x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 31-1241495 | |
(State or other jurisdiction of | (I.R.S. employer | |
Incorporation or organization) | identification number) | |
500 Plaza Drive | ||
Secaucus, New Jersey | 07094 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company o | |
(Do not check if a smaller reporting company) |
Item 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(unaudited) | (unaudited) | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 186,260 | $ | 194,128 | $ | 204,826 | |||||
Short-term investments | 15,000 | 15,000 | — | ||||||||
Accounts receivable | 22,223 | 18,490 | 18,656 | ||||||||
Inventories | 251,285 | 266,976 | 220,486 | ||||||||
Prepaid expenses and other current assets | 36,327 | 40,927 | 40,808 | ||||||||
Deferred income taxes | 10,518 | 9,714 | 5,128 | ||||||||
Total current assets | 521,613 | 545,235 | 489,904 | ||||||||
Long-term assets: | |||||||||||
Property and equipment, net | 334,443 | 330,101 | 329,058 | ||||||||
Deferred income taxes | 44,689 | 43,678 | 50,084 | ||||||||
Other assets | 4,327 | 4,396 | 4,339 | ||||||||
Total assets | $ | 905,072 | $ | 923,410 | $ | 873,385 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
LIABILITIES: | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 69,644 | $ | 87,461 | $ | 34,784 | |||||
Income taxes payable | 6,076 | 2,459 | 1,749 | ||||||||
Accrued expenses and other current liabilities | 101,094 | 101,586 | 90,241 | ||||||||
Total current liabilities | 176,814 | 191,506 | 126,774 | ||||||||
Long-term liabilities: | |||||||||||
Deferred rent liabilities | 90,948 | 92,598 | 95,702 | ||||||||
Other tax liabilities | 7,607 | 7,864 | 8,965 | ||||||||
Other long-term liabilities | 8,293 | 10,493 | 5,939 | ||||||||
Total liabilities | 283,662 | 302,461 | 237,380 | ||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||
STOCKHOLDERS’ EQUITY: | |||||||||||
Preferred stock, $1.00 par value, 1,000 shares authorized, 0 shares issued and outstanding | — | — | — | ||||||||
Common stock, $0.10 par value, 100,000 shares authorized; 22,872, 23,179 and 24,435 issued; 22,843, 23,155 and 24,412 outstanding | 2,287 | 2,318 | 2,443 | ||||||||
Additional paid-in capital | 217,447 | 215,691 | 209,967 | ||||||||
Treasury stock, at cost (29, 24, 23 shares) | (1,388 | ) | (1,119 | ) | (1,062 | ) | |||||
Deferred compensation | 1,388 | 1,119 | 1,062 | ||||||||
Accumulated other comprehensive income | 12,040 | 13,258 | 15,394 | ||||||||
Retained earnings | 389,636 | 389,682 | 408,201 | ||||||||
Total stockholders’ equity | 621,410 | 620,949 | 636,005 | ||||||||
Total liabilities and stockholders’ equity | $ | 905,072 | $ | 923,410 | $ | 873,385 |
Thirteen Weeks Ended | |||||||
May 4, 2013 | April 28, 2012 | ||||||
Net sales | $ | 423,164 | $ | 438,508 | |||
Cost of sales | 259,896 | 259,863 | |||||
Gross profit | 163,268 | 178,645 | |||||
Selling, general and administrative expenses | 119,008 | 122,283 | |||||
Asset impairment charges | — | 1,250 | |||||
Other costs (income) | (1,023 | ) | 834 | ||||
Depreciation and amortization | 16,824 | 17,218 | |||||
Operating income | 28,459 | 37,060 | |||||
Interest income (expense), net | 60 | (51 | ) | ||||
Income before income taxes | 28,519 | 37,009 | |||||
Provision for income taxes | 9,247 | 12,275 | |||||
Net income | $ | 19,272 | $ | 24,734 | |||
Earnings per common share | |||||||
Basic | $ | 0.84 | $ | 1.01 | |||
Diluted | $ | 0.83 | $ | 1.00 | |||
Weighted average common shares outstanding | |||||||
Basic | 23,043 | 24,535 | |||||
Diluted | 23,289 | 24,691 | |||||
Thirteen Weeks Ended | |||||||
May 4, 2013 | April 28, 2012 | ||||||
Net income | $ | 19,272 | $ | 24,734 | |||
Other Comprehensive Income: | |||||||
Foreign currency translation adjustment | (1,218 | ) | 2,514 | ||||
Comprehensive income | $ | 18,054 | $ | 27,248 |
Thirteen Weeks Ended | |||||||
May 4, 2013 | April 28, 2012 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 19,272 | $ | 24,734 | |||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 16,824 | 17,218 | |||||
Stock-based compensation | 5,432 | 2,997 | |||||
Excess tax benefits from stock-based compensation | (14 | ) | — | ||||
Deferred taxes | (1,851 | ) | 1,758 | ||||
Deferred rent expense and lease incentives | (2,821 | ) | (3,343 | ) | |||
Other | 2,568 | 2,785 | |||||
Changes in operating assets and liabilities: | |||||||
Inventories | 15,329 | 17,923 | |||||
Prepaid expenses and other assets | (4,366 | ) | (1,899 | ) | |||
Income taxes payable, net of prepayments | 8,732 | 9,211 | |||||
Accounts payable and other current liabilities | (17,586 | ) | (7,451 | ) | |||
Deferred rent and other liabilities | (3,656 | ) | 4,001 | ||||
Total adjustments | 18,591 | 43,200 | |||||
Net cash provided by operating activities | 37,863 | 67,934 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Property and equipment purchases, lease acquisition and software costs | (22,101 | ) | (22,012 | ) | |||
Purchase of company-owned life insurance policies | (11 | ) | (62 | ) | |||
Net cash used in investing activities | (22,112 | ) | (22,074 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Borrowings for letters of credit under revolving credit facility | 36,211 | 28,365 | |||||
Repayments for letters of credit under revolving credit facility | (36,211 | ) | (28,365 | ) | |||
Purchase and retirement of common stock, including transaction costs | (24,203 | ) | (19,258 | ) | |||
Exercise of stock options | 1,169 | 47 | |||||
Excess tax benefits from stock-based compensation | 14 | — | |||||
Net cash used in financing activities | (23,020 | ) | (19,211 | ) | |||
Effect of exchange rate changes on cash | (599 | ) | 1,522 | ||||
Net increase (decrease) in cash and cash equivalents | (7,868 | ) | 28,171 | ||||
Cash and cash equivalents, beginning of period | 194,128 | 176,655 | |||||
Cash and cash equivalents, end of period | $ | 186,260 | $ | 204,826 |
Thirteen Weeks Ended | |||||||
May 4, 2013 | April 28, 2012 | ||||||
OTHER CASH FLOW INFORMATION: | |||||||
Net cash paid during the period for income taxes | $ | 2,543 | $ | 1,310 | |||
Cash paid during the period for interest | 99 | 185 | |||||
Increase (decrease) in accrued purchases of property and equipment | (287 | ) | 2,432 |
1. | BASIS OF PRESENTATION |
• | First Quarter 2013 — The thirteen weeks ended May 4, 2013. |
• | First Quarter 2012 — The thirteen weeks ended April 28, 2012. |
• | FASB — Financial Accounting Standards Board. |
• | SEC — U.S. Securities and Exchange Commission. |
• | U.S. GAAP — Generally Accepted Accounting Principles in the United States. |
• | FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants. |
• | management, having the authority to approve the action, commits to a plan of termination; |
• | the plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date; |
• | the plan establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination (including but not limited to cash payments), in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated; and |
• | actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. |
Other Associated Costs | Lease Termination Costs | Total | ||||||||||
Balance at February 2, 2013 | $ | — | $ | 8,376 | $ | 8,376 | ||||||
Restructuring costs | 330 | (1,353 | ) | (1,023 | ) | |||||||
Payments and reductions | (330 | ) | (875 | ) | (1,205 | ) | ||||||
Balance at May 4, 2013 | $ | — | $ | 6,148 | $ | 6,148 |
• | Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities |
• | Level 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly |
• | Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities |
2. | STOCKHOLDERS’ EQUITY |
Thirteen Weeks Ended | ||||||||||||
May 4, 2013 | April 28, 2012 | |||||||||||
Shares | Value | Shares | Value | |||||||||
Shares repurchases related to: | ||||||||||||
2011 Share buyback program | — | — | 377.2 | 19,245 | ||||||||
2012 Share buyback program (1) | 512.3 | 24,196 | — | — | ||||||||
Withholding taxes | 1.0 | 46 | 0.2 | 12 | ||||||||
Shares acquired and held in treasury | 5.2 | 269 | 9.3 | 463 |
(1) | Subsequent to May 4, 2013 and through June 4, 2013, the Company repurchased approximately 0.4 million shares for approximately $18.6 million. |
3. | STOCK-BASED COMPENSATION |
Thirteen Weeks Ended | |||||||
May 4, 2013 | April 28, 2012 | ||||||
Deferred Awards | $ | 3,531 | $ | 2,377 | |||
Performance Awards | 1,901 | 620 | |||||
Total stock-based compensation expense (1) | $ | 5,432 | $ | 2,997 |
(1) | During the First Quarter 2013 and the First Quarter 2012, approximately $0.7 million and $0.2 million, respectively, were included in cost of sales. All other stock-based compensation is included in selling, general & administrative expenses. |
Number of Shares | Weighted Average Grant Date Fair Value | |||||
(in thousands) | ||||||
Unvested Deferred Awards, beginning of period | 560 | $ | 49.53 | |||
Granted | 356 | 48.36 | ||||
Vested | (163 | ) | 49.28 | |||
Forfeited | (9 | ) | 48.57 | |||
Unvested Deferred Awards, end of period | 744 | $ | 49.04 |
Number of Shares (1) | Weighted Average Grant Date Fair Value | |||||
(in thousands) | ||||||
Unvested Performance Awards, beginning of period | 172 | $ | 48.59 | |||
Granted | 203 | 47.86 | ||||
Vested | (1 | ) | 45.38 | |||
Forfeited | (2 | ) | 47.68 | |||
Unvested Performance Awards, end of period | 372 | $ | 48.21 |
(1) | For those awards in which the performance period is complete, the number of unvested shares is based on actual shares that will vest upon completion of the service period. For those awards in which the performance period is not yet complete, the number of unvested shares is based on the participants earning their Target Shares at 100%. |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||
(in thousands) | (in years) | (in thousands) | ||||||||||
Options outstanding, beginning of period | 84 | $ | 30.08 | 3.5 | $ | 1,633 | ||||||
Exercised | (41 | ) | 27.97 | N/A | 875 | |||||||
Forfeited | (1 | ) | 23.23 | N/A | 5 | |||||||
Options outstanding and exercisable, end of period | 42 | $ | 32.23 | 4.1 | $ | 714 |
4. | NET INCOME PER COMMON SHARE |
Thirteen Weeks Ended | ||||||||
May 4, 2013 | April 28, 2012 | |||||||
Net income | $ | 19,272 | $ | 24,734 | ||||
Basic weighted average common shares | 23,043 | 24,535 | ||||||
Dilutive effect of stock awards | 246 | 156 | ||||||
Diluted weighted average common shares | 23,289 | 24,691 | ||||||
Antidilutive stock awards | 128 | 104 |
5. | PROPERTY AND EQUIPMENT |
Asset Life | May 4, 2013 | February 2, 2013 | April 28, 2012 | ||||||||||
Property and equipment: | |||||||||||||
Land and land improvements | — | $ | 3,403 | $ | 3,403 | $ | 3,403 | ||||||
Building and improvements | 20-25 yrs | 35,548 | 35,548 | 35,548 | |||||||||
Material handling equipment | 10-15 yrs | 48,454 | 48,346 | 52,772 | |||||||||
Leasehold improvements | Lease life | 395,391 | 391,311 | 414,165 | |||||||||
Store fixtures and equipment | 3-10 yrs | 253,828 | 265,030 | 293,897 | |||||||||
Capitalized software | 5-10 yrs | 74,457 | 65,885 | 80,621 | |||||||||
Construction in progress (1) | — | 29,145 | 34,433 | 24,880 | |||||||||
840,226 | 843,956 | 905,286 | |||||||||||
Accumulated depreciation and amortization | (505,783 | ) | (513,855 | ) | (576,228 | ) | |||||||
Property and equipment, net | $ | 334,443 | $ | 330,101 | $ | 329,058 |
(1) | The majority of the Construction in progress at each reporting period relates to the Company's new enterprise resource planning system. |
(i) | the prime rate plus a margin of 0.50% to 0.75% based on the amount of the Company’s average excess availability under the facility; or |
(ii) | the London InterBank Offered Rate, or “LIBOR”, for an interest period of one, two, three or six months, as selected by the Company, plus a margin of 1.50% to 1.75% based on the amount of the Company’s average excess availability under the facility. |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
Credit facility maximum | $ | 150.0 | $ | 150.0 | $ | 150.0 | |||||
Borrowing base | 150.0 | 150.0 | 150.0 | ||||||||
Outstanding borrowings | — | — | — | ||||||||
Letters of credit outstanding—merchandise | 28.0 | 27.1 | 19.7 | ||||||||
Letters of credit outstanding—standby | 11.2 | 10.6 | 12.2 | ||||||||
Utilization of credit facility at end of period | 39.2 | 37.7 | 31.9 | ||||||||
Availability (1) | $ | 110.8 | $ | 112.3 | $ | 118.1 | |||||
Interest rate at end of period | 3.8 | % | 3.8 | % | 4.0 | % |
First Quarter 2013 | Fiscal 2012 | First Quarter 2012 | |||||||||
Average end of day loan balance during the period | $ | — | $ | — | $ | — | |||||
Highest end of day loan balance during the period | — | 1.1 | — | ||||||||
Average interest rate | 3.8 | % | 4.0 | % | 4.0 | % |
(1) | The sublimit availability for the letters of credit was $85.8 million, $87.3 million, and $93.1 million at May 4, 2013, February 2, 2013, and April 28, 2012, respectively. |
7. | LEGAL AND REGULATORY MATTERS |
8. | INCOME TAXES |
9. | INTEREST INCOME (EXPENSE), NET |
Thirteen Weeks Ended | |||||||
May 4, 2013 | April 28, 2012 | ||||||
Interest income | $ | 251 | $ | 223 | |||
Tax-exempt interest income | — | — | |||||
Total interest income | 251 | 223 | |||||
Less: | |||||||
Interest expense – credit facilities | 26 | 37 | |||||
Unused line fee | 74 | 114 | |||||
Amortization of deferred financing fees | 91 | 91 | |||||
Other interest and fees | — | 32 | |||||
Total interest expense | 191 | 274 | |||||
Interest income (expense), net | $ | 60 | $ | (51 | ) |
10. | SEGMENT INFORMATION |
Thirteen Weeks Ended | ||||||||
May 4, 2013 | April 28, 2012 | |||||||
Net sales: | ||||||||
The Children’s Place U.S. | $ | 373,653 | $ | 384,783 | ||||
The Children’s Place International (1) | 49,511 | 53,725 | ||||||
Total net sales | $ | 423,164 | $ | 438,508 | ||||
Gross profit: | ||||||||
The Children’s Place U.S. | $ | 143,936 | $ | 156,407 | ||||
The Children’s Place International | 19,332 | 22,238 | ||||||
Total gross profit | $ | 163,268 | $ | 178,645 | ||||
Gross Margin: | ||||||||
The Children’s Place U.S. | 38.5 | % | 40.6 | % | ||||
The Children’s Place International | 39.0 | % | 41.4 | % | ||||
Total gross margin | 38.6 | % | 40.7 | % | ||||
Operating income: | ||||||||
The Children’s Place U.S. (2) | $ | 27,935 | $ | 34,454 | ||||
The Children’s Place International (4) | 524 | 2,606 | ||||||
Total operating income | $ | 28,459 | $ | 37,060 | ||||
Operating income as a percent of net sales: | ||||||||
The Children’s Place U.S. | 7.5 | % | 9.0 | % | ||||
The Children’s Place International | 1.1 | % | 4.9 | % | ||||
Total operating income | 6.7 | % | 8.5 | % | ||||
Depreciation and amortization: | ||||||||
The Children’s Place U.S. (3) | $ | 14,559 | $ | 14,230 | ||||
The Children’s Place International (4) | 2,265 | 2,988 | ||||||
Total depreciation and amortization | $ | 16,824 | $ | 17,218 | ||||
Capital expenditures: | ||||||||
The Children’s Place U.S. | $ | 17,974 | $ | 19,160 | ||||
The Children’s Place International | 4,127 | 2,852 | ||||||
Total capital expenditures | $ | 22,101 | $ | 22,012 |
(1) | Includes approximately $2.6 million and $0.4 million of revenue from international franchisees for the First Quarter 2013 and First Quarter 2012, respectively. There was no revenue from international franchisees prior to fiscal 2012. |
(2) | Includes other costs (income) associated with the closures of the West Coast DC and Northeast DC of ($1.0 million) and $0.8 million for the First Quarter 2013 and First Quarter 2012, respectively, and includes a $1.3 million impairment charge during the First Quarter 2012. Includes additional costs incurred related to restructuring, severance and reorganizations of approximately $0.5 million and $2.7 million for the First Quarter 2013 and First Quarter 2012, respectively. |
(3) | Includes approximately $0.4 million of accelerated depreciation related to stores whose lease we plan to terminate. |
(4) | Includes approximately $0.9 million of accelerated depreciation associated with certain Canadian stores remodeled earlier than originally anticipated in the First Quarter 2012. |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
Total assets: | |||||||||||
The Children’s Place U.S. | $ | 750,378 | $ | 746,911 | $ | 712,344 | |||||
The Children’s Place International | 154,694 | 176,499 | 161,041 | ||||||||
Total assets | $ | 905,072 | $ | 923,410 | $ | 873,385 |
11. | SUBSEQUENT EVENTS |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | First Quarter 2013 — The thirteen weeks ended May 4, 2013. |
• | First Quarter 2012 — The thirteen weeks ended April 28, 2012. |
• | Comparable Store Sales — Net sales, in constant currency, from stores that have been open for at least 14 consecutive months. Stores that temporarily close for non- substantial remodeling will be excluded from comparable store sales for only the period that they were closed. A store is considered substantially remodeled if it has been relocated or materially changed in size. |
• | Comparable E-commerce Sales — Net sales, in constant currency, from our e-commerce store, excluding postage and handling fees. |
• | Comparable Retail Sales — Comparable Store Sales plus Comparable E-commerce Sales. |
• | Gross Margin — Gross profit expressed as a percentage of net sales. |
• | SG&A — Selling, general and administrative expenses. |
• | FASB — Financial Accounting Standards Board. |
• | SEC — U.S. Securities and Exchange Commission. |
• | U.S. GAAP — Generally Accepted Accounting Principles in the United States. |
• | FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants. |
Thirteen Weeks Ended | |||
May 4, 2013 | April 28, 2012 | ||
Average Translation Rates (1) | |||
Canadian Dollar | 0.9848 | 1.0069 | |
Hong Kong Dollar | 0.1289 | 0.1289 | |
China Yuan Renminbi | 0.1609 | 0.1588 |
(1) | The average translation rates are the average of the monthly translation rates used during each period to translate the respective income statements. The rates represent the U.S. dollar equivalent of a unit of each foreign currency. |
• | Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities |
• | Level 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly |
• | Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities |
Thirteen Weeks Ended | |||||
May 4, 2013 | April 28, 2012 | ||||
Net sales | 100.0 | % | 100.0 | % | |
Cost of sales | 61.4 | 59.3 | |||
Gross profit | 38.6 | 40.7 | |||
Selling, general and administrative expenses | 28.1 | 27.9 | |||
Asset impairment charge | — | 0.3 | |||
Other costs | (0.2 | ) | 0.2 | ||
Depreciation and amortization | 4.0 | 3.9 | |||
Operating income | 6.7 | 8.5 | |||
Interest (expense), net | — | — | |||
Income before income taxes | 6.7 | 8.4 | |||
Provision for income taxes | 2.2 | 2.8 | |||
Net income | 4.6 | % | 5.6 | % | |
Number of stores, end of period | 1,111 | 1,062 |
Thirteen Weeks Ended | |||||||
May 4, 2013 | April 28, 2012 | ||||||
Net sales: | |||||||
The Children’s Place U.S. | $ | 373,653 | $ | 384,783 | |||
The Children’s Place International | 49,511 | 53,725 | |||||
Total net sales | $ | 423,164 | $ | 438,508 | |||
Gross profit: | |||||||
The Children’s Place U.S. | $ | 143,936 | $ | 156,407 | |||
The Children’s Place International | 19,332 | 22,238 | |||||
Total gross profit | $ | 163,268 | $ | 178,645 | |||
Gross Margin: | |||||||
The Children’s Place U.S. | 38.5 | % | 40.6 | % | |||
The Children’s Place International | 39.0 | % | 41.4 | % | |||
Total gross margin | 38.6 | % | 40.7 | % |
• | during the First Quarter 2013 we restructured certain store and corporate operations which resulted in costs of approximately $0.5 million; and |
• | during the First Quarter 2012 we streamlined our field workforce and eliminated certain positions in our corporate headquarters which resulted in severance expense of approximately $2.0 million and as part of a continuing store fleet review, we identified certain store fixtures and supplies that would no longer be used, which resulted in a write-off charge of approximately $0.7 million. |
• | performance-based compensation increased approximately $1.9 million, or 50 basis points, due to more equity awards outstanding during the First Quarter 2013 compared to the First Quarter 2012; |
• | pre-opening and remodel expenses increased approximately $1.4 million, or 40 basis points. The increase is due primarily to opening and remodeling 49 more stores during the First Quarter 2013 compared to the First Quarter 2012; |
• | administrative payroll and related expenses increased slightly by approximately $0.2 million, but increased 30 basis points due to negative Comparable Retail Sales; and |
• | marketing expenses decreased approximately $2.3 million, or 50 basis points, resulting from decreased direct mailings, signage advertising and the timing of certain promotions. |
(i) | the prime rate plus a margin of 0.50% to 0.75% based on the amount of our average excess availability under the facility; or |
(ii) | the London InterBank Offered Rate, or “LIBOR”, for an interest period of one, two, three or six months, as selected by us, plus a margin of 1.50% to 1.75% based on the amount of our average excess availability under the facility. |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Item 4. | CONTROLS AND PROCEDURES. |
Item 1. | LEGAL PROCEEDINGS. |
Item 1A. | RISK FACTORS. |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||
2/3/13-3/2/13 (1) | 93,642 | $ | 48.86 | 92,292 | $ | 75,844 | ||||||||
3/3/13-4/6/13 | 120,000 | 46.11 | 120,000 | 70,311 | ||||||||||
4/7/13-5/4/13 (2) | 300,839 | 47.19 | 300,000 | 56,155 | ||||||||||
Total | 514,481 | $ | 47.24 | 512,292 | $ | 56,155 |
(1) | Includes 1,220 shares acquired as treasury stock as directed by participants in the Company's deferred compensation plan and 130 shares withheld to cover taxes in conjunction with the vesting of a stock award. |
(2) | Includes 839 shares withheld to cover taxes in conjunction with the vesting of a stock award. |
Item 6. | Exhibits. |
31.1 | Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |
31.2 | Certificate of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |
32 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS* | XBRL Instance Document. | |
101.SCH* | XBRL Taxonomy Extension Schema. | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase. | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase. | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase. | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase. |
* | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability. |
THE CHILDREN’S PLACE RETAIL STORES, INC. | |||
Date: | June 6, 2013 | By: | /S/ JANE T. ELFERS |
JANE T. ELFERS | |||
Chief Executive Officer and President | |||
(Principal Executive Officer) | |||
Date: | June 6, 2013 | By: | /S/ MICHAEL SCARPA |
MICHAEL SCARPA | |||
Chief Operating Officer and Chief Financial Officer | |||
(Principal Accounting and Financial Officer) | |||
1. | I have reviewed this quarterly report on Form 10-Q of The Children’s Place Retail Stores, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | June 6, 2013 | By: | /S/ JANE T. ELFERS |
JANE T. ELFERS Chief Executive Officer and President (Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of The Children’s Place Retail Stores, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | June 6, 2013 | By: | /S/ MICHAEL SCARPA |
MICHAEL SCARPA Chief Operating Officer and Chief Financial Officer (Principal Accounting and Financial Officer) |
1. | The Quarterly Report of the Company on Form 10-Q for the quarter ended May 4, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in such quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /S/ JANE T. ELFERS | |
Chief Executive Officer and President (Principal Executive Officer) |
1. | The Quarterly Report of the Company on Form 10-Q for the quarter ended May 4, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in such quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /S/ MICHAEL SCARPA | |
Chief Operating Officer and Chief Financial Officer (Principal Accounting and Financial Officer) |
SUBSEQUENT EVENTS
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3 Months Ended |
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May 04, 2013
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Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | SUBSEQUENT EVENTS Subsequent to May 4, 2013 and through June 4, 2013, the Company repurchased approximately 0.4 million shares for approximately $18.6 million, which brought the total under the 2012 Share Repurchase Program to approximately $62.5 million. In May 2013, the Company executed a sublet arrangement for the entire Northeast DC facility that will commence on June 1, 2013 and run through the end of the lease, which expires in January 2021. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | |
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May 04, 2013
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Apr. 28, 2012
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Net sales | $ 423,164 | $ 438,508 |
Cost of sales | 259,896 | 259,863 |
Gross profit | 163,268 | 178,645 |
Selling, general and administrative expenses | 119,008 | 122,283 |
Asset impairment charges | 0 | 1,250 |
Business Exit Costs | (1,023) | 834 |
Depreciation and amortization | 16,824 | 17,218 |
Operating income (loss) | 28,459 | 37,060 |
Interest (expense), net | 60 | (51) |
Income (loss) from continuing operations before income taxes | 28,519 | 37,009 |
Provision (benefit) for income taxes | 9,247 | 12,275 |
Net income (loss) | $ 19,272 | $ 24,734 |
Basic earnings (loss) per share amounts | ||
Net income (loss) (in dollars per share) | $ 0.84 | $ 1.01 |
Basic weighted average common shares outstanding (in shares) | 23,043 | 24,535 |
Diluted earnings (loss) per share amounts | ||
Net income (loss) (in dollars per share) | $ 0.83 | $ 1.00 |
Diluted weighted average common shares outstanding (in shares) | 23,289 | 24,691 |
NET INCOME (LOSS) PER COMMON SHARE
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May 04, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME (LOSS) PER COMMON SHARE | NET INCOME PER COMMON SHARE The following table reconciles net income and share amounts utilized to calculate basic and diluted net income per common share (in thousands):
Antidilutive stock awards (stock options, Deferred Awards and Performance Awards) represent those awards that are excluded from the earnings per share calculation as a result of their antidilutive effect in the application of the treasury stock method in accordance with the “Earnings per Share” topic of the FASB ASC. |
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CREDIT FACILITY (Tables)
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May 04, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of credit facility |
____________________________________________
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BASIS OF PRESENTATION (Policies)
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May 04, 2013
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Costs Associated with Exit or Disposal Activities or Restructurings, Policy [Policy Text Block] | Exit or Disposal Cost Obligations In accordance with the “Exit or Disposal Cost Obligations” topic of the FASB ASC, the Company records its exit and disposal costs at fair value to terminate an operating lease or contract when termination occurs before the end of its term and without future economic benefit to the Company. In cases of employee termination benefits, the Company recognizes an obligation only when all of the following criteria are met:
During the first quarter of fiscal 2012, management approved a plan to exit its distribution center in Ontario, California (the "West Coast DC") and move the operations to its distribution center in Fort Payne, Alabama (the "Southeast DC"). The lease of the West Coast DC expires in March 2016 and the Company ceased using the facility in May 2012. During fiscal 2012, the Company recognized approximately $4.2 million of costs in exiting the West Coast DC, which primarily included lease termination costs (net of anticipated sublease income), asset disposal costs, and severance to affected employees. These costs are included in other costs in the accompanying condensed consolidated statements of operations. Remaining costs associated with the exit of the West Coast DC are not expected to be material. In August 2012, management approved a plan to close the Company's distribution center in Dayton, New Jersey ("Northeast DC") and move the operations to its Southeast DC. The Company ceased operations in the Northeast DC during the fourth quarter of fiscal 2012. The lease of its Northeast DC expires in January 2021. Total exit costs related to this move are expected to be approximately $5.8 million, consisting of lease termination costs (net of anticipated sublease income), accelerated depreciation, and severance to affected employees. Remaining costs associated with the exit of the Northeast DC are not expected to be material. During the second fiscal quarter, the Company executed a sublet arrangement for this facility. As a result of higher than anticipated sublease income, the Company reduced the Northeast DC accrual by $1.4 million in the current quarter. The following table provides details of the remaining accruals for the West Coast DC and Northeast DC, of which approximately $3.8 million was included in accrued expenses and other current liabilities and approximately $2.3 million was included in other long-term liabilities (dollars in thousands):
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Stock-based Compensation | Stock-based Compensation The Company generally grants time vesting stock awards ("Deferred Awards") and performance-based stock awards ("Performance Awards") to employees at management levels. The Company also grants Deferred Awards to its non-employee directors. Deferred Awards are granted in the form of restricted stock units that require each recipient to complete a service period. Deferred Awards generally vest ratably over three years except for those granted to non-employee directors, which generally vest over one year. Performance Awards are granted in the form of restricted stock units which have performance criteria that must be achieved for the awards to vest in addition to a service period requirement. Each Performance Award has a defined number of shares that an employee can earn (“Target Shares”) and based on the performance level achieved, the number of shares earned can be anywhere from zero up to a maximum percentage of Target Shares, as defined in the award agreement, which generally has been 200%. Performance Awards have generally cliff vested after a three year service period, except those granted pursuant to a contract. The fair value of all awards issued prior to May 20, 2011 was based on the average of the high and low selling price of the Company’s common stock on the grant date. Effective with the adoption of the Company's 2011 Equity Incentive Plan, the fair value of all awards granted on or after May 20, 2011 is based on the closing price of the Company’s common stock on the grant date. Stock-based compensation expense is recognized ratably over the related service period reduced for estimated forfeitures of those awards not expected to vest due to employee turnover. Stock-based compensation expense, as it relates to Performance Awards, is also adjusted based on the Company's estimate of the percentage of the aggregate Target Shares expected to be earned. |
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Deferred Compensation Plan | Deferred Compensation Plan The Company has a deferred compensation plan (the “Deferred Compensation Plan”), which is a nonqualified, unfunded plan, for eligible senior level employees. Under the plan, participants may elect to defer up to 80% of his or her base salary and/or up to 100% of his or her bonus to be earned for the year following the year in which the deferral election is made. The Deferred Compensation Plan also permits members of the Board of Directors to elect to defer payment of all or a portion of their retainer and other fees to be earned for the year following the year in which a deferral election is made. In addition, eligible employees and directors of the Company may also elect to defer payment of any shares of Company stock that is earned with respect to stock-based awards. Directors may elect to have all or a certain portion of their fees earned for their service on the Board invested in shares of the Company’s common stock. Such elections are irrevocable. The Company is not required to contribute to the Deferred Compensation Plan, but at its sole discretion, can make additional contributions on behalf of the participants. Deferred amounts are not subject to forfeiture and are deemed invested among investment funds offered under the Deferred Compensation Plan, as directed by each participant. Payments of deferred amounts (as adjusted for earnings and losses) are payable following separation from service or at a date or dates elected by the participant at the time the deferral is elected. Payments of deferred amounts are generally made in either a lump sum or in annual installments over a period not exceeding 15 years. All deferred amounts are payable in the form in which they were made except for board fees invested in shares of the Company's common stock, which will be settled in shares of Company common stock. Earlier distributions are not permitted except in the case of an unforeseen hardship. The Company has established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The assets of the rabbi trust are general assets of the Company and as such, would be subject to the claims of creditors in the event of bankruptcy or insolvency. The investments of the rabbi trust consist of company-owned life insurance policies (“COLIs”) and Company common stock. The Deferred Compensation Plan liability, excluding Company common stock, is included in other long-term liabilities and changes in the balance, except those relating to payments, are recognized as compensation expense. The cash surrender values of the COLIs are included in other assets and related earnings and losses are recognized as investment income or loss, which is included in selling, general and administrative expenses. Company stock deferrals are included in the equity section of the Company’s consolidated balance sheet as treasury stock and as a deferred compensation liability. Deferred stock is recorded at fair market value at the time of deferral and any subsequent changes in fair market value are not recognized. The Deferred Compensation Plan liability, excluding Company stock, at fair value, was approximately $0.3 million, $0.7 million, and $0.6 million at May 4, 2013, February 2, 2013 and April 28, 2012, respectively. The cash surrender value of the COLIs, at fair value, was approximately $0.7 million at each of May 4, 2013, February 2, 2013 and April 28, 2012. Company stock was $1.4 million, $1.1 million, and $1.1 million at May 4, 2013, February 2, 2013 and April 28, 2012, respectively |
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Retained Earnings [Policy Text Block] | Retained Earnings The Company is currently restricted from paying dividends in cash under its credit facility agreement (see Note 6). There are no other restrictions on the Company's retained earning |
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Fair Value Measurement and Financial Instruments | Fair Value Measurement and Financial Instruments The “Fair Value Measurements and Disclosure” topic of the FASB ASC provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. This topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:
The Company’s cash and cash equivalents, short-term investments, accounts receivable, accounts payable and credit facility are all short-term in nature. As such, their carrying amounts approximate fair value and fall within Level 1 of the fair value hierarchy. The underlying assets and liabilities of the Company’s Deferred Compensation Plan, excluding Company stock, fall within Level 1 of the fair value hierarchy. The Company stock that is included in the Deferred Compensation Plan is not subject to fair value measurement. |
SUBSEQUENT EVENTS (Details) (USD $)
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3 Months Ended | 12 Months Ended | 1 Months Ended | 4 Months Ended | 3 Months Ended | ||
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May 04, 2013
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Apr. 28, 2012
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Feb. 02, 2013
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Jun. 04, 2013
2012 Share Repurchase Program
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Jun. 04, 2013
2012 Share Repurchase Program
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May 04, 2013
2012 Share Repurchase Program [Member]
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Apr. 28, 2012
2012 Share Repurchase Program [Member]
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Subsequent Events | |||||||
Number of additional shares repurchased (in shares) | 400,000 | 512,300 | 0 | ||||
Value of shares repurchased | $ 18,600,000 | $ 62,500,000 | $ 24,196,000 | $ 0 | |||
Business Exit Costs | (1,023,000) | 834,000 | 5,800,000 | ||||
Stock Repurchase Program, Authorized Amount | $ 100,000,000 |
BASIS OF PRESENTATION (Details) (USD $)
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3 Months Ended | 12 Months Ended | |
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May 04, 2013
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Apr. 28, 2012
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Feb. 02, 2013
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Stock awards | |||
Vesting period (in years) | 1 year | 3 years | |
Maximum percentage of Target Shares that can be earned by the participants (as a percent) | 200.00% | ||
Deferred Compensation Plan | |||
Maximum percentage of base salary elected to be deferred (as a percent) | 80.00% | ||
Maximum percentage of bonus elected to be deferred (as a percent) | 100.00% | ||
Maximum period over which annual installments of deferred payments are made (in years) | 15 | ||
Deferred compensation plan liability | $ 300,000 | $ 600,000 | $ 700,000 |
Cash Surrender Value of Life Insurance | 700,000 | ||
Deferred compensation - Company stock | (1,388,000) | (1,062,000) | (1,119,000) |
Business Exit Costs | (1,023,000) | 834,000 | 5,800,000 |
westcoastdcexit [Domain]
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Deferred Compensation Plan | |||
Business Exit Costs | 4,200,000 | ||
accelerateddepreciation [Domain]
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Deferred Compensation Plan | |||
Business Exit Costs | $ 1,400,000 |
SEGMENT INFORMATION (Tables)
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May 04, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment level financial information |
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INTEREST INCOME (EXPENSE), NET (Tables)
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May 04, 2013
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Components of interest income (expense) | The following table presents the components of the Company’s interest expense, net (in thousands):
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STOCKHOLDERS' EQUITY
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May 04, 2013
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY On March 3, 2011 a share repurchase program was authorized in the amount of $100 million (the “2011 Share Repurchase Program”) and on November 26, 2012 a share repurchase program was authorized in the amount of $100 million (the "2012 Share Repurchase Program"). At May 4, 2013, there was approximately $56.2 million remaining on the 2012 Share Repurchase Program. The 2011 Share Repurchase Program has been completed. Under the 2012 Share Repurchase Program, the Company may repurchase shares in the open market at current market prices at the time of purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under the program will depend on a variety of factors including price, corporate and regulatory requirements, and other market and business conditions. The Company may suspend or discontinue the program at any time, and may thereafter reinstitute purchases, all without prior announcement. Pursuant to restrictions imposed by the Company's insider trading policy during black-out periods, the Company withholds and retires shares of vesting stock awards in exchange for payments to satisfy the withholding tax requirements of certain recipients. The Company's payment of the withholding taxes in exchange for the shares constitutes a purchase of its common stock. The Company also acquires shares of its common stock in conjunction with liabilities owed under the Company's Deferred Compensation Plan, which are held in treasury. The following table summarizes the Company's share repurchases (in thousands):
In accordance with the “Equity” topic of the FASB ASC, the par value of the shares retired is charged against common stock and the remaining purchase price is allocated between additional paid-in capital and retained earnings. The portion charged against additional paid-in capital is done using a pro rata allocation based on total shares outstanding. Related to all shares retired during the First Quarter 2013 and the First Quarter 2012, approximately $19.3 million and $16.0 million, respectively, were charged to retained earnings. |
PROPERTY AND EQUIPMENT
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May 04, 2013
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands):
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At May 4, 2013, the Company performed impairment testing on 981 stores with a total net book value of approximately$159.7 million. At April 28, 2012, the Company performed impairment testing on 933 stores with a total net book value of approximately $152.6 million. All stores tested were open for at least two years and the Company noted no circumstances that indicated any other stores would require impairment testing. During the First Quarter 2013, the Company recorded no impairment charges. During the First Quarter 2012, the Company recorded $1.3 million of impairment charges primarily related to one underperforming store, which was fully impaired. As of May 4, 2013, February 2, 2013 and April 28, 2012, the Company had approximately $4.0 million, $4.3 million and $8.5 million, respectively, in property and equipment for which payment had not yet been made. These amounts are included in accounts payable and accrued expenses and other current liabilities. |
STOCK-BASED COMPENSATION
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May 04, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The following table summarizes the Company’s stock-based compensation expense (in thousands):
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The Company recognized a tax benefit related to stock-based compensation expense of approximately $2.2 million and $1.2 million for the First Quarter 2013 and the First Quarter 2012, respectively. Awards Granted During the First Quarter 2013 The Company granted Deferred Awards and Performance Awards to various executives and members of our Board of Directors during the First Quarter 2013. Awards were issued in connection with annual performance reviews, new hires and contractual obligations. Generally, the Deferred Awards have a three year vesting period with one third of the award vesting annually. Deferred Awards granted to the Board of Directors vest after one year. In general, the Performance Awards have three annual performance periods and one three-year cumulative performance period and, if earned, vest upon completion of the three year performance period. As required by her employment contract, the Performance Award granted to our Chief Executive Officer and President, if earned, has a one year vest period. Depending on the final adjusted operating income for the Company's performance periods, the percentage of Target Shares earned can be 0% and range up to 200%. Unfavorable weather conditions across the country resulted in the Company achieving revenues which were well below operating plan for the First Quarter 2013 (see “Management's Discussion and Analysis of Financial Condition and Results of Operations”). As a result, prior to the end of the First Quarter 2013, the Board of Directors chose to revise the operating plan for the 2013 fiscal year. The Board revised the plan in a manner which will require management to reverse the first quarter trends and to achieve results for the remainder of fiscal 2013 which exceed the results attained during the comparable period in fiscal 2012. Following the Board action, the Compensation Committee revised the performance target (and related threshold and maximum) for purposes of the Company's Performance Awards granted during the First Quarter 2013 to bring them in line with the revised operating plan. However, in order to take into account the First Quarter 2013 results, the revised threshold, target and maximum levels were set such that achievement of the revised performance target for fiscal 2013 will result in less than the number of Target Shares being earned. The revisions to Performance Award targets did not have a material effect on our first quarter financial statements. Changes in the Company’s Unvested Stock Awards during the First Quarter 2013 Deferred Awards
Total unrecognized stock-based compensation expense related to unvested Deferred Awards approximated $32.6 million as of May 4, 2013, which will be recognized over a weighted average period of approximately 2.8 years. Performance Awards
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As of May 4, 2013, the cumulative expense recognized reflects changes in estimates as they occur. Total unrecognized stock-based compensation expense related to unvested Performance Awards approximated $11.6 million as of May 4, 2013, which will be recognized over a weighted average period of approximately 1.8 years. Stock Options At May 4, 2013, there were no unvested stock options. Outstanding Stock Options Changes in the Company’s outstanding stock options for the First Quarter 2013 were as follows:
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NET INCOME (LOSS) PER COMMON SHARE (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
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May 04, 2013
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Apr. 28, 2012
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Basic and diluted net income per common share | ||
Net income | $ 19,272 | $ 24,734 |
Basic weighted average common shares (in shares) | 23,043 | 24,535 |
Dilutive effect of stock awards (in shares) | 246 | 156 |
Diluted weighted average common shares (in shares) | 23,289 | 24,691 |
Antidilutive stock awards (in shares) | 128 | 104 |