The Children's Place Retail Stores, Inc. Reports Preliminary Fourth Quarter and Fiscal Year 2004 Financial Results
SECAUCUS, N.J.--(BUSINESS WIRE)--March 10, 2005--The Children's Place Retail Stores, Inc. (Nasdaq: PLCE) The Children's Place Retail Stores, Inc. (Nasdaq: PLCE) today reported preliminary unaudited financial results for the fourth quarter and fiscal year ended January 29, 2005. As discussed below, all results presented in this press release exclude the effect of any potential corrections to the Company's lease-related accounting practices in light of a recent SEC clarification.
Fourth Quarter
Net sales for the fourth quarter increased 97% to $462.1 million, compared with $234.6 million for the same period in 2003. Fourth quarter sales results included 10 weeks of sales totaling $163.4 million from the Disney Store North America, which was acquired as of November 21, 2004. Comparable store sales at The Children's Place stores increased 17% in the quarter, on top of a 9% increase for the same period last year. The Company's fourth quarter net income was $24.0 million and income before extraordinary gain was $23.7 million, as compared to net income of $15.2 million for the fourth quarter last year. The extraordinary gain, net of taxes, of $0.3 million, in the fourth quarter of 2004, resulted from the acquisition of Disney Store North America, and represents the excess of the fair value of assets acquired and liabilities assumed over the amounts paid for the Disney Store North America business. Fourth quarter earnings per share were $0.85, compared to earnings per share of $0.55 in the fiscal 2003 period. Earnings per share before the extraordinary gain were $0.84 in the fourth quarter.
To facilitate the analysis of net income, the Company has adjusted fourth quarter and fiscal 2004 net income to exclude a non-cash item and the extraordinary gain mentioned above, both associated with the Disney Store North America acquisition. The Company has excluded such items, because it does not believe they are indicative of the core business and that the adjusted presentation is a beneficial supplemental disclosure to investors in analyzing its past and future performance. Adjusted net income was $26.8 million in the fourth quarter 2004, a 76% increase over net income of $15.2 million in fiscal 2003. Adjusted earnings per share were $0.95 in the fourth quarter, a 73% increase over earnings per share of $0.55 in the fiscal 2003 period. Accompanying this press release is a reconciliation of net income to adjusted net income for the fourth quarter and fiscal year ended January 29, 2005.
The Company opened 17 Children's Place stores and closed one store during the fourth quarter. In addition, consistent with its plans, the Company closed seven Disney Stores.
Fiscal Year 2004
Net sales for the fiscal year increased 45% to $1.157 billion, from $797.9 million in 2003. Fiscal 2004 sales results included 10 weeks of sales totaling $163.4 million from the Disney Store North America. Comparable store sales at The Children's Place stores increased 16% for the fiscal year, compared to a 4% increase last year. Net income was $43.3 million and income before extraordinary gain was $43.0 million, compared to net income of $23.0 million last year. Fiscal 2004 earnings per share were $1.57 compared to earnings per share of $0.85 in fiscal 2003. Earnings per share before the extraordinary gain were $1.56 in fiscal 2004.
Adjusted net income, as defined above, was $46.1 million in fiscal 2004, a 100% increase over net income of $23.0 million in fiscal 2003. Adjusted earnings per share were $1.67 compared to earnings per share of $0.85 in 2003.
The Company opened 62 Children's Place stores and closed three stores during the fiscal year. In addition, the Company closed seven Disney Stores.
"Fiscal 2004 was a remarkable year. We are pleased with our fourth quarter and full year financial performance, as evidenced by our strong revenues and earnings results," said Ezra Dabah, Chairman and Chief Executive Officer of The Children's Place. "Especially gratifying is that we achieved our strong results while consummating and seamlessly integrating the Disney Store business. This is a testament to the team, the teamwork, and the infrastructure we have in place."
Mr. Dabah concluded, "The Children's Place brand achieved new heights, while the Disney Store acquisition gives us an extraordinary new platform for growth and earnings. We are intent on continuing our strong growth into 2005, and are confident that our business is well-positioned to achieve profitable growth over the long term."
Outlook
The Company now anticipates fiscal 2005 earnings per share in the range of $2.10 to $2.20, before any changes made to the way the Company accounts for lease-related transactions, a non-cash item associated with the Disney Store acquisition, and the effect of new accounting rules requiring the expensing of stock options. The Company plans to initiate the expensing of stock options prospectively beginning with the third quarter of fiscal 2005, in accordance with the requirements of FASB Statement No. 123R.
Lease-Related Accounting Practices
As previously announced and as discussed above, the Company is re-evaluating its lease-related accounting practices in light of a recent SEC clarification. While this evaluation has not been completed, and therefore no decisions have been made, management believes that a restatement of the Company's previously issued financial statements is likely.
Management continues to believe that any correction to the Company's lease-related accounting practices, if necessary, would not have a material impact on net income for the year ended January 29, 2005, nor will any potential restatement have any impact on net sales, comparable store sales or overall cash flows for any period. Further, any correction to the Company's lease accounting practices would not materially impact its anticipated results of operations for the year ending January 28, 2006. The Company is in the process of completing its analysis, which it will review with its audit committee and independent auditors, and will report the results of its review as soon as it has been completed.
Conference Call Information
The Children's Place will host a webcast of its fourth quarter conference call today at 10:00 a.m., Eastern Time. Interested parties are invited to listen to the call at the Company's web site, www.childrensplace.com. An archive of the webcast will be available on the site through Thursday, March 17, 2005.
About The Children's Place Retail Stores, Inc.
The Children's Place Retail Stores, Inc. is a leading specialty retailer of children's merchandise, ages newborn to ten years old. The Company designs, contracts to manufacture and sells high-quality, value-priced apparel and accessories under the "The Children's Place" brand name. As of February 26, 2005, the Company operated 750 The Children's Place stores in North America and owns the subsidiary that operates 306 Disney Stores in North America. The Company also sells The Children's Place merchandise through its virtual store located at www.childrensplace.com.
Use of Non-GAAP Measures
Adjusted net income and adjusted earnings per share are "Non-GAAP financial measures" as defined by the Securities and Exchange Commission, and may differ from non-GAAP financial measures used by other companies. The Company has excluded a non-cash item and the extraordinary gain, both associated with the Disney Store North America acquisition, because it does not believe they are indicative of the core business. The Company is providing adjusted financial information as an addition to, and not as a substitute for, financial measures presented in accordance with generally accepted accounting principles ("GAAP"). The Company believes that the adjusted presentation is a beneficial supplemental disclosure to investors in analyzing its past and future performance. Accompanying this press release is a reconciliation of net income to adjusted net income for the fourth quarter and fiscal year ended January 29, 2005.
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 from those contemplated in such forward-looking statements including, in particular, the risks and uncertainties described in the Company's filings with the Securities and Exchange Commission. Actual results, events, and performance may differ. 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 hereof. We undertake 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 Children's Place or any other person that the events or circumstances described in such statement are material.
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)(a)
13 Weeks Ended:
---------------
January 29, January 31,
----------- -------------
2005 2004
---- ----
Net sales $ 462,108 $ 234,569
Cost of sales 284,322 133,952
----------- --------------
Gross profit 177,786 100,617
Selling, general and
administrative expenses 129,003 65,831
Asset impairment charges 164 448
Depreciation and amortization 10,724 10,471
----------- --------------
Operating income 37,895 23,867
Interest expense (income), net 177 (127)
----------- --------------
Income before income taxes and
extraordinary gain 37,718 23,994
Provision for income taxes 14,031 8,819
----------- --------------
Income before extraordinary gain 23,687 15,175
Extraordinary gain (net of taxes) 273 --
----------- --------------
Net income $ 23,960 $ 15,175
=========== ==============
Basic income per share $ 0.88 $ 0.57
Basic weighted average number
of shares outstanding 27,076 26,726
Diluted income per share before
extraordinary gain $ 0.84 $ 0.55
Diluted Income per share $ 0.85 $ 0.55
Diluted weighted average number
of shares outstanding 28,106 27,510
52 Weeks Ended:
---------------
January 29, January 31,
----------- -------------
2005 2004
---- ----
Net sales $ 1,157,548 $ 797,938
Cost of sales 715,623 485,671
----------- --------------
Gross profit 441,925 312,267
Selling, general and
administrative expenses 329,916 235,293
Asset impairment charges 164 448
Depreciation and amortization 41,920 40,028
----------- --------------
Operating income 69,925 36,498
Interest expense (income), net 22 (255)
----------- --------------
Income before income taxes and
extraordinary gain 69,903 36,753
Provision for income taxes 26,912 13,796
----------- --------------
Income before extraordinary gain 42,991 22,957
Extraordinary gain (net of taxes) 273 --
----------- --------------
Net income $ 43,264 $ 22,957
=========== ==============
Basic income per share $ 1.61 $ 0.86
Basic weighted average number
of shares outstanding 26,919 26,646
Diluted income per share before
extraordinary gain $ 1.56 $ 0.85
Diluted income per share $ 1.57 $ 0.85
Diluted weighted average number
of shares outstanding 27,633 27,099
(a)These condensed consolidated statements of income
exclude the effects of any potential corrections to the Company's
lease-related accounting practices in light of a recent SEC
clarification.
THE CHILDREN'S PLACE RETAIL STORES, INC.
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
(In thousands, except per share amounts)(a)
13 Weeks Ended January 29, 2005
---------------------------------------
Reported Adjustments Adjusted
---------- ----------- -----------
Net sales $ 462,108 $ -- $ 462,108
Cost of sales(b) 284,322 (5,044) 279,278
---------- ----------- -----------
Gross profit 177,786 5,044 182,830
Selling, general
and administrative
expenses 129,003 -- 129,003
Asset impairment
charges 164 -- 164
Depreciation
and amortization 10,724 -- 10,724
---------- ----------- -----------
Operating income 37,895 5,044 42,939
Interest expense
(income), net 177 -- 177
---------- ---------- -----------
Income before
income taxes and
extraordinary gain 37,718 5,044 42,762
Provision for
income taxes 14,031 1,942 15,973
---------- ----------- -----------
Income before
extraordinary gain 23,687 3,102 26,789
Extraordinary
gain (net of
taxes(c) 273 (273) 0
---------- ----------- -----------
Net income $ 23,960 $ 2,829 $ 26,789
========== =========== ===========
Basic income per
share $ 0.88 $ 0.11 $ 0.99
Basic weighted
average number
of shares
outstanding 27,076 27,076 27,076
Diluted income
per share $ 0.85 $ 0.10 $ 0.95
Diluted weighted
average number
of shares
outstanding 28,106 28,106 28,106
52 Weeks Ended January 29, 2005
---------------------------------------
Reported Adjustments Adjusted
---------- ----------- -----------
Net sales $1,157,548 $ -- $ 1,157,548
Cost of sales(b) 715,623 (5,044) 710,579
---------- ----------- -----------
Gross profit 441,925 5,044 446,969
Selling, general
and administrative
expenses 329,916 -- 329,916
Asset impairment
charges 164 -- 164
Depreciation
and amortization 41,920 -- 41,920
----------- ----------- -----------
Operating income 69,925 5,044 74,969
Interest expense
(income), net 22 -- 22
---------- ----------- -----------
Income before
income taxes and
extraordinary gain 69,903 5,044 74,947
Provision for
income taxes 26,912 1,942 28,854
---------- ---------- -----------
Income before
extraordinary gain 42,991 3,102 46,093
Extraordinary
gain (net of
taxes(c) 273 (273) 0
---------- ---------- -----------
Net income $ 43,264 $ 2,829 $ 46,093
========== =========== ===========
Basic income per
share $ 1.61 $ 0.10 $ 1.71
Basic weighted
average number
of shares
outstanding 26,919 26,919 26,919
Diluted income
per share $ 1.57 $ 0.10 $ 1.67
Diluted weighted
average number
of shares
outstanding 27,633 27,633 27,633
(a)This reconciliation of net income to adjusted net income
excludes the effects of any potential corrections to the Company's
lease-related accounting practices in light of a recent SEC
clarification.
(b)The adjustment reverses the higher cost of sales resulting from
the write-up of the acquired Disney Store inventory to its fair value
from the value determined under the retail inventory method for the
inventory that was sold during the 10 weeks ended January 29, 2005.
Approximately $1.2 million fair value inventory write-up remains on
the balance sheet as of January 29, 2005. The Company expects this
remaining balance will be recorded as a cost of sales during the first
quarter of fiscal 2005 as the remaining acquired inventory is sold.
(c) The extraordinary gain represents the fair value of assets
acquired and liabilities assumed in excess of amounts paid to acquire
the Disney Store North America.
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS(a)
(In thousands)
(Unaudited)
January 29, 2005 January 31, 2004
------------------ ------------------
Current assets:
Cash and cash equivalents $ 165,196 $ 74,772
Accounts receivable 23,987 8,462
Inventories 161,970 96,128
Other current assets 40,427 20,070
------------------ ------------------
Total current assets 391,580 199,432
Property and equipment, net 153,140 146,707
Other assets, net 12,350 13,527
------------------ ------------------
Total assets $ 557,070 $ 359,666
================== ==================
Current liabilities:
Revolving credit facility $ 37,268 $ 0
Accounts payable 78,106 35,173
Accrued expenses and
other current liabilities 100,657 49,984
------------------ ------------------
Total current liabilities 216,031 85,157
Other liabilities 28,472 17,504
------------------ ------------------
Total liabilities 244,503 102,661
Stockholders' equity 312,567 257,005
------------------ ------------------
Total liabilities and
stockholders' equity $ 557,070 $ 359,666
================== ==================
(1)These condensed balance sheets exclude the effects of any
potential corrections to the Company's lease-related accounting
practices in light of a recent SEC clarification.
CONTACT: The Children's Place
Seth Udasin, 201-558-2409
or
Investor Relations:
Heather Anthony, 201-558-2865
SOURCE: The Children's Place Retail Stores, Inc.