EX-99.1 2 v133036_ex99-1.htm Unassociated Document
 
FOR IMMEDIATE RELEASE 

THE CHILDREN’S PLACE RETAIL STORES, INC. REPORTS
THIRD QUARTER 2008 FINANCIAL RESULTS

Secaucus, New Jersey - November 20, 2008 - The Children’s Place Retail Stores, Inc. (Nasdaq: PLCE) today reported financial results for the third quarter and fiscal year-to-date ended November 1, 2008. Results from continuing operations for the third quarters and fiscal year-to-date periods ended November 1, 2008 and November 3, 2007 are based on The Children’s Place business only. The Disney Store North America (“DSNA”) business has been classified as a discontinued operation in accordance with generally accepted accounting principles (“GAAP”) reflecting the Company’s exit of the business.

Third Quarter

 
·
Net sales from continuing operations for the third quarter increased 5% to $450.6 million, compared to $430.6 million in the third quarter of 2007.
 
·
Comparable store sales increased 2% in the third quarter of 2008 on top of a 1% increase for the same period last year.
 
·
Income from continuing operations after tax was $28.4 million, or $0.96 earnings per share, in the third quarter of 2008, compared to $14.9 million, or $0.51 per share, in the third quarter of 2007. The Company’s third quarter income from continuing operations included several items which the Company deems to be unusual or one-time in nature, including:
·
In the third quarter of 2008, income of $5.9 million pre-tax, primarily from transition services being provided to the acquirer of the DSNA business; and
·
In the third quarter of 2007, severance expense of $4.0 million pre-tax, professional and legal fees of $2.3 million pre-tax associated with the Company’s 2006 stock option investigation and related restatements, stock option tolling expense of $0.3 million pre-tax and fees for the review of strategic alternatives of $0.1 million pre-tax.
 
·
Excluding the unusual or one-time items mentioned above from the third quarters of both years, adjusted income from continuing operations after tax was $24.9 million, or $0.84 earnings per share, in the third quarter of 2008, compared to $19.4 million, or $0.66 per share, in the third quarter of 2007. The third quarter income from continuing operations excluding these items is a non-GAAP measure. The Company believes the excluded items are not indicative of the performance of its core business and that by providing this supplemental disclosure to investors it will facilitate comparisons of its past and present performance. A reconciliation of income from continuing operations as reported is included in this press release in Table 3.
 
·
Net income, including the impact of discontinued operations, was $24.1 million in the third quarter of 2008, or $0.81 earnings per share, compared to $12.3 million, or $0.42 per share, for the same period last year.
 
·
During the third quarter, the Company opened 19 stores and closed one.
 
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PLCE - Third Quarter 2008 Financial Results
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Fiscal Year-to-Date
 
·
Net sales from continuing operations increased 10% to $1,188.9 million, for fiscal year-to-date 2008, compared to $1,077.1 million for the same period of 2007.
 
·
Comparable store sales increased 5% year-to-date 2008 on top of a 1% increase for the same period last year.
 
·
Income from continuing operations after tax was $50.6 million, or $1.72 earnings per share, year-to-date 2008, compared to $14.2 million, or $0.49 per share, for the same period last year.
 
·
Excluding the unusual or one-time items from both years, income from continuing operations after tax was $44.7 million, or $1.52 earnings per share, year-to-date 2008, compared to $22.1 million, or $0.74 per share, for the same period last year. As previously noted, this is a non-GAAP measure which the Company is providing as a supplemental disclosure.
 
·
Net income, including the impact of discontinued operations, was $43.6 million, or $1.48 earnings per share, year-to-date 2008, compared to a loss of $1.1 million, or $0.04 loss per share, for the same period last year.
 
·
Year-to-date, the Company opened 22 stores and closed six.

Chuck Crovitz, Interim Chief Executive Officer of The Children’s Place Retail Stores, Inc., commented, “We were pleased with our sales and earnings growth during the third quarter, in spite of the weakening economic conditions and reduced shopper traffic. We believe our positive results are attributable to the strength of The Children’s Place brand - which offers great color, outfitting and fashion at a tremendous value - as well as the many actions the Company has taken over the past year to reduce inventory levels, right-size our cost structure, strengthen the balance sheet and refocus efforts on our core The Children’s Place brand.

“We believe The Children’s Place is uniquely well-positioned for this economy as we offer parents the fashion and value they are looking for, coupled with an excellent customer experience to help expedite and simplify their holiday shopping. However, we expect this holiday season to be a very challenging one as the macroeconomic environment remains weak and is impacting consumers’ purchasing power.”

The Children’s Place will host a conference call to discuss its third quarter results today at 10:00 a.m. Eastern Time. Interested parties are invited to listen to the call by dialing 1-800-894-5910 and providing the Conference ID, PLCE. The call will also be webcast live and can be accessed via the Company’s web site, www.childrensplace.com. A replay of the call will be available approximately one hour after the conclusion of the call, until midnight on November 27, 2008. To access the replay, dial 1-800-753-9146, or you may listen to the audio archive on the Company’s website.

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” brand name. As of November 1, 2008, the Company owned and operated 920 stores and an online store at www.childrensplace.com.
 
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This press release (and above referenced call) 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. Some of these risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission, including in the “Risk Factors” section of its report on Form 10-K. The following risks and uncertainties could cause actual results, events and performance to differ materially: the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risk resulting from the highly competitive nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by the downturn in the economy, and risks and uncertainties relating to the Company’s strategic review. Readers (or listeners on the call) are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes 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 Company or any other person that the events or circumstances described in such statement are material.

Contact:
The Children’s Place Retail Stores, Inc.
Susan Riley, EVP, Finance & Administration, (201) 558-2400
Jane Singer, VP, Investor Relations, (201) 453-6955  

(Tables Follow)
 
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Table 1
THE CHILDREN’S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

   
Third Quarter Ended
  
Year-to-Date Ended
  
   
Nov. 1, 2008
  
Nov. 3, 2007
  
Nov. 1, 2008
  
Nov. 3, 2007
  
                   
Net sales
  
$
450,623
  
$
430,572
  
$
1,188,864
  
$
1,077,065
  
Cost of sales
    
254,239
    
258,251
   
692,839
    
659,326
  
Gross profit
    
196,384
    
172,321
   
496,025
    
417,739
  
Selling, general and administrative expenses
    
126,716
    
131,004
   
351,919
    
347,998
  
Asset impairment charge
    
954
    
947
   
1,081
    
1,582
  
Depreciation and amortization
    
17,791
    
17,063
   
53,152
    
46,814
  
Income from continuing operations before interest and taxes
    
50,923
    
23,307
    
89,873
    
21,345
  
Interest income (expense), net
    
(1,912
)
  
(796
)
  
(2,803
)
  
632
  
Income from continuing operations before income taxes
    
49,011
    
22,511
    
87,070
    
21,977
  
Provision for income taxes
    
20,563
    
7,586
    
36,466
    
7,789
  
Income from continuing operations net of income taxes
    
28,448
    
14,925
    
50,604
    
14,188
  
(Loss) from discontinued operations net of income taxes
    
(4,391
)
  
(2,622
)
  
(7,018
)
  
(15,262
)
Net income (loss)
  
$
24,057
  
$
12,303
  
$
43,586
  
$
(1,074
)
                           
Basic income from continuing operations per common share
  
$
0.97
  
$
0.51
  
$
1.73
  
$
0.49
  
(Loss) from discontinued operations per common share
    
(0.15
)
  
(0.09
)
  
(0.24
)
  
(0.52
)
Basic net income (loss) per common share
  
$
0.82
  
$
0.42
  
$
1.49
  
$
(0.04
 )*
Basic weighted average common shares outstanding
    
29,364
    
29,084
    
29,173
    
29,084
  
                           
Diluted income from continuing operations per common share
  
$
0.96
  
$
0.51
  
$
1.72
  
$
0.49
  
(Loss) from discontinued operations per common share
    
(0.15
)
  
(0.09
)
  
(0.24
)
  
(0.52
)
Diluted net income (loss) per common share
  
$
0.81
  
$
0.42
  
$
1.48
  
$
(0.04
 )* 
Diluted weighted average common shares and common shares equivalents outstanding
    
29,726
    
29,357
    
29,440
    
29,084
  
 
* Does not add due to rounding.
 
Note: All periods presented above reflect the exit of the DSNA business, which has been classified as a discontinued operation in accordance with GAAP. Continuing operations, as presented above, includes the operations of The Children’s Place business only.
 
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Table 2
THE CHILDREN’S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
   
November 1, 2008
  
February 2, 2008
 
November 3, 2007
  
               
Current assets:
              
               
Cash and investments
  
$
185,980
  
$
81,626
  
$
108,291
  
Accounts receivable
    
24,213
    
41,143
    
43,686
  
Inventories
    
232,776
    
196,606
    
263,301
  
Other current assets
    
104,218
    
92,910
    
97,003
  
Restricted assets in bankruptcy estate of subsidiary
    
78,971
    
--
    
--
  
Current assets held for sale
    
--
    
98,591
   
135,312
  
Total current assets
    
626,158
    
510,876
    
647,593
  
                     
Property and equipment, net
    
336,921
    
354,141
    
374,432
  
Other assets, net
    
83,230
    
128,357
    
84,582
  
Non-current assets held for sale
    
--
    
4,163
    
76,065
  
Total assets
  
$
1,046,309
  
$
997,537
  
$
1,182,672
  
                     
Current liabilities:
                    
                     
Revolving credit facility
  
$
--
  
$
88,976
  
$
108,886
  
Short term portion of term loan
    
30,000
    
--
    
--
  
Accounts payable
    
79,913
    
80,807
    
163,934
  
Accrued expenses and other current liabilities
    
123,179
    
140,712
    
166,602
  
Liabilities of the bankrupt estate of subsidiary
    
107,767
    
--
    
--
  
Total current liabilities
    
340,859
    
310,495
    
439,422
  
                     
Long term portion of term loan
    
55,000
    
--
    
--
  
Other liabilities
    
140,984
    
214,809
    
207,417
  
Total liabilities
    
536,843
    
525,304
    
646,839
  
                     
Stockholders’ equity
    
509,466
    
472,233
    
535,833
  
                     
Total liabilities and stockholders’ equity
  
$
1,046,309
  
$
997,537
  
$
1,182,672
  
 
Note: The balance sheet as of November 1, 2008, reflects DSNA restricted assets available to settle its liabilities through bankruptcy. “Assets held for sale” on the February 2, 2008 and November 3, 2007 balance sheets reflect the assets sold to an affiliate of The Walt Disney Company. The remaining assets and liabilities of the Disney Store business are reflected in their respective balance sheet categories on the February 2, 2008 and November 3, 2007 balance sheets.
 
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Table 3
THE CHILDREN’S PLACE RETAIL STORES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In millions, except per share amounts)
(Unaudited)
 
   
Third Quarter Ended
  
Year-to-Date Ended
  
   
Nov. 1, 2008
 
Nov. 3, 2007
  
Nov. 1, 2008
  
Nov. 3, 2007
  
                   
Income from continuing operations net of income taxes
  
$
28.4
  
$
14.9
  
$
50.6
  
$
14.2
  
                         
Significant one-time items pre-tax:
                          
Net transition services (income)
    
(5.7
)
  
--
   
(11.1
)
  
--
  
Sale of store lease (income)
    
--
    
--
    
(2.3
)
  
--
  
Tolling of stock options
    
--
    
0.3
    
--
    
2.0
  
Severance expense for former CEO
    
--
    
4.0
    
--
    
4.0
  
                           
Professional fees:
                          
Legal fee recovery (income)
    
(0.2
)
  
--
    
(0.2
)
  
--
  
Stock option/special investigation fees
    
--
    
2.3
    
1.3
    
5.6
  
Strategic alternatives review
    
--
    
0.1
   
2.4
    
0.1
  
                           
Aggregate (income) expense from significant items
    
(5.9
)
  
6.7
    
(9.9
)
  
11.7
  
Income tax provision for significant items
    
2.4
    
(2.2
)
  
4.0
    
(3.8
)
                           
Adjusted (income) expense from significant items after taxes
    
(3.5
)
  
4.5
    
(5.9
)
  
7.9
  
                           
Adjusted income from continuing operations net of income taxes
  
$
24.9
  
$
19.4
  
$
44.7
  
$
22.1
  
                           
GAAP income from continuing operations per common share
  
$
0.96
  
$
0.51
  
$
1.72
  
$
0.49
  
                           
Adjusted income from continuing operations per common share
  
$
0.84
  
$
0.66
  
$
1.52
  
$
0.74
  
 
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