Financial Statements - Consolidated Statements of Cash Flows
`
`Consolidated Statements of
`Cash Flows (USD $)
`In Thousands
`
`Operating Activities
`
`Net ineeme
`
`Adjustments to reconcile net income to net cash provided by operating
`activities:
`
`Depreciation and amortization
`
`Stock-based compensation expense
`
`Loss on impairment of long-lived assets
`
`Loss on disposal of assets
`
`Loss on extinguishment of debt
`
`Deferred income tax (benefit) provision
`
`Amortization of deferred financing costs
`
`(Increase) decrease in:
`
`Trade receivables
`
`Inventories
`
`Prepaid expenses and other current assets
`
`Other non-current assets
`
`Increase (decrease) in:
`
`12 Months Ended
`Sep, 30,
`Sep, 30,
`sep_ 30,
`2012
`2011
`2010
`
`$ 19,372
`
`$ 22,988
`
`$ 16,829
`
`12,445
`
`12,769
`
`12,917
`
`2,357
`
`1,876
`
`115
`
`22
`
`2,344
`
`768
`
`270
`
`37
`
`1,936
`
`1865
`
`196
`
`51
`
`(1,373)
`
`2,679
`
`(2,062)
`
`105
`
`170
`
`196
`
`(2,188)
`
`(680)
`
`(3,814)
`
`1,61 1
`
`2,577
`
`(12)
`
`(9,632)
`
`(1,863)
`
`(1,634)
`
`(1,310)
`
`(26)
`
`(4)
`
`Accounts payable, accrued expenses and other current liabilities
`
`6,201
`
`(5,525)
`
`(1,028)
`
`Deferred rent and other non-current liabilities
`
`Net cash provided by operating activities
`
`(406)
`
`42 697
`
`(3 085)
`
`21 443
`
`2 065
`
`25 974
`
`Investing Activities
`
`Capital expenditures
`
`Additions to intangible assets
`
`Withdrawal from (contribution to) grantor trust
`
`Net cash used in investing activities
`
`Financing Activities
`
`(Decrease) increase in cash overdrafts
`
`Repayment Of long-term debt
`
`Deferred financing costs paid
`
`Withholding taxes on stock-based compensation paid in connection with repurchase
`of common stock
`
`Cash dividends paid
`
`Proceeds from exercise of stock options
`
`Excess tax benefit from exercise of stock options and restricted stock vesting
`
`Net cash used in financing activities
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`(9,256)
`
`(12,270)
`
`(10,448)
`
`(265)
`
`(313)
`
`1,504
`
`(293)
`
`(1,500)
`
`(9,521)
`
`(11,079)
`
`(12,241)
`
`(401)
`
`(1,147)
`
`550
`
`(16,085)
`
`(13,819)
`
`(12,248)
`
`(61)
`
`(26)
`
`(597)
`
`(9,325)
`
`107
`
`289
`
`(L786)
`
`(6,901)
`
`2,285
`
`2,69 5
`
`(960)
`
`1,369
`
`1,563
`
`(26,073)
`
`(19,699)
`
`(9,726)
`
`DMC Exhibit 2041_112
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Effect of exchange rate changes on cash and cash equivalents
`
`Net Increase (Decrease) in Cash and Cash Equivalents
`
`Cash and Cash Equivalents, Beginning of Year
`
`Cash and Cash Equivalents, End of Year
`
`(12)
`
`7,091
`
`(13)
`
`(9,348)
`
`4,007
`
`15,285
`
`24,633
`
`20,626
`
`$ 22,376
`
`$ 15,285
`
`$ 24,633
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_113
`
`Target v. DMC
`lPR2013-00530, 531, 532, 533
`
`

`
`Notes to Financial Statements - Nature of Business
`
`Nature of Business
`[Abstract]
`NATURE OF BUSINESS
`
`South Korea. The Company was incorporated in Delaware in 1982.
`
`1. NATURE OF BUSINESS
`
`Destination Maternity Corporation and subsidiaries (the “Company”) is a specialty designer and
`retailer of maternity clothing. The Company operated 2,008 retail locations as of September 30, 2012,
`including 625 stores and 1,383 leased departments, throughout the United States, Puerto Rico and Canada,
`and Inalkets its n1ate1‘11ity apparel on the I11te1‘11ettl11‘ougl1 its DestinationMate1‘11ity.con1 and brand-specific
`websites. In addition, the Company markets maternity apparel at Kohl’s® stores throughout the United
`States under an exclusive product and license agreement. The Company has expanded internationally and
`has entered i11to exclusive store franchise and product supply relationships in the Middle East, India and
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_114
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Notes to Financial Statements - Summary of Significant Accounting Policies
`
`Summary’ of significant
`Accounting Policies
`Summary of Significant
`Accountin Policies
`[Abstract]
`
`SUMMARY OF SIGNIFICANT
`ACCOUNTING POLICIES
`
`12 Morlths Ended
`‘sep, 3;), 2012
`
`V
`2. SUMIVIARX OF SIGNIFICANT ACCOUNTING POLICIES
`a. Principles of Consolidation and Basis of Financial Statement Presentation
`
`Tl1e accompanying consolidated financial statements include the accounts of the Company and its
`direct and indirect wholly-owned subsidiaries: Cave Springs, I11c., Mothers Work Canada, Inc., Destination
`Maternity Apparel Private Limited and Mothers Work Services, Inc. All significant intercompany
`transactions and accounts have been eliminated in consolidation.
`
`b. Fiscul Year-Em]
`
`The Company operates on a fiscal year ending September 30 of each year. All references to fiscal years
`of the Company refer to the fiscal years ended on September 30 in those years. For example, the
`Company’s “fiscal 2012” ended on September 30, 2012.
`
`c. Use of Estimates
`The preparation of financial statements in conformity with accounting principles generally accepted in
`the United States requires 111a11agen1e11t to make certai11 estimates and assumptions that may affect the
`reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
`the financial statements and the reported amounts of revenues and expenses during the reporting period.
`Actual results could differ from those estimates.
`
`d. Cash and Cash Equivalents
`
`Cash a11d cash equivalents include cash on hand, cash in the bank and short-term investments with an
`original maturity of three months or less when purchased. Cash overdrafis of $3,452,000 a11d $3,853,000
`were included in accounts payable as of September 30, 2012 and 2011, respectively.
`The Company maintains cash accounts that, at times, may exceed federally insured limits. The
`Company has not experienced any losses from maintaining cash accounts in excess of such limits.
`Management believes that it is not exposed to any significant credit risks 011 its cash accounts.
`e. Inventories
`
`Inventories are valued at the lower of cost or market. Cost is determined by the “first—in, first—out”
`(FIFO) method. Inventories of goods manufactured by the Company include the cost ofmaterials, freight,
`direct labor, and manufacturing and distribution overhead.
`
`f Praperty, Plant and Equipment
`Property, plant a11d equipment are stated at cost. Depreciation and amortization are computed for
`financial reporting purposes on a straight-line basis, using service lives ranging principally from five to ten
`years for fiimiture a11d equipment and forty years for the building. Leasehold improvements are amortized
`using the straight-line method over the shorter of the lease term or their useful life. The cost ofassets sold
`or retired and the related accumulated depreciation or amortization are removed fron1 the accounts with any
`resulting gain or loss included in net income. Maintenance and repairs are expensed as incurred, except for
`the capitalization of maj or renewals and betterments that extend the life of the asset. Long-lived assets are
`reviewed for impairment whenever adverse events, or changes in circumstances or business climate,
`indicate that the carrying value may 11ot be recoverable. Factors used in the evaluation include, but are not
`limited to, management’s plans for future operations, brand initiatives, recent operating results and
`projected cash flows. If the associated undiscounted easl1 flows are insufficient to support the recorded
`asset, a11 i111pairn1e11t loss is recognized to reduce the carrying val11e of the asset. The amount of the
`impairment loss is determined by comparing the fair value of the asset with the carrying value.
`During fiscal 2012, 2011 and 2010, the Company recorded impairment write-downs of property, plant
`and equipment totaling $1,875,000, $759,000 and $1,863,000, respectively, on a pretax basis.
`
`g. Intangible Assets
`Intangible assets with definite useful lives consist primarily of patent and lease acquisition costs. The
`Company capitalizes legal costs incurred to defend its patents when a successful outcome is deemed
`probable and to the extent of an evident increase in the value of the patents. Intangible assets are
`amortized over the shorter of their useful life or, if applicable, the lease term. Management reviews the
`carrying a111ou11t of these intangible assets as impairment intlicators arise, to assess the continued
`reeoverability based on future undiscounted cash flows and operating results from the related asset, future
`asset utilization and changes in market conditions. During fiscal 2012, 201 1 and 2010, the Company
`recorded write-downs of intangible assets totaling $1,000, $9,000 and $2,000, respectively, on a pretax
`basis. The Company has not identified any indefinite-lived intangible assets. Aggregate amortization
`expense ofintangible assets in fiscal 2012, 2011 and 2010 was $142,000, $135,000 and S119,000,
`respectively.
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_115
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Estimated a1nortizatio11 expense of the Company’s intangible assets as of September 30, 2012, for the
`next five fiscal years, is as follows (in thousands):
`
`FiscalY£-ar
`2013
`2014
`2015
`2016
`2017
`
`h. Interest Rate Derivatives
`
`S151
`134
`117
`112
`105
`
`Tl1e Company mitigated a portio11 of its floating rate interest risk on variable rate lo11g-te1m debt
`through an interest rate swap agreement that expired on April 18, 2012. In accordance with applicable
`accounting standards for derivative instruments, the Company recognized the derivative on the balance
`sheet at fair value. On the date the derivative instrument was entered into, the Company designated it as a
`hedge of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash
`flow hedge”). Changes in the fair value of a derivative that is designated as, a11d meets all the criteria for, a
`cash flow hedge are recorded in accumulated other comprehensive loss and reclassified into earnings as
`the underlying hedged item affects earnings. V\7hen applicable, the Company formally documents the
`relationship between hedging instruments and hedged items. Also when applicable, the Company formally
`assesses at the inception of tlie hedge and on a quarterly basis, whether the derivative is highly effective
`in offsetting changes in cash flows of the hedged item. Any portion of the change in fair value of the
`derivative associated with hedge ineffectiveness is included in current earnings. For fiscal 2012, 2011 and
`2010, the Company’s interest rate swap was determined to l1ave no ineffectiveness.
`
`i. Deferred Fimmcing Costs
`
`Deferred financing costs are amortized to interest expense over the term of the related debt agreement.
`Amortization expense of deferred financing costs in fiscal 2012, 2011 a11d 2010 was $105,000, $170,000 and
`$196,000, respectively. In con11ection with debt extinguishments, i11 fiscal 2012. 2011 a11d 2010 the Company
`wrote off $22,000, $37,000 and $51,000, respectively, of unamortized deferred financing costs (see Note 10).
`In connection with its new credit facility entered into on November 1, 2012, the Company incurred
`approximately $825,000 in deferred financing costs, of which $61,000 was paid in fiscal 201 2 (see Note 9).
`Estimated amortization expense of the Company’s deferred financing costs as of September 30. 2012
`plus those incurred i11 November 2012, for tl1e next five fiscal years, is as follows (i11 tl1ousa11ds):
`
`Fiscal Year
`2013
`2014
`2015
`2016
`2017
`
`S173
`165
`165
`165
`l 65
`
`j. Deferred Rent
`Rent expense on operating leases, including rent holidays and scheduled rent increases. is recorded
`on a straight-line basis over the term ofthe lease commencing on the date tl1e Company takes possession
`of the leased property, which is generally four to six weeks prior to a store’s opening date. The net excess
`of rent expense over tl1e actual casl1 paid 11as been recorded as a deferred rent liability i11 tl1e
`accompanying Consolidated Balance Sheets. Tenant improvement allowances received from landlords are
`also included in tlie accompanying Consolidated Balance Sheets as deferred rent liabilities and are
`amortized as a reduction ofrent expense over the term ofthe lease from the possession date.
`
`k. Treasury (Reacquired) Shares
`
`Shares repurchased are retired and treated as authorized but unissued shares, with the cost in excess
`of par value of the reacquired shares charged to additional paid—in capital and the par value charged to
`common stock.
`
`L Fair Value of Financial Instruments
`The carrying values of cash a11d cash equivalents, trade receivables and accounts payable
`approximate fair value due to the short-terrn nature of those instruments. The majority of the Company’s
`long-term debt bears interest at variable rates, which adjust based o11 market conditions, and the carrying
`val11e of tl1e long-term debt approximates fair value. The fair value of tl1e Company’s debt was dete1n1i11ed
`using a discounted cash flow analysis based on interest rates currently available to the Company or for
`similar instruments available to companies with comparable credit quality. A significant portion of the
`Company’s floating rate interest risk on variable rate long-term debt was mitigated through an interest rate
`swap agreement that expired on April 18, 2012. As ofSeptember 30, 2011, the estimated fair value ofthe
`interest rate swap was an unrealized loss of $(145,000).
`
`m Revenue Recognition, Sales Returns and Allowances
`
`Revenue is recognized at tl1e poi11t of sale for retail store sales, including leased department sales, or
`when merchandise is delivered to customers for licensed product and Internet sales, and when
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_116
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`merchandise is shipped to international franchisees. A liability is established for the retail value of gift
`cards sold and merchandise credits issued. The liability is relieved and revenue is recognized when gift
`cards or merchandise credits are redeemed by customers as tender for merchandise purchased. Allowances
`for rctur11s are recorded as a reduction of revenue, based on the Company’s historical cxpcric11cc.
`Revenues are recorded net of applicable sales taxes.
`n. Other Revenues
`
`Included in net sales are revenues earned by tl1e Company through a variety of marketing partnership
`programs utilizing the Company’s opt—in customer database and various in—store marketing initiatives,
`focused on baby and parent-related products and services. Revenue fron1 marketing partnership programs
`is recognized when goods or services are provided. Also included in net sales are fees and royalties
`related to international franchise agreements. Franchise fees are earned by the Company when all material
`services or conditions related to the franchise agree111e11t have been substantially performed or satisfied
`and royalties are earned based on net sales of the Company’s international franchisees and may include
`minimum guaranteed royalti es.
`
`0. Cast of Goods Sold
`
`Cost of goods sold in tl1e accompanying Consolidated Statements of Income includcs: mcrchandisc
`costs (including customs duty expenses), expenses related to inventory shrinkage, product-related
`corporate expenses (including expenses related to payroll, benefit costs and operating expenses of the
`Company’s buying departments), inventory reserves (including lower of cost or market reserves), inbound
`freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer
`costs, and the other costs of the Company’s distribution network.
`
`p. Shipping and Handling Fees and Costs
`The Company includes shipping a11d handling revenue earned from its Internet activities in net sales.
`Shipping a11d handling costs, which are included i11 cost of goods sold i11 the accon1pa11yi11g Consolidated
`Statements of Income, include shipping supplies, related labor costs and third—part_y shipping costs.
`
`q. Selling, General and Administrative Expenses
`
`Selling, general and administrative expenses in the accompanying Consolidated Statements of I11co1ne
`include advertising and marketing expenses. corporate administrative expenses, store expenses (including
`store payroll and store occupancy expenses), and store opening expenses.
`
`r. Advertising Costs
`
`The Company expenses tl1e costs of advertising when the advertising lirst occurs. Advertising
`expenses, including Internet advertising expenses, were $13,878,000, $11,712,000 and $12,147.000 in fiscal
`2012, 201 l and 2010, respectively.
`
`s. Stock-based Compensation
`
`The Company recognizes employee stock-based compensation as a cost in the accompanying
`Consolidated Statements of Income. Stock-based awards are measured at the grant date fair value and are
`recorded generally on a straight-line basis over the vesting period, net of estimated forfeitures. Excess tax
`benefits related to stock option exercises and restricted stock vesting, which are recognized in
`stockholders" equity, are reflected as financing cash inflows.
`
`1‘. Store Closing, Asset Impairment and Asset Disposal Expenses
`Store closing expenses include lease termination fees, gains or losses on disposal of closed store
`assets and recognition of u11amortized deferred rent. Asset impairment expenses represent losses
`recognized to reduce the carrying value of impaired long-lived assets. Asset disposal cxpcnscs rcprcscnt
`gains or losses on disposal of assets other than in connection with store closings, including assets
`disposed from remodeling or relocation of stores.
`ll. Income Taxes
`
`The Company utilizes the asset and liability method of accounting for income taxes. Under this
`method, deferred tax assets and liabilities are recogni7ed for the expected future tax consequences of
`temporary differences between the carrying amounts and the tax bases of assets and liabilities as well as
`from net operating loss carryforwards. 'I'hc cffcct on deferred tax assets and liabilities of a change i11 tax
`rates is recognized in operations in the period that includes the enactment date.
`Under the accounting standard for uncertain income tax positions, recognition of a tax benefit occurs
`when a tax position is estimated by management to be more likely than not to be sustained upon
`examination, based solely on its technical merits. Derecognition of a previously recognized tax position
`would occur if it is subsequently determined that the tax position no longer meets tl1e 111ore-likely-than-not
`threshold of being sustained. Recognized tax positions are measured at the largest amount that
`management believes has a greater than 50% likelihood of being finalized. The Company records interest
`and penalties related to unrecognized tax benefits in income tax provision.
`
`v. Net Income per Share and Cash Divizlemlc
`Basic net income (or earnings) per share (“Basic EPS”) is computed by dividing net income by the
`weighted average number of common shares outstanding. excluding restricted stock awards for which the
`restrictions l1ave not lapsed. Diluted net income per share (“Diluted EPS”) is computed by dividing net
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_117
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`income by the weighted average number of common shares outstanding, after giving effect to the potential
`dilution, if applicable, from the assumed lapse of restrictions on restricted stock awards and exercise of
`stock options into shares of common stock as if those stock options were exercised. Common shares
`issuable in connection with the award of perforrnancc-based restricted stock units (“RSUs”) are excluded
`from the calculation of EPS 111111] the RSUs’ performance conditions are achieved and the shares in respect
`ofthe RSUs become issuable (see Note 14).
`
`The following table summarizes those effects for the diluted net income per share calculation (in
`thousands, except per share amounts):
`
`Net income
`Net income per share Basic
`Net income per sl1are—Dih1ted
`Average number of shares outstanding—Basic
`Incremental shares from the assumed exercise of outstanding stock
`options
`Incremental shares from the assumed lapse of restrictions on restricted
`stock awards
`
`Year Ended September 30,
`2012
`2011
`2010
`
`$19,372
`$
`1.48
`$
`1.46
`13,096
`
`122
`
`49
`
`$22,988
`$
`1.79
`$
`1.75
`12,820
`
`239
`
`61
`
`$16,829
`$
`1.37
`$
`1.33
`12,304
`
`316
`
`71
`
`Average number of shares outstanding—Diluted
`
`13,267
`
`13,120
`
`12,691
`
`In addition to performance-ha sed RSUs, for fiscal 2012, 2011 and 2010, stock options and 11r1vested
`restricted stock totaling approximately 321,000, 164,000 and 292,000 shares, respectively, were excluded
`from the calculation of Diluted EPS as their effect would have been antidilutive.
`
`On January 26, 2011, the Company announced the initiation of a regular quarterly cash dividend.
`During fiscal 2012 and 201 l the Company paid cash dividends totaling S9,325,000 (S0.70 per share) and
`$6,901,000 ($0.525 per share), respectively. On November 8, 2012 the Company declared a quarterly cash
`dividend of$0. 175 per share payable on December 28, 2012. which will require approximately $2,400,000 of
`available cash.
`
`w. Statements of Cash Flows
`
`In fiscal 2012, 2011 and 2010, the Company paid interest, including payments made or1 its interest rate
`swap agreement (see Note 10), of $1,359,000, $2,266,000 and $3,414,000, respectively, and made income tax
`payments, net ofrefunds, of $7,432.000, $9,804,000 and $2,357,000, respectively.
`x. Business and Credit Risk
`
`Financial instruments, primarily cash and cash equivalents and trade receivables, potentially subject
`the Company to concerrtrations of credit risk. The Company li111its its credit risk associated with cash ar1d
`cash equivalents by placing such investments in highly liquid funds and instruments. Trade receivables
`associated with third-party credit cards are processed by financial institutions, which are monitored for
`financial stability. Trade receivables associated with licensed, leased department and other relationships
`are evaluated for collcctibility based on a combination of factors. including aging of trade receivables,
`write-off experience and past payment trends. The Company is dependent on key suppliers to provide
`sufficient quantities of inventory at competitive prices. No single supplier represented 10% or more of net
`p11rcl1ases i11 fiscal 2012, 2011 or 2010. A significant majority of the Company’s purchases during fiscal
`2012, 2011 and 2010 were imported. Management believes that any event causing a disruption of imports
`from any specific country could be mitigated by moving production to readily available alternative
`sources.
`
`y. Insurance
`
`The Company is self—insured for workers’ compensation, general liability and automotive liability
`claims, and employee-related health care benefits, up to certain stop-loss limits. Such costs are accrued
`based on known claims and an estimate of incurred but not reported claims. Further, the Company utilizes a
`cooperative arrangement with a number of other companies to assist i11 managing certain workers’
`compensation and general liability insurance risks for loss occurences prior to March 1, 2010. The
`Company’s expenses associated with this relationship could be impacted by the loss history associated
`with the cooperative as a whole. Liabilities associated with these risks are estimated by considering
`historical claims experience and other actuarial assumptions.
`
`z. Store Preopening Costs
`
`Non-capital expenditures, such as payroll costs incurred prior to the opening of a new store, are
`charged to expense in the period in which they were incurred.
`
`an. Recent A cconnting Prananncements
`
`In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
`Update (“ASU”) No. 2011-05, Cr.7mpre}1em'1ve Income (Topic 220).‘ Piereritatioii 0fCr.m7pI'e}1ensive
`Income. ASU No. 2011-05 requires companies to present the components of net income and other
`comprehensive income either as one continuous statement or as two consecutive statements. It eliminates
`the option to present components of other comprehensive income as part of the statement of
`stockholders’ equity. The standard does not change the items which must be reported in other
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_118
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`comprehensive income. ASU No. 2011-05 is effective for financial statements issued for annual reporting
`periods beginning afier December 15, 201 l and interim periods within those years. Because this guidance
`impacts presentation only, the adoption of the new requirements of ASU No. 2011-05 will not have any
`impact on thc Company’s consolidated financial position or results of operations.
`In May 2011, the FASB issued ASU No. 2011-04, Fair Value Aleasurement (Topic 820): Amendments
`to Aclzzeve Common Fair Valuelweasurenzem andDz'sel0sure Requirernentx in U.S. GAAP and[FRSs.
`The amendments i11 ASU No. 2011-04 result in common fair value measurement and disclosure
`requirements in U.S. GAAP and IFRSs and change the wording used to describe many of the requirements
`i11 U.S. GAAP fo1‘111easu1‘i11g fair value and for disclosing irlformation about fair value 111easuIe1I1e11ts. The
`amendments do not require additional fair value measurements a11d are not intended to establish Valuation
`standards or affect valuation practices outside of financial reporting. ASU No. 2011-04 is effective during
`interim and annual periods beginning after December 15, 2011. The adoption of the new requirements of
`ASU l\o. 2011-04 did not have any impact on thc Company's consolidatcd financial position or rcsults of
`operations.
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_119
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Notes to Financial Statements - Trade Receivables
`
`Trade Receivables [Abstract]
`
`TRADE RECEIVABLES
`
`receivables were net of allowance for doubtful accounts of $201,000 and $156,000, respectively.
`
`3. TRADE RECEIVABLES
`
`Trade receivables are recorded based on revenue recognized for sales of t11e Con1pany’s Inerchandise
`and for other revenue earned by the Company through its marketing partnership programs and
`international franchise agreements, and are non-interest bearing. The Company evaluates the collectability
`of trade receivables based on a combination of factors, including aging of trade receivables, write-off
`experience, analysis of historical trends and expectations of future performance. An allowance for doubtful
`accounts is recorded for the amount of trade receivables that are considered unlikely to be collected.
`When the Company’s collection efforts are unsuccessful, uncollectible trade receivables are charged
`against the allowance for doubtful accounts. As of September 30, 2012 and 2011. the Co1npa11y’s trade
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_120
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Notes to Financial Statements - Inventories
`
`Inventories [Abstract]
`
`INVENTORIES
`
`4. INVENTORIES
`
`Inventories as of September 30 were comprised of the following (in thousands):
`
`$ 90,366
`
`1?i1;1'i%sFJ;'a£’15'gg§1K:3f1LS‘
`Wor1<—in—
`grass
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_121
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Notes to Financial Statements - Property, Plant and Equipment, Net
`
`Property, P|ant and
`Equipment. Net
`Property, Plant and
`Equipment, Net [Abstract]
`PROPERTY, PLANT AND
`EQUIPMENT, NH
`
`12 Months Ended
`Sep. 30, 2012
`
`5. PROPERTY, PLANT AND EQUIPMENT, NET
`Property, plant and equipment as of September 30 was comprised of the following (in thousands):
`
`Land
`Building and improvements
`Furniture and equipment
`Lcaschold improvcmcnts
`
`Less: accumulated depreciation and am0rti7ation
`
`S
`
`2012
`
`1,400
`15,843
`69,504
`84,702
`171,449
`120,371 )
`
`$
`
`2011
`
`1,400
`15,465
`69,919
`91,927
`178,711
`122,857)
`
`i J
`
`Aggregate depreciation and amortization expense of property, plant and equipment in fiscal 2012, 2011
`and 2010 was $12,303,000, $12,634,000 and $12,798,000, respectively. During fiscal 2012, 2011 and 2010, the
`Company recorded pretax charges of $1,875,000, $759,000 and $1,863,000, respectively, related to the
`impairment of leasehold improvements and furniture and equipment at certain of its retail locations.
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_122
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Notes to Financial Statements - Restructuring and Other Charges
`
`Restructuring and Other
`Charges
`Restructuring And Other
`Charges [Abstract]
`RESTRUCTURING AN D OTHER
`CHARGES
`
`12 Months Ended
`Sep. 30,, 2012
`
`6. RESTRUCTURING AND OTHER CHARGES
`
`In July 2008, the Company commenced a significant restructuring and cost reduction program, with the
`obj cctivcs of streamlining its mcrchandisc brands and store namcplatcs, continuing to improve a11d
`simplify critical processes and continuing to reduce its expense structure. The Company completed the
`planned activities of these initiatives i11 fiscal 2010 and incurred $3,884,000 of pretax expense substantially
`related to these initiatives in fiscal 2010, primarily for consulting services.
`A summary of the charges incurred and reserves recorded in connection with the restructuring, cost
`reduction and other initiatives during fiscal 2011 and 2010 is as follows (i11 thousands):
`
`Balance
`Accrued
`September 30,
`2010
`
`Severance and related benefits
`Cost reduction and other
`initiatives
`Total
`
`$
`
`$
`
`159
`
`106
`265
`
`Year Ended
`September 30, 2011
`Charges
`Incurred
`$ —
`
`Payments
`$
`(159)
`
`—
`$ —
`
`(106)
`(265)
`
`$
`
`Balance
`Accrued
`September 30,
`2011
`
`$
`
`$
`
`—
`
`—
`—
`
`Cumulative
`Charges
`Incurred to
`September 30,
`2011
`1371
`
`$
`
`5,006
`6,377
`
`$
`
`Balance
`Accrued
`September 30,
`2009
`
`3;
`
`Balance
`Accrued
`September 30,
`2010
`
`g
`
`Yea!‘ Ended
`September 30, 2010
`Charges
`Payments
`Incurred
`159
`g
`(201)
`$
`323
`37
`Severance and related benefits
`105
`£47093)
`3,561
`633
`Cost reduction and other initiatives
`265
`s
`s g4,294)
`$ 3,884
`675
`s
`Tvlal
`Afier his retirement on September 30, 2008, Dan Matthias, the Company’s former Chief Executive
`Officer (“Form er CFO”), agreed to continue to serve the Company as a director and as non-executive
`Chairman of the Board of Directors (the “Board”), a11d agreed to remain available to the Company in an
`advisory capacity through Scptcmbcr 2012. For these services, thc Company agreed to pay the Former
`CEO an annual retainer of S200,000 through September 2012. In November 2009, the Former CEO entered
`into a letter agreement witl1 the Company. which confirmed that he would not seek reelection to the Board
`(and, therefore, would no longer serve as tl1e Con1pany’s non-executive Chairman of the Board) after tl1e
`expiration of his term in January 2010. The letter agreement did not change the terms of payment under tl1e
`annual retainer for advisory services, however the Company incurred a pretax charge of $5 85,000,
`representing the amount due for the remaining term of the arrangement, in fiscal 2010.
`In connection with the retirement of Rebecca Matthias, the Company’s former President and Chief
`Creative Officer, at the end of fiscal 2010, the Company incurred a pretax charge of $888,000 in fiscal 2010.
`The charge rcficcts bcncfit costs related to an amendment to thc cxccutivc’s supplcmcntal rctircmcnt
`agreement with the Company (see Notes 17 and 18).
`In April 2011, the Company announced the hiring of Chris Daniel as the Company’s President effective
`June 1, 2011. In connection with the search and hiring of a new President, tl1e Company incurred pretax
`charges of $193,000 in fiscal 2011 for relocation costs, and $301,000 in fiscal 2010, primarily related to
`executive reciniting costs.
`
`Source: Destination Maternity Corp, XBRL, 12/14/2012 | Powered by Intelligize
`
`
`
`DMC Exhibit 2041_123
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Notes to Financial Statements - Accrued Expenses and Other Current Liabilities
`
`Accrued Expenses and Other
`Current Liabilities
`Accrued Expenses and Other Current
`Liabilities [Abstract]
`ACCRUED EXPENSES AND OTHER CURRENT
`LIABILITIES
`
`12 Months Ended
`sep, 30, 2012
`
`7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
`As of September 30, accrued expenses a11d other current liabilities were comprised
`of the following (in thousands):
`
`Employee compensation and bcncfits
`Insura11ce, primarily self insurance reserves
`Gift certificates and store credits
`Deferred rent
`Sales taxes
`Product return reserve
`Income taxes payable
`Accounting and legal
`Supplemental executive retirement plan benefits
`Other
`
`2012
`
`$ 5,918
`5,341
`4,194
`3,599
`3,097
`2,225
`1,350
`1,215
`150
`8.455
`
`$3 5,544
`
`2011
`
`$ 6,526
`4,558
`4,423
`3,567
`3.065
`2,