Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. ANN INC. (874214) 10-Q published on May 22, 2015 at 12:02 pm
Reporting Period: May 01, 2015
Completion of the Merger is subject to various closing conditions, including: approval by the Company’s stockholders of the Merger; the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; the absence of any governmental order prohibiting the consummation of the transactions contemplated by the Merger Agreement; the U.S. Securities and Exchange Commission (the “SEC”) declaring effective the Form S-4 to be filed by Ascena with respect to the shares of Ascena common stock to be issued in the Merger; the shares of Ascena common stock to be issued in the Merger being approved for listing on the NASDAQ Global Select Market; the accuracy of the representations and warranties of each party (subject to certain materiality standards) and the material compliance by each party with its obligations under the Merger Agreement. Consummation of the Merger is not subject to a financing condition and does not require approval by Ascena stockholders.
The Merger Agreement contains customary representations, warranties and covenants, including, among others, covenants providing for each of the parties to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the closing and to use reasonable best efforts to obtain required government approvals, subject to certain exceptions. The Merger Agreement also includes covenants requiring the Company (1) not to solicit, or enter into discussions with third parties relating to, alternative business combination transactions during the period between the execution of the Merger Agreement and the closing, subject to fulfillment of certain fiduciary requirements of the Company’s Board and (2) to call and hold a special meeting of the Company’s stockholders to approve the Merger and, subject to certain exceptions, not to withdraw, amend or modify in a manner adverse to Ascena the recommendation of the Company’s Board that the Company’s stockholders approve the Merger.
The Merger Agreement contains certain termination rights, including the right of either party to terminate the Merger Agreement if the Merger does not occur by February 17, 2016, the right of the Company to terminate the Merger Agreement to accept a superior proposal for an alternative business combination (as long as the Company complies with certain notice and other requirements under the Merger Agreement) and the right of Ascena to terminate due to a change of recommendation by the Company’s Board. Upon termination of the Merger Agreement by the Company or Ascena upon specified conditions, a termination fee of $48,270,000 may be payable by the Company. In addition, upon a termination of the Merger Agreement for the failure to obtain the approval of the Company’s stockholders, the Company may be required to reimburse Ascena for up to $5 million in expenses related to the Merger Agreement.
Ascena has obtained a commitment letter from Goldman, Sachs & Co. and Guggenheim Securities (the “Lenders”) for the purpose of financing the transactions contemplated by the Merger Agreement. The obligations of the Lenders to provide financing under the commitment letter are subject to certain conditions.
Our results during the first quarter of Fiscal 2015 reflected weak performance in the month of February, due in part to unseasonably cold weather throughout much of the country, partially offset by positive comparable sales in the combined March/April period. Continued traffic challenges and a highly promotional retail environment also caused us to be more promotional than planned, which also weighed on gross margin rate performance. However, our continued focus on expense management helped drive a 140 basis point reduction in selling, general and administrative expenses from the year-ago period, which helped mitigate some of the impact to our bottom-line. During the quarter, we also recorded a $6.4 million pre-tax restructuring charge in connection with our previously announced Supply Chain Initiative and SG&A Optimization Program, which we expect to deliver significant savings and efficiencies over the longer term. As a result, net income was $13.6 million, or $0.29 per diluted share, for the first quarter of Fiscal 2015, compared to net income of $5.2 million, or $0.11 per diluted share, for the first quarter of Fiscal 2014. However, excluding the $3.7 million, or $0.08 per diluted share, after-tax impact of our first quarter 2015 restructuring charge, net income would have been $17.3 million, or $0.37 per diluted share, both up more than 12% over adjusted net income of $15.4 million, or $0.33 per diluted share, in the first quarter of 2014, excluding the $10.2 million, or $0.22 per diluted share, after-tax impact of our first quarter 2014 restructuring charge.
During the first quarter of Fiscal 2015, we also made progress on our strategic growth initiatives for 2015. First among these is our Supply Chain Initiative, which was launched in November 2014. Since that time, we have identified a series of opportunities and are moving forward to develop and execute on our plans. Our near-term opportunities include expanding our use of test and chase strategies and working with vendors in new ways to compress production timelines and buy product closer to season. While this initiative is still in its early phase, we continue to anticipate at least $50 million in incremental annualized gross margin by 2017. Our second growth initiative, our SG&A Optimization Program, which was launched in March 2015, is expected to generate ongoing, annualized savings of $35 million by 2016 as a result of our current and planned actions to further increase our operational efficiency. Our third 2015 initiative is the continued enhancement of our omni-channel offering. During the first quarter of Fiscal 2015, we completed the roll-out of our omni-channel Phase II “endless aisle” capabilities at all Ann Taylor and LOFT stores, giving our clients seamless access to online inventory from the store environment. Finally, we continue to test and refine our newest concept, Lou & Grey. During the quarter, we opened our sixth stand-alone Lou & Grey store in Chicago and plan to open a handful of additional locations in 2015. We also remain on track to launch our stand-alone Lou & Grey e-commerce site later this year.