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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED NOVEMBER 3, 2001
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
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Commission file number 1-10738
ANNTAYLOR STORES CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3499319
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
142 WEST 57TH STREET, NEW YORK, NY 10019
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(Address of principal executive offices) (Zip Code)
(212) 541-3300
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(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No ___.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding as of
Class November 30, 2001
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COMMON STOCK, $.0068 PAR VALUE 29,172,732
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INDEX TO FORM 10-Q
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PAGE NO.
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PART I. FINANCIAL INFORMATION
-----------------------------
Item 1.Financial Statements
Condensed Consolidated Statements of Operations
for the Quarters and Nine Months Ended
November 3, 2001 and October 28, 2000.................. 3
Condensed Consolidated Balance Sheets at
November 3, 2001 and February 3, 2001.................. 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended November 3, 2001 and
October 28, 2000....................................... 5
Notes to Condensed Consolidated Financial Statements..... 6
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9
PART II.OTHER INFORMATION
-------------------------
Item 6.Exhibits and Reports on Form 8-K.........................15
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3
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
ANNTAYLOR STORES CORPORATION
----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
FOR THE QUARTERS AND NINE MONTHS ENDED NOVEMBER 3, 2001 AND OCTOBER 28, 2000
(unaudited)
QUARTERS ENDED NINE MONTHS ENDED
------------------ -----------------
NOV. 3, OCT. 28, NOV. 3, OCT. 28,
2001 2000 2001 2000
------- ------- ------- -------
(in thousands except per share amounts)
Net sales ........................ $310,804 $305,876 $928,187 $889,196
Cost of sales .................... 142,929 135,438 448,657 426,354
------- ------- ------- -------
Gross profit ..................... 167,875 170,438 479,530 462,842
Selling, general and
administrative expenses........ 142,212 125,143 413,763 365,308
Amortization of goodwill ......... 2,760 2,760 8,280 8,280
------- ------- ------- -------
Operating income ................. 22,903 42,535 57,487 89,254
Interest income .................. 242 464 1,100 1,734
Interest expense ................. 1,516 1,899 5,015 5,525
------- ------- ------- -------
Income before income taxes ....... 21,629 41,100 53,572 85,463
Income tax provision ............. 9,535 17,223 24,135 36,878
------- ------- ------- -------
Net income ................... $ 12,094 $ 23,877 $ 29,437 $ 48,585
======= ======= ======= =======
Basic earnings per share
of common stock ................ $ 0.42 $ 0.83 $ 1.02 $ 1.69
======= ======= ======= =======
Diluted earnings per share
of common stock ............... $ 0.40 $ 0.78 $ 1.00 $ 1.61
======= ======= ======= =======
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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ANNTAYLOR STORES CORPORATION
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
NOVEMBER 3, 2001 AND FEBRUARY 3, 2001
(unaudited)
NOV. 3, FEBRUARY 3,
2001 2001
--------- ---------
ASSETS (in thousands)
Current assets
Cash and cash equivalents .................... $ 3,649 $ 31,962
Accounts receivable, net ..................... 70,752 57,989
Merchandise inventories ...................... 224,810 170,631
Prepaid expenses and other current assets .... 54,481 53,227
--------- ---------
Total current assets ..................... 353,692 313,809
Property and equipment, net .................... 252,794 220,032
Goodwill, net .................................. 289,340 297,619
Deferred financing costs, net .................. 4,721 4,281
Other assets ................................... 18,250 12,374
--------- ---------
Total assets ............................. $ 918,797 $ 848,115
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ............................. $ 72,300 $ 65,903
Accrued salaries and bonus ................... 10,798 12,960
Accrued tenancy .............................. 10,959 9,800
Gift certificates and merchandise
credits redeemable .......................... 14,936 20,375
Accrued expenses ............................. 49,623 30,604
Current portion of long-term debt ............ 15,731 1,400
--------- ---------
Total current liabilities ................ 174,347 141,042
Long-term debt, net ............................ 117,516 116,210
Deferred lease costs and other liabilities ..... 16,456 16,834
Stockholders' equity
Common stock, $.0068 par value;
120,000,000 shares authorized;
32,184,255 and 31,834,088
shares issued, respectively .............. 219 216
Additional paid-in capital ................... 484,552 475,393
Retained earnings ............................ 219,530 190,093
Deferred compensation on
restricted stock ......................... (3,870) (1,723)
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700,431 663,979
Treasury stock at cost,
3,011,606 and 3,011,519
shares, respectively ................... (89,953) (89,950)
--------- ---------
Total stockholders' equity ............... 610,478 574,029
--------- ---------
Total liabilities and stockholders' equity $ 918,797 $ 848,115
========= =========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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ANNTAYLOR STORES CORPORATION
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
FOR THE NINE MONTHS ENDED NOVEMBER 3, 2001 AND OCTOBER 28, 2000
(unaudited)
NINE MONTHS ENDED
-----------------
NOVEMBER 3, OCTOBER 28,
2001 2000
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(in thousands)
Operating activities:
Net income ...................................... $ 29,437 $ 48,585
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for loss on accounts receivable ..... 1,087 852
Depreciation and amortization ................. 31,330 25,035
Amortization of goodwill ...................... 8,280 8,280
Non-cash interest ............................. 3,021 3,179
Amortization of deferred compensation ......... 998 1,160
Deferred income taxes ......................... 2,025 (2,189)
Loss on disposal of property and equipment .... 1,502 1,791
Tax benefit from exercise of stock options .... 793 ---
Changes in assets and liabilities:
Receivables ................................. (13,850) (13,457)
Merchandise inventories ..................... (54,179) (74,893)
Prepaid expenses and other current assets ... (2,192) 9,871
Accounts payable ............................ 6,397 20,232
Accrued expenses ............................ 12,577 21,385
Other non-current assets and liabilities, net (7,350) (2,095)
------- -------
Net cash provided by operating activities ....... 19,876 47,736
------- -------
Investing activities:
Purchases of property and equipment ............. (65,586) (64,810)
------- -------
Net cash used by investing activities ........... (65,586) (64,810)
------- -------
Financing activities:
Net borrowings under revolving credit facility .. 14,250 ---
Payment of deferred financing costs ............. (1,033) (45)
Payments on mortgage ............................ (1,040) (965)
Issuance of common stock, net ................... 5,220 2,232
------- -------
Net cash provided by financing activities ....... 17,397 1,222
------- -------
Net decrease in cash .............................. (28,313) (15,852)
Cash and cash equivalents, beginning of period .... 31,962 35,081
------- -------
Cash and cash equivalents, end of period .......... $ 3,649 $ 19,229
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest ........ $ 1,522 $ 1,563
======= =======
Cash paid during the period for income taxes .... $ 11,984 $ 28,968
======= =======
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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ANNTAYLOR STORES CORPORATION
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
1. BASIS OF PRESENTATION
---------------------
The condensed consolidated financial statements are unaudited but, in the
opinion of management, contain all adjustments (which are of a normal
recurring nature) necessary to present fairly the financial position, results
of operations and cash flows for the periods presented. All significant
intercompany accounts and transactions have been eliminated.
The results of operations for the Fiscal 2001 interim period shown in this
report are not necessarily indicative of results to be expected for the
fiscal year.
The February 3, 2001 condensed consolidated balance sheet amounts have
been derived from the previously audited consolidated balance sheet of
AnnTaylor Stores Corporation (the "Company").
Certain Fiscal 2000 amounts have been reclassified to conform to the
Fiscal 2001 presentation.
Detailed footnote information is not included for the quarters and nine
months ended November 3, 2001 and October 28, 2000. The financial
information set forth herein should be read in conjunction with the Notes to
the Company's Consolidated Financial Statements contained in the AnnTaylor
Stores Corporation Fiscal 2000 Annual Report to Stockholders.
2. NET INCOME PER SHARE
--------------------
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share assumes the issuance of additional shares of
common stock that are issuable by the Company upon the conversion of all
potentially dilutive securities. Basic and diluted earnings per share
calculations follow:
[Tables on next page]
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ANNTAYLOR STORES CORPORATION
----------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
2. NET INCOME PER SHARE (CONTINUED)
--------------------------------
QUARTERS ENDED
-------------------------------------------------------
NOVEMBER 3, 2001 OCTOBER 28, 2000
------------------------ -------------------------
(in thousands, except per share amounts)
PER PER
SHARE SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------- ------ ----- ------ ------ ------
BASIC EARNINGS PER SHARE
- ------------------------
Income available to common stockholders $12,094 28,946 $0.42 $23,877 28,791 $ 0.83
==== =====
EFFECT OF DILUTIVE SECURITIES
- ------------------------------
Stock options and restricted stock .... -- 182 -- 367
Convertible Debentures ................ 648 2,404 671 2,404
------- ------ ------- -------
DILUTED EARNINGS PER SHARE
- --------------------------
Income available to common stockholders $12,742 31,532 $0.40 $24,548 31,562 $ 0.78
======= ====== ==== ======= ======= =====
NINE MONTHS ENDED
-------------------------------------------------------
NOVEMBER 3, 2001 OCTOBER 28, 2000
------------------------ -------------------------
(in thousands, except per share amounts)
PER PER
SHARE SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------- ------ ----- ------ ------ ------
BASIC EARNINGS PER SHARE
- ------------------------
Income available to common stockholders $29,437 28,865 $1.02 $48,585 28,754 $ 1.69
==== =====
EFFECT OF DILUTIVE SECURITIES
- ------------------------------
Stock options and restricted stock .... -- 239 -- 242
Convertible Debentures ................ 2,044 2,404 1,984 2,404
------- ------ ------- -------
DILUTED EARNINGS PER SHARE
- --------------------------
Income available to common stockholders $31,481 31,508 $1.00 $50,569 31,400 $ 1.61
======= ====== ==== ======= ======= =====
Options to purchase 1,122,340 and 1,100,340 shares of common stock during
the thirteen and thirty-nine weeks ended November 3, 2001, respectively, and
809,250 and 956,170 shares during the thirteen and thirty-nine weeks ended
October 28, 2000, respectively, were excluded from the above computations of
weighted average shares for diluted earnings per share because the options'
exercise prices were greater than the average market prices of the common
shares.
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ANNTAYLOR STORES CORPORATION
----------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
3. LONG-TERM DEBT
--------------
The following summarizes long-term debt outstanding at November 3, 2001:
(in thousands)
Mortgage........................................ $ 1,610
Net borrowings under revolving credit facility 14,250
Convertible Debentures, net.................... 117,387
-------
Total debt ................................. 133,247
Less current portion........................... 15,731
-------
Total long-term debt........................ $117,516
========
4. RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 141, "Business
Combinations", and SFAS 142, "Goodwill and Other Intangible Assets". SFAS
141 requires that the purchase method of accounting be used for all business
combinations completed after June 30, 2001 and clarifies the criteria for
recognition of intangible assets separately from goodwill. Management does
not believe that the adoption of SFAS 141 will have an impact on the
Company's consolidated financial position or consolidated results of
operations. SFAS 142 requires that ratable amortization of goodwill be
replaced with periodic tests of the goodwill's impairment and that intangible
assets, other than goodwill, which have determinable useful lives be
amortized over that period. SFAS 142 is effective for fiscal years beginning
after December 15, 2001. Management intends to adopt SFAS 142 in Fiscal
2002, and estimates that it will add approximately $11,000,000 and $0.35
annually to net income and earnings per share, respectively.
In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" which addresses the conditions under which
an impairment charge should be recorded related to long-lived assets, other
than goodwill, to be held and used, as well as those to be disposed of by
sale or otherwise. SFAS 144 is effective for fiscal years beginning after
December 15, 2001. Management is currently assessing, but has not yet
determined, the impact the adoption of SFAS 144 will have on the Company's
consolidated financial position or consolidated results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTERS ENDED NINE MONTHS ENDED
------------------ -----------------
NOV. 3, OCT. 28, NOV. 3, OCT. 28,
2001 2000 2001 2000
---- ---- ---- ----
Number of Stores:
Open at beginning of period ...... 500 430 478 405
Opened during period ............. 33 37 58 67
Expanded during period* ......... 1 1 6 3
Closed during period ............. 1 -- 4 5
Open at end of period ............ 532 467 532 467
Type of Stores Open at End of Period:
Ann Taylor stores ................ 341 331
Ann Taylor Loft stores ........... 178 123
Ann Taylor Factory Stores ........ 13 13
- --------------
* Expanded stores are excluded from comparable store sales for the first year
following expansion.
QUARTER ENDED NOVEMBER 3, 2001 COMPARED TO QUARTER ENDED OCTOBER 28, 2000
The Company's net sales in the third quarter of 2001 increased to
$310,804,000 from $305,876,000 in the third quarter of Fiscal 2000, an
increase of $4,928,000 or 1.6%. The increase is attributable to the opening
of new stores and the expansion of certain existing stores offset by a 10.6%
decrease in comparable store sales. Comparable store sales by division for
the third quarter ended November 3, 2001 were down 13.5% for Ann Taylor
stores and up 0.6% for new concept Ann Taylor Loft stores. The Loft
comparable store sales percentage does not include 18 Ann Taylor Loft outlet
stores or any AnnTaylor Factory stores. Management believes that the net
decrease in comparable store sales was, in part, the result of customer
dissatisfaction with certain of the Company's product offerings and
merchandise assortment available in Ann Taylor stores in the third quarter of
Fiscal 2001. This situation was worsened by an overall reduction in client
spending caused by the current economic environment, as well as the impact of
the events of September 11, 2001.
Gross profit as a percentage of net sales decreased to 54.0% in the third
quarter of Fiscal 2001 from 55.7% in the third quarter of Fiscal 2000. This
decrease was primarily due to higher promotional sales activity, offset in
part by higher margin achieved on full price sales at both divisions
throughout the quarter.
Selling, general and administrative expenses represented 45.8% of net
sales in the third quarter of Fiscal 2001, compared to 40.9% of net sales in
the third quarter of Fiscal 2000. The increase in selling, general, and
administrative expenses as a percentage of net sales was primarily
attributable to decreased leverage on fixed expenses resulting from negative
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10
comparable store sales and increases in tenancy and Ann Taylor Loft store
operations expenses due to expansion.
As a result of the foregoing, the Company had operating income of
$22,903,000, or 7.4% of net sales, in the third quarter of Fiscal 2001,
compared to operating income of $42,535,000, or 13.9% of net sales, in the
third quarter of Fiscal 2000. Amortization of goodwill was $2,760,000 in
both the third quarter of Fiscal 2001 and the third quarter of Fiscal 2000.
Operating income, without giving effect to goodwill amortization in either
year, was $25,663,000, or 8.3% of net sales, in the third quarter of Fiscal
2001 and $45,295,000, or 14.8% of net sales, in the third quarter of Fiscal
2000.
Interest income was $242,000 in the third quarter of Fiscal 2001 compared
to $464,000 in the third quarter of Fiscal 2000. The decrease was primarily
attributable to lower cash on hand and lower interest rates during the third
quarter of Fiscal 2001, compared to the third quarter of Fiscal 2000.
Interest expense was $1,516,000 in the third quarter of Fiscal 2001 and
$1,899,000 in the third quarter of Fiscal 2000. The decrease in interest
expense was primarily attributable to a decrease in letter of credit fees and
a reduction in amortization of deferred financing costs resulting from the
Credit Facility entered into in the first quarter of Fiscal 2001.
The income tax provision was $9,535,000, or 44.1% of income before income
taxes, in the third quarter of Fiscal 2001, compared to $17,223,000, or 41.9%
of income before income taxes, in the third quarter of Fiscal 2000. The
effective income tax rate for both periods was higher than the statutory rate
primarily as a result of non-deductible goodwill amortization.
As a result of the foregoing factors, the Company had net income of
$12,094,000, or 3.9% of net sales, for the third quarter of Fiscal 2001,
compared to net income of $23,877,000, or 7.8% of net sales, for the third
quarter of Fiscal 2000.
AnnTaylor Stores Corporation conducts no business other than the
management of Ann Taylor.
NINE MONTHS ENDED NOVEMBER 3, 2001 COMPARED TO NINE MONTHS ENDED OCTOBER 28,
2000
The Company's net sales in the first nine months of Fiscal 2001 increased
to $928,187,000 from $889,196,000, an increase of $38,991,000, or 4.4%.
Comparable store sales for the first nine months of Fiscal 2001 decreased
9.1% compared to an increase of 1.0% during the same period in Fiscal 2000.
Comparable store sales by division were down 11.9 percent for Ann Taylor and
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11
up 2.0 percent for new concept Ann Taylor Loft. The sales increase was
primarily attributable to the opening of new stores and the expansion of
existing stores offset, in part, by the net decrease in comparable store
sales. Management believes that the net decrease in comparable store sales
was, in part, the result of customer dissatisfaction with certain of the
Company's product offerings and merchandise assortment available in Ann
Taylor stores during the first nine months of Fiscal 2001. An overall
reduction in client spending caused by the current economic environment, as
well as the impact of the events of September 11, 2001, further contributed
to the decrease.
Gross profit as a percentage of net sales decreased to 51.7% in the first
nine months of Fiscal 2001 from 52.0% in the first nine months of Fiscal
2000.
Selling, general and administrative expenses were 44.6% of net sales in
the first nine months of Fiscal 2001, compared to 40.1% of net sales in the
first nine months of Fiscal 2000, excluding a pre-tax nonrecurring charge of
approximately $8,500,000 or 1.0% of net sales, in connection with an
extensive review conducted with the Company's financial and legal advisors of
various strategic approaches to enhance shareholder value. The increase in
selling, general and administrative expenses as a percentage of net sales was
primarily attributable to decreased leverage on fixed expenses resulting from
negative comparable store sales and increases in tenancy and Ann Taylor Loft
store operations expenses due to expansion.
As a result of the foregoing, the Company had operating income of
$57,487,000, or 6.2% of net sales, in the first nine months of Fiscal 2001,
compared to operating income, after taking into account the nonrecurring
charge, of $89,254,000, or 10.0% of net sales, in the first nine months of
Fiscal 2000. Amortization of goodwill was $8,280,000 in each of the first
nine months of Fiscal 2001 and Fiscal 2000. Operating income, without giving
effect to goodwill amortization, was $65,767,000, or 7.1% of net sales, in
the Fiscal 2001 period and $97,534,000, or 11.0% of net sales, in the Fiscal
2000 period.
Interest income was $1,100,000 in the first nine months of Fiscal 2001
compared to $1,734,000 in the first nine months of Fiscal 2000. The decrease
was primarily attributable to lower cash on hand and lower interest rates
during the first nine months of Fiscal 2001, compared to the first nine
months of Fiscal 2000.
Interest expense was $5,015,000 in the first nine months of Fiscal 2001
compared to $5,525,000 in the first nine months of Fiscal 2000. The decrease
in interest expense was primarily attributable to a decrease in letter of
credit fees and a reduction in amortization of deferred financing costs
resulting from the Credit Facility entered into in the first quarter of
Fiscal 2001.
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12
The income tax provision was $24,135,000, or 45.1% of income before income
taxes, in the Fiscal 2001 period, compared to $36,878,000, or 43.2% of income
before income taxes, in the Fiscal 2000 period. The effective income tax
rate for both periods differed from the statutory rate primarily because of
non-deductible goodwill amortization.
As a result of the foregoing factors, the Company had net income of
$29,437,000, or 3.2% of net sales, for the first nine months of Fiscal 2001,
compared to net income of $48,585,000, or 5.5% of net sales, for the first
nine months of Fiscal 2000.
FINANCIAL CONDITION
For the first nine months of Fiscal 2001, net cash provided by operating
activities totaled $19,876,000, primarily as a result of earnings, non-cash
charges, and increases in accounts payable and accrued liabilities, partially
offset by increases in merchandise inventories and accounts receivable. Cash
used for investing activities during the first nine months of Fiscal 2001
amounted to $65,586,000, for the purchase of property and equipment. Cash
provided by financing activities during the first nine months of Fiscal 2001
amounted to $17,397,000, primarily as a result of net borrowings under the
Company's Revolving Credit Facility and the issuance of Company common stock
pursuant to employee benefit plans, offset in part by mortgage payments on
the Company's distribution center and deferred financing costs.
Merchandise inventories were $224,810,000 at November 3, 2001, compared to
inventories of $170,631,000 at February 3, 2001. Merchandise inventories at
November 3, 2001 and February 3, 2001 included approximately $22,216,000 and
$33,469,000, respectively, of inventory associated with the Company's
sourcing division, which is primarily finished goods in transit from
factories. The increase in inventories resulted principally from inventory
to support 58 new stores opened since the beginning of the year and increased
inventory in anticipation of fourth quarter selling. On a per square foot
basis, inventories at the end of the third quarter of Fiscal 2001, excluding
inventories attributable to the Company's sourcing division, were down
approximately 9% compared to the same period last year.
At November 3, 2001, there was $14,250,000 in net borrowings outstanding
under AnnTaylor's $175,000,000 senior secured revolving credit facility (the
"Credit Facility"). Loans outstanding under the Credit Facility at any time
may not exceed $75,000,000. Maximum availability for loans and letters of
credit under the Credit Facility is governed by a monthly borrowing base,
determined by the application of specified rates against certain eligible
assets.
For Fiscal 2001, the Company's capital expenditures, which are primarily
attributable to the Company's store expansion, renovation and refurbishment
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13
programs, and the investment in information systems, are expected to total
approximately $83,000,000. For the nine months ended November 3, 2001,
capital expenditures of $65,586,000 were incurred. During the first nine
months of Fiscal 2001, the Company opened 9 new Ann Taylor stores and 49 new
Ann Taylor Loft stores. In addition, the Company completed the expansion of 6
existing Ann Taylor stores, closed 2 Ann Taylor Loft Outlet stores and 2 Ann
Taylor Factory stores, and converted 2 Ann Taylor Loft Outlet stores to Ann
Taylor Factory stores. For the remainder of Fiscal 2001, the Company expects
to open one additional Ann Taylor store and 8 additional Ann Taylor Loft
stores.
In order to finance its operations and capital requirements, the Company
expects to use internally generated funds, trade credit, and funds available
to it under the Revolving Credit Facility. The Company believes that cash
flow from operations and funds available under the Revolving Credit Facility
are sufficient to enable it to meet its on-going cash needs for its business,
as presently conducted, for the foreseeable future.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 141, "Business
Combinations", and SFAS 142, "Goodwill and Other Intangible Assets". SFAS
141 requires that the purchase method of accounting be used for all business
combinations completed after June 30, 2001 and clarifies the criteria for
recognition of intangible assets separately from goodwill. Management does
not believe that the adoption of SFAS 141 will have an impact on the
Company's consolidated financial position or consolidated results of
operations. SFAS 142 requires that ratable amortization of goodwill be
replaced with periodic tests of the goodwill's impairment and that intangible
assets, other than goodwill, which have determinable useful lives be
amortized over that period. SFAS 142 is effective for fiscal years beginning
after December 15, 2001. Management intends to adopt SFAS 142 in Fiscal
2002, and estimates that it will add approximately $11,000,000 and $0.35
annually to net income and earnings per share, respectively.
In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" which addresses the conditions under which
an impairment charge should be recorded related to long-lived assets, other
than goodwill, to be held and used, as well as those to be disposed of by
sale or otherwise. SFAS 144 is effective for fiscal years beginning after
December 15, 2001. Management is currently assessing, but has not yet
determined, the impact the adoption of SFAS 144 will have on the Company's
consolidated financial position or consolidated results of operations.
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14
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURES
Sections of this Quarterly Report on Form 10-Q, including the preceding
Management's Discussion and Analysis of Financial Condition and Results of
Operation contain various forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The forward-looking statements may use the words "expect",
"anticipate", "plan", "intend", "project", "believe" and similar expressions.
These forward-looking statements reflect the Company's current expectations
concerning future events and actual results may differ materially from
current expectations or historical results, any such forward-looking
statements are subject to various risks and uncertainties, including failure
by the Company to predict accurately customer fashion preferences; decline in
the demand for merchandise offered by the Company; competitive influences;
changes in levels of store traffic or consumer spending habits; effectiveness
of the Company's brand awareness and marketing programs; lack of sufficient
customer acceptance of the Ann Taylor Loft concept in the
upper-moderate-priced women's apparel market; general economic conditions or
a downturn in the retail industry; the inability of the Company to locate new
store sites or negotiate favorable lease terms for additional stores or for
the expansion of existing stores; lack of sufficient consumer interest in the
Company's Online Store; a significant change in the regulatory environment
applicable to the Company's business; an increase in the rate of import
duties or export quotas with respect to the Company's merchandise; financial
or political instability in any of the countries in which the Company's goods
are manufactured; acts of war or terrorism in the United States or worldwide;
and other factors set fourth in the Company's Form 10-K and all filings with
the SEC made by the Company after the filing of the Form 10-K. The Company
does not assume any obligation to update or revise any forward-looking
statements at any time for any reason.
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15
PART II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
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16
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANNTAYLOR STORES CORPORATION
Date: December 14, 2001 By: /s/J. Patrick Spainhour
------------------------- -------------------------------
J. Patrick Spainhour
Chairman and Chief Executive
Officer
Date: December 14, 2001 By: /s/James M. Smith
------------------------- -------------------------------
James M. Smith
Senior Vice President,
Chief Financial Officer and
Treasurer
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