'We continue to make progress on the merger with Dress Barn' – TWB Chairman

19 Aug '09

6 min read

The Company recognized an income tax benefit of $10.7 million in the second quarter of fiscal 2009 due to the pretax loss of $13.5 million as compared to the $4.5 million income tax benefit recognized in conjunction with the pretax loss of $11.2 million in 2008. The amount of the second quarter tax benefit was driven by the distribution of income and losses across legal entities and among the taxing jurisdictions in which we operate, along with expenses related to the proposed merger which are non-deductible.

Capital Investment
Capital expenditures for the second quarter of fiscal 2009 and year-to-date were $2.4 million and $6.6 million, respectively. This compares to $19.2 million and $40.8 million, respectively, for the corresponding 2008 periods. Capital expenditures for fiscal 2009 net of cash tenant allowances received are expected to be approximately $10 million, inclusive of the $6.6 million incurred to date. This is primarily composed of store signage changes of approximately $4 million, and new planned store openings as well as remodels.

Balance Sheet
At August 1, 2009 the Company had total current assets of $247.8 million, including $71.5 million in cash and cash equivalents, and total current liabilities of $107.8 million. Long term debt was $163.3 million, inclusive of $14.3 million in current maturities of long term debt. The Company's current ratio was 2.3 and the debt-to-equity ratio was 0.94.

Controlled Inventories
Total inventories at the end of the second quarter of fiscal 2009 were down 18.5% per square foot at cost, compared to total inventories at the end of the second quarter of fiscal 2008. In-store inventories for the second quarter of fiscal 2009 were down 19.0% per square foot at cost as compared to the second quarter of 2008.

Stores
Tween Brands ended the quarter with 903 stores. During the second quarter 2009, the Company closed 7 stores and 11 stores have been closed year-to-date.

SEC Regulation G
Results include non-cash store impairment charges related to 31 stores of $3.5 million and merger expenses of $1.9 million. Excluding the store impairment charge of $3.5 million, or $0.04 of net income per diluted share, and merger expenses of $1.9 million, or $0.01 of net income per diluted share, the ongoing loss for the quarter totaled $4.0 million or $0.16 per diluted share.

Merger Update
On June 25, 2009, the Company announced that it had entered into a definitive agreement with Dress Barn, Inc. pursuant to which a subsidiary of Dress Barn will merge with the Company in a stock-for-stock transaction. The transaction continues on track with an anticipated completion in the fourth quarter of calendar year 2009. On July 28, 2009, Dress Barn and the Company submitted notification and report forms under the Hart Scott Rodino Act with the FTC and the Antitrust Division of the U.S. Department of Justice.In addition, on August 11, 2009, Dress Barn filed a registration statement on Form S-4 with the Securities and Exchange Commission. The Form S-4 contains the Company's proxy statement. Once the Form S-4 is declared effective, the Company will distribute a definitive proxy statement to its stockholders in connection with the stockholder meeting to vote on a proposal to adopt the merger agreement.

Tween Brands Inc

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