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

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

PHILADELPHIA, Nov. 29, 2012 (GLOBE NEWSWIRE) -- Five Below, Inc. (Nasdaq:FIVE)
today announced financial results for the thirteen weeks and thirty-nine weeks
ended October 27, 2012.

For the thirteen weeks ended October 27, 2012:

  * Net sales increased by 39.9% to $86.6 million from $61.9 million in the
    third quarter of fiscal 2011; comparable store sales increased by 8.8%.
     
  * Operating income increased to $1.8 million from $0.7 million in the third
    quarter of fiscal 2011. Adjusted operating income, which excludes the
    impact of the founders' transaction in both periods (see GAAP/Non-GAAP
    reconciliation table), increased to $3.4 million from $0.9 million in the
    third quarter of fiscal 2011.
     
  * The Company opened 17 new stores and ended the quarter with 243 stores in
    18 states, an increase of 29% from the end of the third quarter of fiscal
    2011.
     
  * Net interest expense increased to $0.6 million from $6,000 in the third
    quarter of fiscal 2011. The increase in net interest expense resulted from
    a $100 million term loan entered into in the second quarter of fiscal
    2012, of which $65.5 million has been repaid subsequent to the completion
    of the Company's initial public offering ("IPO") on July 24, 2012.
     
  * Net income was $0.7 million compared to $0.4 million in the third quarter
    of fiscal 2011.  Adjusted net income, which excludes the impact of the
    founders' transaction in both periods (see GAAP/Non-GAAP reconciliation
    table), was $1.6 million compared to $0.6 million for the third quarter of
    fiscal 2011.
     
  * U.S. generally accepted accounting principles, or GAAP, diluted earnings
    per common share was $0.01 compared to a loss of $(0.22) per share in the
    third quarter of fiscal 2011 and includes GAAP adjustments for income
    attributable to participating securities in fiscal 2012 and GAAP
    adjustments for the potential impact of the Company's Series A 8%
    Convertible Preferred Stock cumulative dividends in fiscal 2011.  Adjusted
    diluted income per common share, which is adjusted net income on an
    adjusted diluted weighted average common shares outstanding basis (see
    GAAP/Non-GAAP reconciliation table), was $0.03 compared to $0.01 in the
    third quarter of fiscal 2011.

Thomas Vellios, Co-Founder, President and CEO, stated: "We are pleased to have
delivered strong third quarter results.  Our top-line performance combined
with our disciplined operating model drove adjusted net income to a level more
than double that of the year ago period."

Mr. Vellios added, "Our thoughts go out to the millions of people affected by
the devastation brought about by Hurricane Sandy. While our sales and
operations at the beginning of the fourth quarter were impacted by this event
and its aftermath, our most important shopping days of the year lie ahead. 
With our trend-right merchandise at extremely compelling price points, and the
wide array of exciting and affordable gift choices offered, we are excited
about the holiday season and are well-positioned as a shopping destination of
choice for our customers."

For the thirty-nine weeks ended October 27, 2012:

  * Net sales increased by 43.2% to $245.2 million from $171.3 million in the
    comparable period in fiscal 2011; comparable store sales increased by
    9.2%.
     
  * Operating income was $4.6 million as compared to $6.1 million in the
    comparable period in fiscal 2011. Adjusted operating income, which
    excludes the impact of the founders' transaction in both periods (see
    GAAP/Non-GAAP reconciliation table), increased 109% to $13.9 million from
    $6.6 million in the comparable period in fiscal 2011.
     
  * The Company opened 51 new stores compared to 47 net new stores opened in
    the comparable period in fiscal 2011.
     
  * Net interest expense increased to $1.8 million from $8,000 in the
    corresponding period of fiscal 2011.  The increase in net interest expense
    resulted from a $100 million term loan entered into in the second quarter
    of fiscal 2012, of which $65.5 million has been repaid subsequent to the
    completion of the Company's IPO on July 24, 2012. 
     
  * Loss on debt extinguishment was $1.6 million for the thirty-nine week
    period of fiscal 2012 and was the result of a write-off of deferred
    financing costs in connection with the partial repayment of the Company's
    term loan.
     
  * Net income was $0.8 million compared to $3.7 million in the corresponding
    period of fiscal 2011.  Adjusted net income, which excludes the impact of
    the founders' transaction in both periods (see GAAP/Non-GAAP
    reconciliation table), was $6.1 million compared to $4.0 million in the
    corresponding period of fiscal 2011.
     
  * GAAP diluted loss per common share was $(2.21) compared to $(0.51) in the
    corresponding period of fiscal 2011 and  includes dividends paid to
    preferred and unvested restricted shareholders in fiscal 2012 and GAAP
    adjustments for the potential impact of the Company's Series A 8%
    Convertible Preferred Stock cumulative dividends in fiscal 2011.  Adjusted
    diluted income per common share, which is adjusted net income on an
    adjusted diluted weighted average common shares outstanding basis (see
    GAAP/Non-GAAP reconciliation table), was $0.11 compared to $0.08 in the
    corresponding period of fiscal 2011.

Balance sheet highlights as of October 27, 2012:

  * Cash: $7.2 million
  * Total debt: $34.5 million
  * Total liquidity (cash plus availability on a $20 million revolver
    facility): $27.2 million

Fourth Quarter and Fiscal 2012 Outlook:

For the fourth quarter of fiscal 2012, net sales are expected to be in the
range of $167 million to $170 million based on opening one new store and
assuming a 4% increase in comparable store sales.  GAAP net income is expected
to be in the range of $18 million to $19 million, with a GAAP diluted income
per common share range of $0.34 to $0.36 on approximately 53.0 million
estimated weighted average common shares outstanding. Excluding $0.9 million,
or $0.02 per adjusted diluted share in tax-effected expenses related to the
founders' transaction, adjusted net income is expected to be approximately $19
million to $20 million, or $0.35 to $0.37 per diluted share based on estimated
adjusted diluted weighted average common shares outstanding of approximately
54.4 million.

For fiscal 2012, net sales are expected to be in the range of $412 million to
$415 million based on opening 52 new stores for the full year and assuming a
7% increase in comparable store sales. GAAP net income is expected to be in
the range of $19 million to $20 million, with a GAAP diluted loss per common
share of $(1.28) to $(1.31) (which includes the impact of $65.4 million of
dividends paid to preferred and unvested restricted shareholders) on
approximately 35.4 million estimated weighted average common shares
outstanding.  Excluding $6.5 million, or $0.12 per adjusted diluted share in
tax-effected expenses related to the founders' transaction, adjusted net
income is expected to be in the range of $26 million to $27 million, or $0.47
to $0.49 per diluted share based on estimated adjusted diluted weighted
average common shares outstanding of approximately 54.3 million.

Conference Call Information:

A conference call to discuss third quarter fiscal 2012 financial results is
scheduled for today, November 29, 2012, at 4:30 PM Eastern Time. Investors and
analysts interested in participating in the call are invited to dial
877-879-6217 (international callers please dial 913-312-0417) approximately 10
minutes prior to the start of the call. A live audio webcast of the conference
call will be available online at www.fivebelow.com in the investor relations
section of the website.

A taped replay of the conference call will be available within two hours of
the conclusion of the call and can be accessed both online and by dialing
(877) 870-5176. The pin number to access the telephone replay is 7248712. The
replay will be available until December 6, 2012.

Non-GAAP Information

This press release includes non-GAAP adjusted operating income, adjusted net
income, adjusted diluted weighted average common shares outstanding and
adjusted diluted income per common share, each a non-GAAP financial measure.
The Company has reconciled these non-GAAP financial measures with the most
directly comparable GAAP financial measures in a table accompanying this
release. The Company believes that these non-GAAP financial measures not only
provide its management with comparable financial data for internal financial
analysis but also provide meaningful supplemental information to investors.
Specifically, these non-GAAP financial measures allow investors to better
understand the performance of the Company's business and facilitate a
meaningful evaluation of its quarterly and fiscal year 2012 diluted income per
common share and actual results on a comparable basis with its quarterly and
fiscal year 2011 results. In evaluating these non-GAAP financial measures,
investors should be aware that in the future the Company may incur expenses or
be involved in transactions that are the same as or similar to some of the
adjustments in this presentation. The Company's presentation of non-GAAP
financial measures should not be construed to imply that its future results
will be unaffected by any such adjustments. The Company has provided this
information as a means to evaluate the results of its ongoing operations.
Other companies in the Company's industry may calculate these items
differently than it does. Each of these measures is not a measure of
performance under GAAP and should not be considered as a substitute for the
most directly comparable financial measures prepared in accordance with GAAP.
Non-GAAP financial measures have limitations as analytical tools, and
investors should not consider them in isolation or as a substitute for
analysis of the Company's results as reported under GAAP.

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 centers, 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 data)
                                                               
                                  October    January 28, 2012 October 29, 2011
                                  27, 2012
Assets                                                         
Current assets:                                                
Cash and cash equivalents         $ 7,245    $ 41,293         $ 1,767 
Inventories                        84,399     38,790           57,573 
Prepaid income taxes               9,951      —                —  
Deferred income taxes              —          4,863            3,031 
Prepaid expenses and other         12,250     7,303            7,928 
current assets 
Total current assets               113,845    92,249           70,299 
Property and equipment, net        54,086     42,040           40,192 
Deferred income taxes              —          —                164 
Other assets                       1,083      238              222 
                                   $ 169,014  $ 134,527        $ 110,877
Liabilities and Shareholders'                                  
Equity (Deficit)
Current liabilities:                                           
Line of credit                    $ —        $ —              $ —  
Accounts payable                   40,250     23,588           27,774 
Income taxes payable               —          9,139            1,732 
Accrued salaries and wages         1,693      9,254            1,536 
Other accrued expenses             11,472     7,961            10,737 
Deferred income taxes              1,710      —                  —  
Total current liabilities          55,125     49,942           41,779 
Notes payable                      34,500     250                250 
Deferred rent                      27,773     20,933           20,777 
Deferred income taxes              2,216      1,306              —  
Total liabilities                  119,614    72,431           62,806 
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     —          191,855           191,855
and outstanding zero, 89,291,773
and 89,291,773 shares,
respectively, with a liquidation
preference of zero, $214,420 and
$210,210, respectively 
Shareholders' equity (deficit):                                
Common stock, $0.01 par value.
Authorized 120,000,000 shares;
issued and outstanding             540        162              161 
53,972,006, 16,248,797 and
16,084,358 shares, respectively.
Additional paid-in capital         268,499    3,691            2,094 
Accumulated deficit                (219,639)  (133,612)         (146,039)
Total shareholders' equity         49,400     (129,759)        (143,784)
(deficit) 
                                  $ 169,014  $ 134,527        $ 110,877 
                                                               
                                                               

FIVE BELOW, INC.
 
Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
                                                                    
                               Thirteen weeks ended    Thirty-nine weeks ended
                               October 27, October 29, October 27, October 29,
                               2012        2011        2012        2011
Net sales                      $ 86,587    $ 61,895    $ 245,236   $ 171,288
Cost of goods sold              59,656      43,522      166,538     118,317
Gross profit                    26,931      18,373      78,698      52,971
Selling, general and            25,090      17,634      74,087      46,883
administrative expenses 
Operating income                1,841       739         4,611       6,088
Interest expense, net           550         6           1,829       8
Loss on debt extinguishment     7           —           1,594       —
Other income                    —           —           (258)       —
Income before income taxes      1,284       733         1,446       6,080
Income tax expense              555         293         627         2,429
Net income                      729         440         819         3,651
Dividend paid to preferred and
unvested restricted             —           —           (65,403)    — 
shareholders
Series A 8% Convertible
Preferred Stock cumulative      —           (3,964)     —           (11,703)
dividends
Income attributable to          (19)        —           —           — 
participating securities
Net income (loss) attributable $ 710       $ (3,524)   $ (64,584)  $ (8,052)
to common shareholders 
Basic income (loss) per common $ 0.01      $ (0.22)    $ (2.21)    $ (0.51)
share 
Diluted income (loss) per      $ 0.01      $ (0.22)    $ (2.21)    $ (0.51)
common share 
Dividends declared and paid    $ —         $ —         $ 2.02      $ —
per common share 
Weighted average shares                                             
outstanding:
Basic shares                    52,565,576  15,884,527  29,282,385  15,845,372
Diluted shares                  52,959,169  15,884,527  29,282,385  15,845,372

                                                                    
                                                                    
FIVE BELOW, INC.                                                    
Statements of Cash Flows                                            
(Unaudited)                                                         
(in thousands)                                                      
                                                       Thirty-nine weeks ended
                                                       October 27, October 29,
                                                        2012        2011
Operating activities:                                               
Net income                                             $ 819       $ 3,651
Adjustments to reconcile net income to net cash (used               
in) provided by operating activities:
Depreciation and amortization                           6,841       5,001 
Gain on conversion of note payable                      (200)       — 
Loss on debt extinguishment                             1,594       — 
Amortization of deferred financing costs                387         21
Warrant expense related to professional service         43          31 
providers for services rendered
Stock-based compensation expense                        10,157      839 
Deferred income tax expense                             7,483       418 
Other                                                   (71)        322 
Changes in operating assets and liabilities:                        
Prepaid income taxes                                    (9,951)     20
Inventories                                             (45,609)    (30,819)
Prepaid expenses and other assets                       (5,008)     (3,872)
Accounts payable                                        16,662      17,376
Income taxes payable                                    (9,139)     1,591
Accrued salaries and wages                              (7,561)     (507)
Deferred rent                                           7,499       6,054 
Other accrued expenses                                  2,207       5,025 
Net cash (used in) provided by operating activities     (23,847)    5,151
Investing activities:                                               
Capital expenditures                                    (17,442)    (15,397)
Net cash used in investing activities                   (17,442)    (15,397)
Financing activities:                                               
Borrowing under Term Loan Facility                      100,000     — 
Repayment of Term Loan Facility                         (65,500)    — 
Cash paid for debt financing costs                      (2,751)     — 
Repayment of note payable                               (50)        — 
Dividend paid to shareholders                           (99,451)    — 
Net proceeds from issuance of common stock              73,259      — 
Proceeds from exercise of warrants to purchase common   201         — 
stock
Repurchase of unvested restricted shares related to     (17)        (140) 
stock option exercises
Excess tax benefit related to restricted shares         1,550       — 
Net cash provided by (used in) financing activities     7,241       (140)
Net decrease in cash and cash equivalents               (34,048)    (10,386)
Cash and cash equivalents at beginning of period        41,293      12,153 
Cash and cash equivalents at end of period             $ 7,245     $ 1,767 
                                                                    

 
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      Thirty-nine weeks ended
                            October 27,  October 29,  October 27,  October 29,
                            2012         2011         2012         2011
Operating income            $ 1,841      $ 739        $ 4,611      $ 6,088
Adjustments:                                                        
Founders' transaction (1)   1,515        183          9,282        546
Adjusted operating income   $ 3,356      $ 922        $  13,893    $ 6,634
                                                                    
Reconciliation of net income (loss) attributable to common shareholders, as
reported, to adjusted net income
                            Thirteen weeks ended      Thirty-nine weeks ended
                            October 27,  October 29,  October 27,  October 29,
                            2012         2011         2012         2011
Net income (loss)
attributable to common      $ 710        $ (3,524)    $ (64,584)   $ (8,052)
shareholders
Adjustments:                                                        
Dividends paid to preferred
and unvested                 —           —            65,403       —
restricted shareholders
Series A 8% Convertible
Preferred Stock ("Preferred  —           3,964         —           11,703
stock") cumulative
dividends
Income attributable to      19           —            —            — 
participating securities
Net income                  729          440          819          3,651
Adjustments:                                                        
Founders' transaction (1)   1,515        183          9,282        546
Less tax benefit            (655)        (73)         (4,025)      (218)
Adjusted net income         $ 1,589      $ 550        $ 6,076      $ 3,979
                                                                    
Reconciliation of diluted weighted average common shares outstanding, as
reported, to adjusted diluted weighted average common shares outstanding
                            Thirteen weeks ended      Thirty-nine weeks ended
                            October 27,  October 29,  October 27,  October 29,
                             2012        2011         2012         2011
Diluted weighted average    52,959,169   15,884,527   29,282,385   15,845,372
common shares outstanding
Adjustments:                                                        
Preferred shares conversion —            30,894,953   20,030,794   30,894,953
Initial public offering     —            4,807,692    3,117,075    4,807,692
shares issuance
Unvested and vested         1,406,430    173,729      1,564,878    212,884
restricted stock (2)
Diluted effect of stock     —            —            133,639      —
options and warrants (3)
Adjusted diluted weighted
average common shares       54,365,599   51,760,901   54,128,771   51,760,901
outstanding
                                                                    

 
FIVE BELOW, INC.
GAAP to Non-GAAP Reconciliation of Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
 
Reconciliation of diluted income (loss) per common share, as reported, to
adjusted diluted income per common share
                            Thirteen weeks ended     Thirty-nine weeks ended
                            October 27, October 29,  October 27,  October 29,
                            2012        2011         2012         2011
Diluted income (loss) per   $  0.01     $ (0.22)     $ (2.21)     $ (0.51)
common share, as reported
Adjustments:                                                       
Dividends paid to preferred
and unvested restricted     —           —            2.23         —
shareholders per share
Series A 8% Convertible
Preferred Stock             —           0.25         —            0.74
cumulative dividends per
share
Founders' transaction per   0.03        0.01         0.32         0.03
share (1)
Income tax benefit per      (0.01)      —            (0.14)       (0.01)
share
Adjustments to weighted
average common shares       —           (0.03)       (0.09)       (0.17)
outstanding per share
Adjusted diluted income per $ 0.03      $ 0.01       $ 0.11       $ 0.08
common share
                                                                   
(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
        
         Media Contact:
         Gregory FCA
         Joe Hassett
         610-642-8253