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Hot Topic, Inc. Reports 2nd Quarter Financial Results

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.

 

HOT TOPIC, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(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 )
Benefit for income taxes (478 ) (3,796 )
Net loss $(768 ) $(6,220 )
 
Loss per share:
Basic and Diluted $(0.02 ) $(0.14 )
Shares used in computing loss per share:
Basic and Diluted 42,252 44,843
 
 
Six Months Ended
Jul. 28, 2012 Jul. 30, 2011
 
Net sales $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 )
Interest income and other income, net 56 134
Income (loss) before provision (benefit) for income taxes 4,898 (22,353 )
Provision (benefit) for income taxes 1,831 (8,472 )
Net income (loss) $3,067 $(13,881 )
 
Income (loss) per share:
Basic and Diluted $0.07 $(0.31 )
Shares used in computing earnings (loss) per share:
Basic 42,196 44,778
Diluted 42,915 44,778

 
HOT TOPIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  Jul. 28, 2012   Jul. 30, 2011
Current Assets:

Cash, cash equivalents and short-term investments

$63,643 $72,550
Inventory 80,239 72,984
Prepaid expenses and other 16,006 27,431
Deferred tax assets 5,706 4,304
Total current assets 165,594 177,269
 
Property and equipment, net 106,863 112,705
Deposits and other 7,165 6,441
Long-term investments 1,724 1,819
Deferred tax assets 3,900 6,391
 
Total assets $285,246 $304,625
 
Current Liabilities:
 
Accounts payable $34,051 $35,282
Accrued liabilities 42,736 39,716
Income taxes payable 1,350 665
Total current liabilities 78,137 75,663
 
Deferred rent 19,217 22,565
Deferred compensation liability 4,596 4,665
Income taxes payable 593 1,911
Total liabilities 102,543 104,804
 
Total shareholders’ equity 182,703 199,821
 
Total liabilities and shareholders’ equity $285,246 $304,625

 

HOT TOPIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
  Six Months Ended
July 28, 2012   July 30, 2011
Operating Activities
Net income (loss) $3,067 ($13,881)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization 16,941 18,217
Change in inventory (9,594) (2,681)
Other, net 11,871 10,361
Net cash flows provided by operating activities 22,285 12,016
 

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)
 
Financing activities
Payment of cash dividends (6,762) (6,278)
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)
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
 
 

OTHER DATA

 
 

Total company store square footage

1,534,000 1,488,900
Hot Topic average store size 1,773 1,771
Torrid average store size 2,540 2,498

 
HOT TOPIC, INC.

RECONCILIATION OF SELECTED GAAP MEASURES TO

NON-GAAP MEASURES

 
(In thousands, except per share amounts)
 
(Unaudited)
 
 

Three Months Ended

July 28, 2012   July 30, 2011
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
 

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.

Stock quotes in this article: HOTT 

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