Hot Topic Inc. (HOTT, Financial) filed Quarterly Report for the period ended 2010-05-01.
Hot Topic Inc. has a market cap of $260.8 million; its shares were traded at around $5.88 with a P/E ratio of 21.7 and P/S ratio of 0.4. The dividend yield of Hot Topic Inc. stocks is 1.1%.HOTT is in the portfolios of Paul Tudor Jones of The Tudor Group, Chuck Royce of Royce& Associates.
Historically and during the first quarter of fiscal 2010, other uses of cash have been to purchase merchandise inventories, improve our information technology infrastructure and finance store remodels, relocations and to a lesser extent, new store openings. In the past we have also made periodic repurchases of our common stock. During the first quarter of fiscal 2010 and consistent with recent years, we satisfied our cash requirements principally from cash flows from operations. We also maintain a $5.0 million unsecured credit agreement for issuing letters of credit for inventory purchases that will expire on September 1, 2010, after which we expect to renew it under similar terms. There were letters of credit for $76,000 and $111,000 outstanding as of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, respectively. Cash, cash equivalents and short- and long-term investments held by us were $76.9 million and $131.3 million as of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, respectively. We believe our current cash balances and cash generated from operations will be sufficient to fund our operations through at least the next 12 months.
Cash and cash equivalents are held primarily in diversified money market funds. Our short-term investments were $5.4 million and $5.3 million as of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, respectively. They consist primarily of highly rated municipal bonds, have maturities that are less than six months and are accounted for as available for sale. As of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, our long-term investments consisted of certificates of deposit and AAA/Aaa/A3-rated auction rate securities. The certificates of deposit are guaranteed by the Federal Deposit Insurance Corporation and have maturities of approximately 2 years. As of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, the fair value of our certificates of deposit was $4.8 million and $5.0 million, respectively.
As of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, the fair value of our auction rate securities was $3.2 million. The fair value of our auction rate securities, which increased by an immaterial amount during the first quarter of fiscal 2010, reflects a cumulative decline of $0.7 million from the par value. This cumulative $0.7 million decline ($0.4 million net of tax) is deemed temporary as we do not have the intent to sell these securities and it is not likely that we will be required to sell the securities before the recovery of their amortized cost basis. If uncertainties in the credit and capital markets continue, we may incur additional losses, some of which may be other-than-temporary, which could negatively affect our financial condition or results of operations. In addition, in the event that we decide to sell these securities and it becomes more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis, we may be required to recognize impairment charges against income.
Net cash flows used in investing activities were $5.7 million in the first quarter of fiscal 2010 compared to $2.4 million in the first quarter of fiscal 2009. The $3.3 million increase in cash flows used in investing activities in the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009 was attributable to a $3.1 million decrease in proceeds from the sale of short- and long-term investments, net of purchases and a $0.2 million increase in purchases of property and equipment.
We anticipate we will spend approximately $30 to $32 million on capital expenditures in fiscal 2010. Of the $30 to $32 million, we plan to spend approximately $17 to $19 million for store construction and other improvements to existing stores, including the remodel or relocation of 30 to 40 existing Hot Topic stores. We plan to spend the remaining capital expenditures on various improvements in our information technology infrastructure, including technological improvements at the store level, new computer hardware and software and the further development and improvement of our Internet websites.
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Hot Topic Inc. has a market cap of $260.8 million; its shares were traded at around $5.88 with a P/E ratio of 21.7 and P/S ratio of 0.4. The dividend yield of Hot Topic Inc. stocks is 1.1%.HOTT is in the portfolios of Paul Tudor Jones of The Tudor Group, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
Net sales decreased $12.5 million, or 7.1%, to $162.6 million during the first quarter of fiscal 2010 from $175.1 million during the first quarter of fiscal 2009. The components of this $12.5 million decrease in net sales are as follows:Historically and during the first quarter of fiscal 2010, other uses of cash have been to purchase merchandise inventories, improve our information technology infrastructure and finance store remodels, relocations and to a lesser extent, new store openings. In the past we have also made periodic repurchases of our common stock. During the first quarter of fiscal 2010 and consistent with recent years, we satisfied our cash requirements principally from cash flows from operations. We also maintain a $5.0 million unsecured credit agreement for issuing letters of credit for inventory purchases that will expire on September 1, 2010, after which we expect to renew it under similar terms. There were letters of credit for $76,000 and $111,000 outstanding as of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, respectively. Cash, cash equivalents and short- and long-term investments held by us were $76.9 million and $131.3 million as of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, respectively. We believe our current cash balances and cash generated from operations will be sufficient to fund our operations through at least the next 12 months.
Cash and cash equivalents are held primarily in diversified money market funds. Our short-term investments were $5.4 million and $5.3 million as of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, respectively. They consist primarily of highly rated municipal bonds, have maturities that are less than six months and are accounted for as available for sale. As of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, our long-term investments consisted of certificates of deposit and AAA/Aaa/A3-rated auction rate securities. The certificates of deposit are guaranteed by the Federal Deposit Insurance Corporation and have maturities of approximately 2 years. As of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, the fair value of our certificates of deposit was $4.8 million and $5.0 million, respectively.
As of the end of the first quarter of fiscal 2010 and as of the end of fiscal 2009, the fair value of our auction rate securities was $3.2 million. The fair value of our auction rate securities, which increased by an immaterial amount during the first quarter of fiscal 2010, reflects a cumulative decline of $0.7 million from the par value. This cumulative $0.7 million decline ($0.4 million net of tax) is deemed temporary as we do not have the intent to sell these securities and it is not likely that we will be required to sell the securities before the recovery of their amortized cost basis. If uncertainties in the credit and capital markets continue, we may incur additional losses, some of which may be other-than-temporary, which could negatively affect our financial condition or results of operations. In addition, in the event that we decide to sell these securities and it becomes more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis, we may be required to recognize impairment charges against income.
Net cash flows used in investing activities were $5.7 million in the first quarter of fiscal 2010 compared to $2.4 million in the first quarter of fiscal 2009. The $3.3 million increase in cash flows used in investing activities in the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009 was attributable to a $3.1 million decrease in proceeds from the sale of short- and long-term investments, net of purchases and a $0.2 million increase in purchases of property and equipment.
We anticipate we will spend approximately $30 to $32 million on capital expenditures in fiscal 2010. Of the $30 to $32 million, we plan to spend approximately $17 to $19 million for store construction and other improvements to existing stores, including the remodel or relocation of 30 to 40 existing Hot Topic stores. We plan to spend the remaining capital expenditures on various improvements in our information technology infrastructure, including technological improvements at the store level, new computer hardware and software and the further development and improvement of our Internet websites.
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