length of time varying by item. The
Company reviews its inventory levels in order to identify slow-
moving merchandise and broken assortments (items no longer in
stock in a sufficient range of sizes) and uses markdowns to
clear merchandise. Markdowns may be used if inventory exceeds
customer demand for reasons of style, seasonal adaptation or
changes in customer preference or if it is determined that the
inventory will not sell at its currently marked price. Marked
down items that are not sold after several more weeks are
generally moved to the Company's Factory Stores where additional
markdowns may be taken. In 1994, inventory turned 4.6 times.
Inventory turnover is determined by dividing net cost of goods
sold by the average of the cost of inventory at the beginning
and end of the period.
The Company uses a centralized distribution system, under
which the Company's distribution center receives, processes and
distributes Ann Taylor merchandise, other than hosiery which is
shipped from the manufacturer directly to the Company's stores.
In 1994, the Company also utilized a contract distribution
center in Connecticut to distribute merchandise to its Factory
Stores. Merchandise is shipped to the Company's stores nearly
every business day. In 1994, the Company commenced construction
of a 256,000 square foot distribution facility in Louisville,
Kentucky that is expected to replace the Company's existing
Connecticut distribution facilities in late spring 1995. See
"Properties" and "Management's Discussion and Analysis".
Stores
As of January 28, 1995, the Company operated 262 stores in 38
states and the District of Columbia, including 236 Ann Taylor
Stores, 21 Ann Taylor Factory Stores, and five Ann Taylor Studio
stores. The following table sets forth by state the stores that
were open as of January 28, 1995:
Locations by State
Number Number Number
of of of
State Stores State Stores State Stores
- ------- ------ -------- ------ -------------- -------
Alabama 2 Louisiana 4 North Carolina 5
Arizona 3 Maryland 6 Ohio 13
Arkansas 1 Massachusetts 13 Oklahoma 3
California 44 Michigan 8 Oregon 1
Colorado 4 Minnesota 5 Pennsylvania 12
Connecticut 10 Mississippi 1 Rhode Island 1
Dist Columbia 5 Missouri 6 South Carolina 2
Florida 20 Nebraska 1 Tennessee 5
Georgia 5 Nevada 2 Texas 12
Hawaii 2 New Hampshire 2 Utah 2
Illinois 12 New Jersey 11 Virginia 8
Indiana 2 New Mexico 2 Washington 2
Kentucky 2 New York 22 Wisconsin 1
As of January 28, 1995, the Company's 236 Ann Taylor stores
were distributed as follows: 113 stores were located in regional
malls, 61 stores were in upscale specialty centers, 37 stores
were in village locations, and 25 stores were in downtown
locations. The Company's 21 Factory Stores were all located in
factory outlet centers. The Company's five AnnTaylor Studio
stores were located in regional malls in which there is also an
Ann Taylor Store.
The Company selects store locations that it believes are
convenient for its customers. Store locations are determined on
the basis of various factors, including geographic location,
demographic studies, anchor tenants in a mall location, other
specialty stores in a mall or specialty center location or in
the vicinity of a village location, and the proximity to
professional offices in a downtown or village location. Ann
Taylor Factory Stores are generally located in factory outlet
malls in which co-tenants include a significant number of
nationally recognized upscale brand names.
Ann Taylor Stores opened prior to January 30, 1993 averaged
3,300 square feet in size, with the exception of three stores
that ranged between 10,300 square feet and 12,500 square feet.
During 1992, the Company designed two new store prototypes for
its Ann Taylor Stores. The first is a store model of
approximately 5,500 square feet, on which most new and expanded
stores opened since 1993 are based. The Company also designed a
new larger store prototype of approximately 10,000 to 12,000
square feet, which is reserved for certain premier markets that
management believes can support such a store. Both new store
prototypes incorporate modified display features, fixtures and
fitting rooms. The Company believes that these store formats
enhance the Company's ability to merchandise its customer
offerings and reinforce its total wardrobing concept, provide
area necessary for the proper presentation of Ann Taylor shoes,
petites and other product line extensions, and improve customer
service and ease of shopping. The typical Ann Taylor Store has
approximately 19% of its total square footage allocated to
stockroom and other non-selling space.
In fall 1995, the Company will open two Ann Taylor Stores in
excess of 25,000 square feet each, one on Madison Avenue in New
York City, and the other on Post Street in San Francisco. These
two larger stores will represent the fullest assortment of Ann
Taylor merchandise, and are expected to include amenities unique
to these stores, such as business centers and personal shoppers.
The Madison Avenue store replaces the Company's former store on
57th Street in New York City that was 12,500 square feet. The
57th Street store was closed on January 31, 1995 at the end of
that store's lease term. The Company is currently occupying an
8,000 square foot temporary location on 57th Street, in order to
accommodate its customers while the Madison Avenue store is
under construction.
In 1993 the Company began testing Ann Taylor Factory Stores
as an additional channel of distribution, by converting its four
then-existing clearance centers to the Ann Taylor Factory Store
format and opening five new Ann Taylor Factory Stores. In 1994,
the Company opened an additional 12 Ann Taylor Factory Stores.
The Factory Stores average 6,000 square feet and are located in
factory outlet malls. Outlet malls appeal to consumers'
increasing orientation to value and to manufacturers' and
retailers' desire for additional channels of distribution and
control over liquidation of their product.
The success of the Company's Factory Stores and consumers'
continuing emphasis on value has led the Company to begin
testing, in 1995, a separate moderate priced store concept under
the name "Ann Taylor Loft". Ann Taylor Loft stores will be
approximately 10,000 square feet and initially will be located
in factory outlet malls.
In 1994 the Company also introduced five Ann Taylor Studio
shoe and accessory stores, all located in regional malls in
which the Company also has an Ann Taylor Store. Ann Taylor
Studio stores average approximately 1,800 square feet. For more
information regarding the Company's different store formats, see
"Business -- Merchandising".
Expansion
Ann Taylor has grown significantly since the Acquisition,
with the number of stores increasing from 119 at the beginning
of 1989 to 262 at the end of 1994, and with net sales increasing
from approximately $353,900,000 in 1989 to approximately
$658,800,000 in 1994. The following table sets forth certain
information regarding store openings, expansions and closings
for Ann Taylor Stores ("ATS"), Ann Taylor Factory Stores
("ATO"), and Ann Taylor Studio stores ("ATA") since the
consummation of the Acquisition in the beginning of the 1989
fiscal year:
Number of Stores
------------------------------------------------------
Total Stores ATS ATS
open at Opened expanded closed Open at end
Fiscal beginning of during during during of fiscal
Year fiscal year fiscal year fiscal fiscal year
year
- ---- ----------- ------------ ------- ------ -----------
ATS ATO ATA ATS ATO ATA
--- --- --- --- --- ---
1989 119(a) 20 1(b) --- 2 1 138 1 ---
1990 139 29 3(b) --- 3 1 166 4 ---
1991 170 33 --- --- 3 3 196 4 ---
1992 200 20 --- --- 5 1 215 4 ---
1993 219 8 5 --- 12 1 222 9 ---
1994 231 18 12 5 24(c) 4 236 21 5
(a) Prior to 1989, the Company did not operate any factory
stores or clearance centers.
(b) Prior to 1993, ATO stores served only as clearance
centers for Ann Taylor Store merchandise.
(c) One ATO store was also expanded in 1994.
An important aspect of the Company's business strategy is a
real estate expansion program that is designed to reach new
customers through the opening of new stores, as well as the
expansion of existing stores in order to accommodate product
extensions and improve customer service. As market conditions
warrant and as sites become available, the Company adds
additional stores or expands the size of existing stores, in
major cities and their affluent suburbs where Ann Taylor already
has a presence. The Company also opens new stores in additional
cities that it believes have a sufficient concentration of its
target customers. Prior to 1993, the real estate expansion
program focused primarily on adding new Ann Taylor Stores.
Since developing the larger Ann Taylor Store prototypes in 1992,
the Company views the expansion of existing stores as an
integral part of the Company's expansion strategy. Stores
expanded by more than 15% are excluded from comparable sales
calculations until they have been open over one year at their
expanded size.
Another important aspect of the Company's business strategy
is the addition of new channels of distribution through new
store concepts. The Company's real estate efforts support this
strategy by seeking real estate sites compatible with each
particular concept.
Once an appropriate site has been selected and a lease
signed, the Company generally requires a relatively short lead
time to open a new store, with store construction typically
taking approximately three months.
In 1994, the Company opened 18 Ann Taylor Stores, 12 Factory
Stores and 5 Studio stores, expanded 24 existing Ann Taylor
Stores and one existing Factory Store, and closed 4 Ann Taylor
Stores, resulting in a net increase in the Company's total store
square footage from approximately 929,000 square feet to
approximately 1,173,000 square feet, a net increase of
approximately 244,000 square feet or 26.3%. Approximately 71.6%
of this additional square footage was opened during the second
half of 1994. Capital expenditures for the Company's real
estate expansion program totaled approximately $36.6 million in
1994, including expenditures for store refurbishing and store
refixturing.
The Company expects to increase store square footage by at
least 500,000 square feet, or 42.6%, in 1995. Approximately 37%
of this new square footage will be represented by new Ann Taylor
Stores, approximately 38% will be new Ann Taylor Loft and
Factory Stores, approximately 3% will be new Ann Taylor Studio
stores, and approximately 22% will be attributable to the
expansion of existing Ann Taylor Stores. The Company expects
that capital expenditures for its 1995 real estate expansion
program will be approximately $64.0 million, including
expenditures for store refurbishing and store refixturing. The
Company's ability to continue to increase store square footage
will be dependent upon general economic and business conditions
affecting consumer confidence and spending, the availability of
desirable locations and the negotiation of acceptable lease
terms. See "Management's Discussion and Analysis--Liquidity and
Capital Resources" for a discussion of the restrictions on
capital expenditures in the Ann Taylor Revolving Credit
Agreement.
Information Systems
Over the past two years, the Company has increased its
investment in computer hardware, systems applications and
networks to speed customer service, to support the purchase and
allocation of merchandise and to improve operating efficiencies.
In spring 1994, the Company completed the roll out of a new
point of sale system to all Ann Taylor stores. The new system
allows the introduction of a number of features that will enable
the Company to manage its business more effectively and cost
efficiently. Through the new system, the Company has introduced
on-line acknowledgment of inventory receipts and transfers,
which results in more timely inventory information and a
reduction in paperwork; and advance ship notices to stores prior
to their receipt of merchandise, allowing better store labor
planning. The new system permits automated promotional
tracking, providing better information to the stores on current
promotions and providing the results of these promotions to the
Company's headquarters on a more timely basis. This allows the
Company to respond more quickly and accurately to customer
preferences. The new system will also permit on-line entry of
time and attendance information and staff scheduling, improving
accuracy and reducing paperwork.
In 1994, the Company also made significant upgrades to its
inventory management system. These upgrades, along with the new
point of sale system, enabled the Company to introduce full
price look-up in the stores in fall 1994 and provide for more
timely information on inventory levels and improved analysis of
sales trends. The enhanced information will also allow the
Company to more fully integrate its merchandise planning and
allocation systems. The Company expects that by the fall of
1995 its merchandise planning system, store assortment planning
system, merchandise allocation system and merchandise
replenishment system will be fully integrated, allowing the
Company to respond more quickly to individual store trends and
make allocations of merchandise more closely aligned with an
individual store's customer base. The Company is also
initiating systems integration with its suppliers. In spring
1994, the Company's first electronic data interchange
relationship was implemented with its hosiery supplier, allowing
quicker response to sales and facilitating more timely
maintenance of in-store inventory levels in line with model
stock levels.
In July 1994, the Company provided all field management with
portable computers which are capable of communicating with the
central systems to obtain financial information and general
communication. In 1995, the Company began establishing formal
communication to certain suppliers via the primary public
communication network. By late spring 1995, CAT will be fully
integrated and on-line with the Company. The Company expects to
have electronic communication to all primary suppliers by late
fall 1995.
Customer Credit
Customers may pay for merchandise with the Ann Taylor credit
card, American Express, Visa, MasterCard, cash or check. Credit
card sales were 77.7% of net sales in 1994, 77.9% in 1993, and
77.6% in 1992. In 1994, 27.2% of net sales were made with the
Ann Taylor credit card and 50.5% were made with third-party
credit cards. Accounts written off in 1994 were $1,583,000, or
0.2% of net sales.
Ann Taylor has offered customers its proprietary credit card
since 1976. The Company believes that the Ann Taylor credit
card enhances customer loyalty while providing the customer with
additional credit. At January 28, 1995, the Company had over
480,000 credit accounts that had been used during the past 18
months.
Advertising and Promotion
The Company views its fashion catalog, which is mailed
principally to Ann Taylor credit card holders, as its principal
advertising vehicle. Prior to 1994, the Company also
occasionally ran print advertisements in national women's
fashion magazines such as Elle, Vogue and Harpers Bazaar. In
1994, the Company did not run any print or broadcast
advertisements and does not expect to do so in the immediate
future.
Trademarks and Service Marks
The Company is the owner in the United States of the
trademark and service mark "AnnTaylor". This mark is protected
by several federal registrations in the United States Patent and
Trademark Office, covering clothing, shoes, jewelry and certain
other accessories, and clothing store services. The terms of
these registrations vary from ten to twenty years (expiring in
2003 and 2007), and each is renewable indefinitely if the mark
is still in use at the time of renewal.
The Company is also the owner in the United States of the
trademark "ATdenim" for clothing and the trademark "destination"
for fragrance and certain personal care items, and has applied
for registration of certain other trademarks used by it, for
example "Ann Taylor Loft", "The Shoe Loft" and "Action".
The Company's rights in the "AnnTaylor" mark and the other
marks used by it are a significant part of the Company's
business, as the Company believes its marks are well-known in
the women's retail apparel industry. Accordingly, the Company
intends to maintain its AnnTaylor mark and related
registrations. The Company is not aware of any claims of
infringement or other challenges to the Company's right to use
any of its marks in the United States.
The Company owns registrations for the "AnnTaylor" mark for
clothing in Brazil, Canada, Hong Kong, Japan and Taiwan, and
owns or has applied for registration for the "AnnTaylor",
"ATdenim", "destination" and "Action" marks for clothing and
other goods in other countries as well.
Competition
The women's retail apparel industry is highly competitive.
The Company believes that the principal bases upon which it
competes are fashion, quality, value and service. The Company's
Ann Taylor Stores and Ann Taylor Studio stores compete with
certain departments in better national department stores such as
Neiman Marcus, Saks Fifth Avenue, Lord & Taylor, Nordstrom and
Bloomingdale's, as well as certain departments in regional
department stores, such as Marshall Fields and Dillard's. The
Company believes that it competes with these department stores
by offering a focused merchandise selection, personalized
service and convenience, as well as exclusive Ann Taylor
fashions, which distinguish its goods from the goods carried by
these department stores. Certain of the Company's product lines
also compete with other specialty retailers such as Talbots,
Ralph Lauren, The Limited, The Gap and Banana Republic. The
Company believes that its focused merchandise selection,
exclusive Ann Taylor brand name fashions, personalized service
and convenience distinguish it from other specialty retailers.
Many of the Company's competitors are considerably larger and have
substantially greater financial, marketing and other resources
than the Company, and there is no assurance that the Company
will be able to compete successfully with them in the future.
Employees
Store management receives compensation in the form of
salaries and performance-based bonuses. Sales associates are
paid on an hourly basis plus performance incentives. A number
of programs exist that offer incentives to both management and
sales associates to increase sales and support the Company's
total wardrobing strategy. For example, certain incentive
programs offer individual associates payment for selling
multiple wardrobe items and for achieving individual sales
goals. Other programs provide bonuses or payments to all
associates in a store that has achieved, for example, the
highest percentage increase in sales for a given period.
As of January 28, 1995, the Company had 5,258 employees, of
whom 1,170 were full-time salaried employees, 1,501 were full-
time hourly employees and 2,587 were part-time hourly employees
working less than 30 hours per week. Approximately 86% of the
Company's employees are eligible to participate in the Company's
health insurance programs. None of the Company's employees are
represented by a labor union. The Company believes that its
relationship with its employees is good.
ITEM 2. Properties
As of January 28, 1995, the Company had 262 stores, all of
which were leased. The leases typically provide for an initial
five-to ten-year term and grant the Company the right to extend
the term for one or two additional five-year periods. In most
cases, the Company pays a minimum rent plus a contingent rent
based on the store's net sales in excess of a specified
threshold. The contingent rental payment is typically 5% of net
sales in excess of the applicable threshold. Substantially all
of the leases require the Company to pay insurance, utilities
and repair and maintenance expenses and contain tax escalation
clauses. The current terms of the Company's leases, including
renewal options, expire as follows:
Fiscal
Years Lease Number of
Terms Expire Stores
------------ ---------
1995-1997 37
1998-2000 20
2001-2003 23
2004 and later 182
Ann Taylor leases corporate offices at 142 West 57th Street,
New York, containing approximately 86,700 square feet. The
lease for these premises expires in 2006. The Company is also
leasing an additional 8,600 square feet of office space in the
same building on a temporary basis. The lease for these
additional premises expires in March 1996 with an option to
extend this lease for an additional six months. Ann Taylor also
leases office space in New Haven, which contains approximately
31,000 square feet. The lease for these offices expires in
1996.
Ann Taylor leases its New Haven distribution center, which
contains 78,790 square feet. The lease for this facility
expires in September 1995. In 1994, the Company purchased
property in Louisville, Kentucky on which it is constructing a
256,000 square foot facility to replace the Company's existing
distribution center facilities in Connecticut. The Company
expects to begin testing the flow of merchandise through this
facility in May 1995 and expects the facility to be fully
operational in late spring 1995. The Company expects capital
expenditures to build and equip the distribution center to total
approximately $16.0 million. See "Management's Discussion and
Analysis".
ITEM 3. Legal Proceedings
Ann Taylor has been named as a defendant in several legal
actions arising from its normal business activities. Although
the amount of any liability that could arise with respect to
these actions cannot be accurately predicted, in the opinion of
the Company, any such liability will not have a material adverse
effect on the financial position or results of operations of the
Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
=======================================================================
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Common Stock is listed and traded on the New York Stock
Exchange under the symbol ANN. The number of holders of record
of Common Stock at April 10, 1995 was 495. The following table
sets forth the high and low closing sales prices for the Common
Stock on the New York Stock Exchange during fiscal 1994 and
fiscal 1993.
Market Price
-------------------
High Low
--------- -------
Fiscal Year 1994
Fourth quarter $ 44 1/4 $31 7/8
Third quarter 44 35
Second quarter 41 1/8 31 1/2
First quarter 36 20 7/8
Fiscal Year 1993
Fourth quarter $ 28 1/4 $20 7/8
Third quarter 29 5/8 22 7/8
Second quarter 27 7/8 20
First quarter 23 1/4 17 7/8
The Company has never paid dividends on the Common Stock and
does not intend to pay dividends in the foreseeable future. As
a holding company, the ability of the Company to pay dividends
is dependent upon the receipt of dividends or other payments
from Ann Taylor. The payment of dividends by Ann Taylor to the
Company is subject to certain restrictions under Ann Taylor's
bank revolving credit agreement (the "Revolving Credit
Agreement") and the indenture relating to AnnTaylor, Inc's. 8-
3/4% Subordinated Notes due 2000 (the "8-3/4% Notes"). The
payment of cash dividends on the Common Stock by the Company is
also subject to certain restrictions contained in the Company's
guarantee of Ann Taylor's obligations under the Revolving 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.
ITEM 6. Selected Financial Data
The following selected historical financial information for
the periods indicated has been derived from the audited
consolidated financial statements of the Company. Such
financial statements audited by Deloitte & Touche llp,
independent auditors, for the fiscal years 1994, 1993 and 1992
appear elsewhere in this report. The information set forth
below should be read in conjunction with "Management's
Discussion and Analysis" and the consolidated financial
statements and notes thereto of the Company included elsewhere
in this report. All references to years are to the fiscal year
of the Company, which ends on the Saturday nearest January 31 in
the following calendar year. All fiscal years for which
financial information is set forth below had 52 weeks.
Fiscal Years Ended
Jan 28, Jan 29, Jan 30, Feb 1, Feb 2,
1995 1994 1993 1992 1991
------ ------- ------- ------ ------
(dollars in thousands, except per square foot
data and per share data)
Operating Statement Information:
Net sales, including leased
shoe departments(a) $658,804 $501,649 $468,381 $437,711 $410,782
Cost of sales 357,783 271,749 264,301 234,136 217,414
------- ------- ------- ------- -------
Gross profit 301,021 229,900 204,080 203,575 193,368
Selling, general and
administrative expenses 214,224 169,371 152,072 150,842 125,872
Distribution center
restructuring charge (b) --- 2,000 --- --- ---
Amortization of goodwill (c) 9,506 9,508 9,504 9,506 9,484
------- ------- ------- ------- -------
Operating income 77,291 49,021 42,504 43,227 58,012
Interest expense (d) 14,229 17,696 21,273 33,958 50,081
Stockholder litigation
settlement (e) --- --- 3,905 --- ---
Other (income) expense, net 168 (194) 259 542 168
------ ------- ------- ------- -------
Income before income taxes and
extraordinary loss 62,894 31,519 17,067 8,727 7,763
Income tax provision 30,274 17,189 11,150 7,703 6,657
-------- ------ ------- ------- -------
Income before extraordinary loss 32,620 14,330 5,917 1,024 1,106
Extraordinary loss (f) 868 11,121 --- 16,835 ---
-------- ------ ------- ------- -------
Net income (loss) $31,752 $ 3,209 $ 5,917 $(15,811) $1,106
======= ======= ======= ======== ======
Income per share before
extraordinary loss $ 1.40 $ .66 $ .28 $ .05 $ .08
Extraordinary loss per share (f) (.04) (.51) --- (.87) ---
------ ------- ------- -------- ------
Net income (loss) per share $ 1.36 $ .15 $ .28 $ (.82) $ .08
======= ======= ======= ======== ======
Weighted average shares
outstanding (in thousands) 23,286 21,929 21,196 19,326 14,160
Operating Information:
Percentage increase (decrease)
in total comparable
store sales (g) 13.7% 2.3% (1.0)% (5.6)% 2.3%
Percentage increase (decrease)
in owned comparable
store sales (g) (h) 13.7% 4.0% 0.8 % (0.9)% 5.1%
Average net sales per
gross square foot (i) $ 627 $ 576 $ 600 $ 642 $ 740
Number of stores:
Open at beginning of the period 231 219 200 170 139
Opened during the period 35 13 20 33 32
Expanded during the period 25 12 5 3 3
Closed during the period 4 1 1 3 1
Open at the end of the period 262 231 219 200 170
Total store square footage at
end of period 1,173,000 929,000 814,000 746,000 619,000
Capital expenditures $61,341 $25,062 $ 4,303 $10,004 $11,783
Depreciation and amortization,
including goodwill (c) $21,293 $18,013 $16,990 $15,709 $14,177
Working capital turnover (j) 8.5x 12.1x 16.8x 12.8x 12.4x
Inventory turnover (k) 4.6x 4.9x 5.3x 4.6x 4.6x
Balance Sheet Information
(at end of period):
Working capital $102,181 $ 53,283 $ 29,539 $ 26,224 $ 42,234
Goodwill, net (c) 323,031 332,537 342,045 351,549 361,055
Total assets 598,254 513,399 487,592 491,747 510,724
Total debt 200,000 189,000 195,474 211,917 380,362
Stockholders' equity 326,112 259,271 245,298 229,464 47,483
(a) Prior to 1990, all shoes sold in Ann Taylor Stores were
"Joan & David" shoes, sold in leased shoe departments by Joan
& David Helpern, Inc. ("Joan & David") pursuant to a license
agreement. In 1990, the Company introduced a line of Ann
Taylor brand name shoes. Beginning in August 1990, Joan &
David began a scheduled withdrawal of its leased shoe
departments, vacating additional departments every six months
through the end of fiscal 1992. As of February 1, 1993, Joan
& David no longer operated leased shoe departments in any Ann
Taylor stores. Sales from leased shoe departments were
$8,207,000 in 1992, $16,056,000 in 1991 and $35,517,000 in
1990.
(b) Relates to the relocation of the Company's distribution
center, expected to be completed in late spring 1995, and
represents a charge of $1,100,000 principally for severance
and job training benefits and $900,000 for the write-off of
the net book value of certain assets that are not expected to
be used in the new facility. This charge reduced 1993 net
earnings per share by $.05 per share.
(c) As a result of the Acquisition, which was effective as
of January 29, 1989, $380,250,000, representing the excess of
the allocated purchase price over the fair value of the
Company's net assets, was recorded as goodwill and is being
amortized on a straight-line basis over 40 years.
(d) Includes non-cash interest expense of $978,000,
$4,199,000, $8,581,000, $12,243,000 and $18,294,000 in the
fiscal years 1994, 1993, 1992, 1991 and 1990, respectively,
from amortization of deferred financing costs, in 1993, 1992,
1991 and 1990, accretion of original issue discount and the
issuance of additional 10% junior subordinated exchange notes
due 2004 in 1992, 1991 and 1990.
(e) Relates to the settlement in January 1993 of a
stockholder class action lawsuit that was filed against the
Company and certain other defendants in October 1991.
(f) In fiscal 1994, Ann Taylor incurred an extraordinary
loss of $1,522,000 ($868,000, or $.04 per share, net of
income tax benefit), in connection with the prepayment of
long-term debt with the proceeds of the Offering. In fiscal
1993, Ann Taylor incurred an extraordinary loss of
$17,244,000 ($11,121,000, or $.51 per share, net of income
tax benefit) due to debt refinancing activities. In fiscal
1991, Ann Taylor incurred an extraordinary loss of
$25,900,000 ($16,835,000, or $.87 per share, net of income
tax benefit), in connection with the repurchase of a portion
of its then outstanding debt securities with proceeds from
the IPO.
(g) Comparable store sales are calculated by excluding the
net sales of a store for any month of one period if the store
was not open during the same month of the prior period. A
store opened within the first two weeks of a month is deemed
to have been opened on the first day of that month and a
store opened later in a month is deemed to have been opened
on the first day of the next month. For example, if a store
were opened on June 8, 1992, its sales from June 8, 1992
through year-end 1992 and its sales from June 1, 1993 through
year-end 1993 would be included in determining comparable
store sales for 1993, compared to 1992. In addition, in a
year with 53 weeks, the extra week is not included in
determining comparable store sales. For periods prior to
1993, when a store's square footage was increased as a result
of expansion or relocation in the same mall or specialty
center, the store continued to be treated as a comparable
store after the expansion. Commencing with stores expanded
in fiscal 1993, any store the square footage of which is
expanded by more than 15% is treated as a new store for the
first year following the opening of the expanded store.
(h) Excludes sales from leased shoe departments for periods
prior to fiscal 1993.
(i) Average net sales per gross square foot is determined by
dividing net sales for the period by the average of the gross
square feet at the beginning and end of each period. Unless
otherwise indicated, references herein to square feet are to
gross square feet, rather than net selling space.
(j) Working capital turnover is determined by dividing net
sales by the average of the amount of working capital at the
beginning and end of the period.
(k) Inventory turnover is determined by dividing net cost of
goods sold (excluding costs of leased shoe departments) by
the average of the cost of inventory at the beginning and end
of the period.
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Ann Taylor has grown significantly since the Acquisition,
with the number of stores increasing from 119 at the beginning
of 1989 to 262 stores at the end of 1994. During fiscal 1994,
the Company expanded 25 stores, added 35 new stores and closed 4
stores, resulting in a net increase in the Company's square
footage of approximately 244,000 square feet, or 26.3% over
total store square footage of 929,000 square feet at the end of
1993. The Company expects to increase square footage by at
least 500,000 square feet, or 42.6%, in fiscal 1995. The
Company expects that approximately 37% of this new square
footage will be represented by new Ann Taylor Stores,
approximately 38% will be new Ann Taylor Loft and Factory
Stores, approximately 3% will be new Ann Taylor Studio stores,
and approximately 22% will be attributable to the expansion of
existing Ann Taylor Stores. The Company's ability to continue
to expand will be dependent upon general economic and business
conditions affecting consumer spending, the availability of
desirable locations and the negotiation of acceptable lease
terms for new locations. See "Business--Expansion".
The Company's net sales do not show significant seasonal
variation, although net sales in the third and fourth quarters
have traditionally been higher than in the first and second
quarters. The Company believes that its merchandise is
purchased primarily by women who are buying for their own
wardrobes rather than as gifts, and the Company historically has
experienced only moderate increases in net sales during the
Christmas season. As a result of these factors, the Company has
not had significant overhead and other costs generally
associated with large seasonal variations.
The following table shows the distribution of the Company's
annual net sales and operating income by quarter for 1994, 1993
and 1992:
Fiscal 1994 Fiscal 1993 Fiscal 1992
--------------- ------------ --------------
Oper- Oper- Oper-
Net ating Net ating Net ating
Sales Income Sales Income(a) Sales Income
------ ------ ----- --------- ----- --------
First Quarter 22.0% 25.3% 24.0% 24.3% 24.5% 26.6%
Second Quarter 24.3 24.2 24.9 25.3 24.0 19.5
Third Quarter 25.0 25.7 24.3 25.2 24.6 34.6
Fourth Quarter 28.7 24.8 26.8 25.2 26.9 19.3
----- ----- ----- ------ ----- ------
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====
(a) Excludes the $2,000,000 charge to earnings relating to
the Company's announced relocation of its distribution
center.
Comparable Store Sales
The following table sets forth for the years 1994, 1993 and
1992 certain information regarding the percentage increase
(decrease) over the prior year's sales in (i) total comparable
store sales and (ii) owned comparable sales (consisting of total
comparable store sales less leased shoe department comparable
sales, which were phased out by February 1, 1993):
Fiscal Fiscal Fiscal
1994 1993 1992
------ ------ ------
Comparable store sales:
Owned sales 13.7% 4.0% 0.8%
Total 13.7 2.3 (1.0)
The Company believes that the increase in owned comparable
store sales was primarily due to improved customer acceptance of
merchandise offerings, including product extensions introduced
in 1994 and 1993, and in 1992, to promotional activities.
Results of Operations
The following table sets forth operating statement data
expressed as a percentage of net sales for the historical
periods indicated:
Fiscal Fiscal Fiscal
1994 1993 1992
------ ------ -------
Net sales (including leased shoe
departments in 1992) 100.0% 100.0% 100.0%
Cost of sales 54.3 54.2 56.4
----- ----- -----
Gross profit (a) 45.7 45.8 43.6
Selling, general and administrative
expenses 32.5 33.8 32.5
Distribution center restructuring charge --- 0.4 ---
Amortization of goodwill 1.5 1.8 2.0
----- ----- -----
Operating income 11.7 9.8 9.1
Interest expense 2.2 3.5 4.6
Stockholder litigation settlement --- --- 0.8
Other (income) expense, net (b) --- --- ---
----- ----- -----
Income before income taxes and
extraordinary loss 9.5 6.3 3.7
Income tax provision 4.6 3.4 2.4
----- ----- -----
Income before extraordinary loss 4.9 2.9 1.3
Extraordinary loss 0.1 2.3 ---
----- ----- -----
Net income 4.8% 0.6% 1.3 %
===== ===== =====
(a) Gross profit margin on net sales, excluding leased shoe
departments, was 44.1% in 1992. Gross profit margin on
leased shoe department net sales was 14.4% in 1992.
(b) Other (income) expense, net was less than 0.1% of net
sales in 1994, 1993 and 1992.
Fiscal 1994 Compared to Fiscal 1993
The Company's net sales increased to $658,804,000 in 1994
from $501,649,000 in 1993, an increase of $157,155,000, or
31.3%. The increase in net sales was attributable to the
inclusion of a full year of operating results for the 13 stores
opened and 12 stores expanded during 1993, the opening of 35 new
stores and expansion of 25 stores in 1994 and a 13.7% increase
in comparable store sales. The 13.7% increase in comparable
stores sales was due primarily to customer acceptance of the
Company's merchandise offerings in 1994, including product
extensions such as Ann Taylor petites, shoes and "destination".
The sales increase was partially offset by the closing of four
stores in 1994.
Gross profit as a percentage of net sales decreased slightly
to 45.7% in 1994 from 45.8% in 1993. This decrease was
attributable to increased cost of goods sold resulting from
lower initial markups, offset by lower markdowns associated with
reduced promotional activities.
Selling, general and administrative expenses as a percentage
of net sales decreased to 32.5% in 1994 from 33.8% in 1993. The
decrease was primarily attributable to the leveraging of four-
wall expenses over a larger sales base and was partially offset
by increased expenditures relating primarily to the Company's
information systems, expansion of the Company's merchandising
and product design teams, and higher catalog expenses.
Operating income increased to $77,291,000, or 11.7% of net
sales, in 1994, from $49,021,000, or 9.8% of net sales, in 1993.
Operating income for 1993 was reduced by a $2,000,000
restructuring charge representing .4% of net sales.
Amortization of goodwill from the Acquisition was $9,506,000 in
1994 and $9,508,000 in 1993. Operating income without giving
effect to such amortization was $86,797,000, or 13.2% of net
sales, in 1994, and $58,529,000, or 11.6% of net sales, in 1993.
Interest expense was $14,229,000, including $978,000 of non-
cash interest expense, in 1994 and $17,696,000, including
$4,199,000 of non-cash interest expense, in 1993. The decrease
in interest expense is 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 and summer of 1994 and the reduction of the
Company's long-term debt with the net proceeds from the Offering
in May 1994. After taking into account the Company's interest
rate swap agreement (see Financial Statement Note 4), all of the
Company's debt obligations bear interest at variable rates. The
weighted average interest rate on the Company's outstanding
indebtedness at January 28, 1995 was 8.90% compared to 6.22% at
January 29, 1994. Because the Company's debt bears interest at
variable rates, the Company's interest expense for fiscal 1994
is not necessarily indicative of interest expense for future
periods. See "Liquidity and Capital Resources".
The income tax provision was $30,274,000, or 48.1% of income
before income taxes and extraordinary loss, in the 1994 period
compared to $17,189,000, or 54.5% of income before income taxes
and extraordinary loss, in 1993. The effective tax rates for
both periods were higher than the statutory rates, primarily as
a result of non-deductible goodwill expense.
In connection with the debt refinancing activities undertaken
by the Company in 1994 (see Financial Statement Notes 3 and 4),
the Company incurred an extraordinary loss of $1,522,000
($868,000 net of income tax benefit). The Company also incurred
an extraordinary loss of $17,244,000 ($11,121,000 net of income
tax benefit) in 1993 as a result of debt refinancing activities
undertaken in that year.
As a result of the foregoing factors, the Company had net
income of $31,752,000, or 4.8% of net sales, for 1994 compared
to net income of $3,209,000, or 0.6% of net sales, for 1993.
Fiscal 1993 Compared to Fiscal 1992
The Company's net sales increased to $501,649,000 in 1993
from $468,381,000 in 1992, an increase of $33,268,000, or 7.1%.
The increase in net sales was attributable to the inclusion of a
full year of operating results for the 20 stores opened during
1992, the opening of 13 new stores and expansion of 12 stores in
1993 and a 2.3% increase in comparable store sales. The 2.3%
increase in total comparable stores sales was due primarily to
customer acceptance of the Company's merchandise offerings in
1993. The increase in net sales was partially offset by the
closing of one store in 1993. Net sales included $29,922,000
and $25,638,000 from Ann Taylor brand shoes in 1993 and 1992,
respectively.
Gross profit as a percentage of net sales increased to 45.8%
in 1993 from 43.6% in 1992. This increase was attributable to
reduced cost of goods sold resulting from lower markdowns
associated with reduced promotional activities, higher initial
markups and the elimination of the leased shoe department which
had a substantially lower gross margin.
Selling, general and administrative expenses as a percentage
of net sales increased to 33.8% in 1993 from 32.5% in 1992. The
increase was primarily attributable to additional store tenancy
and selling expenses, severance costs, agency fees and
relocation expenses, and the Company's continuing investment in
such areas as design and manufacturing, marketing and
information systems.
Operating income increased to $49,021,000, or 9.8% of net
sales, in 1993, from $42,504,000, or 9.1% of net sales, in 1992.
As described below, 1993 operating income was reduced by a
$2,000,000, or 0.4% of net sales, charge to earnings relating to
the Company's announced relocation of its distribution center
facilities from New Haven, Connecticut to Louisville, Kentucky.
Amortization of goodwill from the Acquisition was $9,508,000 in
1993 and $9,504,000 in 1992. Operating income without giving
effect to such amortization was $58,529,000, or 11.6% of net
sales, in 1993, and $52,008,000, or 11.1% of net sales, in 1992.
In early 1994, the Company announced that it will be
relocating its distribution centers from New Haven, Connecticut
to Louisville, Kentucky. The Company recorded a $2,000,000 pre-
tax restructuring charge ($1,140,000 net of income tax benefit,
or $.05 per share), representing approximately $1,100,000
principally for severance and job training benefits, and
approximately $900,000 for the write-off of the net book value
of certain assets that are not expected to be utilized in the
new facility. The Company selected Louisville, Kentucky as the
site for its new distribution center facility because of
Louisville's central location relative to the Company's stores,
which is expected to result in reduced merchandise delivery
times, the lower cost of construction in Louisville as compared
to the Northeast, and economic incentives offered by the state
of Kentucky.
Interest expense was $17,696,000, including $4,199,000 of non-
cash interest expense, in 1993 and $21,273,000, including
$8,581,000 of non-cash interest expense, in 1992. The decrease
is primarily attributable to lower interest rates resulting
principally from refinancing transactions entered into in 1993.
As a result of these refinancing transactions, the weighted
average interest rate on the Company's outstanding indebtedness
at January 29, 1994 was 6.22% compared to 9.50% at January 30,
1993. After taking into account the Company's interest rate
swap agreement, all of the Company's debt obligations bear
interest at variable rates. Therefore, the Company's interest
expense for fiscal 1993 is not necessarily indicative of
interest expense for future periods.
The income tax provision was $17,189,000, or 54.5% of income
before income taxes and extraordinary loss, in the 1993 period
compared to $11,150,000, or 65.3% of income before income taxes,
in 1992. The effective tax rates for both periods were higher
than the statutory rates, primarily because of non-deductible
goodwill expense. During fiscal 1993, the Company adopted the
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). Adoption of SFAS 109 did not
have a material effect on the results of operations.
The refinancing transactions referred to above resulted in an
extraordinary loss of $17,244,000 ($11,121,000 net of income tax
benefit), attributable to premiums paid to purchase or discharge
Ann Taylor's notes, and to the write-off of deferred financing
costs associated with the early retirement of indebtedness.
As a result of the foregoing factors, the Company had net
income of $3,209,000, or 0.6% of net sales, for 1993 compared to
a net income of $5,917,000, or 1.3% of net sales for 1992.
Changes in Receivables and Inventories
Accounts receivable increased to $61,211,000 at the end of
1994 from $49,279,000 at the end of 1993, an increase of
$11,932,000, or 24.2%. This increase was partially attributable
to Ann Taylor credit card receivables, which increased
$8,554,000, or 20.8% to $49,731,000 in 1994; to third-party
credit card receivables (American Express, Mastercard and Visa),
which increased $820,000 due to the timing of payments by the
third-party credit card issuers; and to construction allowance
receivables, which increased $1,649,000 to $5,549,000 in 1994.
Ann Taylor credit card sales were 19.7% higher in the last
thirteen weeks of 1994 compared to the last thirteen weeks of
1993.
Merchandise inventories increased to $93,705,000 at the end
of 1994 from $60,890,000 at the end of 1993, an increase of
$32,815,000, or 53.9%. The higher inventory level at the end of
1994 was principally attributable to the purchase of inventory
for new and expanded stores that were opened in 1994 and planned
square footage increases in spring 1995, an increase in
inventories of shoes and accessories, including inventories of
the Company's new "destination" fragrance and personal care
products, and an increase in inventories for the Company's
expanded mail order catalog business.
Accounts payable increased to $36,625,000 at the end of 1994
from $33,087,000 at the end of 1993, an increase of $3,538,000,
or 10.7%. The increase in accounts payable is primarily due to
the increase in inventory at the end of fiscal 1994.
Liquidity and Capital Resources
The Company's primary sources of working capital are cash
flow from operations and borrowings under a $125 million
revolving credit agreement (the "Revolving Credit Agreement").
The following sets forth material measures of the Company's
liquidity:
Fiscal Year
-------------------------
1994 1993 1992
------- ------- -------
(dollars in thousands)
Cash provided by operating activities $ 17,149 $ 47,322 $ 23,579
Working capital $102,181 $ 53,283 $ 29,539
Current ratio 2.55:1 1.78:1 1.38:1
Debt to equity ratio .61:1 .73:1 .80:1
Cash provided by operating activities decreased in 1994
principally as a result of an increase in merchandise
inventories and accounts receivable. The increase in working
capital in 1994 results from the increase in accounts receivable
and merchandise inventories, and a decrease in the current
portion of long-term debt, offset by an increase in accounts
payable.
In July 1994, the Company completed the refinancing of its
outstanding bank debt by entering into the Revolving Credit
Agreement, which under its original terms provided for a
revolving loan facility of $75,000,000. The Company borrowed
funds under this revolving credit facility to prepay in full its
outstanding Term Loan and other obligations under its then-
existing bank credit agreement. The Revolving Credit Agreement
was amended on January 27, 1995 to provide for borrowings of up
to $125,000,000. Amounts borrowed under the Revolving Credit
Agreement mature on July 29, 1997; however, the Company is
required to reduce the outstanding balance under the Revolving
Credit Agreement to $67,000,000 or less for a 30-day period in
fiscal 1995 and to $50,000,000 or less for a 30-day period in
each fiscal year thereafter. At January 28, 1995, the Company
had $64,000,000 outstanding under the Revolving Credit
Agreement.
In July 1993, Ann Taylor entered into a $110,000,000
(notional amount) interest rate swap agreement. Under the
agreement, the Company receives a fixed rate of 4.75% and pays a
floating rate based on LIBOR, as determined in six month
intervals. As of January 28, 1995, the Company was paying a
variable rate of 6.75%. The swap agreement matures in July
1996.
During the fourth quarter of fiscal 1993, Ann Taylor and its
wholly owned subsidiary AnnTaylor Funding, Inc. entered into a
receivables financing agreement due 1996 (the "Receivables
Facility") secured by Ann Taylor credit card receivables.
AnnTaylor Funding, Inc. can borrow up to $40,000,000 based on
its accounts receivable balance. As of January 28, 1995,
$36,000,000 was outstanding under this facility.
The Company's capital expenditures totaled $61,341,000,
$25,062,000, and $4,303,000 in 1994, 1993 and 1992,
respectively. Capital expenditures in 1994 include $12,818,000
for construction of the Company's Louisville, Kentucky
distribution center and material handling equipment. Capital
expenditures in 1994 also reflect increased average net
construction costs for the opening of new stores, costs
associated with the expansion of a greater number of existing
stores, lower average landlord construction allowances and an
increased investment in new management information systems. The
Company expects its capital expenditure requirements to be
approximately $75,000,000 in 1995, including $3,000,000 for
completion of the distribution center and material handling
equipment.
The Revolving Credit Agreement imposes limits on the
Company's ability to make capital expenditures by requiring the
Company to maintain a minimum fixed charge coverage ratio. The
computation of this ratio excludes capital expenditures for the
distribution center. The actual amount of the Company's capital
expenditures will depend in part on the number of stores opened,
expanded and refurbished and on the amount of construction
allowances the Company receives from the landlords of its new or
expanded stores. See "Business--Expansion".
Dividends and distributions from Ann Taylor to the Company
are restricted by both the Revolving Credit Agreement and the
indenture for the 8-3/4% Notes.
In order to finance its operations and capital requirements,
including its debt service payments, the Company expects to use
internally generated funds and funds available to it under the
Revolving Credit Agreement. The Company believes that cash flow
from operations and funds available under the Revolving Credit
Agreement will be sufficient to enable it to meet its ongoing
cash needs for the foreseeable future.
ITEM 8. Financial Statement and Supplementary Data
The following consolidated financial statements of the
Company for the years ended January 28, 1995, January 29, 1994
and January 30, 1993 are included as a part of this Report (See
Item 14):
Consolidated Statements of Operations for the fiscal years
ended January 28, 1995, January 29, 1994 and January 30,
1993.
Consolidated Balance Sheets as of January 28, 1995 and
January 29, 1994.
Consolidated Statements of Stockholders' Equity for the
fiscal years ended January 28, 1995, January 29, 1994 and
January 30, 1993.
Consolidated Statements of Cash Flows for the fiscal years
ended January 28, 1995, January 29, 1994 and January 30,
1993.
Notes to Consolidated Financial Statements.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
None.
=============================================================================
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information regarding
the executive officers of the Company as of January 28, 1995:
Term
Name Age Position and Offices Expiration
- ----------- ---- --------------------------- ------------
Sally Frame 50 Chairman, Chief Executive 1996
Kasaks Officer and Director of the
Company and Ann Taylor
Paul E. Francis 40 Executive Vice President - 1997
Finance and Administration,
Treasurer and Director of
the Company and Ann Taylor
Anthony D. 45 Senior Vice President - ---
Atenasio Planning & Allocation of Ann
Taylor
Joseph R. 48 Senior Vice President - ---
Gromek (a) General Merchandise Manager
of the Company and Ann
Taylor
Barry I. Shapiro 40 Senior Vice President and ---
General Manager of Ann
Taylor Loft
Andrea M. Weiss 39 Senior Vice President, ---
Director of Stores of the
Company and Ann Taylor
Jocelyn F.L. 34 Vice President, General ---
Barandiaran Counsel and Corporate
Secretary of the Company and
Ann Taylor
Gerald S. 51 Director of the Company and 1997
Armstrong Ann Taylor
James J. Burke,Jr. 43 Director of the Company and 1996
Ann Taylor
Robert C. Grayson 50 Director of the Company and 1995
Ann Taylor
Rochelle B. 47 Director of the Company and 1995
Lazarus Ann Taylor
Hanne M. Merriman 53 Director of the Company and 1997
Ann Taylor
(a) Mr. Gromek resigned from his position with the Company and
Ann Taylor on April 18, 1995.
Each member of the Board of Directors of the Company and Ann
Taylor holds office for a three-year term and until his or her
successor is elected and qualified. Mr. Grayson and Ms. Lazarus
serve as members of the audit committee and Mr. Burke, Mr.
Armstrong, Ms. Lazarus and Ms. Merriman serve as members of the
compensation committee. Directors who are employees of the
Company or Directors serving on the board as representatives of
Merrill Lynch & Co., Inc. ("ML&Co.") or its affiliates do not
receive any compensation for serving on either Board of
Directors. In 1993, Messrs. Armstrong and Burke, together with
other colleagues from ML Capital Partners, founded Stonington
Partners, Inc., formerly known as First Capital Partners, Inc.
In July 1994, Messrs. Armstrong and Burke left the employment of
ML&Co., although each has continued as a director of Merrill
Lynch Capital Partners, Inc. (the "ML Capital Partners") and the
other companies, including the Company and Ann Taylor, in which
ML&Co. or certain of its affiliates have equity investments and
for which they were serving as a director in July 1994. In this
connection, each of Messrs. Armstrong and Burke entered into a
consulting agreement with ML&Co. which provides, among other
things, for his continued availability to serve on the Board of
Directors of the Company, Ann Taylor and such other companies,
unless requested to resign by ML&Co., and for his compensation
by ML&Co. for serving in such capacities and for other
consulting services. Directors who are not representatives of
ML&Co. or its affiliates or employees of the Company receive
$20,000 in compensation plus $750 for each meeting attended.
Sally Frame Kasaks. Ms. Kasaks has been Chairman, Chief
Executive Officer and a Director of the Company and Ann Taylor
since February 1992. From February 1989 to January 1992, she
was president and chief executive officer of Abercrombie &
Fitch, a specialty retailer and a division of The Limited, Inc.,
a specialty retailer. From 1985 to 1988, she was president of
Talbots, a specialty women's apparel retailer. For the six
years prior to 1985, Ms. Kasaks served in various capacities at
Ann Taylor, the last two of those years as president.
Paul E. Francis. Mr. Francis has been Executive Vice
President - Finance and Administration of the Company and Ann
Taylor since April 1993, Treasurer of the Company and AnnTaylor
since February 1994, and a Director of the Company and Ann
Taylor since consummation of the Acquisition in February 1989.
He was a vice president of ML Capital Partners from July 1987 to
April 1993 and a managing director of the Investment Banking
Division of ML&Co. from January 1993 to April 1993. From
January 1990 to January 1993, he was a director of the
Investment Banking Division of ML&Co.
Anthony D. Atenasio. Mr. Atenasio has been Senior Vice
President - Planning & Allocation of Ann Taylor since December
1994. From March 1992 to December 1994, he was vice president -
planning & distribution for The Sports Authority, Inc., a
sporting goods superstore retailer. From August 1972 to March
1992, Mr. Atenasio worked for Ames Department Stores, Inc.,
formerly known as Zayre Discount Department Stores, Inc., where
he held various senior positions in replenishment and
merchandising.
Joseph R. Gromek. Mr. Gromek has been Senior Vice President
- - General Merchandise Manager of the Company and Ann Taylor from
April 1993 to April 1995. From January 1991 to April 1993, Mr.
Gromek was vice president - ready to wear at The Limited stores,
a specialty women's apparel retailer and a division of The
Limited, Inc., a specialty retailer. From September 1987 to
December 1990, he was senior vice president/general merchandise
manager - men's and shoes for Saks Fifth Avenue, a department
store.
Barry I. Shapiro. Mr. Shapiro has been Senior Vice President
and General Manager of AnnTaylor Loft since March 1993. From
November 1990 to October 1991, he was Vice President and
Director of Merchandise Distribution and Quality Control and
from October 1991 to March 1993 he was Vice President of
Merchandise Administration of AnnTaylor. From February 1989 to
November 1990, Mr. Shapiro was director of operations for
Abraham & Strauss, a department store.
Andrea M. Weiss. Ms. Weiss has been Senior Vice President,
Director of Stores of the Company and Ann Taylor since July
1992. From April 1990 to July 1992, she was director of retail
operations for the Walt Disney World Resort, a division of the
Walt Disney Company. From November 1987 to April 1990, she was
senior vice president - operations for the Naragansett Clothing
Company, a specialty women's apparel retailer.
Jocelyn F.L. Barandiaran. Ms. Barandiaran has been Vice
President, General Counsel and Corporate Secretary of the
Company and Ann Taylor since May 1992. From June 1985 to April
1992, she was a corporate mergers and acquisitions associate
with the law firm of Skadden, Arps, Slate, Meagher & Flom.
Gerald S. Armstrong. Mr. Armstrong has been a Director of
the Company and AnnTaylor since February 1989. He has been a
partner of Stonington Partners, Inc. ("Stonington Partners"), a
private investment firm, since November 1993, and a director of
Stonington Partners since August 1993. He was a partner of ML
Capital Partners, a private investment firm associates with
ML&Co., from May 1993 to June 1994, and was an executive vice
president of ML Capital Partners from November 1988 through
April 1993. Mr. Armstrong was a managing director of the
Investment Banking Division of ML&Co. from November 1988 to June
1994. Mr. Armstrong is also a director of ML Capital Partners,
First USA, Inc., Beatrice Foods, Inc., Blue Bird Corporation,
World Color Press, Inc. and Wherehouse Entertainment, Inc.
James J. Burke, Jr. Mr. Burke has been a Director of the
Company and Ann Taylor since February 1989. He has been
managing partner of Stonington Partners, a private investment
firm, since November 1993 and a director of Stonington Partners
since August 1993. He was a partner of ML Capital Partners, a
private investment firm associated with ML&Co., from May 1993
through June 1994, and was president and chief executive officer
of ML Capital Partners from January 1987 through April 1993.
Mr. Burke was a first vice president of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") from July 1988
through June 1994 and was a managing director of the Investment
Banking Division of ML&Co. from April 1985 through June 1994.
Mr. Burke is also a director of ML Capital Partners, Amstar
Corporation, Borg-Warner Security Corporation, Supermarkets
General Holdings Corporation, Pathmark Stores, Inc., United
Artists Theater Circuit, Inc., Wherehouse Entertainment, Inc.
and World Color Press, Inc.
Robert C. Grayson. Mr. Grayson has been a Director of the
Company and Ann Taylor since April 1992. Mr. Grayson has been
president of Robert C. Grayson & Associates, Inc., a retail
marketing consulting firm, since February 1992. Mr. Grayson has
been vice chairman of the board of Tommy Hilfiger Corp., a men's
apparel manufacturer and retailer, and chairman of the board of
Tommy Hilfiger Retail, a subsidiary of such company since June
1994. From June 1985 to February 1992, Mr. Grayson was the
president and chief executive officer of Lerner New York, a
specialty women's apparel retailer and a division of The
Limited, Inc., a specialty retailer. Mr. Grayson is also a
director of Tommy Hilfiger Corp. and Sunglass Hut International,
Inc.
Rochelle B. Lazarus. Ms. Lazarus has been a Director of the
Company and Ann Taylor since April 1992. She has been president
of Ogilvy & Mather North America, an advertising agency, since
April 1994 and was president of Ogilvy & Mather New York from
June 1991 to April 1994. She was employed by Ogilvy & Mather
Direct from 1987 to 1991, serving as President for the last two
of those years.
Hanne M. Merriman. Ms. Merriman has been a Director of the
Company and Ann Taylor since December 1993. She has been the
principal in Hanne Merriman Associates, retail business
consultants, since January 1992, and from February 1990 to
December 1990. From January 1991 to June 1992, Ms. Merriman was
president and chief operating officer of Nan Duskin, Inc., a
specialty women's apparel retailer, and from December 1988 to
January 1990 was president and chief executive officer of
Honeybee, Inc. a women's apparel retail catalog business and a
division of Spiegel, Inc. Ms. Merriman is also a director of
USAir Group, Inc., CIPSCO, Inc., Central Illinois Public Service
Company, State Farm Mutual Automobile Insurance Company, The
Rouse Company and T. Roe Price Mutual Funds. She is a member of
the National Women's Forum and a trustee of the American-
Scandinavian Foundation.
ITEM 11. Executive Compensation
The following summary compensation table sets forth
information regarding the annual and long-term compensation
awarded or paid for each of the last three fiscal years to these
persons who were, for the fiscal year ended January 28, 1995,
the Chief Executive Officer and the four other most highly
compensated executive officers of the Company and Ann Taylor
(collectively, the "named executives"). None of Mr. Francis,
Mr. Gromek or Mr. Richardson was employed by the Company in
fiscal year 1992; accordingly, no information is set forth in
the table with respect to these officers for that year.
TABLE I
Summary of Compensation to Certain Executive Officers
Annual Compensation Long Term Compensation
--------------------------- ------------------------------
Other All
Annual Securities Other
Name and Compen- Restricted Underlying Compen-
Principal Fiscal Salary Bonus sation Stock Options sation
Position Year ($) ($) (a) ($) Awards ($) (#) ($) (b)
- -------- ------ ------ -------- ------ ----------- -------- -------
Sally Frame 1994 $750,000 $450,000 $ 8,303 -- 170,000 $7,857
Kasaks, 1993 $650,000 $243,750 --- -- 30,000 $7,755
Chairman & 1992 $600,000 $150,000 --- 1,327,500(c) 200,000 $3,077
Chief Exec-
utive Officers
Paul E. 1994 $325,000 $156,000 --- --- 80,000 $2,281
Francis 1993 $262,292 $ 80,167 --- --- 70,000 ---
Executive 1992 --- --- --- --- --- ---
Vice
President -
Finance &
Administration
Joseph R. 1994 $365,000 $131,400 --- --- 60,000(e) $4,330
Gromek (d) 1993 $282,468 $ 64,750 --- --- 30,000(f) $1,188
Sr. Vice 1992 --- --- --- --- --- ---
President -
General
Merchandise
Manager
Andrea M. 1994 $254,600 $ 88,200 --- --- 50,000 $2,757
Weiss 1993 $234,600 $ 50,625 --- --- 15,000 $1,318
Sr. Vice 1992 $120,569 $ 35,000 $15,576 --- 25,000 $ 180
President-
Director of
Stores
Randy 1994 $195,000 $ 58,500 $11,239 --- 30,000 $2,611
Richardson 1993 $185,000 $ 39,312 $64,189(h) --- 20,000 $ 583
Sr. Vice 1992 --- --- --- --- --- ---
President -
Information
Services
(a) Bonus awards indicated for 1994 and 1993 were paid
pursuant to the Company's Management Performance Compensation
Plan. Bonus amounts indicated for 1992 were guaranteed bonus
amounts paid to Ms. Kasaks pursuant to her 1992 Employment
Agreement as in effect in 1992 and to Ms. Weiss in accordance
with the terms of her compensation arrangement upon hire by
the Company.
(b) Represents the amount of contributions made by the
Company to its 401(k) Savings Plan (for Ms. Kasaks, $2,375 in
1994 and $4,350 in 1993; for Mr. Francis, $1,625 in 1994; for
Mr. Gromek, $2,706 in 1994; for Mr. Richardson, $2,262 in
1994; and for Ms. Weiss, $2,275 in 1994 and $875 in 1993);
and the cost of group term life insurance paid by the Company
on behalf of qualifying executive officers during the years
shown.
(c) Pursuant to the terms of her 1992 Employment Agreement
prior to its amendment and restatement, Ms. Kasaks was
awarded 60,000 shares of restricted stock, of which 15,000
vested upon hiring, and 15,000 shares vested at the end of
each of fiscal years 1992, 1993, and 1994. For purposes of
the above table, the 60,000 restricted shares have been
valued at $22.125 per share, which was the closing market
price of the Company's Common Stock on the New York Stock
Exchange on the effective date of the grant. Ms. Kasaks
would be entitled to receive dividends on these shares
proportionately with the other holders of the Company's
Common Stock, if dividends are paid. Ms. Kasaks has received
no other awards of restricted stock from the Company.
(d) Mr. Gromek resigned from his position with the Company
on April 18, 1995.
(e) 55,001 of these options were not vested at the time of
Mr. Gromek's separation of employment and were cancelled on
the separation date.
(f) 12,000 of these options were not vested at the time of
Mr. Gromek's separation of employment and were cancelled on
the separation date.
(g) Mr. Richardson was promoted to Senior Vice President -
Technology & Logistics effective February 20, 1995.
(h) Represents $47,119 reimbursement of relocation expenses.
The following table sets forth certain information with
respect to stock options awarded during fiscal year 1994 to the
named executives. These option grants are also reflected in
Table I. In accordance with Securities and Exchange Commission
(the "Commission") rules, the hypothetical realizable values for
each option grant are shown based on compound annual rates of
stock price appreciation of 5% and 10% from the grant date to
the expiration date. The assumed rates of appreciation are
prescribed by the Commission and are for illustration purposes
only; they are not intended to predict future stock prices,
which will depend upon market conditions and the Company's
future performance and prospects.
TABLE II
Stock Options Granted in Fiscal Year 1994
% of
Total Potential
Options Realizable
# of Granted Value
Securities to at Assumed
Underlying Employees Exer- Annual Rates
Options in cise Expir- of Stock Price
Granted Fiscal Price ation Appreciation
(a) 1994 ($/Share) Date for Option Term (b)
--------- ------- -------- ----- --------------------
5% ($) 10% ($)
--------- -------
Sally Frame
Kasaks 170,000 21.59% $25.375 2/23/04 $2,712,900 $6,875,000
Paul E. Francis 80,000 10.16% $25.375 2/23/04 1,276,650 3,235,300
Joseph R. Gromek 60,000(c) 7.62% $25.375 2/23/04 957,500 2,426,500
Andrea M. Weiss 50,000 6.35% $25.375 2/23/04 797,900 2,022,000
Randy Richardson 30,000 3.81% $25.375 2/23/04 478,750 1,213,250
(a) One-third of the options granted to each of the named
executives in 1994 are "time-vesting" options which vest 25%
per year on each of the first through fourth anniversaries of
the date of the grant. The remaining two-thirds of these
options are "performance-vesting" options which become fully
exercisable upon the earliest to occur of: (i) the ninth
anniversary of the date of grant, (ii) the date on which the
trading price of the Common Stock is at least $50.75
(representing a doubling of the stock price on the date of
the grant) provided that this occurs before the fifth
anniversary of the date of the grant, and (iii) the date on
which the Company's aggregate consolidated net income before
extraordinary items for four consecutive quarters after
fiscal 1993 equals at least $2.13 per share (representing a
tripling of fiscal year 1993 net income before extraordinary
items), provided that this occurs before the fifth
anniversary of the date of the grant. If the Company
achieves 80% of either of the performance measures described
in (ii) or (iii) above by the fifth anniversary of the date
of the grant, then a portion of the options becomes
exercisable, equal to 25% of the grant plus 3.75% for every
percentage point by which performance exceeds 80% of the
measure.
(b) These columns show the hypothetical realizable value of
the options granted for the ten-year term of the options,
assuming that the market price of the Common Stock subject to
the options appreciates in value at the annual rate indicated
in the table, from the date of grant to the end of the option
term.
(c) 55,001 of these options were not vested at the time of
Mr. Gromek's separation of employment and were cancelled on
the separation date.
The following table shows the number and value of stock
options exercised by each of the named executives during fiscal
year 1994, the number of all vested (exercisable) and unvested
(not yet exercisable) stock options held by each such officer at
the end of fiscal year 1994, and the value of all such options
that were "in the money" (i.e., the market price of the Common
Stock was greater than the exercise price of the options) at the
end of fiscal year 1994.
TABLE III
Aggregate Option Exercises in Fiscal 1994 and Fiscal Year End
Options Values
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-
Acquired Options Money Options
on at End of Fiscal at End of Fiscal
Exercise Value 1994 Exercisable/ 1994 Exercisable/
(#) Realized ($) Unexercisable Unexercisable (a)
-------- -------- ----------------- -------------------
Sally Frame
Kasaks -- -- 162,000/238,000 $1,658,500/2,215,125
Paul E.
Francis -- -- 28,000/122,000 $318,500/1,167,750
Joseph R.
Gromek 9,000 $221,625 3,000/78,000(b) $47,625/$803,250
Randy
Richardson -- -- 10,000/40,000 $119,000/$384,750
Andrea M.
Weiss 10,000 $203,125 11,000/69,000 $131,500/$675,750
(a) Calculated based on the closing market price of the
Common Stock of $34.00 on January 27, 1995, the last trading
day in fiscal year 1994, less the amount required to be paid
upon exercise of the option.
(b) 67,001 of these unexercisable options were not vested at
the time of Mr. Gromek's separation of employment and were
cancelled on the separation date.
1989 Pension Plan. Ann Taylor adopted, as of July 1, 1989, a
defined benefit retirement plan for the benefit of the employees
of Ann Taylor (the "Pension Plan"). The Pension Plan is a "cash
balance pension plan" intended to qualify under Section 401(a)
of the Code. An account balance is established for each
participant which is credited with a benefit equal to 3% of
compensation during each of the participant's first ten years of
service, 4% of compensation during each of the participant's
next five years of service and 5% of compensation during each of
the participant's years of service in excess of fifteen. The
Code limits the compensation that may be taken into account
under the Pension Plan for any participant. Participants'
accounts are credited with interest quarterly at a rate equal to
the average one-year Treasury bill rate. Retirement benefits
are determined by dividing the amount of a participant's account
by a specified actuarial factor, subject, however, to the
limitation imposed by the Code. Participants are fully vested
in their accounts after completion of five years of service.
Participants receive credit for service with Ann Taylor prior to
July 11, 1989 (including service with Allied Stores Corporation
prior to the closing date of the Acquisition) for purposes of
vesting and determining the percentage of compensation that will
be credited to their accounts.
As of January 28, 1995, the credited years of service under
the Pension Plan for Ms. Kasaks were 1.75 years, for Mr. Francis
.50 years, for Mr. Gromek .50 years, for Mr. Richardson 1.0
years, and for Ms. Weiss 1.25 years. The estimated monthly
retirement benefit, payable as a single life annuity, that would
be payable to each of the executives named in Table I above who
were participants in the plan during fiscal year 1994, assuming
retirement as of December 31, 1994, the commencement of payments
at age 65 and annual interest at the rate of 7.0%, is as
follows: Ms. Kasaks, $182; Mr. Francis $230; Mr. Gromek, $132;
Mr. Richardson $301; and Ms. Weiss, $296. These benefits would
not be subject to any deduction for social security benefits or
other offset amounts.
Employment Agreement. Effective as of February 1, 1994, the
Company and Ms. Sally Frame Kasaks entered into an employment
agreement (the "1994 Agreement"), which replaced the employment
agreement previously in effect between the Company and Ms.
Kasaks. The 1994 Agreement provides for Ms. Kasaks' employment
as Chairman of the Board and Chief Executive Officer of the
Company for a term of three years, which term is automatically
extended on an annual basis for one additional year unless
either party provides notice (a "Nonrenewal Notice") that it
does not wish to extend the term. Under the terms of the 1994
Agreement, Ms. Kasaks is entitled to an annual base salary of
not less than $750,000, and is entitled to participate in the
Company's annual bonus and stock option plans as well as other
Company benefit programs.
The 1994 Agreement also provides Ms. Kasaks with a
supplemental retirement benefit (the "SERP") equal to 50 percent
of her "final average compensation" (the highest average of her
annual salary and bonus over a period of three consecutive
fiscal years, except that the maximum bonus to be taken into
account for any year may not exceed Ms. Kasaks' salary for that
year), reduced by social security benefits and amounts payable
under any Company pension plan. The SERP is fully vested upon
Ms. Kasaks' attainment of age 55 with 15 years of service with
the Company. The SERP also becomes fully vested (although
subject to reduction to reflect actual and deemed service of
less than 15 years) in the event of Ms. Kasaks' death,
disability or termination by the Company without Cause (as
defined in the 1994 Agreement); in the event of termination by
Ms. Kasaks for Good Reason (as defined in the 1994 Agreement);
or in the event the term of the 1994 Agreement expires by reason
of a Nonrenewal Notice provided by the Company. The SERP
provides a 50% survivor benefit to Ms. Kasaks' spouse for his
life. Payment of the SERP benefits is subject to Ms. Kasaks'
continued compliance with certain noncompete and nonsolicitation
provisions contained in the 1994 Agreement.
Pursuant to the 1994 Agreement, the Company loaned Ms. Kasaks
the sum of $500,000, which amount is payable on January 31,
1999, which bears interest at the rate of 7.32% per annum,
compounded semi-annually. On each date on which interest is
payable under the loan, the Company has agreed to pay to Ms.
Kasaks such amounts as may be necessary to place her in the same
after-tax position as if the loan had been interest-free. The
loan shall be forgiven by the Company if Ms. Kasaks is employed
on the maturity date; if, prior to such date, she is
involuntarily terminated without Cause or dies or becomes
disabled while still employed, or if the term of the 1994
Agreement expires by reason of a Nonrenewal Notice having been
provided by the Company.
In the event of termination of Ms. Kasaks employment by the
Company without Cause, termination by Ms. Kasaks for Good Reason
or expiration of the term of the 1994 Agreement by reason of a
Nonrenewal Notice provided by the Company, Ms. Kasaks shall be
entitled, among other things, to receive continued salary and
the average of her last three bonuses (such amounts generally to
be paid over a period equal to the longer of 18 months or the
remainder of the term of the 1994 Agreement, subject to Ms.
Kasaks' compliance with the noncompete and nonsolicitation
provisions of the 1994 Agreement), and to additional vesting of
all or a portion of her outstanding stock options and restricted
shares. If any payments or benefits received by Ms. Kasaks
would be subject to the "golden parachute" excise tax under the
Internal Revenue Code, the Company has agreed to pay to Ms.
Kasaks such additional amounts as may be necessary to place her
in the same after-tax position as if the paments had not been
subject to such excise tax.
Compensation Committee Interlocks and Insider Participation
As of April 10, 1995, ML&Co. and certain of its affiliates
beneficially owned an aggregate of approximately 26.6% of the
outstanding Common Stock. Messrs. Armstrong and Burke serve on
the Boards of Directors of the Company and Ann Taylor as
representatives of ML&Co. and its affiliates. Accordingly,
ML&Co. and its affiliates are in a position to influence the
management of the Company. Mr. Francis, who became an executive
officer of the Company and Ann Taylor in April 1993 and who is a
Director of the Company and Ann Taylor, was an employee of ML
Capital Partners and served on the Board as a representative of
certain affiliates of ML&Co. until April 1993. Messrs.
Armstrong and Burke are also members of the Compensation
Committee of the Board of Directors of the Company and Ann
Taylor.
The Company paid underwriting commissions to Merrill Lynch in
connection with the Offering. The Company agreed to indemnify
Merrill Lynch, as underwriter, against certain liabilities,
including certain liabilities under the federal securities laws,
in connection with the Offering.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management
Principal Stockholders
As of April 10, 1995, the Common Stock was held of record by 495
stockholders. The following table sets forth certain
information concerning the beneficial ownership of Common Stock
by each stockholder who is known by the Company to own
beneficially in excess of 5% of the outstanding Common Stock, by
each director, by the named executives, and by all executive
officers and directors as a group, as of April 10, 1995. Except
as otherwise indicated, all persons listed below have (i) sole
voting power and investment power with respect to their shares
of Common Stock, except to the extent that authority is shared
by spouses under applicable law, and (ii) record and beneficial
ownership with respect to their shares of Common Stock.
Number of Percent of
Shares of Common
Name of Beneficial Owner Common Stock Stock
- ----------------------------- ------------ -----------
Merrill Lynch Entities (a) 6,155,278 26.6
FMR Corp. (b) 1,540,800 6.7
Nicholas-Applegate Capital
Management (c) 1,198,521 5.2
Sally Frame Kasaks (d) 292,165 1.3
Paul E. Francis (d) 82,653 *
Joseph R. Gromek (d) 14,222 *
Randy Richardson (d) 15,004 *
Andrea M. Weiss (d) 23,366 *
Gerald S. Armstrong (e)(f) 10,964 *
James J. Burke, Jr. (e) 52,920 *
Robert C. Grayson 15,000 *
Rochelle B. Lazarus (g) 300 *
Hanne M. Merriman 200 *
All executive officers and directors
as a group (13 persons) (d) 539,229 2.3
- -------------
* Less than 1%
(a) The Merrill Lynch Entities beneficially owned an
aggregate of 6,155,278 shares, or approximately 26.6% of the
outstanding Common Stock. Shares of Common Stock
beneficially owned by the Merrill Lynch Entities were held as
follows: 3,010,249 shares by Merrill Lynch Capital
Appreciation Partnership No. B-II, L.P.; 1,756,892 shares by
ML Offshore LBO Partnership No. B-II; 851,656 shares by ML
IBK Positions, Inc.; 334,796 shares by Merchant Banking L.P.
No. III; 163,448 shares by Merrill Lynch KECALP L.P. 1989;
29,834 shares by MLCP Associates L.P. No. I; 7,483 shares by
Merrill Lynch KECALP L.P. 1987; 760 shares by ML Capital
Partners; and 160 shares by Merrill Lynch Capital
Appreciation Company Limited II. The Merrill Lynch Entities
shown are deemed to have shared voting and investment power
with other ML&Co. affiliates with respect to the shares of
Common Stock indicated as held by them. The address for
Merrill Lynch Capital Appreciation Company Limited II is P.O.
Box 25, Roseneath, The Grange, St. Peter Port, Guernsey, The
Channel Islands. The address for each of the other Merrill
Lynch Entities is 250 Vesey Street, World Financial Center,
North Tower, New York, New York 10281.
(b) Pursuant to a Schedule 13-G dated March 9, 1995 and
filed with the Commission by FMR Corp., as of February 28,
1995, FMR Corp. had sole voting power with respect to 71,400
shares, shared voting power with respect to no shares, and
shared dispositive power with respect to 1,540,800 shares.
The address for FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
(c) Pursuant to a Schedule 13-G dated February 14, 1995 and
filed with the Commission by Nicholas-Applegate Capital
Management, Nicholas-Applegate Capital Management has sole
voting power with respect to 483,665 shares, shared voting
power with respect to no shares, and sole dispositive power
with respect to 1,198,521 shares. The address for Nicholas-
Applegate Capital Management is 600 West Broadway, 29th
floor, San Diego, California 92101.
(d) The shares listed include shares subject to options
exercisable within 60 days as follows: Ms. Kasaks, 232,165
shares; Mr. Francis, 48,666 shares; Mr. Gromek, 13,999
shares; Mr. Richardson, 14,499 shares; and Ms. Weiss, 23,166
shares; and all executive officers and directors as a group
(13 persons), 364,636 shares.
(e) James J. Burke, Jr. and Gerald S. Armstrong are
directors of the Company and Ann Taylor. Messrs. Burke and
Armstrong are designees of ML&Co. and certain of its
affilates and are directors of ML Capital Partners. Messrs.
Burke and Armstrong disclaim beneficial ownership of shares
beneficially owned by the ML Entities.
(f) 3,000 of these shares are held by Mr. Armstrong's wife,
as custodian for their children. Mr. Armstrong disclaims
beneficial ownership of these shares.
(g) Shares are held in a pension fund of which Ms. Lazarus'
husband is the sole beneficiary. Ms. Lazarus has no voting
or investment power with respect to these shares.
ITEM 13. Certain Relationship and Related Transactions
Transactions with ML Entities
The Company paid commissions aggregating approximately
$2,692,000 to Merrill Lynch in connection with the issuance of
the 8-3/4% Notes in 1993 and the repurchases of Discount Notes,
Notes and 8-3/4% Notes. The Company also paid underwriting
commissions of approximately $1,027,000 to Merrill Lynch in
connection with the Offering. The Company agreed to indemnify
Merrill Lynch, as underwriter, against certain liabilities,
including certain liabilities under the federal securities
laws, in connection with the note issuance and the Offering.
In January 1993, in connection with the settlement, for $4.8
million, of the class action lawsuit known as In Re AnnTaylor
Stores Securities Litigation (No. 91 Civ. 7145 (CBM)), and
consistent with the Company's indemnification obligations
referred to above, the Company, Merrill Lynch and ML&Co., among
others, entered into an agreement pursuant to which, after
contribution to the settlement by ML&Co. and the application of
insurance proceeds, the Company paid to or for the benefit of
the plaintiffs $2.8 million of the above referenced settlement
amount on behalf of itself and certain other defendants,
including Merrill Lynch. The settlement was approved by the
Court on May 25, 1993. The Company also reimbursed Merrill
Lynch $128,281 for certain costs incurred by it in connection
with the class action in fiscal 1992, pursuant to the Company's
indemnification obligations.
Transaction with Director
Robert C. Grayson & Associates, Inc. ("RCG Associates"), a
company wholly-owned by Mr. Grayson, has been engaged as a
consultant to Ann Taylor with respect to certain real estate and
other matters since August 1992. The current term of the
engagement runs through July 1995 and requires payment by Ann
Taylor to RCG Associates of $4,000 per month through July 1995.
For fiscal 1994, RCG Associates received aggregate fees of
$48,000 pursuant to this engagement.
Tax Sharing Agreement
Pursuant to a tax sharing agreement, the Company and Ann
Taylor have agreed to elect to file consolidated income tax
returns for federal income tax purposes and may elect to file
such returns in states and other relevant jurisdictions that
permit such an election for income tax purposes. With respect
to such consolidated income tax returns, the tax sharing
agreement generally requires Ann Taylor to pay to the Company
the entire tax shown to be due on such consolidated returns,
provided that the amount paid by Ann Taylor may not exceed the
amount of taxes that would have been owed by Ann Taylor on a
stand-alone basis.
===================================================================
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) List of documents filed as part of this Annual Report:
The following consolidated financial statements of the
Company and the independent auditors' report are included
on pages 38 through 53 and are filed as part of this
Annual Report:
Consolidated Statements of Operations for the fiscal years
ended January 28, 1995, January 29, 1994 and January 30,
1993; Consolidated Balance Sheets as of January 28, 1995
and January 29, 1994; Consolidated Statements of
Stockholders' Equity for the fiscal years ended January
28, 1995, January 29, 1994 and January 30, 1993;
Consolidated Statements of Cash Flows for the fiscal years
ended January 28, 1995, January 29, 1994 and January 30,
1993; Notes to Consolidated Financial Statements;
Independent Auditors' Report.
(b) Reports on Form 8-K
None.
(c) Exhibits
The exhibits listed in the following exhibit index are
filed as a part of this Annual Report.
Exhibit Number
- -------------
3.1 Restated Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit No. 4.1 to the
Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission (the
"Commission") on August 10, 1992 (Registration No. 33-
50688).
3.2 By-Laws of the Company. Incorporated by reference to
Exhibit No. 3.2 to the Quarterly Report on Form 10-Q
of the Company filed on December 17, 1991
(Registration No. 33-28522).
4.1 Indenture, dated as of June 15, 1993, between Ann
Taylor and Fleet Bank, N.A., as Trustee, including the
form of Subordinated Note due 2000. Incorporated by
reference to Exhibit 4.1 to the Current Report on Form
8-K of Ann Taylor filed on July 7, 1993.
10.1 Form of U.S. Purchase Agreement among Merrill Lynch,
Robertson, Stephens & Company, the other U.S.
Underwriters, the Selling Warrantholders and the
Company, including the form of Price Determination
Agreement. Incorporated by reference to Exhibit No.
1.1 to the Registration Statement of the Company filed
on April 11, 1991 (Registration No. 33-39905).
10.2 Form of International Purchase Agreement among Merrill
Lynch International Limited, Robertson, Stephens &
Company, the other International Underwriters and the
Company, including the form of Price Determination
Agreement. Incorporated by reference to Exhibit No.
1.2 to the Registration Statement of the Company filed
on April 11, 1991 (Registration No. 33-39905).
10.3 Form of U.S. Purchase Agreement among Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley &
Co. Incorporated, Robertson, Stephens & Company, L.P.,
William Blair & Company, the other U.S. Underwriters,
the Selling Stockholders and the Company, including
the form of Price Determination Agreement.
Incorporated by reference to Exhibit No. 1.1 to the
Registration Statement of the Company filed on April
20, 1994 (Registration No. 33-52941).
10.4 Form of International Purchase Agreement among Merrill
Lynch International Limited, Morgan Stanley & Co.
International Limited, Robertson, Stephens & Company,
L.P., William Blair & Company, the other International
Underwriters, the Selling Stockholders and the
Company, including the form of Price Determination
Agreement. Incorporated by reference to Exhibit 1.2
to the Registration Statement of the Company filed on
April 20, 1994 (Registration No. 33-52941).
10.5 Form of Warrant Agreement entered into between Ann
Taylor and The Connecticut Bank and Trust Company,
National Association, including the form of Warrant.
Incorporated by reference to Exhibit No. 4.3 to
Amendment No. 1 to the Registration Statement of the
Company and Ann Taylor filed on June 21, 1989
(Registration No. 33-28522).
10.6 Credit Agreement, dated as of June 28, 1993, between Ann
Taylor, Bank of America National Trust and Savings
Association ("Bank of America"), Bank of Montreal, the
financial institutions party thereto, and Bank of
America, as Agent. Incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K of Ann
Taylor filed on July 7, 1993.
10.6.1 Amendment No. 1 to Credit Agreement, dated as of
August 10, 1993, between Ann Taylor, Bank of America
National Trust and Savings Association ("Bank of
America"), Bank of Montreal, the financial
institutions party thereto, and Bank of America, as
Agent. Incorporated by reference to Exhibit 10.9 to
the Quarterly Report on Form 10-Q of Ann Taylor for
the Quarter ended October 30, 1993 filed on November
26, 1993.
10.6.2 Amendment No. 2 to Credit Agreement dated as of
October 6, 1993, between Ann Taylor, Bank of America
National Trust and Savings Association ("Bank of
America"), Bank of Montreal, the financial
institutions party thereto, and Bank of America, as
Agent. Incorporated by reference to Exhibit 10.10 to
the Quarterly Report on Form 10-Q of Ann Taylor for
the Quarter ended October 30, 1993 filed on November
26, 1993.
10.6.3 Amendment No. 3 to Credit Agreement dated as of
December 23, 1993, between Ann Taylor, Bank of America
National Trust and Savings Association ("Bank of
America"), Bank of Montreal, the financial
institutions party thereto, and Bank of America, as
Agent. Incorporated by reference to Exhibit 10.6.3 to
the Annual Report on Form 10-K of the Company filed on
March 31, 1994.
10.6.4 Amendment No. 4 to Credit Agreement dated as of
January 24, 1994, between Ann Taylor, Bank of America
National Trust and Savings Association ("Bank of
America"), Bank of Montreal, the financial
institutions party thereto, and Bank of America, as
Agent. Incorporated by reference to Exhibit 10.6.4 to
the Annual Report on Form 10-K of the Company filed on
March 31, 1994.
10.7 Guaranty, dated as of June 28, 1993, made by the Company
in favor of Bank of America, as Agent. Incorporated
by reference to Exhibit 10.4 to the Current Report on
Form 8-K of Ann Taylor filed on July 7, 1993.
10.8 Security and Pledge Agreement, dated as of June 28,
1993, made by the Company in favor of Bank of America,
as Agent. Incorporated by reference to Exhibit 10.5
to the Current Report on Form 8-K of Ann Taylor filed
on July 7, 1993.
10.9 Revolving Credit Agreement, dated as of July 29, 1994,
between Ann Taylor, Bank of America National Trust and
Savings Association ("Bank of America"), Fleet Bank,
the financial institutions party thereto, and Bank of
America, as Agent. Incorporated by reference to
Exhibit 10.4 on Form 10-Q of Ann Taylor for the
Quarter ended July 30, 1994 filed on September 12,
1994.
10.9.1 Amendment No. 1 to the Revolving Credit Agreement,
dated as of January 27, 1995, between Ann Taylor, Bank
of America National Trust and Savings Association
("Bank of America"), Fleet Bank, the financial
institutions party thereto, and Bank of America, as
Agent.
10.10 Guaranty, dated as of July 29, 1994, made by the Company
in favor of Bank of America, as Agent. Incorporated
by reference to Exhibit 10.5 on Form 10-Q of Ann
Taylor for the Quarter ended July 30, 1994 filed on
September 12, 1994.
10.11 Pledge Agreement, dated as of July 29, 1994, made by Ann
Taylor in favor of Bank of America, as Agent.
Incorporated by reference to Exhibit 10.6 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended July 30, 1994 filed on September 12,
1994.
10.12 Pledge Agreement, dated as of July 29, 1994 made by the
Company in favor of Bank of America, as Agent.
Incorporated by reference to Exhibit 10.7 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended July 30, 1994 filed on September 12,
1994.
10.13 Form of Investor Stock Subscription Agreement, dated
February 8, 1989, between the Company and each of the
ML Entities. Incorporated by reference to Exhibit No.
10.15 to the Registration Statement of the Company and
Ann Taylor filed on May 3, 1989 (Registration No. 33-
28522).
10.14 1989 Stock Option Plan. Incorporated by reference to
Exhibit No. 10.18 to the Registration Statement of the
Company and Ann Taylor filed on May 3, 1989
(Registration No. 33-28522).
10.14.1 Amendment to 1989 Stock Option Plan. Incorporated by
reference to Exhibit 10.15.1 to the Annual Report on
Form 10-K of the Company filed on April 30, 1993.
10.15 Lease, dated as of March 17, 1989, between Carven
Associates and Ann Taylor concerning the West 57th
Street headquarters. Incorporated by reference to
Exhibit No. 10.21 to the Registration Statement of the
Company and Ann Taylor filed on May 3, 1989
(Registration No. 33-28522).
10.15.1 First Amendment to Lease, dated as of November 14,
1990, between Carven Associates and Ann Taylor.
Incorporated by reference to Exhibit No. 10.17.1 to
the Registration Statement of the Company filed on
April 11, 1991 (Registration No. 33-39905).
10.15.2 Second Amendment to Lease, dated as of February 28,
1993, between Carven Associates and Ann Taylor.
Incorporated by reference to Exhibit 10.17.2 to the
Annual Report on Form 10-K of the Company filed on
April 29, 1993.
10.15.3 Extension and Amendment to Lease dated as of October
1, 1993, between Carven Associates and Ann Taylor.
Incorporated by reference to Exhibit 10.11 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended October 30, 1993 filed on November 26,
1993.
10.15.4 Modification of Amendment and Extension to Lease,
dated as of April 14, 1994 between Carven Associates
and Ann Taylor.
10.15.5 Fifth Amendment to Lease, dated as of March 14, 1995,
between Carven Associates and Ann Taylor.
10.16 Lease, dated December 1, 1985, between Hamilton Realty
Co. and Ann Taylor concerning the New Haven
distribution center. Incorporated by reference to
Exhibit No. 10.22 to the Registration Statement of the
Company and Ann Taylor filed on May 3, 1989
(Registration No. 33-28522).
10.16.1 Agreement, dated March 22, 1993, between Hamilton
Realty Co. and Ann Taylor amending the New Haven
distribution center lease. Incorporated by reference
to Exhibit No. 10.14.1 to the Annual Report on Form 10-
K of Ann Taylor filed on April 30, 1993.
10.16.2 Extension dated February 24, 1994, between Hamilton
Realty Co. and Ann Taylor extending the New Haven
distribution center lease.
10.16.3 Extension dated May 23, 1994, between Hamilton Realty
Co. and Ann Taylor extending the New Haven
distribution center lease.
10.16.4 Extension dated March 13, 1995, between Hamilton
Realty Co. and Ann Taylor extending the New Haven
distribution center lease.
10.17 Agreement, dated April 12, 1993, between Dixson
Associates and Ann Taylor amending the 3 East 57th
Street lease. Incorporated by reference to Exhibit
No. 10.15.1 to the Annual Report on Form 10-K of Ann
Taylor filed on April 30, 1993.
10.18 Tax Sharing Agreement, dated as of July 13, 1989,
between the Company and Ann Taylor. Incorporated by
reference to Exhibit No. 10.24 to Amendment No. 2 to
the Registration Statement of the Company and Ann
Taylor filed on July 13, 1989 (Registration No. 33-
28522).
10.19 Employment Agreement, effective as of February 3, 1992,
between the Company and Sally Frame Kasaks.
Incorporated by reference to Exhibit 10.28 to the
Annual Report on Form 10-K of the Company filed on
April 28, 1992.
10.20 Employment Agreement dated as of February 1, 1994
between the Company and Sally Frame Kasaks.
Incorporated by reference to Exhibit 10.8 to the
Quarterly Report on Form 10-Q of the Company filed on
December 9, 1994.
10.21 The AnnTaylor Stores Corporation 1992 Stock Option Plan.
Incorporated by reference to Exhibit No. 4.3 to the
Company's Registration Statement on Form S-8 filed
with the Commission on August 10, 1992 (Registration
No. 33-50688).
10.21.1 The AnnTaylor Stores Corporation 1992 Stock Option and
Restricted Stock and Unit Award Plan Amended and
Restated as of February 23, 1994. Incorporated by
reference to the Company's Registration Statement on
Form S-8 filed with the Commission on June 30, 1994
(Registration No. 33-50688).
10.22 Management Performance Compensation Plan. Incorporated
by reference to Exhibit 10.30 to the Quarterly Report
on Form 10-Q filed on December 15, 1992.
10.22.1 Amended and restated Management Performance
Compensation Plan as approved by stockholders on June
1, 1994.
10.22.2 Amendment to the AnnTaylor Stores Corporation
Management Performance Compensation Plan dated as of
February 24, 1995.
10.23 Associate Stock Purchase Plan. Incorporated by
reference to Exhibit 10.31 to the Quarterly Report on
Form 10-Q filed on December 15, 1992.
10.24 Stipulation of Settlement dated February 16, 1993
providing for the settlement of Consolidated Action.
Incorporated by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K filed on April
30, 1993.
10.25 Agreement among Defendants to the Stipulation of
Settlement dated February 16, 1993 providing for the
settlement of Consolidated Action. Incorporated by
reference to Exhibit 10.28 to the Company's Annual
Report on Form 10-K filed on April 30, 1993.
10.26 Opinion Re Settlement Plan of Allocation and Application
for Attorney's Fees and Expenses dated May 25, 1993,
In Re AnnTaylor Stores Securities Litigation.
Incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the
Quarter ended May 1, 1993 filed on May 28, 1993.
10.27 Consulting and Severance Agreement dated April 6, 1993
between the Company and Joseph J. Schumm.
Incorporated by reference to Exhibit 10.30 to the
Company's Annual Report on Form 10-K filed on April
30, 1993.
10.27.1 Consulting and Severance Agreement dated March 21,
1994 between ATSC, Ann Taylor 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.
10.28 Interest Rate Swap Agreement dated as of July 22, 1993,
between Ann Taylor and Fleet Bank of Massachusetts,
N.A. Incorporated by reference to Exhibit 10.6 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended July 31, 1993 filed on September 2,
1993.
10.29 Stock Purchase Agreement, dated as of July 13, 1993,
between Ann Taylor and Cleveland Investment, Ltd.
Incorporated by reference to Exhibit 10.7 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended July 31, 1993 filed on September 2,
1993.
10.30 Agreement, dated July 13, 1993, among Cygne Designs,
Inc., CAT US, Inc., C.A.T. (Far East) Limited and Ann
Taylor. Incorporated by reference to Exhibit 10.8 on
Form 10-Q of Ann Taylor for the Quarter ended July 31,
1993 filed on September 2, 1993. (Confidential
treatment has been granted with respect to certain
portions of this Exhibit.)
10.31 Receivables Financing Agreement dated January 27, 1994,
among AnnTaylor Funding, Inc., Ann Taylor, Clipper
Receivables Corporation, State Street Boston Capital
Corporation and PNC Bank National Association.
Incorporated by reference to Exhibit 10.28 to the
Annual Report on Form 10-K of the Company filed on
March 31, 1994.
10.31.1 First Amendment to Receivables Financing Agreement,
dated as of May 31, 1994, among AnnTaylor Funding,
Inc., Ann Taylor, Clipper Receivables Corporation,
State Street Boston Corporation and PNC Bank National
Association.
10.31.2 Second Amendment to Receivables Financing Agreement,
dated as of March 31, 1995, among AnnTaylor Funding,
Inc., Ann Taylor, Clipper Receivables Corporation,
State Street Boston Capital Corporation and PNC Bank
National Association.
10.32 Purchase and Sale Agreement dated as of January 27, 1994
between Ann Taylor and AnnTaylor Funding, Inc.
Incorporated by reference to Exhibit 10.29 to the
Annual Report on Form 10-K of the Company filed on
March 31, 1994.
10.33 AnnTaylor Stores Corporation Deferred Compensation Plan.
21 Subsidiaries of the Company.
23 Consent of Deloitte & Touche llp.
99 Annual Report on Form 11-K of the AnnTaylor, Inc.
Savings Plan for the year ended December 31, 1994
filed on April 27, 1995.
=======================================================================
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ PAUL E. FRANCIS
---------------------------
Paul E. Francis
Executive Vice President -
Finance and Administration -
Chief Financial Officer
By: /s/ WALTER J. PARKS
-----------------------------
Walter J. Parks
Senior Vice President -
Finance -
Principal Accounting
Officer
Date: April 27, 1995
-------------------
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
/s/ SALLY FRAME KASAKS Chairman,Chief Executive April 27, 1995
- ----------------------- Officer and Director --------------
Sally Frame Kasaks
/s/ PAUL E. FRANCIS Executive Vice President - April 27, 1995
- ------------------- Finance and Administration --------------
Paul E. Francis and Director
/s/ GERALD S. ARMSTRONG Director April 27, 1995
- ------------------------- --------------
Gerald S. Armstrong
/s/ JAMES J. BURKE, JR. Director April 27, 1995
- -------------------------
James J. Burke, Jr.
/s/ ROBERT C. GRAYSON Director April 27, 1995
- -------------------------
Robert C. Grayson
/s/ ROCHELLE B. LAZARUS Director April 27, 1995
- ------------------------- --------------
Rochelle B. Lazarus
/s/ HANNE M. MERRIMAN Director April 27, 1995
- ------------------------ --------------
Hanne M. Merriman
=============================================================================
ANNTAYLOR STORES CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report 38
Consolidated Financial Statements:
Consolidated Statements of Operations for the
fiscal years ended January 28, 1995, January
29, 1994 and January 30, 1993 39
Consolidated Balance Sheets as of January 28,
1995 and January 29, 1994 40
Consolidated Statements of Stockholders' Equity
for the fiscal years ended January 28, 1995,
January 29, 1994 and January 30, 1993 41
Consolidated Statements of Cash Flows for the
fiscal years ended January 28, 1995,
January 29, 1994 and January 30, 1993 42
Notes to Consolidated Financial Statements 43
========================================================================
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
AnnTaylor Stores Corporation:
We have audited the accompanying consolidated financial
statements of AnnTaylor Stores Corporation and its subsidiary,
listed in the accompanying index. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of the Company and its subsidiary at January 28, 1995 and
January 29, 1994, and the results of their operations and their
cash flows for each of the three fiscal years in the period
ended January 28, 1995 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
New Haven, Connecticut
April 5, 1995
==========================================================================
ANNTAYLOR STORES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Years Ended January 28, 1995, January 29, 1994
and January 30, 1993
Fiscal Years Ended
January 28, January 29, January 30,
1995 1994 1993
------------ ----------- -----------
(in thousands, except per share amounts)
Net sales (including
leased shoe
departments in 1992) $658,804 $501,649 $468,381
Cost of sales 357,783 271,749 264,301
-------- ------- -------
Gross profit 301,021 229,900 204,080
Selling, general and
administrative expenses 214,224 169,371 152,072
Distribution center
restructuring charge --- 2,000 ---
Amortization of goodwill 9,506 9,508 9,504
-------- ------- ------
Operating income 77,291 49,021 42,504
Interest expense 14,229 17,696 21,273
Stockholder litigation
settlement --- --- 3,905
Other (income) expense, net 168 (194) 259
------ ------ -----
Income before income taxes
and extraordinary loss 62,894 31,519 17,067
Income tax provision 30,274 17,189 11,150
------- ------- -------
Income before
extraordinary loss 32,620 14,330 5,917
Extraordinary loss
(net of income tax
benefit of $654,000
and $6,123,000,
respectively) 868 11,121 ---
------- -------- ------
Net income $31,752 $3,209 $5,917
======= ====== ======
Net income per share
of common stock:
Income per share before
extraordinary loss $1.40 $.66 $.28
Extraordinary loss
per share (.04) (.51) ---
------ ------ -----
Net income per share $1.36 $ .15 $ .28
====== ====== =====
Weighted average shares
and share equivalents
outstanding 23,286 21,929 21,196
See accompanying notes to consolidated financial statements.
=========================================================================
ANNTAYLOR STORES CORPORATION
CONSOLIDATED BALANCE SHEETS
January 28, 1995 and January 29, 1994
January 28, January 29,
1995 1994
-------------- -------------
(in thousands)
Assets
Current assets
Cash $1,551 $ 292
Accounts receivable, net of allowances of
$931,000 and $787,000, respectively 61,211 49,279
Merchandise inventories 93,705 60,890
Prepaid expenses and other current assets 7,956 7,184
Deferred income taxes 3,650 3,750
-------- -------
Total current assets 168,073 121,395
Property and equipment
Land 499 ---
Leasehold improvements 43,370 30,539
Furniture and fixtures 59,105 37,596
Construction in progress 24,867 8,621
------- -------
127,841 76,756
Less accumulated depreciation and
amortization 31,503 28,703
------- -------
Net property and equipment 96,338 48,053
Goodwill, net of accumulated amortization
of $57,219,000 and $47,713,000, respectively 323,031 332,537
Investment in CAT 3,792 2,245
Deferred income taxes 1,600 1,500
Deferred financing costs, net of
accumulated amortization of
$956,000 and $643,000, respectively 2,829 4,990
Other assets 2,591 2,679
-------- -------
Total assets $598,254 $513,399
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $36,625 $ 33,087
Accrued salaries and wages 5,929 4,996
Accrued rent 5,243 3,584
Gift certificates redeemable 3,970 2,699
Accrued expenses 14,125 14,989
Current portion of long-term debt --- 8,757
-------- -------
Total current liabilities 65,892 68,112
Long-term debt 200,000 180,243
Other liabilities 6,250 5,773
Commitments and contingencies
Stockholders' equity
Common stock, $.0068 par value;
40,000,000 shares authorized;
23,106,572 and 21,902,811 shares
issued, respectively 157 149
Additional paid-in capital 310,714 271,810
Warrants to acquire 58,412 and 446,249
shares of common stock, respectively 951 7,378
Retained earnings (accumulated deficit) 14,996 (16,756)
Deferred compensation on restricted stock (149) (119)
------- -------
326,669 262,462
Less treasury stock, 65,843 and 450,817
shares, respectively, at cost (557) (3,191)
------- -------
Total stockholders' equity 326,112 259,271
------- -------
Total liabilities and stockholders' equity $598,254 $513,399
======== ========
See accompanying notes to consolidated financial statements.
=========================================================================
ANNTAYLOR STORES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Fiscal Years Ended January 28, 1995, January 29, 1994
and January 30, 1993
(in thousands)
Retained
Earnings
Additional (Accum-Note Restricted
Total
Common Stock Paid-In Warrants ulatedDue From
Stock Treasury Stock Stockholders'
SharesAmountCapital SharesAmountDeficit)Stockholder Awards
Shares AmountEquity
Balance at February 1, 1992 20,306 $138 $249,622 715 $11,648
$ (25,882) $(999) --- 726 $(5,063) $229,464
Net income --- --- --- --- --- 5,917 --- --- ---
- --- 5,917
Exercise of stock options 792 6 5,436 --- --- ---
- --- --- --- --- 5,442
Tax benefits related to
stock options --- --- 3,536 --- --- --- --- --- ---
- --- 3,536
Exercise of warrants --- --- 1,892 (203) (3,307) --- --- ---
(203) 1,415 ---
Common stock issued as
employee and restricted
stock awards 60 --- 1,334 --- --- --- --- $(1,327)
- --- 3 10
Amortization of restricted
stock award --- --- --- --- --- --- --- 929 --- --
- - 929
Balance at January 30, 1993 21,158 144 261,820 512 8,341
(19,965) (999) (398)523 (3,645) 245,298
Net income --- --- --- --- --- 3,209 --- --- ---
- --- 3,209
Exercise of stock options 745 5 6,121 --- --- ---
- --- --- --- --- 6,126
Tax benefits related to
stock options --- --- 3,240 --- --- --- --- --- ---
- --- 3,240
Exercise of warrants --- --- 550 (66) (963) --- --- ---
(66) 413 ---
Common stock issued as
employee stock award --- --- 79 --- --- --- --- ---
(6) 41 120
Amortization of restricted
stock award --- --- --- --- --- --- --- 279 --- --
- - 279
Repayment of note due
from stockholder --- --- --- --- --- --- 999 --- -
- -- --- 999
Balance at January 29, 1994 21,903 149 271,810 446 7,378
(16,756) 0 (119)451 (3,191) 259,271
Net income --- --- --- --- --- 31,752 --- --- ---
- --- 31,752
Exercise of stock options 191 2 2,915 --- --- ---
- --- --- 3 (118) 2,799
Tax benefits related to
stock options --- --- 1,565 --- --- --- --- --- ---
- --- 1,565
Exercise of warrants --- --- 3,675 (388) (6,427) --- --- ---
(388) 2,752 ---
Issuance of common stock 1,000 6 30,414 --- --- ---
- --- --- --- --- 30,420
Common stock issued as
employee and restricted
stock awards 13 --- 335 --- --- --- --- (328) ---
- --- 7
Amortization of restricted
stock awards --- --- --- --- --- --- --- 298 -
- -- --- 298
Balance at January 28, 1995 23,107 $157 $310,714 58 $951 $
14,996 $ 0 $(149) 66 $(557) $326,112
See accompanying notes to consolidated financial statements.
============================================================================
ANNTAYLOR STORES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Fiscal Years Ended January 28, 1995, January 29, 1994
and January 30, 1993
Fiscal Years Ended
January 28, January 29, January 30,
1995 1994 1993
----------- ----------- -----------
(in thousands)
Operating activities:
Net income $31,752 $3,209 $5,917
Adjustments to reconcile
net income to net cash
provided by operating activities:
Extraordinary loss 1,522 17,244 ---
Distribution center
restructuring charge --- 2,000 ---
Equity earnings in CAT (1,547) (517) ---
Provision for loss on accounts
receivable 1,727 1,171 1,240
Depreciation and amortization 11,787 8,505 7,486
Amortization of goodwill 9,506 9,508 9,504
Amortization of deferred
compensation 298 279 929
Non-cash interest 978 4,199 8,581
Deferred income taxes --- (1,750) (1,500)
Loss on disposal of property and
equipment 1,268 312 72
Increase in receivables (13,659) (7,447) (2,539)
Increase in merchandise inventories(32,815) (10,583) (4,325)
Increase in prepaid expenses and
other current assets (772) (1,280) (187)
Decrease (increase) in refundable
income taxes --- 5,097 (2,078)
Increase (decrease) in accounts
payable and accrued liabilities 6,537 18,218 (250)
Decrease (increase) in other non-
current assets and liabilities,
net 567 (843) 729
------- -------- --------
Net cash provided by operating
activities 17,149 47,322 23,579
------ ------ ------
Investing activities:
Purchases of property and equipment (61,341) (25,062) (4,303)
Investment in CAT --- (1,640) (88)
------- ------- ------
Net cash used by investing activities (61,341) (26,702) (4,391)
------- ------- ------
Financing activities:
Borrowings (repayments) under
line of credit agreement 64,000 (3,500) 2,500
Decrease in bank overdrafts --- (2,361) (4,660)
Payments of long-term debt (56,000) (137,610) (26,000)
Purchase of Subordinated Debt Securities --- (93,689) ---
Net proceeds from issuance of
common stock 30,420 --- ---
Net proceeds from 8-3/4% Notes --- 107,387 ---
Proceeds from Term Loan --- 80,000 ---
Proceeds from note due from stockholder --- 999 ---
Proceeds from Receivables Facility 3,000 33,000 ---
Purchase of 8-3/4% Notes --- (10,225) ---
Proceeds from exercise of stock options 4,371 9,486 8,988
Payment of financing costs (340) (4,041) ---
------ ------- -------
Net cash provided by (used by)
financing activities 45,451 (20,554) (19,172)
------ ------- -------
Net increase in cash 1,259 66 16
Cash, beginning of year 292 226 210
----- ------- ------
Cash, end of year $1,551 $ 292 $ 226
====== ======= ======
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for interest $13,211 $12,664 $13,917
======= ======= =======
Cash paid during the year for
income taxes $26,242 $5,114 $11,192
======= ====== =======
See accompanying notes to consolidated financial statements.
=============================================================================
ANNTAYLOR STORES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Ann Taylor is a leading national specialty retailer of better
quality women's apparel, shoes and accessories sold principally
under the Ann Taylor brand name.
Basis of Presentation
The consolidated financial statements include the accounts of
AnnTaylor Stores Corporation (the "Company") and AnnTaylor, Inc.
("Ann Taylor"). The Company has no material assets other than
the common stock of Ann Taylor and conducts no business other
than the management of Ann Taylor. All intercompany accounts
have been eliminated in consolidation.
Certain fiscal 1993 and 1992 amounts have been reclassified
to conform to the fiscal 1994 presentation.
Fiscal Year
The Company follows the standard fiscal year of the retail
industry, which is a 52-or 53-week period ending on the Saturday
closest to January 31 of the following calendar year.
Finance Service Charge Income
Income from finance service charges relating to customer
receivables, which is deducted from selling, general and
administrative expenses, amounted to $6,871,000 for fiscal 1994,
$6,166,000 for fiscal 1993 and $5,608,000 for fiscal 1992.
Merchandise Inventories
Merchandise inventories are accounted for by the retail
inventory method and are stated at the lower of cost (first-in,
first-out method) or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation
and amortization are computed on a straight-line basis over the
estimated useful lives of the assets (3 to 15 years) or, in the
case of leasehold improvements, over the lives of the respective
leases, if shorter.
Pre-Opening Expenses
Pre-opening store expenses are charged to selling, general
and administrative expenses in the period incurred.
Leased Shoe Department Sales
Net sales include leased shoe department sales of $8,207,000
for fiscal 1992. Leased shoe departments were phased out by
February 1, 1993. Accordingly, there were no leased shoe
department sales during fiscal 1993 or 1994. The gross profit
margin on leased shoe department sales was approximately 14.4%.
Deferred Financing Costs
Deferred financing costs are being amortized using the
interest method over the terms of the related debt.
Goodwill
Goodwill is being amortized on a straight-line basis over 40
years. On an annual basis the Company compares the carrying
value of its goodwill to an estimate of the Company's fair value
to evaluate the reasonableness of the carrying value and
remaining amortization period. Fair value is computed using
projections of future cash flows.
Income Taxes
During the first quarter of 1993, the Company adopted the
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109") which requires an asset and
liability method of accounting for deferred income taxes. Under
the asset and liability method, deferred tax assets and
liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for
the year in which those differences are expected to be recovered
or settled. Adoption of SFAS 109 did not have a material effect
on the results of operations.
Net Income per Share
Net income per share is calculated by dividing net income by
the weighted average number of common shares and common share
equivalents outstanding during the period and assumes the
exercise of the warrants and the dilutive effect of the stock
options.
2. Restructuring
The Company recorded a $2,000,000 pre-tax restructuring
charge in the fourth quarter of 1993 in connection with the
announced relocation of its distribution center from New Haven,
Connecticut to Louisville, Kentucky. The primary components of
the restructuring charge are approximately $1,100,000 for
employee related costs, principally for severance and job
training benefits, and approximately $900,000 for the write-off
of the estimated net book value of fixed assets at the time of
relocation. The relocation is expected to be completed by late
spring 1995.
3. Extraordinary Items
On May 18, 1994, the Company completed a public offering of
1,000,000 shares of common stock (the "Offering") at a price of
$32.00 per share, resulting in aggregate net proceeds of
$30,420,000 (after payment of underwriting discounts and
expenses of the Offering payable by the Company). As required
by the Company's then-existing bank credit agreement,
$30,000,000 of the net proceeds of the Offering were used to
reduce the amount of a term loan outstanding under that
agreement. The write-off of deferred financing costs associated
with the payment on the term loan with the proceeds of the
Offering and refinancing of long-term debt (see Note 4) resulted
in an extraordinary loss of $1,522,000 ($868,000 net of income
tax benefit). Pro forma income before extraordinary loss,
income before extraordinary loss per share and weighted average
shares outstanding, assuming the Offering had occurred at the
beginning of the year, would have been $32,875,000, $1.40 and
23,536,000, respectively.
The Offering was consummated concurrently with the public
offering and sale by certain affiliates of Merrill Lynch & Co.,
Inc. ("ML&Co.") (the "Selling Stockholders") of 4,075,000 shares
of the Company's common stock held by them. The Company did not
receive any of the proceeds of the shares sold by the Selling
Stockholders.
In 1993, the Company entered into a series of debt
refinancing transactions that resulted in an extraordinary loss
of $17,244,000 ($11,121,000 net of income tax benefit). The
loss was attributable to the premiums paid in connection with
the purchase or discharge of Ann Taylor's 14-3/8% Senior
Subordinated Discount Notes due 1999 ("Discount Notes") and its
13-3/4% Subordinated Notes due 1999 ("Notes") and the purchase
of $10,000,000 principal amount of Ann Taylor's 8-3/4%
Subordinated Notes due 2000 ("8-3/4% Notes"), and the write-off
of deferred financing costs.
4. Long-Term Debt
The following summarizes long-term debt outstanding at
January 28, 1995 and January 29, 1994:
January 28, 1995 January 29, 1994
---------------- ----------------
Carrying Est Carrying Est
Amount Fair Value Amount Fair Value
------- --------- -------- ----------
(in thousands)
Senior Debt:
Revolving Credit Agreement $64,000 $64,000 --- ---
Revolving Credit Facility --- --- $2,000 $2,000
Term loan --- --- 54,000 54,000
8-3/4% Notes 100,000 97,000 100,000 102,750
Interest rate swap agreement --- 4,125 --- (780)
Receivables facility 36,000 36,000 33,000 33,000
------- ------- ------- -------
Total debt 200,000 201,125 189,000 190,970
Less current portion --- --- 8,757 8,757
------- ------- ------- -------
Total long-term debt $200,000 $201,125 $180,243 $182,213
======== ======== ======== ========
The bank credit agreement entered into on June 28, 1993
between Ann Taylor and Bank of America, as agent for a syndicate
of banks (the "Bank Credit Agreement"), provided for an
$80,000,000 term loan ("Term Loan") and a $55,000,000 revolving
credit facility ("Revolving Credit Facility") (collectively, the
"Bank Loans"). The Term Loan was subject to regularly scheduled
semi-annual repayments of principal, which commenced on January
15, 1994. The Company made the semi-annual payment of
$6,000,000 in January 1994, and an additional payment of
$20,000,000. The maximum amount that was able to be borrowed
under the Revolving Credit Facility was reduced by the amount of
commercial and standby letters of credit outstanding under the
Bank Credit Agreement. At January 29, 1994, the amount
available under the Revolving Credit Facility was $46,150,000.
In May 1994, the Company applied $30,000,000 of the net
proceeds from its Offering referred to in Note 3 above, to
reduce the amount of the Term Loan outstanding under its then-
existing bank credit agreement.
In July 1994, the Company completed the refinancing of its
outstanding bank debt by entering into a new credit agreement
(the "Revolving Credit Agreement"), which under its original
terms provided for a revolving loan facility of $75,000,000.
The Revolving Credit Agreement was amended on January 27, 1995
to provide for borrowings of up to $125,000,000. The Company
borrowed funds under this revolving credit facility to prepay in
full its outstanding Term Loan and other obligations under its
then-existing bank credit agreement.
The Revolving Credit Agreement has an initial term of three
years. The maximum amount that may be borrowed under this
facility is reduced by the amount of commercial and standby
letters of credit outstanding. There are no amortization
payments required to be made under the agreement during its
term, although the Company is required to reduce the outstanding
loan balance under the facility to $67,000,000 or less for
thirty consecutive days during fiscal 1995 and to $50,000,000 or
less for thirty consecutive days in each fiscal year thereafter.
At January 28, 1995, the amount available under the Revolving
Credit Agreement was $54,570,000.
The Revolving Credit Agreement bears interest at a rate per
annum equal to, at the Company's option, Bank of America's (1)
Base Rate, or (2) Eurodollar rate plus .75%. In addition, Ann
Taylor is required to pay Bank of America a quarterly commitment
fee of .30% per annum of the unused revolving loan commitment.
At January 28, 1995, the $64,000,000 outstanding under the
Revolving Credit Agreement bore interest at the weighted average
rate of 7.23% per annum.
Under the terms of the Revolving Credit Agreement, Bank of
America obtained a pledge of Ann Taylor's common stock. In
addition, the Revolving Credit Agreement contains financial and
other covenants, including limitations on indebtedness, liens
and investments, restrictions on dividends or other
distributions to stockholders, and maintaining certain financial
ratios and specified levels of net worth.
Beginning in the fourth quarter of 1993, Ann Taylor sells its
proprietary credit card accounts receivable to AnnTaylor
Funding, Inc., a wholly owned subsidiary, which uses the
receivables to secure borrowings under a receivables financing
facility due 1996 (the "Receivables Facility"). As of January
28, 1995, $36,000,000 was outstanding under the Receivables
Facility. AnnTaylor Funding, Inc. can borrow up to $40,000,000
under the Receivables Facility based on its accounts receivable
balance. The interest rate as of January 28, 1995 was 6.5%. At
January 28, 1995, AnnTaylor Funding, Inc. had total assets of
approximately $50,348,000 all of which are subject to the
security interest of the lender under the Receivables Facility.
On June 28, 1993, Ann Taylor issued $110,000,000 principal
amount of its 8-3/4% Notes, the net proceeds of $107,387,000 of
which were used in part to repay the outstanding indebtedness
under Ann Taylor's then-existing bank credit agreement. The
outstanding principal amount of these notes as of January 28,
1995 was $100,000,000.
In July 1993, Ann Taylor entered into a $110,000,000
(notional amount) interest rate swap agreement, which had the
effect of converting the Company's interest obligations on the 8-
3/4% Notes to a variable rate. Under the agreement, the Company
receives a fixed rate of 4.75% and pays a floating rate based on
LIBOR, as determined in six month intervals. The swap agreement
matures in July 1996. AnnTaylor is currently receiving a fixed
rate of 4.75% and paying a variable rate of 6.75%. Net receipts
or payments under the agreement are recognized as an adjustment
to interest expense. The Company is exposed to credit loss in
the event of non-performance by the other party to the swap
agreement; however, the Company does not anticipate any such
losses.
The aggregate principal payments of all long-term obligations
for the next five fiscal years are as follows:
Fiscal Year (in thousands)
----------
1995 ---
1996 $36,000
1997 64,000
1998 ---
1999 ---
At January 28, 1995 and January 29, 1994, Ann Taylor had
outstanding commercial and standby letters of credit under its
credit facilities with Bank of America totaling $6,430,000 and
$6,850,000, respectively.
In accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments", the Company determined the estimated
fair value of its debt instruments and interest rate swap using
quoted market information, as available. As judgment is
involved, the estimates are not necessarily indicative of the
amounts the Company could realize in a current market exchange.
5. Allowance for Doubtful Accounts
A summary of activity in the allowance for doubtful accounts
for the fiscal years ended January 28, 1995, January 29, 1994
and January 30, 1993 is as follows:
Fiscal Years Ended
January 28, January 29, January 30,
1995 1994 1993
---------- ---------- -----------
(in thousands)
Balance at beginning of year $ 787 $1,006 $ 899
Provision for loss on accounts
receivable 1,727 1,171 1,240
Accounts written off (1,583) (1,390) (1,133)
------ ------ ------
Balance at end of year $ 931 $ 787 $1,006
======= ======= ======
6. Commitments and Contingencies
Ann Taylor occupies its retail stores, New Haven distribution
center and administrative facilities under operating leases,
most of which are non-cancellable. Some leases contain renewal
options for periods ranging from one to ten years under
substantially the same terms and conditions as the original
leases. Most of the leases require Ann Taylor to pay real
estate taxes, insurance and certain common area and maintenance
costs in addition to the future minimum lease payments shown
below. Most of the store leases require Ann Taylor to pay a
specified minimum rent, plus a contingent rent based on a
percentage of the store's net sales in excess of a certain
threshold.
Future minimum lease payments under non-cancellable operating
leases at January 28, 1995 are as follows:
Fiscal Year (in thousands)
-----------
1995 $36,415
1996 34,647
1997 32,891
1998 31,614
1999 29,253
2000 and thereafter 113,757
-------
Total $278,577
========
Rent expense for the fiscal years ended January 28, 1995,
January 29, 1994 and January 30, 1993 was as follows:
Fiscal Years Ended
----------------------------------------
January 28, January 29, January 30,
1995 1994 1993
---------- ---------- ------------
(in thousands)
Minimum rent $35,382 $28,076 $24,933
Percentage rent 4,684 3,343 4,217
------- ------- -------
Total $40,066 $31,419 $29,150
======= ======= =======
In January 1993, the Company and the other defendants agreed
to settle a stockholder class action lawsuit filed against them
in October 1991. As a result of the settlement, the Company was
required to pay to or for the benefit of the plaintiff class
$2,800,000 (after application of insurance proceeds). To
provide for the settlement, the Company recorded an expense of
$3,905,000 ($.11 per share, net of income tax benefit), which
includes certain of the legal defense costs and other expenses
associated with the suit, in its fiscal 1992 financial
statements.
Ann Taylor has been named as a defendant in several legal
actions arising from its normal business activities. Although
the amount of any liability that could arise with respect to
these actions cannot be accurately predicted, in the opinion of
the Company, any such liability will not have a material adverse
effect on the financial position or results of operations of the
Company.
7. Common Stock Warrants
At January 28, 1995, the Company had outstanding warrants to
acquire, in the aggregate, 58,412 shares of the common stock of
the Company (the "Warrants"). The Warrants, when exercised,
entitle the holders thereof to acquire such shares, subject to
adjustment, at no additional cost. The Warrants expire on July
15, 1999 and became exercisable as a result of the initial
public offering of the Company's common stock in May 1991.
8. Preferred Stock
At January 28, 1995, January 29, 1994 and January 30, 1993,
there were 2,000,000 shares of preferred stock, par value $.01,
authorized and unissued.
9. Stock Option Plans
In 1989 and 1992, the Company established stock option plans.
Under the terms of both plans, the exercise price of any option
may not be less than 100% of the fair market value of the common
stock on the date of grant. 165,813 shares of common stock are
reserved for issuance under the 1989 plan and 1,469,600 shares
of common stock are reserved for issuance under the 1992 plan.
At January 28, 1995, there were 19,307 shares under the 1989
plan and 418,100 shares under the 1992 plan available for future
grant. Generally, options granted under the plans expire ten
years from the date of the grant.
Pursuant to an employment agreement with the Company, as of
February 3, 1992, the Chairman of the Board and Chief Executive
Officer of the Company was granted 100,000 stock options at
$22.125 per share and 100,000 stock options at $26.00 per share.
The following summarizes stock option transactions for the
fiscal years ended January 28, 1995, January 29, 1994 and
January 30, 1993:
Option Prices Number of Shares
-------------- ----------------
Outstanding Options February 1, 1992 $6.80-$22.10 1,753,967
Granted $18.625-$26.00 517,500
Exercised $6.80-$22.10 (792,210)
Cancelled $6.80-$22.25 (17,173)
---------
Outstanding Options January 30, 1993 $6.80-$26.00 1,462,084
Granted $18.125-$26.00 279,000
Exercised $6.80-$22.25 (745,346)
Cancelled $6.80-$22.25 (86,426)
---------
Outstanding Options January 29, 1994 $6.80-$26.00 909,312
Granted $25.375-$42.75 787,500
Exercised $6.80-$28.00 (190,771)
Cancelled $6.80-$28.00 (108,035)
---------
Outstanding Options January 28, 1995 $6.80-$42.75 1,398,006
=========
At January 28, 1995, January 29, 1994 and January 30, 1993
there were exercisable 461,669 options, 516,889 options and
995,407 options, respectively.
In 1994, the Company's 1992 stock option plan was amended and
restated to include restricted stock and unit awards. On
February 23, 1994, 13,630 shares of restricted stock and 6,820
restricted units were awarded. The restrictions on these grants
lapse with respect to one-third of the shares and units awarded
on each of the first through third anniversaries of the date of
the grant. In the event a grantee terminates employment with
the Company, any restricted stock or restricted units remaining
subject to restrictions are forfeited. As of January 28, 1995,
12,497 shares of restricted stock and 6,249 restricted units
were outstanding. The resulting unearned compensation expense
was charged to stockholders' equity and is being amortized over
the applicable restricted period.
10.Executive Compensation
As of February 3, 1992, the Chairman of the Board and Chief
Executive Officer of the Company received 60,000 shares of
restricted common stock. The resulting unearned compensation
expense of $1,327,500, based on the market value on the date of
the grant, was charged to stockholders' equity and was amortized
over the restricted period applicable to these shares. As of
January 28, 1995, unearned compensation expense was fully
amortized.
Effective February 1, 1994, the Company and the Chairman and
Chief Executive Officer of the Company entered into a new
employment agreement (the "1994 Agreement"). Pursuant to the
1994 Agreement, the Company advanced the Chairman and Chief
Executive Officer the sum of $500,000, which bears interest at
the rate of 7.32% per annum compounded semi-annually. All
principal and accrued interest on the loan is due January 31,
1999, or otherwise forgiven if the Chairman and Chief Executive
Officer fulfills the requirements of the 1994 Agreement.
11 Certain Relationships and Related Transactions
Transactions with Merrill Lynch and its Affiliates
At January 28, 1995, certain affiliates of ML&Co. held
approximately 28.7% of the outstanding common stock. Two of the
members of the Board of Directors of the Company and Ann Taylor
serve as representatives of ML&Co. and its affiliates. As a
result, ML&Co. and such affiliates are in a position to
influence the management of Ann Taylor and the Company.
In January 1993, in connection with the settlement of a
stockholder class action lawsuit, the Company, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
ML&Co., among others, entered into an agreement pursuant to
which ML&Co. paid $750,000 and the Company paid the balance of
the settlement to or for the benefit of the plaintiffs. The
Company also reimbursed Merrill Lynch $128,000 for certain costs
incurred by it in connection with the class action in fiscal
1992, pursuant to the Company's indemnification obligations.
The Company paid commissions aggregating approximately
$2,692,000 to Merrill Lynch in 1993 in connection with the
issuance of the 8-3/4% Notes, and repurchases of Discount Notes,
Notes and 8-3/4% Notes. In 1994, the Company also paid
underwriting commissions of approximately $1,027,000 to Merrill
Lynch in connection with the Offering. The Company agreed to
indemnify Merrill Lynch, as underwriter, against certain
liabilities, including certain liabilities under the federal
securities law, in connection with the Offering.
Transactions with CAT
In May 1992, the Company commenced a joint venture known as
CAT U.S., Inc. ("CAT") with Cygne Designs, Inc., which was
formed for the purpose of sourcing Ann Taylor merchandise
directly with manufacturers. As of January 28, 1995, the
Company owned a 40% interest in CAT which is being accounted for
under the equity method of accounting. The Company's agreement
with Cygne relating to the parties' ownership of CAT provides
that, at any time after July 1, 1995, either Cygne or Ann Taylor
may offer to purchase the other party's interest in CAT.
Merchandise purchased by Ann Taylor through CAT was $142,429,000
or 36.3%, and $67,202,000, or 23.5%, of all merchandise
purchased by the Company in 1994 and 1993, respectively.
Accounts payable to CAT in the ordinary course of business was
approximately $4,800,000 and $3,100,000 as of January 28, 1995
and January 29, 1994, respectively.
12.Income Taxes
The provision for income taxes for the fiscal years ended
January 28, 1995, January 29, 1994 and January 30, 1993 consists
of the following:
Fiscal Years Ended
------------------------------------------
January 28, January 29, January 30,
1995 1994 1993
---------- ----------- ------------
(in thousands)
Federal:
Current $22,534 $14,339 $9,300
Deferred --- (1,750) (1,500)
State and local 7,740 4,600 3,350
------- ------- -------
Total $30,274 $17,189 $11,150
======= ======= =======
The reconciliation between the provision for income taxes and
the provision for income taxes at the federal statutory rate for
the fiscal years ended January 28, 1995, January 29, 1994 and
January 30, 1993 is as follows:
Fiscal Years Ended
January 28, January 29, Jannuary 30,
1995 1994 1993
----------- ----------- ------------
(in thousands)
Income before income taxes and
extraordinary loss $62,894 $ 31,519 $17,067
======= ========= =======
Federal statutory rate 35% 35% 34%
======= ======== =======
Provision for income taxes at
federal statutory rate $22,013 $ 11,032 $ 5,803
State and local income taxes,
net of federal income tax benefit 5,031 2,990 2,211
Non-deductible amortization of
goodwill 3,327 3,328 3,232
Other (97) (161) (96)
------- ------- -------
Provision for income taxes $30,274 $17,189 $11,150
======= ======= =======
The tax effects of significant items comprising the Company's
net deferred tax assets as of January 28, 1995 and January 29,
1994 are as follows:
January 28, January 29,
1995 1994
----------- ----------
(in thousands)
Current:
Inventory $1,464 $ 981
Accrued expenses 1,524 1,288
Restructuring 700 700
Other (38) 781
------ ------
Total current $3,650 $3,750
====== ======
Noncurrent:
Depreciation $ 340 $ 125
Rent expense 2,052 1,375
Other (792) ---
------ ------
Total noncurrent $1,600 $1,500
====== ======
13.Retirement Plans
Savings Plan. Ann Taylor maintains a defined contribution
401(k) savings plan for substantially all employees.
Participants may contribute to the plan an aggregate of up to
10% of their annual earnings. Ann Taylor makes a matching
contribution of 50%, with respect to the first 3% of each
participant's annual earnings contributed to the plan. Ann
Taylor's contributions to the plan for fiscal 1994, fiscal 1993
and fiscal 1992 were $333,000, $199,000 and $111,000,
respectively.
Pension Plan. Substantially all employees of Ann Taylor are
covered under a noncontributory defined benefit pension plan.
The pension plan is a "cash balance pension plan". An account
balance is established for each participant which is credited
with a benefit based on compensation and years of service with
Ann Taylor. Ann Taylor's funding policy for the plan is to
contribute annually the amount necessary to provide for benefits
based on accrued service and projected pay increases. Plan
assets consist primarily of cash, equity and fixed income
securities.
The following table sets forth the funded status of the
Pension Plan at January 28, 1995, January 29, 1994 and January
30, 1993, in accordance with Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions":
January 28, January 29, January 30,
1995 1994 1993
---------- ----------- ----------
(dollars in thousands)
Actuarial present value of
benefits obligation:
Accumulated benefit obligation,
including vested benefits of
$1,500,000, $1,056,000 and
$702,000, respectively $2,516 $2,401 $ 1,832
====== ====== ========
Projected benefit obligation
for service rendered to date $2,516 $2,401 $ 1,832
Plan assets at fair value 2,522 2,344 1,847
------ ------ --------
Plan assets in excess of projected
benefit obligation (projected
benefit obligation in excess
of plan assets) 6 (57) 15
Unrecognized net gain (136) (58) ---
------ ----- -------
Prepaid (accrued) pension cost $ (130) $ (115) $ 15
====== ====== =======
Net periodic pension cost for fiscal
1994, 1993 and 1992 included
the following components:
Service cost/benefits earned
during the year $ 622 $ 680 $521
Interest cost on projected
benefit obligation 133 117 100
Actual loss (return) on plan assets 72 (124) (100)
Net amortization and deferral (285) (36) 9
-------- ----- -----
Net periodic pension cost $ 542 $ 637 $530
======= ====== ===
Assumptions used to determine the
projected benefit obligation
and plan assets were:
Discount rate 8.5% 7.0% 7.0%
Rate of increase in compensation level 5.5% 4.0% 4.0%
Expected long-term rate of return on
assets 8.0% 8.0% 9.0%
Quarter
---------------------------------------
First Second Third Fourth
-------- -------- ------- -------
(in thousands,except per share amount)
Fiscal 1994
Net sales $145,283 $159,936 $164,632 $188,953
Operating income 19,530 18,733 19,853 19,175
Income before extraordinary loss 8,060 7,923 8,284 8,353
Extraordinary loss --- (868) --- ---
Net income 8,060 7,055 8,284 8,353
Income per share before
extraordinary loss $ .36 $ .34 $ .35 $ .35
Extraordinary loss per share --- (.04) --- ---
Net income per share $ .36 $ .30 $ .35 $ .35
Fiscal 1993
Net sales $120,175 $124,837 $122,025 $134,612
Operating income 12,410 12,929 12,850 10,832
Income before extraordinary loss 3,290 3,630 4,321 3,089
Extraordinary loss -- (10,496) -- (625)
Net income (loss) 3,290 (6,866) 4,321 2,464
Income per share before
extraordinary loss $ .15 $ .16 $ .20 $ .14
Extraordinary loss per share -- (.47) -- (.03)
Net income (loss) per share $ .15 $ (.31) $ .20 $ .11
The sum of the quarterly per share data may not equal the
annual amounts due to changes in the weighted average shares and
share equivalents outstanding.
The early retirement of indebtedness in the fourth quarter of
1993 led to an extraordinary pre-tax charge to earnings of
$1,096,000 ($625,000 net of income tax benefit). The Company
also recorded a $2,000,000 pre-tax restructuring charge in the
fourth quarter of 1993 for the relocation of its distribution
center from New Haven, Connecticut to Louisville, Kentucky
anticipated to occur in late spring 1995.
============================================================================
INDEX TO EXHIBITS
Exhibits
- --------
3.1 Restated Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit No. 4.1 to the
Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission (the
"Commission") on August 10, 1992 (Registration No. 33-
50688).
3.2 By-Laws of the Company. Incorporated by reference to
Exhibit No. 3.2 to the Quarterly Report on Form 10-Q
of the Company filed on December 17, 1991
(Registration No. 33-28522).
4.1 Indenture, dated as of June 15, 1993, between Ann
Taylor and Fleet Bank, N.A., as Trustee, including the
form of Subordinated Note due 2000. Incorporated by
reference to Exhibit 4.1 to the Current Report on Form
8-K of Ann Taylor filed on July 7, 1993.
10.1 Form of U.S. Purchase Agreement among Merrill Lynch,
Robertson, Stephens & Company, the other U.S.
Underwriters, the Selling Warrantholders and the
Company, including the form of Price Determination
Agreement. Incorporated by reference to Exhibit No.
1.1 to the Registration Statement of the Company filed
on April 11, 1991 (Registration No. 33-39905).
10.2 Form of International Purchase Agreement among Merrill
Lynch International Limited, Robertson, Stephens &
Company, the other International Underwriters and the
Company, including the form of Price Determination
Agreement. Incorporated by reference to Exhibit No.
1.2 to the Registration Statement of the Company filed
on April 11, 1991 (Registration No. 33-39905).
10.3 Form of U.S. Purchase Agreement among Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley &
Co. Incorporated, Robertson, Stephens & Company, L.P.,
William Blair & Company, the other U.S. Underwriters,
the Selling Stockholders and the Company, including
the form of Price Determination Agreement.
Incorporated by reference to Exhibit No. 1.1 to the
Registration Statement of the Company filed on April
20, 1994 (Registration No. 33-52941).
10.4 Form of International Purchase Agreement among Merrill
Lynch International Limited, Morgan Stanley & Co.
International Limited, Robertson, Stephens & Company,
L.P., William Blair & Company, the other International
Underwriters, the Selling Stockholders and the
Company, including the form of Price Determination
Agreement. Incorporated by reference to Exhibit 1.2
to the Registration Statement of the Company filed on
April 20, 1994 (Registration No. 33-52941).
10.5 Form of Warrant Agreement entered into between Ann
Taylor and The Connecticut Bank and Trust Company,
National Association, including the form of Warrant.
Incorporated by reference to Exhibit No. 4.3 to
Amendment No. 1 to the Registration Statement of the
Company and Ann Taylor filed on June 21, 1989
(Registration No. 33-28522).
10.6 Credit Agreement, dated as of June 28, 1993, between Ann
Taylor, Bank of America National Trust and Savings
Association ("Bank of America"), Bank of Montreal, the
financial institutions party thereto, and Bank of
America, as Agent. Incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K of Ann
Taylor filed on July 7, 1993.
10.6.1 Amendment No. 1 to Credit Agreement, dated as of
August 10, 1993, between Ann Taylor, Bank of America
National Trust and Savings Association ("Bank of
America"), Bank of Montreal, the financial
institutions party thereto, and Bank of America, as
Agent. Incorporated by reference to Exhibit 10.9 to
the Quarterly Report on Form 10-Q of Ann Taylor for
the Quarter ended October 30, 1993 filed on November
26, 1993.
10.6.2 Amendment No. 2 to Credit Agreement dated as of
October 6, 1993, between Ann Taylor, Bank of America
National Trust and Savings Association ("Bank of
America"), Bank of Montreal, the financial
institutions party thereto, and Bank of America, as
Agent. Incorporated by reference to Exhibit 10.10 to
the Quarterly Report on Form 10-Q of Ann Taylor for
the Quarter ended October 30, 1993 filed on November
26, 1993.
10.6.3 Amendment No. 3 to Credit Agreement dated as of
December 23, 1993, between Ann Taylor, Bank of America
National Trust and Savings Association ("Bank of
America"), Bank of Montreal, the financial
institutions party thereto, and Bank of America, as
Agent. Incorporated by reference to Exhibit 10.6.3 to
the Annual Report on Form 10-K of the Company filed on
March 31, 1994.
10.6.4 Amendment No. 4 to Credit Agreement dated as of
January 24, 1994, between Ann Taylor, Bank of America
National Trust and Savings Association ("Bank of
America"), Bank of Montreal, the financial
institutions party thereto, and Bank of America, as
Agent. Incorporated by reference to Exhibit 10.6.4 to
the Annual Report on Form 10-K of the Company filed on
March 31, 1994.
10.7 Guaranty, dated as of June 28, 1993, made by the Company
in favor of Bank of America, as Agent. Incorporated
by reference to Exhibit 10.4 to the Current Report on
Form 8-K of Ann Taylor filed on July 7, 1993.
10.8 Security and Pledge Agreement, dated as of June 28,
1993, made by the Company in favor of Bank of America,
as Agent. Incorporated by reference to Exhibit 10.5
to the Current Report on Form 8-K of Ann Taylor filed
on July 7, 1993.
10.9 Revolving Credit Agreement, dated as of July 29, 1994,
between Ann Taylor, Bank of America National Trust and
Savings Association ("Bank of America"), Fleet Bank,
the financial institutions party thereto, and Bank of
America, as Agent. Incorporated by Reference to
Exhibit 10.4 on Form 10-Q of Ann Taylor for the
Quarter ended July 30, 1994 filed on September 12,
1994.
10.9.1 Amendment No. 1 to the Revolving Credit Agreement,
dated as of January 27, 1995, between Ann Taylor, Bank
of America National Trust and Savings Association
("Bank of America"), Fleet Bank, the financial
institutions party thereto, and Bank of America, as
Agent.
10.10 Guaranty, dated as of July 29, 1994, made by the Company
in favor of Bank of America, as Agent. Incorporated
by reference to Exhibit 10.5 on Form 10-Q of Ann
Taylor for the Quarter ended July 30, 1994 filed on
September 12, 1994.
10.11 Pledge Agreement, dated as of July 29, 1994, made by Ann
Taylor in favor of Bank of America, as Agent.
Incorporated by reference to Exhibit 10.6 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended July 30, 1994 filed on September 12,
1994.
10.12 Pledge Agreement, dated as of July 29, 1994 made by the
Company in favor of Bank of America, as Agent.
Incorporated by reference to Exhibit 10.7 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended July 30, 1994 filed on September 12,
1994.
10.13 Form of Investor Stock Subscription Agreement, dated
February 8, 1989, between the Company and each of the
ML Entities. Incorporated by reference to Exhibit No.
10.15 to the Registration Statement of the Company and
Ann Taylor filed on May 3, 1989 (Registration No. 33-
28522).
10.14 1989 Stock Option Plan. Incorporated by reference to
Exhibit No. 10.18 to the Registration Statement of the
Company and Ann Taylor filed on May 3, 1989
(Registration No. 33-28522).
10.14.1 Amendment to 1989 Stock Option Plan. Incorporated by
reference to Exhibit 10.15.1 to the Annual Report on
Form 10-K of the Company filed on April 30, 1993.
10.15 Lease, dated as of March 17, 1989, between Carven
Associates and Ann Taylor concerning the West 57th
Street headquarters. Incorporated by reference to
Exhibit No. 10.21 to the Registration Statement of the
Company and Ann Taylor filed on May 3, 1989
(Registration No. 33-28522).
10.15.1 First Amendment to Lease, dated as of November 14,
1990, between Carven Associates and Ann Taylor.
Incorporated by reference to Exhibit No. 10.17.1 to
the Registration Statement of the Company filed on
April 11, 1991 (Registration No. 33-39905).
10.15.2 Second Amendment to Lease, dated as of February 28,
1993, between Carven Associates and Ann Taylor.
Incorporated by reference to Exhibit 10.17.2 to the
Annual Report on Form 10-K of the Company filed on
April 29, 1993.
10.15.3 Extension and Amendment to Lease dated as of October
1, 1993, between Carven Associates and Ann Taylor.
Incorporated by reference to Exhibit 10.11 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended October 30, 1993 filed on November 26,
1993.
10.15.4 Modification of Amendment and Extension to Lease,
dated as of April 14, 1994 between Carven Associates
and Ann Taylor.
10.15.5 Fifth Amendment to Lease, dated as of March 14, 1995,
between Carven Associates and Ann Taylor.
10.16 Lease, dated December 1, 1985, between Hamilton Realty
Co. and Ann Taylor concerning the New Haven
distribution center. Incorporated by reference to
Exhibit No. 10.22 to the Registration Statement of the
Company and Ann Taylor filed on May 3, 1989
(Registration No. 33-28522).
10.16.1 Agreement, dated March 22, 1993, between Hamilton
Realty Co. and Ann Taylor amending the New Haven
distribution center lease. Incorporated by reference
to Exhibit No. 10.14.1 to the Annual Report on Form 10-
K of Ann Taylor filed on April 30, 1993.
10.16.2 Extension dated February 24, 1994, between Hamilton
Realty Co. and Ann Taylor extending the New Haven
distribution center lease.
10.16.3 Extension dated May 23, 1994, between Hamilton Realty
Co. and Ann Taylor extending the New Haven
distribution center lease.
10.16.4 Extension dated March 13, 1995, between Hamilton
Realty Co. and Ann Taylor extending the New Haven
distribution center lease.
10.17 Agreement, dated April 12, 1993, between Dixson
Associates and Ann Taylor amending the 3 East 57th
Street lease. Incorporated by reference to Exhibit
No. 10.15.1 to the Annual Report on Form 10-K of Ann
Taylor filed on April 30, 1993.
10.18 Tax Sharing Agreement, dated as of July 13, 1989,
between the Company and Ann Taylor. Incorporated by
reference to Exhibit No. 10.24 to Amendment No. 2 to
the Registration Statement of the Company and Ann
Taylor filed on July 13, 1989 (Registration No. 33-
28522).
10.19 Employment Agreement, effective as of February 3, 1992,
between the Company and Sally Frame Kasaks.
Incorporated by reference to Exhibit 10.28 to the
Annual Report on Form 10-K of the Company filed on
April 28, 1992.
10.20 Employment Agreement dated as of February 1, 1994
between the Company and Sally Frame Kasaks.
Incorporated by reference to Exhibit 10.8 to the
Quarterly Report on Form 10-Q of the Company filed on
December 9, 1994.
10.21 The AnnTaylor Stores Corporation 1992 Stock Option Plan.
Incorporated by reference to Exhibit No. 4.3 to the
Company's Registration Statement on Form S-8 filed
with the Commission on August 10, 1992 (Registration
No. 33-50688).
10.21.1 The AnnTaylor Stores Corporation 1992 Stock Option and
Restricted Stock and Unit Award Plan Amended and
Restated as of February 23, 1994. Incorporated by
reference to the Company's Registration Statement on
Form S-8 filed with the Commission on June 30, 1994
(Registration No. 33-50688).
10.22 Management Performance Compensation Plan. Incorporated
by reference to Exhibit 10.30 to the Quarterly Report
on Form 10-Q filed on December 15, 1992.
10.22.1 Amended and restated Management Performance
Compensation Plan as approved by stockholders on June
1, 1994.
10.22.2 Amendment to the AnnTaylor Stores Corporation
Management Performance Compensation Plan dated as of
February 24, 1995.
10.23 Associate Stock Purchase Plan. Incorporated by
reference to Exhibit 10.31 to the Quarterly Report on
Form 10-Q filed on December 15, 1992.
10.24 Stipulation of Settlement dated February 16, 1993
providing for the settlement of Consolidated Action.
Incorporated by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K filed on April
30, 1993.
10.25 Agreement among Defendants to the Stipulation of
Settlement dated February 16, 1993 providing for the
settlement of Consolidated Action. Incorporated by
reference to Exhibit 10.28 to the Company's Annual
Report on Form 10-K filed on April 30, 1993.
10.26 Opinion Re Settlement Plan of Allocation and Application
for Attorney's Fees and Expenses dated May 25, 1993,
In Re AnnTaylor Stores Securities Litigation.
Incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the
Quarter ended May 1, 1993 filed on May 28, 1993.
10.27 Consulting and Severance Agreement dated April 6, 1993
between the Company and Joseph J. Schumm.
Incorporated by reference to Exhibit 10.30 to the
Company's Annual Report on Form 10-K filed on April
30, 1993.
10.27.1 Consulting and Severance Agreement dated March 21,
1994 between ATSC, Ann Taylor 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.
10.28 Interest Rate Swap Agreement dated as of July 22, 1993,
between Ann Taylor and Fleet Bank of Massachusetts,
N.A. Incorporated by reference to Exhibit 10.6 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended July 31, 1993 filed on September 2,
1993.
10.29 Stock Purchase Agreement, dated as of July 13, 1993,
between Ann Taylor and Cleveland Investment, Ltd.
Incorporated by reference to Exhibit 10.7 to the
Quarterly Report on Form 10-Q of Ann Taylor for the
Quarter ended July 31, 1993 filed on September 2,
1993.
10.30 Agreement, dated July 13, 1993, among Cygne Designs,
Inc., CAT US, Inc., C.A.T. (Far East) Limited and Ann
Taylor. Incorporated by reference to Exhibit 10.8 on
Form 10-Q of Ann Taylor for the Quarter ended July 31,
1993 filed on September 2, 1993. (Confidential
treatment has been granted with respect to certain
portions of this Exhibit.)
10.31 Receivables Financing Agreement dated January 27, 1994,
among AnnTaylor Funding, Inc., Ann Taylor, Clipper
Receivables Corporation, State Street Boston Capital
Corporation and PNC Bank National Association.
Incorporated by reference to Exhibit 10.28 to the
Annual Report on Form 10-K of the Company filed on
March 31, 1994.
10.31.1 First Amendment to Receivables Financing Agreement,
dated as of May 31, 1994, among AnnTaylor Funding,
Inc., Ann Taylor, Clipper Receivables Corporation,
State Street Boston Corporation and PNC Bank National
Association.
10.31.2 Second Amendment to Receivables Financing Agreement,
dated as of March 31, 1995, among AnnTaylor Funding,
Inc., Ann Taylor, Clipper Receivables Corporation,
State Street Boston Capital Corporation and PNC Bank
National Association.
10.32 Purchase and Sale Agreement dated as of January 27, 1994
between Ann Taylor and AnnTaylor Funding, Inc.
Incorporated by reference to Exhibit 10.29 to the
Annual Report on Form 10-K of the Company filed on
March 31, 1994.
10.33 AnnTaylor Stores Corporation Deferred Compensation Plan.
21 Subsidiaries of the Company.
23 Consent of Deloitte & Touche llp.
99 Annual Report on Form 11-K of the AnnTaylor, Inc.
Savings Plan for the year ended December 31, 1994
filed on April 27, 1995.
==========================================================================
Exhibit 21
SUBSIDIARIES OF
ANNTAYLOR STORES CORPORATION
AnnTaylor, Inc.,
a Delaware corporation
AnnTaylor Travel, Inc.,
a Delaware corporation and
wholly-owned subsidiary of
Ann Taylor, Inc.
AnnTaylor Funding, Inc.,
a Delaware corporation and
wholly-owned subsidiary of
Ann Taylor, Inc.
AnnTaylor Distribution Services, Inc.,
a Delaware corporation and
wholly-owned subsidiary of
Ann Taylor, Inc.
AnnTaylor Loft, Inc.
a Delaware corporation and
wholly-owned subsidiary of
Ann Taylor, Inc.
======================================================================
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
AnnTaylor Stores Corporation:
We consent to the incorporation by reference in AnnTaylor
Stores Corporation's Registration Statements No. 33-31505 on
Form S-8, No. 33-50688 on Form S-8, No. 33-52389 on Form S-8,
and No. 33-55629 on Form S-8 of our report dated April 5, 1995
appearing in the Annual Report on Form 10-K of AnnTaylor Stores
Corporation for the year ended January 28, 1995.
Deloitte & Touche LLP
New Haven, Connecticut
April 25, 1995
========================================================================
April 27, 1995
Via EDGAR Transmission
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Filing Desk
Re: Ann Taylor Stores Corporation
Annual Report on Form 10-K
Dear Sirs/Madams:
On behalf of AnnTaylor Stores Corporation (the
"Company"), enclosed and transmitted to you for filing pursuant
to the Securities Act of 1933, as amended, via the Electronic
Data Gathering Analysis and Retrieval System ("EDGAR"), is the
Company's Annual Report on Form 10-K.
Pursuant to Rule 3a of the Rules of Practice, the
filing fee of $250 is included as part of a wire transfer to
Mellon Bank in Pittsburgh, Pennsylvania on Tuesday, March 29,
1994 in the amount of $78,665. This wire transfer also
included the filing fee of $63,330 for a registration statement
on Form S-3 filed by the Company on March 31, 1994 and certain
other filing fees relating to filings by the Company since
then.
Please contact the undersigned if you have any
questions or comments with respect to the foregoing.
Very truly yours,
/s/ Sallie A. DeMarsilis
--------------------------
Sallie A. DeMarsilis
Assistant Controller
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (this "Amendment")
is entered into as of January 27, 1995 among ANNTAYLOR, INC., a
Delaware corporation (the "Borrower"), the various financial
institutions named on the signature pages hereto (the "Lenders")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION. as
Agent.
WHEREAS, the Borrower, the Lenders, the Co-Agents named
therein, BA Securities, Inc. as Arranger and the Agent are party
to that certain Credit Agreement dated as of July 29, 1994 (as
from time to time amended, the "Credit Agreement"); and
WHEREAS, the Borrower has requested the Lenders to increase
the Commitments under the Credit Agreement by $50,000,000 to
$125,000,000 and to make certain other changes to the Credit
Agreement, and the Lenders are willing to agree to the Borrower's
request on the terms and subject to the conditions set forth
herein;
NOW THEREFORE, the parties hereto hereby agree as follows:
Section 1. Defined Terms. Unless otherwise defined in
this Amendment, defined terms used herein shall have the meanings
assigned to such terms in the Credit Agreement.
Section 2. Amendments to Credit Agreement.
(a) Increase in Commitments. The Lenders hereby agree
to increase their Commitments to the amounts set forth in
Schedule 1 to this Amendment and Schedule 1.01(b) to the
Credit Agreement is hereby amended to read as Schedule 1 to
this Amendment.
(b) Change in Cleandown Provisions. Clause (v) of
Section 2.01(a) of the Credit Agreement is hereby amended to
read as follows:
"(v) The Borrower shall from time to time effect a
prepayment of the outstanding Loans (such amount, a
"Cleandown") so as to cause the aggregate outstanding
principal amount of the Loans to be not more than (A)
$50,000,000, for at least 30 consecutive days during
the period from the Initial Funding Date to the last
day of the Fiscal Year beginning on January 30, 1994,
(B) $67,000,000, for at least 30 consecutive days in
the Fiscal Year beginning on January 29, 1995 and (C)
$50,000,000, for at least 30 consecutive days in each
Fiscal Year thereafter (each such period, a "Cleandown
Period"). Promptly after the end of any Cleandown
Period, the Borrower shall notify the Agent that a
Cleandown Period has occurred and the Agent shall
notify the Lenders."
(c) Change in Investment Provisions.
(i) A new paragraph (j) is hereby added to
Section 8.03 of the Credit Agreement
reading as follows:
"(j) Investments in the form of advance
payments to suppliers not in excess of an
aggregate amount of $10,000,000 outstanding
at any one time; and"
(ii) The word "and" appearing at the end of
paragraph (i) of Section 8.03 of the Credit
Agreement is hereby deleted.
(iii) Current paragraph (j) of Section 8.03 of
the Credit Agreement is hereby re-lettered
as paragraph (k) of Section 8.03 of the
Credit Agreement.
(d) Change in Minimum Fixed Charge Coverage Ratio.
Section 9.03 of the Credit Agreement is hereby
amended to read as follows:
"9.03 Minimum Fixed Charge Coverage Ratio. The
Borrower shall not permit the Fixed Charge
Coverage Ratio, as determined at the end of any
fiscal quarter for the preceding four fiscal
quarters (or, if less, the number of quarters
elapsed since the Initial Funding Date) to be less
than the ratio set forth opposite the month in
which such fiscal quarter ends:
Quarter Ended Minimum Ratio
October 1994 1.00 to 1.00
January 1995 1.00 to 1.00
April 1995 1.00 to 1.00
July 1995 1.00 to 1.00
October 1995 1.00 to 1.00
January 1996 1.00 to 1.00
April 1996 1.00 to 1.00
July 1996 1.05 to 1.00
October 1996
and thereafter 1.10 to 1.00"
Section 3. Representations and Warranties.
The Borrower represents and warrants that:
(a) (i) the execution and delivery of this Amendment
have been duly authorized by all necessary corporate action;
and (ii) do not violate any Requirement of Law nor conflict
with or result in the breach of any Contractual Obligation
binding on the Borrower; and
(b) after giving effect to this Amendment, the
representations and warranties of the Borrower contained in
Article V of the Credit Agreement (except for
representations and warranties relating to a particular
point in time) and in each other Loan Document are true and
correct in all material respects as if made on and as of the
date of this Amendment and no Potential Event of Default or
Event of Default has occurred and is continuing.
Section 4. Effectiveness.
(a) This Amendment shall become effective as of the
date first above written when the Agent has received the
following:
(i) counterparts hereof executed by the Borrower,
all the Lenders and the Agent and signed by ATSC as a
consenting party; and
(ii) copies of the resolutions of the Board of
Directors of the Borrower authorizing the execution and
delivery of this Amendment and the performance of the
transactions contemplated hereby, certified by the
Secretary or an Assistant Secretary of the Borrower.
(b) Upon the effectiveness of this Amendment (i) each
reference in the Credit Agreement to "this Agreement",
"hereunder", hereof", "herein", or words of like import
shall mean and be a reference to the Credit Agreement as
amended hereby and (ii) each reference in each other Loan
Document to the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended hereby.
(c) Except as specifically amended above, the Credit
Agreement shall remain in full force and effect.
(d) The execution, delivery, and effectiveness of this
Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power, or remedy of any
Lender or the Agent under the Credit Agreement or any of the
other Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.
Section 5. Miscellaneous.
(a) This Amendment may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when executed and delivered
shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
(b) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective duly authorized
officers as of the date first above written.
ANNTAYLOR, INC.
By:/s/ Walter J. Parks
_____________________________
Title: Sr. V.P. - Finance
__________________________
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Walter J. Parks
_____________________________
Title: Sr. V.P. - Finance
__________________________
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:/s/ Lannhi Tran
_____________________________
Title:__________________________
FLEET BANK, NATIONAL ASSOCIATION
By: /s/ David B. Coleman
--------------------------
Title:__________________________
LTCB TRUST COMPANY
By:_____________________________
Title:__________________________
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:__________________________
SHAWMUT BANK, N.A.
By:_____________________________
Title:__________________________
Consenting Party:
ANNTAYLOR STORES CORPORATION
By:_____________________________
Title:__________________________
MODIFICATION OF AMENDMENT AND EXTENSION TO LEASE
------------------------------------------------
MODIFICATION OF AMENDMENT AND EXTENSION TO LEASE, dated as of the 14th
day of April 1994, between CARVEN ASSOCIATES, a New York limited partnership
with offices at 142 West 57th Street, New York, New York 10019 (the
"Landlord"), and AnnTaylor, Inc., a Delaware corporation having an office at
142 West 57th Street, New York, New York 10019 (the "Tenant").
WITNESSETH
----------
WHEREAS, under date of March 17, 1989, Landlord and Tenant entered into a
lease as amended pursuant to a First Amendment To Lease dated November 14,
1990, as further amended pursuant to an Extension and Amendment to Lease
dated October 1, 1993, together, collectively referred to as the "Lease"
affecting the entire second (2nd), third (3rd), fourth (4th), fifth (5th)
floors and sixth (6th) floors (the "Original Premises"), deemed to comprise
70,825 rentable square feet, in the commercial condominium unit (the
"Building") of which the Premises form a part known by the street address
of 142 West 57th Street, New York, New York;
WHEREAS, Tenant desires that the entire fourteenth (14th) floor, deemed
to comprise 13,850 rentable square feet, be added to the space demised under
the Lease*
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:
1. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the entire fourteenth (14th) floor of the Building, substantially as
shown by outlining and crosshatching in Exhibit A annexed hereto and made a
part hereof (the "Additional Space"), upon and subject to all of the executory
terms, covenants, conditions and limitations contained in the Lease, except as
otherwise provided for herein, for a term to commence on April 17, 1994 (the
"Effective Date") and to end on the Expiration Date (as defined in Paragraph
37 of the Lease and modified pursuant to Paragraph 1 of the Extension and
Amendment to Lease) unless sooner terminated pursuant to any of the terms,
covenants or conditions of the Lease or pursuant to law.
2. As of the Effective Date the Lease shall be deemed amended as
follows:
a. The Premises shall include the Additional Space cross hatched on
Exhibit A for all purposes of the Lease;
b. The Fixed Rent as defined in Schedule A of the Lease as increased
pursuant to the First Amendment to Lease and the Extension and Amendment to
Lease shall be increased as of June 17, 1994 (i) by Four Hundred Seventy
Thousand Nine Hundred ($470,900.) Dollars per annum for the period from the
Effective Date to and including July 31, 1999 (ii) and by Five Hundred Twelve
Thousand Four Hundred Fifty ($512,450.) Dollars per annum for the period
from August l, l999 to and including the Expiration Date inclusive, which
amounts shall be payable in equal monthly installments in advance on the first
day of each and every calendar month during the term of this Lease.
c. Tenant's Percentage (as defined in Section 39 A(vi) of the Lease)
shall be increased by 6.16%.
d. Tenant's Operating Expense Percentage (as defined in Section
40A (iii) of the Lease) shall be increased by 6.16%.
e. Landlord shall not be obligated to perform any work or
construction in the Additional Space in order to make it ready for Tenant's
occupancy. Tenant represents that it has inspected the Additional Space and
agrees to accept same absolutely "as is".
*which Premises shall be deemed to comprise a total of 84,675 rentable
square feet;
f. Tenant shall obtain electric for the fourteenth (14th) floor in
accordance with Paragraph 46B of the Lease, for which Landlord has or will
supply meter pans for separate meters for the floor.
3. Landlord and Tenant covenant, warrant and represent to each other
that no broker except Manhattan Pacific Management Co., Inc. (the "Broker")
was instrumental in bringing about or consummating this Agreement and that
neither party had any conversations or negotiations with any broker except the
Broker concerning the leasing of the Premises. Landlord and Tenant each agree
to indemnify the other against and hold the other harmless from any claims for
any brokerage commissions and all costs, expenses and liabilities in
connection therewith, including, without limitation, attorney's fees and
expenses arising out of any breach of the covenants, warranties and
representations contained in this Paragraph 3 made by Landlord or Tenant, as
the case may be. Landlord shall pay any brokerage commissions due the Broker
as per a separate agreement between Landlord and Broker.
4. The terms of this Amendment cannot be changed orally, but only by an
instrument in writing executed by the party sought to be changed.
5. Except as herein expressly modified, the Lease is unmodified and is
ratified and confirmed in all respects.
6. The terms, covenants and provisions contained in this Agreement are
binding on and shall inure to the benefit of the parties hereto and their
respective heirs, successors and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Agreement as of the day and year first above written.
LANDLORD:
CARVEN ASSOCIATES
By: Carven Investors, Inc.
By: /s/ Robert Johnson
--------------------
TENANT:
AnnTaylor, Inc.
By: /s/ Craig Sorrels
--------------------
Craig Sorrels
Senior Vice President, Real Estate
Store Planning & Construction
FIFTH AMENDMENT TO LEASE
------------------------
FIFTH AMENDMENT TO LEASE dated as of the 14th day of March 1995
between PACIFIC METROPOLITAN CORPORATION, a Delaware Corporation
(successor-in-interest to Carven Associates) with offices at 3000 Executive
Parkway, San Ramon, California 94583 (the "Landlord"), and AnnTaylor, Inc. a
Delaware corporation having an office at 142 West 57th Street, New York,
NY 10019 (the "Tenant").
WITNESSETH
----------
WHEREAS, under date of March 17, 1989, Landlord and Tenant entered
into a lease as amended pursuant to a First Amendment to Lease dated
November 14, 1990, as further amended pursuant to an Extension and Amendment
to Lease dated October 1, 1993, and Modification of Amendment and Extension
to Lease dated April 14, 1994, together, collectively referred to as the
"Lease" affecting the entire second (2nd), third (3rd), fourth (4th),
fifth (5th), sixth (6th) and fourteenth (14th) floors (the "Existing
Premises"), deemed to comprise 84,675 rentable square feet, in the commercial
condominium unit (the "Building") of which the Premises form a part known by
street address of 142 West 57th Street, New York, New York;
WHEREAS, Tenant desires that a portion of the seventeenth (17th) floor,
deemed to comprise 8,600 rentable square feet, be added to the space demised
under the Lease for the time period set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:
1. Landlord hereby leases to Tenant, and Tenant hereby hires
from Landlord, a portion of the seventeenth (17th) floor of the Building,
substantially as shown by outlining and crosshatching in Exhibit A annexed
hereto and made a part hereof (the "17th Floor Additional Space"), upon and
subject to all of the executory terms, covenants, conditions and limitations
contained in the Lease, except as otherwise provided for herein, for a term
to commence upon the execution of this Fifth Amendment to Lease (the
"Effective Date") and to end on February 29, 1996 (the "Expiration Date")
unless such term is extended pursuant to paragraph 3 hereof or unless sooner
terminated pursuant to any of the terms, covenants or conditions of the
Lease or pursuant to law. If possession of the 17th Floor Additional Space
is not delivered to Tenant on the Effective Date, then the Effective Date
shall be deemed to be the date that possession of the 17th Floor Additional
Space is delivered to Tenant and the Expiration Date shall be extended by one
day for each day the Effective Date is beyond the date of execution of this
Fifth Amendment to Lease, if any; provided however, that if possession is not
delivered on or before May 1, 1995, Tenant shall have the right to terminate
its obligations with respect to this Fifth Amendment to Lease on prior
written notice to Landlord given on or before May 15, 1995 and neither party
shall thereafter have any liability to the other hereunder.
2. As of the Effective Date the Lease shall be deemed amended
as follows:
a. The Existing Premises shall include the 17th Floor
Additional Space cross hatched on Exhibit A for all purposes of the Lease.
b. The Fixed Rent as defined in Schedule A of the Lease
as same has been increased by various amendments and modifications prior to
the date hereof shall be further increased by Three Hundred Thirty-Three
Thousand Two Hundred Fifty ($333,250.) Dollars, inclusive of the Temporary
Charge for the "electrical rent inclusion plan" as described in subparagraph
(e) below, per annum for the period from the Effective Date to and including
the Expiration Date, which amount shall be payable in equal monthly
installments in advance on the first day of each and every calendar month
during the term of this Lease; provided, however, that not withstanding
anything to the contrary contained herein, Tenant shall be entitled to and
is hereby granted a credit in the amount of Twenty Thousand ($20,000.00)
Dollars as against the first installment of Fixed Rent due hereunder.
c. Tenant's Percentage (as defined in Section 39 A(vi)
of the Lease) shall be increased by 3.82%.
d. Tenant's Operating Expense Percentage (as defined in
Section 40 A (iii) of the Lease) shall be increased by 3.82%.
e. Landlord shall furnish electrical energy to Tenant at
the 17th Floor Additional Space on the basis of an "electrical rent inclusion
plan". Pending the results of the survey provided for in subsection (i) below,
the Tenant agrees that the Fixed Rent set forth in Article 2(b) hereof includes
the "Temporary Charge" (hereinafter defined). In the event the electrical
energy is initially furnished to Tenant under the provisions of this
subsection, the Temporary Charge shall be $23,650 per annum and the Temporary
Charge shall be included in the Fixed Rent as more particularly provided in
paragraph 2(b) above. In the event that the Additional Charge payable by
Tenant pursuant to subsection (i) below as a result of an electrical survey
exceeds the Temporary Charge, Tenant shall upon Landlord's written request
reimburse Owner for the differential, computed from the date on which the
"electrical rent inclusion plan" was effected until the date of such demand
and shall pay the increased annual rent provided for in subsection (i) below
from and after the date of such demand. Tenant shall pay said increase in
charges for electricity as additional Fixed Rent payable monthly on the first
day of each and every month in advance from the date of the "electric rent
inclusion plan" is in effect. During the period that Landlord furnished
electrical energy to Tenant under such "electric rent inclusion plan", the
following provisions shall be applicable:
(i) Landlord shall have the right, at any time
and from time to time during the lease term for the 17th Floor Additional
Space, to designate an independent electrical consultant reasonably acceptable
to Tenant to make a survey or resurvey of the electrical consumption and
power load on the 17th Floor Additional Space. If such survey discloses that
Tenant's average consumption is greater than the estimated consumption upon
which the "electric rent inclusion plan" was initially based (or greater
than the comsumption disclosed by the survey last taken if Tenant's rental
was previously increased pursuant to such survey), the Fixed Rent shall, upon
written notice from Landlord to Tenant and effective as of the date of such
notice (except as specifically provided in the immediately preceding section),
be increased by the annual cost of such additional consumption, as estimated
by the electrical consultant. The determination of the electrical consultant
shall be conclusive.
(ii) Tenant shall at any time and from time to time
within thirty (30 days) of Landlord's request, execute and deliver, to
Landlord in a form reasonably acceptable to Tenant a certificate confirming
the Fixed Rent, inclusive of the charges payable by reason of the "electric
rent inclusion plan".
(iii) If at any time after the "electric rent
inclusion plan" is effected, the rates or charges at which Landlord purchases
electrical current from the public utility company supplying electrical
service to the Building shall be increased over the rates in effect on the
date thereof, the Fixed Rent payable hereunder shall be increased by the
amount of the additional cost to the Landlord of furnishing electrical service
to Tenant. In the event of a dispute between Landlord and Tenant as to the
Landlord's additional cost, the determination of an independent electrical
consultant designated by Landlord and reasonably acceptable to Tenant shall
be conclusive. Such increased rental shall be effective as of the effective
date of the increase rates or charges to Landlord.
(f) Landlord shall not be obligated to perform any work
or construction in the 17th Floor Additional Space in order to make it ready
for Tenant's occupancy. Tenant represents that it has inspected the 17th
Floor Additional Space and agrees to accept same in its "as is" condition with
the sole exception that the Additional Space shall be delivered in "broom-clean
condition". Landlord has approved Tenant's contractor, FCI having an address
at 37-37 Ninth Street, Long Island City, New York connection with Tenant's
preparation of the 17th Floor of Additional Space for its occupancy.
Tenant has represented, warranted, covenanted and agreed that (i) all of the
aforementioned preparatory work shall be performed in accordance with the
provisions of the Lease and (ii) Tenant will not perform or cause to be
performed any electrical, mechanical, plumbing or structural work in the 17th
Floor Additional Space.
3. Provided that Tenant is not in default of its obligations
under the Lease beyond any applicable grace or cure period, Tenant may extend
the term of the demise of the 17th floor Additional Space for a period of six
(6) months by giving Landlord written notice thereof on or before November 1,
1995, time being of the essence. Such extension shall be on the same terms
and conditions as contained in this Fifth Amendment to Lease.
4. Landlord and Tenant covenant, warrant and represent to each
other that no broker except Manhattan Pacific Management Co., Inc. (the
"Broker") was instrumental in bringing about or consummating this Fifth
Amendment to Lease and that neither party had any conversations or
negotiations with any broker except the Broker concerning the leasing of the
Premises. Landlord and Tenant each agree to indemnify the other against
and hold the other harmless from any claims for any brokerage commissions
and all costs, expenses and liabilities in connections therewith, including,
without limitation, attorney's fees and expenses arising out of any breach of
the covenants, warranties and representations contained in this Paragraph 4
made by Landlord or Tenant, as the case may be. Landlord shall pay any
brokerage commissions due the Broker as per a separate agreement between
Landlord and Broker.
5. The terms of this Agreement cannot be changed orally, but
only by an instrument in writing executed by the party sought to be changed.
6. Except as herein expressly modified, the Lease is unmodified
and is ratified and confirmed in all respects.
7. The terms, covenants and provisions contained in this
Agreement are binding and shall inure to the benefit of the parties hereto
and their respective heirs, successors and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Agreement as of the day and year first above written.
LANDLORD
PACIFIC METROPOLITAN CORP.
By: /s/ David A.Hennefer
----------------------
David A. Hennefer
TENANT:
ANNTAYLOR, INC.
By: /s/Jocelyn Barandiaran
------------------------------
Jocelyn Barandiaran
Vice President/General Counsel
VIA CERTIFIED MAIL RETURN RECEIPT REQUESTED
February 24, 1994
Hamilton Realty Co.
P.O. Box 527
Clinton, CT 06413
Attn: Seymour Shapiro
General Partner
Re: 130 Hamilton Street
New Haven, Connecticut
Gentlemen:
Reference is made to the Lease Agreement dated December 1, 1985 between
Hamilton Realty Co., a Connecticut general partnership, as Lessor, and
AnnTaylor, Inc. (as successor in interest thereunder to ASC Stores III,
Inc.), as Lessee (the "Lease"), modified by a Letter Agreement dated
March 22, 1993. Capitalized terms used and not defined herein shall
have the meanings ascribed thereto in the Lease.
Lessee desires to extend the Term of the Lease and Lessor hereby grants
and extends unto the Lessee this extension which will commence on
January 1, 1995 and expire on March 31, 1995 (hereinafter called the
Extension Term), notwithstanding the Letter Agreement of March 22, 1993,
on the terms and conditions set forth in the Lease, excluding the fixed
monthly rental rate which shall be for the Extension Term the amount of
$33,149.52 per month.
In addition the undersigned, grants Lessee the option with notice on or
before June 1, 1994, to extend the term of the Lease for an additional
three (3) months. Such additional three (3) period will commence on
April 1, 1995 and terminate on June 30, 1995 and all other terms and
conditions of the Lease (excluding the fixed monthly rental rate which
shall be the amount of $33,149.52 per month) shall remain unchanged.
If the foregoing correctly sets forth our understanding, please sign
the enclosed copy of the letter and return it to the undersigned.
Very truly yours,
AnnTaylor, Inc. ACCEPTED AND AGREED
Hamilton Realty Co.
/s/ Craig Sorrels /s/ Seymour Shapiro
By: __________________ By: ____________________
Craig Sorrels Seymour Shapiro
Senior Vice President Real Estate, General Partner
Store Planning and Construction
VIA CERTIFIED MAIL RETURN RECEIPT REQUESTED
May 23, 1994
Hamilton Realty Co.
P.O. Box 527
Clinton, CT 06413
Attn: Seymour Shapiro
General Partner
Re: 130 Hamilton Street
New Haven, Connecticut
Gentlemen:
Reference is made to the Lease Agreement dated December 1, 1985
between Hamilton Realty Co., a Connecticut general partnership,
as Lessor, and AnnTaylor, Inc. (as successor in interest
thereunder to ASC Stores III, Inc.), as Lessee (the "Lease"),
modified by Letter Agreements dated March 22, 1993 and
February 24, 1994. Capitalized terms used and not defined herein
shall have the meanings ascribed thereto in the Lease.
Lessee desires to extend the Term of the Lease and Lessor hereby
grants and extends unto the Lessee this extension which will
commence on April 1, 1995 and expire on June 30, 1995
(hereinafter called the Extension Term), notwithstanding the
Letter Agreement of March 22, 1993, on the terms and conditions
set forth in the Lease, excluding the fixed monthly rental
rate which shall be for the Extension Term the amount of
$33,149.52 per month.
If the foregoing correctly sets forth our understanding, please
sign the enclosed copy of this letter and return it to the
undersigned.
Very truly yours,
AnnTaylor, Inc. ACCEPTED AND AGREED
/s/ Craig Sorrels /s/ Seymour Shapiro
By: ________________________ By: __________________________
Craig Sorrels Seymour Shapiro
Senior Vice President Real Estate, General Partner
Store Planning and Construction
VIA CERTIFIED MAIL RETURN RECEIPTED REQUESTED
March 13, 1995
Hamilton Realty Co.
P.O.Box 527
Clinton, Connecticut 06413
Attn: Seymour Shapiro
General Partner
RE: 130 Hamilton Street
New Haven, Connecticut
Gentlemen:
Reference is made to the Lease Agreement dated December 1, 1985
between Hamilton Realty Co., a Connecticut general partnership,
as Lessor, and AnnTaylor, Inc. (as successor in interest
thereunder to ASC Stores III, Inc.), as Lessee (the "Lease")
modified by Letter Agreements dated March 22, 1993, February 24,
1994 and May 23, 1994. Capitalized terms used and not defined
herein shall have the meanings ascribed thereto in the Lease.
Lessee desires to extend the Term of the Lease and Lessor hereby
grants and extends unto the Lessee this extension which shall
commence on July 1, 1995 and expire on September 30, 1995
(hereinafter called the Extension Term) on the terms and
conditions set forth in the Lease, excluding the fixed monthly
rental rate which shall be for the Extension Term the amount of
$33,149.52 per month.
If the foregoing correctly sets forth our understanding, please
sign the enclosed copy of this letter and return it to the
undersigned.
Very truly yours,
AnnTaylor, Inc. ACCEPTED AND AGREED
Hamilton Realty Co.
By: /s/ Jocelyn Barandiaran /s/ Seymour Shapiro
___________________________ ________________________
Jocelyn Barandiaran General Partner
Vice President/General Counsel
ANNTAYLOR STORES CORPORATION
MANAGEMENT PERFORMANCE COMPENSATION PLAN
Effective as of August 7, 1992 the Board adopted the
Management Performance Compensation Plan (the "Prior Plan"). The
Prior Plan, as amended and restated hereby (the "Plan") is
effective as of the beginning of the Fall 1994 Season, subject to
the approval of the stockholders of the Company at the 1994
Annual Meeting of 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) 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 six-month Season.
(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 an "outside director" within the meaning of Section
162(m) of the Code. 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. No
member of the Committee shall be eligible for selection as a
Participant at any time while such person is serving on the
Committee.
(d) "Company" means AnnTaylor Stores Corporation.
(e) "Eligible Associate" means a person who is
eligible to participate in this Plan pursuant to Section 3 below.
(f) "Executive Officer" means an officer of the
Company who, as of the beginning of a Season, is an "executive
officer" within the meaning of Rule 3b-7 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act").
(g) "Operating Profit" has the meaning assigned
thereto in Section 5(b) hereof.
(h) "Participant" means an Eligible Associate who
has been designated as a Participant by the Committee in
accordance with Section 4 of this Plan.
(i) "Performance Compensation" means the cash
amount payable to a Participant pursuant to this Plan.
(j) "Performance Percentage" and "Performance
Ratio" have the meanings assigned thereto in Section 5(a) hereof.
(k) "Plan" means this AnnTaylor Stores
Corporation Management Performance Compensation Plan.
(l) "Season" means the Company's fiscal six-month
Spring or Fall season.
(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) shall be
eligible 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 Season shall have become available, and after having
received the input 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 Season.
(b) Prior to the beginning of a Season and as
promptly as possible after the Company's Budget for a Season
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 who the Chief Executive Officer recommends
that the Committee designate as Participants under this Plan for
such Season.
(c) The Committee shall have the authority to
designate from time to time prior to the commencement of as well
as during a Season additional Eligible Associates as Participants
under this Plan for such Season.
(d) In selecting from among all Eligible
Associates those who shall become Participants in any Season and
in determining the Performance Percentages of such Participants
for such Season, 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 Season, or within such other time period
which may comply with Section 162(m) of the Code, the Committee
shall:
(i) assign to each Participant such Participant's
individual "Performance Percentage" for such Season;
and
(ii) establish a matrix in the form of the sample appended
hereto as Exhibit A, assigning a "Performance Ratio" to
various levels of Operating Profit which the Company
might achieve for such Season.
(b) As used in this Plan, "Operating Profit" means
the consolidated earnings of the Company and its Subsidiaries
before interest, taxes, non-operating income and expenses, and
amortization of goodwill, but after taking into account
Performance Compensation which would be payable under this Plan
if such Operating Profit were achieved.
(c) Subject to adjustment pursuant to Section 5(d)
below, a Participant's Performance Compensation for the Season
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 Season 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 Season pursuant to Section 5(a)(i)
above, multiplied by (iii) the Performance Ratio achieved by the
Company for such Season. An illustration of how Performance
Compensation would be calculated is included in Exhibit A to this
Plan.
(d) For any Season, the Board may establish a
ceiling on the aggregate amount which may be paid out in
Performance Compensation for such Season, expressed as a
percentage of the actual Operating Profit of the Company for such
Season. In the event that such a limit is established for any
Season, the Performance Compensation otherwise payable to all
Participants for such Season 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 Season in excess of $500,000.
(e) Performance Compensation shall be paid by the
Company or the Subsidiary employing the Participant promptly
following the end of the Season to which it relates and the
availability of the Company's final consolidated financial
results for such Season. The foregoing notwithstanding, no
payment of Performance Compensation for a Season may be made to
an Executive Officer until the Company's Operating Profit
performance results for that Season 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 Season shall not guarantee or require that such Eligible
Associate be designated as a Participant in any later Season.
(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 CODE SECTION 162(m). The Plan is
designed and intended to comply with Section 162(m) of the Code,
and all provisions hereof shall be construed in a manner to so
comply.
Exhibit A to Management Performance Compensation Plan
SAMPLE MATRIX
1. Pursuant to the Plan, the Committee shall establish a matrix
for possible actual Operating Profit levels, and set a
Performance Ratio for these various levels of Operating
Profit. Following is a sample matrix for a Season. The
levels of Operating Profit and Performance Ratios set forth
below are for illustrative purposes only and shall not be
binding on the Committee.
Operating Profit (in '000s) Performance
Ratio (to 1)
$50,001 and above . . . . . . . . . . . . . .2.0
$49,001 to $50,000 . . . . . . . . . . . . . . 1.9
$48,001 to $49,000 . . . . . . . . . . . . . . 1.8
$47,001 to $48,000 . . . . . . . . . . . . . 1.7
$46,001 to $47,000 . . . . . . . . . . . . . 1.6
$45,001 to $46,000 . . . . . . . . . . . . . 1.5
$44,001 to $45,000 . . . . . . . . . . . . . 1.4
$43,001 to $44,000 . . . . . . . . . . . . . 1.3
$42,001 to $43,000 . . . . . . . . . . . . . 1.2
$41,001 to $42,000 . . . . . . . . . . . . . 1.1
$40,001 to $41,000 . . . . . . . . . . . . . 1.0
$39,001 to $40,000 . . . . . . . . . . . . . 0.9
$38,001 to $39,000 . . . . . . . . . . . . . 0.8
$37,001 to $38,000 . . . . . . . . . . . . . 0.7
$36,001 to $37,000 . . . . . . . . . . . . . 0.6
$35,001 to $36,000 . . . . . . . . . . . . . 0.5
$34,001 to $35,000 . . . . . . . . . . . . . 0.4
$33,001 to $34,000 . . . . . . . . . . . . . 0.3
$32,001 to $33,000 . . . . . . . . . . . . . 0.2
$31,001 to $32,000 . . . . . . . . . . . . . 0.1
Below $31,001 . . . . . . . . . . . . . . . . 0.0
2. An example of how the Performance Compensation award
would be calculated for a Participant selected by the
Committee, based on the above matrix, follows:
a. Assume the Committee has selected Eligible Associate
"Smith", whose annual salary is $100,000, to be a
Participant, and has assigned Smith a Performance
Percentage of 10% for the Season.
b. Assume the Company achieves actual Operating Profit for
the Season of $42,500,000, resulting in a Performance
Ratio of 1.2.
c. Smith's Performance Compensation award for the Season
would be equal to the product of (i) $100,000 x (ii)
.10 x (iii) 1.2 (i.e., $12,000).
SECRETARY'S CERTIFICATE
Amendment to the
AnnTaylor Stores Corporation
Management Performance Compensation Plan
The undersigned, being the Secretary of AnnTaylor
Stores Corporation (the "Company"), hereby certifies that,
at a meeting of the Board of Directors of the Company duly
held on February 24, 1995, the Board of Directors of the
Company, by resolution duly adopted, unanimously approved
and adopted the following amendment to the AnnTaylor Stores
Corporation Management Performance Compensation Plan, as
heretofore amended and restated, such amendment to be
effective as of February 24, 1995:
"Section 4(b) of the Plan is hereby amended to
read in its entirety as follows:
(b) Prior to the beginning of a Season, or
by such later date permissible under Section
162(m) of the Code, and after the Company's
Budget for a Season shall have become available,
the Chief Executive Officer of the Company shall
submit to the Committee a list of the manes,
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 Season."
IN WITNESS WHEREOF, the undersigned has hereunto
affixed her signature as Secretary of the Company, this 24th
day of February, 1995.
/s/ Jocelyn F.L. Barandiaran
______________________________
Jocelyn F.L. Barandiaran
Secretary
AnnTaylor Stores Corporation
EXHIBIT A
FIRST AMENDMENT TO RECEIVABLES FINANCING AGREEMENT
THIS FIRST AMENDMENT TO RECEIVABLES FINANCING AGREEMENT,
dated as of May 31, 1994 (this "Amendment"), is among AnnTaylor
Funding, Inc. a Delaware corporation (the "Company"), AnnTaylor,
Inc., a Delaware corporation ("AnnTaylor"), Clipper Receivables
Corporation, a Delaware corporation ("Lender"), State Street
Boston Capital Corporation, a Massachusetts corporation, as
administrator for Lender (the "Administrator") and PNC Bank,
National Association, a national banking association (the
"Relationship Bank").
BACKGROUND
1. The Company, AnnTaylor, Lender, the Administrator and
the Relationship Bank entered into a Receivables Financing
Agreement, dated as of January 27, 1994 (the "Agreement").
2. The Company, AnnTaylor, Lender, the Administrator and
the Relationship Bank desire to amend the Agreement in certain
respects as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Definitions. The capitalized terms used in this
Amendment and not otherwise defined herein shall have the
meanings assigned thereto in the Agreement.
SECTION 2. Settlement Procedures. Section 3.01(a) of the
Agreement is hereby amended by adding an additional sentence to
the end thereof as follows:
"In the event that the amount of Collections received
during the Settlement Period to which an Information
Package relates is less than the sum of (i) the Amount
Payable for the related Settlement Date plus (ii) the
amount of funds then on deposit in the Spread Account,
the Administrator shall withdraw the amount of any such
deficiency from the Customer Letter of Credit on the
Business Day next succeeding the applicable Reporting
Date. The Administrator shall hold the funds so
withdrawn from the Customer Letter of Credit in a
segregated account for application on the related
Settlement Date pursuant to this Section 3.01."
Section 3.01(b) of the Agreement is hereby amended by (i)
inserting at the end of the fourth sentence thereof, prior to the
period, the following: "(the amount set forth in this clause (2),
the "Amount Payable")" and (ii) deleting the word "first," and
the phrase "and second, draw the amount of any remaining
deficiency from the Customer Letter of Credit" where they appear
in the fifth sentence thereof. Section 3.01(c) of the Agreement
is hereby amended by inserting in the fourth line thereof after
the phrase "paragraph (b)" the phrase "and any amounts withdrawn
from the Customer Letter of Credit pursuant to the foregoing
paragraph (a)". Section 3.01(d) is hereby amended by inserting
in the fourth line thereof after the phrase "paragraph (b)" the
phrase "and any amounts withdrawn from the Customer Letter of
Credit pursuant to the foregoing paragraph (a)".
SECTION 3. Customer Letter of Credit. Section 3.05(e) of
the Agreement is hereby amended by inserting ", or confirmed by,"
in the seventh line thereof after the words "Enhancement Limit,
from". Section 3.05(f) of the Agreement is hereby amended by
adding at the end thereof the following: "In the event that the
Company has provided a Customer Letter of Credit and the issuer
of such Customer Letter of Credit (including any issuer of a
confirming letter of credit) is downgraded below the ratings
required pursuant to the foregoing paragraph (e) (or such ratings
are withdrawn), unless the Company has provided a substitute
Customer Letter of Credit satisfying the requirements of the
foregoing paragraph (e) or the Company has deposited in the
Spread Account the amount necessary to bring the amount therein
up to the Enhancement Limit, in each case, on or prior to two (2)
Business Days after such downgrading or withdrawal, the
Administrator shall withdraw the full stated amount of the
Customer Letter of Credit and deposit it in the Spread Account.
If the Customer Letter of Credit has a stated expiration date
that is earlier than the Final Payout Date, unless the Company
has substituted therefor another Customer Letter of Credit
satisfying the requirements of the foregoing paragraph (e) or
deposited into the Spread Account the amount necessary to bring
the amount of funds therein up to the Enhancement Limit on or
before two (2) Business Days prior to the stated expiration date,
the Administrator shall withdraw the full stated amount of the
Customer Letter of Credit and deposit such funds into the Spread
Account.
SECTION 4. Certain Ratios. Section 10.01(g) of the
Agreement is hereby amended by (i) deleting the number "1.95%"
where it appears therein and substituting therefor the number
"2.00%" and (ii) deleting the number "1.325%" where it appears
therein and substituting therefor the number "1.40%".
SECTION 5. Definitions - Appendix A. Appendix A to the
Agreement is hereby amended by adding, in the appropriate
alphabetical order, the following definition:
"Amount Payable" has the meaning set forth in
Section 3.01(b).
SECTION 6. Miscellaneous. The Agreement, as amended
hereby, remains in full force and effect. Any reference to the
Agreement from and after the date hereof shall be deemed to refer
to the Agreement as amended hereby unless otherwise expressly
stated. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall
constitute one and the same agreement. This Amendment shall be
governed by the laws of the State of New York. The Company
hereby agrees to pay, promptly upon demand, all costs and
expenses incurred by Lender, the Administrator or the
Relationship Bank in connection with this Amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
ANNTAYLOR FUNDING, INC.
By: /s/ Walter J. Parks
_______________________
ANNTAYLOR, INC.
By: /s/ Walter J. Parks
_______________________
CLIPPER RECEIVABLES CORPORATION
By: /s/ Lannhi Tran
________________________
STATE STREET BOSTON CAPITAL
CORPORATION, as Administrator
By: /s/ David B. Coleman
_____________________________
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Mark Williams
_____________________
SECOND AMENDMENT TO RECEIVABLES FINANCING AGREEMENT
THIS SECOND AMENDMENT TO RECEIVABLES FINANCING AGREEMENT,
dated as of March 31, 1995 (this "Amendment"), is among AnnTaylor
Funding, Inc. a Delaware corporation (the "Company"), AnnTaylor,
Inc., a Delaware corporation ("AnnTaylor"), Clipper Receivables
Corporation, a Delaware corporation ("Lender"), State Street
Boston Capital Corporation, a Massachusetts corporation, as
administrator for Lender (the "Administrator") and PNC Bank,
National Association, a national banking association (the
"Relationship Bank").
BACKGROUND
1. The Company, AnnTaylor, Lender, the Administrator and
the Relationship Bank entered into a Receivables Financing
Agreement, dated as of January 27, 1994, as amended by the First
Amendment to Receivables Financing Agreement, dated as of May 31,
1994 (the "Agreement").
2. The Company, AnnTaylor, Lender, the Administrator and
the Relationship Bank desire to amend the Agreement in certain
respects as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Definitions. The capitalized terms used in this
Amendment and not otherwise defined herein shall have the
meanings assigned thereto in the Agreement.
SECTION 2. Mergers. Section 7.05(b) of the Agreement is
hereby amended by deleting such Section in its entirety, and
substituting therefor the following:
"Be a party to any merger, consolidation, or purchase
or otherwise acquire all or substantially all of the assets
or any stock of any class of, or any partnership or joint
venture interest in, any other person, or, except in the
ordinary course of its business, sell, transfer, convey or
lease all or any substantial part of its assets, or sell or
assign with or without recourse any Receivables or any
interest therein other than:
(i) pursuant to the Purchase Agreement;
(ii) licenses of trademarks to the extent
necessary to maintain or protect such trademarks in
jurisdictions outside the United States of America;
(iii) any sale or disposition of AnnTaylor's
interest in the CAT Joint Venture pursuant to the CAT Joint
Venture Agreement;
(iv) any purchase or acquisition of any assets
among AnnTaylor and its Restricted Subsidiaries; it being
understood that AnnTaylor shall be permitted to incorporate
new Restricted Subsidiaries;
(v) any purchase or acquisition of any interest
in joint ventures (in the form of corporations, partnerships
or otherwise) in a maximum amount not exceeding $10,000,000
at any one time outstanding;
(vi) any purchase or acquisition of any assets or
capital stock in Unrestricted Subsidiaries in an amount not
to exceed $1,000,000 at any one time outstanding;
(vii) any purchase or acquisition of any assets or
capital stock in the CAT Joint Venture pursuant to the CAT
Joint Venture Agreement in an amount not to exceed 15% of
Net Worth; and
(viii) any merger or consolidation of any Subsidiary
into or with AnnTaylor, so long as AnnTaylor is the
surviving corporation.
SECTION 3. Net Worth. Section 7.05(d) of the Agreement is
hereby amended by deleting such Section in its entirety, and
substituting therefor the following:
"Permit Net Worth as determined at the end of any fiscal
quarter (beginning with the fiscal quarter ending on or
about January 28, 1995) to be less than the Net Worth on or
about October 30, 1994 plus (a) 50% of Net Income after
October 30, 1994 (without deducting from such cumulative
amount the amount of any net loss incurred in any fiscal
year except extraordinary losses associated with the
redemption or repurchase of indebtedness) plus (b) 100% of
the net proceeds of any equity issue or conversion of debt
to equity subsequent to October 30, 1994 minus (c) any
expenses related to the payments for ATSC's share of
expenses incurred in connection with any public offering of
common stock minus (d) payments by ATSC or AnnTaylor to
acquire shares of common stock from employees of ATSC,
AnnTaylor or any Restricted Subsidiary in an aggregate
amount not exceeding $100,000 in any fiscal year."
SECTION 4. Fixed Charge Coverage Ratio. Section 7.05(e) of
the Agreement is hereby amended by deleting such Section in its
entirety, and substituting therefor the following:
"Permit the Fixed Charge Coverage Ratio, as determined
at the end of any fiscal quarter for the preceding four
fiscal quarters to be less than the ratio set forth opposite
the month in which such fiscal quarter ends:
Quarter Ended Minimum Ratio
October 1994 1.00 to 1.00
January 1995 1.00 to 1.00
April 1995 1.00 to 1.00
July 1995 1.00 to 1.00
October 1995 1.00 to 1.00
January 1996 1.00 to 1.00
April 1996 1.00 to 1.00
July 1996 1.05 to 1.00
October 1996 and thereafter 1.10 to 1.00
SECTION 5. Events of Default. Section 10.01(f) of the
Agreement is hereby amended deleting the number "0%" where it
appears therein and substituting therefor the number "-2%".
Section 10.01(h) of the Agreement is hereby amended by deleting
the number "27%" where it appears therein and substituting
therefor the number "22%".
SECTION 6. Certain Definitions. The following definitions
that appear in Appendix A to the Agreement are hereby amended as
follows:
(i) the definition of "AnnTaylor Credit Agreement" is
hereby amended by (1) deleting the date "June 28, 1993" and
substituting therefor the date "July 29, 1994"; (2) by
deleting the phrase "Bank of Montreal" where it appears
therein and substituting therefor the phrase "Fleet Bank,
National Association"; and (3) by deleting the phrase "as
heretofore amended" where it appears at the end thereof and
substituting therefor the phrase "as amended by the First
Amendment to Credit Agreement, dated as of January 27,
1995";
(ii) the definition of "Defaulted Receivable" that
appears in Appendix A to the Agreement is hereby amended by
deleting the number "5" where it appears in the second line
thereof and substituting therefor the number "6" and by
deleting the number "6" where it appears in the fourth line
thereof and substituting therefor the number "7";
(iii) the definition of "EBITDA" is hereby amended by
deleting the phrase "all income tax" where it appears in
clause (iii) thereof and substituting therefor the phrase
"income tax expense";
(iv) the definition of "Fixed Charge Coverage Ratio"
that appears in Appendix A to the Agreement is hereby
amended by deleting such definition in its entirety, and
substituting therefor the following:
"Fixed Charge Coverage Ratio" shall mean, for any
period, the quotient obtained by dividing (a) EBITDA by (b)
the sum of (i) Capital Expenditures paid or accrued during
such period excluding any Capital Expenditures made in
respect of the Distribution Center, plus (ii) scheduled
payments made since July 29, 1994 for principal on
Indebtedness excluding any payment made upon termination of
the transactions contemplated by this Agreement plus (iii)
Cash Interest Expense during such period plus (iv) income
tax expense during such period.";
(v) the definition of "Interest Expense" is hereby
amended by inserting the word "ATSC," before the word
"AnnTaylor" in the first line thereof;
(vi) the definition of "Net Income" is hereby amended
by adding the word "ATSC," before the word "AnnTaylor" in
the second line thereof; and
(vii) the definition of "Net Worth" is hereby amended
by adding the following phrase at the end thereof before the
period: ", but excluding, for the purposes of this
definition, unrealized foreign exchange translation gains
and losses from investments in foreign Subsidiaries".
The following definitions are hereby added to Appendix A in the
appropriate alphabetical order:
"Restricted Subsidiary" shall mean any Subsidiary of
AnnTaylor which is not an Unrestricted Subsidiary. Whether or
not a Restricted Subsidiary is a "wholly-owned Restricted
Subsidiary" shall be determined without taking into account any
directors' qualifying shares.
"Unrestricted Subsidiary" shall mean a Subsidiary of
AnnTaylor which has been designated as such by resolution duly
adopted by the board of directors of AnnTaylor, which at the time
of such designation had assets of $1,000 or less and which does
not own or hold any securities of, or any Lien on any property
of, ATSC, AnnTaylor or any Restricted Subsidiary provided no
Subsidiary of AnnTaylor shall be (or, if already an Unrestricted
Subsidiary shall immediately cease to be) an Unrestricted
Subsidiary if, at any time, ATSC, AnnTaylor or any other
Restricted Subsidiary of AnnTaylor shall create, incur, issue,
assume, guarantee or in any other manner whatsoever be or become
liable with respect to any claim against or any contractual
obligation or indebtedness of, such Subsidiary.
SECTION 7. Credit and Collection Policy. Lender and the
Administrator hereby consent to the changes to the Credit and
Collection Policy described in the letter from the Company to
Lender, dated January 16, 1995, a copy of which is attached
hereto as Exhibit A.
SECTION 8. Miscellaneous. The Agreement, as amended
hereby, remains in full force and effect. Any reference to the
Agreement from and after the date hereof shall be deemed to refer
to the Agreement as amended hereby unless otherwise expressly
stated. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall
constitute one and the same agreement. This Amendment shall be
governed by the laws of the State of New York. The Company
hereby agrees to pay, promptly upon demand, all costs and
expenses incurred by Lender, the Administrator or the
Relationship Bank in connection with this Amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
ANNTAYLOR FUNDING, INC.
By: /s/ Walter J. Parks
---------------------
ANNTAYLOR, INC.
By: /s/ Walter J. Parks
------------------------
CLIPPER RECEIVABLES CORPORATION
By: /s/ Lannhi Tran
----------------------
STATE STREET BOSTON CAPITAL
CORPORATION, as Administrator
By: /s/ David B. Coleman
-------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Mark Williams
------------------------
ANNTAYLOR STORES
CORPORATION
DEFERRED COMPENSATION PLAN
1. Purpose
The purpose of this AnnTaylor Stores Corpora
tion Deferred Compensation Plan (the "Plan") is to enable
select employees of AnnTaylor Stores Corporation and its
subsidiaries (collectively, the "Company") to defer
compensation in accordance with the terms and conditions
set forth herein.
2. Administration
(a) The Plan shall be administered by the
Board of Directors of AnnTaylor Stores Corporation
("AnnTaylor"), by a committee thereof, or by a committee
of three or more persons appointed by the Board (the
Board serving in such function, or such committee, or
their respective delegate, hereinafter referred to as the
"Committee").
(b) The Committee shall have full power and
authority to administer the Plan and otherwise to perform
the duties and responsibilities specified hereunder. All
determinations by the Committee shall be binding and
conclusive on all parties. Without limiting the foregoing,
the Committee shall have the following specific powers
and duties:
(i) to interpret the provisions of the
Plan and make any and all determinations arising thereunder;
(ii) to maintain such records as it shall
deem necessary or appropriate for the proper administration
of the Plan;
(iii) to establish such rules and procedures
not inconsistent with the terms of the Plan as it
shall deem necessary or appropriate to effectuate the
purpose of the Plan.
3. Plan Year
The Plan Year for each year beginning in 1996
shall be the calendar year. The Plan Year for 1995 shall
be the effective date of the Plan through December 31, 1995.
4. Eligible Employees
Subject to the following sentence, eligibility
to make deferrals under the Plan for any Plan Year shall
be limited to those employees of the Company who, as of
the day prior to the start of such Plan Year, hold the
title of vice president or above (the "Participants").
For the Plan Year beginning in 1995, employees who hold
the title of vice president or above as of the effective
date of the Plan shall be eligible to participate in the
Plan for 1995.
5. Deferral of Compensation
(a) Subject to such restrictions and limitations
as the Committee may impose, each Participant may
elect, in writing on a form or forms prescribed by the
Committee and at the time prescribed below, to have the
Company defer payment of (1) up to 25% of the
Participant's Compensation (as defined herein) with
respect to a Plan Year, or (2) up to 100% of the
Participant's Incentive Compensation (as defined herein)
with respect to a Plan Year. For purposes hereof, (i)
the term "Compensation" with respect to a Plan Year shall
mean the total salary and Incentive Compensation (as defined
herein) paid to or earned by the Participant for
services rendered in respect of such Plan Year (without
regard to his or her deferral election hereunder), and
(ii) the term "Incentive Compensation" with respect to a
Plan Year shall mean all incentive compensation (attributable
to "incentive compensation periods" which begin
during the Plan Year) paid to or earned by the Participant
for services rendered in respect of such Plan Year
(without regard to his or her deferral election hereunder).
For this purpose, Performance Compensation paid or
earned under the AnnTaylor Stores Corporation Management
Performance Compensation Plan shall be considered Incentive
Compensation. Deferrals of salary shall be effected
through payroll deductions. For purposes of the 1995
Plan Year, a Participant's salary to be included as
Compensation shall be limited to salary earned during pay
periods which commence after the effective date of the
Plan.
(b) Subject to the following sentence, any
election made pursuant to subparagraph (a) above to defer
Compensation shall be submitted to the Committee at such
time prior to the beginning of the Plan Year with respect
to which such Compensation will be earned as the Committee
shall determine, and such election shall become
irrevocable as of the commencement of such Plan Year.
For the Plan Year beginning in 1995, any election pursuant
to subparagraph (a) above shall be submitted to the
Committee prior to the effective date of the Plan.
6. Deferred Compensation Account
The Company shall establish a memorandum account
("Deferred Compensation Account") for each Participant in
the Plan. A Participant's Deferred Compensation
Account shall be (i) credited with all amounts deferred
by the Participant under the Plan as of the date such
amounts would otherwise have been paid to such Participant,
and (ii) charged with any distributions made with
respect to the Participant pursuant to Paragraph 7. A
Participant's Deferred Compensation Account will be
credited quarterly on the last day of each calendar quarter
with an amount representing interest at an annual
rate equal to the rate on one-year Treasury Bills, determined
as of the first day of each Plan Year, plus two
percentage points.
7. Payment of Deferred Compensation
(a) Except as otherwise provided in subparagraphs
(b), (c) or (d) below, the amount then credited to
a Participant's Deferred Compensation Account shall be
paid to him or her by the Company, in a single lump sum
cash payment (less any mandatory withholding as provided
in Paragraph 12 hereof), as soon as practicable following
January 1 of the calendar year following the
Participant's termination of employment with the Company.
(b) In the event of the Participant's termination
of employment by reason of death or Disability (as
defined herein), the Company shall pay to such Participant
(or to such Participant's Beneficiary, as defined in
Paragraph 8 hereof), in a single lump sum cash payment,
the amount then credited to such Participant's Deferred
Compensation Account (less any mandatory withholding as
provided in Paragraph 12 hereof) as soon as practicable
following the date of death or Disability. For purposes
hereof, "Disability" of a Participant shall mean such
Participant's termination as a result of a condition which
entitles the Participant to receive benefits under the
Company's long-term disability plan.
(c) In the event that a Participant incurs a
severe financial hardship occasioned by accident, illness
or other emergency beyond the control of the Participant,
the Committee, in its sole discretion and upon written
application of such Participant, may authorize immediate
payment of all or a portion of the amount then credited
to such Participant's Deferred Compensation Account (less
any mandatory withholding as provided in Section 12
hereof) (a "Hardship Withdrawal"); provided that such
payment shall in no event exceed the amount necessary to
alleviate such financial hardship. The circumstances
that will give rise to the approval of a Hardship Withdrawal
will depend upon the facts of each case, but, in
any case, payment under subparagraph (c) herein may not
be made to the extent that such hardship is or may be relieved
(i) through reimbursement or compensation by
insurance or otherwise, (ii) by liquidation of the
Participant's assets, to the extent the liquidation of
such assets would not itself cause severe financial
hardship, or (iii) by cessation of deferrals under the
Plan.
(d) In the event of a Change in Control (as
defined in subparagraph (e) hereof), the Company shall
pay each Participant the amount then credited to such
Participant's Deferred Compensation Account in a single
lump sum cash payment (less any mandatory withholding as
provided in Paragraph 12 hereof) as soon as practicable
thereafter.
(e) A "Change in Control" shall be deemed to
have occurred if the conditions set forth in any one of
the following paragraphs shall have been satisfied:
(i) any "person", as such term is used
in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange
Act"), other than (1) the Company, (2)
Merrill Lynch & Co. or any affiliate thereof,
which for purposes of this Agreement shall
include First Capital Partners Inc. and its
affiliates (collectively, "ML"), (3) any
trustee or other fiduciary holding securities
under an employee benefit plan of the Company,
or (4) any corporation owned, directly or
indirectly, by the stockholders of AnnTaylor
in substantially the same proportion as their
ownership of shares of common stock of
AnnTaylor)(a "Person"), is or becomes the
"beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly,
of securities of AnnTaylor representing
30% or more of the combined voting power of
AnnTaylor's then outstanding voting securities
(not including in the securities beneficially
owned by such Person securities acquired directly
from ML representing in excess of 15% of the
combined voting power of AnnTaylor's then
outstanding voting securities but including any
such securities acquired directly from ML
representing up to 15% of such combined voting
power);
(ii) during any period of not more than
two consecutive years, individuals who at the
beginning of such period constitute the
Board, and any new director (other than a director
designated by a person who has entered
into an agreement with AnnTaylor to effect a
transaction described in clause (i), (iii),
or (iv) of this Paragraph 7(e)) whose election
by the Board or nomination for election
by AnnTaylor's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors
then still in office who either were
directors at the beginning of the period or
whose election or nomination for election was
previously so approved, cease for any reason
to constitute at least a majority thereof;
(iii) the stockholders of AnnTaylor approve
a merger or consolidation of AnnTaylor
with any other corporation, other than (1) a
merger or consolidation which would result in
the voting securities of AnnTaylor outstanding
immediately prior thereto continuing to
represent (either by remaining outstanding or
by being converted into voting securities of
the surviving or parent entity) 50% or more
of the combined voting power of the voting
securities of AnnTaylor or such surviving or
parent entity outstanding immediately after
such merger or consolidation or (2) a merger
or consolidation effected to implement a re
capitalization of AnnTaylor (or similar
transaction) in which no Person is or becomes
the beneficial owner (as defined in (A)
above), directly or indirectly, of securities
of AnnTaylor representing 30% or more of the
combined voting power of AnnTaylor's then out
standing securities (not including in the
securities beneficially owned by such Person
securities acquired directly from ML representing
in excess of 15% of the combined voting power
of AnnTaylor's then outstanding voting securities
but including any such securities acquired directly
from ML representing up to 15% of such combined
voting power); or
(iv) the stockholders of AnnTaylor approve
a plan of complete liquidation of
AnnTaylor or an agreement for the sale or
disposition by AnnTaylor of all or substantially
all of AnnTaylor's assets (or any
transaction having a similar effect).
8. Designation of Beneficiary
A Participant may designate a Beneficiary or
Beneficiaries to receive any amount due him or her hereunder
at his or her death by executing a form prescribed by the
Committee and delivering it to the Committee at any time
prior to his or her death. A Participant may revoke or
change his or her Beneficiary designation without the
Beneficiary's consent by executing a new form and delivering
it to the Committee at any time and from time to time prior
to his or her death. If a Participant shall have failed to
designate a Beneficiary, or if no such Beneficiary shall survive
him or her, then such amounts shall be paid to his or
her spouse, if then living, or, if not, to his or her
estate.
9. Other Employee Benefits
Any Compensation deferred and any benefits
paid under the Plan shall not be included in creditable
compensation in computing benefits under any employee
benefit plans of the Company, except to the extent provided
for thereunder.
10. No Right to Employment
Nothing contained herein shall be construed
as conferring upon any Participant the right to continue
in the employ of the Company.
11. Deferred Compensation as an Unsecured Promise
The Company shall not be required to segregate
any funds representing the Deferred Compensation
Accounts of Participants hereunder, and nothing in the
Plan shall be construed as providing for such segregation.
All payments provided for under the Plan shall be
paid in cash from general assets of the Company. Nothing
in the Plan, and no action taken pursuant to its
terms, shall create or be construed to create a trust
or escrow account of any kind, or a fiduciary relationship
between the Committee or the Company and any Participant,
designated Beneficiary or any other person.
The Participants, their designated Beneficiaries and
any other persons under the Plan, shall rely solely on
the unsecured promise of the Company to make payments
required hereunder, but shall have the right to enforce
such a claim in the same manner as any unsecured general
creditor of the Company.
12. Withholding
The Company shall deduct and withhold from
any payments made hereunder all sums which it then may
be required to deduct or withhold pursuant to any applicable
statute, law, regulation or order of any jurisdiction whatsoever.
13. No Assignment
No Participant, designated Beneficiary, or
any other person entitled to any payment hereunder
shall have the power to transfer, assign, anticipate,
mortgage or otherwise encumber any right to receive a
payment in advance of any such payment and any attempted
transfer, assignment, anticipation, mortgage or
encumbrance shall be void.
14. Obligations to the Company
If a Participant becomes entitled to a distribution
of benefits under the Plan, and if at such time
the Participant has outstanding any debt, obligation,
or other liability representing an amount owed to the
Company, then the Company may offset such amounts owing
it against the amount of benefits otherwise distributable.
15. Amendment and Termination
The Board reserves the absolute right to
amend or terminate the Plan, in whole or in part, at
any time and from time to time; provided that no such
amendment or termination shall adversely affect the
right of any Participant or Beneficiary hereunder to
receive payment of any benefits deferred hereunder prior
to the date of such amendment or termination.
Notwithstanding the foregoing or any other provision of
the Plan, upon termination of the Plan, the Committee, in
its sole discretion, may accelerate payment of all benefits
deferred hereunder in such manner as it shall determine.
16. Distribution of Plan and Amendments; Acknowledgments
(a) The Committee shall furnish each Participant
with a copy of the Plan prior to his or her initial
deferral election hereunder. In addition, the
Committee shall furnish each Participant, or in the
case of a deceased Participant, his or her Beneficiary,
with a copy of any amendment of the Plan.
(b) Each Participant, prior to or simultaneously
with his or her initial deferral election,
shall acknowledge receipt of a copy of the Plan. Such
acknowledgment shall constitute an agreement by the
Participant that the Participant, his or her Beneficiary
and any representatives shall be bound by all of the
terms and conditions of the Plan.
17. Governing Law
Except to the extent preempted by federal
law, the Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, AnnTaylor has caused this
Deferred Compensation Plan to be adopted on this 24th
day of February, 1995, to be effective as of April 1,
1995.
ANNTAYLOR STORES CORPORATION
By: /s/ Jocelyn Barandiaran
-------------------------
Vice President/General
Counsel and Secretary
- ------------------------------------------------------
ANNTAYLOR STORES CORPORATION
DEFERRED COMPENSATION PLAN
1995 Salary/Bonus Election Form
I. Pursuant to the AnnTaylor Stores Corporation De
ferred Compensation Plan (the "Plan"), I elect to
defer (subject to Section II below):
(Choose ONE of the following)
______% of COMPENSATION (up to a maximum of 25%) that I
earn for the remainder of the 1995 calendar
year. Compensation consists of (1) my salary
earned from and after April 1, 1995, plus (2)
any Incentive Compensation earned for periods
commencing in 1995;
-OR-
______% of the INCENTIVE COMPENSATION (up to a maximum
of 100%) that I earn for periods commencing in
the 1995 calendar year.
II. a) Payment of Deferred Compensation -- I hereby
acknowledge that the above amounts deferred (in
creased in accordance with the Plan) will be paid to
me in a single lump sum as soon as practicable
following January 1 of the year following the year
of my termination of employment (or at such sooner
time as may be provided in the Plan).
b) Receipt of Plan Document -- I hereby acknowledge
receipt of a copy of the AnnTaylor Stores Corporation
Deferred Compensation Plan, and agree to be
bound by its terms and conditions. I further agree
that I shall have no right to cause any distribution
to be made to me of the amounts deferred under Plan,
except in accordance with its terms.
c) Timely Elections -- I understand that in order
to be effective, this election form must be completed
by me and returned to the Company no later than
March 31, 1995.
______________________________
Associate's Name (please print)
______________________ ______________________________
Date Associate's Signature
- ----------------------------------------------------------
ANNTAYLOR STORES CORPORATION
DEFERRED COMPENSATION PLAN
Beneficiary Designation Form
I hereby elect that in the event of my death
before all amounts due under the AnnTaylor Stores Corpo
ration Deferred Compensation Plan have been paid to me,
such amounts shall be paid, as soon as practicable after
my death, in a single cash payout to the following Benefi
ciary or Beneficiaries:
Beneficiary(ies) Share of Payment (%)
_________________________ __________
Name
_________________________
Address
_________________________ __________
Name
_________________________
Address
______________________________
Associate's Name (please print)
_____________________ ______________________________
Date Associate's Signature
This designation revokes any previous designation
under the aforesaid plan. I hereby reserve the
right to change my Beneficiary designation without notice
to or consent of any previously designated Beneficiaries.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED].
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from ___________ to __________________.
Commission File No. 33-55629
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
ANNTAYLOR, INC. SAVINGS PLAN
B. Name of the issuer of the securities held pursuant to the
plan and the address of its principal executive office:
ANNTAYLOR STORES CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
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)
================================================================
ANNTAYLOR, INC. SAVINGS PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------
Page
Independent Auditors' Report............................. 1
Financial Statements:
Statements of Net Assets Available for Benefits,
December 31, 1994 and 1993............................. 2
Statements of Changes in Net Assets Available for
Benefits for the Years Ended December 31, 1994
and 1993............................................... 3
Notes to Financial Statements........................... 4
Supplemental Schedules:
form 5500:
Item 27a - Schedule of Assets Held for Investment
Purposes at December 31, 1994......................... 10
Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1994.................. 11
===========================================================
INDEPENDENT AUDITORS' REPORT
- -----------------------------
AnnTaylor, Inc. Savings Plan:
We have audited the accompanying statements of net assets
available for benefits of the AnnTaylor, Inc. Savings Plan
(the "Plan") as of December 31, 1994 and 1993, and the related
statements of changes in net assets available for benefits for
the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly,
in all material respects, the net assets available for
benefits of the Plan as of December 31, 1994 and 1993, and the
changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules of assets held for investment
purposes as of December 31, 1994, and of reportable
transactions for the year ended December 31, 1994, are
presented for the purpose of additional analysis and are not a
required part of the basic financial statements, but are
supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974.
These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the
auditing procedures applied in our audit of the basic
financial statements and, in our opinion, are fairly stated in
all material respects when considered in relation to the basic
financial statements taken as a whole.
Deloitte & Touche LLP
New Haven, Connecticut
April 5, 1995
==============================================================
ANNTAYLOR, INC. SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE
FOR BENEFITS, DECEMBER 31, 1994 AND 1993
ASSETS:
1994 1993
---- ----
Investments at fair value:
Mutual funds $3,466,421 $2,839,969
AnnTaylor Stores Corporation
Common Stock 14,541 ---
--------- ---------
Total investments 3,480,962 2,839,969
--------- ---------
Receivables:
Employer contributions 46,831 63,624
Employee contributions 100,567 76,888
Accrued income 196 ---
--------- ---------
Total receivables 147,594 140,512
--------- ---------
Cash --- 2,118
--------- ---------
Net assets available for benefits $3,628,556 $2,982,599
========== ==========
See notes to financial statements.
==================================================================
ANNTAYLOR, INC. SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS FOR THE YEARS
ENDED DECEMBER 31, 1994 AND 1993
1994 1993
---- ----
ADDITIONS TO NET ASSETS ATTRIBUTED TO
INVESTMENT ACTIVITIES:
Dividend income $ 55,406 $116,815
Investment income 92,992 84,048
Net (depreciation) appreciation
in fair value of investments (104,802) 89,784
-------- -------
Total additions attributed to
investment activities 43,596 290,647
-------- -------
ADDITIONS TO NET ASSETS ATTRIBUTED
TO CONTRIBUTION ACTIVITIES:
Employer contributions 295,595 237,483
Employee contributions 1,138,377 969,314
Rollover contributions 9,134 ---
--------- --------
Total additions attributed to
contribution activities 1,443,106 1,206,797
--------- ---------
BENEFITS PAID TO PARTICIPANTS 840,745 809,549
--------- ---------
NET INCREASE IN NET ASSETS
AVAILABLE FOR BENEFITS 645,957 687,895
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 2,982,599 2,294,704
--------- ---------
End of year $3,628,556 $2,982,599
========== ==========
See notes to financial statements.
==================================================================
ANNTAYLOR, INC. SAVINGS PLAN
Notes to Financial Statements
- ------------------------------------------------------------------
1. Plan Description
The following description of the AnnTaylor, Inc. Savings
Plan (the "Plan") provides only general information.
Participants should refer to the Summary Plan Description,
which is available from the plan administrator, for a more
complete description of the Plan's provisions.
General
The Plan is a contributory, defined contribution plan
established by AnnTaylor, Inc. (the "Company") as of July 1,
1989. The Plan covers all employees of the Company who have
completed a twelve consecutive month period of at least
1,000 hours of service. It is subject to the provisions of
the Employment Retirement Income Security Act of 1974
("ERISA").
Contributions
The Company contributes to the Plan 50% of the
Participant's before-tax contributions, or after-tax
contributions, or both, subject to an overall maximum
Company matching contribution of 3% of the participant's
compensation. As of the last day of each Plan year, the
Company may make an additional Company matching contribution
in an amount, as determined by the Board of Directors, of up
to 100% of the amount of Company matching contributions for
such year.
Participants may make pre-tax contributions in an amount
not less than 1% or more than 10% of their compensation for
each pay period. Participants aggregate pre-tax
contributions may not exceed $9,240 (as indexed for
inflation) for the 1994 plan year. A participant may elect
to make after-tax contributions in an amount not to exceed
10% of their compensation when combined with pre-tax
contributions. Total employee contributions are subject to
limitations imposed by the Internal Revenue Service. All
employee contributions shall be remitted to the trustee and
invested together with Company contributions. All
contributions to the Plan by or on behalf of a participant
shall be invested in one or all of the following Investment
Funds, or such other Investment Funds which the
administrative committee of the Plan may from time to time
specify:
(a) Fund A, which is a Fixed Income Fund invested in pools
of investments that provide a fixed rate of return for
a specified period of time,
(b) Fund B, which is an Equity Fund invested in equity
securities designed to appreciate in value,
(c) Fund C, which is a Balanced Fund invested in a
diversified portfolio of high-yielding securities, or
(d) Fund D, which is the AnnTaylor Common Stock Fund which
invests primarily in shares of AnnTaylor Stores
Corporation Common Stock.
======================================================================
ANNTAYLOR, INC. SAVINGS PLAN
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------
Participant Accounts
Each participant's account is credited with (a) the
participant's contributions, (b) the Company's matching
contributions, and (c) an allocable share of plan earnings.
Allocations of Plan earnings are based on participant
account balances. A participant is entitled to the vested
balance in their account.
Vesting
The Plan provides that participants have no vested
interest in Company contributions or plan earnings thereon
credited to their accounts until they have three years of
service, at which time they are 50% vested. Vesting
increases by 25% per year up to 100% after five years of
service. The Plan provides 100% vesting of a participant's
account balance upon their retirement, death or disability.
Participants are fully vested at all times with respect
to employee contributions and earnings thereon.
Payment of Benefits
Participants or their beneficiaries are entitled to
receive their entire account balance, in accordance with the
vesting provisions of the Plan, upon retirement, death,
disability or employment termination. All distributions are
lump sum payments. Participants whose account balances are
in excess of $3,500 may elect deferred payment.
Forfeitures
Amounts forfeited by participants shall be used to reduce
future Company contributions.
2. Summary of Significant Accounting Policies
The significant accounting policies followed by the Plan are
detailed below:
* The accompanying financial statements of the Plan have been
prepared on the accrual basis of accounting.
* Investments are reported at fair value which, for
investments traded publicly including mutual funds, is
based on published market prices.
* Interest on investments is recorded as earned.
* Dividend income is recorded on ex-dividend dates.
* Security transactions are recorded as of the trade date.
====================================================================
ANNTAYLOR, INC. SAVINGS PLAN
Notes to Financial Statements (continued)
- --------------------------------------------------------------------
3. Investments
Fleet Bank, N.A. is the Plan Trustee. The Plan Trustee
invests all employee and Company contributions, as well as
earnings thereon, pursuant to the terms of the Plan. The
Plan trustee has custody of all assets in the funds.
Investments that represent 5% or more of the Plan's net
assets are separately identified.
December 31,
1994 1993
---- ----
Investments at fair value as determined
by Quoted Market Prices:
Mutual funds:
Fidelity Magellan Fund $1,619,821 $1,298,769
Fidelity Open End Portfolio 1,797,226 1,541,200
Other 49,374 ---
--------- ---------
Total Mutual funds 3,466,421 2,839,969
Ann Taylor Stores Corporation
Common Stock 14,541 ---
---------- ----------
Total Investments $3,480,962 $2,839,969
========== ==========
Net Appreciation (Depreciation) in
Fair Value of Investments
The Plan's investments, (including investments bought and
sold, as well as held during the year) depreciated in value
by $104,802 during the year ended December 31, 1994 and
appreciated in value by $89,784 during the year ended
December 31, 1993, as shown below.
Year Ended December 31,
1994 1993
Net Change in Fair Value of Investments:
Mutual funds $(102,609) $ 89,784
AnnTaylor Stores Corporation Common Stock (2,193) ---
--------- -------
Net (depreciation) appreciation $(104,802) $ 89,784
========= ========
=====================================================================
ANNTAYLOR, INC. SAVINGS PLAN
Notes to Financial Statements (continued)
- -------------------------------------------------------------------
4. SUMMARY OF NET ASSETS AVAILABLE FOR BENEFITS AND CHANGES IN NET
ASSETS AVAILABLE FOR BENEFITS BY SEPARATE FUND
Fiscal 1994
-----------------------------------------------
Fixed Company
Income Equity Balanced Stock
Fund Fund Fund Fund Total
---- ---- ------ ------- -----
ADDITIONS (DEDUCTIONS) TO
NET ASSETS ATTRIBUTED TO
NET INVESTMENT ACTIVITIES:
Dividend income --- $55,066 $ 340 --- $55,406
Investment income $92,384 511 8 $ 89 92,992
Net depreciation in fair
value of investments --- (102,135) (474) (2,193) (104,802)
-------- -------- --- ----- -------
Total additions (deductions)
attributed to investment
activities 92,384 (46,558) (126) (2,104) 43,596
-------- -------- --- ------ -------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO
CONTRIBUTION ACTIVITIES:
Employer contributions 148,877 143,854 577 2,287 295,595
Employee contributions 570,210 562,206 1,799 4,162 1,138,377
Rollover contributions 645 2,934 2,934 2,621 9,134
Transfers in from other
funds 1,982 56,865 19,180 37,616 115,643
-------- -------- ------ ------- ---------
Total additions
attributed to
contribution
activities 721,714 765,859 24,490 46,686 1,558,749
-------- ------- ------ ------ ---------
DEDUCTIONS FROM NET
ASSETS:
Participant withdrawals 482,305 358,440 --- --- 840,745
Transfers out to other
funds 82,717 32,926 --- --- 115,643
-------- ------- ----- ------ --------
Total deduction from
net assets 565,022 391,366 --- --- 956,388
--------- ------- ----- ------- -------
NET INCREASE IN NET
ASSETS AVAILABLE
FOR BENEFITS 249,076 327,935 24,364 44,582 645,957
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of period 1,581,113 1,401,486 --- --- 2,982,599
--------- --------- ------ ------ ---------
End of period $1,830,189 $1,729,421 $24,364 $44,582 $3,628,556
========== ========== ======= ======= =========
Total number of units
of participation 1,193,141 929,544 50,269 934
Net asset value per unit $1.534 $1.861 $.485 $47.732
=============================================================================
ANNTAYLOR, INC. SAVINGS PLAN
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------------
SUMMARY OF NET ASSETS AVAILABLE FOR BENEFITS
AND CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS BY SEPARATE FUND (continued)
Fiscal 1993
Fixed
Income Equity
Fund Fund Total
---- ------ -------
ADDITIONS TO NET ASSETS
TO INVESTMENT ACTIVITIES:
Dividend income --- $116,815 $116,815
Investment income $84,048 --- 84,048
Net appreciation in fair
value of investments --- 89,784 89,784
-------- -------- --------
Total additions attributed to
investment activities 84,048 206,599 290,647
-------- -------- --------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO CONTRIBUTION
ACTIVITIES:
Employer contributions 144,799 92,684 237,483
Employee contributions 580,307 389,007 969,314
Rollover contributions --- --- ---
Transfers in from other funds --- 95,953 95,953
--------- -------- --------
Total additions (deductions)
attributed to contribution
activities 725,106 577,644 1,302,750
--------- -------- ---------
DEDUCTIONS FROM NET ASSETS:
Participant withdrawals 497,141 312,408 809,549
Transfers out to other funds 95,953 --- 95,953
--------- -------- -------
Total deduction from net assets 593,094 312,408 905,502
--------- -------- -------
NET INCREASE IN NET ASSETS
AVAILABLE FOR BENEFITS 216,060 471,835 687,895
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of period 1,365,053 929,651 2,294,704
--------- ------- ---------
End of period $1,581,113 $1,401,486 $2,982,599
========== ========== ==========
Total number of units
of participation 1,063,335 754,438
Net asset value per unit $1.487 $1.858
5. Priorities upon termination of the plan
The Company expects and intends to continue the Plan
indefinitely, but reserves the right under the Plan to
discontinue its contributions at any time and to amend or
terminate the Plan. In the event of termination,
participants will be 100% vested in their accounts.
6. Administrative costs
Professional and administrative fees and other expenses
of the Plan are paid by the Company. Personnel and
facilities of the Company are used by the Plan for its
accounting and other activities at no charge to the Plan.
The Company, at any time, may elect to have all such
expenses paid by the Plan.
===============================================================
ANNTAYLOR, INC. SAVINGS PLAN
Notes to Financial Statements (continued)
- --------------------------------------------------------------
7. Tax status
The Plan obtained its latest determination letter on July
30, 1991, in which the Internal Revenue Service stated that
the Plan, as then designed, was in compliance with the
applicable requirements of the Internal Revenue Code. The
Plan has been amended since receiving the determination
letter. However, the plan administrator believes that the
Plan is currently designed and being operated in compliance
with the applicable requirements of the Internal Revenue
Code. Therefore, no provision for income taxes has been
included in the Plan's financial statements.
8. Forfeitures
During the years ended December 31, 1994 and 1993,
forfeitures of approximately $36,360 and $52,017,
respectively, were allocated to reduce Company
contributions.
9. Participant withdrawals payable
As of December 31, 1994 and 1993, there were unprocessed
distribution requests of $227,597 and $212,051,
respectively. These amounts have not been recorded in the
Plan's financial statements but are included as a liability
and benefit payments in the Plan's Form 5500 Annual
Return/Report of Employee Benefit Plan for the applicable
Plan year.
==================================================================
ANNTAYLOR, INC. SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT DECEMBER 31, 1994
- ---------------------------------------------------------------
Party in
Interest
(a) (b) Identity (c) Description (e) Current
of Party of Investment (d) Cost Value
------ ------------- --------------- ---------- ------------
No Fidelity
Magellan
Fund 24,248 shares $1,664,646 $1,619,821
No Fidelity
Open End
Portfolio 1,797,226 shares 1,797,226 1,797,226
No Fidelity
Puritan
Fund 1,549 shares 23,410 22,937
No Galaxy
Money
Market
Fund 26,437 shares 26,437 26,437
Yes AnnTaylor
Stores
Corporation
Common Stock 423 shares 16,728 14,541
--------- ---------
$3,528,447 $3,480,962
========== ==========
Employer Identification Number: 51-0297083
Plan Number: 001
================================================================
ANNTAYLOR, INC. SAVINGS PLAN
Item 27d - schedule of reportable transactions for the year ended
december 31, 1994
- --------------------------------------------------------------------
Identity of Fidelity Investments
Party (a) ----------------------------------------------------------
Description Galaxy Money Fidelity Fidelity
of Asset (b) Market Magellan Open End
Fund Fund Portfolio
(Single (Series of (Series of
Transaction) Transactions) Transactions)
------------ -------- ---------------
Purchase Price(c) $1,032,923 $ 716,032 $ 733,329
Selling Price (d) $1,032,202 292,045 477,303
Lease Rental (e) --- --- ---
Expenses incurred
with
transaction (f) --- --- ---
Cost of Asset (g) $1,032,202 290,860 477,303
Current Value of
Asset on
Transaction
Date (h) $1,032,202 $ 292,845 $ 477,303
Net Gain (i) --- 1,985 ---
Employer Identification Number: 51-0297083
Plan Number: 001
==========================================================================
SIGNATURES
The Plan. Pursuant to the requirements of the Securities
Exchange Act of 1934, the Investment Committee has duly caused
this Annual Report to be signed on its behalf by the
undesigned hereunto duly authorized.
AnnTaylor, Inc. Savings Plan
By: /s/ Walter J. Parks
--------------------------
Walter J. Parks
Senior Vice President - Finance
April 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONATINS 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> 0000874214
<NAME> ANNTAYLOR STORES CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> JAN-28-1995
<CASH> 1,551
<SECURITIES> 0
<RECEIVABLES> 62,142
<ALLOWANCES> 931
<INVENTORY> 93,705
<CURRENT-ASSETS> 168,073
<PP&E> 127,841
<DEPRECIATION> 31,503
<TOTAL-ASSETS> 598,254
<CURRENT-LIABILITIES> 65,892
<BONDS> 0
<COMMON> 157
0
0
<OTHER-SE> 325,955
<TOTAL-LIABILITY-AND-EQUITY> 598,254
<SALES> 658,804
<TOTAL-REVENUES> 658,804
<CGS> 357,783
<TOTAL-COSTS> 357,783
<OTHER-EXPENSES> 223,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,229
<INCOME-PRETAX> 62,894
<INCOME-TAX> 30,274
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (868)
<CHANGES> 0
<NET-INCOME> 31,752
<EPS-PRIMARY> 0
<EPS-DILUTED> 1.36
</TABLE>
