What changed in this filing

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Item 1. Financial Statements

2023-08-30 compared with 2023-06-07 · 209 added, 135 removed, 444 unchanged (44% of the section changed)

4 unchanged sentences

2023 January 28,

2023 April 30,

2023 July 30,

(in thousands, except par value)

46 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Thirteen Weeks Ended

2023 April 30,

Thirteen Weeks Ended Twenty-six Weeks Ended

2023 July 30,

2022 July 29,

2023 July 30,

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

21 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Thirteen Weeks Ended

2023 April 30,

Thirteen Weeks Ended Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29,

2023 July 30,

(in thousands)

Net income (loss) $ ( 35,355 ) $ ( 13,298 ) $ ( 64,188 ) $ 6,533

Other comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation adjustment 1,101 54 283 ( 428 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Thirteen Weeks Ended April 29, 2023

Thirteen Weeks Ended July 29, 2023

Additional Retained Other Total

1 unchanged sentence

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

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

Vesting of stock awards 119 12 ( 12 ) —

Stock-based compensation benefit ( 4,762 ) ( 4,762 )

Purchase and retirement of common stock ( 48 ) ( 5 ) ( 955 ) 85 ( 875 )

Other comprehensive income 1,101 1,101

Deferral of common stock into deferred compensation plan 74 ( 3 ) ( 74 ) —

Net loss ( 35,355 ) ( 35,355 )

Balance, July 29, 2023 12,544 $ 1,254 $ 145,117 $ 3,884 $ ( 44,477 ) $ ( 15,964 ) ( 71 ) $ ( 3,884 ) $ 85,930

Twenty-six Weeks Ended July 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

Vesting of stock awards 455 46 ( 46 ) —

Stock-based compensation expense 3,083 3,083

Stock-based compensation benefit ( 1,679 ) ( 1,679 )

Purchase and retirement of common stock ( 203 ) ( 21 ) ( 4,114 ) ( 2,829 ) ( 6,964 )

Other comprehensive loss ( 818 ) ( 818 )

Other comprehensive income 283 283

Deferral of common stock into deferred compensation plan 148 ( 4 ) ( 148 ) —

Net loss ( 64,188 ) ( 64,188 )

Balance, July 29, 2023

12,544 $ 1,254 $ 145,117 $ 3,884 $ ( 44,477 ) $ ( 15,964 ) ( 71 ) $ ( 3,884 ) $ 85,930

See accompanying notes to these consolidated financial statements.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Thirteen Weeks Ended July 30, 2022

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

Thirteen Weeks Ended April 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 147 15 ( 15 ) —

3 unchanged sentences

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 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

Vesting of stock awards 270 27 ( 27 ) —

Stock-based compensation expense 13,834 13,834

Purchase and retirement of common stock ( 1,147 ) ( 114 ) ( 22,201 ) ( 38,915 ) ( 61,230 )

Other comprehensive loss ( 428 ) ( 428 )

Deferral of common stock into deferred compensation plan 144 ( 3 ) ( 144 ) —

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

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.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirteen Weeks Ended

2023 April 30,

Twenty-six Weeks Ended

2023 July 30,

(in thousands)

1 unchanged sentence

Net income (loss) $ ( 64,188 ) $ 6,533

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

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

Non-cash portion of operating lease expense 37,757 40,075

Depreciation and amortization 23,801 26,856

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

Non-cash stock-based compensation expense (benefit), net ( 1,679 ) 13,834

Asset impairment charges 2,532 1,379

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

Other non-cash charges, net 149 467

Deferred income tax provision 828 2,768

Other non-cash charges (income), net 331 ( 521 )

Changes in operating assets and liabilities:

6 unchanged sentences

Other long-term liabilities ( 2,237 ) 1,729

Net cash provided by (used in) operating activities 5,134 ( 18,837 )

Net cash used in operating activities ( 32,705 ) ( 52,789 )

CASH FLOWS FROM INVESTING ACTIVITIES:

6 unchanged sentences

Purchase and retirement of common stock, including shares surrendered for tax withholdings and transaction costs ( 6,964 ) ( 62,900 )

Payment of debt issuance costs ( 623 ) —

Net cash provided by financing activities 52,969 45,714

Effect of exchange rate changes on cash and cash equivalents 154 ( 396 )

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

Net increase (decrease) in cash and cash equivalents 2,157 ( 26,594 )

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

12 unchanged sentences

The Children’s Place, Inc.

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.

and subsidiaries (collectively, the “Company”) is an omni-channel children’s specialty portfolio of brands with an industry-leading digital-first operating model.

Its global retail and wholesale network includes four digital storefronts, more than 500 stores in North America, wholesale marketplaces and distribution in 16 countries through six international franchise partners.

The Company designs, contracts to manufacture, and sells fashionable, high-quality apparel, accessories and footwear predominantly at value prices, primarily under the Company’s proprietary brands:

“The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place”.

The Company classifies its business into two segments:

6 unchanged sentences

Each segment includes an e-commerce business located at www.childrensplace.com, www.gymboree.com, www.sugarandjade.com, and www.pjplace.com .

The Company also has social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest.

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

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

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

• Second Quarter 2023 — The thirteen weeks ended July 29, 2023

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

• Year-To-Date 2023 — The twenty-six weeks ended July 29, 2023

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

• Fiscal 2023 – The fifty-three weeks ending February 3, 2024

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

12 unchanged sentences

Intercompany balances and transactions have been eliminated.

As of April 29, 2023, January 28, 2023 and April 30, 2022, the Company did not have any investments in unconsolidated affiliates.

As of July 29, 2023, January 28, 2023 and July 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 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.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the consolidated financial position of the Company as of July 29, 2023 and July 30, 2022, 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 29, 2023 and July 30, 2022, and consolidated cash flows for the twenty-six weeks ended July 29, 2023 and July 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 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.

Due to the seasonal nature of the Company’s business, the results of operations for the thirteen and twenty-six weeks ended July 29, 2023 and July 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

THE CHILDREN’S PLACE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Use of Estimates

7 unchanged sentences

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

Thirteen Weeks Ended

2023 April 30,

Thirteen Weeks Ended Twenty-six Weeks Ended

2023 July 30,

2022 July 29,

2023 July 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 $ 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.

The Company deferred sales of $ 11.7 million, $ 2.9 million, and $ 12.6 million within Accrued expenses and other current liabilities as of July 29, 2023, January 28, 2023, and July 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 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)

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.

The allowance for wholesale revenue included within Accounts receivable was $ 7.4 million, $ 5.0 million, and $ 4.3 million as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively.

For the sale of goods to retail customers 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 $ 1.8 million, $ 1.0 million, and $ 1.7 million as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively.

The allowance for estimated sales returns, which is recorded in Accrued expenses and other current liabilities, was $ 2.5 million, $ 1.0 million, and $ 2.3 million as of July 29, 2023, January 28, 2023, and July 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.

14 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 $ 3.8 million, $ 2.6 million, and $ 1.8 million as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively.

The total contract liabilities related to this program were $ 5.6 million, $ 2.6 million, and $ 3.9 million as of July 29, 2023, January 28, 2023, and July 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 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 gift card liability balance as of July 29, 2023, January 28, 2023, and July 30, 2022 was $ 10.2 million, $ 11.1 million, and $ 11.7 million, respectively.

During Year-To-Date 2023, the Company recognized Net sales of $ 3.1 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.

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

RESTRUCTURING

In support of the Company’s ongoing structural transformation from a legacy store operating model to a digital-first retailer, during the Second Quarter 2023, the Company voluntarily entered into an early termination of its corporate office lease and implemented a workforce reduction.

On May 26, 2023, the Company proactively accelerated the termination of its corporate office lease to capitalize on the prevailing tenant-favorable market conditions.

That lease will now expire in May 2024.

On June 28, 2023, the Company announced that it implemented a 17 % reduction in the number of its salaried workforce, the substantial majority of whom were located at the Company’s corporate offices in Secaucus, New Jersey, with the balance at other domestic and international locations.

The voluntary lease termination, combined with the workforce reduction, will enable the Company to reduce its current space configuration and capitalize on lower prevailing market rates than would have been applicable under its existing lease, which included escalations in occupancy costs, and did not expire until 2029.

The actions associated with the workforce reduction are expected to be substantially completed by the end of the third quarter of 2023.

As a result of these strategic actions associated with the voluntary early termination of its corporate office lease and workforce reduction, the Company incurred non-operating charges of $ 10.6 million in restructuring costs during the Second Quarter 2023 and Year-To-Date 2023 on a pre-tax basis, summarized in the following table:

Thirteen Weeks Ended Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29,

2023 July 30,

(in thousands)

Employee-related costs

$ 5,433 $ — $ 5,433 $ —

Lease termination costs (1)

4,947 — 4,947 —

Professional fees 186 — 186 —

Total restructuring costs (2)

$ 10,566 $ — $ 10,566 $ —

____________________________________________

(1) Includes $ 0.9 million of non-cash charges related to accelerated depreciation on certain assets in the corporate office over the reduced lease term.

The Company expects to record additional accelerated depreciation charges of approximately $1.5 million until the expiration of its corporate office lease.

(2) Restructuring costs are recorded within Selling, general and administrative expenses, except accelerated depreciation charges noted above, which are recorded within Depreciation and amortization, and are primarily recorded within The Children’s Place U.S.

The following table summarizes the restructuring costs that have been partially settled with cash payments and the remaining related liability as of July 29, 2023.

The remaining related liability is expected to be settled with cash payments in the future and these costs are included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets:

Employee-Related Costs Lease Termination Costs Professional Fees Total

(in thousands)

Balance at April 29, 2023

$ — $ — $ — $ —

5,433 4,040 186 9,659

Cash payments

( 2,602 ) ( 4,040 ) — ( 6,642 )

Balance at July 29, 2023 $ 2,831 $ — $ 186 $ 3,017

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

INTANGIBLE ASSETS

The Company’s intangible assets were as follows:

April 29, 2023

July 29, 2023

Useful Life Gross Amount Accumulated Amortization Net Amount

15 unchanged sentences

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

April 30, 2022

July 30, 2022

Useful Life Gross Amount Accumulated Amortization Net Amount

16 unchanged sentences

2023 January 28,

2023 April 30,

2023 July 30,

(in thousands)

10 unchanged sentences

Property and equipment, net $ 141,244 $ 149,874 $ 154,738

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.

At July 29, 2023 and July 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 Second Quarter 2023 and Year-To-Date 2023 of $ 0.8 million and $ 2.5 million, respectively, inclusive of right-of-use (“ROU”) assets.

The Company recorded asset impairment charges in the Second Quarter 2022 and Year-To-Date 2022 of $ 1.4 million, inclusive of ROU assets.

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

The Company’s leases have remaining lease terms ranging from less than one year up to ten years , some of which include options to extend the leases for up to five years , and some of which include options to terminate the lease early.

The Company’s leases have remaining lease terms ranging from less than one year up to nine years , some of which include options to extend the leases for up to five years , and some of which include options to terminate the lease early.

The Company records all occupancy costs in Cost of sales, except costs for administrative office buildings, which are recorded in Selling, general, and administrative expenses.

1 unchanged sentence

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

Thirteen Weeks Ended

2023 April 30,

Thirteen Weeks Ended Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29,

2023 July 30,

(in thousands)

5 unchanged sentences

(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.

As of July 29, 2023, the weighted-average remaining operating lease term was 3.2 years, and the weighted-average discount rate for operating leases was 5.2 %.

Cash paid for amounts included in the measurement of operating lease liabilities during Year-To-Date 2023 was $ 41.9 million.

ROU assets obtained in exchange for new operating lease liabilities were $ 15.5 million during Year-To-Date 2023.

THE CHILDREN’S PLACE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

(in thousands)

4 unchanged sentences

Present value of operating lease liabilities $ 128,980

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”).

On November 16, 2021, the Company completed the refinancing of its previous $ 360.0 million asset-based revolving credit facility and previous $ 80.0 million 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 consisted of a $ 350.0 million asset-based revolving credit facility (the “ABL Credit Facility”) and a $ 50.0 million term loan (the “Term Loan”).

On June 5, 2023, the Company entered into a fifth amendment to its Credit Agreement, 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) the London InterBank Offered Rate (“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.

ABL Credit Facility and Term Loan

The Company and certain of its subsidiaries maintain the $ 350.0 million ABL Credit Facility and the $ 50.0 million Term Loan with Wells Fargo, Truist Bank, Bank of America, N.A., HSBC Business Credit (USA) Inc., and JPMorgan Chase Bank, N.A., as lenders (collectively, the “Lenders”) and Wells Fargo, as Administrative Agent, Collateral Agent, Swing Line Lender and Term Agent.

Both the ABL Credit Facility and the Term Loan mature in November 2026, and both of these debt facilities have lower interest rates, reduced reporting requirements, and increased flexibility under the covenants compared to the Previous ABL Credit Facility and Previous Term Loan.

The Company and certain of its subsidiaries maintain the $ 445.0 million ABL Credit Facility and the $ 50.0 million Term Loan with Wells Fargo, Truist Bank, Bank of America, N.A., HSBC Business Credit (USA) Inc., JPMorgan Chase Bank, N.A., and PNC Bank as lenders (collectively, the “Lenders”) and Wells Fargo, as Administrative Agent, Collateral Agent, Swing Line Lender and Term Agent.

Both the ABL Credit Facility and the Term Loan mature in November 2026.

The ABL Credit Facility includes a $ 25.0 million Canadian sublimit and a $ 50.0 million sublimit for standby and documentary letters of credit.

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

(i) the prime rate, plus a margin of 0.375 % or 0.625 % based on the amount of the Company’s average excess availability under the facility;

(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.

Under the 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 1.250 % or 1.500 %;

(ii) the SOFR per annum, plus a margin of 2.000 % or 2.250 %.

The Company is charged a fee of 0.200 % on the unused portion of the commitments.

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 excess availability under the facility.

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

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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.

For the Second Quarter 2023 and Year-To-Date 2023, the Company recognized $ 6.1 million and $ 10.8 million, respectively, in interest expense related to the ABL Credit Facility.

For the Second Quarter 2022 and Year-To-Date 2022, the Company recognized $ 2.4 million and $ 3.9 million, respectively, in interest expense related to the ABL Credit Facility.

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, 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.

3 unchanged sentences

2023 January 28,

2023 April 30,

2023 July 30,

(in millions)

Total borrowing base availability $ 466.8 $ 404.2 $ 478.0

Credit facility maximum 350.0 350.0 350.0

Credit facility maximum, net of the excess availability requirement, as applicable 400.5 315.0 350.0

Maximum borrowing availability (1)

6 unchanged sentences

Interest rate at end of period 8.1 % 5.9 % 3.4 %

First Quarter 2023 Fiscal 2022 First Quarter 2022

Year-To-Date 2023 Fiscal 2022 Year-To-Date 2022

(in millions)

2 unchanged sentences

Average interest rate 6.3 % 3.7 % 2.4 %

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

____________________________________________

(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.

(1) Lower of the credit facility maximum, net of the excess availability requirement, and the total borrowing base availability.

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

The Term Loan bears interest, payable monthly, at (a) the SOFR per annum plus 2.750 % for any portion that is a SOFR loan, or (b) the base rate per annum plus 2.000 % 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 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.

For the Second Quarter 2023 and Year-To-Date 2023, the Company recognized $ 1.0 million, and $ 1.9 million, respectively, in interest expense related to the Term Loan.

For the Second Quarter 2022 and Year-To-Date 2022, the Company recognized $ 0.5 million, and $ 0.8 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.)

As of July 29, 2023, unamortized deferred financing costs amounted to $ 2.6 million, of which $ 2.3 million related to our ABL Credit Facility.

COMMITMENTS AND CONTINGENCIES

22 unchanged sentences

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.

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

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 Company may suspend or discontinue the program at any time and may thereafter reinstitute purchases, all

THE CHILDREN’S PLACE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

without prior announcement.

As of July 29, 2023, there was $ 157.4 million remaining availability under the Share Repurchase Program.

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

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 following table summarizes the Company’s share repurchases:

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

Twenty-six Weeks Ended

July 29, 2023 July 30, 2022

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 2023 and First Quarter 2022, $ 2.9 million and $ 25.8 million was charged to Retained earnings (deficit), respectively.

For all shares retired in Year-To-Date 2023 and Year-To-Date 2022, $ 2.8 million and $ 38.9 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.

2 unchanged sentences

The Company also grants Deferred Awards to its non-employee directors.

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

Thirteen Weeks Ended

2023 April 30,

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

Thirteen Weeks Ended Twenty-six Weeks Ended

2023 July 30,

2022 July 29,

2023 July 30,

(in thousands)

1 unchanged sentence

Performance Awards (1)

Total stock-based compensation expense (1)

( 6,452 ) 4,101 ( 5,869 ) 8,238

Total stock-based compensation expense (benefit) (2)

$ ( 4,762 ) $ 6,272 $ ( 1,679 ) $ 13,834

(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.

____________________________________________

(1) Included within the Performance Awards benefit for the Second Quarter 2023 and Year-To-Date 2023 was a combination of ongoing expense associated with existing grants, and $ 6.7 million of credits resulting from (a) a change in estimate based on revised expectations of the attainment levels for performance metrics of certain awards, and (b) the reversal of unvested expense related to forfeited awards for employees no longer with the Company.

(2) Stock-based compensation expense (benefit) recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $( 0.5 ) million and $ 0.3 million in the Second Quarter 2023 and Second Quarter 2022, respectively, and $( 0.1 ) million and $ 0.9 million in Year-To-Date 2023 and Year-To-Date 2022, respectively.

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

THE CHILDREN’S PLACE, INC.

3 unchanged sentences

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,

Thirteen Weeks Ended Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29,

2023 July 30,

(in thousands)

7 unchanged sentences

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.

The Company’s effective income tax rate for the Second Quarter 2023 was a benefit of 20.7 %, or $ 9.2 million, compared to 19.0 %, or $ 3.1 million, during the Second Quarter 2022.

The increase in the effective income tax rate and income tax benefit for the Second Quarter 2023 compared to the Second Quarter 2022 was primarily driven by the increase in the Second Quarter 2023 pretax loss compared to the pretax loss in the Second Quarter 2022 and the impact of nonrecurring items recognized in the Second Quarter 2023.

The Company’s effective income tax rate for Year-To-Date 2023 was a benefit of 20.3 %, or $ 16.4 million, compared to ( 477.6 )%, or $ 5.4 million, for Year-To-Date 2022.

The increase in the effective income tax rate for Year-To-Date 2023 compared to Year-To-Date 2022 was primarily driven by the Year-To-Date 2023 pretax loss as compared to near break-even pretax income for Year-To-Date 2022 and the release of a reserve in the first quarter of Fiscal 2022 of $ 6.4 million for unrecognized tax benefits as a result of a settlement with a taxing authority which was nonrecurring, partially offset by the impact of nonrecurring items recognized in the Second Quarter 2023.

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

The CARES Act allows net operating losses (“NOLs”) incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to offset 100% of taxable income and to generate a refund of previously paid income taxes.

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

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.

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

During the first quarter of Fiscal 2022, the Company received $ 22.0 million of this income tax refund and the remaining balance of $ 19.1 million as of July 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 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 total amount of unrecognized tax benefits was $ 4.3 million, $ 3.6 million, and $ 2.3 million as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively, and is included within long-term liabilities.

Interest expense recognized in Year-To-Date 2023 and Year-To-Date 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.

3 unchanged sentences

federal, state and local or foreign tax authorities for tax years 2016 and prior.

Management believes that an adequate provision has been made for any adjustments that may result from tax examinations.

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 taxes in the period such resolution occurs.

THE CHILDREN’S PLACE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Management believes that an adequate provision has been made for any adjustments that may result from tax examinations.

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

SEGMENT INFORMATION

13 unchanged sentences

The Company periodically reviews these allocations and adjusts them based upon changes in business circumstances.

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 29, 2023, The Children’s Place U.S.

Net sales to external customers are derived from merchandise sales, and the Company has one wholesale customer that individually accounted for more than 10% of its net sales for the Second Quarter 2023.

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

had 525 stores and The Children’s Place International had 71 stores.

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.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides segment level financial information:

Thirteen Weeks Ended

2023 April 30,

Thirteen Weeks Ended Twenty-six Weeks Ended

2023 July 30,

2022 July 29,

2023 July 30,

(in thousands)

27 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.

(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