The accompanying notes are an integral part of these consolidated statements.
The accompanying notes are an integral part of these consolidated statements
The accompanying notes are an integral part of these consolidated statements.
The accompanying notes are an integral part of these consolidated statements.
The accompanying notes are an integral part of these consolidated statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and where otherwise indicated)
1.
|
BUSINESS ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
|
Description of Business
The accompanying consolidated financial statements include the accounts of Chicos FAS, Inc., a Florida corporation, and its
wholly-owned
subsidiaries (the Company, we, us, and our). We operate as an omni-channel specialty retailer of womens private branded, sophisticated,
casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items. We currently sell our products through retail stores, catalog, and via the Internet at
www.chicos.com
,
www.whbm.com
,
www.soma.com
,
and
www.bostonproper.com
. As of February 1, 2014, we had 1,472 stores located throughout the United States, the U.S. Virgin Islands, Puerto Rico and Canada.
Fiscal Year
Our fiscal years end on the
Saturday closest to January 31 and are designated by the calendar year in which the fiscal year commences. The periods presented in these consolidated financial statements are the fiscal years ended February 1, 2014 (fiscal
2013 or current period), February 2, 2013 (fiscal 2012 or prior period) and January 28, 2012 (fiscal 2011). Fiscal 2012 contained 53 weeks while fiscal 2013 and 2011 each contained 52
weeks.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Segment Information
Our brands, Chicos, Soma Intimates, WH|BM, and Boston Proper, have been identified as separate operating segments and aggregated into one
reportable segment due to the similarities of the economic and operating characteristics of the brands.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks, short-term highly liquid investments with original maturities of three months or
less and payments due from banks for third-party credit card and debit transactions for approximately 3 to 5 days of sales.
38
Marketable Securities
Marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized holding gains and losses, net of
income taxes, reflected in accumulated other comprehensive income until realized. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis. We consider all securities
available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities within current assets on the consolidated balance sheets as they are available to support current operational liquidity needs.
Fair Value of Financial Instruments
Our
consolidated financial instruments consist of cash and cash equivalents, marketable securities, and accounts receivable and payable. The carrying values of these assets and liabilities approximate their fair value due to the short-term nature of the
instruments.
Inventories
We use the
weighted average cost method to determine the cost of merchandise inventories. We identify potentially excess and slow-moving inventories by evaluating inventory aging, turn rates and inventory levels in conjunction with our overall sales trend.
Excess quantities of inventory are identified through evaluation of inventory aging, review of inventory turns and historical sales experience, as well as specific identification based on fashion trends. Further, inventory realization exposure is
identified through analysis of gross margins and markdowns in combination with changes in current business trends. We provide lower of cost or market adjustments for such identified excess and slow-moving inventories. We estimate our expected
shrinkage of inventories between physical inventory counts by using average store shrinkage experience rates, which are updated on a regular basis. Substantially all of our inventories consist of finished goods.
Costs associated with sourcing are generally capitalized while merchandising, distribution, and product development costs are generally
expensed as incurred, and are included in the accompanying consolidated statements of income as a component of cost of goods sold. Approximately 23% of total purchases in fiscal 2013 and 21% of total purchases in 2012 were made from one supplier.
Property and Equipment
Property and
equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation of property and equipment is provided on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the
shorter of their estimated useful lives (generally 10 years or less) or the related lease term, plus one anticipated renewal when there is an economic cost associated with non-renewal.
Our property and equipment is depreciated using the following estimated useful lives:
|
|
|
|
|
Estimated Useful Lives
|
Land improvements
|
|
15 - 35 years
|
Building and building improvements
|
|
20 - 35 years
|
Equipment, furniture and fixtures
|
|
2 - 20 years
|
Leasehold improvements
|
|
10 years or term
of lease, if shorter
|
Maintenance and repairs of property and equipment are expensed as incurred, and major improvements are
capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation or amortization are eliminated from the accounts, and any gain or loss is charged to income.
39
Operating Leases
We lease retail stores and a limited amount of office space, primarily in Boca Raton, Florida, under operating leases. The majority of our
lease agreements provide for tenant improvement allowances, rent escalation clauses and/or contingent rent provisions. Tenant improvement allowances are recorded as a deferred lease credit within deferred liabilities and amortized as a reduction of
rent expense over the term of the lease. Rent escalation clauses, rent-free periods, and other rental expenses are amortized on a straight-line basis over the term of the leases, including the construction period. This is generally 60 -
90 days prior to the store opening date, when we generally begin improvements in preparation for our intended use.
Certain leases provide
for contingent rents, in addition to a basic fixed rent, which are determined as a percentage of gross sales in excess of specified levels. We record a contingent rent liability in accrued liabilities on the consolidated balance sheets and the
corresponding rent expense when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets are tested for impairment at least annually. We perform our annual impairment test during
the fourth quarter, or more frequently should events or circumstances change that would indicate that impairment may have occurred.
Goodwill represents the excess of the purchase price over the fair value of identifiable tangible and intangible assets acquired and
liabilities assumed in a business combination. Impairment testing for goodwill is done at a reporting unit level. Reporting units are defined as an operating segment or one level below an operating segment, called a component. Using these criteria,
we identified our reporting units and concluded that the goodwill related to the territorial franchise rights for the state of Minnesota should be allocated to the Chicos reporting unit, the goodwill associated with the WH|BM acquisition
should be assigned to the WH|BM reporting unit and the goodwill associated with the Boston Proper acquisition should be assigned to the Boston Proper reporting unit.
We evaluate the appropriateness of performing a qualitative assessment, on a reporting unit level, based on current circumstances. If the
results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, the two-step impairment test will not be performed. If we conclude that it is more likely
than not that the fair value of a reporting unit is less than its carrying amount, then the two-step impairment test is performed. We may elect to skip the qualitative assessment and perform the two-step impairment test. The first step of the
impairment test compares the fair value of our reporting units with their carrying amounts, including goodwill. If the carrying amount exceeds fair value, then the second step of the impairment test is performed to measure the amount of any
impairment loss. Fair value is determined based on both an income approach and market approach. The income approach is based on estimated future cash flows, discounted at a rate that approximates the cost of capital of a market participant, while
the market approach is based on sales and EBITDA multiples of similar companies and transactions. In the third quarter of 2013 we performed an interim goodwill impairment assessment of the Boston Proper reporting unit and recorded pre-tax, non-cash
goodwill impairment charges of $67.3 million as further discussed in Note 6. For 2013, we performed our annual goodwill impairment assessment for our reporting units and concluded that the fair values of those reporting units were not less than
their carrying amounts as of the annual assessment date.
In 2012, we early adopted guidance that provides companies the option to test
indefinite-lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the intangible is less than its carrying amount. If the results of the qualitative
assessment indicate that it is more likely than not that the fair value of the intangible is less than its carrying amount, we calculate the value of the indefinite-lived intangible assets using a discounted cash flow method, based on the relief
from royalty concept. We may elect to skip the qualitative assessment when appropriate based on current circumstances. In the third quarter of 2013, we performed an interim quantitative assessment of certain Boston Proper indefinite-lived intangible
assets and recorded pre-tax, non-cash impairment charges of $5.2 million on the
40
Boston Proper trade name as further discussed in Note 6. For 2013, we performed our annual qualitative assessment of our indefinite-lived intangible assets and concluded it was more likely than
not that the fair value exceeded the carrying amount as of the annual assessment date.
Intangible assets subject to amortization consist
of the value of Boston Proper customer relationships, which are being amortized on a straight-line basis over a period of 10 years.
Accounting for the
Impairment of Long-lived Assets
Long-lived assets, including definite-lived intangibles, are reviewed periodically for impairment if
events or changes in circumstances indicate that the carrying amount may not be recoverable. If future undiscounted cash flows expected to be generated by the asset are less than its carrying amount, an asset is determined to be impaired. The fair
value of an asset is estimated using estimated future cash flows of the asset discounted by a rate commensurate with the risk involved with such asset while incorporating marketplace assumptions. The impairment loss recorded is the amount by which
the carrying value of the asset exceeds its fair value. In fiscal 2013, 2012 and 2011, we completed an evaluation of long-lived assets at certain underperforming stores for indicators of impairment and, as a result, recorded impairment charges of
approximately $1.3 million, $1.1 million and $2.1 million, respectively.
Revenue Recognition
Retail sales by our stores are recorded at the point of sale and are net of estimated customer returns, sales discounts under rewards programs
and company issued coupons, promotional discounts and associate discounts. For sales from our websites and catalogs, revenue is recognized at the time we estimate the customer receives the product, which is typically within a few days of shipment.
Under our current program, gift cards do not have expiration dates. We account for gift cards by recognizing a liability at the time a
gift card is sold. The liability is relieved and revenue is recognized for gift cards upon redemption. In addition, we recognize revenue on unredeemed gift cards when it can be determined that the likelihood of the gift card being redeemed is remote
and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions (commonly referred to as gift card breakage). We recognize gift card breakage under the redemption recognition method. This method records gift card
breakage as revenue on a proportional basis over the redemption period based on the historical gift card breakage rate. We determine the gift card breakage rate based on our historical redemption patterns.
As part of the normal sales cycle, we receive customer merchandise returns related to store, website and catalog sales. To account for the
financial impact of potential customer merchandise returns, we estimate future returns on previously sold merchandise. Reductions in sales and gross margin are recorded for estimated merchandise returns based on return history, current sales levels
and projected future return levels.
Our policy towards taxes assessed by a government authority directly imposed on revenue producing
transactions between a seller and a customer is, and has been, to exclude all such taxes from revenue.
Advertising Costs
Costs associated with the production of advertising, such as writing, copying, printing, and other costs are expensed as incurred. Costs
associated with communicating advertising that has been produced, such as television and magazine, are expensed when the advertising event takes place. Catalog expenses consist of the cost to create, print, and distribute catalogs. Such costs are
amortized over their expected period of future benefit, which is typically less than nine weeks. For fiscal 2013, 2012 and 2011, advertising expense was approximately $151.9 million, $145.6 million, and $110.6 million, respectively, and is included
within selling, general and administrative expense (SG&A) in the accompanying consolidated statements of income.
41
Stock-Based Compensation
Stock-based compensation for all awards is based on the grant date fair value of the award, net of estimated forfeitures, and is recognized
over the requisite service period of the awards. The fair value of restricted stock awards and performance-based awards is determined by using the closing price of the Companys common stock on the date of the grant. Compensation expense for
performance-based awards is recorded based on the amount of the award ultimately expected to vest and, depending on the level and likelihood of the performance condition to be met. The fair value of stock option grants is estimated on the date of
grant using the Black-Scholes option pricing model.
Shipping and Handling Costs
Shipping and handling costs to transport goods to customers, net of amounts paid to us by customers, amounted to $18.4 million, $8.3 million,
and $10.5 million in fiscal 2013, 2012 and 2011, respectively, and are included within SG&A in the accompanying consolidated statements of income. Amounts paid by customers to cover shipping and handling costs are immaterial.
Store Pre-opening Costs
Operating costs
(including store set-up, rent and training expenses) incurred prior to the opening of new stores are expensed as incurred and are included within SG&A in the accompanying consolidated statements of income.
Income Taxes
Income taxes are accounted
for in accordance with authoritative guidance, which requires the use of the asset and liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Additionally, we follow a comprehensive model to recognize, measure, present, and disclose in our consolidated financial statements the estimated aggregate tax liability of uncertain tax positions that
we have taken or expect to take on a tax return. This model states that a tax benefit from an uncertain tax position may be recognized if it is more likely than not that the position is sustainable, based upon its technical merits.
The tax benefit of a qualifying position is the largest amount of tax benefit that has greater than a 50% likelihood of being realized upon
the ultimate settlement with a taxing authority having full knowledge of all relevant information.
Foreign Currency
The functional currency of our foreign operations is generally the applicable local currency. Assets and liabilities are translated into U.S.
dollars using the current exchange rates in effect as of the balance sheet date, while revenues and expenses are translated at the average exchange rates for the period. The resulting translation adjustments are recorded as a component of
comprehensive income in the consolidated statements of comprehensive income and the consolidated statements of stockholders equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a
currency other than the local functional currency are included in the consolidated statements of income.
Self-Insurance
We are self-insured for certain losses relating to workers compensation, medical and general liability claims. Self-insurance claims
filed and claims incurred but not reported are accrued based upon managements estimates of the aggregate liability for uninsured claims incurred based on historical experience. While we do not expect the amount we will ultimately pay to differ
significantly from our estimates, self-insurance accruals could be affected if future claims experience differs significantly from the historical trends and assumptions.
42
Supplier Allowances
From time to time, we receive allowances and/or credits from certain of our suppliers. The aggregate amount of such allowances and credits is
immaterial to our consolidated results of operations.
Earnings Per Share
In accordance with relevant accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether
paid or unpaid, are considered participating securities. As a result, such awards are required to be included in the calculation of earnings per common share pursuant to the two-class method. For us, participating securities are
comprised of unvested restricted stock awards.
Under the two-class method, net income is reduced by the amount of dividends declared in
the period for common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic EPS excludes
dilution and is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period including the participating securities. Diluted EPS reflects the dilutive effect of
potential common shares from securities such as stock options and performance-based stock units.
Newly Issued Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued new disclosure guidance related to the reporting of
amounts reclassified out of accumulated other comprehensive income (AOCI). This guidance requires an entity to disclose significant items reclassified out of AOCI to net income and the effect of these reclassifications on the respective
line items in net income. This guidance is effective for reporting periods beginning after December 15, 2012. We adopted this guidance effective February 3, 2013 and its adoption did not have an impact on our consolidated results of
operations, financial position or cash flows.
43
2.
|
MARKETABLE SECURITIES:
|
Marketable securities are classified as available-for-sale and
as of February 1, 2014 generally consist of municipal bonds, corporate bonds, and U.S. government and agency securities with $65.9 million of securities with maturity dates within one year or less and $50.1 million with maturity dates over one
year and less than two years. As of February 2, 2013, marketable securities generally consisted of corporate bonds, municipal bonds, and U.S. government and agency securities.
The following tables summarize our investments in marketable securities at February 1, 2014 and February 2, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 1, 2014
|
|
|
|
(in thousands)
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
Total marketable securities
|
|
$
|
115,889
|
|
|
$
|
118
|
|
|
$
|
5
|
|
|
$
|
116,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2, 2013
|
|
|
|
(in thousands)
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
Total marketable securities
|
|
$
|
272,283
|
|
|
$
|
242
|
|
|
$
|
26
|
|
|
$
|
272,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
FAIR VALUE MEASUREMENTS:
|
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Entities are required to use a three-level hierarchy, which requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The valuation hierarchy
is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or; Unadjusted quoted prices
for identical or similar assets or liabilities in markets that are not active, or; Inputs other than quoted prices that are observable for the asset or liability
Level 3 Unobservable inputs for the asset or liability.
We measure certain financial assets at fair value on a recurring basis, including our marketable securities, which are classified as
available-for-sale securities, certain cash equivalents, specifically our money market accounts, and assets held in our non-qualified deferred compensation plan. The money market accounts are valued based on quoted market prices in active markets.
Our marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information
provided by independent third party pricing entities, except for U.S. government securities which are valued based on quoted market prices in active markets. The investments in our non-qualified deferred compensation plan are valued using quoted
market prices and are included in other assets on our consolidated balance sheets.
44
From time to time, we measure certain assets at fair value on a non-recurring basis, including
evaluation of long-lived assets, goodwill and other intangible assets for impairment using company-specific assumptions which would fall within Level 3 of the fair value hierarchy.
To assess the fair value of goodwill, we utilize both an income approach and a market approach. Inputs used to calculate the fair value
based on the income approach primarily include estimated future cash flows, discounted at a rate that approximates the cost of capital of a market participant. Inputs used to calculate the fair value based on the market approach include identifying
sales and EBITDA multiples based on guidelines for similar publicly traded companies and recent transactions.
To assess the fair value of
the trade names, we utilize a relief from royalty approach. Inputs used to calculate the fair value of the trade names primarily include future sales projections, discounted at a rate that approximates the cost of capital of a
market participant and an estimated royalty rate.
During fiscal 2013, we recorded a $72.5 million pre-tax
impairment charge related to assets measured at fair value on a non-recurring basis, comprised of $67.3 million in Boston Proper goodwill impairment and $5.2 million pre-tax related to the Boston Proper trade name.
Fair value calculations contain significant judgments and estimates, which may differ from actual results due to, among other things, economic
conditions, changes to the business model or changes in operating performance.
During fiscal 2013, we did not make any transfers between
Level 1 and Level 2 financial assets. Furthermore during fiscal 2013 and 2012, we did not have any Level 3 cash equivalents or marketable securities. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if
significant inputs have changed that would impact the fair value hierarchy disclosure.
45
In accordance with the provisions of the guidance, we categorized our financial assets, which are
valued on a recurring basis, based on the priority of the inputs to the valuation technique for the instruments, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
Balance as of
February 1,
2014
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(in thousands)
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market accounts
|
|
$
|
7,509
|
|
|
$
|
7,509
|
|
|
$
|
|
|
|
$
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
|
51,519
|
|
|
|
|
|
|
|
51,519
|
|
|
|
|
|
U.S. government securities
|
|
|
9,812
|
|
|
|
9,812
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
|
9,020
|
|
|
|
|
|
|
|
9,020
|
|
|
|
|
|
Corporate bonds
|
|
|
45,651
|
|
|
|
|
|
|
|
45,651
|
|
|
|
|
|
Non Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan
|
|
|
6,299
|
|
|
|
6,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
129,810
|
|
|
$
|
23,620
|
|
|
$
|
106,190
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
Balance as of
February 2,
2013
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(in thousands)
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market accounts
|
|
$
|
25,366
|
|
|
$
|
25,366
|
|
|
$
|
|
|
|
$
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
|
92,448
|
|
|
|
|
|
|
|
92,448
|
|
|
|
|
|
U.S. government securities
|
|
|
44,714
|
|
|
|
44,714
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
|
28,064
|
|
|
|
|
|
|
|
28,064
|
|
|
|
|
|
Corporate bonds
|
|
|
100,255
|
|
|
|
|
|
|
|
100,255
|
|
|
|
|
|
Commercial paper
|
|
|
4,996
|
|
|
|
|
|
|
|
4,996
|
|
|
|
|
|
Certificates of deposit
|
|
|
2,022
|
|
|
|
|
|
|
|
2,022
|
|
|
|
|
|
Non Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan
|
|
|
4,629
|
|
|
|
4,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
302,494
|
|
|
$
|
74,709
|
|
|
$
|
227,785
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
4.
|
PREPAID AND OTHER CURRENT ASSETS:
|
Prepaid and other current assets consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
February 1,
2014
|
|
|
February 2,
2013
|
|
|
|
(in thousands)
|
|
Prepaid expenses
|
|
$
|
39,974
|
|
|
$
|
38,960
|
|
Accounts receivable
|
|
|
6,341
|
|
|
|
8,438
|
|
Income tax receivable
|
|
|
3,990
|
|
|
|
1,719
|
|
Other current assets
|
|
|
393
|
|
|
|
12,669
|
|
|
|
|
|
|
|
|
|
|
Total prepaid and other current assets
|
|
$
|
50,698
|
|
|
$
|
61,786
|
|
|
|
|
|
|
|
|
|
|
5.
|
PROPERTY AND EQUIPMENT, NET:
|
Property and equipment, net, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
February 1,
2014
|
|
|
February 2,
2013
|
|
|
|
(in thousands)
|
|
Land and land improvements
|
|
$
|
49,413
|
|
|
$
|
45,214
|
|
Building and building improvements
|
|
|
126,858
|
|
|
|
125,606
|
|
Equipment, furniture and fixtures
|
|
|
611,439
|
|
|
|
561,402
|
|
Leasehold improvements
|
|
|
545,526
|
|
|
|
495,018
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
1,333,236
|
|
|
|
1,227,240
|
|
Less accumulated depreciation and amortization
|
|
|
(702,186
|
)
|
|
|
(619,120
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
631,050
|
|
|
$
|
608,120
|
|
|
|
|
|
|
|
|
|
|
Total depreciation expense for fiscal 2013, 2012 and 2011 was $113.8 million, $103.9 million and $97.8
million, respectively.
47
6.
|
GOODWILL AND OTHER INTANGIBLE ASSETS:
|
Goodwill and other intangible assets consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
February 1,
2014
|
|
|
February 2,
2013
|
|
|
|
(in thousands)
|
|
|
|
|
Goodwill:
|
|
|
|
|
|
|
|
|
Total Goodwill
|
|
$
|
171,427
|
|
|
$
|
238,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-Lived Intangibles:
|
|
|
|
|
|
|
|
|
WH|BM trade name
|
|
$
|
34,000
|
|
|
$
|
34,000
|
|
Minnesota territorial franchise rights
|
|
|
4,930
|
|
|
|
4,930
|
|
Boston Proper trade name
|
|
|
46,000
|
|
|
|
51,200
|
|
|
|
|
|
|
|
|
|
|
Total indefinite-lived intangibles
|
|
$
|
84,930
|
|
|
$
|
90,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite-Lived Intangibles:
|
|
|
|
|
|
|
|
|
Boston Proper customer relationships
|
|
$
|
43,580
|
|
|
$
|
43,580
|
|
|
|
|
Accumulated amortization expense recorded
|
|
|
(10,314
|
)
|
|
|
(5,956
|
)
|
|
|
|
|
|
|
|
|
|
Total definite-lived intangibles
|
|
|
33,266
|
|
|
|
37,624
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets, net
|
|
$
|
118,196
|
|
|
$
|
127,754
|
|
|
|
|
|
|
|
|
|
|
On September 19, 2011, we acquired all of the outstanding equity of Boston Proper, Inc. (Boston
Proper), a privately held online and catalog retailer of distinctive womens apparel and accessories. Total cash consideration was approximately $214 million. We allocated the purchase price to the tangible and intangible assets
acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill.
In fiscal 2013, as a result of declines in the Boston Proper catalog business due to the increasingly competitive direct-to-consumer
environment and the impact of integration efforts and new initiatives, we recorded a pre-tax goodwill impairment charge of $67.3 million, reducing the carrying value of Boston Proper goodwill to $74.6 million and an impairment charge related to the
Boston Proper trade name of $5.2 million pre-tax, reducing the carrying value of the Boston Proper trade name to $46.0 million.
Intangible assets subject to amortization consist of $33.3 million in Boston Proper customer relationships with amortization expense for
fiscal 2013 of approximately $4.4 million. For fiscal years 2014 through 2018, we expect to record annual amortization expense of approximately $4.4 million in each fiscal year.
48
7.
|
OTHER CURRENT AND DEFERRED LIABILITIES:
|
Other current and deferred liabilities
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
February 1,
2014
|
|
|
February 2,
2013
|
|
|
|
(in thousands)
|
|
|
|
|
Allowance for estimated customer returns, gift cards and store credits outstanding
|
|
$
|
56,034
|
|
|
$
|
54,355
|
|
Accrued payroll, benefits, bonuses and severance costs
|
|
|
32,355
|
|
|
|
60,646
|
|
Current portion of deferred rent and lease credits
|
|
|
27,166
|
|
|
|
23,951
|
|
Other
|
|
|
26,518
|
|
|
|
34,072
|
|
|
|
|
|
|
|
|
|
|
Total other current and deferred liabilities
|
|
$
|
142,073
|
|
|
$
|
173,024
|
|
|
|
|
|
|
|
|
|
|
8.
|
NON-CURRENT DEFERRED LIABILITIES:
|
Deferred liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
February 1,
2014
|
|
|
February 2,
2013
|
|
|
|
(in thousands)
|
|
|
|
|
Deferred rent
|
|
$
|
45,897
|
|
|
$
|
44,222
|
|
Deferred lease credits
|
|
|
106,808
|
|
|
|
98,589
|
|
Other deferred liabilities
|
|
|
13,335
|
|
|
|
13,514
|
|
|
|
|
|
|
|
|
|
|
Total deferred liabilities
|
|
|
166,040
|
|
|
|
156,325
|
|
Less current portion of deferred rent and lease credits
|
|
|
(27,166
|
)
|
|
|
(23,951
|
)
|
|
|
|
|
|
|
|
|
|
Total non-current deferred liabilities
|
|
$
|
138,874
|
|
|
$
|
132,374
|
|
|
|
|
|
|
|
|
|
|
Deferred rent represents the difference between operating lease obligations currently due and operating lease
expense, which is recorded on a straight-line basis over the terms of our leases.
Deferred lease credits represent construction
allowances received from landlords and are amortized as a reduction of rent expense over the appropriate respective terms of the related leases.
9.
|
COMMITMENTS AND CONTINGENCIES:
|
Leases
We lease retail stores, a limited amount of office space, primarily in Boca Raton, Florida, and various office equipment under operating leases
expiring in various years through the fiscal year ending 2024. Certain operating leases provide for renewal options that generally approximate five years at a pre-determined rental value. In the normal course of business, operating leases are
generally renewed or replaced by other leases.
49
Minimum future rental payments under non-cancelable operating leases (including leases with
certain minimum sales cancellation clauses described below and exclusive of common area maintenance charges and/or contingent rental payments based on sales) as of February 1, 2014, are approximately as follows:
|
|
|
|
|
FISCAL YEAR ENDING:
|
|
|
|
(in thousands)
|
|
|
|
January 31, 2015
|
|
$
|
180,173
|
|
January 30, 2016
|
|
|
172,683
|
|
January 28, 2017
|
|
|
154,181
|
|
January 27, 2018
|
|
|
121,382
|
|
February 2, 2019
|
|
|
92,782
|
|
Thereafter
|
|
|
295,252
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
1,016,453
|
|
|
|
|
|
|
Certain of the leases provide that we may cancel the lease if our retail sales at that location fall below an
established level. A majority of our store operating leases contain cancellation clauses that allow the leases to be terminated at our discretion, if certain minimum sales levels are not met within the first few years of the lease term. We have not
historically exercised many or met these cancellation clauses and, therefore, have included commitments for the full lease terms of such leases in the above table. For fiscal 2013, 2012 and 2011, total rent expense under operating leases was
approximately $230.0 million, $206.0 million, and $184.5 million, respectively, including common area maintenance charges of approximately $37.2 million, $31.6 million, and $27.5 million, respectively, other rental charges of approximately
$32.8 million, $27.5 million, and $25.8 million, respectively, and contingent rental expense, based on sales, of approximately $9.1 million, $12.1 million, and $10.6 million, respectively.
Credit Facility
On July 27, 2011,
we entered into a $70 million senior five-year unsecured revolving credit facility (the Credit Facility) with a syndicate led by JPMorgan Chase Bank, N.A., as administrative agent and HSBC Bank USA, National Association, as syndication
agent.
The Credit Facility provides a $70 million revolving credit facility that matures on July 27, 2016. The Credit Facility
provides for swing advances of up to $5 million and issuance of letters of credit up to $40 million. The Credit Facility also contains a feature that provides the Company the ability, subject to satisfaction of certain conditions, to expand the
commitments available under the Credit Facility from $70 million up to $125 million. As of February 1, 2014, no borrowings are outstanding under the Credit Facility.
The Credit Facility contains customary financial covenants for unsecured credit facilities, consisting of a maximum total debt leverage ratio
that cannot be greater than 3.25 to 1.00 and a minimum fixed charge coverage ratio that cannot be less than 1.20 to 1.00.
The Credit
Facility contains customary events of default. If a default occurs and is not cured within any applicable cure period or is not waived, the Companys obligations under the Credit Facility may be accelerated or the Credit Facility may be
terminated. The Company was in compliance with the applicable ratio requirements and other covenants at February 1, 2014.
50
Other
At February 1, 2014 and February 2, 2013, we had approximately $433.5 million and $392.3 million, respectively, of open purchase
orders for inventory, in the normal course of business, which are cancellable with no or limited recourse available to the vendor until the merchandise shipping date.
We are not currently a party to any legal proceedings, other than various claims and lawsuits arising in the normal course of business, none
of which we believe should have a material adverse effect on our consolidated financial condition or results of operations.
10.
|
STOCK COMPENSATION PLANS AND CAPITAL STOCK TRANSACTIONS:
|
General
In April 2012, the Board approved the Chicos FAS, Inc. 2012 Omnibus Stock and Incentive Plan (the Omnibus Plan), which
replaced the Chicos FAS, Inc. 2002 Omnibus Stock and Incentive Plan and was approved by our shareholders, effective June 21, 2012. As of the effective date, the Omnibus Plan provided for 7.0 million shares of our common stock that
may be delivered to participants and their beneficiaries in addition to approximately 3.5 million shares of our common stock available for future awards under prior plans. Awards under the Omnibus Plan may be in the form of restricted stock,
restricted stock units, performance awards, stock options, and stock appreciation rights, in accordance with the terms and conditions of the Omnibus Plan. The terms of each award will be determined by the Compensation and Benefits Committee of the
Board of Directors.
We have historically issued restricted stock, including non-vested restricted stock and performance-based restricted
stock, performance-based stock units, and stock options. Shares of non-vested restricted stock and performance-based restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon, and
are considered to be currently issued and outstanding. Performance-based stock units are not entitled to voting rights or dividends. Generally, stock-based awards vest evenly over three years; stock options generally have a 10-year term. As of
February 1, 2014, approximately 2.6 million nonqualified stock options are outstanding under the Omnibus Plan and approximately 9.0 million shares remain available for future grants of stock-based awards.
Stock-based compensation expense for all awards is based on the grant date fair value of the award, net of estimated forfeitures, and is
recognized over the requisite service period of the awards. Compensation expense for restricted stock awards and stock options with a service condition is recognized on a straight-line basis over the requisite service period. Compensation expense
for performance-based awards with a service condition is recognized ratably for each vesting tranche based on our estimate of the level and likelihood of meeting certain Company-specific performance goals. We estimate the expected forfeiture rate
for all stock-based awards, and only recognize expense for those shares expected to vest. In determining the portion of the stock-based payment award that is ultimately expected to be earned, we derive forfeiture rates based on historical data. In
accordance with the authoritative guidance, we revise our forfeiture rates, when necessary, in subsequent periods if actual forfeitures differ from those originally estimated. Total compensation expense related to stock-based awards in fiscal 2013,
2012 and 2011 was $27.1 million, $26.5 million and $15.2 million, respectively. The total tax benefit associated with stock-based compensation for fiscal 2013, 2012 and 2011 was $10.4 million, $10.1 million and $5.8 million, respectively.
51
Restricted Stock Awards
Restricted stock activity for fiscal 2013 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average Grant
Date Fair
Value
|
|
Unvested, beginning of period
|
|
|
3,066,264
|
|
|
$
|
13.27
|
|
Granted
|
|
|
2,228,050
|
|
|
|
16.99
|
|
Vested
|
|
|
(1,045,674
|
)
|
|
|
13.70
|
|
Canceled
|
|
|
(365,506
|
)
|
|
|
15.00
|
|
|
|
|
|
|
|
|
|
|
Unvested, end of period
|
|
|
3,883,134
|
|
|
|
15.13
|
|
|
|
|
|
|
|
|
|
|
Performance-based restricted stock activity for fiscal 2013 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Unvested, beginning of period
|
|
|
34,444
|
|
|
$
|
13.69
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(17,222
|
)
|
|
|
13.69
|
|
Canceled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested, end of period
|
|
|
17,222
|
|
|
|
13.69
|
|
|
|
|
|
|
|
|
|
|
Total fair value of shares of restricted stock and performance-based restricted stock that vested during
fiscal 2013, 2012 and 2011 was $17.6 million, $13.3 million and $5.3 million, respectively. The weighted average grant date fair value of restricted stock and performance-based restricted stock granted during the fiscal 2013, 2012 and
2011 was $16.99, $15.40, and $12.65, respectively. As of February 1, 2014, there was $33.2 million of unrecognized stock-based compensation expense related to non-vested restricted stock and performance-based restricted
stock awards. That cost is expected to be recognized over a weighted average period of 2.4 years and 0.1 years for restricted stock and performance-based restricted stock, respectively. For performance-based restricted stock outstanding all relevant
performance conditions have been met.
Performance-based Stock Units
Performance-based stock unit activity for fiscal 2013 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average Grant
Date Fair
Value
|
|
Unvested, beginning of period
|
|
|
657,316
|
|
|
$
|
15.01
|
|
Granted
|
|
|
756,050
|
|
|
|
16.59
|
|
Vested
|
|
|
(267,829
|
)
|
|
|
15.01
|
|
Canceled
|
|
|
(659,602
|
)
|
|
|
16.82
|
|
|
|
|
|
|
|
|
|
|
Unvested, end of period
|
|
|
485,935
|
|
|
|
15.01
|
|
|
|
|
|
|
|
|
|
|
Total fair value of performance-based stock units that vested during fiscal 2013 was $4.5 million. The
weighted average grant date fair value of performance-based stock units granted during the fiscal 2013 and 2012 was $16.59 and $15.01, respectively. No performance-based stock units were granted in fiscal 2011. There was
52
$1.3 million of unrecognized stock-based compensation expense related to performance-based stock units expected to vest. That cost is expected to be recognized over a weighted average period of
approximately 1.0 years.
Stock Option Awards
We used the Black-Scholes option-pricing model to value our stock options. No stock options have been issued since 2011. Using this
option-pricing model, the fair value of each stock option award was estimated on the date of grant. The fair value of the stock option awards, which are subject to pro-rata vesting generally over 3 years, is expensed on a straight-line basis over
the vesting period of the stock options. The expected volatility assumptions were based on the historical volatility of the stock over a term equal to the expected term of the option granted. The expected terms of stock option awards granted were
derived from historical exercise experience under the stock option plans and represents the period of time that stock option awards granted are expected to be outstanding. The expected term assumption incorporates the contractual term of an option
grant, which is ten years, as well as the vesting period of an award, which is generally pro-rata vesting over three years. The risk-free interest rates were based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal
to the expected term of the option granted. The expected dividend yields were based on the expected annual dividend divided by the market price of our common stock at the time of declaration.
The weighted average assumptions relating to the valuation of our stock options for fiscal 2011 were as follows:
|
|
|
|
|
Weighted average fair value of grants
|
|
$
|
6.49
|
|
Expected volatility
|
|
|
66
|
%
|
Expected term (years)
|
|
|
4.5 years
|
|
Risk-free interest rate
|
|
|
1.8
|
%
|
Expected dividend yield
|
|
|
1.5
|
%
|
Stock option activity for fiscal 2013 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|
Outstanding, beginning of period
|
|
|
3,851,830
|
|
|
$
|
15.91
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(780,656
|
)
|
|
|
12.56
|
|
|
|
|
|
|
|
|
|
Canceled or expired
|
|
|
(428,905
|
)
|
|
|
23.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of period
|
|
|
2,642,269
|
|
|
$
|
15.63
|
|
|
|
5.01
|
|
|
$
|
9,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at February 1, 2014
|
|
|
2,627,964
|
|
|
$
|
15.65
|
|
|
|
5.00
|
|
|
$
|
9,111
|
|
Exercisable at February 1, 2014
|
|
|
2,243,041
|
|
|
$
|
16.04
|
|
|
|
4.63
|
|
|
$
|
7,861
|
|
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the excess, if
any, of the closing stock price on the last trading day of fiscal 2013 and the exercise price, multiplied by the
53
number of such in-the-money options) that would have been received by the option holders had all option holders exercised their options on February 1, 2014. This amount changes based on the
fair market value of our common stock. Total intrinsic value of options exercised during fiscal 2013, 2012 and 2011 (based on the difference between our stock price on the respective exercise date and the respective exercise price, multiplied by the
number of respective options exercised) was $4.3 million, $20.8 million and $5.2 million, respectively.
As of February 1, 2014,
there was $0.4 million of total unrecognized compensation expense related to unvested stock options. That expense is expected to be recognized over a weighted average period of 0.4 years.
Cash received from option exercises for fiscal 2013 was $9.8 million. The actual tax benefit realized for the tax deduction from option
exercises of stock option awards totaled $1.7 million for fiscal 2013.
Employee Stock Purchase Plan
We sponsor an employee stock purchase plan (ESPP) under which substantially all full-time employees are given the right to purchase
shares of our common stock during each of the two specified offering periods each fiscal year at a price equal to 85 percent of the value of the stock immediately prior to the beginning of each offering period. During fiscal 2013, 2012 and 2011,
approximately 187,000, 132,000, and 72,000 shares, respectively, were purchased under the ESPP. Cash received from purchases under the ESPP for fiscal 2013 was $2.6 million.
Share Repurchase Program
During fiscal
2013, we repurchased 13.8 million shares, at a total cost of approximately $245.0 million. On December 19, 2013, we announced that our Board approved a new $300 million share repurchase program of our outstanding common stock, and
cancelled in its entirety the prior $300 million share repurchase program, which had $55.0 million remaining. However, we have no continuing obligation to repurchase shares under this authorization, and the timing, actual number and value of any
additional shares to be purchased will depend on the performance of our stock price, market conditions and other considerations.
We have a 401(k) defined contribution employee benefit plan (the
Plan) covering substantially all employees upon completion of one year of service, working 1,000 hours or more, and are at least age 21. Employees rights to Company contributions vest fully upon completing five years of service,
with incremental vesting starting in service year two. Under the Plan, employees may contribute up to 100 percent of their annual compensation, subject to certain statutory limitations. We have elected to match employee contributions at 50 percent
on the first 6 percent of the employees contributions and can elect to make additional contributions over and above the mandatory match. For fiscal 2013, 2012 and 2011, our costs under the Plan were approximately $3.5 million, $3.2 million,
and $2.8 million, respectively.
In April 2002, we adopted the Chicos FAS, Inc. Deferred Compensation Plan (the Deferred
Plan) to provide supplemental retirement income benefits for a select group of management employees. Eligible participants may elect to defer up to 80 percent of their salary and 100 percent of their bonuses pursuant to the terms and
conditions of the Deferred Plan. The Deferred Plan generally provides for payments upon retirement, death or termination of employment. In addition, we may make employer contributions to participants under the Deferred Plan. To date, no Company
contributions have been made under the Deferred Plan. The amount of the deferred compensation liability payable to the participants is included in deferred liabilities in the consolidated balance sheets. These obligations are funded through the
establishment of rabbi trust accounts held by us on behalf of the management group participating in the plan. The trust accounts are reflected in other assets in the accompanying consolidated balance sheets.
54
The income tax provision consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2013
|
|
|
Fiscal 2012
|
|
|
Fiscal 2011
|
|
|
|
(in thousands)
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
58,000
|
|
|
$
|
95,410
|
|
|
$
|
52,245
|
|
Foreign
|
|
|
12
|
|
|
|
|
|
|
|
|
|
State
|
|
|
7,557
|
|
|
|
17,001
|
|
|
|
11,366
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
8,479
|
|
|
|
(2,585
|
)
|
|
|
17,991
|
|
State
|
|
|
1,752
|
|
|
|
(1,626
|
)
|
|
|
1,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
75,800
|
|
|
$
|
108,200
|
|
|
$
|
83,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The foreign component of pre-tax income (loss), arising principally from operating foreign stores, for fiscal
2013, 2012, and 2011 was ($0.6) million, $0.0 million, and $0.0 million respectively.
A reconciliation between the statutory federal
income tax rate and the effective income tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2013
|
|
|
Fiscal 2012
|
|
|
Fiscal 2011
|
|
|
|
|
|
Federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income tax, net of federal tax benefit
|
|
|
3.0
|
|
|
|
3.5
|
|
|
|
3.8
|
|
Goodwill Impairment
|
|
|
18.0
|
|
|
|
|
|
|
|
|
|
Enhanced Charitable Contribution
|
|
|
(1.8
|
)
|
|
|
(0.7
|
)
|
|
|
(1.1
|
)
|
Other items, net
|
|
|
(0.7
|
)
|
|
|
(0.3
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
53.5
|
%
|
|
|
37.5
|
%
|
|
|
37.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
Deferred tax assets and liabilities are recorded due to different carrying amounts for financial
and income tax reporting purposes arising from cumulative temporary differences. These differences consist of the following as of February 1, 2014 and February 2, 2013:
|
|
|
|
|
|
|
|
|
|
|
February 1,
2014
|
|
|
February 2,
2013
|
|
|
|
(in thousands)
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Accrued liabilities and allowances
|
|
$
|
10,694
|
|
|
$
|
20,103
|
|
Accrued straight-line rent
|
|
|
18,124
|
|
|
|
17,533
|
|
Stock-based compensation
|
|
|
18,388
|
|
|
|
17,822
|
|
Other
|
|
|
4,197
|
|
|
|
4,540
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
51,403
|
|
|
|
59,998
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Other
|
|
|
(1,148
|
)
|
|
|
|
|
Prepaid expenses
|
|
|
(5,759
|
)
|
|
|
(5,360
|
)
|
Property related
|
|
|
(45,452
|
)
|
|
|
(40,719
|
)
|
Other intangible assets
|
|
|
(51,291
|
)
|
|
|
(53,894
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(103,650
|
)
|
|
|
(99,973
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(52,247
|
)
|
|
$
|
(39,975
|
)
|
|
|
|
|
|
|
|
|
|
A reconciliation of the beginning and ending amounts of uncertain tax positions for each of fiscal 2013,
fiscal 2012 and fiscal 2011 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2013
|
|
|
Fiscal 2012
|
|
|
Fiscal 2011
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
4,715
|
|
|
$
|
3,677
|
|
|
$
|
3,628
|
|
Additions for tax positions of prior years
|
|
|
12
|
|
|
|
506
|
|
|
|
167
|
|
Reductions for tax positions of prior years
|
|
|
|
|
|
|
|
|
|
|
(81
|
)
|
Additions for tax positions for the current year
|
|
|
461
|
|
|
|
694
|
|
|
|
442
|
|
Settlements with tax authorities
|
|
|
(1,114
|
)
|
|
|
(63
|
)
|
|
|
(306
|
)
|
Reductions due to lapse of applicable statutes of limitation
|
|
|
(118
|
)
|
|
|
(99
|
)
|
|
|
(173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
3,956
|
|
|
$
|
4,715
|
|
|
$
|
3,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the February 1, 2014, February 2, 2013, and January 28, 2012 balances were
$2.6 million, $3.1 million, and $2.4 million respectively, of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate in future periods.
Our continuing practice is to recognize potential accrued interest and penalties relating to unrecognized tax benefits in the income tax
provision. For fiscal 2013, 2012 and 2011, we accrued $0.4 million per year for interest and penalties. We had approximately $2.3 million, $2.4 million and $2.1 million, respectively for the payment of interest and penalties accrued at
February 1, 2014, February 2, 2013 and January 28, 2012, respectively. The amounts included in the reconciliation of uncertain tax positions do not include accruals for interest and penalties.
56
In fiscal 2006, we began participating in the IRSs real time audit program, Compliance
Assurance Process (CAP). Under the CAP program, material tax issues and initiatives are disclosed to the IRS throughout the year with the objective of reaching agreement as to the proper reporting treatment when the federal return is
filed. Our fiscal 2011 year has been examined and a full acceptance letter issued. For fiscal 2012, all issues have been resolved during the post-file review process and we are awaiting a full acceptance letter.
With few exceptions, we are no longer subject to state and local examinations for years before fiscal 2009. Various state examinations are
currently underway for fiscal periods spanning from 2004 through 2012; however, we do not expect any significant change to our uncertain tax positions within the next year.
In September 2013, the Internal Revenue Service enacted final guidance regarding the deduction and capitalization of expenditures related to
tangible property (tangible property regulations). The tangible property regulations clarify and expand sections 162(a) and 263(a) of the Internal Revenue Code, which relate to amounts paid to acquire, produce, or improve tangible
property. Additionally, the tangible property regulations provide final guidance under section 167 regarding accounting for and retirement of depreciable property and regulations under section 168 relating to the accounting for property under the
Modified Accelerated Cost Recovery System. The tangible property regulations affect all taxpayers that acquire, produce, or improve tangible property, and generally apply to taxable years beginning on or after January 1, 2014, which will impact
the fiscal year ending January 31, 2015. We evaluated the tangible property regulations and believe the regulations will not have a significant impact on our financial condition or results of operations.
13.
|
NET EARNINGS PER SHARE
|
The following table sets forth the computation of basic and
diluted EPS shown on the face of the accompanying consolidated statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 1,
2014
|
|
|
February 2,
2013
|
|
|
January 28,
2012
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
65,883
|
|
|
$
|
180,219
|
|
|
$
|
140,874
|
|
Net income and dividends declared allocated to unvested restricted stock
|
|
|
(1,746
|
)
|
|
|
(3,309
|
)
|
|
|
(1,834
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
64,137
|
|
|
$
|
176,910
|
|
|
$
|
139,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding basic
|
|
|
155,047,529
|
|
|
|
162,988,767
|
|
|
|
169,152,870
|
|
Dilutive effect of stock options and PSUs
outstanding
|
|
|
947,332
|
|
|
|
1,130,313
|
|
|
|
1,097,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common
equivalent shares outstanding diluted
|
|
|
155,994,861
|
|
|
|
164,119,080
|
|
|
|
170,250,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.41
|
|
|
$
|
1.09
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.41
|
|
|
$
|
1.08
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2013, 2012 and 2011, 922,532, 1,391,228 and 3,823,166 potential shares of common stock,
respectively, were excluded from the diluted per share calculation relating to stock option awards and performance-based stock units, because the effect of including these potential shares was antidilutive.
57
14.
|
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
Gross
Margin
|
|
|
Net Income
(Loss)
|
|
|
Net Income
(Loss) Per
Common
Share - Basic
|
|
|
Net Income
(Loss) Per
Common and
Common
Equivalent
Share - Diluted
|
|
|
|
(dollars in thousands)
|
|
Fiscal year ended February 1, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
670,722
|
|
|
$
|
386,844
|
|
|
$
|
51,122
|
|
|
$
|
0.31
|
|
|
$
|
0.31
|
|
Second quarter
|
|
|
649,503
|
|
|
|
356,142
|
|
|
|
43,588
|
|
|
|
0.27
|
|
|
|
0.27
|
|
Third quarter
|
|
|
655,579
|
|
|
|
364,010
|
|
|
|
(28,479
|
)
|
|
|
(0.18
|
)
|
|
|
(0.18
|
)
|
Fourth quarter
|
|
|
610,233
|
|
|
|
309,635
|
|
|
|
(348
|
)
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
|
|
|
|
Fiscal year ended February 2, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
650,817
|
|
|
$
|
378,596
|
|
|
$
|
53,645
|
|
|
$
|
0.32
|
|
|
$
|
0.32
|
|
Second quarter
|
|
|
641,722
|
|
|
|
362,180
|
|
|
|
53,395
|
|
|
|
0.32
|
|
|
|
0.32
|
|
Third quarter
|
|
|
636,665
|
|
|
|
364,296
|
|
|
|
41,657
|
|
|
|
0.25
|
|
|
|
0.25
|
|
Fourth quarter
|
|
|
651,853
|
|
|
|
346,728
|
|
|
|
31,522
|
|
|
|
0.20
|
|
|
|
0.19
|
|
Each quarter in fiscal 2013 and 2012 contained 13 weeks, except for the fourth quarter of fiscal 2012, which
contained 14 weeks.
On February 27, 2014, we announced that our Board of Directors
declared a quarterly dividend of $0.075 per share on our common stock. The dividend will be payable on March 31, 2014 to shareholders of record at the close of business on March 17, 2014. Although it is our Companys intention to
continue to pay a quarterly cash dividend in the future, any decision to pay future cash dividends will be made by the Board of Directors and will depend on future earnings, financial condition and other factors.
58