<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended October 28, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____________ to
_____________
Commission file number 0-23071
THE CHILDREN'S PLACE RETAIL STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1241495
(State or other jurisdiction of (I. R. S. employer identification
incorporation or organization) number)
915 Secaucus Road
Secaucus, New Jersey 07094
(Address of Principal Executive Offices) (Zip Code)
(201) 558-2400
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $0.10 per share, outstanding at December 1,
2000: 25,892,516 shares.
<PAGE>
THE CHILDREN'S PLACE RETAIL STORES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED OCTOBER 28, 2000
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Consolidated Financial Statements: Page
----
<S> <C> <C>
Consolidated Balance Sheets....................................................... 1
Consolidated Statements of Income................................................. 2
Consolidated Statements of Cash Flows............................................. 3
Notes to Consolidated Financial Statements....................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ 5
Item 3. Quantitative and Qualitative Disclosures about Market Risks....................... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................ 9
Item 6. Exhibits and Reports on Form 8-K ................................................. 9
Signatures................................................................................. 10
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
OCTOBER 28, 2000 JANUARY 29, 2000
---------------- ----------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................. $ 7,509 $ 2,204
Accounts receivable....................................................... 13,647 5,112
Inventories............................................................... 77,784 56,021
Prepaid expenses and other current assets................................. 11,540 8,527
Deferred income taxes..................................................... 1,720 1,720
-------- --------
Total current assets................................................... 112,200 73,584
Property and equipment, net............................................... 113,648 87,674
Deferred income taxes..................................................... 5,051 5,051
Other assets.............................................................. 5,596 4,650
-------- --------
Total assets........................................................... $236,495 $170,959
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Revolving credit facility................................................. $ 23,851 $ 6,507
Accounts payable.......................................................... 26,991 20,216
Taxes payable............................................................. 8,435 3,495
Accrued expenses, interest and other current liabilities.................. 21,622 16,026
-------- --------
Total current liabilities.............................................. 80,899 46,244
Other long-term liabilities................................................... 6,016 4,649
-------- --------
Total liabilities...................................................... 86,915 50,893
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value; 100,000,000 shares authorized; 25,889,577 shares
and 25,698,120 shares issued and outstanding, at October 28, 2000 and
January 29, 2000, respectively............................................ 2,589 2,570
Additional paid-in capital.................................................... 90,141 88,376
Translation adjustments....................................................... (15) (7)
Retained earnings............................................................. 56,865 29,127
-------- --------
Total stockholders' equity............................................. 149,580 120,066
-------- --------
Total liabilities and stockholders' equity............................. $236,495 $170,959
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
1
<PAGE>
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTEEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
--------------------- -----------------------
OCTOBER 28, 2000 OCTOBER 30, 1999 OCTOBER 28, 2000 OCTOBER 30, 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales............................................ $165,774 $119,442 $403,546 $285,983
Cost of sales........................................ 93,173 64,935 233,557 165,356
-------- -------- -------- --------
Gross profit......................................... 72,601 54,507 169,989 120,627
Selling, general and administrative expenses......... 38,256 28,328 103,384 71,777
Pre-opening costs.................................... 766 1,156 5,035 3,124
Depreciation and amortization........................ 5,525 3,310 15,050 9,497
-------- -------- -------- --------
Operating income..................................... 28,054 21,713 46,520 36,229
Interest expense, net................................ 483 324 941 135
Other expense, net................................... 8 4 135 49
-------- -------- -------- --------
Income before income taxes........................... 27,563 21,385 45,444 36,045
Provision for income taxes........................... 10,718 8,651 17,709 14,526
-------- -------- -------- --------
Net income .......................................... $ 16,845 $ 12,734 $ 27,735 $ 21,519
======== ======== ======== ========
Basic net income per common share.................... $0.65 $0.50 $1.07 $0.85
Basic weighted average common shares outstanding..... 25,885 25,539 25,805 25,300
Diluted net income per common share.................. $0.63 $0.48 $1.04 $0.81
Diluted weighted average common shares outstanding... 26,921 26,680 26,646 26,681
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
2
<PAGE>
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------
OCTOBER 28, 2000 OCTOBER 30, 1999
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $27,735 $21,519
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 15,050 9,497
Deferred financing fee amortization............................. 40 24
Loss on disposals of property and equipment..................... 315 272
Deferred taxes.................................................. 302 (74)
Changes in operating assets and liabilities:
Accounts receivable............................................. (8,535) (4,196)
Inventories..................................................... (21,763) (22,328)
Prepaid expenses and other current assets....................... (3,013) (2,560)
Other assets.................................................... (1,785) (2,937)
Accounts payable................................................ 6,776 8,140
Accrued expenses, interest and other current liabilities........ 10,890 7,330
-------- ---------
Total adjustments............................................ (1,723) (6,832)
-------- ---------
Net cash provided by operating activities.............................. 26,012 14,687
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchases....................................... (39,411) (46,760)
--------- ---------
Net cash used in investing activities.................................. (39,411) (46,760)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and employee stock purchases................. 1,482 2,465
Borrowings under revolving credit facility............................. 437,642 167,951
Repayments under revolving credit facility............................. (420,298) (152,812)
Payment of obligations under capital leases............................ -- (2)
Deferred financing costs............................................... (122) (63)
---------- ----------
Net cash provided by financing activities.............................. 18,704 17,539
---------- ----------
Net increase (decrease) in cash and cash equivalents............ 5,305 (14,534)
Cash and cash equivalents, beginning of period.................. 2,204 16,370
----------- ----------
Cash and cash equivalents, end of period............................... $7,509 $1,836
========== ==========
OTHER CASH FLOW INFORMATION:
Cash paid during the period for interest............................... $1,395 $ 454
Cash paid during the period for income taxes........................... 13,168 10,393
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
3
<PAGE>
THE CHILDREN'S PLACE RETAIL STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Certain information and footnote disclosures required by
generally accepted accounting principles for complete financial statements have
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
accompanying unaudited financial statements contain all material adjustments,
consisting of normal recurring accruals, necessary to present fairly the
Company's financial position, results of operations and cash flow for the
periods indicated, and have been prepared in a manner consistent with the
audited financial statements as of January 29, 2000. These financial statements
should be read in conjunction with the audited financial statements and
footnotes for the fiscal year ended January 29, 2000 included in the Company's
Annual Report on Form 10-K for the year ended January 29, 2000 filed with the
Securities and Exchange Commission. Due to the seasonal nature of the Company's
business, the results of operations for the thirty-nine weeks ended October 28,
2000 are not necessarily indicative of operating results for a full fiscal year.
2. NET INCOME PER COMMON SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," the following table reconciles income and share amounts
utilized to calculate basic and diluted net income per common share.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------- -----------------------
OCTOBER 28, 2000 OCTOBER 30, 1999 OCTOBER 28, 2000 OCTOBER 30, 1999
---------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Net income (in thousands)................. $16,845 $12,734 $27,735 $21,519
======= ======= ======= =======
Basic shares.............................. 25,884,879 25,538,560 25,805,123 25,299,589
Dilutive effect of stock options.......... 1,035,669 1,141,934 841,309 1,381,290
----------- ----------- ------------ -----------
Dilutive shares........................... 26,920,548 26,680,494 26,646,432 26,680,879
========== ========== ========== ==========
Antidilutive options...................... 189,317 178,510 382,192 64,050
</TABLE>
Antidilutive options consist of the weighted average of stock options for
the respective periods ended October 28, 2000 and October 30, 1999 that had an
exercise price greater than the average market price during the period. Such
options are therefore excluded from the computation of diluted shares.
3. LITIGATION
The Company is involved in various legal proceedings arising in the normal
course of its business. In the opinion of management, any ultimate liability
arising out of such proceedings will not have a material adverse effect on the
Company's financial position or results of operations.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of federal securities laws, which are intended to be covered
by the safe harbors created thereby. Those statements include, but may not be
limited to, the discussions of the Company's operating and growth strategy.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties including, without limitation, those set forth under the caption
"Risk Factors" in the Business section of the Company's Annual Report on Form
10-K for the year ended January 29, 2000. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could prove to be inaccurate, and therefore,
there can be no assurance that the forward-looking statements included in this
Quarterly Report on Form 10-Q will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved. The Company undertakes no obligation to
publicly release any revisions to any forward-looking statements contained
herein to reflect events and circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events.
The following discussion should be read in conjunction with the Company's
unaudited financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q and the annual audited financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended January 29, 2000 filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected income
statement data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------- -----------------------
OCTOBER 28, 2000 OCTOBER 30, 1999 OCTOBER 28, 2000 OCTOBER 30, 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................. 56.2 54.4 57.9 57.8
--------- -------- -------- --------
Gross profit................................... 43.8 45.6 42.1 42.2
Selling, general and administrative expenses... 23.1 23.7 25.6 25.1
Pre-opening costs.............................. 0.5 1.0 1.3 1.1
Depreciation and amortization.................. 3.3 2.7 3.7 3.3
--------- --------- --------- ---------
Operating income............................... 16.9 18.2 11.5 12.7
Interest expense, net.......................... 0.3 0.3 0.2 0.1
--------- ---------- --------- ---------
Income before income taxes..................... 16.6 17.9 11.3 12.6
Provision for income taxes..................... 6.4 7.2 4.4 5.1
--------- --------- --------- ---------
Net income..................................... 10.2% 10.7% 6.9% 7.5%
======== ======== ======== ========
Number of stores, end of period................ 392 282 392 282
</TABLE>
Thirteen Weeks Ended October 28, 2000 (the "Third Quarter 2000") Compared to
Thirteen Weeks Ended October 30, 1999 (the "Third Quarter 1999")
Net sales increased by $46.4 million, or 39%, to $165.8 million during the
Third Quarter 2000 from $119.4 million during the Third Quarter 1999. During the
Third Quarter 2000, we opened 21 new stores. Net sales for the 21 new stores, as
well as the other stores that did not qualify as comparable stores, contributed
$41.0 million of the net sales increase. As of October 28, 2000, we operated 392
stores in 42 states, primarily located in regional shopping malls. Our
comparable store sales increased 5% and contributed $5.4 million of our net
sales increase during the Third Quarter 2000. Sales increases were recorded in
all geographic regions. Our comparable store sales increase was primarily
attributable to our folding scooter, which was introduced in the Third Quarter
2000. Comparable store sales increased 15% during the Third Quarter 1999. During
the fourth quarter of 2000, we are opening an additional 8 stores to end the
year with 400 stores.
5
<PAGE>
Gross profit increased by $18.1 million to $72.6 million during the Third
Quarter 2000 from $54.5 million during the Third Quarter 1999. As a percentage
of net sales, gross profit decreased 1.8% to 43.8% during the Third Quarter 2000
from 45.6% during the Third Quarter 1999. The decrease in gross profit, as a
percentage of net sales, was principally due to higher markdowns, lower initial
markups and higher occupancy costs. Our markdowns were higher, as a percentage
of net sales, due to increased planned promotional activity. Our lower initial
markup was primarily due to the lower markup achieved on our scooters. Excluding
our folding scooters, our initial markup during the Third Quarter 2000 would
have been slightly higher than the Third Quarter 1999. Occupancy costs were
higher, as a percentage of net sales, due to increased occupancy costs from new
stores that have not been open long enough to leverage their rent through an
established sales base.
Selling, general and administrative expenses increased $10.0 million to
$38.3 million during the Third Quarter 2000 from $28.3 million during the Third
Quarter 1999. Selling, general and administrative expenses were 23.1% of net
sales during the Third Quarter 2000 as compared with 23.7% during the Third
Quarter 1999. The decrease, as a percentage of net sales, was primarily due to
the leveraging of our corporate administrative expenses and lower marketing
costs, partially offset by higher store payroll wage rates and costs associated
with our E-Commerce website, which was not operational in the Third Quarter
1999.
During the Third Quarter 2000, pre-opening costs were $0.8 million, or 0.5%
of net sales, as compared to $1.2 million, or 1.0% of net sales, during the
Third Quarter 1999. We opened 21 stores, during both the Third Quarter 2000 and
the Third Quarter 1999. During the Third Quarter 2000, pre-opening costs were
favorably impacted by the timing and location of our new store openings. As a
percentage of net sales, pre-opening costs during the Third Quarter 2000 were
also favorably impacted by the leveraging of these costs over a significantly
higher sales base.
Depreciation and amortization amounted to $5.5 million, or 3.3% of net
sales, during the Third Quarter 2000, as compared to $3.3 million, or 2.7% of
net sales, during the Third Quarter 1999. The increase in depreciation and
amortization primarily was a result of increases to our store base and
amortization of our E-Commerce assets, which was not operational in the Third
Quarter 1999.
During the Third Quarter 2000, we recorded interest expense of $0.5
million, or 0.3% of net sales, as compared to interest expense of $0.3 million,
or 0.3% of net sales during the Third Quarter 1999.
Our provision for income taxes for the Third Quarter 2000 was $10.7
million, as compared to a $8.7 million provision for income taxes during the
Third Quarter 1999 due to our increased profitability.
We recorded net income of $16.8 million and $12.7 million during the Third
Quarter 2000 and the Third Quarter 1999, respectively.
THIRTY-NINE WEEKS ENDED OCTOBER 28, 2000 COMPARED TO THIRTY-NINE WEEKS ENDED
OCTOBER 30, 1999
Net sales increased $117.5 million, or 41%, to $403.5 million during the
thirty-nine weeks ended October 28, 2000 from $286.0 million during the
thirty-nine weeks ended October 30, 1999. Net sales for the 100 stores opened
during the thirty-nine weeks ended October 28, 2000, as well as the other stores
that did not qualify as comparable stores, contributed $104.1 million of the net
sales increase. During the thirty-nine weeks ended October 28, 2000, we entered
several new markets in the Pacific Northwest, California and Texas. Our
comparable store sales increased 6% and contributed $13.4 million of our net
sales increase during the thirty-nine weeks ended October 28, 2000. Comparable
store sales increased 21% during the thirty-nine weeks ended October 30, 1999.
Gross profit increased $49.4 million to $170.0 million during the
thirty-nine weeks ended October 28, 2000 from $120.6 million during the
thirty-nine weeks ended October 30, 1999. As a percentage of net sales, gross
profit decreased 0.1% of net sales to 42.1% during the thirty-nine weeks ended
October 28, 2000 from 42.2% during the thirty-nine weeks ended October 30, 1999.
The decrease in gross profit, as a percentage of net sales, was principally due
to higher markdowns, occupancy and distribution costs, partially offset by
higher initial markups.
Selling, general and administrative expenses increased $31.6 million to
$103.4 million during the thirty-nine weeks ended October 28, 2000 from $71.8
million during the thirty-nine weeks ended October 30, 1999. Selling, general
and administrative expenses were 25.6% of net sales during the thirty-nine weeks
ended October 28, 2000, as compared with 25.1% during the thirty-nine weeks
ended October 30, 1999. The increase, as a percentage of net sales, was due
primarily to higher store payroll wage rates, costs associated with our
E-Commerce website which was not operational in the comparable prior year
period, and the settlement of an employment agreement for our former President
and Chief Operating Officer, who resigned in February 2000, partially offset by
the leveraging of corporate administrative expenses.
6
<PAGE>
During the thirty-nine weeks ended October 28, 2000, pre-opening costs were
$5.0 million or 1.3% of net sales, as compared with $3.1 million, or 1.1% of net
sales, during the thirty-nine weeks ended October 30, 1999. We opened 100 stores
and 73 stores during the thirty-nine weeks ended October 28, 2000 and the
thirty-nine weeks ended October 30, 1999, respectively. During the thirty-nine
weeks ended October 28, 2000, we incurred higher pre-opening expenses due to
increased marketing costs to introduce The Children's Place brand in our new
markets, as well as increased travel and freight costs to open our first stores
on the West Coast.
Depreciation and amortization amounted to $15.1 million, or 3.7% of net
sales, during the thirty-nine weeks ended October 28, 2000, as compared with
$9.5 million, or 3.3% of net sales, during the thirty-nine weeks ended October
30, 1999. The increase in depreciation and amortization primarily was a result
of increases to our store base, depreciation recorded for our new distribution
center and corporate headquarters facility and amortization of our E-Commerce
assets. These increases, as a percentage of net sales, were partially offset by
the leveraging of depreciation and amortization expense over a higher sales
base. During the thirty-nine weeks ended October 30, 1999, we accelerated
depreciation expense by $1.8 million, or 0.6% of net sales, in conjunction with
a store re-fixturing and renovation program.
During the thirty-nine weeks ended October 28, 2000, we recorded interest
expense of $0.9 million, or 0.2% of net sales, due to borrowings under our
working capital facility. During the thirty-nine weeks ended October 30, 1999,
we recorded interest expense of $0.1 million, or 0.1% of net sales, due to a net
cash investment position during most of the first half of fiscal 1999.
Our provision for income taxes during the thirty-nine weeks ended October
28, 2000 was $17.7 million, as compared with $14.5 million during the
thirty-nine weeks ended October 30, 1999. Our effective tax rate for the
thirty-nine weeks ended October 28, 2000 was 39.0% as compared to an effective
rate of 40.3% during the thirty-nine weeks ended October 30, 1999. The decrease
in our effective tax rate is attributable to our foreign subsidiary and other
state tax savings.
We recorded net income of $27.7 million and $21.5 million during the
thirty-nine weeks ended October 28, 2000 and the thirty-nine weeks ended October
30, 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
DEBT SERVICE/LIQUIDITY
Our primary uses of cash are financing new store openings and providing for
working capital, which principally represents the purchase of inventory. Our
working capital needs follow a seasonal pattern, peaking during the second and
third quarters when inventory is purchased for the back to school and holiday
seasons. We have been able to meet our cash needs principally by using cash
flows from operations and seasonal borrowings under our working capital
facility. As of October 28, 2000, we had no long-term debt obligations.
Our working capital facility with Foothill Capital Corporation currently
provides for borrowings up to $75 million (including a sublimit for letters of
credit of $60 million). As of October 28, 2000, we had $23.9 million in
borrowings under our working capital facility and had outstanding letters of
credit of $23.2 million. Availability under our working capital facility was
$24.0 million. During the Third Quarter 2000, the interest rate charged under
our working capital facility for reference rate borrowings was 9.5% per annum
and LIBOR borrowings bore interest at 8.0% per annum. The maximum borrowings
under our working capital facility during the thirteen weeks ended October 28,
2000 was $33.5 million. As of October 28, 2000, we were in compliance with all
of our covenants under our working capital facility.
CASH FLOWS/CAPITAL EXPENDITURES
Cash flows provided by operating activities were $26.0 million during the
thirty-nine weeks ended October 28, 2000 as compared to $14.7 million during the
thirty-nine weeks ended October 30, 1999. During the thirty-nine weeks ended
October 28, 2000, cash flows provided by operating activities increased
primarily as a result of improved operating earnings and increases in our
current liabilities, partially offset by increases in our accounts receivable
due to increases in our construction allowance and credit card receivables.
Cash flows used in investing activities were $39.4 million and $46.8
million in the thirty-nine weeks ended October 28, 2000 and the thirty-nine
weeks ended October 30, 1999, respectively. During the thirty-nine weeks
ended October 28, 2000, cash flows used in investing activities represented
capital expenditures primarily for new store openings and remodelings. In the
thirty-nine weeks ended October 30, 1999, cash flows used in investing
activities represented capital expenditures of approximately $31 million for
new stores, remodelings and re-fixturings, with the majority of the remainder
of capital expenditures spent on our new distribution center and corporate
headquarters facility, as well as our warehouse management system and
equipment.
7
<PAGE>
In the thirty-nine weeks ended October 28, 2000 and the thirty-nine weeks
ended October 30, 1999, we opened 100 and 73 stores and remodeled 12 and 9
stores, respectively. During fiscal 2000, we plan to open a total of 108 stores
and remodel 14 stores. We anticipate that total capital expenditures during
fiscal 2000 will approximate $55 million, the majority of which we plan to fund
with cash flows from operations.
Cash flows provided by financing activities were $18.7 million during the
thirty-nine weeks ended October 28, 2000 as compared to $17.5 million in the
thirty-nine weeks ended October 30, 1999. During the thirty-nine weeks ended
October 28, 2000 and the thirty-nine weeks ended October 30, 1999, cash flows
provided by financing activities reflected net borrowings under our working
capital facility and funds received from the exercise of employee stock options
and employee stock purchases.
In September 2000, we signed a seven year lease with options for an
approximately 250,000 square foot distribution center and office facility in
Ontario, California. Annual rent under this lease is approximately $1.2 million.
We plan to utilize this facility beginning in the summer of 2001 to support the
warehousing and distribution of merchandise to our stores in the western
portions of the United States. The term of this lease commenced in November
2000. We expect to make a cash outlay of approximately $7.5 million to install
an automated warehouse management system and to renovate this facility. The
majority of this cash outlay will occur during the fourth quarter of fiscal
2000, with the remainder in fiscal 2001.
In December 2000, we entered into a six year lease with a three year option
period for an approximately 72,500 square foot facility located in Secaucus, New
Jersey, near our headquarters. We plan to use this facility for warehousing,
distribution and ancillary offices to support our growing business. Annual rent
under this lease is approximately $0.7 million per year. We plan to make a cash
outlay during the fourth quarter of fiscal 2000 and the first half of fiscal
2001 of approximately $3.4 million to renovate this facility.
We believe that cash generated from operations and funds available under
our working capital facility will be sufficient to fund our capital and other
cash flow requirements for at least the next 12 months. In addition, as we
continue our store expansion program we will consider additional sources of
financing to fund our long-term growth.
Our ability to meet our capital requirements will depend on our ability to
generate cash from operations and successfully implement our store expansion
plans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS (Not applicable)
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising in the
normal course of its business. In the opinion of management, any ultimate
liability arising out of such proceedings will not have a material adverse
effect on the Company's financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
------- ----------------------------------------------------
27.1 Financial Data Schedule.
10.2 Amended and Restated Merchant Services Agreement
between the Company and Hurley State Bank, dated as
of July 1, 2000.
10.3 Lease Agreement between the Company and Haven Gateway
LLC, dated as of August 17, 2000.
10.4 Lease Agreement between the Company and Hartz
Mountain Associates, dated as of October 31, 2000.
(b) REPORTS ON FORM 8-K
None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE CHILDREN'S PLACE
RETAIL STORES, INC.
Date: December 11, 2000
By: /s/ Ezra Dabah
---------------------------------
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: December 11, 2000 By: /s/ Seth L. Udasin
---------------------------------
Vice President and
Chief Financial Officer
(Principal Financial Officer)
10
