UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 4, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 1-14987
TOO, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1333930
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3885 Morse Road, Columbus, OH 43219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 479-3500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days (or such shorter time as the Company became
effective).
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding at September 13, 2001
------------ ---------------------------------
$.01 Par Value 31,041,877 Shares
1
TOO, INC.
TABLE OF CONTENTS
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income for the Thirteen and Twenty-Six Weeks Ended
August 4, 2001 and July 29, 2000........................................................................................ 3
Consolidated Balance Sheets
August 4, 2001 and February 3, 2001..................................................................................... 4
Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended
August 4, 2001 and July 29, 2000........................................................................................ 5
Notes to Consolidated Financial Statements................................................................................. 6
Report of Independent Accountants.......................................................................................... 10
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition................................ 11
PART II. Other Information
Item 1. Legal Proceedings................................................................................................... 15
Item 4. Matters Submitted to a Vote of Security Holders..................................................................... 15
Item 6. Exhibits and Reports on Form 8-K.................................................................................... 15
Signature.................................................................................................................... 16
Index to Exhibits............................................................................................................ 17
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TOO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands except per share amounts)
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------------------------- -----------------------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
------------------ -------------------- ----------------- ----------------
Net sales $125,468 $108,315 $262,125 $227,068
Costs of goods sold, buying and
occupancy costs 84,494 73,584 176,188 152,865
----------------- -------------- ------------------- ------------
Gross income 40,974 34,731 85,937 74,203
General, administrative and store
operating expenses 35,720 31,133 74,236 64,991
----------------- -------------- ------------------- ------------
Operating income 5,254 3,598 11,701 9,212
Interest expense, net 377 477 509 849
----------------- -------------- ------------------- ------------
Income before income taxes 4,877 3,121 11,192 8,363
Provision for income taxes 2,000 1,200 4,500 3,300
----------------- -------------- ------------------- ------------
Net income $ 2,877 $ 1,921 $ 6,692 $ 5,063
================= ============== =================== ============
Earnings per share:
Basic $ 0.09 $ 0.06 $ 0.22 $ 0.16
================= ============== ================= ============
Diluted $ 0.09 $ 0.06 $ 0.21 $ 0.16
================= ============== ================= ============
Weighted average common shares:
Basic 30,938 30,736 30,878 30,733
================= ============== ================= ============
Diluted 32,006 31,818 31,803 31,778
================= ============== ================= ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
TOO, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
August 4, February 3,
2001 2001
------------- -------------
(unaudited)
ASSETS
Current Assets:
Cash and equivalents $ 40,343 $ 54,788
Receivables 3,278 2,422
Inventories 51,877 45,715
Store supplies 9,254 9,050
Deferred income taxes 2,978 2,898
Other 825 1,408
------------- -------------
Total current assets 108,555 116,281
Property and equipment, net 95,030 81,184
Deferred income taxes 11,174 10,321
Other assets 999 1,325
------------- -------------
TOTAL ASSETS $ 215,758 $ 209,111
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion long-term debt $ 10,000 $ -
Accounts payable 29,715 24,213
Accrued expenses 34,437 37,703
Income taxes payable 6,818 13,603
------------- -------------
Total current liabilities 80,970 75,519
Long-term debt 40,000 50,000
Other long-term liabilities 4,683 3,881
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, 50 million shares authorized - -
Common stock, $.01 par value, 100 million shares
authorized, 31.0 million and 30.8 million issued and
outstanding, respectively 310 308
Paid in capital 30,108 26,408
Retained earnings 59,687 52,995
------------- -------------
Total shareholders' equity 90,105 79,711
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 215,758 $ 209,111
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
4
TOO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Twenty-Six Weeks Ended
------------------------------
August 4, July 29,
2001 2000
-------------- -------------
Cash flows from operating activities:
Net income $ 6,692 $ 5,063
Impact of other operating activities on cash flows:
Depreciation and amortization 8,852 8,507
Changes in assets and liabilities:
Inventories (6,162) (12,765)
Accounts payable and accrued expenses 2,937 (4,568)
Income taxes (7,317) (4,547)
Other assets 2 (4,151)
Other liabilities 802 625
-------------- -------------
Net cash provided by (used for) operating activities 5,806 (11,836)
-------------- -------------
Investing activities:
Capital expenditures (23,552) (17,086)
-------------- -------------
Net cash used for investing activities (23,552) (17,086)
-------------- -------------
Financing activities:
Stock options, restricted stock and other equity changes 3,301 787
-------------- -------------
Net cash provided by financing activities 3,301 787
-------------- -------------
Net decrease in cash and equivalents (14,445) (28,135)
Cash and equivalents, beginning of period 54,788 59,984
-------------- -------------
Cash and equivalents, end of period $ 40,343 $ 31,849
============== =============
The accompanying notes are an integral part of these consolidated financial
statements.
5
TOO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION
Too, Inc. (referred to herein as "the Company") is a specialty retailer
that sells apparel, underwear, sleepwear, swimwear, lifestyle and personal
care products for fashion-aware, trend-setting young girls ages seven to
fourteen years. The consolidated financial statements include the accounts
of Too, Inc. and its wholly owned subsidiaries and reflect the Company's
assets, liabilities, results of operations and cash flows on a historical
cost basis.
The accompanying unaudited interim consolidated financial statements as of
August 4, 2001 and for the thirteen and twenty-six week periods ended
August 4, 2001 and July 29, 2000, are presented to comply with the rules
and regulations of the Securities and Exchange Commission. Accordingly,
these consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto contained in the
Company's 2000 Annual Report on Form 10-K. In the opinion of management,
the accompanying interim consolidated financial statements reflect all
adjustments (which are of a normal, recurring nature) necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods, but are not necessarily indicative of the results of
operations for a full fiscal year.
The consolidated financial statements as of August 4, 2001, and for the
thirteen and twenty-six weeks ended August 4, 2001 and July 29, 2000
included herein have been reviewed by the independent public accounting
firm of PricewaterhouseCoopers LLP and the report of such firm follows the
notes to consolidated financial statements. PricewaterhouseCoopers LLP is
not subject to the liability provisions of Section 11 of the Securities Act
of 1933 for its report on the consolidated financial statements because
that report is not a "report" within the meaning of Sections 7 and 11 of
that Act.
2. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
stock options or restricted stock were converted to common stock using the
treasury stock method.
The following table shows the amounts used in the computation of basic and
diluted earnings per share (in thousands):
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------------------ ---------------------------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---------------- ---------------- ---------------- -------------------
Net income $ 2,877 $ 1,921 $ 6,692 $ 5,063
================ ================ ================ ===================
Weighted average common shares - basic 30,938 30,736 30,878 30,733
Dilutive effect of stock options
and restricted stock 1,068 1,082 925 1,045
---------------- ---------------- ---------------- -------------------
Weighted average common shares - diluted 32,006 31,818 31,803 31,778
================ ================ ================ ===================
6
Due to the options' price exceeding the average market price of the common
shares for the reporting periods, certain options were excluded from the
calculation of net income per diluted share. In Fiscal 2001, options to
purchase 185,000 and 215,000 common shares, were not included in the
computation of net income per diluted share for the thirteen and twenty-six
week periods ended August 4, 2001, respectively. In Fiscal 2000, options to
purchase 124,000 common shares, were not included in the computation of net
income per diluted share for both the thirteen and twenty-six week periods
ended July 29, 2000.
3. INVENTORIES
The fiscal year of the Company is comprised of two principal selling
seasons: Spring (the first and second quarters) and Fall (the third and
fourth quarters). Inventories are principally valued at the lower of
average cost or market, on a first-in, first-out basis utilizing the retail
method. Inventory valuation at the end of the first and third quarters
reflects adjustments for inventory markdowns and shrinkage estimates for
the total selling season.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, at cost, consisted of (in thousands):
August 4, February 3,
2001 2001
--------------- ---------------
Land $ 7,691 $ 7,691
Furniture, fixtures and equipment 97,816 93,880
Leasehold improvements 41,644 42,528
Construction-in-progress 21,487 3,643
--------------- ---------------
Total 168,638 147,742
Less: accumulated depreciation and amortization (73,608) (66,558)
--------------- ---------------
Property and equipment, net $ 95,030 $ $ 81,184
=============== ===============
7
5. RELATIONSHIP WITH THE LIMITED
In connection with the Spin-off, the Company entered into a service
agreement with Limited Logistics Services (formerly known as Limited
Distribution Services), a wholly owned subsidiary of The Limited, to
provide distribution services to us covering flow of merchandise from
factory to our stores for up to three years after the August 23, 1999 Spin-
off. Most of the merchandise and related materials for the Company's stores
are shipped to a distribution center owned by The Limited in Columbus,
Ohio, where the merchandise is received, inspected, allocated and packed
for shipment to stores. Under the service agreement, The Limited
distributes merchandise and related materials using common and contract
carriers to the Company's stores. Inbound freight is charged to Too based
upon actual receipts and related charges, while outbound freight is charged
based on a percentage of cartons shipped.
Our main office is owned by Distribution Land Corp., a wholly owned
subsidiary of the Limited, and leased to us with a lease term expiring in
August 2002.
Our largest apparel supplier has been Mast Industries, Inc., a wholly owned
subsidiary of The Limited. Mast Industries supplied approximately 30% of
the apparel that we purchased in 2000. We believe that all transactions
that we have entered into with Mast Industries have been on terms that
would have been obtained on an arm's length basis since we treat them as if
they were a third party. We were not, and will not be, obligated to
continue to source products through Mast Industries.
Amounts payable to The Limited, including merchandise payables to Mast
Industries, approximated $12.5 million at August 4, 2001.
6. CREDIT FACILITY
During August 1999, the Company entered into a five-year $100 million
credit agreement (the "Credit Facility") with a syndicate of banks. The
Credit Facility is collateralized by virtually all assets of the Company
and is comprised of a $50 million five-year term loan and a $50 million
revolving loan commitment. The entire amount of the term portion was drawn
in order to fund a $50 million dividend to The Limited and $14 million was
drawn under the revolving loan commitment principally to repay a portion of
working capital advances made by the Limited prior to the Spin-off.
The $50 million revolving loan commitment is available to fund working
capital requirements and for general corporate purposes. Interest on
borrowings under the Credit Facility is based on matrix pricing applied to
either the London Interbank Offered Rate or Prime, as defined in the
agreement. Payments of principal under the term loan are due at various
dates from July 2002 to August 2004. A commitment fee based on matrix
pricing is charged on the unused portion of the revolving loan commitment.
The commitment fee is up to 1/2 of 1% of the unused revolving credit
commitment per annum. Under the terms of the Credit Facility, the Company
is required to comply with certain covenants including financial ratios.
The Credit Facility limits the Company from incurring certain additional
indebtedness and restricts substantial asset sales, capital expenditures
above approved limits and cash dividends. The Company is in compliance with
all applicable terms of the Credit Facility. As of August 4, 2001, there
were no amounts outstanding under the revolving portion of the Credit
Facility.
Current maturities of long-term debt for each of the next three fiscal
years are $17.5 million in 2002, $20.0 million in 2003, and $12.5 million
in 2004.
8
Interest expense, including the amortization of financing fees, amounted to
$1,015,000 for the quarter ending August 4, 2001. Interest expense was
partially offset by interest income of $638,000 for the quarter. Interest
expense and interest income amounted to $1,245,000 and $768,000,
respectively, for the quarter ending July 29, 2000. For the twenty-six
periods ended August 4, 2001 and July 29, 2000, interest expense amounted
to $2,067,000 and $2,479,000 and interest income amounted to $1,558,000 and
$1,630,000, respectively.
9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Too, Inc.:
We have reviewed the accompanying consolidated balance sheet of Too, Inc. and
its subsidiaries (the "Company") as of August 4, 2001, and the related
consolidated statements of income for each of the thirteen and twenty-six week
periods ended August 4, 2001 and July 29, 2000 and the consolidated statements
of cash flows for the twenty-six week periods ended August 4, 2001 and July 29,
2000. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of February
3, 2001, and the related consolidated statements of income, shareholders'
equity, and of cash flows for the year then ended (not presented herein), and in
our report dated February 21, 2001 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet information as of February 3, 2001
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
August 15, 2001
10
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Net sales for the thirteen weeks ended August 4, 2001 were $125.5 million, an
increase of 16% from $108.3 million for the comparable period of 2000. Gross
income increased 18% to $41.0 million from $34.7 million in 2000 and operating
income rose 47% to $5.3 million from $3.6 million in 2000. Net income increased
52% to $2.9 million from $1.9 million in 2000. Diluted earnings per share
increased to $.09, a 50% increase, versus diluted earnings per share of $.06 in
2000.
Net sales for the twenty-six weeks ended August 4, 2001 were $262.1 million, an
increase of 15% from $227.1 million for the comparable period of 2000. Gross
income increased 16% to $85.9 million from $74.2 million in 2000 and operating
income rose 27% to $11.7 million from $9.2 million in 2000. Net income increased
31% to $6.7 million from $5.1 million in 2000. Diluted earnings per share
increased to $.21, a 31% increase, versus diluted earnings per share of $.16 in
2000.
FINANCIAL SUMMARY
The following summarized financial and statistical data compares the thirteen
and twenty-six week periods ended August 4, 2001, to the comparable 2000 period:
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------------------------ ----------------------------------------
August 4, July 29, Percent August 4, July 29, Percent
2001 2000 Change 2001 2000 Change
------------------------------------------ ----------------------------------------
Net sales (millions) $125.5 $108.3 16% $262.1 $227.1 15%
Comparable store sales performance/(1)/ 0% 9% -1% 10%
Retail sales per average square foot/(2)/ $ 73 $ 71 3% $ 155 $ 153 1%
Retail gross square feet at end of
quarter (thousands) 1,725 1,529 13%
Stores with "Girl Power" format 176 116
Percentage of stores in "Girl Power"
format 42% 31%
Number of Stores:
----------------
Beginning of period 413 359 406 352
Opened 9 14 17 23
Closed - - (1) (2)
---------------------------- ---------------------------
End of period 422 373 422 373
============================ ===========================
/(1)/ A store is included in our comparable store sales calculation once it has
completed 52 weeks of operation. Further, stores that are expanded more
than 20% in square feet are treated as new stores for purposes of this
calculation. Fiscal 2001 comparable store sales are reported on a
calendar-shifted basis.
/(2)/ Retail sales per average square foot is the result of dividing net sales
for the fiscal quarter by average gross square feet, which reflects the
impact of opening and closing stores throughout the quarter.
11
Net Sales
Net sales for the second quarter of 2001 increased 16% to $125.5 million from
$108.3 million in 2000. Comparable store sales were flat at 0% for the second
quarter 2001 compared to a 9% increase during second quarter 2000. Net sales
benefited from a 13% increase in square footage growth over last year and a
nearly $1 million increase in net sales coming through the catalog and web
channels.
Merchandise categories displaying solid sales increases were cut-and-sewn casual
tops, active shorts and add-on, driven primarily by cami bras, footwear, and
lifestyle products. Personal care and the ready-to-wear categories continued to
struggle.
Gross Income
Gross income, expressed as a percentage of net sales, was 32.7% for the second
quarter of 2001, an increase of 60 basis points from a gross income rate of
32.1% for the second quarter of 2000. This rate increase was due to higher
merchandise margin. The increase in merchandise margin was due to higher initial
mark-ups, and a lower markdown rate. These increases more than offset an
increase in catalog costs, which are included in buying and occupancy costs.
For the year-to-date period, the gross income rate increased 10 basis points to
32.8% from 32.7% in 2000. Higher initial mark-ups more than offset an increase
in the markdown rate and increased catalog costs.
General, Administrative and Store Operating Expenses
General, administrative and store operating expense, expressed as a percentage
of net sales, decreased 20 basis points to 28.5% in the second quarter of 2001
from 28.7% for the same period in 2000. On a year-to-date basis general,
administrative and store operating expense decreased by 30 basis points to 28.3%
in 2001 from 28.6% in 2000. The decrease during the quarter and year-to-date
periods was due to lower home office expenses and lower distribution center
costs, expressed as a percentage of net sales, which were partially offset by
slightly higher store operating and marketing expenses.
Operating Income
Operating income, expressed as a percentage of net sales, was 4.2 % in the
second quarter of 2001 from 3.3% for the same period in 2000, resulting in a 90
basis point increase. Year-to-date operating income increased to 4.5% in 2001
compared to 4.1% in 2000. The increase in operating income, expressed as a
percentage of net sales, for both the quarter and year-to-date periods was due
to higher merchandise margins and lower home office and distribution center
expenses, expressed as a percentage of net sales.
Net Interest Expense
Net interest expense amounted to $377,000 and $509,000 for the quarter and year-
to-date periods ending August 4, 2001, respectively. Net interest expense in the
comparable periods in 2000 amounted to $477,000 and $849,000, respectively.
Interest expense, including the amortization of financing fees, amounted to
$1,015,000 and $2,067,000 for the quarter and year-to-date periods ending August
4, 2001, respectively. Interest expense was partially offset by interest income
of $638,000 and $1,558,000 for the quarter and year-to-date periods,
respectively. Interest income was earned on money market instruments.
Income Taxes
Income tax expense, provided at an approximate rate of 40%, amounted to $2.0
million and $4.5 million for the quarter ending and year-to-date periods ending
August 4, 2001, respectively, compared to $1.2 million and $3.3 million for the
comparable
12
periods ending July 29, 2000. We anticipate that the annual effective tax rate
will remain unchanged for the balance of fiscal 2001.
FINANCIAL CONDITION
Liquidity and Capital Resources
Cash provided from operating activities provides the resources to support
operations, including projected growth, seasonal working capital requirements
and capital expenditures.
Net cash provided by operating activities amounted to $5.8 million for the
twenty-six weeks ending August 4, 2001 versus net cash used by operating
activities of $11.8 million for the same period in 2000. The increase in net
cash provided by operating activities versus the comparable period in 2000 was
due to an increase in net income, a smaller increase in year-on-year
inventories, including improved leveraging of accounts payable, and a year-on-
year reduction of accounts receivable.
Investing activities represented capital expenditures, which were primarily for
new and remodeled stores, as well as progress payments on the construction of
our new home office and distribution center.
Financing activities principally represented proceeds from employee stock option
exercises and the issuance of restricted stock.
A summary of our working capital position and capitalization follows
(thousands).
August 4, February 3,
2001 2001
-------------- --------------
Working capital $ 27,585 $ 40,762
============== ==============
Capitalization:
Long-term debt 40,000 50,000
Shareholders' equity 90,105 79,711
-------------- --------------
Total capitalization $ 130,105 $ 129,711
============== ==============
Amounts authorized under revolving portion
of credit facility $ 50,000 $ 50,000
============== ==============
In August 1999, we entered into a five-year, $100 million collateralized Credit
Facility. The Credit Facility consists of a $50 million five-year term loan and
a $50 million, five-year annual revolving credit commitment. The Credit
Facility's interest rates, which reflect matrix pricing, are based on the London
Interbank Offered Rate or Prime plus a spread as defined in the agreement. The
term loan is interest only until the end of the third year at which time the
amortization of the outstanding principle balance will begin. The decrease in
long-term debt is due to the classification of a $10 million payment due in July
2002 as a current liability. The Credit Facility contains customary
representations and warranties as well as certain affirmative, negative and
financial covenants.
No amounts were borrowed against the $50 million revolving credit commitment
during the twenty-six weeks ended August 4, 2001.
13
Capital Expenditures
Capital expenditures totaled $23.6 million for the twenty-six weeks ended August
4, 2001 compared to $17.1 million for the comparable period of 2000. 2001
capital expenditures were $9.0 million for new and remodeled stores, $11.4
million for the new distribution center and $3.2 million for the new home office
and other items. We anticipate spending approximately $70 to $72 million in 2001
for capital expenditures including the construction of approximately 55 new
stores, the remodel of 6 existing stores and 7 stores for our new concept,
mishmash, along with $48 to $51 million for our new Home Office and Distribution
Center facilities. Our store expansion and remodel program should add
approximately 220,000 to 236,000 gross square feet during 2001, representing a
13% to 14% increase over year-end 2000. The Company expects that capital
expenditures will be funded principally by net cash provided by operating
activities.
Recently Issued Accounting Pronouncements
EITF Issue No. 00-14, "Accounting for Certain Sales Incentives," will be
effective in the first quarter of 2002 and addresses the accounting for, and
classification of, various sales incentives. The Company has determined that
adopting the provisions of this EITF Issue will not have a material impact on
its consolidated financial statements.
Statement of Financial Accounting Standards ("SFAS") No. 143, Accounting for
Asset Retirement Obligations will be effective in the first quarter of 2003. The
standard requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. When the liability
is initially recorded, the entity capitalizes a cost by increasing the carrying
amount of the related long-lived asset. Over time, the liability is accreted to
its present value each period, and the capitalized cost is depreciated over the
useful life of the related asset. Upon settlement of the liability, an entity
either settles the obligation for its recorded amount or incurs a gain or loss
upon settlement. Because costs associated with exiting leased properties at the
end of the lease terms are minimal, the Company believes that when the statement
is adopted, it will not have a significant effect on the Company's results of
operations or its financial position.
Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995
The Company cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) contained in
this Management's Discussion and Analysis or made by management of the Company
involve risks and uncertainties and are subject to change based on various
important factors, many of which may be beyond the Company's control. Forward-
looking statements are indicated by words such as "anticipate," "estimate,"
"expect," "intend," "risk," "could," "may," "will," "pro forma," "likely,"
"possible," "potential," and similar words and phrases and the negative forms
and variations of these words and phrases, and include statements in this
Management's Discussion and Analysis relating to anticipated capital
expenditures in 2001 for new stores and the remodeling or expansion of existing
stores, and the related funding. The following factors, among others, in some
cases have affected, and in the future could affect, the Company's financial
performance and actual results and could cause future performance and financial
results to differ materially from those expressed or implied in any forward-
looking statements included in this Management's Discussion and Analysis or
otherwise made by management: changes in consumer spending patterns, consumer
preferences and overall economic conditions; the impact of competition and
pricing; changes in weather patterns; currency and exchange risks; changes in
existing or potential trade restrictions, duties, tariffs or quotas; changes in
political or financial stability; changes in postal rates and charges and paper
and printing costs; availability of suitable store locations at appropriate
terms; ability to develop new merchandise; ability to hire and train associates;
and/or other risk factors that may be described in the Risk Factors section of
the Company's Form 10, filed August 18, 1999, as well as other filings with the
Securities and Exchange Commission. Future economic and industry trends that
could potentially impact revenue and profitability are difficult to predict.
Therefore, there can be no assurance that the forward-looking statements
included herein will prove to be accurate. In light of the significant
uncertainties in the forward-looking statements included herein, the inclusion
of such information should not be regarded a representation by the Company, or
any other person, that the objectives of the Company will be
14
achieved. The forward-looking statements made herein are based on information
presently available to the management of the Company. The Company assumes no
obligation to publicly update or revise its forward-looking statements even if
experience or future changes make it clear that any projected results expressed
or implied therein will not be realized.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 4. Matters Submitted to a Vote of Security Holders
Not applicable.
Item 6. Exhibits
(a) Exhibits
15 Letter re: Unaudited Interim Financial Information to Securities
and Exchange Commission re: Incorporation of Report of
Independent Accountants.
(b) Reports on Form 8-K
On August 14, 2001, the Company filed a current report on Form 8-K
that reported the Board's adoption of the Rights Agreement (also known
as a stockholders rights plan) contained therein.
15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOO, INC.
(Registrant)
By /s/ Kent A. Kleeberger
-----------------------
Kent A. Kleeberger,
Executive Vice President - Chief Financial
Officer,
Logistics and Systems
Secretary and Treasurer
(duly authorized officer and Principal Financial
and Accounting Officer)
Date: September 14, 2001
16
EXHIBIT INDEX
Exhibit
No. Document
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15 Letter re: Unaudited Interim Financial Information to Securities and
Exchange Commission re: Incorporation of Report of Independent
Accountants.