Following is a reconciliation of net loss and net loss per share (diluted) to net income before loss on extinguishment of debt and restructuring and
`other charges, and net income per share before loss on extinguishment of debt and restructuring and other charges (diluted) for the years ended
`September 30, 2008 and 2007 (in thousands, except per share amounts):
`
`Net loss
`Loss on extinguishment of debt, net of tax
`Restructuring and other charges, net of tax
`I11cremental shares from the assumed lapse of restrictions on restricted
`stock awards
`Incremental shares fiorn the assumed exercise of outstanding stock
`options
`Adjusted net income before loss on extinguishment of debt a11d
`restructuring and other charges
`
`Years Ended September 30, 2007 and 2006
`
`Year Ended
`Year Ended
`September 30, 2007
`September 30, 2008
`Diluted
`Net Income
`Diluted
`Net Income
`M; Shares i Shares i
`$
`(1,389 ) 5,924
`$
`(0.23 )
`$
`(393 )
`5,802
`$
`(0.07)
`61
`—
`5,748
`—
`2,171
`—
`—
`—
`
`—
`
`—
`
`22
`
`102
`
`—
`
`—
`
`36
`
`297
`
`55
`
`843
`
`6.048
`
`$
`
`0.14
`
`$
`
`5,355
`
`6,135
`
`$
`
`0.87
`
`Net Sales. Our net sales for fiscal 2007 decreased by 3.5%, or approximately $21.3 million, to $581.4 million from $602.7 million for fiscal 2006. The
`decrease in sales versus last year resulted primarily from a decrease i11 comparable store sales, partially offset by increased sales from the
`Company's leased department and licensed relationships and marketing partnerships. Comparable store sales decreased by 4.8% during fiscal 2007,
`based on 1,330 retail locations, versus a comparable store sales increase of 4.3% during fiscal 2006, based on 932 retail locations.
`
`As of September 30. 2007. we operated a total of 781 stores and 1.576 total retail locations: 635 Motherhood Maternity stores (including 91
`Motherhood Maternity Outlet stores), 100 Mimi Maternity stores, 32 A Pea in the Pod stores, 14 Destination Maternity superstores, and 795
`leased 111aternity depa11n1ents, of which 501 were i11 Sears stores a11d the balance were pri111arily 11r1der the Motherhood brand. I11 addition, our Oh
`Baby by Motherhood collection is available at Kohl's stores throughout the United States. In comparison, as of September 30, 2006, we operated a
`total of 810 stores and 1,541 total retail locations: 659 Motherhood Maternity stores (including 97 Motherhood Maternity Outlet stores), 106 Mimi
`Maternity stores, 33 A Pea iii the Pod stores, 12 Destination Maternity superstores, and 731 leased departments. As of September 30, 2007, our
`store total included 57 multi-brand stores, including 14 Destination Matemity superstores, with the remaining multi-brand stores under the Mimi
`Maternity brand. In comparison, as of September 30, 2006, we operated 48 n1ulti-brand stores, including 12 Destination Maternity superstores.
`These multi-brand store figures for fiscal 2007 and fiscal 2006 exclude our A Pea in the Pod stores, which have traditionally carried a full line of
`both A Pea in the Pod a11d Mimi branded merchandise. During fiscal 2007, we opened 18 stores, including nine multi-brand stores, and closed 47
`stores, with 20 of these store closings related to multi-brand store openings. In addition, during fiscal 2007, the Company opened 121 leased
`department locations a11d closed 57 leased department locations.
`
`Gross Profit. Our gross profit for fiscal 2007 decreased by 4.6%, or approximalely $14.5 million, to $300.2 million compared lo $314.7 million for fiscal
`2006, reflecting the decrease in net sales as well as a decrease in gross profit as a percentage ofnet sales. Gross profit as a percentage ofnet sales
`(gross margin) was 51.6% for fiscal 2007, compared to 52.2% for fiscal 2006. The decrease in gross margin for fiscal 2007 as compared to fiscal 2006
`reflects the negative effect of spreading product overhead costs over a smaller sales base, partially offset by modestly higher maintained gross
`n1arg1n1n
`
`43
`
`Source: DESTINATION MAT'ERNITY CORR,
`
`‘lO~K, 12/'15/2038 | Powered by Intelligize
`
`DMC Exhibit 2039_O44
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`our stores and increased marketing partnership revenues. The increase in our maintained gross margin in our stores for fiscal 2007 primarily reflects
`dccrcascd markdown levels compared to fiscal 2006 for the first six months offiscal 2007.
`
`Selling, General ana’Au’rninz'slrative Expenses. Our selling, general and administrative expenses for fiscal 2007 were equal to fiscal 2006, at $279.7
`million for both fiscal years. Significantly lower variable incentive compensation costs, and lower store occupancy expenses, as a result of our
`store closings and our new multi—brand stores, were offset by increased legal expenses that were primarily related to certain intellectual property
`disputes, increased employee benefits costs and increased payroll expenses. As a percentage of net sales, selling, general and administrative
`expenses increased to 48.1% for fiscal 2007 compared to 46.4% for fiscal 2006. The increase in this percentage was primarily a result ofdecreased
`net sales, even tl1o11gl1 tl1e actual amount of selling, general ar1d administrative expenses for fiscal 2007 was consistent with fiscal 2006. I11 addition
`to this unfavorable expense leverage related to decreased net sales, the operating expense percentage increased due to increased legal expenses,
`increased employee benefits costs and increased payroll expenses. The increase in selling, general and administrative expenses as a percentage of
`net sales was partially offset by decreases as a percentage of net sales in variable incentive compensation expense.
`
`Store Closing, Asset Impairment and/lssel‘ Disposal Expenses. Our store closing, asset impairment and asset disposal expenses for fiscal 2007
`decreased by 61.3%, or $2.8 million, to $1.8 n1illio11 from $4.6 million for fiscal 2006. \Veincu1red irnpainnent charges for write-dow11s of long-lived
`assets of $1.8 million for fiscal 2007, as compared to $2.6 million for fiscal 2006. We incurred charges relating to store closings and other asset
`disposals of $7,000 for fiscal 2007, comprised of $0.4 million of cash lease termination fees offset by $0.4 million non—cash gain on asset disposals
`from closed stores, as compared to $2.0 million for fiscal 2006, comprised of $2.1 million of cash lease termination fees and $0.1 million ofnon—cash
`other asset disposal costs, partially offset by S02 million of non—cash gain on asset disposals from closed stores. The majority ofthe store closing
`charges for fiscal 2006 were for stores closed in connection with multi-brand store openings, with n1ost of these charges related to the opening of
`our world flagship Destination Matemity superstore in New York City in February 2006.
`
`Operating Income. Our operating income for fiscal 2007 decreased by 38. %, or $11.6 million, to $18.7 million from $30.3 million for fiscal 2006, due
`to the lower sales volume and associated gross profit rcduction partially offset by lower storc closing and asset impairment costs. Opcrating
`income as a percentage ofnet sales (operating income margin) for fiscal 2007 decreased to 3.2% from 5.0% for fiscal 2006. The decrease in
`operating income rnargi11 was primarily due to unfavorable leverage of selling, general a11d administrative expenses resulting from decreased
`comparable store sales a11d, to a lesser extent, due to our decreased gross margin, partially offset by a lower percentage of store closing and asset
`impairment costs.
`
`Interest Expense, Net. Our net interest expense for fiscal 2007 decreased by 32. %, or $4.7 million. to $9.8 million from $14.5 million in fiscal 2006.
`This decrease was primarily due to the repurchase of $35.0 million of our Senior Notes from August 2006 through December 2006 and, to a lesser
`extent, the partial year benefit of the lower interest rate on our new $90.0 million Tern1 Loan, which we began to recognize in April 2007. During
`fiscal 2007, our average level of direct borrowings under our credit facility was $1.0 million, but we did not have any direct borrowings under our
`credit facility as of September 30, 2007. During fiscal 2006. our average level of direct borrowings under our credit facility was $0.3 million.
`
`Loss on Extingmslzznent 0/"Debt. 111 December 2006, we repurchased S25 .0 million principal amount of our outstanding Senior Notes. In April 2007,
`we repurchased the remaining $90.0 million principal amount of o11r outstanding Senior Notes with the proceeds from a new Tern1 Loan. The $115.0
`million of Senior Note repurchases resulted in pre-tax charges totaling $9.4 million, representing
`
`44
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O45
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`the premium paid plus the write—off of unamortized debt issuance discount and deferred financing costs.
`
`Income Taxes. Our effective tax rate was a benefit of30.l% in fiscal 2007, compared to a provision of‘39.0% in fiscal 2006, which reflected the
`effects of certain n1i11i111u111 state tax requirements and allowable federal tax credits i11 fiscal 2007. See Note 13 of the Notes to Consolidated Financial
`Statements for the reconciliation of the statutory federal income tax rate to our effective tax rate.
`
`Net Income (Loss). Net loss for fiscal 2007 was $0.4 million, or S(0.07) per share (diluted), compared to net income of $9.1 million for fiscal 2006. or
`$1.63 per share (diluted). Excluding the debt extinguishment charges in fiscal 2007 and fiscal 2006, net income for fiscal 2007 was $5.4 million, or
`$0.87 per share (diluted), compared to net income of $9.6 million for fiscal 2006, or Sl.72 per share (diluted).
`
`The average diluted shares outstanding of 5,802,000 shares for fiscal 2007 was 3.8% higher than the 5,591,000 shares outstanding for fiscal 2006.
`The increase in average diluted shares outstanding reflects higher shares outstanding in fiscal 2007 compared to fiscal 2006, as a result of stock
`option exercises and restricted stock awards, partially offset by the elimination of the dilutive impact of outstanding stock options and restricted
`stock in fiscal 2007 due to the net loss for fiscal 2007, compared to the dilutive impact of outstanding stock options in fiscal 2006, when we
`generated net income.
`
`Following is a reconciliation of net income (loss) and 11et income (loss) per share (diluted) to net income before loss on extinguishment of debt and
`net income per share before loss on ex1inguishment of debt (diluted) for the years ended September 30, 2007 and 2006 (in thousands, except per
`share amounts):
`
`Year Ended
`September SI], 2007
`Net Income
`Loss!
`
`Shares
`(393 ) 5,802
`5,748
`—
`
`Net
`Diluted
`Income
`EPS
`(0.07 ) $ 9,102
`533
`
`Year Ended
`September 30, 2006
`Diluted
`EPS
`1.63
`
`Shares
`5.591(1) $
`—
`
`$
`
`Net income (loss)
`Loss on extinguishment of debt, net of tax
`I11cre111e11tal sl1ares fiom the assumed lapse of restrictions o11 restricted
`stock awards
`Incremental shares from the assumed exercise of outstanding stock options
`Adjusted net income before loss on extinguishment ofdebt
`
`$
`
`$
`
`—
`—
`5,355
`
`36
`297
`6,135
`
`—
`—
`9,635
`
`—
`—
`5,591
`
`$
`
`1.72
`
`$
`
`0.87
`
`$
`
`(1)
`
`Includes 243,000 shares from the assumed exercise of outstanding stock options and warrants.
`
`Liquidity and Capital Resources
`
`Our cash needs have primarily been for: (i) debt service, (ii) capital expenditures, including leasehold improvements, fixtures and equipment for new
`stores, store relocations a11d expansions of our existing stores, as well as improvements and new equipment for our distribution and corporate
`facilities and information systems, and (iii) working capital, including inventory to support our business. We have historically financed these
`capital requirements from cash flows from operations, borrowings under our credit facility or available cash balances.
`
`Cash a11d cash equivalents increased by S2.0 million during fiscal 2008 compared to a decrease of $8.8 million during fiscal 2007.
`
`45
`
`Source: DESTINATION MATERNITY CORR,
`
`‘10~K, 12/'15/2038 | Powered by Intelligize
`
`DMC Exhibit 2039_O46
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Cash provided by operations of $27.8 million for fiscal 2008 increased by $0.4 million from $27.4 million for fiscal 2007. This increase in cash
`provided by operations versus the prior year was primarily the result of working capital changes that provided more cash in fiscal 2008 compared
`to fiscal 2007, primarily due to a decrease in inventories in fiscal 2008, partially offset by the larger net loss and smaller loss on extinguishment of
`debt in fiscal 2008 compared to fiscal 2007. Total inventories as ofseptember 30, 2008 were $88.1 million, a decrease of$12.4 million or 12.4% below
`the $100.5 million inventories balance as of September 30, 2007. During fiscal 2008 we used the majority of our cash provided by operations to pay
`for capital expenditures. For fiscal 2008 we spent $15.7 million on capital expenditures, including $12.3 million for leasehold improvements, fixtures
`and equipment principally for new store facilities. as well as improvements to existing stores, and $3.4 million for our information systems and
`distribution and corporate facilities. V»’e funded repayments of long-term debt in fiscal 2008, including $13.0 million of prepayments of o11r Term
`Loan, by using the remaining cash provided by operations and the cash received from the Grantor Trust related to amendments to certain
`supplemental executive retirement agreements (as described later in this section).
`
`Cash provided by operations of $27.4 million for fiscal 2007 decreased by $15.0 million from $42.4 million for fiscal 2006. This decrease in cash
`provided by operations versus the prior year was primarily the result of an increase in inventories in fiscal 2007 compared to cash generated from a
`decrease in inventories during fiscal 2006. Total inventories as of September 30, 2007 were $100.5 million, an increase of $6.2 million or 6.6% above
`the $94.3 million inventories balance as of September 30, 2006. During fiscal 2007 we used a significant amount of our cash provided by operations
`to pay for capital expenditures. For fiscal 2007 we spent $15.4 million in capital expenditures, including $11.0 million for leasehold improvements,
`fixtures and equipment principally for new store facilities, as well as improvements to existing stores, and $4.4 million for our distribution and
`corporate facilities a11d information systems. We funded the $25.0 million repurchase of our Senior Notes in December 2006 by utilizing available
`cash, cash generated by net proceeds from the sales (net of purchases) of sl1ort-term investments, casl1 generated from stock option exercises, as
`well as the remaining cash provided by operations.
`
`On December 8, 2006, we completed the repurchase of $25.0 million principal amount of our Senior Notes at 105.625% of the principal amount, plus
`accrued and unpaid interest. On April 18, 2007, we completed the redemption of the remaining $90 .0 million principal amount of our outstanding
`Senior Notes through a new Temi Loan financing. The December 2006 and April 2007 redemptions ofthe Senior Notes, which were both at a price
`of 105.625% of principal amount, plus accrued interest, resulted in "Loss on extinguishment of debt" of $9.4 1I1illio11 or1 a pre-tax basis, consisting of
`the $6.5 million cash redemption premium and $2.9 million of non-cash expense from the write-off of unamortized deferred financing costs and debt
`issuance costs.
`
`On March 13, 2007, we entered into a Term Loan Agreement for a $90.0 million senior secured Term Loan B due March 13. 2013, the proceeds of
`which were received on April 18, 2007 and were used to redeem the remaining $90.0 million principal am onnt of our Senior Notes. The new Term
`Loan extended the maturity for $90.0 million principal amount ofour debt from August 1, 2010 (the maturity date of the redeemed Senior Notes) to
`March 13, 2013 (the maturity date of the new Term Loan). The interest rate on the Term Loan is equal to, at our election, either (i) the prime rate
`plus 1.00%, or (ii) the LIBOR rate plus the applicable margin. The applicable margin for LIBOR rate borrowings is either 2.25% or 2.50%, depending
`on our Consolidated Leverage Ratio (as defined). Based upon our applicable quarterly Consolidated Leverage Ratio during fiscal 2008, the
`applicable margin for LIBOR rate borrowings remained at 2.50% for fiscal 2008. We are required to make minimum repayments of the principal
`amount of the Term Loan in quarterly installments of $225,000 each. We are also required to make an annual principal repayment equal to 25% or
`50% of Excess Cash Flow (as defined) in excess of $5,000,000 for each fiscal year, with the 25% or 50% factor depending on our Consolidated
`Leverage Ratio. The required principal repayment for fiscal 2008, which was calculated based on the 50% factor. is $622,000 and is due in December
`2008. Additionally. the Term Loan can be prepaid at
`
`46
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O47
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`our option, in part or in whole, at any time without any prepayment premium or penalty. On March 19, 2008, we prepaid $5.0 million of the
`outstanding Term Loan and on June 19, 2008 we prepaid $8.0 million of the outstanding Term Loa11. At September 30, 200 8, our indebtedness under
`the Term Loan Agreement was S75 .7 million.
`
`The Term Loan is secured by a security interest in our accounts receivable, inventory, real estate interests, letter of credit rights, cash, intangibles
`and certain other assets. The security interest granted to the Term Lenders is, in certain respects, subordinate to the security interest granted to
`the Credit Facility Lender. The Term Loan Agreement imposes certain restrictions on our ability to, among other things, incur additional
`indebtedness, pay dividends, repurchase stock, and enter into other various types of transactions. The Term Loan Agreement also co11tains
`quarterly fi11ar1cial Covenants that require us to 111ai11tair1 a specified rnaxiniurn permitted Consolidated Leverage Ratio and a specified n1ini11111n1
`permitted Consolidated Interest Coverage Ratio (as defined). Since the inception of the Term Loan Agreement we have been in compliance with all
`covenants of our Term Loan Agreement.
`
`In order to mitigate our floating rate interest risk on the variable rate Term Loan, we entered into an interest rate swap agreement with the Agent
`bank for the Term Loan that commenced on April 18, 2007, the date the $90.0 million Term Loan proceeds were received, and expires on April 18,
`2012. The interest rate swap agree111er1t enables us to effectively convert an amount of the Tenn Loa11 equal to the notional amount of tlie interest
`rate swap from a floating interest rate of LIBOR plus 2.50% (subject to reduction to LIBOR plus 2.25% if we achieve a specified leverage ratio), to a
`fixed interest rate of 7.50% (subject to reduction to 7.25% if we achieve a specified leverage ratio) for the significant majority of the Term Loan. The
`notional amount of the interest rate swap was $75.0 million at the inception of the swap agreement and decreases over time to a notional amount of
`$5.0 million at the expiration date. The notional amount ofthe swap was $57.5 million as of September 30, 2008 and over the next eighteen months
`decreases as follows: to $50.0 111illio11 starting October 20, 2008; to $42.5 111illior1 starting April 20, 2009; a11d to S350 n1illio11 staifing October 19,
`2009.
`
`In connection with the Term Loan transaction, we amended our existing $60.0 million revolving Credit Facility in order to permit the new Term Loan
`financing. This amendment ofthe Credit Facility also extended its maturity from October 15, 2009 to March 13, 2012, increased its size to S65.0
`million, and reduced the LIBOR-based interest rate option under the facility by 0.25%. There are no financial covenant requirements under the
`Credit Facility provided that Excess Availability (as defined) does 11ot fall below 10% ofthe Borrowing Base (as defined). IfExcess Availability
`were to fall below 10% of the Borrowing Base, we would be required to meet a specified minimum Fixed Charge Coverage Ratio (as defined). During
`all of fiscal 2008 and fiscal 2007, we exceeded the minimum requirements for Excess Availability under the Credit Facility.
`
`As of September 30, 2008, we had no outstanding borrowings under the Credit Facility and $10.6 million in letters of credit, with $45.9 million of
`availability under our credit line based on Borrowing Base limitations, compared to no outstanding borrowings and $7.0 million in letters ofcredit,
`with $58.0 million of availability under our credit line as of September 30, 2007. Borrowings under the Credit Facility as of September 30, 2008 would
`have borne interest at a rate of between approximately 4.93% and 5.00% per annum. During fiscal 2008 and 2007, our average level of direct
`borrowings u11der the Credit Facility was $5.2 million and $1.0 million, respectively. We expect that we will have borrowings under our Credit
`Facility duri11g certain periods of fiscal 2009, reflecting seasonal and other timing variations in cash flow.
`
`In March 2007, we entered into Supplemental Executive Retirement Agreements (the "SERP Agreements") with our Chairman of the Board and
`former Chief Executive Otficer and our President and Chief Creative Officer (the “SERP Executives"). In April 2007, we made an initial required
`contribution of $2.7 million to a Grantor Trust, which was established for the purpose of accumulating assets in anticipation of our payment
`obligations under the SERP Agreements. In November 2007, we made an additional required contribution to the Grantor Trust of $1.2 million. In
`order to impact
`
`47
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O48
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`positively our ability to comply with the Consolidated Leverage Ratio covenant of our Term Loa11 Agreement at March 31, 2008, with the consent
`ofthc SERP Executives we withdrew $1.0 million from the Grantor Trust 011 March 28, 2008. The withdrawn funds were used to repay i11debtedness
`under o11r credit facility. 011 May 20, 2008, we entered into (i) a Letter Agreement with the SERP Executives and the trustee for the Grantor Trust
`(tl1e "Trustee"), and (ii) an amendment to the Grantor Trust agreement with the Trustee (collectively, the "Agreements"). The Agreements
`amended tl1e SERP Agreements and the Grantor Trust agreement to provide for us to deliver an irrevocable standby letter of credit to the Trustee
`in an amount equal to our then current funding obligation u11der the SERP Agreements, wl1ich was $3.9 million. As provided in the Agreements, in
`the third quarter of fiscal 2008 We received a distribution of the remaining assets held i11 the Grantor Trust, amounting to $2.8 million. The
`amendments affected by the Agreements also allow for tl1e issuance, fron1 time to time, of irrevocable standby letters of credit, or the increase of
`size of an irrevocable standby letter of credit already held by the Trustee, in lieu ofany deposit to the Grantor Trust otherwise required i11 the
`future. In addition, tl1e Agreements permit us, from time to time at our sole discretion, to reduce the size of any irrevocable standby letter of credit
`issued to the Trustee, so long as we simultaneously fund the Gra11tor Trust with a11 amount of cash equal to the amount of the reduetio11 of tl1e
`letter of credit.
`
`Our management believes that o11r current casl1 and working capital positions, expected operating casl1 flows and available borrowing capacity
`under our Credit Facility, will be sufficient to fund our working capital, capital expenditures and debt repayment requirements and to fund stock
`and/or debt repurchases, if any, for at least the next twelve months.
`
`Contractual Obligations and Commercial Commitments
`
`We have entered into agreements that create contractual obligations and commercial commitments. These obligations and commitments will have
`an impact on future liquidity and the availability ofcapital resources. The tables below set forth a summary of these obligations and commitments
`as of September 30, 2008 (in thousands):
`
`Contractual Obligations."
`
`Description
`
`Long-term debt
`Interest related to long-term debt (2)
`Operating leases (3)
`Purchase obligations (4)
`Total contractual cash obligations
`
`Total Oblioalions (1)
`$
`78,646
`22,114
`251,824
`82,836
`435,420
`
`$
`
`Pavments Due by Period
`Less Than One Year One In Three Years
`Three to Five Years After Five Years
`$
`1,860
`$
`2,443
`$
`72,703
`$
`1,640
`5,399
`9,909
`6,438
`368
`54,301
`88,374
`63,232
`45,917
`82,836
`144,396
`
`142,373
`
`$
`
`47,925
`
`$
`
`$
`
`100,726
`
`$
`
`(1)
`
`(2)
`
`(3)
`
`(4)
`
`The amounts in this table exclude obligations under employment and retirement agreements. For a discussion ofthe compensation of our
`executive officers, see tl1e information contained under the caption "Executive Compensation" in our proxy statement, which will be filed
`with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders scheduled to be held on January 23,
`2009.
`
`Interest costs on our floating rate long-term debt were estimated using the interest rates in effect as of September 30, 2008. This
`presentation of interest costs on our floating rate long-term debt includes the effects of our interest rate swap agreement further described
`above in "Liquidity and Capital Resources.“
`
`Includes store operating leases, which generally provide for payme11t of direct operati11g costs in addition to rent. The amounts reflected
`include future minimum lease payments and exclude such direct operating costs.
`
`Our purchase orders with contract manufacturers are eaneelable by us at any time prior to our acceptance of tl1e merchandise. Excludes
`purchase orders for supplies in the normal course ofbusiness.
`
`Source: DESTINATION lw’|AT'ERNITY CORR,
`
`‘lO~K, 12/'15/2038 | Powered by Intelligize
`
`DMC Exhibit 2039_O49
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Commercial Commitments.‘
`
`Description
`
`Credit facility (1)
`Other standby letters of credit
`Total commercial commitments
`
`Total Obligations
`$
`10,605
`—
`10,605
`
`$
`
`Less Than One Year
`$
`10,605
`—
`10,605
`
`$
`
`(1)
`
`Consists of outstanding letter of credit commitments under our credit facility.
`
`New Accounting Pronouncements
`
`SFAS No. 157
`
`Amount of Commitment Per Period
`One to Three Years
`Three to Five Years After Five Years
`$
`—
`$
`—
`$
`—
`—
`—
`—
`—
`—
`—
`
`$
`
`$
`
`$
`
`In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.“ SFAS No. 157 defines fair value, establishes a framework for
`measuring fair value in U.S. generally accepted accounting principles, a11d expands disclosures about fair value measurements. SFAS No. 157 is
`effective for financial assets and liabilities that are measured at fair value on a recurring basis for financial statements issued for fiscal years
`beginning afte1‘Nove111be1‘ 15, 2007, a11d i11te1i111 periods within those fiscal years. The FASB has issued a o11e-year deferral of SFAS No. 157's fair
`value measurement requirements for no11-financial assets and liabilities that are not required or permitted to be measured at fair value 011 a recurring
`basis. The adoption of SFAS No. 157 for financial assets a11d liabilities is not expected to have a material impact on our consolidated financial
`position or results of operations. The impact from adoption of SFAS No. 157 for non-financial assets and liabilities, if any, on our consolidated
`financial position or results of operations l1as not yet been determined.
`
`SFAS No. 159
`
`In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." SFAS No. 159 provides
`companies with an option to report selected financial assets and liabilities at fair value and requires entities to display the fair value of those assets
`and liabilities for which the company has chosen to use fair value on the face of the balance sheet. SFAS No. 159 is effective for financial
`statements issued for fiscal years beginning afier November 1 5, 2007. The adoption of SFAS N0. 159 is not expected to have a material impact on
`our consolidated financial position or results of operations.
`
`SFAS No. 161
`
`In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB
`Statement No. 133." SFAS No. 161 requires companies to provide qualitative disclosures about the objectives and strategies for using derivatives,
`quantitative data about the fair value of and gains a11d losses on derivative contracts, a11d details of credit-risk-related contingent features i11
`hedged positions. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008, and interim periods
`within those fiscal years. The adoption of SFAS No. 161 is not expected to have a material impact on our consolidated financial position or results
`ofoperations.
`
`Inflation
`
`We do not believe that the relatively moderate levels of inflation which have been experienced in the United States in recent years have had a
`significant effect on our net sales or profitability. However, there can be no assurance that our business will not be affected by inflation i11 the
`future.
`
`49
`
`Source: DESTINATION MATERNITY CORR,
`
`‘lO~K, 12/'15/2038 | Powered by Intelligize
`
`DMC Exhibit 2039_O50
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Forward—Looking Statements
`
`Some of the information in tl1is report, including tl1e information incorporated by reference (as well as information included in oral statements or
`other written statements made or to be made by us), contains forward-looking statements witl1ir1 tl1e meaning of Section 27A of tl1e Securities Act
`of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The forward-looking statements
`involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to
`be materially different fron1 any future results, performance or achievements expressed or implied by these forward-looking statements. These
`factors include, but are not limited to: our ability to successfully manage various business initiatives, our ability to successfully implement our
`r11ercha11dise brand and retail nameplate rest111cturing, the success of our ir1terr1atior1al expansion, our ability to successfully manage a11d retain our
`leased department and licensed relationships and marketing partnerships, future sales trends in our existing retail locations, weather, changes in
`consumer spending patterns, raw material price increases, consumer preferences and overall economic conditions, our ability to anticipate and
`respond to fashion trends and consumer preferences, anticipated fluctuations in our operating results, the impact of competition and pricing,
`availability of suitable store locations, continued availability of capital and financing, ability to hire and develop senior management and sales
`associates, ability to develop and source merchandise, ability to receive production from foreign sources or1 a timely basis, potential stock
`repurchases, potential debt prepayments, changes in market interest rates, war or acts of terrorism and other factors referenced i11 this report,
`including those set forth u11der the caption "Item 1A. Risk Factors.“
`
`In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise and
`involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included in this report do not
`purport to be predictions of future events or circumstances a11d r11ay 11ot be realized. Forward-looking stater11e11ts can be identified by, among other
`things, the use of forward-looking terms such as ‘'believes,‘‘ "expects," "may," ‘'will,‘‘ “ should,“ "seeks,“ "pro forma,“ “anticipates," "intends,"
`"continues," “could," "estimates," "plans,“ “potential,“ “predicts," "goa1,“ "objective,“ or the negative of any of these terms, or comparable
`tcrminology, or by discussions of our outlook. plans, goals. strategy or intcntions. Forward-looking statcmcnts speak only as of thc datc made.
`Except as required by applicable law, including the securities laws of the United States a11d the rules and regulations of the Securities and
`Exchange Cornrnission, we assume no obligation to update any of these forward-looking statements to reflect actual results, changes in
`assumptions or changes i11 other factors affecting these forward-look