Occupancy, Distribution and Buying Costs Reclassification

Historically, the Company included occupancy, distribution and buying costs within cost of goods sold on the face of its statements of operations. However, in the fourth quarter of Fiscal 2012, in connection with conforming the financial presentation of Charming Shoppes, the Company decided to present each of the aggregate of occupancy, distribution and buying costs and gross margin separately on the face of its statements of operations. In addition, certain costs, such as store utility costs, were reclassified from selling, general and administrative expenses to occupancy, distribution and buying costs. Financial information for all prior periods has been reclassified in order to conform to the current period’s presentation. There have been no changes in historical operating income or historical net income for any period as a result of these changes.

Other Reclassifications

Certain other immaterial reclassifications also have been made to the prior period’s financial information in order to conform to the current period’s presentation.

Note 2. Use of Non-GAAP Financial Measures

To provide investors information to assist them in assessing the Company’s ongoing operations on a comparable basis, the Company has provided Fiscal 2012 financial measures in this press release that exclude the effect of the Charming Acquisition that closed effective June 14, 2012. Throughout this release, the term “reported” refers to information prepared in accordance with accounting principles generally accepted in the United States (GAAP), while the term “adjusted” refers to non-GAAP financial information adjusted to exclude the impact of the Charming Acquisition. Management believes that the Charming Acquisition makes comparisons to Fiscal 2011 difficult because the acquisition is included for a partial period in Fiscal 2012, but is not included at all in Fiscal 2011. All information below is presented for the Company’s continuing operations.
 
(in millions, except per share amounts)
  Fourth Quarter FY 2012   Fiscal Year FY 2012
      Diluted       Diluted
net net
Income income Income income
before per before per
income Income

Net
common income Income

Net
common
taxes   taxes  

income
  share taxes   taxes  

income
  share
Reported basis $22.0 $10.8 $11.2 $0.07 $279.0 $107.2 $171.8 $1.08
Adjustments:
Effect of Charming Acquisition 48.2   10.4   37.8   0.24 55.0   13.0   42.0   0.26
Adjusted basis $70.2   $21.2  

$49.0
  $0.31 $334.0   $120.2   $213.8   $1.34
 

Net sales:
 
  (in millions) FY2012
Fourth   Fiscal
Quarter Year
Reported basis $939.7 $3,353.3
Adjustments:
Effect of Charming Acquisition (156.1 ) (156.1 )
Adjusted basis $783.6   $3,197.2  
 

Gross margin:
(in millions) FY2012
Fourth Fiscal

Quarter
Year
Reported basis $501.6 $1,878.6
Adjustments:
Effect of Charming Acquisition (67.9 ) (67.9 )
Adjusted basis $433.7   $1,810.7  
 

Occupancy, distribution and buying expenses:
(in millions) FY2012
Fourth Fiscal
Quarter Year
Reported basis $156.9 $542.3
Adjustments:
Effect of Charming Acquisition (30.6 ) (30.6 )
Adjusted basis $126.3   $511.7  
 

Selling, general and administrative expenses:
(in millions) FY2012
Fourth Fiscal
Quarter Year
Reported basis $281.7 $936.3
Adjustments:
Effect of Charming Acquisition (71.0 ) (71.0 )
Adjusted basis $210.7   $865.3  
 

Operating income:
(in millions) FY2012
Fourth Fiscal

Quarter
Year
Reported basis $30.8 $292.6
Adjustments:
Effect of Charming Acquisition 39.6   39.6  
Adjusted basis $70.4   $332.2  

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