What changed in this filing

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Item 1. Financial Statements

2023-12-04 compared with 2023-08-30 · 161 added, 137 removed, 516 unchanged (37% of the section changed)

4 unchanged sentences

2023 January 28,

2023 July 30,

2023 October 29,

(in thousands, except par value)

46 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Thirteen Weeks Ended Twenty-six Weeks Ended

2023 July 30,

2022 July 29,

2023 July 30,

Thirteen Weeks Ended Thirty-nine Weeks Ended

2023 October 29,

2022 October 28,

2023 October 29,

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

8 unchanged sentences

Interest income 17 24 68 43

Income (loss) before benefit for income taxes ( 44,582 ) ( 16,418 ) ( 80,551 ) 1,131

Benefit for income taxes ( 9,227 ) ( 3,120 ) ( 16,363 ) ( 5,402 )

Income (loss) before provision (benefit) for income taxes 37,028 54,051 ( 43,523 ) 55,181

Provision (benefit) for income taxes ( 1,454 ) 11,196 ( 17,818 ) 5,794

Net income (loss) $ 38,482 $ 42,855 $ ( 25,705 ) $ 49,387

9 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Thirteen Weeks Ended Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29,

2023 July 30,

Thirteen Weeks Ended Thirty-nine Weeks Ended

2023 October 29,

2022 October 28,

2023 October 29,

(in thousands)

Net income (loss) $ 38,482 $ 42,855 $ ( 25,705 ) $ 49,387

Other comprehensive income (loss):

Other comprehensive loss:

Foreign currency translation adjustment ( 1,535 ) ( 2,397 ) ( 1,252 ) ( 2,825 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Thirteen Weeks Ended July 29, 2023

Thirteen Weeks Ended October 28, 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

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

Vesting of stock awards 7 1 ( 1 ) —

1 unchanged sentence

Purchase and retirement of common stock ( 2 ) — ( 40 ) ( 20 ) ( 60 )

Other comprehensive income 1,101 1,101

Other comprehensive loss ( 1,535 ) ( 1,535 )

Deferral of common stock into deferred compensation plan 48 ( 2 ) ( 48 ) —

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

Net income 38,482 38,482

Balance, October 28, 2023 12,549 $ 1,255 $ 140,330 $ 3,932 $ ( 6,015 ) $ ( 17,499 ) ( 73 ) $ ( 3,932 ) $ 118,071

Thirty-nine Weeks Ended October 28, 2023

Additional Retained Other Total

6 unchanged sentences

Purchase and retirement of common stock ( 205 ) ( 21 ) ( 4,155 ) ( 2,850 ) ( 7,026 )

Other comprehensive income 283 283

Other comprehensive loss ( 1,252 ) ( 1,252 )

Deferral of common stock into deferred compensation plan 196 ( 6 ) ( 196 ) —

Net loss ( 25,705 ) ( 25,705 )

Balance, July 29, 2023

Balance, October 28, 2023

12,549 $ 1,255 $ 140,330 $ 3,932 $ ( 6,015 ) $ ( 17,499 ) ( 73 ) $ ( 3,932 ) $ 118,071

3 unchanged sentences

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 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 ) —

1 unchanged sentence

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

Other comprehensive income 54 54

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

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

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

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

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 49,387 49,387

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

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.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Twenty-six Weeks Ended

2023 July 30,

Thirty-nine Weeks Ended

2023 October 29,

(in thousands)

7 unchanged sentences

Deferred income tax provision 1,266 2,186

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

Other non-cash charges, net 528 58

Changes in operating assets and liabilities:

18 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 35 ) ( 974 )

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

Net decrease in cash and cash equivalents ( 3,167 ) ( 35,543 )

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

26 unchanged sentences

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

• 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

• Third Quarter 2023 — The thirteen weeks ended October 28, 2023

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

• Year-To-Date 2023 — The thirty-nine weeks ended October 28, 2023

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

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

13 unchanged sentences

Intercompany balances and transactions have been eliminated.

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

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

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 October 28, 2023 and October 29, 2022, the results of its consolidated operations, consolidated comprehensive income (loss), and consolidated changes in stockholders’ equity for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022, and consolidated cash flows for the thirty-nine weeks ended October 28, 2023 and October 29, 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 28, 2023 and October 29, 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.

9 unchanged sentences

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

Thirteen Weeks Ended Twenty-six Weeks Ended

2023 July 30,

2022 July 29,

2023 July 30,

Thirteen Weeks Ended Thirty-nine Weeks Ended

2023 October 29,

2022 October 28,

2023 October 29,

(in thousands)

8 unchanged sentences

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

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

The Company deferred sales of $ 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.

THE CHILDREN’S PLACE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company deferred sales of $ 7.6 million, $ 2.9 million, and $ 8.9 million within Accrued expenses and other current liabilities as of October 28, 2023, January 28, 2023, and October 29, 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 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.

The allowance for wholesale revenue included within Accounts receivable was $ 8.6 million, $ 5.0 million, and $ 4.9 million as of October 28, 2023, January 28, 2023, and October 29, 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 $ 2.5 million, $ 1.0 million, and $ 2.3 million as of July 29, 2023, January 28, 2023, and July 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 $ 2.2 million as of October 28, 2023, January 28, 2023, and October 29, 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 $ 5.6 million, $ 2.6 million, and $ 3.9 million as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively.

The total contract liabilities related to this program were $ 2.0 million, $ 2.6 million, and $ 2.0 million as of October 28, 2023, January 28, 2023, and October 29, 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 July 29, 2023, January 28, 2023, and July 30, 2022 was $ 10.2 million, $ 11.1 million, and $ 11.7 million, respectively.

The gift card liability balance as of October 28, 2023, January 28, 2023, and October 29, 2022 was $ 6.3 million, $ 11.1 million, and $ 11.2 million, respectively.

During Year-To-Date 2023, the Company recognized Net sales of $ 8.4 million related to the gift card liability balance that existed at January 28, 2023.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

4 unchanged sentences

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)

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.

In support of the Company’s ongoing structural transformation from a legacy store operating model to a digital-first retailer, during the second quarter of 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.

That lease will now expire in May 2024, and the Company is continuing to explore various options for a new lease, including negotiations with the current landlord.

During the second quarter of 2023, the Company implemented a plan that encompassed two headcount reductions, which accounted for over 20 % 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,

The actions associated with the workforce reduction were substantially completed by the end of the Third Quarter 2023.

In addition, the lease for the Company’s distribution center in Toronto, Canada (“TODC”) expires in April 2024.

The Company expects to move these operations to the United States to its current distribution center in Alabama, which will result in a further headcount reduction at the TODC.

The transition out of the TODC is expected to be substantially completed by the end of the first quarter of 2024.

As a result of these strategic actions associated with the voluntary early termination of its corporate office lease, the move from the TODC, and workforce reductions, the Company incurred non-operating charges of $ 1.2 million and $ 11.8 million in restructuring costs during the Third Quarter 2023 and Year-To-Date 2023, respectively on a pretax basis, summarized in the following table:

Thirteen Weeks Ended Thirty-nine Weeks Ended

2023 October 29,

2022 October 28,

2023 October 29,

(in thousands)

7 unchanged sentences

___________________________________________

(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.

(1) Includes non-cash charges related to accelerated depreciation on certain assets in the corporate office over the reduced term, amounting to $ 0.5 million and $ 1.4 million for the Third Quarter 2023 and Year-To-Date 2023, respectively.

The Company expects to record additional accelerated depreciation charges of approximately $ 1.0 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 CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the restructuring costs that have been partially settled with cash payments and the remaining related liability as of October 28, 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:

2 unchanged sentences

Balance at April 29, 2023 $ — $ — $ — $ —

$ — $ — $ — $ —

5,433 4,040 186 9,659

Provision 5,433 4,040 186 9,659

Cash payments ( 2,602 ) ( 4,040 ) — ( 6,642 )

( 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)

Cash payments

( 2,652 ) — ( 268 ) ( 2,920 )

Balance at October 28, 2023 $ 853 $ — $ — $ 853

INTANGIBLE ASSETS

The Company’s intangible assets were as follows:

July 29, 2023

October 28, 2023

Useful Life Gross Amount Accumulated Amortization Net Amount

15 unchanged sentences

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

July 30, 2022

October 29, 2022

Useful Life Gross Amount Accumulated Amortization Net Amount

16 unchanged sentences

2023 January 28,

2023 July 30,

2023 October 29,

(in thousands)

10 unchanged sentences

Property and equipment, net $ 134,639 $ 149,874 $ 154,975

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.

At October 28, 2023 and October 29, 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 Third Quarter 2023 and Year-To-Date 2023 of $ 0.6 million and $ 3.1 million, respectively, inclusive of right-of-use (“ROU”) assets.

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 ROU assets.

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 Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29,

2023 July 30,

Thirteen Weeks Ended Thirty-nine Weeks Ended

2023 October 29,

2022 October 28,

2023 October 29,

(in thousands)

5 unchanged sentences

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

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 %.

As of October 28, 2023, the weighted-average remaining operating lease term was 3.1 years, and the weighted-average discount rate for operating leases was 5.3 %.

Cash paid for amounts included in the measurement of operating lease liabilities during Year-To-Date 2023 was $ 64.7 million.

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

As of October 28, 2023, the maturities of operating lease liabilities were as follows:

(in thousands)

8 unchanged sentences

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

As previously disclosed in the Company’s Form 8-K dated October 30, 2023, the Company became aware of an inadvertent calculation error contained in the June, July and August 2023 borrowing base certificates provided to the lenders under its Credit Agreement, all of which have since been remedied.

While the lenders determined the calculation error resulted in certain technical defaults under the Credit Agreement (including the Company not being in compliance with certain debt covenants), the Company and the lenders entered into a Waiver and Amendment Agreement (the “Waiver Agreement”) on October 24, 2023, pursuant to which the lenders waived all of the defaults and the Company agreed to certain temporary enhanced reporting requirements and temporary restrictions on certain payments.

These enhanced reporting requirements and restrictions will cease once the Company achieves certain excess availability thresholds.

At no time prior to or following entering into the Waiver Agreement was the Company prevented from borrowing under the Credit Agreement in the ordinary course.

ABL Credit Facility and Term Loan

4 unchanged sentences

(i) the prime rate per annum, plus a margin of 1.250 % or 1.500 %;

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

3 unchanged sentences

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)

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:

3 unchanged sentences

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.

For the Third Quarter 2023 and Year-To-Date 2023, the Company recognized $ 7.2 million and $ 18.0 million, respectively, in interest expense related to the ABL Credit Facility.

For the Third Quarter 2022 and Year-To-Date 2022, the Company recognized $ 3.0 million and $ 6.9 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 the maximum borrowing availability (as reflected in the table below), based on the Company’s ability to maintain a certain amount of excess availability for borrowings (the “excess availability threshold”).

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 CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2023 January 28,

2023 July 30,

2023 October 29,

(in millions)

Total borrowing base availability $ 466.8 $ 404.2 $ 478.0

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

Total borrowing base availability, net of the excess availability threshold, as applicable $ 394.7 $ 363.8 $ 463.9

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

Maximum borrowing availability (1)

11 unchanged sentences

Average interest rate 7.0 % 3.7 % 3.0 %

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

____________________________________________

(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.

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

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

For the Third Quarter 2023 and Year-To-Date 2023, the Company recognized $ 0.4 million, and $ 2.4 million, respectively, in interest expense related to the Term Loan.

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.

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.

1 unchanged sentence

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

As of October 28, 2023, unamortized deferred financing costs amounted to $ 2.4 million, of which $ 2.2 million related to our ABL Credit Facility.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

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

Currently, pursuant to the Waiver Agreement described above, the Company is temporarily restricted from repurchasing any shares.

As of October 28, 2023, there was $ 157.3 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:

Twenty-six Weeks Ended

July 29, 2023 July 30, 2022

Thirty-nine Weeks Ended

October 28, 2023 October 29, 2022

Shares Amount Shares Amount

8 unchanged sentences

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.

Currently, pursuant to the Waiver Agreement described above, the Company is temporarily restricted from issuing any cash dividends.

STOCK-BASED COMPENSATION

2 unchanged sentences

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,

Thirteen Weeks Ended Thirty-nine Weeks Ended

2023 October 29,

2022 October 28,

2023 October 29,

(in thousands)

5 unchanged sentences

___________________________________________

(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.

(1) Included within the Performance Awards benefit for the Third Quarter 2023 was a combination of ongoing expense associated with existing grants and $ 6.2 million of credits resulting from a change in estimate based on revised expectations of the attainment levels for performance metrics of certain awards.

Included within the Performance Awards benefit for Year-To-Date 2023 was a combination of ongoing expense associated with existing grants and $ 12.9 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 $ 0.1 million and $ 0.3 million in the Third Quarter 2023 and Third Quarter 2022, respectively, and $ 1.2 million in Year-To-Date 2022.

The stock-based compensation expense (benefit) recorded within Cost of sales (exclusive of depreciation and amortization) in Year-To-Date 2023 nets to zero .

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

4 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 Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29,

2023 July 30,

Thirteen Weeks Ended Thirty-nine Weeks Ended

2023 October 29,

2022 October 28,

2023 October 29,

(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 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.

The Company’s provision for income taxes during interim reporting periods has historically been calculated by applying an estimate of the annual effective tax rate for the full fiscal year to pretax income (loss) excluding unusual or infrequently occurring discrete items for the reporting period.

For the Third Quarter 2023, and in accordance with ASC 740-270-30-18 “Income Taxes - Interim Reporting - Initial Measurement,” and paragraph 82 of FASB interpretation No.

18, “Accounting for Income Taxes in Interim Periods” (“FIN 18”), the Company computed its provision for income taxes based on the actual effective tax rate for the year-to-date period by applying the discrete method.

The Company determined that the historical method would not provide a reliable estimate for the Third Quarter 2023 because small changes in estimated ordinary income for Fiscal 2023 would result in a significant change in the estimated annual effective tax rate.

We believe that, at this time, the use of this discrete method represents the best estimate of our annual effective tax rate.

The Company’s effective income tax rate for the Third Quarter 2023 was a benefit of ( 3.9 )%, or $ 1.5 million, compared to a provision of 20.7 %, or $ 11.2 million, during the Third Quarter 2022.

The change in the effective income tax rate and income tax provision (benefit) for the Third Quarter 2023 compared to the Third Quarter 2022 was primarily driven by the utilization of the discrete tax provision methodology discussed above in the Third Quarter 2023, and the impact of certain non-deductible executive compensation.

The Company’s effective income tax rate for Year-To-Date 2023 was a benefit of ( 40.9 )%, or $ 17.8 million, compared to a provision of 10.5 %, or $ 5.8 million, for Year-To-Date 2022.

The change 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 pretax income for Year-To-Date 2022, jurisdictional earnings mix, the impact of certain non-deductible executive compensation, 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, in addition to the utilization of the discrete tax provision methodology.

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 $ 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.

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 October 28, 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 $ 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.

The total amount of unrecognized tax benefits was $ 4.8 million, $ 3.6 million, and $ 2.3 million as of October 28, 2023, January 28, 2023, and October 29, 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.

4 unchanged sentences

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

THE CHILDREN’S PLACE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

16 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 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.

Net sales to external customers are derived from merchandise sales, and the Company has one U.S.

wholesale customer that individually accounted for more than 10% of its net sales, amounting to $ 54.5 million and $ 116.0 million for the Third Quarter 2023 and Year-To-Date 2023, respectively, and accounts for a majority of the Company’s accounts receivable.

As of October 28, 2023, The Children’s Place U.S.

had 520 stores and The Children’s Place International had 71 stores.

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

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

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

3 unchanged sentences

The following table provides segment level financial information:

Thirteen Weeks Ended Twenty-six Weeks Ended

2023 July 30,

2022 July 29,

2023 July 30,

Thirteen Weeks Ended Thirty-nine Weeks Ended

2023 October 29,

2022 October 28,

2023 October 29,

(in thousands)

28 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements