Tilly’s, Inc. Announces Fourth Quarter Fiscal 2012 Results; Introduces First Quarter and Full Year 2013 Outlook

  Tilly’s, Inc. Announces Fourth Quarter Fiscal 2012 Results; Introduces First
  Quarter and Full Year 2013 Outlook

  *Fourth Quarter Net Sales Increased 14.5%; Comp Store Sales Decreased 0.9%
                *Fourth Quarter GAAP Net Income of $9.8 million
          *Fourth Quarter Adjusted Net Income up 11% to $8.9 million
  *Fiscal Year Adjusted Net Income up 19% to $23.3 million

Business Wire

IRVINE, Calif. -- March 20, 2013

Tilly’s, Inc. (NYSE: TLYS) today announced financial results for the fourth
quarter of fiscal 2012 ended February 2, 2013.

“I am proud of what we accomplished in fiscal 2012. In line with our long-term
goals we achieved double-digit growth in net sales and, on an adjusted basis,
leveraged our SG&A expenses, increased our operating margin and grew net
income by 19% during the year. Despite the variability in sales trends we
experienced in the second half of 2012, we maintained our strong pricing
discipline and exited the year with inventory that was clean, current and well
positioned for the spring season. Our business continued to generate
significant cash flow and we capitalized on a strong pipeline of real estate
opportunities to open a net 28 new stores during the year, further expanding
the Tilly’s concept into 20 new markets and augmenting a key driver of future
growth,” commented Daniel Griesemer, President and Chief Executive Officer.
“As we begin fiscal 2013, we are confident in the fundamentals of our business
and in our ability to deliver on the opportunities we see to expand the
Tilly’s brand for sustainable, long-term, quality growth.”

For the fourth quarter ended February 2, 2013:

  *Total net sales for the fourth quarter were $140.8 million, an increase of
    14.5% compared to the fourth quarter of 2011.
  *Comparable store sales for the thirteen-week period, which include
    e-commerce sales, decreased 0.9%. E-commerce sales for the thirteen-week
    period were $19.3 million, an increase of 20% compared to the fourth
    quarter of 2011.
  *Gross profit increased 13.2% to $46.8 million. Gross margin was 33.3%,
    compared to 33.6% in the fourth quarter of 2011.
  *Operating income on a GAAP basis was $14.8 million compared to $14.1
    million in the fourth quarter of 2011. Operating margin was 10.5%,
    compared to 11.4% in the fourth quarter of 2011.
  *On a GAAP basis, net income was $9.8 million, or $0.35 per diluted share,
    based on a weighted average diluted share count of 28.0 million shares.
    This compares to net income of $13.9 million, or $0.67 per diluted share,
    based on 20.5 million weighted average diluted shares in the fourth
    quarter of 2011.
  *Adjusted net income for the quarter increased 10.8% to $8.9 million, or
    $0.32 per diluted share, compared to adjusted net income of $8.0 million,
    or $0.39 per diluted share in the fourth quarter of 2011. These results
    adjust GAAP net income to assume an expected long-term effective tax rate
    of 40% for both this year and last year periods, and add back a charge for
    on-going non-cash compensation expense for stock options of $0.7 million,
    before tax, to the fourth quarter of 2011, which equals the charge for
    on-going non-cash compensation expense in the fourth quarter of 2012.
  *At the conclusion of this press release is a reconciliation of non-GAAP
    results to GAAP results.

For the fiscal year ended February 2, 2013:

  *Total net sales for the fiscal year were $467.3 million, an increase of
    16.6% compared to the prior year.
  *Comparable store sales for the fifty-two week period, which include
    e-commerce sales, increased 2.2%. E-commerce sales for the fifty-two week
    period were $53.0 million, an increase of 21% compared to the prior year.
  *Gross profit increased 16.3% to $150.2 million. Gross margin was 32.1%,
    compared to 32.2% in the prior year.
  *Operating income on a GAAP basis was $31.4 million including a one-time,
    non-cash charge to SG&A expense of $7.6 million, before tax, to recognize
    life to date compensation expense for stock options, which was triggered
    by the completion of the Company’s initial public offering in the second
    quarter of 2012.
  *On a GAAP basis, net income was $23.9 million, or $0.92 per diluted share,
    based on a weighted average diluted share count of 26.1 million shares.
    GAAP net income includes the one-time non-cash compensation charge for
    stock options of $7.6 million to SG&A as well as a one-time net tax
    provision benefit of $3.0 million, both triggered at the initial public
    offering effective date in the second quarter of 2012. This compares to
    prior year net income of $34.3 million, or $1.68 per diluted share, based
    on 20.5 million weighted average diluted shares in the prior year.
  *Adjusted net income increased 18.7% to $23.3 million, or $0.90 per diluted
    share, compared to adjusted net income of $19.7 million, or $0.96 per
    diluted share, in the prior year period. These results adjust GAAP net
    income for the one-time, non-cash compensation charge to SG&A incurred in
    the second quarter of 2012, assume an expected long-term effective tax
    rate of 40% for both this year and last year periods, and add back a
    charge for on-going non-cash compensation expense for stock options of
    $2.0 million, before tax, for the second, third and fourth quarters of
    2011, which equals the charge for on-going non-cash compensation expense
    in the second, third and fourth quarters of 2012.
  *At the conclusion of this press release is a reconciliation of non-GAAP
    results to GAAP results.

Tilly’s follows the retail 4-5-4 reporting calendar, which included an extra
week in the fourth quarter of fiscal 2012 (the 53rd week). In the 53rd week,
the Company had pre-tax income of approximately $0.6 million. The 53rd week is
not included in the comparable store sales percentage.

Balance Sheet and Liquidity

As of February 2, 2013, the Company had $57.2 million of cash and marketable
securities compared to $25.1 million as of January 28, 2012. The Company ended
the quarter with no borrowings and no debt outstanding on its revolving credit
facility.

First Quarter 2013 Outlook

Although traffic and sales were soft in the first few weeks of the quarter,
trends have shown solid improvement in March. Given this variability we
believe it prudent to remain cautious and therefore expect comparable store
sales to decline in the low- to mid-single digit range compared to a 4.3%
comparable store sales increase in the first quarter of 2012. Using the
anticipated effective tax rate of 40%, net income for the first quarter is
expected to be in the range of $1.1 million to $2.0 million, or $0.04 to $0.07
per diluted share, and assumes a weighted average diluted share count of 28.2
million shares, compared to 20.5 million weighted average diluted shares in
the first quarter of last year.

First quarter 2012 adjusted net income was $3.2 million, which includes
ongoing stock-based compensation expense and a 40% effective tax rate to make
that quarter, operating as an S-corporation, comparable to operating in 2013
as a C-corporation. (See reconciliation of non-GAAP results to GAAP results at
the end of this release.)

Fiscal Year 2013 Outlook

Given continued economic uncertainty, the Company is projecting comparable
store sales growth in the low-single digit range for fiscal 2013, on a 52-week
vs. 52-week basis. Using an anticipated full year effective tax rate of 40%,
net income for fiscal year 2013 is expected to be in the range of $21.5
million to $23.0 million, or $0.75 to $0.81 per diluted share, and assumes a
weighted average diluted share count of 28.4 million shares, compared to 26.1
million weighted average diluted shares for the full year 2012.

Full year 2012 adjusted net income was $22.9 million, which includes four
quarters of ongoing stock –based compensation expense totaling $2.7 million
and a 40% effective tax rate for the entire year, and excludes a one-time
charge to recognize life-to-date stock-based compensation that was recorded in
the second quarter of 2012 and a one-time tax benefit resulting from the
conversion of deferred tax assets to the higher C-corporation value of those
assets. (See reconciliation of non-GAAP results to GAAP results at the end of
this release.)

Conference Call Information

A conference call to discuss the financial results is scheduled for today,
March 20, 2013, at 5:30 p.m. ET (2:30 p.m. PT). Investors and analysts
interested in participating in the call are invited to dial (888) 395-3227 at
5:25 p.m. ET (2:25 p.m. PT). The conference call will also be available to
interested parties through a live webcast at www.tillys.com. Please visit the
website and select the “Investor Relations” link at least 15 minutes prior to
the start of the call to register and download any necessary software.

A telephone replay of the call will be available until April 3, 2013, by
dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) and
entering the conference identification number: 1954786. Please note
participants must enter the conference identification number in order to
access the replay.

About Tilly’s

Tilly's is a fast-growing destination specialty retailer of West Coast
inspired apparel, footwear and accessories with an extensive assortment of the
most relevant and sought-after brands rooted in action sports, music, art and
fashion. Tilly’s is headquartered in Southern California and, as of February
2, 2013, operated 168 stores and through its website, www.tillys.com.

Non-GAAP Financial Measures

In addition to reporting financial measures in accordance with generally
accepted accounting principles in the United States (“GAAP”), the Company
provides non-GAAP “adjusted selling, general and administrative expenses”,
“adjusted operating income”, “adjusted income before income taxes”, “adjusted
income tax provision”, “adjusted net income”, “adjusted basic earnings per
share” and “adjusted diluted earnings per share”. These amounts are not in
accordance with, or an alternative to, GAAP. The Company’s management believes
that these measures provide investors with transparency by helping illustrate
the financial results: (i) as if the Company had been a publicly traded “C”
Corporation during the relevant time periods, in order to provide a better
comparison of past periods to current periods as a “C” Corporation; and (ii)
to exclude items that may not be indicative of, or are unrelated to, the
Company’s core operating results, providing a better baseline for analyzing
trends in the underlying business.

For a description of these non-GAAP financial measures and reconciliations of
these non-GAAP financial measures to the most directly comparable financial
measures prepared in accordance with GAAP, please see the accompanying table
titled " Supplemental Information - Consolidated Statements of Income;
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures”
contained in this press release.

Forward Looking Statements

Certain statements in this press release and oral statements made from time to
time by our representatives are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. In particular,
statements regarding our guidance, future financial and operating results and
any other statements about our future expectations, plans, intentions, beliefs
or prospects expressed by management are forward-looking statements. These
forward-looking statements are based on management’s current expectations and
beliefs, but they involve a number of risks and uncertainties that could cause
actual results or events to differ materially from those indicated by such
forward-looking statements, including, but not limited to, our ability to
respond to changing customer preferences, execute our growth strategy, expand
into new markets, effectively compete with other retailers, enhance our brand
image and other factors that are detailed in our Registration Statement on
Form S-1 (File No. 333-175299), including those detailed in the section titled
“Risk Factors” contained that registration statement, which is available from
the SEC’s website at www.sec.gov and from our website at www.tillys.com under
the heading “Investor Relations”. Readers are urged not to place undue
reliance on these forward-looking statements, which speak only as of the date
of this press release. We do not undertake any obligation to update or alter
any forward-looking statements, whether as a result of new information, future
events or otherwise. This release should be read in conjunction with our
financial statements and notes thereto contained in our registration statement
and our Forms 10-Q.

                                                              
Tilly’s, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)
                                                                   
                                                   February 2,     January 28,

                                                   2013            2012
                                                                   
ASSETS
Current assets:
Cash and cash equivalents                          $ 17,314        $  25,091
Marketable securities                                39,868           -
Receivables                                          5,934            6,605
Merchandise inventories                              46,595           36,531
Prepaid expenses and other current assets           11,387         5,616
Total current assets                                 121,098          73,843
Property and equipment, net                          80,926           64,077
Other assets                                        3,357          2,899
Total assets                                       $ 205,381      $  140,819
                                                                   
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                   $ 18,261        $  16,830
Deferred revenue                                     5,453            4,865
Accrued compensation and benefits                    6,094            7,536
Accrued expenses                                     12,132           12,935
Current portion of deferred rent                     4,555            3,335
Current portion of capital lease                    712            669
obligation/Related party
Total current liabilities                            47,207           46,170
Long-term portion of deferred rent                   37,620           30,256
Long-term portion of capital lease                  3,258          3,969
obligation/Related party
Total long-term liabilities                         40,878         34,225
Total liabilities                                    88,085           80,395
                                                                   
Commitments and contingencies
                                                                   
Stockholders' equity:
Common stock, $0.001 par value; February 2,
2013 - no shares authorized, issued or
outstanding;
January 28, 2012 - 21,600 shares authorized,         -                20
20,000 shares issued and outstanding
Common stock (Class A), $0.001 par value;
February 2, 2013 - 100,000 shares authorized,
10,772
shares issued and outstanding; January 28,
2012 - 100,000 shares authorized, 1 shares           11               -
issued and outstanding
Common stock (Class B), $0.001 par value;
February 2, 2013 - 35,000 shares authorized,
16,920 shares
issued and outstanding; January 28, 2012 -
35,000 shares authorized, no shares issued or        17               -
outstanding
Preferred stock, $0.001 par value; February 2,
2013 and January 28, 2012 - 10,000 shares
authorized,
no shares issued or outstanding                      -                -
Additional paid-in capital                           117,391          150
Retained earnings (deficit)                          (140    )        60,254
Accumulated other comprehensive income              17             -
Total stockholders' equity                          117,296        60,424
Total liabilities and stockholders' equity         $ 205,381      $  140,819
                                                                      

                                                           
Tilly’s, Inc.

Consolidated Statements of Income

(In thousands, except per share data)
                                                                     
                     14 Weeks        13 Weeks        53 Weeks        52 Weeks

                     Ended           Ended           Ended           Ended
                     February 2,     January 28,     February 2,     January
                                                                     28,
                     2013            2012            2013
                                                                     2012
                                                                     
Net sales            $  140,771      $  122,929      $  467,291      $ 400,624
Cost of goods
sold (includes
buying,                93,946         81,572         317,096       271,482
distribution,
and occupancy
costs)
Gross profit            46,825          41,357          150,195        129,142
Selling, general
and                    32,011         27,302         118,805       94,217
administrative
expenses
Operating income        14,814          14,055          31,390         34,925
Interest               46             46             91            196
expense, net
Income before           14,768          14,009          31,299         34,729
income taxes
Income tax             4,927          153            7,406         389
expense
Net income           $  9,841        $  13,856       $  23,893       $ 34,340
                                                                     
Basic earnings       $  0.36         $  0.69         $  0.93         $ 1.72
per share
Diluted earnings     $  0.35         $  0.67         $  0.92         $ 1.68
per share
Weighted average
basic shares            27,686          20,000          25,656         20,000
outstanding
Weighted average
diluted shares          28,033          20,532          26,076         20,500
outstanding
                                                                     

                                                            
Tilly’s, Inc.

Consolidated Statements of Cash Flows

(In thousands)
                                                                   
                                   Fiscal Year Ended
                                   February 2,     January 28,     January 29,

                                   2013            2012            2011
                                                                   
Cash flows from operating
activities
Net income                         $ 23,893        $ 34,340        $ 24,416
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization        16,679          15,129          14,292
Loss on disposal of assets           111             232             224
Impairment of assets                 -               554             1,985
Loss on sales of marketable          28              -               -
securities
Deferred income taxes                6,689           -               -
Stock-based compensation             9,570           -               -
expense
Excess tax benefit from              (95     )       -               -
stock-based compensation
Changes in operating assets
and liabilities:
Receivables                          21              (2,304  )       (2,153  )
Merchandise inventories              (9,927  )       (3,028  )       (9,621  )
Prepaid expenses and other           (12,930 )       (2,868  )       (1,356  )
assets
Accounts payable                     1,431           2,113           4,059
Accrued expenses                     (1,470  )       155             5,327
Accrued compensation and             (1,442  )       3,362           958
benefits
Deferred rent                        8,584           4,159           3,085
Deferred revenue                    588           740           486     
Net cash provided by operating      41,730        52,584        41,702  
activities
                                                                   
Cash flows from investing
activities
Purchase of property and             (33,298 )       (20,223 )       (15,674 )
equipment
Proceeds from sale of property       17              28              41
and equipment
Insurance proceeds from              822             -               375
casualty loss
Purchases of marketable              (75,377 )       -               -
securities
Sales of marketable securities      35,510        -             -       
Net cash used in investing          (72,326 )      (20,195 )      (15,258 )
activities
                                                                   
Cash flows from financing
activities
Payment of capital lease             (668    )       (628    )       (591    )
obligation
Net proceeds from initial            106,789         -               -
public offering
Proceeds from exercise of            890             -               -
stock options
Excess tax benefit from              95              -               -
stock-based compensation
Distributions                       (84,287 )      (36,008 )      (22,220 )
Net cash provided by (used in)      22,819        (36,636 )      (22,811 )
financing activities
                                                                   
Change in cash and cash              (7,777  )       (4,247  )       3,633
equivalents
Cash and cash equivalents,          25,091        29,338        25,705  
beginning of period
Cash and cash equivalents, end     $ 17,314       $ 25,091       $ 29,338  
of period
                                                                             
                                                                             

                                Tilly’s, Inc.
         Supplemental Information - Consolidated Statements of Income
   Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
                   (In thousands, except per share amounts)
                                 (Unaudited)

    The tables below reconcile the non-GAAP financial measures of adjusted
  selling, general and administrative expenses (“SG&A”), adjusted operating
 income, adjusted income before income taxes, adjusted income tax provision,
 adjusted net income, and adjusted basic and diluted earnings per share, with
 the most directly comparable GAAP financial measures of actual SG&A, actual
    operating income, actual income before income taxes, actual income tax
provision, actual net income, and actual basic and diluted earnings per share.

                                                             
                         Q4 2012 - 14 weeks                        Q4 2011 - 13 weeks
                         (quarter ended February 2, 2013)          (quarter ended January 28, 2012)
                                                                                       
                         Reported   Adjustments   Adjusted     Reported   Adjustments   Adjusted
                         (GAAP)                                    (GAAP)
                                                                                                
Selling,
general and        (1)    32,011     -                32,011      27,302     677              27,979
administrative
expenses
Operating                  14,814     -                 14,814       14,055     (677     )        13,378
income
Income before              14,768     -                 14,768       14,009     (677     )        13,332
income taxes
Income tax         (2)     4,927      980               5,907        153        5,180             5,333
provision
Net income               $9,841       ($980    )        8,861        13,856     (5,857   )        7,999
                                                                                                
Basic earnings           $0.36        ($0.04   )      $0.32        $0.69        ($0.29   )      $0.40
per share
Diluted
earnings per             $0.35        ($0.03   )      $0.32        $0.67        ($0.28   )      $0.39
share
                                                                                                

                                          
Notes:
(1) 2012 GAAP SG&A includes a charge for stock-based compensation expense for
the quarter; 2011 adjustment reflects a charge for stock-based compensation
expense equal to the charge in the 2012 quarter. The result of this adjustment
to 2011 is to reflect a similar on-going stock-based compensation expense as
if the Company had recognized stock-based compensation expense in both years'
fourth quarters.
(2) Tax provision adjusted to the expected long-term effective tax rate of 40%
for both years; GAAP provision rate in 2012 was impacted by the conversion in
the second quarter of 2012 from an "S" Corporation to a "C" Corporation and
the 2011 GAAP tax rate reflected an "S" Corporation rate.


                      Fiscal Year 2012 - 53 weeks               Fiscal Year 2011 - 52 weeks
                         (twelve months ended February 2, 2013)      (twelve months ended January 28,
                                                                     2012)
                                                                                         
                         Reported    Adjustments   Adjusted      Reported   Adjustments   Adjusted
                         (GAAP)                                      (GAAP)
                                                                                                  
Selling,
general and        (1)    118,805     (7,615   )       111,190      94,217     1,955            96,172
administrative
expenses
Operating                  31,390      7,615             39,005        34,925     (1,955   )        32,970
income
Income before              31,299      7,615             38,914        34,729     (1,955   )        32,774
income taxes
Income tax         (2)     7,406       8,160             15,566        389        12,721            13,110
provision
Net income                 23,893      (545     )        23,348        34,340     (14,676  )        19,664
                                                                                                  
Basic earnings           $0.93         ($0.02   )      $0.91         $1.72        ($0.74   )      $0.98
per share
Diluted
earnings per             $0.92         ($0.02   )      $0.90         $1.68        ($0.72   )      $0.96
share
                                                                                                  

                                          
Notes:
(1) 2012 GAAP SG&A adjustment excludes a charge for life-to-date stock-based
compensation expense covering periods up to the May 2012 IPO date; 2011
adjustment reflects the add-back of stock-based compensation expense starting
in Q2 consistent with the ongoing expense starting in Q2 of 2012. The result
of these adjustments to both 2012 and 2011 is to reflect a similar ongoing
stock-based compensation expense as if the Company had recognized only ongoing
stock-based compensation expense starting in both years' second quarters.
(2) Tax provision adjusted to the expected long-term effective tax rate of 40%
for both years; the GAAP tax provision rate in 2012 was impacted by the
conversion in the second quarter of 2012 from an "S" Corporation to a "C"
Corporation while the 2011 GAAP tax provision rate reflected an "S"
Corporation rate.



Supplemental Information - Consolidated Statements of Income
Reconciliation of Prior Year Non-GAAP Financial Measures to GAAP Financial Measures
(In thousands, except per share amounts)
(Unaudited)
                                                                                   
                         Q1 2012 (Prior Year)                      Full Year 2012 (Prior Year)
                         (quarter ended April 28, 2012)            (year ended February 2, 2013)
                                                                                                 
                         Reported   Adjustments   Adjusted     Reported    Adjustments   Adjusted
                         (GAAP)                                    (GAAP)
                                                                                                 
Selling,
general and        (1)    24,392     700              25,092      118,805     (6,915   )       111,890
administrative
expenses
Operating                  6,026      (700     )        5,326        31,390      6,915             38,305
income
Income before              5,982      (700     )        5,282        31,299      6,915             38,214
income taxes
Income tax         (2)     68         2,045             2,113        7,406       7,880             15,286
provision
Net income                 5,914      (2,745   )        3,169        23,893      (965     )        22,928
                                                                                                 
Basic earnings           $0.30        ($0.14   )      $0.16        $0.93         ($0.04   )      $0.89
per share
Diluted
earnings per             $0.29        ($0.14   )      $0.15        $0.92         ($0.04   )      $0.88
share
                                                                                                 

                                          
Notes:
(1) Adjustment to prior year's first quarter SG&A expenses reflects adding a
charge for on-going stock-based compensation expense similar to the charge in
the other three quarters of the year. These on-going charges commenced
following the Company's IPO at the beginning of the second quarter. Adjustment
to full year SG&A expenses reflects the exclusion of $7.615 million for
life-to-date stock-based compensation expense charged in May 2012 for all
prior periods up to the May 2012 IPO date, adding in the $0.7 million
adjustment for the first quarter.
(2) Tax provision adjusted to the expected long-term effective tax rate of 40%
for both the first quarter and full year. The GAAP tax provision rate in 2012
reflected the Company being taxed as an "S" Corporation until the beginning of
the second quarter, and a full year which reflected a partial year taxed as an
"S" Corporation and a partial year taxed as a "C" Corporation.


                                                                  
Tilly's, Inc.
Store Count and Square Footage
                                                                                 
                                                                                 
                                                                                 Total
                                                                                 Gross
         Stores     Stores     Stores     Store         Store         Stores     Square
                                                                                 Footage
         Open       Opened     Closed     Remodels-     Remodels-     Open       End of Qtr
         at                                                           at
         Beg of     During     During     Closed        Reopened      End of     (in
         Qtr        Qtr        Qtr                                    Qtr        thousands)
2011     125        1          0          0             0             126        977
Q1
2011     126        6          1          0             0             131        1,015
Q2
2011     131        4          0          1             0             134        1,044
Q3
2011     134        5          0          0             1             140        1,094
Q4
                                                                                 
2012     140        5          0          0             0             145        1,134
Q1
2012     145        10         0          0             0             155        1,215
Q2
2012     155        7          1          0             0             161        1,272
Q3
2012     161        7          0          0             0             168        1,319
Q4

Contact:

Investor Relations:
ICR, Inc.
Anne Rakunas/Joseph Teklits
310-954-1113
anne.rakunas@icrinc.com
 
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