NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and where otherwise indicated)
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1.
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BUSINESS ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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Description of Business
The accompanying consolidated financial statements include the accounts of Chico’s 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 women’s private branded, sophisticated, casual-to-dressy clothing, intimates and complementary accessories. We currently sell our products through retail stores, catalogs and via our websites at
www.chicos.com
,
www.whbm.com
and
www.soma.com
. As of
January 28, 2017
, we had
1,501
stores located throughout the United States, the U.S. Virgin Islands, Puerto Rico and Canada, and sold merchandise through
91
franchise locations in Mexico.
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
January 28, 2017
(“fiscal
2016
” or “current period”),
January 30, 2016
(“fiscal
2015
” or “prior period”) and
January 31, 2015
(“fiscal
2014
”). Fiscal
2016
,
2015
and
2014
all 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, Chico’s, Soma, and White House Black Market ("WHBM") 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.
Change in Accounting Policy
Effective January 31, 2016, the Company made a voluntary change in accounting principle related to our classification of shipping expenses. Historically, we have presented shipping expenses within selling, general and administrative expenses ("SG&A"). Under the new policy, the Company is presenting these expenses within cost of good sold ("COGS") in the audited consolidated statements of income. The Company believes that this change is preferable as the shipping expenses represent direct costs associated with the sale of our merchandise and improves comparability with the Company's peers. The accounting policy change was applied retrospectively to all periods presented. There was no change to consolidated net income, however, cost of sales increased by
$37.3 million
and
$37.8 million
, and SG&A decreased by the same amount for the years ended
January 30, 2016
, and
January 31, 2015
. The Company recorded
$35.9 million
in shipping expenses as a component of COGS during the year ended
January 28, 2017
.
Reclassification of Occupancy Expenses and Correction of Immaterial Accounting Error
The Company has changed its classification of store occupancy expenses. Historically, we have presented store occupancy expenses within SG&A. As now reclassified, the Company is presenting these expenses within COGS in the consolidated statements of income. The Company believes that store occupancy expenses represent direct costs associated with the sale of our merchandise and improves comparability with the Company’s peers. This reclassification was applied retrospectively to all periods presented. There was no change to consolidated net income, however, cost of sales increased by
$384.9 million
and
$373.0 million
, and SG&A decreased by the same amount for the years ended
January 30, 2016
and
January 31, 2015
. The Company recorded
$381.0 million
in store occupancy expenses as a component of COGS during the year ended
January 28, 2017
.
The Company has also elected to correct the historical classification of shipping revenue within SG&A. To correct the immaterial error, we are classifying shipping revenue as a component of net sales within the consolidated statements of income for all periods presented. There was no change to consolidated net income, however, net sales increased by
$18.3 million
,
$18.7 million
, and SG&A increased by the same amount for the years ended
January 30, 2016
and
January 31, 2015
. The Company recorded
$13.0 million
in shipping revenue as a component of net sales during the year ended
January 28, 2017
.
Adjustments to Presentation
The above mentioned changes had no cumulative effect on the presentation of the consolidated statements of income, consolidated balance sheets, or consolidated statements of cash flows. The effects of the aforementioned accounting policy change, change in classification and error correction to the
January 30, 2016
and
January 31, 2015
consolidated statements of income are as follows (dollars in thousands):
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As Previously Reported
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% of Sales
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Change in Accounting Policy
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Effect of Change in Occupancy Classification
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Effect of Error Correction
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As Adjusted
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% of Sales
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Twelve Months Ended January 30, 2016
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Net sales
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$
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2,642,309
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100.0
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$
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—
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$
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—
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$
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18,326
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$
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2,660,635
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100.0
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Cost of goods sold
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1,211,552
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45.9
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37,317
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384,895
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—
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1,633,764
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61.4
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Gross Margin
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1,430,757
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54.1
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(37,317
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)
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(384,895
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)
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18,326
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1,026,871
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38.6
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Selling, general and administrative expenses
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1,282,585
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48.5
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(37,317
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)
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(384,895
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)
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18,326
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878,699
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33.0
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As Previously Reported
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% of Sales
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Change in Accounting Policy
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Effect of Change in Occupancy Classification
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Effect of Error Correction
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As Adjusted
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% of Sales
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Twelve Months Ended January 31, 2015
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Net sales
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$
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2,675,211
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100.0
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$
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—
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$
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—
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$
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18,718
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$
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2,693,929
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100.0
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Cost of goods sold
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1,248,889
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46.7
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37,815
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372,987
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—
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1,659,691
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61.6
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Gross Margin
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1,426,322
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53.3
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(37,815
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)
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(372,987
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)
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18,718
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1,034,238
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38.4
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Selling, general and administrative expenses
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1,263,134
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47.2
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(37,815
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)
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(372,987
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)
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18,718
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871,050
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32.3
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Footnotes to the consolidated financial statements herein have been adjusted to reflect the impact of these changes accordingly.
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.
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 and fair value are 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, money market accounts, marketable securities, assets held in our non-qualified deferred compensation plan, accounts receivable, accounts payable and debt. Cash, accounts receivable and accounts payable are carried at cost, which approximates 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. Further, inventory realization exposure is identified through analysis of gross margins and markdowns in combination with changes in current business trends. We record excess and slow-moving inventories at net realizable value and may liquidate certain slow-moving inventory through third parties. 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
2016
and
23%
of total purchases in
2015
were made from
one
supplier. In fiscal
2016
and
2015
, approximately
55%
and
54%
of our merchandise cost originated in China, respectively.
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 generally depreciated using the following estimated useful lives:
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Estimated Useful Lives
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Land improvements
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15 - 35 years
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Building and building improvements
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20 - 35 years
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Equipment, furniture and fixtures
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2 - 20 years
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Leasehold improvements
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10 years or term
of lease, if shorter
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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.
Operating Leases
We lease retail stores and a limited amount of office space 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 it is determined that achieving the specified levels during the lease year is probable.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets are assessed 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 Chico’s reporting unit and the goodwill associated with the WHBM acquisition should be assigned to the WHBM reporting unit.
We evaluate the appropriateness of performing a qualitative assessment, on a reporting unit level, based on current circumstances. A two-step impairment test is performed only if the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. 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 or EBITDA multiples of similar companies and transactions or other available indications of value. For
2016
, we performed a qualitative assessment of the goodwill associated with the Chico's and WHBM reporting units and concluded it was more likely than not that the fair value exceeded the carrying amount as of the annual assessment date. In fiscal
2015
and
2014
, we performed a goodwill impairment assessment of the Boston Proper reporting unit and recorded pre-tax, non-cash goodwill impairment charges of
$48.9 million
and
$25.8 million
, respectively, as further discussed in Note 8. We completed the sale of the Boston Proper direct-to-consumer ("DTC") business in January 2016.
We 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, and compare the fair value to the carrying value to determine if the asset is impaired. We may elect to skip the qualitative assessment when appropriate based on current circumstances. For
2016
, we performed a qualitative assessment of the WHBM trade name and concluded it was more likely than not that the fair value exceeded the carrying amount as of the annual assessment date. In fiscal
2015
and
2014
we performed an impairment assessment of Boston Proper indefinite-lived intangible assets and recorded pre-tax, non-cash impairment charges of
$39.4 million
and
$4.3 million
on the Boston Proper trade name as further discussed in Note 8.
Intangible assets subject to amortization consisted of the value of Boston Proper customer relationships. In fiscal
2015
, we performed an impairment assessment of the Boston Proper customer relationships and recorded pre-tax, non-cash impairment charges of
$24.2 million
as further discussed in Note 8. All remaining Boston Proper intangible assets, including the Boston Proper trade name and customer relationships were included in the sale of the Boston Proper DTC business in fiscal 2015.
Accounting for the Impairment of Long-lived Assets and Assets Held for Sale
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
2016
,
2015
and
2014
, 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
$2.5 million
,
$1.4 million
and
$1.3 million
, respectively, which are included in SG&A in the accompanying consolidated statements of income. Additionally, in connection with the restructuring program initiated in fiscal 2014 as further discussed in Note 2, we have identified approximately
150
stores, including the Boston Proper stores, to be closed from fiscal 2015 through 2017. As a result, in fiscal
2015
and
2014
, we recorded additional impairment charges of approximately
$12.5 million
and
$5.4 million
, respectively, which are included in restructuring and strategic charges in the accompanying consolidated statements of income.
Assets held for sale are measured at the lower of their carrying value or fair value less costs of disposal. Upon retirement or disposition, the asset cost and related accumulated depreciation or amortization are removed from the accounts, and a gain or loss is recognized based on the difference between the fair value of proceeds received and the asset’s carrying value.
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 employee 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. Amounts related to shipping and handling costs billed to customers are recorded in net sales and the related shipping and handling costs are recorded in cost of goods sold in the accompanying consolidated statements of income. Amounts paid by customers to cover shipping and handling costs are immaterial.
Our gift cards do not have expiration dates. We account for gift cards by recognizing a liability at the time the gift card is sold. The liability is relieved and revenue is recognized for gift cards upon redemption. In addition, we recognize revenue for the amount of gift cards expected to go unredeemed (commonly referred to as 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 our historical gift card breakage rate. We determine the gift card breakage rate based on our historical redemption patterns. We recognize revenue on the remaining unredeemed gift cards based on determining that the likelihood of the gift card being redeemed is remote and that there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions.
Soma offers a points based loyalty program in which customers earn points based on purchases. Attaining specified loyalty point levels results in the issuance of reward coupons to discount future purchases. As program members accumulate points, we accrue the estimated future liability, adjusted for expected redemption rates and expirations. The liability is relieved and revenue is recognized for loyalty point reward coupons upon redemption. In addition, we recognize revenue on unredeemed points when it can be determined that the likelihood of the point being redeemed is remote and there is no legal obligation to remit the point value. We determined the loyalty point breakage rate based on historical and 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 non-catalog 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 six weeks. For fiscal
2016
,
2015
and
2014
, advertising expense was approximately
$115.4 million
,
$159.9 million
and
$153.1 million
, respectively, and is included within SG&A in the accompanying consolidated statements of income.
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 Company’s 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, depending on the level and likelihood of the performance condition to be met.
Shipping and Handling Costs
Shipping and handling costs to transport goods to customers, amounted to
$35.9 million
,
$37.3 million
and
$37.8 million
in fiscal
2016
,
2015
and
2014
, respectively, and are included within cost of goods sold in the accompanying consolidated statements of income.
Occupancy and Store Pre-opening Costs
Occupancy and store pre-opening costs (including store-related costs and training expenses) incurred prior to the opening of new stores are expensed as incurred and are included within cost of sales 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. 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 management’s 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.
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, which is included in cost of goods sold, 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 composed entirely of unvested restricted stock awards and performance-based stock units that have met their relevant performance criteria.
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 non-participating securities such as stock options and performance-based stock units.
Newly Issued Accounting Pronouncements
In October 2016, the FASB issued ASU No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. ASU 2016-16 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. ASU 2016-16 requires companies to recognize the income tax effects of intercompany sales or transfers of other assets in the income statement as income tax expense (benefit) in the period the sale or transfer occurs. Additionally, companies would evaluate whether the tax effects of the intercompany sales of transfers of non-inventory assets should be included in their estimates of annual effective tax rates by using today's interim guidance on income tax accounting. ASU 2016-16 will require modified retrospective transition with a cumulative catch-up adjustment to opening retained earnings in the period of adoption, which we expect to implement in fiscal 2018. At January 28, 2017 the Company had
$6.2 million
in assets related to the transfer of intra–entity asset transfers.
In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-09, Compensation - Stock Compensation. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. ASU 2016-09 requires entities to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The standard also permits an employer to repurchase more of an employee's shares for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. We have performed preliminary assessments and have concluded that we will continue to estimate expected forfeitures and although the inclusion of excess tax benefits and deficiencies will increase volatility within our provision for income taxes, we do not anticipate a material impact to our consolidated results of operations based upon equity events. Further, the Company notes that all significant excess tax benefits have been realized through a reduction to income taxes payable.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces the existing guidance in Accounting Standard Codification 840, Leases. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and should be applied on a modified retrospective basis. ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize straight-line total rent expense. Upon adoption of the standard, we expect to record material right–of–use assets and lease liabilities on the balance sheet approximating the present value of the remaining terms of our leases in fiscal 2019.
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, under which entities will no longer be able to recognize unrealized holding gains and losses on equity securities they classify as available-for-sale in other comprehensive income but instead recognize the change in fair value in net income. The standard is effective for interim and annual reporting periods beginning after December 15, 2017. We do not anticipate adoption to have a material impact to our consolidated results of operations, financial position or cash flows.
In July 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330). The amendments, which apply to inventory that is measured using any method other than the last-in, first-out (LIFO) or retail inventory method, require that entities measure inventory at the lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied on a prospective basis. We do not, at this time, anticipate a material impact to our consolidated results of operations, financial position or cash flows.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB approved a one year deferral of the effective date, to make it effective for annual and interim reporting periods beginning after December 15, 2017. The standard allows for either a full retrospective or a modified retrospective transition method. The FASB has issued subsequent ASUs related to ASU No. 2014-09, which detail amendments to the ASU, implementation considerations, narrow-scope improvements and practical expedients. Through our evaluation of the impact of this ASU, we have identified certain changes that are expected to be made to our accounting policies, including: the timing of our recognition of advertising expenses, whereby certain expenses that are currently amortized over their expected period of future benefit will be expensed the first time the advertisement appears, and the balance sheet presentation of merchandise returns as both an asset equal to the inventory value, less estimated processing costs, and a related return liability, compared to the net returns liability currently recorded. We plan to adopt this ASU beginning in the first quarter of fiscal 2018 with a cumulative adjustment to retained earnings as opposed to retrospectively adjusting prior periods. We are continuing to evaluate the impact this ASU, and related amendments and interpretive guidance, will have on our consolidated financial statements.
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2.
|
RESTRUCTURING AND STRATEGIC CHARGES:
|
During the fourth quarter of fiscal 2014, we initiated a restructuring program, including the acceleration of domestic store closures and an organizational realignment, to ensure that resources align with long-term growth initiatives, including omni-channel. In connection with this effort, in fiscal 2014, we recorded pre-tax restructuring and strategic charges of approximately
$16.7 million
primarily related to severance and termination benefits, store closures and other impairment charges.
In fiscal
2015
, we completed an evaluation of the Boston Proper brand, completed the sale of the Boston Proper DTC business, and closed its stores. We assessed the disposal group and determined that the sale of the Boston Proper DTC business did not have a major effect on our consolidated results of operations, financial position or cash flows. Accordingly, the disposal group is not presented in the consolidated financial statements as a discontinued operation. Pretax losses for the Boston Proper DTC business for fiscal
2015
and
2014
were
$11.8 million
and
$7.9 million
, respectively. The loss recorded in fiscal 2015 upon disposition of the Boston Proper assets held for sale was not material.
In connection with our restructuring and strategic activities, in fiscal
2016
we continued to evaluate future store closures and adjusted the estimated store closures to approximately
150
through fiscal 2017, including the Boston Proper stores, with
103
stores across our brands closed through fiscal
2016
. We do not expect to incur any material additional cash charges related to lease termination expenses for these future closures.
During the first quarter of fiscal
2016
, we expanded our restructuring program to include components of our strategic initiatives that further align the organizational structure with long-term growth initiatives, including transition of executive leadership, and to reduce COGS and SG&A through strategic initiatives. These strategic initiatives include realigning marketing and digital commerce, improving supply chain efficiency, reducing non-merchandise expenses, and optimizing marketing spend. In fiscal
2016
, the Company recorded pre-tax restructuring and strategic charges of
$31.0 million
, primarily related to outside services, severance and proxy solicitation costs. Effective in the third quarter of fiscal
2016
, we have substantially completed our restructuring program and do not expect significant additional charges to be incurred.
A summary of the restructuring and strategic charges is presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
|
Fiscal 2015
|
|
Fiscal 2014
|
|
|
|
|
|
|
|
(in thousands)
|
Impairment charges
|
$
|
1,453
|
|
|
$
|
22,001
|
|
|
$
|
8,554
|
|
Continuing employee-related costs
|
1,796
|
|
|
8,330
|
|
|
—
|
|
Severance charges
|
9,485
|
|
|
6,863
|
|
|
7,577
|
|
Proxy solicitation costs
|
5,697
|
|
|
—
|
|
|
—
|
|
Lease terminations
|
427
|
|
|
9,578
|
|
|
—
|
|
Outside services
|
12,013
|
|
|
—
|
|
|
—
|
|
Other charges
|
156
|
|
|
2,029
|
|
|
614
|
|
Restructuring and strategic charges, pre-tax
|
$
|
31,027
|
|
|
$
|
48,801
|
|
|
$
|
16,745
|
|
As of
January 28, 2017
, a reserve of
$11.2 million
related to restructuring and strategic activities was included in other current and deferred liabilities in the accompanying consolidated balance sheets. A roll-forward of the reserve is presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing employee-related costs
|
|
Severance Charges
|
|
Proxy solicitation costs
|
|
Lease Termination Charges
|
|
Outside services
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
Beginning Balance, January 30, 2016
|
$
|
2,549
|
|
|
$
|
1,678
|
|
|
$
|
—
|
|
|
$
|
1,101
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
5,337
|
|
Charges
|
1,796
|
|
|
9,485
|
|
|
5,697
|
|
|
427
|
|
|
12,013
|
|
|
156
|
|
|
29,574
|
|
Payments
|
(3,674
|
)
|
|
(8,750
|
)
|
|
(5,697
|
)
|
|
(682
|
)
|
|
(4,723
|
)
|
|
(156
|
)
|
|
(23,682
|
)
|
Ending Balance, January 28, 2017
|
$
|
671
|
|
|
$
|
2,413
|
|
|
$
|
—
|
|
|
$
|
846
|
|
|
$
|
7,299
|
|
|
$
|
—
|
|
|
$
|
11,229
|
|
|
|
3.
|
MARKETABLE SECURITIES:
|
Marketable securities are classified as available-for-sale and as of
January 28, 2017
generally consist of corporate bonds and U.S. government agencies with
$26.2 million
of securities with maturity dates within one year or less and
$24.2 million
with maturity dates over one year and less than two years. As of
January 30, 2016
, marketable securities generally consisted of corporate bonds and U.S. government agency securities.
The following tables summarize our investments in marketable securities at
January 28, 2017
and
January 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
(in thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
Total marketable securities
|
$
|
50,460
|
|
|
$
|
3
|
|
|
$
|
(93
|
)
|
|
$
|
50,370
|
|
|
|
|
|
|
|
|
|
|
January 30, 2016
|
|
(in thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
Total marketable securities
|
$
|
50,232
|
|
|
$
|
10
|
|
|
$
|
(48
|
)
|
|
$
|
50,194
|
|
|
|
4.
|
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.
From time to time, we measure certain assets at fair value on a non-recurring basis. This includes the 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. We estimate the fair value of assets held for sale using market values for similar assets which would fall within Level 2 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 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.
To assess the fair value of long-term debt, we utilize a discounted future cash flow model using current borrowing rates for similar types of debt of comparable maturities.
During fiscal 2015, we recorded a
$112.5 million
pre-tax impairment charge related to assets measured at fair value on a non-recurring basis, comprised of
$48.9 million
in Boston Proper goodwill impairment,
$39.4 million
pre-tax related to the Boston Proper trade name, and
$24.2 million
pre-tax related to the Boston Proper intangible customer list.
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
2016
, we did not make any transfers between Level 1 and Level 2 financial assets. Furthermore, during fiscal
2016
and
2015
we did not have any Level 3 financial assets measured on a recurring basis. 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.
In accordance with the provisions of the guidance, we categorized our financial assets and liabilities 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 January 28, 2017
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Financial Assets:
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market accounts
|
$
|
471
|
|
|
$
|
471
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
Municipal securities
|
5,634
|
|
|
—
|
|
|
5,634
|
|
|
—
|
|
U.S. government agencies
|
23,071
|
|
|
—
|
|
|
23,071
|
|
|
—
|
|
Corporate bonds
|
15,799
|
|
|
—
|
|
|
15,799
|
|
|
—
|
|
Commercial paper
|
5,866
|
|
|
—
|
|
|
5,866
|
|
|
—
|
|
Non Current Assets
|
|
|
|
|
|
|
|
Deferred compensation plan
|
7,523
|
|
|
7,523
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
58,364
|
|
|
$
|
7,994
|
|
|
$
|
50,370
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
Long-term debt
1
|
$
|
84,785
|
|
|
$
|
—
|
|
|
85,139
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Balance as of January 30, 2016
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Financial Assets:
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market accounts
|
$
|
275
|
|
|
$
|
275
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
Municipal securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
U.S. government agencies
|
21,800
|
|
|
—
|
|
|
21,800
|
|
|
—
|
|
Corporate bonds
|
26,149
|
|
|
—
|
|
|
26,149
|
|
|
—
|
|
Commercial paper
|
2,245
|
|
|
—
|
|
|
2,245
|
|
|
—
|
|
Non Current Assets
|
|
|
|
|
|
|
|
Deferred compensation plan
|
7,023
|
|
|
7,023
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
57,492
|
|
|
$
|
7,298
|
|
|
$
|
50,194
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
Long-term debt
|
$
|
92,219
|
|
|
$
|
—
|
|
|
92,647
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
1
The carrying value of long-term debt includes the remaining unamortized discount of $0.2 million on the issuance of debt.
|
|
|
5.
|
PREPAID EXPENSES AND ACCOUNTS RECEIVABLE:
|
Prepaid expenses and accounts receivable consisted of the following:
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
January 30, 2016
|
|
|
|
|
|
(in thousands)
|
Prepaid expenses
|
$
|
39,847
|
|
|
$
|
38,179
|
|
Accounts receivable
|
10,503
|
|
|
7,481
|
|
Prepaid expenses and accounts receivable
|
$
|
50,350
|
|
|
$
|
45,660
|
|
In connection with the restructuring program, we determined that certain vacant land met the criteria to be classified as held for sale as of
January 30, 2016
. In fiscal
2016
, we completed the sale of this vacant land for
$16.2 million
.
|
|
7.
|
PROPERTY AND EQUIPMENT, NET:
|
Property and equipment, net, consisted of the following:
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
January 30, 2016
|
|
|
|
|
|
(in thousands)
|
Land and land improvements
|
$
|
31,103
|
|
|
$
|
30,157
|
|
Building and building improvements
|
127,398
|
|
|
128,093
|
|
Equipment, furniture and fixtures
|
617,311
|
|
|
626,952
|
|
Leasehold improvements
|
538,735
|
|
|
553,125
|
|
Total property and equipment
|
1,314,547
|
|
|
1,338,327
|
|
Less accumulated depreciation and amortization
|
(837,362
|
)
|
|
(787,374
|
)
|
Property and equipment, net
|
$
|
477,185
|
|
|
$
|
550,953
|
|
Total depreciation expense for fiscal
2016
,
2015
and
2014
was
$109.1 million
,
$116.6 million
and
$117.8 million
, respectively.
|
|
8.
|
GOODWILL AND OTHER INTANGIBLE ASSETS:
|
Goodwill and other intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
January 30, 2016
|
|
|
|
|
|
(in thousands)
|
Goodwill
|
$
|
96,774
|
|
|
$
|
96,774
|
|
|
|
|
|
Indefinite-Lived Intangibles:
|
|
|
|
WHBM trade name
|
$
|
34,000
|
|
|
$
|
34,000
|
|
Minnesota territorial franchise rights
|
4,930
|
|
|
4,930
|
|
Indefinite-lived intangibles
|
$
|
38,930
|
|
|
$
|
38,930
|
|
|
|
|
|
Definite-Lived Intangibles:
|
|
|
|
Boston Proper customer relationships
|
$
|
—
|
|
|
$
|
43,580
|
|
Accumulated amortization expense recorded
|
—
|
|
|
(16,851
|
)
|
Impairment expense recorded
|
—
|
|
|
(24,166
|
)
|
Sale of Boston Proper customer relationships
|
—
|
|
|
(2,563
|
)
|
Definite-lived intangibles
|
—
|
|
|
—
|
|
Other intangible assets, net
|
$
|
38,930
|
|
|
$
|
38,930
|
|
In fiscal
2015
, based on market indications of value and a decline in sales, we recorded a pre-tax goodwill impairment charge of
$48.9 million
related to Boston Proper goodwill, reducing the carrying value of goodwill to
zero
, pre-tax impairment charges related to the Boston Proper trade name of
$39.4 million
, reducing the carrying value of the trade name to
$2.3 million
, and a pre-tax impairment charge related to Boston Proper customer relationships of
$24.2 million
, reducing the carrying value of the customer relationships to
$2.6 million
. All impairment charges were recorded within goodwill and intangible impairment charges in the accompanying consolidated statements of income.
In fiscal 2015, the Company completed the sale the Boston Proper DTC business, which included the carrying values of the Boston Proper trade name of
$2.3 million
and Boston Proper customer relationships of
$2.6 million
. The net proceeds on the sale of the Boston Proper DTC business are included in restructuring and strategic charges in the accompanying consolidated statements of income. Amortization expense for fiscal
2015
was approximately
$2.2 million
related to Boston Proper customer relationships.
In fiscal
2014
, as a result of sales and margin declines in the Boston Proper brand due to issues with merchandising and marketing effectiveness, we recorded a pre-tax goodwill impairment charge of
$25.8 million
, reducing the carrying value of Boston Proper goodwill to
$48.9 million
and an impairment charge related to the Boston Proper trade name of
$4.3 million
pre-tax, reducing the carrying value of the Boston Proper trade name to
$41.7 million
. All impairment charges were recorded within 'Goodwill and intangible impairment charges' in the accompanying consolidated statements of income.
The following table provides the carrying amounts of Boston Proper goodwill and pre-tax cumulative goodwill impairment charges:
|
|
|
|
|
|
|
|
|
|
|
January 30, 2016
|
|
January 31, 2015
|
|
|
|
|
|
|
|
(in thousands)
|
Gross carrying amount
|
$
|
141,919
|
|
|
$
|
141,919
|
|
|
Cumulative impairment, beginning of year
|
(93,066
|
)
|
|
(67,266
|
)
|
|
Impairment charges
|
(48,853
|
)
|
|
(25,800
|
)
|
|
Cumulative impairment, end of year
|
(141,919
|
)
|
|
(93,066
|
)
|
|
Net carrying amount
|
$
|
—
|
|
|
$
|
48,853
|
|
|
There were
no
changes in goodwill during fiscal
2016
.
|
|
9.
|
OTHER CURRENT AND DEFERRED LIABILITIES:
|
Other current and deferred liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
January 30, 2016
|
|
|
|
|
|
(in thousands)
|
Allowance for customer returns, gift cards and store credits outstanding
|
$
|
59,893
|
|
|
$
|
58,060
|
|
Accrued payroll, benefits, bonuses and severance costs and termination benefits
|
45,512
|
|
|
40,993
|
|
Current portion of deferred rent and lease credits
|
22,451
|
|
|
26,596
|
|
Other
|
42,376
|
|
|
33,139
|
|
Other current and deferred liabilities
|
$
|
170,232
|
|
|
$
|
158,788
|
|
In fiscal 2015, we entered into a credit agreement (the "Agreement") among the Company, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A., as Syndication Agent and the other lenders. Our obligations under the Agreement are guaranteed by certain of our material U.S. subsidiaries. The Agreement provides for a term loan commitment in the amount of
$100.0 million
, of which
$100.0 million
was drawn at closing, and matures on May 4, 2020, payable in quarterly installments, as defined in the Agreement, with the remainder due at maturity.
The Agreement also provides for a
$100.0 million
revolving credit facility, of which
$24.0 million
was drawn at closing and repaid in the second quarter of fiscal 2015. There were
no
amounts outstanding on the revolving credit facility as of
January 28, 2017
. The revolving credit facility matures on May 4, 2020.
The Agreement contains various covenants and restrictions, including maximum leverage ratio, as defined, of no more than
3.50
to
1.00
until July 31, 2018, and
3.25
to
1.00
after July 31, 2018, and minimum fixed charge coverage ratio, as defined, of not less than
1.20
to
1.00
. If the Company failed to comply with these financial covenants, a default would trigger and all principal and outstanding interest would be due and payable. At
January 28, 2017
, the Company was in compliance with all financial covenant requirements of the Agreement.
The Agreement has borrowing options which accrue interest by reference, at our election, at either an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate ("ABR") plus an interest rate margin, as defined in the Agreement. The interest rate on borrowings and our commitment fee rate vary based on the maximum leverage ratio as follows:
|
|
|
|
|
|
|
|
|
|
Maximum Leverage Ratio:
|
|
Eurodollar Spread
|
|
ABR Spread
|
|
Commitment Fee Rate
|
Category 1:
|
< 2.25 to 1.00
|
|
1.25%
|
|
0.25%
|
|
0.20%
|
Category 2:
|
≥ 2.25 to 1.00 but
< 3.00 to 1.00
|
|
1.50%
|
|
0.50%
|
|
0.25%
|
Category 3:
|
≥ 3.00 to 1.00
|
|
1.75%
|
|
0.75%
|
|
0.30%
|
On May 4, 2015, in connection with our entry into the Agreement, we repaid and terminated with no prepayment penalties, the
$124.0 million
outstanding obligation under our 2011 revolving credit facility. We used the proceeds from the initial draw of the term loan and revolving credit facility of the Agreement to repay such obligations.
As of
January 28, 2017
,
$84.8 million
in borrowings were outstanding under the Agreement, and are reflected as
$16.3 million
in current debt and
$68.5 million
in long-term debt in the accompanying consolidated balance sheets.
The following table provides details on our debt outstanding as of
January 28, 2017
and
January 30, 2016
:
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
January 30, 2016
|
|
|
|
|
|
(in thousands)
|
Credit Agreement, net
|
$
|
84,785
|
|
|
$
|
92,219
|
|
Less: current debt
|
(16,250
|
)
|
|
(10,000
|
)
|
Long-term debt
|
$
|
68,535
|
|
|
$
|
82,219
|
|
Aggregate future maturities of long-term debt are as follows:
|
|
|
|
|
FISCAL YEAR ENDING:
|
|
(in thousands)
|
|
February 3, 2018
|
$
|
16,250
|
|
February 2, 2019
|
15,000
|
|
February 1, 2020
|
15,000
|
|
January 30, 2021
|
38,750
|
|
|
|
11.
|
NON-CURRENT DEFERRED LIABILITIES:
|
Deferred liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
January 30, 2016
|
|
|
|
|
|
(in thousands)
|
Deferred rent
|
$
|
51,909
|
|
|
$
|
50,469
|
|
Deferred lease credits
|
80,217
|
|
|
96,747
|
|
Other deferred liabilities
|
8,868
|
|
|
10,123
|
|
Deferred liabilities
|
140,994
|
|
|
157,339
|
|
Less current portion of deferred rent and lease credits
|
(22,451
|
)
|
|
(26,596
|
)
|
Non-current deferred liabilities
|
$
|
118,543
|
|
|
$
|
130,743
|
|
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 appropriate respective terms of the 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.
|
|
12.
|
COMMITMENTS AND CONTINGENCIES:
|
Leases
We lease retail stores, a limited amount of office space and certain office equipment under operating leases expiring in various years through the fiscal year ending 2028. 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 typically renewed or replaced by other leases.
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
January 28, 2017
, are approximately as follows:
|
|
|
|
|
FISCAL YEAR ENDING:
|
|
(in thousands)
|
|
February 3, 2018
|
$
|
189,134
|
|
February 2, 2019
|
162,035
|
|
February 1, 2020
|
141,170
|
|
January 30, 2021
|
127,559
|
|
January 29, 2022
|
109,191
|
|
Thereafter
|
182,856
|
|
Total minimum lease payments
|
$
|
911,945
|
|
Certain 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 met or exercised a significant number of these cancellation clauses and, therefore, have included commitments for the full lease terms of such leases in the above table. For fiscal
2016
,
2015
and
2014
, total rent expense under operating leases was approximately
$268.5 million
,
$266.2 million
and
$253.2 million
, respectively, including common area maintenance charges of approximately
$47.6 million
,
$46.7 million
and
$42.5 million
, respectively, other rental charges of approximately
$41.2 million
,
$40.1 million
and
$37.6 million
, respectively, and contingent rental expense, based on sales, of approximately
$5.2 million
,
$5.8 million
and
$7.0 million
, respectively.
Open Purchase Orders
At
January 28, 2017
and
January 30, 2016
, we had approximately
$356.7 million
and
$398.6 million
, respectively, of open purchase orders for inventory, in the normal course of business.
Legal Proceedings
In July 2015, the Company was named as a defendant in Altman v. White House Black Market, Inc., a putative class action filed in the United States District Court for the Northern District of Georgia. The Complaint alleges that the Company, in violation of federal law, published more than the last five digits of a credit or debit card number or an expiration date on customers' receipts. The Company denies the material allegations of the complaint. Its motion to dismiss was denied on July 13, 2016, but the Company continues to believe that the case is without merit and is not appropriate for class treatment. It will continue to vigorously defend the matter. At this time, it is not possible to predict whether the proceeding will be permitted to proceed as a class or the size of the putative class, and no assurance can be given that the Company will be successful in its defense on the merits or otherwise. No specific dollar amount in damages or other relief is specified in the Complaint, and the Company is unable to estimate any potential loss or range of loss. However, if the case were to proceed as a class action and the Company were to be unsuccessful in its defense on the merits, the ultimate resolution of the case could have a material adverse effect on the Company’s consolidated financial condition.
In June 2015, the Company was named as a defendant in Ackerman v. Chico’s FAS, Inc., a putative representative Private Attorney General action filed in the Superior Court of California, County of Los Angeles. The Complaint alleges numerous violations of California law related to wages, meal periods, rest periods, wage statements and failure to reimburse business expenses, among other things. Plaintiff subsequently amended her complaint to make the same allegations on a class action basis. In June 2016, the parties submitted a proposed settlement of the matter to the court, and the court granted preliminary approval on August 26, 2016, and settlement notices have been distributed. If finally approved, the proposed settlement will not have a material adverse effect on the Company’s consolidated financial condition or results of operations.
In March 2016, the Company was named as a defendant in Cunningham v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of San Diego. The Complaint alleged many of the same Labor Code violations as Ackerman, described above. Given the overlap with the Ackerman case, the Court stayed the matter pending final approval of the Ackerman proposed settlement. In October 2016, the parties agreed to lift the stay and to resolve the matter as an individual action. The Court has since dismissed the case. The settlement amount was immaterial.
In June 2016, the Company was named as a defendant in Rodems v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of Fresno. The Complaint alleged many of the same Labor Code violations as Ackerman, described above. Given the overlap with the Ackerman case, the court stayed the matter pending final approval of the Ackerman proposed settlement. The Company and the plaintiff subsequently agreed to a lifting of the stay and a filing of an amended complaint in early November. The Company removed the case to the United States District Court for the Eastern District of California on November 9, 2016. In the First Amended Complaint, the plaintiffs make similar claims, but only on behalf of three individuals, and they do not seek class status. The Company disputes the allegations of the First Amended Complaint and, as the matter is no longer a putative class action, is confident that this case will not have a material adverse effect on the Company’s consolidated financial condition or results of operation.
On July 28, 2016, the Company was named as a defendant in Calleros v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of Santa Barbara. Plaintiff alleges that the Company failed to comply with California law requiring it to provide consumers cash for gift cards with a stored value of less than $10.00. Following voluntary mediation of the matter in November of 2016, the parties entered into a settlement agreement, which is subject to court review and approval. If finally approved, the settlement will not have a material adverse effect on the Company’s consolidated financial condition or results of operation.
Other than as noted above, 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.
|
|
13.
|
STOCK COMPENSATION PLANS AND CAPITAL STOCK TRANSACTIONS:
|
General
In April 2012, the Board approved the Chico’s FAS, Inc. 2012 Omnibus Stock and Incentive Plan (the “Omnibus Plan”), which replaced the Chico’s 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-based restricted stock, performance-based stock units, 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 entitled to dividends based on certain Company-specific performance goals and are entitled to voting rights upon meeting these Company-specific performance goals. Generally, stock-based awards vest evenly over
three
years; stock options generally have a
10
-year term. As of
January 28, 2017
, approximately
0.6 million
nonqualified stock options are outstanding under the Omnibus Plan and approximately
5.8 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
2016
,
2015
and
2014
was
$21.2 million
,
$30.1 million
and
$26.5 million
, respectively. The total tax benefit associated with stock-based compensation for fiscal
2016
,
2015
and
2014
was
$8.1 million
,
$11.5 million
and
$10.1 million
, respectively.
Restricted Stock Awards
Restricted stock activity for fiscal
2016
was as follows:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average Grant
Date Fair
Value
|
Unvested, beginning of period
|
2,585,392
|
|
|
$
|
16.60
|
|
Granted
|
1,817,830
|
|
|
12.38
|
|
Vested
|
(1,157,261
|
)
|
|
16.75
|
|
Forfeited
|
(782,775
|
)
|
|
15.19
|
|
Unvested, end of period
|
2,463,186
|
|
|
13.87
|
|
Total fair value of shares of restricted stock that vested during fiscal
2016
,
2015
and
2014
was
$14.7 million
,
$34.8 million
and
$21.8 million
, respectively. The weighted average grant date fair value of restricted stock granted during the fiscal
2016
,
2015
and
2014
was
$12.38
,
$16.97
, and
$16.44
, respectively. As of
January 28, 2017
, there was
$18.7 million
of unrecognized stock-based compensation expense related to non-vested restricted stock awards. That cost is expected to be recognized over a weighted average remaining period of
1.8
years.
Performance-based Stock Units
Performance-based stock unit activity for fiscal
2016
was as follows:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average Grant
Date Fair
Value
|
Unvested, beginning of period
|
469,898
|
|
|
$
|
18.23
|
|
Granted
|
733,360
|
|
|
12.55
|
|
Vested
|
(228,105
|
)
|
|
18.23
|
|
Forfeited
|
(322,905
|
)
|
|
15.34
|
|
Unvested, end of period
|
652,248
|
|
|
13.28
|
|
Total fair value of performance-based stock units that vested during fiscal
2016
and
2015
was
$2.9 million
and
$3.9 million
, respectively. There was
$3.3 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
1.5
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
three
years, was expensed on a straight-line basis over the vesting period of the stock options. As of
January 28, 2017
, all outstanding stock options were fully vested, and there was
no
unrecognized compensation expense.
Stock option activity for fiscal
2016
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
Outstanding, beginning of period
|
1,060,774
|
|
|
$
|
15.17
|
|
|
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
(213,310
|
)
|
|
10.67
|
|
|
|
|
|
Forfeited or expired
|
(270,218
|
)
|
|
22.13
|
|
|
|
|
|
Outstanding, end of period
|
577,246
|
|
|
$
|
13.58
|
|
|
2.97
|
|
$
|
603
|
|
Vested and expected to vest at January 28, 2017
|
577,246
|
|
|
$
|
13.58
|
|
|
2.97
|
|
$
|
603
|
|
Exercisable at January 28, 2017
|
577,246
|
|
|
$
|
13.58
|
|
|
2.97
|
|
$
|
603
|
|
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
2016
and the exercise price, multiplied by the number of such in-the-money options) that would have been received by the option holders had all option holders exercised their options on
January 28, 2017
. This amount changes based on the fair market value of our common stock. Total intrinsic value of options exercised during fiscal
2016
,
2015
and
2014
(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
$0.7 million
,
$4.6 million
and
$1.5 million
, respectively.
Cash received from option exercises for fiscal
2016
was
$2.3 million
. The actual tax benefit realized for the tax deduction from option exercises of stock option awards totaled
$0.3 million
for fiscal
2016
.
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
2016
,
2015
and
2014
, approximately
191,000
,
174,000
and
180,000
shares, respectively, were purchased under the ESPP. Cash received from purchases under the ESPP for fiscal
2016
was
$2.1 million
.
Share Repurchase Program
During fiscal
2016
, we repurchased
8.1 million
shares, at a total cost of approximately
$96.4 million
. In fiscal 2015, the Company repurchased
14.6 million
shares for
$250.0 million
through our
$300 million
share repurchase program announced in December 2013, and
3.7 million
shares for
$40.0 million
under its
$300 million
share repurchase program announced in November 2015. As of January 28, 2017,
$163.6 million
remains under the share repurchase program. 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 retirement benefit plan (the “Plan”) covering all employees upon the completion of
one
year of service, working
1000
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
2016
,
2015
and
2014
, our costs under the Plan were approximately
$3.4 million
,
$3.8 million
and
$3.7 million
, respectively.
In April 2002, we adopted the Chico’s FAS, Inc. Deferred Compensation Plan (the “Deferred Plan”) to provide supplemental retirement income benefits for a highly compensated employees. Eligible participants may elect to defer up to
80
percent of their base salary and
100
percent of their bonus earned under an approved bonus plan pursuant to the terms and conditions of the Deferred Plan. The Deferred Plan generally provides for payments upon retirement, death, disability 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 purchase of corporate owned life insurance (COLI), cash and other securities held within a rabbi trust established on behalf of the employee participating in the plan. The trust assets are reflected in other assets in the accompanying consolidated balance sheets.
The income tax provision consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
|
Fiscal 2015
|
|
Fiscal 2014
|
|
|
|
|
|
|
|
(in thousands)
|
Current:
|
|
|
|
|
|
Federal
|
$
|
49,994
|
|
|
$
|
15,622
|
|
|
$
|
53,985
|
|
Foreign
|
260
|
|
|
210
|
|
|
124
|
|
State
|
5,654
|
|
|
1,683
|
|
|
7,152
|
|
Deferred:
|
|
|
|
|
|
Federal
|
(8,483
|
)
|
|
(25,004
|
)
|
|
(6,550
|
)
|
State
|
75
|
|
|
(9,411
|
)
|
|
(2,911
|
)
|
Income tax provision (benefit)
|
$
|
47,500
|
|
|
$
|
(16,900
|
)
|
|
$
|
51,800
|
|
The foreign component of pre-tax income (loss), arising principally from operating foreign stores and other management and cost sharing charges we are required to allocate under U.S. tax law, for fiscal
2016
,
2015
, and
2014
was
$0.1 million
,
$(0.8) million
and
$(2.8) million
respectively.
A reconciliation between the statutory federal income tax rate and the effective income tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
|
Fiscal 2015
|
|
Fiscal 2014
|
Federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income tax, net of federal tax benefit
|
3.4
|
|
|
4.3
|
|
|
1.9
|
|
Goodwill impairment
|
—
|
|
|
(124.2
|
)
|
|
8.4
|
|
Outside basis difference - Boston Proper sale
|
(2.8
|
)
|
|
165.2
|
|
|
—
|
|
Other state benefits associated with sale and liquidation of Boston Proper
|
(0.3
|
)
|
|
20.1
|
|
|
—
|
|
Enhanced charitable contribution
|
(1.9
|
)
|
|
19.3
|
|
|
(2.5
|
)
|
Executive compensation limitation
|
1.2
|
|
|
(7.3
|
)
|
|
1.3
|
|
Foreign losses with full valuation allowance
|
0.2
|
|
|
(2.9
|
)
|
|
1.0
|
|
Federal tax credits
|
(0.5
|
)
|
|
3.4
|
|
|
(0.7
|
)
|
Other items, net
|
(0.1
|
)
|
|
0.4
|
|
|
0.1
|
|
Total
|
34.2
|
%
|
|
113.3
|
%
|
|
44.5
|
%
|
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
January 28, 2017
and
January 30, 2016
:
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
January 30, 2016
|
|
|
|
|
|
(in thousands)
|
Deferred tax assets:
|
|
|
|
Accrued liabilities and allowances
|
$
|
17,790
|
|
|
$
|
13,416
|
|
Accrued straight-line rent
|
20,361
|
|
|
19,716
|
|
Stock-based compensation
|
10,329
|
|
|
12,945
|
|
Property related
|
1,816
|
|
|
6,270
|
|
Charitable contribution limitation carryfowards
|
5,109
|
|
|
5,720
|
|
State tax credits and net operating loss carryforwards
|
5,105
|
|
|
5,384
|
|
Other
|
3,376
|
|
|
4,675
|
|
Total deferred tax assets
|
63,886
|
|
|
68,126
|
|
Valuation allowance
|
(749
|
)
|
|
(911
|
)
|
Net deferred tax assets
|
63,137
|
|
|
67,215
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Other
|
—
|
|
|
(1,249
|
)
|
Prepaid expenses
|
(2,976
|
)
|
|
(4,099
|
)
|
Property related
|
(43,271
|
)
|
|
(50,601
|
)
|
Other intangible assets
|
(24,197
|
)
|
|
(23,200
|
)
|
Total deferred tax liabilities
|
(70,444
|
)
|
|
(79,149
|
)
|
Net deferred taxes
|
$
|
(7,307
|
)
|
|
$
|
(11,934
|
)
|
As of
January 28, 2017
, the Company had available for state income tax purposes net operating loss and tax credit carryovers which expire, if unused, in the years 2020 - 2035 and 2019 - 2026, respectively.
We have not recognized any United States (“U.S.”) tax expense on undistributed foreign earnings as they are intended to be indefinitely reinvested outside of the U.S. There were no significant undistributed earnings at
January 28, 2017
and
January 30, 2016
.
Accumulated other comprehensive income is shown net of deferred tax assets and deferred tax liabilities. These deferred taxes are not reflected in the table above. The amount is not significant at
January 28, 2017
or
January 30, 2016
.
A reconciliation of the beginning and ending amounts of uncertain tax positions for each of fiscal
2016
, fiscal
2015
and fiscal
2014
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
|
Fiscal 2015
|
|
Fiscal 2014
|
|
|
|
|
|
|
|
(in thousands)
|
Balance at beginning of year
|
$
|
4,840
|
|
|
$
|
2,532
|
|
|
$
|
3,956
|
|
Additions for tax positions of prior years
|
1,280
|
|
|
2,618
|
|
|
757
|
|
Reductions for tax positions of prior years
|
(1
|
)
|
|
(56
|
)
|
|
(736
|
)
|
Additions for tax positions for the current year
|
246
|
|
|
259
|
|
|
390
|
|
Settlements/payments with tax authorities
|
(850
|
)
|
|
—
|
|
|
(1,501
|
)
|
Reductions due to lapse of applicable statutes of limitation
|
(357
|
)
|
|
(513
|
)
|
|
(334
|
)
|
Balance at end of year
|
$
|
5,158
|
|
|
$
|
4,840
|
|
|
$
|
2,532
|
|
At
January 28, 2017
,
January 30, 2016
and
January 31, 2015
, balances included
$4.4 million
,
$4.0 million
and
$1.6 million
respectively, of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate in future periods. Included in the
January 28, 2017
uncertain tax positions balance of
$5.2 million
is
$2.8 million
of unrecognized tax benefits that have been offset directly against the associated tax attributes. We do not expect any events to occur that would cause a change to our unrecognized tax benefits or income tax expense within the next twelve months.
Our continuing practice is to recognize potential accrued interest and penalties relating to unrecognized tax benefits in the income tax provision. For fiscal
2016
,
2015
and
2014
, we accrued
$0.2 million
,
$0.2 million
and
$0.3 million
, respectively for interest and penalties. We had approximately
$0.5 million
,
$0.4 million
and
$0.5 million
, respectively for the payment of interest and penalties accrued at
January 28, 2017
,
January 30, 2016
and
January 31, 2015
, respectively. The amounts included in the reconciliation of uncertain tax positions do not include accruals for interest and penalties.
In fiscal 2006, we began participating in the IRS’s 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. For fiscal 2014, we have received a partial acceptance letter with all issues resolved with the exception of the domestic production activities deduction. The Company did not claim the domestic production activities deduction for fiscal 2015 and has received a full acceptance letter for that fiscal year.
With few exceptions, we are no longer subject to state and local examinations for years before fiscal 2012. Various state examinations are currently underway for fiscal periods spanning from 2011 through 2015; however, we do not expect any significant change to our uncertain tax positions within the next year.
|
|
16.
|
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 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28, 2017
|
|
January 30, 2016
|
|
January 31, 2015
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
Net income
|
$
|
91,229
|
|
|
$
|
1,946
|
|
|
$
|
64,641
|
|
Net income and dividends declared allocated to participating securities
|
(1,915
|
)
|
|
—
|
|
|
(1,697
|
)
|
Net income available to common shareholders
|
$
|
89,314
|
|
|
$
|
1,946
|
|
|
$
|
62,944
|
|
Denominator
|
|
|
|
|
|
Weighted average common shares outstanding – basic
|
128,995
|
|
|
138,366
|
|
|
148,622
|
|
Dilutive effect of non-participating securities
|
242
|
|
|
375
|
|
|
504
|
|
Weighted average common and common equivalent shares outstanding – diluted
|
129,237
|
|
|
138,741
|
|
|
149,126
|
|
Net income per common share:
|
|
|
|
|
|
Basic
|
$
|
0.69
|
|
|
$
|
0.01
|
|
|
$
|
0.42
|
|
Diluted
|
$
|
0.69
|
|
|
$
|
0.01
|
|
|
$
|
0.42
|
|
In fiscal
2016
,
2015
and
2014
,
0.7 million
,
0.3 million
and
0.6 million
potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.
|
|
17.
|
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 January 28, 2017:
|
|
|
|
|
|
|
|
|
|
First quarter
|
$
|
642,977
|
|
|
$
|
262,335
|
|
|
$
|
31,084
|
|
|
$
|
0.23
|
|
|
$
|
0.23
|
|
Second quarter
|
635,732
|
|
|
240,810
|
|
|
23,039
|
|
|
0.17
|
|
|
0.17
|
|
Third quarter
|
596,912
|
|
|
230,294
|
|
|
23,598
|
|
|
0.18
|
|
|
0.18
|
|
Fourth quarter
|
600,789
|
|
|
213,397
|
|
|
13,508
|
|
|
0.10
|
|
|
0.10
|
|
Fiscal year ended January 30, 2016:
|
|
|
|
|
|
|
|
|
|
First quarter
|
$
|
697,766
|
|
|
$
|
295,618
|
|
|
$
|
33
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
Second quarter
|
685,826
|
|
|
264,701
|
|
|
2
|
|
|
0.02
|
|
|
0.02
|
|
Third quarter
|
645,433
|
|
|
249,163
|
|
|
(12
|
)
|
|
(0.09
|
)
|
|
(0.09
|
)
|
Fourth quarter
|
631,610
|
|
|
217,389
|
|
|
(21
|
)
|
|
(0.16
|
)
|
|
(0.16
|
)
|
On February 22, 2017, we announced that our Board of Directors declared a quarterly dividend of
$0.0825
per share on our common stock. The dividend will be payable on March 27, 2017 to shareholders of record at the close of business on March 13, 2017. Although it is our Company’s 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.