EX-99.2 2 a08-20693_2ex99d2.htm EX-99.2

EXHIBIT 99.2

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION AS OF AND FOR EACH OF THE THREE FISCAL YEARS ENDED FEBRUARY 2, 2008

 

As previously reported, Hoop Retail Stores, LLC and Hoop Canada, Inc. (collectively, “Hoop”) and The Children’s Place Services Company, LLC, each a subsidiary of The Children’s Place Retail Stores, Inc. (the “Company”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with affiliates of The Walt Disney Company, T2 Acquisition , LLC and T1 WDC Inc., to transfer a substantial portion of the Disney Store business and assets to Disney (the “Private Sale”), subject to approval by the U.S. Bankruptcy Court and the Canadian Bankruptcy Court on April 23, 2008 and April 24, 2008, respectively, and closed on April 30, 2008. On April 30, 2008, Disney paid approximately $64 million for the acquired assets of the Disney Store business, subject to a post-closing inventory and asset adjustment.

 

The following unaudited pro forma condensed consolidated balance sheet as of February 2, 2008 and the unaudited pro forma condensed consolidated statements of operations for the three fiscal years ended February 2, 2008 and the accompanying notes, have been prepared to illustrate the effect of the Private Sale.

 

The unaudited pro forma condensed consolidated statement of operations for the three fiscal years ended February 2, 2008 has been presented as if the Company had discontinued operations of the Disney Stores as of January 29, 2005. The “Historical” column represents the consolidated financial statements reported in the Company’s Annual Report filed on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2008.  When the Company filed its Annual Report on Form 10-K, it had not met the criteria to report the Disney Stores as a discontinued operation. The unaudited pro forma condensed consolidated balance sheet as of February 2, 2008 assumes that the Private Sale was completed on that date.

 

In the opinion of management, the accompanying pro forma condensed consolidated financial statements include all material adjustments necessary to reflect, on a pro forma basis, to illustrate the effect of the Private Sale. The adjustments are described in the notes to the unaudited pro forma condensed consolidated financial information and are set forth in the “Pro Forma” adjustments column. The unaudited pro forma condensed consolidated financial statements should be read together with the consolidated financial statements filed by the Company in a Current Report on Form 8-K filed with SEC on August 6, 2008 for the purpose of providing audited consolidated financial statements as of February 2, 2008 and for the two years ended February 2, 2008 to reflect the Disney Stores as a discontinued operation as well as the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2008.  Additionally, the Company reported its financial results with the Disney Stores as a discontinued operation for the thirteen weeks ended May 3, 2008 in its Quarterly Report on Form 10-Q which was filed with the SEC on June 12, 2008.

 

The unaudited pro forma condensed consolidated financial information has been presented for informational purposes only and should not be relied upon as being indicative of the results of operations or financial position of the Company that would have occurred had the Company completed the Private Sale as of and for the periods presented. Actual results may have differed.

 

1


 

THE CHILDREN'S PLACE RETAIL STORES INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED FEBRUARY 2, 2008

(In millions, except per share and share amounts)

 

 

 

Historical

 

Discontinued
Operations

 

Pro Forma
Continuing
Operations

 

Net sales

 

$

2,162.6

 

$

642.2

 

$

1,520.4

 

Cost of sales

 

1,364.1

 

439.9

 

924.2

 

 

 

 

 

 

 

 

 

Gross profit

 

798.5

 

202.3

 

596.2

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

807.5

 

305.9

 

501.6

 

Depreciation and amortization

 

79.7

 

14.4

 

65.3

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

(88.7

)

(118.0

)

29.3

 

Interest (expense) income, net

 

(0.1

)

0.3

 

(0.4

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(88.8

)

(117.7

)

28.9

 

(Benefit) provision for income taxes

 

(29.2

)

(48.1

)

18.9

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(59.6

)

$

(69.6

)

$

10.0

 

 

 

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

 

 

Basic

 

$

(2.05

)

 

 

$

0.34

 

Diluted

 

$

(2.05

)

 

 

$

0.34

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding (in thousands)

 

 

 

 

 

 

 

Basic

 

29,090

 

 

 

29,090

 

Diluted

 

29,090

 

 

 

29,648

 

 

See accompanying notes to these pro forma condensed consolidated financial statements

 

2


 

THE CHILDREN'S PLACE RETAIL STORES INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2007

(In millions, except per share and share amounts)

 

 

 

Historical

 

Discontinued
Operations

 

Pro Forma
Continuing
Operations

 

Net sales

 

$

2,017.7

 

$

612.3

 

$

1,405.4

 

Cost of sales

 

1,189.3

 

394.3

 

795.0

 

 

 

 

 

 

 

 

 

Gross profit

 

828.4

 

218.0

 

610.4

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

643.3

 

207.2

 

436.1

 

Depreciation and amortization

 

65.7

 

7.7

 

58.0

 

 

 

 

 

 

 

 

 

Operating income

 

119.4

 

3.1

 

116.3

 

Interest income, net

 

3.9

 

1.2

 

2.7

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

123.3

 

4.3

 

119.0

 

Provision for income taxes

 

35.9

 

1.2

 

34.7

 

 

 

 

 

 

 

 

 

Net income

 

$

87.4

 

$

3.1

 

$

84.3

 

 

 

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

 

 

Basic

 

$

3.03

 

 

 

$

2.92

 

Diluted

 

$

2.92

 

 

 

$

2.82

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding (in thousands)

 

 

 

 

 

 

 

Basic

 

28,828

 

 

 

28,828

 

Diluted

 

29,907

 

 

 

29,907

 

 

See accompanying notes to these pro forma condensed consolidated financial statements

 

3


 

THE CHILDREN'S PLACE RETAIL STORES INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED JANUARY 28, 2006

(In millions, except per share and share amounts)

 

 

 

Historical

 

Discontinued
Operations

 

Pro Forma
Continuing
Operations

 

Net sales

 

$

1,668.7

 

$

497.7

 

$

1,171.0

 

Cost of sales

 

1,008.7

 

345.0

 

663.7

 

 

 

 

 

 

 

 

 

Gross profit

 

660.0

 

152.7

 

507.3

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

514.2

 

159.2

 

355.0

 

Depreciation and amortization

 

52.9

 

1.6

 

51.3

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

92.9

 

(8.1

)

101.0

 

Interest (expense) income, net

 

0.6

 

1.3

 

(0.7

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes (benefit) and extraordinary gain

 

93.5

 

(6.8

)

100.3

 

Provision (benefit) for income taxes

 

35.2

 

(2.6

)

37.8

 

 

 

 

 

 

 

 

 

Net income (loss) before extraordinary gain

 

$

58.3

 

$

(4.2

)

$

62.5

 

 

 

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

 

 

Basic

 

$

2.11

 

 

 

$

2.26

 

Diluted

 

$

2.03

 

 

 

$

2.18

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding (in thousands)

 

 

 

 

 

 

 

Basic

 

27,676

 

 

 

27,676

 

Diluted

 

28,687

 

 

 

28,687

 

 

See accompanying notes to these pro forma condensed consolidated financial statements

 

4


 

THE CHILDREN'S PLACE RETAIL STORES INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF FEBRUARY 2, 2008

(In millions, except shares issued, authorized and outstanding)

 

 

 

Historical

 

Pro Forma
Adjustments

 

Pro Forma

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

82.1

 

$

63.6

 

(1)

$

145.7

 

Accounts receivable

 

45.7

 

(4.6

)

(1)

41.1

 

Inventories

 

285.3

 

(88.7

)

(1)

196.6

 

Prepaid expenses and other current assets

 

97.8

 

(4.9

)

(1)

 

 

 

 

 

 

(8.0

) 

(2)

142.1

 

Total current assets

 

510.9

 

(42.6

) 

525.5

 

Long-term assets:

 

 

 

 

 

 

 

Property and equipment, net

 

357.4

 

(3.3

) 

(1)

354.1

 

Deferred income taxes

 

125.3

 

—

 

 

125.3

 

Other assets

 

3.9

 

(0.8

) 

(1)

3.1

 

Total assets

 

$

997.5

 

$

(46.7

)

$

950.8

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Revolving loan

 

$

89.0

 

$

—

 

$

89.0

 

Accounts payable

 

80.8

 

—

 

80.8

 

Accrued expenses, interest, and other current liabilities

 

140.7

 

—

 

140.7

 

Total current liabilities

 

310.5

 

—

 

310.5

 

Long-term liabilities:

 

 

 

 

 

 

 

Deferred rent liabilities

 

136.7

 

(14.8

) 

(1)

121.9

 

Deferred royalty

 

43.0

 

(43.0

) 

(1)

—

 

Other long-term liabilities

 

35.1

 

—

 

35.1

 

Total liabilities

 

525.3

 

(57.8

)

467.5

 

COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

Common stock, $0.10 par value, 100,000,000 shares authorized, 29,139,664 issued and outstanding at February 2, 2008

 

2.9

 

—

 

2.9

 

Additional paid-in capital

 

195.6

 

—

 

195.6

 

Accumulated other comprehensive income

 

13.9

 

—

 

13.9

 

Retained earnings

 

259.8

 

19.1

 

(1)

 

 

 

 

 

 

(8.0

) 

(2)

270.9

 

Total stockholders’ equity

 

472.2

 

11.1

 

483.3

 

Total liabilities and stockholders’ equity

 

$

997.5

 

$

(46.7

)

$

950.8

 

 

See accompanying notes to these pro forma condensed consolidated financial statements

 

5


 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

BASIS OF PRESENTATION

 

As previously reported, on April 30, 2008, Hoop Retail Stores, LLC and Hoop Canada, Inc. (collectively, “Hoop”) and The Children’s Place Services Company, LLC, each a subsidiary of the Company, transferred a substantial portion of the Disney Store business and assets (the “Private Sale”) to affiliates of The Walt Disney Company, T2 Acquisition, LLC and T1 WDC Inc. (collectively, “Disney”).

 

The Private Sale was completed after receiving the approval of the bankruptcy courts in the United States and Canada, pursuant to section 363 in the United States Bankruptcy Code and similar provisions under the CCAA (as defined below). On March 26, 2008, Hoop Holdings, LLC, Hoop Retail Stores, LLC and Hoop Canada Holdings, Inc. each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “U.S. Bankruptcy Court”). On March 27, 2008, Hoop Canada, Inc. filed for protection pursuant to the Companies’ Creditors Arrangement Act (the “CCAA”) in the Ontario Superior Court of Justice (Commercial List) (“Canadian Bankruptcy Court”). Each of the foregoing Hoop entities are referred to collectively herein as the “Hoop Entities”.

 

On April 30, 2008, Disney paid approximately $64 million for the acquired assets of the Disney Store business, subject to a post-closing inventory and asset adjustment. Approximately $6.0 million of the purchase price was held in escrow for such true-up purposes. The proceeds received from the Private Sale will be utilized to settle the liabilities of the Hoop Entities as “debtors-in-possession” under the jurisdiction of the U.S. Bankruptcy Court or Canadian Bankruptcy Court, as applicable. According to the terms of the Private Sale, Hoop transferred 217 Disney Stores to affiliates of Disney and granted such affiliates the right to operate and wind-down the affairs of the remaining Disney Stores for a specified time period, after which Disney may choose to return such stores to the Hoop Entities’ bankruptcy estate for treatment as approved by the relevant bankruptcy court.

 

PRO FORMA ADJUSTMENTS

 

The historical Consolidated Statements of Operation for the three fiscal years ended February 2, 2008 have been adjusted to reverse its allocation of shared services to the Disney Stores and to charge administrative and distribution expenses that were attributable to the Disney Stores, as well as professional and legal fees incurred related to the reorganization and bankruptcy of Hoop. No pro forma adjustment for interest was required because interest was charged /credited directly to the Disney Stores in the historical financial statements.

 

The historical Consolidated Balance Sheet as of February 2, 2008 has been adjusted to give pro forma effect to the Private Sale.  The balance sheet pro forma adjustments include the following:

 

(1)

 

To record the assets transferred to Disney in the Private Sale for $64.0 million in cash, net of $0.4 million of store register funds, to write-off deferred royalties, and to write-off of deferred rent liabilities for stores leases acquired in the Private Sale; and

(2)

 

To record the related tax effect of the Private Sale.

 

 

6


 

The following table reconciles the cash received to the pro forma gain on the Private Sale:

 

Cash received for assets sold

 

$

64.0

 

Assets sold:

 

 

 

Store register funds

 

(0.4

)

Accounts receivable

 

(4.6

)

Inventory

 

(88.7

)

Prepaids and other current assets

 

(4.9

)

Property and equipment, net

 

(3.3

)

Other assets

 

(0.8

)

Write off of deferred rent and deferred royalties

 

57.8

 

Pro forma gain before income taxes

 

19.1

 

Income taxes

 

8.0

 

Net pro forma gain

 

$

11.1

 

 

7