<Page>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended November 3, 2001
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____________ to
_____________
Commission file number 0-23071
THE CHILDREN'S PLACE RETAIL STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1241495
(State or other jurisdiction of (I. R. S. employer identification
incorporation or organization) number)
915 SECAUCUS ROAD
SECAUCUS, NEW JERSEY 07094
(Address of Principal Executive Offices) (Zip Code)
(201) 558-2400
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $0.10 per share, outstanding at December 10,
2001: 26,358,796 shares.
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THE CHILDREN'S PLACE RETAIL STORES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED NOVEMBER 3, 2001
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<Table>
<Caption>
PAGE
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets....................................................... 1
Consolidated Statements of Income................................................. 2
Consolidated Statements of Cash Flows............................................. 3
Notes to Consolidated Financial Statements........................................ 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ 5
Item 3. Quantitative and Qualitative Disclosures about Market Risks....................... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................. 9
Item 6. Exhibits and Reports on Form 8-K ................................................. 9
Signatures................................................................................. 10
</Table>
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PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
NOVEMBER 3, 2001 FEBRUARY 3, 2001
---------------- ----------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 8,653 $ 8,141
Accounts receivable....................................................... 19,089 9,118
Inventories............................................................... 79,304 68,105
Prepaid expenses and other current assets................................. 12,706 11,054
Deferred income taxes..................................................... 2,555 2,555
---------- ---------
Total current assets................................................... 122,307 98,973
Property and equipment, net................................................... 136,456 121,975
Deferred income taxes......................................................... 4,166 4,166
Other assets.................................................................. 11,471 6,582
---------- ---------
Total assets........................................................... $ 274,400 $ 231,696
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Revolving credit facility................................................. $ 7,365 $ 3,324
Accounts payable.......................................................... 26,457 28,366
Taxes payable............................................................. 5,565 2,656
Accrued expenses, interest and other current liabilities.................. 30,317 23,683
---------- ---------
Total current liabilities.............................................. 69,704 58,029
Other long-term liabilities................................................... 8,557 7,000
---------- ---------
Total liabilities...................................................... 78,261 65,029
---------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value; 100,000,000 shares authorized; 26,297,941
shares and 26,095,296 shares issued and outstanding, at November 3, 2001 and
February 3, 2001, respectively............................................ 2,630 2,610
Additional paid-in capital.................................................... 94,060 92,252
Translation adjustments....................................................... (13) (12)
Retained earnings............................................................. 99,462 71,817
---------- ----------
Total stockholders' equity............................................. 196,139 166,667
---------- ---------
Total liabilities and stockholders' equity............................. $ 274,400 $ 231,696
========== =========
</Table>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
1
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THE CHILDREN'S PLACE RETAIL STORES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------- -----------------------
NOVEMBER 3, 2001 OCTOBER 28, 2000 NOVEMBER 3, 2001 OCTOBER 28, 2000
---------------- ---------------- ---------------- ----------------
Net sales.............................................. $181,433 $165,887 $458,212 $403,830
Cost of sales.......................................... 97,363 93,367 265,167 234,110
-------- -------- -------- --------
Gross profit........................................... 84,070 72,520 193,045 169,720
Selling, general and administrative expenses........... 44,497 38,175 122,414 103,115
Pre-opening costs...................................... 1,301 766 5,243 5,035
Depreciation and amortization.......................... 7,374 5,525 19,716 15,050
-------- -------- -------- --------
Operating income....................................... 30,898 28,054 45,672 46,520
Interest expense, net.................................. 162 483 197 941
Other expense, net..................................... 33 8 140 135
-------- -------- -------- --------
Income before income taxes............................. 30,703 27,563 45,335 45,444
Provision for income taxes............................. 11,984 10,718 17,690 17,709
-------- -------- -------- --------
Net income ............................................ $ 18,719 $ 16,845 $ 27,645 $ 27,735
======== ======== ======== ========
Basic net income per common share...................... $ 0.71 $ 0.65 $ 1.05 $ 1.07
Basic weighted average common shares outstanding....... 26,281 25,885 26,229 25,805
Diluted net income per common share ................... $ 0.70 $ 0.63 $ 1.03 $ 1.04
Diluted weighted average common shares outstanding..... 26,876 26,921 26,907 26,646
</Table>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
2
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THE CHILDREN'S PLACE RETAIL STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<Table>
<Caption>
THIRTY-NINE WEEKS ENDED
-----------------------
NOVEMBER 3, 2001 OCTOBER 28, 2000
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................... $ 27,645 $ 27,735
Adjustments to reconcile net income to net cash (used by) provided by
operating activities:
Depreciation and amortization......................................... 19,716 15,050
Deferred financing fee amortization................................... 47 40
Loss on disposals of property and equipment........................... 598 315
Deferred taxes........................................................ 152 302
Deferred rent......................................................... 1,635 1,215
Changes in operating assets and liabilities:
Accounts receivable................................................... (9,971) (8,535)
Inventories........................................................... (11,199) (21,763)
Prepaid expenses and other current assets............................. (1,652) (3,013)
Other assets.......................................................... (6,007) (1,785)
Accounts payable...................................................... (1,909) 6,776
Accrued expenses, interest and other current liabilities.............. 9,333 9,683
---------- ----------
Total adjustments.................................................. 743 (1,715)
---------- ----------
Net cash provided by operating activities.................................... 28,388 26,020
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchases............................................. (33,594) (39,411)
---------- ----------
Net cash used in investing activities........................................ (33,594) (39,411)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and employee stock purchases....................... 1,678 1,482
Borrowings under revolving credit facility................................... 489,823 437,642
Repayments under revolving credit facility................................... (485,782) (420,298)
Deferred financing costs..................................................... 0 (122)
---------- ----------
Net cash provided by financing activities.................................... 5,719 18,704
---------- ----------
Effect of exchange rate on cash.............................................. (1) (8)
Net increase in cash and cash equivalents............................. 512 5,305
Cash and cash equivalents, beginning of period........................ 8,141 2,204
---------- ----------
Cash and cash equivalents, end of period..................................... $ 8,653 $ 7,509
========== ==========
OTHER CASH FLOW INFORMATION:
Cash paid during the period for interest..................................... $ 751 $ 1,395
Cash paid during the period for income taxes................................. 15,537 13,168
</Table>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
3
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THE CHILDREN'S PLACE RETAIL STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States ("GAAP") for interim financial information. Certain information
and footnote disclosures required by GAAP 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 February 3, 2001. These financial statements
should be read in conjunction with the audited financial statements and
footnotes for the fiscal year ended February 3, 2001 included in the Company's
Annual Report on Form 10-K for the year ended February 3, 2001 filed with the
Securities and Exchange Commission. Due to the seasonal nature of the Company's
business, the results of operations for the thirty-nine weeks ended November 3,
2001 and October 28, 2000 are not necessarily indicative of operating results
for a full fiscal year.
2. NET INCOME PER COMMON SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," the following table reconciles net income and share
amounts utilized to calculate basic and diluted net income per common share.
<Table>
<Caption>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------- -----------------------
NOVEMBER 3, 2001 OCTOBER 28, 2000 NOVEMBER 3, 2001 OCTOBER 28, 2000
---------------- ---------------- ---------------- ----------------
Net income (in thousands)........ $18,719 $16,845 $27,645 $27,735
======= ======= ======= =======
Basic shares..................... 26,280,753 25,884,879 26,228,828 25,805,123
Dilutive effect of stock options. 595,187 1,035,669 677,990 841,309
---------- ---------- ---------- ----------
Dilutive shares.................. 26,875,940 26,920,548 26,906,818 26,646,432
========== ========== ========== ==========
Antidilutive options............. 437,150 189,317 289,867 382,192
</Table>
Antidilutive options consist of the weighted average of stock options
for the respective periods ended November 3, 2001 and October 28, 2000 that had
an exercise price greater than the average market price during the period. Such
options are therefore excluded from the computation of diluted shares.
3. LITIGATION
The Company is involved in various legal proceedings arising in the
normal course of its business. In the opinion of management, any ultimate
liability arising out of such proceedings will not have a material adverse
effect on the Company's financial position or results of operations.
4
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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 FEBRUARY 3, 2001. 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 FEBRUARY 3, 2001 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
income statement data expressed as a percentage of net sales:
<Table>
<Caption>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------- -----------------------
NOVEMBER 3, 2001 OCTOBER 28, 2000 NOVEMBER 3, 2001 OCTOBER 28, 2000
---------------- ---------------- ---------------- ----------------
Net sales...................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................. 53.7 56.3 57.9 58.0
-------- -------- -------- --------
Gross profit................................... 46.3 43.7 42.1 42.0
Selling, general and administrative expenses... 24.5 23.0 26.7 25.5
Pre-opening costs.............................. 0.7 0.5 1.1 1.3
Depreciation and amortization.................. 4.1 3.3 4.3 3.7
--------- --------- --------- ---------
Operating income............................... 17.0 16.9 10.0 11.5
Interest expense, net.......................... 0.1 0.3 0.1 0.2
Other expense, net............................. -- -- -- --
--------- --------- --------- ---------
Income before income taxes..................... 16.9 16.6 9.9 11.3
Provision for income taxes..................... 6.6 6.4 3.9 4.4
--------- --------- --------- ---------
Net income..................................... 10.3% 10.2% 6.0% 6.9%
========= ========= ========= =========
Number of stores, end of period................ 513 392 513 392
</Table>
THIRTEEN WEEKS ENDED NOVEMBER 3, 2001 (THE "THIRD QUARTER 2001") COMPARED TO
THIRTEEN WEEKS ENDED OCTOBER 28, 2000 (THE "THIRD QUARTER 2000")
Net sales increased by $15.5 million, or 9%, to $181.4 million during
the Third Quarter 2001 from $165.9 million during the Third Quarter 2000. During
the Third Quarter 2001, we opened 33 new stores and closed one store. Net sales
for the 33 new stores, as well as the other stores that did not qualify as
comparable stores, contributed $27.8 million of our net sales increase. This net
sales increase was partially offset by a 9% comparable store sales decline in
the Third Quarter 2001, which decreased our net sales by $12.3 million.
Comparable store sales increased 5% during the Third Quarter 2000. To more
closely match the same period last year, comparable store sales calculations for
fiscal 2001 have shifted last year's sales by one week since fiscal 2000 was a
fifty-three week year.
During the Third Quarter 2001, our comparable store sales decline was
primarily attributable to a slowdown in store traffic caused by the difficult
economic climate which affected a large segment of the retail sector. In
addition, sales for our folding "Yaak"
5
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scooter, which was a trend item introduced in the latter portion of the second
quarter 2000, contributed $9.1 million to our sales in the Third Quarter 2000.
Excluding sales of the Yaak folding scooter, Third Quarter 2001 comparable store
sales decreased 4% from the Third Quarter 2000. As of November 3, 2001, we
operated 513 stores in 46 states, primarily located in regional shopping malls.
During November 2001, we opened an additional 7 stores to end the year with 520
stores.
During the four weeks ended December 1, 2001, we experienced a 16% same
store sales decline as compared to a 8% increase for the comparable four week
period in fiscal 2000. Sales continued to be impacted by a difficult economic
climate and unseasonable, spring-like weather that weakened demand for cold
weather merchandise categories. Excluding sales of our Yaak folding scooter,
comparable store sales during the four weeks ended December 1, 2001 decreased
14% from the comparable prior year period.
Gross profit increased by $11.6 million to $84.1 million during the
Third Quarter 2001 from $72.5 million during the Third Quarter 2000. As a
percentage of net sales, gross profit increased 2.6% to 46.3% during the Third
Quarter 2001 from 43.7% during the Third Quarter 2000. The increase in gross
profit, as a percentage of net sales, was principally due to higher initial
markups achieved through lower product costs from our manufacturers, partially
offset by higher occupancy costs. Occupancy costs were higher, as a percentage
of net sales, due to our comparable store sales decline and increased occupancy
costs from new stores that have not been open long enough to leverage their rent
through an established sales base.
Selling, general and administrative expenses increased $6.3 million to
$44.5 million during the Third Quarter 2001 from $38.2 million during the Third
Quarter 2000. Selling, general and administrative expenses were 24.5% of net
sales during the Third Quarter 2001, as compared with 23.0% during the Third
Quarter 2000. The increase, as a percentage of net sales, was primarily due to
higher store payroll and medical benefit costs, partially offset by lower
marketing costs. Store payroll, as a percentage of net sales, was unfavorably
impacted by our comparable store sales decline and by higher wage rates. Our
marketing costs were lower, as a percentage of net sales, primarily due to the
timing of our back to school marketing campaign, which was launched in the
second quarter 2001. During fiscal 2000, our back to school marketing campaign
was launched in the Third Quarter 2000.
During the Third Quarter 2001, pre-opening costs were $1.3 million, or
0.7% of net sales, as compared to $0.8 million, or 0.5% of net sales, during the
Third Quarter 2000. We opened 33 stores and 21 stores, during the Third Quarter
2001 and the Third Quarter 2000, respectively.
Depreciation and amortization amounted to $7.4 million, or 4.1% of net
sales, during the Third Quarter 2001, as compared to $5.5 million, or 3.3% of
net sales, during the Third Quarter 2000. The increase in depreciation and
amortization primarily was a result of increases to our store base.
During the Third Quarter 2001, we recorded net interest expense of $0.2
million, or 0.1% of net sales, as compared to interest expense of $0.5 million,
or 0.3% of net sales, during the Third Quarter 2000. Our lower interest expense
was due to lower borrowings under our working capital facility, lower interest
rates and interest income recorded on our investments.
Our provision for income taxes for the Third Quarter 2001 was $12.0
million, as compared to a $10.7 million provision for income taxes during the
Third Quarter 2000. Our effective tax rate was 39% during the Third Quarter 2001
and the Third Quarter 2000.
We recorded net income of $18.7 million and $16.8 million during the
Third Quarter 2001 and the Third Quarter 2000, respectively.
THIRTY-NINE WEEKS ENDED NOVEMBER 3, 2001 COMPARED TO THIRTY-NINE WEEKS ENDED
OCTOBER 28, 2000
Net sales increased $54.4 million, or 13%, to $458.2 million during the
thirty-nine weeks ended November 3, 2001 from $403.8 million during the
thirty-nine weeks ended October 28, 2000. Net sales for the 114 stores opened
during the thirty-nine weeks ended November 3, 2001, as well as the other stores
that did not qualify as comparable stores, contributed $79.0 million of the net
sales increase. This net sales increase was partially offset by a 8% comparable
store sales decline in the thirty-nine weeks ended November 3, 2001, which
decreased our net sales by $24.6 million. Comparable store sales increased 6%
during the thirty-nine weeks ended October 28, 2000. To more closely match the
same period last year, comparable store sales calculations for fiscal 2001 have
shifted last year's sales by one week since fiscal 2000 was a fifty-three week
year.
During the thirty-nine weeks ended November 3, 2001, our comparable
store sales decline was attributable primarily to a slowdown in store traffic
caused by the difficult economic climate. In addition, sales of our folding Yaak
scooter, contributed $10.9
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million to the sales of the thirty-nine weeks ended October 28, 2000. Excluding
the Yaak folding scooter, comparable store sales for the thirty-nine weeks ended
November 3, 2001 decreased 6% from the thirty-nine weeks ended October 28, 2000.
Gross profit increased $23.3 million to $193.0 million during the
thirty-nine weeks ended November 3, 2001 from $169.7 million during the
thirty-nine weeks ended October 28, 2000. As a percentage of net sales, gross
profit increased 0.1% to 42.1% during the thirty-nine weeks ended November 3,
2001 from 42.0% during the thirty-nine weeks ended October 28, 2000. During the
thirty-nine weeks ended November 3, 2001, gross profit, as a percentage of net
sales, increased due to higher initial markups achieved through effective
product sourcing. These increases were offset by higher occupancy costs and
higher markdowns. Occupancy costs were higher, as a percentage of net sales, due
to our comparable store sales declines and increased occupancy costs from new
stores that have not been open long enough to leverage their rent through an
established sales base. Our markdowns were higher, as a percentage of net sales,
due to the weak sales environment.
Selling, general and administrative expenses increased $19.3 million to
$122.4 million during the thirty-nine weeks ended November 3, 2001 from $103.1
million during the thirty-nine weeks ended October 28, 2000. Selling, general
and administrative expenses were 26.7% of net sales during the thirty-nine weeks
ended November 3, 2001, as compared with 25.5% of net sales during the
thirty-nine weeks ended October 28, 2000. The increase, as a percentage of net
sales, was primarily due to higher store payroll and medical benefits costs,
partially offset by the leveraging of corporate administrative expenses and
marketing costs.
During the thirty-nine weeks ended November 3, 2001, pre-opening costs
were $5.2 million, or 1.1% of net sales, as compared with $5.1 million, or 1.3%
of net sales, during the thirty-nine weeks ended October 28, 2000. We opened 114
stores and 100 stores during the thirty-nine weeks ended November 3, 2001 and
the thirty-nine weeks ended October 28, 2000, respectively. During the
thirty-nine weeks ended October 28, 2000, we incurred higher pre-opening
expenses due to higher travel, freight and marketing costs to introduce The
Children's Place brand in new markets and to open our first stores on the West
Coast.
Depreciation and amortization amounted to $19.7 million, or 4.3% of net
sales, during the thirty-nine weeks ended November 3, 2001, as compared to $15.1
million, or 3.7% of net sales, during the thirty-nine weeks ended October 28,
2000. The increase in depreciation and amortization primarily was a result of
increases to our store base.
During the thirty-nine weeks ended November 3, 2001, we recorded net
interest expense of $0.2 million, or 0.1% of net sales, due to lower borrowings
under our working capital facility, lower interest rates and interest income
recorded on our investments. During the thirty-nine weeks ended October 28,
2000, we recorded net interest expense of $0.9 million, or 0.2% of net sales,
due to borrowings under our working capital facility. Other expense, net, during
the thirty-nine weeks ended November 3, 2001 and the thirty-nine weeks ended
October 28, 2000 primarily consisted of anniversary fees related to our working
capital facility.
Our provision for income taxes during both the thirty-nine weeks ended
November 3, 2001 and the thirty-nine weeks ended October 28, 2000 was $17.7
million. Our effective tax rate was 39.0% during the thirty-nine weeks ended
November 3, 2001 and the thirty-nine weeks ended October 28, 2000.
We recorded net income of $27.6 million and $27.7 million during the
thirty-nine weeks ended November 3, 2001 and the thirty-nine weeks ended October
28, 2000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
DEBT SERVICE/LIQUIDITY
Our primary uses of cash are financing new store openings and providing
for working capital, which principally represents the purchase of inventory. Our
working capital needs follow a seasonal pattern, peaking during the second and
third quarters when inventory is purchased for the back to school and holiday
seasons. We have been able to meet our cash needs principally by using cash
flows from operations and seasonal borrowings under our working capital
facility. As of November 3, 2001, we had no long-term debt obligations.
Our working capital facility provides for borrowings up to $75 million
(including a sublimit for letters of credit of $60 million). As of November 3,
2001, we had $7.4 million in outstanding borrowings under our working capital
facility and had outstanding letters of credit of $14.4 million. Availability
under our working capital facility was $49.1 million. During the Third Quarter
2001, the interest rate charged under our working capital facility for reference
rate borrowings was 6.1% per annum and LIBOR borrowings bore interest at 4.6%
per annum. The maximum borrowings and outstanding letter of credit usage under
our working capital facility during the thirty-nine weeks ended November 3, 2001
was $45.2 million. As of November 3, 2001, we were in compliance with all of our
covenants under our working capital facility.
7
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CASH FLOWS/CAPITAL EXPENDITURES
During the thirty-nine weeks ended November 3, 2001, operating
activities provided $28.4 million in cash flow as compared to $26.0 million in
cash flow provided by operating activities during the thirty-nine weeks ended
October 28, 2000. During the thirty-nine weeks ended November 3, 2001, cash
flows provided by operating activities increased primarily as a result of a a
smaller inventory buildup for the holiday season resulting from conservative
inventory management and greater cash generated from operations, partially
offset by decreases in accounts payable and increases in our other assets.
Cash flows used in investing activities were $33.6 million and $39.4
million in the thirty-nine weeks ended November 3, 2001 and the thirty-nine
weeks ended October 28, 2000, respectively. During the thirty-nine weeks ended
November 3, 2001 and the thirty-nine weeks ended October 28, 2000, cash flows
used in investing activities primarily represented capital expenditures for new
store openings and remodelings. The decrease in cash flows used in investing
activities during the thirty-nine weeks ended November 3, 2001, was primarily
due to the timing and location of our new store openings and store remodelings,
as well as increased landlord contributions during the thirty-nine weeks ended
November 3, 2001.
In the thirty-nine weeks ended November 3, 2001 and the thirty-nine
weeks ended October 28, 2000, we opened 114 and 100 stores, respectively. In the
thirty-nine weeks ended November 3, 2001 and the thirty-nine weeks ended October
28, 2000, we remodeled 12 stores in each of the respective periods. During
fiscal 2001, we plan to open a total of approximately 120 stores and remodel 14
stores. We anticipate that total capital expenditures during fiscal 2001 will
approximate $40 to $50 million, all of which we plan to fund with cash flows
from operations.
Cash flows provided by financing activities were $5.7 million during
the thirty-nine weeks ended November 3, 2001 as compared to $18.7 million
provided by financing activities in the thirty-nine weeks ended October 28,
2000. During the thirty-nine weeks ended November 3, 2001 and the thirty-nine
weeks ended October 28, 2000, cash flows provided by financing activities
reflected net borrowings under our working capital facility and funds received
from the exercise of employee stock options and employee stock purchases.
We believe that cash generated from operations and funds available
under our working capital facility will be sufficient to fund our capital and
other cash flow requirements for at least the next 12 months. In addition, as we
continue our store expansion program we will consider additional sources of
financing to fund our long-term growth.
Our ability to meet our capital requirements will depend on our ability
to generate cash from operations and successfully implement our store expansion
plans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS (Not
applicable).
8
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising in the
normal course of its business. In the opinion of management, any ultimate
liability arising out of such proceedings will not have a material adverse
effect on the Company's financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
None.
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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.
THE CHILDREN'S PLACE
RETAIL STORES, INC.
Date: December 17, 2001
By: /s/ Ezra Dabah
---------------------------------
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: December 17, 2001 By: /s/ Seth L. Udasin
--------------------------------------
Vice President and
Chief Financial Officer
(Principal Financial Officer)
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