NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 — Basis of Presentation
The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Christopher & Banks Corporation and its subsidiaries (collectively referred to as “Christopher & Banks”, “the Company”, “we” or “us”) pursuant to the current rules and regulations of the United States ("U.S.") Securities and Exchange Commission. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been omitted, pursuant to such rules and regulations. These unaudited condensed consolidated financial statements, except the condensed consolidated balance sheet as of
February 3, 2018
derived from the Company's audited financial statements, should be read in conjunction with the audited financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 3, 2018
.
The results of operations for the interim period shown in this report are not necessarily indicative of results to be expected for the full fiscal year. In the opinion of management, the information contained herein reflects all adjustments, consisting only of normal adjustments, except as otherwise stated in these notes, considered necessary to present fairly our financial position, results of operations, and cash flows as of
August 4, 2018
, and
July 29, 2017
and for all periods presented.
Recently issued accounting pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02,
Leases
, which requires that any lease arrangements longer than twelve months result in an entity recognizing an asset and liability on its balance sheet. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The Company has elected to apply the standard on a prospective basis with an adjustment to retained earnings in the first period of adoption. The Company is currently evaluating the guidance and its impact on our consolidated financial statements and the related internal controls over financial reporting. The Company expects the adoption of this standard will have a material impact on its consolidated balance sheet for recognition of lease-related assets and liabilities. We will adopt the ASU beginning in the first quarter of fiscal 2019.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
. ASU 2016-18 requires that a statement of cash flows explain the change during the period among the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for public companies for fiscal years and interim periods within those years beginning after December 15, 2017. There was no adjustment to prior year financial statements as the Company had no restricted cash in prior years. As of
August 4, 2018
, the Company included
$1.6 million
of restricted cash in cash and cash equivalents within the statement of cash flows related to cash held in escrow in conjunction with the sale-leaseback transaction.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
. The Company adopted ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) on February 4, 2018 using the modified retrospective method for all contracts. The additional disclosures required by the ASU have been included in Note 6
Revenue
. Results for reporting periods beginning February 4, 2018 reflect the application of ASC 606, while the results for prior reporting periods were prepared under the guidance of ASC 605,
Revenue Recognition
(“previous guidance”). We recorded a net increase to opening equity of
$2.0 million
as of February 4, 2018 due to the cumulative impact of adopting the new standard, with the impact primarily related to the recognition of gift card breakage. Further, as a result of applying the modified retrospective method, the following adjustments were made to accounts on the condensed consolidated balance sheet as of February 4, 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 3, 2018
|
|
ASC 606 Adjustments
|
|
February 4, 2018
|
Balance Sheet
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Merchandise inventories
|
|
$
|
41,361
|
|
|
$
|
(482
|
)
|
|
$
|
40,879
|
|
Prepaid expenses and other current assets
|
|
2,715
|
|
|
482
|
|
|
3,197
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Accrued liabilities and other current liabilities
|
|
26,201
|
|
|
(1,983
|
)
|
|
24,218
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Retained earnings
|
|
34,993
|
|
|
1,983
|
|
|
36,976
|
|
Impact on Financial Statements
The following tables summarize the impacts of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the
thirteen and twenty-six
weeks ended
August 4, 2018
(in thousands):
Condensed Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
Balance without adoption of ASC 606
|
|
Effect of change
Higher/(lower)
|
Balance Sheet
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Merchandise inventories
|
|
$
|
40,184
|
|
|
$
|
40,781
|
|
|
$
|
(597
|
)
|
Prepaid expenses and other current assets
|
|
4,263
|
|
|
3,666
|
|
|
597
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Accrued liabilities and other current liabilities
|
|
19,655
|
|
|
19,746
|
|
|
(91
|
)
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Retained earnings
|
|
24,231
|
|
|
24,140
|
|
|
91
|
|
Condensed Consolidated Statement of Operations and Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen weeks ended August 4, 2018
|
|
Twenty-six weeks ended August 4, 2018
|
|
|
As reported
|
|
Balance without adoption of ASC 606
|
|
Effect of change
Higher/(lower)
|
|
As reported
|
|
Balance without adoption of ASC 606
|
|
Effect of change
Higher/(lower)
|
Statement of Operations and Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
87,418
|
|
|
$
|
87,407
|
|
|
$
|
11
|
|
|
$
|
173,319
|
|
|
$
|
173,228
|
|
|
$
|
91
|
|
Net loss
|
|
(7,426
|
)
|
|
(7,437
|
)
|
|
11
|
|
|
(12,745
|
)
|
|
(12,836
|
)
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.20
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.34
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
0.00
|
|
Diluted
|
|
$
|
(0.20
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.34
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
0.00
|
|
We reviewed all other significant newly-issued accounting pronouncements and concluded they are either not applicable to our operations, or that no material affect is expected on our consolidated financial statements as a result of future adoption.
NOTE 2 — Property, Equipment and Improvements, Net
Property, equipment and improvements, net consisted of the following (in thousands):
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|
|
|
|
|
|
|
|
|
Description
|
|
August 4, 2018
|
|
February 3, 2018
|
Land
|
|
$
|
—
|
|
|
$
|
1,597
|
|
Corporate office, distribution center and related building improvements
|
|
—
|
|
|
12,753
|
|
Store leasehold improvements
|
|
48,587
|
|
|
50,094
|
|
Store furniture and fixtures
|
|
68,149
|
|
|
70,447
|
|
Corporate office and distribution center furniture, fixtures and equipment
|
|
5,033
|
|
|
5,053
|
|
Computer and point of sale hardware and software
|
|
33,825
|
|
|
33,126
|
|
Construction in progress
|
|
1,300
|
|
|
1,275
|
|
Total property, equipment and improvements, gross
|
|
156,894
|
|
|
174,345
|
|
Less accumulated depreciation and amortization
|
|
(118,511
|
)
|
|
(126,572
|
)
|
Total property, equipment and improvements, net
|
|
$
|
38,383
|
|
|
$
|
47,773
|
|
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In conjunction with an impairment analysis, the Company analyzed improvements and equipment at certain under-performing stores and stores identified for closure for impairment. As a result, the Company recorded
no
long-lived asset impairment during the thirteen week period ended
August 4, 2018
and approximately
$0.1 million
during the thirteen week period ended
July 29, 2017
. Additionally, the Company recorded
no
impairment during the
twenty-six
week period ended
August 4, 2018
and approximately
$0.2 million
during the
twenty-six
week period ended
July 29, 2017
.
Sale-Leaseback
On April 27, 2018, the Company completed the sale of and entered into an agreement to leaseback its corporate headquarters facility, including the distribution center, in Plymouth, MN. The agreement provided for the sale of the facility for a purchase price of
$13.7 million
and the subsequent leaseback of the facility for a
15
-year period. The lease is classified as an operating lease. As a result, the Company recorded a deferred gain of
$7.7 million
. As of
August 4, 2018
,
$7.1 million
of the deferred gain is reflected in the condensed consolidated balance sheet under other non-current liabilities, with the remaining
$0.5 million
included as a component of accrued liabilities and other current liabilities. The Company recorded
$0.1 million
into earnings during the thirteen week period ended
August 4, 2018
. As part of the transaction, the Company put
$1.7 million
in escrow for certain repairs to the building. As of
August 4, 2018
,
$1.6 million
remained in escrow for repairs to the building. This amount is considered to be restricted cash and is included within cash and cash equivalents on the condensed consolidated balance sheet.
NOTE 3 — Accrued Liabilities
Accrued liabilities and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
August 4, 2018
|
|
February 3, 2018
|
Gift card and store credit liabilities
|
|
$
|
2,899
|
|
|
$
|
6,931
|
|
Accrued Friendship Rewards Program loyalty liability
|
|
3,868
|
|
|
3,539
|
|
Accrued income, sales and other taxes payable
|
|
1,287
|
|
|
1,587
|
|
Accrued occupancy-related expenses
|
|
3,743
|
|
|
3,432
|
|
Sales return reserve
|
|
1,304
|
|
|
1,079
|
|
eCommerce obligations
|
|
3,999
|
|
|
3,824
|
|
Other accrued liabilities
|
|
2,555
|
|
|
5,809
|
|
Total accrued liabilities and other current liabilities
|
|
$
|
19,655
|
|
|
$
|
26,201
|
|
NOTE 4 — Credit Facility
The Company is party to an amended and restated credit agreement ("the Credit Facility") with Wells Fargo Bank, National Association ("Wells Fargo"), as lender. On August 3, 2018, the Company entered into a second amendment ("Second Amendment") to the Credit Facility.
The Second Amendment, among other changes, (i) extended the term of the Credit Facility to August 3, 2023; and (ii) supplemented the existing
$50.0 million
revolving Credit Facility by adding a new
$5.0 million
revolving "first-in, last-out" tranche credit facility (the "FILO Facility"), subject to borrowing base restrictions applicable to the FILO Facility. The Company must draw under the FILO Facility before making any borrowings under the revolving Credit Facility.
Loans under the FILO Facility will bear interest based on quarterly excess available under the Borrowing Base as defined in the Credit Facility. The interest rate under the FILO Facility will be either (i) the London interbank Offered Rate ("LIBOR") plus
3.00%
for FILO loans that are LIBOR loans; or (ii)
2.00%
above the Base Rate for FILO loans that are Base Rate loans as such terms are defined in the Credit Facility. Borrowings under the Credit Facility will generally accrue interest at a rate ranging from
1.50%
to
1.75%
over the LIBOR or
0.50%
to
0.75%
over the Wells Fargo Prime Rate based on the amount of Average Daily Availability for the Fiscal Quarter immediately preceding each Adjustment Date, as such terms are defined in the Credit Facility. The Company has the ability to select between the LIBOR or prime based rate at the time of the cash advance. The Credit Facility has an unused commitment fee of
0.25%
.
In addition to these changes, the Second Amendment eliminates availability against the Company's real property, which was the subject of a recent sale-leaseback transaction. The Company recorded approximately
$0.2 million
of deferred financing costs in the second quarter of fiscal 2018 in connection with the Second Amendment. The deferred financing costs have been combined with the balance of the deferred financing costs remaining from the prior amendment on September 8, 2014. The entire deferred financing costs are recorded within other assets on the condensed consolidated balance sheet and are being amortized as interest expense over the related term of the Second Amendment.
The Credit Facility contains customary events of default and various affirmative and negative covenants. The sole financial covenant contained in the Credit Facility requires the Company to maintain Availability at least equal to the greater of (a) ten percent (
10%
) of the borrowing base or (b)
$3.0 million
. In addition, the Credit Facility permits the payment of dividends to the Company's stockholders if certain financial conditions are met. The Company was in compliance with all financial covenants and other financial provisions as of
August 4, 2018
.
The Company's obligations under the Credit Facility are secured by the assets of the Company and its subsidiaries. The Company has pledged substantially all of its assets as collateral security for the loans, including accounts owed to the Company, bank accounts, inventory, other tangible and intangible personal property, intellectual property (including patents and trademarks), and stock or other evidences of ownership of
100%
of all of the Company's subsidiaries.
There were
no
outstanding borrowings under the Credit Facility as of
August 4, 2018
and
July 29, 2017
. The total Borrowing Base at
August 4, 2018
was approximately
$29.6 million
. As of
August 4, 2018
, the Company had open on-demand letters of credit of approximately
$6.7 million
. Accordingly, after reducing the Borrowing Base for the open letters of credit and the required minimum availability of the greater of
$3.0 million
, or
10.0%
of the Borrowing Base, the net availability of revolving credit loans under the Credit Facility was approximately
$22.2 million
at
August 4, 2018
.
NOTE 5 — Income Taxes
For the thirteen weeks ended August 4, 2018, the Company recorded income tax expense of
$63 thousand
, or an effective rate of
(0.9)%
, compared to income tax expense of
$40 thousand
, or an effective rate of
(0.5)%
, for the second quarter of fiscal 2017. For the twenty-six weeks ended August 4, 2018, the Company recorded income tax expense of
$106 thousand
, or an effective rate of
(0.8)%
, compared to income tax expense of
$92 thousand
, or an effective rate of
(0.8)%
, for the same period of fiscal 2017. The income tax provision for the fiscal 2018 and 2017 periods is primarily driven by state taxes.
As of August 4, 2018, the possibility of future cumulative losses still exists. Accordingly, the Company has continued to maintain a valuation allowance against its net deferred tax assets. A small deferred tax asset remains related to certain state tax benefits. The Company has federal and state net operating loss ("NOL") carryforwards which will reduce future taxable income. Approximately
$26.1 million
in net federal tax benefits are available from these federal loss carryforwards. An additional
$0.8 million
is available in net tax credit carryforwards. The state loss carryforwards will result in net state tax benefits of approximately
$4.5 million
.
Sections 382 and 383 of the Internal Revenue Code limit the annual utilization of certain tax attributes, including net operating loss carryforwards, incurred prior to a change in ownership. If the Company were to experience an ownership change, as defined by Sections 382 and 383, its ability to utilize its tax attributes could be substantially limited. Depending on the severity of the annual NOL limitation, the Company could permanently lose its ability to use a significant number of its accumulated NOLs.
The Company's liability for unrecognized tax benefits associated with uncertain tax positions is recorded within other non-current liabilities. There has been no material change in the reserve for unrecognized tax benefits since the end of the previous fiscal year. The Company recognizes interest and penalties related to unrecognized tax benefits as components of income tax expense. We do not expect any significant changes to the amount of unrecognized tax benefits in the next twelve months.
The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. With few exceptions, the Company or its subsidiaries are no longer subject to examination prior to tax years before fiscal 2013. The Company does not have any ongoing income tax audits.
The Tax Cuts and Jobs Act ("the Act") was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35% to 21% as of January 1, 2018. The income tax effects of the Act required the remeasurement of our deferred tax assets and liabilities in accordance with ASC Topic 740. The Securities and Exchange Commission ("SEC") staff issued Staff Accounting Bulletin No. 118 ('SAB 118') that allows companies to record provisional estimates of the impacts of the Act during a measurement period of up to one year from the enactment, which is similar to the measurement period used when accounting for business combinations. The Company has estimated the effects of the Act, and those estimates have been reflected in our 2017 financial statements.
NOTE 6 — Revenue
Merchandise sales
We sell merchandise through our brick and mortar and eCommerce sales channels. Revenues are recognized when control of the promised merchandise is transferred to our customers. Within our brick and mortar sales channel, control is transferred at the point of sale. Within our eCommerce sales channel, control is transferred upon delivery of the merchandise to our customers. Shipping revenues associated with the eCommerce channel are recognized upon the completion of the delivery. The revenue recorded reflects the consideration that we expect to receive in exchange for our merchandise. The Company has elected, as an accounting policy, to exclude from the transaction price all taxes assessed by governmental authorities imposed on merchandise sales.
Right of return
As part of our merchandise sales, we offer customers a right of return on merchandise that lapses based on the original purchase date. The Company estimates the amount of sales that may be returned by our customers and records this estimate as a reduction of revenue in the period in which the related revenues are recognized. We utilize historical and industry data to estimate the total return liability. Conversely, the reduction in revenue results in a corresponding reduction in merchandise, buying and occupancy costs which results in a contract asset for the anticipated merchandise returned. The total reduction in revenue from estimated returns was
$1.3 million
as of
August 4, 2018
, which is included within accrued liabilities and other current liabilities in the condensed consolidated balance sheet.
Friendship rewards program
The Company established the Friendship Rewards Program as a loyalty program where customers earn points towards future discount certificates based on their purchase activity. We have identified the additional benefits received from this program as a separate performance obligation within a sales contract in the form of the discount certificates earned by customers. Accordingly, we assess any incremental discounts issued to our customers through the program and allocate a portion of the transaction price associated with merchandise sales from loyalty program members to the future discounts earned. The transaction price allocated to future discounts is recorded as deferred revenue until the discounts are used or forfeited.
In addition, the Company estimates breakage on the points earned within the program that will not be used by customers for future discounts. The Company estimates breakage based on the historical redemption rate and considers industry trends. Breakage is recorded as a reduction to the deferred revenue associated with the program.
As of
August 4, 2018
, the Company recorded
$3.9 million
in deferred revenue associated with the program, which is included in accrued liabilities and other current liabilities in the condensed consolidated balance sheet.
Gift card revenue
The Company sells gift cards to customers which can be redeemed for merchandise within our brick and mortar and eCommerce sales channels. Gift cards are recorded as deferred revenue when issued and are subsequently recorded as revenue upon redemption. The Company estimates breakage related to gift cards when the likelihood of redemption is remote. This estimate utilizes historical trends based on the vintage of the gift card. Breakage on gift cards is recorded as revenue in proportion to the rate of gift card redemptions by vintage. This represents a change in the methodology used to estimate
breakage as we have historically recognized breakage for the portion of the gift card balances that remained outstanding following
36
months of issuance.
As of
August 4, 2018
, the Company had $
2.9 million
of deferred revenue associated with the issuance of gift cards, which is included in accrued liabilities and other current liabilities in the condensed consolidated balance sheet.
Private label credit card
The Company offers a private label credit card ("PLCC") which bears the Christopher and Banks brand name offered under an agreement with Comenity Bank. Pursuant to this agreement, there are several obligations on behalf of Comenity Bank that impact the recording of revenue.
As part of the agreement, the Company received a signing bonus. We have determined that the benefits associated with signing the agreement are recognized over time throughout its term. This is a faithful depiction of the transfer of services as the customer receives and consumes the benefits by obtaining and having the ability to use financing through Comenity Bank for purchases within our brick and mortar and eCommerce sales channels throughout the agreement's term. As of
August 4, 2018
, the Company had
$1.8 million
recorded as deferred revenue associated with the signing bonus, which is included in accrued liabilities and other current liabilities in the condensed consolidated balance sheet. The Company recorded
$0.1 million
into revenue for the thirteen week and
twenty-six
week periods ended
August 4, 2018
associated with the signing bonus.
The Company records revenue associated with royalties received for purchases made using the PLCC. Royalty revenue is recognized based on the total amount to which we have a right to invoice in accordance with the practical expedient included in ASC 606-10-55-18. Therefore, royalty revenue is recognized in the period in which the related purchases are recognized.
The Company receives a performance bonus based on the total amount of new accounts that are opened during the year. We have determined that this is a form of variable consideration. Variable consideration is recorded if, in the Company’s judgment, it is probable that a significant future reversal of revenue under the contract will not occur. For the thirteen week and
twenty-six
week periods ended
August 4, 2018
, the Company met certain performance metrics within the contract and recorded a small amount of revenue associated with performance bonuses.
Disaggregation of revenue
The following table provides information about disaggregated revenue by sales channel. All revenue illustrated below is included within our
one
reportable segment.
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
|
|
August 4, 2018
|
|
August 4, 2018
|
Brick and mortar stores
|
|
$
|
66,715
|
|
|
$
|
134,770
|
|
eCommerce sales
|
|
19,216
|
|
|
38,010
|
|
Other
|
|
1,487
|
|
|
539
|
|
Net sales
|
|
$
|
87,418
|
|
|
$
|
173,319
|
|
Amounts included within other revenue relate to revenues earned from our private label credit card, net of any revenue adjustments and accruals.
Contract balances
The following table provides information about contract assets and liabilities from contracts with customers (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Contract liabilities
(current)
|
|
Contract liabilities
(non-current)
|
Contract Balances - February 4, 2018
|
|
|
|
|
Right of return
|
|
$
|
1,079
|
|
|
$
|
—
|
|
Friendship Rewards Program
|
|
3,501
|
|
|
—
|
|
Gift card revenue
|
|
4,986
|
|
|
—
|
|
Private label credit card
|
|
274
|
|
|
1,622
|
|
Total
|
|
$
|
9,840
|
|
|
$
|
1,622
|
|
|
|
|
|
|
Contract Balances - August 4, 2018
|
|
|
|
|
Right of return
|
|
$
|
1,304
|
|
|
$
|
—
|
|
Friendship Rewards Program
|
|
3,868
|
|
|
—
|
|
Gift card revenue
|
|
2,899
|
|
|
—
|
|
Private label credit card
|
|
274
|
|
|
1,485
|
|
Total
|
|
$
|
8,345
|
|
|
$
|
1,485
|
|
The Company recognized revenue of
$1.5 million
and
$3.4 million
in the thirteen week and
twenty-six
week periods ended
August 4, 2018
, respectively, related to contract liabilities recorded at the beginning of the period. Such revenues were comprised of the redemption and forfeiture of Friendship Rewards Program discount certificates, redemption of gift cards, and amortization of the PLCC signing bonus. The Company does not have any material contract assets as of
August 4, 2018
.
For the
thirteen and twenty-six
week periods ended
August 4, 2018
, the Company did not recognize any revenue resulting from changes in the estimated variable consideration to be received associated with performance obligations satisfied or partially satisfied in prior periods.
Transaction price allocated to remaining performance obligations
The following table includes the estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied as of
August 4, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Remainder of
|
|
|
|
|
|
|
Fiscal 2018
|
|
Fiscal 2019
|
|
Thereafter
|
Private label credit card
|
|
137
|
|
|
274
|
|
|
1,348
|
|
Total
|
|
137
|
|
|
274
|
|
|
1,348
|
|
Contract Costs
The Company has not incurred any costs to obtain or fulfill a contract.
NOTE 7 — Earnings Per Share
The following table sets forth the calculation of basic and diluted earnings per share (“EPS”) shown on the face of the accompanying consolidated statement of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
|
|
August 4,
|
|
July 29,
|
|
August 4,
|
|
July 29,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Numerator
(in thousands)
:
|
|
|
|
|
|
|
|
|
Net loss attributable to Christopher & Banks Corporation
|
|
$
|
(7,426
|
)
|
|
$
|
(7,889
|
)
|
|
$
|
(12,745
|
)
|
|
$
|
(11,577
|
)
|
Denominator
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
37,458
|
|
|
37,156
|
|
|
37,381
|
|
|
37,123
|
|
Dilutive shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Weighted average common and common equivalent shares outstanding - diluted
|
|
37,458
|
|
|
37,156
|
|
|
37,381
|
|
|
37,123
|
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.20
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.31
|
)
|
Diluted
|
|
$
|
(0.20
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.31
|
)
|
Total stock options of approximately
4.3 million
and
4.1 million
were excluded from the shares used in the computation of diluted earnings per share for the thirteen week periods ended
August 4, 2018
and
July 29, 2017
, as they were anti-dilutive. Total stock options of approximately
4.0 million
and
4.1 million
were excluded from the shares used in the computation of diluted earnings per share for the
twenty-six
week periods ended
August 4, 2018
and
July 29, 2017
, as they were anti-dilutive.
NOTE 8 — Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair value measurements, as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable
Level 3 – Unobservable inputs that are significant to the fair value of the asset or liability.
Assets that are Measured at Fair Value on a Non-recurring Basis:
The following table summarizes certain information for non-financial assets for the
twenty-six
weeks ended
August 4, 2018
and the fiscal year ended
February 3, 2018
, that are measured at fair value on a non-recurring basis in periods subsequent to an initial recognition period. The Company places amounts into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-six Weeks Ended
|
|
Fiscal Year Ended
|
Long-Lived Assets Held and Used
(in thousands)
:
|
|
August 4, 2018
|
|
February 3, 2018
|
Carrying value
|
|
$
|
—
|
|
|
$
|
318
|
|
Fair value measured using Level 3 inputs
|
|
$
|
—
|
|
|
$
|
—
|
|
Impairment charge
|
|
$
|
—
|
|
|
$
|
318
|
|
All of the fair value measurements included in the table above were based on significant unobservable inputs (Level 3). The Company determines fair value for measuring assets on a non-recurring basis using a discounted cash flow approach as discussed in
Note 1, Nature of Business and Significant Accounting Policies
in our Form 10-K for the year ended
February 3, 2018
. In determining future cash flows, the Company uses its best estimate of future operating results, which requires the use of significant estimates and assumptions, including estimated sales, merchandise margin and expense levels, and the selection of an appropriate discount rate; therefore, differences in the estimates or assumptions could produce significantly different results. General economic uncertainty impacting the retail industry and continuation of recent trends in company performance makes it reasonably possible that additional long-lived asset impairments could be identified and recorded in future periods.
Fixed asset fair values were derived using a discounted cash flow ("DCF") model to estimate the present value of net cash flows that the asset or asset group is expected to generate. The key inputs to the DCF model generally included our forecasts of
net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate. In the case of assets for which the impairment was the result of restructuring activities, no future cash flows have been assumed as the assets will cease to be used and expected sale values are nominal.
n
NOTE 9 — Legal Proceedings
We are subject, from time to time, to various claims, lawsuits or actions that arise in the ordinary course of business. We accrue for loss contingencies associated with outstanding litigation or legal claims for which management has determined it is probable that a loss contingency exists and the amount of the loss can be reasonably estimated. If we determine an unfavorable outcome is not probable or reasonably estimable, we do not accrue a potential loss contingency.
The ultimate resolution of legal matters can be inherently uncertain and, for some matters, we may be unable to predict the ultimate outcome, determine whether a liability has been incurred or make an estimate of the reasonably possible liability that could result from an unfavorable outcome because of these uncertainties. We do not, however, currently believe that the resolution of any pending matter will have a material adverse effect on our financial position, results of operations or liquidity.