Press release from PR Newswire
Chico's FAS, Inc. Reports Third Quarter Earnings Per Share of $0.16 Net of Acquisition Costs of $0.02
Tuesday, November 22, 2011
Chico's FAS, Inc. Reports Third Quarter Earnings Per Share of $0.16 Net of Acquisition Costs of $0.0207:15 EST Tuesday, November 22, 2011-- Net sales increased 11.5% to $538.5 million with comparable sales increasing 3.7% -- EPS increased 13% over last year's third quarter excluding acquisition costs -- Completed acquisition of direct-to-consumer retailer Boston Proper, Inc.FORT MYERS, Fla., Nov. 22, 2011 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2011 third quarter and nine months ended October 29, 2011, which includes the results of Boston Proper subsequent to the closing of the acquisition on September 19, 2011. (Logo: http://photos.prnewswire.com/prnh/20110920/FL71045LOGO) Net Income and Earnings per Share The Company reported net income totaling $26.5 million, or $0.16 per diluted share, for the third quarter compared to net income of $28.8 million, or $0.16 per diluted share, for the same period last year.The third quarter 2011 results include non-recurring acquisition and integration costs related to the Boston Proper acquisition totaling approximately $3.5 million, net of tax, or $0.02 per diluted share. Excluding these costs, the Company's third quarter net income was $30.0 million, or $0.18 per diluted share, an earnings per share increase of 13%, compared to net income of $28.8 million, or $0.16 per diluted share for the same period last year.For the nine months ended October 29, 2011, the Company reported net income totaling $115.8 million or $0.66 per diluted share, compared to net income of $94.7 million, or $0.53 per diluted share, reported for the same period last year. Excluding the non-recurring acquisition and integration costs in the third quarter of fiscal 2011, the Company's net income for the nine months ended October 29, 2011 was $119.3 million, or $0.68 per diluted share, an increase of 28%, compared to net income of $94.7 million, or $0.53 per diluted share, for the same period last year.Net Sales Net sales for the quarter increased 11.5% to $538.5 million from $483.0 million in last year's third quarter. Consolidated comparable sales increased 3.7% for the quarter following a 5.5% increase for the same period last year reflecting increases in average dollar sale and transaction count. The Chico's/Soma Intimates brands' comparable sales increased 0.6% following a 3.6% increase for the same period last year and the White House | Black Market ("WH|BM") brand's comparable sales increased 11.0% following a 10.2% increase for the same period last year. Boston Proper's sales are excluded from the comparable sales calculation until twelve full months after the acquisition.Gross MarginGross margin for the third quarter of $301.5 million, or 56.0% of net sales, represents a 100 basis point decrease from last year's third quarter attributable to higher discounting for the Chico's brand as a result of a soft sales environment partially offset by higher margins at the WH|BM and Soma Intimates brands due to increased full-price selling and effective promotional activities.Selling, General and Administrative ExpensesSelling, general and administrative expenses (SG&A) for the third quarter were $259.5 million, or 48.2% of net sales. Excluding $5.0 million of non-recurring acquisition and integration costs consisting of professional service fees and employee benefit related costs, SG&A expenses were $254.5 million, or 47.3% of net sales, a 50 basis point improvement from 47.8% of net sales for last year's third quarter primarily attributable to the sales leverage impact on occupancy costs as well as lower performance based compensation, partially offset by increased marketing expenses. Tax RateFor the 2011 third quarter, the effective tax rate was 37.8% compared to 35.4% for the same period last year. Excluding the impact of certain non-deductible Boston Proper acquisition and integration costs, the 2011 third quarter effective tax rate would have been 36.7%. The effective tax rate was higher in the current quarter compared to last year's third quarter due to a favorable state income tax audit settlement last year. InventoriesTotal inventories at the end of the third quarter were $247 million compared to $179 million for the same period last year. Excluding $17 million of inventory related to Boston Proper, inventories increased $51 million or 29%, of which $18 million was for fourth quarter comparable sales, $14 million for year-over-year new stores, $12 million for earlier receipts and $7 million due to higher average unit costs. Share Repurchase ProgramDuring the third quarter of 2011, the Company repurchased 4.7 million shares for $60.0 million. ABOUT CHICO'S FAS, INC.The Company, through its brands ? Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a women's specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. The Chico's brand offers women a combination of great style, one-of-a-kind details and warm personal service. Chico's currently operates 604 boutiques and 83 outlets throughout the U.S., publishes a monthly catalog and offers round-the-clock shopping at www.chicos.com. White House | Black Market strives to make women feel beautiful with apparel and accessories in the honest simplicity of black and white and the individuality of styles built from it. White House | Black Market currently operates 363 boutiques and 25 outlets, publishes a catalog highlighting its latest fashions and connects with customers at www.whbm.com. Soma Intimates offers beautiful and sensual lingerie, loungewear and beauty. Soma Intimates currently operates 168 boutiques and 17 outlets, publishes a catalog coinciding with key shopping periods and sells direct-to-consumer at www.soma.com. Boston Proper is a leading direct-to-consumer retailer of women's high-end apparel and accessories. Boston Proper provides unique, distinctive fashion designed for today's independent, confident and active woman. The merchandise focus is about creating a daring, modern style with a sensual feel and is available exclusively through the Boston Proper catalog and website, www.bostonproper.com.SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the Company or future results or events constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements involve known or unknown risks, including, but not limited to, general economic and business conditions, and conditions in the specialty retail industry. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Users of forward-looking statements are encouraged to review the Company's latest annual report on Form 10-K, its filings on Form 10-Q, management's discussion and analysis in the Company's latest annual report to stockholders, the Company's filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Company's business, results of operations and financial condition. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized.For more detailed information on Chico's FAS, Inc., please go to our corporate website, www.chicosfas.com.(Financial Tables Follow)Chico's FAS, Inc.Consolidated Statements of Income(Unaudited)(in thousands, except per share amounts)Thirty-Nine Weeks EndedThirteen Weeks EndedOctober 29, 2011October 30, 2010October 29, 2011October 30, 2010Amount% of Sales Amount % of SalesAmount% of Sales Amount % of SalesNet Sales:Chico's/Soma Intimates$ 1,106,46668.0$ 993,98969.5357,20866.3$337,62969.9White House | Black Market509,67731.3435,99230.5170,32831.6145,39330.1Boston Proper11,0100.7??11,0102.1?? Total net sales1,627,153100.01,429,981100.0538,546100.0483,022100.0Cost of goods sold698,65542.9614,12842.9237,03844.0207,95543.0 Gross margin928,49857.1815,85357.1301,50856.0275,06757.0Selling, general and administrative expenses:Store and direct operating expenses 549,39133.8503,22635.2184,41434.2169,72635.1Marketing 90,9795.679,0195.539,0087.331,9286.6National Store Support Center 99,3536.187,0356.131,1005.829,2526.1Acquisition and integration costs4,9850.3??4,9850.9?? Total selling, general and administrative expenses 744,70845.8669,28046.8259,50748.2230,90647.8 Income from operations183,79011.3146,57310.342,0017.844,1619.2Interest income, net1,3860.11,3270.05660.14830.1 Income before income taxes185,17611.4147,90010.342,5677.944,6449.3Income tax provision69,4004.353,2003.716,1003.015,8003.3 Net income $ 115,7767.1$ 94,7006.6$ 26,4674.9$ 28,8446.0Per share data:Net income per common share-basic$ 0.67$ 0.53$ 0.16$ 0.16Net income per common & common equivalent share?diluted$ 0.66$ 0.53$ 0.16$ 0.16Weighted average common shares outstanding?basic170,912177,028166,519176,215Weighted average common & common equivalent shares outstanding?diluted172,092178,320167,575177,262Dividends declared per share$ 0.15$ 0.12??Chico's FAS, Inc.Consolidated Balance Sheets(in thousands)October 29,January 29,October 30,201120112010(Unaudited)(Unaudited)ASSETS Current Assets: Cash and cash equivalents$ 49,485$ 14,695$ 21,930 Marketable securities, at fair value190,328534,019483,622 Receivables5,7353,8454,901 Income tax receivable 6,2796,56512,814 Inventories247,530159,814179,110 Prepaid expenses32,47226,85123,442 Deferred taxes11,73810,97614,347 Total Current Assets543,567756,765740,166 Property and Equipment: Land and land improvements43,63142,46842,351 Building and building improvements96,71289,32887,246 Equipment, furniture and fixtures487,975428,217420,420 Leasehold improvements 448,357426,141425,237 Total Property and Equipment1,076,675986,154975,254 Less accumulated depreciation and amortization(534,313)(468,777)(447,354) Property and Equipment, Net542,362517,377527,900Other Assets: Goodwill 238,95296,77496,774 Other intangible assets133,20138,93038,930 Deferred taxes?9641,027 Other assets, net6,6605,2115,112 Total Other Assets378,813141,879141,843$ 1,464,742$ 1,416,021$ 1,409,909LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities: Accounts payable$ 144,196$ 106,680$ 101,086 Accrued liabilities114,23294,837107,941 Current portion of deferred liabilities21,02719,76019,905 Total Current Liabilities279,455221,277228,932Noncurrent Liabilities: Deferred liabilities173,097129,837132,665Stockholders' Equity: Preferred stock??? Common stock1,6761,7791,776 Additional paid-in capital297,480282,528279,227 Retained earnings 712,766780,212766,619 Accumulated other comprehensive income 268388690 Total Stockholders' Equity1,012,1901,064,9071,048,312$ 1,464,742$ 1,416,021$ 1,409,909Chico's FAS, Inc.Consolidated Cash Flow Statements(Unaudited)(in thousands)Thirty-Nine Weeks EndedOctober 29,2011October 30,2010CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 115,776$ 94,700 Adjustments to reconcile net income to net cash provided by operating activities ? Depreciation and amortization72,95270,218 Deferred tax expense 11,39929,828 Stock-based compensation expense11,0518,874 Excess tax benefit from stock-based compensation(1,758)(1,223) Deferred rent and lease credits (14,106)(12,053) Loss on disposal of property and equipment2,6031,912 Decrease (increase) in assets, net of effects of acquisition ? Receivables, net(1,723)(978) Income tax receivable 5,086(12,503) Inventories(73,485)(40,593) Prepaid expenses and other(4,722)737 Increase in liabilities, net of effects of acquisition? Accounts payable29,13121,850 Accrued and other deferred liabilities28,80516,138 Total adjustments65,23382,207 Net cash provided by operating activities 181,009176,907CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in marketable securities343,570(96,836) Acquisition of Boston Proper, Inc., net of cash acquired(212,733)? Purchases of property and equipment, net(98,174)(58,501) Net cash provided by (used in) investing activities32,663(155,337)CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock3,5672,137 Excess tax benefit from stock-based compensation1,7581,223 Dividends paid (25,888)(21,389) Repurchase of common stock(157,905)(18,654) Cash paid for deferred financing costs(414)? Net cash used in financing activities (178,882)(36,683) Net increase (decrease) in cash and cash equivalents34,790(15,113)CASH AND CASH EQUIVALENTS, Beginning of period14,69537,043CASH AND CASH EQUIVALENTS, End of period$ 49,485$ 21,930SEC Regulation G - The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP operating results, which exclude certain non-recurring charges including acquisition and integration costs, may provide a more meaningful measure on which to compare the Company's results of operations between periods. The Company believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that impact the comparability of the results. A reconciliation of net income and earnings per diluted share on a GAAP basis to net income and earnings per diluted share on a non-GAAP basis is presented in the table below:Chico's FAS, Inc.Non-GAAP to GAAP Reconciliation of Net Income and Diluted EPS(in thousands, except per share amounts)Thirty-NineWeeks EndedThirteen Weeks EndedNet income: October 29, 2011October 29, 2011GAAP basis $ 115,776$ 26,467Add: Impact of acquisition and integration costs, net of tax3,5333,533Non-GAAP adjusted basis$ 119,309$ 30,000Net income per diluted share:GAAP basis $ 0.66$ 0.16Add: Impact of acquisition and integration costs, net of tax 0.020.02Non-GAAP adjusted basis$ 0.68$ 0.18Chico's FAS, Inc.Boutique Count and Square FootageAs of October 29, 2011As of New As of 7/30/2011StoresClosures10/29/2011Store count:Chico's frontline boutiques5985(4)599Chico's outlets775?82WH|BM frontline boutiques3566(4)358WH|BM outlets25??25Soma frontline boutiques14820?168Soma outlets143?17Total Chico's FAS, Inc.1,21839(8)1,249Remodels/Relos andAs of New change in As of 7/30/2011StoresClosuresSSF10/29/2011Net selling square footage (SSF):Chico's frontline boutiques1,619,87212,968(10,404)1,5201,623,956Chico's outlets198,50612,302?(372)210,436WH|BM frontline boutiques745,77414,622(10,401)2,276752,271WH|BM outlets48,238???48,238Soma frontline boutiques302,73238,203?(260)340,675Soma outlets25,7356,279?3632,050Total Chico's FAS, Inc.2,940,85784,374(20,805)3,2003,007,626Executive Contact:Robert C. AtkinsonVice President-Investor RelationsChico's FAS, Inc.(239) 274-4199SOURCE Chico's FAS, Inc.