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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 30, 2011
¨ | 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: 000-51648
dELiA*s, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-3397172 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
50 West 23rd Street, New York, NY 10010
(Address of Principal Executive Offices) (Zip Code)
(212) 590-6200
(Registrant’s telephone number, including area code)
Former name, former address and former fiscal year, if changed since last report:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate 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 (§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 ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ¨ | Accelerated Filer | ¨ | |||||||
Non-accelerated Filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of September 6, 2011 the registrant had 31,432,531 shares of common stock, $.001 par value per share, outstanding.
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dELiA*s, Inc.
Page No. | ||||||
PART I — FINANCIAL INFORMATION | ||||||
Item 1. | Financial Statements | |||||
3 | ||||||
4 | ||||||
5 | ||||||
Notes to Condensed Consolidated Financial Statements (unaudited) | 6 | |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 23 | ||||
Item 4. | Controls and Procedures | 23 | ||||
PART II — OTHER INFORMATION | ||||||
Item 1. | Legal Proceedings | 23 | ||||
Item 1A. | Risk Factors | 24 | ||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 24 | ||||
Item 3. | Defaults upon Senior Securities | 24 | ||||
Item 4. | Removed and Reserved | 24 | ||||
Item 5. | Other Information | 24 | ||||
Item 6. | Exhibits | 25 | ||||
SIGNATURES | ||||||
EXHIBIT INDEX |
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Item 1. | Financial Statements |
dELiA*s, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share data)
July 30, 2011 | January 29, 2011 | July 31, 2010 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash and cash equivalents | $ | 22,216 | $ | 28,074 | $ | 15,156 | ||||||
Inventories, net | 39,862 | 32,025 | 40,364 | |||||||||
Prepaid catalog costs | 2,955 | 1,845 | 2,851 | |||||||||
Restricted cash | — | 8,268 | 8,505 | |||||||||
Deferred income taxes | — | — | 1,138 | |||||||||
Other current assets | 4,248 | 12,511 | 17,105 | |||||||||
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TOTAL CURRENT ASSETS | 69,281 | 82,723 | 85,119 | |||||||||
PROPERTY AND EQUIPMENT, NET | 46,612 | 49,988 | 54,973 | |||||||||
GOODWILL | 4,462 | 4,462 | 12,073 | |||||||||
INTANGIBLE ASSETS, NET | 2,419 | 2,419 | 2,419 | |||||||||
OTHER ASSETS | 855 | 111 | 169 | |||||||||
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TOTAL ASSETS | $ | 123,629 | $ | 139,703 | $ | 154,753 | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Accounts payable | $ | 20,902 | $ | 21,301 | $ | 24,877 | ||||||
Accrued expenses and other current liabilities | 19,447 | 21,788 | 23,486 | |||||||||
Income taxes payable | 833 | 742 | 797 | |||||||||
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TOTAL CURRENT LIABILITIES | 41,182 | 43,831 | 49,160 | |||||||||
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES | 12,076 | 11,828 | 11,978 | |||||||||
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TOTAL LIABILITIES | 53,258 | 55,659 | 61,138 | |||||||||
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COMMITMENTS AND CONTINGENCIES | ||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Preferred Stock; $.001 par value, 25,000,000 shares authorized, none issued | — | — | — | |||||||||
Common Stock; $.001 par value, 100,000,000 shares authorized; 31,432,531, 31,432,531 and 31,310,091 shares issued and outstanding, respectively | 31 | 31 | 31 | |||||||||
Additional paid-in capital | 98,918 | 98,510 | 99,111 | |||||||||
Accumulated deficit | (28,578 | ) | (14,497 | ) | (5,527 | ) | ||||||
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TOTAL STOCKHOLDERS’ EQUITY | 70,371 | 84,044 | 93,615 | |||||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 123,629 | $ | 139,703 | $ | 154,753 | ||||||
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See accompanying Notes to Condensed Consolidated Financial Statements.
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dELiA*s, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
For the Thirteen Weeks Ended | For the Twenty-Six Weeks Ended | |||||||||||||||
July 30, 2011 | July 31, 2010 | July 30, 2011 | July 31, 2010 | |||||||||||||
NET REVENUES | $ | 44,347 | $ | 43,213 | $ | 93,493 | $ | 93,174 | ||||||||
Cost of goods sold | 32,381 | 30,826 | 65,046 | 65,138 | ||||||||||||
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GROSS PROFIT | 11,966 | 12,387 | 28,447 | 28,036 | ||||||||||||
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Selling, general and administrative expenses | 21,426 | 21,545 | 43,324 | 45,136 | ||||||||||||
Other operating income | (34 | ) | (94 | ) | (72 | ) | (238 | ) | ||||||||
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TOTAL OPERATING EXPENSES | 21,392 | 21,451 | 43,252 | 44,898 | ||||||||||||
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OPERATING LOSS | (9,426 | ) | (9,064 | ) | (14,805 | ) | (16,862 | ) | ||||||||
Interest expense, net | (136 | ) | (82 | ) | (223 | ) | (169 | ) | ||||||||
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LOSS BEFORE INCOME TAXES | (9,562 | ) | (9,146 | ) | (15,028 | ) | (17,031 | ) | ||||||||
Provision (benefit) for income taxes | 50 | (2,298 | ) | (947 | ) | (4,358 | ) | |||||||||
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NET LOSS | $ | (9,612 | ) | $ | (6,848 | ) | $ | (14,081 | ) | $ | (12,673 | ) | ||||
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BASIC AND DILUTED LOSS PER SHARE: | ||||||||||||||||
NET LOSS PER SHARE | $ | (0.31 | ) | $ | (0.22 | ) | $ | (0.45 | ) | $ | (0.41 | ) | ||||
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WEIGHTED AVERAGE BASIC AND DILUTED COMMON SHARES OUTSTANDING | 31,209,737 | 31,105,434 | 31,209,737 | 31,102,369 | ||||||||||||
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See accompanying Notes to Condensed Consolidated Financial Statements.
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dELiA*s, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Twenty-Six Weeks Ended | ||||||||
July 30, 2011 | July 31, 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (14,081 | ) | $ | (12,673 | ) | ||
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Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 5,722 | 5,169 | ||||||
Stock-based compensation | 408 | 474 | ||||||
Changes in operating assets and liabilities: | ||||||||
Inventories | (7,837 | ) | (6,662 | ) | ||||
Prepaid catalog costs and other assets | 6,409 | (4,594 | ) | |||||
Restricted cash | 8,268 | (965 | ) | |||||
Income taxes payable | 91 | 64 | ||||||
Accounts payable, accrued expenses and other liabilities | (2,870 | ) | (2,904 | ) | ||||
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Total adjustments | 10,191 | (9,418 | ) | |||||
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NET CASH USED IN OPERATING ACTIVITIES | (3,890 | ) | (22,091 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Capital expenditures | (1,968 | ) | (4,400 | ) | ||||
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NET CASH USED IN INVESTING ACTIVITIES | (1,968 | ) | (4,400 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from the exercise of employee stock options | — | 1 | ||||||
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NET CASH PROVIDED BY FINANCING ACTIVITIES | — | 1 | ||||||
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NET DECREASE IN CASH AND CASH EQUIVALENTS | (5,858 | ) | (26,490 | ) | ||||
CASH AND CASH EQUIVALENTS, beginning of period | 28,074 | 41,646 | ||||||
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CASH AND CASH EQUIVALENTS, end of period | $ | 22,216 | $ | 15,156 | ||||
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SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Cash paid during the period for interest | $ | 959 | $ | 91 | ||||
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Cash paid during the period for taxes | $ | 129 | $ | 127 | ||||
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Capital expenditures incurred not yet paid | $ | 778 | $ | 1,306 | ||||
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See accompanying Notes to Condensed Consolidated Financial Statements.
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
In this Form 10-Q , when we refer to “Alloy, Inc.” we are referring to Alloy, Inc., our former parent corporation, and when we refer to “Alloy” we are referring to the Alloy-branded direct marketing and merchandising business that we operate. Similarly, when we refer to “dELiA*s” we are referring to the dELiA*s-branded direct marketing, merchandising and retail store business that we operate, when we refer to “dELiA*s, Inc.,” the “Company” “we,” “us,” or “our,” we are referring to dELiA*s, Inc. and its subsidiaries. When we refer to “the Spinoff”, we are referring to the December 19, 2005 spinoff of the outstanding common shares of dELiA*s, Inc. to the Alloy, Inc. shareholders.
1. Basis of Presentation
We are a direct marketing and retail company comprised of two lifestyle brands primarily targeting teenage girls and young women. Our two lifestyle brands—dELiA*s and Alloy—generate revenue by selling to consumers through the integration of direct mail catalogs, e-commerce websites and, for dELiA*s, mall-based retail stores. Through our catalogs and e-commerce web pages, we sell many name brand products, along with our own proprietary brand products, directly to consumers, including apparel, accessories, footwear and room furnishings. Our mall-based retail stores derive revenue primarily from the sale of apparel and accessories to teenage girls.
The accompanying unaudited condensed consolidated financial statements (the “financial statements”) of dELiA*s, Inc. at July 30, 2011 and July 31, 2010 and for the thirteen week and twenty-six week periods ended July 30, 2011 and July 31, 2010 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Certain notes and other information have been condensed or omitted from the financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the most recent dELiA*s, Inc. Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated balance sheet at January 29, 2011 and related information presented in the footnotes have been derived from audited consolidated statements at that date.
The Company’s fiscal year ends on the Saturday closest to January 31st. References to “fiscal 2010” represent the 52-week period ended January 29, 2011 and references to “fiscal 2011” represent the 52-week period ending January 28, 2012.
The financial statements include the accounts of dELiA*s, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
2. Recently Issued Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06,Fair Value Measurements and Disclosures(“ASU 2010-06”). ASU 2010-06 amends Accounting Standards Codification (“ASC”) 820-10,Fair Value Measurements and Disclosures(“ASC 820”), and requires new disclosures surrounding certain fair value measurements. ASU 2010-06 is effective for the first interim or annual reporting period beginning on or after December 15, 2009, except for certain disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for the first interim and annual reporting periods beginning on or after December 15, 2010. During fiscal 2010, the Company adopted the disclosure requirements effective for the first interim or annual reporting period beginning on or after December 15, 2009. The Company adopted the remaining disclosure requirements in the first quarter of fiscal 2011. The adoption of the remaining disclosure requirements of ASU 2010-06 did not have a material impact on our condensed consolidated financial statements.
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
3. Fair Value of Financial Instruments
We follow the guidance in ASC 820 as it relates to financial and nonfinancial assets and liabilities. Our non-financial assets, which include property and equipment, goodwill and indefinite-lived intangibles, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is required and we are required to evaluate the non-financial asset for impairment, a resulting asset impairment would require that the non-financial asset be recorded at fair value. ASC 820 prioritizes inputs used in measuring fair value into a hierarchy of three levels: Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2—inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and Level 3—unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying amounts of our financial instruments, including cash and cash equivalents, receivables, payables, and other accrued liabilities approximated fair value due to the short maturity of these financial instruments.
4. Cash and Cash Equivalents
Cash and cash equivalents consist of cash, credit card receivables and highly liquid investments with original maturities of three months or less. Credit card receivable balances included in cash and cash equivalents as of July 30, 2011, January 29, 2011 and July 31, 2010 were approximately $2.3 million, $1.3 million and $2.4 million, respectively.
5. Inventories
Inventories, which consist of finished goods, including certain capitalized expenses, are stated at the lower of cost (first-in, first out method) or market value. Inventories may include items that have been written down to our best estimate of their net realizable value. Our decisions to write-down and establish valuation allowances against our merchandise inventories are based on our current rate of sale, the age of the inventory and other factors. Actual final sales prices to customers may be higher or lower than our estimated sales prices and could result in a fluctuation in gross profit in subsequent periods.
6. Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing the Company’s net income (loss) by the weighted average number of shares outstanding during the period. When the effects are not anti-dilutive, diluted earnings per share is computed by dividing the Company’s net earnings by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options, restricted stock and convertible debentures. The dilutive impact of stock options and restricted stock is determined by applying the “treasury stock” method.
The total weighted average number of potential common shares with an anti-dilutive impact excluded from the calculation of diluted net income (loss) per share is detailed in the following table for the thirteen and twenty-six week periods ended July 30, 2011 and July 31, 2010:
For Thirteen Weeks Ended | For Twenty-Six Weeks Ended | |||||||||||||||
July 30, 2011 | July 31, 2010 | July 30, 2011 | July 31, 2010 | |||||||||||||
Options, warrants and restricted shares | 5,249,053 | 7,166,920 | 5,249,053 | 7,169,986 | ||||||||||||
Conversion of 5.375% Convertible Debentures | — | 873 | — | 873 | ||||||||||||
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Total | 5,249,053 | 7,167,793 | 5,249,053 | 7,170,859 | ||||||||||||
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7. Other Current Assets
Other current assets consisted of the following (in thousands):
July 30, 2011 | January 29, 2011 | July 31, 2010 | ||||||||||
Income taxes receivable | $ | 250 | $ | 9,965 | $ | 11,778 | ||||||
Other current assets | 3,998 | 2,546 | 5,327 | |||||||||
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$ | 4,248 | $ | 12,511 | $ | 17,105 | |||||||
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
8. Property and Equipment, net
Property and equipment, net, consisted of the following (in thousands):
July 30, 2011 | January 29, 2011 | July 31, 2010 | ||||||||||
Construction in progress | $ | 1,001 | $ | 789 | $ | 636 | ||||||
Computer equipment | 11,295 | 11,066 | 10,971 | |||||||||
Machinery and equipment | 125 | 125 | 125 | |||||||||
Office furniture | 19,936 | 19,765 | 20,027 | |||||||||
Leasehold improvements | 54,114 | 52,449 | 54,440 | |||||||||
Building | 7,559 | 7,559 | 7,559 | |||||||||
Land | 500 | 500 | 500 | |||||||||
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94,530 | 92,253 | 94,258 | ||||||||||
Less: accumulated depreciation and amortization | (47,918 | ) | (42,265 | ) | (39,285 | ) | ||||||
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$ | 46,612 | $ | 49,988 | $ | 54,973 | |||||||
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Depreciation and amortization expense related to property and equipment was approximately $2.9 million and $5.7 million for the thirteen and twenty-six week periods ended July 30, 2011, respectively, and $2.7 million and $5.2 million for the thirteen and twenty-six weeks periods ended July 31, 2010, respectively.
9. Credit Facility
dELiA*s, Inc. and certain of its wholly-owned subsidiaries were parties to a letter of credit agreement (“Letter of Credit Agreement”) with Wells Fargo Retail Finance II, LLC (“Wells Fargo”). The Letter of Credit Agreement, which was terminated on May 26, 2011, provided for the issuance of letters of credit to finance the acquisition of inventory from suppliers, to provide standby letters of credit to factors, landlords and other parties for business purposes, and for other general corporate purposes. Aggregate letters of credit issued and to be issued under the Letter of Credit Agreement at any one time outstanding could not exceed the lesser of $15 million or an amount equal to a certain percentage of cash collateral held by Wells Fargo to secure repayment of the Company’s and the Subsidiaries’ respective obligations to Wells Fargo under the Letter of Credit Agreement and related letter of credit documents. The Company had secured these obligations by the pledge to Wells Fargo of cash collateral in the amount of $15.8 million. None of the other assets or properties of the Company, or any of its subsidiaries or affiliates, had been pledged as collateral for these obligations.
On January 28, 2010, the Company entered into a First Amendment to Letter of Credit Agreement (the “First Amendment”) with Wells Fargo. Pursuant to the First Amendment, the Letter of Credit Agreement was amended at the Company’s request to, among other things, reduce the maximum aggregate face amount of letters of credit that may be issued under the Letter of Credit Agreement, to the lesser of (a) $10,000,000 or (b) an amount equal to a specified percentage of cash collateral held by Wells Fargo. In addition, cash collateral was only required in an amount equal to 105% of the face amount of outstanding letters of credit issued under the Letter of Credit Agreement, as amended. At July 31, 2010, the cash collateral required to secure the Company’s obligations under the Letter of Credit Agreement, as amended, was approximately $8.5 million. The cash collateral, which was shown as restricted cash on the accompanying condensed consolidated balance sheet, was included in current assets as of July 31, 2010 since the restriction related to the Letter of Credit Agreement was to expire within one year.
The Letter of Credit Agreement called for the payment by the Company of an unused line fee of 0.75% per annum on the average unused portion of the Letter of Credit Agreement, a letter of credit fee of 2.00% per annum on the average outstanding face amount of letters of credit issued under the Letter of Credit Agreement, as well as other customary fees and expenses generally charged by the letter of credit issuer. The Letter of Credit Agreement did not contain any financial covenants with which the Company or any of its subsidiaries or affiliates had to comply during the term of the Letter of Credit Agreement.
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
On May 26, 2011, the Company and certain of its wholly-owned subsidiaries entered into a new credit agreement (the “Credit Agreement”) with General Electric Capital Corporation (“GE Capital”), as a lender and as agent for the financial institutions from time to time party to the Credit Agreement (together with GE Capital in its capacity as a lender, the “Lenders”). The Credit Agreement provides for a total aggregate commitment of the Lenders of $25,000,000, including a $15,000,000 sublimit for the issuance of letters of credit and a swingline loan facility of $5,000,000. Under the Credit Agreement, the Company has the right to request, subject to the agreement of the Lenders, that the Lenders increase their revolving commitments up to an additional $25,000,000. The Credit Agreement has a term of five years and matures on May 26, 2016. The obligations of the borrowers under the Credit Agreement are secured by substantially all property and assets of the Company and certain of its subsidiaries.
As of July 30, 2011, there were approximately $11.9 million of outstanding letters of credit under the Credit Agreement, and unused availability of approximately $13.0 million.
The Credit Agreement calls for the payment by the Company of a fee of 0.375% per annum on the average unused portion of the Credit Agreement, a letter of credit fee calculated using a per annum rate equal to the Applicable Margin with respect to letters of credit (as defined in the Credit Agreement) multiplied by the average outstanding face amount of letters of credit issued under the Credit Agreement, as well as other customary fees and expenses. The Credit Agreement does not contain any financial covenants with which the Company or any of its subsidiaries or affiliates has to comply during the term of the Credit Agreement.
Interest accrues on the outstanding principal amount of the revolving credit loans at an annual rate equal to LIBOR (as defined in the Credit Agreement) or the Base Rate (as defined in the Credit Agreement), plus an applicable margin which is subject to periodic adjustment based on average excess availability under the Credit Agreement. Interest on each swingline loan is calculated using the Base Rate.
The Credit Agreement contains customary representations and warranties, as well as customary covenants that, among other things, restricts the ability of the Company and its subsidiaries to incur liens, consolidate or merge with other entities, incur certain additional indebtedness and guaranty obligations, pay dividends or make certain other restricted payments. The Credit Agreement also contains customary events of default, including payment defaults, breaches of representations and warranties and covenants, cross defaults to other material indebtedness, and bankruptcy and insolvency matters.
10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
July 30, 2011 | January 29, 2011 | July 31, 2010 | ||||||||||
Accrued sales tax | $ | 474 | $ | 1,349 | $ | 723 | ||||||
Accrued payroll, bonus, taxes and withholdings | 1,480 | 1,425 | 1,551 | |||||||||
Accrued professional services | 387 | 533 | 456 | |||||||||
Credits due to customers | 9,819 | 10,617 | 11,707 | |||||||||
Allowance for sales returns | 775 | 1,004 | 889 | |||||||||
Accrued capital expenditures | 578 | 296 | 941 | |||||||||
Other accrued expenses | 5,934 | 6,564 | 7,219 | |||||||||
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$ | 19,447 | $ | 21,788 | $ | 23,486 | |||||||
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
11. Deferred Credits and Other Long-Term Liabilities
Deferred credits and other long-term liabilities consist primarily of long-term portions of deferred rent and tenant allowances. We occupy our retail stores, home office and call center facility under operating leases generally with terms of seven to ten years. Some of these retail store leases have early cancellation clauses, which permit the lease to be terminated if certain sales levels are not met in specific periods. Most of the store leases require payment of a specified minimum rent, plus a contingent rent based on a percentage of the store’s net sales in excess of a specified threshold. Most of the lease agreements have defined escalating rent provisions, which are reported as a deferred rent liability and expensed on a straight-line basis over the term of the related lease, commencing with date of possession. This includes any lease renewals deemed to be probable. In addition, we receive cash allowances from our landlords on certain properties and have reported these amounts as tenant allowances which are amortized to rent expense over the term of the lease, also commencing with date of possession. Included in deferred credits at July 30, 2011, January 29, 2011 and July 31, 2010 was approximately $5.8 million, $5.7 million, and $5.8 million, respectively, of deferred rent liability, and approximately $5.3 million, $5.1 million, and $5.6 million, respectively, of tenant allowances.
12. Share-Based Compensation
The Company accounts for share-based compensation under the provisions of ASC 718 Compensation-Stock Compensation, which requires share-based compensation related to stock options to be measured based on estimated fair values at the date of grant using an option-pricing model.
The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model, which requires the Company to estimate the expected term of stock option grants and expected future stock price volatility over the expected term.
Included in selling, general and administrative expense in the financial statements was stock-based compensation expense of approximately $235,000 and $408,000 for the thirteen and twenty-six week periods ended July 30, 2011, respectively, and $175,000 and $474,000 for the thirteen and twenty-six week periods ended July 31, 2010, respectively, related to employee stock options and restricted stock.
The per share weighted average fair value of stock options granted during the twenty-six weeks ended July 30, 2011 was $0.95. The fair value of each option grant is estimated on the date of grant with the following weighted average assumptions:
July 30, 2011 | ||||
Dividend yield | — | |||
Risk-free interest rate | 2.6 | % | ||
Expected life (in years) | 6.25 | |||
Historical volatility | 60 | % |
A summary of the Company’s stock option activity and weighted average exercise prices is as follows:
Options | Weighted Average Exercise Price | |||||||
Options outstanding at January 29, 2011 | 5,656,568 | $ | 6.80 | |||||
Options granted | 596,000 | 1.63 | ||||||
Options exercised | — | — | ||||||
Options cancelled | (2,104,807 | ) | 7.64 | |||||
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Options outstanding at July 30, 2011 | 4,147,761 | $ | 5.64 | |||||
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Options exercisable at July 30, 2011 | 3,026,512 | $ | 7.05 | |||||
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As of July 30, 2011, there was $634,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of approximately 1.6 years.
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
13. Stockholders’ equity
Rights Offering
On December 30, 2005, we filed a prospectus under which we distributed to persons who were holders of our common stock on December 28, 2005 transferable rights to purchase up to an aggregate of 2,691,790 shares of our common stock at a cash subscription price of $7.43 per share. The rights offering was made to fund the costs and expenses of our retail store expansion plan and to provide funds for general corporate purposes following the Spinoff. MLF Investments, LLC (“MLF”), which was controlled by Matthew L. Feshbach, our former Chairman of the Board, agreed to backstop the rights offering, meaning MLF agreed to purchase all shares of our common stock that remained unsold upon completion of the rights offering at the same $7.43 subscription price per share. The rights offering was completed in February 2006 with $20 million of gross proceeds. The stockholders exercised subscription rights to purchase 2,040,570 shares of dELiA*s, Inc. common stock, of the 2,691,790 shares offered in the rights offering, raising a total of $15,161,435. On February 24, 2006, MLF purchased the remaining 651,220 shares for a total of $4,838,565. MLF received as compensation for its backstop commitment a nonrefundable fee of $50,000 and ten-year warrants to purchase 215,343 shares of our common stock at an exercise price of $7.43 per share. The warrants had a grant date fair value of approximately $900,000 and were recorded as a cost of raising capital. The MLF warrants were subsequently split so that MLF Offshore Portfolio Company, LP owned warrants to purchase 206,548 shares of our common stock and MLF Partners 100, LP owned warrants to purchase 8,795 shares of our common stock. Such warrants were distributed on a pro-rata basis to investors as part of the winding up of operations of MLF and its affiliated funds.
Warrants and Convertible Debentures
Prior to the Spinoff, Alloy, Inc. had warrants outstanding for the purchase of 1,326,309 shares in the aggregate of Alloy, Inc. common stock that were issued to certain purchasers of (i) Alloy, Inc. common stock in a private placement transaction completed on January 25, 2002, and (ii) Alloy, Inc.’s Series A Convertible Preferred Stock (collectively the “Warrants”). Upon consummation of the Spinoff, the Warrants became exercisable into both the number of shares of Alloy, Inc. common stock into which such Warrants otherwise were exercisable and one-half that number of shares, or 663,155 shares of our common stock, none of which have been issued. We have agreed with Alloy, Inc. that we will issue shares of our common stock, without compensation, on behalf of Alloy, Inc. to holders of the Warrants as and when required in connection with any exercise of the Warrants. All other outstanding Alloy, Inc. warrants were unaffected by the Spinoff. The warrants are due to expire on January 28, 2012.
At the time of the Spinoff, Alloy, Inc. had outstanding $69.3 million of 5.375% convertible senior debentures due 2023 (the “Debentures”). The outstanding Debentures were convertible into 8,274,628 shares of Alloy, Inc. common stock. As a result of the Spinoff, the Debentures were convertible into 8,274,628 shares of Alloy, Inc. common stock (before consideration of a subsequent reverse stock split by Alloy, Inc.) and 4,137,314 shares of our common stock if and when the conditions to conversion are satisfied. We had agreed with Alloy, Inc. that we would issue shares of our common stock, without compensation, on behalf of Alloy, Inc. to holders of the Debentures as and when required in connection with any conversion of the Debentures. There were 4,136,441 shares of dELiA*s, Inc. common stock issued in connection with conversions of the Debentures, leaving 873 debentures outstanding to be converted. During the fourth quarter of fiscal 2010, Alloy, Inc. was acquired by an investor group led by Zelnick Media and is no longer a public company. As a result of such transaction, the above 873 debentures are no longer outstanding.
Restricted Stock
The Company issues shares of restricted stock, which are subject to vesting requirements, primarily to outside board members. These shares are charged to stock-based compensation expense ratably over the vesting period, which is generally three years. No restricted shares were issued during the thirteen and twenty-six weeks ended July 30, 2011 or July 31, 2010.
14. Interest Expense, Net
Interest expense and income are presented net in the condensed consolidated statements of operations. Interest income is derived from cash balances in money market accounts. Interest expense for thirteen and twenty-six weeks ended July 31, 2011 relates to costs associated with our Credit Agreement and our former Letter of Credit Agreement. Interest expense for thirteen and twenty-six weeks ended July 31, 2010 relates to costs associated with our former Letter of Credit Agreement. Interest expense for the thirteen and twenty-six week periods ended July 30, 2011 was $136,000 and $226,000, respectively, and for the thirteen and twenty-six week periods ended July 31, 2010 was $ 87,000 and $180,000, respectively. Interest income for the thirteen and twenty-six week periods ended July 30, 2011 was $ -0- and $3,000, respectively, and for thirteen and twenty-six week periods ended July 31, 2010 was $5,000 and $11,000 respectively.
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
15. Spinoff Related Transactions
Services and Revenues
We recognize other revenues that consist primarily of advertising provided for third parties in our catalogs, on our e-commerce web pages, in our outbound packages, and in our retail stores pursuant to specific pricing arrangements with Alloy, Inc. Alloy, Inc. originally arranged these advertising services on our behalf, through a Media Services Agreement (the “Original Agreement”) entered into in connection with the Spinoff. Revenue under these arrangements is recognized, net of commissions and agency fees, when the underlying advertisement is published or otherwise delivered pursuant to the terms of each arrangement.
On November 16, 2010, the Company entered into an Amended and Restated Media Services Agreement (the “A/R Media Services Agreement”) with Alloy, Inc. The A/R Media Services Agreement replaces the Original Agreement, which expired by its terms on December 19, 2010, and became effective on December 20, 2010, upon expiration of the Original Agreement. The A/R Media Services Agreement provides, among other things, that Alloy, Inc. will serve as our exclusive sales agent for the purpose of providing the following media and marketing related services to the Company and its subsidiaries: license of websites, internet advertising, direct segment upsell arrangements, catalog advertisements and insertions, sampling and in-store promotions, and database collection and marketing. The A/R Media Services Agreement expires on December 20, 2015. Effective May 6, 2011, the Company and Alloy, Inc. amended the A/R Media Services Agreement to remove the sampling and in-store promotion services therefrom.
Prior to the Spinoff, we and Alloy, Inc. entered into the following agreements that were to define our ongoing relationships after the Spinoff: a distribution agreement, tax separation agreement, trademark agreement, information technology and intellectual property agreement, and an On Campus Marketing call center agreement. In addition, as part of the transaction involving the sale of our former CCS business, we entered into a Media Placement Services Agreement with Alloy, Inc. pursuant to which we agreed to purchase specified media services over a three year period for $3.3 million. The Media Placement Services Agreement expires on February 1, 2012.
16. Income Taxes
The provision (benefit) for income taxes is based on the current estimate of the annual effective rate and is adjusted as necessary for quarterly events. The effective income tax rate for the thirteen and twenty-six weeks ended July 30, 2011 was (0.5%) and 6.3%, respectively, and for the thirteen and twenty-six weeks ended July 31, 2010 was 25.2% and 25.6%, respectively. During fiscal 2010, the Company recorded a federal tax benefit related to the carry-back of net operating losses (“NOL”). In the first quarter of fiscal 2011, the Company recognized a benefit for adjustments related to the filing of the Company’s 2010 income tax return. However, the Company does not expect to recognize any additional tax benefit for federal taxes for the remainder of the year, since the Company did not generate taxable income during the two-year carry-back period for the fiscal 2011 NOL. In the second quarter of fiscal 2011 the Company recognized tax expense related to state taxes.
The Company follows ASC 740-10Income Taxes, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For this benefit to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes interest accrued for increases in the net liability for unrecognized income tax benefits in interest expense and any related penalties in income tax expense.
At July 30, 2011, the Company had a liability for unrecognized tax benefits of $408,000 all of which would favorably affect the Company’s effective tax rate if recognized. Included within the $408,000 is an accrual of $121,000 for the payment of related interest and penalties. There were no material changes to the Company’s unrecognized tax benefits during the thirteen and twenty-six weeks ended July 30, 2011 and July 31, 2010. The Company does not believe there will be any material changes in the unrecognized tax positions over the next twelve months.
The Company’s U.S. subsidiaries join in the filing of a U.S. federal consolidated income tax return. The U.S. federal statute of limitations remains open for the fiscal years 2006, 2008, 2009 and 2010. State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective returns. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. The Company is periodically subject to state income tax examinations.
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
17. Litigation
The Company is involved from time to time in litigation incidental to the business and, from time to time, the Company may make provisions for potential litigation losses. The Company follows ASC 450 Contingencieswhen assessing pending or potential litigation. The Company believes that there is no claim or litigation pending, the outcome of which could have a material adverse effect on its financial condition or operating results.
18. Segment Reporting
The Company’s executive management, being its chief operating decision makers, works together to allocate resources and assess the performance of the Company’s business. The Company’s executive management manages the Company as two distinct operating segments—direct marketing and retail stores. Although offering customers substantially similar merchandise, the Company’s direct and retail operating segments have distinct management, marketing and operating strategies and processes.
The Company’s executive management assesses the performance of each operating segment based on operating income (loss), which is defined as net sales less the cost of goods sold and selling, general and administrative expenses both directly identifiable and allocable. For the direct segment, these operating costs, in addition to the cost of merchandise sold, primarily consist of catalog development, production and circulation costs, order processing costs, direct personnel costs and allocated overhead expenses. For the retail segment, these operating costs, in addition to the cost of merchandise sold, primarily consist of store selling expenses, direct labor costs and allocated overhead expenses. Allocated overhead expenses are costs associated with general corporate expenses and shared departmental services (e.g., executive, facilities, accounting, data processing, legal and human resources).
Operating segment assets are those directly used in or clearly allocable to an operating segment’s operations. For the retail segment, these assets primarily include inventory, fixtures and leasehold improvements. For the direct segment, these assets primarily include inventory and prepaid catalog costs, together with goodwill. Corporate and other assets include corporate headquarters, distribution and contact center facilities, shared technology infrastructure as well as corporate cash and cash equivalents and prepaid expenses. Operating segment depreciation and amortization and capital expenditures are recorded directly to each operating segment. Corporate and other depreciation and amortization and corporate and other capital expenditures are allocated to each operating segment. The accounting policies of the segments are the same as those described in our most recent Form 10-K. Reportable data for our operating segments were as follows:
Direct Segment | Retail Store Segment | Total | ||||||||||
(in thousands) | ||||||||||||
Total Assets | ||||||||||||
July 30, 2011 | $ | 52,254 | $ | 71,375 | $ | 123,629 | ||||||
January 29, 2011 | 69,943 | 69,760 | 139,703 | |||||||||
July 31, 2010 | 69,341 | 85,412 | 154,753 | |||||||||
Capital Expenditures (accrual basis) | ||||||||||||
July 30, 2011—26 weeks ended | $ | 94 | $ | 2,252 | $ | 2,346 | ||||||
July 31, 2010—26 weeks ended | 151 | 4,649 | 4,800 | |||||||||
Depreciation and Amortization | ||||||||||||
July 30, 2011—26 weeks ended | $ | 581 | $ | 5,141 | $ | 5,722 | ||||||
July 31, 2010—26 weeks ended | 665 | 4,504 | 5,169 | |||||||||
Goodwill | ||||||||||||
July 30, 2011 | $ | 4,462 | $ | — | $ | 4,462 | ||||||
January 29, 2011 | 4,462 | — | 4,462 | |||||||||
July 31, 2010 | 12,073 | — | 12,073 |
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dELiA*s, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
July 30, 2011 | July 31, 2010 | July 30, 2011 | July 31, 2010 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net revenues: | ||||||||||||||||
Retail store | $ | 26,388 | $ | 24,353 | $ | 53,402 | $ | 50,335 | ||||||||
Direct marketing | 17,959 | 18,860 | 40,091 | 42,839 | ||||||||||||
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Total net revenue | $ | 44,347 | $ | 43,213 | $ | 93,493 | $ | 93,174 | ||||||||
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Operating loss: | ||||||||||||||||
Retail store | $ | (7,548 | ) | $ | (7,675 | ) | $ | (11,900 | ) | $ | (14,271 | ) | ||||
Direct marketing | (1,878 | ) | (1,389 | ) | (2,905 | ) | (2,591 | ) | ||||||||
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Operating loss | $ | (9,426 | ) | $ | (9,064 | ) | $ | (14,805 | ) | $ | (16,862 | ) | ||||
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes included elsewhere in this report on Form 10-Q and in conjunction with our audited financial statements and related notes in our most recent Form 10-K. Descriptions of all documents incorporated by reference herein or included as exhibits hereto are qualified in their entirety by reference to the full text of such documents so incorporated or included. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those set forth below in this Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Forward Looking Statements”.
Results of Operations and Financial Condition
Executive Summary
dELiA*s, Inc. is a multi-channel retailer of apparel, and accessories, comprised of two lifestyle brands—dELiA*s and Alloy. Our merchandise assortment (which includes many name brand products along with our own proprietary brand products), our catalogs, our e-commerce webpages, and our mall-based dELiA*s retail stores are designed to appeal directly to consumers. We reach our customers through our direct marketing segment, which consists of our catalog and e-commerce businesses, and our growing base of retail stores.
Our strategy is to improve upon our strong competitive position as a direct marketing company; to increase productivity in our dELiA*s retail stores; and to carry out such strategy while controlling costs.
We expect that improved productivity in each segment of our business will be the key element of our overall growth strategy. Our current focus is to improve productivity in our retail store base, to invest in alternative methods to drive additional traffic to our websites and to improve the productivity of catalogs distributed. As productivity improves and market conditions allow, we plan to continue to expand the dELiA*s retail store base over the long term. In addition, as store performance and market conditions allow, we may plan on accelerating our growth in gross square footage. Should we accelerate our growth, we may need additional equity or debt financing.
Goals
We believe that focusing on our brands and implementing the following initiatives should lead to profitable growth and improved results from operations:
• | delivering low-to mid-single digit comparable store sales growth in our dELiA*s retail stores over the long term; |
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• | driving low-to mid-single digit top-line growth in direct marketing, through targeted circulation in productive mailing segments, and implementation of web, mobile and social media based initiatives; |
• | improving gross profit margins each year by 50 basis points; |
• | developing retail merchandising assortments that emphasize key sportswear categories more effectively; |
• | improving our retail store metrics through increased focus on the selling culture, with emphasis on increased customer conversion, thereby improving productivity; |
• | implementing profit-improving inventory planning and allocation strategies such as seasonal carry-in reduction, better store-planning, targeted replenishment by size, tactical fashion investment, and vendor consolidation, to create inventory turn improvement; |
• | leveraging our current expense infrastructure and taking additional operating costs out of the business; |
• | monitoring and opportunistically closing underperforming stores; and |
• | expanding the dELiA’s retail store base over the long-term. |
Key Performance Indicators
The following measurements are among the key business indicators that management reviews regularly to gauge the Company’s results:
• | store metrics such as comparable store sales, sales per gross square foot, average retail price per unit sold, average transaction values, average units per transaction, traffic conversion rates, and store contribution margin (defined as store gross profit less direct costs of running the store); |
• | direct marketing metrics such as average order value and demand generated by book, with demand defined as the amount customers seek to purchase without regard to merchandise availability; |
• | web metrics such as site visits, carts opened and carts converted; |
• | fill rate, which is the percentage of any particular order we are able to ship for our direct marketing business, from available on-hand inventory or future inventory orders; |
• | gross profit; |
• | operating income; |
• | inventory turnover and average inventory per store; and |
• | cash flow and liquidity determined by the Company’s cash provided by operations. |
The discussion below includes references to “comparable stores.” We consider a store comparable after it has been open for fifteen full months without closure for more than seven consecutive days and whose square footage has not been expanded or reduced by more than 25% within that period. If a store is closed during a fiscal period, it is removed from the computation of comparable store sales for that fiscal quarter.
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Our fiscal year is on a 52-53 week basis and ends on the Saturday nearest to January 31st. The fiscal year ended January 29, 2011 was a 52-week fiscal year, and fiscal year ending January 28, 2012 will also be a 52-week fiscal year.
Consolidated Results of Operations
The following table sets forth our statements of operations data for the periods indicated, reflected as a percentage of revenues:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
July 30, 2011 | July 31, 2010 | July 30, 2011 | July 31, 2010 | |||||||||||||
STATEMENTS OF OPERATIONS DATA: | ||||||||||||||||
Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of goods sold | 73.0 | % | 71.3 | % | 69.6 | % | 69.9 | % | ||||||||
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Gross profit | 27.0 | % | 28.7 | % | 30.4 | % | 30.1 | % | ||||||||
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Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | 48.3 | % | 49.9 | % | 46.3 | % | 48.4 | % | ||||||||
Other operating income | (0.1 | %) | (0.2 | %) | (0.1 | %) | (0.2 | %) | ||||||||
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Total operating expenses | 48.2 | % | 49.6 | % | 46.2 | % | 48.2 | % | ||||||||
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Operating loss | (21.3 | %) | (21.0 | %) | (15.8 | %) | (18.1 | %) | ||||||||
Interest expense, net | (0.3 | %) | (0.2 | %) | (0.2 | %) | (0.2 | %) | ||||||||
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Loss before income taxes | (21.6 | %) | (21.2 | %) | (16.1 | %) | (18.3 | %) | ||||||||
Provision (benefit) for income taxes | 0.1 | % | (5.3 | %) | (1.0 | %) | (4.7 | %) | ||||||||
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Net loss | (21.7 | %) | (15.8 | %) | (15.1 | %) | (13.6 | %) | ||||||||
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Thirteen Weeks Ended July 30, 2011 Compared to Thirteen Weeks Ended July 31, 2010
Revenues
Total Revenues.Total revenues increased 2.6% to $44.3 million in the quarter ended July 30, 2011 from $43.2 million in the quarter ended July 31, 2010.
Direct Marketing Revenues. Direct marketing revenues decreased 4.8% to $18.0 million in the quarter ended July 30, 2011 from $18.9 million in the quarter ended July 31, 2010. The revenue decrease was primarily due to lower clearance inventory, as well as a reduction in catalog circulation from the prior year period.
Retail Store Revenues.Retail store revenues increased 8.4% to $26.4 million in the quarter ended July 30, 2011 from $24.4 million in the quarter ended July 31, 2010. The revenue increase was driven by a comparable store sales increase of 7.2% over the prior year period. During the quarter ended July 30, 2011, we remodeled one store, ending the period with 115 stores in operation, as compared to 115 stores in operation as of July 31, 2010.
The following table sets forth select operating data in connection with the revenues of our Company:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
July 30, 2011 | July 31, 2010 | July 30, 2011 | July 31, 2010 | |||||||||||||
Channel net revenues (in thousands): | ||||||||||||||||
Retail | $ | 26,388 | $ | 24,353 | $ | 53,402 | $ | 50,335 | ||||||||
Direct | 17,959 | 18,860 | 40,091 | 42,839 | ||||||||||||
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Total net revenues | $ | 44,347 | $ | 43,213 | $ | 93,493 | $ | 93,174 | ||||||||
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Catalogs Mailed (in thousands) | 7,843 | 8,492 | 16,584 | 17,566 | ||||||||||||
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Number of Stores: | ||||||||||||||||
Beginning of period | 115 | 111 | 114 | 109 | ||||||||||||
Stores opened | 1 | * | 7 | ** | 2 | * | 9 | ** | ||||||||
Stores closed | 1 | * | 3 | ** | 1 | * | 3 | ** | ||||||||
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End of Period | 115 | 115 | 115 | 115 | ||||||||||||
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Total Gross Sq. Ft. End of Period (in thousands) | 440.0 | 440.4 | 440.0 | 440.4 | ||||||||||||
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* | Totals include one store that was closed, remodeled and reopened in the second quarter of fiscal 2011. |
** | Totals include one store that was closed, remodeled and reopened in the second quarter of fiscal 2010, and one store that was closed and relocated to an alternative site in the same mall during the second quarter of fiscal 2010. |
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Gross Profit
Total Gross Profit.Total gross profit for the quarter ended July 30, 2011 was $12.0 million or 27% of revenues as compared to $12.4 million or 28.7% of revenues in the quarter ended July 31, 2010.
Direct Marketing Gross Profit. Direct marketing gross profit for the quarter ended July 30, 2011 was $7.8 million or 43.1% of revenues as compared to $8.4 million or 44.4% of revenues for the quarter ended July 31, 2010. The decrease in gross profit, as a percentage of sales, primarily resulted from decreased postage, handling and other revenue, partially offset by increased merchandise margins.
Retail Store Gross Profit. Retail store gross profit for the quarter ended July 30, 2011 was $4.2 million or 16.0% of revenues as compared to $4.0 million or 16.5% of revenues for the quarter ended July 31, 2010. The decrease in gross profit, as a percentage of sales, resulted from lower merchandise margins and increased inventory obsolescence, partially offset by occupancy cost leverage.
Selling, General and Administrative
Total Selling, General and Administrative.As a percentage of revenues, total selling, general and administrative expenses (SG&A) decreased to 48.3% for the quarter ended July 30, 2011 from 49.9% for the quarter ended July 31, 2010. In total dollars, SG&A decreased to $21.4 million in the quarter ended July 30, 2011 from $21.5 million in the quarter ended July 31, 2010.
Direct Marketing SG&A. Direct marketing SG&A decreased to $9.6 million in the quarter ended July 30, 2011 compared to $9.8 million in the quarter ended July 31, 2010. As a percentage of related revenues, the direct marketing SG&A increased to 53.6% from 52.0% for the quarter ended July 31, 2010. The decrease in SG&A, in dollars, reflects planned overhead costs savings and reduced selling expenses driven by a reduction in catalog circulation. These savings were partially offset by an increased investment in alternative web-marketing vehicles and severance and other costs related to the recent change in the President of the dELiA*s Brand.
Retail Store SG&A. Retail SG&A increased to $11.8 million in the quarter ended July 30, 2011 from $11.7 million in the quarter ended July 31, 2010. As a percentage of related revenues, retail SG&A decreased to 44.7% in the quarter ended July 30, 2011 from 48.2% for the quarter ended July 31, 2010. The decrease in SG&A, as a percentage of sales, was driven by selling and overhead expense leverage. The increase in SG&A, in dollars, reflects the severance and other costs related to the recent change in the President of the dELiA*s Brand, offset by planned selling and overhead expense reductions.
Other Operating Income
Other operating income, which represents breakage income, was $34,000 for the second quarter of fiscal 2011 compared to $94,000 in second quarter of fiscal 2010.
Operating Loss
Total Operating Loss.Our total operating loss was $9.4 million for the quarter ended July 30, 2011 as compared to a loss of $9.1 million for the quarter ended July 31, 2010.
Direct Marketing Operating Loss. Direct marketing operating loss was $1.9 million for the quarter ended July 30, 2011 as compared to a loss of $1.4 million for the quarter ended July 31, 2010.
Retail Store Operating Loss.Operating loss from retail stores was $7.5 million for the quarter ended July 30, 2011 as compared to a loss of $7.7 million for the quarter ended July 31, 2010.
Interest expense, net
We recorded net interest expense of $136,000 in the quarter ended July 30, 2011 compared to $82,000 for the quarter ended July 31, 2010. Interest expense for the quarter ended July 30, 2011 related to costs associated with our Credit Agreement and our former Letter of Credit Agreement. Interest expense for the quarter ended July 31, 2010 related to our former Letter of Credit Agreement. Interest income was earned from cash balances in money market accounts.
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Benefit for income taxes
We recorded an income tax provision of $50,000 for the fiscal quarter ended July 30, 2011 and an income tax benefit of $2.3 million for the fiscal quarter ended July 31, 2010. The Company does not expect to recognize any additional tax benefit for federal taxes for the remainder of the year, since the Company did not generate taxable income during the two-year carry-back period for the fiscal 2011 NOL.
Twenty-Six Weeks Ended July 30, 2011 Compared to Twenty-Six Weeks Ended July 31, 2010
Revenues
Total Revenues.Total revenues increased 0.3% to $93.5 million in the twenty-six weeks ended July 30, 2011 from $93.2 million in the twenty-six weeks ended July 31, 2010.
Direct Marketing Revenues. Direct marketing revenues decreased 6.4% to $40.1 million in the twenty-six weeks ended July 30, 2011 from $42.8 million in the twenty-six weeks ended July 31, 2010. The revenue decrease was primarily due to lower clearance inventory, as well as a reduction in catalog circulation from the prior year period.
Retail Store Revenues.Retail store revenues increased 6.1% to $53.4 million in the twenty-six weeks ended July 30, 2011 from $50.3 million in the twenty-six weeks ended July 31, 2010. The revenue increase was driven by a comparable store sales increase of 3.9% over the prior year period. During the twenty-six weeks ended July 30, 2011, we opened two new stores, including one remodel, and ended with 115 stores in operation as compared to 115 stores in operation as of July 31, 2010.
Gross Profit
Total Gross Profit. Total gross profit for the twenty-six weeks ended July 30, 2011 was $28.4 million or 30.4% of revenues as compared to $28.0 million or 30.1% of revenues in the twenty-six weeks ended July 31, 2010.
Direct Marketing Gross Profit. Direct marketing gross profit for the twenty-six weeks ended July 30, 2011 was $17.6 million or 44.0% of revenues as compared to $18.9 million or 44.2% of revenues for the twenty-six weeks ended July 31, 2010. The decrease in gross profit, as a percentage of sales, primarily resulted from decreased postage, handling and other revenue, partially offset by increased merchandise margins.
Retail Store Gross Profit. Retail store gross profit for the twenty-six weeks ended July 30, 2011 was $10.8 million or 20.3% of revenues as compared to $9.1 million or 18.1% of revenues for the twenty-six weeks ended July 31, 2010. The increase in gross profit, as a percentage of sales, reflects increased merchandise margins and occupancy cost leverage.
Selling, General and Administrative
Total Selling, General and Administrative.As a percentage of revenues, total selling, general and administrative expenses (SG&A) decreased to 46.3% for the twenty-six weeks ended July 30, 2011 from 48.4% for the twenty-six weeks ended July 31, 2010. In total dollars, SG&A decreased to $43.3 million in the twenty-six weeks ended July 30, 2011 from $45.1 million in the twenty-six weeks ended July 31, 2010.
Direct Marketing SG&A. Direct marketing SG&A decreased to $20.5 million in the twenty-six weeks ended July 30, 2011 from $21.6 million in the twenty-six weeks ended July 31, 2010. As a percentage of related revenues, the direct marketing SG&A increased to 51.2% in the twenty-six weeks ended July 30, 2011 from 50.5% in the twenty-six weeks ended July 31, 2010. The reduction in dollars was driven by planned reductions in overhead costs and selling expenses, partially offset by an increased investment in alternative web-marketing vehicles. The increase in SG&A, as a percentage of sales, reflects the deleveraging of selling expense on lower sales.
Retail Store SG&A. Retail SG&A decreased to $22.8 million in the twenty-six weeks ended July 30, 2011 from $23.5 million in the twenty-six weeks ended July 31, 2010. As a percentage of related revenues, retail SG&A decreased to 42.7% in the twenty-six weeks ended July 30, 2011 from 46.7% for the twenty-six weeks ended July 31, 2010. The decrease in SG&A, as a percentage of sales, reflects selling and overhead expense leverage, partially offset by increased depreciation expense. The decrease in SG&A, in dollars, reflects the planned reductions in overhead costs.
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Other Operating Income
Other operating income of $72,000 and $238,000 for the twenty-six weeks ended July 30, 2011 and July 31, 2010, respectively, represents breakage income.
Operating Loss
Total Operating Loss.Our total operating loss was $14.8 million for the twenty-six weeks ended July 30, 2011 as compared to a loss of $16.9 million for the twenty-six weeks ended July 31, 2010.
Direct Marketing Operating Loss.Direct marketing operating loss was $2.9 million for the twenty-six weeks ended July 30, 2011 as compared to a loss of $2.6 million for the twenty-six weeks ended July 31, 2010.
Retail Store Operating Loss.Operating loss from retail stores was $11.9 million for the twenty-six weeks ended July 30, 2011 as compared to a loss of $14.3 million for the twenty-six weeks ended July 31, 2010.
Interest expense, net
We recorded net interest expense of $223,000 in the twenty-six weeks ended July 30, 2011 as compared with net interest expense of $169,000 in the twenty-six weeks ended July 31, 2010. Interest expense for the twenty-six weeks ended July 30, 2011 related to costs associated with our Credit Agreement and our former Letter of Credit Agreement. Interest expense for the twenty-six weeks ended July 31, 2010 related to our former Letter of Credit Agreement. Interest income was earned from cash balances in money market accounts.
Benefit for income taxes
Our income tax benefit reflects our anticipated annual effective tax rate and is adjusted as necessary for quarterly events. We recorded an income tax benefit of $0.9 million in the twenty-six weeks ended July 30, 2011 and an income tax benefit of $4.4 million for the twenty-six weeks ended July 31, 2010.
Seasonality and Quarterly Fluctuation
Our historical revenues and operating results have varied significantly from quarter to quarter due to seasonal fluctuations in consumer purchasing patterns. Sales of apparel, accessories and footwear through our e-commerce web pages, catalogs and retail stores have generally been higher in our third and fourth fiscal quarters, which contain the key back-to-school and holiday selling seasons, than in our first and second fiscal quarters. Starting in the second quarter and through the beginning of our fourth fiscal quarter, our working capital requirements increase and have typically been funded by our cash balances as well as utilization of our former Letter of Credit Agreement and during this year through the Credit Agreement. Quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including the timing of store openings and the relative proportion of our new stores to mature stores, fashion trends and changes in consumer preferences, calendar shifts of holiday or seasonal periods, changes in merchandise mix, timing of promotional events, fuel, postage and paper prices, general economic conditions, competition and weather conditions.
Liquidity and Capital Resources
Our capital requirements include construction, fixture and inventory costs related to the opening of new retail stores, maintenance and remodeling expenditures for existing stores, and information technology, distribution and other infrastructure related investments. Future capital requirements will depend on many factors, including, but not limited to, the pace of new store openings, the availability of suitable locations for new stores, the size of the specific stores we open and the nature of arrangements negotiated with landlords. In that regard, our net investment to open new stores is likely to vary significantly in the future.
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We expect our current cash balance, cash flow from operations and availability under our Credit Agreement will be sufficient to meet our cash requirements for operations and planned capital expenditures at least through the next twelve months. However, if we decide to accelerate growth of our retail operations beyond the ranges in our present retail strategy, or if cash balances, cash flow from operations, or availability under the new credit facility are not sufficient to meet our capital requirements, then we may be required to obtain additional equity or debt financing in the future. Such equity or debt financing may not be available to us when we need it or, if available, may not be on terms that will be satisfactory to us or may be dilutive to our stockholders. If financing is not available when required or is not available on acceptable terms, we may be unable to take advantage of business opportunities or respond to competitive pressures. Any of these events could have a material and adverse effect on our business, results of operations and financial condition.
dELiA*s, Inc. and certain of its wholly-owned subsidiaries were parties to the Letter of Credit Agreement with Wells Fargo. The Letter of Credit Agreement, which was terminated on May 26, 2011, provided for the issuance of letters of credit to finance the acquisition of inventory from suppliers, to provide standby letters of credit to factors, landlords and other parties for business purposes, and for other general corporate purposes. Aggregate letters of credit issued and to be issued under the Letter of Credit Agreement at any one time outstanding could not exceed the lesser of $15 million or an amount equal to a certain percentage of cash collateral held by Wells Fargo to secure repayment of the Company’s and the Subsidiaries’ respective obligations to Wells Fargo under the Letter of Credit Agreement and related letter of credit documents. The Company had secured these obligations by the pledge to Wells Fargo of cash collateral in the amount of $15.8 million. None of the other assets or properties of the Company, or any of its subsidiaries or affiliates, had been pledged as collateral for these obligations.
On January 28, 2010, the Company entered into the First Amendment. Pursuant to the First Amendment, the Letter of Credit Agreement was amended at the Company’s request to, among other things, reduce the maximum aggregate face amount of letters of credit that may be issued under the Letter of Credit Agreement, to the lesser of (a) $10,000,000 or (b) an amount equal to a specified percentage of cash collateral held by Wells Fargo. In addition, cash collateral was only required in an amount equal to 105% of the face amount of outstanding letters of credit issued under the Letter of Credit Agreement, as amended. At July 31, 2010, the cash collateral required to secure the Company’s obligations under the Letter of Credit Agreement, as amended, was approximately $8.5 million. The cash collateral, which was shown as restricted cash on the accompanying condensed consolidated balance sheet, was included in current assets as of July 31, 2010 since the restriction related to the Letter of Credit Agreement was to expire within one year.
The Letter of Credit Agreement called for the payment by the Company of an unused line fee of 0.75% per annum on the average unused portion of the Letter of Credit Agreement, a letter of credit fee of 2.00% per annum on the average outstanding face amount of letters of credit issued under the Letter of Credit Agreement, as well as other customary fees and expenses generally charged by the letter of credit issuer. The Letter of Credit Agreement did not contain any financial covenants with which the Company or any of its subsidiaries or affiliates had to comply during the term of the Letter of Credit Agreement.
On May 26, 2011, the Company and certain of its wholly-owned subsidiaries entered into the Credit Agreement with GE Capital, as a lender and as agent for the Lenders. The Credit Agreement provides for a total aggregate commitment of the Lenders of $25,000,000, including a $15,000,000 sublimit for the issuance of letters of credit and a swingline loan facility of $5,000,000. Under the Credit Agreement, the Company has the right to request, subject to the agreement of the Lenders, that the Lenders increase their revolving commitments up to an additional $25,000,000. The Credit Agreement has a term of five years and matures on May 26, 2016. The obligations of the borrowers under the Credit Agreement are secured by substantially all property and assets of the Company and certain of its subsidiaries.
As of July 30, 2011, there were approximately $11.9 million of outstanding letters of credit under the Credit Agreement, and unused availability of approximately $13.0 million.
The Credit Agreement calls for the payment by the Company of a fee of 0.375% per annum on the average unused portion of the Credit Agreement, a letter of credit fee calculated using a per annum rate equal to the Applicable Margin with respect to letters of credit (as defined in the Credit Agreement) multiplied by the average outstanding face amount of letters of credit issued under the Credit Agreement, as well as other customary fees and expenses. The Credit Agreement does not contain any financial covenants with which the Company or any of its subsidiaries or affiliates has to comply during the term of the Credit Agreement.
Interest accrues on the outstanding principal amount of the revolving credit loans at an annual rate equal to LIBOR (as defined in the Credit Agreement) or the Base Rate (as defined in the Credit Agreement), plus an applicable margin which is subject to periodic adjustment based on average excess availability under the Credit Agreement. Interest on each swingline loan is calculated using the Base Rate.
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The Credit Agreement contains customary representations and warranties, as well as customary covenants that, among other things, restricts the ability of the Company and its subsidiaries to incur liens, consolidate or merge with other entities, incur certain additional indebtedness and guaranty obligations, pay dividends or make certain other restricted payments. The Credit Agreement also contains customary events of default, including payment defaults, breaches of representations and warranties and covenants, cross defaults to other material indebtedness, and bankruptcy and insolvency matters.
Operating Activities
Net cash used in operating activities was $3.9 million in the twenty-six weeks ended July 30, 2011, compared with $22.1 million in the twenty-six weeks ended July 31, 2010. The cash used in operating activities for the twenty-six weeks ended July 30, 2011 was due primarily to funding the net operating loss and the timing of vendor payments, partially offset by the return of restricted cash and the receipt of a tax refund. The cash used in operating activities for the twenty-six weeks ended July 31, 2010 was due primarily to funding the net operating loss and inventory purchases.
Investing Activities
Cash used in investing activities was $2.0 million in the twenty-six weeks ended July 30, 2011, compared with $4.4 million in the twenty-six weeks ended July 31, 2010. The cash used in investing activities was primarily due to capital expenditures associated with the construction of our new retail stores.
Financing Activities
Cash provided by financing activities was $-0- in the twenty-six weeks ended July 30, 2011, compared with $1,000 in the twenty-six weeks ended July 31, 2010, related to the exercise of employee stock options.
Contractual Obligations
The following table presents our significant contractual obligations as of July 30, 2011 (in thousands):
Payments Due By Period | ||||||||||||||||||||
Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | ||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Operating Lease Obligations (1) | $ | 162,861 | $ | 33,671 | 48,176 | $ | 44,911 | $ | 36,103 | |||||||||||
Purchase Obligations (2) | 28,322 | 28,322 | ||||||||||||||||||
Future Severance-Related Payments (3) | 2,150 | 2,150 | ||||||||||||||||||
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Total | $ | 193,333 | $ | 64,143 | $ | 48,176 | $ | 44,911 | $ | 36,103 | ||||||||||
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(1) | Our operating lease obligations are primarily related to dELiA*s retail stores and our corporate headquarters. |
(2) | Our purchase obligations are primarily related to inventory commitments and service agreements. |
(3) | Our future severance-related payments consist of severance agreements with existing employees. |
We have long-term, non-cancelable operating lease commitments for retail stores, office space, contact center facilities and equipment.
Critical Accounting Policies
Management has determined that our most critical accounting policies are those related to revenue recognition, catalog costs, inventory valuation, goodwill and other indefinite-lived intangible assets and long-lived asset impairment, and income taxes. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to these policies as discussed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.
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Recent Accounting Pronouncements
In January 2010, the FASB issued ASU 2010-06,Fair Value Measurements and Disclosures. ASU 2010-06 amends ASC 820-10,Fair Value Measurements and Disclosures, and requires new disclosures surrounding certain fair value measurements. ASU 2010-06 is effective for the first interim or annual reporting period beginning on or after December 15, 2009, except for certain disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for the first interim and annual reporting periods beginning on or after December 15, 2010. During fiscal 2010, the Company adopted the disclosure requirements effective for the first interim or annual reporting period beginning on or after December 15, 2009. The Company adopted the remaining disclosure requirements in the first quarter of fiscal 2011. The adoption of the remaining disclosure requirements of ASU 2010-06 did not have a material impact on our condensed consolidated financial statements.
Off-Balance Sheet Arrangements
We entered into letters of credit issued under the Letter of Credit Agreement and now enter into letters of credit issued under the Credit Agreement in each instance to finance the acquisition of inventory from suppliers, to provide standby letters of credit to factors, landlords and other parties for business purposes, and for other general corporate purposes.
dELiA*s Brand, LLC, one of our subsidiaries, entered into a license agreement in 2003 with JLP Daisy that grants JLP Daisy exclusive rights (except for our rights) to use the dELiA*s trademarks to advertise, promote and market the licensed products, and to sublicense to permitted sublicensees the right to use the trademarks in connection with the manufacture, sale and distribution of the licensed products to approved wholesale customers.
We do not maintain any other off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Guarantees
We have no significant financial guarantees.
Inflation
In general, our costs, some of which include postage, paper, cotton, freight and energy costs, are affected by inflation and we may experience the effects of inflation in future periods. We believe, however, that such effects have not been material to us during the past.
Forward-Looking Statements
In order to keep stockholders and investors informed of our future plans, this Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains and, from time to time, other reports and oral or written statements issued by us may contain, statements expressing our expectations and beliefs regarding our future results, goals, performance and objectives that are or may be deemed to be “forward-looking statements” within the meaning of applicable securities laws. Our ability to do this has been fostered by the Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. When used in this document, the words “anticipate”, “may”, “could”, “plan”, “project”, “should”, “would”, “predict”, “believe”, “estimate”, “expect” and “intend” and similar expressions are intended to identify such forward-looking statements.
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Our forward-looking statements are based upon management’s current expectations and beliefs. They are subject to a number of known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from those described or implied in the forward-looking statements as a result of various factors, including, but not limited to, the impact of general economic and business conditions, including the difficult economic environment and turmoil in financial and credit markets; our inability to realize the full value of merchandise currently in inventory as a result of underperforming sales; unanticipated increases in mailing and printing costs; the cost of additional overhead that may be required to expand our brands; changing customer tastes and buying trends; the inherent difficulty in forecasting consumer buying patterns and trends, and the possibility that any improvements in our product margins, or in customer response to our merchandise, may not be sustained; uncertainties related to our multi-channel model, and, in particular, the effects of shifting patterns of e-commerce or retail purchases versus catalog purchases; any significant variations between actual amounts and the amounts estimated for those matters identified as our critical accounting estimates or our other accounting estimates made in the preparation of our financial statements; as well as the various other risk factors set forth in our periodic and other reports filed with the Securities and Exchange Commission. Accordingly, while we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and we cannot assure you that our future results, levels of activity, performance or achievements will meet these expectations. You are urged to consider all such factors. Except as required by law, we assume no obligation for updating any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors.
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
We have significant amounts of cash and cash equivalents (money market funds) at financial institutions that are in excess of federally insured limits. With the current financial environment and the instability of financial institutions, we cannot be assured that we will not experience losses on our deposits. As of July 30, 2011, we did not hold any marketable securities and do not own any derivative financial instruments in our portfolio, thus we do not believe there is any market risk exposure with respect to these items.
Item 4. | Controls and Procedures |
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal period covered by this Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, July 30, 2011, that our disclosure controls and procedures were effective to ensure both that (i) 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 the Exchange Act, and (ii) information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
There were no changes in our internal control over financial reporting that occurred during our fiscal quarter ended July 30, 2011 identified in connection with the evaluation thereof by our Chief Executive Officer and Chief Financial Officer that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
We are involved from time to time in litigation incidental to our business and, from time to time, we may make provisions for potential litigation losses. We follow ACS 450Contingencies when assessing pending or potential litigation.
The information set forth in Part I, Note 17 to the Notes to Condensed Consolidated Financial Statements contained on page 13 under the caption “Litigation” is incorporated herein by reference.
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Item 1A. | Risk Factors. |
There have been no material changes from the risk factors disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2011.
Risk factors and the other information are set forth in our most recent Annual Report on Form 10-K and our other periodic reports filed with the Securities Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on our business, financial condition, and results of operations. Other than response to rules and regulations promulgated by the Securities and Exchange Commission, we assume no obligation (and specifically disclaim any such obligation) to update our risk factors or any other forward-looking statements to reflect actual results, changes in assumptions or other factors affecting such forward-looking statements.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable.
Item 3. | Defaults upon Senior Securities |
Not applicable.
Item 4. | Removed and Reserved |
Not applicable.
Item 5. | Other Information |
Not applicable.
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Item 6. | Exhibits |
(A) | Exhibits | |
10.1 | Employment Agreement dated as of June 16, 2011 between dELiA*s, Inc. and Dyan Jozwick.* | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.* | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.* | |
32.1 | Certification under section 906 by the Chief Executive Officer.* | |
32.2 | Certification under section 906 by the Chief Financial Officer.* | |
101. INS | XBRL Instance Document** | |
101.SCH | XBRL Taxonomy Extension Schema Document** | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document** | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document** | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document** | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document** |
* | Filed herewith. |
** | Furnished with this report. |
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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.
dELiA*s, Inc. | ||||
Date: September 8, 2011 | By: | /S/ WALTER KILLOUGH | ||
Walter Killough | ||||
Chief Executive Officer | ||||
Date: September 8, 2011 | By: | /S/ DAVID J. DICK | ||
David J. Dick | ||||
Chief Financial Officer |
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