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Five Below, Inc. Announces Second Quarter Fiscal 2012 Financial Results

Forward-Looking Statements:

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect management's current views and estimates regarding the Company's industry, business strategy, goals and expectations concerning its market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. Investors can identify these statements by the fact that they use words such as "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "future" and similar terms and phrases. The Company cannot assure investors that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to risks relating to the Company's strategy and expansion plans, the availability of suitable new store locations, risks that consumer spending may decline and that U.S. and global macroeconomic conditions may worsen, risks related to the Company's continued retention of its senior management and other key personnel, risks relating to changes in consumer preferences and economic conditions, risks relating to the Company's distribution center, quality or safety concerns about the Company's merchandise, events that may affect the Company's vendors, increased competition from other retailers, risks relating to trade restrictions, risks associated with leasing substantial amounts of space, and other factors that are set forth in the Company's filings with the Securities and Exchange Commission ("SEC"), including risk factors contained in the final prospectus relating to the IPO dated July 18, 2012 filed with the SEC and available at www.sec.gov . If one or more of these risks or uncertainties materialize, or if any of the Company's assumptions prove incorrect, the Company's actual results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by the Company in this news release speaks only as of the date on which the Company makes it. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

About Five Below

Five Below is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the teen and pre-teen customer. Five Below offers a dynamic, edited assortment of exciting products, all priced at $5 and below, including select brands and licensed merchandise across a number of category worlds – Style, Room, Sports, Media, Crafts, Party, Candy and Seasonal. Five Below is headquartered in Philadelphia, Pennsylvania. 

FIVE BELOW, INC.
Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
       
       
  July 28, 2012 January 28, 2012 July 30, 2011
       
Assets      
Current assets:      
Cash and cash equivalents  $17,676 $41,293 $5,695
Inventories  63,631 38,790 43,012
Prepaid income taxes  10,577 —   —  
Deferred income taxes  —   4,863 2,928
Prepaid expenses and other current assets  12,155 7,303 7,408
       
Total current assets  104,039 92,249 59,043
Property and equipment, net  49,039 42,040 36,672
Deferred income taxes  —   —   439
Other assets  1,116 238 165
       
  $154,194 $134,527 $96,319
Total assets 
       
Liabilities and Shareholders' Equity (Deficit)      
Current liabilities:      
Line of credit  —   —   —  
Current portion of note payable  1,000 —   —  
Accounts payable  28,064 23,588 18,521
Income taxes payable  —   9,139 1,718
Accrued salaries and wages  2,830 9,254 1,837
Other accrued expenses  11,496 7,961 9,078
Deferred income taxes  1,045 —   —  
       
Total current liabilities  44,435 49,942 31,154
Notes payable  33,750 250 250
Deferred rent  26,294 20,933 17,686
Deferred income taxes  2,949 1,306 —  
       
Total liabilities  107,428 72,431 49,090
       
       
Preferred stock, $0.01 par value. Authorized 100,000,000 shares; 10,000,000 shares undesignated; 90,000,000 shares designated as Series A 8% Convertible Preferred Stock, $0.01 par value. Issued and outstanding zero, 89,291,773 and 89,291,773 shares, respectively, with a liquidation preference of zero, $214,420 and $206,246, respectively  —   191,855 191,855
       
Shareholders' equity (deficit):      
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 53,972,006, 16,248,797 and 16,084,358 shares, respectively  540 162 161
Additional paid-in capital  266,594 3,691 1,692
Accumulated deficit  (220,368) (133,612) (146,479)
       
Total shareholders' equity (deficit)  46,766 (129,759) (144,626)
       
  $154,194 $134,527 $96,319
       
FIVE BELOW, INC. 
Statements of Operations 
(Unaudited) 
(in thousands, except share and per share data) 
               
               
         
  Thirteen weeks ended Twenty-six weeks ended
   July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
Net sales  $86,820 $61,966 $158,649 $109,393
Cost of goods sold  58,073 41,955 106,882 74,795
Gross profit  28,747 20,011 51,767 34,598
Selling, general and administrative expenses  24,012 16,323 48,997 29,249
Operating income  4,735 3,688 2,770 5,349
Interest expense, net  1,316 5 1,279 2
Loss on debt extinguishment  1,587 —   1,587 —  
Other income  (258) —   (258) —  
         
Income before income taxes  2,090 3,683 162 5,347
Income tax expense  843 1,471 72 2,136
Net income  1,247 2,212 90 3,211
Dividend paid to preferred and unvested restricted shareholders  (65,403) —   (65,403) —  
Series A 8% Convertible Preferred Stock cumulative dividends  —   (3,870) —   (7,739)
         
Net loss attributable to common shareholders  $(64,156) $(1,658) $(65,313) $(4,528)
Basic loss per common share   $ (3.41)  $ (0.10) $ (3.71)    $ (0.29)
Diluted loss per common share   $ (3.41)  $ (0.10) $ (3.71)    $ (0.29)
         
Dividends declared and paid per common share  $2.02 $ —   $ 2.02    $ —  
         
Weighted average shares outstanding:        
Basic shares  18,803,979 15,854,003 17,627,376 15,826,046
Diluted shares  18,803,979 15,854,003 17,627,376 15,826,046
 
 
FIVE BELOW, INC. 
Statements of Cash Flows 
(Unaudited) 
(in thousands) 
     
     
  Twenty-six weeks ended
  July 28, 2012 July 30, 2011
Operating activities:    
Net income  $90 $3,211
Adjustments to reconcile net income to net cash (used in) provided by operating activities:    
Depreciation and amortization  4,342 3,091
Gain on conversion of note payable  (200) — 
Loss on debt extinguishment  1,587 — 
Amortization of deferred financing costs  305 14
Warrant expense related to professional service providers for services rendered  43 25
Stock-based compensation expense  8,241 595
Deferred income tax expense  7,551 246
Other  (71) — 
Changes in operating assets and liabilities:    
Prepaid income taxes  (10,577) 20
Inventories  (24,841) (16,258)
Prepaid expenses and other assets  (4,884) (3,287)
Accounts payable  4,717 7,714
Income taxes payable  (9,139) 1,577
Accrued salaries and wages  (6,424) (206)
Deferred rent  6,228 2,578
Other accrued expenses  2,460 3,490
     
Net cash (used in) provided by operating activities  (20,572) 2,810
     
Investing activities:    
Capital expenditures  (11,603) (9,236)
     
Net cash used in investing activities  (11,603) (9,236)
     
Financing activities:    
Borrowing under Term Loan Facility  100,000 — 
Repayment of Term Loan Facility  (65,250) — 
Cash paid for debt financing costs  (2,738) — 
Repayment of note payable  (50) — 
Dividend paid to shareholders  (99,451) — 
Net proceeds from issuance of common stock  74,308 — 
Proceeds from exercise of warrants to purchase common stock  201 — 
Repurchase of unvested restricted shares related to stock option exercises  (17) (32)
Excess tax benefit related to restricted shares  1,555 — 
     
Net cash provided by (used in) financing activities  8,558 (32)
     
Net decrease in cash and cash equivalents  (23,617) (6,458)
Cash and cash equivalents at beginning of period  41,293 12,153
     
Cash and cash equivalents at end of period  $17,676 $5,695
     
FIVE BELOW, INC. 
GAAP to Non-GAAP Reconciliation of Statements of Operations
(Unaudited) 
(in thousands, except share and per share data) 
         
         
Reconciliation of operating income, as reported, to adjusted operating income
  Thirteen weeks ended Twenty-six weeks ended
  July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
Operating income $4,735 $3,688 $2,770 $5,349
Adjustments:        
 Founders' transaction (1) 1,515 182 7,767 364
Adjusted operating income $6,250 $3,870 $10,537 $5,713
         
Reconciliation of net loss attributable to common shareholders, as reported, to adjusted net income
  Thirteen weeks ended Twenty-six weeks ended
  July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
Net loss attributable to common shareholders ($64,156) ($1,658) ($65,313) ($4,528)
Adjustments:        
 Dividends paid to preferred and unvested restricted shareholders 65,403 65,403
 Series A 8% Convertible Preferred Stock ("Preferred stock") cumulative dividends 3,870 7,739
Net income 1,247 2,212 90 3,211
Adjustments:        
 Founders' transaction (1) 1,515 182 7,767 364
 Less tax benefit (611) (73) (3,113) (145)
Adjusted net income $2,151 $2,321 $4,744 $3,430
         
Reconciliation of diluted weighted average common shares outstanding, as reported, to adjusted diluted weighted average common shares outstanding
  Thirteen weeks ended Twenty-six weeks ended
  July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
Diluted weighted average common shares outstanding 18,803,979 15,854,003 17,627,376 15,826,046
Adjustments:        
 Preferred shares conversion 29,197,429 30,894,953 30,046,192 30,894,953
 Initial public offering shares issuance 4,543,534 4,807,682 4,675,614 4,807,682
 Unvested and vested restricted stock (2) 1,423,756 204,252 1,644,105 232,208
 Diluted effect of stock options and warrants (3) 167,614 93,025
Adjusted diluted weighted average common shares outstanding 54,136,312 51,760,890 54,086,312 51,760,889
         
FIVE BELOW, INC. 
GAAP to Non-GAAP Reconciliation of Statements of Operations
 (Unaudited) 
(in thousands, except share and per share data) 
         
Reconciliation of diluted loss per common share, as reported, to adjusted diluted income per common share
  Thirteen weeks ended Twenty-six weeks ended
  July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
Diluted loss per common share, as reported  $ (3.41)  $ (0.10)  $ (3.71)  $ (0.29)
Adjustments:        
 Dividends paid to preferred and unvested restricted shareholders per share 3.48 3.71
 Series A 8% Convertible Preferred Stock cumulative dividends per share 0.24 0.49
 Founders' transaction per share (1) 0.08 0.01 0.44 0.02
 Income tax benefit per share (0.03) (0.18) (0.01)
Adjustments to weighted average common shares outstanding per share (0.08) (0.11) (0.17) (0.14)
Adjusted diluted income per common share $0.04 $0.04 $0.09 $0.07
(1) Founders' transaction relates to the amortization of expense for options granted to the founders in Fiscal 2010 and their modification in March 2012, which cancelled the Fiscal 2010 option award to purchase 2,020,620 shares of common stock and granted an equal number of restricted shares that vest through March 2014. 
(2) Assumes the impact of all unvested and vested restricted stock as of the beginning of the period.
(3) Assumes the diluted impact of stock options and warrants utilizing the treasury stock method.
CONTACT: Investor Contact:
         ICR, Inc.
         Farah Soi / Joseph Teklits
         203-682-8200
         Farah.soi@icrinc.com

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