UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~April 30, ~~2021~~2022


☐						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 ~~CHILDRENS~~CHILDREN’S PLACE, INC.

(Exact name of registrant as specified in its charter)


Delaware						31-1241495
(State or ~~Other Jurisdiction~~other jurisdiction of						(I.R.S. Employer
~~Incorporation~~incorporation or ~~Organization)~~organization)						Identification Number)

500 Plaza Drive
Secaucus, New Jersey						07094
(Address of ~~Principal Executive Offices)~~principal executive offices)						(Zip Code)

(201) 558-2400

(Registrant’s ~~Telephone Number, Including Area Code)~~telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: ~~Common Stock, $0.10 par value~~

~~Trading Symbol: PLCE~~

~~Name of each exchange on which registered:~~


Title of each class:	Trading Symbol:	Name of each exchange on which registered:
Common Stock, $0.10 par value	PLCE	Nasdaq Global Select Market

___________________________________________

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 oNo☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one).~~

Large accelerated filer

Accelerated filer

x☐

Non-accelerated filer

o☐

Smaller reporting company

☐

~~(Do not check if a smaller reporting company)~~

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 provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

~~The~~Indicate the number of shares outstanding of each of the registrant’s classes of common stock, ~~with a~~as of the latest practicable date: Common Stock, par value of $0.10 per share, ~~as of November 30, 2021 was 14,361,889 shares.~~outstanding at May 26, 2022: 13,173,854.

Table of Contents

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED ~~OCTOBER~~APRIL 30, ~~2021~~2022

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION		PAGE

Item 1.	~~Consolidated~~ F inancial S tatements.
	Consolidated Balance Sheets as of April 30, 2022, January 29, 2022, and May 1, 2021	1
	Consolidated Statements of Operations for the thirteen weeks ended April 30, 2022 and May 1, 2021	2
	Consolidated Statements of Comprehensive Income ~~(Loss)~~for the thirteen weeks ended April 30, 2022 and May 1, 2021	3
	Consolidated Statements of Changes in Stockholders’ Equity for the thirteen weeks ended April 30, 2022 and May 1, 2021	4
	Consolidated Statements of Cash Flows for the thirteen weeks ended April 30, 2022 and May 1, 2021	5
	Notes to C onsolidated F inancial S tatements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 3.	Quantitative and Qualitative Disclosures ~~about~~A bout Market Risk.	24
Item 4.	Controls and Procedures.	25

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings.	26
Item 1A.	Risk Factors.	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	26
Item 6.	Exhibits.	27
~~Signatures~~

Table of Contents

PART I. FINANCIAL INFORMATION

~~Item~~ITEM 1.~~CONSOLIDATED~~ FINANCIAL ~~STATEMENTS~~STATEMENTS.

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


		October 30, 2021		January 30, 2021		October 31, 2020			April 30, 2022		January 29, 2022		May 1, 2021
		(unaudited)				(unaudited)			(unaudited)				(unaudited)
		(in thousands, except par value)							(in thousands, except par value)
ASSETS	ASSETS							ASSETS
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	67,062	$	63,548	$	64,456	Cash and cash equivalents	$	58,494	$	54,787	$	65,376

Accounts receivable	Accounts receivable	38,758		39,534		31,376		Accounts receivable	28,812		21,863		42,619
Inventories	Inventories	441,817		388,141		427,629		Inventories	549,167		428,813		417,808
Prepaid expenses and other current assets	Prepaid expenses and other current assets	59,628		55,860		16,159		Prepaid expenses and other current assets	50,990		76,075		50,594

Total current assets	Total current assets	607,265		547,083		539,620		Total current assets	687,463		581,538		576,397
Long-term assets:	Long-term assets:							Long-term assets:
Property and equipment, net	Property and equipment, net	159,243		181,801		191,544		Property and equipment, net	157,033		155,006		172,090
Right-of-use assets	Right-of-use assets	209,430		283,624		297,206		Right-of-use assets	191,559		194,653		260,919
Tradenames, net	Tradenames, net	71,892		72,492		72,692		Tradenames, net	71,492		71,692		72,292
Deferred income taxes	Deferred income taxes	27,801		45,579		93,697		Deferred income taxes	24,568		23,109		37,433
Other assets	Other assets	12,735		9,548		12,184		Other assets	12,911		11,462		8,536
Total assets	Total assets	$	1,088,366	$	1,140,127	$	1,206,943	Total assets	$	1,145,026	$	1,037,460	$	1,127,667

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Current liabilities:	Current liabilities:							Current liabilities:
Revolving loan	Revolving loan	$	174,384	$	169,778	$	179,360	Revolving loan	$	249,544	$	175,318	$	196,893
Current portion of long-term debt		28,270		2,270		1,328

Accounts payable	Accounts payable	173,055		252,124		283,943		Accounts payable	260,634		183,758		228,149
Current lease liabilities		94,122		174,585		171,276
Current portion of operating lease liabilities								Current portion of operating lease liabilities	89,566		91,097		129,070
Income taxes payable	Income taxes payable	10,701		5,508		7,445		Income taxes payable	6,001		10,984		6,418
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	143,866		114,234		133,407		Accrued expenses and other current liabilities	111,926		130,669		112,904
Total current liabilities	Total current liabilities	624,398		718,499		776,759		Total current liabilities	717,671		591,826		673,434
Long-term liabilities:	Long-term liabilities:							Long-term liabilities:

Long-term debt	Long-term debt	48,892		75,346		76,307		Long-term debt	49,702		49,685		74,526
Long-term lease liabilities		154,325		214,173		232,153
Long-term portion of operating lease liabilities								Long-term portion of operating lease liabilities	129,111		134,761		195,435
Income taxes payable	Income taxes payable	14,939		14,939		17,589		Income taxes payable	18,929		14,939		14,939
Other tax liabilities	Other tax liabilities	6,285		6,304		6,821		Other tax liabilities	2,316		8,689		6,323
Other long-term liabilities	Other long-term liabilities	17,279		17,489		19,945		Other long-term liabilities	13,613		12,088		18,000
Total liabilities	Total liabilities	866,118		1,046,750		1,129,574		Total liabilities	931,342		811,988		982,657
COMMITMENTS AND CONTINGENCIES		0		0		0
STOCKHOLDERS’ EQUITY:
Commitments and contingencies (see Note 7)								Commitments and contingencies (see Note 7)	0		0		0
Stockholders' equity:								Stockholders' equity:
Preferred stock, $1.00 par value, 1,000 shares authorized, 0 shares issued and outstanding	Preferred stock, $1.00 par value, 1,000 shares authorized, 0 shares issued and outstanding	—		—		—		Preferred stock, $1.00 par value, 1,000 shares authorized, 0 shares issued and outstanding	—		—		—
Common stock, $0.10 par value, 100,000 shares authorized; 14,468, 14,641, and 14,641 issued; 14,408, 14,584, and 14,586 outstanding		1,447		1,464		1,464
Common stock, $0.10 par value, 100,000 shares authorized; 13,422, 13,964, and 14,693 issued; 13,360, 13,903, and 14,635 outstanding								Common stock, $0.10 par value, 100,000 shares authorized; 13,422, 13,964, and 14,693 issued; 13,360, 13,903, and 14,635 outstanding	1,342		1,396		1,469
Additional paid-in capital	Additional paid-in capital	164,010		148,519		141,613		Additional paid-in capital	155,097		160,348		155,908
Treasury stock, at cost (60, 57, and 55 shares)		(3,373)		(3,164)		(3,095)
Treasury stock, at cost (62, 61, and 58 shares)								Treasury stock, at cost (62, 61, and 58 shares)	(3,512)		(3,443)		(3,234)
Deferred compensation	Deferred compensation	3,373		3,164		3,095		Deferred compensation	3,512		3,443		3,234
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(12,962)		(13,816)		(15,170)		Accumulated other comprehensive loss	(14,668)		(14,186)		(12,930)
Retained earnings (deficit)		69,753		(42,790)		(50,538)
Retained earnings								Retained earnings	71,913		77,914		563
Total stockholders’ equity	Total stockholders’ equity	222,248		93,377		77,369		Total stockholders’ equity	213,684		225,472		145,010
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,088,366	$	1,140,127	$	1,206,943	Total liabilities and stockholders’ equity	$	1,145,026	$	1,037,460	$	1,127,667

See accompanying notes to these consolidated financial statements.

Table of Contents

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
		October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020			April 30, 2022		May 1, 2021
		(in thousands, except earnings per share)									(in thousands, except earnings per share)
Net sales	Net sales	$	558,225	$	425,571	$	1,407,561	$	1,049,701	Net sales	$	362,350	$	435,481
Cost of sales (exclusive of depreciation and amortization)	Cost of sales (exclusive of depreciation and amortization)	313,394		279,506		806,663		856,229		Cost of sales (exclusive of depreciation and amortization)	220,445		247,275

Gross profit	Gross profit	244,831		146,065		600,898		193,472		Gross profit	141,905		188,206

Selling, general, and administrative expenses	Selling, general, and administrative expenses	115,563		106,639		337,921		319,442		Selling, general, and administrative expenses	109,036		106,738
Depreciation and amortization	Depreciation and amortization	14,204		15,809		44,157		50,405		Depreciation and amortization	13,615		15,561
Asset impairment charges		1,254		294		1,254		37,929

Operating income (loss)		113,810		23,323		217,566		(214,304)

Operating income										Operating income	19,254		65,907
Interest expense	Interest expense	(3,963)		(3,266)		(13,077)		(7,802)		Interest expense	(1,710)		(4,414)
Interest income	Interest income	4		3		11		60		Interest income	5		3
Income (loss) before provision (benefit) for income taxes		109,851		20,060		204,500		(222,046)
Income before provision (benefit) for income taxes										Income before provision (benefit) for income taxes	17,549		61,496
Provision (benefit) for income taxes	Provision (benefit) for income taxes	30,983		6,740		56,332		(73,917)		Provision (benefit) for income taxes	(2,282)		16,291

Net income (loss)		$	78,868	$	13,320	$	148,168	$	(148,129)
Net income										Net income	$	19,831	$	45,205

Earnings (loss) per common share
Earnings per common share										Earnings per common share
Basic	Basic	$	5.38	$	0.91	$	10.08	$	(10.13)	Basic	$	1.46	$	3.08
Diluted	Diluted	$	5.30	$	0.91	$	9.89	$	(10.13)	Diluted	$	1.43	$	3.01

Weighted average common shares outstanding	Weighted average common shares outstanding									Weighted average common shares outstanding
Basic	Basic	14,668		14,639		14,706		14,628		Basic	13,621		14,670
Diluted	Diluted	14,873		14,643		14,979		14,628		Diluted	13,841		15,002

See accompanying notes to these consolidated financial statements.

Table of Contents

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited)

Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020
(in thousands)
Net income (loss) $ 78,868 $ 13,320 $ 148,168 $ (148,129)
Other comprehensive income (loss):
Foreign currency translation adjustment 323 216 854 (876)
Change in fair value of cash flow hedges, net of income taxes — (949) — (749)
Other comprehensive income (loss) 323 (733) 854 (1,625)
Total comprehensive income (loss) $ 79,191 $ 12,587 $ 149,022 $ (149,754)


	Thirteen Weeks Ended
		April 30, 2022		May 1, 2021
		(in thousands)
Net income		$	19,831	$	45,205
Other comprehensive income:
Foreign currency translation adjustment		(482)		886


Total comprehensive income		$	19,349	$	46,091

See accompanying notes to these consolidated financial statements.

Table of Contents

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Thirteen Weeks Ended October 30, 2021
Accumulated
Additional Retained Other Total
Common Stock Paid-In Deferred Earnings Comprehensive Treasury Stock Stockholders’
(in thousands) Shares Amount Capital Compensation (Deficit) Income (Loss) Shares Amount Equity
BALANCE, July 31, 2021 14,831 $ 1,483 $ 164,290 $ 3,304 $ 15,697 $ (13,285) (59) $ (3,304) $168,185
Vesting of stock awards 9 1 (1) —
Stock-based compensation 6,594 6,594
Purchase and retirement of shares (372) (37) (6,873) (24,812) (31,722)
Change in cumulative translation
adjustment 323 323
Deferral of common stock into
deferred compensation plan 69 (1) (69) —
Net income 78,868 78,868
BALANCE, October 30, 2021 14,468 $ 1,447 $ 164,010 $ 3,373 $ 69,753 $ (12,962) (60) $ (3,373) $ 222,248


Thirteen Weeks Ended April 30, 2022
										Accumulated
				Additional						Other					Total
	Common Stock			Paid-In		Deferred		Retained		Comprehensive		Treasury Stock			Stockholders’
(in thousands)	Shares	Amount		Capital		Compensation		Earnings		Loss		Shares	Amount		Equity











































Balance, January 29, 2022	13,964	$	1,396	$	160,348	$	3,443	$	77,914	$	(14,186)	(61)	$	(3,443)	$	225,472


Vesting of stock awards	123	12		(12)											—
Stock-based compensation expense				7,562											7,562

Purchase and retirement of common stock	(665)	(66)		(12,801)				(25,832)							(38,699)
Other comprehensive loss										(482)					(482)





Deferral of common stock into deferred compensation plan						69						(1)	(69)		—
Net income								19,831							19,831
Balance, April 30, 2022	13,422	$	1,342	$	155,097	$	3,512	$	71,913	$	(14,668)	(62)	$	(3,512)	$	213,684

Thirty-nine Weeks Ended October 30, 2021
Accumulated
Additional Retained Other Total
Common Stock Paid-In Deferred Earnings Comprehensive Treasury Stock Stockholders’
(in thousands) Shares Amount Capital Compensation (Deficit) Income (Loss) Shares Amount Equity
BALANCE, January 30, 2021 14,641 $ 1,464 $ 148,519 $ 3,165 $ (42,790) $ (13,816) (57) $ (3,165) $93,377
Vesting of stock awards 345 35 (35) —
Stock-based compensation 25,036 25,036
Purchase and retirement of shares (518) (52) (9,510) (35,625) (45,187)
Change in cumulative translation
adjustment 854 854
Deferral of common stock into
deferred compensation plan 208 (3) (208) —
Net income 148,168 148,168
BALANCE, October 30, 2021 14,468 $ 1,447 $ 164,010 $ 3,373 $ 69,753 $ (12,962) (60) $ (3,373) $ 222,248


Thirteen Weeks Ended May 1, 2021
										Accumulated
				Additional				Retained		Other					Total
	Common Stock			Paid-In		Deferred		Earnings		Comprehensive		Treasury Stock			Stockholders’
(in thousands)	Shares	Amount		Capital		Compensation		(Deficit)		Loss		Shares	Amount		Equity











































Balance, January 30, 2021	14,641	$	1,464	$	148,519	$	3,165	$	(42,790)	$	(13,816)	(57)	$	(3,165)	$	93,377


Vesting of stock awards	81	8		(8)											—
Stock-based compensation expense				7,916											7,916

Purchase and retirement of common stock	(29)	(3)		(519)				(1,852)							(2,374)

Other comprehensive income										886					886


Deferral of common stock into deferred compensation plan						69						(1)	(69)		—
Net income								45,205							45,205
Balance, May 1, 2021	14,693	$	1,469	$	155,908	$	3,234	$	563	$	(12,930)	(58)	$	(3,234)	$	145,010

See accompanying notes to these consolidated financial statements.

Table of Contents

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY~~CASH FLOWS

(Unaudited)


	Thirteen Weeks Ended
	April 30, 2022		May 1, 2021
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	19,831	$	45,205


Reconciliation of net income to net cash used in operating activities:
Non-cash portion of operating lease expense	19,247		26,659
Depreciation and amortization	13,615		15,561

Non-cash stock-based compensation expense	7,562		7,916

Deferred income tax provision (benefit)	(1,583)		8,389



Other non-cash charges, net	467		389
Changes in operating assets and liabilities:
Inventories	(120,806)		(29,689)
Accounts receivable and other assets	(8,460)		(2,080)
Prepaid expenses and other current assets	(210)		623
Income taxes payable, net of prepayments	20,840		8,347
Accounts payable and other current liabilities	52,961		(30,085)
Lease liabilities	(23,822)		(68,303)
Other long-term liabilities	1,521		506

Net cash used in operating activities	(18,837)		(16,562)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(10,723)		(6,726)


Change in deferred compensation plan	(260)		18
Net cash used in investing activities	(10,983)		(6,708)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility	222,776		192,415
Repayments under revolving credit facility	(148,550)		(165,300)




Purchase and retirement of common stock, including shares surrendered for tax withholdings and transaction costs	(40,370)		(2,374)
Payment of debt issuance costs	—		(291)
Net cash provided by financing activities	33,856		24,450
Effect of exchange rate changes on cash and cash equivalents	(329)		648
Net increase in cash and cash equivalents	3,707		1,828
Cash and cash equivalents, beginning of period	54,787		63,548
Cash and cash equivalents, end of period	$	58,494	$	65,376

Thirteen Weeks Ended October 31, 2020
Accumulated
Additional Retained Other Total
Common Stock Paid-In Deferred Earnings Comprehensive Treasury Stock Stockholders’
(in thousands) Shares Amount Capital Compensation (Deficit) Income (Loss) Shares Amount Equity
BALANCE, August 1, 2020 14,637 $ 1,464 $ 138,350 $ 3,025 $ (63,862) $ (14,437) (52) $ (3,025) $ 61,515
Vesting of stock awards 4 — —
Stock-based compensation 3,275 3,275
Purchase and retirement of shares (12) 4 (8)
Change in cumulative translation
adjustment 216 216
Change in fair value of cash flow
hedges, net of income taxes (949) (949)
Deferral of common stock into
deferred compensation plan 70 (3) (70) —
Net income 13,320 13,320
BALANCE, October 31, 2020 14,641 $ 1,464 $ 141,613 $ 3,095 $ (50,538) $ (15,170) (55) $ (3,095) $ 77,369

Thirty-nine Weeks Ended October 31, 2020
Accumulated
Additional Retained Other Total
Common Stock Paid-In Deferred Earnings Comprehensive Treasury Stock Stockholders’
(in thousands) Shares Amount Capital Compensation (Deficit) Loss Shares Amount Equity
BALANCE, February 1, 2020 14,762 $ 1,476 $ 139,041 $ 2,956 $ 108,215 $ (13,545) (51) $ (2,956) $ 235,187
Vesting of stock awards 171 17 (17) —
Stock-based compensation 7,388 7,388
Purchase and retirement of shares (292) (29) (4,799) (10,624) (15,452)
Change in cumulative translation
adjustment (876) (876)
Change in fair value of cash flow
hedges, net of income taxes (749) (749)
Deferral of common stock into
deferred compensation plan 139 (4) (139) —
Net loss (148,129) (148,129)
BALANCE, October 31, 2020 14,641 $ 1,464 $ 141,613 $ 3,095 $ (50,538) $ (15,170) (55) $ (3,095) $ 77,369

See accompanying notes to these consolidated financial statements.

Table of Contents

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Thirty-nine Weeks Ended
October 30,
2021 October 31,
2020
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 148,168 $ (148,129)
Reconciliation of net income (loss) to net cash provided by (used in) operating activities:
Non-cash portion of operating lease expense 76,418 81,582
Depreciation and amortization 44,157 50,405
Non-cash stock-based compensation 25,036 7,388
Deferred income tax provision (benefit) 17,974 (80,778)
Asset impairment charges 1,254 37,929
Other non-cash charges, net 1,101 399
Changes in operating assets and liabilities:
Inventories (55,183) (100,346)
Accounts receivable and other assets (2,121) 2,522
Prepaid expenses and other current assets (4,995) 7,117
Income taxes payable, net of prepayments 6,437 1,667
Accounts payable and other current liabilities (47,980) 120,784
Lease liabilities (142,574) (36,643)
Other long-term liabilities (244) 5,372
Net cash provided by (used in) operating activities 67,448 (50,731)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (22,000) (23,763)
Change in deferred compensation plan 48 211
Net cash used in investing activities (21,952) (23,552)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility 557,034 356,316
Repayments under revolving credit facility (552,429) (347,764)
Proceeds from term loan, net of discount — 78,750
Repayment of term loan (1,000) —
Purchase and retirement of common stock, including shares surrendered for tax withholdings and transaction costs (45,187) (15,452)
Payment of debt issuance costs (366) (1,164)
Net cash provided by (used in) financing activities (41,948) 70,686
Effect of exchange rate changes on cash and cash equivalents (34) (434)
Net increase (decrease) in cash and cash equivalents 3,514 (4,031)
Cash and cash equivalents, beginning of period 63,548 68,487
Cash and cash equivalents, end of period $ 67,062 $ 64,456

~~See accompanying notes to these consolidated financial statements.~~

~~Table of Contents~~

~~THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

Thirty-nine Weeks Ended
October 30,
2021 October 31,
2020
(in thousands)
OTHER CASH FLOW INFORMATION:
Net cash paid during the period for income taxes $ 31,718 $ 4,975
Cash paid during the period for interest 11,870 6,177
Decrease in accrued capital expenditures (135) (2,162)


	Thirteen Weeks Ended
	April 30, 2022		May 1, 2021
	(in thousands)
OTHER CASH FLOW INFORMATION:
Net cash paid (received) for income taxes	$	(21,645)	$	210
Cash paid for interest	1,713		4,123
Increase (decrease) in accrued capital expenditures	4,374		(1,547)

See accompanying notes to these consolidated financial statements.

Table of Contents

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.BASIS OF PRESENTATION

Description of Business

The Children’s Place, Inc. and subsidiaries (collectively, the “Company”) is the largest pure-play children’s specialty apparel retailer in North America. The Company provides apparel, footwear, accessories, and other items for children and ‘tweens.’ The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell trend right, high-quality merchandise ~~predominately~~predominantly at value prices, primarily under the Company’s proprietary “The Children’s Place”, “Place”, “Baby Place”, “Gymboree”, and “Sugar & Jade” brand names.

The Company classifies its business into 2 segments: The Children’s Place U.S. and The Children’s Place International. Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and revenue from its U.S.-based wholesale business. Included in The Children’s Place International segment are its Canadian-based stores, revenue from the Company’s Canadian-based wholesale business, as well as revenue from international franchisees. Each segment includes an e-commerce business located at www.childrensplace.com, www.gymboree.com, and www.sugarandjade.com.

~~Interim~~Terms that are commonly used in the notes to the Company’s consolidated financial statements are defined as follows:

•First Quarter 2022 — The thirteen weeks ended April 30, 2022

•First Quarter 2021 — The thirteen weeks ended May 1, 2021

•SEC — U.S. Securities and Exchange Commission

•U.S. GAAP — Generally Accepted Accounting Principles in the United States

•FASB — Financial ~~Statements~~Accounting Standards Board

•FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants

Basis of Presentation

The ~~accompanying~~ unaudited consolidated financial statements ~~have been~~and accompanying notes to consolidated financial statements are prepared in accordance with ~~accounting principles generally accepted in the United States (“~~U.S. ~~GAAP”)~~GAAP for interim financial information and the rules and regulations of the ~~Securities and Exchange Commission (the “SEC”).~~SEC. Accordingly, certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. As of April 30, 2022, January 29, 2022 and May 1, 2021, the Company did not have any investments in unconsolidated affiliates. FASB ASC 810—Consolidation is considered when determining whether an entity is subject to consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020,~~May 1, 2021, the results of its consolidated operations for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020,~~May 1, 2021, consolidated comprehensive income ~~(loss)~~ for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020,~~May 1, 2021, consolidated cash flows for the ~~thirty-nine~~thirteen weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020,~~May 1, 2021, and consolidated changes in stockholders’ equity for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020.~~May 1, 2021. The consolidated balance sheet as of January ~~30, 2021~~29, 2022 was derived from audited financial statements. Due to the seasonal nature of the Company’s business, the results of operations for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 are not necessarily indicative of operating results for a full fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021.~~

In December 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”) that began in Wuhan, China and has since spread to the other regions of the world. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and the President of the United States declared a national emergency. Federal, state, and local governments and health officials mandated and continue to mandate various restrictions, including closures of businesses and other activities, travel restrictions, restrictions on public gatherings, stay at home orders and advisories, quarantining of people who may have been exposed to the virus, and the adoption of remote or hybrid learning models for schools. The COVID-19 pandemic has significantly negatively affected the global economy, significantly disrupted global supply chains, and created significant disruption of the financial and retail markets, including a significant disruption in consumer demand for children’s clothing and accessories. As such, the comparability of the Company’s operating results has been affected by significant adverse impacts related to the COVID-19 pandemic.

~~Terms that are commonly used in the notes to the Company’s consolidated financial statements are defined as follows:~~

•~~Third Quarter 2021 — The thirteen weeks ended October 30, 2021~~

•~~Third Quarter 2020 — The thirteen weeks ended October 31, 2020~~

•~~Year-To-Date 2021 — The thirty-nine weeks ended October 30, 2021~~

•~~Year-To-Date 2020 — The thirty-nine weeks ended October 31, 2020~~

•~~FASB — Financial Accounting Standards Board~~

~~Table of Contents~~

•~~SEC — U.S. Securities and Exchange Commission~~

•~~U.S. GAAP — Generally Accepted Accounting Principles in the United States~~

~~Consolidation~~

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. As of October 30, 2021, January 30, 2021 and October 31, 2020, the Company did not have any investments in unconsolidated affiliates. FASB ASC 810—~~Consolidation~~ ~~is considered when determining whether an entity is subject to consolidation.~~29, 2022.

Fiscal Year

The Company’s fiscal year is a 52-week or 53-week period ending on the Saturday on or nearest to January 31.

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenues and expenses reported during the period. Actual results could differ from the assumptions used and estimates made by management, which could have a material impact on the Company’s financial position or results of operations. ~~Significant~~Critical accounting estimates inherent in the preparation of the consolidated financial statements include: reserves for the realizability of inventory; reserves for litigation and other contingencies; useful lives and impairments of long-lived assets; fair value measurements; accounting for income taxes and related uncertain tax positions; insurance reserves; intangible assets; valuation of stock-based compensation awards and related estimated forfeiture rates, among others.

~~Reclassifications~~

~~Certain reclassifications have been made to prior periods' financial statements to conform to the current period's presentation.~~

~~Inventories~~

Inventories, which consist primarily of finished goods, are stated at the lower of cost or net realizable value, with cost determined on an average cost basis. The Company capitalizes certain buying, design, and supply chain costs in inventory, and these costs are reflected within cost of sales as the inventories are sold. Inventory shrinkage is estimated in interim periods based upon the historical results of physical inventory counts in the context of current year facts and circumstances.

~~Stock-based Compensation~~

The Company generally grants time-vesting stock awards (“Deferred Awards”) and performance-based stock awards (“Performance Awards”) to employees at management levels. The Company also grants Deferred Awards to its non-employee directors. Deferred Awards are granted in the form of restricted stock units that require each recipient to complete a service period. Deferred Awards generally vest ratably over three years, except for those granted to non-employee directors, which generally vest after one year. Performance Awards are granted in the form of restricted stock units which have performance criteria that must be achieved for the awards to vest (the “Target Shares”) in addition to a service period requirement. For Performance Awards, an employee may earn from 0% to 300% of their Target Shares based on the terms of the award and the Company’s achievement of certain performance goals established at the beginning of the applicable performance period. The Performance Awards cliff vest, if earned, after completion of the applicable performance period, which is generally three years. The fair value of Deferred Awards and Performance Awards granted is based on the closing price of the Company’s common stock on the grant date.

Stock-based compensation expense is recognized ratably over the related service period, reduced for estimated forfeitures of those awards not expected to vest due to employee turnover. Stock-based compensation expense, as it relates to Performance Awards, is also adjusted based on the probability that the performance criteria will be achieved.

~~Impairment of Long-Lived Assets~~

~~The Company periodically reviews its long-lived assets when events indicate that their carrying value may not be recoverable. Such events~~ include historical trends or projected trends of cash flow losses or a future expectation that the Company will sell or dispose of an asset significantly before the end of its previously estimated useful life. In reviewing for

~~Table of Contents~~

impairment ~~the Company groups its long-lived assets at the lowest possible level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.~~

The Company reviews all stores that have reached comparable sales status, or sooner if circumstances should dictate, on at least an annual basis. The Company believes waiting this period of time allows a store to reach a maturity level where a more comprehensive analysis of financial performance can be performed. For each store that shows indications of impairment, the Company performs a recoverability test comparing estimated undiscounted future cash flows to the carrying value of the related long-lived assets. If the undiscounted cash flows are less than the related net book value of the long-lived assets, they are written down to their fair market value. The Company primarily uses discounted future cash flows directly associated with those assets to determine fair market value of long-lived assets, income taxes, stock-based compensation, and right-of-use (“ROU”) assets. In evaluating future cash flows, the Company considers external and internal factors. External factors comprise the local environment in which the store resides, including mall traffic, competition, and their effect on sales trends, as well as macroeconomic factors, such as the global COVID-19 pandemic. Internal factors include the Company’s ability to gauge the fashion taste of its customers, control variable costs such as cost of sales and payroll, and in certain cases, its ability to renegotiate lease costs.inventory valuation.

~~Deferred Compensation Plan~~Recent Accounting Standards Updates

The Company has a deferred compensation plan (the “Deferred Compensation Plan”), which is a nonqualified plan, for eligible senior level employees. Under the Deferred Compensation Plan, a participant may elect to defer up to 80% of his or her base salary and/or up to 100% of his or her bonus to be earned for the year following the year in which the deferral election is made. The Deferred Compensation Plan also permits members of the Board of Directors to elect to defer payment of all or a portion of their retainer and other fees to be earned for the year following the year in which a deferral election is made. In addition, eligible employees and directors of the Company may also elect to defer payment of any shares of Company stockThere are no pending accounting standards updates that are ~~earned with respect~~currently expected to stock-based awards. Directors may elect to have all or a certain portion of their fees earned for their service on the Board invested in shares of the Company’s common stock. Such elections are irrevocable. The Company is not required to contribute to the Deferred Compensation Plan, but at its sole discretion, can make additional contributions on behalf of the participants. Deferred amounts are not subject to forfeiture and are deemed invested among investment funds offered under the Deferred Compensation Plan, as directed by each participant. Payments of deferred amounts (as adjusted for earnings and losses) are payable following separation from service or at a date or dates elected by the participant at the time the deferral is elected. Payments of deferred amounts are generally made in either a lump sum or in annual installments over a period not exceeding 15 years. All deferred amounts are payable in the form in which they were made, except for Board of Directors fees invested in shares of the Company’s common stock, which are settled in shares of Company common stock. Earlier distributions are not permitted except in the case of an unforeseen hardship.

The Company has established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The assets of the rabbi trust are general assets of the Company and, as such, would be subject to the claims of creditors in the event of bankruptcy or insolvency. Investments of the rabbi trust consist of mutual funds and Company common stock. The Deferred Compensation Plan liability, excluding Company common stock, is included within other long-term liabilities, and changes in the balance, except those relating to payments, are recognized as compensation expense within selling, general, and administrative expenses. The value of the mutual funds is included in other assets and related earnings and losses are recognized as investment income or loss, which is included within selling, general, and administrative expenses. Company stock deferrals are included within the equity section of the Company’s consolidated balance sheet as treasury stock and as a deferred compensation liability. Deferred stock is recorded at fair market value at the time of deferral, and any subsequent changes in fair market value are not recognized.

~~Fair Value Measurement and Financial Instruments~~

~~FASB ASC 820—Fair Value Measurement~~ ~~provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities.~~

This topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:

•~~Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities~~

•~~Level 2 - inputs to the valuation techniques that are other than quoted prices, but are observable for the assets or liabilities, either directly or indirectly~~

•~~Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities~~

~~Table of Contents~~

The Company’s cash and cash equivalents, accounts receivable, assets of the Company’s Deferred Compensation Plan, accounts payable, and revolving loan are all short-term in nature. As such, their carrying amounts approximate fair value and fall within Level 1 of the fair value hierarchy. The Company stock included in the Deferred Compensation Plan is not subject to fair value measurement.

The Company’s derivative assets and liabilities include foreign exchange forward contracts that are measured at fair value using observable market inputs such as forward rates, the Company’s credit risk, and counterparties’ credit risks. Based on these inputs, the Company’s derivative assets and liabilities are classified within Level 2 of the fair value hierarchy.

The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, such as intangible assets, fixed assets, and ROU assets. The Company reviews the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to fall within Level 3 of the fair value hierarchy.

~~Recently Issued Accounting Standards~~

~~Adopted in Fiscal 2021~~

In December 2019, the FASB issued guidance related to the accounting for income taxes. The guidance aims to simplify the accounting for income taxes by removing certain exceptions to the general principles within the previous guidance and by clarifying and amending the previous guidance. The guidance was effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. The Company adopted this guidance in the first quarter of 2021. The adoption of this guidance did not have a material impact on the ~~Company’s consolidated financial statements.~~Company.

2. REVENUES

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration ~~we expect~~the Company expects to be entitled to in exchange for those goods or services.

The following table presents the Company’s revenues disaggregated by geography:


											Thirteen Weeks Ended
		Thirteen Weeks Ended				Thirty-nine Weeks Ended					April 30, 2022	May 1, 2021
		October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020				(in thousands)
Net sales:	Net sales:	(in thousands)								Net sales:
South	South	$	194,081	$	151,374	$	524,449	$	395,655	South		$	136,372	$	165,738
Northeast	Northeast	129,308		97,668		309,284		232,435		Northeast		75,396		95,022
West	West	80,103		50,896		202,180		143,472		West		50,132		62,223
Midwest	Midwest	71,482		61,740		180,375		139,243		Midwest		43,613		60,804
International and other	International and other	83,251		63,893		191,273		138,896		International and other		56,837		51,694
Total net sales	Total net sales	$	558,225	$	425,571	$	1,407,561	$	1,049,701	Total net sales		$	362,350	$	435,481

The Company recognizes revenue, including shipping and handling fees billed to customers, upon purchase at the Company’s retail stores or when received by the customer if the product was purchased via e-commerce, net of coupon redemptions and anticipated sales returns. The Company deferred sales of ~~$8.8~~$5.3 million and ~~$7.4~~$6.7 million within Accrued expenses and other current liabilities as of ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020,~~May 1, 2021, respectively, based upon estimated time of delivery, at which point control passes to the customer. Sales tax collected from customers is excluded from revenue.

For the sale of goods with a right of return, the Company recognizes revenue for the consideration it expects to be entitled to and calculates an allowance for estimated sales returns based upon the Company’s sales return experience. Adjustments to the allowance for estimated sales returns in subsequent periods ~~are generally~~have not been material based on historical data, thereby reducing the uncertainty inherent in such estimates. The allowance for estimated sales returns, which is recorded in ~~accrued~~Accrued expenses and other current liabilities, was ~~$2.9 million and~~ $1.7 million as of ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020, respectively.~~May 1, 2021.

The Company’s private label credit card is issued to customers for use exclusively at The Children’s Place stores and online at www.childrensplace.com, www.gymboree.com, and www.sugarandjade.com, and credit is extended to such customers by a third-party financial institution on a non-recourse basis to the Company. The private label credit card includes multiple performance obligations for the Company, including marketing and promoting the program on behalf of the bank and the

~~Table of Contents~~

operation of the loyalty rewards program. Included in the agreement with the third-party financial institution was an upfront bonus paid to the Company. The upfront bonus is recognized as revenue and allocated between brand and reward obligations. As the license of the Company’s brand is the predominant item in the performance obligation, the amount allocated to the brand obligation is recognized on a straight-line basis over the initial term. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur.

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration, such as additional bonuses, including profit-sharing, over the life of the private label credit card program. Similar to the upfront bonus, the usage-based royalties and bonuses are recognized as revenue and allocated between the brand and reward obligations. The amount allocated to the brand obligation is recognized on a straight-line basis over the initial term. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur. In addition, the annual profit-sharing amount is estimated and recognized quarterly within an annual period when earned. The additional bonuses are amortized over the contract term based on anticipated progress against future targets and level of risk associated with achieving the targets.

The Company has a points-based customer loyalty program in which customers earn points based on purchases and other promotional activities. These points can be redeemed for coupons to discount future purchases. A contract liability is estimated based on the standalone selling price of benefits earned by customers through the program and the related redemption experience under the program. The value of each point earned is recorded as deferred revenue and is included within ~~accrued~~Accrued expenses and other current liabilities. The total contract liabilities related to this program were ~~$6.0~~$1.8 million and ~~$2.5~~$4.3 million as of ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020,~~May 1, 2021, respectively.

The Company’s policy with respect to gift cards is to record revenue as and when the gift cards are redeemed for merchandise. The Company recognizes gift card breakage income in proportion to the pattern of rights exercised by the customer when the Company expects to be entitled to breakage and the Company determines that it does not have a legal obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed or abandoned ~~property, which~~property. Gift card breakage is recorded within ~~net~~Net sales. Prior to their redemption, gift cards are recorded as a liability within Accrued expenses and other current liabilities. The liability is estimated based on expected breakage that considers historical patterns of redemption. The ~~following table provides~~gift card liability balance as of April 30, 2022, January 29, 2022, and May 1, 2021 was $13.3 million, $12.1 million, and $12.7 million, respectively. In the ~~reconciliation~~First Quarter 2022, the Company recognized Net sales of ~~the contract liability~~$2.3 million related to the gift ~~cards:~~


	~~Contract Liability~~
	~~(in thousands)~~
~~Balance at January 30, 2021~~	$	~~13,634~~
~~Gift cards sold~~	~~17,733~~
~~Gift cards redeemed~~	~~(16,716)~~
~~Gift card breakage~~	~~(2,256)~~
~~Balance at October 30, 2021~~	$	~~12,395~~

card liability balance that existed at January 29, 2022.

The Company has an international program of territorial agreements with franchisees. The Company generates revenues from the franchisees from the sale of product and, in certain cases, sales royalties. The Company records net sales and cost of goods sold on the sale of product to franchisees when the franchisee takes ownership of the product. The Company records net sales for royalties when the applicable franchisee sells the product to their customers. Under certain agreements, the Company receives a fee from each franchisee for exclusive territorial rights and based on the opening of new stores. The Company records these territorial fees as deferred revenue and amortizes the fee into net sales over the life of the territorial agreement.

3. INTANGIBLE ASSETS

The Company’s intangible assets were as follows:


		April 30, 2022
	Useful Life	Gross Amount		Accumulated Amortization		Net Amount
		(in thousands)
Gymboree tradename (1)	Indefinite	$	69,953	$	—	$	69,953
Crazy 8 tradename (1)	5 years	4,000		(2,461)		1,539
Customer databases (2)	3 years	3,000		(3,000)		—
Total intangibles		$	76,953	$	(5,461)	$	71,492


		January 29, 2022
	Useful Life	Gross Amount		Accumulated Amortization		Net Amount
		(in thousands)
Gymboree tradename (1)	Indefinite	$	69,953	$	—	$	69,953
Crazy 8 tradename (1)	5 years	4,000		(2,261)		1,739
Customer databases (2)	3 years	3,000		(2,827)		173
Total intangibles		$	76,953	$	(5,088)	$	71,865

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


		May 1, 2021
	Useful Life	Gross Amount		Accumulated Amortization		Net Amount
		(in thousands)
Gymboree tradename (1)	Indefinite	$	69,953	$	—	$	69,953
Crazy 8 tradename (1)	5 years	4,000		(1,661)		2,339
Customer databases (2)	3 years	3,000		(2,077)		923
Total intangibles		$	76,953	$	(3,738)	$	73,215

(1)Included within Tradenames, net on the Consolidated Balance Sheets.

(2)Included within Other assets on the Consolidated Balance Sheets.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:


	April 30, 2022		January 29, 2022		May 1, 2021
	(in thousands)
Property and equipment:
Land and land improvements	$	3,403	$	3,403	$	3,403
Building and improvements	36,188		36,045		36,045
Material handling equipment	64,179		64,989		58,209
Leasehold improvements	196,055		197,436		213,672
Store fixtures and equipment	213,039		212,613		223,546
Capitalized software	325,163		320,716		299,966
Construction in progress	16,199		8,170		16,862
	854,226		843,372		851,703
Less accumulated depreciation and amortization	(697,193)		(688,366)		(679,613)
Property and equipment, net	$	157,033	$	155,006	$	172,090

At April 30, 2022 and May 1, 2021, the Company reviewed its store related long-lived assets for indicators of impairment, and performed a recoverability test if indicators were identified. Based on the results of the analyses performed, the Company did not record significant asset impairment charges in the First Quarter 2022 or First Quarter 2021.

5. LEASES

The Company has operating leases for retail stores, corporate offices, distribution facilities, and certain equipment. The Company’s leases have remaining lease terms ranging from less than one year up to ~~nine~~ten years, some of which ~~may~~ include options to extend the leases for up to five years, and some of which ~~may~~ include options to terminate the lease early.

The lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. For operating leases, the ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives. For finance leases, the ROU asset is initially measured at cost and subsequently amortized using the straight-line method generally from the lease commencement date to the earlier of the end of its useful life or the end of the lease term.

~~Table of Contents~~

The discount rate is the rate implicit in the lease unless that rate cannot be readily determined. In that case, the Company is required to use its incremental borrowing rate. The discount rate for a lease is determined based on the information available at lease commencement. In general, the Company accounts for the underlying leased asset and applies a discount rate at the lease level. However, there are certain non-real estate leases for which the Company utilizes the portfolio method by aggregating similar leased assets based on the underlying lease term.

The Company ~~has made an accounting policy election by class~~records all occupancy costs in Cost of ~~underlying asset to not apply the recognition requirements of FASB ASC 842—Leases~~ ~~(“Topic 842”) to leases with an initial term of 12 months or less. Leases with an initial lease term of 12 months or less~~sales, except costs for administrative office buildings, which are ~~not~~ recorded ~~on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.~~

~~The Company has lease agreements with lease~~in Selling, general, and ~~non-lease components. The Company has elected a policy to account for lease and non-lease components as a single component for all asset classes.~~

In certain leases, the Company has the right to exercise lease renewal options. Renewal option periods are included in the measurement of lease ROU assets and lease liabilities where the exercise is reasonably certain to occur.

administrative expenses. As of the periods presented, the Company’s finance leases were not material to the ~~consolidated balance sheets, consolidated statements~~Consolidated Balance Sheets, Consolidated Statements of ~~operations,~~Operations, or ~~consolidated statements~~Consolidated Statements of ~~cash flows.~~Cash Flows.

The Company has certain lease agreements structured with both a fixed base rent and a contingent rent based on a percentage of sales over contractual levels, others with only contingent rent based on a percentage of sales, and some with a fixed base rent adjusted periodically for inflation or changes in fair market value of the underlying real estate. Contingent rent is recognized as sales occur. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

~~The Company records all occupancy costs in cost of sales, except costs for administrative office buildings, which are recorded in selling, general, and administrative expenses.~~THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

In April 2020, the FASB staff released guidance regarding rent concessions related to the effects of the COVID-19 pandemic to allow for a temporary practical expedient (the “COVID-19 expedient”) to account for rent concessions as though enforceable rights and obligations for those concessions existed in the lease agreements. The election is available for concessions related to the effects of the COVID-19 pandemic that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon the temporary closure of the Company’s store fleet in March 2020, the Company began negotiating for concessions of certain rent payments for the time the stores were impacted. While more than 99% of the Company’s stores have reopened, these discussions and negotiations had remained ongoing and were substantially completed at the end of the second quarter of 2021. For the lease concessions that have been agreed upon and executed, the Company did not reassess each existing contract to determine whether enforceable rights and obligations for concessions existed and elected not to apply the lease modification guidance in ASC 842 to those contracts that shared similar characteristics. Rather, the Company accounts for COVID-19 lease concessions as reductions to variable lease cost.(Unaudited)

The following components of lease expense ~~are included~~were recognized in the Company’s ~~consolidated statements~~Consolidated Statements of ~~operations.~~Operations:

Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020
(in thousands)
Operating lease cost $ 28,378 $ 29,218 $ 78,408 $ 108,412
Variable lease cost (1)
15,459 16,871 29,680 36,696
Total lease cost $ 43,837 $ 46,089 $ 108,088 $ 145,108


	Thirteen Weeks Ended
		April 30, 2022		May 1, 2021
		(in thousands)
Fixed operating lease cost		$	22,970	$	25,758
Variable operating lease cost (1)		15,118		3,374
Total operating lease cost		$	38,088	$	29,132

(1)Includes short term leases with lease periods of less than 12 months as well as lease abatements accounted for as reductions to variable lease costs under the COVID-19 expedient of ~~$0.7~~$0.8 million and ~~$11.0~~$8.0 million during the ~~Third~~First Quarter ~~2021~~2022 and ~~Year-To-Date~~First Quarter 2021, respectively.

As of ~~October~~April 30, ~~2021,~~2022, the weighted-average remaining operating lease term was 4.3 years, and the weighted-average discount rate for operating leases was ~~5.3%~~4.9%.

Cash paid for amounts included in the measurement of operating lease liabilities during ~~Year-To-Date 2021~~the First Quarter 2022 was ~~$142.6~~$23.8 million.

ROU assets obtained in exchange for new operating lease liabilities were ~~approximately $6.1~~$21.1 million during ~~Year-To-Date 2021.~~

~~Table of Contents~~

the First Quarter 2022.

As of ~~October~~April 30, ~~2021,~~2022, the maturities of operating lease liabilities were as follows:


		October 30, 2021		April 30, 2022
		(in thousands)		(in thousands)
Remainder of 2021		$	36,503
2022		89,827
Remainder of 2022					Remainder of 2022	$	81,935
2023	2023	50,651			2023	60,543
2024	2024	30,406			2024	30,697
2025	2025	18,456			2025	18,292
2026					2026	15,679
Thereafter	Thereafter	50,082			Thereafter	33,671
Total lease payments	Total lease payments	275,925			Total lease payments	240,817
Less: imputed interest	Less: imputed interest	(27,478)			Less: imputed interest	(22,140)
Present value of lease liabilities		$	248,447
Present value of operating lease liabilities					Present value of operating lease liabilities	$	218,677

~~4. INTANGIBLE ASSETS~~

On April 4, 2019, the Company acquired certain intellectual property and related assets (the “Gymboree Assets”) of Gymboree Group, Inc. and related entities, which included the worldwide rights to the names “Gymboree” and “Crazy 8” and other intellectual property, including trademarks, domain names, copyrights, and customer databases. These intangible assets, inclusive of acquisition costs, are recorded in the long-term assets section of the consolidated balance sheets.

The Company’s intangible assets include both indefinite-lived and finite-lived assets. Intangible assets with indefinite lives consist primarily of trademarks and acquired trade names, which are tested for impairment annually or whenever circumstances indicate that a decline in value may have occurred. The Company estimates the fair value of these intangible assets based on an income approach using the relief-from-royalty method. The Company’s finite-lived intangible assets consist primarily of customer lists and other acquisition-related assets. Finite-lived intangible assets are amortized over their estimated useful economic lives and are reviewed for impairment when factors indicate that an impairment may have occurred. The Company recognizes an impairment charge when the estimated fair value of the intangible asset is less than its carrying value.

~~The Company’s intangible assets were as follows:~~
October 30, 2021
Useful life Gross amount Accumulated amortization Net amount
(in thousands)
Gymboree tradename(1)
Indefinite $ 69,953 $ — $ 69,953
Crazy 8 tradename(1)
5 years 4,000 (2,061) 1,939
Customer databases(2)
3 years 3,000 (2,578) 422
Total intangibles, net $ 76,953 $ (4,639) $ 72,314

January 30, 2021
Useful life Gross amount Accumulated amortization Net amount
(in thousands)
Gymboree tradename(1)
Indefinite $ 69,953 $ — $ 69,953
Crazy 8 tradename(1)
5 years 4,000 (1,461) 2,539
Customer databases(2)
3 years 3,000 (1,827) 1,173
Total intangibles, net $ 76,953 $ (3,288) $ 73,665

~~Table of Contents~~

October 31, 2020
Useful life Gross amount Accumulated amortization Net amount
(in thousands)
Gymboree tradename(1)
Indefinite $ 69,953 $ — $ 69,953
Crazy 8 tradename(1)
5 years 4,000 (1,261) 2,739
Customer databases(2)
3 years 3,000 (1,577) 1,423
Total intangibles, net $ 76,953 $ (2,838) $ 74,115

~~(1)Included within Tradenames, net in the consolidated balance sheets.~~

~~(2)Included within Other assets in the consolidated balance sheets.~~

~~5. STOCKHOLDERS’ EQUITY~~

~~Share Repurchase Program~~

In March 2018, the Board of Directors authorized a $250 million share repurchase program (the “2018 Share Repurchase Program”). As of October 30, 2021, there was approximately $47.7 million remaining on the 2018 Share Repurchase Program. In November 2021, the Board of Directors approved another $250.0 million share repurchase program, which adds to the remaining availability under the 2018 Share Repurchase Program. Under these programs, the Company may repurchase shares on the open market at current market prices at the time of purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under a program will depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business conditions. The Company may suspend or discontinue the programs at any time and may thereafter reinstitute purchases, all without prior announcement. From March 2020 through July 2021, the Company suspended share repurchases, other than to satisfy withholding tax requirements of equity award recipients, due to the COVID-19 pandemic.

Pursuant to the Company’s practice, including due to restrictions imposed by the Company’s insider trading policy during black-out periods, the Company withholds and repurchases shares of vesting stock awards and makes payments to taxing authorities as required by law to satisfy the withholding tax requirements of all equity award recipients. The Company’s payment of the withholding taxes in exchange for the surrendered shares constitutes a repurchase of its common stock. The Company also acquires shares of its common stock in conjunction with liabilities owed under the Company’s Deferred Compensation Plan, which are held in treasury.

~~The following table summarizes the Company’s share repurchases:~~

Thirty-nine Weeks Ended
October 30, 2021 October 31, 2020
Shares Value Shares Value
(in thousands)
Share repurchases related to:
2018 Share Repurchase Program 518 $ 45,187 292 $ 15,452
Shares acquired and held in treasury under Deferred Compensation Plan 3 $ 208 4 $ 139

~~In accordance with the FASB ASC 505—Equity~~, the par value of the shares retired is charged against common stock and the remaining purchase price is allocated between additional paid-in capital and retained earnings. The portion charged against additional paid-in capital is determined using a pro-rata allocation based on total shares outstanding. During Year-To-Date 2021 and Year-To-Date 2020, $35.6 million and $10.6 million, respectively, was charged to retained earnings related to all shares retired during those periods.

~~Dividends~~

~~In March 2020, the Company announced it had temporarily suspended its dividend payments due to the COVID-19 pandemic.~~

~~Table of Contents~~

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 financial performance, and other investment priorities.

6. ~~STOCK-BASED COMPENSATION~~DEBT

~~The following table summarizes the Company’s stock-based compensation expense:~~

Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30,
2021 October 31,
2020 October 30,
2021 October 31,
2020
(In thousands)
Deferred Awards $ 2,956 $ 2,775 $ 9,722 $ 10,282
Performance Awards 3,638 500 15,314 (2,894)
Total stock-based compensation expense (1)
$ 6,594 $ 3,275 $ 25,036 $ 7,388

~~(1)~~Stock-based compensation expense recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $0.8 million and $0.9 million in the Third Quarter 2021 and Third Quarter 2020, respectively, and $2.5 million and $2.6 million in the Year-To-Date 2021 and Year-To-Date 2020, respectively. All other stock-based compensation is included in Selling, general, and administrative expenses.

~~The Company recognized a tax benefit related to stock-based compensation expense of $6.9 million and $2.0 million during Year-To-Date 2021 and Year-To-Date 2020, respectively.~~

~~Changes in the Company’s Unvested Stock Awards During Year-To-Date 2021~~

~~Deferred Awards~~
Number of
Shares Weighted
Average
Grant Date
Fair Value
(in thousands)
Unvested Deferred Awards, beginning of period 550 $ 55.43
Granted 155 76.50
Vested (227) 86.47
Forfeited (4) 97.91
Unvested Deferred Awards, end of period 474 47.03

Total unrecognized stock-based compensation expense related to unvested Deferred Awards was $17.9 million as of October 30, 2021, which will be recognized over a weighted average period of approximately 1.8 years.

~~Performance Awards~~

Number of
Shares (1)
Weighted
Average
Grant Date
Fair Value
(in thousands)
Unvested Performance Awards, beginning of period 350 $ 74.37
Granted 160 74.92
Shares earned in excess of (below) target (22) 65.34
Vested shares, including shares earned (118) 95.61
Forfeited (1) 104.45
Unvested Performance Awards, at end of period 369 68.22

~~(1)~~For awards for which the performance period is complete, the number of unvested shares is based on actual shares that will vest upon completion of the service period. For awards for which the performance period is not yet complete, the number of unvested shares is based on participants earning their Target Shares at 100%.

On November 16,

~~Table of Contents~~

The cumulative expense recognized for performance shares reflects changes in the probability that the performance criteria will be achieved as they occur. Based on the current number of Performance Awards expected to be earned, total unrecognized stock-based compensation expense related to unvested Performance Awards was $16.0 million as of October 30, 2021, which will be recognized over a weighted average period of approximately 2.0 years.

~~7. EARNINGS PER COMMON SHARE~~

~~The following table reconciles net income (loss) and share amounts utilized to calculate basic and diluted earnings (loss) per common share:~~

Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020
(in thousands)
Net income (loss) $ 78,868 $ 13,320 $ 148,168 $ (148,129)
Basic weighted average common shares 14,668 14,639 14,706 14,628
Dilutive effect of stock awards 205 4 273 —
Diluted weighted average common shares 14,873 14,643 14,979 14,628

~~8. PROPERTY AND EQUIPMENT, NET~~

~~Property and equipment, net consisted of the following:~~
October 30, 2021 January 30, 2021 October 31, 2020
(in thousands)
Property and equipment:
Land and land improvements $ 3,403 $ 3,403 $ 3,403
Building and improvements 36,045 36,133 35,927
Material handling equipment 61,717 58,034 56,926
Leasehold improvements 211,420 216,989 226,881
Store fixtures and equipment 221,104 226,404 234,423
Capitalized software 316,440 296,967 295,277
Construction in progress 8,822 15,211 12,701
858,951 853,141 865,538
Less accumulated depreciation and amortization (699,708) (671,340) (673,994)
Property and equipment, net $ 159,243 $ 181,801 $ 191,544

~~At October 30,~~ 2021, the Company ~~reviewed~~completed the refinancing of its ~~store related long-lived assets for indicators of impairment,~~previous $360.0 million asset-based revolving credit facility (the “Previous ABL Credit Facility”) and ~~performed a recoverability test if indicators were identified. Based on the results of the analysis performed, the Company recorded asset impairment charges of $1.3~~previous $80.0 million ~~inclusive of ROU assets, in the Third Quarter 2021 and Year-To-Date 2021.~~

~~At October 31, 2020, the Company reviewed its store related long-lived assets for 809 stores~~term loan (the “Previous Term Loan”) with a ~~total net book value~~new lending group led by an affiliate of ~~approximately $44.0~~Wells Fargo Bank, National Association (“Wells Fargo”) by entering into a fourth amendment to its Credit Agreement, dated as of May 9, 2019, with the lenders party thereto. The new debt consists of a revolving credit facility with $350.0 million ~~for indicators~~ of ~~impairment,~~availability (the “ABL Credit Facility”) and ~~performed~~ a ~~recoverability test if indicators were identified. Based on the results of the analysis performed, the Company recorded asset impairment charges of $0.3~~$50.0 million inclusive of ROU assets, primarily for 1 store, in the Third Quarter 2020. The Company recorded asset impairment charges of $37.9 million, inclusive of ROU assets, for 419 stores, during Year-To-Date 2020.term loan (the “Term Loan”).

~~Table of Contents~~

~~9. DEBT~~

~~Revolving~~ABL Credit Facility and Term Loan

The Company and certain of its subsidiaries maintain ~~an asset-based revolving credit facility (the “ABL~~the $350 million ABL Credit ~~Facility”)~~Facility and the $50 million Term Loan with Wells Fargo, Truist Bank, ~~National Association (“Wells Fargo”),~~ Bank of America, N.A., HSBC Business Credit (USA) Inc., and JPMorgan Chase Bank, N.A., as lenders (collectively, the “Lenders”) and Wells Fargo, as Administrative Agent, Collateral Agent, ~~and~~ Swing Line ~~Lender.~~

~~The~~Lender and Term Agent. Both the ABL Credit Facility ~~which expires~~and the Term Loan mature in ~~May 2024, consists~~November 2026, and both of ~~a $360 million asset-based revolving credit facility that was~~these debt facilities have lower interest rates, reduced reporting requirements, and increased ~~from $325 million as a result of finalizing an amendment with the Lenders on April 24, 2020 to secure the Company an additional $35 million available~~flexibility under the ~~accordion feature for a period of one year.~~ covenants compared to the Previous ABL Credit Facility and Previous Term Loan.

The ABL Credit Facility includes a $25 million Canadian sublimit and a $50 million sublimit for standby and documentary letters of credit. On October 5, 2020, the Company further amended the ABL Credit Facility to provide for certain changes that permitted the issuance of an $80 million term loan (the “Term Loan”) on that date and align certain terms of the ABL Credit Facility to those of the Term Loan. The Term Loan is discussed in more detail below. On April 23, 2021, the Company and its Lenders extended the $35 million of additional availability for an additional year until April 23, 2022.

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Borrowings outstanding under the ABL Credit Facility bear interest, at the Company’s option, at:

(i)the prime rate, plus a margin of ~~1.75% to 1.88%~~0.375% or 0.625% based on the amount of the Company’s average excess availability under the facility; or

(ii)the London InterBank Offered Rate, or “LIBOR”, for an interest period of one, ~~two,~~ three, or six months, as selected by the Company, plus a margin ~~of: a) 2.50% to 2.75% and b) 1.00%,~~of 1.125% or 1.375% based on the amount of the Company’s average excess availability under the facility.

The Company is charged a fee of ~~0.25%~~0.20% on the unused portion of the commitments. Letter of credit fees range from ~~1.25%~~0.563% to ~~1.38%~~0.683% for commercial letters of credit and from ~~2.00%~~0.625% to ~~2.25%~~0.875% for standby letters of credit. Letter of credit fees are determined based on the amount of the Company’s average excess availability under the facility. The amount available for loans and letters of credit under the ABL Credit Facility is determined by a borrowing base consisting of certain credit card receivables, ~~and~~ certain trade receivables, certain inventory, and the fair market value of certain real estate, subject to certain reserves.

The outstanding obligations under the ABL Credit Facility may be accelerated upon the occurrence of certain events, including, among others, non-payment, breach of covenants, the institution of insolvency proceedings, defaults under other material indebtedness, and a change of control, subject, in the case of certain defaults, to the expiration of applicable grace periods. The Company is not subject to any early termination fees.

The ABL Credit Facility contains covenants, which include conditions on stock buybacks and the payment of cash dividends or similar payments. These covenants also limit the ability of the Company and its subsidiaries to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of its business.

Credit extended under the ABL Credit Facility is secured by a first priority security interest in substantially all of the Company’s U.S. and Canadian assets ~~excluding~~other than intellectual property, ~~software,~~certain furniture, fixtures, equipment, and ~~fixtures. In connection with the Term Loan, the Lenders under the ABL Credit Facility entered into an intercreditor agreement with the Term Loan lender~~pledges of subsidiary capital stock, and ~~were granted~~ a second priority security interest in the ~~Term Loan collateral, which includes the~~ Company’s intellectual property, certain furniture, fixtures, ~~and~~ equipment, and pledges of subsidiary capital stock.

As of October 30, 2021 the Company has capitalized an aggregate of approximately $6.3 million in deferred financing costs related to the ABL Credit Facility. The unamortized balance of deferred financing costs as of October 30, 2021 was approximately $1.0 million. Unamortized deferred financing costs are amortized over the remaining term of the ABL Credit Facility.

~~Table of Contents~~

The table below presents the components of the Company’s ABL Credit Facility and Previous ABL Credit Facility:


		October 30, 2021			January 30, 2021			October 31, 2020				April 30, 2022		January 29, 2022		May 1, 2021
		(in millions)										(in millions)
Credit facility maximum	Credit facility maximum	$	360.0		$	360.0		$	360.0		Credit facility maximum	$	350.0	$	350.0	$	360.0
Borrowing base (1)	Borrowing base (1)	360.0			282.2			360.0			Borrowing base (1)	350.0		279.7		330.4

Outstanding borrowings	Outstanding borrowings	174.4			169.8			179.4			Outstanding borrowings	249.5		175.3		196.9

Letters of credit outstanding—standby	Letters of credit outstanding—standby	7.4			8.2			7.8			Letters of credit outstanding—standby	7.4		7.4		7.4
Utilization of credit facility at end of period	Utilization of credit facility at end of period	181.8			178.0			187.2			Utilization of credit facility at end of period	256.9		182.7		204.3

Availability (2)	Availability (2)	$	178.2		$	104.2		$	172.8		Availability (2)	$	93.1	$	97.0	$	126.1

Interest rate at end of period	Interest rate at end of period	3.8		%	4.2		%	3.9		%	Interest rate at end of period	2.0%		1.6%		4.0%


		Year-To-Date 2021			Fiscal 2020			Year-To-Date 2020				First Quarter 2022		Fiscal 2021		First Quarter 2021
Average end of day loan balance during the period	Average end of day loan balance during the period	$	195.0		$	216.2		$	233.2		Average end of day loan balance during the period	$	251.2	$	187.0	$	210.3
Highest end of day loan balance during the period	Highest end of day loan balance during the period	$	269.7		$	275.6		$	275.6		Highest end of day loan balance during the period	$	308.6	$	269.7	$	260.6
Average interest rate	Average interest rate	3.8		%	3.8		%	3.7		%	Average interest rate	2.0%		3.6%		4.0%

(1)Lower of the credit facility maximum or the total borrowing base collateral.

(2)The sub-limit availability for letters of credit was $42.6 million ~~as of October~~at April 30, ~~2021, $41.8 million as of~~2022, January ~~30, 2021,~~29, 2022, and ~~$42.2 million as of October 31, 2020.~~May 1, 2021.

~~Long-Term Debt~~

~~Long-term debt was solely comprised of the Term Loan transaction completed during the third quarter of 2020, as discussed below.~~

On October 5, 2020, the Company and certain of its subsidiaries entered into a loan agreement (the “Loan Agreement”) dated October 5, 2020 with SLR Credit Solutions (formerly known as Crystal Financial LLC), as Lender, Administrative Agent, and Collateral Agent, providing for an $80 million Term Loan. The net proceeds from the Term Loan, after deducting related fees and expenses, were used to repay borrowings under the Company’s ABL Credit Facility.

The Term ~~Loan: (i) matures on the earlier of October 5, 2025 or the maturity date under the ABL Credit Facility, currently in May 2024; (ii)~~Loan bears interest, payable monthly, at ~~the greater of~~ (a) the ~~three month~~ LIBOR Rate ~~published in~~plus 2.50% for any portion that is a LIBOR loan, or (b) the ~~Wall Street Journal,~~base rate plus 1.75% for any portion that is a base rate loan. The Term Loan is pre-payable at any time without

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

penalty, and (b) 1.00%, plus 7.75% or 8.00% depending on the average excess availability of credit under the ABL Credit Facility, adjusted quarterly; and (iii) amortizes by (x) 5.00% per annum payable quarterly beginning with the fiscal quarter ending on or around July 31, 2021 through the fiscal quarter ending on or around April 30, 2022, (y) 7.50% per annum payable quarterly beginning with the fiscal quarter ending on or around July 31, 2022 through the fiscal quarter ending on or around April 30, 2023, and (z) 10.00% per annum payable quarterly thereafter.does not require amortization. For the ~~Third~~First Quarter ~~2021 and Year-To-Date 2021,~~2022, the Company recognized ~~$1.9~~$0.4 million ~~and $5.5 million, respectively, within~~in interest expense related to the Term Loan.

The Term Loan is secured by a first priority security interest in the Company’s intellectual property, certain furniture, fixtures, ~~and~~ equipment, and pledges of subsidiary capital stock, and a second priority security interest in the collateral securing the ABL Credit ~~Facility.~~Facility on a first-priority basis. The Term Loan is guaranteed ~~subject to certain exceptions,~~ by each of the Company’s subsidiaries that guarantees the ABL Credit ~~Facility.~~

~~The Term Loan is, in whole or in part, pre-payable any time~~Facility and ~~from time to time, subject to certain prepayment premiums specified in the Loan Agreement, plus accrued and unpaid interest.~~

Among other covenants, the Loan Agreement limits the ability of the Company and its subsidiaries to incur certain liens, to incur certain indebtedness, including under the ABL Credit Facility, to make certain investments, acquisitions, dispositions or restricted payments, or to change the nature of its business. These covenants arecontains substantially the same covenants as provided in the ABL Credit Facility.

~~The~~Both the ABL Credit Facility and the Term Loan ~~Agreement contains~~contain customary events of default, which include (subject in certain cases to customary grace and cure periods), nonpayment of principal or interest, breach of ~~other~~ covenants, ~~in the Loan Agreement,~~ failure to pay certain other indebtedness, ~~including under the ABL Credit Facility,~~ and certain events of bankruptcy, insolvency or reorganization.

~~Table of Contents~~

~~The following table summarizes the current and long-term portion of the long-term debt:~~

October 30,
2021

~~(in thousands)~~

~~Term Loan principal~~

~~79,000~~

~~Less: Unamortized discount, net~~

~~(877)~~

~~Less: Unamortized debt issuance costs, net~~

~~(961)~~

~~Term Loan, net~~

~~77,162~~

~~Less: Current portion, net~~ ~~(1)~~

~~(28,270)~~

~~Long-term debt, net~~

~~48,892~~

~~(1)Includes principal of $29.0 million that was repaid in connection with the refinancing of the Term Loan in November 2021 (see Note 14 - Subsequent Events for further information).~~

~~Future principal payments of long-term debt due subsequent to October 30, 2021 are as follows:~~
Period
Future Principal Payments (1)
(in thousands)
Remainder of 2021 $ 1,000
2022 5,500
2023 7,500
2024 65,000
Total future principal payments $ 79,000

~~(1)Future principal payments do not give effect to the refinancing of the Term Loan in November 2021 (see Note 14 - Subsequent Events for further information).~~

On November 16, 2021, the Company completed the refinancing of the ABL Credit Facility and Term Loan with a new lending group led by an affiliate of Wells Fargo by entering into a fourth amendment to its Credit Agreement, dated as of May 9, 2019, with the lenders party thereto. At the same time, the Company repaid outstanding principal of $79.0 million under the Term Loan. The new debt consists of a revolving credit facility with $350.0 million of maximum availability and a $50.0 million term loan (see Note 14 - Subsequent Events for further information).

~~10. LEGAL~~7. COMMITMENTS AND ~~REGULATORY MATTERS~~CONTINGENCIES

Legal and Regulatory Matters

The Company is a defendant in Rael v. The Children’s Place, Inc., a purported class action, pending in the U.S. District Court, Southern District of California. In the initial complaint filed in February 2016, the plaintiff alleged that the Company falsely advertised discount prices in violation of California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. The plaintiff filed an amended complaint in April 2016, adding allegations of violations of other state consumer protection laws. In August 2016, the plaintiff filed a second amended complaint, adding an additional plaintiff and removing the other state law claims. The plaintiffs’ second amended complaint sought to represent a class of California purchasers and sought, among other items, injunctive relief, damages, and attorneys’ fees and costs.

The Company engaged in mediation proceedings with the plaintiffs in December 2016 and April 2017. The parties reached an agreement in principle in April 2017, and signed a definitive settlement agreement in November 2017, to settle the matter on a class basis with all individuals in the U.S. who made a qualifying purchase at The Children’s Place from February 11, 2012 through January 28, 2020, the date of preliminary approval by the court of the settlement. The Company submitted its memorandum in support of final approval of the class settlement on March 2, 2021. On March 29, 2021, the court granted final approval of the class settlement and denied plaintiff’s motion for attorney’s fees, with the amount of attorney’s fees to be decided after the class recovery amount has been determined. The settlement provides merchandise vouchers for qualified class members who submit valid claims, as well as payment of legal fees and expenses and claims administration expenses. Vouchers were distributed to class members on November 15, 2021 and they will be eligible for redemption in multiple rounds through November 2023. In connection with the settlement, the Company recorded a reserve for $5.0 million in its consolidated financial statements in the first quarter of 2017.

~~Table of Contents~~

The Company is also involved in various legal proceedings arising in the normal course of business. In the opinion of management, any ultimate liability arising out of these proceedings will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

8. STOCKHOLDERS’ EQUITY

Share Repurchase Programs

In March 2018, the Board of Directors authorized a $250.0 million share repurchase program (the “2018 Share Repurchase Program”). In November 2021, the Board of Directors approved another $250.0 million share repurchase program (the “2021 Share Repurchase Program”), which added to the then remaining availability under the 2018 Share Repurchase Program. Under these programs, the Company may repurchase shares on the open market at current market prices at the time of purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under a program will depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business conditions. The Company may suspend or discontinue the programs at any time and may thereafter reinstitute purchases, all without prior announcement. As of April 30, 2022, there was $218.6 million remaining under the 2021 Share Repurchase Program. From March 2020 through July 2021, the Company suspended share repurchases, other than to satisfy withholding tax requirements of equity award recipients, due to the COVID-19 pandemic.

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

authorities as required by law to satisfy the withholding tax requirements of all equity award recipients. The Company’s payment of the withholding taxes in exchange for the surrendered shares constitutes a repurchase of its common stock. The Company also acquires shares of its common stock in conjunction with liabilities owed under the Company’s deferred compensation plan, which are held in treasury.

The following table summarizes the Company’s share repurchases:


	Thirteen Weeks Ended
	April 30, 2022			May 1, 2021
	Shares	Amount		Shares	Amount
	(in thousands)
Share repurchases related to:
Share repurchase program	665	$	38,699	29	$	2,374
Shares acquired and held in treasury	1	$	69	1	$	69

In accordance with the FASB ASC 505—Equity, the par value of the shares retired is charged against Common stock and the remaining purchase price is allocated between Additional paid-in capital and Retained earnings. The portion charged against Additional paid-in capital is determined using a pro-rata allocation based on total shares outstanding. For all shares retired in the First Quarter 2022 and First Quarter 2021, $25.8 million and $1.9 million was charged to Retained earnings, respectively.

Dividends

In March 2020, the Company announced it had temporarily suspended its dividend payments due to the COVID-19 pandemic.

9. STOCK-BASED COMPENSATION

The following table summarizes the Company’s stock-based compensation expense:


	Thirteen Weeks Ended
		April 30, 2022		May 1, 2021
		(in thousands)
Deferred Awards		$	3,425	$	3,579
Performance Awards		4,137		4,337
Total stock-based compensation expense (1)		$	7,562	$	7,916

(1)Stock-based compensation expense recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $0.6 million and $1.0 million in the First Quarter 2022 and First Quarter 2021, respectively. All other stock-based compensation expense is included in Selling, general, and administrative expenses.

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

10. EARNINGS PER COMMON SHARE

The following table reconciles net income and share amounts utilized to calculate basic and diluted earnings per common share:


	Thirteen Weeks Ended
		April 30, 2022		May 1, 2021


		(in thousands)
Net income		$	19,831	$	45,205

Basic weighted average common shares outstanding		13,621		14,670
Dilutive effect of stock awards		220		332
Diluted weighted average common shares outstanding		13,841		15,002

11. INCOME TAXES

The Company computes income taxes using the liability method. This method requires recognition of deferred tax assets and liabilities, measured by enacted rates, attributable to temporary differences between the financial statement and income tax basis of assets and liabilities. The Company’s deferred tax assets and liabilities are comprised largely of differences relating to depreciation and amortization, rent expense, inventory, stock-based compensation, net operating loss carryforwards, tax credits, and various accruals and reserves.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. ~~Included in the~~The CARES Act ~~is a provision that~~ allows net operating losses (“NOLs”) incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to offset 100% of taxable income and to generate a refund of previously paid income taxes. ~~The Company has evaluated the impact of~~Pursuant to the CARES Act, the Company carried back the taxable year 2020 tax loss of approximately $150.0 million to prior years. During the First Quarter 2022, the Company received $22.0 million of this income tax refund and ~~expects~~ the ~~NOL carryback provision~~remaining balance of $19.1 million as of April 30, 2022, is included within Prepaid expenses and other current assets on the ~~CARES Act to result in a material cash benefit to the Company.~~Consolidated Balance Sheets.

The Company’s effective income tax rate for the ~~Third~~First Quarter ~~2021~~2022 was ~~28.2% as compared to 33.6% during the Third Quarter 2020. The Company’s provision for income taxes for the Third Quarter 2021 was $31.0~~a benefit of 13.0%, or $2.3 million, compared to ~~$6.7~~a provision of 26.5%, or $16.3 million, induring the ~~Third~~First Quarter ~~2020.~~2021. The decrease in the effective income tax rate for the ~~Third~~First Quarter ~~2021~~2022 compared to the ~~Third~~First Quarter ~~2020~~2021 was primarily driven by the release of a reserve of $6.4 million for unrecognized tax benefits ~~from the CARES Act~~as a result of a settlement with a taxing authority in the ~~prior year.~~

The Company’s effective tax rate for Year-To-Date 2021 was a tax provision of 27.5% as compared to a tax benefit of 33.3% for Year-To-Date 2020. The Company’s provision for income taxes for the Year-To-Date 2021 was $56.3 million compared to an income tax benefit of $73.9 million in Year-To-Date 2020. The decrease in the effective tax rate for Year-To-Date 2021 compared to Year-To-Date 2020 was primarily driven by tax benefits from the CARES Act in the prior year.First Quarter 2022.

The Company ~~recognizes accrued~~accrues interest and penalties related to unrecognized tax benefits inas part of the provision for income taxes. The total amount of unrecognized tax benefits was $2.3 million, $8.7 million, and $7.9 million as of ~~October~~April 30, ~~2021,~~2022, January ~~30,~~29, 2022, and May 1, 2021, ~~and October 31, 2020 was $8.0 million, $7.9 million, and $6.8 million,~~ respectively, and is included within non-current liabilities. Additional interest expense recognized in the ~~Third~~First Quarter ~~2021, Third~~2022 and First Quarter ~~2020, Year-To-Date~~ 2021 ~~and Year-To-Date 2020~~ related to unrecognized tax benefits was not significant.

The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong. The Company ~~including its domestic subsidiaries,~~ files a consolidated U.S. income tax return for federal income tax purposes. The Company is no longer subject to income tax examinations by U.S. federal, state and local or foreign tax authorities for ~~fiscal~~ tax years ~~2014~~2016 and ~~prior, with the exception of Hong Kong, which is open through fiscal tax year 2013 due to an ongoing tax examination.~~prior.

Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues arise as a result of a tax audit, and are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

12. SEGMENT INFORMATION

In accordance with FASB ASC 280—Segment Reporting, the Company reports segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com, www.gymboree.com, and www.sugarandjade.com. Included in The Children’s Place U.S. segment are

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

the Company’s U.S. and Puerto Rico-based stores and revenue from the Company’s U.S.-based wholesale business. Included in The Children’s Place International segment are the Company’s Canadian-based stores, revenue from the Company’s Canadian-based wholesale business, and revenue from international franchisees. The Company measures its segment profitability based on operating income, defined as income before interest and taxes. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions, such as production and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. The Company periodically reviews these allocations and adjusts them based upon changes in business circumstances. Net sales to external customers are derived from merchandise sales, and the Company has no ~~major~~ customers that individually account for more than 10% of its net sales. As of ~~October~~April 30, ~~2021,~~2022, The Children’s Place U.S. had ~~611 stores~~

~~Table of Contents~~

~~and The Children’s Place International had 92 stores. As of October 31, 2020, The Children’s Place U.S. had 702~~583 stores and The Children’s Place International had ~~107~~82 stores. As of May 1, 2021, The Children’s Place U.S. had 624 stores and The Children’s Place International had 100 stores.

The following tables provide segment level financial information:


		Thirteen Weeks Ended						Thirty-nine Weeks Ended							Thirteen Weeks Ended
		October 30, 2021			October 31, 2020			October 30, 2021			October 31, 2020					April 30, 2022		May 1, 2021
		(in thousands)														(in thousands)
Net sales(1):								]
Net sales:														Net sales:
The Children’s Place U.S.	The Children’s Place U.S.	$	498,836		$	373,625		$	1,269,196		$	941,607		The Children’s Place U.S.		$	327,961	$	399,659
The Children’s Place International ~~(2)~~(1)	The Children’s Place International ~~(2)~~(1)	59,389			51,946			138,365			108,094			The Children’s Place International ~~(2)~~(1)		34,389		35,822
Total net sales	Total net sales	$	558,225		$	425,571		$	1,407,561		$	1,049,701		Total net sales		$	362,350	$	435,481

Operating income (loss)(1):
Operating income:														Operating income:
The Children’s Place U.S.	The Children’s Place U.S.	$	100,456		$	17,491		$	196,262		$	(204,468)		The Children’s Place U.S.		$	16,869	$	63,912
The Children’s Place International	The Children’s Place International	13,354			5,832			21,304			(9,836)			The Children’s Place International		2,385		1,995
Total operating income (loss)		$	113,810		$	23,323		$	217,566		$	(214,304)
Operating income (loss) as a percent of net sales(1):
Total operating income														Total operating income		$	19,254	$	65,907
Operating income as a percentage of net sales:														Operating income as a percentage of net sales:
The Children’s Place U.S.	The Children’s Place U.S.	20.1		%	4.7		%	15.5		%	(21.7)		%	The Children’s Place U.S.		5.1%		16.0%
The Children’s Place International	The Children’s Place International	22.5		%	11.2		%	15.4		%	(9.1)		%	The Children’s Place International		6.9%		5.6%
Total operating income (loss) as a percent of net sales		20.4		%	5.5		%	15.5		%	(20.4)		%
Total operating income as a percentage of net sales														Total operating income as a percentage of net sales		5.3%		15.1%
Depreciation and amortization:	Depreciation and amortization:													Depreciation and amortization:
The Children’s Place U.S.	The Children’s Place U.S.	$	13,153		$	14,542		$	40,767		$	46,322		The Children’s Place U.S.		$	12,587	$	14,311
The Children’s Place International	The Children’s Place International	1,051			1,267			3,390			4,083			The Children’s Place International		1,028		1,250
Total depreciation and amortization	Total depreciation and amortization	$	14,204		$	15,809		$	44,157		$	50,405		Total depreciation and amortization		$	13,615	$	15,561
Capital expenditures:	Capital expenditures:													Capital expenditures:
The Children’s Place U.S.	The Children’s Place U.S.	$	8,432		$	9,413		$	21,304		$	23,046		The Children’s Place U.S.		$	10,357	$	6,487
The Children’s Place International	The Children’s Place International	72			82			696			717			The Children’s Place International		366		239
Total capital expenditures	Total capital expenditures	$	8,504		$	9,495		$	22,000		$	23,763		Total capital expenditures		$	10,723	$	6,726

(1)~~Net sales and operating income (loss) were significantly impacted by the COVID-19 pandemic in the Third Quarter 2020 and Year-To-Date 2020.~~

~~(2)~~Net sales from The Children’s Place International are primarily derived from Canadian operations. The Company’s foreign subsidiaries, primarily in Canada, have operating results based in foreign currencies and are thus subject to the fluctuations of the corresponding translation rates into U.S. dollars.

October 30, 2021 January 30, 2021 October 31, 2020
Total assets: (in thousands)
The Children’s Place U.S. $ 995,835 $ 1,054,339 $ 1,113,309
The Children’s Place International 92,531 85,788 93,634
Total assets $ 1,088,366 $ 1,140,127 $ 1,206,943

~~13. DERIVATIVE INSTRUMENTS~~

The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates attributable to inventory purchases denominated in a foreign currency. Specifically, the functional currency of the Company’s Canadian subsidiary is the Canadian dollar, but it purchases inventory from suppliers in U.S. dollars. In order to mitigate the variability of cash flows associated with certain of these forecasted inventory purchases, the Company enters, from time to time, into foreign exchange forward contracts. These contracts typically mature within 12 months. The Company does not use forward contracts to engage in currency speculation, and it does not enter into derivative financial instruments for trading purposes.

~~The Company accounts for all of its derivatives and hedging activity under FASB ASC 815—Derivatives and Hedging~~.

Under the Company’s risk management policy and in accordance with guidance under the topic, in order to qualify for hedge accounting treatment, a derivative must be considered highly effective at offsetting changes in either the hedged item’s cash flows or fair value. Additionally, the hedge relationship must be documented to include the risk management objective and strategy, the hedging instrument, the hedged item, the risk exposure, and how hedge effectiveness will be assessed

~~Table of Contents~~

prospectively and retrospectively. The Company formally measures effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis. The Company discontinues hedge accounting under a foreign exchange forward contract prospectively: (i) if management determines that the derivative is no longer highly effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is terminated, (iii) if the forecasted transaction being hedged by the derivative is no longer probable of occurring, or (iv) if management determines that designation of the derivative as a hedge instrument is no longer appropriate.

All derivative instruments are presented at gross fair value on the consolidated balance sheets within either Prepaid expenses and other current assets or Accrued expenses and other current liabilities. As of October 30, 2021 and October 31, 2020, the Company did not have any open foreign exchange forward contracts.

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings within Cost of sales (exclusive of depreciation and amortization) in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in earnings within Selling, general, and administrative expenses, consistent with where the Company records realized and unrealized foreign currency gains and losses on transactions in foreign denominated currencies. There were no losses related to hedge ineffectiveness during Year-To-Date 2021 or Year-To-Date 2020. Changes in fair value associated with derivatives that were not designated and qualified as cash flow hedges were recognized in earnings within Selling, general, and administrative expenses. During Year-To-Date 2021, there were no derivatives that qualified as cash flow hedges.

~~14. SUBSEQUENT EVENTS~~

~~Refinancing of ABL Credit Facility and Term Loan~~

On November 16, 2021, the Company completed the refinancing of its ABL Credit Facility and Term Loan with a new lending group led by an affiliate of Wells Fargo by entering into a fourth amendment to its Credit Agreement, dated as of May 9, 2019, with the lenders party thereto. The new debt consists of a revolving credit facility with $350.0 million of maximum availability and a $50.0 million term loan, both with five year maturities, lower interest rates, reduced reporting requirements, and increased flexibility under the covenants.

The new revolving credit facility is secured by a first-priority lien on substantially all of the Company’s U.S. and Canadian assets, and a second-priority lien on the Company’s intellectual property, and certain furniture, fixtures and equipment. Interest on borrowings is payable monthly at LIBOR plus 1.125% or 1.375%, based on the amount of the Company’s average excess availability under the facility. The new revolving credit facility has an unused line fee of 0.20%.

The new term loan is secured by a first-priority lien on the Company’s intellectual property, and certain furniture, fixtures and equipment, and a second-priority lien on the assets securing the new revolving credit facility. Interest is payable monthly at LIBOR plus 2.50%. The new term loan does not require amortization if certain conditions are met and is pre-payable at any time without penalty.

~~Concurrently, the Company repaid remaining principal of $79.0 million on its $80.0 million Term Loan with SLR Credit Solutions (formerly known as Crystal Financial LLC).~~

~~Share Repurchase Program~~

~~In November 2021, the Board of Directors approved another $250.0 million share repurchase program, which adds to the remaining availability under the 2018 Share Repurchase Program.~~

2316

~~Table of Contents~~

~~Item~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS~~ OPERATIONS.

This Quarterly Report on Form 10-Q 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 January ~~30, 2021.~~29, 2022. 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 risks related to the COVID-19 pandemic, including the impact of the COVID-19 pandemic on our business or the economy in general (including decreased customer traffic, schools adopting remote and hybrid learning models, closures of businesses and other activities causing decreased demand for our products and negative impacts on our customers’ spending patterns due to decreased income or actual or perceived wealth, and the impact of ~~the CARES Act and other~~ legislation related to the COVID-19 pandemic, ~~and~~including any changes to ~~the CARES Act or~~ such ~~other~~ legislation), 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 the COVID-19 pandemic or other disease outbreaks, or foreign sources of supply in less developed countries, more politically unstable countries, or countries where vendors fail to comply with industry standards or ethical business practices, including the use of forced, indentured or child labor, 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.

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 ~~30, 2021.~~29, 2022.

Terms that are commonly used in our ~~management’s discussion~~Management’s Discussion and ~~analysis~~Analysis of ~~financial condition~~Financial Condition and ~~results~~Results of ~~operations~~Operations are defined as follows:

•~~Third~~First Quarter 2022 — The thirteen weeks ended April 30, 2022

•First Quarter 2021 — The thirteen weeks ended ~~October 30,~~May 1, 2021

•~~Third Quarter 2020 —~~Fiscal 2022 – The ~~thirteen~~52 weeks ~~ended October 31, 2020~~

•~~Year-To-Date 2021 — The thirty-nine weeks ended October 30, 2021~~

•~~Year-To-Date 2020 — The thirty-nine weeks ended October 31, 2020~~ending January 28, 2023

•Fiscal 2021 – The 52 weeks ~~ending~~ended January 29, 2022

•~~Fiscal 2020 – The 52 weeks ended January 30, 2021~~SEC — U.S. Securities and Exchange Commission

•~~Gross Margin~~U.S. GAAP — ~~Gross profit expressed as a percentage of net sales~~

•~~SG&A — Selling, general, and administrative expenses~~Generally Accepted Accounting Principles in the United States

•FASB — Financial Accounting Standards Board

•AUR — ~~U.S. Securities and Exchange Commission~~Average unit retail price

•Comparable Retail Sales — Net sales, in constant currency, from stores that have been open for at least 14 consecutive months and from our e-commerce store, excluding postage and handling fees. Store closures in the current fiscal year will be excluded from Comparable Retail Sales beginning in the fiscal quarter in which the store closes. A store that is closed for a substantial remodel, relocation, or material change in size will be excluded from Comparable Retail Sales for at least 14 months beginning in the fiscal quarter in which the closure occurred. However, stores that temporarily close will be excluded from Comparable Retail Sales until the store is

2417

~~Table of Contents~~

reopened for a full fiscal month. Comparable Retail Sales do not exclude any temporarily closed stores impacted by the COVID-19 pandemic.

•~~U.S. GAAP~~Gross Margin — ~~Generally Accepted Accounting Principles in the United States~~Gross profit expressed as a percentage of net sales

•~~FASB ASC~~SG&A — ~~FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules~~Selling, general, and ~~interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants~~administrative expenses

OVERVIEW

Our Business

We are the largest pure-play children’s specialty apparel retailer in North America. We design, contract to manufacture, sell at retail and wholesale, and license to sell, trend right, high quality merchandise ~~predominately~~predominantly at value prices, primarily under our proprietary “The Children’s Place”, “Place”, “Baby Place”, “Gymboree”, and “Sugar & Jade” brand names. As of ~~October~~April 30, ~~2021,~~2022, we had ~~703~~665 stores across North America, our e-commerce ~~businesses~~business at www.childrensplace.com, ~~and~~ www.gymboree.com, and www.sugarandjade.com, and had ~~221~~212 international points of distribution with our ~~eight~~six franchise partners in ~~17 countries, and in November 2021, we launched the Sugar & Jade e-commerce website at~~ ~~www.sugarandjade.com~~.16 countries.

Segment Reporting

In accordance with FASB ASC 280—Segment Reporting, we report segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com, www.gymboree.com, and www.sugarandjade.com. Included in The Children’s Place U.S. segment are our U.S. and Puerto Rico-based stores and revenue from our U.S.-based wholesale business. Included in The Children’s Place International segment are our Canadian-based stores, revenue from our Canadian-based wholesale business, as well as revenue from international franchisees. We measure our segment profitability based on operating income, defined as income before interest and taxes. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions such as production and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. We periodically review these allocations and adjust them based upon changes in business circumstances. Net sales ~~from~~to external customers are derived from merchandise sales, and we have no ~~major~~ customers that individually account for more than 10% of our net sales.

COVID-19 Pandemic

The COVID-19 pandemic ~~has~~continues to significantly ~~impacted~~impact regions all around the world, ~~resulting~~including the United States and Canada. Since March 2020, this has resulted in restrictions ~~and shutdowns~~ of businesses and other activities implemented by national, state, and local authorities and private entities, leading to significant adverse economic conditions and business and lifestyle disruptions, as well as significant volatility in global financial and retail markets. ~~Federal,~~From the onset of the pandemic and as new variants emerged, federal, state, and local governments and health officials worldwide ~~have~~ imposed ~~and continue to impose~~ varying degrees of preventative and protective actions such as travel bans, restrictions on public gatherings, forced closures of businesses and other activities, social distancing, the adoption of remote or hybrid learning models for schools, and stay-at-home orders, all in an effort to reduce the spread of the virus. ~~In addition, certain mall owners have restricted hours of operation and the number of people permitted in stores.~~ Such factors, among others, have resulted in a significant decline in retail traffic and consumer spending on discretionary items.

~~As a result of the impact of the COVID-19 pandemic,~~ In addition, we have experienced, ~~significant~~and will likely continue to experience, disruptions in our global supply chain, which have caused delays in the production and transportation of our products, which we are seeking to mitigate, including through shifting production schedules.

As of the First Quarter 2022, the progress achieved nationwide in addressing the effects of the pandemic has allowed most businesses and shopping malls to reopen and resume operations, with some malls continuing to restrict hours of operation and the number of people permitted in stores. Our distribution centers remained open and operating during the pandemic to support our retail stores and e-commerce business, ~~disruption,~~ and ~~on March 18, 2020, we temporarily closed~~as of April 30, 2022, all of our stores ~~across the U.S. and Canada. We reopened the majority of our stores during the last two weeks of June 2020 and, as of October 30, 2021, we had more than 99% of our stores~~are open to the public in the U.S., Canada, and Puerto Rico. Our ~~distribution centers remain~~U.S. office and certain of our foreign offices are also open ~~and operating~~in a hybrid work environment, while we continue to ~~support our retail store and e-commerce business.~~

~~Our strategic actions taken to address~~monitor the developments of the pandemic ~~since March 2020,~~for our other foreign offices. We will continue to assess the pandemic’s impact on our operations and ~~our continued execution of our strategic initiatives have allowed us~~financial situation, and will seek to ~~support the financial and operational stabilization of the Company during these uncertain times.~~implement all necessary measures as needed.

Recent Developments

Recent macroeconomic events have increased the cost of goods and services necessary to produce and distribute our products, including cotton and other materials used in production, as well as labor, transportation, fuel and energy. We expect these increased product input and transportation costs to continue to impact the remainder of 2022.

On November 16, 2021, we completed the refinancing of ~~the~~our previous $360.0 million asset-based revolving credit facility (the ~~“ABL~~“Previous ABL Credit Facility”) and ~~the~~our previous $80.0 million term loan (the ~~“Term~~“Previous Term Loan”) with a new

lending group led by an affiliate of Wells Fargo Bank, National Association (“Wells Fargo”) by entering into a ~~fourth~~Fourth amendment to our Credit Agreement, dated as of May 9, 2019, with the lenders party thereto (the “Fourth Amendment”). The new debt consists of a revolving credit facility with $350.0 million of ~~maximum~~ availability (the “ABL Credit Facility”) and a $50.0 million term loan (the “Term Loan”), both with five year maturities, lower interest rates, reduced reporting requirements, and increased flexibility under the covenants.

~~Table of Contents~~

The new revolving credit facility is secured by a first-priority lien on substantially all of our U.S. and Canadian assets, and a second-priority lien on our intellectual property, and certain furniture, fixtures and equipment. Interest on borrowings is payable monthly at LIBOR plus 1.125% or 1.375%, based on the amount of our average excess availability under the facility. The new revolving credit facility has an unused line fee of 0.20%.

The new term loan is secured by a first-priority lien on our intellectual property, and certain furniture, fixtures and equipment, and a second-priority lien on the assets securing the new revolving credit facility. Interest is payable monthly at LIBOR plus 2.50%. The new term loan does not require amortization if certain conditions are met and is pre-payable at any time without penalty.

~~Concurrently, we repaid remaining principal of $79.0 million on the $80.0 million Term Loan with SLR Credit Solutions (formerly known as Crystal Financial LLC).~~

The description of the Fourth Amendment set forth herein is qualified in its entirety by reference to the full text thereof, a copy of which is filed as Exhibit 10.4 to this Quarterly Report on Form 10-Q.

Operating Highlights

Net sales~~increased $132.6~~ decreased $73.1 million, or ~~31.2%~~16.8%, to ~~$558.2~~$362.4 million during the ~~Third~~First Quarter ~~2021~~2022 from ~~$425.6~~$435.5 million during the ~~Third~~First Quarter ~~2020,~~2021, primarily ~~driven by strong customer response~~due to lapping the COVID-19 stimulus relief program last year, the impact of unprecedented inflation on our ~~product assortment~~customers, prolonged unseasonably cold temperatures through the end of the First Quarter 2022 in our major markets, and the ~~strategic reset~~impact of ~~our pricing and promotions.~~permanent store closures. Comparable retail sales ~~were 36.2%~~decreased 16.9% for the ~~Third~~First Quarter ~~2021.~~2022.

Gross profit ~~increased $98.7~~decreased $46.3 million to ~~$244.8~~$141.9 million during the ~~Third~~First Quarter ~~2021~~2022 from ~~$146.1~~$188.2 million during the ~~Third~~First Quarter 2020. The Third Quarter 2021 results included incremental expenses related to the COVID-19 pandemic, including personal protective equipment and incentive pay for our associates of $0.2 million, compared to $3.8 million in the Third Quarter 2020. Excluding the impact of these charges, gross2021. Gross margin ~~leveraged 868~~deleveraged 406 basis points to ~~43.9%~~39.2% of net ~~sales.~~sales in the First Quarter 2022. The ~~increase~~decrease was primarily athe result of ~~significantly~~ higher ~~merchandise margins in both our digital~~inbound transportation expenses and ~~stores channels as a result of~~ the ~~strategic reset of our pricing and promotions, the leverage~~deleverage of fixed expenses resulting from the ~~increase in net sales, and lower occupancy expenses due to favorable lease negotiations and permanent store closures.~~

Selling, general, and administrative expenses increased $9.0 million to $115.6 million during the Third Quarter 2021 from $106.6 million during the Third Quarter 2020. The Third Quarter 2021 results included incremental operating expenses of $0.8 million, including costs for personal protective equipment for our associates, restructuring costs and fleet optimization costs. The Third Quarter 2020 results included incremental operating expenses of $3.2 million, including costs for personal protective equipment for our associates, restructuring costs, primarily related to severance costs for corporate associates, and fleet optimization costs. Excluding the impact of these incremental charges, SG&A leveraged 375 basis points to 20.6% of net sales, primarily as a result of the leverage of fixed expenses resulting from the increasedecline in net sales, partially offset by higher ~~incentive compensation accruals~~merchandise margins in our brick-and-mortar retail and ~~higher marketing expenses.~~e-commerce channels, driven by AUR increases in both channels.

~~Provision for~~Operating income ~~taxes was $31.0~~decreased $46.6 million to $19.3 million during the ~~Third~~First Quarter ~~2021 compared to $6.7~~2022 from $65.9 million during the ~~Third~~First Quarter 2020. Our effective tax rate was 28.2% and 33.6% in the Third Quarter 2021 and the Third Quarter 2020, respectively. The decrease in our effective tax rate was primarily driven by tax benefits from the CARES Act in the prior year.2021. Operating income deleveraged 982 basis points to 5.3% of net sales.

Net income ~~increased $65.6~~decreased $25.4 million to ~~$78.9~~$19.8 million, or ~~$5.30~~$1.43 per diluted share, during the ~~Third~~First Quarter ~~2021~~2022 compared to ~~$13.3~~$45.2 million, or ~~$0.91~~$3.01 per diluted share, during the ~~Third~~First Quarter ~~2020,~~2021, due to the ~~impact~~factors discussed above.

During the First Quarter 2022, we repurchased approximately 0.7 million shares of our common stock for $38.8 million, consisting of shares surrendered to cover tax withholdings associated with the ~~COVID-19 pandemic~~vesting of equity awards and shares acquired in the ~~prior year and the other factors discussed above.~~open market. As of April 30, 2022, there was $218.6 million remaining under our share repurchase program.

Although we are facing ~~a period~~challenging macroeconomic events, including increases in the cost of goods and services necessary to produce and distribute our products, including cotton and other materials used in production, as well as labor, transportation, fuel and energy and continuing uncertainty regarding the future impact of the COVID-19 pandemic, we continue to focus on our key strategic growth initiatives – superior product, digital transformation, and fleet optimization.

The transformation of our digital capabilities continues to expand given a completely redesigned responsive site and mobile application, providing a rich online shopping experience geared ~~towards~~toward the needs of our “on-the-go” mobile customers, expanded customer personalization, ~~which delivers unique, relevant content~~ to drive sales, loyalty and retention, and the ability to have our entire store fleet equipped with ship-from-store capabilities. Also, in response to increased digital demand, including as a result of the COVID-19 pandemic, we have increased and will continue to monitor the utilization of our third-party logistics provider to further support both our U.S. and Canadian e-commerce operations.

We continue to evaluate our store fleet ~~as a result of~~through our fleet optimization initiative. We have closed ~~496~~534 stores, including ~~the 178~~7 stores closed during ~~Fiscal 2020 and 47 stores closed during Year-To-Date 2021,~~the First Quarter 2022, since the announcement of our fleet optimization initiative in 2013. ~~As a result of favorable lease negotiations, we~~We are ~~now targeting~~planning to close a total of ~~275 retail store closures since Fiscal 2020, versus the previously announced target of 300 retail store closures.~~

~~During Year-To-Date 2021, we repurchased~~ approximately 0.5 million shares of our common stock for $45.2 million, consisting of shares surrendered to cover tax withholdings associated with the vesting of equity awards and shares acquired under the 2018 Share Repurchase Program. As of October 30, 2021, there was approximately $47.7 million remaining pursuant to the 2018 Share Repurchase Program. In November 2021, the Board of Directors approved another $250.0 million share repurchase program, which adds to the remaining availability under the 2018 Share Repurchase Program. In March 2020, we

~~Table of Contents~~

~~announced a temporary suspension of our capital return program and payment of dividends continues to be temporarily suspended due to the COVID-19 pandemic.~~40 stores this year.

We have subsidiaries whose operating results are based in foreign currencies and are thus subject to the fluctuations of the corresponding translation rates into U.S. dollars. The table below summarizes ~~those~~the average translation rates that most significantly impact our operating results:
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30,
2021 October 31,
2020 October 30,
2021 October 31,
2020
Average Translation Rates (1)

Canadian Dollar 0.7956 0.7565 0.8015 0.7384
Hong Kong Dollar 0.1285 0.1290 0.1287 0.1290
China Yuan Renminbi 0.1550 0.1466 0.1547 0.1435


	Thirteen Weeks Ended
		April 30, 2022	May 1, 2021
Average Translation Rates (1)
Canadian dollar		0.7895	0.7948
Hong Kong dollar		0.1279	0.1288
Chinese renminbi		0.1570	0.1539

(1)The average translation rates are the average of the monthly translation rates used during each period to translate the respective income statements. ~~The rates represent~~Each rate represents the U.S. dollar equivalent of ~~a unit of each~~the respective foreign currency.

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ~~POLICIES~~ESTIMATES

We describe our significant accounting policies in “Note 1. Basis of Preparation and Summary of Significant Accounting Policies” of the notes to consolidated financial statements included in our most recent Annual Report on Form 10-K for the fiscal year ended January 29, 2022. There have been no significant changes in our accounting policies from those described in our most recent Annual Report on Form 10-K.

The preparation of ~~the consolidated~~ financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, ~~and the~~ disclosure of contingent assets and liabilities ~~as of~~at the date of the financial statements, ~~as well as~~and the ~~reported~~amounts of revenues and expenses reported during the ~~reported~~ period. ~~In many cases, there are alternative policies or estimation techniques that could be used.~~ We continuously review ~~the application of our accounting policies and evaluate~~ the appropriateness of the estimates used in preparing our financial statements; however, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information. Consequently, actual results could differ materially from our estimates.

~~The~~Our critical accounting ~~policies and~~ estimates ~~discussed below include those that we believe~~ are described under the ~~most critical to aid~~heading “Critical Accounting Estimates” in ~~fully understanding and evaluating our financial results. Senior management has discussed the development and selection~~Item 7 of our most recent Annual Report on Form 10-K for the fiscal year ended January 29, 2022. Our critical accounting ~~policies and~~ estimates ~~with the Audit Committee of our Board of Directors, which has reviewed our related disclosures herein.~~

~~Inventory Valuation~~

We value inventory at the lower of cost or net realizable value, with cost determined using an average cost method. The estimated market value of inventory is determined based on an analysis of historical sales trends of our individual product categories, the impact of market trends and economic conditions, and a forecast of future demand, as well as plans to sell through inventory. Estimates may differ from actual results due to the quantity, quality, and mix of products in inventory, consumer and retailer preferences, and market conditions such as those resulting from disease pandemics and other catastrophic events. Our historical estimates have not differed materially from actual results.

Reserves for inventory shrinkage, representing the risk of physical loss of inventory, are estimated based on historical experience and are adjusted based upon physical inventory counts. A 0.5% difference in our shrinkage rate as a percentage of cost of goods sold would have impacted each quarter’s net income by approximately $0.6 million.

~~Stock-Based Compensation~~

~~We account for stock-based compensation according to the provisions of FASB ASC 718—Compensation-Stock Compensation~~.

~~Time-Vesting and Performance-Based Awards~~

We generally grant time-vesting and performance-based stock awards to employees at management levels. We also grant time-vesting stock awards to our non-employee directors. Time-vesting awards are granted in the form of restricted stock units that require each recipient to complete a service period (“Deferred Awards”). Deferred Awards granted to employees generally vest ratably over three years. Deferred Awards granted to non-employee directors generally vest after one year. Performance-based stock awards are granted in the form of restricted stock units which have performance criteria that must be achieved for the awards to be earned in addition to a service period requirement (“Performance Awards”), and each Performance Award has a defined number of shares that an employee can earn (the “Target Shares”). With the approval of the Board’s Compensation Committee, we may settle vested Deferred Awards and Performance Awards to the employee in shares, in a cash amount equal

~~Table of Contents~~

to the market value of such shares at the time all requirements for delivery of the award have been met, or in part shares and cash. For Performance Awards, an employee may earn from 0% to 300% of their Target Shares based on the terms of the award and our achievement of certain performance goals established at the beginning of the applicable performance period. Performance Awards cliff vest, if earned, after completion of the applicable performance period, which is generally three years. The fair value of Deferred Awards and Performance Awards granted is based on the closing price of our common stock on the grant date. Compensation expense is recognized ratably over the related service period reduced for estimated forfeitures of those awards not expected to vest due to employee turnover. Compensation expense, as it relates to Performance Awards, is also adjusted based on the probability that the performance criteria will be achieved. While actual forfeitures could vary significantly from those estimated, a 10% change in our estimated forfeiture rate would have impacted our Third Quarter 2021 net income by approximately $0.6 million.

~~Impairment of Long-Lived Assets~~

~~We periodically review our long-lived assets when events indicate that their carrying value may not be recoverable. Such events~~ include a historical or projected trend of cash flow losses or a future expectation that we will sell or dispose of an asset significantly before the end of its previously estimated useful life. In reviewing for impairment ~~we group our long-lived assets at the lowest possible level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.~~

We review all stores that have reached comparable sales status, or sooner if circumstances should dictate, on at least an annual basis. We believe waiting this period of time allows a store to reach a maturity level where a more comprehensive analysis of financial performance can be performed. For each store that shows indications of impairment, we perform a recoverability test comparing estimated undiscounted future cash flows to the carrying value of the related long-lived assets. If the undiscounted cash flows are less than the related net book value of the long-lived assets, they are written down to their fair market value. We primarily use discounted future cash flows directly associated with those assets to determine fair market value of long-lived assets, and ROU assets. In evaluating future cash flows, we consider external and internal factors. External factors comprise the local environment in which the store resides, including mall traffic, competition, and their effect on sales trends, as well as macroeconomic factors, such as the global pandemic. Internal factors include our ability to gauge the fashion taste of our customers, control over variable costs such as cost of sales and payroll, and in certain cases, our ability to renegotiate lease costs. If external factors should change unfavorably, if actual sales should differ from our projections, or if our ability to control costs is insufficient to sustain the necessary cash flows, future impairment charges could be material.

~~Income Taxes~~

~~We utilize the liability method of accounting for~~ income taxes, ~~as set forth~~stock-based compensation, and inventory valuation. There have been no material changes in ~~FASB ASC 740—Income Taxes. Under the liability method, deferred taxes~~these critical accounting estimates from those described in our most recent Annual Report on Form 10-K.

Recent Accounting Standards Updates

There are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities, as well as for net operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using currently enacted tax rates that apply to taxable income in effect for the years in which the basis differences and tax assets are expected to be realized. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need for valuation allowances, we consider projected future taxable income, the availability of tax planning strategies, taxable income in prior carryback years, and future reversals of existing taxable temporary differences. If, in the future, we determine that we would not be able to realize our recorded deferred tax assets, an increase in the valuation allowance would decrease earnings in the period in which such determination is made.

We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no ~~tax benefit has been recognized in the financial statements.~~

~~Fair Value Measurement and Financial Instruments~~

•~~Level 1 - inputs to the valuation techniques~~pending accounting standards updates that are ~~quoted prices in active markets for identical assets or liabilities~~

~~Table of Contents~~

•~~Level 2 - inputs~~currently expected to ~~the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly~~

•~~Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities~~

Our cash and cash equivalents, accounts receivable, assets of the Deferred Compensation Plan, accounts payable, and revolving loan are all short-term in nature. As such, their carrying amounts approximate fair value and fall within Level 1 of the fair value hierarchy. The Company stock included in the Deferred Compensation Plan is not subject to fair value measurement.

Our derivative assets and liabilities include foreign exchange forward contracts that are measured at fair value using observable market inputs such as forward rates, our credit risk, and our counterparties’ credit risks. Based on these inputs, our derivative assets and liabilities are classified within Level 2 of the fair value hierarchy.

Our assets measured at fair value on a nonrecurring basis include long-lived assets, such as intangible assets, fixed assets, and ROU assets. We review the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to fall within Level 3 of the fair value hierarchy.

~~Insurance and Self-Insurance Liabilities~~

Based on our assessment of risk and cost efficiency, we self-insure as well as purchase insurance policies to provide for workers’ compensation, general liability and property losses, cyber-security coverage, as well as directors’ and officers’ liability, vehicle liability, and employee medical benefits. We estimate risks and record a liability based upon historical claim experience, insurance deductibles, severity factors, and other actuarial assumptions. These estimates include inherent uncertainties due to the variability of the factors involved, including type of injury or claim, required services by the providers, healing time, age of claimant, case management costs, location of the claimant, and governmental regulations. While we believe that our risk assessments are appropriate, these uncertainties or a deviation in future claims trends from recent historical patterns could result in our recording additional or reduced expenses, which may be material to our results of operations. Our historical estimates have not differed materially from actual results, and a 10% difference in our insurance reserves as of October 30, 2021 would have impacted net income by approximately $0.4 million.

~~Recently Issued Accounting Standards~~

~~Adopted in Fiscal 2021~~

In December 2019, the FASB issued guidance related to the accounting for income taxes. The guidance aims to simplify the accounting for income taxes by removing certain exceptions to the general principles within the previous guidance and by clarifying and amending the previous guidance. The guidance was effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. We adopted this guidance in the first quarter of 2021. The adoption of this guidance did not have a material impact on ~~our consolidated financial statements.~~the Company.

~~Table of Contents~~

RESULTS OF OPERATIONS

We believe that our e-commerce and brick-and-mortar retail store operations are highly interdependent, with both sharing common customers purchasing from a common pool of product inventory. Accordingly, we believe that consolidated omni-channel reporting presents the most meaningful and appropriate measure of our performance, including net sales.

The following table sets forth, for the periods indicated, selected ~~statements of operations~~income statement data expressed as a percentage of net sales. We primarily evaluate the results of our operations as a percentage of net sales rather than in terms of absolute dollar increases or decreases by analyzing the year over year change in our business expressed as a percentage of net sales (i.e., “basis points”). For example, SG&A ~~decreased 440~~increased 558 basis points to ~~20.7%~~30.1% of net sales during the ~~Third~~First Quarter ~~2021~~2022 from ~~25.1%~~24.5% during the ~~Third~~First Quarter ~~2020.~~2021. Accordingly, to the extent that our sales have increased at a faster rate than our costs (~~i.e.~~(i.e., “leveraging”), the more efficiently we have utilized the investments we have made in our business. Conversely, if our sales decrease or if our costs grow at a faster pace than our sales (i.e., ~~“deleveraging”~~“de-leveraging”), we have less efficiently utilized the investments we have made in our business.
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30,
2021 October 31,
2020 October 30,
2021 October 31,
2020
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (exclusive of depreciation and amortization) 56.1 65.7 57.3 81.6
Gross profit 43.9 34.3 42.7 18.4
Selling, general, and administrative expenses 20.7 25.1 24.0 30.4
Depreciation and amortization 2.5 3.7 3.1 4.8
Asset impairment charges 0.2 0.1 0.1 3.6
Operating income (loss) 20.4 5.5 15.5 (20.4)
Income (loss) before provision (benefit) for income taxes 19.7 4.7 14.5 (21.2)
Provision (benefit) for income taxes 5.6 1.6 4.0 (7.0)
Net income (loss) 14.1 % 3.1 % 10.5 % (14.1) %
Number of Company-operated stores, end of period 703 809 703 809
~~____________________________________________~~


	Thirteen Weeks Ended
	April 30, 2022		May 1, 2021
Net sales	100.0	%	100.0	%
Cost of sales (exclusive of depreciation and amortization)	60.8		56.8
Gross profit	39.2		43.2
Selling, general, and administrative expenses	30.1		24.5
Depreciation and amortization	3.8		3.6



Operating income	5.3		15.1

Income before provision (benefit) for income taxes	4.8		14.1
Provision (benefit) for income taxes	(0.6)		3.7
Net income	5.5	%	10.4	%
Number of Company stores, end of period	665		724

Table may not add due to rounding.

The following table sets forth net sales by segment, for the periods ~~indicated.~~
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30,
2021 October 31,
2020 October 30,
2021 October 31,
2020
Net sales: (in thousands)
The Children’s Place U.S. $ 498,836 $ 373,625 $ 1,269,196 $ 941,607
The Children’s Place International 59,389 51,946 138,365 108,094
Total net sales $ 558,225 $ 425,571 $ 1,407,561 $ 1,049,701
indicated:

~~Third~~


	Thirteen Weeks Ended
		April 30, 2022		May 1, 2021
		(in thousands)
Net sales:
The Children’s Place U.S.		$	327,961	$	399,659
The Children’s Place International		34,389		35,822
Total net sales		$	362,350	$	435,481

First Quarter 2022 Compared to First Quarter 2021 ~~Compared to Third Quarter 2020~~

Net sales ~~increased $132.6~~decreased $73.1 million or ~~31.2%~~16.8%, to ~~$558.2~~$362.4 million during the ~~Third~~First Quarter ~~2021~~2022 from ~~$425.6~~$435.5 million during the ~~Third~~First Quarter ~~2020,~~2021, primarily ~~driven by strong customer response to our product assortment and the strategic reset of our pricing and promotions. Net sales for the Third Quarter 2020 reflected a decrease in back-to-school sales~~ due to ~~schools adopting remote and hybrid learning models, along with~~lapping the COVID-19 stimulus relief program last year, the impact of unprecedented inflation on our customers, prolonged unseasonably cold temperatures through the ~~permanent~~end of the First Quarter 2022 in our major markets, and ~~temporary~~the impact of permanent store closures. Comparable retail sales ~~were 36.2%~~decreased 16.9% for the quarter.

The Children’s Place U.S. net sales ~~increased $125.2~~decreased $71.7 million or ~~33.5%~~17.9%, to ~~$498.8~~$328.0 million in the ~~Third~~First Quarter ~~2021~~2022, compared to ~~$373.6~~$399.7 million in the ~~Third~~First Quarter ~~2020.~~2021. This ~~increase~~decrease was primarily ~~driven by strong customer response~~due to lapping the COVID-19 stimulus relief program last year, the impact of unprecedented inflation on our ~~product assortment~~customers, prolonged unseasonably cold temperatures through the end of the First Quarter 2022 in our major markets, and the ~~strategic reset~~impact of ~~our pricing and promotions.~~permanent store closures.

The Children’s Place International net sales ~~increased $7.4~~decreased $1.4 million or ~~14.3%~~4.0%, to ~~$59.4~~$34.4 million in the ~~Third~~First Quarter ~~2021~~2022, compared to ~~$51.9~~$35.8 million in the ~~Third~~First Quarter ~~2020.~~2021. This ~~increase~~decrease was primarily driven by ~~strong customer response to~~the impact of unprecedented inflation on our ~~product assortment~~customers and permanent store closures, partially offset by the ~~strategic reset~~favorable impact of ~~our pricing and promotions.~~stores that were temporarily closed in Canada during the First Quarter 2021.

Total e-commerce sales, which include postage and handling, were ~~45.4%~~42.1% of net sales during the ~~Third~~First Quarter ~~2021~~2022, compared to ~~43.9%~~42.6% during the ~~Third~~First Quarter ~~2020.~~

~~Table of Contents~~

2021.

Gross profit~~increased $98.7~~ decreased $46.3 million to ~~$244.8 million~~ ~~in the Third Quarter 2021, compared to $146.1~~$141.9 million in the ~~Third~~First Quarter ~~2020.~~2022, compared to $188.2 million in the First Quarter 2021. Gross margin deleveraged 406 basis points to 39.2% of net sales in the First Quarter 2022. The ~~Third~~First Quarter 2021 results included incremental expenses related to the COVID-19 pandemic, including personal protective equipment and incentive pay for our associates of $0.2 million, compared to $3.8 million in the Third Quarter 2020. Excluding the impact of these charges, gross margin leveraged 868 basis points to 43.9% of net sales. The increase was primarily a result of significantly higher merchandise margins, resulting from double-digit AUR increases, in both our digital and stores channels as a result of the strategic reset of our pricing and promotions, the leverage of fixed expenses resulting from the increase in net sales, and lower occupancy expenses due to favorable lease negotiations and permanent store closures.

Gross profit as a percentage of net sales is dependent upon a variety of factors, including changes in the relative sales mix among distribution channels, changes in the mix of products sold, the timing and level of promotional activities, foreign currency exchange rates, and fluctuations in material costs. These factors, among others, may cause gross profit as a percentage of net sales to fluctuate from period to period.

Selling, general, and administrative expenses increased $9.0 million to $115.6 million during the Third Quarter 2021 from $106.6 million during the Third Quarter 2020. The Third Quarter 2021 results included incremental operating expenses, including personal protective equipment for our associates of $0.3 million, restructuring costs of $0.1 million, and fleet optimization costs of $0.3 million. The Third Quarter 2020 results included incremental operating expenses, primarily personal protective equipment for our associates, of $1.6 million, restructuring costs, primarily related to severance costs for corporate associates, of $0.9 million, and fleet optimization costs of $0.6 million. Excluding the impact of these incremental charges, SG&A leveraged 375 basis points to 20.6% of net sales, primarily as a result of the leverage of fixed expenses resulting from the increase in net sales, partially offset by higher incentive compensation accruals and higher marketing expenses.

~~Asset impairment charges~~ ~~during the Third Quarter 2021 were $1.3 million, inclusive of ROU assets, primarily related to two stores. Asset impairment charges during the Third Quarter 2020~~ ~~were $0.3 million, inclusive of ROU assets, primarily related to one store. These~~ ~~charges were related to underperforming stores identified in our ongoing store portfolio evaluation primarily as a result of decreased net sales and cash flow projections.~~

~~Depreciation and amortization~~ was $14.2 million during the Third Quarter 2021, compared to $15.8 million during the Third Quarter 2020. The decrease was primarily driven by decreased depreciation of capitalized software and the permanent closure o~~f 107 stores during the past twelve months.~~

~~Interest expense, net~~ ~~was $4.0 million during the~~ ~~Third Quarter 2021~~ ~~compared to $3.3 million during the Third Quarter 2020. The increase was primarily driven by a higher debt balance and the higher interest rate associated with our Term Loan.~~

~~Provision for income taxes~~ was $31.0 million during the Third Quarter 2021 compared to $6.7 million during the Third Quarter 2020. Our effective tax rate was 28.2% and 33.6% in the Third Quarter 2021 and the Third Quarter 2020, respectiv~~ely. The decrease in our effective tax rate was primarily driven by tax benefits from the CARES Act in the prior year.~~

~~Net income increased~~ $65.6 million to $78.9 million, or $5.30 per diluted share, during the Third Quarter 2021 compared to $13.3 million, or $0.91 per diluted share, during the Third Quarter 2020, due to the impact of COVID-19 pandemic in the prior year and the other factors discussed above.

~~Year-To-Date 2021 Compared to Year-To-Date 2020~~

~~Net sales~~ increased $357.9 million, or 34.1%, to $1.408 billion during Year-To-Date 2021 from $1.050 billion during Year-To-Date 2020 primarily driven by strong customer response to our product assortment, strategic pricing and promotional changes, and the unprecedented level of stimulus and enhanced child tax credit payments to our customers resulting from the government pandemic relief legislation. Our Year-To-Date 2021 net sales were negatively impacted by permanent and temporary store closures and the impact of reduced operating hours in our mall stores, as mandated by the mall owners. Our Year-To-Date 2020 net sales were negatively impacted by the initial onset of the COVID-19 pandemic. Comparable retail sales w~~ere 39.3% for the nine months ended October 30, 2021.~~

~~The Children’s Place U.S.~~ net sales increased $327.6 million, or 34.8%, to $1.269 billion during Year-To-Date 2021 compared to $941.6 million during Year-To-Date 2020. This increase was primarily driven by strong customer response to our product assortment, strategic pricing and promotional changes, and the unprecedented level of stimulus and enhanced child tax credit payments to our customers resulting from the government pandemic relief legislation.

~~The Children’~~s Place International net sales increased $30.3 million, or 28.0%, to $138.4 million during Year-To-Date 2021 compared to $108.1 million during Year-To-Date 2020. The increase was primarily driven by strong customer response to our product assortment and strategic pricing and promotional changes.

~~Table of Contents~~

~~Total e-commerce sales, which include postage and handling, decreased to 43.7% of net sales during Year-To-Date 2021 from 55.6% during Year-To-Date 2020.~~

~~Gross profit~~ ~~increased $407.4 million~~ ~~to $600.9 million during Year-To-Date 2021 from $193.5 million during Year-To-Date 2020. The Year-To-Date 2021~~ ~~results included incremental expenses, including personal protective equipment and incentive pay for our associates, of $1.4 million.~~ ~~The~~ Year-To-Date 2020 results included an inventory provision of $63.2 million related to the adverse business disruption resulting from the COVID-19 pandemic, including store closures and incremental expenses, including personal protective equipment and incentive pay for our associates, of $8.2$1.0 million. Excluding the impact of these charges, gross margin ~~leveraged 1,755~~deleveraged 429 basis points to ~~42.8%~~39.2% of net sales. The ~~increase~~decrease was primarily ~~due~~ to the ~~leverage~~result of higher inbound transportation expenses, higher occupancy expenses and the deleverage of fixed expenses resulting from the ~~increase~~decline in net sales, partially offset by higher merchandise margins in our brick-and-mortar retail and e-commerce channels, driven by AUR increases in both ~~our digital and stores channels due to strategic pricing and promotional changes, and lower occupancy expenses due to rent abatements of $11.0 million, favorable lease negotiations, and permanent store closures.~~channels.

Selling, general, and administrative expenses increased ~~$18.5~~$2.3 million to ~~$337.9~~$109.0 million during ~~Year-To-Date 2021~~the First Quarter 2022 from ~~$319.4~~$106.7 million ~~during Year-To-Date 2020.~~during the First Quarter 2021. SG&A deleveraged 558 basis points to 30.1% of net sales in the First Quarter 2022. The ~~Year-To-Date 2021~~First Quarter 2022 results included incremental operating expenses, including professional and consulting fees of $0.5 million and fleet optimization costs of $0.3 million. The First Quarter 2021 results included incremental operating expenses, primarily personal protective equipment ~~and incentive pay~~ for our associates, of ~~$1.6~~$0.6 million, fleet optimization costs of $0.8 million, contract termination costs of $0.8 million, and restructuring costs, primarily related to severance costs for corporate ~~and store~~ associates, of ~~$1.2 million, fleet optimization costs of $1.3 million, and contract termination costs of $0.8 million.~~ ~~The~~ Year-To-Date 2020 results included incremental operating expenses, including personal protective equipment and incentive pay for our associates, of approximately $9.4 million, restructuring costs, primarily related to severance costs for corporate and store associates, of approximately $7.3 million, the write-off of certain account receivables of approximately $1.1 million, fleet optimization costs of $1.3 million, Gymboree integration costs of $0.6 million, and legal reserves of $0.3$0.5 million. Excluding the impact of these incremental charges, SG&A ~~leveraged 486~~deleveraged 595 basis points to ~~27.3%~~29.9% of net sales, ~~due to~~primarily as a result of the ~~leverage~~deleverage of fixed expenses resulting from the ~~increase~~decline in net sales ~~partially offset by higher incentive compensation accruals and~~as well as planned higher marketing ~~expenses.~~

~~Asset impairment charges~~ ~~during Year-To-Date 2021 were $1.3 million, inclusive of ROU assets, for two stores. Asset impairment charges were~~ ~~$37.9 million~~ ~~during Year-To-Date 2020, inclusive of ROU assets,~~ ~~for 419 stores. T~~he asset impairment charges in the Year-To-Date 2020 were related to underperforming stores identified in our store portfolio evaluation primarily as a result of decreased net sales and cash flow projections resulting from the COVID-19 disruption.spend.

Depreciation and amortizationwas ~~$44.2~~$13.6 million during ~~Year-To-Date 2021,~~the First Quarter 2022, compared to ~~$50.4~~$15.6 million during ~~Year-To-Date 2020.~~the First Quarter 2021. The decrease was primarily driven by reduced depreciation of capitalized software and the permanent closure of ~~107~~60 stores during the past twelve ~~months and~~months.

Operating income decreased ~~depreciation~~$46.6 million to $19.3 million during the First Quarter 2022 from $65.9 million during the First Quarter 2021. Operating income deleveraged 982 basis points to 5.3% of ~~capitalized software.~~net sales in the First Quarter 2022. The First Quarter 2022 results included incremental operating expenses of $1.4 million, compared to $4.8 million in the First Quarter 2021. Excluding the impact of these incremental charges, operating income deleveraged 1,057 basis points to 5.7% of net sales.

Interest ~~Expense,~~expense, net was ~~$13.1~~$1.7 million during ~~Year-To-Date 2021~~the First Quarter 2022, compared to ~~$7.7~~$4.4 million during the First Quarter 2021.~~Year-To-Date 2020~~. The ~~increase in interest expense~~decrease was primarily driven by lower interest rates due to our recent refinancing and a ~~higher debt~~lower Term Loan balance ~~and~~in the ~~higher interest rate associated with our Term Loan.~~First Quarter 2022.

Provision (benefit) for income taxes was a ~~tax provision~~benefit of ~~$56.3~~$2.3 million during ~~Year-To-Date 2021~~the First Quarter 2022, compared to a ~~tax benefit~~provision of ~~$73.9~~$16.3 million during ~~Year-To-Date 2020.~~the First Quarter 2021. Our effective tax rate was ~~27.5%~~a benefit of 13.0% and ~~33.3% during Year-To-Date~~a provision of 26.5% in the First Quarter 2022 and the First Quarter 2021, ~~and Year-To-Date 2020, respectively.~~respectively. The decrease in our effective tax rate for the First Quarter 2022 compared to the First Quarter 2021 was primarily driven by the release of a reserve for unrecognized tax benefits ~~from the CARES Act~~as a result of a settlement with a taxing authority in the ~~prior year.~~First Quarter 2022.

Net income ~~(loss)~~ ~~increased $296.3~~decreased $25.4 million to ~~$148.2~~$19.8 million, or ~~$9.89~~$1.43 per diluted share during ~~Year-To-Date 2021~~the First Quarter 2022, compared to ~~a net loss of $148.1~~$45.2 million, or ~~$10.13~~$3.01 per diluted share during ~~Year-To-Date 2020,~~the First Quarter 2021, due to the ~~impact of the COVID-19 pandemic and the other~~ factors discussed ~~above.~~above

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our working capital needs typically follow a seasonal pattern, peaking during the third fiscal quarter based on seasonal inventory purchases. However, during Fiscal 2022, we anticipate our working capital needs will remain elevated in the second fiscal quarter, in part due to actions taken in an effort to mitigate the global supply chain disruption. Our primary uses of cash are for working capital requirements, which are principally inventory purchases, the financing of capital projects, including investments in new systems, and for ~~the~~our capital return program (other than payment of dividends, which continue to be temporarily suspended due to the COVID-19 pandemic).

~~In response to the COVID-19 pandemic, we took the following actions in Fiscal 2020 to preserve liquidity:~~

•~~Executed a substantial reduction and/or deferral of all non-essential expenses and capital expenditures;~~

~~Table of Contents~~

•~~Collaborated with vendor partners to extend payment terms and balance forward inventory receipts to reflect reduced demand;~~

•Temporarily suspended rent payments on all of our U.S. and Canadian retail stores during the first quarter of 2020 and resumed rent payments on a modified basis as stores began to reopen during the second quarter of 2020. Our lease flexibility gave us the opportunity to strategically secure rent abatements for Fiscal 2020 and/or forward rent reductions;

•Evaluated our options on store lease events occurring through the end of Fiscal 2021, impacting approximately 65% of our current store fleet, targeting a total of 275 additional retail store closures in Fiscal 2020 and Fiscal 2021;

•Finalized an amendment to our revolving credit facility, which increased borrowing capacity from $325 million to $360 million for a period of one year, which was subsequently extended in April 2021 for an additional year to April 2022; and

•~~Temporarily suspended our capital return program, inclusive of share repurchases and dividends.~~

Our strategic actions during the pandemic preserved our financial and operational flexibility and liquidity in Fiscal 2020. Our working capital deficit improved $220.0 million to a deficit of $17.1 million as of October 30, 2021 compared to a deficit of $237.1 million as of October 31, 2020, primarily reflecting operating results over the past twelve months, the strategic actions discussed above and other cash management activities to preserve liquidity during the pandemic, as well as lower current lease liabilities resulting from favorable lease negotiations, and the Term Loan transaction completed in the Third Quarter 2020. We generated $67.4 million in cash from operations during Year-To-Date 2021 due to earnings during the period, offset by the repayment of certain suspended Fiscal 2020 rents, net of abatements, as well as other planned changes in working capital, which brought vendor payables in line with historical payment terms. Also, during Year-To-Date 2021, we repurchased shares for $45.2 million, inclusive of shares repurchased and surrendered to cover tax withholdings associated with the vesting of equity awards.

On November 16, 2021, we completed the refinancing of the Previous ABL Credit Facility and Previous Term Loan with a new lending group led by an affiliate of Wells Fargo by entering into the Fourth Amendment to our Credit Agreement with the lenders party thereto. The new debt consists of a revolving credit facility with $350.0 million of ~~maximum~~ availability and a $50.0 million term ~~loan (see “Recent Developments”~~loan. (See “ABL Credit Facility and Term Loan” below for further information).

Our working capital deficit improved $66.8 million to a deficit of $30.2 million at April 30, 2022, compared to a deficit of $97.0 million at May 1, 2021, primarily reflecting operating results over the past twelve months, as well as lower current lease liabilities. During the First Quarter 2022, we used $40.4 million of cash to repurchase shares, inclusive of shares repurchased and surrendered to cover tax withholdings associated with the vesting of equity awards.

At April 30, 2022, we had $249.5 million of outstanding borrowings and $93.1 million available for borrowing under our ABL Credit Facility. In addition, at April 30, 2022, we had $7.4 million of outstanding letters of credit with an additional $42.6 million available for issuing letters of credit under our ABL Credit Facility.

We expect to be able to meet our working capital and capital expenditure requirements for the foreseeable future by using our cash on hand, cash flows from operations, and availability under our ~~new revolving credit facility.~~ABL Credit Facility.

ABL Credit Facility and Term Loan

We and certain of our subsidiaries maintain ~~the~~a $350 million ABL Credit Facility and a $50 million Term Loan with Wells Fargo, Truist Bank, Bank of America, N.A., HSBC Business Credit (USA) Inc., and JPMorgan Chase Bank, N.A., as lenders (collectively, the ~~Lenders~~“Lenders”) and Wells Fargo, as Administrative Agent, Collateral Agent, ~~and~~ Swing Line ~~Lender.~~

~~The~~Lender and Term Agent. Both the ABL Credit Facility ~~which expires~~and the Term Loan mature in ~~May 2024, consists~~November 2026, and both of ~~a $360 million asset-based revolving credit facility that was~~these debt facilities have lower interest rates, reduced reporting requirements, and increased ~~from $325 million as a result of finalizing an amendment with the Lenders on April 24, 2020 to secure an additional $35 million available~~flexibility under the ~~accordion feature for a period of one year.~~ covenants compared to the Previous ABL Credit Facility and Previous Term Loan.

The ABL Credit Facility includes a $25 million Canadian sublimit and a $50 million sublimit for standby and documentary letters of credit. On October 5, 2020, we further amended the ABL Credit Facility to provide for certain changes that permitted the issuance of an $80 million Term Loan on that date and align certain terms of the ABL Credit Facility to those of the Term Loan. The Term Loan is discussed in more detail below. On April 23, 2021, we and our Lenders extended the $35 million of additional availability for an additional year until April 23, 2022.

Borrowings outstanding under the ABL Credit Facility bear interest, at our option, at:

(i)the prime rate plus a margin of ~~1.75% to 1.88%~~0.375% or 0.625% based on the amount of our average excess availability under the facility; or

(ii)the London InterBank Offered Rate, or “LIBOR”, for an interest period of one, ~~two,~~ three, or six months, as selected by us, plus a margin of ~~a) 2.50% to 2.75% and b) 1.00%~~1.125% or 1.375% based on the amount of our average excess availability under the facility.

We are charged aan unused line fee of ~~0.25%~~0.20% on the unused portion of the commitments. Letter of credit fees range from ~~1.25%~~0.563% to ~~1.38%~~0.683% for commercial letters of credit and range from ~~2.00%~~0.625% to ~~2.25%~~0.875% for standby letters of credit. Letter of credit fees are determined based on the amount of our average excess availability under the facility. The amount available for

loans and letters of credit under the ABL Credit Facility is determined by a borrowing base consisting of certain credit card receivables, ~~and~~ certain trade receivables, certain inventory, and the fair market value of certain real estate, subject to certain reserves.

~~Table of Contents~~

The ABL Credit Facility contains covenants, which include conditions on stock buybacks and the payment of cash dividends or similar payments. These covenants also limit our ability to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, or dispositions, or to change the nature of our business.

Credit extended under the ABL Credit Facility is secured by a first priority security interest in substantially all of our U.S. and Canadian assets ~~excluding~~other than intellectual property, ~~software,~~certain furniture, fixtures, equipment, and ~~fixtures. In connection with the Term Loan, the Lenders under the ABL Credit Facility entered into an intercreditor agreement with the Term Loan lender~~pledges of subsidiary capital stock, and ~~were granted~~ a second priority security interest in ~~the Term Loan collateral, which includes~~ our intellectual property, certain furniture, fixtures, ~~and~~ equipment, and pledges of subsidiary capital stock.

As of October 30, 2021, we have capitalized an aggregate of $6.3 million in deferred financing costs related to the ABL Credit Facility. The unamortized balance of deferred financing costs as of October 30, 2021 was $1.0 million. Unamortized deferred financing costs are amortized over the remaining term of the ABL Credit Facility.

The table below presents the components of our ABL Credit Facility and Previous ABL Credit Facility:
October 30,
2021 January 30,
2021 October 31,
2020
(in millions)
Credit facility maximum $ 360.0 $ 360.0 $ 360.0
Borrowing base (1)
360.0 282.2 360.0
Outstanding borrowings 174.4 169.8 179.4
Letters of credit outstanding—standby 7.4 8.2 7.8
Utilization of credit facility at end of period 181.8 178.0 187.2
Availability (2)
$ 178.2 $ 104.2 $ 172.8
Interest rate at end of period 3.8 % 4.2 % 3.9 %

Year-To-Date 2021 Fiscal 2020 Year-To-Date 2020
Average end of day loan balance during the period $ 195.0 $ 216.2 $ 233.2
Highest end of day loan balance during the period 269.7 275.6 275.6
Average interest rate 3.8 % 3.8 % 3.7 %


	April 30, 2022		January 29, 2022		May 1, 2021
	(in millions)
Credit facility maximum	$	350.0	$	350.0	$	360.0
Borrowing base (1)	350.0		279.7		330.4

Outstanding borrowings	249.5		175.3		196.9

Letters of credit outstanding—standby	7.4		7.4		7.4
Utilization of credit facility at end of period	256.9		182.7		204.3

Availability (2)	$	93.1	$	97.0	$	126.1

Interest rate at end of period	2.0%		1.6%		4.0%


	First Quarter 2022		Fiscal 2021		First Quarter 2021
Average end of day loan balance during the period	$	251.2	$	187.0	$	210.3
Highest end of day loan balance during the period	$	308.6	$	269.7	$	260.6
Average interest rate	2.0%		3.6%		4.0%

(1)Lower of the credit facility maximum or the total borrowing base collateral.

(2)The sub-limit availability for the letters of credit was $42.6 million ~~as of October~~at April 30, ~~2021, $41.8~~2022, January 29, 2022, and May 1, 2021.

The Term Loan bears interest, payable monthly, at (a) the LIBOR Rate plus 2.50% for any portion that is a LIBOR loan, or (b) the base rate plus 1.75% for any portion that is a base rate loan. The Term Loan is pre-payable at any time without penalty, and does not require amortization. For the First Quarter 2022, we recognized $0.4 million ~~as of January 30, 2021, and $42.2 million as of October 31, 2020.~~

~~Term Loan~~

On October 5, 2020, we and certain of our subsidiaries entered into a loan agreement dated October 5, 2020 with SLR Credit Solutions (formerly known as Crystal Financial LLC), as Lender, Administrative Agent, and Collateral Agent, providing for an $80.0 million Term Loan. The net proceeds fromin interest expense related to the Term ~~Loan, after deducting related fees and expenses, were used to repay borrowings under our ABL Credit Facility.~~Loan.

The Term Loan is secured by a first priority security interest in our intellectual property, certain furniture, fixtures, ~~and~~ equipment, and pledges of subsidiary capital stock, and a second priority security interest in the collateral securing the ABL Credit ~~Facility.~~Facility on a first-priority basis. The Term Loan is guaranteed ~~subject to certain exceptions,~~ by each of our subsidiaries that guarantees the ABL Credit ~~Facility.~~

~~Table of Contents~~

Among other covenants, the Loan Agreement limits our ability to incur certain liens, to incur certain indebtedness, including under the ABL Credit Facility, to make certain investments, acquisitions, dispositions or restricted payments, or to change the nature of our business. These covenants arecontains substantially the same covenants as provided in the ABL Credit Facility.

~~Refinancing~~ As of April 30, 2022, unamortized deferred financing costs amounted to $2.7 million, of which $2.4 million related to our ABL Credit ~~Facility and Term Loan~~Facility.

~~Concurrently, we repaid remaining principal of $79.0 million on the $80.0 million Term Loan with SLR Credit Solutions (formerly known as Crystal Financial LLC).~~

Cash ~~Flows/~~Flows and Capital Expenditures

Cash ~~generated by~~used in operating activities was ~~$67.4~~$18.8 million during ~~Year-To-Date 2021,~~the First Quarter 2022, compared to ~~$50.7~~$16.6 million ~~of cash~~during the First Quarter 2021. Cash used byin operating activities during ~~Year-To-Date 2020.~~the First Quarter 2022 was primarily the result of the timing of inventory receipts as a result of global supply chain disruptions, partially offset by earnings generated during the period, the receipt of a net income tax refund of $21.6 million, as well as other planned changes in working capital. Cash ~~generated by~~used in operating activities ~~in Year-To-Date~~during the First Quarter 2021 was primarily the result of ~~earnings generated during~~ the ~~period, partially offset by the repayment~~payment of certain suspended 2020 rents, net of abatements, as well as other planned changes in working capital, which brought our vendor payables in line with historical payment ~~terms. Cash used in operating activities in Year-To-Date 2020 was primarily driven~~terms, partially offset by earnings generated during the ~~impact of the temporary closure of our entire store fleet resulting from the onset of the COVID-19 pandemic.~~period.

Cash used in investing activities was ~~$22.0~~$11.0 million during ~~Year-To-Date 2021,~~the First Quarter 2022, compared to ~~$23.6~~$6.7 million during ~~Year-To-Date 2020.~~the First Quarter 2021. This change was primarily driven by the timing of capital expenditures.

Cash ~~used in financing activities was $41.9 million during Year-To-Date 2021, compared to cash~~ provided by financing activities ~~of $70.7~~was $33.9 million during ~~Year-To-Date 2020.~~the First Quarter 2022, compared to $24.5 million during the First Quarter 2021. The ~~decrease~~increase primarily resulted from ~~proceeds received from the issuance of the Term Loan during Year-To-Date 2020 and~~additional net borrowings under our asset-based revolving credit facility, partially offset by increased repurchases of our common stock during ~~Year-To-Date 2021,~~the First Quarter 2022 compared to ~~Year-To-Date 2020.~~the First Quarter 2021.

We anticipate total capital expenditures to approximate ~~$40~~$55 million in Fiscal ~~2021,~~2022, primarily related to digital and supply chain fulfillment initiatives, compared to ~~$30.6~~$29.3 million in Fiscal ~~2020.~~2021. Our ability to continue to meet our capital requirements in Fiscal ~~2021~~2022 depends on our cash on hand, our ability to generate cash flows from operations, and available borrowings under our ~~new revolving credit facility.~~ABL Credit Facility. Cash flows generated from operations depends on our ability to achieve our financial plans. We believe that our existing cash on hand, cash generated from operations, and funds available to us through our ~~new revolving credit facility~~ABL Credit Facility will be sufficient to fund our capital and other cash requirements for the foreseeable future.

~~Item~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In the normal course of business, our financial position and results of operations are routinely subject to market risk associated with interest rate movements on borrowings and investments and currency rate movements on non-U.S. dollar denominated assets, liabilities, income, and expenses. We utilize cash from operations and short-term borrowings to fund our working capital and investment needs.

~~Table of Contents~~

Cash and Cash Equivalents

Cash and cash equivalents are normally invested in short-term financial instruments that will be used in operations within 90 days of the balance sheet date. Because of the short-term nature of these instruments, changes in interest rates would not materially affect ~~the~~their fair ~~value of these financial instruments.~~values.

Interest Rates

Our ABL Credit Facility bears interest at a floating rate equal to the prime rate or LIBOR, plus a calculated spread based on our average excess ~~availability.~~availability under the facility. As of ~~October~~April 30, ~~2021,~~2022, we had ~~$174.4~~$249.5 million in borrowings under our ~~credit facility.~~ABL Credit Facility. A 10% change in the prime rate or LIBOR interest rates would not have had a material impact on our interest expense.

Our Term Loan bears interest, payable monthly, at ~~a floating rate at the greater of:~~ (a) the ~~three month~~ LIBOR Rate ~~published in~~plus 2.50% for any portion that is a LIBOR loan, or (b) the ~~Wall Street Journal, and (b) 1.00%,~~base rate plus ~~7.75% or 8.00% depending on the average excess availability of credit under the ABL Credit Facility.~~1.75% for any portion that is a base rate loan. As of ~~October~~April 30, ~~2021,~~2022, the outstanding balance of the Term Loan was ~~$79.0~~$50.0 million. A 10% change in the three month LIBOR Rate would not have had a material impact on our interest expense.

On November 16, 2021, we completed the refinancing of the ABL Credit Facility and Term Loan with a new lending group led by an affiliate of Wells Fargo by entering into the Fourth Amendment to our Credit Agreement with the lenders party thereto. The new debt consists of a revolving credit facility with $350.0 million of maximum availability and a $50.0 million term loan. Interest on borrowings under the new revolving credit facility is payable monthly at LIBOR plus 1.125% or 1.375%, based on the amount of our average excess availability under the facility. The new revolving credit facility has an unused line fee of 0.20%. Interest under the new term loan is payable monthly at LIBOR plus 2.50%. See “Recent Developments” above for further information.

~~Foreign~~ Assets and Liabilities of Foreign Subsidiaries

Assets and liabilities outside the United States are primarily located in Canada and Hong ~~Kong. Our~~Kong, where our investments in our ~~Canadian and Hong Kong~~ subsidiaries are considered long-term. As of ~~October~~April 30, ~~2021,~~2022, net assets in Canada and Hong Kong ~~were approximately $23.7 million and $31.1 million, respectively.~~amounted to $70.7 million. A 10% increase or decrease in the Canadian and Hong Kong foreign currency exchange rates would increase or decrease the corresponding net investment by ~~approximately $2.4 million and $3.1 million, respectively.~~$7.1 million. All changes in the net investments in our foreign subsidiaries are recorded in other comprehensive ~~income as unrealized gains or losses.~~income.

As of ~~October~~April 30, ~~2021,~~2022, we had ~~approximately $59.7~~$51.4 million of our cash and cash equivalents held in foreign ~~countries,~~subsidiaries, of which ~~approximately $38.2~~$36.2 million was in Hong Kong ~~approximately $16.2~~and $10.4 million was in ~~Canada, and approximately $5.3 million was in other foreign countries.~~Canada.

Foreign Operations

We have exchange rate exposure primarily with respect to certain revenues and expenses denominated in Canadian dollars. As a result, fluctuations in exchange rates impact the amount of our reported sales and expenses. Assuming a 10% change in foreign currency exchange rates, ~~Year-To-Date 2021~~the First Quarter 2022 net sales would have decreased or increased by approximately ~~$12.1~~$3.0 million, and total costs and expenses would have decreased or increased by approximately ~~$13.3~~$3.8 million. Additionally, we have foreign currency denominated receivables and payables that, when settled, result in transaction gains or losses. ~~As of October 30, 2021, we had~~A 10% change in foreign currency ~~denominated receivables and payables, including inter-company balances, of $9.7 million and $10.9 million, respectively.~~exchange rates would not result in a significant transaction gain or loss in earnings.

We import a vast majority of our merchandise from foreign countries, primarily Vietnam, Cambodia, Indonesia, Ethiopia, Bangladesh, ~~Cambodia, China, Ethiopia, Vietnam,~~ and ~~Indonesia.~~China. Consequently, any significant or sudden change in ~~these countries’~~the political, foreign trade, financial, banking, or currency policies and practices, or the occurrence of significant labor unrest in these countries, could have a material adverse impact on our business, financial position, results of operations, and cash flows.

~~Item~~ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed only to provide “reasonable assurance” that the controls and procedures will meet their objectives. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

~~Table of Contents~~

Management, including our Chief Executive Officer and President and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of ~~October~~April 30, ~~2021.~~2022. Based on that evaluation, our Chief Executive Officer and President and our Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level, as of ~~October~~April 30, ~~2021,~~2022, to ensure that all information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our principal executive, principal accounting, and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3725

~~Table of Contents~~

PART II - OTHER INFORMATION

~~Item~~ITEM 1.LEGAL PROCEEDINGS.

Certain legal proceedings in which we are involved are discussed in ~~Note 10~~“Note 7. Commitments and Contingencies” to the accompanying consolidated financial statements and Part I, Item 3 of our Annual Report on Form 10-K for the year ended January ~~30, 2021. See Note 10 to the accompanying consolidated financial statements for a discussion of the recent developments concerning our legal proceedings.~~29, 2022.

~~Item~~ITEM 1A.RISK FACTORS.

There were no material changes to the risk factors disclosed in Item 1A of Part I in our Annual Report on Form 10-K for the year ended January ~~30, 2021.~~29, 2022.

~~Item~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

In March 2018, ~~the~~our Board of Directors authorized a ~~$250~~$250.0 million share repurchase program (the “2018 Share Repurchase Program”). In November 2021, ~~the~~our Board of Directors approved another $250.0 million share repurchase program (the “2021 Share Repurchase Program”), which ~~adds~~added to the then remaining availability under the 2018 Share Repurchase Program. Under these programs, we may repurchase shares on the open market at current market prices at the time of purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under ~~the~~a program will depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business conditions. We may suspend or discontinue the programs at any time and may thereafter reinstitute purchases, all without prior announcement.

Pursuant to our practice, including due to restrictions imposed by our insider trading policy during black-out periods, we withhold and repurchase shares of vesting stock awards and make payments to taxing authorities as required by law to satisfy the withholding tax requirements of all equity award recipients. Our payment of the withholding taxes in exchange for the surrendered shares constitutes a repurchase of our common stock. We also acquire shares of our common stock in conjunction with liabilities owed under our deferred compensation plan, which are held in treasury.

The following table provides a month-by-month summary of our share repurchase activity during the ~~Third~~First Quarter ~~2021:~~2022:
Period Total Number of
Shares Purchased Average
Price Paid
per Share Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs Approximate Dollar
Value (in thousands) of
Shares that May Yet
Be Purchased Under
the Plans or Programs
8/1/21-8/28/21 (1)
79,939 $92.37 79,121 $ 72,158
8/29/21-10/2/21 (2)
158,641 83.19 158,641 58,960
10/3/21-10/30/21 (2)
134,088 83.61 134,088 47,749
Total 372,668 $85.31 371,850 $ 47,749


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Plans or Programs
1/30/22-2/26/22 (1)	231,384	$	67.63	230,440	$	241,713
2/27/22-4/2/22	380,343	53.43		380,343	221,391
4/3/22-4/30/22 (2)	54,308	51.50		54,308	218,594
Total	666,035	$	58.21	665,091	$	218,594

(1)Includes ~~818~~944 shares acquired as treasury stock as directed by participants in the deferred compensation plan and ~~3,166~~6,240 shares withheld to cover taxes in conjunction with the vesting of stock awards.

(2)Includes ~~156 shares and 294~~42,464 shares withheld to cover taxes in conjunction with the vesting of stock awards.

~~Table of Contents~~

~~Item~~ITEM 6. ~~Exhibits.~~EXHIBITS.

The following exhibits are filed with this Quarterly Report on Form 10-Q:



~~10.3~~						~~Letter Agreement dated July 21, 2021, between The Children’s Place Services Company, LLC and Deborah Derby.~~

~~10.4~~						~~Joinder and Fourth Amendment to the Amended and Restated Credit Agreement and Other Loan Documents, dated as of November 15, 2021, among the Company, the Borrowers identified on Schedule I thereto,~~ ~~the Guarantors identified on Schedule II thereto, the Lenders and Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent, L/C Issuer, Swing Line Lender and Term Agent.~~

31.1(+)						Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

31.2(+)						Certificate of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

32(+)						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*						XBRL Instance Document.

101.SCH*						XBRL Taxonomy Extension Schema.

101.CAL*						XBRL Taxonomy Extension Calculation Linkbase.

101.DEF*						XBRL Taxonomy Extension Definition Linkbase.

101.LAB*						XBRL Taxonomy Extension Label Linkbase.

101.PRE*						XBRL Taxonomy Extension Presentation Linkbase.

(+) Filed herewith.

~~(*)~~ ~~Compensation arrangement.~~

*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

3927

~~Table of Contents~~

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, INC.


Date:	~~December 7, 2021~~June 1, 2022	By:	/S/ ~~JANE~~Jane T. ~~ELFERS~~Elfers
			~~JANE~~ Jane T. ~~ELFERS~~Elfers
			Chief Executive Officer and President
			~~(Principal~~ (Principal Executive Officer)


Date:	~~December 7, 2021~~June 1, 2022	By:	/S/ ~~ROBERT HELM~~Robert Helm
			~~ROBERT HELM~~ Robert Helm
			Chief Financial Officer
			~~(Principal~~ (Principal Financial Officer)

4028


Thirteen Weeks Ended October 30, 2021
										Accumulated
				Additional				Retained		Other					Total
	Common Stock			Paid-In		Deferred		Earnings		Comprehensive		Treasury Stock			Stockholders’
(in thousands)	Shares	Amount		Capital		Compensation		(Deficit)		Income (Loss)		Shares	Amount		Equity











































BALANCE, July 31, 2021	14,831	$	1,483	$	164,290	$	3,304	$	15,697	$	(13,285)	(59)	$	(3,304)	$168,185


Vesting of stock awards	9	1		(1)											—
Stock-based compensation				6,594											6,594

Purchase and retirement of shares	(372)	(37)		(6,873)				(24,812)							(31,722)
Change in cumulative translation adjustment										323					323





Deferral of common stock into deferred compensation plan						69						(1)	(69)		—
Net income								78,868							78,868
BALANCE, October 30, 2021	14,468	$	1,447	$	164,010	$	3,373	$	69,753	$	(12,962)	(60)	$	(3,373)	$	222,248


Thirteen Weeks Ended October 31, 2020
										Accumulated
				Additional				Retained		Other					Total
	Common Stock			Paid-In		Deferred		Earnings		Comprehensive		Treasury Stock			Stockholders’
(in thousands)	Shares	Amount		Capital		Compensation		(Deficit)		Income (Loss)		Shares	Amount		Equity











































BALANCE, August 1, 2020	14,637	$	1,464	$	138,350	$	3,025	$	(63,862)	$	(14,437)	(52)	$	(3,025)	$	61,515


Vesting of stock awards	4	—													—
Stock-based compensation				3,275											3,275

Purchase and retirement of shares				(12)				4							(8)

Change in cumulative translation adjustment										216					216
Change in fair value of cash flow hedges, net of income taxes										(949)					(949)

Deferral of common stock into deferred compensation plan						70						(3)	(70)		—
Net income								13,320							13,320
BALANCE, October 31, 2020	14,641	$	1,464	$	141,613	$	3,095	$	(50,538)	$	(15,170)	(55)	$	(3,095)	$	77,369


		January 30, 2021
	Useful life	Gross amount		Accumulated amortization		Net amount
		(in thousands)
Gymboree tradename(1)	Indefinite	$	69,953	$	—	$	69,953
Crazy 8 tradename(1)	5 years	4,000		(1,461)		2,539
Customer databases(2)	3 years	3,000		(1,827)		1,173
Total intangibles, net		$	76,953	$	(3,288)	$	73,665


		October 31, 2020
	Useful life	Gross amount		Accumulated amortization		Net amount
		(in thousands)
Gymboree tradename(1)	Indefinite	$	69,953	$	—	$	69,953
Crazy 8 tradename(1)	5 years	4,000		(1,261)		2,739
Customer databases(2)	3 years	3,000		(1,577)		1,423
Total intangibles, net		$	76,953	$	(2,838)	$	74,115


	Number of Shares	Weighted Average Grant Date Fair Value
	(in thousands)
Unvested Deferred Awards, beginning of period	550	$	55.43
Granted	155	76.50
Vested	(227)	86.47
Forfeited	(4)	97.91
Unvested Deferred Awards, end of period	474	47.03


	Number of Shares (1)	Weighted Average Grant Date Fair Value
	(in thousands)
Unvested Performance Awards, beginning of period	350	$	74.37
Granted	160	74.92
Shares earned in excess of (below) target	(22)	65.34
Vested shares, including shares earned	(118)	95.61
Forfeited	(1)	104.45
Unvested Performance Awards, at end of period	369	68.22


Period	Future Principal Payments (1)
	(in thousands)
Remainder of 2021	$	1,000
2022	5,500
2023	7,500
2024	65,000

Total future principal payments	$	79,000