2008-08-13 06:14:00
- Reports Q2 Fiscal 2008 GAAP Loss per Share from Continuing Operations of
($0.17) and Adjusted EPS from Continuing Operations of $0.09
- Completes Bank Credit Facility Amendment
- Drives Inventory Decrease of 26% Compared to Q2 2007
- Narrows Full Year 2008 Adjusted EPS Guidance to a Range of $1.40 to $1.50
from a Range of $1.40 to $1.60
NEW YORK, Aug. 13 /EMWNews/ -- Liz Claiborne Inc. (NYSE:
LIZ) today announced earnings for the second quarter and first six months
of 2008. For the first six months of 2008 and on a GAAP basis, the loss per
share from continuing operations was ($0.32) compared to diluted earnings
per share ("EPS") from continuing operations of $0.20 for the first six
months of 2007. Adjusted diluted EPS from continuing operations for the
first six months of 2008 were $0.37 compared to adjusted diluted EPS from
continuing operations of $0.40 for the first six months of 2007. Net sales
from continuing operations for the first six months of 2008 were $2.088
billion, a decrease of $24 million, or 1.2% from 2007, inclusive of an $81
million decrease associated with brands or certain brand activities that
have been closed / exited and have not been presented as part of
discontinued operations.
For the second quarter of 2008 and on a GAAP basis, the loss per share
from continuing operations was ($0.17) compared to diluted earnings per
share from continuing operations of $0.10 for the second quarter of 2007.
Adjusted diluted EPS from continuing operations for the second quarter of
2008 were $0.09 compared to adjusted diluted EPS from continuing operations
of $0.23 for the second quarter of 2007. Net sales from continuing
operations for the second quarter of 2008 were $974 million, a decrease of
$75 million, or 7.1% from 2007, inclusive of a $47 million decrease
associated with brands or certain brand activities that have been closed /
exited and have not been presented as part of discontinued operations.
The adjusted results for the second quarter and first six months of
2008 and 2007 on a continuing operations basis exclude the impact of
expenses incurred in connection with the Company's streamlining and
brand-exiting activities.
The Company believes that the adjusted results for the second quarter
and first six months of 2008 and 2007 and the adjusted projected results
for fiscal 2008 represent a more meaningful presentation of its historical
and estimated operations and financial performance since these results
provide period to period comparisons that are consistent and more easily
understood. The attached tables, captioned "Reconciliation of Non-GAAP
Financial Information", provide a full reconciliation of actual results to
the adjusted results.
William L. McComb, Chief Executive Officer of Liz Claiborne Inc., said:
"Second quarter adjusted EPS from continuing operations were $0.09 in what
remains a very challenging macroeconomic environment. Although expected,
our Partnered Brands net sales and total company operating margin results
were disappointing. This was offset by demonstrated progress on a number of
fronts. In particular, we generated an 18% net sales increase in our
retail-based Direct Brands segment, driven by a 13% comp store sales
increase in Juicy Couture and a 5% comp store sales increase in Lucky
Brand. We realized tangible benefits from our streamlining activities in
the second quarter, as evidenced by the $22 million year over year
reduction in adjusted SG&A. We also reaped the benefits of our focus on
working capital, as evidenced by the 26% reduction in inventory compared to
last year. This enables a clean transition into the second half and begins
to position us well for the 2009 re-launch of our flagship Liz Claiborne
brand under the design direction of Isaac Mizrahi and the re-launch of our
Claiborne men's business with John Bartlett as well."
Mr. McComb added, "While our second quarter results exceeded our
conservative expectations, the difficult macroeconomic environment causes
us to be cautious in our outlook as we proceed through the second half of
the year. Accordingly, we are narrowing our fiscal 2008 adjusted EPS
guidance range, resulting in a new range of $1.40 to $1.50, compared to the
previous range of $1.40 to $1.60. For the third quarter of 2008, we expect
adjusted EPS to be in the range of $0.37 to $0.42."
Mr. McComb concluded, "We are currently in the execution phase of our
turnaround. We have built strong brand teams and are accelerating
initiatives that we believe will result in a solid and consistently
profitable company. Our focus on improving cash management, productivity
and operating margin represent big opportunities for us as we move forward.
We are not expecting a significant macroeconomic recovery in the near
future, but will continue to prudently execute our plans, implementing very
meaningful product initiatives and driving operating margin expansion."
The Company will sponsor a conference call today at 10:00 am EDT to
discuss its results for the second quarter and first six months of 2008.
The dial-in number is 1-888-694-4676 with pass code 58108610. The webcast
and slides accompanying the prepared remarks can be accessed via the
Investor Relations section of the Liz Claiborne website at
http://www.lizclaiborneinc.com . An archive of the webcast will be available
through September 3, 2008. Additional information on the results of the
Company's operations is available in the Company's Form 10-Q for the second
quarter of 2008, which is being filed today with the Securities and
Exchange Commission.
OPERATING SUMMARY
* The Company aggregates its brand-based activities into two reporting
segments as follows:
-- The Direct Brands segment - consists of the specialty retail,
outlet, wholesale apparel, wholesale non-apparel (including accessories,
jewelry and handbags), e-commerce and licensing operations of the Company's
four retail-based brands: Mexx, Juicy Couture, Lucky Brand and Kate Spade.
-- The Partnered Brands segment - consists of the wholesale apparel,
wholesale non-apparel, outlet, specialty retail, e-commerce and licensing
operations for the Company's owned and licensed wholesale-based brands.
* The results of the Company's former Emma James, Intuitions, J.H.
Collectibles, Tapemeasure, C&C California, Laundry by Design and Prana
brands in addition to the retail operations of the Company's former Ellen
Tracy brand and certain of the retail operations of the Sigrid Olsen brands
are shown as discontinued operations. In the second quarter of 2008, the
Company entered into an exclusive long-term global licensing agreement for
the manufacture, distribution and marketing of its fragrance brands.
* Net sales from continuing operations for the second quarter of 2008
were $974 million, a decrease of $75 million, or 7.1% from 2007, inclusive
of a $47 million decrease associated with brands or certain brand
activities that have been closed / exited and have not been presented as
part of discontinued operations. The impact of changes in foreign currency
exchange rates in our international businesses increased net sales by
approximately $43 million, or 4.1%, during the quarter. Net sales for our
segments are provided below:
-- Direct Brands segment net sales increased 18.2% in the second
quarter to $584 million.
-- Partnered Brands segment net sales decreased $165 million, or 29.7%,
in the second quarter to $390 million, inclusive of a $47 million decrease
associated with brands or certain brand activities that have been closed /
exited and have not been presented as part of discontinued operations.
* Net sales for our Direct Brands segment in the second quarter were as
follows:
-- Mexx - $289 million, an 8.8% increase compared to last year.
Excluding the impact of changes in foreign currency exchange rates, net
sales for Mexx were $253 million, a 4.9% decrease compared to last year.
-- Juicy Couture - $148 million, a 47.4% increase compared to last
year.
-- Lucky Brand - $118 million, a 9.3% increase compared to last year.
-- Kate Spade - $30 million, a 44.5% increase compared to last year.
* Operating loss in the second quarter was ($26) million ((2.6)% of net
sales) compared to an operating profit of $25 million (2.4% of net sales)
in 2007. Adjusted operating income in the second quarter was $21 million
(2.2% of adjusted net sales) compared to $45 million (4.4% of adjusted net
sales) in 2007. Operating income for our business segments are provided
below:
-- Direct Brands segment operating income in the second quarter was $13
million (2.2% of net sales), compared to $30 million (6.1% of net sales) in
2007. Direct Brands segment adjusted operating income in the second quarter
was $27 million (4.7% of adjusted net sales) compared to $36 million (7.3%
of adjusted net sales) in 2007.
-- Partnered Brands segment operating loss in the second quarter was
($38) million ((9.9)% of net sales), compared to an operating loss of ($5)
million ((0.9)% of net sales) in 2007. Partnered Brands segment adjusted
operating loss in the second quarter was ($6) million ((1.6)% of adjusted
net sales) compared to an adjusted operating profit of $10 million (1.7% of
adjusted net sales) in 2007.
* Expenses associated with our streamlining and brand-exiting
activities were $47 million in the second quarter of 2008 compared to $21
million in the second quarter of 2007. For the first six months of 2008,
expenses associated with our streamlining and brand-exiting activities were
$110 million compared to $31 million in the first six months of 2007.
* Inventories decreased 26.0% to $497 million compared to the second
quarter of 2007, primarily reflecting decreases in our Partnered Brands
segment, including the impact of brands sold, discontinued, or licensed,
partially offset by increases in our Direct Brands segment. Inventories of
ongoing Partnered Brands decreased 41.4% compared to the second quarter of
2007. The impact of changes in foreign currency exchange rates increased
inventories by $22 million, or 3.2%, in the second quarter of 2008 compared
to the second quarter of 2007.
* Cash flow from continuing operating activities for the last twelve
months was $254 million.
* We ended the quarter with $100 million in cash and with $898 million
of debt outstanding. Our total debt to total capital ratio was 38.6% in the
second quarter compared to 25.4% in 2007, primarily reflecting the impact
of the 2007 goodwill impairment in addition to share repurchases, capital
expenditures and acquisition-related payments over the last 12 months.
SECOND QUARTER RESULTS
Overall Results
Net sales from continuing operations for the second quarter of 2008
were $974 million, a decrease of $75 million, or 7.1% from the second
quarter of 2007, due to decreases in our Partnered Brands segment, offset
by increases in our Direct Brands segment. Net sales were inclusive of a
$47 million decrease associated with brands or certain brand activities
that have been closed / exited and have not been presented as part of
discontinued operations. The impact of changes in foreign currency exchange
rates in our international businesses increased net sales by approximately
$43 million, or 4.1%, during the quarter.
Gross profit as a percent of net sales was 47.4% in 2008 compared to
49.3% in the second quarter of 2007, principally reflecting decreased gross
profit rates in our Direct and Partnered Brands segments, partially offset
by an increased proportion of sales from our Direct Brands segment, which
runs at a higher gross profit rate than the company average.
Selling, General & Administrative expenses ("SG&A") were $487 million,
or 50.1% of net sales in 2008, compared to $492 million, or 46.9% of net
sales in the second quarter of 2007, primarily reflecting the following:
* a $26 million increase due to the impact of changes in foreign
currency exchange rates in our international operations;
* a $17 million increase associated with retail expansion in our Direct
Brands segment;
* a $16 million increase in Direct Brands SG&A;
* a $13 million year over year increase in expenses associated with our
streamlining and brand-exiting activities; and
* a ($78) million decrease in Partnered Brands and corporate SG&A.
Operating loss was ($26) million ((2.6)% of net sales) in the second
quarter of 2008 compared to operating income of $25 million (2.4% of net
sales) in the second quarter of 2007. Adjusted operating income in the
second quarter was $21 million (2.2% of adjusted net sales) compared to $45
million (4.4% of adjusted net sales) in 2007. The impact of changes in
foreign currency exchange rates in our international businesses was
immaterial during the quarter.
Income taxes in the second quarter of 2008 decreased by $25 million to
a tax benefit of $20 million compared to a tax expense of $5 million in the
second quarter of 2007. The tax benefit increased by $2 million as a result
of discrete items which along with changes to the mix and amounts of
pre-tax earnings increased our tax rate in the second quarter of 2008 to a
benefit of 55.2% from a tax rate of 35.2% in the second quarter of 2007.
Loss from Continuing Operations in the second quarter of 2008 was ($16)
million, or ($0.17) per share, compared to income from continuing
operations in the second quarter of 2007 of $10 million, or $0.10 per
share. Adjusted diluted EPS from continuing operations in the second
quarter of 2008 were $0.09 compared to adjusted diluted EPS from continuing
operations of $0.23 in the second quarter of 2007.
Net loss in the second quarter of 2008 was ($23) million, inclusive of
losses related to discontinued operations of ($7) million, compared to net
income of $14 million in the second quarter of 2007, inclusive of income
from discontinued operations of $4 million. Loss per share was ($0.25) in
the second quarter of 2008 compared to diluted EPS of $0.13 in the second
quarter of 2007.
Segment Highlights
Direct Brands
Net sales in our Direct Brands segment in the second quarter were $584
million, increasing $90 million, or 18.2%.
Net sales for Mexx were $289 million, an 8.8% increase compared to
2007. Excluding the impact of changes in foreign currency exchange rates,
net sales for Mexx were $253 million, a 4.9% decrease compared to last
year.
-- We ended the quarter with 133 specialty stores, 95 outlets and 284
concessions, reflecting the net addition over the last 12 months of 10
outlet stores and the net closure of 22 concessions;
-- Average retail square footage in the second quarter was
approximately 1.446 million square feet, a 9% increase compared to 2007;
-- Sales per square foot for comparable stores over the latest twelve
months was $467; and
-- Comparable store sales decreased 2% in the second quarter,
reflecting comparable store sales decreases in our Mexx Europe business,
partially offset by increases in our Mexx Canada business.
Net sales for Juicy Couture were $148 million, a 47.4% increase
compared to 2007, primarily driven by increases in retail, outlet,
wholesale apparel and non-apparel.
-- We ended the quarter with 48 specialty stores and 25 outlet stores,
reflecting the net addition over the last 12 months of 22 specialty stores
and 12 outlet stores;
-- Average retail square footage in the second quarter was
approximately 235 thousand square feet, a 126% increase compared to 2007;
-- Sales per square foot for comparable stores over the latest twelve
months was $1,278; and
-- Comparable store sales increased 13% in the second quarter.
Net sales for Lucky Brand were $118 million, a 9.3% increase compared
to 2007, primarily driven by increases in retail and outlet, partially
offset by decreases in wholesale apparel and wholesale non-apparel.
-- We ended the quarter with 179 specialty stores and 29 outlet stores,
reflecting the net addition over the last 12 months of 32 specialty stores
and 22 outlet stores;
-- Average retail square footage in the second quarter was
approximately 457 thousand square feet, a 29% increase compared to 2007;
-- Sales per square foot for comparable stores over the latest twelve
months was $620; and
-- Comparable store sales increased 5% in the second quarter.
Net sales for Kate Spade were $30 million, a 44.5% increase compared to
2007, primarily driven by increases in retail and outlet.
-- We ended the quarter with 33 specialty stores and 23 outlet stores,
reflecting the net addition over the last 12 months of 13 specialty stores
and 19 outlet stores;
-- Average retail square footage in the second quarter was
approximately 102 thousand square feet, a 97% increase compared to 2007;
-- Sales per square foot for comparable stores over the latest twelve
months was $752; and
-- Comparable store sales decreased 7% in the second quarter.
Direct Brands segment operating income in the second quarter was $13
million (2.2% of net sales), compared to $30 million (6.1% of net sales) in
2007. Direct Brands segment adjusted operating income in the second quarter
was $27 million (4.7% of adjusted net sales) compared to $36 million (7.3%
of adjusted net sales) in 2007.
Partnered Brands
Net sales from continuing operations in our Partnered Brands segment
decreased $165 million, or 29.7%, in the second quarter to $390 million,
inclusive of a $47 million decrease associated with brands or certain brand
activities that have been closed / exited and have not been presented as
part of discontinued operations.
-- The $165 million decrease in net sales in our Partnered Brands
segment was primarily due to decreases in our Liz Claiborne, Claiborne,
Enyce, Monet, Ellen Tracy and Sigrid Olsen brands, partially offset by
increases in our Liz & Co., licensed DKNY Jeans and Kensie brands.
Partnered Brands segment operating loss in the second quarter was ($38)
million ((9.9)% of net sales), compared to an operating loss of ($5)
million ((0.9)% of net sales) in 2007. Partnered Brands segment adjusted
operating loss in the second quarter was ($6) million ((1.6%) of adjusted
net sales) compared to an operating profit of $10 million (1.7% of adjusted
net sales) in 2007.
FIRST SIX MONTHS RESULTS
Overall Results
Net sales from continuing operations for the first six months of 2008
were $2.088 billion, a decrease of $24 million, or 1.2% from the first six
months of 2007, primarily due to decreases in our Partnered Brands segment,
offset by increases in our Direct Brands segment. Net sales were inclusive
of an $81 million decrease associated with brands or certain brand
activities that have been closed / exited and have not been presented as
part of discontinued operations. The impact of changes in foreign currency
exchange rates in our international businesses increased net sales by
approximately $95 million, or 4.5%, in the first six months of 2008.
Net sales for our Direct Brands segment in the first six months of 2008
were as follows:
-- Mexx - $631 million, a 14.4% increase compared to last year.
Excluding the impact of changes in foreign currency exchange rates, net
sales for Mexx were $550 million, a 0.3% decrease compared to last year.
-- Juicy Couture - $288 million, a 52.2% increase compared to last year.
-- Lucky Brand - $228 million, a 14.7% increase compared to last year.
-- Kate Spade - $57 million, a 44.3% increase compared to last year.
Operating loss was ($47) million ((2.3)% of net sales) in the first six
months of 2008 compared to an operating profit of $55 million (2.6% of net
sales) in 2007. Adjusted operating income in the first six months of 2008
was $63 million (3.0% of adjusted net sales) compared to $86 million (4.1%
of adjusted net sales) in 2007. The impact of changes in foreign currency
exchange rates in our international businesses increased operating income
by approximately $2 million in the first six months of 2008.
Direct Brands segment operating income in the first six months of 2008
was $40 million (3.3% of net sales) compared to $80 million (8.2% of net
sales) in 2007. Direct Brands segment adjusted operating income in the
first six months of 2008 was $66 million (5.5% of net sales) compared to
$86 million (8.8% of net sales) in 2007.
Partnered Brands segment operating loss in the first six months of 2008
was ($87) million ((9.9)% of net sales) compared to an operating loss of
($25) million ((2.2)% of net sales) in 2007. Partnered Brands segment
adjusted operating loss in the first six months of 2008 was ($4) million
((0.4)% of adjusted net sales) compared to adjusted operating income of
$0.4 million in 2007.
Income taxes in the first half of 2008 decreased by $59 million to a
tax benefit of $43 million compared to a tax expense of $16 million in the
first half of 2007. The tax benefit increased by $14 million as a result of
discrete items which along with changes to the mix and amounts of pre-tax
earnings increased our tax rate in the first half of 2008 to a benefit of
59.3% from a tax rate of 42.9% in the second quarter of 2007.
Net loss in the first six months of 2008 was ($54) million compared to
net income of $30 million in 2007. Loss per share was ($0.58) in the first
six months of 2008 compared to diluted EPS of $0.29 in 2007. Adjusted
diluted EPS in 2008 were $0.37 compared to adjusted diluted EPS of $0.40 in
2007.
Bank Credit Facility Amendment
On August 12, 2008, the Company entered into a second amendment to its
revolving credit facility, whereby it modified certain existing financial
and other covenants, added an additional financial covenant relating to
asset coverage, modified the facility's fee structure and agreed to provide
its banks with security in substantially all of its assets in the event it
fails to achieve a specified leverage ratio. The amendment also provides
for the exclusion of additional cash restructuring charges in the
calculation of certain financial covenants. A copy of such amendment will
be filed with today's Quarterly Report on Form 10-Q.
About Liz Claiborne Inc.
Liz Claiborne Inc. designs and markets a global portfolio of
retail-based premium brands including Kate Spade, Juicy Couture, Lucky
Brand and Mexx. The Company also has a refined group of department
store-based brands with strong consumer franchises including the Liz
Claiborne and Monet families of brands, Enyce, Kensie, Kensiegirl, Mac &
Jac, Narciso Rodriguez and the licensed DKNY Jeans Group. For more
information visit http://www.lizclaiborneinc.com .
Forward-Looking Statement
Statements contained herein that relate to future events or the
Company's future performance, including, without limitation, statements
with respect to the Company's anticipated results of operations or level of
business for 2008 or any other future period, are forward-looking
statements within the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements are based on current
expectations only and are not guarantees of future performance, and are
subject to certain risks, uncertainties and assumptions. The Company may
change its intentions, belief or expectations at any time and without
notice, based upon any change in the Company's assumptions or otherwise.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or projected. In addition, some factors
are beyond the Company's control. Among the factors that could cause actual
results to materially differ include: risks associated with the current
macroeconomic conditions, including the possibility of a recession in the
United States and the rising price of fuel; risks related to the
reorganization of the Company into two segments and the related realignment
of the Company's management structure; risks associated with the Company's
ability to attract and retain talented, highly qualified executives and
other key personnel; risks associated with providing for the succession of
senior management; risks associated with the Company's ability to execute
successfully on its previously announced long-term growth plan; risks
associated with the Company's recently completed strategic review of
brands, including whether the Company identified the appropriate brands for
review or appropriately valued assets related to brands sold or licensed to
third parties; risks associated with the Company's operation and expansion
of its specialty retail business, including the ability to successfully
expand the specialty retail store base of its Direct Brands segment and to
develop best-in-class retail capabilities; risks associated with the
Company's ability to achieve greater collaboration with its wholesale
customers; risks associated with the Company's ability to achieve projected
cost savings; the Company's ability to continue to have the liquidity
necessary, through cash flow from operations and financing, to fund its
plans may be adversely impacted by a number of factors, including
maintenance of financial covenants (as amended) of our debt and credit
facilities, interest rate and exchange rate fluctuations, and the further
downgrading of the Company's credit rating; risks associated with the
continuing challenging retail conditions, including the levels of consumer
confidence and discretionary spending and the levels of customer traffic
within department stores, malls and other shopping and selling
environments; risks related to the Company's ability to successfully
continue to evolve its supply chain system, including its product
development, sourcing, logistics and technology functions, to, among other
things, reduce product cycle-time and costs and meet customer demands and
the requirements of the projected growth in the Company's specialty retail
business; risks associated with selling the Company's Liz & Co. and
Concepts by Claiborne brands outside of better department stores; risks
associated with the Company's Liz Claiborne and Claiborne branded products
association with known designers and customer acceptance of the resulting
products; risks associated with the Company's dependence on sales to a
limited number of large United States department store customers; the
impact of consolidation, restructurings and other ownership changes, and,
financial difficulties, including bankruptcies, in the retail industry; the
Company's ability to respond to constantly changing consumer demands and
tastes and fashion trends, across multiple product lines, shopping channels
and geographies; risks related to retailer and consumer acceptance of the
Company's products; risks associated with the possible failure of the
Company's unaffiliated manufacturers to manufacture and deliver products in
a timely manner, to meet quality or safety standards or to comply with
Company policies regarding labor practices or applicable laws or
regulations; risks related to the Company's ability to adapt to and compete
effectively in the current quota environment, including changes in sourcing
patterns resulting from the elimination of quota on apparel products as
well as lowered barriers to entry; risks associated with the Company's
ability to maintain and enhance favorable brand recognition; risks
associated with the Company's ability to correctly balance the level of its
commitments with actual orders; risks associated with the Company's ability
to identify appropriate business development opportunities and risks
associated with acquisitions and new product lines, product categories and
markets, including risks relating to integration of acquisitions, retaining
and motivating key personnel of acquired businesses and achieving projected
or satisfactory levels of sales, profits and/or return on investment, and
risks inherent in licensing arrangements such as the Company's license of
the DKNY Jeans and DKNY Active brands and the license with Elizabeth Arden;
risks associated with any significant disruptions in the Company's
relationship with its employees or with its relationship with the unions
which represent certain Company employees; risks associated with changes in
social, political, economic, legal and other conditions affecting foreign
operations, sourcing or international trade, including the impact of
foreign currency exchange rates, and currency devaluations in countries in
which the Company sources product and risks associated with the importation
and exportation of product; risks associated with war, the threat of war
and terrorist activities; work stoppages or slowdowns by suppliers or
service providers; risks relating to protecting and managing the Company's
intellectual property rights; and such other economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices and such other factors as are set
forth in the Company's Quarterly Report on Form 10-Q for the quarter ended
July 5, 2008, including under the section captioned "Item 1A. Risk
Factors", and in the Company's 2007 Annual Report on Form 10-K, including,
without limitation, those set forth under the headings "Risk Factors" and
"Statement Regarding Forward-Looking Disclosure." The Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
LIZ CLAIBORNE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per common share data)
(Unaudited)
Three Months Ended Three Months Ended
July 5, 2008 % of June 30, 2007 % of
(13 weeks) Sales (13 weeks) Sales
Net Sales $973,766 100.0 % $1,048,545 100.0 %
Cost of goods sold 512,054 52.6 % 531,678 50.7 %
Gross Profit 461,712 47.4 % 516,867 49.3 %
Selling, general &
administrative expenses 487,479 50.1 % 492,081 46.9 %
Operating (Loss) Income (25,767) (2.6)% 24,786 2.4 %
Other (expense) income, net (925) (0.1)% 335 -
Interest expense, net (9,770) (1.0)% (9,816) (0.9)%
(Loss) Income Before (Benefit)
Provision for Income Taxes (36,462) (3.7)% 15,305 1.5 %
(Benefit) provision for
income taxes (20,127) (2.1)% 5,386 0.5 %
(Loss) Income from
Continuing Operations (16,335) (1.7)% 9,919 0.9 %
(Loss) income from
discontinued operations,
net of tax (5,134) 3,712
Loss on disposal of
discontinued operations,
net of tax (1,694) -
Net (Loss) Income $(23,163) $13,631
Earnings per Share:
Basic
(Loss) Income from
Continuing Operations $(0.17) $0.10
(Loss) Income from
Discontinued Operations (0.06) 0.03
Loss on Disposal of
Discontinued Operations (0.02) -
Net (Loss) Income $(0.25) $0.13
Diluted
(Loss) Income from
Continuing Operations $(0.17) $0.10
(Loss) Income from
Discontinued Operations (0.06) 0.03
Loss on Disposal of
Discontinued Operations (0.02) -
Net (Loss) Income $(0.25) $0.13
Weighted Average Shares,
Basic (1) 93,638 101,855
Weighted Average Shares,
Diluted (1) 93,638 102,828
Supplemental Information:
Dividends Paid per Common Share
(Rounded to the nearest penny) $0.06 $0.06
(1) Because the Company incurred a loss from continuing operations in
2008, all outstanding stock options and restricted shares are
antidilutive. Accordingly, basic and diluted weighted average
shares outstanding are equal for such period.
LIZ CLAIBORNE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per common share data)
(Unaudited)
Six Months Ended Six Months Ended
July 5, 2008 % of June 30, 2007 % of
(27 weeks) Sales (26 weeks) Sales
Net Sales $2,088,303 100.0 % $2,112,684 100.0 %
Cost of goods sold 1,098,825 52.6 % 1,099,988 52.1 %
Gross Profit 989,478 47.4 % 1,012,696 47.9 %
Selling, general &
administrative expenses 1,036,577 49.6 % 957,275 45.3 %
Operating (Loss) Income (47,099) (2.3)% 55,421 2.6 %
Other expense, net (3,672) (0.2)% (394) -
Interest expense, net (21,873) (1.0)% (18,347) (0.9)%
(Loss) Income Before (Benefit)
Provision for Income Taxes (72,644) (3.5)% 36,680 1.7 %
(Benefit) provision for
income taxes (43,060) (2.1)% 15,734 0.7 %
(Loss) Income from
Continuing Operations (29,584) (1.4)% 20,946 1.0 %
(Loss) income from
discontinued operations,
net of tax (10,703) 8,883
Loss on disposal of
discontinued operations,
net of tax (13,897) -
Net (Loss) Income $(54,184) $29,829
Earnings per Share:
Basic
(Loss) Income from
Continuing Operations $(0.32) $0.20
(Loss) Income from
Discontinued Operations (0.11) 0.09
Loss on Disposal of
Discontinued Operations (0.15) -
Net (Loss) Income $(0.58) $0.29
Diluted
(Loss) Income from
Continuing Operations $(0.32) $0.20
(Loss) Income from
Discontinued Operations (0.11) 0.09
Loss on Disposal of
Discontinued Operations (0.15) -
Net (Loss) Income $(0.58) $0.29
Weighted Average Shares,
Basic (1) 93,202 101,825
Weighted Average Shares,
Diluted (1) 93,202 102,978
Supplemental Information:
Dividends Paid per Common
Share (Rounded to the
nearest penny) $0.11 $0.11
(1) Because the Company incurred a loss from continuing operations in
2008, all outstanding stock options and restricted shares are
antidilutive. Accordingly, basic and diluted weighted average
shares outstanding are equal for such period.
LIZ CLAIBORNE INC.
CONSOLIDATED BALANCE SHEETS
(All dollar amounts in thousands)
(Unaudited)
July 5, 2008 June 30, 2007
Assets
Current Assets:
Cash and cash equivalents $100,380 $110,288
Accounts receivable - trade, net 439,459 500,295
Inventories, net 496,878 671,850
Deferred income taxes 100,603 78,594
Other current assets 301,670 161,586
Assets held for sale 5,273 -
Total current assets 1,444,263 1,522,613
Property and Equipment, net 595,819 567,869
Goodwill and Intangibles, net 995,015 1,460,084
Other Assets 36,854 21,382
Total Assets $3,071,951 $3,571,948
Liabilities and Stockholders' Equity
Current Liabilities $693,976 $609,559
Long-Term Debt 811,294 683,545
Other Non-Current Liabilities 114,550 104,131
Deferred Income Taxes 17,009 66,571
Minority Interest 3,873 3,489
Stockholders' Equity 1,431,249 2,104,653
Total Liabilities and Stockholders' Equity $3,071,951 $3,571,948
LIZ CLAIBORNE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
(Unaudited)
Six Months Ended
July 5, 2008 June 30, 2007
(27 Weeks) (26 Weeks)
Cash Flows from Operating Activities:
Net (loss) income $(54,184) $29,829
Adjustments to arrive at (loss)
income from continuing operations 24,600 (8,883)
(Loss) income from continuing
operations (29,584) 20,946
Adjustments to reconcile (loss)
income from continuing operations to
net cash used in operating activities:
Depreciation and amortization 81,757 75,825
Streamlining initiatives;
asset write-down 2,805 -
Loss on asset disposals 12,855 9,691
Share-based compensation 8,015 10,365
Tax benefit on exercise of
stock options 7 4,615
Other, net (47) (784)
Changes in assets and liabilities,
exclusive of acquisitions:
Decrease in accounts
receivable - trade, net 9,343 3,577
Decrease (increase) in
inventories, net 37,272 (70,930)
Increase in other current
and non-current assets (5,464) (9,379)
Decrease in accounts payable (30,630) (2,513)
Decrease in accrued expenses (58,941) (47,273)
Net change in income tax
assets and liabilities (71,245) (29,244)
Net cash (used in) provided by
operating activities of
discontinued operations (12,016) 12,281
Net cash used in
operating activities (55,873) (22,823)
Cash Flows from Investing Activities:
Proceeds from disposition 21,252 -
Purchases of property and equipment (86,853) (67,193)
Purchases of businesses and
payment of related debt (5,137) (48,262)
Payments for in-store merchandise shops (3,133) (2,532)
Proceeds from sales of securities - 9,616
Proceeds from sales of property
and equipment - 1,410
Other, net (430) 153
Net cash provided by (used in) investing
activities of discontinued operations 64,913 (672)
Net cash used in
investing activities (9,388) (107,480)
LIZ CLAIBORNE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(All dollar amounts in thousands)
(Unaudited)
Six Months Ended
July 5, 2008 June 30, 2007
(27 Weeks) (26 Weeks)
Cash Flows from Financing Activities:
Short term borrowings, net (27,005) 12,252
Principal payments under
capital lease obligations (2,094) (3,188)
Commercial paper, net - 104,313
Proceeds from exercise of
common stock options 51 35,286
Purchase of common stock - (81,560)
Dividends paid (10,525) (11,432)
Excess tax benefit related to
share-based compensation - 2,521
Other, net (1,110) (747)
Net cash (used in) provided
by financing activities (40,683) 57,445
Effect of exchange rate changes
on cash and cash equivalents 923 (2,499)
Net Change in Cash and Cash Equivalents (105,021) (75,357)
Cash and Cash Equivalents at
Beginning of Period 205,401 185,645
Cash and Cash Equivalents at End
of Period $100,380 $110,288
LIZ CLAIBORNE INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(All amounts in thousands, except per common share data)
(Unaudited)
The following tables provide reconciliations of (Loss) Income from
Continuing Operations to Income from Continuing Operations Excluding
Streamlining Initiatives and Brand-Exiting Activities and of Operating
(Loss) Income to Income from Continuing Operations Excluding Streamlining
Initiatives and Brand-Exiting Activities.
Three Months Ended Six Months Ended
July 5, June 30, July 5, June 30,
2008 2007 2008 2007
(13 weeks)(13 weeks)(27 weeks)(26 weeks)
(Loss) Income from
Continuing Operations $(16,335) $9,919 $(29,584) $20,946
Streamlining initiatives and
brand-exiting activities (1) 46,777 20,667 109,716 30,814
Provision for income taxes (22,162) (7,121) (46,020) (10,774)
Income from Continuing
Operations Excluding
Streamlining Initiatives
and Brand-Exiting Activities $8,280 $23,465 $34,112 $40,986
Operating (Loss) Income $(25,767) $24,786 $(47,099) $55,421
Streamlining initiatives and
brand-exiting activities (1) 46,777 20,667 109,716 30,814
Operating Income Excluding
Streamlining Initiatives
and Brand-Exiting Activities 21,010 45,453 62,617 86,235
Interest expense, net 9,770 9,816 21,873 18,347
Other expense (income), net 925 (335) 3,672 394
Provision for income taxes (2,035) (12,507) (2,960) (26,508)
Income from Continuing Operations
Excluding Streamlining Initiatives
and Brand-Exiting Activities $8,280 $23,465 $34,112 $40,986
Basic Earnings per Common Share
from Continuing Operations
Excluding Streamlining Initiatives
and Brand-Exiting Activities $0.09 $0.23 $0.37 $0.40
Diluted Earnings per Common Share
from Continuing Operations
Excluding Streamlining Initiatives
and Brand-Exiting Activities (2) $0.09 $0.23 $0.37 $0.40
(1) During the three and six months ended July 5, 2008 and June 30,
2007, the Company recorded expenses related to its streamlining
initiatives and/or brand-exiting activities as follows:
Three Months Ended Six Months Ended
July 5, June 30, July 5, June 30,
2008 2007 2008 2007
(13 weeks)(13 weeks)(27 weeks)(26 weeks)
Payroll, lease terminations
and asset write-downs $21,550 $20,460 $59,669 $27,437
Store closure and other costs 25,227 207 50,047 3,377
$46,777 $20,667 $109,716 $30,814
(2) Amounts for the three and six months ended July 5, 2008 are based
on 93,704 and 93,362 weighted average shares outstanding,
respectively.
LIZ CLAIBORNE INC.
SEGMENT REPORTING
(All dollar amounts in thousands)
(Unaudited)
Three Months Ended Three Months Ended
July 5, 2008 % to June 30, 2007 % to
(13 weeks) Total (13 weeks) Total
NET SALES:
Direct Brands $584,180 60.0 % $494,066 47.1 %
Partnered Brands 389,586 40.0 % 554,479 52.9 %
Total Net Sales $973,766 100.0 % $1,048,545 100.0 %
Three Months Ended Three Months Ended
July 5, 2008 % to June 30, 2007 % to
(13 weeks) Sales (13 weeks) Sales
OPERATING (LOSS) INCOME:
Direct Brands $12,650 2.2 % $29,934 6.1 %
Partnered Brands (38,417) (9.9)% (5,148) (0.9)%
Total Operating
(Loss) Income $(25,767) (2.6)% $24,786 2.4 %
Three Months Ended Three Months Ended
July 5, 2008 % to June 30, 2007 % to
(13 weeks) Total (13 weeks) Total
NET SALES:
Domestic $627,918 64.5 % $729,490 69.6 %
International 345,848 35.5 % 319,055 30.4 %
Total Net Sales $973,766 100.0 % $1,048,545 100.0 %
Three Months Ended Three Months Ended
July 5, 2008 % to June 30, 2007 % to
(13 weeks) Sales (13 weeks) Sales
OPERATING (LOSS) INCOME:
Domestic $(29,828) (4.8)% $12,883 1.8 %
International 4,061 1.2 % 11,903 3.7 %
Total Operating
(Loss) Income $(25,767) (2.6)% $24,786 2.4 %
LIZ CLAIBORNE INC.
SEGMENT REPORTING
(All dollar amounts in thousands)
(Unaudited)
Six Months Ended Six Months Ended
July 5, 2008 % to June 30, 2007 % to
(27 weeks) Total (26 weeks) Total
NET SALES:
Direct Brands $1,204,330 57.7 % $979,671 46.4 %
Partnered Brands 883,973 42.3 % 1,133,013 53.6 %
Total Net Sales $2,088,303 100.0 % $2,112,684 100.0 %
Six Months Ended Six Months Ended
July 5, 2008 % to June 30, 2007 % to
(27 weeks) Sales (26 weeks) Sales
OPERATING (LOSS) INCOME:
Direct Brands $40,023 3.3 % $79,984 8.2 %
Partnered Brands (87,122) (9.9)% (24,563) (2.2)%
Total Operating
(Loss) Income $(47,099) (2.3)% $55,421 2.6 %
Six Months Ended Six Months Ended
July 5, 2008 % to June 30, 2007 % to
(27 weeks) Total (26 weeks) Total
NET SALES:
Domestic $1,343,558 64.3 % $1,449,162 68.6 %
International 744,745 35.7 % 663,522 31.4 %
Total Net Sales $2,088,303 100.0 % $2,112,684 100.0 %
Six Months Ended Six Months Ended
July 5, 2008 % to June 30, 2007 % to
(27 weeks) Sales (26 weeks) Sales
OPERATING (LOSS) INCOME:
Domestic $(61,840) (4.6)% $30,795 2.1 %
International 14,741 2.0 % 24,626 3.7 %
Total Operating
(Loss) Income $(47,099) (2.3)% $55,421 2.6 %
LIZ CLAIBORNE INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
SEGMENT REPORTING
(All dollar amounts in thousands)
(Unaudited)
The following tables provide reconciliations of Net Sales to Adjusted
Net Sales, which excludes Store Closure and Brand-Exiting Activities and of
Operating Income (Loss) to Adjusted Operating Income (Loss), which excludes
Streamlining Initiatives and Bran
Three Months Ended
July 5, 2008 (13 weeks)
Direct Partnered
Brands Brands Total
Net Sales:
As Reported $584,180 $389,586 $973,766
Store Closure and Brand-Exiting
Activities (5,731) (9,921) (15,652)
Adjusted Net Sales $578,449 $379,665 $958,114
Operating Income (Loss):
As Reported $12,650 $(38,417) $(25,767)
Streamlining Initiatives and
Brand-Exiting Activities 14,318 32,459 46,777
Adjusted Operating Income $26,968 $(5,958) $21,010
% of Adjusted Net Sales 4.7 % (1.6)% 2.2 %
Three Months Ended
June 30, 2007 (13 weeks)
Direct Partnered
Brands Brands Total
Net Sales:
As Reported $494,066 $554,479 $1,048,545
Store Closure Adjustments - (4,378) (4,378)
Adjusted Net Sales $494,066 $550,101 $1,044,167
Operating Income (Loss):
As Reported $29,934 $(5,148) $24,786
Streamlining Initiatives 5,899 14,768 20,667
Adjusted Operating Income (Loss) $35,833 $9,620 $45,453
% of Adjusted Net Sales 7.3 % 1.7 % 4.4 %
LIZ CLAIBORNE INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
SEGMENT REPORTING
(All dollar amounts in thousands)
(Unaudited)
The following tables provide reconciliations of Net Sales to Adjusted
Net Sales, which excludes Store Closure and Brand-Exiting Activities and of
Operating Income (Loss) to Adjusted Operating Income (Loss), which excludes
Streamlining Initiatives and Brand-Exiting Activities.
Six Months Ended
July 5, 2008 (27 weeks)
Direct Partnered
Brands Brands Total
Net Sales:
As Reported $1,204,330 $883,973 $2,088,303
Store Closure and Brand-Exiting
Activities (5,731) (26,218) (31,949)
Adjusted Net Sales $1,198,599 $857,755 $2,056,354
Operating Income (Loss):
As Reported $40,023 $(87,122) $(47,099)
Streamlining Initiatives and
Brand-Exiting Activities 26,274 83,442 109,716
Adjusted Operating Income $66,297 $(3,680) $62,617
% of Adjusted Net Sales 5.5 % (0.4)% 3.0 %
Six Months Ended
June 30, 2007 (26 weeks)
Direct Partnered
Brands Brands Total
Net Sales:
As Reported $979,671 $1,133,013 $2,112,684
Store Closure Adjustments - (11,029) (11,029)
Adjusted Net Sales $979,671 $1,121,984 $2,101,655
Operating Income:
As Reported $79,984 $(24,563) $55,421
Streamlining Initiatives 5,899 24,915 30,814
Adjusted Operating Income $85,883 $352 $86,235
% of Adjusted Net Sales 8.8 % - 4.1 %
LIZ CLAIBORNE INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
SEGMENT REPORTING
(All dollar amounts in thousands)
(Unaudited)
The following tables provide reconciliations of Net Sales to Adjusted
Net Sales, which excludes Store Closure and Brand-Exiting Activities and of
Operating Income (Loss) to Adjusted Operating Income (Loss), which excludes
Streamlining Initiatives and Bran
Three Months Ended
July 5, 2008 (13 weeks)
Domestic International Total
Net Sales:
As Reported $627,918 $345,848 $973,766
Store Closure and Brand-Exiting
Activities (9,362) (6,290) (15,652)
Adjusted Net Sales $618,556 $339,558 $958,114
Operating (Loss) Income:
As Reported $(29,828) $4,061 $(25,767)
Streamlining Initiatives and
Brand-Exiting Activities 41,070 5,707 46,777
Adjusted Operating Income $11,242 $9,768 $21,010
% of Adjusted Net Sales 1.8 % 2.9 % 2.2 %
Three Months Ended
June 30, 2007 (13 weeks)
Domestic International Total
Net Sales:
As Reported $729,490 $319,055 $1,048,545
Store Closure Adjustments (4,378) - (4,378)
Adjusted Net Sales $725,112 $319,055 $1,044,167
Operating Income:
As Reported $12,883 $11,903 $24,786
Streamlining Initiatives 14,439 6,228 20,667
Adjusted Operating Income $27,322 $18,131 $45,453
% of Adjusted Net Sales 3.8 % 5.7 % 4.4 %
LIZ CLAIBORNE INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
SEGMENT REPORTING
(All dollar amounts in thousands)
(Unaudited)
The following tables provide reconciliations of Net Sales to Adjusted
Net Sales, which excludes Store Closure and Brand-Exiting Activities and of
Operating Income (Loss) to Adjusted Operating Income (Loss), which excludes
Streamlining Initiatives and Bran
Six Months Ended
July 5, 2008 (27 weeks)
Domestic International Total
Net Sales:
As Reported $1,343,558 $744,745 $2,088,303
Store Closure and Brand-Exiting
Activities (24,993) (6,956) (31,949)
Adjusted Net Sales $1,318,565 $737,789 $2,056,354
Operating (Loss) Income:
As Reported $(61,840) $14,741 $(47,099)
Streamlining Initiatives and
Brand-Exiting Activities 96,436 13,280 109,716
Adjusted Operating Income $34,596 $28,021 $62,617
% of Adjusted Net Sales 2.6 % 3.8 % 3.0 %
Six Months Ended
June 30, 2007 (26 weeks)
Domestic International Total
Net Sales:
As Reported $1,449,162 $663,522 $2,112,684
Store Closure Adjustments (11,029) - (11,029)
Adjusted Net Sales $1,438,133 $663,522 $2,101,655
Operating Income:
As Reported $30,795 $24,626 $55,421
Streamlining Initiatives 23,821 6,993 30,814
Adjusted Operating Income $54,616 $31,619 $86,235
% of Adjusted Net Sales 3.8 % 4.8 % 4.1 %
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