The Jones Group Inc. (ticker: JNY, exchange: New York Stock Exchange (.N))
News Release -
5-May-2005
Jones Apparel Group, Inc. Reports First Quarter 2005 Financial Results NEW YORK, May 5 /PRNewswire-FirstCall/ -- Jones Apparel Group, Inc.
(NYSE: JNY) today reported results for the first quarter ended April 2, 2005.
Revenues totaled $1,349.3 million versus $1,218.1 million for the first
quarter of 2004. Earnings per share were $0.71 for the first quarter of 2005,
as compared to $0.73 in the same period last year.
Peter Boneparth, President and Chief Executive Officer, stated, "Our first
quarter results were better than we had anticipated, partially as we benefited
from approximately $27 million in net shipments and approximately $11 million
in associated operating income during the first quarter, which we had planned
in second quarter. The better than expected results were primarily realized
in our better wholesale apparel businesses. Comparable store sales from our
owned footwear and ready-to-wear stores (excluding Barneys New York) were down
3.7% versus an increase of 13% in the prior year. We are very encouraged by
the continued strong performance of our Barneys New York luxury retail
business that generated a comparable store sales increase of 10.7% in the
quarter, as compared to 18.7% in the first quarter of 2004. These positives
were offset by weakness in our wholesale footwear, accessories and junior
denim businesses. Gross margin pressure in these businesses dampened our
performance and overall results."
Wesley Card, Chief Operating and Financial Officer, commented, "The
acquisitions of Maxwell Shoe and Barneys New York added $180.7 million to
revenues during the quarter, partially offset by decreases in our wholesale
footwear and accessories business, and our l.e.i. junior denim business. Our
operating profit margin for the quarter was 11.7%, compared to 13.3% in the
prior year. This decrease was primarily a result of gross margin pressure
within our footwear and accessories businesses and our l.e.i. junior denim
business. Our operating cash flow during the period improved by $25.1 million
over first quarter 2004, as our working capital planning remained
disciplined."
Mr. Card added, "Inventory at the end of the first quarter totaled $645.8
million, compared to $570.0 million at the end of the prior year period.
Exclusive of Maxwell Shoe and Barneys New York inventory, which were acquired
during the third and fourth quarters of 2004, respectively, inventory at the
end of the first quarter 2005 totaled $552.9 million, a 3.0% decrease from the
year-earlier period. Our accounts receivable at the end of the first quarter
was $680.6 million, compared to $638.5 at the end of the prior year period.
Excluding acquisitions, accounts receivable decreased $28.6 million, or 4.5%.
We ended the quarter with $1,346.4 billion of funded debt and, net of $45.4
million cash on hand, our debt to book capitalization ratio was 32.6%, in line
with our expectations. During the quarter, we repurchased approximately 1.4
million shares of common stock in the open market at an aggregate cost of
$45.3 million, or $33.16 per share."
Mr. Boneparth concluded, "We feel it is prudent to maintain a cautious
outlook for the remainder of the year with customer consolidation and
macroeconomic issues potentially creating consumer concerns. Therefore, we
are tightening our 2005 expected revenue to a range of $5.20 to $5.25 billion,
and our projected earnings per share to a range of $2.75 to $2.85. Over the
long term, we remain confident in our multi-brand, multi-channel business
model, which serves as the cornerstone of our strategy."
The Company's Board of Directors has declared a regular quarterly cash
dividend of $0.10 per share to all common stockholders of record as of May 20,
2005 for payment on June 3, 2005. The Board of Directors has also authorized
an additional $150 million share repurchase program, leaving $246 million
available as of the end of the first quarter.
The Company will host a conference call with management to discuss these
results and its outlook for 2005 at 8:30 a.m. eastern time today, which is
accessible by dialing 412-858-4600 or through a web cast at
http://www.jny.com. The call will be recorded and made available through May
13 and is accessible by dialing 877-344-7529. Enter account number 370375.
Jones Apparel Group, Inc. (http://www.jny.com), a Fortune 500 company, is
a leading designer, marketer and wholesaler of branded apparel, footwear and
accessories. We also market directly to consumers through our chain of
specialty retail and value-based stores, and operate the Barneys chain of
luxury stores. Our nationally recognized brands include Jones New York, Evan-
Picone, Norton McNaughton, Gloria Vanderbilt, Erika, l.e.i., Energie, Nine
West, Easy Spirit, Enzo Angiolini, Bandolino, Joan & David, Mootsies Tootsies,
Sam & Libby, Napier, Judith Jack, Kasper, Anne Klein, Albert Nipon, Le Suit
and Barneys New York. The Company also markets apparel under the Polo Jeans
Company brand licensed from Polo Ralph Lauren Corporation, costume jewelry
under the Tommy Hilfiger brand licensed from Tommy Hilfiger Licensing, Inc.
and the Givenchy brand licensed from Givenchy Corporation and footwear under
the Dockers Women brand licensed from Levi Strauss & Co. Each brand is
differentiated by its own distinctive styling, pricing strategy, distribution
channel and target consumer. We primarily contract for the manufacture of our
products through a worldwide network of quality manufacturers. We have
capitalized on our nationally known brand names by entering into various
licenses for several of our trademarks, including Jones New York, Evan-Picone,
Anne Klein New York, Nine West, Gloria Vanderbilt and l.e.i., with select
manufacturers of women's and men's products which we do not manufacture. For
more than 30 years, we have built a reputation for excellence in product
quality and value, and in operational execution.
Certain statements contained herein are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
All statements regarding the Company's expected financial position, business
and financing plans are forward-looking statements. The words "believes,"
"expects," "plans," "intends," "anticipates" and similar expressions identify
forward-looking statements. Forward-looking statements also include
representations of the Company's expectations or beliefs concerning future
events that involve risks and uncertainties, including:
- those associated with the effect of national and regional economic
conditions;
- lowered levels of consumer spending resulting from a general economic
downturn or lower levels of consumer confidence or generally reduced
shopping activity caused by public safety concerns;
- the performance of the Company's products within the prevailing
retail environment;
- customer acceptance of both new designs and newly-introduced product
lines;
- the Company's reliance on a few department store groups for large
portions of the Company's business;
- consolidation of the Company's retail customers;
- financial difficulties encountered by customers;
- the effects of vigorous competition in the markets in which the
Company operates;
- the Company's ability to identify acquisition candidates and acquire
such businesses on reasonable financial and other terms, in an
increasingly competitive environment for such acquisitions;
- the integration of the organizations and operations of any acquired
businesses into the Company's existing organization and operations;
- the Company's reliance on independent foreign manufacturers;
- changes in the costs of raw materials, labor and advertising;
- the general inability to obtain higher wholesale prices for the
Company's products that the Company has experienced for many years;
- the uncertainties of sourcing associated with the new environment in
which quota has been eliminated on apparel products while political
pressure is building for the re-imposition of quotas in certain
categories; and
- the Company's ability to secure and protect trademarks and other
intellectual property rights.
A further description of these risks and uncertainties and other important
factors that could cause actual results to differ materially from the
Company's expectations can be found in the Company's Annual Report on Form 10-
K/A for the fiscal year ended December 31, 2004, including, but not limited
to, the Statement Regarding Forward-Looking Disclosure and the information
concerning trends and risk factors included in Management's Discussion and
Analysis of Financial Condition and Results of Operations therein, and in the
Company's other filings with the Securities and Exchange Commission. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, such expectations may prove to be incorrect. 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
FIRST QUARTER
2005 2004
Net sales $1,335.1 98.9% $1,205.0 98.9%
Licensing income (net) 14.2 1.1% 13.1 1.1%
Total revenues 1,349.3 100.0% 1,218.1 100.0%
Cost of goods sold 850.6 63.0% 756.5 62.1%
Gross profit 498.7 37.0% 461.6 37.9%
SG&A expenses 340.4 25.2% 299.7 24.6%
Income from operations 158.3 11.7% 161.9 13.3%
Net interest expense and financing
costs 18.9 1.4% 11.7 1.0%
Equity in earnings of unconsolidated
affiliates 0.9 0.1% 0.8 0.1%
Income before taxes 140.3 10.4% 151.0 12.4%
Provision for income taxes 53.3 4.0% 56.6 4.6%
Net income $87.0 6.4% $94.4 7.7%
Shares outstanding - diluted 122.7 130.1
Earnings per share - diluted $0.71 $0.73
Percentages may not add due to rounding.
JONES APPAREL GROUP, INC.
SEGMENT INFORMATION
(UNAUDITED)
All amounts in millions
Wholesale Wholesale Wholesale
Better Moderate Footwear &
Apparel Apparel Accessories
For the fiscal quarter ended
April 2, 2005
Revenues from external customers $428.7 $355.1 $267.7
Intersegment revenues 34.9 2.8 12.0
Total revenues 463.6 357.9 279.7
Segment income $71.6 $45.6 $41.6
15.4% 12.7% 14.9%
Net interest expense
Equity in earnings of
unconsolidated affiliates
Income before provision for
income taxes
For the fiscal quarter ended
April 3, 2004
Revenues from external customers $409.1 $395.3 $230.8
Intersegment revenues 41.3 2.0 19.0
Total revenues 450.4 397.3 249.8
Segment income $56.0 $60.6 $49.6
12.4% 15.3% 19.9%
Net interest expense
Equity in earnings of
unconsolidated affiliates
Income before provision for
income taxes
Licensing,
Other &
Retail Eliminations Consolidated
For the fiscal quarter
ended April 2, 2005
Revenues from external
customers $283.6 $14.2 $1,349.3
Intersegment revenues - (49.7) -
Total revenues 283.6 (35.5) 1,349.3
Segment income $10.3 $(10.8) 158.3
3.6% 11.7%
Net interest expense (18.9)
Equity in earnings of
unconsolidated affiliates 0.9
Income before provision for
income taxes $140.3
For the fiscal quarter
ended April 3, 2004
Revenues from external
customers $169.8 $13.1 $1,218.1
Intersegment revenues - (62.3) -
Total revenues 169.8 (49.2) 1,218.1
Segment income $7.7 $(12.0) 161.9
4.5% 13.3%
Net interest expense (11.7)
Equity in earnings of
unconsolidated affiliates 0.8
Income before provision for
income taxes $151.0
JONES APPAREL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
All amounts in millions
April 2, 2005 April 3, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $45.4 $31.9
Accounts receivable, net of
allowances of $57.7 and $54.7 for
doubtful accounts, discounts,
returns and co-op advertising 680.6 638.5
Inventories 645.8 570.0
Deferred taxes 62.8 75.7
Other current assets 73.5 46.7
TOTAL CURRENT ASSETS 1,508.1 1,362.8
Property, plant and equipment, at
cost, less accumulated depreciation and
amortization 301.0 266.1
Goodwill 2,124.6 1,637.0
Other intangibles, less accumulated
amortization 791.5 758.3
Other assets 56.7 51.3
$4,781.9 $4,075.5
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $196.5 $295.5
Current portion of long-term debt
and capital lease obligations 133.5 180.7
Accounts payable 266.1 213.6
Income taxes payable 78.3 62.4
Accrued expenses and other current
liabilities 171.5 128.4
TOTAL CURRENT LIABILITIES 845.9 880.6
NONCURRENT LIABILITIES:
Long-term debt and obligation
under capital leases 1,016.4 396.2
Deferred taxes 142.0 126.6
Other 82.0 58.6
TOTAL NONCURRENT LIABILITIES 1,240.4 581.4
TOTAL LIABILITIES 2,086.3 1,462.0
STOCKHOLDERS' EQUITY 2,695.6 2,613.7
$4,781.9 $4,075.7
JONES APPAREL GROUP, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
All amounts in millions Three Months Ended
April 2, 2005 April 3, 2004
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $87.0 $94.4
Adjustments to reconcile net
income to net cash
used in operating activities, net
of acquisitions:
Amortization of original issue
discount - 1.3
Depreciation and other
amortization 25.2 27.9
Provision for losses on accounts
receivable 1.0 (0.2)
Deferred taxes 13.6 9.3
Loss on redemption of Zero
Coupon Convertible Senior Notes - 8.4
Other (0.5) (0.2)
Changes in operating assets and
liabilities:
Accounts receivable (233.4) (253.0)
Inventories 18.2 21.6
Prepaid expenses and other
current assets (5.3) 2.2
Other assets 2.6 (3.2)
Accounts payable 3.9 (24.2)
Income taxes payable 49.9 50.1
Accrued expenses and other
liabilities (20.4) (17.7)
Total adjustments (145.2) (177.7)
Net cash used in operating
activities (58.2) (83.3)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payments related to Barneys
acquisition (4.1) -
Payments related to Kasper
acquisition - (37.8)
Capital expenditures (17.6) (13.5)
Acquisition of intangibles (0.1) -
Other 0.2 -
Net cash used in investing
activities (21.6) (51.3)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings under credit
facilities 127.2 295.5
Redemption of Zero Coupon
Convertible Senior Notes - (446.6)
Debt issuance costs (0.4) -
Principal payments on capitalized
leases (1.3) (1.5)
Purchases of treasury stock (42.3) (41.1)
Dividends paid (12.2) (10.1)
Proceeds from exercise of employee
stock options 8.3 20.3
Net cash provided by (used in)
financing activities 79.3 (183.5)
EFFECT OF EXCHANGE RATES ON CASH 0.9 -
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 0.4 (318.1)
CASH AND CASH EQUIVALENTS,
beginning of period 45.0 350.0
CASH AND CASH EQUIVALENTS, end of
period $45.4 $31.9
SOURCE Jones Apparel Group, Inc.
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.
