Company narrows loss for Q2 to $0.02 per share
CITY OF INDUSTRY, Calif.--(BUSINESS WIRE)--Aug. 15, 2012--
Hot Topic, Inc. (Nasdaq Global Select Market: HOTT) reported results for
its second quarter of fiscal 2012 (13 weeks) ended July 28, 2012.
The company reported a net loss in the second fiscal quarter of $0.8
million, or $0.02 per share, compared to a net loss of $6.2 million, or
$0.14 per share, for the comparable period last year. The results for
the second quarter of 2011 include $4.1 million of expenses, or $0.06
per share, for the implementation of the strategic business changes and
cost reduction plan. On a non-GAAP basis, which excludes these charges,
the second quarter of 2011 results were a net loss of $0.08 per share.
Refer to GAAP to non-GAAP reconciliation below.
Total sales for the second quarter of fiscal 2012 increased 4.6% to
$157.8 million compared to $150.9 million for the second quarter last
year. Total company comparable sales increased 3.9% for the second
quarter of fiscal 2012.
“This was a strong quarter, with improved merchandising, markdown
optimization, and other productivity initiatives showing great results
at Hot Topic and Torrid,” said Lisa Harper, Chairman and CEO of Hot
Topic, Inc. “We’re also pleased with the progress at Torrid, where we’ve
rolled out a comprehensive, well-differentiated rebrand over the last
couple of weeks. We believe our sexy, fashion-forward point of view will
help drive continued improvement for the brand and the company overall.”
At the end of the second quarter of fiscal 2012, the company operated
620 Hot Topic stores and 171 Torrid stores compared to 636 Hot Topic
stores and 145 Torrid stores at the end of second quarter of fiscal
2011. During the second quarter of fiscal 2012, the company opened one
Hot Topic store and ten Torrid stores and closed five Hot Topic stores
and three Torrid stores. The company also remodeled or relocated twenty
Hot Topic stores and four Torrid stores during the quarter.
A conference call to discuss second quarter results, business trends,
guidance and other matters is scheduled for August 15, 2012 at 4:30 PM
(ET). The live conference call number is 800-510-9836, pass code “Hot
Topic”, and will be accessible to all interested parties. It will also
be webcast on the company’s Investor Relations website located at http://investorrelations.hottopic.com.
A replay of the conference call will be available at 888-286-8010, pass
code 73585505, for approximately two weeks. In addition, a webcast
replay of the conference call will be available on the company’s
Investor Relations website for approximately two weeks.
Hot Topic, Inc. is a mall and web based specialty retailer operating the
Hot Topic and Torrid concepts. Hot Topic offers music/pop
culture-licensed and music/pop culture-influenced apparel, accessories,
music and gift items for young men and women. Torrid offers on-trend
fashion apparel, lingerie and accessories inspired by and designed to
fit the young, voluptuous woman who wears a size 12 and up.
This news release and the aforementioned conference call contain
forward-looking statements, which may include statements relating to
financial results, guidance, store and online operations (including
closures, remodels and relocations), projections, financial performance
including cost reductions and changes in business operations, and
related matters. These statements involve risks and uncertainties,
including risks and uncertainties associated with meeting expected
financial results, fluctuations in sales and comparable sales results,
music, license and fashion trends, competition from other retailers,
uncertainties generally associated with specialty retailing, technology
and other risks associated with Internet sales, the effect of negative
conditions in the economic environment (including global capital and
credit markets), the effect of severe weather or natural disasters,
political and/or social changes or events that could negatively impact
shopping patterns and/or mall traffic, relationships with mall
developers and operators, relationships with our vendors, litigation
proceedings and contingent liabilities, as well as other risks detailed
in the company’s SEC reports including its Annual Report on Form 10-K
for the year ended January 28, 2012, and its Quarterly Reports on Form
10-Q. Historical results achieved are not necessarily indicative of the
future prospects of the company, and actual results or circumstances
could differ materially from the forward-looking statements.
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HOT TOPIC, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
|
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(In thousands, except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Jul. 28, 2012
|
|
Jul. 30, 2011
|
|
|
|
|
|
|
|
Net sales
|
|
$157,828
|
|
|
$150,950
|
|
|
Cost of goods sold, including buying, distribution and occupancy
costs
|
|
103,977
|
|
|
102,288
|
|
|
Gross margin
|
|
53,851
|
|
|
48,662
|
|
|
Selling, general & administrative expenses
|
|
55,091
|
|
|
58,760
|
|
|
Loss from operations
|
|
(1,240
|
)
|
|
(10,098
|
)
|
|
Interest income and other income (expense), net
|
|
(6
|
)
|
|
82
|
|
|
Loss before benefit for income taxes
|
|
(1,246
|
)
|
|
(10,016
|
)
|
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Benefit for income taxes
|
|
(478
|
)
|
|
(3,796
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)
|
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Net loss
|
|
$(768
|
)
|
|
$(6,220
|
)
|
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|
|
|
|
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Loss per share:
|
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|
|
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Basic and Diluted
|
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$(0.02
|
)
|
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$(0.14
|
)
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Shares used in computing loss per share:
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|
|
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Basic and Diluted
|
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42,252
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|
|
44,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Six Months Ended
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|
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Jul. 28, 2012
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Jul. 30, 2011
|
|
|
|
|
|
|
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Net sales
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$329,372
|
|
|
$312,223
|
|
|
Cost of goods sold, including buying, distribution and occupancy
costs
|
|
213,836
|
|
|
213,152
|
|
|
Gross margin
|
|
115,536
|
|
|
99,071
|
|
|
Selling, general & administrative expenses
|
|
110,694
|
|
|
121,558
|
|
|
Income (loss) from operations
|
|
4,842
|
|
|
(22,487
|
)
|
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Interest income and other income, net
|
|
56
|
|
|
134
|
|
|
Income (loss) before provision (benefit) for income taxes
|
|
4,898
|
|
|
(22,353
|
)
|
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Provision (benefit) for income taxes
|
|
1,831
|
|
|
(8,472
|
)
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Net income (loss)
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$3,067
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$(13,881
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)
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|
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Income (loss) per share:
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|
|
|
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Basic and Diluted
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$0.07
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|
|
$(0.31
|
)
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Shares used in computing earnings (loss) per share:
|
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|
|
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Basic
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42,196
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|
44,778
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Diluted
|
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42,915
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44,778
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HOT TOPIC, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(In thousands)
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(Unaudited)
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Jul. 28, 2012
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Jul. 30, 2011
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Current Assets:
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|
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Cash, cash equivalents and short-term investments
|
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$63,643
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|
$72,550
|
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Inventory
|
|
80,239
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|
72,984
|
|
Prepaid expenses and other
|
|
16,006
|
|
27,431
|
|
Deferred tax assets
|
|
5,706
|
|
4,304
|
|
Total current assets
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|
165,594
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|
177,269
|
|
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|
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Property and equipment, net
|
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106,863
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112,705
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Deposits and other
|
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7,165
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6,441
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Long-term investments
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1,724
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|
1,819
|
|
Deferred tax assets
|
|
3,900
|
|
6,391
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|
|
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Total assets
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$285,246
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|
$304,625
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Current Liabilities:
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Accounts payable
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$34,051
|
|
$35,282
|
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Accrued liabilities
|
|
42,736
|
|
39,716
|
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Income taxes payable
|
|
1,350
|
|
665
|
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Total current liabilities
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78,137
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75,663
|
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Deferred rent
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19,217
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|
22,565
|
|
Deferred compensation liability
|
|
4,596
|
|
4,665
|
|
Income taxes payable
|
|
593
|
|
1,911
|
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Total liabilities
|
|
102,543
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|
104,804
|
|
|
|
|
|
|
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Total shareholders’ equity
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182,703
|
|
199,821
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$285,246
|
|
$304,625
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HOT TOPIC, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(In thousands)
|
|
(Unaudited)
|
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|
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Six Months Ended
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July 28, 2012
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July 30, 2011
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Operating Activities
|
|
|
|
|
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Net income (loss)
|
|
$3,067
|
|
($13,881)
|
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Adjustments to reconcile net income (loss) to net cash provided by
operations:
|
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|
|
|
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Depreciation and amortization
|
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16,941
|
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18,217
|
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Change in inventory
|
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(9,594)
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(2,681)
|
|
Other, net
|
|
11,871
|
|
10,361
|
|
Net cash flows provided by operating activities
|
|
22,285
|
|
12,016
|
|
|
|
|
|
|
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Investing activities
|
|
|
|
|
|
Purchases of property and equipment
|
|
(19,491)
|
|
(12,102)
|
|
Proceeds from sale of investments
|
|
4,435
|
|
10,974
|
|
Net cash flows used in investing activities
|
|
(15,056)
|
|
(1,128)
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|
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Financing activities
|
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|
|
|
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Payment of cash dividends
|
|
(6,762)
|
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(6,278)
|
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Excess tax benefit from stock-based compensation
|
|
421
|
|
194
|
|
Proceeds from employee stock purchases and stock options exercised
|
|
1,073
|
|
1,111
|
|
Payment of capital lease obligation
|
|
-
|
|
(191)
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|
Net cash used in financing activities
|
|
(5,268)
|
|
(5,164)
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
1,961
|
|
5,724
|
|
Effect of foreign currency exchange rate changes on cash
|
|
(1)
|
|
(35)
|
|
Cash and cash equivalents at beginning of period
|
|
49,615
|
|
51,316
|
|
Cash and cash equivalents at end of period
|
|
$51,575
|
|
$57,005
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|
|
|
|
|
|
|
|
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OTHER DATA
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|
|
|
|
|
|
|
|
|
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Total company store square footage
|
|
1,534,000
|
|
1,488,900
|
|
Hot Topic average store size
|
|
1,773
|
|
1,771
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|
Torrid average store size
|
|
2,540
|
|
2,498
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HOT TOPIC, INC.
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RECONCILIATION OF SELECTED GAAP MEASURES TO
|
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NON-GAAP MEASURES
|
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|
(In thousands, except per share amounts)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
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|
|
July 28, 2012
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July 30, 2011
|
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|
|
Reported
|
|
Charges
|
|
Non-GAAP
|
|
Reported
|
|
Charges
|
|
Non-GAAP
|
|
Net sales
|
|
$157,828
|
|
$-
|
|
$157,828
|
|
$150,950
|
|
$-
|
|
$150,950
|
|
Cost of goods sold, including buying, distribution and occupancy
costs
|
|
103,977
|
|
-
|
|
103,977
|
|
102,288
|
|
31
|
|
102,257
|
|
Gross margin
|
|
53,851
|
|
-
|
|
53,851
|
|
48,662
|
|
31
|
|
48,693
|
|
Selling, general and administrative expenses
|
|
55,091
|
|
-
|
|
55,091
|
|
58,760
|
|
4,117
|
|
54,643
|
|
Loss from operations
|
|
(1,240)
|
|
-
|
|
(1,240)
|
|
(10,098)
|
|
4,148
|
|
(5,950)
|
|
Interest income, net
|
|
(6)
|
|
-
|
|
(6)
|
|
82
|
|
-
|
|
82
|
|
Loss before benefit for income taxes
|
|
(1,246)
|
|
-
|
|
(1,246)
|
|
(10,016)
|
|
4,148
|
|
(5,868)
|
|
Benefit for income taxes
|
|
(478)
|
|
-
|
|
(478)
|
|
(3,796)
|
|
1,572
|
|
(2,224)
|
|
Net loss
|
|
($768)
|
|
$-
|
|
$(768)
|
|
($6,220)
|
|
$2,576
|
|
$(3,644)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$(0.02)
|
|
|
|
$(0.02)
|
|
$(0.14)
|
|
|
|
$(0.08)
|
|
Diluted
|
|
$(0.02)
|
|
|
|
$(0.02)
|
|
$(0.14)
|
|
|
|
$(0.08)
|
|
Shares used in computing loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
42,252
|
|
|
|
42,252
|
|
44,843
|
|
|
|
44,843
|
|
Diluted
|
|
42,252
|
|
|
|
42,252
|
|
44,843
|
|
|
|
44,843
|
|
|
|
|
|
Six Months Ended
|
|
|
|
July 28, 2012
|
|
July 30, 2011
|
|
|
|
Reported
|
|
Charges
|
|
Non-GAAP
|
|
Reported
|
|
Charges
|
|
Non-GAAP
|
|
Net sales
|
|
$329,372
|
|
$-
|
|
$329,372
|
|
$312,223
|
|
$-
|
|
$312,223
|
|
Cost of goods sold, including buying, distribution and occupancy
costs
|
|
213,836
|
|
-
|
|
213,836
|
|
213,152
|
|
5,401
|
|
207,751
|
|
Gross margin
|
|
115,536
|
|
-
|
|
115,536
|
|
99,071
|
|
5,401
|
|
104,472
|
|
Selling, general and administrative expenses
|
|
110,694
|
|
-
|
|
110,694
|
|
121,558
|
|
11,176
|
|
110,382
|
|
Income (loss) from operations
|
|
4,842
|
|
-
|
|
4,842
|
|
(22,487)
|
|
16,577
|
|
(5,910)
|
|
Interest income, net
|
|
56
|
|
-
|
|
56
|
|
134
|
|
-
|
|
134
|
|
Income (loss) before provision (benefit) for income taxes
|
|
4,898
|
|
-
|
|
4,898
|
|
(22,353)
|
|
16,577
|
|
(5,776)
|
|
Provision (benefit) for income taxes
|
|
1,831
|
|
-
|
|
1,831
|
|
(8,472)
|
|
6,283
|
|
(2,189)
|
|
Net income (loss)
|
|
$3,067
|
|
$-
|
|
$3,067
|
|
($13,881)
|
|
$10,294
|
|
($3,587)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.07
|
|
|
|
$0.07
|
|
$(0.31)
|
|
|
|
$(0.08)
|
|
Diluted
|
|
$0.07
|
|
|
|
$0.07
|
|
$(0.31)
|
|
|
|
$(0.08)
|
|
Shares used in computing earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
42,196
|
|
|
|
42,196
|
|
44,778
|
|
|
|
44,778
|
|
Diluted
|
|
42,915
|
|
|
|
42,915
|
|
44,778
|
|
|
|
44,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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NON-GAAP PERFORMANCE MEASURES – Hot Topic, Inc. reports its financial
results in accordance with generally accepted accounting principles
(GAAP). However, management believes that non-GAAP performance measures,
which exclude certain items that the Company does not consider part of
its ongoing operating results when assessing the performance of the
Company, present the operating results of the Company on a basis
consistent with those used in managing the Company's business, and
provide users of the Company's financial information with a more
meaningful report on the condition of the Company's business. Non-GAAP
performance measures should be viewed in addition to, and not as an
alternative for, the Company's reported results prepared in accordance
with GAAP.
Within this release, the Company has excluded the following items from
its non-GAAP performance measures:
Second quarter of fiscal 2011:
– $4.3 million of charges,
comprising of $0.2 million in cost of goods sold and $4.1 million in
selling, general and administrative expenses, related to the strategic
business changes previously announced on March 28, 2011.
– $0.2
million net recovery of charges in cost of goods sold related to the
implementation of the cost reduction plan previously announced on
November 16, 2010.
Year-To-Date (Six months ended July 30, 2011):
– $17.2 million of
charges, comprising of $6.2 million in cost of goods sold and $11.0
million in selling, general and administrative expenses, related to the
strategic business changes previously announced on March 28, 2011.
–
$0.6 million net recovery of charges, comprising of $0.8 million
recovery in cost of goods sold and $0.2 million charge in selling,
general and administrative expenses, related to the implementation of
the cost reduction plan previously announced on November 16, 2010.
Source: Hot Topic, Inc.
Hot Topic, Inc.
Investor Contacts:
Jim McGinty, CFO
626-839-4681
x2675
or
George Wehlitz, VP Finance
626-839-4681 x2174
or
Media
Contact:
Jennifer Vides, 626-839-4681 x2970
jvides@hottopic.com
|
