What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-26 compared with 2022-06-01 · 176 added, 99 removed, 435 unchanged (39% of the section changed)

4 unchanged sentences

2022 January 29,

2022 July 31,

(unaudited) (unaudited)

47 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Thirteen Weeks Ended

(in thousands, except earnings per share)

Thirteen Weeks Ended Twenty-six Weeks Ended

2022 July 31,

2021 July 30,

2022 July 31,

(in thousands, except earnings (loss) per common share)

Net sales $ 380,885 $ 413,855 $ 743,235 $ 849,336

3 unchanged sentences

Depreciation and amortization 13,241 14,392 26,856 29,953

Operating income 19,254 65,907

Asset impairment charges 1,379 — 1,379 —

Operating income (loss) ( 13,829 ) 37,849 5,425 103,756

Interest expense ( 2,603 ) ( 4,700 ) ( 4,313 ) ( 9,114 )

Interest income 14 4 19 7

Income before provision (benefit) for income taxes 17,549 61,496

Income (loss) before provision (benefit) for income taxes ( 16,418 ) 33,153 1,131 94,649

Provision (benefit) for income taxes ( 3,120 ) 9,058 ( 5,402 ) 25,349

Net income $ 19,831 $ 45,205

Earnings per common share

Net income (loss) $ ( 13,298 ) $ 24,095 $ 6,533 $ 69,300

Earnings (loss) per common share

Basic $ ( 1.01 ) $ 1.63 $ 0.49 $ 4.71

6 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Thirteen Weeks Ended

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Thirteen Weeks Ended Twenty-six Weeks Ended

2022 July 31,

2021 July 30,

2022 July 31,

(in thousands)

Net income $ 19,831 $ 45,205

Other comprehensive income:

Net income (loss) $ ( 13,298 ) $ 24,095 $ 6,533 $ 69,300

Other comprehensive income (loss):

Foreign currency translation adjustment 54 ( 355 ) ( 428 ) 531

Total comprehensive income $ 19,349 $ 46,091

Total comprehensive income (loss) $ ( 13,244 ) $ 23,740 $ 6,105 $ 69,831

See accompanying notes to these consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Thirteen Weeks Ended April 30, 2022

Thirteen Weeks Ended July 30, 2022

Additional Other Total

1 unchanged sentence

(in thousands) Shares Amount Capital Compensation Earnings Loss Shares Amount Equity

Balance, April 30, 2022 13,422 $ 1,342 $ 155,097 $ 3,512 $ 71,913 $ ( 14,668 ) ( 62 ) $ ( 3,512 ) $ 213,684

Vesting of stock awards 147 15 ( 15 ) —

Stock-based compensation expense 6,272 6,272

Purchase and retirement of common stock ( 482 ) ( 48 ) ( 9,400 ) ( 13,083 ) ( 22,531 )

Other comprehensive income 54 54

Deferral of common stock into deferred compensation plan 75 ( 2 ) ( 75 ) —

Net loss ( 13,298 ) ( 13,298 )

Balance, July 30, 2022 13,087 $ 1,309 $ 151,954 $ 3,587 $ 45,532 $ ( 14,614 ) ( 64 ) $ ( 3,587 ) $ 184,181

Twenty-six Weeks Ended July 30, 2022

Additional Other Total

Common Stock Paid-In Deferred Retained Comprehensive Treasury Stock Stockholders’

(in thousands) Shares Amount Capital Compensation Earnings Loss Shares Amount Equity

Balance, January 29, 2022

13,964 $ 1,396 $ 160,348 $ 3,443 $ 77,914 $ ( 14,186 ) ( 61 ) $ ( 3,443 ) $ 225,472

Vesting of stock awards 270 27 ( 27 ) —

4 unchanged sentences

Net income 6,533 6,533

Balance, April 30, 2022 13,422 $ 1,342 $ 155,097 $ 3,512 $ 71,913 $ ( 14,668 ) ( 62 ) $ ( 3,512 ) $ 213,684

Thirteen Weeks Ended May 1, 2021

Balance, July 30, 2022

13,087 $ 1,309 $ 151,954 $ 3,587 $ 45,532 $ ( 14,614 ) ( 64 ) $ ( 3,587 ) $ 184,181

See accompanying notes to these consolidated financial statements.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)

Thirteen Weeks Ended July 31, 2021

Additional Other Total

Common Stock Paid-In Deferred Retained Comprehensive Treasury Stock Stockholders’

(in thousands) Shares Amount Capital Compensation Earnings Loss Shares Amount Equity

Balance, May 1, 2021 14,693 $ 1,469 $ 155,908 $ 3,234 $ 563 $ ( 12,930 ) ( 58 ) $ ( 3,234 ) $ 145,010

Vesting of stock awards 255 26 ( 26 ) —

Stock-based compensation expense 10,526 10,526

Purchase and retirement of common stock ( 117 ) ( 12 ) ( 2,118 ) ( 8,961 ) ( 11,091 )

Other comprehensive loss ( 355 ) ( 355 )

Deferral of common stock into deferred compensation plan 70 ( 1 ) ( 70 ) —

Net income 24,095 24,095

Balance, July 31, 2021 14,831 $ 1,483 $ 164,290 $ 3,304 $ 15,697 $ ( 13,285 ) ( 59 ) $ ( 3,304 ) $ 168,185

Twenty-six Weeks Ended July 31, 2021

Additional Retained Other Total

8 unchanged sentences

Net income 69,300 69,300

Balance, May 1, 2021 14,693 $ 1,469 $ 155,908 $ 3,234 $ 563 $ ( 12,930 ) ( 58 ) $ ( 3,234 ) $ 145,010

Balance, July 31, 2021 14,831 $ 1,483 $ 164,290 $ 3,304 $ 15,697 $ ( 13,285 ) ( 59 ) $ ( 3,304 ) $ 168,185

See accompanying notes to these consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirteen Weeks Ended

Twenty-six Weeks Ended

2022 July 31,

(in thousands)

5 unchanged sentences

Non-cash stock-based compensation expense 13,834 18,442

Deferred income tax provision (benefit) ( 1,583 ) 8,389

Other non-cash charges, net 467 389

Deferred income tax provision 2,768 9,390

Asset impairment charges 1,379 —

Other non-cash items, net ( 521 ) 743

Changes in operating assets and liabilities:

18 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 396 ) 960

Net increase in cash and cash equivalents 3,707 1,828

Net increase (decrease) in cash and cash equivalents ( 26,594 ) 434

Cash and cash equivalents, beginning of period 54,787 63,548

3 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirteen Weeks Ended

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Twenty-six Weeks Ended

2022 July 31,

(in thousands)

21 unchanged sentences

Terms that are commonly used in the notes to the Company’s consolidated financial statements are defined as follows:

• Second Quarter 2022 — The thirteen weeks ended July 30, 2022

• Second Quarter 2021 — The thirteen weeks ended July 31, 2021

• First Quarter 2022 — The thirteen weeks ended April 30, 2022

• First Quarter 2021 — The thirteen weeks ended May 1, 2021

• Year-To-Date 2022 — The twenty-six weeks ended July 30, 2022

• Year-To-Date 2021 — The twenty-six weeks ended July 31, 2021

• Fiscal 2022 – The fifty-two weeks ending January 28, 2023

• Fiscal 2021 – The fifty-two weeks ended January 29, 2022

Securities and Exchange Commission

11 unchanged sentences

Intercompany balances and transactions have been eliminated.

As of April 30, 2022, January 29, 2022 and May 1, 2021, the Company did not have any investments in unconsolidated affiliates.

As of July 30, 2022, January 29, 2022, and July 31, 2021, the Company did not have any investments in unconsolidated affiliates.

FASB ASC 810— Consolidation is considered when determining whether an entity is subject to consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of April 30, 2022 and May 1, 2021, the results of its consolidated operations for the thirteen weeks ended April 30, 2022 and May 1, 2021, consolidated comprehensive income for the thirteen weeks ended April 30, 2022 and May 1, 2021, consolidated cash flows for the thirteen weeks ended April 30, 2022 and May 1, 2021, and consolidated changes in stockholders’ equity for the thirteen weeks ended April 30, 2022 and May 1, 2021.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of July 30, 2022 and July 31, 2021, the results of its consolidated operations, consolidated comprehensive income (loss), and consolidated changes in stockholders’ equity for the thirteen and twenty-six weeks ended July 30, 2022 and July 31, 2021, and consolidated cash flows for the twenty-six weeks ended July 30, 2022 and July 31, 2021.

The consolidated balance sheet as of January 29, 2022 was derived from audited financial statements.

Due to the seasonal nature of the Company’s business, the results of operations for the thirteen weeks ended April 30, 2022 and May 1, 2021 are not necessarily indicative of operating results for a full fiscal year.

Due to the seasonal nature of the Company’s business, the results of operations for the thirteen and twenty-six weeks ended July 30, 2022 and July 31, 2021 are not necessarily indicative of operating results for a full fiscal year.

These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

The Company’s fiscal year is a 52-week or 53-week period ending on the Saturday on or nearest to January 31.

THE CHILDREN’S PLACE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s fiscal year is a fifty-two week or fifty-three week period ending on the Saturday on or nearest to January 31.

Use of Estimates

7 unchanged sentences

The following table presents the Company’s revenues disaggregated by geography:

Thirteen Weeks Ended

Thirteen Weeks Ended Twenty-six Weeks Ended

2022 July 31,

2021 July 30,

2022 July 31,

(in thousands)

4 unchanged sentences

International and other (1)

70,775 56,329 127,612 108,023

Total net sales $ 380,885 $ 413,855 $ 743,235 $ 849,336

____________________________________________

(1) Includes retail and e-commerce sales in Canada and Puerto Rico, wholesale and franchisee sales, and certain amounts earned under the Company’s private label credit card program.

The Company recognizes revenue, including shipping and handling fees billed to customers, upon purchase at the Company’s retail stores or when received by the customer if the product was purchased via e-commerce, net of coupon redemptions and anticipated sales returns.

The Company deferred sales of $ 5.3 million and $ 6.7 million within Accrued expenses and other current liabilities as of April 30, 2022 and May 1, 2021, respectively, based upon estimated time of delivery, at which point control passes to the customer.

The Company deferred sales of $ 12.6 million, $ 3.6 million, and $ 9.5 million within Accrued expenses and other current liabilities as of July 30, 2022, January 29, 2022, and July 31, 2021, respectively, based upon estimated time of delivery, at which point control passes to the customer.

Sales tax collected from customers is excluded from revenue.

1 unchanged sentence

Adjustments to the allowance for estimated sales returns in subsequent periods have not been material based on historical data, thereby reducing the uncertainty inherent in such estimates.

The allowance for estimated sales returns, which is recorded in Accrued expenses and other current liabilities, was $ 1.7 million as of April 30, 2022 and May 1, 2021.

The allowance for estimated sales returns, which is recorded in Accrued expenses and other current liabilities, was $ 2.3 million, $ 1.0 million, and $ 3.1 million as of July 30, 2022, January 29, 2022, and July 31, 2021, respectively.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s private label credit card is issued to customers for use exclusively at The Children’s Place stores and online at www.childrensplace.com, www.gymboree.com , and www.sugarandjade.com, and credit is extended to such customers by a third-party financial institution on a non-recourse basis to the Company.

4 unchanged sentences

The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration, such as additional bonuses, including profit-sharing, over the life of the private label credit card program.

8 unchanged sentences

The value of each point earned is recorded as deferred revenue and is included within Accrued expenses and other current liabilities.

The total contract liabilities related to this program were $ 1.8 million and $ 4.3 million as of April 30, 2022 and May 1, 2021, respectively.

The total contract liabilities related to this program were $ 3.9 million, $ 5.0 million, and $ 7.1 million as of July 30, 2022, January 29, 2022, and July 31, 2021, respectively.

The Company’s policy with respect to gift cards is to record revenue as and when the gift cards are redeemed for merchandise.

3 unchanged sentences

The liability is estimated based on expected breakage that considers historical patterns of redemption.

The gift card liability balance as of April 30, 2022, January 29, 2022, and May 1, 2021 was $ 13.3 million, $ 12.1 million, and $ 12.7 million, respectively.

In the First Quarter 2022, the Company recognized Net sales of $ 2.3 million related to the gift card liability balance that existed at January 29, 2022.

The gift card liability balance as of July 30, 2022, January 29, 2022, and July 31, 2021 was $ 11.7 million, $ 12.1 million, and $ 12.8 million, respectively.

During Year-To-Date 2022, the Company recognized Net sales of $ 3.6 million related to the gift card liability balance that existed at January 29, 2022.

The Company has an international program of territorial agreements with franchisees.

6 unchanged sentences

The Company’s intangible assets were as follows:

April 30, 2022

July 30, 2022

Useful Life Gross Amount Accumulated Amortization Net Amount

7 unchanged sentences

Total intangibles $ 76,953 $ ( 5,661 ) $ 71,292

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

January 29, 2022

8 unchanged sentences

Total intangibles $ 76,953 $ ( 5,088 ) $ 71,865

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

July 31, 2021

Useful Life Gross Amount Accumulated Amortization Net Amount

13 unchanged sentences

2022 January 29,

2022 July 31,

(in thousands)

10 unchanged sentences

Property and equipment, net $ 154,738 $ 155,006 $ 165,558

At April 30, 2022 and May 1, 2021, the Company reviewed its store related long-lived assets for indicators of impairment, and performed a recoverability test if indicators were identified.

Based on the results of the analyses performed, the Company did not record significant asset impairment charges in the First Quarter 2022 or First Quarter 2021.

At July 30, 2022, January 29, 2022, and July 31, 2021, the Company reviewed its store related long-lived assets for indicators of impairment, and performed a recoverability test if indicators were identified.

Based on the results of the analyses performed, the Company recorded asset impairment charges in the Second Quarter 2022 and Year-To-Date 2022 of $ 1.4 million, inclusive of right-of-use (“ROU”) assets.

The Company did no t record asset impairment charges in the Second Quarter 2021 or Year-To-Date 2021.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company has operating leases for retail stores, corporate offices, distribution facilities, and certain equipment.

2 unchanged sentences

As of the periods presented, the Company’s finance leases were not material to the Consolidated Balance Sheets, Consolidated Statements of Operations, or Consolidated Statements of Cash Flows.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following components of lease expense were recognized in the Company’s Consolidated Statements of Operations:

Thirteen Weeks Ended

The following components of operating lease expense were recognized in the Company’s Consolidated Statements of Operations:

Thirteen Weeks Ended Twenty-six Weeks Ended

2022 July 31,

2021 July 30,

2022 July 31,

(in thousands)

1 unchanged sentence

Variable operating lease cost (1)

12,573 10,847 27,691 14,221

Total operating lease cost $ 36,643 $ 35,119 $ 74,731 $ 64,251

____________________________________________

(1) Includes short term leases with lease periods of less than 12 months as well as lease abatements accounted for as reductions to variable lease costs under the COVID-19 expedient of $ 0.8 million and $ 8.0 million during the First Quarter 2022 and First Quarter 2021, respectively.

As of April 30, 2022, the weighted-average remaining operating lease term was 4.3 years, and the weighted-average discount rate for operating leases was 4.9 %.

Cash paid for amounts included in the measurement of operating lease liabilities during the First Quarter 2022 was $ 23.8 million.

ROU assets obtained in exchange for new operating lease liabilities were $ 21.1 million during the First Quarter 2022.

As of April 30, 2022, the maturities of operating lease liabilities were as follows:

(1) Includes short term leases with lease periods of less than 12 months as well as lease abatements accounted for as reductions to variable lease costs under the COVID-19 expedient of $ 0.1 million and $ 2.3 million during the Second Quarter 2022 and Second Quarter 2021, and $ 0.9 million and $ 10.3 million during Year-To-Date 2022 and Year-To-Date 2021 , respectively.

As of July 30, 2022, the weighted-average remaining operating lease term was 4.3 years, and the weighted-average discount rate for operating leases was 4.9 %.

Cash paid for amounts included in the measurement of operating lease liabilities during Year-To-Date 2022 was $ 47.9 million.

ROU assets obtained in exchange for new operating lease liabilities were $ 22.6 million during Year-To-Date 2022.

As of July 30, 2022, the maturities of operating lease liabilities were as follows:

(in thousands)

1 unchanged sentence

Thereafter 30,664

Total lease payments

Total operating lease payments

imputed interest ( 18,828 )

2 unchanged sentences

The new debt consists of a revolving credit facility with $ 350.0 million of availability (the “ABL Credit Facility”) and a $ 50.0 million term loan (the “Term Loan”).

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ABL Credit Facility and Term Loan

2 unchanged sentences

The ABL Credit Facility includes a $ 25 million Canadian sublimit and a $ 50 million sublimit for standby and documentary letters of credit.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Borrowings outstanding under the ABL Credit Facility bear interest, at the Company’s option, at:

13 unchanged sentences

2022 January 29,

2022 July 31,

(in millions)

8 unchanged sentences

Interest rate at end of period 3.4 % 1.6 % 3.8 %

First Quarter 2022 Fiscal 2021 First Quarter 2021

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year-To-Date 2022 Fiscal 2021 Year-To-Date 2021

(in millions)

Average end of day loan balance during the period $ 268.2 $ 187.0 $ 213.5

3 unchanged sentences

(1) Lower of the credit facility maximum or the total borrowing base collateral.

(2) The sub-limit availability for letters of credit was $ 42.6 million at April 30, 2022, January 29, 2022, and May 1, 2021.

(2) The sub-limit availability for letters of credit was $ 42.6 million at July 30, 2022, January 29, 2022, and July 31, 2021.

The Term Loan bears interest, payable monthly, at (a) the LIBOR Rate plus 2.50 % for any portion that is a LIBOR loan, or (b) the base rate plus 1.75 % for any portion that is a base rate loan.

The Term Loan is pre-payable at any time without

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

penalty, and does not require amortization.

For the First Quarter 2022, the Company recognized $ 0.4 million in interest expense related to the Term Loan.

The Term Loan is pre-payable at any time without penalty, and does not require amortization.

For the Second Quarter 2022 and Year-To-Date 2022, the Company recognized $ 0.5 million and $ 0.8 million in interest expense related to the Term Loan.

The Term Loan is secured by a first priority security interest in the Company’s intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock, and a second priority security interest in the collateral securing the ABL Credit Facility on a first-priority basis.

2 unchanged sentences

COMMITMENTS AND CONTINGENCIES

Legal and Regulatory Matters

The Company is a defendant in Rael v.

16 unchanged sentences

In the opinion of management, any ultimate liability arising out of these proceedings will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STOCKHOLDERS’ EQUITY

5 unchanged sentences

The Company may suspend or discontinue the programs at any time and may thereafter reinstitute purchases, all without prior announcement.

As of April 30, 2022, there was $ 218.6 million remaining under the 2021 Share Repurchase Program.

As of July 30, 2022, there was $ 196.1 million remaining under the 2021 Share Repurchase Program.

From March 2020 through July 2021, the Company suspended share repurchases, other than to satisfy withholding tax requirements of equity award recipients, due to the COVID-19 pandemic.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

authorities as required by law to satisfy the withholding tax requirements of all equity award recipients.

Pursuant to the Company’s practice, including due to restrictions imposed by the Company’s insider trading policy during black-out periods, the Company withholds and repurchases shares of vesting stock awards and makes payments to taxing authorities as required by law to satisfy the withholding tax requirements of all equity award recipients.

The Company’s payment of the withholding taxes in exchange for the surrendered shares constitutes a repurchase of its common stock.

1 unchanged sentence

The following table summarizes the Company’s share repurchases:

Thirteen Weeks Ended

April 30, 2022 May 1, 2021

Twenty-six Weeks Ended

July 30, 2022 July 31, 2021

Shares Amount Shares Amount

6 unchanged sentences

The portion charged against Additional paid-in capital is determined using a pro-rata allocation based on total shares outstanding.

For all shares retired in the First Quarter 2022 and First Quarter 2021, $ 25.8 million and $ 1.9 million was charged to Retained earnings, respectively.

For all shares retired during Year-To-Date 2022 and Year-To-Date 2021, $ 38.9 million and $ 10.8 million was charged to Retained earnings, respectively.

In March 2020, the Company announced it had temporarily suspended its dividend payments due to the COVID-19 pandemic.

Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by the Company’s Board of Directors based on a number of factors, including business and market conditions, the Company’s financial performance, and other investment priorities.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STOCK-BASED COMPENSATION

2 unchanged sentences

The following table summarizes the Company’s stock-based compensation expense:

Thirteen Weeks Ended

Thirteen Weeks Ended Twenty-six Weeks Ended

2022 July 31,

2021 July 30,

2022 July 31,

(in thousands)

4 unchanged sentences

____________________________________________

(1) Stock-based compensation expense recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $ 0.6 million and $ 1.0 million in the First Quarter 2022 and First Quarter 2021, respectively.

(1) Stock-based compensation expense recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $ 0.3 million and $ 0.8 million in the Second Quarter 2022 and Second Quarter 2021, respectively, and $ 0.9 million and $ 1.7 million in the Year-To-Date 2022 and Year-To-Date 2021, respectively.

All other stock-based compensation expense is included in Selling, general, and administrative expenses.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

EARNINGS PER COMMON SHARE

The following table reconciles net income and share amounts utilized to calculate basic and diluted earnings per common share:

Thirteen Weeks Ended

EARNINGS (LOSS) PER COMMON SHARE

The following table reconciles net income (loss) and share amounts utilized to calculate basic and diluted earnings (loss) per common share:

Thirteen Weeks Ended Twenty-six Weeks Ended

2022 July 31,

2021 July 30,

2022 July 31,

(in thousands)

Net income $ 19,831 $ 45,205

Net income (loss) $ ( 13,298 ) $ 24,095 $ 6,533 $ 69,300

Basic weighted average common shares outstanding 13,147 14,780 13,384 14,725

Dilutive effect of stock awards (1)

— 282 148 307

Diluted weighted average common shares outstanding 13,147 15,062 13,532 15,032

____________________________________________

(1) Because the Company incurred a net loss in the Second Quarter 2022, unvested stock awards are anti-dilutive and are therefore excluded from the calculation of diluted loss per common share for such period.

The Company computes income taxes using the liability method.

4 unchanged sentences

Pursuant to the CARES Act, the Company carried back the taxable year 2020 tax loss of approximately $ 150.0 million to prior years.

During the First Quarter 2022, the Company received $ 22.0 million of this income tax refund and the remaining balance of $ 19.1 million as of April 30, 2022, is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

The Company’s effective income tax rate for the First Quarter 2022 was a benefit of 13.0 %, or $ 2.3 million, compared to a provision of 26.5 %, or $ 16.3 million, during the First Quarter 2021.

The decrease in the effective income tax rate for the First Quarter 2022 compared to the First Quarter 2021 was primarily driven by the release of a reserve of $ 6.4 million for unrecognized tax benefits as a result of a settlement with a taxing authority in the First Quarter 2022.

During the First Quarter 2022, the Company received $ 22.0 million of this

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

income tax refund and the remaining balance of $ 19.1 million as of July 30, 2022, is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

The Company’s effective income tax rate for the Second Quarter 2022 was a benefit of 19.0 %, or $ 3.1 million, compared to a provision of 27.3 %, or $ 9.1 million, during the Second Quarter 2021.

The decrease in the effective income tax rate for the Second Quarter 2022 compared to the Second Quarter 2021 was primarily driven by a decrease in the forecasted effective income tax rate resulting from a favorable mix of income on forecasted earnings compared to the prior year and the impact of discrete items recognized in the Second Quarter 2022.

The Company’s effective income tax rate for Year-To-Date 2022 was a benefit of 477.6 %, or $ 5.4 million, compared to a provision of 26.8 %, or $ 25.3 million, for Year-To-Date 2021.

The effective income tax rate for Year-To-Date 2022 reflected the release of a reserve of $ 6.4 million for unrecognized tax benefits as a result of a settlement with a taxing authority in the First Quarter 2022.

The Company accrues interest and penalties related to unrecognized tax benefits as part of the provision for income taxes.

The total amount of unrecognized tax benefits was $ 2.3 million, $ 8.7 million, and $ 7.9 million as of April 30, 2022, January 29, 2022, and May 1, 2021, respectively, and is included within non-current liabilities.

Additional interest expense recognized in the First Quarter 2022 and First Quarter 2021 related to unrecognized tax benefits was not significant.

The total amount of unrecognized tax benefits was $ 2.3 million, $ 8.7 million, and $ 8.0 million as of July 30, 2022, January 29, 2022, and July 31, 2021, respectively, and is included within long-term liabilities.

Additional interest expense recognized during Year-To-Date 2022 and Year-To-Date 2021 related to unrecognized tax benefits was not significant.

The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong.

5 unchanged sentences

However, the outcome of tax audits cannot be predicted with certainty.

If any issues arise as a result of a tax audit, and are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

SEGMENT INFORMATION

4 unchanged sentences

Included in The Children’s Place U.S.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the Company’s U.S.

segment are the Company’s U.S.

and Puerto Rico-based stores and revenue from the Company’s U.S.-based wholesale business.

7 unchanged sentences

Net sales to external customers are derived from merchandise sales, and the Company has no customers that individually account for more than 10% of its net sales.

As of April 30, 2022, The Children’s Place U.S.

As of July 30, 2022, The Children’s Place U.S.

had 577 stores and The Children’s Place International had 81 stores.

As of May 1, 2021, The Children’s Place U.S.

As of July 31, 2021, The Children’s Place U.S.

had 615 stores and The Children’s Place International had 93 stores.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables provide segment level financial information:

Thirteen Weeks Ended

Thirteen Weeks Ended Twenty-six Weeks Ended

2022 July 31,

2021 July 30,

2022 July 31,

(in thousands)

4 unchanged sentences

Total net sales $ 380,885 $ 413,855 $ 743,235 $ 849,336

Operating income:

Operating income (loss):

The Children’s Place U.S.

1 unchanged sentence

The Children’s Place International 114 3,494 2,499 5,489

Total operating income $ 19,254 $ 65,907

Operating income as a percentage of net sales:

Total operating income (loss) $ ( 13,829 ) $ 37,849 $ 5,425 $ 103,756

Operating income (loss) as a percentage of net sales:

The Children’s Place U.S.

( 4.1 %) 9.2 % 0.4 % 12.7 %

The Children’s Place International 0.3 % 8.4 % 3.4 % 7.1 %

Total operating income as a percentage of net sales 5.3 % 15.1 %

Total operating income (loss) as a percentage of net sales ( 3.6 %) 9.1 % 0.7 % 12.2 %

Depreciation and amortization:

12 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