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Hot Topic, Inc. Reports 4th Quarter Financial Results



  Hot Topic, Inc. Reports 4th Quarter Financial Results

Business Wire

CITY OF INDUSTRY, Calif. -- March 13, 2013

Hot Topic, Inc. (Nasdaq Global Select Market: HOTT) reported results for its
fiscal fourth quarter and fiscal year of 2012 (14 weeks and 53 weeks,
respectively) ended February 2, 2013.

The company reported net income in the fourth quarter of $12.1 million, or
$0.29 per share, compared to net income of $9.0 million, or $0.21 per share,
for the fourth quarter of fiscal year 2011 (13 weeks). Total sales for the
fourth quarter of fiscal 2012 increased 11.0% to $233.0 million compared to
$209.9 million for the fourth quarter of fiscal year 2011. Total company
comparable sales increased 2.6% for the fourth quarter of fiscal 2012. Due to
the 53rd week in fiscal 2012, fourth quarter comparable sales are compared to
the corresponding 14 week period ended February 4, 2012. Additionally, during
the first quarter of fiscal 2012, the company began including Internet sales
in the computation of comparable sales. All prior year comparable sales
results have been adjusted to reflect this change. A summary of the sales
results by division was included in the fourth quarter sales release.

For the fiscal year of 2012, the company reported net income of $19.5 million,
or $0.46 per share, compared to a net loss of $1.8 million, or $0.04 per
share, for fiscal year 2011 (52 weeks). The results for fiscal year 2011
include a charge of $16.6 million for the implementation of the strategic
business changes and cost reduction plan. On a non-GAAP basis, which excludes
the charges for the strategic business changes and the cost reduction plan,
fiscal year 2011 net income was $0.19 per share. (Refer to GAAP to non-GAAP
reconciliation.)

At the end of the fourth quarter of fiscal 2012, the company operated 618 Hot
Topic stores, 190 Torrid stores and five Blackheart stores compared to 628 Hot
Topic stores and 148 Torrid stores at the end of fourth quarter of fiscal
2011. During the fourth quarter of fiscal 2012, the company opened five Torrid
stores and five Blackheart stores, and closed two Hot Topic stores and one
Torrid store. The company also remodeled one Hot Topic store during the
quarter.

A conference call to discuss fourth quarter results is scheduled for March 13,
2013 at 4:30 PM (ET). The conference call number is 866-700-6067, 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 41187953, 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, as well as a new test retail concept, Blackheart.
Hot Topic offers music/pop culture-licensed and music/pop culture-influenced
apparel, accessories, music and gift items for young men and women. Torrid
retails on-trend fashion apparel, lingerie and accessories inspired by and
designed to fit the young, voluptuous woman who wears size 12 and up.
Blackheart offers an expanded collection of dark, edgy, sexy lingerie,
accessories and beauty products. As of February 2, 2013, the company operated
618 Hot Topic stores in all 50 states, Puerto Rico and Canada, 190 Torrid
stores, five Blackheart stores, and Internet stores hottopic.com, torrid.com
and blackheartlingerie.com.

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)
 
                                                  Quarter Ended
                                                  Feb. 2, 2013   Jan. 28, 2012
                                                                  
Net sales                                         $   232,960    $  209,889
Cost of goods sold, including buying,                 144,496       135,692
distribution and occupancy costs
Gross margin                                          88,464        74,197
Selling, general & administrative expenses            69,328        59,382
Income from operations                                19,136        14,815
Interest and other income, net                        43            88
Income before provision for income taxes              19,179        14,903
Provision for income taxes                            7,066         5,947
Net income                                        $   12,113     $  8,956
                                                                  
Earnings per share:
Basic and Diluted                                 $   0.29       $  0.21
Shares used in computing earnings per share:
Basic                                                 41,228        42,068
Diluted                                               42,063        42,451
                                                                  
                                                  Year Ended
                                                  Feb. 2, 2013   Jan. 28, 2012
                                                                  
Net sales                                         $   741,745    $  697,934
Cost of goods sold, including buying,                 473,505       465,081
distribution and occupancy costs
Gross margin                                          268,240       232,853
Selling, general & administrative expenses            237,401       236,308
Income (loss) from operations                         30,839        (3,455   )
Interest and other income, net                        138           310
Income (loss) before provision (benefit) for          30,977        (3,145   )
income taxes
Provision (benefit) for income taxes                  11,507        (1,327   )
Net income (loss)                                 $   19,470     $  (1,818   )
                                                                  
Earnings (loss) per share:
Basic and Diluted                                 $   0.46       $  (0.04    )
Shares used in computing earnings (loss) per
share:
Basic                                                 41,970        43,892
Diluted                                               42,737        43,892

 
HOT TOPIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
                                                  Feb. 2, 2013   Jan. 28, 2012
Current Assets:
Cash, cash equivalents and short-term             $   49,991     $   66,118
investments
Inventory                                             80,844         70,800
Prepaid expenses and other                            13,716         17,474
Deferred tax assets                                   10,664         5,953
Total current assets                                  155,215        160,345
Property and equipment, net                           107,347        105,790
Deposits and other                                    8,039          7,002
Long-term investments                                 1,730          1,722
Deferred tax assets                                   2,614          3,104
Total assets                                      $   274,945    $   277,963
                                                                  
Current Liabilities:
Accounts payable                                  $   23,211     $   23,828
Accrued liabilities                                   48,065         44,253
Income taxes payable                                  5,143          171
Total current liabilities                             76,419         68,252
Deferred rent                                         19,627         20,486
Deferred compensation liability                       5,488          4,410
Income taxes payable                                  657            1,812
Total liabilities                                     102,191        94,960
Total shareholders’ equity                            172,754        183,003
Total liabilities and shareholders’ equity        $   274,945    $   277,963

 
HOT TOPIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
                                                 Year Ended
                                                 Feb. 2, 2013    Jan. 28, 2012
Operating Activities
Net income (loss)                                $ 19,470          ($1,818   )
Adjustments to reconcile net income (loss) to
net cash provided by operations:
Depreciation and amortization                      33,135          35,729
Change in inventory                                (10,200   )     (536      )
Other, net                                         10,788          12,521
Net cash flows provided by operating               53,193          45,896
activities
Investing activities
Purchases of property and equipment                (36,369   )     (23,891   )
Proceeds from sale of investments                  10,344          10,053
Net cash flows used in investing activities        (26,025   )     (13,838   )
                                                                  
Financing activities
Payment of cash dividends                          (13,420   )     (12,199   )
Excess tax benefit from stock-based                1,082           592
compensation
Proceeds from employee stock purchases and         4,432           3,132
stock options exercised
Payment of capital lease obligation                -               (191      )
Repurchase of common stock                         (25,051   )     (25,079   )
Net cash used in financing activities              (32,957   )     (33,745   )
Decrease in cash and cash equivalents              (5,789    )     (1,687    )
Effect of foreign currency exchange rate           7               (14       )
changes on cash
Cash and cash equivalents at beginning of          49,615          51,316
period
Cash and cash equivalents at end of period       $ 43,833        $ 49,615
                                                                  
                                                                  
OTHER DATA
                                                                  
                                                                  
Total company store square footage                 1,590,700       1,481,500
Hot Topic average store size                       1,740           1,769
Torrid average store size                          2,507           2,496

 
                 Year Ended
                 Feb. 2, 2013                      Jan. 28, 2012
                 Reported    Charges   Non-GAAP    Reported      Charges    Non-GAAP
Net sales        $ 741,745   $   -     $ 741,745   $ 697,934     $ -        $ 697,934
Cost of goods
sold,
including
buying,            473,505       -       473,505     465,081       5,401      459,680  
distribution
and occupancy
costs
Gross margin       268,240       -       268,240     232,853       5,401      238,254
Selling,
general and        237,401       -       237,401     236,308       11,176     225,132  
administrative
expenses
Income (loss)
from               30,839        -       30,839      (3,455  )     16,577     13,122
operations
Interest           138           -       138         310           -          310      
income, net
Income (loss)
before
provision          30,977        -       30,977      (3,145  )     16,577     (13,432 )
(benefit) for
income taxes
Provision
(benefit) for      11,507        -       11,507      (1,327  )     6,283      4,956    
income taxes
Net income       $ 19,470    $   -     $ 19,470      ($1,818 )   $ 10,294   $ 8,476    
(loss)
                                                                             
Earnings
(loss) per
share:
Basic            $ 0.46                $ 0.46      $ (0.04   )              $ 0.19
Diluted          $ 0.46                $ 0.46      $ (0.04   )              $ 0.19
Shares used in
computing
earnings
(loss) per
share:
Basic              41,970                41,970      43,892                   43,892
Diluted            42,737                42,737      43,892                   43,892

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.

Within this release, the Company has excluded the following items from its
non-GAAP performance measures:

Fiscal Year (year ended Jan. 28, 2012) - $16.6 million of charges consist of
the following items:
– $17.2 million of charges, comprising of $6.2 million in cost of goods sold
and $11.0 million in selling, general and administrative expenses, related to
the strategic business changes previously announced on March 28, 2011.
– $0.6 million net recovery of charges, comprising of $0.8 million recovery in
cost of goods sold and $0.2 million charge in selling, general and
administrative expenses, related to the implementation of the cost reduction
plan previously announced on November 16, 2010.

Contact:

Hot Topic, Inc.
Investor Contact:
George Wehlitz, CFO
626-839-4681 x2174
or
Media Contact:
Jennifer Vides, 626-839-4681 x2970
jvides@hottopic.com
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