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) | ||
Emerging growth company o |
Item 1. | CONSOLIDATED FINANCIAL STATEMENTS |
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
(unaudited) | (unaudited) | ||||||||||
(in thousands, except par value) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 257,743 | $ | 193,709 | $ | 192,243 | |||||
Short-term investments | 15,000 | 49,300 | 75,100 | ||||||||
Accounts receivable | 32,432 | 31,413 | 30,605 | ||||||||
Inventories | 363,788 | 286,343 | 325,463 | ||||||||
Prepaid expenses and other current assets | 22,690 | 13,318 | 14,475 | ||||||||
Deferred income taxes | — | 17,504 | 19,459 | ||||||||
Total current assets | 691,653 | 591,587 | 657,345 | ||||||||
Long-term assets: | |||||||||||
Property and equipment, net | 266,230 | 264,280 | 274,747 | ||||||||
Deferred income taxes | 51,015 | 29,734 | 28,495 | ||||||||
Other assets | 4,526 | 5,322 | 3,497 | ||||||||
Total assets | $ | 1,013,424 | $ | 890,923 | $ | 964,084 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
LIABILITIES: | |||||||||||
Current liabilities: | |||||||||||
Revolving loan | $ | 56,400 | $ | 15,380 | $ | 65,600 | |||||
Accounts payable | 249,562 | 158,632 | 170,192 | ||||||||
Income taxes payable | 6,790 | 13,812 | 26,877 | ||||||||
Accrued expenses and other current liabilities | 116,426 | 121,797 | 119,250 | ||||||||
Total current liabilities | 429,178 | 309,621 | 381,919 | ||||||||
Long-term liabilities: | |||||||||||
Deferred rent liabilities | 55,095 | 61,128 | 63,578 | ||||||||
Other tax liabilities | 3,220 | 7,344 | 7,772 | ||||||||
Other long-term liabilities | 15,465 | 16,543 | 16,500 | ||||||||
Total liabilities | 502,958 | 394,636 | 469,769 | ||||||||
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; 17,487, 17,764 and 18,156 issued; 17,443, 17,722 and 18,114 outstanding (shares in thousands) | 1,749 | 1,776 | 1,816 | ||||||||
Additional paid-in capital | 253,724 | 239,940 | 238,892 | ||||||||
Treasury stock, at cost (44, 42 and 42 shares, in thousands) | (2,374 | ) | (2,188 | ) | (2,126 | ) | |||||
Deferred compensation | 2,374 | 2,188 | 2,126 | ||||||||
Accumulated other comprehensive loss | (17,640 | ) | (20,341 | ) | (23,348 | ) | |||||
Retained earnings | 272,633 | 274,912 | 276,955 | ||||||||
Total stockholders’ equity | 510,466 | 496,287 | 494,315 | ||||||||
Total liabilities and stockholders’ equity | $ | 1,013,424 | $ | 890,923 | $ | 964,084 |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
(In thousands, except earnings per share) | |||||||||||||||
Net sales | $ | 490,026 | $ | 473,777 | $ | 1,300,303 | $ | 1,264,544 | |||||||
Cost of sales (exclusive of depreciation and amortization) | 287,593 | 279,260 | 798,874 | 780,805 | |||||||||||
Gross profit | 202,433 | 194,517 | 501,429 | 483,739 | |||||||||||
Selling, general, and administrative expenses | 118,288 | 115,442 | 338,642 | 332,557 | |||||||||||
Depreciation and amortization | 16,789 | 16,586 | 48,460 | 48,938 | |||||||||||
Asset impairment charges | 3,203 | 392 | 4,661 | 3,218 | |||||||||||
Other costs | 4 | 17 | 14 | 276 | |||||||||||
Operating income | 64,149 | 62,080 | 109,652 | 98,750 | |||||||||||
Interest expense | (517 | ) | (572 | ) | (1,772 | ) | (1,503 | ) | |||||||
Interest income | 417 | 414 | 1,343 | 1,095 | |||||||||||
Income before provision for income taxes | 64,049 | 61,922 | 109,223 | 98,342 | |||||||||||
Provision for income taxes | 19,972 | 17,756 | 14,627 | 30,202 | |||||||||||
Net income | $ | 44,077 | $ | 44,166 | $ | 94,596 | $ | 68,140 | |||||||
Earnings per common share | |||||||||||||||
Basic | $ | 2.50 | $ | 2.41 | $ | 5.36 | $ | 3.63 | |||||||
Diluted | $ | 2.44 | $ | 2.36 | $ | 5.19 | $ | 3.56 | |||||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 17,617 | 18,342 | 17,645 | 18,785 | |||||||||||
Diluted | 18,090 | 18,703 | 18,223 | 19,139 | |||||||||||
Cash dividends declared per common share | $ | 0.40 | $ | 0.20 | $ | 1.20 | $ | 0.60 |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Net income | $ | 44,077 | $ | 44,166 | $ | 94,596 | $ | 68,140 | |||||||
Other comprehensive income: | |||||||||||||||
Foreign currency translation adjustment | (4,741 | ) | (3,745 | ) | 2,476 | 3,844 | |||||||||
Change in fair value of cash flow hedges, net of income taxes | 191 | 158 | 225 | 293 | |||||||||||
Total comprehensive income | $ | 39,527 | $ | 40,579 | $ | 97,297 | $ | 72,277 |
Thirty-nine Weeks Ended | |||||||
October 28, 2017 | October 29, 2016 | ||||||
(In thousands) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 94,596 | $ | 68,140 | |||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 48,460 | 48,938 | |||||
Stock-based compensation | 22,561 | 20,904 | |||||
Excess tax benefits from stock-based compensation | — | (1,571 | ) | ||||
Deferred taxes | (3,654 | ) | (8,462 | ) | |||
Asset impairment charges | 4,661 | 3,218 | |||||
Other | 272 | 686 | |||||
Changes in operating assets and liabilities: | |||||||
Inventories | (76,556 | ) | (55,627 | ) | |||
Accounts receivable and other assets | (6,968 | ) | (4,145 | ) | |||
Income taxes payable, net of prepayments | (8,051 | ) | 34,713 | ||||
Accounts payable and other current liabilities | 66,129 | 26,675 | |||||
Deferred rent and other liabilities | (11,505 | ) | (7,919 | ) | |||
Net cash provided by operating activities | 129,945 | 125,550 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital expenditures | (37,882 | ) | (26,483 | ) | |||
Purchase of short-term investments | (15,000 | ) | (75,100 | ) | |||
Proceeds from sale of short-term investments | 49,300 | 40,100 | |||||
Change in company-owned life insurance policies | (636 | ) | (270 | ) | |||
Net cash used in investing activities | (4,218 | ) | (61,753 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Repurchase of common stock, including shares surrendered for tax withholdings and transaction costs | (85,385 | ) | (118,494 | ) | |||
Payment of dividends | (21,145 | ) | (11,203 | ) | |||
Borrowings under revolving loan | 487,660 | 496,282 | |||||
Repayments under revolving loan | (446,640 | ) | (430,682 | ) | |||
Exercise of stock options | — | 438 | |||||
Excess tax benefits from stock-based compensation | — | 1,571 | |||||
Net cash used in financing activities | (65,510 | ) | (62,088 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 3,817 | 3,000 | |||||
Net increase in cash and cash equivalents | 64,034 | 4,709 | |||||
Cash and cash equivalents, beginning of period | 193,709 | 187,534 | |||||
Cash and cash equivalents, end of period | $ | 257,743 | $ | 192,243 |
Thirty-nine Weeks Ended | |||||||
October 28, 2017 | October 29, 2016 | ||||||
(In thousands) | |||||||
OTHER CASH FLOW INFORMATION: | |||||||
Net cash paid during the period for income taxes | $ | 30,297 | $ | 6,028 | |||
Cash paid during the period for interest | 1,567 | 1,299 | |||||
Increase in accrued purchases of property and equipment | 6,428 | 1,992 |
1. | BASIS OF PRESENTATION |
• | Third Quarter 2017 — The thirteen weeks ended October 28, 2017 |
• | Third Quarter 2016 — The thirteen weeks ended October 29, 2016 |
• | Year-To-Date 2017 — The thirty-nine weeks ended October 28, 2017 |
• | Year-To-Date 2016 — The thirty-nine weeks ended October 29, 2016 |
• | 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 |
• | 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 |
Thirty-nine Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | |||||||||||||
Shares | Value | Shares | Value | |||||||||||
(In thousands) | ||||||||||||||
Shares repurchases related to: | ||||||||||||||
2015 Share Repurchase Program | — | — | 310 | $ | 20,726 | |||||||||
2015 $250 Million Share Repurchase Program (1) (2) | 766 | $ | 85,385 | 1,157 | 91,527 | |||||||||
Shares acquired and held in treasury | 1.7 | $ | 186 | 3 | $ | 187 |
(1) | Inclusive of 0.3 million shares for approximately $32.7 million withheld to cover taxes in conjunction with the vesting of stock awards. |
(2) | Subsequent to October 28, 2017 and through November 17, 2017, the Company repurchased approximately 50 thousand shares for approximately $5.7 million. |
3. | STOCK-BASED COMPENSATION |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Deferred Awards | $ | 2,804 | $ | 2,202 | $ | 8,730 | $ | 6,629 | |||||||
Performance Awards | 5,277 | 6,073 | 13,831 | 14,275 | |||||||||||
Total stock-based compensation expense (1) | $ | 8,081 | $ | 8,275 | $ | 22,561 | $ | 20,904 |
(1) | During the Third Quarter 2017 and the Third Quarter 2016, approximately $1.1 million and $1.1 million, respectively, were included within cost of sales. During Year-To-Date 2017 and Year-To-Date 2016, approximately $3.1 million and $2.6 million, respectively, were included within cost of sales. All other stock-based compensation is included in selling, general, and administrative expenses. |
Number of Shares | Weighted Average Grant Date Fair Value | |||||
(In thousands) | ||||||
Unvested Deferred Awards, beginning of period | 469 | $ | 61.19 | |||
Granted | 211 | 110.18 | ||||
Vested | (185 | ) | 60.79 | |||
Forfeited | (43 | ) | 77.74 | |||
Unvested Deferred Awards, end of period | 452 | $ | 82.64 |
Number of Shares (1) | Weighted Average Grant Date Fair Value | |||||
(In thousands) | ||||||
Unvested Performance Awards, beginning of period | 515 | $ | 68.11 | |||
Granted | 171 | 113.77 | ||||
Shares earned in excess of target | 203 | 50.97 | ||||
Vested shares, including shares vested in excess of target | (301 | ) | 50.97 | |||
Forfeited | (36 | ) | 82.55 | |||
Unvested Performance Awards, end of period | 552 | $ | 103.87 |
(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. |
4. | EARNINGS PER COMMON SHARE |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Net income | $ | 44,077 | $ | 44,166 | $ | 94,596 | $ | 68,140 | |||||||
Basic weighted average common shares | 17,617 | 18,342 | 17,645 | 18,785 | |||||||||||
Dilutive effect of stock awards | 473 | 361 | 578 | 354 | |||||||||||
Diluted weighted average common shares | 18,090 | 18,703 | 18,223 | 19,139 | |||||||||||
Antidilutive stock awards | — | — | — | 1 |
5. | PROPERTY AND EQUIPMENT |
October 28, 2017 | January 28, 2017 | October 29, 2016 | ||||||||||
(In thousands) | ||||||||||||
Property and equipment: | ||||||||||||
Land and land improvements | $ | 3,403 | $ | 3,403 | $ | 3,403 | ||||||
Building and improvements | 35,548 | 35,548 | 35,548 | |||||||||
Material handling equipment | 48,345 | 48,345 | 48,345 | |||||||||
Leasehold improvements | 311,093 | 317,884 | 325,329 | |||||||||
Store fixtures and equipment | 222,619 | 223,873 | 229,210 | |||||||||
Capitalized software | 223,318 | 204,901 | 199,380 | |||||||||
Construction in progress | 27,519 | 7,316 | 6,741 | |||||||||
871,845 | 841,270 | 847,956 | ||||||||||
Accumulated depreciation and amortization | (605,615 | ) | (576,990 | ) | (573,209 | ) | ||||||
Property and equipment, net | $ | 266,230 | $ | 264,280 | $ | 274,747 |
(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 1.25% to 1.50% based on the amount of the Company’s average excess availability under the facility. |
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
(In millions) | |||||||||||
Credit facility maximum | $ | 250.0 | $ | 250.0 | $ | 250.0 | |||||
Borrowing base | 250.0 | 223.8 | 250.0 | ||||||||
Outstanding borrowings | 56.4 | 15.4 | 65.6 | ||||||||
Letters of credit outstanding—standby | 7.0 | 7.3 | 7.3 | ||||||||
Utilization of credit facility at end of period | 63.4 | 22.7 | 72.9 | ||||||||
Availability (1) | $ | 186.6 | $ | 201.1 | $ | 177.1 | |||||
Interest rate at end of period | 2.8 | % | 2.8 | % | 2.0 | % |
Year-To-Date 2017 | Fiscal 2016 | Year-To-Date 2016 | |||||||||
Average end of day loan balance during the period | $ | 55.2 | $ | 39.9 | $ | 45.5 | |||||
Highest end of day loan balance during the period | 98.2 | 95.8 | 95.8 | ||||||||
Average interest rate | 2.8 | % | 2.4 | % | 2.4 | % |
(1) | The sublimit availability for the letters of credit was $43.0 million, $42.7 million, and $42.7 million at October 28, 2017, January 28, 2017, and October 29, 2016, respectively. |
7. | LEGAL AND REGULATORY MATTERS |
8. | INCOME TAXES |
9. | DERIVATIVE INSTRUMENTS |
10. | SEGMENT INFORMATION |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Net sales: | |||||||||||||||
The Children’s Place U.S. | $ | 427,603 | $ | 412,380 | $ | 1,149,741 | $ | 1,106,676 | |||||||
The Children’s Place International (1) | 62,423 | 61,397 | 150,562 | 157,868 | |||||||||||
Total net sales | $ | 490,026 | $ | 473,777 | $ | 1,300,303 | $ | 1,264,544 | |||||||
Operating income: | |||||||||||||||
The Children’s Place U.S. | $ | 51,751 | $ | 48,997 | $ | 89,567 | $ | 74,535 | |||||||
The Children’s Place International | 12,398 | 13,083 | 20,085 | 24,215 | |||||||||||
Total operating income (2) | $ | 64,149 | $ | 62,080 | $ | 109,652 | $ | 98,750 | |||||||
Operating income as a percent of net sales: | |||||||||||||||
The Children’s Place U.S. | 12.1 | % | 11.9 | % | 7.8 | % | 6.7 | % | |||||||
The Children’s Place International | 19.9 | % | 21.3 | % | 13.3 | % | 15.3 | % | |||||||
Total operating income | 13.1 | % | 13.1 | % | 8.4 | % | 7.8 | % | |||||||
Depreciation and amortization: | |||||||||||||||
The Children’s Place U.S. | $ | 14,921 | $ | 14,073 | $ | 43,155 | $ | 43,605 | |||||||
The Children’s Place International | 1,868 | 2,513 | 5,305 | 5,333 | |||||||||||
Total depreciation and amortization | $ | 16,789 | $ | 16,586 | $ | 48,460 | $ | 48,938 | |||||||
Capital expenditures: | |||||||||||||||
The Children’s Place U.S. | $ | 14,415 | $ | 10,160 | $ | 37,291 | $ | 24,989 | |||||||
The Children’s Place International | 311 | 287 | 591 | 1,494 | |||||||||||
Total capital expenditures | $ | 14,726 | $ | 10,447 | $ | 37,882 | $ | 26,483 |
(1) | Net sales from The Children's Place International are primarily derived from revenues from Canadian operations. |
(2) | Includes costs incurred related to asset impairment charges and costs arising out of the restructuring of certain store and corporate operations totaling approximately $4.2 million for the Third Quarter 2017. |
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
Total assets: | (In thousands) | ||||||||||
The Children’s Place U.S. | $ | 825,969 | $ | 716,377 | $ | 799,908 | |||||
The Children’s Place International | 187,455 | 174,546 | 164,176 | ||||||||
Total assets | $ | 1,013,424 | $ | 890,923 | $ | 964,084 |
11. | SUBSEQUENT EVENTS |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Third Quarter 2017 — The thirteen weeks ended October 28, 2017 |
• | Third Quarter 2016 — The thirteen weeks ended October 29, 2016 |
• | Year-To-Date 2017 — The thirty-nine weeks ended October 28, 2017 |
• | Year-To-Date 2016 — The thirty-nine weeks ended October 29, 2016 |
• | Comparable Retail Sales — Net sales, in constant currency, from stores that have been open for at least 14 consecutive months and from our e-commerce store, excluding postage and handling fees. Store closures in the current fiscal year will be excluded from Comparable Retail Sales beginning in the fiscal quarter in which the store closes. Stores that temporarily close for non- substantial remodeling will be excluded from Comparable Retail 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 and will be excluded from Comparable Retail Sales for at least 14 months beginning in the period in which the remodel occurred. |
• | AUR — Average unit retail |
• | 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 | Thirty-nine Weeks Ended | ||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||
Average Translation Rates (1) | |||||||
Canadian Dollar | 0.8001 | 0.7630 | 0.7700 | 0.7628 | |||
Hong Kong Dollar | 0.1280 | 0.1289 | 0.1283 | 0.1288 | |||
China Yuan Renminbi | 0.1509 | 0.1497 | 0.1476 | 0.1516 |
(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 | Thirty-nine Weeks Ended | ||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
Cost of sales (exclusive of depreciation and amortization) | 58.7 | 58.9 | 61.4 | 61.7 | |||||||
Gross profit | 41.3 | 41.1 | 38.6 | 38.3 | |||||||
Selling, general, and administrative expenses | 24.1 | 24.4 | 26.0 | 26.3 | |||||||
Depreciation and amortization | 3.4 | 3.5 | 3.7 | 3.9 | |||||||
Asset impairment charge | 0.7 | 0.1 | 0.4 | 0.3 | |||||||
Operating income | 13.1 | 13.1 | 8.4 | 7.8 | |||||||
Income before income taxes | 13.1 | 13.1 | 8.4 | 7.8 | |||||||
Provision for income taxes | 4.1 | 3.7 | 1.1 | 2.4 | |||||||
Net income | 9.0 | % | 9.3 | % | 7.3 | % | 5.4 | % | |||
Number of Company-operated stores, end of period | 1,027 | 1,061 | 1,027 | 1,061 |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Net sales: | (In thousands) | ||||||||||||||
The Children’s Place U.S. | $ | 427,603 | $ | 412,380 | $ | 1,149,741 | $ | 1,106,676 | |||||||
The Children’s Place International | 62,423 | 61,397 | 150,562 | 157,868 | |||||||||||
Total net sales | $ | 490,026 | $ | 473,777 | $ | 1,300,303 | $ | 1,264,544 |
(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 1.25% to 1.50% 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 | ||||||||||
7/30/17-8/26/17 (1) | 66,591 | $ | 105.07 | 66,039 | $ | 298,684 | ||||||||
8/27/17-9/30/17 (2) | 88,731 | 110.85 | 88,731 | 288,848 | ||||||||||
10/1/17-10/28/17 (3) | 103,899 | 108.18 | 103,899 | 277,608 | ||||||||||
Total | 259,221 | $ | 108.30 | 258,669 | $ | 277,608 |
(1) | Consists of 552 shares acquired as treasury stock as directed by participants in the Company's deferred compensation plan and 1,476 shares withheld to cover taxes in conjunction with the vesting of stock awards. |
(2) | Consists of 299 shares withheld to cover taxes in conjunction with the vesting of stock awards. |
(3) | Consists of 6,923 shares withheld to cover taxes in conjunction with the vesting of stock awards. |
Item 6. | Exhibits. |
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, INC. | |||
Date: | November 21, 2017 | By: | /S/ JANE T. ELFERS |
JANE T. ELFERS | |||
Chief Executive Officer and President | |||
(Principal Executive Officer) | |||
Date: | November 21, 2017 | By: | /S/ ANURUP PRUTHI |
ANURUP PRUTHI | |||
Chief Financial Officer | |||
(Principal Accounting and Financial Officer) | |||
1. | I have reviewed this quarterly report on Form 10-Q of The Children’s Place, 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 officer 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: | November 21, 2017 | 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, 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 officer 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: | November 21, 2017 | By: | /S/ ANURUP PRUTHI |
ANURUP PRUTHI Chief Financial Officer (Principal Accounting and Financial Officer) |
1. | The Quarterly Report of the Company on Form 10-Q for the quarter ended October 28, 2017 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 October 28, 2017 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/ ANURUP PRUTHI | |
Chief Financial Officer (Principal Accounting and Financial Officer) |
Document and Entity Information Document - shares |
9 Months Ended | |
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Oct. 28, 2017 |
Nov. 17, 2017 |
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Entity Information [Line Items] | ||
Entity Registrant Name | Childrens Place, Inc. | |
Entity Central Index Key | 0001041859 | |
Current Fiscal Year End Date | --02-03 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Oct. 28, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 17,395,543 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
CONDENSED CONSOLIDATED BALANCE SHEETS Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
9 Months Ended | ||
---|---|---|---|
Oct. 28, 2017 |
Jan. 28, 2017 |
Oct. 29, 2016 |
|
Document Period End Date | Oct. 28, 2017 | ||
Common Stock, Par or Stated Value Per Share | $ 0.10 | $ 0.10 | $ 0.10 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 | 100,000,000 |
Common Stock, Shares, Issued | 17,487,000 | 17,764,000 | 18,156,000 |
Common Stock, Shares, Outstanding | 17,443,000 | 17,722,000 | 18,114,000 |
Preferred Stock, Par or Stated Value Per Share | $ 1.00 | $ 1.00 | $ 1.00 |
Preferred Stock, Shares Authorized | 1,000 | 1,000 | 1,000 |
Preferred Stock, Shares Issued | 0 | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 | 0 |
Treasury Stock, Shares | 44,000 | 42,000 | 42,000 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 28, 2017 |
Oct. 29, 2016 |
Oct. 28, 2017 |
Oct. 29, 2016 |
|
Net sales | $ 490,026 | $ 473,777 | $ 1,300,303 | $ 1,264,544 |
Cost of sales | 287,593 | 279,260 | 798,874 | 780,805 |
Gross profit | 202,433 | 194,517 | 501,429 | 483,739 |
Selling, general and administrative expenses | 118,288 | 115,442 | 338,642 | 332,557 |
Asset impairment charges | 3,203 | 392 | 4,661 | 3,218 |
Business Exit Costs | 4 | 17 | 14 | 276 |
Depreciation and amortization | 16,789 | 16,586 | 48,460 | 48,938 |
Operating income (loss) | 64,149 | 62,080 | 109,652 | 98,750 |
Interest (expense), net | (517) | (572) | (1,772) | (1,503) |
Interest income | 417 | 414 | 1,095 | |
Income (loss) from continuing operations before income taxes | 64,049 | 61,922 | 109,223 | 98,342 |
Provision (benefit) for income taxes | 19,972 | 17,756 | 14,627 | 30,202 |
Net income (loss) | $ 44,077 | $ 44,166 | $ 94,596 | $ 68,140 |
Basic earnings (loss) per share amounts | ||||
Net income (loss) (in dollars per share) | $ 2.50 | $ 2.41 | $ 5.36 | $ 3.63 |
Basic weighted average common shares outstanding (in shares) | 17,617 | 18,342 | 17,645 | 18,785 |
Diluted earnings (loss) per share amounts | ||||
Net income (loss) (in dollars per share) | $ 2.44 | $ 2.36 | $ 5.19 | $ 3.56 |
Diluted weighted average common shares outstanding (in shares) | 18,090 | 18,703 | 18,223 | 19,139 |
Common Stock, Dividends, Per Share, Cash Paid | $ 0.40 | $ 0.20 | $ 1.20 | $ 0.60 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 28, 2017 |
Oct. 29, 2016 |
Oct. 28, 2017 |
Oct. 29, 2016 |
|
Net income | $ 44,077 | $ 44,166 | $ 94,596 | $ 68,140 |
Foreign currency translation adjustment | (4,741) | (3,745) | 2,476 | 3,844 |
Change in fair value of cash flow hedges, net of income taxes | 191 | 158 | 225 | 293 |
Comprehensive income | $ 39,527 | $ 40,579 | $ 97,297 | $ 72,277 |
BASIS OF PRESENTATION |
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Oct. 28, 2017 | |||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | BASIS OF PRESENTATION Description of Business The Children's Place, Inc. and subsidiaries (the “Company”) is the largest pure-play children's specialty apparel retailer in North America. The Company provides apparel, accessories, footwear, and other items for children. The Company designs, contracts to manufacture, sells at retail and wholesale and licenses to sell trend right, high-quality merchandise at value prices, the substantial majority of which is under its proprietary “The Children's Place”, "Place" and "Baby Place" brand names. The Company classifies its business into two segments: The Children’s Place U.S. and The Children’s Place International. Included in The Children’s Place U.S. segment are the Company's U.S. and Puerto Rico-based stores and revenue from its U.S.- based wholesale business. Included in The Children's Place International segment are its Canadian-based stores, revenue from the Company's Canada wholesale business, as well as revenue from international franchisees. Each segment includes an e-commerce business located at www.childrensplace.com. Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of The Children’s Place, Inc. (the “Company”) as of October 28, 2017 and October 29, 2016 and the results of its consolidated operations for the thirteen and thirty-nine weeks ended October 28, 2017 and October 29, 2016 and cash flows for the thirty-nine weeks ended October 28, 2017 and October 29, 2016. The consolidated financial position as of January 28, 2017 was derived from audited financial statements. Due to the seasonal nature of the Company’s business, the results of operations for the thirty-nine weeks ended October 28, 2017 and October 29, 2016 are not necessarily indicative of operating results for a full fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017. Terms that are commonly used in the Company’s notes to consolidated financial statements are defined as follows:
Consolidation The consolidated financial statements include the accounts of the Company and its wholly‑owned subsidiaries. Intercompany balances and transactions have been eliminated. FASB ASC 810--Consolidation is considered when determining whether an entity is subject to consolidation. Fiscal Year The Company's fiscal year is a 52-week or 53-week period ending on the Saturday on or nearest to January 31. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenues and expenses reported during the period. Actual results could differ from the assumptions used and estimates made by management, which could have a material impact on the Company's financial position or results of operations. Significant estimates inherent in the preparation of the consolidated financial statements include: reserves for the realizability of inventory; reserves for litigation and other contingencies; useful lives and impairments of long-lived assets; fair value measurements; accounting for income taxes and related uncertain tax positions; insurance reserves; valuation of stock-based compensation awards and related estimated forfeiture rates, among others. Reclassifications Certain reclassifications have been made to prior period financial statements to conform to the current period presentation. Short-term Investments Short-term investments consist of investments which the Company expects to convert into cash within one year, including time deposits, which have original maturities greater than 90 days. The Company classifies its investments in securities at the time of purchase as held-to-maturity and reevaluates such classifications on a quarterly basis. Held-to-maturity investments consist of securities that the Company has the intent and ability to retain until maturity. These securities are recorded at cost and adjusted for the amortization of premiums and discounts, which approximates fair value. Cash inflows and outflows related to the sale and purchase of investments are classified as investing activities in the Company's consolidated statements of cash flows. All of the Company's short-term investments are U.S. dollar denominated time deposits with banking institutions in Hong Kong that have six month maturity dates from inception. Revenue Recognition The Company recognizes revenue, including shipping and handling fees billed to customers, upon purchase at the Company's retail stores or when received by the customer if the product was purchased via the internet, net of coupon redemptions and anticipated sales returns. Sales tax collected from customers is excluded from revenue. An allowance for estimated sales returns is calculated based upon the Company's sales return experience and is recorded within accrued expenses and other current liabilities. The Company's policy with respect to gift cards is to record revenue as the gift cards are redeemed for merchandise. Prior to their redemption, gift cards are recorded as a liability, included within accrued expenses and other current liabilities. The Company recognizes breakage income for the estimated portion of unredeemed gift cards that is unlikely to be redeemed and the Company determines that it does not have a legal obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed or abandoned property and is recorded within selling, general, and administrative expenses. In fiscal 2016, the Company launched a new points-based customer loyalty program to replace its prior program. In this program, customers earn points based on purchases and other promotional activities. These points can be redeemed for coupons to discount future purchases. The Company has developed an estimated value of each point earned based on the awards customers can attain less a reasonable breakage rate. The value of each point earned is recorded as deferred revenue and is included within accrued expenses and other current liabilities. The Company has an international expansion program through territorial agreements with franchisees. The Company generates revenues from the franchisees from the sale of product and, in certain cases, sales royalties. The Company records net sales and cost of goods sold on the sale of product to franchisees when the franchisee takes ownership of the product. The Company records net sales for royalties when the applicable franchisee sells the product to their customers. Under certain agreements, the Company receives a fee from each franchisee for exclusive territorial rights. The Company records this territorial fee as deferred revenue and amortizes the fee into gross sales over the life of the territorial agreement. Inventories Inventories, which consist primarily of finished goods, are stated at the lower of cost or net realizable value, with cost determined on an average cost basis. The Company capitalizes certain supply chain costs in inventory and these costs are reflected within cost of sales as the inventories are sold. Inventory includes items that have been marked down to the Company's best estimate of their lower of cost or net realizable value and an estimate for inventory shrinkage. The Company bases its decision to mark-down merchandise upon its current rate of sale, the seasonal nature of the product, and the expected sell-through of the item. Inventory shrinkage is estimated in interim periods based upon the historical results of physical inventories in the context of current year facts and circumstances. Impairment of Long-Lived Assets The Company periodically reviews its long-lived assets when events indicate that their carrying value may not be recoverable. Such events include historical trends or projected trend of cash flow losses or a future expectation that the Company will sell or dispose of an asset significantly before the end of its previously estimated useful life. In reviewing for impairment, the Company groups its long-lived assets at the lowest possible level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In that regard, the Company groups its assets into two categories: corporate-related and store-related. Corporate-related assets consist of those associated with the Company's corporate offices, distribution centers, and its information technology systems. Store-related assets consist of leasehold improvements, furniture and fixtures, certain computer equipment, and lease-related assets associated with individual stores. For store-related assets, the Company reviews all stores that have reached comparable sales status, or sooner if circumstances should dictate, on at least an annual basis. The Company believes waiting this period of time allows a store to reach a maturity level where a more comprehensive analysis of financial performance can be performed. For each store that shows indications of operating losses, the Company projects future cash flows over the remaining life of the lease and compares the total undiscounted cash flows to the net book value of the related long-lived assets. If the undiscounted cash flows are less than the related net book value of the long-lived assets, they are written down to their fair market value. The Company primarily determines fair market value to be the discounted future cash flows directly associated with those assets. In evaluating future cash flows, the Company considers external and internal factors. External factors comprise the local environment in which the store resides, including mall traffic, competition and their effect on sales trends. Internal factors include the Company's ability to gauge the fashion taste of its customers, control variable costs such as cost of sales and payroll and, in certain cases, its ability to renegotiate lease costs. 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 a defined number 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 after 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 (the "Target Shares") in addition to a service period requirement. For Performance Awards issued during fiscal 2014 and 2015 (the “2014 and 2015 Performance Awards”), an employee may earn from 0% to 300% of their Target Shares based on the achievement of adjusted earnings per share for a cumulative three-fiscal year performance period and our total shareholder return (“TSR”) relative to that of companies in our peer group. The 2014 and 2015 Performance Awards cliff vest, if earned, after completion of the applicable three year performance period. The 2014 and 2015 Performance Awards grant date fair value was estimated using a Monte Carlo simulation covering the period from the valuation date through the end of the applicable performance period using our simulated stock price as well as the TSR of companies in our peer group. For Performance Awards issued during fiscal 2016 and 2017 (the “2016 and 2017 Performance Awards”), an employee may earn from 0% to 200% of their Target Shares based on the achievement of cumulative adjusted earnings per share achieved for the three-year performance period, adjusted operating margin expansion achieved for the three-year performance period and adjusted return on invested capital achieved as of the end of the performance period. The 2016 and 2017 Performance Awards cliff vest, if earned, after completion of the three-year performance period. The fair value of the 2016 and 2017 Performance Awards granted is based on the closing price of our 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 adjusted earnings per share and adjusted operating margin expansion, and adjusted return on invested capital as they occur. Deferred Compensation Plan The Company has a deferred compensation plan (the “Deferred Compensation Plan”), which is a nonqualified 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. Investments of the rabbi trust consist of mutual funds and Company common stock. The Deferred Compensation Plan liability, excluding Company common stock, is included within other long-term liabilities and changes in the balance, except those relating to payments, are recognized as compensation expense within selling, general, and administrative expenses. The value of the mutual funds is included in other assets and related earnings and losses are recognized as investment income or loss, which is included within selling, general, and administrative expenses. Company stock deferrals are included within 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. Fair Value Measurement and Financial Instruments FASB ASC 820--Fair Value Measurements and Disclosure 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, assets of the Company’s Deferred Compensation Plan, accounts receivable, accounts payable, and revolving loan 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 Company stock that is included in the Deferred Compensation Plan is not subject to fair value measurement. The Company's assets and liabilities include foreign exchange forward contracts that are measured at fair value using observable market inputs such as forward rates, the Company's credit risk, and our counterparties’ credit risks. Based on these inputs, the Company's derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets. The Company reviews the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to fall within Level 3 of the fair value hierarchy. Recently Issued Accounting Standards Adopted in Fiscal 2017 In March 2016, the FASB issued guidance relating to the accounting for share-based payment transactions. This guidance involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classifications of awards as either equity or liabilities and classification on the statement of cash flows. With respect to the accounting for income taxes, this guidance requires, on a prospective basis, recognition of excess tax benefits and tax deficiencies (resulting from an increase or decrease in the fair value of an award from grant date to the vesting date) in the provision for income taxes as a discrete item in the quarterly period in which they occur. The guidance also requires that the value of shares withheld from employees upon vesting of stock awards in order to satisfy any applicable tax withholding requirements be presented within financing activities in the consolidated statement of cash flows. This presentation requirement is consistent with the Company’s current presentation, and will therefore have no impact to the Company. The Company adopted this guidance prospectively in the first fiscal quarter of 2017 and the adoption resulted in a reduction of our provision for income taxes of approximately $16.5 million for Year-To-Date 2017. The future impacts that this adoption will have on our provision or benefit for income taxes are dependent in part upon future grants and vesting of stock-based compensation awards and other factors that are not fully controllable or predicable by the Company, such as the future market price of the Company's common stock and the future achievement of performance criteria that affect performance-based awards. Therefore, the impact on the consolidated financial statements will be dependent upon future events which are unpredictable. However, based on the number of outstanding unvested Deferred and Performance Awards expected to vest during the remainder of fiscal 2017, the adoption of this guidance will not have a significant impact on our provision for income taxes and net income during the remainder of fiscal 2017. In November 2015, the FASB issued guidance relating to balance sheet classification of deferred taxes. This guidance simplifies the current guidance by requiring entities to classify all deferred tax assets and liabilities, together with any related valuation allowance, as noncurrent on the balance sheet. The Company adopted this guidance in the first fiscal quarter of 2017 and applied its provisions prospectively. As a result, the prior periods were not retrospectively adjusted. In July 2015, the FASB issued an update to accounting guidance to simplify the measurement of inventory. Prior to adoption, all inventory was measured at the lower of cost or market. The update requires an entity to measure inventory within the scope of the guidance at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. The update does not apply to inventory measured using last-in, first-out or the retail inventory methods. The adoption was applied prospectively and did not have a material impact on the Company’s consolidated financial statements. To Be Adopted After Fiscal 2017 In August 2017, the FASB issued guidance relating to the accounting for hedging activities. This guidance aims to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments in the guidance expand and refine hedge accounting for both non-financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The standard is effective for the Company beginning in its fiscal year 2019, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently reviewing the potential impact of this standard. In February 2016, the FASB issued guidance relating to the accounting for leases. This guidance applies a right of use model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset for the lease term and a liability to make lease payments. The lease term is the noncancellable period of the lease, and includes both periods covered by an option to extend the lease, if the lessee is reasonably certain to exercise that option, and periods covered by an option to terminate the lease, if the lessee is reasonably certain not to exercise that termination option. The standard is effective for the Company beginning in its fiscal year 2019, including interim periods within those fiscal years, and early adoption is permitted. We are in the process of developing an implementation plan and beginning to gather information to assess which of our real estate, personal property and other arrangements may meet the definition of a lease as contemplated in the guidance. While we are currently reviewing the potential impact of this standard, we would expect that the adoption of this standard will require us to recognize right-of-use assets and lease liabilities that will be material to our consolidated balance sheet given the extent of our lease portfolio. In May 2014, the FASB issued guidance relating to revenue recognition from contracts with customers. This guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued guidance to defer the effective date by one year and, therefore, the standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017 and is to be applied retrospectively. We have substantially completed the process of reviewing our current accounting policies and business practices to identify potential differences that would result from applying the new guidance. The majority of our revenue is generated from sales of finished products directly to the consumer, which will continue to be recognized when control is transferred. We have also evaluated the impact that the guidance may have on the accounting for our retail promotional programs, including our loyalty and private label credit card programs, as well as gift cards, and the related classification of these items within our consolidated income statement. The new guidance requires gift card breakage income to be recognized in proportion to the pattern of rights exercised by the customer when the Company expects to be entitled to breakage. We plan to adopt this guidance in the first quarter of fiscal 2018 using the modified-retrospective method and do not believe that the adoption of this standard will have a material impact on the Company’s consolidated financial statements. The new guidance will also require expanded disclosures related to revenue streams, performance obligations and consideration and the related judgments used in developing the necessary estimates. |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Share Repurchase Programs The Company's Board of Directors has authorized the following share repurchase programs active during Year-To-Date 2017 and Year-To-Date 2016: (1) $100 million in January 2015 (the "2015 Share Repurchase Program"); (2) $250 million in December 2015 (the "2015 $250 Million Share Repurchase Program"); and (3) $250 million in March 2017 (the "2017 Share Repurchase Program"). The 2015 Share Repurchase Program has been completed. At October 28, 2017, there was approximately $277.6 million in the aggregate remaining on the 2015 $250 Million and 2017 Share Repurchase Programs. Under the 2015 $250 Million and 2017 Share Repurchase Programs, 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 a 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 a program at any time, and may thereafter reinstitute purchases, all without prior announcement. Pursuant to the Company's practice, including due to restrictions imposed by the Company's insider trading policy during black-out periods, the Company withholds and surrenders shares of vesting stock awards and makes payments to taxing authorities as required by law to satisfy the withholding tax requirements of all recipients. The Company's payment of the withholding taxes in exchange for the surrendered 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 accordance with the FASB ASC 505--Equity, 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 Year-To-Date 2017 and Year-To-Date 2016, approximately $74.5 million and $100.5 million, respectively, were charged to retained earnings. Dividends The Third Quarter 2017 dividend of $0.40 per share was paid on October 3, 2017 to shareholders of record on the close of business on September 12, 2017. During Year-To-Date 2017, $22.4 million was charged to retained earnings, of which $21.1 million related to cash dividends paid and $1.3 million related to dividend share equivalents on unvested Deferred Awards and Performance Awards. During Year-To-Date 2016, $11.8 million was charged to retained earnings, of which $11.2 million related to cash dividends paid and $0.6 million related to dividend share equivalents on unvested Deferred Awards and Performance Awards. The Company's Board of Directors declared a quarterly cash dividend of $0.40 per share to be paid on January 3, 2018 to shareholders of record on the close of business on December 13, 2017. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by the Company’s Board of Directors based on a number of factors, including business and market conditions, the Company’s future financial performance and other investment priorities. |
STOCK-BASED COMPENSATION |
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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:
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The Company recognized a tax benefit related to stock-based compensation expense of approximately $8.8 million and $8.3 million during Year-To-Date 2017 and Year-To-Date 2016, respectively. Awards Granted During Year-To-Date 2017 The Company granted Deferred Awards and Performance Awards to various executives and Deferred Awards to members of our Board of Directors during Year-To-Date 2017. Awards were also granted in connection with new hires and contractual obligations. Generally, the Deferred Awards have a three year vesting period with one third of the award vesting annually. Generally, the Deferred Awards granted to members of the Board of Directors vest after one year. Performance Awards granted during Year-To-Date 2017 have a three-year performance period, and, if earned, vest upon completion of the three-year performance period. Depending on the cumulative adjusted earnings per share achieved for the three-year performance period, adjusted operating margin expansion achieved for the three-year performance period, and adjusted return on invested capital achieved as of the end of fiscal 2019, the percentage of Target Shares earned range from 0% to 200%. Changes in the Company’s Unvested Stock Awards during Year-To-Date 2017 Deferred Awards
Total unrecognized stock-based compensation expense related to unvested Deferred Awards approximated $24.3 million as of October 28, 2017, which will be recognized over a weighted average period of approximately 2.2 years. Performance Awards
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For those awards in which the performance period is not yet complete, the number of unvested shares in the table above is based on the participants earning their Target Shares at 100%. However, the cumulative expense recognized reflects changes in estimated adjusted earnings per share, adjusted operating margin expansion, and adjusted return on invested capital as they occur. Total unrecognized stock-based compensation expense related to unvested Performance Awards approximated $33.7 million as of October 28, 2017, which will be recognized over a weighted average period of approximately 1.9 years. |
NET INCOME (LOSS) PER COMMON SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME (LOSS) PER COMMON SHARE | PER COMMON SHARE The following table reconciles net income and share amounts utilized to calculate basic and diluted earnings per common share:
Antidilutive stock awards (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 FASB ASC 260--Earnings per Share. |
PROPERTY AND EQUIPMENT |
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PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Property and equipment, net consist of the following:
At October 28, 2017, the Company performed impairment testing on 1,027 stores with a total net book value of approximately $81.7 million. During the Third Quarter 2017, the Company recorded asset impairment charges of $0.8 million for 8 stores, all of which were fully impaired. During Year-To-Date 2017, the Company recorded asset impairment charges of $2.3 million for 17 stores, all of which were fully impaired. Additionally, during the Third Quarter 2017, the Company recorded asset impairment charges of $2.4 million related to the write-down of information technology systems. At October 29, 2016, the Company performed impairment testing on 1,046 stores with a total net book value of approximately $95.8 million. During the Third Quarter 2016, the Company recorded asset impairment charges of $0.4 million for nine stores, all of which were partially impaired. During Year-To-Date 2016, the Company recorded asset impairment charges of $1.9 million for 21 stores, of which four stores were fully impaired and 17 stores were partially impaired. Additionally, the Company recorded asset impairment charges of $1.3 million related to the write-down of some previously capitalized development costs and information technology systems. As of October 28, 2017, January 28, 2017 and October 29, 2016, the Company had approximately $15.8 million, $9.4 million and $8.1 million, respectively, within property and equipment for which payment had not yet been made. These amounts are included within accounts payable and accrued expenses and other current liabilities. |
CREDIT FACILITY |
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CREDIT FACILITY | CREDIT FACILITY The Company and certain of its domestic subsidiaries maintain a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), Bank of America, N.A., HSBC Business Credit (USA) Inc., and JPMorgan Chase Bank, N.A., as lenders (collectively, the “Lenders”) and Wells Fargo, as Administrative Agent, Collateral Agent and Swing Line Lender. The Credit Agreement, which expires in September 2020, consists of a $250 million asset based revolving credit facility, with a $50 million sublimit for standby and documentary letters of credit and an uncommitted accordion feature that could provide up to $50 million of additional availability. Revolving credit loans outstanding under the Credit Agreement bear interest, at the Company’s option, at:
The Company is charged a fee of 0.25% on the unused portion of the commitments. Letter of credit fees range from 0.625% to 0.75% for commercial letters of credit and from 0.75% to 1.00% for standby letters of credit. Letter of credit fees are determined based on the amount of the Company's average excess availability under the facility. The amount available for loans and letters of credit under the Credit Agreement is determined by a borrowing base consisting of certain credit card receivables, certain trade and franchise receivables, certain inventory, and the fair market value of certain real estate, subject to certain reserves. The outstanding obligations under the Credit Agreement may be accelerated upon the occurrence of certain events, including, among others, non-payment, breach of covenants, the institution of insolvency proceedings, defaults under other material indebtedness and a change of control, subject, in the case of certain defaults, to the expiration of applicable grace periods. The Company is not subject to any early termination fees. The Credit Agreement contains covenants which include conditions on stock buybacks and the payment of cash dividends or similar payments. Credit extended under the Credit Agreement is secured by a first priority security interest in substantially all of the Company’s U.S. assets excluding intellectual property, software, equipment, and fixtures. The Company has capitalized an aggregate of approximately $4.3 million in deferred financing costs related to the Credit Agreement. The unamortized balance of deferred financing costs at October 28, 2017 was approximately $0.8 million. Unamortized deferred financing costs are amortized over the remaining term of the Credit Agreement. The table below presents the components of the Company’s credit facility:
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LEGAL AND REGULATORY MATTERS |
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LEGAL AND REGULATORY MATTERS [Abstract] | |
Legal Matters and Contingencies [Text Block] | LEGAL AND REGULATORY MATTERS The Company is a defendant in Rael v. The Children’s Place, Inc., a purported class action, pending in the U.S. District Court, Southern District of California. In the initial complaint filed in February 2016, the plaintiff alleged that the Company falsely advertised discount prices in violation of California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. The plaintiff filed an amended complaint in April 2016, adding allegations of violations of other state consumer protection laws. In August 2016, the plaintiff filed a second amended complaint, adding an additional plaintiff and removing the other state law claims. The plaintiffs’ second amended complaint seeks to represent a class of California purchasers and seeks, among other items, injunctive relief, damages, and attorneys’ fees and costs. The Company engaged in mediation proceedings with the plaintiffs in December 2016 and April 2017. The parties reached an agreement in principle in April 2017, and signed a definitive settlement agreement in November 2017, to settle the matter on a class basis with all individuals in the U.S. who made a qualifying purchase at The Children’s Place from February 11, 2012 through the date of preliminary approval by the court of the settlement. The settlement is subject to court approval and provides for merchandise vouchers for class members who submit valid claims, as well as payment of legal fees and expenses and claims administration expenses. The settlement, if ultimately approved by the court, will result in the dismissal of all claims through the date of the court’s preliminary approval of the settlement. However, if the settlement is rejected by the court, the parties will likely return to litigation, and in such event, no assurance can be given as to the ultimate outcome of this matter. In connection with the proposed settlement, the Company recorded a reserve for $5.0 million in its consolidated financial statements in the first quarter of fiscal 2017. The Company is also involved in various legal proceedings arising in the normal course of business. In the opinion of management, any ultimate liability arising out of these proceedings will not have a material adverse effect on the Company's financial position, results of operations or cash flows. |
INCOME TAXES |
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Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company computes income taxes using the liability method. This method requires recognition of deferred tax assets and liabilities, measured by enacted rates, attributable to temporary differences between the financial statement and income tax basis of assets and liabilities. The Company's deferred tax assets and liabilities are comprised largely of differences relating to depreciation, rent expense, inventory and various accruals and reserves. The Company’s effective tax rate for the Third Quarter 2017 and Year-To-Date 2017 was 31.2% and 13.4%, respectively, compared to 28.7% and 30.7% during the Third Quarter 2016 and Year-To-Date 2016, respectively. The effective tax rate was higher during the Third Quarter 2017 primarily as a result of a $1.6 million tax benefit recorded for uncertain tax positions during the Third Quarter 2016. The decrease in the Year-To-Date 2017 effective tax rate was primarily the result of tax benefits of $16.5 million for excess stock compensation benefits recorded during Year-To-Date 2017, as well as the release of a $4.0 million reserve for an uncertain tax position that was resolved during the first quarter of fiscal 2017 compared to a $1.6 million tax benefit recorded for uncertain tax positions during Year-To-Date 2016. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in provision for income taxes. The total amount of unrecognized tax benefits as of October 28, 2017, January 28, 2017, and October 29, 2016 were $3.2 million, $7.3 million and $7.8 million, respectively, and is included within non-current liabilities. The Company recognized less than $0.1 million in each of the Third Quarter 2017 and the Third Quarter 2016, respectively, of additional interest expense related to its unrecognized tax benefits. During each of Year-To-Date 2017 and Year-To-Date 2016, the Company recognized approximately $0.1 million of additional interest expense. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in provision for income taxes. The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong. The Company, joined by its domestic subsidiaries, files a consolidated income tax return for federal income tax purposes. The Company, with certain exceptions, is no longer subject to income tax examinations by U.S. federal, state and local or foreign tax authorities for tax years 2012 and prior. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations; however, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company's tax audits are resolved in a manner not consistent with management's expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. |
DERIVATIVE INSTRUMENTS (Notes) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | DERIVATIVE INSTRUMENTS The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates attributable to inventory purchases denominated in a foreign currency. Specifically, our Canadian subsidiary’s functional currency is the Canadian dollar, but purchases inventory from suppliers in U.S. dollars. In order to mitigate the variability of cash flows associated with certain of these forecasted inventory purchases, we enter into foreign exchange forward contracts. These contracts typically mature within 12 months. We do not use forward contracts to engage in currency speculation and we do not enter into derivative financial instruments for trading purposes. The Company accounts for all of its derivatives and hedging activity under FASB ASC 815--Derivatives and Hedging. Under the Company’s risk management policy and in accordance with guidance under the topic, in order to qualify for hedge accounting treatment, a derivative must be considered highly effective at offsetting changes in either the hedged item’s cash flows or fair value. Additionally, the hedge relationship must be documented to include the risk management objective and strategy, the hedging instrument, the hedged item, the risk exposure, and how hedge effectiveness will be assessed prospectively and retrospectively. The Company formally measures effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis. The Company would discontinue hedge accounting under a foreign exchange forward contract prospectively (i) if management determines that the derivative is no longer highly effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is terminated, (iii) if the forecasted transaction being hedged by the derivative is no longer probable of occurring, or (iv) if management determines that designation of the derivative as a hedge instrument is no longer appropriate. All derivative instruments are presented at gross fair value on the consolidated balance sheets within either prepaid expenses and other current assets or accrued expenses and other current liabilities. As of October 28, 2017, the Company had foreign exchange forward contracts with an aggregate notional amount of $26.1 million and the fair value of the derivative instruments was an asset of $1.6 million. As these foreign exchange forward contracts are measured at fair value using observable market inputs such as forward rates, the Company's credit risk and our counterparties’ credit risks, they are classified within Level 2 of the valuation hierarchy. Cash settlements related to these forward contracts are recorded within cash flows from operating activities within the consolidated statements of cash flows. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings within cost of sales (exclusive of depreciation and amortization) in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in earnings within selling, general, and administrative expenses, consistent with where the Company records realized and unrealized foreign currency gains and losses on transactions in foreign denominated currencies. There were no losses related to hedge ineffectiveness during Year-To-Date 2017. Assuming October 28, 2017 exchange rates remain constant, $0.7 million of gains, net of tax, related to hedges of these transactions are expected to be reclassified from OCI into earnings over the next 12 months. Changes in fair value associated with derivatives that are not designated and qualified as cash flow hedges are recognized as earnings within selling, general, and administrative expenses. The Company enters into foreign exchange forward contracts with major banks and has risk exposure in the event of nonperformance by either party. However, based on our assessment, the Company believes that obligations under the contracts will be fully satisfied. Accordingly, there was no requirement to post collateral or other security to support the contracts as of October 28, 2017. |
SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION In accordance with FASB ASC 280---Segment Reporting, the Company reports segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com. Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and revenue from the Company's U.S.-based wholesale business. Included in The Children's Place International segment are the Company's Canadian-based stores, revenue from the Company's Canadian wholesale business and revenue from international franchisees. The Company measures its segment profitability based on operating income, defined as income before interest and taxes. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions such as production and design as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. The Company periodically reviews these allocations and adjusts them based upon changes in business circumstances. Net sales to external customers are derived from merchandise sales and the Company has no major customers that account for more than 10% of its net sales. As of October 28, 2017, The Children’s Place U.S. operated 898 stores and The Children’s Place International operated 129 stores. As of October 29, 2016, The Children’s Place U.S. operated 930 stores and The Children’s Place International operated 131 stores. The following tables provide segment level financial information:
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Includes costs incurred related to a provision for a legal settlement, asset impairment charges, costs related to foreign exchange control penalties, and a sales and use tax audit settlement, and costs arising out of the restructuring of certain store and corporate operations totaling approximately $12.2 million during Year-To-Date 2017. Includes costs incurred related to asset impairment charges and costs arising out of the restructuring of certain store and corporate operations, of approximately $0.4 million and $3.0 million for the Third Quarter 2016 and Year-To-Date 2016, respectively.
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SUBSEQUENT EVENTS |
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Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | SUBSEQUENT EVENTS Subsequent to October 28, 2017 and through November 17, 2017, the Company repurchased approximately 50 thousand shares for approximately $5.7 million. The Company announced that its Board of Directors has declared a quarterly cash dividend of $0.40 per share to be paid on January 3, 2018 to shareholders of record on the close of business on December 13, 2017. |
BASIS OF PRESENTATION (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Consolidation, Policy [Policy Text Block] | Consolidation The consolidated financial statements include the accounts of the Company and its wholly‑owned subsidiaries. Intercompany balances and transactions have been eliminated. FASB ASC 810--Consolidation is considered when determining whether an entity is subject to consolidation. |
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Fiscal Period, Policy [Policy Text Block] | Fiscal Year The Company's fiscal year is a 52-week or 53-week period ending on the Saturday on or nearest to January 31. |
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Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenues and expenses reported during the period. Actual results could differ from the assumptions used and estimates made by management, which could have a material impact on the Company's financial position or results of operations. Significant estimates inherent in the preparation of the consolidated financial statements include: reserves for the realizability of inventory; reserves for litigation and other contingencies; useful lives and impairments of long-lived assets; fair value measurements; accounting for income taxes and related uncertain tax positions; insurance reserves; valuation of stock-based compensation awards and related estimated forfeiture rates, among others. |
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Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition The Company recognizes revenue, including shipping and handling fees billed to customers, upon purchase at the Company's retail stores or when received by the customer if the product was purchased via the internet, net of coupon redemptions and anticipated sales returns. Sales tax collected from customers is excluded from revenue. An allowance for estimated sales returns is calculated based upon the Company's sales return experience and is recorded within accrued expenses and other current liabilities. The Company's policy with respect to gift cards is to record revenue as the gift cards are redeemed for merchandise. Prior to their redemption, gift cards are recorded as a liability, included within accrued expenses and other current liabilities. The Company recognizes breakage income for the estimated portion of unredeemed gift cards that is unlikely to be redeemed and the Company determines that it does not have a legal obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed or abandoned property and is recorded within selling, general, and administrative expenses. In fiscal 2016, the Company launched a new points-based customer loyalty program to replace its prior program. In this program, customers earn points based on purchases and other promotional activities. These points can be redeemed for coupons to discount future purchases. The Company has developed an estimated value of each point earned based on the awards customers can attain less a reasonable breakage rate. The value of each point earned is recorded as deferred revenue and is included within accrued expenses and other current liabilities. The Company has an international expansion program through territorial agreements with franchisees. The Company generates revenues from the franchisees from the sale of product and, in certain cases, sales royalties. The Company records net sales and cost of goods sold on the sale of product to franchisees when the franchisee takes ownership of the product. The Company records net sales for royalties when the applicable franchisee sells the product to their customers. Under certain agreements, the Company receives a fee from each franchisee for exclusive territorial rights. The Company records this territorial fee as deferred revenue and amortizes the fee into gross sales over the life of the territorial agreement. |
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Inventory, Policy [Policy Text Block] | Inventories Inventories, which consist primarily of finished goods, are stated at the lower of cost or net realizable value, with cost determined on an average cost basis. The Company capitalizes certain supply chain costs in inventory and these costs are reflected within cost of sales as the inventories are sold. Inventory includes items that have been marked down to the Company's best estimate of their lower of cost or net realizable value and an estimate for inventory shrinkage. The Company bases its decision to mark-down merchandise upon its current rate of sale, the seasonal nature of the product, and the expected sell-through of the item. Inventory shrinkage is estimated in interim periods based upon the historical results of physical inventories in the context of current year facts and circumstances. |
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Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Impairment of Long-Lived Assets The Company periodically reviews its long-lived assets when events indicate that their carrying value may not be recoverable. Such events include historical trends or projected trend of cash flow losses or a future expectation that the Company will sell or dispose of an asset significantly before the end of its previously estimated useful life. In reviewing for impairment, the Company groups its long-lived assets at the lowest possible level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In that regard, the Company groups its assets into two categories: corporate-related and store-related. Corporate-related assets consist of those associated with the Company's corporate offices, distribution centers, and its information technology systems. Store-related assets consist of leasehold improvements, furniture and fixtures, certain computer equipment, and lease-related assets associated with individual stores. For store-related assets, the Company reviews all stores that have reached comparable sales status, or sooner if circumstances should dictate, on at least an annual basis. The Company believes waiting this period of time allows a store to reach a maturity level where a more comprehensive analysis of financial performance can be performed. For each store that shows indications of operating losses, the Company projects future cash flows over the remaining life of the lease and compares the total undiscounted cash flows to the net book value of the related long-lived assets. If the undiscounted cash flows are less than the related net book value of the long-lived assets, they are written down to their fair market value. The Company primarily determines fair market value to be the discounted future cash flows directly associated with those assets. In evaluating future cash flows, the Company considers external and internal factors. External factors comprise the local environment in which the store resides, including mall traffic, competition and their effect on sales trends. Internal factors include the Company's ability to gauge the fashion taste of its customers, control variable costs such as cost of sales and payroll and, in certain cases, its ability to renegotiate lease costs. |
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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 a defined number 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 after 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 (the "Target Shares") in addition to a service period requirement. For Performance Awards issued during fiscal 2014 and 2015 (the “2014 and 2015 Performance Awards”), an employee may earn from 0% to 300% of their Target Shares based on the achievement of adjusted earnings per share for a cumulative three-fiscal year performance period and our total shareholder return (“TSR”) relative to that of companies in our peer group. The 2014 and 2015 Performance Awards cliff vest, if earned, after completion of the applicable three year performance period. The 2014 and 2015 Performance Awards grant date fair value was estimated using a Monte Carlo simulation covering the period from the valuation date through the end of the applicable performance period using our simulated stock price as well as the TSR of companies in our peer group. For Performance Awards issued during fiscal 2016 and 2017 (the “2016 and 2017 Performance Awards”), an employee may earn from 0% to 200% of their Target Shares based on the achievement of cumulative adjusted earnings per share achieved for the three-year performance period, adjusted operating margin expansion achieved for the three-year performance period and adjusted return on invested capital achieved as of the end of the performance period. The 2016 and 2017 Performance Awards cliff vest, if earned, after completion of the three-year performance period. The fair value of the 2016 and 2017 Performance Awards granted is based on the closing price of our 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 adjusted earnings per share and adjusted operating margin expansion, and adjusted return on invested capital as they occur. |
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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 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. Investments of the rabbi trust consist of mutual funds and Company common stock. The Deferred Compensation Plan liability, excluding Company common stock, is included within other long-term liabilities and changes in the balance, except those relating to payments, are recognized as compensation expense within selling, general, and administrative expenses. The value of the mutual funds is included in other assets and related earnings and losses are recognized as investment income or loss, which is included within selling, general, and administrative expenses. Company stock deferrals are included within 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. |
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Fair Value Measurement and Financial Instruments | Fair Value Measurement and Financial Instruments FASB ASC 820--Fair Value Measurements and Disclosure 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, assets of the Company’s Deferred Compensation Plan, accounts receivable, accounts payable, and revolving loan 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 Company stock that is included in the Deferred Compensation Plan is not subject to fair value measurement. The Company's assets and liabilities include foreign exchange forward contracts that are measured at fair value using observable market inputs such as forward rates, the Company's credit risk, and our counterparties’ credit risks. Based on these inputs, the Company's derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets. The Company reviews the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to fall within Level 3 of the fair value hierarchy. |
STOCKHOLDERS' EQUITY Share Repurchase (Tables) |
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Stockholders' Equity Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Repurchase Agreements [Table Text Block] | The following table summarizes the Company's share repurchases:
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STOCK-BASED COMPENSATION (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock-based compensation expense |
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Schedule of changes in unvested deferred awards |
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Schedule of unvested performance awards |
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NET INCOME (LOSS) PER COMMON SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciles net income (loss) and share amounts utilized to calculate basic and diluted net income (loss) per common share |
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PROPERTY AND EQUIPMENT (Tables) |
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CREDIT FACILITY (Tables) |
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Components of credit facility |
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SEGMENT INFORMATION (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment level financial information |
____________________________________________
Includes costs incurred related to a provision for a legal settlement, asset impairment charges, costs related to foreign exchange control penalties, and a sales and use tax audit settlement, and costs arising out of the restructuring of certain store and corporate operations totaling approximately $12.2 million during Year-To-Date 2017. Includes costs incurred related to asset impairment charges and costs arising out of the restructuring of certain store and corporate operations, of approximately $0.4 million and $3.0 million for the Third Quarter 2016 and Year-To-Date 2016, respectively.
|
BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 28, 2017 |
Oct. 29, 2016 |
Oct. 28, 2017 |
Oct. 29, 2016 |
Jan. 28, 2017 |
|
Accounting Policies [Abstract] | |||||
Vesting period (in years) | 1 year | 3 years | |||
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% | ||||
Deferred compensation - Company stock | $ (2,374) | $ (2,126) | $ (2,374) | $ (2,126) | $ (2,188) |
Business Exit Costs | $ 4 | $ 17 | $ 14 | $ 276 |
BASIS OF PRESENTATION (Details 2) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 28, 2017 |
Oct. 29, 2016 |
Oct. 28, 2017 |
Oct. 29, 2016 |
Jan. 28, 2017 |
|
Accounts Payable and Accrued Liabilities, Current | $ 116,426 | $ 119,250 | $ 116,426 | $ 119,250 | $ 121,797 |
Business Exit Costs | 4 | 17 | $ 14 | 276 | |
Deferred Compensation Arrangements Maximum Percentage of Base Salary | 80.00% | ||||
Deferred Compensation Arrangements Maximum Percentage of Bonus | 100.00% | ||||
Other Liabilities, Noncurrent | $ 15,465 | $ 16,500 | $ 15,465 | $ 16,500 | $ 16,543 |
NET INCOME (LOSS) PER COMMON SHARE (Details) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 28, 2017 |
Oct. 29, 2016 |
Oct. 28, 2017 |
Oct. 29, 2016 |
|
Basic and diluted net income per common share | ||||
Net income | $ 44,077 | $ 44,166 | $ 94,596 | $ 68,140 |
Basic weighted average common shares (in shares) | 17,617 | 18,342 | 17,645 | 18,785 |
Dilutive effect of stock awards (in shares) | 473 | 361 | 578 | 354 |
Diluted weighted average common shares (in shares) | 18,090 | 18,703 | 18,223 | 19,139 |
Antidilutive stock awards (in shares) | 0 | 0 | 0 | 1 |
LEGAL AND REGULATORY MATTERS (Details) $ in Millions |
Oct. 28, 2017
USD ($)
|
---|---|
Legal and Regulatory Matters | |
Loss Contingency, Estimate of Possible Loss | $ 5.0 |
INCOME TAXES (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Oct. 28, 2017 |
Oct. 29, 2016 |
Jan. 28, 2017 |
|
Income Tax Disclosure [Abstract] | |||
Effective tax rate from continuing operations (as a percent) | 28.70% | ||
Liability for Uncertainty in Income Taxes, Noncurrent | $ 3,220 | $ 7,772 | $ 7,344 |
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued | $ 100 |
DERIVATIVE INSTRUMENTS (Details) $ in Millions |
9 Months Ended |
---|---|
Oct. 28, 2017
USD ($)
| |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Asset, Notional Amount | $ 26.1 |
Derivative Asset, Fair Value, Gross Asset | 1.6 |
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax | $ 0.7 |
SUBSEQUENT EVENTS (Details) - $ / shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 28, 2017 |
Oct. 29, 2016 |
Oct. 28, 2017 |
Oct. 29, 2016 |
|
Subsequent Events | ||||
Common Stock, Dividends, Per Share, Cash Paid | $ 0.40 | $ 0.20 | $ 1.20 | $ 0.60 |
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