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TABLE OF CONTENTS
Index to Financial Statements
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ý |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended January 31, 2015 |
OR |
o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Commission File Number 1-32315
NEW YORK & COMPANY, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of
incorporation or organization) |
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33-1031445
(I.R.S. Employer
Identification No.) |
330 West 34th Street, 9th Floor,
NEW YORK, NEW YORK
(Address of principal executive offices) |
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10001
(Zip Code) |
(212) 884-2000
(Registrant's telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
Common Stock, par value $0.001 per share |
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New York Stock Exchange |
Securities
registered pursuant to Section 12(g) of the Act: None.
(Title
of Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes o No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o |
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Accelerated filer ý |
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Non-accelerated filer o (Do not check if a
smaller reporting company) |
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Smaller reporting company o |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No ý
The aggregate market value of common stock held by non-affiliates as of August 1, 2014 was approximately $106.8 million, using the closing price per
share of $3.32, as reported on the New York Stock Exchange as of such date.
The
number of shares of registrant's common stock outstanding as of March 31, 2015 was 64,269,744.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates certain information by reference to the Proxy Statement for the 2015 Annual Meeting of Stockholders.
Table of Contents
ANNUAL REPORT ON FORM 10-K INDEX
2
Table of Contents
Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements intended to qualify for safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect,"
"continue," "could," "may," "plan," "project," "predict" and similar expressions and include references to assumptions that the Company believes are reasonable and relate to its future prospects,
developments and business strategies. Factors that could cause the Company's actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not
limited to, those discussed under the headings "Item 1A. Risk Factors" and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in this Annual Report on
Form 10-K.
The
Company undertakes no obligation to revise the forward looking statements included in this Annual Report on Form 10-K to reflect any future events or circumstances. The
Company's actual results, performance or achievements could differ materially from the results expressed or implied by these forward looking statements.
PART I
Item 1. Business
Overview
New York & Company, Inc. (together with its subsidiaries, collectively the "Company") is a specialty retailer of women's
fashion apparel and accessories, and the modern wear-to-work destination for women, providing perfectly fitting pants and NY Style that is feminine, polished, on-trend and versatileall at
compelling values. The Company's proprietary branded New York & Company® merchandise is sold exclusively through its national network of retail stores and online at www.nyandcompany.com.
The target customers for the Company's merchandise are women between the ages of 25 and 45. As of January 31, 2015, the
Company operated 504 stores in 43 states.
The
Company offers a merchandise assortment consisting of wear-to-work, casual apparel and accessories, including pants, dresses, jackets, knit tops, blouses, sweaters, denim, t-shirts,
activewear, handbags and jewelry. The Company's strongest presence is within the wear-to-work and pant categories. The Company's merchandise reflects current fashions and fulfills a broad spectrum of
its customers' lifestyle and wardrobe requirements.
The
Company positions its retail stores and eCommerce store as a source of fashion, quality and value by providing its customers with an appealing merchandise assortment at attractive
price points, generally below those of department stores and other specialty retailers. The Company's stores are typically concentrated in medium to large population centers of the United States and
are located in shopping malls, lifestyle centers, outlet centers, and off-mall locations, including urban street locations.
The
Company was founded in 1918 and operated as a subsidiary of L Brands, Inc. (NYSE: LB) ("L Brands"), formerly known as Limited Brands, Inc., from 1985 to 2002. New
York & Company, Inc., formerly known as NY & Co. Group, Inc., was incorporated in the state of Delaware on November 8, 2002. It was formed to acquire all of
the outstanding stock of Lerner New York Holding, Inc. ("Lerner Holding") and its subsidiaries from L Brands, an unrelated company. On November 27, 2002, Irving Place Capital, formerly
known as Bear Stearns Merchant Banking, completed the acquisition of Lerner Holding and its subsidiaries from L Brands (the "acquisition of Lerner Holding"). On October 6, 2004, the Company
completed an initial public offering and listed its common stock on the New York Stock Exchange.
The
Company's fiscal year is a 52- or 53-week year that ends on the Saturday closest to January 31. The 52-week year ended January 31, 2015, the 52-week year ended
February 1, 2014, and
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Table of Contents
the
53-week year ended February 2, 2013 are referred to herein as "fiscal year 2014," "fiscal year 2013," and "fiscal year 2012," respectively. The 52-week year ending January 30, 2016
is referred to herein as "fiscal year 2015."
The Company's Growth Strategies
The Company's strategic initiatives include driving increases in net sales and comparable store sales in each channel of its business;
increasing brand awareness and driving traffic to stores by attracting new customers and engaging existing customers; and growing the Company brand through key merchandise initiatives. In support of
these strategic initiatives, the Company is opening new stores and optimizing its existing real estate portfolio to maximize sales and profitability. Also supporting the Company's strategic
initiatives is its omni-channel retail strategy, which is to provide a seamless and consistent shopping experience across both store and eCommerce channels. The Company has experienced increases in
traffic and net sales attributable to its omni-channel capabilities, which include the ability for customers to be in a store and order an item to be fulfilled either from another store or from the
Company's eCommerce website and also allows a customer to order from the Company's eCommerce website and pick up the merchandise in-store. In addition, the Company has the ability to ship items from a
store in order to fulfill a customer's order made through the eCommerce website. The Company plans to continue investing in omni-channel retail initiatives and believes this strategy will drive
further increases in traffic and sales across all channels of the business.
In
addition, the Company remains focused on its key merchandise initiatives and core sub-brandsincluding the 7th Avenue Suiting, Love NY&C, Soho Jeans,
and Eva Mendes Collectionand continues to grow the pant and denim categories. The Company believes that its sub-brand strategy differentiates it from its competitors and enables it to
create a deeper emotional connection with its customers, which drives increased traffic to its stores and eCommerce website. By providing its customers fashion, quality and value with an appealing
merchandise assortment at attractive price points, the Company believes it will continue to differentiate itself from competitors and maximize sales and profitability.
eCommerce Store
The Company believes that its eCommerce store (www.nyandcompany.com) provides an
effective means to reach its existing customers and, more importantly, attract new customers to the New York & Company brand. The eCommerce store is designed to cater to the customers'
lifestyle needs by offering an easy shopping experience, while also increasing brand awareness. Based on the Company's future outlook for heightened awareness of the New York & Company brand
and continued growth of online sales, the Company believes that it can continue to grow sales with its eCommerce store by broadening its online assortment with new product exclusives and expanded
product extensions, enhancing its omni-channel retail capabilities, and optimizing the Company's digital marketing initiatives.
One
of the Company's top priorities is optimizing its omni-channel retail strategy to provide a seamless and consistent customer shopping experience across both store and eCommerce
channels. The Company believes that its omni-channel retail strategy improves the customers' shopping experiences, enhances brand image and increases customer loyalty. The Company intends to continue
to invest resources into omni-channel retail initiatives and leverage the enhanced customer shopping experience to drive additional traffic and increase sales across both store and eCommerce channels.
Expand the New York & Company Store Base
The New York & Company Outlet stores continue to be a highly productive and profitable channel for the Company. The Outlet
stores offer a merchandise mix consisting of apparel and accessories that is exclusive to the Outlet stores, as well as merchandise that can be found at New York & Company
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Table of Contents
stores,
and clearance merchandise. Currently, Outlet exclusive merchandise represents over 75% of the Outlet business and this percentage is expected to continue to grow. The Company plans to continue
opening a number of New York & Company Outlet stores each year, and believes over the long-term, the New York & Company Outlet business could grow to more than 100 locations. As of
January 31, 2015, the Company operated 62 Outlet stores.
The
Company also plans to open a number of new New York & Company stores annually. The Company has targeted locations where it believes it can increase market penetration and
operate highly profitable New York & Company stores.
Optimize the New York & Company Store Base
The Company is continually focused on optimizing the size and productivity of its existing New York & Company store base by
relocating and remodeling a portion of its existing stores annually. The reduction of non-productive selling square feet is an integral component of the Company's goal to improve productivity and
profitability across its chain of stores. In addition, the Company is leveraging selling square feet in existing locations by testing the conversion of a number of New York & Company stores to
a side-by-side New York & Company store and an Eva Mendes boutique, as well as testing the conversion of a number of New York & Company stores to Outlet stores. The Company believes
these store conversions will increase traffic, increase net sales and profitability.
Enhance Brand Image and Increase Customer Loyalty
The Company seeks to build and enhance the recognition, appeal and reach of its New York & Company brand through its merchandise
assortment, customer service, and consistent marketing in-store and online through a variety of marketing channels. The Company believes that its combination of fashion apparel, most notably its
wear-to-work and pant categories, and its sub-brand strategy combined with accessories and attractive price points differentiates its brand from its competitors and drives strong recognition and
endorsement by its target customers. The Company continues to invest in the development of its brand through, among other things, direct mail marketing, Fashion Books, in-store marketing, digital
marketing, e-mail and text messaging programs, social
mediaFacebook, Instagram, Twitter, Pinterest, and Google+, public relations programs and select advertising.
In
September 2014, the Company celebrated its one year anniversary of its Eva Mendes Collection, which is featured across the majority of the New York & Company store base. The
Company plans to expand the Eva Mendes Collection to include Bridal and Footwear in select stores in fiscal year 2015. In addition, the Company will be running a TV commercial in limited markets for
the Eva Mendes Spring 2015 Collection, which combines the energy of the modern city with the allure of old New York. The Company believes that the marketing and publicity around the Eva Mendes
Collection has broadened awareness and interest in the New York & Company brand, building the strength of the brand.
Design and Merchandising
The Company's product development group, led by its merchant and design teams, is dedicated to consistently delivering to its
customers, high-quality and on trend fashion apparel and accessories at competitive prices. The Company seeks to provide its customers with key fashion items of the season, as well as a broad
assortment of coordinating apparel items and accessories that will complete their wardrobe. The Company's merchandising, marketing and promotional efforts encourage multiple-unit and outfit purchases.
While
the Company delivers selected new items every two to four weeks to its stores in order to keep the merchandise current and to keep customers engaged, new product lines are
introduced into
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Table of Contents
the
Company's stores in five major deliveries each year (spring, summer, fall, holiday and pre-spring). Product line development begins with the introduction of design concepts, key styles and its
initial assortment selection for the product line. The Company's designers focus on overall concepts and identify and interpret the fashion trends for the season, identifying those particular apparel
items and accessories that will appeal to its target customer, designing the product line and presenting it to the Company's merchants for review. The Company's merchants are responsible for
developing seasonal strategies in partnership with their planners, in addition to a detailed list of desired apparel pieces and accessories to guide the designers, as well as buying, testing, editing
and pricing the line during the season on an ongoing basis. This integrated approach to design, merchandising and sourcing enables the Company to carry a merchandise assortment that addresses customer
demand while attempting to minimize inventory risk and maximize sales and profitability.
Sourcing
The Company's sourcing approach focuses on quality, speed and cost in order to provide timely delivery of quality goods. This is
accomplished by closely managing the product development cycle, from raw materials and garment production to store-ready packaging, logistics and customs clearance.
Sourcing Relationships. The Company purchases apparel and accessories products directly from manufacturers and in some instances from
importers. The
Company's relationships with its direct manufacturers are supported by independent buying agents, who help coordinate the Company's purchasing requirements with the factories. The Company's unit
volumes, long-established vendor relationships and knowledge of fabric and production costs, combined with a flexible, diversified sourcing base, enable it to buy high-quality, low-cost goods. The
Company is not subject to long-term production contracts with any of its vendors, manufacturers or buying agents. The Company's broad sourcing network allows it to meet its factory workplace
standards; objectives of quality, cost, speed to market; and inventory efficiency by shifting merchandise purchases as required, and allows it to react quickly to changing market or regulatory
conditions. The Company sources nearly all of its merchandise from approximately five countries, with China, Vietnam and Indonesia representing approximately 93% of all merchandise purchases during
fiscal year 2014.
Quality Assurance and Compliance Monitoring. The Company entered into a transition services agreement with L Brands on November 27,
2002, as
amended, in connection with the acquisition of Lerner Holding (the "transition services agreement"). As part of the transition services agreement, Independent Production Services ("IPS"), a unit of L
Brands, provides the Company with monitoring of country of origin, point of fabrication compliance, compliance with the Company's Code of Business Conduct for suppliers, labor standards, and supply
chain security. In addition, all of the factories that manufacture merchandise for the Company sign a master sourcing agreement that specifies their obligations with respect to quality and ethical
business practices. IPS representatives visit apparel factories to ensure that the factory quality control associates understand and comply with the Company's requirements. The Company's independent
buying agents and importers also conduct in-line factory and final quality audits.
The
Company also engages two independent audit firms to visit each year a selection of factories that manufacture accessories for the Company to ensure that these factories understand
and comply with the Company's Code of Business Conduct for suppliers, labor standards and supply chain security standards.
Distribution and Logistics
L Brands provides the Company with certain warehousing and distribution services under the transition services agreement. All of the
Company's merchandise is received, processed, warehoused and distributed through L Brands' distribution center in Columbus, Ohio. Details about each receipt
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Table of Contents
are
supplied to the Company's store inventory planners, who determine how the product should be distributed among the Company's stores based on current inventory levels, sales trends and specific
product characteristics. Advance shipping notices are electronically communicated to the stores.
Under
the transition services agreement, as amended on September 14, 2010, these services will terminate upon the earliest of the following: (i) 24 months from the
date that L Brands notifies the Company that L Brands wishes to terminate the services; (ii) 24 months from the date that the Company notifies L Brands that the Company wishes to
terminate the services; (iii) 60 days after the Company has given notice to L Brands that L Brands has failed to perform any material obligations under the agreement and such failure
shall be continuing; (iv) 30 days after L Brands has given notice to the Company that the Company has failed to perform any material obligations under the agreement and such failure
shall be continuing; (v) within 75 days of receipt of the annual proposed changes to the agreement schedules which outline the cost methodologies and estimated costs of the services for
the coming year, if such proposed changes would result in a significant increase in the amount of service costs that the Company would be obligated to pay; (vi) 15 months after a change
of control of the Company, at the option of L Brands; or (vii) upon reasonable notice under the prevailing circumstances by the Company to L Brands after a disruption of services due to force
majeure that cannot be remedied or restored within a reasonable period of time. The Company believes that these services are provided at a competitive price and the Company anticipates continuing to
use L Brands for these services.
The
Company relies on a third-party to operate its eCommerce store, including fulfillment services. The third-party warehouse facility is located in Martinsville, Virginia. Merchandise
is received in this location from L Brands' distribution center. The operation of the Company's eCommerce store is covered by a master services agreement that is set to expire on April 30,
2018.
Real Estate
As of January 31, 2015, the Company operated 504 stores in 43 states, with an average of 5,153 selling square feet per store.
The Company's growth and productivity statistics are reported based on selling square footage because management believes the use of selling square footage yields a more accurate measure of store
productivity than gross square footage. All of the Company's stores are leased and are primarily located in medium to large population centers of the United States in shopping malls, lifestyle
centers, outlet centers, and off-mall locations, including urban street locations.
Historical Store Count
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|
|
|
|
|
|
Fiscal Year
|
|
Total stores open
at beginning of
fiscal year |
|
Number of stores
opened during
fiscal year |
|
Number of stores
closed during
fiscal year |
|
Number of stores
remodeled during
fiscal year |
|
Total stores
open at end of
fiscal year |
|
2010 |
|
|
576 |
|
|
22 |
|
|
(43 |
) |
|
8 |
|
|
555 |
|
2011 |
|
|
555 |
|
|
|
|
|
(23 |
) |
|
11 |
|
|
532 |
|
2012 |
|
|
532 |
|
|
18 |
|
|
(31 |
) |
|
13 |
|
|
519 |
|
2013 |
|
|
519 |
|
|
8 |
|
|
(20 |
) |
|
7 |
|
|
507 |
|
2014 |
|
|
507 |
|
|
12 |
|
|
(15 |
) |
|
11 |
|
|
504 |
|
7
Table of Contents
Historical Selling Square Footage
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Fiscal Year
|
|
Total selling
square feet at
beginning
of fiscal year |
|
Increase in
selling square
feet for stores
opened during
fiscal year |
|
Reduction of
selling square
feet for stores
closed during
fiscal year |
|
Net reduction of
selling square
feet for stores
remodeled during
fiscal year |
|
Total selling
square feet
at end of
fiscal year |
|
2010 |
|
|
3,193,602 |
|
|
74,830 |
|
|
(230,435 |
) |
|
(11,514 |
) |
|
3,026,483 |
|
2011 |
|
|
3,026,483 |
|
|
|
|
|
(123,978 |
) |
|
(29,069 |
) |
|
2,873,436 |
|
2012 |
|
|
2,873,436 |
|
|
64,224 |
|
|
(175,483 |
) |
|
(36,904 |
) |
|
2,725,273 |
|
2013 |
|
|
2,725,273 |
|
|
30,445 |
|
|
(106,256 |
) |
|
(12,388 |
) |
|
2,637,074 |
|
2014 |
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|
2,637,074 |
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46,161 |
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(74,478 |
) |
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(11,769 |
) |
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2,596,988 |
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Store Count by State as of January 31, 2015
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State
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|
# of
Stores |
|
State
|
|
# of
Stores |
|
State
|
|
# of
Stores |
|
Alabama |
|
|
10 |
|
Maine |
|
|
1 |
|
North Dakota |
|
|
1 |
|
Arizona |
|
|
8 |
|
Maryland |
|
|
17 |
|
Ohio |
|
|
22 |
|
Arkansas |
|
|
2 |
|
Massachusetts |
|
|
9 |
|
Oklahoma |
|
|
3 |
|
California |
|
|
49 |
|
Michigan |
|
|
11 |
|
Pennsylvania |
|
|
34 |
|
Colorado |
|
|
6 |
|
Minnesota |
|
|
6 |
|
Rhode Island |
|
|
2 |
|
Connecticut |
|
|
7 |
|
Mississippi |
|
|
4 |
|
South Carolina |
|
|
13 |
|
Delaware |
|
|
2 |
|
Missouri |
|
|
11 |
|
South Dakota |
|
|
1 |
|
Florida |
|
|
30 |
|
Nebraska |
|
|
2 |
|
Tennessee |
|
|
11 |
|
Georgia |
|
|
18 |
|
Nevada |
|
|
4 |
|
Texas |
|
|
45 |
|
Illinois |
|
|
20 |
|
New Hampshire |
|
|
1 |
|
Utah |
|
|
2 |
|
Indiana |
|
|
6 |
|
New Jersey |
|
|
30 |
|
Virginia |
|
|
21 |
|
Iowa |
|
|
1 |
|
New Mexico |
|
|
1 |
|
Washington |
|
|
1 |
|
Kansas |
|
|
2 |
|
New York |
|
|
47 |
|
West Virginia |
|
|
3 |
|
Kentucky |
|
|
8 |
|
North Carolina |
|
|
19 |
|
Wisconsin |
|
|
6 |
|
Louisiana |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total |
|
|
504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site Selection. The Company's real estate department is responsible for new store site selection. While selecting a specific location
for a new
store, the Company targets high-traffic real estate in locations with demographics reflecting concentrations of the Company's target customers and a complementary tenant mix.
The
Company plans to open a number of new New York & Company Outlet stores each year. Each Outlet store is approximately 3,000 to 4,000 selling square feet. New York &
Company Outlet stores offer a merchandise mix consisting of apparel and accessories that is exclusive to the Outlet stores, as well as merchandise that can be found at New York & Company
stores, and clearance merchandise. Currently, Outlet exclusive merchandise represents over 75% of the Outlet business and this percentage is expected to continue to grow.
The
Company also plans to open a number of new New York & Company stores each year, while relocating and remodeling a portion of its existing store base annually. Each New
York & Company store is approximately 4,000 to 6,000 selling square feet.
Store Display and Merchandising. The Company's stores are designed to effectively display its merchandise and create an upbeat
atmosphere. Expansive
front windows allow potential customers to see easily into the store and are used as a vehicle to highlight major merchandising and promotional
8
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events.
The open floor design allows customers to readily view the majority of the merchandise on display, while store fixtures allow for the efficient display of garments and accessories. Merchandise
displays are modified on a weekly basis based on sales trends and inventory receipts. The Company's in-store product presentation utilizes a variety of different fixtures to highlight the product
line's breadth and versatility. Complete outfits are displayed throughout the store using garments from a variety of product categories. The Company displays complete outfits to demonstrate how its
customers can combine different pieces in order to increase unit sales.
Pricing and Promotional Strategy. The Company's in-store pricing and promotional strategy is designed to drive customer traffic and
promote brand
loyalty. The promotional pricing strategy is designed to encourage multiple-unit sales. Select key items are also prominently displayed in store windows at competitive prices to drive traffic into the
stores.
Inventory Management. The Company's inventory management systems, which support the Company's omni-channel retail strategy, are
designed to maximize
merchandise profitability and increase inventory turns. The Company constantly monitors inventory turns on the selling floor and uses pricing and promotions to maximize sales and profitability and to
achieve inventory turn goals. The Company has a refined inventory loss prevention program that is integrated with the store operations and finance departments of its business. This program includes
electronic article surveillance systems in a majority of stores as well as the monitoring of merchandise returns, merchandise voids, employee sales and deposits, and educating store personnel on loss
prevention.
Field Sales Organization. Store operations are organized into three regions and 38 districts. Each region is managed by a regional
sales leader. The
Company staffs approximately 38 district sales leaders, with each typically responsible for the sales and operations of 13 stores on average. Each store is typically staffed with a store manager and
two additional support managers. Higher volume stores may have additional support managers as required. All stores are staffed with hourly sales associates. The Company has approximately 1,300
full-time in-store managers. The goal of the Company's field sales organization is to provide a memorable customer experience by creating an environment that is inspirational, exciting and fun. To
accomplish this goal, the field sales organization is continuously engaged in various initiatives to improve talent assessment and acquisition processes, enhance brand education and communication
training and increase engagement with the customer in-store to drive sales and profitability. The Company seeks to instill enthusiasm and dedication in its store management personnel by maintaining an
incentive/bonus plan for its field managers. The program is currently based on monthly sales performance and seasonal inventory loss targets. The Company believes that this
program effectively creates incentives for its senior field professionals and aligns their interests with the financial goals of the Company. The Company evaluates merchandise fill, fitting room
service, checkout service, and store appearance. Stores are required to meet or exceed established corporate standards to ensure the quality of the Company's customers' overall in-store experience.
Store Sales Associates. The Company typically employs between 4,000 and 6,000 full- and part-time store sales associates, depending on
the Company's
seasonal needs. The Company has well-established store operating policies and procedures and efficient point-of-sale ("POS") terminals and an in-store training program for all new store employees.
Detailed product descriptions are also provided to sales associates to enable them to gain familiarity with product offerings. The Company offers its sales associates a discount to encourage them to
wear the Company's apparel and accessories on the selling floor.
Brand Building and Marketing
The Company believes that its New York & Company brand is among its most important assets. The Company's ability to continuously
evolve its brand to appeal to the changing needs and priorities of its target customer is a key source of its competitive advantage. The Company believes its fashion
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apparel,
most notably its wear-to-work and pant categories, combined with accessories, proprietary merchandise designs, value pricing, merchandise quality, in-store merchandise display and store
service differentiates its brand from its competitors and drives strong brand recognition and endorsement by its target customers. Differentiating the Company's brand further are its key merchandise
initiatives and core sub-brandsincluding the 7th Avenue Suiting, Love NY&C, Soho Jeans, and Eva Mendes Collection. The Company consistently communicates its brand
image across all aspects of its business, including product design, store merchandising and shopping environments, channels of distribution, and marketing and advertising. The Company continues to
invest in the development of its brand through, among other things, direct mail marketing, Fashion Books, in-store marketing, digital marketing, e-mail and text messaging programs, social
mediaFacebook, Instagram, Twitter, Pinterest, and Google+, public relations programs and select advertising. The Company also makes investments to enhance the overall customer experience
through opening new stores, remodeling existing stores, broadening its assortment online at www.nyandcompany.com, and focusing on customer service.
The
Company believes that it is strategically important to communicate on a regular basis directly with its current customer base and with potential customers. The Company uses its
customer database, which includes approximately five million customers who have made purchases within the last twelve months, to design marketing programs to attract its core customers.
Customer Credit
The Company has a credit card processing agreement with a third party (the "administration company") that provides the services of the
Company's proprietary credit card program. The Company allows payments on this credit card to be made at its stores as a service to its customers. The administration company owns the credit card
accounts, with no recourse to the Company. All of the Company's proprietary credit cards carry the New York & Company brand. These cards provide purchasing power to customers and additional
vehicles for the Company to communicate product offerings.
Information Technology
Information technology is a key component of the Company's business strategy and the Company is committed to utilizing technology to
enhance its competitive position. The Company's information systems integrate data from field sales, eCommerce sales, design, merchandising, planning and distribution, and financial reporting
functions. The Company's core business systems consist of both purchased and internally developed software, operating on Microsoft, Oracle, and IBM platforms. These systems are accessed over a
company-wide network through which associates have access to many key business applications.
Sales,
cash deposit and related credit card information are electronically collected from the stores' POS terminals and eCommerce website on a daily basis. During this process, the
Company also obtains information concerning inventory receipts and transmits pricing, markdown and shipment notification data. In addition, where permitted by law, the Company collects customer
transaction data to grow and update its customer database. The merchandising staff and merchandise planning staff evaluate the sales and inventory information collected from the stores to make key
merchandise planning decisions, including orders and markdowns. These systems enhance the Company's ability to optimize sales while limiting markdowns, achieve planned inventory turns, reorder
successful styles, and effectively distribute new inventory to the stores.
One
of the Company's top priorities is optimizing its omni-channel retail strategy to provide a seamless and consistent customer shopping experience across both store and eCommerce
channels. The Company believes that its omni-channel retail strategy will improve its customers' shopping experiences, enhance brand image and increase customer loyalty. The Company intends to
continue to invest
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resources
into omni-channel retail initiatives and leverage the enhanced customer shopping experience to drive additional traffic and increase sales across both store and eCommerce channels.
Competition
The retail and apparel industries are highly competitive. The Company has positioned its stores as a source of fashion, quality and
value by providing its customers with an appealing merchandise assortment at attractive price points generally below those of department stores and other specialty retailers. The Company competes with
traditional department stores, specialty store retailers, discount apparel stores and direct marketers for, among other things, customers, raw materials, market share, retail space, finished goods,
sourcing and personnel. The Company differentiates itself from its competitors on the basis of its fashion apparel, most notably its wear-to-work and pant categories and its sub-brand strategy,
combined with accessories, proprietary merchandise designs, value pricing, merchandise quality, in-store merchandise display and store service.
Seasonality
The Company views the retail apparel market as having two principal selling seasons: spring (first and second quarter) and fall (third
and fourth quarter). The Company's business experiences seasonal fluctuations in net sales and operating income, with a significant portion of its operating income typically realized during the fourth
quarter. Seasonal fluctuations also affect inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period in the fourth quarter and
prior to the Easter and Mother's Day holidays toward the latter part of the first quarter and beginning of the second quarter.
Intellectual Property
The Company believes that it has all of the registered trademarks it needs to protect its New York & Company®,
NY&C®, City Style®, NY Style®, Soho Jeans®, Lerner®, and Lerner New York® brands and it vigorously enforces all of its trademark
rights.
Employees and Labor Relations
As of January 31, 2015, the Company had a total of 6,400 employees of which 1,740 were full-time employees and 4,660 were
part-time employees, who are primarily store associates. The number of part-time employees fluctuates depending on the Company's seasonal needs. The collective bargaining agreement with the Local 1102
unit of the Retail, Wholesale and Department Store Union (RWDSU) AFL-CIO is currently being renegotiated in accordance with the terms of the agreement. Approximately 8% of the Company's total
employees are covered by collective bargaining agreements and are primarily non-management store associates. The Company believes its relationship with its employees is good.
Government Regulation
The Company is subject to federal and state minimum wage laws, as well as various business customs, truth-in-advertising,
truth-in-lending and other laws, including consumer protection regulations and zoning and occupancy ordinances that regulate retailers generally and/or govern the importation, promotion and sale of
merchandise, the use of the Company's proprietary credit cards and the operation of retail stores and warehouse facilities. The Company undertakes to monitor changes in these laws and believes that it
is in material compliance with applicable laws with respect to these practices. Congress also is considering cyber-security legislation that, if enacted, could impose additional obligations upon the
Company.
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The
majority of the Company's merchandise is manufactured by factories located outside of the United States. These products are imported and are subject to U.S. customs laws, which
impose tariffs for textiles and apparel. In addition, some of the Company's imported products are eligible for certain duty-advantaged programs, including but not limited to the North American Free
Trade Agreement, the Andean Trade Preference Act, the U.S. Caribbean Basin Trade Partnership Act and the Caribbean Basin Initiative.
Available Information
The Company makes available free of charge on its website, http://www.nyandcompany.com, copies of its Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") as soon as reasonably practicable after filing or furnishing such material electronically with the United States Securities and
Exchange Commission. Copies of the charters of each of the Company's Audit Committee, Compensation Committee, and Nomination & Governance Committee, as well as the Company's Corporate
Governance Guidelines, Code of Business Conduct for Associates, Code of Conduct for Principal Executive Officers and Key Financial Associates, and Code of Business Conduct for Suppliers, are also
available on the website.
Item 1A. Risk Factors
Economic conditions may cause a decline in business and consumer spending which could adversely
affect the Company's business and financial performance.
The Company's business is impacted by general economic conditions and their effect on consumer confidence and the level of consumer
spending on the merchandise the Company offers. These economic factors include recessionary cycles, interest rates, currency exchange rates, economic growth, wage rates, unemployment levels, energy
prices, availability of consumer credit, and consumer confidence, among others. Economic conditions could negatively affect consumer purchases of the Company's merchandise and adversely impact the
Company's business, financial condition and results of operations. Economic conditions could also negatively impact the Company's merchandise vendors and their ability to deliver products and sustain
profits and sufficient liquidity. To counteract their cash flow problems, the Company's merchandise vendors may require letters-of-credit or attempt to increase prices, pass through increased costs or
seek some other form of relief, which may adversely impact the Company's business, financial condition and results of operations. In addition, economic conditions could negatively impact the Company's
retail landlords and their ability to maintain their shopping centers in a first-class condition and otherwise perform their obligations, which could negatively impact traffic in the Company's stores
leading to a decrease in sales and profitability.
The raw materials used to manufacture the Company's products and its distribution and labor costs
are subject to availability constraints and price volatility, which could result in increased costs.
The raw materials used to manufacture the Company's products are subject to availability constraints and price volatility caused by
high demand for petroleum-based synthetic fabrics, weather, supply conditions, government regulations, economic climate and other unpredictable factors. The Company sources nearly all of its
merchandise from approximately five countries, with China, Vietnam and Indonesia representing approximately 93% of all merchandise purchases during fiscal year 2014. Any one of these countries could
experience increased inflationary pressure, which could lead to increased costs for the Company. In addition, the Company's transportation and labor costs are subject to price volatility caused by the
price of oil, supply of labor, governmental regulations, economic climate and other unpredictable factors. Increases in demand for, or the price of, raw materials, distribution services and labor,
could have a material adverse effect on the Company's business, financial condition and results of operations.
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If the Company is not able to respond to fashion trends in a timely manner, develop new merchandise
or launch new product lines successfully, it may be left with unsold inventory, experience decreased profits or incur losses or suffer reputational harm to its brand image.
The Company's success depends in part on management's ability to anticipate and respond to changing fashion tastes and consumer demands
and to translate market trends into appropriate, saleable product offerings. Customer tastes and fashion trends change rapidly. If the Company is unable to successfully identify or react to changing
styles or trends and misjudges the market for its products or any new product lines, its sales may be lower, gross margins may be lower and the Company may be faced with a significant amount of unsold
finished goods inventory. In response, the Company may be forced to increase its marketing promotions or price markdowns, which could have a material adverse effect on its financial condition and
results of operations. The Company's brand image may also suffer if customers believe that it is no longer able to offer the latest fashions. The Company's Eva Mendes Collection is affiliated with a
celebrity. If the Company experiences an unplanned interruption in the collaboration with Eva Mendes, for any number of reasons, it may result in a decrease in net sales and profitability.
Fluctuations in comparable store sales in any one of the Company's channels, including New
York & Company stores, Outlets and eCommerce, or fluctuations in the Company's results of operations could cause the price of the Company's common stock to decline substantially.
The Company's results of operations have fluctuated in the past and can be expected to fluctuate in the future. Since the beginning of
fiscal year 2005 through fiscal year 2014, the Company's quarterly comparable store sales have ranged from an increase of 14.1% to a decrease of 16.4%. The Company cannot ensure that it will be able
to achieve consistency in its future sales and cannot ensure a high level of comparable store sales in the future.
The
Company's comparable store sales and results of operations are affected by a variety of factors, including but not limited to:
-
- fashion trends;
-
- mall traffic;
-
- the Company's ability to effectively market to its customers and drive traffic to its stores;
-
- calendar shifts of holiday or seasonal periods;
-
- the effectiveness of the Company's inventory management;
-
- changes in the Company's merchandise mix;
-
- the timing of promotional events;
-
- weather conditions;
-
- changes in general economic conditions and consumer spending patterns; and
-
- actions of competitors or mall anchor tenants.
If
the Company's future comparable store sales fail to meet expectations, then the market price of the Company's common stock could decline substantially.
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The Company's net sales, operating income and inventory levels fluctuate on a seasonal basis and
decreases in sales or margins during the Company's peak seasons could have a disproportionate effect on its overall financial condition and results of operations.
The Company's business experiences seasonal fluctuations in net sales and operating income, with a significant portion of its operating
income typically realized during its fourth quarter. Any decrease in sales or margins during this period could have a disproportionate effect on the Company's financial condition and results of
operations. For further information related to seasonality and quarterly results, please refer to Note 13, "Quarterly Results," in the Notes to Consolidated Financial Statements appearing
elsewhere in this Annual Report on Form 10-K.
Seasonal
fluctuations also affect the Company's inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period in the
fourth quarter and prior to the Easter and Mother's Day holidays toward the latter part of the first quarter and beginning of the second quarter. If the Company is not successful in selling its
inventory, it may have to write down the value of its inventory or sell it at significantly reduced prices or the Company may not be able to sell such inventory at all, which could have a material
adverse effect on the Company's financial condition and results of operations.
Since the Company relies significantly on international sources of production, it is at risk from a
variety of factors that could leave it with inadequate or excess inventories, resulting in decreased profits or losses.
The Company purchases apparel and accessories in international markets, with a significant portion coming from China, Vietnam and
Indonesia. The Company does not have any long-term merchandise supply contracts and many of its imports are subject to existing or potential duties and tariffs. The Company competes with other
companies for production facilities.
The
Company also faces a variety of other risks generally associated with doing business in international markets and importing merchandise from abroad, such
as:
-
- political or labor instability in countries where vendors are located;
-
- political or military conflict involving the United States, which could cause a delay in the transportation of the Company's products
and an increase in transportation costs;
-
- heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections,
leading to delays in deliveries or impoundment of goods for extended periods or could result in decreased scrutiny by customs officials for counterfeit goods, leading to lost sales and damage to the
reputation of the Company's brand;
-
- natural disasters, disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity
of raw materials and scrutiny or embargoing of goods produced in infected areas;
-
- the migration and development of manufacturers, which can affect where the Company's products are or will be produced;
-
- imposition of regulations relating to imports and the Company's ability to adjust in a timely manner to changes in trade regulations,
which among other things, could limit the Company's ability to source products from countries that have the labor and expertise needed to manufacture its products on a cost-effective basis;
-
- imposition of duties, taxes and other charges on imports; and
-
- currency volatility.
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Any
of the foregoing factors, or a combination thereof, could have a material adverse effect on the Company's business.
The
contract between the International Longshore and Warehouse Union and the operators of West Coast ports, through which the Company processes a portion of its products, expired on
July 1, 2014. As a result, the Company's net sales and gross profit were negatively impacted during fiscal year 2014, and could continue to be negatively impacted, by late merchandise
deliveries due to shipping delays at West Coast ports, longer lead times, increased freight costs on goods diverted to the East Coast as part of the Company's contingency plans, and increased air
freight to secure key merchandise items. Continued slow-downs, disruptions or if a strike occurs in connection with such contract expiration or otherwise, it may have a material adverse effect on the
Company's relationships with its customers and its business, potentially resulting in canceled orders by customers, unanticipated inventory accumulation, and reduced revenues and earnings. The
International Longshore and Warehouse Union and the operators of West Coast ports reached a tentative agreement, which longshore union members will now vote on. A final tally of the vote is scheduled
for May 22, 2015.
The Company's manufacturers may be unable to manufacture and deliver products in a timely manner or
meet its quality standards, which could result in lost sales, cancellation charges or excessive markdowns.
The Company purchases apparel and accessories directly from third-party manufacturers and in some instances from importers. The Company
utilizes three major apparel vendors, which together represented approximately 76% of the Company's merchandise purchases during fiscal year 2014; however, no individual factory represented more than
approximately 6% of the Company's merchandise purchases. Similar to most other specialty retailers, the Company has short selling seasons for much of its inventory. Factors outside of the Company's
control, such as manufacturing or shipping delays or quality problems, could disrupt merchandise deliveries and result in lost sales, product recalls, cancellation charges or excessive markdowns.
The Company's growth strategy includes the addition of a number of new New York & Company
Outlet stores and new New York & Company stores each year, while relocating and remodeling a portion of its existing store base annually. The Company may not be able to successfully implement
this strategy on a timely basis or at all. In addition, the Company's growth strategy may strain its resources and cause the performance of its existing stores to suffer.
The Company's growth strategy includes the addition of a number of new New York & Company Outlet stores and new New
York & Company stores each year, while relocating and remodeling a portion of its existing store base annually. The success of this strategy is dependent upon, among other things, the
identification of suitable markets and sites for store locations, the negotiation of acceptable lease and renewal terms, including the renegotiation of existing rent concessions, the hiring, training
and retention of competent sales personnel, and the effective management of inventory to meet the needs of new and existing stores on a timely basis. To the extent that the Company's new store
openings are in existing markets, the Company may experience reduced net sales volumes in existing stores in those markets. The Company expects to fund its new stores through cash flow from operations
and, if necessary, by borrowings under its revolving credit facility; however, if the Company experiences a decline in performance, the Company may slow or discontinue store openings. The Company may
not be able to successfully execute any of these strategies on a timely basis. If the Company fails to successfully implement these strategies, its financial condition and results of operations would
be adversely affected.
In
addition, continued consolidation in the commercial retail real estate market could affect the Company's ability to successfully negotiate favorable lease and renewal terms for its
stores in the future. Should significant consolidation continue, a large proportion of the Company's store base could be concentrated with one or a few entities that could then be in a position to
dictate unfavorable terms
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due
to their significant negotiating leverage. If the Company is unable to negotiate favorable lease terms with these entities, this could affect its ability to profitably operate its stores, which
could adversely affect the Company's financial condition and results of operations.
A continued reduction in the volume of mall traffic could significantly reduce the Company's sales
and leave it with unsold inventory, reducing the Company's profits or creating losses.
Many of the Company's stores are located in shopping malls. Sales at these stores are derived, in part, from the volume of traffic in
those malls. The Company's stores benefit from the ability of the mall's other tenants and other area attractions to generate consumer traffic in the vicinity of its stores and the continuing
popularity of malls as shopping destinations. Sales volume and mall traffic may be adversely affected by economic downturns in a particular area, competition from internet retailers, non-mall
retailers and other malls where the Company does not have stores and the closing of other stores in the malls in which the Company's stores are located. A continued reduction in mall traffic as a
result of these or any other factors could materially adversely affect the Company's business.
Because of the Company's focus on keeping its inventory at the forefront of fashion trends, extreme
and/or unseasonable weather conditions could have a disproportionately large effect on the Company's business, financial condition and results of operations because it would be forced to mark down
inventory.
Extreme weather conditions in the areas in which the Company's stores are located could have a material adverse effect on the Company's
business, financial condition and results of operations. For example, heavy snowfall or other extreme weather conditions over a prolonged period might make it difficult for the Company's customers to
travel to its stores. The Company's business is also susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm temperatures during the winter season or cool
weather during the summer season could render a portion of the Company's inventory incompatible with those unseasonable conditions. These prolonged unseasonable weather conditions could adversely
affect the Company's business, financial condition and results of operations.
If third parties who manage some aspects of the Company's business do not adequately perform their
functions, the Company might experience disruptions in its business, leaving it with inadequate or excess inventories, among other adverse effects, resulting in decreased profits or losses.
L Brands handles the distribution of the Company's merchandise through its distribution facility in Columbus, Ohio pursuant to a
transition services agreement. The efficient operation of the Company's stores is dependent on its ability to distribute merchandise to locations throughout the United States in a timely manner. The
Company depends on L Brands to receive, sort, pack and distribute substantially all of the Company's merchandise. As part of the transition services agreement, L Brands contracts with third-party
transportation companies to deliver the Company's merchandise from international ports to their warehouses and to the Company's stores. Any failure by
any of these third parties to respond adequately to the Company's warehousing and distribution needs would disrupt the Company's operations and negatively impact its profitability.
Additional
services are also provided by L Brands and its subsidiaries and affiliates pursuant to the transition services agreement. IPS assists the Company with its monitoring of
country of origin and point of fabrication compliance for U.S. Customs. IPS also monitors compliance with the Company's Code of Business Conduct for suppliers, and labor standards and supply chain
security standards. Any failure of L Brands or IPS to fulfill their obligations under the transition services agreement would disrupt the Company's operations and negatively impact its profitability.
Under
the transition services agreement, as amended on September 14, 2010, these services will terminate upon the earliest of the following: (i) 24 months from the
date that L Brands notifies the
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Company
that L Brands wishes to terminate the services; (ii) 24 months from the date that the Company notifies L Brands that the Company wishes to terminate the services;
(iii) 60 days after the Company has given notice to L Brands that L Brands has failed to perform any material obligations under the agreement and such failure shall be continuing;
(iv) 30 days after L Brands has given notice to the Company that the Company has failed to perform any material obligations under the agreement and such failure shall be continuing;
(v) within 75 days of receipt of the annual proposed changes to the agreement schedules which outline the cost methodologies and estimated costs of the services for the coming year, if
such proposed changes would result in a significant increase in the amount of service costs that the Company would be obligated to pay; (vi) 15 months after a change of control of the
Company, at the option of L Brands; or (vii) upon reasonable notice under the prevailing circumstances by the Company to L Brands after a disruption of services due to force majeure that cannot
be remedied or restored within a reasonable period of time. The Company believes that these services are provided at a competitive price and the Company anticipates continuing to use L Brands for
these services. The Company's failure to successfully replace the services could have a material adverse effect on the Company's business and prospects.
The
Company uses a third party for its eCommerce operations, including order management, order fulfillment, customer care, and channel management services. A failure by the third party
to adequately manage the Company's eCommerce operations may negatively impact the Company's profitability.
The
Company relies on third parties to monitor Code of Business Conduct for suppliers and labor standards compliance, supply chain security standards, and product quality requirements
for its accessories business. Any failure by these third parties to adequately perform their functions may disrupt the Company's operations and negatively impact its reputation and its profitability.
The
Company may rely on third parties for the implementation and/or management of certain aspects of its information technology infrastructure. Failure by any of these third parties to
implement and/or manage the Company's information technology infrastructure effectively could disrupt its operations and negatively impact its profitability.
The
Company relies on a third party to administer its proprietary credit card program. The inability of the administration company to effectively service the credit card program could
materially limit credit availability for the Company's customers, which would negatively impact the Company's revenues and, consequently, its profitability.
A
work stoppage resulting from, among other things, a dispute over a collective bargaining agreement covering employees of a third party relied on by the Company or employees of the
Company, may cause disruptions in the Company's business and negatively impact its profitability.
The Company's marketing efforts rely upon the use of customer information. Restrictions on the
availability or use of customer information could adversely affect the Company's marketing program, which could result in lost sales and a decrease in profits.
The Company uses its customer database to market to its customers. Any limitations imposed on the use of such consumer data, whether
imposed by federal or state governments or business partners, could have an adverse effect on the Company's future marketing activity. In addition, while the Company is compliant with Payment Card
Industry Data Security Standards ("PCI DSS"), to the extent the Company's or its business partners' security procedures and protection of customer information prove to be insufficient or inadequate,
the Company may become subject to litigation, which could expose it to liability and cause damage to its reputation or brand.
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The Company relies on its manufacturers to use acceptable ethical business practices, and if they
fail to do so, the New York & Company brand name could suffer reputational harm and the Company's sales could decline or its inventory supply could be interrupted.
The Company requires its manufacturers to operate in compliance with applicable laws, rules and regulations regarding working
conditions, employment practices, product quality and safety, and environmental compliance. Additionally, the Company imposes upon its business partners operating guidelines that require additional
obligations in order to promote ethical business practices. The staff of third party inspection services companies, and the staff of the Company's non-exclusive buying agents and importers
periodically visit and monitor the operations of the Company's manufacturers to determine compliance. However, the Company does not control its manufacturers or their labor and other business
practices. If one of the Company's manufacturers violates labor or other laws or implements labor or other business practices that are generally regarded as unethical in the United States, the
shipment of finished products to the Company could be interrupted, orders could be canceled, relationships could be terminated and the Company's reputation could be damaged. Any of these events could
have a material adverse effect on the Company's revenues and, consequently, its results of operations.
The Company is subject to numerous laws and regulations, including federal and state minimum wage
laws, that could affect its operations. Changes in such laws and regulations could affect its profitability and impact the operation of its business through delayed shipments of its goods, increased
costs, fines or penalties.
The Company is subject to federal and state minimum wage laws, healthcare legislation, various business customs, truth-in-advertising,
truth-in-lending and other laws, including consumer protection regulations and zoning and occupancy ordinances that regulate retailers generally and/or govern the importation, promotion and sale of
merchandise, the use of the Company's proprietary credit cards and the operation of retail stores and warehouse facilities. Although the Company undertakes to monitor changes in these laws, if these
laws change without the Company's knowledge, or are violated by the Company's employees, importers, buying agents, manufacturers or distributors, the Company could experience delays in shipments and
receipt of goods or be subject to fines or other penalties under the controlling laws or regulations, any of which could have a material adverse effect on the Company's business, financial condition
and results of operations. Changes in these laws or regulations could result in increased costs to the Company, which could have a material adverse effect on the Company's financial condition and
results of operations.
The Company may be unable to compete favorably in the highly competitive retail industry, and if it
loses customers to its competitors, its sales could decrease causing a decrease in profits or losses.
The sale of apparel and accessories is highly competitive. Increased competition could result in price reductions, increased marketing
expenditures and loss of market share, all of which could have a material adverse effect on the Company's financial condition and results of operations.
The
Company competes for sales with a broad range of other retailers, including individual and chain fashion specialty stores and department stores. In addition to the traditional
store-based retailers, the Company also competes with direct marketers that sell similar lines of merchandise and target customers through catalogs and eCommerce.
Some
of the Company's competitors may have greater financial, marketing and other resources available to them. In many cases, the Company's competitors sell their products in stores that
are located in the same shopping malls as the Company's stores. In addition to competing for sales, the Company competes for favorable site locations and lease terms in shopping malls.
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The Company may be unable to protect its trademarks, which could diminish the value of its brand.
The Company's trademarks are important to its success and competitive position. The Company's major trademarks are New York &
Company, NY&C, City Style, NY Style, Soho Jeans, Lerner, and Lerner New York and are protected in the United States and in some cases internationally. The Company engages in the following steps to
protect and enforce its trademarks: file and prosecute trademark applications for registration in those countries where the marks are not yet registered; response to office actions and examining
attorneys in those countries where the marks are not yet registered; maintenance of its trademark portfolio in the United States; filings of statements of use, renewal documents, assignments, change
of name and address forms; policing of marks and third party infringements; initiation and defense of opposition and/or cancellation proceedings, including discovery and preparation of evidence; and
litigation, including filing enforcement lawsuits against third party infringers. The Company is susceptible to others imitating the Company's products and infringing on the Company's intellectual
property rights. Imitation or counterfeiting of the Company's products or other infringement of the Company's intellectual property rights could diminish the value of its brand
or otherwise adversely affect its revenues. The actions the Company has taken to establish and protect its trademarks may not be adequate to prevent imitation of its products by others or to prevent
others from seeking to invalidate its trademarks or block sales of its products as a violation of the trademarks and intellectual property rights of others. In addition, others may assert rights in,
or ownership of, trademarks and other intellectual property rights of the Company or in marks that are similar to the Company's or marks that the Company licenses and/or markets and the Company may
not be able to successfully resolve these types of conflicts to its satisfaction. In some cases, there may be trademark owners who have prior rights to the Company's marks because the laws of certain
countries may not protect intellectual property rights to the same extent as do the laws of the United States. In other cases, there may be holders who have prior rights to similar marks. Failure to
protect the Company's trademarks could result in a material adverse effect on the Company's business.
The Company relies on its information technology infrastructure, which includes third party and
internally developed software, and purchased or leased hardware that support the Company's information technology, cybersecurity and various business processes. The Company's business, reputation and
brand image could suffer if its infrastructure fails to perform as intended.
The Company relies on purchased or leased hardware and software licensed from third parties or internally developed in order to manage
its business. The Company's ability to maintain and upgrade its information technology infrastructure is critical to the success of its business and the continued enhancement of its omni-channel
retail strategy. This hardware and software may not continue to be available on commercially reasonable terms or at all. Any disruptions to the Company's infrastructure or loss of the right to use any
of this hardware or software could affect the Company's operations, which could negatively affect the Company's business until corrected or until equivalent technology is either developed by the
Company or, if available, is identified, obtained and integrated. In addition, the software underlying the Company's operations can contain undetected errors. The Company may be forced to modify its
operations until such problems are corrected and, in some cases, may need to implement enhancements to correct errors that it does not detect. Problems with the software underlying the Company's
operations could result in loss of revenue, unexpected expenses and capital costs, diversion of resources, loss of market share and damage to the Company's reputation which could adversely affect the
Company's business, financial condition and results of operations. Furthermore, the Company's information systems initiatives and omni-channel retail strategy are complex and require managerial and
financial expertise to implement successfully. If the Company is unable to successfully implement these initiatives or if the Company's customers are not provided with the intended benefits, the
Company's financial condition and results of operations could be adversely affected.
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The
Company and third parties that manage portions of the Company's secure data are subject to cybersecurity risks and incidents. The Company's business involves the storage and
transmission of
customers' personal information, shopping preferences and credit card information, in addition to employee information and the Company's financial and strategic data. The protection of the Company's
customer, employee and Company data is vitally important to the Company. While the Company has implemented measures to prevent and detect security breaches and cyber incidents, and continues to invest
in the fortification of its information systems, networks and infrastructure, any failure of these measures and any failure of third parties that assist the Company in managing its secure data could
adversely affect the Company's business, financial condition and results of operations.
Because
the Company's brand is associated with all of its New York & Company merchandise in addition to its stores, the Company's success depends heavily on the value associated
with its brand. The New York & Company name is integral to the Company's existing business, as well as to the implementation of its strategy for growing and expanding its business. The New
York & Company brand could be adversely affected if the Company's public image or reputation were to be tarnished, which could result in a material adverse effect on the Company's business. If
the value associated with the Company's brand were to diminish, the Company's sales could decrease, causing lower profits or losses.
Risks associated with the Company's eCommerce store
The Company operates an online store at www.nyandcompany.com to sell its merchandise.
The Company's eCommerce operations are subject to numerous risks, including unanticipated operating problems, reliance on third-party computer hardware and software providers, system failures,
cybersecurity breaches and the need to invest in additional computer systems. The eCommerce operations also involve other risks that could have an impact on the Company's results of operations,
including but not limited to diversion of sales from the Company's other stores, rapid technological change, liability for online content, credit card fraud and risks related to the failure of the
computer systems that operate the website and its related support systems. If the Company is unable to successfully address and respond to these risks, eCommerce revenues could be lost, costs could
increase, and the Company's reputation may be damaged.
The Company is subject to customer payment-related risks that could increase its operating costs,
expose it to fraud or theft, subject it to potential liability and potentially disrupt its business.
The Company accepts payments using a variety of methods, including cash, checks, credit and debit cards, PayPal, its private label
credit cards and gift cards. Acceptance of these payment options subjects the Company to rules, regulations, contractual obligations and compliance requirements, including payment network rules and
operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making
compliance more difficult or costly. The payment card industry has set October 1, 2015 as the date on which it will shift liability for certain transactions to retailers who are not able to
accept chip-and-PIN card transactions. The Company
expects to implement the chip-and-PIN technology and receive certification sometime before or during the second quarter of 2016, however, final certification is subject to the time availability of
third-party service providers, which the Company has no control over. As a result, in the event of a data breach following the October 2015 deadline but before the implementation and certification of
the chip-and-PIN technology, the Company may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or its ability to
accept or facilitate certain types of payments may be impaired. The payment methods that the Company offers also subject it to potential fraud and theft by criminals. As a result, a data breach could
have a material adverse effect on the Company's brand image, results of operations and financial condition.
20
Table of Contents
The covenants in the Company's credit facilities, including its revolving credit facility and
long-term debt, impose restrictions that may limit its operating and financial flexibility.
The Company's credit facilities contain a number of significant restrictions and covenants that limit its ability
to:
-
- incur additional indebtedness;
-
- declare dividends, make distributions or redeem or repurchase capital stock, including the Company's common stock, or to make certain
other restricted payments or investments;
-
- sell assets, including capital stock of restricted subsidiaries;
-
- agree to payment restrictions affecting the Company's restricted subsidiaries;
-
- consolidate, merge, sell or otherwise dispose of all or substantially all of the Company's assets;
-
- incur liens;
-
- alter the nature of the Company's business;
-
- enter into sale/leaseback transactions;
-
- conduct transactions with affiliates; or
-
- designate the Company's subsidiaries as unrestricted subsidiaries.
In
addition, the Company's credit facilities include other and more restrictive covenants and prohibit it from prepaying its other indebtedness while indebtedness under its credit
facilities are outstanding. The agreement governing the Company's credit facilities also requires it to achieve specified financial and operating results and maintain compliance with specified
financial ratios. The Company's ability to comply with these ratios may be affected by events beyond the Company's control.
The
restrictions contained in the agreement governing the Company's credit facilities could:
-
- limit the Company's ability to plan for or react to market conditions or meet capital needs or otherwise restrict its activities or
business plans; and
-
- adversely affect the Company's ability to finance its operations, strategic acquisitions, investments or other capital needs or to
engage in other business activities that would be in the Company's interest.
A
breach of any of these restrictive covenants or the Company's inability to comply with the required financial ratios could result in a default under the agreement governing its credit
facilities. If a default occurs, the lender under the credit facilities may elect to declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and
payable.
The
lender also has the right in these circumstances to terminate any commitments the lender has to provide further borrowings. If the Company is unable to repay outstanding borrowings
when due, the lender under the credit facilities also has the right to proceed against the collateral, including the Company's available cash, granted to the lender to secure the indebtedness.
The Company may lose key personnel.
The Company believes that it has benefited from the leadership and experience of its Chief Executive Officer, Gregory J. Scott, and its
other key executives. The loss of the services of any of these individuals could have a material adverse effect on the business and the prospects of the Company. Competition for key personnel in the
retail industry is intense and the Company's future success will depend upon its ability to retain, recruit and train qualified personnel.
21
Table of Contents
Provisions in the Company's restated certificate of incorporation and Delaware law may delay or
prevent the Company's acquisition by a third party.
The Company's restated certificate of incorporation contains a "blank check" preferred stock provision. Blank check preferred stock
enables the Company's Board of Directors, without stockholders' approval, to designate and issue additional series of preferred stock with such dividend, liquidation, conversion, voting or other
rights, including the right to issue convertible securities with no limitation on conversion, as the Company's Board of Directors may determine, including rights to dividends and proceeds in a
liquidation that are senior to the common stock.
These
provisions may make it more difficult or expensive for a third party to acquire a majority of the Company's outstanding voting common stock. The Company is also subject to certain
provisions of Delaware law which could delay, deter or prevent the Company from entering into a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in the
Company's stockholders receiving a premium over the market price for their stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
All of the Company's stores, encompassing approximately 3.3 million total gross square feet as of January 31, 2015, are
leased under operating leases. The typical store lease is for
a ten-year term and requires the Company to pay real estate taxes, common area maintenance charges, utilities and other landlord charges. On February 25, 2014, the Company entered into a lease
for 182,709 square feet of office space at 330 West 34th Street, New York, New York, which the Company moved its corporate headquarters to in December 2014 prior to the expiration
of its previous lease at 450 West 33rd Street, New York, New York on January 15, 2015. The lease for the new corporate headquarters expires in 2030. Additionally, the
Company owns a parcel of land located in Brooklyn, New York on which it operates one of its leased stores.
Item 3. Legal Proceedings
There are various claims, lawsuits and pending actions against the Company arising in the normal course of the Company's business. It
is the opinion of management that the ultimate resolution of these matters will not have a material effect on the Company's financial condition, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not Applicable.
22
Table of Contents
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company's common stock is listed on the New York Stock Exchange under the symbol "NWY." The number of holders of record of common
stock at March 31, 2015 was 176. The following table sets forth the high and low sale prices for the common stock on the New York Stock Exchange for the periods indicated:
|
|
|
|
|
|
|
|
|
|
Market Price |
|
|
|
High |
|
Low |
|
Fiscal Year 2014 |
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
3.25 |
|
$ |
2.22 |
|
Third quarter |
|
$ |
3.63 |
|
$ |
2.71 |
|
Second quarter |
|
$ |
4.42 |
|
$ |
3.29 |
|
First quarter |
|
$ |
5.10 |
|
$ |
4.08 |
|
Fiscal Year 2013 |
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
5.50 |
|
$ |
4.00 |
|
Third quarter |
|
$ |
6.31 |
|
$ |
4.64 |
|
Second quarter |
|
$ |
6.87 |
|
$ |
4.37 |
|
First quarter |
|
$ |
5.02 |
|
$ |
3.59 |
|
The
Company has not declared or paid any dividends on its common stock since the acquisition of the Company by Irving Place Capital in November 2002. The Company currently expects to
retain any future earnings for use in the operation and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future. The Company's ability to pay dividends on
its common stock is limited by the covenants of its credit facility and may be further restricted by the terms of any of its future debt or preferred securities.
23
Table of Contents
Performance Graph
The following graph shows a comparison of the cumulative total return on an initial investment of $100 on January 30, 2010 in
the Company's common stock, the Standard & Poor's SmallCap 600 Index and the Standard & Poor's 600 Apparel Retail Index. The comparison assumes the reinvestment of any dividends.
- *
- $100
invested on 1/30/10 in stock or index, including reinvestment of dividends. Indexes calculated on month-end basis.
Issuer Sales of Equity Securities
During fiscal year 2014, there were no unregistered sales of equity securities of the registrant and there were no shares that may yet
be purchased under any repurchase plans or programs.
Issuer Purchases of Equity Securities
The Company neither purchased any shares of its common stock during the fourth quarter of fiscal year 2014 nor has it made any plans or
established any programs to purchase any shares of its common stock.
24
Table of Contents
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data for New York & Company, Inc. and its subsidiaries for
each of the periods presented. The consolidated financial data for the 52-week fiscal year ended January 31, 2015, referred to as "fiscal year 2014," the 52-week fiscal year ended
February 1, 2014, referred to as "fiscal year 2013," the 53-week fiscal year ended February 2, 2013, referred to as "fiscal year 2012," the 52-week fiscal year ended January 28,
2012, referred to as "fiscal year 2011," and the 52-week fiscal year ended January 29, 2011, referred to as "fiscal year 2010," have been derived from the audited consolidated financial
statements of New York & Company, Inc. and its subsidiaries.
The
selected consolidated financial data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the
Company's consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands, except per share data)
|
|
Fiscal Year
2014
(52-weeks) |
|
Fiscal Year
2013
(52-weeks) |
|
Fiscal Year
2012
(53-weeks) |
|
Fiscal Year
2011
(52-weeks) |
|
Fiscal Year
2010
(52-weeks) |
|
Statements of operations data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
923,332 |
|
$ |
939,163 |
|
$ |
966,434 |
|
$ |
956,456 |
|
$ |
1,021,699 |
|
Cost of goods sold, buying and occupancy costs |
|
|
673,557 |
|
|
674,793 |
|
|
701,613 |
|
|
734,838 |
|
|
788,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
249,775 |
|
|
264,370 |
|
|
264,821 |
|
|
221,618 |
|
|
233,321 |
|
Selling, general and administrative expenses(1) |
|
|
265,371 |
|
|
261,293 |
|
|
262,569 |
|
|
257,188 |
|
|
298,419 |
|
Restructuring charges(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(15,596 |
) |
|
3,077 |
|
|
2,252 |
|
|
(35,570 |
) |
|
(66,379 |
) |
Interest expense, net of interest income |
|
|
573 |
|
|
369 |
|
|
360 |
|
|
495 |
|
|
697 |
|
Loss on modification and extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (income) from continuing operations before income taxes |
|
|
(16,169 |
) |
|
2,708 |
|
|
1,892 |
|
|
(36,209 |
) |
|
(67,076 |
) |
Provision (benefit) for income taxes(3) |
|
|
716 |
|
|
314 |
|
|
(208 |
) |
|
2,728 |
|
|
9,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(16,885 |
) |
|
2,394 |
|
|
2,100 |
|
|
(38,937 |
) |
|
(76,542 |
) |
Income from discontinued operations, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(16,885 |
) |
$ |
2,394 |
|
$ |
2,100 |
|
$ |
(38,937 |
) |
$ |
(76,461 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share from continuing operations |
|
$ |
(0.27 |
) |
$ |
0.04 |
|
$ |
0.03 |
|
$ |
(0.64 |
) |
$ |
(1.29 |
) |
Basic earnings per share from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
|
$ |
(0.27 |
) |
$ |
0.04 |
|
$ |
0.03 |
|
$ |
(0.64 |
) |
$ |
(1.29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share from continuing operations |
|
$ |
(0.27 |
) |
$ |
0.04 |
|
$ |
0.03 |
|
$ |
(0.64 |
) |
$ |
(1.29 |
) |
Diluted earnings per share from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.27 |
) |
$ |
0.04 |
|
$ |
0.03 |
|
$ |
(0.64 |
) |
$ |
(1.29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
62,825 |
|
|
62,313 |
|
|
61,516 |
|
|
60,824 |
|
|
59,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares of common stock |
|
|
62,825 |
|
|
63,240 |
|
|
62,164 |
|
|
60,824 |
|
|
59,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
Fiscal Year
2011 |
|
Fiscal Year
2010 |
|
Balance sheet data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
69,293 |
|
$ |
69,723 |
|
$ |
60,933 |
|
$ |
50,787 |
|
$ |
77,392 |
|
Working capital |
|
$ |
46,531 |
|
$ |
52,418 |
|
$ |
41,055 |
|
$ |
27,267 |
|
$ |
45,295 |
|
Total assets |
|
$ |
301,880 |
|
$ |
288,753 |
|
$ |
292,680 |
|
$ |
299,791 |
|
$ |
355,210 |
|
Capital lease obligation |
|
$ |
2,165 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Total long-term debt(4) |
|
$ |
14,750 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
7,500 |
|
Stockholders' equity |
|
$ |
99,359 |
|
$ |
113,215 |
|
$ |
106,252 |
|
$ |
100,105 |
|
$ |
133,837 |
|
- (1)
- Fiscal
year 2014 includes $9.2 million of non-operating charges. For further information related to the non-operating charges in fiscal year 2014,
please refer to the "Management's Discussion and Analysis of Financial Condition and Results of OperationsResults of Operations" section below.
- (2)
- During
fiscal year 2010, the Company exited an underperforming test accessories concept consisting of five stores. In connection with the exit of this
concept, the Company recorded pre-tax restructuring charges totaling $2.1 million, of which $1.3 million is reported in "Restructuring charges" and $0.8 million is reported in
"Cost of goods sold, buying and occupancy costs" on the Company's consolidated statements of operations.
- (3)
- The
income tax provision in fiscal year 2010, despite the loss from continuing operations, is primarily due to the following: (i) a
$44.8 million valuation allowance against the company's deferred tax assets as of January 30, 2010 plus deferred tax assets generated by the fiscal year 2010 loss, (ii) a
$6.1 million tax benefit recorded during the third quarter of fiscal year 2010 related primarily to a change in accounting methods for tax purposes, which resulted in a reduction of the
depreciable lives of certain assets, and a refund of amounts previously paid with a corresponding adjustment to the Company's valuation allowance against its deferred tax assets, and (iii) a
$1.9 million benefit resulting from other tax related items. For further information related to the deferred tax valuation allowance, please refer to Note 11, "Income Taxes" in the Notes
to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
- (4)
- On
October 24, 2014, Lerner New York, Inc., Lernco, Inc. and Lerner New York Outlet, Inc., wholly-owned indirect subsidiaries of
New York & Company, Inc., entered into a Fourth Amended and Restated Loan and Security Agreement with Wells Fargo Bank, N.A., as Agent and Term Loan Agent and the lenders party thereto.
For further information related to the Fourth Amended and Restated Loan and Security Agreement, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources" section below.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The purpose of this section is to discuss and analyze the Company's consolidated financial condition, liquidity and capital resources,
and results of operations. The following discussion should be read in conjunction with the Company's consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report
on Form 10-K.
Overview
The Company is a specialty retailer of women's fashion apparel and accessories, and the modern wear-to-work destination for women,
providing perfectly fitting pants and NY Style that is feminine, polished, on-trend and versatileall at compelling values. The Company's proprietary branded New York &
Company® merchandise is sold exclusively through its national network of retail stores and online at www.nyandcompany.com. The target
customers for the Company's merchandise are women between the ages of 25 and 45. As of January 31, 2015, the Company operated 504 stores in 43 states.
26
Table of Contents
The Company's fiscal year is a 52- or 53-week year that ends on the Saturday closest to January 31. The 52-week year ended January 31, 2015, the
52-week year ended February 1, 2014, and the 53-week year ended February 2, 2013 are referred to herein as "fiscal year 2014," "fiscal year 2013," and "fiscal year 2012," respectively.
The 52-week year ending January 30, 2016 is referred to herein as "fiscal year 2015."
Fiscal Year 2014 Summary
The Company remained focused on its strategic initiatives during fiscal year 2014, which include driving increases in net sales and
comparable store sales growth in each channel of its business; increasing brand awareness and driving traffic to stores by attracting new customers and engaging existing customers; and growing the
Company brand through key merchandise initiatives. In support of these strategic initiatives, the Company is opening new outlet stores and optimizing its existing real estate portfolio to maximize
sales and profitability. Furthermore, the Company believes its omni-channel retail initiatives will continue to drive traffic and increase sales across both store and eCommerce channels. In addition,
the Company remains focused on its key merchandise initiatives and core sub-brandsincluding the 7th Avenue Suiting, Love NY&C,
Soho Jeans, and Eva Mendes Collectionand continues to grow the pant and denim categories.
In
September 2014, the Company celebrated its one year anniversary of its Eva Mendes Collection, which is featured across the majority of the New York & Company store base. The
Company plans to expand the Eva Mendes Collection to include Bridal and Footwear in select stores in fiscal year 2015.
Net
sales for fiscal year 2014 were $923.3 million, as compared to $939.2 million for fiscal year 2013. Comparable store sales for fiscal year 2014 decreased 1.0%, as
compared to an increase of 1.1% for fiscal year 2013. Sales from the Company's eCommerce store are included in comparable store sales. During fiscal year 2014, the Company's eCommerce and Outlet
channels continued to expand, experiencing a 22% and 16% increase in net sales, respectively, as compared to fiscal year 2013. During fiscal year 2014, eCommerce and Outlets represented 11.6% and
10.9%, respectively, of total net sales, as compared to 9.3% and 9.2%, respectively, of total net sales during fiscal year 2013. In the New York & Company Outlet stores, outlet exclusive
merchandise has grown to over 75% of the Outlet business.
The
contract between the International Longshore and Warehouse Union and the operators of West Coast ports, through which the Company processes a portion of its products, expired on
July 1, 2014. As a result, the Company's net sales and gross profit were negatively impacted during fiscal year 2014, and could continue to be negatively impacted, by late merchandise
deliveries due to shipping delays at West Coast ports, longer lead times, increased freight costs on goods diverted to the East Coast as part of the Company's contingency plans, and increased air
freight to secure key merchandise items. At January 31, 2015, total inventory was up 12.4%, as compared to February 1, 2014, reflecting higher levels of in-store inventory and in-transit
inventory as the Company executed its contingency plans related to the uncertainty regarding a potential work stoppage by the International Longshore and Warehouse Union. The International Longshore
and Warehouse Union and the operators of West Coast ports reached a tentative agreement, which longshore union members will now vote on. A final tally of the vote is scheduled for May 22, 2015.
During
fiscal year 2014, the Company opened 11 new Outlet stores and 1 New York & Company store, closed 15 stores, and remodeled 11 existing stores, ending the year with 504
stores, including 62 Outlet stores and 2.6 million selling square feet. The Company believes over the long term, the New York & Company Outlet business could grow to over 100
locations.
Strengthening
its omni-channel retail strategy during fiscal year 2014, the Company expanded the capabilities of its 'Ask Us' program, which allows customers to be in a store and order
an item to be fulfilled either from another store or from the Company's eCommerce website. The expanded
27
Table of Contents
capabilities
allow customers to order from the Company's eCommerce website and pick up the merchandise in-store. In addition, the Company has the ability to ship items from a store in order to fulfil
a customer's order made through the New York & Company website.
On
February 25, 2014, the Company entered into a lease for 182,709 square feet of office space at 330 West 34th Street, New York, New York, which the Company
moved its corporate headquarters to in December 2014 prior to the expiration of its previous lease at 450 West 33rd Street, New York, New York on January 15, 2015. The
lease for the new corporate headquarters expires in 2030.
On
October 24, 2014, the Company amended its existing credit facility with Wells Fargo Bank, N.A. The amendments provide for, but are not limited to: (i) an extension of
the term of its $100 million credit facility to October 24, 2019; (ii) a reduction of interest rates related to the revolving credit facility; (iii) a reduction of certain
fees related to the revolving credit facility; and (iv) a $15 million, 5-year term loan, bearing interest at the Adjusted Eurodollar Rate plus 4.50% (the "Term Loan"). The Company used a
portion of the proceeds from the Term Loan to pay for costs associated with the relocation and build-out of its new corporate headquarters and for general corporate purposes. For further information
related to the Fourth Amended and Restated Loan and Security Agreement, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity
and Capital Resources" section below.
During
the third quarter of fiscal year 2014, the Company engaged a leading global business advisory firm to assist the Company in analyzing its business processes and organizational
structure in an effort to improve sales productivity and operating efficiencies, as well as reduce the Company's overall cost structure (the "business re-engineering program"). In November 2014, the
Company initiated an organizational realignment in connection with the business analysis performed. As a result of the organizational changes made, the Company expects to save $9 million to
$10 million in annual payroll and related costs in fiscal year 2015 and thereafter. The Company expects to reinvest a portion of these savings into its growth strategies discussed in
"Item 1. Business" of this Annual Report on Form 10-K. For further information related to the business re-engineering program, please refer to Note 13, "Quarterly Results" in the
Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
Looking
forward to fiscal year 2015, the Company's strategic priorities remain unchanged. The Company will continue to focus on providing its customers with great fashion, style, quality
and value, leveraging its "best at pant" advantage into denim and activewear while expanding its Eva Mendes Collection. At the same time, the Company will continue to invest in marketing through the
use of television, digital, social media and public relations in order to create a deeper emotional connection to the brand, in support of increasing traffic and its customer base in order to drive
sales. The Company also expects to maintain its expense discipline, and reinvest a portion of the savings resulting from the business re-engineering program discussed above into initiatives to
increase net sales and comparable store sales in each channel of its business.
General
Net Sales. Net sales consist of sales from comparable and non-comparable stores. A store is included in the comparable store sales
calculation after
it has completed 13 full fiscal months of operations from the store's opening date or once it has been reopened after remodeling if the gross square footage did not change by more than 20%. Sales from
the Company's eCommerce store are included in comparable store sales. Non-comparable store sales include new stores, stores relocated within the same shopping center and remodeled stores that have a
change in gross square footage of more than 20%, which have not completed 13 full fiscal months of operations, sales from closed stores, and sales from stores closed or in temporary locations during
periods of remodeling. In addition, in a year with 53 weeks, sales in the last week of the year are not included in determining comparable store
28
Table of Contents
sales.
Net sales from the sale of merchandise at the Company's stores are recognized when the customer takes possession of the merchandise and the purchases are paid for, primarily with either cash or
credit card. Net sales, including shipping fees billed to customers, from the sale of merchandise at the Company's eCommerce store are recognized when the merchandise is shipped to the customer and
the purchases are paid for. A reserve is provided for projected merchandise returns based on prior experience.
The
Company issues gift cards and merchandise credits which do not contain provisions for expiration or inactivity fees. The portion of the dollar value of gift cards and merchandise
credits that ultimately is not used by customers to make purchases is known as breakage and will be recognized as revenue, if the Company determines it is not required to escheat such amounts to
government agencies under state escheatment laws. The Company recognizes gift card and merchandise credit breakage as revenue as they each are redeemed over a two-year redemption period based on their
respective historical breakage rate. The Company considers the likelihood of redemption remote beyond a two-year redemption period, at which point any unrecognized breakage is recognized as revenue.
The Company determined the redemption period and the breakage rate for gift cards and merchandise credits based on their respective historical redemption patterns.
Cost of Goods Sold, Buying and Occupancy Costs. Cost of goods sold, buying and occupancy costs is comprised of direct inventory costs
for merchandise
sold, distribution costs, shipping costs, payroll and related costs for design, sourcing, production, merchandising, planning and allocation personnel, and store occupancy and related costs.
Gross Profit. Gross profit represents net sales less cost of goods sold, buying and occupancy costs.
Selling, General and Administrative Expenses. Selling, general and administrative expenses include selling, store management and
corporate expenses,
including payroll and employee benefits, employment taxes, management information systems, marketing, insurance, legal, store pre-opening and other corporate level expenses. Store pre-opening expenses
include store level payroll, grand opening event marketing, travel, supplies and other store opening expenses.
Results of Operations
The following tables summarize the Company's results of operations as a percentage of net sales and selected store operating data for
fiscal year 2014, fiscal year 2013 and fiscal year 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(as a % of net sales)
|
|
Net sales |
|
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
Cost of goods sold, buying and occupancy costs |
|
|
72.9 |
% |
|
71.9 |
% |
|
72.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
27.1 |
% |
|
28.1 |
% |
|
27.4 |
% |
Selling, general and administrative expenses |
|
|
28.8 |
% |
|
27.8 |
% |
|
27.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(1.7 |
)% |
|
0.3 |
% |
|
0.2 |
% |
Interest expense, net |
|
|
0.1 |
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
|
(1.8 |
)% |
|
0.3 |
% |
|
0.2 |
% |
Provision (benefit) for income taxes |
|
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(1.8 |
)% |
|
0.3 |
% |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(amounts in thousands, except square
foot data)
|
|
Selected operating data: |
|
|
|
|
|
|
|
|
|
|
Comparable store sales (decrease) increase |
|
|
(1.0 |
)% |
|
1.1 |
% |
|
0.1 |
% |
Net sales per average selling square foot(1) |
|
$ |
353 |
|
$ |
350 |
|
$ |
345 |
|
Net sales per average store(2) |
|
$ |
1,825 |
|
$ |
1,831 |
|
$ |
1,837 |
|
Average selling square footage per store(3) |
|
|
5,153 |
|
|
5,201 |
|
|
5,251 |
|
- (1)
- Net
sales per average selling square foot is defined as net sales divided by the average of beginning and end of period selling square feet.
- (2)
- Net
sales per average store is defined as net sales divided by the average of beginning and end of period number of stores.
- (3)
- Average
selling square footage per store is defined as end of period selling square feet divided by end of period number of stores.
The
following table includes store count and selling square feet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2014 |
|
Fiscal Year 2013 |
|
Fiscal Year 2012 |
|
|
|
Store
Count |
|
Selling
Square Feet |
|
Store
Count |
|
Selling
Square Feet |
|
Store
Count |
|
Selling
Square Feet |
|
Stores open, beginning of period |
|
|
507 |
|
|
2,637,074 |
|
|
519 |
|
|
2,725,273 |
|
|
532 |
|
|
2,873,436 |
|
New stores |
|
|
12 |
|
|
46,161 |
|
|
8 |
|
|
30,445 |
|
|
18 |
|
|
64,224 |
|
Closed stores |
|
|
(15 |
) |
|
(74,478 |
) |
|
(20 |
) |
|
(106,256 |
) |
|
(31 |
) |
|
(175,483 |
) |
Net impact of remodeled stores on selling square feet |
|
|
|
|
|
(11,769 |
) |
|
|
|
|
(12,388 |
) |
|
|
|
|
(36,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores open, end of period |
|
|
504 |
|
|
2,596,988 |
|
|
507 |
|
|
2,637,074 |
|
|
519 |
|
|
2,725,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2014 Compared to Fiscal Year 2013
Net Sales. Net sales for fiscal year 2014 were $923.3 million, as compared to $939.2 million for fiscal year 2013. Comparable
store
sales for fiscal year 2014 decreased 1.0%, as compared to an increase of 1.1% for fiscal year 2013. In the comparable store base, average dollar sales per transaction decreased by 1.6%, while the
number of transactions per average store increased by 0.6%, as compared to fiscal year 2013. Net sales from the eCommerce and Outlet channels increased 22% and 16%, respectively, in
fiscal year 2014, as compared to fiscal year 2013. Contributing to the decrease in net sales was the Company's lower store base throughout fiscal year 2014, as compared to fiscal year 2013.
As
a result of the ongoing contract negotiation between the International Longshore and Warehouse Union and the operators of West Coast ports, through which the Company processes a
portion of its products, the Company's net sales and gross profit during fiscal year 2014 were negatively impacted, and could continue to be negatively impacted, by late merchandise deliveries due to
shipping delays at West Coast ports, longer lead times, increased freight costs on goods diverted to the East Coast as part of the Company's contingency plans, and increased air freight to secure key
merchandise items.
Gross Profit. Gross profit for fiscal year 2014 was $249.8 million, or 27.1% of net sales, as compared to $264.4 million, or
28.1% of
net sales, in fiscal year 2013. The decline in gross profit as a percentage of net sales during fiscal year 2014, as compared to fiscal year 2013, was due to a 110 basis point decrease in merchandise
margin, primarily attributable to a higher level of markdowns, in
30
Table of Contents
addition
to increased freight and shipping costs, partially offset by reduced product costs and a 10 basis point decrease in buying and occupancy costs.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $265.4 million, or 28.8% of net
sales, for
fiscal year 2014, as compared to $261.3 million, or 27.8% of net sales, for fiscal year 2013. The increase in selling, general, and administrative expenses as a percentage of net sales during
fiscal year 2014, as compared to fiscal year 2013, was primarily the result of $9.2 million of non-operating charges, as well as increased marketing expenses, partially offset by a decrease in
performance-based compensation expense. The $9.2 million of non-operating charges in fiscal year 2014 include the following: $4.1 million of duplicative rent expense related to the
relocation of the Company's corporate headquarters, $3.0 million of severance expense and $1.7 million of consulting fees incurred in connection with the business re-engineering program
described in the "Overview" section above, and $0.4 million of legal and other expenses. As a result of the business re-engineering program, the Company recognized approximately
$1.5 million of savings in payroll and related costs during the fourth quarter of fiscal year 2014. There were no non-operating charges recorded during fiscal year 2013.
In
addition, during fiscal years 2014 and 2013, the Company recorded $0.9 million and $0.5 million of non-cash asset impairment charges in selling, general and
administrative expenses, respectively, related to underperforming stores.
Operating (Loss) Income. For the reasons discussed above, operating loss for fiscal year 2014 was $15.6 million, or 1.7% of net
sales, as
compared to operating income of $3.1 million, or 0.3% of net sales, during fiscal year 2013.
Interest Expense, Net. Net interest expense was $0.6 million and $0.4 million during fiscal year 2014 and fiscal year 2013,
respectively.
Provision (Benefit) for Income Taxes. As previously disclosed, the Company continues to provide for adjustments to the deferred tax
valuation
allowance initially recorded during the second quarter of fiscal year 2010. For further information related to the deferred tax valuation allowance, please refer to Note 11, "Income Taxes" in
the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
Net (Loss) Income. For the reasons discussed above, net loss was $16.9 million, or 1.8% of net sales, for fiscal year 2014. This
compares to
net income of $2.4 million, or 0.3% of net sales, for fiscal year 2013.
Fiscal Year 2013 Compared to Fiscal Year 2012
Net Sales. Net sales for fiscal year 2013 were $939.2 million, as compared to $966.4 million for fiscal year 2012. Fiscal
year 2013
included 52 weeks versus 53 weeks in fiscal year 2012. The 53rd week in fiscal year 2012 contributed $11.6 million of sales. Comparable store sales for fiscal
year 2013 increased 1.1%, as compared to an increase of 0.1% for fiscal year 2012. In the comparable store base, average dollar
sales per transaction increased by 2.7%, while the number of transactions per average store decreased by 1.5%, as compared to fiscal year 2012. Net sales from the eCommerce and Outlet channels
increased 14% and 20%, respectively, in fiscal year 2013, as compared to fiscal year 2012. Contributing to the decrease in net sales was the Company's lower store base throughout fiscal year 2013, as
compared to fiscal year 2012. In addition, during the fourth quarter of fiscal year 2012, the Company determined it had adequate information on historical redemption patterns for merchandise credits
and utilized this to revise its estimates of redemption rates and the period over which breakage income is recognized, which resulted in a $4.3 million benefit to net sales, gross profit, and
operating income.
31
Table of Contents
Gross Profit. Gross profit for fiscal year 2013 was $264.4 million, or 28.1% of net sales, as compared to $264.8 million, or
27.4% of
net sales, in fiscal year 2012. The improvement in gross profit as a percentage of net sales during fiscal year 2013, as compared to fiscal year 2012, was due to a 110 basis point increase in
merchandise margin, primarily attributable to a lower level of markdowns and reduced product costs, partially offset by a 40 basis point increase in buying and occupancy costs. The slight decrease in
gross profit was driven primarily by the inclusion of a $4.3 million benefit recognized for merchandise credit breakage income in the fourth quarter of fiscal year 2012.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $261.3 million, or 27.8% of net
sales, for
fiscal year 2013, as compared to $262.6 million, or 27.2% of net sales, for fiscal year 2012. The increase in selling, general, and administrative expenses as a percentage of net sales during
fiscal year 2013, as compared to fiscal year 2012, was a result of increased marketing expenses and unfavorable insurance claims, partially offset by a decrease in performance-based compensation
expense. During fiscal years 2013 and 2012, the Company recorded $0.5 million and $0.6 million of non-cash asset impairment charges in selling, general and administrative expenses,
respectively, related to underperforming stores.
Operating (Loss) Income. For the reasons discussed above, operating income for fiscal year 2013 was $3.1 million, or 0.3% of net
sales, as
compared to operating income of $2.3 million, or 0.2% of net sales, during fiscal year 2012.
Interest Expense, Net. Net interest expense was $0.4 million during fiscal year 2013 and fiscal year 2012.
Provision (Benefit) for Income Taxes. As previously disclosed, the Company continues to provide for adjustments to the deferred tax
valuation
allowance initially recorded during the second quarter of fiscal year 2010. For further information related to the deferred tax valuation allowance, please refer to Note 11, "Income Taxes" in
the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
Net (Loss) Income. For the reasons discussed above, net income was $2.4 million, or 0.3% of net sales, for fiscal year 2013. This
compares to
net income of $2.1 million, or 0.2% of net sales, for fiscal year 2012.
Seasonality
The Company views the retail apparel market as having two principal selling seasons: spring (first and second quarter) and fall (third
and fourth quarter). The Company's business experiences seasonal fluctuations in net sales and operating income, with a significant portion of its operating income typically realized during its fourth
quarter. Any decrease in sales or margins during either of the principal selling seasons in any given year could have a disproportionate effect on the Company's financial condition and results of
operations. Seasonal fluctuations also affect inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period in the fourth quarter and
prior to the Easter and Mother's Day holidays toward the latter part of the first quarter and beginning of the second quarter.
Liquidity and Capital Resources
The Company's primary uses of cash are to fund working capital, operating expenses, debt service and capital expenditures related
primarily to the construction of new stores, remodeling of existing stores and development of the Company's information technology infrastructure. Historically, the Company has financed these
requirements from internally generated cash flow. The Company intends to fund its ongoing capital and working capital requirements, as well as debt service obligations, primarily through cash flows
from operations, supplemented by borrowings under its credit facility, if
32
Table of Contents
needed.
As of the date of this Annual Report on Form 10-K, the Company is in compliance with all debt covenants.
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands)
|
|
January 31,
2015 |
|
February 1,
2014 |
|
February 2,
2013 |
|
Cash and cash equivalents |
|
$ |
69,293 |
|
$ |
69,723 |
|
$ |
60,933 |
|
Working capital |
|
$ |
46,531 |
|
$ |
52,418 |
|
$ |
41,055 |
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands)
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
Net cash provided by operating activities |
|
$ |
12,000 |
|
$ |
27,888 |
|
$ |
27,380 |
|
Net cash used in investing activities |
|
$ |
(26,527 |
) |
$ |
(18,836 |
) |
$ |
(17,329 |
) |
Net cash provided by (used in) financing activities |
|
$ |
14,097 |
|
$ |
(262 |
) |
$ |
95 |
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
$ |
(430 |
) |
$ |
8,790 |
|
$ |
10,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
Net cash provided by operating activities was $12.0 million during fiscal year 2014, as compared to $27.9 million during
fiscal year 2013. The decrease in cash provided by operating activities during fiscal year 2014, as compared to fiscal year 2013, is primarily due to a $19.3 million decrease in net income, as
compared to fiscal year 2013, reflecting a decrease in net sales and the inclusion of $9.2 million of non-operating charges in fiscal year 2014, as described in the "Results of Operations"
section above. There were no non-operating charges recorded during fiscal year 2013.
Net
cash provided by operating activities was $27.9 million during fiscal year 2013, as compared to $27.4 million during fiscal year 2012. The increase in cash provided by
operating activities during fiscal year 2013, as compared to fiscal year 2012, is primarily due to an increase in net income, as compared to fiscal year 2012, reflecting the execution of the Company's
strategic initiatives combined with stringent cost controls and benefits recognized from prior store lease negotiations.
Investing Activities
Net cash used in investing activities was $26.5 million, $18.8 million, and $17.3 million, during fiscal year
2014, fiscal year 2013, and fiscal year 2012, respectively. The $7.7 million increase in fiscal year 2014, as compared to fiscal year 2013, is primarily due to $5.9 million of capital
expenditures related to the build-out of the Company's new corporate headquarters and the related information technology infrastructure. In addition, during fiscal year 2014, capital spending of
$16.1 million was related to the opening of 11 new Outlet stores, and 1 New York & Company store, and the remodeling of 11 existing locations. The Company also invested
$4.8 million in non-store capital projects, which principally represent information technology to enhance its omni-channel capabilities and eCommerce website. These investments were partially
offset by $0.3 million of insurance recoveries.
Net
cash used in investing activities during fiscal year 2013 reflects capital expenditures of $18.8 million, which includes $9.0 million related to non-store capital
projects, which principally represent information technology to optimize the Company's omni-channel retail strategy. In addition, capital spending of $9.8 million was related to the opening of
seven new Outlet stores and one New York & Company store, and the remodeling of seven existing locations during fiscal year 2013. Net cash used in investing activities during fiscal year 2012
reflects capital expenditures of $18.1 million, which includes $13.4 million related to the opening of 18 new Outlet stores and the remodeling of 13 existing stores, and
$4.7 million related to non-store capital projects, which principally represent information technology enhancements, partially offset by $0.8 million of insurance recoveries.
33
Table of Contents
For fiscal year 2015, capital expenditures are expected to range between $28 million and $30 million, which includes the carryforward of
$6.2 million of planned expenditures from fiscal year 2014 for the build-out of the corporate headquarters and information technology. In total, fiscal year 2015 capital expenditures reflect
the build-out of the Company's new corporate headquarters, continued investments in the Company's information technology infrastructure, including its eCommerce website, and real estate spending to
support the opening of new Outlet stores and New York & Company stores, along with remodels. In fiscal year 2015, the Company expects to open approximately 3 new New York & Company
stores, open between 11 and 15 new Outlet stores, convert 9 New York & Company stores to new Outlet stores, remodel between 8 and 12 existing stores and close between 18 and 22 stores, ending
the fiscal year with between 496 and 504 stores, including between 82 and 86 Outlet stores.
Financing Activities
Net cash provided by financing activities was $14.1 million in fiscal year 2014, as compared to net cash used in financing
activities of $0.3 million in fiscal year 2013, and net cash provided by financing activities of $0.1 million in fiscal year 2012. Net cash used in financing activities for fiscal year
2014 consisted of $15.0 million of proceeds from the Term Loan and $0.3 million of proceeds from the exercise of stock options, partially offset by the payment of $0.6 million of
financing costs, $0.3 million for the quarterly repayment of the Term Loan, $0.3 million of shares withheld for payment of employee payroll taxes, and $0.1 million for payments on
a capital lease obligation. Net cash used in financing activities for fiscal year 2013 consisted of $0.8 million of shares withheld for payment of employee payroll taxes and $0.5 million
provided by proceeds from the exercise of stock options. Net cash provided by financing activities for fiscal year 2012 consisted of $0.1 million of proceeds from the exercise of stock options.
Long-Term Debt and Credit Facilities
On October 24, 2014, Lerner New York, Inc., Lernco, Inc. and Lerner New York Outlet, Inc., wholly-owned
indirect subsidiaries of New York & Company, Inc., entered into a Fourth Amended and Restated Loan and Security Agreement (the "Loan Agreement") with Wells Fargo Bank, National
Association, as Agent and Term Loan Agent and the lenders party thereto. The obligations under the Loan Agreement are guaranteed by New York & Company, Inc. and its other subsidiaries.
The Loan Agreement amended and restated the Third Amended and Restated Loan and Security Agreement (the "Previous Agreement"), dated August 10, 2011, among Lerner New York, Inc.,
Lernco, Inc., and Lerner New York Outlet, Inc. as borrowers, together with Wells Fargo Bank, National Association, as Agent and the lenders party thereto, as amended. The Previous
Agreement was scheduled to mature on August 10, 2016.
The
amendments to the Previous Agreement provide for, but are not limited to: (i) an extension of the term of the revolving credit facility to October 24, 2019;
(ii) a reduction of interest rates related to the revolving credit facility; (iii) a reduction of certain fees related to the revolving credit facility; and (iv) a
$15 million, 5-year term loan, bearing interest at the Adjusted Eurodollar Rate plus 4.50% (the "Term Loan"). The Company used a portion of the proceeds from the Term Loan to pay for costs
associated with the relocation and build-out of its new corporate headquarters and for general corporate purposes.
The
revolving borrowing availability under the revolving credit facility remains unchanged, providing the Company with up to $100 million of credit, consisting of a
$75 million revolving credit facility (which includes a sub-facility for issuance of letters of credit up to $45 million) with a fully committed accordion option that allows the Company
to increase the revolving credit facility up to $100 million or decrease it to a minimum of $60 million, subject to certain restrictions. The maximum borrowing availability under the
Company's revolving credit facility also remains unchanged and is
34
Table of Contents
determined
by a monthly borrowing base calculation based on applying specified advance rates against inventory and certain other eligible assets. Under the Loan Agreement, the Company continues to be
subject to a Minimum Excess Availability covenant of $7.5 million. The Loan Agreement contains other covenants and conditions, including restrictions on the Company's ability to pay dividends
on its common stock, prepay the Term Loan, incur additional indebtedness and to prepay, redeem, defease or purchase other debt. Subject to such restrictions, the Company may incur more debt for
working capital, capital expenditures, stock repurchases, acquisitions and for other purposes.
Under
the terms of the Loan Agreement, the interest rates applicable to Revolving Loans have been reduced by 0.25% and Revolving Loans now bear interest, at the Company's option, either
at a floating rate equal to the Adjusted Eurodollar Rate plus a margin of between 1.50% and 1.75% per year for Eurodollar Rate Loans or a floating rate equal to the Prime Rate plus a margin of between
0.50% and 0.75% per year for Prime Rate Loans, depending upon the Company's Average Compliance Excess Availability. The Company pays to the Lenders under the revolving credit facility a monthly fee on
outstanding commercial letters of credit at a rate of between 0.75% and 0.875% per year and on standby letters of credit at a rate of between 1.50% and 1.75% per year, depending upon the Company's
Average Compliance Excess Availability, plus a monthly fee on a proportion of the unused commitments under the revolving credit facility at a rate of 0.25% per year.
The
maximum borrowing availability under the Company's revolving credit facility is determined by a monthly borrowing base calculation based on applying specified advance rates against
inventory and certain other eligible assets. As of January 31, 2015, the Company had availability under its revolving credit facility of $30.0 million, net of letters of credit
outstanding of $19.8 million, as compared to availability of $37.1 million, net of letters of credit outstanding of $11.5 million, as of February 1, 2014. Included in the
$19.8 million of letters of credit outstanding at January 31, 2015 are $0.7 million of trade letters of credit and $19.1 million of standby letters of credit primarily
related to the Company's new corporate headquarters, which represents the $8.0 million increase from February 1, 2014, and certain insurance contracts.
The
lender has been granted a pledge of the common stock of Lerner New York Holding, Inc. and certain of its subsidiaries, and a first priority security interest in substantially
all other tangible and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the Loan Agreement. In addition, New
York & Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the obligations under the Loan Agreement, and such guarantees are joint and several.
Cash Requirements
The Company believes that cash flows from operations, its current cash balance and funds available under its credit facility will be
sufficient to meet its working capital needs and planned capital expenditures through fiscal year 2015.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements as defined by Item 303 (a) (4) of Regulation S-K.
35
Table of Contents
Contractual Obligations
The following table summarizes the Company's contractual obligations as of January 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period(5) |
|
|
|
Total
obligations |
|
Less than
one year |
|
One to
three years |
|
Three to
five years |
|
More than
five years |
|
|
|
(Amounts in thousands)
|
|
Long-term debt(1) |
|
$ |
14,750 |
|
$ |
1,000 |
|
$ |
2,000 |
|
$ |
11,750 |
|
$ |
|
|
Capital leases(2) |
|
|
2,405 |
|
|
506 |
|
|
1,012 |
|
|
887 |
|
|
|
|
Operating leases(3) |
|
|
496,537 |
|
|
97,574 |
|
|
129,411 |
|
|
73,823 |
|
|
195,729 |
|
Purchase obligations(4) |
|
|
95,727 |
|
|
92,477 |
|
|
3,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
$ |
609,419 |
|
$ |
191,557 |
|
$ |
135,673 |
|
$ |
86,460 |
|
$ |
195,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Does
not include any scheduled interest payments.
- (2)
- Represents
future minimum lease payments under capital leases as of January 31, 2015.
- (3)
- Represents
future minimum lease payments under non-cancelable operating leases as of January 31, 2015. The minimum lease payments do not include
common area maintenance ("CAM") charges, real estate taxes or other landlord charges, which are also contractual obligations under store and office operating leases. In many of the Company's leases,
CAM charges are not fixed and can fluctuate from year to year. During fiscal year 2014, CAM charges and real estate taxes were $59.3 million and other landlord charges were
$4.6 million.
- (4)
- Represents
purchase orders for inventory and construction commitments for stores not yet received or recorded on the consolidated balance sheet, as well as
contractual obligations for distribution and logistics services used in the normal course of business, and fees related to the Company's collaboration with Eva Mendes.
- (5)
- Not
included in the above table are net potential cash obligations of $3.9 million associated with unrecognized tax benefits and $2.7 million
associated with an underfunded pension liability due to the high degree of uncertainty regarding the timing of future cash outflows associated with such obligations. For further information related to
unrecognized tax benefits and the underfunded pension liability, please refer to Note 11, "Income Taxes" and Note 7, "Employee Benefit Plans," respectively, in the Notes to Consolidated
Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
Commercial Commitments
The following table summarizes the Company's commercial commitments as of January 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Commitment Per Period(2) |
|
|
|
Total
obligations |
|
Less than
one year |
|
One to
three years |
|
Three to
five years |
|
More than
five years |
|
|
|
(Amounts in thousands)
|
|
Trade letters of credit outstanding(1) |
|
$ |
688 |
|
$ |
688 |
|
$ |
|
|
$ |
|
|
$ |
|
|
Standby letters of credit(1) |
|
|
19,125 |
|
|
19,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial commitments |
|
$ |
19,813 |
|
$ |
19,813 |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Issued
under its revolving credit facility. Standby letters of credit primarily relate to the Company's new corporate headquarters and certain insurance
contracts. At January 31, 2015, there were no outstanding borrowings under the revolving credit facility.
- (2)
- Excludes
purchase orders for merchandise and supplies in the normal course of business.
36
Table of Contents
Critical Accounting Policies
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires
management to make estimates and assumptions that impact the amounts reported on the Company's consolidated financial statements and related notes. On an ongoing basis, management evaluates its
estimates and judgments, including those related to inventories, long-lived assets, intangible assets, and income taxes. Management bases its estimates and judgments on historical experience and
various other factors that are believed to be reasonable under the circumstances. Actual results may differ materially from these judgments. Management believes the following estimates and assumptions
are most significant to reporting the Company's results of operations and financial position.
Inventory Valuation. Inventories are valued at the lower of average cost or market, on a weighted average cost basis, using the retail
method. The
Company records a charge to cost of goods sold, buying and occupancy costs for all inventory on-hand when a permanent retail price reduction is reflected in its stores. In addition, management makes
estimates and judgments regarding, among other things, initial markup, markdowns, future demand and market conditions, all of which significantly impact the ending inventory valuation. If actual
future demand or market conditions are different than those projected by management, future period merchandise margin rates may be unfavorably or favorably affected. Other significant estimates
related to inventory include shrink and obsolete and excess inventory which are also based on historical results and management's operating projections.
Impairment of Long-Lived Assets. The Company evaluates long-lived assets in accordance with Financial Accounting Standards Board
("FASB") Accounting
Standards CodificationTM ("ASC") Topic 360, "Property, Plant and Equipment." Long-lived assets are evaluated for recoverability whenever events or changes in circumstances
indicate that an asset may have been impaired. The evaluation is performed at the individual store level, which is the lowest level for which identifiable cash flows are largely independent of the
cash flows of other groups of assets and liabilities. In evaluating long-lived assets for recoverability, the Company estimates the future cash flows at the individual store level that are expected to
result from the use of each store's assets based on historical experience, knowledge and market data assumptions. If the sum of the expected future undiscounted cash flows is less than the carrying
amount of the long-lived assets, an impairment loss, equal to the excess of the carrying amount over the fair value of the assets, is recognized. An impairment loss could have a material adverse
impact on the Company's financial condition and results of operations. For further information related to the impairment of long-lived assets, please refer to Note 5, "Property and Equipment,"
in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
Intangible Assets. The Company follows ASU 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment," which amends FASB ASC
Topic 350,
"IntangiblesGoodwill and Other" to permit an entity to first assess qualitative factors to determine if it is more likely than not that an indefinite-lived intangible asset is impaired
and whether it is necessary to perform the impairment test of comparing the carrying amount with the recoverable amount of the indefinite-lived intangible asset.
The
Company's intangible assets relate to the New York & Company trademarks, which were initially valued at $14.8 million. The trademarks were initially valued using the
"relief from royalty method" and were determined to have indefinite lives by an independent appraiser. The Company's fiscal year 2014, fiscal year 2013 and fiscal year 2012 impairment tests resulted
in a fair value that significantly exceeded the carrying amount of the Company's trademarks. The calculation of estimated fair values used in the evaluation of long-lived assets and intangible assets
requires estimates of future cash flows, growth rates, discount rates and other variables that are based on historical experience, knowledge, and market data. If actual experience differs materially
from management's estimates or if changes in strategic direction occur, an impairment charge may be required. Management's estimates
37
Table of Contents
may
be affected by factors such as those outlined in "Item 1A. Risk Factors." An impairment loss could have a material adverse impact on the Company's results of operations. In addition to
assessing qualitative factors that could impact the fair value of the New York & Company trademarks, the Company performed a sensitivity analysis on the key assumptions used in the trademark
impairment analysis and has determined that a significant, negative change in the assumptions would not impact the Company's conclusion that no impairment was required.
Income Taxes. Income taxes are calculated in accordance with ASC Topic 740, "Income Taxes" ("ASC 740"), which requires the use of the
liability
method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Inherent
in the measurement of deferred balances are certain judgments and interpretations of enacted tax laws and published guidance with respect to applicability to the Company's operations. A valuation
allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provisions in ASC 740 related to
accounting for uncertain tax positions prescribe a comprehensive model of how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the
company has taken or expects to take on a tax return. In accordance with these provisions, the Company recognizes a tax benefit when a tax position is more-likely-than-not to be sustained upon
examination, based solely on its technical merits. The Company measures the recognized tax benefit as the largest amount of tax benefit that has greater than a 50% likelihood of being realized upon
the ultimate settlement with a taxing authority. The Company reverses a previously recognized tax benefit if it determines that the tax position no longer meets the more-likely-than-not threshold of
being sustained. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense.
For
further information related to deferred tax assets and the related valuation allowance, please refer to Note 11, "Income Taxes," in the Notes to Consolidated Financial
Statements appearing elsewhere in this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rates. The Company's market risks relate primarily to changes in interest rates. The Company's credit facility carries
floating interest
rates that are tied to the Adjusted Eurodollar Rate and the Prime rate and therefore, if the Company borrows under the credit facility, the consolidated statements of operations and the consolidated
statements of cash flows will be exposed to changes in interest rates. As of January 31, 2015, the Company had no borrowings outstanding under its credit facility. The Company's long-term debt
carries a floating interest rate that is tied to the Adjusted Eurodollar Rate and therefore, a 1.0% increase in interest rates would increase interest expense by approximately $0.1 million
annually. The Company historically has not engaged in interest rate hedging activities.
Currency Exchange Rates. The Company historically has not been exposed to currency exchange rate risks with respect to inventory
purchases as such
expenditures have been, and continue to be, denominated in U.S. Dollars.
Item 8. Financial Statements and Supplementary Data
The financial statements and schedule included in Part IV, "Item 15. Exhibits and Financial Statement Schedules" of this
Annual Report on Form 10-K are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
38
Table of Contents
Item 9A. Controls and Procedures
- (a)
- Evaluation
of disclosure controls and procedures
The
Company carried out an evaluation, as of January 31, 2015, under the supervision and with the participation of the Company's management, including the Company's Principal
Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and
procedures are effective in ensuring that all information required to be filed in this Annual Report on Form 10-K was (i) recorded, processed, summarized and reported within the time
period specified in the Securities and Exchange Commission's rules and forms and (ii) that the disclosure controls and procedures include, without limitation, controls and procedures designed
to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management,
including its Principal Executive and Principal Financial Officers, as appropriate to allow timely decisions regarding required disclosure.
- (b)
- Report
of management on internal control over financial reporting
The
Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934, as amended. The Company's internal control over financial reporting is a process designed to provide reasonable assurance to the Company's management and Board of
Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance with accounting principles generally accepted in
the United States.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management
assessed the effectiveness of the Company's internal control over financial reporting as of January 31, 2015. In making this assessment, management used the criteria
established in the Internal ControlIntegrated Framework report issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the "COSO criteria").
Based
upon management's assessment and the COSO criteria, management believes that the Company maintained effective internal control over financial reporting as of January 31,
2015.
The
Company's independent auditors, Ernst & Young LLP, an independent registered public accounting firm, have audited and reported on the consolidated financial statements
of the Company and the effectiveness of the Company's internal control over financial reporting. The reports of the independent auditors appear on pages 46 and 47 herein and expressed
unqualified opinions on the consolidated financial statements and the effectiveness of the Company's internal control over financial reporting.
- (c)
- Changes
in internal control over financial reporting
There
has been no change in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act
Rule 13a-15 or 15d-15 that occurred during the Company's last fiscal quarter (the Company's fourth fiscal quarter in the case of an
39
Table of Contents
annual
report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. Other Information
None.
40
Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 18, 2015.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 18, 2015.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 18, 2015.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 18, 2015.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held June 18, 2015.
41
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules
- (a)
- List
of documents filed as part of this Annual Report:
- 1.
- The
following consolidated financial statements of the Company are filed as part of this Annual Report:
-
- Reports of Independent Registered Public Accounting Firm;
-
- Consolidated Statements of Operations;
-
- Consolidated Statements of Comprehensive (Loss) Income;
-
- Consolidated Balance Sheets;
-
- Consolidated Statements of Cash Flows;
-
- Consolidated Statements of Stockholders' Equity; and
-
- Notes to Consolidated Financial Statements.
- 2.
- Financial
Statement Schedule II Valuation and Qualifying Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Reserve
Description |
|
Balance at
beginning of
period |
|
Additions
Charged to Operations |
|
Deductions |
|
Balance at
end of
period |
|
|
|
|
|
(Amounts in thousands)
|
|
2012 |
|
Sales Return Reserve |
|
$ |
1,397 |
|
$ |
36,864 |
|
$ |
36,658 |
|
$ |
1,603 |
|
2013 |
|
Sales Return Reserve |
|
$ |
1,603 |
|
$ |
33,277 |
|
$ |
33,461 |
|
$ |
1,419 |
|
2014 |
|
Sales Return Reserve |
|
$ |
1,419 |
|
$ |
32,861 |
|
$ |
32,767 |
|
$ |
1,513 |
|
The
exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Form 10-K.
42
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 16, 2015.
|
|
|
|
|
NEW YORK & COMPANY, INC.
(REGISTRANT) |
|
|
/s/ SHEAMUS TOAL
Sheamus Toal Executive Vice President and
Chief Financial Officer
(Principal financial officer and
Principal accounting officer) |
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the
capacities indicated.
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ GREGORY J. SCOTT
Gregory J. Scott |
|
Chief Executive Officer and Director
(Principal executive officer) |
|
April 16, 2015 |
/s/ SHEAMUS TOAL
Sheamus Toal |
|
Executive Vice President and
Chief Financial Officer
(Principal financial officer and
Principal accounting officer) |
|
April 16, 2015 |
/s/ BODIL M. ARLANDER
Bodil M. Arlander |
|
Director |
|
April 16, 2015 |
/s/ JILL BERAUD
Jill Beraud |
|
Director |
|
April 16, 2015 |
/s/ DAVID H. EDWAB
David H. Edwab |
|
Director |
|
April 16, 2015 |
/s/ JAMES O. EGAN
James O. Egan |
|
Director |
|
April 16, 2015 |
43
Table of Contents
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ JOHN D. HOWARD
John D. Howard |
|
Director |
|
April 16, 2015 |
/s/ GRACE NICHOLS
Grace Nichols |
|
Director and Chair of the Board |
|
April 16, 2015 |
/s/ MICHELLE PEARLMAN
Michelle Pearlman |
|
Director |
|
April 16, 2015 |
/s/ RICHARD L. PERKAL
Richard L. Perkal |
|
Director |
|
April 16, 2015 |
/s/ ARTHUR E. REINER
Arthur E. Reiner |
|
Director |
|
April 16, 2015 |
44
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Financial Statements
Index to Financial Statements
|
|
|
|
|
Page |
Reports of Independent Registered Public Accounting Firm |
|
46 |
Consolidated Statements of Operations for the years ended January 31, 2015, February 1, 2014, and February 2,
2013 |
|
48 |
Consolidated Statements of Comprehensive (Loss) Income for the years ended January 31, 2015, February 1, 2014, and
February 2, 2013 |
|
48 |
Consolidated Balance Sheets as of January 31, 2015 and February 1, 2014 |
|
49 |
Consolidated Statements of Cash Flows for the years ended January 31, 2015, February 1, 2014, and February 2,
2013 |
|
50 |
Consolidated Statements of Stockholders' Equity for the years ended January 31, 2015, February 1, 2014, and
February 2, 2013 |
|
51 |
Notes to Consolidated Financial Statements |
|
52 |
45
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board of Directors and Shareholders of New York & Company, Inc. and subsidiaries
We
have audited New York & Company, Inc. and subsidiaries' internal control over financial reporting as of January 31, 2015, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). New York &
Company, Inc. and subsidiaries' management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In
our opinion, New York & Company, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of January 31,
2015, based on the COSO criteria.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of New York &
Company, Inc. and subsidiaries as of January 31, 2015 and February 1, 2014, and the related consolidated statements of operations, comprehensive (loss) income, stockholders'
equity and cash flows for each of the three years in the period ended January 31, 2015 and our report dated April 16, 2015 expressed an unqualified opinion thereon.
New
York, New York
April 16, 2015
46
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board of Directors and Shareholders of New York & Company, Inc. and subsidiaries
We
have audited the accompanying consolidated balance sheets of New York & Company, Inc. and subsidiaries (the "Company") as of January 31, 2015 and
February 1, 2014, and the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows for each of the three years in the period ended
January 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of New York & Company, Inc. and
subsidiaries at January 31, 2015 and February 1, 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended
January 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), New York & Company, Inc. and subsidiaries' internal
control over financial reporting as of January 31, 2015, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) and our report dated April 16, 2015 expressed an unqualified opinion thereon.
New
York, New York
April 16, 2015
47
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
Fiscal year
ended
January 31,
2015
(52-weeks) |
|
Fiscal year
ended
February 1,
2014
(52-weeks) |
|
Fiscal year
ended
February 2,
2013
(53-weeks) |
|
Net sales |
|
$ |
923,332 |
|
$ |
939,163 |
|
$ |
966,434 |
|
Cost of goods sold, buying and occupancy costs |
|
|
673,557 |
|
|
674,793 |
|
|
701,613 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
249,775 |
|
|
264,370 |
|
|
264,821 |
|
Selling, general and administrative expenses |
|
|
265,371 |
|
|
261,293 |
|
|
262,569 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(15,596 |
) |
|
3,077 |
|
|
2,252 |
|
Interest expense, net of interest income of $5, $8 and $17, respectively |
|
|
573 |
|
|
369 |
|
|
360 |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
|
(16,169 |
) |
|
2,708 |
|
|
1,892 |
|
Provision (benefit) for income taxes |
|
|
716 |
|
|
314 |
|
|
(208 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(16,885 |
) |
$ |
2,394 |
|
$ |
2,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
|
$ |
(0.27 |
) |
$ |
0.04 |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.27 |
) |
$ |
0.04 |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
62,825 |
|
|
62,313 |
|
|
61,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares of common stock |
|
|
62,825 |
|
|
63,240 |
|
|
62,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York & Company, Inc. and Subsidiaries
Consolidated Statements of Comprehensive (Loss) Income
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands)
|
|
Fiscal year
ended
January 31,
2015
(52-weeks) |
|
Fiscal year
ended
February 1,
2014
(52-weeks) |
|
Fiscal year
ended
February 2,
2013
(53-weeks) |
|
Net (loss) income |
|
$ |
(16,885 |
) |
$ |
2,394 |
|
$ |
2,100 |
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
Change in minimum pension liability, net of taxes of $(429), $385 and $33, respectively |
|
|
(1,075 |
) |
|
965 |
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income |
|
$ |
(17,960 |
) |
$ |
3,359 |
|
$ |
2,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
48
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
January 31,
2015 |
|
February 1,
2014 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
69,293 |
|
$ |
69,723 |
|
Restricted cash |
|
|
1,509 |
|
|
|
|
Accounts receivable |
|
|
7,406 |
|
|
7,026 |
|
Income taxes receivable |
|
|
99 |
|
|
99 |
|
Inventories, net |
|
|
93,791 |
|
|
83,479 |
|
Prepaid expenses |
|
|
20,581 |
|
|
21,141 |
|
Other current assets |
|
|
1,121 |
|
|
1,280 |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
193,800 |
|
|
182,748 |
|
Property and equipment, net |
|
|
84,374 |
|
|
83,553 |
|
Intangible assets |
|
|
14,879 |
|
|
14,879 |
|
Deferred income taxes |
|
|
6,660 |
|
|
6,501 |
|
Other assets |
|
|
2,167 |
|
|
1,072 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
301,880 |
|
$ |
288,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders' equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Current portionlong-term debt |
|
$ |
1,000 |
|
$ |
|
|
Accounts payable |
|
|
86,481 |
|
|
75,874 |
|
Accrued expenses |
|
|
52,418 |
|
|
46,880 |
|
Income taxes payable |
|
|
710 |
|
|
1,075 |
|
Deferred income taxes |
|
|
6,660 |
|
|
6,501 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
147,269 |
|
|
130,330 |
|
Long-term debt, net of current portion |
|
|
13,750 |
|
|
|
|
Deferred rent |
|
|
35,169 |
|
|
39,925 |
|
Other liabilities |
|
|
6,333 |
|
|
5,283 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
202,521 |
|
|
175,538 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
Common stock, voting, par value $0.001; 300,000 shares authorized; 65,236 and 64,467 shares issued and 64,236 and 63,467 shares outstanding at
January 31, 2015 and February 1, 2014, respectively |
|
|
65 |
|
|
64 |
|
Additional paid-in capital |
|
|
174,609 |
|
|
170,506 |
|
Retained deficit |
|
|
(69,112 |
) |
|
(52,227 |
) |
Accumulated other comprehensive loss |
|
|
(2,806 |
) |
|
(1,731 |
) |
Treasury stock at cost; 1,000 shares at January 31, 2015 and February 1, 2014 |
|
|
(3,397 |
) |
|
(3,397 |
) |
|
|
|
|
|
|
|
|
Total stockholders' equity |
|
|
99,359 |
|
|
113,215 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ |
301,880 |
|
$ |
288,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
49
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands)
|
|
Fiscal year
ended
January 31,
2015
(52-weeks) |
|
Fiscal year
ended
February 1,
2014
(52-weeks) |
|
Fiscal year
ended
February 2,
2013
(53-weeks) |
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(16,885 |
) |
$ |
2,394 |
|
$ |
2,100 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
27,315 |
|
|
32,719 |
|
|
34,909 |
|
Loss from impairment charges |
|
|
911 |
|
|
524 |
|
|
556 |
|
Amortization of deferred financing costs |
|
|
131 |
|
|
119 |
|
|
119 |
|
Share-based compensation expense |
|
|
4,089 |
|
|
3,866 |
|
|
3,869 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
(1,509 |
) |
|
|
|
|
|
|
Accounts receivable |
|
|
(380 |
) |
|
1,190 |
|
|
(947 |
) |
Income taxes receivable |
|
|
|
|
|
389 |
|
|
(11 |
) |
Inventories, net |
|
|
(10,312 |
) |
|
(3,281 |
) |
|
1,130 |
|
Prepaid expenses |
|
|
560 |
|
|
326 |
|
|
(410 |
) |
Accounts payable |
|
|
10,607 |
|
|
1,464 |
|
|
2,113 |
|
Accrued expenses |
|
|
5,538 |
|
|
(2,167 |
) |
|
(3,415 |
) |
Income taxes payable |
|
|
(365 |
) |
|
86 |
|
|
(2,075 |
) |
Deferred rent |
|
|
(4,756 |
) |
|
(8,909 |
) |
|
(8,293 |
) |
Other assets and liabilities |
|
|
(2,944 |
) |
|
(832 |
) |
|
(2,265 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
12,000 |
|
|
27,888 |
|
|
27,380 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(26,781 |
) |
|
(18,836 |
) |
|
(18,144 |
) |
Insurance recoveries |
|
|
254 |
|
|
|
|
|
815 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(26,527 |
) |
|
(18,836 |
) |
|
(17,329 |
) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
|
15,000 |
|
|
|
|
|
|
|
Repayment of debt |
|
|
(250 |
) |
|
|
|
|
|
|
Payment of financing costs |
|
|
(566 |
) |
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
299 |
|
|
510 |
|
|
95 |
|
Shares withheld for payment of employee payroll taxes |
|
|
(284 |
) |
|
(772 |
) |
|
|
|
Principal payment on capital lease obligation |
|
|
(102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
14,097 |
|
|
(262 |
) |
|
95 |
|
Net (decrease) increase in cash and cash equivalents |
|
|
(430 |
) |
|
8,790 |
|
|
10,146 |
|
Cash and cash equivalents at beginning of period |
|
|
69,723 |
|
|
60,933 |
|
|
50,787 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
69,293 |
|
$ |
69,723 |
|
$ |
60,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
371 |
|
$ |
259 |
|
$ |
258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for taxes |
|
$ |
1,390 |
|
$ |
403 |
|
$ |
2,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash capital lease transaction |
|
$ |
2,267 |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
50
Table of Contents
New York & Company, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Treasury Stock |
|
|
|
|
|
Accumulated
Other
Comprehensive
Loss |
|
|
|
|
|
Additional
Paid-in
Capital |
|
Retained
Deficit |
|
|
|
(Amounts in thousands)
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Total |
|
Balance at January 28, 2012 |
|
|
62,053 |
|
$ |
62 |
|
|
1,000 |
|
$ |
(3,397 |
) |
$ |
162,940 |
|
$ |
(56,721 |
) |
$ |
(2,779 |
) |
$ |
100,105 |
|
Issuance of common stock upon exercise of stock options and stock appreciation rights |
|
|
362 |
|
|
2 |
|
|
|
|
|
|
|
|
93 |
|
|
|
|
|
|
|
|
95 |
|
Restricted stock issued |
|
|
469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock forfeits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,869 |
|
|
|
|
|
|
|
|
3,869 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,100 |
|
|
|
|
|
2,100 |
|
Minimum pension liability adjustment, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83 |
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 2, 2013 |
|
|
62,884 |
|
$ |
64 |
|
|
1,000 |
|
$ |
(3,397 |
) |
$ |
166,902 |
|
$ |
(54,621 |
) |
$ |
(2,696 |
) |
$ |
106,252 |
|
Issuance of common stock upon exercise of stock options and stock appreciation rights |
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
510 |
|
|
|
|
|
|
|
|
510 |
|
Restricted stock issued and vesting of units |
|
|
651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock forfeits and shares withheld for employee payroll taxes |
|
|
(368 |
) |
|
|
|
|
|
|
|
|
|
|
(772 |
) |
|
|
|
|
|
|
|
(772 |
) |
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,866 |
|
|
|
|
|
|
|
|
3,866 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,394 |
|
|
|
|
|
2,394 |
|
Minimum pension liability adjustment, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
965 |
|
|
965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 1, 2014 |
|
|
63,467 |
|
$ |
64 |
|
|
1,000 |
|
$ |
(3,397 |
) |
$ |
170,506 |
|
$ |
(52,227 |
) |
$ |
(1,731 |
) |
$ |
113,215 |
|
Issuance of common stock upon exercise of stock options and stock appreciation rights |
|
|
116 |
|
|
1 |
|
|
|
|
|
|
|
|
298 |
|
|
|
|
|
|
|
|
299 |
|
Restricted stock issued and vesting of units |
|
|
832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock forfeits and shares withheld for employee payroll taxes |
|
|
(179 |
) |
|
|
|
|
|
|
|
|
|
|
(284 |
) |
|
|
|
|
|
|
|
(284 |
) |
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,089 |
|
|
|
|
|
|
|
|
4,089 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,885 |
) |
|
|
|
|
(16,885 |
) |
Minimum pension liability adjustment, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,075 |
) |
|
(1,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,960 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2015 |
|
|
64,236 |
|
$ |
65 |
|
|
1,000 |
|
$ |
(3,397 |
) |
$ |
174,609 |
|
$ |
(69,112 |
) |
$ |
(2,806 |
) |
$ |
99,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
51
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements
January 31, 2015
1. Organization and Basis of Presentation of Financial Statements
New York & Company, Inc. (together with its subsidiaries, collectively the "Company") is a specialty retailer of women's fashion apparel and accessories, and the modern
wear-to-work destination for women, providing perfectly fitting pants and NY Style that is feminine, polished, on-trend and versatileall at compelling values. The Company's proprietary
branded New York & Company® merchandise is sold exclusively through its national network of retail stores and eCommerce store at www.nyandcompany.com. The target customers for the Company's
merchandise are fashion-conscious, value-sensitive women between the ages of 25 and 45. As
of January 31, 2015, the Company operated 504 stores in 43 states.
The
Company's fiscal year is a 52- or 53-week year that ends on the Saturday closest to January 31. The accompanying consolidated financial statements include the accounts of the
Company for the 52-weeks ended January 31, 2015 ("fiscal year 2014"), 52-weeks ended February 1, 2014 ("fiscal year 2013"), and the 53-weeks ended February 2, 2013 ("fiscal year
2012"). All significant intercompany balances and transactions have been eliminated in consolidation. The Company operates as one segment and all of its revenues are generated in the United States.
2. Summary of Significant Accounting Policies
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from
Contracts with Customers" ("ASU 2014-09"), which supersedes the revenue recognition requirements in FASB Accounting Standards Codification ("ASC") Topic 605, "Revenue Recognition"
and 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 to which the entity expects to be
entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that
reporting period, with early application not permitted. ASU 2014-09 may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of
the date of adoption. The Company is evaluating the new standard and its impact on the Company's financial position and results of operations.
In
August 2014, the FASB issued ASU 2014-15, "Presentation of Financial StatementsGoing Concern" ("ASU 2014-15"), which requires management to evaluate whether there is
substantial doubt about an entity's ability to continue as a going concern and provide related footnote disclosures. The guidance is effective for annual or interim reporting periods beginning on or
after December 15, 2016. Early adoption is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU 2014-15 to have an impact on
the Company's financial position or results of operations.
Revenue Recognition
Revenue from the sale of merchandise at the Company's stores is recognized at the time the customer takes possession of the related
merchandise and the purchases are paid for, primarily with either cash or credit card. Revenue, including shipping fees billed to customers, from the sale of merchandise at the Company's eCommerce
store is recognized when the merchandise is shipped to the
52
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
2. Summary of Significant Accounting Policies (Continued)
customer
and the purchases are paid for. Revenue for gift cards and merchandise credits is recognized at redemption. Prior to their redemption, gift cards and merchandise credits are recorded as a
liability. Discounts and promotional coupons offered to customers are accounted for as a reduction of sales revenue at the time the coupons are tendered by the customer. The Company presents sales
taxes collected from customers on a net basis (excluded from revenues).
The
Company issues gift cards and merchandise credits which do not contain provisions for expiration or inactivity fees. The portion of the dollar value of gift cards and merchandise
credits that ultimately is not used by customers to make purchases is known as breakage and will be recognized as revenue, if the Company determines it is not required to escheat such amounts to
government agencies under state escheatment laws. The Company recognizes gift card and merchandise credit breakage as revenue as they each are redeemed over a two-year redemption period based on their
respective historical breakage rate. The Company considers the likelihood of redemption remote beyond a two-year redemption period, at which point any unrecognized breakage is recognized as revenue.
The Company determined the redemption period and the breakage rates for gift cards and merchandise credits based on their respective historical redemption patterns.
During
fiscal year 2014, fiscal year 2013, and fiscal year 2012 the Company recorded breakage revenue for gift cards and merchandise credits of $0.8 million, $1.1 million,
and $5.1 million, respectively. Included in the $5.1 million of breakage revenue in fiscal year 2012 is $4.3 million of breakage revenue that resulted from the Company revising
its estimates of redemption rates and the period over which breakage is recognized for merchandise credits based on historical redemption patterns.
Reserve for Returns
The Company reserves for sales returns through reductions in sales and gross margin based upon historical merchandise returns
experience and current sales levels.
Fair Value Measurements and Financial Instruments
The Company measures fair value in accordance with ASC 820 Topic, "Fair Value Measurements" ("ASC 820"). ASC 820 establishes a
three-level fair value hierarchy that requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs used
to measure fair value are as follows:
|
|
|
Level 1: |
|
Observable inputs such as quoted prices in active markets; |
Level 2: |
|
Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
Level 3: |
|
Unobservable inputs in which there is little or no market data and require the reporting entity to develop its own assumptions. |
The
Company's financial instruments consist of cash and cash equivalents, restricted cash, short-term trade receivables, accounts payable, and long-term debt. The carrying values on the
balance sheet for cash and cash equivalents, restricted cash, short-term trade receivables and accounts payable approximate their fair values due to the short-term maturities of such items. At
January 31, 2015, the
53
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
2. Summary of Significant Accounting Policies (Continued)
carrying
amount of long-term debt approximated its fair value due to the variable interest rate it carries.
Cash and Cash Equivalents
Cash and cash equivalents include all cash in banks, cash on-hand, and all short-term investments with an original maturity of three
months or less when purchased.
Restricted Cash
As of January 31, 2015, the Company had $1.5 million in restricted cash related to its new corporate headquarters, which
it expects to release to the lessor during the next eight months. For further information related to the new corporate headquarters, please refer to Note 6, "Commitments and Contingencies."
Inventories
Inventories are valued at the lower of average cost or market, on a weighted average cost basis, using the retail method.
Deferred Rent
The Company recognizes fixed minimum rent expense on non-cancelable leases on a straight-line basis over the term of each individual
lease including the build-out period. The difference between recognized rental expense and amounts payable under the lease is recorded as a deferred lease liability. In addition, the Company
recognizes landlord allowances as a deferred lease liability, which is amortized over the term of the related lease as a reduction to rent expense. For contingent rent expense based upon sales, the
Company estimates annual contingent rent expense and recognizes a portion each month based on actual sales. At January 31, 2015 and February 1, 2014, the deferred lease liability was
$35.2 million and $39.9 million, respectively, and is reported as "Deferred rent" on the consolidated balance sheets.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for new properties and improvements are capitalized, while the cost of repair
and maintenance is charged to expense. Depreciation of property and equipment is provided on a straight-line basis over the estimated useful lives of the assets.
54
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
2. Summary of Significant Accounting Policies (Continued)
The
estimated useful lives of property and equipment, for financial statement purposes, are as follows:
|
|
|
Depreciable Fixed Assets
|
|
Useful Life |
Land |
|
|
Store fixtures and equipment |
|
3 - 10 years |
Office furniture, fixtures and equipment |
|
3 - 15 years |
Software |
|
5 years |
Leasehold improvements |
|
Lesser of the useful life or the term of the lease |
Cost of Goods Sold, Buying and Occupancy Costs
Cost of goods sold, buying and occupancy costs is comprised of direct inventory costs for merchandise sold, distribution costs,
shipping costs, payroll and related costs for the Company's design, sourcing, production, merchandising, planning and allocation personnel, and store occupancy and related costs.
Share-Based Compensation
The Company accounts for all share-based payments in accordance with FASB ASC Topic 718, "CompensationStock Compensation"
("ASC 718"). For further information related to share-based compensation, please refer to Note 8, "Share-Based Compensation."
Marketing
Marketing costs, which consist primarily of direct mail and point-of-sale ("POS") advertising costs, are expensed at the time the
promotion is mailed or first appears in the store. For the following periods, marketing costs reported in "Selling, general, and administrative expenses" on the consolidated statements of operations
were as follows:
|
|
|
|
|
Fiscal Year
|
|
(Amounts in thousands) |
|
2014 |
|
$ |
33,352 |
|
2013 |
|
$ |
31,137 |
|
2012 |
|
$ |
30,413 |
|
At
January 31, 2015 and February 1, 2014, marketing costs reported in "Prepaid expenses" on the consolidated balance sheets amounted to $1.8 million and
$1.7 million, respectively.
Pre-Opening Expenses
Costs, such as advertising and payroll costs, incurred prior to the opening of a new store are expensed as incurred.
55
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
2. Summary of Significant Accounting Policies (Continued)
Store Supplies
The initial inventory and subsequent shipments of supplies for new stores, including, but not limited to, hangers, signage, packaging
and POS supplies, are expensed as incurred.
Deferred Financing Costs
Costs related to the issuance of debt are capitalized as "Other assets" in the consolidated balance sheets and amortized as interest
expense over the terms of the related debt. At January 31, 2015 and February 1, 2014, net deferred financing costs were $0.8 million and $0.3 million, respectively.
Interest Expense
Interest expense, net of interest income, includes interest primarily related to the Company's revolving credit facility, amortization
of deferred financing costs, and long-term debt.
Impairment of Long-lived Assets
The Company evaluates the impairment of long-lived assets in accordance with ASC Topic 360, "Property, Plant and Equipment." Long-lived
assets are evaluated for recoverability whenever events or changes in circumstances indicate that an asset may have been impaired. The evaluation is performed at the individual store level, which is
the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. In evaluating long-lived assets for recoverability, the Company
estimates the future cash flows at the individual store level that are expected to result from the use of each store's assets based on historical experience, knowledge and market data assumptions. If
the sum of the expected future undiscounted
cash flows is less than the carrying amount of the long-lived assets, an impairment loss, equal to the excess of the carrying amount over the fair value of the assets, is recognized.
Intangible Assets
The Company follows ASU 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment," which amends FASB ASC Topic 350,
"IntangiblesGoodwill and Other" to permit an entity to first assess qualitative factors to determine if it is more likely than not that an indefinite-lived intangible asset is impaired
and whether it is necessary to perform the impairment test of comparing the carrying amount with the recoverable amount of the indefinite-lived intangible asset.
The
Company's intangible assets relate to the New York & Company trademarks, which were initially valued at $14.8 million. The trademarks were initially valued using the
"relief from royalty method" and were determined to have indefinite lives by an independent appraiser. The Company assesses trademarks for impairment annually as of December 31, or more
frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of trademarks below their carrying value. The Company's fiscal year 2014, fiscal year 2013
and fiscal year 2012 impairment tests resulted in a fair value that significantly exceeded the carrying amount of the Company's trademarks. In addition to assessing qualitative factors that could
impact the fair value of the New York & Company trademarks, the Company performed a sensitivity analysis on the key assumptions
56
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
2. Summary of Significant Accounting Policies (Continued)
used
in the trademark impairment analysis and has determined that a significant, negative change in the assumptions would not impact the Company's conclusion that no impairment was required.
Income Taxes
Income taxes are calculated in accordance with ASC Topic 740, "Income Taxes" ("ASC 740"), which requires the use of the liability
method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of assets and
liabilities and their respective tax bases. Inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax laws and published guidance with respect to
applicability to the Company's operations. A valuation allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not
be realized. The provisions in ASC 740 related to accounting for uncertain tax positions prescribe a comprehensive model of how a company should recognize, measure, present and disclose in its
financial statements uncertain tax positions that the company has taken or expects to take on a tax return. Under these provisions, the Company recognizes a tax benefit when a tax position is
more-likely-than-not to be sustained upon examination, based solely on its technical merits. The Company measures the recognized tax benefit as the largest amount of tax benefit that has greater than
a 50% likelihood of being realized upon the ultimate settlement with a taxing authority. The Company reverses a previously recognized tax benefit if it determines that the tax position no longer meets
the more-likely-than-not threshold of being sustained. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense.
Comprehensive Income (Loss)
Comprehensive income (loss) is calculated in accordance with ASC Topic 220, "Comprehensive Income." Comprehensive income (loss)
includes net income (loss) and other comprehensive income (loss). The Company reports the components of other comprehensive income (loss) and accumulated other comprehensive loss in the consolidated
financial statements included in this Annual Report on Form 10-K.
Earnings (Loss) Per Share
Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares of common stock
outstanding for the period. Except when the effect would be anti-dilutive, diluted earnings (loss) per share are calculated based on the weighted average number of outstanding shares of common stock
plus the dilutive effect of share-based awards calculated under the
57
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
2. Summary of Significant Accounting Policies (Continued)
treasury
stock method. A reconciliation between basic and diluted earnings (loss) per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(Amounts in thousands, except per
share amounts)
|
|
Net (loss) income |
|
$ |
(16,885 |
) |
$ |
2,394 |
|
$ |
2,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
62,825 |
|
|
62,313 |
|
|
61,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
|
$ |
(0.27 |
) |
$ |
0.04 |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
62,825 |
|
|
62,313 |
|
|
61,516 |
|
Plus impact of share-based awards |
|
|
|
|
|
927 |
|
|
648 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares of common stock |
|
|
62,825 |
|
|
63,240 |
|
|
62,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.27 |
) |
$ |
0.04 |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
calculation of diluted (loss) earnings per share for fiscal year 2014, fiscal year 2013, and fiscal year 2012 excludes the share-based awards listed in the following table due to
their anti-dilutive effect, as determined under the treasury stock method:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(Amounts in thousands)
|
|
Stock options |
|
|
528 |
|
|
329 |
|
|
957 |
|
Stock appreciation rights(1) |
|
|
4,163 |
|
|
1,808 |
|
|
3,266 |
|
Restricted stock and units |
|
|
797 |
|
|
118 |
|
|
492 |
|
|
|
|
|
|
|
|
|
|
|
|
Total anti-dilutive shares |
|
|
5,488 |
|
|
2,255 |
|
|
4,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Each
stock appreciation right ("SAR") referred to above represents the right to receive a payment measured by the increase in the fair market value of one
share of common stock from the date of grant of the SAR to the date of exercise of the SAR. Upon exercise the SARs will be settled in stock.
58
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
3. Significant Risks and Uncertainties
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires the Company's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, management evaluates its estimates and judgments, including those related to inventories, long-lived assets, intangible assets, and income taxes. Management bases its estimates and
judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.
Concentration of Risk
The Company is subject to concentration of credit risk relating to cash, primarily store depository accounts, which are maintained with
major financial institutions. The Company monitors the relative credit standing of these financial institutions and other entities and limits the amount of credit exposure with any one entity. The
Company also monitors the creditworthiness of the entities to which it grants credit terms in the normal course of business.
The
Company's largest country sources are China, Vietnam and Indonesia, which represented approximately 93% of merchandise purchases in fiscal year 2014. The Company utilizes three major
apparel vendors, which together represented approximately 76% of the Company's merchandise purchases during fiscal year 2014; however, no individual factory represented more than approximately 6% of
the Company's merchandise purchases.
4. Proprietary Credit Card
The Company has a credit card processing agreement with a third party (the "administration company"), which provides the services of the Company's proprietary credit card program. The
Company allows payments on this credit card to be made at its stores as a service to its customers. The administration company owns the credit card accounts, with no recourse from the Company. The
Company's receivable due from the administration company at any time represents the standard processing time of approximately three days. The amount due at January 31, 2015 and
February 1, 2014 was $1.6 million and $1.0 million, respectively. The Company does not have any off-balance sheet arrangements with credit exposure.
59
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
5. Property and Equipment
Property and equipment at January 31, 2015 and February 1, 2014 consist of the following:
|
|
|
|
|
|
|
|
|
|
January 31,
2015 |
|
February 1,
2014 |
|
|
|
(Amounts in thousands)
|
|
Land |
|
$ |
117 |
|
$ |
117 |
|
Store fixtures and equipment |
|
|
171,450 |
|
|
165,822 |
|
Office furniture, fixtures, and equipment |
|
|
18,972 |
|
|
18,808 |
|
Leasehold improvements |
|
|
161,944 |
|
|
170,293 |
|
Software |
|
|
41,125 |
|
|
37,870 |
|
Construction in progress |
|
|
6,752 |
|
|
8,164 |
|
|
|
|
|
|
|
|
|
Total |
|
|
400,360 |
|
|
401,074 |
|
Less accumulated depreciation |
|
|
315,986 |
|
|
317,521 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
84,374 |
|
$ |
83,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included
in office furniture, fixtures, and equipment above is $2.3 million of assets recorded under a capital lease in the fourth quarter of fiscal year 2014.
Depreciation
expense amounted to $27.3 million, $32.7 million and $34.9 million for fiscal year 2014, fiscal year 2013 and fiscal year 2012, respectively.
The
Company classifies long-lived store assets within level 3 of the fair value hierarchy as defined in ASC 820. The Company reported the following non-cash impairment charges
related to underperforming store assets in fiscal year 2014, fiscal year 2013 and fiscal year 2012 in "Selling, general and administrative expenses" on the Company's consolidated statements of
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(Amounts in thousands)
|
|
First quarter |
|
$ |
358 |
|
$ |
|
|
$ |
|
|
Second quarter |
|
|
|
|
|
278 |
|
|
366 |
|
Third quarter |
|
|
553 |
|
|
|
|
|
|
|
Fourth quarter |
|
|
|
|
|
246 |
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
Total fiscal year impairment charges |
|
$ |
911 |
|
$ |
524 |
|
$ |
556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Commitments and Contingencies
The Company leases retail business locations, office and warehouse facilities, copier equipment and automotive equipment under various non-cancelable operating leases expiring in various
years through
2030. Leases on retail business locations typically specify minimum rentals plus common area maintenance ("CAM") charges, real estate taxes, other landlord charges and possible additional rentals
based upon percentages of sales. Most of the retail business location leases have an original term of 10 years and some provide renewal options at rates specified in the leases.
On
February 25, 2014, the Company entered into a lease for 182,709 square feet of office space at 330 West 34th Street, New York, New York, which the Company
moved its corporate headquarters to in
60
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
6. Commitments and Contingencies (Continued)
December
2014 prior to the expiration of its previous lease at 450 West 33rd Street, New York, New York on January 15, 2015. The lease for the new corporate headquarters
expires in 2030.
A
summary of rent expense is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(Amounts in thousands)
|
|
Fixed minimum rentals |
|
$ |
87,107 |
|
$ |
85,423 |
|
$ |
86,538 |
|
Contingent rentals |
|
|
3,654 |
|
|
4,049 |
|
|
4,605 |
|
|
|
|
|
|
|
|
|
|
|
|
Total store rentals |
|
|
90,761 |
|
|
89,472 |
|
|
91,143 |
|
Office space rentals |
|
|
5,661 |
|
|
5,280 |
|
|
5,320 |
|
Equipment rentals |
|
|
903 |
|
|
862 |
|
|
698 |
|
|
|
|
|
|
|
|
|
|
|
|
Total rental expense |
|
$ |
97,325 |
|
$ |
95,614 |
|
$ |
97,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sublease rental income |
|
$ |
6 |
|
$ |
29 |
|
$ |
72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of January 31, 2015, the aggregate minimum rent commitments under non-cancelable operating leases and capital leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases |
|
Capital Leases |
|
Fiscal Year
|
|
Fixed Minimum
Rent |
|
Principal |
|
Interest |
|
Total
Payment |
|
|
|
(Amounts in thousands)
|
|
2015 |
|
$ |
97,574 |
|
$ |
419 |
|
$ |
87 |
|
$ |
506 |
|
2016 |
|
|
73,704 |
|
|
438 |
|
|
68 |
|
|
506 |
|
2017 |
|
|
55,707 |
|
|
457 |
|
|
49 |
|
|
506 |
|
2018 |
|
|
40,437 |
|
|
478 |
|
|
28 |
|
|
506 |
|
2019 |
|
|
33,386 |
|
|
373 |
|
|
8 |
|
|
381 |
|
Thereafter |
|
|
195,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
496,537 |
|
$ |
2,165 |
|
$ |
240 |
|
$ |
2,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
minimum lease payments on operating leases above do not include CAM charges, real estate taxes or other landlord charges, which are also required contractual obligations under the
Company's store and office operating leases. In many of the Company's leases, CAM charges are not fixed and can fluctuate from year to year. During fiscal year 2014, CAM charges and real estate taxes
were $59.3 million and other landlord charges were $4.6 million.
As
of January 31, 2015, the Company had open purchase commitments of $87.2 million for inventory and $1.0 million for store construction.
Legal Proceedings
There are various claims, lawsuits and pending actions against the Company arising in the normal course of the Company's business. It
is the opinion of management that the ultimate resolution of these matters will not have a material effect on the Company's financial condition, results of operations or cash flows.
61
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
7. Employee Benefit Plans
Savings and Retirement Plan
The Company contributes to a defined contribution savings and retirement plan (the "SARP") qualifying under section 401(k) of
the Internal Revenue Code. Participation in the SARP is available to all associates, if not covered by the pension plan discussed below, who have completed 1,000 or more hours of service with the
Company during certain twelve-month periods and have attained the age of 21. Participants are able to contribute up to 100% of their pay to the SARP, subject to Internal Revenue Service ("IRS")
limits. The Company matches 100% of the employee's contribution up to a maximum of 4% of the employee's eligible pay. The Company match is immediately vested.
The
Company's costs under this plan were as follows:
|
|
|
|
|
Fiscal Year
|
|
(Amounts
in thousands) |
|
2014 |
|
$ |
1,759 |
|
2013 |
|
$ |
1,737 |
|
2012 |
|
$ |
1,793 |
|
Pension Plan
The Company sponsors a single employer defined benefit pension plan ("plan") covering substantially all union employees. Employees
covered by collective bargaining agreements are primarily non-management store associates, representing approximately 8% of the Company's workforce at January 31, 2015. The plan provides
retirement benefits for union employees who have attained the age of 21 and complete 1,000 or more hours of service in any calendar year following the date of employment. The plan provides benefits
based on length of service. The Company's funding policy for the pension plan is to contribute annually the amount necessary to provide for benefits based on accrued service and to contribute at least
the minimum required by ERISA rules. The Company anticipates contributing approximately $0.7 million to the plan during fiscal year 2015. The Company's pension plan weighted average asset
allocation, by asset category, is as follows:
|
|
|
|
|
|
|
|
Asset Category
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Equity securities |
|
|
65 |
% |
|
67 |
% |
Fixed income |
|
|
31 |
% |
|
32 |
% |
Cash and cash equivalents |
|
|
4 |
% |
|
1 |
% |
The
Company's investment policy generally targets 65% to 70% in equity securities and 30% to 35% in fixed income.
62
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
7. Employee Benefit Plans (Continued)
The
fair values of the pension plan assets at January 31, 2015, utilizing the fair value hierarchy in accordance with ASC 820, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
January 31,
2015 |
|
Quoted
Prices in
Active
Markets
(Level 1) |
|
Significant
Other
Observable
Inputs
(Level 2) |
|
Significant
Unobservable
Inputs
(Level 3) |
|
|
|
(Amounts in thousands)
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. common stocks |
|
$ |
4,349 |
|
$ |
4,349 |
|
$ |
|
|
$ |
|
|
International common stocks |
|
|
532 |
|
|
|
|
|
532 |
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury/government bonds |
|
|
1,034 |
|
|
|
|
|
1,034 |
|
|
|
|
U.S. corporate bonds |
|
|
1,230 |
|
|
|
|
|
1,230 |
|
|
|
|
U.S. mortgage-backed securities |
|
|
47 |
|
|
|
|
|
47 |
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
308 |
|
|
293 |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,500 |
|
$ |
4,642 |
|
$ |
2,858 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
fair values of the pension plan assets at February 1, 2014, utilizing the fair value hierarchy in accordance with ASC 820, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
February 1,
2014 |
|
Quoted
Prices in
Active
Markets
(Level 1) |
|
Significant
Other
Observable
Inputs
(Level 2) |
|
Significant
Unobservable
Inputs
(Level 3) |
|
|
|
(Amounts in thousands)
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. common stocks |
|
$ |
4,174 |
|
$ |
4,174 |
|
$ |
|
|
$ |
|
|
International common stocks |
|
|
519 |
|
|
|
|
|
519 |
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury/government bonds |
|
|
1,159 |
|
|
|
|
|
1,159 |
|
|
|
|
U.S. corporate bonds |
|
|
955 |
|
|
|
|
|
955 |
|
|
|
|
U.S. mortgage-backed securities |
|
|
108 |
|
|
|
|
|
108 |
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
78 |
|
|
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6,993 |
|
$ |
4,174 |
|
$ |
2,819 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
consideration of the fund's investment goals, demographics, time horizon available for investment and the overall risk tolerance of the board of trustees (consisting of two union
trustees and two employer trustees) a long-term investment objective of long-term income and growth has been adopted for the fund's assets. This is a risk-averse balanced approach that seeks long-term
growth in capital along with significant current income.
63
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
7. Employee Benefit Plans (Continued)
The
following weighted average assumptions were used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Discount rate |
|
|
3.30 |
% |
|
4.30 |
% |
The
following weighted average assumptions were used to determine net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
Discount rate |
|
|
4.30 |
% |
|
3.90 |
% |
|
4.50 |
% |
Long-term rate of return on assets |
|
|
8.00 |
% |
|
8.00 |
% |
|
8.00 |
% |
The
measurement dates for fiscal year 2014 and fiscal year 2013 are January 31, 2015 and February 1, 2014, respectively, for the determination of benefit obligations. The
following table provides information for the pension plan:
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
|
|
(Amounts in thousands)
|
|
Change in benefit obligation: |
|
|
|
|
|
|
|
Benefit obligation, beginning of period |
|
$ |
8,986 |
|
$ |
9,810 |
|
Service cost |
|
|
339 |
|
|
347 |
|
Interest |
|
|
370 |
|
|
360 |
|
Actuarial loss (gain) |
|
|
1,254 |
|
|
(738 |
) |
Benefits paid |
|
|
(723 |
) |
|
(793 |
) |
|
|
|
|
|
|
|
|
Benefit obligation, end of period |
|
$ |
10,226 |
|
$ |
8,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
Fair value of plan assets, beginning of period |
|
$ |
6,993 |
|
$ |
6,683 |
|
Actual return on plan assets |
|
|
594 |
|
|
557 |
|
Benefits paid |
|
|
(723 |
) |
|
(793 |
) |
Employer contributions |
|
|
636 |
|
|
546 |
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of period |
|
$ |
7,500 |
|
$ |
6,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status |
|
$ |
(2,726 |
) |
$ |
(1,993 |
) |
Unrecognized net actuarial loss |
|
|
4,103 |
|
|
3,043 |
|
Unrecognized prior service credit |
|
|
(173 |
) |
|
(188 |
) |
|
|
|
|
|
|
|
|
Net amount recognized |
|
$ |
1,204 |
|
$ |
862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets: |
|
|
|
|
|
|
|
Accrued pension liability |
|
$ |
(2,726 |
) |
$ |
(1,993 |
) |
Accumulated other comprehensive loss |
|
|
3,930 |
|
|
2,855 |
|
|
|
|
|
|
|
|
|
Net amount recognized |
|
$ |
1,204 |
|
$ |
862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
7. Employee Benefit Plans (Continued)
At January 31, 2015 and February 1, 2014, the Company reported a minimum pension liability of $2.7 million and $2.0 million, respectively, due to the
underfunded status of the plan. The increase between years was primarily due to a decrease in the discount rate used to determine the funded status of the plan and the use of an updated mortality
table issued by the Society of Actuaries in October 2014, which reflects longer life expectancies compared to previous mortality assumptions. The minimum pension liability is reported in "Other
liabilities" on the consolidated balance sheets. Included in accumulated other comprehensive loss at January 31, 2015 is a net loss of $0.5 million that is expected to be recognized in
net periodic benefit cost during fiscal year 2015.
Net
periodic benefit cost includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(Amounts in thousands)
|
|
Service cost |
|
$ |
339 |
|
$ |
347 |
|
$ |
340 |
|
Interest cost |
|
|
370 |
|
|
360 |
|
|
408 |
|
Expected return on plan assets |
|
|
(550 |
) |
|
(517 |
) |
|
(486 |
) |
Amortization of unrecognized losses |
|
|
149 |
|
|
201 |
|
|
208 |
|
Amortization of prior service credit |
|
|
(15 |
) |
|
(15 |
) |
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
293 |
|
$ |
376 |
|
$ |
455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following schedule shows the expected benefit payments over the next 10 years:
|
|
|
|
|
Fiscal Year
|
|
(Amounts
in thousands) |
|
2015 |
|
$ |
806 |
|
2016 |
|
|
778 |
|
2017 |
|
|
748 |
|
2018 |
|
|
712 |
|
2019 |
|
|
683 |
|
2020-2024 |
|
|
3,015 |
|
|
|
|
|
|
Total |
|
$ |
6,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Share-Based Compensation
2006 Amended and Restated Long-Term Incentive Plan. The Company's board of directors and stockholders approved the 2006 Long-Term
Incentive Plan (the
"2006 Plan") on May 3, 2006, and June 21, 2006, respectively. From time to time, the Company's stockholders approve amendments to the 2006 Plan to increase the number of shares reserved
for issuance, among other matters. The aggregate number of shares of the Company's common stock that may be issued under the New York & Company, Inc. Amended and Restated 2006 Long-Term
Incentive Plan (the "Amended and Restated 2006 Plan") is 12,668,496 shares, and the maximum number of shares which may be used for awards other than stock options or stock appreciation rights ("SARs")
is 7,750,000 shares. These shares may be in whole or in part authorized and unissued or held by the Company as treasury shares.
65
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
8. Share-Based Compensation (Continued)
Amended and Restated 2002 Stock Option Plan. The Company originally adopted the 2002 Stock Option Plan on November 27, 2002 and
approved the
Amended and Restated 2002 Stock Option Plan (the "2002 Plan") to become effective on October 13, 2004. Upon stockholder approval of the 2006 Plan, the 2002 Plan ceased to be available for the
grants of new incentive awards, other than awards granted wholly from shares returned to the 2002 Plan by forfeiture or expiration after May 5, 2006; all other new incentive awards are to be
granted under the Amended and Restated 2006 Plan. As of November 27, 2012, the 2002 Plan expired and no new awards may be issued from the 2002 Plan.
Under
the Amended and Restated 2006 Plan, the Company is able to grant share-based awards to its executives, consultants, directors, or other key employees. Options and SARs generally
have a maximum term of up to 10 years. Upon grant of share-based awards, the compensation committee of the Company's board of directors will determine the exercise price, if applicable, and the
term and conditions of any award pursuant to the Amended and Restated 2006 Plan. The exercise price of an incentive stock option and a SAR; however, may not be less than 100% of the fair market value
of a share of common stock on the date of grant. The exercise price of an incentive stock option awarded to a person who owns stock constituting more than 10% of the total combined voting power of all
classes of stock of the Company may not be less than 110% of the fair market value on such date and the option must be exercised within five years of the date of grant. The aggregate fair market value
of common stock for which an incentive stock option is exercisable for the first time during any calendar year, under all equity incentive plans of the Company, may not exceed $0.1 million.
Upon the exercise of a SAR, a participant will receive a number of shares of the Company's common stock equal in value to the excess of the fair market value of a share of common stock over the
exercise price per share, multiplied by the number of shares in respect of which the SAR is exercised. Vesting provisions for all share-based awards, are determined by the compensation committee of
the Company's board of directors at the date of grant; however, subject to certain restrictions, all outstanding share-based awards may vest upon a sale of the Company. Shares that are not currently
outstanding and are available for issuance at January 31, 2015 amounted to 3,645,055.
66
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
8. Share-Based Compensation (Continued)
A
summary of the Company's stock options and SARs outstanding as of January 31, 2015 and activity for fiscal year 2014 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares |
|
Weighted
Average
Exercise
Price |
|
Weighted
Average
Remaining
Contractual
Term
(years) |
|
Aggregate
Intrinsic
Value |
|
|
|
(Amounts in
thousands)
|
|
|
|
|
|
(Amounts in
thousands)
|
|
Outstanding, beginning of period |
|
|
4,488 |
|
$ |
4.55 |
|
|
|
|
|
|
|
Granted |
|
|
2,423 |
|
|
3.44 |
|
|
|
|
|
|
|
Exercised |
|
|
(212 |
) |
|
2.73 |
|
|
|
|
|
|
|
Forfeited |
|
|
(434 |
) |
|
4.44 |
|
|
|
|
|
|
|
Expired |
|
|
(261 |
) |
|
5.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of period(1) |
|
|
6,004 |
|
$ |
4.15 |
|
|
7.6 |
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, end of period |
|
|
2,226 |
|
$ |
4.64 |
|
|
5.5 |
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- There
were 529,378 stock options and 5,475,121 SARs outstanding as of January 31, 2015, of which 516,878 stock options and 1,709,458 SARs were
vested. The non-vested stock options and SARs outstanding at January 31, 2015 vest subject to the passage of time through fiscal year 2018.
Aggregate
intrinsic value for both outstanding and exercisable options and SARs, in the table above, represents the total pre-tax intrinsic value (the difference between the Company's
closing stock price on the last trading day of fiscal year 2014 and the exercise price, multiplied by the number of in-the-money options and SARs) that would have been received by the option and SAR
holders had all option and SAR holders exercised their options and SARs on January 31, 2015. This amount changes based on the fair market value of the Company's common stock. Total intrinsic
value of options exercised for fiscal year 2014, fiscal year 2013 and fiscal year 2012 (based on the difference between the Company's stock price on the respective exercise date and the respective
exercise price, multiplied by the number of respective options and SARs exercised) was $0.2 million, $1.4 million and $1.2 million, respectively.
In
accordance with ASC 718, the fair value of each option and SAR granted is estimated on the date granted using the Black-Scholes option-pricing model for all employees and non-employee
board members. The weighted average fair value for options and SARs granted during fiscal year 2014, fiscal year 2013 and fiscal year 2012 was $1.61, $2.64 and $2.17, respectively. The total fair
value of share-based awards that vested during fiscal year 2014, fiscal year 2013 and fiscal year 2012 was $4.2 million, $4.6 million and $2.3 million, respectively.
67
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
8. Share-Based Compensation (Continued)
The
following weighted average assumptions were used to value stock options and SARs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
Expected volatility |
|
|
56.8 |
% |
|
65.1 |
% |
|
86.8 |
% |
Expected life |
|
|
4.4 years |
|
|
4.1 years |
|
|
3.8 years |
|
Risk-free interest rate |
|
|
1.64 |
% |
|
1.51 |
% |
|
0.78 |
% |
Expected dividend yield |
|
|
|
% |
|
|
% |
|
|
% |
The
risk-free interest rate used to value stock options and SARs is based on the U.S. Treasury yield curve in effect at the time of grant with maturity dates that coincide with the
expected life of the options and SARs. The expected life represents the weighted average period the stock options and SARs are expected to remain outstanding and is based primarily on industry
averages due to the Company's limited historical data for employee exercises. The Company's assumption for volatility is based on its historical volatility calculated on the grant date of an award for
a period of time that coincides with the expected life of the options.
The
following table summarizes the restricted stock and unit awards outstanding at January 31, 2015 and activity for fiscal year 2014:
|
|
|
|
|
|
|
|
|
|
Shares |
|
Weighted Average
Grant Date Fair Value |
|
|
|
(Amounts in
thousands)
|
|
|
|
Nonvested at February 1, 2014 |
|
|
905 |
|
$ |
4.56 |
|
Granted |
|
|
1,190 |
|
$ |
3.54 |
|
Vested |
|
|
(326 |
) |
$ |
4.69 |
|
Forfeited |
|
|
(437 |
) |
$ |
3.67 |
|
|
|
|
|
|
|
|
|
Nonvested at January 31, 2015 |
|
|
1,332 |
|
$ |
3.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
fair value of restricted stock and units is based on the closing stock price of an unrestricted share of the Company's common stock on the grant date. Each vested stock unit is
convertible into one share of the Company's common stock. The non-vested shares outstanding at January 31, 2015 vest subject to the passage of time through fiscal year 2018.
Total
share-based compensation expense attributable to all share-based awards was $4.1 million, $3.9 million and $3.9 million in fiscal year 2014, fiscal year 2013
and fiscal year 2012, respectively. The Company recognizes share-based compensation expense in the consolidated statements of operations over the requisite service period for each share-based payment
award. The Company recognized a tax benefit in the consolidated statements of operations related to share-based compensation expense of $1.6 million, $1.5 million and $1.6 million
in fiscal year 2014, fiscal year 2013 and fiscal year 2012, respectively. The tax benefit recognized in fiscal year 2014, fiscal year 2013 and fiscal year 2012 consolidated statements of operations
was offset by corresponding adjustments to the valuation allowance against deferred tax assets. In addition, as a result of the deferred tax valuation allowance, the Company did not recognize an
excess benefit related to the exercise of options during fiscal year 2014, fiscal year 2013 and fiscal year 2012. For further information related to the deferred tax valuation
68
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
8. Share-Based Compensation (Continued)
allowance,
please refer to Note 11, "Income Taxes." Unamortized share-based compensation expense at January 31, 2015 was $8.4 million and will be recognized in the consolidated
statements of operations over a weighted average period of 1.9 years.
9. Accrued Expenses
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
January 31,
2015 |
|
February 1,
2014 |
|
|
|
(Amounts in thousands)
|
|
Gift cards and merchandise credits |
|
$ |
12,677 |
|
$ |
12,062 |
|
Sourcing and distribution |
|
|
8,029 |
|
|
4,034 |
|
Compensation and benefits |
|
|
6,223 |
|
|
10,239 |
|
Other taxes |
|
|
5,247 |
|
|
5,824 |
|
Consulting |
|
|
2,217 |
|
|
610 |
|
Occupancy and related |
|
|
1,795 |
|
|
1,584 |
|
Construction in progress |
|
|
1,572 |
|
|
1,697 |
|
Insurance |
|
|
1,351 |
|
|
1,131 |
|
Other accrued expenses |
|
|
13,307 |
|
|
9,699 |
|
|
|
|
|
|
|
|
|
Total accrued expenses |
|
$ |
52,418 |
|
$ |
46,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Long-Term Debt and Credit Facilities
On October 24, 2014, Lerner New York, Inc., Lernco, Inc. and Lerner New York Outlet, Inc., wholly-owned indirect subsidiaries of New York &
Company, Inc., entered into a Fourth Amended and
Restated Loan and Security Agreement (the "Loan Agreement") with Wells Fargo Bank, National Association, as Agent and Term Loan Agent and the lenders party thereto. The obligations under the Loan
Agreement are guaranteed by New York & Company, Inc. and its other subsidiaries. The Loan Agreement amended and restated the Third Amended and Restated Loan and Security Agreement (the
"Previous Agreement"), dated August 10, 2011, among Lerner New York, Inc., Lernco, Inc., and Lerner New York Outlet, Inc. as borrowers, together with Wells Fargo Bank,
National Association, as Agent and the lenders party thereto, as amended. The Previous Agreement was scheduled to mature on August 10, 2016.
The
amendments to the Previous Agreement provide for, but are not limited to: (i) an extension of the term of the revolving credit facility to October 24, 2019;
(ii) a reduction of interest rates related to the revolving credit facility; (iii) a reduction of certain fees related to the revolving credit facility; and (iv) a
$15 million, 5-year term loan, bearing interest at the Adjusted Eurodollar Rate plus 4.50% (the "Term Loan"). The Company used a portion of the proceeds from the Term Loan to pay for costs
associated with the relocation and build-out of its new corporate headquarters at 330 West 34th Street,
69
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
10. Long-Term Debt and Credit Facilities (Continued)
New
York, New York and for general corporate purposes. In accordance with the Loan Agreement, the Term Loan will be repaid as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Fiscal Year
2015 |
|
Fiscal Year
2016 |
|
Fiscal Year
2017 |
|
Fiscal Year
2018 |
|
Fiscal Year
2019 |
|
|
|
|
|
(Amounts in thousands)
|
|
Term Loan |
|
$ |
14,750 |
|
$ |
1,000 |
|
$ |
1,000 |
|
$ |
1,000 |
|
$ |
1,000 |
|
$ |
10,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
revolving borrowing availability under the revolving credit facility remains unchanged, providing the Company with up to $100 million of credit, consisting of a
$75 million revolving credit facility (which includes a sub-facility for issuance of letters of credit up to $45 million) with a fully committed accordion option that allows the Company
to increase the revolving credit facility up to $100 million or decrease it to a minimum of $60 million, subject to certain restrictions. The maximum borrowing availability under the
Company's revolving credit facility also remains unchanged and is determined by a monthly borrowing base calculation based on applying specified advance rates against inventory and certain other
eligible assets. Under the Loan Agreement, the Company continues to be subject to a Minimum Excess Availability covenant of $7.5 million. The Loan Agreement contains other covenants and
conditions, including restrictions on the Company's ability to pay dividends on its common stock, prepay the Term Loan, incur additional indebtedness and to prepay, redeem, defease or purchase other
debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, stock repurchases, acquisitions and for other purposes.
Under
the terms of the Loan Agreement, the interest rates applicable to Revolving Loans have been reduced by 0.25% and Revolving Loans now bear interest, at the Company's option, either
at a floating rate equal to the Adjusted Eurodollar Rate plus a margin of between 1.50% and 1.75% per year for Eurodollar Rate Loans or a floating rate equal to the Prime Rate plus a margin of between
0.50% and
0.75% per year for Prime Rate Loans, depending upon the Company's Average Compliance Excess Availability. The Company pays to the Lenders under the revolving credit facility a monthly fee on
outstanding commercial letters of credit at a rate of between 0.75% and 0.875% per year and on standby letters of credit at a rate of between 1.50% and 1.75% per year, depending upon the Company's
Average Compliance Excess Availability, plus a monthly fee on a proportion of the unused commitments under the revolving credit facility at a rate of 0.25% per year.
The
maximum borrowing availability under the Company's revolving credit facility is determined by a monthly borrowing base calculation based on applying specified advance rates against
inventory and certain other eligible assets. As of January 31, 2015, the Company had availability under its revolving credit facility of $30.0 million, net of letters of credit
outstanding of $19.8 million, as compared to availability of $37.1 million, net of letters of credit outstanding of $11.5 million, as of February 1, 2014. Included in the
$19.8 million of letters of credit outstanding at January 31, 2015 are $0.7 million of trade letters of credit and $19.1 million of standby letters of credit primarily
related to the Company's new corporate headquarters, which represents the $8.0 million increase from February 1, 2014, and certain insurance contracts.
70
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
10. Long-Term Debt and Credit Facilities (Continued)
The lender has been granted a pledge of the common stock of Lerner New York Holding, Inc. and certain of its subsidiaries, and a first priority security interest in substantially
all other tangible and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the Loan Agreement. In addition, New
York & Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the obligations under the Loan Agreement, and such guarantees are joint and several.
11. Income Taxes
Income tax expense (benefit) consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(Amounts in thousands)
|
|
Federal: |
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
|
|
$ |
(439 |
) |
$ |
(180 |
) |
Deferred |
|
|
|
|
|
|
|
|
|
|
State and Local: |
|
|
|
|
|
|
|
|
|
|
Current |
|
|
716 |
|
|
753 |
|
|
(28 |
) |
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
716 |
|
$ |
314 |
|
$ |
(208 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
components of items giving rise to the net deferred income tax (liabilities) assets recognized in the Company's consolidated balance sheets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2015 |
|
February 1, 2014 |
|
|
|
Current |
|
Non-current |
|
Current |
|
Non-current |
|
|
|
(Amounts in thousands)
|
|
Deferred income tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
8,242 |
|
$ |
6,705 |
|
$ |
8,414 |
|
$ |
6,939 |
|
Inventory |
|
|
1,213 |
|
|
|
|
|
1,100 |
|
|
|
|
Fixed assets and intangible assets |
|
|
|
|
|
15,463 |
|
|
|
|
|
19,819 |
|
Net operating loss |
|
|
|
|
|
29,144 |
|
|
|
|
|
18,548 |
|
Other assets |
|
|
|
|
|
10,917 |
|
|
|
|
|
9,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
9,455 |
|
|
62,229 |
|
|
9,514 |
|
|
55,065 |
|
Valuation allowance |
|
|
(8,444 |
) |
|
(55,569 |
) |
|
(8,391 |
) |
|
(48,564 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax assets |
|
$ |
1,011 |
|
$ |
6,660 |
|
$ |
1,123 |
|
$ |
6,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Prepaid costs |
|
|
(7,671 |
) |
|
|
|
|
(7,624 |
) |
|
|
|
Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax liabilities |
|
$ |
(7,671 |
) |
$ |
|
|
$ |
(7,624 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax (liabilities) assets |
|
$ |
(6,660 |
) |
$ |
6,660 |
|
$ |
(6,501 |
) |
$ |
6,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
11. Income Taxes (Continued)
The
Company continues to maintain a valuation allowance against its deferred tax assets until the Company believes it is more likely than not that these assets will be realized in the
future. If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more-likely-than-not standard under ASC 740, the valuation allowance
would be reversed accordingly in the period that such determination is made.
As
of January 31, 2015, the Company had $332.2 million of various state net operating loss carryforwards and $71.6 million of federal net operating loss
carryforwards.
The
state net operating loss carryforwards are reported on a pre-apportioned basis that applies to various states with varying tax laws and expiration dates. Below is a summary of the
Company's loss carryforwards and when they expire:
|
|
|
|
|
|
|
|
|
Tax Year Ended
|
|
State NOL
Carryover
(Amounts in
thousands) |
|
The Earliest
Expiration
Starts at the
Beginning of
Fiscal Year |
|
Years
Remaining |
2/3/2007 |
|
$ |
5,146 |
|
|
FY2012 |
|
12 |
2/2/2008 |
|
|
50,698 |
|
|
FY2013 |
|
13 |
1/31/2009 |
|
|
13,481 |
|
|
FY2014 |
|
14 |
1/30/2010 |
|
|
30,264 |
|
|
FY2015 |
|
15 |
1/29/2011 |
|
|
47,229 |
|
|
FY2016 |
|
1 to 16 |
1/28/2012 |
|
|
38,186 |
|
|
FY2017 |
|
2 to 17 |
2/2/2013 |
|
|
30,184 |
|
|
FY2018 |
|
3 to 18 |
2/1/2014 |
|
|
44,850 |
|
|
FY2019 |
|
4 to 19 |
1/31/2015 |
|
|
72,170 |
|
|
FY2020 |
|
5 to 20 |
|
|
|
|
|
|
|
|
|
|
|
$ |
332,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Year Ended
|
|
Federal NOL
Carryover
(Amounts in
thousands) |
|
The Earliest
Expiration
Starts at the
Beginning of
Fiscal Year |
|
Years
Remaining |
|
1/29/2011 |
|
$ |
29,499 |
|
|
FY2031 |
|
|
16 |
|
1/28/2012 |
|
|
23,897 |
|
|
FY2032 |
|
|
17 |
|
1/31/2015 |
|
|
18,174 |
|
|
FY2035 |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
71,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
11. Income Taxes (Continued)
A
reconciliation of the statutory federal income tax expense (benefit) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(Amounts in thousands)
|
|
Statutory 35% federal tax |
|
$ |
(5,660 |
) |
$ |
947 |
|
$ |
663 |
|
State and local income taxes, net of federal income tax benefit |
|
|
(638 |
) |
|
2,710 |
|
|
(724 |
) |
Federal tax credit |
|
|
(358 |
) |
|
(270 |
) |
|
(157 |
) |
Basis adjustment |
|
|
733 |
|
|
(784 |
) |
|
(1,505 |
) |
Permanent difference |
|
|
216 |
|
|
273 |
|
|
183 |
|
Alternative minimum tax |
|
|
|
|
|
220 |
|
|
|
|
Federal unrecognized tax benefit |
|
|
|
|
|
(444 |
) |
|
19 |
|
Valuation allowance |
|
|
6,630 |
|
|
(2,322 |
) |
|
1,328 |
|
Other, net |
|
|
(207 |
) |
|
(16 |
) |
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
$ |
716 |
|
$ |
314 |
|
$ |
(208 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company files U.S. federal income tax returns and income tax returns in various state and local jurisdictions. The Company is no longer subject to U.S. federal income tax
examinations for tax years through 2010. With limited exception, the Company is no longer subject to state and local income tax examinations for tax years through 2010.
A
reconciliation of the beginning and ending amounts of unrecognized tax benefits in accordance with ASC 740 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2014 |
|
Fiscal Year
2013 |
|
Fiscal Year
2012 |
|
|
|
(Amounts in thousands)
|
|
Unrecognized tax benefits at beginning of period |
|
$ |
3,883 |
|
$ |
4,449 |
|
$ |
1,617 |
|
Additions based on tax positions related to the current year |
|
|
108 |
|
|
|
|
|
|
|
Additions for tax positions of prior years |
|
|
61 |
|
|
78 |
|
|
3,120 |
|
Reductions for tax positions of prior years |
|
|
(50 |
) |
|
|
|
|
(23 |
) |
Settlements |
|
|
(66 |
) |
|
|
|
|
|
|
Reductions for lapse of statute of limitations |
|
|
(64 |
) |
|
(644 |
) |
|
(265 |
) |
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits at end of period |
|
$ |
3,872 |
|
$ |
3,883 |
|
$ |
4,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal year 2014, fiscal year 2013 and fiscal year 2012 the
Company recorded a net benefit for interest and penalties in the consolidated statements of operations of $0.1 million, $0.2 million and $0.1 million, respectively. At
January 31, 2015 and February 1, 2014, the Company had accrued $0.2 million for the potential payment of interest and penalties. The Company does not anticipate any significant
increases or decreases to the balance of unrecognized tax benefits during the next twelve months. Of the total $3.9 million of unrecognized tax benefits at January 31, 2015,
approximately $1.0 million, if recognized, would affect the Company's effective tax rate.
73
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
12. Redeemable Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, $0.001 par value. At January 31, 2015 and February 1, 2014, there were no shares of preferred stock
outstanding.
13. Quarterly Results
The following tables set forth the Company's quarterly consolidated statements of operations data for the last eight fiscal quarters and such information expressed as a percentage of net
sales. This unaudited quarterly information has been prepared on the same basis as the annual audited financial statements and includes all necessary adjustments, consisting only of normal recurring
adjustments that the Company considers necessary to present fairly the financial information for the quarters presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2014 |
|
Fiscal Year 2013 |
|
|
|
Quarter ended |
|
Quarter ended |
|
Statements of Operations data
|
|
May 3,
2014 |
|
August 2,
2014 |
|
November 1,
2014 |
|
January 31,
2015 |
|
May 4,
2013 |
|
August 3,
2013 |
|
November 2,
2013 |
|
February 1,
2014 |
|
|
|
(Amounts in thousands, except per share data)
|
|
Net sales |
|
$ |
219,593 |
|
$ |
226,066 |
|
$ |
210,314 |
|
$ |
267,359 |
|
$ |
227,483 |
|
$ |
223,050 |
|
$ |
217,626 |
|
$ |
271,004 |
|
Gross profit |
|
$ |
62,204 |
|
$ |
61,918 |
|
$ |
57,277 |
|
$ |
68,376 |
|
$ |
66,334 |
|
$ |
60,002 |
|
$ |
60,988 |
|
$ |
77,046 |
|
Operating income (loss) |
|
$ |
61 |
|
$ |
180 |
|
$ |
(9,474 |
) |
$ |
(6,363 |
) |
$ |
1,217 |
|
$ |
(2,243 |
) |
$ |
(3,119 |
) |
$ |
7,222 |
|
Net (loss) income |
|
$ |
(282 |
) |
$ |
(147 |
) |
$ |
(9,736 |
) |
$ |
(6,720 |
) |
$ |
1,594 |
|
$ |
(2,709 |
) |
$ |
(3,434 |
) |
$ |
6,943 |
|
Basic (loss) earnings per share of common stock |
|
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.15 |
) |
$ |
(0.11 |
) |
$ |
0.03 |
|
$ |
(0.04 |
) |
$ |
(0.05 |
) |
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share of common stock |
|
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.15 |
) |
$ |
(0.11 |
) |
$ |
0.03 |
|
$ |
(0.04 |
) |
$ |
(0.05 |
) |
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares of common stock |
|
|
62,638 |
|
|
62,819 |
|
|
62,911 |
|
|
62,933 |
|
|
61,970 |
|
|
62,279 |
|
|
62,491 |
|
|
62,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares of common stock |
|
|
62,638 |
|
|
62,819 |
|
|
62,911 |
|
|
62,933 |
|
|
62,704 |
|
|
62,279 |
|
|
62,491 |
|
|
63,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2014 |
|
Fiscal Year 2013 |
|
|
|
Quarter ended |
|
Quarter ended |
|
(as a % of net sales)
|
|
May 3,
2014 |
|
August 2,
2014 |
|
November 1,
2014 |
|
January 31,
2015 |
|
May 4,
2013 |
|
August 3,
2013 |
|
November 2,
2013 |
|
February 1,
2014 |
|
Net sales |
|
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
Gross profit |
|
|
28.3 |
% |
|
27.4 |
% |
|
27.2 |
% |
|
25.6 |
% |
|
29.2 |
% |
|
26.9 |
% |
|
28.0 |
% |
|
28.4 |
% |
Operating income (loss) |
|
|
|
% |
|
0.1 |
% |
|
(4.5 |
)% |
|
(2.4 |
)% |
|
0.5 |
% |
|
(1.0 |
)% |
|
(1.4 |
)% |
|
2.7 |
% |
Net (loss) income |
|
|
(0.1 |
)% |
|
(0.1 |
)% |
|
(4.6 |
)% |
|
(2.5 |
)% |
|
0.7 |
% |
|
(1.2 |
)% |
|
(1.6 |
)% |
|
2.6 |
% |
During
the third quarter of fiscal year 2014, the Company engaged a leading global business advisory firm to assist the Company in analyzing its business processes and organizational
structure in an effort to improve sales productivity and operating efficiencies, as well as reduce the Company's overall cost structure (the "business re-engineering program"). In November 2014, the
Company initiated an organizational realignment in connection with the business analysis performed. As a result of the organizational changes made, the Company saved approximately $1.5 million
during the fourth quarter of fiscal year 2014 and expects to save $9 million to $10 million in annual payroll and related costs in fiscal year 2015 and thereafter. The Company plans to
reinvest a portion of the savings
74
Table of Contents
New York & Company, Inc.
Notes to Consolidated Financial Statements (Continued)
January 31, 2015
13. Quarterly Results (Continued)
resulting
from the business re-engineering program discussed above into initiatives to increase net sales and comparable store sales in each channel of its business.
The
Company recorded the following non-operating charges in "Selling, general and administrative expenses" on the consolidated statements of operations during the third and fourth
quarters of fiscal year 2014 that affect comparability:
-
- Third quarter ended November 1, 2014 includes $2.8 million of non-operating charges consisting of $1.0 million of
duplicative rent expense related to the relocation of the Company's corporate headquarters, $0.8 million of certain severance and recruiting expenses, and $1.0 million of consulting fees
incurred in connection with the business re-engineering program.
-
- Fourth quarter ended January 31, 2015 includes $6.4 million of non-operating charges consisting of $3.2 million
of duplicative rent expense related to the relocation of the Company's corporate headquarters, $2.3 million of severance expense and $0.7 million of consulting fees incurred in
connection with the business re-engineering program, and $0.2 million of legal expenses.
At
January 31, 2015, the Company reported a liability for severance related to the business re-engineering program of $1.4 million, which it expects to pay in full during
fiscal year 2015.
75
Table of Contents
EXHIBIT INDEX
|
|
|
|
Exhibit
No. |
|
Description |
|
3.1 |
|
Restated Certificate of Incorporation. |
|
3.2 |
|
Amended and Restated Bylaws. |
|
9.1 |
|
Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated August 25, 2004.** |
|
9.2 |
|
Amendment No. 4 to Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated May 22, 2006. |
|
9.3 |
|
Amendment No. 5 to Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated August 16, 2006.+ |
|
9.4 |
|
Amendment No. 6 to Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated May 10, 2011.(c) |
|
9.5 |
|
Amendment No. 7 to Stockholders Agreement by and among New York & Company, Inc. and the stockholders party thereto, dated March 13, 2012.(d) |
|
10.1 |
|
Employment Letter, dated as of April 28, 2010, between New York & Company, Inc. and Gregory Scott. TTT |
|
10.2 |
|
Employment Letter, dated as of May 30, 2006, between New York & Company, Inc. and Kevin L. Finnegan. |
|
10.3 |
|
Employment Letter, dated as of November 3, 2008, between New York & Company, Inc. and Sheamus Toal. |
|
10.4 |
|
Employment Letter, dated as of November 9, 2011, between New York & Company, Inc. and Faeth Bradley.(d) |
|
10.5 |
|
Employment Letter, dated as of June 28, 2012, between New York & Company, Inc. and Laura Weil.(e) |
|
10.6 |
|
Amendment No. 1 to Employment Letter, dated as of May 30, 2006, between New York & Company, Inc. and Kevin L. Finnegan, as amended December 22,
2006. |
|
10.7 |
|
Offer Letter and Employment Letter, dated as of October 24, 2014, between New York & Company, Inc. and John Worthington.(f) |
|
10.8 |
|
Transition Services Agreement by and between Lerner New York Holding, Inc. and Limited Brands, Inc., dated as of November 27, 2002.* |
|
10.9 |
|
Amendment No. 1 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on April 19, 2006. T |
|
10.10 |
|
Amendment No. 2 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on October 11, 2007. |
76
Table of Contents
|
|
|
|
Exhibit
No. |
|
Description |
|
10.11 |
|
Amendment No. 3 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on July 17, 2008. |
|
10.12 |
|
Amendment No. 4 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on April 6, 2009. |
|
10.13 |
|
Amendment No. 5 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on March 16, 2010. |
|
10.14 |
|
Amendment No. 6 to Transition Services Agreement, dated as of November 27, 2002, between Lerner New York Holding, Inc., New York & Company, Inc. as successor-in-interest to
NY & Co. Group, Inc. and Limited Brands, Inc., as amended on September 14, 2010.(a) |
|
10.15 |
|
Fourth Amended and Restated Loan and Security Agreement made by and among Lerner New York, Inc., Lernco, Inc. and Lerner New York Outlet, Inc., wholly-owned indirect subsidiaries of New York &
Company, Inc., and Wells Fargo Bank, N.A., as Agent and Sole Lender, dated as of October 24, 2014.(f) |
|
10.16 |
|
Post-Closing Letter to the Fourth Amended and Restated Loan and Security Agreement made by and among Lerner New York, Inc., Lernco, Inc. and Lerner New York Outlet, Inc., wholly-owned indirect
subsidiaries of New York & Company, Inc., and Wells Fargo Bank, N.A., as Agent and Sole Lender, dated as of October 24, 2014.(f) |
|
10.17 |
|
Amendment No. 1 to Second Amended and Restated Collateral Assignment of Trademarks made among Lernco, Inc. and Lerner New York Outlet, Inc. in favor of Wells Fargo Bank, N.A., as Agent for itself
and Sole Lender named in the Fourth Amended and Restated Loan and Security Agreement, dated as of October 24, 2014.(f) |
|
10.18 |
|
Amendment No. 1 to Amended and Restated Collateral Assignment of Trademarks made among Lerner New York, Inc. in favor of Wells Fargo Bank, N.A., as Agent for itself and Sole Lender named in the Fourth
Amended and Restated Loan and Security Agreement, dated as of October 24, 2014.(f) |
|
10.19 |
|
Copyright Collateral Assignment and Security Agreement made by and among Lernco Inc. and New York & Company, Inc., and Wells Fargo Bank, N.A., as Agent for itself and Sole Lender named in the Fourth
Amended and Restated Loan and Security Agreement, dated October 24, 2014.(f) |
|
10.20 |
|
Patent Collateral Assignment and Security Agreement made by and among Lerner New York, Inc. and New York & Company, Inc., and Wells Fargo Bank, N.A. as Agent for itself and Sole Lender named in the
Fourth Amended and Restated Loan and Security Agreement, dated October 24, 2014.(f) |
77
Table of Contents
|
|
|
|
Exhibit
No. |
|
Description |
|
10.21 |
|
Third Amended and Restated Guarantee, made by New York & Company, Inc., Lerner New York Holding, Inc., Nevada Receivable Factoring, Inc., New York & Company Stores, Inc. (formerly
known as Associated Lerner Shops of America, Inc.), and Lerner New York GC, LLC, in favor of Wells Fargo Bank, N.A., as Agent and Sole Lender named in the Third Amended and Restated Loan and Security Agreement, dated as of August 10,
2011.(b) |
|
10.22 |
|
Collateral Assignment of Transition Services Documents, made by Lerner New York Holding, Inc. and New York & Company, Inc., in favor of Wells Fargo Bank, N.A., as Agent and Sole Lender named in the
Third Amended and Restated Loan and Security Agreement, dated as of August 10, 2011.(b) |
|
10.23 |
|
Second Amended and Restated Stock Pledge Agreement by and between Lerner New York, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and Restated
Loan and Security Agreement, dated as of August 22, 2007. TT |
|
10.24 |
|
Second Amended and Restated Stock Pledge Agreement by and between Lerner New York Holding, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended and
Restated Loan and Security Agreement, dated as of August 22, 2007. TT |
|
10.25 |
|
Second Amended and Restated Stock Pledge Agreement by and between New York & Company, Inc. and Wachovia Bank, National Association, as Agent for itself and the other Lender named in the Second Amended
and Restated Loan and Security Agreement, dated as of August 22, 2007. TT |
|
10.26 |
|
Second Amended and Restated Intercompany Subordination Agreement made among the Obligors, as defined in the Second Amended and Restated Loan and Security Agreement, and Wachovia Bank, National Association, as Agent
for itself and the other Lender named in the Second Amended and Restated Loan and Security Agreement, dated as of August 22, 2007. TT |
|
10.27 |
|
Form of Amended and Restated 2002 Stock Option Plan that became effective immediately prior to the consummation of the Company's initial public offering.** |
|
10.28 |
|
Form of Amended and Restated 2006 Long-Term Incentive Plan, as amended and restated on June 16, 2014, approved by the Company's Stockholders on June 16, 2014.*** |
|
21.1 |
|
Subsidiaries of the Registrant. |
|
23.1 |
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. |
|
31.1 |
|
Certification by the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 16, 2015. |
|
31.2 |
|
Certification by the Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 16, 2015. |
|
32.1 |
|
Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley act of 2002, dated April 16, 2015. |
|
101.INS |
|
XBRL Instance Document. |
|
101.SCH |
|
XBRL Taxonomy Extension Schema Document. |
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document. |
78
Table of Contents
|
|
|
|
Exhibit
No. |
|
Description |
|
101.DEF |
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XBRL Taxonomy Definition Linkbase Document. |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document. |
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- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2005, as filed with
the SEC on April 19, 2005.
-
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2007, as
filed with the SEC on April 6, 2007.
-
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended
February 2, 2008, as filed with the SEC on April 8, 2008.
-
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 2009, as filed with the SEC on April 7, 2009.
-
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal
year ended January 30, 2010, as filed with the SEC on April 6, 2010.
- T
- Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended April 29, 2006, as
filed with the SEC on June 8, 2006.
- TT
- Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended August 4, 2007, as
filed with the SEC on September 7, 2007.
- TTT
- Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended May 1, 2010, as
filed with the SEC on June 10, 2010.
- *
- Incorporated
by reference from Amendment No. 1 to the Company's Registration Statement on Form S-1 as filed with the SEC on July 9,
2004.
- **
- Incorporated
by reference from Amendment No. 3 to the Company's Registration Statement on Form S-1 as filed with the SEC on
September 14, 2004.
- ***
- Incorporated
by reference from the Company's Registration Statement on Form S-8 as filed with the SEC on February 12, 2015.
- +
- Incorporated
by reference from the Company's Current Report on Form 8-K filed with the SEC on August 17, 2006.
- (a)
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2011, as filed with the SEC on
April 11, 2011.
- (b)
- Incorporated
by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended July 30, 2011, as filed with the SEC on
September 8, 2011.
- (c)
- Incorporated
by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended October 29, 2011, as filed with the SEC on
December 8, 2011.
- (d)
- Incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2012, as filed with the SEC on
April 9, 2012.
- (e)
- Incorporated
by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended July 28, 2012, as filed with the SEC on
September 6, 2012.
- (f)
- Incorporated
by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended November 1, 2014, as filed with the SEC on
December 11, 2014.
79
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference, in the Registration Statements (Form S-8 No. 333-119803), pertaining to the
New York & Company, Inc. and subsidiaries Amended and Restated 2002 Stock Option Plan and (Form S-8 No. 333-163266, Form S-8 No. 333-178085, and
Form S-8 No. 333-202058), pertaining to the New York & Company, Inc. and subsidiaries, Amended and Restated 2006 Long-Term Incentive Plan, of our reports dated
April 16, 2015, with respect to the consolidated financial statements and schedule of New York & Company, Inc. and the effectiveness of internal control over financial reporting
of New York & Company, Inc., included in this Annual Report (Form 10-K) for the year ended January 31, 2015.
/s/
Ernst & Young LLP
New
York, New York
April 16, 2015
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Consent of Independent Registered Public Accounting Firm
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Exhibit 31.1
CERTIFICATION
I,
Gregory J. Scott, certify that:
1. I
have reviewed this Annual Report on Form 10-K of New York & Company, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The
registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial
reporting.
Date:
April 16, 2015
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/s/ GREGORY J. SCOTT
Gregory J. Scott Chief Executive Officer |
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CERTIFICATION
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Exhibit 31.2
CERTIFICATION
I,
Sheamus Toal, certify that:
1. I
have reviewed this Annual Report on Form 10-K of New York & Company, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The
registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial
reporting.
Date:
April 16, 2015
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/s/ SHEAMUS TOAL
Sheamus Toal Executive Vice President and Chief Financial Officer |
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CERTIFICATION
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Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Executive Vice President and Chief Financial Officer of New York & Company, Inc. (the "Company"), hereby
certify, based on our knowledge, that the Annual Report on Form 10-K of the Company for the year ended January 31, 2015 (the "Report") fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended and that information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date:
April 16, 2015
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/s/ GREGORY J. SCOTT
Gregory J. Scott Chief Executive Officer |
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/s/ SHEAMUS TOAL
Sheamus Toal Executive Vice President and Chief Financial Officer |
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Certification Pursuant to 18 U.S.C. Section 1350 As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
New York & Company (NYSE:NWY)
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