The Children's Place Retail Stores, Inc. Reports Second Quarter 2008 Financial Results
Second Quarter
- Net sales from continuing operations for the second quarter increased 16% to $338.0 million, compared to $290.5 million last year.
- Comparable store sales increased 9% in the second quarter of 2008 compared to a 1% decrease last year.
- Income from continuing operations after tax was $2.7 million, or
$0.09 earnings per share, in the second quarter of 2008, compared
to a loss of $19.8 million, or $0.68 loss per share, last year.
The Company's second quarter income from continuing operations
included several items which the Company deems to be unusual or
one-time in nature, including:
- Transition services income net of variable expenses of $5.4 million pre-tax in the second quarter of 2008 for services being provided to the acquirer of the DSNA business;
- Sale of a significant store lease for approximately $2.3 million pre-tax in the second quarter of 2008;
- Professional fees associated with the Company's restructuring activities of $1.2 million pre-tax in the second quarter of 2008;
- Legal fees related to the Company's 2006 stock-option investigation of $0.5 million pre-tax in the second quarter of 2008, and $1.8 million pre-tax in the second quarter of 2007; and
- Stock option tolling expenses of $1.3 million pre-tax in the second quarter of 2007.
- Excluding the unusual or one-time items mentioned above from the second quarters of both years, adjusted loss from continuing operations after tax was $0.9 million, or $0.03 loss per share, in the second quarter of 2008, compared to a loss of $17.8 million, or $0.61 loss per share, in the second quarter of 2007. The second quarter loss excluding these items is a non-GAAP measure. The Company believes the excluded items are not indicative of the performance of its core business and that by providing this supplemental disclosure to investors it may facilitate comparisons of its past and future performance. A reconciliation of income (loss) from continuing operations as reported to adjusted loss is included in this press release.
- Net income including the impact of discontinued operations was breakeven in the second quarter of 2008, compared to a loss of $28.1 million, or $0.97 loss per share, last year.
- The effective tax rate for continuing operations in the second quarter was 39%.
- During the second quarter, the Company closed four stores.
Fiscal Year-to-Date
- Net sales from continuing operations increased 14% to $738.2 million, for fiscal year-to-date 2008, compared to $646.5 million for the same period of the prior year.
- Comparable store sales increased 7% year-to-date 2008 compared to a 1% increase last year.
- Income from continuing operations after tax was $22.2 million, or $0.75 earnings per share, year-to-date 2008, compared to a loss of $0.7 million, or $0.03 loss per share, last year.
- Excluding the unusual or one-time items from both years, income from continuing operations after tax was $19.8 million, or $0.67 earnings per share, year-to-date 2008, compared to $2.5 million, or $0.09 earnings per share, last year. As previously noted, this is a non-GAAP measure which the Company is providing as a supplemental disclosure.
- Net income including the impact of discontinued operations was $19.5 million, or $0.66 earnings per share, year-to-date 2008, compared to a loss of $13.4 million, or $0.46 loss per share, last year.
- Year-to-date, the Company opened three stores and closed five.
As previously announced, during the second quarter the Company closed on an $85 million five-year term loan to ensure adequate liquidity would be available in the event that the difficult economic conditions persist and adversely impact the Company's business. Under negotiated terms of the loan, the Company has voluntary prepayment opportunities and is required to repay 50% of excess cash flow, as defined by the agreement, at the end of each fiscal year. The Company also signed a new credit agreement for a $200 million asset-based revolving credit facility during the quarter which replaced the revolving credit facility previously in effect.
Chuck Crovitz, Interim Chief Executive Officer of The Children's Place Retail Stores, Inc., commented, "We are gratified to see that the hard work and dedication of our entire team continued to pay off in the second quarter. Overall, we achieved solid top-line growth for the quarter while implementing cost reduction initiatives to better support our value positioning. Our merchandise assortment for summer was very well-received by customers and our sharpened E-commerce marketing and merchandising efforts helped to drive web traffic and sales.
"We expect that consumer purchasing power will continue to be pressured by ongoing weakness in the economy and we are maintaining our focus on offering great color, great outfitting, and great fashion at a tremendous value."
The Children's Place will host a conference call to discuss its second quarter results today at 10:00 a.m. Eastern Time. Interested parties are invited to listen to the call by dialing 1-800-862-9098 and providing the Conference ID, PLCE. The call will also be webcast live and can be accessed via the Company's web site, www.childrensplace.com. A replay of the call will be available approximately one hour after the conclusion of the call, until midnight on August 28, 2008. To access the replay, please dial 1-800-753-6121, or you may listen to the audio archive on the Company's website.
The Children's Place Retail Stores, Inc. is a leading specialty retailer of children's merchandise. The Company designs, contracts to manufacture and sells high-quality, value-priced merchandise under the proprietary "The Children's Place" brand name. As of August 2, 2008, the Company owned and operated 902 stores and its online store at www.childrensplace.com.
This press release (and above referenced call) may contain certain forward-looking statements regarding future circumstances. 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 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 report on Form 10-K. The following risks and uncertainties could cause actual results, events and performance to differ materially: the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risk resulting from the highly competitive nature of the Company's business and its dependence on consumer spending patterns, which may be affected by the downturn in the economy, and risks and uncertainties relating to other elements of the Company's strategic review. Readers (or listeners on the call) 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. The inclusion of any statement in this release does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Second Quarter Year-to-Date
Ending Ending
-------------------- --------------------
August 2, August 4, August 2, August 4,
2008 2007 2008 2007
--------- --------- --------- ---------
Net sales $ 338,029 $ 290,498 $ 738,241 $ 646,493
Cost of sales 209,480 197,054 438,600 401,075
--------- --------- --------- ---------
Gross profit 128,549 93,444 299,641 245,418
Selling, general and
administrative
expenses 105,793 109,219 225,203 216,994
Asset impairment
charge 127 635 127 635
Depreciation and
amortization 17,709 15,154 35,361 29,751
--------- --------- --------- ---------
Income (loss) from
continuing operations
before interest and
taxes 4,920 (31,564) 38,950 (1,962)
Interest income
(expense), net (398) 428 (891) 1,428
--------- --------- --------- ---------
Income (loss) from
continuing operations
before income taxes 4,522 (31,136) 38,059 (534)
Provision (benefit) for
income taxes 1,786 (11,330) 15,903 203
--------- --------- --------- ---------
Income (loss) from
continuing
operations net of
income taxes 2,736 (19,806) 22,156 (737)
(Loss) from
discontinued
operations net of
income taxes (2,725) (8,285) (2,627) (12,640)
--------- --------- --------- ---------
Net income (loss) $ 11 $ (28,091) $ 19,529 $ (13,377)
========= ========= ========= =========
Basic income (loss)
from continuing
operations per
common share $ 0.09 $ (0.68) $ 0.76 $ (0.03)
(Loss) from
discontinued
operations per
common share (0.09) (0.28) (0.09) (0.43)
--------- --------- --------- ---------
Basic net income
(loss)per common
share $ 0.00 $ (0.97)* $ 0.67 $ (0.46)
========= ========= ========= =========
Basic weighted
average common shares
outstanding 29,255 29,084 29,177 29,084
Diluted income (loss)
from continuing
operations per common
share $ 0.09 $ (0.68) $ 0.75 $ (0.03)
Income (loss) from
discontinued
operations per
common share (0.09) (0.28) (0.09) (0.43)
--------- --------- --------- ---------
Diluted net income
(loss)per common
share $ 0.00 $ (0.97)* $ 0.66 $ (0.46)
========= ========= ========= =========
Diluted weighted
average common
shares and common
share
equivalents
outstanding 29,599 29,084 29,395 29,084
* Does not add due to rounding.
Note: All periods presented above reflect the exit of the DSNA
business, which has been classified as a discontinued operation in
accordance with GAAP. Continuing operations, as presented above,
includes the operations of The Children's Place business only.
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
August 2, February 2, August 4,
2008 2008 2007
---------- ---------- ----------
Current assets:
Cash and investments $ 146,704 $ 81,626 $ 80,161
Accounts receivable 26,150 41,143 34,609
Inventories 219,100 196,606 247,091
Other current assets 100,316 92,910 84,642
Restricted assets in
bankruptcy estate of
subsidiary 85,265 -- --
Current assets held for sale -- 98,591 95,776
---------- ---------- ----------
Total current assets 577,535 510,876 542,279
Property and equipment, net 333,783 354,141 342,708
Other assets, net 97,868 128,357 87,273
Non-current assets held for
sale -- 4,163 60,026
---------- ---------- ----------
Total assets $1,009,186 $ 997,537 $1,032,286
========== ========== ==========
Current liabilities:
Revolving credit facility $ -- $ 88,976 $ 72,225
Short term portion of term
loan 30,000 -- --
Accounts payable 80,287 80,807 120,766
Accrued expenses and
other current liabilities 99,145 140,712 127,702
Liabilities of the bankrupt
estate of subsidiary 108,409 -- --
---------- ---------- ----------
Total current liabilities 317,841 310,495 320,693
Long term portion of term
loan 55,000 -- --
Other liabilities 140,119 214,809 197,963
---------- ---------- ----------
Total liabilities 512,960 525,304 518,656
Stockholders' equity 496,226 472,233 513,630
---------- ---------- ----------
Total liabilities and
stockholders' equity $1,009,186 $ 997,537 $1,032,286
========== ========== ==========
Note: The balance sheet as of August 2, 2008, reflects DSNA
restricted assets available to settle its liabilities through
bankruptcy. "Assets held for sale" on the February 2, 2008 and
August 4, 2007, balance sheets reflect the assets sold to
an affiliate of The Walt Disney Company. The remaining assets and
liabilities of the Disney Store business are reflected in their
respective balance sheet categories on the February 2, 2008 and
August 4, 2007 balance sheets.
THE CHILDREN'S PLACE RETAIL STORES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In millions, except per share amounts)
(Unaudited)
Second Quarter Year-to-Date
Ending Ending
-------------------- --------------------
August 2, August 4, August 2, August 4,
2008 2007 2008 2007
--------- --------- --------- ---------
Income/(loss) from
continuing
operations net of
income taxes $ 2.7 $ (19.8) $ 22.2 $ (0.7)
Net transition
services income (5.4) -- (5.4) --
Sale of store lease (2.3) -- (2.3) --
Tolling of stock
options -- 1.3 -- 1.7
Professional fees:
Stock option/special
investigation fees 0.5 1.8 1.3 3.4
Company restructuring 1.2 2.5
--------- --------- --------- ---------
Aggregate impact of
significant items (6.0) 3.1 (3.9) 5.1
Income tax effect of
significant items 2.4 (1.1) 1.5 (1.9)
--------- --------- --------- ---------
Adjustments after
taxes (3.6) 2.0 (2.4) 3.2
Adjusted income (loss)
from continuing
operations net of
income taxes (0.9) (17.8) 19.8 2.5
========= ========= ========= =========
GAAP income (loss)
from continuing
operations per common
share $ 0.09 $ (0.68) $ 0.75 $ (0.03)
Adjusted income (loss)
from continuing
operations per common
share $ (0.03) $ (0.61) $ 0.67 $ 0.09
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SOURCE: The Children's Place Retail Stores, Inc.
The Children's Place Retail Stores, Inc.
Susan Riley, EVP, Finance & Administration
(201) 558-2400
Jane Singer, VP, Investor Relations
(201) 453-6955