UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 4, 2014
FRANCESCA’S HOLDINGS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware | ||
001-35239 | (State or Other Jurisdiction of Incorporation) | 20-8874704 |
(Commission File Number) | (I.R.S. Employer Identification No.) |
8760 Clay Road, Houston, Texas |
77080 |
(Address of Principal Executive Offices) | (Zip Code) |
(713) 864-1358
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On December 5, 2014, Francesca’s Holdings Corporation (the “Company”) issued a press release announcing certain preliminary consolidated financial results for the fiscal third quarter ended November 1, 2014 and on December 10, 2014, the Company issued a press release announcing its consolidated financial results for the fiscal third quarter ended November 1, 2014. Copies of these press releases are furnished as Exhibit 99.1 and Exhibit 99.2 to this report, respectively. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On December 4, 2014, Neill Davis, the Company’s Chief Executive Officer and President, notified the Company’s Board of Directors (the “Board”) that he will be resigning from his positions as Chief Executive Officer and President of the Company and from all other positions he holds with the Company, including as a director of the Company, effective as of December 4, 2014. In connection with the termination of his employment, Mr. Davis will be entitled to receive the severance benefits provided in the amended and restated employment letter agreement between Francesca’s Collections, Inc., a wholly-owned subsidiary of the Company (“Francesca’s”), the Company and Mr. Davis, dated December 28, 2012 (the “Davis Employment Letter”), due to a termination of his employment without “cause” (as defined in the Davis Employment Letter). As required pursuant to the terms of the Davis Employment Letter, Mr. Davis entered into a separation agreement with the Company that includes a release by Mr. Davis of claims against the Company. As discussed below, Michael W. Barnes succeeded Mr. Davis as the Company’s Chief Executive Officer and President, effective as of December 4, 2014.
On December 4, 2014, the Board appointed Mr. Barnes to succeed Mr. Davis as the Company’s Chief Executive Officer and President, effective as of December 4, 2014. In connection with his appointment as Chief Executive Officer and President, the Board also appointed Mr. Barnes to serve as Chairman of the Board, effective as of December 4, 2014. At that time, Greg Brenneman stepped down from his role as Chairman of the Board, but will continue to serve as a director of the Company and will also serve as the Company’s Lead Director.
Prior to joining the Company, from February 2011 to October 2014, Mr. Barnes, 54, served as Chief Executive Officer of Signet Jewelers, Ltd., where he oversaw the $1.46 billion acquisition of Zale Corp. Mr. Barnes previously spent 25 years at Fossil Group, Inc., where he served in a number of leadership roles, including serving most recently as President, Chief Operating Officer and a member of the Board of Directors from January 2007 to November 2010. Additionally, Mr. Barnes served on the Board of Directors for Darden Restaurants Inc. from June 2012 to August 2014.
The terms of Mr. Barnes’ employment are outlined in an employment offer letter between the Company and Mr. Barnes, effective as of December 4, 2014 (the “CEO Offer Letter”). The CEO Offer Letter provides for Mr. Barnes to receive an annual base salary of $875,000 and, commencing with the Company’s fiscal year 2015, an annual bonus opportunity at threshold, target and maximum levels equal to 50%, 150% and 200%, respectively, of Mr. Barnes’ annual base salary for the applicable fiscal year, subject to pro ration if results fall between such levels. The CEO Offer Letter also provides for Mr. Barnes to participate in the Company’s employee savings and welfare benefit plans made available to the Company’s employees generally.
Pursuant to the terms of the CEO Offer Letter, during the Company’s fiscal year 2015 and for each year thereafter, the Company will grant Mr. Barnes (so long as he is employed by the Company at the time it grants its annual equity awards) a performance-based award of restricted shares of the Company’s common stock. The award will be granted under the Francesca’s Holdings Corporation 2011 Equity Incentive Plan (the “2011 Plan”). The “target” number of shares of the Company’s common stock subject to the award will equal $2,500,000 divided by the closing price of a share of the Company’s common stock on the last trading day prior to the date of grant of the award.
The CEO Offer Letter provides that Mr. Barnes is employed by the Company on at-will basis. The CEO Offer Letter provides that if Mr. Barnes’ employment with the Company is terminated, regardless of the reason for such termination of employment, Mr. Barnes will be entitled to his accrued and unused vacation and any accrued benefits under the Company’s 401(k) retirement plan. Pursuant to the terms of the CEO Offer Letter, if Mr. Barnes’ employment is terminated by the Company without “cause” (as such term is defined in the CEO Offer Letter), he will be entitled to receive as severance pay (subject to applicable tax withholdings) continued payment of his annual base salary and target bonus at the rate in effect immediately prior to the Severance Date (as such term is defined in the CEO Offer Letter) for 18 months following the termination of his employment. Mr. Barnes’ right to receive the severance benefits described above is subject to his execution of a release of claims in favor of the Company upon termination of his employment, which release may contain certain restrictive covenants including, without limitation, non-solicitation and non-compete covenants.
In connection with his appointment as Chief Executive Officer and President of the Company, on December 4, 2014, the Compensation Committee of the Board approved an option award to Mr. Barnes to purchase 1,000,000 shares of the Company’s common stock under the 2011 Plan. The option award is evidenced by a nonqualified stock option agreement between the Company and Mr. Barnes, dated as of December 4, 2014 (the “Option Agreement”). The option award has a per-share exercise price equal to the closing price of a share of the Company’s common stock on the date of grant and a maximum term of 10 years. Fifty percent of the total number of shares subject to the option award (the “Tranche 1 Shares”) will be eligible to vest at the end of the three-year period consisting of the Company’s 2015, 2016 and 2017 fiscal years, provided that (1) the closing price of the Company’s common stock equals or exceeds $20 for not less than 60 trading days during a period of not less than 90 consecutive trading days during such three-year period and (2) Mr. Barnes remains continuously employed through the end of such three-year period, and the remaining 50% of the total number of shares subject to the option award (the “Tranche 2 Shares”) will be eligible to vest at the end of the two-year period consisting of the Company’s 2018 and 2019 fiscal years, provided that (1) the closing price of the Company’s common stock equals or exceeds $25 for not less than 60 trading days during a period of not less than 90 consecutive trading days during such two-year period and (2) Mr. Barnes remains continuously employed through the end of such two-year period. To the extent the Tranche 1 Shares do not become eligible to vest during the applicable three-year period described above, such shares will, subject to Mr. Barnes’ continuous employment through the last day of such period, remain eligible to vest on the same vesting terms as the Tranche 2 Shares.
In the event a “change in control” (as defined in the CEO Offer Letter) occurs prior to the last day of the Tranche 2 Shares performance period and prior to a termination of Mr. Barnes’ employment for any reason, and pursuant to which the value of a share of the Company’s common stock in such change in control is equal to or greater than 140% of the per-share exercise price of the option award, the total number of shares subject to the option award that are outstanding and unvested as of the date of such change in control will remain eligible to vest and become exercisable on the first to occur of the following events after the change in control (regardless of whether the stock price goals with respect to the Tranche 1 Shares and the Tranche 2 Shares described above are attained after the date of such event): (1) the date Mr. Barnes’ employment is terminated by the Company without “cause” (as defined in the Option Agreement); (2) the date Mr. Barnes resigns with “good reason” (as defined in the Option Agreement); and (3) the last day of the Tranche 2 Shares performance period, subject to Mr. Barnes’ continuous employment through the last day of the Tranche 2 Shares performance period.
There was no arrangement or understanding between Mr. Barnes and any other person pursuant to which Mr. Barnes was appointed Chief Executive Officer, President or Chairman of the Board. There are no family relationships between Mr. Barnes and any director or executive officer of the Company, and Mr. Barnes has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Item 7.01. Regulation FD Disclosure.
On December 5, 2014, the Company issued a press release announcing the management changes set forth in Item 5.02 of this Current Report on Form 8-K along with certain preliminary consolidated financial results for the fiscal third quarter ended November 1, 2014 and on December 10, 2014, the Company issued a press release announcing its consolidated financial results for the fiscal third quarter ended November 1, 2014.
Copies of these press releases are furnished as Exhibit 99.1 and Exhibit 99.2 to this report, respectively. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
99.1 | Press Release issued by Francesca’s Holdings Corporation on December 5, 2014. |
99.2 | Press Release issued by Francesca’s Holdings Corporation on December 10, 2014. |
SIGNATURES
Pursuant to the requirements 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 hereunto duly authorized.
FRANCESCA’S HOLDINGS CORPORATION | ||
Date: December 10, 2014 | By: | /s/ Kal Malik |
Kal Malik | ||
Chief Administrative Officer |
EXHIBIT INDEX
Exhibit No.
|
Description
| |
99.1 | Press Release issued by Francesca’s Holdings Corporation on December 5, 2014. | |
99.2 | Press Release issued by Francesca’s Holdings Corporation on December 10, 2014. |
Exhibit 99.1
Michael W. Barnes Named Chairman, President, and CEO of francesca's
Company Announces Preliminary Fiscal Third Quarter Results;
Expects Net Sales of Approximately $87 Million, Comparable Store Sales Decrease of 6%,
and Diluted Earnings Per Share of $0.17
HOUSTON, December 5, 2014 -- Francesca's Holdings Corporation (Nasdaq: FRAN) today announced that specialty retailing veteran Michael W. Barnes has been named Chairman, President, and Chief Executive Officer, effective immediately. He succeeds Neill Davis, who has resigned as President, CEO and a Director. Greg Brenneman, Chairman of the Board since 2010, has been named Lead Director.
Mr. Barnes joins francesca’s after serving as Chief Executive Officer of Signet Jewelers, Ltd. (NYSE: SIG) since 2011. He led Signet’s $1.46 billion acquisition of Zale Corp., which transformed Signet into the largest specialty jewelry retailer in the U.S., U.K. and Canada with approximately 3,500 retail outlets. Signet’s share price almost tripled during Mr. Barnes nearly four-year tenure. Prior to Signet, Mr. Barnes spent more than 25 years in increasingly senior roles at global consumer fashion accessory company Fossil Group, Inc. (Nasdaq: FOSL), concluding in the role of President, Chief Operating Officer and a Director from 2007 to 2010. As one of Fossil’s first employees, he was part of the management team that took the Company public and led the rapid profitable growth of the business.
Mr. Brenneman said, “Mike Barnes is a world-class retail executive with a proven history of driving growth at specialty retailing businesses. His ability to set and execute transformational strategic plans, along with his track record of creating value for shareholders, make him the right executive to capitalize fully on francesca’s solid growth platform. We are confident that he has the vision and skill set to make francesca’s one of America’s leading specialty retailers. We appreciate the contributions that Neill Davis made to francesca’s and we wish him well in his future endeavors.”
Mr. Barnes said, “I am honored by the Board’s confidence in me and look forward to building francesca’s by leveraging its outstanding brand, unique retailing strategy and deep customer loyalty. I am excited to lead a company with such tremendous potential and look forward to working with the strong leadership team and talented employees at francesca’s.”
francesca’s is announcing preliminary results for its fiscal third quarter ended November 1, 2014. Consistent with the lower end of its guidance, the Company expects net sales of approximately $87 million, a comparable sales decrease of 6%, and diluted earnings per share of $0.17.
As previously announced, francesca’s will report its third quarter results and provide its outlook for the fourth quarter on Wednesday, December 10, 2014, at 7:30 am ET. Mr. Barnes will join the conference call.
About Francesca's Holdings Corporation:
francesca's® is a growing specialty retailer with retail locations designed and merchandised to feel like independently owned, upscale boutiques providing customers a fun and differentiated shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Today francesca's® operates 538 boutiques in 47 states and the District of Columbia, and serves its customers through francescas.com. For additional information on francesca's®, please visit www.francescas.com.
Contacts:
ICR, Inc.
Jean Fontana
646-277-1214
Company
Mark Vendetti
832-494-2315
mark.vendetti@francescas.com
Exhibit 99.2
francesca’s® Reports Third Quarter Fiscal Year 2014
Financial Results
HOUSTON, TEXAS — December 10, 2014 — Francesca’s Holdings Corporation (NASDAQ: FRAN) today reported earnings for the third quarter ended November 1, 2014.
Third Quarter of Fiscal 2014 Highlights:
· | Net sales increased 9% to $87.1 million |
· | Comparable sales decreased 6% |
· | Net income was $7.3 million, or $0.17 per diluted share, as compared to net income of $8.7 million, or $0.20 per diluted share, for the third quarter of 2013 |
Michael W. Barnes, Chairman, President, and CEO stated, “While the current financial performance is disappointing, I am optimistic about the future of the francesca’s brand. After just one week with the Company, I am energized by what I believe to be a distinct business model with enormous potential. My first priority, upon evaluation of the entire business, will be to create a strong foundation for growth. With a highly diversified and differentiated merchandising strategy, a unique small boutique format and strong brand equity, I believe francesca’s is positioned to become a leader in the specialty retail sector. I look forward to drawing from my background in branding and product as well as specialty retail, and working with the entire team in developing and implementing strategies that I believe will position us for long-term success.”
THIRD QUARTER RESULTS
Net sales for the thirteen weeks ended November 1, 2014 were $87.1 million compared to net sales of $79.6 million in the prior year quarter. The increase in third quarter sales was driven by 92 new boutiques opened since the end of the third quarter last year. We opened 12 new boutiques during the quarter bringing our year-to-date total to 87 new boutiques and a total boutique count to 538 at quarter end. We have opened 13 outlets year-to-date and finished the third quarter with 16 outlets.
Direct-to-consumer sales increased 53% versus the prior year quarter. Year to-date direct-to-consumer sales were up 76% over the comparable period of the prior year primarily due to increased traffic.
Gross profit, as a percentage of net sales, decreased to 47.3% compared to 50.7% in the prior year quarter. This decrease included a 160 basis points decrease in merchandise margin primarily due to increased markdowns and promotional activities. The remaining 180 basis points decline was the result of deleveraging of fixed occupancy costs.
Selling, general and administrative expenses increased 16% to $29.8 million from $25.8 million in the prior year quarter. This increase was primarily due to higher boutique and corporate payroll expenses to support the larger boutique base and direct-to-consumer sales growth.
Our effective tax rate for the third quarter was 35.7% resulting from a true-up of prior year state taxes. Excluding this adjustment, our effective tax rate for the quarter was 37.1%.
Income from operations was $11.4 million, or 13.1% of net sales, compared to $14.6 million, or 18.3% of net sales, in the prior year quarter.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at quarter end were $22.8 million compared to $31.8 million at prior year quarter end. The Company had no debt outstanding under its revolving credit facility at the end of the third quarter.
The Company ended the quarter with $35.4 million of inventory on hand, an increase of 16%, compared to $30.6 million at the end of the third quarter of 2013. The increase in inventory was due to the 21% increase in the number of boutiques in operation as compared to the end of the third quarter of 2013. Ending inventory on a per boutique basis was down 4% for the quarter, compared to the same period in 2013.
FOURTH QUARTER AND FULL FISCAL YEAR 2014 GUIDANCE
The Company’s updated fourth quarter guidance assumes the continuation of a challenging retail environment and aggressive promotional activity throughout the holiday season, in addition to the expectation that our apparel business will remain challenged. As a result, the Company may take more aggressive markdowns in order to clear excess inventory which is expected to lead to approximately 475 to 525 basis points decrease in gross profit margin in the fourth quarter compared to the same period of the prior year. These expectations are incorporated into the Company’s fourth quarter guidance.
For the fourth quarter ending January 31, 2015, net sales are expected to increase 4% to 11% and be in the range of $96 million and $102 million; which also assumes a 5% to 10% decrease in comparable sales. This compares to the prior year comparable sales decrease of 6% versus the fourth quarter of 2012. The Company plans to open one new boutique during the fourth quarter. Diluted earnings per share are expected to be in the range of $0.13 to $0.19 excluding any charges related to the CEO transition implemented earlier this month.
For the full year ending January 31, 2015, net sales are now expected to increase 8% to 9% and be in the range of $366 million and $372 million; which also assumes a 6% to 8% decrease in comparable sales compared to a prior year comparable sales decrease of 2%. The Company expects to open 88 boutiques in fiscal year 2014, with one boutique to be opened in the fourth quarter. This compares to 91 new boutiques opened in fiscal year 2013, with five boutiques opened in the fourth quarter. Diluted earnings per share are now expected to be in the range of $0.75 to $0.81 excluding any charges related to the CEO transition. The number of average diluted shares for the full year assumed in guidance is expected to be 42.4 million shares. The effective tax rate is estimated to be 38.0% for the fourth quarter and 37.6% for the full year.
Capital expenditures for fiscal year 2014 are now expected to be in the range of $25.5 million to $26.5 million which have been primarily spent on boutique openings and remodels, as well as investments in our merchandising and direct-to-consumer information technology systems.
Conference Call Information
A conference call to discuss third quarter 2014 results is scheduled for December 10, 2014, at 8:30 a.m. ET. A live web cast of the conference call will be available in the investor relations section of the Company's website, www.francescas.com. In addition, a replay of the call will be available after the call and remain available until December 17, 2014. To access the telephone replay, listeners should dial 1-877- 870-5176. The access code for the replay is 1023855. A replay of the web cast will also be available shortly after the call and will remain on the website for ninety days.
Forward-Looking Statements
Certain statements in this release are "forward-looking statements" made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected. These risks and uncertainties include, but are not limited to, the following: the risk that we cannot anticipate, identify and respond quickly to changing fashion trends and customer preferences; our ability to attract a sufficient number of customers to our boutiques or sell sufficient quantities of our merchandise through our direct-to-consumer business; our ability to successfully open and operate new boutiques each year; and our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth. Additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to "Risk Factors" in our Annual Report on Form 10-K for the year ended February 1, 2014 filed with the Securities and Exchange Commission on March 28, 2014 and any risk factors contained in subsequent quarterly and annual reports we file with the SEC. We undertake no obligation to publicly update or revise any forward- looking statement. Financial schedules are attached to this release.
About Francesca's Holdings Corporation
francesca's® is a growing specialty retailer with retail locations designed and merchandised to feel like independently owned, upscale boutiques providing customers a fun and differentiated shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Today francesca's® operates 538 boutiques in 47 states and the District of Columbia and also serves its customers through francescas.com. For additional information on francesca's®, please visit www.francescas.com.
CONTACT:
ICR, Inc. | Company |
Jean Fontana | Mark Vendetti |
646-277-1214 | 832-494-2315 |
Mark.Vendetti@francescas.com |
Francesca’s Holdings Corporation
Unaudited Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts and Percentages)
Thirteen Weeks Ended | ||||||||||||||||||||||||||||
November 1, 2014 | November 2, 2013 | Variance | ||||||||||||||||||||||||||
In USD | As a % of Net Sales(1) | In USD | As a % of Net Sales(1) | In USD | % | Basis Points | ||||||||||||||||||||||
Net sales | $ | 87,110 | 100.0 | % | $ | 79,632 | 100.0 | % | $ | 7,478 | 9 | % | - | |||||||||||||||
Cost of goods sold and occupancy costs | 45,925 | 52.7 | % | 39,275 | 49.3 | % | 6,650 | 17 | % | 340 | ||||||||||||||||||
Gross profit | 41,185 | 47.3 | % | 40,357 | 50.7 | % | 828 | 2 | % | (340 | ) | |||||||||||||||||
Selling, general and administrative expenses | 29,810 | 34.2 | % | 25,766 | 32.4 | % | 4,044 | 16 | % | 180 | ||||||||||||||||||
Income from operations | 11,375 | 13.1 | % | 14,591 | 18.3 | % | (3,216 | ) | (22 | )% | (520 | ) | ||||||||||||||||
Interest expense | (117 | ) | (0.1 | )% | (129 | ) | (0.2 | )% | 12 | (9 | )% | 10 | ||||||||||||||||
Other income | 42 | 0.0 | % | (77 | ) | (0.1 | )% | 119 | (155 | )% | 10 | |||||||||||||||||
Income before income tax expense | 11,300 | 13.0 | % | 14,385 | 18.1 | % | (3,085 | ) | (21 | )% | (510 | ) | ||||||||||||||||
Income tax expense | 4,030 | 4.6 | % | 5,714 | 7.2 | % | (1,684 | ) | (29 | )% | (260 | ) | ||||||||||||||||
Net income | $ | 7,270 | 8.3 | % | $ | 8,671 | 10.9 | % | $ | (1,401 | ) | (16 | )% | (260 | ) | |||||||||||||
(1) Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding. | ||||||||||||||||||||||||||||
Diluted earnings per share | $ | 0.17 | $ | 0.20 | ||||||||||||||||||||||||
Weighted average diluted share count | 42,389 | 43,993 | ||||||||||||||||||||||||||
Comparable sales change | (6 | )% | (3 | )% |
Thirty Nine Weeks Ended | ||||||||||||||||||||||||||||
November 1, 2014 | November 2, 2013 | Variance | ||||||||||||||||||||||||||
In USD | As a % of Net Sales | In USD | As a % of Net Sales | In USD | % | Basis Points | ||||||||||||||||||||||
Net sales | $ | 269,853 | 100.0 | % | $ | 248,185 | 100.0 | % | $ | 21,668 | 9 | % | - | |||||||||||||||
Cost of goods sold and occupancy costs | 141,521 | 52.4 | % | 118,700 | 47.8 | % | 22,821 | 19 | % | 460 | ||||||||||||||||||
Gross profit | 128,332 | 47.6 | % | 129,485 | 52.2 | % | (1,153 | ) | (1 | )% | (460 | ) | ||||||||||||||||
Selling, general and administrative expenses | 86,275 | 32.0 | % | 72,800 | 29.3 | % | 13,475 | 19 | % | 270 | ||||||||||||||||||
Income from operations | 42,057 | 15.6 | % | 56,685 | 22.8 | % | (14,628 | ) | (26 | )% | (720 | ) | ||||||||||||||||
Interest expense | (507 | ) | (0.2 | )% | (362 | ) | (0.1 | )% | (145 | ) | 40 | % | (10 | ) | ||||||||||||||
Other income | 201 | 0.1 | % | 127 | 0.1 | % | 74 | 58 | % | - | ||||||||||||||||||
Income before income tax expense | 41,751 | 15.5 | % | 56,450 | 22.7 | % | (14,699 | ) | (26 | )% | (720 | ) | ||||||||||||||||
Income tax expense | 15,614 | 5.8 | % | 22,223 | 9.0 | % | (6,609 | ) | (30 | )% | (320 | ) | ||||||||||||||||
Net income | $ | 26,137 | 9.7 | % | $ | 34,227 | 13.8 | % | $ | (8,090 | ) | (24 | )% | (410 | ) | |||||||||||||
(1) Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding. | ||||||||||||||||||||||||||||
Diluted earnings per share | $ | 0.62 | $ | 0.77 | ||||||||||||||||||||||||
Weighted average diluted share count | 42,373 | 44,600 | ||||||||||||||||||||||||||
Comparable sales change | (7 | )% | (1 | )% |
Francesca’s Holdings Corporation
Unaudited Consolidated Balance Sheets
(In thousands, except share amounts)
November 1, 2014 | February 1, 2014 | November 2, 2013 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 22,830 | $ | 37,498 | $ | 31,842 | ||||||
Accounts receivable | 9,214 | 8,984 | 9,850 | |||||||||
Inventories | 35,428 | 24,614 | 30,638 | |||||||||
Deferred income taxes | 4,797 | 4,565 | 3,688 | |||||||||
Prepaid expenses and other current assets | 5,699 | 6,764 | 6,222 | |||||||||
Total current assets | 77,968 | 82,425 | 82,240 | |||||||||
Property and equipment, net | 70,646 | 64,131 | 57,359 | |||||||||
Deferred income taxes | 6,573 | 2,335 | 4,046 | |||||||||
Other assets, net | 2,776 | 1,654 | 2,555 | |||||||||
TOTAL ASSETS | $ | 157,963 | $ | 150,545 | $ | 146,200 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 13,074 | $ | 10,207 | $ | 8,570 | ||||||
Accrued liabilities | 8,610 | 9,823 | 10,365 | |||||||||
Total current liabilities | 21,684 | 20,030 | 18,935 | |||||||||
Landlord incentives and deferred rent | 33,299 | 27,448 | 27,554 | |||||||||
Long-term debt | — | 25,000 | 25,000 | |||||||||
Total liabilities | 54,983 | 72,478 | 71,489 | |||||||||
Commitments and contingencies | ||||||||||||
Stockholders’ equity: | ||||||||||||
Common stock - $.01 par value, 80.0 million shares authorized; 45.5 million, 45.2 million and 44.2 million shares issued at November 1, 2014, February 1, 2014 and November 2, 2013, respectively. | 455 | 452 | 442 | |||||||||
Additional paid-in capital | 105,235 | 101,192 | 90,511 | |||||||||
Retained earnings | 57,433 | 31,296 | 20,684 | |||||||||
Treasury stock, at cost – 3.2 million, 2.9 million and 1.9 million shares held at November 1, 2014, February 1, 2014 and November 2, 2013, respectively. | (60,143 | ) | (54,873 | ) | (36,926 | ) | ||||||
Total stockholders’ equity | 102,980 | 78,067 | 74,711 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 157,963 | $ | 150,545 | $ | 146,200 |
Francesca’s Holdings Corporation
Unaudited Consolidated Statements of Cash Flows
(In thousands)
Thirty Nine Weeks Ended | ||||||||
November 1, 2014 | November 2, 2013 | |||||||
Cash Flows Provided By Operating Activities: | ||||||||
Net income | $ | 26,137 | $ | 34,227 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation expense | 9,664 | 7,421 | ||||||
Stock-based compensation expense | 2,488 | 2,955 | ||||||
Excess tax benefit from stock-based compensation | (226 | ) | (3,522 | ) | ||||
Inventory write-off | 2,743 | — | ||||||
Loss on sale of assets | 191 | 343 | ||||||
Amortization of debt issuance costs | 184 | 216 | ||||||
Deferred income taxes | (4,470 | ) | (1,871 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (4 | ) | (3,824 | ) | ||||
Inventories | (13,557 | ) | (11,589 | ) | ||||
Prepaid expenses and other assets | (240 | ) | (2,295 | ) | ||||
Accounts payable | 3,268 | (597 | ) | |||||
Accrued liabilities | (1,213 | ) | (302 | ) | ||||
Landlord incentive and deferred rent | 5,851 | 5,462 | ||||||
Net cash provided by operating activities | 30,816 | 26,624 | ||||||
Cash Flows Used in Investing Activities: | ||||||||
Purchase of property and equipment | (16,785 | ) | (15,646 | ) | ||||
Proceeds from sale of assets | 13 | 82 | ||||||
Net cash used in investing activities | (16,772 | ) | (15,564 | ) | ||||
Cash Flows Used in Financing Activities: | ||||||||
Repayments of borrowings under the revolving credit facility | (25,000 | ) | — | |||||
Proceeds from borrowings under the revolving credit facility | — | 25,000 | ||||||
Payments of debt issuance costs | — | (376 | ) | |||||
Repurchases of common stock | (5,270 | ) | (36,117 | ) | ||||
Proceeds from the exercise of stock options | 1,332 | 1,156 | ||||||
Taxes paid related to net settlement of equity awards | — | (2,280 | ) | |||||
Excess tax benefit from stock-based compensation | 226 | 3,522 | ||||||
Net cash used in financing activities | (28,712 | ) | (9,095 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (14,668 | ) | 1,965 | |||||
Cash and cash equivalents, beginning of year | 37,498 | 29,877 | ||||||
Cash and cash equivalents, end of period | $ | 22,830 | $ | 31,842 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid for income taxes | $ | 17,716 | $ | 28,352 | ||||
Interest paid | $ | 340 | $ | 125 |
Francesca’s Holdings Corporation
Supplemental Information
Sales by Merchandise Category
Thirteen Weeks Ended | Variance | |||||||||||||||
November 1, 2014 | November 2, 2013 | In Dollars | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Apparel | $ | 44,274 | $ | 41,604 | $ | 2,670 | 6 | % | ||||||||
Jewelry | 18,638 | 17,335 | 1,303 | 8 | % | |||||||||||
Accessories | 14,220 | 13,771 | 449 | 3 | % | |||||||||||
Gifts | 9,606 | 6,540 | 3,066 | 47 | % | |||||||||||
Merchandise Sales | 86,738 | 79,250 | 7,488 | 9 | % | |||||||||||
Others(1) | 372 | 382 | (10 | ) | (3 | )% | ||||||||||
Net sales | $ | 87,110 | $ | 79,632 | $ | 7,478 | 9 | % |
(1) | Includes gift card breakage income, shipping and change in return reserve. |
Quarterly Comparable Transactions Results
FY 2014 | ||||||||
Transactions (1) | Average Transaction Value (2) | |||||||
Q1 | (7 | )% | 0 | % | ||||
Q2 | (7 | )% | 0 | % | ||||
Q3 | (6 | )% | 0 | % |
(1) | The number of comparable transactions (including merchandise and gift card purchases, returns and gift card redemptions) processed through our point-of-sale system for which a receipt was issued. |
(2) | Average transaction value is calculated by dividing total comparable sales by the number of comparable transactions during the period. |
Quarterly Comparable Sales
FY 2012(1) | FY 2013(2) | FY 2014 | ||||||||||
Q1 | 16 | % | 2 | % | (7 | )% | ||||||
Q2 | 21 | % | (1 | )% | (7 | )% | ||||||
Q3 | 17 | % | (6 | )% | (6 | )% |
(1) | Beginning in the first quarter of fiscal year 2013, comparable sales results include our direct-to-consumer sales. To facilitate comparability with the prior year period, prior year comparable sales results was recalculated and now includes direct-to-consumer sales results. |
(2) | The 53rd week in fiscal 2012 caused a one-week shift in our 2013 fiscal calendar, resulting in the first quarter of fiscal year 2013 being later by one week relative to the quarter-ending date in fiscal year 2012 (“retail calendar shift”). Our reported comparable sales results for fiscal 2012 were adjusted for this retail calendar shift. |
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