Financial Guarantees

6 Months Ended

Jul. 28, 2017

Financial Guarantees

Financial Guarantees

15.           Financial Guarantees

On December 29, 2011, the Company issued $250.0 million principal amount of the Senior Notes.  The Senior Notes are irrevocably and unconditionally guaranteed, jointly and severally, by each of the Company’s existing and future restricted subsidiaries that are guarantors under the Credit Facilities and certain other indebtedness.

As of July 28, 2017 and January 27, 2017, the Senior Notes are fully and unconditionally guaranteed by the Subsidiary Guarantors.

The tables in the following pages present the condensed consolidating financial information for the Company and the Subsidiary Guarantors together with consolidating entries, as of and for the periods indicated.  The subsidiaries that are not Subsidiary Guarantors are minor.  The condensed consolidating financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the Company, and the Subsidiary Guarantors operated as independent entities.

CONDENSED CONSOLIDATING BALANCE SHEETS

As of July 28, 2017

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Current Assets:
Cash	$	1,189		$	1,217		$	79		$	—		$	2,485
Accounts receivable, net	2,844			83			—			—			2,927
Income taxes receivable	2,739			—			—			—			2,739
Inventories, net	162,642			26,204			—			—			188,846
Assets held for sale	4,903			—			—			—			4,903
Other	16,385			993			5			—			17,383
Total current assets	190,702			28,497			84			—			219,283
Property and equipment, net	417,233			48,899			25			—			466,157
Deferred financing costs, net	2,480			—			—			—			2,480
Equity investments and advances to subsidiaries	852,365			789,728			3,094			(1,645,187		)	—
Intangible assets, net	442,628			1,564			—			—			444,192
Goodwill	380,643			—			—			—			380,643
Deposits and other assets	8,545			323			15			—			8,883
Total assets	$	2,294,596		$	869,011		$	3,218		$	(1,645,187	)	$	1,521,638
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Accounts payable	$	91,783		$	10,077		$	—		$	—		$	101,860
Intercompany payable	791,298			811,361			3,617			(1,606,276		)	—
Payroll and payroll-related	28,467			1,881			—			—			30,348
Sales tax	14,682			623			—			—			15,305
Other accrued expenses	51,187			3,551			11			—			54,749
Workers’ compensation	68,866			75			—			—			68,941
Current portion of long-term debt	5,669			—			—			—			5,669
Current portion of capital and financing lease obligation	1,214			—			—			—			1,214
Total current liabilities	1,053,166			827,568			3,628			(1,606,276		)	278,086
Long-term debt, net of current portion	876,658			—			—			—			876,658
Unfavorable lease commitments, net	3,357			14			—			—			3,371
Deferred rent	28,524			2,108			—			—			30,632
Deferred compensation liability	912			—			—			—			912
Capital and financing lease obligation, net of current portion	52,820			—			—			—			52,820
Deferred income taxes	161,450			—			—			—			161,450
Other liabilities	15,813			—			—			—			15,813
Total liabilities	2,192,700			829,690			3,628			(1,606,276		)	1,419,742
Member’s Equity:
Member units	551,172			—			1			(1		)	551,172
Additional paid-in capital	—			99,943			—			(99,943		)	—
Investment in Number Holdings, Inc. preferred stock	(19,200		)	—			—			—			(19,200		)
Accumulated deficit	(430,076		)	(60,622		)	(411		)	61,033			(430,076		)
Total equity	101,896			39,321			(410		)	(38,911		)	101,896
Total liabilities and equity	$	2,294,596		$	869,011		$	3,218		$	(1,645,187	)	$	1,521,638

CONDENSED CONSOLIDATING BALANCE SHEETS

As of January 27, 2017

(In thousands)

	Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Current Assets:
Cash	$	1,207		$	1,105		$	136		$	—		$	2,448
Accounts receivable, net	3,478			32			—			—			3,510
Income taxes receivable (payable)	3,885			(9		)	—			—			3,876
Inventories, net	148,429			27,463			—			—			175,892
Assets held for sale	4,903			—			—			—			4,903
Other	9,571			723			13			—			10,307
Total current assets	171,473			29,314			149			—			200,936
Property and equipment, net	456,020			51,571			29			—			507,620
Deferred financing costs, net	3,488			—			—			—			3,488
Equity investments and advances to subsidiaries	766,276			696,162			2,907			(1,465,345		)	—
Intangible assets, net	445,302			1,725			—			—			447,027
Goodwill	380,643			—			—			—			380,643
Deposits and other assets	8,246			331			15			—			8,592
Total assets	$	2,231,448		$	779,103		$	3,100		$	(1,465,345	)	$	1,548,306
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Accounts payable	$	78,835		$	7,753		$	—		$	—		$	86,588
Intercompany payable	697,590			719,397			3,497			(1,420,484		)	—
Payroll and payroll-related	22,370			1,740			—			—			24,110
Sales tax	18,867			522			—			—			19,389
Other accrued expenses	43,962			2,103			17			—			46,082
Workers’ compensation	69,094			75			—			—			69,169
Current portion of long-term debt	6,138			—			—			—			6,138
Current portion of capital and financing lease obligation	31,330			—			—			—			31,330
Total current liabilities	968,186			731,590			3,514			(1,420,484		)	282,806
Long-term debt, net of current portion	865,375			—			—			—			865,375
Unfavorable lease commitments, net	3,969			19			—			—			3,988
Deferred rent	28,141			2,216			3			—			30,360
Deferred compensation liability	816			—			—			—			816
Capital and financing lease obligation, net of current portion	47,195			—			—			—			47,195
Deferred income taxes	161,450			—			—			—			161,450
Other liabilities	12,297			—			—			—			12,297
Total liabilities	2,087,429			733,825			3,517			(1,420,484		)	1,404,287
Member’s Equity:
Member units	550,918			—			1			(1		)	550,918
Additional paid-in capital	—			99,943			—			(99,943		)	—
Investment in Number Holdings, Inc. preferred stock	(19,200		)	—			—			—			(19,200		)
Accumulated deficit	(387,699		)	(54,665		)	(418		)	55,083			(387,699		)
Total equity	144,019			45,278			(417		)	(44,861		)	144,019
Total liabilities and equity	$	2,231,448		$	779,103		$	3,100		$	(1,465,345	)	$	1,548,306

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Second Quarter Ended July 28, 2017

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Non- Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	493,393		$	47,057		$	77	$	(77	)	$	540,450
Cost of sales	348,266			36,321			—		—			384,587
Gross profit	145,127			10,736			77		(77		)	155,863
Selling, general and administrative expenses	158,209			14,054			73		(77		)	172,259
Operating (loss) income	(13,082		)	(3,318		)	4		—			(16,396		)
Other (income) expense:
Interest income	(5		)	—			—		—			(5		)
Interest expense	17,161			—			—		—			17,161
Loss on extinguishment of debt	—			—			—		—			—
Equity in loss (earnings) of subsidiaries	3,314			—			—		(3,314		)	—
Total other expense, net	20,470			—			—		(3,314		)	17,156
(Loss) income before provision for income taxes	(33,552		)	(3,318		)	4		3,314			(33,552		)
Provision for income taxes	72			—			—		—			72
Net (loss) income	$	(33,624	)	$	(3,318	)	$	4	$	3,314		$	(33,624	)
Comprehensive (loss) income	$	(33,624	)	$	(3,318	)	$	4	$	3,314		$	(33,624	)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the First Half Ended July 28, 2017

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Non- Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	991,635		$	96,327		$	143	$	(143	)	$	1,087,962
Cost of sales	695,597			74,149			—		—			769,746
Gross profit	296,038			22,178			143		(143		)	318,216
Selling, general and administrative expenses	297,882			28,135			136		(143		)	326,010
Operating (loss) income	(1,844		)	(5,957		)	7		—			(7,794		)
Other (income) expense:
Interest income	(7		)	—			—		—			(7		)
Interest expense	34,503			—			—		—			34,503
Loss on extinguishment of debt	—			—			—		—			—
Equity in loss (earnings) of subsidiaries	5,950			—			—		(5,950		)	—
Total other expense, net	40,446			—			—		(5,950		)	34,496
(Loss) income before provision for income taxes	(42,290		)	(5,957		)	7		5,950			(42,290		)
Provision for income taxes	87			—			—		—			87
Net (loss) income	$	(42,377	)	$	(5,957	)	$	7	$	5,950		$	(42,377	)
Comprehensive (loss) income	$	(42,377	)	$	(5,957	)	$	7	$	5,950		$	(42,377	)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Second Quarter Ended July 29, 2016

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Non- Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	455,238		$	41,220		$	111	$	(111	)	$	496,458
Cost of sales	323,033			32,225			—		—			355,258
Gross profit	132,205			8,995			111		(111		)	141,200
Selling, general and administrative expenses	146,560			13,027			9		(111		)	159,485
Operating (loss) income	(14,355		)	(4,032		)	102		—			(18,285		)
Other (income) expense:
Interest income	(36		)	—			—		—			(36		)
Interest expense	16,784			—			—		—			16,784
Loss on extinguishment of debt	—			—			—		—			—
Equity in loss (earnings) of subsidiaries	3,930			—			—		(3,930		)	—
Total other expense, net	20,678			—			—		(3,930		)	16,748
(Loss) income before provision for income taxes	(35,033		)	(4,032		)	102		3,930			(35,033		)
Provision for income taxes	52			—			—		—			52
Net (loss) income	$	(35,085	)	$	(4,032	)	$	102	$	3,930		$	(35,085	)
Comprehensive (loss) income	$	(35,088	)	$	(4,032	)	$	102	$	3,930		$	(35,088	)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the First Half Ended July 29, 2016

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Non- Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	924,460		$	84,927		$	111	$	(111	)	$	1,009,387
Cost of sales	653,375			65,845			—		—			719,220
Gross profit	271,085			19,082			111		(111		)	290,167
Selling, general and administrative expenses	290,823			25,940			62		(111		)	316,714
Operating (loss) income	(19,738		)	(6,858		)	49		—			(26,547		)
Other (income) expense:
Interest income	(38		)	—			—		—			(38		)
Interest expense	33,310			—			—		—			33,310
Loss on extinguishment of debt	335			—			—		—			335
Equity in loss (earnings) of subsidiaries	6,809			—			—		(6,809		)	—
Total other expense, net	40,416			—			—		(6,809		)	33,607
(Loss) income before provision for income taxes	(60,154		)	(6,858		)	49		6,809			(60,154		)
Provision for income taxes	125			—			—		—			125
Net (loss) income	$	(60,279	)	$	(6,858	)	$	49	$	6,809		$	(60,279	)
Comprehensive (loss) income	$	(60,117	)	$	(6,858	)	$	49	$	6,809		$	(60,117	)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the First Half Ended July 28, 2017

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Non- Guarantor Subsidiary			Consolidating Adjustments		Consolidated
Cash flows from operating activities:
Net cash (used in) provided by operating activities	$	(14,854	)	$	1,276		$	(57	)	$	—	$	(13,635	)
Cash flows from investing activities:
Purchases of property and equipment	(17,754		)	(1,164		)	—			—		(18,918		)
Proceeds from sales of property and fixed assets	9,396			—			—			—		9,396
Net cash used in investing activities	(8,358		)	(1,164		)	—			—		(9,522		)
Cash flows from financing activities:
Payments of long-term debt	(3,538		)	—			—			—		(3,538		)
Proceeds under revolving credit facility	115,400			—			—			—		115,400
Payments under revolving credit facility	(103,400		)	—			—			—		(103,400		)
Proceeds from financing lease obligations	15,317			—			—			—		15,317
Payments of capital and financing lease obligations	(585		)	—			—			—		(585		)
Net cash provided by financing activities	23,194			—			—			—		23,194
Net (decrease) increase in cash	(18		)	112			(57		)	—		37
Cash — beginning of period	1,207			1,105			136			—		2,448
Cash — end of period	$	1,189		$	1,217		$	79		$	—	$	2,485

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the First Half Ended July 29, 2016

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Non- Guarantor Subsidiary			Consolidating Adjustments		Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	26,029		$	1,012		$	(5	)	$	—	$	27,036
Cash flows from investing activities:
Purchases of property and equipment	(22,928		)	(1,032		)	—			—		(23,960		)
Proceeds from sales of fixed assets	612			—			—			—		612
Net cash used in investing activities	(22,316		)	(1,032		)	—			—		(23,348		)
Cash flows from financing activities:
Payments of long-term debt	(3,069		)	—			—			—		(3,069		)
Proceeds under revolving credit facility	92,200			—			—			—		92,200
Payments under revolving credit facility	(119,100		)	—			—			—		(119,100		)
Payments of debt issuance costs	(4,725		)	—			—			—		(4,725		)
Proceeds from financing lease obligations	31,503			—			—			—		31,503
Payments of capital and financing lease obligations	(500		)	—			—			—		(500		)
Net cash used in financing activities	(3,691		)	—			—			—		(3,691		)
Net increase (decrease) in cash	22			(20		)	(5		)	—		(3		)
Cash — beginning of period	1,266			1,009			37			—		2,312
Cash — end of period	$	1,288		$	989		$	32		$	—	$	2,309