-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LrIVTwADjgRuuJ25JaDfG/XBz8WLolPlT2ThsDAxOIZeWoe64RiKTnLdxC1JLMuA YY1TNv/gBR3RvYE8dfvfvg== 0001157523-10-006970.txt : 20101117 0001157523-10-006970.hdr.sgml : 20101117 20101116173441 ACCESSION NUMBER: 0001157523-10-006970 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20101116 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Cost Associated with Exit or Disposal Activities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20101117 DATE AS OF CHANGE: 20101116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOT TOPIC INC /CA/ CENTRAL INDEX KEY: 0001017712 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 770198182 STATE OF INCORPORATION: CA FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28784 FILM NUMBER: 101197581 BUSINESS ADDRESS: STREET 1: 18305 EAST SAN JOSE AVENUE CITY: CITY OF INDUSTRY STATE: CA ZIP: 91748 BUSINESS PHONE: 6268394681 MAIL ADDRESS: STREET 1: 18305 EAST SAN JOSE AVENUE CITY: CITY OF INDUSTRY STATE: CA ZIP: 91768 8-K 1 a6515100.htm HOT TOPIC, INC. 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Form 8-K

Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  November 16, 2010



Hot Topic, Inc.
(Exact name of registrant as specified in charter)

California
(State or other
jurisdiction of
incorporation)

 

0-28784
(Commission File

Number)

 

77-0198182
(I.R.S. Employer
Identification No.)

 

18305 E. San Jose Avenue

City of Industry, California

(Address of principal executive offices)

 

91748

(Zip Code)

Registrant’s telephone number, including area code: (626) 839-4681

Not Applicable.
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 2.02       Results of Operations and Financial Condition.

Attached hereto as Exhibit 99.1 is a copy of a press release that Hot Topic, Inc. issued on November 16, 2010, containing certain financial information for the third quarter ended October 30, 2010.

The information in this Item 2.02 and the corresponding exhibit are being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

In addition, the information set forth in Item 2.05 below is incorporated by reference herein.


Item 2.05       Costs Associated with Exit or Disposal Activities.

In November 2010, the Board of Directors of Hot Topic, Inc. approved a cost reduction plan that, beginning in fiscal 2011, is expected to result in an estimated annual pre-tax income improvement of approximately $13 million.  The cost reduction plan, which is designed to meet the challenges of the current environment, will involve closing approximately 40 to 50 underperforming stores by the end of the first quarter of fiscal 2011.  These closures will occur as a result of natural lease expirations, exercising lease kick out clauses and other negotiations.  The cost reduction plan also includes reducing planned capital expenditures in fiscal 2011 to approximately $20 million from approximately $30 to $32 million in fiscal 2010.  In addition, the company expects to reduce approximately 14% of its home office and field management positions in fiscal 2010 and implement other non-payroll overhead expense reduction initiatives as part of the cost reduction plan.

In connection with the cost reduction plan, the company estimates that it will incur a total pre-tax charge of approximately $8 million primarily in the fourth quarter of fiscal 2010, a portion of which will be a non-cash charge of approximately $4 million. Of the approximately $8 million charge, the company expects that approximately $6 million will be incurred primarily during the fourth quarter of fiscal 2010 for the write down of store assets, early lease terminations and store management severance.  The company also expects that approximately $2 million of the approximately $8 million charge will be incurred for severance and outplacement in the fourth quarter of fiscal 2010.

The company’s current estimates and assumptions regarding the implementation of the cost reduction plan, particularly surrounding the closure of underperforming stores, are subject to significant uncertainty, including negotiations with landlords, fluctuations in store sales trends and unpredictable results of internal initiatives.  As a result, the company’s estimated charges, cash outlays and expense savings related to the cost reduction plan may differ from actual, and any of these factors may result in the company not realizing the anticipated benefits from the plan.


Item 9.01       Financial Statements and Exhibits.

 

(d)

Exhibits:

 

Exhibit No.

Description

 
99.1 Press Release of Hot Topic, Inc. dated November 16, 2010.





[Remainder of page intentionally left blank; signature on following page.]


SIGNATURE

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 hereunto duly authorized.

HOT TOPIC, INC.

 

By:

/s/ JAMES MCGINTY

James McGinty

Chief Financial Officer

 

Date:

November 16, 2010

 


INDEX TO EXHIBITS

Exhibit No.

Description

 
99.1

Press Release issued by Hot Topic, Inc. on November 16, 2010.

EX-99.1 2 a6515100ex99_1.htm EXHIBIT 99.1

Exhibit 99.1

Hot Topic, Inc. Reports Third Quarter Financial Results, Announces Cost Reduction Plan and Fourth Quarter Guidance

CITY OF INDUSTRY, Calif.--(BUSINESS WIRE)--November 16, 2010--Hot Topic, Inc. (Nasdaq: HOTT), today reported net income in the third quarter of fiscal 2010 (13 weeks ended October 30, 2010) of $0.4 million, or $0.01 per share, compared to $5.8 million, or $0.13 per share, in the third quarter of fiscal 2009 (13 weeks ended October 31, 2009). The third quarter results include the previously announced non-cash asset impairment charge of $3.0 million, or $0.04 per diluted share, related to the impairment of ShockHound assets.

Total sales for the third quarter of fiscal 2010 decreased 3.4% to $183.2 million compared to $189.6 million for the third quarter last year. Total company comparable store sales declined 5.0% for the third quarter of fiscal 2010. A summary of the sales results by division was included in the October sales release.

At the end of the third quarter of fiscal 2010, the company operated 680 Hot Topic stores and 155 Torrid stores compared to 680 Hot Topic stores and 156 Torrid stores at the end of the third quarter of fiscal 2009. During the third quarter of fiscal 2010, the company opened four new Hot Topic stores and closed three stores. The company also remodeled or relocated nine Hot Topic stores during the quarter.

The company is also announcing that it has developed and is in the process of implementing a cost reduction plan to meet the challenges of the current environment. Beginning in 2011, these efforts are expected to result in an estimated annual pre-tax income improvement of approximately $13 million.

The key elements of this plan are as follows:

  1. Closure of approximately 40 to 50 underperforming store locations by the end of the first quarter of 2011. These closures will occur as a result of natural lease expirations, exercising lease kick out clauses and other negotiations. The company expects to incur costs of approximately $6 million, primarily in the fourth quarter of 2010. These costs are associated with the write down of store assets, early lease terminations and store management severance.
  2. Reduction of capital expenditures for 2011 to approximately $20 million from an estimated $30 to $32 million in 2010.
  3. Reduction of approximately 14% of the home office and field management positions plus planned savings in other non-payroll overhead expenses. The company expects to incur approximately $2 million in expenses in the fourth quarter of 2010 primarily related to severance and outplacement.

The company issued fourth quarter (13 weeks ending January 29, 2011) guidance of earnings in the range of $0.11 to $0.14 per diluted share, excluding the costs associated with the cost reduction plan. This guidance is based upon a low-single-digit decline in comparable store sales. The company expects to incur the additional costs primarily in the fourth quarter, as previously discussed related to the implementation of the cost reduction plan, that will equate to approximately $8 million or $0.11 per diluted share.


A conference call to discuss third quarter results, business trends, guidance and the cost reduction plan is scheduled for November 17, 2010 at 4:30 PM (ET). The conference call number is 800-706-7749, pass code “Hot Topic”, and will be accessible to all interested parties. It will also be webcast on the company’s Investor Relations website located at http://investorrelations.hottopic.com. A replay of the conference call will be available at 888-286-8010, pass code 29783398, for approximately two weeks. In addition, a webcast replay of the conference call will be available on the company’s Investor Relations website for approximately two weeks.

Hot Topic, Inc. is a mall and web based specialty retailer operating the Hot Topic and Torrid concepts, as well as the e-space music concept, ShockHound. Hot Topic offers music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women principally between the ages of 12 and 22. Torrid offers apparel, lingerie, shoes and accessories designed for various lifestyles for plus-size females principally between the ages of 15 and 29. ShockHound (www.shockhound.com) is a genre-spanning music website where people of all ages can purchase MP3s and music merchandise, share their music interests, read the latest music news and view exclusive editorial content.

In addition to historical information, this news release and the aforementioned conference call contain forward-looking statements, which may include statements relating to financial results, guidance, store and online operations (including closures, remodels and relocations), projections and other financial performance including cost reductions. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, fluctuations in sales and comparable store sales results, our online music site, music, license and fashion trends, competition from other retailers, uncertainties generally associated with specialty retailing, technology and other risks associated with Internet sales, the effect of negative conditions in the economic environment (including global capital and credit markets), the effect of severe weather or natural disasters, political and/or social changes or events that could negatively impact shopping patterns and/or mall traffic, relationships with mall developers and operators, relationships with our vendors, litigation proceedings and contingent liabilities, as well as other risks detailed in the company’s SEC reports including its Annual Report on Form 10-K for the year ended January 30, 2010 and its Quarterly Reports on Form 10-Q. Historical results achieved are not necessarily indicative of the future prospects of the company, and actual results or circumstances could differ materially from the forward-looking statements.


 
HOT TOPIC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
Oct. 30, 2010   Oct. 31, 2009
 
Net sales $ 183,219 $ 189,568

Cost of goods sold, including buying, distribution and occupancy costs

118,669 119,674
Gross margin 64,550 69,894
Selling, general & administrative expenses 64,229 60,260
Income from operations 321 9,634
Interest income-net 114 93
Income before income taxes 435 9,727
Provision for income taxes 45 3,878
Net income $ 390 $ 5,849
 
Earnings per share:
Basic and Diluted $ 0.01 $ 0.13

Shares used in computing earnings per share:

Basic 44,616 44,143
Diluted 44,662 44,497
 
 
Nine Months Ended
Oct. 30, 2010 Oct. 31, 2009
 
Net sales $ 495,873 $ 522,485

Cost of goods sold, including buying, distribution and occupancy costs

330,838 342,803
Gross margin 165,035 179,682
Selling, general & administrative expenses 178,066 173,622
(Loss)income from operations (13,031 ) 6,060
Interest income-net 246 446
(Loss) income before (benefit) provision

for income taxes

(12,785 ) 6,506
(Benefit) provision for income taxes (5,128 ) 2,609
Net (loss) income $ (7,657 ) $ 3,897
 
(Loss) earnings per share:
Basic and Diluted $ (0.17 ) $ 0.09

Shares used in computing (loss) earnings per share:

 

Basic 44,526 44,069
Diluted 44,526 44,413
 

 
HOT TOPIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  Oct. 30, 2010   Oct. 31, 2009
Current Assets:
Cash, cash equivalents and short-term

investments

$ 57,952 $ 91,424
Inventory 90,743 91,393
Prepaid expenses and other 22,421 14,503
Deferred tax assets 6,036 6,183
Total current assets 177,152 203,503
Property and equipment, net 130,522 145,253
Deposits and other 4,258 3,129
Long-term investments 2,480 8,184
Deferred tax assets 6,113 8,834
Total assets $ 320,525 $ 368,903
 
Current Liabilities:
Accounts payable $ 29,785 $ 27,932
Accrued liabilities 35,023 34,222
Income taxes payable 538 654
Total current liabilities 65,346 62,808
Deferred rent 28,594 33,219
Deferred compensation liability 4,094 2,924
Income taxes payable 2,380 1,850
Total liabilities 100,414 100,801
Total shareholders’ equity 220,111 268,102
Total liabilities and shareholders’ equity $ 320,525 $ 368,903
 
 
OTHER DATA
(Dollars in thousands)
(Unaudited)
 
  Nine Months Ended
Oct. 30, 2010   Oct. 31, 2009
Depreciation and amortization $ 29,397 $ 28,438
Capital expenditures $ 23,739 $ 19,518
 
Total company store square footage 1,585,000 1,584,000
Hot Topic average store size 1,762 1,757
Torrid average store size 2,496 2,495
 

CONTACT:
Hot Topic, Inc., City of Industry, CA
Jim McGinty, CFO
626-839-4681 x2675

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