Delaware | 001-34742 | 26-2828128 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1 Express Drive Columbus, Ohio | 43230 | |||
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
99.1 | Press Release of Express, Inc. dated December 1, 2016. |
EXPRESS, INC. | ||
Date: December 1, 2016 | /s/ Periclis Pericleous | |
Periclis Pericleous | ||
Senior Vice President, Chief Financial Officer and Treasurer |
• | Net sales decreased 7% to $506.1 million. |
• | Diluted EPS was $0.15, including a $0.04 net tax benefit. |
• | Total inventory was down 6%. |
• | Net sales decreased 7% to $506.1 million from $546.6 million in the third quarter of 2015. |
• | Comparable sales (including e-commerce sales) decreased 8%, compared to a 6% increase in the third quarter of 2015. |
• | E-commerce sales increased 15% to $96.3 million. |
• | Merchandise margin declined by 340 basis points driven by increased promotional activity. Buying and occupancy as a percentage of net sales rose by 160 basis points. In combination, this resulted in a 500 basis point decline in gross margin, representing 30.0% of net sales compared to 35.0% in last year’s third quarter. |
• | Selling, general, and administrative (SG&A) expenses were $136.6 million versus $146.6 million in last year's third quarter. As a percentage of net sales, SG&A expenses increased by 20 basis points to 27.0%. |
• | Operating income was $15.1 million, or 3.0% of net sales, compared to $44.5 million, or 8.1% of net sales in the third quarter of 2015. |
• | Income tax expense was $2.8 million, at an effective tax rate of 19.6%, compared to $16.9 million, at an effective tax rate of 39.2% in last year's third quarter. The effective tax rate for the thirteen weeks ended October 29, 2016 includes a net tax benefit of approximately $2.9 million attributable to certain discrete items that occurred during the third quarter. |
• | Net income was $11.6 million, or $0.15 per diluted share and includes a net $0.04 per diluted share benefit related to the aforementioned income tax items. This compares to net income of $26.3 million, or $0.31 per diluted share, in the third quarter of 2015. |
• | Real estate activity for the third quarter of 2016 is presented in Schedule 5. |
• | Cash and cash equivalents totaled $101.9 million versus $91.2 million at the end of the third quarter of 2015. During the thirty-nine weeks ended October 29, 2016, approximately $51.5 million was used to repurchase approximately 3.2 million shares of the Company's outstanding common stock. |
• | Capital expenditures totaled $80.9 million for the thirty-nine weeks ended October 29, 2016 compared to $85.0 million for the thirty-nine weeks ended October 31, 2015. |
• | Inventory was $341.9 million compared to $364.7 million at the end of the prior year’s third quarter, a 6% decrease. |
Fourth Quarter 2016 Guidance | Fourth Quarter 2015 Actual Results | ||
Comparable Sales | Negative low double digits | 4% | |
Effective Tax Rate | Approximately 39% | 38.5% | |
Interest Expense, Net | $0.7 million | $1.1 million | |
Net Income | $20 to $23 million | $56.1 million | |
Diluted Earnings Per Share (EPS) | $0.26 to $0.30 | $0.67 | |
Weighted Average Diluted Shares Outstanding | 78.8 million | 83.3 million |
Full Year 2016 Guidance | Full Year 2015 Actual Results | ||
Comparable Sales | Negative high single digits | 6% | |
Effective Tax Rate | Approximately 37% | 38.9% | |
Interest Expense, Net | $13.5 million(1) | $15.9 million(2) | |
Net Income | $55 to $58 million(1) | $116.5 million(2) | |
Adjusted Net Income | $62 to $65 million(3) | $122.4 million(3) | |
Diluted EPS | $0.70 to $0.74(1) | $1.38(2) | |
Adjusted Diluted EPS | $0.78 to $0.82(3) | $1.45(3) | |
Weighted Average Diluted Shares Outstanding | 79.1 million | 84.6 million | |
Capital Expenditures | $100 to $105 million | $115.3 million |
October 29, 2016 | January 30, 2016 | October 31, 2015 | |||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | 101,855 | $ | 186,903 | $ | 91,215 | |||||
Receivables, net | 16,274 | 22,130 | 25,810 | ||||||||
Inventories | 341,936 | 255,350 | 364,662 | ||||||||
Prepaid minimum rent | 31,434 | 30,694 | 30,660 | ||||||||
Other | 21,786 | 18,342 | 28,788 | ||||||||
Total current assets | 513,285 | 513,419 | 541,135 | ||||||||
PROPERTY AND EQUIPMENT | 1,017,259 | 948,608 | 928,434 | ||||||||
Less: accumulated depreciation | (550,725 | ) | (504,211 | ) | (484,929 | ) | |||||
Property and equipment, net | 466,534 | 444,397 | 443,505 | ||||||||
TRADENAME/DOMAIN NAMES/TRADEMARKS | 197,618 | 197,597 | 197,597 | ||||||||
DEFERRED TAX ASSETS | 21,612 | 21,227 | 11,718 | ||||||||
OTHER ASSETS | 12,696 | 2,004 | 2,990 | ||||||||
Total assets | $ | 1,211,745 | $ | 1,178,644 | $ | 1,196,945 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Accounts payable | $ | 222,818 | $ | 149,884 | $ | 209,874 | |||||
Deferred revenue | 25,322 | 30,895 | 22,302 | ||||||||
Accrued expenses | 166,953 | 126,624 | 106,925 | ||||||||
Total current liabilities | 415,093 | 307,403 | 339,101 | ||||||||
DEFERRED LEASE CREDITS | 145,507 | 139,236 | 139,203 | ||||||||
OTHER LONG-TERM LIABILITIES | 40,451 | 114,052 | 112,518 | ||||||||
Total liabilities | 601,051 | 560,691 | 590,822 | ||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||
Total stockholders’ equity | 610,694 | 617,953 | 606,123 | ||||||||
Total liabilities and stockholders’ equity | $ | 1,211,745 | $ | 1,178,644 | $ | 1,196,945 |
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
October 29, 2016 | October 31, 2015 | October 29, 2016 | October 31, 2015 | ||||||||||||
NET SALES | $ | 506,090 | $ | 546,616 | $ | 1,513,766 | $ | 1,584,576 | |||||||
COST OF GOODS SOLD, BUYING AND OCCUPANCY COSTS | 354,373 | 355,527 | 1,043,382 | 1,049,853 | |||||||||||
Gross profit | 151,717 | 191,089 | 470,384 | 534,723 | |||||||||||
OPERATING EXPENSES: | |||||||||||||||
Selling, general, and administrative expenses | 136,633 | 146,585 | 405,547 | 420,334 | |||||||||||
Other operating (income) expense, net | (17 | ) | (29 | ) | 28 | 43 | |||||||||
Total operating expenses | 136,616 | 146,556 | 405,575 | 420,377 | |||||||||||
OPERATING INCOME | 15,101 | 44,533 | 64,809 | 114,346 | |||||||||||
INTEREST EXPENSE, NET | 567 | 1,207 | 12,845 | 14,751 | |||||||||||
OTHER EXPENSE (INCOME), NET | 90 | 70 | (404 | ) | 140 | ||||||||||
INCOME BEFORE INCOME TAXES | 14,444 | 43,256 | 52,368 | 99,455 | |||||||||||
INCOME TAX EXPENSE | 2,827 | 16,949 | 17,725 | 39,058 | |||||||||||
NET INCOME | $ | 11,617 | $ | 26,307 | $ | 34,643 | $ | 60,397 | |||||||
EARNINGS PER SHARE: | |||||||||||||||
Basic | $ | 0.15 | $ | 0.31 | $ | 0.44 | $ | 0.72 | |||||||
Diluted | $ | 0.15 | $ | 0.31 | $ | 0.44 | $ | 0.71 | |||||||
WEIGHTED AVERAGE SHARES OUTSTANDING: | |||||||||||||||
Basic | 78,401 | 84,240 | 78,754 | 84,453 | |||||||||||
Diluted | 78,595 | 84,849 | 79,151 | 85,009 |
Thirty-Nine Weeks Ended | |||||||
October 29, 2016 | October 31, 2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 34,643 | $ | 60,397 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 58,960 | 56,103 | |||||
Loss on disposal of property and equipment | 907 | 1,313 | |||||
Impairment charge | 829 | — | |||||
Amortization of lease financing obligation discount | 11,354 | — | |||||
Excess tax benefit from share-based compensation | — | (334 | ) | ||||
Share-based compensation | 10,783 | 15,114 | |||||
Non-cash loss on extinguishment of debt | — | 5,314 | |||||
Deferred taxes | (385 | ) | (6,805 | ) | |||
Landlord allowance amortization | (8,345 | ) | (9,208 | ) | |||
Payment of original issue discount | — | (2,812 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Receivables, net | 5,883 | (2,546 | ) | ||||
Inventories | (86,468 | ) | (123,806 | ) | |||
Accounts payable, deferred revenue, and accrued expenses | 28,749 | 42,514 | |||||
Other assets and liabilities | 2,954 | 20,389 | |||||
Net cash provided by operating activities | 59,864 | 55,633 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital expenditures | (80,900 | ) | (85,013 | ) | |||
Purchase of intangible assets | (21 | ) | (35 | ) | |||
Investment in equity interests | (10,133 | ) | — | ||||
Net cash used in investing activities | (91,054 | ) | (85,048 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Repayment of long-term debt | — | (198,038 | ) | ||||
Costs incurred in connection with debt arrangements | — | (1,006 | ) | ||||
Payments on lease financing obligations | (1,186 | ) | (1,168 | ) | |||
Excess tax benefit from share-based compensation | — | 334 | |||||
Proceeds from exercise of stock options | 2,735 | 1,265 | |||||
Repurchase of common stock under share repurchase program | (51,538 | ) | (22,020 | ) | |||
Repurchase of shares for tax withholding obligations | (4,498 | ) | (4,400 | ) | |||
Net cash used in financing activities | (54,487 | ) | (225,033 | ) | |||
EFFECT OF EXCHANGE RATE ON CASH | 629 | (496 | ) | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (85,048 | ) | (254,944 | ) | |||
CASH AND CASH EQUIVALENTS, Beginning of period | 186,903 | 346,159 | |||||
CASH AND CASH EQUIVALENTS, End of period | $ | 101,855 | $ | 91,215 |
Thirty-Nine Weeks Ended October 29, 2016 | ||||||||||
(in thousands, except per share amounts) | Net Income | Diluted Earnings per Share | Weighted Average Diluted Shares Outstanding | |||||||
Reported GAAP Measure | $ | 34,643 | $ | 0.44 | 79,151 | |||||
Interest Expense (a) | 11,354 | 0.14 | ||||||||
Income Tax Benefit (b) | (4,428 | ) | (0.06 | ) | ||||||
Adjusted Non-GAAP Measure | $ | 41,569 | $ | 0.53 |
(a) | Represents non-core items related to the amendment of the Times Square Flagship store lease. |
(b) | Represents the tax impact of the interest expense adjustment at our statutory rate of approximately 39% for the thirty-nine weeks ended October 29, 2016. |
Thirty-Nine Weeks Ended October 31, 2015 | ||||||||||
(in thousands, except per share amounts) | Net Income | Diluted Earnings per Share | Weighted Average Diluted Shares Outstanding | |||||||
Reported GAAP Measure | $ | 60,397 | $ | 0.71 | 85,009 | |||||
Interest Expense (a) | 9,657 | 0.11 | ||||||||
Income Tax Benefit (b) | (3,741 | ) | (0.04 | ) | ||||||
Adjusted Non-GAAP Measure | $ | 66,313 | $ | 0.78 |
(a) | Includes the redemption premium paid, the write-off of unamortized debt issuance costs, and the write-off of the unamortized debt discount related to the redemption of all $200.9 million of our Senior Notes. |
(b) | Represents the tax impact of the interest expense adjustment at our statutory rate of approximately 39% for the thirty-nine weeks ended October 31, 2015. |
Fifty-Two Weeks Ended January 28, 2017 | ||||||||||
(in thousands, except per share amounts) | Projected Net Income | Projected Diluted Earnings per Share | Projected Weighted Average Diluted Shares Outstanding | |||||||
Projected GAAP Measure * | $ | 56,500 | $ | 0.71 | 79,068 | |||||
Interest Expense (a) | 11,354 | 0.14 | ||||||||
Income Tax Benefit (b) | (4,428 | ) | (0.06 | ) | ||||||
Projected Adjusted Non-GAAP Measure * | $ | 63,426 | $ | 0.80 |
(a) | Represents non-core items related to the amendment of the Times Square Flagship store lease. |
(b) | Represents the tax impact of the interest expense adjustment at our statutory rate of approximately 39% for the fifty-two weeks ended January 28, 2017. |
Fifty-Two Weeks Ended January 30, 2016 | ||||||||||
(in thousands, except per share amounts) | Net Income | Diluted Earnings per Share | Weighted Average Diluted Shares Outstanding | |||||||
Reported GAAP Measure | $ | 116,513 | $ | 1.38 | 84,591 | |||||
Interest Expense (a) | 9,657 | 0.11 | ||||||||
Income Tax Benefit (b) | (3,741 | ) | (0.04 | ) | ||||||
Adjusted Non-GAAP Measure | $ | 122,429 | $ | 1.45 |
(a) | Includes the redemption premium paid, the write-off of unamortized debt issuance costs, and the write-off of the unamortized debt discount related to the redemption of all $200.9 million of our Senior Notes. |
(b) | Represents the tax impact of the interest expense adjustment at our statutory rate of approximately 39% for the fifty-two weeks ended January 30, 2016. |
Third Quarter 2016 - Actual | October 29, 2016 - Actual | |||||
Company-Operated Stores | Opened | Closed | Conversion | Store Count | Gross Square Footage | |
United States - Retail Stores | — | — | — | 537 | ||
United States - Outlet Stores | 5 | — | — | 99 | ||
Canada | — | — | — | 17 | ||
Total | 5 | — | — | 653 | 5.6 million | |
Fourth Quarter 2016 - Projected | January 28, 2017 - Projected | |||||
Company-Operated Stores | Opened | Closed | Conversion | Store Count | Gross Square Footage | |
United States - Retail Stores | — | (1) | (1) | 535 | ||
United States - Outlet Stores | 4 | — | 1 | 104 | ||
Canada | — | — | — | 17 | ||
Total | 4 | (1) | — | 656 | 5.7 million | |
Full Year 2016 - Projected | ||||||
Company-Operated Stores | Opened | Closed | Conversion | |||
United States - Retail Stores | — | (16) | (4) | |||
United States - Outlet Stores | 19 | — | 4 | |||
Canada | — | — | — | |||
Total | 19 | (16) | — |
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