CHARMING SHOPPES, INC.
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(Exact name of registrant as specified in its charter)
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PENNSYLVANIA
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000-07258
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23-1721355
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(State or other jurisdiction
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(Commission
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(IRS Employer
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of incorporation)
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File Number)
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Identification No.)
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3750 STATE ROAD, BENSALEM, PA
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19020
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(Address of principal executive offices)
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(Zip Code)
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Exhibit No.
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Description
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99.1
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CHARMING SHOPPES, INC.
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(Registrant)
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Date: September 1, 2011
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/S/ ERIC M. SPECTER
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Eric M. Specter
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Executive Vice President
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Chief Financial Officer
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Exhibit No.
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Description
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99.1
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●
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Consolidated net sales were $499.2 million for the second quarter ended July 30, 2011, compared to $517.6 million for the prior year period;
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●
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Consolidated comparable store sales for the second quarter increased 1%, led by a 3% increase at Lane Bryant; e-commerce sales increased 17%, led by a 20% increase at lanebryant.com and a 23% increase at catherines.com;
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●
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Consolidated Adjusted EBITDA* for the second quarter improved by $8.2 million to $18.5 million, compared to consolidated Adjusted EBITDA* of $10.3 million for the second quarter of the prior year;
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●
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On a GAAP basis, net loss per diluted share was $(0.02) for the second quarter, compared to net loss per diluted share of $(0.07) for the second quarter of the prior year;
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●
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On a non-GAAP basis*, net loss per diluted share was $(0.01) for the second quarter, compared to net loss per diluted share of $(0.09) for the second quarter of the prior year. Both periods’ results on a non-GAAP basis exclude restructuring and other charges; the prior year period also excludes a gain on repurchase of debt;
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●
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Cash increased to $227.4 million, with $47.0 million generated during the second quarter; Total liquidity is $374.2 million.
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*(refer to GAAP to non-GAAP reconciliation below)
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●
|
Consolidated net sales for the three months ended July 30, 2011 were $499.2 million, a decrease of 3.5% compared to $517.6 million for the three months ended July 31, 2010. Net sales results included a 1% increase in comparable store sales and an increase in e-commerce sales, offset by the impact of operating 155 (or 7%) fewer stores than in the year-ago period. E-commerce sales increased 17.0% to $35.6 million in the second quarter, compared to $30.5 million in the year-ago period, led by a 20% increase at lanebryant.com and a 23% increase at catherines.com.
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●
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Consolidated gross profit was $245.9 million in the quarter, compared to $249.1 million in the same quarter last year, related to a higher gross margin, which was more than offset by lower consolidated sales as a result of operating fewer stores than in the year-ago period. Gross margin benefitted from improved seasonal assortments and inventory management, resulting in fewer markdowns compared to the year-ago period and faster sell-throughs of Spring merchandise. The consolidated gross margin increased by 120 basis points to 49.3% for the quarter ended July 30, 2011, compared to 48.1% for the quarter ended July 31, 2010.
|
●
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Consolidated operating expenses, excluding restructuring and other charges, decreased by $13.9 million to $241.9 million or 48.5% of sales in the quarter, primarily attributable to the operation of fewer stores than in the year ago period and expense reductions at the Company’s Fashion Bug and Lane Bryant brands. This compares to $255.8 million or 49.4% of sales in the same period last year (refer to GAAP to non-GAAP reconciliation below). Selling, General and Administrative expenses decreased by $6.1 million and improved by 20 basis points as a percent of sales. Additionally, Occupancy and Buying expenses decreased by $5.3 million and improved by 50 basis points as a percent of sales.
|
●
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Consolidated Adjusted EBITDA for the quarter increased by 80% to $18.5 million or 3.7% of sales, with each of the Company’s brands contributing better performance. This compares to $10.3 million or 2.0% of sales in the prior-year period (refer to GAAP to non-GAAP reconciliation below), reflecting an improvement of $8.2 million.
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●
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Consolidated income from operations, excluding restructuring and other charges, improved by $10.7 million or 210 basis points to $4.0 million or 0.8% of sales in the second quarter. This compares to a consolidated loss from operations of $(6.7) million or 1.3% of sales for the prior-year period, which excluded restructuring and other charges and a gain on repurchase of debt (refer to GAAP to non-GAAP reconciliation below).
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●
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The tax provision continues to reflect the impact of a valuation allowance recorded against net deferred tax assets and primarily represents state and foreign income taxes payable, required deferred taxes, and changes in the liability for unrecognized tax benefits.
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●
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Net loss on a GAAP basis was $(1.9) million, 0.4% of sales, or $(0.02) per diluted share for the second quarter, compared to net loss on a GAAP basis of $(8.6) million, 1.7% of sales, or $(0.07) per diluted share in the second quarter of the prior year.
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●
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On a non-GAAP basis, net loss per diluted share was $(0.01) for the second quarter, compared to net loss per diluted share of $(0.09) in the second quarter of the prior year. Both periods’ results on a non-GAAP basis exclude restructuring and other charges and a gain on repurchase of debt. (Refer to GAAP to non-GAAP reconciliation below.)
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●
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The Company’s cash position for the quarter ended July 30, 2011 was $227.4 million, compared to $117.5 million for the period ended January 29, 2011. Total liquidity was $374.2 million, including $227.4 million in cash and $146.7 million of net availability under the Company’s committed and undrawn line of credit.
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●
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Consolidated net sales for the six months ended July 30, 2011 were $1.004 billion, compared to $1.022 billion for the six months ended July 31, 2010. Net sales results included a 1% increase in comparable store sales and an increase in e-commerce sales, offset by the impact of operating 155 (or 7%) fewer stores than in the year-ago period. E-commerce sales increased 17% to $72.3 million in the first half, compared to $62.1 million in the year-ago period.
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●
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Consolidated gross profit increased by $5.5 million to $531.2 million in the first half, compared to $525.7 million in the same period last year, related to a 150 basis point increase in the gross margin. The gross margin increased to 52.9% for the six months ended July 30, 2011, compared to 51.4% for the six months ended July 31, 2010.
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●
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Consolidated operating expenses, excluding restructuring and other charges/(credits) and gain from sale of office premises, improved by 140 basis points and decreased by $23.0 million to $501.0 million or 49.9% of sales for the six months, compared to $524.0 million or 51.3% of sales in the same period last year (refer to GAAP to non-GAAP reconciliation below). Selling, General and Administrative expenses decreased by $10.1 million and improved by 40 basis points as a percent of sales. Additionally, Occupancy and Buying expenses decreased by $8.1 million and improved by 50 basis points as a percent of sales.
|
●
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Consolidated Adjusted EBITDA for the first half increased by 67% and was $59.1 million or 5.9% of sales, compared to $35.5 million or 3.5% of sales in the prior-year period (refer to GAAP to non-GAAP reconciliation below), reflecting a year over year improvement of $23.6 million.
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●
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Consolidated income from operations, excluding restructuring and other charges/(credits) and gain from sale of office premises, improved by $28.5 million to $30.2 million or 3.0% of sales in the first half. This compares to consolidated income from operations of $1.7 million or 0.2% of sales for the prior-year period, which excluded restructuring and other charges/(credits) and a gain on repurchase of debt (refer to GAAP to non-GAAP reconciliation below).
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●
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The tax provision continues to reflect the impact of a valuation allowance recorded against net deferred tax assets, as well as the availability of net operating loss carry forwards, and primarily represents state and foreign income taxes payable, required deferred taxes and changes in the liability for unrecognized tax benefits.
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●
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Net income on a GAAP basis was $24.1 million, 2.4% of sales, or $0.20 per diluted share for the first half, compared to net loss on a GAAP basis of $(4.7) million, 0.5% of sales, or $(0.04) per diluted share in the first half of the prior year.
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●
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On a non-GAAP basis, net income per diluted share was $0.16 for the first half, compared to net loss per diluted share of $(0.04) in the first half of the prior year. Both periods’ results on a non-GAAP basis exclude restructuring and other charges/(credits) and a gain on repurchase of debt. The current period excludes the gain from the sale of the Company’s Hong Kong office premises. (Refer to GAAP to non-GAAP reconciliation below.)
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For the Three Month Periods
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For the Six Month Periods
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||||||||
($ in millions)
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Net Sales Period Ended 7/30/11
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Net Sales Period Ended 7/31/10
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Total Net Sales Change
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Comparable Store Sales Period Ended 7/30/11
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Net Sales Period Ended 7/30/11
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Net Sales Period Ended 7/31/10
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Total Net Sales Change
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Comparable Store Sales Period Ended 7/30/11
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Lane Bryant(1)
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$251.5
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$249.2
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+1%
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+3%
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$514.3
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$495.3
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+4%
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+5%
|
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Fashion Bug
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161.4
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182.8
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-12%
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-3%
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311.4
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348.7
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-11%
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-3%
|
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Catherines
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79.9
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80.2
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0%
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+2%
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157.7
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160.3
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-2%
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0%
|
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Direct-to-Consumer (primarily Figi’s)
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6.4
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5.4
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+19%
|
20.2
|
18.1
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+12%
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|||
Consolidated
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$499.2
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$517.6
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-4%
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+1%
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$1,003.6
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$1,022.4
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-2%
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+1%
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(1) Includes Lane Bryant Outlet Stores.
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( $ in millions)
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3 Months Ended 7/30/11
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3 Months Ended 7/31/10
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6 Months Ended 7/30/11
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6 Months Ended 7/31/10
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Total operating expenses, on a GAAP basis
|
$242.4
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$256.4
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$495.7
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$525.5
|
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Gain from sale of office premises
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(5.2)
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||||
Restructuring and other charges/(credits)
|
0.5
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0.6
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(0.1)
|
1.5
|
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Total operating expenses excluding the above items
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$241.9
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$255.8
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$501.0
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$524.0
|
|
Results may not add due to rounding.
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($ in millions)
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3 Months Ended 7/30/11
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3 Months Ended 7/31/10
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6 Months Ended 7/30/11
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6 Months Ended 7/31/10
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Income (loss) from operations, on a GAAP basis
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$3.5
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$(7.3)
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$35.6
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$0.2
|
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Restructuring and other charges/(credits)
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0.5
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0.6
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(0.1)
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1.5
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(Gain) from sale of office premises
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(5.2)
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||||
Income (loss) from operations, excluding the above items, on a non-GAAP basis
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4.0
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(6.7)
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30.2
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1.7
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Depreciation and amortization
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14.5
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16.9
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28.9
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33.7
|
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Adjusted EBITDA
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$18.5
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$10.3
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$59.1
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$35.5
|
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Results may not add due to rounding.
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3 Months Ended 7/30/11
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3 Months Ended 7/31/10
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6 Months Ended 7/30/11
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6 Months Ended 7/31/10
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||
Net income (loss) per diluted share, on a GAAP basis
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$(0.02)
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$(0.07)
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$0.20
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$(0.04)
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Gain on repurchase of debt
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(0.02)
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(0.02)
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|||
Gain from sale of office premises
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(0.04)
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||||
Restructuring and other charges/(credits)
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0.00
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0.01
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0.00
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0.01
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Net income (loss) per diluted share, on a non-GAAP basis
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$(0.01)
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$(0.09)
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$0.16
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$(0.04)
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Results may not add due to rounding.
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CONTACT:
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Gayle M. Coolick
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Vice President, Investor Relations
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215-638-6955
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CHARMING SHOPPES, INC.
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||||||||||||||||||||
(Unaudited)
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||||||||||||||||||||
2nd Quarter
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2nd Quarter
|
|||||||||||||||||||
Ended
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Ended
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|||||||||||||||||||
Percent
|
July 30,
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Percent
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July 31,
|
Percent
|
||||||||||||||||
(in thousands, except per share amounts)
|
Change
|
2011
|
of Sales (a)
|
2010
|
of Sales (a)
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|||||||||||||||
Net sales
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(3.5 | ) % | $ | 499,202 | 100.0 | % | $ | 517,564 | 100.0 | % | ||||||||||
Cost of goods sold
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(5.6 | ) | 253,296 | 50.7 | 268,441 | 51.9 | ||||||||||||||
Gross profit
|
(1.3 | ) | 245,906 | 49.3 | 249,123 | 48.1 | ||||||||||||||
Occupancy and buying
|
(5.7 | ) | 86,601 | 17.3 | 91,880 | 17.8 | ||||||||||||||
Selling, general, and administrative
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(4.2 | ) | 140,847 | 28.2 | 146,979 | 28.4 | ||||||||||||||
Depreciation and amortization (b)
|
(14.5 | ) | 14,482 | 2.9 | 16,937 | 3.3 | ||||||||||||||
Restructuring and other charges (c)
|
(23.4 | ) | 474 | 0.1 | 619 | 0.1 | ||||||||||||||
Total operating expenses
|
(5.5 | ) | 242,404 | 48.6 | 256,415 | 49.5 | ||||||||||||||
Income/(loss) from operations
|
148.0 | 3,502 | 0.7 | (7,292 | ) | (1.4 | ) | |||||||||||||
Other income
|
(75.8 | ) | 96 | 0.0 | 396 | 0.1 | ||||||||||||||
Gain on repurchase of debt
|
(100.0 | ) | 0 | 0.0 | 1,907 | 0.4 | ||||||||||||||
Non-cash interest expense
|
(5.7 | ) | (1,732 | ) | (0.3 | ) | (1,837 | ) | (0.4 | ) | ||||||||||
Interest expense
|
(4.1 | ) | (2,166 | ) | (0.4 | ) | (2,259 | ) | (0.4 | ) | ||||||||||
Loss from operations before income taxes
|
96.7 | (300 | ) | (0.1 | ) | (9,085 | ) | (1.8 | ) | |||||||||||
Income tax provision/(benefit)
|
(463.7 | ) | 1,611 | 0.3 | (443 | ) | (0.1 | ) | ||||||||||||
Net loss
|
77.9 | % | $ | (1,911 | ) | (0.4 | ) % | $ | (8,642 | ) | (1.7 | ) % | ||||||||
Loss per share:
|
||||||||||||||||||||
Basic and diluted:
|
||||||||||||||||||||
Net loss
|
$ | (0.02 | ) | $ | (0.07 | ) | ||||||||||||||
Weighted average shares outstanding
|
116,743 | 115,699 |
CHARMING SHOPPES, INC.
|
||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||
Six Months
|
Six Months
|
|||||||||||||||||||
Ended
|
Ended
|
|||||||||||||||||||
Percent
|
July 30,
|
Percent
|
July 31,
|
Percent
|
||||||||||||||||
(in thousands, except per share amounts)
|
Change
|
2011
|
of Sales (a)
|
2010
|
of Sales (a)
|
|||||||||||||||
Net sales
|
(1.8 | ) % | $ | 1,003,555 | 100.0 | % | $ | 1,022,369 | 100.0 | % | ||||||||||
Cost of goods sold
|
(4.9 | ) | 472,328 | 47.1 | 496,657 | 48.6 | ||||||||||||||
Gross profit
|
1.0 | 531,227 | 52.9 | 525,712 | 51.4 | |||||||||||||||
Occupancy and buying
|
(4.4 | ) | 176,012 | 17.5 | 184,104 | 18.0 | ||||||||||||||
Selling, general, and administrative
|
(3.3 | ) | 296,094 | 29.5 | 306,152 | 29.9 | ||||||||||||||
Depreciation and amortization (b)
|
(14.4 | ) | 28,890 | 2.9 | 33,748 | 3.3 | ||||||||||||||
Gain on sale of office premises (c)
|
n/a | (5,185 | ) | (0.5 | ) | 0 | 0.0 | |||||||||||||
Restructuring and other charges/(credits) (d)
|
(109.2 | ) | (139 | ) | 0.0 | 1,508 | 0.1 | |||||||||||||
Total operating expenses
|
(5.7 | ) | 495,672 | 49.4 | 525,512 | 51.4 | ||||||||||||||
Income from operations
|
n/a | 35,555 | 3.5 | 200 | 0.0 | |||||||||||||||
Other income
|
(55.6 | ) | 237 | 0.0 | 534 | 0.1 | ||||||||||||||
Gain on repurchase of debt
|
(100.0 | ) | 0 | 0.0 | 1,907 | 0.2 | ||||||||||||||
Non-cash interest expense
|
(13.6 | ) | (3,432 | ) | (0.3 | ) | (3,974 | ) | (0.4 | ) | ||||||||||
Interest expense
|
(7.7 | ) | (4,242 | ) | (0.4 | ) | (4,596 | ) | (0.4 | ) | ||||||||||
Income/(loss) from operations before income taxes
|
574.2 | 28,118 | 2.8 | (5,929 | ) | (0.6 | ) | |||||||||||||
Income tax provision/(benefit)
|
(437.6 | ) | 3,991 | 0.4 | (1,182 | ) | (0.1 | ) | ||||||||||||
Net income/(loss)
|
608.3 | % | $ | 24,127 | 2.4 | % | $ | (4,747 | ) | (0.5 | ) % | |||||||||
Income/(loss) per share:
|
||||||||||||||||||||
Basic:
|
||||||||||||||||||||
Net income/(loss)
|
$ | 0.21 | $ | (0.04 | ) | |||||||||||||||
Weighted average shares outstanding
|
116,459 | 115,851 | ||||||||||||||||||
Diluted:
|
||||||||||||||||||||
Net income/(loss)
|
$ | 0.20 | $ | (0.04 | ) | |||||||||||||||
Weighted average shares outstanding
|
117,803 | 115,851 |
July 30,
|
January 29,
|
|||||||
(In thousands, except share amounts)
|
2011
|
2011
|
||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 227,436 | $ | 117,482 | ||||
Accounts receivable, net of allowances of $2,326 and $5,667
|
5,395 | 36,568 | ||||||
Merchandise inventories
|
271,862 | 282,248 | ||||||
Deferred taxes
|
3,153 | 3,153 | ||||||
Prepayments and other
|
95,839 | 98,458 | ||||||
Total current assets
|
603,685 | 537,909 | ||||||
Property, equipment, and leasehold improvements – at cost
|
1,009,497 | 1,028,843 | ||||||
Less accumulated depreciation and amortization
|
772,312 | 772,895 | ||||||
Net property, equipment, and leasehold improvements
|
237,185 | 255,948 | ||||||
Trademarks, tradenames, and internet domain names
|
187,132 | 187,132 | ||||||
Goodwill
|
23,436 | 23,436 | ||||||
Other assets
|
18,659 | 18,233 | ||||||
Total assets
|
$ | 1,070,097 | $ | 1,022,658 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 136,222 | $ | 107,882 | ||||
Accrued expenses
|
142,318 | 142,002 | ||||||
Current portion – long-term debt
|
10,826 | 11,449 | ||||||
Total current liabilities
|
289,366 | 261,333 | ||||||
Deferred taxes
|
53,237 | 51,466 | ||||||
Other non-current liabilities
|
155,291 | 167,089 | ||||||
Long-term debt, net of debt discount of $21,247 and $24,679
|
132,056 | 128,350 | ||||||
Stockholders’ equity
|
||||||||
Common Stock $.10 par value:
|
||||||||
Authorized – 300,000,000 shares
|
||||||||
Issued – 155,087,788 shares and 154,185,373 shares
|
15,509 | 15,419 | ||||||
Additional paid-in capital
|
510,174 | 508,664 | ||||||
Treasury stock at cost – 38,617,180 shares
|
(348,400 | ) | (348,400 | ) | ||||
Retained earnings
|
262,864 | 238,737 | ||||||
Total stockholders’ equity
|
440,147 | 414,420 | ||||||
Total liabilities and stockholders’ equity
|
$ | 1,070,097 | $ | 1,022,658 |
Twenty-six Weeks Ended
|
||||||||
July 30,
|
July 31,
|
|||||||
(In thousands)
|
2011
|
2010
|
||||||
Operating activities
|
||||||||
Net income/(loss)
|
$ | 24,127 | $ | (4,747 | ) | |||
Adjustments to reconcile net income/(loss) to net cash provided by operating activities
|
||||||||
Depreciation and amortization
|
29,991 | 34,696 | ||||||
Stock-based compensation
|
2,387 | 2,010 | ||||||
Accretion of discount on 1.125% Senior Convertible Notes
|
3,432 | 3,974 | ||||||
Deferred income taxes
|
1,771 | (918 | ) | |||||
Gain on repurchases of 1.125% Senior Convertible Notes
|
0 | (1,907 | ) | |||||
Write-down of capital assets due to restructuring
|
822 | 0 | ||||||
Net (gain)/loss from disposition of capital assets
|
(4,849 | ) | 534 | |||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable, net
|
31,173 | 28,886 | ||||||
Merchandise inventories
|
10,386 | (21,931 | ) | |||||
Accounts payable
|
28,340 | 33,182 | ||||||
Prepayments and other
|
2,619 | 30,916 | ||||||
Accrued expenses and other
|
(7,010 | ) | (22,653 | ) | ||||
Net cash provided by operating activities
|
123,189 | 82,042 | ||||||
Investing activities
|
||||||||
Investment in capital assets
|
(14,596 | ) | (16,584 | ) | ||||
Proceeds from sales of capital assets
|
7,537 | 0 | ||||||
Proceeds from sales of securities
|
0 | 200 | ||||||
Increase in other assets
|
(345 | ) | (954 | ) | ||||
Net cash used by investing activities
|
(7,404 | ) | (17,338 | ) | ||||
Financing activities
|
||||||||
Repayments of long-term borrowings
|
(3,232 | ) | (3,100 | ) | ||||
Repurchases of 1.125% Senior Convertible Notes
|
0 | (38,260 | ) | |||||
Payment of deferred financing costs
|
(1,812 | ) | 0 | |||||
Issuance of common stock under employee stock plans, net of amounts withheld for payroll taxes
|
(787 | ) | 131 | |||||
Net cash used by financing activities
|
(5,831 | ) | (41,229 | ) | ||||
Increase in cash and cash equivalents
|
109,954 | 23,475 | ||||||
Cash and cash equivalents, beginning of period
|
117,482 | 186,580 | ||||||
Cash and cash equivalents, end of period
|
$ | 227,436 | $ | 210,055 | ||||
Non-cash financing and investing activities
|
||||||||
Assets acquired through capital leases
|
$ | 2,883 | $ | 0 |