The Jones Group Inc. (ticker: JNY, exchange: New York Stock Exchange (.N))
News Release -
26-Apr-2006
Jones Apparel Group, Inc. Reports First Quarter 2006 Financial Results NEW YORK, April 26 /PRNewswire-FirstCall/ -- Jones Apparel Group, Inc.
(NYSE: JNY) today reported results for the first quarter ended April 1, 2006.
Revenues totaled $1,215.3 million versus $1,349.3 million for the first
quarter of 2005.
Earnings per share were $0.22 for the first quarter of 2006, as compared
to $0.71 in the same period last year. Excluding the impact of (i) loss on
sale of the Polo Jeans Company business, (ii) severance and other expenses
related to the strategic operating review and, (iii) the cumulative effect of
change in accounting principle, adjusted earnings per share for the first
quarter of 2006 was $0.66 as detailed in the accompanying schedule.
Peter Boneparth, President and Chief Executive Officer, stated, "Our first
quarter results were stronger than we had anticipated. The better than
expected results were primarily realized in our better wholesale apparel
businesses, which benefited from improved gross margins and lower operating
expenses versus the year ago period. In addition, our collective moderate
business, along with the wholesale footwear and accessories business each
performed according to plan. Comparable store sales from our owned footwear
and ready-to-wear stores (excluding Barneys New York) were up 0.9%. We were
also very pleased with the performance of our Barneys New York luxury retail
business, which generated a comparable store sales increase of 6.6% in the
quarter."
Efthimios P. Sotos, Chief Financial Officer, commented, "Inventory at
April 1, 2006 totaled $590.0 million, compared to $645.8 million at the end of
the prior year period. Accounts receivable at the end of the first quarter
was $555.7 million compared to $680.6 million at the end of the prior year
period. We ended the quarter with $1,020.4 million of funded debt and, net of
$140.2 million cash on hand, our debt to book capitalization ratio was 25.6%,
in line with our expectations. Our operating cash flow during the period was
$43.4 million, an improvement of $101.6 million versus the comparable period
in 2005, as our working capital planning remained disciplined. During the
quarter, we repurchased approximately 4.2 million shares of common stock in
the open market at an aggregate cost of $125.1 million, or $29.83 per share."
Mr. Boneparth added, "We are very pleased with the progress of our
strategic operating review and initiatives, which are well underway. Tangible
improvements and cost reductions are being realized in the areas of pre-
production, supply-chain management, customer service and compliance, and non-
merchandise purchasing. In total, we remain comfortable with our stated cost
reduction goal of approximately $30 million in 2006 and over $100 million
annually by the end of 2007, which will serve to offset the impact from the
department store consolidations and expand our future operating margin."
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. As such, we
continue to target 2006 full year adjusted earnings per share of $2.19 which
is consistent with our prior guidance. 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 $0.12 per share to all common stockholders of record as of May 12,
2006 for payment on May 26, 2006.
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 http://www.jny.com. The call will be
recorded and made available through May 4 and may be accessed by dialing
877-344-7529. Enter account number 389399.
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. The Company also markets directly to consumers through our chain
of specialty retail and value-based stores, and operates the Barneys New York
chain of luxury stores. The Company's 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
costume jewelry under 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. The Company primarily contracts for
the manufacture of its products through a worldwide network of quality
manufacturers. The Company has capitalized on its nationally known brand names
by entering into various licenses for several of its 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 the
Company does not manufacture. For more than 30 years, the Company has 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,"
"expect," "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 involves 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;
- 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, in an
increasingly competitive environment for such acquisitions, acquire
such businesses on reasonable financial and other terms;
- 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 general quota has expired on apparel products (while China has
agreed to safeguard quota on certain classes of apparel products
through 2008, political pressure will likely continue for restraint on
importation of apparel);
- the Company's ability to successfully implement new operational and
financial computer systems; 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 for the fiscal year ended December 31, 2005, including, but not limited to,
the Statement Regarding Forward-Looking Disclosure and Item 1A - Risk Factors
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
2006 2005
Net sales $1,200.2 98.8% $1,335.1 98.9%
Licensing income (net) 11.9 1.0% 14.2 1.1%
Service income 3.2 0.3% - -
Total revenues 1,215.3 100.0% 1,349.3 100.0%
Cost of goods sold 765.0 62.9% 850.6 63.0%
Gross profit 450.3 37.1% 498.7 37.0%
SG&A expenses 319.6 26.3% 340.4 25.2%
Loss on sale of Polo Jeans Company
business 45.1 3.7% - -
Income from operations 85.6 7.0% 158.3 11.7%
Net interest expense and financing
costs (15.3) (1.3%) (18.9) (1.4%)
Equity in earnings of unconsolidated
affiliates 0.9 0.1% 0.9 0.1%
Income before taxes 71.2 5.9% 140.3 10.4%
Provision for income taxes 47.3 3.9% 53.3 4.0%
Income before cumulative effect of
change in accounting principle 23.9 2.0% 87.0 6.4%
Cumulative effect of change in
accounting for share-based payments,
net of tax 1.9 0.2% - -
Net income $25.8 2.1% $87.0 6.4%
Shares outstanding - diluted 115.5 122.7
Earnings per share - diluted
Income before cumulative effect of
change in accounting principle $0.21 $0.71
Net income $0.22 $0.71
Percentages may not add due to rounding.
As required by the Securities and Exchange Commission Regulation G, the
following table contains information regarding the non-GAAP adjustments
used by the Company in the presentation of its financial results:
FIRST QUARTER
2006 2005
Net income (as reported) $25.8 $87.0
Provision for income taxes 47.3 53.3
Cumulative effect of change in
accounting principle (1.9) -
Loss on sale of Polo Jeans Company
business 45.1 -
Manufacturing inefficiencies and other
fees - 3.8
Severance and other expenses related
to strategic review 6.3 -
Adjusted income before taxes 122.6 144.1
Adjusted provision for income taxes 46.0 54.6
Adjusted net income $76.6 $89.5
Earnings per share - diluted (as
reported) $0.22 $0.71
Provision for income taxes 0.41 0.43
Cumulative effect of change in
accounting principle (0.01) -
Loss on sale of Polo Jeans Company
business 0.39 -
Manufacturing inefficiencies and other
fees - 0.03
Severance and other expenses related
to strategic review 0.05 -
Adjusted income before taxes 1.06 1.17
Adjusted provision for income taxes 0.40 0.44
Adjusted earnings per share - diluted $0.66 $0.73
JONES APPAREL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
All amounts in millions
April 1, 2006 April 2, 2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $140.2 $45.4
Accounts receivable, net of
allowances of $44.1 and $57.7 for
doubtful accounts, discounts,
returns and co-op advertising 555.7 680.6
Inventories 590.0 645.8
Deferred taxes 49.3 62.8
Other current assets 79.5 73.5
TOTAL CURRENT ASSETS 1,414.7 1,508.1
Property, plant and equipment, at
cost, less accumulated depreciation
and amortization 323.2 301.0
Goodwill 1,740.6 2,124.6
Other intangibles, less accumulated
amortization 826.1 791.5
Other assets 50.7 56.7
$4,355.3 $4,781.9
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $- $196.5
Current portion of long-term debt
and capital lease obligations 228.9 133.5
Accounts payable 232.3 266.1
Income taxes payable 84.4 78.3
Accrued expenses and other current
liabilities 158.9 171.5
TOTAL CURRENT LIABILITIES 704.5 845.9
NONCURRENT LIABILITIES:
Long-term debt and obligation
under capital leases 791.5 1,016.4
Deferred taxes 185.2 142.0
Other 109.6 82.0
TOTAL NONCURRENT LIABILITIES 1,086.3 1,240.4
TOTAL LIABILITIES 1,790.8 2,086.3
STOCKHOLDERS' EQUITY 2,564.5 2,695.6
$4,355.3 $4,781.9
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 1,
2006
Revenues from external customers $337.7 $332.1 $227.9
Intersegment revenues 37.8 1.3 12.1
Total revenues 375.5 333.4 240.0
Segment income $66.7 $40.4 $30.3
17.8% 12.1% 12.6%
Loss on sale of Polo Jeans
Company business
Net interest expense
Equity in earnings of
unconsolidated affiliates
Income before provision for
income taxes
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
Licensing,
Other &
Retail Eliminations Consolidated
For the fiscal quarter ended April 1,
2006
Revenues from external customers $305.2 $12.4 $1,215.3
Intersegment revenues - (51.2) -
Total revenues 305.2 (38.8) 1,215.3
Segment income $4.6 $(11.3) 130.7
1.5% 10.8%
Loss on sale of Polo Jeans
Company business (45.1)
Net interest expense (15.3)
Equity in earnings of
unconsolidated affiliates 0.9
Income before provision for
income taxes $71.2
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
JONES APPAREL GROUP, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
All amounts in millions Three Months Ended
April 1, 2006 April 2, 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $25.8 $87.0
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities,
net of sale of Polo Jeans Company
business:
Loss on sale of Polo Jeans
Company business 45.1 -
Cumulative effect of change in
accounting for share-based
payments (3.1) -
Depreciation and amortization 23.6 25.2
Equity in earnings of
unconsolidated affiliates (0.9) (0.9)
Provision for losses on accounts
receivable 0.7 1.0
Deferred taxes 10.6 13.6
Other 0.4 0.4
Changes in operating assets and
liabilities:
Accounts receivable (97.9) (233.4)
Inventories 30.1 18.2
Prepaid expenses and other
current assets 9.7 (5.3)
Other assets 1.1 2.6
Accounts payable (24.2) 3.9
Income taxes payable 30.2 49.9
Accrued expenses and other
liabilities (7.8) (20.4)
Total adjustments 17.6 (145.2)
Net cash provided by (used in)
operating activities 43.4 (58.2)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of Polo
Jeans Company business 350.6 -
Capital expenditures (29.4) (17.6)
Payments related to Barneys
acquisition - (4.1)
Acquisition of intangibles - (0.1)
Other - 0.2
Net cash provided by (used in)
investing activities 321.2 (21.6)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net (repayments) borrowings under
credit facilities (129.5) 127.2
Principal payments on capitalized
leases (1.2) (1.3)
Debt issuance costs - (0.4)
Purchases of treasury stock (125.1) (42.3)
Dividends paid (13.6) (12.2)
Proceeds from exercise of employee
stock options 8.8 8.3
Excess tax benefits from share-
based payment arrangements 1.2 -
Net cash provided by (used in)
financing activities (259.4) 79.3
EFFECT OF EXCHANGE RATES ON CASH 0.1 0.9
NET INCREASE IN CASH AND CASH
EQUIVALENTS 105.3 0.4
CASH AND CASH EQUIVALENTS,
beginning of period 34.9 45.0
CASH AND CASH EQUIVALENTS, end of
period $140.2 $45.4
SOURCE Jones Apparel Group, Inc.
-0- 04/26/2006
/CONTACT: Efthimios P. Sotos, Chief Financial Officer of Jones Apparel
Group, Inc., +1-215-785-4000; or Media Contact, Joele Frank and Sharon
Goldstein of Joele Frank, Wilkinson Brimmer Katcher, +1-212-355-4449, for
Jones Apparel Group/
/Web site: http://www.jny.com /
(JNY)
CO: Jones Apparel Group, Inc.
ST: New York
IN: FAS TEX REA
SU: ERN ERP DIV CCA
JT
-- PHW012 --
5800 04/26/2006 07:00 EDT http://www.prnewswire.com
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The Jones Group Inc.
