EX-99.1 2 d358000dex991.htm PRESS RELEASE Press Release

EXHIBIT 99.1

AMERICAN EAGLE OUTFITTERS

REPORTS 38% INCREASE IN FIRST QUARTER ADJUSTED EPS AND 18% SALES GROWTH

PITTSBURGH—May 23, 2012—American Eagle Outfitters, Inc. (NYSE:AEO) today announced earnings of $0.20 per diluted share for the first quarter ended April 28, 2012, compared to $0.14 per diluted share for the comparable quarter last year. Adjusted earnings for the quarter were $0.22 per diluted share, which excludes the operating results for 77kids, compared to adjusted earnings of $0.16 per diluted share last year. Please see the following tables for a complete reconciliation of GAAP to non-GAAP results for all periods presented.

Robert Hanson, chief executive officer stated, “I’m extremely pleased by our performance this quarter and appreciate the team’s accomplishments. We remain focused on delivering continued improvements in the near term, while fortifying our core brands and capabilities to pursue incremental profitable growth and consistent returns to shareholders.”

GAAP First Quarter Results

 

  •  

Net sales increased 18% to $719 million, compared to $610 million last year.

 

  •  

Comparable store sales, including AE Direct, increased 17%, compared to a 7% decrease last year.

 

  •  

Gross profit increased 18% to $273 million, or 37.9% as a rate to sales, compared to $232 million, or 38.0% as a rate to sales, last year. Higher product costs, driven by the spike in cotton and incremental incentive costs, adversely affected the merchandise margin. This was offset by a 220 basis point improvement in buying, occupancy and warehousing due to strong sales.

 

  •  

Selling, general and administrative expense of $183 million improved 60 basis points to 25.4%, as a rate to sales, compared to 26.0% last year.

 

  •  

Operating income of $57 million increased 49%, compared to $38 million last year. The operating margin rate of 8.0% compared to 6.3% last year.

 

  •  

Other income of $4 million primarily relates to a settlement recovery from auction rate securities.

 

  •  

EPS of $0.20 compared to $0.14 last year, a 43% increase.

Non-GAAP First Quarter Results

The following discussion of first quarter results excludes the operating results for the 77kids brand.

 

  •  

Net sales increased 18% to $709 million, compared to $603 million last year.

 

  •  

Comparable store sales, including AE Direct, increased 17%, compared to a 7% decrease last year.

 

  •  

Gross profit increased 18% to $275 million. The gross margin rate of 38.8% was flat to last year. Higher product costs, driven by the spike in cotton and incremental incentive costs, adversely affected the merchandise margin. This was offset by a 220 basis point improvement in buying, occupancy and warehousing due to strong sales.

 

  •  

Selling general and administrative expense of $179 million improved 60 basis points to 25.2%, compared to 25.8% last year.

 

  •  

Operating income increased 46% to $64 million. The operating margin expanded to 9.1% compared to 7.3% last year.

 

  •  

EPS of $0.22 compared to $0.16 last year, a 38% increase.

77kids Update

On May 18, 2012, the company announced plans to exit its children’s business, 77kids, which includes 22 stores and the online business. The company is currently exploring options for the business, which include a full or partial disposition of assets to a third party.

In fiscal 2011, the brand generated an after-tax loss of approximately $24 million on sales of $40 million. The company anticipates charges associated with the disposition of 77kids to be taken primarily in the second and third quarters of 2012, which will be disclosed as plans are finalized.

AEO Direct

In the first quarter, online sales increased 22%, compared to a 3% increase last year. The company’s online business includes ae.com, aerie.com and 77kids.com.

Inventory

Total merchandise inventories at the end of the first quarter were $377 million vs. $332 million last year. At cost per foot, inventory is up 14% compared to last year. Second quarter ending inventory cost per foot is expected to be up in the mid single digits.

Capital Expenditures

For the first quarter, capital expenditures were $25 million, compared to $38 million last year. For fiscal 2012, the company continues to expect capital expenditures to be approximately $100 million.

Real Estate

In the first quarter, total square footage increased slightly, reflecting seven store openings, offset by seven store closures, and 21 remodels and refurbishments. For additional first quarter 2012 actual and fiscal 2012 projected real estate information, see the accompanying table.

Cash and Investments

The company ended the quarter with total cash and short-term investments of $722 million compared to $605 million last year.

Future Outlook

Assuming low to mid-single digit comparable store sales growth for the year, the company expects annual adjusted EPS of $1.16 to $1.22 compared to adjusted EPS of $0.97 last year. For the second quarter the company expects adjusted EPS of $0.13 to $0.15, assuming mid single digit comparable store sale growth. This compares to adjusted EPS of $0.13 last year. Guidance excludes operating results and exit charges related to 77kids in addition to other potential restructuring charges.

Conference Call and Supplemental Financial Information

Today management will host a conference call and real time webcast at 9:00 a.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to www.ae.com to access the webcast and audio replay. Also, a financial results presentation is posted on the company’s website.

* * * *

About American Eagle Outfitters, Inc.

American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle Outfitters®, Aerie® and 77kids® brands. The company operates more than 1,000 stores in North America, and ships to 77 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at approximately 35 international franchise stores in 12 countries. For more information, please visit www.ae.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding second quarter and fiscal 2012 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors beyond the company’s control. Such factors include, but are not limited to the risk that the company’s operating, financial and capital plans may not be achieved and the risks described in the Risk Factor Section of the company’s Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. Accordingly, the company’s future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The company does not undertake to publicly update or revise its forward-looking statements even if future changes make it clear that projected results expressed or implied will not be realized.

 

CONTACT:    American Eagle Outfitters Inc.
   Judy Meehan, 412-432-3300

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

      April 28,
2012		     January 28,
2012		     April 30,
2011		  
     (unaudited)           (unaudited)  

ASSETS

       

Cash and cash equivalents

    $ 713,443      $ 719,545      $ 474,668   

Short-term investments

      8,587        25,499        130,513   

Merchandise inventory

      376,688        378,426        331,588   

Accounts receivable

      37,472        40,310        31,464   

Prepaid expenses and other

      75,433        74,947        84,687   

Deferred income taxes

      48,358        48,761        49,023   
  

 

 

    

 

 

    

 

 

  

Total current assets

      1,259,981        1,287,488        1,101,943   
  

 

 

    

 

 

    

 

 

  

Property and equipment, net

      572,104        582,162        641,907   

Intangible assets, net

      39,556        39,832        40,454   

Goodwill

      11,544        11,469        11,710   

Non-current deferred income taxes

      16,579        13,467        10,030   

Other assets

      16,688        16,384        26,294   
  

 

 

    

 

 

    

 

 

  

Total Assets

    $ 1,916,452      $ 1,950,802      $ 1,832,338   
  

 

 

    

 

 

    

 

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Accounts payable

    $ 133,861      $ 183,783      $ 155,183   

Accrued compensation and payroll taxes

      21,970        42,625        14,915   

Accrued rent

      76,550        76,921        70,873   

Accrued income and other taxes

      14,333        20,135        12,242   

Unredeemed gift cards and gift certificates

      30,783        44,970        29,187   

Current portion of deferred lease credits

      14,945        15,066        15,981   

Other current liabilities and accrued expenses

      25,779        21,901        24,566   
  

 

 

    

 

 

    

 

 

  

Total current liabilities

      318,221        405,401        322,947   
  

 

 

    

 

 

    

 

 

  

Deferred lease credits

      73,350        71,880        79,131   

Non-current accrued income taxes

      31,806        35,471        40,310   

Other non-current liabilities

      22,544        21,199        23,486   
  

 

 

    

 

 

    

 

 

  

Total non-current liabilities

      127,700        128,550        142,927   
  

 

 

    

 

 

    

 

 

  

Commitments and contingencies

      —          —          —     

Preferred stock

      —          —          —     

Common stock

      2,496        2,496        2,496   

Contributed capital

      567,700        552,797        543,393   

Accumulated other comprehensive income

      30,532        28,659        33,573   

Retained earnings

      1,774,205        1,771,464        1,716,173   

Treasury stock

      (904,402 )      (938,565 )      (929,171 ) 
  

 

 

    

 

 

    

 

 

  

Total stockholders’ equity

      1,470,531        1,416,851        1,366,464   
  

 

 

    

 

 

    

 

 

  

Total Liabilities and Stockholders’ Equity

    $ 1,916,452      $ 1,950,802      $ 1,832,338   
  

 

 

    

 

 

    

 

 

  

Current Ratio

      3.96        3.18        3.41   

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars and shares in thousands, except per share amounts)

(unaudited)

 

     13 Weeks Ended  
      April 28,
2012		      % of
Sales		     April 30,
2011		      % of
Sales		  

Net sales

    $ 719,093         100.0 %    $ 609,562         100.0 % 

Cost of sales, including certain buying, occupancy and warehousing expenses

      446,430         62.1 %      377,801         62.0 % 
  

 

 

     

 

 

    

 

 

     

 

 

  

Gross profit

      272,663         37.9 %      231,761         38.0 % 

Selling, general and administrative expenses

      182,605         25.4 %      158,491         26.0 % 

Depreciation and amortization

      32,798         4.5 %      34,880         5.7 % 
  

 

 

     

 

 

    

 

 

     

 

 

  

Operating income

      57,260         8.0 %      38,390         6.3 % 

Other income, net

      3,507         0.5 %      4,512         0.7 % 
  

 

 

     

 

 

    

 

 

     

 

 

  

Income before income taxes

      60,767         8.5 %      42,902         7.0 % 

Provision for income taxes

      21,070         3.0 %      14,577         2.4 % 
  

 

 

     

 

 

    

 

 

     

 

 

  

Net income

    $ 39,697         5.5 %    $ 28,325         4.6 % 
  

 

 

     

 

 

    

 

 

     

 

 

  

Net income per basic common share

    $ 0.20         $ 0.15      

Net income per diluted common share

    $ 0.20         $ 0.14      

Weighted average common shares outstanding—basic

      194,890           194,683      

Weighted average common shares outstanding—diluted

      197,252           196,633      

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

 

     13 Weeks Ended  
      April 28,
2012		     April 30,
2011		  

Operating activities:

     

Net income

    $ 39,697      $ 28,325   

Adjustments to reconcile net income to net cash from operating activities:

     

Depreciation and amortization

      33,323        35,534   

Share-based compensation

      21,299        2,506   

Provision for deferred income taxes

      (2,772 )      8,708   

Tax benefit from share-based payments

      4,422        256   

Excess tax benefit from share-based payments

      (2,643 )      (139 ) 

Foreign currency transaction gain

      (145 )      (219 ) 

Changes in assets and liabilities:

     

Merchandise inventory

      2,345        (28,674 ) 

Accounts receivable

      2,865        5,445   

Prepaid expenses and other

      (347 )      (30,327 ) 

Other assets

      (426 )      (2,400 ) 

Accounts payable

      (46,852 )      (7,301 ) 

Unredeemed gift cards and gift certificates

      (14,260 )      (11,960 ) 

Deferred lease credits

      1,203        (174 ) 

Accrued compensation and payroll taxes

      (20,687 )      (20,110 ) 

Accrued income and other taxes

      (9,498 )      (18,749 ) 

Accrued liabilities

      5,154        90   
  

 

 

    

 

 

  

Total adjustments

      (27,019 )      (67,514 ) 
  

 

 

    

 

 

  

Net cash provided by (used for) operating activities

    $ 12,678      $ (39,189 ) 

Investing activities:

     

Capital expenditures for property and equipment

      (24,831 )      (37,744 ) 

Acquisition of intangible assets

      (220 )      (33,151 ) 

Purchase of available-for-sale securities

      (3,051 )      (111,199 ) 

Sale of available-for-sale securities

      20,119        48,887   
  

 

 

    

 

 

  

Net cash used for investing activities

    $ (7,983 )    $ (133,207 ) 

Financing activities:

     

Payments on capital leases

      (941 )      (756 ) 

Repurchase of common stock from employees

      (4,100 )      (2,181 ) 

Net proceeds from stock options exercised

      12,165        2,539   

Excess tax benefit from share-based payments

      2,643        139   

Cash dividends paid

      (21,524 )      (21,430 ) 
  

 

 

    

 

 

  

Net cash used for financing activities

    $ (11,757 )    $ (21,689 ) 
  

 

 

    

 

 

  

Effect of exchange rates on cash

      960        1,160   
  

 

 

    

 

 

  

Net decrease in cash and cash equivalents

    $ (6,102 )    $ (192,925 ) 

Cash and cash equivalents—beginning of period

      719,545        667,593   
  

 

 

    

 

 

  

Cash and cash equivalents—end of period

    $ 713,443      $ 474,668   
  

 

 

    

 

 

  

AMERICAN EAGLE OUTFITTERS, INC.

COMPARABLE STORE SALES RESULTS BY BRAND

(unaudited)

 

     First Quarter
Comparable Store Sales		  
     2012     2011  

American Eagle Outfitters, Inc. (1)

      17 %      -7 % 

AE Brand

      17 %      -8 % 

aerie

      20 %      -7 % 

AEO Direct (1)

      22 %      3 % 

 

(1) AEO Direct is comprised of ae.com, aerie.com and 77kids.com. AEO Direct is included in consolidated comparable store sales.

AMERICAN EAGLE OUTFITTERS, INC.

REAL ESTATE INFORMATION

(unaudited)

 

     First Quarter
Fiscal 2011		      Fiscal 2012
Guidance		  

Consolidated stores at beginning of period

      1,090         1,090   

Consolidated stores opened during the period

      

AE Brand

      6         15   

77kids

      1         1   

Consolidated stores closed during the period

      

AE Brand and aerie

      (7)         (20) —(30)   

77kids

      —           (22)   
  

 

 

     

 

 

  

Total consolidated stores at end of period

      1,090         1,054 —1,064   

Stores remodeled and refurbished during the period

      21         55 — 65   

Total gross square footage at end of period

      6,414,420         Not Provided   

International franchise stores at end of period (1)

      34         52   

 

(1) International franchise stores are not included in the consolidated store data or the total gross square footage calculation.

AMERICAN EAGLE OUTFITTERS, INC.

GAAP TO NON-GAAP RECONCILIATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars and shares in thousands, except per share amounts)

(unaudited)

 

     First Quarter Fiscal 2012  
     American Eagle
Outfitters, Inc.
(GAAP Basis)		     77kids (1)     American Eagle
Outfitters, Inc.
(Non-GAAP Basis)		  
             % of
Sales		                  % of
Sales		  

Net sales

    $ 719,093         100.0 %    $ 10,398      $ 708,695         100.0 % 

Cost of sales, including certain buying, occupancy and warehousing expenses

      446,430         62.1 %      12,648        433,782         61.2 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Gross profit (loss)

      272,663         37.9 %      (2,250 )      274,913         38.8 % 

Selling, general and administrative expenses

      182,605         25.4 %      4,066        178,539         25.2 % 

Depreciation and amortization

      32,798         4.5 %      732        32,066         4.5 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Operating income (loss)

      57,260         8.0 %      (7,048 )      64,308         9.1 % 

Other income, net

      3,507         0.5 %      —          3,507         0.5 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) before income taxes

      60,767         8.5 %      (7,048 )      67,815         9.6 % 

Provision (benefit) for income taxes

      21,070         3.0 %      (2,710 )      23,780         3.4 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net income (loss)

    $ 39,697         5.5 %    $ (4,338 )    $ 44,035         6.2 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net income (loss) per basic common share

    $ 0.20         $ (0.02 )    $ 0.22      

Net income (loss) per diluted common share

    $ 0.20         $ (0.02 )    $ 0.22      

Weighted average common shares outstanding—basic

      194,890           194,890        194,890      

Weighted average common shares outstanding—diluted

      197,252           197,252        197,252      

 

     First Quarter Fiscal 2011  
     American Eagle
Outfitters, Inc.
(GAAP Basis)		     77kids (1)     American Eagle
Outfitters, Inc.
(Non-GAAP Basis)		  
             % of
Sales		                  % of
Sales		  

Net sales

    $ 609,562         100.0 %    $ 6,478      $ 603,084         100.0 % 

Cost of sales, including certain buying, occupancy and warehousing expenses

      377,801         62.0 %      8,536        369,265         61.2 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Gross profit (loss)

      231,761         38.0 %      (2,058 )      233,819         38.8 % 

Selling, general and administrative expenses

      158,491         26.0 %      3,239        155,252         25.8 % 

Depreciation and amortization

      34,880         5.7 %      444        34,436         5.7 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Operating income (loss)

      38,390         6.3 %      (5,741 )      44,131         7.3 % 

Other income, net

      4,512         0.7 %      —          4,512         0.7 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) before income taxes

      42,902         7.0 %      (5,741 )      48,643         8.0 % 

Provision (benefit) for income taxes

      14,577         2.4 %      (2,195 )      16,772         2.7 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net income (loss)

    $ 28,325         4.6 %    $ (3,546 )    $ 31,871         5.3 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net income (loss) per basic common share

    $ 0.15         $ (0.02 )    $ 0.17      

Net income (loss) per diluted common share

    $ 0.14         $ (0.02 )    $ 0.16      

Weighted average common shares outstanding—basic

      194,683           194,683        194,683      

Weighted average common shares outstanding—diluted

      196,633           196,633        196,633      

 

(1) Represents 77kids store and online business operating results, as well as home office and other costs directly attributable to 77kids operations.

AMERICAN EAGLE OUTFITTERS, INC.

GAAP TO NON-GAAP RECONCILIATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars and shares in thousands, except per share amounts)

(unaudited)

 

     Fiscal 2011  
     American Eagle
Outfitters, Inc.
(GAAP Basis)		     77kids (1)     Non-GAAP
Items (2)		     American Eagle
Outfitters, Inc.
(Non-GAAP
excluding 77kids and
Other Non-GAAP
Items)		  
             % of
Sales		                        % of
Sales		  

Net sales

    $ 3,159,818         100.0 %    $ 39,753      $ —        $ 3,120,065         100.0 % 

Cost of sales, including certain buying, occupancy and warehousing expenses

      2,031,477         64.3 %      56,006        —          1,975,471         63.3 % 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Gross profit (loss)

      1,128,341         35.7 %      (16,253 )      —          1,144,594         36.7 % 

Selling, general and administrative expenses

      735,828         23.3 %      17,705        5,536        712,587         22.9 % 

Loss on impairment of assets

      20,730         0.7 %      1,552        19,178        —           0.0 % 

Depreciation and amortization

      140,647         4.4 %      2,689        —          137,958         4.4 % 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Operating income (loss)

      231,136         7.3 %      (38,199 )      (24,714 )      294,049         9.4 % 

Other income (expense), net

      5,874         0.2 %      —          (677 )      6,551         0.2 % 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) before income taxes

      237,010         7.5 %      (38,199 )      (25,391 )      300,600         9.6 % 

Provision (benefit) for income taxes

      85,305         2.7 %      (14,625 )      (9,725 )      109,655         3.5 % 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net income (loss)

    $ 151,705         4.8 %    $ (23,574 )    $ (15,666 )    $ 190,945         6.1 % 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net income (loss) per basic common share

    $ 0.78         $ (0.12 )    $ (0.08 )    $ 0.98      

Net income (loss) per diluted common share

    $ 0.77         $ (0.12 )    $ (0.08 )    $ 0.97      

Weighted average common shares outstanding—basic

      194,445           194,445        194,445        194,445      

Weighted average common shares outstanding—diluted

      196,314           196,314        196,314        196,314      

 

     Fiscal 2010  
     American Eagle
Outfitters, Inc.
(GAAP Basis)		     77kids (1)     Non-GAAP
Items (3)		     American Eagle
Outfitters, Inc.
(Non-GAAP
excluding 77kids and
Other Non-GAAP
Items)		  
           % of
Sales		                       % of
Sales		  

Net sales

    $ 2,967,559        100.0 %    $ 22,265      $ —        $ 2,945,294        100.0 % 

Cost of sales, including certain buying, occupancy and warehousing expenses

   

 

1,796,600

  

     60.5 %      33,457        —          1,763,143        59.9 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit (loss)

      1,170,959        39.5 %      (11,192 )      —          1,182,151        40.1 % 

Selling, general and administrative expenses

      713,197        24.0 %      10,273        —          702,924        23.9 % 

Depreciation and amortization

      140,501        4.8 %      826        —          139,675        4.8 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

   

 

317,261

  

     10.7 %      (22,291 )      —          339,552        11.4 % 

Realized loss on sale of investment securities

      (24,426 )      -0.8 %      —          (24,201 )      (225 )      0.0 % 

Other income, net

      2,249        0.0 %      —          —          2,249        0.1 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes

      295,084        9.9 %      (22,291 )      (24,201 )      341,576        11.5 % 

Provision (benefit) for income taxes

      113,150        3.8 %      (8,494 )      —          121,644        4.0 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ 181,934        6.1 %    $ (13,797 )    $ (24,201 )    $ 219,932        7.5 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) per basic common share

    $ 0.91        $ (0.07 )    $ (0.12 )    $ 1.10     

Net income (loss) per diluted common share

    $ 0.90        $ (0.07 )    $ (0.12 )    $ 1.09     

Weighted average common shares outstanding—basic

      199,979          199,979        199,979        199,979     

Weighted average common shares outstanding—diluted

      201,818          201,818        201,818        201,818     

 

(1) Represents 77kids store and online business operating results, as well as home office and other costs directly attributable to 77kids operations.
(2) Non-GAAP items for Fiscal 2011 consist of $19.2 million of pre-tax store asset impairment charges for the AE and aerie brand and $6.2 million of pre-tax executive transition costs.
(3) Non-GAAP items for Fiscal 2010 consist of a $24.2 million loss on sale of investment securities for which no tax benefit was realized.

77KIDS

HISTORICAL STATEMENTS OF OPERATIONS (1)

(Dollars and shares in thousands, except per share amounts)

(unaudited)

 

     Fiscal 2011 Quarterly Periods Ended  
     April 30,
2011		     % of
Sales		     July 30,
2011		     % of
Sales		     October 29,
2011		     % of
Sales		     January 28,
2012		     % of
Sales		  

Net sales

   

$

6,478

  

     100.0 %    $ 6,583        100.0 %    $ 12,407        100.0 %   

$

14,285

  

     100.0 % 

Cost of sales, including certain buying, occupancy and warehousing expenses

   

 

8,536

  

     131.8 %      10,700        162.5 %      15,695        126.5 %      21,075        147.5 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

      (2,058 )      -31.8 %      (4,117 )      -62.5 %      (3,288 )      -26.5 %      (6,790 )      -47.5 % 

Selling, general and administrative expenses

      3,239        50.0 %      3,986        60.6 %      4,896        39.5 %      5,584        39.1 % 

Loss on impairment of assets

      —          0.0 %      —          0.0 %      —          0.0 %      1,552        10.9 % 

Depreciation and amortization

      444        6.8 %      678        10.3 %      784        6.3 %      783        5.5 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating loss

      (5,741 )      -88.6 %      (8,781 )      -133.4 %      (8,968 )      -72.3 %      (14,709 )      -103.0 % 

Other income, net

      —          0.0 %      —          0.0 %      —          0.0 %      —          0.0 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loss before income taxes

      (5,741 )      -88.6 %      (8,781 )      -133.4 %      (8,968 )      -72.3 %      (14,709 )      -103.0 % 

Benefit for income taxes

      (2,195 )      -33.9 %      (3,358 )      -51.0 %      (3,444 )      -27.8 %      (5,628 )      -39.4 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loss

    $ (3,546 )      -54.7 %      (5,423 )      -82.4 %      (5,524 )      -44.5 %      (9,081 )      -63.6 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loss per basic common share

    $ (0.02 )      $ (0.03 )      $ (0.03 )      $ (0.05 )   

Net loss per diluted common share

    $ (0.02 )      $ (0.03 )      $ (0.03 )      $ (0.05 )   

Weighted average common shares outstanding—basic

      194,683          194,909          194,378          193,798     

Weighted average common shares outstanding—diluted

      196,633          196,578          195,985          195,913     

 

     Fiscal 2010 Quarterly Periods Ended  
     May 1,     % of     July 31,     % of     October 30,     % of     January 29,     % of  
     2010     Sales     2010     Sales     2010     Sales     2011     Sales  

Net sales

    $ 3,342        100.0 %    $ 2,761        100.0 %    $ 6,658        100.0 %    $ 9,504        100.0 % 

Cost of sales, including certain buying, occupancy and warehousing expenses

      4,769        142.7 %      4,363        158.0 %      9,769        146.7 %      14,556        153.2 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

      (1,427 )      -42.7 %      (1,602 )      -58.0 %      (3,111 )      -46.7 %      (5,052 )      -53.2 % 

Selling, general and administrative expenses

      1,578        47.2 %      1,752        63.5 %      3,509        52.7 %      3,434        36.1 % 

Depreciation and amortization

      71        2.1 %      98        3.5 %      270        4.1 %      387        4.1 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating loss

      (3,076 )      -92.0 %      (3,452 )      -125.0 %      (6,890 )      -103.5 %      (8,873 )      -93.4 % 

Other income, net

      —          0.0 %      —          0.0 %      —          0.0 %      —          0.0 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loss before income taxes

      (3,076 )      -92.0 %      (3,452 )      -125.0 %      (6,890 )      -103.5 %      (8,873 )      -93.4 % 

Benefit for income taxes

      (1,169 )      -35.0 %      (1,304 )      -47.2 %      (2,630 )      -39.5 %      (3,391 )      -35.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loss

    $ (1,907 )      -57.2 %      (2,148 )      -77.8 %      (4,260 )      -64.0 %      (5,482 )      -57.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loss per basic common share

    $ (0.01 )      $ (0.01 )      $ (0.02 )      $ (0.03 )   

Net loss per diluted common share

    $ (0.01 )      $ (0.01 )      $ (0.02 )      $ (0.03 )   

Weighted average common shares outstanding—basic

      207,718          201,764          195,590          194,878     

Weighted average common shares outstanding—diluted

      210,285          203,153          197,323          196,789     

 

(1) Represents 77kids store and online business operating results, as well as home office and other costs directly attributable to 77kids operations.