-----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, JwhihNYv6Bvh4y+r4t+X9w8we1A0ui25yb5EbkV5h2EVi/59utyP6w3QsNA5YzHi qtUkn8hMvfB8x5QrJU2cJg== 0000899681-05-000306.txt : 20050414 0000899681-05-000306.hdr.sgml : 20050414 20050413174110 ACCESSION NUMBER: 0000899681-05-000306 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050412 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050414 DATE AS OF CHANGE: 20050413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHILDRENS PLACE RETAIL STORES INC CENTRAL INDEX KEY: 0001041859 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 311241495 FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23071 FILM NUMBER: 05749107 BUSINESS ADDRESS: STREET 1: 915 SECAUCUS RD CITY: SECAUCUS STATE: NJ ZIP: 07094 BUSINESS PHONE: 2015582400 MAIL ADDRESS: STREET 1: 915 SECAUCUS RD CITY: SECAUCUS STATE: NJ ZIP: 07094 8-K 1 children-8k_041305.txt 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) APRIL 12, 2005 THE CHILDREN'S PLACE RETAIL STORES, INC. ______________________________________________________________________________ (Exact name of registrant as specified in its charter) DELAWARE 0-23071 31-1241495 -------- -------- ----------- (State or other jurisdiction (Commission (IRS Employer ID of incorporation) File Number) Number) 915 SECAUCUS ROAD, NEW JERSEY 07094 ______________________________________________________________________________ (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 558-2400 ______________________________________________________________________________ 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: [ ] 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 On April 13, 2005, The Children's Place Retail Stores, Inc. (the "Company") announced that it completed its previously announced analysis of its leases-related accounting practices and concluded that certain of these accounting practices were incorrect and should be changed. As a result, the Company announced that it is restating its financial results for fiscal 2002 and fiscal 2003, and its previously filed financial results should no longer be relied upon. In its announcement, the Company included updated financial information, giving effect to these changes, for the fourth quarter and fiscal year ended January 29, 2005 as well as certain restated financial information for the fiscal years ended January 31, 2004 and February 1, 2003. The Company stated that full financial results for these fiscal years would be included in the Company's Form 10-K for the year ended January 29, 2005 to be filed with the Securities and Exchange Commission. Additional information about the change in the Company's accounting practices and its restatement of its financial results is set forth below in Item 4.02 and Item 8.01. A copy of the Company's April 13, 2005 press release is attached as Exhibit 99.1. ITEM 4.02. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW. On March 10, 2005, The Children's Place Retail Stores, Inc. (the "Company") reported preliminary unaudited financial results for the fourth quarter and fiscal year ended January 29, 2005 ("fiscal 2004"). In this report, the Company noted that such preliminary results excluded the effect of any potential corrections to the Company's lease-related accounting practices. At that time, the Company stated that, like many other companies, it was engaged in an evaluation of its lease-related accounting practices in light of a recent clarification from the Securities and Exchange Commission ("SEC") and that, while this evaluation had not been completed, and therefore no decisions had been made, management believed that a restatement of the Company's previously issued financial statements was likely. On April 12, 2005, the Company completed its analysis and reviewed the results with its audit committee and independent registered public accounting firm. The Company has concluded that certain of its lease-related accounting practices were incorrect. Therefore, the Company is restating its financial results, and advises users that such financial results contained in the Company's prior filings with the SEC should no longer be relied upon. Restated results for the years ended January 31, 2004 and February 1, 2003 will be included in the Company's Annual Report on Form 10-K for the year ended January 29, 2005 to be filed with the SEC. Under FASB Technical Bulletin 88-1, "Issues Related to Accounting for Leases," lease incentives such as landlord construction allowances received to defray construction costs incurred by the Company should be reflected as a deferred lease incentive, amortized over the lease term and reflected as a reduction to rent expense. The Company had previously classified landlord construction allowances as a reduction to property and equipment instead of as a deferred lease incentive. The Company has corrected its accounting policy to treat landlord construction allowances as deferred lease incentives. In addition, under the requirements of FASB Technical Bulletin 85-3, "Accounting for Operating Leases with Scheduled Rent Increases," rent expense is required to be recognized on a straight-line basis over the lease term. In prior periods, the Company had incorrectly determined that the term of the lease begins on the commencement date of the lease, which generally coincides with the store opening date. The Company has corrected this policy to properly commence the lease for accounting purposes when the Company takes physical possession of the property to begin construction. This has the effect of including the construction period in the determination of the period over which rent is calculated. The Company continues to capitalize occupancy costs incurred prior to the commencement of store pre-opening activities. These capitalized costs are amortized over the remaining lease term. The net effect of this correction was to decrease rent expense with a corresponding increase in depreciation expense and to increase the amount of deferred rent liability with the corresponding increase in leasehold improvements. Additional information about these restatements and corrections is contained under Item 8.01 below. ITEM 8.01 OTHER EVENTS As a result of the correction to its accounting for leases, the Company is revising its previously-announced preliminary unaudited fourth quarter and fiscal 2004 financial results due to the recording of additional lease incentive income of $16,000 after tax. As a result, the Company is now reporting net income of $24.0 million, or diluted net income per share of $0.85 and diluted income before extraordinary gain per share of $0.84 for the fourth quarter of fiscal 2004. For the full fiscal 2004, net income was $43.3 million, or diluted net income per share of $1.57 and diluted income before extraordinary gain per share of $1.56. On a restated basis, net income for the year ended January 31, 2004 ("fiscal 2003") and for the year ended February 1, 2003 ("fiscal 2002") was $22.9 million, or diluted net income per share of $0.85, and $8.1 million, or diluted net income per share of $0.30, respectively. In addition to the changes in net income, net property and equipment, total assets, total liabilities and total stockholders' equity as of January 29, 2005 were $222.7 million, $627.4 million, $315.7 million and $311.7 million, respectively. As of January 31, 2004, restated net property and equipment, total assets, total liabilities and total stockholders' equity were $211.5 million, $426.2 million, $170.1 million and $256.1 million, respectively. While the correction of the errors did not change total cash flows, changes in classification were made in the consolidated statement of cash flows from cash flows provided by investing activities to cash flows provided by operating activities. For fiscal 2004, fiscal 2003 (as restated) and fiscal 2002 (as restated), cash flows provided by operating activities approximated $212.9 million, $80.0 million and $58.3 million, respectively. Additionally, cash flows used in investing activities for fiscal 2004, fiscal 2003 (as restated) and fiscal 2002 (as restated) approximated $168.9 million, $43.5 million and $69.2 million, respectively. The Company's revised unaudited financial information for the fourth quarter and fiscal year ended January 29, 2005 and restated financial information for the fiscal year ended January 31, 2004 are attached hereto as Exhibit 99.1. The Company reaffirms its adjusted earnings per share guidance of $2.10 to $2.20 for the fiscal year ending January 28, 2006 ("fiscal 2005"), which excludes the effects of the remaining $1.2 million non-cash charge related to acquired Disney Store inventory, which will be reflected in the Company's first quarter of fiscal 2005 financial results, and the effect of new accounting rules requiring the expensing of stock options. The Company plans to initiate the expensing of stock options prospectively beginning in the third quarter of fiscal 2005, in accordance with the requirements of FASB Statement No. 123R. In addition, the Company is reaffirming its guidance regarding investments in capital expenditures and landlord construction allowances. The Company continues to expect to invest approximately $110 million in capital expenditures and to receive $10 million in landlord construction allowances in fiscal 2005, for net capital-related expenditures of $100 million. FORWARD-LOOKING STATEMENTS This Form 8-K report contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as "expect," "anticipate," "believe," "estimate," "intend," "plan," and similar expressions also identify forward-looking statements. Forward-looking statements include statements regarding estimated net income on a restated basis. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause the Company's actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the risk that additional information may arise from the preparation of the Company's financial statements or other subsequent events that would require the Company to make additional adjustments. SECTION 9 FINANCIAL STATEMENTS AND EXHIBITS ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (a) Exhibits: Exhibit 99.1 -- Press Release dated April 13, 2005 Exhibit 99.2 -- The Children's Place Retail Stores, Inc. and Subsidiaries Unaudited Financial Statements for Fourth Quarter and Fiscal Year 2004 (Revised). [Remainder of page intentionally left blank; signature on following page.] SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE CHILDREN'S PLACE RETAIL STORES, INC. By: /S/ SETH L. UDASIN --------------------- Name: Seth L. Udasin Title: Vice President and Chief Financial Officer Dated: April 13, 2005 INDEX TO EXHIBITS Current Report on Form 8-K dated April 12, 2005 The Children's Place Retail Stores, Inc. Exhibit 99.1 Press Release dated April 13, 2005. Exhibit 99.2 The Children's Place Retail Stores, Inc. and Subsidiaries Unaudited Financial Information for Fourth Quarter and Fiscal Year 2004 (Revised). EX-99 2 children-ex991_041305.txt EXHIBIT 99.1 THE CHILDREN'S PLACE FOR IMMEDIATE RELEASE - --------------------- THE CHILDREN'S PLACE RETAIL STORES, INC. REPORTS RESULTS OF LEASE-RELATED ACCOUNTING ASSESSMENT PREVIOUSLY REPORTED FOURTH QUARTER & FISCAL 2004 EARNINGS PER SHARE REMAIN UNCHANGED ~ SECAUCUS, NEW JERSEY - APRIL 13, 2005 - THE CHILDREN'S PLACE RETAIL STORES, INC. (NASDAQ: PLCE), today announced that it has completed its previously announced analysis of its lease-related accounting practices in light of an SEC clarification in February. Upon review of the results with its audit committee and independent auditors, the Company has concluded that certain of its accounting practices relating to leases were incorrect and should be changed. These accounting corrections do not materially impact fiscal 2003 net income and, as anticipated, do not materially impact fiscal 2004 net income. All related adjustments are detailed below, and final fourth quarter and fiscal year income statements and balance sheets for fiscal 2004 and fiscal 2003 are attached. Also as expected, these corrections do not impact the Company's current fiscal 2005 adjusted earnings per share guidance of $2.10 to $2.20, which excludes the effects of a non-cash item associated with the Disney Store acquisition and new accounting rules requiring the expensing of stock options. The Company continues to believe that fiscal 2005 net capital-related expenditures will approximate $100 million, comprised of capital expenditures of $110 million and landlord construction allowances of $10 million. As a result of these corrections, the Company is restating its financial results for fiscal 2002 and fiscal 2003, and advises users that its previously filed financial results should no longer be relied upon. The Company is filing a Form 8-K today that describes the lease-related accounting corrections in more detail. Restated results for the years ended January 31, 2004 and February 1, 2003 will be included in the Company's Form 10-K for the year ended January 29, 2005 to be filed with the Securities and Exchange Commission. LEASE-RELATED ACCOUNTING PRACTICES Historically, when the Company received landlord construction allowances, they were classified on the balance sheet as a reduction of property and equipment and then amortized as a reduction of depreciation expense over the estimated useful life of the property. Consistent with the SEC clarification, the Company will now account for landlord construction allowances as lease incentives and record them as deferred liabilities, which are amortized as a reduction of rent expense over the lease term. In addition, the Company has revised its treatment of occupancy costs during construction. Historically, the Company had incorrectly determined that the term of the lease begins on the commencement date of the lease, which generally coincides with the store opening date. The Company has corrected this policy to properly commence the lease once it takes physical possession of the property, which has the effect of including the construction phase in the period over which rent is calculated. The Company continues to capitalize occupancy costs incurred prior to the commencement of store pre-opening activities. These capitalized costs are amortized over the remaining lease term. The net effect was to decrease rent expense with a corresponding increase in depreciation expense, and to increase the amount of deferred rent liability with a corresponding increase in leasehold improvements. As a result of these lease accounting corrections, the Company is increasing its previously announced fourth quarter, and therefore, fiscal 2004 net income by $16,000. As a result, there is no change to the Company's previously reported earnings per share amounts for the fourth quarter and full fiscal 2004 periods. In addition, the Company is decreasing its previously reported fiscal 2003 net income by $52,000, which does not change earnings per share for that period. Fiscal 2002 net income decreased by $853,000, or $0.03 per share. - more - PLCE: ANNOUNCES LEASE ACCOUNTING CORRECTIONS PAGE 2 The impact of the lease-related accounting corrections on the Company's January 29, 2005, consolidated balance sheet is an increase in net property and equipment of approximately $69.6 million, an increase in total assets of $71.4 million, an increase in total liabilities of $72.3 million and a decrease in stockholders' equity of $0.9 million. The impact on the Company's January 31, 2004, consolidated balance sheet is an increase in net property and equipment of approximately $64.8 million, an increase in total assets of $66.5 million, an increase in total liabilities of $67.5 million, and a decrease in stockholders' equity of $0.9 million. While the corrections did not change total cash flows, they have changed the classification of landlord construction allowances received from a reduction of cash flows used in investing activities to an increase in cash flows provided by operating activities. For the fiscal years ended January 29, 2005, January 31, 2004 (as restated), and February 1, 2003 (as restated), cash flows provided by operating activities approximated $212.9 million, $80.0 million and $58.3 million, respectively. Additionally, cash flows used in investing activities for those same fiscal years approximated $168.9 million, $43.5 million and $69.2 million, respectively. Please refer to the attached income statements for the quarter and year and consolidated balance sheets for ABOUT THE CHILDREN'S PLACE RETAIL STORES, INC. The Children's Place Retail Stores, Inc. is a leading specialty retailer of children's merchandise. The Company designs, contracts to manufacture and sells high-quality, value-priced merchandise under the proprietary "The Children's Place" and licensed "Disney Store" brand names. As of April 1, 2005, the Company owned and operated 752 The Children's Place stores in North America, 306 Disney Stores in North America and its online store, www.childrensplace.com. USE OF NON-GAAP MEASURES The Company is providing adjusted financial information as an addition to, and not as a substitute for, financial measures presented in accordance with generally accepted accounting principles ("GAAP"). To facilitate the analysis of net income, the Company adjusted its fourth quarter and fiscal 2004 net income to exclude a non-cash item and an extraordinary gain, both associated with the Company's November 2004 acquisition of Disney Store North America. The Company has excluded such items because it does not believe they are indicative of the core business and believes that the adjusted presentation is a beneficial supplemental disclosure to investors in analyzing its past and future performance. Such presentation is a non-GAAP measure, and a reconciliation to net income under accounting principles generally accepted in the United States is attached. Adjusted net income and adjusted earnings per share are "Non-GAAP financial measures" as defined by the Securities and Exchange Commission, and may differ from non-GAAP financial measures used by other companies. THIS PRESS RELEASE MAY CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS REGARDING FUTURE CIRCUMSTANCES. THESE FORWARD-LOOKING STATEMENTS ARE BASED UPON THE COMPANY'S CURRENT EXPECTATIONS AND ASSUMPTIONS AND ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS INCLUDING, IN PARTICULAR, THE RISKS AND UNCERTAINTIES DESCRIBED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. ACTUAL RESULTS, EVENTS, AND PERFORMANCE MAY DIFFER. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. THE INCLUSION OF ANY STATEMENT IN THIS RELEASE DOES NOT CONSTITUTE AN ADMISSION BY THE CHILDREN'S PLACE OR ANY OTHER PERSON THAT THE EVENTS OR CIRCUMSTANCES DESCRIBED IN SUCH STATEMENT ARE MATERIAL. CONTACT: The Children's Place Seth Udasin, Chief Financial Officer, (201) 558-2409 Heather Anthony, Director, Investor Relations, (201) 558-2865 EX-99 3 children-ex992_041305.txt EXHIBIT 99.2 EXHIBIT 99.2 THE CHILDREN'S PLACE RETAIL STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) 13 Weeks Ended: ---------------------------- January 29, January 31, 2005 2004 ----------- ------------- (As restated) Net sales $ 462,108 $ 234,569 Cost of sales 281,659 131,663 ----------- -------------- Gross profit 180,449 102,906 Selling, general and administrative expenses 128,982 65,922 Asset impairment charges 164 448 Depreciation and amortization 13,383 12,753 ----------- -------------- Operating income 37,920 23,783 Interest expense (income), net 176 (127) ----------- -------------- Income before income taxes and extraordinary gain 37,744 23,910 Provision for income taxes 14,042 8,787 ----------- -------------- Income before extraordinary gain 23,702 15,123 Extraordinary gain (net of taxes) 273 -- ----------- -------------- Net income $ 23,975 $ 15,123 =========== ============== Basic income per share $ 0.89 $ 0.57 Basic weighted average number of shares outstanding 27,076 26,726 Diluted income per share before extraordinary gain $ 0.84 $ 0.55 Diluted income per share $ 0.85 $ 0.55 Diluted weighted average number of shares outstanding 28,106 27,510 THE CHILDREN'S PLACE RETAIL STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) 52 Weeks Ended: ---------------------------- January 29, January 31, 2005 2004 ----------- ------------- (As restated) Net sales $ 1,157,548 $ 797,938 Cost of sales 705,681 476,961 ----------- -------------- Gross profit 451,867 320,977 Selling, general and administrative expenses 329,916 235,415 Asset impairment charges 164 448 Depreciation and amortization 51,835 48,700 ----------- -------------- Operating income 69,952 36,414 Interest expense (income), net 22 (255) ----------- -------------- Income before income taxes and extraordinary gain 69,930 36,669 Provision for income taxes 26,923 13,764 ----------- -------------- Income before extraordinary gain 43,007 22,905 Extraordinary gain (net of taxes) 273 -- ----------- -------------- Net income $ 43,280 $ 22,905 =========== ============== Basic income per share $ 1.61 $ 0.86 Basic weighted average number of shares outstanding 26,919 26,646 Diluted income per share before extraordinary gain $ 1.56 $ 0.85 Diluted income per share $ 1.57 $ 0.85 Diluted weighted average number of shares outstanding 27,633 27,099 THE CHILDREN'S PLACE RETAIL STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) January 29, 2005 January 31, 2004 ------------------ ------------------ (As restated) Current assets: Cash and cash equivalents $ 165,196 $ 74,772 Accounts receivable 23,987 8,462 Inventories 161,969 96,128 Other current assets 41,007 20,070 ------------------ ------------------ Total current assets 392,159 199,432 Property and equipment, net 222,722 211,454 Other assets, net 12,507 15,317 ------------------ ------------------ Total assets $ 627,388 $ 426,203 ================== ================== Current liabilities: Revolving credit facility $ 37,268 $ 0 Accounts payable 78,106 35,173 Accrued expenses and other current liabilities 99,575 49,984 ------------------ ------------------ Total current liabilities 214,949 85,157 Deferred rent liabilities 91,111 81,644 Other liabilities 9,665 3,317 ------------------ ------------------ Total liabilities 315,725 170,118 Total Stockholders' equity 311,663 256,085 ------------------ ------------------ Total liabilities and stockholders' equity $ 627,388 $ 426,203 ================== ================== -----END PRIVACY-ENHANCED MESSAGE-----