The Jones Group Inc. (ticker: JNY, exchange: New York Stock Exchange (.N))
News Release -
28-Oct-2003
Jones Apparel Group, Inc. Reports Third Quarter 2003 Financial Results -- Earnings Per Share of $.71 Exceeds Company's Expectations
-- Spring 2004 Launch of Jones New York Signature Product Line on Track
-- Updates Guidance for 2003
-- Reconfirms Guidance for 2004
-- Repurchases $33 Million in Common Stock During Quarter
-- Declares Regular Quarterly Cash Dividend of $.08 Per Share
NEW YORK, Oct. 28 /PRNewswire-FirstCall/ -- Jones Apparel Group, Inc.
(NYSE: JNY) today reported results for the third quarter of 2003. While
results were lower than last year, in large part due to previously disclosed
exit costs surrounding the Lauren by Ralph Lauren licensed product line, they
exceeded the Company's expectations. Revenues were $1.181 billion for the
third quarter ended October 4, 2003, compared to $1.278 billion for the third
quarter ended October 5, 2002. Earnings per share were $.71 for the third
quarter of 2003 as compared to $.95 for the third quarter of 2002. Peter Boneparth, Chief Executive Officer, stated, "We are quite pleased
that these results surpassed our expectations. Throughout most of the third
quarter, we noticed continued caution by consumers, apparently due to the
lackluster employment situation and its impact on the overall economy. In the
final weeks of the period, however, we experienced a stronger level of
consumer spending in our own retail operation, as well as in the comparable
store sales trends reported by many of our retail customers." Wesley Card, Chief Operating and Financial Officer, commented, "Our
operating margin for the quarter was 13.9%, compared to an operating margin of
17.4% for the third quarter of 2002. Incremental expenses incurred in the
quarter to exit the Lauren by Ralph Lauren business (licensed from Polo Ralph
Lauren Corporation) approximated $28 million and continued challenges in the
status denim market resulted in higher markdowns in Polo Jeans Company, which
combined, impacted the operating margin by approximately 3.3 percentage
points." Mr. Card further noted, "Inventory levels were $555 million as compared to
$576 million in 2002, a 4% decrease. Accounts receivable were $621 million,
or $74 million less than the prior year period. Our operating results
generated positive operating cash flow for the first nine months of
$77 million. We ended the quarter with $1 billion of debt resulting in a debt
(net of $194 million cash on hand) to book capitalization ratio of 24.6%.
During the quarter, we repurchased 1.1 million shares of Company common stock
in the open market at an aggregate cost of $33 million. The dynamics of our
balance sheet and operating cash flow continue to provide an excellent base
for operating and growing our core business as well as acquiring new
businesses." Mr. Boneparth added, "We had a very successful Spring 2004 Market for the
introduction of Jones New York Signature, our new lifestyle-inspired product
line. The reaction from our retail customers was outstanding, resulting in a
launch in over 800 department store locations for February 2004, with expected
net sales of at least $200 million for the full year 2004. This highly
anticipated launch will be supported by a comprehensive media campaign,
including national advertising featuring a well known celebrity as the face of
Signature in both fashion and lifestyle publications, and grassroots
activities including trunk shows and in-store events, as well as retail
support across all doors through our retail coordinator program." "We believe that net revenues for the full year 2003 will approximate
$4.3 billion resulting in earnings per share in a range of $2.45 to $2.50. We
forecast operating cash flow for the full year 2003 to be approximately
$500 million. Regarding 2004, we are affirming previously discussed guidance
for net revenues of approximately $4 billion and earnings per share in a range
of $2.25 to $2.50. The 2004 guidance excludes the contribution of the pending
Kasper acquisition, changes to our existing capital and debt structure, and
other acquisitions. We are forecasting cash flow from operations for 2004 to
be in excess of $400 million." Mr. Boneparth continued, "We have rationalized our overhead and performed
a review of our existing product lines within the better apparel segment of
our business, given the transitions in the business for the introduction of
Jones New York Signature, the exit from the Lauren and Ralph businesses and
the pending acquisition of Kasper. During this process, we elected to close
the Rena Rowan division effective for Fall 2004. The closure of this division
will result in a $4.4 million writedown of the trademark portfolio value
during the fourth quarter which is reflected in our guidance for 2003." Mr. Boneparth concluded, "We are anticipating a bankruptcy court order
which will allow us to close on the purchase of Kasper A.S.L., Ltd., in early
December. We are working with the various Kasper functional teams to assure a
smooth integration process and look forward to the many opportunities that
these businesses will present as part of Jones Apparel Group. We anticipate
that the inclusion of the Kasper businesses for the short period at the end of
2003 may be slightly dilutive as a result of the purchase accounting
adjustments that will be recorded as of the closing date." The Company's Board of Directors has declared a regular quarterly cash
dividend of $.08 per share to all common stockholders of record as of
November 14, 2003 for payment on November 28, 2003.
The Company will host a conference call with management to discuss these
results at 8:30 a.m. Eastern Time today, which is accessible by dialing
412-858-4600 or through a web cast at www.jny.com.
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; Polo Jeans
Company licensed from Polo Ralph Lauren Corporation; Evan-Picone, Rena Rowan,
Norton McNaughton, Gloria Vanderbilt, Erika, l.e.i., Energie, 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, and footwear and accessories under the ESPRIT brand licensed from
Esprit Europe, B.V. 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
2002 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
THIRD QUARTER
2003 2002
Net sales $1,171.1 99.2% $1,271.0 99.5%
Licensing income (net) 9.4 0.8% 6.5 0.5%
Total revenues 1,180.5 100.0% 1,277.5 100.0%
Cost of goods sold 752.1 63.7% 793.1 62.1%
Gross profit 428.4 36.3% 484.4 37.9%
SG&A expenses 264.4 22.4% 262.7 20.6%
Executive compensation obligations - - - -
Income from operations 164.0 13.9% 221.7 17.4%
Net interest expense and
financing costs 13.9 1.2% 14.1 1.1%
Equity in earnings of
unconsolidated affiliates 0.6 0.1% 0.7 0.1%
Income before taxes 150.7 12.8% 208.3 16.3%
Provision for income taxes 56.8 4.8% 78.5 6.1%
Income before cumulative effect of
change in accounting principle 93.9 8.0% 129.8 10.2%
Cumulative effect of change in
accounting for intangible
assets, net of tax - - - -
Net income $93.9 8.0% $129.8 10.2%
Shares outstanding - diluted 135.7 139.7
Earnings per share - diluted
Income before cumulative effect of
change in accounting principle $0.71 $0.95
Cumulative effect of change in
accounting for intangible assets,
net of tax - -
Net income $0.71 $0.95
Percentages may not add due to rounding.
JONES APPAREL GROUP, INC.
CONSOLIDATED OPERATING RESULTS
(UNAUDITED)
All amounts in millions except per share data
NINE MONTHS
2003 2002
Net sales $3,372.6 99.3% $3,357.4 99.4%
Licensing income (net) 22.6 0.7% 19.0 0.6%
Total revenues 3,395.2 100.0% 3,376.4 100.0%
Cost of goods sold 2,108.2 62.1% 2,054.4 60.8%
Gross profit 1,287.0 37.9% 1,322.0 39.2%
SG&A expenses 786.3 23.2% 795.8 23.6%
Executive compensation obligations - - 31.9 0.9%
Income from operations 500.7 14.7% 494.3 14.6%
Net interest expense
and financing costs 42.1 1.2% 44.3 1.3%
Equity in earnings of
unconsolidated affiliates 1.7 0.1% 0.7 0.0%
Income before taxes 460.3 13.6% 450.7 13.3%
Provision for income taxes 173.5 5.1% 170.0 5.0%
Income before cumulative effect of
change in accounting principle 286.8 8.4% 280.7 8.3%
Cumulative effect of change in
accounting for intangible assets,
net of tax - - 13.8 0.4%
Net income $286.8 8.4% $266.9 7.9%
Shares outstanding - diluted 136.6 138.9
Earnings per share - diluted
Income before cumulative effect of
change in accounting principle $2.15 $2.07
Cumulative effect of change in
accounting for intangible assets,
net of tax - (0.10)
Net income $2.15 $1.97
Percentages may not add due to rounding.
JONES APPAREL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
all amounts in millions
October 4, 2003 October 5, 2002
ASSETS
CURRENT:
Cash and cash equivalents $194.2 $28.7
Accounts receivable, net of
allowances of $48.3 and $49.6 for
doubtful accounts, discounts,
returns and co-op advertising 620.9 694.5
Inventories 554.9 576.5
Deferred taxes 77.9 58.8
Other current assets 50.1 50.1
TOTAL CURRENT ASSETS 1,498.0 1,408.6
Property, plant and equipment, at
cost, less accumulated depreciation and
amortization 256.5 262.3
Goodwill, less accumulated
amortization 1,587.7 1,541.0
Other intangibles, less accumulated
amortization 670.7 680.8
Other assets 49.9 95.8
$4,062.8 $3,988.5
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Short-term debt and current
portion of long-term debt and
capital lease obligations $180.5 $64.2
Accounts payable 200.3 289.2
Income taxes payable 48.1 59.7
Accrued expenses and other current
liabilities 138.1 185.2
TOTAL CURRENT LIABILITIES 567.0 598.3
NONCURRENT LIABILITIES:
Long-term debt and obligation
under capital leases 831.3 1,006.0
Deferred taxes 107.4 62.3
Other 48.8 36.6
TOTAL NONCURRENT LIABILITIES 987.5 1,104.9
TOTAL LIABILITIES 1,554.5 1,703.2
STOCKHOLDERS' EQUITY 2,508.3 2,285.3
$4,062.8 $3,988.5
JONES APPAREL GROUP, INC.
SEGMENT INFORMATION
(UNAUDITED)
all amounts in millions
Wholesale
Wholesale Wholesale Footwear & Other &
Better Moderate Accessories Elimin- Consol-
Apparel Apparel Retail ations idated
For the fiscal quarter
ended October 4, 2003
Revenues from
external
customers $410.6 $355.1 $240.8 $164.6 $9.4 $1,180.5
Intersegment
revenues 26.8 2.9 18.9 - (48.6) -
Total
revenues 437.4 358.0 259.7 164.6 (39.2) 1,180.5
Segment
income (loss) $60.0 $44.4 $49.7 $15.8 $(5.9) 164.0
13.7% 12.4% 19.1% 9.6% 13.9%
Net interest
expense (13.9)
Equity in earnings
of unconsolidated
affiliates 0.6
Income before
provision for
income taxes $150.7
For the fiscal
quarter ended
October 5, 2002
Revenues from
external
customers $508.2 $341.8 $255.4 $165.6 $6.5 $1,277.5
Intersegment
revenues 27.9 3.8 21.1 - (52.8) -
Total
revenues 536.1 345.6 276.5 165.6 (46.3) 1,277.5
Segment income
(loss) $128.0 $39.8 $49.2 $11.8 $(7.1) 221.7
23.9% 11.5% 17.8% 7.1% 17.4%
Net interest
expense (14.1)
Equity in earnings
of unconsolidated
affiliates 0.7
Income before
provision for
income taxes $208.3
For the fiscal nine
months ended
October 4, 2003
Revenues from
external
customers $1,173.9 $1,053.7 $663.0 $482.0 $22.6 $3,395.2
Intersegment
revenues 69.3 11.5 48.5 - (129.3) -
Total
revenues 1,243.2 1,065.2 711.5 482.0 (106.7) 3,395.2
Segment income
(loss) $209.8 $148.2 $125.2 $39.1 $(21.6) 500.7
16.9% 13.9% 17.6% 8.1% 14.7%
Net interest
expense (42.1)
Equity in earnings
of unconsolidated
affiliates 1.7
Income before
provision for
income taxes $460.3
For the fiscal nine
months ended
October 5, 2002
Revenues from
external
customers $1,325.9 $822.4 $700.1 $509.0 $19.0 $3,376.4
Intersegment
revenues 75.9 9.5 58.5 - (143.9) -
Total
revenues 1,401.8 831.9 758.6 509.0 (124.9) 3,376.4
Segment income
(loss) $301.9 $111.1 $99.7 $41.7 $(60.1) 494.3
21.5% 13.4% 13.1% 8.2% 14.6%
Net interest
expense (44.3)
Equity in earnings
of unconsolidated
affiliates 0.7
Income before
provision for
income taxes $450.7
JONES APPAREL GROUP, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
October 4, 2003 October 5, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $286.8 $266.9
Adjustments to reconcile
net income to net cash
provided by operating activities,
net of acquisitions:
Cumulative effect of change in
accounting principle - 13.8
Amortization of original issue
discount 11.3 11.0
Trademark impairment losses - 5.8
Depreciation and other
amortization 59.9 57.8
Provision for losses on accounts
receivable 1.0 2.6
Deferred taxes 14.4 0.3
Gain on short sale of U.S.
Treasury Securities (6.6) (11.0)
Losses on sale of assets 0.4 1.0
Other (1.1) (0.8)
Changes in operating assets and
liabilities:
Accounts receivable (231.5) (182.5)
Inventories (23.4) 76.0
Prepaid expenses and other
current assets (20.3) (0.2)
Other assets 16.8 15.9
Accounts payable (31.0) 57.5
Income taxes payable 23.5 66.7
Accrued expenses and other
liabilities (23.7) (10.5)
Total adjustments (210.3) 103.4
Net cash provided by operating
activities 76.5 370.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired - (332.7)
Capital expenditures (40.3) (40.3)
Payments relating to acquisitions (54.1) (2.0)
Net cash related to sale of U. S.
Treasury bonds 12.2 9.2
Acquisition of intangibles (6.0) (2.8)
Repayments of loans to officers - 2.0
Proceeds from sales of property,
plant and equipment 25.4 0.3
Other 0.2 (0.1)
Net cash used in investing
activities (62.6) (366.4)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under various credit
facilities - 56.0
Repayment of long-term debt (7.4) (2.0)
Refinancing of acquired debt - (126.9)
Principal payments on capitalized
leases (4.0) (11.6)
Purchases of treasury stock (92.1) (29.5)
Dividends paid (10.1) -
Proceeds from exercise of employee
stock options 10.0 62.2
Net cash used in financing
activities (103.6) (51.8)
EFFECT OF EXCHANGE RATES ON CASH 0.6 0.1
NET DECREASE IN CASH AND CASH
EQUIVALENTS (89.1) (47.8)
CASH AND CASH EQUIVALENTS, beginning
of period 283.3 76.5
CASH AND CASH EQUIVALENTS, end of
period $194.2 $28.7
All amounts in millions
SOURCE Jones Apparel Group, Inc. |
The Jones Group Inc.
