What changed in this filing

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Item 1. Financial Statements

2023-06-07 compared with 2022-11-30 · 175 added, 206 removed, 404 unchanged (49% of the section changed)

4 unchanged sentences

2023 January 28,

2022 October 30,

(unaudited) (unaudited)

2023 April 30,

(in thousands, except par value)

15 unchanged sentences

Revolving loan $ 300,835 $ 286,990 $ 249,544

Current portion of long-term debt — — 28,270

Accounts payable 223,244 177,147 260,634

22 unchanged sentences

Accumulated other comprehensive loss ( 17,065 ) ( 16,247 ) ( 14,668 )

Retained earnings 79,375 77,914 69,753

Retained earnings (deficit) ( 9,207 ) 22,540 71,913

Total stockholders’ equity 125,821 158,478 213,684

4 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Thirteen Weeks Ended Thirty-nine Weeks Ended

2022 October 30,

2021 October 29,

2022 October 30,

(in thousands, except earnings per common share)

Thirteen Weeks Ended

2023 April 30,

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

Net sales $ 321,640 $ 362,350

4 unchanged sentences

Asset impairment charges 1,750 —

Operating income 57,837 113,810 63,261 217,566

Operating income (loss) ( 30,067 ) 19,254

Interest expense ( 5,937 ) ( 1,710 )

Interest income 34 5

Income before provision for income taxes 54,051 109,851 55,181 204,500

Provision for income taxes 11,196 30,983 5,794 56,332

Net income $ 42,855 $ 78,868 $ 49,387 $ 148,168

Earnings per common share

Income (loss) before benefit for income taxes ( 35,970 ) 17,549

Benefit for income taxes ( 7,136 ) ( 2,282 )

Net income (loss) $ ( 28,834 ) $ 19,831

Earnings (loss) per common share

Basic $ ( 2.33 ) $ 1.46

6 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Thirteen Weeks Ended Thirty-nine Weeks Ended

2022 October 30,

2021 October 29,

2022 October 30,

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Thirteen Weeks Ended

2023 April 30,

(in thousands)

Net income $ 42,855 $ 78,868 $ 49,387 $ 148,168

Other comprehensive income (loss):

Net income (loss) $ ( 28,834 ) $ 19,831

Other comprehensive loss:

Foreign currency translation adjustment ( 818 ) ( 482 )

Total comprehensive income $ 40,458 $ 79,191 $ 46,562 $ 149,022

Total comprehensive income (loss) $ ( 29,652 ) $ 19,349

See accompanying notes to these consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Thirteen Weeks Ended October 29, 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, July 30, 2022 13,087 $ 1,309 $ 151,954 $ 3,587 $ 45,532 $ ( 14,614 ) ( 64 ) $ ( 3,587 ) $ 184,181

Vesting of stock awards 9 1 ( 1 ) —

Stock-based compensation expense 5,221 5,221

Purchase and retirement of common stock ( 434 ) ( 44 ) ( 8,628 ) ( 9,012 ) ( 17,684 )

Other comprehensive loss ( 2,397 ) ( 2,397 )

Deferral of common stock into deferred compensation plan 74 ( 1 ) ( 74 ) —

Net income 42,855 42,855

Balance, October 29, 2022 12,662 $ 1,266 $ 148,546 $ 3,661 $ 79,375 $ ( 17,011 ) ( 65 ) $ ( 3,661 ) $ 212,176

Thirty-nine Weeks Ended October 29, 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

Thirteen Weeks Ended April 29, 2023

Additional Retained Other Total

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

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

Balance, January 28, 2023 12,292 $ 1,229 $ 150,956 $ 3,736 $ 22,540 $ ( 16,247 ) ( 67 ) $ ( 3,736 ) $ 158,478

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

Vesting of stock awards 336 34 ( 34 ) —

3 unchanged sentences

Deferral of common stock into deferred compensation plan 74 ( 1 ) ( 74 ) —

Net income 49,387 49,387

Balance, October 29, 2022

12,662 $ 1,266 $ 148,546 $ 3,661 $ 79,375 $ ( 17,011 ) ( 65 ) $ ( 3,661 ) $ 212,176

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 October 30, 2021

Net loss ( 28,834 ) ( 28,834 )

Balance, April 29, 2023 12,473 $ 1,247 $ 150,846 $ 3,810 $ ( 9,207 ) $ ( 17,065 ) ( 68 ) $ ( 3,810 ) $ 125,821

Thirteen Weeks Ended April 30, 2022

Additional Other Total

1 unchanged sentence

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

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

Vesting of stock awards 9 1 ( 1 ) —

Stock-based compensation expense 6,594 6,594

Purchase and retirement of common stock ( 372 ) ( 37 ) ( 6,873 ) ( 24,812 ) ( 31,722 )

Other comprehensive income 323 323

Deferral of common stock into deferred compensation plan 69 ( 1 ) ( 69 ) —

Net income 78,868 78,868

Balance, October 30, 2021 14,468 $ 1,447 $ 164,010 $ 3,373 $ 69,753 $ ( 12,962 ) ( 60 ) $ ( 3,373 ) $ 222,248

Thirty-nine Weeks Ended October 30, 2021

Additional Retained Other Total

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

(in thousands) Shares Amount Capital Compensation (Deficit) 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

5 unchanged sentences

Net income 19,831 19,831

Balance, October 30, 2021 14,468 $ 1,447 $ 164,010 $ 3,373 $ 69,753 $ ( 12,962 ) ( 60 ) $ ( 3,373 ) $ 222,248

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

See accompanying notes to these consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirty-nine Weeks Ended

2022 October 30,

Thirteen Weeks Ended

2023 April 30,

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 49,387 $ 148,168

Reconciliation of net income to net cash provided by (used in) operating activities:

Net income (loss) $ ( 28,834 ) $ 19,831

Reconciliation of net income (loss) to net cash provided by (used in) operating activities:

Non-cash portion of operating lease expense 18,441 19,247

1 unchanged sentence

Non-cash stock-based compensation expense 3,083 7,562

Deferred income tax provision 2,186 17,974

Asset impairment charges 1,750 —

Other non-cash items, net 58 1,101

Deferred income tax provision (benefit) 112 ( 1,583 )

Other non-cash charges, net 149 467

Changes in operating assets and liabilities:

14 unchanged sentences

Repayments under revolving credit facility ( 121,738 ) ( 148,550 )

Repayment of term loan — ( 1,000 )

Purchase and retirement of common stock, including shares surrendered for tax withholdings and transaction costs ( 6,088 ) ( 40,370 )

Payment of debt issuance costs — ( 366 )

Net cash provided by (used in) financing activities 14,010 ( 41,948 )

Net cash provided by financing activities 7,757 33,856

Effect of exchange rate changes on cash and cash equivalents ( 301 ) ( 329 )

Net increase (decrease) in cash and cash equivalents ( 35,543 ) 3,514

Net increase in cash and cash equivalents 1,553 3,707

Cash and cash equivalents, beginning of period 16,689 54,787

Cash and cash equivalents, end of period $ 18,242 $ 58,494

See accompanying notes to these consolidated financial statements.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Thirty-nine Weeks Ended

2022 October 30,

(in thousands)

OTHER CASH FLOW INFORMATION:

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Net cash paid (received) for income taxes $ 2,293 $ ( 21,645 )

Cash paid for interest 5,784 1,713

Increase (decrease) in accrued capital expenditures 7,795 ( 135 )

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

Purchases of property and equipment not yet paid 7,151 13,507

See accompanying notes to these consolidated financial statements.

6 unchanged sentences

and subsidiaries (collectively, the “Company”) is the largest pure-play children’s specialty apparel retailer in North America.

The Company provides apparel, footwear, accessories, and other items for children and ‘tweens.’ The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell trend right, high-quality merchandise predominantly at value prices, primarily under the Company’s proprietary “The Children’s Place”, “Place”, “Baby Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place” brand names.

The Company provides apparel, footwear, accessories, and other items for children and ‘tweens’.

The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell trend right, high-quality merchandise predominantly at value prices, primarily under the Company’s proprietary “The Children’s Place”, “Place”, “Baby Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place” brand names.

The Company classifies its business into two segments:

7 unchanged sentences

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

• Third Quarter 2022 — The thirteen weeks ended October 29, 2022

• Third Quarter 2021 — The thirteen weeks ended October 30, 2021

• First Quarter 2023 — The thirteen weeks ended April 29, 2023

• Year-To-Date 2022 — The thirty-nine weeks ended October 29, 2022

• Year-To-Date 2021 — The thirty-nine weeks ended October 30, 2021

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

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

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

12 unchanged sentences

Intercompany balances and transactions have been eliminated.

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

As of April 29, 2023, January 28, 2023 and April 30, 2022, 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 October 29, 2022 and October 30, 2021, the results of its consolidated operations, consolidated comprehensive income, and consolidated changes in stockholders’ equity for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021, and consolidated cash flows for the thirty-nine weeks ended October 29, 2022 and October 30, 2021.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of its consolidated financial position of the Company as of April 29, 2023 and April 30, 2022, the results of its consolidated operations, consolidated comprehensive income (loss), consolidated changes in stockholders’ equity, and consolidated cash flows for the thirteen weeks ended April 29, 2023 and April 30, 2022.

The consolidated balance sheet as of January 28, 2023 was derived from audited financial statements.

Due to the seasonal nature of the Company’s business, the results of operations for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 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 weeks ended April 29, 2023 and April 30, 2022 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 28, 2023.

Certain prior period financial statement disclosures have been conformed to the current period presentation.

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.

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

2 unchanged sentences

Actual results could differ from the assumptions used and estimates made by management, which could have a material impact on the Company’s financial position or results of operations.

Critical accounting estimates inherent in the preparation of the consolidated financial statements include impairment of long-lived assets, income taxes, stock-based compensation, and inventory valuation.

Critical accounting estimates inherent in the preparation of the consolidated financial statements include impairment of long-lived assets, impairment of indefinite-lived intangible assets, income taxes, stock-based compensation, and inventory valuation.

Recent Accounting Standards Updates

There are no pending accounting standards updates that are currently expected to have a material impact on the Company.

There are no pending accounting standards updates that are currently expected to have a material impact on the Company’s consolidated financial statements.

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

2022 October 30,

2021 October 29,

2022 October 30,

Thirteen Weeks Ended

2023 April 30,

(in thousands)

9 unchanged sentences

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 $ 8.9 million, $ 3.6 million, and $ 8.8 million within Accrued expenses and other current liabilities as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively, based upon estimated time of delivery, at which point control passes to the customer.

The Company deferred sales of $ 5.9 million, $ 2.9 million, and $ 5.3 million within Accrued expenses and other current liabilities as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively, based upon estimated time of delivery, at which point control passes to the customer.

Sales tax collected from customers is excluded from revenue.

For the sale of goods with a right of return, the Company recognizes revenue for the consideration it expects to be entitled to and calculates an allowance for estimated sales returns based upon the Company’s sales return experience.

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 $ 2.2 million, $ 1.0 million, and $ 2.9 million as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively.

For its wholesale business, the Company recognizes revenue, including shipping and handling fees billed to customers, when title of the goods passes to the customer, net of commissions, discounts, operational chargebacks, and cooperative advertising.

The reserve for wholesale revenue included within Accounts receivable was $ 5.5 million, $ 5.0 million, and $ 2.7 million as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively.

THE CHILDREN’S PLACE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 $ 1.8 million, $ 1.0 million, and $ 1.7 million as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively.

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 , www.sugarandjade.com, and www.pjplace.com, and credit is extended to such customers by a third-party financial institution on a non-recourse basis to the Company.

The private label credit card includes multiple performance obligations for the Company, including marketing and promoting the program on behalf of the bank and the operation of the loyalty rewards program.

Included in the agreement with the third-party financial institution was an upfront bonus paid to the Company.

The upfront bonus is recognized as revenue and allocated between brand and reward obligations.

As the license of the Company’s brand is the predominant item in the performance obligation, the amount allocated to the brand obligation is recognized on a straight-line basis over the initial term.

Included in the agreement with the third-party financial institution was an upfront bonus paid to the Company and an additional bonus to extend the term of the agreement.

These bonuses are recognized as revenue and allocated between brand and reward obligations.

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

3 unchanged sentences

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

In addition, the annual profit-sharing amount is estimated and recognized quarterly within an annual period when earned.

In addition, the annual profit-sharing amount is recognized quarterly within an annual period when it can be estimated reliably.

The additional bonuses are amortized over the contract term based on anticipated progress against future targets and level of risk associated with achieving the targets.

3 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 $ 2.0 million, $ 5.0 million, and $ 6.0 million as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively.

The total contract liabilities related to this program were $ 3.8 million, $ 2.6 million, and $ 1.8 million as of April 29, 2023, January 28, 2023, and April 30, 2022, 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 October 29, 2022, January 29, 2022, and October 30, 2021 was $ 11.2 million, $ 12.1 million, and $ 12.4 million, respectively.

During Year-To-Date 2022, the Company recognized Net sales of $ 4.5 million related to the gift card liability balance that existed at January 29, 2022.

The gift card liability balance as of April 29, 2023, January 28, 2023, and April 30, 2022 was $ 10.5 million, $ 11.1 million, and $ 13.3 million, respectively.

During the First Quarter 2023, the Company recognized Net sales of $ 2.0 million related to the gift card liability balance that existed at January 28, 2023.

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

The Company generates revenues from the franchisees from the sale of product and, in certain cases, sales royalties.

The Company records net sales and cost of goods sold on the sale of product to franchisees when the franchisee takes ownership of the product.

The Company recognizes revenue on the sale of product to franchisees when the franchisee takes ownership of the product.

The Company records net sales for royalties when the applicable franchisee sells the product to their customers.

1 unchanged sentence

The Company records these territorial fees as deferred revenue and amortizes the fee into Net sales over the life of the territorial agreement.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

INTANGIBLE ASSETS

The Company’s intangible assets were as follows:

October 29, 2022

April 29, 2023

Useful Life Gross Amount Accumulated Amortization Net Amount

4 unchanged sentences

5 years 4,000 ( 3,262 ) 738

Customer databases (2)

3 years 3,000 ( 3,000 ) —

Total intangibles $ 76,953 $ ( 5,862 ) $ 71,091

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total intangible assets $ 73,953 $ ( 3,262 ) $ 70,691

January 28, 2023

7 unchanged sentences

3 years 3,000 ( 3,000 ) —

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

October 30, 2021

Total intangible assets $ 76,953 $ ( 6,062 ) $ 70,891

April 30, 2022

Useful Life Gross Amount Accumulated Amortization Net Amount

6 unchanged sentences

3 years 3,000 ( 3,000 ) —

Total intangibles $ 76,953 $ ( 4,639 ) $ 72,314

Total intangible assets $ 76,953 $ ( 5,461 ) $ 71,492

____________________________________________

1 unchanged sentence

(2) Included within Other assets on the Consolidated Balance Sheets.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PROPERTY AND EQUIPMENT, NET

1 unchanged sentence

2023 January 28,

2022 October 30,

2023 April 30,

(in thousands)

10 unchanged sentences

Property and equipment, net $ 146,315 $ 149,874 $ 157,033

At October 29, 2022, January 29, 2022, and October 30, 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, no impairment charge was recorded in the Third Quarter 2022.

The Company recorded asset impairment charges during Year-To-Date 2022 of $ 1.4 million, inclusive of right-of-use (“ROU”) assets.

The Company recorded asset impairment charges of $ 1.3 million, inclusive of ROU assets, in the Third Quarter 2021 and Year-To-Date 2021.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

At April 29, 2023 and April 30, 2022, 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 First Quarter 2023 of $ 1.8 million, inclusive of right-of-use (“ROU”) assets.

The Company did not record asset impairment charges in the First Quarter 2022.

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

3 unchanged sentences

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

2022 October 30,

2021 October 29,

2022 October 30,

Thirteen Weeks Ended

2023 April 30,

(in thousands)

4 unchanged sentences

____________________________________________

(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 $ 0.7 million during the Third Quarter 2022 and Third Quarter 2021, respectively, and $ 1.0 million and $ 11.0 million during Year-To-Date 2022 and Year-To-Date 2021 , respectively.

As of October 29, 2022, the weighted-average remaining operating lease term was 3.9 years, and the weighted-average discount rate for operating leases was 5.0 %.

Cash paid for amounts included in the measurement of operating lease liabilities during Year-To-Date 2022 was $ 75.8 million.

ROU assets obtained in exchange for new operating lease liabilities were $ 38.8 million during Year-To-Date 2022.

As of October 29, 2022, the maturities of operating lease liabilities were as follows:

(1) Includes short term leases with lease periods of less than 12 months.

As of April 29, 2023, the weighted-average remaining operating lease term was 3.6 years, and the weighted-average discount rate for operating leases was 5.1 %.

Cash paid for amounts included in the measurement of operating lease liabilities during the First Quarter 2023 was $ 20.9 million.

ROU assets obtained in exchange for new operating lease liabilities were $ 10.6 million during the First Quarter 2023.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of April 29, 2023, the maturities of operating lease liabilities were as follows:

(in thousands)

4 unchanged sentences

Present value of operating lease liabilities $ 162,646

On November 16, 2021, the Company completed the refinancing of its previous $ 360.0 million asset-based revolving credit facility (the “Previous ABL Credit Facility”) and previous $ 80.0 million term loan (the “Previous Term Loan”) with a new lending group led by an affiliate of Wells Fargo Bank, National Association (“Wells Fargo”) by entering into a fourth amendment to its Credit Agreement, dated as of May 9, 2019, with the lenders party thereto.

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)

On November 16, 2021, the Company completed the refinancing of its previous $ 360.0 million asset-based revolving credit facility (the “Previous ABL Credit Facility”) and previous $ 80.0 million term loan (the “Previous Term Loan”) with a new lending group led by an affiliate of Wells Fargo Bank, National Association (“Wells Fargo”) by entering into a fourth amendment to its credit agreement, dated as of May 9, 2019, with the lenders party thereto (as amended from time to time, the “Credit Agreement”).

The refinanced debt consists of a $ 350.0 million asset-based revolving credit facility (the “ABL Credit Facility”) and a $ 50.0 million term loan (the “Term Loan”).

ABL Credit Facility and Term Loan

5 unchanged sentences

(ii) the London InterBank Offered Rate, or “LIBOR”, for an interest period of one, three, or six months, as selected by the Company, plus a margin of 1.125 % or 1.375 % based on the amount of the Company’s average excess availability under the facility.

For the First Quarter 2023 and First Quarter 2022, the Company recognized $ 4.7 million and $ 1.6 million, respectively, in interest expense related to the ABL Credit Facility.

The Company is charged a fee of 0.20 % on the unused portion of the commitments.

Letter of credit fees range from 0.563 % to 0.683 % for commercial letters of credit and from 0.625 % to 0.875 % for standby letters of credit.

Letter of credit fees range from 0.563 % to 0.683 % for commercial letters of credit and range from 0.625 % to 0.875 % for standby letters of credit.

Letter of credit fees are determined based on the amount of the Company’s average excess availability under the facility.

The amount available for loans and letters of credit under the ABL Credit Facility is determined by a borrowing base consisting of certain credit card receivables, certain trade receivables, certain inventory, and the fair market value of certain real estate, subject to certain reserves.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The outstanding obligations under the ABL Credit Facility may be accelerated upon the occurrence of certain events, including, among others, non-payment, breach of covenants, the institution of insolvency proceedings, defaults under other material indebtedness, and a change of control, subject, in the case of certain defaults, to the expiration of applicable grace periods.

The Company is not subject to any early termination fees.

The ABL Credit Facility contains covenants, which include conditions on stock buybacks and the payment of cash dividends or similar payments.

The ABL Credit Facility contains covenants, which include conditions on stock buybacks and the payment of cash dividends or similar payments, and a fixed-charge coverage ratio covenant, which only becomes effective in the event that borrowings and other uses of credit exceed $ 315.0 million.

These covenants also limit the ability of the Company and its subsidiaries to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of its business.

1 unchanged sentence

and Canadian assets other than intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock, and a second priority security interest in the Company’s intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock.

The table below presents the components of the Company’s ABL Credit Facility and Previous ABL Credit Facility:

The table below presents the components of the Company’s ABL Credit Facility:

2023 January 28,

2022 October 30,

2023 April 30,

(in millions)

Total borrowing base availability $ 408.9 $ 404.2 $ 420.0

Credit facility maximum 350.0 350.0 350.0

Borrowing base (1)

Maximum borrowing availability (1)

350.0 350.0 350.0

5 unchanged sentences

Interest rate at end of period 6.5 % 5.9 % 2.0 %

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

First Quarter 2023 Fiscal 2022 First Quarter 2022

(in millions)

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 October 29, 2022, January 29, 2022, and October 30, 2021.

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

(2) The sub-limit availability for letters of credit was $ 42.6 million at April 29, 2023, January 28, 2023, and April 30, 2022.

(3) The ABL Credit Facility contains an excess availability requirement which would effectively reduce this amount to $ 6.8 million as of April 29, 2023.

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 penalty, and does not require amortization.

For the Third Quarter 2022 and Year-To-Date 2022, the Company recognized $ 0.6 million and $ 1.5 million, respectively, in interest expense related to the Term Loan.

For the First Quarter 2023 and First Quarter 2022, the Company recognized $ 0.9 million, and $ 0.4 million, respectively, 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.

The Term Loan is guaranteed by each of the Company’s subsidiaries that guarantees the ABL Credit Facility and contains substantially the same covenants as provided in the ABL Credit Facility.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Both the ABL Credit Facility and the Term Loan contain customary events of default, which include (subject in certain cases to customary grace and cure periods) nonpayment of principal or interest, breach of covenants, failure to pay certain other indebtedness, and certain events of bankruptcy, insolvency or reorganization.

As of April 29, 2023, unamortized deferred financing costs amounted to $ 2.2 million, of which $ 1.9 million related to our ABL Credit Facility.

On June 5, 2023, the Company entered into a fifth amendment to its Credit Agreement, dated as of May 9, 2019, with the lenders party thereto (the “Fifth Amendment”), pursuant to which, among other things, (i) PNC Bank, National Association (“PNC Bank”) was added as a new lender, (ii) the ABL Credit Facility was increased to $ 445.0 million, (iii) LIBOR was replaced by the Secured Overnight Financing Rate (“SOFR”) as the interest rate benchmark, and (iv) the pricing grid for applicable margins on borrowings was updated.

All other material terms and conditions of the Credit Agreement remained unchanged.

(See Note 13 - Subsequent Events for further information.)

COMMITMENTS AND CONTINGENCIES

17 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

Share Repurchase Programs

In March 2018, the Board of Directors authorized a $ 250.0 million share repurchase program (the “2018 Share Repurchase Program”).

In November 2021, the Board of Directors approved another $ 250.0 million share repurchase program (the “2021 Share Repurchase Program”), which added to the then remaining availability under the 2018 Share Repurchase Program.

Under these programs, the Company may repurchase shares on the open market at current market prices at the time of purchase or in privately negotiated transactions.

The timing and actual number of shares repurchased under a program will depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business conditions.

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

As of October 29, 2022, there was $ 178.4 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.

Share Repurchase Program

In November 2021, the Board of Directors authorized a $ 250.0 million share repurchase program (the “Share Repurchase Program”).

Under this program, the Company may repurchase shares on the open market at current market prices at the time of purchase or in privately negotiated transactions.

The timing and actual number of shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business conditions.

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

As of April 29, 2023, there was $ 158.3 million remaining availability under the Share Repurchase Program.

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.

1 unchanged sentence

The Company also acquires shares of its common stock in conjunction with liabilities owed under the Company’s deferred compensation plan, which are held in treasury.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the Company’s share repurchases:

Thirty-nine Weeks Ended

October 29, 2022 October 30, 2021

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

Shares Amount Shares Amount

4 unchanged sentences

Shares acquired and held in treasury 1 $ 74 1 $ 69

In accordance with the FASB ASC 505— Equity , the par value of the shares retired is charged against Common stock and the remaining purchase price is allocated between Additional paid-in capital and Retained earnings.

In accordance with the FASB ASC 505—Equity, the par value of the shares retired is charged against Common stock and the remaining purchase price is allocated between Additional paid-in capital and Retained earnings (deficit).

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

For all shares retired during Year-To-Date 2022 and Year-To-Date 2021, $ 47.9 million and $ 35.6 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.

For all shares retired in the First Quarter 2023 and First Quarter 2022, $ 2.9 million and $ 25.8 million was charged to Retained earnings (deficit), respectively.

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 Thirty-nine Weeks Ended

2022 October 30,

2021 October 29,

2022 October 30,

Thirteen Weeks Ended

2023 April 30,

(in thousands)

4 unchanged sentences

____________________________________________

(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 Third Quarter 2022 and Third Quarter 2021, respectively, and $ 1.2 million and $ 2.5 million in Year-To-Date 2022 and Year-To-Date 2021, respectively.

(1) Stock-based compensation expense recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $ 0.4 million and $ 0.6 million in the First Quarter 2023 and First Quarter 2022, respectively.

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

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 Thirty-nine Weeks Ended

2022 October 30,

2021 October 29,

2022 October 30,

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2023 April 30,

(in thousands)

Net income $ 42,855 $ 78,868 $ 49,387 $ 148,168

Net income (loss) $ ( 28,834 ) $ 19,831

Basic weighted average common shares outstanding 12,374 13,621

1 unchanged sentence

Diluted weighted average common shares outstanding 12,374 13,841

Anti-dilutive shares excluded from diluted earnings (loss) per common share calculation 228 —

The Company computes income taxes using the liability method.

1 unchanged sentence

The Company’s deferred tax assets and liabilities are comprised largely of differences relating to depreciation and amortization, rent expense, inventory, stock-based compensation, net operating loss carryforwards, tax credits, and various accruals and reserves.

The Company’s effective income tax rate for the First Quarter 2023 was a benefit of 19.8 %, or $ 7.1 million, compared to 13.0 %, or $ 2.3 million, during the First Quarter 2022.

The increase in the effective income tax rate for the First Quarter 2023 compared to the First Quarter 2022 was primarily driven by the release of a reserve in the First Quarter 2022 of $ 6.4 million for unrecognized tax benefits as a result of a settlement with a taxing authority which was nonrecurring and the First Quarter 2023 pretax loss as compared to pretax income in the First Quarter 2022.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic.

1 unchanged sentence

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 the related income tax refund and the remaining balance of $ 19.1 million as of October 29, 2022, is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

The Company’s effective income tax rate was a provision of 20.7 %, or $ 11.2 million for the Third Quarter 2022, compared to 28.2 %, or $ 31.0 million, for the Third Quarter 2021 and a provision of 10.5 %, or $ 5.8 million for Year-To-Date

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2022, compared to 27.5 %, or $ 56.3 million, for Year-To-Date 2021.

The decrease in the effective income tax rate for the Third Quarter 2022, compared to the Third Quarter 2021 and Year-To-Date 2022, compared to Year-To-Date 2021 reflected a decrease in the forecasted effective income tax rate resulting from a favorable mix of income on forecasted earnings compared to the prior year.

The effective income tax rate for Year-To-Date 2022 also 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 remaining balance of $ 19.1 million as of April 29, 2023 is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

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

The amount of unrecognized tax benefits was $ 2.3 million, $ 8.7 million, and $ 8.0 million as of October 29, 2022, January 29, 2022, and October 30, 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 total amount of unrecognized tax benefits was $ 3.8 million, $ 3.6 million, and $ 2.3 million as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively, and is included within long-term liabilities.

Additional interest expense recognized in the First Quarter 2023 and First Quarter 2022 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.

6 unchanged sentences

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 taxes in the period such resolution occurs.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEGMENT INFORMATION

14 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 October 29, 2022, The Children’s Place U.S.

As of April 29, 2023, The Children’s Place U.S.

had 528 stores and The Children’s Place International had 71 stores.

As of October 30, 2021, The Children’s Place U.S.

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

had 583 stores and The Children’s Place International had 82 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 Thirty-nine Weeks Ended

2022 October 30,

2021 October 29,

2022 October 30,

The following table provides segment level financial information:

Thirteen Weeks Ended

2023 April 30,

(in thousands)

4 unchanged sentences

Total net sales $ 321,640 $ 362,350

Operating income:

Operating income (loss):

The Children’s Place U.S.

1 unchanged sentence

The Children’s Place International ( 2,040 ) 2,385

Total operating income $ 57,837 $ 113,810 $ 63,261 $ 217,566

Operating income as a percentage of net sales:

Total operating income (loss) $ ( 30,067 ) $ 19,254

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

The Children’s Place U.S.

1 unchanged sentence

The Children’s Place International ( 7.2 %) 6.9 %

Total operating income as a percentage of net sales 11.4 % 20.4 % 5.1 % 15.5 %

Total operating income (loss) as a percentage of net sales ( 9.3 %) 5.3 %

Depreciation and amortization:

11 unchanged sentences

The Company’s foreign subsidiaries, primarily in Canada, have operating results based in foreign currencies and are thus subject to the fluctuations of the corresponding translation rates into U.S.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SUBSEQUENT EVENTS

Termination of corporate office building lease

On May 26, 2023, the Company proactively issued a voluntary termination notice for its corporate office building lease, to accelerate the termination date to June 1, 2024, and paid a termination fee of approximately $ 4 million.

This termination was executed in order to capitalize on the prevailing tenant-favorable market conditions, as compared to the existing lease escalations contained in the Company’s agreement which was signed in 2009.

The lease termination will reduce the Company’s ROU assets and operating lease liabilities balance by approximately $ 17 million.

Amendment of ABL Credit Facility and Term Loan

On June 5, 2023, the Company entered into the Fifth Amendment to its Credit Agreement, dated as of May 9, 2019, with the lenders party thereto, pursuant to which, among other things, (i) PNC Bank was added as a new lender, (ii) the ABL Credit Facility was increased to $ 445.0 million, (iii) LIBOR was replaced by SOFR as the interest rate benchmark, and (iv) the pricing grid for applicable margins on borrowings was updated.

As a result of the amendment, our liquidity increased by approximately $ 85 million (after factoring in our excess availability requirement), based upon our borrowing base availability as of June 5, 2023.

Under the amended ABL Credit Facility, based on the amount of the Company’s average daily excess availability under the facility, borrowings outstanding bear interest, at the Company’s option, at:

(i) the prime rate per annum, plus a margin of 1.25 % or 1.50 %;

(ii) the SOFR rate per annum, plus a margin of 2.00 % or 2.25 %.

Letter of credit fees range from 1.000 % to 1.125 % for commercial letters of credit and range from 1.500 % to 1.750 % for standby letters of credit.

Letter of credit fees are determined based on the amount of the Company’s average daily excess availability under the facility.

Once the Company achieves a consolidated EBITDA of at least $ 200.0 million across four consecutive fiscal quarters, and based on the amount of the Company’s average daily excess availability under the facility, borrowings outstanding under the ABL Credit Facility would bear interest, at the Company’s option, at:

(i) the prime rate per annum, plus a margin of 0.625 % or 0.875 %;

(ii) the SOFR rate per annum, plus a margin of 1.375 % or 1.625 %.

Letter of credit fees would range from 0.688 % to 0.813 % for commercial letters of credit and would range from 0.875 % to 1.125 % for standby letters of credit.

Letter of credit fees are determined based on the amount of the Company’s average daily excess availability under the facility.

The Term Loan bears interest, payable monthly, at (a) the SOFR rate per annum plus 2.75 % for any portion that is a SOFR loan, or (b) the base rate per annum plus 2.00 % for any portion that is a base rate loan.

All other material terms and conditions of the Credit Agreement remain unchanged .

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