GUESS INC - Quarter Report: 2012 April (Form 10-Q)

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

For the transition period from             to           

 

Commission file number:  1-11893

 

GUESS?, INC.

(Exact name of registrant as specified in its charter)

 

 

(213) 765-3100

(Registrant’s telephone number, including area code)

 

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.  Yes  x  No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  x

 

As of May 31, 2012 the registrant had 89,970,564 shares of Common Stock, $.01 par value per share, outstanding.

 

 

Table of Contents

 

GUESS?, INC.

FORM 10-Q

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets as of April 28, 2012 and January 28, 2012	1
	Condensed Consolidated Statements of Income — Three Months Ended April 28, 2012 and April 30, 2011	2
	Condensed Consolidated Statements of Comprehensive Income — Three Months Ended April 28, 2012 and April 30, 2011	3
	Condensed Consolidated Statements of Cash Flows — Three Months Ended April 28, 2012 and April 30, 2011	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	28
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29

 

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PART I. FINANCIAL INFORMATION

 

ITEM 1.  Financial Statements.

 

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

		Apr. 28, 2012			Jan. 28, 2012
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	480,353		$	491,805
Short-term investments		9,618			4,060
Accounts receivable, net		335,517			340,602
Inventories		334,235			328,602
Other current assets		81,788			96,413
Total current assets		1,241,511			1,261,482
Property and equipment, net		354,394			348,885
Goodwill		29,135			29,070
Other intangible assets, net		10,297			10,697
Long-term deferred tax assets		51,786			52,613
Other assets		152,621			141,728
		$	1,839,744		$	1,844,475
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of capital lease obligations and borrowings		$	1,967		$	2,030
Accounts payable		188,732			224,859
Accrued expenses		198,475			193,147
Total current liabilities		389,174			420,036
Capital lease obligations		9,807			10,206
Deferred rent and lease incentives		90,808			87,795
Other long-term liabilities		131,170			123,880
		620,959			641,917
Redeemable noncontrolling interests		10,342			8,293
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding		—			—
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 138,414,402 and 138,089,021 shares, outstanding 89,970,864 and 89,631,328 shares, at April 28, 2012 and January 28, 2012, respectively		900			896
Paid-in capital		405,082			400,178
Retained earnings		1,161,695			1,155,696
Accumulated other comprehensive income (loss)		(22,518		)	(23,197		)
Treasury stock, 48,443,538 and 48,457,693 shares at April 28, 2012 and January 28, 2012, respectively		(357,838		)	(357,943		)
Guess?, Inc. stockholders’ equity		1,187,321			1,175,630
Nonredeemable noncontrolling interests		21,122			18,635
Total stockholders’ equity		1,208,443			1,194,265
		$	1,839,744		$	1,844,475

 

See accompanying notes to condensed consolidated financial statements.

 

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

 

		Three Months Ended
		Apr. 28, 2012			Apr. 30, 2011
Product sales		$	550,366		$	563,399
Net royalties		28,900			28,845
Net revenue		579,266			592,244
Cost of product sales		344,190			344,214
Gross profit		235,076			248,030
Selling, general and administrative expenses		195,935			177,097
Earnings from operations		39,141			70,933
Other income (expense):
Interest expense		(384		)	(405		)
Interest income		694			1,295
Other income (expense), net		568			(10,002		)
		878			(9,112		)
Earnings before income tax expense		40,019			61,821
Income tax expense		12,806			18,237
Net earnings		27,213			43,584
Net earnings attributable to noncontrolling interests		567			902
Net earnings attributable to Guess?, Inc.		$	26,646		$	42,682
Net earnings per common share attributable to common stockholders (Note 2):
Basic		$	0.30		$	0.46
Diluted		$	0.30		$	0.46
Weighted average common shares outstanding attributable to common stockholders (Note 2):
Basic		89,190			91,629
Diluted		89,510			92,171
Dividends declared per common share		$	0.20		$	0.20

 

See accompanying notes to condensed consolidated financial statements.

 

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

		Three Months Ended
		Apr. 28, 2012			Apr. 30, 2011
Net earnings		$	27,213		$	43,584
Other comprehensive income (loss):
Foreign currency translation adjustment		2,720			49,733
Net unrealized gain (loss) on hedges
Net gains (losses) arising during the period		(3,495		)	(9,710		)
Less income tax effect		701			1,706
Net unrealized gain (loss) on investments
Net gains (losses) arising during the period		232			137
Less income tax effect		(89		)	(50		)
Supplemental Executive Retirement Plan (“SERP”)
Actuarial loss amortization		835			589
Prior service cost amortization		155			388
Less income tax effect		(378		)	(336		)
Total comprehensive income		27,894			86,041
Less comprehensive income attributable to noncontrolling interests:
Net earnings		567			902
Foreign currency translation adjustment		2			1,042
Amounts attributable to noncontrolling interests		569			1,944
Comprehensive income attributable to Guess?, Inc.		$	27,325		$	84,097

 

See accompanying notes to condensed consolidated financial statements.

 

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

		Three Months Ended
		Apr. 28, 2012			Apr. 30, 2011
Cash flows from operating activities:
Net earnings		$	27,213		$	43,584
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization of property and equipment		20,247			19,260
Amortization of intangible assets		474			634
Share-based compensation expense		4,802			7,255
Unrealized forward contract losses		1,465			13,758
Net loss on disposition of property and equipment		81			1,150
Other items, net		(537		)	(158		)
Changes in operating assets and liabilities:
Accounts receivable		5,629			2,663
Inventories		(6,204		)	4,442
Prepaid expenses and other assets		5,911			(5,152		)
Accounts payable and accrued expenses		(32,387		)	(40,885		)
Deferred rent and lease incentives		2,991			398
Other long-term liabilities		6,968			886
Net cash provided by operating activities		36,653			47,835
Cash flows from investing activities:
Purchases of property and equipment		(25,441		)	(30,894		)
Acquisition of lease interest		—			(1,339		)
Net cash settlement of forward contracts		2,348			(1,600		)
Purchases of investments		(8,291		)	(10,248		)
Net cash used in investing activities		(31,384		)	(44,081		)
Cash flows from financing activities:
Repayment of borrowings and capital lease obligations		(491		)	(444		)
Dividends paid		(18,087		)	(18,582		)
Issuance of common stock, net of nonvested award repurchases		1,078			(1,296		)
Excess tax benefits from share-based compensation		18			913
Net cash used in financing activities		(17,482		)	(19,409		)
Effect of exchange rates on cash and cash equivalents		761			15,392
Net decrease in cash and cash equivalents		(11,452		)	(263		)
Cash and cash equivalents at beginning of period		491,805			427,037
Cash and cash equivalents at end of period		$	480,353		$	426,774
Supplemental cash flow data:
Interest paid		$	181		$	267
Income taxes paid		$	6,137		$	9,063

 

See accompanying notes to condensed consolidated financial statements.

 

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GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 28, 2012

(unaudited)

 

(1)                                 Basis of Presentation

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Guess?, Inc. and its subsidiaries (the “Company”) contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheets as of April 28, 2012 and January 28, 2012, and the condensed consolidated statements of income, comprehensive income and cash flows for the three months ended April 28, 2012 and April 30, 2011. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three months ended April 28, 2012 are not necessarily indicative of the results of operations to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended January 28, 2012. The Company has made certain reclassifications to the prior year’s condensed consolidated financial statements to conform to classifications in the current year. For the three months ended April 30, 2011, the Company reclassified certain distribution costs from selling, general and administrative expenses to cost of product sales to conform to current period presentation. This reclassification had no impact on previously reported earnings from operations, net earnings or net earnings per share.

 

The three months ended April 28, 2012 had the same number of days as the three months ended April 30, 2011. All references herein to “fiscal 2013”, “fiscal 2012” and “fiscal 2011” represent the results of the 53-week fiscal year ending February 2, 2013 and the 52-week fiscal years ended January 28, 2012 and January 29, 2011, respectively.

 

New Accounting Guidance

 

In May 2011, the Financial Accounting Standards Board (“FASB”) issued an update to its authoritative guidance regarding fair value measurement to clarify disclosure requirements and improve comparability. Additional disclosure requirements in the update include:  (a) for Level 3 fair value measurements, quantitative information about the significant unobservable inputs used, qualitative information about the sensitivity of the measurements to changes in the unobservable inputs disclosed including the interrelationship between inputs, and a description of the Company’s valuation processes; (b) all, not just significant, transfers between Levels 1 and 2 of the fair value hierarchy; (c)  the reason why, if applicable, the current use of a nonfinancial asset measured at fair value differs from its highest and best use; and (d) the categorization in the fair value hierarchy for financial instruments not measured at fair value but for which disclosure of fair value is required. The Company adopted this guidance effective January 29, 2012. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

 

In June 2011, the FASB issued authoritative guidance that revised its requirements related to the presentation of comprehensive income, which was effective for fiscal periods beginning after January 1, 2012, with early adoption allowed.  This guidance eliminates the option to present the components of other comprehensive income (“OCI”) as part of the consolidated statement of equity.  It requires presentation of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The Company elected to early adopt this guidance in the fourth quarter of fiscal 2012 and accordingly has presented the required comprehensive income disclosures in the accompanying condensed consolidated statements of comprehensive income.

 

In September 2011, the FASB issued an update to its authoritative guidance regarding the methods used to test goodwill for impairment, which was effective for fiscal years beginning after December 15, 2011, with early adoption allowed. The amendment provides the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under that option, an entity would no longer be required to calculate the fair value of a reporting unit if the entity determines, based on that qualitative assessment, that it is more likely than not that its carrying amounts are less than their fair values. If an entity concludes otherwise, then it must perform the two-step impairment test. The Company elected to early adopt this guidance in fiscal 2012. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

 

(2)                                 Earnings Per Share

 

Basic earnings per share represents net earnings attributable to common stockholders divided by the weighted-average number of common shares outstanding for the period.  Diluted earnings per share represents net earnings attributable to common stockholders divided by the weighted-average number of common shares outstanding, inclusive of the dilutive impact of common equivalent shares outstanding during the period. However, nonvested restricted stock awards (referred to as participating securities) are excluded from the dilutive impact of common equivalent shares outstanding in accordance with authoritative guidance under the two-class method since the nonvested restricted stockholders are entitled to participate in dividends declared on common stock as if the shares were fully vested and hence are deemed to be participating securities.  Under the two-class method, earnings attributable to nonvested restricted stockholders are excluded from net earnings attributable to common stockholders for purposes of calculating basic and diluted earnings per common share.

 

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The computation of basic and diluted net earnings per common share attributable to common stockholders is as follows (in thousands, except per share data):

 

		Three Months Ended
		Apr. 28, 2012			Apr. 30, 2011
Net earnings attributable to Guess?, Inc.		$	26,646		$	42,682
Less net earnings attributable to nonvested restricted stockholders		169			304
Net earnings attributable to common stockholders		$	26,477		$	42,378
Weighted average common shares used in basic computations		89,190			91,629
Effect of dilutive securities:
Stock options and restricted stock units		320			542
Weighted average common shares used in diluted computations		89,510			92,171
Net earnings per common share attributable to common stockholders:
Basic		$	0.30		$	0.46
Diluted		$	0.30		$	0.46

 

For the three months ended April 28, 2012 and April 30, 2011, equity awards granted for 1,205,081 and 435,583, respectively, of the Company’s common shares were outstanding but were excluded from the computation of diluted weighted average common shares and common share equivalents outstanding because their effect would have been anti-dilutive.

 

On March 14, 2011, the Company’s Board of Directors terminated the previously authorized 2008 share repurchase program (which had $84.9 million capacity remaining) and authorized a new program to repurchase, from time-to-time and as market and business conditions warrant, up to $250.0 million of the Company’s common stock (the “2011 Share Repurchase Program”). Repurchases may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program and the program may be discontinued at any time, without prior notice. There were no share repurchases under the 2011 or 2008 Share Repurchase Programs during the three months ended April 28, 2012 or the three months ended April 30, 2011. At April 28, 2012, the Company had remaining authority under the 2011 Share Repurchase Program to purchase $158.0 million of its common stock.

 

(3)                                 Stockholders’ Equity and Redeemable Noncontrolling Interests

 

A reconciliation of the total carrying amount of total stockholders’ equity, Guess?, Inc. stockholders’ equity and stockholders’ equity attributable to nonredeemable and redeemable noncontrolling interests for the fiscal year ended January 28, 2012 and three months ended April 28, 2012 is as follows (in thousands):

 

		Stockholders’ Equity
		Guess?, Inc. Stockholders’ Equity			Nonredeemable Noncontrolling Interests			Total			Redeemable Noncontrolling Interests
Balances at January 29, 2011		$	1,054,876		$	11,318		$	1,066,194		$	14,711
Issuance of common stock under stock compensation plans, net of tax effect		2,923			—			2,923			—
Issuance of stock under ESPP		1,377			—			1,377			—
Share-based compensation		28,100			—			28,100			—
Dividends		(74,166		)	—			(74,166		)	—
Share repurchases		(92,082		)	—			(92,082		)	—
Redeemable noncontrolling interest redemption value adjustment		3,721			2,051			5,772			(5,772		)
Comprehensive income (loss):
Net earnings		265,500			5,150			270,650			—
Foreign currency translation adjustment		(17,569		)	116			(17,453		)	(646		)
Unrealized gain on hedges, net of income tax of ($1,170)		6,048			—			6,048			—
Unrealized loss on investments, net of income tax of $24		(43		)	—			(43		)	—
SERP prior service cost amortization, curtailment and actuarial valuation loss and related amortization, net of income tax of $2,057		(3,055		)	—			(3,055		)	—
Balances at January 28, 2012		$	1,175,630		$	18,635		$	1,194,265		$	8,293
Issuance of common stock under stock compensation plans, net of tax effect		(156		)	—			(156		)	—
Issuance of stock under ESPP		370			—			370			—
Share-based compensation		4,802			—			4,802			—
Dividends		(17,988		)	—			(17,988		)	—
Noncontrolling interest capital contribution		—			1,279			1,279
Redeemable non-controlling interest redemption value adjustment		(2,662		)	639			(2,023		)	2,023
Comprehensive income (loss):
Net earnings		26,646			567			27,213			—
Foreign currency translation adjustment		2,718			2			2,720			26
Unrealized loss on hedges, net of income tax of $701		(2,794		)	—			(2,794		)	—
Unrealized gain on investments, net of income tax of ($89)		143			—			143			—
SERP prior service cost and actuarial valuation amortization, net of income tax of ($378)		612			—			612			—
Balances at April 28, 2012		$	1,187,321		$	21,122		$	1,208,443		$	10,342

 

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Redeemable Noncontrolling Interests

 

In connection with the acquisition of two majority-owned subsidiaries, the Company is party to put arrangements with respect to the common securities that represent the remaining noncontrolling interests of the acquired companies. Each put arrangement is exercisable by the counter-party outside the control of the Company by requiring the Company to redeem the counterparty’s entire equity stake in the subsidiary at a put price based on a multiple of earnings formula. Each put arrangement is recorded on the balance sheet at its expected redemption value and classified as a redeemable noncontrolling interest outside of permanent equity. As of April 28, 2012, the redeemable noncontrolling interests of $10.3 million were composed of redemption values related to the Focus Europe S.r.l. (“Focus”) and Guess Sud SAS (“Guess Sud”) put arrangements of $3.5 million and $6.8 million, respectively. As of January 28, 2012, the redeemable noncontrolling interests of $8.3 million were composed of redemption values related to the Focus and Guess Sud put arrangements of $4.2 million and $4.1 million, respectively.

 

The put arrangement for Focus, representing 25% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the minority owner by providing written notice to the Company no later than June 27, 2012. The redemption value of the Focus put arrangement calculated as of April 28, 2012 is based on a multiple of Focus’s net earnings.

 

The put arrangement for Guess Sud, representing 40% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the minority owners by providing written notice to the Company anytime after January 30, 2012. The redemption value of the Guess Sud put arrangement calculated as of April 28, 2012 is based on a multiple of Guess Sud’s earnings before interest, taxes, depreciation and amortization.

 

(4)                                 Accounts Receivable

 

Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe, and to a lesser extent, to its wholesale businesses in North America and Asia. The Company provided for allowances relating to these receivables of $34.1 million and $34.4 million at April 28, 2012 and January 28, 2012, respectively. In addition, accounts receivable includes royalty receivables relating to licensing operations of $26.8 million and $14.1 million at April 28, 2012 and January 28, 2012, respectively, for which the Company recorded an allowance for doubtful accounts of $0.7 million and $0.4 million at April 28, 2012 and January 28, 2012, respectively. The accounts receivable allowance includes allowances for doubtful accounts, wholesale sales returns and wholesale markdowns. Retail sales returns allowances are included in accrued expenses.

 

(5)                                 Inventories

 

Inventories consist of the following (in thousands):

 

		Apr. 28, 2012			Jan. 28, 2012
Raw materials		$	15,614		$	8,903
Work in progress		2,919			2,713
Finished goods		315,702			316,986
		$	334,235		$	328,602

 

As of April 28, 2012 and January 28, 2012, inventories had been written down to the lower of cost or market by $19.8 million and $19.7 million, respectively.

 

(6)                                 Income Taxes

 

Income tax expense for the interim periods was computed using the effective tax rate estimated to be applicable for the full fiscal year. The Company’s effective income tax rate increased to 32.0% for the three months ended April 28, 2012 from 29.5% for the three months ended April 30, 2011, due primarily to a larger estimated mix of taxable income in higher tax jurisdictions compared to the prior year.

 

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From time to time, the Company is subject to routine income tax audits on various tax matters around the world in the ordinary course of business. As of April 28, 2012, several income tax audits were underway for various periods in multiple jurisdictions. In April 2012, the Company received a written report from the Italian tax authority regarding its ongoing audit of one of the Company’s Italian subsidiaries for the 2008 and 2009 fiscal years. While the tax authority has not made a formal tax assessment, based on the written report, the Company believes it is likely to receive a formal tax assessment from the tax authority for these two periods for roughly $11 million, though it is possible that the formal tax assessment will not be consistent with the written report. Further, it is possible that the Company will receive similar or even larger assessments in the future for periods subsequent to fiscal 2009. The Company disagrees with the positions that the Italian tax authority has indicated it may take and intends to vigorously contest any such assessments.

 

As required under applicable accounting rules, the Company accrues an amount for its estimate of additional income tax liability which the Company, more likely than not, could incur as a result of the ultimate resolution of the income tax audits (“uncertain tax positions”). The Company reviews and updates the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, upon completion of tax audits, upon expiration of statutes of limitation, or upon occurrence of other events. The Company does not believe that the resolution of open matters will have a material effect on the Company’s financial position or liquidity.

 

As of April 28, 2012 and January 28, 2012, the Company had $16.8 million and $16.7 million, respectively, of aggregate accruals for uncertain tax positions, including penalties and interest and net of federal tax benefits. The change in the accrual balance from January 28, 2012 to April 28, 2012 resulted primarily from interest.

 

(7)                                 Segment Information

 

The Company’s businesses are grouped into five reportable segments for management and internal financial reporting purposes:  North American Retail, Europe, Asia, North American Wholesale and Licensing. Management evaluates segment performance based primarily on revenues and earnings from operations. The Company believes this segment reporting reflects how its five business segments are managed and each segment’s performance is evaluated. The North American Retail segment includes the Company’s retail operations in North America. The Europe segment includes the Company’s wholesale and retail operations in Europe and the Middle East. The Asia segment includes the Company’s wholesale and retail operations in Asia. The North American Wholesale segment includes the Company’s wholesale operations in North America and export sales to Central and South America. The Licensing segment includes the worldwide licensing operations of the Company. The business segment operating results exclude corporate overhead costs, which consist of shared costs of the organization. These costs are presented separately and generally include, among other things, the following unallocated corporate costs: information technology, human resources, global advertising and marketing, accounting and finance, executive compensation, facilities and legal.

 

Net revenue and earnings from operations are summarized as follows for the three months ended April 28, 2012 and April 30, 2011 (in thousands):

 

		Three Months Ended
		April 28, 2012			April 30, 2011
Net revenue:
North American Retail		$	251,798		$	247,457
Europe		189,815			210,209
Asia		64,835			60,087
North American Wholesale		43,918			45,646
Licensing		28,900			28,845
		$	579,266		$	592,244
Earnings (loss) from operations:
North American Retail		$	16,990		$	18,630
Europe		12,481			33,181
Asia		5,875			7,101
North American Wholesale		9,346			11,114
Licensing		24,586			25,290
Corporate Overhead		(30,137		)	(24,383		)
		$	39,141		$	70,933

 

Due to the seasonal nature of the Company’s business segments, the above net revenue and operating results are not necessarily indicative of the results that may be expected for the full fiscal year.

 

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(8)                                 Borrowings and Capital Lease Obligations

 

Borrowings and capital lease obligations are summarized as follows (in thousands):

 

		Apr. 28, 2012			Jan. 28, 2012
European capital lease, maturing quarterly through 2016		$	11,493		$	11,925
Other		281			311
		11,774			12,236
Less current installments		1,967			2,030
Long-term capital lease obligations		$	9,807		$	10,206

 

The Company entered into a capital lease in December 2005 for a new building in Florence, Italy. At April 28, 2012, the capital lease obligation was $11.5 million. The Company entered into a separate interest rate swap agreement designated as a non-hedging instrument that resulted in a swap fixed rate of 3.55%. This interest rate swap agreement matures in 2016 and converts the nature of the capital lease obligation from Euribor floating rate debt to fixed rate debt. The fair value of the interest rate swap liability as of April 28, 2012 was approximately $1.0 million.

 

On July 6, 2011, the Company entered into a five-year senior secured revolving credit facility with JPMorgan Chase Bank, N.A., Bank of America, N.A. and the other lenders party thereto (the “Credit Facility”). The Credit Facility provides for a $200 million revolving multicurrency line of credit, and is available for direct borrowings and the issuance of letters of credit, subject to certain letters of credit sublimits. It may be used for working capital and other general corporate purposes. The Credit Facility also allows for incremental revolving commitments or incremental term loans in an aggregate amount that does not exceed $100 million, subject to certain conditions. At April 28, 2012, the Company had $1.0 million in outstanding standby letters of credit, no outstanding documentary letters of credit and no outstanding borrowings under the Credit Facility.

 

The Company, through its European subsidiaries, maintains short-term uncommitted borrowing agreements, primarily for working capital purposes, with various banks in Europe. The majority of the borrowings under these agreements are secured by specific accounts receivable balances. Based on the applicable accounts receivable balances at April 28, 2012, the Company could have borrowed up to $158.7 million under these agreements. At April 28, 2012, the Company had no outstanding borrowings and $12.3 million in outstanding documentary letters of credit under these agreements. The agreements are denominated primarily in euros and provide for annual interest rates ranging from 0.9% to 3.5%. The maturities of the short-term borrowings are generally linked to the credit terms of the underlying accounts receivable that secure the borrowings. With the exception of one facility for up to $46.4 million that has a minimum net equity requirement, there are no other financial ratio covenants.

 

From time to time the Company will obtain other short term financing in foreign countries for working capital to finance its local operations.

 

(9)                                 Share-Based Compensation

 

The following table summarizes the share-based compensation expense recognized under all of the Company’s stock plans during the three months ended April 28, 2012 and April 30, 2011 (in thousands):

 

		Three Months Ended
		Apr. 28, 2012			Apr. 30, 2011
Stock options		$	1,188		$	1,313
Nonvested stock awards/units		3,509			5,829
Employee Stock Purchase Plan		105			113
Total share-based compensation expense		$	4,802		$	7,255

 

Unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested stock options and nonvested stock awards/units totaled approximately $8.6 million and $21.2 million, respectively, as of April 28, 2012.  This unrecognized expense assumes the performance-based equity awards vest in the future. This cost is expected to be recognized over a weighted-average period of 1.8 years. The weighted average fair values of stock options granted during the three months ended April 28, 2012 and April 30, 2011 were $9.23 and $12.21, respectively.

 

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On March 28, 2012, the Company made an annual grant of 290,400 stock options and 292,800 nonvested stock awards/units to its employees. On April 15, 2011, the Company made an annual grant of 284,200 stock options and 256,100 nonvested awards/units to its employees.

 

On June 18, 2011, Maurice Marciano, the Company’s then-serving executive Chairman of the Board of Directors, notified the Company of his decision to retire as an employee and executive officer effective January 28, 2012, the end of fiscal 2012.  Mr. Marciano continues to serve as non-executive Chairman of the Board of Directors.  In accordance with the terms of Mr. Marciano’s employment agreement, the Company and Mr. Marciano entered into a two-year consulting agreement, under which Mr. Marciano will provide certain consulting services to the Company through January 2014.  In connection with the ongoing services to be provided, Mr. Marciano’s outstanding equity awards were modified to provide that all awards that would have otherwise been unvested and forfeited at January 28, 2012, will continue to vest in accordance with the original vesting terms for as long as Mr. Marciano continues to serve as a member of the Board of Directors of the Company.  The original grant date fair value of the modified equity awards aggregated $4.7 million while the modified grant date fair value aggregated $5.0 million.  As a result of the modification, compensation expense of $2.5 million was accelerated and recorded in the last eight months of fiscal 2012.

 

On May 1, 2008, the Company granted an aggregate of 167,000 nonvested stock awards to certain employees which are subject to certain annual performance-based vesting conditions over a five-year period. During the first quarter of fiscal 2010, the Compensation Committee determined that the performance goals established in the prior year were no longer set at an appropriate level to incentivize and help retain employees given the greater than previously anticipated deterioration of the economy that had occurred since the goals were established. Therefore, in April 2009, the Compensation Committee modified the performance goals of that year’s tranche of the outstanding performance-based stock awards to address the challenges associated with the economic environment. During the first quarter of fiscal 2011, fiscal 2012 and fiscal 2013, the Compensation Committee modified the performance goals of the respective year’s tranche of the outstanding performance-based stock awards to address the continuing challenges associated with the economic environment. None of the modifications had a material impact on the consolidated financial statements of the Company.

 

(10)                          Related Party Transactions

 

The Company and its subsidiaries periodically enter into transactions with other entities or individuals that are considered related parties, including certain transactions with entities affiliated with trusts for the respective benefit of Paul Marciano, who is an executive of the Company, Maurice Marciano, Chairman of the Board, Armand Marciano, their brother and former executive of the Company, and certain of their children (the “Marciano Trusts”).

 

Leases

 

The Company leases warehouse and administrative facilities, including the Company’s corporate headquarters in Los Angeles, California, from partnerships affiliated with the Marciano Trusts and certain of their affiliates. There were four of these leases in effect at April 28, 2012 with expiration dates ranging from 2013 to 2020.

 

Aggregate rent and property tax expense under these related party leases for the three months ended April 28, 2012 and April 30, 2011 was $1.5 million and $1.2 million, respectively. The Company believes the related party lease terms have not been significantly affected by the fact that the Company and the lessors are related.

 

Aircraft Arrangements

 

The Company periodically charters aircraft owned by MPM Financial, LLC (“MPM Financial”), an entity affiliated with the Marciano Trusts, through independent third party management companies contracted by MPM Financial to manage its aircraft. Under an informal arrangement with MPM Financial and the third party management companies, the Company has chartered and may from time-to-time continue to charter aircraft owned by MPM Financial at a discount from the third party management companies’ preferred customer hourly charter rates. The total fees paid under these arrangements were approximately $0.4 million for each of the three months ended April 28, 2012 and April 30, 2011.

 

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Consulting Arrangement

 

After serving for over 30 years as an executive and leader for Guess?, co-founder Maurice Marciano elected to retire from his position as executive Chairman of the Board and as an employee of the Company upon the expiration of his employment agreement on January 28, 2012. Mr. Marciano will continue to serve the Company as its non-executive Chairman of the Board. In addition, under the terms of his previously existing employment agreement, the Company and Mr. Marciano entered into a two-year consulting agreement (the “Marciano Consulting Agreement”) under which Mr. Marciano will provide certain consulting services to the Company, including advice and counsel to the Company’s Chief Executive Officer and other senior executives. The Marciano Consulting Agreement, which has a two-year term that commenced on January 28, 2012, provides for consulting fees of $500,000 per year and continued automobile use in a manner consistent with past practice. Total expenses incurred with respect to the Marciano Consulting Agreement for the three months ended April 28, 2012 and April 30, 2011 were $0.1 million and zero, respectively.

 

These related party disclosures should be read in conjunction with the disclosure concerning related party transactions in the Company’s Annual Report on Form 10-K for the year ended January 28, 2012.

 

(11)                          Commitments and Contingencies

 

Leases

 

The Company leases its showrooms and retail store locations under operating lease agreements expiring on various dates through September 2031. Some of these leases require the Company to make periodic payments for property taxes, utilities and common area operating expenses. Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 12%, when specific sales volumes are exceeded. Some leases include lease incentives, rent abatements and fixed rent escalations, which are amortized and recorded over the initial lease term on a straight-line basis. The Company also leases some of its equipment under operating lease agreements expiring at various dates through January 2017. As discussed in further detail in Note 8, the Company leases a building in Florence, Italy under a capital lease.

 

Incentive Bonuses

 

Certain officers and key employees of the Company are eligible to receive annual cash incentive bonuses based on the achievement of certain performance criteria. These bonuses are based on performance measures such as earnings per share and earnings from operations of the Company or particular segments thereof, as well as other objective and subjective criteria as determined by the Compensation Committee of the Board of Directors. In addition to such annual incentive opportunities, Paul Marciano, Chief Executive Officer and Vice Chairman of the Company, is entitled to receive a $3.5 million special cash bonus as of December 31, 2012 related to the Company’s receipt of a fixed cash rights payment of $35.0 million in January 2012 from one of its licensees. In connection with this special bonus, the Company will accrue an expense of $3.5 million, plus applicable payroll taxes, through December 2012, $2.8 million of which was accrued as of April 28, 2012.

 

Litigation

 

On May 6, 2009, Gucci America, Inc. filed a complaint in the U.S. District Court for the Southern District of New York against Guess?, Inc. and certain third-party licensees for the Company asserting, among other things, trademark and trade dress law violations and unfair competition. The complaint sought injunctive relief, compensatory damages, including treble damages, and certain other relief. Similar complaints have also been filed against the Company and certain of its subsidiaries in both the Court of Milan, Italy and the Court of Paris, France. Following the conclusion of a three week bench trial in the U.S. matter on April 19, 2012, the court issued its preliminary ruling on May 21, 2012.  Although the plaintiff was seeking compensation in the U.S. matter in the form of damages of $26 million and an accounting of profits of $99 million, the court provided for monetary damages of $2.6 million against the Company and certain of its licensee affiliates, plus a separate award for monetary damages of $1.9 million against the Company’s footwear licensee. The court also granted narrow injunctions in favor of the plaintiff for certain of the claimed infringements. The Company is presently reviewing the preliminary ruling in order to assess its next course of action. Once the final ruling in the U.S. matter is issued, the parties will have thirty days to file an appeal. Although the Company believes that it has a strong position and will continue to vigorously defend each of these matters, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcomes will have a material impact on the Company’s financial position or results of operations.

 

The Company is also involved in various other claims and other matters incidental to the Company’s business, the resolution of which is not expected to have a material adverse effect on the Company’s financial position or results of operations. No material amounts were accrued as of April 28, 2012 or January 28, 2012 related to any of the Company’s legal proceedings.

 

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(12)                          Supplemental Executive Retirement Plan

 

The components of net periodic pension cost for the three months ended April 28, 2012 and April 30, 2011 were as follows (in thousands):

 

		Three Months Ended
		Apr. 28, 2012			Apr. 30, 2011
Interest cost		$	598		$	657
Net amortization of unrecognized prior service cost		155			388
Net amortization of actuarial losses		835			589
Net periodic defined benefit pension cost		$	1,588		$	1,634

 

As a non-qualified pension plan, no dedicated funding of the SERP is required; however, the Company has and expects to continue to make periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The amount of future payments may vary, depending on the future years of service, future annual compensation of the participants and investment performance of the trust. The cash surrender values of the insurance policies were $39.6 million and $38.4 million as of April 28, 2012 and January 28, 2012, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded unrealized gains of $1.2 million and $1.5 million in other income during the three months ended April 28, 2012 and April 30, 2011, respectively.

 

(13)                          Fair Value Measurements

 

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e. interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data.

 

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of April 28, 2012 and January 28, 2012 (in thousands):

 

		Fair Value Measurements at Apr. 28, 2012												Fair Value Measurements at Jan. 28, 2012
Recurring Fair Value Measures		Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Assets:
Foreign exchange currency contracts		$	—		$	3,582		$	—		$	3,582		$	—		$	8,315		$	—		$	8,315
Held-to-maturity securities		4,038			—			—			4,038			4,060			—			—			4,060
Available-for-sale securities		16,401			—			—			16,401			16,201			—			—			16,201
Total		$	20,439		$	3,582		$	—		$	24,021		$	20,261		$	8,315		$	—		$	28,576
Liabilities:
Foreign exchange currency contracts		$	—		$	2,482		$	—		$	2,482		$	—		$	1,107		$	—		$	1,107
Interest rate swaps		—			967			—			967			—			975			—			975
Deferred compensation obligations		—			6,668			—			6,668			—			6,762			—			6,762
Total		$	—		$	10,117		$	—		$	10,117		$	—		$	8,844		$	—		$	8,844

 

There were no transfers of financial instruments between the three levels of fair value hierarchy during the three months ended April 28, 2012.

 

The fair values of the Company’s available-for-sale and held-to-maturity securities are based on quoted prices. The fair value of the interest rate swaps are based upon inputs corroborated by observable market data. Foreign exchange forward contracts are entered into by the Company principally to hedge the future payment of inventory and intercompany transactions by non-U.S. subsidiaries. The fair values of the Company’s foreign exchange forward contracts are based on quoted foreign exchange forward rates at the reporting date. Deferred compensation obligations to employees are adjusted based on changes in the fair value of the underlying employee-directed investments. Fair value of these obligations is based upon inputs corroborated by observable market data.

 

At April 28, 2012 and January 28, 2012, the Company’s held-to-maturity securities consisted of corporate bonds maturing in September 2012 which are recorded at amortized cost and presented as short-term investments in the accompanying condensed consolidated balance sheets. The Company presently does not intend to sell these investments and believes it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost bases. The amortized cost of held-to-maturity securities at April 28, 2012 and January 28, 2012 was $4.0 million and $4.1 million, respectively, which approximated fair value.

 

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Available-for-sale securities are recorded at fair value and are included in short-term investments and other assets in the accompanying condensed consolidated balance sheets depending on their respective maturity dates. At April 28, 2012, available-for-sale securities consisted of $15.9 million of corporate bonds with maturity dates ranging from January 2013 to September 2014 and $0.5 million of marketable equity securities. At January 28, 2012, available-for-sale securities consisted of $15.7 million of corporate bonds and $0.5 million of marketable equity securities. Unrealized gains (losses), net of taxes, are included as a component of stockholders’ equity and comprehensive income. The accumulated unrealized gains, net of taxes, included in accumulated other comprehensive income related to available-for-sale securities owned by the Company at April 28, 2012 were $0.1 million.  The accumulated unrealized losses, net of taxes, included in accumulated other comprehensive income related to available-for-sale securities owned by the Company at January 28, 2012 were minimal.

 

The carrying amount of the Company’s remaining financial instruments, which principally include cash and cash equivalents, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relatively short maturity of such instruments. The fair values of the Company’s debt instruments (see Note 8) are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. At April 28, 2012 and January 28, 2012, the carrying value of all financial instruments was not materially different from fair value, as the interest rates on variable rate debt including the capital lease obligation approximated rates currently available to the Company.

 

Long-lived assets, such as property, plant, and equipment, and purchased intangibles that are subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value, which is determined based on discounted future cash flows. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in the future cash flows. The estimated cash flows used for this nonrecurring fair value measurement are considered a Level 3 input as defined above.

 

(14)                          Derivative Financial Instruments

 

Hedging Strategy

 

The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company has entered into certain forward contracts to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these hedges.

 

The Company’s objective is to hedge the variability in forecasted cash flows due to the foreign currency risk. Various transactions that occur in Canada, Europe and South Korea are denominated in U.S. dollars, British pounds or Swiss francs and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. dollar denominated purchases of merchandise and U.S. dollar and British pound intercompany liabilities. In addition, certain sales, operating expenses and tax liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. The Company enters into derivative financial instruments, including forward exchange contracts, to offset some but not all of the exchange risk on certain of these anticipated foreign currency transactions.

 

The impact of the credit risk of the counterparties to the derivative contracts is considered in determining the fair value of the foreign currency forward contracts. As of April 28, 2012, credit risk did not have a significant effect on the fair value of the Company’s foreign currency contracts.

 

The Company also has interest rate swap agreements, which are not designated as hedges for accounting purposes, to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s variable rate capital lease obligation, thus reducing the impact of interest rate changes on future interest payment cash flows. Refer to Note 8 for further information.

 

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Hedge Accounting Policy

 

U.S. dollar forward contracts are used to hedge forecasted merchandise purchases over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income within stockholders’ equity, and are recognized in cost of product sales in the period which approximates the time the hedged merchandise inventory is sold.  The Company also hedges forecasted intercompany royalties over specific months. Changes in the fair value of these U.S. dollar forward contracts designated as cash flow hedges are recorded as a component of accumulated other comprehensive income within stockholders’ equity, and are recognized in other income and expense in the period in which the royalty expense is incurred.

 

The Company also has foreign currency contracts that are not designated as hedges for accounting purposes.  Changes in fair value of foreign currency contracts not qualifying as cash flow hedges are reported in net earnings as part of other income and expense.

 

Summary of Derivative Instruments

 

The fair value of derivative instruments in the condensed consolidated balance sheet as of April 28, 2012 and January 28, 2012 was as follows (in thousands):

 

		Derivative Balance Sheet Location		Fair Value at Apr. 28, 2012			Fair Value at Jan. 28, 2012
ASSETS:
Derivatives designated as hedging instruments:
Foreign exchange currency contracts		Other current assets		$	2,278		$	3,113
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts		Other current assets		1,304			5,202
Total				$	3,582		$	8,315
LIABILITIES:
Derivatives designated as hedging instruments:
Foreign exchange currency contracts		Current liabilities		$	993		$	641
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts		Current liabilities		1,489			466
Interest rate swaps		Long-term liabilities		967			975
Total derivatives not designated as hedging instruments				2,456			1,441
Total				$	3,449		$	2,082

 

Forward Contracts Designated as Cash Flow Hedges

 

During the three months ended April 28, 2012, the Company purchased U.S. dollar forward contracts in Europe and Canada totaling US$55.3 million and US$11.2 million, respectively, to hedge forecasted merchandise purchases and intercompany royalties that were designated as cash flow hedges.  As of April 28, 2012, the Company had forward contracts outstanding for its European and Canadian operations of US$129.3 million and US$42.2 million, respectively, which are expected to mature over the next ten months.

 

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The following table summarizes the gains (losses) before taxes recognized on the derivative instruments designated as cash flow hedges in OCI and net earnings for the three months ended April 28, 2012 and April 30, 2011 (in thousands):

 

		Gain/(Loss) Recognized in OCI						Location of Gain/(Loss)		Gain/(Loss) Reclassified from Accumulated OCI into Income
		Three Months Ended Apr. 28, 2012			Three Months Ended Apr. 30, 2011			Reclassified from Accumulated OCI into Income (1)		Three Months Ended Apr. 28, 2012			Three Months Ended Apr. 30, 2011
Derivatives designated as hedging instruments:
Foreign exchange currency contracts		$	(823	)	$	(11,052	)	Cost of sales		$	2,443		$	(2,333	)
Foreign exchange currency contracts		$	(51	)	$	(891	)	Other income/expense		$	178		$	100

 

(1) The ineffective portion was immaterial during the three months ended April 28, 2012 and April 30, 2011 and was recorded in net earnings and included in interest income/expense.

 

As of April 28, 2012, accumulated other comprehensive income included an unrealized gain of approximately $1.5 million, net of tax, which will be recognized in other income or cost of product sales over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.

 

The following table summarizes net after-tax derivative activity recorded in accumulated other comprehensive income (in thousands):

 

		Three Months Ended Apr. 28, 2012			Three Months Ended Apr. 30, 2011
Beginning balance gain (loss)		$	4,259		$	(1,789	)
Net losses from changes in cash flow hedges		(494		)	(9,929		)
Net (gains) losses reclassified to income		(2,300		)	1,925
Ending balance gain (loss)		$	1,465		$	(9,793	)

 

As of January 28, 2012, the Company had forward contracts outstanding for its European and Canadian operations of US$90.0 million and US$41.5 million, respectively.

 

Forward Contracts Not Designated as Cash Flow Hedges

 

As of April 28, 2012, the Company had euro foreign currency contracts to purchase US$84.6 million expected to mature over the next ten months, Canadian dollar foreign currency contracts to purchase US$48.3 million expected to mature over the next eight months, Swiss franc foreign currency contracts to purchase US$7.5 million expected to mature over the next six months and GBP2.6 million of foreign currency contracts to purchase euros expected to mature over the next four months.

 

The following table summarizes the gains (losses) before taxes recognized on the derivative instruments not designated as cash flow hedges in other income and expense for the three months ended April 28, 2012 and April 30, 2011 (in thousands):

 

		Location of		Gain/(Loss) Recognized in Income
		Gain/(Loss) Recognized in Income		Three Months Ended Apr. 28, 2012			Three Months Ended Apr. 30, 2011
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts		Other income/expense		$	(2,254	)	$	(15,676	)
Interest rate swaps		Other income/expense		$	19		$	163

 

As of January 28, 2012, the Company had euro foreign currency contracts to purchase US$88.0 million, Canadian dollar foreign currency contracts to purchase US$50.5 million, Swiss franc foreign currency contracts to purchase US$14.0 million and GBP5.0 million of foreign currency contracts to purchase euros.

 

(15)                          Subsequent Events

 

On May 22, 2012, the Company announced a regular quarterly cash dividend of $0.20 per share on the Company’s common stock. The cash dividend will be paid on June 22, 2012 to stockholders of record as of the close of business on June 6, 2012.

 

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