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 May 2, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ___________ to _____
Commission file number 0-23071
THE CHILDREN'S PLACE RETAIL STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1241495
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
ONE DODGE DRIVE
WEST CALDWELL, NEW JERSEY 07006
(Address of Principal Executive Offices) (Zip Code)
(973) 227-8900
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $0.10 per share, outstanding at June 1, 1998:
24, 768,083 shares
THE CHILDREN'S PLACE RETAIL STORES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MAY 2, 1998
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements: Page
Balance Sheets...................................... 1
Statements of Income................................ 2
Statement of Cash Flows............................. 3
Notes to Financial Statements....................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 6
Item 3. Quantitative and Qualitative Disclosures about
Market Risk......................................... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................... 9
Item 6. Exhibits and Reports on Form 8-K.................... 10
Signatures................................................... 11
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE CHILDREN'S PLACE RETAIL STORES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MAY 2, 1998 JANUARY 31, 1998
----------- ----------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents.............................................. $3,570 $887
Accounts receivable.................................................... 2,940 1,904
Inventories............................................................ 17,977 20,334
Prepaid expenses and other current assets.............................. 5,262 4,612
Deferred income taxes.................................................. 10,653 10,653
--------------- --------------
Total current assets............................................... 40,402 38,390
Property and equipment, net................................................ 35,407 32,121
Deferred income taxes...................................................... 6,533 8,244
Other assets............................................................... 680 598
--------------- --------------
Total assets....................................................... $83,022 $79,353
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Revolving credit facility.............................................. $0 $1,089
Current maturities of obligations under capital leases................. 18 24
Accounts payable....................................................... 9,186 9,471
Accrued expenses, interest and other current liabilities............... 9,522 7,568
--------------- ---------------
Total current liabilities.......................................... 18,726 18,152
Other long-term liabilities................................................ 2,835 2,734
--------------- ---------------
Total liabilities.................................................. 21,561 20,886
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value; 100,000,000 shares authorized;
24,712,195 shares and 24,622,103 shares issued and outstanding,
at May 2, 1998 and January 31, 1998, respectively.......................... 2,471 2,462
Additional paid-in capital................................................. 82,832 82,589
Accumulated deficit........................................................ (23,842) (26,584)
--------------- ----------------
Total stockholders' equity......................................... 61,461 58,467
--------------- ----------------
Total liabilities and stockholders' equity $83,022 $79,353
=============== ================
The accompanying notes to financial statements are an integral part
of these balance sheets.
THE CHILDREN'S PLACE RETAIL STORES, INC.
STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THIRTEEN WEEKS ENDED
--------------------
MAY 2, 1998 MAY 3, 1997
----------- -----------
Net sales........................................................... $55,999 $39,203
Cost of sales....................................................... 33,866 25,185
----------- --------
Gross profit........................................................ 22,133 14,018
Selling, general and administrative expenses........................ 14,678 9,695
Pre-opening costs................................................... 1,110 472
Depreciation and amortization....................................... 1,663 1,233
-------------- ---------
Operating income.................................................... 4,682 2,618
Interest expense, net............................................... 59 828
Other expense, net.................................................. 0 101
------------- ----------
Income before income taxes.......................................... 4,623 1,689
Provision for income taxes.......................................... 1,881 678
------------- ----------
Net income.......................................................... $2,742 $1,011
============= ==========
Basic net income per common share................................. $0.11 $0.05
Basic weighted average common shares outstanding.................. 24,660 20,421
Diluted net income per common share............................... $0.11 $0.04
Diluted weighted average common shares outstanding................ 25,605 23,804
The accompanying notes to financial statements are an integral part
of these statements.
THE CHILDREN'S PLACE RETAIL STORES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THIRTEEN WEEKS ENDED
--------------------
MAY 2, 1998 MAY 3, 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................... $2,742 $1,011
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................... 1,663 1,233
Deferred financing fee amortization..................... 6 152
Loss on disposals of property and equipment............. 216 10
Deferred taxes.......................................... 1,711 578
Changes in operating assets and liabilities:
Accounts receivable..................................... (1,036) (655)
Inventories............................................. 2,357 (404)
Prepaid expenses and other current assets............... (650) (441)
Other assets............................................ (135) (124)
Accounts payable........................................ (285) (155)
Accrued expenses, interest and other current liabilities 1,985 157
---------------- -----------
Total adjustments..................................... 5,832 351
---------------- -----------
Net cash provided by operating activities..................... 8,574 1,362
---------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchases.............................. (5,048) (4,343)
---------------- -------------
Net cash used in investing activities (5,048) (4,343)
---------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and employee stock purchases........ 252 0
Borrowings under revolving credit facility.................... 11,634 40,946
Repayments under revolving credit facility.................... (12,723) (40,287)
Repayment of long-term debt................................... 0 (150)
Payment of obligations under capital leases................... (6) (185)
----------------- -------------
Net cash (used in) provided by financing activities........... (843) 324
----------------- -------------
Net increase (decrease) in cash and cash equivalents....... 2,683 (2,657)
Cash and cash equivalents, beginning of period............. 887 3,422
----------------- --------------
Cash and cash equivalents, end of period.................. $3,570 $765
================= ==============
OTHER CASH FLOW INFORMATION:
Cash paid during the period for interest...................... $70 $669
Cash paid during the period for income taxes.................. 172 450
The accompanying notes to financial statements are an integral part
of these statements.
THE CHILDREN'S PLACE RETAIL STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Certain information and footnote disclosures required by generally
accepted accounting principles for complete financial statements have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the accompanying unaudited
financial statements contain all material adjustments, consisting of normal
recurring accruals, necessary to present fairly the Company's financial
position, results of operations and cash flow for the periods indicated, and
have been prepared in a manner consistent with the audited financial statements
as of January 31, 1998. These financial statements should be read in conjunction
with the audited financial statements and footnotes for the fiscal year ended
January 31, 1998 included in the Company's Form 10-K filed with the Securities
and Exchange Commission. Due to the seasonal nature of the Company's business,
the results of operations for the thirteen weeks ended May 2, 1998 are not
necessarily indicative of operating results for a full fiscal year.
2. INITIAL PUBLIC OFFERING
On September 18, 1997, the Company sold 4,000,000 shares of Common
Stock at $14.00 per share in an initial public offering (the "Offering")
pursuant to a registration statement filed on Form S-1 (No. 333-31535) with the
Securities and Exchange Commission and in its prospectus dated September 18,
1997 (the "Prospectus"). The Company used the net proceeds of $50.7 million,
after deducting the underwriters' discount of $3.9 million and estimated
transaction expenses of $1.4 million from the Offering, to (i) pay the
principal amount of, and accrued interest on, the Senior Subordinated Notes (the
"Senior Subordinated Notes") held by Nomura Holding America Inc., (the
"Noteholder") of $20.6 million, (ii) repurchase a warrant held by Nomura Holding
America Inc. (the "Noteholder Warrant") for $20.6 million, (iii) repurchase
two-thirds of a warrant held by Legg Mason Wood Walker Inc. (the "Legg Mason
Warrant") for $5.2 million, and (iv) reduce borrowings outstanding under the
Company's revolving credit facility (the "Foothill Credit Facility") with the
remainder of the net proceeds. The Senior Subordinated Notes, the Noteholder
Warrant and the Legg Mason Warrant were issued in conjunction with a 1996
recapitalization of the Company.
Concurrent with the Offering, the Company effected a 120-for-one stock
split of the Series A Common Stock (the "Stock Split"), converted all
outstanding shares of the Series B Common Stock into 7,659,889 shares of Series
A Common Stock (the "Series B Conversion") and redesignated the Series A Common
Stock as Common Stock (the "Reclassification"). The Company also issued 201,414
shares of Common Stock upon the exercise of one-third of the Legg Mason Warrant.
3. NET INCOME PER COMMON SHARE
In accordance with Statement of Financial Accounting Standards No.
128, "Earnings Per Share," the following table reconciles income and share
amounts utilized to calculate basic and diluted net income per common share.
THIRTEEN WEEKS ENDED
--------------------
MAY 2, 1998 MAY 3, 1997
----------- ----------
Net income.............................................. $2,742 $1,011
====== ======
Weighted average common shares outstanding - Basic...... 24,660,493 20,420,689
Incremental shares from assumed conversions of options.. 944,322 3,383,496
----------- -----------
Weighted average common shares outstanding - Diluted..... 25,604,815 23,804,185
============ ==========
4. LITIGATION
CLASS ACTION SUITS
On October 16, 1997, Stephen Brosious and Rudy Pallastrone, who
allegedly purchased shares of the Company's common stock in or after an initial
public offering on or about September 19, 1997 (the "IPO"), filed a lawsuit
against the Company, several of the Company's directors and officers, and the
underwriters of the IPO (the "Defendants") in the United States District Court
for the District of New Jersey (the "Court"). The named plaintiffs purport to
maintain a class action on behalf of all persons, other than the Defendants, who
purchased the Company's common stock issued in connection with the IPO on or
about September 19, 1997 through October 13, 1997. The complaint alleges that
the Defendants violated federal securities laws by making materially false or
misleading statements and/or omissions in connection with the IPO. The
plaintiffs seek monetary damages of an unspecified amount, rescission or
rescissory damages and fees and costs. Since October 16, 1997, fifteen
additional putative class actions making substantially similar allegations and
seeking substantially similar relief have been filed against some or all of the
Defendants. On January 13, 1998, the sixteen putative class actions were
consolidated in the Court and on February 26, 1998 the plaintiffs served and
filed their amended consolidated complaint. No discovery has been taken. The
Company has filed a motion to dismiss this complaint which is currently pending
before the Court. The Company believes that the allegations made in this
complaint are untrue and totally without merit and intends to defend this action
vigorously.
On October 27, 1997, Bulldog Capital Management, L.P., a limited
partnership that serves as a general partner for a series of investment funds
which allegedly purchased shares of the Company's common stock issued in
connection with the IPO, also filed a lawsuit against the Company and several of
the Company's directors and officers in the Superior Court of New Jersey, Essex
County Division. The complaint alleges that by making materially false or
misleading statements and/or omissions in connection with the IPO, the Company
and several of the Company's directors and officers violated provisions of
federal and state law. The plaintiff seeks monetary damages of an unspecified
amount, rescission or rescissory damages and fees and costs. On November 20,
1997, the plaintiff filed its first request for production of documents from the
defendants. No discovery has been taken. This action is presently stayed,
pending resolution of the defendant's motion to dismiss in the federal lawsuit
described above. The Company believes that the allegations made in this
complaint are untrue and totally without merit and intends to defend this action
vigorously.
OTHER LITIGATION
The Company is also involved in various legal proceedings arising in
the normal course of its business. In the opinion of management, any ultimate
liability arising out of such proceedings will not have a material adverse
effect on the Company's financial position or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF FEDERAL SECURITIES LAWS, WHICH ARE INTENDED TO BE COVERED
BY THE SAFE HARBORS CREATED THEREBY. THOSE STATEMENTS INCLUDE, BUT MAY NOT BE
LIMITED TO, THE DISCUSSIONS OF THE COMPANY'S OPERATING AND GROWTH STRATEGY.
INVESTORS ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH UNDER THE CAPTION
"RISK FACTORS" IN THE BUSINESS SECTION OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED JANUARY 31, 1998. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE
REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE TO BE INACCURATE, AND THEREFORE,
THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
QUARTERLY REPORT ON FORM 10-Q WILL PROVE TO BE ACCURATE. IN LIGHT OF THE
SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED
HEREIN, THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A
REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS
OF THE COMPANY WILL BE ACHIEVED. THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLICLY RELEASE ANY REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED
HEREIN TO REFLECT EVENTS AND CIRCUMSTANCES OCCURRING AFTER THE DATE HEREOF OR TO
REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN
THIS QUARTERLY REPORT ON FORM 10-Q AND THE ANNUAL AUDITED FINANCIAL STATEMENTS
AND NOTES THERETO INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED JANUARY 31,1998 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
income statement data expressed as a percentage of net sales:
THIRTEEN WEEKS ENDED
--------------------
MAY 2, 1998 MAY 3, 1997
----------- -----------
Net sales................................................. 100.0% 100.0%
Cost of sales............................................. 60.5 64.2
------ ------
Gross profit.............................................. 39.5 35.8
Selling, general and administrative expenses.............. 26.2 24.7
Pre-opening costs......................................... 2.0 1.2
Depreciation and amortization............................. 3.0 3.2
--- ---
Operating income.......................................... 8.3 6.7
Interest expense, net..................................... 0.1 2.1
Other expense, net........................................ -- 0.3
----- ------
Income before income taxes................................ 8.2 4.3
Provision for income taxes................................ 3.3 1.7
----- ------
Net income................................................ 4.9% 2.6%
======= ========
Number of stores, end of period........................... 178 119
THIRTEEN WEEKS ENDED MAY 2, 1998 COMPARED TO THIRTEEN WEEKS ENDED MAY 3, 1997
Net sales increased by $16.8 million, or 43%, to $56.0 million during
the thirteen weeks ended May 2, 1998 (the "First Quarter 1998") from $39.2
million during the thirteen weeks ended May 3, 1997 (the "First Quarter 1997").
Net sales for the 23 new stores opened during the First Quarter 1998, as well as
the stores opened and remodeled during fiscal 1997 and fiscal 1998 that did not
qualify as comparable stores, contributed $14.5 million of the sales increase.
During the First Quarter 1998, the Company opened stores in several new markets,
including its first stores in Atlanta, St. Louis and Kansas City. As of May 2,
1998, the Company operated 178 stores in 24 states, primarily located in
regional shopping malls in the eastern half of the United States. During the
remainder of fiscal 1998, the Company plans to open approximately 27 new stores
in its existing markets and in adjacent states.
The Company's comparable store sales increased 7% and contributed $2.3
million of the net sales increase during the First Quarter 1998. Comparable
store sales increased 5% during the First Quarter 1997. The Company's First
Quarter 1998 comparable store sales increase was attributable to strong customer
acceptance of the merchandise, led by the growth of the newborn department.
Gross profit increased by $8.1 million to $22.1 million during the
First Quarter 1998 from $14.0 million during the First Quarter 1997. As a
percentage of net sales, gross profit increased to 39.5% during the First
Quarter 1998 from 35.8% during the First Quarter 1997. The increase in gross
profit as a percentage of net sales was principally due to higher initial
markups achieved through more effective product sourcing and lower markdowns due
to the strong customer acceptance of the Company's merchandise. As a percentage
of net sales, gross profit was also favorably impacted by the leveraging of
buying and distribution expenses partially offset by increased store occupancy
costs from new stores with higher rents that have not been open long enough to
leverage their rent through an established sales base.
Selling, general and administrative expenses increased $5.0 million to
$14.7 million during the First Quarter 1998 from $9.7 million during the First
Quarter 1997. As a percentage of net sales, selling, general and administrative
expenses increased to 26.2% during the First Quarter 1998 from 24.7% during the
First Quarter 1997. The increase as a percentage of net sales was primarily due
to an increase in the executive and store operations management personnel of the
Company and increased marketing and legal fees, partially offset by the
leveraging of other corporate administrative functions. In addition, store
expenses as a percentage of net sales were also unfavorably impacted by new
stores which have not been open long enough to leverage their expenses through
an established sales base.
During the First Quarter 1998, pre-opening costs were $1.1 million, or
2.0% of net sales, as compared to $0.5 million, or 1.2% of net sales, during the
First Quarter 1997. The increase in pre-opening costs in the First Quarter 1998
reflected the opening of 23 stores and costs incurred for future store openings
as compared to the opening of 11 stores during the First Quarter 1997.
Depreciation and amortization amounted to $1.7 million, or 3.0% of net
sales, during the First Quarter 1998 as compared to $1.2 million, or 3.2% of net
sales, during the First Quarter 1997. The increase in depreciation and
amortization primarily was a result of the increase in the store base.
Interest expense, net, for the First Quarter 1998 was $0.1 million, or
0.1% of net sales, as compared to $0.8 million, or 2.1% of net sales, during the
First Quarter 1997. The decrease in interest expense was primarily due to the
elimination of interest expense on the Senior Subordinated Notes which were
repaid with a portion of the proceeds from the Company's initial public offering
in September 1997.
The Company had no other expense, net, during the First Quarter 1998.
Other expense, net, for the First Quarter 1997 amounted to $0.1 million, or 0.3%
of net sales, and represented anniversary fees under the Foothill Credit
Facility.
The Company recorded income before income taxes of $4.6 million during
the First Quarter 1998 as compared with $1.7 million in the comparable prior
year period. As a percentage of net sales, the Company's income before income
taxes increased to 8.2% during the First Quarter 1998 from 4.3% during the First
Quarter 1997 due to the factors discussed above.
The Company's provision for income taxes for the First Quarter 1998
was $1.9 million, or 3.3% of net sales, as compared with a provision for income
taxes for the First Quarter 1997 of $0.7 million or 1.7% of net sales. Due to
the Company's utilization of its net operating loss ("NOL") carry forwards, the
majority of the Company's tax provision will not be paid in cash, but will
reduce the deferred tax asset on the balance sheet. However, the Company expects
to make cash tax payments for the federal alternative minimum tax, state minimum
taxes and state taxes where the Company is not in an NOL status.
The Company had net income of $2.7 million, or 4.9% of net sales, and
$1.0 million, or 2.6% of net sales, in the First Quarter 1998 and the First
Quarter 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
DEBT SERVICE/LIQUIDITY
The Company's primary uses of cash are to finance new store openings
and provide for working capital, which primarily represents the purchase of
inventory. Since the Offering, the Company has had no long-term debt obligations
other than obligations under capital leases. During the First Quarter 1998, the
Company has been able to meet its cash needs primarily through cash flows from
operations.
As of May 2, 1998, the Company had no borrowings under the Foothill
Credit Facility and had outstanding letters of credit of $6.5 million.
Availability under the Foothill Credit Facility as of May 2, 1998 was $17.2
million. During the First Quarter 1998, the interest rates charged under the
Foothill Credit Facility for reference rate borrowings were 8.5% per annum and
LIBOR borrowings bore interest at 7.188% per annum.
As of May 2, 1998, the Company was in compliance with all of its
covenants under the Foothill Credit Facility. Management believes that the
Company will be able to comply with the financial covenants contained in the
facility and does not believe that compliance with these covenants will
interfere with its business or the implementation of its growth strategy.
CASH FLOWS/CAPITAL EXPENDITURES
Cash flows provided by operating activities were $8.6 million and $1.4
million during the First Quarter 1998 and First Quarter 1997, respectively. In
the First Quarter 1998, cash flows from operating activities increased as a
result of an increase in operating earnings, the sell through of inventory, the
utilization of the Company's net operating loss carry forwards and increases in
current liabilities.
Cash flows used in investing activities were $5.0 million and $4.3
million in the First Quarter 1998 and the First Quarter 1997, respectively.
During the First Quarter 1998 and the First Quarter 1997, cash flows used in
investing activities related primarily to new store openings and remodelings. In
the First Quarter 1998 and the First Quarter 1997, the Company opened 23 and 11
stores and remodeled 2 and 3 stores, respectively. Management anticipates
that total capital expenditures during fiscal 1998 will approximate $22 million.
These expenditures, which primarily relate to the opening of approximately 50
stores and store remodelings, also include ongoing store maintenance programs,
computer and warehouse equipment and capital expenditures related to the
relocation of the distribution center and corporate headquarters facility.
Management plans to fund these capital expenditures primarily from cash flow
from operations.
Cash flows (used in) provided by financing activities were $(0.8) and
$0.3 million in the First Quarter 1998 and the First Quarter 1997, respectively.
During the First Quarter 1998, cash flows used in financing activities reflected
the repayment of borrowings outstanding under the Foothill Credit Facility,
partially offset by funds received from the exercise of employee stock options
and employee stock purchases. During the First Quarter 1997, cash flows provided
by financing activities reflected net borrowings under the Foothill Credit
Facility partially offset by the payment of debt obligations.
The Company's lease for its current distribution center and corporate
headquarters facility is scheduled to expire in March 1999. The Company has
located a site in northern New Jersey for its distribution center and corporate
headquarters facility and is currently in lease negotiations. The Company
anticipates entering into a lease during the second quarter of fiscal 1998 and
expects to move its distribution and corporate headquarters facility during the
first quarter of fiscal 1999.
The Company believes that its current financing arrangements under the
Foothill Credit Facility and its anticipated level of internally generated funds
will be adequate to fund its capital requirements for at least the next 18 to 24
months. The Company's ability to meet these capital requirements, will depend on
its ability to generate cash from operations and successfully implement its
store expansion plans.
YEAR 2000 COMPLIANCE
Although the Company has upgraded certain computer software for Year
2000 compliance, the Company continues to assess the impact of the Year 2000 on
its systems and operations and the costs and programming efforts required to
fully address this issue. Any disruptions of its operations, whether caused by
the Company's computer systems or those of its manufacturers, suppliers and
financial institutions, could have a material adverse effect on the Company's
financial position or results of operation.
The Company continues to utilize its existing management information
systems staff to modify existing computer systems and applications to ensure its
systems are Year 2000 compliant. Management expects its computer systems to be
Year 2000 compliant by the second quarter of 1999. However, there can be no
assurances that the Company will not experience significant cost overruns in
connection with upgrading software or the program changes required to address
this issue.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
(Not applicable)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Part I, Item 3 in the Company's Annual Report on
Form 10-K for certain class action suit information.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION OF DOCUMENT
10.1 Service Agreement, between the Company and AST StockPlan,
Inc. dated June 8, 1998.
11.1 Statement re: computation of per share earnings.
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE CHILDREN'S PLACE
RETAIL STORES, INC.
Date: June 12, 1998
By: /s/ Ezra Dabah
-----------------
Ezra Dabah
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: June 12, 1998 By: /s/ Seth L. Udasin
--------------------
Seth L. Udasin
Vice President &
Chief Financial Officer
(Principal Financial Officer)
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Service Agreement, between the Company
and AST StockPlan, Inc. dated June 8, 1998.
11.1 Statement re: computation of per share earnings.
27 Financial Data Schedule.