Exhibit 99.1
Investor Relations Contact: Media Contact:
Robert J. Vill Jane Randel
Vice President - Finance and Treasurer Vice President, Public Relations
Liz Claiborne Inc. Liz Claiborne Inc.
201.295.7515 212.626.3408
LIZ CLAIBORNE INC. POSTS RECORD 2nd QUARTER SALES AND EPS
---------------------------------------------------------
o REPORTS DILUTED EPS OF $0.50 VERSUS $0.46 IN 2nd QUARTER 2004
-------------------------------------------------------------
o INCREASES EPS GUIDANCE FOR FISCAL 2005 TO A RANGE OF $2.98 TO $3.04
-------------------------------------------------------------------
o REPURCHASES 2.8 MM SHARES IN THE QUARTER FOR APPROXIMATELY $105 MM
------------------------------------------------------------------
New York, NY July 27, 2005 - Liz Claiborne Inc. (NYSE:LIZ) announced today
diluted earnings per share ("EPS") of $0.50 for the second quarter 2005, an
increase of 8.7%, compared to diluted EPS of $0.46 for the second quarter 2004.
Net sales for the second quarter 2005 were a record $1.1 billion, up 7.1% over
the comparable 2004 period.
The Company will sponsor a conference call today at 10:00 am EDT to discuss its
second quarter 2005 results. This call will be webcast to the general public and
can be accessed via the Investor Relations section of the Liz Claiborne website
at www.lizclaiborneinc.com. An archive of the webcast will be available through
Wednesday, August 10, 2005.
Paul R. Charron, Chairman and Chief Executive Officer, stated: "We are pleased
to report these very strong second quarter results which once again were driven
by the strength of our balanced and diversified portfolio and disciplined
execution of our core strategies. Our ability to successfully execute our
multi-brand, multi-channel, multi-geography diversification strategy enabled us
to achieve record sales and EPS which exceeded the upper end of our forecasted
range. During the quarter, we returned $105 million of capital to our
shareholders through the repurchase of approximately 2.8 million shares of our
stock. Our ongoing focus on cash flow management continues to reap benefits, as
we have generated $424 million in cash from operations over the past 12 months,
providing us with the financial flexibility to continue to execute our
strategies."
Mr. Charron continued: "We are especially pleased that more than 70% of the
sales increase in the quarter was derived from growth in our existing
businesses, with significant contributions from numerous brands across our
portfolio. Notable performance was generated by our Mexx Europe, Juicy Couture,
J.H. Collectibles, Axcess women's and licensed DKNY(R) Jeans (both men's and
women's) wholesale apparel businesses, our cosmetics, Liz Claiborne and licensed
Kenneth Cole accessories wholesale non-apparel businesses, our Mexx Canada and
Lucky Brand retail businesses and our licensing business."
1
Mr. Charron concluded: "For fiscal 2005, we are adjusting our sales increase
guidance to a range of 6.0 - 7.5% and increasing our EPS guidance to a range of
$2.98 - $3.04, reflecting our continued strong performance and the effect of the
share repurchases in the second quarter, partially offset by the projected
negative second half impact of a stronger dollar. This guidance includes the
impact, which we estimate will be approximately $0.11, resulting from the early
adoption in the third quarter of 2005 of FASB 123R ("Accounting for Share-Based
Payment") as well as the shift in the composition of the Company's 2005
equity-based management compensation toward restricted stock and away from stock
options. We believe that it is appropriate to proceed with the adoption of FASB
123R in spite of the SEC's recent announcement delaying the effective date. It
is also important to note that the shift toward restricted stock should
ultimately reduce dilution and enhance shareholder value, as we expect that
fewer shares will be used for equity-based compensation purposes than in prior
years.
For the third quarter of 2005, we are providing our initial guidance,
forecasting a sales increase of 4 - 5% and EPS in the range of $1.06 - $1.09,
including the impact, which we estimate will be approximately $0.05, resulting
from the early adoption of FASB 123R and the shift in the composition of the
Company's 2005 equity-based management compensation discussed above. All of
these forward looking statements exclude the impact of any future acquisitions
or additional stock repurchases."
SECOND QUARTER RESULTS
- ----------------------
Net Sales
- ---------
Net sales for the second quarter of 2005 were a record $1.1 billion, an increase
of $73 million, or 7.1%, compared to the second quarter of 2004. The impact of
foreign currency exchange rates, primarily as a result of the strengthening of
the euro, in our international businesses added approximately $14 million in
sales during the quarter. Net sales results for our business segments are
provided below:
o Wholesale Apparel net sales increased $18 million, or 2.8%, to $653 million
------------------
as a result of:
- The inclusion of $4 million of sales from the acquired C & C California
business;
- A $6 million increase resulting from the impact of foreign currency
exchange rates in our international businesses;
- An $8 million net increase across our other wholesale apparel businesses,
primarily driven by increases in our Juicy Couture, Mexx Europe, licensed
DKNY(R) Jeans (both men's and women's), J.H. Collectibles, Lucky Brand,
Axcess (both men's and women's), Liz Claiborne Canada, Dana Buchman,
Sigrid Olsen and Crazy Horse men's businesses as well as the addition of
our Tint business, partially offset by decreases in our domestic Liz
Claiborne, Ellen Tracy and Enyce businesses as well as the impact of the
discontinuation of the Kenneth Cole womenswear license. Net sales in our
domestic Liz Claiborne business decreased 17.3% compared to last year.
o Wholesale Non-Apparel net sales increased $23 million, or 19.0%, to $141
----------------------
million, primarily due to increases in our cosmetics, Juicy Couture
accessories, Liz Claiborne and licensed Kenneth Cole jewelry and Crazy Horse
and Villager handbags businesses, as well as the addition of our First Issue
and Axcess handbags businesses. Net sales in our domestic Liz Claiborne
businesses increased 16.3% compared to last year.
The impact of foreign currency exchange rates in our international businesses
was not material in this segment.
2
o Retail net sales increased $30 million, or 11.5%, to $294 million as a result
------
of:
- A $7 million increase resulting from the impact of foreign currency
exchange rates in our international businesses;
- A $23 million net increase primarily driven by higher comparable store
sales in our specialty retail business (including a 30.8% comparable store
sales increase in our Lucky Brand business), and the net addition over the
last twelve months of 44 specialty retail and 30 outlet stores, reflecting
in part the opening of 16 Sigrid Olsen, 13 Mexx Europe, 11 Lucky Brand and
5 Mexx USA specialty retail stores, and 18 Liz Claiborne and 14 Mexx
outlet stores in the United States, Canada and Europe.
Comparable store sales in our Company-operated stores increased by 1.0%
overall, driven by a 10.7% increase in our specialty retail business,
partially offset by a 5.7% decrease in our outlet business. We ended the
quarter with a total of 303 outlet stores, 283 specialty retail stores and
610 international concession stores.
o Corporate net sales, consisting of licensing revenue, increased $2 million to
---------
$10 million as a result of new licenses and growth from our existing license
portfolio.
Gross Profit
- ------------
Gross profit increased $40 million, or 8.2%, to $529 million in the second
quarter of 2005 over the second quarter of 2004. Approximately $8 million of the
increase in the quarter was due to the impact of foreign currency exchange
rates, primarily as a result of the strengthening of the euro, in our
international businesses. Gross profit as a percent of net sales increased to
48.2% in 2005 from 47.7% in 2004. The increased gross profit rate reflected the
positive impact of lower sourcing costs and a changing mix within our portfolio,
primarily reflecting an increased proportion of sales from our Mexx Europe and
domestic specialty retail businesses, which run at higher gross profit rates
than the Company average, as well as a decreased proportion of sales from our
domestic Liz Claiborne apparel business, which runs at a lower gross profit rate
than the Company average, partially offset by the additional liquidation of
excess inventory.
Selling, General & Administrative Expenses
- ------------------------------------------
Selling, General & Administrative expenses ("SG&A") increased $34 million, or
8.4%, to $437 million, in the second quarter of 2005 over the second quarter of
2004 and as a percent of net sales was 39.8%, compared to 39.3% in the second
quarter of 2004 as a result of:
o The inclusion of $3 million of expenses from the acquired C & C California
business and the start-up of new businesses;
o A $7 million increase resulting from the impact of foreign currency
exchange rates, primarily as a result of the strengthening of the euro, in
our international businesses;
o The inclusion of an additional $2 million of expense resulting from the
migration of our equity-based management compensation plan primarily to
restricted stock;
o A $22 million net increase primarily resulting from the expansion of our
domestic and international retail businesses as well as the continued
investment in building a multi-brand platform in Europe.
The increased SG&A rate primarily reflected the impact of the increased
proportion of expenses described above related to our domestic specialty retail
and Mexx Europe businesses, which run at higher SG&A rates than the Company
average, and reduced expense leverage resulting from the decreased proportion of
expenses related to our domestic Liz Claiborne wholesale apparel business, which
runs at a lower SG&A rate than the Company average, partially offset by
Company-wide expense control initiatives.
3
Operating Income
- ----------------
Operating income for the second quarter of 2005 was $92 million (or 8.4% of net
sales), compared to $86 million (or 8.4% of net sales) in the second quarter of
2004. The impact of foreign currency exchange rates, primarily as a result of
the strengthening of the euro, in our international businesses added
approximately $1 million in 2005. The increase in operating income primarily
resulted from lower sourcing costs, partially offset by increased expenses
associated with the expansion of our domestic and international retail
businesses, the additional liquidation of excess inventory and continued
investment in building a multi-brand platform in Europe, as discussed above.
Operating income by business segment is provided below:
o Wholesale Apparel operating income was $43 million (or 6.6% of net sales) in
------------------
the second quarter of 2005, compared to $42 million (or 6.7% of net sales) in
the second quarter of 2004, principally reflecting increased profits in our
Mexx Europe, Juicy Couture, J.H. Collectibles, Axcess women's and licensed
DKNY(R) Jeans (both men's and women's) businesses as well as the favorable
impact of the discontinuation of the Kenneth Cole womenswear license,
partially offset by reduced profits in our Liz Claiborne, Ellen Tracy,
Claiborne and Enyce businesses.
o Wholesale Non-Apparel operating income was $15 million (or 10.4% of net
----------------------
sales) in the second quarter of 2005 compared to $10 million (or 8.4% of net
sales) in the second quarter of 2004, principally due to increased profits in
our Liz Claiborne handbags and fashion accessories, licensed Kenneth Cole
jewelry and cosmetics businesses.
o Retail operating income was $27 million (or 9.0% of net sales) in the second
------
quarter of 2005 compared to $28 million (or 10.5% of net sales) in the second
quarter of 2004, principally reflecting reduced profits in our outlet
business along with increased costs associated with building a multi-brand
platform in Europe, partially offset by increased profits in our Mexx Canada,
Lucky Brand and Sigrid Olsen businesses.
o Corporate operating income, primarily consisting of licensing income, was $7
---------
million in the second quarter of 2005, compared to $6 million in the second
quarter of 2004.
Net Interest Expense
- --------------------
Net interest expense in the second quarter of 2005 was $8 million compared to $7
million in the second quarter of 2004.
Net Income
- ----------
Net income was $54 million (or 4.9% of net sales) in the second quarter of 2005,
compared to $51 million (or 4.9% of net sales) in the second quarter of 2004.
Diluted earnings per common share increased to $0.50 in the second quarter of
2005, from $0.46 in the second quarter of 2004, an 8.7% increase.
Average diluted shares outstanding decreased by 1.8 million shares to 108.4
million in the second quarter of 2005 compared to 2004 as a result of the impact
of shares repurchased during the second quarter of 2005, partially offset by the
exercise of stock options and the effect of dilutive securities.
SIX MONTHS RESULTS
- ------------------
Net Sales
- ---------
Net sales for the six months of 2005 were a record $2.312 billion, an increase
of $183 million, or 8.6% compared to the six months of 2004. Approximately $30
million of the year-over-year increase was due to the impact of foreign currency
exchange rates, primarily as a result of the
4
strengthening of the euro, in our international businesses. Net sales results
for our business segments are provided below:
o Wholesale Apparel net sales increased $53 million, or 3.8%, to $1.463 billion
-----------------
as a result of:
- An $8 million increase resulting from the acquisition of C & C California;
- A $15 million increase resulting from the impact of foreign currency
exchange rates in our international businesses;
- A $30 million net increase across our other wholesale apparel businesses,
primarily driven by increases in our Juicy Couture, Mexx Europe, licensed
DKNY(R) Jeans (both men's and women's), Axcess (both men's and women's),
J.H. Collectibles, Lucky Brand, Liz Claiborne Canada, First Issue, Dana
Buchman, Claiborne, Sigrid Olsen and Emma James businesses as well as the
addition of our Tint business, partially offset by decreases in our
domestic Liz Claiborne, Ellen Tracy and Enyce businesses as well as the
impact of the discontinuation of the Kenneth Cole womenswear license. Net
sales in our domestic Liz Claiborne business decreased 13.0% compared to
last year.
o Wholesale Non-Apparel net sales increased $48 million, or 21.0%, to $278
----------------------
million. The increase primarily reflected increases in our cosmetics, Juicy
Couture accessories, Crazy Horse and Villager handbags and Monet, Liz
Claiborne and licensed Kenneth Cole jewelry businesses, as well as the
addition of our First Issue and Axcess handbags businesses. Net sales in our
domestic Liz Claiborne businesses increased 15.6% compared to last year.
The impact of foreign currency exchange rates in our international businesses
was not material in this segment.
o Retail net sales increased $78 million, or 16.5%, to $550 million as a result
------
of:
- A $14 million increase resulting from the impact of foreign currency
exchange rates in our international businesses;
- A $64 million net increase primarily driven by higher comparable store
sales in our specialty retail business (including a 30.0% comparable store
sales increase in our Lucky Brand business) and the net store openings
mentioned above.
Comparable store sales in our Company-operated stores increased by 2.2%
overall, driven by a 12.7% increase in our specialty retail business,
partially offset by a 5.5% decrease in our outlet business.
o Corporate net sales, primarily consisting of licensing revenue, was $21
---------
million in the six months of 2005, compared to $17 million in the six months
of 2004.
Gross Profit
- ------------
Gross profit increased $97 million, or 9.8%, to $1.088 billion in the six months
of 2005 over 2004. Gross profit as a percent of net sales increased to 47.1% in
the six months of 2005 from 46.5% in 2004. Approximately $17 million of the
increase was due to the impact of foreign currency exchange rates, primarily as
a result of the strengthening of the euro, in our international businesses. The
increased gross profit rate reflected the positive impact of lower sourcing
costs and a changing mix within our portfolio, primarily reflecting an increased
proportion of sales from our Mexx Europe, Canadian retail and domestic specialty
retail businesses, which run at higher gross profit rates than the Company
average as well as a decreased proportion of sales from our domestic Liz
Claiborne apparel business, which runs at a lower gross profit rate than the
Company average, partially offset by the additional liquidation of excess
inventory.
5
Selling, General & Administrative Expenses
- ------------------------------------------
SG&A increased $87 million, or 11.0%, to $877 million in the six months of 2005
and as a percent of net sales increased to 37.9% in the six months of 2005 from
37.1% in 2004 as a result of:
o A $5 million increase resulting from the acquisition of C & C California
and the start-up of new businesses;
o A $16 million increase resulting from the impact of foreign currency
exchange rates, primarily as a result of the strengthening of the euro, in
our international businesses;
o The inclusion of an additional $3 million of expense resulting from the
migration of our equity-based management compensation plan primarily to
restricted stock;
o A $63 million net increase primarily resulting from the expansion of our
domestic and international retail businesses and the continued investment
in building a multi-brand platform in Europe.
The increased SG&A rate primarily reflected the impact of the increased
proportion of expenses described above related to our domestic specialty retail
and Mexx Europe businesses, which run at higher SG&A rates than the Company
average, and reduced expense leverage resulting from the decreased proportion of
expenses related to our domestic Liz Claiborne wholesale apparel business, which
runs at a lower SG&A rate than the Company average, partially offset by
Company-wide expense control initiatives.
Operating Income
- ----------------
Operating income in the six months of 2005 was $211 million, an increase of $11
million, or 5.3%, over 2004. Approximately $2 million of the increase in 2005
was due to the impact of foreign currency exchange rates, primarily as a result
of the strengthening of the euro, in our international businesses. Operating
income as a percent of net sales decreased to 9.1% in the six months of 2005
from 9.4% in 2004. The decrease in operating income as a percent of sales
primarily resulted from the continued investment in the expansion of our
domestic and international retail businesses as well as increased expenses
associated with building a multi-brand platform in Europe, as discussed above.
Operating income by business segment is provided below:
o Wholesale Apparel operating income was $149 million in 2005, flat to 2004,
------------------
principally reflecting increased profits in our Juicy Couture, Mexx Europe,
J.H. Collectibles, Axcess women's and licensed DKNY(R) Jeans (both men's and
women's) businesses as well as the favorable impact of the discontinuation of
the Kenneth Cole womenswear license, offset by reduced profits in our Liz
Claiborne, Ellen Tracy and Sigrid Olsen businesses. Operating income as a
percent of sales decreased to 10.2% in 2005 from 10.6% in 2004.
o Wholesale Non-Apparel operating income increased by $10 million to $27
----------------------
million (9.6% of net sales) in 2005 compared to $16 million (7.0% of net
sales) in 2004, principally due to increased profits in our cosmetics, Juicy
Couture accessories, Liz Claiborne, Crazy Horse and Villager handbags and Liz
Claiborne, Monet and licensed Kenneth Cole jewelry businesses.
o Retail operating income was $19 million (3.5% of net sales) in 2005 compared
------
to $21 million (4.4% of net sales) in 2004, principally reflecting reduced
profits in our outlet and Mexx USA businesses, in addition to increased costs
associated with building a multi-brand platform in Europe, partially offset
by increased profits in our Lucky Brand and Mexx Canada businesses.
o Corporate operating income, primarily consisting of licensing income, was $16
---------
million in 2005 compared to $14 million in 2004.
6
Net Interest Expense
- --------------------
Net interest expense in the six months of 2005 was $15 million, flat to last
year.
Net Income
- ----------
Net income increased in the six months of 2005 to $126 million, or 5.4% of net
sales, from $119 million in 2004, or 5.6% of net sales. Diluted EPS increased
6.5% to $1.15 in the six months of 2005, up from $1.08 in 2004.
Average diluted shares outstanding decreased by 1.5 million shares to 109.2
million in the six months of 2005 on a year-over-year basis, as a result of the
impact of shares repurchased during the second quarter of 2005, partially offset
by the exercise of stock options and the effect of dilutive securities.
BALANCE SHEET AND CASH FLOW
- ---------------------------
We ended the second quarter of 2005 with $178 million in cash and marketable
securities, compared to $272 million at the end of the second quarter of 2004,
and with $503 million of debt outstanding compared to $463 million at the end of
the second quarter of 2004. This $134 million increase in our net debt position
is primarily attributable to $105 million in share repurchases, the 160 million
euro ($192 million based upon the exchange rate on such date) final payment made
in connection with the fiscal 2001 acquisition of Mexx Europe, $144 million in
capital and in-store expenditures, the $29 million payment made in connection
with the acquisition of C & C California, the $35 million payment made in
connection with the purchase of an additional 8.25% of the equity interest of
Lucky Brand and the 45 million Canadian dollars ($37 million based upon the
exchange rate on such date) final payment made in connection with the fiscal
2002 acquisition of Mexx Canada over the prior twelve months, partially offset
by cash flow from operations for the prior twelve months of $424 million and the
effect of foreign currency translation on our Eurobond (which reduced our debt
balance by $7 million). We ended the second quarter with $1.872 billion in
stockholders' equity, giving us a total debt to total capital ratio of 21.2% at
the end of the second quarter of 2005, compared to 22.1% at the end of the
second quarter of 2004. As of the end of the second quarter of 2005, we had
approximately $246 million remaining on our share repurchase authorization.
Accounts receivable increased $36 million, or 7.8%, at the end of the second
quarter of 2005 compared to the end of the second quarter of 2004, primarily due
to increased sales volume and the timing of shipments in the quarter. The impact
on our accounts receivable balance of foreign currency exchange rates in our
international businesses was not material.
Inventories increased $35 million, or 6.4%, at the end of the second quarter of
2005 compared to the end of the second quarter of 2004. New business initiatives
added $8 million to our inventory levels. The continuing expansion of our
specialty retail business added $16 million to our inventory levels. The impact
on our inventory balance of foreign currency exchange rates in our international
businesses was not material.
Net cash provided by operating activities was $24 million in the six months of
2005, compared to $57 million in the six months of 2004. This $33 million
decrease in cash flow was primarily due to changes in working capital in 2005
compared to 2004, driven primarily by year-over-year changes in accrued expenses
primarily due to the payment of employment-related obligations, partially offset
by year-over-year changes in our inventory balance as well as the year-over-year
increase in net income.
7
Net cash used in investing activities was $158 million in the six months of
2005, compared to $71 million in the six months of 2004. Net cash used in 2005
primarily reflected the $29 million payment made in connection with the
acquisition of C & C California, the $35 million payment made in connection with
the purchase of an additional 8.25% of the equity interest of Lucky Brand and
the 45 million Canadian dollars ($37 million based upon the exchange rate on
such date) final payment made in connection with the fiscal 2002 acquisition of
Mexx Canada as well as $60 million for capital and in-store expenditures. Net
cash used in 2004 primarily reflected $63 million in capital and in-store
expenditures.
Net cash used in financing activities was $84 million in the six months of 2005,
compared to $89 million in the six months of 2004. This $5 million decrease
primarily reflected a year-over-year reduction in the purchase of common stock,
partially offset by a year-over-year decrease in proceeds received from the
exercise of stock options.
FORWARD OUTLOOK
- ---------------
For fiscal 2005, we are adjusting our sales increase guidance to a range of 6.0
- - 7.5%, reaffirming our operating margin guidance in the range of 10.9 - 11.1%
and increasing our EPS guidance to a range of $2.98 - $3.04, reflecting our
continued strong performance and share repurchase activity in the second
quarter, partially offset by the projected negative second half impact of a
stronger dollar. This includes the impact, which we estimate will be
approximately $0.11, resulting from the early adoption in the third quarter of
2005 of FASB 123R ("Accounting for Share-Based Payment") and a shift in the
composition of the Company's 2005 equity-based compensation discussed above. We
do not expect foreign currency exchange rates in our international businesses to
have a material impact on full year 2005 results.
o In our wholesale apparel segment, we expect fiscal 2005 net sales to
increase in the range of 2 - 3%, primarily driven by the acquisition of C
& C California in addition to increases in our Juicy Couture, Mexx Europe,
Axcess men's and women's, J.H. Collectibles, licensed DKNY(R) Jeans, Lucky
Brand and Emma James businesses, as well as the addition of our Tint,
Metroconcepts, Belongings and Tapemeasure businesses, partially offset by
decreases in our domestic Liz Claiborne business and the impact of the
discontinuation of our Kenneth Cole womenswear license. We expect net
sales in our domestic Liz Claiborne business to decrease in the mid teens
year-over-year.
o In our wholesale non-apparel segment, we expect fiscal 2005 net sales to
increase in the range of 11 - 13%, primarily driven by increases in our
cosmetics, Juicy Couture accessories, handbags and jewelry businesses. We
expect net sales in our domestic Liz Claiborne businesses to increase high
single digits year-over-year.
o In our retail segment, we expect fiscal 2005 net sales to increase in the
range of 14 - 17%, primarily driven by increases in our Lucky Brand, Mexx
Europe, outlet, Sigrid Olsen, Liz Claiborne Canada, Mexx Canada and Mexx
USA businesses. We project comparable store sales to be flat to up low
single digits over fiscal 2004.
o In our corporate segment, we expect fiscal 2005 licensing revenue to
increase by 15% over fiscal 2004.
For the third quarter of 2005, we are providing our initial guidance,
forecasting a net sales increase of 4 - 5%, an operating margin in the range of
13.6 - 13.9% and EPS in the range of $1.06 - $1.09, including the impact, which
we estimate will be approximately $0.05, resulting from the early adoption of
FASB 123R ("Accounting for Share-Based Payment") and the shift in the
composition
8
of the Company's 2005 equity-based management compensation discussed above. We
do not expect foreign currency exchange rates in our international businesses to
have a material impact on third quarter 2005 results.
o In our wholesale apparel segment, we expect third quarter 2005 net sales
to increase in the range of 0 - 1%, primarily driven by the acquisition of
C & C California as well as increases in our Mexx Europe, Juicy Couture,
Lucky Brand, J.H. Collectibles, Emma James and Axcess women's businesses,
as well as the addition of our Tint, Metroconcepts, Belongings and
Tapemeasure businesses, partially offset by a decrease in our domestic Liz
Claiborne business as well as the impact of the discontinuation of our
licensed Kenneth Cole womenswear business.
o In our wholesale non-apparel segment, we expect third quarter 2005 net
sales to increase in the range of 4 - 6%, primarily driven by increases in
our jewelry and handbags businesses.
o In our retail segment, we expect third quarter 2005 net sales to increase
in the range of 15 - 18%, primarily driven by increases in our Mexx
Europe, outlet, Lucky Brand, Mexx Canada, Sigrid Olsen, Liz Claiborne
Canada and Mexx USA businesses.
o In our corporate segment, we expect third quarter 2005 licensing revenue
to increase by 10%.
All of these forward-looking statements exclude the impact of any future
acquisitions or additional stock repurchases.
Statements contained herein that relate to the Company's future performance,
including, without limitation, statements with respect to the Company's
anticipated results of operations or level of business for 2005 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 subject to certain risks,
uncertainties and assumptions. 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. Among the factors that could cause actual results to materially
differ include risks related to the continuing challenging retail and
macro-economic 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, and a continuation of
the deflationary trend in prices for apparel products; risks related to retailer
and consumer acceptance of the Company's products; risks related to the
Company's ability, especially through its sourcing, logistics and technology
functions, to operate within substantial production and delivery constraints,
including risks associated with the possible failure of the Company's
unaffiliated manufacturers to manufacture and deliver products in a timely
manner, to meet quality 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 new 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 dependence on sales to a limited number of
large United States department store customers; risks associated with the
Company's ability to maintain and enhance favorable brand recognition; risks
associated with the operation and expansion of the Company's own retail
business; 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 acquisition candidates and negotiate favorable
financial and other terms, against the background of increasing market
competition (from both strategic and financial buyers) for the types of
acquisitions the Company has made; risks associated with acquisitions and new
product lines and markets, including risks relating to integration of
acquisitions, retaining and motivating
9
key personnel of acquired businesses and achieving projected or satisfactory
levels of sales, profits and/or return on investment; risks associated with the
Company's ability to attract and retain talented, highly qualified executives
and other key personnel; risks associated with any significant disruptions in
the Company's relationship with, and any work stoppages by, its employees,
including its union employees; risks associated with providing for the
succession of senior management; 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, currency devaluations in countries in which the Company sources
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 intellectual property; and such other economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices as are set forth in our 2004
Annual Report on Form 10-K, including, without limitation, those set forth under
the heading "Business-Competition; Certain Risks" and under the heading
"Statement Regarding Forward-Looking Statements". 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. designs and markets an extensive range of women's and men's
fashion apparel and accessories appropriate to wearing occasions ranging from
casual to dressy. The Company also markets fragrances for women and men. Liz
Claiborne Inc.'s brands include Axcess, Belongings, Bora Bora, C&C California,
Claiborne, Crazy Horse, Curve, Dana Buchman, Elisabeth, Ellen Tracy, Emma James,
Enyce, First Issue, Intuitions, J.H. Collectibles, Juicy Couture, Lady Enyce,
Laundry by Shelli Segal, LIZ, Liz Claiborne, Lucky Brand, Mambo, Marvella,
Metroconcepts, Mexx, Monet, Monet 2, Realities, Sigrid Olsen, Soul, Spark,
Tapemeasure, Tint, Trifari and Villager. In addition, Liz Claiborne Inc. holds
the exclusive, long-term license to produce and sell men's and women's
collections of DKNY(R) Jeans and DKNY(R) Active, as well as CITY DKNY(R) better
women's sportswear in the Western Hemisphere. The Company also has the exclusive
license to produce jewelry under the Kenneth Cole New York and Reaction Kenneth
Cole brand names.
Financial tables attached
10
LIZ CLAIBORNE INC.
CONSOLIDATED STATEMENTS OF INCOME
(All amounts in thousands except per share data)
(Unaudited)
13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended
July 2, 2005 July 3, 2004 July 2, 2005 July 3, 2004
------------ ------------ ------------ ------------
Net Sales $ 1,099,104 $ 1,025,924 $ 2,311,511 $ 2,128,691
Cost of Goods Sold 569,644 536,490 1,223,821 1,138,227
------------ ------------ ------------ ------------
Gross Profit 529,460 489,434 1,087,690 990,464
Selling, General & Administrative
Expenses 437,425 403,595 876,899 790,298
------------ ------------ ------------ ------------
Operating Income 92,035 85,839 210,791 200,166
Other Expense - Net (446) (933) (1,060) (1,523)
Interest Expense - Net (7,781) (6,896) (15,369) (14,506)
------------ ------------ ------------ ------------
Income Before Provision for Income Taxes 83,808 78,010 194,362 184,137
Provision for Income Taxes 29,668 27,460 68,804 64,817
------------ ------------ ------------ ------------
Net Income $ 54,140 $ 50,550 $ 125,558 $ 119,320
============ ============ ============ ============
Weighted Average Common Shares
Outstanding 106,671 108,703 107,367 108,992
Basic Earnings per Common Share $0.51 $0.47 $1.17 $1.09
===== ===== ===== =====
Weighted Average Common Shares and
Share Equivalents Outstanding 108,378 110,216 109,218 110,730
Diluted Earnings per Common Share $0.50 $0.46 $1.15 $1.08
===== ===== ===== =====
Supplemental Information:
Dividends per Common Share (Rounded to
the nearest penny) $0.06 $0.06 $0.11 $0.11
===== ===== ===== =====
11
LIZ CLAIBORNE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(All dollar amounts in thousands)
(Unaudited)
July 2, 2005 July 3, 2004
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 168,843 $ 213,024
Marketable securities 8,721 58,576
Accounts receivable - trade, net 491,354 455,820
Inventories, net 575,919 541,400
Deferred income taxes 44,968 46,047
Other current assets 128,055 101,180
------------ ------------
Total Current Assets 1,417,860 1,416,047
------------ ------------
Property and Equipment - net 459,734 423,967
Goodwill and Intangibles - net 1,145,166 839,340
Other Assets 10,007 5,161
------------ ------------
Total Assets $ 3,032,767 $ 2,684,515
============ ============
Liabilities and Stockholders' Equity
Current Liabilities $ 618,157 $ 540,682
Long-Term Debt 430,536 430,965
Other Non-Current Liabilities 53,513 21,034
Deferred Income Taxes 55,422 50,552
Minority Interest 2,955 11,879
Stockholders' Equity 1,872,184 1,629,403
------------ ------------
Total Liabilities and Stockholders' Equity $ 3,032,767 $ 2,684,515
============ ============
12
LIZ CLAIBORNE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
(Unaudited)
26 weeks ended 26 weeks ended
July 2, 2005 July 3, 2004
------------ ------------
Cash Flows from Operating Activities:
Net income $ 125,558 $ 119,320
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 59,479 53,082
Deferred income taxes 6,748 300
Other - net 12,314 10,684
Change in current assets and liabilities,
exclusive of acquisitions:
(Increase) in accounts receivable - trade (71,632) (72,508)
(Increase) in inventories (46,410) (64,291)
(Increase) in other current assets (39,315) (19,653)
Increase in accounts payable 14,659 12,958
(Decrease) increase in accrued expenses (13,889) 34,891
(Decrease) in income taxes payable (23,813) (17,649)
------------ ------------
Net cash provided by operating activities 23,699 57,134
------------ ------------
Cash Flows from Investing Activities:
Purchases of investment instruments (1,016) (49)
Purchases of property and equipment (56,915) (59,975)
Payments for acquisitions, net of cash acquired (99,822) (4,844)
Payments for in-store merchandise shops (3,303) (3,012)
Other - net 3,213 (3,007)
------------ ------------
Net cash used in investing activities (157,843) (70,887)
------------ ------------
Cash Flows from Financing Activities:
Short-term borrowings 16,168 13,414
Principal payments under capital lease obligations (981) --
Proceeds from exercise of common stock options 18,213 26,893
Purchase of common stock (105,166) (116,817)
Dividends paid (11,990) (12,244)
------------ ------------
Net cash used in financing activities (83,756) (88,754)
------------ ------------
Effect of Exchange Rate Changes on Cash 1,106 22,028
------------ ------------
Net Change in Cash and Cash Equivalents (216,794) (80,479)
Cash and Cash Equivalents at Beginning of Period 385,637 293,503
------------ ------------
Cash and Cash Equivalents at End of Period $ 168,843 $ 213,024
============ ============
13
LIZ CLAIBORNE INC.
SEGMENT REPORTING
(All dollar amounts in thousands)
(Unaudited)
13 weeks ended % to 13 weeks ended % to
July 2, 2005 Total July 3, 2004 Total
------------ ----- ------------ -----
NET SALES:
Wholesale Apparel $ 653,216 59.4% $ 635,526 61.9%
Wholesale Non-Apparel 141,383 12.9% 118,817 11.6%
Retail 294,410 26.8% 263,932 25.7%
Corporate 10,095 0.9% 7,649 0.8%
------------ ------ ------------ ------
Total Net Sales $ 1,099,104 100.0% $ 1,025,924 100.0%
============ ====== ============ ======
13 weeks ended % of 13 weeks ended % of
July 2, 2005 Sales July 3, 2004 Sales
------------ ----- ------------ -----
OPERATING INCOME:
Wholesale Apparel $ 43,437 6.6% $ 42,356 6.7%
Wholesale Non-Apparel 14,650 10.4% 10,005 8.4%
Retail 26,554 9.0% 27,750 10.5%
Corporate 7,394 73.2% 5,728 74.9%
------------ ------ ------------ ------
Total Operating Income $ 92,035 8.4% $ 85,839 8.4%
============ ====== ============ ======
13 weeks ended % to 13 weeks ended % to
July 2, 2005 Total July 3, 2004 Total
------------ ----- ------------ -----
NET SALES:
Domestic $ 828,379 75.4% $ 791,078 77.1%
International 270,725 24.6% 234,846 22.9%
------------ ------ ------------ ------
Total Net Sales $ 1,099,104 100.0% $ 1,025,924 100.0%
============ ====== ============ ======
13 weeks ended % of 13 weeks ended % of
July 2, 2005 Sales July 3, 2004 Sales
------------ ----- ------------ -----
OPERATING INCOME:
Domestic $ 81,586 9.8% $ 81,243 10.3%
International 10,449 3.9% 4,596 2.0%
------------ ------ ------------ ------
Total Operating Income $ 92,035 8.4% $ 85,839 8.4%
============ ====== ============ ======
14
LIZ CLAIBORNE INC.
SEGMENT REPORTING
(All dollar amounts in thousands)
(Unaudited)
26 weeks ended % to 26 weeks ended % to
July 2, 2005 Total July 3, 2004 Total
------------ ----- ------------ -----
NET SALES:
Wholesale Apparel $ 1,462,862 63.3% $ 1,409,961 66.2%
Wholesale Non-Apparel 278,043 12.0% 229,823 10.8%
Retail 549,944 23.8% 471,955 22.2%
Corporate 20,662 0.9% 16,952 0.8%
------------ ------ ------------ ------
Total Net Sales $ 2,311,511 100.0% $ 2,128,691 100.0%
============= ====== ============ ======
26 weeks ended % of 26 weeks ended % of
July 2, 2005 Sales July 3, 2004 Sales
------------ ----- ------------ -----
OPERATING INCOME:
Wholesale Apparel $ 148,862 10.2% $ 149,453 10.6%
Wholesale Non-Apparel 26,598 9.6% 16,168 7.0%
Retail 19,091 3.5% 20,992 4.4%
Corporate 16,240 78.6% 13,553 79.9%
------------ ------ ------------ ------
Total Operating Income $ 210,791 9.1% $ 200,166 9.4%
============ ====== ============ ======
26 weeks ended % to 26 weeks ended % to
July 2, 2005 Total July 3, 2004 Total
------------ ----- ------------ -----
NET SALES:
Domestic $ 1,728,443 74.8% $ 1,625,591 76.4%
International 583,068 25.2% 503,100 23.6%
------------ ------ ------------ ------
Total Net Sales $ 2,311,511 100.0% $ 2,128,691 100.0%
============= ====== ============ ======
26 weeks ended % of 26 weeks ended % of
July 2, 2005 Sales July 3, 2004 Sales
------------ ----- ------------ -----
OPERATING INCOME:
Domestic $ 181,237 10.5% $ 175,859 10.8%
International 29,554 5.1% 24,307 4.8%
------------ ------ ------------ ------
Total Operating Income $ 210,791 9.1% $ 200,166 9.4%
============ ====== ============ ======
15