DESTINATION MATERNITY CORPORATION (DEST, Financial) filed Quarterly Report for the period ended 2010-12-31.
Destination Maternity Corp. has a market cap of $269.3 million; its shares were traded at around $41.76 with a P/E ratio of 12.4 and P/S ratio of 0.5. Destination Maternity Corp. had an annual average earning growth of 7.3% over the past 5 years.Hedge Fund Gurus that owns DEST: Michael Price of MFP Investors LLC, Jim Simons of Renaissance Technologies LLC.
Net Income. Net income for the first quarter of fiscal 2011 was $5.2 million, or $0.81 per share (diluted), compared to net income of $1.3 million, or $0.20 per share (diluted) for the first quarter of fiscal 2010. Net income for the first quarter of fiscal 2011 includes (net of tax) stock compensation expense of $0.5 million and loss on extinguishment of debt of $6,000. Net income for the first quarter of fiscal 2010 includes (net of tax) restructuring and other charges of $2.3 million, stock compensation expense of $0.3 million and loss on extinguishment of debt of $18,000. Before restructuring and other charges, stock compensation expense and loss on extinguishment of debt, our first quarter fiscal 2011 net income was $5.7 million or $0.88 per share (diluted) compared to $3.8 million or $0.62 per share (diluted) for the first quarter of fiscal 2010.
In July 2008, we announced that we were streamlining our merchandise brands and store nameplates and implementing cost reductions in order to simplify our business model, reduce overhead costs and improve and tighten our merchandise assortments, and during fiscal 2009 we began to implement actions to achieve further cost reductions. The objectives of our restructuring and cost reduction program were to improve and simplify critical processes, consolidate activities and infrastructure, and reduce our expense structure. As of September 30, 2010, we had substantially completed the planned activities of these initiatives and incurred $3.9 million of pretax expense substantially related to these initiatives in fiscal 2010 (primarily for consulting services), of which $2.5 million was incurred in the first quarter of fiscal 2010. These initiatives resulted in approximate pretax savings of $12 million in fiscal 2009, with incremental pretax savings of approximately $11 million in fiscal 2010. We project total annualized pretax savings of approximately $27 to $30 million in fiscal 2011 as a result of our cost reduction initiatives, which includes the savings realized in fiscal 2009 plus the incremental savings in fiscal 2010.
Cash and cash equivalents increased by $11.3 million during the first quarter of fiscal 2011 compared to a decrease of $6.4 million for the first quarter of fiscal 2010. Cash provided by operations of $18.1 million for the first quarter of fiscal 2011 increased by $11.8 million from the $6.3 million in cash provided by operations for the first quarter of fiscal 2010. This increase in cash provided by operations versus the prior year was primarily the result of higher pretax income in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010, and working capital changes that provided a significant amount of cash in the first quarter of fiscal 2011 compared to a small use of cash in the first quarter of fiscal 2010, partially offset by the $4.2 million SERP benefit payment made in December 2010. The working capital changes were primarily (i) a larger decrease in inventories in fiscal 2011 compared to the fiscal 2010 decrease, which reflects our efforts to tightly control our inventory levels, (ii) a small decrease in prepaid expenses and other current assets in fiscal 2011, compared to an increase in fiscal 2010, which primarily reflected higher tenant allowances due from landlords, and (iii) a larger decrease in trade receivables in fiscal 2011 compared to the fiscal 2010 decrease, which primarily reflects timing of collections for licensed relationship sales. Our quarterly net income, cash flow adjustments and working capital changes may fluctuate significantly and net cash provided by operating activities for any quarter is not necessarily indicative of the results that may be achieved for a full fiscal year.
During the first quarter of fiscal 2011 we used cash provided by operations primarily to pay for capital expenditures and to fund repayments of long-term debt. For the first quarter of fiscal 2011, we spent $3.6 million on capital expenditures, including $2.1 million for leasehold improvements, fixtures and equipment for new store facilities, as well as improvements to existing stores, and $1.5 million for our information systems and distribution and corporate facilities. Our repayments of long-term debt in the first quarter of fiscal 2011 consisted predominately of a $2.6 million prepayment of our Term Loan , which was required under the annual Excess Cash Flow provision of the Term Loan. We also withdrew $1.5 million from our Grantor Trust, which was used to partially fund the $4.2 million December 2010 SERP benefit payment. The remaining cash provided by operations during the first quarter of fiscal 2011 was used primarily to increase our available cash. During the first quarter of fiscal 2010 we used the majority of our cash provided by operations to pay for capital expenditures and to fund a contribution to the Grantor Trust related to our executive retirement plans. For the first quarter of fiscal 2010, we spent $4.0 million on capital expenditures, including $2.5 million for leasehold improvements, fixtures and equipment for new store facilities, as well as improvements to existing stores, and $1.5 million for our information systems and distribution and corporate facilities. We used available cash to fund repayments of long-term debt in the first quarter of fiscal 2010. Our repayments of long-term debt in the first quarter of fiscal 2010 consisted predominately of $6.0 million of prepayments of our Term Loan, including a $5.8 million prepayment required under the annual Excess Cash Flow provision of the Term Loan.
We have in place a Term Loan Agreement for a senior secured Term Loan B, which matures on March 13, 2013, the proceeds of which were used to redeem the Senior Notes. The interest rate on the Term Loan is equal to, at our election, either (i) the prime rate plus 1.00%, or (ii) a LIBOR rate plus an applicable margin. The applicable margin was initially fixed at 2.50% through and including the fiscal quarter ended September 30, 2007. Thereafter, the applicable margin for LIBOR rate borrowings is either 2.25% or 2.50%, depending on our Consolidated Leverage Ratio. Based upon our applicable quarterly Consolidated Leverage Ratios, the applicable margin for LIBOR rate borrowings was 2.50% prior to December 30, 2009 and has been reduced to 2.25% effective from December 30, 2009. We are required to make minimum repayments of the principal amount of the Term Loan in quarterly installments of $225,000 each. We are also required to make an annual principal repayment equal to 25% or 50% of Excess Cash Flow in excess of $5.0 million for each fiscal year, with the 25% or 50% factor depending on our Consolidated Leverage Ratio. The required principal repayment for fiscal 2010, which was calculated based on the 25% factor, was $2.6 million and was paid in December 2010. The required principal repayment for fiscal 2009, which was calculated based on the 25% factor, was $5.8 million and was paid in December 2009. Additionally, the Term Loan can be prepaid at our option, in part or in whole, at any time without any prepayment premium or penalty. During the first quarter of fiscal 2010, we prepaid $6.0 million of the outstanding Term Loan, including the $5.8 million prepayment required under the annual Excess Cash Flow provision. At December 31, 2010, our indebtedness under the Term Loan Agreement was $40.0 million.
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Destination Maternity Corp. has a market cap of $269.3 million; its shares were traded at around $41.76 with a P/E ratio of 12.4 and P/S ratio of 0.5. Destination Maternity Corp. had an annual average earning growth of 7.3% over the past 5 years.Hedge Fund Gurus that owns DEST: Michael Price of MFP Investors LLC, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Store Closing, Asset Impairment and Asset Disposal Expenses. Our store closing, asset impairment and asset disposal expenses for the first quarter of fiscal 2011 decreased to $0.2 million from $0.7 million for the first quarter of fiscal 2010. We incurred lower impairment charges for write-downs of long-lived assets of $0.1 million for the first quarter of fiscal 2011, as compared to $0.7 million for the first quarter of fiscal 2010. We incurred charges relating to store closings and other asset disposals of $0.1 million for the first quarter of fiscal 2011, as compared to $13,000 for the first quarter of fiscal 2010.Net Income. Net income for the first quarter of fiscal 2011 was $5.2 million, or $0.81 per share (diluted), compared to net income of $1.3 million, or $0.20 per share (diluted) for the first quarter of fiscal 2010. Net income for the first quarter of fiscal 2011 includes (net of tax) stock compensation expense of $0.5 million and loss on extinguishment of debt of $6,000. Net income for the first quarter of fiscal 2010 includes (net of tax) restructuring and other charges of $2.3 million, stock compensation expense of $0.3 million and loss on extinguishment of debt of $18,000. Before restructuring and other charges, stock compensation expense and loss on extinguishment of debt, our first quarter fiscal 2011 net income was $5.7 million or $0.88 per share (diluted) compared to $3.8 million or $0.62 per share (diluted) for the first quarter of fiscal 2010.
In July 2008, we announced that we were streamlining our merchandise brands and store nameplates and implementing cost reductions in order to simplify our business model, reduce overhead costs and improve and tighten our merchandise assortments, and during fiscal 2009 we began to implement actions to achieve further cost reductions. The objectives of our restructuring and cost reduction program were to improve and simplify critical processes, consolidate activities and infrastructure, and reduce our expense structure. As of September 30, 2010, we had substantially completed the planned activities of these initiatives and incurred $3.9 million of pretax expense substantially related to these initiatives in fiscal 2010 (primarily for consulting services), of which $2.5 million was incurred in the first quarter of fiscal 2010. These initiatives resulted in approximate pretax savings of $12 million in fiscal 2009, with incremental pretax savings of approximately $11 million in fiscal 2010. We project total annualized pretax savings of approximately $27 to $30 million in fiscal 2011 as a result of our cost reduction initiatives, which includes the savings realized in fiscal 2009 plus the incremental savings in fiscal 2010.
Cash and cash equivalents increased by $11.3 million during the first quarter of fiscal 2011 compared to a decrease of $6.4 million for the first quarter of fiscal 2010. Cash provided by operations of $18.1 million for the first quarter of fiscal 2011 increased by $11.8 million from the $6.3 million in cash provided by operations for the first quarter of fiscal 2010. This increase in cash provided by operations versus the prior year was primarily the result of higher pretax income in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010, and working capital changes that provided a significant amount of cash in the first quarter of fiscal 2011 compared to a small use of cash in the first quarter of fiscal 2010, partially offset by the $4.2 million SERP benefit payment made in December 2010. The working capital changes were primarily (i) a larger decrease in inventories in fiscal 2011 compared to the fiscal 2010 decrease, which reflects our efforts to tightly control our inventory levels, (ii) a small decrease in prepaid expenses and other current assets in fiscal 2011, compared to an increase in fiscal 2010, which primarily reflected higher tenant allowances due from landlords, and (iii) a larger decrease in trade receivables in fiscal 2011 compared to the fiscal 2010 decrease, which primarily reflects timing of collections for licensed relationship sales. Our quarterly net income, cash flow adjustments and working capital changes may fluctuate significantly and net cash provided by operating activities for any quarter is not necessarily indicative of the results that may be achieved for a full fiscal year.
During the first quarter of fiscal 2011 we used cash provided by operations primarily to pay for capital expenditures and to fund repayments of long-term debt. For the first quarter of fiscal 2011, we spent $3.6 million on capital expenditures, including $2.1 million for leasehold improvements, fixtures and equipment for new store facilities, as well as improvements to existing stores, and $1.5 million for our information systems and distribution and corporate facilities. Our repayments of long-term debt in the first quarter of fiscal 2011 consisted predominately of a $2.6 million prepayment of our Term Loan , which was required under the annual Excess Cash Flow provision of the Term Loan. We also withdrew $1.5 million from our Grantor Trust, which was used to partially fund the $4.2 million December 2010 SERP benefit payment. The remaining cash provided by operations during the first quarter of fiscal 2011 was used primarily to increase our available cash. During the first quarter of fiscal 2010 we used the majority of our cash provided by operations to pay for capital expenditures and to fund a contribution to the Grantor Trust related to our executive retirement plans. For the first quarter of fiscal 2010, we spent $4.0 million on capital expenditures, including $2.5 million for leasehold improvements, fixtures and equipment for new store facilities, as well as improvements to existing stores, and $1.5 million for our information systems and distribution and corporate facilities. We used available cash to fund repayments of long-term debt in the first quarter of fiscal 2010. Our repayments of long-term debt in the first quarter of fiscal 2010 consisted predominately of $6.0 million of prepayments of our Term Loan, including a $5.8 million prepayment required under the annual Excess Cash Flow provision of the Term Loan.
We have in place a Term Loan Agreement for a senior secured Term Loan B, which matures on March 13, 2013, the proceeds of which were used to redeem the Senior Notes. The interest rate on the Term Loan is equal to, at our election, either (i) the prime rate plus 1.00%, or (ii) a LIBOR rate plus an applicable margin. The applicable margin was initially fixed at 2.50% through and including the fiscal quarter ended September 30, 2007. Thereafter, the applicable margin for LIBOR rate borrowings is either 2.25% or 2.50%, depending on our Consolidated Leverage Ratio. Based upon our applicable quarterly Consolidated Leverage Ratios, the applicable margin for LIBOR rate borrowings was 2.50% prior to December 30, 2009 and has been reduced to 2.25% effective from December 30, 2009. We are required to make minimum repayments of the principal amount of the Term Loan in quarterly installments of $225,000 each. We are also required to make an annual principal repayment equal to 25% or 50% of Excess Cash Flow in excess of $5.0 million for each fiscal year, with the 25% or 50% factor depending on our Consolidated Leverage Ratio. The required principal repayment for fiscal 2010, which was calculated based on the 25% factor, was $2.6 million and was paid in December 2010. The required principal repayment for fiscal 2009, which was calculated based on the 25% factor, was $5.8 million and was paid in December 2009. Additionally, the Term Loan can be prepaid at our option, in part or in whole, at any time without any prepayment premium or penalty. During the first quarter of fiscal 2010, we prepaid $6.0 million of the outstanding Term Loan, including the $5.8 million prepayment required under the annual Excess Cash Flow provision. At December 31, 2010, our indebtedness under the Term Loan Agreement was $40.0 million.
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