Price | 1.28 | EPS | -1 | |
Shares | 14 | P/E | -1 | |
MCap | 18 | P/FCF | -2 | |
Net Debt | 24 | EBIT | -10 | |
TEV | 42 | TEV/EBIT | -4 | TTM 2019-08-03, in MM, except price, ratios |
10-Q | 2019-08-03 | Filed 2019-09-17 |
10-Q | 2019-05-04 | Filed 2019-06-12 |
10-K | 2019-02-02 | Filed 2019-04-16 |
10-Q | 2018-11-03 | Filed 2018-12-11 |
10-Q | 2018-08-04 | Filed 2018-09-10 |
10-Q | 2018-05-05 | Filed 2018-06-14 |
10-K | 2018-02-03 | Filed 2018-04-19 |
10-Q | 2017-10-28 | Filed 2017-12-07 |
10-Q | 2017-07-29 | Filed 2017-09-07 |
10-Q | 2017-04-29 | Filed 2017-06-08 |
10-K | 2017-01-28 | Filed 2017-04-13 |
10-Q | 2016-10-29 | Filed 2016-12-08 |
10-Q | 2016-07-30 | Filed 2016-08-25 |
10-Q | 2016-04-30 | Filed 2016-05-26 |
10-K | 2016-01-30 | Filed 2016-04-14 |
10-Q | 2015-10-31 | Filed 2015-12-03 |
10-Q | 2015-08-01 | Filed 2015-08-27 |
10-Q | 2015-05-02 | Filed 2015-06-11 |
10-K | 2014-09-30 | Filed 2014-12-12 |
10-Q | 2014-06-30 | Filed 2014-08-08 |
10-Q | 2014-03-31 | Filed 2014-05-07 |
10-Q | 2013-12-31 | Filed 2014-02-07 |
10-K | 2013-09-30 | Filed 2013-12-13 |
10-Q | 2013-06-30 | Filed 2013-08-08 |
10-Q | 2013-03-31 | Filed 2013-05-08 |
10-Q | 2012-12-31 | Filed 2013-02-08 |
10-K | 2012-09-30 | Filed 2012-12-14 |
10-Q | 2012-03-31 | Filed 2012-05-09 |
10-Q | 2011-12-31 | Filed 2012-02-07 |
10-K | 2011-09-30 | Filed 2011-12-14 |
10-Q | 2011-06-30 | Filed 2011-08-09 |
10-Q | 2011-03-31 | Filed 2011-05-10 |
10-Q | 2010-12-31 | Filed 2011-02-09 |
10-K | 2010-09-30 | Filed 2010-12-14 |
10-Q | 2010-06-30 | Filed 2010-08-09 |
10-Q | 2010-03-31 | Filed 2010-05-10 |
10-Q | 2009-12-31 | Filed 2010-02-09 |
8-K | 2019-12-20 | |
8-K | 2019-11-06 | |
8-K | 2019-10-21 | |
8-K | 2019-09-18 | |
8-K | 2019-07-17 | |
8-K | 2019-06-24 | |
8-K | 2019-06-20 | |
8-K | 2019-06-12 | |
8-K | 2019-06-12 | |
8-K | 2019-06-04 | |
8-K | 2019-04-16 | |
8-K | 2019-04-16 | |
8-K | 2019-04-10 | |
8-K | 2019-04-09 | |
8-K | 2019-03-28 | |
8-K | 2019-03-13 | |
8-K | 2019-01-09 | |
8-K | 2018-12-17 | |
8-K | 2018-12-11 | |
8-K | 2018-11-01 | |
8-K | 2018-11-01 | |
8-K | 2018-09-26 | |
8-K | 2018-08-27 | |
8-K | 2018-08-10 | |
8-K | 2018-08-04 | |
8-K | 2018-07-30 | |
8-K | 2018-07-30 | |
8-K | 2018-07-25 | |
8-K | 2018-06-14 | |
8-K | 2018-06-04 | |
8-K | 2018-05-29 | |
8-K | 2018-05-23 | |
8-K | 2018-05-23 | |
8-K | 2018-04-19 | |
8-K | 2018-04-12 | |
8-K | 2018-04-11 | |
8-K | 2018-04-02 | |
8-K | 2018-03-13 | |
8-K | 2018-02-01 | |
8-K | 2018-01-02 |
Part I - Financial Information |
Item 1. Financial Statements |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
Item 4. Controls and Procedures |
Part II - Other Information |
Item 1. Legal Proceedings |
Item 1A. Risk Factors |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. Defaults Upon Senior Securities |
Item 4. Mine Safety Disclosures |
Item 5. Other Information |
Item 6. Exhibits |
EX-31.1 | dest-ex311_9.htm |
EX-31.2 | dest-ex312_8.htm |
EX-32.1 | dest-ex321_6.htm |
EX-32.2 | dest-ex322_7.htm |
Balance Sheet | Income Statement | Cash Flow |
---|---|---|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended August 03, 2019
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-21196
Destination Maternity Corporation
(Exact name of registrant as specified in its charter)
Delaware | 13-3045573 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
232 Strawbridge Drive Moorestown, New Jersey | 08057 |
(Address of principal executive offices) | (Zip code) |
(856) 291-9700
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | DEST | NASDAQ |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(1) of the Exchange Act ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value — 14,226,121 shares outstanding as of September 3, 2019
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
INDEX
|
| |||
|
|
|
|
|
Item 1. |
|
| 3 | |
|
|
|
|
|
|
|
| 3 | |
|
|
|
|
|
|
|
| 4 | |
|
|
|
|
|
|
|
| 5 | |
|
|
|
|
|
|
|
| 6 | |
|
|
|
|
|
|
|
| 7 | |
|
|
|
|
|
|
|
| 8 | |
|
|
|
|
|
Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 19 |
|
|
|
|
|
Item 3. |
|
| 30 | |
|
|
|
|
|
Item 4. |
|
| 31 | |
|
|
|
|
|
|
| |||
|
|
|
|
|
Item 1. |
|
| 32 | |
|
|
|
|
|
Item 1A. |
|
| 32 | |
|
|
|
|
|
Item 2. |
|
| 33 | |
|
|
|
|
|
Item 5. |
|
| 34 | |
|
|
|
|
|
Item 6. |
|
| 35 | |
|
|
| ||
| 36 |
2
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
(in thousands, except share and per share amounts)
(unaudited)
|
| August 3, 2019 |
|
| February 2, 2019 |
| ||
|
|
|
|
|
|
|
| |
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
| $ | 1,142 |
|
| $ | 1,154 |
|
Trade receivables, net |
|
| 7,012 |
|
|
| 7,945 |
|
Inventories |
|
| 67,691 |
|
|
| 70,872 |
|
Prepaid expenses and other current assets |
|
| 9,961 |
|
|
| 9,407 |
|
Total current assets |
|
| 85,806 |
|
|
| 89,378 |
|
Property and equipment, net of accumulated depreciation and amortization of $111,181 and $106,479 |
|
| 48,215 |
|
|
| 51,483 |
|
Operating lease assets |
|
| 125,283 |
|
|
| — |
|
Deferred income taxes |
|
| 3,967 |
|
|
| 2,671 |
|
Other non-current assets |
|
| 1,868 |
|
|
| 2,642 |
|
Total assets |
| $ | 265,139 |
|
| $ | 146,174 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Line of credit borrowings |
| $ | 23,300 |
|
| $ | 20,400 |
|
Current portion of long-term debt |
|
| 3,841 |
|
|
| 4,372 |
|
Accounts payable |
|
| 21,477 |
|
|
| 21,854 |
|
Operating lease liabilities |
|
| 30,301 |
|
|
| — |
|
Accrued expenses and other current liabilities |
|
| 24,226 |
|
|
| 31,056 |
|
Total current liabilities |
|
| 103,145 |
|
|
| 77,682 |
|
Long-term debt |
|
| 21,343 |
|
|
| 21,784 |
|
Operating leases and other non-current liabilities |
|
| 119,225 |
|
|
| 19,557 |
|
Total liabilities |
|
| 243,713 |
|
|
| 119,023 |
|
Commitments and contingencies (Note 17) |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, 1,656,381 shares authorized, none outstanding |
|
| — |
|
|
| — |
|
Common stock, $.01 par value; 20,000,000 shares authorized, 14,227,184 and 14,416,500 shares issued and outstanding |
|
| 142 |
|
|
| 144 |
|
Additional paid-in capital |
|
| 107,932 |
|
|
| 107,675 |
|
Accumulated deficit |
|
| (86,574 | ) |
|
| (80,594 | ) |
Accumulated other comprehensive loss |
|
| (74 | ) |
|
| (74 | ) |
Total stockholders’ equity |
|
| 21,426 |
|
|
| 27,151 |
|
Total liabilities and stockholders’ equity |
| $ | 265,139 |
|
| $ | 146,174 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| August 3, 2019 |
|
| August 4, 2018 |
|
| August 3, 2019 |
|
| August 4, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 84,901 |
|
| $ | 96,395 |
|
| $ | 179,114 |
|
| $ | 199,622 |
|
Cost of goods sold |
|
| 41,253 |
|
|
| 46,530 |
|
|
| 83,869 |
|
|
| 94,354 |
|
Gross profit |
|
| 43,648 |
|
|
| 49,865 |
|
|
| 95,245 |
|
|
| 105,268 |
|
Selling, general and administrative expenses |
|
| 45,153 |
|
|
| 50,095 |
|
|
| 93,643 |
|
|
| 101,952 |
|
Store closing, asset impairment and asset disposal expenses |
|
| 778 |
|
|
| 672 |
|
|
| 1,647 |
|
|
| 1,641 |
|
Other (income) charges, net |
|
| (119 | ) |
|
| 1,923 |
|
|
| 543 |
|
|
| 3,073 |
|
Operating loss |
|
| (2,164 | ) |
|
| (2,825 | ) |
|
| (588 | ) |
|
| (1,398 | ) |
Interest expense, net |
|
| 1,340 |
|
|
| 1,144 |
|
|
| 2,755 |
|
|
| 2,301 |
|
Loss before income taxes |
|
| (3,504 | ) |
|
| (3,969 | ) |
|
| (3,343 | ) |
|
| (3,699 | ) |
Income tax provision |
|
| 31 |
|
|
| 56 |
|
|
| 62 |
|
|
| 112 |
|
Net loss |
| $ | (3,535 | ) |
| $ | (4,025 | ) |
| $ | (3,405 | ) |
| $ | (3,811 | ) |
Net loss per share— Basic |
| $ | (0.25 | ) |
| $ | (0.29 | ) |
| $ | (0.25 | ) |
| $ | (0.28 | ) |
Average shares outstanding— Basic |
|
| 13,871 |
|
|
| 13,823 |
|
|
| 13,848 |
|
|
| 13,831 |
|
Net loss per share— Diluted |
| $ | (0.25 | ) |
| $ | (0.29 | ) |
| $ | (0.25 | ) |
| $ | (0.28 | ) |
Average shares outstanding— Diluted |
|
| 13,871 |
|
|
| 13,823 |
|
|
| 13,848 |
|
|
| 13,831 |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| August 3, 2019 |
|
| August 4, 2018 |
|
| August 3, 2019 |
|
| August 4, 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (3,535 | ) |
| $ | (4,025 | ) |
| $ | (3,405 | ) |
| $ | (3,811 | ) |
Foreign currency translation adjustments |
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Comprehensive loss |
| $ | (3,535 | ) |
| $ | (4,027 | ) |
| $ | (3,405 | ) |
| $ | (3,813 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
5
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| ||||||
|
| Number of Shares |
|
| Amount |
|
| Additional Paid-in Capital |
|
| Accumulated Deficit |
|
| Other Comprehensive Loss |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of February 2, 2019 |
|
| 14,417 |
|
| $ | 144 |
|
| $ | 107,675 |
|
| $ | (80,594 | ) |
| $ | (74 | ) |
| $ | 27,151 |
|
Adoption of ASC 842 - Leases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,576 | ) |
|
| — |
|
|
| (2,576 | ) |
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 130 |
|
|
| — |
|
|
| 130 |
|
Dividends forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
Stock-based compensation |
|
| 75 |
|
|
| 1 |
|
|
| 143 |
|
|
| — |
|
|
| — |
|
|
| 144 |
|
Repurchase and retirement of common stock |
|
| (116 | ) |
|
| (1 | ) |
|
| (33 | ) |
|
| — |
|
|
| — |
|
|
| (34 | ) |
Balance as of May 4, 2019 |
|
| 14,376 |
|
| $ | 144 |
|
| $ | 107,785 |
|
| $ | (83,039 | ) |
| $ | (74 | ) |
| $ | 24,816 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,535 | ) |
|
| — |
|
|
| (3,535 | ) |
Stock-based compensation |
|
| 6 |
|
|
| 0 |
|
|
| 146 |
|
|
| — |
|
|
| — |
|
|
| 146 |
|
Repurchase and retirement of common stock |
|
| (155 | ) |
|
| (2 | ) |
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
Balance as of August 3, 2019 |
|
| 14,227 |
|
| $ | 142 |
|
| $ | 107,932 |
|
| $ | (86,574 | ) |
| $ | (74 | ) |
| $ | 21,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of February 3, 2018 |
|
| 14,684 |
|
| $ | 147 |
|
| $ | 106,865 |
|
| $ | (66,274 | ) |
| $ | (70 | ) |
| $ | 40,668 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 214 |
|
|
| — |
|
|
| 214 |
|
Dividends forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
Stock-based compensation |
|
| 383 |
|
|
| 4 |
|
|
| 324 |
|
|
| — |
|
|
| — |
|
|
| 328 |
|
Repurchase and retirement of common stock |
|
| (62 | ) |
|
| (1 | ) |
|
| (18 | ) |
|
| — |
|
|
| — |
|
|
| (19 | ) |
Balance as of May 5, 2018 |
|
| 15,005 |
|
| $ | 150 |
|
| $ | 107,171 |
|
| $ | (66,059 | ) |
| $ | (70 | ) |
| $ | 41,192 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,025 | ) |
|
| — |
|
|
| (4,025 | ) |
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
Dividends forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Stock-based compensation |
|
| 60 |
|
|
| — |
|
|
| 256 |
|
|
| — |
|
|
| — |
|
|
| 256 |
|
Exercise of stock options, net |
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
Repurchase and retirement of common stock |
|
| (260 | ) |
|
| (2 | ) |
|
| (8 | ) |
|
| — |
|
|
| — |
|
|
| (10 | ) |
Balance as of August 4, 2018 |
|
| 14,805 |
|
| $ | 148 |
|
| $ | 107,420 |
|
| $ | (70,081 | ) |
| $ | (72 | ) |
| $ | 37,415 |
|
The accompanying notes are an integral part of these consolidated financial statements.
6
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
| Six Months Ended |
| |||||
|
| August 3, 2019 |
|
| August 4, 2018 |
| ||
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
Net loss |
| $ | (3,405 | ) |
| $ | (3,811 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 6,992 |
|
|
| 7,961 |
|
Stock-based compensation expense |
|
| 290 |
|
|
| 584 |
|
Loss on impairment of long-lived assets |
|
| 1,172 |
|
|
| 1,519 |
|
Loss on disposal of assets |
|
| 259 |
|
|
| 68 |
|
Grow NJ award benefit |
|
| (1,296 | ) |
|
| (1,412 | ) |
Amortization of deferred financing costs |
|
| 346 |
|
|
| 336 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease (increase) in: |
|
|
|
|
|
|
|
|
Trade receivables |
|
| 933 |
|
|
| (145 | ) |
Inventories |
|
| 3,181 |
|
|
| 3,503 |
|
Prepaid expenses and other current assets |
|
| (554 | ) |
|
| 479 |
|
Operating leases and other non-current assets |
|
| 8,583 |
|
|
| 12 |
|
Decrease in: |
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses, operating leases and other current liabilities |
|
| (4,822 | ) |
|
| (1,831 | ) |
Operating leases and other non-current liabilities |
|
| (10,262 | ) |
|
| (1,417 | ) |
Net cash provided by operating activities |
|
| 1,417 |
|
|
| 5,846 |
|
Investing Activities |
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (3,780 | ) |
|
| (2,579 | ) |
Net cash used in investing activities |
|
| (3,780 | ) |
|
| (2,579 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
Increase (decrease) in cash overdraft |
|
| 759 |
|
|
| (2,657 | ) |
Increase (decrease) in line of credit borrowings |
|
| 2,900 |
|
|
| (700 | ) |
Proceeds from long-term debt |
|
| 1,802 |
|
|
| 2,500 |
|
Repayment of long-term debt |
|
| (3,075 | ) |
|
| (2,537 | ) |
Deferred financing costs paid |
|
| — |
|
|
| (160 | ) |
Withholding taxes on stock-based compensation paid in connection with repurchase of common stock |
|
| (35 | ) |
|
| (29 | ) |
Net cash provided by (used in) financing activities |
|
| 2,351 |
|
|
| (3,583 | ) |
Effect of exchange rate changes on cash and cash equivalents |
|
| — |
|
|
| (2 | ) |
Net Decrease in Cash and Cash Equivalents |
|
| (12 | ) |
|
| (318 | ) |
Cash and Cash Equivalents, Beginning of Period |
|
| 1,154 |
|
|
| 1,635 |
|
Cash and Cash Equivalents, End of Period |
| $ | 1,142 |
|
| $ | 1,317 |
|
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 2,367 |
|
| $ | 1,965 |
|
Cash (received) paid for income taxes |
| $ | (177 | ) |
| $ | 118 |
|
The accompanying notes are an integral part of these consolidated financial statements.
7
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. | BASIS OF FINANCIAL STATEMENT PRESENTATION |
The accompanying unaudited consolidated financial statements for the three and six months ended August 3, 2019 and August 4, 2018 have been prepared in accordance with the requirements for Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures have been condensed or omitted. See the Company’s Annual Report on Form 10-K as of and for the year ended February 2, 2019 for Destination Maternity Corporation and subsidiaries (the “Company” or “Destination Maternity”) as filed with the Securities and Exchange Commission (“SEC”) for additional disclosures including a summary of the Company’s accounting policies.
In the opinion of management, the consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company for the periods presented. Since the Company’s operations are seasonal, the interim operating results of the Company may not be indicative of operating results for the full year.
The Company operates on a 52/53-week fiscal year ending on the Saturday nearest January 31 of each year. References to the Company’s fiscal 2019 refer to the 52-week fiscal year, or periods within such fiscal year, which began February 3, 2019 and will end February 1, 2020. References to the Company’s fiscal 2018 refer to the 52-week fiscal year, or periods within such fiscal year, which began February 4, 2018 and ended February 2, 2019.
2. | GOING CONCERN |
As of August 3, 2019, the Company was in compliance with all covenants under the Credit Facility and Term Loan Agreement. However, the lender under the Credit Facility has imposed additional availability reserves which will increase over time. Based on the Company’s current operating plan, the Company anticipates significant liquidity constraints, and considering these liquidity concerns, there is no assurance that the Company will be able to remain in compliance. If any event of default is triggered and the Company does not obtain a waiver from its lenders, the lenders can, among other things, accelerate the entire outstanding amount of the debt, which could result in the Company needing to seek bankruptcy protection to protect stakeholder value. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company is, with the assistance of strategic advisors including Greenhill & Co., LLC, exploring various potential strategic and financial alternatives and is engaged in ongoing discussions with its lenders. Such strategic and financial alternatives include, among other things, a sale of the company or certain of its assets and consideration of out-of-court restructurings as well as bankruptcy court proceedings to effectuate any such sale or to recapitalize or restructure the Company’s indebtedness and other obligations. There are no assurances that such alternatives will be available on terms acceptable to the Company, or at all. In an effort to reduce costs and better position the Company for operational profitability the Company has adopted a plan to close approximately 50 underperforming stores as their leases expire over the next six months. The Company has also made provisions to have sufficient inventory available through the anticipated duration of the Company’s exploration of financial and strategic alternatives.
3. | EARNINGS PER SHARE (“EPS”) |
Basic net income (loss) (or earnings) per share (“Basic EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding, excluding restricted stock awards for which the restrictions have not lapsed. Diluted net income (loss) (or earnings) per share (“Diluted EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding, after giving effect to the potential dilution, if applicable, from the assumed lapse of restrictions on restricted stock and restricted stock unit (“RSU”) awards, and from shares of common stock resulting from the assumed exercise of outstanding stock options. Common shares issuable in connection with the award of performance-based restricted stock units (“PRSUs”) are excluded from the calculation of EPS until the PRSUs’ performance conditions are achieved and the shares in respect of the PRSUs become issuable (see Note 14).
8
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following tables summarize the Basic EPS and Diluted EPS calculations (in thousands, except per share amounts):
|
| Three Months Ended |
| |||||||||||||||||||||
|
| August 3, 2019 |
|
| August 4, 2018 |
| ||||||||||||||||||
|
| Net Loss |
|
| Shares |
|
| EPS |
|
| Net Loss |
|
| Shares |
|
| EPS |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted EPS |
| $ | (3,535 | ) |
|
| 13,871 |
|
| $ | (0.25 | ) |
| $ | (4,025 | ) |
|
| 13,823 |
|
| $ | (0.29 | ) |
|
| Six Months Ended |
| |||||||||||||||||||||
|
| August 3, 2019 |
|
| August 4, 2018 |
| ||||||||||||||||||
|
| Net Loss |
|
| Shares |
|
| EPS |
|
| Net Loss |
|
| Shares |
|
| EPS |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted EPS |
| $ | (3,405 | ) |
|
| 13,848 |
|
| $ | (0.25 | ) |
| $ | (3,811 | ) |
|
| 13,831 |
|
| $ | (0.28 | ) |
In addition to PRSUs, for the three and six months ended August 3, 2019 and August 4, 2018 stock options and unvested restricted stock totaling approximately 707,000 and 538,000 shares, respectively, were excluded from the calculation of Diluted EPS as their effect would have been antidilutive. Stock options and unvested restricted stock totaling approximately 717,000 and 1,696,000 shares of the Company’s common stock were outstanding as of August 3, 2019 and August 4, 2018, respectively, but were not included in the computation of Diluted EPS for the three and six months ended August 3, 2019 and August 4, 2018 due to the Company’s net loss. Had the Company reported a profit for the three and six months ended August 3, 2019 and August 4, 2018 the weighted average number of dilutive shares outstanding for computation of Diluted EPS would have been approximately 13,872,000, 13,887,000, 14,284,000 and 14,124,000 shares, respectively.
4. | TRADE RECEIVABLES |
Trade receivables are recorded based on revenue recognized for sales of the Company’s merchandise and for other revenue earned by the Company through its marketing partnership programs and international franchise agreements, and are non-interest bearing. The Company evaluates the collectability of trade receivables based on a combination of factors, including aging of trade receivables, write-off experience, analysis of historical trends and expectations of future performance. An allowance for doubtful accounts is recorded for trade receivables that are considered unlikely to be collected. When the Company’s collection efforts are unsuccessful, uncollectible trade receivables are charged against the allowance for doubtful accounts. As of August 3, 2019, and February 2, 2019 the Company’s trade receivables were net of allowance for doubtful accounts of $166,000 and $166,000, respectively.
5. | INVENTORIES |
Inventories were comprised of the following (in thousands):
|
| August 3, 2019 |
|
| February 2, 2019 |
| ||
|
|
|
|
|
|
|
|
|
Finished goods |
| $ | 67,479 |
|
| $ | 70,660 |
|
Work-in-progress |
|
| 34 |
|
|
| 148 |
|
Raw materials |
|
| 178 |
|
|
| 64 |
|
|
| $ | 67,691 |
|
| $ | 70,872 |
|
9
DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Accrued expenses and other current liabilities were comprised of the following (in thousands):
|
| August 3, 2019 |
|
| February 2, 2019 |
| ||
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
| $ | 5,890 |
|
| $ | 6,741 |
|
Insurance, primarily self-insurance reserves |
|
| 3,164 |
|
|
| 3,049 |
|
Gift certificates and store credits |
|
| 2,812 |
|
|
| 3,464 |
|
Sales and use taxes |
|
| 2,757 |
|
|
| 2,737 |
|
Accrued expenses |
|
| 2,045 |
|
|
| 4,561 |
|
Deferred revenue |
|
| 1,914 |
|