PENNSYLVANIA
|
23-1721355
|
|||
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
450
WINKS LANE, BENSALEM, PA 19020
|
(215)
245-9100
|
|||
(Address
of principal executive offices) (Zip Code)
|
(Registrant’s
telephone number, including Area Code)
|
Large
Accelerated Filer x
|
Accelerated
Filer o
|
Non-accelerated
Filer o
|
Page
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
2
|
Condensed
Consolidated Balance Sheets
|
||
July
29, 2006 and January 28,
2006
|
2
|
|
Condensed
Consolidated Statements of Operations and Comprehensive
Income
|
||
Thirteen
weeks ended July 29,
2006 and July 30, 2005
|
3
|
|
Twenty-six
weeks ended July 29,
2006 and July 30, 2005
|
4
|
|
Condensed
Consolidated Statements of Cash Flows
|
||
Twenty-six
weeks ended July 29,
2006 and July 30, 2005
|
5
|
|
Notes
to Condensed Consolidated Financial Statements
|
6
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
17
|
Forward-looking
Statements
|
17
|
|
Critical
Accounting Policies
|
19
|
|
Recent
Developments
|
21
|
|
Results
of Operations
|
21
|
|
Liquidity
and Capital Resources
|
28
|
|
Financing
|
31
|
|
Market
Risk
|
32
|
|
Impact
of Recent Accounting Pronouncements
|
32
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
32
|
Item
4.
|
Controls
and Procedures
|
33
|
PART
II.
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
34
|
Item
1A.
|
Risk
Factors
|
34
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
35
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
36
|
Item
6.
|
Exhibits
|
36
|
SIGNATURES
|
37
|
|
Exhibit
Index
|
38
|
July
29,
|
January
28,
|
||||||
(In
thousands, except share amounts)
|
2006
|
2006
|
|||||
(Unaudited)
|
|||||||
ASSETS
|
|||||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
$
|
211,819
|
$
|
130,132
|
|||
Available-for-sale
securities
|
22,200
|
20,150
|
|||||
Accounts
receivable, net of allowances of $2,044 and $6,588
|
3,145
|
38,603
|
|||||
Investment
in asset-backed securities
|
64,535
|
66,828
|
|||||
Merchandise
inventories
|
381,533
|
376,409
|
|||||
Deferred
advertising
|
16,080
|
20,591
|
|||||
Deferred
taxes
|
18,550
|
13,848
|
|||||
Prepayments
and other
|
100,133
|
89,245
|
|||||
Total
current
assets
|
817,995
|
755,806
|
|||||
Property,
equipment, and leasehold improvements – at cost
|
911,384
|
888,481
|
|||||
Less
accumulated depreciation and amortization
|
537,926
|
525,882
|
|||||
Net
property, equipment, and
leasehold improvements
|
373,458
|
362,599
|
|||||
Trademarks
and other intangible assets
|
249,606
|
250,074
|
|||||
Goodwill
|
154,020
|
154,553
|
|||||
Other
assets
|
50,994
|
43,963
|
|||||
Total
assets
|
$
|
1,646,073
|
$
|
1,566,995
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities
|
|||||||
Short-term
borrowings
|
$
|
20,000
|
$
|
50,000
|
|||
Accounts
payable
|
173,659
|
133,236
|
|||||
Accrued
expenses
|
195,215
|
217,421
|
|||||
Income
taxes payable
|
8,528
|
1,743
|
|||||
Current
portion – long-term debt
|
12,672
|
14,765
|
|||||
Total
current
liabilities
|
410,074
|
417,165
|
|||||
Deferred
taxes
|
51,147
|
45,046
|
|||||
Other
non-current liabilities
|
108,751
|
98,457
|
|||||
Long-term
debt
|
186,472
|
191,979
|
|||||
Stockholders’
equity
|
|||||||
Common
Stock $.10 par value:
|
|||||||
Authorized
–
300,000,000
shares
|
|||||||
Issued
–
134,829,765
shares and
133,954,852 shares
|
13,483
|
13,395
|
|||||
Additional
paid-in capital
|
271,642
|
261,077
|
|||||
Treasury
stock at cost – 12,265,993 shares
|
(84,136
|
)
|
(84,136
|
)
|
|||
Accumulated
other comprehensive loss
|
1
|
(3
|
)
|
||||
Retained
earnings
|
688,639
|
624,015
|
|||||
Total
stockholders’
equity
|
889,629
|
814,348
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
1,646,073
|
$
|
1,566,995
|
|||
Certain
prior-year amounts have been reclassified to conform to the current-year
presentation.
|
|||||||
See
Notes to Condensed Consolidated Financial
Statements
|
Thirteen
Weeks Ended
|
|||||||
July
29,
|
July
30,
|
||||||
(In
thousands, except per share amounts)
|
2006
|
2005
|
|||||
Net
sales
|
$
|
763,353
|
$
|
689,075
|
|||
Cost
of goods sold, buying, catalog, and occupancy expenses
|
532,244
|
467,014
|
|||||
Selling,
general, and administrative expenses
|
178,941
|
157,067
|
|||||
Total
operating expenses
|
711,185
|
624,081
|
|||||
Income
from operations
|
52,168
|
64,994
|
|||||
Other
income
|
2,866
|
1,985
|
|||||
Interest
expense
|
(3,811
|
)
|
(4,712
|
)
|
|||
Income
before income taxes
|
51,223
|
62,267
|
|||||
Income
tax provision
|
18,660
|
22,843
|
|||||
Net
income
|
32,563
|
39,424
|
|||||
Other
comprehensive income, net of tax
|
|||||||
Unrealized
gains on available-for-sale securities, net of income tax provision
of $1
in 2006
|
1
|
0
|
|||||
Comprehensive
income
|
$
|
32,564
|
$
|
39,424
|
|||
Basic
net income per share
|
$
|
.27
|
$
|
.33
|
|||
Diluted
net income per share
|
$
|
.24
|
$
|
.30
|
|||
Certain
prior-year amounts have been reclassified to conform to the current-year
presentation.
|
|||||||
See
Notes to Condensed Consolidated Financial
Statements
|
Twenty-six
Weeks Ended
|
|||||||
July
29,
|
July
30,
|
||||||
(In
thousands, except per share amounts)
|
2006
|
2005
|
|||||
Net
sales
|
$
|
1,498,275
|
$
|
1,292,428
|
|||
Cost
of goods sold, buying, catalog, and occupancy expenses
|
1,031,532
|
869,717
|
|||||
Selling,
general, and administrative expenses
|
362,173
|
308,005
|
|||||
Total
operating expenses
|
1,393,705
|
1,177,722
|
|||||
Income
from operations
|
104,570
|
114,706
|
|||||
Other
income
|
4,414
|
3,581
|
|||||
Interest
expense
|
(7,935
|
)
|
(8,637
|
)
|
|||
Income
before income taxes
|
101,049
|
109,650
|
|||||
Income
tax provision
|
36,425
|
40,209
|
|||||
Net
income
|
64,624
|
69,441
|
|||||
Other
comprehensive income, net of tax
|
|||||||
Unrealized
gains on available-for-sale securities, net of income tax provision
of $3
in 2006
|
4
|
0
|
|||||
Comprehensive
income
|
$
|
64,628
|
$
|
69,441
|
|||
Basic
net income per share
|
$
|
.53
|
$
|
.58
|
|||
Diluted
net income per share
|
$
|
.48
|
$
|
.53
|
|||
Certain
prior-year amounts have been reclassified to conform to the current-year
presentation.
|
|||||||
See
Notes to Condensed Consolidated Financial
Statements
|
Twenty-six
Weeks Ended
|
|||||||
July
29,
|
July
30,
|
||||||
(In
thousands)
|
2006
|
2005
|
|||||
Operating
activities
|
|||||||
Net
income
|
$64,624
|
$69,441
|
|||||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
|||||||
Depreciation
and
amortization
|
45,129
|
38,982
|
|||||
Deferred
income
taxes
|
1,290
|
889
|
|||||
Stock-based
compensation
|
5,015
|
2,913
|
|||||
Excess
tax benefits related to
stock-based compensation
|
(2,516)
|
2,178
|
|||||
Net
(gain)/loss from disposition
of capital assets
|
139
|
(939)
|
|||||
Net
gain from sale of
available-for-sale securities
|
(57)
|
0
|
|||||
Net
gain from securitization
activities
|
(451)
|
(3,577)
|
|||||
Changes
in operating assets and
liabilities
|
|||||||
Accounts
receivable
|
35,458
|
0
|
|||||
Merchandise
inventories
|
(5,124)
|
(36,717)
|
|||||
Accounts
payable
|
40,423
|
34,821
|
|||||
Deferred
advertising
|
4,511
|
(2,766)
|
|||||
Prepayments
and
other
|
(10,888)
|
10,143
|
|||||
Income
taxes
payable
|
9,301
|
10,164
|
|||||
Accrued
expenses and
other
|
(11,273)
|
7,757
|
|||||
Net
cash provided by operating activities
|
175,581
|
133,289
|
|||||
Investing
activities
|
|||||||
Investment
in capital assets
|
(54,971)
|
(37,393)
|
|||||
Proceeds
from sales of capital assets
|
0
|
2,432
|
|||||
Gross
purchases of securities
|
(17,127)
|
(48,064)
|
|||||
Proceeds
from sales of securities
|
17,885
|
11,078
|
|||||
Acquisition
of Crosstown Traders, Inc., net of cash acquired
|
0
|
(256,467)
|
|||||
Purchase
of Catherines receivables portfolio
|
0
|
(56,582)
|
|||||
Securitization
of Catherines receivables portfolio
|
0
|
56,582
|
|||||
Securitization
of Crosstown apparel-related receivables
|
0
|
50,000
|
|||||
Increase
in other assets
|
(7,719)
|
(2,220)
|
|||||
Net
cash used by investing activities
|
(61,932)
|
(280,634)
|
|||||
Financing
activities
|
|||||||
Proceeds
from short-term borrowings
|
131,410
|
177,880
|
|||||
Repayments
of short-term borrowings
|
(161,410)
|
(117,880)
|
|||||
Proceeds
from long-term borrowings
|
0
|
50,000
|
|||||
Repayments
of long-term borrowings
|
(7,600)
|
(8,413)
|
|||||
Payments
of deferred financing costs
|
0
|
(850)
|
|||||
Excess
tax benefits related to stock-based compensation
|
2,516
|
0
|
|||||
Proceeds
from issuance of common stock
|
3,122
|
5,007
|
|||||
Net
cash provided/(used) by financing activities
|
(31,962)
|
105,744
|
|||||
Increase
(decrease) in cash and cash equivalents
|
81,687
|
(41,601)
|
|||||
Cash
and cash equivalents, beginning of period
|
130,132
|
273,049
|
|||||
Cash
and cash equivalents, end of period
|
$211,819
|
$231,448
|
|||||
Non-cash
financing and investing activities
|
|||||||
Equipment
acquired through capital leases
|
$
|
0
|
$
|
0
|
|||
Certain
prior-year amounts have been reclassified to conform to the current-year
presentation.
|
|||||||
See
Notes to Condensed Consolidated Financial
Statements
|
Average
|
||||||||||||||||
Option
|
Option
|
Option
Prices
|
||||||||||||||
Shares
|
Price
|
Per
Share
|
||||||||||||||
Outstanding
at January 28, 2006
|
3,672,108
|
$
|
5.82
|
$
|
1.00
|
–
|
$
|
12.48
|
||||||||
Granted
– option price equal to market price
|
61,233
|
11.33
|
11.28
|
–
|
13.84
|
|||||||||||
Granted
– option price less than market price
|
31,600
|
1.00
|
1.00
|
–
|
1.00
|
|||||||||||
Canceled/forfeited
|
(6,902
|
)
|
3.21
|
1.00
|
–
|
6.65
|
||||||||||
Exercised
|
(658,410
|
)
|
5.93
|
1.00
|
–
|
9.10
|
||||||||||
Outstanding
at July 29, 2006
|
3,099,629
|
$
|
5.86
|
$
|
1.00
|
–
|
$
|
13.84
|
||||||||
Exercisable
at July 29, 2006
|
2,858,963
|
$
|
5.86
|
$
|
1.00
|
–
|
$
|
13.84
|
Thirteen
|
Twenty-six
|
||||||
Weeks
Ended
|
Weeks
Ended
|
||||||
July
30,
|
July
30,
|
||||||
(In
thousands, except per share amounts)
|
2005
|
2005
|
|||||
Net
income as reported
|
$
|
39,424
|
$
|
69,441
|
|||
Add
stock-based employee compensation using intrinsic value
method,
|
|||||||
net
of income
taxes
|
940
|
1,737
|
|||||
Less
stock-based employee compensation using fair value method,
|
|||||||
net
of income
taxes
|
(1,107
|
)
|
(2,164
|
)
|
|||
Pro
forma net income
|
$
|
39,257
|
$
|
69,014
|
|||
Basic
net income per share:
|
|||||||
As
reported
|
$
|
.33
|
$
|
.58
|
|||
Pro
forma
|
.33
|
.58
|
|||||
Diluted
net income per share:
|
|||||||
As
reported
|
.30
|
.53
|
|||||
Pro
forma
|
.29
|
.52
|
Twenty-six
Weeks Ended
|
|||||||||||||
Balance
at
|
July
29, 2006
|
Balance
at
|
|||||||||||
January
28,
|
Payments/
|
July
29,
|
|||||||||||
(In
thousands)
|
2006
|
Adjustments
|
Settlements
|
2006
|
|||||||||
Severance
and related costs
|
$
|
4,380
|
$
|
(982
|
)
|
$
|
(1,041
|
)
|
$
|
2,357
|
|||
Lease
termination and related costs
|
2,180
|
564
|
(30
|
)
|
2,714
|
||||||||
Unfavorable
contract costs
|
900
|
(900
|
)
|
0
|
|||||||||
Other
costs
|
1,154
|
(62
|
)
|
(193
|
)
|
899
|
|||||||
Total
|
$
|
8,614
|
$
|
(1,380
|
)
|
$
|
(1,264
|
)
|
$
|
5,970
|
Thirteen
|
Twenty-six
|
||||||
Weeks
Ended
|
Weeks
Ended
|
||||||
July
30,
|
July
30,
|
||||||
(In
thousands, except per share amounts)
|
2005
|
2005
|
|||||
Net
sales
|
$
|
729,677
|
$
|
1,441,443
|
|||
Net
income
|
36,984
|
66,388
|
|||||
Net
income per share:
|
|||||||
Basic
|
$
|
.31
|
$
|
.56
|
|||
Diluted
|
.28
|
.50
|
July
29,
|
January
28,
|
||||||
(In
thousands)
|
2006
|
2006
|
|||||
Due
from customers
|
$
|
5,189
|
$
|
45,191
|
|||
Allowance
for doubtful accounts
|
(2,044
|
)
|
(6,588
|
)
|
|||
Net
accounts receivable
|
$
|
3,145
|
$
|
38,603
|
July
29,
|
January
28,
|
||||||
(In
thousands)
|
2006
|
2006
|
|||||
Trademarks,
tradenames, and internet domain names
|
$
|
240,300
|
$
|
238,800
|
|||
Customer
lists, customer relationships, and covenant not to compete
|
16,400
|
16,400
|
|||||
Total
at cost
|
256,700
|
255,200
|
|||||
Less
accumulated amortization of customer lists, customer
|
|||||||
relationships,
and covenant not
to compete
|
7,094
|
5,126
|
|||||
Net
trademarks and other intangible assets
|
$
|
249,606
|
$
|
250,074
|
July
29,
|
January
28,
|
||||||
(In
thousands)
|
2006
|
2006
|
|||||
Short-term
borrowings
|
|||||||
Revolving
credit facility
|
$
|
20,000
|
$
|
50,000
|
|||
Long-term
debt
|
|||||||
4.75%
Senior Convertible Notes, due June 2012
|
$
|
150,000
|
$
|
150,000
|
|||
Capital
lease obligations
|
18,591
|
24,825
|
|||||
6.07%
mortgage note, due October 2014
|
11,989
|
12,261
|
|||||
6.53%
mortgage note, due November 2012
|
8,750
|
9,450
|
|||||
7.77%
mortgage note, due December 2011
|
8,778
|
9,050
|
|||||
Other
long-term debt
|
1,036
|
1,158
|
|||||
Total
long-term debt
|
199,144
|
206,744
|
|||||
Less
current portion
|
12,672
|
14,765
|
|||||
Long-term
debt
|
$
|
186,472
|
$
|
191,979
|
Twenty-six
|
||||
Weeks
Ended
|
||||
July
29,
|
||||
(Dollars
in thousands)
|
2006
|
|||
Total
stockholders’ equity, beginning of period
|
$
|
814,348
|
||
Net
income
|
64,624
|
|||
Issuance
of common stock (874,913 shares)
|
3,122
|
|||
Stock-based
compensation expense
|
5,015
|
|||
Excess
tax benefits related to stock-based compensation
|
2,516
|
|||
Unrealized
gains on available-for-sale securities, net of tax
|
4
|
|||
Total
stockholders’ equity, end of period
|
$
|
889,629
|
Thirteen
Weeks Ended
|
Twenty-six
Weeks Ended
|
||||||||||||
July
29,
|
July
30,
|
July
29,
|
July
30,
|
||||||||||
(In
thousands, except per share amounts)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
Basic
weighted average common shares outstanding
|
122,125
|
119,452
|
121,969
|
119,219
|
|||||||||
Dilutive
effect of assumed conversion of
|
|||||||||||||
convertible
notes
|
15,182
|
15,182
|
15,182
|
15,182
|
|||||||||
Dilutive
effect of stock options and awards
|
2,047
|
1,975
|
2,240
|
1,775
|
|||||||||
Diluted
weighted average common shares and
|
|||||||||||||
equivalents
outstanding
|
139,354
|
136,609
|
139,391
|
136,176
|
|||||||||
Net
income
|
$
|
32,563
|
$
|
39,424
|
$
|
64,624
|
$
|
69,441
|
|||||
Decrease
in interest expense from assumed
|
|||||||||||||
conversion
of notes, net of
income taxes
|
1,128
|
1,128
|
2,257
|
2,257
|
|||||||||
Net
income used to determine diluted
|
|||||||||||||
net
income per
share
|
$
|
33,691
|
$
|
40,552
|
$
|
66,881
|
$
|
71,698
|
|||||
Options
with weighted average exercise price
|
|||||||||||||
greater
than market price,
excluded from
|
|||||||||||||
computation
of net income per
share:
|
|||||||||||||
Number
of shares
|
4
|
0
|
1
|
11
|
|||||||||
Weighted
average exercise price
per share
|
$
|
12.87
|
$
|
0.00
|
$
|
13.84
|
$
|
9.10
|
Retail
|
Direct-to-
|
Corporate
|
|||||||||||
(In
thousands)
|
Stores(1)
|
Consumer
|
and
Other
|
Consolidated
|
|||||||||
Thirteen
weeks ended July 29, 2006
|
|||||||||||||
Net
sales
|
$
|
669,808
|
$
|
92,348
|
$
|
1,197
|
$
|
763,353
|
|||||
Depreciation
and amortization
|
15,383
|
755
|
8,833
|
24,971
|
|||||||||
Income
before interest and taxes
|
55,186
|
424
|
(576
|
)
|
55,034
|
||||||||
Interest
expense
|
(3,811
|
)
|
(3,811
|
)
|
|||||||||
Income
tax provision
|
(18,660
|
)
|
(18,660
|
)
|
|||||||||
Net
income
|
55,186
|
424
|
(23,047
|
)
|
32,563
|
||||||||
Capital
expenditures
|
22,698
|
2,030
|
6,389
|
31,117
|
|||||||||
Twenty-six
weeks ended July 29, 2006
|
|||||||||||||
Net
sales
|
$
|
1,297,212
|
$
|
199,753
|
$
|
1,310
|
$
|
1,498,275
|
|||||
Depreciation
and amortization
|
26,477
|
1,300
|
17,352
|
45,129
|
|||||||||
Income
before interest and taxes
|
115,473
|
3,396
|
(9,885
|
)
|
108,984
|
||||||||
Interest
expense
|
(7,935
|
)
|
(7,935
|
)
|
|||||||||
Income
tax provision
|
(36,425
|
)
|
(36,425
|
)
|
|||||||||
Net
income
|
115,473
|
3,396
|
(54,245
|
)
|
64,624
|
||||||||
Capital
expenditures
|
38,111
|
2,990
|
13,870
|
54,971
|
|||||||||
____________________
|
|||||||||||||
(1)Includes
76 LANE BRYANT OUTLET stores opened in July 2006 (see “Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations; RECENT DEVELOPMENTS” below).
|
|||||||||||||
(Table
continued on next page)
|
Retail
|
Direct-to-
|
Corporate
|
|||||||||||
(In
thousands)
|
Stores
|
Consumer(1)
|
and
Other
|
Consolidated
|
|||||||||
Thirteen
weeks ended July 30, 2005
|
|||||||||||||
Net
sales
|
$
|
638,813
|
$
|
49,439
|
$
|
823
|
$
|
689,075
|
|||||
Depreciation
and amortization
|
10,327
|
277
|
9,650
|
20,254
|
|||||||||
Income
before interest and taxes
|
74,594
|
66
|
(7,681
|
)
|
66,979
|
||||||||
Interest
expense
|
(4,712
|
)
|
(4,712
|
)
|
|||||||||
Income
tax provision
|
(22,843
|
)
|
(22,843
|
)
|
|||||||||
Net
income
|
74,594
|
66
|
(35,236
|
)
|
39,424
|
||||||||
Capital
expenditures
|
13,939
|
297
|
5,460
|
19,696
|
|||||||||
Twenty-six
weeks ended July 30, 2005
|
|||||||||||||
Net
sales
|
$
|
1,242,080
|
$
|
49,439
|
$
|
909
|
$
|
1,292,428
|
|||||
Depreciation
and amortization
|
20,821
|
277
|
17,884
|
38,982
|
|||||||||
Income
before interest and taxes
|
132,242
|
66
|
(14,021
|
)
|
118,287
|
||||||||
Interest
expense
|
(8,637
|
)
|
(8,637
|
)
|
|||||||||
Income
tax provision
|
(40,209
|
)
|
(40,209
|
)
|
|||||||||
Net
income
|
132,242
|
66
|
(62,867
|
)
|
69,441
|
||||||||
Capital
expenditures
|
27,851
|
297
|
9,245
|
37,393
|
|||||||||
____________________
|
|||||||||||||
(1)From
date of acquisition of Crosstown Traders, Inc. on June 2,
2005.
|
|
·
|
Our
business is dependent upon our ability to accurately predict rapidly
changing fashion trends, customer preferences, and other fashion-related
factors, which we may not be able to successfully accomplish in
the
future.
|
|
·
|
A
slowdown in the United States economy, an uncertain economic outlook,
and
escalating energy costs could lead to reduced consumer demand for
our
products in the future.
|
|
·
|
The
women’s specialty retail apparel and direct-to-consumer markets are highly
competitive and we may be unable to compete successfully against
existing
or future competitors.
|
|
·
|
We
may be unable to successfully integrate the operations of Crosstown
Traders, Inc. (“Crosstown Traders”) with the operations of Charming
Shoppes, Inc. In addition, we cannot assure the successful implementation
of our business plan for Crosstown
Traders.
|
|
·
|
We
cannot assure the successful implementation of our business plans
for
entry into the outlet store distribution channel and expansion
of our
CACIQUE® product line through new store
formats.
|
|
·
|
We
cannot assure the successful implementation of our business plan
for
increased profitability and growth in our Retail Stores or
Direct-to-Consumer segments.
|
|
·
|
Our
business plan is largely dependent upon continued growth in the
plus-size
women’s apparel market, which may not
occur.
|
|
·
|
We
depend on key personnel, particularly our Chief Executive Officer,
Dorrit
J. Bern, and we may not be able to retain or replace these employees
or
recruit additional qualified
personnel.
|
|
·
|
We
depend on our distribution and fulfillment centers, and could incur
significantly higher costs and longer lead times associated with
distributing our products to our stores and shipping our products
to our
E-commerce and catalog customers if operations at any of these
distribution and fulfillment centers were to be disrupted for any
reason.
|
|
·
|
We
depend on the availability of credit for our working capital needs,
including credit we receive from our suppliers and their agents,
and on
our credit card securitization facilities. If we were unable to
obtain
sufficient financing at an affordable cost, our ability to merchandise
our
stores, E-commerce, or catalog businesses would be adversely
affected.
|
|
·
|
Natural
disasters, as well as war, acts of terrorism, or the threat of
either may
negatively impact availability of merchandise and customer traffic
to our
stores, or otherwise adversely affect our
business.
|
|
·
|
We
rely significantly on foreign sources of production and face a
variety of
risks generally associated with doing business in foreign markets
and
importing merchandise from abroad. Such risks include (but are
not
necessarily limited to) political instability; imposition of, or
changes
in, duties or quotas; trade restrictions; increased security requirements
applicable to imports; delays in shipping; increased costs of
transportation; and issues relating to compliance with domestic
or
international labor standards.
|
|
·
|
Our
Retail Stores and Direct-to-Consumer segments experience seasonal
fluctuations in net sales and operating income. Any decrease in
sales or
margins during our peak sales periods, or in the availability of
working
capital during the months preceding such periods, could have a
material
adverse effect on our business. In addition, extreme or unseasonable
weather conditions may have a negative impact on our
sales.
|
|
·
|
We
may be unable to obtain adequate insurance for our operations at
a
reasonable cost.
|
|
·
|
We
may be unable to protect our trademarks and other intellectual
property
rights, which are important to our success and our competitive
position.
|
|
·
|
We
may be unable to hire and retain a sufficient number of suitable
sales
associates at our stores.
|
|
·
|
Our
manufacturers may be unable to manufacture and deliver merchandise
to us
in a timely manner or to meet our quality
standards.
|
|
·
|
Our
Retail Stores segment sales are dependent upon a high volume of
traffic in
the strip centers and malls in which our stores are located, and
our
future retail store growth is dependent upon the availability of
suitable
locations for new stores.
|
|
·
|
Successful
operation of our E-commerce websites and our catalog business is
dependent
on our ability to maintain efficient and uninterrupted customer
service
and fulfillment operations.
|
|
·
|
We
may be unable to manage significant increases in certain costs
vital to
catalog operations, including postage, paper, and acquisition of
prospects, which could adversely affect our results of
operations.
|
|
·
|
Response
rates to our catalogs and access to new customers could decline,
which
would adversely affect our net sales and results of
operations.
|
|
·
|
We
may be unable to successfully implement our plan to improve merchandise
assortments in our Retail Stores or Direct-to-Consumer
segments.
|
|
·
|
We
make certain significant assumptions, estimates, and projections
related
to the useful lives of our property, plant, and equipment and the
valuation of intangible assets related to acquisitions. The carrying
amount and/or useful life of these assets are subject to periodic
valuation tests for impairment. Impairment results when the carrying
value
of an asset exceeds the undiscounted (or for goodwill and indefinite-lived
intangible assets the discounted) future cash flows associated
with the
asset. If actual experience were to differ materially from the
assumptions, estimates, and projections used to determine useful
lives or
the valuation of property, plant, equipment, or intangible assets,
a
write-down for impairment of the carrying value of the assets,
or
acceleration of depreciation or amortization of the assets, could
result.
Such a write-down or acceleration of depreciation or amortization
would
have an adverse impact on our reported results of
operations.
|
|
·
|
Changes
to existing accounting rules or the adoption of new rules could
have an
adverse impact on our reported results of
operations.
|
|
·
|
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we are required
to
include our assessment of the effectiveness of our internal control
over
financial reporting in our annual reports. Our independent registered
public accounting firm is also required to attest to whether or
not our
assessment is fairly stated in all material respects and to separately
report on whether or not they believe that we maintained, in all
material
respects, effective internal control over financial reporting.
If we are
unable to maintain effective internal control over financial reporting,
or
if our independent registered public accounting firm is unable
to timely
attest to our assessment, we could be subject to regulatory sanctions
and
a possible loss of public confidence in the reliability of our
financial
reporting. Such a failure could result in our inability to provide
timely
and/or reliable financial information and could adversely affect
our
business.
|
Percentage
|
Percentage
|
||||||||||||||||||
Thirteen
Weeks Ended(1)
|
Change
|
Twenty-six
Weeks Ended(1)
|
Change
|
||||||||||||||||
July
29,
|
July
30,
|
From
Prior
|
July
29,
|
July
30,
|
From
Prior
|
||||||||||||||
2006
|
2005(2)
|
Period
|
2006
|
2005(2)
|
Period
|
||||||||||||||
Net
sales
|
100.0
|
%
|
100.0
|
%
|
10.8
|
%
|
100.0
|
%
|
100.0
|
%
|
15.9
|
%
|
|||||||
Cost
of goods sold, buying, catalog,
|
|||||||||||||||||||
and
occupancy
expenses
|
69.7
|
67.8
|
14.0
|
68.8
|
67.3
|
18.6
|
|||||||||||||
Selling,
general, and
|
|||||||||||||||||||
administrative
expenses
|
23.4
|
22.8
|
13.9
|
24.2
|
23.8
|
17.6
|
|||||||||||||
Income
from operations
|
6.8
|
9.4
|
(19.7
|
)
|
7.0
|
8.9
|
(8.8
|
)
|
|||||||||||
Other
income
|
0.4
|
0.3
|
44.4
|
0.3
|
0.3
|
23.3
|
|||||||||||||
Interest
expense
|
0.5
|
0.7
|
(19.1
|
)
|
0.5
|
0.7
|
(8.1
|
)
|
|||||||||||
Income
tax provision
|
2.4
|
3.3
|
(18.3
|
)
|
2.4
|
3.1
|
(9.4
|
)
|
|||||||||||
Net
income
|
4.3
|
5.7
|
(17.4
|
)
|
4.3
|
5.4
|
(6.9
|
)
|
|||||||||||
____________________
|
|||||||||||||||||||
(1)Results
may not add due to rounding.
|
|||||||||||||||||||
(2)Includes
the results of operations of Crosstown Traders, Inc. from the date
of
acquisition on June 2, 2005.
|
Thirteen
Weeks Ended
|
Twenty-six
Weeks Ended
|
||||||||||||
July
29,
|
July
30,
|
July
29,
|
July
30,
|
||||||||||
(In
millions)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
FASHION
BUG
|
$
|
292.7
|
$
|
292.9
|
$
|
548.5
|
$
|
549.4
|
|||||
LANE
BRYANT(1)
|
281.2
|
252.9
|
558.3
|
510.4
|
|||||||||
CATHERINES
|
95.9
|
93.0
|
190.4
|
182.3
|
|||||||||
Total
Retail Stores segment sales
|
669.8
|
638.8
|
1,297.2
|
1,242.1
|
|||||||||
Total
Direct-to-Consumer segment sales(2)
|
92.3
|
49.4
|
199.8
|
49.4
|
|||||||||
Corporate
and other(3)
|
1.2
|
0.9
|
1.3
|
0.9
|
|||||||||
Total
net sales
|
$
|
763.3
|
$
|
689.1
|
$
|
1,498.3
|
$
|
1,292.4
|
|||||
____________________
|
|||||||||||||
(1)Includes
76 LANE BRYANT OUTLET stores opened in July 2006 (see “RECENT
DEVELOPMENTS” above).
|
|||||||||||||
(2)Includes
the results of operations of Crosstown Traders, Inc. from the date
of
acquisition on June 2, 2005.
|
|||||||||||||
(3)Revenue
related to loyalty card
fees.
|
Thirteen
Weeks Ended
|
Twenty-six
Weeks Ended
|
||||||||||||
July
29,
|
July
30,
|
July
29,
|
July
30,
|
||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Retail
Stores segment
|
|||||||||||||
Increase
(decrease) in comparable store sales(1) :
|
|||||||||||||
Consolidated
retail
stores
|
2
|
%
|
3
|
%
|
1
|
%
|
1
|
%
|
|||||
FASHION
BUG
|
(1
|
)
|
1
|
(1
|
)
|
0
|
|||||||
LANE
BRYANT
|
4
|
2
|
3
|
1
|
|||||||||
CATHERINES
|
2
|
10
|
4
|
7
|
|||||||||
Sales
from new stores as a percentage
|
|||||||||||||
of
total consolidated
prior-period sales:
|
|||||||||||||
FASHION
BUG
|
2
|
2
|
2
|
1
|
|||||||||
LANE
BRYANT
|
4
|
4
|
5
|
4
|
|||||||||
CATHERINES
|
1
|
1
|
1
|
1
|
|||||||||
Prior-period
sales from closed stores as a percentage
|
|||||||||||||
of
total consolidated
prior-period sales:
|
|||||||||||||
FASHION
BUG
|
(1
|
)
|
(2
|
)
|
(1
|
)
|
(2
|
)
|
|||||
LANE
BRYANT
|
(1
|
)
|
(1
|
)
|
(1
|
)
|
(1
|
)
|
|||||
CATHERINES
|
(1
|
)
|
(1
|
)
|
(1
|
)
|
(1
|
)
|
|||||
Increase
in Retail Stores segment sales
|
5
|
4
|
4
|
3
|
|||||||||
Direct-to-Consumer
segment
|
|||||||||||||
Increase
in Direct-to-Consumer segment sales
|
—
|
(2)
|
—
|
—
|
(2)
|
—
|
|||||||
Increase
in consolidated total net sales
|
11
|
13
|
16
|
7
|
|||||||||
____________________
|
|||||||||||||
(1)“Comparable
store sales” is not a measure that has been defined under generally
accepted accounting principles. The method of calculating comparable
store
sales varies across the retail industry and, therefore, our calculation
of
comparable store sales is not necessarily comparable to similarly-titled
measures reported by other companies. We define comparable store
sales as
sales from stores operating in both the current and prior-year
periods.
New stores are added to the comparable store sales base 13 months
after
their open date. Sales from stores that are relocated within the
same mall
or strip-center, remodeled, or have a legal square footage change
of less
than 20% are included in the calculation of comparable store sales.
Sales
from stores that are relocated outside the existing mall or strip-center,
or have a legal square footage change of 20% or more, are excluded
from
the calculation of comparable store sales until 13 months after
the
relocated store is opened. Stores that are temporarily closed for
a period
of 4 weeks or more are excluded from the calculation of comparable
store
sales for the applicable periods in the year of closure and the
subsequent
year. Non-store sales, such as catalog and internet sales, are
excluded
from the calculation of comparable store sales.
|
|||||||||||||
(2)Comparison
not meaningful, as prior-year periods include sales from Crosstown
Traders, Inc. from the date of acquisition on June 2, 2005 (approximately
8 weeks).
|
FASHION
|
LANE
|
||||||||||||
BUG
|
BRYANT
|
CATHERINES
|
Total
|
||||||||||
Fiscal
2007 Year-to-Date(1):
|
|||||||||||||
Stores
at January 28, 2006
|
1,025
|
748
|
463
|
2,236
|
|||||||||
Stores
opened
|
4
|
95
|
(2)
|
6
|
105
|
||||||||
Stores
closed
|
(8
|
)
|
(13
|
)
|
(3
|
)
|
(24
|
)
|
|||||
Net
change in stores
|
(4
|
)
|
82
|
3
|
81
|
||||||||
Stores
at July 29, 2006
|
1,021
|
830
|
466
|
2,317
|
|||||||||
Stores
relocated during period
|
14
|
14
|
4
|
32
|
|||||||||
Fiscal
2007(3):
|
|||||||||||||
Planned
store openings
|
13
|
134
|
(4)
|
8
|
155
|
||||||||
Planned
store closings
|
20
|
16
|
8
|
44
|
|||||||||
Planned
store relocations
|
26
|
35
|
11
|
72
|
|||||||||
____________________
|
|||||||||||||
(1)Excludes
2 Crosstown Traders outlet stores.
|
|||||||||||||
(2)Includes
76 LANE BRYANT OUTLET stores opened in July 2006 (see “RECENT
DEVELOPMENTS” above).
|
|||||||||||||
(3)Does
not include approximately 45 PETITE SOPHISTICATE OUTLET stores
(see
“RECENT DEVELOPMENTS” above).
|
|||||||||||||
(4)Includes
83 LANE BRYANT OUTLET stores (see “RECENT DEVELOPMENTS”
above).
|
July
29,
|
January
28,
|
||||||
(Dollars
in millions)
|
2006
|
2006
|
|||||
Cash
and cash equivalents
|
$
|
211.8
|
$
|
130.1
|
|||
Available-for-sale
securities
|
22.2
|
20.2
|
|||||
Working
capital
|
$
|
407.9
|
$
|
338.6
|
|||
Current
ratio
|
2.0
|
1.8
|
|||||
Long-term
debt to equity ratio
|
21.0
|
%
|
23.6
|
%
|
(Dollars
in millions)
|
Series
1999-2
|
Series
2002-1
|
Series
2004
|
Series
2004-1
|
2005-RPA(1)
|
Date
of facility
|
May
1999
|
November
2002
|
January
2004
|
August
2004
|
May
2005
|
Type
of facility
|
Conduit
|
Term
|
Conduit
|
Term
|
Conduit
|
Maximum
funding
|
$50.0
|
$100.0
|
$50.0
|
$180.0
|
$55.0
|
Funding
as of July 29, 2006
|
$27.9
|
$100.0
|
$00.0
|
$180.0
|
$51.5
|
First
scheduled principal payment
|
Not
applicable
|
August
2007
|
Not
applicable
|
April
2009
|
Not
applicable
|
Expected
final principal payment
|
Not
applicable(2)
|
May
2008
|
Not
applicable(2)
|
March
2010
|
Not
applicable(2)
|
Renewal
|
Annual
|
Not
applicable
|
Annual
|
Not
applicable
|
Annual
|
____________________
|
|||||
(1)Receivables
Purchase Agreement (for the Crosstown Traders catalog proprietary
credit
card receivables program).
|
|||||
(2)Series
1999-2 and Series 2004 have scheduled final payment dates that
occur in
the twelfth month following the month in which the series begins
amortizing. These series and 2005-RPA generally begin amortizing
364 days
after start of the purchase commitment by the series purchaser
currently
in effect.
|
Total
|
Maximum
|
||||||||||||
Number
|
Number
of
|
||||||||||||
of
Shares
|
Shares
that
|
||||||||||||
Purchased
as
|
May
Yet be
|
||||||||||||
Total
|
Part
of Publicly
|
Purchased
|
|||||||||||
Number
|
Average
|
Announced
|
Under
the
|
||||||||||
of
Shares
|
Price
Paid
|
Plans
or
|
Plans
or
|
||||||||||
Period
|
Purchased
|
per
Share
|
Programs(2)
|
Programs(2)
|
|||||||||
April
30, 2006 through
|
|||||||||||||
May
27, 2006
|
1,209
|
(1)
|
$
|
13.96
|
-
|
-
|
|||||||
May
28, 2006 through
|
|||||||||||||
July
1, 2006
|
7,052
|
(1)
|
11.48
|
-
|
-
|
||||||||
July
2, 2006 through
|
|||||||||||||
July
29, 2006
|
861
|
(1)
|
10.93
|
-
|
-
|
||||||||
Total
|
9,122
|
$
|
11.75
|
-
|
-
|
||||||||
____________________
|
|||||||||||||
(1) Shares
withheld for the payment of payroll taxes on employee stock awards
that
vested during the period.
|
|||||||||||||
(2) In
Fiscal 1998, we publicly announced that our Board of Directors
granted
authority to repurchase up to 10,000,000 shares of our common
stock. In
Fiscal 2000, we publicly announced that our Board of Directors
granted
authority to repurchase up to an additional 10,000,000 shares
of our
common stock. In Fiscal 2003, the Board of Directors granted
an additional
authorization to repurchase 6,350,662 shares of common stock
issued to
Limited Brands in connection with our acquisition of LANE BRYANT.
From
Fiscal 1998 through Fiscal 2003, we repurchased a total of 21,370,993
shares of common stock, which included shares purchased on the
open market
as well as shares repurchased from Limited Brands. As of July
30, 2005,
4,979,669 shares of our common stock remain available for repurchase
under
these programs. Our revolving credit facility allows the repurchase
of our
common stock subject to maintaining a minimum level of Excess
Availability
(as defined in the facility agreement) immediately before and
after such
repurchase. As conditions may allow, we may from time to time
acquire
additional shares of our common stock under these programs. Such
shares,
if purchased, would be held as treasury shares. No shares were
acquired
under these programs during the thirteen weeks ended July 29,
2006. The
repurchase programs have no expiration
date.
|
Name
|
Votes
For
|
Votes
Withheld
|
William
O. Albertini
|
113,385,288
|
2,380,714
|
Charles
T. Hopkins
|
101,717,914
|
14,048,088
|
Yvonne
M. Curl
|
113,622,693
|
2,143,309
|
M.
Jeannine Strandjord
|
113,619,877
|
2,146,125
|
2.1
|
Stock
Purchase Agreement dated May 19, 2005 by and among Chestnut Acquisition
Sub, Inc., Crosstown Traders, Inc., the Securityholders of Crosstown
Traders, Inc. whose names are set forth on the signature pages
thereto,
and J.P. Morgan Partners (BHCA), L.P., as the Sellers’ Representative,
incorporated by reference to Form 8-K of the Registrant dated June
2,
2005, filed on June 8, 2005. (Exhibit 2.1).
|
3.1
|
Restated
Articles of Incorporation, incorporated by reference to Form 10-K
of the
Registrant for the fiscal year ended January 29, 1994 (File No.
000-07258,
Exhibit 3.1).
|
3.2
|
Bylaws,
as Amended and Restated, incorporated by reference to Form 10-Q
of the
Registrant for the quarter ended July 31, 1999 (File No. 000-07258,
Exhibit 3.2).
|
31.1
|
Certification
by Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification
by Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
99.1
|
Amendment
No. 1, dated as of May 17, 2006, to Second Amended and Restated
Loan and
Security Agreement, dated July 28, 2005, by and among Charming
Shoppes,
Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc.,
FB
Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc.,
and
Crosstown Traders, Inc. as borrowers; a syndicate of banks and
other
financial institutions as lenders, including Wachovia Bank, National
Association as agent for the lenders; and certain of the Company’s
subsidiaries as guarantors.
|
CHARMING
SHOPPES, INC.
|
|
(Registrant)
|
|
Date:August
31, 2006
|
/S/
DORRIT J. BERN
|
Dorrit
J. Bern
|
|
Chairman
of the Board
|
|
President
and Chief Executive Officer
|
|
Date:August
31, 2006
|
/S/
ERIC M. SPECTER
|
Eric
M. Specter
|
|
Executive
Vice President
|
|
Chief
Financial Officer
|
Exhibit
No.
|
Item
|
2.1
|
Stock
Purchase Agreement dated May 19, 2005 by and among Chestnut Acquisition
Sub, Inc., Crosstown Traders, Inc., the Securityholders of Crosstown
Traders, Inc. whose names are set forth on the signature pages
thereto and
J.P. Morgan Partners (BHCA), L.P., as the Sellers’ Representative,
incorporated by reference to Form 8-K of the Registrant dated June
2,
2005, filed on June 8, 2005. (Exhibit 2.1).
|
3.1
|
Restated
Articles of Incorporation, incorporated by reference to Form 10-K
of the
Registrant for the fiscal year ended January 29, 1994 (File No.
000-07258,
Exhibit 3.1).
|
3.2
|
Bylaws,
as Amended and Restated, incorporated by reference to Form 10-Q
of the
Registrant for the quarter ended July 31, 1999 (File No. 000-07258,
Exhibit 3.2).
|
31.1
|
Certification
By Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification
By Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
99.1
|
Amendment
No. 1, dated as of May 17, 2006, to Second Amended and Restated
Loan and
Security Agreement, dated July 28, 2005, by and among Charming
Shoppes,
Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc.,
FB
Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc.,
and
Crosstown Traders, Inc. as borrowers; a syndicate of banks and
other
financial institutions as lenders, including Wachovia Bank, National
Association as agent for the lenders; and certain of the Company’s
subsidiaries as guarantors.
|