ANNTAYLOR
NEWS RELEASE
142 WEST 57TH STREET NEW YORK, N.Y. 10019
FOR IMMEDIATE RELEASE
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ANN TAYLOR ANNOUNCES FISCAL YEAR 2002 SECOND QUARTER
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EARNINGS, MOST PROFITABLE SECOND QUARTER TO DATE
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AND $50 MILLION SECURITIES BUY-BACK PROGRAM
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NEW YORK, NEW YORK, August 14, 2002 - AnnTaylor Stores
Corporation (NYSE: ANN) announced today net income for the second
quarter ended August 3, 2002 of $18,202,000, or $0.39 per share on
a diluted basis (on an average of 48.5 million shares outstanding),
compared to net income of $6,399,000, or $0.15 per share on a
diluted basis (on an average of 43.9 million shares outstanding),
in the second quarter of fiscal 2001. Fiscal 2001 second quarter
earnings per share and shares outstanding have been restated for
the effect of the 3-for-2 stock split that occurred in May 2002.
There was no goodwill amortization recorded in the second quarter
of fiscal 2002, in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 142 "Goodwill and Other
Intangible Assets", which the Company adopted in February 2002.
Excluding the amortization of goodwill, second quarter fiscal 2001
net income and earnings per share on a diluted basis (restated for
the effect of the 2002 stock split) would have been $8,961,000 or
$0.20 per share on a diluted basis.
As previously reported, total net sales for the second quarter
of fiscal 2002 increased 10.6 percent to $343,143,000, from
$310,292,000 in the second quarter of fiscal 2001. Comparable
store sales for the second quarter of fiscal 2002 decreased 0.2
percent, compared to a comparable store sales decrease of 12.9
percent in the second quarter of fiscal 2001. Comparable store
sales by division for the quarter were up 0.3 percent for Ann
Taylor stores, compared to a 17.2 percent decrease last year and
down 1.5 percent for Ann Taylor Loft stores, compared to a 1.5
percent increase last year.
Ann Taylor Chairman J. Patrick Spainhour said, "The second
quarter of 2002 was our most profitable second quarter to date and
follows our most profitable first quarter in history. Gross margin
on both full price and non-full price sales was strong throughout
the season at both of our retail concepts, exceeding our
expectations."
Mr. Spainhour continued, "Based on stronger gross margin run
rates in the first half of the year, last week we raised our third
quarter earnings per share guidance to a range of $0.50 - $0.51
from a range of $0.45 - $0.46. Comparable sales for the third
quarter are expected to be in the mid-single digits positive range,
with August projected to be low-single digits negative to flat,
September projected to be high mid-single digits positive, and
October projected to be low-single digits positive. For the fourth
quarter we remain comfortable with current earnings per share
guidance in the range of $0.32 - $0.33. Comparable sales guidance
for the fourth quarter is flat to last year. Full year earnings
per share guidance is now in the range of $1.66 - $1.68."
Inventory levels at the end of the second quarter were down
approximately 25 percent on a per square foot basis, compared to
the prior year. This comparison excludes inventory attributable to
Ann Taylor Global Sourcing. Inventory levels for the second
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quarter were lower than anticipated due to an increase in sales
volume and the receipt of some fall product in August that was
expected to be received in July. The Company expects inventory
levels will be down 10 - 15 percent for the full year, compared to
last year.
Gross margin, as a percentage of net sales increased to 52.8
percent in the second quarter of fiscal 2002, compared to 49.0
percent in the second quarter of fiscal 2001. The increase in
gross margin as a percentage of net sales is primarily due to
higher margin rates achieved on both full price and non-full price
sales at both divisions.
Selling, general and administrative expenses during the second
quarter of fiscal 2002 as a percentage of net sales were flat to
last year, at $150,425,000, or 43.8 percent of net sales, compared
to $135,833,000, or 43.8 percent of net sales, in the second
quarter of fiscal 2001. Efficiencies in Ann Taylor store
operations, lower internet costs and reduced marketing spend were
offset by an increase in the provision for management performance
bonus.
Operating profit was 9.0 percent of net sales in the second
quarter of fiscal 2002, compared to 5.2 percent (excluding the
amortization of goodwill) in the second quarter of last year.
During the quarter, the Company opened one new Ann Taylor
store and three new Ann Taylor Loft stores. The total store count
at the end of the second quarter of fiscal 2002 was 555, comprised
of 344 Ann Taylor stores, 183 Ann Taylor Loft stores, and 28 Ann
Taylor Factory stores. For the remaining fiscal year, the Company
plans to open approximately five Ann Taylor stores and 23 Ann
Taylor Loft stores bringing the fiscal 2002 year total to
approximately 45 store openings.
Total store square footage increased to 3,152,000 square feet
as of August 3, 2002 from 2,838,000 square feet at the end of the
second quarter of fiscal 2001.
Total long-term debt at August 3, 2002 was $119,951,000. At
the end of the quarter, the Company had no borrowings outstanding
under its $175,000,000 credit facility.
For the full Spring season (fiscal year-to-date period ending
August 3, 2002), the Company's net income was $39,124,000, or $0.84
per share on a diluted basis (on an average of 48.4 million shares
outstanding), compared to net income of $17,343,000 or $0.40 per
share on a diluted basis (on an average of 47.2 million shares
outstanding), for the same period last year. Excluding the
amortization of goodwill, Spring 2001 net income and earnings per
share on a diluted basis would have been $22,665,000 and $0.51,
respectively. All fiscal 2001 Spring season earnings per share and
shares outstanding have been restated for the effect of the 3-for-2
stock split that occurred in May 2002.
Spring 2002 net sales totaled $688,535,000, up 11.5 percent
from $617,382,000 in Spring 2001, and comparable store sales
decreased 0.1 percent in Spring 2002 compared to the same season
last year. Gross margin as a percent of net sales for the 2002
Spring season was 53.4 percent, compared to 50.5 percent in Spring
2001. The increase in gross margin as a percentage of net sales is
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primarily due to higher margin rates achieved on both full price
and non-full price sales at both divisions. Selling, general and
administrative expenses as a percentage of total sales were 43.8
percent in Spring 2002, compared to 44.0 percent in Spring 2001.
The decrease in selling, general and administrative expenses as a
percentage of net sales in Spring 2002 compared to Spring 2001 was
primarily the result of efficiencies gained in Ann Taylor store
operations and lower internet costs, partially offset by an
increase in the provision for management performance bonus.
The Company also announced today that its Board of Directors
authorized a $50 million securities repurchase program. Under this
program, purchases of shares of the Company's Common Stock and/or
its Convertible Debentures due 2019 will be made from time to time,
subject to market conditions and at prevailing market prices,
through open market purchases or in privately negotiated
transactions. The repurchase program is subject to compliance with
the Company's credit agreement. Repurchased shares of Common Stock
will become treasury shares and may be used for general corporate
and other purposes and repurchased Convertible Debentures will be
cancelled.
Additionally, Ann Taylor Chairman and Chief Executive Officer
J. Patrick Spainhour and Ann Taylor Chief Financial Officer James
Smith signed and filed sworn statements with the U.S. Securities
and Exchange Commission (SEC) affirming the accuracy of SEC filings
made by the Company in 2002. The documents for which Spainhour and
Smith signed include Ann Taylor's 10-K for 2001, its 10-Q report
for the first quarter of 2002, and its 2002 proxy statement.
The Company also announced two executive appointments. Mark
Eisen, who for 14 years headed his own, highly successful design
business, will be joining the Company as Senior Vice President of
Design for the Ann Taylor division, effective August 19, 2002. In
his new position Mr. Eisen will report to Kim Roy, President of the
Ann Taylor Division. The Company has continued to refine the
design and merchandising staff at the Ann Taylor division. In
addition, Bud Wagner, formly of Cap Gemini/Ernst & Young, will be
joining the Company as Senior Vice President of Information
Systems, effective September 9, 2002. Mr. Wagner will report to
Barry Erdos, Chief Operating Officer of Ann Taylor.
Kim Roy, President of the Ann Taylor Division said, "We are
very happy to have Mark Eisen join the Ann Taylor Team. He will
work with me to ensure that our collection has a consistently high
quality in keeping with our clients' expectations."
Mr. Wagner brings with him 25 years of experience in
information technology and management consulting and will be
replacing retiring Wolly Morin. Barry Erdos, Chief Operating
Officer of Ann Taylor said, "Bud's wealth of knowledge about
information systems, technology investments, distribution
initiatives, sourcing systems and telecommunications solutions make
him a welcome addition to our team. We extend our sincere
appreciation to Wolly for all of the significant contributions he
has made during his tenure at Ann Taylor."
Ann Taylor is one of the country's leading women's specialty
retailers, operating 555 stores in 42 states, the District of
Columbia and Puerto Rico, and also an Online Store at
www.anntaylor.com as of August 3, 2002.
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FORWARD-LOOKING STATEMENTS
Certain statements in this press release are 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; work stoppages,
slowdowns or strikes; and other factors set fourth in the Company's
filings with the SEC. The Company does not assume any obligation
to update or revise any forward-looking statements at any time for
any reason.
- - - Tables Follow - - -
. . .
Contact:
Barry Erdos
Chief Operating Officer
(212) 541-3318
Doreen D. Riely
Director, Investor Relations
(212) 541-3484
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ANNTAYLOR 5
ANNTAYLOR STORES CORPORATION
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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FOR THE QUARTERS AND SIX MONTHS ENDED AUGUST 3, 2002 AND AUGUST 4, 2001
(UNAUDITED)
QUARTERS ENDED SIX MONTHS ENDED
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AUGUST 3, AUGUST 4, AUGUST 3, AUGUST 4,
2002 2001 2002 2001
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales .................. $ 343,143 $ 310,292 $ 688,535 $ 617,382
Cost of sales .............. 161,965 158,289 320,794 305,727
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Gross profit ............... 181,178 152,003 367,741 311,655
Selling, general and
administrative expenses ... 150,425 135,833 301,506 271,551
Amortization of goodwill ... --- 2,760 --- 5,520
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Operating income ........... 30,753 13,410 66,235 34,584
Interest income ............ 913 523 1,429 858
Interest expense ........... 1,826 1,719 3,525 3,499
------- ------- ------- -------
Income before income taxes . 29,840 12,214 64,139 31,943
Income tax provision ....... 11,638 5,815 25,015 14,600
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Net income ............. $ 18,202 $ 6,399 $ 39,124 $ 17,343
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Basic earnings per share
of common stock (1) ...... $ 0.41 $ 0.15 $ 0.89 $ 0.40
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Weighted average shares
outstanding (1) .......... 44,311 43,347 44,145 43,236
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Diluted earnings per share
of common stock (1) ..... $ 0.39 $ 0.15 $ 0.84 $ 0.40
---
Weighted average shares
outstanding, assuming
dilution (1) ............. 48,500 43,916 48,385 47,240
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Number of stores open
at beginning of period ... 551 488 538 478
Number of stores opened
during period ............ 4 14 17 25
Number of stores expanded
during period * ......... --- 1 --- 5
Number of stores closed
during period ............ --- 2 --- 3
Number of stores open
at end of period ......... 555 500 555 500
Total store square
footage at end of period . 3,152,000 2,838,000
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* Expanded stores are excluded from comparable store sales for the
first year following expansion.
(1) Fiscal 2001 earnings per share and shares outstanding have been restated
- --- for the effect of the May 2002 3-for-2 stock split.
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ANNTAYLOR 6
ANNTAYLOR STORES CORPORATION
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CONDENSED CONSOLIDATED BALANCE SHEETS
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AUGUST 3, 2002 AND FEBRUARY 2, 2002
(UNAUDITED)
AUGUST 3, FEBRUARY 2,
2002 2002
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ASSETS (IN THOUSANDS)
Current assets
Cash and cash equivalents ........................ $ 180,452 $ 30,037
Accounts receivable, net ......................... 11,400 65,296
Merchandise inventories .......................... 169,455 180,117
Prepaid expenses and other current assets ........ 49,908 50,403
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Total current assets ......................... 411,215 325,853
Property and equipment, net ........................ 244,222 250,735
Goodwill, net ...................................... 286,579 286,579
Deferred financing costs, net ...................... 4,614 5,044
Other assets ....................................... 14,969 14,775
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Total assets ................................. $ 961,599 $ 882,986
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ................................. $ 69,582 $ 59,482
Accrued expenses ................................. 83,942 75,882
Current portion of long-term debt ................ -- 1,250
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Total current liabilities .................... 153,524 136,614
Long-term debt, net ................................ 119,951 118,280
Deferred lease costs and other liabilities ......... 18,742 15,963
Stockholders' equity (1)
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Common stock, $.0068 par value; 120,000,000
shares authorized; 48,883,809 and
48,275,957 shares issued, respectively ....... 221 219
Additional paid-in capital ....................... 499,262 484,582
Retained earnings ................................ 255,158 218,709
Deferred compensation on restricted stock ........ (7,129) (9,296)
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747,512 694,214
Treasury stock, at cost
4,051,553 and 4,210,232 shares,
respectively .............................. (78,130) (82,085)
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Total stockholders' equity ................... 669,382 612,129
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Total liabilities and stockholders' equity ... $ 961,599 $ 882,986
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(1) February 2, 2002 share information has been restated for the
- --- effect of the May 2002 3-for-2 stock split.