Rue 21 2012 Annual Report Download

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FASHION, QUALITY, VALUE.
2012 ANNUAL REPORT

Table of contents

  • Page 1
    2012 ANNUAL REPORT FASHION, QUALITY, VALUE.

  • Page 2

  • Page 3
    ...registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ' No Í The aggregate market value of voting stock held by non-affiliates of the registrant as of July 28, 2012 was $400,186,969. The number of shares of the registrant's common stock outstanding as of March 25, 2013 was 23,758...

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  • Page 5
    ... to identify and respond to new and changing fashion trends, customer preferences and other related factors; • our failure to successfully execute our growth strategy, due to delays in store growth and our e-commerce initiatives, difficulties executing sales and operating profit margin initiatives...

  • Page 6
    .... The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. 2

  • Page 7
    ... Accounting and Financial Disclosure ...Item 9A. Controls and Procedures ...Item 9B. Other Information ...Item 10. Item 11. Item 12. Item 13. Item 14. Item 15. PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners...

  • Page 8
    ... principal executive offices are located at 800 Commonwealth Drive, Warrendale, Pennsylvania, 15086. Our telephone number is 724-776-9780. Our internet address is www.rue21.com. We make available through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on...

  • Page 9
    ... Product - girls, guys, and rue21 etc! We offer a broad range of girls and guys apparel and accessories, including footwear, jewelry and fragrances. • Flexible Real Estate - strip centers, regional malls, and outlet centers. As of February 2, 2013 approximately 51% of our 877 stores were located...

  • Page 10
    ... our stores contributes to the overall shopping experience. Each of our stores is typically led by a manager, a full-time assistant manager, two part-time assistant managers and eight to ten part-time sales associates, depending on store volume. Store Growth Our in-house real estate team works along...

  • Page 11
    ... every day great value. We seek to identify the most current fashion trends in the market and utilize our product and sourcing teams to quickly introduce these fashions to our stores. All of our brands are sold exclusively through our own stores. Our apparel and accessory brands include rue21 (Girls...

  • Page 12
    ... product selection for our customers by regularly editing our merchandise assortment to reflect key fashion trends and by shipping new merchandise to our stores multiple times per week. Merchandising Our merchandise buying teams, led by our General Merchandise Manager and Merchandising Directors...

  • Page 13
    ... is shipped to our stores daily via a third-party delivery service to ensure a steady flow of new products to our stores. Information Systems Our management information systems provide a full range of business process support and information to our store, merchandising, financial and real estate...

  • Page 14
    ... can be affected by the timing of new store openings and store closings, the amount of sales contributed by new and existing stores, as well as the timing of certain holidays. Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all...

  • Page 15
    ...adverse effect on our results of operations, financial condition and cash flows. We currently have several strategies planned to improve sales and merchandise margins. There is no guarantee that the shift to new business processes will result in higher sales in our stores or improved margins for our...

  • Page 16
    ... stores, department stores and discount retailers. In addition to the traditional store-based retailers, we also compete with direct marketers or retailers that sell similar lines of merchandise online and who target customers through the internet. Brand image, marketing, design, price, service...

  • Page 17
    ... in popularity of shopping centers or of stores in the shopping centers in which our stores are located, the closing of anchor stores important to our business, or a deterioration in the financial condition of shopping center operators or developers which could, for example, limit their ability to...

  • Page 18
    ..., our ability to run and expand our business or to respond to competitive pressures would be limited and we could be required to delay, significantly curtail or eliminate planned store openings or operations or other elements of our growth strategy. Additional sites that we lease may be subject to...

  • Page 19
    ... expand sales of their products through their own stores or through the Internet to the retail market and therefore compete with us directly; or • sell their products through outlet centers or discount stores, increasing the competitive pricing pressure we face. So long as we purchase merchandise...

  • Page 20
    ... stores, our financial accounting and reporting, compensating our employees, managing our website and various other processes and transactions. See "Business - Information Systems." Our ability to effectively manage our business and coordinate the sourcing, distribution and sale of our merchandise...

  • Page 21
    ... financial statements as a whole or may negatively affect our operating results if changes to our business operation are required. The cost to defend future litigation may be significant. There also may be adverse publicity associated with litigation that could negatively affect customer perception...

  • Page 22
    • failure by us to process on-line customer orders properly and on time, which may negatively impact future on-line and in-store purchases by such customers; and • failure to integrate or execute fulfillment services into our distribution center, which may negatively impact future on-line and in...

  • Page 23
    ... could limit our ability to obtain supplies from less costly markets or penetrate new markets should our business plan change to include selling our merchandise in those jurisdictions outside the United States. Concentration of ownership among our existing executive officers, directors and...

  • Page 24
    ... the market price for their common stock. Our amended and restated certificate of incorporation provides that the doctrine of corporate opportunity does not apply to Apax Partners, funds advised by Apax Partners, or any of our directors who are employees of or affiliated with Apax Partners, acting...

  • Page 25
    Our 378,000 square foot distribution facility is located in Weirton, West Virginia. Our distribution facility is leased under a lease agreement expiring in 2026, with an option to renew for two additional five-year terms. As of February 2, 2013, we operated 877 stores in 824 cities in 47 states. All...

  • Page 26
    .... Before then, there was no public market for our common stock. The following table sets forth the high and low sales prices of our common stock per share, as reported by The NASDAQ Global Select Market. The number of holders of record of our stock as of December 31, 2012 was approximately 154. The...

  • Page 27
    Stock Price Performance Graph The following graph compares the cumulative stockholder return on our common stock from November 13, 2009 (the date of our initial public offering) through February 2, 2013 with the return on the Total Return Index for the NASDAQ Stock Market (US securities only) and ...

  • Page 28
    ... provides information regarding our repurchases of our common stock during the 14 Weeks Ended February 2, 2013. Total Number of Shares Purchased as Part of Publicly Total Number of Average Price Paid Announced Plans Shares Purchased Per Share(1) or Programs(1) Approximate Dollar value of Shares that...

  • Page 29
    ..., net ...Provision for income taxes ...Net income ...Net income per common share Basic ...Diluted ...Weighted average common shares outstanding Basic ...Diluted ...Operating Data (unaudited): Comparable store sales change(2) ...Number of stores open at end of period ...Total gross square feet end of...

  • Page 30
    ... our company by aligning our stores under one brand name, strengthening our management team, honing our fashion value merchandise approach and refocusing our store growth strategy. In late 2006, we introduced our larger rue21 etc! store layout, which averages approximately 5,000 square feet...

  • Page 31
    ... week in fiscal year 2012 has been excluded from the comparable store sales calculation. Store Productivity As we continue to pursue our store growth strategy, we expect that a significant percentage of our net sales increase will continue to come from non-comparable store sales. Opening new stores...

  • Page 32
    ... ...Income from operations ...Interest (Income) expense, net ...Income before income taxes ...Provision for income taxes ...Net income ...Operating Data (unaudited) Number of stores open at the end of the period ...Gross square feet at the end of the period (in thousands) ...Comparable store sales...

  • Page 33
    ... average dollar value of transactions increased due to a higher average unit retail and slight increase in units per transaction. In fiscal year 2012, the 53rd week contributed $11.3 million in total sales. During fiscal year 2012, we opened 125 new stores and closed three stores compared to 120 new...

  • Page 34
    ...dollar value of transactions increased due to a higher average unit retail slightly offset by a decrease in units per transaction. During fiscal year 2011, we opened 120 new stores and closed three stores compared to 105 new stores and 2 store closures in fiscal year 2010. Our comparable store sales...

  • Page 35
    ..., merchandise inventories, accounts payable and other current liabilities. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within several days of the related sale, and...

  • Page 36
    ... Year Ended January 28, January 29, 2012 2011 (in thousands) Net income ...Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...Deferred taxes ...Share-based compensation ...Merchandise inventory ...Accounts payable ...Other working...

  • Page 37
    ... consist of capital expenditures for new and existing stores, as well as investment in information technology. Additionally, the company purchased and redeemed short term investments during fiscal year 2012. February 2, 2013 Fiscal Year Ended January 28, January 29, 2012 2011 (in thousands) Capital...

  • Page 38
    ...) More than 5 years Operating lease obligations(1) ...Merchandise inventory purchase commitments ... 461,173 162,324 $623,497 75,921 162,324 $238,245 133,918 - $133,918 107,183 - $107,183 144,151 - $144,151 (1) Excludes common area maintenance (CAM) charges, real estate taxes and certain other...

  • Page 39
    ... Financial Statements. Revenue Recognition Revenue is recognized upon purchase of merchandise by customers. Allowances for sales returns are recorded as a reduction of sales in the periods in which the sales are recognized. Deferred revenue is established upon the purchase of gift cards by customers...

  • Page 40
    ... allowance require management to make estimates and assumptions. We believe that our assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances, or net income. Stock...

  • Page 41
    Item 8. Financial Statements and Supplementary Data. rue21, inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of February 2, 2013 and January 28, 2012 ...Consolidated Statements of Income for the fiscal ...

  • Page 42
    ... of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform...

  • Page 43
    .... Consolidated Balance Sheets January 28, 2012 (in thousands, except per share data) February 2, 2013 Assets Current assets: Cash and cash equivalents ...Short term investments ...Accounts receivable ...Merchandise inventory, net ...Prepaid expenses and other current assets ...Deferred tax assets...

  • Page 44
    rue21, inc. Consolidated Statements of Income Fiscal Year Ended February 2, January 28, January 29, 2013 2012 2011 (in thousands, except per share data) Net sales ...Cost of goods sold (includes certain buying, occupancy and distribution center expenses) ...Gross profit ...Selling, general, and ...

  • Page 45
    ..., 2012 Net income ...Stock-based compensation expense ...Repurchase of common stock as part of publicly announced programs ...Repurchase of common stock from employees ...Stock issued for stock option exercises ...Excess tax benefits from stock-based award activities ...Balance February 2, 2013 24...

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    ...other current assets ...Accounts payable ...Accrued payroll and related taxes ...Accrued expenses and other current liabilities ...Deferred rent and tenant allowances ...Accrued income and franchise taxes ...Other ...Net cash provided by operating activities ...Investing activities Purchase of short...

  • Page 47
    ...malls and outlet centers throughout the United States. Sales are generally transacted for cash, checks and through the acceptance of third-party credit and debit cards. On November 13, 2009, the Company completed an initial public offering of 7,780,252 shares of common stock at a price to the public...

  • Page 48
    ...indicates our product mix as a percentage of net sales as of the fiscal year indicated: Fiscal Year 2012 2011 2010 Girls Apparel ...Accessories ...Guys Apparel and Accessories ...Total ...Fair Value of Financial Instruments The FASB has established authoritative guidance that requires management to...

  • Page 49
    ... reserve utilized in valuing current inventory, as such new inventory in certain circumstances will displace merchandise units currently on-hand. The markdown reserve is recorded as an increase to cost of goods sold in the accompanying Consolidated Statements of Income. The Company also estimates...

  • Page 50
    ... years 2012, 2011, and 2010, respectively. Gift card breakage income is recorded as reduction to cost of goods sold. Cost of Goods Sold Cost of goods sold includes costs related to merchandise sold, distribution and warehousing, freight from the distribution center to the stores, store occupancy...

  • Page 51
    ... in fiscal year 2012, the Company recognized compensation expense on an accelerated attribution method. The Company has historically issued new shares of common stock upon the exercise of employee stock options. See Note 5 "Stock-Based Compensation." Store Pre-opening Costs Store pre-opening costs...

  • Page 52
    ... effect on net income and the weighted average number of shares of potential dilutive common stock (stock options): Fiscal Year Ended February 2, January 28, January 29, 2013 2012 2011 (in thousands, except per share data) Net income ...Weighted average basic common shares outstanding ...Impact of...

  • Page 53
    ... tables represent the fair value hierarchy for the Company's financial assets (cash equivalents) measured at fair value on a recurring basis as of February 2, 2013 and January 28, 2012: Fair Value Measurements at February 2, 2013 Quoted Market Prices in Active Markets for Significant Other Identical...

  • Page 54
    ... initial public offering, pursuant to which key employees, officers, and directors shall be eligible to receive grants of stock options, stock appreciation rights, restricted stock or restricted stock units to purchase or receive, as applicable, up to an aggregate of 3,626,000 shares of common stock...

  • Page 55
    ... 15, 2003, the Company adopted the 2003 Ownership Incentive Plan (the 2003 Plan) pursuant to which key employees, officers, and directors were eligible to receive options to purchase common stock for an aggregate of up to 19.8% of the number of shares of the common stock outstanding upon adoption of...

  • Page 56
    ... any, will determine the number of shares that can be received. Below is a summary of restricted stock unit activity for the year ended February 2, 2013: Restricted Stock Unit Grants Time-Based Restricted Stock Units For the Year Ended February 2, 2013 Weighted Averaged Fair Value at Grant Date (per...

  • Page 57
    ... all operating leases follows: Fiscal Year Ended January 28, January 29, 2012 2011 (in thousands) February 2, 2013 Store Rent : Fixed minimum ...Contingent ...Total store rent, excluding common maintenance charges, real estate taxes and certain other expenses ...Offices, distribution facilities...

  • Page 58
    ... Financial Statements - Continued Note 8 - Income Taxes The provision for income taxes at the fiscal years 2012, 2011, and 2010 consists of the current and deferred elements in the table below: Income Taxes February 2, 2013 Fiscal Year Ended January 28, January 29, 2012 2011 (in thousands) Current...

  • Page 59
    ... wages; failed to provide in-store employees bona fide meal and rest periods; failed to reimburse in-store employees for business expenses they incur; and failed to provide accurate, timely itemized wage statements, in violation of the California Labor Code, the California Industrial Welfare 55

  • Page 60
    ... board of directors authorized an additional $25 million under its stock repurchase program. Under the stock repurchase program, the Company may repurchase shares in the open market at current market prices at the time of purchase or in privately negotiated transactions. The timing and actual number...

  • Page 61
    ..., our management concluded that, as of February 2, 2013, our internal control over financial reporting is effective based on those criteria. The Company's independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report issued an...

  • Page 62
    ... audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of rue21, inc. as of February 2, 2013 and January 28, 2012 and the related consolidated statements of income, stockholders' equity and cash flows for each of...

  • Page 63
    ... 16(a) Beneficial Ownership Reporting Compliance" and "Information Concerning Our Board of Directors - Code of Business Conduct and Ethics" in the 2013 Proxy Statement. The Code applies to all employees including our principal executive officer, principal financial officer, controller and persons...

  • Page 64
    .... 2. Financial Statement Schedule: All Schedules are omitted because they are not required or because the information is immaterial or provided elsewhere in the Consolidated Financial Statements or Notes thereto. 3. Exhibits: See Exhibit Index following the signature page of this Annual Report on...

  • Page 65
    ... Title: President and Chief Executive Officer Date: April 3, 2013 By: /s/ Keith A. McDonough Name: Keith A. McDonough Title: Senior Vice President and Chief Financial Officer Date: April 3, 2013 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by...

  • Page 66
    ...to Registration Statement on Form S-8 (SEC File No. 333-164401) filed on February 19, 2010. Specimen Common Stock Certificate, ...Current Report on Form 8-K filed on December 1, 2009. Second Amendment to Credit Agreement by and among rue21, as the Lead Borrower, rue services corporation, r services...

  • Page 67
    ... & Young LLP, independent registered public accounting firm. Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of rue21 inc. (Section 302 of the Sarbanes-Oxley Act of 2002). Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of rue21 inc. (Section 302 of the...

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    Exhibit 21.1 Subsidiaries Name Jurisdiction of Organization r services llc ...rue services corporation ... Virginia Delaware

  • Page 69
    ... Plan and the rue21, inc. 2009 Omnibus Incentive Plan of our reports dated April 3, 2013 with respect to the consolidated financial statements of rue21, inc. , and the effectiveness of internal control over financial reporting of rue21, inc. , included in this Annual Report (Form 10-K) for the year...

  • Page 70
    ..., process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Robert Fisch Robert Fisch President and Chief Executive Officer...

  • Page 71
    ...record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Keith McDonough Keith McDonough Senior Vice President and...

  • Page 72
    ... of 2002 In connection with the Annual Report of rue21, inc. (the Registrant) on Form 10-K for the period ended February 2, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert Fisch, Chairman and Chief Executive Officer of the Registrant, certify to...

  • Page 73
    ... connection with the Annual Report of rue21, inc. (the Registrant) on Form 10-K for the period ended February 2, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Keith McDonough, Senior Vice President and Chief Financial Officer of the Registrant, certify...

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    800 Commonwealth Drive, Warrendale, PA 15086 724-776-9780 rue21.com