WTSLA gains confidence in lower-priced merchandise model at Arden B
21 Aug '09
5 min read
Capital Expenditures and Depreciation During the second quarter, the Company incurred capital expenditures of $6.6 million, of which $6.0 million was for construction of new stores and remodels of existing stores. The Company recognized tenant improvement allowances of $0.5 million associated primarily with new store construction, resulting in net capital expenditures for the quarter of $6.1 million.
Depreciation in the second quarter totaled $3.6 million as compared to $3.6 million in the prior year second quarter.
Capital Transactions During the second quarter, there were no conversions of Secured Convertible Notes or convertible preferred stock. As of August 1, 2009, Secured Convertible Notes and Convertible Preferred Stock remain outstanding that are convertible into approximately 3.1 million shares and 537,000 shares, respectively, of the Company's Class A common stock.
During the second quarter, investors exercised warrants for 83,572 shares of the Company's Class A common stock, generating proceeds to the Company of $0.2 million. As of August 1, 2009, warrants exercisable into approximately 10.6 million shares of the Company's Class A common stock remain outstanding.
Exercise of all remaining outstanding warrants via cash payment by the warrant holders would result in proceeds to the Company of $39.1 million. The average exercise price on the outstanding warrants is $3.70, with approximately 7.8 million of such warrants having an exercise price in excess of the Company's closing Class A common stock price as of August 19, 2009.
Third Quarter Fiscal 2009 Guidance For the third quarter of fiscal 2009, earnings are estimated in the range of $0.02 to $0.05 per diluted share. The guidance is based on the following major assumptions: - Total net sales between $138 million and $142 million versus $146.6 million in the third quarter of fiscal 2008. - Comparable store sales decline between 6% and 9% versus a 7.6% decrease in the prior year third quarter. - Gross margin rate between 27.9% and 29.7% of net sales versus 31.3% in the prior year third quarter, with the decrease driven mainly by a deleveraging effect on occupancy costs due to the forecasted comparable store sales decline and a reduction in merchandise margin. - SG&A expense between 26.0% and 26.4% of net sales versus 26.1% in the prior year third quarter. - Operating income between $2.1 million and $5.2 million versus operating income of $7.1 million in the prior year third quarter. - Interest expense of $0.1 million versus interest income of $0.4 million in the prior year third quarter. - Income tax expense of between $0.1 million and $0.2 million versus income tax expense of $0.6 million in the prior year third quarter. - Net new store openings of 3 stores at Wet Seal and closing of 1 store at Arden B.
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