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Proc-Type: 2001,MIC-CLEAR
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0001047469-09-003909.txt : 20090407
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20090407163218
ACCESSION NUMBER: 0001047469-09-003909
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 17
CONFORMED PERIOD OF REPORT: 20090131
FILED AS OF DATE: 20090407
DATE AS OF CHANGE: 20090407
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: New York & Company, Inc.
CENTRAL INDEX KEY: 0001211351
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621]
IRS NUMBER: 331031445
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-32315
FILM NUMBER: 09737933
BUSINESS ADDRESS:
STREET 1: 450 WEST 33RD ST 5TH FL
CITY: NEW YORK
STATE: NY
ZIP: 10001
BUSINESS PHONE: 212-884-2110
MAIL ADDRESS:
STREET 1: 450 WEST 33RD ST 5TH FL
CITY: NEW YORK
STATE: NY
ZIP: 10001
FORMER COMPANY:
FORMER CONFORMED NAME: NY & CO GROUP INC
DATE OF NAME CHANGE: 20021220
10-K
1
a2190251z10-k.htm
10-K
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ý |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended January 31, 2009 |
OR |
o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period
from to
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Commission File Number 1-32315
NEW YORK & COMPANY, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of
incorporation or organization) |
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33-1031445
(I.R.S. Employer Identification No.) |
450 West 33rd Street, 5th Floor,
NEW YORK, NEW YORK
(Address of principal executive offices) |
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10001
(Zip Code) |
(212) 884-2000
(Registrant's telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
Common Stock, par value $0.001 per share |
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New York Stock Exchange |
Securities
registered pursuant to Section 12(g) of the Act: None.
(Title
of Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes o No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ý
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o |
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Accelerated filer ý |
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Non-accelerated filer o (Do not check if a smaller reporting company) |
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Smaller reporting company o |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No
ý
The aggregate market value of common stock held by non-affiliates as of August 1, 2008 was approximately $255.7 million, using the
closing price per share of $9.85, as reported on the New York Stock Exchange as of such date.
The
number of shares of registrant's common stock outstanding as of March 31, 2009 was 60,385,782.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates certain information by reference to the Proxy Statement for the 2009 Annual Meeting of
Stockholders.
ANNUAL REPORT ON FORM 10-K INDEX
2
Table of Contents
PART I
Item 1. Business
Overview
New York & Company, Inc. (together with its subsidiaries, collectively the "Company") is a leading specialty retailer of
fashion-oriented, moderately-priced women's apparel. The Company designs and sources its proprietary branded New York & Company merchandise sold exclusively through its national
network of retail stores and E-commerce store at www.nyandcompany.com. The target customers for the Company's New York & Company
merchandise are fashion-conscious, value-sensitive women between the ages of 25 and 45. As of January 31, 2009, the Company operated 589 stores with 3.295 million selling square feet in
44 states.
The
Company offers a merchandise assortment consisting of casual and wear-to-work apparel and accessories, including pants, jackets, knit tops, blouses, sweaters,
denim, t-shirts, activewear, handbags and jewelry. The Company's merchandise reflects current fashions and fulfills a broad spectrum of its customers' lifestyle and wardrobe requirements.
The
Company positions its stores as a source of fashion, quality and value by providing its customers with an appealing merchandise assortment at attractive price points, generally below
those of department stores and other specialty retailers. The Company believes its stores create an exciting shopping experience through the use of compelling window displays, creative and coordinated
merchandise presentations and in-store promotional signage. The Company's stores are typically concentrated in large population centers of the United States and are located in shopping
malls, lifestyle centers and off-mall locations, including urban street locations.
The
Company was founded in 1918 and operated as a subsidiary of Limited Brands, Inc. ("Limited Brands") from 1985 to 2002. New York & Company, Inc., formerly known
as NY & Co. Group, Inc., was incorporated in the state of Delaware on November 8, 2002. It was formed to acquire all of the outstanding stock of Lerner New York
Holding, Inc. ("Lerner Holding") and its subsidiaries from Limited Brands, an unrelated company. On November 27, 2002, Irving Place Capital, formerly known as Bear Stearns Merchant
Banking, completed the acquisition of Lerner Holding and its subsidiaries from Limited Brands (the "acquisition of Lerner Holding"). On October 6, 2004, the Company completed an initial public
offering and listed its common stock on the New York Stock Exchange.
On
October 18, 2007, the Company announced its decision to close all of the stores operated by the Company's subsidiary, Jasmine Company, Inc. ("JasmineSola"), by
February 2, 2008. JasmineSola was a women's retailer of upscale and contemporary apparel, footwear and accessories sold through its chain of JasmineSola branded stores, which the
Company acquired on July 19, 2005. The Company decided to exit the JasmineSola business after a thorough assessment and analysis. This decision enabled the Company to focus financial and
management resources on its New York & Company brand. As of February 2, 2008, the Company completed the closure of all of the Company's JasmineSola stores and substantially completed all
other exit procedures. As a result, the Company's
financial statements reflect JasmineSola as discontinued operations for all periods presented. Unless otherwise noted, the description of the Company's business, financial and store operating data, in
this Annual Report on Form 10-K relates to the New York & Company business.
The Company's Growth Strategies
Increase Sales of Apparel and Accessories
The Company intends to continue to grow sales of both apparel and accessories products. The Company believes that it can increase sales
of apparel by providing its customers fashion, quality and value with an appealing merchandise assortment at attractive price points. The Company plans to drive higher margin sales with new fashion
items and increased focus on its wear-to-work assortments. In an
3
Table of Contents
effort
to increase accessories sales, the Company has upgraded the fashion and quality of its accessories offerings, with a heightened focus on the jewelry and handbag businesses.
E-commerce Store
In November 2006, the Company launched its E-commerce store to offer customers the opportunity to view and purchase its
merchandise on-line at www.nyandcompany.com. The Company believes that its E-commerce store provides an effective means to reach
its existing customers and more importantly attract new customers to the New York & Company brand. The E-commerce store is designed to cater to the customers' lifestyle needs by
offering an easy alternative to shop, while also increasing brand awareness. During fiscal year 2008, net sales were $41.0 million, as compared to net sales of $22.3 million for fiscal
year 2007. The Company believes that it can continue to grow sales with its E-commerce store by broadening its online assortment with new product exclusives and expanded product
extensions. The Company is continuing to develop the infrastructure and functionality of the site to offer more merchandise on the E-commerce store and to enhance customer service on the
site.
Expand the Company's Store Base
Increasing market penetration by opening new stores has been an important component of the Company's growth strategies. The Company
continues to remodel its existing stores to improve sales productivity and the consistency of the customers' brand experience. The Company opened 25 stores in fiscal year 2008, adding 104,641 selling
square feet. During fiscal year 2008, the Company also remodeled 14 stores and closed 14 stores, resulting in a reduction of 137,312 selling square feet. The reduction in non-productive
selling square feet is an integral component of the Company's program to improve productivity and profitability. The Company ended the fiscal year operating 589 stores with 3.3 million selling
square feet.
The
Company continues to view the expansion of its store base and the remodeling of existing stores as a component of its long-term growth strategy; however, in response to
the current economic downturn the Company plans to minimize new store openings and the remodeling of existing stores during fiscal year 2009 in order to conserve cash and position itself for growth
once the macroeconomic environment begins to improve. The Company intends to continue to open a significant number of new stores in future years, while relocating and remodeling a portion of its
existing store base annually.
Enhance Brand Image and Increase Customer Loyalty
The Company seeks to build and enhance the recognition, appeal and reach of its New York & Company brand through its merchandise
assortment, customer service, direct marketing and advertising. The Company's brand has gained strong recognition and endorsement by its target customers. The Company believes a nationally recognized
brand further drives brand awareness, merchandise sales and customer loyalty.
Design and Merchandising
The Company's product development group, led by its merchant and design teams, is dedicated to consistently delivering to its customers
high-quality fashion apparel and accessories at competitive prices. New York & Company stores carry only New York & Company brand merchandise. The Company seeks to provide
its customers with key fashion items of the season, as well as a broad assortment of coordinating apparel items and accessories that will
complete their wardrobe. The Company's merchandising, marketing and promotional efforts encourage multiple unit and outfit purchases.
New
product lines are introduced into the Company's stores in six major deliveries each year (spring, summer, transition, fall, holiday and pre-spring) that are updated with
selected new items every four to six weeks to keep the merchandise current. Product line development begins with the introduction of design concepts, key styles and its initial assortment selection
for the product line. The
4
Table of Contents
Company's
designers focus on overall concepts and identify and interpret the fashion trends for the season, identifying those particular apparel items and accessories that will appeal to its target
customer, designing the product line and presenting it to the Company's merchants for review. The Company's merchants are responsible for developing seasonal strategies and a detailed list of desired
apparel pieces and accessories to guide the designers, as well as buying, testing, editing and pricing the line during the season on an ongoing basis. This integrated approach to design, merchandising
and sourcing enables the Company to carry a merchandise assortment that addresses customer demand while attempting to minimize inventory risk and maximize sales and profitability.
Sourcing
The Company's sourcing approach focuses on quality, speed and cost in order to provide timely delivery of quality goods. This is
accomplished by closely managing the product development cycle, from raw materials and garment production to store-ready packaging, logistics and customs clearance.
Sourcing Relationships. The Company purchases apparel and accessories products both from importers and directly from manufacturers. The
Company's
relationships with its direct manufacturers are supported by independent buying agents, who help coordinate the Company's purchasing requirements with the factories. The Company's unit volumes,
long-established vendor relationships and its knowledge of fabric and production costs, combined with a flexible, diversified sourcing base, enable it to buy high-quality,
low-cost goods. The Company sources from approximately 20 countries and it is not subject to long-term production contracts with any of its vendors, manufacturers or buying
agents. The Company's broad sourcing network allows it to meet its factory workplace standards, objectives of quality, cost, speed to market, and inventory efficiency by shifting merchandise purchases
as required, and allows it to react quickly to changing market or regulatory conditions. In fiscal year 2008, the Company sourced nearly 100% of its merchandise from Cambodia, China, Hong Kong, India,
Indonesia, Japan, Macau, Mexico, the Philippines, the Republic of Korea, Sri Lanka, Taiwan, Thailand, the United States and Vietnam. The
Company's largest country sources are China, Macau and Hong Kong, which represented approximately 65% of purchases in fiscal year 2008.
Quality Assurance and Compliance Monitoring. As part of the Company's transition services agreement with Limited Brands, Independent
Production
Services ("IPS"), a unit of Limited Brands, provides the Company with monitoring of country of origin, point of fabrication compliance, code of business conduct and labor standards compliance, and
supply chain security. In addition, all of the factories that manufacture merchandise for the Company sign a master sourcing agreement that details their obligations with respect to quality and
ethical business practices. The Company's quality assurance field inspectors or IPS representatives visit each new apparel factory prior to its first bulk garment production to ensure that the factory
quality control associates understand and comply with the Company's requirements. The Company's independent buying agents and importers also conduct in-line factory and final quality
audits. Under the transition services agreement with Limited Brands, the Company's inbound shipments are further audited by Limited Brands for visual appearance and measurement.
The
Company also engages two independent audit firms to visit each year a selection of factories that manufacture accessories for the Company to ensure that these factories understand
and comply with code of business conduct and labor standards and supply chain security standards. All of the Company's jewelry suppliers are required to be in compliance with the Prop 65 Lead in
Surface Coatings revisions enacted in the California Health & Safety Code, which includes manufacturing and product testing requirements that are audited by the Company's quality assurance and
compliance teams.
Distribution and Logistics
Limited Brands provides the Company with certain warehousing and distribution services under the transition services agreement entered
into on November 27, 2002, as amended, in connection with
5
Table of Contents
the
acquisition of Lerner Holding. All of the Company's merchandise is received, inspected, processed, warehoused and distributed through Limited Brands' distribution center in Columbus, Ohio. Details
about each receipt are supplied to the Company's store inventory planners, who determine how the product should be distributed among the Company's stores based on current inventory levels, sales
trends and specific product characteristics. Advance shipping notices are electronically communicated to the stores.
Under
the transition services agreement, as amended on April 6, 2009, (See Exhibit 10.22 of this Annual Report on Form 10-K) these services will
terminate upon the earliest of the following: (i) 24 months from the date that Limited Brands notifies the Company that Limited Brands wishes to terminate the services;
(ii) 24 months from the date that the Company notifies Limited Brands that the Company wishes to terminate the services, which notice shall be no earlier than February 1, 2010;
(iii) 60 days after the Company has given notice to Limited Brands that Limited Brands has failed to perform any material obligations under the agreement and such failure shall be
continuing; (iv) 30 days after Limited Brands has given notice to the Company that the Company has failed to perform any material obligations under the agreement and such failure shall
be continuing; (v) within 75 days of receipt of the annual proposed changes to the agreement schedules which outline the cost methodologies and estimated costs of the services for the
coming year, if such proposed changes would result in a significant increase in the amount of service costs that the Company would be obligated to pay; (vi) 15 months after a change of
control of the Company, at the option of Limited Brands; or (vii) upon reasonable notice under the prevailing circumstances by the Company to Limited Brands after a disruption of services due
to force majeure that cannot be remedied or restored within a reasonable period of time. The Company believes that these services are provided at a competitive price and the Company anticipates
continuing to use Limited Brands for these services.
Inventory
and fulfillment for the Company's E-commerce operations are handled by a third-party warehouse facility located in Martinsville, Virginia. Merchandise is received
in this location from Limited Brands' distribution center.
Real Estate
As of January 31, 2009, the Company operated 589 stores in 44 states, with an average of 5,594 selling square feet per store.
All of the Company's stores are leased and are located in large population centers of the United States in shopping malls, lifestyle centers and off-mall locations, including urban street
locations.
Historical Store Count
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|
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|
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|
|
|
|
|
|
Fiscal Year
|
|
Total stores open
at beginning of
fiscal year |
|
Number of stores
opened during
fiscal year |
|
Number of stores
closed during
fiscal year |
|
Number of stores
remodeled during
fiscal year |
|
Total stores
open at end of
fiscal year |
|
2004 |
|
|
468 |
|
|
26 |
|
|
(18 |
) |
|
40 |
|
|
476 |
|
2005 |
|
|
476 |
|
|
44 |
|
|
(17 |
) |
|
40 |
|
|
503 |
|
2006 |
|
|
503 |
|
|
52 |
|
|
(19 |
) |
|
35 |
|
|
536 |
|
2007 |
|
|
536 |
|
|
54 |
|
|
(12 |
) |
|
25 |
|
|
578 |
|
2008 |
|
|
578 |
|
|
25 |
|
|
(14 |
) |
|
14 |
|
|
589 |
|
Historical Selling Square Footage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Total selling
square feet at
beginning
of fiscal year |
|
Increase in
selling square
feet for stores
opened during
fiscal year |
|
Reduction of
selling square
feet for stores
closed during
fiscal year |
|
Reduction of
selling square
feet for stores
remodeled during
fiscal year |
|
Total selling
square feet
at end of
fiscal year |
|
2004 |
|
|
3,318,466 |
|
|
115,487 |
|
|
(131,253 |
) |
|
(112,930 |
) |
|
3,189,770 |
|
2005 |
|
|
3,189,770 |
|
|
200,759 |
|
|
(125,422 |
) |
|
(57,480 |
) |
|
3,207,627 |
|
2006 |
|
|
3,207,627 |
|
|
241,048 |
|
|
(138,208 |
) |
|
(73,927 |
) |
|
3,236,540 |
|
2007 |
|
|
3,236,540 |
|
|
228,727 |
|
|
(88,042 |
) |
|
(49,775 |
) |
|
3,327,450 |
|
2008 |
|
|
3,327,450 |
|
|
104,641 |
|
|
(98,572 |
) |
|
(38,740 |
) |
|
3,294,779 |
|
6
Table of Contents
Store Count by State as of January 31, 2009
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State
|
|
# of
Stores |
|
State
|
|
# of
Stores |
|
State
|
|
# of
Stores
|
|
Alabama |
|
|
13 |
|
Louisiana |
|
|
9 |
|
North Carolina |
|
|
18 |
|
Arizona |
|
|
10 |
|
Maine |
|
|
1 |
|
North Dakota |
|
|
1 |
|
Arkansas |
|
|
4 |
|
Maryland |
|
|
16 |
|
Ohio |
|
|
25 |
|
California |
|
|
56 |
|
Massachusetts |
|
|
12 |
|
Oklahoma |
|
|
4 |
|
Colorado |
|
|
6 |
|
Michigan |
|
|
13 |
|
Pennsylvania |
|
|
34 |
|
Connecticut |
|
|
8 |
|
Minnesota |
|
|
10 |
|
Rhode Island |
|
|
3 |
|
Delaware |
|
|
1 |
|
Mississippi |
|
|
6 |
|
South Carolina |
|
|
11 |
|
Florida |
|
|
38 |
|
Missouri |
|
|
13 |
|
South Dakota |
|
|
1 |
|
Georgia |
|
|
22 |
|
Nebraska |
|
|
4 |
|
Tennessee |
|
|
16 |
|
Idaho |
|
|
1 |
|
Nevada |
|
|
4 |
|
Texas |
|
|
50 |
|
Illinois |
|
|
27 |
|
New Hampshire |
|
|
3 |
|
Utah |
|
|
2 |
|
Indiana |
|
|
10 |
|
New Jersey |
|
|
29 |
|
Virginia |
|
|
22 |
|
Iowa |
|
|
3 |
|
New Mexico |
|
|
2 |
|
Washington |
|
|
4 |
|
Kansas |
|
|
2 |
|
New York |
|
|
57 |
|
West Virginia |
|
|
4 |
|
Kentucky |
|
|
7 |
|
|
|
|
|
|
Wisconsin |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total |
|
|
589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site Selection. The Company's real estate management team is responsible for new store site selection. In selecting a specific location
for a new
store, the Company targets high-traffic, prime real estate in locations with demographics reflecting concentrations of the Company's target customers and a complementary tenant mix.
In
response to the ongoing deterioration of the macroeconomic environment and the resulting impact on consumer spending in the retail sector, the Company initiated a comprehensive review
of its business and on January 8, 2009 announced the launch of a multi-year restructuring and cost reduction program, which includes, among other cost-savings
initiatives, the closure of 40 to 50 underperforming stores over a five-year period. For a further description of the restructuring and cost reduction program see Note 3,
"Restructuring," in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K. During
fiscal year 2009, the Company plans to minimize new store openings in order to preserve cash and position itself for growth once the macroeconomic environment begins to improve.
Store Display and Merchandising. The Company's stores are designed to effectively display its merchandise and create an upbeat
atmosphere. Expansive
front windows allow potential customers to see easily into the store and are used as a vehicle to highlight major merchandising and promotional events. The open floor design allows customers to
readily view the majority of the merchandise on display, while store fixtures allow for the efficient display of garments and accessories. Merchandise displays are modified on a weekly basis based on
sales trends and inventory receipts. The Company's in-store product presentation utilizes a variety of different fixtures to highlight the product line's breadth and versatility. Complete
outfits are displayed throughout the store using garments from a variety of product categories. The Company displays complete outfits to demonstrate how its customers can combine different pieces in
order to increase unit sales.
Pricing and Promotional Strategy. The Company's in-store pricing and promotional strategy is designed to drive customer traffic and
promote brand loyalty. The promotional pricing strategy is designed to encourage multiple unit sales. Select key items are also prominently displayed in store windows at competitive prices to drive
traffic into the stores.
7
Table of Contents
Inventory Management. The Company's inventory management systems are designed to maximize merchandise profitability and increase
inventory turns. The
Company constantly monitors inventory turns on the selling floor and uses pricing and promotions to maximize sales and profitability and to achieve inventory turn goals. The Company has a refined
inventory loss prevention program that is integrated with the store operations and finance departments of its business. This program includes electronic article surveillance systems in a majority of
stores as well as the monitoring of merchandise returns, merchandise voids, employee sales and deposits, and educating store personnel on loss prevention.
Field Sales Organization. Store operations are organized into eight regions and 49 districts. Each region is managed by either a
regional vice
president or a regional sales leader, depending upon the size of the region. The Company staffs approximately 49 district sales leaders, with each typically responsible
for the sales and operations of 12 stores on average. Each store is typically staffed with a store manager, a co-sales manager and an assistant sales manager, as required, in addition to
hourly sales associates. The Company has approximately 1,800 in-store managers. The Company seeks to instill enthusiasm and dedication in its store management personnel by maintaining an
incentive/bonus plan for its field managers. The program is based on monthly sales performance, effective labor management and seasonal inventory loss targets. The Company believes that this program
effectively creates incentives for its senior field professionals and aligns their interests with the financial goals of the Company. The Company conducts independent surveys of customer satisfaction
in all major stores on a recurring basis. The Company evaluates merchandise fill, fitting room service, checkout service, and store appearance. Stores are required to meet or exceed established
corporate standards to ensure the quality of the Company's customers' shopping experience.
In
connection with the restructuring and cost reduction program announced in January 2009, the Company reduced its field management staff by 12%, which is reflected in the numbers above.
For a further description of the restructuring and cost reduction program see Note 3, "Restructuring," in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual
Report on Form 10-K.
Store Sales Associates. The Company typically employs between 7,000 and 11,000 full- and part-time store sales associates,
depending on the Company's seasonal needs. The Company has well-established store operating policies and procedures and utilizes an in-store training program for all new store
employees. Detailed product descriptions are also provided to sales associates to enable them to gain familiarity with product offerings.
Brand Building and Marketing
The Company believes that its New York & Company brand is among its most important assets. The Company's ability to continuously
evolve its brand to appeal to the changing needs and priorities of its target customer is a key source of its competitive advantage. The Company believes that its combination of fashion-oriented
apparel, accessories and attractive price points differentiates its brand from its competitors. The Company consistently communicates its brand image across all aspects of its business, including
product design, store merchandising and shopping environments, channels of distribution, and marketing and advertising. The Company continues to invest in the development of this brand through, among
other things, advertising, in-store marketing, direct mail marketing, and email communications. The Company also makes investments to enhance the overall client experience through the
opening of new stores, the expansion and remodeling of existing stores, and a focus on client service.
The
Company believes that it is strategically important to communicate on a regular basis directly with its current client base and with potential clients, through national and regional
advertising, as well as through direct mail marketing, e-mail communications and in-store presentation. The Company uses
8
Table of Contents
its
customer database, which includes approximately 6 million customers who have made purchases within the last twelve months, to design marketing programs to its core customers.
In
November 2006, the Company launched its E-commerce store to offer customers the opportunity to view and purchase its merchandise on-line at www.nyandcompany.com. The Company believes that its E-commerce
store caters to its customers' lifestyle needs by offering an easy
alternative to shop, while also increasing brand awareness.
Customer Credit
The Company has a credit card processing agreement with a third party (the "administration company") that provides the services of the
Company's proprietary credit card program. The Company allows payments on this credit card to be made at its stores as a service to its customers. The administration company owns the credit card
accounts, with no recourse to the Company. All of the Company's proprietary credit cards carry the New York & Company brand. These cards provide purchasing power to customers and additional
vehicles for the Company to communicate product offerings.
Information Technology
Information technology is a key component of the Company's business strategy and the Company is committed to utilizing technology to
enhance its competitive position. The Company's information systems integrate data from the field sales, design, merchandising, planning and distribution, and financial reporting functions. The
Company's core business systems consist of both purchased and internally developed software, operating on UNIX, AS400 and Windows NT platforms. These systems are accessed over a
company-wide network and provide corporate employees with access to key business applications.
Sales,
cash deposit and related credit card information are electronically collected from the stores' point-of-sale ("POS") terminals on a daily basis. During
this process, the Company also obtains information concerning inventory receipts and transmits pricing, markdown and shipment notification data. In addition, the Company collects customer transaction
data to update its customer database. The merchandising staff and merchandise planning staff evaluate the sales and inventory information collected from the stores to make key merchandise planning
decisions, including orders and markdowns. These systems enhance the Company's ability to optimize sales while limiting markdowns, achieve planned inventory turns, reorder successful styles, and
effectively distribute new inventory to the stores.
The
Company continues to invest in technology to upgrade core systems to increase efficiencies and provide a competitive advantage. During fiscal year 2007, the Company partnered with
Datavantage (a subsidiary of Micros Systems, Inc.) to implement a new POS system across its chain and partnered with JDA Software Group, Inc. to upgrade its existing merchandise planning
system. The Company completed the implementation of the new POS system during fiscal year 2008 and expects to complete the upgrade of its merchandise planning system during fiscal year 2009.
Competition
The retail and apparel industries are highly competitive. The Company has positioned its stores as a source of fashion, quality and
value by providing its customers with an appealing merchandise assortment at attractive price points generally below those of department stores and other specialty retailers. The Company competes with
traditional department stores, specialty store retailers, discount apparel stores and direct marketers for, among other things, customers, raw materials, market share, retail space, finished goods,
sourcing and personnel. The Company believes its competitors include Ann Taylor LOFT, Express, The Gap, JCPenney, Kohl's, Old
Navy and Target, among others.
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The
Company differentiates itself from its competitors on the basis of its fashion and proprietary merchandise designs, value pricing, merchandise quality, in-store merchandise display and
store service.
Intellectual Property
The Company believes that it has all of the registered trademarks it needs to protect its New York & Company,
Lerner, Lerner New York, City Crepe, City Spa, City Stretch, New York Jeans and NY&C brands and it vigorously
enforces all of its trademark rights.
Employees and Labor Relations
As of January 31, 2009, the Company had a total of 8,129 employees of which 2,358 were full-time employees and 5,771
were part-time employees, who are primarily store associates. The number of part-time employees fluctuates depending on the Company's seasonal needs. The Company's collective
bargaining agreement with Local 1102 unit of the Retail, Wholesale and Department Store Union (RWDSU) AFL-CIO is set to expire on May 31, 2009. The Company anticipates the
collective bargaining agreement with Local 1102 will be extended. Approximately 8% of the Company's total employees are covered by collective bargaining agreements and are primarily
non-management store associates. The Company believes its relationship with its employees is good.
Government Regulation
The Company is subject to customs, truth-in-advertising and other laws, including consumer protection
regulations and zoning and occupancy ordinances that regulate retailers generally and/or govern the promotion and sale of merchandise and the operation of retail stores and warehouse facilities. The
Company undertakes to monitor changes in these laws and believes that it is in material compliance with applicable laws with respect to these practices.
The
majority of the Company's merchandise is manufactured by factories located outside of the United States. These products are imported and are subject to U.S. customs laws, which
impose tariffs for textiles and apparel. In addition, some of the Company's imported products are eligible for certain duty-advantaged programs; for example, the North American Free Trade
Agreement, the Andean Trade Preference Act, the U.S. Caribbean Basin Trade Partnership Act and the Caribbean Basin Initiative.
Available Information
The Company makes available free of charge on its website, http://www.nyandcompany.com,
copies of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as soon as reasonably practicable after filing or furnishing such material
electronically with the United States Securities and Exchange Commission. Copies of the charters of each of the Company's Audit Committee, Compensation Committee, and Nomination & Governance
Committee, as well as the Company's Governance Guidelines, Code of Conduct for Associates, and Code of Conduct for Suppliers, are also available on the website or in print upon written request by any
stockholder to the Corporate Secretary at 450 West 33rd Street, Fifth Floor, New York, New York 10001.
Item 1A. Risk Factors
Economic conditions may cause a decline in business and consumer spending which could adversely affect the Company's business and financial performance.
The Company's business is impacted by general economic conditions and their effect on consumer confidence and the level of consumer
spending on the merchandise the Company offers, which have
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recently
deteriorated significantly and may continue to do so for the foreseeable future. These economic factors include recessionary cycles, interest rates, currency exchange rates, economic growth,
wage rates, unemployment levels, energy prices, availability of consumer credit, and consumer confidence, among others. The current downturn in the economy may continue to affect consumer purchases of
the Company's merchandise and to adversely impact the Company's results of operations, liquidity and continued growth. In addition, the deteriorating economic conditions could negatively impact the
Company's merchandise vendors and their ability to deliver products and sustain profits and sufficient liquidity. To counteract their cash flow problems, the Company's merchandise vendors may
require letters-of-credit or attempt to increase prices, pass through increased costs or seek some other form of relief, which may adversely impact the Company's results of
operations, liquidity and continued growth.
The Company's ability to successfully integrate its restructuring and cost reduction program.
On January 8, 2009, the Company announced a multi-year restructuring and cost reduction program as part of a major
drive to enhance profitability and improve overall operating effectiveness. The key elements of the restructuring and cost reduction program include: strategic staff reductions in both the field and
corporate office, optimization of the Company's store portfolio, a broad-based organizational cost reduction effort and the reduction of capital spending plans for fiscal year 2009. The estimated
costs and charges associated with the restructuring program are preliminary and may vary materially based on various factors, including the timing in execution of the restructuring plan; outcome of
negotiations with landlords and other third parties; inventory levels; and changes in management's assumptions and projections. As a result of these events and circumstances, delays and unexpected
costs may occur, which could result in the Company not realizing all or any of the anticipated benefits of the restructuring and cost reduction program.
The Company's growth strategy includes the addition of a significant number of new stores each year and the potential relocation and remodeling of existing stores. The
Company may not be able to successfully implement this strategy on a timely basis or at all. In addition, the Company's growth strategy may strain its resources and cause the performance of its
existing stores to suffer.
The Company's growth will largely depend on its ability to open and operate new stores successfully and the availability of suitable
store locations on acceptable terms. However, in response to the current economic downturn the Company plans to minimize new store openings during fiscal year 2009 in order to conserve cash and
position itself for growth once the macroeconomic environment begins to improve. The Company intends to continue to open a significant number of new stores in future years, while relocating and
remodeling a portion of its existing store base annually. The success of this strategy is dependent upon, among other things, the identification of suitable markets and sites for store locations, the
negotiation of acceptable lease terms, the hiring, training and retention of competent sales personnel, and the effective management of inventory to meet the needs of new and existing stores on a
timely basis. The Company's proposed expansion also will place increased demands on its operational, managerial and administrative resources. These increased demands could cause the Company to operate
its business less effectively, which in turn could cause deterioration in the financial performance of its existing stores. In addition, to the extent that the Company's new store openings are in
existing markets, the Company may experience reduced net sales volumes in existing stores in those markets. The Company expects to fund its expansion through cash flow from operations and, if
necessary, by borrowings under its revolving credit facility; however, as mentioned above, if the Company experiences a decline in performance, the Company may slow or discontinue store openings. The
Company may not be able to successfully execute any of these strategies on a timely basis. If the Company fails to successfully implement these strategies, its financial condition and results of
operations would be adversely affected.
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The
Company's net sales, operating income and inventory levels fluctuate on a seasonal basis and decreases in sales or margins during the Company's peak seasons could have a
disproportionate effect on its overall financial condition and results of operations. The Company's business experiences seasonal fluctuations in net sales and operating income, with a significant
portion of its operating income typically realized during its fourth quarter. Any decrease in sales or margins during this period could have a disproportionate effect on the Company's financial
condition and results of operations. You should refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsQuarterly Results and
Seasonality" for more information.
Seasonal
fluctuations also affect the Company's inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period. If the
Company is not successful in selling its inventory, it may have to write down the value of its inventory or sell it at significantly reduced prices or the Company may not be able to sell such
inventory at all, which could have a material adverse effect on the Company's financial condition and results of operations.
Fluctuations
in comparable store sales and results of operations could cause the price of the Company's common stock to decline substantially.
The
Company's results of operations for its individual stores have fluctuated in the past and can be expected to fluctuate in the future. Since the beginning of fiscal year 2003 through
fiscal year 2008, the Company's quarterly comparable store sales have ranged from an increase of 14.1% to a decrease of 14.0%. The Company cannot ensure that it will be able to achieve a high level of
comparable store sales in the future.
The
Company's comparable store sales and results of operations are affected by a variety of factors, including:
-
- fashion trends;
-
- mall traffic;
-
- calendar shifts of holiday or seasonal periods;
-
- the effectiveness of the Company's inventory management;
-
- changes in the Company's merchandise mix;
-
- the timing of promotional events;
-
- weather conditions;
-
- changes in general economic conditions and consumer spending patterns; and
-
- actions of competitors or mall anchor tenants.
If
the Company's future comparable store sales fail to meet expectations, then the market price of the Company's common stock could decline substantially. You should refer to the section
entitled "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.
If the Company is not able to respond to fashion trends in a timely manner, develop new merchandise or launch new product lines successfully, it may be left with unsold
inventory, experience decreased profits or incur losses or suffer reputational harm to its brand image.
The Company's success depends in part on management's ability to anticipate and respond to changing fashion tastes and consumer demands
and to translate market trends into appropriate, saleable product offerings. Customer tastes and fashion trends change rapidly. If the Company is unable to successfully identify or react to changing
styles or trends and misjudges the market for its products or any new product lines, its sales may be lower, gross margins may be lower and the
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Company
may be faced with a significant amount of unsold finished goods inventory. In response, the Company may be forced to increase its marketing promotions or price markdowns, which could have a
material adverse effect on its financial condition and results of operations. The Company's brand image may also suffer if customers believe that it is no longer able to offer the latest fashions.
A reduction in the volume of mall traffic could significantly reduce the Company's sales and leave it with unsold inventory, reducing the Company's profits or creating
losses.
Many of the Company's stores are located in shopping malls. Sales at these stores are derived, in part, from the volume of traffic in
those malls. The Company's stores benefit from the ability of the mall's other tenants and other area attractions to generate consumer traffic in the vicinity of its stores and the continuing
popularity of malls as shopping destinations. Sales volume and mall traffic may be adversely affected by economic downturns in a particular area, competition from internet retailers,
non-mall retailers and other malls where the Company does not have stores and the closing of other stores in the malls in which the Company's stores are located. A reduction in mall
traffic as a result of these or any other factors could materially adversely affect the Company's business.
The Company may lose key personnel.
The Company believes that it has benefited from the leadership and experience of its key personnel. The loss of the services of any of
these individuals could have a material adverse effect on the business and the prospects of the Company. Competition for key personnel in the retail industry is intense and the Company's future
success will also depend upon its ability to retain, recruit and train key personnel.
The Company faces risks arising from possible union legislation in the United States.
There is a possibility that the proposed Employee Free Choice Act ("EFCA") may be enacted, which would facilitate unionization. If the
EFCA is passed, it could impact the Company's relationship with its associates, which may increase expenses and negatively impact the Company's business and its profitability. In addition, the
Company's vendors and service providers may have their relationships with their workforce impacted by the EFCA leading to increased costs or disruptions in their operations, which could have an
adverse effect on the Company's business and its results of operations.
Because of the Company's focus on keeping its inventory at the forefront of fashion trends, extreme and/or unseasonable weather conditions could have a disproportionately
large effect on the Company's business, financial condition and results of operations because it would be forced to mark down inventory.
Extreme weather conditions in the areas in which the Company's stores are located could have a material adverse effect on the Company's
business, financial condition and results of operations. For example, heavy snowfall or other extreme weather conditions over a prolonged period might make it difficult for the Company's customers to
travel to its stores. The Company's business is also susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm temperatures during the winter season or cool
weather during the summer season could render a portion of the Company's inventory incompatible with those unseasonable conditions. These prolonged unseasonable weather conditions could adversely
affect the Company's business, financial condition and results of operations.
If third parties who manage some aspects of the Company's business do not adequately perform their functions, the Company might experience disruptions in its business,
leaving it with inadequate or excess inventories, among other adverse effects, resulting in decreased profits or losses.
Limited Brands handles the distribution of the Company's merchandise through its distribution facility in Columbus, Ohio pursuant to a
transition services agreement. The efficient operation of the
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Company's
stores is dependent on its ability to distribute merchandise to locations throughout the United States in a timely manner. The Company depends on Limited Brands to receive, sort, pack and
distribute substantially all of the Company's merchandise. As part of the transition services agreement, Limited Brands contracts with third-party transportation companies to deliver the Company's
merchandise from foreign ports to their warehouses and to the Company's stores. Any failure by any of these third parties to respond adequately to the Company's warehousing and distribution needs
would disrupt the Company's operations and negatively impact its profitability.
Additional
services are also provided by Limited Brands and its subsidiaries and affiliates pursuant to the transition services agreement. IPS assists the Company with its monitoring of
country of origin and point of fabrication compliance for U.S. Customs. IPS also monitors compliance with the Company's code of business conduct and labor standards and its supply chain security. Any
failure of Limited Brands or IPS to fulfill their obligations under the transition services agreement would disrupt the Company's operations and negatively impact its profitability.
Limited
Brands may terminate those portions of the transition services agreement which provide for the distribution of the Company's merchandise and the compliance monitoring provided by
IPS, upon providing the Company with 24-months advance notice of such termination, the occurrence of certain types of changes of control, or the Company's failure to perform any of its
material obligations under the transition services agreement. If Limited Brands terminates a portion or all of the Company's transition services agreement, the Company may not be able to replace the
services on terms acceptable to it or at all. The Company's failure to successfully replace the services could have a material adverse effect on the Company's business and prospects.
The
Company uses a third-party for its E-commerce operations, including order management, order fulfillment, customer care, and channel management services. A failure by the
third party to adequately manage the Company's E-commerce operations may negatively impact the Company's profitability.
The
Company relies on third parties to monitor code of business conduct and labor standards compliance, supply chain security standards, and product quality requirements for its
accessories business. Any failure by these third parties to adequately perform their functions may disrupt the Company's operations and negatively impact its reputation and its profitability.
The
Company may rely on third parties for the implementation and/or management of certain aspects of its information technology infrastructure. Failure by any of these third parties to
implement and/or manage the Company's information technology infrastructure effectively could disrupt its operations and negatively impact its profitability.
The
Company relies on a third-party to administer its proprietary credit card program. The inability of the administration company to effectively service the credit card program could
materially limit credit availability for the Company's customers, which would negatively impact the Company's revenues and, consequently, its profitability.
A
work stoppage resulting from, among other things, a dispute over a collective bargaining agreement covering employees of a third party relied on by the Company or employees of the
Company, may cause disruptions in the Company's business and negatively impact its profitability.
The raw materials used to manufacture the Company's products and its distribution and labor costs are subject to availability constraints and price volatility, which could
result in increased costs. In addition, the Company faces the risk of increases in federal and state minimum wage rates, which could result in increased costs.
The raw materials used to manufacture the Company's products are subject to availability constraints and price volatility caused by
high demand for petroleum-based synthetic fabrics, weather, supply conditions, government regulations, economic climate and other unpredictable factors. In
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addition,
the Company's transportation and labor costs are subject to price volatility caused by the price of oil, supply of labor, governmental regulations, economic climate and other unpredictable
factors. Increases in demand for, or the price of, raw materials, distribution services and labor, including federal and state minimum wage rates, could have a material adverse effect on the Company's
business, financial condition and results of operations.
Since the Company relies significantly on foreign sources of production, it is at risk from a variety of factors that could leave it with inadequate or excess inventories,
resulting in decreased profits or losses.
The Company purchases apparel and accessories in foreign markets, with a significant portion coming from China, Macau and Hong Kong.
The Company does not have any long-term merchandise supply contracts and many of its imports are subject to existing or potential duties and tariffs. The Company competes with other
companies for production facilities.
The Company also faces a variety of other risks generally associated with doing business in foreign markets and importing merchandise from abroad, such as:
-
- political or labor instability in countries where suppliers are located;
-
- political or military conflict involving the United States, which could cause a delay in the transportation of the
Company's products and an increase in transportation costs;
-
- heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough
inspections, leading to delays in deliveries or impoundment of goods for extended periods or could result in decreased scrutiny by customs officials for counterfeit goods, leading to lost sales and
damage to the reputation of the Company's brand;
-
- natural disasters, disease epidemics and health related concerns, which could result in closed factories, reduced
workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas;
-
- the migration and development of manufacturers, which can affect where the Company's products are or will be produced;
-
- imposition of regulations relating to imports and the Company's ability to adjust in a timely manner to changes in trade
regulations, which among other things, could limit the Company's ability to source products from countries that have the labor and expertise needed to manufacture its products on a
cost-effective basis;
-
- imposition of duties, taxes and other charges on imports; and
-
- currency volatility.
Any
of the foregoing factors, or a combination thereof, could have a material adverse effect on the Company's business.
The Company's manufacturers may be unable to manufacture and deliver products in a timely manner or meet its quality standards, which could result in lost sales,
cancellation charges or excessive markdowns.
The Company purchases apparel and accessories from importers and directly from third-party manufacturers. Similar to most other
specialty retailers, the Company has short selling seasons for much of its inventory. Factors outside of the Company's control, such as manufacturing or shipping delays or quality problems, could
disrupt merchandise deliveries and result in lost sales, product recalls, cancellation charges or excessive markdowns.
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The Company's ability to successfully integrate new or acquired businesses into its existing business, to the extent it enters new lines of business or consummates
acquisitions in the future, will affect the Company's financial condition and results of operations.
The process of integrating new or acquired businesses into the Company's existing operations may result in unforeseen difficulties and
liabilities and may require a disproportionate amount of resources and management attention. Difficulties that the Company may encounter in integrating the operations of new or acquired businesses
could have a material adverse effect on its results of operations and financial condition. Moreover, the Company may not realize any of the anticipated benefits of a new business or an acquisition and
integration costs may exceed anticipated amounts. In addition, future acquisitions of businesses may require the Company to assume or incur additional debt financing, resulting in additional leverage.
The Company relies on its manufacturers to use acceptable ethical business practices, and if they fail to do so, the New York & Company brand name could suffer
reputational harm and the Company's sales could decline or its inventory supply could be interrupted.
The Company requires its manufacturers to operate in compliance with applicable laws, rules and regulations regarding working
conditions, employment practices, product
quality and safety, and environmental compliance. Additionally, the Company imposes upon its business partners operating guidelines that require additional obligations in order to promote ethical
business practices. The Company's staff, the staff of third party inspection services companies, and the staff of the Company's non-exclusive buying agents and importers periodically visit
and monitor the operations of the Company's manufacturers to determine compliance. However, the Company does not control its manufacturers or their labor and other business practices. If one of the
Company's manufacturers violates labor or other laws or implements labor or other business practices that are generally regarded as unethical in the United States, the shipment of finished products to
the Company could be interrupted, orders could be canceled, relationships could be terminated and the Company's reputation could be damaged. Any of these events could have a material adverse effect on
the Company's revenues and, consequently, its results of operations.
The Company may be unable to protect its trademarks, which could diminish the value of its brand.
The Company's trademarks are important to its success and competitive position. The Company's major trademarks are New York &
Company, Lerner, Lerner New York, City Crepe, City Spa, City Stretch, New York Jeans and NY&C and are protected in the United States and internationally. The Company engages in the following steps to
protect and enforce its trademarks: file and prosecute trademark applications for registration in those countries where the marks are not yet registered; response to office actions and examining
attorneys in those countries where the marks are not yet registered; maintenance of its trademark portfolio in the United States and foreign countries; filings of statements of use, renewal documents,
assignments, change of name and address forms; policing of marks and third party infringements; initiation and defense of opposition and/or cancellation proceedings, including discovery and
preparation of evidence; and litigation, including filing enforcement lawsuits against third party infringers. The Company is susceptible to others imitating the Company's products and infringing on
the Company's intellectual property rights. Imitation or counterfeiting of the Company's products or other infringement of the Company's intellectual property rights could diminish the value of its
brand or otherwise adversely affect its revenues. The actions the Company has taken to establish and protect its trademarks may not be adequate to prevent imitation of its products by others or to
prevent others from seeking to invalidate its trademarks or block sales of its products as a violation of the trademarks and intellectual property rights of others. In addition, others may assert
rights in, or ownership of, trademarks and other intellectual property rights of the Company or in marks that are similar to the Company's or marks that the Company licenses and/or markets and the
Company may not be able to successfully resolve these types of conflicts to its
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satisfaction.
In some cases, there may be trademark owners who have prior rights to the Company's marks because the laws of certain foreign countries may not protect intellectual property rights to
the same extent as do the laws of the United States. In other cases, there may be holders who have prior rights to similar marks. Failure to protect the Company's trademarks could result in a material
adverse effect on the Company's business.
The Company relies on its information technology infrastructure, which includes third party and internally developed software, and purchased or leased hardware that support
the Company's information technology and various business processes. The Company's business, reputation and brand image could suffer if its infrastructure fails to perform as intended.
The Company relies on purchased or leased hardware and software licensed from third parties or internally developed in order to manage
its business. The Company's ability to maintain and upgrade its information technology infrastructure is critical to the success of its business. This hardware and software may not continue to be
available on commercially reasonable terms or at all. Any disruptions to the Company's infrastructure or loss of the right to use any of this hardware or software could affect the Company's
operations, which could negatively affect the Company's business until corrected or until equivalent technology is either developed by the Company or, if available, is identified, obtained and
integrated. In addition, the software underlying the Company's operations can contain undetected errors. The Company may be forced to modify its operations until such problems are corrected and, in
some cases, may need to implement enhancements to correct errors that it does not detect. Problems with the software underlying the Company's operations could result in loss of revenue, unexpected
expenses and capital costs, diversion of resources, loss of market share and damage to the Company's reputation which could adversely affect the Company's business, financial condition and results of
operations.
Because
the Company's brand is associated with all of its New York & Company merchandise in addition to its stores, the Company's success depends heavily on the value associated
with its brand. The New York & Company name is integral to the Company's existing business, as well as to the implementation of its strategy for growing and expanding its business. The New
York & Company brand could be adversely affected if the Company's public image or reputation were to be tarnished, which could result in a material adverse effect on the Company's business. If
the value associated with the Company's brand were to diminish, the Company's sales could decrease, causing lower profits or losses.
The Company may be unable to compete favorably in the highly competitive retail industry, and if it loses customers to its competitors, its sales could decrease causing a
decrease in profits or losses.
The sale of apparel and accessories is highly competitive. Increased competition could result in price reductions, increased marketing
expenditures and loss of market share; all of which could have a material adverse effect on the Company's financial condition and results of operations.
The
Company competes for sales with a broad range of other retailers, including individual and chain fashion specialty stores and department stores. The Company's competitors include Ann
Taylor LOFT, Express, The Gap, JCPenney, Kohl's, Old Navy and Target, among others. In addition to the traditional store-based retailers, the Company also competes with direct marketers that sell
similar lines of merchandise and target customers through catalogs and E-commerce.
Some
of the Company's competitors may have greater financial, marketing and other resources available to them. In many cases, the Company's competitors sell their products in stores that
are located in the same shopping malls as the Company's stores. In addition to competing for sales, the Company competes for favorable site locations and lease terms in shopping malls.
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The Company's marketing efforts rely upon the effective use of customer information. Restrictions on the availability or use of customer information could adversely affect
the Company's marketing program, which could result in lost sales and a decrease in profits.
The Company uses its customer database to market to its customers. Any limitations imposed on the use of such consumer data, whether
imposed by federal or state governments or business partners, could have an adverse effect on the Company's future marketing activity. In addition, while the Company is compliant with Payment Card
Industry Data Security Standards ("PCI DSS"), to the extent the Company's or its business partners' security procedures and protection of customer information prove to be insufficient or inadequate,
the Company may become subject to litigation, which could expose it to liability and cause damage to its reputation or brand.
The Company is subject to numerous regulations that could affect its operations. Changes in such regulations could affect its profitability and impact the operation of its
business through delayed shipments of its goods, fines or penalties.
The Company is subject to federal and state minimum wage laws, as well as various business customs,
truth-in-advertising,
truth-in-lending and other laws, including consumer protection regulations and zoning and occupancy ordinances that regulate retailers generally and/or govern the importation,
promotion and sale of merchandise, the use of the Company's proprietary credit cards and the operation of retail stores and warehouse facilities. Although the Company undertakes to monitor changes in
these laws, if these laws change without the Company's knowledge, or are violated by the Company's employees, importers, buying agents, manufacturers or distributors, the Company could experience
delays in shipments and receipt of goods or be subject to fines or other penalties under the controlling regulations, any of which could have a material adverse effect on the Company's business,
financial condition and results of operations.
The covenants in the Company's credit facilities impose restrictions that may limit its operating and financial flexibility.
The Company's credit facilities contain a number of significant restrictions and covenants that limit its ability
to:
-
- incur additional indebtedness;
-
- declare dividends, make distributions or redeem or repurchase capital stock, including the Company's common stock, or to
make certain other restricted payments or investments;
-
- sell assets, including capital stock of restricted subsidiaries;
-
- agree to payment restrictions affecting the Company's restricted subsidiaries;
-
- consolidate, merge, sell or otherwise dispose of all or substantially all of the Company's assets;
-
- incur liens;
-
- alter the nature of the Company's business;
-
- enter into sale/leaseback transactions;
-
- conduct transactions with affiliates; or
-
- designate the Company's subsidiaries as unrestricted subsidiaries.
In
addition, the Company's credit facilities include other and more restrictive covenants and prohibit it from prepaying its other indebtedness while indebtedness under its credit
facilities is outstanding. The agreement governing the Company's credit facilities also requires it to achieve
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specified
financial and operating results and maintain compliance with specified financial ratios. The Company's ability to comply with these ratios may be affected by events beyond the Company's
control.
The
restrictions contained in the agreement governing the Company's credit facilities could:
-
- limit the Company's ability to plan for or react to market conditions or meet capital needs or otherwise restrict its
activities or business plans; and
-
- adversely affect the Company's ability to finance its operations, strategic acquisitions, investments or other capital
needs or to engage in other business activities that would be in the Company's interest.
A
breach of any of these restrictive covenants or the Company's inability to comply with the required financial ratios could result in a default under the agreement governing its credit
facilities. If a default occurs, the lenders under the credit facilities may elect to declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and
payable.
The
lenders also have the right in these circumstances to terminate any commitments they have to provide further borrowings. If the Company is unable to repay outstanding borrowings when
due, the lenders under the credit facilities also have the right to proceed against the collateral, including the Company's available cash, granted to them to secure the indebtedness.
The Company is a "controlled company," and the interests in its business of its controlling stockholders may be different from yours.
Pursuant to a stockholders agreement among certain stockholders of the Company, Irving Place Capital (formerly known as Bear Stearns
Merchant Banking) is able to, subject to applicable law, designate a majority of the members of the Board of Directors of the Company and control actions to be taken by the Company and its Board of
Directors, including amendments to the Company's restated certificate of incorporation and amended and restated bylaws and approval of significant corporate transactions, including mergers and sales
of substantially all of the Company's assets. The directors so elected will have the authority, subject to the terms of the Company's indebtedness and the rules and regulations of the New York Stock
Exchange, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. Because Irving Place Capital owns more than 50% of the voting power of the
Company, the Company is considered a "controlled company" for the purposes of the New York Stock Exchange listing requirements. As such, the Company is permitted to, and has opted out of, the New York
Stock Exchange corporate governance requirements that its Board of Directors, its Compensation Committee and its Nomination and Governance Committee meet the standard of independence established by
those corporate governance requirements. As a result, the Company's Board of Directors and those committees may have more directors who do not meet the New York Stock Exchange independence standards
than they would if those independence standards were to apply. The New York Stock Exchange independence standards are intended to ensure that directors who meet the independence standard are free of
any conflicting interest that could influence their actions as directors. Three of the Company's directors are employees of Irving Place Capital. It is possible that the interests of Irving Place
Capital or that of an entity that controls Irving Place Capital may in some circumstances conflict with the Company's interests and the interests of its other stockholders.
Provisions in the Company's restated certificate of incorporation and Delaware law may delay or prevent the Company's acquisition by a third party.
The Company's restated certificate of incorporation contains a "blank check" preferred stock provision. Blank check preferred stock
enables the Company's Board of Directors, without stockholders approval, to designate and issue additional series of preferred stock with such dividend, liquidation,
19
Table of Contents
conversion,
voting or other rights, including the right to issue convertible securities with no limitation on conversion, as the Company's Board of Directors may determine, including rights to
dividends and proceeds in a liquidation that are senior to the common stock.
These
provisions may make it more difficult or expensive for a third party to acquire a majority of the Company's outstanding voting common stock. The Company is also subject to certain
provisions of Delaware law which could delay, deter or prevent the Company from entering into a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in the
Company's stockholders receiving a premium over the market price for their stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
All of the Company's stores, encompassing approximately 4.2 million total gross square feet as of January 31, 2009, are
leased under operating leases. The typical store lease is for a ten-year term and requires the Company to pay real estate taxes, common area maintenance charges, utilities and other
landlord charges. The Company also leases approximately 185,083 square feet of space at its headquarters located at 450 West 33rd Street, New York, New York
under a lease which expires in 2015. Additionally, the Company owns a parcel of land located in Brooklyn, New York on which it operates one of its leased stores.
Item 3. Legal Proceedings
On April 29, 2008, a class action claim was filed in the Superior Court of the State of California for the County of Contra
Costa captioned Jannika Schakow v. Lerner New York, Inc. and New York & Company, Inc. The class action was seeking relief for, among other things, meal and rest periods allegedly
not provided or permitted to certain eligible employees in California.
On
March 25, 2008, a class action claim was filed in the Superior Court of the State of California for the County of San Diego, the caption of which has been changed to Leslie
Johnson v. Lerner New York, Inc. The class action was seeking relief for, among other things, collection of customers' personal information in a manner that is allegedly in violation of
California law.
In
January 2009, the Company reached settlements in principle with the plaintiffs of both class action claims in the State of California and recorded charges in connection with the
settlements totaling $1.5 million.
There
are various claims, lawsuits and pending actions against the Company arising in the normal course of the Company's business. It is the opinion of management that the ultimate
resolution of these matters will not have a material effect on the Company's financial condition, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the quarter ended January 31, 2009.
20
Table of Contents
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company's common stock has been listed and publicly traded on the New York Stock Exchange under the symbol "NWY" since
October 7, 2004. The number of holders of record of common stock at March 31, 2009 was 192. The following table sets forth the high and low sale prices for the common stock on the New
York Stock Exchange for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Market Price |
|
|
|
High |
|
Low |
|
Fiscal Year 2008 |
|
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
3.00 |
|
$ |
0.82 |
|
|
Third quarter |
|
$ |
12.12 |
|
$ |
2.21 |
|
|
Second quarter |
|
$ |
9.97 |
|
$ |
6.50 |
|
|
First quarter |
|
$ |
6.57 |
|
$ |
4.49 |
|
Fiscal Year 2007 |
|
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
8.20 |
|
$ |
3.65 |
|
|
Third quarter |
|
$ |
9.58 |
|
$ |
5.69 |
|
|
Second quarter |
|
$ |
13.87 |
|
$ |
8.76 |
|
|
First quarter |
|
$ |
16.20 |
|
$ |
13.30 |
|
The
Company has not declared or paid any dividends on its common stock since the acquisition of the Company by Irving Place Capital in November 2002. The Company currently expects to
retain future earnings, if any, for use in the operation and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future. The Company's ability to pay
dividends on its common stock is limited by the covenants of its credit facilities and may be further restricted by the terms of any of its future debt or preferred securities.
21
Table of Contents
Performance Graph
The following graph shows a quarterly comparison of the cumulative total return on a $100 investment in the Company's common stock, the
Standard & Poor's SmallCap 600 Index and the Standard & Poor's SmallCap 600 Apparel Retail Index. The cumulative total return for New York & Company, Inc. common stock
assumes an initial investment of $100 in the common stock of the Company on October 7, 2004, which was the Company's first day of trading on the New York Stock Exchange after its initial public
offering. The cumulative total return for the Standard & Poor's SmallCap 600 Index and the Standard & Poor's SmallCap 600 Apparel Retail Index assumes an initial investment of $100 on
September 30, 2004. The comparison also assumes the reinvestment of any dividends.
22
Table of Contents
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On November 26, 2008, the Company announced that its board of directors had authorized the repurchase of up to 3,750,000 shares
over the next 12 months ending in November 2009. Repurchases, if any, would be made from time to time in the manner the Company believes appropriate, through open market or private transactions
including through pre-established trading plans.
As
of January 31, 2009, as set forth in the following table, the Company did not make any purchases of the Company's common stock, pursuant to the authorized share repurchase
program, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number
of Shares
Purchased |
|
Average
Price Paid
Per Share |
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Program |
|
Maximum Number
of Shares that May
Yet Be Purchased
Under the Program |
|
November 2, 2008 to November 29, 2008 |
|
|
|
|
|
|
|
|
|
|
|
3,750,000 |
|
November 30, 2008 to January 3, 2009 |
|
|
|
|
|
|
|
|
|
|
|
3,750,000 |
|
January 4, 2009 to January 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
3,750,000 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
3,750,000 |
|
|
|
|
|
|
|
|
|
|
|
23
Table of Contents
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data for New York & Company, Inc. and its subsidiaries for
each of the periods presented. The consolidated financial data for the 52-week fiscal year ended January 31, 2009, referred to as "fiscal year 2008," the 52-week fiscal
year ended February 2, 2008, referred to as "fiscal year 2007," the 53-week fiscal year ended February 3, 2007, referred to as "fiscal year 2006," the 52-week
fiscal year ended January 28, 2006, referred to as "fiscal year 2005," and the 52-week fiscal year ended January 29, 2005, referred to as "fiscal year 2004," have been
derived from the audited consolidated financial statements of New York & Company, Inc. and its subsidiaries.
The
selected consolidated financial data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the
Company's consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands, except per share data)
|
|
Fiscal Year
2008
(52-weeks) |
|
Fiscal Year
2007
(52-weeks) |
|
Fiscal Year
2006
(53-weeks) |
|
Fiscal Year
2005
(52-weeks) |
|
Fiscal Year
2004
(52-weeks) |
|
Statements of operations data(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,139,853 |
|
$ |
1,194,944 |
|
$ |
1,153,333 |
|
$ |
1,112,950 |
|
$ |
1,040,028 |
|
|
Cost of goods sold, buying and occupancy costs |
|
|
843,478 |
|
|
851,739 |
|
|
786,757 |
|
|
751,586 |
|
|
682,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
296,375 |
|
|
343,205 |
|
|
366,576 |
|
|
361,364 |
|
|
357,089 |
|
|
Selling, general and administrative expenses |
|
|
306,101 |
|
|
298,325 |
|
|
284,664 |
|
|
258,642 |
|
|
262,201 |
|
|
Restructuring charges(2) |
|
|
24,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(34,255 |
) |
|
44,880 |
|
|
81,912 |
|
|
102,722 |
|
|
94,888 |
|
|
Interest expense, net of interest income |
|
|
726 |
|
|
1,200 |
|
|
1,663 |
|
|
5,726 |
|
|
9,256 |
|
|
Accrued dividendsredeemable preferred stock(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,703 |
|
|
Loss on modification and extinguishment of debt(3) |
|
|
|
|
|
|
|
|
|
|
|
933 |
|
|
2,034 |
|
|
Loss on derivative instrument(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(34,981 |
) |
|
43,680 |
|
|
80,249 |
|
|
96,063 |
|
|
51,497 |
|
|
(Benefit) provision for income taxes |
|
|
(14,683 |
) |
|
17,004 |
|
|
31,853 |
|
|
38,363 |
|
|
34,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(20,298 |
) |
|
26,676 |
|
|
48,396 |
|
|
57,700 |
|
|
17,438 |
|
|
Income (loss) from discontinued operations, net of taxes(1) |
|
|
491 |
|
|
(31,533 |
) |
|
(2,226 |
) |
|
788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(19,807 |
) |
$ |
(4,857 |
) |
$ |
46,170 |
|
$ |
58,488 |
|
$ |
17,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share from continuing operations |
|
$ |
(0.34 |
) |
$ |
0.46 |
|
$ |
0.86 |
|
$ |
1.07 |
|
$ |
0.37 |
|
|
Basic earnings (loss) per share from discontinued operations |
|
|
0.01 |
|
|
(0.54 |
) |
|
(0.04 |
) |
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
|
$ |
(0.33 |
) |
$ |
(0.08 |
) |
$ |
0.82 |
|
$ |
1.08 |
|
$ |
0.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share from continuing operations |
|
$ |
(0.34 |
) |
$ |
0.44 |
|
$ |
0.81 |
|
$ |
1.01 |
|
$ |
0.33 |
|
|
Diluted earnings (loss) per share from discontinued operations |
|
|
0.01 |
|
|
(0.52 |
) |
|
(0.04 |
) |
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.33 |
) |
$ |
(0.08 |
) |
$ |
0.77 |
|
$ |
1.02 |
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
59,650 |
|
|
58,537 |
|
|
56,072 |
|
|
53,923 |
|
|
47,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares of common stock |
|
|
59,650 |
|
|
61,028 |
|
|
60,031 |
|
|
57,316 |
|
|
52,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
Fiscal Year
2005 |
|
Fiscal Year
2004 |
|
Balance sheet data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (including cash at discontinued operations of $1, $223, $206 and $1,593, respectively) |
|
$ |
54,281 |
|
$ |
73,957 |
|
$ |
68,064 |
|
$ |
57,436 |
|
$ |
85,161 |
|
|
Working capital |
|
|
70,599 |
|
|
84,479 |
|
|
69,964 |
|
|
47,701 |
|
|
83,105 |
|
|
Total assets |
|
|
456,813 |
|
|
488,456 |
|
|
469,799 |
|
|
406,275 |
|
|
330,188 |
|
|
Total debt(3) |
|
|
19,500 |
|
|
25,500 |
|
|
31,500 |
|
|
37,500 |
|
|
75,000 |
|
|
Stockholders' equity |
|
$ |
222,496 |
|
$ |
239,961 |
|
$ |
240,799 |
|
$ |
179,050 |
|
$ |
103,283 |
|
- (1)
- In
connection with the decision to exit the JasmineSola business, the Company recorded a $35.2 million impairment charge in fiscal year 2007 related
to the property and equipment, goodwill and trademarks of JasmineSola, a $1.3 million charge for severance costs and a $5.8 million charge for lease termination costs. As of
February 2, 2008, all JasmineSola stores were closed and all other exit procedures were substantially complete; therefore, JasmineSola's results of operations are presented as discontinued
operations in the current and prior periods presented.
- (2)
- In
connection with the Company's multi-year restructuring and cost reduction program launched in January 2009, the Company recorded
pre-tax restructuring charges totaling $24.5 million. These charges were comprised of a non-cash charge of $22.9 million related to the impairment of store assets
and a $1.7 million cash charge primarily related to severance and other costs necessary to implement the restructuring and cost reduction program. For further information related to the
restructuring and cost reduction program, please refer to Note 3, "Restructuring," in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on
Form 10-K.
- (3)
- On
March 16, 2004, the Company amended and restated its credit facility to include a three-year $75.0 million term loan
("March 16, 2004 term loan"). The Company used $75.0 million of term loan proceeds, together with $32.2 million of cash on-hand, to repay a $75.0 million
principal amount, 10% subordinated note, plus $10.0 million of accrued interest to Limited Brands; repurchase from LFAS, Inc., an affiliate of Limited Brands, a common stock warrant for
$20.0 million plus a contingent obligation; and pay $2.2 million of fees and expenses associated with these transactions. The Company measured the fair value of the contingent obligation
("derivative instrument") on March 16, 2004 and reported $16.3 million as a reduction of stockholders' equity and a liability on the consolidated balance sheet. During fiscal year 2004,
the Company remeasured the fair value of the contingent obligation, which resulted in a charge to earnings of $29.4 million. On May 19, 2004, the Company entered into a new credit
facility comprised of a five-year $75.0 million junior secured term loan ("May 19, 2004 term loan"). The Company used the $75.0 million loan proceeds to purchase
substantially all of the Company's outstanding Series A preferred stock for $72.4 million, which included $62.5 million aggregate principal amount and $12.5 million accrued
and unpaid dividends, and is presented net of $2.6 million of promissory notes receivable and $0.2 million of common stock subscription receivable. Additionally, cash on-hand
was used to pay $1.9 million of fees and expenses related to these transactions. On October 13, 2004, the Company used approximately $75.2 million of the net proceeds received
from the initial public offering to repay the $75.0 million May 19, 2004 term loan, plus accrued and unpaid interest of approximately $0.2 million. In connection with the early
repayment of both the $75.0 million, 10% subordinated note to Limited Brands and the $75.0 million May 19, 2004 term loan during fiscal year 2004, the Company recorded
$2.0 million of charges related to the write-off of unamortized deferred financing costs.
On
January 4, 2006, the Company's credit facilities were amended to provide for, among other matters, an additional $37.5 million term loan facility maturing on March 17, 2009
bearing interest at the Eurodollar rate plus 2.50%. Using the $37.5 million of proceeds from the January 4, 2006 term loan plus cash on-hand, the Company prepaid in full the
$75.0 million March 16, 2004 term loan, which was bearing interest at the Eurodollar rate plus 5.00%, and $0.5 million in fees related to the refinancing. The Company recorded a
$0.9 million charge in January 2006 related to the write-off of unamortized deferred financing fees associated with the Company's March 16, 2004 term loan.
On
August 22, 2007, the Company's credit facilities were further amended to provide for, among other matters, an extension of the term of the Company's existing $90.0 million revolving
credit facility and existing term loan to March 17, 2012. As of January 31, 2009, the outstanding principal balance of the term loan was $19.5 million.
25
Table of Contents
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and
other sections of this Annual Report on Form 10-K are forward-looking statements intended to qualify for safe harbors from liability established by the Private Securities Litigation
Reform Act of 1995. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "may," "plan," "project,"
"predict" and similar expressions and include references to assumptions that the Company believes are reasonable and relate to its future prospects,
developments and business strategies. Factors that could cause the Company's actual results to differ materially from those expressed or implied in such forward-looking statements, include, but are
not limited to those discussed under the headings "Item 1A. Risk Factors" and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in this Annual Report on
Form 10-K and:
-
- the Company's business is impacted by general economic conditions and their effect on consumer confidence and spending
patterns, which have recently deteriorated significantly and may continue to do so for the foreseeable future;
-
- the deteriorating economic conditions could negatively impact the Company's merchandise vendors and their ability to
deliver products;
-
- the Company's ability to successfully integrate its restructuring and cost reduction program;
-
- the Company's ability to open and operate stores successfully and the potential lack of availability of suitable store
locations on acceptable terms;
-
- seasonal fluctuations in the Company's business;
-
- the Company's ability to anticipate and respond to fashion trends, develop new merchandise and launch new product lines
successfully;
-
- the Company's dependence on mall traffic for its sales;
-
- the Company's dependence on the success of its brand;
-
- competition in the Company's market, including promotional and pricing competition;
-
- the Company's reliance on the effective use of customer information;
-
- the Company's ability to service any debt it incurs from time to time as well as its ability to maintain the requirements
that the agreements related to such debt impose upon the Company;
-
- the susceptibility of the Company's business to extreme and/or unseasonable weather conditions;
-
- the Company's ability to retain, recruit and train key personnel;
-
- the Company's reliance on third parties to manage some aspects of its business;
-
- changes in the cost of raw materials, distribution services or labor, including federal and state minimum wage rates;
-
- the potential impact of national and international security concerns on the retail environment, including any possible
military action, terrorist attacks or other hostilities;
-
- the Company's reliance on foreign sources of production, including the disruption of imports by labor disputes, political
instability, legal and regulatory matters, duties, taxes, other charges, local business practices, potential delays in shipping and related pricing impacts and political issues and fluctuation in
currency and exchange rates;
26
Table of Contents
-
- the potential impact of natural disasters and health concerns relating to outbreaks of widespread diseases, particularly
on manufacturing operations of the Company's vendors;
-
- the ability of the Company's manufacturers to manufacture and deliver products in a timely manner while meeting its
quality standards;
-
- the Company's ability to successfully integrate new or acquired businesses into its existing business;
-
- the Company's reliance on manufacturers to maintain ethical business practices;
-
- the Company's ability to protect its trademarks and other intellectual property rights;
-
- the Company's ability to maintain, and its reliance on, its information technology infrastructure;
-
- the effects of government regulation; and
-
- the control of the Company by its sponsors and any potential change of ownership of those sponsors.
The
Company undertakes no obligation to revise the forward-looking statements included in this Annual Report on Form 10-K to reflect any future events or
circumstances.
The
purpose of this section is to discuss and analyze the Company's consolidated financial condition, liquidity and capital resources, and results of operations. The following discussion
should be read in conjunction with the Company's consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.
Overview
The Company is a leading specialty retailer of fashion-oriented, moderately-priced women's apparel. The Company designs and sources its
proprietary branded New York & Company merchandise sold exclusively through its national network of retail stores and E-commerce store at www.nyandcompany.com. The target customers for the
Company's merchandise are fashion-conscious, value-sensitive women between the ages of 25 and 45. As
of January 31, 2009, the Company operated 589 stores in 44 states.
The
Company's fiscal year is a 52 or 53 week year that ends on the Saturday closest to January 31. The 52-week years ended January 31, 2009 and
February 2, 2008 and the 53-week year ended February 3, 2007 are referred to herein as "fiscal year 2008," "fiscal year 2007" and "fiscal year 2006," respectively. The
52-week year ending January 30, 2010 is referred to herein as "fiscal year 2009."
As
of February 2, 2008, the Company completed the closure of all of the Company's 23 JasmineSola stores and substantially completed all other exit procedures. As a result, the
Company's financial statements reflect JasmineSola as discontinued operations for all periods presented. Unless otherwise noted, the description of the Company's business, including all financial and
store operating data,
presented in this Annual Report on Form 10-K relate to the New York & Company business.
Fiscal Year 2008 Summary
The dramatic deterioration in financial markets and the adverse affect on the U.S. and global economy throughout the second half of
fiscal year 2008 resulted in a significant reduction in consumer confidence and the level of consumer spending on the merchandise the Company offers. In response, the Company initiated a comprehensive
review of its business and on January 8, 2009 announced the launch of a multi-year restructuring and cost reduction program that is expected to generate approximately
$175 million in pre-tax savings over the next five years, of which approximately $30 million is expected to be realized in fiscal year 2009. This program is designed to
streamline the
27
Table of Contents
Company's
organization by reducing costs and eliminating underperforming assets while enhancing efficiency and profitability.
The
key components of the restructuring and cost reduction program include:
-
- Strategic staff downsizing resulting in a permanent reduction of 12% of the Company's field management in its existing
stores and approximately a 10% reduction of corporate office professionals;
-
- The optimization of the Company's store portfolio, including the closure of 40 to 50 underperforming stores over a five
year period;
-
- A broad based cost reduction effort across all aspects of the Company's business; and
-
- Significant reductions in capital expenditure plans as compared to fiscal year 2008.
During
the fourth quarter of fiscal year 2008, the Company recorded a pre-tax restructuring charge of $24.5 million, comprised of a non-cash charge of
$22.9 million related to the impairment of store assets and a $1.7 million cash charge primarily related to severance and other costs necessary to implement the restructuring and cost
reduction program. The Company does not currently expect to record any material restructuring charges for these matters in fiscal year 2009.
The
ongoing deterioration of the macroeconomic environment and the resulting impact on consumer spending during fiscal year 2008 contributed to a significant decrease in the Company's
comparable store sales, which resulted in a loss of leverage on buying and occupancy costs and a decline in profit margins. Net sales for fiscal year 2008 were $1,139.9 million, as compared to
net sales of $1,194.9 million for fiscal year 2007. Comparable store sales decreased 8.6% for fiscal year 2008, as compared to a comparable store sales decrease of 1.3% for fiscal year 2007.
Loss from continuing operations in fiscal year 2008 was $20.3 million, or $0.34 per diluted share, inclusive of a loss of $0.29 per diluted share attributable to the restructuring charges
discussed above, a $2.5 million charge incurred in connection with management changes during the third quarter of fiscal year 2008, and a $1.5 million charge related to legal settlements
recorded during the fourth quarter of fiscal year 2008. This compares to income from continuing operations of $26.7 million, or $0.44 per diluted share, in fiscal year 2007. For a discussion of
the more significant factors impacting these results, see "Results of Operations" below.
Capital
spending for fiscal year 2008 was $44.6 million, as compared to $75.5 million for fiscal year 2007. The $44.6 million of capital spending represents
$26.8 million related to the construction of new stores and the remodeling of existing stores and $17.8 million related to non-store capital projects, which principally
represent information technology enhancements including, among other projects, a new POS system implemented across the chain and the upgrade of the Company's existing merchandise planning system. The
Company completed the implementation of the new POS system during fiscal year 2008 and expects to complete the upgrade of its merchandise planning system during fiscal year 2009. During fiscal year
2008, the Company successfully opened 25 new stores, closed 14 stores, and completed 14 remodels, ending the fiscal year operating 589 stores in 44 states, as compared to 578 stores as of
February 2, 2008. Total selling square footage as of January 31, 2009 was 3.295 million, compared to 3.327 million as of February 2, 2008.
As
of January 31, 2009, the Company had cash and cash equivalents of $54.3 million, working capital of $70.6 million and availability under its revolving credit
facility of $68.7 million. Looking forward to fiscal year 2009, the Company will focus on managing expenses and inventory tightly and conserving cash in order to position itself for growth once
the macroeconomic environment begins to improve. Capital expenditures are estimated to be approximately $15.0 million in fiscal year 2009, down from $44.6 million in fiscal year 2008.
28
Table of Contents
General
Net Sales. Net sales consist of sales from comparable and non-comparable stores and the Company's E-commerce store. A store
is included in the comparable store sales calculation after it has completed 13 full fiscal months of operation from the store's original opening date or once it has been reopened after remodeling.
Beginning in February 2008, sales from the Company's E-commerce store are included in comparable store sales. Non-comparable store sales include stores which have not completed
13 full fiscal months of operations, sales from closed stores, and sales from stores closed or in temporary locations during periods of remodeling. In addition, in a year with 53 weeks, sales
in the last week of the year are not included in determining comparable store sales. Net sales from the sale of merchandise at the Company's stores are recognized when the customer takes possession of
the merchandise and the purchases are paid for, primarily with either cash or credit card. Net sales from the sale of merchandise at the Company's E-commerce store are recognized when the
merchandise is shipped to the customer. A reserve is provided for projected merchandise returns based on prior experience.
The
Company issues gift cards which do not contain provisions for expiration or inactivity fees. The portion of the dollar value of gift cards that ultimately is not used by customers to
make purchases is known as breakage. The Company estimates gift card breakage and records such amount as revenue as gift cards are redeemed. The Company's estimate of gift card breakage is based on
analysis of historical redemption patterns as well as the remaining balance of gift cards for which the Company believes the likelihood of redemption to be remote.
Cost of Goods Sold, Buying and Occupancy Costs. Cost of goods sold, buying and occupancy costs is comprised of direct inventory costs
for merchandise
sold, distribution, payroll and related costs for design, sourcing, production, merchandising, planning and allocation personnel, and store occupancy and related costs.
Gross Profit. Gross profit represents net sales less cost of goods sold, buying and occupancy costs.
Selling, General and Administrative Expenses. Selling, general and administrative expenses include selling, store management and
corporate expenses,
including payroll and employee benefits, employment taxes, management information systems, marketing, insurance, legal, store pre-opening and other corporate level expenses. Store
pre-opening expenses include store level payroll, grand opening event marketing, travel, supplies and other store opening expenses.
29
Table of Contents
Results of Operations
The following tables summarize the Company's results of operations as a percentage of net sales and selected store operating data for
fiscal year 2008, fiscal year 2007 and fiscal year 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
|
|
(as a % of net sales)
|
|
Net sales |
|
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
Cost of goods sold, buying and occupancy costs |
|
|
74.0 |
% |
|
71.3 |
% |
|
68.2 |
% |
|
|
|
|
|
|
|
|
Gross profit |
|
|
26.0 |
% |
|
28.7 |
% |
|
31.8 |
% |
Selling, general and administrative expenses |
|
|
26.8 |
% |
|
24.9 |
% |
|
24.7 |
% |
Restructuring charges |
|
|
2.2 |
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(3.0 |
)% |
|
3.8 |
% |
|
7.1 |
% |
Interest expense, net |
|
|
0.1 |
% |
|
0.1 |
% |
|
0.1 |
% |
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(3.1 |
)% |
|
3.7 |
% |
|
7.0 |
% |
(Benefit) provision for income taxes |
|
|
(1.3 |
)% |
|
1.5 |
% |
|
2.8 |
% |
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(1.8 |
)% |
|
2.2 |
% |
|
4.2 |
% |
Income (loss) from discontinued operations, net of taxes |
|
|
0.1 |
% |
|
(2.6 |
)% |
|
(0.2 |
)% |
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(1.7 |
)% |
|
(0.4 |
)% |
|
4.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
|
|
(amounts in thousands, except square foot data)
|
|
Selected operating data: |
|
|
|
|
|
|
|
|
|
|
Comparable store sales decrease |
|
|
(8.6 |
)% |
|
(1.3 |
)% |
|
(2.7 |
)% |
Net sales per average selling square foot(1) |
|
$ |
344 |
|
$ |
364 |
|
$ |
358 |
|
Net sales per average store(2) |
|
$ |
1,952 |
|
$ |
2,145 |
|
$ |
2,218 |
|
Average selling square footage per store(3) |
|
|
5,594 |
|
|
5,757 |
|
|
6,038 |
|
- (1)
- Net
sales per average selling square foot is defined as net sales divided by the average of beginning and end of period selling square feet.
- (2)
- Net
sales per average store is defined as net sales divided by the average of beginning and end of period number of stores.
- (3)
- Average
selling square footage per store is defined as end of period selling square feet divided by end of period number of stores.
The
following table includes store count and selling square feet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008 |
|
Fiscal Year 2007 |
|
Fiscal Year 2006 |
|
|
|
Store
Count |
|
Selling
Square Feet |
|
Store
Count |
|
Selling
Square Feet |
|
Store
Count |
|
Selling
Square Feet |
|
Stores open, beginning of period |
|
|
578 |
|
|
3,327,450 |
|
|
536 |
|
|
3,236,540 |
|
|
503 |
|
|
3,207,627 |
|
New stores |
|
|
25 |
|
|
104,641 |
|
|
54 |
|
|
228,727 |
|
|
52 |
|
|
241,048 |
|
Closed stores |
|
|
(14 |
) |
|
(98,572 |
) |
|
(12 |
) |
|
(88,042 |
) |
|
(19 |
) |
|
(138,208 |
) |
Net impact of remodeled stores on selling square feet |
|
|
|
|
|
(38,740 |
) |
|
|
|
|
(49,775 |
) |
|
|
|
|
(73,927 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores open, end of period |
|
|
589 |
|
|
3,294,779 |
|
|
578 |
|
|
3,327,450 |
|
|
536 |
|
|
3,236,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Table of Contents
Fiscal Year 2008 Compared to Fiscal Year 2007
Net Sales. Net sales for fiscal year 2008 were $1,139.9 million, as compared to net sales of $1,194.9 million for fiscal year
2007. The
dramatic deterioration in financial markets and the adverse effect on the U.S. and global economy throughout the second half of fiscal year 2008 resulted in a significant reduction in consumer
confidence and the level of consumer spending on the merchandise the Company offers. The Company's comparable store sales decreased 8.6% for fiscal year 2008, which resulted in a loss of leverage on
buying and occupancy costs and a decline in profit margins. This decrease in comparable store sales was partially offset by an increase in non-comparable store sales, driven by net sales
from new store openings not yet included in comparable store sales. In the comparable store base, the average dollar sales per transaction decreased 1.9%, and the number of transactions per average
store decreased 6.8%, as compared to last year.
Gross Profit. Gross profit decreased $46.8 million to $296.4 million, or 26.0% of net sales, during fiscal year 2008, as
compared to
$343.2 million, or 28.7% of net sales, during fiscal year 2007. During the first half of fiscal year 2008, the Company improved gross profit by 220 basis points, which was primarily the result
of a 340 basis point improvement in merchandise margins, reflecting the success of the Company's strategy to improve margin through disciplined inventory control and targeted, well-planned
promotions, partially offset by a 120 basis point increase in buying and occupancy costs as a percentage of net sales. As the impact of the economic downturn worsened during the second half of fiscal
year 2008, the improvement in gross profit recognized during the first half of the fiscal year was more than offset by a decrease in gross profit realized during the second half of the fiscal year.
For full fiscal year 2008, gross profit as a percentage of net sales decreased by 270 basis points, resulting primarily from a 230 basis point increase in buying and occupancy costs as a percentage of
net sales primarily due to the lack of leverage resulting from negative comparable store sales. In addition, merchandise margins decreased by 40 basis points during fiscal year 2008 resulting from the
decrease in comparable store sales and an increase in promotional and inventory clearance activity throughout the second half of the fiscal year.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $7.8 million to
$306.1 million, or
26.8% of net sales, during fiscal year 2008, as compared to $298.3 million, or 24.9% of net sales, during fiscal year 2007, primarily as a result of spending to support new stores. The increase
in selling, general and administrative expenses as a percentage of net sales is primarily a result of the decrease in comparable store sales, partially offset by the impact of the Company's ongoing
cost savings initiatives. In addition, selling, general and administrative expenses includes a $2.5 million charge related to management changes during the third quarter of fiscal year 2008 and
a $1.5 million charge recognized during the fourth quarter of fiscal year 2008 in connection with the settlement of two separate class action lawsuits in the State of California. On an average
store basis, selling general and administrative expenses declined by 2.1%, reflecting the success of the Company's expense control efforts.
Restructuring Charges. In connection with the Company's multi-year restructuring and cost reduction program launched in January 2009,
the
Company recorded pre-tax restructuring charges totaling $24.5 million, or 2.2% of net sales, during the fourth quarter of fiscal year 2008. The charges included a
non-cash charge of $22.9 million related to the impairment of store assets and a $1.7 million cash charge primarily related to severance and other costs necessary to
implement the restructuring and cost reduction program. For further information related to the restructuring and cost reduction program, please refer to Note 3, "Restructuring," in the Notes to
Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
Operating (Loss) Income. For the reasons discussed above, operating loss for fiscal year 2008 was $34.3 million, or 3.0% of net
sales, as
compared to operating income of $44.9 million, or 3.8% of net sales, during fiscal year 2007.
31
Table of Contents
Interest Expense, Net. Net interest expense decreased to $0.7 million during fiscal year 2008, as compared to $1.2 million
during
fiscal year 2007. The decrease in net interest expense is primarily related to a decrease in borrowings and fluctuations in interest rates.
(Benefit) Provision for Income Taxes. The effective tax rate during fiscal year 2008 reflects a benefit of 42.0%, as compared to a
provision of 38.9%
during fiscal year 2007. The change in effective tax rate for fiscal year 2008, as compared to fiscal year 2007, is primarily due to a tax benefit resulting from the reduction of tax positions for
prior years.
(Loss) Income from Continuing Operations. For the reasons discussed above, loss from continuing operations was $20.3 million, or
1.8% of net
sales, for fiscal year 2008. This compares to income from continuing operations of $26.7 million, or 2.2% of net sales, for fiscal year 2007.
Income (Loss) from Discontinued Operations, Net of Taxes. Income from discontinued operations, net of taxes, which represents the
operations of
JasmineSola, was $0.5 million for fiscal year 2008, as compared to a loss of $31.5 million for fiscal year 2007. The $31.5 million loss from discontinued operations, net of taxes
in fiscal year 2007 is primarily related to the decision to exit the JasmineSola business and the related non-cash charges to impair certain assets of JasmineSola, including goodwill,
trademarks and property and equipment, and cash charges for severance and lease termination costs.
Fiscal Year 2007 Compared to Fiscal Year 2006
Net Sales. Net sales for fiscal year 2007 were $1,194.9 million, as compared to net sales of $1,153.3 million for fiscal year
2006. The
increase in net sales is primarily attributable to an increase in non-comparable store sales, driven by net sales from new store openings not yet included in comparable store sales, and a
$21.1 million increase in net sales from the Company's E-commerce store launched in November 2006. These increases were partially offset by reduced sales due to a reduction in the
number of weeks of selling in fiscal year 2007 compared to fiscal year 2006 (52 weeks in fiscal year 2007 versus 53 weeks in fiscal year 2006) and a 1.3% decrease in comparable store
sales for the 52-weeks ended February 2, 2008, as compared to the 52-weeks ended February 3, 2007. Excluding $15.1 million of net sales from the extra week
in fiscal year 2006, net sales in fiscal year 2007 increased 5.0%. In the comparable store base, the average dollar sales per transaction decreased 1.6%, while the number of transactions per average
store increased 0.3%, as compared to last year.
Gross Profit. Gross profit decreased $23.4 million to $343.2 million, or 28.7% of net sales, during fiscal year 2007, as
compared to
$366.6 million, or 31.8% of net sales, during fiscal year 2006. The 310 basis point decrease in gross profit as a percentage of net sales during fiscal year 2007 is in part due to a decrease in
comparable store sales and an increase in promotional and inventory clearance activity, which resulted in a 170 basis point decrease in merchandise margin. Also contributing to the decrease was a 140
basis point increase in buying and occupancy costs as a percentage of net sales, which was primarily caused by the lack of leverage resulting from negative comparable store sales combined with an
increase in real estate costs related to the impact of new and remodeled stores.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $13.7 million to
$298.3 million,
or 24.9% of net sales, during fiscal year 2007, as compared to $284.7 million, or 24.7% of net sales, during fiscal year 2006. The 20 basis point increase in selling, general and administrative
expenses as a percentage of net sales during fiscal year 2007 is primarily the result of a reduction in marketing and corporate overhead spending, which largely offset an increase in store selling
expenses and the reduction in leverage due to the decrease in comparable store sales.
Operating Income. For the reasons discussed above, operating income decreased $37.0 million to $44.9 million, or 3.8% of net
sales,
during fiscal year 2007, as compared to $81.9 million, or 7.1% of net sales, during fiscal year 2006.
32
Table of Contents
Interest Expense, Net. Net interest expense decreased $0.5 million to $1.2 million during fiscal year 2007, as compared to
$1.7 million during fiscal year 2006. The decrease in net interest expense is primarily related to a decrease in borrowings and fluctuations in interest rates.
Provision for Income Taxes. The effective tax rate during fiscal year 2007 was 38.9%, as compared to 39.7% during fiscal year 2006. The
change in
effective tax rate for fiscal year 2007 is primarily due to the recognition of $0.6 million of tax benefits due to the settlement of U.S. federal income tax examinations for the tax years 2003
through 2005.
Income from Continuing Operations. For the reasons discussed above, income from continuing operations decreased $21.7 million to
$26.7 million, or 2.2% of net sales, for fiscal year 2007, from $48.4 million, or 4.2% of net sales, for fiscal year 2006.
Loss from Discontinued Operations, Net of Taxes. Loss from discontinued operations, net of taxes, which represents the operations of
JasmineSola, was
$31.5 million for fiscal year 2007, as compared to a loss of $2.2 million for fiscal year 2006. The increase in the loss from discontinued operations, net of taxes is directly related to
the decision to exit the JasmineSola business and the related non-cash charges to impair certain assets of JasmineSola, including goodwill, trademarks and property and equipment, and cash
charges for severance and lease termination costs.
Non-GAAP Financial Measure
The Company has provided a non-GAAP financial measure to adjust (loss) income from continuing operations for fiscal year
2008, fiscal year 2007 and fiscal year 2006. This information reflects, on a non-GAAP adjusted basis, the Company's (loss) income from continuing operations before interest expense, net;
(benefit) provision for income taxes; depreciation and amortization; and loss from impairment charges ("EBITDA"). The calculation for EBITDA is provided to enhance the user's understanding of the
Company's operating results. EBITDA is provided because management believes it is an important measure of financial performance commonly used to determine the value of companies and to define
standards for borrowing from institutional lenders. The non-GAAP financial information should be considered in addition to, not as an alternative to, (loss) income from continuing
operations, as an indicator of the Company's operating performance, and cash flows from operating activities of
continuing operations, as a measure of the Company's liquidity, as determined in accordance with accounting principles generally accepted in the United States. The Company may calculate EBITDA
differently than other companies.
Reconciliation of (Loss) Income from Continuing Operations to EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008 |
|
Fiscal Year 2007 |
|
Fiscal Year 2006 |
|
|
|
Amounts in
thousands |
|
As a % of
net sales |
|
Amounts in
thousands |
|
As a % of
net sales |
|
Amounts in
thousands |
|
As a % of
net sales |
|
(Loss) income from continuing operations |
|
$ |
(20,298 |
) |
|
(1.8 |
)% |
$ |
26,676 |
|
|
2.2 |
% |
$ |
48,396 |
|
|
4.2 |
% |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
726 |
|
|
0.1 |
% |
|
1,200 |
|
|
0.1 |
% |
|
1,663 |
|
|
0.1 |
% |
|
(Benefit) provision for income taxes |
|
|
(14,683 |
) |
|
(1.3 |
)% |
|
17,004 |
|
|
1.5 |
% |
|
31,853 |
|
|
2.8 |
% |
|
Depreciation and amortization |
|
|
43,939 |
|
|
3.9 |
% |
|
38,500 |
|
|
3.2 |
% |
|
31,607 |
|
|
2.7 |
% |
|
Loss from impairment charges |
|
|
22,854 |
|
|
2.0 |
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
32,538 |
|
|
2.9 |
% |
$ |
83,380 |
|
|
7.0 |
% |
$ |
113,519 |
|
|
9.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Table of Contents
Quarterly Results and Seasonality
The Company views the retail apparel market as having two principal selling seasons: spring (first and second quarter) and fall (third
and fourth quarter). The Company's business experiences seasonal fluctuations in net sales and operating income, with a significant portion of its operating income typically realized during its fourth
quarter. The following table sets forth the percentage of fiscal year net sales, operating income (loss) and income (loss) from continuing operations that was realized in each quarter of the last two
fiscal years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008 |
|
Fiscal Year 2007 |
|
|
|
Quarter ended |
|
Quarter ended |
|
(as a % of fiscal year)
|
|
May 3,
2008 |
|
August 2,
2008 |
|
November 1,
2008 |
|
January 31,
2009 |
|
May 5,
2007 |
|
August 4,
2007 |
|
November 3,
2007 |
|
February 2,
2008 |
|
Net sales |
|
|
23.7 |
% |
|
25.9 |
% |
|
21.9 |
% |
|
28.5 |
% |
|
22.9 |
% |
|
23.9 |
% |
|
23.1 |
% |
|
30.1 |
% |
Operating income (loss) |
|
|
33.2 |
% |
|
42.2 |
% |
|
(38.3 |
)% |
|
(137.1 |
)% |
|
19.9 |
% |
|
19.2 |
% |
|
18.6 |
% |
|
42.3 |
% |
Income (loss) from continuing operations |
|
|
33.1 |
% |
|
42.4 |
% |
|
(39.4 |
)% |
|
(136.1 |
)% |
|
19.4 |
% |
|
18.9 |
% |
|
19.8 |
% |
|
41.9 |
% |
Any decrease in sales or margins during either of the principal selling seasons in any given year could have a disproportionate effect on the
Company's financial condition and results of operations. Seasonal fluctuations also affect inventory levels. The Company must carry a significant amount of inventory, especially before the holiday
season selling period.
The
following tables set forth the Company's quarterly consolidated statements of operations data for the last eight fiscal quarters and such information expressed as a percentage of net
sales. This unaudited quarterly information has been prepared on the same basis as the annual audited financial statements appearing elsewhere in this Annual Report on Form 10-K and
includes all necessary
34
Table of Contents
adjustments,
consisting only of normal recurring adjustments, that the Company considers necessary to present fairly the financial information for the quarters presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008 |
|
Fiscal Year 2007 |
|
|
|
Quarter ended |
|
Quarter ended |
|
Statements of Operations data
|
|
May 3,
2008 |
|
August 2,
2008 |
|
November 1,
2008 |
|
January 31,
2009 |
|
May 5,
2007 |
|
August 4,
2007 |
|
November 3,
2007 |
|
February 2,
2008 |
|
|
|
(Amounts in thousands, except per share data)
|
|
Net sales |
|
$ |
270,069 |
|
$ |
295,668 |
|
$ |
249,027 |
|
$ |
325,089 |
|
$ |
274,186 |
|
$ |
284,966 |
|
$ |
276,379 |
|
$ |
359,413 |
|
Gross profit |
|
$ |
83,941 |
|
$ |
88,382 |
|
$ |
62,938 |
|
$ |
61,114 |
|
$ |
79,443 |
|
$ |
78,691 |
|
$ |
82,116 |
|
$ |
102,955 |
|
Operating income (loss) |
|
$ |
11,366 |
|
$ |
14,454 |
|
$ |
(13,132 |
) |
$ |
(46,943 |
) |
$ |
8,918 |
|
$ |
8,640 |
|
$ |
8,358 |
|
$ |
18,964 |
|
Income (loss) from continuing operations |
|
$ |
6,723 |
|
$ |
8,610 |
|
$ |
(7,992 |
) |
$ |
(27,639 |
) |
$ |
5,177 |
|
$ |
5,036 |
|
$ |
5,291 |
|
$ |
11,172 |
|
Income (loss) from discontinued operations, net of taxes |
|
$ |
|
|
$ |
167 |
|
$ |
68 |
|
$ |
256 |
|
$ |
(4,375 |
) |
$ |
(1,537 |
) |
$ |
(21,321 |
) |
$ |
(4,300 |
) |
Net income (loss) |
|
$ |
6,723 |
|
$ |
8,777 |
|
$ |
(7,924 |
) |
$ |
(27,383 |
) |
$ |
802 |
|
$ |
3,499 |
|
$ |
(16,030 |
) |
$ |
6,872 |
|
Basic earnings (loss) per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
continuing operations |
|
$ |
0.11 |
|
$ |
0.15 |
|
$ |
(0.13 |
) |
$ |
(0.46 |
) |
$ |
0.09 |
|
$ |
0.09 |
|
$ |
0.09 |
|
$ |
0.19 |
|
|
Basic EPS
discontinued operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(0.08 |
) |
$ |
(0.03 |
) |
$ |
(0.36 |
) |
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
0.11 |
|
$ |
0.15 |
|
$ |
(0.13 |
) |
$ |
(0.46 |
) |
$ |
0.01 |
|
$ |
0.06 |
|
$ |
(0.27 |
) |
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
continuing operations |
|
$ |
0.11 |
|
$ |
0.14 |
|
$ |
(0.13 |
) |
$ |
(0.46 |
) |
$ |
0.08 |
|
$ |
0.08 |
|
$ |
0.09 |
|
$ |
0.18 |
|
|
Diluted EPS
discontinued operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(0.07 |
) |
$ |
(0.02 |
) |
$ |
(0.35 |
) |
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share |
|
$ |
0.11 |
|
$ |
0.14 |
|
$ |
(0.13 |
) |
$ |
(0.46 |
) |
$ |
0.01 |
|
$ |
0.06 |
|
$ |
(0.26 |
) |
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
59,274 |
|
|
59,426 |
|
|
59,858 |
|
|
60,040 |
|
|
57,805 |
|
|
58,262 |
|
|
58,845 |
|
|
59,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares of common stock |
|
|
61,232 |
|
|
61,395 |
|
|
59,858 |
|
|
60,040 |
|
|
60,869 |
|
|
60,954 |
|
|
61,074 |
|
|
61,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008 |
|
Fiscal Year 2007 |
|
|
|
Quarter ended |
|
Quarter ended |
|
(as a % of net sales)
|
|
May 3,
2008 |
|
August 2,
2008 |
|
November 1,
2008 |
|
January 31,
2009 |
|
May 5,
2007 |
|
August 4,
2007 |
|
November 3,
2007 |
|
February 2,
2008 |
|
Net sales |
|
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
Gross profit |
|
|
31.1 |
% |
|
29.9 |
% |
|
25.3 |
% |
|
18.8 |
% |
|
29.0 |
% |
|
27.6 |
% |
|
29.7 |
% |
|
28.6 |
% |
Operating income (loss) |
|
|
4.2 |
% |
|
4.9 |
% |
|
(5.3 |
)% |
|
(14.4 |
)% |
|
3.3 |
% |
|
3.0 |
% |
|
3.0 |
% |
|
5.3 |
% |
Income (loss) from continuing operations |
|
|
2.5 |
% |
|
2.9 |
% |
|
(3.2 |
)% |
|
(8.5 |
)% |
|
1.9 |
% |
|
1.8 |
% |
|
1.9 |
% |
|
3.1 |
% |
Liquidity and Capital Resources
The Company's primary uses of cash are to fund working capital, operating expenses, debt service and capital expenditures related
primarily to the construction of new stores, remodeling of existing stores and development of the Company's information technology infrastructure. Historically, the Company has financed these
requirements from internally generated cash flow. The Company intends to fund its ongoing capital and working capital requirements, as well as debt service obligations, primarily through cash flows
from operations, supplemented by borrowings under its credit facilities, if needed. The Company is in compliance with all debt covenants.
As
of January 31, 2009, the Company had cash and cash equivalents of $54.3 million, working capital of $70.6 million and availability under its revolving credit
facility of $68.7 million. Looking forward to fiscal year 2009, the Company will focus on managing expenses and inventory tightly and conserving cash in order to position itself for growth once
the macroeconomic environment begins to improve. Capital expenditures are estimated to be approximately $15.0 million in fiscal year 2009, down from $44.6 million in fiscal year 2008.
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands)
|
|
January 31,
2009 |
|
February 2,
2008 |
|
February 3,
2007 |
|
Cash and cash equivalents (including cash at discontinued operations of $1, $223 and $206, respectively) |
|
$ |
54,281 |
|
$ |
73,957 |
|
$ |
68,064 |
|
Working capital |
|
$ |
70,599 |
|
$ |
84,479 |
|
$ |
69,964 |
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands)
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
Net cash provided by operating activities of continuing operations |
|
$ |
34,463 |
|
$ |
70,928 |
|
$ |
84,479 |
|
Net cash used in investing activities of continuing operations |
|
$ |
(44,352 |
) |
$ |
(75,464 |
) |
$ |
(77,536 |
) |
Net cash (used in) provided by financing activities of continuing operations |
|
$ |
(3,635 |
) |
$ |
(1,798 |
) |
$ |
9,596 |
|
Net cash (used in) provided by discontinued operations |
|
$ |
(6,152 |
) |
$ |
12,227 |
|
$ |
(5,911 |
) |
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
$ |
(19,676 |
) |
$ |
5,893 |
|
$ |
10,628 |
|
|
|
|
|
|
|
|
|
Operating Activities of Continuing Operations
Net cash provided by operating activities of continuing operations was $34.5 million during fiscal year 2008, as compared to net
cash provided by operating activities of continuing operations of $70.9 million during fiscal year 2007. The decrease in net cash provided by operating activities of continuing operations
during fiscal year 2008, as compared to fiscal year 2007, is primarily related to the loss from continuing operations in fiscal year 2008 and changes in prepaid expenses, accounts payable, deferred
rent, and other assets and liabilities, partially offset by changes in accounts receivable, income taxes receivable, inventory, accrued expenses, and income taxes payable. Cash provided by deferred
rent primarily consists of unamortized landlord allowances related to the Company's store expansion and remodel programs.
36
Table of Contents
Net
cash provided by operating activities of continuing operations was $70.9 million during fiscal year 2007, as compared to net cash provided by operating activities of
continuing operations of $84.5 million during fiscal year 2006. The decrease in net cash provided by operating activities of continuing operations during fiscal year 2007, as compared to fiscal
year 2006, is primarily related to a decrease in income from continuing operations and changes in accounts receivable, income taxes receivable, inventory, prepaid expenses, accrued expenses, income
taxes payable and deferred rent, partially offset by changes in accounts payable and other assets and liabilities. Cash provided by deferred rent primarily consists of unamortized landlord allowances
related to the Company's store expansion and remodel programs.
Investing Activities of Continuing Operations
Net cash used in investing activities of continuing operations was $44.4 million, $75.5 million and $77.5 million,
during fiscal year 2008, fiscal year 2007 and fiscal year 2006, respectively. These amounts primarily reflect capital expenditures related to the construction of new stores, the remodeling of existing
stores and non-store capital projects. During fiscal year 2008, the Company invested $17.8 million in non-store capital projects, which principally represent information
technology enhancements including, among other projects, a new POS system being implemented across the chain and the upgrade of its existing merchandise planning system. The Company completed the
implementation of the new POS system during fiscal year 2008 and expects to complete the upgrade of its merchandise planning system during fiscal year 2009.
The
decrease in net cash used in investing activities of continuing operations during fiscal year 2008, as compared to fiscal year 2007, is due to the construction of 25 new stores and
the remodeling of 14 existing stores during fiscal year 2008, as compared to 54 new stores and 25 remodeled stores in fiscal year 2007. During fiscal year 2006, the Company opened 52 new stores and
remodeled 35 existing stores.
Financing Activities of Continuing Operations
Net cash used in financing activities of continuing operations was $3.6 million during fiscal year 2008, as compared to net cash
used in financing activities of continuing
operations of $1.8 million during fiscal year 2007. Net cash used in financing activities of continuing operations for fiscal year 2008 consisted of the following: quarterly payments against
the Company's outstanding term loan totaling $6.0 million; $2.5 million of proceeds from the exercise of stock options and the related excess tax benefit to the Company; and payment of
financing costs totaling $0.2 million in connection with the December 9, 2008 amendment of the Company's credit facilities. Net cash used in financing activities of continuing operations
for fiscal year 2007 consisted primarily of the following: quarterly payments against the Company's outstanding term loan totaling $6.0 million; $4.7 million of proceeds from the
exercise of stock options and the related excess tax benefit to the Company; and payment of financing costs totaling $0.4 million in connection with the August 22, 2007 amendment of the
Company's credit facilities.
Net
cash used in financing activities of continuing operations was $1.8 million during fiscal year 2007, as compared to net cash provided by financing activities of continuing
operations of $9.6 million during fiscal year 2006. Net cash used in financing activities of continuing operations for fiscal year 2007 is explained in the preceding paragraph. Net cash
provided by financing activities of continuing operations for fiscal year 2006 consisted of the following: proceeds of $2.3 million from the public offering of common stock, consummated on
January 31, 2006; the payment of $0.4 million in fees and expenses related to the offering; quarterly payments against the Company's outstanding term loan totaling $6.0 million;
and $13.7 million of proceeds from the exercise of stock options and the related excess tax benefit to the Company.
37
Table of Contents
Discontinued Operations Cash Flows
Net cash used in discontinued operations was $6.2 million during fiscal year 2008, as compared to net cash provided by
discontinued operations of $12.2 million during fiscal year 2007. Net cash used in discontinued operations during fiscal year 2008 consisted primarily of lease termination payments and the
payment of other exit related liabilities. Net cash provided by discontinued operations for fiscal year 2007 consisted primarily of $12.6 million of cash provided by operating activities, which
was largely the result of the tax benefit associated with the impairment charges related to JasmineSola trademarks, goodwill and property and equipment and the liquidation of JasmineSola inventory
during the closeout period.
Net
cash provided by discontinued operations was $12.2 million during fiscal year 2007, as compared to net cash used in discontinued operations of $5.9 million during
fiscal year 2006. Net cash provided by discontinued operations for fiscal year 2007 is explained in the preceding paragraph. Net cash used in discontinued operations for fiscal year 2006 was related
primarily to capital expenditures of $5.4 million for the construction of nine JasmineSola stores.
Long-Term Debt and Credit Facilities
On August 22, 2007, Lerner New York, Inc., Lernco, Inc. and Jasmine Company, Inc. entered into a Second
Amended and Restated Loan and Security Agreement (the "Loan Agreement") with Wachovia Bank, National Association, as Agent for itself and the other lender party to the Loan Agreement. The Loan
Agreement further amended and restated the Amended and Restated Loan and Security Agreement, dated March 16, 2004, among Lerner New York, Inc. and Lernco, Inc., as borrowers,
together with the Agent and the lenders party thereto, as amended.
The
Company's credit facilities currently consist of a term loan, of which $19.5 million was outstanding at January 31, 2009, and a $90.0 million revolving credit
facility (which includes a sub-facility available for issuance of letters of credit of up to $75.0 million), both having a maturity date of March 17, 2012.
The
revolving loans under the credit facilities bear interest, at the Company's option, either at a floating rate equal to the Eurodollar rate plus a margin of between 1.00% and 1.25%
per year, depending upon the Company's financial performance, or the Prime rate. The Company pays the lenders under the revolving credit facility a monthly fee on outstanding commercial letters of
credit at a rate of 0.625% per year and on standby letters of credit at a rate of between 1.00% and 1.25% per year, depending upon the Company's financial performance, plus a monthly fee on a
proportion of the unused commitments under that facility at a rate of 0.20% per year. The term loan bears interest at a floating rate equal to the Eurodollar rate plus 2.50% per year. If any default
were to exist under the revolving credit facility and for so long as such default were to continue, at the option of the agent or lenders, the monthly fee on outstanding standby letters of credit may
increase to 3.25% per year, interest on the revolving loans may increase to 3.25% per year above the Eurodollar rate for Eurodollar rate loans and 2.00% per year above the Prime rate for all Prime
rate loans, and interest on the term loan may increase to the Eurodollar rate plus 4.50% per year.
The
Company's credit facilities contain certain covenants, including restrictions on the Company's ability to pay dividends on its common stock, incur additional indebtedness and to
prepay, redeem, defease or purchase other debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, stock repurchases, acquisitions and for other
purposes. The terms of the Company's credit facilities also subject it to certain maintenance covenants, which were amended on December 9, 2008. The amendment removed the maximum leverage ratio
of 2.75 to 1.00 and limited the application of the minimum fixed charge coverage ratio of 1.00 to 1.00, such that the Company is only subject to the minimum fixed charge coverage ratio if borrowing
availability under its revolving credit facility plus qualified cash falls below specified minimum levels. Prior to the existing
38
Table of Contents
term
loan being repaid in full, the Company will only be subject to the minimum fixed charge coverage ratio in the event that borrowing availability under its revolving credit facility plus qualified
cash falls
below $30.0 million ($20.0 million during March and November). Should the Company fully repay its existing term loan, the Company will only be subject to the minimum fixed charge
coverage ratio in the event that borrowing availability under its revolving credit facility falls below $12.5 million. In addition, the Company is required at all times to maintain minimum
borrowing availability under its credit facility of $10.0 million. The Company is currently in compliance with the financial covenants referred to above.
The
lenders have been granted a pledge of the common stock of Lerner Holding and certain of its subsidiaries, and a first priority security interest in substantially all other tangible
and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the credit facilities. In addition, New York &
Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the credit facilities, and such guarantees are joint and several.
As
of January 31, 2009, the Company had availability under its revolving credit facility of $68.7 million, net of letters of credit outstanding of $6.9 million, as
compared to availability of $72.2 million, net of letters of credit outstanding of $6.8 million, as of February 2, 2008. As of January 31, 2009 and February 2, 2008,
there were no loans outstanding under the revolving credit facility. Borrowings under the revolving credit facility are due March 17, 2012, and may be borrowed, repaid and reborrowed prior to
maturity.
Cash Requirements
The Company believes that cash flows from operations, its current cash balance and funds available under its credit facilities will be
sufficient to meet its working capital needs and planned capital expenditures through fiscal year 2009.
Off-Balance Sheet Arrangements
The Company does not have off-balance sheet arrangements.
Contractual Obligations
The following table summarizes the Company's contractual obligations as of January 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period(4) |
|
|
|
Total
obligations |
|
Less than
one year |
|
One to
three years |
|
Three to
five years |
|
More than
five years |
|
|
|
(Amounts in thousands)
|
|
Long-term debt(1) |
|
$ |
19,500 |
|
$ |
6,000 |
|
$ |
13,500 |
|
$ |
|
|
$ |
|
|
Operating leases(2) |
|
|
732,688 |
|
|
109,232 |
|
|
203,472 |
|
|
185,894 |
|
|
234,090 |
|
Purchase obligations(3) |
|
|
97,536 |
|
|
90,036 |
|
|
7,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
$ |
849,724 |
|
$ |
205,268 |
|
$ |
224,472 |
|
$ |
185,894 |
|
$ |
234,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Does
not include any scheduled interest payments.
- (2)
- Represents
future minimum lease payments, under non-cancelable leases as of January 31, 2009. The minimum lease payments do not include
common area maintenance ("CAM") charges, real estate taxes or other landlord charges, which are also contractual obligations under store and office operating leases. In many of the Company's leases,
CAM charges are not fixed and can fluctuate from year to year. During fiscal year 2008, CAM charges and real estate taxes were $70.7 million and other landlord charges were $5.9 million.
39
Table of Contents
- (3)
- Represents
purchase orders for merchandise not yet received or recorded on the consolidated balance sheet, as well as a contractual obligation for
distribution and logistics services used in the normal course of business.
- (4)
- Not
included in the above table are net potential cash obligations of $3.6 million associated with unrecognized tax benefits and $3.5 million
associated with an unfunded pension liability due to the high degree of uncertainty regarding the timing of future cash outflows associated with such obligations. For further information related to
unrecognized tax benefits and the unfunded pension liability, please refer to Note 14, "Income Taxes" and Note 10, "Employee Benefit Plans," respectively, in the Notes to Consolidated
Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
Commercial Commitments
The following table summarizes the Company's commercial commitments as of January 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Commitment Per Period(2) |
|
|
|
Total
obligations |
|
Less than
one year |
|
One to
three years |
|
Three to
five years |
|
More than
five years |
|
|
|
(Amounts in thousands)
|
|
Trade letters of credit outstanding(1) |
|
$ |
101 |
|
$ |
101 |
|
$ |
|
|
$ |
|
|
$ |
|
|
Standby letters of credit(1) |
|
|
6,778 |
|
|
6,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial commitments |
|
$ |
6,879 |
|
$ |
6,879 |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Issued
under its revolving credit facility. At January 31, 2009, there were no outstanding borrowings under this facility.
- (2)
- Excludes
purchase orders for merchandise and supplies in the normal course of business.
Critical Accounting Policies
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires
management to make estimates and assumptions that impact the amounts reported on the Company's consolidated financial statements and related notes. On an ongoing basis, management evaluates its
estimates and judgments, including those related to inventories, long-lived assets, goodwill and other intangible assets. Management bases its estimate and judgments on historical
experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ materially from these judgments. Management believes the following estimates
and assumptions are most significant to reporting the Company's results of operations and financial position.
Inventory Valuation. Inventories are valued at the lower of average cost or market, on a weighted average cost basis, using the retail
method. The
Company records a charge to cost of goods sold, buying and occupancy costs for all inventory on-hand when a permanent retail price reduction is reflected in its stores. In addition,
management makes estimates and judgments regarding, among other things, initial markup, markdowns, future demand and market conditions, all of which significantly impact the ending inventory
valuation. If actual future demand or market conditions are different than those projected by management, future period merchandise margin rates may be unfavorably or favorably affected. Other
significant estimates related to inventory include shrink and obsolete and excess inventory which are also based on historical results and management's operating projections.
Impairment of Long-Lived Assets. The Company evaluates long-lived assets in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or
40
Table of Contents
Disposal
of Long-Lived Assets" ("SFAS No. 144"). Long-lived assets are evaluated for recoverability in accordance with SFAS No. 144 whenever events or changes in
circumstances indicate that an asset may have been impaired. In evaluating an asset for recoverability, the Company estimates the future cash flow expected to result from the use of the asset and
eventual disposition. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the
fair value of the asset, is recognized. An impairment loss could have a material adverse impact on the Company's financial condition and results of operations. In connection with the Company's
multi-year restructuring and cost reduction program launched in January 2009, the Company recorded a non-cash charge of $22.9 million during the fourth quarter of fiscal
year 2008 related to the impairment of store assets. In connection with the decision to exit the JasmineSola business, during the third quarter of fiscal year 2007, the Company recorded a
non-cash charge of approximately $6.9 million related to JasmineSola property and equipment. The Company's evaluations during fiscal year 2006 resulted in no material asset
impairment charges.
Goodwill and Other Intangible Assets. SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), prohibits the
amortization
of goodwill and intangible assets with indefinite lives. The Company's intangible assets relate to the New York & Company trademarks and historically the JasmineSola trademarks and goodwill
associated with the acquisition of JasmineSola on July 19, 2005, which were initially valued at $14.8 million, $17.2 million and $11.1 million, respectively. The trademarks
were initially valued using the "relief from royalty method" and were determined to have indefinite lives by an independent appraiser. Goodwill represents the excess of the purchase price over the
fair value of the net assets acquired.
The
Company tests for impairment of goodwill and other intangible assets at least annually in the fourth quarter, or more frequently if events or circumstances indicate that the asset
may be impaired, by comparing the fair value with the carrying amount for each individual asset. Goodwill impairment is determined using a two-step process. The first step of the goodwill
impairment test is to identify a potential impairment by comparing the fair value of a reporting unit with its carrying amount, including the goodwill assigned to the reporting unit. The estimate of
fair value of a reporting unit is determined using a discounted cash flow model. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not deemed to be
impaired and the second step of the impairment test is not performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that
goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair
value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the fair value of the reporting unit is allocated to all of the
assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the
purchase price paid to acquire the reporting unit.
The
impairment test for other intangible assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying value. The estimates of
fair value of intangible assets not subject to amortization, specifically trademarks, are determined using the "relief from royalty method." If the carrying value of the intangible asset exceeds its
fair value, an impairment loss is recognized in an amount equal to that excess.
The
calculation of estimated fair values used in the evaluation of goodwill and other intangible assets requires estimates of future cash flows, growth rates, discount rates and other
variables, that are based on historical experience, knowledge, and market data. If actual experience differs materially from management's estimates or if changes in strategic direction occur, an
impairment charge may be required. Management's estimates may be affected by factors such as those outlined in "Item 1A. Risk
41
Table of Contents
Factors."
An impairment loss could have a material adverse impact on the Company's results of operations. The Company's fiscal year 2008 impairment test did not result in any impairment. In connection
with the decision to exit the JasmineSola business, during the third quarter of fiscal year 2007, the Company recorded non-cash impairment charges of $17.2 million and
$11.1 million related to the JasmineSola trademarks and goodwill, respectively. The Company's fiscal year 2006 impairment test did not result in any impairment.
Income Taxes. Income taxes are calculated in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the use
of the
liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of assets and liabilities and their respective tax bases.
Inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax laws and published guidance with respect to applicability to the Company's operations.
Deferred tax assets are believed to be fully realizable as management expects future taxable income will be sufficient to recover the asset values and, as such, no related valuation allowance has been
provided for. The Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109" in
the first quarter of fiscal year 2007. This Interpretation prescribes a comprehensive model of how a company should recognize, measure, present and disclose in its financial statements uncertain tax
positions that the company has taken or expects to take on a tax return. Under this Interpretation, the Company recognizes a tax benefit when a tax position is
more-likely-than-not to be sustained upon examination, based solely on its technical merits. The Company measures the recognized tax benefit as the largest amount
of tax benefit that has greater than a 50% likelihood of being realized upon the ultimate settlement with a taxing authority. The Company reverses a previously recognized tax benefit if it determines
that the tax position no longer meets the more-likely-than-not threshold of being sustained. The Company accrues interest and penalties related to unrecognized tax
benefits in income tax expense.
Adoption of New Accounting Standards
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157
establishes a common definition for fair value to be applied to US GAAP guidance requiring the use of fair value, establishes a framework for measuring
fair value, and expands the disclosure about such fair value measurements. The application of SFAS No. 157 as it relates to financial assets and financial liabilities is effective for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal years. On February 12, 2008, the FASB issued FSP FAS 157-2, "Effective Date of FASB
Statement No. 157," which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value
in the financial statements on at least an annual basis, to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company's adoption of SFAS
No. 157 on February 3, 2008 for all financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurring basis did not
impact the Company's consolidated financial statements. The provisions of SFAS No. 157 are to be applied prospectively as of the beginning of the fiscal year in which it is applied, with any
transition adjustment recognized as a cumulative effect adjustment to the opening balance of retained earnings. The Company does not anticipate that the adoption of SFAS No. 157 for
nonfinancial assets and liabilities measured at fair value on a non-recurring basis will have a material impact on its financial position and results of operations
In
September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB statements No. 87,
88, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires recognition of the overfunded or underfunded status of defined benefit postretirement plans as an asset or liability in the
statement of financial
42
Table of Contents
position
and requires companies to recognize changes in that funded status in comprehensive income (loss) in the year in which the changes occur. SFAS No. 158 also requires measurement of the
funded status of a plan as of the date of the statement of financial position. SFAS No. 158 is effective for recognition of the funded status of benefit plans for fiscal years ending after
December 15, 2006 and is effective for the measurement date provisions for fiscal years ending after December 15, 2008. The adoption of the recognition provisions at February 3,
2007 and the measurement date provisions at January 31, 2009 did not have a material impact on the Company's financial position and results of operations.
In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162"). SFAS No. 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with
US GAAP for non-governmental entities. SFAS No. 162 is effective on November 15, 2008, which is 60 days following the SEC's September 16, 2008 approval
of the Public Company Accounting Oversight Board amendments to AU Section 411, the meaning of "Present Fairly in Conformity with GAAP." Any effect of applying the provisions of SFAS
No. 162 is to be reported as a change in accounting principle in accordance with FASB Statement No. 154, "Accounting Changes and Error Corrections." The Company's adoption of SFAS
No. 162 will not have a material impact on its financial position and results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rates. The Company's market risks relate primarily to changes in interest rates. The Company's credit facilities carry
floating interest
rates that are tied to the Eurodollar rate and the Prime rate and therefore, the consolidated statements of operations and the consolidated statements of cash flows will be exposed to changes in
interest rates. A 1.0% interest rate increase would increase interest expenses by approximately $0.2 million annually. The Company historically has not engaged in interest rate hedging
activities.
Currency Exchange Rates. The Company historically has not been exposed to currency exchange rate risks with respect to inventory
purchases as such
expenditures have been, and continue to be, denominated in U.S. Dollars. The Company purchases some of its inventory from suppliers in China, for which the Company pays U.S. Dollars. Since July 2005,
China has been slowly increasing the value of the Chinese Yuan, which is now linked to a basket of world-currencies. If the exchange rate of the Chinese Yuan to the U.S. Dollar continues to increase,
the Company may experience fluctuations in the cost of inventory purchased from China and the Company would adjust its supply chain accordingly.
Item 8. Financial Statements and Supplementary Data
The financial statements and schedule included in Part IV, "Item 15. Exhibits and Financial Statement Schedules" of this
Annual Report on Form 10-K are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
- (a)
- Evaluation
of disclosure controls and procedures
The
Company carried out an evaluation, as of January 31, 2009, under the supervision and with the participation of the Company's management, including the Company's Principal
Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15(e)
and 15d-15(e) of the Securities
43
Table of Contents
Exchange
Act of 1934, as amended. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are
effective in ensuring that all information required to be filed in this Annual Report on Form 10-K was (i) recorded, processed, summarized and reported within the time period
specified in the Securities and Exchange Commission's rules and forms (ii) and that the disclosure controls and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management,
including its Principal Executive and Principal Financial Officers, as appropriate to allow timely decisions regarding required disclosure.
- (b)
- Report
of management on internal control over financial reporting
The
Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934, as amended. The Company's internal control over financial reporting is a process designed to provide reasonable assurance to the Company's management and Board of
Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance with accounting principles generally accepted in
the United States.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management
assessed the effectiveness of the Company's internal control over financial reporting as of January 31, 2009. In making this assessment, management used the criteria
established in the Internal ControlIntegrated Framework report issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the "COSO criteria").
Based
upon management's assessment and the COSO criteria, management believes that the Company maintained effective internal control over financial reporting as of January 31,
2009.
The
Company's independent auditors, Ernst & Young LLP, a registered public accounting firm, have audited and reported on the consolidated financial statements of the
Company and the effectiveness of the Company's internal control over financial reporting. The reports of the independent auditors appear on page 53 herein and expressed unqualified opinions on
the consolidated financial statements and the effectiveness of the Company's internal control over financial reporting.
- (c)
- Changes
in internal control over financial reporting
There
has been no change in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act
Rule 13a-15 or 15d-15 that occurred during the Company's last fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9A(T). Controls and Procedures
Not applicable.
Item 9B. Other Information
None.
44
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 29, 2009.
On
July 24, 2008, the Company filed with the New York Stock Exchange ("NYSE") the Annual CEO Certification regarding the Company's compliance with the NYSE's corporate governance
listing standards as required by Section 303A-12(a) of the NYSE Listed Company Manual. In addition, the Company has filed as exhibits to this annual report on
Form 10-K and to the annual report on Form 10-K for the year ended February 2, 2008 the applicable
certifications of its Chief Executive Officer and its Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002, regarding the quality of the Company's public
disclosures.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 29, 2009.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 29, 2009.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 29, 2009.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 29, 2009.
45
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules
- (a)
- List
of documents filed as part of this Annual Report:
- 1.
- The
following consolidated financial statements of the Company are filed as part of this Annual Report:
-
- Reports of Independent Registered Public Accounting Firm;
-
- Consolidated Statements of Operations;
-
- Consolidated Balance Sheets;
-
- Consolidated Statements of Cash Flows;
-
- Consolidated Statements of Stockholders' Equity; and
-
- Notes to Consolidated Financial Statements.
- 2.
- Financial
Statement Schedule II Valuation and Qualifying Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Reserve
Description |
|
Balance at
beginning of
period |
|
Additions
Charged to Operations |
|
Deductions |
|
Balance at
end of
period |
|
|
|
|
|
(Amounts in thousands)
|
|
2006 |
|
Sales Return Reserve |
|
$ |
2,113 |
|
$ |
41,438 |
|
$ |
41,578 |
|
$ |
1,973 |
|
2007 |
|
Sales Return Reserve |
|
$ |
1,973 |
|
$ |
39,800 |
|
$ |
39,756 |
|
$ |
2,017 |
|
2008 |
|
Sales Return Reserve |
|
$ |
2,017 |
|
$ |
40,379 |
|
$ |
40,717 |
|
$ |
1,679 |
|
|
|
|
|
Exhibit
No. |
|
Description |
|
3.1 |
|
Restated Certificate of Incorporation. |
|
3.2 |
|
Amended and Restated Bylaws. |
|
9.1 |
|
Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated August 25, 2004.** |
|
9.2 |
|
Amendment No. 4 to Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated May 22, 2006. |
|
9.3 |
|
Amendment No. 5 to Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated August 16, 2006.+ |
|
10.1 |
|
Second Amended and Restated Employment Agreement between New York & Company, Inc. and Richard P. Crystal, dated August 25, 2004.** |
|
10.2 |
|
Amendment No. 1 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Richard P. Crystal, as amended on December 22,
2006.++ |
|
10.3 |
|
Amendment No. 2 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Richard P. Crystal, as amended on May 4, 2007.++ |
|
10.4 |
|
Amendment No. 3 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Richard P. Crystal, as amended on April 10, 2008.++ |
46
Table of Contents
|
|
|
|
Exhibit
No. |
|
Description |
|
10.5 |
|
Amendment No. 4 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Richard P. Crystal, as amended on January 28, 2009. |
|
10.6 |
|
Second Amended and Restated Employment Agreement between New York & Company, Inc. and Ronald W. Ristau, dated August 25, 2004.** |
|
10.7 |
|
Amendment No. 1 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Ronald W. Ristau, as amended on December 22,
2006.++ |
|
10.8 |
|
Amendment No. 2 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Ronald W. Ristau, as amended on April 10, 2008.++ |
|
10.9 |
|
Separation Agreement and General Release between New York & Company, Inc., Lerner New York, Inc. and Ronald W. Ristau, dated November 19, 2008. T T
T |
|
10.10 |
|
Amendment No. 1 to Separation Agreement and General Release, dated November 19, 2008, between New York & Company, Inc., Lerner New York, Inc. and Ronald W. Ristau, as amended on
January 27, 2009. |
|
10.11 |
|
Employment Letter, dated as of March 13, 2006, between New York & Company, Inc. and Sandra Brooslin Viviano. |
|
10.12 |
|
Employment Letter, dated as of March 13, 2006, between New York & Company, Inc. and John DeWolf. |
|
10.13 |
|
Employment Letter, dated as of April 20, 2006, between New York & Company, Inc. and Leslie Goldmann. |
|
10.14 |
|
Employment Letter, dated as of November 3, 2008, between New York & Company, Inc. and Sheamus Toal. |
|
10.15 |
|
Amendment No.1 to Employment Letter, dated as of March 13, 2006, between New York & Company, Inc. and Sandra Brooslin Viviano, as amended December 22, 2006. |
|
10.16 |
|
Amendment No.1 to Employment Letter, dated as of March 13, 2006 between New York & Company, Inc. and John DeWolf, as amended December 22, 2006. |
|
10.17 |
|
Amendment No.1 to Employment Letter, dated as of April 20, 2006 between New York & Company, Inc. and Leslie Goldmann, as amended December 22, 2006. |
|
10.18 |
|
Transition Services Agreement by and between Lerner New York Holding, Inc. and Limited Brands, Inc., dated as of November 27, 2002.* |
|
10.19 |
|
Amendment No. 1 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on April 19, 2006. T |
|
10.20 |
|
Amendment No. 2 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on October 11, 2007. |
|
10.21 |
|
Amendment No. 3 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on July 17, 2008. |
|
10.22 |
|
Amendment No. 4 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on April 6, 2009. |
47
Table of Contents
|
|
|
|
Exhibit
No. |
|
Description |
|
10.23 |
|
Second Amended and Restated Loan and Security Agreement by and among Lerner New York, Inc., Lernco, Inc., Jasmine Company, Inc., Wachovia Bank, National Association, as Agent for itself and the other Lender
named therein, dated as of August 22, 2007. T T |
|
10.24 |
|
Amendment No. 1 to Second Amended and Restated Loan and Security Agreement by and among Lerner New York, Inc., Lernco, Inc., Jasmine Company, Inc., Wachovia Bank, National Association, as Agent for
itself and the other Lender named therein, dated as of December 9, 2008. T T T |
|
10.25 |
|
Second Amended and Restated Guarantee made by New York & Company, Inc., Lerner New York Holding, Inc., Nevada Receivable Factoring, Inc., Associated Lerner Shops of America, Inc. and Lerner
New York GC, LLC in favor of Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and Restated Loan and Security Agreement, dated as of August 22, 2007. T
T |
|
10.26 |
|
Second Amended and Restated Collateral Assignment of Trademarks made among Lernco, Inc. and Jasmine Company, Inc. in favor of Wachovia Bank, National Association, as Agent for itself and the other Lender named
in the Second Amended and Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.27 |
|
Amended and Restated Collateral Assignment of Trademarks made among Lerner New York, Inc. in favor of Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and
Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.28 |
|
Second Amended and Restated Stock Pledge Agreement by and between Lerner New York, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and Restated Loan
and Security Agreement, dated as of August 22, 2007. T T |
|
10.29 |
|
Second Amended and Restated Stock Pledge Agreement by and between Lerner New York Holding, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and
Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.30 |
|
Second Amended and Restated Stock Pledge Agreement by and between New York & Company, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and
Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.31 |
|
Second Amended and Restated Intercompany Subordination Agreement made among the Obligors, as defined in the Second Amended and Restated Loan and Security Agreement, and Wachovia Bank, National Association, as Agent for
itself and the other Lender named in the Second Amended and Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.32 |
|
Performance Unit Award Agreement, dated as of January 28, 2009, between New York & Company, Inc. and Richard P. Crystal. |
|
10.33 |
|
Form of Amended and Restated 2002 Stock Option Plan that became effective immediately prior to the consummation of the Company's initial public offering.** |
|
10.34 |
|
New York & Company, Inc. 2006 Long-Term Incentive Plan approved by the Company's Board of Directors and Stockholders on May 3, 2006 and June 21, 2006, respectively. +++ |
|
21.1 |
|
Subsidiaries of the Registrant. |
|
23.1 |
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. |
|
31.1 |
|
Certification by the Chairman and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 7, 2009. |
48
Table of Contents
|
|
|
|
Exhibit
No. |
|
Description |
|
31.2 |
|
Certification by the Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 7, 2009. |
|
32.1 |
|
Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley act of 2002, dated April 7, 2009. |
|
|
|
|
|
Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2005, as filed with the SEC on April 19, 2005. |
|
|
Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2006, as filed with the SEC on April 7, 2006. |
|
|
Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2007, as filed with the SEC on April 6, 2007. |
|
|
Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2008, as filed with the SEC on April 8, 2008. |
T |
|
Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended April 29, 2006, as filed with the SEC on June 8, 2006. |
T T |
|
Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended August 4, 2007, as filed with the SEC on September 7, 2007. |
T T T |
|
Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended November 1, 2008, as filed with the SEC on December 11, 2008. |
* |
|
Incorporated by reference from Amendment No. 1 to the Company's Registration Statement on Form S-1 as filed with the SEC on July 9, 2004. |
** |
|
Incorporated by reference from Amendment No. 3 to the Company's Registration Statement on Form S-1 as filed with the SEC on September 14, 2004. |
+ |
|
Incorporated by reference from the Company's Current Report on Form 8-K filed with the SEC on August 17, 2006. |
++ |
|
Incorporated by reference from the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008. |
+++ |
|
Incorporated by reference from the Company's 2006 Proxy Statement, as filed with the SEC on May 19, 2006.
|
- (b)
- The
exhibits listed in the Exhibit Index attached hereto are filed as part of this Annual Report on Form 10-K and are incorporated herein
by reference.
- (c)
- Not
applicable.
49
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 7, 2009.
|
|
|
|
|
NEW YORK & COMPANY, INC.
(REGISTRANT) |
|
/s/ SHEAMUS G. TOAL
Sheamus G. Toal Executive Vice President and
Chief Financial Officer
(Principal financial officer and
Principal accounting officer) |
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the
capacities indicated.
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ RICHARD P. CRYSTAL
Richard P. Crystal |
|
Chairman and Chief Executive Officer
(Principal executive officer) |
|
April 7, 2009 |
/s/ SHEAMUS G. TOAL
Sheamus G. Toal |
|
Executive Vice President and
Chief Financial Officer
(Principal financial officer and
Principal accounting officer) |
|
April 7, 2009 |
/s/ BODIL M. ARLANDER
Bodil M. Arlander |
|
Director |
|
April 7, 2009 |
/s/ PHILIP M. CARPENTER III
Philip M. Carpenter III |
|
Director |
|
April 7, 2009 |
/s/ DAVID H. EDWAB
David H. Edwab |
|
Director |
|
April 7, 2009 |
/s/ JOHN D. HOWARD
John D. Howard |
|
Director |
|
April 7, 2009 |
/s/ LOUIS LIPSCHITZ
Louis Lipschitz |
|
Director |
|
April 7, 2009 |
50
Table of Contents
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Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ EDWARD W. MONEYPENNY
Edward W. Moneypenny |
|
Director |
|
April 7, 2009 |
/s/ GRACE NICHOLS
Grace Nichols |
|
Director |
|
April 7, 2009 |
/s/ RICHARD L. PERKAL
Richard L. Perkal |
|
Director |
|
April 7, 2009 |
/s/ ARTHUR E. REINER
Arthur E. Reiner |
|
Director |
|
April 7, 2009 |
/s/ PAMELA GRUNDER SHEIFFER
Pamela Grunder Sheiffer |
|
Director |
|
April 7, 2009 |
51
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Financial Statements
Index to Financial Statements
|
|
|
|
|
Page |
Reports of Independent Registered Public Accounting Firm |
|
53 |
Consolidated Statements of Operations for the years ended January 31, 2009, February 2, 2008,
and February 3, 2007 |
|
55 |
Consolidated Balance Sheets as of January 31, 2009 and February 2, 2008 |
|
56 |
Consolidated Statements of Cash Flows for the years ended January 31, 2009, February 2,
2008, and February 3, 2007 |
|
57 |
Consolidated Statements of Stockholders' Equity for the years ended January 31, 2009,
February 2, 2008 and February 3, 2007 |
|
58 |
Notes to Consolidated Financial Statements |
|
59 |
52
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of New York & Company, Inc. and subsidiaries
We
have audited New York & Company, Inc. and subsidiaries' internal control over financial reporting as of January 31, 2009, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). New York & Company, Inc. and
subsidiaries' management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting
based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A
company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In
our opinion, New York & Company, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of January 31,
2009, based on the COSO criteria.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of New York &
Company, Inc. and subsidiaries as of January 31, 2009 and February 2, 2008, and the related consolidated statements of operations, changes in stockholders' equity and cash flows
for each of the three years in the period ended January 31, 2009 and our report dated March 18, 2009 expressed an unqualified opinion thereon.
New
York, New York
March 18, 2009
53
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of New York & Company, Inc. and subsidiaries
We
have audited the accompanying consolidated balance sheets of New York & Company, Inc. and subsidiaries (the "Company") as of January 31, 2009 and
February 2, 2008, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended January 31, 2009. Our audits
also included the financial statement schedule listed in the index at Item 15. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of New York & Company, Inc. and
subsidiaries at January 31, 2009 and February 2, 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended
January 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects the information set forth therein.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), New York & Company, Inc. and subsidiaries' internal
control over financial reporting as of January 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated March 18, 2009 expressed an unqualified opinion thereon.
New
York, New York
March 18, 2009
54
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year
ended
January 31,
2009
(52-weeks) |
|
Fiscal year
ended
February 2,
2008
(52-weeks) |
|
Fiscal year
ended
February 3,
2007
(53-weeks) |
|
|
|
(Amounts in thousands, except
per share amounts)
|
|
Net sales |
|
$ |
1,139,853 |
|
$ |
1,194,944 |
|
$ |
1,153,333 |
|
Cost of goods sold, buying and occupancy costs |
|
|
843,478 |
|
|
851,739 |
|
|
786,757 |
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
296,375 |
|
|
343,205 |
|
|
366,576 |
|
Selling, general and administrative expenses |
|
|
306,101 |
|
|
298,325 |
|
|
284,664 |
|
Restructuring charges |
|
|
24,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(34,255 |
) |
|
44,880 |
|
|
81,912 |
|
Interest expense, net of interest income of $1,026, $1,534 and $1,416, respectively |
|
|
726 |
|
|
1,200 |
|
|
1,663 |
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(34,981 |
) |
|
43,680 |
|
|
80,249 |
|
(Benefit) provision for income taxes |
|
|
(14,683 |
) |
|
17,004 |
|
|
31,853 |
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(20,298 |
) |
|
26,676 |
|
|
48,396 |
|
Income (loss) from discontinued operations, net of taxes |
|
|
491 |
|
|
(31,533 |
) |
|
(2,226 |
) |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(19,807 |
) |
$ |
(4,857 |
) |
$ |
46,170 |
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share from continuing operations |
|
$ |
(0.34 |
) |
$ |
0.46 |
|
$ |
0.86 |
|
|
Basic earnings (loss) per share from discontinued operations |
|
|
0.01 |
|
|
(0.54 |
) |
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
|
$ |
(0.33 |
) |
$ |
(0.08 |
) |
$ |
0.82 |
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share from continuing operations |
|
$ |
(0.34 |
) |
$ |
0.44 |
|
$ |
0.81 |
|
|
Diluted earnings (loss) per share from discontinued operations |
|
|
0.01 |
|
|
(0.52 |
) |
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.33 |
) |
$ |
(0.08 |
) |
$ |
0.77 |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
59,650 |
|
|
58,537 |
|
|
56,072 |
|
|
|
|
|
|
|
|
|
|
Diluted shares of common stock |
|
|
59,650 |
|
|
61,028 |
|
|
60,031 |
|
|
|
|
|
|
|
|
|
See
accompanying notes.
55
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
January 31, 2009 |
|
February 2, 2008 |
|
|
|
(Amounts in thousands, except per share amounts)
|
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
54,280 |
|
$ |
73,734 |
|
|
Accounts receivable |
|
|
11,993 |
|
|
18,523 |
|
|
Income taxes receivable |
|
|
10,202 |
|
|
11,730 |
|
|
Inventories, net |
|
|
104,861 |
|
|
103,923 |
|
|
Prepaid expenses |
|
|
24,610 |
|
|
21,991 |
|
|
Other current assets |
|
|
2,390 |
|
|
1,913 |
|
|
Current assets of discontinued operations |
|
|
110 |
|
|
716 |
|
|
|
|
|
|
|
Total current assets |
|
|
208,446 |
|
|
232,530 |
|
Property and equipment, net |
|
|
217,248 |
|
|
239,557 |
|
Intangible assets |
|
|
14,879 |
|
|
14,843 |
|
Deferred income taxes |
|
|
14,897 |
|
|
|
|
Other assets |
|
|
1,343 |
|
|
1,500 |
|
Non-current assets of discontinued operations |
|
|
|
|
|
26 |
|
|
|
|
|
|
|
Total assets |
|
$ |
456,813 |
|
$ |
488,456 |
|
|
|
|
|
|
|
Liabilities and stockholders' equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portionlong-term debt |
|
$ |
6,000 |
|
$ |
6,000 |
|
|
Accounts payable |
|
|
68,431 |
|
|
77,177 |
|
|
Accrued expenses |
|
|
61,121 |
|
|
53,618 |
|
|
Deferred income taxes |
|
|
2,020 |
|
|
3,928 |
|
|
Current liabilities of discontinued operations |
|
|
275 |
|
|
7,328 |
|
|
|
|
|
|
|
Total current liabilities |
|
|
137,847 |
|
|
148,051 |
|
Long-term debt, net of current portion |
|
|
13,500 |
|
|
19,500 |
|
Deferred income taxes |
|
|
|
|
|
3,747 |
|
Deferred rent |
|
|
75,848 |
|
|
72,537 |
|
Other liabilities |
|
|
7,122 |
|
|
4,660 |
|
|
|
|
|
|
|
Total liabilities |
|
|
234,317 |
|
|
248,495 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock, voting, par value $0.001; 300,000 shares authorized; 60,508 and 59,286 shares issued and outstanding at January 31, 2009 and
February 2, 2008, respectively |
|
|
60 |
|
|
59 |
|
|
Additional paid-in capital |
|
|
152,330 |
|
|
148,208 |
|
|
Retained earnings |
|
|
72,158 |
|
|
91,974 |
|
|
Accumulated other comprehensive loss |
|
|
(2,052 |
) |
|
(280 |
) |
|
|
|
|
|
|
|
Total stockholders' equity |
|
|
222,496 |
|
|
239,961 |
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ |
456,813 |
|
$ |
488,456 |
|
|
|
|
|
|
|
See
accompanying notes.
56
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year
ended
January 31,
2009
(52-weeks) |
|
Fiscal year
ended
February 2,
2008
(52-weeks) |
|
Fiscal year
ended
February 3,
2007
(53-weeks) |
|
|
|
(Amounts in thousands)
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(19,807 |
) |
$ |
(4,857 |
) |
$ |
46,170 |
|
Less: Income (loss) from discontinued operations, net of taxes |
|
|
491 |
|
|
(31,533 |
) |
|
(2,226 |
) |
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(20,298 |
) |
|
26,676 |
|
|
48,396 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities of continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
43,939 |
|
|
38,500 |
|
|
31,607 |
|
|
Loss from impairment charges |
|
|
22,854 |
|
|
|
|
|
|
|
|
Amortization of deferred financing costs |
|
|
232 |
|
|
234 |
|
|
277 |
|
|
Share-based compensation expense |
|
|
1,575 |
|
|
1,660 |
|
|
1,665 |
|
|
Deferred income taxes |
|
|
(19,361 |
) |
|
1,262 |
|
|
(1,326 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
6,530 |
|
|
(4,737 |
) |
|
(1,117 |
) |
|
|
Income taxes receivable |
|
|
1,528 |
|
|
(11,730 |
) |
|
|
|
|
|
Inventories, net |
|
|
(938 |
) |
|
(1,667 |
) |
|
3,477 |
|
|
|
Prepaid expenses |
|
|
(2,619 |
) |
|
(2,408 |
) |
|
(1,129 |
) |
|
|
Accounts payable |
|
|
(8,746 |
) |
|
14,223 |
|
|
(26,607 |
) |
|
|
Accrued expenses |
|
|
7,503 |
|
|
(5,575 |
) |
|
4,109 |
|
|
|
Income taxes payable |
|
|
|
|
|
(6,391 |
) |
|
6,391 |
|
|
|
Deferred rent |
|
|
3,311 |
|
|
18,704 |
|
|
19,217 |
|
|
|
Other assets and liabilities |
|
|
(1,047 |
) |
|
2,177 |
|
|
(481 |
) |
|
|
|
|
|
|
|
|
Net cash provided by operating activities of continuing operations |
|
|
34,463 |
|
|
70,928 |
|
|
84,479 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
Acquisition of trademarks |
|
|
(36 |
) |
|
|
|
|
|
|
Proceeds from sale of fixed assets |
|
|
260 |
|
|
|
|
|
|
|
Capital expenditures |
|
|
(44,576 |
) |
|
(75,464 |
) |
|
(77,536 |
) |
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing operations |
|
|
(44,352 |
) |
|
(75,464 |
) |
|
(77,536 |
) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
Net proceeds from public offering |
|
|
|
|
|
|
|
|
2,295 |
|
Payment of offering costs related to public offering |
|
|
|
|
|
|
|
|
(439 |
) |
Repayment of debt |
|
|
(6,000 |
) |
|
(6,000 |
) |
|
(6,000 |
) |
Payment of financing costs |
|
|
(183 |
) |
|
(369 |
) |
|
|
|
Proceeds from exercise of stock options |
|
|
167 |
|
|
265 |
|
|
1,209 |
|
Excess tax benefit from exercise of stock options |
|
|
2,381 |
|
|
4,481 |
|
|
12,531 |
|
Other |
|
|
|
|
|
(175 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities of continuing operations |
|
|
(3,635 |
) |
|
(1,798 |
) |
|
9,596 |
|
Cash flows from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows |
|
|
(6,152 |
) |
|
12,628 |
|
|
(496 |
) |
|
Investing cash flows |
|
|
|
|
|
(401 |
) |
|
(5,415 |
) |
|
Financing cash flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by discontinued operations |
|
|
(6,152 |
) |
|
12,227 |
|
|
(5,911 |
) |
Net (decrease) increase in cash and cash equivalents |
|
|
(19,676 |
) |
|
5,893 |
|
|
10,628 |
|
Cash and cash equivalents at beginning of period (including cash at discontinued operations of $223, $206 and $1,593, respectively) |
|
|
73,957 |
|
|
68,064 |
|
|
57,436 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period (including cash at discontinued operations of $1, $223 and $206, respectively) |
|
$ |
54,281 |
|
$ |
73,957 |
|
$ |
68,064 |
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
1,608 |
|
$ |
2,571 |
|
$ |
2,873 |
|
|
|
|
|
|
|
|
|
Cash paid during the period for taxes |
|
$ |
3,555 |
|
$ |
8,186 |
|
$ |
11,130 |
|
|
|
|
|
|
|
|
|
See accompanying notes.
57
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
Accumulated
Other
Comprehensive
Loss |
|
|
|
|
|
Additional
Paid-in
Capital |
|
Retained
Earnings |
|
|
|
|
|
Shares |
|
Amount |
|
Total |
|
|
|
(Amounts in thousands)
|
|
Balance at January 28, 2006 |
|
|
54,629 |
|
$ |
55 |
|
$ |
126,490 |
|
$ |
52,974 |
|
$ |
(469 |
) |
$ |
179,050 |
|
Fees related to the public offering |
|
|
|
|
|
|
|
|
(89 |
) |
|
|
|
|
|
|
|
(89 |
) |
Stock options exercised |
|
|
2,872 |
|
|
2 |
|
|
1,207 |
|
|
|
|
|
|
|
|
1,209 |
|
Restricted stock issued |
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefit from exercise of stock options |
|
|
|
|
|
|
|
|
12,531 |
|
|
|
|
|
|
|
|
12,531 |
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
1,665 |
|
|
|
|
|
|
|
|
1,665 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
46,170 |
|
|
|
|
|
46,170 |
|
Minimum pension liability adjustment, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
263 |
|
|
263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 3, 2007 |
|
|
57,538 |
|
|
57 |
|
|
141,804 |
|
|
99,144 |
|
|
(206 |
) |
|
240,799 |
|
Stock options exercised |
|
|
1,734 |
|
|
2 |
|
|
263 |
|
|
|
|
|
|
|
|
265 |
|
Restricted stock issued |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefit from exercise of stock options |
|
|
|
|
|
|
|
|
4,481 |
|
|
|
|
|
|
|
|
4,481 |
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
1,660 |
|
|
|
|
|
|
|
|
1,660 |
|
Cumulative effect of adoption of FIN 48 |
|
|
|
|
|
|
|
|
|
|
|
(2,313 |
) |
|
|
|
|
(2,313 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(4,857 |
) |
|
|
|
|
(4,857 |
) |
Minimum pension liability adjustment, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(74 |
) |
|
(74 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,931 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 2, 2008 |
|
|
59,286 |
|
|
59 |
|
|
148,208 |
|
|
91,974 |
|
|
(280 |
) |
|
239,961 |
|
Stock options exercised |
|
|
820 |
|
|
1 |
|
|
166 |
|
|
|
|
|
|
|
|
167 |
|
Restricted stock issued |
|
|
410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock forfeits |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefit from exercise of stock options |
|
|
|
|
|
|
|
|
2,381 |
|
|
|
|
|
|
|
|
2,381 |
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
1,575 |
|
|
|
|
|
|
|
|
1,575 |
|
Cumulative effect of adoption of SFAS 158 |
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
(9 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(19,807 |
) |
|
|
|
|
(19,807 |
) |
Minimum pension liability adjustment, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,772 |
) |
|
(1,772 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2009 |
|
|
60,508 |
|
$ |
60 |
|
$ |
152,330 |
|
$ |
72,158 |
|
$ |
(2,052 |
) |
$ |
222,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
58
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements
January 31, 2009
1. Organization and Basis of Presentation of Financial Statements
Formation of New York & Company, Inc.
New York & Company, Inc. (together with its subsidiaries, collectively the "Company") is a leading specialty retailer of
fashion-oriented, moderately-priced women's apparel. The Company designs and sources its proprietary branded New York & Company merchandise sold exclusively through its national
network of retail stores and E-commerce store at www.nyandcompany.com. The target customers for the Company's New York & Company
merchandise are fashion-conscious, value-sensitive women between the ages of 25 and 45. As of January 31, 2009, the Company operated 589 stores in 44 states.
The
Company was founded in 1918 and operated as a subsidiary of Limited Brands, Inc. ("Limited Brands") from 1985 to 2002. New York & Company, Inc., formerly known
as NY & Co. Group, Inc., was incorporated in the state of Delaware on November 8, 2002. It was formed to acquire all of the outstanding stock of Lerner New York
Holding, Inc. ("Lerner Holding") and its subsidiaries from Limited Brands, an unrelated company. On November 27, 2002, Irving Place Capital, formerly known as
Bear Stearns Merchant Banking, completed the acquisition of Lerner Holding and its subsidiaries from Limited Brands (the "acquisition of Lerner Holding"). On October 6, 2004, the Company
completed an initial public offering and listed its common stock on the New York Stock Exchange.
Basis of Presentation and Principles of Consolidation
The Company's fiscal year is a 52 or 53 week year that ends on the Saturday closest to January 31. The accompanying
consolidated financial statements include the accounts of the Company for the 52-weeks ended January 31, 2009 ("fiscal year 2008"), the 52-weeks ended February 2,
2008 ("fiscal year 2007"), and the 53-weeks ended February 3, 2007 ("fiscal year 2006"). Lerner Holding's wholly owned subsidiaries consist of Lerner New York, Inc. (and its
wholly owned subsidiaries, which includes Jasmine Company, Inc.), Lernco, Inc., and Nevada Receivable Factoring, Inc. On a stand alone basis, without the consolidation of Lerner
Holding and its subsidiaries, New York & Company, Inc. has no significant independent assets or operations. All significant intercompany balances and transactions have been eliminated in
consolidation.
On
October 18, 2007, the Company announced its decision to close all stores operated by the Company's subsidiary, Jasmine Company, Inc. ("JasmineSola"), by the end of the
fourth quarter of fiscal year 2007. JasmineSola was a women's retailer of upscale and contemporary apparel, footwear and accessories sold through its chain of JasmineSola branded stores,
which the Company acquired on July 19, 2005. The Company decided to exit the JasmineSola business after a thorough assessment and analysis. This decision enabled the Company to focus financial
and management resources on its New York & Company brand. As of February 2, 2008, the Company completed the closure of all of the Company's JasmineSola stores and substantially completed
all other exit procedures. As a result, the Company's financial statements reflect JasmineSola as discontinued operations for all periods. Unless otherwise noted, the information presented in these
Notes to Consolidated Financial Statements relates to the New York & Company business.
59
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
2. Summary of Significant Accounting Policies
Revenue Recognition
Revenue from the sale of merchandise at the Company's stores is recognized at the time the customer takes possession of the related
merchandise and the purchases are paid for, primarily with either cash or credit card. Revenue from the sale of merchandise at the Company's E-commerce store is recognized when the
merchandise is shipped to the customer and the purchases are paid for. Revenue for gift certificate and gift card sales and store credits is recognized at redemption. Prior to their redemption, the
gift certificates, gift cards and store credits are recorded as a liability. Discounts and promotional coupons offered to customers are accounted for as a reduction of sales revenue at the time the
coupons are tendered by the customer. The Company presents sales taxes collected from customers on a net basis (excluded from revenues).
The
Company issues gift cards which do not contain provisions for expiration or inactivity fees. The portion of the dollar value of gift cards that ultimately is not used by customers to
make purchases is known as breakage. The Company estimates gift card breakage and records such amount as revenue as gift cards are redeemed. The Company's estimate of gift card breakage is based on
analysis of historical redemption patterns as well as the remaining balance of gift cards for which the Company believes the likelihood of redemption to be remote.
Reserve for Returns
The Company reserves for sales returns through reductions in sales and gross margin based upon historical merchandise returns
experience and current sales levels.
Cash and Cash Equivalents
Cash and cash equivalents include all cash in banks, cash on-hand, and all short-term investments with an
original maturity of three months or less when purchased.
Inventories
Inventories are valued at the lower of average cost or market, on a weighted average cost basis, using the retail method.
Deferred Rent
The Company recognizes fixed minimum rent expense on non-cancelable leases on a straight-line basis over the
term of each individual lease including the build-out period. The difference between recognized rental expense and amounts payable under the lease is recorded as a deferred lease
liability. In addition, the Company recognizes landlord allowances as a deferred lease liability, which is amortized over the term of the related lease as a reduction to rent expense. For contingent
rent expense based upon sales, the Company estimates annual contingent rent expense and recognizes a portion each month based on actual sales. At January 31, 2009 and February 2, 2008,
the deferred lease liability was $75.8 million and $72.5 million, respectively, and is reported as deferred rent on the consolidated balance sheets. The increase in deferred rent during
fiscal year 2008 is primarily related to the 25 new stores opened and 14 stores remodeled during the fiscal year.
60
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
2. Summary of Significant Accounting Policies (Continued)
Property and Equipment
Property and equipment are recorded at cost. Expenditures for new properties and improvements are capitalized, while the cost of repair
and maintenance is charged to expense. Depreciation of property and equipment is provided on a straight-line basis over the estimated useful lives of the assets.
The
estimated useful lives of property and equipment, for financial statement purposes, are as follows:
|
|
|
Depreciable Fixed Assets
|
|
Useful Life |
Land |
|
|
Store fixtures and equipment |
|
3-10 years |
Office furniture, fixtures, and equipment |
|
3-10 years |
Software |
|
3-5 years |
Leasehold improvements |
|
Lesser of the useful life or the term of the lease |
Cost of Goods Sold, Buying and Occupancy Costs
Cost of goods sold, buying and occupancy costs is comprised of direct inventory costs for merchandise sold, distribution, payroll and
related costs for the Company's design, sourcing, production, merchandising, planning and allocation personnel, and store occupancy and related costs.
Share-Based Compensation
In December 2004, the Financial Accounting Standards Board ("FASB") published Statement of Financial Accounting Standards ("SFAS")
No. 123 (Revised 2004), "Share-Based Payment" ("SFAS No. 123-R"). SFAS No. 123-R retains certain of the requirements of the original SFAS No. 123,
"Accounting for Stock Based Compensation" ("SFAS No. 123") and requires that the cost resulting from all share-based payment transactions be treated as
compensation and recognized in the consolidated financial statements. The Company adopted SFAS No. 123-R in December 2004, utilizing the modified prospective method. Prior to the
Company's adoption of SFAS No. 123-R, the Company followed SFAS No. 123 and treated all forms of share-based payments as compensation recognized in the consolidated
statements of operations. Therefore, the adoption of SFAS No. 123-R did not have a material impact on the consolidated financial statements.
Marketing
Marketing costs, which consist primarily of direct mail and point-of-sale ("POS") advertising costs, are
expensed at the time the promotion is mailed or first appears in the store. For the following periods, marketing costs reported in selling, general, and administrative expenses on the consolidated
statements of operations were as follows:
|
|
|
|
|
Fiscal Year
|
|
(Amounts in thousands) |
|
2008 |
|
$ |
32,217 |
|
2007 |
|
$ |
33,546 |
|
2006 |
|
$ |
33,053 |
|
61
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
2. Summary of Significant Accounting Policies (Continued)
At
January 31, 2009 and February 2, 2008, marketing costs reported in prepaid expenses on the consolidated balance sheets amounted to $1.5 million and
$1.2 million, respectively.
Pre-Opening Expenses
Costs, such as advertising and payroll costs, incurred prior to the opening of a new store are expensed as incurred.
Store Supplies
The initial inventory and subsequent shipments of supplies for new stores, including, but not limited to, hangers, signage, packaging
and POS supplies, are expensed as incurred.
Deferred Financing Costs
Costs related to the issuance of debt are capitalized as other assets in the consolidated balance sheets and amortized as interest
expense over the terms of the related debt. When the Company repays debt prior to its maturity, the related unamortized deferred financing costs are written-off and reported as a loss on
modification and extinguishment of debt in the consolidated statements of operations. At January 31, 2009 and February 2, 2008, deferred financing costs were $0.7 million and
$0.7 million, net of accumulated amortization of $1.0 million and $0.8 million, respectively.
Interest Expense
Interest expense, net of interest income, includes interest primarily related to the Company's revolving credit facility,
long-term debt and amortization of deferred financing costs.
Impairment of Long-lived Assets
The Company evaluates the impairment of long-lived assets in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets" ("SFAS No. 144"). Long-lived assets are evaluated for recoverability in accordance with SFAS No. 144 whenever events
or changes in circumstances indicate that an asset may have been impaired. In evaluating an asset for recoverability, the Company estimates the future cash flows expected to result from the use of the
asset and eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount
over the fair value of the asset, is recognized.
Intangible Assets
The Company follows SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), which prohibits the
amortization of goodwill and intangible assets with
indefinite lives. SFAS No. 142 requires that these assets be reviewed for impairment at least annually, or more frequently if events or circumstances indicate that the asset may be impaired. An
impairment charge is recognized for the amount, if any, by which the carrying value of an intangible asset exceeds its fair value. Intangible assets with finite lives are amortized over their
estimated useful lives.
62
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
2. Summary of Significant Accounting Policies (Continued)
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents, short-term trade receivables, accounts payable,
and long-term debt. The carrying values of cash and cash equivalents, short-term trade receivables, and accounts payable approximate their fair value due to the
short-term maturities of such items.
At
January 31, 2009 and February 2, 2008, the carrying amount of long-term debt approximated its fair value due to the variable interest rate it carries.
Income Taxes
Income taxes are calculated in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the use of the
liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of assets and liabilities and their respective tax bases.
Inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax laws and published guidance with respect to applicability to the Company's operations.
Deferred tax assets are believed to be fully realizable as management expects future taxable income will be sufficient to recover the asset values and, as such, no related valuation allowance has been
provided for. The Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109" in
the first quarter of fiscal year 2007. This Interpretation prescribes a comprehensive model of how a company should recognize, measure, present and disclose in its financial statements uncertain tax
positions that the company has taken or expects to take on a tax return. Under this Interpretation, the Company recognizes a tax benefit when a tax position is
more-likely-than-not to be sustained upon examination, based solely on its technical merits. The Company measures the recognized tax benefit as the largest amount
of tax benefit that has greater than a 50% likelihood of being realized upon the ultimate
settlement with a taxing authority. The Company reverses a previously recognized tax benefit if it determines that the tax position no longer meets the
more-likely-than-not threshold of being sustained. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense.
Comprehensive Income (Loss)
Comprehensive income (loss) is calculated in accordance with SFAS No. 130, "Reporting Comprehensive Income." Comprehensive
income (loss) includes net income (loss) and other comprehensive income (loss). For fiscal year 2008, other comprehensive loss consisted of a minimum pension liability adjustment of
$1.8 million, net of a $1.2 million tax benefit. For fiscal year 2007, other comprehensive loss consisted of a minimum pension liability adjustment of $0.1 million, net of taxes.
For fiscal year 2006, other comprehensive income consisted of a minimum pension liability adjustment of $0.3 million, net of taxes of $0.2 million. Accumulated other comprehensive loss
is reported separately in the consolidated statement of stockholders' equity.
Earnings Per Share
Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding for
the period. Except when the effect would be anti-dilutive at the continuing operations level, diluted earnings per share are calculated based on the weighted
63
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
2. Summary of Significant Accounting Policies (Continued)
average
number of outstanding shares of common stock plus the dilutive effect of stock options as if they were exercised and unvested restricted stock as if it were vested. A reconciliation between
basic and diluted earnings per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008 |
|
Fiscal Year 2007 |
|
Fiscal Year 2006 |
|
|
|
(Amounts in thousands, except per share amounts)
|
|
(Loss) income from continuing operations |
|
$ |
(20,298 |
) |
$ |
26,676 |
|
$ |
48,396 |
|
Income (loss) from discontinued operations, net of taxes |
|
|
491 |
|
|
(31,533 |
) |
|
(2,226 |
) |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(19,807 |
) |
$ |
(4,857 |
) |
$ |
46,170 |
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
59,650 |
|
|
58,537 |
|
|
56,072 |
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share from continuing operations |
|
$ |
(0.34 |
) |
$ |
0.46 |
|
$ |
0.86 |
|
|
Basic earnings (loss) per share from discontinued operations |
|
|
0.01 |
|
|
(0.54 |
) |
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
|
$ |
(0.33 |
) |
$ |
(0.08 |
) |
$ |
0.82 |
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
59,650 |
|
|
58,537 |
|
|
56,072 |
|
|
Plus impact of stock options and restricted stock |
|
|
|
|
|
2,491 |
|
|
3,959 |
|
|
|
|
|
|
|
|
|
|
Diluted shares of common stock |
|
|
59,650 |
|
|
61,028 |
|
|
60,031 |
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share from continuing operations |
|
$ |
(0.34 |
) |
$ |
0.44 |
|
$ |
0.81 |
|
|
Diluted earnings (loss) per share from discontinued operations |
|
|
0.01 |
|
|
(0.52 |
) |
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.33 |
) |
$ |
(0.08 |
) |
$ |
0.77 |
|
|
|
|
|
|
|
|
|
The
calculation of diluted (loss) earnings per share from continuing operations for fiscal year 2008, fiscal year 2007, and fiscal year 2006 excludes options to purchase 2,613,297
shares, 973,608 shares, and 805,062 shares, respectively, due to their antidilutive effect.
Recently Issued Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157
establishes a common definition for fair value to be applied to US GAAP guidance requiring the use of fair value, establishes a framework for measuring fair value, and expands the disclosure
about such fair value measurements. The application of SFAS No. 157 as it relates to financial assets and financial liabilities is effective for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. On February 12, 2008, the FASB issued FSP FAS 157-2,
64
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
2. Summary of Significant Accounting Policies (Continued)
"Effective
Date of FASB Statement No. 157," which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on at least an annual basis, to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. The Company's adoption of SFAS No. 157 on February 3, 2008 for all financial assets and liabilities and any other
assets and liabilities that are recognized or disclosed at fair value on a recurring basis did not impact the Company's consolidated financial statements. The provisions of SFAS No. 157 are to
be applied prospectively as of the beginning of the fiscal year in which it is applied, with any transition adjustment recognized as a cumulative effect adjustment to the opening balance of retained
earnings. The Company does not anticipate that the adoption of SFAS No. 157 for nonfinancial assets and liabilities measured at fair value on a non-recurring basis will have a
material impact on its financial position and results of operations.
In
September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB statements No. 87,
88, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires recognition of the overfunded or underfunded status of defined benefit postretirement plans as an asset or liability in the
statement of financial position and requires companies to recognize changes in that funded status in comprehensive income (loss) in the year in which the changes occur. SFAS No. 158 also
requires measurement of the funded status of a plan as of the date of the statement of financial position. SFAS No. 158 is effective for recognition of the funded status of benefit plans for
fiscal years ending after December 15, 2006 and is effective for the measurement date provisions for fiscal years ending after December 15, 2008. The adoption of the recognition
provisions at February 3, 2007 and the measurement date provisions at January 31, 2009 did not have a material impact on the Company's financial position and results of operations.
In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162"). SFAS No. 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with
US GAAP for non-governmental entities. SFAS No. 162 is effective on November 15, 2008, which is 60 days following the SEC's September 16, 2008 approval
of the Public Company Accounting Oversight Board amendments to AU Section 411, the meaning of "Present Fairly in Conformity with GAAP." Any effect of applying the provisions of SFAS
No. 162 is to be reported as a change in accounting principle in accordance with FASB Statement No. 154, "Accounting Changes and Error Corrections." The Company's adoption of SFAS
No. 162 will not have a material impact on its financial position and results of operations.
3. Restructuring
In response to the ongoing deterioration of the macroeconomic environment and the resulting impact on consumer spending in the retail sector, the Company initiated a comprehensive review
of its business and on January 8, 2009 announced the launch of a multi-year restructuring and cost reduction program that is expected to generate approximately $175 million
in pre-tax savings over the next five years, of which approximately $30 million is expected to be realized during the fiscal year ending January 30, 2010 ("fiscal year
2009"). This program is designed to streamline the Company's
65
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
3. Restructuring (Continued)
organization
by reducing costs and eliminating underperforming assets while enhancing efficiency and profitability.
The
key components of the restructuring and cost reduction program include:
-
- Strategic staff downsizing resulting in a permanent reduction of 12% of the Company's field management in its existing
stores and approximately a 10% reduction of corporate office professionals;
-
- The optimization of the Company's store portfolio, including the closure of 40 to 50 underperforming stores over a five
year period;
-
- A broad based cost reduction effort across all aspects of the Company's business; and
-
- Significant reductions in capital expenditure plans as compared to fiscal year 2008.
Strategic Staff Downsizing. The strategic staff reductions involve a streamlining of the Company's field management organization which
will result in
a permanent net reduction of approximately 260 management level positions in its existing stores. In addition, the Company has eliminated approximately 50 corporate office positions, consisting of
salaried managers and support professionals. In accordance with SFAS No. 146, "Accounting for Costs Associated With Exit or Disposal Activities," the Company recorded a pre-tax
charge of $1.7 million during the fourth quarter of fiscal year 2008 in connection with these reductions. These reductions are expected to result in pre-tax savings of approximately
$12 million per year beginning in fiscal year 2009.
Optimization of Store Portfolio. The store optimization component of the restructuring involves the closure of approximately 40 to 50
underperforming
stores and the related non-cash impairment of store assets in underperforming or closing stores. The Company conducted a review of the performance of each of its stores in order to
identify stores that do not demonstrate the potential to deliver an acceptable long-term return on investment. The Company plans to close stores that do not meet this return on investment
criteria in a staged approach over the next five years upon the termination of the respective leases or upon the exercise of kickout provisions, and as a result, the Company does not presently
anticipate that it will incur significant lease exit costs associated with these decisions. In accordance with SFAS No. 144, the Company recorded a non-cash charge of
$22.9 million related to the impairment of store assets in the fourth quarter of fiscal year 2008. In fiscal year 2008, these stores achieved approximately $60 to $70 million in sales
and generated negative four-wall profit contribution. The Company currently expects to close 10 to 15 of these underperforming stores in fiscal year 2009, with the remainder of the planned
store closures occurring over fiscal years 2010 to 2013. The Company currently estimates that these efforts will result in annualized pre-tax savings of $4 to $6 million beginning
in fiscal year 2009.
Broad Based Cost Reductions. The Company has initiated a corporate-wide program to identify and implement strategic and structural cost
improvements across all aspects of the Company's business including store operations, sourcing, real estate, marketing, and general home office operations. These efforts include the optimization of
external resources, reduction of discretionary spending, consolidation of certain purchasing activities to leverage scale, and the renegotiation of existing agreements to achieve cost reductions. The
Company currently estimates that these efforts will
result in annualized pre-tax savings of approximately $14 to $17 million per year beginning in fiscal year 2009.
66
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
3. Restructuring (Continued)
Capital Expenditures. The Company plans to minimize new store openings in fiscal year 2009 and as a result, expects capital
expenditures to
approximate $15 million in fiscal year 2009, as compared to $44.6 million in fiscal year 2008.
In
total, the Company recorded pre-tax restructuring charges of $24.5 million during the fourth quarter of fiscal year 2008, which includes a non-cash
charge of $22.9 million related to the impairment of store assets and a $1.7 million cash charge related primarily to severance and other costs necessary to implement the restructuring
and cost reduction program. Restructuring charges are reported as a separate line item in the consolidated statement of operations. As of January 31, 2009, approximately $1.0 million of
severance related accruals are included in accrued expenses on the consolidated balance sheet and are expected to be paid in full during fiscal year 2009. The Company does not currently expect to
record any material restructuring charges for these matters in fiscal year 2009.
4. Discontinued Operations
On October 18, 2007, the Company announced its decision to close all 23 JasmineSola stores by the end of the fourth quarter of fiscal year 2007. JasmineSola was a women's retailer
of upscale and contemporary apparel, footwear and accessories sold through its chain of JasmineSola branded stores, which the Company acquired on July 19, 2005. The Company decided to exit the
JasmineSola business
after a thorough assessment and analysis. This decision enabled the Company to focus financial and management resources on its New York & Company brand. As of February 2, 2008, the
Company completed the closure of all of the Company's JasmineSola stores and substantially completed all other exit procedures. As a result, the Company's financial statements reflect JasmineSola as
discontinued operations for all periods presented in accordance with SFAS No. 144.
In
accordance with SFAS No. 144 and SFAS No. 142, the Company recorded a $35.2 million non-cash charge in October 2007 related to the impairment of
JasmineSola assets, including $17.2 million of trademarks, $11.1 million of goodwill, and $6.9 million of property and equipment. In accordance with SFAS No. 146, the
Company recorded charges during the third and fourth quarters of fiscal year 2007 of $5.8 million for lease termination costs and $1.3 million for severance costs. As of
February 2, 2008, approximately $3.4 million of lease termination accruals and $0.8 million of severance accruals are included in current liabilities of discontinued operations on
the consolidated balance sheet. As of January 31, 2009, the Company had paid all lease termination and severance liabilities relating to the discontinued operations.
The
operating results of JasmineSola, which are being presented as discontinued operations, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008 |
|
Fiscal Year 2007 |
|
Fiscal Year 2006 |
|
|
|
(Amounts in thousands)
|
|
Net sales |
|
$ |
|
|
$ |
43,227 |
|
$ |
39,860 |
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before income taxes |
|
$ |
755 |
|
$ |
(52,112 |
) |
$ |
(3,730 |
) |
Income tax expense (benefit) |
|
$ |
264 |
|
$ |
(20,579 |
) |
$ |
(1,504 |
) |
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of taxes |
|
$ |
491 |
|
$ |
(31,533 |
) |
$ |
(2,226 |
) |
|
|
|
|
|
|
|
|
67
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
5. Significant Risks and Uncertainties
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from these estimates.
Concentration of Risk
The Company is subject to concentration of credit risk relating to cash, primarily store depository accounts, which are maintained with
major financial institutions. The Company monitors the relative credit standing of these financial institutions and other entities and limits the amount of credit exposure with any one entity. The
Company also monitors the creditworthiness of the entities to which it grants credit terms in the normal course of business.
The
Company utilizes three major apparel suppliers, which together represented approximately 72% of the Company's merchandise purchases during fiscal year 2008. The Company's largest
country sources are China, Macau and Hong Kong, which represented approximately 65% of purchases in fiscal year 2008. No individual factory represented more than approximately 5% of the Company's
merchandise purchases during fiscal year 2008.
Economic Uncertainty
The Company's business is impacted by general economic conditions and their effect on consumer confidence and the level of consumer
spending on the merchandise the Company offers, which have recently deteriorated significantly and may continue to do so for the foreseeable future. The current downturn in the economy may continue to
affect consumer purchases of the Company's merchandise and to adversely impact the Company's results of operations, liquidity and continued growth. In addition, the deteriorating economic conditions
could negatively impact the Company's merchandise vendors and their ability to deliver products, which may also adversely impact the Company's results of operations, liquidity and continued growth.
6. Proprietary Credit Card
The Company has a credit card processing agreement with a third party (the "administration company"), which provides the services of the Company's proprietary credit card program. The
Company allows payments on this credit card to be made at its stores as a service to its customers. The administration company owns the credit card accounts, with no recourse from the Company. The
Company's receivable due from the administration company at any time represents the standard processing time of approximately three days. The amount due at January 31, 2009 and
February 2, 2008 was $0.8 million and $1.8 million, respectively. The Company does not have any off-balance sheet arrangements.
7. Goodwill and Other Intangible Assets
SFAS No. 142, "Goodwill and Other Intangible Assets," prohibits the amortization of goodwill and intangible assets with indefinite lives. The Company's intangible assets relate to
the New York & Company trademarks and historically the JasmineSola trademarks and goodwill associated with the
68
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
7. Goodwill and Other Intangible Assets (Continued)
acquisition
of JasmineSola on July 19, 2005, which were initially valued at $14.8 million, $17.2 million and $11.1 million, respectively. The trademarks were initially
valued using the "relief from royalty method" and were determined to have indefinite lives by an independent appraiser. Goodwill represents the excess of the purchase price over the fair value of the
net assets acquired.
The
Company tests for impairment of goodwill and other intangible assets at least annually in the fourth quarter, or more frequently if events or circumstances indicate that the asset
may be impaired, by comparing the fair value with the carrying amount for each individual asset. Goodwill impairment is determined using a two-step process. The first step of the goodwill
impairment test is to identify a potential impairment by comparing the fair value of a reporting unit with its carrying amount, including the goodwill assigned to the reporting unit. The estimate of
fair value of a reporting unit is determined using a discounted cash flow model. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not deemed to be
impaired and the second step of the impairment test is not performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that
goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair
value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the fair value of the reporting unit is allocated to all of the
assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the
purchase price paid to acquire the reporting unit.
The
impairment test for other intangible assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying value. The estimates of
fair value of intangible assets not subject to amortization, specifically trademarks, are determined using the "relief from royalty method." If the carrying value of the intangible asset exceeds its
fair value, an impairment loss is recognized in an amount equal to that excess.
The
Company's fiscal year 2008 impairment test did not result in any impairment. In connection with the decision to exit the JasmineSola business, during the third quarter of fiscal year
2007, the Company recorded non-cash impairment charges of $17.2 million and $11.1 million related to the JasmineSola trademarks and goodwill, respectively. The Company's
fiscal year 2006 impairment test did not result in any impairment.
69
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
8. Property and Equipment
Property and equipment at January 31, 2009 and February 2, 2008 consist of the following:
|
|
|
|
|
|
|
|
|
|
January 31,
2009 |
|
February 2,
2008 |
|
|
|
(Amounts in thousands)
|
|
Land |
|
$ |
117 |
|
$ |
117 |
|
Store fixtures and equipment |
|
|
162,475 |
|
|
143,108 |
|
Office furniture, fixtures, and equipment |
|
|
13,937 |
|
|
11,084 |
|
Leasehold improvements |
|
|
183,473 |
|
|
168,387 |
|
Software |
|
|
24,118 |
|
|
14,941 |
|
Construction in progress |
|
|
3,431 |
|
|
10,892 |
|
|
|
|
|
|
|
Total |
|
|
387,551 |
|
|
348,529 |
|
Less accumulated depreciation |
|
|
170,303 |
|
|
108,972 |
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
217,248 |
|
$ |
239,557 |
|
|
|
|
|
|
|
Depreciation
expense amounted to approximately $43.8 million, $38.3 million and $31.3 million for fiscal year 2008, fiscal year 2007 and fiscal year 2006,
respectively. In addition, during the fourth quarter of fiscal year 2008, the Company recorded a non-cash charge of $22.9 million related to the impairment of store assets in
connection with its restructuring and cost reduction program.
9. Commitments and Contingencies
The Company leases retail business locations, office and warehouse facilities, copier equipment and automotive equipment under various noncancelable operating leases expiring in various
years through 2020. Leases on retail business locations specify minimum rentals plus common area maintenance ("CAM") charges, real estate taxes, other landlord charges and possible additional rentals
based upon percentages of sales. Most of the retail business location leases have an original term of 10 years and provide renewal options at rates specified in the leases. In the normal course
of business, these leases are generally renewed or replaced by other leases.
A
summary of rent expense is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
|
|
(Amounts in thousands)
|
|
Fixed minimum rentals |
|
$ |
102,764 |
|
$ |
100,046 |
|
$ |
92,826 |
|
Contingent rentals |
|
|
4,301 |
|
|
4,164 |
|
|
5,070 |
|
|
|
|
|
|
|
|
|
Total store rentals |
|
|
107,065 |
|
|
104,210 |
|
|
97,896 |
|
Office space rentals |
|
|
5,404 |
|
|
5,208 |
|
|
4,361 |
|
Equipment rentals |
|
|
1,115 |
|
|
976 |
|
|
1,003 |
|
|
|
|
|
|
|
|
|
Total rental expense |
|
$ |
113,584 |
|
$ |
110,394 |
|
$ |
103,260 |
|
|
|
|
|
|
|
|
|
Sublease rental income |
|
$ |
668 |
|
$ |
891 |
|
$ |
1,021 |
|
|
|
|
|
|
|
|
|
70
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
9. Commitments and Contingencies (Continued)
As
of January 31, 2009 the aggregate minimum rent commitments under non-cancelable operating leases are as follows:
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Fixed
Minimum Rent |
|
Sublease
Rental Income |
|
|
|
(Amounts in thousands)
|
|
2009 |
|
$ |
109,232 |
|
$ |
482 |
|
2010 |
|
|
106,067 |
|
|
410 |
|
2011 |
|
|
97,405 |
|
|
5 |
|
2012 |
|
|
94,355 |
|
|
|
|
2013 |
|
|
91,539 |
|
|
|
|
Thereafter |
|
|
234,090 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
732,688 |
|
$ |
897 |
|
|
|
|
|
|
|
The
minimum lease payments above do not include CAM charges, real estate taxes or other landlord charges, which are also required contractual obligations under the Company's store and
office operating leases. In many of the Company's leases, CAM charges are not fixed and can fluctuate from year to year. During fiscal year 2008, CAM charges and real estate taxes were
$70.7 million and other landlord charges were $5.9 million.
As
of January 31, 2009, the Company had open purchase commitments for merchandise totaling approximately $87.0 million.
Legal Proceedings
On April 29, 2008, a class action claim was filed in the Superior Court of the State of California for the County of Contra
Costa captioned Jannika Schakow v. Lerner New York, Inc. and New York & Company, Inc. The class action was seeking relief for, among other things, meal and rest periods allegedly
not provided or permitted to certain eligible employees in California.
On
March 25, 2008, a class action claim was filed in the Superior Court of the State of California for the County of San Diego, the caption of which has been changed to Leslie
Johnson v. Lerner New York, Inc. The class action was seeking relief for, among other things, collection of customers' personal information in a manner that is allegedly in violation of
California law.
In
January 2009, the Company reached settlements in principle with the plaintiffs of both class action claims in the State of California and recorded charges in connection with the
settlements totaling $1.5 million, which is reported in selling, general and administrative expenses on the consolidated statement of operations.
There
are various claims, lawsuits and pending actions against the Company arising in the normal course of the Company's business. It is the opinion of management that the ultimate
resolution of these matters will not have a material effect on the Company's financial condition, results of operations or cash flows.
71
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
10. Employee Benefit Plans
Savings and Retirement Plan
The Company contributes to a defined contribution savings and retirement plan ("the SARP") qualifying under section 401(k) of
the Internal Revenue Code. Participation in the SARP is available to all associates, if not covered by the pension plan discussed below, who have completed 1,000 or more hours of service with the
Company during certain twelve-month periods and have attained the age of 21. Prior to January 1, 2008, participants could contribute
an aggregate of up to 15% of their pay to the SARP, subject to Internal Revenue Service ("IRS") limits. Beginning in 2008, participants may contribute up to 100% of their pay to the SARP, subject to
IRS limits. The Company matches 100% of the employee's contribution up to a maximum of 4% of the employee's eligible pay. The Company match is immediately vested. In addition, the Company makes a
discretionary retirement contribution ranging from 3% to 8% of each participant's eligible base salary depending on the length of service. For retirement contributions made prior to January 1,
2007, the Company's retirement contribution vests 20% per year, beginning in the third year of service. As a result of the adoption of new pension plan legislation in 2006, beginning in 2007, the
vesting period for new contributions made by the Company begins in the second year of service.
The
Company's costs under this plan were as follows:
|
|
|
|
|
Fiscal Year
|
|
(Amounts
in thousands) |
|
2008 |
|
$ |
6,117 |
|
2007 |
|
$ |
5,664 |
|
2006 |
|
$ |
4,228 |
|
Pension Plan
The Company sponsors a single employer defined benefit pension plan ("plan") covering substantially all union employees. Employees
covered by collective bargaining agreements are primarily non-management store associates, representing approximately 8% of the Company's workforce at January 31, 2009. The plan
provides retirement benefits for union employees, consisting of non-management store associates, who have attained the age of 21 and complete 1,000 or more hours of service in any calendar
year following the date of employment. The plan provides benefits based on length of service. The Company's funding policy for the pension plan is to contribute annually the amount necessary to
provide for benefits based on accrued service. The Company does not anticipate the need for a material contribution to the plan during the twelve months ending January 30, 2010. The Company's
pension plan weighted average asset allocation, by asset category, is as follows:
|
|
|
|
|
|
|
|
Asset Category
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Equity securities |
|
|
53 |
% |
|
59 |
% |
Fixed income |
|
|
47 |
% |
|
40 |
% |
Cash and cash equivalents |
|
|
|
% |
|
1 |
% |
The
Company's investment policy generally targets 60% to 65% in equity securities and 35% to 40% in fixed income.
72
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
10. Employee Benefit Plans (Continued)
In
consideration of the fund's investment goals, demographics, time horizon available for investment and the overall risk tolerance of the board of trustees (consisting of two union
trustees and two employer trustees) a long-term investment objective of long-term income and growth has been adopted for the fund's assets. This is a risk-averse
balanced approach that seeks long-term growth in capital along with significant current income.
The
following weighted average assumptions were used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008 |
|
Fiscal Year 2007 |
|
Discount rate |
|
|
6.50 |
% |
|
5.90 |
% |
The
following weighted average assumptions were used to determine net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
Discount rate |
|
|
5.90 |
% |
|
5.90 |
% |
|
5.60 |
% |
Long-term rate of return on assets |
|
|
8.00 |
% |
|
8.00 |
% |
|
8.00 |
% |
In
accordance with the recent adoption of the measurement date provisions of SFAS No. 158, the fiscal year 2008 measurement date is January 31, 2009 for the determination
of benefit obligations. The
73
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
10. Employee Benefit Plans (Continued)
fiscal
year 2007 measurement date is December 31, 2008 for the determination of benefit obligations. The following table provides information for the pension plan:
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
|
|
(Amounts in thousands)
|
|
Change in benefit obligation: |
|
|
|
|
|
|
|
Benefit obligation, beginning of period |
|
$ |
9,583 |
|
$ |
9,690 |
|
Service cost |
|
|
245 |
|
|
360 |
|
Interest |
|
|
550 |
|
|
547 |
|
Actuarial gain |
|
|
(446 |
) |
|
(162 |
) |
Benefits paid |
|
|
(909 |
) |
|
(852 |
) |
SFAS No. 158 adjustment due to change in the measurement date |
|
|
48 |
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of period |
|
$ |
9,071 |
|
$ |
9,583 |
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
Fair value of plan assets, beginning of period |
|
$ |
9,087 |
|
$ |
9,403 |
|
Actual return on plan assets |
|
|
(2,679 |
) |
|
428 |
|
Benefits paid |
|
|
(909 |
) |
|
(852 |
) |
Employer contributions |
|
|
99 |
|
|
108 |
|
|
|
|
|
|
|
Fair value of plan assets, end of period |
|
$ |
5,598 |
|
$ |
9,087 |
|
|
|
|
|
|
|
Funded status |
|
$ |
(3,473 |
) |
$ |
(496 |
) |
Unrecognized net actuarial loss |
|
|
3,432 |
|
|
468 |
|
|
|
|
|
|
|
Net amount recognized |
|
$ |
(41 |
) |
$ |
(28 |
) |
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets: |
|
|
|
|
|
|
|
Accrued pension liability |
|
$ |
(3,473 |
) |
$ |
(496 |
) |
Accumulated other comprehensive loss |
|
|
3,432 |
|
|
468 |
|
|
|
|
|
|
|
Net amount recognized |
|
$ |
(41 |
) |
$ |
(28 |
) |
|
|
|
|
|
|
At
January 31, 2009 and February 2, 2008, the Company reported a minimum pension liability of $3.5 million and $0.5 million, respectively, due to the
underfunded status of the plan. The minimum pension liability is reported in other liabilities on the consolidated balance sheets. Included in accumulated other comprehensive loss at
January 31, 2009 is a net loss of $0.1 million that is expected to be recognized in net periodic benefit cost during fiscal year 2009.
74
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
10. Employee Benefit Plans (Continued)
Net
periodic benefit cost includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
|
|
(Amounts in thousands)
|
|
Service cost |
|
$ |
245 |
|
$ |
360 |
|
$ |
332 |
|
Interest cost |
|
|
550 |
|
|
547 |
|
|
540 |
|
Expected return on plan assets |
|
|
(691 |
) |
|
(714 |
) |
|
(719 |
) |
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
104 |
|
$ |
193 |
|
$ |
153 |
|
|
|
|
|
|
|
|
|
The
following schedule shows the expected benefit payments over the next 10 years:
|
|
|
|
|
Fiscal Year
|
|
(Amounts
in thousands) |
|
2009 |
|
$ |
935 |
|
2010 |
|
|
900 |
|
2011 |
|
|
883 |
|
2012 |
|
|
846 |
|
2013 |
|
|
823 |
|
2014-2018 |
|
|
3,660 |
|
|
|
|
|
Total |
|
$ |
8,047 |
|
|
|
|
|
11. Share-Based Compensation
2006 Long-Term Incentive Plan. The Company's board of directors and stockholders approved the 2006 Long-Term Incentive Plan
(the "2006 Plan") on May 3, 2006, and June 21, 2006, respectively. A total of 2,168,496 shares of the Company's common stock have been reserved for issuance under the 2006 Plan. The 2006
Plan provides for the grant of incentive or non-qualified stock options, stock appreciation rights, restricted stock, deferred stock and performance awards to eligible participants. Of the
2,168,496 shares of common stock reserved, the maximum number of shares which may be used for awards other than stock options or stock appreciation rights is 750,000 shares. These shares may be in
whole or in part authorized and unissued or held by the Company as treasury shares.
Amended and Restated 2002 Stock Option Plan. The Company originally adopted the 2002 Stock Option Plan on November 27, 2002 and
approved the
Amended and Restated 2002 Stock Option Plan (the "2002 Plan") to become effective on October 13, 2004. The 2002 Plan provides for the grant of either incentive stock options or
non-qualified stock options. The shares to be issued upon the exercise of the options may be in whole or in part authorized and unissued shares or held by the Company as treasury shares.
Upon stockholder approval of the 2006 Plan, the 2002 Plan ceased to be available for the grants of new incentive awards, other than awards granted wholly from shares returned to the 2002 Plan by
forfeiture or expiration after May 5, 2006; all other new incentive awards are to be granted under the 2006 Plan. There are options to purchase 3,038,090 shares of the Company's common stock
that have been or will be subject to forfeiture or expiration under the 2002 Plan at January 31, 2009 and therefore will be potentially available for issuance under the 2002 Plan. Of these
options, 504,503 had not yet vested as of January 31, 2009.
75
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
11. Share-Based Compensation (Continued)
Under
both the 2002 Plan and the 2006 Plan (together, referred to herein as the "Plans"), the Company is able to grant share-based awards to its executives, consultants, directors, or
other key employees. Options generally have a maximum term of up to 10 years. Upon grant, the compensation committee of the Company's board of directors will determine the exercise price and
term of any option at its discretion. The exercise price of an incentive stock option, however, may not be less than 100% of the fair market value of a share of common stock on the date of grant. The
exercise price of an incentive stock option awarded to a person who owns stock constituting more than 10% of the total combined voting power of all classes of stock of the Company may not be less than
110% of the fair market value on such date and the option must be exercised within five years of the date of grant. The aggregate fair market value of common stock for which an incentive stock option
is exercisable for the first time during any calendar year, under all equity incentive plans of the Company, may not exceed $0.1 million. Vesting provisions for all share-based awards granted
under the Plans are determined by the compensation committee of the Company's board of directors at the date of grant; however, subject to certain restrictions, all outstanding share-based awards may
vest upon a sale of the Company. Shares that are not currently outstanding or reserved for outstanding performance units under the Plans and are available for issuance at January 31, 2009
amounted to 251,678.
There
were 4,406,415 stock options outstanding as of January 31, 2009, of which 2,561,937 were vested. The 1,844,478 unvested stock options outstanding at January 31, 2009
vest subject to the passage of time through 2012.
A
summary of the Company's stock options outstanding as of January 31, 2009 and activity for fiscal year 2008 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares |
|
Weighted
Average
Exercise
Price |
|
Weighted
Average
Remaining
Contractual
Term
(years) |
|
Aggregate
Intrinsic
Value |
|
|
|
(Amounts in thousands)
|
|
|
|
|
|
(Amounts in thousands)
|
|
Outstanding, beginning of period |
|
|
4,027 |
|
$ |
4.31 |
|
|
|
|
|
|
|
Granted |
|
|
1,542 |
|
|
6.12 |
|
|
|
|
|
|
|
Exercised |
|
|
(820 |
) |
|
0.20 |
|
|
|
|
|
|
|
Forfeited |
|
|
(190 |
) |
|
9.72 |
|
|
|
|
|
|
|
Expired |
|
|
(153 |
) |
|
5.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of period |
|
|
4,406 |
|
$ |
5.44 |
|
|
5.9 |
|
$ |
2,993 |
|
|
|
|
|
|
|
|
|
|
|
Exercisable, end of period |
|
|
2,562 |
|
$ |
3.42 |
|
|
4.6 |
|
$ |
2,922 |
|
|
|
|
|
|
|
|
|
|
|
Aggregate
intrinsic value for both outstanding and exercisable options, in the table above, represents the total pre-tax intrinsic value (the difference between the Company's
closing stock price on the last trading day of fiscal year 2008 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the
option holders had all option holders exercised their options on January 31, 2009. This amount changes based on the fair market value of the Company's common stock. Total intrinsic value of
options exercised for fiscal year 2008, fiscal year 2007 and fiscal year 2006 (based on the difference between the Company's stock price on the respective exercise date
76
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
11. Share-Based Compensation (Continued)
and
the respective exercise price, multiplied by the number of respective options exercised) was $5.9 million, $17.1 million and $38.7 million, respectively.
In
accordance with the adoption provisions of SFAS No. 123-R, for compensation expense purposes, the fair value of each option granted, during the period the Company
was a non-public entity, was estimated on the date granted using the Minimum-value option-pricing model for all employees and non-employee board members. In accordance with
SFAS No. 123-R, for compensation expense purposes, the fair value of each option granted, as a public entity, is estimated on the date granted using the Black-Scholes option-pricing
model for all employees and non-employee board members. The weighted average fair value for options granted during fiscal year 2008, fiscal year 2007 and fiscal year 2006 was $1.61, $7.31,
and $8.37, respectively. The total fair value of stock options and restricted stock vested during fiscal year 2008, fiscal year 2007 and fiscal year 2006 was $1.1 million, $1.6 million
and $1.6 million, respectively.
The
following weighted average assumptions were used to value stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
Expected volatility |
|
|
44.0 |
% |
|
44.0 |
% |
|
54.7 |
% |
Expected life |
|
|
4.6 years |
|
|
6.0 years |
|
|
5.6 years |
|
Risk-free interest rate |
|
|
2.20 |
% |
|
4.50 |
% |
|
4.71 |
% |
Expected dividend yield |
|
|
|
% |
|
|
% |
|
|
% |
The
risk-free interest rate used to value stock options is based on the U.S. Treasury yield curve in effect at the time of grant with maturity dates that coincide with the
expected life of the options. The expected life of stock options represents the weighted average period the stock options are expected to remain outstanding and is based primarily on industry
averages, due to the Company's limited historical data for employee exercises. The Company's assumption for volatility is based primarily on the volatility factor of other publicly traded companies in
the retail industry that are similar in size and financial leverage. In addition, the Company considers its historical volatility for the period of time since its initial public offering on
October 6, 2004.
The
following table summarizes the restricted stock outstanding at January 31, 2009 and activity for fiscal year 2008:
|
|
|
|
|
|
|
|
|
|
Shares |
|
Weighted Average
Grant Date
Fair Value |
|
|
|
(Amounts in thousands)
|
|
|
|
Nonvested at February 2, 2008 |
|
|
37 |
|
$ |
10.52 |
|
Granted |
|
|
410 |
|
|
2.33 |
|
Vested |
|
|
(14 |
) |
|
7.44 |
|
Forfeited |
|
|
(8 |
) |
|
12.43 |
|
|
|
|
|
|
|
Nonvested at January 31, 2009 |
|
|
425 |
|
$ |
2.69 |
|
|
|
|
|
|
|
77
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
11. Share-Based Compensation (Continued)
The 425,182 shares of restricted stock outstanding at January 31, 2009 consists of the following:
On
August 16, 2006, the Company's Chairman and Chief Executive officer, Richard P. Crystal, was granted 15,000 shares of restricted stock, which may cliff vest on
August 16, 2010 subject to the performance of the Company's diluted earnings per share growth in relation to a peer group and continuous employment from the grant date through August 16,
2010.
On
November 19, 2008, 366,182 shares of restricted stock, subject to performance vesting requirements, were granted to certain key executives. The number of restricted shares that
may vest ranges from zero to 366,182 shares, depending on the operating income level achieved for the first two fiscal quarters of fiscal year 2009 ("Spring 2009"). The executives who were awarded
these performance-based restricted shares are no longer eligible for their target cash bonuses for Spring 2009 under the Company's Incentive Compensation Plan.
The
remaining 44,000 shares of restricted stock outstanding at January 31, 2009 vest subject to the passage of time through 2012.
The
fair value of restricted stock is based on the closing stock price of an unrestricted share of the Company's common stock on the grant date.
On
January 28, 2009, Mr. Crystal was granted a performance unit award, which is subject to a performance vesting requirement and continued employment with the Company
through February 11, 2011. In order to meet the performance vesting requirement, the average closing stock price of the Company's common stock for the 30 trading days prior to
February 11, 2011 (the "Average Closing Stock Price") shall be equal to or greater than $11.00 per share. If the performance units become vested on February 11, 2011, Mr. Crystal
will receive the number of shares of common stock equal to (i) $3,000,000 divided by the Average Closing Stock Price if such Average Closing Stock Price is equal or greater to $11.00 per share
but less than $20.00 per share or (ii) $5,000,000 divided by the Average Closing Stock Price if the Average Closing Stock Price is greater or equal to $20.00 per share. The maximum number of
shares Mr. Crystal can receive is limited to 272,727 shares. If Mr. Crystal's employment is terminated by the Company within six months prior to February 11, 2011 for any reason
other than for Cause, as defined in his employment agreement, the performance unit award will vest as if he was still employed at February 11, 2011, and the performance conditions are otherwise
satisfied. The fair value of the performance unit award was calculated on the grant date using the Monte Carlo simulation model, which resulted in a fair value of $0.1 million. The Monte Carlo
model uses the same input assumptions as the Black-Scholes model; however, it also further incorporates into the fair value determination, the probability that the market condition may not be
satisfied. The Monte Carlo simulation was computed using a risk-free rate of 0.83% and a volatility of 93.2%, which represents the Company's historical volatility for the two year period
preceding the grant date. The Company's two year historical volatility was used, since the performance period of the award is two years.
Total
share-based compensation expense attributable to all share-based awards granted since the inception of the Plans was $1.6 million, $1.7 million and
$1.7 million in fiscal year 2008, fiscal year 2007 and fiscal year 2006, respectively. The Company recognizes share-based compensation expense in the consolidated statements of operations over
the requisite service period for each stock option and restricted stock award. The Company recognized a tax benefit in the consolidated statements of operations related to share-based compensation
expense of $0.6 million, $0.5 million and $0.5 million in
78
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
11. Share-Based Compensation (Continued)
fiscal
year 2008, fiscal year 2007 and fiscal year 2006, respectively. Unamortized share-based compensation expense at January 31, 2009 was $4.9 million and will be recognized in the
consolidated statements of operations over a weighted average period of 1.9 years.
12. Accrued Expenses
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
January 31,
2009 |
|
February 2,
2008 |
|
|
|
(Amounts in thousands)
|
|
Gift cards and certificates |
|
$ |
15,327 |
|
$ |
15,976 |
|
Compensation and benefits |
|
|
11,779 |
|
|
11,091 |
|
Other taxes |
|
|
6,042 |
|
|
5,066 |
|
Construction in progress |
|
|
2,178 |
|
|
2,654 |
|
Occupancy and related |
|
|
3,806 |
|
|
3,141 |
|
Insurance |
|
|
4,488 |
|
|
5,044 |
|
Other accrued expenses |
|
|
17,501 |
|
|
10,646 |
|
|
|
|
|
|
|
Total accrued expenses |
|
$ |
61,121 |
|
$ |
53,618 |
|
|
|
|
|
|
|
13. Long-Term Debt and Credit Facilities
On August 22, 2007, Lerner New York, Inc., Lernco, Inc. and Jasmine Company, Inc. entered into a Second Amended and Restated Loan and Security Agreement (the
"Loan Agreement") with Wachovia Bank, National Association, as Agent for itself and the other lender party to the Loan Agreement. The Loan Agreement further amended and restated the Amended and
Restated Loan and Security Agreement, dated March 16, 2004, among Lerner New York, Inc. and Lernco, Inc., as borrowers, together with the Agent and the lenders party thereto, as
amended.
The
Company's credit facilities currently consist of a term loan, of which $19.5 million was outstanding at January 31, 2009, and a $90.0 million revolving credit
facility (which includes a sub-facility available for issuance of letters of credit of up to $75.0 million), both having a maturity date of March 17, 2012.
The
revolving loans under the credit facilities bear interest, at the Company's option, either at a floating rate equal to the Eurodollar rate plus a margin of between 1.00% and 1.25%
per year, depending upon the Company's financial performance, or the Prime rate. The Company pays the lenders under the revolving credit facility a monthly fee on outstanding commercial letters of
credit at a rate of 0.625% per year and on standby letters of credit at a rate of between 1.00% and 1.25% per year, depending upon the Company's financial performance, plus a monthly fee on a
proportion of the unused commitments under that facility at a rate of 0.20% per year. The term loan bears interest at a floating rate equal to the Eurodollar rate plus 2.50% per year. If any default
were to exist under the revolving credit facility and for so long as such default were to continue, at the option of the agent or lenders, the monthly fee on outstanding standby letters of credit may
increase to 3.25% per year, interest on the revolving loans may increase to 3.25% per year above the Eurodollar rate for
79
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
13. Long-Term Debt and Credit Facilities (Continued)
Eurodollar
rate loans and 2.00% per year above the Prime rate for all Prime rate loans, and interest on the term loan may increase to the Eurodollar rate plus 4.50% per year.
The
Company's credit facilities contain certain covenants, including restrictions on the Company's ability to pay dividends on its common stock, incur additional indebtedness and to
prepay, redeem, defease or purchase other debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, stock repurchases, acquisitions and for other
purposes. The terms of the Company's credit facilities also subject it to certain maintenance covenants, which were amended on December 9, 2008. The amendment removed the maximum leverage ratio
of 2.75 to 1.00 and limited the application of the minimum fixed charge coverage ratio of 1.00 to 1.00, such that the Company is only subject to the minimum fixed charge coverage ratio if borrowing
availability under its revolving credit facility plus qualified cash falls below specified minimum levels. Prior to the existing term loan being repaid in full, the Company will only be subject to the
minimum fixed charge coverage ratio in the event that borrowing availability under its revolving credit facility plus qualified cash falls below $30.0 million ($20.0 million during March
and November). Should the Company fully repay its existing term loan, the Company will only be subject to the minimum fixed charge coverage ratio in the event that borrowing availability under its
revolving credit facility falls below $12.5 million. In addition, the Company is required at all times to maintain minimum borrowing availability under its credit facility of
$10.0 million. The Company is currently in compliance with the financial covenants referred to above.
The
lenders have been granted a pledge of the common stock of Lerner Holding and certain of its subsidiaries, and a first priority security interest in substantially all other tangible
and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the credit facilities. In addition, New York &
Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the credit facilities, and such guarantees are joint and several.
As
of January 31, 2009, the Company had availability under its revolving credit facility of $68.7 million, net of letters of credit outstanding of $6.9 million, as
compared to availability of $72.2 million, net of letters of credit outstanding of $6.8 million, as of February 2, 2008. As of January 31, 2009 and February 2, 2008,
there were no loans outstanding under the revolving credit facility. Borrowings under the revolving credit facility are due March 17, 2012, and may be borrowed, repaid and reborrowed prior to
maturity.
The
carrying amounts and fair values of debt as of January 31, 2009 and February 2, 2008, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2009 |
|
February 2, 2008 |
|
|
|
Carrying
Amount |
|
Estimated
Fair Value |
|
Carrying
Amount |
|
Estimated
Fair Value |
|
|
|
(Amounts in thousands)
|
|
Term loan, due March 17, 2012 |
|
$ |
19,500 |
|
$ |
19,500 |
|
$ |
25,500 |
|
$ |
25,500 |
|
Less: current portion |
|
|
(6,000 |
) |
|
(6,000 |
) |
|
(6,000 |
) |
|
(6,000 |
) |
|
|
|
|
|
|
|
|
|
|
Total long-term debt, net of current |
|
$ |
13,500 |
|
$ |
13,500 |
|
$ |
19,500 |
|
$ |
19,500 |
|
|
|
|
|
|
|
|
|
|
|
80
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
13. Long-Term Debt and Credit Facilities (Continued)
In
accordance with the Loan Agreement, the $19.5 million outstanding principal amount of the term loan will be repaid as follows: $6.0 million in each of fiscal year 2009
and 2010 and $7.5 million in fiscal year 2011.
14. Income Taxes
Income taxes for continuing operations consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
|
|
(Amounts in thousands)
|
|
Federal: |
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
3,579 |
|
$ |
11,078 |
|
$ |
26,971 |
|
|
Deferred |
|
|
(15,518 |
) |
|
2,402 |
|
|
(1,203 |
) |
State and Local: |
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
1,099 |
|
|
2,931 |
|
|
6,383 |
|
|
Deferred |
|
|
(3,843 |
) |
|
593 |
|
|
(298 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
(14,683 |
) |
$ |
17,004 |
|
$ |
31,853 |
|
|
|
|
|
|
|
|
|
The
approximate tax effect of items giving rise to the net deferred income tax assets and liabilities recognized in the Company's consolidated balance sheets is as follows:
|
|
|
|
|
|
|
|
|
|
January 31,
2009 |
|
February 2,
2008 |
|
|
|
(Amounts in thousands)
|
|
Accrued expenses |
|
$ |
14,324 |
|
$ |
10,829 |
|
Fixed assets and intangible assets |
|
|
2,408 |
|
|
(13,962 |
) |
Inventory |
|
|
1,218 |
|
|
1,218 |
|
Other assets |
|
|
3,119 |
|
|
2,216 |
|
Prepaid costs |
|
|
(8,192 |
) |
|
(7,976 |
) |
|
|
|
|
|
|
Total deferred tax assets and (liabilities) |
|
|
12,877 |
|
|
(7,675 |
) |
Valuation allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets and (liabilities) |
|
$ |
12,877 |
|
$ |
(7,675 |
) |
|
|
|
|
|
|
As
of January 31, 2009, the Company had no federal net operating loss carryforwards.
81
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
14. Income Taxes (Continued)
A
reconciliation of the statutory federal income tax expense for continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
Fiscal Year
2006 |
|
|
|
(Amounts in thousands)
|
|
Statutory 35% federal tax |
|
$ |
(12,243 |
) |
$ |
15,288 |
|
$ |
28,088 |
|
State and local income taxes, net of federal income tax benefit |
|
|
(1,783 |
) |
|
2,291 |
|
|
4,035 |
|
Other, net |
|
|
(657 |
) |
|
(575 |
) |
|
(270 |
) |
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
$ |
(14,683 |
) |
$ |
17,004 |
|
$ |
31,853 |
|
|
|
|
|
|
|
|
|
The
Company files U.S. federal income tax returns and income tax returns in various state and local jurisdictions. In November 2008, the Internal Revenue Service began its
examination of the Company's U.S. federal income tax return for the 2006 tax year. The Company is subject to a U.S. federal income tax examination for the 2007 tax year and state and local income tax
examinations for the tax years 2005 through 2007.
On
February 4, 2007, the Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement No. 109," which resulted in a cumulative effect reduction of retained earnings of $2.3 million and an increase in its liability for unrecognized tax benefits, including
interest and penalties. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2008 |
|
Fiscal Year
2007 |
|
|
|
(Amounts in thousands)
|
|
Unrecognized tax benefits at beginning of period |
|
$ |
4,317 |
|
$ |
4,530 |
|
Additions based on tax positions related to the current year |
|
|
462 |
|
|
294 |
|
Additions for tax positions of prior years |
|
|
981 |
|
|
451 |
|
Reductions for tax positions of prior years |
|
|
|
|
|
(958 |
) |
Settlements |
|
|
(142 |
) |
|
|
|
Reductions for lapse of statute of limitations |
|
|
(2,064 |
) |
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits at end of period |
|
$ |
3,554 |
|
$ |
4,317 |
|
|
|
|
|
|
|
At
January 31, 2009, the Company reported a liability of $3.6 million in other liabilities on the consolidated balance sheet for unrecognized tax benefits, including
interest and penalties, all of which would impact the Company's effective tax rate if recognized. The Company does not anticipate any significant increases or decreases to the balance of unrecognized
tax benefits during the next twelve months.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During both fiscal year 2008 and fiscal year 2007, the Company recorded
a net benefit of $0.2 million for interest and penalties in the consolidated statement of operations. At January 31, 2009 and February 2, 2008, the Company had accrued
$1.6 million and $1.9 million, respectively, for the potential payment of interest and penalties.
82
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2009
15. Fair Value Measurements
As described in Note 2, "Summary of Significant Accounting Policies," on February 3, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements" ("SFAS
No. 157") for financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurring basis. SFAS No. 157 establishes a common
definition for fair value to be applied to US GAAP guidance requiring the use of fair value, establishes a framework for measuring fair value, and expands the disclosure about such fair value
measurements. SFAS No. 157 establishes a three level fair value hierarchy that requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. The three levels of inputs used to measure fair value are as follows:
- Level
- 1: Observable
inputs such as quoted prices in active markets;
- Level
- 2: Inputs,
other than the quoted prices in active markets, that are observable either directly or indirectly; and
- Level
- 3: Unobservable
inputs in which there is little or no market data and require the reporting entity to develop its own assumptions.
At
January 31, 2009 and February 2, 2008, the carrying amount of the Company's long-term debt approximated its fair value due to the variable interest rate it
carries, and as such it is classified within level 2 of the fair value hierarchy.
16. Redeemable Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, $0.001 par value. At January 31, 2009 and February 2, 2008, there were no shares of preferred stock
outstanding.
17. Common Stock
The Company is authorized to issue 300,000,000 shares of common stock, $0.001 par value.
On
January 25, 2006, the Company completed an offering of 8,050,000 shares of common stock, including the underwriters' over-allotment option, of which 130,000 shares
were offered by the Company and 7,920,000 shares were offered by certain selling stockholders at a price to the public of $18.50 per share. Upon consummation of the public offering on
January 31, 2006, net proceeds of $2.3 million and $139.8 million were distributed to the Company and selling stockholders, respectively. The net proceeds received by the Company
were used to pay the fees and expenses of the offering, as well as for general corporate purposes.
The
Company issued 819,582, 1,733,507 and 2,872,291 shares of common stock upon exercise of stock options during fiscal year 2008, fiscal year 2007 and fiscal year 2006, respectively. In
addition, the Company issued 410,182, 14,000, and 36,500 shares of restricted stock during fiscal year 2008, fiscal year 2007 and fiscal year 2006, respectively.
83
Table of Contents
EXHIBIT INDEX
|
|
|
|
Exhibit No. |
|
Description |
|
3.1 |
|
Restated Certificate of Incorporation. |
|
3.2 |
|
Amended and Restated Bylaws. |
|
9.1 |
|
Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated August 25, 2004.** |
|
9.2 |
|
Amendment No. 4 to Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated May 22, 2006. |
|
9.3 |
|
Amendment No. 5 to Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated August 16, 2006.+ |
|
10.1 |
|
Second Amended and Restated Employment Agreement between New York & Company, Inc. and Richard P. Crystal, dated August 25, 2004.** |
|
10.2 |
|
Amendment No. 1 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Richard P. Crystal, as amended on December 22,
2006.++ |
|
10.3 |
|
Amendment No. 2 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Richard P. Crystal, as amended on May 4, 2007.++ |
|
10.4 |
|
Amendment No. 3 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Richard P. Crystal, as amended on April 10, 2008.++ |
|
10.5 |
|
Amendment No. 4 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Richard P. Crystal, as amended on January 28, 2009. |
|
10.6 |
|
Second Amended and Restated Employment Agreement between New York & Company, Inc. and Ronald W. Ristau, dated August 25, 2004.** |
|
10.7 |
|
Amendment No. 1 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Ronald W. Ristau, as amended on December 22,
2006.++ |
|
10.8 |
|
Amendment No. 2 to Second Amended and Restated Employment Agreement, dated August 25, 2004, between New York & Company, Inc. and Ronald W. Ristau, as amended on April 10, 2008.++ |
|
10.9 |
|
Separation Agreement and General Release between New York & Company, Inc., Lerner New York, Inc. and Ronald W. Ristau, dated November 19, 2008. T T
T |
|
10.10 |
|
Amendment No. 1 to Separation Agreement and General Release, dated November 19, 2008, between New York & Company, Inc., Lerner New York, Inc. and Ronald W. Ristau, as amended on
January 27, 2009. |
|
10.11 |
|
Employment Letter, dated as of March 13, 2006, between New York & Company, Inc. and Sandra Brooslin Viviano. |
|
10.12 |
|
Employment Letter, dated as of March 13, 2006, between New York & Company, Inc. and John DeWolf. |
|
10.13 |
|
Employment Letter, dated as of April 20, 2006, between New York & Company, Inc. and Leslie Goldmann. |
|
10.14 |
|
Employment Letter, dated as of November 3, 2008, between New York & Company, Inc. and Sheamus Toal. |
|
10.15 |
|
Amendment No.1 to Employment Letter, dated as of March 13, 2006, between New York & Company, Inc. and Sandra Brooslin Viviano, as amended December 22, 2006. |
|
10.16 |
|
Amendment No.1 to Employment Letter, dated as of March 13, 2006 between New York & Company, Inc. and John DeWolf, as amended December 22, 2006. |
|
10.17 |
|
Amendment No.1 to Employment Letter, dated as of April 20, 2006 between New York & Company, Inc. and Leslie Goldmann, as amended December 22, 2006. |
|
10.18 |
|
Transition Services Agreement by and between Lerner New York Holding, Inc. and Limited Brands, Inc., dated as of November 27, 2002.* |
Table of Contents
|
|
|
|
Exhibit No. |
|
Description |
|
10.19 |
|
Amendment No.1 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to NY & Co.
Group, Inc. and Limited Brands, Inc., as amended on April 19, 2006. T |
|
10.20 |
|
Amendment No. 2 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on October 11, 2007. |
|
10.21 |
|
Amendment No. 3 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on July 17, 2008. |
|
10.22 |
|
Amendment No. 4 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on April 6, 2009. |
|
10.23 |
|
Second Amended and Restated Loan and Security Agreement by and among Lerner New York, Inc., Lernco, Inc., Jasmine Company, Inc., Wachovia Bank, National Association, as Agent for itself and the other Lender
named therein, dated as of August 22, 2007. T T |
|
10.24 |
|
Amendment No. 1 to Second Amended and Restated Loan and Security Agreement by and among Lerner New York, Inc., Lernco, Inc., Jasmine Company, Inc., Wachovia Bank, National Association, as Agent for
itself and the other Lender named therein, dated as of December 9, 2008. T T T |
|
10.25 |
|
Second Amended and Restated Guarantee made by New York & Company, Inc., Lerner New York Holding, Inc., Nevada Receivable Factoring, Inc., Associated Lerner Shops of America, Inc. and Lerner
New York GC, LLC in favor of Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and Restated Loan and Security Agreement, dated as of August 22, 2007. T
T |
|
10.26 |
|
Second Amended and Restated Collateral Assignment of Trademarks made among Lernco, Inc. and Jasmine Company, Inc. in favor of Wachovia Bank, National Association, as Agent for itself and the other Lender named
in the Second Amended and Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.27 |
|
Amended and Restated Collateral Assignment of Trademarks made among Lerner New York, Inc. in favor of Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and
Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.28 |
|
Second Amended and Restated Stock Pledge Agreement by and between Lerner New York, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and Restated Loan
and Security Agreement, dated as of August 22, 2007. T T |
|
10.29 |
|
Second Amended and Restated Stock Pledge Agreement by and between Lerner New York Holding, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and
Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.30 |
|
Second Amended and Restated Stock Pledge Agreement by and between New York & Company, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and
Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
|
10.31 |
|
Second Amended and Restated Intercompany Subordination Agreement made among the Obligors, as defined in the Second Amended and Restated Loan and Security Agreement, and Wachovia Bank, National Association, as Agent for
itself and the other Lender named in the Second Amended and Restated Loan and Security Agreement, dated as of August 22, 2007. T T |
Table of Contents
|
|
|
|
Exhibit No. |
|
Description |
|
10.32 |
|
Performance Unit Award Agreement, dated as of January 28, 2009, between New York & Company, Inc. and Richard P. Crystal. |
|
10.33 |
|
Form of Amended and Restated 2002 Stock Option Plan that became effective immediately prior to the consummation of the Company's initial public offering.** |
|
10.34 |
|
New York & Company, Inc. 2006 Long-Term Incentive Plan approved by the Company's Board of Directors and Stockholders on May 3, 2006 and June 21, 2006, respectively.+++ |
|
21.1 |
|
Subsidiaries of the Registrant. |
|
23.1 |
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. |
|
31.1 |
|
Certification by the Chairman and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 7, 2009. |
|
31.2 |
|
Certification by the Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 7, 2009. |
|
32.1 |
|
Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley act of 2002, dated April 7, 2009. |
-
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2005, as
filed with the SEC on April 19, 2005.
-
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended
January 28, 2006, as filed with the SEC on April 7, 2006.
-
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended
February 3, 2007, as filed with the SEC on April 6, 2007.
-
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal
year ended February 2, 2008, as filed with the SEC on April 8, 2008.
- T
- Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended
April 29,
2006, as filed with the SEC on June 8, 2006.
- TT
- Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended August 4,
2007, as filed with the SEC on September 7, 2007.
- TTT
- Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended
November 1, 2008, as filed with the SEC on December 11, 2008.
- *
- Incorporated
by reference from Amendment No. 1 to the Company's Registration Statement on Form S-1 as filed with the SEC on
July 9, 2004.
- **
- Incorporated
by reference from Amendment No. 3 to the Company's Registration Statement on Form S-1 as filed with the SEC on
September 14, 2004.
- +
- Incorporated
by reference from the Company's Current Report on Form 8-K filed with the SEC on August 17, 2006.
- ++
- Incorporated
by reference from the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008.
- +++
- Incorporated
by reference from the Company's 2006 Proxy Statement, as filed with the SEC on May 19, 2006.
EX-10.5
2
a2190251zex-10_5.htm
EXHIBIT 10.5
Exhibit 10.5
AMENDMENT
NO. 4 TO SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Amendment (this Amendment),
made as of January 28, 2009, by and among New York & Company, Inc.
(the Company), Lerner New York, Inc. (Lerner) and
Richard Crystal (Executive).
R E C I T A L S
WHEREAS, Executive is
party to that certain Second Amended and Restated Employment Agreement by and
among between the Company, Lerner and Executive dated August 25, 2004, as
amended as of December 20, 2006, May 4, 2007 and April 10, 2008
(the Agreement).
WHEREAS, the Company,
Lerner and Executive wish to amend the Agreement to acknowledge certain
mutually agreed upon changes to the Agreement, including, but not limited to,
the removal of the evergreen term and the award of the special signing bonus
described below in consideration for Executive agreeing to be bound by certain
restrictive covenants contained in the Agreement after the end of the
employment term.
NOW, THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to the following:
1. Amendments.
(a) Section 1 shall be amended and restated in its
entirety as follows:
The
term of employment under this Agreement shall be for the period commencing on
the date hereof and ending on February 11, 2011 (Term).
(b) A new Section 4(i) shall
be added after Section 4(h) as follows:
(i) In consideration for Executive agreeing
to be bound by the covenants contained in Section 12 (originally
numbered Section 11 and renumbered Section 12 by
Amendment No. 1 to this Agreement), Executive shall be paid a special
aggregate bonus of $2,000,000, to be paid in four semi-annual installments of
$444,444.42 each, on June 1, 2009, December 1, 2009, June 1,
2010 and December 1, 2010, and a final payment of $222,222.32 on February 11,
2011 (each a Payment Date).
Each such payment is contingent upon Executives continued employment
with the Company through such Payment Date.
(c) The first paragraph of Section 9
shall be amended to remove the phrase in form and substance satisfactory to
Holdings and replacing it with the phrase in form and substance satisfactory
to Holdings and such release is executed and irrevocable within 60 days of the
termination of Executives employment.
(d) Section 9(a) shall be amended to remove the
phrase or gives written notice not to extend the Term.
(e) Section 9(b)(i) shall be amended to remove the
phrase including by reason of Holdings written notice to Executive of its
decision not to extend the Term, as contemplated by Section 1, and.
(f) The first paragraph of Section 9(b)(ii) shall
be amended to remove the phrase including by reason of Holdings written
notice to Executive of its decision not to extend the Term, as contemplated in Section 1,
but only if as a result thereof, the Term would expire within twenty-four (24)
months following the Change of Control, and.
(g) Section 9(b)(i)(D) (as revised by Amendment No. 3
to this Agreement) shall be amended by removing the phrase payable
semi-annually in accordance with prior practice and replacing it with the
phrase payable within 60 days of the date that is the last day of each such
Bonus Period.
(h) Section 9(b)(ii)(D) shall be amended by adding to the
end of the first sentence thereof the following phrase ; provided that if the
Change of Control is not also a change in control event under Code Section 409A,
then Executive shall instead receive the severance benefits in Section 9(b)(i)(D) in
accordance with the terms thereof and any amounts in excess thereof otherwise
due under this Section 9(b)(ii)(D) shall be paid in a lump sum within
ten (10) business days after his Termination Date and by replacing the
phrase total lump sum amount with the phrase total amount each time it
appears in the last sentence.
(i) Section 10 of the original Agreement (as renumbered
to be Section 11 by Amendment No. 1 to the Agreement) shall be
amended by removing the last sentence of such section and replacing it with the
following sentences:
The parties agree
that any reduction of amounts that Executive receives or is entitled to receive
as provided in this Section 11 shall be reduced in order beginning
with the parachute payment with the highest Parachute Payment Ratio (as
defined below). For parachute payments
with the same Parachute Payment Ratio, such parachute payments shall be
reduced based on the time of payment of such parachute payments, with amounts
having later payment dates being reduced first.
For parachute payments with the same Parachute Payment Ratio and the
same time of payment, such parachute payments shall be reduced on a pro rata
basis
(but not below
zero) prior to reducing parachute payments with a lower Parachute Payment
Ratio. For purposes hereof, the term Parachute
Payment Ratio shall mean a fraction the numerator of which is the value of the
applicable parachute payment for purposes of Section 280G of the Code
and the denominator of which is the intrinsic value of such parachute payment.
(j) Section 11(b) and 11(c) of the original Agreement (as
renumbered to be Section 12(b) and 12(c) by Amendment No. 1
of the Agreement) are hereby amended by replacing the phrase after Executive
ceases to be employed with the phrase after Executive ceases to be employed
for any reason.
(k) New Section 30, entitled Section 409A
Compliance is hereby added, with the following subsections to be contained
in such section:
(a) The payment of the Spring Bonus, if any,
shall be paid no later than July 31 immediately following the conclusion
of the Companys second fiscal quarter and the payment of any bonus relating to
a bonus period ending at the conclusion of the Companys fiscal year (which
concludes the fourth weekend of January) shall be paid no later than March 31
immediately following the conclusion of such fiscal year; provided, however,
that for purposes of compliance with Code Section 409A any Bonus that may
be payable pursuant to this Agreement shall under no circumstances be paid
later than March 15th of the calendar year following the calendar year in
which the bonus is no longer subject to a substantial risk of forfeiture as
such phrase is defined for purposes of the short term deferral rule under
Treas. Reg. 1.409A-1(b)(4) (regarding short-term deferrals). For purposes of this section, a right to
payment will be treated as having vested when it is no longer subject to a
substantial risk of forfeiture as determined by the Company in its sole
discretion.
(b) A termination of employment shall not be
deemed to have occurred for purposes of any provision of this Agreement
providing for the payment of any amounts or benefits upon or following a
termination of employment unless such termination is also a separation from
service within the meaning of Code Section 409A and, for purposes of any
such provision of this Agreement, references to a termination, termination
of employment or like terms shall mean separation from service.
(c) All expenses or other reimbursements
under the Agreement that would constitute nonqualified deferred compensation
subject to Code Section 409A, as determined by the Company in its sole
discretion, (i) shall be paid on or prior to the last day of the taxable
year following the taxable year in which such expenses were incurred by
Executive, (ii) no such reimbursement or expenses eligible for
reimbursement in any taxable year shall in any way affect Executives right to
reimbursement of
any other expenses
eligible for reimbursement in any other taxable year, and (iii) Executives
right to reimbursement shall not be subject to liquidation in exchange for any
other benefit.
(d) For purposes of Code Section 409A,
Executives right to receive any installment payment pursuant to this Agreement
shall be treated as a right to receive a series of separate and distinct
payments.
(e) Whenever a payment under this Agreement
specifies a payment period with reference to a number of days (e.g., payment
shall be made within thirty (30) days following the date of termination), the
actual date of payment within the specified period shall be within the sole
discretion of the Company.
(f) Notwithstanding any other provision of
this Agreement to the contrary, in no event shall any payment under this
Agreement that constitutes deferred compensation for purposes of Code Section 409A
be subject to offset, counterclaim or recoupment by any other amount payable to
Executive unless otherwise permitted by Code Section 409A.
(g) Unless this Agreement provides a
specified and objectively determinable payment schedule to the contrary, to the
extent that any payment of base salary or other compensation is to be paid for
a specified continuing period of time beyond the date of Executives
termination of employment in accordance with the Companys or Holdings payroll
practices (or other similar term), the payments of such base salary or other
compensation shall be made in accordance with such payroll practices as in
effect on the date of termination, but in no event less frequently than on a
monthly basis.
2. Agreement Otherwise Unchanged.
All other provisions of the Agreement shall remain in full force and
effect.
3. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the conflict of law principals thereof.
4. Counterparts. This Amendment may be executed in
separate counterparts (including via facsimile or electronic mail) each of
which shall be deemed an original and all of which taken together shall
constitute one and the same agreement.
5. Waiver of Jury Trial. Each of the parties hereto waives any
right it may have to trial by jury in respect of any litigation based on,
arising out of, under or in connection with this Agreement or any course of
conduct, course of dealing, verbal or written statement or action of any party
hereto.
* * *
* *
IN WITNESS WHEREOF, the undersigned has executed this
Amendment as of the date and year first written above.
|
NEW
YORK & COMPANY, INC.
|
|
|
|
By:
|
/s/ Sandra
Brooslin Viviano
|
|
|
|
Sandra Brooslin
Viviano
|
|
Executive Vice
President,
|
|
Human Resources
|
|
|
|
|
|
LERNER
NEW YORK, INC.
|
|
|
|
By:
|
/s/ Sandra
Brooslin Viviano
|
|
|
|
Sandra Brooslin
Viviano
|
|
Executive Vice
President,
|
|
Human Resources
|
|
|
|
|
|
/s/ Richard P.
Crystal
|
|
Richard P.
Crystal
|
|
Chairman and
Chief Executive Officer
|
EX-10.10
3
a2190251zex-10_10.htm
EXHIBIT 10.10
Exhibit 10.10
AMENDMENT NO. 1 TO SEPARATION AGREEMENT AND
GENERAL RELEASE
DATED: JANUARY
27, 2009
WHEREAS, New York & Company, Inc. (f/k/a/ NY &
Co. Group, Inc.), a Delaware corporation (Holdings), Lerner New York, Inc.,
a Delaware corporation (Lerner,
and, together with Holdings, the Companies), and Ronald Ristau (Executive and together with the Companies, the Parties) previously
entered into a Separation Agreement and General Release dated November 19,
2008 (the Agreement).
WHEREAS, the Parties now wish to amend the Agreement in
accordance with the provisions of Section 17 of the Agreement.
NOW, THEREFORE, in consideration of the
foregoing, of the mutual promises contained herein and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree to amend the Agreement as set
forth herein.
FIRST: Section 3(f) of
the Agreement is hereby amended in its entirety to read in full as follows:
(f) During the Salary Continuation Period, Holdings shall,
at its expense, provide to Executive and Executives covered dependents medical
and dental benefits substantially similar in the aggregate to those provided to
Executive and Executives covered dependents immediately prior to the
Separation Date, including benefits provided under the New York &
Company Executive Medical Plan (the Executive Medical Plan). Holdings shall provide such coverage in kind
(i.e., without charging Executive
monthly premiums). The amount of
expenses eligible for reimbursement under the coverages provided under this Section 3(f) during
one taxable year of the Executive shall not affect the expenses eligible for
reimbursement in any other taxable year of the Executive. The Executives right to reimbursement of
expenses eligible for reimbursement under the coverages provided under this Section 3(f) shall
not be subject to liquidation or exchange for another benefit.
Notwithstanding the foregoing provisions of this Section 3(f),
Holdings obligation with respect to coverage under this Section 3(f) shall
be eliminated to the extent that Executive or Executives covered dependents,
as applicable, obtain, during the Salary Continuation Period, equivalent or
substantially similar benefits pursuant to a subsequent employers benefit
plans. Holdings hereby acknowledges and
agrees that Executives termination of employment with the Companies as of the
Separation Date shall not be treated as a qualifying event within the meaning
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), and that,
upon the cessation of coverage under this Section 3(f), Executive and
Executives covered dependents shall have all rights to which they are entitled
under COBRA. Thereafter, Holdings
obligation with respect to such coverage shall be eliminated to the extent that
such coverage terminates in accordance with COBRA.
SECOND: Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings given them in the
Agreement.
THIRD: Except as expressly set forth herein,
this Amendment No. 1 shall not alter, modify, amend or in any way affect
any of the terms, conditions, covenants, obligations or agreements contained in
the Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
FOURTH: This Amendment No. 1 may be executed in any
number of counterparts, which taken together shall be deemed to constitute one
and the same agreement and each of which individually shall be deemed to be an
original, with the same effect as if the signature on each counterpart were on
the same original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
IN
WITNESS WHEREOF,
Executive and duly authorized representatives of Holdings and Lerner have executed
this Amendment No. 1 to the Agreement as of the date first
written above.
EMPLOYEE
|
|
|
|
/s/ Ronald W. Ristau
|
|
Ronald W. Ristau
|
|
IN
WITNESS WHEREOF,
Executive and duly authorized representatives of Holdings and Lerner have executed
this Amendment No. 1 to the Agreement as of the date first
written above.
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NEW YORK &
COMPANY, INC.
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/s/ Sandra Brooslin
Viviano
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Sandra Brooslin Viviano
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Executive Vice
President, Human Resources
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LERNER NEW YORK, INC.
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/s/ Sandra Brooslin Viviano
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Sandra Brooslin Viviano
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Executive Vice President, Human Resources
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EX-10.13
4
a2190251zex-10_13.htm
EXHIBIT 10.13
Exhibit 10.13
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450 WEST 33RD STREET
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NEW YORK, NY 10001
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212 884 2000 P
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212 884 2396 F
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NEW YORK & COMPANY
450 West 33rd Street
New York, NY 10001
Leslie
Goldmann
Re: Letter Agreement of Employment
Dear
Leslie:
This
letter agreement (this Agreement) sets forth the terms and conditions
of your employment, and your employment relationship, with Lerner New York, Inc.
(the Company). Your execution
of this Agreement will represent your acceptance of all of the terms set forth
below and will supercede any other Letter Agreement of Employment entered into
prior to this Agreement.
1. Nature of
Agreement and Relationship.
This Agreement does not represent an employment contract for any
specified term. Your employment
relationship thus will remain at-will, meaning that, subject to the terms
hereof, either party to this Agreement may terminate the employment
relationship at any time for any lawful reason.
2. Job Title and Duties.
Your job title will
be Vice President, General Merchandise Manager.
You will be expected to devote all of your full time efforts to the
performance of the duties and responsibilities normally associated with this
position, including those from time-to-time that may be assigned to you by your
Supervisor, the President, the Chief Executive Officer, the Chief Operating
Officer or the Board of Directors of the Company (or the designee of any of the
foregoing).
3. Salary. For
the 12-month period ending on the last Saturday of each January (the last
day of the fiscal year), you will receive a base salary at the rate of $380,000 per annum (Base Salary), subject to the remaining
provisions of this Section. For the
remainder of the current fiscal year starting on the date of this Agreement,
your Base Salary will be pro rated based on the number of days remaining in
such fiscal year divided by 365. At the
Companys sole discretion, your Base Salary may be increased or decreased based
on your performance and the performance of the business. You will be paid in accordance with the
Companys normal payroll policies and practices, with all applicable deductions
being withheld from your paychecks.
4. Bonus.
You will be eligible
to participate in the Companys then current bonus plan, in accordance with its
terms and conditions, and to receive performance-based bonuses pursuant to any
formula that may be established. For the
Companys current fiscal year, your bonus target for the spring bonus (relating
to the Companys results for the first and second fiscal quarters of each
fiscal year) will be 20% of your Base Salary and for the fall bonus (relating
to the Companys results for the third and fourth fiscal quarters of each
fiscal year) will be 30% of your Base
Salary. Any bonus will be payable in the
month following the last quarter to which that bonus relates. All bonuses are determined at the Companys
sole discretion, and the Company has the sole discretion to modify or terminate
any bonus plan and that plan will govern your right, if any, to a bonus payment
upon termination of your employment.
1
5. Stock Options and Other Long-Term
Incentives. You
will be eligible to receive awards under stock option, restricted stock or
other equity-based long-term incentive plans established by the Company (or an
Affiliate) that cover executive officers of the Company. The term Affiliate means any
corporation, partnership, limited liability company or other entity (other than
the Company) that controls or is controlled by the Company, whether directly or
indirectly, such as a parent company or subsidiary. All equity awards described in this paragraph
are determined at the Companys sole discretion, and the Company has the sole
discretion to modify or terminate any stock option, restricted stock or other
equity-based long-term incentive plan and that plan will govern your rights, if
any, relating to any equity award(s) you have received, or may be entitled
to receive, upon termination of your employment.
6. Employee Benefits. You
will be entitled to participate in all employee benefits plans, practices and
programs maintained by the Company and made available to senior executives
generally and as may be in effect from time to time (the Benefits Plans). Your participation in the Benefits Plans will
be on the same basis and terms as are applicable to senior executives of the
Company generally. Benefits Plans
include, but are not limited to, savings and retirement plans, deferred
compensation, health and prescription drug benefits, disability benefits, other
insurance programs, vacation and other leave, merchandise discounts and
business expense procedures. Plan
documents setting forth terms of certain of the Benefits Plans are available
upon request, which plan documents control all questions of interpretation
concerning applicable Benefits Plans, including your rights, if any, upon
termination of your employment. The
Benefits Plans are subject to modification or termination by the Company at any
time, at its sole discretion, in accordance with their terms.
7. Severance Pay. Upon
your termination of employment by the Company and all Affiliates without Cause
(as defined below), but subject to your performance of all post-employment
obligations set forth in this Agreement and also subject to your signing a
release of claims in a form acceptable to the Company, you will be entitled to
receive severance pay for nine (9) month Severance Period at your final
Base Salary (Severance Pay), beginning the first pay period following
your separation date and ending upon the earlier of: (i) your receipt of 38 such payments or (ii) your first day of employment
with another employer, whichever is earlier.
If you obtain employment at an annual salary that is lower than your
final Base Salary, you will continue to receive the differential between the
two rates of pay for the balance of the 38 weeks. This Severance Pay, which
will be subject to applicable deductions required by law, will be paid on the
Companys regular payroll dates for the balance of the nine (9) month Severance
Period following your termination date, as outlined above. For purposes of this Agreement, Cause
means: (i) your wrongful misappropriation of the Companys or an Affiliates
assets of a material value; (ii) any physical or mental impairment that
renders you incapable of performing the essential functions of your position
with reasonable accommodations; (iii) your conviction of, or pleading guilty
or no contest to, a felony; (iv) your intentionally causing the Company
or an Affiliate to violate a material local state or federal law in any
material respect; (v) your willful refusal to comply with a significant,
lawful and proper policy, directive or decision of your supervisor or the Board
in furtherance of a legitimate business purpose or your willful refusal to
perform the duties reasonably assigned to you consistent with your functions,
duties and responsibilities, in each case, in any material respect, and only if
not remedied within thirty (30) days after receipt of written notice from the
Company; or (vi) your breach of this Agreement, in any material respect,
not remedied within thirty (30) days after receipt of written notice from the
Company.
8. Confidential Information,
Intellectual Property.
8.1 Confidentiality. You
agree to not disclose, distribute, publish, communicate or in any way cause to
be disclosed, distributed, published, or communicated in any way or at any
time, Confidential Information (as defined herein), or any part of Confidential
Information, to any person, firm, corporation, association, or any other
operation or entity except on behalf of the Company in performance of your
2
duties and responsibilities for the Company, and then only in a fashion
consistent with protecting the Confidential Information from unauthorized use
or disclosure, except as otherwise approved by the Company. You further agree not to use or permit the
reproduction of any Confidential Information except on behalf of the Company in
your capacity as an employee of the Company.
You agree to take all reasonable care to avoid the unauthorized
disclosure or use of any Confidential Information. You assume responsibility for and hold
harmless the Company from and against any disclosure or use of the Confidential
Information in violation of this Agreement.
8.2 Confidential Information. For
the purpose of this Agreement, Confidential Information shall mean any
written or unwritten information which relates to and/or is used in the Companys
business (including, without limitation, information related to the names,
addresses, buying habits and other special information regarding past, present
and potential customers, employees and suppliers of the Company; customer and
supplier contracts and transactions or price lists of the Company and
suppliers; all agreements, files, books, logs, charts, records, studies,
reports, processes, schedules and statistical information relating to the
Company; all products, services, programs and processes sold, and all computer
software licensed or developed by the Company; data, plans and specifications
related to present and/or future development projects of the Company; financial
and/or marketing data respecting the conduct of the present or future phases of
business of the Company; computer programs, computer- and/or web-based training
programs, systems and/or software; ideas, inventions, trademarks, business
information, know-how, processes, techniques, improvements, designs, redesigns,
creations, discoveries and developments of the Company; and finances and
financial information of the Company) which the Company deems confidential and
proprietary, which is generally not known to others outside the Company, or
which gives or tends to give the Company a competitive advantage over persons
who do not possess such information or the secrecy of which is otherwise of
value to the Company in the conduct of its business regardless of when and by
whom such information was developed or acquired, and regardless of whether any
of these are described in writing, copyrightable or considered copyrightable,
patentable or considered patentable. Confidential
Information shall not include general industry information or information
which is publicly available or otherwise known to those persons outside the
Company working in the area of the business of the Company or is otherwise in
the public domain without breach of this Agreement or information which you
have lawfully acquired without an obligation to maintain the information in
confidence from a source other than the Company. Confidential Information specifically
includes information received by the Company from others, including the Companys
clients, that the Company has an obligation to treat as confidential and also
includes any confidential information acquired or obtained by you while in the
employment of any of the Companys subsidiary or affiliated companies or any
company which has been acquired by the Company.
8.3 Invention Ownership. With
respect to information, inventions and discoveries developed, made or conceived
by you, either alone or with others, at any time during your employment by the
Company and whether or not within normal working hours, arising out of such
employment or pertinent to any field of business or research in which, during
such employment, the Company is engaged or (if such is known to or
ascertainable by you) is considering engaging, you agree:
(a) that all such information, inventions and discoveries, whether or not
patented or patentable, shall be and remain the sole property of the Company;
3
(b) to disclose promptly to an authorized representative of the Company all
such information, inventions and discoveries and all information in your
possession as to possible applications and uses thereof;
(c) not to file any patent applications relating to any such invention or
discovery except with the prior consent of an authorized representative of the
Company; and
(d) at the request of the Company, and without expense or additional
compensation to you, to execute such documents and perform such other acts as
the Company deems necessary, to obtain patents on such inventions in a
jurisdiction or jurisdictions designated by the Company, and to assign to the
Company or its designee such inventions and all patent applications and patents
relating thereto.
Both
the Company and you intend that all original works of authorship within the
purview of the copyright laws of the United States authored or created by you
in the course of your employment with the Company will be works for hire within
the meaning of such copyright laws.
8.4 Confidentiality of Inventions; Return of
Materials and Confidential Information. With respect to the information,
inventions and discoveries referred to in Section 8.3, and also with
respect to all other information, whatever its nature and form and whether
obtained orally, by observation, from graphic materials, or otherwise (except
such as is generally available through publication) obtained by you during or
as a result of your employment by the Company and relating to any product,
service, process, or apparatus or to any use of any of them, or to materials,
tolerances, specifications, costs (including manufacturing costs), prices, or
to any plans of the Company, you agree:
(a) to hold all such information, inventions and discoveries in strict
confidence and not to publish or otherwise disclose any portion thereof except
with the prior consent of an authorized representative of the Company;
(b) to take all reasonable precautions to ensure that all such information,
inventions, and discoveries are properly protected from access by unauthorized
persons;
(c) to make no use of any such information, invention, or discovery except
as required or permitted in the performance of your duties and responsibilities
for the Company; and
(d) upon termination of your employment by the Company, or at any time upon
request of the Company, to deliver to the Company all graphic materials and all
substances, models, prototypes and the like containing or relating to
Confidential Information or any such information, invention, or discovery, all
of which graphic materials and other things shall be and remain the sole
property of the Company. The term graphic
materials includes letters, memoranda, reports, notes, notebooks, books of
account, drawings, prints, specifications, formulae, data printouts,
microfilms, magnetic tapes and disks and other documents and recordings, together
with all copies thereof.
9. Non-Solicitation.
Regardless of whether
you are eligible to receive Severance Pay, you agree
that, if your employment with the Company ends for any reason, you will not,
for a period of eighteen (18) months following such termination of employment, (i) directly
or indirectly, either for yourself or for any other person, business, company
or entity, hire from the Company or
4
any Affiliate, or attempt to hire, divert or take away from the Company
or any Affiliate, any of the then current officers or employees of the Company
or any Affiliate, (ii) interfere with or harm, or attempt to interfere
with or harm, the relationship of the Company or any Affiliate with any person
who at any time was an employee, customer or supplier of the Company or any
Affiliate or otherwise had a business relationship with the Company or any
Affiliate, or (iii) unless compelled by law to do so, directly or
indirectly, knowingly make any statement or other communication that impugns or
attacks the reputation or character of the Company or any Affiliate, or damages
the goodwill of the Company or any Affiliate, or knowingly take any action,
directly or indirectly, that would interfere with any contractual or customer
or supplier relationships of the Company or any Affiliate.
10. Non-Competition. If you resign your employment, or if your
employment is terminated with Cause, for a period of six (6) months
following such employment termination, you may not and will not, within the
United States of America, directly or indirectly, without the prior written
consent of the Companys chief executive officer or its Board of Directors
(which may be given or withheld in its sole discretion), own, manage, operate,
join, control, be employed by, consult with or participate in the ownership,
management, operation or control of, or be connected with (as a stockholder,
partner or otherwise) any business, partnership, firm, company, corporation or
other entity engaged in the retail business of womens fashion apparel, accessories and related products that
directly compete with New York & Company or any other product sold or
intended to be sold by the Company or an Affiliate during your employment with
the Company. Notwithstanding the
foregoing, your beneficial ownership after your termination of employment with
the Company, either individually or as a member of a group, of not more than
two percent (2%) of the voting stock of any publicly held corporation shall not
be a violation of this provision.
11. Remedies. You
acknowledge that money will not adequately compensate the Company for the
substantial damages that will arise upon the breach of any provision of
Sections 8, 9 and 10 of this Agreement and that the Company would have no
adequate remedy at law. For this reason,
any claim the Company may make that you have breached or are threatening to
breach Sections 8, 9, or 10 is not subject to mandatory arbitration under Section 14. Instead, if you breach or threaten to breach
any provision of Sections 8, 9 or 10, the Company will be entitled, in addition
to other rights and remedies, to specific performance, injunctive relief and
other equitable relief to prevent or restrain any breach or threatened breach
of Sections 8, 9 or 10. The Company may
obtain such relief from (i) any court of competent jurisdiction, (ii) an
arbitrator acting pursuant to Section 14 hereof, or (iii) a combination of the two (e.g.,
by simultaneously seeking arbitration under Section 14 and a temporary
injunction from a court pending the outcome of the arbitration). It shall be the Companys sole and exclusive
right to elect which approach to use to vindicate its rights. You also agree that in the event of a breach
(or any threat of breach) the Company shall be entitled to obtain an immediate
injunction and restraining order to prevent such breach and/or threatened
breach and/or continued breach, without having to prove damages, and to obtain
all costs and expenses, including reasonable attorneys fees and costs. If the Company initiates such legal action
and the final judicial decision concludes that there was no such breach or
threat of breach, then the Company shall pay all of your costs and expenses,
including reasonable attorneys fees and costs, arising from the Companys
legal action. In addition, the existence
of any claim or cause of action by you against the Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the restrictive covenants of this Agreement.
12. Acknowledgment of Reasonableness.
You and the Company
specifically agree that the provisions of the restrictive covenants contained
in this Agreement, including the post-employment covenants regarding non-solicitation
and non-competition, are reasonable and that the Company would not have entered
into this Agreement but for the inclusion of such covenants. You understand that the Companys business is
nationwide, and, therefore, a nationwide restrictive covenant is
reasonable. If a court or arbitrator
determines that any provision of any such restrictive covenant is unreasonable,
whether in period of time, geographical area, or otherwise, you and the Company
agree that the covenant shall be
5
interpreted and enforced to the maximum extent which a court or
arbitrator deems reasonable. In
addition, you and the Company authorize any such court or arbitrator to reform
these restrictions to the minimum extent necessary.
13. Company Property. Upon
your termination of employment for any reason, you will promptly return to the
Company all Company-related documents and Company property within your
possession or control.
14. Arbitration of Disputes.
Except as set forth in Section 11, any dispute, claim or difference
arising out of or in relation to your employment will be settled exclusively by
binding arbitration administered by the American Arbitration Association under
its National Rules for the Resolution of Employment Disputes before a
single arbitrator. The Executive expressly understands and agrees that claims
subject to arbitration under this section include asserted violations of the
Employee Retirement and Income Security Act of 1974; the Age Discrimination in
Employment Act; the Older Workers Benefit Protection Act; the Americans with
Disabilities Act; Title VII of the Civil Rights Act of 1964 (as amended); the
Family and Medical Leave Act; and any law prohibiting discrimination,
harassment or retaliation in employment, whether based on federal, state or
local law; any claim of breach of contract, tort, promissory estoppel or
detrimental reliance, defamation, intentional infliction of emotional distress;
or the public policy of any state, or any other federal, state or local law.
The arbitration will be held in New York, New York unless you and the Company
(each a Party, and jointly, the Parties) mutually agree
otherwise. To the extent permitted by
law, each Party will bear its own costs and fees of the arbitration, and other
fees and expenses of the arbitrator will be borne equally by the Parties; provided, however, that
the arbitrator will be empowered to require any one or more of the Parties to
bear all or any portion of fees and expenses of the Parties and/or the fees and
expenses of the arbitrator in the event that the arbitrator determines such
Party has acted in bad faith. The
arbitrator will have the authority to award any remedy or relief that a court
sitting in the State of New York could order or grant. The decision and award of the arbitrator will
be binding on all Parties. Either Party
to the arbitration may seek to have the ruling of the arbitrator entered in any
court having jurisdiction thereof. Each
Party agrees that it will not file suit, motion, petition or otherwise commence
any legal action or proceeding for any matter which is required to be submitted
to arbitration as contemplated herein, except in connection with the
enforcement of an award rendered by an arbitrator and except to seek the
issuance of an injunction or temporary restraining order pending a final
determination by the arbitrator.
15. Post-Termination Cooperation. As is
required of you during employment, you agree that during and after employment
with the Company you will, without expense or additional compensation to you,
cooperate with the Company or any Affiliate in the following areas:
15.1 Cooperation With the Company. You
agree [a] to be reasonably available to
answer questions for the Companys (or any Affiliates) officers regarding any
matter, project, initiative or effort for which you were responsible while
employed by the Company and [b] to
cooperate with the Company (and with any Affiliate) during the course of all
third-party proceedings arising out of the Companys (or any Affiliates)
business about which you have knowledge or information. For purposes of this Agreement, [c] proceedings includes internal investigations,
administrative investigations or proceedings and lawsuits (including pre-trial
discovery and trial testimony) and [d] cooperation
includes [i] your being
reasonably available for interviews, meetings, depositions, hearings and/or
trials without the need for subpoena or assurances by the Company (or any
Affiliate), [ii] providing any and all
documents in your possession that relate to the proceeding, and [iii] providing assistance in locating any and all
relevant notes and/or documents.
15.2 Cooperation With Media. You
agree not to communicate with, or give statements to, any member of the media
(including print, television or radio media) relating to
6
any matter (including pending or threatened lawsuits or administrative
investigations) about which you have knowledge or information (other than
knowledge or information that is not Confidential Information as defined in Section 8.2)
as a result of employment with the Company.
You also agree to notify the Chief Executive Officer or his designee
immediately after being contacted by any member of the media with respect to
any matter affected by this section.
16. Entire Agreement.
This Agreement
constitutes your entire agreement with the Company relating to the subject
mater hereof, and superseded in its entirety any and all prior agreements,
understandings or arrangements with the Company.
17. Governing Law.
All issues and
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.
18. Survival of Provisions. Sections 8 to 12, 14, 15, 17 and 18 will
survive the termination of your employment for any reason and shall not be
affected by any transfer(s) between the Company and its Affiliate(s).
19. Understandings and
Representations.
You should not sign this Agreement until you
understand its terms and conditions.
Your execution of this Agreement represents your acknowledgement that
you have take all steps you believe necessary, including consultation with financial
and/or legal advisors of your choice, to understand this Agreement.
Sincerely,
By:
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/s/
Sandra Brooslin Viviano
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Dated:
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April 20,
2006
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Name:
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Sandra
Brooslin Viviano
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Executive
Vice President, Human Resources
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/s/
Leslie Goldmann
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Dated:
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April 20,
2006
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Leslie
Goldmann
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Vice
President, General Merchandise Manager
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7
EX-10.14
5
a2190251zex-10_14.htm
EXHIBIT 10.14
Exhibit 10.14
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450
WEST 33RD STREET
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NEW
YORK, NY 10001
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212
884 2000 P
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212
884 2396 F
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NEW YORK &
COMPANY
450 West 33rd Street
New York, NY 10001
Mr. Sheamus Toal
Re: Letter Agreement of Employment
Dear Sheamus:
This letter agreement
(this Agreement) sets forth the terms and conditions of your
employment, and your employment relationship, with Lerner New York, Inc.
(the Company). Your execution
of this Agreement will represent your acceptance of all of the terms set forth
below.
1. Nature of Agreement and
Relationship. This Agreement does not represent an
employment contract for any specified term.
Your employment relationship thus will remain at-will, meaning that,
subject to the terms hereof, either party to this Agreement may terminate the
employment relationship at any time for any lawful reason.
2. Job Title and Duties.
Your job
title will be Chief Financial Officer.
You will be expected to devote all of your full time efforts to the
performance of the duties and responsibilities normally associated with this
position, including those from time-to-time that may be assigned to you by your
Supervisor, the President, the Chief Executive Officer, the Chief Operating
Officer or the Board of Directors of the Company (or the designee of any of the
foregoing).
3. Salary. For the
12-month period ending on the last Saturday of each January (the last day
of the fiscal year), you will receive a base salary at the rate of $375,000.00 per annum (Base Salary), subject to the remaining
provisions of this Section. For the
remainder of the current fiscal year starting on the date of this Agreement,
your Base Salary will be pro rated based on the number of days remaining in
such fiscal year divided by 365. At the
Companys sole discretion, your Base Salary may be increased or decreased based
on your performance and the performance of the business. You will be paid in accordance with the
Companys normal payroll policies and practices, with all applicable deductions
being withheld from your paychecks.
4. Bonus.
You will
be eligible to participate in the Companys then current bonus plan, in
accordance with its terms and conditions, and to receive performance-based
bonuses pursuant to any formula that may be established. For the Companys current fiscal year, your
bonus target for the spring bonus (relating to the Companys results for the
first and second fiscal quarters of each fiscal year) will be 17.5% of your
Base Salary; for the fall bonus (relating to the Companys results for the
third and fourth fiscal quarters of each fiscal year) will be 22.5% of your Base Salary; and for the annual bonus (relating to
the Companys results for the fiscal year) will be 10% of your Base Salary. Any bonus will be payable in the month
following the last quarter to which that bonus relates. All bonuses are determined at the Companys
sole discretion, and the Company has the sole discretion to modify or terminate
any bonus plan and that plan will govern your right, if any, to a bonus payment
upon termination of your employment.
1
5. Stock Options and Other
Long-Term Incentives. You will be eligible to receive awards under
stock option, restricted stock or other equity-based long-term incentive plans
established by the Company (or an Affiliate) that cover executive officers of
the Company. The term Affiliate
means any corporation, partnership, limited liability company or other entity
(other than the Company) that controls or is controlled by the Company, whether
directly or indirectly, such as a parent company or subsidiary. All equity awards described in this paragraph
are determined at the Companys sole discretion, and the Company has the sole
discretion to modify or terminate any stock option, restricted stock or other
equity-based long-term incentive plan and that plan will govern your rights, if
any, relating to any equity award(s) you have received, or may be entitled
to receive, upon termination of your employment.
6. Employee Benefits. You will be
entitled to participate in all employee benefits plans, practices and programs
maintained by the Company and made available to senior executives generally and
as may be in effect from time to time (the Benefits Plans). Your participation in the Benefits Plans will
be on the same basis and terms as are applicable to senior executives of the
Company generally. Benefits Plans
include, but are not limited to, savings and retirement plans, deferred compensation,
health and prescription drug benefits, disability benefits, other insurance
programs, vacation and other leave, merchandise discounts and business expense
procedures. Plan documents setting forth
terms of certain of the Benefits Plans are available upon request, which plan
documents control all questions of interpretation concerning applicable
Benefits Plans, including your rights, if any, upon termination of your
employment. The Benefits Plans are
subject to modification or termination by the Company at any time, at its sole
discretion, in accordance with their terms.
7. Severance.
7.1 Severance Pay.
Upon your termination of employment by the Company and all Affiliates
without Cause (as defined below), but subject to your performance of all
post-employment obligations set forth in this Agreement and also subject to
your signing a release of claims in a form acceptable to the Company, you will
be entitled to receive severance pay for twelve (12) months Severance Period at your final Base Salary (Severance
Pay), beginning the first pay period following your separation date and
ending upon the earlier of: (i)
your receipt of 52 such payments
or (ii) your first day of employment with another employer, whichever is
earlier. If you obtain employment at an
annual salary that is lower than your final Base Salary, you will continue to
receive the differential between the two rates of pay for the balance of the 52
weeks. This Severance Pay, which will be subject to applicable deductions
required by law, will be paid on the Companys regular payroll dates for the
balance of the Severance Period following your
termination date, as outlined above. For
purposes of this Agreement, Cause means: (i) your wrongful
misappropriation of the Companys or an Affiliates assets of a material value;
(ii) any physical or mental impairment that renders you incapable of
performing the essential functions of your position with reasonable
accommodations; (iii) your conviction of, or pleading guilty or no
contest to, a felony; (iv) your intentionally causing the Company or an
Affiliate to violate a material local state or federal law in any material
respect; (v) your willful refusal to comply with a significant, lawful and
proper policy, directive or decision of your supervisor or the Board in
furtherance of a legitimate business purpose or your willful refusal to perform
the duties reasonably assigned to you consistent with your functions, duties
and responsibilities, in each case, in any material respect, and only if not
remedied within thirty (30) days after receipt of written notice from the
Company; or (vi) your breach of this Agreement, in any material respect,
not remedied within thirty (30) days after receipt of written notice from the
Company.
2
7.2 Severance Pay
of Key Employee. If on the
date of your termination of employment by the Company: (i) a distribution
of compensation to which you become entitled under this Agreement upon your
termination of employment (including but not limited to severance or other
termination benefits) would be nonqualified deferred compensation within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended
(the Code), and the Treasury Regulations issued thereunder, including
Proposed Regulation Section 1.409A-1(b)(9)(iii) (or any successor
provision), which describes certain separation pay arrangements that do not provide for the deferral of
compensation, and (ii) you are a key employee, as defined in Code Section 416(i) without
regard to paragraph (5) thereof, then such distribution shall not be made
before the date which is six months after the date of your termination of
employment (or, if earlier, your death).
All distributions to which you otherwise would be entitled during such
period shall be made on the date which is six months after the date of your
termination of employment (or, if earlier, your death). Any distributions thereafter owed to you
under this Agreement will be made in accordance with the Companys normal
payroll policies and procedures.
8. Application of Code Section 409A. It is the Companys intent that compensation
and benefits to which you are entitled under this Agreement not be treated as nonqualified deferred
compensation under Code Section 409A (or any regulations or other
guidance promulgated thereunder) and that any ambiguities in the construction
of this Agreement be interpreted in order to effectuate such intent. In the event that the Company determines, in
its sole discretion, that any compensation or benefits to which you are
entitled under this Agreement could be treated as nonqualified deferred
compensation under Code Section 409A unless this Agreement is amended or
modified, the Company may, in its sole discretion, amend or modify this
Agreement without obtaining any additional consent from you, so long as such
amendment or modification does not materially affect the net present value of
the compensation or benefits to which you otherwise would be entitled under
this Agreement.
9. Confidential Information, Intellectual Property.
9.1 Confidentiality.
You agree to not disclose, distribute, publish, communicate or in any
way cause to be disclosed, distributed, published, or communicated in any way
or at any time, Confidential Information (as defined herein), or any part of
Confidential Information, to any person, firm, corporation, association, or any
other operation or entity except on behalf of the Company in performance of
your duties and responsibilities for the Company, and then only in a fashion
consistent with protecting the Confidential Information from unauthorized use
or disclosure, except as otherwise approved by the Company. You further agree not to use or permit the
reproduction of any Confidential Information except on behalf of the Company in
your capacity as an employee of the Company.
You agree to take all reasonable care to avoid the unauthorized
disclosure or use of any Confidential Information. You assume responsibility for and agree to
indemnify and hold harmless the Company from and against any disclosure or use
of the Confidential Information in violation of this Agreement.
9.2 Confidential Information.
For the purpose of this Agreement, Confidential Information shall mean
any written or unwritten information which relates to and/or is used in the
Companys business (including, without limitation, information related to the
names, addresses, buying habits and other special information regarding past,
present and potential customers, employees and suppliers of the Company; customer
and supplier contracts and transactions or price lists of the Company and
suppliers; all agreements, files, books, logs, charts, records, studies,
reports, processes, schedules and statistical information relating to the
Company; all products, services, programs and processes sold,
3
and all computer
software licensed or developed by the Company; data, plans and specifications
related to present and/or future development projects of the Company; financial
and/or marketing data respecting the conduct of the present or future phases of
business of the Company; computer programs, computer- and/or web-based training
programs, systems and/or software; ideas, inventions, trademarks, business
information, know-how, processes, techniques, improvements, designs, redesigns,
creations, discoveries and developments of the Company; and finances and
financial information of the Company) which the Company deems confidential and
proprietary, which is generally not known to others outside the Company, or
which gives or tends to give the Company a competitive advantage over persons
who do not possess such information or the secrecy of which is otherwise of
value to the Company in the conduct of its business regardless of when and by
whom such information was developed or acquired, and regardless of whether any
of these are described in writing, copyrightable or considered copyrightable,
patentable or considered patentable. Confidential
Information shall not include general industry information or information
which is publicly available or otherwise known to those persons outside the
Company working in the area of the business of the Company or is otherwise in
the public domain without breach of this Agreement or information which you
have lawfully acquired without an obligation to maintain the information in
confidence from a source other than the Company. Confidential Information specifically
includes information received by the Company from others, including the Companys
clients, that the Company has an obligation to treat as confidential and also
includes any confidential information acquired or obtained by you while in the
employment of any of the Companys subsidiary or affiliated companies or any
company which has been acquired by the Company.
9.3 Invention Ownership.
With respect to information, inventions and discoveries developed, made
or conceived by you, either alone or with others, at any time during your
employment by the Company and whether or not within normal working hours,
arising out of such employment or pertinent to any field of business or
research in which, during such employment, the Company is engaged or (if such
is known to or ascertainable by you) is considering engaging, you agree:
(a) that all such information, inventions and
discoveries, whether or not patented or patentable, shall be and remain the
sole property of the Company;
(b) to disclose promptly to an authorized
representative of the Company all such information, inventions and discoveries
and all information in your possession as to possible applications and uses
thereof;
(c) not to file any patent applications
relating to any such invention or discovery except with the prior consent of an
authorized representative of the Company; and
(d) at the request of the Company, and
without expense or additional compensation to you, to execute such documents
and perform such other acts as the Company deems necessary, to obtain patents
on such inventions in a jurisdiction or jurisdictions designated by the
Company, and to assign to the Company or its designee such inventions and all
patent applications and patents relating thereto.
4
Both the Company and you
intend that all original works of authorship within the purview of the
copyright laws of the United States authored or created by you in the course of
your employment with the Company will be works for hire within the meaning of
such copyright laws.
9.4 Confidentiality of Inventions; Return of
Materials and Confidential Information. With respect
to the information, inventions and discoveries referred to in Section 9.3,
and also with respect to all other information, whatever its nature and form
and whether obtained orally, by observation, from graphic materials, or
otherwise (except such as is generally available through publication) obtained
by you during or as a result of your employment by the Company and relating to
any product, service, process, or apparatus or to any use of any of them, or to
materials, tolerances, specifications, costs (including manufacturing costs),
prices, or to any plans of the Company, you agree:
(a) to hold all such information, inventions
and discoveries in strict confidence and not to publish or otherwise disclose
any portion thereof except with the prior consent of an authorized
representative of the Company;
(b) to take all reasonable precautions to
ensure that all such information, inventions, and discoveries are properly
protected from access by unauthorized persons;
(c) to make no use of any such information,
invention, or discovery except as required or permitted in the performance of
your duties and responsibilities for the Company; and
(d) upon termination of your employment by
the Company, or at any time upon request of the Company, to deliver to the
Company all graphic materials and all substances, models, prototypes and the
like containing or relating to Confidential Information or any such
information, invention, or discovery, all of which graphic materials and other
things shall be and remain the sole property of the Company. The term graphic materials includes
letters, memoranda, reports, notes, notebooks, books of account, drawings,
prints, specifications, formulae, data printouts, microfilms, magnetic tapes
and disks and other documents and recordings, together with all copies thereof.
10. Non-Solicitation.
Regardless
of whether you are eligible to receive Severance Pay, you
agree that, if your employment with the Company ends for any reason, you will
not, for a period of twelve (12) months following such termination of
employment, (i) directly or indirectly, either for yourself or for any
other person, business, company or entity, hire from the Company or any
Affiliate, or attempt to hire, divert or take away from the Company or any
Affiliate, any of the then current officers or employees of the Company or any
Affiliate, (ii) interfere with or harm, or attempt to interfere with or
harm, the relationship of the Company or any Affiliate with any person who at
any time was an employee, customer or supplier of the Company or any Affiliate
or otherwise had a business relationship with the Company or any Affiliate, or (iii) unless
compelled by law to do so, directly or indirectly, knowingly make any statement
or other communication that impugns or attacks the reputation or character of
the Company or any Affiliate, or damages the goodwill of the Company or any
Affiliate, or knowingly take any action, directly or indirectly, that would interfere
with any contractual or customer or supplier relationships of the Company or
any Affiliate.
11. Non-Competition. If you resign your employment, or if your employment
is terminated with Cause, for a period of twelve (12) months following such employment
termination, you may not and will not, within the United States of America,
directly or indirectly, without the prior written consent of the Companys
chief executive officer or its Board of Directors (which may be given or
withheld in its sole discretion), own, manage, operate, join, control, be
employed by,
5
consult with or
participate in the ownership, management, operation or control of, or be
connected with (as a stockholder, partner or otherwise) any business,
partnership, firm, company, corporation or other entity engaged in the retail
business of womens fashion apparel,
accessories and related products or any other product sold or intended
to be sold by the Company or an Affiliate during your employment with the
Company. Notwithstanding the foregoing,
your beneficial ownership after your termination of employment with the
Company, either individually or as a member of a group, of not more than two percent
(2%) of the voting stock of any publicly held corporation shall not be a
violation of this provision.
12. Remedies. You acknowledge that money will not
adequately compensate the Company for the substantial damages that will arise
upon the breach of any provision of Sections 9, 10 and 11 of this Agreement and
that the Company would have no adequate remedy at law. For this reason, any claim the Company may
make that you have breached or are threatening to breach Sections 9, 10, or 11
is not subject to mandatory arbitration under Section 15. Instead, if you breach or threaten to breach
any provision of Sections 9, 10, or 11, the Company will be entitled, in
addition to other rights and remedies, to specific performance, injunctive
relief and other equitable relief to prevent or restrain any breach or
threatened breach of Sections 9, 10, or 11.
The Company may obtain such relief from (i) any court of competent
jurisdiction, (ii) an arbitrator acting pursuant to Section 15
hereof, or (iii) a combination of
the two (e.g., by simultaneously seeking arbitration under Section 15 and
a temporary injunction from a court pending the outcome of the
arbitration). It shall be the Companys
sole and exclusive right to elect which approach to use to vindicate its
rights. You also agree that in the event
of a breach (or any threat of breach) the Company shall be entitled to obtain
an immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach, without having to prove damages, and
to obtain all costs and expenses, including reasonable attorneys fees and
costs. In addition, the existence of any
claim or cause of action by you against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the restrictive covenants of this Agreement.
13. Acknowledgment of Reasonableness.
You and
the Company specifically agree that the provisions of the restrictive covenants
contained in this Agreement, including the post-employment covenants regarding
non-solicitation and non-competition, are reasonable and that the Company would
not have entered into this Agreement but for the inclusion of such
covenants. You understand that the
Companys business is nationwide, and, therefore, a nationwide restrictive
covenant is reasonable. If a court or
arbitrator determines that any provision of any such restrictive covenant is
unreasonable, whether in period of time, geographical area, or otherwise, you
and the Company agree that the covenant shall be interpreted and enforced to
the maximum extent which a court or arbitrator deems reasonable. In addition, you and the Company authorize
any such court or arbitrator to reform these restrictions to the minimum extent
necessary.
14. Company Property. Upon your
termination of employment for any reason, you will promptly return to the
Company all Company-related documents and Company property within your
possession or control.
15. Arbitration of Disputes. Except as set
forth in Section 12, any dispute, claim or difference arising out of or in
relation to your employment will be settled exclusively by binding arbitration
administered by the American Arbitration Association under its National Rules for
the Resolution of Employment Disputes before a single arbitrator. The Executive
expressly understands and agrees that claims subject to arbitration under this
section include asserted violations of the Employee Retirement and Income
Security Act of 1974; the Age Discrimination in Employment Act; the Older Workers
Benefit Protection Act; the Americans with Disabilities Act; Title VII of the
Civil Rights Act of 1964 (as amended); the Family and Medical Leave Act; and
any law prohibiting discrimination, harassment or retaliation in employment,
whether based on federal, state or local law; any claim of breach of contract,
tort, promissory estoppel or detrimental reliance, defamation, intentional
infliction of emotional distress; or the public policy of any state, or
6
any other federal,
state or local law. The arbitration will be held in New York, New York unless
you and the Company (each a Party, and jointly, the Parties)
mutually agree otherwise. To the extent
permitted by law, each Party will bear its own costs and fees of the
arbitration, and other fees and expenses of the arbitrator will be borne
equally by the Parties; provided, however, that the arbitrator will be empowered to require
any one or more of the Parties to bear all or any portion of fees and expenses
of the Parties and/or the fees and expenses of the arbitrator in the event that
the arbitrator determines such Party has acted in bad faith. The arbitrator will have the authority to
award any remedy or relief that a court of the State of New York could order or
grant. The decision and award of the
arbitrator will be binding on all Parties.
Either Party to the arbitration may seek to have the ruling of the
arbitrator entered in any court having jurisdiction thereof. Each Party agrees that it will not file suit,
motion, petition or otherwise commence any legal action or proceeding for any
matter which is required to be submitted to arbitration as contemplated herein,
except in connection with the enforcement of an award rendered by an arbitrator
and except to seek the issuance of an injunction or temporary restraining order
pending a final determination by the arbitrator.
16. Post-Termination Cooperation. As is required
of you during employment, you agree that during and after employment with the
Company you will, without expense or additional compensation to you, cooperate
with the Company or any Affiliate in the following areas:
16.1 Cooperation With the Company.
You agree [a] to be reasonably available to
answer questions for the Companys (or any Affiliates) officers regarding any
matter, project, initiative or effort for which you were responsible while
employed by the Company and [b] to
cooperate with the Company (and with any Affiliate) during the course of all
third-party proceedings arising out of the Companys (or any Affiliates)
business about which you have knowledge or information. For purposes of this Agreement, [c] proceedings includes internal investigations,
administrative investigations or proceedings and lawsuits (including pre-trial
discovery and trial testimony) and [d] cooperation
includes [i] your being
reasonably available for interviews, meetings, depositions, hearings and/or
trials without the need for subpoena or assurances by the Company (or any
Affiliate), [ii] providing any and all
documents in your possession that relate to the proceeding, and [iii] providing assistance in locating any and all
relevant notes and/or documents.
16.2 Cooperation With Media.
You agree not to communicate with, or give statements to, any member of
the media (including print, television or radio media) relating to any matter
(including pending or threatened lawsuits or administrative investigations)
about which you have knowledge or information (other than knowledge or
information that is not Confidential Information as defined in Section 9.3)
as a result of employment with the Company.
You also agree to notify the Chief Executive Officer or his designee
immediately after being contacted by any member of the media with respect to any
matter affected by this section.
17. Entire Agreement.
This
Agreement constitutes your entire agreement with the Company relating to the
subject mater hereof, and superseded in its entirety any and all prior
agreements, understandings or arrangements with the Company.
18. Governing Law.
All issues
and questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
19. Survival of Provisions. Sections 9 to
13, 15 16, 18 and 19 will survive the termination of your employment for any
reason and shall not be affected by any transfer(s) between the Company
and its Affiliate(s).
7
20. Understandings and Representations. You should not
sign this Agreement until you understand its terms and conditions. Your execution of this Agreement represents
your acknowledgement that you have take all steps you believe necessary,
including consultation with financial and/or legal advisors of your choice, to
understand this Agreement.
Sincerely,
By:
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/s/ Richard P. Crystal
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Dated:
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November 3, 2008
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Richard P. Crystal
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Chairman &
Chief Executive Officer
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By:
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/s/ Sheamus Toal
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Dated:
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November 3, 2008
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Sheamus Toal
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Chief Financial Officer
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8
EX-10.17
6
a2190251zex-10_17.htm
EXHIBIT 10.17
Exhibit 10.17
AMENDMENT NO. 1 TO LETTER AGREEMENT
OF EMPLOYMENT
Amendment (this Amendment), made as of this December 22,
2006, by and among Lerner New York, Inc.
(the Company) and Leslie Goldmann (Executive).
R E C I T A L
S
WHEREAS, Executive is party to that certain Letter
Agreement of Employment between the Company and Executive dated April 20, 2006 (the Agreement).
WHEREAS, the Company and Executive wish to amend the
Agreement in order to clarify treatment of certain payments under the Agreement
in order to make them compliant with Section 409A of the Internal Revenue
Code of 1986, as amended.
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
to the following:
1. Amendment.
(a) The current Section 7 of the
Agreement will be renumbered Section 7.1.
(b) A new Section 7.2 shall be
added to the Agreement immediately following Section 7.1 as follows:
Severance Pay of Key
Employee. If on the date of your
termination of employment by the Company: (i) a distribution of
compensation to which you become entitled under this Agreement upon your
termination of employment (including but not limited to severance or other
termination benefits) would be nonqualified deferred compensation within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended
(the Code), and the Treasury Regulations issued thereunder, including
Proposed Regulation Section 1.409A-1(b)(9)(iii) (or any successor
provision), which describes certain separation pay arrangements that do not provide for the deferral of
compensation, and (ii) you are a key employee, as defined in Code Section 416(i) without
regard to paragraph (5) thereof, then such distribution shall not be made
before the date which is six months after the date of your termination of
employment (or, if earlier, your death).
All distributions to which you otherwise would be entitled during such
period shall be made on the date which is six months after the date of your
termination of employment (or, if earlier, your death). Any distributions thereafter owed to you
under this Agreement will be made in accordance with the Companys normal
payroll policies and procedures.
(c) A new Section 8 shall be
added to the Agreement immediately following Section 7.2 as
follows:
Application of Code Section 409A. It is the Companys intent that compensation
and benefits to which you are entitled under this Agreement not be treated as nonqualified deferred
compensation under Code Section 409A (or any regulations or other
guidance promulgated thereunder) and that any ambiguities in the construction
of this Agreement be interpreted in order to effectuate such intent. In the event that the Company determines, in
its sole discretion, that any compensation or benefits to which you are
entitled under this Agreement could be treated as nonqualified deferred
compensation under Code Section 409A unless this Agreement is amended or
modified, the Company may, in its sole discretion, amend or modify this
Agreement without obtaining any additional consent from you, so long as such
amendment or modification does not
materially affect the net
present value of the compensation or benefits to which you otherwise would be
entitled under this Agreement.
(d) All section references thereafter shall
be updated to reflect the above additions.
2. Agreement Otherwise Unchanged.
All other provisions of the Agreement shall remain in full force and
effect.
3. Governing Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York.
4. Counterparts. This Amendment may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
5. Waiver of Jury Trial. Each of the parties hereto waives any
right it may have to trial by jury in respect of any litigation based on, arising
out of, under or in connection with this Agreement or any course of conduct,
course of dealing, verbal or written statement or action of any party hereto.
* *
* * *
2
IN
WITNESS WHEREOF, the undersigned has executed this Amendment as of the date and
year first written above.
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By:
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/s/ Richard P. Crystal
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Name:
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Richard P. Crystal
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Title:
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Chairman, President and
Chief Executive Officer
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By:
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/s/ Leslie Goldmann
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Name:
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Leslie
Goldmann
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3
EX-10.20
7
a2190251zex-10_20.htm
EXHIBIT 10.20
Exhibit
10.20
AMENDMENT
TO TRANSITION SERVICES AGREEMENT
This Amendment to the
Transition Services Agreement, dated November 27, 2002, (Amendment) is
made and entered into by and between Limited Brands, Inc. (Limited Brands)
and Lerner New York Holding, Inc. and New York & Company, Inc.,
successor in interest to New York & Co. Group, Inc.
(collectively, Buyer and/or Lerner).
Defined terms that are used but not defined herein shall be as defined
in the Agreement between Limited Brands and Buyer. The Parties wish to amend the Agreement and
Schedules as described below. It is
therefore agreed as follows:
1. In the
Transition Services Agreement, Section 2 PURCHASE AND SALE OF SERVICES, Section 2.01
(b), item (4) is deleted and replaced with the following: (4) in no
event shall Limited Brands be required to provide Buyer and its Subsidiaries
with any Service other than services related to apparel and related merchandise
(and non merchandise on a project basis only) and accessories customarily handled
by Limited Brands, including personal care or cosmetics products which have
been approved by Limited Brands.
2. In
Schedule III to the Agreement, Item 2 Distribution Services, the
following is added: 2.16 In regard to personal care or cosmetic products
handled under this Agreement by Limited Brands, the following will apply:
a. Buyer shall be responsible for arranging
all inbound shipments to Limited Brands designated site, delivered duty
paid. Limited Brands is to provide
receiving, storage and destination shipping services. Limited Brands will only receive items
included on an Advance Shipping Notice (ASN) or Advance Packing List. Limited
Brands will receive all items and notify Buyer of any discrepancies or damage
in shipment. Buyer is responsible for
filing any claims for any noted discrepancies or damage.
b. Limited Brands will support Buyer in
establishing a reverse logistics process for all items, originally shipped by
Limited Brands, that need to be handled for return/destruction (ie testers,
customer returns, damaged items).
Limited Brands will only receive items from the Buyer locations in the
mailer designated and in accordance with all procedures specified by Limited
Brands. Buyer will be the shipper of
Record and must ensure that all handling of materials by Buyer is performed in
accordance with Department of Transportation (DOT) and Environmental
Protection Agency and other federal regulations, or other laws and
guidelines. Limited Brands will process
items and make them ready for the contracted third-party that Limited Brands
nominates to handle destruction and/or disposal of the returned items on behalf
of Buyer.
c. Limited Brands will only accept and
handle (receive, distribute, store) personal care or cosmetics items that have
been pre-approved by Limited Brands and for which a current Material Safety
Data Sheet (MSDS) has been provided by Buyer.
The MSDS may be provided to Limited Brands in electronic or paper
format. The only approved
classifications of materials pursuant to the National Fire Protection
Association (NFPA) are the following:
Flammable Liquids IB
Flammable Liquids IC
Combustible Liquids II
Combustible Liquids IIIA
Combustible Liquids IIIB
Initially, there are 5 types of approved items:
·Hand and Body Cream
·Body Scrub
·Body Lotion
·Body Mist
·Shower Gel
Limited Brands may approve additional SKUs and
classifications at any time upon notice to Buyer.
3. All costs
associated with the Distribution Services for personal care and cosmetics
products shall be determined by and charged to Buyer using the Customary
Billing Method.
4. This Amendment is supplementary to and
modifies the Agreement. This Amendment
shall be incorporated as part of the Agreement. The terms of this Amendment
supersede provisions in the Agreement only to the extent that the terms of this
Amendment and the Agreement expressly conflict. However, nothing in this
Amendment should be interpreted as invalidating the Agreement, and provisions
of the Agreement will continue to govern relations between the parties insofar
as they do not expressly conflict with this Amendment.
5. Due to the nature of the personal care and
cosmetic items, the items may require specialized hazardous materials storage
outside DC2. Storage for hazardous materials shall be billed on a per pallet
basis under the Customary Billing method.
IN WITNESS WHEREOF, the
parties hereto have executed this Amendment as of the date first written above.
Lerner New York
Holding, Inc.
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Limited Brands, Inc.
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By:
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/s/ Ronald W. Ristau
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By:
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/s/ Douglas L. Williams
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Name:
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Ronald W. Ristau
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Name:
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Douglas L. Williams
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Title:
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President and Chief
Financial Officer
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Title:
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General Counsel
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Date:
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October 11, 2007
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Date:
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October 9, 2007
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New York &
Company, Inc.
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By:
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/s/ Ronald W. Ristau
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Name:
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Ronald W. Ristau
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Title:
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President and Chief
Financial Officer
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Date:
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October 11, 2007
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EX-10.21
8
a2190251zex-10_21.htm
EXHIBIT 10.21
Exhibit
10.21
AMENDMENT
TO TRANSITION SERVICES AGREEMENT
This Amendment to the
Transition Services Agreement, dated November 27, 2002, (Amendment) is
made and entered into by and between Limited Brands, Inc. (Limited Brands)
and Lerner New York Holding, Inc. and New York & Company, Inc.,
successor in interest to New York & Co. Group, Inc.
(collectively, Buyer and/or Lerner).
Defined terms that are used but not defined herein shall be as defined
in the Agreement between Limited Brands and Buyer. The Parties wish to amend the Agreement and
Schedules as described below. It is
therefore agreed as follows:
1. In Schedule III to the
Agreement, Item 6 Outbound Transportation To E-Commerce Distribution Center,
is added: 6.1 Limited Brands agrees to
provide to Buyer outbound transportation services from the Limited Brands
distribution center in Columbus, Ohio to the E-commerce distribution center in
Martinsville, Virginia in support of Buyers e-commerce operations provided
under this Agreement. In regard to
outbound transportation services, the following will apply:
a. All costs
associated with outbound transportation services from the Limited Brands
distribution center in Columbus, Ohio to the E-commerce distribution center in
Martinsville, Virginia in support of Buyers e-commerce operations provided
under this Agreement by Limited Brands shall be determined by and charged to
Buyer using the mutually agreed Specific Billing Method (as defined in
Transition Services Agreement, Article 3, Section 3.01). The mutually agreed upon price for outbound
transportation services shall be $1.62 USD per carton from February 3,
2008 to August 2, 2008 and $1.75 USD per carton from August 3, 2008
to January 31, 2009. Changes in
pricing for future fiscal years will be communicated by Limited Brands through
the budget guidance process at the start of each fiscal year.
2. This Amendment is supplementary to and
modifies the Agreement. This Amendment
shall be incorporated as part of the Agreement. The terms of this Amendment
supersede provisions in the Agreement only to the extent that the terms of this
Amendment and the Agreement expressly conflict.
However, nothing in this Amendment should be interpreted as invalidating
the Agreement, and provisions of the Agreement will continue to govern
relations between the parties insofar as they do not expressly conflict with
this Amendment.
IN WITNESS WHEREOF, the
parties hereto have executed this Amendment as of the date first written above.
Lerner New York Holding, Inc.
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Limited Brands, Inc.
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|
|
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By:
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/s/ Ronald W. Ristau
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By:
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/s/ Mike Sherman
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Name:
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Ronald W. Ristau
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Name:
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Mike Sherman
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|
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Title:
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President and Chief
Financial Officer
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|
Title:
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SVP
Transportation & Logistics
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Date:
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July 17, 2008
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|
Date:
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July 7, 2008
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New York &
Company, Inc.
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By:
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/s/ Ronald W. Ristau
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Name:
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Ronald W. Ristau
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Title:
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President and Chief
Financial Officer
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Date:
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July 17, 2008
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EX-10.22
9
a2190251zex-10_22.htm
EXHIBIT 10.22
Exhibit 10.22
FOURTH AMENDMENT TO TRANSITION SERVICES AGREEMENT
This
FOURTH AMENDMENT TO TRANSITION SERVICES AGREEMENT (Fourth Amendment), dated April 6, 2009 and deemed effective as of February 1, 2009, is made and entered into by and
between Limited Brands, Inc. (Limited Brands) and Lerner New York
Holding, Inc. and New York & Company, Inc., successor in
interest to New York & Co. Group, Inc. (collectively, Buyer
and/or Lerner). Defined terms that are
used but not defined herein shall be as defined in the Transition Services
Agreement dated November 27, 2002 (Agreement), as amended by that
certain Amendment To Transition Services Agreement dated April 19, 2006
(the First Amendment), that certain Amendment To Transition Services
Agreement dated on or about October 11, 2007 (the Second Amendment), and
that certain Amendment To Transition Services Agreement dated on or about July 17,
2008 (the Third Amendment; the Agreement, First Amendment, Second Amendment
and Third Amendment are collectively referred to herein as the TSA) between
Limited Brands and Buyer. The Parties
wish to amend the TSA and Schedules as described below. It is therefore agreed
as follows:
1. Section 5.02(a)(v) of
the TSA is deleted in its entirety and replaced with the following:
For
any reason, upon 24-months advance written notice, which notice shall be given
no earlier than February 1, 2010, Buyer may
terminate (A) all (but not less than all) Logistics Services, (B) the
Logistics Services described under the heading Compliance Support Services in
Schedule III, or (C) if the Logistics Services described under the heading
Compliance Support Services in Schedule III have been terminated earlier, all
(but not less than all) of the remaining Logistics Services (such termination
right, as applicable, to be exercisable more than once).
2. Section 5.02(c) of
the TSA is deleted in its entirety and replaced with the following:
For
any reason, upon 24-months advance written notice, Limited Brands may terminate
(A) all (but not less than all) Logistics Services, (B) the Logistics
Services described under the heading Compliance Support Services in Schedule
III, or (C) if the Logistics Services described under the heading Compliance
Support Services in Schedule III have been terminated earlier, all (but not
less than all) of the remaining Logistics Services (such termination right, as
applicable, to be exercisable more than once).
3. Schedule III, Section 1.1
of the TSA is deleted in its entirety and replaced with the following:
Except
as otherwise provided in this Schedule III, Limited Brands obligation to
provide or procure, and Lerners obligation to purchase, the Services described
in this Schedule III (the Logistics Services) shall commence on the Closing
Date and terminate on the earliest to occur of (i) the date which is
twenty four (24) months after the date on which Limited Brands notifies Lerner
in writing that it has elected to terminate its obligation to provide or
procure the Logistics Services, (ii) the date which is twenty four (24)
months after the date on which Lerner notifies Limited Brands in writing that
it has elected to terminate its obligation to purchase the Logistics Services,
which notice shall be given no earlier than February 1,
2010, and (iii) the date specified for such termination in the
applicable section of Section 5.02 of the Agreement, if Limited Brands or
Lerner, as the case may be, terminates the Logistics Services in accordance
with Section 5.02 of the Agreement. The period from the Closing Date until
the date on which the Logistics Services are terminated is referred to as the Logistics
Term.
4. Paragraph 6 of
the First Amendment is modified as follows:
1.13
In addition to any other fees as stated herein, Lerner shall pay a Management
Fee to Limited Brands in the amounts as
specified below:
Management
Fee Payment Schedule
Fiscal Year
|
|
2009
|
|
2010
|
|
2011
|
|
Management Fee
|
|
$
|
3,000,000
|
|
$
|
3,500,000
|
|
$
|
4,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Management Fee Payment Schedule above is deemed to be effective retroactively
as of February 1, 2009. The payments for
Fiscal Year 2009 shall begin in April 2009 and continue each month thereafter in equal
installments. For all subsequent full Fiscal Years, the Management Fee shall be
invoiced forty percent (40%) of the annual total in the months of February to
July and sixty percent (60%) of the annual total in the months of August to
January and invoiced in equal payments over each of those semiannual
periods. For each successive annual period after the Fiscal Year
2011 payments, the annual amount of the Management Fee shall
cumulatively increase each year thereafter based upon the CPI Adjustment. For any partial Fiscal Year at the end of the
term, the Management Fee shall be reduced in proportion to the number of months
in such Fiscal Year that this Agreement shall be effective, and the Management
Fee shall be billed and paid each month in equal installments.
5. This Fourth
Amendment is supplementary to and modifies the TSA. This Fourth Amendment shall be incorporated
as part of the TSA. The terms of this
Fourth Amendment supersede provisions in the TSA only to the extent that the
terms of this Fourth Amendment and the TSA expressly conflict. However, nothing in this Fourth Amendment
should be interpreted as invalidating the TSA, and provisions of the TSA will
continue to govern relations between the parties insofar as they do not
expressly conflict with this Fourth Amendment.
2
IN
WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment as of
the date first written above.
LERNER
NEW YORK HOLDING, INC.
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|
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LIMITED
BRANDS, INC.
|
|
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By:
|
/s/
Sheamus G. Toal
|
|
By:
|
/s/
Rick Jackson
|
|
|
|
|
|
Name:
|
Sheamus
G. Toal
|
|
Name:
|
Rick
Jackson
|
|
|
|
|
|
Title:
|
Executive
Vice President and Chief Financial Officer
|
|
Title:
|
Executive
Vice President Limited Logistics Services
|
|
|
|
|
|
Date:
|
April 6,
2009
|
|
Date:
|
April 6,
2009
|
|
|
|
|
|
|
|
NEW
YORK & COMPANY, INC.
|
|
|
|
|
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By:
|
/s/
Sheamus G. Toal
|
|
|
|
|
|
|
Name:
|
Sheamus
G. Toal
|
|
|
|
|
|
|
Title:
|
Executive
Vice President and Chief Financial Officer
|
|
|
|
|
|
|
Date:
|
April 6,
2009
|
|
|
3
EX-10.32
10
a2190251zex-10_32.htm
EXHIBIT 10.32
Exhibit
10.32
New York & Company, Inc.
PERFORMANCE UNIT AWARD
Under the 2006 Long-Term
Incentive Plan
January 28, 2009
Richard P. Crystal
Chairman and CEO
New York & Company, Inc.
450 West 33rd Street
New York, NY 10001
Re: New York & Company, Inc. Grant
of Performance Unit Award
Dear Richard:
New York & Company, Inc.
(the Company) is pleased to advise you that the independent
Subcommittee of the Compensation Committee of its Board of Directors has
granted to you a performance award (Performance Units),
as provided below, under the New York & Company, Inc. 2006
Long-Term Incentive Plan (the Plan), a copy of which is attached
hereto and incorporated herein by reference.
Any capitalized terms used but not defined herein shall have the meaning
given such terms in the Plan.
1. Definitions. For the purposes of this
Agreement, the following terms shall have the meanings set forth below:
Board shall mean
the board of directors of the Company.
Common Stock shall
mean the Companys Common Stock, par value $0.001 per share, together with any
other class or series of common stock issued by the Company, or in the event
that the outstanding Common Stock is hereafter changed into or exchanged for
different stock or securities of the Company, such other stock or securities.
Participant shall
mean Richard P. Crystal.
Securities Act
shall mean the Securities Act of 1933, as amended, and any successor statute.
2. Grant and Issuance of Stock.
Subject to the terms and conditions of this Agreement and of the Plan,
the Company hereby grants to Participant (the Award) 1,000 Performance
Units, subject to all of the
restrictions hereinafter set forth. The Performance
Units are hereby granted in contemplation of receipt of future services of the
Participant.
3. Vesting Requirements. This
Award a subject to a performance vesting
requirement and a continued employment requirement. In order to meet the performance vesting
requirement the average closing stock price of the Common Stock for the 30
trading days prior to February 11, 2011 (the Average Closing Stock
Price) shall be equal to or greater than $11.00 per share. If such performance vesting requirement is
not met, then all of the Performance Units issued under this award shall
immediately be cancelled and the Participant (and the Participants estate,
designated beneficiary or other legal representative) shall forfeit any rights
or interests in and with respect to any such unvested Performance Units. In addition, in order for the interest of Participant in the Performance
Units to become fully vested,
Participant must be continuously employed by the Company or one of its
subsidiaries from the date of this Award through the end of the
Performance Period. If the Participants
employment with the Company and its subsidiaries terminates for any reason
prior to the full vesting of the Performance Units awarded under this
Agreement, such unvested Performance Units shall immediately be cancelled and
the Participant (and the Participants estate, designated beneficiary or other
legal representative) shall forfeit any rights or interests in and with respect
to any such unvested Performance Units.
Notwithstanding the above, if Participants employment with the Company
and its subsidiaries terminates for any reason other than for Cause within six (6) months
of February 11, 2011, such Performance Units shall vest in accordance with
Section 3 as if Participant had still been employed by the Company
on February 11, 2011 and the performance conditions are satisfied.
4. No
Stockholder Rights. Participant shall not
have the rights of a stockholder in respect of the shares of Common Stock
underlying this Award until such Common Stock is delivered to Participant in
accordance with Section 5 hereof.
5. Delivery
of Award Stock. Subject to the terms of
the Plan, if the Performance Units awarded by this Agreement become vested on February 11,
2011, the Company shall promptly distribute to the Participant the number of
shares Common Stock (the Award Stock) equal to (i) $3,000,000
divided by the Average Closing Stock Price if such Average Closing Stock Price
is equal or greater to $11.00 per share but less than $20.00 per share or (ii) $5,000,000
divided by the Average Closing Stock Price if the Average Closing Stock Price
is greater or equal to $20.00 per share.
In any case, the Award Stock if earned shall be delivered no later than
the end of calendar year 2011. The
Participant shall not have any rights as a stockholder in respect of the Award
Stock until such Award Stock is delivered to Participant in accordance with
this Section 5.
6. Taxes.
(a) The issuance of the Award Stock pursuant to Section 3
hereof shall be conditioned on Participant or the Representative having made
such
arrangements with the Company as the Company
may require to provide for the withholding of any taxes required to be withheld
by federal, state or local law with respect to such grant or lapse (including
without limitation, for all purposes of this Section 6, FICA and
other payroll taxes and social insurance contributions).
(b) Participant shall
be liable for any and all taxes, including withholding taxes, arising out of
the grant or vesting of this Award or the grant of Award Stock
hereunder. Participant may satisfy any
such obligation by surrendering (or the Company may withhold from delivery to
Participant) a sufficient number of whole shares of Award Stock as may be
necessary to cover all applicable withholding taxes at the time that the
restrictions on the Performance Units lapses, unless alternative procedures for
such payment are established by the Company.
To the extent that any surrender of Award Stock or alternative procedure for such
payment is insufficient, Participant authorizes the Company, its affiliates and
subsidiaries to deduct all applicable withholding taxes from any other payments
made by the Company to Participant.
Participant agrees to pay to the Company any amount of withholding taxes
that cannot be satisfied from wages or other cash compensation and that are not
otherwise provided for hereunder.
(c) Regardless of any action that the Company
takes with respect to any item of income tax, social insurance contribution,
payroll tax, payment or other tax-related item (Tax-Related Items),
Participant acknowledges and agrees that the ultimate liability for all
Tax-Related Items legally due by Participant is and remains Participants
responsibility, and that the Company (i) makes no representations or
undertakings regarding the treatment of any Tax-Related Items in connection
with any aspect of this Award,
including the grant or vesting of the Award or the issuance of Award Stock, or the subsequent sale of
unrestricted shares of Award Stock and (ii) does not commit to structure
the terms or any aspect of this grant of Award Stock to reduce or eliminate Participants liability for Tax-Related
Items. Participant shall pay the Company
any amount of Tax-Related Items that the Company or its subsidiaries may be
required to withhold as a result of Participants participation in the Plan or
Participants receipt of the Award or any Award Stock that cannot be satisfied by the means previously described. The Company may refuse to deliver the Award
Stock if Participant fails to comply
with Participants obligations in connection with the Tax-Related Items.
(d) It is the Committees intention that this
Award and any Award Stock shall not be
treated as a payment of deferred compensation for purposes of Section 409A
of the Code, as amended from time to time, and that any ambiguities in
construction be interpreted to effectuate such intent.
7. Securities Laws Restrictions and Other
Restrictions on Transfer. Participant understands and acknowledges, in
addition to any Restrictions contained in this Agreement, that federal and
state securities laws govern and restrict Participants right to offer, sell or
otherwise dispose of any shares of stock of the Company unless Participants
offer, sale or other disposition thereof is registered under the Securities
Act and state securities laws, or, in the
opinion of the Companys counsel, such offer, sale or other disposition is
exempt from registration or qualification thereunder. The Company shall not be obligated to issue
any shares of Award Stock pursuant to this Agreement if such issuance would
violate any applicable laws and regulations or the requirements of any exchange
pursuant to which the Common Stock is traded.
Participant agrees not to offer, sell or otherwise dispose of any shares
of stock of the Company in any manner which would violate or cause the Company
to violate the Securities Act, the rules and regulations promulgated
thereunder or any other state or federal law.
8. Conformity with Plan. The
Award is intended to conform in all respects with, and is subject to all applicable
provisions of, the Plan (which is incorporated herein by reference). Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By executing and returning the enclosed copy
of this Agreement, Participant acknowledges receipt of this Agreement and the
Plan and agrees to be bound by all of the terms of this Agreement and the Plan.
9. Rights of Participants.
Nothing in this Agreement shall interfere with or limit in any way the
right of the Company or any of its subsidiaries to terminate Participants
employment at any time (with or without Cause), nor confer upon Participant any
right to continue in the employ of the Company or any of its subsidiaries for
any period of time or to continue Participants present (or any other) rate of
compensation. Nothing in this Agreement
shall confer upon Participant any right to be selected again as a Plan
participant.
10. Adjustments. In the event of a
reorganization, recapitalization, stock dividend or stock split, or combination
or other change in the shares of Common Stock, the Board or the Committee may,
in order to prevent the dilution or enlargement of rights under the Award, make
such adjustments in the number and type of shares authorized by the Plan, the
number and type of shares covered by the Award as may be determined to be
appropriate and equitable and consistent with the treatment afforded to all
other Common Stock, including the substitution of equity interests in other
entities involved in such transactions, to provide for cash payments in lieu of
restricted or unrestricted shares, and to determine whether continued
employment with any entity resulting from such a transaction will or will not
be treated as continued employment by the Company or a subsidiary or
affiliate. Unless otherwise determined
by the Committee, such stock, securities, cash, property or other consideration
shall remain subject to all of the conditions, restrictions and other criteria contained
herein that were applicable to the Award prior to such adjustment.
11. Further Assurances. The parties hereto hereby agree to execute
such further instruments and to take such action as may reasonably be necessary
to carry out the intent of this Agreement.
12. Remedies. The parties hereto shall be
entitled to enforce their rights under this Agreement specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto acknowledge and agree that
money damages would not be an adequate remedy for any breach of the provisions
of this Agreement and that any
party hereto may, in its sole discretion,
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
13. Amendment. Except as otherwise provided
herein, any provision of this Agreement may be amended or waived only with the
prior written consent of Participant and the Company.
14. Arbitration. If any dispute or claim arises
out of this Agreement, or as to the rights and liabilities of the parties
hereunder, or as to the breach or invalidity hereof, including any dispute,
claim or difference as to whether an issue is arbitrable, the parties shall
settle such dispute exclusively by binding arbitration in accordance with the
then prevailing rules of the American Arbitration Association (or other
organization of national reputation mutually acceptable to the parties). The arbitration shall be administered by one
independent and impartial arbitrator jointly selected by the parties to the
dispute and shall be held in New York, New York, or such other location mutually
acceptable to the parties. The
arbitrator shall have the power and authority in his sole discretion to order
pre-arbitration discovery. The
arbitrator shall render its decision and award within 30 days after the
conclusion of the arbitration hearing, which hearing shall be conducted on an
expedited schedule. At the conclusion of
the arbitration, the arbitrator shall award costs and expenses to the
prevailing party (including the costs of the arbitration but not the fees and
expenses of attorneys, accountants and other experts). The award rendered by the arbitrator shall be
final and not subject to judicial review, and judgment thereon may be entered
in any court having competent jurisdiction.
Notwithstanding anything to the contrary contained in this Section 14
and without prejudice to the procedures described herein, either party to the
dispute shall be entitled to specific performance and/or other injunctive
relief (without posting any bond or deposit) from any court of law or equity of
competent jurisdiction in order to enforce or prevent any violations of the
provisions of this Agreement.
15. Successors and Assigns.
Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
permitted assigns of the parties hereto whether so expressed or not.
16. Severability.
Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this
Agreement.
17. Counterparts. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall constitute an original, but all of which taken together shall
constitute one and the same Agreement.
18. Descriptive Headings. The
descriptive headings of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
19. Governing Law. The
corporate law of the State of Delaware shall govern all issues and questions
concerning the relative rights of the Company and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
any choice of law or conflicts of law rules or provisions (whether of the
State of New York or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of New York.
20. Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally or mailed by certified or registered mail, return receipt
requested and postage prepaid, to the recipient. Such notices, demands and other
communications shall be sent to Participant at the address set forth in the
Companys books and record, and to the Company at the addresses indicated
below:
(a) If to the Company:
New York & Company, Inc.
450 West 33rd Street, 5th Floor
New York, New York 10001
Attention: Linda Gormezano
Tel.: 212-884-2026
Fax: 212-884-2396
With
a copy, which shall not constitute notice, to:
Kirkland & Ellis
LLP
153 East 53rd Street
Citigroup Center
New York, New York 10022-4611
Attention: Susan J. Zachman, Esq.
Tel.: 212-446-4947
Fax: 212-446-4900
(b) if to Participant, to the address first set
forth above.
or to such other address or to the attention of such
other person as the recipient party has specified by prior written notice to
the sending party.
21. Entire Agreement. This
Agreement, as awarded under and governed by the Plan, constitutes the entire
understanding between Participant and the Company and supersedes all other
agreements, whether written or oral, with respect to the grant to Participant
of this Award.
* * *
[signature pages follow]
Please execute the extra copy
of this Agreement in the space below and return it to the Companys Vice
President of Human Resources at its executive offices to confirm your
understanding and acceptance of the agreements contained in this
Agreement. If you are married your
spouse must also sign the consent form attached hereto.
|
Very
truly yours,
|
|
|
|
NEW YORK & COMPANY, INC.
|
|
|
|
|
|
|
|
By:
|
/s/
SANDRA BROOSLIN VIVIANO
|
|
|
Name:
Sandra Brooslin Viviano
|
|
|
Its:
Executive Vice President,
Human Resources
|
The undersigned hereby
acknowledges having read this Agreement and the Plan and hereby agrees to be
bound by all provisions set forth herein and in the Plan.
Date:
|
January 28,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
RICHARD P. CRYSTAL
|
|
|
|
RICHARD
P. CRYSTAL
|
Enclosures:
|
|
1. Extra
copy of this Agreement
|
|
2. Copy
of the Plan
|
EX-23.1
11
a2190251zex-23_1.htm
EXHIBIT 23.1
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference, in the Registration Statement (Form S-8
No. 333-119803), pertaining to the New York & Company, Inc. and subsidiaries Amended and Restated 2002 Stock Option Plan and the 2006 Long-Term Incentive
Plan, of our reports dated March 18, 2009, with respect to the consolidated financial statements and schedule of New York & Company, Inc. and subsidiaries, and the effectiveness
of internal control over financial reporting of New York & Company, Inc. and subsidiaries included in this Annual Report (Form 10-K) for the year ended
January 31, 2009.
New
York, New York
April 6, 2009
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Consent of Independent Registered Public Accounting Firm
EX-31.1
12
a2190251zex-31_1.htm
EXHIBIT 31.1
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Exhibit 31.1
CERTIFICATION
I,
Richard P. Crystal, certify that:
1. I
have reviewed this Annual Report on Form 10-K of New York & Company, 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the 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:
April 7, 2009
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|
|
|
|
/s/ RICHARD P. CRYSTAL
Richard P. Crystal Chairman and Chief Executive Officer |
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CERTIFICATION
EX-31.2
13
a2190251zex-31_2.htm
EXHIBIT 31.2
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Exhibit 31.2
CERTIFICATION
I,
Sheamus G. Toal, certify that:
1. I
have reviewed this Annual Report on Form 10-K of New York & Company, 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the 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:
April 7, 2009
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/s/ SHEAMUS G. TOAL
Sheamus G. Toal Executive Vice President and Chief Financial Officer |
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CERTIFICATION
EX-32.1
14
a2190251zex-32_1.htm
EXHIBIT 32.1
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Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, we, the undersigned Chairman and Chief Executive Officer and Executive Vice President and Chief Financial Officer of New York & Company, Inc. (the "Company"),
hereby certify, based on our knowledge, that the Annual Report on Form 10-K of the Company for the year ended January 31, 2009 (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended and that information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date:
April 7, 2009
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/s/ RICHARD P. CRYSTAL
Richard P. Crystal Chairman and Chief Executive Officer |
|
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/s/ SHEAMUS G. TOAL
Sheamus G. Toal Executive Vice President and Chief Financial Officer |
QuickLinks
Certification Pursuant to 18 U.S.C. Section 1350 As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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