UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): August 23, 2018
THE CHILDREN’S PLACE, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 0-23071 | 31-1241495 |
| (Commission File Number) | (IRS Employer Identification No.) |
| 500 Plaza Drive, Secaucus, New Jersey | 07094 |
| (Address of Principal Executive Offices) | (Zip Code) |
(201) 558-2400
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(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 (see General Instruction A.2. below):
| ¨ | 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12-b-2 of this chapter).
| ¨ | Emerging Growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02 | Results of Operations and Financial Condition. |
On August 23, 2018, the Company issued a press release containing the Company’s financial results for the second quarter of the fiscal year ending February 2, 2019 (“Fiscal 2018”), providing an updated estimated range of adjusted net income per diluted share for Fiscal 2018 and providing a preliminary estimated range of adjusted net income per diluted share for the third quarter of Fiscal 2018. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Current Report is being furnished pursuant to Item 2.02 of Form 8-K insofar as it discloses historical information regarding the Company’s results of operations and financial condition as of and for the second quarter of Fiscal 2018. In accordance with General Instructions B.2 of Form 8-K, such information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 8.01 | Other Events. |
On August 23, 2018, the Company issued a press release announcing that its Board of Directors has declared a quarterly cash dividend of $0.50 per share, payable on September 17, 2018 to holders of record of the Company’s common stock on September 5, 2018. A copy of the press release is being furnished as Exhibit 99.2 to this Current Report on Form 8-K.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits |
| 2 |
Forward Looking Statements
This Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, contains or may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to the Company’s strategic initiatives and adjusted net income per diluted share. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. These forward-looking statements are based upon the Company’s current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company’s filings with the Securities and Exchange Commission, including in the “Risk Factors” section of its Annual Report on Form 10-K for the fiscal year ended February 3, 2018. Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by changes in economic conditions, the risk that the Company’s strategic initiatives to increase sales and margin are delayed or do not result in anticipated improvements, the risk of delays, interruptions and disruptions in the Company’s global supply chain, including resulting from foreign sources of supply in less developed countries or more politically unstable countries, the risk that the cost of raw materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost increases through value engineering or price increases, various types of litigation, including class action litigations brought under consumer protection, employment, and privacy and information security laws and regulations, the imposition of regulations affecting the importation of foreign-produced merchandise, including duties and tariffs, and the uncertainty of weather patterns. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
* * *
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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.
Date: August 23, 2018
| THE CHILDREN’S PLACE, INC. | |||
| By: | /s/ Jane Elfers | ||
| Name: | Jane Elfers | ||
| Title: | President and Chief Executive Officer | ||
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Exhibit 99.1
THE CHILDREN’S PLACE REPORTS SECOND QUARTER 2018 RESULTS
Delivers Q2 Comparable Retail Sales Increase of 13.2%
Highest Quarterly Comp in Company History
Reports Q2 GAAP Earnings per Diluted Share of $0.45 vs $0.79 in Q2 2017 and
Q2 Adjusted Earnings per Diluted Share of $0.70 vs $0.86 in Q2 2017
Increases FY 2018 Adjusted EPS Guidance to $8.09 to $8.29
Secaucus, New Jersey – August 23, 2018 – The Children’s Place, Inc. (Nasdaq: PLCE), the largest pure-play children’s specialty apparel retailer in North America, today announced financial results for the thirteen weeks ended August 4, 2018.
Jane Elfers, President and Chief Executive Officer announced, “We set the bar very high for the second quarter and we beat it. We delivered our highest ever quarterly comp, a positive 13.2% on top of a positive 3.1% last year. We delivered adjusted EPS of $0.70, $0.09 above the high end of our guidance range. We delivered positive brick and mortar sales comps and positive digital sales comps every month in the second quarter. Additionally, we drove positive brick and mortar traffic comps every month of the quarter resulting in a positive mid-single digit traffic increase. Specifically, our mall traffic was exceptional, delivering a high single digit positive comp for the quarter. Our momentum has continued into August and with the majority of back-to-school sales behind us, our comps are running positive low double digits quarter to date.”
Ms. Elfers concluded, “We have significant runway ahead of us through the continued successful execution of our multi-year strategic growth initiatives. In addition, we are uniquely positioned from a competitive standpoint to accelerate our transformation, with the goal of driving additional market share gains. We are focused on driving customer acquisition, improving customer retention and increasing customer engagement through our digital transformation investments. We look forward to continuing to deliver best-in-class results for our shareholders.”
Financial Results
The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. A reconciliation of non-GAAP to GAAP financial information is provided at the end of this press release.
Second Quarter 2018 Results
Net sales increased by $75.1 million, or 20.1%, to $448.7 million during the second quarter 2018 from $373.6 million during the second quarter 2017. This increase was primarily driven by a positive comparable retail sales increase of 13.2%, an approximately $22.0 million benefit from the calendar shift related to the 53rd week in fiscal 2017, and an approximately $5.0 million due to the new revenue recognition rules.
Net income was $7.5 million, or $0.45 per diluted share, in the second quarter of 2018, compared to net income of $14.3 million, or $0.79 per diluted share, the previous year. Adjusted net income was $11.7 million, or $0.70 per diluted share, compared to adjusted net income of $15.6 million, or $0.86 per diluted share, in the second quarter last year. The impact of the accounting rules related to the income tax impact on share-based compensation was $0.03 per share in the second quarter compared to $0.68 per share last year as the majority of share vesting occurred in the first quarter this year versus the second quarter last year.
| 1 |
Gross profit was $154.8 million in the second quarter, compared to $128.4 million in the second quarter of 2017. Adjusted gross profit was $154.8 million in the second quarter, compared to $128.7 million last year. Adjusted gross margin leveraged 10 basis points to 34.5% of sales, as result of fixed cost leverage based on strong comparable retail sales, the reclassification of certain items due to the new revenue recognition rules, offset by lower merchandise margins along with continued increase in ecommerce penetration.
Selling, general, and administrative expenses were $124.2 million compared to $108.2 million in the second quarter of 2017. Adjusted selling, general, and administrative expense was $122.5 million compared to $107.6 million in the second quarter last year and leveraged 150 basis points as a percentage of net sales. The increase in selling, general, and administrative expenses were driven by an increase in expenditures in our transformation initiatives and the reclassification of certain items due to the new revenue recognition rules, partially offset by lower incentive compensation expenses.
Operating income was $10.0 million, compared to $3.2 million in the second quarter of 2017. Adjusted operating income in the second quarter of 2018 was $15.7 million, or 3.5% of net sales, compared to adjusted operating income of $5.1 million in the second quarter last year, leveraging 210 basis points.
Adjusted tax rate was 21.0% for the quarter versus negative 226% last year, which was impacted by share-based compensation discussed earlier.
For the second quarter, the Company’s adjusted results exclude net expenses of approximately $4.2 million, compared to excluded net expenses of approximately $1.3 million in the second quarter of 2017, comprising certain items, which the Company believes, are not reflective of the performance of its core business. For the second quarter of 2018, these excluded items primarily related to asset impairment charges, restructuring costs, consulting costs for organizational design efforts, system transition costs, and costs incurred in connection with the review of the Company’s warehouse and distribution network. For the second quarter of 2017, these excluded items were primarily related to expenses associated with asset impairment charges, a state sales and use tax audit settlement, a provision for foreign exchange control penalties and an insurance claim deductible, partially offset by income related to restructuring costs.
Fiscal Year to Date Results
Net sales increased 9.2% to $885.0 million and comparable retail sales increased 5.1% in the first half of 2018, inclusive of a positive impact of approximately $22.0 million resulting from the calendar shift related to the 53rd week in fiscal 2017 and approximately $9.0 million due to the new revenue recognition rules.
Net income was $39.0 million, or $2.27 per diluted share, in the first half of 2018, compared to net income of $50.5 million, or $2.76 per diluted share, the previous year. Adjusted net income was $44.9 million, or $2.60 per diluted share, compared to adjusted net income of $51.6 million, or $2.82 per diluted share, in the first half last year.
Gross profit was $315.0 million in the first half, compared to $299.0 million in the first half of 2017. Adjusted gross profit was $316.2 million in the first half, compared to $299.6 million last year, and deleveraged 130 basis points to 35.7% of sales.
Selling, general and administrative expenses were $242.7 million compared to $220.4 million in the first half of 2017. Adjusted selling, general, and administrative expense was $241.2 million compared to $214.5 million in the first half of last year and deleveraged 70 basis points as a percentage of net sales. The increase in selling, general, and administrative expenses were driven by an increase in expenditures in our transformation initiatives and the reclassification of certain items due to the new revenue recognition rules, partially offset by lower incentive compensation expenses.
| 2 |
Operating income was $33.1 million, compared to operating income of $45.5 million in the first half of 2017. Adjusted operating income in the first half of 2018 was $41.1 million, or 4.6% of net sales, compared to adjusted operating income of $53.5 million in the first half last year, deleveraging 200 basis points compared to last year.
Adjusted tax rate was negative 12.6% for the first half versus 3.0% last year, as a result of lower income and the impact of the new tax legislation.
During the first half of fiscal 2018, the Company’s adjusted results exclude net expenses of approximately $5.8 million, compared to excluded net expenses of approximately $1.0 million in the first half of 2017, comprising certain items, which the Company believes, are not reflective of the performance of its core business. For the first half of 2018, these excluded items primarily related to asset impairment charges, restructuring costs, consulting costs for organizational design efforts, system transition costs, and costs incurred in connection with the review of the Company’s warehouse and distribution network. For the first half of fiscal 2017, these excluded items are primarily related to charges due to a provision for a legal settlement resulting from a pricing litigation, asset impairment charges, restructuring costs, a state sales and use tax audit settlement, a provision for foreign exchange control penalties, and an insurance claim deductible, partially offset by income associated with the release of reserves for prior year uncertain tax positions.
Store Openings and Closures
Consistent with the Company’s store fleet optimization initiative, the Company closed 10 stores and did not open any stores during the second quarter of 2018. The Company ended the second quarter with 992 stores and square footage of 4.6 million, a decrease of 4% compared to the prior year. Since our fleet optimization initiative announced in 2013, the Company has closed 191 stores.
The Company’s international franchise partners opened 11 points of distribution and closed one in the second quarter, and the Company ended the quarter with 211 international points of distribution open and operated by its eight franchise partners in 20 countries.
Capital Return Program
During the second quarter of 2018, the Company repurchased 440,147 shares for approximately $25 million, inclusive of shares repurchased under an accelerated share repurchase program and shares surrendered to cover tax withholdings associated with the vesting of equity awards held by management. The Company also paid a quarterly dividend of approximately $8 million, or $0.50 per share, in the quarter.
For the first half of 2018, the Company repurchased approximately1.5 million shares for approximately $188 million, inclusive of shares repurchased under an accelerated share repurchase program and shares surrendered to cover tax withholdings associated with the vesting of equity awards held by management. The Company also paid quarterly dividends totaling approximately $17 million in the first half of 2018.
Since 2009, the Company has repurchased approximately $1.05 billion of its common stock and, since 2014, paid approximately $83 million in dividends. At the end of the second quarter of 2018, approximately $307 million remained available for future share repurchases under the Company’s existing share repurchase programs.
The Company’s Board of Directors authorized a dividend of $0.50 per share, payable on September 17, 2018 to shareholders of record at the close of business on September 5, 2018.
Outlook
For fiscal 2018, the Company is raising its outlook for adjusted net income per diluted share to a range of $8.09 to $8.29 from a range of $7.95 to $8.20. This compares to adjusted net income per diluted share of $7.91 in fiscal 2017. The Company now expects total net sales for the year to be in the range of $1.945 to $1.955 billion. This guidance assumes a positive mid-single digit comparable retail sales increase. The Company expects adjusted operating margin to be in the range of 8.5% to 8.7%.
| 3 |
The Company expects net income per diluted share in the third quarter of 2018 to be in the range of $2.97 to $3.07 based upon a mid-single digit comparable retail sales increase. This compares to adjusted net income per diluted share of $2.58 in the third quarter of 2017.
Additional details underlying the Company’s outlook for the third quarter and full year 2018 will be provided on the conference call and will be available in the conference call transcript, which will be posted on our website. An audio archive will also be available on the Company’s website.
Conference Call Information
The Children’s Place will host a conference call today at 8:00 a.m. Eastern Time to discuss its second quarter 2018 results and the Company’s outlook. The call will be broadcast live at http://investor.childrensplace.com. An audio archive will be available on the Company’s website approximately one hour after the conclusion of the call. A conference call transcript will also be posted on our website.
Financial Results
The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. Adjusted net income, adjusted net income per diluted share, adjusted gross profit, adjusted selling, general, and administrative expense, and adjusted operating income are non-GAAP measures, and are not intended to replace GAAP financial information and may be different from non-GAAP measures reported by other companies. The Company believes the income and expense items excluded as non-GAAP adjustments are not reflective of the performance of its core business and that providing this supplemental disclosure to investors will facilitate comparisons of the past and present performance of its core business. The Company uses non-GAAP measures to evaluate and measure operating performance, including, to measure performance for purposes of the Company’s annual bonus and long-term incentive compensation plans. A reconciliation of non-GAAP to GAAP financial information is provided at the end of this press release.
About The Children’s Place, Inc.
The Children’s Place is the largest pure-play children’s specialty apparel retailer in North America. The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell fashionable, high-quality merchandise at value prices, primarily under the proprietary “The Children’s Place,” “Place” and “Baby Place” brand names. As of August 4, 2018, the Company operated 992 stores in the United States, Canada and Puerto Rico, an online store at www.childrensplace.com, and had 211 international points of distribution open and operated by its eight franchise partners in 20 countries.
| 4 |
Forward Looking Statement
This press release contains or may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to the Company’s strategic initiatives and adjusted net income per diluted share. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. These forward-looking statements are based upon the Company’s current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company’s filings with the Securities and Exchange Commission, including in the “Risk Factors” section of its annual report on Form 10-K for the fiscal year ended February 3, 2018. Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by changes in economic conditions, the risk that the Company’s strategic initiatives to increase sales and margin are delayed or do not result in anticipated improvements, the risk of delays, interruptions and disruptions in the Company’s global supply chain, including resulting from foreign sources of supply in less developed countries or more politically unstable countries, the risk that the cost of raw materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost increases through value engineering or price increases, various types of litigation, including class action litigations brought under consumer protection, employment, and privacy and information security laws and regulations, the imposition of regulations affecting the importation of foreign-produced merchandise, including duties and tariffs, and the uncertainty of weather patterns. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Contact: Investor Relations, (201) 453-6693
(Tables Follow)
| 5 |
THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Second Quarter Ended | Year-To-Date Ended | |||||||||||||||
| August 4, | July 29, | August 4, | July 29, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net sales | $ | 448,718 | $ | 373,601 | $ | 885,031 | $ | 810,277 | ||||||||
| Cost of sales | 293,912 | 245,196 | 570,034 | 511,281 | ||||||||||||
| Gross profit | 154,806 | 128,405 | 314,997 | 298,996 | ||||||||||||
| Selling, general and administrative expenses | 124,223 | 108,227 | 242,689 | 220,354 | ||||||||||||
| Asset impairment charges | 3,979 | 974 | 5,236 | 1,458 | ||||||||||||
| Other costs | (13 | ) | 6 | (9 | ) | 10 | ||||||||||
| Depreciation and amortization | 16,595 | 15,979 | 34,001 | 31,671 | ||||||||||||
| Operating income | 10,022 | 3,219 | 33,080 | 45,503 | ||||||||||||
| Interest expense | (946 | ) | (291 | ) | (1,243 | ) | (329 | ) | ||||||||
| Income before taxes | 9,076 | 2,928 | 31,837 | 45,174 | ||||||||||||
| Provision for income taxes | 1,590 | (11,362 | ) | (7,186 | ) | (5,345 | ) | |||||||||
| Net income | $ | 7,486 | $ | 14,290 | $ | 39,023 | $ | 50,519 | ||||||||
| Earnings per common share | ||||||||||||||||
| Basic | $ | 0.45 | $ | 0.81 | $ | 2.32 | $ | 2.86 | ||||||||
| Diluted | $ | 0.45 | $ | 0.79 | $ | 2.27 | $ | 2.76 | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 16,636 | 17,704 | 16,819 | 17,659 | ||||||||||||
| Diluted | 16,715 | 18,177 | 17,225 | 18,289 | ||||||||||||
| 6 |
THE CHILDREN’S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
| Second Quarter Ended | Year-To-Date Ended | |||||||||||||||
| August 4, | July 29, | August 4, | July 29, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income | $ | 7,486 | $ | 14,290 | $ | 39,023 | $ | 50,519 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Asset impairment charges | 3,979 | 974 | 5,236 | 1,458 | ||||||||||||
| Organizational design costs | 715 | - | 715 | - | ||||||||||||
| Restructuring costs | 600 | (75 | ) | 2,261 | 562 | |||||||||||
| System transition costs | 250 | - | 250 | - | ||||||||||||
| Distribution network review costs | 150 | - | 150 | - | ||||||||||||
| Provision for legal settlement | - | - | - | 5,000 | ||||||||||||
| Sales tax audit | - | 418 | - | 418 | ||||||||||||
| Foreign exchange penalties | - | 300 | - | 300 | ||||||||||||
| Insurance claim deductible | - | 250 | - | 250 | ||||||||||||
| Insurance claim settlement | - | - | (606 | ) | - | |||||||||||
| Aggregate impact of Non-GAAP adjustments | 5,694 | 1,867 | 8,006 | 7,988 | ||||||||||||
| Income tax effect (1) | (1,513 | ) | (527 | ) | (2,049 | ) | (2,894 | ) | ||||||||
| Prior year uncertain tax positions (2) | - | - | (112 | ) | (4,048 | ) | ||||||||||
| Net impact of Non-GAAP adjustments | 4,181 | 1,340 | 5,845 | 1,046 | ||||||||||||
| Adjusted net income | $ | 11,667 | $ | 15,630 | $ | 44,868 | $ | 51,565 | ||||||||
| GAAP net income per common share | $ | 0.45 | $ | 0.79 | $ | 2.27 | $ | 2.76 | ||||||||
| Adjusted net income per common share | $ | 0.70 | $ | 0.86 | $ | 2.60 | $ | 2.82 | ||||||||
| (1) | The tax effects of the non-GAAP items are calculated based on the statutory rate of the jurisdiction in which the discrete item resides. |
| (2) | Prior year tax related to uncertain tax positions. |
| Second Quarter Ended | Year-To-Date Ended | |||||||||||||||
| August 4, | July 29, | August 4, | July 29, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Operating income | $ | 10,022 | $ | 3,219 | $ | 33,080 | $ | 45,503 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Asset impairment charges | 3,979 | 974 | 5,236 | 1,458 | ||||||||||||
| Organizational design costs | 715 | - | 715 | - | ||||||||||||
| Restructuring costs | 600 | (75 | ) | 2,261 | 562 | |||||||||||
| System transition costs | 250 | - | 250 | - | ||||||||||||
| Distribution network review costs | 150 | - | 150 | - | ||||||||||||
| Provision for legal settlement | - | - | - | 5,000 | ||||||||||||
| Sales tax audit | - | 418 | - | 418 | ||||||||||||
| Foreign exchange penalties | - | 300 | - | 300 | ||||||||||||
| Insurance claim deductible | - | 250 | - | 250 | ||||||||||||
| Insurance claim settlement | - | - | (606 | ) | - | |||||||||||
| Aggregate impact of Non-GAAP adjustments | 5,694 | 1,867 | 8,006 | 7,988 | ||||||||||||
| Adjusted operating income | $ | 15,716 | $ | 5,086 | $ | 41,086 | $ | 53,491 | ||||||||
| 7 |
THE CHILDREN’S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
| Second Quarter Ended | Year-To-Date Ended | |||||||||||||||
| August 4, | July 29, | August 4, | July 29, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Gross Profit | $ | 154,806 | $ | 128,405 | $ | 314,997 | $ | 298,996 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Restructuring costs | (50 | ) | - | 1,239 | 377 | |||||||||||
| Insurance claim deductible | - | 250 | - | 250 | ||||||||||||
| Aggregate impact of Non-GAAP adjustments | (50 | ) | 250 | 1,239 | 627 | |||||||||||
| Adjusted Gross Profit | $ | 154,756 | $ | 128,655 | $ | 316,236 | $ | 299,623 | ||||||||
| Second Quarter Ended | Year-To-Date Ended | |||||||||||||||
| August 4, | July 29, | August 4, | July 29, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Selling, general and administrative expenses | $ | 124,223 | $ | 108,227 | $ | 242,689 | $ | 220,354 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Organizational design costs | (715 | ) | - | (715 | ) | - | ||||||||||
| Restructuring costs | (650 | ) | 75 | (1,022 | ) | (185 | ) | |||||||||
| System transition costs | (250 | ) | - | (250 | ) | - | ||||||||||
| Distribution network review costs | (150 | ) | - | (150 | ) | - | ||||||||||
| Provision for legal settlement | - | - | - | (5,000 | ) | |||||||||||
| Sales tax audit | - | (418 | ) | - | (418 | ) | ||||||||||
| Foreign exchange penalties | - | (300 | ) | - | (300 | ) | ||||||||||
| Insurance claim settlement | - | - | 606 | - | ||||||||||||
| Aggregate impact of Non-GAAP adjustments | (1,765 | ) | (643 | ) | (1,531 | ) | (5,903 | ) | ||||||||
| Adjusted Selling, general and administrative expenses | $ | 122,458 | $ | 107,584 | $ | 241,158 | $ | 214,451 | ||||||||
| 8 |
THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| August 4, | February 3, | July 29, | ||||||||||
| 2018 | 2018* | 2017 | ||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 106,405 | $ | 244,519 | $ | 202,332 | ||||||
| Short-term investments | - | 15,000 | 55,800 | |||||||||
| Accounts receivable | 47,622 | 26,094 | 33,077 | |||||||||
| Inventories | 366,461 | 324,435 | 311,047 | |||||||||
| Other current assets | 53,224 | 46,456 | 54,100 | |||||||||
| Total current assets | 573,712 | 656,504 | 656,356 | |||||||||
| Property and equipment, net | 257,055 | 258,537 | 263,311 | |||||||||
| Other assets, net | 23,577 | 25,187 | 51,008 | |||||||||
| Total assets | $ | 854,344 | $ | 940,228 | $ | 970,675 | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||
| Revolving loan | $ | 89,335 | $ | 21,460 | $ | 54,500 | ||||||
| Accounts payable | 250,184 | 210,300 | 219,334 | |||||||||
| Accrued expenses and other current liabilities | 107,789 | 128,764 | 122,651 | |||||||||
| Total current liabilities | 447,308 | 360,524 | 396,485 | |||||||||
| Other liabilities | 83,913 | 106,005 | 76,530 | |||||||||
| Total liabilities | 531,221 | 466,529 | 473,015 | |||||||||
| Stockholders’ equity | 323,123 | 473,699 | 497,660 | |||||||||
| Total liabilities and stockholders’ equity | $ | 854,344 | $ | 940,228 | $ | 970,675 | ||||||
| * | Derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018. |
| 9 |
THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(In thousands)
(Unaudited)
| 26 Weeks Ended | 26 Weeks Ended | |||||||
| August 4, | July 29, | |||||||
| 2018 | 2017 | |||||||
| Net income | $ | 39,023 | $ | 50,519 | ||||
| Non-cash adjustments | 59,669 | 48,524 | ||||||
| Working Capital | (87,381 | ) | (27,595 | ) | ||||
| Net cash provided by operating activities | 11,311 | 71,448 | ||||||
| Net cash used in investing activities | (13,315 | ) | (30,174 | ) | ||||
| Net cash used in financing activities | (136,365 | ) | (32,351 | ) | ||||
| Effect of exchange rate changes on cash | 255 | (300 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | (138,114 | ) | 8,623 | |||||
| Cash and cash equivalents, beginning of period | 244,519 | 193,709 | ||||||
| Cash and cash equivalents, end of period | $ | 106,405 | $ | 202,332 | ||||
###
| 10 |
Exhibit 99.2
THE CHILDREN’S PLACE CONTINUES CAPITAL RETURN PROGRAM, DECLARES QUARTERLY DIVIDEND
Secaucus, New Jersey – August 23, 2018 – The Children’s Place, Inc. (Nasdaq: PLCE), the largest pure-play children’s specialty apparel retailer in North America, today announced that its Board of Directors has declared a quarterly dividend.
Jane Elfers, President and Chief Executive Officer, commented, “The continuation of our quarterly dividend is a further reflection of our confidence in our ability to execute on our strategic initiatives and our continuing commitment to return excess capital to shareholders. The Children’s Place has a profitable business model, which generates strong cash flow. Since 2009, we have repurchased approximately $1.05 billion of our common stock and since 2014, paid approximately $83 million in dividends.”
The Board declared a quarterly cash dividend of $0.50 per share to be paid September 17, 2018 to shareholders of record at the close of business on September 5, 2018. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by the Company’s Board of Directors based on a number of factors, including business and market conditions, the Company’s future financial performance and other investment priorities.
About The Children’s Place, Inc.
The Children’s Place is the largest pure-play children’s specialty apparel retailer in North America. The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell fashionable, high-quality merchandise at value prices, primarily under the proprietary “The Children’s Place,” “Place” and “Baby Place” brand names. As of August 4, 2018, the Company operated 992 stores in the United States, Canada and Puerto Rico, an online store at www.childrensplace.com, and had 211 international points of distribution open and operated by its eight franchise partners in 20 countries.
Forward Looking Statement
This press release contains or may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to the Company’s strategic initiatives and adjusted net income per diluted share. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. These forward-looking statements are based upon the Company’s current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company’s filings with the Securities and Exchange Commission, including in the “Risk Factors” section of its annual report on Form 10-K for the fiscal year ended February 3, 2018. Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by changes in economic conditions, the risk that the Company’s strategic initiatives to increase sales and margin are delayed or do not result in anticipated improvements, the risk of delays, interruptions and disruptions in the Company’s global supply chain, including resulting from foreign sources of supply in less developed countries or more politically unstable countries, the risk that the cost of raw materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost increases through value engineering or price increases, various types of litigation, including class action litigations brought under consumer protection, employment, and privacy and information security laws and regulations, the imposition of regulations affecting the importation of foreign-produced merchandise, including duties and tariffs, and the uncertainty of weather patterns. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Contact: Investor Relations (201) 453-6693