The Jones Group Inc. (ticker: JNY, exchange: New York Stock Exchange (.N))
News Release -
31-Jul-2002
Jones Apparel Group, Inc. Reports Second Quarter 2002 Revenues and Earnings NEW YORK, July 31 /PRNewswire-FirstCall/ -- Jones Apparel Group, Inc.
(NYSE: JNY) today announced that revenues for the second quarter of 2002
increased by 10.0% to $972.1 million from $883.9 million for the second
quarter of 2001. Revenue gains resulting from the acquisitions of Gloria
Vanderbilt and McNaughton Apparel Group of $148 million over the prior year
were partially offset by planned decreases of $60 million in our core
businesses. Earnings per share for the second quarter were $0.53, excluding a
non-cash after-tax charge of $5.8 million, or $.04, related to a purchase
accounting adjustment to bring the Gloria Vanderbilt inventory to fair market
value. This compares to second quarter 2001 reported results of $0.47 per
share, excluding a similar non-cash charge of $.04 to bring the McNaughton
Apparel Group and Judith Jack inventories to fair market value. Prior year
results adjusted for the adoption of SFAS No. 142 (Accounting for Goodwill and
Other Intangibles) would have been $0.56 per share. Peter Boneparth, President and CEO, stated, "We were very pleased with our
operating performance during the second quarter. By successfully executing
our multi-brand product strategy which focuses on diversification and balance
across distribution channels, target consumers and core competencies, we were
able to exceed our expectations for the period. Stronger than planned results
in the majority of our apparel businesses, as well as, our wholesale and
retail footwear businesses were somewhat offset by continued challenges in our
better career collection and costume jewelry businesses." Wesley Card, Chief Operating and Financial Officer, commented on the
Company's financial and liquidity position, by stating, "We generated
$322 million of cash flow from operations in the first half with our cash
balance increasing to $296 million, after funding $124 million in cash for the
acquisition of Gloria Vanderbilt. Quarter-end inventories were $554 million,
or $525 million exclusive of Gloria Vanderbilt. This compares to a 2001
quarter ending inventory level of $770 million, representing a year-over-year
reduction of 32%. We ended the quarter with $992 million of debt, principally
long-term, resulting in a net debt to book capitalization ratio of 24.5%. As
a result of our strong financial position, we anticipate funding the recently
announced l.e.i. acquisition primarily from cash on hand and to a lesser
extent our committed bank revolver." Mr. Boneparth further commented, "We are increasing our expected earnings
per share guidance for 2002 to $2.72-$2.75 from $2.65 due to our strong second
quarter performance. Forecasted revenues for 2002 should approximate $4.2-
$4.3 billion. We would expect to achieve the high end of these ranges when
including the successful completion of the l.e.i. acquisition. In addition,
we are increasing our 2003 full year earnings per share guidance from $2.95 to
$3.05 due to the inclusion of l.e.i., not reflecting additional acquisitions
or share repurchases." Mr. Boneparth went on to say, "In accordance with Securities and Exchange
Commission guidelines, Wes Card and I will be certifying our 2001 Annual
Report on Form 10-K and our 2002 quarterly reports on Form 10-Q within our
respective capacities as Chief Operating and Financial Officer, and President
and Chief Executive Officer. Furthermore, we have reviewed our policy
relating to the accounting treatment of stock options and have elected to
record compensation expense for all stock option grants effective January 1,
2003. Given the prospective treatment required by SFAS No. 123 (Accounting
for Stock-Based Compensation), we anticipate that an annual stock option grant
at past levels would have a nominal 1-2% dilutive effect on 2003 earnings per
share." Mr. Boneparth concluded, "In addition, our Board of Directors believes
that its composition and that of its committees are consistent with the
proposals recently made by the New York Stock Exchange Corporate
Accountability and Listing Standards Committee. The Company's management and
the Board of Directors will continue to consider and adopt best practices for
corporate governance." The Company will webcast the management review of its second quarter
earnings at 8:30 a.m. EDT.
Jones Apparel Group, Inc. (www.jny.com), a Fortune 500 Company, is a
leading designer and marketer of branded apparel, footwear and accessories.
The Company's nationally recognized brands include: Jones New York; Lauren by
Ralph Lauren, Ralph by Ralph Lauren, and Polo Jeans Company, which are
licensed from Polo Ralph Lauren Corporation; Evan-Picone, Rena Rowan, Norton
McNaughton, Gloria Vanderbilt, Erika, Energie, Currants, Jamie Scott, Todd
Oldham, Nine West, Easy Spirit, Enzo Angiolini, Bandolino, Napier and Judith
Jack. The Company also markets costume jewelry under the Tommy Hilfiger brand
licensed from Tommy Hilfiger Corporation and the Givenchy brand licensed from
Givenchy Corporation. Celebrating more than 30 years of service, the Company
has built a reputation for excellence in product quality and value, and in
operational execution.
Certain statements herein are "forward-looking statements" made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements represent the Company's expectations
or beliefs concerning future events that involve risks and uncertainties,
including the strength of the economy and the overall level of consumer
spending, the performance of the Company's products within the prevailing
retail environment, and other factors which are set forth in the Company's
2001 Form 10-K and in all filings with the SEC made by the Company subsequent
to the filing of the Form 10-K. The Company does not undertake to publicly
update or revise its forward-looking statements as a result of new
information, future events or otherwise.
JONES APPAREL GROUP, INC.
CONSOLIDATED OPERATING RESULTS
(UNAUDITED)
All amounts in millions except per share data
SECOND QUARTER SIX MONTHS
2002 2001 2002 2001
Net sales $966.1 99.4% $878.4 99.4% $2,086.3 99.4% $1,950.6 99.4%
Licensing
income
(net) 6.0 0.6% 5.5 0.6% 12.6 0.6% 11.0 0.6%
Total
revenues 972.1 100.0% 883.9 100.0% 2,098.9 100.0% 1,961.6 100.0%
Cost of goods
sold 573.5 59.0% 524.6 59.4% 1,252.0 59.7% 1,155.0 58.9%
Gross profit
before
purchase
accounting
adjust-
ments 398.6 41.0% 359.3 40.6% 846.9 40.3% 806.6 41.1%
Purchase
accounting
adjustments
to cost of
goods sold* 9.3 1.0% 7.8 0.9% 9.3 0.4% 7.8 0.4%
Gross
profit 389.3 40.0% 351.5 39.8% 837.6 39.9% 798.8 40.7%
SG&A
expenses 267.6 27.5% 229.5 26.0% 533.1 25.4% 486.7 24.8%
Executive
compensation
obligations 0.7 0.1% - - 31.9 1.5% - -
Amortization
of goodwill - - 10.0 1.1% - - 19.7 1.0%
Income from
operations 121.0 12.4% 112.0 12.7% 272.6 13.0% 292.4 14.9%
Net interest
expense and
financing
costs 14.2 1.5% 20.4 2.3% 30.2 1.4% 41.4 2.1%
Income before
taxes 106.8 11.0% 91.6 10.4% 242.4 11.5% 251.0 12.8%
Provision
for income
taxes 40.3 4.1% 36.2 4.1% 91.4 4.4% 99.2 5.1%
Income before
cumulative
effect of
change in
accounting
principle 66.5 6.8% 55.4 6.3% 151.0 7.2% 151.8 7.7%
Cumulative
effect of
change in
accounting
for intangible
assets, net
of tax - - - - 13.8 0.7% - -
Net income $66.5 6.8% $55.4 6.3% $137.2 6.5% $151.8 7.7%
Shares
outstanding
- diluted 139.8 133.7 138.5 132.0
Reported income
before cumulative
effect of change
in accounting
principle $66.5 $55.4 $151.0 $151.8
Add back:
amortization
of goodwill
and trademarks,
net of tax - 12.2 - 23.7
Adjusted income
before
cumulative
effect of
change in
accounting
principle 66.5 67.6 151.0 175.5
Cumulative
effect of
change in
accounting
for intangible
assets - - 13.8 -
Adjusted
net income
per SFAS
No. 142 $66.5 $67.6 $137.2 $175.5
Earnings
per share
- diluted
Income before
purchase
accounting
adjustments
and cumulative
effect of
change in
accounting
principle $0.53 $0.47 $1.16 $1.21
Purchase
accounting
adjustments
to cost of
goods sold* 0.04 0.04 0.04 0.03
Income before
cumulative
effect of
change in
accounting
principle 0.49 0.43 1.12 1.18
Amortization
of goodwill
and trademarks,
net of tax - 0.09 - 0.18
Adjusted income
before
cumulative
effect of
change in
accounting
principle 0.49 0.52 1.12 1.36
Cumulative
effect of
change in
accounting for
intangible
assets - - 0.10 -
Adjusted
net income
per SFAS
No. 142 $0.49 $0.52 $1.02 $1.36
Percentages may not add due to rounding.
* reflects an increase in cost of goods sold attributable to the fair
value of inventory over cost, recorded as a result of the acquisitions
of Gloria Vanderbilt in 2002 and Judith Jack and McNaughton in 2001.
JONES APPAREL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
all amounts in millions
July 6, 2002 July 7, 2001
ASSETS
CURRENT:
Cash and cash equivalents $296.3 $37.6
Accounts receivable, net of allowances
of $36.6 and $40.3 for doubtful accounts,
discounts, returns and co-op advertising 415.1 530.7
Inventories 553.7 769.9
Deferred taxes 69.1 76.9
Other current assets 48.2 98.1
TOTAL CURRENT ASSETS 1,382.4 1,513.2
Property, plant and equipment, at cost, less
accumulated depreciation and amortization 248.5 237.1
Goodwill, less accumulated amortization 1,369.4 1,374.0
Other intangibles, less accumulated
amortization 575.5 545.4
Other assets 82.4 98.6
$3,658.2 $3,768.3
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Short-term borrowings and current portion of
long-term debt and capital lease obligations $7.2 $517.6
Accounts payable 211.7 215.7
Income taxes payable 40.7 -
Accrued expenses and other current liabilities 161.7 156.2
TOTAL CURRENT LIABILITIES 421.3 889.5
NONCURRENT LIABILITIES:
Long-term debt and obligation under
capital leases 985.0 964.5
Other 104.4 113.3
TOTAL NONCURRENT LIABILITIES 1,089.4 1,077.8
TOTAL LIABILITIES 1,510.7 1,967.3
STOCKHOLDERS' EQUITY 2,147.5 1,801.0
$3,658.2 $3,768.3
JONES APPAREL GROUP, INC.
SEGMENT INFORMATION
(UNAUDITED)
all amounts in millions
Wholesale Wholesale Wholesale
Better Moderate Footwear &
Apparel Apparel(A) Accessories(B)
For the fiscal quarter
ended July 6, 2002
Revenues from external
customers $343.7 $224.0 $210.8
Intersegment revenues 18.1 4.4 14.9
Total revenues 361.8 228.4 225.7
Segment Income $65.7 $24.5 $19.5
18.2% 10.7% 8.6%
Net interest expense
Income before provision for
income taxes
For the fiscal quarter
ended July 7, 2001
Revenues from external
customers $393.7 $81.3 $220.1
Intersegment revenues 16.9 7.2 15.6
Total revenues 410.6 88.5 235.7
Segment Income $64.6 $2.2 $41.6
15.7% 2.5% 17.6%
Amortization of goodwill
Net interest expense
Income before provision
for income taxes
For the fiscal six months
ended July 6, 2002
Revenues from external
customers $817.6 $480.6 $444.7
Intersegment revenues 48.0 5.7 37.4
Total revenues 865.6 486.3 482.1
Segment Income $173.8 $71.4 $50.5
20.1% 14.7% 10.5%
Net interest expense
Income before provision
for income taxes
For the fiscal six months
ended July 7, 2001
Revenues from external
customers $932.6 $160.0 $514.2
Intersegment revenues 42.5 13.3 41.2
Total revenues 975.1 173.3 555.4
Segment Income $188.5 $7.8 $113.2
19.3% 4.5% 20.4%
Amortization of goodwill
Net interest expense
Income before provision
for income taxes
Other &
Retail Eliminations Consolidated
For the fiscal quarter
ended July 6, 2002
Revenues from external
customers $187.6 $6.0 $972.1
Intersegment revenues - (37.4) -
Total revenues 187.6 (31.4) 972.1
Segment Income $23.4 ($12.1) 121.0
12.5% 12.4%
Net interest expense 14.2
Income before provision for
income taxes $106.8
For the fiscal quarter
ended July 7, 2001
Revenues from external
customers $183.3 $5.5 $883.9
Intersegment revenues - (39.7) -
Total revenues 183.3 (34.2) 883.9
Segment Income $23.5 ($9.9) 122.0
12.8% 13.8%
Amortization of goodwill 10.0
Net interest expense 20.4
Income before provision
for income taxes $91.6
For the fiscal six months
ended July 6, 2002
Revenues from external
customers $343.4 $12.6 $2,098.9
Intersegment revenues - (91.1) -
Total revenues 343.4 (78.5) 2,098.9
Segment Income $29.8 ($52.9) 272.6
8.7% 13.0%
Net interest expense 30.2
Income before provision
for income taxes $242.4
For the fiscal six months
ended July 7, 2001
Revenues from external
customers $343.9 $10.9 $1,961.6
Intersegment revenues - (97.0) -
Total revenues 343.9 (86.1) 1,961.6
Segment Income $25.6 ($23.0) 312.1
7.4% 15.9%
Amortization of goodwill 19.7
Net interest expense 41.4
Income before provision
for income taxes $251.0
A - Includes $9.3 million and $7.2 million in cost of goods sold during
the second fiscal quarters of 2002 and 2001, respectively, attributable
to the fair value of inventory over cost, recorded as a result of the
acquisitions of Gloria Vanderbilt in 2002 and McNaughton in 2001.
Excluding this purchase accounting charge, the operating margin for the
wholesale moderate apparel segment would have been 14.8% and 10.6% for
the second fiscal quarters of 2002 and 2001, respectively, and 16.6% and
8.7% for the first fiscal six months of 2002 and 2001, respectively.
B - Includes $0.6 million in cost of goods sold during the second fiscal
quarter of 2001 attributable to the fair value of inventory over cost,
recorded as a result of the acquisitions of Judith Jack in 2001.
Excluding this purchase accounting charge, the operating margin for the
wholesale footwear and accessories segment would have been 17.9% and
20.5% for the second fiscal quarter and first fiscal six months of 2001,
respectively.
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SOURCE Jones Apparel Group, Inc.
Web site: http: //www.jny.com
CONTACT: Wesley R. Card, Chief Operating and Financial Officer, or Anita Britt, Executive Vice President Finance, both of Jones Apparel Group, +1-215-785-4000 |
The Jones Group Inc.
