What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-06-09 compared with 2020-12-08 · 75 added, 140 removed, 188 unchanged (53% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Short-term investment securities

Prepaid and other current assets

Income tax receivable

Total current assets

Property and equipment, net of accumulated depreciation of $ 275,599 and $ 262,570 as of October 31, 2020 and February 1, 2020, respectively

Property and equipment, net of accumulated depreciation of $ 281,842 and $ 279,080 as of May 1, 2021 and January 31, 2021, respectively

Operating lease right of use assets

Long-term investment securities

Deferred income taxes

5 unchanged sentences

Accrued compensation

Income tax payable

Layaway deposits

6 unchanged sentences

Authorized 32,000,000 shares;

15,968,849 shares issued as of October 31, 2020 and 15,907,666 shares issued as of February 1, 2020;

10,259,260 shares outstanding as of October 31, 2020 and 10,834,134 shares outstanding as of February 1, 2020

15,973,001 shares issued as of May 1, 2021 and 15,981,394 shares issued as of January 30, 2021;

9,331,012 shares outstanding as of May 1, 2021 and 9,876,901 shares outstanding as of January 30, 2021

Paid in capital

1 unchanged sentence

Treasury stock, at cost;

5,709,589 shares held as of October 31, 2020 and 5,073,532 shares held as of February 1, 2020

6,641,989 shares held as of May 1, 2021 and 6,104,493 shares held as of January 30, 2021

Total stockholders’ equity

5 unchanged sentences

(in thousands, except per share amounts)

Thirty-Nine Weeks Ended

Cost of sales (exclusive of depreciation)

Selling, general and administrative expenses

Asset impairment

Income from operations

Interest income

Interest expense

Income before income taxes

Income tax provision

Basic net income per common share

Diluted net income per common share

Weighted average number of shares outstanding

Citi Trends, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Thirteen Weeks Ended

1 unchanged sentence

Selling, general and administrative expenses

Asset impairment

Income (loss) from operations

11 unchanged sentences

(in thousands)

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

Operating activities:

Net income (loss)

Adjustments to reconcile net income to net cash provided by operating activities:

10 unchanged sentences

Accrued compensation

Income tax receivable/payable

Income tax payable

Layaway deposits

5 unchanged sentences

Insurance proceeds related to investing activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Financing activities:

Borrowings under revolving credit facility

Repayments of revolving credit facility

Payments of debt issuance costs

Cash used to settle withholding taxes on the vesting of nonvested restricted stock

1 unchanged sentence

Repurchases of common stock

Net cash used in financing activities

Net cash (used in) provided by financing activities

Net increase in cash and cash equivalents

4 unchanged sentences

Cash paid for interest

Cash payments of income taxes

Cash payments (refunds) of income taxes

Supplemental disclosures of non-cash investing activities:

5 unchanged sentences

Treasury Stock

Balances — February 1, 2020

Vesting of nonvested restricted stock units

Balances — January 30, 2021

Issuance of nonvested shares under incentive plan

1 unchanged sentence

Stock-based compensation expense

Net share settlement of nonvested shares and restricted stock units

Net share settlement of nonvested shares

Repurchase of common stock

Dividends paid to stockholders ($ 0.08 per common share)

Balances — May 1, 2021

Issuance of nonvested shares under incentive plan

Stock-based compensation expense

Net share settlement of nonvested shares and restricted stock units

Balances — August 1, 2020

Issuance of nonvested shares under incentive plan

Forfeiture of nonvested shares by employees and directors

Stock-based compensation expense

Net share settlement of nonvested shares and restricted stock units

Repurchase of common stock

Balances — October 31, 2020

Treasury Stock

Balances — February 1, 2020

Adoption of lease accounting standard

Vesting of nonvested restricted stock units

1 unchanged sentence

Stock-based compensation expense

Net share settlement of nonvested shares and restricted stock units

Net share settlement of nonvested shares

Repurchase of common stock

1 unchanged sentence

Balances — May 2, 2020

Issuance of nonvested shares under incentive plan

Forfeiture of nonvested shares

Stock-based compensation expense

Net share settlement of nonvested shares and restricted stock units

Repurchase of common stock

Dividends paid to stockholders ($ 0.08 per common share)

Balances — August 3, 2019

Issuance of nonvested shares under incentive plan

Stock-based compensation expense

Repurchase of common stock

Dividends paid to stockholders ($ 0.08 per common share)

Balances — November 2, 2019

See accompanying notes to the condensed consolidated financial statements (unaudited).

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements (unaudited)

October 31, 2020

Significant Accounting Policies

1 unchanged sentence

Citi Trends, Inc.

(collectively referred to herein with its wholly owned subsidiary as the “Company”) is a value-priced retailer of fashion apparel, accessories and home goods for the entire family.

As of October 31, 2020, the Company operated 585 stores in 33 states.

and its subsidiary (the “Company”) is a growing specialty value retailer of apparel, accessories and home trends primarily for African American and Latinx families.

As of May 1, 2021, the Company operated 584 stores in urban, suburban and rural markets in 33 states.

The condensed consolidated financial statements are prepared in accordance with U.S.

2 unchanged sentences

In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

The condensed consolidated balance sheet as of February 1, 2020 is derived from the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020, as amended (the “2019 Form 10-K”).

The condensed consolidated balance sheet as of January 30, 2021 is derived from the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021 (the “2020 Form 10-K”).

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2020 Form 10-K.

Operating results for the thirty-nine weeks ended October 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year as a result of the seasonality of the business and changes in our business, consumer spending patterns, and the macroeconomic environment, including those resulting from the novel coronavirus (“COVID-19”) pandemic.

The following contains references to fiscal years 2020 and 2019, which represent fiscal years ending or ended on January 30, 2021 and February 1, 2020, respectively.

Operating results for the first quarter of 2021 are not necessarily indicative of the results that may be expected for the fiscal year, as a result of the seasonality of the business and the current uncertainty surrounding the economic impact of the novel coronavirus (“COVID-19”) pandemic and the duration and extent of any economic stimulus programs.

The following contains references to fiscal years 2021 and 2020, which represent fiscal years ending or ended on January 29, 2022 and January 30, 2021, respectively.

Fiscal 2021 and 2020 both have 52 -week accounting periods.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduced an expected credit loss model for the impairment of financial assets measured at amortized costs.

The model replaces the incurred loss model for those assets and broadens the information an entity must consider in developing its expected credit loss estimate for assets measured at amortized cost.

The Company adopted ASU No.

2016-13 on February 2, 2020.

The adoption of the new standard did not have a material impact to the Company’s consolidated financial position, results of operations or cash flows.

Impact of the COVID-19 Pandemic

In December 2019, COVID-19 emerged and spread worldwide.

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic.

After closely monitoring and taking into consideration the guidance from federal, state and local governments, the Company temporarily closed all of its retail store locations and distribution centers effective March 20, 2020.

Beginning April 24, 2020, the Company started to reopen stores in select states in accordance with state and local government guidelines.

As of July 18, 2020, the Company safely reopened all of its stores and distribution centers.

The temporary closure of the Company’s stores has had, and may continue to have, an adverse impact on the Company’s financial condition, results of operations and liquidity.

In the first quarter of 2020, the Company took several steps to increase its cash position and preserve financial flexibility in light of uncertainties resulting from the COVID-19 pandemic, including (i) the drawdown of $ 43.7 million in principal amount under the revolving credit facility on March 20, 2020 and an amendment to the revolving credit facility to extend the term to August 2021;

(ii) temporary furloughs of substantially all store and distribution center personnel and a significant portion of the corporate staff, with employee benefits for eligible employees continued through the temporary furloughs;

(iii) temporary tiered salary reductions for management level corporate employees and a reduction to the cash portion of non-employee director fees;

(iv) extensions of payment terms with vendors and suppliers;

and (v) temporarily suspending share repurchases.

Other measures taken by the Company to mitigate the impact of the pandemic that began in the first quarter of 2020 and are continuing include negotiating rent concessions with landlords and executing substantial reductions in operating expenses, store occupancy costs, capital expenditures and other costs.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was signed into law.

The provisions include technical corrections to tax depreciation methods for qualified improvement property which allow for accelerated depreciation, an employee retention tax credit and the deferral of the employer portion of social security deposits.

As of October 31, 2020, the Company had deferred payment of approximately $ 3.5 million of amounts due for the employer portion of social security tax deposits.

The Company expects to defer approximately $ 1.2 million of additional tax deposits during the remainder of the calendar year as allowed by the CARES Act.

The total amounts of deferred payroll taxes will be paid in two equal installments during the fourth calendar quarters of 2021 and 2022.

In addition, in the second quarter of 2020, the Company recognized a $ 1.5 million benefit related to the employee retention credit created under the CARES Act based on qualified wages paid primarily to store and distribution center associates.

The retention credit is included in selling, general and administrative expenses on the condensed consolidated statements of operations for the thirty-nine weeks ended October 31, 2020.

Changes to U.S.

GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

The Company considers the applicability and impact of all ASUs.

ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which removes certain exceptions in the application of Topic 740 for franchise taxes, investments, intra-period allocations and interim calculations, and also adds guidance to reduce complexity in accounting for income taxes.

The Company adopted ASU 2019-12 on January 31, 2021.The adoption of the new standard did not have a material impact to the Company’s consolidated financial position, results of operations or cash flows.

COVID-19 Update

In March 2020, the World Health Organization declared the spread of the coronavirus (“COVID-19”) a global pandemic.

During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19.

The pandemic has caused and may continue to cause significant disruptions in the U.S.

economy as the virus continues to spread or has a resurgence in certain jurisdictions.

Measures have been implemented by the U.S.

government in an effort to contain the virus, including lockdowns, physical distancing, travel restrictions, limitations on public gatherings, work from home and restrictions on nonessential businesses.

The COVID-19 pandemic has resulted in periods of disruption for the Company, including the temporary closure of stores and limited store operating hours, reduced customer traffic and consumer spending, and delays in the manufacturing and shipping of products.

The Company saw improvement in its financial results and positive trends during the latter half of fiscal 2020 and into the first quarter of 2021 as certain governments began to gradually ease restrictions and provide economic stimulus and vaccine distribution accelerated, leading to an increase in spending and increased customer demand.

The Company expects continued uncertainty in its business and the global economy, although the extent and duration is unknown, by the COVID-19 pandemic and its effects on the economy in a variety of ways, potentially including volatility in employment trends and consumer confidence, the direction or extent of current or future restrictive actions that may be imposed by governments or public health authorities, timing and effectiveness of vaccines, the duration and extent of any economic stimulus programs, supply chain interruptions, increased distribution and transportation costs, increased payroll expenses, and increased costs in an effort to maintain safe work and shopping environments.

The impacts of the pandemic

have had, and may continue to have, an adverse impact on the Company’s financial condition, results of operations and liquidity.

The Company will continue to monitor the effects of COVID-19 and take the necessary actions to serve our associates, customers, communities and shareholders.

Cash and Cash Equivalents/Concentration of Credit Risk

9 unchanged sentences

The Company includes as assumed proceeds the amount of compensation cost attributed to future services and not yet recognized.

For the thirty-nine weeks ended October 31, 2020 and November 2, 2019, there were 150,000 and 139,000 shares of nonvested restricted stock, respectively, excluded from the calculation of diluted earnings per share because of antidilution.

For the thirteen weeks ended October 31, 2020 and November 2, 2019, there were 134,000 and 147,000 shares of nonvested restricted stock, respectively, excluded from the calculation of diluted earnings per share because of antidilution.

For the first quarters of 2021 and 2020, there were 38,000 and 179,000 shares of nonvested restricted stock, respectively, excluded from the calculation of diluted earnings per share because of antidilution.

The following table provides a reconciliation of the weighted average number of common shares outstanding used to calculate basic earnings per share to the number of common shares and common stock equivalents outstanding used in calculating diluted earnings per share:

Thirty-Nine Weeks Ended

October 31, 2020

November 2, 2019

Weighted average number of common shares outstanding

Incremental shares from assumed vesting of nonvested restricted stock

Weighted average number of common shares and common stock equivalents outstanding

Thirteen Weeks Ended

October 31, 2020

November 2, 2019

Weighted average number of common shares outstanding

4 unchanged sentences

If this review indicates that the carrying value of the asset will not be recovered as determined based on projected undiscounted cash flows related to the asset over its remaining life, the carrying value of the asset is reduced to its estimated fair value.

Non-cash impairment expenses consisted of the following (in thousands):

Thirty-Nine Weeks Ended

October 31, 2020

November 2, 2019

Operating lease right-of-use asset impairment

Store asset impairment

Total asset impairment

There was no impairment expense recorded in the first quarter of 2021.

In the first quarter of 2020, non-cash impairment charges related to an underperforming store totaled $ 0.3 million, comprised of $ 0.2 million for an operating lease right-of-use asset and $ 0.1 million for leasehold improvements and fixtures and equipment.

Revolving Credit Facility

On October 27, 2011, the Company entered into a five-year , $ 50 million credit facility with Bank of America.

The facility was amended on August 18, 2015, extending the maturity date to August 18, 2020.

The facility was amended again on May 12, 2020, extending the maturity date to August 18, 2021.

In October 2011, the Company entered into a five-year , $ 50 million credit facility with Bank of America.

The facility was amended in August 2015 and May 2020 to extend the maturity dates.

The facility was amended again on April 15, 2021 to modify terms and extend the maturity date to April 15, 2026.

The amended facility provides a $ 75 million credit commitment and a $ 25 million uncommitted “accordion” feature that under certain circumstances could allow the Company to increase the size of the facility to $ 100 million.

1 unchanged sentence

The facility has an unused commitment fee of 0.20 % and permits the payment of cash dividends subject to certain limitations.

Borrowings under the Revolving Credit Facility bear interest (a) for Eurodollar Loans, at a rate equal to LIBOR plus either 2.25 % or 2.5 %, or (b) for Base Rate Loans, at a rate equal to the highest of (i) the prime rate, (ii) the Federal Funds Rate plus 0.5 % or (iii) LIBOR for a period of one month plus 1.0 %, plus, in each case either 1.25 % or 1.5 % , based in any such case on the average daily availability for borrowings under the facility.

On March 20, 2020, in response to the COVID-19 pandemic, the Company borrowed $ 43.7 million on the credit facility to enhance its liquidity position.

Such borrowings accrued interest ranging from 1.625 % to 3.5 % .

During the second quarter of 2020, the Company repaid $ 2.1 million of the outstanding borrowings.

On September 11, 2020, the Company repaid the full amount outstanding under the credit facility.

Borrowings under the credit facility bear interest (a) for

Eurodollar Loans, at a rate equal to the Eurodollar Rate plus either 1.25 % , 1.50 % or 1.75 % , or (b) for Base Rate Loans, at a rate equal to the highest of (i) the prime rate, (ii) the Federal Funds Rate plus 0.5 % or (iii) the Eurodollar Rate plus 1.0 % , plus, in each case either 0.25 % , 0.50 % or 0.75 % , based in any such case on the average daily availability for borrowings under the facility.

Income taxes are accounted for under the asset and liability method.

3 unchanged sentences

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

For the thirty-nine weeks ended October 31, 2020 and November 2, 2019, the Company utilized the annual effective tax rate method to calculate income taxes.

The effective income tax rate was 23.2 % for the thirty-nine weeks ended October 31, 2020, compared to 15.6 % for the thirty-nine weeks ended November 2, 2019.

The difference in the effective income tax rate was due to lower federal and state tax credits this year.

If there is a change in tax rates, the Company would recognize the impact of such change in income in the period that includes the enactment date.

For the first quarter of 2021, the Company utilized the annual effective tax rate method to calculate income taxes.

For the first quarter of 2020, the Company utilized the discrete effective tax rate method based on the determination that the full-year tax rate was not reliably predictable.

The tax rate was 20.7 % for the first quarter of 2021, compared to 24.0 % (benefit) for the first quarter of 2020.

The difference in the tax rate was due to pretax income for the first quarter of 2021 compared to a pretax loss in the prior year.

Commitments and Contingencies

The Company from time to time is involved in various legal proceedings incidental to the conduct of its business, including claims by customers, landlords, employees or former employees.

Once it becomes probable that the Company will incur costs in connection with a legal proceeding and such costs can be reasonably estimated, it establishes appropriate reserves.

Once it becomes probable that the Company will incur costs in connection with a legal proceeding and such costs can be reasonably estimated, the Company establishes appropriate reserves.

While legal proceedings are subject to uncertainties and the outcome of any such matter is not predictable, the Company is not aware of any legal proceedings pending or threatened against it that it expects to have a material adverse effect on its financial condition, results of operations or liquidity.

Stock Repurchase Program and Cash Dividends

Stock Repurchases and Cash Dividends

Repurchases of Common Stock

In November 2019, the Company’s board of directors approved a program that authorized the repurchase of up to $ 25.0 million in shares of the Company’s common stock.

During the thirty-nine weeks ended November 2, 2019, the Company repurchased 82,312 shares of its common stock at an aggregate cost of $ 1.6 million.

This repurchase program was completed in October 2019.

In November 2019, the Company’s board of directors approved a new program that authorized the repurchase of up to $ 25.0 million in shares of the Company’s common stock.

During the thirty-nine weeks ended October 31, 2020, the Company repurchased 260,254 shares of its common stock under this program at an aggregate cost of $ 6.3 million.

This repurchase program was completed in February 2020.

On March 13, 2020, the Company’s board of directors approved another new program that authorized the repurchase of up to $ 30.0 million in shares of the Company’s common stock.

On March 23, 2020, due to the economic uncertainty stemming from the COVID-19 pandemic, the Company temporarily suspended any repurchases.

On September 14, 2020, the Company announced the reinstatement of this program.

During the thirteen weeks ended October 31, 2020, the Company repurchased 375,803 shares of its common stock under this program at an aggregate cost of $ 9.9 million.

During the first quarter of 2020, the Company repurchased 260,254 shares of its common stock at an aggregate cost of $ 6.3 million.

In March 2020, the Company’s board of directors approved another program that authorized the repurchase of up to $ 30.0 million in shares of the Company’s common stock.

Shortly thereafter, due to the economic uncertainty stemming from the COVID-19 pandemic, the Company temporarily suspended any repurchases.

In September 2020, the Company announced the reinstatement of this program.

In December 2020, the Company announced that its board of directors approved an additional $ 30.0 million stock repurchase program.

In the first quarter of 2021, the Company repurchased 287,496 shares of its common stock under this program at an aggregate cost of $ 23.6 million.

In addition, on March 23, 2021, the Company completed a block repurchase of 250,000 shares of its common stock at an aggregate cost of $ 21.9 million.

On June 2, 2021, the Company announced that its board of directors approved another program that authorized the repurchase of up to $ 30.0 million in shares of the Company’s common stock.

On February 18, 2020, the Company’s board of directors declared a dividend of $ 0.08 per common share, which was paid on March 17, 2020 to stockholders of record as of March 3, 2020.

15 unchanged sentences

The percentage of net sales related to each classification of its merchandise assortment was approximately:

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

Accessories & Beauty

Home & Lifestyle

The Company leases its retail store locations and certain office space and equipment.

5 unchanged sentences

Lease costs consisted of the following (in thousands):

Thirty-Nine Weeks Ended

October 31, 2020

November 2, 2019

Thirteen Weeks Ended

Operating lease cost

2 unchanged sentences

Total lease cost

In response to the impact of the COVID-19 pandemic on the Company’s operations, the Company suspended certain lease payments under its existing lease agreements.

In response to the impact of the COVID-19 pandemic on the Company’s operations, the Company suspended certain lease payments in 2020 under its existing lease agreements.

During the suspension of payments, the Company continued to recognize expenses and liabilities for lease obligations and corresponding right-of-use assets on the balance sheet in accordance with the applicable accounting guidance.

The Company is engaging in ongoing discussions with landlords regarding the potential restructuring of lease payments and rent concessions.

As of October 31, 2020, the Company negotiated contractual rent concessions on certain leases in the form of early renewals, rent deferrals and rent abatements.

The Company has elected to account for qualifying COVID-19 related rent concessions as if they were part of the enforceable rights and obligations under the existing lease agreements, as permitted by the updated guidance provided by the FASB in April 2020.

As a result of this election, the Company recognized rent abatement credits of approximately $ 0.8 million and $ 0.2 million during the thirty-nine and thirteen weeks ended October 31, 2020, respectively.

Future minimum lease payments as of October 31, 2020 are as follows (in thousands):

As of May 1, 2021, the Company negotiated

contractual rent concessions on many leases in the form of early renewals, rent deferrals and rent abatements.

The Company elected to account for qualifying COVID-19 related rent concessions as if they were part of the enforceable rights and obligations under the existing lease agreements, as permitted by the updated guidance provided by the FASB in April 2020.

As a result of this election, the Company recognized rent abatement credits of approximately $ 0.1 million during the first quarter of 2021.

Future minimum lease payments as of May 1, 2021 are as follows (in thousands):

Remainder of 2021

2 unchanged sentences

Total present value of lease liabilities

(1) Calculated using the incremental borrowing rate for each lease.

(2) Includes short-term and long-term operating leases.

(1) Calculated using the discount rate for each lease.

(2) Includes short-term and long-term portions of operating lease liabilities.

Certain operating leases provide for fixed monthly rents, while others provide for contingent rents computed as a percentage of net sales and others provide for a combination of both fixed monthly rents and contingent rents computed as a percentage of net sales.

Supplemental cash flows and other information related to operating leases are as follows (in thousands, except for weighted average amounts):

Thirty-Nine Weeks Ended

October 31, 2020

November 2, 2019

Thirteen Weeks Ended

Cash paid for operating leases

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements